1
00:00:00,120 --> 00:00:02,920
Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in

2
00:00:03,000 --> 00:00:07,840
Speaker 1: local communities, economies and a sustainable future. That's the power

3
00:00:08,080 --> 00:00:12,360
Speaker 1: of global connections, Mary Lynch, Pierce, Fenner and Smith Incorporated

4
00:00:12,760 --> 00:00:27,400
Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

5
00:00:27,840 --> 00:00:31,520
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

6
00:00:31,560 --> 00:00:36,600
Speaker 1: insight from the best in economics, finance, investment, and international relations.

7
00:00:37,000 --> 00:00:41,600
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

8
00:00:41,680 --> 00:00:49,360
Speaker 1: of course on the Bloomberg We kick things off at

9
00:00:49,360 --> 00:00:51,159
Speaker 1: the Pierre Hotel this morning with Michael Holland. He's the

10
00:00:51,200 --> 00:00:53,720
Speaker 1: chairman of Holland Company and the president and founder of

11
00:00:53,760 --> 00:00:55,680
Speaker 1: the Holland Balance On. Great to have you with us.

12
00:00:55,680 --> 00:00:58,240
Speaker 1: Great to see you once again. Thanks for the coffee.

13
00:00:59,240 --> 00:01:01,160
Speaker 1: It's good, I must say. Let's let's start with it

14
00:01:01,200 --> 00:01:03,800
Speaker 1: with the news from yesterday, the Prime Minister's speech and

15
00:01:03,800 --> 00:01:05,759
Speaker 1: sort of what what you saw there, what you heard

16
00:01:05,760 --> 00:01:08,119
Speaker 1: there from the Prime minister, How you're processing the formal

17
00:01:08,200 --> 00:01:11,319
Speaker 1: start of Brexit as an investor, the beginning of a

18
00:01:11,360 --> 00:01:14,560
Speaker 1: two year slug for her. I mean it's gonna be

19
00:01:14,600 --> 00:01:18,240
Speaker 1: a very difficult and the Scots made a life even

20
00:01:18,240 --> 00:01:23,360
Speaker 1: more interesting with their recent Shenanigan. So I think for

21
00:01:23,720 --> 00:01:26,080
Speaker 1: us we tend to look at the real world, and

22
00:01:26,200 --> 00:01:29,600
Speaker 1: the numbers coming out of the UK David right now

23
00:01:29,840 --> 00:01:33,240
Speaker 1: continue to be for companies better than expected. So this

24
00:01:33,280 --> 00:01:36,920
Speaker 1: is a wonderful we we we could have the market

25
00:01:36,959 --> 00:01:40,280
Speaker 1: in the UK going up while we're all wringing our

26
00:01:40,319 --> 00:01:42,520
Speaker 1: hands about what a job she has to do. Meanwhile

27
00:01:42,520 --> 00:01:45,759
Speaker 1: the companies are doing okay. On the issue of uncertainty.

28
00:01:46,240 --> 00:01:48,480
Speaker 1: She stuck to the timetable that she set out to

29
00:01:48,520 --> 00:01:51,040
Speaker 1: stick to early on. Does that give you more optimism

30
00:01:51,040 --> 00:01:52,640
Speaker 1: that these next two years are going to proceed a pace,

31
00:01:52,720 --> 00:01:54,080
Speaker 1: that she's gonna be able to stick to the schedule,

32
00:01:54,080 --> 00:01:56,640
Speaker 1: that these negotiations will take two years and we'll be

33
00:01:56,640 --> 00:02:00,000
Speaker 1: finished by the end. I think it's potentially a content

34
00:02:00,000 --> 00:02:03,680
Speaker 1: any continuing mess. But I think she is a wonderful

35
00:02:03,720 --> 00:02:07,080
Speaker 1: person to be because she seems resolute as you just described.

36
00:02:07,320 --> 00:02:09,600
Speaker 1: I think she's got an opportunity to surprise to the

37
00:02:09,680 --> 00:02:13,040
Speaker 1: upside because we all expect a mess. You look at

38
00:02:13,080 --> 00:02:15,840
Speaker 1: the overtures in that speech to Europe. What do they

39
00:02:15,880 --> 00:02:17,959
Speaker 1: portended for you? She she's that she's talked about the

40
00:02:18,000 --> 00:02:20,680
Speaker 1: relationship they have hadnity that she wants to have going forward.

41
00:02:21,200 --> 00:02:23,920
Speaker 1: A lot of happy talk there where where are the

42
00:02:23,919 --> 00:02:25,960
Speaker 1: problems going to arise? As you see it when it

43
00:02:25,960 --> 00:02:29,440
Speaker 1: comes to the issues of trade and security, well, trade

44
00:02:29,440 --> 00:02:32,480
Speaker 1: and security, I think trade is the is the key issue,

45
00:02:32,480 --> 00:02:35,400
Speaker 1: and the security thing is what what drove the voters,

46
00:02:35,480 --> 00:02:38,840
Speaker 1: I presume in in the UK on the on the

47
00:02:38,880 --> 00:02:42,000
Speaker 1: issue of trade. I think that if we don't get

48
00:02:42,639 --> 00:02:47,720
Speaker 1: crazies on the EU side trying to punish UH the

49
00:02:47,800 --> 00:02:51,480
Speaker 1: UK trying to say to the remaining members who might

50
00:02:51,520 --> 00:02:53,359
Speaker 1: be wavering a little bit, don't even think about it

51
00:02:53,360 --> 00:02:55,360
Speaker 1: because look what we did to the UK. If those

52
00:02:55,400 --> 00:02:59,320
Speaker 1: people have any any important impact on what's going on,

53
00:03:00,000 --> 00:03:01,679
Speaker 1: and it could get messier than we But I think

54
00:03:01,680 --> 00:03:04,200
Speaker 1: that at the end of this process we will look

55
00:03:04,240 --> 00:03:06,480
Speaker 1: back and say a lot of the pragmatists did get involved.

56
00:03:06,520 --> 00:03:08,640
Speaker 1: I hope that's the case. You mentioned the data a

57
00:03:08,680 --> 00:03:10,520
Speaker 1: moment ago, and I wonder what it counts for it.

58
00:03:10,800 --> 00:03:12,400
Speaker 1: As you see at the fact that there was such

59
00:03:12,440 --> 00:03:15,400
Speaker 1: pessimism going into the vote and immediate aftermath of that

60
00:03:15,480 --> 00:03:17,799
Speaker 1: vote that the economy would go south. You look at Sterling,

61
00:03:17,840 --> 00:03:20,560
Speaker 1: I guess that's the exception, but uh, it seems like

62
00:03:20,560 --> 00:03:22,360
Speaker 1: the economy has fared better than many people thought. Why

63
00:03:22,360 --> 00:03:24,760
Speaker 1: do you think that's the case, you know, it's it's interesting.

64
00:03:24,800 --> 00:03:28,360
Speaker 1: I'm seeing a simultaneous thing in three places the US.

65
00:03:28,440 --> 00:03:32,040
Speaker 1: The last couple of quarters, just met with our people

66
00:03:32,200 --> 00:03:35,920
Speaker 1: who do our China investing and talking about the companies.

67
00:03:35,920 --> 00:03:38,840
Speaker 1: That things are better in China than people have been expecting,

68
00:03:39,280 --> 00:03:41,440
Speaker 1: and things are better in the UK, as he said,

69
00:03:41,480 --> 00:03:43,640
Speaker 1: and it kind of broadly across the room. So this

70
00:03:43,680 --> 00:03:46,640
Speaker 1: is a worldwide phenomena. It's not just there. And we

71
00:03:46,640 --> 00:03:50,120
Speaker 1: were told time and again at nausea that if Trump

72
00:03:50,120 --> 00:03:52,640
Speaker 1: got into office, you know this this whole stock market

73
00:03:52,640 --> 00:03:54,880
Speaker 1: thing and the economy would go into the into the dump.

74
00:03:55,400 --> 00:03:57,880
Speaker 1: That didn't happen. Here. We heard that Brexit was going

75
00:03:57,920 --> 00:04:00,440
Speaker 1: to kill the u K and killed the markets. None

76
00:04:00,480 --> 00:04:03,160
Speaker 1: of these happened. So I think that one of the

77
00:04:03,200 --> 00:04:05,840
Speaker 1: things that that is going on is the absence of

78
00:04:05,840 --> 00:04:09,520
Speaker 1: the negatives is helping people do the animal spirits game

79
00:04:09,560 --> 00:04:12,800
Speaker 1: a little bit. How do you balance a political risk

80
00:04:12,840 --> 00:04:15,400
Speaker 1: at this point? You have it here with with tax reform,

81
00:04:15,480 --> 00:04:18,320
Speaker 1: the prospect for tax reform, the prospect for infrastructure spending.

82
00:04:18,520 --> 00:04:20,440
Speaker 1: You have it overseas with it with these elections coming

83
00:04:20,480 --> 00:04:22,600
Speaker 1: up in France. How much weight are you giving that

84
00:04:22,839 --> 00:04:26,120
Speaker 1: versus say, what central banks are doing. Um, I'm gonna

85
00:04:26,120 --> 00:04:28,280
Speaker 1: give you a little advertisement here because if you if

86
00:04:28,279 --> 00:04:30,200
Speaker 1: you look at Bloomberg this morning, there are a number

87
00:04:30,240 --> 00:04:33,480
Speaker 1: of articles that referred to just that question, which includes

88
00:04:33,520 --> 00:04:36,400
Speaker 1: the observation that things have gone better, as I just

89
00:04:36,440 --> 00:04:39,200
Speaker 1: said a second ago, with respect particularly to the markets,

90
00:04:39,240 --> 00:04:43,520
Speaker 1: and but also with with the fundamentals and economic fundamentals,

91
00:04:43,520 --> 00:04:46,839
Speaker 1: company fundamentals. So as as we're moving forward here, things

92
00:04:46,880 --> 00:04:49,680
Speaker 1: are moving apace. Earnings look to be surprising a little

93
00:04:49,680 --> 00:04:52,200
Speaker 1: bit to the upside around the world. But starting with

94
00:04:52,240 --> 00:04:53,800
Speaker 1: the U s and the numbers we're about to get,

95
00:04:54,320 --> 00:04:57,159
Speaker 1: and I think that what's going on is the fundamentals

96
00:04:57,200 --> 00:05:01,160
Speaker 1: are good. So they have been trumping hunt intended. They

97
00:05:01,200 --> 00:05:05,080
Speaker 1: have been trumping. They have been trumping the political worries,

98
00:05:05,520 --> 00:05:07,440
Speaker 1: and we were supposed to get all of these bad

99
00:05:07,480 --> 00:05:11,680
Speaker 1: things happening politically affecting the markets, and that the bad

100
00:05:11,680 --> 00:05:14,000
Speaker 1: stuff didn't happen to the markets. And I think that's

101
00:05:14,040 --> 00:05:16,520
Speaker 1: it feeds on itself. Then what's your counsel to an

102
00:05:16,520 --> 00:05:19,719
Speaker 1: investor who is preoccupied by the politics. How much should

103
00:05:19,720 --> 00:05:21,800
Speaker 1: he or should be paying attention to the politics versus

104
00:05:21,839 --> 00:05:26,840
Speaker 1: the fundamentals. Um, if my wife is listening, i'd say

105
00:05:27,880 --> 00:05:31,520
Speaker 1: you should spend no time, you know, but I think

106
00:05:31,640 --> 00:05:34,839
Speaker 1: very little time. I think to the extent that we

107
00:05:35,000 --> 00:05:38,000
Speaker 1: get some positive things. For example, we now we're talking

108
00:05:38,000 --> 00:05:40,799
Speaker 1: about tax reform in the US. If we get corporate

109
00:05:40,800 --> 00:05:44,839
Speaker 1: tax reform of some kind over the next six months,

110
00:05:44,880 --> 00:05:47,279
Speaker 1: I think that will help the market somewhat, will help.

111
00:05:47,560 --> 00:05:50,160
Speaker 1: But I think at this time we we have companies

112
00:05:50,640 --> 00:05:54,120
Speaker 1: and individuals feeling a little bit better about things. So

113
00:05:54,440 --> 00:05:57,239
Speaker 1: numbers are continuing to surprise a little bit to the upside.

