1 00:00:10,039 --> 00:00:13,720 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Always 2 00:00:14,000 --> 00:00:17,560 Speaker 1: with Michael McKee. Daily we bring you insight from the 3 00:00:17,560 --> 00:00:22,800 Speaker 1: best in economics, finance, investment, and international relations. Find Bloomberg 4 00:00:22,840 --> 00:00:27,240 Speaker 1: Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of course 5 00:00:27,760 --> 00:00:34,479 Speaker 1: on the Bloomberg. Joining us this morning, Ian Bremer from 6 00:00:34,560 --> 00:00:38,519 Speaker 1: the Eurasia Group, working on his the sequel to his 7 00:00:38,640 --> 00:00:43,040 Speaker 1: book G Zero World, Gee Whiz World. I think it's 8 00:00:43,080 --> 00:00:45,000 Speaker 1: what you're going to have to call it this time, 9 00:00:45,520 --> 00:00:48,880 Speaker 1: because gee whiz this is amazing. There are different schools 10 00:00:48,880 --> 00:00:50,560 Speaker 1: of thought. There is an article out this morning says 11 00:00:50,640 --> 00:00:54,160 Speaker 1: these these yields are pointing to an enormous global slowdown 12 00:00:54,240 --> 00:00:58,240 Speaker 1: and the possibility of global recession, and others say this 13 00:00:58,320 --> 00:01:01,480 Speaker 1: is just you know, a man of expression of uncertainty, 14 00:01:01,760 --> 00:01:03,760 Speaker 1: that nobody knows what's going to happen because we've never 15 00:01:03,760 --> 00:01:06,760 Speaker 1: been in this kind of situation before. Where would you 16 00:01:07,000 --> 00:01:10,600 Speaker 1: come down, Uh, clearly the ladder. I think the level 17 00:01:10,640 --> 00:01:17,040 Speaker 1: of geopolitical volatility is growing um the weakness of established institutions, 18 00:01:17,120 --> 00:01:22,440 Speaker 1: the unwillingness of the Americans to act as the global policeman, 19 00:01:22,560 --> 00:01:25,720 Speaker 1: the architect of global trade, the cheerleader for global values 20 00:01:26,200 --> 00:01:30,319 Speaker 1: UM and our strongest allies, the Europeans incomplete and utter disarray. 21 00:01:30,480 --> 00:01:32,200 Speaker 1: David Lipton, the number two at the I m F, 22 00:01:32,319 --> 00:01:34,920 Speaker 1: give a speech last week saying we the I m 23 00:01:34,959 --> 00:01:37,040 Speaker 1: F thinks it's we're now in a G zero world. 24 00:01:37,280 --> 00:01:40,520 Speaker 1: They weren't saying that five years ago. David was suggesting 25 00:01:40,560 --> 00:01:46,600 Speaker 1: that what's happening challenges the long held dogma that globalization 26 00:01:46,680 --> 00:01:50,920 Speaker 1: can't be reversed. That's right, and the processes of deglobalization 27 00:01:51,520 --> 00:01:54,480 Speaker 1: UM as technology brings us closer and closer together, the 28 00:01:54,520 --> 00:01:57,400 Speaker 1: walls are coming up, the real walls that are being built, 29 00:01:57,720 --> 00:02:02,440 Speaker 1: the virtual walls in aligning in dividuals to nations, cleaving 30 00:02:02,480 --> 00:02:07,360 Speaker 1: them into sects um and narrower and narrower political ideologies. 31 00:02:07,720 --> 00:02:10,320 Speaker 1: This is happening. It's the opposite of Tom Friedman's world 32 00:02:10,440 --> 00:02:13,880 Speaker 1: is flat. It's the opposite of Frank Fukiyama's the end 33 00:02:13,919 --> 00:02:17,080 Speaker 1: of History. We certainly are entering a period of much 34 00:02:17,120 --> 00:02:20,920 Speaker 1: more divisiveness politically, and that's causing a lot more conflict. 35 00:02:20,960 --> 00:02:23,680 Speaker 1: The markets are reflecting that. We've only got with you 36 00:02:23,680 --> 00:02:26,280 Speaker 1: about a half hour, so this question maybe too long 37 00:02:26,400 --> 00:02:30,120 Speaker 1: for that. But what happened between when Fukiyama was writing 38 00:02:30,520 --> 00:02:34,079 Speaker 1: that capitalism had triumphed because none of the other economic 39 00:02:34,200 --> 00:02:36,679 Speaker 1: systems worked and where we are now, well, a few 40 00:02:36,720 --> 00:02:40,160 Speaker 1: things happened. One is, countries like China and emerging markets 41 00:02:40,200 --> 00:02:43,559 Speaker 1: were rising and becoming more influential. But they have dramatically 42 00:02:43,560 --> 00:02:46,919 Speaker 1: different political and economic values and culcated in those political 43 00:02:46,960 --> 00:02:50,480 Speaker 1: systems the authoritarian they are state capitalists in many cases, 44 00:02:50,639 --> 00:02:53,360 Speaker 1: they're different levels of development, and so they're not going to, 45 00:02:53,680 --> 00:02:57,840 Speaker 1: you know, easily agree with the established players on the 46 00:02:57,880 --> 00:02:59,960 Speaker 1: world order that, oh, let's all work together, let's all 47 00:03:00,120 --> 00:03:05,280 Speaker 1: responsible stakeholders. The other issue is that globalization has been 48 00:03:05,360 --> 00:03:11,320 Speaker 1: all about emerging market labor displacing and replacing developed market labor, 49 00:03:11,440 --> 00:03:15,520 Speaker 1: and well, that meant that social contracts across the developed 50 00:03:15,520 --> 00:03:18,639 Speaker 1: market were not worth the paper they were printed on, 51 00:03:18,880 --> 00:03:23,000 Speaker 1: and that's hollowed out these middle classes and working classes 52 00:03:23,000 --> 00:03:25,600 Speaker 1: and lead to enormous degrees of populism here in the 53 00:03:25,680 --> 00:03:29,359 Speaker 1: United States, in Canada, in Europe, and and as weak 54 00:03:29,440 --> 00:03:33,600 Speaker 1: in those countries. Final point, technology has sped this up 55 00:03:33,639 --> 00:03:36,560 Speaker 1: and made it sharper. Whether it's you know the fact 56 00:03:36,600 --> 00:03:39,360 Speaker 1: that you don't have mainstream media and so Instead, people 57 00:03:39,400 --> 00:03:42,600 Speaker 1: are much more capable through their social media of only 58 00:03:42,800 --> 00:03:45,440 Speaker 1: identifying with people that they like, so they have echo 59 00:03:45,520 --> 00:03:47,960 Speaker 1: bubbles and the way they hear news, or the fact 60 00:03:47,960 --> 00:03:51,000 Speaker 1: that a terrorist organization can recruit much more easily across 61 00:03:51,000 --> 00:03:53,520 Speaker 1: its borders. You see that the threats to the world 62 00:03:53,640 --> 00:03:58,160 Speaker 1: order are not individual states anymore. They're these systemic processes 63 00:03:58,200 --> 00:04:02,560 Speaker 1: that undermine state governance. So central governments are becoming weaker 64 00:04:02,720 --> 00:04:05,839 Speaker 1: and weaker as this process goes through. And that's where 65 00:04:05,840 --> 00:04:09,760 Speaker 1: I wanted to go. Technical progress is different. Now, this 66 00:04:10,000 --> 00:04:13,880 Speaker 1: isn't Nikki Calder's world. It's not Simon because that's it's 67 00:04:13,920 --> 00:04:17,680 Speaker 1: certainly not Dr Solo's world of m I T. I 68 00:04:17,760 --> 00:04:21,720 Speaker 1: like how you say speeding up and sharper. Let's focus 69 00:04:21,760 --> 00:04:25,599 Speaker 1: on the sharper. What do