1 00:00:00,080 --> 00:00:13,800 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jailey. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,519 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg I 5 00:00:33,520 --> 00:00:35,280 Speaker 1: want to cross the surbit of London quickly to catch 6 00:00:35,360 --> 00:00:38,559 Speaker 1: up with Julian at Lee, Bloomberg's oil strategist for for 7 00:00:38,600 --> 00:00:41,559 Speaker 1: what's going on. Jillian, walk me through the moves. I 8 00:00:41,560 --> 00:00:43,280 Speaker 1: think there's been a number of things that have have 9 00:00:43,960 --> 00:00:48,880 Speaker 1: driven this last little leg up. We had the US 10 00:00:48,960 --> 00:00:54,280 Speaker 1: inventory data yesterday which showed another drop in stockpiles of 11 00:00:54,440 --> 00:00:57,560 Speaker 1: crude and products. I think that has has sort of 12 00:00:57,600 --> 00:01:01,520 Speaker 1: fed into a slightly more bullish view. Clearly, We've got 13 00:01:01,560 --> 00:01:06,920 Speaker 1: the Iran sanctions issue. President Trump's decision to um to 14 00:01:07,080 --> 00:01:09,960 Speaker 1: pull the U S out of that deal, which is looking, 15 00:01:10,040 --> 00:01:12,440 Speaker 1: despite all the words coming out of the European Union, 16 00:01:12,440 --> 00:01:14,520 Speaker 1: as though it is going to have a significant impact 17 00:01:14,560 --> 00:01:19,360 Speaker 1: on Iran's oil exports. We are seeing shippers, insurers, and 18 00:01:19,440 --> 00:01:24,880 Speaker 1: refiners all taking a very cautious approach to future dealings 19 00:01:24,880 --> 00:01:27,319 Speaker 1: with Iran. I think you know that has an impact. 20 00:01:27,520 --> 00:01:29,640 Speaker 1: And then we've had Goldman coming out with a report, 21 00:01:30,280 --> 00:01:33,319 Speaker 1: um you know, talking up the price of oil and 22 00:01:33,400 --> 00:01:37,000 Speaker 1: saying that it doesn't see OPEQ and shale being able 23 00:01:37,080 --> 00:01:42,720 Speaker 1: to solve the any problems caused by a disruption to Iran. 24 00:01:42,720 --> 00:01:44,400 Speaker 1: All those have fed in. This week we had a 25 00:01:44,440 --> 00:01:46,720 Speaker 1: report from the i A suggesting that because of high 26 00:01:46,800 --> 00:01:49,640 Speaker 1: crude prices that demand could take a bit of a hit. 27 00:01:49,720 --> 00:01:52,000 Speaker 1: What does w C and north of seven C and 28 00:01:52,040 --> 00:01:55,760 Speaker 1: Brent with an eight hand or mean for global oil demand? Well, 29 00:01:55,800 --> 00:01:58,280 Speaker 1: I think we are starting to see signs of some 30 00:01:58,360 --> 00:02:02,200 Speaker 1: of that feeding through. We're so me seeing higher gasoline 31 00:02:02,200 --> 00:02:05,960 Speaker 1: prices in the US my own very unscientific study of 32 00:02:06,000 --> 00:02:08,880 Speaker 1: petrol prices in the UK, which consists of looking at 33 00:02:08,880 --> 00:02:12,240 Speaker 1: the posted price on the three the three petrol stations 34 00:02:12,280 --> 00:02:15,240 Speaker 1: I pass on my way into work. Um, you know, 35 00:02:15,360 --> 00:02:18,919 Speaker 1: I I now see petrol in the UK creeping up. 36 00:02:19,639 --> 00:02:22,480 Speaker 1: Those prices, you know, they're back up at one thirty elite. 37 00:02:23,160 --> 00:02:25,079 Speaker 1: That's the price we haven't seen for some time in 38 00:02:25,120 --> 00:02:28,560 Speaker 1: the UK. So these higher crude prices are feeding through. 39 00:02:29,120 --> 00:02:31,320 Speaker 1: Um even in Europe, where we you know, we have 40 00:02:31,480 --> 00:02:35,600 Speaker 1: very high fixed taxes on petrol that tend to limit 41 00:02:35,680 --> 00:02:39,399 Speaker 1: the movements of petrol prices against crude. We're seeing it here. 42 00:02:39,600 --> 00:02:41,519 Speaker 1: And of course, one of the things that happened during 43 00:02:41,600 --> 00:02:44,200 Speaker 1: the downturn in prices was that a lot of the 44 00:02:45,040 --> 00:02:48,600 Speaker 1: consuming country governments in in the developing world, in Asia 45 00:02:48,639 --> 00:02:51,520 Speaker 1: and places like that, began to take off some of 46 00:02:51,520 --> 00:02:54,840 Speaker 1: the subsidies that they had and some of the price 47 00:02:54,919 --> 00:03:00,520 Speaker 1: caps that they had on on gasoline and another oil products. 48 00:03:00,520 --> 00:03:03,320 Speaker 1: And that means that as prices take up again, so 49 00:03:03,360 --> 00:03:06,320 Speaker 1: those are feeding through into two retail prices in some 50 00:03:06,400 --> 00:03:09,120 Speaker 1: of the developing world as well. Um and so we 51 00:03:09,240 --> 00:03:12,960 Speaker 1: might see some of the demand growth beginning to ease there. 52 00:03:12,960 --> 00:03:15,240 Speaker 1: We certainly saw some numbers coming out of India that 53 00:03:15,320 --> 00:03:19,839 Speaker 1: suggested that while product demand is still growing, it it's 54 00:03:19,880 --> 00:03:22,519 Speaker 1: at that rate of growth is slowing a bit. Julian, 55 00:03:22,560 --> 00:03:24,240 Speaker 1: the greater catch hot with your joining us from London 56 00:03:24,240 --> 00:03:26,680 Speaker 1: on the lettuce moves in a crude price Brent with 57 00:03:26,680 --> 00:03:29,280 Speaker 1: an eight handle really briefly for the first time since 58 00:03:29,400 --> 00:03:33,120 Speaker 1: late treading right now at seventy eight cents w c 59 00:03:33,240 --> 00:03:35,600 Speaker 1: I just north of seventy two. Joining us around a 60 00:03:35,640 --> 00:03:37,600 Speaker 1: table in New York, really pleased to say, Chris Grosanti 61 00:03:37,640 --> 00:03:42,440 Speaker 1: Grasanti Capital Management CEO Chris from the commodity price story 62 00:03:42,800 --> 00:03:46,000 Speaker 1: and trying to push that view through equities. It's really 63 00:03:46,000 --> 00:03:48,280 Speaker 1: difficult last year despite the running and crude. Is it 64 00:03:48,280 --> 00:03:51,200 Speaker 1: getting a little bit more straightforward now? I think so, Jonathan. 