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,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. The
Speaker 1: thing that was interesting, and you I thought were really
Speaker 1: on top of this was who will run the United Kingdom?
Speaker 1: I mean, there's this whole pregnant issue of the when
Speaker 1: of it and the who of it. I couldn't get
Speaker 1: it now, I couldn't get a straight answer. And this
Speaker 1: goes to the tension that Gideon Rose tries to find
Speaker 1: in Foreign Affairs Magazine is all of you know, I'm
Speaker 1: a huge fan of a print subscription too. Were in
Speaker 1: fairs you throw it at every smart mouth college graduate
Speaker 1: and says, shut up and read this, Gideon, who will
Speaker 1: run the world? What did you find out? Well? Uh,
Speaker 1: the it's an interesting question. And what I will say
Speaker 1: is there's a big debate going on UM and it's
Speaker 1: not just about whether China will overtake the US. It's
Speaker 1: if the US UH can get its act together to
Speaker 1: desire and reinvigorate its international leadership and there's everything there
Speaker 1: from somebody who says the fight is over, China has
Speaker 1: one to arguments saying no, the United States can reinvigorate
Speaker 1: the liberal international order post Trump and keep it going,
Speaker 1: and not all of us can be right. And the
Speaker 1: really interesting question is, like those year end summaries about
Speaker 1: what the market's gonna do, all you can do is
Speaker 1: look at the logic and try past predictions or no,
Speaker 1: and performance is no guarantee of future results. What's going
Speaker 1: to happen in the forward looking balance of power? Is
Speaker 1: anybody's game? Well, Gideon, I always think it's valuable to
Speaker 1: talk to you into a distinction between ability and willingness.
Speaker 1: The discussion that we often have about China and leading
Speaker 1: the world, it's about their ability to do so. Do
Speaker 1: they have the willingness to take a global leadership role?
Speaker 1: Um no, Yes and no. So the interest that there's
Speaker 1: a fascinating piece in the issue by um orienta mastro
Speaker 1: American China expert arguing that what China is going for
Speaker 1: and has already largely achieved, is essentially exclusive dominance in
Speaker 1: its sphere in Asia and a contestation with the US
Speaker 1: for global uh leadership and power. More there and so
Speaker 1: the uh, they're playing a regional game and a domestic
Speaker 1: economic and economic growth game as well as a global
Speaker 1: leadership game. But in something like strategic affairs, they war
Speaker 1: want to push us out of the Pacific than organize
Speaker 1: an entire Okay, it just goes in my book of
Speaker 1: the Summer, Robert Cappel and the Return of Marco Polo's World.
Speaker 1: And one of your advertisers and foreign affairs is stravits
Speaker 1: is Fletcher School as well. What's the Gideon Rose scorecard
Speaker 1: on the South China Sea? Is it China one US zero?
Speaker 1: This year? Uh, there's no question. Well, things are drifting
Speaker 1: in China's favor. Essentially the United States with Brexit and Trump,
Speaker 1: the anglosphere is taking itself out of the geopolitical game
Speaker 1: and so essentially, uh, the normal operations of global order
Speaker 1: maintenance continue, but nobody believes that anymore because the United
Speaker 1: States really doesn't have his heart in it. But China
Speaker 1: isn't actually taking advantage to make new moves forward, and
Speaker 1: they're obviously weak and have been pushed back because of
Speaker 1: the trade policies. The question is what's gonna happen next?
Speaker 1: And that's anybody's investador Hosses. In the issue, Greg Mankeew
Speaker 1: of Harvard Allen Blind to the former vice chairman at Princeton,
Speaker 1: I'm gonna go to Senate Warren. Good Morning one or
Speaker 1: six one FM Boston. Elizabeth Warren's strengthening democracy at home
Speaker 1: and abroad, and she says the urgency of the moment
Speaker 1: could not be overstated. It sounds like she's running for office.
Speaker 1: So you can't have any other candidates. We would love
Speaker 1: to feature all the major candidates in the next cycle.