the elites do? You identified 70 00:04:25,640 --> 00:04:29,400 Speaker 1: ten minutes ago that Michael McKee is an elite. What 71 00:04:29,480 --> 00:04:33,600 Speaker 1: do the elites do to get back in touch with 72 00:04:33,720 --> 00:04:39,560 Speaker 1: people harmed, hurt, cut by the sharpness of our new technology. Well, 73 00:04:39,720 --> 00:04:42,400 Speaker 1: what we see is that they don't do anything until 74 00:04:42,480 --> 00:04:44,640 Speaker 1: they're forced to. UM. I mean, if I look at 75 00:04:44,680 --> 00:04:48,360 Speaker 1: countries that are addressing this, they're small and homogeneous. Denmark, 76 00:04:48,480 --> 00:04:51,640 Speaker 1: for example, where you know, sort of your um all 77 00:04:51,720 --> 00:04:55,520 Speaker 1: of your benefits don't follow you as as with your workplace, 78 00:04:55,560 --> 00:04:57,880 Speaker 1: but follow you as an individual worker, whether you're in 79 00:04:58,120 --> 00:05:00,640 Speaker 1: or out of an individual job. So it makes more 80 00:05:00,640 --> 00:05:03,440 Speaker 1: sense for the gig economy, and it creates much more 81 00:05:03,480 --> 00:05:07,240 Speaker 1: flexible workforces. That's not happening in the United States, not 82 00:05:07,360 --> 00:05:11,000 Speaker 1: happening in the UK because thus far the elites have 83 00:05:11,160 --> 00:05:14,680 Speaker 1: not in established power, have not felt they've needed to. 84 00:05:14,880 --> 00:05:21,039 Speaker 1: But our individualism accentuates our elite nous, almost our lockey 85 00:05:21,080 --> 00:05:25,080 Speaker 1: in view accentuates us away from the Danish model. Well, 86 00:05:25,160 --> 00:05:29,240 Speaker 1: you you can be an individual until you can't. I mean, 87 00:05:29,440 --> 00:05:31,839 Speaker 1: after nine eleven I was here in New York City. 88 00:05:32,240 --> 00:05:34,640 Speaker 1: This city did not feel like a city of individuals. 89 00:05:34,640 --> 00:05:37,200 Speaker 1: This city felt like one that came together. That was 90 00:05:37,240 --> 00:05:41,200 Speaker 1: true after Pearl Harbor and World War Two. But today UH, 91 00:05:41,240 --> 00:05:44,640 Speaker 1: in the world of Trump versus Clinton to UH to 92 00:05:44,920 --> 00:05:48,599 Speaker 1: two candidates who are by far the most negatively disposed 93 00:05:48,640 --> 00:05:51,719 Speaker 1: to buy the population we've seen in decades, it feels 94 00:05:51,800 --> 00:05:54,440 Speaker 1: much more like a lockey in view of individuals and 95 00:05:54,560 --> 00:05:58,080 Speaker 1: dog eat dog. We we haven't yet experienced the size 96 00:05:58,120 --> 00:06:01,400 Speaker 1: of crisis that will force us to move beyond that, 97 00:06:01,520 --> 00:06:05,000 Speaker 1: and that means that from a market perspective of this volatility, 98 00:06:05,200 --> 00:06:08,159 Speaker 1: the uncertainty, the crises that we're experiencing, they're clearly going 99 00:06:08,200 --> 00:06:12,000 Speaker 1: to grow. Well, we seem to be validating the concept 100 00:06:12,040 --> 00:06:16,200 Speaker 1: of autocrats that at this in this kind of environment, 101 00:06:17,360 --> 00:06:22,880 Speaker 1: it awakens a latent desire for someone to be in control. Uh. Yeah. 102 00:06:22,880 --> 00:06:25,600 Speaker 1: If you look at the demographics that align with Trump 103 00:06:25,760 --> 00:06:28,159 Speaker 1: is um. Uh. The one thing you see is these 104 00:06:28,160 --> 00:06:32,080 Speaker 1: are individuals that want a strong leader, and that aligns 105 00:06:32,120 --> 00:06:34,680 Speaker 1: with people that like Urdawan and aligns with people that 106 00:06:34,760 --> 00:06:37,919 Speaker 1: like Putin. Um. I mean this, this is a and 107 00:06:37,920 --> 00:06:42,599 Speaker 1: and many of the European populist leaders on the continent 108 00:06:43,000 --> 00:06:47,320 Speaker 1: um as well. So I mean, clearly the idea that 109 00:06:47,560 --> 00:06:50,200 Speaker 1: rule of law is the most important thing that you 110 00:06:50,279 --> 00:06:52,719 Speaker 1: cherish well, I mean, depending on what you think of 111 00:06:52,760 --> 00:06:55,880 Speaker 1: your economic outlook and your security outlook, not so much. 112 00:06:56,200 --> 00:06:58,680 Speaker 1: I thought Dr Kissinger's essay the other day in the 113 00:06:58,680 --> 00:07:03,400 Speaker 1: Wall Street Journal was particularly smart, an update on the 114 00:07:03,440 --> 00:07:08,280 Speaker 1: world order and an update on the seriousness of the moment. 115 00:07:09,000 --> 00:07:11,800 Speaker 1: You can always agree and disagree with Dr Kissinger. That's 116 00:07:12,280 --> 00:07:15,840 Speaker 1: part of the game. Tell me about Ian Bremer's world 117 00:07:16,040 --> 00:07:20,840 Speaker 1: order right now? What does Europe end up being within 118 00:07:21,360 --> 00:07:25,440 Speaker 1: that world order? Well, you know, so interesting that Europe 119 00:07:25,480 --> 00:07:29,640 Speaker 1: was getting so much weaker well before the Brexit referendum. 120 00:07:29,640 --> 00:07:31,400 Speaker 1: And whether you thought it was a good idea or 121 00:07:31,400 --> 00:07:34,280 Speaker 1: a bad idea for the u K, let's recognize the 122 00:07:34,320 --> 00:07:38,000 Speaker 1: ten years down the road. Uh, it's vastly more likely 123 00:07:38,000 --> 00:07:40,520 Speaker 1: that Europe will be smaller and less well governed and 124 00:07:40,600 --> 00:07:43,160 Speaker 1: less meaningful on the global stage and as a market 125 00:07:43,200 --> 00:07:47,400 Speaker 1: than it is today. The governance doesn't work. Um, the 126 00:07:47,520 --> 00:07:52,240 Speaker 1: alignments of countries around common principles and norms doesn't work. So, 127 00:07:52,360 --> 00:07:54,960 Speaker 1: I mean, I don't like the people that were supporting Brexit, 128 00:07:55,040 --> 00:07:58,120 Speaker 1: the leaders who were clearly venal and we're not interested 129 00:07:58,120 --> 00:08:02,040 Speaker 1: in really providing, um a a pathway of the UK 130 00:08:02,640 --> 00:08:06,800 Speaker 1: towards greatness. But um, there's no question that there were 131 00:08:06,920 --> 00:08:09,320 Speaker 1: very good reasons and continue to be good reasons to 132 00:08:09,400 --> 00:08:13,440 Speaker 1: vote out of Europe. My Kissinger view is is pretty 133 00:08:13,440 --> 00:08:15,800 Speaker 1: different on this, right. I mean, I think the Kissinger 134 00:08:15,840 --> 00:08:18,760 Speaker 1: is increasingly showing himself to be one of the eminent 135 00:08:18,800 --> 00:08:22,920 Speaker 1: statesmen of the twenty century, not of one. He's focusing 136 00:08:23,280 --> 00:08:29,239 Speaker 1: on states still as the principal enemies, and whether that's China, 137 00:08:29,560 --> 00:08:31,960 Speaker 1: or Russia and the big challenges that are coming. It's 138 00:08:32,040 --> 00:08:34,840 Speaker 1: very that that kind of a real politic model when 139 00:08:35,000 --> 00:08:39,200 Speaker 1: actually the entire model that Kissinger grew up with is 140 00:08:39,360 --> 00:08:44,920 Speaker 1: coming unglued by systemic challenges that are aimed directly