Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We
Speaker 1: turn our attention now to energy. After Hurricanes Katrina and
Speaker 1: Rita hit the US about a dozen years ago, the
Speaker 1: International Energy Agency released emergency petroleum reserves. This time, there
Speaker 1: doesn't seem to be any need to release these stocks
Speaker 1: because inventories remain high. Here to tell us more about
Speaker 1: the effects of Hurricane Harvey on the energy industry is
Speaker 1: Andy Lipow. He is the president of Lippow Oil Associates
Speaker 1: and they are based in Houston, and he joins us
Speaker 1: in our eleven three oh studios here. Thanks very much
Speaker 1: for being here, and first of all, maybe just tell
Speaker 1: people you're from Houston. You can't get back home, correct, Uh,
Speaker 1: that's right. I can't get back home because the airlines
Speaker 1: are not restoring their full schedules. So even though the
Speaker 1: airports have begun operations, if if you were to look
Speaker 1: the amount of flights is a handful every day, but
Speaker 1: it appears that I'm flying on Southwest. I'll restore full
Speaker 1: operations by Sunday, Okay. So can we apply similar kind
Speaker 1: of perspective when it comes to the energy industry that
Speaker 1: even though that you may say are certain refineries are
Speaker 1: shut down, the effects ripple through the entire energy complex. Well,
Speaker 1: they certainly do. And if one looks at how Harvey
Speaker 1: has impacted the Texas Gulf Coast, it started in Corpus
Speaker 1: and it moved over to the Houston area and now
Speaker 1: it's in the Beaumont Port author area. So we've had
Speaker 1: this ripple effect from west to east, shutting down refineries.
Speaker 1: As we stand here today, the refineries in Corpus Christie
Speaker 1: are in their startup operations and we expect to see
Speaker 1: a similar events happen in Houston over the next few weeks.
Speaker 1: But Beaumont Port author really has taken the brunt of
Speaker 1: the flooding event and it may be several weeks or
Speaker 1: even a month to get them back. So right now
Speaker 1: I'm looking at gasoline futures that are at the highest
Speaker 1: level since two thousand and fourteen. Also Uh. They have
Speaker 1: risen just today alone nearly thirteen percent. So definitely is
Speaker 1: a lot of expectation that gas supplies refined UH guess
Speaker 1: refined crude, they're going to be in short supply. Do
Speaker 1: you think that the current UH market sentiment is overblown
Speaker 1: or do you think that gasoline has further to climb? Well,
Speaker 1: I think the market looked at UH today's news when
Speaker 1: Motiva said it's going to take them two weeks just
Speaker 1: to assess the damage in Port author and are extrapolating
Speaker 1: that to the rest of the refineries in that region
Speaker 1: that account for eight percent of the total refinery capacity
Speaker 1: in the US. So we are going to see these
Speaker 1: spikes until we see more refineries get back online. Can
Speaker 1: you speak a little bit about the Colonial Pipeline, because
Speaker 1: there's been some back and forth about the information about
Speaker 1: the pipeline and about the fuel that normally flows through it. Sure, So,
Speaker 1: Colonial Pipeline originates in Houston and picks up refined products
Speaker 1: from Houston and then Beaumont Port Author than the Louisiana
Speaker 1: refineries as well as Mississippi. And it had been reported
Speaker 1: that the entire pipeline for both gasoline and diesel fuel
Speaker 1: had been shut down, but that's actually not quite correct.
Speaker 1: What is correct is that Colonial Pipeline continues to operate
Speaker 1: by receiving refined products from those operations in Lake Charles
Speaker 1: or New Orleans or Pascagoula, Mississippi. But it is true
Speaker 1: that they in fact are shut down out of Houston
Speaker 1: and Beaumont Port author locations because those refineries simply aren't running.
Speaker 1: Andy I'm looking right now, the average gas price at
Speaker 1: the pump in the United States right now is about
Speaker 1: two dollars and forty four cents, maybe forty five cents. UH.
