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Speaker 1: This is Bloomberg Surveillance. Brexit really is a structural issue,

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Speaker 1: and that is of Britain does leave the EU, what

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Speaker 1: sort of events will that triggered? In the Philips croup,

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Speaker 1: you have an infliction point, and the infection point is

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Speaker 1: when you hit employment. The market's going to be of

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Speaker 1: all adult the fed raisers rates because the majority of

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Speaker 1: investors out there, quite frankly, haven't been through a regular

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Speaker 1: cycle and because of that, they're gonna be reactive and

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Speaker 1: probably sell stocks. Bloomberg Surveillance your link to the world

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Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning everyone,

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Speaker 1: Michael McKee and Tom Keane Bloomberg Surveillance. From our world

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Speaker 1: headquarters in New York, we say good morning to all

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Speaker 1: of you worldwide. Ian Bremer will join us here in

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Speaker 1: a moment with your raise your group looking forward to

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Speaker 1: a discussion on the American politics and the ramifications of

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Speaker 1: our international policy. Are international relations. Bloomberg Surveillance This morning

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Speaker 1: brought you by Investco. Looking for investment views. Experienced experts

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Speaker 1: are just to click away. Go to investco dot com

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Speaker 1: slash us to subscribe to the investco blog and follow

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Speaker 1: at investo us out on Twitter, a churn to the markets.

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Speaker 1: Fort Exchange speaks volumes with some curve flattening earlier this morning.

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Speaker 1: We're back to normal there, oil dashing. We're almost a

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Speaker 1: fifty dollars of barrel on Brent crude forty on Brent,

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Speaker 1: a little lower West Texas intermediate five. And I showed

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Speaker 1: dollar strength with yen one on ninety four and the

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Speaker 1: euro was at one thirteen now one twelve seventy two,

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Speaker 1: a weeker euro this morning. There are always too many

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Speaker 1: things to talk about with Ian Bremer, and I guess

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Speaker 1: it's wonderful to do this on a moment where the

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Speaker 1: Queen is speaking all the pageantry and parliament, and I

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Speaker 1: believe she's wearing a crown that goes back to Queen

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Speaker 1: Victoria eighteen thirty eight. Henry Kissinger talks about a Westphalian world,

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Speaker 1: which is a nineteenth century world, is classic book diplomacy,

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Speaker 1: and all that is that just from a bygone He

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Speaker 1: right now is the queen speaking to institutions that have

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Speaker 1: to move on to something new, but to degree she is,

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Speaker 1: you know, I would say your Asia group, we probably

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Speaker 1: spend about percent of our time right now still talking

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Speaker 1: about Central governments, states and the impact they from our

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Speaker 1: constructional world. And I think that in five years time

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Speaker 1: that number is probably going to be and in the

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Speaker 1: Middle East that number might be. We're gonna be talking

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Speaker 1: fundamentally about different actors that are going to be more

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Speaker 1: important in these spaces. Some of them will be sub

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Speaker 1: national regional actors, will be governors, some of be religious leaders,

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Speaker 1: some of them will be CEO, some will be terrorist leaders.

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Speaker 1: They will be playing I mean, states are failing across

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Speaker 1: the Middle East, and it's not as if they're gonna

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Speaker 1: come back after we intervene. I mean, Syria and Iraq

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Speaker 1: are fictional concepts in the twenty one century, they no

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Speaker 1: longer exist, and virtual borders and virtual communities are arising

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Speaker 1: with the help of technology that are much more power

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Speaker 1: because you will eight ways to go here. Let's rip

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Speaker 1: up the script, Sykes Peco, I believe in the anniversary

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Speaker 1: a few days just turned a hundred. That's it's charming

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Speaker 1: and tragic. When you look at the scenes of Syria,

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Speaker 1: or you look at the scenes here there or everywhere,

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Speaker 1: are those borders forever gone? You know? The cultural revolution

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Speaker 1: yesterday just turned fifty and if you asked me which

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Speaker 1: of the two probably has more durability. I'd focus on China. Uh,