Speaker 1: We've already had. We've had John kay sick in, we've
Speaker 1: had the president. What is a president written in? I
Speaker 1: say for you, the president has not um a Secretary Pompeo,
Speaker 1: where we love to have the administration and we we
Speaker 1: pride ourselves on being open to all voices. Uh. And
Speaker 1: we've had a Secretary Pompeo in last issue. So uh.
Speaker 1: And we want the Republican candidates as well as the
Speaker 1: democratic ones. Democracy is the new inWORD. You know, it's
Speaker 1: like we're taking a journey. Okay, we're doing democracy. What
Speaker 1: does democracy mean to Gideon Rose, Well, that's a great
Speaker 1: question because there's no as people have been pointing out
Speaker 1: in many respects, the populist movements are majoritarian democratic movements.
Speaker 1: There's a real sense in many of the countries we're
Speaker 1: talking about, from from Turkey and Russia all the way
Speaker 1: to Eastern Europe and elsewhere. There's no question that there's
Speaker 1: a lot of popular support for certain kinds of policies.
Speaker 1: But that doesn't necessarily mean that the liberal democracy and
Speaker 1: the rule of law and some of the things that
Speaker 1: we think beyond simple majoritarian You get to decide what happens.
Speaker 1: That stuff is under threat, and the really interesting question
Speaker 1: forward is whether not democracy will succeed, but will liberal
Speaker 1: democracy succeed? Gideon Rose, thank you so much, John Say
Speaker 1: thirties six percent. You know they've got these little things
Speaker 1: in the magazine, and the answer is for the price
Speaker 1: of one point three six beverages of your choice at
Speaker 1: Hemmingways at the in Paris, you you just get in
Speaker 1: brilliance for Christmas? Is that think you know, human well,
Speaker 1: that Bill's already got one you're going to get would
Speaker 1: be that it's a small price to pay not just
Speaker 1: for new information, but rather for the context that allows
Speaker 1: you to organize the information you actually have. You got
Speaker 1: a ton of data all the way through your terminals
Speaker 1: through everything, and what we provide is a way to
Speaker 1: contextualize that and fit all the data into some pattern
Speaker 1: that is intellectually I think, yes, Gideon, Gideon, the Foreign
Speaker 1: Affairs is thick and heavy. You throw it at the
Speaker 1: smart mouth college kid and say shut up and read this.
Speaker 1: So I actually have one of those smart math college
Speaker 1: kids myself this year, and so I wrote the lead
Speaker 1: issue because I felt like I needed to do the
Speaker 1: next generation what to think, and I wasn't sure that
Speaker 1: anybody else could do it. So I went out and
Speaker 1: did it to my college kids son in the pages
Speaker 1: of n Affairs. Gieon Roal, thank you so much. Foreign
Speaker 1: Affairs at Magazine don't leave home without it. It's not
Speaker 1: Joining us for a quick chat from London and Retail.
Speaker 1: Andrew felstaed Uh joins us. Andrew, good morning. Your article
Speaker 1: this morning is on the crushing disappointments of Brexit United
Speaker 1: Kingdom Retail. Can you take it worldwide? Well? The interesting
Speaker 1: thing was, I mean we were all expecting Christmas to
Speaker 1: be bad in the UK because of the uncertainty of
Speaker 1: a Brexit, asas also mentioned France and Germany and said, um,
Speaker 1: things were quite tough there too. Well, things are quite
Speaker 1: tough there too. I mean these are these are real drops,
Speaker 1: aren't they. I mean, there's no other way to put it,
Speaker 1: that's right. I mean we were all expecting, you know,
Speaker 1: Christmas to be taff and Germany had quite a poor
Speaker 1: autumn because it had really unseasonable weather. And I mean
Speaker 1: retailers are always blaming the weather, but actually it does matter.
Speaker 1: Because you have a hot spell in sort of September, Rocktome,
Speaker 1: then no one actually wants to buy a coat coat.
Speaker 1: So your high value items that you rely on bolstering
Speaker 1: your profits, that's not happening. It's quite bad. New the
Speaker 1: blur I saw. I mean, and I can't name Laura
Speaker 1: Ashley since time begin with the X number of stores
Speaker 1: are shutting down. I mean, come on, the one word
Speaker 1: in your report, I mean Amazon is global and it's
Speaker 1: beginning to have an effect across all retail, right, that's right.