at 141 00:08:45,000 --> 00:08:49,480 Speaker 1: governance and the state itself. It's not just terrorism, it's 142 00:08:49,520 --> 00:08:53,840 Speaker 1: not just pandemics. It's technology and the ability of those 143 00:08:53,840 --> 00:08:57,400 Speaker 1: things to just undermine the social contract that made you 144 00:08:57,520 --> 00:09:01,400 Speaker 1: believe in your government leaders and regard. The United States 145 00:09:01,400 --> 00:09:04,640 Speaker 1: and China have vastly more in common today than they 146 00:09:04,679 --> 00:09:08,160 Speaker 1: have a part, and Kissinger hasn't yet decided that that's 147 00:09:08,160 --> 00:09:13,000 Speaker 1: the case. I'm curious what that implies as you sort 148 00:09:13,040 --> 00:09:17,400 Speaker 1: of look out into the future about nation states and 149 00:09:17,720 --> 00:09:23,480 Speaker 1: their ability to retain the cultural ties within that nation 150 00:09:23,559 --> 00:09:27,040 Speaker 1: state that bind them together. Well, it implies good things 151 00:09:27,040 --> 00:09:28,960 Speaker 1: and bad things. The good thing it implies is that 152 00:09:29,000 --> 00:09:33,360 Speaker 1: the United States in China, for example, great powers should 153 00:09:33,440 --> 00:09:36,320 Speaker 1: find much more that they can work together on, whether 154 00:09:36,400 --> 00:09:40,080 Speaker 1: it's climate, whether it's dealing with terror, whether it's dealing 155 00:09:40,080 --> 00:09:43,520 Speaker 1: with a rogue like North Korea. That's a positive thing, right, 156 00:09:43,559 --> 00:09:45,880 Speaker 1: So we we have much less concerned about world wars 157 00:09:45,960 --> 00:09:48,600 Speaker 1: or major power wars in that regard. The bad thing 158 00:09:48,880 --> 00:09:53,600 Speaker 1: is that this decentralization process, where effective governance is going 159 00:09:53,640 --> 00:09:56,280 Speaker 1: to be found much more flexibly, much more locally through 160 00:09:56,320 --> 00:10:01,720 Speaker 1: networks as well as through your municipality, through your state, uh, 161 00:10:01,760 --> 00:10:07,120 Speaker 1: through your town, um, those things are directly making state 162 00:10:07,200 --> 00:10:10,160 Speaker 1: leaders more vulnerable. In the United States. That just means 163 00:10:10,200 --> 00:10:13,400 Speaker 1: Washington becomes less relevant over time. As we continue to 164 00:10:13,400 --> 00:10:15,800 Speaker 1: see the polarization in China, it means that those people 165 00:10:16,000 --> 00:10:19,079 Speaker 1: could potentially lose their lives, right, and that's a problem 166 00:10:19,120 --> 00:10:21,439 Speaker 1: for them. True, and that is much worse than our 167 00:10:21,480 --> 00:10:23,680 Speaker 1: situation for the moment. But I'm wondering in a Donald 168 00:10:23,720 --> 00:10:26,440 Speaker 1: Trump world, where the US has succeeded in the European 169 00:10:26,520 --> 00:10:30,000 Speaker 1: Union failed so far, is that we are willing to 170 00:10:30,120 --> 00:10:32,079 Speaker 1: take tax dollars from New York and send them to 171 00:10:32,120 --> 00:10:35,959 Speaker 1: Mississippi if Mississippi has a budget problem. They're not willing 172 00:10:36,320 --> 00:10:38,559 Speaker 1: to They've done some of that, but they're not willing 173 00:10:38,640 --> 00:10:41,680 Speaker 1: or happy about it. In Europe. Do we lose that? 174 00:10:41,760 --> 00:10:46,080 Speaker 1: Do people in individual states start to resent other states 175 00:10:46,320 --> 00:10:49,719 Speaker 1: if we devolve power so much? Oh? Certainly, And and 176 00:10:49,760 --> 00:10:52,760 Speaker 1: despite the fact that we've done a decent job of 177 00:10:53,040 --> 00:10:56,160 Speaker 1: actually moving money around at the state level. We haven't 178 00:10:56,200 --> 00:10:59,840 Speaker 1: necessarily done a very good job of effectively deploying that 179 00:11:00,000 --> 00:11:03,160 Speaker 1: money towards those in the middle and working classes that 180 00:11:03,320 --> 00:11:05,880 Speaker 1: feel like they're being left behind by this economy. And 181 00:11:05,920 --> 00:11:08,920 Speaker 1: I don't think anyone thinks either Hillary or Trump are 182 00:11:08,920 --> 00:11:11,520 Speaker 1: going to be able to effectively respond to that. So yes, 183 00:11:11,960 --> 00:11:15,000 Speaker 1: I think that the inequalities that are growing in the 184 00:11:15,080 --> 00:11:19,920 Speaker 1: United States will will be exacerbated by the fact that 185 00:11:20,000 --> 00:11:23,000 Speaker 1: the players that matter are becoming more local, and therefore 186 00:11:23,080 --> 00:11:26,280 Speaker 1: they'll have strength to resist when other states come with 187 00:11:26,320 --> 00:11:29,760 Speaker 1: the begging bowl. That'll be interesting. Where are you on 188 00:11:29,840 --> 00:11:33,079 Speaker 1: the money question, particularly for our global Wall Street audience, 189 00:11:33,640 --> 00:11:35,960 Speaker 1: and whether people want to move from London to other 190 00:11:36,040 --> 00:11:38,200 Speaker 1: parts of Europe? I mean, I don't buy it for 191 00:11:38,240 --> 00:11:40,440 Speaker 1: a minute. I was I was talking with Kevin Schiky 192 00:11:40,480 --> 00:11:44,760 Speaker 1: and Bloombergelpi about this yesterday. Granted, folks, I'm talking in 193 00:11:44,760 --> 00:11:47,880 Speaker 1: her book We're building a world headquarters next the Mansion 194 00:11:47,880 --> 00:11:51,000 Speaker 1: House in London. Do people want to move to Europe? 195 00:11:51,280 --> 00:11:55,400 Speaker 1: I think that the banking sector, because of the nature 196 00:11:55,440 --> 00:11:58,640 Speaker 1: of the regulatory environment changing and the power of the 197 00:11:58,640 --> 00:12:01,680 Speaker 1: European courts um, will end up having to do a 198 00:12:01,720 --> 00:12:04,280 Speaker 1: significant piece of their business. If they want to do 199 00:12:04,320 --> 00:12:06,520 Speaker 1: euro deenominated work, it's not going to be out of London. 200 00:12:06,559 --> 00:12:09,120 Speaker 1: It's going to be in the in the continent, So 201 00:12:09,160 --> 00:12:11,719 Speaker 1: the passporting issue is going to be important. They could 202 00:12:11,800 --> 00:12:17,000 Speaker 1: lose or more of their job over five to ten years. 