WEBVTT - Coal is Going to Zero, Straszheim Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.520 Bloomberg dot Com, and of course on the Bloomberg From 0:00:33.520 --> 0:00:37.080 Morgan Stanley joining us in New York. Jennifer's around. Jennifer, 0:00:37.159 --> 0:00:39.800 go through the numbers for me. What are we looking at? UM? Well, 0:00:39.840 --> 0:00:42.000 I think the first number everyone likes to look at 0:00:42.000 --> 0:00:44.320 his fixed income trading, and that was a little bit 0:00:44.320 --> 0:00:47.040 of a miss. They came in at eight eight million. 0:00:47.080 --> 0:00:49.440 Analysts were thinking it would be closer to one point 0:00:49.640 --> 0:00:52.320 two billion UM, and so you know, that's been the 0:00:52.320 --> 0:00:55.440 case across Wall Street. You know, yesterday Goldman also reported 0:00:55.480 --> 0:00:58.920 a miss UM. Now this has been like an ongoing competition. 0:00:58.920 --> 0:01:02.120 We'regan Stanley really gay eating some ground on Goldman UM 0:01:02.160 --> 0:01:04.240 and it seems like maybe they slipped a little bit 0:01:04.280 --> 0:01:07.319 this quarter. Uh, but they're up in early trading, and 0:01:07.319 --> 0:01:09.280 so I'm thinking that people have kind of shifted their 0:01:09.319 --> 0:01:11.600 focus a little bit UM and looked at their wealth 0:01:11.640 --> 0:01:15.479 management unit, which posted both record income and record revenues 0:01:15.920 --> 0:01:18.520 UM that you know, James Gorman made this huge back 0:01:18.520 --> 0:01:20.679 back in two thousand nine when he bought Smith Barney, 0:01:20.720 --> 0:01:23.440 and it seems like maybe that's starting to show the results. 0:01:23.680 --> 0:01:26.120 And Jennifer Morgan Stanley of course less dependent on Fick 0:01:26.160 --> 0:01:28.720 trading revenue than say a Goldman Sacks, much more dependent 0:01:28.760 --> 0:01:30.839 on the equity side of the bank, and equity sales 0:01:30.880 --> 0:01:33.319 and trading revenue coming in at one ninety two the 0:01:33.440 --> 0:01:35.720 estimate at one point eight nine billions, So looking solid 0:01:35.720 --> 0:01:38.160 there and looking solid out swhere. James Gorman is doing 0:01:38.160 --> 0:01:40.440 a terrific job here. And we spend a lot of 0:01:40.440 --> 0:01:43.600 time talking about Jamie Diamond at JP Morgan Lloyd Blank 0:01:43.640 --> 0:01:46.200 find at Gorman Sacks. But Gorman's like the quiet man 0:01:46.200 --> 0:01:50.320 on Wall Street delivering some pretty solid results for Morgan Stanley. Yeah, 0:01:50.520 --> 0:01:52.560 he has a strong bench, you know. He um he 0:01:52.640 --> 0:01:55.760 promoted Ted pick there Um he's now their global head 0:01:55.760 --> 0:01:58.680 of sales and trading after Ted pick Uh turned around 0:01:58.800 --> 0:02:01.400 the equities business. And it seems like he just knows 0:02:01.440 --> 0:02:04.320 who to surround himself with. Maybe and so uh that 0:02:04.520 --> 0:02:07.400 unit has actually um, like I said, gained ground on 0:02:07.440 --> 0:02:10.640 Goldman in the last couple of years. And Um is 0:02:10.720 --> 0:02:13.240 it's really starting to show the results that the bank 0:02:13.280 --> 0:02:16.079 had promised. Is it fair to say, Jennifer that Morgan 0:02:16.160 --> 0:02:18.240 Stanley is more of a UBS than it is a 0:02:18.240 --> 0:02:20.840 Goldman Sax? Are we not there yet? I don't think 0:02:20.880 --> 0:02:23.720 we're quite there yet. I mean, I still think, um, 0:02:23.760 --> 0:02:25.760 I think it's still a trading shop. I think, I mean, 0:02:25.800 --> 0:02:29.600 obviously wealth management has become increasingly important to the bank, UM, 0:02:29.720 --> 0:02:33.000 but I think that they are still um, still thought 0:02:33.000 --> 0:02:35.040 of as a trading shop, at least by investors. Bloom 0:02:35.040 --> 0:02:38.440 Bug's very young Jennifer surrounded by investors this morning some 0:02:38.520 --> 0:02:41.120 confidence after the numbers. The stock up by around about 0:02:41.120 --> 0:02:44.120 one four percentage point in the pre market. I'm Jonathan 0:02:44.160 --> 0:02:46.440 Farao in New York City for Bloomberg Surveillance over in 0:02:46.480 --> 0:02:49.239 the city of London all week. Bloomberg's Tom kink and 0:02:49.320 --> 0:02:51.639 morning Mr king A. You're morning, John Farrell. Interesting to 0:02:51.680 --> 0:02:54.360 see Morgan Stanley there off of Goldmen Sex yesterday. It'll 0:02:54.360 --> 0:02:57.040 be sliced and dice to the day. But really what 0:02:57.160 --> 0:02:59.520 this is about, whether you are part of global Wall Street, 0:02:59.520 --> 0:03:02.760 whether you're just an informed investor, or we think all 0:03:02.800 --> 0:03:06.639 of you listening across a bite body of age groups. Uh. 0:03:06.680 --> 0:03:08.240 And I've run into a lot of people John in 0:03:08.320 --> 0:03:10.480 London who you know, they're not really in the game, 0:03:10.560 --> 0:03:12.600 but they just love listening to us and we say 0:03:12.639 --> 0:03:14.799 good morning. And we do that with Bill Blaine of 0:03:14.840 --> 0:03:16.839 Mint Partners, and we can go right to the heart 0:03:16.840 --> 0:03:19.440 of the matter, Bill Blaine, which is whether it's Morgan 0:03:19.560 --> 0:03:23.520 Stanley or somebody listening on the street seventy miles north 0:03:23.560 --> 0:03:27.680 of London, it's about volatility. There's no volve there, there's 0:03:27.720 --> 0:03:31.760 no alpha, there's no dampening, there's no opportunity. The economists 0:03:31.800 --> 0:03:34.280 would say it comes down to lower potential g d P. 0:03:34.760 --> 0:03:37.520 Is this something we need to get used to? Well, 0:03:37.720 --> 0:03:41.160 that's fair. And you mentioned volatility because just the last 0:03:41.240 --> 0:03:43.560 few days, in the beginning of last week and into 0:03:43.600 --> 0:03:47.280 this week, we are actually beginning to see volatility slightly 0:03:47.600 --> 0:03:51.480 taking up and that's going to present all kinds of opportunities, 0:03:51.520 --> 0:03:54.120 but also leaves people with an awful lot of work 0:03:54.200 --> 0:03:56.160 to do to make sure them the right side of 0:03:56.160 --> 0:03:59.680 that volatility. If it's going to continue increasing, I think 0:03:59.680 --> 0:04:03.440 we're in to something of a new market. Well, we're 0:04:03.480 --> 0:04:05.320 you know, in something of a new market. And I 0:04:05.320 --> 0:04:08.080 guess there's a quiet tour. How does Global Wall Street? 0:04:08.120 --> 0:04:10.480 How does the city? How does New York? How does 0:04:10.560 --> 0:04:13.080 Hong Kong? How do they adapt to this? Do you 0:04:13.120 --> 0:04:16.280 say to Jim Gorman, James Gorman over at Morgan Stanley 0:04:16.360 --> 0:04:18.680 or Lloyd Blank find this is a one off, it's 0:04:18.720 --> 0:04:21.120 a cyclical thing. You keep the game going, or do 0:04:21.120 --> 0:04:25.160 you start to really make structural structural changes in institutional 0:04:25.160 --> 0:04:28.560 Wall Street, institutional Wall Street of courses or as you 0:04:28.640 --> 0:04:30.560 call it, we would call it the city of London. 0:04:30.600 --> 0:04:34.480 Of course. Um, it's always changing, it's always adapting. Here 0:04:34.520 --> 0:04:38.560 in Europe, we're coping with the effects of the imposition 0:04:38.600 --> 0:04:43.640 and new trading rules. Method to market makers and investment 0:04:43.680 --> 0:04:45.919 banks all around the world are going to have to 0:04:46.040 --> 0:04:49.400 change when it comes to dealing with European clients in 0:04:49.480 --> 0:04:51.840 terms of the way they structure of their own business. Though, 0:04:52.160 --> 0:04:55.320 they are going to be preparing for this usual cyclicality 0:04:55.440 --> 0:05:00.680 we see in in trading fixed income, in commodities. Um results, 0:05:00.720 --> 0:05:04.720 We're going to see banks re establish themselves in different 0:05:04.800 --> 0:05:07.520 areas to try and take advantage of where they perceive 0:05:07.640 --> 0:05:10.479 that market going at the moment. You're absolutely right. The 0:05:10.560 --> 0:05:13.599 numbers have been very poor right across the board, but 0:05:13.680 --> 0:05:16.880 they will improve. Bill, who's getting this right right now, 0:05:17.080 --> 0:05:18.960 whether they're in Europe or on Wall Street in the 0:05:19.040 --> 0:05:21.960 United States? Which bank, which CEO has got this right? 