1
00:00:00,440 --> 00:00:13,040
Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.

2
00:00:13,480 --> 00:00:17,560
Speaker 1: Daily 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 --> 00:00:33,920
Speaker 1: Bloomberg dot com, and of course on the Bloomberg Lisa

5
00:00:34,000 --> 00:00:36,400
Speaker 1: brown Winson, Tom Keene looking at fly aware. It's a

6
00:00:36,400 --> 00:00:40,440
Speaker 1: great service flight aware dot com. The Toronto Cafe Pacific

7
00:00:40,520 --> 00:00:43,560
Speaker 1: is in path to land at Hong Kong, which indicates

8
00:00:43,560 --> 00:00:46,839
Speaker 1: some of the international arrivals that we're still seeing at

9
00:00:46,840 --> 00:00:49,760
Speaker 1: the Hong Kong Airport. Our Von Man leading all of

10
00:00:49,760 --> 00:00:53,520
Speaker 1: our Asia coverage is at the Hong Kong Airport, putting

11
00:00:53,520 --> 00:00:57,360
Speaker 1: in prodigious days for us. Ivan to begin with, what

12
00:00:57,600 --> 00:01:01,960
Speaker 1: is the distinction of this Tuesday in your Tuesday seven

13
00:01:02,000 --> 00:01:06,840
Speaker 1: pm versus twenty four hours ago. Well, Tom assumes by

14
00:01:06,880 --> 00:01:10,920
Speaker 1: airport officials are still trying to get some planes out.

15
00:01:11,080 --> 00:01:14,199
Speaker 1: That's the difference here. They're not completely candling remaining flight.

16
00:01:14,640 --> 00:01:18,240
Speaker 1: We did hear some confusing or conflicting messages from the

17
00:01:18,240 --> 00:01:20,440
Speaker 1: ground here on the ground here in the last hour

18
00:01:20,520 --> 00:01:22,760
Speaker 1: or ago. But you hear that that's a loud speaker

19
00:01:22,760 --> 00:01:26,520
Speaker 1: they've been playing that out very frequently and and muks

20
00:01:26,520 --> 00:01:29,520
Speaker 1: louder and devil and volume, I should say, And what

21
00:01:29,560 --> 00:01:32,360
Speaker 1: they're saying now is that I'll check in servants for

22
00:01:32,520 --> 00:01:36,279
Speaker 1: departures like I been suspended as of four thirty pm

23
00:01:36,360 --> 00:01:40,520
Speaker 1: this afternoon Locial Times about two and a half hours ago,

24
00:01:40,640 --> 00:01:44,280
Speaker 1: so basically anyone that checked in before that are still

25
00:01:44,280 --> 00:01:47,200
Speaker 1: able to take anyone else. So they're telling able to

26
00:01:47,280 --> 00:01:50,440
Speaker 1: leave the terminal right now and contact your respected airlines

27
00:01:50,720 --> 00:01:54,559
Speaker 1: to and Lisa. Just to give an example, Hong Kong

28
00:01:54,640 --> 00:01:58,320
Speaker 1: to Boston Pacific eight one two just took off, so

29
00:01:59,360 --> 00:02:01,560
Speaker 1: it's at its way. Evan, I wanted to talk a

30
00:02:01,560 --> 00:02:04,520
Speaker 1: little bit about a tweet from the editor in chief

31
00:02:04,600 --> 00:02:07,080
Speaker 1: of China's state run Global Times, who's been thought of

32
00:02:07,080 --> 00:02:09,720
Speaker 1: as sort of a harbinger of the mainland's point of

33
00:02:09,800 --> 00:02:12,800
Speaker 1: view and sort of actions, and he tweeted out that

34
00:02:12,800 --> 00:02:15,400
Speaker 1: if the situation in Hong Kong doesn't improve, he thinks

35
00:02:15,520 --> 00:02:19,200
Speaker 1: China will intervene. Is that sort of the growing feeling

36
00:02:19,280 --> 00:02:24,480
Speaker 1: here that Beijing is preparing to get involved, well, And

37
00:02:24,639 --> 00:02:27,240
Speaker 1: that's always a tough question to to say, but what

38
00:02:27,400 --> 00:02:29,880
Speaker 1: we have heard is the rhetoric has random right, They've

39
00:02:29,880 --> 00:02:32,079
Speaker 1: been talking about how you know they're calling it signs

40
00:02:32,120 --> 00:02:34,959
Speaker 1: of terrorism that they're seeing in Hong Kong, that they're

41
00:02:34,960 --> 00:02:37,480
Speaker 1: going to clamp down on this with an iron fish,

42
00:02:37,520 --> 00:02:40,400
Speaker 1: just just escalates further at this point. We've heard from

43
00:02:40,440 --> 00:02:44,040
Speaker 1: Terry Lamb earlier this morning in a press conference, and

44
00:02:44,320 --> 00:02:47,040
Speaker 1: she didn't offer any kind of developments there. So she

45
00:02:47,120 --> 00:02:50,240
Speaker 1: continued to say that the Beijing sup towards her. They

46
00:02:50,320 --> 00:02:53,000
Speaker 1: doing supports the Hong Kong police and how they've responded

47
00:02:53,360 --> 00:02:56,520
Speaker 1: to these protests and the violent classes that we've seen,

48
00:02:56,600 --> 00:03:00,480
Speaker 1: which probably the protesters you're more they already ding another

49
00:03:00,840 --> 00:03:05,120
Speaker 1: much on Sunday, and the international community has also chimed

50
00:03:05,120 --> 00:03:07,600
Speaker 1: in as well. We talked about Nancy Pelosi, the US

51
00:03:07,639 --> 00:03:11,239
Speaker 1: House Speakers, urging Harry Land to meet with protesters, try

52
00:03:11,320 --> 00:03:13,399
Speaker 1: to me in the middle with some of their demands,

53
00:03:13,800 --> 00:03:16,959
Speaker 1: and that's what earth the most. When the International Committee

54
00:03:18,160 --> 00:03:21,360
Speaker 1: v I'm thinking so much, Von Man. The Hong Kong airport,

55
00:03:21,919 --> 00:03:24,720
Speaker 1: Now there are some departures, Uh, excuse me, there are

56
00:03:24,840 --> 00:03:29,280
Speaker 1: some arrivals, and it seems very select departures as well.