Speaker 1: But don't forget that a sauces online too. So if
Speaker 1: anybody was supposed to be well set up to compete
Speaker 1: with ours, and it's as Nasals often been touted as
Speaker 1: an Amazon acquisition target because one thing that Amazon hasn't
Speaker 1: really got right is fashion and whatever you say about
Speaker 1: as it has got fashion right for the young shopper,
Speaker 1: well are they going to take I mean it's they're
Speaker 1: enjoying it. Our shares on sale today it reduced, I
Speaker 1: mean exactly. I mean, are you announcing the effect of
Speaker 1: this transaction? No? No, no, but but but Asace should
Speaker 1: be a challenger to Amazon, the challenger for me is
Speaker 1: your from me. He throw on, you're driving in and
Speaker 1: they're on the right side as you quietly got by
Speaker 1: his Herod's. And then there's Harvey Nichols and the rest
Speaker 1: of it. What's the state of fancy London shopping? That's
Speaker 1: so many of our listeners are aware of. Fancy London
Speaker 1: shopping is doing pretty well because the pound is still weak,
Speaker 1: We've still got lots of travelers. A fancy London shopping
Speaker 1: shouldn't have any problem, and neither really should bargain basement
Speaker 1: London shopping. You know, when we spend we all want
Speaker 1: to barking. Where there is real trouble is this mid
Speaker 1: market where they're not cheap and they're also not aspirational.
Speaker 1: That's where the real trouble is. But I think fancy
Speaker 1: London shopping no problem. Let me bring in my colleague
Speaker 1: PIMPM and it's a real retail turm wail, whether it's
Speaker 1: UK or here. Yeah. Well, I was just going to
Speaker 1: go through the list of retailers that have actually shuttered
Speaker 1: some of their operations. Debenham's, House of Phraser, Home Base,
Speaker 1: Marks and Spencer New Look, John Lewis Patissary, Valerie, and
Speaker 1: of course all the Toys r Us stores were forced
Speaker 1: to close because of that. And I'm just wondering, does
Speaker 1: this mean that there's going to be an excess of
Speaker 1: real estate coming on the market. Yes, there will be.
Speaker 1: The I mean the other thing, all those shops closing,
Speaker 1: all things being equal, they should have started to benefit
Speaker 1: the ones that are left. You get a last man
Speaker 1: standing effect. But you know, the uncertainty over Brexit has
Speaker 1: really overshadowed that, and it's also overshadowed the fact that
Speaker 1: people actually have more money in their pocket. The fundamental
Speaker 1: was a good it's just everybody's worried. You know, they
Speaker 1: stopped spending because they're worried what's going to happen in March.
Speaker 1: Do you believe also that there's gonna be a clamor
Speaker 1: for staffing because many of the people that work in
Speaker 1: retail and in many of those kinds of jobs on
Speaker 1: the high Street, and indeed in logistics and so on.
Speaker 1: They come from countries outside the United Kingdom. That is
Speaker 1: certainly a problem that that retailers and and those restaurants
Speaker 1: and coffee shops have all alluded to. So it depends
Speaker 1: what happens in March, really, and also we've learned that drivers,
Speaker 1: you know, just people that are driving the lorries the
Speaker 1: trucks throughout the the United Kingdom, that there is a
Speaker 1: shortage of over fifty thousand drivers because recruiters, well, new
Speaker 1: immigration rules are going to make it more difficult for
Speaker 1: them to get those people. And that's going to hit online.
Speaker 1: That's another challenge to online if if things can't be delivered.
Speaker 1: Do you get the sense that people are spending money
Speaker 1: in order to stock up on food and essential items?
Speaker 1: Those are reports that we've heard in the news meeting, No,
Speaker 1: not at all. I get the sense that everybody is worried.
Speaker 1: It's it's a bit like sort of two thousand and eight,
Speaker 1: really two thousand and nine, when everyone was worried about
Speaker 1: the financial crisis on what was going to happen, and
Speaker 1: they held off from spending. One retailer said to me,
Speaker 1: it's as if somebody switched the lights off in October.