0:05:22.240 --> 0:05:25.120 Given the current regime we're working our way through. I 0:05:25.200 --> 0:05:28.880 don't think anyone really has it perfect yet. And it's 0:05:29.000 --> 0:05:32.800 very interesting to see that, John, because we are in 0:05:32.800 --> 0:05:37.080 this period that Tom's just described where zero ball has 0:05:37.160 --> 0:05:41.440 created this massive downturn and thick incomes. It's the person 0:05:41.520 --> 0:05:45.800 who can anticipate best and be positioned for the uptick 0:05:45.880 --> 0:05:49.440 when it comes. Now, when that up case tick comes 0:05:49.520 --> 0:05:52.159 is the absolute question. Is it going to be a 0:05:52.200 --> 0:05:55.600 result of the inflation we were talking about earlier? Is 0:05:55.640 --> 0:05:57.720 it going to be a result of the of a 0:05:57.839 --> 0:06:01.599 suddenly discovering that far from global aligned macro growth, we 0:06:01.640 --> 0:06:05.120 actually roll into some kind of recession which would trigger 0:06:05.160 --> 0:06:09.120 all kinds of market events. These are all vole creating events, 0:06:09.560 --> 0:06:12.560 and that's when the smarter trading desks are going to 0:06:12.600 --> 0:06:16.520 be able to contribute substantial profits to the right investment bank. 0:06:16.960 --> 0:06:20.160 And of course that has ever thus been the problem. Well, 0:06:20.200 --> 0:06:23.839 so arguably Bill that's Goldment Sex ready to go leverage 0:06:23.839 --> 0:06:26.720 to a pickup involved when that story comes around Goldment 0:06:26.760 --> 0:06:29.760 Sex just deliver. But many people are questioning the firm strategy. Bill, 0:06:29.800 --> 0:06:32.520 do you question the firm strategy or are you saying 0:06:32.560 --> 0:06:35.480 that Lloyd's doing this right quite patiently in the coming 0:06:35.520 --> 0:06:39.279 chord as things will change. Good good opera. Good call 0:06:39.360 --> 0:06:41.120 to try and get me to comment on any of 0:06:41.360 --> 0:06:44.080 the banks individually, But I don't think it would be 0:06:44.120 --> 0:06:47.640 fair for me to comment at any one bank in particular. 0:06:48.080 --> 0:06:52.480 But it is fair to say that the shall we say, 0:06:52.520 --> 0:06:57.000 the benches on all the investment banks have changed in 0:06:57.040 --> 0:07:00.279 recent years. I certainly pick up from the class bants 0:07:00.360 --> 0:07:03.240 we speak to in my company is a large brokerage, 0:07:03.520 --> 0:07:06.440 but from the client's way speak to, they are finding 0:07:06.480 --> 0:07:09.320 that the service that they're getting from the investment banks 0:07:09.320 --> 0:07:12.480 over the last few years has changed. And that's because 0:07:12.520 --> 0:07:16.360 the investment banks don't want the high costs of having older, 0:07:16.600 --> 0:07:19.840 very expensive managers in place. They want to have younger, 0:07:19.920 --> 0:07:23.480 cheaper graduates doing the calls. They also want to cut 0:07:23.560 --> 0:07:26.360 down on the risk that they are willing to cover 0:07:27.000 --> 0:07:29.760 or to carry, and that's also been reinforced by the 0:07:29.800 --> 0:07:31.840 trading rules that have been put on them by the 0:07:31.880 --> 0:07:36.080 central banks and regulatory authorities, and as a result, the 0:07:36.160 --> 0:07:39.680 banks are far less responsive to change and many of 0:07:39.720 --> 0:07:42.960 them look tired. As one of my clients said recently, 0:07:43.240 --> 0:07:46.000 that opens up loads of new opportunities for people to 0:07:46.040 --> 0:07:49.760 look at alternative ways of trading very quickly. Here and Sterling, 0:07:49.760 --> 0:07:52.000 do you ever call? We had a huge variation on 0:07:52.040 --> 0:07:55.720 the shows, Right and Sterling. One of the very interesting 0:07:55.760 --> 0:08:00.240 things is despite all the negativity in the UK out 0:08:00.280 --> 0:08:03.920 Brexit and the Karelian event this week, Starling is strong. 