203 00:12:17,040 --> 00:12:20,679 Speaker 1: I think that's fairly that's fairly likely. But leaving that aside, 204 00:12:20,800 --> 00:12:23,960 Speaker 1: I think most of the people that live in London, 205 00:12:24,000 --> 00:12:25,920 Speaker 1: if they want to move, are not going to be 206 00:12:25,920 --> 00:12:27,960 Speaker 1: moving to Europe. I think most of the super high 207 00:12:27,960 --> 00:12:30,360 Speaker 1: net worth individuals are going to be moving to other 208 00:12:30,400 --> 00:12:33,520 Speaker 1: places that also feel like truly global cities. I think 209 00:12:33,520 --> 00:12:35,480 Speaker 1: that's a smaller hit, a much smaller hit to the 210 00:12:35,559 --> 00:12:38,640 Speaker 1: UK than the financial sector. Hit Ian Bremer, Thank you 211 00:12:38,679 --> 00:12:51,920 Speaker 1: so much. Michael McKeon, John King here in Francine Laqua 212 00:12:52,520 --> 00:12:56,680 Speaker 1: in London. Francine, We're gonna go to our analysts from 213 00:12:56,679 --> 00:13:00,640 Speaker 1: airmys here in a moment. But Francine help me here 214 00:13:01,240 --> 00:13:04,320 Speaker 1: with when we say there's a crisis and Italian banks, 215 00:13:04,840 --> 00:13:07,640 Speaker 1: is your family in Italy thinking of taking their money 216 00:13:07,720 --> 00:13:11,600 Speaker 1: out of the bank, what does the crisis actually mean? Well, 217 00:13:11,640 --> 00:13:13,280 Speaker 1: if we have a run on the banks like we 218 00:13:13,320 --> 00:13:16,120 Speaker 1: saw Northern Rock here in the UK, it will get 219 00:13:16,120 --> 00:13:18,079 Speaker 1: really ugly. But Tommy, you actually hit the nail on 220 00:13:18,120 --> 00:13:19,600 Speaker 1: the head right. The problem is that at the moment 221 00:13:19,600 --> 00:13:22,480 Speaker 1: it's share prices going down. They're looking for a solution. 222 00:13:22,840 --> 00:13:25,280 Speaker 1: When mom and pops an itity decide that they don't 223 00:13:25,280 --> 00:13:27,600 Speaker 1: want to keep their money in an Italian bank anymore, 224 00:13:27,640 --> 00:13:29,680 Speaker 1: that's when the real trouble could start, and that's what 225 00:13:29,720 --> 00:13:32,120 Speaker 1: people are trying to avoid at the moment. Filippo Alati 226 00:13:32,240 --> 00:13:36,959 Speaker 1: with us with Arms, Armes Investment Management, Tours of duty 227 00:13:36,960 --> 00:13:40,840 Speaker 1: at BNP, Perry, Bob Barnberg and there's Filippo help me 228 00:13:41,000 --> 00:13:44,319 Speaker 1: here with the back story. What are we not seeing 229 00:13:44,400 --> 00:13:46,320 Speaker 1: in the media. What are we not seeing in the 230 00:13:46,360 --> 00:13:50,200 Speaker 1: press about Italian banks right now? What we've seen basically 231 00:13:50,240 --> 00:13:52,800 Speaker 1: over here it's um an in Italy is that there 232 00:13:52,920 --> 00:13:56,000 Speaker 1: is a some banksts with which I very much in 233 00:13:56,080 --> 00:13:59,959 Speaker 1: the on the ad screen and they're having some tropic 234 00:14:00,040 --> 00:14:02,160 Speaker 1: with the bad lungs, which actually it's something which is 235 00:14:02,240 --> 00:14:06,800 Speaker 1: been going on for many years and there's been actually 236 00:14:06,920 --> 00:14:09,520 Speaker 1: if you look at the result the most recent results 237 00:14:09,800 --> 00:14:12,800 Speaker 1: a move from the weaker banks to the strongest bank 238 00:14:12,840 --> 00:14:15,880 Speaker 1: like for example, in days that's been in termal deposits, 239 00:14:15,880 --> 00:14:18,480 Speaker 1: so actually people in Italy has start moving the possites 240 00:14:18,520 --> 00:14:20,840 Speaker 1: from the weaker to the stronger banks. And of course 241 00:14:20,840 --> 00:14:24,000 Speaker 1: also if that continue, that is not going to be 242 00:14:24,480 --> 00:14:29,200 Speaker 1: good news. Will there be one bank standing? Yeah, if 243 00:14:29,320 --> 00:14:31,440 Speaker 1: there will be only one bank standing, there wouldn't be 244 00:14:31,520 --> 00:14:34,160 Speaker 1: very good for the Italian banking system of course. So 245 00:14:34,200 --> 00:14:37,440 Speaker 1: that's why the the the authorities, they're trying to negotiate 246 00:14:37,480 --> 00:14:40,480 Speaker 1: it a deal with the European Union in order to 247 00:14:40,680 --> 00:14:44,400 Speaker 1: recapitalize the banks and have many of them still standing. 248 00:14:44,720 --> 00:14:46,560 Speaker 1: But I think that's also one of the wing for 249 00:14:46,800 --> 00:14:50,000 Speaker 1: will be more consolidation in a very fragmented market because 250 00:14:50,000 --> 00:14:53,880 Speaker 1: I think it's there um still something like three hundred 251 00:14:54,920 --> 00:14:57,280 Speaker 1: different banking group in it that which is far too light. 252 00:14:57,360 --> 00:15:01,640 Speaker 1: It's one of the most fragmented bank marketing in Europe, 253 00:15:01,800 --> 00:15:05,440 Speaker 1: together with Germany, Philippa overall into these bank rescue plan 254 00:15:05,560 --> 00:15:07,920 Speaker 1: has just been not credible. Right, This is what the 255 00:15:07,920 --> 00:15:10,240 Speaker 1: markets have been saying for quite a few weeks now 256 00:15:10,280 --> 00:15:14,640 Speaker 1: accelerated because of Brexit. Does the European Commission need to 257 00:15:14,720 --> 00:15:18,640 Speaker 1: be more flexible with the Italian banks? I think so. 258 00:15:18,840 --> 00:15:22,520 Speaker 1: At the the reason why the the the different set 259 00:15:22,640 --> 00:15:25,600 Speaker 1: of measures which has been announced over the last busically 260 00:15:25,680 --> 00:15:29,000 Speaker 1: last year or so, they were all, in my opinion, 261 00:15:29,080 --> 00:15:31,160 Speaker 1: going into the right direction. But of course so they 262 00:15:31,160 --> 00:15:35,480 Speaker 1: were quite minimal internal expected outcome. And now I think 263 00:15:35,520 --> 00:15:38,000 Speaker 1: that's so. Since that so we can really go on. 264 00:15:38,080 --> 00:15:41,240 Speaker 1: And so we're having the banking stocks making new laws 265 00:15:41,240 --> 00:15:43,520 Speaker 1: because some point in time, as you say, the moms 266 00:15:43,560 --> 00:15:45,920 Speaker 1: and that, as we start asking questions about these savings, 267 00:15:46,520 --> 00:15:49,160 Speaker 1: I think, at some point in time, and so a 268 00:15:49,240 --> 00:15:52,920 Speaker 1: high profile compromise needs to be found between financial stability 269 00:15:52,960 --> 00:15:55,680 Speaker 1: and stated because I think at some point in time 270 00:15:56,120 --> 00:15:59,280 Speaker 1: and perhaps we near in the breaking time, and so 271 00:15:59,320 --> 00:16:03,200 Speaker 1: we need different untrustability to effectively trump the state aid 272 00:16:03,240 --> 00:16:06,760 Speaker 1: in risk in rescue. In the Italian banking system, the 273 00:16:06,760 --> 00:16:10,360 Speaker 1: e USE policy has basically been are the euro Zone 274 00:16:10,360 --> 00:16:15,000 Speaker 1: policy has basically been throughout its existence, to find the 275 00:16:15,120 --> 00:16:20,080 Speaker 1: least painful compromise and then kick the can down the road. 276 00:16:20,400 --> 00:16:23,840 Speaker 1: How systemic is the Italian situation and can they get 277 00:16:23,840 --> 00:16:26,400 Speaker 1: away with that this time? I think, yeah, it's been 278 00:16:26,760 --> 00:16:28,720 Speaker 1: kicking the cant down the road and so for as 279 00:16:28,720 --> 00:16:30,800 Speaker 1: long as I can remember. But also we have to 280 00:16:30,800 --> 00:16:33,800 Speaker 1: remember so we have this new concept of banking union 281 00:16:34,080 --> 00:16:37,800 Speaker 1: in place for only since basically November for Tina. So 282 00:16:37,840 --> 00:16:42,240 Speaker 1: all these problems are in my opinion, derived from a 283 00:16:42,280 --> 00:16:45,600 Speaker 1: regulator in Italy, another county in Spain. In Ireland, the 284 00:16:45,680 --> 00:16:49,440 Speaker 1: pasta been basically captured by the banks and the only 285 00:16:49,480 --> 00:16:53,160 Speaker 1: one that's the easy b took corresponsibility for the banking 286 00:16:53,200 --> 00:16:58,840 Speaker 1: supervision and we saw the real um uh exp rex 287 00:16:58,880 --> 00:17:01,320 Speaker 1: exposure in the Italian a banking book. And I think 288 00:17:01,320 --> 00:17:05,920 Speaker 1: it takes time and we still have different we're trying 289 00:17:05,920 --> 00:17:08,359 Speaker 1: to get things someone izing over Europe. It takes time 290 00:17:08,400 --> 00:17:10,680 Speaker 1: and to answer the second party requests. I think the 291 00:17:10,920 --> 00:17:15,320 Speaker 1: banking system that is very um systemic in a sense. 