WEBVTT - Italy Election was Unexpected, Eichengreen Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.280 Bloomberg dot Com, and of course, on the Bloomberg. The 0:00:33.360 --> 0:00:37.120 news over the last few hours a two hundred billion 0:00:37.280 --> 0:00:41.320 dollar reduction of a trade surplus. Some China disputing reports 0:00:41.520 --> 0:00:44.240 this morning that it had offered to reduce its annual 0:00:44.280 --> 0:00:47.240 trade surplus with the United States by that number, with 0:00:47.400 --> 0:00:51.080 a Foreign Ministry officials saying he was unaware of any 0:00:51.159 --> 0:00:54.240 such concession. Where does the two billion come from? While 0:00:54.240 --> 0:00:56.920 the reduction in the U. S trade get with China 0:00:57.000 --> 0:01:00.560 by was on a list of demands that the president's 0:01:00.560 --> 0:01:04.480 administration made earlier this month, as Treasury Secretary Steve Manuchin 0:01:04.520 --> 0:01:07.200 led a delegation to Beijing. So just where are we? What? 0:01:07.280 --> 0:01:09.240 I'm really pleased to say that Barry I. Can Green 0:01:09.480 --> 0:01:12.760 University of California Berkeley professor joins us now the author 0:01:12.800 --> 0:01:16.400 of his new Berkeley Populist Temptation, Economic Grievance and Political 0:01:16.480 --> 0:01:18.880 Reaction in the Modern Era, and joining us on his 0:01:19.000 --> 0:01:22.200 most recent project syndicate column as well, China and the 0:01:22.280 --> 0:01:26.240 future of democracy, Barry, where better to begin than with China. 0:01:26.319 --> 0:01:27.920 Let's just begin with the news if we can, and 0:01:27.920 --> 0:01:29.640 we'll work our way through some of the work you've 0:01:29.640 --> 0:01:32.720 been doing recently. How realistic is it to get this 0:01:32.760 --> 0:01:38.639 trade surplus down two billion dollars? It's unrealistic period um. 0:01:38.680 --> 0:01:42.800 I think a number like that may be attainable over 0:01:42.840 --> 0:01:47.600 a decade um as a consequence of big changes in 0:01:47.640 --> 0:01:50.480 the structure of the Chinese economy, and maybe some changes 0:01:50.520 --> 0:01:53.400 in the structure of the U s economy as well, 0:01:53.680 --> 0:01:57.320 but not as a matter of government fiat. If China 0:01:57.400 --> 0:02:01.800 were to take major steps to curtail its exports to 0:02:01.840 --> 0:02:04.440 the US, it would export more to other markets, say 0:02:04.480 --> 0:02:08.040 to Europe, and other countries in Asia would redirect their 0:02:08.040 --> 0:02:11.520 exports towards the United States. Even if you deal with 0:02:11.560 --> 0:02:16.120 the bilateral trade balance, you don't end up solving the 0:02:16.240 --> 0:02:18.960 problem if you regard it as a problem of the 0:02:19.040 --> 0:02:22.560 overall US trade deficit. The other big issues as well. Barry. 0:02:22.639 --> 0:02:24.480 On the list of demands that the United States has 0:02:24.840 --> 0:02:27.919 reportedly given to China, this might be the easier one 0:02:27.960 --> 0:02:30.440 to get the Chinese to agree to. Bring this surplus 0:02:30.480 --> 0:02:33.720 down over an agreed period of time. The more difficult one, 0:02:33.760 --> 0:02:36.880 perhaps is to get the Chinese to stop subsidizing the 0:02:36.919 --> 0:02:41.520 industries around the made in China five effort. How difficult 0:02:41.560 --> 0:02:45.120 will that be? Barry? I agree that to focus on 0:02:45.160 --> 0:02:48.760 the trade deficit is to take our eyes off the 0:02:48.800 --> 0:02:53.880 more important issues. I don't think that China thing is 0:02:54.240 --> 0:02:58.880 a big or objectionable issue. Every country has an industrial 0:02:58.919 --> 0:03:01.520 policy and does things us to try to develop its 0:03:01.600 --> 0:03:07.280 high tech sectors. Where China violates international norms is in 0:03:07.400 --> 0:03:10.800 terms of intellectual property protections. And my worry is that 0:03:10.840 --> 0:03:14.040 if we focus on the headline trade deficit number and 0:03:14.040 --> 0:03:18.360 and congratulate ourselves on our ability to export more motor 0:03:18.480 --> 0:03:22.560 vehicles