Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg with
Speaker 1: us here in New York and Police to say Savena Subramanium.
Speaker 1: Bank of America, Merrill Lynch, head of US Equity Strategy,
Speaker 1: Good morning to Savita, Good morning. What are you talent
Speaker 1: clients at the moment about December? That line in the
Speaker 1: sand when terrorists could go on? What is it? A
Speaker 1: hundred and sixty billion dollars a Chinese impulse? What's the
Speaker 1: message at the moment? And it's mostly consumer goods, which
Speaker 1: is which is different from what we've seen in the past.
Speaker 1: You know, I think the messages that if we get
Speaker 1: some sort of a skinny deal, I think we could
Speaker 1: see a really strong wrong rally in the more cyclical
Speaker 1: areas of the market, because my sense is that the
Speaker 1: market is actually pricing in a fairly dire scenario on trade.
Speaker 1: I mean, if you look at what's expensive within the
Speaker 1: SMP five hundred, it's utilities, it's consumer staples. These are
Speaker 1: you know, the recession stocks of the SMP five hundred.
Speaker 1: It's not machinery and and you know retailers. Those are
Speaker 1: the stocks that are really cheap. So my sense is
Speaker 1: that the market is actually pricing in not a great
Speaker 1: outcome from from the tariff scenario. Now now here, I
Speaker 1: think is where it gets interesting. I don't see the
Speaker 1: trade war ending, even if we get some kind of
Speaker 1: skinny deal. I think what it turns into is more
Speaker 1: of a tech war. UM. So I think we're shifting
Speaker 1: from this trade war tariffs on you know, soybeans, to
Speaker 1: and to an environment where I think the real war
Speaker 1: is around technology, UM, intellectual property, national security, and I
Speaker 1: think that could could continue for a lot longer. You
Speaker 1: actively talent claunch the need to position that fundio I
Speaker 1: was the equity allocation with regards to those kind of
Speaker 1: consents that you have. Absolutely, I mean, I think the
Speaker 1: way to think about this is the tech which hasn't
Speaker 1: been a market leader for you know, ten years running
Speaker 1: now UM is one of the areas that could actually
Speaker 1: take it on the chin in the near term. I mean,
Speaker 1: not only do you have tariffs, not only do you
Speaker 1: have the idea of you know, tech companies having to
Speaker 1: dislocate their supply chain, but you also have bipartisan support
Speaker 1: to regulate tech companies. So you know, what I worry
Speaker 1: about within tech is the same thing that we saw
Speaker 1: in financials back in two thousand five. So there's should
Speaker 1: I sell my Amazon and Apple? That's all I want
Speaker 1: to know. So I think if you're worried about the
Speaker 1: next year or two, I don't see Amazon and Apple
Speaker 1: or you know, just fang stocks in general. Are big
Speaker 1: cap tech companies as retaining their leadership. I think there's
Speaker 1: even when their regular growth if you look at the
Speaker 1: nominal g D be called Ethan Harris has and and
Speaker 1: your team, you're telling me to get out of revenue
Speaker 1: growth stocks with that are double digit inn sure, and
Speaker 1: go over to something with a much less revenue growth
Speaker 1: stream scheme. Now here's the thing I think that the
Speaker 1: I mean you you, we all kind of know this.
Speaker 1: But the second derivative story for tech is less positive
Speaker 1: than it has been fast. That's calculus talk on our
Speaker 1: Wednesday folks. Just but but I think the second derivative
Speaker 1: story for you know, potent to some of the more
Speaker 1: cyclical areas of the market could actually recover nicely if
Speaker 1: we see any sort of a you know, resolution on
Speaker 1: trade in the near term. So so, I guess when
Speaker 1: I look at it, I think, Okay, here's your tech
Speaker 1: companies that have crushed it for ten years, but now
Speaker 1: they're super crowded, they're arguably a little bit more expensive
Speaker 1: than than they happened in the past, and we're seeing
Speaker 1: a lot of different catalysts that could unseat that. I
Speaker 1: love what you're saying, and I love your smart, smart
Speaker 1: research deck about how we're gonna have this big shift
Speaker 1: to international big shift a small and big cap. What
Speaker 1: will be the pri some catalyst to make that occur?
Speaker 1: Is it as simple as FED policy or do we
Speaker 1: have to get more equity in nature or yield nature?
Speaker 1: In our analysis, I don't know if it's has to
Speaker 1: do with the FED. I mean, so, I think the
Speaker 1: biggest driver for rotations in style are the contours of
Speaker 1: the profit cycle. That's what we found in our quant work.
Speaker 1: And you know, I think what's important here is we've
Speaker 1: gone from an environment of very very slow decelerating growth
Speaker 1: to what looks like a reasonable acceleration in growth in
Speaker 1: two thousand twenty. And here's why I say that. So
Speaker 1: if you look at two thousand nineteen, this year, it's
Speaker 1: been flat earnings growth. We've had a flat year on
Speaker 1: on SMP earnings. Next year, without a lot of great
Speaker 1: economic delivery, we're likely to see a better year and
Speaker 1: amidst that pickup. This has historically been the biggest driver
Speaker 1: for value cycles, over growth cycles, for small, over large,
Speaker 1: for rest of world over us is just the idea
Speaker 1: that we get some kind of a pickup in profit cycle.