0:08:04.080 --> 0:08:06.280 Why is that? I think it's because people are looking 0:08:06.320 --> 0:08:09.560 past the immediate news and are looking forward to the 0:08:09.680 --> 0:08:13.840 UK reversing the current decline that's apparent and a stronger 0:08:13.840 --> 0:08:20.000 and more productive economy and marriaging despite Brexit. Fascinating, Bill Blane, 0:08:20.000 --> 0:08:22.040 thank you so much. We've been partners for the briefing 0:08:22.040 --> 0:08:40.199 this morning on Bloomberg Radio Bloomberg Television as well. How 0:08:40.240 --> 0:08:43.960 could it possibly be that one of the most acute, sharpest, 0:08:44.080 --> 0:08:49.440 at persistent critics of modern American politics is in England? 0:08:49.760 --> 0:08:52.120 John Farrell would understand that. Of course, I'm talking about 0:08:52.200 --> 0:08:56.160 John Farrell. I'm also talking about Brian Class. He's at 0:08:56.200 --> 0:08:59.120 the London School of Economics. He made a modest splash 0:08:59.160 --> 0:09:02.199 a number of years ago. The Despot's accomplice followed it 0:09:02.280 --> 0:09:07.560 up with Donald Trump's attack on democracy, uh aging eight 0:09:07.600 --> 0:09:10.040 weeks ago. It seems forever when you're publishing on the 0:09:10.040 --> 0:09:13.719 political milieu of the day, Doctor Class. It's just extraordinary 0:09:14.040 --> 0:09:17.360 how quickly it all blurs by. If you were to 0:09:17.400 --> 0:09:22.200 rewrite the Desperates Despot's Apprenticed right now, what would the 0:09:22.200 --> 0:09:25.720 next chapter be? Uh, probably about the politicization of rule 0:09:25.760 --> 0:09:28.480 of law and the recklessness with North Korea. UM. You know, 0:09:28.520 --> 0:09:30.800 I think it is truly remarkable this moment we're in 0:09:30.880 --> 0:09:33.880 where things seem like an an eternity ago. And you know, 0:09:33.920 --> 0:09:37.240 the tweet that Trump sent out about how his button 0:09:37.360 --> 0:09:40.520 was bigger than Kim Jongon's was like nine days ago, 0:09:40.720 --> 0:09:42.560 you know, I mean, it seems like ancient history, and 0:09:42.640 --> 0:09:45.480 yet these things are political moment is moving so quickly 0:09:45.520 --> 0:09:48.080 that people can't keep up. And and what's interesting here 0:09:48.160 --> 0:09:51.440 John Farrow's ambassador Gardner was with us, the former US 0:09:51.559 --> 0:09:54.480 ambassador to the EU, and he went right to where 0:09:54.559 --> 0:09:58.160 doctor Class went to. He went right to Korea. Is 0:09:58.200 --> 0:10:00.280 the issue of the moment and R Class, so think 0:10:00.280 --> 0:10:02.160 you bring up a really good point. Not only does 0:10:02.320 --> 0:10:04.600 nine days ago feel like a distant memory, I think 0:10:04.640 --> 0:10:08.360 we've become obsessed around very specific things that maybe aren't 0:10:08.360 --> 0:10:11.320 too significant. So we become obsessed by a book called 0:10:11.480 --> 0:10:14.120 called Far and Fury and the relationship between the President 0:10:14.120 --> 0:10:17.079 of the United States and Mr Bannon. In the meantime, 0:10:17.200 --> 0:10:20.040 things are happening behind the scenes that don't get attention. 0:10:20.080 --> 0:10:22.440 So my question to you, Brian, it's quite simple, what 0:10:22.520 --> 0:10:26.559 are we missing whilst we're distracted by things that might 0:10:26.600 --> 0:10:29.439 not mean too much. So I think what we're missing 0:10:29.600 --> 0:10:31.480 is the fact that there is a huge risk of 0:10:31.520 --> 0:10:35.760 an unpredictable crisis emerging. So every US president in modern 0:10:35.800 --> 0:10:39.240 history is dealt with one shortly after taking office. President H. W. 0:10:39.400 --> 0:10:42.079 Bush dealt with the fall of the Berlin Wall. Clinton 0:10:42.120 --> 0:10:44.440 dealt with the Rwanan genocide and the black Hawk Down 0:10:44.440 --> 0:10:47.040 incident in Somalia. Then you have George W. Bush with 0:10:47.080 --> 0:10:50.560 September eleven, and Obama had to deal with the financial meltdown. 