WEBVTT - Brexit Future is Uncertain After Election, Says Rosenberg 0:00:00.240 --> 0:00:04.040 Runt You by Bank of America Mary Lynch. With virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:28.120 Pierced Fenner and Smith Incorporated. Ye, Welcome to the Bloomberg 0:00:28.160 --> 0:00:32.360 Surveillance Podcast. I'm Tom Keene with David Gura. Daily we 0:00:32.440 --> 0:00:36.080 bring you insight from the best of economics, finance, investment, 0:00:36.120 --> 0:00:42.160 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:42.280 --> 0:00:50.080 Bloomberg dot Com, and of course on the Bloomberg phil 0:00:50.120 --> 0:00:52.040 and Powder joins us now here on Bloomberg eleven three 0:00:52.040 --> 0:00:54.520 oh Studios in New York, and great to have you 0:00:54.560 --> 0:00:56.800 with us. Suffice to say this was a bit of 0:00:56.800 --> 0:00:58.760 a surprise for for you, as it was for many people. 0:00:58.760 --> 0:01:04.920 I think, yes, clearly the lead had been narrowing spectacularly, 0:01:04.959 --> 0:01:10.639 but yes, to have actually a minority government and the 0:01:10.680 --> 0:01:13.720 tourists coming out of this much the minute, especially Mrs 0:01:13.800 --> 0:01:16.720 May is a surprise as you you piece together what 0:01:16.840 --> 0:01:20.240 happened here, what what you attributed to. I mean, these 0:01:20.280 --> 0:01:22.480 are these are early hours, yet we don't know a 0:01:22.520 --> 0:01:25.200 whole lot still about turnout, who voted, who didn't, vote, etcetera. 0:01:25.440 --> 0:01:28.039 But what you attributed to first this was not a 0:01:28.040 --> 0:01:33.280 brexit actually, uh, the British people, for better words, considered 0:01:33.319 --> 0:01:35.280 brexit done deal. They don't know what it means yet, 0:01:35.360 --> 0:01:38.119 but it's going to be out. So it became an 0:01:38.120 --> 0:01:39.959 issue about the kind of bris that they're on the 0:01:40.000 --> 0:01:44.440 living and apparently on a number of key issues Mrs 0:01:44.440 --> 0:01:47.560 May managed to push the wrong button, especially on the 0:01:47.640 --> 0:01:52.880 MENSA attacks and other social economic issues. What what happens 0:01:53.160 --> 0:01:55.640 from here? As you see it? I mentioned the negotiations 0:01:55.640 --> 0:01:57.920 that are taking place. We expect the Prime Minister to 0:01:57.960 --> 0:02:00.320 go to bucking In Palace. That indicates that she has 0:02:00.320 --> 0:02:03.120 gotten some commitment here that a coalition could could be formed. 0:02:03.600 --> 0:02:05.920 How tenuous a coalition would that bedia think? And what 0:02:05.960 --> 0:02:08.000 does it mean for for the negotiations over breaks that 0:02:08.120 --> 0:02:10.000 are scheduled to take place I think in just ten 0:02:10.080 --> 0:02:13.120 days time. It's it's very hard to say. Clearly, they 0:02:13.160 --> 0:02:19.519 have a majority three nineteen Conservatives, ten Democratic Unionists and 0:02:20.160 --> 0:02:23.880 so they can govern whether they will lost beyond the 0:02:23.919 --> 0:02:27.560 fall or whether w generary election, which of course, but 0:02:27.720 --> 0:02:31.560 the Tories wouldn't enter with Mrs May, Mrs making the 0:02:31.639 --> 0:02:33.960 leadership it's it's all possible. I think we're going to 0:02:34.000 --> 0:02:38.400 see the negotiations starting in a very different tone from 0:02:38.840 --> 0:02:41.160 the band that Mrs May hope to start with so 0:02:41.400 --> 0:02:47.320 confident with personal mandate. There is no mandate, and I 0:02:47.320 --> 0:02:51.040 think Britain will end up playing a lot nicer. Who's 0:02:51.040 --> 0:02:53.000 gonna Who's gonna set that tone? Is that going to 0:02:53.040 --> 0:02:55.560 be the the EU taking advantage here of of a 0:02:55.639 --> 0:02:57.680 change in dynamic? Is it going to be a chastened 0:02:57.800 --> 0:03:00.320 there reason May if in fact she continues to service 0:03:00.360 --> 0:03:02.000 as Prime Minister. Who's going to set the tone going 0:03:02.000 --> 0:03:07.520 forward here in those negotiations? Well, it's a two party negotiation, right, 0:03:07.560 --> 0:03:13.959 so I don't think that Mrs clearly Bill