Speaker 1: Let's get your rival White survey to financials, consumer discretionary industrials,
Speaker 1: utilities that you rove a weights into. Those are overweighting
Speaker 1: sight into the conversations you're having at the moment. Where's
Speaker 1: the pushback coming from you? So the pushback is, why
Speaker 1: the heck are you overweight utilities because it's really expensive
Speaker 1: and it looks like a bond um. I guess utilities
Speaker 1: is our hedge against you know, things not going well
Speaker 1: over the next twelve months and utilities. What I like
Speaker 1: about it is that it's got a dividend yield that's
Speaker 1: a you know, a couple of percentage points higher than
Speaker 1: bond yields and um and it's basically, you know, it
Speaker 1: gives you what you think you're getting, regulated earnings growth
Speaker 1: relatively smooth. The real pushback that we get is on financials,
Speaker 1: because financials, everybody thinks we need the yield curve to
Speaker 1: steep in in order for financials to work, And here
Speaker 1: I totally disagree. I don't think you need the yield
Speaker 1: curve to steep in. I think financials is going to
Speaker 1: start to be acknowledged as a high quality dividend yield sector,
Speaker 1: which is something that we haven't really seen it as
Speaker 1: in a very long time. It was the less ever
Speaker 1: toxic sector back in two thousand seven, and I think
Speaker 1: that's how investors are painting it today. But the truth
Speaker 1: is the leverage ray show has been. You know, it's
Speaker 1: a shadow of its former self. These companies are arguably
Speaker 1: over capitalized, and their shareholder yield, if you add up
Speaker 1: share buy backs and dividend yield, shareholder yield for financials
Speaker 1: is the highest of all eleven sectors. You and I've
Speaker 1: talked about this many times. For this to work, you
Speaker 1: need a perception shift. You need investors to sit there
Speaker 1: and agree with you, not think that everything is just
Speaker 1: about a ten year yield of a shape and yield curve.
Speaker 1: You've seen evidence of that this year because actually some
Speaker 1: of these big names are more straighted, performed really rather
Speaker 1: well through. Is that already starting to happen. I think
Speaker 1: you're starting to get that acknowledgement that these are different
Speaker 1: companies than what what we saw in two thousand and eight.
Speaker 1: And then you know also just the idea that they've
Speaker 1: been so shunned for so many years that their underweight
Speaker 1: positions are now arguably risky. If the stocks start to
Speaker 1: move at all, I think that investors are going to
Speaker 1: be forced to start adding exposure. I mean, financials is
Speaker 1: a sect where the average institutional manager is two standard
Speaker 1: deviations below his or her relative exposure to the sector.
Speaker 1: So that means that they basically hate financials right now.
Speaker 1: You're gonna have to leave it there, Thank you, Superman.
Speaker 1: Really optimistic view in really stating that the shift will occur.
Speaker 1: That's been a huge debate. John on the show. Let's
Speaker 1: get to Lensley Vinja Murray, who joins US now Sheffield
Speaker 1: United as two points had Leslie vin Ja Murray knew
Speaker 1: that Chatham House head of US and America's program. Don't worry, Leslie,
Speaker 1: We're not going to continue that conversation. We are awaiting.
Speaker 1: We are awaiting a bilateral between Chancellor Angela Merkel and
Speaker 1: a President of the United States, Donald Trump, taking place
Speaker 1: just outside of London, England. We're going to bring that
Speaker 1: to our listeners in just a moment when it begins.
Speaker 1: But let's see, what are you looking for outside of
Speaker 1: the body language in the spectacle, what are you listening
Speaker 1: for when these two start talking. Well, I mean, I
Speaker 1: think you know the big thing right now is are
Speaker 1: we going to see a unity and cohesion? And of course,
Speaker 1: you know, the relationship between angel and Donald Trump has
Speaker 1: not been the easiest one. Of course, it's now being
Speaker 1: sort of overtaken, at least optically by the relationship between
Speaker 1: Trump and Macron. I think there's more to say about that,
Speaker 1: but I think we will still be looking to say,
Speaker 1: you know, are they on the same page? Will they
Speaker 1: speak to internal issues in the alliance, the question of Turkey.
Speaker 1: I think that's probably less likely, But I really do
Speaker 1: think that this is this going to be, you know,
Speaker 1: can they waive the flag as it were of NATO
Speaker 1: and forward that come in front lessa you're such a
Speaker 1: student of this, the US and then folding in the
Speaker 1: European Prison. I look at it as a fossil of SPD.
Speaker 1: The liberals being Billy, Bryant and Conrad added an hour's
Speaker 1: in the mix. And of course Helmet Cole had changed
Speaker 1: German politics. Does the President perceive Ms Miracle as a
Speaker 1: conservative or is he have a greater affinity to those
Speaker 1: in Germany even more servative? You know, I don't, to
Speaker 1: be very honest, I don't think Donald Trump is is
Speaker 1: thinking in quite this way. I think he hasn't a
Speaker 1: view of Germany in general that's driven by his antagonismic
Speaker 1: front right absolutely, and you know, in terms of sort
Speaker 1: of drilling down and thinking where does she stand? Because
Speaker 1: just not motivating this president because Johnny does it with
Speaker 1: the Prime Minister Johnson, but he just can't translate that
Speaker 1: over to some of these other nations were looking at Jeermany.
Speaker 1: I thought it was fascinating yesterday here in the President
Speaker 1: called out Germany by name Leslie, referring to the lack
Speaker 1: or the failure of getting the military spending up to
Speaker 1: two percent of GDP in the country and basically threatening
Speaker 1: to use trade as a tool to push the Germans
Speaker 1: to spend more on military. Leslie this is something new
Speaker 1: that I don't think many people have been thinking about
Speaker 1: at all in the last couple of years, as the
Speaker 1: President has made this book push. How are you thinking
Speaker 1: about that in the last twenty four hours. Yeah, I mean,
Speaker 1: and remember it's not just the last twenty four hours.
Speaker 1: Donald Trump has has linked sanctions to national security concerns
Speaker 1: for a little while right now, and I think for
Speaker 1: many of us this is very distressing because, of course,
Speaker 1: especially when it comes to America's relationship with its most
Speaker 1: important allies, the idea that you would link questions of
Speaker 1: trade um to national security concerns is is contrary to
Speaker 1: you know, what we've what we've witnessed over the last
Speaker 1: seven decades. So it's it is a very significant shift.
Speaker 1: It's one that's getting traction. He's taking it to the
Speaker 1: next level. UM. But I don't think that it really plays.
Speaker 1: It doesn't play. You know, this is not the U. S.
Speaker 1: China relationship. I don't think it plays actually back home
Speaker 1: in the same way. But and it and it alienates,
Speaker 1: but it is um it's another thing driving a wedge
Speaker 1: through America, and it's European partners. We welcome all of
Speaker 1: you coast to coast and worldwide. A good conversation with Leslie,
Speaker 1: Vinja Murray of Chatham House and expertise across the Atlantic
Speaker 1: from London on the United States, Chan Fero and Tom
Speaker 1: Keene futures of fifteen down futures. We await the symbolism,
Speaker 1: a huge symbolism of the leader of Germany in the
Speaker 1: United States of America at the Seventh Needle Meetings channel.