to China, we lose sight of what really matters, 0:03:22.680 --> 0:03:27.200 which is intellectual property rights. Bury the hallmark of your work, 0:03:27.400 --> 0:03:32.080 your books from Golden Fetters to Globalizing Capital, in the 0:03:32.240 --> 0:03:34.400 many many books that all of us have read, and 0:03:34.440 --> 0:03:37.400 of course this book Folcus is an immediate view of 0:03:37.480 --> 0:03:40.120 book of the year. This is on populism from Professor 0:03:40.160 --> 0:03:43.680 Eiken Green is the old phrase O B E. Then 0:03:43.680 --> 0:03:45.720 we get to a point where all our good thinking, 0:03:46.280 --> 0:03:49.840 where we're overcome by events. When you look at dollars strength, 0:03:50.000 --> 0:03:54.520 how close are we to being overcome by events? I 0:03:54.560 --> 0:04:00.320 think there is obviously a tendency to react excess of lee. 0:04:00.400 --> 0:04:05.640 That's what financial markets do. They react excessively to news. 0:04:05.720 --> 0:04:08.680 So people are extrapolating the recent rise of the dollar 0:04:08.760 --> 0:04:14.280 into the future and imagining that it could proceed much further. 0:04:14.400 --> 0:04:17.120 And that's part of the reason I think why emerging 0:04:17.200 --> 0:04:19.480 markets are having such a tough time at the moment. 0:04:19.480 --> 0:04:22.719 It could be that the dollar pauses, and that gives 0:04:23.400 --> 0:04:27.600 Argentina time, for example, to conclude its negotiations with the IMF. 0:04:27.720 --> 0:04:30.479 It gives Argentina time, but then you get knock on effects. 0:04:30.520 --> 0:04:33.440 For example, John I did log in honor of professor 0:04:33.480 --> 0:04:36.080 Ike Green. I did a semilog chart of Brazilian real 0:04:36.880 --> 0:04:39.920 which is curve a linear log, which means some acceleration 0:04:40.000 --> 0:04:43.839 back up to new Brazilian weakness. Is it a domino effect? 0:04:43.920 --> 0:04:47.040 Does it? Does it go from Argentina or Turkey onto 0:04:47.080 --> 0:04:49.640 other things? Is is that what we learned in Ecuador, 0:04:49.800 --> 0:04:53.640 Mexico or Thailand, what we learned from from that earlier 0:04:53.680 --> 0:04:58.040 experiences that investors can um go to sleep for extended 0:04:58.080 --> 0:05:01.320 periods and then something called s along to send them 0:05:01.320 --> 0:05:03.279 a wake up call. So I don't think there is 0:05:04.080 --> 0:05:09.120 economic spillover from Argentina Brazil, but there is a greater 0:05:09.160 --> 0:05:12.280 awareness all of a sudden that there's an election coming 0:05:12.279 --> 0:05:16.760 in Brazil later this year, and that could deliver the unexpected, 0:05:16.839 --> 0:05:22.520 as it did in Italy. I look, Barry at the 0:05:22.640 --> 0:05:25.839 political Maelstruman as we spoke on television this morning. I 0:05:25.880 --> 0:05:29.279 think our audience worldwide on radio wants to know what 0:05:29.360 --> 0:05:33.159 the backside of populism is. I mean, William Jennings Bryan 0:05:33.520 --> 0:05:37.480 was William Jennings Bryan and then things changed. How do 0:05:37.600 --> 0:05:42.280 things change? Is it just economic growth solves populous fears 0:05:42.279 --> 0:05:47.080 of elites. Economic growth certainly helps. So the economy in 0:05:47.120 --> 0:05:51.840 the United States had turned around in a year before 0:05:51.960 --> 0:05:57.360 that historic McKinley Brian election. Prices had begun to rise 0:05:57.480 --> 0:05:59.839 rather than falling, So all that help. That helped the 0:06:00.080 --> 0:06:03.960 armors and UH and the workers. But the other thing 0:06:04.000 --> 0:06:08.360 that happened was an effort to address distributional concerns and 0:06:08.480 --> 0:06:14.960 to strengthen competition anticrust policy, to deal with the railway monopolies. 0:06:15.320 --> 0:06:18.920 And UH. It's not only only growth, but it's also 0:06:19.800 --> 0:06:23.080 economic and social policy. More broadly, then you have to 0:06:23.080 --> 0:06:25.760 ask the question why are some countries better able to 0:06:25.800 --> 0:06:30.800 respond in that constructive manner, whereas in contrast, you saw 0:06:31.120 --> 0:06:34.760 in Italy and Germany in the ninet twenties no no 0:06:34.920 --> 0:06:39.120 response and UH an even more extreme swing to the right. 