WEBVTT - Surveillance: Risk Parity Framework is Unraveling, Major Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jai Ley. 0:00:13.960 --> 0:00:16.960 We bring you insight from the best in economics, finance, 0:00:17.040 --> 0:00:23.480 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.280 Bloomberg dot Com, and of course, on the Bloomberg Tom. 0:00:34.320 --> 0:00:38.120 British and European officials have hailed progress in Brexit negotiations 0:00:38.440 --> 0:00:40.680 with the EU. We found that out in the last 0:00:40.680 --> 0:00:44.400 couple of days. British and European officials have hailed progress 0:00:44.400 --> 0:00:48.400 in these Brexit negotiations, with the UK leader negotiator Dominic 0:00:48.479 --> 0:00:51.120 rob predicting a deal on the divorce will be finalized 0:00:51.440 --> 0:00:54.160 by November twenty one. Now joining us now with Semma 0:00:54.200 --> 0:00:56.360 La Tra a member of Parliament for the UK Labor 0:00:56.440 --> 0:00:59.360 Party and a member of the Select Committee on Exiting 0:00:59.480 --> 0:01:02.120 the europe In Union, still with us, as well as 0:01:02.200 --> 0:01:04.880 David Owen of Jeffreys that Mr Malanger, thank you so 0:01:04.959 --> 0:01:07.560 much for joining us. What is your basic case scenario 0:01:07.880 --> 0:01:12.480 of what happens and Brexit? Well, I don't believe that 0:01:12.680 --> 0:01:17.440 we're going to see a deal by the twenty one November. 0:01:17.480 --> 0:01:20.120 I think in terms of Dominic Rath prediction that was 0:01:20.160 --> 0:01:23.600 already being backtracked. You know, we're in less than a 0:01:23.640 --> 0:01:27.720 hundred fifty days from Brexit and there is still huge uncertainty, 0:01:27.840 --> 0:01:30.520 huge uncertainty about what we're going to have as the 0:01:30.560 --> 0:01:33.720 final deal, huge uncertainty almost more importantly about what's going 0:01:33.760 --> 0:01:36.440 to be in the Political Declaration which is the forerunner 0:01:36.520 --> 0:01:40.120 to the Future Trade Agreement that we will have in 0:01:40.160 --> 0:01:43.920 the future framework with the European Union, And even of 0:01:43.959 --> 0:01:46.800 more significance as well to members of Parliament, what kind 0:01:46.840 --> 0:01:49.800 of parliamentary process we're going to have, what meaningful vote 0:01:49.840 --> 0:01:52.440 there's going to be, and if our evidence of the 0:01:52.560 --> 0:01:55.040 Select Committee yesterday is anything to go by, this is 0:01:55.080 --> 0:01:57.600 more of a meaning less vote than a meaningful vote 0:01:57.640 --> 0:02:04.600 with huge consequences for scrutiny and accountability of the government. Right, 0:02:04.680 --> 0:02:06.840 what exactly what are you telling me that we'll have 0:02:06.880 --> 0:02:09.240 an agreement? And well banks, how to access are we are? 0:02:09.240 --> 0:02:11.600 Are we staying in the Common Market for a no? 0:02:11.600 --> 0:02:15.360 How or what will the deal look like? Well, we 0:02:15.400 --> 0:02:17.040 don't know what the deal would look like. I think 0:02:17.040 --> 0:02:20.680 in terms of transition we will be saying staying within 0:02:20.880 --> 0:02:22.800 much of the framework that we already have, but we 0:02:22.840 --> 0:02:25.880 will be rule takers rather than be seated around the 0:02:25.919 --> 0:02:30.239 table and having a say in what happened. People are 0:02:30.720 --> 0:02:34.480 very concerned about what this could mean if there is 0:02:34.520 --> 0:02:37.080 no deal as well. For the UK, we there is 0:02:37.120 --> 0:02:38.880 no guarantee that's going to be a deal that gets 0:02:38.880 --> 0:02:42.200 through Parliament. That could mean real challenges in terms of 0:02:42.840 --> 0:02:47.760 um difficulties with trade, delays at the border, questions about 0:02:47.760 --> 0:02:50.560 whether even basics like the European Health Insurance Card would 0:02:50.560 --> 0:02:55.320 be available to citizens, legal certainty around contracts. I mean, 0:02:55.639 --> 0:02:59.760 this uncertainty is not what people voted for, and it's 0:02:59.800 --> 0:03:02.480 in credibly concerning