jointly determined 0:03:13.960 --> 0:03:16.200 the tone. But the tone is going to be, I think, 0:03:16.560 --> 0:03:22.480 very much less assertive and aggressive and no no deals 0:03:22.520 --> 0:03:26.560 better than a bad deal type of stuff that was 0:03:26.639 --> 0:03:30.280 in the air until not that long ago. You mentioned 0:03:30.320 --> 0:03:32.800 that it's it's it was not a Brexit vote. What 0:03:32.880 --> 0:03:35.000 are the kind of global ramifications of the vote that 0:03:35.040 --> 0:03:37.560 we had yesterday? Are they diminished as well? In other words, 0:03:37.760 --> 0:03:39.240 is the outcome from this going to have less of 0:03:39.240 --> 0:03:41.440 an effect than the outcome of the vote we had 0:03:41.480 --> 0:03:45.640 last last June. Well, what was interesting in UH where 0:03:45.720 --> 0:03:49.280 this election was that UH in Britain unlike in France, 0:03:49.280 --> 0:03:54.360 but like in Germany, the traditional two large parties are 0:03:54.400 --> 0:03:58.600 back right. This is the obviously don't happen in France, 0:03:58.640 --> 0:04:00.560 and it hasn't never been every add but here are 0:04:00.600 --> 0:04:03.920 two key European countries ready old sort of center left 0:04:03.920 --> 0:04:07.640 and center right dominant again old the minority parties UH 0:04:08.160 --> 0:04:11.000 flunked out. Let's come back to that. That's an important point. 0:04:11.000 --> 0:04:14.080 Film about her with US City. Good morning, David, you're back. 0:04:14.360 --> 0:04:16.120 I had a dream last night and you said on 0:04:16.160 --> 0:04:25.240 the runway Reagan Bloomberg surveillance this morning with all of 0:04:25.240 --> 0:04:27.719 our news flow and thanks to our team for really 0:04:27.720 --> 0:04:32.320 working truly around the clock over the last hours. I 0:04:32.360 --> 0:04:35.840 love your idea, Professor Powder. We've come full circle back 0:04:35.920 --> 0:04:38.560 to two parties, which I guess goes back to the 0:04:38.680 --> 0:04:42.200 seventies and the eighties, almost pre Thatcher. I would I 0:04:42.240 --> 0:04:46.000 would put it to where we are, where does labor 0:04:46.200 --> 0:04:51.480 fit into labor? I mean the unions. That's the big difference. 0:04:51.760 --> 0:04:56.560 The atomization of any labor market now makes it totally 0:04:56.600 --> 0:05:00.360 different than the nostalgia we have for another time. In yes, 0:05:00.880 --> 0:05:03.360 the Labor Party in terms of ideology at the moment 0:05:03.560 --> 0:05:07.240 is very much the leadership like the Labor Party of 0:05:07.279 --> 0:05:11.120 Michael Foot in the seventies. But clearly the role of 0:05:11.240 --> 0:05:13.600 the unions in the economy is much weak, and they 0:05:13.640 --> 0:05:16.880 still have a significant savers inside the Labor Party. But 0:05:16.960 --> 0:05:20.800 yet from that perspective we are not back where we 0:05:20.839 --> 0:05:24.160 where before, because as you say, the atomization of the 0:05:24.240 --> 0:05:27.839 labor market, the fact that organized labor is almost a 0:05:27.839 --> 0:05:31.400 contradiction in terms right, that really is a qualitative change 0:05:31.640 --> 0:05:35.320 that we see in this country, as indeed we see 0:05:35.360 --> 0:05:38.680 in continental Europe. A critical question on this morning, and 0:05:38.720 --> 0:05:40.800 I haven't had time to ask it with the news flow, 0:05:41.440 --> 0:05:45.839 is this a generational election or is it just another election? 0:05:47.360 --> 0:05:50.360 Is there a shift going on? Almost as in Japan. 0:05:51.200 --> 0:05:54.919 It's interesting in some way as usual, they all suggested, No, 0:05:55.160 --> 0:05:58.560 it's a generational election in the sense that Labor got 0:05:58.640 --> 0:06:02.800 voted in by the young. But at the same time, 0:06:03.520 --> 0:06:11.200 Labor's leadership inspires the young is very no past generation. 