57
00:03:29,320 --> 00:03:32,560
Speaker 1: Gideon Rose, listening to all this, he has rebuilt Foreign

58
00:03:32,600 --> 00:03:36,280
Speaker 1: Affairs Magazine into a monthly must read. But the September

59
00:03:36,400 --> 00:03:40,400
Speaker 1: issue is truly extraordinary. And you go back to the

60
00:03:40,520 --> 00:03:46,320
Speaker 1: loadstone of modern Chinese study, which is a journalist Richard McGregor.

61
00:03:46,840 --> 00:03:49,080
Speaker 1: I remember when he first came out with his books

62
00:03:49,160 --> 00:03:51,240
Speaker 1: on China, and we also, damn, I've got to read

63
00:03:51,320 --> 00:03:54,960
Speaker 1: this because it was so immediate. What does Richard McGregor

64
00:03:55,080 --> 00:03:58,560
Speaker 1: say that we need to know about the leadership of China?

65
00:03:58,880 --> 00:04:01,120
Speaker 1: That that's thank you, Tom. And the what he says

66
00:04:01,280 --> 00:04:05,720
Speaker 1: is that the driving force behind the mature adult Jian

67
00:04:05,840 --> 00:04:10,600
Speaker 1: Ping in power in China is the restoration of party rule,

68
00:04:10,880 --> 00:04:14,600
Speaker 1: the acting out of his filial piety towards his Communist father,

69
00:04:15,200 --> 00:04:19,480
Speaker 1: and essentially restoring the authority and dominance of the Chinese

70
00:04:19,560 --> 00:04:23,520
Speaker 1: Communist Party within China and more broadly beyond it. So

71
00:04:23,640 --> 00:04:27,440
Speaker 1: I do not think that Shiji and Ping can ultimately

72
00:04:27,600 --> 00:04:31,600
Speaker 1: allow these protests to emerge towards an independence movement in

73
00:04:31,680 --> 00:04:34,120
Speaker 1: Hong Kong. And if he decides that things are going

74
00:04:34,160 --> 00:04:37,520
Speaker 1: in that direction, there will be a crackdown. The question

75
00:04:37,680 --> 00:04:40,320
Speaker 1: is only whether it will be in real time or

76
00:04:41,080 --> 00:04:43,360
Speaker 1: a pull back and then a crackdown after the fact.

77
00:04:43,440 --> 00:04:45,280
Speaker 1: But at the end of the day, Hong Kong does

78
00:04:45,320 --> 00:04:48,120
Speaker 1: not separate itself from China. So the rhetoric out of

79
00:04:48,160 --> 00:04:52,640
Speaker 1: Beijing has been one of liberalization of their economy, of

80
00:04:52,760 --> 00:04:56,640
Speaker 1: opening up to foreign investors and foreign businesses. But in

81
00:04:56,800 --> 00:05:00,480
Speaker 1: many ways the country has become more protectionists. So which

82
00:05:00,640 --> 00:05:03,640
Speaker 1: is it is the country becoming more open to outsiders

83
00:05:03,920 --> 00:05:07,400
Speaker 1: or more closed. Well, it's the answer is both simultaneously,

84
00:05:07,480 --> 00:05:10,280
Speaker 1: in different directions and different dimensions. You have totally very

85
00:05:10,440 --> 00:05:13,800
Speaker 1: growing economy that is engaged with the world, but at

86
00:05:13,839 --> 00:05:15,880
Speaker 1: the same time there are policy measures on different sides

87
00:05:15,920 --> 00:05:18,000
Speaker 1: and different types of re oriented. So the short answer

88
00:05:18,120 --> 00:05:21,760
Speaker 1: is these all these trends are going simultaneously. If the

89
00:05:21,960 --> 00:05:25,200
Speaker 1: world economic trends of everybody trying to beg of their

90
00:05:25,240 --> 00:05:29,920
Speaker 1: neighbor and protect their own economy as things go down accelerates,

91
00:05:29,960 --> 00:05:33,480
Speaker 1: then we get the classic spiral downward. But if the

92
00:05:34,000 --> 00:05:37,080
Speaker 1: prospect of a hanging scares everybody enough to basically get

93
00:05:37,120 --> 00:05:39,320
Speaker 1: them to a deal, then things can keep going forward.

94
00:05:39,440 --> 00:05:42,280
Speaker 1: Thirty seconds. Do you think that in two years time

95
00:05:42,320 --> 00:05:44,480
Speaker 1: there are going to be more foreign businesses in China

96
00:05:44,520 --> 00:05:47,000
Speaker 1: than there are today? I actually think they'll be fewer,

97
00:05:47,040 --> 00:05:49,360
Speaker 1: because I think, unfortunately we're heading towards some kind of

98
00:05:49,440 --> 00:05:53,160
Speaker 1: slow decoupling, uh, and until there's some really stable deal

99
00:05:53,240 --> 00:05:55,520
Speaker 1: in which people can understand how they can go forward,

100
00:05:55,839 --> 00:05:58,160
Speaker 1: I think we're going to see more of attention and

101
00:05:58,279 --> 00:06:00,840
Speaker 1: disarray in I hate you. Thank you for ruining my

102
00:06:00,920 --> 00:06:02,560
Speaker 1: last two weeks of August, because now I've got to

103
00:06:02,600 --> 00:06:05,800
Speaker 1: read your magazine cover to cover. Gideon Rose, Foreign Affairs

104
00:06:05,839 --> 00:06:11,040
Speaker 1: of magazine Autocracy now really just really extorting Tom. Why

105
00:06:11,040 --> 00:06:12,760
Speaker 1: don't you say that you hate me more often? Because

106
00:06:12,800 --> 00:06:18,320
Speaker 1: because he's right, he's got these you got quickly here

107
00:06:18,800 --> 00:06:22,520
Speaker 1: Robert Blackwool in India is just superb. Yeah, and actually

108
00:06:22,560 --> 00:06:25,440
Speaker 1: to India is a great underlooked and overlooked a part

109
00:06:25,480 --> 00:06:29,000
Speaker 1: of the picture. And the argument here from uh Blackwell

110
00:06:29,080 --> 00:06:31,760
Speaker 1: and and actually tell us uh is that basically we

111
00:06:31,920 --> 00:06:33,840
Speaker 1: can and should make more of a resource of the

112
00:06:33,880 --> 00:06:36,679
Speaker 1: Indian Alliance. There's some also great pieces by Jacob Weisberg

113
00:06:36,760 --> 00:06:38,960
Speaker 1: in the Future of the Media, and lots of different

114
00:06:39,000 --> 00:06:41,320
Speaker 1: great great stuff. But I mean, it's just a great

115
00:06:41,440 --> 00:06:44,360
Speaker 1: article to article. And of course it's like thick, as

116
00:06:44,400 --> 00:06:46,960
Speaker 1: I said, it's thick like every schools in their advertising.

