1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along

2
00:00:09,240 --> 00:00:13,200
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you

3
00:00:13,320 --> 00:00:18,600
Speaker 1: insight from the best and economics, finance, investment, and international relations.

4
00:00:18,960 --> 00:00:23,840
Speaker 1: Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com,

5
00:00:23,920 --> 00:00:30,520
Speaker 1: and of course on the Bloomberg terminal. We are honored

6
00:00:30,520 --> 00:00:32,920
Speaker 1: that the chief executive officer of ax And, Thomas Burble,

7
00:00:33,000 --> 00:00:35,800
Speaker 1: joins US now in support with Ian Bremer and eraisia

8
00:00:35,840 --> 00:00:40,080
Speaker 1: group of actually quantifying risk. Thomas, I've got to say

9
00:00:40,120 --> 00:00:45,200
Speaker 1: congratulations on the acuity of your study. You go out

10
00:00:45,280 --> 00:00:49,920
Speaker 1: and speak to thousands of people, explain why this study

11
00:00:49,960 --> 00:00:52,760
Speaker 1: is different from last year or the others of the

12
00:00:52,880 --> 00:00:56,760
Speaker 1: thousands you talked to. Thanks Tommy. I'll be doing this

13
00:00:56,840 --> 00:01:00,000
Speaker 1: study now for the eight ya. The extra futurisquit pol

14
00:01:00,240 --> 00:01:02,640
Speaker 1: And what's important for us is to understand how risks

15
00:01:02,680 --> 00:01:05,840
Speaker 1: are perceived, but also how we can map them out

16
00:01:05,959 --> 00:01:08,679
Speaker 1: and what you can see that obviously the hierarchy of

17
00:01:08,800 --> 00:01:12,280
Speaker 1: risks is changing over the time. Well, last year, obviously

18
00:01:12,360 --> 00:01:15,319
Speaker 1: pandemic was the number one risk. We are now seeing

19
00:01:15,400 --> 00:01:18,000
Speaker 1: that climate is back at the top. So it's for

20
00:01:18,080 --> 00:01:21,000
Speaker 1: us very important to understand what are the key risks

21
00:01:21,120 --> 00:01:24,320
Speaker 1: and also how can they be solved. Walk me through

22
00:01:24,319 --> 00:01:26,240
Speaker 1: the key risk right now, then tell us frame the

23
00:01:26,240 --> 00:01:30,199
Speaker 1: climate debate for us from a company perspective. People worried

24
00:01:30,240 --> 00:01:33,039
Speaker 1: about climate change change in their business, or they're worried

25
00:01:33,040 --> 00:01:35,520
Speaker 1: about stakeholders turning them back on their business because they're

26
00:01:35,520 --> 00:01:38,920
Speaker 1: not worried enough about climate change. I would say all

27
00:01:38,959 --> 00:01:41,520
Speaker 1: of the above the issues today that we have a

28
00:01:42,080 --> 00:01:47,000
Speaker 1: very very many evidences around us that climate change does

29
00:01:47,440 --> 00:01:49,960
Speaker 1: matter to us, just change our life. I think when

30
00:01:50,000 --> 00:01:52,080
Speaker 1: you look at COVID nineteen, this could also well be

31
00:01:52,120 --> 00:01:55,400
Speaker 1: connected to climate change, and the issue is really what

32
00:01:55,560 --> 00:01:57,480
Speaker 1: can we do about it? How can we change it?

33
00:01:57,520 --> 00:01:59,520
Speaker 1: We see that in the political arena there is a

34
00:01:59,600 --> 00:02:03,720
Speaker 1: strong desire now on the legislative front to really um

35
00:02:04,040 --> 00:02:08,359
Speaker 1: uh push the transition, and so companies, investors and insure

36
00:02:08,440 --> 00:02:12,200
Speaker 1: US will have to align. And we've been very early

37
00:02:12,240 --> 00:02:14,920
Speaker 1: on in this game making sure that on the investment side,

38
00:02:14,919 --> 00:02:17,400
Speaker 1: but also on the underwriting side, we are going in

39
00:02:17,440 --> 00:02:21,720
Speaker 1: the direction of helping society, helping the companies to really

40
00:02:21,800 --> 00:02:25,080
Speaker 1: make this climate change happen, because it is the top risk,

41
00:02:25,520 --> 00:02:29,320
Speaker 1: not only in the general public, but certainly also for

42
00:02:29,360 --> 00:02:32,079
Speaker 1: the young people that for the first time we actually

43
00:02:32,560 --> 00:02:35,440
Speaker 1: put a specific focus on in that eighth edition, keeping

44
00:02:35,520 --> 00:02:38,760
Speaker 1: some numbers on that for the underwriting business specifically, Thomas,

45
00:02:38,760 --> 00:02:42,880
Speaker 1: how if you changed how you do business? So essentially

46
00:02:43,320 --> 00:02:46,360
Speaker 1: we are looking at firstly, how can we make sure

47
00:02:46,480 --> 00:02:50,280
Speaker 1: that we are avoiding uh companies risks that are clearly

48
00:02:50,320 --> 00:02:53,320
Speaker 1: pulled us. If you take the coal industry, it was

49
00:02:53,360 --> 00:02:56,440
Speaker 1: in two thousand fifteen that dacts are decided to exit

50
00:02:56,600 --> 00:02:59,560
Speaker 1: call on the investment side, and we've also followed the

51
00:02:59,600 --> 00:03:02,400
Speaker 1: same lot on the underwriting side, making sure that we

52
00:03:02,400 --> 00:03:07,080
Speaker 1: are redeploying that investment and capacity in green in the

53
00:03:07,120 --> 00:03:10,160
Speaker 1: green area. However, this is not enough if you look

54
00:03:10,360 --> 00:03:13,240
Speaker 1: the meat of the transition and the key area is

55
00:03:13,240 --> 00:03:16,480
Speaker 1: really how to help industrial companies to move from a

56
00:03:16,520 --> 00:03:19,720
Speaker 1: mix that is not sustainable to something that is more sustainable.

57
00:03:19,720 --> 00:03:23,920
Speaker 1: And this transition area, helping to invest in companies that

58
00:03:24,000 --> 00:03:26,960
Speaker 1: have a very clear and credible transition plan and also

59
00:03:27,040 --> 00:03:29,680
Speaker 1: doing the same on the underwriting side is the journey

60
00:03:29,680 --> 00:03:32,359
Speaker 1: by going now, Thomas, is your have to in dealing

61
00:03:32,360 --> 00:03:35,000
Speaker 1: with this issue as a company more on the insurance

62
00:03:35,000 --> 00:03:38,000
Speaker 1: side or more on the underwriting side more on the

63
00:03:38,040 --> 00:03:42,000
Speaker 1: investing side. It is on both sides, but I do

64
00:03:42,040 --> 00:03:44,760
Speaker 1: believe Lisa that on the insurance side it is even

65
00:03:44,760 --> 00:03:47,240
Speaker 1: more powerful. On the investment side, we are one of

66
00:03:47,320 --> 00:03:50,880
Speaker 1: many investors, and if you want to find funds for

67
00:03:50,920 --> 00:03:54,840
Speaker 1: a call factory today, you will. However, on the insurance side,

68
00:03:55,120 --> 00:03:57,480
Speaker 1: if you don't have an insurance, you will not find

69
00:03:57,520 --> 00:04:00,920
Speaker 1: any investment. And we have launched recent lee the net

70
00:04:01,000 --> 00:04:04,320
Speaker 1: Zero Insurance Alliance, which is an alliance of eight insurers

71
00:04:04,360 --> 00:04:07,000
Speaker 1: under the lead of AKSA to make sure that we

72
00:04:07,080 --> 00:04:10,920
Speaker 1: get the largest insurer commercial insurers together to make sure

73
00:04:10,960 --> 00:04:13,600
Speaker 1: that these risks are not underwritten anymore, and that we

74
00:04:13,640 --> 00:04:17,760
Speaker 1: are really helping focusing our insurance on the companies that

75
00:04:17,839 --> 00:04:20,640
Speaker 1: are in transition. So has this been effective? Have you

76
00:04:20,680 --> 00:04:23,520
Speaker 1: seen those companies that will not get insurance from the

77
00:04:23,520 --> 00:04:27,920
Speaker 1: big companies actually struggle or or actually shift their businesses

78
00:04:27,960 --> 00:04:32,960
Speaker 1: in response. So on the on the question around avoiding coal,

79
00:04:33,080 --> 00:04:35,640
Speaker 1: we've clearly seen it, and I've personally been involved in

80
00:04:35,720 --> 00:04:38,520
Speaker 1: quite a few customer conversations as you can mention, this

81
00:04:38,600 --> 00:04:41,239
Speaker 1: is not easy, but if we don't go this way,

82
00:04:41,520 --> 00:04:43,800
Speaker 1: we will not make that transition happening. So on the

83
00:04:43,880 --> 00:04:48,120
Speaker 1: coal side, it has already happened. The transition side is