Speaker 1: Everybody I talked to says October November has been very difficult.
Speaker 1: This is this isn't some excuse for portraying that this
Speaker 1: mood on the high street is real? Do you find
Speaker 1: it also that inventory levels stark scarcity has also been
Speaker 1: a factor that they just don't have enough on the
Speaker 1: shelves because of these issues. Well, no, not because of Brexit.
Speaker 1: I think some retailers have bought very tightly because you know,
Speaker 1: they knew things were going to be pretty tough, so
Speaker 1: they've bought quite tightly, and actually Marks and Spencers had
Speaker 1: the opposite effect. They've actually they've struggled with their fashion
Speaker 1: views and they had some great fashion this season and
Speaker 1: probably is it in are enough of it? So they
Speaker 1: did have some shortages of the great stuff that they had.
Speaker 1: I can tell you scientifically at the Keen household, this
Speaker 1: is a great comment. They're sold out of everything, not
Speaker 1: enough things to spend. Because you're a retailer, there aren't
Speaker 1: any prizes for overstocking. You know, these retailers kind of
Speaker 1: monitor consumers many they know things are going to be tough,
Speaker 1: so they think, you know what, I'll just order in
Speaker 1: a bit less. What's gonna be the global the global losses?
Speaker 1: I mean, can you judge yet the margin compression that
Speaker 1: we're going to see? Um, not yet. I mean one
Speaker 1: thing that we will see. I mean was saying they
Speaker 1: did off on Black Friday and that wasn't deep enough.
Speaker 1: Other people have been doing much bigger savings. So if
Speaker 1: people are discounting like crazy, that means margins will be hit.
Speaker 1: So we know that, Um, what we don't know is
Speaker 1: the extent yet. I gotta say a source shares right now,
Speaker 1: the online retail are down near to day. One thing
Speaker 1: about a SOOCE is it it's always been quite a
Speaker 1: strong It's always had quite strong growth. It's always been
Speaker 1: a bit of a market favorite. So you know, when
Speaker 1: you do have bad news from a company like that,
Speaker 1: it does become compounded because people have been used to
Speaker 1: them performing and they stopped performing, and so there's an
Speaker 1: outside effect. So it was always bound to be a
Speaker 1: big hit for them. Andrew Felster, thank you so much,
Speaker 1: greatly appreciated today. What do you see in the stock market?
Speaker 1: I see that this is going to be a pretty
Speaker 1: quiet week. One of the big issues to talk about
Speaker 1: initial public offerings and is there enough money in order
Speaker 1: to soak up all of the new issues that are
Speaker 1: either scheduled to go out between now and the end
Speaker 1: of the year and coming up a lot of money.
Speaker 1: What I find extraordinary is besides the FED meeting, we're
Speaker 1: in a holiday mode. I get that, except I'm seeing
Speaker 1: a tape deteriorates for the morning. We started out FED
Speaker 1: dead and all of a sudden negative futures through to
Speaker 1: yields you know, coming you know, we're just sort of
Speaker 1: it's a new g market into the FED meeting. Well,
Speaker 1: I mean, I think there's also the issue, as I said,
Speaker 1: of cash. Right, unless there's new cash that comes into
Speaker 1: the market, you don't see stock prices move higher. And
Speaker 1: if you take a look at the flows, particularly the
Speaker 1: equity flows, you've seen people come out out exactly where
Speaker 1: are they going? Just going to cash and people either
Speaker 1: cash maybe or people got to spend it things, you know,
Speaker 1: Despite the CPI numbers that come out on a regular basis,
Speaker 1: I find that people tell me things are more expensive.