0:06:39.320 --> 0:06:42.359 Have we had the populist shock yet, Barry? Have we 0:06:42.400 --> 0:06:46.360 actually seen that and where have we seen it? Well? 0:06:46.400 --> 0:06:48.760 I think we have seen it in a sense that 0:06:48.800 --> 0:06:54.960 there's been a profound disaffection towards mainstream political parties, UH, 0:06:57.560 --> 0:07:03.520 criticism of the elites, UH, targeting immigrants, minorities and others, 0:07:04.240 --> 0:07:07.359 and and authoritarian tendencies. So if you asked me to 0:07:07.400 --> 0:07:12.560 define populism, I would say anti elite, anti authoritarian, and 0:07:12.800 --> 0:07:16.960 anti other where other can mean the wealthy bankers or 0:07:17.080 --> 0:07:20.120 or foreigners, depending on whether you have right wing or 0:07:20.240 --> 0:07:23.440 left wing populism. So, yes, we've seen it, we just 0:07:23.600 --> 0:07:27.320 don't know how it will end. Very congratulations on this effort, folks. 0:07:27.320 --> 0:07:30.720 I'll be direct. I've already downloaded it to the old kindle. 0:07:30.720 --> 0:07:32.360 I've got a big trip coming up and it will 0:07:32.400 --> 0:07:35.880 be major airplane reading. Already a shortlist for Book of 0:07:35.880 --> 0:07:40.480 the Year, The populist populist temptation by Barry Coon Green 0:07:40.560 --> 0:07:44.160 at the University of California at Berkeley. We greatly appreciate 0:07:44.200 --> 0:08:01.000 his attendance. Julia Carnado with us right now, with micro policies, 0:08:01.080 --> 0:08:03.360 we look at any number of things. I think, just 0:08:03.400 --> 0:08:05.520 because of time, Julie, I really want to focus in 0:08:05.920 --> 0:08:10.520 on the inflation dynamic. Is the Fed's measurement of inflation 0:08:10.640 --> 0:08:14.760 right now anywhere near accurate in the measurement of the 0:08:14.760 --> 0:08:19.280 inflation our viewers feel? Yes, I mean, I think that 0:08:19.560 --> 0:08:22.160 what they tend to look at is while they focus 0:08:22.200 --> 0:08:25.200 on core inflation as the underlying trend, they look at 0:08:25.200 --> 0:08:28.320 headline inflation. So right now we're seeing headline inflation perk 0:08:28.400 --> 0:08:31.640 up a bit on higher gas. Goods is coming up 0:08:31.640 --> 0:08:35.560 as well as it was. Actually, you know, broader goods, 0:08:35.600 --> 0:08:38.720 core goods prices really aren't showing the strength that they've 0:08:38.760 --> 0:08:41.320 been wanting to see. So we see things like auto 0:08:41.360 --> 0:08:45.120 prices coming down because auto the auto cycle is peaked 0:08:45.120 --> 0:08:48.040 and we're seeing auto demand come off. Auto prices are 0:08:48.440 --> 0:08:50.640 you know, people have to offer discounts to get people 0:08:50.640 --> 0:08:54.360 to buy cars now. So broadly speaking, the inflation picture 0:08:54.440 --> 0:08:58.520 looks pretty benign again abstracting from what consumers are going 0:08:58.559 --> 0:09:00.480 to feel as a big hit front gas prices in 0:09:00.520 --> 0:09:02.560 the near term overnight. John Fair, I bring this up 0:09:02.559 --> 0:09:05.280 because of Japan, where I mean, I'm sorry it was 0:09:05.360 --> 0:09:08.760 it was Mouldi nominal g d P John, and Mouldy 0:09:08.840 --> 0:09:12.080 inflation as well in Japan. Julia West thinky credit picture 0:09:12.160 --> 0:09:14.120 in the United States. Now, the New York Fed coming 0:09:14.120 --> 0:09:17.240 out with their high frequency data, the release of the 0:09:17.840 --> 0:09:21.599 credit loans and and looking at the number of consumers 0:09:21.600 --> 0:09:25.720 inquiring about taking a more credit within six months, and 0:09:25.760 --> 0:09:29.880 it's fallen into five point six five it's very very low. Yeah, 0:09:29.920 --> 0:09:32.440 So that reflects again the peaking of the auto cycle, 0:09:32.520 --> 0:09:36.360 less demand for auto's, less need for loans ferrautos. In general, 0:09:36.440 --> 0:09:40.400 consumers have not shown a taste for releveraging one. Credit 0:09:40.440 --> 0:09:45.120 standards are still pretty tight, but in general we really 0:09:45.160 --> 0:09:50.040 haven't seen that sort of rush to add on new obligations, 0:09:50.280 --> 0:09:52.800 even as the economy is better, in the labor market 0:09:52.840 --> 0:09:54.920 heats up a bit, so people will be sort of 0:09:54.920 --> 0:09:57.360 wandering about that drop of five point six five percent. 