Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
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Speaker 1: An extraordinary day in Washington yesterday. I like what um
Speaker 1: Axio says this morning, Jim vander High talking about American
Speaker 1: politics Off the rails? Are Kevin surreally in Washington? Really
Speaker 1: seconding that? The mystery of where we are to Thursday
Speaker 1: with Judge Kavanaugh and the Deputy Attorney General as well.
Speaker 1: We will stay focused on one of the great themes.
Speaker 1: And we have a wonderful guest John this morning to
Speaker 1: begin this conversation on our trade war, on our terror,
Speaker 1: on our taxes, which I think is another word for tariffs.
Speaker 1: Have I studied my Spence over the years. He is
Speaker 1: Michael Spence of New York University and of course of
Speaker 1: Laurea where the Acre Loft and Stiglets and a glorious
Speaker 1: your What was it like to get on stage with
Speaker 1: Acer Laft and Stiglets, were you guys on speaking terms? Oh? Absolutely, yeah, No,
Speaker 1: we don't each other for years and been colleagues at
Speaker 1: Harvard or Stanford. In my case with Joe um No,
Speaker 1: it was a joyful occasion. It's a joyful occation right now,
Speaker 1: President ge and uh Mr Trump, President Trump keeping up
Speaker 1: good face. But the fact is, is your grievous rifts
Speaker 1: between China in America. What is your observation of the
Speaker 1: choice set, the set of ideas that the president has
Speaker 1: right now? Well, you know, there's considerable debate about that,
Speaker 1: but it looks like what the President in a fairly
Speaker 1: confrontational ways renegotiating the terms of engagement with China and
Speaker 1: other countries. Professor, is always great to get your insight
Speaker 1: on things, and we're while aware that you also serve
Speaker 1: as a consultant and advisor to some really big asset
Speaker 1: managers like PIMCO. What are you telling them right now?
Speaker 1: What are you advising them about the vulnerabilities emerging markets
Speaker 1: off the back of this try dispute between the United
Speaker 1: States and China. Well, there's considerable uncertainty about um the
Speaker 1: impact that of the of the of the confrontation between
Speaker 1: the United States and China on the emerging economies. And
Speaker 1: I think the reason for that is it's just simply
Speaker 1: too hard to figure out, or there's if you drew
Speaker 1: a decision tree, there's too many branches on it to
Speaker 1: kind of get to the end. But but it's certainly
Speaker 1: true that the emerging economies have gotten themselves out of balance,
Speaker 1: uh in the post crisis period with you know, things
Speaker 1: that I at least thought were you know, mistakes that
Speaker 1: wouldn't be made again, like borrowing and her and currency,
Speaker 1: running large current account deficits, et cetera. Uh um, And
Speaker 1: I was wrong about that. So there's some rebalancing. I
Speaker 1: don't think it's it's it's fatal at this point, whether
Speaker 1: you know that. One of the reasons it's hard to
Speaker 1: figure out what the longer term effects are is one
Speaker 1: of China's objectives is to be a positive influence in
Speaker 1: the developing world. That's part of their game plan of
Speaker 1: becoming a more influential country um our nation around the world.
Speaker 1: And and so they're well on the way to doing that,
Speaker 1: and China's engagement in terms of investment and other things
Speaker 1: could could be um, you know, pretty positive, and a
Speaker 1: lot of emerging economies, well, the ways they sort of
Speaker 1: optimistic time out there at the moment, Professor, that might
Speaker 1: be China shifts towards an easing boss and an easing
Speaker 1: boss which could stimulate the emerging world. Do you have
Speaker 1: that confidence? Do you share that optimism? Um? I think
Speaker 1: it's there's some easing that's likely in the cards as
Speaker 1: they try to buffer their economy. But that but for
Speaker 1: the emerging economies, access to their technologies, like the digital technologies,
Speaker 1: which are very advanced in China, access to the Chinese
Speaker 1: market are really crucial things. So I think there's justified
Speaker 1: optimism based on China's longer term objectives. Um, whether the
Speaker 1: easing the short term, you know kind of monetary and
Speaker 1: fiscal responses are particularly positive free ms, I'm not so sure.