0:10:50.720 --> 0:10:54.000 Trump has amazingly made it about a year without any 0:10:54.120 --> 0:10:57.040 major severe international crisis that just dropped in his lap. 0:10:57.040 --> 0:10:59.160 And I think, you know, the world is a tumultuous 0:10:59.200 --> 0:11:01.840 and dangerous play and that's where the stories like Fire 0:11:01.880 --> 0:11:04.160 and Fury actually come into play as relevant. Is they 0:11:04.160 --> 0:11:07.440 show that, Okay, what happens when this person who is 0:11:07.480 --> 0:11:12.720 clearly reckless, impulsive, and has serious questions about their fitness 0:11:12.720 --> 0:11:15.160 for office swirling around them even within their own party, 0:11:15.440 --> 0:11:19.520 has to deal with a major, serious, consequential international crisis. 0:11:19.520 --> 0:11:22.000 And that's where I think we are sort of just 0:11:22.440 --> 0:11:25.199 deluding ourselves to believe that there will be no consequences 0:11:25.200 --> 0:11:27.520 to this presidency. So, Brian, I was listening to Gillian 0:11:27.559 --> 0:11:29.800 Tett at the Financial Time Speak a couple of nights ago, 0:11:29.840 --> 0:11:33.120 and she compared the current situation to an Agaca Thristy novel, 0:11:33.440 --> 0:11:35.520 whereby there's a big noise in the kitchen and everyone 0:11:35.600 --> 0:11:38.240 rushes towards the kitchen, but the murder takes place in 0:11:38.280 --> 0:11:40.959 the library, and we're constantly distracted by what's handing in 0:11:40.960 --> 0:11:43.199 the kitchen, but ultimately what is handling in the library 0:11:43.280 --> 0:11:46.880 is much more significant. Does that resonate with you too, Brian? 0:11:47.840 --> 0:11:49.960 So yes, and no. I mean I think that absolutely 0:11:50.000 --> 0:11:52.240 we are distracted by small things, but I think that 0:11:52.320 --> 0:11:54.800 the small things captivate us because they speak to this 0:11:54.920 --> 0:11:57.199 larger truth, which is that the person in charge of 0:11:57.200 --> 0:11:59.439 the United States is both out of step with democratic 0:11:59.520 --> 0:12:02.839 values in the United States and is clearly unfit to 0:12:02.880 --> 0:12:05.280 be president. I mean, it's it's something where there's an 0:12:05.280 --> 0:12:07.360 it's an open secret in Washington, and I don't even 0:12:07.360 --> 0:12:10.280 think it's that shocking of a claim to say that. Privately, 0:12:10.320 --> 0:12:13.080 most Republicans would agree with that sentiment, and then they 0:12:13.120 --> 0:12:16.680 would publicly say something different. But it's a democracy, and 0:12:16.760 --> 0:12:19.800 you're really, you know, we're buying everybody says he Isn't 0:12:19.800 --> 0:12:21.679 he like forty years older than he is. I mean, 0:12:21.720 --> 0:12:26.679 you're the young turk of democratic analysis. To the supporters 0:12:26.679 --> 0:12:30.560 of the president, the guy won, he did, And I 0:12:30.559 --> 0:12:34.200 think it's important that the message he used resonated with people, right. 0:12:34.520 --> 0:12:37.480 I think there's absolutely legitimate grievances that Trump tapped into 0:12:37.520 --> 0:12:39.680 about the state of the economy and all of the 0:12:39.720 --> 0:12:43.000 aspects of his presidency that resonate with those people are important. 0:12:43.360 --> 0:12:46.640 But I think there's also a factor of democracy where 0:12:46.640 --> 0:12:48.840 you have to also, once you're in power, respect the 0:12:48.880 --> 0:12:51.240 norms of the system, which he does not do um 0:12:51.280 --> 0:12:53.360 And so I think, you know, over the long term, 0:12:53.400 --> 0:12:57.320 this recklessness, this abuse of democratic norms, basic checks and 0:12:57.360 --> 0:13:00.760 balances that he's engaging in are meaningful. When does the 0:13:00.840 --> 0:13:03.960 third book come out? Actually, I have another book coming 0:13:03.960 --> 0:13:07.880 out and that that I co wrote with Professor Nick 0:13:07.960 --> 0:13:10.560 Cheeseman in Birmingham called How To Rigging Election about election 0:13:10.640 --> 0:13:13.840 rigging around the world. So it's a it's it's excuse 0:13:13.880 --> 0:13:16.559 we saved the punchline. Did we rigged the election in 0:13:16.600 --> 0:13:19.839 the United States? Looking back? So there wasn't election rigging 0:13:19.840 --> 0:13:21.600 in the United States, but I think that there was. 0:13:22.120 --> 0:13:25.560 There's a chapter on international election medaling and hacking, which 0:13:25.600 --> 0:13:26.959 is going to become the new normal. I mean, I 0:13:27.040 --> 0:13:29.280 just saw jerry mandering folks in the southern part of 0:13:29.280 --> 0:13:32.240 the United States where the congressman put his summer home 0:13:32.760 --> 0:13:37.560 into the new district. He did a little that's positively British. 