1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,560 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. They're 5 00:00:33,640 --> 00:00:35,600 Speaker 1: sort of a big tension when we talk about China 6 00:00:35,720 --> 00:00:38,559 Speaker 1: trade talks, which is just how much ammunition does the 7 00:00:38,600 --> 00:00:41,479 Speaker 1: Government of China does the PBOC have to stimulate the 8 00:00:41,479 --> 00:00:44,040 Speaker 1: economy amid all of the back and forth between the 9 00:00:44,120 --> 00:00:47,360 Speaker 1: US and China. And Gabrielle Santos has been following this. 10 00:00:47,560 --> 00:00:50,400 Speaker 1: She of course, is a vice president Global market Strategist 11 00:00:50,720 --> 00:00:53,960 Speaker 1: for JPMorgan Asset Management. UM, thank you so much for 12 00:00:53,960 --> 00:00:56,760 Speaker 1: being here. She is in our Bloomberg Interactive Broker Studios. Gabriella, 13 00:00:57,000 --> 00:00:59,880 Speaker 1: what did you make of this record credit growth that 14 00:01:00,040 --> 00:01:02,760 Speaker 1: we saw in January out of China. So China has 15 00:01:02,800 --> 00:01:06,800 Speaker 1: this balancing act they're trying to to play here right there, 16 00:01:06,840 --> 00:01:10,600 Speaker 1: trying to do some structural reforms. They've acknowledged over the 17 00:01:10,640 --> 00:01:14,319 Speaker 1: past couple of years that they have a credit problem. Surprise, UM, 18 00:01:14,360 --> 00:01:17,320 Speaker 1: we can clearly see a big, big increase in corporate 19 00:01:17,319 --> 00:01:20,520 Speaker 1: credit in China, most of them have credit problem. They 20 00:01:20,520 --> 00:01:23,240 Speaker 1: tried to double down on that and you know, try 21 00:01:23,280 --> 00:01:25,319 Speaker 1: to try to do something about it. And now we're 22 00:01:25,360 --> 00:01:28,280 Speaker 1: just seeing them say, all right, actually leverage is great. No, no, no, 23 00:01:28,360 --> 00:01:30,760 Speaker 1: And so that's the balance the act they try to play, right, 24 00:01:30,840 --> 00:01:33,759 Speaker 1: So it's long term, we've got to fix this. Short term, 25 00:01:34,000 --> 00:01:38,160 Speaker 1: we have to guarantee social stability pretty much UM, meaning 26 00:01:38,680 --> 00:01:41,880 Speaker 1: have a decent economic backdrop. So it's a bit of 27 00:01:41,920 --> 00:01:45,280 Speaker 1: a push pull. Long term they want to eventually wind 28 00:01:45,280 --> 00:01:47,960 Speaker 1: down that credit piece. Short term they're happy to step 29 00:01:48,000 --> 00:01:51,200 Speaker 1: on that lever um just to guarantee some stability. But 30 00:01:51,280 --> 00:01:54,560 Speaker 1: what's interesting about the Chinese stimulus is that credit is 31 00:01:54,600 --> 00:01:57,000 Speaker 1: just part of it. They've been relying on some other 32 00:01:57,080 --> 00:02:00,400 Speaker 1: stimulus that's new for them, which is actually reduced saying 33 00:02:00,400 --> 00:02:03,280 Speaker 1: income taxes, corporate taxes. So they have been trying to 34 00:02:03,320 --> 00:02:05,920 Speaker 1: be a little bit more creative UM at the same 35 00:02:05,960 --> 00:02:07,880 Speaker 1: time that unfortunately they have to revert to the old 36 00:02:07,880 --> 00:02:10,079 Speaker 1: playbook from time to time. And yet, Gabby, we've had 37 00:02:10,120 --> 00:02:15,240 Speaker 1: five reserve requirement ratio cuts since early and still growth 38 00:02:15,240 --> 00:02:18,400 Speaker 1: has not stabilized. What is different about the character the 39 00:02:18,520 --> 00:02:21,440 Speaker 1: nature of the stimulus this time around, and why the 40 00:02:21,480 --> 00:02:24,639 Speaker 1: economy isn't stabilizing as it has done in response to 41 00:02:24,680 --> 00:02:27,519 Speaker 1: these kind of measures in previous years, Well because it's 42 00:02:27,560 --> 00:02:30,720 Speaker 1: not a bazooka like they've used in the past post 43 00:02:31,120 --> 00:02:35,680 Speaker 1: global financial crisis, or even they were doing broad based 44 00:02:35,760 --> 00:02:40,440 Speaker 1: monetary easing, broad based stepping on that credit lever This 45 00:02:40,520 --> 00:02:43,119 Speaker 1: time they're doing a little bit of that, but they 46 00:02:43,200 --> 00:02:45,600 Speaker 1: are aware of that structural issues. So they are also 47 00:02:45,680 --> 00:02:49,120 Speaker 1: trying to deal with fiscal uh stimulus, which takes a 48 00:02:49,120 --> 00:02:51,080 Speaker 1: little bit of a there's a bit of a lag 49 00:02:51,200 --> 00:02:53,560 Speaker 1: until that plays out in the economy. Alright. So the 50 00:02:53,560 --> 00:02:55,760 Speaker 1: reason why this all matters, right is because first of all, 51 00:02:55,840 --> 00:02:57,600 Speaker 1: China is the second biggest economy in the world, but 52 00:02:57,680 --> 00:03:01,519 Speaker 1: also we have a situation we're invests are racing, they're 53 00:03:01,560 --> 00:03:04,840 Speaker 1: tripping over themselves to go into emerging markets, debt and 54 00:03:04,880 --> 00:03:07,440 Speaker 1: equities that I have to wonder how much this really 55 00:03:07,520 --> 00:03:09,960 Speaker 1: hinges on the idea that China is going to remain 56 00:03:10,080 --> 00:03:13,120 Speaker 1: a powerhouse come hell or high water, no matter how 57 00:03:13,160 --> 00:03:15,680 Speaker 1: they have to get there, and including adding leverage and 58 00:03:16,000 --> 00:03:20,280 Speaker 1: basically sacrificing their future for the now. So there's very 59 00:03:20,360 --> 00:03:24,440 Speaker 1: much an expectation that China will succeed in stabilizing their economy, 60 00:03:24,760 --> 00:03:27,160 Speaker 1: so it's not that bazook of stimulus, so it's not 61 00:03:27,240 --> 00:03:30,400 Speaker 1: an acceleration and growth, but it is an expectation of 62 00:03:30,680 --> 00:03:33,840 Speaker 1: stabilization and growth. So that's very important of course, as 63 00:03:33,840 --> 00:03:36,119 Speaker 1: you mentioned, because China is a huge economy. It has 64 00:03:36,280 --> 00:03:39,240 Speaker 1: links all over emerging markets, and it has an impact 65 00:03:39,320 --> 00:03:42,960 Speaker 1: on developed markets as well, Europe directly, as as as 66 00:03:43,120 --> 00:03:45,760 Speaker 1: as a big trading partner, but even in the US 67 00:03:45,880 --> 00:03:48,280 Speaker 1: right for US companies, So it matters in so many 68 00:03:48,320 --> 00:03:51,280 Speaker 1: different dimensions, and that's why we have to actually see 69 00:03:51,280 --> 00:03:53,400 Speaker 1: the effect on the data of that stabilization. So let's 70 00:03:53,400 --> 00:03:55,760 Speaker 1: think about the spill over, the potential negative spillover, because 71 00:03:55,800 --> 00:03:58,520 Speaker 1: here are the fears. This morning, you get a decelerating 72 00:03:58,920 --> 00:04:02,720 Speaker 1: PPI reading, perhaps falling back into deflation. There the fearies 73 00:04:02,760 --> 00:04:06,320 Speaker 1: industrial profits will be lower, companies already under pressure