117
00:06:47,200 --> 00:06:49,280
Speaker 1: I will just the schools in there. That's sort of

118
00:06:49,360 --> 00:06:53,480
Speaker 1: the equivalent of vogues fashion advertisers. I will say, if

119
00:06:53,520 --> 00:06:56,960
Speaker 1: you want to get your pessimistic confirmation, how a global

120
00:06:57,040 --> 00:07:15,640
Speaker 1: trading system dies is the top. It's Lisa Abrama and

121
00:07:15,760 --> 00:07:19,280
Speaker 1: some Tom King's world. You're with this, Lisa, two cents

122
00:07:19,320 --> 00:07:21,600
Speaker 1: spread just twelve minutes ago, going down to a new

123
00:07:22,080 --> 00:07:25,440
Speaker 1: uh new flattening or inversion right now four point eight

124
00:07:25,520 --> 00:07:28,160
Speaker 1: eight on that one of the indications here of a

125
00:07:28,360 --> 00:07:31,360
Speaker 1: giant bond call. There's been a couple of HSBC Steve

126
00:07:31,440 --> 00:07:34,560
Speaker 1: Major with a great call. But then there's a collegial

127
00:07:34,680 --> 00:07:38,600
Speaker 1: set at Morgan Stanley which is really rung true over

128
00:07:38,640 --> 00:07:40,880
Speaker 1: the last number of months. And we're so lucky to

129
00:07:40,960 --> 00:07:43,400
Speaker 1: have Brian Weinstein in whose head a global fixed income

130
00:07:43,400 --> 00:07:46,800
Speaker 1: at Morgan Stanley Investment Management. Yes, so lucky joining us

131
00:07:46,840 --> 00:07:49,840
Speaker 1: here in studio to talk about what we're seeing in bondmarkets. Brian,

132
00:07:49,880 --> 00:07:51,720
Speaker 1: I think that the key question, just to go from

133
00:07:51,760 --> 00:07:55,200
Speaker 1: a thirty thousand foot view here is our bond markets

134
00:07:55,240 --> 00:07:58,920
Speaker 1: screaming we are heading toward a recession. Bondom markets are

135
00:07:58,960 --> 00:08:02,320
Speaker 1: screaming there's no growth. Um. You can pick and choose

136
00:08:02,360 --> 00:08:05,400
Speaker 1: if you believe yield curves are telling you that there's

137
00:08:05,400 --> 00:08:07,440
Speaker 1: going to be a recession. But that is the direction

138
00:08:07,520 --> 00:08:10,840
Speaker 1: of travel. Hello, are we going to go here? Especially

139
00:08:10,880 --> 00:08:13,440
Speaker 1: with the thirty year yield close to it's all time low.

140
00:08:14,280 --> 00:08:15,840
Speaker 1: I mean, it feels like we're going to take a

141
00:08:15,920 --> 00:08:19,160
Speaker 1: pause at some point. But it's obvious that people are underderrated.

142
00:08:19,360 --> 00:08:21,120
Speaker 1: Right at three and a quarter on the tenure note.

143
00:08:21,160 --> 00:08:24,200
Speaker 1: Nobody wanted them underdrated? Is that a word? Yeah? The

144
00:08:24,280 --> 00:08:32,160
Speaker 1: concept more only underrated. I tell my children, excuse me

145
00:08:32,200 --> 00:08:36,480
Speaker 1: that it's completely underderrated. That is, it's we'll give us

146
00:08:36,480 --> 00:08:40,160
Speaker 1: a nuance on the caution Mike Wilson equities caution, Ellen's

147
00:08:40,280 --> 00:08:44,160
Speaker 1: ener g DP caution, FED policy, FED rate cuts, etcetera.

148
00:08:44,720 --> 00:08:47,520
Speaker 1: What's the new caution you have in a bond market

149
00:08:48,000 --> 00:08:51,760
Speaker 1: price to Austrian one hundred year perfection. It's really interesting

150
00:08:51,800 --> 00:08:53,840
Speaker 1: to look at interest rates where they are, and that's

151
00:08:53,880 --> 00:08:55,480
Speaker 1: been the big mover. Right three and a quarter to

152
00:08:55,600 --> 00:08:58,959
Speaker 1: one sixty on the tenure note. Credit? Now, what's the

153
00:08:59,040 --> 00:09:02,280
Speaker 1: now cut? Even now? What is? I think risk assets

154
00:09:02,360 --> 00:09:04,760
Speaker 1: probably have to come off a little bit more. Equities

155
00:09:04,760 --> 00:09:07,080
Speaker 1: are still very close to the Hayes US credit spreads

156
00:09:07,080 --> 00:09:11,280
Speaker 1: haven't really moved. Um, we've taken risk down because so

157
00:09:11,400 --> 00:09:13,520
Speaker 1: if you move from credit to full faith and credit

158
00:09:13,679 --> 00:09:16,720
Speaker 1: is a we've really done thousand foot view. Yeah, it's right,

159
00:09:17,200 --> 00:09:19,640
Speaker 1: add more duration. I didn't really want to ask that question.

