1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 2 00:00:13,560 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,239 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course 5 00:00:27,320 --> 00:00:33,240 Speaker 1: on the Bloomberg. And our first guest this morning, against 6 00:00:33,280 --> 00:00:35,600 Speaker 1: north Vic. He led currency strategy and fixed income research 7 00:00:35,640 --> 00:00:38,120 Speaker 1: for Numeris Securities. Then he found it Exante Data. He's 8 00:00:38,159 --> 00:00:40,919 Speaker 1: now the CEO of that company and in our Bloomberg 9 00:00:40,960 --> 00:00:42,920 Speaker 1: eleven three studios in New York. Great to have you 10 00:00:42,920 --> 00:00:45,479 Speaker 1: with us once again, Thank you very much. Let me 11 00:00:45,520 --> 00:00:47,360 Speaker 1: start by asking Agains if I could just about the 12 00:00:47,640 --> 00:00:49,400 Speaker 1: this trip. Let's let's use that as the peg to 13 00:00:49,440 --> 00:00:53,680 Speaker 1: talk here about about China and Chinese monetary policy in particular. 14 00:00:53,880 --> 00:00:56,600 Speaker 1: What's the status of of market liberalization in China. What 15 00:00:56,600 --> 00:00:58,240 Speaker 1: do we learn from the People's Congress of a few 16 00:00:58,280 --> 00:01:02,600 Speaker 1: weeks ago. Well, so I think that the big dynamic 17 00:01:02,640 --> 00:01:05,400 Speaker 1: we've seen this year is that they impose capital controls 18 00:01:06,040 --> 00:01:10,360 Speaker 1: going into two thousand seventeen, and those controls have been successful. 19 00:01:10,640 --> 00:01:14,320 Speaker 1: So we managed to get the currency under control, had 20 00:01:14,360 --> 00:01:16,440 Speaker 1: been under a lot of pressure for the previous two years, 21 00:01:17,360 --> 00:01:21,320 Speaker 1: and that's kind of allowing the authorities to again think 22 00:01:21,360 --> 00:01:23,759 Speaker 1: about what they really want to do in the long term, 23 00:01:23,840 --> 00:01:26,840 Speaker 1: and that is a more open currency market. So I 24 00:01:26,880 --> 00:01:29,600 Speaker 1: think we're started to see most in that direction. So 25 00:01:29,680 --> 00:01:33,200 Speaker 1: for example, they essentially had restrictions on how you trade 26 00:01:33,200 --> 00:01:35,640 Speaker 1: the Fords and the currency market that they now lifted 27 00:01:36,120 --> 00:01:38,600 Speaker 1: after having them on for two years. So that's the 28 00:01:38,600 --> 00:01:42,040 Speaker 1: direction we're going. They're also super super keen on getting 29 00:01:42,080 --> 00:01:45,480 Speaker 1: foreign participation in the bond market, so they did a 30 00:01:45,520 --> 00:01:49,360 Speaker 1: presentation in New York, first one ever a couple of 31 00:01:49,360 --> 00:01:51,560 Speaker 1: weeks ago, So that's a part of that marketing effort. 32 00:01:51,880 --> 00:01:54,800 Speaker 1: So that's their goal. How effectively have they been doing that, 33 00:01:54,840 --> 00:01:57,160 Speaker 1: in other words, how much international attention or interest if 34 00:01:57,160 --> 00:02:01,080 Speaker 1: they attracted well. So, I think a lot of investors 35 00:02:01,080 --> 00:02:05,600 Speaker 1: globally got pretty scared of this control wave. If you're 36 00:02:06,000 --> 00:02:08,560 Speaker 1: a big money manager, do you like the idea of 37 00:02:08,560 --> 00:02:11,359 Speaker 1: capital controls? Absolutely not. So it's going to take a 38 00:02:11,400 --> 00:02:13,919 Speaker 1: little bit of time before they do get comfortable with 39 00:02:14,720 --> 00:02:17,960 Speaker 1: the sort of new new path we're on now, but 40 00:02:18,080 --> 00:02:20,800 Speaker 1: a lot of people are definitely getting ready. So you 41 00:02:20,840 --> 00:02:22,880 Speaker 1: can sort of look at statistics of of how many 42 00:02:22,919 --> 00:02:26,280 Speaker 1: funds have gotten approval to trade Chinese bonds, and and 43 00:02:26,320 --> 00:02:29,040 Speaker 1: that list is getting longer and longer and longer, and 44 00:02:29,080 --> 00:02:31,080 Speaker 1: we asked time to see some inflows. I wouldn't say 45 00:02:31,080 --> 00:02:34,120 Speaker 1: they're huge, but they're starting. So I think that's something 46 00:02:34,160 --> 00:02:37,080 Speaker 1: really to watch if if there's a big move into 47 00:02:37,160 --> 00:02:39,239 Speaker 1: Chinese bonds over the next couple of years, it could 48 00:02:39,280 --> 00:02:42,120 Speaker 1: be one of the biggest new themes in the global 49 00:02:42,160 --> 00:02:44,840 Speaker 1: fixed income markets. As I listened to the rhetoric from 50 00:02:44,840 --> 00:02:46,680 Speaker 1: the President on this trip, again, he's focused on this 51 00:02:46,720 --> 00:02:49,160 Speaker 1: trade deficit and we look for clarity on what this 52 00:02:49,200 --> 00:02:52,520 Speaker 1: administration's trade policy is as the trip through Asia continues. 53 00:02:52,560 --> 00:02:55,400 Speaker 1: How much of a weight is that on occurrencies in particular, 54 00:02:55,480 --> 00:02:59,000 Speaker 1: just the uncertainty about US trade policy. Well, so we've 55 00:02:59,040 --> 00:03:02,440 Speaker 1: seen it and it's played out very clearly in Mexico, 56 00:03:02,639 --> 00:03:05,160 Speaker 1: where obviously in the run up to the election we 57 00:03:05,200 --> 00:03:07,360 Speaker 1: had a very big move, we had a further extension 58 00:03:07,400 --> 00:03:10,840 Speaker 1: of the move into early two thousand seventeen, and then 59 00:03:10,840 --> 00:03:13,320 Speaker 1: we calm down a little bit. We've not seen very 60 00:03:13,400 --> 00:03:16,280 Speaker 1: much in other currencies, I think because we have not 61 00:03:16,400 --> 00:03:21,400 Speaker 1: had any sort of specific disagreement that is about to explode, 62 00:03:21,840 --> 00:03:23,960 Speaker 1: So this would be very interesting whether there's something more 63 00:03:24,000 --> 00:03:27,200 Speaker 1: specific coming up soon. But I guess the North Korean 64 00:03:27,200 --> 00:03:31,880 Speaker 1: issue is uh is one factor that's actually keeping Trump 65 00:03:31,919 --> 00:03:33,519 Speaker 1: at bay in the sense that he doesn't want to 66 00:03:33,520 --> 00:03:37,240 Speaker 1: push too hard until that issue is resolved. But it's 67 00:03:37,240 --> 00:03:40,960 Speaker 1: a very important issue overall. So at my company we 68 00:03:41,040 --> 00:03:44,720 Speaker 1: actually hired a specific person to cover this issue. Only 69 00:03:44,800 --> 00:03:47,440 Speaker 1: that tells you something about our focused we are on it. 70 00:03:48,040 --> 00:03:52,280 Speaker 1: And the negotiations around NAFTA are gonna sort of come 71 00:03:52,320 --> 00:03:55,320 Speaker 1: to ahead in the next three to six months. There's 72 00:03:55,320 --> 00:03:58,520 Speaker 1: a deadline in Q one, so we will get something there, 73 00:03:58,560 --> 00:04:01,840 Speaker 1: and it's something that I think in some markets is 74 00:04:01,920 --> 00:04:04,200 Speaker 1: underestimated how big the risk of a blow up is. 75 00:04:04,800 --> 00:04:07,400 Speaker 1: Let me turn domestic if I could. Michael mckeear colleague 76 00:04:07,400 --> 00:04:09,520 Speaker 1: sat down with the U. S Treasury Secretary yesterday, and 77 00:04:09,600 --> 00:04:11,520 Speaker 1: then I was wondering going into that interview, So what 78 00:04:11,600 --> 00:04:13,640 Speaker 1: you might have to say about the strength of the 79 00:04:13,720 --> 00:04:16,919 Speaker 1: US dollar, about the U strong dollar policy. Do you 80 00:04:16,920 --> 00:04:19,159 Speaker 1: have clarity on that? Do we see a continuation of 81 00:04:19,160 --> 00:04:21,240 Speaker 1: that strong dollar policy that's been in place now for 82 00:04:21,240 --> 00:04:24,480 Speaker 1: for many years. Well, so I've made the point for 83 00:04:24,520 --> 00:04:27,360 Speaker 1: a while now that Trump is