Speaker 1: Let's least to continue this conversation, shall we. I think
Speaker 1: the President quite rightly identifies a problem. He's identified a
Speaker 1: problem with China that many people agree with him on.
Speaker 1: They need to open up. They have been stealing i P.
Speaker 1: There has been forced technology transfer. The disagreement has been
Speaker 1: about the approach and as you say, is alienated allies.
Speaker 1: We see the same thing with NATO. They've all pledged
Speaker 1: to get military spending up to two percentage GDP, and
Speaker 1: let's be quite honest, some people, even the Germans, haven't
Speaker 1: done enough to get themselves there. But once again, the
Speaker 1: President identifies a problem. Then he's criticized for his approach.
Speaker 1: But letslie, I think many people are asking the following question. Okay,
Speaker 1: criticize his approach, but what did previous administrations do, and
Speaker 1: why should we continue at that very same approach if
Speaker 1: we are just going to end up with the same results.
Speaker 1: What do you say back to that, Leslie, Well, first
Speaker 1: of all, you know, let's let's break that down. M
Speaker 1: on the on the question of European contributions to defense
Speaker 1: spending hitting that two percent target. This is something that
Speaker 1: preceded Donald Trump. Um the increase in European spending. What proceeded,
Speaker 1: you know, began really in fourteen. It's it's continued and
Speaker 1: taken on more steam, and it's certainly gotten a lot
Speaker 1: more visibility because of the rhetorical line taken by the president,
Speaker 1: very aggressive rhetorical line. But that you know that push
Speaker 1: dates pre dates the president on China absolutely. You know,
Speaker 1: people have been wanting to level the playing field with
Speaker 1: China for some time and Donald Trump has certainly been
Speaker 1: the person that has taken us He's driven it forward,
Speaker 1: and I think it's game changing regardless of what we
Speaker 1: see who we see in the White House post does
Speaker 1: the president change international American rather foreign relations? Is it
Speaker 1: so seismic, this different approach by the gentleman from Manhattan
Speaker 1: that it's a permanent change to how America addresses its
Speaker 1: foreign policy. You know, this is the question that everybody
Speaker 1: wants to an answer to. We've been certainly discussing it,
Speaker 1: frankly all morning at Chatham House. Um uh, and it's
Speaker 1: it's it's clearly the case that he's taken some things
Speaker 1: that I think we're a long term, long time coming
Speaker 1: America's relationship with China, reorienting it, taking a harder line
Speaker 1: on trade, um and and driven them forward. And I
Speaker 1: do think that the style and the attention that he's
Speaker 1: given to those changes, you know, they predate the president,
Speaker 1: but he's made them front and center. Will we see
Speaker 1: the continued style of diplomacy that we've seen it under
Speaker 1: this president? I don't think so. I think it's very
Speaker 1: hard to imagine any anybody other than this President m
Speaker 1: pursuing kind of diplomacy that he's pursued with America's allies.
Speaker 1: But will America ask for more on the global stage, Yes,
Speaker 1: I think it will. Of its allies as well as
Speaker 1: of its adversaries going to continue to be put in
Speaker 1: that second, that second bracket. Dr Vinjabinry absolutely nails us
Speaker 1: about this idea of substance versus style, and so much
Speaker 1: of the reporting, John ignores the substance that could be
Speaker 1: permanent of this absolutely unique president and whether things are
Speaker 1: going to change, Leslie, I think is an important point.
Speaker 1: I just look at the situation and wonder what the
Speaker 1: electorate actually wants, what the demands of the electorate will be.
Speaker 1: Do they want to go back to the old way
Speaker 1: of doing things, which is getting countries together in Europe,
Speaker 1: playing nicely and saying to China please open up? Or
Speaker 1: do they want this more confrontational approach from their leader
Speaker 1: here in America. Is that what they want on the
Speaker 1: international stage. What's your perception of what the electorate wants
Speaker 1: to see, Leslie, I don't think that people are behind
Speaker 1: I think, you know, there's there's a peeling off of
Speaker 1: support for this style of trade wars because it's so
Speaker 1: far not delivered any results. Um. It's you know, it's
Speaker 1: a destabilized it's it's raised protectionism has gotten worse, the
Speaker 1: numbers aren't getting better. Um. And so I think that
Speaker 1: people are aware that now this is an issue, but
Speaker 1: is it really changing the playing fields, really leveling the
Speaker 1: playing field as Donald Trump taking on the bigger issues.
Speaker 1: I think Americans are pretty aware that, you know, it's
Speaker 1: the right issue, but it's the wrong approach. We thank you.
Speaker 1: They're looking for a more strategic approach. We thank you
Speaker 1: for listening. Dr Vinja Murray with us here from Chadow Mouse.
Speaker 1: Jay John is a supporter of the President United States.
Speaker 1: We're thrilled. I think he's I think he's taking advantage
Speaker 1: of municipal bonds. Jay emails in and says the President
Speaker 1: is more like Churchill and the US Founders. He considers
Speaker 1: the European leaders smug and self righteous. I mean, leslie.
Speaker 1: That is a perception of Republicans and Democrats in America.
Speaker 1: Do did you buy the idea European leaders have a
Speaker 1: smugness about America? Yeah? First of all, is it a
Speaker 1: perception of Republicans? And I think that's a broad you know,
Speaker 1: too far, too broad. ABRESHI data that's coming out of
Speaker 1: serious places like the Chicago Council, like Pe. The vast
Speaker 1: majority of Americans want to be a native, They want
Speaker 1: to cooperate with Europe, they want to be internationally engaged.
Speaker 1: There are certain things that they don't want to do
Speaker 1: any more troop deployments. They'd like to see scaled back. Um.
Speaker 1: But I you know, to sort of the Republican Party.
Speaker 1: I don't think is in any way anti European um,
Speaker 1: and the question of smugness is really again it's I'm
Speaker 1: not so sure how helpful it is. I think there's
Speaker 1: always been a admiration of European leaders. But in regardless
Speaker 1: what Americans thing of the president, nobody likes to see,
Speaker 1: you know, the president being talked about out um negatively
Speaker 1: because it sort of reflects badly on the entire country.