160
00:09:19,679 --> 00:09:22,679
Speaker 1: I just did do impress Lisa. I'm impressed. Hum, that

161
00:09:22,800 --> 00:09:24,959
Speaker 1: was great. One question that I have. It seems like

162
00:09:25,120 --> 00:09:28,000
Speaker 1: in markets there is the expectation the Federal Reserve will

163
00:09:28,040 --> 00:09:30,760
Speaker 1: cut rates four times by the end of next year,

164
00:09:31,080 --> 00:09:33,760
Speaker 1: and then it won't work. And you know, I have

165
00:09:33,920 --> 00:09:37,079
Speaker 1: to wonder does that sound a warning signal? Well, it's

166
00:09:37,080 --> 00:09:40,040
Speaker 1: interesting to say it won't work. The inflation expectations have fallen,

167
00:09:40,120 --> 00:09:42,880
Speaker 1: but they're still fairly positive. It's growth, right, there's no

168
00:09:43,520 --> 00:09:45,280
Speaker 1: sign that they're going to create growth, and I think

169
00:09:45,320 --> 00:09:46,880
Speaker 1: part of that is it's not just up to them,

170
00:09:47,120 --> 00:09:49,640
Speaker 1: but there's global forces at work. They're keeping growth low.

171
00:09:49,920 --> 00:09:52,319
Speaker 1: The FED easing may keep us alive, but it's not

172
00:09:52,640 --> 00:09:55,080
Speaker 1: It can't spur the global economy. Just want to interrupt.

173
00:09:55,120 --> 00:09:57,040
Speaker 1: I'm watching the flight plans out of Hong Kong for

174
00:09:57,080 --> 00:09:59,600
Speaker 1: our New York audience. I just want to say, Hong Kong.

175
00:09:59,679 --> 00:10:03,960
Speaker 1: Didj K just took off flight eight four six? Cathy there? Yeah,

176
00:10:04,040 --> 00:10:05,280
Speaker 1: Well it was a little bit. I don't want to

177
00:10:05,320 --> 00:10:09,079
Speaker 1: oversell it. But that critical JFK flight took off, I

178
00:10:09,160 --> 00:10:12,800
Speaker 1: believe arrived at eleven o'clock. You know, I have to wonder, Brian,

179
00:10:13,000 --> 00:10:16,840
Speaker 1: as we look at yields going lower and the failure

180
00:10:17,040 --> 00:10:20,160
Speaker 1: of central bank stimulus to really move anything, you'd say

181
00:10:20,240 --> 00:10:22,840
Speaker 1: that there's going to be a sell off in risk assets.

182
00:10:22,920 --> 00:10:25,800
Speaker 1: There has to be How deep will it be? Because

183
00:10:25,840 --> 00:10:27,560
Speaker 1: people are saying, well, if it's not like a two

184
00:10:27,600 --> 00:10:30,400
Speaker 1: thousand and eight sell off, it's a buying opportunity. I

185
00:10:30,440 --> 00:10:32,400
Speaker 1: would never say it has to be. These markets can

186
00:10:32,600 --> 00:10:35,120
Speaker 1: can stay pretty tight, as we've proven. What we've done

187
00:10:35,200 --> 00:10:37,520
Speaker 1: is we've taken down risk in the hopes that will

188
00:10:37,559 --> 00:10:40,120
Speaker 1: buy something cheaper. But we're not under risked. The problem

189
00:10:40,240 --> 00:10:43,280
Speaker 1: is that people need yield. Right when you see negative

190
00:10:43,360 --> 00:10:45,160
Speaker 1: rates in Europe, when you see some one percent rates

191
00:10:45,200 --> 00:10:49,240
Speaker 1: in Australia, the the savior of risk assets continues to

192
00:10:49,320 --> 00:10:52,760
Speaker 1: be that people need to buy non negative yields. How

193
00:10:52,840 --> 00:10:55,199
Speaker 1: long ago did you start taking down risk? We started

194
00:10:55,240 --> 00:10:57,719
Speaker 1: taking down risk in April May. I mean remember where

195
00:10:57,720 --> 00:11:00,480
Speaker 1: we came from. December was a really bad month. Things

196
00:11:00,520 --> 00:11:03,280
Speaker 1: got really wide into December January. We added risk and

197
00:11:03,480 --> 00:11:06,360
Speaker 1: took it down in we called April May. What would

198
00:11:06,360 --> 00:11:09,120
Speaker 1: it take for you to get back in probably another

199
00:11:09,160 --> 00:11:11,760
Speaker 1: couple of days like the last couple. And you can't

200
00:11:11,800 --> 00:11:13,599
Speaker 1: wait for all the uncertainty to go away. It's not

201
00:11:13,679 --> 00:11:16,640
Speaker 1: going to happen. I think, knowing what the FED is

202
00:11:16,720 --> 00:11:19,240
Speaker 1: going to do, they seem like they are not ahead

203
00:11:19,280 --> 00:11:21,040
Speaker 1: of the curve. That is always a dangerous place for

204
00:11:21,160 --> 00:11:23,240
Speaker 1: risk assets. So I think we need the FED to

205
00:11:23,440 --> 00:11:25,439
Speaker 1: be a little more clear that they see what the

206
00:11:25,480 --> 00:11:28,080
Speaker 1: market is asking for and that they agree as a committee.

207
00:11:28,440 --> 00:11:31,600
Speaker 1: You have a story career at Black Rocket, at Morgan Stanley,

208
00:11:31,640 --> 00:11:35,959
Speaker 1: and it's wrapped around research. Let's take damn Fuss, the

209
00:11:36,080 --> 00:11:40,560
Speaker 1: giant loomas sales who wanted to buy discount paper, take

210
00:11:40,640 --> 00:11:43,559
Speaker 1: it up off of a credit redo and improving credit redo.

211
00:11:44,360 --> 00:11:47,480
Speaker 1: All that stuff is thrown out the window here, isn't

212
00:11:47,520 --> 00:11:51,240
Speaker 1: it It is? I mean, uncertainty will make the markets

213
00:11:51,240 --> 00:11:52,800
Speaker 1: to do things that don't make sense, and that's good

214
00:11:52,880 --> 00:11:55,760
Speaker 1: for people. Yeah, but negative interest rates aren't in fabosi.

215
00:11:56,120 --> 00:11:59,160
Speaker 1: They're not something damn Fuss was we done? Negative interest

216
00:11:59,200 --> 00:12:01,640
Speaker 1: rates are problematic, the not in the textbook. So how

217
00:12:01,720 --> 00:12:06,720
Speaker 1: do we clear the fixed income market of these historical oddities.

218
00:12:06,800 --> 00:12:09,680
Speaker 1: Don't tell me there's a permanence to negative interest rates.

219
00:12:10,240 --> 00:12:12,360
Speaker 1: It's hard to imagine those are permanents negative interest rates,

220
00:12:12,400 --> 00:12:15,080
Speaker 1: but they can stick around for a very long time. Listen.