from 74 00:04:06,320 --> 00:04:09,400 Speaker 1: a weaker economy. The fear is that the export prices 75 00:04:09,440 --> 00:04:11,320 Speaker 1: are going to roll over, and the fearies you export 76 00:04:11,360 --> 00:04:14,240 Speaker 1: disinflation into the rest of the world. Feels a little 77 00:04:14,240 --> 00:04:17,520 Speaker 1: bit like early perhaps with the volume turned down. Is 78 00:04:17,520 --> 00:04:21,040 Speaker 1: that a decent comparison, that is a decent comparison that 79 00:04:21,200 --> 00:04:23,440 Speaker 1: was that time that we were worried about a Chinese 80 00:04:23,480 --> 00:04:26,479 Speaker 1: hard landing if we recall and all of its negative 81 00:04:26,480 --> 00:04:30,360 Speaker 1: spillover effect on emerging markets developed markets as well. Um So, 82 00:04:30,400 --> 00:04:32,320 Speaker 1: I do think we need to see that stability in 83 00:04:32,440 --> 00:04:35,000 Speaker 1: Chinese data, but that perhaps the old China is not 84 00:04:35,040 --> 00:04:37,719 Speaker 1: where we should look. Right as we were mentioning there 85 00:04:37,760 --> 00:04:40,320 Speaker 1: is more of a fiscal stimulus push. I don't think 86 00:04:40,320 --> 00:04:43,840 Speaker 1: we should overlook the tremendous amount of stimulus they've done 87 00:04:44,360 --> 00:04:47,120 Speaker 1: through their reworking of income taxes. Right, So where we 88 00:04:47,160 --> 00:04:49,680 Speaker 1: should look for that stability is actually on the consumer 89 00:04:49,720 --> 00:04:52,440 Speaker 1: side in China. From an investor perspective, Does this mean 90 00:04:52,520 --> 00:04:56,800 Speaker 1: by Chinese bonds, by Chinese equities? From that perspective, I 91 00:04:56,800 --> 00:05:00,719 Speaker 1: would say it's by you know, emerging market So you 92 00:05:00,720 --> 00:05:02,839 Speaker 1: don't think it's been overplayed this whole em But I 93 00:05:02,880 --> 00:05:05,039 Speaker 1: do not think it's been overplayed. Even though the Bank 94 00:05:05,040 --> 00:05:07,719 Speaker 1: of America Mary Lynch for Manager Survey actually says, for 95 00:05:07,720 --> 00:05:10,200 Speaker 1: the first time in its history, the majority of clients 96 00:05:10,240 --> 00:05:13,520 Speaker 1: think that that the E M long trade is the 97 00:05:13,640 --> 00:05:15,920 Speaker 1: most crowded trade out there. You know, when I actually 98 00:05:15,920 --> 00:05:18,560 Speaker 1: look at flow data for emerging markets, I think the 99 00:05:18,600 --> 00:05:20,920 Speaker 1: best source for for that is the i a F. 100 00:05:20,960 --> 00:05:23,960 Speaker 1: The Institute of International Finance. They do a great job 101 00:05:24,000 --> 00:05:26,560 Speaker 1: of tracking flows to e M. You did see an 102 00:05:26,600 --> 00:05:29,680 Speaker 1: increase in the fourth quarter of last year, but I 103 00:05:29,680 --> 00:05:32,320 Speaker 1: mean it's it's barely a wrinkle in the water. So 104 00:05:32,800 --> 00:05:36,840 Speaker 1: maybe people are saying they're feeling optimistic about emerging markets. Frankly, 105 00:05:36,880 --> 00:05:38,679 Speaker 1: I haven't seen that in the flow days. The market 106 00:05:38,720 --> 00:05:41,640 Speaker 1: seems to be positioning for this reality, just in terms 107 00:05:41,640 --> 00:05:43,279 Speaker 1: of price. I mean, we're up seven and a half 108 00:05:43,279 --> 00:05:46,200 Speaker 1: percent on the Shankai come through en. We're on for 109 00:05:46,240 --> 00:05:48,960 Speaker 1: another week of games for Chinese equities. Gabby, I just 110 00:05:49,000 --> 00:05:50,760 Speaker 1: get the fitting in the market is already behind your 111 00:05:50,760 --> 00:05:54,200 Speaker 1: point of view. The market is already invested to capture 112 00:05:54,279 --> 00:05:57,400 Speaker 1: upside once China stabilizes, and I think the real fear 113 00:05:57,480 --> 00:05:59,000 Speaker 1: and I get a lot of messages about this on 114 00:05:59,040 --> 00:06:01,279 Speaker 1: any given day. Now what happens if we get a 115 00:06:01,320 --> 00:06:06,240 Speaker 1: trade deal and the economy still doesn't stabilize. So, yes, 116 00:06:06,279 --> 00:06:09,159 Speaker 1: we're up seven percent in emerging markets this year, but 117 00:06:09,240 --> 00:06:12,320 Speaker 1: that's after we tanked fifteen percent last year, right, So 118 00:06:12,400 --> 00:06:15,119 Speaker 1: when we look at valuations in e M, still below 119 00:06:15,160 --> 00:06:17,320 Speaker 1: average on a price to book ratio, which is our 120 00:06:17,360 --> 00:06:21,320 Speaker 1: favorite valuation metric. When we look at emerging markets earnings estimates, 121 00:06:21,320 --> 00:06:24,400 Speaker 1: they've been downgraded by seven percent in two months, so 122 00:06:24,520 --> 00:06:29,680 Speaker 1: still very low bar there for earnings, especially in China, Korea, Taiwan. 123 00:06:30,200 --> 00:06:32,760 Speaker 1: Um So, No, I don't think that e M story 124 00:06:32,800 --> 00:06:35,320 Speaker 1: is overplayed, and I think it has further room to go. 125 00:06:35,520 --> 00:06:38,480 Speaker 1: How much is the M e M story uh contingent 126 00:06:38,640 --> 00:06:42,279 Speaker 1: on the dollar continuing to weaken or not strengthening further here, 127 00:06:42,520 --> 00:06:45,720 Speaker 1: that's a really crucial point. It's e M has always 128 00:06:45,720 --> 00:06:48,800 Speaker 1: been very, very highly correlated to dollar moves, not as 129 00:06:48,880 --> 00:06:51,039 Speaker 1: much as in the past because it is less commodity 130 00:06:51,080 --> 00:06:53,880 Speaker 1: focus now, but there is still a strong correlation of 131 00:06:53,920 --> 00:06:56,960 Speaker 1: about zero point seven. Um So, it very much needs 132 00:06:56,960 --> 00:07:01,080 Speaker 1: the dollar to weekend. And I'm somewhat can sarned that 133 00:07:01,200 --> 00:07:04,279 Speaker 1: the dollar has started to strengthen again. Um So, to 134 00:07:04,440 --> 00:07:07,159 Speaker 1: be fair, that's a wrinkle in this positive story that 135 00:07:07,200 --> 00:07:10,480 Speaker 1: we've been discussing. Um I think for em the dollar 136 00:07:10,640 --> 00:07:14,160 Speaker 1: very much trades on growth differentials versus interest rate differentials. 137 00:07:14,160 --> 00:07:16,640 Speaker 1: That's more of a developed market story. Um So. Again, 138 00:07:16,720 --> 00:07:18,760 Speaker 1: going back to that point, if we need to see 139 00:07:18,800 --> 00:07:21,520 Speaker 1: the data stabilized in China, which would get the rest 140 00:07:21,520 --> 00:07:23,360 Speaker 1: of em going well, Lisa, you mentioned the Bank of 141 00:07:23,440 --> 00:07:26,480 Speaker 1: American Mary Lynch Fund Manager survey. The interesting thing about 142 00:07:26,520 --> 00:07:28,680 Speaker 1: it wasn't just the number one most crowded trade, It 143 00:07:28,720 --> 00:07:30,680 Speaker 1: was the number two most crowded traits. The number one 144 00:07:30,720 --> 00:07:33,920 Speaker 1: was long EM. Number two was long the US dollar. 