Speaker 1: It's obviously actually it's much lower right now in Texas,
Speaker 1: which is interesting because a lot of people have talked
Speaker 1: about perhaps the entire gasoline supply getting cut off for
Speaker 1: a while. How high do you expect prices to go
Speaker 1: in the near term, Well, I think they're gonna jump
Speaker 1: another twenty cents a gallon from where they are today.
Speaker 1: If we were to look at the price in the
Speaker 1: pipeline system or the wholesale price, it's up fifty cents
Speaker 1: a gallon as UH retailers and refiners scramble for supply.
Speaker 1: So a lot of that increase is going to be
Speaker 1: passed into the consumer. We're looking right now at NIMEX
Speaker 1: gasoline futures. They're up more than uh Andy, what kinds
Speaker 1: of maintenance and what kinds of damage can you assess
Speaker 1: based on your previous knowledge of what happens when you
Speaker 1: flood a refinery. So the biggest damage occurs to the
Speaker 1: electric motors that have been submerged, so they have to
Speaker 1: be pulled out of the refinery in many cases rewired
Speaker 1: and then brought back. But when you have so many
Speaker 1: pumps and motors that have been damaged, you simply run
Speaker 1: out of repair shops if you will to get them
Speaker 1: back online really quickly. Andy, when I talk about rising
Speaker 1: gas prices, I have to think someone is going to
Speaker 1: benefit from this, because someone is getting paid more for
Speaker 1: their gasoline. Who is it? Well, the biggest beneficiaries are
Speaker 1: those refiners who continue to operate and are being able
Speaker 1: to sell product into the market. So which ones are they?
Speaker 1: So the ones here in the US that come to
Speaker 1: mind right away are PBF Energy, Holly, Frontier two, Sorrow, CVR,
Speaker 1: or DELK because they all have operations that are far
Speaker 1: from the horror cane Harvey impacts, as well as European
Speaker 1: refiners are now benefiting because their strong demand for them
Speaker 1: to make gasoline to ship over to the US. Will
Speaker 1: they find more customers, for example, in Latin America, because
Speaker 1: don't they Latin American countries they rely on imports from
Speaker 1: Texas and Louisiana for their refined product. Well, that is
Speaker 1: certainly going to happen. If we were to look at
Speaker 1: Mexico specifically, who's buying about three barrels a day of
Speaker 1: gasoline from the US. They need to scramble for supplies
Speaker 1: from other parts of the world, so where they look
Speaker 1: to is Europe and Asia. What about the argument that
Speaker 1: you're going to see such reduced demand from people in
Speaker 1: Texas that that will eventually create some equilibrium in the market.
Speaker 1: Do you think that's the case and do you expect
Speaker 1: shortages of gasoline in Texas during this whole cleanup? Well,
Speaker 1: while there has been some demand destruction in Texas, it's
Speaker 1: nowhere near the loss of refineries supply. We've had thirty
Speaker 1: one percent of the refineries UH in the US being
Speaker 1: affected by Harvey. At the same time, refiners have reduced
Speaker 1: runs by over five million barrels a day, even though
Speaker 1: some of them are in partial operation, So there is
Speaker 1: a big impact, and that's why you're seeing sore and gasoline,
Speaker 1: diesel and jet fuel prices. Will you see any changes
Speaker 1: in the way that the refinery or energy industry does
Speaker 1: business or protects its assets after this hurricane. Well, it's
Speaker 1: very difficult to protect yourself from four and a half
Speaker 1: feet of rain. So, uh, you know, they may look
Speaker 1: at raising their electrical pumps, you know, to a little
Speaker 1: bit higher, a couple of three or four feet off
Speaker 1: the ground, but I don't think as a practical matter,
Speaker 1: they're going to be able to do much unless they're
Speaker 1: able to build dikes around the refineries to keep the
Speaker 1: water out. Well, any good luck getting home. I'm sure
Speaker 1: it's going to be a trying expedition and even once
Speaker 1: you get there, just getting to your home might be
Speaker 1: quite adventure. Yeah, yeah, thank you very much. I appreciate it. Yeah,
Speaker 1: all our best. Andy Lippo is president of Lippout Oil Associates,
Speaker 1: which is based in Houston, but he is marooned here
Speaker 1: in New York City. Uh. There could be worse places
Speaker 1: to be marooned, but we really wish you all the
Speaker 1: best getting back and getting back to normal in the area.