Speaker 1: Insurance is more expensive, utilities and more expensive. Taxes are
Speaker 1: going up, and many people have not necessarily saved for
Speaker 1: the tax bill. It's going to come in twenty nine
Speaker 1: when they find out that they're not able to deduct
Speaker 1: all those property tax Well, that's a very New York
Speaker 1: City kind of thing. No, no, no, sir, This is
Speaker 1: this is California, New Jersey, Canna. This is everywhere. What
Speaker 1: I'm hearing is the mystery about taxes for this year
Speaker 1: is permanent. Throughout every accounting practice, every single customer, every
Speaker 1: walk of life is in the same panic about Okay,
Speaker 1: what what are my taxes really gonna look like? Well,
Speaker 1: and also you end up figuring out that you work
Speaker 1: more than half the year in order to pay your taxes.
Speaker 1: Very good our interview already on this Monday or interview
Speaker 1: of the week, and I would say, what a wonderful
Speaker 1: way to set up two thousand nineteen for all Americans.
Speaker 1: He is Paul Romer, He is out of Colorado. He
Speaker 1: is someone who did mathiness at Chicago and then I
Speaker 1: went on to an extinguished career in economics at a
Speaker 1: number of institutions and the Laurea Jones. I can't remember
Speaker 1: if I've spoken to you some Stockholm in the blur,
Speaker 1: I can't remember it. All, what was it like? Is
Speaker 1: it young Turk to work with George acre Love? If
Speaker 1: you wrote a paper he did a co write with
Speaker 1: acre Love, were you trembling as you did this? No, George,
Speaker 1: George is a very modest guy. And Mr Yell I
Speaker 1: I love. Yeah, Harry's married to Janet, you know, and
Speaker 1: that's right, um, and Janet's great too. But George is
Speaker 1: very easy to work with and it was just a
Speaker 1: joy to write that paper with him. You came out
Speaker 1: of Chicago already known there for just a complete ability
Speaker 1: to grab the Mathew Nous of economics, and more than
Speaker 1: anyone I know, you've somewhat stayed away from it. Are
Speaker 1: we at a better point in Matthew Nous now where
Speaker 1: we're not slaves to the model? You remember when Harry
Speaker 1: Truman was reputed to have said I wanted one armed
Speaker 1: economists because he gets sick of this. Well, on the
Speaker 1: one hand, this and the other hand that. Unfortunately, with math,
Speaker 1: that's a two handed problem. Some math can be very helpful,
Speaker 1: it can really clarify our understanding, but too much of it,
Speaker 1: or Matthews the wrong way, can confuses, can exclude. And
Speaker 1: so what we need to do is get to that
Speaker 1: Goldilocks use of just the right amount of masks to
Speaker 1: zoom in on the things we really need to understand.
Speaker 1: I want to talk about the path from nifty seven.
Speaker 1: I mean the folks on the Modern Ears seven Samuelson
Speaker 1: textbook The Clouds part for solo at M I T
Speaker 1: and N seven ish, and then the entire issue of
Speaker 1: how we grow moves forward and what you canonize is
Speaker 1: innovation and folding it into what's called indogenous growth. How
Speaker 1: are we doing? Are we growing within our system? Now?
Speaker 1: Are we making it up? But actually, let me let
Speaker 1: me tell you the story. When I tried to explain
Speaker 1: to my son what I do at work, I said, well,
Speaker 1: I'm trying to understand why it is that your grandparents,
Speaker 1: when they were your age, didn't have these great things
Speaker 1: like a video cassette recorder. He looked at me and
Speaker 1: he said, Dad, that's obvious. When nanny and granddad were kids,
Speaker 1: the VCR hadn't been invented yet. Is there anything else
Speaker 1: with your work that I can help you with? No?
Speaker 1: But but but the other place, it's sort of been
Speaker 1: obvious to everybody that innovation is really what drives standards
Speaker 1: of living, What and you know, Solo recognized this. What
Speaker 1: I did, though, was say we can understand it. We
Speaker 1: don't want to just say innovation happens. We need to
Speaker 1: understand what causes it, and then what policies can we
Speaker 1: use to increase the rate of innovation, to increase discoveries?
Speaker 1: Raise is your Paul Romer is your world? The fault
Speaker 1: of this gilded age in that we've applied the innovation
Speaker 1: to the benefit game of a gain rather of a
Speaker 1: modest or narrow segment of the American population, and everybody's
Speaker 1: flat on their back and a luddite America because it
Speaker 1: hasn't benefited that. Yeah, I think that, you know, people
Speaker 1: like me who have been advocates for innovation really need
Speaker 1: to be held to account. The first problem is it
Speaker 1: doesn't seem like everybody's getting a share of the benefits.