0:06:11.480 --> 0:06:16.120 So it is it's a it's a very strange concoction 0:06:16.560 --> 0:06:23.360 of youngsters going a ladders. Wow, there you go. Is 0:06:23.400 --> 0:06:26.200 there is their residence here, with what we saw as 0:06:26.240 --> 0:06:28.560 the residents here, with what we saw with with Bernie 0:06:28.560 --> 0:06:32.080 Sanders in the US very much. Yes, How does Jeremy 0:06:32.120 --> 0:06:34.400 Corby murag from from all from all of this? He 0:06:34.480 --> 0:06:36.000 was the one where everyone had been talking about, who 0:06:36.240 --> 0:06:38.159 is he going to continue to lead his party? Is 0:06:38.200 --> 0:06:40.320 this a victory in some small light for for him? 0:06:40.360 --> 0:06:44.240 And absolutely? I mean, you know, he led his party 0:06:44.279 --> 0:06:46.880 into this election. People thought that he was go to 0:06:47.040 --> 0:06:50.560 bomb and he's done much better than expected. Though he 0:06:50.800 --> 0:06:53.880 gains from this personal level and his wing of the 0:06:53.920 --> 0:06:57.560 party gains from this. Yes, go ahead, no, go ahead, 0:06:57.600 --> 0:07:02.080 Please insist you're on the runway right yesterday? How how 0:07:02.600 --> 0:07:05.000 do you see treason a you know, a few months 0:07:05.000 --> 0:07:07.520 in here settling into this job as prime minister, we've 0:07:07.520 --> 0:07:09.200 now had occasion to listen to her, could deliver many 0:07:09.200 --> 0:07:12.600 important speeches, some of which were tied to two terrible events, 0:07:12.680 --> 0:07:15.160 terrorist events in the country. But how how do you 0:07:15.200 --> 0:07:17.240 see her in that role? How is she doing as 0:07:17.280 --> 0:07:20.320 prime minister in terms of the duties of the job 0:07:20.360 --> 0:07:22.880 of taking care of the country, of addressing national tragedies 0:07:22.880 --> 0:07:26.720 and big, big events, and of planning a path forward. Well, unfortunately, 0:07:26.800 --> 0:07:32.320 we haven't seen any real ideas, initiatives, deep thoughts like 0:07:32.440 --> 0:07:35.640 brexit means brexit and enough is enough and not a 0:07:35.720 --> 0:07:39.080 substitute for policies, right, So I think she has to 0:07:39.240 --> 0:07:42.640 me got a lot to prove that you can actually 0:07:42.960 --> 0:07:48.080 lead by addressing concrete issues with concrete policies. And unless 0:07:48.080 --> 0:07:51.040 she does that, I don't think she lost long has 0:07:51.080 --> 0:07:53.840 her reactiveness been because of the fact that Brexit is 0:07:53.880 --> 0:07:56.480 so all consuming? Do you see it being that that 0:07:56.520 --> 0:07:58.880 she's myopic or shortsighted, or is she just dealing with 0:07:58.880 --> 0:08:00.760 what she has to do that being this is this 0:08:00.800 --> 0:08:03.040 is the overarching, biggest issue that this government has to do. 0:08:03.120 --> 0:08:06.960 And she comes from the background bitches home office of 0:08:07.120 --> 0:08:10.000 the pulpit of the Interior, if you are, and so 0:08:10.360 --> 0:08:15.720 international cross border issues simply not part of uh what's 0:08:15.720 --> 0:08:18.720 just all about? And it shows. But we're waiting at 0:08:18.720 --> 0:08:22.080 some point we may have comments from the Prime Minister 0:08:22.160 --> 0:08:25.280 of the United Kingdom. We've got all sorts of feeds 0:08:25.280 --> 0:08:29.720 into our world headquarters, into our radio operation. Here the 0:08:29.840 --> 0:08:36.000 jaguar waits outside of ten Downing Street, My great the Queen, 0:08:36.320 --> 0:08:42.560 I mean, rather the Prime Minister over to jaguar jaguar 0:08:42.880 --> 0:08:46.760 jaguar anyways, Uh it is silver uh and the cat 0:08:46.840 --> 0:08:58.080 is not separately North Nicole Sturgeon is taking questions and speaking. 0:08:58.480 --> 0:09:01.840 I believe it's boothouse, Fuessor Bouder, b u t e 0:09:02.120 --> 0:09:06.440 beaute house. I think I am. I'm in Scotland, I'm 0:09:06.480 --> 0:09:10.640 the beautiful lot of jokes here mute but mute house. 0:09:10.720 --> 0:09:14.440 There it is. But she is speaking after the SMP 0:09:15.240 --> 0:09:19.239 was defeated, Alex Sanmon even losing his seat among other worthies. 