145 00:07:34,160 --> 00:07:37,800 Speaker 1: There's some tension between number one and two. The market 146 00:07:37,840 --> 00:07:41,440 Speaker 1: has positioned for a stronger dollar. It's positioned long EM. 147 00:07:42,000 --> 00:07:45,440 Speaker 1: How of those two things reconcile. No, those are contradictory ideas. 148 00:07:46,640 --> 00:07:50,840 Speaker 1: Very much needs the dollar to weekend. It cannot outperform 149 00:07:50,920 --> 00:07:53,880 Speaker 1: if the dollar is strengthening. Gabby sends us great to 150 00:07:53,880 --> 00:07:57,120 Speaker 1: have you with us JP Morgan Asset Management, Global Market Strategists. 151 00:07:57,280 --> 00:07:59,760 Speaker 1: So the two most crowded trades in the market, according 152 00:07:59,800 --> 00:08:02,680 Speaker 1: to this of contradictory ideas, and most people would agree 153 00:08:02,680 --> 00:08:04,680 Speaker 1: with Gappy. That just makes sense. I just wont to 154 00:08:04,720 --> 00:08:06,520 Speaker 1: how those two traits are going to reconcile in the 155 00:08:06,600 --> 00:08:09,000 Speaker 1: coming months. It shows me just how much confusion there 156 00:08:09,040 --> 00:08:11,960 Speaker 1: is out there. I mean, honestly, right now, uncertainty is 157 00:08:11,960 --> 00:08:14,040 Speaker 1: sort of the key word. You hear sort of a 158 00:08:14,080 --> 00:08:16,720 Speaker 1: bell go off any time anyone says uncertainty, it's saying, 159 00:08:16,760 --> 00:08:18,600 Speaker 1: you know, basically, we don't have conviction because it's really 160 00:08:18,640 --> 00:08:20,440 Speaker 1: hard to know what's going to happen. So who knows. 161 00:08:20,600 --> 00:08:22,720 Speaker 1: Isn't it just a nature of financial markets that there 162 00:08:22,800 --> 00:08:25,320 Speaker 1: is always something to worry about? No, I actually think 163 00:08:25,360 --> 00:08:26,960 Speaker 1: that this is a change. I mean, yes, of course, 164 00:08:26,960 --> 00:08:28,960 Speaker 1: there's always something to worry about. But I think that 165 00:08:29,000 --> 00:08:30,920 Speaker 1: for a number of years there was a don't fight 166 00:08:30,960 --> 00:08:33,560 Speaker 1: the Fed, don't fight the central banks kind of mantra, 167 00:08:33,840 --> 00:08:36,520 Speaker 1: and if people went along with that, they won. And 168 00:08:36,559 --> 00:08:38,840 Speaker 1: I think that there is not the same macro story anymore. 169 00:08:39,080 --> 00:08:42,480 Speaker 1: So essentially, what you're saying is the fedist backed away 170 00:08:42,640 --> 00:08:45,679 Speaker 1: and that is sufficient. That is used to be sufficient 171 00:08:45,720 --> 00:08:48,360 Speaker 1: to stabilize growth and stabilize risk, But now that's just 172 00:08:48,360 --> 00:08:50,880 Speaker 1: the prerequisite and no longer sufficient. No, you're taking the 173 00:08:50,920 --> 00:08:53,160 Speaker 1: morphine away. People actually have to price the market, they 174 00:08:53,200 --> 00:08:55,040 Speaker 1: actually have to figure out You think that's what we're 175 00:08:55,040 --> 00:08:57,200 Speaker 1: doing now. I mean a little bit more than we 176 00:08:57,320 --> 00:09:01,800 Speaker 1: used to. Months of rough market dates and the federals 177 00:09:01,800 --> 00:09:04,719 Speaker 1: of does a full one eight right? I mean, we 178 00:09:04,760 --> 00:09:07,160 Speaker 1: could talk about, you know, whether the morphine actually has 179 00:09:07,200 --> 00:09:09,000 Speaker 1: been pulled away, but that's like guess a conversation for 180 00:09:09,040 --> 00:09:11,640 Speaker 1: another time. I thing, we're still loaded up. We shot 181 00:09:11,679 --> 00:09:14,560 Speaker 1: some more thing worldwide. We can talk about that through this. 182 00:09:14,720 --> 00:09:28,280 Speaker 1: Let's talk about our morphine addiction. Let's not I wanted 183 00:09:28,240 --> 00:09:30,920 Speaker 1: to really dig into the dollar because this seems to 184 00:09:30,920 --> 00:09:33,280 Speaker 1: be one of the biggest conundrums of twenty nineteen. Is 185 00:09:33,320 --> 00:09:36,280 Speaker 1: it going to strengthen or weaken? Joining us now is 186 00:09:36,280 --> 00:09:38,320 Speaker 1: Bip and Rye. He is c IBC head of North 187 00:09:38,360 --> 00:09:41,800 Speaker 1: American Foreign Exchange Strategy, Viben. Thank you so much for 188 00:09:41,840 --> 00:09:44,760 Speaker 1: being with us. Really, this is an area that I 189 00:09:45,280 --> 00:09:47,960 Speaker 1: hear complete lack of conviction on. You've got some people 190 00:09:48,000 --> 00:09:49,839 Speaker 1: saying the dollar is going to weaken because of a 191 00:09:49,880 --> 00:09:51,800 Speaker 1: devilish fed. You have other people saying it's going to 192 00:09:51,800 --> 00:09:54,120 Speaker 1: strengthen because everybody else is going to be more dovish. 193 00:09:54,360 --> 00:09:57,760 Speaker 1: Where do you fall on this, Well, we're on the 194 00:09:57,760 --> 00:10:00,520 Speaker 1: side of the former camp. We do think that's rategically 195 00:10:00,559 --> 00:10:03,559 Speaker 1: the dollar is overvalued by some twelve to fifteen percent, 196 00:10:03,840 --> 00:10:06,240 Speaker 1: and over the longer term, the trend is going to 197 00:10:06,280 --> 00:10:08,600 Speaker 1: be for the dollar to weekend, and of course that's 198 00:10:08,720 --> 00:10:11,680 Speaker 1: reflective of like you said, it dash fed and also 199 00:10:11,760 --> 00:10:15,760 Speaker 1: because of you we we would term is irresponsible fiscal 200 00:10:15,800 --> 00:10:19,720 Speaker 1: policy and as a cyclical deceleration in the U. S. Economy. Now, 201 00:10:19,880 --> 00:10:22,280 Speaker 1: of course, you know tactically that hasn't really born fruit, 202 00:10:22,360 --> 00:10:24,960 Speaker 1: and our view that's because really there's there's a lack 203 00:10:25,000 --> 00:10:27,960 Speaker 1: of alternatives out there worth investing in when you when 204 00:10:27,960 --> 00:10:31,160 Speaker 1: you judge from a fundamental perspective, and that's really what's 205 00:10:31,200 --> 00:10:33,480 Speaker 1: kept the dollar inflow in view for the first month 206 00:10:33,600 --> 00:10:36,840 Speaker 1: or so in two. The argument over the fiscal story 207 00:10:36,960 --> 00:10:39,000 Speaker 1: for foreign exchange that I've heard a couple of times, 208 00:10:39,360 --> 00:10:41,080 Speaker 1: many times over the last couple of years is that 209 00:10:41,120 --> 00:10:43,000 Speaker 1: the fiscal deficit is going to get so big to 210 00:10:43,120 --> 00:10:46,000 Speaker 1: fund it, either you need much high treasury yields or 211 00:10:46,040 --> 00:10:48,520 Speaker 1: you need a much weaker currency. Been why does that 212 00:10:48,559 --> 00:10:53,079 Speaker 1: story play out anytime soon? That's that's probably going to 213 00:10:53,120 --> 00:10:55,040 Speaker 1: be something again, and that's going to weigh on the 214 00:10:55,080 --> 00:10:58,160 Speaker 1: dollar more longer term as opposed to anything short term. 215 00:10:58,240 --> 00:11:02,120 