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Speaker 1: And it's it's the right question to ask. The Psykes

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Speaker 1: peaklem and we we set up these borders and they

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Speaker 1: worked for a time. They were frozen instability in the

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Speaker 1: same way that the Soviet Union was in the case

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Speaker 1: of the Middle East. It was because they had security

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Speaker 1: support from the U S and the Europeans, because they

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Speaker 1: had a lot of money that came right out of

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Speaker 1: the ground, and because their populations were pretty quiescent despite

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Speaker 1: the fact that they were badly governed. All three of

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Speaker 1: those things don't exist anymore. And so of course that

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Speaker 1: means that the borders aren't going to make a lot

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Speaker 1: of sense. And the ability of these governments, even countries

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Speaker 1: like Saudi Arabia, to maintain true control of populations just

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Speaker 1: as not ledge. And then how does Americas show the flag?

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Speaker 1: It speaks to Senator Sanders and Mr Trump a new

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Speaker 1: definition of how we show the flag. We used to

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Speaker 1: do it with military projection, like we're doing with the

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Speaker 1: Chinese in uh to the west of the Philippines right now.

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Speaker 1: But how do we show the flag in the new

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Speaker 1: Ian Bremmer world. It's a smaller flag, we wave it

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Speaker 1: a little bit less vigorously, and we wave it with

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Speaker 1: larger numbers of players. I mean, the Iranian deal is

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Speaker 1: the breakthrough that the Americans have had over the course

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Speaker 1: of the last seven years that not only brings oil

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Speaker 1: prices down, so it allows the Americans to care less

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Speaker 1: about the Middle East, but it also hedges the US

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Speaker 1: in terms of relationships with different countries in the region,

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Speaker 1: which allows the Americans to care less about the Middle East.

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Speaker 1: Getting the theme here, I mean, the fact is that

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Speaker 1: the Middle East is broken. Could could could the Irani deal?

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Speaker 1: I'm gonna soul it would occur under President Hillary Clinton.

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Speaker 1: Could occur under President Trump. Uh No, probably not, because

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Speaker 1: I don't think Trump would have had the fortitude to

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Speaker 1: stick with some thing for such a time because he

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Speaker 1: gets bored, right, he just moves on with different issues. Now,

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Speaker 1: let's see who is sex status. And I thought it

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Speaker 1: was very interesting that John Huntsman, a good friend, came

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Speaker 1: out in favor of Trump a few weeks ago, so early, right,

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Speaker 1: he didn't have to do that, and clearly I can't

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Speaker 1: see him doing that unless he's thinking, well, I could

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Speaker 1: be Secretary of State and the Trump administration. I can't

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Speaker 1: under Hillary that line is tend deep. Um, you know,

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Speaker 1: I mean, depending on who his cabinet is. There plenty

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Speaker 1: of Republican politicians that will line up to be a

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Speaker 1: part of a Trump administration. If Trump says, you know what,

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Speaker 1: I don't feel like dealing with this, you do it.

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Speaker 1: Then there are a lot of things that are feasible

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Speaker 1: in a Trump administration. I remember with us, with you

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Speaker 1: raise your group. As we consider our international relations, I

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Speaker 1: think to keep it domestically here and we'll talk about

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Speaker 1: a lot of other things through this half Our is

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Speaker 1: do we have a Clinton foreign policy and what is

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Speaker 1: the distinction of it versus the Obama foreign policy? Yeah,

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Speaker 1: we do have one. Um. I mean I think it's

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Speaker 1: not just that simplest because she's also is more committed

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Speaker 1: to traditional American alliances. I think that means across Asia.