that we may have two cliff edges 0:03:02.639 --> 0:03:05.239 as well facing us, one at the end of March 0:03:05.520 --> 0:03:07.400 and then the second one at the end of our 0:03:07.480 --> 0:03:10.560 transition period as well. So the government has a lot 0:03:10.639 --> 0:03:13.040 to do in a very short space of time, both 0:03:13.080 --> 0:03:15.120 to get a deal, to have a deal that's going 0:03:15.160 --> 0:03:17.600 to win the confidence of Parliament, and then to have 0:03:17.760 --> 0:03:20.600 us be ready for leaving on March twenty nine. There 0:03:20.600 --> 0:03:23.079 are huge questions as well about whether we will be 0:03:23.160 --> 0:03:25.800 ready in terms of having passed the legislation that's needed, 0:03:26.080 --> 0:03:30.680 with over eight hundred statutory instruments still set to go through, 0:03:30.760 --> 0:03:33.040 so we We've got a lot of work to do yet. 0:03:35.680 --> 0:03:37.560 So what does that mean for the Labor Party? Will 0:03:37.560 --> 0:03:40.320 they push for a second referendum if it's not the 0:03:40.400 --> 0:03:42.360 right kind of deal? Do you want elections if it's 0:03:42.360 --> 0:03:46.160 not the right kind of deal? Well, there are increasing 0:03:46.280 --> 0:03:49.120 calls for a second referendum, and for the very simple 0:03:49.160 --> 0:03:52.560 reason that what's emerging and what the Prime Minister has 0:03:52.600 --> 0:03:57.280 been has has now is now doing in terms of 0:03:57.280 --> 0:04:01.000 being forced into a very difficult position, is not what 0:04:01.040 --> 0:04:03.840 people thought was going to happen as a result of Brexit. 0:04:04.040 --> 0:04:06.680 We there is no way in which we are heading 0:04:06.720 --> 0:04:09.840 to be a more prosperous nation. In fact, every scenario 0:04:10.000 --> 0:04:13.200 under the government's own Brexit impact assessments suggested that we 0:04:13.240 --> 0:04:15.760 would be worse of to some scenarios would be less 0:04:15.800 --> 0:04:18.680 worse of than others. So two percent less growth over 0:04:18.720 --> 0:04:22.359 fifteen years which were staying within the European Economic Area. 0:04:22.880 --> 0:04:25.760 So the reason why there's called for a second referendum 0:04:25.839 --> 0:04:27.720 is because people are saying, if, if, if what is 0:04:27.800 --> 0:04:30.080 now on offer isn't what people voted for, surely they 0:04:30.080 --> 0:04:33.560 should have a chance to express a point of view 0:04:34.080 --> 0:04:36.200 when it comes to the final deal, and particularly if 0:04:36.240 --> 0:04:39.240 that deal doesn't go through Parliament. The Labor Party has 0:04:39.279 --> 0:04:42.040 said that if there is no deal that's agreed by Parliament, 0:04:42.120 --> 0:04:45.400 and if there is no general election, which would be 0:04:46.120 --> 0:04:48.360 our preference, so that we can have a different negotiating 0:04:48.400 --> 0:04:51.920 team that's really putting the economy first and not party 0:04:52.000 --> 0:04:54.120 interest first, which is what Theresa May has now become 0:04:54.240 --> 0:04:57.320 known for, then should the people have another say? But 0:04:57.400 --> 0:04:59.120 there is all going to be an important question about 0:04:59.160 --> 0:05:02.080 what they have a say about, and there are increasing 0:05:02.600 --> 0:05:05.360 calls as well from some in Parliament to say, look, 0:05:05.400 --> 0:05:07.320 if there is no end state and we are going 0:05:07.400 --> 0:05:10.800 to leave, then it's better to leave with being a 0:05:10.880 --> 0:05:14.360 member potentially in something like the European Economic Area, with 0:05:15.600 --> 0:05:18.080 with some of the the benefits that go with that, 0:05:18.520 --> 0:05:20.880 rather than leave with no deal, which would be catastrophic 0:05:20.960 --> 0:05:23.919 for our country and our economy. It's wonderful to speak 0:05:23.960 --> 0:05:25.720 to you, and I think I can speak for a 0:05:25.760 --> 0:05:28.880 global audience that finds a Labor Party of the United 0:05:29.000 --> 0:05:33.400 Kingdom and absolute mystery. You've provided leadership to the Fabian 