65 00:03:51,240 --> 00:03:53,800 Speaker 1: What you're seeing here is a long cycle finally playing 66 00:03:53,840 --> 00:03:57,040 Speaker 1: itself out. There's been under investment in the oil field 67 00:03:57,400 --> 00:04:00,960 Speaker 1: for now four years, and at the same time you're 68 00:04:00,960 --> 00:04:03,120 Speaker 1: seeing increased demand. So you've got that great from a 69 00:04:03,200 --> 00:04:06,200 Speaker 1: from an investor standpoint, You've got that great synergy of 70 00:04:06,800 --> 00:04:11,840 Speaker 1: under under investment, shortage and greater demand. So we really 71 00:04:11,880 --> 00:04:13,920 Speaker 1: like the oil service companies right now. You're gonna have 72 00:04:13,920 --> 00:04:15,880 Speaker 1: to dig more holes, You're gonna have to find more oil, 73 00:04:15,960 --> 00:04:18,560 Speaker 1: and it's getting harder and harder. In spite of the 74 00:04:18,560 --> 00:04:20,919 Speaker 1: the the image, the superficial image that it's easy to 75 00:04:20,920 --> 00:04:23,600 Speaker 1: frack in the United States. We have had a close 76 00:04:23,640 --> 00:04:28,320 Speaker 1: to rally and crew prices through much of last year. 77 00:04:28,360 --> 00:04:30,680 Speaker 1: Through this rally, the equity investor just didn't want to 78 00:04:30,680 --> 00:04:33,600 Speaker 1: buy it. Are we seeing capitulation now, Chris? As far 79 00:04:33,640 --> 00:04:35,880 Speaker 1: as your concern, I think we see it in the majors, 80 00:04:35,880 --> 00:04:37,480 Speaker 1: So we see it in the big integrat if you're 81 00:04:37,480 --> 00:04:39,080 Speaker 1: seeing it in the majors, are certainly seeing in the 82 00:04:39,120 --> 00:04:42,120 Speaker 1: domestic US players like EO G. Where you haven't seen 83 00:04:42,120 --> 00:04:44,320 Speaker 1: it yet again is the oil service companies. And we 84 00:04:44,360 --> 00:04:46,320 Speaker 1: don't think this is a head fake, Jonathan. We think 85 00:04:46,320 --> 00:04:48,640 Speaker 1: this is a real multi year move with you know, 86 00:04:48,680 --> 00:04:50,800 Speaker 1: with fits and starts. But we think over the next 87 00:04:50,839 --> 00:04:53,960 Speaker 1: two years oil will be higher even than it is now. Chris, 88 00:04:53,960 --> 00:04:57,159 Speaker 1: good morning, Good morning. Very simply, here are people in 89 00:04:57,200 --> 00:05:02,440 Speaker 1: this market, our taxicab drivers talking about where we are 90 00:05:02,480 --> 00:05:06,480 Speaker 1: in the market. I don't sense it, but are they no, Tom, 91 00:05:06,520 --> 00:05:08,840 Speaker 1: It's not like it was in the late nineties that 92 00:05:08,880 --> 00:05:10,560 Speaker 1: you and I remember where you get you get in, 93 00:05:11,080 --> 00:05:13,080 Speaker 1: you'd get stock tips from your taxi and drivers and 94 00:05:13,120 --> 00:05:15,560 Speaker 1: your shoes guys. By getting stock tips from a mutual 95 00:05:15,560 --> 00:05:18,280 Speaker 1: fund manager, I mean to the institutions in this market, 96 00:05:18,520 --> 00:05:20,400 Speaker 1: to the extent that there are still humans that are 97 00:05:20,480 --> 00:05:23,920 Speaker 1: mutual fund managers, yes, you probably would. But what we're 98 00:05:23,960 --> 00:05:28,760 Speaker 1: seeing now is the gravitation towards fang continues. Uh. And 99 00:05:28,880 --> 00:05:31,440 Speaker 1: you know you have Amazon and Netflix both up fifty 100 00:05:31,520 --> 00:05:34,480 Speaker 1: six just this year, and then the rest of the 101 00:05:34,520 --> 00:05:36,800 Speaker 1: market lagging behind. The phenomenon We also saw in the 102 00:05:36,880 --> 00:05:41,000 Speaker 1: late nineties the revenue growth everybody wants. If everybody wants 103 00:05:41,040 --> 00:05:43,720 Speaker 1: top line growth, you certainly have it in those companies. 104 00:05:43,839 --> 00:05:46,600 Speaker 1: The problem is the earnings growth is lagging there, and 105 00:05:46,680 --> 00:05:49,320 Speaker 1: sooner or later again like the late nineties, folks will 106 00:05:49,360 --> 00:05:52,400 Speaker 1: if the economy slows or something else, those multiples will 107 00:05:52,400 --> 00:05:55,679 Speaker 1: just stick out like a sore. Can you own less 108 00:05:55,720 --> 00:06:02,120 Speaker 1: sexy industrials that are showing marginal revenue growth without nearly 109 00:06:02,160 --> 00:06:04,520 Speaker 1: the multiples of these fancies? You or I think you can, 110 00:06:04,600 --> 00:06:07,000 Speaker 1: if you, if you, if you define industrials broadly like 111 00:06:07,200 --> 00:06:11,640 Speaker 1: slumberj and Haliburton or Lockheed Martin, a defense contractor that's 112 00:06:11,640 --> 00:06:14,720 Speaker 1: selling more expensively than it usually does, but it's also 113 00:06:14,760 --> 00:06:17,920 Speaker 1: growing its top line. Again, that's important, uh, much more 114 00:06:18,040 --> 00:06:20,240 Speaker 1: strongly because of the new F thirty five than it 115 00:06:20,320 --> 00:06:22,000 Speaker 1: than it usually do. Yeah, I'm gonna catch up with 116 00:06:22,000 --> 00:06:24,960 Speaker 1: Saveta supermaniument of Bank of American mar Lynch a little 117 00:06:24,960 --> 00:06:27,440 Speaker 1: bit later. And she's got this would be on one 118 00:06:27,480 --> 00:06:31,440 Speaker 1: of your other one of my other franchises, And she's 119 00:06:31,440 --> 00:06:35,520 Speaker 1: got a theory. Now, now is the time to be 120 00:06:35,520 --> 00:06:38,120 Speaker 1: buying old economy equities and to shift away from the 121 00:06:38,120 --> 00:06:40,159 Speaker 1: new economy equities because we're about to go into a 122 00:06:40,160 --> 00:06:43,640 Speaker 1: big from her mouth, Jan that's is that what you're 123 00:06:43,640 --> 00:06:47,160 Speaker 1: looking for? To sure? Because you know we're paying ten 124 00:06:47,360 --> 00:06:50,600 Speaker 1: or eleven times earnings for say, Wells