0:13:37.760 --> 0:13:39.920 So jerry mannering is a huge problem. And one of 0:13:39.920 --> 0:13:42.240 the things that I think is the hidden story about 0:13:42.240 --> 0:13:46.079 how polarization has taken root in American politics and going 0:13:46.120 --> 0:13:48.400 to have consequences related to it for a long time, 0:13:48.760 --> 0:13:51.079 is that the average margin of victory in two sen 0:13:51.160 --> 0:13:55.320 was mostly uncompetitive elections. We're so happy to have you 0:13:55.360 --> 0:13:58.960 into our London offices. Professor Class Brian Class look for him, 0:13:59.000 --> 0:14:01.920 particularly out on Twitter, with whether you agree or disagree 0:14:01.920 --> 0:14:06.120 with them doesn't matter, It's just an intelligent newsflow of 0:14:06.200 --> 0:14:21.640 debate and dialogue on these too much was times in China. 0:14:21.720 --> 0:14:24.360 The big story the economy ceiling its first full year 0:14:24.400 --> 0:14:28.080 acceleration since twenty ten. There's one man I always like 0:14:28.160 --> 0:14:30.400 to go to to talk China and his name is 0:14:30.480 --> 0:14:32.840 Don stress Sign. He was for twelve years the former 0:14:32.960 --> 0:14:35.600 Merrill Lynch Global Chief Economists. Then Mike milk and called 0:14:35.640 --> 0:14:38.320 and he became the president of the Milken Institute. He 0:14:38.360 --> 0:14:41.360 has now the ever core I s I Senior Managing 0:14:41.400 --> 0:14:45.240 Director for China. Specifically, don't great to have you with 0:14:45.320 --> 0:14:47.520 us on the program to get your insight into numbers 0:14:47.560 --> 0:14:50.120 that a lot of people are always confused by, or 0:14:50.160 --> 0:14:54.160 what do you make of Chinese GDP figures at the moment? Well, 0:14:54.360 --> 0:14:57.880 first thing I'd say, Jonathan is they've been roughly flat 0:14:57.960 --> 0:15:00.720 now for six years in a row. We go up 0:15:00.720 --> 0:15:04.120 and down in that tenth or two. This is implausible 0:15:04.760 --> 0:15:08.560 given all the things that have happened in China and 0:15:08.680 --> 0:15:12.280 happened around the world in markets that they serve. So 0:15:12.400 --> 0:15:16.320 we read these numbers quite frankly with a sense of 0:15:16.360 --> 0:15:19.760 obligation more than a sense of to learn that we're 0:15:19.800 --> 0:15:23.160 going to learn anything. It doesn't make sense just looking 0:15:23.160 --> 0:15:25.920 in from thirty five feet that you can have the 0:15:25.960 --> 0:15:28.960 prospect of a real heart landing and growth. So o, 0:15:29.080 --> 0:15:32.800 kate in real concerns about how they're going to sort 0:15:32.800 --> 0:15:35.680 out the debt pile and then growth. So Kate, what's 0:15:35.680 --> 0:15:39.640 happening Tom? What leave is they pulling that makes things okay? Well, 0:15:40.080 --> 0:15:43.200 it is a command and control economy. Chinese economy was 0:15:43.360 --> 0:15:46.840 terrible in two thousand and fifteen, much worse than they 0:15:47.040 --> 0:15:51.720 ever reported. Uh. They did a lot of stimulus in 0:15:51.760 --> 0:15:55.200 their own political interest anticipating the party congress and the 0:15:55.280 --> 0:15:59.960 handover in the end of seventeen, so that lifted the 0:16:00.040 --> 0:16:04.400 economy a lot. In Uheen. A lot of that was 0:16:04.440 --> 0:16:07.480 infrastructure spending. You can't build a subway in a year. 0:16:08.040 --> 0:16:11.200 There are five year projects. So there's still some of 0:16:11.240 --> 0:16:15.920 that going. But the longer term prospects are for China's 0:16:15.920 --> 0:16:19.560 growth rate to slow year after year after year. So 0:16:19.560 --> 0:16:21.920 don't we have these dead issues kind of bubbling underneath 0:16:21.920 --> 0:16:23.760 the economy. But at the same time, I was told 0:16:23.760 --> 0:16:25.840 that they would shift from the old economy dependent on 0:16:25.880 --> 0:16:29.240 exports to the world, to an economy the new economy, 0:16:29.560 --> 0:16:34.480 domestic consumption, et cetera. I still see a pronounced move 0:16:35.000 --> 0:16:39.600 in the old economy and export based growth through Is 0:16:39.640 --> 0:16:43.840 that what you see? Two exports contributed more in seventeen 0:16:43.920 --> 0:16:47.640 than they did in in China. That part is true. 0:16:48.160 --> 0:16:53.280 But they also are making big changes within the industrial sector. 