not exactly a strong 84 00:04:27,480 --> 00:04:32,080 Speaker 1: dollar guy, not a strong dollar, so we we have 85 00:04:32,160 --> 00:04:36,040 Speaker 1: him talked to deficits down all the time and uh 86 00:04:36,080 --> 00:04:38,680 Speaker 1: and he has actually been actively talking to dollar down 87 00:04:38,760 --> 00:04:42,800 Speaker 1: early in the year, so that's definitely his position. I 88 00:04:42,839 --> 00:04:46,000 Speaker 1: think on the on the sort of dollar outlook, I 89 00:04:46,040 --> 00:04:48,400 Speaker 1: think we're moving into what I would call a more 90 00:04:48,440 --> 00:04:51,400 Speaker 1: tactical phase. And what I mean by that is that 91 00:04:51,440 --> 00:04:54,120 Speaker 1: we had a very big dollar appreciation move from the 92 00:04:54,160 --> 00:04:57,280 Speaker 1: summer of two thousand fourteen to early this year, and 93 00:04:57,279 --> 00:05:00,880 Speaker 1: when we've seen some pretty big retracement for from February 94 00:05:00,960 --> 00:05:03,479 Speaker 1: to September and now we've started to sort of bounce 95 00:05:03,520 --> 00:05:05,280 Speaker 1: around and arrange, and I think we're going to see 96 00:05:05,279 --> 00:05:08,640 Speaker 1: more of that. And and the reason for that is 97 00:05:08,680 --> 00:05:12,320 Speaker 1: that we have come through a period where it was 98 00:05:12,440 --> 00:05:15,800 Speaker 1: only the FIT that was tightening policy, and now other 99 00:05:15,839 --> 00:05:18,359 Speaker 1: economies around the world are catching up. So the difference 100 00:05:18,400 --> 00:05:20,880 Speaker 1: between how the US is doing and other economies are doing, 101 00:05:20,880 --> 00:05:22,599 Speaker 1: it's just not as big as it used to be. 102 00:05:22,960 --> 00:05:25,360 Speaker 1: And that means that these big structural moves in the 103 00:05:25,360 --> 00:05:28,280 Speaker 1: FX market, they're probably behind it and it's going to 104 00:05:28,360 --> 00:05:30,880 Speaker 1: be more tactical from here. Let's talk a bit about 105 00:05:30,880 --> 00:05:33,040 Speaker 1: the FED that j Powell is going to inherit. Of course, 106 00:05:33,120 --> 00:05:35,080 Speaker 1: drum Pal has been on the FED as a governor 107 00:05:35,120 --> 00:05:37,160 Speaker 1: for some time now, but he'll be taking over his 108 00:05:37,320 --> 00:05:40,159 Speaker 1: chair if all goes according to what the President has planned. 109 00:05:40,279 --> 00:05:42,160 Speaker 1: What does this FED look like? What's in its tool kit? 110 00:05:42,240 --> 00:05:46,080 Speaker 1: How how if there's another crisis that does? Does it 111 00:05:46,160 --> 00:05:48,800 Speaker 1: have all it needs? Well, the first thing I would 112 00:05:48,800 --> 00:05:52,080 Speaker 1: say is that obviously we had the chair nomination that 113 00:05:52,160 --> 00:05:55,119 Speaker 1: was important, but we also have a lot of other 114 00:05:55,279 --> 00:05:59,320 Speaker 1: open seats at the at the FED. So my former 115 00:05:59,360 --> 00:06:03,960 Speaker 1: BOS said Golden Bill Dudley resigned on Monday, that's another 116 00:06:04,080 --> 00:06:08,880 Speaker 1: open seat. Yelling is probably gonna resign from the board. 117 00:06:08,920 --> 00:06:11,440 Speaker 1: There's another open seat. We have Fisher sets, so there's 118 00:06:11,440 --> 00:06:13,719 Speaker 1: a lot of moving parts. We just don't know who's 119 00:06:13,760 --> 00:06:17,279 Speaker 1: going to be setting policy in two thousand nineteen, like 120 00:06:17,400 --> 00:06:20,680 Speaker 1: eighteen and nineteen and so forth. So so that's a 121 00:06:20,760 --> 00:06:23,480 Speaker 1: that's a big uncertainty. I think that the tricky bit 122 00:06:23,640 --> 00:06:25,479 Speaker 1: is that on the one hand, the economy is doing 123 00:06:25,480 --> 00:06:31,600 Speaker 1: better and we have these names floating around who could 124 00:06:31,600 --> 00:06:34,120 Speaker 1: fill those empty seat that sound hawkers, But on the 125 00:06:34,160 --> 00:06:37,560 Speaker 1: other hand, inflation is just not there. So what does 126 00:06:37,600 --> 00:06:40,320 Speaker 1: the Fed do Now if we have another couple of 127 00:06:40,360 --> 00:06:44,800 Speaker 1: week inflation prints, this is really a dilemma for the Fed. 128 00:06:45,000 --> 00:06:47,480 Speaker 1: Do they see through it or do they pause the 129 00:06:47,560 --> 00:06:51,240 Speaker 1: hiking cycle. The market is sort of buying into the 130 00:06:51,279 --> 00:06:55,160 Speaker 1: notion that December is a done deal, and I do 131 00:06:55,240 --> 00:06:57,640 Speaker 1: think December is likely. But if we have another couple 132 00:06:57,680 --> 00:07:00,120 Speaker 1: of of week inflation prints, I think the Fed it's 133 00:07:00,160 --> 00:07:02,479 Speaker 1: going to have to make a very difficult decision. Actually, 134 00:07:02,839 --> 00:07:05,440 Speaker 1: so that is something we have to watch carefully. You 135 00:07:05,440 --> 00:07:08,360 Speaker 1: have another CPI print next week, so so watch that one. 136 00:07:08,920 --> 00:07:10,440 Speaker 1: Is that going to be the moment when we see 137 00:07:10,840 --> 00:07:13,040 Speaker 1: the first contours of a J. Powell Fed? In other words, 138 00:07:13,080 --> 00:07:15,240 Speaker 1: what's the data on the calendar of the point at 139 00:07:15,280 --> 00:07:17,320 Speaker 1: which we would see him making an imprint on on 140 00:07:17,360 --> 00:07:21,720 Speaker 1: this federal reserve? Yeah? I think. I think if he 141 00:07:21,760 --> 00:07:25,080 Speaker 1: does a speech after the next CPI number, let's say 142 00:07:25,080 --> 00:07:27,080 Speaker 1: we have a week's CPI number, then a lot of 143 00:07:27,120 --> 00:07:30,000 Speaker 1: people were listening to how does he interpret that data. 144 00:07:30,480 --> 00:07:32,760 Speaker 1: In the past, it's been yelling so interpretation, and now 145 00:07:32,800 --> 00:07:34,800 Speaker 1: they're going to be watching more and more what he says. 146 00:07:34,840 --> 00:07:37,239 Speaker 1: So the first couple of speeches he's going to deliver 147 00:07:37,880 --> 00:07:41,360 Speaker 1: is going to be absolutely key, and I think he's 148 00:07:41,360 --> 00:07:44,960 Speaker 1: been very balanced in the past, balance into how he 149 00:07:45,000 --> 00:07:48,800 Speaker 1: interprets the data, and also quite pragmatic. So it will 150 00:07:48,840 --> 00:07:51,200 Speaker 1: be very very important to see if he continues that 151 00:07:51,520 --> 00:07:54,040 Speaker 1: line of thinking. Let me ask you least we'll come 152 00:07:54,080 --> 00:07:55,720 Speaker 1: back here in just a moment. Talks about some currencies 153 00:07:55,880 --> 00:07:58,200 Speaker 1: in particular, But let me ask you just about uh, 154 00:07:58,520 --> 00:08:01,520 Speaker 1: sort of the the composition of that you mentioned the 155 00:08:01,600 --> 00:08:04,560 Speaker 1: vacancies that we have. How much does does one person's 156 00:08:04,600 --> 00:08:06,960 Speaker 1: leadership matter versus the full complement of the committee? And 157 00:08:06,960 --> 00:08:08,360 Speaker 1: and and when are we going to get a better 158 00:08:08,400 --> 00:08:10,800 Speaker 1: sense here of the shape of the direction that committee 159 00:08:10,840 --> 00:08:12,960 Speaker 1: is going to go in? Well, I guess it depends 160 00:08:12,960 --> 00:08:15,080 Speaker 1: a little bit on how forceful a leader you have, 161 00:08:15,120 --> 00:08:19,960 Speaker 1: how forceful a chair, And we don't really we don't 162 00:08:19,960 --> 00:08:23,840 Speaker 1: really know exactly how how Power wants to assert himself. 