221
00:12:15,120 --> 00:12:17,760
Speaker 1: The theory after oada's rates went down was that it

222
00:12:17,800 --> 00:12:21,480
Speaker 1: would be massively inflationary, right, central banks buying the contempay.

223
00:12:21,559 --> 00:12:25,319
Speaker 1: Some people thought that, and it hasn't happened. I think

224
00:12:25,360 --> 00:12:28,160
Speaker 1: there are I think there's a broader question which will

225
00:12:28,200 --> 00:12:30,679
Speaker 1: probably for the audience, which is we got four minutes.

226
00:12:32,720 --> 00:12:34,880
Speaker 1: Other other things that are at play besides inter beside

227
00:12:34,920 --> 00:12:39,199
Speaker 1: central bank rades and demographics right causing uh causing interest

228
00:12:39,320 --> 00:12:41,760
Speaker 1: rates to go down, And there's a lot of forces

229
00:12:41,800 --> 00:12:44,600
Speaker 1: that Sir John Templeton said there will be a shortage

230
00:12:44,640 --> 00:12:48,000
Speaker 1: of bonds. Is there a shortage of bonds? Yes, it

231
00:12:48,040 --> 00:12:49,559
Speaker 1: feels like there's a shortage of bonds. I think when

232
00:12:49,559 --> 00:12:51,720
Speaker 1: you see the bond market do what it did yesterday,

233
00:12:51,760 --> 00:12:55,160
Speaker 1: we have a fifteen basis. Yeah, that that does a

234
00:12:55,200 --> 00:12:57,679
Speaker 1: short at least. I think it's really important that observation.

235
00:12:57,800 --> 00:13:01,240
Speaker 1: Yesterday it was different. Yesterday it was straordinary. Well, you've

236
00:13:01,280 --> 00:13:03,240
Speaker 1: made a really good point this morningtime. What I do

237
00:13:04,360 --> 00:13:07,400
Speaker 1: besides showing up. No, you said, you know, all of

238
00:13:07,440 --> 00:13:09,800
Speaker 1: a sudden, everyone's a long term investor, and and it

239
00:13:09,920 --> 00:13:14,640
Speaker 1: raises a question, who's trading right now? And Bryan, that's

240
00:13:14,640 --> 00:13:16,640
Speaker 1: a question a lot of people are wondering because when

241
00:13:16,679 --> 00:13:19,400
Speaker 1: I talk with real money investors, they're sitting on our hands,

242
00:13:20,000 --> 00:13:21,960
Speaker 1: I mean our trading volumes. You go down a lot

243
00:13:22,080 --> 00:13:25,400
Speaker 1: on investment management side when when there's this much uncertainty.

244
00:13:25,480 --> 00:13:27,440
Speaker 1: So I think you have people that are forced to trade,

245
00:13:27,480 --> 00:13:29,480
Speaker 1: and those are often levered players. Right, people who have

246
00:13:29,640 --> 00:13:32,120
Speaker 1: borrowed money to invest in Argentina or something like that

247
00:13:32,200 --> 00:13:35,160
Speaker 1: will have to to move. And then algorithms, right, the computers,

248
00:13:35,200 --> 00:13:37,760
Speaker 1: the models will will move risk around as there's opportugity.

249
00:13:38,640 --> 00:13:41,120
Speaker 1: I was in the triple leverage all cash fun but

250
00:13:41,320 --> 00:13:43,880
Speaker 1: vet Bill said, throw ten percent into the triple leverage

251
00:13:43,880 --> 00:13:47,960
Speaker 1: point series fun. We only do work Europe, Bloombergs and Valance,

252
00:13:48,000 --> 00:13:52,000
Speaker 1: we only need triple for leverage. No, but this is

253
00:13:52,040 --> 00:13:55,160
Speaker 1: an important point. I'm wondering if it's algorithms, everybody always

254
00:13:55,200 --> 00:13:57,680
Speaker 1: points to them and sort of has become a cliche.

255
00:13:58,520 --> 00:14:00,319
Speaker 1: But does this mean that markets are much less of fishing?

256
00:14:01,040 --> 00:14:04,360
Speaker 1: I think in in certain idiots and credit cases, Yes,

257
00:14:04,400 --> 00:14:07,880
Speaker 1: an opportunity comes from that. Whereas their volume in treasuries, right,

258
00:14:07,960 --> 00:14:09,480
Speaker 1: you could see that there was a clear need from

259
00:14:09,480 --> 00:14:12,280
Speaker 1: many places for treasuries. But I think in other markets

260
00:14:12,360 --> 00:14:15,080
Speaker 1: volumes fall and price discovery is more difficult, and fixed

261
00:14:15,080 --> 00:14:21,240
Speaker 1: income is particularly notorious for getting less efficient when things

262
00:14:21,280 --> 00:14:23,800
Speaker 1: get very uncertain. Brian, don't be a stranger. This has

263
00:14:23,800 --> 00:14:39,360
Speaker 1: been great Morgan Stanley on fixed income. William selves Is

264
00:14:39,440 --> 00:14:43,880
Speaker 1: with HSBC is the enviable title Chief Market Strategist and

265
00:14:44,000 --> 00:14:47,200
Speaker 1: he joins us now for an important conversation. Well, I

266
00:14:47,400 --> 00:14:50,040
Speaker 1: I look at what we're hearing, which is I'm a

267
00:14:50,080 --> 00:14:54,000
Speaker 1: long term investor. I have to stand pat through all

268
00:14:54,160 --> 00:14:57,840
Speaker 1: the emotion and the cacophony that we see. How do

269
00:14:57,920 --> 00:15:02,720
Speaker 1: you stand pat on this Tuesday warning? Well, you know,

270
00:15:02,840 --> 00:15:06,360
Speaker 1: it's it's easier said than done, because clearly, indeed, from

271
00:15:06,400 --> 00:15:09,880
Speaker 1: a longer term perspective, it it pays to to remain invested.