Speaker 1: Jared Kushner, Donald Trump's president, Donald Trump's son in law
Speaker 1: and top advisor. Uh, he wakes up each morning to
Speaker 1: a growing problem, and here tell us what that problem
Speaker 1: is and the extent to which that problem seems to be.
Speaker 1: Deevil him is our own reporter for Bloomberg Business Week,
Speaker 1: David Kochanski and David, thanks very much for being with us.
Speaker 1: Can you describe for people, maybe they're not familiar with
Speaker 1: Jared Kushner's family business, what exactly does his family do,
Speaker 1: how did it get into the real estate business, and
Speaker 1: what kind of issues are they facing. Um. The Christiers
Speaker 1: have been a real estate family for several generation. UM.
Speaker 1: Jared's grandparents, who are Holocaust survivors, started a small construction company.
Speaker 1: His dad took over the company in the eighties when
Speaker 1: they had about four thousand apartments, and by the two thousands,
Speaker 1: early two thousands, they had twenty five thousand apartments, mostly
Speaker 1: in the suburbs. UM. In two thousand and seven when Jared,
Speaker 1: shortly after Jared had kind of taken control of the company,
Speaker 1: they moved into New York real estate and they bought
Speaker 1: a tower at six sixty six Fifth Avenue. They bought
Speaker 1: it at the height of the market, paid a lot
Speaker 1: of money, took on a lot of debt, and have
Speaker 1: been struggling with that asset ever since. They paid one
Speaker 1: billion dollars correct and that was a new record. Yes,
Speaker 1: there was a record for any building in the US
Speaker 1: at the time. UM. It was highly leveraged UM and
Speaker 1: in order to make it work UM they had to
Speaker 1: take on a lot of debt. They had to sell
Speaker 1: some the most expensive assets. There's some retail on the
Speaker 1: lower floors of it that was profitable, but they had
Speaker 1: to sell that off. They had to refinance and kind
Speaker 1: of turnover of the rest of the building to Tornado,
Speaker 1: the big, very profitable real estate company. UM. Now with
Speaker 1: the debt is coming to UM the motage that we
Speaker 1: is do in en They've only been paying interest so far.
Speaker 1: They got to figure out a way to make this
Speaker 1: building work. And as of now there's some quarters where
Speaker 1: it is not profitable, so refinancing it is going to
Speaker 1: be difficult when it's not turning a profit. They've been
Speaker 1: searching the globe trying to raise money and get foreign
Speaker 1: investment to profit up. And that's what our story is about,
Speaker 1: right And and part of the story was the complications
Speaker 1: that come along with looking for international financing when you
Speaker 1: are the son in law of the president of the
Speaker 1: United States. Correct, And that's sort of becoming somewhat of
Speaker 1: an obstacle as well as an advantage. Yes, And you know,
Speaker 1: in January, Jared Krishner UM divested of his interest in
Speaker 1: the company. He try for the company to other family members,
Speaker 1: so he technically is not involved in it. UM, But
Speaker 1: because he's a top advisor to the president, there are
Speaker 1: a lot of concerns about potential conflicts of interest and
Speaker 1: UM we laid out in the story for the first
Speaker 1: time that there were a sovereign wealth fund in South
Speaker 1: Korea that he and his father had met with to
Speaker 1: ask for investments during this campaign in sixteen and Donald
Speaker 1: Trump was making his way to the White House. UM,
Speaker 1: there's a Saudi investor who in the family had preliminary
Speaker 1: talks with that had not been mentioned before. UM. And
Speaker 1: what we saw in our reporting is that UM, you know,
Speaker 1: until fifteen or so, they had a hard time getting
Speaker 1: anyone to UM show interests and many times not even
Speaker 1: take meetings with them. As Donald Trump rose UM and
Speaker 1: Jared's prominence rose, there a lot of people interested UM
Speaker 1: including some UH. One that has been reported before was
Speaker 1: a bad the Chinese corporation that's tightly tied closely to
Speaker 1: the government. UM. The Krishners UH after the election came
Speaker 1: to a deal where an Bang was going to bail
Speaker 1: them out. UM. After the deal, the details of that
Speaker 1: deal came public. That fell apart. UM. But what we
Speaker 1: found in our reporting is that there's a lot of
Speaker 1: other places they've been looking for money and they still
Speaker 1: at this point have not figured out a solution to
Speaker 1: the building. Well, David and your reporting, what kind of
Speaker 1: options are there for for the Kushner real estate company. Well,
Speaker 1: you know Laurent Morale who we interviewed as the president
Speaker 1: of Krishner Companies. He said that they have several options.