114
00:05:57,600 --> 00:06:01,280
Speaker 1: If Washington doesn't if Washington doesn't screw that up, um,

115
00:06:01,560 --> 00:06:04,000
Speaker 1: and that's a big bet. But if they don't, that's

116
00:06:04,000 --> 00:06:05,919
Speaker 1: a good thing. But even if they do screw it up,

117
00:06:05,960 --> 00:06:08,880
Speaker 1: it hasn't been enough to derail what's going on around

118
00:06:08,960 --> 00:06:11,960
Speaker 1: the world. Have the contours of your portfolio changed much

119
00:06:11,960 --> 00:06:13,920
Speaker 1: over these last few months, since since the elections. I

120
00:06:14,440 --> 00:06:19,200
Speaker 1: know the interesting question because, um, I think there's been

121
00:06:19,240 --> 00:06:21,560
Speaker 1: a bit of a rising tide lifting all the boats.

122
00:06:21,600 --> 00:06:25,400
Speaker 1: But I think that the best companies are continuing to

123
00:06:25,400 --> 00:06:28,279
Speaker 1: figure out ways that's actually that's a seminal question because

124
00:06:28,560 --> 00:06:30,800
Speaker 1: the best companies, the g E s and so on,

125
00:06:31,320 --> 00:06:37,240
Speaker 1: rather the Johnson and Johnson's, the the Microsoft, the world's

126
00:06:37,279 --> 00:06:41,200
Speaker 1: great companies have figured out that we'll we'll be able

127
00:06:41,240 --> 00:06:44,440
Speaker 1: to survive globally if we just continue to do smart

128
00:06:44,560 --> 00:06:48,560
Speaker 1: things and incorporating the challenges from what may happen in

129
00:06:48,600 --> 00:06:51,720
Speaker 1: the various countries around the world, and there their political miasthma.

130
00:06:52,320 --> 00:06:54,600
Speaker 1: You mentioned you met with these Chinese fund managers, and

131
00:06:54,600 --> 00:06:57,799
Speaker 1: I wonder what they said about the investment landscape in China,

132
00:06:57,880 --> 00:07:00,760
Speaker 1: the appetite for for investing, how is that changed in

133
00:07:00,800 --> 00:07:03,440
Speaker 1: recent In recent times, they have some of the same

134
00:07:03,480 --> 00:07:06,400
Speaker 1: malady we have here, which is the flows that are

135
00:07:06,400 --> 00:07:10,120
Speaker 1: continuing to grow from the e T s. So that

136
00:07:10,320 --> 00:07:12,960
Speaker 1: means that the large companies which are part of the

137
00:07:13,040 --> 00:07:16,040
Speaker 1: index of programs that the E T S are are

138
00:07:16,120 --> 00:07:20,160
Speaker 1: involved in, that they end up with the wind at

139
00:07:20,160 --> 00:07:23,120
Speaker 1: their backs. So the small and medium sized companies in

140
00:07:23,560 --> 00:07:26,920
Speaker 1: the emerging markets, beginning with China, are being a little

141
00:07:26,920 --> 00:07:30,280
Speaker 1: bit ignored. So there's a growing opportunity, that's what we're hearing.

142
00:07:30,440 --> 00:07:32,840
Speaker 1: But the company's overall are doing a little bit better

143
00:07:32,840 --> 00:07:36,360
Speaker 1: than people suspected and the numbers for the coming quarter

144
00:07:36,400 --> 00:07:38,360
Speaker 1: in the coming year look to be able once again

145
00:07:38,400 --> 00:07:40,840
Speaker 1: a little bit better than than suspected. How do you

146
00:07:40,880 --> 00:07:44,280
Speaker 1: go about finding companies in which to invest in in China? What? What?

147
00:07:44,280 --> 00:07:46,440
Speaker 1: What's your? Is the metric different there than it is

148
00:07:46,480 --> 00:07:50,560
Speaker 1: here or in Europe? I don't even try. And you know,

149
00:07:51,360 --> 00:07:53,920
Speaker 1: what we do try to do is find the smartest

150
00:07:53,920 --> 00:07:58,560
Speaker 1: people on the ground in Shanghai, Beijing, Hong Kong, who

151
00:07:58,680 --> 00:08:03,120
Speaker 1: visit all the places around China and in the Greater

152
00:08:03,200 --> 00:08:05,800
Speaker 1: China area and they and you have to do. You

153
00:08:05,800 --> 00:08:08,760
Speaker 1: have to look at these people face to face and

154
00:08:08,920 --> 00:08:11,240
Speaker 1: and talk about what is actually going on in their

155
00:08:11,280 --> 00:08:13,960
Speaker 1: businesses and that for me, we've been doing this. We

156
00:08:14,120 --> 00:08:17,640
Speaker 1: launched the China Fund, which we're talking about actually um

157
00:08:17,920 --> 00:08:20,600
Speaker 1: over twenty years ago and so I've seen major changes,

158
00:08:20,760 --> 00:08:25,680
Speaker 1: but we've made some mistakes, but overall the record is

159
00:08:25,680 --> 00:08:27,800
Speaker 1: is what it is. It's really good and made a

160
00:08:27,800 --> 00:08:29,600
Speaker 1: lot of money over there. But it we've done it

161
00:08:29,640 --> 00:08:32,520
Speaker 1: by having people on the ground, spending all their time

162
00:08:32,679 --> 00:08:35,040
Speaker 1: going visiting companies and seeing what's going on. Do you

163
00:08:35,080 --> 00:08:38,800
Speaker 1: find the economy to be uh more transparent? Communications about

164
00:08:38,800 --> 00:08:41,880
Speaker 1: the economy more transparent, now versus twenty years ago? Are

165
00:08:41,880 --> 00:08:44,959
Speaker 1: they getting better at it? Did you say less? Okay?

166
00:08:45,960 --> 00:08:50,240
Speaker 1: The glass empty or full? Yeah? Yeah, they are less opay. Uh.

167
00:08:50,480 --> 00:08:53,240
Speaker 1: But that's a that's a key point and buttresses whatever

168
00:08:53,320 --> 00:08:54,920
Speaker 1: since talking about in terms of you have to go

169
00:08:55,000 --> 00:08:57,040
Speaker 1: talk to the people and you see if they're lying

170
00:08:57,080 --> 00:09:00,480
Speaker 1: to you. Um. Just maybe a last question before we'll

171
00:09:00,480 --> 00:09:01,679
Speaker 1: have to come back here after make you mentioned the

172
00:09:01,760 --> 00:09:03,440
Speaker 1: t F. Let's let's talk about that when you come back.

173
00:09:03,480 --> 00:09:05,240
Speaker 1: But we saw such a big, big news out of

174
00:09:05,240 --> 00:09:07,600
Speaker 1: black Rock yesterday. How how how important is it? And

175
00:09:07,640 --> 00:09:09,520
Speaker 1: again we'll come back and talk more about it. Important,

176
00:09:09,520 --> 00:09:13,320
Speaker 1: good to talk about and part of it, but part

177
00:09:13,320 --> 00:09:14,800
Speaker 1: of a trend, you see it. I mean it's a

178
00:09:14,840 --> 00:09:17,800
Speaker 1: part of the continuum here, major trend. All the listeners

179
00:09:17,840 --> 00:09:19,600
Speaker 1: should pay attention. All right, we'll come back and talk

180
00:09:19,600 --> 00:09:21,760
Speaker 1: about that with Michael Holland. He's the chairman of Holland Company,

181
00:09:21,760 --> 00:09:23,960
Speaker 1: the president and founder of the Holland Balance Fund. He's

182
00:09:24,000 --> 00:09:26,280
Speaker 1: with us here at the Pier Hotel for Wheels Up

183
00:09:26,320 --> 00:09:29,320
Speaker 1: Power Breakfast at the Pier. David Gura and Tom Keene

184
00:09:29,360 --> 00:09:31,680
Speaker 1: here in New York and worldwide on Bloomberg Gradio. David

185
00:09:31,679 --> 00:09:33,760
Speaker 1: Gura and Tom Keene at the Wheels Up Power Breakfast

186
00:09:33,760 --> 00:09:35,720
Speaker 1: at the Pier Hotel and Fifth Avenue in Manhattan. Today,

187
00:09:35,720 --> 00:09:37,600
Speaker 1: we're here with Michael Holland, the chairman of Holland Company,

188
00:09:37,640 --> 00:09:39,959
Speaker 1: the president, founder of the Holland Balanced from great to

189
00:09:40,000 --> 00:09:43,160
Speaker 1: have you with us. We teased this before break. We're

190
00:09:43,160 --> 00:09:45,200
Speaker 1: talking about the black Rock news and black Rock deciding

191
00:09:45,280 --> 00:09:47,120
Speaker 1: yesterday it's gonna let go about thirty people in its

192
00:09:47,160 --> 00:09:50,080
Speaker 1: active equities the group, and wanted to go to you

193
00:09:50,080 --> 00:09:52,040
Speaker 1: for some perspective on that. The importance of that. We

194
00:09:52,080 --> 00:09:53,600
Speaker 1: of course saw the news out of Fidelity a few

195
00:09:53,640 --> 00:09:56,120
Speaker 1: weeks ago that they're gonna do buyouts of some three

196
00:09:56,160 --> 00:09:59,160
Speaker 1: thousand people. Talk about this trend that's shaping up here

197
00:09:59,400 --> 00:10:01,360
Speaker 1: and what that means for the industry generally. Let me

198
00:10:01,360 --> 00:10:04,040
Speaker 1: add a third day t ro Price a week ago

199
00:10:04,200 --> 00:10:07,920
Speaker 1: talking about robo investing. H I thought of the three,

200
00:10:08,000 --> 00:10:10,440
Speaker 1: the most interesting of them was tro Price, which is

201
00:10:10,480 --> 00:10:15,040
Speaker 1: that a long history of very successful active management. Uh.

202
00:10:16,000 --> 00:10:19,439
Speaker 1: The people there over the years have done a spectacular

203
00:10:19,559 --> 00:10:23,560
Speaker 1: job on the number of fronts, and yet they are

204
00:10:23,679 --> 00:10:27,920
Speaker 1: part of this movement towards computers, internet and artificial intelligence.

205
00:10:28,320 --> 00:10:31,400
Speaker 1: I think it's not a cyclical thing. I think it's secular.

206
00:10:31,480 --> 00:10:35,640
Speaker 1: I think that the numbers are very difficult to ignore

207
00:10:36,400 --> 00:10:40,760
Speaker 1: in terms of particularly the efficient large cap markets around

208
00:10:40,760 --> 00:10:43,480
Speaker 1: the world, starting with the US. So that when you

209
00:10:43,559 --> 00:10:46,680
Speaker 1: have as black Rock in money managers who are paid

210
00:10:46,679 --> 00:10:49,760
Speaker 1: a lot of money to manage large shaft stocks and

211
00:10:49,800 --> 00:10:53,240
Speaker 1: the e t s that across the aisle that they have,

212
00:10:53,320 --> 00:10:57,000
Speaker 1: which are index of funds, which have very little in

213
00:10:57,040 --> 00:10:59,520
Speaker 1: the way of expenses associated with them, and they can

214
00:10:59,559 --> 00:11:02,600
Speaker 1: charge a little to the consumer. It's it's a no brainer.

215
00:11:02,840 --> 00:11:05,679
Speaker 1: So that's going to continue. It's just it's too obvious.

216
00:11:06,200 --> 00:11:08,600
Speaker 1: Do you think yesterday spoke about changing the ecosystem and

217
00:11:08,600 --> 00:11:11,360
Speaker 1: that implies that, to my ear, at least some agency

218
00:11:11,400 --> 00:11:13,600
Speaker 1: that he's going to be able to do so? Uh

219
00:11:13,960 --> 00:11:17,080
Speaker 1: is black Rock behind? Here? Are these companies behind a trend?

220
00:11:17,240 --> 00:11:19,040
Speaker 1: They're gonna be able to catch up? Do you think? Well,

221
00:11:19,040 --> 00:11:21,160
Speaker 1: I think they'll catch up. I think, you know, there's

222
00:11:21,160 --> 00:11:24,040
Speaker 1: a lot of money to be to be made or

223
00:11:24,160 --> 00:11:27,040
Speaker 1: or lost, and I think they will move very quickly.