272
00:15:09,920 --> 00:15:12,040
Speaker 1: But you still, that doesn't mean that you don't adapt

273
00:15:12,120 --> 00:15:14,440
Speaker 1: your portfolio a little bit um, you know, from time

274
00:15:14,480 --> 00:15:16,600
Speaker 1: to time, and so for example, at this point in them,

275
00:15:16,640 --> 00:15:18,960
Speaker 1: we are holding a little bit more cash than usual,

276
00:15:19,120 --> 00:15:23,440
Speaker 1: we are holding less equities than usual, and especially we're

277
00:15:23,480 --> 00:15:27,920
Speaker 1: holding more defensive UM equities UM, and you know, we're

278
00:15:28,080 --> 00:15:30,680
Speaker 1: basically not yet buying the dip here because we do

279
00:15:30,920 --> 00:15:33,640
Speaker 1: think that you know, indeed, you're talking about the yield

280
00:15:33,680 --> 00:15:37,280
Speaker 1: curve inversion. Potentially there are these worries about global growth

281
00:15:37,720 --> 00:15:41,120
Speaker 1: UM that are accelerating UM and therefore I think there

282
00:15:41,200 --> 00:15:43,560
Speaker 1: might be a little bit further over shake out before

283
00:15:43,600 --> 00:15:46,360
Speaker 1: we would before we would step in. Well, I'm we're

284
00:15:46,400 --> 00:15:49,880
Speaker 1: talking recession, we're talking gloom and doom, and yet everyone's

285
00:15:49,920 --> 00:15:52,200
Speaker 1: talking about that, and everyone is saying that they're due

286
00:15:52,320 --> 00:15:55,080
Speaker 1: risking and going into higher quality stocks holding more cash.

287
00:15:55,520 --> 00:16:01,360
Speaker 1: Isn't that a positive technically? Well so, so depends when

288
00:16:01,440 --> 00:16:04,280
Speaker 1: you do it. And the difficulty with this, with this UM,

289
00:16:05,120 --> 00:16:07,800
Speaker 1: with the last few months, that is that you know,

290
00:16:07,840 --> 00:16:10,240
Speaker 1: there is some economics and then there is some politics,

291
00:16:10,320 --> 00:16:13,000
Speaker 1: and politics always make it much more difficult to actually

292
00:16:13,120 --> 00:16:16,200
Speaker 1: make that decision UM. So therefore we did it actually

293
00:16:16,280 --> 00:16:18,600
Speaker 1: in three steps. We started in May, then we did

294
00:16:18,960 --> 00:16:21,160
Speaker 1: you know, another bit in June, and then you know

295
00:16:21,240 --> 00:16:23,840
Speaker 1: our final bit here hopefully the final bit here in

296
00:16:24,280 --> 00:16:27,560
Speaker 1: in August. Now, if indeed, as you're saying, people have

297
00:16:27,800 --> 00:16:30,680
Speaker 1: been re risking after a while, you find you should

298
00:16:30,760 --> 00:16:34,680
Speaker 1: find the bottom. Also, actually people were not that heavily

299
00:16:34,760 --> 00:16:37,040
Speaker 1: invested because actually in the beginning of the year we

300
00:16:37,080 --> 00:16:40,160
Speaker 1: published a piece which said this is an unloved rally

301
00:16:40,240 --> 00:16:42,280
Speaker 1: the beginning of the year. Remember that rally, if you

302
00:16:42,360 --> 00:16:45,200
Speaker 1: still remember it, people were not participating in it. People

303
00:16:45,200 --> 00:16:48,120
Speaker 1: stood on the sidelines. So a good thing that people

304
00:16:48,160 --> 00:16:50,720
Speaker 1: are not overly invested there or potentially need to sell this.

305
00:16:52,120 --> 00:16:55,000
Speaker 1: What is the market bet right now? Obviously in barns

306
00:16:55,640 --> 00:16:59,480
Speaker 1: everybody's predicting, you know, they're piled down, price up, yield down.

307
00:17:00,120 --> 00:17:02,520
Speaker 1: What is the bet now in the equity market that

308
00:17:02,640 --> 00:17:09,199
Speaker 1: concerns you? The over benefit will UM? I think the UM.

309
00:17:09,760 --> 00:17:11,440
Speaker 1: You know there is a there is a big bet

310
00:17:11,680 --> 00:17:15,480
Speaker 1: I think on the US relative to Europe. We have

311
00:17:15,600 --> 00:17:18,119
Speaker 1: it on as well, So I won't be the contribuon

312
00:17:18,200 --> 00:17:21,240
Speaker 1: here on this call. I do think that um, you know,

313
00:17:21,320 --> 00:17:26,720
Speaker 1: the US economy is still more resilient UM than Europe. UM. Clearly,

314
00:17:26,920 --> 00:17:30,240
Speaker 1: the risk here is that if the US economy gives,

315
00:17:30,520 --> 00:17:33,040
Speaker 1: then you know that the big anchor that gives as well.

316
00:17:33,480 --> 00:17:37,240
Speaker 1: Now the the we do think that that the anchor

317
00:17:37,320 --> 00:17:40,119
Speaker 1: will remain in place. Why because the weakness in the

318
00:17:40,160 --> 00:17:43,800
Speaker 1: global economy is mostly around manufacturing and that effect the

319
00:17:44,240 --> 00:17:47,440
Speaker 1: you know, the trading oriented countries around the world. That's why,

320
00:17:47,560 --> 00:17:49,760
Speaker 1: for example, you had the weak data points in Germany

321
00:17:49,800 --> 00:17:53,159
Speaker 1: as well earlier morning. Um. But the US is a

322
00:17:53,240 --> 00:17:56,639
Speaker 1: big domesty economy. The consumer is still fine, you know,

323
00:17:56,760 --> 00:17:59,040
Speaker 1: especially if you're housing market that you were talking about

324
00:17:59,160 --> 00:18:02,080
Speaker 1: is fine as well. That consumer will reaching resilience. UM.

325
00:18:02,200 --> 00:18:05,800
Speaker 1: But clearly if the manufacturing weekends too much, you're going

326
00:18:05,840 --> 00:18:08,440
Speaker 1: to get layoffs and then your consumer good weekends. So

327
00:18:08,680 --> 00:18:10,800
Speaker 1: it is something to watched, Lisa, I'm watching two S

328
00:18:10,880 --> 00:18:14,000
Speaker 1: tend breakdown again four point six one as well a

329
00:18:14,160 --> 00:18:17,760
Speaker 1: set of lower highs on the two S tend spread

330
00:18:17,800 --> 00:18:21,720
Speaker 1: trading since quarters seven this morning. Yeah, definitely important to watch. Well.