163 00:08:23,880 --> 00:08:26,360 Speaker 1: But I think he's been seen as some somebody who 164 00:08:26,440 --> 00:08:29,280 Speaker 1: was sort of within the consensus. So from that perspective, 165 00:08:29,320 --> 00:08:31,600 Speaker 1: it matters a lot who the other guys are, what 166 00:08:31,640 --> 00:08:34,720 Speaker 1: the consensus is actually going to be, I think for 167 00:08:34,720 --> 00:08:37,480 Speaker 1: for the New York fed Post, I think it's actually 168 00:08:37,520 --> 00:08:41,120 Speaker 1: really important because Dudley was definitely in the dobbish camp 169 00:08:41,520 --> 00:08:44,679 Speaker 1: of the FED in in the last several years. If 170 00:08:44,679 --> 00:08:47,600 Speaker 1: we had a more hawker Is appointment there, that could 171 00:08:47,679 --> 00:08:50,160 Speaker 1: be really changed in complexion of the threat. For example, 172 00:08:50,280 --> 00:08:54,120 Speaker 1: wash who didn't get to FET chair nomination, has been 173 00:08:54,120 --> 00:08:56,240 Speaker 1: mentioned as somebody who could come out of New York FED. 174 00:08:56,559 --> 00:08:58,960 Speaker 1: That would definitely be a shift, So that would be important. 175 00:08:58,960 --> 00:09:00,800 Speaker 1: So those are the key point it's to watch out 176 00:09:00,840 --> 00:09:04,160 Speaker 1: for as we we learn more about what the new 177 00:09:04,240 --> 00:09:06,160 Speaker 1: FED is going to look like. All right, well, let's 178 00:09:06,160 --> 00:09:07,600 Speaker 1: come back here in just a moment talking with YenS 179 00:09:07,679 --> 00:09:10,080 Speaker 1: nord Viga. He's with the Exante Data, the founder of 180 00:09:10,080 --> 00:09:11,920 Speaker 1: that company, the CEO of that company. He's joining us 181 00:09:11,920 --> 00:09:14,199 Speaker 1: today from our studios in New York are Bloomberg eleven 182 00:09:14,240 --> 00:09:17,640 Speaker 1: three oh studios. I am downtown the Oppenheimer Fund Studios. 183 00:09:17,640 --> 00:09:19,240 Speaker 1: Tom Keene making his way down here to join me. 184 00:09:19,360 --> 00:09:22,199 Speaker 1: We broadcast from here. Yen's Nordvig with us from Exante. 185 00:09:22,240 --> 00:09:24,400 Speaker 1: He's in our Bloomberg eleven three oh studios in New York. 186 00:09:24,440 --> 00:09:27,560 Speaker 1: As we continue our conversation about at geopolitics, fixed income 187 00:09:27,559 --> 00:09:30,760 Speaker 1: currencies as well, and let me go to the latest 188 00:09:30,840 --> 00:09:33,240 Speaker 1: undulations of the Brexit debate yains, we have them get 189 00:09:33,280 --> 00:09:35,400 Speaker 1: underway in Brussels again and it seems like there's still 190 00:09:35,440 --> 00:09:38,280 Speaker 1: the same intractability we've seen throughout this whole process. What 191 00:09:38,320 --> 00:09:40,120 Speaker 1: are you watching as all of this unfolds when it 192 00:09:40,160 --> 00:09:43,120 Speaker 1: comes to Sterling in particular, Well, so, I think there's 193 00:09:43,160 --> 00:09:48,080 Speaker 1: an interplay between brexit, um the currency, and then what 194 00:09:48,120 --> 00:09:50,280 Speaker 1: the Bank of England is doing. That's very interesting now. 195 00:09:50,360 --> 00:09:53,000 Speaker 1: So I think the Bank of England has essentially changed 196 00:09:53,120 --> 00:09:56,920 Speaker 1: its stance, Like initially it was very afraid of Brexit 197 00:09:57,600 --> 00:09:59,960 Speaker 1: and it led them to be as easy as pass 198 00:10:00,000 --> 00:10:03,680 Speaker 1: stable and that has changed. So now what it's seeing 199 00:10:03,800 --> 00:10:07,080 Speaker 1: is that Brexit is actually generating a kind of supply 200 00:10:07,200 --> 00:10:10,559 Speaker 1: shock on the economy and the currency is very very weak, 201 00:10:11,120 --> 00:10:13,560 Speaker 1: and it's actually generating inflation. So in the UK is 202 00:10:13,600 --> 00:10:16,640 Speaker 1: one of the few countries in Europe where there's meaningful inflation. 203 00:10:17,400 --> 00:10:20,480 Speaker 1: They responded in November, and I think the more of 204 00:10:20,640 --> 00:10:26,319 Speaker 1: this political uncertainty we have that takes the currency down. Ironically, 205 00:10:26,360 --> 00:10:28,600 Speaker 1: actually the more the Bank of England be forced to 206 00:10:28,640 --> 00:10:31,960 Speaker 1: react and deliver more tightening to rain this inflation dynamic 207 00:10:32,040 --> 00:10:36,080 Speaker 1: in so um it's it's pretty pretty important shift that 208 00:10:36,120 --> 00:10:39,200 Speaker 1: has happened, and I think we're going to see more 209 00:10:39,240 --> 00:10:41,520 Speaker 1: of it against What did you make of the Bank 210 00:10:41,559 --> 00:10:43,560 Speaker 1: of England's decision to raise rate at that last meeting 211 00:10:43,600 --> 00:10:45,520 Speaker 1: for the first time since two thousand seven? You had 212 00:10:45,520 --> 00:10:48,400 Speaker 1: the to most I guess technocratic memories of the Monetary 213 00:10:48,400 --> 00:10:52,199 Speaker 1: Policy Committee that the economists on the committee voting against 214 00:10:52,200 --> 00:10:54,160 Speaker 1: it happening. What did you make of their decision to 215 00:10:54,200 --> 00:10:57,840 Speaker 1: do it all? So, I think it really has to 216 00:10:57,920 --> 00:11:00,520 Speaker 1: do with with the fact that they've been wrong on 217 00:11:00,559 --> 00:11:05,640 Speaker 1: the economy. They've they've been expecting like a big, big, 218 00:11:05,640 --> 00:11:09,520 Speaker 1: big confidence shock and it just never materialized. Right. So, 219 00:11:10,040 --> 00:11:13,880 Speaker 1: on the one hand, you have asset prices pricing in 220 00:11:14,040 --> 00:11:17,880 Speaker 1: something very dire, and the currencies are part of that. 221 00:11:17,880 --> 00:11:20,720 Speaker 1: The currency is very weak and that's generating inflation. On 222 00:11:20,760 --> 00:11:24,240 Speaker 1: the other hand, confidence in the economy is not so bad, 223 00:11:24,360 --> 00:11:27,839 Speaker 1: so consumer conference is not so bad. Business conference is 224 00:11:27,880 --> 00:11:30,760 Speaker 1: not so bad, and therefore we've not seen the recession 225 00:11:30,840 --> 00:11:34,360 Speaker 1: that was initially projected. So they're responding now to being 226 00:11:34,360 --> 00:11:38,240 Speaker 1: wrong about that and delivering a hike to essentially is 227 00:11:38,280 --> 00:11:40,800 Speaker 1: removed the using the delivered all right right after Brexit, 228 00:11:41,440 --> 00:11:44,360 Speaker 1: and I think they'll probably have to normalize rates more 229 00:11:44,520 --> 00:11:48,200 Speaker 1: because we still have this disconnect between the forward looking 230 00:11:48,200 --> 00:11:52,240 Speaker 1: markets that is generating inflationary pressure and then consumer conference 231 00:11:52,280 --> 00:11:54,200 Speaker 1: that is not so forward looking, and they just can't 232 00:11:54,200 --> 00:11:58,319 Speaker 1: wait until Brexit has happened to to to to see 233 00:11:58,360 --> 00:12:00,040 Speaker 1: that conference eventually come out and they have to be 234 00:12:00,080 --> 00:12:02,319 Speaker 1: a little bit forward looking as well. On the subject 235 00:12:02,360 --> 00:12:03,960 Speaker 1: of of bitcoin, I have to ask you about this 236 00:12:04,040 --> 00:12:06,640 Speaker 1: as I see that's coming up more and more in conversation. 