Speaker 1: So it's incredibly complicated. I want to explore this relationship
Speaker 1: with China in the United States just a little bit further.
Speaker 1: There are some people that might argue time is up.
Speaker 1: The labor arbor trage has taken place, the plants have
Speaker 1: been built on the mainland. Western multinationals will do anything
Speaker 1: to keep a foothold in the country now, despite the
Speaker 1: fact that seems to be serious allegations of human rights
Speaker 1: violations in the mainland at the moment, with the exception
Speaker 1: of big tech and perhaps finance as well, I think
Speaker 1: at the moment, gaining entry to this market is perhaps
Speaker 1: not the issue it once was. It's keeping access, and
Speaker 1: I think keeping access may well be the issue in
Speaker 1: the next few decades. China is not going to become
Speaker 1: more like the United States. And a question I've been
Speaker 1: thinking about, Leslie, is how does a multinational company succeed
Speaker 1: navigating what the Economist and the last weekend called two
Speaker 1: spheres of influence, the American sphere of influence and the
Speaker 1: Chinese sphere of influence. And I think about it in
Speaker 1: the following terms, how does a multinational company please a
Speaker 1: progressive consumer in the way than a country like America
Speaker 1: and a repressive state abroad in a country like China.
Speaker 1: How does that kind of company succeed on the global
Speaker 1: state in a coming ten years? How do they do that? Leslie?
Speaker 1: I think it is difficult, because, of course, consumers in
Speaker 1: the West are becoming much more tuned to issues of
Speaker 1: labor standards, of environmental regulations, of you know, a number
Speaker 1: of what we might consider progressive policies are really becoming
Speaker 1: things that people individual certainly in the States in Europe,
Speaker 1: are taking very very seriously, and they want to know
Speaker 1: when they're buying from a multinational when they're engaging that
Speaker 1: that China is hitting the same standard that they would
Speaker 1: expect of an American company back home. So it's it's complicated,
Speaker 1: but I think that the harder choices, you know, for
Speaker 1: for multinationals are are balancing governments and not really not
Speaker 1: necessarily balancing consumers. On the human rights question, very tricky. Right,
Speaker 1: Clearly there's now more pressure coming out of Congress on
Speaker 1: the human rights question. Uh know, human rights is something
Speaker 1: that America had takes very seriously, American to take seriously,
Speaker 1: but but selectively. It's always been selective. Um. And if
Speaker 1: you look even at the most recent legislation, there are
Speaker 1: exceptions written in saying that you know that the president
Speaker 1: can and the weaker bill could could waive sanctions, um,
Speaker 1: if he determined that this would be in the national
Speaker 1: interest to do so. So. Even the legislation, which is
Speaker 1: potentially very powerful if it if it becomes a part
Speaker 1: of law, has exceptions written and that and that's pretty
Speaker 1: much the story of America's human rights to point. Well, Leslie,
Speaker 1: I don't mean to put you on the spot, but
Speaker 1: I think this is an important question. If China wasn't
Speaker 1: the world's second largest economy, if it didn't have the
Speaker 1: consumer base that so many of these companies want access to,
Speaker 1: if we had these kind of allegations of human rights
Speaker 1: abuses in any other country would we be looking at
Speaker 1: doing a trade deal with them. Um, it's it's clearly
Speaker 1: a very difficult issue. And again China is not the
Speaker 1: only country in which human rights are a very serious issue,
Speaker 1: which is in no um way, shape or form to
Speaker 1: diminish them. Think about North Korea right, Think about the
Speaker 1: Commission of Inquiry that was released UH investigating the human
Speaker 1: rights abuses in North Korea, and that at the moment
Speaker 1: it's pretty much been set aside in order to try
Speaker 1: and engage, you know, selectively again with talks on the
Speaker 1: non proliferation issues. So America when engages abroad, has a
Speaker 1: set of priorities and it tries to balance them, and
Speaker 1: of course human rights is a through line, but it
Speaker 1: has been selectively applied in China is not the only
Speaker 1: country in which, you know, there's a sort of oscillation
Speaker 1: based on a range of a range of interests. Lessie Benjaminy,
Speaker 1: thank you so much. With Chad A mouse would greatly
Speaker 1: appreciate it. This morning. Jane Farley jointing US now founding
Speaker 1: in from London, the capital of global foreign exchange. Rabbit
Speaker 1: bankhead of ex Strategy, Jane why sterling up here ahead
Speaker 1: of some serious event risk next week. Well, I think
Speaker 1: the market thinks that perhaps the event risk is is
Speaker 1: relatively muted. Now. We've got to remember, of course, that
Speaker 1: although there is still over a week, just over a
Speaker 1: week to go until the election, there's been lots of
Speaker 1: reports and in the UK suggesting that Boris Johnson's advisors
Speaker 1: have really been tried to keep a lid on what
Speaker 1: he can say. Now, if you go back to the
Speaker 1: twenty seventeen election, at that point, certainly at the beginning
Speaker 1: of that election campaign, PM May, the previous Tory Prime minister,
Speaker 1: had at least a ten point lead, and then that
Speaker 1: lead narrowed and of course, if you remember, we ended
Speaker 1: up and she didn't manage to have a majority at
Speaker 1: that election. So it seems that or list these are
Speaker 1: the reports which have been circulated, it seems that Johnson's
Speaker 1: advisors are taking note from that and are telling him
Speaker 1: only to give one word short sort of popular responses,
Speaker 1: and also to say very little. Now. The market seems
Speaker 1: to be inferring that if that policy remains, then he
Speaker 1: can hold on to this lead in the polls, meaning
Speaker 1: that if he gets into power next week, he will
Speaker 1: have sufficient votes to push his withdrawal agreement through Parliament. Now,
Speaker 1: for now, the markets associating that withdrawal agreement to mean
Speaker 1: that there will not be in no deal brexit. But
Speaker 1: of course next year the trade talks have to start
Speaker 1: and that might bring back the threat of a nodal
Speaker 1: Brexit if they don't go well. So, Jane, let's talk
Speaker 1: about the polls and how the polls translate into seats.
Speaker 1: I think this is a big challenge for a lot
Speaker 1: of people. The polls have been pretty consistent over the
Speaker 1: last couple of weeks, maybe even the last couple of months.