Speaker 1: And moreover, we're actually in a period where people have
Speaker 1: less confidence in science then they used to have twenty
Speaker 1: years ago. And that's the thing that troubles me the
Speaker 1: most because science is the is the key to progress.
Speaker 1: It's what it's the greatest thing humans have ever invented.
Speaker 1: And if we lose our faith in science, you know,
Speaker 1: where are we going to get the extensions of health
Speaker 1: and life, and pim Fox has comes to American exceptionalism
Speaker 1: and that that is is Professor Rohmer says that that
Speaker 1: loss of confidence, Well, my question would be indeed art
Speaker 1: if that loss of confidence exists, but you still have
Speaker 1: a cadre of scientists and technicians that are able to
Speaker 1: figure out what really goes on. But you have of
Speaker 1: the population basically putting on the brakes and making it
Speaker 1: more difficult for those innovations to reach the public. What
Speaker 1: do you do. You've been involved in smart cities. What
Speaker 1: can you physically do well. I think what would be
Speaker 1: a terrible mistake is for the say the scientists, to
Speaker 1: say we're smart. Just let us make all the decisions.
Speaker 1: We're in control. Just just let us do our thing. Um,
Speaker 1: people in science, people in the government. We need to
Speaker 1: be accountable to the public. If the public doesn't understand
Speaker 1: what we're doing, why we're doing it, that's on us,
Speaker 1: and we need to do a better job of explaining
Speaker 1: it and rebuilding that kind of faith in what we
Speaker 1: do and belief in the idea that facts are our friends.
Speaker 1: I think one of the mistakes that we have made
Speaker 1: is we've fed this kind of doom and gloom scenario
Speaker 1: that there's that there's no hope for the future. And
Speaker 1: you know, for example, fun climate change. We can solve
Speaker 1: climate change. We can manage that problem, just like we've
Speaker 1: managed every other problem. The only question is how do
Speaker 1: we decide to move forward. But we've got to be
Speaker 1: careful not to make everybody so pessimistic and also make
Speaker 1: sure that they see benefits in their own lives if
Speaker 1: we want to keep this consensus for more discovery, more change,
Speaker 1: more growth. Granted, but it reminds me of Daniel Patrick
Speaker 1: moyna hands comment about people are entitled to their own opinions,
Speaker 1: but they're not a title to their own facts. If not,
Speaker 1: if we're not are all looking at the same fact
Speaker 1: based situation, how do you even take that first step?
Speaker 1: But one of the things I've been talking about recently
Speaker 1: is having a sharper separation between the people who established
Speaker 1: the facts and then the people who have to make
Speaker 1: decisions based on those facts. And often those decisions involve compromise.
Speaker 1: That's just the way of the world. The people who
Speaker 1: are providing the facts should not be thinking about compromise.
Speaker 1: They should not be thinking about who wins who loses.
Speaker 1: They just need to say facts or facts here they are,
Speaker 1: you figure out what to do with it. And sometimes frankly,
Speaker 1: in the academic community we kind of pretend we're acting
Speaker 1: like the facts people. But then we started staying you
Speaker 1: should do this, you should do that, And that's that's
Speaker 1: mixing the roles in a way that I think isn't helpful.
Speaker 1: They celebrated Rome couple of years ago the and I
Speaker 1: find him phenomenal Chad Jones explaining the growthiness in English.
Speaker 1: Chad has done a great job. And he talked about
Speaker 1: rival non rival products, which is fancy economic talk, which
Speaker 1: is our thinking and our ideas are not the same
Speaker 1: as accountable item like a pencil or a bow tie. Okay, fine,
Speaker 1: help our audience with the threat that all this intellectual
Speaker 1: mumbo jumbo is only the purview of the wealthy and
Speaker 1: the haves. What do they have nots? Do ye? Well? First?