292 00:17:15,720 --> 00:17:18,679 Speaker 1: If we have some some type of bailing so burden 293 00:17:18,720 --> 00:17:21,960 Speaker 1: sharing on the bond holders, this could be to could 294 00:17:21,960 --> 00:17:26,520 Speaker 1: cause a confident shock which could easily translate it on 295 00:17:26,600 --> 00:17:29,199 Speaker 1: some sort of bank runds and if banks run up 296 00:17:29,200 --> 00:17:32,520 Speaker 1: in it, and then there's really no way not to 297 00:17:32,600 --> 00:17:35,240 Speaker 1: see those happening. I don't know in Spain or in 298 00:17:35,280 --> 00:17:38,280 Speaker 1: Portugal and at the weaker countries. How big is the 299 00:17:38,400 --> 00:17:42,000 Speaker 1: danger to the European banking system right now in terms 300 00:17:42,080 --> 00:17:44,760 Speaker 1: of what time and Francine, we're talking about a moment 301 00:17:44,800 --> 00:17:48,080 Speaker 1: ago of any kind of runs or any kind of 302 00:17:48,160 --> 00:17:51,639 Speaker 1: cure party failures, the risk is always very high. And 303 00:17:52,720 --> 00:17:56,359 Speaker 1: I mean if it's not that delta properly, then I 304 00:17:56,400 --> 00:17:59,920 Speaker 1: mean we kind of have some type of serious dumb 305 00:18:00,320 --> 00:18:02,720 Speaker 1: We have to remember, so we all left this rescue, 306 00:18:03,040 --> 00:18:06,520 Speaker 1: state rescue, found this so called yes M still seven 307 00:18:06,600 --> 00:18:10,160 Speaker 1: hundred billion euros at the very last results. It could 308 00:18:10,160 --> 00:18:12,480 Speaker 1: be used, but hopefully so we don't get down this 309 00:18:12,600 --> 00:18:17,640 Speaker 1: road and use the yes M, which was lately used 310 00:18:17,640 --> 00:18:21,840 Speaker 1: for the Greek rescue. But but what I don't understand 311 00:18:21,920 --> 00:18:24,479 Speaker 1: is why Germany or Brussels would play with fire, right. 312 00:18:24,480 --> 00:18:27,880 Speaker 1: We understand that they would both impose this this they 313 00:18:27,880 --> 00:18:31,040 Speaker 1: would oppose any bailout that basically doesn't comply with existing 314 00:18:31,080 --> 00:18:34,359 Speaker 1: bank failure rules. But they can't take such a chance 315 00:18:34,359 --> 00:18:37,159 Speaker 1: at this moment when Brexit happened ten days ago. Yeah no, 316 00:18:37,280 --> 00:18:39,320 Speaker 1: that's so that would be a very risky and neighbor 317 00:18:40,040 --> 00:18:42,840 Speaker 1: for as much as understand the German point in order 318 00:18:42,880 --> 00:18:46,600 Speaker 1: on respecting the rules, because so we have to think 319 00:18:46,600 --> 00:18:50,440 Speaker 1: as all we had the banking rescue in Spain, in Portugal, 320 00:18:50,560 --> 00:18:54,720 Speaker 1: in Greece and then b Older, they did suffer by 321 00:18:54,920 --> 00:18:57,600 Speaker 1: being involving the after those banks, of course, and so 322 00:18:57,680 --> 00:19:02,399 Speaker 1: they will never zero apart from some margin a casa 323 00:19:02,600 --> 00:19:05,760 Speaker 1: novo banko. But of course that's all. As I say, 324 00:19:05,800 --> 00:19:12,359 Speaker 1: that's all the the state intervention ruling generally are forbidden, 325 00:19:12,640 --> 00:19:16,280 Speaker 1: but there's some limited extension they could they make for 326 00:19:16,359 --> 00:19:20,200 Speaker 1: some some room for flexibility. Filip, you have a beautiful 327 00:19:20,240 --> 00:19:24,440 Speaker 1: paragraph in your research note on the EU bank Recovery 328 00:19:24,640 --> 00:19:29,199 Speaker 1: and Resolution Directive, And basically this is a coco of 329 00:19:29,240 --> 00:19:33,919 Speaker 1: Deutsche Bank infamy of eight months ago, done through the 330 00:19:34,000 --> 00:19:36,720 Speaker 1: legislation of the e c B and the EB. I 331 00:19:36,760 --> 00:19:41,240 Speaker 1: get all that alphabet soup. The bottom line is the 332 00:19:41,400 --> 00:19:46,120 Speaker 1: EU would do a cram down to bond holders in Italy. 333 00:19:46,400 --> 00:19:49,359 Speaker 1: Do I have that right that the only solution with 334 00:19:49,480 --> 00:19:53,199 Speaker 1: equity capital not available is a route is to do 335 00:19:53,240 --> 00:19:56,680 Speaker 1: a cram down with bond losses. Is that the right 336 00:19:56,720 --> 00:19:59,320 Speaker 1: approach that that would be there in my opinion on 337 00:19:59,320 --> 00:20:01,439 Speaker 1: one of the worst case scenario, because I mean I 338 00:20:01,640 --> 00:20:05,240 Speaker 1: still believe that. So there is some room in the 339 00:20:05,320 --> 00:20:08,800 Speaker 1: rules actually to make some sort of equity interaction, so 340 00:20:09,000 --> 00:20:12,800 Speaker 1: say in in plain English, or some sort of bailout 341 00:20:13,160 --> 00:20:16,399 Speaker 1: if you want to, sobeil like bailout two point zero 342 00:20:16,800 --> 00:20:18,960 Speaker 1: by which was so the capital is the sorry, the 343 00:20:19,040 --> 00:20:22,320 Speaker 1: state inject capital in the bank in this case Montelepaski, 344 00:20:22,520 --> 00:20:27,560 Speaker 1: and therefore Italy gates a carve out, an extemption from 345 00:20:27,600 --> 00:20:30,920 Speaker 1: the state rule for I don't know, six months, one year, 346 00:20:31,080 --> 00:20:33,760 Speaker 1: so for as long as they can manage, because I mean, 347 00:20:34,080 --> 00:20:36,800 Speaker 1: what is certain is that at this level monte past 348 00:20:36,920 --> 00:20:42,240 Speaker 1: is trading basically ten cents on the intangible and attached value, 349 00:20:42,560 --> 00:20:47,879 Speaker 1: so they can't raise really happita from the from private investors. 350 00:20:49,080 --> 00:20:51,640 Speaker 1: I mean it's fund managers, senior credit and less. We're 351 00:20:51,640 --> 00:20:54,080 Speaker 1: talking about Italian banks and also joining Tom and I 352 00:20:54,640 --> 00:20:58,560 Speaker 1: in this half, our friends in Lakwa from Bloomberg Surveillance 353 00:20:58,720 --> 00:21:02,720 Speaker 1: in London, who has been following Italian banks for quite 354 00:21:02,800 --> 00:21:12,360 Speaker 1: sometimes she may have a few dollars in an Italian bank. Uh. 355 00:21:12,440 --> 00:21:16,119 Speaker 1: There are four banks, uh Philippa that have been bailed 356 00:21:16,160 --> 00:21:21,280 Speaker 1: out by the Italian government. Uh. They are the minority. 