224
00:11:27,440 --> 00:11:32,920
Speaker 1: Larry think has hired some very high powered uh Internet

225
00:11:33,000 --> 00:11:35,360
Speaker 1: kinds of people over the last couple of years, and

226
00:11:35,360 --> 00:11:38,360
Speaker 1: I think they're they're they're fully prepared to win this game.

227
00:11:39,040 --> 00:11:40,920
Speaker 1: Good morning every one time. Can you here with David

228
00:11:40,920 --> 00:11:43,480
Speaker 1: Gurrow wheels a power breakfast getting ready? This is a

229
00:11:43,800 --> 00:11:47,720
Speaker 1: chore for you. They think we've convinced UM, the producers

230
00:11:47,720 --> 00:11:51,840
Speaker 1: of this wonderful UH entertainment vehicle, that it's a chore

231
00:11:51,920 --> 00:11:53,920
Speaker 1: for us to come to the Pier Hotel. Now we

232
00:11:53,960 --> 00:11:56,600
Speaker 1: get to leave the building, we get to walk and yeah,

233
00:11:56,800 --> 00:12:02,440
Speaker 1: but you're god fresher, beautiful spring morning here, wonderful hospitality,

234
00:12:02,679 --> 00:12:05,920
Speaker 1: an elegant breakfast and venue. Even Michael Holland showed up

235
00:12:05,960 --> 00:12:11,160
Speaker 1: for Michael help me here. With robo investing, that's not

236
00:12:11,200 --> 00:12:13,880
Speaker 1: a Graham dogg coddle. I don't even think it's in

237
00:12:14,000 --> 00:12:17,960
Speaker 1: Jack Bogel, Would you please explain what robo investing is.

238
00:12:18,320 --> 00:12:21,640
Speaker 1: It's just one more facet of using computers to help

239
00:12:21,880 --> 00:12:25,400
Speaker 1: make money for for individual investors. Tom and I think

240
00:12:25,480 --> 00:12:30,640
Speaker 1: that um it is simply a way of UM eliminating

241
00:12:30,760 --> 00:12:34,880
Speaker 1: the potential screw ups that we humans can do, and

242
00:12:35,040 --> 00:12:39,040
Speaker 1: the the eliminating the fees that we humans can charge

243
00:12:39,559 --> 00:12:42,600
Speaker 1: for those mistakes. And that's really important because a lot

244
00:12:42,640 --> 00:12:45,280
Speaker 1: of times you end up with a high price product

245
00:12:45,320 --> 00:12:49,280
Speaker 1: that is an inferior product to enter Princeton on you here,

246
00:12:49,400 --> 00:12:53,079
Speaker 1: Harvard guy, and ask you what Jack Bogel would say

247
00:12:53,080 --> 00:12:56,520
Speaker 1: at four cents, at four tenths of a percent, it's

248
00:12:56,559 --> 00:12:58,839
Speaker 1: seven tenths of a percent. How can you afford to

249
00:12:58,880 --> 00:13:01,680
Speaker 1: do anything with computer uters, with the with the fee

250
00:13:01,679 --> 00:13:05,280
Speaker 1: battle that's going on. Well, I think what's going to

251
00:13:05,360 --> 00:13:10,000
Speaker 1: happen is, uh, we will have a continuing migration for

252
00:13:10,080 --> 00:13:13,280
Speaker 1: a lot of investors, which be done several years ago,

253
00:13:13,559 --> 00:13:15,280
Speaker 1: is picking up steam over the last couple of years

254
00:13:15,280 --> 00:13:19,280
Speaker 1: where people are realizing the in a two percent world.

255
00:13:19,760 --> 00:13:22,000
Speaker 1: We're talking a little while ago in the market check,

256
00:13:22,280 --> 00:13:24,320
Speaker 1: we have a two percent world. If you look across

257
00:13:24,360 --> 00:13:30,600
Speaker 1: the fixed income markets, you can't ignore the the fees

258
00:13:30,679 --> 00:13:32,000
Speaker 1: the way we used to when we had a ten

259
00:13:32,040 --> 00:13:34,760
Speaker 1: and fifteen percent return world. What do you say to

260
00:13:35,080 --> 00:13:39,000
Speaker 1: somebody who's uh nearing graduation from from college or graduate

261
00:13:39,000 --> 00:13:42,520
Speaker 1: school thinking about getting into this business. How radically has

262
00:13:42,520 --> 00:13:45,360
Speaker 1: it changed? Is it changing? And what kind of jobs

263
00:13:45,360 --> 00:13:47,160
Speaker 1: are going to exist for somebody who's interested in getting

264
00:13:47,160 --> 00:13:50,120
Speaker 1: into invest in. So for the young people who are

265
00:13:50,160 --> 00:13:55,080
Speaker 1: listening to that's a really important question to go to

266
00:13:55,120 --> 00:13:59,040
Speaker 1: the traditional stuff in Wall Street as their uncles or

267
00:13:59,080 --> 00:14:01,320
Speaker 1: their parents might have on doesn't make a lot of

268
00:14:01,360 --> 00:14:04,839
Speaker 1: sense without going the extra step in acknowledging what we're

269
00:14:04,880 --> 00:14:07,319
Speaker 1: just talking about, which is you better have your computer

270
00:14:07,360 --> 00:14:10,679
Speaker 1: skills way up there and incorporate that and how you

271
00:14:10,720 --> 00:14:14,360
Speaker 1: approach this business in the future. Michael Bloomberg is one

272
00:14:14,400 --> 00:14:16,319
Speaker 1: of the one of the best people to think about it.

273
00:14:16,440 --> 00:14:18,960
Speaker 1: And he changed the business. The business is changing again.

274
00:14:19,640 --> 00:14:22,240
Speaker 1: He changed the business. Uh, well, we're gonna run out

275
00:14:22,240 --> 00:14:24,760
Speaker 1: of time here. We should mention that Mr Bloomberg's principal

276
00:14:24,760 --> 00:14:27,520
Speaker 1: owner of Bloomberg Help and is a modest interest in

277
00:14:27,560 --> 00:14:30,320
Speaker 1: this radio station. And well, Michael, we've got to have

278
00:14:30,360 --> 00:14:32,680
Speaker 1: you come back here to talk about this about the

279
00:14:32,760 --> 00:14:36,040
Speaker 1: changes in the business because the sequence, as you mentioned, David,

280
00:14:36,320 --> 00:14:41,960
Speaker 1: the number of announcements, including tro Price, has been absolutely extraordinary.

281
00:14:42,040 --> 00:14:44,880
Speaker 1: David Gurin Tim Caine, we're beginning a good number of

282
00:14:44,880 --> 00:14:48,400
Speaker 1: hours here and our wheels up, Power, Breakfast, Appear Hotel.

283
00:14:48,520 --> 00:14:52,560
Speaker 1: This has become a wonderful part of our thursdays at Bloomberg.

284
00:14:52,600 --> 00:14:55,360
Speaker 1: To be here. Is Megan Murphy gonna be with us

285
00:14:56,240 --> 00:15:01,440
Speaker 1: over yonder She's like, you're the room nats from Bloomberger.

286
00:15:01,600 --> 00:15:17,440
Speaker 1: Is this week, Megan Murphy, this is Bloomberg. Why don't

287
00:15:17,440 --> 00:15:19,920
Speaker 1: you bring a gentleman? Is the only one here at

288
00:15:19,920 --> 00:15:23,320
Speaker 1: the Pier hotel who knows what a white paper is.

289
00:15:23,880 --> 00:15:25,800
Speaker 1: Just you're hard to joined us now. He's the chief

290
00:15:25,800 --> 00:15:28,320
Speaker 1: investment strategist and co founder at as R. As you said,

291
00:15:28,400 --> 00:15:29,760
Speaker 1: joining us here at the Pier, and I want you

292
00:15:29,800 --> 00:15:32,800
Speaker 1: to play a spectral veterinarian here at the top. Give

293
00:15:32,880 --> 00:15:34,760
Speaker 1: us your sense of the health of the animal spirits,

294
00:15:34,800 --> 00:15:37,040
Speaker 1: your your read on the role they're playing right now.

295
00:15:37,120 --> 00:15:38,440
Speaker 1: So I think that you know, the thing that we're

296
00:15:38,480 --> 00:15:41,440
Speaker 1: concerned about is that the all this soft data that

297
00:15:41,520 --> 00:15:43,920
Speaker 1: the animal spirits. You know, this is all about the

298
00:15:44,200 --> 00:15:48,560
Speaker 1: US consumers and the US of corporate effectively having mentally

299
00:15:48,600 --> 00:15:51,560
Speaker 1: spent those tax cuts. The trouble is that the hope

300
00:15:51,560 --> 00:15:54,359
Speaker 1: of that fist glazing is going to confront the reality

301
00:15:54,520 --> 00:15:57,560
Speaker 1: of the monetary tightening that has already taken place. You know,

302
00:15:57,560 --> 00:15:59,880
Speaker 1: we don't need another rate rise to to drag that.

303
00:16:00,080 --> 00:16:03,000
Speaker 1: You know even further. Where short rates are up, long

304
00:16:03,120 --> 00:16:05,000
Speaker 1: rates are up, and the dollar is up over the

305
00:16:05,080 --> 00:16:07,360
Speaker 1: last six months and in the past, that tends to

306
00:16:07,440 --> 00:16:09,920
Speaker 1: drag down economic growth. So you know, the hard data.

307
00:16:10,000 --> 00:16:12,160
Speaker 1: We can see that it's actually really struggling. When you

308
00:16:12,200 --> 00:16:15,160
Speaker 1: look at retail sales, auto sales, housing sales, you know,

309
00:16:15,200 --> 00:16:18,640
Speaker 1: anything that stuff is actually finding it hard to deliver um.

310
00:16:18,800 --> 00:16:20,880
Speaker 1: And you know that's going to be the reality. And

311
00:16:21,040 --> 00:16:22,640
Speaker 1: you look at the money supply, the ATA as well,

312
00:16:22,800 --> 00:16:25,640
Speaker 1: see an I loan growth, that's all decelerating, you know.

313
00:16:25,680 --> 00:16:27,840
Speaker 1: So I think it's We've got a lot of hope there.

314
00:16:28,440 --> 00:16:33,960
Speaker 1: Do you see Ian hurt? It's having tears. Don't you

315
00:16:34,040 --> 00:16:39,120
Speaker 1: just expect that Triple Expresses has tears much much more.

316
00:16:39,640 --> 00:16:41,320
Speaker 1: I mentioned to buy Its Left Witch, who is our

317
00:16:41,320 --> 00:16:43,400
Speaker 1: guest here earlier in the week, and his comments on

318
00:16:43,440 --> 00:16:45,080
Speaker 1: the fact that the soft data to his to his

319
00:16:45,160 --> 00:16:47,440
Speaker 1: eye at least, is it's indicating what's to come through

320
00:16:47,440 --> 00:16:49,120
Speaker 1: the economy. A lot of people very happy with the

321
00:16:49,160 --> 00:16:52,480
Speaker 1: optimism expressed in those data. What are you seeing? Well,

322
00:16:52,560 --> 00:16:54,680
Speaker 1: you know, I think if you look back in the history,

323
00:16:54,760 --> 00:16:57,200
Speaker 1: you can see the way that soft data does normally

324
00:16:57,320 --> 00:16:59,520
Speaker 1: lead the hard data, but it leads abo about two

325
00:16:59,520 --> 00:17:02,000
Speaker 1: to three months. So if it looks like two thousand

326
00:17:02,000 --> 00:17:04,800
Speaker 1: and nine, yeah, the soft data took off and then

327
00:17:04,840 --> 00:17:07,680
Speaker 1: the real data picked up. But two thousand and thirteen,

328
00:17:07,920 --> 00:17:10,280
Speaker 1: the soft data picked up and then had to come

329
00:17:10,280 --> 00:17:12,440
Speaker 1: down and meet the reality. I want you to help

330
00:17:12,480 --> 00:17:15,720
Speaker 1: our listeners with a concept it's really hard to get

331
00:17:15,720 --> 00:17:18,400
Speaker 1: a handle on. Atlanta does this with their Woogie index,

332
00:17:18,760 --> 00:17:22,360
Speaker 1: which is if things outside of central banks become more

333
00:17:22,440 --> 00:17:26,840
Speaker 1: tighter strong dollars you've just mentioned, how does it be

334
00:17:26,960 --> 00:17:30,600
Speaker 1: equivalent to a rate? Right? Were you guys say this happened,

335
00:17:30,600 --> 00:17:33,879
Speaker 1: this happened, that happened, and it's like two equivalent rate increases?