Speaker 1: You are an important insight professor on television. I want
Speaker 1: to advance that forward on the radio. We've got the
Speaker 1: advantage of doing that on a radio. In hindsight, which
Speaker 1: is that we've gone awfully far in our multilateral world
Speaker 1: and people are rebelling against the multilateral outcome. Did we
Speaker 1: go too far? In a way? I think we did. Um.
Speaker 1: You know, Danny Roderick is a very knowledgeable commentator on this,
Speaker 1: and what Danny says is that for most of the
Speaker 1: period where the GAT was the sort of the evolving
Speaker 1: government structure. Um the principle was nations agreed provided it
Speaker 1: looked like it was broadly beneficial by their own values
Speaker 1: and standards. And at some point he associates it with
Speaker 1: the ascendency of the w t O coming into existence,
Speaker 1: the global the rules in the of the system became
Speaker 1: you know, inviolable, and then countries had to adapt, you know,
Speaker 1: to a system we agreed on, but you didn't get
Speaker 1: the tinker with that with that system. And I think
Speaker 1: that's the sense in which is how he would put
Speaker 1: the proposition that we went too far. This is critical
Speaker 1: because Danny Roderick and Brad DeLong I would also put
Speaker 1: in this group have looked carefully at the bargain we
Speaker 1: made and we didn't follow through on, and that we
Speaker 1: said for labor that was crushed by international trade, we
Speaker 1: would provide domestic support, and we didn't do that out
Speaker 1: of NAFTA and frankly out of other trade agreements. If
Speaker 1: that's a missing link, is there any political tone to
Speaker 1: help labor it's crushed by the advantage, the societal advantages
Speaker 1: of international trade. I don't see it. I don't see
Speaker 1: any political oomph to help out retail or to help
Speaker 1: out UH textile workers in in the Carolinas. I think
Speaker 1: that's a fair observation. Tom. You know, I suspect we
Speaker 1: may see a change in that UM if a large
Speaker 1: contingent of Democrats get elected in the mid term elections,
Speaker 1: because this is this kind of thing is clearly on
Speaker 1: their agenda, and and we may go too far in
Speaker 1: the other direction, UM and start knucking up market performance.
Speaker 1: But but I think what you said is right. There's
Speaker 1: been a lot of talk, but not a lot of
Speaker 1: action on that front. Well, we gonna have to leave
Speaker 1: it there. Michael Spence, thank you so much. The Laura
Speaker 1: from New York University. I really can't say enough about
Speaker 1: his work and Project Syndicate. I've made very clear through
Speaker 1: the crisis, his essays have been crucial to making us
Speaker 1: think for there on where we are within the crisis
Speaker 1: and beyond. Right now Christopher Rone speaks to us was fatiguous, Chris,
Speaker 1: there's like eight ways to go, always within technical analysis.
Speaker 1: But your call on oil is so important. We have
Speaker 1: to start with that. How do you determine a breakout?
Speaker 1: You have a rising trend? I get that, But then
Speaker 1: how do you know that the breakout is there? Well,
Speaker 1: we have to put this in context of the trend,
Speaker 1: like you say, Tom, and let's remember the last six
Speaker 1: or seven months. Even as oil consolidated, it consolidated from
Speaker 1: the benefit of an uptrend. Oil sideways for six or
Speaker 1: seven months above the upward sloping Tuitter day moving average.
Speaker 1: So we are inclined to believe the validity of this
Speaker 1: breakout getting up through brand. We think low nineties maybe
Speaker 1: the next target. Here talk in technological talk, what momentum means.
Speaker 1: I've never understood that. You know, Rowe goals, I'm ving
Speaker 1: all the other Newtonian mv we have. What does momentum mean?
Speaker 1: The chart people, momentum uh clearly is an academic term.
Speaker 1: As technicians we call it trend. It's simply rate of change.
Speaker 1: I think when you look back at different factors that
Speaker 1: have been proven to work over time, momentum is the
Speaker 1: most reliable of those. What we know about momentum is
Speaker 1: it's very mean learning in the short term, right, It's
Speaker 1: very random in the short term, but very powerful over
Speaker 1: the longer term. John, what's so important about this? John Farrell?