Speaker 1: Um if I mean, they'll be put in a plug
Speaker 1: for my lecture. And in Sweden, I actually avoided the
Speaker 1: use of that term non rival because it's a little
Speaker 1: too jargon e and really just try to explain what
Speaker 1: we really mean, which is that when you codify knowledge
Speaker 1: in a in words or in math, then you can
Speaker 1: share it with everybody. So conified knowledge is very different
Speaker 1: from like a pound of of copper, because you can't
Speaker 1: all use the copper at the same time. You can
Speaker 1: all use the knowledge at the same time. Now, on
Speaker 1: this question of how everybody gets to share, we have
Speaker 1: two very different systems for producing new codified knowledge. One
Speaker 1: is the the system of science and open, transparent exchange
Speaker 1: of ideas. The other is the market, where there's some
Speaker 1: control a way to make money on ideas. We need
Speaker 1: to decide as a society, where do we draw the line.
Speaker 1: Where do we draw line between say that ni H
Speaker 1: National Institutes of Health, which is fund discovering new farmancy coals,
Speaker 1: Where do we give it over to the to the
Speaker 1: pharmaceutical sector. And one of the things we can do
Speaker 1: is if there are too many people capturing too much
Speaker 1: of the profits is just used to Do you have
Speaker 1: an optimism, professor rumor quickly, because we're gonna have to go,
Speaker 1: Do you have an optimism that our political system could
Speaker 1: clear this market and get to a better technological outcome. Yeah,
Speaker 1: I'm I'm just a incorrigible optimists. So my view about
Speaker 1: people is like Churchill's view about the US. They always
Speaker 1: do the right thing after they exhaust all the alternatives.
Speaker 1: So we'll eventually get back on track on these big challenges.
Speaker 1: Thank you so much, and congratulations again on Well, it
Speaker 1: was just assumed that work him Fox was so penetrating
Speaker 1: decades ago that we almost take it for granted, this
Speaker 1: idea of moving on from solo fifty seven to where
Speaker 1: are we going and how do we grow? And that
Speaker 1: was before the video cassette recorder or I was gonna say,
Speaker 1: professor is optimistic for no other reason than he needs
Speaker 1: congratulations for his marriage. It was a laureate marriage, right Sweden,
Speaker 1: You didn't marry an Austrian economist. No, no, no, no,
Speaker 1: I'm married a French literature professor. That's that's that's that's
Speaker 1: why optimists. That's more rationalistic. Tell Mr mccron right now
Speaker 1: on the markets, Douglas cast joins us. We're in our
Speaker 1: Bloomberg Interactive Brooker Studios. Mr cass in Florida with Sea
Speaker 1: Breeze Partners. Doug abut your positioning right now. First of all,
Speaker 1: following Um Paul Roma a Nobel laureate, I am not
Speaker 1: worthy Um, I would say I exist. I'm usually considered
Speaker 1: something of a Cassandra tom And and Pim and I'm
Speaker 1: following Paul Roma, who is, by his own admission and
Speaker 1: incurable optimists. So I have no better person to quote
Speaker 1: than Woody Allen, who may be the second most pessimistic
Speaker 1: in terms of the state of the economy and the
Speaker 1: state of the market. Um Woody Allen said something in
Speaker 1: an op ed in The New York Times back in
Speaker 1: nine It was entitled My Speech to the Year's Graduates,
Speaker 1: in which he wrote, more than any other time in history,
Speaker 1: mankind faces a crossroads. One path leads to despair, an
Speaker 1: utter hopelessness, the other to total extinction. Let us pray
Speaker 1: we have the wisdom to choose correctly. He went on
Speaker 1: to write. The trouble is our leaders have not adequately
Speaker 1: heratus with this mechanized society. Unfortunately, are politicians are either
Speaker 1: incompetent or corrupt, sometimes both on the same day. So
Speaker 1: that's where basically I spend clear markets. And there's a
Speaker 1: fair amount of gloom out there right now with a
Speaker 1: good correction as well. In your history, how do you
Speaker 1: call bottom? How do you get back on board? If
Speaker 1: you're cautious. My approaches us an old Ben Graham um
Speaker 1: approach back in the nineties who wrote the book Security Analysis.