Speaker 1: The Conservatives in the low forties, the Labor Party in
Speaker 1: the low thirties. How does that number translate into seats one, Well,
Speaker 1: it's quite complicated. And the reason for that, as you know,
Speaker 1: of course, is because in the UK it's it's the
Speaker 1: first past the post system, meaning that really the election
Speaker 1: has really been fought over just a finite number of
Speaker 1: seats that could go either way. Now, from from that
Speaker 1: point of view, it's difficult to extrapolate the percentage that
Speaker 1: we see in many of the polls back to what
Speaker 1: it means for seats. But last week there was a
Speaker 1: pole that did extrapolate that and suggest that it meant
Speaker 1: a very comfortable at working majority for for P M. Johnson.
Speaker 1: That Since then, some other poles have suggested that maybe
Speaker 1: that leads is not what it will be in reality
Speaker 1: for Johnson, perhaps because the Labor Party manifesto had plenty
Speaker 1: of popular content and perhaps that should give up additional
Speaker 1: support for the Labor Party. But generally speaking, some pulses
Speaker 1: are suggesting that as a rule of fum, as long
Speaker 1: as the Tories are around about nine points percentage points
Speaker 1: ahead of Labor in both the poles that were seen,
Speaker 1: that will mean that he could have a majority. Jane Fold,
Speaker 1: you talk about event risk. Me putting up the Christmas
Speaker 1: tree is event risk. It's that ugly. I got to
Speaker 1: pay for the thing. What's the trade right now? Is
Speaker 1: there an opportunistic pair you can recommend into the end
Speaker 1: of the year to play through January in February, Well,
Speaker 1: I think it probably has to be sterling, and we
Speaker 1: we a lot of good news in terms of Brexit
Speaker 1: is already in the price of sterling. But I think
Speaker 1: if if Johnson wins, I think would probably go higher
Speaker 1: maybe two one thirty two. So very much obviously depends
Speaker 1: on the election. Aside from that, um, you know, I'm
Speaker 1: still quite bearish on currency sly alsin. You saw that
Speaker 1: move again this week in the some better news and
Speaker 1: what to missit him from the r b A and
Speaker 1: then some worst news overnight in the form of their GDP.
Speaker 1: I think that's going to be a very interesting story
Speaker 1: next year, more cuts potentially from the r b A
Speaker 1: and maybe contributing, So that's going to be very interesting
Speaker 1: story into the new year. And then of course the
Speaker 1: Swedish Krona and write heike potentially at this month's bump
Speaker 1: from the ricks back just kinda go further up on
Speaker 1: the back of that. So that's a very interesting story
Speaker 1: as well. Do you play croner versus the euro or
Speaker 1: versus the dollar or versus something else, I don't know.
Speaker 1: I think it's generally versus the chrona, and that's because,
Speaker 1: of course the trade links between Sweden and the Europe
Speaker 1: are so strong, so and that's more meaningful really for
Speaker 1: the Swedish economy abandon abandoning negative interest rates. We're starting
Speaker 1: to see it, aren't we, Jane and I just wonder
Speaker 1: whether we're going to see a whole lot more on
Speaker 1: a bigger stage let's say the ECB, what is the
Speaker 1: attitude on the continent at the moment towards negative interest
Speaker 1: rates and a place like the Ricks Bank, at a
Speaker 1: place like the u c B, well, the Rick Bank.
Speaker 1: I think it's a really interesting example because you could say,
Speaker 1: we'll look hold on a minute. Why why would they
Speaker 1: possibly hike interest rates when you've got the biggest trading
Speaker 1: partner in having cut interest rates to see the Arizona
Speaker 1: course where we have growth arguably slipping in Sweden? Why
Speaker 1: would they hike interest rates now? And one of their
Speaker 1: big concerns, and they're quite candid about it, is that
Speaker 1: they are concerned about the level of household debt now
Speaker 1: asset pross inflation like in in In many countries, since
Speaker 1: the global for natural crissis has been strong, house prices
Speaker 1: have gone up quite a lot. And as as individuals
Speaker 1: have to chase house prices better to get on that property,
Speaker 1: or chase pause prices higher to get on that property ladder,
Speaker 1: they've ended up with a large amount of disposable debt
Speaker 1: as a percentage of disposable income. And that's the case
Speaker 1: in many codes of failure at New Zealand, UM, various
Speaker 1: countries around the globe. Canada another one. So that is
Speaker 1: a big concern. And it seems that bit the pushback
Speaker 1: against negative eels really is spreading. We see more conversation
Speaker 1: UM in Japan, UM in the Eurozone, UM. And and
Speaker 1: this is part of what what's informing the RBA's decision
Speaker 1: and probably one of the reasons why the RBA have said, look,
Speaker 1: we're not going to cut to interestrates to five, well,
Speaker 1: do content divising instead. Very good, Jane Folly, where this
Speaker 1: informing us with good conversation less Vinja Murray before this
Speaker 1: special edition of Bloomberg Surveillance, as John Farrell and I
Speaker 1: in New York awaited an important discussion of the Chancellor
Speaker 1: of Germany the President of the United States, John, I
Speaker 1: believe the President will of other bilaterals, and I believe
Speaker 1: even with them being so far behind their schedule, he
Speaker 1: has a separate press conference at this point scheduled later
Speaker 1: in the New York afternoon. The day is already running
Speaker 1: a little bit, like what do you think we're behind.