Speaker 1: Is chrisop Ron nailed that, and that the trend is
Speaker 1: your drift function. It's your momentum, not a further inertial
Speaker 1: force from the trend. That's to me where a lot
Speaker 1: of people get this wrong. Was that enough physics, John?
Speaker 1: That was really impressive. Tom, Thank you, thank you. Can
Speaker 1: we get to just how this old market has really
Speaker 1: changed Chris in the last several years. Several years ago
Speaker 1: someone told me think about the oil market as if
Speaker 1: it has a ceiling, that once we get to sixty
Speaker 1: sixty five, the crude comes online in the United States
Speaker 1: and it drives prices lower. And now I'm just hearing
Speaker 1: think about the crude market with a floor. We have
Speaker 1: a supply risk story in the market. Now, how has
Speaker 1: it changed that much? Why has it changed that much
Speaker 1: in just a couple of years. Yeah, I would make
Speaker 1: maybe two or three observations. I would say number one,
Speaker 1: the idea that crude had a ceiling on it in
Speaker 1: the mid sixties or low seventies, I think became a
Speaker 1: very very consensus view. And as we know, what do
Speaker 1: markets like to do, they like to challenge consensus views.
Speaker 1: I think the big change from when oil was under
Speaker 1: a lot of pressure that was a credit driven move.
Speaker 1: If you look at energy sector credit, it was under
Speaker 1: lots and lots of pressure uh during that two or
Speaker 1: three year period. That has been different over the last
Speaker 1: eighteen months. Even though the energy stocks haven't been fantastic,
Speaker 1: we haven't seen the systemic risk emerge from energy credit.
Speaker 1: I think that's a very important distinguishing factor. You've had energy.
Speaker 1: How yield spreads actually make new loads this week. I
Speaker 1: think that is support of both for oil price itself
Speaker 1: and for the energy stocks in particular. So you believe
Speaker 1: there's discipline in the credit market now, Chris, that was
Speaker 1: absent a couple of years ago. It certainly reflects that.
Speaker 1: And at the end of the day, I am very
Speaker 1: reluctant to embrace the equities when credit conditions are weakening.
Speaker 1: So I certainly welcome the improvement that we've seen, most
Speaker 1: notably over the last six months. Even as oil was
Speaker 1: consolidating this year, credit conditions were still stable. That is
Speaker 1: an asset for the stocks. Let's go back to the
Speaker 1: equity markets and the fundamental people will notice the narrowness
Speaker 1: of the market, only selected stocks really doing well. How
Speaker 1: do you fold that into technical analysis? You look at sectors,
Speaker 1: you look at individual charts. But how do you take
Speaker 1: the Apple Amazon effect into what you're doing? Tom? I
Speaker 1: have to say I think that's one of the most
Speaker 1: overstated fallacies of two thousand and ten. This market is
Speaker 1: not as narrow as commonly described. Let me give you
Speaker 1: three iterations of the SPS. We know the cap weighted
Speaker 1: SMP is at new highs. That's the index we look
Speaker 1: at every day. Well, the equally weighted SMP is also
Speaker 1: at new highs, as is the reverse weighted SMP. So
Speaker 1: if all your large weights Apple, Amazon, Facebook become your
Speaker 1: smallest weights, that index is still making new high so
Speaker 1: it's difficult for me to buy. The market is dangerously
Speaker 1: narrow story when all these different iterations of the index
Speaker 1: are actually making new highs. And what we did recently
Speaker 1: we looked at a distribution of Russell one thousand returns
Speaker 1: by market cap. Believe it or not, it's the second
Speaker 1: and third quintiles, the belly of the market that has
Speaker 1: actually outperformed this year. So that is not where you
Speaker 1: find your biggest stock. So I think this story, Um
Speaker 1: that it's only four or five names leading this market
Speaker 1: is just partently false. Chris, for anyone that might have
Speaker 1: missed what you just said. Are you essentially saying that
Speaker 1: if you make every single stock on the SMP five
Speaker 1: hundred had exactly the same contribution to the overall index
Speaker 1: as the next stalk that disanquity markets, that a record high.