Fargo, We're paying 125 00:06:50,760 --> 00:06:53,200 Speaker 1: twelve times earnings for Comcast. These are all bread and 126 00:06:53,240 --> 00:06:57,719 Speaker 1: butter terrific balance sheets and relatively inflation proof, excuse me, 127 00:06:57,760 --> 00:07:01,200 Speaker 1: recession proof companies. So yeah, that's what we'd prefer to 128 00:07:01,240 --> 00:07:04,200 Speaker 1: buy instead of Netflix and Amazon. That's been the wrong 129 00:07:04,240 --> 00:07:06,640 Speaker 1: way to go, but the safer way to go, I think, 130 00:07:06,680 --> 00:07:08,200 Speaker 1: and then as soon I think it'll be both the 131 00:07:08,240 --> 00:07:09,920 Speaker 1: safer way and the right way to go. Well, I'm 132 00:07:09,960 --> 00:07:12,320 Speaker 1: interested in this wood safe. Let's explol the woods safe. 133 00:07:12,400 --> 00:07:15,360 Speaker 1: We're safe about it. When these big tech companies have 134 00:07:15,640 --> 00:07:20,120 Speaker 1: really strong secular growth stories and fantastic earnings growth as well. 135 00:07:20,560 --> 00:07:23,400 Speaker 1: What's safe about going the other way? Well, you know 136 00:07:23,920 --> 00:07:27,360 Speaker 1: there's the old saying that, um, there's no investment that's 137 00:07:27,360 --> 00:07:28,960 Speaker 1: so good it can't be ruined by a high enough 138 00:07:29,040 --> 00:07:31,760 Speaker 1: entry price. So if you're gonna pay a hundred and 139 00:07:31,800 --> 00:07:34,480 Speaker 1: twenty times for Netflix or a hundred ten times for Amazon, 140 00:07:34,960 --> 00:07:37,120 Speaker 1: you better hope that those earnings grow by leaps and 141 00:07:37,120 --> 00:07:39,960 Speaker 1: bounds for a decade or more. And that's just something 142 00:07:40,000 --> 00:07:43,520 Speaker 1: that frankly, has never happened before. Think you so much 143 00:07:43,880 --> 00:07:47,360 Speaker 1: appreciated this morning long conversation and value and growth. Look 144 00:07:47,440 --> 00:07:51,280 Speaker 1: for that across all of our platform. John Farrell or 145 00:07:51,480 --> 00:07:54,160 Speaker 1: out with a tweet, am I, this is a British 146 00:07:54,160 --> 00:07:56,960 Speaker 1: phrase which John's gonna have to explain to me. Am 147 00:07:56,960 --> 00:08:00,840 Speaker 1: I the only one sick to the back teeth of 148 00:08:00,880 --> 00:08:04,760 Speaker 1: the Royal Wedding. What a sick to back teeth? Is 149 00:08:04,760 --> 00:08:08,520 Speaker 1: that a British phrase? Yeah? What does that mean? I 150 00:08:08,560 --> 00:08:11,920 Speaker 1: can't change it? Totally fed up, totally fed up. And 151 00:08:11,920 --> 00:08:14,480 Speaker 1: I can tell you why I'm totally fed up of 152 00:08:14,560 --> 00:08:17,280 Speaker 1: the Royal Wedding. I have no interest in it. Was 153 00:08:17,480 --> 00:08:19,960 Speaker 1: to come over to the keyno. Well you're gonna you 154 00:08:20,040 --> 00:08:23,040 Speaker 1: can have a party. Take from We do take out 155 00:08:23,040 --> 00:08:25,600 Speaker 1: from Starbucks, but we do put it in the Royal 156 00:08:25,800 --> 00:08:29,480 Speaker 1: China with you know, I can imagine Prince can imagine 157 00:08:29,480 --> 00:08:31,640 Speaker 1: you doing that. I imagine Mrs King would hate that, 158 00:08:31,800 --> 00:08:33,360 Speaker 1: But that's what you thing to do, to go to 159 00:08:33,440 --> 00:08:37,360 Speaker 1: Starbucks and put it in China. Yeah, but the Royal 160 00:08:37,559 --> 00:08:40,040 Speaker 1: We're doing a surveillance special on the royal wedding. Yeah, 161 00:08:40,080 --> 00:08:42,679 Speaker 1: you're part of it. Can you count me out? No? No, 162 00:08:42,880 --> 00:08:46,320 Speaker 1: you're going to be from a pub near Windsor Kiss. 163 00:08:46,360 --> 00:08:48,959 Speaker 1: I'm happy to go to the pub's not so keen 164 00:08:49,040 --> 00:08:52,679 Speaker 1: on the coverage. No invitation. Chris Croissanti wants to come 165 00:08:52,679 --> 00:08:55,880 Speaker 1: to the pub too. Yeah, everybody's on board, John except you. 166 00:08:56,160 --> 00:08:58,840 Speaker 1: I'm on board with the scenes on board and she's Italian. 167 00:09:01,080 --> 00:09:05,040 Speaker 1: Just remember not everyone. Let's let me give you a 168 00:09:05,120 --> 00:09:09,200 Speaker 1: question quickly here. That's is Beckham invited? I don't know 169 00:09:09,240 --> 00:09:11,439 Speaker 1: who's invited. I don't know who's invite I haven't even 170 00:09:11,480 --> 00:09:13,360 Speaker 1: checked the list. I don't even read the articles. I 171 00:09:13,360 --> 00:09:30,200 Speaker 1: have no interest in this. Let me canter with us. 172 00:09:30,200 --> 00:09:31,600 Speaker 1: And we had a lot of fun an hour ago 173 00:09:32,080 --> 00:09:34,160 Speaker 1: with Libby because we really tried to get away from 174 00:09:34,200 --> 00:09:37,280 Speaker 1: the cable TV back and forth of the scandals and 175 00:09:37,320 --> 00:09:40,320 Speaker 1: all that, and actually talked policy, and we talked NAFTA, 176 00:09:40,400 --> 00:09:43,240 Speaker 1: and I think we can reduct that here. But far 177 00:09:43,320 --> 00:09:47,600 Speaker 1: more importantly to me is what does Congress do as 178 00:09:47,640 --> 00:09:50,960 Speaker 1: they staggered amid terms? I mean, is there any I 179 00:09:50,960 --> 00:09:53,040 Speaker 1: mean other than trade, I get it, and there's a 180 00:09:53,040 --> 00:09:56,120 Speaker 1: few other What do they do all day. Yeah, they're not. 181 00:09:56,200 --> 00:10:00,000 Speaker 1: They're not doing much. The House is going, to their credit, 182 00:10:00,080 --> 00:10:03,600 Speaker 1: It is about to consider a regulatory relief bill next 183 00:10:03,600 --> 00:10:05,880 Speaker 1: week that looks likely to pass and we'll be signed 184 00:10:05,880 --> 00:10:07,840 Speaker 1: into a law. And so that would be actually a 185 00:10:07,880 --> 00:10:11,240 Speaker 1: relatively significant accomplishment for Republicans that I'm sure you'll hear 186 00:10:11,240 --> 00:10:13,800 Speaker 1: on the campaign trail a lot. But outside of that, 187 00:10:14,000 --> 00:10:16,920 Speaker 1: you know, they they're supposed to break for recess in August. 