Speaker 1: The first is this what was called the Mega project
Speaker 1: is grand UM this grand vision where they would knock
Speaker 1: down the building UM and build a gigantic eight story
Speaker 1: tower with five floors of retail, something that looked like
Speaker 1: oz or Abu Dhabi. That's there has been drawings of it,
Speaker 1: UM and it's this glittering thing, but it would be
Speaker 1: so astronomically expensive. UM. A lot of you know, most
Speaker 1: of the investors, as they've approached, are hesitant to get
Speaker 1: involved because they think that the Manhattan real estate market
Speaker 1: and retail market can't sustain the kind of numbers that
Speaker 1: we take to build something that big. So that's the
Speaker 1: big one. And Mr Rowley told us that they still
Speaker 1: are out there trying to do that. If it is not,
Speaker 1: If they can't get that, they say that they'll have
Speaker 1: to try to bring other investors and maybe work the
Speaker 1: building out as UM an office building. But it has
Speaker 1: proven so far. UM. You know, it's been tough for
Speaker 1: them to do it because it's an older building. The
Speaker 1: layout of the building makes it kind of tough to UM.
Speaker 1: It's not like a modern airy building it has. It
Speaker 1: has tight columns and kind of lower ceilings and not
Speaker 1: the kind of light and spacious field that modern offices
Speaker 1: UM businesses want to pay top dollar for. And there's
Speaker 1: also been a change in the Manhattan real estate market.
Speaker 1: I mean Midtown where they are at fifty umty three
Speaker 1: and fifth is not as hot a market as as
Speaker 1: it has been in the past, and there's a lot
Speaker 1: of development going out on the West Side and UM,
Speaker 1: so to get the kind of rent that they would
Speaker 1: need to make that building work, UM will be a challenge,
Speaker 1: and if they can't get the mega project built, it
Speaker 1: probably would involve some kind of renovation that would be difficult,
Speaker 1: um and expensive to carry off. Real quick twenty seconds.
Speaker 1: Have you heard a response from the Kushner family. We
Speaker 1: have not heard from the Christian family. We spoke to
Speaker 1: them extensively and went over all the details of it beforehand,
Speaker 1: and um, so we have they've they've got haven't said
Speaker 1: anything about it at this point. Well, thank you so
Speaker 1: much for joining us and for the interesting reporting on
Speaker 1: this building. Six sixty six Park Avenue and UH one
Speaker 1: point eight billion dollars is a lot of money for
Speaker 1: a building right now. David COCHINESK Cochinski, thank you so
Speaker 1: much for joining us. He's a reporter for Bloomberg Business
Speaker 1: Week who wrote this story, which is truly fabulous. You
Speaker 1: should definitely read it in the latest edition of this
Speaker 1: This week, we hear a lot about cyber crimes, about
Speaker 1: cyber security. We've heard rumors that perhaps that had something
Speaker 1: to do with the crash UH in Southeast Asia. We've
Speaker 1: heard about what the hacking that went on with the
Speaker 1: election and around that with the emails. Now I want
Speaker 1: to talk about the areas that are least protected that
Speaker 1: perhaps will become a little bit more protected against these
Speaker 1: cyber attacks going forward. I want to bring in I'm
Speaker 1: none of our lev He is president of Checkpoints Software,
Speaker 1: which is based in Tel Aviv, but he joins us
Speaker 1: here in our Bloomberg eleven three oh studios. I'm not.