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Speaker 1: I think that means the Gulf States as well, it

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Speaker 1: means Israel. I mean, she just about any leader you

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Speaker 1: talked to in the world, leave aside Putin, leave aside

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Speaker 1: Kim Jong un, who probably likes Trump now that Trump

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Speaker 1: says he'd go and talk to him directly about his nukes,

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Speaker 1: but every other one is comfortable with the idea of

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Speaker 1: Hillary Clinton as the next president. You don't have the

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Speaker 1: negativity that you do. Inside the United States. She's been

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Speaker 1: on the scene for a long time. She's seen as

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Speaker 1: a trust in, a competent pair of hands, people like

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Speaker 1: Jake Sullivan as or National Security Advisor Bill Burns is

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Speaker 1: a probably Secretary of State, um My Michelle Flournoy in defense,

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Speaker 1: um Leo Brainerd and Treasury. I mean, these are old,

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Speaker 1: competent hands, like a lot of with biggest role indexes

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Speaker 1: Obama just right now you look at the Obama White House,

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Speaker 1: they do not have that. As soon as he was

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Speaker 1: the first one who's really begin to bring out names.

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Speaker 1: If you're just joining US, Ian Bremer with US with

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Speaker 1: E raise your group. He celebrates a new member of

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Speaker 1: his team Callum and Henderson helping out in Asia on markets. Uh,

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Speaker 1: Michael McKee, it's always important to talk to Ian about

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Speaker 1: the squirrel stuff. Michael, what's front center for you this morning? Well,

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Speaker 1: you know, we have the FED Minutes this afternoon. It's

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Speaker 1: getting a lot of attention in the markets, and it

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Speaker 1: kind of raises the question Ian of uh, these political

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Speaker 1: candidates fed policy. I know Hillary Clinton hasn't said a

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Speaker 1: whole lot about him. But Trump has uh not only

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Speaker 1: suggested that uh he would replace Janet yelling, but that

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Speaker 1: he might put at risk the full faith and credit

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Speaker 1: of the United States. Given his pronouncements and given his

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Speaker 1: inability to to, you know, stick to one policy or another.

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Speaker 1: How much of a threat is that to the U S?

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Speaker 1: How seriously do people overseas take his talk about the

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Speaker 1: possibility of default and things like that. They take it

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Speaker 1: slightly more seriously than we do, um, because they're not

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Speaker 1: used to this type of of rhetoric coming out of

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Speaker 1: the United States. UM. And I would say that in

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Speaker 1: Europe and in Japan, you have people to hear his

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Speaker 1: pronouncements on the international environment and do get a little

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Speaker 1: bit skittish. Though again I would say the majority expect

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Speaker 1: kind of business as usual from a country as large

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Speaker 1: as the United States that's also as difficult to move um.

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Speaker 1: But within the United States itself, I mean, I the

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Speaker 1: the number of things that Trump says which are either unworkable, unconstitutional,

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Speaker 1: profoundly stupid, or a combination of all three, I don't

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Speaker 1: have enough fingers on my smallish hands to count them,

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Speaker 1: um and and I don't think we should take them

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Speaker 1: very seriously, in the same way that when people were

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Speaker 1: concerned about default and debt Macgeddon in the United States

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Speaker 1: that we never should have taken it very seriously. You know,

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Speaker 1: this is a guy that will say anything humanly possible

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Speaker 1: to win, and that's fine. It works for his base.

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Speaker 1: It is not clear that it works for those that

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Speaker 1: are outside of of of the of the really passionate

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Speaker 1: uh Trump Trump voter group. Now, I do think that

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Speaker 1: if if he's able to get enormous turn out and

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Speaker 1: if Hillary is not, life can get much more interesting

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Speaker 1: and much closer. But for right now, the polls show

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Speaker 1: them pretty dramatically apart. Yeah, just quickly. Um. There's been

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Speaker 1: a lot of talk among Republicans who have come crawling

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Speaker 1: to Donald Trump in recent weeks that well, we can

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Speaker 1: change him. And there are others who say checks and

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Speaker 1: balances in the United States will keep him from doing

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Speaker 1: too much harm. How much truth is there in either

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Speaker 1: of those statements, Um, we can change him. That's probably

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Speaker 1: not much truth in it. We can get a job

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Speaker 1: in a Trump administration where we can do well by

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Speaker 1: ourselves and then we have some governance and voice. I

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Speaker 1: think that is true. And you know, let's keep in

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Speaker 1: mind that Obama, who did represent a pretty radical departure,

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Speaker 1: certainly from President Bush, but also from the last several

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Speaker 1: presidents the U S had, is the first term senator,

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Speaker 1: first black president, um, you know, and obviously very socially

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Speaker 1: liberal on a whole you know, a wealth of issues.