Speaker 1: I think we're behind like a solid half hour on
Speaker 1: the schedule. We welcome all of you. Jane Foley still
Speaker 1: with us with Robbo Bank giving us wonderful perspective on
Speaker 1: the litmus paper of the system. We thank her for
Speaker 1: appearance here. UH Today as well, John and I are
Speaker 1: looking at a set of newsflow. We haven't talked much
Speaker 1: about impeachment as well. John, I would point out that
Speaker 1: this impeachment committee hearing today is original. We actually have
Speaker 1: people that know what they're talking about. For law professors
Speaker 1: Jonathan Turley UH in the Washington Examiner writing up with
Speaker 1: a really piercing essay about the narrowness of this impeachment
Speaker 1: proceeding historically not he's not pro Trump, but he certainly
Speaker 1: tilts towards a more Republican bands. And Noah Feldman, who
Speaker 1: writes for Bloomberg Opinion, has been a huge value to
Speaker 1: me with his history of the Supreme Court. Dr Feldman
Speaker 1: will be I haven't heard a decent argument yet as
Speaker 1: to why this is not a lose lose situation for
Speaker 1: the Democrats at the moment. How did they come out
Speaker 1: looking good from all of this and looking good with
Speaker 1: the electorate, Because in the court of public opinion, that's
Speaker 1: what matters here, And of the last month or so,
Speaker 1: it's not clear to me in the polls that that
Speaker 1: bringing the Court of public opinion along with them. I
Speaker 1: don't disagree with that, but I would suggest there are
Speaker 1: different electorates out there, and from day one year and
Speaker 1: Speaker Pelosi fighting the process the entire way. Speaker Pelosi,
Speaker 1: it was finally caved in, if you will, and they're
Speaker 1: speaking to a certain electorate riveted by this. And John,
Speaker 1: to your point in Jim Glassman on Job's Day mentioned
Speaker 1: this in his travels for JP Morgan. There's a huge
Speaker 1: part of the country where it's like, Okay, what do
Speaker 1: you have, John, Eddie, Peter Port coming out And about
Speaker 1: five or I missed that, Please said that. Jane Fully
Speaker 1: of Rubber Bank is still with us. So Jane, let's
Speaker 1: talk about it. Labor market data coming up through the
Speaker 1: week tomorrow, initial jobless claims, the payrolls report is coming
Speaker 1: up on Friday. So Jane, what are your thoughts? What
Speaker 1: are you looking for in the job's numbers in America? Well,
Speaker 1: I think this is going to be fascinating one because
Speaker 1: of course this week we haven't had a particularly good
Speaker 1: data fund the manufacturing sector. And the question is, you know,
Speaker 1: is this weakness in the manufacturing searcher is it pushing
Speaker 1: into or will it push into the labor market. And
Speaker 1: if that's the case, you know, I do think that
Speaker 1: the market will begin to take a different view on
Speaker 1: the Federal Reserve, begin to be worried about the pals
Speaker 1: class half full outlook on the economy. So I think
Speaker 1: the payrolls number, if it is weaker than expected, if
Speaker 1: there are signs that there are softening there, um, you know,
Speaker 1: I think that would be quite a nasty signal. Jane,
Speaker 1: I look at the feeder, and I look at the
Speaker 1: meeting to December, and then there's a January twenty nine meeting.
Speaker 1: I mean, I think I'm guilty of this. The media
Speaker 1: focuses on the next event, obviously, Are you focused on
Speaker 1: December eleven? Is the be all end all? Or is
Speaker 1: it much more into the meetings of two thousand twenty
Speaker 1: I think it's really the meetings of two thousand and twenties.
Speaker 1: But I think we all need to watch very carefully
Speaker 1: at the rhetoric, watch the guidance, watch any watch out
Speaker 1: for any shifts. And therefore it is going to be
Speaker 1: and I think all about twenty But I don't think
Speaker 1: that we can overlook any of the meetings that are
Speaker 1: coming up. I think they could all provide quite interesting
Speaker 1: clues potentially hugely valuable. Jane Foley, thank you so much
Speaker 1: for joining us on the dusk rubble Bank in London,
Speaker 1: Bloomberg Opinion informed perspectives and expert data driven commentary on
Speaker 1: breaking news. Good morning everyone, time Keene in New York.
Speaker 1: This is the interview of Day on the American military
Speaker 1: and of course our extension across the Atlantic in the
Speaker 1: history the seventieth anniversary of NATO. It is without question
Speaker 1: a timely interview on the state of the Pentagon in Washington.
Speaker 1: We do this with Jane strevidis what you need to
Speaker 1: know within the heritage of Supreme Allied Commander. It started
Speaker 1: in ninete with a gentleman named Eisenhower. The Esteem Ridgeway followed,
Speaker 1: and then onto some wonderful names from the past, including
Speaker 1: General Haig, General Galvin, and I really want to mention
Speaker 1: John shalikash Filly as well. And they're all generals. And
Speaker 1: then someone from the Sea shows up, the Admiral. Admiral strevidis,
Speaker 1: what was it like to be the first Navy guy
Speaker 1: in the room? What what was the body language? Is
Speaker 1: a gentleman of the Navy walked in the NATO door. Yeah,
Speaker 1: it was bad. I had a sense of fifteen generals
Speaker 1: spinning in their grade. Uh. Really a shock to the system.
Speaker 1: In fact, my memoir of those NATO days as Supreme
Speaker 1: Commander is called the Accidental Admiral, and I think that's
Speaker 1: what everyone thought. It was just some kind of a
Speaker 1: huge computer error that delivered me to those shores. Well,
Speaker 1: we are honored to have you with us today, and
Speaker 1: certainly to distill what we've observed, I would go back,
Speaker 1: Admiral to the suits and ties politicking as they do,
Speaker 1: and we should say that Admiral Stevidus was vetted briefly
Speaker 1: as a vice president or candidate along the last path.
Speaker 1: But I would say, James to Vidas that there was
Speaker 1: the gentle dodging of Russian missiles involved with Turkey, and
Speaker 1: then the photo opportunity of Mr Radwan next to Mr Trump.
Speaker 1: Explain how NATO and the serious business of the military
Speaker 1: should adjust to Russian missiles in Turkey. Yeah. Let's let's
Speaker 1: make a point first, which is NATO is a military alliance, Tom,
Speaker 1: but your point, its center of gravity is decidedly political,
Speaker 1: and what we're seeing our centrifugal forces pulling out the
Speaker 1: Alliance today, Francis mccron calling it brain dead. Trump sending
Speaker 1: out ambivalent signals about Article five and where we come
Speaker 1: to Turkey Urdwan leaning out of the Alliance buying Russian
Speaker 1: missile systems. We can't integrate those with NATO ear defenses.
Speaker 1: And by the way, he's also conducting joint patrols on
Speaker 1: the Syrian Turkish border with Russia in the Russian Armed Forces.