0:05:33.520 --> 0:05:37.880 Society for years, and whether it's Bernard Shaw, or it's 0:05:37.920 --> 0:05:42.480 Harold Laski or maybe even at Balls, everybody wants to 0:05:42.560 --> 0:05:45.920 know how labor gets back to what it used to be. 0:05:46.640 --> 0:05:49.560 Could labor go back to the nostalgia of the favors 0:05:49.960 --> 0:05:56.840 Fabian Society or does labor have to find a new way. Well, 0:05:56.880 --> 0:05:59.760 there's one guarantee in politics, which is the past is 0:05:59.800 --> 0:06:02.000 never redeterminant of the future. And what you've got to 0:06:02.040 --> 0:06:05.680 do is always be reinventing yourself to have your values 0:06:05.720 --> 0:06:11.160 in line with where modern situation seeks political solutions. And 0:06:11.520 --> 0:06:13.799 if you take the budget this week as one example 0:06:13.880 --> 0:06:17.320 and how labors responded, what we've seen is, i would 0:06:17.360 --> 0:06:19.280 quote it is less of the same but certainly the 0:06:19.400 --> 0:06:22.240 same coming from the Tory government with a sense of 0:06:22.279 --> 0:06:27.000 a failed economic How do your own target? Okay, Labor Party, 0:06:27.600 --> 0:06:30.000 it's yes, you're absolutely right. But for the Labor Party 0:06:30.160 --> 0:06:33.040 is about having an economic policy that's going to respond 0:06:33.080 --> 0:06:36.000 to the challenges that Mr Corbin provide that this is 0:06:36.080 --> 0:06:40.880 critical because Jeremy Corbin is miles from the Fabian Society. 0:06:41.240 --> 0:06:44.640 How do you get back to the values of another 0:06:44.800 --> 0:06:48.360 time and place. Well, you know, the Fabian Society is 0:06:48.400 --> 0:06:50.560 one of many voices. The Fabian Society was one of 0:06:50.600 --> 0:06:53.000 the founders of the Labor Party, just as the Unions 0:06:53.040 --> 0:06:56.680 were in the Cooperative Party was also very influential at 0:06:56.760 --> 0:06:58.520 that time. And you know, what you have in the 0:06:58.600 --> 0:07:01.920 labor family is a wide range of views, but set 0:07:02.000 --> 0:07:05.880 around common values where we do believe in fairness and 0:07:05.960 --> 0:07:08.400 equality and in all of us paying our part for 0:07:08.720 --> 0:07:11.640 society as a whole. And you know, when we look 0:07:11.680 --> 0:07:13.280 at the budget this week, I'll take that as an 0:07:13.320 --> 0:07:17.040 indicator of where the policy is now going. They saw 0:07:17.160 --> 0:07:20.040 that they had failed in terms of their previous economics, 0:07:20.560 --> 0:07:23.920 economic plans and strategy. They didn't tell you that. They 0:07:24.000 --> 0:07:26.119 pretended that there was going to be some sort of change, 0:07:26.240 --> 0:07:29.880 potentially an end to austerity. But what they haven't got 0:07:30.000 --> 0:07:32.200 is a plan for investment in our country. This was 0:07:32.320 --> 0:07:35.640 a budget that brought off some of their backbenches and 0:07:35.760 --> 0:07:38.200 did enough to get by for the next six months. 0:07:39.360 --> 0:07:41.680 If you make this point, we won seats in the 0:07:41.760 --> 0:07:44.600 general election last year, and when I'm going around the 0:07:44.680 --> 0:07:48.240 country now, I'm seeing people increasingly dissatisfied with the Tories. 0:07:48.640 --> 0:07:49.960 But I need do they not have a plan for 0:07:50.000 --> 0:07:51.800 break so they don't plan for them? Then here's the 0:07:51.880 --> 0:07:55.280 key question. That's that's absolutely correct, But the key question 0:07:55.520 --> 0:07:58.320 is who did they go to if they don't go 0:07:58.480 --> 0:08:01.320 to the Tories. Is an m P of the Labor Party. 