0:09:57.400 --> 0:10:00.160 I'm wondering whether that's related to tax savings, so that 0:10:00.200 --> 0:10:01.920 I need to take on more credits. So is there 0:10:01.960 --> 0:10:04.920 an optimistic story there or is this one of pessimism. 0:10:05.040 --> 0:10:07.360 I mean, that's a that's a pretty high frequency read. 0:10:07.440 --> 0:10:10.160 I mean I think, um, most consumers did see a 0:10:10.240 --> 0:10:14.199 small bump in their paychecks, but a lot of consumers 0:10:14.200 --> 0:10:17.839 are facing uncertainty because of higher state and local liabilities. 0:10:17.920 --> 0:10:20.360 So I think, net net, a lot of consumers are 0:10:20.360 --> 0:10:22.600 going to be really uncertain until they file their taxes 0:10:22.640 --> 0:10:24.839 next year about what the net effect of the tax 0:10:24.840 --> 0:10:28.160 cut is for them. So I wouldn't call this attack story. 0:10:28.240 --> 0:10:30.520 I just think in general, if you look at debt 0:10:30.559 --> 0:10:34.320 to income, consumers have been cautious the entire cycle, and 0:10:34.360 --> 0:10:37.400 there's no sign that that's about to fade. Are we 0:10:37.480 --> 0:10:40.240 make America great again? I mean, you've been more cautious 0:10:40.280 --> 0:10:43.080 in you you know, you made your reputation on being 0:10:43.160 --> 0:10:47.439 right about a more subtle and diminished GDP versus consensus 0:10:47.480 --> 0:10:50.439 at the time. If we're not at this represent run rate, 0:10:50.440 --> 0:10:52.640 where are we? Well? Look, I think a lot of 0:10:52.679 --> 0:10:55.760 my view is based in the demographics of our country 0:10:55.800 --> 0:10:58.520 and of the global economy, and so you've got a 0:10:58.559 --> 0:11:01.840 lot an older generation sation that is more focused on 0:11:02.000 --> 0:11:05.440 saving their gains. If if equity prices go up, that's great. 0:11:05.440 --> 0:11:07.400 We'll spend a little, but we'll save more than we 0:11:07.440 --> 0:11:10.559 did in the past, and and and focus on retirement. 0:11:11.000 --> 0:11:13.560 So I think that that's just a reality that we face. 0:11:13.679 --> 0:11:16.920 So I still think potential GDP growth is below two. 0:11:17.000 --> 0:11:20.840 We're running pretty strong right now. Um, that's creating good, 0:11:20.880 --> 0:11:24.319 good labor market momentum. I think we can see that continue. 0:11:24.679 --> 0:11:29.200 But the underlying trend is is pretty pretty modest. Where 0:11:29.240 --> 0:11:33.720 are you in good question? Most people agree on we'll 0:11:33.720 --> 0:11:35.640 get close to a three handle. That's what the government 0:11:35.679 --> 0:11:40.000 is looking for. The economists surveys by Bloomberg on the Street, 0:11:40.080 --> 0:11:41.920 the median estimate this year, I believe it's two point 0:11:42.000 --> 0:11:43.880 eight pc. It's going to be the high. Two seems 0:11:43.920 --> 0:11:46.479 to be the consensus view. That's the consensus. The consensus 0:11:46.480 --> 0:11:49.600 breaks down significantly next year and the year after that. 0:11:49.720 --> 0:11:52.960 What's your view? So so, not surprisingly I'm on the 0:11:53.000 --> 0:11:56.480 more cautious side, partly because, um, I think when we 0:11:56.559 --> 0:12:01.240 do tax when we do fiscal stimulus, defice financed fiscal 0:12:01.240 --> 0:12:04.200 stimulus at full employment, we are going to see margins 0:12:04.200 --> 0:12:07.079 of crowding out. Um, We're going to see higher interest rates, 0:12:07.080 --> 0:12:11.760 tighter financial conditions, perhaps wider trade deficit. All of these 0:12:11.800 --> 0:12:16.560 things mean that the pass through to the domestic economy 0:12:16.600 --> 0:12:19.719 is not going to be as strong. Jiropolicy Advisors, thank 0:12:19.760 --> 0:12:22.160 you so much. Thank you for wearing like an evening 0:12:22.480 --> 0:12:27.439 gown type you would graduate. I'm all amped up for 0:12:27.640 --> 0:12:31.080 team coverage. I mean, I wore a tuxedo today for radio. 