Speaker 1: Yes it is. And even if you take it one better,
Speaker 1: if you make Apple, Amazon, Facebook, Google, JP Morgan your
Speaker 1: smallest weights, um, the SMP is still at an all
Speaker 1: time high. So this idea that it's narrow, I I
Speaker 1: just think it is not supported by the facts. Tom.
Speaker 1: I don't think people recognize that. I don't have many
Speaker 1: people come on this show with us at least and
Speaker 1: say that, did I No, I don't think so. I
Speaker 1: think that you know. The hallmark of what Chris is
Speaker 1: doing is just go through the data, go through the sectors.
Speaker 1: Where's the anomaly right now? Where's the distinction within the
Speaker 1: thirty page power point? Did you do? I think what's
Speaker 1: most timely right here, perhaps and maybe most underappreciated, is
Speaker 1: the extent to which the industrial stocks have improved over
Speaker 1: the last three months. You have big bell weather names,
Speaker 1: whether it's Caterpillar or Bowing, or Emerson Electric or Parker Hanaffan,
Speaker 1: that has meaningful that have meaningfully improved over the last
Speaker 1: ninety days. I think that is underappreciated here by a
Speaker 1: lot of investors. I mean that's critical because these are
Speaker 1: not you know, fifteen price to sales, eight times cash flow,
Speaker 1: you know, thirteen times eve Dost stocks. They're like, there's
Speaker 1: still are they They're not cheap, right, but I think
Speaker 1: they're Caterpillar at one point this year was trading six
Speaker 1: or seven times forward arting. So just to put it
Speaker 1: in a little bit of context, and you think about
Speaker 1: some of these names, at one point or another in
Speaker 1: two thousand eighteen, all of those stocks have been correlated
Speaker 1: to the emerging market trade. So the fact that they
Speaker 1: have botted and turn up, does that tell us that
Speaker 1: maybe e M is poised to improve. You're a little
Speaker 1: bit something to think about going forward. Christopher Wrong, Thank
Speaker 1: you so much for strtigaus research today. Just important work,
Speaker 1: particularly that I thought an oil to ninety barreled. There
Speaker 1: is Facebook, there is Instagram, and then there's Sarah Ponza
Speaker 1: with a combination of these two. And it's not only
Speaker 1: two guys from Instagram leaving. A lot of are leaving
Speaker 1: Facebook right right. It is quite a shake up at Facebook.
Speaker 1: But what's really standing out is Instagram because Instagram has
Speaker 1: just been such a growing area for Facebook and it
Speaker 1: has become more and more important. So people are saying that, Okay, well,
Speaker 1: if the CEOs or the founders I mean of Instagram
Speaker 1: are now leaving, what does that mean for the importance
Speaker 1: of Instagram going forward for Facebook? But either way, Facebook
Speaker 1: is down to percent this morning, so we'll have to
Speaker 1: see more going forward. Sticking in the same type of space,
Speaker 1: if you look at Square, it's a mobile payment company.
Speaker 1: This is run by Jack Dorsey, who of course is
Speaker 1: also the CEO of Twitter. Square is actually up two
Speaker 1: and a half percent this morning. Now. An analyst over
Speaker 1: at Namura Incident put out a note saying, well, Square
Speaker 1: should probably be the newest member of the fan complex.
Speaker 1: The analysts also raises Chrice Target. Yeah, so adding Facebook,
Speaker 1: adding Amazon, Netflix, Google, So they're saying that it's shaken
Speaker 1: up space. It should be in there anyways, helping the price.
Speaker 1: We've got a Scena, so one of the retailers that
Speaker 1: owns brands including dress bar And and and Taylor Loft Justice.
Speaker 1: Those brands might be better known ven A Sena, but
Speaker 1: the stock is up eighteen percent today. After reporting killer
Speaker 1: earnings yesterday after the close that beat estimates. They also
Speaker 1: had its first comparable sales growth in three years, and
Speaker 1: then til rate. It's been in the news the past
Speaker 1: week or so, up sixteen percent, well until Ray this
Speaker 1: morning said it's successfully exported medical marijuana to Australia to
Speaker 1: distribute to children who suffered from epilepsy. So it was
Speaker 1: down the past three days. Investors are using this to
Speaker 1: snap those losses get into the stock. Hillery up six
Speaker 1: percent this morning. A few upgrades and downgrades for you
Speaker 1: work Eva now. This is a company that provides cloud
Speaker 1: and mobile software. It's based out of Iowa. Up fourteen
Speaker 1: percent after it was upgraded at Bear to an outperform.