336
00:17:34,040 --> 00:17:36,359
Speaker 1: What did translate that? You know? What you're trying to

337
00:17:36,400 --> 00:17:38,520
Speaker 1: do there is to see whether it is what's going

338
00:17:38,560 --> 00:17:41,159
Speaker 1: to impact the corporate sector, what's going to impact the

339
00:17:41,200 --> 00:17:43,560
Speaker 1: household sector? And when we look back in the past,

340
00:17:43,600 --> 00:17:46,880
Speaker 1: we can see that those periods of strong US dollar growth.

341
00:17:47,320 --> 00:17:50,560
Speaker 1: You know, so look back in the night earlyies, you

342
00:17:50,600 --> 00:17:53,359
Speaker 1: know how much was that equivalent to in terms of

343
00:17:53,400 --> 00:17:59,160
Speaker 1: holding down the earnings growth, holding down economic activity? And

344
00:17:59,359 --> 00:18:03,720
Speaker 1: as you saw between five you know that rise in

345
00:18:03,760 --> 00:18:07,160
Speaker 1: the dollar actually led to three years of negative earnings growth,

346
00:18:07,240 --> 00:18:10,600
Speaker 1: weak economic activity, and unemployment going up from eight percent

347
00:18:10,640 --> 00:18:13,120
Speaker 1: to eleven percent. Tom So you know, you're trying to

348
00:18:13,160 --> 00:18:16,399
Speaker 1: see how much mentally, you know that you could have

349
00:18:16,480 --> 00:18:18,639
Speaker 1: done if you'd have had to raise short rates or

350
00:18:18,680 --> 00:18:21,119
Speaker 1: long rates, what would be in the equivalent number. So

351
00:18:21,160 --> 00:18:23,760
Speaker 1: here's the unfair Thursday question. Where are we on Taylor

352
00:18:23,840 --> 00:18:28,040
Speaker 1: rule equivalents? Yet? If Taylor rule is this pure monetary model,

353
00:18:28,520 --> 00:18:31,879
Speaker 1: with all this other stuff going on, have we really

354
00:18:31,920 --> 00:18:34,679
Speaker 1: closed the gap on John B. Taylor's model so on

355
00:18:34,720 --> 00:18:37,439
Speaker 1: our models, Yes, the Taylor rule is pretty close to

356
00:18:37,480 --> 00:18:38,960
Speaker 1: being where you are. But if you look at the

357
00:18:39,000 --> 00:18:42,120
Speaker 1: shadow rates that you were talking about, we've actually seen

358
00:18:42,160 --> 00:18:45,240
Speaker 1: a four percent rise in those shadow rates over the

359
00:18:45,320 --> 00:18:48,320
Speaker 1: last three years. Now, you know, if the economy is

360
00:18:48,359 --> 00:18:52,520
Speaker 1: close to the to the the neutral point, you know

361
00:18:52,800 --> 00:18:56,000
Speaker 1: our warriors that actually you shouldn't be tightening too much further.

362
00:18:56,160 --> 00:18:58,000
Speaker 1: We only think you're going to get one more rate

363
00:18:58,080 --> 00:19:01,000
Speaker 1: rise out of the FED this year. So this is critical.

364
00:19:01,119 --> 00:19:02,920
Speaker 1: Can we earn the end of the year as we

365
00:19:03,000 --> 00:19:05,920
Speaker 1: go into tax reform and all this other mystery stuff

366
00:19:06,640 --> 00:19:10,560
Speaker 1: restrictive where we have a restrictive policy. You know, our

367
00:19:10,640 --> 00:19:14,160
Speaker 1: worry is that if you don't get that fiscal expansion

368
00:19:14,240 --> 00:19:16,359
Speaker 1: coming through, then yeah, you're going to see you know,

369
00:19:16,400 --> 00:19:19,240
Speaker 1: the economy actually slowing down. We know that this is

370
00:19:19,240 --> 00:19:21,760
Speaker 1: close to the peak of the inflation cycle as well,

371
00:19:22,000 --> 00:19:24,200
Speaker 1: and that at that point the Fed's going to find

372
00:19:24,200 --> 00:19:25,639
Speaker 1: it very difficult. So this is why we think the

373
00:19:25,640 --> 00:19:27,920
Speaker 1: Fed's going to put that second rate rise in in May,

374
00:19:28,119 --> 00:19:30,080
Speaker 1: but it's going to find it very difficult to push

375
00:19:30,080 --> 00:19:32,000
Speaker 1: through for a third or fourth in the second half

376
00:19:32,000 --> 00:19:34,560
Speaker 1: of the year because they don't want to be too restrictive.

377
00:19:34,640 --> 00:19:36,679
Speaker 1: They will be data dependent, which is coming back to

378
00:19:36,800 --> 00:19:38,960
Speaker 1: what Tom was saying before the break. We get these data,

379
00:19:39,000 --> 00:19:41,760
Speaker 1: these GDP data shortly at at a thirty Wall Street time.

380
00:19:41,800 --> 00:19:44,119
Speaker 1: How do you regard GDP? What does it tell you about? Annoying?

381
00:19:44,240 --> 00:19:47,679
Speaker 1: How much credence do you It's noisy, it's an noisy,

382
00:19:47,680 --> 00:19:49,520
Speaker 1: it's backward looking. So I think you've got to take

383
00:19:49,520 --> 00:19:51,000
Speaker 1: it with a pinch of salt. You've got to look

384
00:19:51,040 --> 00:19:54,000
Speaker 1: at the broad trend in data. What's the monetary data saying,

385
00:19:54,000 --> 00:19:57,160
Speaker 1: what's the economic data you know that the real economy data,

386
00:19:57,359 --> 00:20:00,119
Speaker 1: And what's the financial market saying. Now I think I

387
00:20:00,200 --> 00:20:02,600
Speaker 1: worry is that when you look at things like financial conditions,

388
00:20:03,000 --> 00:20:05,560
Speaker 1: they're actually telling you more about the equity market, the

389
00:20:05,560 --> 00:20:09,160
Speaker 1: credit market, and they are discounting a big rise in investment.

390
00:20:09,359 --> 00:20:11,720
Speaker 1: And the big challenge is can you get that investment

391
00:20:11,760 --> 00:20:14,240
Speaker 1: coming through without the tax cuts? You know, on the

392
00:20:14,280 --> 00:20:16,360
Speaker 1: subject of tax cuts, it's pouring pouring over your note,

393
00:20:16,400 --> 00:20:18,240
Speaker 1: and the line stood out to meet that changes to

394
00:20:18,320 --> 00:20:21,240
Speaker 1: corporate tax could prove disruptive both within the US and overseas.

395
00:20:21,240 --> 00:20:23,840
Speaker 1: I don't think this is something we've talked about enough.

396
00:20:23,880 --> 00:20:25,800
Speaker 1: We've talked about the potential for it. Who seems to

397
00:20:25,840 --> 00:20:28,240
Speaker 1: be enthusiasm for changing the tax code, but we haven't

398
00:20:28,240 --> 00:20:30,480
Speaker 1: talked about the distruptiveness seven. Yeah, you know, I think

399
00:20:30,520 --> 00:20:33,280
Speaker 1: that you know how the corporate sector deals with that.

400
00:20:33,480 --> 00:20:35,320
Speaker 1: I think the big risk here is that because of

401
00:20:35,320 --> 00:20:38,320
Speaker 1: that first year tax deductibility of investment, you know, the

402
00:20:38,520 --> 00:20:42,000
Speaker 1: the why would you do investment now if you think

403
00:20:42,040 --> 00:20:44,119
Speaker 1: there might be a tax code change, you know in

404
00:20:44,200 --> 00:20:46,399
Speaker 1: six months time or three months time, and if that

405
00:20:46,480 --> 00:20:48,600
Speaker 1: gets pushed back again, you know. So our worry is

406
00:20:48,600 --> 00:20:51,399
Speaker 1: that you get this disappointment about investment coming through in

407
00:20:51,440 --> 00:20:53,320
Speaker 1: the second half the year. Yeah, there'll be some energy

408
00:20:53,359 --> 00:20:57,000
Speaker 1: related capex coming through, but we'll broader capex actually improve.

409
00:20:57,440 --> 00:21:00,880
Speaker 1: And if that doesn't happen, and at the same Chinese

410
00:21:00,880 --> 00:21:04,320
Speaker 1: growth is slowing, then the pressure for the global economy

411
00:21:04,359 --> 00:21:06,639
Speaker 1: to actually disappoint and you're certainly not to get to

412
00:21:06,800 --> 00:21:11,000
Speaker 1: Mr Bullard's new regime. You know. That's the it's fascinating

413
00:21:11,080 --> 00:21:13,600
Speaker 1: here is there's another side of the debate of the

414
00:21:13,720 --> 00:21:16,760
Speaker 1: of the many people we speak to, which is, even

415
00:21:16,800 --> 00:21:19,919
Speaker 1: if the U S stumbles or as tempered or as average,

416
00:21:20,600 --> 00:21:24,639
Speaker 1: there's a global improvement going on. I believe you're not

417
00:21:24,800 --> 00:21:27,720
Speaker 1: sugg You don't agree. Yeah, no, you know, so there

418
00:21:27,920 --> 00:21:30,480
Speaker 1: was a global improvement going on. You know, we believe

419
00:21:30,520 --> 00:21:34,960
Speaker 1: that there's been a cyclical Asian inventory story that has

420
00:21:35,000 --> 00:21:37,359
Speaker 1: been driving the bulk of the improvement, both in the

421
00:21:37,400 --> 00:21:41,760
Speaker 1: real economy but also in the markets as well. Now

422
00:21:41,800 --> 00:21:44,159
Speaker 1: our worry is that if that was driven by Asia,

423
00:21:44,160 --> 00:21:46,960
Speaker 1: if that was driven by the Chinese stimulus that we

424
00:21:46,960 --> 00:21:48,720
Speaker 1: saw at the start of last year and through to

425
00:21:48,720 --> 00:21:51,040
Speaker 1: the middle of the last year, and that is starting

426
00:21:51,040 --> 00:21:54,959
Speaker 1: to wane, that actually that inventory is shortage is now

427
00:21:55,000 --> 00:21:57,639
Speaker 1: being replaced by seeing the pickup in shipments, and that

428
00:21:57,720 --> 00:22:00,200
Speaker 1: takes some of these pressures off, takes the pricing pressure off,

429
00:22:00,200 --> 00:22:02,159
Speaker 1: takes the air freight pressure on. Not think you're the

430
00:22:02,200 --> 00:22:04,879
Speaker 1: most cynical person at the hotel. I got that award

431
00:22:04,920 --> 00:22:08,879
Speaker 1: this morning. Are you saying the Chinese goos their economy

432
00:22:08,960 --> 00:22:12,119
Speaker 1: to get to the political congress is now just like

433
00:22:12,160 --> 00:22:15,800
Speaker 1: in America frankly after the election. Oops, and there's a

434
00:22:15,800 --> 00:22:19,160
Speaker 1: little bit of a well think might be even more

435
00:22:19,160 --> 00:22:21,800
Speaker 1: cynical than that tom which is that they goosed it

436
00:22:21,960 --> 00:22:23,960
Speaker 1: so much that actually they don't want to tell you

437
00:22:24,000 --> 00:22:26,680
Speaker 1: how much they goosed it. So on our Chinese tracker,

438
00:22:27,080 --> 00:22:29,040
Speaker 1: we think Chinese growth is running at eight and a

439
00:22:29,040 --> 00:22:31,840
Speaker 1: half percent. But you know, nobody wants to tell President

440
00:22:31,840 --> 00:22:33,639
Speaker 1: Trump that they're growing at eight and a half percent

441
00:22:33,680 --> 00:22:35,920
Speaker 1: when the US is growing at you know, potentially one

442
00:22:35,960 --> 00:22:38,880
Speaker 1: that we might hear this morning. So you know, from

443
00:22:38,920 --> 00:22:41,399
Speaker 1: that point of view, they can they you know, when

444
00:22:41,440 --> 00:22:44,840
Speaker 1: you look at Shanghai house prices up percent, Beijing house