84
00:04:48,160 --> 00:04:51,560
Speaker 1: currently in the making, and we are now putting the

85
00:04:51,600 --> 00:04:54,559
Speaker 1: coalition together to also act on this level. It's almost

86
00:04:54,600 --> 00:04:56,560
Speaker 1: from the coal side just quickly. If you made the

87
00:04:56,560 --> 00:04:59,919
Speaker 1: decision that you don't think those companies should be insure,

88
00:05:00,320 --> 00:05:02,280
Speaker 1: if you make the decision that you can't put a

89
00:05:02,320 --> 00:05:06,920
Speaker 1: price on the insurance, no, we believe these companies should

90
00:05:06,960 --> 00:05:11,400
Speaker 1: not be insured because somebody who does not contribute to

91
00:05:11,520 --> 00:05:14,880
Speaker 1: the transition of our climate, it's not somebody that we

92
00:05:14,920 --> 00:05:18,839
Speaker 1: would like to invest in, because we obviously see the

93
00:05:18,880 --> 00:05:21,160
Speaker 1: negative effects on this. On the other side, we are

94
00:05:21,160 --> 00:05:23,880
Speaker 1: also a large health insurance so when you look at

95
00:05:24,880 --> 00:05:28,360
Speaker 1: climate related health issues, they have arisen a lot. So

96
00:05:28,440 --> 00:05:32,440
Speaker 1: for us, it makes absolute sense to be true to ourselves.

97
00:05:32,480 --> 00:05:34,799
Speaker 1: How can we avoid these risks on the insurance side

98
00:05:34,960 --> 00:05:37,599
Speaker 1: to also make sure that we have a better experience

99
00:05:37,640 --> 00:05:40,320
Speaker 1: for our patients. Fascinating position to put yourself in, Tho Thomas,

100
00:05:40,320 --> 00:05:43,120
Speaker 1: to decide which companies should or should not fail, which

101
00:05:43,160 --> 00:05:46,440
Speaker 1: companies deserve insurance, and which companies don't. Does it start

102
00:05:46,440 --> 00:05:50,960
Speaker 1: an end with climate change? Lets this's go somewhere else. Look,

103
00:05:51,000 --> 00:05:52,960
Speaker 1: I mean you also have other areas. If you think

104
00:05:53,000 --> 00:05:56,559
Speaker 1: about again health related issues, you have got the question

105
00:05:56,560 --> 00:05:59,360
Speaker 1: around tobacco, and so for example, in areas where we

106
00:05:59,440 --> 00:06:02,880
Speaker 1: clearly see that there is a direct link between an

107
00:06:02,920 --> 00:06:06,560
Speaker 1: industrial activity and negative consequences for health. So, for example,

108
00:06:06,560 --> 00:06:09,200
Speaker 1: on tobacco, as of the first cigarette, you have a

109
00:06:09,240 --> 00:06:12,080
Speaker 1: negative effect. We've also taken the decision in two thousand

110
00:06:12,080 --> 00:06:15,680
Speaker 1: and sixteen to exit this and to redeploy our investment. Means,

111
00:06:15,839 --> 00:06:19,120
Speaker 1: um this needs to continue, but it needs to continue

112
00:06:19,120 --> 00:06:22,919
Speaker 1: in a way that we are accompanying our customers, that

113
00:06:22,960 --> 00:06:25,600
Speaker 1: we are accompanying the companies we invest in to make

114
00:06:25,640 --> 00:06:29,919
Speaker 1: sure that we help this transition and we don't penalize. Interesting,

115
00:06:30,000 --> 00:06:32,840
Speaker 1: some people might think that's controversial. That's a conversation for

116
00:06:32,880 --> 00:06:36,520
Speaker 1: another day. Thomas just quickly someday Man City Liverpool, can

117
00:06:36,560 --> 00:06:41,320
Speaker 1: we get a prediction sir? It is clearly that Liverpool

118
00:06:41,360 --> 00:06:44,720
Speaker 1: will be winning, and because they are so well positioned,

119
00:06:45,120 --> 00:06:48,080
Speaker 1: it would not underwrite the insurance of Man City. Tom,

120
00:06:48,279 --> 00:06:51,359
Speaker 1: I think is the message you're trying to He just

121
00:06:51,480 --> 00:06:55,039
Speaker 1: took undone as an insure. If you can make that

122
00:06:55,080 --> 00:06:59,040
Speaker 1: decision as well, which team succeeds and fails. Thomas Bobo there.

123
00:06:59,080 --> 00:07:08,200
Speaker 1: Thank you, sir, access CEO. Right now we're gonna shift

124
00:07:08,200 --> 00:07:10,880
Speaker 1: to the equity market with someone who does observe the

125
00:07:10,960 --> 00:07:14,840
Speaker 1: yield space as he gauges his bullish view and equities.

126
00:07:14,880 --> 00:07:19,160
Speaker 1: Benjamin Laidler is the Global Markets their strategist and he

127
00:07:19,280 --> 00:07:23,240
Speaker 1: joins us this morning to reaffirm on equities. Ben Laidler,

128
00:07:23,360 --> 00:07:27,200
Speaker 1: you talk about the priors of yield, you talk about

129
00:07:27,280 --> 00:07:30,160
Speaker 1: the other moments where we've seen yield surge, and you

130
00:07:30,280 --> 00:07:35,760
Speaker 1: do say this time is different. I think the speed

131
00:07:35,760 --> 00:07:38,000
Speaker 1: has been different markets. I think I'm reacting to the

132
00:07:38,000 --> 00:07:40,320
Speaker 1: speed of the body yield move you know, not necessarily

133
00:07:40,560 --> 00:07:42,560
Speaker 1: to the level twenty basis points in a week if

134
00:07:42,560 --> 00:07:44,840
Speaker 1: you extract like that. This is the basically the biggest

135
00:07:44,840 --> 00:07:47,760
Speaker 1: move that we've almost ever had, even more than we

136
00:07:47,800 --> 00:07:49,760
Speaker 1: had in in first quarter, which is you know, close

137
00:07:49,800 --> 00:07:52,400
Speaker 1: to record itself. Um. Yeah, Having said that, you know,

138
00:07:52,480 --> 00:07:54,320
Speaker 1: I think we've sort of seen this movie before. Right

139
00:07:54,400 --> 00:07:56,200
Speaker 1: first quarter we had the you know, nearly a hundred

140
00:07:56,200 --> 00:07:58,960
Speaker 1: basis point moving yields. Over the quarter, we saw a

141
00:07:58,960 --> 00:08:01,360
Speaker 1: lot of movements, you know, to your point under the surface,

142
00:08:01,400 --> 00:08:03,520
Speaker 1: there was a lot of sort of sector rotation, but

143
00:08:04,000 --> 00:08:06,720
Speaker 1: you know, the opal market came up six percent, and

144
00:08:06,760 --> 00:08:08,120
Speaker 1: that wasn't as similar to what we saw on the

145
00:08:08,120 --> 00:08:10,560
Speaker 1: table tantram back in which is the best year of

146
00:08:10,560 --> 00:08:14,560
Speaker 1: the decade for for equities. So you know, I think

147
00:08:14,560 --> 00:08:16,480
Speaker 1: the markets sending us some messages here. I think it

148
00:08:16,520 --> 00:08:18,120
Speaker 1: means a lot more per sectors than it was to

149
00:08:18,160 --> 00:08:21,040
Speaker 1: the market. And I think this sort of pain is

150
00:08:21,040 --> 00:08:23,480
Speaker 1: is going to be temporary as um sort of market

151
00:08:23,720 --> 00:08:25,680
Speaker 1: um as the sort of reprice this a little bit.

152
00:08:25,720 --> 00:08:27,600
Speaker 1: But I think that's sort of bulld case of you know,

153
00:08:27,760 --> 00:08:30,520
Speaker 1: fed forbearance and the strong earnings of probably remained in place.

154
00:08:30,640 --> 00:08:33,440
Speaker 1: Have we had enough of a draw down, a pull

155
00:08:33,520 --> 00:08:37,320
Speaker 1: back where it shifts the use of cash game for

156
00:08:37,400 --> 00:08:44,679
Speaker 1: corporations um, And we've had, I mean the story for

157
00:08:44,720 --> 00:08:46,120
Speaker 1: this year, but it has really just been the lack

158
00:08:46,200 --> 00:08:48,760
Speaker 1: of volatility, right, I mean, we've had this huge rally,

159
00:08:48,760 --> 00:08:50,600
Speaker 1: who had one sort of fighter sent pull back this

160
00:08:50,679 --> 00:08:53,040
Speaker 1: year are than the three we've normally had. So you know,

161
00:08:53,120 --> 00:08:55,800
Speaker 1: the VIX remains sort of very low. I mean, you know,

162
00:08:55,800 --> 00:08:57,880
Speaker 1: back in the first quarter of VIX peaked at thirty seven,

163
00:08:58,280 --> 00:09:00,160
Speaker 1: So you know, you can make the case for we

164
00:09:00,240 --> 00:09:03,920
Speaker 1: might get more volatility, especially with everything that's coming out

165
00:09:03,960 --> 00:09:06,960
Speaker 1: of d C and and everything that's coming out of China.