237 00:12:06,720 --> 00:12:09,440 Speaker 1: Certainly have the CEOs of major banks talking about it more, 238 00:12:10,080 --> 00:12:14,160 Speaker 1: some expreting, expressing some skepticism, uh, some calling themselves that 239 00:12:14,240 --> 00:12:17,080 Speaker 1: neo laddites as they as they approach cryptocurrency to make 240 00:12:17,120 --> 00:12:20,720 Speaker 1: up where we are in terms of of acceptance of bitcoin, 241 00:12:20,800 --> 00:12:23,959 Speaker 1: acceptance of cryptocurrency, Well, it's it's certainly is a very 242 00:12:24,000 --> 00:12:27,800 Speaker 1: controversial topic. So a couple of weeks ago we actually 243 00:12:27,840 --> 00:12:31,200 Speaker 1: wrote a public letter about its own accents at data 244 00:12:31,280 --> 00:12:35,040 Speaker 1: dot com. And it was not because we want to 245 00:12:35,080 --> 00:12:36,920 Speaker 1: have a strong view, Okay, this is going to go 246 00:12:37,040 --> 00:12:40,040 Speaker 1: to a certain level, or it's a bubble, it's going 247 00:12:40,040 --> 00:12:44,280 Speaker 1: to explode, But it's because we are actually using bitcoin 248 00:12:44,640 --> 00:12:49,000 Speaker 1: as a macro indicators similar to how we're using other 249 00:12:49,040 --> 00:12:51,920 Speaker 1: macro indicators. So, for example, China is a country we're 250 00:12:52,000 --> 00:12:56,160 Speaker 1: focused on, and we've had very interesting sort of cattle 251 00:12:56,240 --> 00:12:58,720 Speaker 1: flight dynamics playing out over the last couple of years. 252 00:12:58,720 --> 00:13:01,640 Speaker 1: That's why they put in place the controls we discussed previously. 253 00:13:02,840 --> 00:13:05,160 Speaker 1: And you can use the the spread in the bitcoin 254 00:13:05,280 --> 00:13:08,480 Speaker 1: market to sort of see, okay, how keen are Chinese 255 00:13:08,520 --> 00:13:10,880 Speaker 1: residents in terms of getting their money out. So we're 256 00:13:10,960 --> 00:13:14,920 Speaker 1: using it to analyze things and the market has gotten 257 00:13:14,920 --> 00:13:17,720 Speaker 1: big enough that this is something that really matters, So 258 00:13:17,840 --> 00:13:20,559 Speaker 1: we're watching it as a firm. We don't have a 259 00:13:20,640 --> 00:13:22,360 Speaker 1: view as to whether it's going to go up or down, 260 00:13:22,360 --> 00:13:26,480 Speaker 1: but we're using the information within that market to say 261 00:13:26,559 --> 00:13:30,600 Speaker 1: something about other dynamics in terms of capital flows, and 262 00:13:30,640 --> 00:13:32,320 Speaker 1: we find it very helpful and it I think it's 263 00:13:32,320 --> 00:13:34,559 Speaker 1: getting bigger. Volumes are going up, so it's going to 264 00:13:34,600 --> 00:13:37,679 Speaker 1: be increasingly important to watch those signals. Lastly, here was 265 00:13:37,720 --> 00:13:39,600 Speaker 1: just about thirty seconds left to tell me just how 266 00:13:39,679 --> 00:13:42,439 Speaker 1: important to this taxi form process is going to be 267 00:13:42,480 --> 00:13:45,160 Speaker 1: for for the dollar going forward. Uh, it seems like 268 00:13:45,679 --> 00:13:48,760 Speaker 1: there's optimism among Republicans that this is proceeding a pace. 269 00:13:49,400 --> 00:13:51,040 Speaker 1: What does it mean for for the economy and for 270 00:13:51,160 --> 00:13:55,120 Speaker 1: the dollar going forward. It's very important, Like nothing has 271 00:13:55,240 --> 00:13:58,000 Speaker 1: really gotten done in this administration so far, so they 272 00:13:58,080 --> 00:14:00,400 Speaker 1: have to get this done to show some of ability 273 00:14:00,440 --> 00:14:04,600 Speaker 1: to do policy. And we've already seen in the equity 274 00:14:04,600 --> 00:14:08,120 Speaker 1: market pretty big moves in anticipation of this happening. The 275 00:14:08,200 --> 00:14:11,680 Speaker 1: dollar has also strengthened the bid. If the Tracks reform 276 00:14:11,760 --> 00:14:14,200 Speaker 1: does not happen, if we have some news in coming 277 00:14:14,240 --> 00:14:17,560 Speaker 1: months that suggest that this is falling apart, I think 278 00:14:17,559 --> 00:14:20,720 Speaker 1: the dollar is gonna have a very hot time holding. 279 00:14:20,720 --> 00:14:23,320 Speaker 1: I think it's might likely to drift meaningfully weaker in 280 00:14:23,360 --> 00:14:25,280 Speaker 1: the back of that news. So it's very important, and 281 00:14:25,320 --> 00:14:26,640 Speaker 1: thank you very much for the time this morning, both 282 00:14:26,680 --> 00:14:28,600 Speaker 1: on the Bloombergradi Bloomberg Television as well. Do check out 283 00:14:28,600 --> 00:14:30,880 Speaker 1: his interde from Bloomberg TVA TV go on the Bloomberg 284 00:14:31,280 --> 00:14:34,240 Speaker 1: Stante joining this in our Bloomberg eleven three studios in 285 00:14:34,280 --> 00:14:48,640 Speaker 1: New York. It is a magical name from my ute 286 00:14:48,800 --> 00:14:53,360 Speaker 1: in the open investment company Oppenheimer Funds, which over there, David, 287 00:14:53,360 --> 00:14:57,000 Speaker 1: there was a fund a million years ago Oppenheimer Target 288 00:14:58,240 --> 00:15:01,120 Speaker 1: and they had a run of say twenty years of 289 00:15:01,200 --> 00:15:05,080 Speaker 1: Growthiness is Mr Colbert I would say. Over the years, 290 00:15:05,200 --> 00:15:08,120 Speaker 1: they've migrated back to a UM, I'm gonna say all 291 00:15:08,160 --> 00:15:10,840 Speaker 1: in all the global view, and I've done that with 292 00:15:10,960 --> 00:15:15,120 Speaker 1: some better than good performance. Christian MoManI uh with as 293 00:15:15,160 --> 00:15:17,760 Speaker 1: their chief investment officer. You're given a speech in this 294 00:15:17,840 --> 00:15:21,480 Speaker 1: beautiful building this morning ten am. The young troops walk in. 295 00:15:21,760 --> 00:15:26,000 Speaker 1: What's your single message? The single messages? In this sort 296 00:15:26,040 --> 00:15:29,240 Speaker 1: of an environment, it's very easy for people to get 297 00:15:29,680 --> 00:15:35,160 Speaker 1: uh kind of complacent or fearful. Fearful because we we 298 00:15:35,200 --> 00:15:39,480 Speaker 1: have had a very long run. Market levels are high 299 00:15:39,800 --> 00:15:42,640 Speaker 1: and therefore anticipating some sort of a crash, I think 300 00:15:42,680 --> 00:15:45,520 Speaker 1: that can paralyze people. And at the same time, because 301 00:15:45,840 --> 00:15:48,240 Speaker 1: the markets haven't corrected in a big way, kind of 302 00:15:48,280 --> 00:15:52,320 Speaker 1: not anticipating what sort of things, what sort of drivers 303 00:15:52,320 --> 00:15:54,880 Speaker 1: in the markets to look at and and and and 304 00:15:54,880 --> 00:15:57,400 Speaker 1: and and ensure that if things are going to change, 305 00:15:57,880 --> 00:16:00,400 Speaker 1: we we we have some ideas where it's coming. How 306 00:16:00,560 --> 00:16:05,000 Speaker 1: correlated our international markets right now, whether it's market to market, 307 00:16:05,480 --> 00:16:08,440 Speaker 1: across asset classes, it's something You've got a bunch of 308 00:16:08,520 --> 00:16:12,360 Speaker 1: quants that they look at what are the correlations right now? 309 00:16:12,440 --> 00:16:15,480 Speaker 1: So the correlations in various markets is high, but I 310 00:16:15,520 --> 00:16:18,400 Speaker 1: think the reason it is high is because the markets 311 00:16:18,440 --> 00:16:22,800 Speaker 1: at the moment are being driven by synchronized global recovery. 312 00:16:23,160 --> 00:16:29,320 Speaker 1: Ever since the energy crisis or the correction oil prices 313 00:16:29,360 --> 00:16:34,760 Speaker 1: first quarter of two sixteen, since that incident, the markets 314 00:16:35,000 --> 00:16:39,680 Speaker 1: at the global economies have come up together, and therefore 315 00:16:39,720 --> 00:16:42,760 Speaker 1: markets have gone up together as well. So it's the 316 00:16:42,760 --> 00:16:45,280 Speaker 1: they are correlated. But I don't think that's really a 317 00:16:45,320 --> 00:16:48,320 Speaker 1: matter of huge concern. I think what we have to 318 00:16:48,400 --> 00:16:51,280 Speaker 1: look at is what is going to happen over the 319 00:16:51,360 --> 00:16:54,280 Speaker 1: next two years as opposed to what happened over the 320 00:16:54,360 --> 00:16:57,440 Speaker 1: last two years. At this point, it seems to us 321 00:16:57,920 --> 00:17:02,840 Speaker 1: that growth in emerging markets is getting deeper while growth 322 00:17:02,920 --> 00:17:06,280 Speaker 1: in the US is flattening out. And I think as 323 00:17:06,320 --> 00:17:10,160 Speaker 1: you think about your investment strategy that that's the thing 324 00:17:10,359 --> 00:17:12,720 Speaker 1: that you that's the theme that you have to incorporate 325 00:17:12,760 --> 00:17:14,840 Speaker 1: in your thinking. How do you navigate that divergence. Then 326 00:17:14,920 --> 00:17:17,160 Speaker 1: if if you're seeing that the two things split off 327 00:17:17,160 --> 00:17:18,880 Speaker 1: in the way that they are, is now a time 328 00:17:18,960 --> 00:17:21,560 Speaker 1: to make moves. So I would say, you know, it 329 00:17:21,680 --> 00:17:27,200 Speaker 1: makes emerging market equities emerging market debt far more attractive 330 00:17:27,280 --> 00:17:31,240 Speaker 1: than they have been at any point because valuations in 331 00:17:31,320 --> 00:17:34,560 Speaker 1: emerging markets are much better than they are in developed markets, 332 00:17:34,840 --> 00:17:40,360 Speaker 1: especially the US, and the fundamentals economic growth in emerging 333 00:17:40,440 --> 00:17:45,240 Speaker 1: markets is getting deeper and it is getting less China dependent. 