Speaker 1: And again, when we look at deficits or even sorry, 216 00:11:02,120 --> 00:11:04,319 Speaker 1: fiscal deficits versus the dollar, that tends to be a 217 00:11:04,400 --> 00:11:07,120 Speaker 1: fard of five quarter lag. And again you know that 218 00:11:07,280 --> 00:11:09,880 Speaker 1: that was something that was implemented last year, so we 219 00:11:10,200 --> 00:11:12,480 Speaker 1: still expected to be more of a late two eighteen 220 00:11:12,480 --> 00:11:15,720 Speaker 1: early story. And again, you know, the key question to 221 00:11:15,760 --> 00:11:18,360 Speaker 1: ask is that you know you you run the risk 222 00:11:18,400 --> 00:11:21,400 Speaker 1: of running a deficit, a large deficit. Now, what happens 223 00:11:21,400 --> 00:11:24,280 Speaker 1: when the US encounters a recession? Does that depthit blow 224 00:11:24,280 --> 00:11:27,040 Speaker 1: out to say, to nine percent of GDP? We do 225 00:11:27,120 --> 00:11:28,559 Speaker 1: think that that's going to be a little too much 226 00:11:28,559 --> 00:11:31,000 Speaker 1: for foreign investors sy stomach. So you think the reaction 227 00:11:31,080 --> 00:11:34,760 Speaker 1: function of investors, the central bias of investors that has 228 00:11:34,840 --> 00:11:36,720 Speaker 1: existed for a long long time now is going to 229 00:11:36,800 --> 00:11:38,839 Speaker 1: change in the next down term because typically BIP and 230 00:11:38,920 --> 00:11:41,560 Speaker 1: what we used to is if the global economy turns 231 00:11:41,559 --> 00:11:44,720 Speaker 1: to lower, you buy two things, You buy treasuries and 232 00:11:44,760 --> 00:11:47,120 Speaker 1: you buy the US dollar. You think that changes next 233 00:11:47,120 --> 00:11:50,640 Speaker 1: time around. We think that there is a good chance 234 00:11:50,640 --> 00:11:53,959 Speaker 1: because again with the tax cuts last year, what ended 235 00:11:54,000 --> 00:11:57,760 Speaker 1: up happening was a cyclical decoupling of how the year 236 00:11:57,880 --> 00:12:01,559 Speaker 1: zone economic picture it grows, and also how the Japanese 237 00:12:01,600 --> 00:12:03,760 Speaker 1: economic picture goes. And also now with the U s 238 00:12:03,800 --> 00:12:07,280 Speaker 1: economy going undergoing a downturn, I think what's been underappreciated 239 00:12:07,280 --> 00:12:09,640 Speaker 1: is that we're just entering the US cyclical downturn now, 240 00:12:09,640 --> 00:12:11,960 Speaker 1: whereas the euro Zone, Japan have already been going through it. 241 00:12:12,240 --> 00:12:14,160 Speaker 1: So we would expect the years on the Japanese economies 242 00:12:14,200 --> 00:12:17,480 Speaker 1: to come out of this cyclical downturn much sooner than 243 00:12:17,480 --> 00:12:19,640 Speaker 1: the US will. And in our mind, you know, the 244 00:12:19,679 --> 00:12:23,960 Speaker 1: investors will punish the the US fiscal situation because of that. Again, 245 00:12:24,280 --> 00:12:26,000 Speaker 1: you know, that's not a it's not a slide against 246 00:12:26,000 --> 00:12:28,079 Speaker 1: the U S dollars role as a reserve currency. At 247 00:12:28,080 --> 00:12:30,040 Speaker 1: this point, we do think that's much more of a 248 00:12:30,080 --> 00:12:32,280 Speaker 1: longer term theme as opposed to here now. But we 249 00:12:32,320 --> 00:12:33,640 Speaker 1: do think it's going to be more of a story 250 00:12:33,640 --> 00:12:36,800 Speaker 1: about the the decoupling of the cyclical pictures and some 251 00:12:36,840 --> 00:12:39,120 Speaker 1: of the other larger economies in the US. It's so 252 00:12:39,200 --> 00:12:41,760 Speaker 1: interesting because we do talk about the deepening deficit in 253 00:12:41,760 --> 00:12:44,240 Speaker 1: the US, and we talk about, uh, some of the 254 00:12:44,360 --> 00:12:47,480 Speaker 1: concerns around the dollar as a reserve currency, and yet 255 00:12:47,760 --> 00:12:51,960 Speaker 1: there is zero evidence, certainly with rates that people do 256 00:12:52,200 --> 00:12:54,679 Speaker 1: punish the US for borrowing a lot of money. I mean, 257 00:12:54,679 --> 00:12:57,080 Speaker 1: you see people just flooding back to treasuries. So I 258 00:12:57,080 --> 00:12:59,960 Speaker 1: guess where where have we seen any evidence that there 259 00:13:00,120 --> 00:13:04,760 Speaker 1: is any recognition by investors that the fiscal backdrop is weakening? 260 00:13:06,200 --> 00:13:08,280 Speaker 1: You haven't seen it yet. No, that that that's something 261 00:13:08,320 --> 00:13:10,360 Speaker 1: that's going to take a longer time to play out. 262 00:13:10,440 --> 00:13:13,040 Speaker 1: And and again you know you're right. I mean, where's liquidity, 263 00:13:13,040 --> 00:13:14,959 Speaker 1: where's the yield? Right now, it's in the US dollar, 264 00:13:15,600 --> 00:13:17,800 Speaker 1: And that's part and parcel for the reason why the 265 00:13:17,840 --> 00:13:20,920 Speaker 1: US dollars still remained somewhat firm. But again we caution 266 00:13:21,040 --> 00:13:24,600 Speaker 1: that the investors to remember that which which economies are 267 00:13:24,640 --> 00:13:26,680 Speaker 1: running the current account surpluses and where are we seeing 268 00:13:26,720 --> 00:13:29,760 Speaker 1: the portfolio investment really flow out of. And that's of 269 00:13:29,840 --> 00:13:32,840 Speaker 1: course your surplus economies like the Arizone in Japan. So 270 00:13:32,880 --> 00:13:34,840 Speaker 1: what happens when we start to see domestic yields and 271 00:13:34,880 --> 00:13:37,960 Speaker 1: those economy struck to rise when our economies are out 272 00:13:37,960 --> 00:13:39,800 Speaker 1: of from in the US, you would expect to see 273 00:13:39,840 --> 00:13:42,280 Speaker 1: some reversal of portfolio flows that we've seen over the 274 00:13:42,360 --> 00:13:44,880 Speaker 1: last couple of years. So that would be movement out 275 00:13:44,920 --> 00:13:47,319 Speaker 1: of the U s economy and out of US securities 276 00:13:47,360 --> 00:13:52,040 Speaker 1: and back into potentially Japanese, your European or other surplus economies. 277 00:13:52,040 --> 00:13:54,280 Speaker 1: And again that's quite a way on the dollar to 278 00:13:54,320 --> 00:13:56,040 Speaker 1: a certain extent, I want to get your view on 279 00:13:56,080 --> 00:13:58,160 Speaker 1: the prospect for a trade deal. The headlines have dropped 280 00:13:58,160 --> 00:14:00,720 Speaker 1: across the Bloomberg in the last or so and one 281 00:14:00,760 --> 00:14:03,080 Speaker 1: of the headlines that jumped out to me amidst all 282 00:14:03,120 --> 00:14:05,800 Speaker 1: the happy talk about progresses this line right here. The 283 00:14:05,880 --> 00:14:10,360 Speaker 1: United States is focused on technology transfer and currency in 284 00:14:10,400 --> 00:14:12,760 Speaker 1: these talks. But then, how is the currency going to 285 00:14:12,760 --> 00:14:17,360 Speaker 1: be a feature of these negotiations? Well, I mean, there 286 00:14:17,440 --> 00:14:20,000 Speaker 1: is the risk that the Chinese could weaponize the rem 287 00:14:20,040 --> 00:14:23,360 Speaker 1: and b and and and let it depreciate even further. 