Speaker 1: Can you give us a sense of where you think
Speaker 1: the biggest vulnerability remains. Well, I think the biggest vulnerability
Speaker 1: is actually where the most critical part of our lives states,
Speaker 1: which is our critical infrastructure, our electricity, water, are the
Speaker 1: very basic things that we do today in our lives,
Speaker 1: and the cows it will happen in those critical infrastructure
Speaker 1: would be infected. And those environments are much more conservative.
Speaker 1: Their approach there is if it's not broken, don't fix it.
Speaker 1: And I think they have to get the stand out
Speaker 1: of the rest of the industry for this critical infrastructure.
Speaker 1: But you know a lot of people think about that
Speaker 1: infrastructure is being perhaps less connected then others and therefore
Speaker 1: more immune to some of the cyber attacks. Yes, but
Speaker 1: surprisingly or not, there's this trend that I can tell
Speaker 1: you that networks tend to connect every networks tend to
Speaker 1: connect to others, and I think Internet changed that because
Speaker 1: people are connecting all the time. Network are connecting all
Speaker 1: the time, and I've seen different environment networks are connected.
Speaker 1: And not only that. I don't know if you remember
Speaker 1: there was a big attack on I around many years ago.
Speaker 1: It was totally unconnected network, but with a USB or
Speaker 1: can get it into the network and then everything block inside.
Speaker 1: So those networks are are very vulnerable. And I believe
Speaker 1: that when I'm looking at overall happening the world, most
Speaker 1: of the countries actually have cyber warrior not to defend,
Speaker 1: but to offend, and they will go after those environment.
Speaker 1: They will not go after a Google of Facebook. They
Speaker 1: will go to critical infrastructure. You know. One of the
Speaker 1: things that has been in the news of these accidents
Speaker 1: that the U. S. Navy, as Lisa alluded to, have
Speaker 1: been involved in the most recent one involves the destroyer
Speaker 1: the U S. S. John McCain, this was an accident
Speaker 1: with the tanker near Singapore, and I one if you
Speaker 1: could offer your thoughts on do you believe that there
Speaker 1: was any involvement from electronic cyber attacks in any of
Speaker 1: these To be fair, I don't have any details. Of course,
Speaker 1: I'm listening like you, So I don't have anything. I'm
Speaker 1: just saying that all of those environments controlled by computers,
Speaker 1: and all of those computers can be accessed in different ways.
Speaker 1: So if you're asking possibility like that exists, the answer
Speaker 1: is yes, if that's what's really happening, I really don't know,
Speaker 1: because there I mean, there have been reports in the past.
Speaker 1: I mean, for example, in two thousand thirteen, graduate students
Speaker 1: were able to break into the GPS system of a
Speaker 1: yacht and actually directed it way. Of course, that's possible
Speaker 1: with just about any network. You're saying, I can tell
Speaker 1: you basically that every system can be hacked, from your
Speaker 1: robot that clean your house to electricity system everywhere, So
Speaker 1: every system can be hacked. Well, with that uplifting idea,
Speaker 1: what it could be done to prevent this? And are
Speaker 1: big countries doing what's necessary? I think that the private
Speaker 1: sector is actually doing much more and he's investing much more. Um.
Speaker 1: The countries, for different reasons, are way behind. They start
Speaker 1: with regulation, they have good regulation systems, and they start
Speaker 1: building like security operating systems, but they don't have the fundamentals.