166
00:09:07,440 --> 00:09:10,679
Speaker 1: So you know, I think the outlook is one for

167
00:09:10,800 --> 00:09:13,080
Speaker 1: probably more a bit more volatility in the short term.

168
00:09:13,120 --> 00:09:15,280
Speaker 1: But I think you've been set up for, you know,

169
00:09:15,480 --> 00:09:17,160
Speaker 1: for a sentence Santa rally into the end of the

170
00:09:17,240 --> 00:09:18,960
Speaker 1: year as we sort of clear this sort of DC

171
00:09:19,040 --> 00:09:21,960
Speaker 1: in China noise, as the sort of growth bear subside

172
00:09:22,360 --> 00:09:24,400
Speaker 1: in virus cases in the US down thy percent in

173
00:09:24,520 --> 00:09:27,520
Speaker 1: two weeks, and I think that sets us up for um,

174
00:09:27,640 --> 00:09:30,560
Speaker 1: you know, growth recovery into the quarter. With the quarter

175
00:09:30,559 --> 00:09:32,480
Speaker 1: earnings coming up in two weeks, which I think is

176
00:09:32,480 --> 00:09:35,680
Speaker 1: going to be you know, expectations look very low, so

177
00:09:35,720 --> 00:09:38,200
Speaker 1: I think we've been set up for another earnings beat.

178
00:09:38,760 --> 00:09:42,240
Speaker 1: And I think the policy support remains Marion is very strong.

179
00:09:42,240 --> 00:09:43,840
Speaker 1: Whether yields are one and a half percent on the

180
00:09:43,840 --> 00:09:45,960
Speaker 1: ten year or two that there are a fraction of

181
00:09:45,960 --> 00:09:48,240
Speaker 1: where they were coming out of priory sessions, and I

182
00:09:48,320 --> 00:09:50,439
Speaker 1: think that gives you a lot of supports evaluation. And

183
00:09:50,520 --> 00:09:52,360
Speaker 1: then you've touched on something important. I think a lot

184
00:09:52,360 --> 00:09:54,320
Speaker 1: of people are waking up this morning looking at some

185
00:09:54,320 --> 00:09:57,440
Speaker 1: of those popular holdings, the likes of Microsoft, Apple, Amazon,

186
00:09:57,480 --> 00:10:00,360
Speaker 1: they're downheart since the start of September. That dream what

187
00:10:00,440 --> 00:10:02,840
Speaker 1: to do in the face of rising yields been. I

188
00:10:02,880 --> 00:10:05,320
Speaker 1: know you can't do single names, but for those big

189
00:10:05,320 --> 00:10:08,640
Speaker 1: stories that sector, what do you suggest they should do?

190
00:10:10,880 --> 00:10:13,640
Speaker 1: The story? So first quarter, which is our nearest parallel,

191
00:10:13,679 --> 00:10:15,120
Speaker 1: I think here, you know, na's that kind of terms

192
00:10:15,120 --> 00:10:18,600
Speaker 1: stample back and then it then it fairly quickly recovered.

193
00:10:19,080 --> 00:10:21,600
Speaker 1: And the difference of now versus then is, you know,

194
00:10:21,600 --> 00:10:24,120
Speaker 1: I think the yield move then was was much more significant,

195
00:10:24,160 --> 00:10:25,880
Speaker 1: and it was sort of first time out. I think,

196
00:10:26,080 --> 00:10:28,560
Speaker 1: you know this time around UM and I think you

197
00:10:28,559 --> 00:10:31,439
Speaker 1: know what we saw then was yes, you know, higher

198
00:10:31,440 --> 00:10:34,360
Speaker 1: bond yields, you know, hit stocks with higher valuations and

199
00:10:34,480 --> 00:10:36,600
Speaker 1: these sort of long duration cash flows, which is Tech.

200
00:10:36,920 --> 00:10:39,040
Speaker 1: But then very quickly I think we just get reminded

201
00:10:39,400 --> 00:10:40,640
Speaker 1: UM and I think we'll see this in the third

202
00:10:40,679 --> 00:10:42,640
Speaker 1: quarter of just you know how strong the earnings power

203
00:10:42,640 --> 00:10:44,680
Speaker 1: of these companies are on the fortress balance sheets that

204
00:10:44,720 --> 00:10:48,359
Speaker 1: they have UM. So I wouldn't expect tech to necessarily

205
00:10:48,440 --> 00:10:50,640
Speaker 1: lead from here in a rising yield environment. I think

206
00:10:50,679 --> 00:10:54,480
Speaker 1: that's going to be commodities, financials, and value, but I

207
00:10:54,840 --> 00:10:57,000
Speaker 1: certainly see them going up Lisa, this is a big

208
00:10:57,080 --> 00:10:59,720
Speaker 1: chunk of market cam Microsoft seven percent from the middle

209
00:10:59,720 --> 00:11:03,760
Speaker 1: of sep Tember. Apple down nine plus nine plus since

210
00:11:03,800 --> 00:11:06,000
Speaker 1: the start of September, the first week of September. They

211
00:11:06,000 --> 00:11:08,800
Speaker 1: are big moves. And the interesting thing is that they're

212
00:11:08,840 --> 00:11:11,520
Speaker 1: big moves despite what Bernar is talking about here, the

213
00:11:11,559 --> 00:11:14,640
Speaker 1: idea that revenues are tremendous. But at what point it

214
00:11:14,679 --> 00:11:17,840
Speaker 1: can big tech tech start moving in lark step with

215
00:11:17,920 --> 00:11:22,319
Speaker 1: bond yields. I don't think this is all about bond yields.

216
00:11:22,360 --> 00:11:24,320
Speaker 1: I think that's an important ingredient. It was all about

217
00:11:24,360 --> 00:11:26,480
Speaker 1: bond yields, then you know, if you look at the

218
00:11:26,480 --> 00:11:29,280
Speaker 1: macro level, places like Japan and Europe where bond yields

219
00:11:29,320 --> 00:11:31,120
Speaker 1: are you know, dramatically lower, would have done a lot

220
00:11:31,160 --> 00:11:33,840
Speaker 1: better and be trading a lot more expensive than than

221
00:11:34,160 --> 00:11:37,280
Speaker 1: you know they are right now. UM. You know what

222
00:11:37,920 --> 00:11:41,360
Speaker 1: the value sectors and this recovery and growth potentially sets

223
00:11:41,400 --> 00:11:43,280
Speaker 1: us up for is you know, those sectors which are

224
00:11:43,320 --> 00:11:46,120
Speaker 1: most exposed to that growth and those spectors which are

225
00:11:46,200 --> 00:11:49,079
Speaker 1: least exposed to higher bond yields. I'd have the lowest valuations,

226
00:11:49,120 --> 00:11:52,000
Speaker 1: will do you know, will do better? Um, And and

227
00:11:52,040 --> 00:11:55,319
Speaker 1: that is commodities and financials, and and tech which doesn't

228
00:11:55,360 --> 00:11:57,600
Speaker 1: have those two things, which has less sensitivity to this

229
00:11:57,640 --> 00:12:00,120
Speaker 1: growth rebound, which I think we should be talking more

230
00:12:00,000 --> 00:12:03,960
Speaker 1: about now that virus cases are coming down, um and um,

231
00:12:04,160 --> 00:12:06,280
Speaker 1: you know, more sensitivity to sort of high on yours

232
00:12:06,280 --> 00:12:09,360
Speaker 1: well will naturally lag. But I don't think you can

233
00:12:09,360 --> 00:12:11,160
Speaker 1: say that they're going to do particularly badly. I mean,

234
00:12:11,280 --> 00:12:13,640
Speaker 1: evaluations have actually come down quite a lot for big tech.

235
00:12:14,120 --> 00:12:17,760
Speaker 1: And the surprise of this year is that those very

236
00:12:17,800 --> 00:12:20,280
Speaker 1: strong growth rates which you saw last year having maybe

237
00:12:20,320 --> 00:12:22,800
Speaker 1: come down as quickly as some as many thought they

238
00:12:22,800 --> 00:12:25,480
Speaker 1: would do. Then the story of this week is the

239
00:12:25,520 --> 00:12:28,839
Speaker 1: reflation trade has changed. It is a renew reflation trade.

240
00:12:28,840 --> 00:12:31,280
Speaker 1: If you take a look at which sectors are doing

241
00:12:31,320 --> 00:12:33,640
Speaker 1: the best, you're looking at energy, You're looking at financials

242
00:12:33,640 --> 00:12:37,600
Speaker 1: with the prospect of perhaps maybe uh seeper yield curve.