0:12:31.360 --> 0:12:35.360 It works on radio. You look, you look fabulous. Pharaoh. 0:12:35.400 --> 0:12:37.600 On the other hand, what do you have on an 0:12:37.600 --> 0:12:40.959 A C. Mullin Jersey over there? I know, well, a weddy. 0:12:40.960 --> 0:12:42.360 You don't wear black to a wedding in the not 0:12:42.480 --> 0:12:47.400 at Kingdom's home. It's a few really really please protocol 0:12:47.440 --> 0:12:50.000 breath tell us about that. No one of the European 0:12:50.040 --> 0:12:52.520 aristocracy would wear black to a wedding. Really, what do 0:12:52.559 --> 0:12:55.160 they wear? You would? You would wear a different color, 0:12:55.480 --> 0:12:59.760 black and gray and perhaps gray. You'll strung man, you'll, 0:13:00.000 --> 0:13:01.880 I'll go to find many men in the city of 0:13:01.920 --> 0:13:06.800 London as well wearing black suits. One of the miracles, 0:13:07.200 --> 0:13:10.720 the miracles buried on the internet is the photo of 0:13:10.760 --> 0:13:14.199 me at my junior problem. That wasn't a black tuxedo. 0:13:28.040 --> 0:13:29.760 Let's get right to it. And there's been a huge 0:13:29.840 --> 0:13:33.640 demand for foreign exchange analysis, whether it's Berry ken Green 0:13:33.760 --> 0:13:37.200 in international economics or in the trenches of gazing at 0:13:37.240 --> 0:13:42.079 the Bloomberg one M McCormick. Mark McCormick with t D Securities, 0:13:42.679 --> 0:13:47.040 UM is very good at folding Bloomberg functionality into his reports. Mark, 0:13:47.080 --> 0:13:49.319 when you walk in in the morning, what's the first 0:13:49.360 --> 0:13:53.760 thing in the FX world you look at on your Bloomberg? Yeah, 0:13:53.800 --> 0:13:56.240 the first thing is always the w c RS function. 0:13:56.520 --> 0:13:59.880 So I look at w c R, S, w E, I, 0:14:00.160 --> 0:14:02.839 w B and just the commodity function to kind of 0:14:02.840 --> 0:14:05.600 see what's going on across different asset classes. I look 0:14:05.640 --> 0:14:07.800 at w c RS and folks, this is a function 0:14:07.840 --> 0:14:11.120 I know John Farrell doors as well, and you can 0:14:11.200 --> 0:14:15.720 parse it into the different buckets of dollar dynamics against 0:14:15.760 --> 0:14:18.880 G seven, against d x Y, against the emerging market 0:14:18.880 --> 0:14:21.720 a d x y blah blah blah. Which bucket is 0:14:21.760 --> 0:14:25.680 of most interest to t D Securities right now? Um? 0:14:25.720 --> 0:14:28.280 It's actually, so I do I do two different buckets, 0:14:28.280 --> 0:14:30.280 one to customize where it's all G ten, and then 0:14:30.280 --> 0:14:32.120 I do one that I frame out that's kind of 0:14:32.120 --> 0:14:35.280 global macro. So I throw in the major emerging markets 0:14:35.280 --> 0:14:37.040 to T d cover. So we'll you know, we look 0:14:37.080 --> 0:14:40.160 at Turkey, a little bit of South Africa, Brazil, uh, 0:14:40.200 --> 0:14:42.080 some of the Latin and some of the major Asians. 0:14:42.160 --> 0:14:44.200 So come in and kind of look at what's going 0:14:44.200 --> 0:14:45.920 on the G ten, kind of give this sense of 0:14:45.960 --> 0:14:48.120 what's going on with the d x Y and then 0:14:48.200 --> 0:14:50.360 kind of pull it back out to what's going on 0:14:50.400 --> 0:14:52.280 and some of the major emerging markets. After I looked 0:14:52.280 --> 0:14:53.680 at my rad screen, you know, I've got it on 0:14:53.720 --> 0:14:55.400 the screen right now, Mark, and I've got the daughter 0:14:55.440 --> 0:14:58.800 was device currency in my basket. Just plane emerging markets 0:14:58.800 --> 0:15:00.840 have set the time period to one month, and it 0:15:00.960 --> 0:15:04.240 is ugly. The Turkish Lyra down ten percent, the Argentine 0:15:04.240 --> 0:15:07.320 pace so dance sevent the Mexican pay so down almost 0:15:07.360 --> 0:15:10.920 nine percent. The Polish slotty has been hammered as well. 0:15:11.320 --> 0:15:15.680 Muhammad Alarium Bloomberg view columnist, Bloomberg opinion columnist and of 0:15:15.720 --> 0:15:18.880 course economic advisor to Alliance as well, talking about this 0:15:19.000 --> 0:15:24.480 trifecta of higher roll prices, stronger dollar, high US rates 0:15:25.240 --> 0:15:29.160 injecting some poison into emerging markets. Just how brutal is 0:15:29.200 --> 0:15:32.000 it right now for a m Mark? Yeah, this is 0:15:32.040 --> 0:15:33.920 a this is a tricky time pre um because like 0:15:34.040 --> 0:15:38.200 what you have is you've got tighter global financial conditions. 