0:08:01.640 --> 0:08:05.320 Does a Labor Party need a new, cogent view with 0:08:05.440 --> 0:08:09.240 the nostalgia of your fabian society and under something new? 0:08:09.440 --> 0:08:13.760 I mean, I don't see a cogent labor voice in 0:08:13.920 --> 0:08:20.000 this Brexit debate. I don't know if it's about a 0:08:20.080 --> 0:08:23.080 sort of romanticizing the past, because it was very different 0:08:23.120 --> 0:08:25.080 at that time. I do think it is about saying, 0:08:25.120 --> 0:08:26.920 what are our solutions for the present? You know, we 0:08:27.080 --> 0:08:31.160 founded the National Health Service, we brought in the minimum wage, 0:08:31.520 --> 0:08:35.120 we invested in early years. We saw huge growth across 0:08:35.160 --> 0:08:40.160 our country and more an increase in equality between our 0:08:40.240 --> 0:08:43.400 regions as well. We've seen inequality rise hugely. We've seen 0:08:43.480 --> 0:08:46.679 child poverty rise significantly under the Conservatives. I see it 0:08:46.760 --> 0:08:49.760 in my own constituency. People want to know that they've 0:08:49.800 --> 0:08:51.760 got access to good jobs. They want to know they've 0:08:51.760 --> 0:08:56.040 got investment in education. They want good prospects for their children. 0:08:56.320 --> 0:08:58.520 This is the first generation where children are set to 0:08:58.600 --> 0:09:01.280 do worse than their parents. Now, those are the things 0:09:01.400 --> 0:09:05.440 homeownership or a secure place to live in, decent education, 0:09:05.760 --> 0:09:08.559 and that's where the Labor Party's answers are. What people 0:09:08.600 --> 0:09:14.040 are now responding to very very strongly. Are you frustrated 0:09:14.160 --> 0:09:16.800 that many people are proving many voters still going a 0:09:16.920 --> 0:09:21.680 hundred percent know where the Labor stands on Brexit? Sorry 0:09:21.679 --> 0:09:25.280 I couldn't hear your question fully. Am I frustrated with 0:09:25.400 --> 0:09:29.640 the question? Is? Are you frustrated that the voters don't 0:09:29.800 --> 0:09:36.320 understand where Labor is on Brexit? I do think we've 0:09:36.360 --> 0:09:38.520 got to be clearer about that. You know, we had 0:09:38.559 --> 0:09:41.200 a big debate at party conference which was just last month, 0:09:41.800 --> 0:09:44.640 and in that we move the position of the party 0:09:45.160 --> 0:09:48.280 in favor of a second referendum as well under the 0:09:48.320 --> 0:09:52.200 circumstances where there isn't a deal that's agreed by Parliament 0:09:52.320 --> 0:09:54.839 and also where there isn't a general election. Now I 0:09:54.960 --> 0:09:58.080 have called since the week after the referendum, in fact 0:09:58.200 --> 0:10:00.320 that you know, from from my person all the point 0:10:00.320 --> 0:10:02.440 of view thinking about the economy and what I think 0:10:02.559 --> 0:10:04.880 is right for our country, we should be seeking to 0:10:04.920 --> 0:10:07.400 stay in the Single Market as far as possible. I 0:10:07.520 --> 0:10:09.800 do think that we need need to have greater controls 0:10:09.880 --> 0:10:13.319 over freedom of movement and that's something which the EU 0:10:13.520 --> 0:10:16.000 can deliver if it chooses to it. There is no 0:10:16.200 --> 0:10:19.599 legal reason why it couldn't. It's a political reason and 0:10:19.679 --> 0:10:21.679 I do believe that we need to stay within a 0:10:21.960 --> 0:10:24.679 Customs Union or the Customs Union so that we have 0:10:24.960 --> 0:10:29.040 that security for Northern Ireland as well and an Ireland. Now, 0:10:29.120 --> 0:10:32.000 the reason why Ireland is such an issue is because 0:10:32.040 --> 0:10:34.320 the border in Northern Ireland won't just be a border 0:10:34.360 --> 0:10:37.199 between the Republic and Northern Ireland. It will be a 0:10:37.520 --> 0:10:41.480 border between the European Union and a third country that 0:10:41.720 --> 0:10:45.640 is fundamentally different. And we have to accept a responsibility 0:10:45.720 --> 0:10:47.760 in that and say, well, look, if we don't want 0:10:47.800 --> 0:10:50.640 this to have a negative impact on the economy and 0:10:50.720 --> 0:10:55.040 the free flow of trade and goods and supplies between 0:10:55.200 --> 0:10:57.360 the Northern Ireland and the Republic of Ireland, we have 0:10:57.480 --> 0:10:59.560 to say, what's a solution for the UK as a whole. 