243
00:12:37,679 --> 00:12:41,200
Speaker 1: It's not industrials, it's not materials. It's not consumer discretionaries

244
00:12:41,200 --> 00:12:43,440
Speaker 1: that have to absorb some of these higher gas prices

245
00:12:43,760 --> 00:12:47,840
Speaker 1: and supply chain constraint issues. Does this mean something to

246
00:12:47,960 --> 00:12:50,360
Speaker 1: you in terms of what the reflation trade will look

247
00:12:50,400 --> 00:12:54,559
Speaker 1: like over the next six months. Yeah, I think it's

248
00:12:54,559 --> 00:12:56,360
Speaker 1: going to be much more specific. I mean there are

249
00:12:56,360 --> 00:12:57,679
Speaker 1: there are. I mean I think one more sort of

250
00:12:57,679 --> 00:13:00,480
Speaker 1: a tune to some of these supply Chaine shooes them

251
00:13:00,640 --> 00:13:03,640
Speaker 1: we worked for. We obviously have a bunch of concerns

252
00:13:03,679 --> 00:13:06,720
Speaker 1: on sort of Chinese growth out there, which obviously feeds

253
00:13:06,720 --> 00:13:10,040
Speaker 1: through tectifly materials which maybe we didn't have we didn't

254
00:13:10,040 --> 00:13:14,080
Speaker 1: have last time. I would also just say, um, I

255
00:13:14,120 --> 00:13:16,160
Speaker 1: think we'll maybe right at the beginning of re engaging

256
00:13:16,160 --> 00:13:18,479
Speaker 1: in this sort of reflation trade. I mean, inflation expectations

257
00:13:18,520 --> 00:13:22,080
Speaker 1: are really barely budge market inflation expectation. I mean five year,

258
00:13:22,160 --> 00:13:24,480
Speaker 1: five year is still you know, two twenty three, ten

259
00:13:24,559 --> 00:13:26,880
Speaker 1: years to thirty eight. I mean they really haven't moved,

260
00:13:27,120 --> 00:13:30,240
Speaker 1: you know very much. Um, you know this perceived fed

261
00:13:30,440 --> 00:13:33,280
Speaker 1: you know, hawkishness. I mean they basically moved the dots

262
00:13:33,320 --> 00:13:36,560
Speaker 1: in line with where the market already was look last week.

263
00:13:37,120 --> 00:13:40,000
Speaker 1: So I think, um, I think we're really the beginning

264
00:13:40,040 --> 00:13:42,720
Speaker 1: of that, rather than having had a big move already. John,

265
00:13:42,800 --> 00:13:46,680
Speaker 1: let's review the statistics of the greatest equity car coming

266
00:13:46,679 --> 00:13:49,760
Speaker 1: out of the urgency of two thousand eighteen. Late two

267
00:13:49,760 --> 00:13:56,040
Speaker 1: thousand eighteen, Laidler up, sp X UP eighteen percent. The

268
00:13:56,120 --> 00:13:59,760
Speaker 1: next year up fifteen percent. John's so far this year

269
00:14:00,040 --> 00:14:02,920
Speaker 1: that's a lonely group. I remember it, Tom, I remember

270
00:14:02,960 --> 00:14:06,640
Speaker 1: it well, Ben Laidler, Can we ever repeat when everybody

271
00:14:06,640 --> 00:14:09,040
Speaker 1: starts freaking out about the removal of accommodation and this

272
00:14:09,080 --> 00:14:12,240
Speaker 1: equity market flies. I remember that year. Most people do

273
00:14:12,559 --> 00:14:15,880
Speaker 1: what they forget sometimes because the treasury move is so

274
00:14:16,000 --> 00:14:18,640
Speaker 1: burnt in the memory, but they forget sometimes just that

275
00:14:18,679 --> 00:14:21,200
Speaker 1: the equity market was up almost thrty percent on S

276
00:14:21,280 --> 00:14:23,600
Speaker 1: and P five hundred. Ben, how different are things this

277
00:14:23,640 --> 00:14:28,000
Speaker 1: time around? I think we've already had a lot of this, right,

278
00:14:28,040 --> 00:14:30,120
Speaker 1: I mean again, we've got stress tested. In the first quarter,

279
00:14:30,160 --> 00:14:32,720
Speaker 1: we had this huge move in treasury yields and equities

280
00:14:32,720 --> 00:14:35,200
Speaker 1: are up six percent. You know, equities up, you know,

281
00:14:35,440 --> 00:14:37,760
Speaker 1: gotting on for no well until a few days ago,

282
00:14:37,760 --> 00:14:40,360
Speaker 1: we were up for the year already. This was you know,

283
00:14:40,400 --> 00:14:42,800
Speaker 1: this is a big, big move for equities. As I say,

284
00:14:42,800 --> 00:14:44,600
Speaker 1: I mean, we've got some balls early to get through,

285
00:14:44,600 --> 00:14:46,280
Speaker 1: whether it's coming out of the bond market, coming out

286
00:14:46,320 --> 00:14:48,480
Speaker 1: of DCD, coming out of China over the next sort

287
00:14:48,520 --> 00:14:50,200
Speaker 1: a month or so. But but again, I think we're

288
00:14:50,240 --> 00:14:52,440
Speaker 1: being set up for you know, this sort of Santa

289
00:14:52,520 --> 00:14:55,440
Speaker 1: rally into year end. As those concerns sort of fall away,

290
00:14:56,000 --> 00:14:58,600
Speaker 1: we refocus on the growth pace, which I think is

291
00:14:58,600 --> 00:15:01,520
Speaker 1: sort of the stealth catch up just about to re accelerate.

292
00:15:01,600 --> 00:15:04,040
Speaker 1: All this week economic data you've been we've been seeing

293
00:15:04,040 --> 00:15:06,360
Speaker 1: over the last you know, few weeks, all backward looking

294
00:15:06,480 --> 00:15:09,240
Speaker 1: like it was all when US virus cases global virus

295
00:15:09,280 --> 00:15:14,200
Speaker 1: cases were higher than than they are right now. And again,

296
00:15:14,240 --> 00:15:16,680
Speaker 1: I think policies, the policy's support remains in place the

297
00:15:16,840 --> 00:15:18,920
Speaker 1: order a fraction of where they were coming out of

298
00:15:18,920 --> 00:15:21,400
Speaker 1: previous recessions, and that just means that evaluations are going

299
00:15:21,440 --> 00:15:25,240
Speaker 1: to stay high. Ben Laidler still constructive of ETA Global

300
00:15:25,280 --> 00:15:33,880
Speaker 1: market strategists. Can we see a transatlantic linkage here? Any

301
00:15:33,920 --> 00:15:35,960
Speaker 1: whisper of that is what I would listen for joining

302
00:15:36,000 --> 00:15:39,640
Speaker 1: us now on this als RBC Global head of Effect Strategy. Also,

303
00:15:39,720 --> 00:15:41,320
Speaker 1: we've got to talk a lot about what's happening with

304
00:15:41,360 --> 00:15:43,520
Speaker 1: this dollar, a real break out in the past twenty

305
00:15:43,520 --> 00:15:46,320
Speaker 1: four hours. Let me start with this one, though his

306
00:15:46,440 --> 00:15:50,840
Speaker 1: chair power dangerous man from your perspective, I think you

307
00:15:50,920 --> 00:15:53,680
Speaker 1: summed it up well when you said Senator Warren was

308
00:15:53,720 --> 00:15:56,840
Speaker 1: looking for people like you to bite the bait, and

309
00:15:56,920 --> 00:16:01,760
Speaker 1: you did look also at the dollar strength. You are

310
00:16:01,880 --> 00:16:06,040
Speaker 1: truly expert. It's summing it all together, particularly with a

311
00:16:06,120 --> 00:16:10,840
Speaker 1: continental europe perspective. What is the character of this dollar strength.

312
00:16:12,400 --> 00:16:15,080
Speaker 1: That's a really interesting question, Tom, because I think what

313
00:16:15,160 --> 00:16:19,680
Speaker 1: was so unusual about yesterday was the bond and equity

314
00:16:19,920 --> 00:16:22,560
Speaker 1: joints seller. So you know, we're used to being in

315
00:16:22,600 --> 00:16:25,640
Speaker 1: an environment where either bonds are rallying and equities are

316
00:16:25,680 --> 00:16:28,360
Speaker 1: selling off, or vice versa. But when bonds and equities

317
00:16:28,400 --> 00:16:32,040
Speaker 1: are selling off together, historically, that actually means a very

318
00:16:32,120 --> 00:16:35,040
Speaker 1: positive environment for the U s dollar, even against what

319
00:16:35,080 --> 00:16:37,360
Speaker 1: you typically think of as a safe haven like the

320
00:16:37,400 --> 00:16:40,720
Speaker 1: Swiss frant. Well, let's get back to Lignos one oh one.

321
00:16:41,080 --> 00:16:44,560
Speaker 1: Is this gonna be about relative interest rates or is

322
00:16:44,560 --> 00:16:49,720
Speaker 1: it gonna be about flows of capital? You know, both

323
00:16:49,880 --> 00:16:53,120
Speaker 1: clearly matter. When when we think about capital flows, We've

324
00:16:53,160 --> 00:16:55,240
Speaker 1: done a lot of work in the past looking at

325
00:16:55,280 --> 00:16:58,640
Speaker 1: how much money European investors have piled into US equities

326
00:16:58,840 --> 00:17:01,040
Speaker 1: and I was actually just updated in this chance last night,

327
00:17:01,280 --> 00:17:03,840
Speaker 1: and you can see that's increased over the past year.