0:15:38.200 --> 0:15:40.600 So obviously you've got the US rate story, which is 0:15:40.680 --> 0:15:43.480 very clear. We've seen the break of on the tenure, 0:15:43.840 --> 0:15:46.520 which is causing some kind of global financing stress. You've 0:15:46.520 --> 0:15:49.520 got the moving library, So librar o I S has 0:15:49.560 --> 0:15:52.080 been moving probably maybe on what people would look as 0:15:52.080 --> 0:15:56.000 like technical reasons. We maybe it's some refinancing of the 0:15:56.320 --> 0:15:59.600 budgets and those kind of things, along with some repatriation 0:15:59.640 --> 0:16:03.040 that's come through from the Cisco package. But the other 0:16:03.080 --> 0:16:04.880 side of it is you've got US real rates are 0:16:04.880 --> 0:16:06.600 starting to move up. I think that's one thing that 0:16:06.640 --> 0:16:09.280 a lot of people kind of misses that the US 0:16:09.320 --> 0:16:12.120 real rate is the global plumbing of the financial markets, 0:16:12.160 --> 0:16:15.800 and so the US tenure real rates back is pretty 0:16:15.840 --> 0:16:18.920 close to one. So to me, what we're kind of 0:16:18.920 --> 0:16:20.960 really focused on is whether or not the US deal 0:16:21.040 --> 0:16:24.320 ker is going to continue to whether US real rates 0:16:24.360 --> 0:16:26.720 are going to break one percent. And also the story 0:16:26.720 --> 0:16:29.000 behind the scenes is the ECB and the b o 0:16:29.120 --> 0:16:32.080 J are are gradually normalizing policy when you look at 0:16:32.120 --> 0:16:34.200 the deils of their balance sheets. So you've got this 0:16:34.320 --> 0:16:37.040 really kind of toxic mix for emerging market which you 0:16:37.080 --> 0:16:40.320 have volatility and you've got the end of easy money 0:16:40.320 --> 0:16:42.920 coming at the exact same time period. Mark, let's go 0:16:43.000 --> 0:16:45.480 on Canadian onion. In the time we've got left, you're 0:16:45.520 --> 0:16:49.440 with Toronto Dominion Bank TV Securities. And is there a 0:16:49.520 --> 0:16:52.120 play in Looney right now or is there a a 0:16:52.200 --> 0:16:56.120 play and a different Canadian pair where John can you know, 0:16:56.240 --> 0:17:00.680 recover financially from his wedding gift to Megan and and Henry, 0:17:00.760 --> 0:17:04.399 I mean, where where's the place to make it? Henry? 0:17:04.440 --> 0:17:10.359 It's Henry, Not excuse me, folks, it's Henry, not Harry. Okay, Mark, Mark, 0:17:10.400 --> 0:17:13.399 where can I make money in Canada? Yeah, it's a 0:17:13.520 --> 0:17:16.399 very interesting time because I think what people are usually 0:17:16.440 --> 0:17:18.800 focused on in Canada they always look at oil prices, 0:17:19.160 --> 0:17:21.280 and they always look at the kind of interest rate 0:17:21.320 --> 0:17:24.160 differential or terminal rate spread to get between the US 0:17:24.240 --> 0:17:26.879 and UH in Canada. What I think people are missing 0:17:26.920 --> 0:17:29.320 again in this story is that Canada is now becoming 0:17:29.440 --> 0:17:33.760 what we're calling a credit currency. And so you've got essentially, um, 0:17:33.960 --> 0:17:35.359 we're where in the world, as we just kind of 0:17:35.359 --> 0:17:38.479 mentioned here, in emerging markets, where you've got its global 0:17:38.520 --> 0:17:41.120 tighter financial conditions you've got what we'd call a regime 0:17:41.200 --> 0:17:44.440 change in financial system. Central banks are ending the easy 0:17:44.480 --> 0:17:47.320 money game. And Canada here is a country that sits 0:17:47.640 --> 0:17:49.879 with a very large current