331
00:18:21,720 --> 00:18:24,760
Speaker 1: I'm I'm watching the Emerging Market Currency Index, the ms

332
00:18:24,800 --> 00:18:27,200
Speaker 1: c I index here at the lowest is December of

333
00:18:27,359 --> 00:18:29,440
Speaker 1: last year, and I'm just wondering, as we talk about

334
00:18:29,560 --> 00:18:34,320
Speaker 1: Argentina with the expectations of default they're picking up dramatically,

335
00:18:34,920 --> 00:18:39,440
Speaker 1: how concerned are you about emerging markets here? So some

336
00:18:39,600 --> 00:18:42,680
Speaker 1: of the weakness in the emerging market effects is also

337
00:18:42,720 --> 00:18:45,080
Speaker 1: a simply a reflection of US dollar strength. So people

338
00:18:45,119 --> 00:18:47,960
Speaker 1: are flocking into the US dollar on on the basis

339
00:18:48,000 --> 00:18:50,080
Speaker 1: of the global economy weakening on the basis of a

340
00:18:50,200 --> 00:18:52,800
Speaker 1: risk of trade on the basis of the US um

341
00:18:53,520 --> 00:18:56,800
Speaker 1: providing a yield pick up certainly a relative to the

342
00:18:56,960 --> 00:19:00,680
Speaker 1: end and to the euro. So there is that one element. Obviously,

343
00:19:00,800 --> 00:19:03,680
Speaker 1: there is also some weakening in the emerging markets, which

344
00:19:03,760 --> 00:19:07,440
Speaker 1: is related number one to do the questions around are

345
00:19:07,480 --> 00:19:10,159
Speaker 1: we going to have weakness in China? Is China going

346
00:19:10,200 --> 00:19:13,520
Speaker 1: to be able to proper its economy enough? So that's

347
00:19:13,520 --> 00:19:15,639
Speaker 1: the one factor, and then you have a country by

348
00:19:15,720 --> 00:19:19,680
Speaker 1: country you have those more idiosyncratic stories like, for example, Argentina.

349
00:19:20,040 --> 00:19:23,120
Speaker 1: I wouldn't Argentina is always a bit the odoan out

350
00:19:23,359 --> 00:19:26,520
Speaker 1: Usually it doesn't lead to that much contagtion, but obviously

351
00:19:26,600 --> 00:19:29,920
Speaker 1: if you already have a weaker picture, there is a possibility. Yeah,

352
00:19:29,960 --> 00:19:32,080
Speaker 1: but I saw a real move out of three point

353
00:19:32,200 --> 00:19:34,879
Speaker 1: nine nine. I think that's close enough to four and

354
00:19:35,000 --> 00:19:37,560
Speaker 1: even Turkish lea has picked it up. It's been quietcent

355
00:19:37,640 --> 00:19:42,560
Speaker 1: recently as well. What contagion did you an HSBC observed yesterday?

356
00:19:44,160 --> 00:19:46,960
Speaker 1: So I mean on the contagion, I think what we

357
00:19:47,080 --> 00:19:48,960
Speaker 1: need to do is and and and it's and it's

358
00:19:49,080 --> 00:19:52,480
Speaker 1: very important in the emerging markets to you know, focus

359
00:19:52,600 --> 00:19:57,440
Speaker 1: on those countries than have you know, um, improving UM

360
00:19:58,040 --> 00:20:02,960
Speaker 1: macro balances, than have abilities to cut interest rates because

361
00:20:03,280 --> 00:20:06,840
Speaker 1: um you know, the US UH Dolvish policy, by the fact,

362
00:20:06,840 --> 00:20:09,760
Speaker 1: actually gives a lot of countries to the ability to

363
00:20:09,840 --> 00:20:12,080
Speaker 1: cut interestate but obviously they cannot do that if their

364
00:20:12,080 --> 00:20:14,600
Speaker 1: inflation is too high. So one needs to be selected.

365
00:20:14,640 --> 00:20:17,159
Speaker 1: And when when one looks at that, UM, you know,

366
00:20:17,240 --> 00:20:21,160
Speaker 1: it's clear that the likes of Brazil, China, Indonesia, even

367
00:20:21,200 --> 00:20:25,679
Speaker 1: in yet Russia better place than Argentina, Ukraine, Turkey, as

368
00:20:25,840 --> 00:20:28,600
Speaker 1: drop William Sells. Thank you so much, greatly appreciated. With

369
00:20:28,640 --> 00:20:41,640
Speaker 1: the HSBC, we have a wonderful guest for you now

370
00:20:41,720 --> 00:20:45,320
Speaker 1: with decades of experience and looking at continental Europe and

371
00:20:45,400 --> 00:20:49,120
Speaker 1: some of the dynamics of the markets. Mario and Thompson

372
00:20:49,320 --> 00:20:53,160
Speaker 1: is with Credit Agricul, Indo Suez and Indo Suez Wealth

373
00:20:53,240 --> 00:20:56,680
Speaker 1: Management uh dr Owen Thompson. Thank you so much for

374
00:20:56,800 --> 00:21:00,679
Speaker 1: joining us today. How do you link this market turmoil

375
00:21:01,320 --> 00:21:04,359
Speaker 1: into the structure of EU banking. I don't want you

376
00:21:04,400 --> 00:21:08,520
Speaker 1: to speak about individual EU banks. I know that's inappropriate,

377
00:21:08,600 --> 00:21:11,760
Speaker 1: but I'm looking at my screen, and I'm seeing across

378
00:21:11,920 --> 00:21:16,399
Speaker 1: asset market struggle that is affecting the share price of

379
00:21:16,560 --> 00:21:21,240
Speaker 1: European banking. How do you adapt to that? Well? I

380
00:21:21,359 --> 00:21:23,920
Speaker 1: think in general it must be said, though, that the

381
00:21:24,320 --> 00:21:29,280
Speaker 1: European banks have made, you know, great strides in touring

382
00:21:29,359 --> 00:21:32,520
Speaker 1: up their balance sheets ever since two thousand and eight,

383
00:21:32,600 --> 00:21:35,479
Speaker 1: of course, and we have a new regulation in Europe

384
00:21:35,520 --> 00:21:38,440
Speaker 1: also around banks, and the e c B is now