328
00:17:04,160 --> 00:17:06,400
Speaker 1: So if we do go into an environment where US

329
00:17:06,520 --> 00:17:09,480
Speaker 1: equities were on to perform in relative terms, that would

330
00:17:09,480 --> 00:17:12,199
Speaker 1: potentially create some downside risk for the dollar. If this

331
00:17:12,280 --> 00:17:14,639
Speaker 1: is a global risk of environment, though, or if it's

332
00:17:14,640 --> 00:17:17,479
Speaker 1: a global exty bond seller, that's a far better environment

333
00:17:17,480 --> 00:17:19,240
Speaker 1: for the US dollar. So the capital flows, like you say,

334
00:17:19,240 --> 00:17:21,480
Speaker 1: are really key. What's the pain trade right now? Elsa

335
00:17:21,520 --> 00:17:26,400
Speaker 1: the dollar getting a lot stronger or the dollar materially weakening. Honestly,

336
00:17:26,480 --> 00:17:29,560
Speaker 1: I think you know, people are relatively likely positioned in etfects.

337
00:17:29,600 --> 00:17:31,679
Speaker 1: Probably the biggest pain trade would be a massive increase

338
00:17:31,680 --> 00:17:34,320
Speaker 1: in volatility. Nobody is looking for that now. You know,

339
00:17:34,359 --> 00:17:36,920
Speaker 1: We've seen people try to position for that before and

340
00:17:36,960 --> 00:17:39,760
Speaker 1: it's spailed every time. And so in this environment where

341
00:17:39,760 --> 00:17:42,120
Speaker 1: we just don't really expect anything to happen. What about

342
00:17:42,119 --> 00:17:44,440
Speaker 1: the euro weakness that we've seen, the euro a weakening

343
00:17:44,680 --> 00:17:47,480
Speaker 1: to some of the weaker levels that we've seen in

344
00:17:47,520 --> 00:17:50,280
Speaker 1: about a year. Is this the story or is it

345
00:17:50,320 --> 00:17:54,320
Speaker 1: more a dollar story. It's definitely more of a dollar story.

346
00:17:54,359 --> 00:17:56,840
Speaker 1: I'm really excited to see it happened, because that's been

347
00:17:56,880 --> 00:17:58,720
Speaker 1: our core law year and it was a pretty lonely

348
00:17:58,720 --> 00:18:02,240
Speaker 1: place to be in January. But it's certainly a broader

349
00:18:02,320 --> 00:18:04,840
Speaker 1: US dollar move. It's nothing specific to the ear. In fact,

350
00:18:05,040 --> 00:18:07,040
Speaker 1: if you look at the Euro against how yesterday, it

351
00:18:07,080 --> 00:18:09,359
Speaker 1: was actually a relative out performance. Let's get to that

352
00:18:09,440 --> 00:18:12,160
Speaker 1: sterling story. So if we can bring up sterling into

353
00:18:12,240 --> 00:18:14,639
Speaker 1: day we came very really, really really close to break

354
00:18:14,680 --> 00:18:17,399
Speaker 1: in one thirty five. We've had a hawkish tilt from

355
00:18:17,400 --> 00:18:19,880
Speaker 1: the Bank of England. It's failed to anchor sterling. You've

356
00:18:19,880 --> 00:18:24,080
Speaker 1: got a short on here else, sir? What's going on? Yeah,

357
00:18:24,160 --> 00:18:26,800
Speaker 1: like you said, we've got a short sterling card recommendation

358
00:18:26,840 --> 00:18:29,160
Speaker 1: at the moment. We put it on at the start

359
00:18:29,160 --> 00:18:31,680
Speaker 1: of the week. It's really looking at the upcoming event

360
00:18:31,760 --> 00:18:34,439
Speaker 1: risk in the week ahead. I think what's happening at

361
00:18:34,480 --> 00:18:36,280
Speaker 1: the moment. We had a lot of questions on sterling

362
00:18:36,320 --> 00:18:39,280
Speaker 1: yesterday from clients. People were wondering, is this the Bank

363
00:18:39,280 --> 00:18:41,919
Speaker 1: of England making a policy mistake? Are we beginning to

364
00:18:42,000 --> 00:18:45,000
Speaker 1: price credit risk for the UK? You know, it's very

365
00:18:45,080 --> 00:18:48,120
Speaker 1: unusual to see yields going higher and the currency going lower.

366
00:18:48,160 --> 00:18:50,800
Speaker 1: That's typically more what we see an emerging market. I

367
00:18:50,800 --> 00:18:52,960
Speaker 1: wouldn't try and read too much into the price action

368
00:18:53,000 --> 00:18:55,639
Speaker 1: of a single day, but I do think that the

369
00:18:55,680 --> 00:18:58,320
Speaker 1: Bank of England is very optimistically priced in my view,

370
00:18:58,400 --> 00:18:59,960
Speaker 1: and we should think a bit more as a best

371
00:19:00,080 --> 00:19:02,919
Speaker 1: case scenario in terms of how many hikes we could get,

372
00:19:03,040 --> 00:19:05,600
Speaker 1: rather than a central scenario. So that's really important. You

373
00:19:05,640 --> 00:19:08,239
Speaker 1: pushed back against this idea that we'll have this rate

374
00:19:08,320 --> 00:19:10,760
Speaker 1: path kick in at the Bank Amingland anytime soon? Why

375
00:19:10,880 --> 00:19:14,520
Speaker 1: is that ours? But it's not so much that that

376
00:19:14,560 --> 00:19:17,080
Speaker 1: will won't get hikes at all. It's more that I

377
00:19:17,080 --> 00:19:19,520
Speaker 1: think people are factoring in too many hikes, and the

378
00:19:19,520 --> 00:19:21,920
Speaker 1: Back of England have been fairly clear with us and saying,

379
00:19:22,080 --> 00:19:23,840
Speaker 1: you know, we'll hike a couple of times and then

380
00:19:23,880 --> 00:19:26,560
Speaker 1: we'll pause. And alongside of that you have all sorts

381
00:19:26,560 --> 00:19:28,679
Speaker 1: of supply chain disruptions at the moment here in the

382
00:19:28,800 --> 00:19:32,119
Speaker 1: UK which are creating some inflationary prescious but not the

383
00:19:32,119 --> 00:19:35,280
Speaker 1: type that central Bank would typically respond to. Governor Bailey

384
00:19:35,359 --> 00:19:37,520
Speaker 1: was very clear on that on Monday, and I don't

385
00:19:37,520 --> 00:19:40,000
Speaker 1: think people have necessarily listened to that message and factored

386
00:19:40,000 --> 00:19:42,600
Speaker 1: it into the way they're trading. Sterling's really really important

387
00:19:42,640 --> 00:19:50,119
Speaker 1: comments there at the end, ABC Global head of Fax Strategy,

388
00:19:52,280 --> 00:19:57,040
Speaker 1: this is a joy in exceptionally well timed Inmbassador Hormance

389
00:19:57,119 --> 00:20:00,560
Speaker 1: joins US now Rabbit Hormanes with time and advisers. They're

390
00:20:00,600 --> 00:20:03,199
Speaker 1: managing director, but far more. I needed to finish a

391
00:20:03,240 --> 00:20:06,040
Speaker 1: book strong a million years ago and I finished with

392
00:20:06,160 --> 00:20:11,600
Speaker 1: Robert Hormats talking about expectingly unexpected on Asia, and we

393
00:20:11,680 --> 00:20:14,560
Speaker 1: are thrilled Ambassador Hormats could join us this morning on

394
00:20:14,680 --> 00:20:19,520
Speaker 1: the new unexpected of China. Robert Hormats with President g

395
00:20:20,080 --> 00:20:25,120
Speaker 1: what should we expect? Well, I think we can expect

396
00:20:25,160 --> 00:20:31,320
Speaker 1: a strongly nationalistic China. Uh. He wants to have China

397
00:20:31,520 --> 00:20:35,879
Speaker 1: come back from two centuries where he considered that the

398
00:20:35,920 --> 00:20:39,719
Speaker 1: West had taken advantage of China. China was fragmented internally.