Speaker 1: And I tie all my investment decisions, whether it's buying
Speaker 1: or shorting a stock, or buying or shorting the indices
Speaker 1: to the difference between the current share price UM and
Speaker 1: the intrinsic value or private market value of a company,
Speaker 1: or in my view, what the market is worth. And
Speaker 1: that's how I do it. So when the prices UM
Speaker 1: sell at a discount to intrinsic value of the buyer
Speaker 1: and when they're at a premium to intrinsic value on
Speaker 1: the seller and um UM today we have we have
Speaker 1: a number of problems. John Farrow and the About an
Speaker 1: hour ago mentioned that in the past we've had monetary options,
Speaker 1: we've had a functioning G twenty. Today not so much.
Speaker 1: And we're in a flat and increasingly an interconnected world.
Speaker 1: It relies on coordination and cooperation. And although there are
Speaker 1: still some living in the sixties and endorsing policies appropriate
Speaker 1: for a day gone by, we do live in a
Speaker 1: flat and interconnected world. And I've mentioned the past three
Speaker 1: questions that keep me up at night. Um. Firstly, in
Speaker 1: a paper listened cloudy world? Are investors and citizens as
Speaker 1: safe as the markets assume? We are? A second in
Speaker 1: a flat world? Is it even possible for America to
Speaker 1: be an oasis of prosperity and a driver of engine
Speaker 1: or engine of global economic growth? And finally three, with
Speaker 1: the g H GEO political coordination and roll time low,
Speaker 1: how slow and a nept will the reaction be if
Speaker 1: the wheels do fall off? I think the reason I
Speaker 1: want you to remember these questions is that the answers
Speaker 1: might serve as a valuation buster in the full fullness
Speaker 1: of time. We have this uh, We're living in a
Speaker 1: connected world. We have lack of cooperation between the superpowers.
Speaker 1: It's problematic and more impossible than any other time in
Speaker 1: the past. My bottom line is, at best, we're in
Speaker 1: a period of substandard returns, more likely a period of
Speaker 1: steady strikeouts. By Ahead Doug cast, the SMP five hundred
Speaker 1: is down more than eleven percent since the first of October.
Speaker 1: Today we get a note that Goldman Sachs says they
Speaker 1: have a solution to high uncertainty about the stock market
Speaker 1: next year. Is that yeah? They say, now now is
Speaker 1: the time to get defensive. After the markets down, still
Speaker 1: plane dumb? So why do they bother? I mean like,
Speaker 1: I mean, when does the does the emperor really have
Speaker 1: no clothes? We all know the off repeated Buffet comment.
Speaker 1: Be fearful when others are greedy, and greedy when others
Speaker 1: is fearful. If you stick, if you rely on price momentum,
Speaker 1: if you're a passive investor, you're in uh E T
Speaker 1: S or risk parity quant strategies that are agnostic to
Speaker 1: balance sheets, income statements, and intrinsic value. You will be
Speaker 1: negative like oldman Sacks when prices are going down. I
Speaker 1: always say the changing market structure has produced an environment
Speaker 1: where sellers live lower and buyers live higher, which is
Speaker 1: antithetical to Ben Graham and Dodd and Warren Buffet. And
Speaker 1: I'll stick with those three because they've done pretty well
Speaker 1: over time. Um So I have said for some time
Speaker 1: that the markets are under pricing and underappreciating risks, and
Speaker 1: that the markets would be ancuffed by a number of factors.
Speaker 1: We're gonna run out of time. Let's let's come back
Speaker 1: with Douglas asked. I want to talk to him about
Speaker 1: some specific ideas, particularly his vocal, vocal statements on Twitter
Speaker 1: through the years as well. Mr Cast of CBS Partners.
Speaker 1: This will be out on our podcast with Paul Romer
Speaker 1: as well. I think it's pretty cool Romer than casts
Speaker 1: on your podcast. I mean, you know Romer and Cast.
Speaker 1: I mean there's a certain balay to it. Paul Romer
Speaker 1: and Doug cast back to back. Where else can you
Speaker 1: do that? Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.