Speaker 1: Think for a second, the allegory for physical environment. You
Speaker 1: have policemen. You have military, you have sheriffs that when
Speaker 1: there is an incident, you just send those forces and
Speaker 1: they block it. But what happened when there's cyber attack
Speaker 1: in in the US you don't have those soldiers. And
Speaker 1: I think the next evolution that can't will have to
Speaker 1: head that they will have to have those kind of
Speaker 1: cyber sniffer's friend around the network. When they know that
Speaker 1: it's an attack, they can actually activate them and block
Speaker 1: those attacks. And they have to do that, you know.
Speaker 1: I have to say that this raises a little bit
Speaker 1: of concern when I hear about having cyber police officers
Speaker 1: but of the state, because it sort of brings to
Speaker 1: mind a very nineteen eighty four type of situation that
Speaker 1: is trying to curtail people's First Amendment rights and interfering
Speaker 1: with their daily lives, spying on them. How can how
Speaker 1: can there be sort of some resolution to those tensions? Well,
Speaker 1: it's a very complex, uh questions, and a complex subject
Speaker 1: by any means. I think the ideas should not be
Speaker 1: with having a big brother watching on you, uh, in
Speaker 1: any way. I just think that it's a matter of balance.
Speaker 1: It's the same way that you're going to an airport
Speaker 1: and you need to take your shoes off, or when
Speaker 1: you go to the street and there is a policeman
Speaker 1: over there, you you accepted that, and we should accept
Speaker 1: the fact that somebody will help us by protecting us,
Speaker 1: not by watching on us, by any means, and that
Speaker 1: have to be very clearly prevented and regulated. But there
Speaker 1: should be a case when I already knows about attack,
Speaker 1: then I can actually stop it, which today it's not happening.
Speaker 1: You've been quoted as saying that one of the rules
Speaker 1: or one of the secrets of being a CEO is
Speaker 1: don't try to be loved. Yeah, what does that mean
Speaker 1: first time? The president of the CEO of Checkpoint. Ah,
Speaker 1: it's meant that you should not be popular just doing
Speaker 1: things because the market is asking for that, or because
Speaker 1: there's a pushback from from you know, Wall Street to say,
Speaker 1: hey you have to do that. I think you need
Speaker 1: to stick to your DNA and people will respect you
Speaker 1: for that. I think people that are trying just to
Speaker 1: do things because there is a fashion, uh like, hey,
Speaker 1: I have to now grow my business twice and I
Speaker 1: just became i mean not profitable and stuff like that.
Speaker 1: So so you need to make sure that you have
Speaker 1: a principle upon you build your business and you manage
Speaker 1: your business and stick to them. That's much more important
Speaker 1: than just to do what everybody asks you to do. Well,
Speaker 1: given that and the fact that you're in the US,
Speaker 1: I imagine you're you're speaking with potential clients, and I'm wondering, Uh,
Speaker 1: you know, even though the government is less perhaps advanced
Speaker 1: in their attempts to regulate some of these cyber attacks,
Speaker 1: are they receptive to the suggestion that they need to
Speaker 1: have some kind of task force, police force, some way
Speaker 1: to regulate. Uh, that's better than what Yes, it's happening
Speaker 1: in the U S. It's happening in other countries. UM.
Speaker 1: I think US overall administration is very complex and much
Speaker 1: more difficult than we We are actually dealing with many
Speaker 1: smaller countries which things are simpler to do. But and
Speaker 1: government are accepting the fact that they need to build
Speaker 1: systems that allow them to deal with cyber attack like
Speaker 1: they do for physical attacks. So they understand that and
Speaker 1: they're evolving on that. The same things happened also in
Speaker 1: the U S. It's a bit slower, but it's happening
Speaker 1: here as well. Thanks for spending time with us and
Speaker 1: coming by. I'm Non bar lev Is, the president of
Speaker 1: Checkpoint Software. He is an expert in the world of
Speaker 1: cybersecurity and also in protecting your network against malware and
Speaker 1: other cyber attacks. Let's turn our attention now to Brexit
Speaker 1: and Brexit negotiations. Joining us Ed Ludlow he is our
Speaker 1: UK correspondent for Bloomberg. He joins us here in our
Speaker 1: eleven three oh studios. Ed, thanks for being here. Maybe
Speaker 1: just bring everyone up to date on are there actually
Speaker 1: negotiations on Brexit? Are they actually taking place and talking
Speaker 1: about things that mean things? So I say where we
Speaker 1: are now this afternoon. We just finished the third formal
Speaker 1: round of negotiations. Okay. One of the big questions has
Speaker 1: been the pace of negotiations, how often they're meeting, because
Speaker 1: it's all done behind closed doors. This is how it works.