288 00:14:23,400 --> 00:14:25,320 Speaker 1: And again they if I were the US, I be 289 00:14:25,360 --> 00:14:27,840 Speaker 1: somewhat concerned about that, given the implications for trade, and 290 00:14:27,880 --> 00:14:30,920 Speaker 1: of course we've seen ratcheting up of rhetoric from the 291 00:14:30,920 --> 00:14:33,760 Speaker 1: Trump administration on that. But you know, at the same 292 00:14:33,800 --> 00:14:36,040 Speaker 1: time is the end goal for the Chinese is still 293 00:14:36,040 --> 00:14:38,440 Speaker 1: to liberalize the currency. The only issue is they can't 294 00:14:38,480 --> 00:14:40,480 Speaker 1: do it that quickly because if you were to too quickly, 295 00:14:40,680 --> 00:14:42,920 Speaker 1: you would expect to see massive capital outflows from the 296 00:14:42,960 --> 00:14:45,160 Speaker 1: Chinese economy. Then you get a weaker ribbon be anyway, 297 00:14:45,480 --> 00:14:47,320 Speaker 1: So again, I mean, it's it's kind of a fine 298 00:14:47,320 --> 00:14:50,920 Speaker 1: balancing act for the Chinese to do that. And again, 299 00:14:51,000 --> 00:14:54,160 Speaker 1: the focus on the currency, in our view is still 300 00:14:54,240 --> 00:14:56,840 Speaker 1: very much an important part of the Trump platform when 301 00:14:56,840 --> 00:14:59,360 Speaker 1: it comes to China. But I would argue that the 302 00:14:59,360 --> 00:15:02,120 Speaker 1: technology answer is probably, at least in the near term, 303 00:15:02,160 --> 00:15:04,000 Speaker 1: the more important feature to keep an eye on on 304 00:15:04,080 --> 00:15:05,880 Speaker 1: the currency specifically, though, and then we can get too 305 00:15:05,880 --> 00:15:09,200 Speaker 1: technology transfer just quickly. I find it difficult to see 306 00:15:09,200 --> 00:15:11,080 Speaker 1: how we can push for the Chinese to liberalize the 307 00:15:11,080 --> 00:15:13,040 Speaker 1: currency because, as you say, it will end up with 308 00:15:13,040 --> 00:15:15,160 Speaker 1: a weaker Chinese currency. So what do we effectively asking 309 00:15:15,200 --> 00:15:18,960 Speaker 1: the Chinese to do not to liberalize the currency. I 310 00:15:19,000 --> 00:15:23,480 Speaker 1: think there's still a misplaced, misplace rational among the Trump 311 00:15:23,520 --> 00:15:26,000 Speaker 1: administration that the Chinese are managing the currency to be 312 00:15:26,680 --> 00:15:30,000 Speaker 1: weaker than it really needs to be. In the review, again, 313 00:15:30,040 --> 00:15:32,640 Speaker 1: the current accounts are plus a shrunk over several years, 314 00:15:33,240 --> 00:15:35,680 Speaker 1: and that again alludes to the fact that, you know, 315 00:15:35,720 --> 00:15:39,080 Speaker 1: the currency needs to be somewhat weaker. So again, you know, 316 00:15:39,080 --> 00:15:41,320 Speaker 1: we would chalk it up to somewhat of a misplaced 317 00:15:41,400 --> 00:15:43,880 Speaker 1: view amongst the Trump administration in regards to what the 318 00:15:43,960 --> 00:15:46,800 Speaker 1: Chinese are doing with the currency. It's quite the opposite 319 00:15:46,800 --> 00:15:48,200 Speaker 1: of what we had in the middle part of the 320 00:15:48,280 --> 00:15:50,880 Speaker 1: last decade, where you could make a reagionably sound argument 321 00:15:50,880 --> 00:15:54,240 Speaker 1: that the Chinese we're keeping the currency artificially weak. We 322 00:15:54,280 --> 00:15:56,640 Speaker 1: don't think that's the case anymore. In fact that we 323 00:15:56,920 --> 00:15:59,080 Speaker 1: do think that the Trump administration needs to uptake their 324 00:15:59,120 --> 00:16:01,880 Speaker 1: view on and the Chinese currency and how they're managing it. 325 00:16:02,400 --> 00:16:04,800 Speaker 1: Bib and rye of C I b C. What is 326 00:16:04,800 --> 00:16:08,760 Speaker 1: your highest conviction trade this year? Well, we're some where 327 00:16:08,800 --> 00:16:11,600 Speaker 1: we are bullish on surplus currency such as the Japanese 328 00:16:11,640 --> 00:16:13,840 Speaker 1: yen and UH and the Swiss frank to a degree. 329 00:16:13,840 --> 00:16:16,560 Speaker 1: And again those aren't yield plays naturally, they're more of 330 00:16:16,600 --> 00:16:19,360 Speaker 1: our an expension of our view that liquidity will continue 331 00:16:19,360 --> 00:16:21,320 Speaker 1: to wane and we will be and trading more or 332 00:16:21,400 --> 00:16:25,000 Speaker 1: less of a risk of the environment going forward. We 333 00:16:25,080 --> 00:16:27,160 Speaker 1: do think that this equity rally was overdue, given the 334 00:16:27,200 --> 00:16:30,000 Speaker 1: fact that we we overshot in Q four. But but 335 00:16:30,120 --> 00:16:32,680 Speaker 1: going forward, I mean, given the fact that liquidity is slowing, 336 00:16:32,680 --> 00:16:35,600 Speaker 1: and you can draw a reasonably sounded relationship between the 337 00:16:35,640 --> 00:16:39,720 Speaker 1: flow of liquidity UH and both process of volatility, meaning 338 00:16:39,720 --> 00:16:42,320 Speaker 1: that you know, liquids liquidity does decline. That tends to 339 00:16:42,440 --> 00:16:45,120 Speaker 1: lead to a lot more process of volatility, particularly in 340 00:16:45,160 --> 00:16:47,560 Speaker 1: the f X space. So we expect the Japanese and 341 00:16:47,720 --> 00:16:49,880 Speaker 1: the Swiss frank to have perform in that environment versus 342 00:16:49,920 --> 00:16:54,400 Speaker 1: the US dollar. We're also not entirely optimistic on commodity currencies, 343 00:16:54,400 --> 00:16:57,520 Speaker 1: including the Aussie and and and the kiwi uh weed, 344 00:16:57,520 --> 00:17:00,440 Speaker 1: more or less expect them time to perform. And again, 345 00:17:01,000 --> 00:17:03,400 Speaker 1: you know, if we are looking at the Eurozone, we're 346 00:17:03,440 --> 00:17:05,560 Speaker 1: more or less waiting until the political water has become 347 00:17:06,000 --> 00:17:09,760 Speaker 1: much less uh much much less muddier. Of course, we've 348 00:17:09,760 --> 00:17:12,120 Speaker 1: got the parliamentary elections in May, and of course we've 349 00:17:12,160 --> 00:17:14,760 Speaker 1: got the Spanish election has just been called for on 350 00:17:14,840 --> 00:17:19,560 Speaker 1: a and then you've got the entire the break situation, 351 00:17:19,640 --> 00:17:22,160 Speaker 1: whether or not that represents a shock to the euro Zone. However, 352 00:17:22,280 --> 00:17:26,119 Speaker 1: we remained somewhat optimistic on the Scandinavian currencies, including the 353 00:17:26,119 --> 00:17:28,800 Speaker 1: Swedish chronic and then central bank there's is looking set 354 00:17:28,800 --> 00:17:31,280 Speaker 1: to raise rates going forward. So again it's really a 355 00:17:31,280 --> 00:17:33,639 Speaker 1: story about surplus currencies in our mind going forward, and 356 00:17:33,680 --> 00:17:37,000 Speaker 1: we think that's about perhaps the safest that to play 357 00:17:37,040 --> 00:17:41,280 Speaker 1: in the in the effex markets. So safety above all else. 358 00:17:41,320 --> 00:17:42,919 Speaker 1: Pip and Rye, thank you so much for being with us. 359 00:17:42,920 --> 00:17:45,520 Speaker 1: Pip and Rye, c IBC, head of North American Foreign 360 00:17:45,520 --> 00:17:58,960 Speaker 1: Exchange Strategy. Well, talking about the trade story. Uh, let's 361 00:17:59,000 --> 00:18:01,360 Speaker 1: go to Washington, d C. And talk about what's going 362 00:18:01,359 --> 00:18:04,199 Speaker 1: on there. Let's bring in Isaac Boltanski covers point, Director 363 00:18:04,240 --> 00:18:08,359 Speaker 1: of Policy Research. Isaac, let's start with trade, since that 364 00:18:08,560 --> 00:18:12,320 Speaker 1: is what's moving markets more than staving off another government shutdown. 