0:16:53.400 --> 0:16:58.400 Coal is going to zero, not just in China, worldwide. 0:16:58.960 --> 0:17:03.120 That's important. The steel industry is going to migrate ninety 0:17:03.200 --> 0:17:06.960 percent out of China over the next two or three 0:17:06.960 --> 0:17:13.560 decades to lower wage countries India, Bangladesh, India all the 0:17:13.600 --> 0:17:18.360 way to Africa. So they're going to have issues with 0:17:18.560 --> 0:17:20.560 what are we gonna do with these people? The fifty 0:17:20.600 --> 0:17:23.200 five year old guy that's been working at Wuhan Steel 0:17:23.280 --> 0:17:26.760 for twenty years is not going to get hired by Okay, 0:17:26.800 --> 0:17:28.439 we've gotta rip up the script here. I mean what 0:17:28.520 --> 0:17:30.320 you always do with When do I ever talked to 0:17:30.359 --> 0:17:32.560 down strats Im, folks were having ripped up the script. 0:17:32.560 --> 0:17:36.000 But we're doing it right now. You just said China 0:17:36.080 --> 0:17:40.240 is gonna lose steel jobs. Professor Navarro out of Irvine, 0:17:40.560 --> 0:17:43.359 Secretary Ross down in Washington on his way to Dabas 0:17:43.400 --> 0:17:45.760 with the President all just set up as they listened 0:17:45.760 --> 0:17:48.760 to surveillance and said, yeah, because those jobs are coming 0:17:48.760 --> 0:17:51.280 back to the United States. But that's not what you 0:17:51.320 --> 0:17:57.240 said down strats. I'm critique the naivete of a bipartisan 0:17:57.520 --> 0:18:02.439 labor dynamic and manufacture ring between the United States and China, 0:18:02.880 --> 0:18:07.920 given all of the multilateral realities of global labor um 0:18:07.960 --> 0:18:10.439 I think what's going to happen, Tom, is you're going 0:18:10.480 --> 0:18:15.600 to see this big push in China to the high 0:18:15.760 --> 0:18:20.360 end uh high value added manufacturing. They call it made 0:18:20.359 --> 0:18:26.080 in China. So the irony of this is the US, 0:18:27.440 --> 0:18:32.160 Northern Europe, Japan to some extent Korea have made their 0:18:32.160 --> 0:18:36.560 money in the last forty years at the top end 0:18:36.600 --> 0:18:42.040 of manufacturing all the high tech stuff. Now China says, okay, look, 0:18:42.520 --> 0:18:46.040 these are the industries that we, China want to become 0:18:46.119 --> 0:18:50.480 globally dominant in and have an oligopoli staten enterprises that 0:18:50.600 --> 0:18:55.080 are globally efficient. I find that that difficult. But they're 0:18:55.080 --> 0:18:58.520 setting up this competition that's going to make the US 0:18:58.600 --> 0:19:03.840 and Japan and Northern Europe very angry. So okay, let 0:19:03.840 --> 0:19:06.320 me translate that into time. King talk. China wants to 0:19:06.359 --> 0:19:09.040 do a little Switzerland. Can you do that within a 0:19:09.080 --> 0:19:15.280 totalitarian regime? UM, the the the the the great question, 0:19:15.359 --> 0:19:20.560 do the obvious it's the only good one of the day. 0:19:20.640 --> 0:19:31.040 Jonathan doesn't say that anyway, it's the only um Uh. 0:19:31.400 --> 0:19:34.679 They will use a lot of subsidies, a lot of 0:19:34.960 --> 0:19:39.960 UM special favors to lift those companies that they want 0:19:40.040 --> 0:19:45.760 to become globally dominant UM as a replacement quite frankly 0:19:46.320 --> 0:19:51.160 for the innovation and the entrepreneurship UM that you would 0:19:51.200 --> 0:19:54.720 find in a modern market economy. And they have quite frankly, 0:19:54.760 --> 0:19:58.480 I think no interest. So don't we have a situation 0:19:58.520 --> 0:20:01.000 