Speaker 1: David Davis, the UK Bracklet Secretary, rocks up on the
Speaker 1: Monday's Brussels. He makes a statement alongside his EU counterpart Barnier,
Speaker 1: then closed doors for a few days, they come back
Speaker 1: and they update on progress. And this is the point
Speaker 1: after three rounds. From what we've heard today at that
Speaker 1: press conference, there isn't any progress, and there's disagreement between
Speaker 1: the two on their position on what you know, on
Speaker 1: what each sees as it's a tug of war, you know.
Speaker 1: Britain say, you know, we want flexibility from you, the
Speaker 1: European Union, we want flexibility, and the European Unions say back,
Speaker 1: we want progress from you. We want evidence that you've
Speaker 1: thought about these points of the divorce. And so earlier today,
Speaker 1: look at the language that Mischieur Bannier was using. He
Speaker 1: was saying sufficient progress. This is like the EU buzzword
Speaker 1: sufficient progress. And it's all about when they can finish
Speaker 1: the divorce talks and move on to trade talks. That's
Speaker 1: the key point here, and there's a frustration from both
Speaker 1: sides and for all of us waiting there sitting watching
Speaker 1: for the updates. So in other words, there's no progress
Speaker 1: being made. So remember the deadline okay in March. Okay,
Speaker 1: And what we're saying, what we're seeing is Britain wants
Speaker 1: to move quickly on to trade negotiations. Davis was saying
Speaker 1: the press conference earlier. They are They're inexplicable, they're one
Speaker 1: and the same. You have to negotiate divorce and trade
Speaker 1: at the same time. What the EU are saying is
Speaker 1: that we refuse to move on to trade until you
Speaker 1: have proved that you're going to meet your financial obligations.
Speaker 1: I'll come onto that in a second, that you've got
Speaker 1: your citizens right issue sourced out, and that you've got
Speaker 1: a solution to the border between Northern Ireland and the
Speaker 1: Republic of Ireland. Now, people familiar matter we spoke to
Speaker 1: earlier today said actually, what the Brits have been doing
Speaker 1: in these sessions is trying to pick holes in the
Speaker 1: e u s position on the financial bill, rather than
Speaker 1: saying what they're willing to pay. So you know, you
Speaker 1: want them to sess the financial bill, their financial obligations.
Speaker 1: They're saying this is how much we think it is,
Speaker 1: rather than Britain say well, actually, this is how much
Speaker 1: we're willing to pay. They've been picking holes in the
Speaker 1: EU's number. That's pretty that's pretty bad. That's that's not
Speaker 1: a good sign. That sort of signifies that there's quite
Speaker 1: a ways to go before people kind of get to
Speaker 1: an acceptance. Where are markets pricing all this? I mean,
Speaker 1: how are traders sort of reflecting the lack of agreement
Speaker 1: here in prices and what assets? So you looking at particular. Yeah,
Speaker 1: we speaking to Neil Jones of Miszoojo this morning, who's
Speaker 1: head of sales side, and he was basically saying that
Speaker 1: Sterling is now a political currency and that there aren't
Speaker 1: the sharp, volatile moves that we've seen, but you see
Speaker 1: weakness as investors look at the commentary coming out of
Speaker 1: the discussions when the two men are speaking Brussels. Investors
Speaker 1: are watching the wait to see how we've got progress.