0:10:59.800 --> 0:11:01.959 And that's why I do think that the custom Genie 0:11:02.000 --> 0:11:03.400 has got to be a big part of that. We 0:11:03.600 --> 0:11:07.959 must leave it there. A Member of Parliament for the 0:11:08.040 --> 0:11:10.640 Labor spirited discussion on the future of the Labor Party 0:11:10.679 --> 0:11:27.360 as well, thank you so much so. The sleepy days 0:11:27.400 --> 0:11:30.079 of seventeen well, they are long gone. There was the 0:11:30.240 --> 0:11:33.400 Vole Shock of February and then there was that ugly October, 0:11:33.520 --> 0:11:36.600 A warm welcome to November. Is there more to come? 0:11:36.720 --> 0:11:40.199 Steve Whining? Dropping behind the studio, City Global Chief Investment 0:11:40.240 --> 0:11:42.559 officer joins us. Now, good morning to Steve, good morning. 0:11:42.640 --> 0:11:44.600 So it is there more to come? Steve? Well, look 0:11:44.960 --> 0:11:48.800 the way the market dropped so sharply and as rebounding 0:11:49.000 --> 0:11:52.440 so sharply tells us that we're still in a volatile environment. 0:11:53.080 --> 0:11:55.280 And that environment is one where you can still have 0:11:55.559 --> 0:11:58.079 fairly big draw downs and it can be unclear that 0:11:58.120 --> 0:12:00.520 we're in an exact bottom. You don't do that in 0:12:00.559 --> 0:12:02.599 a matter of a couple of days. But I do 0:12:02.800 --> 0:12:05.839 think that the absolute declines that we've seen in US 0:12:05.920 --> 0:12:09.920 shares uh and particularly global shares um really points to 0:12:10.120 --> 0:12:14.679 a larger slowdown than is likely for two thousand nineteen, 0:12:15.440 --> 0:12:18.559 and if we simply know where interest rates are and 0:12:18.720 --> 0:12:21.959 get through a few other issues. Obviously, trade has been 0:12:22.080 --> 0:12:25.520 a major major surprise for markets in two thousand nineteen, 0:12:26.040 --> 0:12:28.440 but I don't think that we can really shock markets 0:12:28.480 --> 0:12:31.160 again with things like tariffs. You know, this expectation is 0:12:31.240 --> 0:12:33.400 high and embedded in the marketplace. So I think that 0:12:33.480 --> 0:12:35.960 we recover from here. I think that that's the story, 0:12:36.360 --> 0:12:39.000 you know, independent of h the volatility continuing in the 0:12:39.080 --> 0:12:41.240 near term. So we had a big vull shelk in February. 0:12:41.280 --> 0:12:43.600 So he essentially sang to the playbook. The post February 0:12:43.600 --> 0:12:47.160 playbook is still intact. If you think about what had 0:12:47.200 --> 0:12:50.440 happened in February, we were in a strong earnings period, 0:12:51.040 --> 0:12:54.360 we were about to rebound UH the March April period. 0:12:54.840 --> 0:12:58.679 The notion of a larger global trade wark was first 0:12:58.760 --> 0:13:01.920 initiated in the marketplace we stop for example, you know, 0:13:02.040 --> 0:13:05.640 the policy uncertainty industries related to trade just absolutely surged 0:13:05.640 --> 0:13:08.120 from nowhere. It shouldn't have been nowhere. Now. I don't 0:13:08.120 --> 0:13:10.679 think that shock can hold us back again. What I 0:13:10.760 --> 0:13:13.280 do think is that we will expect a slower pace 0:13:13.360 --> 0:13:16.840 of earnings gains just you know, three consecutive quarters well 0:13:16.920 --> 0:13:21.120 above that doesn't continue. But I think again, the combination 0:13:21.200 --> 0:13:24.160 of a market that is down, one in which we 0:13:24.280 --> 0:13:27.040 have a good deal of trade warrior priced in around 0:13:27.080 --> 0:13:31.000 the world, and UH a good decent earnings gain still 0:13:31.040 --> 0:13:33.079 ahead of us at a slower pace is enough for 0:13:33.240 --> 0:13:35.560 us to to make a recovery. You've drown a clear 0:13:35.600 --> 0:13:41.719 distinction between peacunnings growth and pecunning absolutely growth because a 0:13:41.800 --> 0:13:44.080 lot of people are sort of confusing the two at 0:13:44.080 --> 0:13:45.800 the moment when they come on programs like this, I 0:13:45.880 --> 0:13:48.000 hear a mix of the two absolutely, and you just 0:13:48.040 --> 0:13:50.480 see it all the time. So that's the thing. If 0:13:50.559 --> 0:13:53.559 you want to say that share prices need to drop 0:13:53.640 --> 0:13:56.440 