445
00:22:44,880 --> 00:22:48,520
Speaker 1: prices up much more consistent with an even stronger number

446
00:22:48,680 --> 00:22:50,679
Speaker 1: than the six and a half type six point nine

447
00:22:50,760 --> 00:22:53,399
Speaker 1: numbers that they're printing, you know, so they can afford

448
00:22:53,400 --> 00:22:57,359
Speaker 1: to see the economy's decelerate going into the plenum, and

449
00:22:57,400 --> 00:23:00,480
Speaker 1: then if it weakens through six and a half, they'll

450
00:23:00,480 --> 00:23:02,560
Speaker 1: turn on this pig at once again. You do this show,

451
00:23:02,600 --> 00:23:04,520
Speaker 1: and by Thursday you can pick up on the themes

452
00:23:04,520 --> 00:23:06,320
Speaker 1: of the week and see an Eye loans as something

453
00:23:06,320 --> 00:23:08,399
Speaker 1: that's come up over and over again. What do you

454
00:23:08,440 --> 00:23:10,200
Speaker 1: see there? What should our listeners take note of? And

455
00:23:10,240 --> 00:23:12,520
Speaker 1: seeing eye loans, well, I think what it highlights is

456
00:23:12,560 --> 00:23:15,640
Speaker 1: that actually the corporate sector is quite extended, and as

457
00:23:15,680 --> 00:23:19,240
Speaker 1: you see the expectation of rate rises coming through, well,

458
00:23:19,280 --> 00:23:22,160
Speaker 1: why would you want to increase your your your exposure

459
00:23:22,200 --> 00:23:25,040
Speaker 1: to debt. Debt levels are already quite high. They're back

460
00:23:25,080 --> 00:23:28,520
Speaker 1: to type levels as a you know, looking at the

461
00:23:28,520 --> 00:23:32,080
Speaker 1: bottom up data relative to sales, even interest costs are

462
00:23:32,119 --> 00:23:35,439
Speaker 1: relatively high given how low interest rates are, so you know,

463
00:23:35,600 --> 00:23:38,800
Speaker 1: the expectation of higher rates is never great for for

464
00:23:39,119 --> 00:23:43,200
Speaker 1: monetary aggregates. To me, it's just let's come back. You

465
00:23:43,359 --> 00:23:46,960
Speaker 1: heard where this with a s R with the courses work,

466
00:23:47,240 --> 00:23:50,240
Speaker 1: particularly out of Europe, and we'll come back with Dr

467
00:23:50,320 --> 00:23:53,800
Speaker 1: Hartner to advance the conversation forward. Not only I guess

468
00:23:53,800 --> 00:23:57,919
Speaker 1: we could talk brexitly with small news item. I just

469
00:23:58,000 --> 00:24:00,840
Speaker 1: wish Americans could speak like Prime Minister May. I don't

470
00:24:00,840 --> 00:24:03,199
Speaker 1: mean the content, I don't want to editorialize it, but

471
00:24:03,640 --> 00:24:06,800
Speaker 1: what it was tri chillion, because would you suggest she

472
00:24:07,080 --> 00:24:10,879
Speaker 1: understood the import of the moment? She almost knew the details? Uh,

473
00:24:14,600 --> 00:24:16,560
Speaker 1: I want to say that we had to go nerdy

474
00:24:16,600 --> 00:24:18,240
Speaker 1: once a week. Can do that right now or the

475
00:24:18,280 --> 00:24:21,800
Speaker 1: inhartment of a s R research. This is a real treat, folks.

476
00:24:21,840 --> 00:24:24,639
Speaker 1: This is what Blumberg surveillance is about. Uh many of

477
00:24:24,680 --> 00:24:26,840
Speaker 1: you know the name Robert Angel of New York University

478
00:24:26,840 --> 00:24:28,959
Speaker 1: and Clive Granger, the laureates who have been with us

479
00:24:29,400 --> 00:24:33,000
Speaker 1: uh Ian Harder study in the same milieu under David

480
00:24:33,040 --> 00:24:36,440
Speaker 1: Henry at Oxford years ago. And the world is a

481
00:24:37,119 --> 00:24:41,359
Speaker 1: is a world of mathematics and error and probability in

482
00:24:41,520 --> 00:24:45,760
Speaker 1: managing mistakes. I would suggest there is a massive distrust

483
00:24:46,200 --> 00:24:49,879
Speaker 1: of a large part of the audience, including the President

484
00:24:50,040 --> 00:24:55,199
Speaker 1: United States, and using economic data that epsilon in the

485
00:24:55,240 --> 00:24:58,080
Speaker 1: back of the equations. How bad is it right now?

486
00:24:58,160 --> 00:25:00,760
Speaker 1: And is it bad because of the great dis doortion? Well,

487
00:25:00,800 --> 00:25:02,119
Speaker 1: I think that you know, what you've got is a

488
00:25:02,200 --> 00:25:06,520
Speaker 1: situation where you know, the economics profession needs to regain

489
00:25:06,600 --> 00:25:08,720
Speaker 1: the trust of society. You know, of our view, is

490
00:25:08,760 --> 00:25:12,080
Speaker 1: that actually part of the problem with society, you know,

491
00:25:12,560 --> 00:25:14,960
Speaker 1: and and the some of the issues that we've seen

492
00:25:15,240 --> 00:25:18,320
Speaker 1: in Brexit and here in the United States is that actually,

493
00:25:18,480 --> 00:25:21,320
Speaker 1: you know, economics hasn't served society. Well, and you know,

494
00:25:21,359 --> 00:25:23,280
Speaker 1: what we need to get back to is actually making

495
00:25:23,320 --> 00:25:25,840
Speaker 1: sure that the data is accurate and that the views

496
00:25:25,880 --> 00:25:31,240
Speaker 1: are more appropriate but critical. Going to William Sharp, Stanford University,

497
00:25:31,280 --> 00:25:34,199
Speaker 1: Michael Holland was with us earlier, and we all know

498
00:25:34,680 --> 00:25:38,480
Speaker 1: that there is a distortion in the investment sphere because

499
00:25:38,480 --> 00:25:42,520
Speaker 1: of totally unnatural nominal in real rates. Is that same

500
00:25:42,600 --> 00:25:47,159
Speaker 1: distortion in Cherry Yellen's economics because she doesn't have a

501
00:25:47,200 --> 00:25:49,840
Speaker 1: real fixed income market to work with. Well, you know,

502
00:25:49,880 --> 00:25:52,800
Speaker 1: I think that that but with this isn't in a

503
00:25:52,840 --> 00:25:55,040
Speaker 1: way the first time we've had this. We had very

504
00:25:55,080 --> 00:25:57,040
Speaker 1: low interest rates in the past, you know, And I

505
00:25:57,119 --> 00:25:58,879
Speaker 1: would argue that, you know, when you go back to

506
00:25:58,920 --> 00:26:00,760
Speaker 1: the nineteen you know, the First World War, in the

507
00:26:00,800 --> 00:26:03,640
Speaker 1: Second World War, we actually had a quantum of negativity.

508
00:26:03,720 --> 00:26:06,320
Speaker 1: Tom about what was required to get those debt to

509
00:26:06,400 --> 00:26:09,480
Speaker 1: GDP ratios down. First World War, you said needed to

510
00:26:09,520 --> 00:26:13,639
Speaker 1: see minus ten real rates, and it took five years

511
00:26:13,760 --> 00:26:16,480
Speaker 1: to get back to real rates being normalized. You know.

512
00:26:16,520 --> 00:26:18,800
Speaker 1: Post World War Two you had to go to minus

513
00:26:18,960 --> 00:26:21,680
Speaker 1: five and it took ten years. Now, I think one

514
00:26:21,680 --> 00:26:26,360
Speaker 1: of the problems is actually by limiting real interest rates. Sorry, nerdy. Yeah,

515
00:26:26,400 --> 00:26:29,120
Speaker 1: you said there's gonna be a nerdy section. By limiting

516
00:26:29,160 --> 00:26:31,840
Speaker 1: real interest rates because of that two percent inflation target

517
00:26:31,840 --> 00:26:34,640
Speaker 1: that we've got around the world to minus two, you've

518
00:26:34,680 --> 00:26:37,280
Speaker 1: actually slowed this process. So I think that's the big

519
00:26:37,320 --> 00:26:40,960
Speaker 1: problem that the inflation targeting has caused some of the

520
00:26:41,000 --> 00:26:43,280
Speaker 1: problem that we've got here, and that's one of the

521
00:26:43,280 --> 00:26:45,560
Speaker 1: issues that we need to overcome. We need more flexibility,

522
00:26:45,600 --> 00:26:48,080
Speaker 1: not less. And David, this alludes to Marvin good Friends

523
00:26:48,160 --> 00:26:51,600
Speaker 1: Jackson whole paper in the reaging debate of how to

524
00:26:51,720 --> 00:26:55,200
Speaker 1: push real and even nominal rates. Lore yes, with the

525
00:26:55,200 --> 00:26:57,760
Speaker 1: speech we heard yesterday from the Prime Minister. And we're

526
00:26:57,760 --> 00:27:00,000
Speaker 1: having a conversation with Michael Haller little earlier. As time mentioned,

527
00:27:00,080 --> 00:27:02,920
Speaker 1: he was painting a rosy picture of the UK economy,

528
00:27:02,960 --> 00:27:04,960
Speaker 1: that things have gone better than many expected in the

529
00:27:05,000 --> 00:27:08,120
Speaker 1: wake of that of that vote, she said a timetable.

530
00:27:08,160 --> 00:27:10,159
Speaker 1: She stuck to the timetable at least as much as

531
00:27:10,200 --> 00:27:12,480
Speaker 1: she could. What does that say about where we're going

532
00:27:12,520 --> 00:27:14,080
Speaker 1: to go from here? Well, I think, you know, let's

533
00:27:14,119 --> 00:27:16,000
Speaker 1: go to two things. First of all, so far it's

534
00:27:16,000 --> 00:27:18,280
Speaker 1: been a phony war. And the key thing is that

535
00:27:18,400 --> 00:27:20,359
Speaker 1: the Bank of England stepped in on day one and

536
00:27:20,440 --> 00:27:22,840
Speaker 1: they said, you know, we will give you the liquidity

537
00:27:22,840 --> 00:27:26,520
Speaker 1: that you need, please use our currency to drive that lower.

538
00:27:26,720 --> 00:27:30,280
Speaker 1: And it's that currency weakness that has provided the instulation here.

539
00:27:30,440 --> 00:27:32,720
Speaker 1: You choose how you want to take your medicine, and

540
00:27:32,760 --> 00:27:34,679
Speaker 1: you know, the bank said, let's take it through the

541
00:27:34,680 --> 00:27:37,240
Speaker 1: week exchange right, a bit like Italy did in the nineties.

542
00:27:37,400 --> 00:27:40,119
Speaker 1: The UK is becoming the Italy of Europe once again.