334 00:17:45,440 --> 00:17:47,480 Speaker 1: So if you look at an economy like Brazil, which 335 00:17:47,600 --> 00:17:50,840 Speaker 1: was a basket case two years ago, and if if 336 00:17:50,960 --> 00:17:53,240 Speaker 1: this in two thousand and eighteen, if they grow at 337 00:17:53,480 --> 00:17:56,400 Speaker 1: two or three or four percent, we wouldn't be surprised 338 00:17:56,400 --> 00:18:00,520 Speaker 1: at all. So things are changing very rapidly in emerging markets. 339 00:18:00,560 --> 00:18:03,520 Speaker 1: Growth is creating deeper and I think that makes merging 340 00:18:03,520 --> 00:18:08,320 Speaker 1: markets far more interesting from an investment standpoint than develop markets. Tom. 341 00:18:08,400 --> 00:18:09,879 Speaker 1: That's the big thing tom in is stage check just 342 00:18:09,880 --> 00:18:13,040 Speaker 1: a moment ago mentioning volatility. They're hovering around very good, 343 00:18:13,040 --> 00:18:16,239 Speaker 1: always check how do you how do you navigate that 344 00:18:16,880 --> 00:18:19,200 Speaker 1: the low volatility that we've seen and do you do 345 00:18:19,200 --> 00:18:20,800 Speaker 1: the sense that we could see an uptaking that in 346 00:18:20,840 --> 00:18:24,719 Speaker 1: anytime soon? Well, so you know low volatility. You look 347 00:18:24,760 --> 00:18:27,159 Speaker 1: at low volatility, and you always get worried. Am I 348 00:18:27,280 --> 00:18:29,960 Speaker 1: missing something? Markets are too complacent? But I think you 349 00:18:30,000 --> 00:18:32,399 Speaker 1: have to take a step back and try to figure 350 00:18:32,400 --> 00:18:35,440 Speaker 1: out what is the driver of that low volatility. And 351 00:18:35,560 --> 00:18:38,399 Speaker 1: at the moment, the driver of the low volatility is 352 00:18:38,440 --> 00:18:43,240 Speaker 1: the synchronized global growth, low policy rates, and lack of inflation. 353 00:18:43,960 --> 00:18:48,160 Speaker 1: If any of those things change, volatility would go up meaningful. 354 00:18:48,240 --> 00:18:50,840 Speaker 1: But this is critical. Then if any of those things change, 355 00:18:50,960 --> 00:18:52,959 Speaker 1: one of them or as you know, when they change 356 00:18:53,400 --> 00:18:57,639 Speaker 1: Christians usually a set of them change. Can you manage 357 00:18:57,920 --> 00:19:02,560 Speaker 1: the various glide pass will be emerging market pain which 358 00:19:02,600 --> 00:19:06,160 Speaker 1: some of us have enjoyed, or is it a manageable 359 00:19:06,200 --> 00:19:10,439 Speaker 1: where you can shift assets and portfolios as we enjoy 360 00:19:10,520 --> 00:19:14,320 Speaker 1: those changes. So I think the pace of change is 361 00:19:14,359 --> 00:19:17,679 Speaker 1: going to be more gradual than it has been in 362 00:19:17,720 --> 00:19:23,000 Speaker 1: the past for two reasons. One, the the the drivers 363 00:19:23,000 --> 00:19:27,440 Speaker 1: of the economic drivers are far more stable. So inflation, 364 00:19:27,560 --> 00:19:32,520 Speaker 1: which typically ends up up ending things. UH, Really, isn't 365 00:19:32,560 --> 00:19:36,160 Speaker 1: that that prominent a factor? And if it comes up, 366 00:19:36,240 --> 00:19:38,640 Speaker 1: it will come up very very gradually, So that's one. 367 00:19:38,880 --> 00:19:42,679 Speaker 1: And second, policymakers are on the case. They are singularly 368 00:19:42,720 --> 00:19:46,720 Speaker 1: focused on making sure that that they're not significant dislocations 369 00:19:46,720 --> 00:19:49,520 Speaker 1: in the economy. And that's why policy rates are as 370 00:19:49,520 --> 00:19:51,760 Speaker 1: low as the arch and policymakers I mean, I want 371 00:19:51,760 --> 00:19:54,480 Speaker 1: to stay internationally or in The President gave this UH 372 00:19:54,600 --> 00:19:58,399 Speaker 1: speech in Beijing today, was that the ultimate mercantilis speech. 373 00:19:59,040 --> 00:20:01,920 Speaker 1: I mean, come on, I he went after Obama to Washington. 374 00:20:01,960 --> 00:20:04,120 Speaker 1: I think he got Martin Vanpurin in there. I don't 375 00:20:04,119 --> 00:20:06,119 Speaker 1: know how he did that, but but but is it 376 00:20:06,200 --> 00:20:09,640 Speaker 1: a zero some presidency in a world that you describe 377 00:20:09,640 --> 00:20:14,720 Speaker 1: with Oppenheimer, which is truly global I think uh approaching 378 00:20:15,000 --> 00:20:20,840 Speaker 1: global trade in a pure mercantile way. I think is 379 00:20:20,840 --> 00:20:23,000 Speaker 1: is not good for the world, and it's not good 380 00:20:23,080 --> 00:20:25,919 Speaker 1: for the US, and it's not good for UH the 381 00:20:26,000 --> 00:20:29,680 Speaker 1: overall growth that we need for us to be UH, 382 00:20:29,840 --> 00:20:33,280 Speaker 1: for all of us to prosper. I think globalization is 383 00:20:33,560 --> 00:20:36,439 Speaker 1: a good thing. I think it has certainly created certain 384 00:20:36,480 --> 00:20:40,360 Speaker 1: dislocations in UH so in some markets and some economies, 385 00:20:40,400 --> 00:20:43,080 Speaker 1: and we have to find ways of dealing with that. 386 00:20:43,440 --> 00:20:46,560 Speaker 1: But you know, it's a baby in the bath water 387 00:20:46,720 --> 00:20:50,400 Speaker 1: kind of an argument. The fact that it has led 388 00:20:50,440 --> 00:20:53,320 Speaker 1: to some unemployment in certain sectors of the US economy, 389 00:20:53,600 --> 00:20:57,119 Speaker 1: it doesn't make it singularly bad for the overall US economy. 390 00:20:57,160 --> 00:20:59,800 Speaker 1: Did you did you see we we played it until 391 00:20:59,880 --> 00:21:03,680 Speaker 1: with vision David it was extor how he basically said, China, 392 00:21:03,720 --> 00:21:07,320 Speaker 1: You're okay, but it's all these previous administrations. I was 393 00:21:07,400 --> 00:21:09,399 Speaker 1: thunderstruck by Yeah, And I think if you look at 394 00:21:09,400 --> 00:21:10,879 Speaker 1: the reaction of those in the audience as well, there 395 00:21:10,920 --> 00:21:12,560 Speaker 1: was some surprise at what he had to say. You 396 00:21:12,560 --> 00:21:15,840 Speaker 1: talked about emerging markets exclusive of China. Help us understand 397 00:21:15,880 --> 00:21:18,000 Speaker 1: the role that China is playing now when it comes 398 00:21:18,000 --> 00:21:20,480 Speaker 1: to economic growth in the developing world and when it 399 00:21:20,520 --> 00:21:24,359 Speaker 1: comes to just investment more generally. So, China is the 400 00:21:24,480 --> 00:21:27,560 Speaker 1: second largest economy in the world and is growing faster 401 00:21:27,720 --> 00:21:32,600 Speaker 1: than basically any developed market. Uh, the investments is a 402 00:21:32,720 --> 00:21:36,399 Speaker 1: large component of that growth. Their savings rate is roughly 403 00:21:37,680 --> 00:21:43,360 Speaker 1: eight percent, to be precise, And I think that volume 404 00:21:43,480 --> 00:21:47,640 Speaker 1: of investments has impact globally because they end up being 405 00:21:47,680 --> 00:21:52,840 Speaker 1: the largest consumer of commodities on a global basis, and 406 00:21:52,840 --> 00:21:56,359 Speaker 1: and therefore what happens in China is very relevant to 407 00:21:56,480 --> 00:22:00,840 Speaker 1: what happens for commodity prices, what happens to emerging market exports, 408 00:22:00,840 --> 00:22:04,719 Speaker 1: and all of all of that stuff. When China was 409 00:22:05,119 --> 00:22:09,680 Speaker 1: slowing down meaningfully because they cracked down on the investment 410 00:22:09,720 --> 00:22:12,080 Speaker 1: in real estate and things like that, we had a 411 00:22:12,119 --> 00:22:15,320 Speaker 1: commodity issue in the morning. Subsequent to that, things have 412 00:22:16,119 --> 00:22:19,919 Speaker 1: things have stabilized as they put more stimulus, so growth 413 00:22:19,920 --> 00:22:24,240 Speaker 1: in China is very critical for growth in emerging markets. 