and level because they embedded too strong a growth rate, 0:13:56.480 --> 0:13:59.560 you can do that. But if we're still going to grow, 0:14:00.240 --> 0:14:03.360 eventually you arrest those declines and prices, you know, And 0:14:03.480 --> 0:14:05.599 that's my point. I think that there's enough inertia for 0:14:05.720 --> 0:14:08.480 us to continue to grow earnings in the coming year, 0:14:08.559 --> 0:14:10.079 both in the U S and the and the rest 0:14:10.120 --> 0:14:12.280 of the world. It was somewhat interesting in the last 0:14:12.360 --> 0:14:14.160 month that actually we find you still some cracks and 0:14:14.240 --> 0:14:17.480 credit in high yield and triple sees whether resiliency has 0:14:17.559 --> 0:14:20.360 been through much of What do you take from that, 0:14:20.520 --> 0:14:23.240 and it's that a sign of fragility. The biggest drag 0:14:23.520 --> 0:14:26.040 on high yield markets, the biggest drags on credit has 0:14:26.080 --> 0:14:29.240 been on the rate front. You know. Again, absolute spread 0:14:29.400 --> 0:14:32.720 levels are low. I do think that you're going to 0:14:32.800 --> 0:14:37.360 see bank credit continuing to be fairly robust. Um. I 0:14:37.480 --> 0:14:39.840 look at credit is more or less a coincident variable. 0:14:39.840 --> 0:14:42.280 I think that's happening from the FED, and what's happening 0:14:42.320 --> 0:14:45.000 in the yield curve is a real leading variable. So 0:14:45.760 --> 0:14:48.360 I think that we're going to see as equities recover some, 0:14:48.560 --> 0:14:52.160 as growth expectations probably stabilize, and the big uncertainty here 0:14:52.200 --> 0:14:55.000 you've got to admit as trade that away from all 0:14:55.040 --> 0:14:58.360 of that, we're going to see credit is not really 0:14:58.440 --> 0:15:00.920 going to be a big inhibitor of of equity markets. 0:15:01.040 --> 0:15:03.280 We're just not going to get any push from credit. 0:15:03.440 --> 0:15:05.720 What have we done with I mean I saw a 0:15:05.800 --> 0:15:10.040 nice matrix from uh Gentleman in Edinburgh yesterday which was 0:15:10.120 --> 0:15:12.320 get out of small caps getting large caps? Do this? 0:15:12.440 --> 0:15:14.480 Do this, do this, do this? What's the do this? 0:15:14.640 --> 0:15:17.920 Do this? Do this for city private bank? Look, since midyear, 0:15:18.160 --> 0:15:22.120 we took down our absolute risk budget some of the 0:15:22.200 --> 0:15:25.600 emerging markets that we might rebound very nicely in a 0:15:25.920 --> 0:15:29.160 very high beta markets for example Eastern Europe, you know 0:15:29.240 --> 0:15:32.320 the ones um These are markets that were underweight, and 0:15:32.520 --> 0:15:34.760 even in a rebound, we're just not going to put 0:15:34.800 --> 0:15:37.800 a lot of money there. We're going to take take 0:15:37.800 --> 0:15:39.800 our risks in Asia to a certain extent and we're 0:15:39.800 --> 0:15:42.520 gonna have a small overweight. And as we mentioned on television. 0:15:42.880 --> 0:15:44.960 You know, we now have an underweight in US small 0:15:45.080 --> 0:15:47.840 caps right for the first time in the cycle. I 0:15:47.880 --> 0:15:49.640 don't think performance is going to be that bad, but 0:15:49.760 --> 0:15:51.960 I think when we look out, you know, we're not 0:15:52.040 --> 0:15:54.240 gonna want to have a massive, massive amount of risk 0:15:54.320 --> 0:15:57.280 in that. But it's still a positive equity environment anticipated 0:15:57.400 --> 0:16:01.000 at least for two thousand. What do earnings grow, because yeah, 0:16:01.080 --> 0:16:03.360 I get the idea that we're phasing out the text cut. 0:16:03.400 --> 0:16:05.720 You can argue if there's a persistent value to its 0:16:05.800 --> 0:16:08.760 good morning, Mr Cudlow, or or if there's a one 0:16:08.800 --> 0:16:10.640 off of vent or a two quarter of it you okay, 0:16:10.680 --> 0:16:12.560 over there, John, I'm doing you were a trick or 0:16:12.600 --> 0:16:14.480 treating too like ton of clocks. I'm hanging in there. 