399
00:20:40,359 --> 00:20:43,000
Speaker 1: Now he's trying to pull it together under very strong

400
00:20:43,080 --> 00:20:49,040
Speaker 1: party leadership and exercise enormous international influence. And he sees

401
00:20:49,119 --> 00:20:53,040
Speaker 1: that the US is a tentative in some areas and

402
00:20:53,200 --> 00:20:57,480
Speaker 1: has raised a lot of doubts among allies, although it's

403
00:20:57,480 --> 00:21:00,159
Speaker 1: trying to put those doubts to aside at the moan

404
00:21:00,480 --> 00:21:03,359
Speaker 1: and strengthen itself. But he sees as a chance for

405
00:21:03,520 --> 00:21:07,520
Speaker 1: China to strengthen his position and eat Asia and other

406
00:21:07,560 --> 00:21:09,240
Speaker 1: parts of the world, and he is going to take

407
00:21:09,280 --> 00:21:12,080
Speaker 1: advantage of it. And the party is having its anniversary

408
00:21:12,160 --> 00:21:16,520
Speaker 1: coming up. The Family of the Republic of the Republic

409
00:21:16,560 --> 00:21:21,800
Speaker 1: of China in um in about twenty years, and he

410
00:21:21,880 --> 00:21:25,040
Speaker 1: wants China to the world leader with a new leader

411
00:21:25,080 --> 00:21:29,720
Speaker 1: in Japan today, Ambassador harmats the Okinawa's the islands of

412
00:21:29,800 --> 00:21:32,639
Speaker 1: Jima and the rest that we remember from World War Two,

413
00:21:33,119 --> 00:21:37,840
Speaker 1: they stretched down some hundred and thirty four miles from Taiwan.

414
00:21:38,440 --> 00:21:43,680
Speaker 1: Japan has a vested southern interest in Taiwan. How should

415
00:21:43,680 --> 00:21:51,200
Speaker 1: the US adapt to the calculus of Beijing, Taipei in Tokyo. Well,

416
00:21:51,280 --> 00:21:57,159
Speaker 1: certainly China is interested in increasing its influence throughout the

417
00:21:57,400 --> 00:22:03,760
Speaker 1: entire Western Pacific, and the small islands are the starting point.

418
00:22:04,320 --> 00:22:09,800
Speaker 1: I don't think taking on Chaiwan is while a goal

419
00:22:09,960 --> 00:22:13,760
Speaker 1: of China's, is probably not something that Chinese are going

420
00:22:13,800 --> 00:22:17,040
Speaker 1: to do anytime soon. I think it would be a

421
00:22:17,200 --> 00:22:21,199
Speaker 1: very disruptive factor in the region. But it certainly is

422
00:22:21,240 --> 00:22:25,960
Speaker 1: going to exert its influence all around Asia, and certainly

423
00:22:26,320 --> 00:22:30,000
Speaker 1: it's increasing its naval presence not only in East Asia,

424
00:22:30,040 --> 00:22:33,680
Speaker 1: but in Southeast Asia and in the Indian Ocean and

425
00:22:34,080 --> 00:22:37,200
Speaker 1: other parts of the world. So I think China will

426
00:22:37,240 --> 00:22:42,560
Speaker 1: be restrained on Taiwan, but certainly will be exercising its

427
00:22:42,640 --> 00:22:46,119
Speaker 1: naval influence throughout the entire region. Bob, it seems like

428
00:22:46,160 --> 00:22:48,440
Speaker 1: there's been a material shift or at least a tightening

429
00:22:48,720 --> 00:22:51,159
Speaker 1: in the screws over and tied up Isaianping and the

430
00:22:51,359 --> 00:22:53,560
Speaker 1: entire party. And it seems like there's been a shift

431
00:22:53,640 --> 00:22:56,320
Speaker 1: in the regulations in terms of how hard they're willing

432
00:22:56,359 --> 00:22:58,560
Speaker 1: to crack down on certain sectors. And yet when we

433
00:22:58,720 --> 00:23:02,119
Speaker 1: speak with corporate exactatives, they are so delicate about this.

434
00:23:02,240 --> 00:23:04,200
Speaker 1: They say, we're not going to change our strategy where

435
00:23:04,200 --> 00:23:06,679
Speaker 1: we still see a lot of opportunity. As somebody who

436
00:23:06,720 --> 00:23:09,720
Speaker 1: has operated on all sides of this debate, how do

437
00:23:09,800 --> 00:23:12,679
Speaker 1: you think that corporate executives from the United States are

438
00:23:12,760 --> 00:23:15,240
Speaker 1: viewing what's going on in China with relation to their

439
00:23:15,240 --> 00:23:18,639
Speaker 1: presence there. Well, it's very interesting. I've spent a lot

440
00:23:18,680 --> 00:23:21,240
Speaker 1: of time over the years of President she when he

441
00:23:21,480 --> 00:23:24,560
Speaker 1: was head of Joan Province and then when he was

442
00:23:24,680 --> 00:23:29,879
Speaker 1: vice president, and he he does want foreign investment in

443
00:23:30,200 --> 00:23:34,240
Speaker 1: China and has been advocating that for a substantial period

444
00:23:34,280 --> 00:23:37,879
Speaker 1: of time. On the other hand, he has a couple

445
00:23:37,920 --> 00:23:41,639
Speaker 1: of goals, one of which is to have much stronger

446
00:23:41,800 --> 00:23:47,160
Speaker 1: party control over the Chinese economy. Uh and he's exerting

447
00:23:47,200 --> 00:23:51,880
Speaker 1: it now primarily with big Chinese companies, where in virtually

448
00:23:51,960 --> 00:23:56,680
Speaker 1: every company there is a Communist Party committee at very

449
00:23:56,760 --> 00:23:59,960
Speaker 1: high levels in the company, and it is very employing

450
00:24:00,080 --> 00:24:04,840
Speaker 1: chill in the decisions that the companies make. The second

451
00:24:04,920 --> 00:24:08,720
Speaker 1: thing he wants is much tighter regulation because he sees

452
00:24:08,960 --> 00:24:12,320
Speaker 1: what he calls something he calls it the three red lines.

453
00:24:12,840 --> 00:24:15,800
Speaker 1: He sees a lot of leveraging going on, particularly in

454
00:24:15,880 --> 00:24:18,600
Speaker 1: the real estate area, and we'll probably talk about that

455
00:24:18,680 --> 00:24:22,600
Speaker 1: in a moment, and he wants a much tougher regulatory

456
00:24:22,760 --> 00:24:26,560
Speaker 1: environment for borrowed cricketing real estate. And third, he wants

457
00:24:26,600 --> 00:24:29,600
Speaker 1: a greater degree of equity in the system than the

458
00:24:29,720 --> 00:24:32,520
Speaker 1: notion that some companies and some people do very well

459
00:24:32,600 --> 00:24:36,720
Speaker 1: and others don't. Is important to the to the Communist

460
00:24:36,800 --> 00:24:43,320
Speaker 1: Party's control over the economy, demonstrating that it's dealing with

461
00:24:43,600 --> 00:24:46,680
Speaker 1: middle and lower income people and not just with a

462
00:24:46,840 --> 00:24:50,159
Speaker 1: higher end people. Investador Ormance, I really have to go

463
00:24:50,440 --> 00:24:53,360
Speaker 1: back to what you said originally, the jumping still very

464
00:24:53,440 --> 00:24:56,480
Speaker 1: much wants foreign investment, and yet the message that's being

465
00:24:56,600 --> 00:25:00,159
Speaker 1: sent to the bondholders of evergrand the dollar bondholders is

466
00:25:00,320 --> 00:25:03,240
Speaker 1: very different. How do you dovetail the actions that they're

467
00:25:03,280 --> 00:25:06,879
Speaker 1: taking with international investors with this case, with that drive

468
00:25:07,080 --> 00:25:12,639
Speaker 1: for more international investment. Well, in this particular case, most

469
00:25:12,880 --> 00:25:17,119
Speaker 1: of the bonds and are and most of the exposure

470
00:25:17,840 --> 00:25:22,960
Speaker 1: is Chinese plus um of the money is owed to

471
00:25:23,080 --> 00:25:28,040
Speaker 1: either Chinese bond holders in our rem and b UM

472
00:25:28,560 --> 00:25:33,560
Speaker 1: or two suppliers in China, and therefore the the impact

473
00:25:34,200 --> 00:25:38,040
Speaker 1: on the rest of the world is not directly going

474
00:25:38,119 --> 00:25:41,720
Speaker 1: to be that great. Um And I think that a

475
00:25:41,880 --> 00:25:44,520
Speaker 1: lot of warnings have already gone out that this is

476
00:25:44,760 --> 00:25:47,640
Speaker 1: going something is going to happen. I think they want

477
00:25:47,680 --> 00:25:51,480
Speaker 1: to have an orderly restructuring. The bigger problem really is

478
00:25:51,560 --> 00:25:55,159
Speaker 1: not so much the foreigners here, although it's gotten a

479
00:25:55,200 --> 00:25:59,240
Speaker 1: lot of press, but it is the localities. This company

480
00:25:59,400 --> 00:26:05,760
Speaker 1: has UH projects in UH two hundred venues in China

481
00:26:05,800 --> 00:26:08,840
Speaker 1: in every province, and in many cases a lot of

482
00:26:08,920 --> 00:26:13,639
Speaker 1: people have bought apartments or homes on the basis that

483
00:26:13,720 --> 00:26:16,440
Speaker 1: they'll be built next year the year after that, but