414 00:22:24,640 --> 00:22:27,960 Speaker 1: Having said that, I think as China slows down and 415 00:22:28,440 --> 00:22:33,600 Speaker 1: as other emerging markets kind of come out of their downdraft, 416 00:22:34,080 --> 00:22:39,040 Speaker 1: the growth in emerging markets is becoming less dependent on China, 417 00:22:39,160 --> 00:22:42,280 Speaker 1: and that's a good thing. That means that growth can 418 00:22:42,320 --> 00:22:45,840 Speaker 1: be sustained and it will be less volatile than it 419 00:22:46,480 --> 00:22:49,160 Speaker 1: was over the last five years. David gerin time Keene 420 00:22:49,160 --> 00:22:52,800 Speaker 1: at the studios of Oppenheimer Funds in UH New York 421 00:22:52,840 --> 00:22:56,240 Speaker 1: and Downtown New York and with as Christian MoManI, chief 422 00:22:56,280 --> 00:23:02,080 Speaker 1: Investment Officer for Oppenheimer Funds, with a terrific UH International perspective. 423 00:23:02,080 --> 00:23:03,800 Speaker 1: I want to rip up the scripture a Christian. I 424 00:23:03,800 --> 00:23:05,720 Speaker 1: know that David wants to get the tax reform and 425 00:23:06,200 --> 00:23:08,280 Speaker 1: all of our thoughts on the elections and what's going 426 00:23:08,320 --> 00:23:13,440 Speaker 1: on in Washington. Um, you were at Burly Institute of Technology. 427 00:23:13,720 --> 00:23:16,760 Speaker 1: This is northwest of Calcutta. Is that right? Yes, it's 428 00:23:16,800 --> 00:23:20,840 Speaker 1: northwest of It's closer to Delhi than Calcutta. Closer to Delhi, Okay. 429 00:23:20,960 --> 00:23:24,200 Speaker 1: I have two questions. The smog and Delhi I find 430 00:23:24,400 --> 00:23:29,400 Speaker 1: absolutely stunning. Is the media overplaying that, particularly the BBC 431 00:23:30,040 --> 00:23:32,879 Speaker 1: or is it factors worse than what I experienced in 432 00:23:33,280 --> 00:23:36,959 Speaker 1: Mexico City or Beijing. I think it's all true. Unfortunately, 433 00:23:36,960 --> 00:23:39,600 Speaker 1: it's all true. It's all true. Uh, you can eat 434 00:23:39,640 --> 00:23:42,359 Speaker 1: the fog. As they say in Delhi. It's uh, it's 435 00:23:42,760 --> 00:23:46,919 Speaker 1: mind bogglingly bad. And and people say it's almost like 436 00:23:47,280 --> 00:23:50,919 Speaker 1: fifty cigarettes a day kind of an environment. We have 437 00:23:51,000 --> 00:23:54,760 Speaker 1: to the or we Indians and the Indian government has 438 00:23:54,800 --> 00:23:57,840 Speaker 1: to do something about it because this is not sustainable 439 00:23:57,880 --> 00:23:59,920 Speaker 1: in the lungest So when you read in your team 440 00:24:00,080 --> 00:24:05,199 Speaker 1: reads forty seven page McKenzie BCG Bain documents on the 441 00:24:05,280 --> 00:24:09,040 Speaker 1: build out of infrastructure, what do you think of those documents? 442 00:24:09,080 --> 00:24:12,560 Speaker 1: And how do you invest for it? Knowing Deli's desperate 443 00:24:12,560 --> 00:24:16,040 Speaker 1: to fix what seems to be a world class problem. 444 00:24:16,119 --> 00:24:19,720 Speaker 1: So I think for India that is really the crux 445 00:24:19,760 --> 00:24:22,679 Speaker 1: of the issue, and that is the primary difference between 446 00:24:22,720 --> 00:24:25,879 Speaker 1: how things have worked out in India as opposed to China. 447 00:24:26,000 --> 00:24:30,760 Speaker 1: That is, Uh, Chinese growth was for all sorts of 448 00:24:30,800 --> 00:24:35,080 Speaker 1: political and economic reasons, was very rapid because they could 449 00:24:35,119 --> 00:24:38,280 Speaker 1: direct it, and in in India it's very difficult for 450 00:24:38,320 --> 00:24:41,919 Speaker 1: them to do that. And uh, because the infrastructure is 451 00:24:41,920 --> 00:24:45,040 Speaker 1: poor and the investment rate has not been as substantial 452 00:24:45,240 --> 00:24:49,000 Speaker 1: as uh as the was the case in China. The 453 00:24:49,560 --> 00:24:54,600 Speaker 1: potential or the risk to potential growth in India is 454 00:24:54,800 --> 00:24:59,080 Speaker 1: significantly higher and will remain significantly higher relative to China, 455 00:24:59,119 --> 00:25:01,119 Speaker 1: where you don't know, Davi. It is. When christ and 456 00:25:01,119 --> 00:25:04,080 Speaker 1: I were studying this stuff a million years ago, international 457 00:25:04,080 --> 00:25:07,159 Speaker 1: investment was which concrete company should we buy? That was 458 00:25:07,200 --> 00:25:10,800 Speaker 1: literally the whole strategy. You bought one telephone, Telemax or 459 00:25:10,800 --> 00:25:14,440 Speaker 1: whatever Max. You bought one telephone and one concrete company. Done, 460 00:25:15,040 --> 00:25:18,400 Speaker 1: and you know it's moved on to a little greater sophistications. 461 00:25:18,440 --> 00:25:24,040 Speaker 1: At least, you know, thankfully the world today is full 462 00:25:24,080 --> 00:25:28,199 Speaker 1: of really really good companies. And at Oppenheimer Funds, the 463 00:25:28,280 --> 00:25:33,280 Speaker 1: way we approach our investment philosophy is really not about geographies. 464 00:25:33,320 --> 00:25:36,359 Speaker 1: It's not about India, it's not about China. It's really 465 00:25:36,400 --> 00:25:40,399 Speaker 1: about great companies in India, great companies in China. Even 466 00:25:40,440 --> 00:25:42,800 Speaker 1: if there's an economy that we don't like, we can 467 00:25:42,840 --> 00:25:44,960 Speaker 1: go always go out and find a company in that 468 00:25:45,080 --> 00:25:48,159 Speaker 1: economy that we like, as we did with with Russia 469 00:25:48,200 --> 00:25:51,520 Speaker 1: and Brazil which were sucking win for a while. Did 470 00:25:51,520 --> 00:25:54,480 Speaker 1: you see how we got that messaging that was smooth this. 471 00:25:54,680 --> 00:25:59,040 Speaker 1: You know, I'm learning from you here at the Oppenheimer 472 00:25:59,119 --> 00:26:01,800 Speaker 1: Fund Studios an jumping here on the US. Yeah, let 473 00:26:01,800 --> 00:26:03,439 Speaker 1: me ask you. I know that you're waiting for, with 474 00:26:03,520 --> 00:26:04,880 Speaker 1: bated breath, you to find out of the next FED 475 00:26:04,920 --> 00:26:06,119 Speaker 1: cheer who is going to be So we have to 476 00:26:06,200 --> 00:26:07,879 Speaker 1: own panel who's going to be filling that position? If 477 00:26:07,880 --> 00:26:11,080 Speaker 1: all goes according to plan, what's this FED going to 478 00:26:11,119 --> 00:26:12,359 Speaker 1: look like? How is it going to be different from 479 00:26:12,400 --> 00:26:15,120 Speaker 1: Janet Yellens Fed? If at all? I I don't think 480 00:26:15,240 --> 00:26:18,480 Speaker 1: the core of the FED is going to be dramatically 481 00:26:18,920 --> 00:26:22,800 Speaker 1: dramatically different from Janet Allen's FED. I