Speaker 1: Science Applications International also known as s A i C.
Speaker 1: This is an enterprise technology company, upgraded to a buy
Speaker 1: from hold at Jeffrey's. It is down one percent actually,
Speaker 1: and Heritage Crystal Cleaning cleaning services company. It was upgraded
Speaker 1: to an outperformed from neutral at Beard as well. Thank you.
Speaker 1: Joining us now is Patrick Gregory of Bloomberg Law. He
Speaker 1: covers the Supreme Court for his Patrick you know, with
Speaker 1: all of this back and forth over the nomination of
Speaker 1: Brent Kavanaugh. It's possible to forget that the Supreme Court
Speaker 1: is going to be open for business in October, and
Speaker 1: I'm wondering if you could tell us what is on
Speaker 1: the docket and what should we be looking for. Well, um,
Speaker 1: that's true. And even Thursday, we're gonna get some orders
Speaker 1: and cases that could grant review or deny review in
Speaker 1: some important cases. One case I'm covering involves a high
Speaker 1: school coach who was praying on a football field and
Speaker 1: was suspended for that. So that's the case the court
Speaker 1: could grant review in and then uh, in October. It's
Speaker 1: really gonna be It's not, um, a whole lot of
Speaker 1: hot button issues. UM need October term. But we'll have
Speaker 1: to see alright, So not a lot of hot button issues.
Speaker 1: So does it matter then whether the Supreme Court has
Speaker 1: a full complement of justices? Um, of course it matters
Speaker 1: to the parties involved into some extent. But I would
Speaker 1: I would say that the real deadline here is going
Speaker 1: to be November midterms. Why is that Well, because if
Speaker 1: Kavanaugh doesn't get confirmed, you look at that scenario and
Speaker 1: you could really have, um, the Democratic voters be galvanized
Speaker 1: by a chance to block block the nominee. What do
Speaker 1: they do with the next nominee? I mean, I don't
Speaker 1: want to, you know, create a news flow here and
Speaker 1: then Mr Kavanaugh. You know, I saw one person sayd
Speaker 1: I believe he's innocent until proved guilty. But assuming Mr
Speaker 1: Kavanaugh in some form steps aside, what would you presume
Speaker 1: from the next nominee? I mean, is the is the
Speaker 1: process forever changed? I think we are certainly in new
Speaker 1: territory here, and that's why a lot of people say
Speaker 1: that there will be pressure on the president to appoint
Speaker 1: a woman, and there are a number of qualified women
Speaker 1: on his Supreme Court shortlist. A lot of people are
Speaker 1: talking about Amy Barrett and there, and there are a
Speaker 1: couple of others. As far as the cases that you
Speaker 1: described that the Supreme Court will be hearing, are they
Speaker 1: able to put off important or contentious cases until they
Speaker 1: get a full complement of justice. They have a lot
Speaker 1: of freedom over over when they schedule oral arguments and
Speaker 1: things like that. So sure, again, looking at the Supreme
Speaker 1: Court and the retiring judges is well, I mean, it's
Speaker 1: it might right that in the history of the Court,
Speaker 1: this is an exceptionally fluid moment in terms of not
Speaker 1: only bodies coming in such as Judge Kavanaugh, but also
Speaker 1: the idea of what retirements could be just in the
Speaker 1: next twelve months. Absolutely, you know, Ruth Bader Ginsburg is
Speaker 1: certainly getting up there in terms of years plants. Thomas
Speaker 1: has been on the Court since I was a kid,
Speaker 1: and yeah, it's you know, who knows what could happen.
Speaker 1: There could be another vacancy there and we just don't now.
Speaker 1: I'll thank you so much, Patrick, We greatly appreciate that
Speaker 1: in the Supreme Court. Pim Fox in time came from
Speaker 1: the Bloomberg Interactive Broker studios in New York. It is
Speaker 1: five thousand three or miles south out of New York,
Speaker 1: out of JFK or Newark, and you wander across Venezuela.