0:16:14.720 --> 0:16:17.600 I was having oysters at Elise at ninety one in Madison, 0:16:17.680 --> 0:16:19.800 and you went by me. You look so good as 0:16:19.880 --> 0:16:23.000 quantitative tightening. Yeah, thank you. It was great. Appreciate that 0:16:23.760 --> 0:16:26.120 you just you know, he looks as good as quantitative tighten. 0:16:26.240 --> 0:16:29.200 He went his quantitative tightening and went to bed with 0:16:29.600 --> 0:16:32.200 lemon and honey and some hot water. My suit is 0:16:32.280 --> 0:16:34.600 quantitatively tightening, as I get found. Yeah, well, no, I 0:16:34.640 --> 0:16:37.640 want his quantitative easy because that's what's happening. But but 0:16:37.840 --> 0:16:40.040 what what is the profit model for it? I mean, 0:16:40.080 --> 0:16:43.760 you're one of the best I know gaming earnings. What's 0:16:43.840 --> 0:16:47.160 the game forward? So if you take a look at 0:16:47.600 --> 0:16:50.920 the level of production and demand in the United States, 0:16:51.000 --> 0:16:54.040 and you say, we can quibble the third quarter, we 0:16:54.200 --> 0:16:57.440 pulled in a lot of imports ahead of tariffs, We 0:16:57.560 --> 0:17:01.480 built some inventories on the external saw Um, we have, 0:17:01.920 --> 0:17:04.320 you know, some modest weakness in some of the cyclical 0:17:04.359 --> 0:17:08.639 areas and housing and autos, but sort of the production level, uh, 0:17:08.760 --> 0:17:11.679 and the cost problems that we have, you know, are 0:17:11.720 --> 0:17:15.040 still not large enough to completely erase the inertia we 0:17:15.119 --> 0:17:18.240 have up in property. This conversation is way too sophisticated 0:17:18.280 --> 0:17:21.000 for this program. What are you doing? No, I'm waiting 0:17:21.040 --> 0:17:23.000 for Steve to end on profits because what he says 0:17:23.119 --> 0:17:27.000 is really important. Profits still Amazon, Just so everyone knows, 0:17:27.119 --> 0:17:29.960 Tom Keane has an alpen prime box. What's in it? 0:17:30.680 --> 0:17:33.000 I don't know? Maybe you do? You know two of 0:17:33.040 --> 0:17:36.160 the kids laptops have broken in the last forty Why 0:17:36.160 --> 0:17:41.080 are you opening your post? What if you got Oh? 0:17:41.640 --> 0:17:46.080 Is it Anthony Anthony from Sparta? Is it it's pink? 0:17:46.240 --> 0:17:49.200 Whatever it is it's John. You it's going to bring 0:17:49.240 --> 0:17:51.600 a tear to your eye. I try to open if 0:17:51.640 --> 0:17:57.760 you bought by this. This is a gift Anthony from Sparta. 0:17:57.960 --> 0:18:00.639 It's a breakfast set for you and me and the studio. 0:18:00.720 --> 0:18:03.480 You've got a child's breakfast set. It is. It's a 0:18:03.560 --> 0:18:07.760 tea set for girls, child's breakfast, so you and I 0:18:07.880 --> 0:18:10.080 can dine and style. I don't think this is the 0:18:10.160 --> 0:18:14.040 studio who gave you this said came Amazon, you know, 0:18:14.920 --> 0:18:21.080 Anthony from Sparta. It's it's it's children breakfast set. Yeah, 0:18:21.160 --> 0:18:24.120 we can put it right here. You like that, John, 0:18:24.200 --> 0:18:28.440 Steve Pink, I can only apologize to my colleague honestly, 0:18:29.359 --> 0:18:32.840 how much did you drink yesterday? I didn't. I didn't. 0:18:33.680 --> 0:18:36.520 You didn't? You didn't? Did you drink? Actually? Can we 0:18:36.560 --> 0:18:39.160 say good morning to Candy on Madison went in huge 0:18:39.240 --> 0:18:42.760 John Farrell fans. I'll write the Dina Yeah yeah, yeah, 0:18:42.800 --> 0:18:45.040 they came in and you know we're having a beverage 0:18:45.080 --> 0:18:47.960 of our choice, Candy Dinas. Good morning to those up 0:18:48.040 --> 0:18:53.240 Madison Avenue, every on Lexington on Lexion. Now this is Candy. 0:18:53.400 --> 0:18:57.240 This is a beverage store. The store, yes you're familiar 0:18:57.280 --> 0:19:01.280 with that. Yes. Yeah. At the Feral Wall on the 0:19:01.920 --> 0:19:06.280 side store on ninety four, I walked in a Quantitative 0:19:06.320 --> 0:19:07.959 Easy and they said good morning. You know they they, 0:19:08.840 --> 0:19:11.560 you know, said thoughts to you. Yeah, I think you 0:19:11.680 --> 0:19:14.720 like pay the rent. I like the Amarona in the 0:19:15.400 --> 0:19:18.160 top left of the store, in the left corner. The amaroni. 