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Speaker 1: But how much was Obama actually able to change policy?

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Speaker 1: Now you have someone with Trump that would have a

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Speaker 1: significantly greater difficulty, both in terms of his lack of

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Speaker 1: acumen and how Washington works, as well as the acrimony

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Speaker 1: among people in his own party. You think he's gonna

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Speaker 1: accomplish more than the limited amount of Obama was. That's

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Speaker 1: just ludicrous. But to be clear, Michael, Mr Dr Bremer

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Speaker 1: suggests Mr Trump doesn't have a chance of winning. All right, Well,

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Speaker 1: we'll come back and talk. Speaking of chance of winning,

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Speaker 1: we gotta talk about Brexit. We'll come back with Ian Bremer.

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Speaker 1: In just a moment from the Eurasia Group. I mentioned

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Speaker 1: the Fed today, the two year note yield trading at

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Speaker 1: eighty four basis points. If they raised rates, the top

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Speaker 1: end of the range would be seventy five. So the

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Speaker 1: two year maybe beginning to price in to move the

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Speaker 1: minutes out. At two o'clock this afternoon, I'll be there.

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Speaker 1: Listen here on Bloomberg Radio. This hour of Surveillance brought

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Speaker 1: to you you by Volvo Cars, White Planes. Visit Volvo Cars,

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Speaker 1: White Planes dot Com. Here's Michael Barr with the latest

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Speaker 1: world national headline. Mike Tom, thank you very much. Hillary

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Speaker 1: Clinton has claiming victory and the Kentucky primary, even though

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Speaker 1: the vote is still very close or Democratic rival Bernie

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Speaker 1: Sanders won Oregon. A wildfire that has burned for more

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Speaker 1: than two weeks in Alberta, Canada has circled back north

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Speaker 1: of the town of Fort McMurray. It has delayed plans

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Speaker 1: to bring back more than a million barrels a day

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Speaker 1: of lost production in Canada's oil sands. The international rights

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Speaker 1: group Human Rights Watch says atrocities by Libya's Islamic state

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Speaker 1: affiliate have included crucifixions and shooting a man to death

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Speaker 1: for cursing God. Human Rights Watch released a report today

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Speaker 1: documenting scenes of horror that followed the militants seizure of

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Speaker 1: the Libyan city of Seert in February of last year.

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Speaker 1: The report says men were flogged for acts such as

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Speaker 1: smoking or listening to music. Global News twenty four hours

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Speaker 1: a day, powered by our journalists. I'm Michael Barn, Mike Tom,

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Speaker 1: Thank you Michael. Well the two years no yield is higher,

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Speaker 1: but futures are flat. SMP features unchanged now futures down six.

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Speaker 1: That's how S and C drives the future of fund administration.

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Speaker 1: S and C the future of fund administration. Global Business

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Speaker 1: News twenty four hours a day at Bloomberg dot com,

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Speaker 1: the Radio, plus mobil and on your radio. This is

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Speaker 1: a Bloomberg Business Flash and I'm Carra in Moscow. This

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Speaker 1: updates brought to you by c g M, a chartered

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Speaker 1: program deliver critical skills your finance team needs to succeed.

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Speaker 1: Learn more at c g M a dot org slash radio.

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Speaker 1: You want to stock index futures that'll change. This morning

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Speaker 1: is investors away minutes from the latest Federal Reserve meeting

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Speaker 1: for cues on the trajectory of interest rates. This after

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Speaker 1: recent data field speculation of a hike as early as June.

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Speaker 1: We checked the markets every fifteen minute. It's about the

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Speaker 1: trading day on Bloomberg again, futures that will change. Dax

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Speaker 1: in Germany down about two tenths per cent. So's the

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Speaker 1: cat in Paris FT one hundred down four tenths per cent.