Speaker 1: Then you really wander across the Amazon in Brazil down
Speaker 1: to Argentina. If you're lucky, you're on American Airlines flight.
Speaker 1: And nobody has done this in Bloomberg more than Eric Shatzka,
Speaker 1: who has spent major time in Buenos Areas. I want
Speaker 1: to talk about the Central Bank resignation in your interview
Speaker 1: yesterday with Mr MacRae, where I know he was managing
Speaker 1: the message and that how are the people of Buenos
Speaker 1: Aires and Argentina doing? I mean, they're the ones living
Speaker 1: this crisis. Pay so out right now thirty eight point
Speaker 1: six four, We're gonna make another dash to forty. How
Speaker 1: are the people of Argentina doing? Uh? With difficulty? It's
Speaker 1: like tangible right. Inflation tom is at the highest level
Speaker 1: in Macari's presidency. The last monthly figure was almost thirty
Speaker 1: and it's heading up. Inflation is getting worse better, The
Speaker 1: economy is getting worse before it's getting better. The best
Speaker 1: Mr Macri could do was to say that he was
Speaker 1: hopeful the thanks to the weakness and the pay so
Speaker 1: and the juice that it's giving exports, the Argentine economy
Speaker 1: might start turning around, might come out of recession in
Speaker 1: the second quarter of twenty But didn't. They just imposed
Speaker 1: tariffs on exports of wheat and soybeans. There are some
Speaker 1: he calls them temporary emergency export taxes, but those are
Speaker 1: being put in place to try and restore a budgetary balance.
Speaker 1: This is you know, he is fighting fires. It's like
Speaker 1: it's like being in the midst of It's like being
Speaker 1: in the rockies. This summer right there, wildfires everywhere you look.
Speaker 1: Before we get to the central banker, what does Madame
Speaker 1: Legarde in the I m F want They're going to
Speaker 1: write a big check. President Trump will say America is
Speaker 1: writing a check. Is a conduit through I am And
Speaker 1: to your point, Macary said that he has had a
Speaker 1: lot of support. This wouldn't be happening without American support.
Speaker 1: That goes without saying, of course, but that wants to
Speaker 1: get dinner Daniels tonight, what I want to know, Eric is,
Speaker 1: and this is critical, what does the I m F
Speaker 1: want this time around of the Argentinean crisis? What's the
Speaker 1: I m F. What What we learned yesterday in the
Speaker 1: conversation that I had with Macary on television and we
Speaker 1: subsequently had with him for an additional half an hour
Speaker 1: behind the scenes on the record, I should add, is
Speaker 1: that this agreement that he is talking about, this new
Speaker 1: agreement with the I m F, which in theory is
Speaker 1: going to span the size of the program from fifty
Speaker 1: billion to something else and accelerate disbursements from the fund
Speaker 1: to Argentina, is going to involve a change in monetary policy.
Speaker 1: Tom would and maybe this gets us to Luis Caputo
Speaker 1: resigning from the central banking Argentina. Would Argentina be changing
Speaker 1: the way that it manages the economy on its own
Speaker 1: or is this a stipulation? I think it's reasonable to ask,
Speaker 1: if not, to conclude this stipulation didn't go there? Are
Speaker 1: you going there and saying this is a stipulation from who? Investors?
Speaker 1: Or I am f Well, what Macari told us yesterday
Speaker 1: the report and again this was I have to emphasize
Speaker 1: this was not on television. He did talk about a
Speaker 1: change in monetary policy coming, He didn't go into a
Speaker 1: lot of detail. He said subsequently that the central bank
Speaker 1: needs to revamp these are his words, revamped monetary policy,
Speaker 1: that the explanation for this would be coming in several weeks.
Speaker 1: But there was a wreck ignition that manipulating a single
Speaker 1: interest rate was not effectively managing the Argentine economy. Is
Speaker 1: this a conclusion that Louis Caputo came to on his own?