484
00:26:16,520 --> 00:26:19,600
Speaker 1: they put their money down. If this company goes under,

485
00:26:20,240 --> 00:26:23,400
Speaker 1: then a lot of those people will find themselves out

486
00:26:23,440 --> 00:26:25,320
Speaker 1: of a lot of money. So I think they're worried

487
00:26:25,440 --> 00:26:30,919
Speaker 1: more about the social instability in China than than they

488
00:26:31,000 --> 00:26:35,720
Speaker 1: are about foreigners. I don't think foreigners, other than perhaps psychologically,

489
00:26:35,760 --> 00:26:38,000
Speaker 1: are going to take a very big hit here. But

490
00:26:38,119 --> 00:26:40,399
Speaker 1: I think he's also going to make the point that

491
00:26:41,200 --> 00:26:45,840
Speaker 1: the longer run here will be a much better regulated

492
00:26:46,720 --> 00:26:50,639
Speaker 1: Chinese financial market, particularly in real estate real estates about

493
00:26:51,880 --> 00:26:54,800
Speaker 1: of the Chinese economy. If for the real estate market tanks,

494
00:26:55,359 --> 00:26:58,879
Speaker 1: it will slow down the overall economy and hurt foreign

495
00:26:59,560 --> 00:27:02,320
Speaker 1: invest there's in China and Chinese companies. So I think

496
00:27:02,720 --> 00:27:06,200
Speaker 1: he's feeling that if he can regulate the economy in

497
00:27:06,359 --> 00:27:09,520
Speaker 1: a in a responsible way, in a curious sense, the

498
00:27:09,680 --> 00:27:14,840
Speaker 1: prospect of a bubble will diminish and the stability of

499
00:27:14,920 --> 00:27:17,560
Speaker 1: the Chinese economy over the medium term will will increase.

500
00:27:17,640 --> 00:27:21,720
Speaker 1: So I think that's the message that he's providing. But

501
00:27:21,840 --> 00:27:24,800
Speaker 1: also don't forget a lot of companies are still doing

502
00:27:24,920 --> 00:27:27,600
Speaker 1: well in China. A lot of American companies still see

503
00:27:27,960 --> 00:27:30,720
Speaker 1: this as the world's fastest growing market, which it is,

504
00:27:31,400 --> 00:27:33,920
Speaker 1: and they don't want to do anything to upset the

505
00:27:34,000 --> 00:27:36,280
Speaker 1: apple class as long as the authorities letting them do well.

506
00:27:36,400 --> 00:27:38,879
Speaker 1: Bubb And I guess that's the issue coming forward from

507
00:27:38,920 --> 00:27:42,800
Speaker 1: his valuable insight. As always Bob holmats there, Robert holmats

508
00:27:48,240 --> 00:27:52,440
Speaker 1: without question. David Rubinstein's most important interview for the nation

509
00:27:52,680 --> 00:27:55,240
Speaker 1: with Stephen Bryan. Were thrilled to Mr Rubinstein could join

510
00:27:55,320 --> 00:27:58,560
Speaker 1: us right now, nine pm tonight. Uh, we'll see that.

511
00:27:58,680 --> 00:28:03,200
Speaker 1: I'm Bloomberg Television. What a wonderful moment, David Rubinstein. What

512
00:28:03,480 --> 00:28:09,040
Speaker 1: was the surprise of your conversation at the ninety second wife. Well,

513
00:28:09,119 --> 00:28:11,680
Speaker 1: he doesn't seem to be that upset when people ask

514
00:28:11,760 --> 00:28:14,760
Speaker 1: him anymore about when he's gonna retire. I mean, he's

515
00:28:14,840 --> 00:28:16,960
Speaker 1: used to the question by now. I would get tired

516
00:28:17,000 --> 00:28:19,159
Speaker 1: of it because he gets asked all the time. But

517
00:28:19,359 --> 00:28:22,320
Speaker 1: he's basically, uh, you know, used to saying I'll make

518
00:28:22,359 --> 00:28:25,080
Speaker 1: a decision when I'm ready to make the decision. And uh,

519
00:28:25,320 --> 00:28:27,920
Speaker 1: he didn't really indicate to me when he's gonna do it.

520
00:28:28,680 --> 00:28:30,440
Speaker 1: I had my own views on what he's likely to

521
00:28:30,480 --> 00:28:33,359
Speaker 1: do it, but he didn't say specifically when he's going

522
00:28:33,400 --> 00:28:37,000
Speaker 1: to retire. But I would suspect it's probably closer to uh,

523
00:28:37,119 --> 00:28:40,360
Speaker 1: this term than the next term. Maybe, My guests, David Rubinstein,

524
00:28:40,440 --> 00:28:45,560
Speaker 1: you've been a student of the court. How liberal is Bryan? Well,

525
00:28:45,640 --> 00:28:47,680
Speaker 1: he's clearly in the liberal wing. And I would think

526
00:28:47,720 --> 00:28:49,760
Speaker 1: people would say he's now the dean of the liberal wing.

527
00:28:49,840 --> 00:28:52,280
Speaker 1: He's been on the court but twenty eight years UM,

528
00:28:52,360 --> 00:28:55,680
Speaker 1: and I would say probably he and UH Justice Soda

529
00:28:55,720 --> 00:28:58,400
Speaker 1: Mayor and Justice Kagan are the liberal wings such as

530
00:28:58,440 --> 00:29:01,120
Speaker 1: it is left UH at this point. So I would

531
00:29:01,160 --> 00:29:04,000
Speaker 1: say he's He wouldn't consider himself liberal, but I would

532
00:29:04,040 --> 00:29:06,880
Speaker 1: say others would probably say that's the appropriate the description

533
00:29:06,920 --> 00:29:08,959
Speaker 1: of him. But a very impressive person. I've known him

534
00:29:09,000 --> 00:29:11,760
Speaker 1: since I worked on Capitol Hill about forty years ago,

535
00:29:12,400 --> 00:29:15,240
Speaker 1: and he's a very very smart person. And he didn't

536
00:29:15,280 --> 00:29:17,120
Speaker 1: necessarily think he was going to be a justice in

537
00:29:17,160 --> 00:29:19,000
Speaker 1: the Supreme Court. In fact, when he went for the

538
00:29:19,040 --> 00:29:21,160
Speaker 1: first interview, he didn't do that well because he had

539
00:29:21,160 --> 00:29:23,360
Speaker 1: a bike accident, was not doing very well in the

540
00:29:23,400 --> 00:29:26,680
Speaker 1: interview with Bill Clinton. He later got the position after

541
00:29:26,800 --> 00:29:29,200
Speaker 1: Ruth Bader Ginsburg got the first appointment by Bill Clinton.

542
00:29:29,800 --> 00:29:31,640
Speaker 1: David the fact that he gets asked all the time

543
00:29:31,640 --> 00:29:34,000
Speaker 1: when he's going to retire, Given that the eighty three

544
00:29:34,080 --> 00:29:37,360
Speaker 1: highlights the deeply politicized nature of all of these appointments

545
00:29:37,400 --> 00:29:41,720
Speaker 1: and some of the machinations behind what happened with Ruth

546
00:29:41,760 --> 00:29:45,200
Speaker 1: Bader Ginsburg, how much do you think this reflects, in

547
00:29:45,400 --> 00:29:49,360
Speaker 1: his view, a more politicized court than ever before. Well,

548
00:29:49,400 --> 00:29:51,080
Speaker 1: he wrote a book and that was the subject of

549
00:29:51,120 --> 00:29:53,920
Speaker 1: the interview. He's been out giving interviews recently because he

550
00:29:53,960 --> 00:29:56,080
Speaker 1: has a book out that talks about the fact that

551
00:29:56,200 --> 00:29:59,640
Speaker 1: justices are not political. They don't talk about politics, and

552
00:29:59,720 --> 00:30:02,680
Speaker 1: it's a not something they ever consider. However, outside the court,

553
00:30:02,760 --> 00:30:07,080
Speaker 1: we've obviously politicized the confirmation process and most people see

554
00:30:07,160 --> 00:30:10,440
Speaker 1: certain decisions like Bush frie Gore as political. Uh, he

555
00:30:10,560 --> 00:30:13,080
Speaker 1: doesn't agree with that, but there's no doubt that today

556
00:30:13,120 --> 00:30:15,320
Speaker 1: I think the court has seen is more political than

557
00:30:15,560 --> 00:30:18,280
Speaker 1: than it was before. And that's something he's not happy about,

558
00:30:18,520 --> 00:30:20,040
Speaker 1: but it's not much he can really do about it.