Speaker 1: So this is a moment of real UH discord within
Speaker 1: the Alliance. Does the Pentagon have the president's ear? I
Speaker 1: mean he is established a tone which I have said
Speaker 1: has Republican and Democrats support, which is is he said
Speaker 1: shape up to Europe that resonates with a certain American public.
Speaker 1: How does his tone resonate with his Pentagon Um, It's
Speaker 1: a mixed picture. In one example was just last week
Speaker 1: when he issued a series of pardons for UH some
Speaker 1: of the Special Forces members who were accused of war
Speaker 1: crose Um. That was a real point of disagreement on NATO.
Speaker 1: The Pentagon is glad that the President presses the Ally
Speaker 1: to spend more and is having some positive result there,
Speaker 1: but the Pentagon is also concerned about his lack of enthusiasm,
Speaker 1: shall we say for supporting Article five, because that undermines
Speaker 1: the confidence of our partners across the Atlantic, the different
Speaker 1: people that we have in NATO, and we have the
Speaker 1: images of our youth for those younger of substantial American
Speaker 1: presidents in Germany with the tension of a divided East
Speaker 1: and West Germany and the complexities of Berlin and the
Speaker 1: Iron Curtain. But if I look at the two hundred
Speaker 1: and sixty six Financial Management Supports Center, part of the
Speaker 1: twenty one Theater Sustainment Command, what do we actually do
Speaker 1: in Europe today, Admiral Um. First and foremost, we have
Speaker 1: training exercises where we integrate with our partners and Tom.
Speaker 1: That's where we trained to go forward and fight in Afghanistan,
Speaker 1: where NATO was fully engaged when I commanded that mission,
Speaker 1: hundred and fifty thousand NATO troops in Afghanistan. So Europe
Speaker 1: is where we train, equipped and organized those forces. Secondly,
Speaker 1: logistics you just mentioned logistics, Um, the logistic ability to
Speaker 1: move those troops forward to not only Afghanistan, but to
Speaker 1: the Balkans, to the Libyan campaign, to maritime operations off
Speaker 1: the coast of East Africa for piracy. All that is
Speaker 1: centered in the NATO command structure, which is in Europe.
Speaker 1: So I'd say we still need those bases all closed.
Speaker 1: Tom By saying at the height of the Cold War
Speaker 1: you mentioned General Galvin. At the height of the Cold War,
Speaker 1: he had four hundred bases all around Europe. Um today
Speaker 1: we're down to something like serious basis, so we've already
Speaker 1: reduced that based structure. By I'd say it's about right
Speaker 1: where it is. Do they want us there? So much
Speaker 1: of the tone that I'm hearing in the endless interviews
Speaker 1: of suits and ties and occasional dresses in London. Here
Speaker 1: at at the Grove north of London, at Watford, we
Speaker 1: avoid the question do they want us there? What is
Speaker 1: your belief on that right now, Admiral I think they
Speaker 1: very strongly want us their President Macrone's comments about NATO
Speaker 1: being brain dead are really driven by a dwindling confidence
Speaker 1: that the Europeans have in whether the US will come
Speaker 1: forward or not. That's why it's so important for the
Speaker 1: President to step up on this Article five, even as
Speaker 1: he correctly continues to press with the Europeans to spend more. So.
Speaker 1: At the end of the day, Europe again is a
Speaker 1: political Alliance. Its center of gravity is confidence in Article
Speaker 1: five UM. The Europeans want us there, but they're a
Speaker 1: little less confident than they were saved five to ten
Speaker 1: years ago. What did you work on that? What is
Speaker 1: the task of General Walters now of the United States
Speaker 1: Air Force, with his leadership for America at NATO. What
Speaker 1: is his task given what the was it in the
Speaker 1: seven less First of all, his principal operational task is
Speaker 1: to continue the uh the operations in Afghanistan, where we
Speaker 1: have twenty thousand NATO troops, much reduced but still a
Speaker 1: very significant mission. Secondly, he'll want to keep his eye
Speaker 1: on the Balkans. Thirdly, I want to keep his eye
Speaker 1: on the Arctic. And fourthly, who want to deter Russia.
Speaker 1: What he is trying to do at the political level,
Speaker 1: working with the Secretary General of NATO, Yen Stoltenberg of Norway,
Speaker 1: is to convince the Secretary General in those men and
Speaker 1: women in suits and dresses, to convince the United States
Speaker 1: to continue to move forward. He has both a diplomatic
Speaker 1: and a military role to play. And by the way,
Speaker 1: General Todd Walters was part of my team when I
Speaker 1: was NATO commander. He's a superb officer and a great
Speaker 1: choice for the job. A Stevides, Thank you so much.
Speaker 1: Sioneer four years a Supreme Allied Commander Europe for the
Speaker 1: United States Navy for uh, the United States of America.
Speaker 1: James Travitas and I really can't say enough about his
Speaker 1: new book, strong book, tens or so chapters on admirals.
Speaker 1: I commend to you, folks the single chapter on the
Speaker 1: Gentleman from Submarines at Murick over Paul. As you know,
Speaker 1: there's any number of views, the yes year, next year, Yes,
Speaker 1: US media forecast, all these kind of things you have
Speaker 1: to read, And the answer is you actually read. Brian
Speaker 1: Weezer a pivotal in this on the United Kingdom. But
Speaker 1: but we're on the U S. Why don't you even
Speaker 1: big in Brian on the nuances of a nice executive
Speaker 1: summary of of of the path forward? Exactly? Brian Weezer,
Speaker 1: he is a group and global president business intelligence. He
Speaker 1: is the go to person when we're talking global advertising. Brian,
Speaker 1: thanks so much for joining us on the phone. So
Speaker 1: let's talk about first of all, a pretty good year
Speaker 1: for advertising, right, Yeah, no, it's it's definitely a diverse
Speaker 1: from yere. Uh you know, it's unusually strong as ten
Speaker 1: was too, and you could be big question for while
Speaker 1: was it so unusually strong? And the reality is that
Speaker 1: there's so many digital based digital first digital athemic marketers,
Speaker 1: the likes of Amazon, like Facebook as a marketer again
Speaker 1: not as a seller of advertising. Dozens of companies are
Speaker 1: probably driving almost all the growth, and it skewing growth
Speaker 1: into digital and so it makes it look like we
Speaker 1: have a really healthy advertising market, but it's not sustainable
Speaker 1: at these levels. So, Brian, is this just a story
Speaker 1: as we think about global advertising? You mentioned some of
Speaker 1: the big digital players. Is this just a game of
Speaker 1: the haves and have nots that you know, if you're
Speaker 1: a Google on a Facebook, life is great. But if
Speaker 1: you're a CBS or you know, a Comcast or Disney
Speaker 1: and you've got broadcast in cable networks, it's not such
Speaker 1: a good story. That's a good way to put it.