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Speaker 1: Ten Your treasury down three thirty seconds, the yield one

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Speaker 1: point seven eight percent. No, i'm x scrud oil at

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Speaker 1: four ten per cent or twenty cents to forty fifty

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Speaker 1: one a barrel, comex school down a tenth of upper

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Speaker 1: cent or a dollar forty to announced the euro a

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Speaker 1: dollar twelve eighty three. The end one oh nine point

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Speaker 1: three four. That's a Bloomberg business flash. Tom and Mike Karen,

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Speaker 1: thank you so much. Michael. I believe it's the Diamond

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Speaker 1: Jubilee State Coach. I may be wrong, but that was

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Speaker 1: the six horse drawn carriage that the Queen used on

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Speaker 1: her eightieth birthday. I think maybe that's the carriage they

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Speaker 1: used today. That's part of the royal collection. Ian Bremer

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Speaker 1: came up Lexington Avenue today in the surveillance coach. That's

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Speaker 1: the one with the mice. The mice twelve mice pulling it.

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Speaker 1: This morning's glass slipper fell off up in the food court. Yeah,

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Speaker 1: well it is, uh. I mean for the markets, it's

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Speaker 1: all about at this point Brexit. Even for the Fed,

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Speaker 1: it's about Brexit and whether or not it goes ahead.

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Speaker 1: You saw a huge reaction in the currency markets this morning,

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Speaker 1: the British pound soaring after a poll came out that

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Speaker 1: showed the stay side remain in EU side with a

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Speaker 1: fifty five to thirty seven percent Leave. What's your gut

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Speaker 1: feeling about how it's going to go, uh, and whether

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Speaker 1: or not it's going to be close enough to affect

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Speaker 1: markets by the time we get to June. Because it's easy,

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Speaker 1: um to to say I think they're going to stay,

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Speaker 1: because the uncertainty tends to play in favor of that,

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Speaker 1: as it did in Scotland, as it has in Quebec,

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Speaker 1: as it has in many of these issues. But Cameron

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Speaker 1: has not done a great job making the economic argument

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Speaker 1: convinsing and europe An attachment to Europe looks worse and

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Speaker 1: worse every single day. It's there's a security issue that

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Speaker 1: the Brits feel, whether or not it's real, they feel it. Um.

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Speaker 1: The refugee crisis is not going away, reliance in Germany

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Speaker 1: on countries like Greece and Turkey, which are the last

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Speaker 1: countries in Europe you want to rely on to get

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Speaker 1: deals done. Um. Those things all make saying let's stick

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Speaker 1: with these guys um a pretty damp squib um. And

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Speaker 1: so I think that the passion and the turnout is

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Speaker 1: going to be for the Brexit vote. Also, of course,

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Speaker 1: the English don't want to stay in the Scots Northern Ireland,

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Speaker 1: the Welsh they do. So Britain is already an enormously

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Speaker 1: divided country. Uh. You know, I think there's a decent

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Speaker 1: chance if turnout ends up being low, you could end

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Speaker 1: up with the Brits out. And the problem is that

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Speaker 1: this isn't over that if they vote to leave, UM,

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Speaker 1: you're immediately going to have a call from Boris Johnson

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Speaker 1: and others to have another vote. But that other vote

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Speaker 1: will be UM with a new EU deal UM that

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Speaker 1: the Europeans may or may not be willing to countenance.