365 00:18:12,760 --> 00:18:14,840 Speaker 1: Do you think that this time we're actually going to 366 00:18:14,880 --> 00:18:17,399 Speaker 1: get some sort of agreement? Is the happy talk out 367 00:18:17,440 --> 00:18:21,600 Speaker 1: of Washington, d C. And Beijing different this time? Good morning. 368 00:18:21,800 --> 00:18:25,040 Speaker 1: I think this time is different in the both sides 369 00:18:25,359 --> 00:18:29,399 Speaker 1: as you were just discussing, I think are incentivized to 370 00:18:29,560 --> 00:18:33,000 Speaker 1: find some way to Yes. It's still unclear what exactly 371 00:18:33,040 --> 00:18:35,280 Speaker 1: that's going to look like. It's still unclear what the 372 00:18:35,359 --> 00:18:38,800 Speaker 1: enforcement mechanisms will be, which is perhaps the most important 373 00:18:38,800 --> 00:18:41,240 Speaker 1: part of this whole story. But I think that pressures 374 00:18:41,320 --> 00:18:43,720 Speaker 1: on both sides of the Pacific have led us to 375 00:18:43,720 --> 00:18:47,840 Speaker 1: where we are. We have continued negotiations, which is always positive, 376 00:18:48,119 --> 00:18:50,840 Speaker 1: and the President made the biggest point this week, which 377 00:18:51,000 --> 00:18:55,000 Speaker 1: was at least signaling a willingness to push the next 378 00:18:55,040 --> 00:18:58,640 Speaker 1: deadline further if there is progress. And so I think 379 00:18:58,640 --> 00:19:00,800 Speaker 1: this happy talk is different and that it's going to 380 00:19:00,880 --> 00:19:03,560 Speaker 1: at least give us another punt. I would just like 381 00:19:03,640 --> 00:19:07,159 Speaker 1: to also say that happy Talk has a trademark on 382 00:19:07,240 --> 00:19:11,200 Speaker 1: it from Jonathan Farroh, who has absolutely coined the term 383 00:19:11,240 --> 00:19:13,800 Speaker 1: so far, just because I abused it this week doesn't 384 00:19:13,840 --> 00:19:16,840 Speaker 1: mean it's mine. We're gonna give it to you. I 385 00:19:16,840 --> 00:19:19,720 Speaker 1: do have to wonder Kyle Bass of Having Capital Management 386 00:19:19,720 --> 00:19:22,639 Speaker 1: writing a Bloomberg opinion piece in the past few weeks 387 00:19:22,640 --> 00:19:26,560 Speaker 1: talking about how President Trump should double down and ask 388 00:19:26,680 --> 00:19:30,280 Speaker 1: for more from China based on the happy Talk trademark 389 00:19:30,800 --> 00:19:34,040 Speaker 1: registered mark. Based on what we're hearing, do you think 390 00:19:34,080 --> 00:19:36,679 Speaker 1: that President Trump will take a hard enough line on 391 00:19:36,880 --> 00:19:40,280 Speaker 1: China and solidify ideal that is appropriate for what some 392 00:19:40,320 --> 00:19:42,919 Speaker 1: of the concerns are well. This has been one of 393 00:19:42,920 --> 00:19:48,000 Speaker 1: the interesting dynamics the battles within the Trump administration itself. Um. 394 00:19:48,000 --> 00:19:50,880 Speaker 1: And whether that's blight heiser versus minution or you can 395 00:19:50,880 --> 00:19:53,040 Speaker 1: go straight on down the line. I think that what 396 00:19:53,080 --> 00:19:55,920 Speaker 1: we're going to get is a document that broadly outlines 397 00:19:56,280 --> 00:19:58,360 Speaker 1: all of the goals that we've been talking about now 398 00:19:58,400 --> 00:20:01,520 Speaker 1: for the past year almost um. But in terms of 399 00:20:01,640 --> 00:20:04,280 Speaker 1: if it's enough, I don't think there will ever be enough. 400 00:20:04,520 --> 00:20:06,920 Speaker 1: It will simply be a few steps in the right 401 00:20:07,040 --> 00:20:11,639 Speaker 1: direction towards opening up China's markets towards um narrowing that 402 00:20:11,720 --> 00:20:16,000 Speaker 1: trade gap and hopefully providing again this enforcement mechanism where 403 00:20:16,520 --> 00:20:19,359 Speaker 1: this time can indeed be different as long as we 404 00:20:19,400 --> 00:20:22,440 Speaker 1: are able to get some clarity into what those promises 405 00:20:22,480 --> 00:20:26,280 Speaker 1: look like and whether those promises that were made are kept. Isaac, 406 00:20:26,320 --> 00:20:28,840 Speaker 1: I'm really fascinated to get your insight on on how 407 00:20:28,880 --> 00:20:31,080 Speaker 1: you think this story is playing out in Washington, d C. 408 00:20:31,720 --> 00:20:36,040 Speaker 1: And that's Amazon abandoning Long Island City before even arrives. 409 00:20:36,520 --> 00:20:39,520 Speaker 1: There seems to be more broadly a backlash against big 410 00:20:39,560 --> 00:20:43,400 Speaker 1: business on the left of American politics right now, increasingly 411 00:20:43,480 --> 00:20:46,240 Speaker 1: so over the last year or so. What's your read 412 00:20:46,240 --> 00:20:49,159 Speaker 1: on how you think this is going to play out? Sure, well, 413 00:20:49,160 --> 00:20:51,080 Speaker 1: I can tell you that the the read from d 414 00:20:51,240 --> 00:20:54,760 Speaker 1: C can sort of be bucketed into two separate reactions. 415 00:20:55,080 --> 00:20:57,640 Speaker 1: The first is worry that traffic here in the DC 416 00:20:57,800 --> 00:21:00,919 Speaker 1: metropolitan area will get much much worse because of it, 417 00:21:01,119 --> 00:21:03,719 Speaker 1: and the second is simply that I think this is 418 00:21:03,920 --> 00:21:07,840 Speaker 1: one more indication, just one more data point of the 419 00:21:08,280 --> 00:21:13,400 Speaker 1: just herculean battle between governments and these these large tech 420 00:21:13,480 --> 00:21:17,280 Speaker 1: companies that are operating in some ways like clasi governmental 421 00:21:18,200 --> 00:21:21,440 Speaker 1: institutions and so It's not just going to happen here. 422 00:21:21,680 --> 00:21:23,520 Speaker 1: We're going to see it in the halls of Congress 423 00:21:23,520 --> 00:21:26,359 Speaker 1: with hearings in big tech. We're seeing in California and 424 00:21:26,400 --> 00:21:29,400 Speaker 1: even Germany with some of the taxation proposals there. This 425 00:21:29,520 --> 00:21:32,600 Speaker 1: is just one part of a much broader battle between 426 00:21:33,040 --> 00:21:37,760 Speaker 1: governments trying to reassert