188 00:10:17,000 --> 00:10:20,560 Speaker 1: I wouldn't be surprised if that's not pushed up um 189 00:10:20,600 --> 00:10:23,640 Speaker 1: and we don't see Speaker Ryan letting out his caucus, 190 00:10:23,679 --> 00:10:25,960 Speaker 1: you know, mid July or so. Just just given that 191 00:10:25,960 --> 00:10:28,440 Speaker 1: that that very fact that Paul Ryan will think that 192 00:10:28,520 --> 00:10:30,760 Speaker 1: his folks will be more effective on the campaign trail 193 00:10:30,800 --> 00:10:35,000 Speaker 1: than in Washington not doing very much. Palacintrigue matters, and 194 00:10:35,000 --> 00:10:43,880 Speaker 1: it matters for policy. Prigue matters. You please, I'm coming 195 00:10:43,880 --> 00:10:47,400 Speaker 1: to Pimcoke. I'm leaving. We're talking about the Royal wedding 196 00:10:47,400 --> 00:10:51,800 Speaker 1: every day. Petter Navarro and a reported spat with the 197 00:10:51,840 --> 00:10:56,840 Speaker 1: Treasury Secretary Steve Manuchin in his behavior around Chinese talks. 198 00:10:56,960 --> 00:10:59,760 Speaker 1: He wasn't going to be around the table this week, reportedly, 199 00:10:59,760 --> 00:11:02,439 Speaker 1: and he is going to be around the table this week. 200 00:11:02,600 --> 00:11:05,120 Speaker 1: How important is it for these individuals to get on 201 00:11:05,160 --> 00:11:09,520 Speaker 1: the same page. Well, it's important for sure, obviously when 202 00:11:09,559 --> 00:11:12,880 Speaker 1: you're negotiating with China, you would like the country to 203 00:11:12,920 --> 00:11:15,640 Speaker 1: have a united front. However, in some ways this is 204 00:11:15,679 --> 00:11:18,319 Speaker 1: just emblematic of a riff that, as you know, has 205 00:11:18,360 --> 00:11:21,360 Speaker 1: been going on for for eighteen months now. Um. This 206 00:11:21,440 --> 00:11:25,240 Speaker 1: is really symbolic of something pretty greater in terms of 207 00:11:25,400 --> 00:11:28,600 Speaker 1: sort of philosophical and ideological differences within the White House, 208 00:11:28,720 --> 00:11:31,959 Speaker 1: especially on trade, and especially as it relates to China. 209 00:11:32,040 --> 00:11:34,400 Speaker 1: Secretary Monation seems to be much more in the vein 210 00:11:34,520 --> 00:11:38,400 Speaker 1: of in some ways President Trump of being more transactionary um, 211 00:11:38,400 --> 00:11:42,280 Speaker 1: trying to get some sort of tangible concessions from China, 212 00:11:42,760 --> 00:11:45,040 Speaker 1: spiking the ball, calling in a victory, and then moving 213 00:11:45,080 --> 00:11:48,200 Speaker 1: on I think Peter Navarro, and then to some extent, 214 00:11:48,240 --> 00:11:51,600 Speaker 1: Bob Leidheizer, who's a pretty important character in this whole 215 00:11:51,960 --> 00:11:54,000 Speaker 1: you know, sort of palace intrigue here. He's the U 216 00:11:54,040 --> 00:11:56,920 Speaker 1: S Trade representative UM, and he's been very hawkish on 217 00:11:57,000 --> 00:12:01,040 Speaker 1: China really his entire public life as well, you know. So, 218 00:12:01,040 --> 00:12:03,320 Speaker 1: so I think that the divisions here are real, and 219 00:12:03,360 --> 00:12:05,720 Speaker 1: I think this latest spat or whatever whatever you want 220 00:12:05,760 --> 00:12:08,720 Speaker 1: to call it, is just emblematic of the deeper fissures 221 00:12:08,760 --> 00:12:11,800 Speaker 1: here in in administration. The President wants an international trade 222 00:12:11,800 --> 00:12:14,080 Speaker 1: win and he could will be close to getting one 223 00:12:14,120 --> 00:12:16,120 Speaker 1: with China, and then you get the likes of Peter 224 00:12:16,240 --> 00:12:20,400 Speaker 1: Nafararo blowing up reportedly in China that compromises things. The 225 00:12:20,400 --> 00:12:22,640 Speaker 1: president really close to a win on North Korea with 226 00:12:22,720 --> 00:12:25,200 Speaker 1: the summit in the next couple of months, and then 227 00:12:25,640 --> 00:12:30,559 Speaker 1: John Bolton, the National Security Advisor, blowing that up potentially 228 00:12:30,640 --> 00:12:33,040 Speaker 1: by bringing up the Libya model and the North Korean's 229 00:12:33,080 --> 00:12:36,439 Speaker 1: pushing back. Can everyone get behind the president's vision? And 230 00:12:37,760 --> 00:12:39,680 Speaker 1: I think the question is what is the president's vision? 231 00:12:39,679 --> 00:12:41,800 Speaker 1: To some extent right? And I think President Trump has 232 00:12:41,920 --> 00:12:46,520 Speaker 1: very deliberately put in people here that have represents sort 233 00:12:46,520 --> 00:12:49,000 Speaker 1: of a spectrum of views. I think that seems very 234 00:12:49,040 --> 00:12:53,920 Speaker 1: intentional and and and very and very deliberate. Um. You know. Again, 235 00:12:53,960 --> 00:12:56,920 Speaker 1: I think on China it's a little bit different because, 236 00:12:57,200 --> 00:12:59,800 Speaker 1: you know, it's interesting talking to folks in the across 237 00:12:59,800 --> 00:13:03,120 Speaker 1: the aministration, but also on Capitol Hill, there's a deep 238 00:13:03,640 --> 00:13:08,520 Speaker 1: um concern about China's state capitalism and how it's going 239 00:13:08,559 --> 00:13:11,559 Speaker 1: to impact our country in the longer term. So while 240 00:13:11,720 --> 00:13:14,760 Speaker 1: you know, Secretary Minutation may want um, you know, went 241 00:13:14,800 --> 00:13:17,400 Speaker 1: on the trade deficit, and maybe President Trump wants that too, 242 00:13:17,600 --> 00:13:20,120 Speaker 1: I think there's a lot of unimity across Washington that 243 00:13:20,120 --> 00:13:23,480 Speaker 1: they want something deeper. They want concessions of structural concessions. 