357 00:21:21,359 --> 00:21:24,879 Speaker 1: But there are a number of others in trouble. Is 358 00:21:24,920 --> 00:21:27,960 Speaker 1: there is there a rank order? Is there somebody who 359 00:21:28,080 --> 00:21:32,560 Speaker 1: is not in trouble? Uh? And somebody that obviously has 360 00:21:32,600 --> 00:21:37,359 Speaker 1: to be fixed immediately. Yeah, actually, yeah, the four banks 361 00:21:37,359 --> 00:21:39,879 Speaker 1: you were mentioning so they were actually as opposed to 362 00:21:39,920 --> 00:21:42,800 Speaker 1: bail out to a bailey in because there was a 363 00:21:42,840 --> 00:21:46,560 Speaker 1: contribution by the subordinate bond holders or those banks and 364 00:21:46,600 --> 00:21:49,359 Speaker 1: those were very minor banks were all together so the 365 00:21:49,400 --> 00:21:52,280 Speaker 1: accounting for less than one percent or the deposit markets 366 00:21:53,080 --> 00:21:55,600 Speaker 1: um and they, as I say, that's the web building. 367 00:21:55,720 --> 00:21:58,960 Speaker 1: So the subordinated b alders which happened also to be 368 00:21:59,119 --> 00:22:02,160 Speaker 1: a deposit or the banks that so where basically zero, 369 00:22:02,520 --> 00:22:05,320 Speaker 1: which caused a lot of stress in the Italian funding 370 00:22:05,400 --> 00:22:09,400 Speaker 1: markets because you have to remember nearly there is a 371 00:22:09,440 --> 00:22:12,639 Speaker 1: specialty versus that the European jurisician in America a lots 372 00:22:12,640 --> 00:22:16,840 Speaker 1: of about ten between ten and fifteen percent or the 373 00:22:16,840 --> 00:22:20,680 Speaker 1: Italian walties in so called bank bonds because they think 374 00:22:21,440 --> 00:22:24,600 Speaker 1: of the bank boond that some some type of deposits 375 00:22:24,600 --> 00:22:28,040 Speaker 1: certifical deposit if you want. So there is a this 376 00:22:28,119 --> 00:22:30,800 Speaker 1: is in my opinion, was a mistake by the Italian 377 00:22:30,840 --> 00:22:35,440 Speaker 1: Parliament when the past the bill indirective into the Italian 378 00:22:35,560 --> 00:22:38,200 Speaker 1: law and the national law um in my opinion, so 379 00:22:38,280 --> 00:22:41,040 Speaker 1: they didn't really take into account the morphology of the 380 00:22:41,080 --> 00:22:45,800 Speaker 1: market and the fact there is a widespread ownership or 381 00:22:45,800 --> 00:22:48,320 Speaker 1: this type of bonds in the retails. So of course, 382 00:22:48,400 --> 00:22:51,400 Speaker 1: so when they did retail bond holders of those four 383 00:22:51,440 --> 00:22:54,880 Speaker 1: banks that's got zero and you can imagine the many 384 00:22:54,880 --> 00:22:57,600 Speaker 1: of them rushed for the accident that caused a lot 385 00:22:57,680 --> 00:23:01,840 Speaker 1: of sharp prince direction. Also on the top of or that, 386 00:23:02,520 --> 00:23:06,320 Speaker 1: around Christmas it happened the Novo bank or fiasco in 387 00:23:06,359 --> 00:23:10,919 Speaker 1: Portugal when some senior Bonalda's were brought back to the 388 00:23:11,040 --> 00:23:15,040 Speaker 1: bad bank of bash. So this is not really it 389 00:23:15,160 --> 00:23:19,240 Speaker 1: wasn't really a confident boasting exercise. And to answer your 390 00:23:19,320 --> 00:23:22,199 Speaker 1: question in terms of the clearly Monte Repaski is the 391 00:23:22,280 --> 00:23:25,320 Speaker 1: largest one which is more in trouble and they need 392 00:23:25,359 --> 00:23:28,679 Speaker 1: to fix it. Um as up there are all the 393 00:23:28,720 --> 00:23:33,159 Speaker 1: other banks, but I would think um Monte pask is 394 00:23:34,040 --> 00:23:36,960 Speaker 1: the next in line. It has to be Priorities number one. 395 00:23:37,160 --> 00:23:39,359 Speaker 1: Then there is between the largest bank there is uniqu 396 00:23:39,359 --> 00:23:41,760 Speaker 1: reade will not they need to raise capita but I 397 00:23:41,800 --> 00:23:44,960 Speaker 1: would think that Unique ready can manage by bank LF. 398 00:23:45,400 --> 00:23:47,520 Speaker 1: But but what happens if they don't fix it to 399 00:23:47,600 --> 00:23:49,480 Speaker 1: these banks? The next six months we were speaking to 400 00:23:49,920 --> 00:23:53,520 Speaker 1: the Chairman Association Lorenzo Beni Smigi, his former SMB, and 401 00:23:53,520 --> 00:23:56,720 Speaker 1: he's saying, look, Italy is banking crisis will spread to 402 00:23:56,760 --> 00:24:00,080 Speaker 1: the rest of Europe unless it's fixed. Yeah, I think so, 403 00:24:00,119 --> 00:24:03,359 Speaker 1: there's many ways to fix this this problem, and so 404 00:24:03,680 --> 00:24:06,879 Speaker 1: one could think of some type of of course, so 405 00:24:07,000 --> 00:24:10,080 Speaker 1: in my opinion at this moment in time, basically the 406 00:24:10,119 --> 00:24:13,240 Speaker 1: bailing or bond holders, that would be the worst possible 407 00:24:13,280 --> 00:24:18,240 Speaker 1: solution in my opinion, likely to create more confidence shocks 408 00:24:18,280 --> 00:24:21,120 Speaker 1: as opposed to boost the confidence. There is a possibility 409 00:24:21,160 --> 00:24:24,679 Speaker 1: of funding the big banks and involving the big banks 410 00:24:24,680 --> 00:24:28,400 Speaker 1: in rescuing the weaker one, but I think it wouldn't 411 00:24:28,400 --> 00:24:31,679 Speaker 1: be a good solut good solution either because then of 412 00:24:31,720 --> 00:24:35,040 Speaker 1: course you would make the larger banks even weaker. Then, 413 00:24:35,040 --> 00:24:38,159 Speaker 1: as all, the possibility of using the Atlanta founder, the 414 00:24:38,240 --> 00:24:42,159 Speaker 1: so called the one which was put in place in 415 00:24:42,240 --> 00:24:44,680 Speaker 1: order to save the chance, and then it I thinks, 416 00:24:44,720 --> 00:24:46,960 Speaker 1: to my opinion, this is probably the way that we're 417 00:24:47,000 --> 00:24:52,480 Speaker 1: trying to go down. But this may fix uh Montelepasky, 418 00:24:52,560 --> 00:24:55,480 Speaker 1: and of course so we need something more. So, but 419 00:24:55,560 --> 00:24:57,920 Speaker 1: so what makes sense now, Philipps just to increase the 420 00:24:58,000 --> 00:25:00,639 Speaker 1: Atlanta fund right it was considered to small. If they 421 00:25:00,640 --> 00:25:03,159 Speaker 1: inject what another twenty billion, will that be enough to 422 00:25:03,200 --> 00:25:06,440 Speaker 1: at least save and buy time for Montepasky. I think 423 00:25:06,600 --> 00:25:09,200 Speaker 1: montepask He probably they need something between say two and 424 00:25:09,400 --> 00:25:12,120 Speaker 1: up two up to five billion euro And I think 425 00:25:12,359 --> 00:25:14,879 Speaker 1: if you think in the grand scheme of things, so 426 00:25:14,960 --> 00:25:18,200 Speaker 1: it's a rather trivial this amount. Because if you think 427 00:25:18,200 --> 00:25:20,679 Speaker 1: I saw the bad loans amount into something like three 428 00:25:20,760 --> 00:25:24,000 Speaker 1: underd and sixty billion, then it shouldn't be too much 429 00:25:24,040 --> 00:25:27,080 Speaker 1: of a problem finding up to five billion from Monte Depasky. 