themselves and large tech companies that 427 00:21:37,840 --> 00:21:42,679 Speaker 1: I think have grown almost unabated over the past decade. Isaac, 428 00:21:42,840 --> 00:21:45,960 Speaker 1: you're saying that you worry about traffic increasing. I'm surprised 429 00:21:45,960 --> 00:21:47,440 Speaker 1: that you say that. I would think that there would 430 00:21:47,440 --> 00:21:50,679 Speaker 1: be a collective cheer uh in Arlington, Virginia and the 431 00:21:50,720 --> 00:21:54,600 Speaker 1: Washington D C. Metro area because it one, it was 432 00:21:54,640 --> 00:21:56,639 Speaker 1: the number one headquarter. It's not going to be split 433 00:21:56,680 --> 00:21:59,600 Speaker 1: between two. I'm surprised to hear. Is there more pushback 434 00:21:59,640 --> 00:22:04,320 Speaker 1: to you in the region against the headquarters coming. No, Look, 435 00:22:04,359 --> 00:22:06,320 Speaker 1: that was that was largely tongue in cheek. I think 436 00:22:06,359 --> 00:22:09,320 Speaker 1: that the reality is that the DC just worried about 437 00:22:09,320 --> 00:22:12,760 Speaker 1: senators getting around the city. That's so sweet of you 438 00:22:14,240 --> 00:22:16,800 Speaker 1: carry on. I think, yeah, No, Look, I think DC 439 00:22:17,000 --> 00:22:18,480 Speaker 1: is happy to get it, and they will be interesting 440 00:22:18,520 --> 00:22:20,920 Speaker 1: to see how the rest goes. But the bigger. The 441 00:22:20,960 --> 00:22:22,680 Speaker 1: bigger battle here, I think is going to be in 442 00:22:22,720 --> 00:22:25,800 Speaker 1: the halls of Congress because what we saw here was 443 00:22:25,920 --> 00:22:28,960 Speaker 1: the progressive left in some ways, and this we've talked 444 00:22:29,000 --> 00:22:32,200 Speaker 1: about before. The herbal Tea Party got a big win 445 00:22:32,320 --> 00:22:37,200 Speaker 1: here and representative of causeyor test is really I think 446 00:22:37,240 --> 00:22:39,520 Speaker 1: the main victor. And this is something that she can 447 00:22:39,560 --> 00:22:42,239 Speaker 1: take from, you know, this battle that was just in 448 00:22:42,320 --> 00:22:45,000 Speaker 1: Queens now to the halls of Congress. But there is 449 00:22:45,000 --> 00:22:50,120 Speaker 1: a big problem here, and that's literacy around certain financial issues, Isaac, 450 00:22:50,200 --> 00:22:52,760 Speaker 1: the belief that if you take away three billion dollars 451 00:22:52,800 --> 00:22:55,520 Speaker 1: of subsidies to Amazon, that you have a parlor cash 452 00:22:55,640 --> 00:22:58,680 Speaker 1: to give away to do something else with um. Is 453 00:22:58,720 --> 00:23:01,600 Speaker 1: the Left trying to sell a pony here and given 454 00:23:01,600 --> 00:23:05,879 Speaker 1: everyone a free pony, or they just misunderstanding what is 455 00:23:05,920 --> 00:23:10,280 Speaker 1: going on. I think I think it depends member to 456 00:23:10,359 --> 00:23:13,440 Speaker 1: member UM in all honesty. But but your your point 457 00:23:13,560 --> 00:23:16,360 Speaker 1: is a fair one. And I think politicians on both 458 00:23:16,400 --> 00:23:20,000 Speaker 1: sides of the aisle have used misinformation and and and 459 00:23:20,840 --> 00:23:25,720 Speaker 1: and I think a broader um mistrust of different entities 460 00:23:25,760 --> 00:23:28,840 Speaker 1: in society to further their cause. And what we have 461 00:23:28,960 --> 00:23:32,760 Speaker 1: here is slaying on a mistrust of big business and 462 00:23:32,800 --> 00:23:36,119 Speaker 1: big tech that is really only just beginning. I actually 463 00:23:36,160 --> 00:23:40,520 Speaker 1: am surprised that you think, uh, that Alexandro Casio Criteles 464 00:23:40,560 --> 00:23:42,480 Speaker 1: can bring this to the halls of Congress as a win. 465 00:23:43,080 --> 00:23:46,040 Speaker 1: I actually that was not my reaction to this. Necessarily, 466 00:23:46,040 --> 00:23:48,240 Speaker 1: there is a lot of backlash to this. You think 467 00:23:48,240 --> 00:23:49,800 Speaker 1: this is going to be viewed as a win or 468 00:23:49,880 --> 00:23:51,560 Speaker 1: do you think that this is going to weaken the 469 00:23:51,560 --> 00:23:56,280 Speaker 1: far left position? I think I think her reaction indicates 470 00:23:56,280 --> 00:23:59,280 Speaker 1: that she believes it's all in, that her supporters believe 471 00:23:59,320 --> 00:24:02,199 Speaker 1: it's to win, and I think it's one where Um 472 00:24:02,200 --> 00:24:06,359 Speaker 1: it's whether whether it longer term is positive for the city, 473 00:24:06,760 --> 00:24:08,960 Speaker 1: No one truly knows, and only time will tell. But 474 00:24:09,000 --> 00:24:11,760 Speaker 1: at the moment, I think it will be spun undeniably 475 00:24:11,800 --> 00:24:16,200 Speaker 1: as a win for uh that particular brand of progressive politics. 476 00:24:16,280 --> 00:24:18,960 Speaker 1: But it was certainly outcomes she wanted, and she can 477 00:24:19,160 --> 00:24:21,280 Speaker 1: turn around and say it was a win as far 478 00:24:21,320 --> 00:24:23,600 Speaker 1: as her objectives were concerned. But I guess the point 479 00:24:23,640 --> 00:24:25,920 Speaker 1: you're trying to make least is that the outcome isn't 480 00:24:25,920 --> 00:24:27,600 Speaker 1: going to be positive. I mean, and I think that 481 00:24:27,600 --> 00:24:29,679 Speaker 1: that's sort of a consensus across the board, is that 482 00:24:29,880 --> 00:24:32,840 Speaker 1: I mean even local politicians in New York City and 483 00:24:32,920 --> 00:24:35,639 Speaker 1: Long Island City have said off the record and on 484 00:24:35,720 --> 00:24:38,520 Speaker 1: the record they kind of were looking for more from Amazon. 485 00:24:38,560 --> 00:24:40,480 Speaker 1: They weren't looking for Amazon to just up and walk 486 00:24:40,520 --> 00:24:43,080 Speaker 1: away from the table. Yeah. The other issue as well, Isaac, 487 00:24:43,119 --> 00:24:44,439 Speaker 1: and I'd love you thought on this, it is the 488 00:24:44,440 --> 00:24:49,840 Speaker 1: battle between cities in America. It's almost been encouraged. Do 489 00:24:49,880 --> 00:24:51,600 Speaker 1: you think that's something we need to take another look 490 00:24:51,640 --> 00:24:54,960 Speaker 1: at good point? Yeah. Look, I think that we saw 491 00:24:55,080 --> 00:25:01,800 Speaker 1: during this entire bidding process a degree of disdain and 492 00:25:01,800 --> 00:25:06,359 Speaker 1: and um and I would say overall sort of discord. 493 00:25:06,600 --> 00:25:10,720 Speaker 1: That is concerning given the state of our local cities, 494 00:25:10,800 --> 00:25:15,120 Speaker 1: given the need for broader sweeping infrastructure spending and ideas 495 00:25:15,160 --> 00:25:18,200 Speaker 1: like that, and so instead of perhaps having cities battle 496 00:25:18,280 --> 00:25:21,200 Speaker 1: wants battle against one another, we should have a broader, 497 00:25:21,720 --> 00:25:25,719 Speaker 1: sweeping agenda that actually handles some of these concerning issues. 