244 00:13:23,800 --> 00:13:26,280 Speaker 1: I don't think China's necessarily willing to willing to give that. 245 00:13:26,520 --> 00:13:30,079 Speaker 1: What's the ostentations of Washington? Now? We had the Trump 246 00:13:30,120 --> 00:13:33,320 Speaker 1: people show up the Trump Hotel, all that is the 247 00:13:33,360 --> 00:13:37,200 Speaker 1: culture of your Washington changed? Uh? You know, I think 248 00:13:37,320 --> 00:13:40,400 Speaker 1: and I think folks have said this, this isn't necessarily 249 00:13:40,720 --> 00:13:44,640 Speaker 1: um idiosyncratic to their unique to the to the Trump administration, 250 00:13:45,240 --> 00:13:47,880 Speaker 1: but it is much more polarized now, right. I mean 251 00:13:47,920 --> 00:13:50,760 Speaker 1: we've talked about this, you know, folks on and I 252 00:13:50,800 --> 00:13:52,320 Speaker 1: was on the hill in the early OTTs. You know, 253 00:13:52,360 --> 00:13:54,840 Speaker 1: we used to go out with the other party, our 254 00:13:54,880 --> 00:13:59,520 Speaker 1: bosses would get together socially. That just doesn't happen anymore. So, Yeah, 255 00:13:59,559 --> 00:14:02,720 Speaker 1: I mean, has the feel and tenor of Washington changed 256 00:14:03,000 --> 00:14:06,040 Speaker 1: under the tuation? Sure? I think it's just in some 257 00:14:06,080 --> 00:14:08,520 Speaker 1: ways continue to trend that was existent there before. How 258 00:14:08,600 --> 00:14:13,360 Speaker 1: much does a wedding dress cost. I am not get 259 00:14:13,400 --> 00:14:16,840 Speaker 1: pulled into that serious. How much are you kidding? How 260 00:14:16,920 --> 00:14:19,480 Speaker 1: much is a wedding dress cost in America? I know, 261 00:14:20,000 --> 00:14:23,640 Speaker 1: I know you don't if we're asking you got married recently, 262 00:14:23,680 --> 00:14:26,880 Speaker 1: Tom Kane? How much does a wedding dress cost? No? No, 263 00:14:27,040 --> 00:14:32,080 Speaker 1: dress is plural? How much dress? I can't believe we're 264 00:14:32,120 --> 00:14:35,040 Speaker 1: going there on Bloomberg, but I regret paying so much 265 00:14:35,080 --> 00:14:47,040 Speaker 1: for my wedding dress. There we go time, Just easy. 266 00:14:47,160 --> 00:14:50,560 Speaker 1: It's two hundred and fifty thousand pounds for the Duchess 267 00:14:50,560 --> 00:15:07,800 Speaker 1: of Cambridge's wedding. Just that's Faroh like m We're gonna 268 00:15:07,800 --> 00:15:10,960 Speaker 1: catch up with Federica Sante, your Asia Group associate, to 269 00:15:11,000 --> 00:15:13,560 Speaker 1: catch up with him about what's what's going on with 270 00:15:13,640 --> 00:15:17,880 Speaker 1: the Italian government as Five Star and League agree on 271 00:15:17,920 --> 00:15:20,960 Speaker 1: a final government program. What's in the program? Federic Covin, 272 00:15:21,000 --> 00:15:24,520 Speaker 1: what should we be looking for in Italy? Well, it's 273 00:15:24,520 --> 00:15:28,680 Speaker 1: a few fairly were in some aspects to the program. 274 00:15:28,840 --> 00:15:31,840 Speaker 1: UH draft was League earlier in the week, which a 275 00:15:31,920 --> 00:15:35,240 Speaker 1: lot of people worried mentioned introducing the mechanism for leaving 276 00:15:35,240 --> 00:15:38,360 Speaker 1: the Currency Union, in addition to calls for the ECB 277 00:15:38,480 --> 00:15:40,240 Speaker 1: to write off as much as Twitter and fifty billion 278 00:15:40,280 --> 00:15:43,880 Speaker 1: in Italian that those most worrying proposals. To be honest, 279 00:15:43,920 --> 00:15:47,200 Speaker 1: we're always non starters from a political perspective, but also 280 00:15:47,280 --> 00:15:51,680 Speaker 1: been removed from the draft reportedly. But some other aspects 281 00:15:51,680 --> 00:15:54,000 Speaker 1: which we already knew about. So plans of what the 282 00:15:54,040 --> 00:15:56,640 Speaker 1: advertised during the election campaign I think are equally as 283 00:15:56,680 --> 00:15:59,800 Speaker 1: problematic to some up. I think both parties are calling 284 00:15:59,840 --> 00:16:03,960 Speaker 1: for or significant fiscal expansion, which of course goes clearly 285 00:16:04,000 --> 00:16:09,800 Speaker 1: against European rules on requirements for continued fiscal consolidation. Also, 286 00:16:09,880 --> 00:16:12,320 Speaker 1: keeping in mind, of course Italy is very large public 287 00:16:12,400 --> 00:16:15,080 Speaker 1: that burden, right, So I think this probably sets up 288 00:16:15,440 --> 00:16:18,040 Speaker 1: a pretty ugly fight with the European Commission, probably this fall, 289 00:16:18,080 --> 00:16:19,960 Speaker 1: around the time where the Italian government will be called 290 00:16:20,000 --> 00:16:22,240 Speaker 1: on to to write a new budget. Just walk me 291 00:16:22,240 --> 00:16:25,160 Speaker 1: through the process. Before we get to the policy quickly, Federica. 292 00:16:25,480 --> 00:16:27,280 Speaker 1: They have to go to the president now, decide who 293 00:16:27,280 --> 00:16:29,680 Speaker 1: the prime minister is. How does this work before this 294 00:16:29,720 --> 00:16:33,800 Speaker 1: government is really put into place? Correct? It sounds like 295 00:16:33,840 --> 00:16:36,680 Speaker 1: they're close to final lighting finalizing this coalition agreement. There's 296 00:16:36,680 --> 00:16:38,440 Speaker 1: a few sticking points still. They still have an agree 297 00:16:38,480 --> 00:16:40,560 Speaker 1: on a prime minister, which is a small detail, of course. 