559
00:30:20,240 --> 00:30:22,479
Speaker 1: And at least so what's so important here, growing up

560
00:30:22,560 --> 00:30:24,800
Speaker 1: with Jerry Brown and Lawrence Tribe and the rest that

561
00:30:24,920 --> 00:30:28,160
Speaker 1: Brier did is the heritage of the country. You're expert

562
00:30:28,240 --> 00:30:31,840
Speaker 1: on this, working you know it's Chicago and studying in

563
00:30:31,880 --> 00:30:34,600
Speaker 1: the milia of Richard Posner and all. Well, the idea

564
00:30:34,680 --> 00:30:37,720
Speaker 1: here of constitutional law being increasingly politicized as you have

565
00:30:37,880 --> 00:30:40,360
Speaker 1: this core of six justices right now deeply in the

566
00:30:40,400 --> 00:30:44,640
Speaker 1: conservative wing and definitely voting as as a pack when

567
00:30:44,680 --> 00:30:47,280
Speaker 1: it comes to certain things like abortion rights at least

568
00:30:47,400 --> 00:30:50,200
Speaker 1: so far, uh and and and all of these more

569
00:30:50,240 --> 00:30:52,680
Speaker 1: politicized issues. There's a deeper issue, though, David, and as

570
00:30:52,680 --> 00:30:55,760
Speaker 1: an investor, you have deep respect for trying to game

571
00:30:55,880 --> 00:30:59,200
Speaker 1: out how Washington acts and your experience on Capitol Hill.

572
00:30:59,560 --> 00:31:02,720
Speaker 1: Has there ever been more of a sense of unpassable

573
00:31:02,800 --> 00:31:06,440
Speaker 1: gridlock at a time when even the parties are divided

574
00:31:06,560 --> 00:31:10,000
Speaker 1: to such a degree. I've not seen anything like this

575
00:31:10,160 --> 00:31:12,360
Speaker 1: in the last hundred years. Anything I've read about ever

576
00:31:12,360 --> 00:31:14,400
Speaker 1: in the last hundred years. Obviously during the Civil War

577
00:31:14,600 --> 00:31:17,000
Speaker 1: was like this, But now we don't have any sense

578
00:31:17,080 --> 00:31:20,520
Speaker 1: that cooperating is a good thing, and bipartisanship is just

579
00:31:20,640 --> 00:31:23,560
Speaker 1: out the window. You can't even get a bipartisan vote

580
00:31:23,600 --> 00:31:26,680
Speaker 1: to pass the debt limit, for example, anymore. So I'm

581
00:31:26,880 --> 00:31:28,920
Speaker 1: saddened by it. I think most people are as well.

582
00:31:29,520 --> 00:31:32,520
Speaker 1: The Supreme Court is trying to avoid being seen as political,

583
00:31:32,800 --> 00:31:37,560
Speaker 1: but I think many people still see it as somewhat political. Unfortunately, that, David,

584
00:31:37,800 --> 00:31:40,080
Speaker 1: is the grace of the Court gone. When you look

585
00:31:40,120 --> 00:31:45,200
Speaker 1: at the clerk system, the cadence of top students becoming clerks,

586
00:31:45,560 --> 00:31:48,920
Speaker 1: with all that competition and then going on to different

587
00:31:48,960 --> 00:31:54,440
Speaker 1: appointments and judges. Is the grace still there in our judiciary. Well,

588
00:31:54,480 --> 00:31:57,640
Speaker 1: it's still a great honor. Each Justice gets four clerks

589
00:31:57,680 --> 00:31:59,560
Speaker 1: and it's a big honor to be one of those clerks.

590
00:32:00,000 --> 00:32:01,640
Speaker 1: I should point out that my law school this year

591
00:32:01,680 --> 00:32:03,680
Speaker 1: has nine clerks, which is the most they've ever had,

592
00:32:04,040 --> 00:32:06,280
Speaker 1: and so we're very pleased with that. But these are

593
00:32:06,320 --> 00:32:09,160
Speaker 1: the leading students in the country and many of them

594
00:32:09,200 --> 00:32:12,320
Speaker 1: do become Justice of the Supreme Court themselves. Justice Brier

595
00:32:12,480 --> 00:32:15,200
Speaker 1: was a clerk for Justice Goldberg, so many of these

596
00:32:15,240 --> 00:32:17,480
Speaker 1: people do come back. And Justice Roberts was a clerk

597
00:32:17,520 --> 00:32:19,360
Speaker 1: as well in the court. So you've seen many of

598
00:32:19,400 --> 00:32:22,880
Speaker 1: these justices coming back having been clerks in the court before.

599
00:32:23,080 --> 00:32:25,720
Speaker 1: These are very very smart people, UM. And I do

600
00:32:25,960 --> 00:32:28,720
Speaker 1: want to point out that the Court, while it's seen

601
00:32:28,840 --> 00:32:32,200
Speaker 1: us some political by by by many people, UM, is

602
00:32:32,280 --> 00:32:35,320
Speaker 1: still probably the most respected of the three branches of government.

603
00:32:35,720 --> 00:32:38,560
Speaker 1: And I think it increasingly people say, well, what the

604
00:32:38,600 --> 00:32:40,840
Speaker 1: court says is that's the law of the land. In

605
00:32:40,960 --> 00:32:43,520
Speaker 1: other countries, uh, it's not necessarily the case. And when

606
00:32:43,560 --> 00:32:46,120
Speaker 1: the when their top court says something, people obey it.

607
00:32:46,440 --> 00:32:49,360
Speaker 1: But here, when people say the Supreme Court says something,

608
00:32:49,400 --> 00:32:51,680
Speaker 1: even it's five to four, we do recognize that's the

609
00:32:51,760 --> 00:32:53,480
Speaker 1: law of the land, and the rule of law is

610
00:32:53,640 --> 00:32:55,920
Speaker 1: very important to this country. So I do think the Court,

611
00:32:56,000 --> 00:32:59,120
Speaker 1: while it's unfortunately seen its political for reasons beyond its control,

612
00:32:59,480 --> 00:33:02,720
Speaker 1: is still more respected honestly than the executive branch or

613
00:33:02,760 --> 00:33:05,440
Speaker 1: the legislative branch. To that point, David, aside from the

614
00:33:05,480 --> 00:33:08,880
Speaker 1: big polemics of the day, how much consensus is there

615
00:33:09,000 --> 00:33:11,160
Speaker 1: on the court? Basically, how many cases do we see

616
00:33:11,200 --> 00:33:14,320
Speaker 1: that are eight to one or even unanimous? Uh? That

617
00:33:14,520 --> 00:33:16,480
Speaker 1: that really go to the heart of of how we

618
00:33:16,640 --> 00:33:19,840
Speaker 1: rule here in the United States. UM. A few years ago,

619
00:33:19,960 --> 00:33:22,360
Speaker 1: the Court used to do twenty cases or so a year.

620
00:33:22,480 --> 00:33:24,400
Speaker 1: Now they're down to about seventy five case of the

621
00:33:24,480 --> 00:33:27,200
Speaker 1: year for lots of technical reasons. I would say probably

622
00:33:27,240 --> 00:33:29,280
Speaker 1: half of them are unanimous. They don't get any attention,

623
00:33:29,560 --> 00:33:33,160
Speaker 1: but they're relatively on exciting bankruptcy cases or other kinds

624
00:33:33,200 --> 00:33:36,120
Speaker 1: of things. Uh. The cases that are five to four

625
00:33:36,240 --> 00:33:39,360
Speaker 1: probably about I would say about the cases or five

626
00:33:39,440 --> 00:33:41,640
Speaker 1: to four or the equivalent of five to four, So

627
00:33:41,960 --> 00:33:44,320
Speaker 1: that that that's when you get most the attention. And

628
00:33:44,400 --> 00:33:47,080
Speaker 1: then Obviously there's only things like abortion, or redistricting or

629
00:33:47,480 --> 00:33:49,800
Speaker 1: or voting rights or things like that, but on most

630
00:33:50,680 --> 00:33:53,440
Speaker 1: cases they're generally fairly straightforward in terms of the law.

631
00:33:53,720 --> 00:33:56,680
Speaker 1: In most cases honestly are or if not unanimous, close

632
00:33:56,720 --> 00:34:00,040
Speaker 1: to being unanimous. David, congratulations on this interview. Did the

633
00:34:00,160 --> 00:34:03,680
Speaker 1: Rubinstein host apear to your conversations with Justice prior? Look

634
00:34:03,720 --> 00:34:06,080
Speaker 1: for that tonight nine pm. Of course with the Carlisle

635
00:34:06,120 --> 00:34:10,839
Speaker 1: Group as well. This is the Bloomberg Surveillance Podcast. Thanks

636
00:34:10,920 --> 00:34:14,239
Speaker 1: for listening. Join us live weekdays from seven to ten

637
00:34:14,280 --> 00:34:18,719
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each

638
00:34:18,840 --> 00:34:22,560
Speaker 1: day from six to nine am for insight from the

639
00:34:22,600 --> 00:34:27,799
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

640
00:34:27,840 --> 00:34:32,719
Speaker 1: to the Surveillance podcast on Apple, podcast, SoundCloud, Bloomberg dot com,

641
00:34:32,880 --> 00:34:36,120
Speaker 1: and of course on the terminal. I'm Tom Keene and

642
00:34:36,239 --> 00:34:38,080
Speaker 1: this is Bloomberg