498 00:25:26,080 --> 00:25:28,560 Speaker 1: It's great to catch up with you on some really 499 00:25:28,560 --> 00:25:31,240 Speaker 1: important stories in the last couple of days. I sat Boltanski, 500 00:25:31,280 --> 00:25:33,760 Speaker 1: do you want to us from Washington Campus Point director 501 00:25:33,800 --> 00:25:36,399 Speaker 1: of Policy Research, Lisa Jonathan. I think you made a 502 00:25:36,440 --> 00:25:39,040 Speaker 1: fantastic point, which is this whole idea of cities battling 503 00:25:39,080 --> 00:25:41,360 Speaker 1: each other, whether it's for budgets, whether it's for companies 504 00:25:41,400 --> 00:25:44,200 Speaker 1: an Amazon fueled that was trying to play the game 505 00:25:44,240 --> 00:25:47,280 Speaker 1: big time, big time, and I guess that I'm wondering 506 00:25:47,320 --> 00:25:50,560 Speaker 1: when the backlash is going to come from that. I mean, ultimately, 507 00:25:50,920 --> 00:25:53,800 Speaker 1: I mean not to be al Kumbaya, but if cities benefits, 508 00:25:53,800 --> 00:25:56,600 Speaker 1: shouldn't have benefit all the cities under the same umbrella. 509 00:25:56,800 --> 00:25:59,000 Speaker 1: I don't imagine you singing, come buy on. I could 510 00:25:59,000 --> 00:26:00,960 Speaker 1: send Comby. I want to go there. I will take 511 00:26:01,000 --> 00:26:05,119 Speaker 1: your past. Tom Kaine's not here are past? Tomkin is 512 00:26:05,160 --> 00:26:08,399 Speaker 1: the lead singer and DJ alright, alright, I will let 513 00:26:08,480 --> 00:26:21,440 Speaker 1: him continue to all that. Mansel. Paul Sweeney joining me 514 00:26:21,560 --> 00:26:24,960 Speaker 1: in the office here in the Bloomberg Interactive Broker's studios. Paul, 515 00:26:25,080 --> 00:26:28,520 Speaker 1: really interesting to watch what's going on in Nigeria. It's 516 00:26:28,560 --> 00:26:32,840 Speaker 1: being called a bell weather for African democracy. That this 517 00:26:32,880 --> 00:26:36,080 Speaker 1: election has more to do and not just with Nigeria, 518 00:26:36,240 --> 00:26:40,560 Speaker 1: but the fate of democracy in the entire continent. Joining 519 00:26:40,600 --> 00:26:44,280 Speaker 1: us now to discuss Amaca Aku Eurasia Group Practice Head 520 00:26:44,400 --> 00:26:47,200 Speaker 1: for Africa. Amaca, can you just set up for people 521 00:26:47,240 --> 00:26:50,159 Speaker 1: who are not following the African elections. What are we 522 00:26:50,240 --> 00:26:55,439 Speaker 1: looking for? Why are they so crucial? Great? Great? So 523 00:26:55,720 --> 00:26:59,280 Speaker 1: this is my guys, fixed elections since it returns to 524 00:26:59,359 --> 00:27:04,280 Speaker 1: democratic grew in the last two have been fairly competitive, 525 00:27:04,359 --> 00:27:08,280 Speaker 1: the last one incombat off to the opposition who is 526 00:27:08,320 --> 00:27:12,720 Speaker 1: now the president, Mohammadbuhari. This one is also very close 527 00:27:13,400 --> 00:27:17,840 Speaker 1: and Buhari now stands, you know, faces of challenge from 528 00:27:18,200 --> 00:27:22,040 Speaker 1: Atiku Abubaka and people are watching to see, you know, 529 00:27:22,080 --> 00:27:27,120 Speaker 1: will just be another scenario where and incombat users. But if, if, 530 00:27:27,280 --> 00:27:30,400 Speaker 1: if the opposition doesn't win, will there as certain results. 531 00:27:30,400 --> 00:27:32,880 Speaker 1: So there's some tension in the air right now. Think 532 00:27:32,920 --> 00:27:36,440 Speaker 1: how this goes down? Not so Amaka. Obviously this is 533 00:27:36,440 --> 00:27:41,280 Speaker 1: an important election. Nigeria is the is Africa's largest economy. Um, 534 00:27:42,400 --> 00:27:45,320 Speaker 1: what is the impact do you believe from this election 535 00:27:45,400 --> 00:27:48,800 Speaker 1: on the broader economy in Nigeria and maybe the region 536 00:27:48,840 --> 00:27:55,080 Speaker 1: in general. Frankly not much. So we had at the 537 00:27:55,119 --> 00:27:58,520 Speaker 1: AGA Group behind Nigeria on a COP ten Global Risks 538 00:27:58,560 --> 00:28:02,199 Speaker 1: for in part because we were making the point that 539 00:28:02,960 --> 00:28:06,120 Speaker 1: you know, there was some optimism that the opposition candidate 540 00:28:06,240 --> 00:28:09,679 Speaker 1: was to win, it might hear out some drastic change 541 00:28:09,720 --> 00:28:13,000 Speaker 1: for the economy and you know, more publive outlook. The 542 00:28:13,000 --> 00:28:15,600 Speaker 1: truth is that they're really sort of to not so 543 00:28:15,880 --> 00:28:20,680 Speaker 1: great choices before Nigerians tomorrow, and we don't see the 544 00:28:20,720 --> 00:28:25,159 Speaker 1: opposition candidates being able to significantly improve the country's outlook 545 00:28:25,200 --> 00:28:28,720 Speaker 1: in the next four years. And that's because he's dogged 546 00:28:28,720 --> 00:28:34,879 Speaker 1: by sevit allegations of corruption. He has no record of 547 00:28:35,080 --> 00:28:40,080 Speaker 1: really tackling sort of the main problems Nigeria faces, which 548 00:28:40,080 --> 00:28:43,880 Speaker 1: is revenue generation. It collects of one of the littlest, 549 00:28:43,920 --> 00:28:48,480 Speaker 1: smallest revenues on the entire continent. Um so, so both 550 00:28:48,480 --> 00:28:49,960 Speaker 1: are the main issues, and then of course we have 551 00:28:50,040 --> 00:28:54,080 Speaker 1: a huge infrastructure that deficits. Those are the main issues 552 00:28:54,120 --> 00:28:56,720 Speaker 1: that we just don't think that either candidate has either 553 00:28:56,760 --> 00:29:03,040 Speaker 1: the energy to creativity or the competent. Really, yeah, Amaca NCU, 554 00:29:03,320 --> 00:29:05,200 Speaker 1: thank you so much for being with us. Amaca Ku 555 00:29:05,360 --> 00:29:10,200 Speaker 1: is Eurasia Group practice head focused on Africa and talking 556 00:29:10,240 --> 00:29:13,960 Speaker 1: about the Nigerian elections. Really interesting to think given how 557 00:29:14,000 --> 00:29:16,560 Speaker 1: big this economy is, given that this nation has more 558 00:29:16,600 --> 00:29:18,400 Speaker 1: than a hundred billion dollars of debt and has been 559 00:29:18,440 --> 00:29:21,880 Speaker 1: borrowing a lot in recent years, and given the fact 560 00:29:21,960 --> 00:29:24,360 Speaker 1: that it is setting the tone for democracy in the 561 00:29:24,520 --> 00:29:29,680 Speaker 1: entire continent. Definitely something that we are watching very closely, uh, 562 00:29:30,040 --> 00:29:33,480 Speaker 1: just to see if this does show that democracy is 563 00:29:33,520 --> 00:29:38,160 Speaker 1: not necessarily on a back foot in the continent. Thanks 564 00:29:38,160 --> 00:29:42,440 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 565 00:29:42,640 --> 00:29:48,000 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 566 00:29:48,080 --> 00:29:52,400 Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast. 567 00:29:52,440 --> 00:30:03,360 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.