0:09:19.640 --> 0:09:22.360 And the clear sight guys this morning is she will 0:09:22.400 --> 0:09:26.920 tilt away from an independence focus to an s MP brex, 0:09:26.960 --> 0:09:31.160 said Professor Bower. Within your wonderful understanding of the culture 0:09:31.160 --> 0:09:35.280 and politics of Europe and the United Kingdom, How does 0:09:35.679 --> 0:09:40.880 remain deal on this interesting morning? Remain in Northern Ireland, 0:09:41.200 --> 0:09:46.400 Remain in Scotland. How lonely are they this morning? Remain 0:09:46.559 --> 0:09:49.480 Have I have a lot of company? Now they've got 0:09:49.559 --> 0:09:52.680 company in England. You think there's been a shift back 0:09:52.679 --> 0:09:57.400 to remain well in a sense that d not the 0:09:58.120 --> 0:10:03.120 main but the from the desire for a softer breck 0:10:03.160 --> 0:10:07.480 shit then, but Mrs May seemed to be hinting at 0:10:08.360 --> 0:10:14.080 step away even from a no deal is UH is 0:10:14.120 --> 0:10:17.640 better than than a bad deal, so UM, I don't 0:10:17.679 --> 0:10:22.439 think regrettably the remains is an option. At this point 0:10:22.880 --> 0:10:25.160 the UK will have to leave the EEL before it 0:10:25.240 --> 0:10:28.600 kind of applied to rejoin. But I think the softer 0:10:28.760 --> 0:10:33.079 landing for all concerned is good news. The uber driver 0:10:33.200 --> 0:10:38.880 showed up, the uber driver the new normal in the 0:10:38.960 --> 0:10:43.800 UK six minutes feeling matter. What's tod that you? Yesterday 0:10:44.320 --> 0:10:46.240 the President of the e CV was in Estonia, not 0:10:46.280 --> 0:10:49.959 in in Frankfort, but in Estonia, delivering that new policy 0:10:50.000 --> 0:10:52.320 statement and taking questions from from reporters. What's that? What 0:10:52.400 --> 0:10:54.280 was the key headline for you of what Mr drug 0:10:54.360 --> 0:10:57.840 he said yesterday? Well, no surprises, A right, They're not 0:10:57.880 --> 0:11:01.360 going to cut rates, uh. It makes no sense to 0:11:01.440 --> 0:11:04.800 cut rates when you're at the zeroo abound unless you're 0:11:04.800 --> 0:11:07.320 going to get rid of cash, which they won't, and 0:11:07.800 --> 0:11:12.680 they will go easy on on the tapering of the 0:11:12.880 --> 0:11:17.960 of the balance sheet. There's both entirely expected. I think 0:11:18.240 --> 0:11:21.680 the fact that he is uh concern about the continuing 0:11:21.720 --> 0:11:24.880 weakness of inflation is also not a surprise. We have 0:11:25.520 --> 0:11:29.880 the flatters Philip skirls. Since you know Mr Philip invented 0:11:30.920 --> 0:11:37.600 and uh, there's no admission yet that they're out of AMMO, 0:11:38.120 --> 0:11:43.120 but they're clearly shame. You're not going to cut rates 0:11:43.200 --> 0:11:47.640 and the build taper more slowly or affect he es 0:11:47.640 --> 0:11:51.800 basically recognized reality that the ECB in terms of the 0:11:51.800 --> 0:11:55.720 ability to stimulate the economy is uh now a bit player. 0:11:55.920 --> 0:11:57.760 To let me pull back the surveillance, Curtiney, here a 0:11:57.800 --> 0:12:00.240 little bit that we take these press conferences after the 0:12:00.280 --> 0:12:03.079 policy statements renounce, and you and I listen and decide 0:12:03.080 --> 0:12:04.640 how long we're gonna we're gonna take it. We really 0:12:04.679 --> 0:12:06.440 take it in full. You were very engaged with what 0:12:06.640 --> 0:12:09.240 with Mark d saying, yeah, it started out dry as dust, 0:12:09.280 --> 0:12:14.000 you mean Bowder nodded off over his audience, and then seriously, Professor, 0:12:14.160 --> 0:12:19.040 it really clicked in. I mean he really went at 0:12:19.120 --> 0:12:22.839 it about how he does not have the fear that 0:12:23.040 --> 0:12:26.040 so many of the handwringers have. You mentioned this earlier 0:12:26.120 --> 0:12:30.559 this morning. You see it as a very stable process 0:12:31.240 --> 0:12:33.720 to do what he has to do on the balance 0:12:33.760 --> 0:12:37.840 sheet on normalizing rates. Oh, you got to give me 0:12:37.880 --> 0:12:40.679 a bigger answer on a Friday than yes, you can 0:12:40.720 --> 0:12:43.280 do that on Wednesday. The balance sheet isn't on the issue, 0:12:43.400 --> 0:12:48.280 but right from an economic technical perspective, a bit bit 0:12:48.679 --> 0:12:51.800 political issue because the central bank, especially on the asset 0:12:51.880 --> 0:12:54.320 side of his balance sheet, has all kinds of rubbish 0:12:54.440 --> 0:12:56.880 that central bank should not have the engage in credit 0:12:56.880 --> 0:13:00.200 policy increased a fiscal policy, and that's an issue from 0:13:00.240 --> 0:13:02.719 a technical point of view. As soon as they get 0:13:02.760 --> 0:13:06.240 away from the zeroo abound, they can play the interest 0:13:06.280 --> 0:13:08.680 rates again, even if the balance sheet is likely to 0:13:09.480 --> 0:13:13.520 GDP by then about twice the size that as the 0:13:13.520 --> 0:13:17.120 GDP of the fense balance sheet. Incidentally, not the the 0:13:17.160 --> 0:13:19.120 two day FED meeting next week, give us a bit 0:13:19.120 --> 0:13:21.839 of a preview for what you're looking for. Their seems 0:13:21.840 --> 0:13:23.800 like insensus we're gonna see rates when it comes to 0:13:23.800 --> 0:13:25.600 the balance sheet. What are you hoping to hear from 0:13:25.600 --> 0:13:30.480 from the Fed next week? Just um a clear statement 0:13:30.800 --> 0:13:37.080 that they are no looking at this very seriously, working 0:13:37.080 --> 0:13:41.920 on the communications strategy only to avoid recurrence of tape 0:13:41.920 --> 0:13:45.600 a tantum nonsense, and that they will do this in 0:13:45.640 --> 0:13:50.520 a way that will not upset especially the RMBS market, 0:13:51.040 --> 0:13:54.360 and that they'll do it slowly, gradually, and that there 0:13:54.360 --> 0:13:57.400 are no villan boarders. Thank you so much for your 0:13:57.679 --> 0:14:02.120 about surveillance greatly, greatly, Ship David. I'm I'm upset the 0:14:02.160 --> 0:14:06.000 first Lady, the former first Lady, Michelle Obama making an 0:14:06.120 --> 0:14:09.040 uproar about the president wearing his tucks for eight years, 0:14:09.880 --> 0:14:12.680 the same tux for eight years. Can I do a 0:14:12.720 --> 0:14:15.400 shout out this morning? I got my tux of trash 0:14:15.440 --> 0:14:18.800 and Vaudeville down in the East Village and that was 0:14:18.880 --> 0:14:22.080 like fourteen years ago, John Tucker, your tux goes back, 0:14:22.240 --> 0:14:25.240 you know, years, goes back like twenty three years, right, Yeah, 0:14:25.280 --> 0:14:29.720 I got it from Jerry Mahoney. Anyways, I I think 0:14:30.120 --> 0:14:34.400 Mrs eight years is just breaking in a tuxedo. Stay 0:14:34.440 --> 0:14:38.720 with us worldwide. This is Bloomberg surveillance much more. Next 0:14:50.840 --> 0:14:54.920 right now, what a perfect guest to wrap up the week. 0:14:55.040 --> 0:14:58.320 Jeffrey Rosenberg is at Blackrock and what he does is 0:14:58.360 --> 0:15:01.280 he brings a synthesis of what we do economics, financial 0:15:01.280 --> 0:15:06.440 investment with prodigious math skills out of Carnegie Mellon. Are 0:15:06.480 --> 0:15:10.800 we in a normal distribution, Jeffrey Rosenberg? Is this a 0:15:10.880 --> 0:15:16.240 normal environment we're in in terms of financial stability? Thanks 0:15:16.280 --> 0:15:19.560 Tom for that. Uh No, we're certainly not. And you know, 0:15:19.640 --> 0:15:23.160 just just to sort of talk about the distributional outcomes 0:15:23.200 --> 0:15:26.360 after the UK election. You know, one of the things 0:15:26.400 --> 0:15:30.520 that this has resulted in is is really raising the 0:15:30.720 --> 0:15:35.880 uncertainty around both sides of the distribution. Does this increase 0:15:35.960 --> 0:15:39.560 the odds of a hard breath Brexit possibly, does it 0:15:39.960 --> 0:15:43.440 increase the odds of a softer Bregxit. The change in 0:15:43.480 --> 0:15:45.760 the leadership that you just talked about and what might 0:15:46.440 --> 0:15:50.720 result from that has has shifted the distribution and and 0:15:50.960 --> 0:15:55.360 increased the uncertainty of over what this means for the bregsit. 