385
00:21:39,200 --> 00:21:42,200
Speaker 1: certainly you know, in charge of regulating the major banks

386
00:21:42,240 --> 00:21:46,320
Speaker 1: in Europe, and we're making progress also towards a more

387
00:21:46,400 --> 00:21:49,400
Speaker 1: profound banking union. So I think that there's a little

388
00:21:49,440 --> 00:21:53,520
Speaker 1: bit of just underloved. Europe tends to be a bit

389
00:21:53,760 --> 00:21:56,720
Speaker 1: underloved and and I believe that that can be said

390
00:21:56,760 --> 00:22:01,359
Speaker 1: also for its banking sector. What's the lower bound for

391
00:22:01,480 --> 00:22:06,240
Speaker 1: German yields? Right now? Sorry? Could you repeat that? What's

392
00:22:06,359 --> 00:22:10,080
Speaker 1: what's the lower bound? How low can German yields go?

393
00:22:10,240 --> 00:22:12,679
Speaker 1: I'm looking at two year yields now currently in Germany

394
00:22:13,040 --> 00:22:17,159
Speaker 1: at negative zero point eight seven per cent. I'm just

395
00:22:17,240 --> 00:22:21,760
Speaker 1: wondering how negative things could potentially go as traders contemplate

396
00:22:21,800 --> 00:22:27,639
Speaker 1: another ECB rate cut. Right, So it's clear from the

397
00:22:27,760 --> 00:22:32,600
Speaker 1: various statements that Mario dragg has made repeatedly that the

398
00:22:32,760 --> 00:22:36,159
Speaker 1: ECB is very happy with the policies that they have

399
00:22:36,680 --> 00:22:39,240
Speaker 1: conducted so far in the wake of the two thousand

400
00:22:39,280 --> 00:22:43,000
Speaker 1: and eight crisis. So basically, what we're hearing them saying

401
00:22:43,240 --> 00:22:46,760
Speaker 1: is that what we used to consider to be unconventional

402
00:22:46,840 --> 00:22:50,080
Speaker 1: monetary policies at one point in time have now become

403
00:22:50,680 --> 00:22:53,439
Speaker 1: totally conventional. And Mario dragging had said that he's very

404
00:22:53,480 --> 00:22:57,000
Speaker 1: happy with negative interest rates. So indeed, I think that

405
00:22:57,240 --> 00:23:00,520
Speaker 1: these negative interest rates are likely to prevail for for

406
00:23:00,640 --> 00:23:04,440
Speaker 1: quite some time, and h and again the Central Bank

407
00:23:04,560 --> 00:23:08,880
Speaker 1: is satisfied with the effect that that has had so far. Now,

408
00:23:09,040 --> 00:23:13,000
Speaker 1: of course things could be radically better, but for that

409
00:23:13,160 --> 00:23:16,160
Speaker 1: to happen, we really need the government and we need

410
00:23:16,240 --> 00:23:19,800
Speaker 1: fiscal policy. I think that we have an over focus

411
00:23:19,920 --> 00:23:23,560
Speaker 1: on central banks in this context and too high expectations

412
00:23:23,680 --> 00:23:27,600
Speaker 1: that central banks can somehow sort everything out with the

413
00:23:27,720 --> 00:23:31,439
Speaker 1: magic wand of either QUEI or negative interest rates, whereas

414
00:23:31,560 --> 00:23:34,480
Speaker 1: the real problem is on the fiscal side. I would

415
00:23:34,640 --> 00:23:36,800
Speaker 1: there to purport. Yeah, a lot of people are saying

416
00:23:36,840 --> 00:23:39,280
Speaker 1: that this morning. Firmly, the conversation and bond markets are

417
00:23:39,280 --> 00:23:42,359
Speaker 1: signaling that they want fiscal stimulus, I am wondering, do

418
00:23:42,440 --> 00:23:46,399
Speaker 1: you think that negative interest rates are deflationary in their

419
00:23:46,440 --> 00:23:52,400
Speaker 1: own right? Well, I mean, clearly it's not good for savers,

420
00:23:52,560 --> 00:23:55,200
Speaker 1: and it's not good potension funds and insurance companies and

421
00:23:55,480 --> 00:23:59,439
Speaker 1: everybody with sort of the necessity of planning for uh

422
00:24:00,000 --> 00:24:03,320
Speaker 1: bring financial liabilities in the future. But at the same time,

423
00:24:03,680 --> 00:24:08,200
Speaker 1: I would argue that when when you are in this

424
00:24:08,359 --> 00:24:10,880
Speaker 1: kind of a situation, it's better to have negative interest

425
00:24:11,000 --> 00:24:13,800
Speaker 1: rates than to do nothing. But you know that what's

426
00:24:13,840 --> 00:24:17,280
Speaker 1: forcing these negative interest rates is the lack of an

427
00:24:17,320 --> 00:24:21,159
Speaker 1: appropriate fiscal policy or you know, structure reform in general.

428
00:24:21,760 --> 00:24:25,159
Speaker 1: The lack of action in other areas is what's forcing

429
00:24:25,240 --> 00:24:28,840
Speaker 1: central banks to take these extreme actions. And and I

430
00:24:28,920 --> 00:24:31,280
Speaker 1: think that this is where we have have too much

431
00:24:31,760 --> 00:24:35,520
Speaker 1: hope on their success because without supporting policies from the

432
00:24:35,600 --> 00:24:40,200
Speaker 1: other policymakers, it's it's having this rather muted response that

433
00:24:40,320 --> 00:24:43,800
Speaker 1: we're seeing instead of creating the higher growth rates that

434
00:24:43,880 --> 00:24:46,160
Speaker 1: we would all like to have. Maria Owen's Thompson, thank

435
00:24:46,200 --> 00:24:48,720
Speaker 1: you so much, greatly appreciate it. With indus who as

436
00:24:49,400 --> 00:24:56,760
Speaker 1: wealth management a Europeans either, thanks for listening to the

437
00:24:56,800 --> 00:25:03,240
Speaker 1: Bloomberg surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

438
00:25:03,640 --> 00:25:07,840
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

439
00:25:07,920 --> 00:25:12,119
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

440
00:25:12,640 --> 00:25:13,680
Speaker 1: I'm Bloomberg Radio