account deficit two and a 0:17:49.880 --> 0:17:52.760 half percent of GDP. It has not improved since the 0:17:52.800 --> 0:17:55.919 paper tantrum, Which was one positive evaluation signally got from 0:17:55.960 --> 0:17:59.639 emerging markets is they started to reduce those external and 0:17:59.720 --> 0:18:02.960 bounce is once the taper tantrum started in two thousand twelve, 0:18:03.000 --> 0:18:06.159 two thirteen. But the concern for Canadas, you have a 0:18:06.160 --> 0:18:08.639 country that hasn't really started to deliver yet, you have 0:18:08.640 --> 0:18:12.400 a wholesale funded banking system. You've got tighter financial conditions 0:18:12.440 --> 0:18:14.280 coming from the US and that's being passed on the 0:18:14.280 --> 0:18:17.359 Canadian consumer. And the big story here is that the 0:18:17.640 --> 0:18:21.000 Bank of Canada is already engineered and overshoot um. Whether 0:18:21.119 --> 0:18:23.800 or not they call it temporary or whether tactically they 0:18:23.800 --> 0:18:27.159 are going to overshoot their inflation target. You're going to 0:18:27.240 --> 0:18:29.200 have lower real rates in Canada. You're gonna have a 0:18:29.280 --> 0:18:33.480 very large current account deficits. Did you see Did you see? JOHNA. 0:18:33.520 --> 0:18:37.280 McCormick didn't answer the question give me an economic dissertation. 0:18:37.520 --> 0:18:39.239 I just want to know John where you can make 0:18:39.280 --> 0:18:42.320 money to bake up for your wedding present. Yeah, to Henry, 0:18:42.560 --> 0:18:45.440 I guess he was town. What do I do? Run mind? Yeah, 0:18:45.440 --> 0:18:51.840 I mean do a do do a dou. So it's 0:18:51.840 --> 0:18:55.879 straight up to buy dollar cat dips trade on fifty, 0:18:56.000 --> 0:19:00.320 but it's also a cross trade on on evaluation but basket. 0:19:00.400 --> 0:19:03.560 So we're looking at short cat against Yeah, we're looking 0:19:03.560 --> 0:19:07.879 at short cat against cable, shortcat against euro. So essentially 0:19:07.920 --> 0:19:09.200 what we're trying to do is we want to be 0:19:09.240 --> 0:19:12.000 along all those turn accounts surplus countries that we still 0:19:12.000 --> 0:19:15.600 see those currencies as being undervalued over the next six 0:19:15.680 --> 0:19:18.200 or twelve months, and we're short the Canadian dollar against them. 0:19:18.240 --> 0:19:20.320 So that's kind of the want to. You don't want 0:19:20.359 --> 0:19:25.480 to be traveling to Europe. McCormick was long the Winnipeg 0:19:25.560 --> 0:19:30.200 Jets leave alone. Just quickly. You mentioned Canada has not delivered. 0:19:30.320 --> 0:19:33.360 We've all heard stories about the property marketing Canada. We've 0:19:33.359 --> 0:19:36.240 all heard very ugly stories. Where is it and where's 0:19:36.280 --> 0:19:39.280 it going? In your mind? Where do you see things going? Well? 0:19:39.320 --> 0:19:42.399 I think things are still relatively positive, So there's you know, 0:19:42.440 --> 0:19:45.119 you kind of have your sentiment base, you know, where 0:19:45.160 --> 0:19:47.520 should you know, where how do people feel about it, 0:19:47.560 --> 0:19:50.600 and how people feel what's the common knowledge about the 0:19:50.600 --> 0:19:52.119 real estate market and whether or not they want to 0:19:52.160 --> 0:19:54.280 continue to kind of you know, buy into it. And 0:19:54.320 --> 0:19:57.280 there's also the supply demand. The supply demand for kind 0:19:57.280 --> 0:19:59.240 of the real estate market is really driven by what's 0:19:59.280 --> 0:20:01.080 happening in toront know, which is becoming a much more 0:20:01.080 --> 0:20:03.959 globalized city and you're seeing a lot more immigration, You're 0:20:03.960 --> 0:20:06.280 seeing a lot more you know, pressure on the supply 0:20:06.320 --> 0:20:08.400 and demand story. It's kind of like you know, where 0:20:08.440 --> 0:20:10.720 New York City was ten fifteen years ago in terms 0:20:10.760 --> 0:20:12.439 of you have all these people coming in, you have 0:20:12.520 --> 0:20:15.280 these different industries changing, and the city is just not 0:20:15.359 --> 0:20:17.960 ready for