set up? And Thomas Rudi and pulled question, we have 0:20:01.040 --> 0:20:03.640 a situation where the United States wants their jobs back 0:20:03.840 --> 0:20:06.159 in the old world, the old manufacturing world, and the 0:20:06.240 --> 0:20:08.919 Chinese are sank Okay, well, we've got a problem with that, 0:20:09.119 --> 0:20:11.280 but maybe you can take them because actually we'd like 0:20:11.359 --> 0:20:14.760 your value added manufacturing jobs. Anyway. That to me just 0:20:14.880 --> 0:20:18.879 spoused tension for years and years to come. How is 0:20:18.920 --> 0:20:20.600 this going to play out? Because the big fit coming 0:20:20.640 --> 0:20:24.879 into was trade protection is m more specifically from the 0:20:24.960 --> 0:20:27.000 U S side. But does the US have a case 0:20:27.080 --> 0:20:29.720 here that it needs to protect itself from an overreach 0:20:29.720 --> 0:20:32.320 from China. That's sank. We're coming after your jobs, the 0:20:32.359 --> 0:20:35.440 big ones, the wow paid jobs. I don't think Washington 0:20:35.600 --> 0:20:41.480 realizes yet that it is the jobs that the us 0:20:41.560 --> 0:20:46.280 UH favors that China once and they're all upset. We're 0:20:46.280 --> 0:20:49.359 gonna bring callback, We're gonna ring back, go steal jobs 0:20:49.359 --> 0:20:53.639 in Erie, Pennsylvania wherever, um, China is gonna say on 0:20:53.760 --> 0:20:59.720 those baker and the jobs that we think are going 0:20:59.760 --> 0:21:03.119 to be favored that we want are the ones that 0:21:03.240 --> 0:21:05.320 China wants to. This is a This is going to 0:21:05.359 --> 0:21:11.800 be a big tension builder. Washington says, only America first. 0:21:13.680 --> 0:21:19.080 She's in pink, says party first. So we have this 0:21:19.200 --> 0:21:24.400 situation now in which nobody is really thinking market economy. 0:21:24.560 --> 0:21:27.680 She's been pink. Surely is not okay. Don't you hung 0:21:27.720 --> 0:21:30.320 on every word at Davos last year when President she 0:21:30.440 --> 0:21:34.000 spoke review for US. Now is a great Chinese authority? 0:21:34.119 --> 0:21:37.840 What did the president of China say that President Trump 0:21:37.880 --> 0:21:41.800 has to bounce off of this year? Um. What he 0:21:42.000 --> 0:21:48.639 said was we China are prepared and ready to take 0:21:48.720 --> 0:21:56.119 over the global economic leadership. That Washington seems to no 0:21:56.280 --> 0:21:59.200 longer want Now this was before as you know this, 0:21:59.600 --> 0:22:05.240 you go there before the inauguration and before the only 0:22:05.280 --> 0:22:12.320 America first UH speech. My my feeling is, uh, Washington 0:22:13.119 --> 0:22:17.280 doesn't want to be the global leader and China is 0:22:17.320 --> 0:22:21.199 incapable of it. You can't be a leader unless you 0:22:21.240 --> 0:22:24.800 have followers. And I know of few countries that matter 0:22:25.760 --> 0:22:30.360 that I think that economic leadership, uh, that's being the 0:22:30.560 --> 0:22:34.480 economic behavior in China is something that they want to emulate. 0:22:35.240 --> 0:22:37.840 This has been hugely valuable, Down Stress, I'm thank you 0:22:37.880 --> 0:22:43.199 so much. Um. It will really focus us some. I 0:22:43.200 --> 0:22:46.960 feel we'll be talking to Dr Stress sim more in 0:22:47.000 --> 0:23:03.320 the coming weeks as well. It is an important survey 0:23:04.480 --> 0:23:06.760 from a conference word Bart van arc Worth, that's right 0:23:06.800 --> 0:23:10.000 now on the mood of CEOs. It's something they routinely 0:23:10.040 --> 0:23:13.359 trot out, except this year. It goes to the heart 0:23:13.440 --> 0:23:17.040 of the great American debate. Bart van ark Is decades 0:23:17.080 --> 0:23:20.639 of experience, not only a parsing economics of America, but 0:23:20.920 --> 0:23:23.199 linking that into what the conference board does, which is 0:23:23.240 --> 0:23:27.320 the behavioral mood, if you will, of what's going on. Bart, 0:23:27.400 --> 0:23:29.439 let me get right to the chase. We all know 0:23:29.600 --> 0:23:33.240 labor is tight. Why don't they just raise the wages? 0:23:34.240 --> 0:23:36.479