think what is 482 00:26:22,840 --> 00:26:25,560 Speaker 1: far more important is the fact that this is a 483 00:26:25,680 --> 00:26:29,320 Speaker 1: leader cycle Fed than Janet Yellen was. So I think 484 00:26:29,320 --> 00:26:33,000 Speaker 1: it's the policies that the FED implements is not going 485 00:26:33,040 --> 00:26:35,800 Speaker 1: to be because the FED is different. It's just the 486 00:26:35,880 --> 00:26:40,320 Speaker 1: economic cycle is at a different point, and our expectation 487 00:26:40,480 --> 00:26:43,760 Speaker 1: is that there probably will be some tightening next year, 488 00:26:44,119 --> 00:26:47,679 Speaker 1: probably will be some tightening in two thousand nineteen. Whether 489 00:26:47,720 --> 00:26:49,919 Speaker 1: that is three or four in two thousand and eighteen 490 00:26:49,960 --> 00:26:51,960 Speaker 1: and three or four in two thousand nineteen, I think 491 00:26:52,040 --> 00:26:54,760 Speaker 1: is up for debate. But the trend is as economic 492 00:26:54,800 --> 00:26:58,800 Speaker 1: growth in the US remains stable and unemployment rate continues 493 00:26:58,840 --> 00:27:01,919 Speaker 1: to go down, the trend in the US is for 494 00:27:02,400 --> 00:27:06,520 Speaker 1: tighter policy rather than easier policy. The exact opposite is 495 00:27:06,560 --> 00:27:09,840 Speaker 1: happening in emerging markets. UH, and and I think that's 496 00:27:09,840 --> 00:27:13,119 Speaker 1: the one reason to like emerging markets. Policy rates or 497 00:27:13,160 --> 00:27:17,240 Speaker 1: interest rates. An emerging market inflation and emerging markets probably lower, 498 00:27:17,480 --> 00:27:21,040 Speaker 1: trending lower rather than higher, the opposite of what's happening 499 00:27:21,040 --> 00:27:23,680 Speaker 1: in developed markets. What are the consequences of the uncertainty 500 00:27:23,680 --> 00:27:26,439 Speaker 1: surrounding personnel when it comes to to the FED, UH, 501 00:27:26,640 --> 00:27:29,320 Speaker 1: Jeffrey Lacker has been replaced in Richmond. Bill Dudley's announced 502 00:27:29,359 --> 00:27:31,720 Speaker 1: his resignation. There are numerous seats around the big conference 503 00:27:31,720 --> 00:27:33,840 Speaker 1: state in the ECHOS building that haven't been filled with 504 00:27:33,840 --> 00:27:36,840 Speaker 1: new individuals. What does that mean? Does it mean continuity 505 00:27:37,000 --> 00:27:38,600 Speaker 1: by default or does it mean there is there is 506 00:27:38,600 --> 00:27:41,080 Speaker 1: a gap an understanding of what's going to happen. Well, 507 00:27:41,320 --> 00:27:44,879 Speaker 1: there certainly is, But I think at the end of 508 00:27:44,880 --> 00:27:48,920 Speaker 1: the day, it's really a political issue. So UH, with 509 00:27:48,920 --> 00:27:52,879 Speaker 1: with the appointment of Powell, I think Mr Trump showed 510 00:27:52,960 --> 00:27:55,399 Speaker 1: us what he's looking to do, that is is not 511 00:27:55,680 --> 00:27:58,880 Speaker 1: looking for radical change in policy, because that doesn't really 512 00:27:58,920 --> 00:28:02,480 Speaker 1: serve him while politically or from a from a growth perspective. 513 00:28:02,760 --> 00:28:06,040 Speaker 1: So there might be other replacements, but the likelihood that 514 00:28:06,119 --> 00:28:09,840 Speaker 1: those replacements are radical given the appointment of power, I 515 00:28:09,880 --> 00:28:12,639 Speaker 1: think that risk has gone down, and the markets are 516 00:28:12,720 --> 00:28:15,360 Speaker 1: kind of incorporating that and their outlook for rates. Verty 517 00:28:15,440 --> 00:28:17,800 Speaker 1: quickly here, what's your outlook for tax reform to the 518 00:28:17,840 --> 00:28:19,439 Speaker 1: likelihood that it happens and what does it mean for 519 00:28:19,440 --> 00:28:22,159 Speaker 1: the markets? Here? And I apologize thirty seconds to well, 520 00:28:22,320 --> 00:28:24,960 Speaker 1: I think some form of tax REUPOEM probably gets done 521 00:28:24,960 --> 00:28:28,320 Speaker 1: because politically it suits everyone to get something done. Whether 522 00:28:28,400 --> 00:28:30,639 Speaker 1: that is going to be meaningful and will change the 523 00:28:30,680 --> 00:28:33,720 Speaker 1: direction of the economy, I think I'm not so. I'm 524 00:28:33,720 --> 00:28:37,840 Speaker 1: not so sure. We will have some deficit, some incremental growth, 525 00:28:37,920 --> 00:28:41,440 Speaker 1: some tax reform. It doesn't change the direction of markets materially. 526 00:28:41,520 --> 00:29:01,280 Speaker 1: Christian Penheimer funds it is not the essay of the day, 527 00:29:01,280 --> 00:29:04,920 Speaker 1: of the week, or even of this November. It is 528 00:29:04,960 --> 00:29:10,200 Speaker 1: possibly the essay of our labor economy in this financial crisis. 529 00:29:10,280 --> 00:29:15,240 Speaker 1: Ned Phelps, as always writes well, writes clearly he has 530 00:29:15,240 --> 00:29:19,840 Speaker 1: written a jewel for Project Syndicate. Nothing natural about his 531 00:29:20,000 --> 00:29:24,360 Speaker 1: I should say natural rate of unemployment. I can't say 532 00:29:24,440 --> 00:29:28,479 Speaker 1: enough about the Laureate's clarity and moving from the lessons 533 00:29:28,560 --> 00:29:33,000 Speaker 1: we learned from Hicks and Marshall and Robert Solo of 534 00:29:33,040 --> 00:29:36,520 Speaker 1: a school on the Charles River in Boston to Ned 535 00:29:36,520 --> 00:29:39,400 Speaker 1: Phelps and the rebels of the nineteen sixties, Well, Ned 536 00:29:39,400 --> 00:29:41,280 Speaker 1: Phelps honored to have you wear this. What do we 537 00:29:41,360 --> 00:29:45,040 Speaker 1: get wrong now in our labor economics? What's the number 538 00:29:45,040 --> 00:29:50,880 Speaker 1: one message you have to this mystery of no wage growth? Well? 539 00:29:50,920 --> 00:29:53,920 Speaker 1: I think they The big message is that the world 540 00:29:54,000 --> 00:29:57,800 Speaker 1: is an awfully it's much more of a complicated place 541 00:29:57,960 --> 00:30:04,800 Speaker 1: than we recognize. And attitudes and beliefs and fears and hopes, 542 00:30:05,120 --> 00:30:09,080 Speaker 1: they all play a big role in UH the behavior 543 00:30:09,120 --> 00:30:15,680 Speaker 1: of workers, the demands of workers, UH, wage setting by 544 00:30:16,080 --> 00:30:19,560 Speaker 1: employers and so forth. Um. So what I did and 545 00:30:19,680 --> 00:30:24,760 Speaker 1: that that column was I dreamed up three or four 546 00:30:25,320 --> 00:30:31,240 Speaker 1: UH factors that that might be slowing down UH the 547 00:30:31,320 --> 00:30:34,160 Speaker 1: rate of increase of prices or the rate of increase 548 00:30:34,200 --> 00:30:38,560 Speaker 1: of wages or both, because people are are kind of 549 00:30:39,280 --> 00:30:43,680 Speaker 1: disturbed by recent developments. We just saw a president, Professor 550 00:30:43,720 --> 00:30:47,320 Speaker 1: Phelps give a work untilist zero sum speech in Beijing 551 00:30:48,200 --> 00:30:51,840 Speaker 1: on America in trade. All of that tenor of the 552 00:30:51,880 --> 00:30:54,800 Speaker 1: President comes out of the agony of a part of 553 00:30:54,840 --> 00:31:00,240 Speaker 1: America that's not enjoying our economic growth, our prosperity, and 554 00:31:00,320 --> 00:31:03,160 Speaker 1: our wealth and income gains. If you were sitting with 555 00:31:03,160 --> 00:31:06,440 Speaker 1: the president, how would you advise him to a better 556 00:31:06,480 --> 00:31:16,040 Speaker 1: economy that doesn't arken back to a failed mercantilism. Great question, tom, Um, Well, 557 00:31:18,280 --> 00:31:22,760 Speaker 1: I think, uh, the most fundamental thing we can do 558 00:31:23,160 --> 00:31:27,560 Speaker 1: is to get economic growth back. We've just got to 559 00:31:27,680 --> 00:31:32,560 Speaker 1: do that. Um. I know there's a big debate raging 560 00:31:32,640 --> 00:31:36,640 Speaker 1: about robots. Are they something that's good for growth or 561 00:31:36,760 --> 00:31:42,080 Speaker 1: or or actually what will they ruin economic life for us? 562 00:31:42,560 --> 00:31:48,080 Speaker 1: But but just putting that for aside for a moment, um, 563 00:31:48,240 --> 00:31:51,960 Speaker 1: I think we have to to get the economy doing 564 00:31:52,000 --> 00:31:57,640 Speaker 1: everything that's possible to uh innovate more, invest more, get 565 00:31:57,640 --> 00:32:02,600 Speaker 1: productivity rising. Than then everything will be so much better. 