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Speaker 1: And they want the exactly and if they stay in UM,

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Speaker 1: it's not as if this is the only referendum we're

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Speaker 1: going to see from the Brits. The issues or will continue,

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Speaker 1: the concerns will continue, So Europe is Europe is not

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Speaker 1: in a sustainable place right now. Um and and the markets,

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Speaker 1: even if it turns out that the markets get a

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Speaker 1: little bit more comfortable depending on where the polls are

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Speaker 1: when we get to June twenty two, UM, I don't

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Speaker 1: think that the Brits will be out of the woods

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Speaker 1: in either circumstance on this issue is uncoing to marcal

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Speaker 1: Sort in the position of being the little chancellor with

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Speaker 1: her finger in the dike, where she's trying to plug

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Speaker 1: holes constantly and nobody can actually step back and say

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Speaker 1: how do we fix this? In a macro sense. She

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Speaker 1: has to focus more on her domestic politics. She has

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Speaker 1: real opposition now um on the refugee issues, she has

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Speaker 1: real opposition on a STRONGERU. Populism is growing in Germany absolutely,

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Speaker 1: and while there's no threat that you're going to have

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Speaker 1: a National Front type government in Germany, you couldn't get

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Speaker 1: those numbers. Uh. Mercle does feel like she has to

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Speaker 1: play more to a populist domestic platform um And and that,

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Speaker 1: of course, given that she has been the leader for

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Speaker 1: Europe since the two thousand and eight financial crisis, that

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Speaker 1: makes all of these things more in play and weaker,

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Speaker 1: and I'm gonna respectfully suggest it's my cluelessness about migrants

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Speaker 1: and refugees. The issue is not dropped off the radar.

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Speaker 1: Is there give us an update on the dynamics of

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Speaker 1: the migrant refugee crisis in Europe? Sure? Um? Well, Uh,

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Speaker 1: the Syria war, we had an anminal ceasefire, though it

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Speaker 1: excluded of course Isis and al Nustra in Syria. It's

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Speaker 1: now unwinding to the extent that the Americans are talking

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Speaker 1: about air drop of humanitarian support UM in Aleppo, which

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Speaker 1: is massively, incredibly expensive and also very inaccurate. Um, the

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Speaker 1: Syria war will persist. Is more refugees will come for

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Speaker 1: the time being. The Turk Service, you know, basically standing

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Speaker 1: up to better security with the two and a half

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Speaker 1: million refugees they have in that country. But that's not

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Speaker 1: going to persist. So I think that the refugee numbers

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Speaker 1: will start going up into mainstream Europe. It's going to

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Speaker 1: create another Greek crisis over the coming months. And the

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Speaker 1: real question will be, um, does that then spill over

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Speaker 1: across into continental mainline continental Europe? And I think the

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Speaker 1: answer is no, over time, It's not the Shangan, the

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Speaker 1: Shangan agreement on freedom of transit will be dead is

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Speaker 1: that it will only work in core Europe where they

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Speaker 1: are defending their borders, in places like France and Germany

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Speaker 1: and the Netherlands and in Southeast Europe. Um, it won't

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Speaker 1: hold um, and you'll end up with a very big

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Speaker 1: distinction between the core and periphery economically and grammar. Thanks

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Speaker 1: for coming in this morning. Um come, it's uh. It

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Speaker 1: is going to be a most interesting the rest of

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Speaker 1: the year. Yeah, I agree with that. On a Sterling

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Speaker 1: move that might mentioned, I'm just putting out on Bloomberg

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Speaker 1: Radio plus. Uh that Sterling move placed in the context

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Speaker 1: of two standard deviations, it's actually an extremely elegant technical

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Speaker 1: bounce off any number of levels of support towards a

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Speaker 1: stronger Sterling weaker uh dollar uh, but nowhere near is

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Speaker 1: an excessive excessive right now, an excessive move on Sterling,

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Speaker 1: just as one interpretation would be a one forties six

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Speaker 1: fifty and we're a solid big figure away from that. Michael.

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Speaker 1: We've moved up stronger Sterling, but need quite a move

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Speaker 1: to go to really break out into new strong Sterling territories.

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Speaker 1: I leave it that well, that move sterling has not

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Speaker 1: excited equity investors. The foot Sea's down twenty point four

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Speaker 1: tens of pcent. Michael McKay, Tom King worldwide, Coast to coast,

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Speaker 1: Bloomberg twelve hunt in Boston, Day Washington. This is Bloomberg Surveillance.

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Speaker 1: Bloomberg Surveillance is brought to by Fordham University the Gabelli

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