543
00:27:40,280 --> 00:27:42,639
Speaker 1: You know it's and you should have a discount for

544
00:27:42,680 --> 00:27:45,239
Speaker 1: that going forward. You know what I would say is

545
00:27:45,280 --> 00:27:48,520
Speaker 1: that our our headline, in our our research take is

546
00:27:48,560 --> 00:27:51,560
Speaker 1: taken from the Irish Times the day that Theresa May

547
00:27:51,720 --> 00:27:55,480
Speaker 1: announced her ten point plan. Everybody has a plan until

548
00:27:55,520 --> 00:27:58,520
Speaker 1: they're punched in the face the Mike Tyson, this is

549
00:27:58,560 --> 00:28:01,159
Speaker 1: the this is the Europe in view of what they

550
00:28:01,160 --> 00:28:02,639
Speaker 1: are going to do to the UK. It is not

551
00:28:02,640 --> 00:28:04,719
Speaker 1: going to end well, it's gonna be hard Brexit, it's

552
00:28:04,720 --> 00:28:06,720
Speaker 1: going to be chaotic Brexit and we're going to end

553
00:28:06,800 --> 00:28:08,919
Speaker 1: up with w t O rules and you know if

554
00:28:09,119 --> 00:28:12,879
Speaker 1: we're gonna need currency weakness to offset some of those

555
00:28:13,359 --> 00:28:16,000
Speaker 1: harsh realities. How did Prime Minister Remains from Marks echo

556
00:28:16,080 --> 00:28:18,359
Speaker 1: off the Stone buildings on three Needle Street yesterday. How

557
00:28:18,359 --> 00:28:20,040
Speaker 1: are the How is that Mark Arney and his colleagues

558
00:28:20,040 --> 00:28:22,200
Speaker 1: is going to interpret what you want to say? You know, well,

559
00:28:22,200 --> 00:28:24,879
Speaker 1: I think Mr Krney has shown very clearly that the

560
00:28:24,880 --> 00:28:27,280
Speaker 1: Bank of England is very you know, remember that they

561
00:28:27,280 --> 00:28:30,080
Speaker 1: want to get inflation. They want to have you know,

562
00:28:30,240 --> 00:28:32,760
Speaker 1: the that that the the the you know, they're prepared

563
00:28:32,800 --> 00:28:35,560
Speaker 1: for a short term boost to inflation. You know, that's

564
00:28:35,600 --> 00:28:37,639
Speaker 1: what central banks have been trying to do. You know,

565
00:28:38,160 --> 00:28:40,760
Speaker 1: I think they will get worried if we see inflation

566
00:28:40,800 --> 00:28:43,520
Speaker 1: carry on above three for a number of years. But

567
00:28:43,640 --> 00:28:46,000
Speaker 1: you know, because what's happening is a real income is

568
00:28:46,040 --> 00:28:49,560
Speaker 1: being compressed. At the moment, UK consumers are overcoming that

569
00:28:49,600 --> 00:28:53,000
Speaker 1: because they're saving less. They're seeing their utility bills go up,

570
00:28:53,160 --> 00:28:54,880
Speaker 1: but they still want to go on holiday, so they're

571
00:28:54,880 --> 00:28:57,800
Speaker 1: borrowing some more and they're saving less. But you can't

572
00:28:57,800 --> 00:29:00,840
Speaker 1: do that forever, and that's when the the problem starts

573
00:29:00,840 --> 00:29:04,000
Speaker 1: to arrive. What is the constraint of tax reform? From

574
00:29:04,080 --> 00:29:06,600
Speaker 1: debt to GDP? There's only number of ways of measuring.

575
00:29:06,640 --> 00:29:09,320
Speaker 1: This is the way I measure is it's over a

576
00:29:09,560 --> 00:29:12,800
Speaker 1: double from the debt to GDP of Ronald Reagan like you,

577
00:29:12,880 --> 00:29:15,880
Speaker 1: just so I'm less concerned. I think Japan tells us

578
00:29:15,920 --> 00:29:18,840
Speaker 1: that the level of GDP can be coped with for

579
00:29:18,880 --> 00:29:22,520
Speaker 1: a period of time. What happens is about debt sustainability.

580
00:29:22,880 --> 00:29:26,160
Speaker 1: And so if global growth slows, if US growth slows,

581
00:29:26,200 --> 00:29:30,840
Speaker 1: if UK growth slows, then your debt limits become really binding.

582
00:29:31,120 --> 00:29:34,040
Speaker 1: You know, it's if you've got nominal growth, you can

583
00:29:34,080 --> 00:29:36,200
Speaker 1: get out of it. But remember the lesson of history,

584
00:29:36,240 --> 00:29:39,800
Speaker 1: Tom is that the creditor always pays, and there's only

585
00:29:39,920 --> 00:29:43,080
Speaker 1: three ways of getting out of debt default, debate, or devalue.

586
00:29:43,120 --> 00:29:45,400
Speaker 1: And this is just Sticklers has been way out front

587
00:29:45,400 --> 00:29:47,560
Speaker 1: of this, and this David girl to finish with a

588
00:29:47,680 --> 00:29:51,560
Speaker 1: nerd fest is a little gene and unfortunately Ian Harting

589
00:29:51,600 --> 00:29:53,560
Speaker 1: it has to leave because if he stayed around, we'd

590
00:29:53,600 --> 00:29:56,200
Speaker 1: have to go to lads. We don't want to go.

591
00:29:56,240 --> 00:29:58,760
Speaker 1: To set a record for laureate mentions in that segment,

592
00:29:58,800 --> 00:30:00,680
Speaker 1: I think we're more than five class. There was there

593
00:30:00,760 --> 00:30:03,280
Speaker 1: was I think two thousand three we had like an

594
00:30:03,280 --> 00:30:10,760
Speaker 1: eight laureate. Ian Harden, thank you so. Absolute Strategy Research

595
00:30:10,800 --> 00:30:22,880
Speaker 1: greatly appreciate this morning brought you by Bank of America.

596
00:30:22,960 --> 00:30:27,200
Speaker 1: Mary Lynch dedicated to bringing our clients insights and solutions

597
00:30:27,480 --> 00:30:30,800
Speaker 1: to meet the challenges of a transforming world. That's the

598
00:30:30,840 --> 00:30:36,000
Speaker 1: power of global connections. Mary Lynch, Pierce Federin Smith Incorporated,

599
00:30:36,160 --> 00:30:42,680
Speaker 1: Member s I p C. It has been far too

600
00:30:42,720 --> 00:30:46,920
Speaker 1: long since we spoke to Ian Bremer of Eurasia Group.

601
00:30:47,560 --> 00:30:52,200
Speaker 1: Dr Bremer changed the dialogue of international relations with any

602
00:30:52,280 --> 00:30:55,240
Speaker 1: number of phrases, including this interesting world we live in now,

603
00:30:55,600 --> 00:30:58,880
Speaker 1: which has a very g zero feel. Whe it Ian Bremer,

604
00:30:58,920 --> 00:31:02,680
Speaker 1: good morning morning to you guys, happy with you and

605
00:31:02,760 --> 00:31:08,120
Speaker 1: I Uh, I saw yesterday the greatest juxtaposition and international

606
00:31:08,240 --> 00:31:11,720
Speaker 1: relations I've ever seen. The eloquence, the fire, the passion

607
00:31:11,760 --> 00:31:15,400
Speaker 1: of Prime Minister May speech and then the leaden silence

608
00:31:15,560 --> 00:31:19,080
Speaker 1: of the European response in Brussels. How's this going to

609
00:31:19,200 --> 00:31:22,600
Speaker 1: play out? Was the body language we saw yesterday indicative

610
00:31:22,920 --> 00:31:26,560
Speaker 1: of how ugly does Brexit debate is going to be? Well?

611
00:31:26,960 --> 00:31:28,600
Speaker 1: I mean, I think one thing I'd say is that

612
00:31:28,600 --> 00:31:31,520
Speaker 1: while Theresa May has done as good of a job

613
00:31:31,560 --> 00:31:35,680
Speaker 1: as could be possibly expected to get the UK looking

614
00:31:35,760 --> 00:31:39,160
Speaker 1: like a unified actor, uh, that's going to be impossible

615
00:31:39,240 --> 00:31:41,120
Speaker 1: to keep up. And you'll see that with the great

616
00:31:41,160 --> 00:31:46,400
Speaker 1: repeal bill, and challenges from Parliament now that they've actually

617
00:31:46,440 --> 00:31:50,200
Speaker 1: triggered Article fifty UM to what it's going to look like.

618
00:31:50,240 --> 00:31:51,880
Speaker 1: What that actually gonna look like. You have problems within

619
00:31:51,920 --> 00:31:55,840
Speaker 1: the Tory Party, problems from Labor and in opposition UH

620
00:31:55,880 --> 00:31:58,800
Speaker 1: and and also of course problems from the Scots who

621
00:31:59,120 --> 00:32:01,240
Speaker 1: want to move ahead with the second referendum. So the

622
00:32:01,280 --> 00:32:05,160
Speaker 1: pressure is both internal on both sides, from May and

623
00:32:05,320 --> 00:32:08,880
Speaker 1: of course the Europeans also facing a French election. If

624
00:32:08,920 --> 00:32:12,040
Speaker 1: Lapen actually wins, which is a possibility, the idea that

625
00:32:12,080 --> 00:32:15,400
Speaker 1: you're going to have a constructive Brexit negotiation is effectively zero.

626
00:32:15,800 --> 00:32:19,080
Speaker 1: Even if that's not the case, it's hard to imagine

627
00:32:19,200 --> 00:32:22,280
Speaker 1: that this is going to be smooth sailing from a

628
00:32:22,480 --> 00:32:26,440
Speaker 1: very deeply political, politically dysfunctional EU and their member states.

629
00:32:26,440 --> 00:32:30,000
Speaker 1: So lots of economic reasons why we should have a

630
00:32:30,080 --> 00:32:34,000
Speaker 1: good and functional Brexit deal between the EU and the UK,

631
00:32:34,560 --> 00:32:37,080
Speaker 1: every political reason to believe that they will not be

632
00:32:37,160 --> 00:32:39,680
Speaker 1: able to get their houses in order. As I was

633
00:32:39,720 --> 00:32:42,720
Speaker 1: listening to Donald Tusk yesterday deliver that statement, I don't

634
00:32:42,720 --> 00:32:44,040
Speaker 1: think i'd call it a speech time. I think it

635
00:32:44,080 --> 00:32:46,400
Speaker 1: was more of him reading a statement on what had happened.

636
00:32:46,440 --> 00:32:49,640
Speaker 1: He talked about the the unified European Union, he and

637
00:32:49,640 --> 00:32:51,880
Speaker 1: the twenty seven Memories would be approaching this in the

638
00:32:52,000 --> 00:32:54,560
Speaker 1: United Front. How confident are you that that's going to happen,

639
00:32:54,600 --> 00:32:57,040
Speaker 1: how much how much unification are we seeing here among

640
00:32:57,080 --> 00:33:00,080
Speaker 1: those ranks. I'm completely confident that there's no such thing

641
00:33:00,080 --> 00:33:03,840
Speaker 1: as a unified approach among the Europeans. And again, keep

642
00:33:03,840 --> 00:33:05,680
Speaker 1: in mind, this is going to be done over two years.

643
00:33:05,920 --> 00:33:08,400
Speaker 1: All of these countries have their own electoral cycles, They

644
00:33:08,400 --> 00:33:10,680
Speaker 1: have a lot of domestic elements to play for. You

645
00:33:10,760 --> 00:33:14,360
Speaker 1: already saw this with President Alan saying that modalities need

646
00:33:14,440 --> 00:33:17,600
Speaker 1: to be agreed to before you can start the actual uh.

647
00:33:17,640 --> 00:33:21,520
Speaker 1: Substance of those negotiations very different from the position that

648
00:33:21,560 --> 00:33:24,280
Speaker 1: toosk Um and Theresa may take. Right now. Now you

649
00:33:24,280 --> 00:33:26,280
Speaker 1: can say, well Aland is a lame duck because he's

650
00:33:26,280 --> 00:33:29,160
Speaker 1: about to lose the elections. Well precisely, and over the

651
00:33:29,160 --> 00:33:31,120
Speaker 1: course of the next two years, you're going to have

652
00:33:31,200 --> 00:33:35,520
Speaker 1: a large number of heads of state, elected leaders and

653
00:33:35,760 --> 00:33:38,480
Speaker 1: want to be elected leaders across Europe. They are gonna

654
00:33:38,520 --> 00:33:42,480
Speaker 1: do their part to score points domestically, irrespective of what

655
00:33:42,600 --> 00:33:46,200
Speaker 1: damage that happens to cause to the Brexit negotiation process.

656
00:33:46,240 --> 00:33:49,000
Speaker 1: That is not their problem, but it will be, of

657
00:33:49,040 --> 00:33:51,480
Speaker 1: course the problem of those of us that hope um

658
00:33:51,520 --> 00:33:55,560
Speaker 1: that the UK deal can be smooth sailing and illuminate us.

659
00:33:55,600 --> 00:33:58,320
Speaker 1: On the French election, I have the joy right now

660
00:33:58,320 --> 00:34:03,040
Speaker 1: of reading Jonathan Fenby's wonderful one volume France on this election.

661
00:34:03,200 --> 00:34:06,880
Speaker 1: What is lost in translation in the reporting? If you

662
00:34:06,880 --> 00:34:09,799
Speaker 1: look at the culture in fabric of France, what are

663
00:34:09,840 --> 00:34:13,200
Speaker 1: we missing in the analysis? I think there are two things.