566 00:32:03,120 --> 00:32:07,080 Speaker 1: And those folks and Appalachia who are kind of desperate, 567 00:32:07,400 --> 00:32:10,160 Speaker 1: well maybe they'll pick up and decide to go to 568 00:32:10,200 --> 00:32:15,480 Speaker 1: California after all and take advantage of um, the high 569 00:32:15,520 --> 00:32:21,280 Speaker 1: and rising wage rates. Right now, the the the the 570 00:32:21,360 --> 00:32:25,120 Speaker 1: market for their services is pretty bleak. I take what 571 00:32:25,160 --> 00:32:28,000 Speaker 1: you're saying that we might see new pioneers heading west, 572 00:32:28,040 --> 00:32:30,320 Speaker 1: go west, young Man and and the like. But when 573 00:32:30,360 --> 00:32:32,240 Speaker 1: you listen to the rhetoric coming from Washington, from this 574 00:32:32,240 --> 00:32:35,280 Speaker 1: president particular, we hear about a renaissance of coal, for instance, 575 00:32:35,360 --> 00:32:38,760 Speaker 1: or returned to economies that we seem to have left behind. 576 00:32:38,800 --> 00:32:40,800 Speaker 1: How much does that matter? How much does the rhetoric 577 00:32:40,800 --> 00:32:44,040 Speaker 1: coming out of Washington matter to the economic progress of 578 00:32:44,080 --> 00:32:47,080 Speaker 1: this country? Well, I don't think the people can eat 579 00:32:47,120 --> 00:32:53,520 Speaker 1: the rhetor rhetoric, so of course uh, um and uh. 580 00:32:53,560 --> 00:32:57,160 Speaker 1: And I also think that reopening the coal mines, uh 581 00:32:58,280 --> 00:33:02,040 Speaker 1: would would not be a good signal to send to 582 00:33:02,120 --> 00:33:04,840 Speaker 1: the rest of the world when we're trying to get 583 00:33:04,840 --> 00:33:10,280 Speaker 1: the rest of the world to respect the environment, um Professor. 584 00:33:10,360 --> 00:33:13,520 Speaker 1: Within the battle that we've just had over John Taylor 585 00:33:14,240 --> 00:33:18,240 Speaker 1: in rules based central banking, and we've gone with presume, 586 00:33:18,960 --> 00:33:24,080 Speaker 1: presumably Chairman Powell, where does your nehru fit in both ties? 587 00:33:24,160 --> 00:33:29,160 Speaker 1: On TV wax philosophical, never on radio wax philosophical about 588 00:33:29,200 --> 00:33:32,920 Speaker 1: Phelps and Taylor's nehru? Would you please explain to mere 589 00:33:32,960 --> 00:33:38,840 Speaker 1: mortals what you invented? What did that Phelps wrought? Um? 590 00:33:38,880 --> 00:33:41,720 Speaker 1: I was one of those like two of us. Maybe 591 00:33:42,080 --> 00:33:50,080 Speaker 1: I was one of those who, um sort of provided 592 00:33:50,240 --> 00:33:54,840 Speaker 1: a theoretical foundation for what it's worth, uh for the 593 00:33:54,960 --> 00:33:58,320 Speaker 1: idea of a natural unemployment rate that no matter what 594 00:33:58,560 --> 00:34:02,840 Speaker 1: the inflation rate is as a customary thing, whether it's running, 595 00:34:03,400 --> 00:34:09,000 Speaker 1: whether it's running at two paranum forever or at five paranum, 596 00:34:09,560 --> 00:34:13,759 Speaker 1: it's the the unemployment rate that will accompany that will 597 00:34:13,840 --> 00:34:20,000 Speaker 1: be the same, because fundamentally, the unemployment rate is determined 598 00:34:20,040 --> 00:34:24,879 Speaker 1: by structural forces, not by the rate of inflation itself. 599 00:34:25,440 --> 00:34:29,600 Speaker 1: Am I being clear clear to me? Tom, I don't 600 00:34:29,600 --> 00:34:33,160 Speaker 1: know I was doing. I was looking at how you're 601 00:34:33,160 --> 00:34:38,440 Speaker 1: going to do this week. Let me ask you about 602 00:34:38,920 --> 00:34:40,920 Speaker 1: how the FED looks at the economy now. And as 603 00:34:40,960 --> 00:34:42,359 Speaker 1: I mentioned a little clearer on the show, we heard 604 00:34:42,360 --> 00:34:44,040 Speaker 1: from Janet yell In a few weeks back, speaking in 605 00:34:44,080 --> 00:34:48,400 Speaker 1: Cleveland talking about reckoning with a forecasting in particular, what 606 00:34:48,440 --> 00:34:50,279 Speaker 1: does the FED need to do differently when it looks 607 00:34:50,320 --> 00:35:00,600 Speaker 1: at the U S economy? Well, UM, I do think that, um, 608 00:35:00,600 --> 00:35:06,640 Speaker 1: there are some significant consequences for the for the extremely 609 00:35:07,239 --> 00:35:13,600 Speaker 1: uh uh cheap money, easy money policies uh at the 610 00:35:13,600 --> 00:35:19,680 Speaker 1: FED and also at the ECB UH in the Eurozone, uh. 611 00:35:20,200 --> 00:35:25,040 Speaker 1: I think, I think financial institutions have earned very rates, 612 00:35:25,360 --> 00:35:29,440 Speaker 1: very low rates rates of return, and so that that 613 00:35:29,760 --> 00:35:34,440 Speaker 1: they I think the financial sector is not as healthy 614 00:35:34,480 --> 00:35:39,600 Speaker 1: and robust and not helping as much with helping businesses 615 00:35:40,080 --> 00:35:48,920 Speaker 1: as as much as uh it UH once would have done. UM. Also, 616 00:35:49,880 --> 00:35:52,040 Speaker 1: I think it'd be good to just to try out 617 00:35:52,520 --> 00:35:57,800 Speaker 1: higher interest rates and see whether whether that wouldn't be okay, 618 00:35:58,400 --> 00:36:00,520 Speaker 1: and and it would be okay, that that would be 619 00:36:00,560 --> 00:36:03,560 Speaker 1: good because we want to be able to lower interest 620 00:36:03,640 --> 00:36:08,279 Speaker 1: rates in the future when when demand weakens, but we 621 00:36:08,320 --> 00:36:11,040 Speaker 1: can't at the moment because all interest rates are already 622 00:36:11,080 --> 00:36:13,000 Speaker 1: so low. Now we're gonna have to leave it there. 623 00:36:13,040 --> 00:36:15,480 Speaker 1: But that's an important point. Professor Phelps. We look forward 624 00:36:15,520 --> 00:36:19,879 Speaker 1: to seeing you soon, particularly this idea of trying out 625 00:36:20,040 --> 00:36:22,720 Speaker 1: higher interest rates. He's a laureate of two thousand six 626 00:36:23,200 --> 00:36:28,719 Speaker 1: Edmund Phelps of Columbia University. Was he coming? I didn't 627 00:36:28,719 --> 00:36:32,080 Speaker 1: know that. I didn't know that. I can't convey the 628 00:36:32,120 --> 00:36:36,080 Speaker 1: importance of this essay and project syndicate. Uh. Mr Phelps 629 00:36:36,120 --> 00:36:39,560 Speaker 1: is of a certain vintage to bring a history into it, 630 00:36:39,760 --> 00:36:42,640 Speaker 1: and and for everybody caught up in the moment, he 631 00:36:42,760 --> 00:36:46,800 Speaker 1: pulls us back over a hundred years to the mysteries 632 00:36:46,840 --> 00:36:49,439 Speaker 1: we've seen about wage growth and about labor as well. 633 00:36:49,640 --> 00:36:52,320 Speaker 1: I put that out on Twitter. I'll continue to advance 634 00:36:52,400 --> 00:37:03,239 Speaker 1: that over the coming days. Yeah. Thanks for listening to 635 00:37:03,320 --> 00:37:08,040 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 636 00:37:08,200 --> 00:37:13,799 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 637 00:37:13,840 --> 00:37:17,600 Speaker 1: on Twitter at Tom Keene. David Gura is at David Gura. 638 00:37:18,040 --> 00:37:21,600 Speaker 1: Before the podcast, you could always catch US World one. 639 00:37:21,800 --> 00:37:22,880 Speaker 1: I'm Bloomberg Radio