it. So there is a natural pressure that 0:20:18.200 --> 0:20:20.520 prices do we just have to to kind of continue 0:20:20.520 --> 0:20:23.600 to rise. But the story is is how much really 0:20:23.760 --> 0:20:27.119 is this impacted by the mobility of global capital and 0:20:27.119 --> 0:20:28.920 how much money is kind of coming in from other 0:20:29.000 --> 0:20:33.119 countries and how much is that dislocating the potential for 0:20:33.160 --> 0:20:35.439 people that can afford real estate versus kind of like 0:20:35.480 --> 0:20:37.960 how much is this an asset play? So I think 0:20:38.000 --> 0:20:41.920 the baseline here is that the market's cooling off, but 0:20:42.359 --> 0:20:44.320 it's pulling off at the exact same time that the 0:20:44.320 --> 0:20:47.680 consumers have just are basically just starting stage one of 0:20:47.760 --> 0:20:51.280 the leveraging. So the domestic demand story is really kind 0:20:51.320 --> 0:20:53.679 of I think what is the major concern is that 0:20:54.119 --> 0:20:56.320 if housing market and the consumer come off from the 0:20:56.359 --> 0:20:59.280 exact same time, there hasn't been anything else to kind 0:20:59.280 --> 0:21:03.240 of kind of hand over the economy to continue to move. Mark, 0:21:03.320 --> 0:21:08.640 nobody cares Jets or Vegas, which one I guess I'll 0:21:08.680 --> 0:21:11.680 just go Vegas. No, you're we You work for TV Securities. 0:21:11.720 --> 0:21:14.920 You're supposed to say Jets. I stopped watching sports after 0:21:15.040 --> 0:21:18.880 the Raptors. Uh after they got swept by the by 0:21:18.920 --> 0:21:24.479 they did. I know, it's it's therapy as well. Okay, 0:21:24.600 --> 0:21:27.440 Mark McCormick, thank you so much, greatly appreciate what TV Securities. 0:21:27.480 --> 0:21:44.720 That was brilliant, nice summary there of Canada. Pim Fox 0:21:44.760 --> 0:21:46.880 and I on a Friday with John Tucker and we're 0:21:46.880 --> 0:21:50.399 sitting around anxiously deciding what champagne to buy for the 0:21:50.480 --> 0:21:54.720 Royal wedding, and Campbell's falls apart, so we're able to 0:21:54.760 --> 0:21:59.119 go out and get Scott muschikin. He's with Wolf for years, 0:21:59.119 --> 0:22:01.720 with d l J and Kidder Peabody's when every award 0:22:01.760 --> 0:22:04.159 out there, he was so good. The Wall Street Journal 0:22:04.160 --> 0:22:06.480 in their beauty contest a couple of years ago, actually 0:22:06.560 --> 0:22:10.400 retired him. He's not retired. He's with Wolf where he's 0:22:10.520 --> 0:22:14.280 He's seen the Durance family struggle for years. Scott Um 0:22:14.560 --> 0:22:17.120 nineteen or rather two thousand and eight, ten years ago, 0:22:17.880 --> 0:22:22.360 Campbell's soup with a moldy five point one percent total 0:22:22.560 --> 0:22:26.320 return and the two minute drill is they're not getting 0:22:26.320 --> 0:22:28.880 it done. From their annual report of ten years ago. 0:22:29.520 --> 0:22:33.199 At Campbell, we believe the key to sustainable success more 0:22:33.240 --> 0:22:38.480 than ever is on course strains, major trends and outstanding 0:22:38.520 --> 0:22:42.720 opportunities worldwide. Isn't this about nobody wants to buy a 0:22:42.800 --> 0:22:46.879 can of Campbell's tomato soup. Yeah. Hey, first of all 0:22:47.000 --> 0:22:49.119 to him and Tom, thanks thanks for having me. But 0:22:49.760 --> 0:22:52.640 you know it's interesting, Uh, the ship category actually grew 0:22:52.680 --> 0:22:55.440 this year, UM, Believe it or not. It was a 0:22:55.520 --> 0:22:58.399 cold winter, so soup grew. So you know, one of 0:22:58.400 --> 0:23:01.440 the things going on here is just lot out mismanagement 0:23:01.480 --> 0:23:06.440 of Campbell's UM. Now there's unprecedented change afflicting the food 0:23:06.480 --> 0:23:10.679 at home space UM, and there's certainly that headwind and 0:23:11.040 --> 0:23:13.840 very disturbing coming off that conference call with them talking 0:23:13.880 --> 0:23:17.080 about not being able to get pricing through and what 0:23:17.200 --> 0:23:20.600 is that is that that's Bentonville, that's Walmart. Walmart saying 0:23:20.720 --> 0:23:23.600