298 00:16:40,920 --> 00:16:43,320 Speaker 1: But once there is an agreement, so presumably before the 299 00:16:43,400 --> 00:16:45,800 Speaker 1: end of the week, uh, they will announce it, at 300 00:16:45,800 --> 00:16:48,560 Speaker 1: which point they'll have a new round of consultations I'm 301 00:16:48,560 --> 00:16:51,720 Speaker 1: referring to the party leaders with the President of the Republic, 302 00:16:52,000 --> 00:16:55,120 Speaker 1: presumably early next week, possibly on Monday, at which point 303 00:16:55,120 --> 00:16:57,760 Speaker 1: the President will appoint the new government, paving the way 304 00:16:57,800 --> 00:17:00,920 Speaker 1: for a vote of confidence again presumably um towards the 305 00:17:01,000 --> 00:17:05,080 Speaker 1: end of next week. The Polish view around Italy Federico 306 00:17:05,280 --> 00:17:07,120 Speaker 1: is that it doesn't matter who's impact because no one 307 00:17:07,160 --> 00:17:09,640 Speaker 1: can get anything done. Talk to me about their margin 308 00:17:09,720 --> 00:17:12,480 Speaker 1: in the Senate and their viability to drive through this policy. 309 00:17:14,080 --> 00:17:16,520 Speaker 1: There is some truth to that. For sure, they faced 310 00:17:16,560 --> 00:17:19,040 Speaker 1: a number of constraints the Constitutional Court. They have a 311 00:17:19,040 --> 00:17:21,320 Speaker 1: slim majority in parliament as as you pointed out, it's 312 00:17:21,320 --> 00:17:25,080 Speaker 1: only six seats. Um. Also, European rules are fairly stringent. 313 00:17:25,119 --> 00:17:26,879 Speaker 1: I think also at some point they also have to 314 00:17:27,440 --> 00:17:31,160 Speaker 1: uh sort of come to terms with the likely reaction 315 00:17:31,160 --> 00:17:34,520 Speaker 1: from finitial markets to any effort to significantly increase the deficit. 316 00:17:35,200 --> 00:17:37,040 Speaker 1: It doesn't mean that they can sort of cause any 317 00:17:37,119 --> 00:17:39,320 Speaker 1: damage in the process. However, I think, as I said, 318 00:17:39,359 --> 00:17:43,560 Speaker 1: the program is actually quite radical, particularly in terms of 319 00:17:43,560 --> 00:17:46,520 Speaker 1: their proposals on on the fiscal policy, and there's been 320 00:17:46,520 --> 00:17:48,320 Speaker 1: a lot of complaces i think in the markets, which 321 00:17:48,359 --> 00:17:51,440 Speaker 1: is probably justified to a large extent given the um 322 00:17:51,480 --> 00:17:54,479 Speaker 1: you know, very supportive external collition conditions in terms of 323 00:17:54,520 --> 00:17:57,919 Speaker 1: monetary policy, energy prices, the recovery and the broader urosone 324 00:17:57,960 --> 00:18:00,080 Speaker 1: and so on. But you know, it doesn't mean that 325 00:18:00,080 --> 00:18:01,560 Speaker 1: will last. So I think at some point they have 326 00:18:01,680 --> 00:18:03,800 Speaker 1: to be a moment of reckoning. Let's talk about radical 327 00:18:03,800 --> 00:18:06,600 Speaker 1: policy in the moment of reckoning. There was a report 328 00:18:06,960 --> 00:18:09,800 Speaker 1: over the last few days about this two fifty billion 329 00:18:10,240 --> 00:18:13,560 Speaker 1: euro debt pile of Italian debt at the European Central 330 00:18:13,560 --> 00:18:16,320 Speaker 1: Bank that reportedly at one point these two parties were 331 00:18:16,320 --> 00:18:19,359 Speaker 1: looking to have forgiveness to have that written off. Then 332 00:18:19,400 --> 00:18:21,960 Speaker 1: there was a conversation about changing the accounting around it 333 00:18:22,040 --> 00:18:25,879 Speaker 1: so that it didn't count towards debt to GDP ratios Federica. 334 00:18:25,960 --> 00:18:28,520 Speaker 1: What are they trying to engineer here to enable them 335 00:18:28,520 --> 00:18:32,160 Speaker 1: to spend more um, Yeah, exactly. That got a lot 336 00:18:32,160 --> 00:18:35,080 Speaker 1: of attention. I think triggered a fairly sizable Mikerot reaction, 337 00:18:35,160 --> 00:18:39,359 Speaker 1: which which we hadn't seen up until now. To be fair, 338 00:18:39,440 --> 00:18:42,960 Speaker 1: the proposals were, as I said, really nonstarters from the 339 00:18:43,080 --> 00:18:46,000 Speaker 1: very beginning. Neither of those things are really up to 340 00:18:46,040 --> 00:18:50,280 Speaker 1: the Italian government to decide. Both instituting a euro exit 341 00:18:50,320 --> 00:18:53,080 Speaker 1: mechanism at the EU level will require agreement for all 342 00:18:53,119 --> 00:18:55,840 Speaker 1: other member states, which is highly unlikely. The same applies 343 00:18:55,920 --> 00:18:58,120 Speaker 1: to calls for the Easy to Beat to write off 344 00:18:58,240 --> 00:19:01,920 Speaker 1: all its holdings of Italian debt. Uh. The mere fact 345 00:19:01,960 --> 00:19:04,399 Speaker 1: that those proposals, whoever made it to the draft agreement, 346 00:19:04,440 --> 00:19:07,160 Speaker 1: I think show at the very least a fairly uh 347 00:19:07,920 --> 00:19:10,840 Speaker 1: worrying lack of understanding of you know, even basic planets 348 00:19:10,880 --> 00:19:12,840 Speaker 1: of euros one governments. Right, So I think it shows 349 00:19:13,320 --> 00:19:15,840 Speaker 1: that this company is still very much has a Eurosceptics slant, 350 00:19:16,160 --> 00:19:18,280 Speaker 1: despite the fact that they've moved away from those more 351 00:19:18,400 --> 00:19:21,760 Speaker 1: radical proposals, and also shows that simply they're pretty much 352 00:19:21,800 --> 00:19:23,760 Speaker 1: out of the depth. I would say, what does this 353 00:19:24,040 --> 00:19:29,520 Speaker 1: coalition mean to the legendary and authentic North self divide 354 00:19:29,640 --> 00:19:32,520 Speaker 1: of Italy? Does the North wind today? Is that what 355 00:19:32,640 --> 00:19:36,760 Speaker 1: it means? But this is fairly imprecedented that you have 356 00:19:36,840 --> 00:19:40,920 Speaker 1: two parties that are respectively very strong in the North 357 00:19:41,200 --> 00:19:44,880 Speaker 1: and in the South, whereas historically you always had government 358 00:19:45,040 --> 00:19:48,919 Speaker 1: that had more uh you know, widespread support or more 359 00:19:49,000 --> 00:19:52,399 Speaker 1: balanced support throughout the country, I should say, uh. And 360 00:19:52,520 --> 00:19:54,400 Speaker 1: this is really one of the main obstacles. I think 361 00:19:54,440 --> 00:19:57,600 Speaker 1: that they will face the very different constituencies and there 362 00:19:57,600 --> 00:20:01,359 Speaker 1: are severe constraints I think on on the leeway that 363 00:20:01,400 --> 00:20:04,120 Speaker 1: the government will have on on fiscal policy. So deciding 364 00:20:04,240 --> 00:20:07,040 Speaker 1: where to allocate those scarce resources I think would be 365 00:20:07,080 --> 00:20:09,399 Speaker 1: a very difficult decision for them to make, but that 366 00:20:09,480 --> 00:20:11,560 Speaker 1: they have to go to the more productive northern regions 367 00:20:11,640 --> 00:20:13,680 Speaker 1: or the less productive south for then to thank you 368 00:20:13,760 --> 00:20:16,600 Speaker 1: so much short notice this morning for middlely greatly appreciate 369 00:20:16,720 --> 00:20:32,440 Speaker 1: that GM has been a big story with US rates 370 00:20:32,480 --> 00:20:35,720 Speaker 1: higher and the dollars stronger, and Harvard economist Commen Reinhardt 371 00:20:36,040 --> 00:20:38,480 Speaker 1: has weighed in turning heads big time through this week 372 00:20:38,560 --> 00:20:42,200 Speaker 1: with comments on the asset class on emerging markets, saying 373 00:20:42,440 --> 00:20:45,920 Speaker 1: they're in worse shape now than during the global financial 374 00:20:46,040 --> 00:20:49,560 Speaker 1: crisis in two thousand and eight. I want to bring 375 00:20:49,640 --> 00:20:53,560 Speaker 1: in Alberta Ramars Gorman Sexes, cohead of Latin America Economic Research, 376 00:20:53,640 --> 00:20:55,560 Speaker 1: and he joined us now. Albert, so can you tell 377 00:20:55,640 --> 00:20:59,119 Speaker 1: me why it's not quite that bad. Well, it's a 378 00:20:59,200 --> 00:21:02,280 Speaker 1: very interesting question, and certainly the external environment is becoming 379 00:21:02,320 --> 00:21:05,760 Speaker 1: a lot more challenging for many emerging markets. If he's 380 00:21:05,760 --> 00:21:09,440 Speaker 1: screen out across them landscape, you can identify a number 381 00:21:09,520 --> 00:21:13,520 Speaker 1: of countries with large external funding needs. Argentina comes to mind. 382 00:21:13,880 --> 00:21:16,040 Speaker 1: So the going is going to be a little bit 383 00:21:16,119 --> 00:21:18,600 Speaker 1: more testy. I think access to external funding will be 384 00:21:19,080 --> 00:21:21,480 Speaker 1: a little bit more selective and more expensive. You know, 385 00:21:21,640 --> 00:21:24,560 Speaker 1: some countries will adjust well to the new realities, some 386 00:21:24,680 --> 00:21:27,320 Speaker 1: other ones will see probably abouts of volatility. Bet how 387 00:21:27,359 --> 00:21:29,159 Speaker 1: which ones do you think would adjust well to the 388 00:21:29,240 --> 00:21:32,920 Speaker 1: new realities? I think about Brazil, for instance, where the 389 00:21:32,960 --> 00:21:35,320 Speaker 1: current account ext is is basically zero right now, that 390 00:21:35,440 --> 00:21:40,120 Speaker 1: external funding needs are very modest, inflation is quite low, 391 00:21:40,280 --> 00:21:42,440 Speaker 1: rates are low, so I think they will navigate to 392 00:21:42,480 --> 00:21:46,399 Speaker 1: our transition into a new reality in much better shape 393 00:21:46,440 --> 00:21:49,440 Speaker 1: than countries that do not share the same characteristics. Again, 394 00:21:49,480 --> 00:21:52,840 Speaker 1: we talked about Argentina, where the currency blew up over 395 00:21:52,920 --> 00:21:55,119 Speaker 1: the last over the last few weeks in the country 396 00:21:55,240 --> 00:21:58,920 Speaker 1: that is very very needs to maintain steady access to 397 00:21:59,000 --> 00:22:01,600 Speaker 1: external markets, and a proposition has now been questions, is 398 00:22:01,600 --> 00:22:03,520 Speaker 1: there an opportunity in ourgenten them right now? Because the 399 00:22:03,560 --> 00:22:06,560 Speaker 1: Financial Times reporting over the last day that the funds 400 00:22:06,600 --> 00:22:10,720 Speaker 1: controlled by Michael Hasson's staff, the CIO of Franklin Sampleton, 401 00:22:11,320 --> 00:22:14,159 Speaker 1: has brought two point five billion dollars two point to 402 00:22:14,359 --> 00:22:18,240 Speaker 1: five billion dollars in Argentinian bonds reportedly are bad. So 403 00:22:19,000 --> 00:22:22,800 Speaker 1: was there an opportunity there? Does that opportunity still exist? Look, 404 00:22:22,880 --> 00:22:25,840 Speaker 1: the financial price handles are quite different, you know, exchange 405 00:22:25,920 --> 00:22:28,120 Speaker 1: rate there moved a lot to the local interest rates 406 00:22:28,440 --> 00:22:30,119 Speaker 1: is a problem, but the problem with the solution the 407 00:22:30,200 --> 00:22:33,199 Speaker 1: authorities were very steadfast in reacting to the pressures. They 408 00:22:33,320 --> 00:22:37,479 Speaker 1: hiked interest rates to very distressed levels. Exchange rate has 409 00:22:37,520 --> 00:22:39,919 Speaker 1: moved significantly, so you can reach a point where they 410 00:22:40,080 --> 00:22:44,000 Speaker 1: change rate is sufficiently weakened and local interest rates are 411 00:22:44,000 --> 00:22:47,399 Speaker 1: sufficiently high to make it very interesting investment opportunity. It 412 00:22:47,480 --> 00:22:49,960 Speaker 1: really depends what is your time arizing and your capacity 413 00:22:50,000 --> 00:22:53,160 Speaker 1: to stomach variations in the piano or the sharp ratio. 414 00:22:53,280 --> 00:22:57,120 Speaker 1: The risk adjusted return is probably still not very compelling 415 00:22:57,240 --> 00:22:58,920 Speaker 1: if you have a very short term orizing. If we 416 00:22:59,000 --> 00:23:02,399 Speaker 1: think more over, the anger arising with the MF coming 417 00:23:02,480 --> 00:23:05,040 Speaker 1: to provide financial assistance, you know, maybe they may change 418 00:23:05,080 --> 00:23:08,600 Speaker 1: the attractiveness of re engaging in Argentina, colvert Aramas for 419 00:23:08,640 --> 00:23:10,960 Speaker 1: this with Goldman Sex as we look to Latin America 420 00:23:11,000 --> 00:23:14,760 Speaker 1: and of course worldwide as well with e M, the 421 00:23:14,920 --> 00:23:20,399 Speaker 1: answer Alberta is at some point these troubled international dynamics 422 00:23:20,680 --> 00:23:25,400 Speaker 1: need to be cleared. Do we clear troubled e M economies, 423 00:23:25,480 --> 00:23:30,440 Speaker 1: troubled EM currencies, troubled EM debt the same way we did, 424 00:23:30,560 --> 00:23:34,439 Speaker 1: say with Ecuador, or that we did in two thousands? 