664
00:34:13,280 --> 00:34:15,600
Speaker 1: The first is that the French as a nation are

665
00:34:15,680 --> 00:34:20,600
Speaker 1: easily as exceptionalist as the Americans are. What what that?

666
00:34:20,719 --> 00:34:23,400
Speaker 1: The fact that Trump was elected, the fact that get

667
00:34:23,400 --> 00:34:25,880
Speaker 1: Wilders did badly in the Netherlands, those things are not

668
00:34:25,960 --> 00:34:28,480
Speaker 1: fundamentally affecting the way the French are thinking about their

669
00:34:28,480 --> 00:34:32,319
Speaker 1: own elections, their French um, and so they'll go in

670
00:34:32,360 --> 00:34:35,919
Speaker 1: with their own dynamic, and their own dynamic is deeply problematic.

671
00:34:35,960 --> 00:34:40,760
Speaker 1: A president of the establishment whose approval ratings are literally

672
00:34:40,840 --> 00:34:43,719
Speaker 1: in the toilet and is seen as particularly failing on

673
00:34:43,880 --> 00:34:50,000
Speaker 1: migrant and security issues. Um macron um certainly um a

674
00:34:50,000 --> 00:34:54,400
Speaker 1: a charismatic person who is anti who is his outside

675
00:34:54,440 --> 00:34:58,000
Speaker 1: the political establishment, but is neither left nor right. And

676
00:34:58,040 --> 00:35:00,480
Speaker 1: so no one is super excited about him. So the

677
00:35:00,560 --> 00:35:04,960
Speaker 1: second important dynamic is that turnout is absolutely key, and

678
00:35:05,000 --> 00:35:08,440
Speaker 1: if not that many people vote, you guaranteed that the

679
00:35:08,480 --> 00:35:11,440
Speaker 1: people that support Lapin are gonna be out. Their final

680
00:35:11,480 --> 00:35:15,280
Speaker 1: point is that social media Lapen is killing it, doing

681
00:35:15,400 --> 00:35:17,840
Speaker 1: vastly better as well as the issues she cares about

682
00:35:18,080 --> 00:35:20,120
Speaker 1: then other candidates are. So I think there was a

683
00:35:20,160 --> 00:35:22,600
Speaker 1: real possibility that Lpenn is the next president from the

684
00:35:22,600 --> 00:35:26,120
Speaker 1: Eurasia Group prison she has the ability to get a

685
00:35:26,200 --> 00:35:30,440
Speaker 1: marginal voter as did Mr Trump. That's exactly right. Uh

686
00:35:30,480 --> 00:35:33,239
Speaker 1: Ian Secretary of State collect frequent flyer miles like George

687
00:35:33,280 --> 00:35:35,440
Speaker 1: Clooney's character and up in the air. Usually you can

688
00:35:35,480 --> 00:35:37,279
Speaker 1: go to the State department website and see how far

689
00:35:37,360 --> 00:35:39,400
Speaker 1: they've flown. I look now at where Rex Taylorson's been,

690
00:35:39,480 --> 00:35:43,120
Speaker 1: it's three places, maybe under twenty thousand miles here in

691
00:35:43,160 --> 00:35:46,480
Speaker 1: his tenure thus far, he's headed to Turkey, headed to Brussels.

692
00:35:46,520 --> 00:35:47,960
Speaker 1: What do you expect he's going to talk about their

693
00:35:47,960 --> 00:35:50,120
Speaker 1: why Turkey? Why they're right now? So he's getting either

694
00:35:50,120 --> 00:35:52,880
Speaker 1: the frequent flyer miles nor the ladies that George Clooney

695
00:35:52,880 --> 00:35:55,359
Speaker 1: did when he traveled internationally and looking at Rex that's

696
00:35:55,400 --> 00:35:58,239
Speaker 1: not then none of that should surprise anybody. Right, He's

697
00:35:58,360 --> 00:36:00,640
Speaker 1: up there age wise, and he's all to accomplish what

698
00:36:00,680 --> 00:36:02,399
Speaker 1: he feels like he needs to accomplish. I mean, Hillary

699
00:36:02,400 --> 00:36:04,600
Speaker 1: Clinton got all the miles, but she wanted to be president,

700
00:36:04,640 --> 00:36:08,040
Speaker 1: so she has something to prove. Um. And uh, you know, look,

701
00:36:08,080 --> 00:36:12,719
Speaker 1: I Rex does not have the relentlessness in terms of

702
00:36:12,880 --> 00:36:15,319
Speaker 1: I'm going to work seven to get a deal done

703
00:36:15,360 --> 00:36:18,560
Speaker 1: that let's say John Kerry did around Iran. Um. But

704
00:36:18,880 --> 00:36:21,560
Speaker 1: he is an adult and he knows a lot of

705
00:36:21,600 --> 00:36:24,480
Speaker 1: these leaders. Well, I think he's going to do a

706
00:36:24,520 --> 00:36:27,319
Speaker 1: lot better in parts of the world where he has experience.

707
00:36:27,840 --> 00:36:30,520
Speaker 1: The fact that his first trip was Asia didn't help

708
00:36:30,640 --> 00:36:33,319
Speaker 1: much because he really doesn't have any background there. But

709
00:36:33,560 --> 00:36:37,880
Speaker 1: you know, the Gulf States, Sub Saharan Africa, Russia, East Europe,

710
00:36:38,080 --> 00:36:40,200
Speaker 1: he's going to be much more comfortable and he's gonna

711
00:36:40,200 --> 00:36:43,920
Speaker 1: be received extremely well. Um. I think there was a

712
00:36:43,920 --> 00:36:45,600
Speaker 1: lot that was made out of the fact that he

713
00:36:45,640 --> 00:36:47,879
Speaker 1: didn't bring any media with him to that Asia trip,

714
00:36:47,960 --> 00:36:51,239
Speaker 1: just one loyalist. Um. You know. Frankly, again, if you're

715
00:36:51,280 --> 00:36:54,080
Speaker 1: Rex Tillerson, you don't have the same view of the

716
00:36:54,200 --> 00:36:57,440
Speaker 1: utility of the media as someone like carri or Hillary Clinton,

717
00:36:57,440 --> 00:37:00,919
Speaker 1: who were career politicians and know how these guys need

718
00:37:00,920 --> 00:37:03,319
Speaker 1: to play. The single thing that worries me the most

719
00:37:03,360 --> 00:37:08,080
Speaker 1: is that Tillerson's direct access to Trump has been virtually zero,

720
00:37:08,440 --> 00:37:10,520
Speaker 1: and I think that if that continues for the next

721
00:37:10,520 --> 00:37:13,160
Speaker 1: six months, He's not going to stick in the position

722
00:37:13,160 --> 00:37:16,160
Speaker 1: for long. He doesn't need this, and ultimately he's not

723
00:37:16,200 --> 00:37:19,320
Speaker 1: going to be seen as marginalized, humiliate, humiliated in the position.

724
00:37:19,840 --> 00:37:21,920
Speaker 1: Let's come back, Dr Bremer, where this is wary with

725
00:37:21,960 --> 00:37:24,359
Speaker 1: your age group, But of course, excuse me, it's only

726
00:37:24,360 --> 00:37:26,279
Speaker 1: one block my fault. That was my mistake. I was

727
00:37:26,520 --> 00:37:28,719
Speaker 1: I was somewhere between the eggs and the sausage at

728
00:37:28,719 --> 00:37:32,080
Speaker 1: the Power Breakfast Pierre Hotel, and I missed that cue.

729
00:37:32,120 --> 00:37:35,240
Speaker 1: Dr Bremmer, thank you so much, greatly appreciated, Ian Bremer,

730
00:37:35,719 --> 00:37:50,879
Speaker 1: of your age, your crew. This is not the most

731
00:37:50,920 --> 00:37:54,560
Speaker 1: important interview of the week, the day. This is at

732
00:37:54,719 --> 00:37:58,120
Speaker 1: least the most important interview until your re up your

733
00:37:58,160 --> 00:38:01,520
Speaker 1: lease or redo your mortgage. Jonathan Miller joins us with

734
00:38:01,640 --> 00:38:05,000
Speaker 1: Miller Samuel right now, I want to know in the

735
00:38:05,120 --> 00:38:08,600
Speaker 1: dynamics of the market nationwide, but in the big cities

736
00:38:08,640 --> 00:38:12,280
Speaker 1: as well, the sanctuary cities. Are the sellers coming down

737
00:38:12,640 --> 00:38:15,640
Speaker 1: or the buyers buying up? Which isn't Oh, I think

738
00:38:15,640 --> 00:38:18,360
Speaker 1: it's clearly the sellers are coming down, especially as e

739
00:38:18,400 --> 00:38:21,800
Speaker 1: skewed to the higher end of any housing market. Uh.

740
00:38:22,360 --> 00:38:24,880
Speaker 1: There's been a lot of talk about the Trump bump,

741
00:38:25,000 --> 00:38:28,160
Speaker 1: especially since the election, and there has been a noticeable

742
00:38:28,320 --> 00:38:33,239
Speaker 1: uptick in activity we're seeing. When I say noticeable, I

743
00:38:33,280 --> 00:38:35,520
Speaker 1: don't mean huge. I just mean we can see an

744
00:38:35,560 --> 00:38:39,360
Speaker 1: increase UM. But what what we're really seeing, which is

745
00:38:39,360 --> 00:38:42,560
Speaker 1: really interesting, is for every big transaction you read about

746
00:38:42,840 --> 00:38:46,880
Speaker 1: UM in the news, in most cases the seller came down,

747
00:38:47,080 --> 00:38:50,120
Speaker 1: you know, twenty thirty five percent off of the last

748
00:38:50,200 --> 00:38:53,400
Speaker 1: asking price. And that's an important step in the market

749
00:38:54,320 --> 00:38:57,600
Speaker 1: trying to uh, to heal itself. But what about the

750
00:38:57,960 --> 00:38:59,839
Speaker 1: beneath the mega deals. It's not in the New York

751
00:39:00,000 --> 00:39:03,480
Speaker 1: most I don't care about some umpting gazillion dollar property.

752
00:39:03,880 --> 00:39:06,960
Speaker 1: In the real world, what are prices doing? Uh? In

753
00:39:07,000 --> 00:39:12,000
Speaker 1: the real world, prices are moving sideways, uh in and

754
00:39:12,520 --> 00:39:15,200
Speaker 1: even a little drifting a little bit lower. Um. We're

755
00:39:15,200 --> 00:39:17,600
Speaker 1: gonna see uh, you know, maybe a little bit more

756
00:39:17,680 --> 00:39:21,160
Speaker 1: of an uptick in the next couple of quarters just

757
00:39:21,200 --> 00:39:24,880
Speaker 1: because of the increase in activity. But inventory has been rising,

758
00:39:25,360 --> 00:39:29,239
Speaker 1: so so you know that that keeps price growth in.

759
00:39:29,360 --> 00:39:31,760
Speaker 1: You don't know this. David Cura just re upped in Brooklyn,

760
00:39:32,040 --> 00:39:34,359
Speaker 1: that's true. Three months were at in a box car Kale.

761
00:39:35,000 --> 00:39:39,719
Speaker 1: That's great. I think we'll let poppy right up here out. What.

762
00:39:40,320 --> 00:39:42,480
Speaker 1: What's what's happening with the rental market here in Manhattan?

763
00:39:42,480 --> 00:39:44,719
Speaker 1: Here in Brooklyn? I mean our price is going to

764
00:39:44,760 --> 00:39:48,239
Speaker 1: continue to go. Who's paying five figures for renting apartment here? So? Uh,

765
00:39:48,880 --> 00:39:51,759
Speaker 1: both Manhattan and Brooklyn are doing just about the same thing.

766
00:39:51,800 --> 00:39:56,480
Speaker 1: We've seen a tremendous uh influx of new product and

767
00:39:56,520 --> 00:39:58,799
Speaker 1: most of it has been skewed towards the higher end.