0:15:55.400 --> 0:15:59.280 That's certainly one of the main takeaways this morning. I'm 0:15:59.280 --> 0:16:01.440 fairly confident they were paying attention to this on thread 0:16:01.520 --> 0:16:03.600 Needle Street. There's a b E B o E meeting 0:16:03.640 --> 0:16:06.960 next week in London. How are they processing what's transpired 0:16:07.000 --> 0:16:10.400 here over the last twenty four hours. So again, you know, 0:16:10.480 --> 0:16:14.520 the issue is what is the implications for the UK 0:16:14.720 --> 0:16:21.400 economy of the Brexit negotiations and what kind of uncertainty 0:16:21.560 --> 0:16:26.560 does that, along the way translate into for the currency, 0:16:26.920 --> 0:16:31.479 what does the currency due to inflation and inflation expectations 0:16:31.680 --> 0:16:34.240 and what does the uncertainty due to the performance of 0:16:34.280 --> 0:16:38.360 the economy. If anything, uncertainty here is going to keep 0:16:38.440 --> 0:16:42.200 the BOE more accommodative for a longer period of time 0:16:42.240 --> 0:16:47.200 as they as they watch what the exit negotiations mean 0:16:47.360 --> 0:16:52.760 for the fundamental performance the UK economy. Were looking forward 0:16:52.800 --> 0:16:55.120 to there being a limited amount of political risk after 0:16:55.120 --> 0:16:58.000 the elections in France just a couple of weeks ago. 0:16:58.080 --> 0:17:00.840 Does this add more political risk to political risk? Stay 0:17:00.880 --> 0:17:02.360 the same? How do you how do you view that? 0:17:03.880 --> 0:17:07.159 So you know, and and shameless plug here we we 0:17:07.359 --> 0:17:10.760 just published on the Black Ark website a whole treatise 0:17:10.880 --> 0:17:14.520 on on political risk and and and the rise of 0:17:14.560 --> 0:17:17.680 populism and and and some of the changes and certainly 0:17:18.000 --> 0:17:21.520 in the aftermath of the French election, the tide appears 0:17:21.600 --> 0:17:26.159 to be actually decreasing in terms of uh the kinds 0:17:26.160 --> 0:17:30.600 of political risk, particularly when we're focused on Europe that 0:17:30.880 --> 0:17:34.480 are associated with the breakup risk, you know, the kinds 0:17:34.560 --> 0:17:37.880 of risks. Look at the market reaction this morning about 0:17:37.960 --> 0:17:42.680 the UK. This is not systemic risk, this is not spillovers. 0:17:42.840 --> 0:17:47.720 This is important to the UK domestic economy, it's important 0:17:47.760 --> 0:17:51.360 to UK related assets, but it's having a very minor 0:17:51.440 --> 0:17:54.680 impact relative to the kinds of conversations we had when 0:17:54.680 --> 0:17:58.439 we were talking about political risk. Where really was affecting 0:17:58.520 --> 0:18:02.840 global market position global markets, So certainly there appears to 0:18:02.840 --> 0:18:05.400 be a bit of decline. We had had that risk 0:18:05.480 --> 0:18:07.840 around the lead up to the French elections, but the 0:18:07.920 --> 0:18:11.000 very surprising result appears to be dampening that some risks 0:18:11.040 --> 0:18:15.160 around that, certainly because you've got the potential early call 0:18:15.240 --> 0:18:18.760 for elections in in in Italy. But relative to the 0:18:18.880 --> 0:18:24.320 kinds of volatility politics have driven in terms of financial markets, 0:18:24.520 --> 0:18:28.520 today's events certainly seem much much lower. Well said, But 0:18:29.160 --> 0:18:31.440 the theme of the week away from all this follow 0:18:31.520 --> 0:18:33.679 a that we've been dealing with is the idea of 0:18:33.680 --> 0:18:37.440 an inflation vector going the wrong way? Does the politics 0:18:38.240 --> 0:18:43.040 subdue nominal GDP? Does it put a dampening on the 0:18:43.119 --> 0:18:46.600 animal spirit? And maybe we do get decent real GDP, 0:18:46.760 --> 0:18:49.600 but the inflation just isn't there. Is that an outcome 0:18:49.680 --> 0:18:53.240 that you and share yell and have to consider. So 0:18:53.240 --> 0:18:57.639 so it's a really interesting question around what the politics 0:18:57.680 --> 0:19:01.399 implies for the inflationary outlook because we've how to separate 0:19:01.760 --> 0:19:05.360 the time horizons over which we're talking about the the 0:19:05.400 --> 0:19:09.720 inflation going the other way. Tom that's the near term dynamic, 0:19:09.840 --> 0:19:12.560 that's the cp I figures. Next week, we're gonna have 0:19:12.560 --> 0:19:15.280 a CPI report a lot of focus that's about the 0:19:15.280 --> 0:19:18.600 near term. What's one of the implications of the UK election. 