430 00:25:27,600 --> 00:25:31,840 Speaker 1: Of course, I saw the atlantiphone needs to be upsize, upscaled. 431 00:25:32,560 --> 00:25:36,760 Speaker 1: I think this is probably the way they preferred in Roma. Philippa, 432 00:25:36,840 --> 00:25:38,919 Speaker 1: Thank you so much, Philippa. I hope to get you 433 00:25:38,920 --> 00:25:43,560 Speaker 1: on again for Army's investment management on banks thanks to 434 00:25:43,560 --> 00:25:55,600 Speaker 1: frienc in THECOA in London as well. Clinton yesterday, she's 435 00:25:55,640 --> 00:25:59,119 Speaker 1: absorbed by the FBI of criminal charges, or at least 436 00:26:00,280 --> 00:26:02,639 Speaker 1: likely the prosecutors will go along with that, but the 437 00:26:02,680 --> 00:26:07,000 Speaker 1: FBI didn't find reason to charge her necessarily. Uh. The UM. 438 00:26:07,359 --> 00:26:10,680 Speaker 1: The problem is that the FBI director of James Comey, 439 00:26:10,760 --> 00:26:14,959 Speaker 1: had quite a lot to say about how she conducted herself. 440 00:26:15,000 --> 00:26:19,600 Speaker 1: Shall we say, Dan Clifton is with strategious he follows politics. 441 00:26:19,880 --> 00:26:23,560 Speaker 1: Um had a policy research for them. And there are 442 00:26:24,000 --> 00:26:28,399 Speaker 1: sort of two camps out there this morning in in 443 00:26:28,520 --> 00:26:32,440 Speaker 1: analyzing what happened. One says she's off the hook and 444 00:26:32,520 --> 00:26:36,520 Speaker 1: so this will fade. Others say, this is a massive 445 00:26:36,560 --> 00:26:41,880 Speaker 1: opening for Donald Trump because the FBI director was so critical. 446 00:26:42,119 --> 00:26:45,160 Speaker 1: You know, it's reinforces our existing biases. I'm not sure 447 00:26:45,200 --> 00:26:48,320 Speaker 1: it changed any undecided voters yesterday, but you know, I 448 00:26:48,320 --> 00:26:51,280 Speaker 1: mean if you watch that press conference, and you know, 449 00:26:51,320 --> 00:26:54,160 Speaker 1: we were about three minutes into that press conferences and said, wow, 450 00:26:54,160 --> 00:26:56,240 Speaker 1: the FBI is going to charge her, which we didn't 451 00:26:56,280 --> 00:26:58,800 Speaker 1: think was going to be the case, but the case 452 00:26:58,880 --> 00:27:02,040 Speaker 1: against her was so damaging. And then you got about 453 00:27:02,160 --> 00:27:04,359 Speaker 1: seven eight minutes in and all of a sudden he 454 00:27:04,440 --> 00:27:06,679 Speaker 1: switches and says, but we're not gonna bring charges, you know. 455 00:27:06,800 --> 00:27:09,680 Speaker 1: So so there's a lot for everybody there, Like Hillary 456 00:27:09,760 --> 00:27:12,080 Speaker 1: is saying, I'm not going to be charged, this is over. 457 00:27:12,200 --> 00:27:14,240 Speaker 1: Let's put it behind us. I can now go out 458 00:27:14,280 --> 00:27:18,920 Speaker 1: and campaign with the very popular existing President Obama. Uh. 459 00:27:19,080 --> 00:27:21,880 Speaker 1: Much of her base is not really enthused about her, 460 00:27:22,240 --> 00:27:24,640 Speaker 1: and Obama helps her there. So you see how this 461 00:27:25,000 --> 00:27:28,280 Speaker 1: really has helped Hillary in that one sense. On the 462 00:27:28,280 --> 00:27:32,200 Speaker 1: other side, I think there's political damage. I think that 463 00:27:32,240 --> 00:27:37,240 Speaker 1: there's legal damage there. I mean just watching NBC News 464 00:27:37,320 --> 00:27:39,960 Speaker 1: last night where they took her statements and saying no 465 00:27:40,160 --> 00:27:44,280 Speaker 1: classified information was ever sent or received, and then juxtaposing 466 00:27:44,280 --> 00:27:47,399 Speaker 1: that with the FBI director saying yes she did send 467 00:27:47,720 --> 00:27:51,600 Speaker 1: and uh send and received classified information. It was terribly 468 00:27:51,720 --> 00:27:53,920 Speaker 1: damaging to watch that on the on the nightly news 469 00:27:54,000 --> 00:27:56,440 Speaker 1: last night. And I believe that the ads are writing 470 00:27:56,480 --> 00:27:58,800 Speaker 1: themselves and the argument that the Republicans are gonna make 471 00:27:58,800 --> 00:28:01,000 Speaker 1: her two fold Number one, that there's a different set 472 00:28:01,040 --> 00:28:03,600 Speaker 1: of rules for the elites and not for regular people, 473 00:28:03,640 --> 00:28:07,360 Speaker 1: including uh meaning the elite like Hillary Clinton. But more importantly, 474 00:28:07,600 --> 00:28:11,359 Speaker 1: this really trying to set up the argument that she 475 00:28:11,560 --> 00:28:13,600 Speaker 1: lied that she couldn't handle her email and that she 476 00:28:13,640 --> 00:28:15,639 Speaker 1: can't keep our country safe if she couldn't keep her 477 00:28:15,640 --> 00:28:18,040 Speaker 1: email safe. I think those could be the two arguments 478 00:28:18,040 --> 00:28:19,880 Speaker 1: that come from Republicans. Damn, let me go to your 479 00:28:19,920 --> 00:28:23,000 Speaker 1: skill set. I'm looking at predict wise just as one summary, 480 00:28:23,080 --> 00:28:26,440 Speaker 1: like real clear politics of all the different polls out there. 481 00:28:26,440 --> 00:28:29,199 Speaker 1: I mean the presidential thing. I'm like most of America, 482 00:28:29,240 --> 00:28:32,240 Speaker 1: I'm like, Okay, we heard it all yesterday. What about 483 00:28:32,280 --> 00:28:35,720 Speaker 1: the Senate in the House. What is the Dan Clifton 484 00:28:36,000 --> 00:28:41,400 Speaker 1: that story on how those people react to this presidential 485 00:28:41,440 --> 00:28:44,800 Speaker 1: news flow. Yeah. Absolutely, I think that's a great question, Tom, 486 00:28:44,840 --> 00:28:47,960 Speaker 1: And you remember the big dynamic for this election is 487 00:28:47,960 --> 00:28:50,480 Speaker 1: whether the Republicans could keep the House. Do you believe 488 00:28:50,600 --> 00:28:53,240 Speaker 1: Hillary is gonna win the White House? And if she 489 00:28:53,280 --> 00:28:55,400 Speaker 1: wins the White House, then the Democrats are likely to 490 00:28:55,440 --> 00:28:59,959 Speaker 1: take the Senate. Republicans are defending seven states that president 491 00:29:00,000 --> 00:29:02,120 Speaker 1: in Obama one in two thousand twelve, and so if 492 00:29:02,160 --> 00:29:04,800 Speaker 1: Hillary wins those states like Obama did, she's likely to 493 00:29:04,800 --> 00:29:07,240 Speaker 1: pull the Democratic Senate candidate over the finish line. They 494 00:29:07,280 --> 00:29:09,600 Speaker 1: only need four seats to take over the Senate, and 495 00:29:09,640 --> 00:29:11,680 Speaker 1: so the question is what happens in the House. And 496 00:29:11,720 --> 00:29:15,400 Speaker 1: what yesterday did was really start to energize Republicans who 497 00:29:15,560 --> 00:29:18,600 Speaker 1: may not really be in support of Donald Trump that 498 00:29:18,760 --> 00:29:21,160 Speaker 1: the idea that this that this can go on, and 499 00:29:21,160 --> 00:29:23,360 Speaker 1: that this system is ray. I think it's going to 500 00:29:23,480 --> 00:29:26,600 Speaker 1: help the Republicans get their turnay out, which allows them 501 00:29:26,600 --> 00:29:29,120 Speaker 1: to keep a firewall in the House that will probably 502 00:29:29,200 --> 00:29:32,200 Speaker 1: keep those Senate races closer. And so I think on 503 00:29:32,320 --> 00:29:34,680 Speaker 1: net this has been positive for Republican on the down 504 00:29:34,760 --> 00:29:37,480 Speaker 1: ballot ticket, which I think will be critical for policy 505 00:29:37,800 --> 00:29:39,840 Speaker 1: in two thousand and seventeen. If you have an old 506 00:29:39,840 --> 00:29:43,680 Speaker 1: Democratic Congress and Democratic White House, Democrats can basically do 507 00:29:43,720 --> 00:29:47,360 Speaker 1: whatever they want. Uh, if you have a Republican House there, 508 00:29:47,480 --> 00:29:49,040 Speaker 1: I think it's gonna make it much harder to get 509 00:29:49,080 --> 00:29:51,959 Speaker 1: fiscal policies to mills, immigration and many of the changes 510 00:29:51,960 --> 00:29:54,360 Speaker 1: that Hillary is going to want to get into place. So, yes, 511 00:29:54,480 --> 00:29:56,840 Speaker 1: it was a very big event for the election. You know, Tom, 512 00:29:56,880 --> 00:29:58,760 Speaker 1: Sometimes we get these events, we make a big deal 513 00:29:58,800 --> 00:30:00,760 Speaker 1: about it. Six months later, you get to November and 514 00:30:00,800 --> 00:30:03,520 Speaker 1: you don't even remember those types of events. But yesterday 515 00:30:03,600 --> 00:30:05,680 Speaker 1: was was one of those big, big events. I think 516 00:30:05,960 --> 00:30:07,880 Speaker 1: switching gears a little bit. Let's ask about the other 517 00:30:07,920 --> 00:30:10,000 Speaker 1: big event out there, Brexit. Is that going to play 518 00:30:10,040 --> 00:30:12,920 Speaker 1: into the US election at all? You know? So? I 519 00:30:12,960 --> 00:30:15,160 Speaker 1: spent my week last week in Europe and and and 520 00:30:15,280 --> 00:30:19,040 Speaker 1: first point is the UK investors are so barished. They 521 00:30:19,080 --> 00:30:22,240 Speaker 1: believe a recession is inevitable. Their barish on equities, the 522 00:30:22,360 --> 00:30:25,480 Speaker 1: barish on their currency. And one of the things that 523 00:30:25,640 --> 00:30:29,560 Speaker 1: really popped up from our conversations with in social investors 524 00:30:29,760 --> 00:30:33,680 Speaker 1: was that UK investors were giving a much greater probability 525 00:30:33,760 --> 00:30:36,520 Speaker 1: that Donald Trump could win the election here in the US, 526 00:30:36,600 --> 00:30:38,920 Speaker 1: and it was it's because they still had this shell 527 00:30:39,000 --> 00:30:43,960 Speaker 1: shock of Brexit vote happening. That of the country voted 528 00:30:43,960 --> 00:30:45,920 Speaker 1: to get out, And there are a lot of differences 529 00:30:45,960 --> 00:30:49,080 Speaker 1: between Brexit and the U s race. Brexit was binary. 530 00:30:49,280 --> 00:30:52,400 Speaker 1: You have personalities here, not many people like Donald Trump. 531 00:30:52,720 --> 00:30:54,920 Speaker 1: But I think that there was this sense that there's 532 00:30:55,000 --> 00:30:59,080 Speaker 1: this anti incumbent, anti establishment mood that's out there that 533 00:30:59,240 --> 00:31:03,560 Speaker 1: is underest made it and much more motivated than say 534 00:31:03,600 --> 00:31:07,719 Speaker 1: the state campaign was there or oh yes, Hillary, she's establishment. 535 00:31:07,880 --> 00:31:10,840 Speaker 1: That the people who are really uh, really motivated to 536 00:31:11,040 --> 00:31:13,520 Speaker 1: vote in this election are going to be voting against 537 00:31:13,520 --> 00:31:17,120 Speaker 1: the establishment, and on net that that benefits Donald Trump. 538 00:31:17,160 --> 00:31:19,200 Speaker 1: But I gotta be honest with you. When I woke 539 00:31:19,280 --> 00:31:22,560 Speaker 1: up this morning, everybody was talking about Trump praising Saddam 540 00:31:22,680 --> 00:31:26,160 Speaker 1: sustain not exactly the message that you want coming out 541 00:31:26,160 --> 00:31:29,600 Speaker 1: of yesterday's press conference from the FBI. So he's got 542 00:31:29,600 --> 00:31:31,680 Speaker 1: to get more disciplined. He's got to raise more money, 543 00:31:31,760 --> 00:31:35,000 Speaker 1: he's got to have organization, he's got to improve his 544 00:31:35,040 --> 00:31:37,440 Speaker 1: favorability rating, and he's got to turn this into a 545 00:31:37,480 --> 00:31:40,600 Speaker 1: referendum on Hillary. All those are very large steps to 546 00:31:40,640 --> 00:31:43,000 Speaker 1: get there. So that's still a lot of more challenges 547 00:31:43,000 --> 00:31:48,160 Speaker 1: from jump in here all that by Friday. You gotta yeah, 548 00:31:48,200 --> 00:31:50,320 Speaker 1: that's true. You know, I'm starting to think that maybe 549 00:31:50,320 --> 00:31:51,840 Speaker 1: he doesn't want to win, to be honest with you, 550 00:31:51,880 --> 00:31:54,480 Speaker 1: because even when the Inspector i G Report came out, 551 00:31:54,520 --> 00:31:57,440 Speaker 1: he was talking about other things like Ted Cruz. He's 552 00:31:57,480 --> 00:32:00,000 Speaker 1: got to get focused and and really has to say 553 00:32:00,120 --> 00:32:03,360 Speaker 1: his sites on her. I've worked on campaigns before where 554 00:32:03,560 --> 00:32:07,400 Speaker 1: we lost by mid July because the candidate was not focused, 555 00:32:07,400 --> 00:32:09,760 Speaker 1: and so he really runs that risk. Given that he's 556 00:32:09,800 --> 00:32:13,200 Speaker 1: at such a disadvantage in fundraising, his VP pick will 557 00:32:13,240 --> 00:32:14,920 Speaker 1: be important and I think that's going to be the 558 00:32:14,960 --> 00:32:18,280 Speaker 1: next data the data point that we get for this election, 559 00:32:18,680 --> 00:32:21,120 Speaker 1: and it's got to be somebody who doesn't get bogged 560 00:32:21,120 --> 00:32:24,200 Speaker 1: down in controversy right away. So it's gonna be somebody 561 00:32:24,200 --> 00:32:27,800 Speaker 1: who's not controversial but still be able to help him 562 00:32:27,840 --> 00:32:31,960 Speaker 1: fundraise and overcome some of those disadvantages. Ailand, Dan Clifton, 563 00:32:32,320 --> 00:32:33,960 Speaker 1: never enough time. We've got to get you back on 564 00:32:33,960 --> 00:32:36,000 Speaker 1: when you're in New York again. Let us know Mr 565 00:32:36,040 --> 00:32:40,400 Speaker 1: Clifton is with Jason turn It Strtigas partners as well. 566 00:32:42,720 --> 00:32:46,800 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 567 00:32:46,840 --> 00:32:52,280 Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform 568 00:32:52,360 --> 00:32:56,440 Speaker 1: you prefer. I'm on Twitter at Tom Keane, Michael McKee 569 00:32:56,520 --> 00:33:01,320 Speaker 1: is at Economy Before the podcast you can always catches worldwide. 570 00:33:01,640 --> 00:33:10,000 Speaker 1: I'm Bloomberg Radio h