0:19:18.400 --> 0:19:20.760 What is the amaroni? I don't know, Amarondi. It's a 0:19:20.880 --> 0:19:23.320 very good red wine. I'll buy you a ball. Steve 0:19:23.359 --> 0:19:25.000 Whine is going why are we having brought toast in 0:19:25.080 --> 0:19:27.760 the studio? What's going on this show? Well, this is 0:19:27.760 --> 0:19:30.199 a lot easier than talking about markets and whether it's 0:19:30.280 --> 0:19:32.560 rates of growth or slower rates of growth. But I 0:19:32.600 --> 0:19:36.040 mean the cacophony of October and John we got a 0:19:36.119 --> 0:19:39.040 salvation day yesterday, right seriously at a couple of That 0:19:39.119 --> 0:19:42.440 was the first two day gain on the SMP for September. 0:19:42.920 --> 0:19:47.560 What what do you do into November into December? Steve 0:19:47.600 --> 0:19:50.440 Whining rights is here in report. So let's just remember 0:19:50.560 --> 0:19:54.280 first that knowing what's going on in the market now 0:19:55.040 --> 0:19:57.560 often tells you very very little about what is a 0:19:57.640 --> 0:20:01.320 good investment, what is a longer term holding? And you're 0:20:02.280 --> 0:20:05.040 listeners really really should decide on whether they're trading this 0:20:05.240 --> 0:20:08.240 or they're investing in this. Now, my point of view 0:20:08.320 --> 0:20:13.720 here is that panic is unnecessary, that the economic outlook 0:20:13.840 --> 0:20:17.960 will again is not going to yield eternal growth, but 0:20:18.119 --> 0:20:21.560 it's good enough to yield us further profit games and 0:20:21.680 --> 0:20:23.720 the constraints that we have on the interest rate front, 0:20:23.720 --> 0:20:26.080 they are not enough to knock us over. They're not 0:20:26.119 --> 0:20:28.199 gonna They're not going to compete with equity. See why 0:20:28.200 --> 0:20:44.200 did you thank you so much? I was just wonderful, John? 0:20:44.280 --> 0:20:49.159 Can I just say it? Granger's causality. Clyde Granger was 0:20:49.240 --> 0:20:53.040 a British giant of mathematics. He ended up and of 0:20:53.119 --> 0:20:55.240 course one of the climbs of the United Kingdom. The 0:20:55.320 --> 0:20:58.680 University of San Diego, Usity of California, San Diego want 0:20:58.680 --> 0:21:01.520 a Nobel Prize for garch with the Robert angle and 0:21:01.600 --> 0:21:05.840 all that. Okay, Does wage growth in a better economy 0:21:06.080 --> 0:21:10.840 cause better productivity? Or does better productivity cause better wage grows? 0:21:11.000 --> 0:21:14.640 The chicken and the egg of economics exactly, And I'm 0:21:14.760 --> 0:21:17.959 sorry there. It is better productivity with a revision up 0:21:18.000 --> 0:21:22.800 for previous productivity. It's interesting head to pay rolls tomorrow. 0:21:22.840 --> 0:21:24.240 Do you want to bring in our guest. No, no, 0:21:24.480 --> 0:21:27.560 you like eating into important times, someone really important? But 0:21:27.880 --> 0:21:30.000 west Ham? Is it? What do we start? Well done? 0:21:30.600 --> 0:21:33.880 I guess start with East London. Please starting with west Ham. 0:21:34.000 --> 0:21:37.800 Steve Major, HSBC Global head of Fixed Income Research, Steve, 0:21:38.040 --> 0:21:39.720 I'm sure that most of our listeners want to talk 0:21:39.760 --> 0:21:42.400 fixed income. Let's start with west Ham. How are we doing. 0:21:42.560 --> 0:21:46.280 There's a lack of productivity there, certainly last night. So 0:21:46.720 --> 0:21:49.919 so this is interesting because productivity must be going up 0:21:50.040 --> 0:21:53.040 in the US economy and in the UK economy by 0:21:53.119 --> 0:21:56.800 the way, because if wages are going at what three 0:21:56.840 --> 0:21:59.760 and a half percent, and the Fed's preferred measures of 0:22:00.000 --> 0:22:03.800 relation they all stuck around two and frankly, the FEDS 0:22:03.880 --> 0:22:07.119 deflator has been falling all year. It's even less than that. 0:22:07.840 --> 0:22:10.200 So if you if you assume too and three and 0:22:10.200 --> 0:22:12.680