0:19:18.840 --> 0:19:22.240 It's out in the tail of the distribution, but the win, 0:19:22.640 --> 0:19:27.359 according to the Labor Party UH is raising the odds 0:19:27.400 --> 0:19:32.480 of potentially a political shift towards more fiscal expansionary policies, 0:19:32.880 --> 0:19:37.879 more debt and deficit policies, which is inflationary and and 0:19:38.040 --> 0:19:41.920 is certainly an impact of greater issuance of government debt 0:19:41.920 --> 0:19:44.919 and potentially higher risk premium around that. It's not in 0:19:44.960 --> 0:19:47.560 the market today, it's not part of the whole conversation 0:19:47.840 --> 0:19:52.720 around near term impacts. But the shift towards more am accommodation, 0:19:52.800 --> 0:19:56.320 more fiscal policy expansion, more debt and deficits is a 0:19:56.440 --> 0:20:00.720 push towards higher inflationary environments. That's what you've seen here 0:20:00.760 --> 0:20:03.159 in the US vs of a fiscal policy, a lot 0:20:03.200 --> 0:20:05.480 of talk about it for a time, a lot of optimism. 0:20:05.480 --> 0:20:08.080 Optimism about it changed how you view the potential for 0:20:08.160 --> 0:20:12.359 it in other countries. Well, you know, we we we've 0:20:12.400 --> 0:20:18.920 had a big turnaround in terms of expectations around fiscal policy. 0:20:18.960 --> 0:20:23.800 The initial enthusiasm UH in the US, UH you know, 0:20:23.880 --> 0:20:27.680 certainly followed by an unwinding of that. You know, the 0:20:27.760 --> 0:20:33.400 fiscal policy is run by politicians, so the political uncertainty 0:20:33.440 --> 0:20:37.840 and the potential swings makes it harder for markets to 0:20:38.359 --> 0:20:43.680 price what those outcomes are relative to monetary policy run 0:20:43.720 --> 0:20:48.680 by technocrats, run under various forms of we don't want 0:20:48.680 --> 0:20:51.239 to get in the whole debate event how hard and 0:20:51.400 --> 0:20:54.600 fast they follow the rules. But there is a reaction 0:20:54.720 --> 0:20:58.960 function that monetary policy tries to show to the market, 0:20:59.000 --> 0:21:03.040 so that there's a little bit more predictability, if you will. 0:21:03.160 --> 0:21:06.320 On the fiscal policy side, very hard to predict that. 0:21:06.400 --> 0:21:09.520 And so the swings here and the UK, you know, 0:21:09.520 --> 0:21:12.360 again pivoting off of last night's results, the swings here 0:21:12.400 --> 0:21:16.080 are are really headspinning for financial marketing, and so it 0:21:16.720 --> 0:21:20.160 widens the scope of uncertainty. Markets have a hard time 0:21:20.240 --> 0:21:23.119 sort of pricing those outcomes. I get about eight more questions, 0:21:23.119 --> 0:21:25.480 but no time. Jeff Rosenberg, right, Well, we'll see your 0:21:25.480 --> 0:21:28.520 research note this weekend or into Monday as well. He 0:21:28.640 --> 0:21:38.800 is with black Rock uh this morning runch you by 0:21:39.080 --> 0:21:43.360 Bank of America Mary Lynch with virtual reality, virtually everything 0:21:43.400 --> 0:21:48.280 will change. Discover opportunities in a transforming world VI of 0:21:48.440 --> 0:21:53.119 a mL dot com slash VR, Mary Lynch, Pierced Fenner 0:21:53.160 --> 0:22:02.399 and Smith Incorporated. After what we saw yesterday, the bright lights, 0:22:02.440 --> 0:22:05.159 the show biz of the Comy testimony, how about a 0:22:05.320 --> 0:22:08.359 move back to reality. Listen to this sentence, folks. He 0:22:08.520 --> 0:22:14.280 strengthened priority programs to fight public corruption, transnational criminal enterprises 0:22:14.560 --> 0:22:18.399 and violent gangs, and work to protect our children. Uh 0:22:18.440 --> 0:22:23.080 and cherished civil rights. That would be an essay by 0:22:23.440 --> 0:22:27.280 Robert Mueller, Director of the FBI, on one Chris Wecker 0:22:27.640 --> 0:22:31.600 as he left the FBI eleven years ago. Chris Wecker, 0:22:31.640 --> 0:22:36.240 good morning, Good morning. You worked with Mr Muller. There's 0:22:36.280 --> 0:22:39.760 this odd linkage now between the Special Council and the 0:22:39.840 --> 0:22:44.240 former acting director. How do you perceive that Mr Muller 0:22:44.280 --> 0:22:50.520 will move forward after the testimony yesterday? Yeah, Well, it's interesting. 0:22:50.800 --> 0:22:54.600 A couple of revelations yesterday and question marks were questions 0:22:54.600 --> 0:22:58.920 were answered in that the the Jim Comy's interactions with 0:22:59.000 --> 0:23:01.639 the President have are now in the hands are are 0:23:01.800 --> 0:23:05.159 are being examined by a special counsel Mueller. That was 0:23:05.160 --> 0:23:08.760 an open question until yesterday. So his note, his memos, 0:23:08.800 --> 0:23:12.000 they're all in the hands of former Director Mueller, that's 0:23:12.040 --> 0:23:16.200 one significant thing. Yeah, they know each other pretty well. Uh. 0:23:16.520 --> 0:23:20.119 At one time, Robert Mueller as director the FBI reported 0:23:20.160 --> 0:23:23.000 to Jim Comey as the Deputy Attorney General. That's the 0:23:23.080 --> 0:23:27.760 reporting hierarchy. Uh and still is was and is. So 0:23:28.000 --> 0:23:30.120 they certainly know each other. But I will say that 0:23:30.640 --> 0:23:33.840 former Director Mueller has the blinders on. He he knows 0:23:33.880 --> 0:23:36.879 a lot of people in those circles. It's not unusual 0:23:37.040 --> 0:23:39.800 for these people be very familiar with each other. I 0:23:39.800 --> 0:23:42.679 don't think it's going to affect him one bit that 0:23:42.760 --> 0:23:45.760 he knows Jim Comey, and I think Jim Comey has 0:23:45.840 --> 0:23:49.400 will cooperate fully with that investigation. That's about the best, uh, 0:23:50.320 --> 0:23:52.800 the thing that you can say about that relationship. Chris, 0:23:52.880 --> 0:23:54.800 let me ask you. There was a comment from the 0:23:54.800 --> 0:23:57.800 House Speaker yesterday that we've seen some missteps here by 0:23:57.840 --> 0:24:01.320 this president because he's new to the job. I'm paraphrasing there, 0:24:01.320 --> 0:24:02.840 but that was the thrust of what the House Speaker 0:24:03.320 --> 0:24:05.600 had to say. Contrast that with what we saw and 0:24:05.680 --> 0:24:08.800 heard yesterday from James Comby. He is somebody who, during 0:24:08.840 --> 0:24:10.879 the course of that almost three hour hearing, really came 0:24:10.920 --> 0:24:14.440 across as somebody who knows about the way government works, 0:24:14.440 --> 0:24:18.000 knows about the way separation of powers and agencies works. 0:24:18.280 --> 0:24:21.200 There were indications here that he did some things deliberately 0:24:21.280 --> 0:24:24.040 so that we could see a special council tell us 0:24:24.080 --> 0:24:26.679 a bit more about that. The way that James Coby 0:24:26.680 --> 0:24:28.800 knows how to maneuver and make his way through the 0:24:29.040 --> 0:24:33.479 system down in Washington, well, that was a big reveal 0:24:33.600 --> 0:24:36.960 yesterday that he basically manipulated the system to get a 0:24:37.000 --> 0:24:40.280 special counsel appointed. But I think what what he also 0:24:40.320 --> 0:24:43.000 have to consider is that Jim Comey laid out his 0:24:43.040 --> 0:24:45.840 own failings yesterday. And I'm a big fan of his, 0:24:46.440 --> 0:24:49.119 We've worked together. I think he has total integrity. I 0:24:49.119 --> 0:24:51.480 don't think he lies. I think he tells the truth. 0:24:52.040 --> 0:24:54.879 But he also showed how weak he was and not 0:24:54.960 --> 0:24:58.080 pushing back at the President when he felt like something 0:24:58.200 --> 0:25:01.040 inappropriate was going on. That's one thing I would have 0:25:01.080 --> 0:25:05.600 expected much much more courage and fortitude and decisiveness on 0:25:05.760 --> 0:25:09.359 his part. And secondly, he's now painting a picture of 0:25:09.400 --> 0:25:12.360 a mandate from the president or directed from the President, 0:25:12.480 --> 0:25:18.000 to to derail the Flint investigation, and if that were 0:25:18.040 --> 0:25:20.439 the case, he should have referred that he should have 0:25:20.480 --> 0:25:24.800 refused himself as a potential witness and referred that to 0:25:25.080 --> 0:25:28.000 his number two or number three as to whether a 0:25:28.000 --> 0:25:31.200