Speaker 1: Remember this is an independent central bank ostensibly. Was this
Speaker 1: a conclusion that Federico Sturtzenegger, his predecessor who stepped down
Speaker 1: three months ago. Did he stepped out of his own volition?
Speaker 1: We don't know. Um came to on his own. It's
Speaker 1: not clear now that we have the central bank governor
Speaker 1: resigning suddenly only three months into his job, in the
Speaker 1: midst of a negotiation with the i m F, during
Speaker 1: which we learned from the President of the country that
Speaker 1: there will be a new monetary policy agreed to as
Speaker 1: part of this expanded aid package. There are a number
Speaker 1: of dots that we can start to connect. Don't you
Speaker 1: think pace was weaker shaker talks that's the effect? Well, Eric,
Speaker 1: I guess I want to try to connect this to
Speaker 1: the larger theme of confidence and credibility, because if you're
Speaker 1: going about an austerity program at the same time as
Speaker 1: you just described that that they have at least last
Speaker 1: measured thirty five inflation, they have a devaluing currency, they
Speaker 1: have a variety of challenges that were unmet under previous administrations.
Speaker 1: Where does this leave their credibility? Well, let's just start
Speaker 1: with where the credibility is now. Let's forget about where
Speaker 1: the credibility is going to be after this I m
Speaker 1: F package is formally announced and the markets have a
Speaker 1: chance to react to it. The credibility is in tatters.
Speaker 1: Part of the problem in Argentine over the past five
Speaker 1: months is that the government has done such a terrible
Speaker 1: job sitting expectations. So not only has it set expectations
Speaker 1: too aggressively, it has dramatically underperformed the expectations it has created.
Speaker 1: Let's begin with the fact that starting the year, the
Speaker 1: Argentine government told the people of Argentine that economic growth
Speaker 1: would accelerate to three percent and inflation would come down
Speaker 1: to fifteen percent by the end of the year. We
Speaker 1: know where inflation is now, running north of and probably
Speaker 1: close to forty. We know that the economy has entered recession. Yes, don't.
Speaker 1: They suffered, in his words, the worst drought in fifty years. Yes,
Speaker 1: there was an emerging markets crisis that probably contributed to
Speaker 1: the dramatic weakening of the pace. So but to go
Speaker 1: to Tim's Pim's point, Tom about credibility Pim. On August
Speaker 1: Mauricio Macri, the president, was on national television talking to
Speaker 1: Argentine's about the need for an accelerated I m F
Speaker 1: program saying that we had it. He said, almost have
Speaker 1: an agreement, the agreement. Agree. Stop stop there, what are
Speaker 1: you the former mayor of New York. You're talking Spanish now,
Speaker 1: I'm Bloomberg. Spence is only one guy that can do that,
Speaker 1: and his name's the building Eric Shatsker. Quickly here, this
Speaker 1: is important. Frame what Argentina is for our American audience.
Speaker 1: It's a million miles away. It's it's something out of
Speaker 1: Eva Parona and all that we are wrong and wrong,
Speaker 1: wrong in our stereotypes. What's the so what of Argentina?
Speaker 1: Is it a diverse economy? Most people's fair concept of
Speaker 1: a Latin American nation. Why it's broadly educated, University education
Speaker 1: is free, there's a large middle class. Argentina is the
Speaker 1: second largest economy in Latin America, and if I'm not mistaken,
Speaker 1: the second the largest grain exporter. We know it because
Speaker 1: of its beef. But this is as European a country
Speaker 1: as there is in Latin America. Probably in you know,
Speaker 1: in the current brilliant it's probably looks a lot more
Speaker 1: like Italy than it does Brazil. Michael, are you gonna
Speaker 1: do the news in Spanish? Can we can we do
Speaker 1: that today? I mean Shatsker is talking Spanish here, I can't.
Speaker 1: I can barely do it in English. Now we noticed recently,
Speaker 1: and I'll just offer this that in Argentina, at least
Speaker 1: in Buenos Aires, has the highest per capita number of
Speaker 1: psychologists per pose where you come up with this stuff,
Speaker 1: Eric Shatsker, Thank you for your continuing reporting, Mr McCree
Speaker 1: and the unique features of Argentina. This is Bloomberg. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
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Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.