768
00:39:59,200 --> 00:40:01,840
Speaker 1: So what we're seeing across all markets as we're seeing,

769
00:40:02,440 --> 00:40:07,000
Speaker 1: um a price the price growth is cooling. UM. If

770
00:40:07,040 --> 00:40:09,640
Speaker 1: you the lower you go in price, the more likely

771
00:40:09,719 --> 00:40:13,319
Speaker 1: prices are rising. UM. I don't think anybody factored in

772
00:40:13,800 --> 00:40:17,319
Speaker 1: during this new condo development boom in both in the

773
00:40:17,480 --> 00:40:20,520
Speaker 1: in New York City that about a quarter of those

774
00:40:20,520 --> 00:40:24,080
Speaker 1: buyers ended up being investors, and those investors go on

775
00:40:24,160 --> 00:40:28,280
Speaker 1: the market and compete with these new developments. Uh and

776
00:40:28,280 --> 00:40:31,680
Speaker 1: and one other thing is that we're seeing record landlord concessions.

777
00:40:31,719 --> 00:40:33,319
Speaker 1: We continue to see that about a third of the

778
00:40:33,360 --> 00:40:37,719
Speaker 1: market tenants are getting significant concessions from the landlord just

779
00:40:37,760 --> 00:40:41,319
Speaker 1: because landlords are trying to keep the buildings full, and

780
00:40:41,360 --> 00:40:45,319
Speaker 1: that seems to be working. Vacancy is not expanding. But

781
00:40:45,840 --> 00:40:48,040
Speaker 1: I don't know how much longer that, how much more

782
00:40:48,080 --> 00:40:51,520
Speaker 1: they can offer before they really have to start cutting prices.

783
00:40:51,560 --> 00:40:54,200
Speaker 1: It's wandering around Wyatt Street and Williamsburg over the weekend

784
00:40:54,200 --> 00:40:56,080
Speaker 1: of the shadow of these tall towers they've built on

785
00:40:56,120 --> 00:40:58,600
Speaker 1: the water. I gather a lot of those are rentals.

786
00:40:58,719 --> 00:41:00,399
Speaker 1: We hear what's gonna happen with the L train. They're

787
00:41:00,400 --> 00:41:05,480
Speaker 1: going to close it for months months? Yeah, what does

788
00:41:05,520 --> 00:41:07,000
Speaker 1: that mean for that neighborhood? What does it mean for

789
00:41:07,000 --> 00:41:08,759
Speaker 1: people who are living there renting there? Well, I think

790
00:41:08,760 --> 00:41:10,360
Speaker 1: it has much more of an impact on the rental

791
00:41:10,400 --> 00:41:12,719
Speaker 1: market than the condom market, because condo, your period of

792
00:41:12,760 --> 00:41:15,799
Speaker 1: ownership might be a decade. Rental, you're you're only so

793
00:41:15,840 --> 00:41:18,479
Speaker 1: I think it's gonna really hurt the rents. Their rents

794
00:41:18,480 --> 00:41:20,239
Speaker 1: are going to be very soft because the community is

795
00:41:20,239 --> 00:41:23,200
Speaker 1: gonna become a lot more difficult, but you'll see rent

796
00:41:23,320 --> 00:41:26,560
Speaker 1: You'll see you'll see more rent pressure. As you know,

797
00:41:26,600 --> 00:41:29,120
Speaker 1: they're gonna drive those lieutenants are gonna drift to other

798
00:41:29,280 --> 00:41:31,919
Speaker 1: other neighborhoods. You see, this is a difference. I'm trying

799
00:41:31,960 --> 00:41:35,920
Speaker 1: to do a national show, sorry, worldwide intrigue our audience.

800
00:41:37,080 --> 00:41:41,919
Speaker 1: David are directly down the street from where he lives.

801
00:41:42,239 --> 00:41:45,040
Speaker 1: Jonathan Miller with Miller Samuel will help be here with

802
00:41:45,120 --> 00:41:47,759
Speaker 1: the acquisition of the house. You've been so good over

803
00:41:47,760 --> 00:41:50,720
Speaker 1: the years about saying forget about all the mumble jumbo

804
00:41:51,000 --> 00:41:53,319
Speaker 1: you can't get a mortgage? Is it? Is it better now?

805
00:41:53,760 --> 00:41:57,239
Speaker 1: Credit conditions still remain so So it's not that it's

806
00:41:57,520 --> 00:42:00,319
Speaker 1: better in the in the sense that mortgage at it

807
00:42:00,360 --> 00:42:03,040
Speaker 1: has eased. What it is is I just think the

808
00:42:03,080 --> 00:42:06,719
Speaker 1: players are better at getting through the process or through

809
00:42:06,719 --> 00:42:10,239
Speaker 1: the system. Uh you know, I think the best thing

810
00:42:10,280 --> 00:42:14,480
Speaker 1: that can happen to And it sounds counterintuitive, but I

811
00:42:14,840 --> 00:42:18,520
Speaker 1: think that mortgage rates continue to be really way too

812
00:42:18,560 --> 00:42:22,239
Speaker 1: low for credit to to noticeably ease, And so there

813
00:42:22,360 --> 00:42:25,360
Speaker 1: is a trade off between people that are payment focused

814
00:42:25,800 --> 00:42:29,400
Speaker 1: and how people feel about, you know, next year with

815
00:42:29,480 --> 00:42:31,240
Speaker 1: their job and whether they're going to get a promotion

816
00:42:31,360 --> 00:42:33,200
Speaker 1: I get all the time because somehow people think I'm

817
00:42:33,200 --> 00:42:35,880
Speaker 1: a conduit to knowledge on this. Because how much money

818
00:42:35,920 --> 00:42:39,080
Speaker 1: down do you need, whether it's a mere mortal property

819
00:42:39,600 --> 00:42:43,319
Speaker 1: in a suburb of Boston or a condo in San Francisco,

820
00:42:43,480 --> 00:42:46,080
Speaker 1: or maybe in Washington and somebody trying to step up

821
00:42:46,080 --> 00:42:48,600
Speaker 1: to live next door Alanka, how much money down do

822
00:42:48,640 --> 00:42:52,560
Speaker 1: you need? Well that I mean that the standard default

823
00:42:52,640 --> 00:42:58,000
Speaker 1: really is, but you can certainly there are many options

824
00:42:58,040 --> 00:43:02,239
Speaker 1: to get far less than that. It's just um, the

825
00:43:03,040 --> 00:43:07,399
Speaker 1: more exceptions to the process, the different more difficulty application is. UM.

826
00:43:07,440 --> 00:43:09,120
Speaker 1: You know, it's kind of interesting if you look at

827
00:43:09,120 --> 00:43:12,960
Speaker 1: the over the last decade, interest rates have essentially plunged

828
00:43:13,520 --> 00:43:18,000
Speaker 1: and mortgage origination has too, So that missing variable is

829
00:43:18,040 --> 00:43:21,240
Speaker 1: really credit conditions. Interesting. So how close are you watching

830
00:43:21,280 --> 00:43:23,200
Speaker 1: the Fed? How how worried are you about about rates

831
00:43:23,200 --> 00:43:27,880
Speaker 1: going up? Well, you know, after this last increase, uh,

832
00:43:27,960 --> 00:43:32,560
Speaker 1: the yelling um increase, we have rates sort of drifting lower.

833
00:43:33,120 --> 00:43:37,000
Speaker 1: So I don't know if everybody buys into that rates

834
00:43:37,000 --> 00:43:40,359
Speaker 1: are because we keep talking rates are gonna continue to rise.

835
00:43:40,600 --> 00:43:43,120
Speaker 1: The Fed may try to do that, but I'm very

836
00:43:43,160 --> 00:43:47,239
Speaker 1: skeptical that that mortgage rates are going to continue to

837
00:43:47,480 --> 00:43:49,879
Speaker 1: rise and um, and we're going to have some kind

838
00:43:49,880 --> 00:43:52,640
Speaker 1: of issue with that, and if they do. What's important

839
00:43:52,640 --> 00:43:56,960
Speaker 1: to realize is that a decade ago, mortgage rates were

840
00:43:57,000 --> 00:44:01,160
Speaker 1: two percent higher than they are now, and sales volume

841
00:44:01,280 --> 00:44:03,719
Speaker 1: in a I'm sorry to be specific to New York,

842
00:44:04,320 --> 00:44:08,280
Speaker 1: UH sales volume was at an all time record. So

843
00:44:08,280 --> 00:44:11,800
Speaker 1: so interest rates aren't the only piece to the housing

844
00:44:12,680 --> 00:44:14,360
Speaker 1: What do you see nationally right now? I mean, I

845
00:44:14,360 --> 00:44:16,319
Speaker 1: know you've got with me or Samuel like Hugh New

846
00:44:16,400 --> 00:44:18,480
Speaker 1: York bias, but you do a lot of other city

847
00:44:18,480 --> 00:44:21,920
Speaker 1: work as well. What do you What's what's the distinction

848
00:44:22,239 --> 00:44:27,080
Speaker 1: of your next memo? So so, the big pattern that

849
00:44:27,160 --> 00:44:29,960
Speaker 1: continues to evolve is that housing markets continue to be

850
00:44:30,080 --> 00:44:34,359
Speaker 1: softest on top, whether we're talking about rental or purchase market. Um,

851
00:44:35,080 --> 00:44:38,200
Speaker 1: the West Coast is in a better position than the

852
00:44:38,239 --> 00:44:40,840
Speaker 1: East Coast that there may be later to the party.

853
00:44:41,760 --> 00:44:43,960
Speaker 1: I'm not quite sure what the timing difference is. It's

854
00:44:44,000 --> 00:44:47,600
Speaker 1: clearly California the housing market there is a lot tighter

855
00:44:47,800 --> 00:44:50,160
Speaker 1: than it is on the East Coast. Are people on

856
00:44:50,200 --> 00:44:51,919
Speaker 1: the fence about whether to rent or buy? Is there

857
00:44:51,960 --> 00:44:54,279
Speaker 1: is there any solution to that argument? Well, that's the

858
00:44:54,360 --> 00:44:58,439
Speaker 1: age old rent because you know, generally speaking, it's still

859
00:44:58,440 --> 00:45:01,680
Speaker 1: a lot cheaper to to buy. It's just the down

860
00:45:01,760 --> 00:45:05,200
Speaker 1: payment is the is the and getting through credit conditions.

861
00:45:05,239 --> 00:45:08,040
Speaker 1: But um, and I've said this in the past, over

862
00:45:08,040 --> 00:45:11,080
Speaker 1: the last year and a half, you are seeing record

863
00:45:11,239 --> 00:45:14,880
Speaker 1: sales activity in again, sorry to be New York centric,

864
00:45:15,400 --> 00:45:17,359
Speaker 1: but we're seeing this in other markets too. We are

865
00:45:17,400 --> 00:45:22,000
Speaker 1: seeing record sales activity continue in the outlying suburb suburber

866
00:45:22,120 --> 00:45:25,400
Speaker 1: markets of New York City as renters priced out of

867
00:45:25,400 --> 00:45:28,680
Speaker 1: the market are becoming first time homebuyers. The volume is

868
00:45:28,760 --> 00:45:33,080
Speaker 1: multi decade highs. Don't be a stranger Miller with Miller

869
00:45:33,160 --> 00:45:36,400
Speaker 1: Samuel of course, with this wonderful work on the counter apility.

870
00:45:36,440 --> 00:45:38,560
Speaker 1: What's great about this, folks, You don't see it within

871
00:45:38,600 --> 00:45:41,880
Speaker 1: the interview. The backdrop of statistics that he has is

872
00:45:42,000 --> 00:45:45,480
Speaker 1: jaw dropping city to city and particularly in the boroughs

873
00:45:45,760 --> 00:45:56,560
Speaker 1: of New York City. Thanks for listening to the Bloomberg

874
00:45:56,600 --> 00:46:02,080
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,

875
00:46:02,520 --> 00:46:06,760
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter

876
00:46:06,840 --> 00:46:10,640
Speaker 1: at Tom Keene. David Gura is at David Gura. Before

877
00:46:10,640 --> 00:46:15,040
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio,

878
00:46:27,520 --> 00:46:31,040
Speaker 1: brought you by Bank of America. Mary Lynch dedicated to

879
00:46:31,120 --> 00:46:35,000
Speaker 1: bringing our clients insights and solutions to meet the challenges

880
00:46:35,160 --> 00:46:38,879
Speaker 1: of a transforming world. That's the power of global connections.

881
00:46:39,239 --> 00:46:43,759
Speaker 1: Mary Lynch, Pierce, Feeder and Smith Incorporated Member s I

882
00:46:43,920 --> 00:46:44,200
Speaker 1: p C