425 00:23:34,520 --> 00:23:37,080 Speaker 1: Do we do? Do we have the mechanisms in place 426 00:23:37,200 --> 00:23:42,280 Speaker 1: to clear out these problems as they occur? Look, it's 427 00:23:42,400 --> 00:23:44,720 Speaker 1: it's it's a very differentiative reality as a lot of 428 00:23:44,760 --> 00:23:48,359 Speaker 1: etrogeneity when to talk about EM, I think you know 429 00:23:48,480 --> 00:23:50,960 Speaker 1: many countries who go through a process of adjustment, but 430 00:23:51,119 --> 00:23:53,439 Speaker 1: avoiding a crisis like an adjustment is not a crisis. 431 00:23:53,520 --> 00:23:56,680 Speaker 1: If the reality is different, access to external funding will 432 00:23:56,720 --> 00:23:59,919 Speaker 1: be most elective and at a different price, So they 433 00:24:00,040 --> 00:24:03,240 Speaker 1: cannot count on external levers in order to grow and develop. 434 00:24:03,320 --> 00:24:05,480 Speaker 1: So this is basically a shock to their funding conditions, 435 00:24:05,480 --> 00:24:08,280 Speaker 1: a shock to the capital account. Countries that are more 436 00:24:08,400 --> 00:24:12,119 Speaker 1: dependent on abundant and ship equal liquidity, they have to 437 00:24:12,160 --> 00:24:15,560 Speaker 1: adjust adjust Perhaps the adjustment will be a lot more 438 00:24:15,680 --> 00:24:18,520 Speaker 1: severe and some of them, depending on the policy response, 439 00:24:18,600 --> 00:24:21,639 Speaker 1: may even experience and a sharp drop in activity and 440 00:24:21,800 --> 00:24:24,360 Speaker 1: eventually even a crisis. And I think those are more 441 00:24:24,440 --> 00:24:27,560 Speaker 1: isolated episodes then you know, if you paint a broad 442 00:24:27,640 --> 00:24:29,800 Speaker 1: brush across M, I think I am today is in 443 00:24:29,840 --> 00:24:32,239 Speaker 1: better shape how bets and they were before. Just how 444 00:24:32,320 --> 00:24:34,680 Speaker 1: manageable is the deadload? Though, with rates do start to 445 00:24:34,720 --> 00:24:37,680 Speaker 1: continue to grind high Fitch pointing out and report this 446 00:24:37,880 --> 00:24:40,800 Speaker 1: week the e M debt has now grown Outstanding debt 447 00:24:40,920 --> 00:24:44,000 Speaker 1: is growing to nineteen trillion dollars from five trillion a 448 00:24:44,040 --> 00:24:49,600 Speaker 1: decade earlier. That's a substantial increase. Can em handle higher 449 00:24:49,680 --> 00:24:52,399 Speaker 1: rates from here? It is indeed, it depends where the 450 00:24:52,480 --> 00:24:55,399 Speaker 1: that is being warehoused. Is that of the public sector, 451 00:24:55,560 --> 00:24:58,120 Speaker 1: of the corporate? Is it hadged? You know, these economies 452 00:24:58,160 --> 00:25:00,399 Speaker 1: have also expanded it also as a share of GDP. 453 00:25:00,840 --> 00:25:03,760 Speaker 1: Perhaps the numbers are not scary, but it is a challenge. 454 00:25:03,800 --> 00:25:06,280 Speaker 1: You know, they have you know they have uh, they 455 00:25:06,320 --> 00:25:09,959 Speaker 1: have increased their external leverage. That's why it's important at 456 00:25:10,000 --> 00:25:12,520 Speaker 1: this stage, when the external conditions are shifting to a 457 00:25:12,600 --> 00:25:15,440 Speaker 1: reality that's less supporting, I will not go necessarily the 458 00:25:15,480 --> 00:25:18,040 Speaker 1: external environment as adverse. We am it's just less friendly 459 00:25:18,080 --> 00:25:20,840 Speaker 1: that what used to be. So that requires more discipline, 460 00:25:20,880 --> 00:25:23,320 Speaker 1: both monetary and fiscal. You know that should be to 461 00:25:23,560 --> 00:25:25,520 Speaker 1: some to some extent, the end of the story does 462 00:25:25,560 --> 00:25:29,520 Speaker 1: not necessarily need to trigger very perverse dynamics that make 463 00:25:29,640 --> 00:25:32,880 Speaker 1: you know, these uh, these economies enter into a crisis 464 00:25:33,240 --> 00:25:36,280 Speaker 1: very quickly, does it? Is it more of I M 465 00:25:36,440 --> 00:25:41,040 Speaker 1: S to the rescue For some it will, But again, 466 00:25:41,080 --> 00:25:43,800 Speaker 1: you know, going back to Argentina does not solve their 467 00:25:43,920 --> 00:25:47,400 Speaker 1: underlying problem. Their underlying problem is a very large physical deficit, 468 00:25:47,480 --> 00:25:50,640 Speaker 1: but provides a steady source of funding much cheaper than 469 00:25:50,760 --> 00:25:53,800 Speaker 1: what they would benefit if they had to access the market, 470 00:25:53,840 --> 00:25:55,440 Speaker 1: but does not solve the problem. The MF is not 471 00:25:55,520 --> 00:25:57,560 Speaker 1: going to solve their problem. The problem needs to be 472 00:25:57,680 --> 00:26:00,720 Speaker 1: solved by you know, the right implement asan off the 473 00:26:00,840 --> 00:26:04,200 Speaker 1: right policies. This has been wonderful, Heart Aromas, thank you 474 00:26:04,280 --> 00:26:07,160 Speaker 1: so much, really really appreciate this briefing ease with Goldman 475 00:26:07,200 --> 00:26:17,679 Speaker 1: Sex and their Latin American research team. Thanks for listening 476 00:26:17,800 --> 00:26:22,320 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 477 00:26:22,359 --> 00:26:27,600 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 478 00:26:28,160 --> 00:26:31,480 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 479 00:26:31,560 --> 00:26:34,920 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.