Speaker 1: No Sterling weaker throughout the morning. Now you've also got
Speaker 1: the other angle, which is growth in the UK. And
Speaker 1: when you look at the six months that followed Brexit,
Speaker 1: you know the UK economy was surprisingly resilient if you
Speaker 1: look at the data. But what we're seeing now is
Speaker 1: a different picture. Business investment is down significantly because those exporters,
Speaker 1: these UK exporters, what's their biggest market is the European Union.
Speaker 1: They don't know what the relationship with that market will
Speaker 1: be when the when Brexit comes to fruition, and so
Speaker 1: they're not in boosting their volumes. But Neil Jones was
Speaker 1: telling me this morning that he thinks he'll see other
Speaker 1: UK assets start to reflect that. The smaller MidCap companies
Speaker 1: right where the EU is their biggest market and they
Speaker 1: are sensitive to Sterling and they're sensitive to that trade relationship.
Speaker 1: But mostly we're seeing it in this what he calls
Speaker 1: the political currency GDP. Yeah, I'm trying to think of
Speaker 1: you know, which, which area you can point to that
Speaker 1: might even lead to some success, But it's a challenge. Um, Europe,
Speaker 1: the European Court of Justice, right, I mean the rules
Speaker 1: and regulations that supposedly government relationships between countries and so on. Um,
Speaker 1: what happened? What? What are the thought? So? I mean
Speaker 1: is there any transitional program even being put into place?
Speaker 1: So there's the two sides are odds. So basically consider
Speaker 1: Brexit day the deadline day itself. Britain's position is that
Speaker 1: the European Court of Justice can have jurisdiction on matters
Speaker 1: that are already underway, cases already underway up until and
Speaker 1: including that day, Brexit deadline day. But after that they
Speaker 1: say that the European Court of Justice should not have
Speaker 1: any jurisdiction of any business matters, civil matters Here in
Speaker 1: the UK, the EU are saying that the e c
Speaker 1: J should be able to deal with cases after Brexit
Speaker 1: where you know they have they had an existing mandate
Speaker 1: to do so in civil rights cases and in other
Speaker 1: business dealings, so that there are odds there. What is
Speaker 1: the compromise is that one says that the u c
Speaker 1: J should the other says it shouldn't. Is it that
Speaker 1: they find areas of commonality where the u c J
Speaker 1: can continue? There are There is a court that adjudicates
Speaker 1: the relationship between the EU and non EU countries, for
Speaker 1: example like Norway and Switzerland, but that has limited power.
Speaker 1: And the question is whether Britain can accept some kind
Speaker 1: of transitional court like that ed You're born and bred
Speaker 1: London night and how has how has the environment changed
Speaker 1: since the Brexit vote? It is different. London is a
Speaker 1: multicultural city, as anyone that will have been knows. And
Speaker 1: one thing you know I was talking to people about
Speaker 1: earlier is the issue of students. Okay, now people underestimate
Speaker 1: the vast numbers of international students that come into London,
Speaker 1: many from the European Union. We have what is called
Speaker 1: the Erasmus Scheme. It is a European Union funded scheme
Speaker 1: whereby British and European Unions, students can come and travel
Speaker 1: and study freely in the UK or vice versa. One
Speaker 1: of the questions is what happens to that scheme. People
Speaker 1: are putting off their decisions, just like businesses putting off investment.
Speaker 1: People are putting off their decision to come to the UK.
Speaker 1: It's changing people's perception and actually, you know, amongst I
Speaker 1: don't want to talk about so an executive evidence, but
Speaker 1: amongst young people that is a big thing. It changed
Speaker 1: people's vision of Britain. Ed Ludlow thank you so much
Speaker 1: for joining us. It's a pleasure to see you in person,
Speaker 1: in the flesh in our New York offices. Ed Ludlow
Speaker 1: is our UK correspondent for Bloomberg News based in London.
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts,
Speaker 1: SoundCloud or whatever podcast platform you prefer. I'm Pim Fox.
Speaker 1: I'm on Twitter at pim Fox. I'm on Twitter at
Speaker 1: Lisa Abramo. It's one before the podcast. You can always
Speaker 1: catch us worldwide on Bloomberg Radio.