Speaker 1: I it's not exactly h terribly for uh, you know,
Speaker 1: TV centric media owners. It's just not necessarily going to
Speaker 1: be much of a growth market uh anytime soon. And
Speaker 1: I think if we look at print is really it's
Speaker 1: all bad. Uh, you know, radio is kind of stable
Speaker 1: outdoors are really helping me, um, which may surprise some. Um,
Speaker 1: but yeah, I haven't had not the general Brian. One
Speaker 1: of your great things that group em and of course
Speaker 1: before that pivotal was the idea of traditional TV is
Speaker 1: not dead. Everybody calling for the death of TV and
Speaker 1: you're saying no, no, no, what I'm seeing And I
Speaker 1: mentioned this earlier, folks, My anecdotal evidence is pretty much
Speaker 1: everybody in a planet, in some way or another is
Speaker 1: using YouTube. In your analysis, do you fit in YouTube revenue? Yeah? Absolutely, um. Now,
Speaker 1: YouTube is still primarily something you would bucket into the
Speaker 1: digital or line item because the vast majority of spending
Speaker 1: is meant to be comparable to into related advertising. Um.
Speaker 1: And it's a big piece of of spending absolutely well.
Speaker 1: Compare it to the small slices. Is YouTube brand wiser?
Speaker 1: Is YouTube bigger than newspapers? Not yet? Not yet um uh.
Speaker 1: But that said, uh, it's not hard to imagine YouTube
Speaker 1: being bigger than newspapers. That's deadline to think about some
Speaker 1: point soon because at the end of the day, newspapers
Speaker 1: continue to shrink by double digits. Even including newspapers digital revenues.
Speaker 1: You know, we're estimating about twelve billion on newspapers today. Um,
Speaker 1: I don't have a YouTube. Vious doesn't disclose its numbers,
Speaker 1: but yeah, YouTube is probably not that far from newspapers.
Speaker 1: So Brian, let's let's talk about the ad agencies here. Um.
Speaker 1: You know, there's been a concern that maybe they're getting disintermediated,
Speaker 1: that you don't really need to go to a big
Speaker 1: ad agency. All you need to do is kind of
Speaker 1: go to Google or Facebook and they'll put the dollars
Speaker 1: worth you know, the people are what's your call or
Speaker 1: what's your thought about how the big ad agencies at WPPS,
Speaker 1: omni comms, how did they fit into the mix going forward? Yeah, well,
Speaker 1: generally the largest marketers certainly benefit from having agencies. There's
Speaker 1: reasons why many of them choose to do certain parts
Speaker 1: of their marketing activities themselves, whether that's the creative or
Speaker 1: the media slide um, you know, and they've got to
Speaker 1: consider the there's pros and cons to doing so right. Yes,
Speaker 1: you can probably faster in some ways, Um, if you
Speaker 1: do everything yourself, but then maybe the choices aren't as
Speaker 1: involving as broad or deep knowledge base as if you're
Speaker 1: using an externality. It's the very same issue that I
Speaker 1: think every industry has their professional services that have with
Speaker 1: respect in sourcing versus outsourcing. UM. Just today though, you
Speaker 1: know one of our competitors, uh just Story and ad
Speaker 1: Week about Cody, which is the many um obviously packaged
Speaker 1: goods company just sending their media back to an agency.
Speaker 1: UM and just interesting. So that happens all the time too.
Speaker 1: I mean, what's so interesting? Years we're all experiencing new
Speaker 1: ways of delivering these messages to us and you know,
Speaker 1: like Brian, let's just go through them now. Given sports meet,
Speaker 1: they're now staying with the sports event on part of
Speaker 1: the screen as they show the ad who's winning. When
Speaker 1: they do that, does X on mobile sending a message
Speaker 1: win or do they lose? You know? I think the
Speaker 1: long term health of the business, uh, for any given
Speaker 1: medium will definitely benefit from uh, you know, trying to
Speaker 1: put a consumer experience first. I think that this has
Speaker 1: been a problem in the United States. Commercial is a problem.
Speaker 1: Unfortunately much large advertisers look on the term basis it
Speaker 1: doesn't necessarily proved to be less effective. But I would
Speaker 1: argue that if the consumer experience is really negative, generally
Speaker 1: will make at a less desirable environment over time. Oh
Speaker 1: you spentioned time. What's the appropriate time ad for Brian Weezer?
Speaker 1: Three seconds? That's a good thing to try to be brief. No, no,
Speaker 1: but but I'm at the ad links is three seconds?
Speaker 1: Or can we get out to fifteen seconds? Is that
Speaker 1: too long? Now? You know, it totally depends. I just
Speaker 1: saw someone who's a tick talking off the Bloomberg former
Speaker 1: TikTok TikTok, but so doing a TikTok thing where you
Speaker 1: can imagine a three second ad uh fitting really well.
Speaker 1: But in traditional TV, you know, the idea of two
Speaker 1: minute ad break has generally worked. Um, So it really
Speaker 1: just depends on the medium. In the context in which
Speaker 1: the most of the well sports is still king. I
Speaker 1: see that Fox sold all their ads maybe like five
Speaker 1: point six million dollars in each or something like that.
Speaker 1: So Brian sports is still there, right, Yeah, I think so.
Speaker 1: There's been maybe over investment in some respects in sports
Speaker 1: on the part of the of networks. Um, it is
Speaker 1: still the environment that will capture more live viewing. UM,
Speaker 1: it's still really important. It's you know, tennifcent of all
Speaker 1: TV viewing is sports, and it probably has disproportionate value.
Speaker 1: We've got to leave it there. Brand Wiser, thank you
Speaker 1: so much. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio