WEBVTT - Macron Is a Modern Monarch, Fenby Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.960 local communities, economies and a sustainable future. That's a power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:26.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.440 --> 0:00:29.920 I'm Tom Keene with David Gura. Daily we bring you 0:00:29.960 --> 0:00:34.800 insight from the best of economics, finance, investment, and international relations. 0:00:35.240 --> 0:00:40.760 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:40.800 --> 0:00:48.560 and of course on the Bloomberg. This is a real joy, 0:00:48.720 --> 0:00:50.600 really a high point that we planned for this trip. 0:00:50.640 --> 0:00:53.880 A conversation with Sir Howard Davies of RBS and of 0:00:53.920 --> 0:00:57.520 course formerly in Seance PO and LC and Jonathan Fenby 0:00:57.560 --> 0:00:59.880 of T S. Lombard and of course Sir Howard and 0:00:59.880 --> 0:01:03.920 I celebrate his wonderful one volume on Francis. Mr McCraw 0:01:04.040 --> 0:01:07.160 mentioned in your book only briefly at the end, and 0:01:07.200 --> 0:01:08.720 I'm afraid but I hope there'll be a new edition 0:01:08.720 --> 0:01:12.920 out before afterward. Fair enough, he's only just come onto 0:01:12.920 --> 0:01:16.160 the politics got any rapid form? What did you think 0:01:16.319 --> 0:01:19.520 of the lou of celebration and that long walk It 0:01:19.800 --> 0:01:22.760 wasn't something I would think John Fenne would approve. Oh 0:01:23.080 --> 0:01:24.959 I did. I thought it was tremendous. I sat there 0:01:24.959 --> 0:01:27.160 watching it on television and I thought, hey, you know 0:01:27.200 --> 0:01:29.399 this guy, he's got the drama right. Whoever? Come on? 0:01:29.480 --> 0:01:32.400 He's walking in the palace, the palace of the sixteenth 0:01:32.400 --> 0:01:35.640 century kings, which you touched on early in your book. 0:01:35.720 --> 0:01:38.080 Was there a symbolism there of a museum that we 0:01:38.120 --> 0:01:40.640 all go to? Or is it the symbolism or royalty 0:01:40.720 --> 0:01:43.440 from another time and place. He's a kind of modern monarch, 0:01:43.520 --> 0:01:44.760 I think, And he was playing that and it was 0:01:44.760 --> 0:01:47.920 wonderful if you looked at it. When the replays the shadow, 0:01:48.080 --> 0:01:50.480 his shadow falling behind on the gateway as he came 0:01:50.520 --> 0:01:54.040 through was absolutely out of a first rate film. He 0:01:54.080 --> 0:01:56.280 was looking towards the carouselo as well. I can you 0:01:56.280 --> 0:02:01.240 think about kind of Napoleon and you know it phoneography 0:02:02.960 --> 0:02:06.640 when you think about what happens next. We heard it 0:02:06.680 --> 0:02:10.000 described earlier as a as a four parts store. Absolutely, 0:02:10.240 --> 0:02:12.720 and we're through two of them too, are still to come? 0:02:14.560 --> 0:02:17.000 Is the easy bit over for Mr Macrol? Does I 0:02:17.080 --> 0:02:19.639 get harder from here? I think in retrospect, yes, I 0:02:19.639 --> 0:02:22.240 mean it's not never easy to win the presidency of France, 0:02:22.360 --> 0:02:24.400 but he had such a lot of luck with the 0:02:24.600 --> 0:02:26.800 or and other people, with the socialist splitting and so on. 0:02:26.840 --> 0:02:29.000 I mean, you know this was handed to him on 0:02:29.040 --> 0:02:31.160 a silver plate, and anybody up against the Penn in 0:02:31.160 --> 0:02:34.120 the second round was going to win. So yes, but 0:02:34.200 --> 0:02:37.120 actually there's probably five more acts to come. That are 0:02:37.120 --> 0:02:39.919 the two rounds of the parliamentary election on June the 0:02:39.919 --> 0:02:42.799 eleventh and June, and then I would guess there will 0:02:42.840 --> 0:02:46.480 be a lot of street theater after that, from the 0:02:46.520 --> 0:02:50.120 hard left to menon sean people with Lapen approving. So 0:02:50.160 --> 0:02:53.000 we're probably into a long running saga. What kind of 0:02:53.040 --> 0:02:55.040 a person? And I mean to get both your take 0:02:55.080 --> 0:02:58.799 on this, does he need to appoint as prime minister? Howard? Well, 0:02:58.840 --> 0:03:00.880 I think it depends on what kind of majority there 0:03:00.960 --> 0:03:04.920 is in parliament. I mean, if there are them before Well, 0:03:05.400 --> 0:03:07.000 I think that there will be an interim there's a 0:03:07.040 --> 0:03:10.720 short term prime minister. Yes, I think that might stay 0:03:10.720 --> 0:03:13.639 on if the unexpected happens and all marsh his party 0:03:13.919 --> 0:03:17.280 gets a majority or close to a working majority in 0:03:17.320 --> 0:03:20.359 the parliamentary election. Sir Howard, I I analyze everything through 0:03:20.440 --> 0:03:23.920 uber drivers. I was going orally into the hotel and 0:03:24.040 --> 0:03:26.400 the uber driver. The first thing he said is Madame 0:03:26.480 --> 0:03:29.839 Legarde should be helping out. Should Christine Lagarde come back 0:03:29.880 --> 0:03:33.880 to France and assist Mr mccron. Well, the difficulty about 0:03:33.960 --> 0:03:36.360 Christine Lagard in francis of course that you know that 0:03:36.520 --> 0:03:40.600 there was a legal case which where she was kind 0:03:40.640 --> 0:03:44.520 of convicted but then not sentenced them and so whereas 0:03:44.560 --> 0:03:47.560 that throw the forgotten about in Washington and elsewhere in France, 0:03:47.560 --> 0:03:50.240 I'm afraid that still does resonate. So it's not completely 0:03:50.240 --> 0:03:54.840 straightforward for Christine Lagarde to take a senior position in France. 0:03:54.880 --> 0:03:59.120 How do somebody from that international world more likely to 0:03:59.160 --> 0:04:04.040 come in? Is about me? Yes, yes, much much more 0:04:04.040 --> 0:04:07.400 straightforward person. And of course you know that Madame lepen 0:04:07.480 --> 0:04:11.560 did win the vote saying anti globalization, and there's nobody 0:04:11.600 --> 0:04:14.600 more globalization than Christine Lagarde. So I'm not sure you'd 0:04:14.600 --> 0:04:17.000 want to go there with Macron. Lagarde s let me 0:04:17.000 --> 0:04:19.520 start with you. If we're doing hope in audacity, reducs 0:04:19.520 --> 0:04:21.760 here with Mr mcgrahan, what is the audacity that the 0:04:21.839 --> 0:04:25.680 new president of France needs? Well, I think he does 0:04:25.800 --> 0:04:30.080 need to do some quite symbolic things on labor market reform, 0:04:30.400 --> 0:04:33.080 because otherwise I think the rest of the world will 0:04:33.080 --> 0:04:36.279 not believe that anything's changed in France. Unfortunately, some of 0:04:36.320 --> 0:04:38.120 those things you can argue up in Hill and down 0:04:38.200 --> 0:04:40.240 Dale about thirty five hour week and how significant it 0:04:40.320 --> 0:04:44.840 really is, but internationally it has achieved a totemic status 0:04:44.880 --> 0:04:47.880 and you have to do something about that because otherwise 0:04:47.920 --> 0:04:51.599 I think your rhetoric about reopening France for business and 0:04:51.600 --> 0:04:53.800 attracting it with investment will not work. Aren't you just 0:04:53.880 --> 0:04:56.400 challenging headlong into the unions if you do that? Isn't 0:04:56.440 --> 0:04:58.760 there a workaround? Isn't there a smarter way of doing it? 0:04:58.920 --> 0:05:01.040 It's not so much question us. I mean, the unions 0:05:01.040 --> 0:05:04.040 are not that significant. Frankly, they don't have very much membership. 0:05:04.080 --> 0:05:07.320 It's more the street union. It's the street and also 0:05:07.360 --> 0:05:09.160 the union is more nuanced so it used to be, 0:05:09.160 --> 0:05:12.240 because the CFDT, which has always been the reformist union, 0:05:12.480 --> 0:05:15.360 now has more members than the hardline CGS. But nevertheless, 0:05:15.400 --> 0:05:17.280 in the point, well, isn't the point still stand that 0:05:17.279 --> 0:05:20.880 that don't work around it, don't work against it. Well, 0:05:20.920 --> 0:05:23.159 this is gonna be difficult. Everything that car would do, 0:05:23.200 --> 0:05:24.839 the kind of thing, how it's talking about on the 0:05:24.880 --> 0:05:27.760 working week, on cutting corporate attacks, which is the highest 0:05:27.800 --> 0:05:31.200 in the EU, which is on exempting investments from the 0:05:31.200 --> 0:05:33.360 wealth tax and sold. All these, of course will be 0:05:33.400 --> 0:05:36.040 seen by the left and by the street as proof 0:05:36.200 --> 0:05:39.360 that yes, indeed, here's the puppet of international globalized finance. 0:05:39.440 --> 0:05:41.760 I'm going to say this worldwide. You've said it for weeks. 0:05:41.839 --> 0:05:44.640 John Ferby's book, You rush through this history with a 0:05:44.680 --> 0:05:48.240 beautiful writing skill in one of the great enigmas within 0:05:48.240 --> 0:05:51.680 the book has just started to stay Compare McCraw is. 0:05:51.720 --> 0:05:54.320 We heard an interview after an interview with Valories just 0:05:54.360 --> 0:05:57.080 started to staying is that apt? Yes, absolutely, he's He's 0:05:57.080 --> 0:05:58.560 the one I would go back to from that can 0:05:58.800 --> 0:06:00.720 including the fact that, of course Scott didn't have a 0:06:00.720 --> 0:06:03.599 parliamentary majority when he started and was dependent on the 0:06:03.640 --> 0:06:06.760 Goal Lists who eventually stabbed him in the back with 0:06:06.880 --> 0:06:08.880 Jack Shark. And you could have the same thing with 0:06:08.960 --> 0:06:12.800 the Republicans being the main force in Parliament after June 0:06:12.839 --> 0:06:15.200 the eighteenth and mac Hale dependent on them. Now, that 0:06:15.240 --> 0:06:17.919 could work because a lot of their ideas are very similar. 0:06:18.120 --> 0:06:20.039 But the Republicans are going to want just like the 0:06:20.040 --> 0:06:22.840 Gold Lists in the seventies to preserve their own identity. 0:06:23.040 --> 0:06:26.359 Sir Howard, does France need a different Euro than Germany? 0:06:26.360 --> 0:06:28.200 And I means separate from the Euro? But what are 0:06:28.200 --> 0:06:31.680 those relative valuations? How far apart is a good Euro 0:06:31.839 --> 0:06:35.200 for Germany from a good Euro for France. I don't 0:06:35.200 --> 0:06:38.599 personally think that there's a much difference between Germany and France. 0:06:38.600 --> 0:06:41.440 There's a different argument if you're talking about Italy, for example, 0:06:41.760 --> 0:06:46.040 But if you look, French productivity has actually matched German 0:06:46.040 --> 0:06:49.880 productivity reasonably well over quite a long period. The French 0:06:49.960 --> 0:06:54.480 problem is more that they do have sclerotic labor markets 0:06:54.520 --> 0:06:58.920 and too high public expenditure and too high taxation. I 0:06:58.960 --> 0:07:02.640 don't think it's a problem of the competitiveness of the 0:07:02.680 --> 0:07:06.080 French trading sector, which is very highly competitive. Me in 0:07:06.080 --> 0:07:08.480 the French produced you know, the almost per hour more 0:07:08.520 --> 0:07:12.000 than we do in the traded sector. So I don't 0:07:12.000 --> 0:07:14.480 think the answer for France is a decline in the 0:07:14.520 --> 0:07:17.000 euro in The answer for France is a rebalancing of 0:07:17.040 --> 0:07:21.560 their economy away from the public sector. Jonathan. As the 0:07:21.640 --> 0:07:26.760 UK leaves, the relationship between Germany and France becomes closer, closer, 0:07:26.880 --> 0:07:30.480 more interesting, and probably in favor of France as a 0:07:30.560 --> 0:07:34.160 result of the kind of the three way split changing. 0:07:34.920 --> 0:07:39.200 How does Mr McCraw take Germany along for the ride? 0:07:39.520 --> 0:07:41.360 And and he is he the guy to do it? 0:07:41.480 --> 0:07:44.280 He's very pro Europe. We heard the music, we've heard 0:07:44.360 --> 0:07:47.840 seen the flags. Is he going to be changing Europe 0:07:47.840 --> 0:07:49.600 in a meaningful way? And will the Germans be on 0:07:49.680 --> 0:07:52.000 board with it? I think it's the best chance of 0:07:52.160 --> 0:07:54.640 something meaningful happening over the next couple of years. He's 0:07:54.640 --> 0:07:58.240 already worked with the Germans. He's drawn up various plans 0:07:58.400 --> 0:08:01.480 for going into the fiscal side of the euro with 0:08:01.520 --> 0:08:04.440 the Social Democrats. Submittedly, but I was in Berlin a 0:08:04.480 --> 0:08:06.840 couple of weeks ago, and certainly the people around CDU, 0:08:06.920 --> 0:08:10.040 around Merkel, they're very anxious to work with Machorn and 0:08:10.080 --> 0:08:13.320 I think they may cut him a bit of easy 0:08:13.520 --> 0:08:15.960 ease on the budget and the deficit things over the 0:08:16.040 --> 0:08:17.960 next couple of years. So long as to go back 0:08:17.960 --> 0:08:21.000 to what how it says he delivers some reforms, Sirard. 0:08:21.000 --> 0:08:23.040 A final question to you before you start your day 0:08:23.080 --> 0:08:26.320 for RBS, what do you need from Janet yelling? Right now? 0:08:26.560 --> 0:08:29.080 We have you not talked about the American Central Bank? 0:08:29.400 --> 0:08:32.280 What does cher yelling need to do in the coming weeks. Well, 0:08:32.280 --> 0:08:33.800 I think she needs to do what she said she's 0:08:33.800 --> 0:08:36.080 going to do, and that would be fine, I think. 0:08:36.280 --> 0:08:39.520 And also I think probably the Fed does need some 0:08:39.679 --> 0:08:42.000 greater clarity about how it's going to reduce the size 0:08:42.000 --> 0:08:43.920 of this balance sheet. My own view is the central 0:08:43.920 --> 0:08:45.720 bank balance sheet in the medium term, in the long 0:08:45.840 --> 0:08:47.319 term are going to be bigger than they used to be, 0:08:47.520 --> 0:08:49.240 but not as big as they are now. And I 0:08:49.240 --> 0:08:51.360 think they need to find some way of edging that 0:08:51.400 --> 0:08:54.120 balance sheet down, and that's I think the big conundrum 0:08:54.160 --> 0:08:56.920 that we're looking for. Maybe edging is an uncer Howard 0:08:56.960 --> 0:08:59.360 phrase for tapering as well. Thank you so much for 0:08:59.360 --> 0:09:02.240 a generous set of time this morning, Sir Howard Davis, 0:09:02.240 --> 0:09:17.640 as chairman of our Eric Nielsen joins us from Berlin. 0:09:17.720 --> 0:09:20.200 He's the chief economist with the UniCredit group. And let's 0:09:20.200 --> 0:09:22.360 start with the French election, if we could hear Eric 0:09:22.840 --> 0:09:24.360 and let me just get your sense of of what 0:09:24.480 --> 0:09:27.239 import we can draw from it. Of course there's domestic significance, 0:09:27.240 --> 0:09:30.240 but when you look at its importance to Europe, to 0:09:30.320 --> 0:09:32.560 the euro Zone, give us your sense of of what 0:09:32.559 --> 0:09:36.400 what what we can draw from that. Yeah, I think 0:09:36.400 --> 0:09:40.760 that it's good news on two accounts. First and foremost, 0:09:41.600 --> 0:09:45.880 it sort of brings a French kind of a leadership 0:09:46.000 --> 0:09:49.040 rule back in place as Europe had originally. I thought 0:09:49.080 --> 0:09:52.200 we had been frozen during the Secosi and the Olan period. 0:09:52.280 --> 0:09:55.040 So Germany has been looking for for a good friends 0:09:55.240 --> 0:09:58.440 collection or a French ship partner in a lot of this. 0:09:58.960 --> 0:10:01.079 And if anything, the risk is now that the Friends 0:10:01.080 --> 0:10:03.679 are going to get more euro pro European than than 0:10:03.720 --> 0:10:06.640 the Germans and wanted to do more than the present 0:10:06.640 --> 0:10:08.800 German government want to do. But but certainly it's a 0:10:08.800 --> 0:10:13.120 big move in that direction. Secondly, um, it's a big 0:10:13.200 --> 0:10:16.360 message that they're, through the European politician and other places 0:10:16.360 --> 0:10:20.320 including Italy, that there is a victory to be gained 0:10:20.320 --> 0:10:24.160 by being unashamefully pro European. It's the first time you've 0:10:24.160 --> 0:10:28.720 had a clear choice in a country between somebody really European. 0:10:28.840 --> 0:10:31.920 Noticed when he walked out in front of the Roue 0:10:31.920 --> 0:10:35.040 War he had did not have the French national anthems 0:10:35.040 --> 0:10:37.720 playing for the European one. This is a big message 0:10:37.800 --> 0:10:40.600 across Europe. I think drew the contrast, if you would, 0:10:40.640 --> 0:10:42.959 between the economy in Germany where you are right now 0:10:43.240 --> 0:10:49.800 in France. How different are these two economies within Europe? Uh? Different, 0:10:49.880 --> 0:10:52.120 but not nearly as different as you think. Let me 0:10:52.160 --> 0:10:57.120 stop by reminding you and the listeners that, since if 0:10:57.160 --> 0:10:59.640 you look at real GDP, France has actually done better 0:10:59.679 --> 0:11:02.880 than many so culatives since they introducted the Euro, the 0:11:02.920 --> 0:11:06.240 French real GDP is up aside a couple of presentative points, 0:11:06.240 --> 0:11:09.320 more than the German. So we get very excited about 0:11:09.360 --> 0:11:11.880 these cycles and swings and and and all the rest 0:11:11.880 --> 0:11:14.760 of it. But these are not that different economies at 0:11:14.760 --> 0:11:16.439 the end of the day, and none of the two 0:11:16.480 --> 0:11:20.600 economies have severe imbalances. If anything, Germany has a two 0:11:20.600 --> 0:11:24.120 big current count surplus, but but not the negative ones 0:11:24.200 --> 0:11:27.960 that that sort of spilled trouble right around the corner. Um. 0:11:28.320 --> 0:11:32.960 That said, the labor market is more rigid, particularly for 0:11:33.040 --> 0:11:35.720 younger people in France. But again, if you look at 0:11:35.720 --> 0:11:39.040 the o c D indicators for rigidities, the two countries 0:11:39.080 --> 0:11:43.640 are quite similar. But but surely there's more rigidities in 0:11:43.679 --> 0:11:47.040 the French economy. That means that it dips less in 0:11:47.160 --> 0:11:51.040 recessions and accelerate less in the recoveries. And that's exactly 0:11:51.040 --> 0:11:53.640 what we've seen, but when you look through it for 0:11:53.640 --> 0:11:59.960 for a decade or so, they perform incredibly uh incredibly alive. 0:12:00.320 --> 0:12:02.160 Eric Nielsen with the UniCredit group with us here on 0:12:02.240 --> 0:12:05.320 Bloomberg Surveillance from Bloomberg Gritty. You talk about labor market 0:12:05.840 --> 0:12:10.000 rigidityes and this president elect has promised to change some 0:12:10.080 --> 0:12:12.200 of those are less than some of those. What kind 0:12:12.240 --> 0:12:14.679 of difference could that make to the French economy if 0:12:14.679 --> 0:12:17.319 you were to make progress on that? And I use 0:12:17.440 --> 0:12:19.839 the word were there? How difficult and undertaking is this 0:12:19.960 --> 0:12:24.800 going to be? It's difficult. They have unions who are 0:12:24.840 --> 0:12:27.240 already on the streets now. But he has a mandate. 0:12:27.360 --> 0:12:30.040 You could argue, um, and I would suggest that what 0:12:30.120 --> 0:12:32.600 he needs to do and probably want we'll do is 0:12:32.640 --> 0:12:35.800 not a lot you could and he doesn't necessarily have 0:12:35.920 --> 0:12:38.280 to do a whole lot what he I think that 0:12:38.400 --> 0:12:40.959 the most obvious one would be to copy the German 0:12:41.640 --> 0:12:44.800 flexible label laws for the youth unemployed that Germany did 0:12:44.840 --> 0:12:47.600 with the Sword reforms so way back, and a lot 0:12:47.600 --> 0:12:50.960 of these timber employments in Germany have actually been merged 0:12:51.000 --> 0:12:55.559 into permanent employments since so there's certainly a live an 0:12:55.600 --> 0:12:57.760 idea to be lifted there that that could help on 0:12:57.880 --> 0:12:59.960 that side. The other one, which I think is important 0:13:00.160 --> 0:13:02.520 not only in France but throughout Europe and in Italy 0:13:02.559 --> 0:13:06.240 included is to lower the payroll tax. So they so 0:13:06.679 --> 0:13:09.360 it is it is ironic the politicians say they want 0:13:09.360 --> 0:13:12.600 people in employment, and the tax employers who try to 0:13:12.640 --> 0:13:15.840 employ people, and particularly young people who in this world 0:13:15.840 --> 0:13:19.040 economy in Europe struggled to make a return for the 0:13:19.080 --> 0:13:21.920 company they work for that matches the cost of them. 0:13:22.120 --> 0:13:25.440 So why not cut the tax on the payroll So 0:13:25.679 --> 0:13:28.400 and I think that's something he will be doing. President 0:13:28.679 --> 0:13:31.080 spoke with with the President elector of France, Amandel McCown 0:13:31.200 --> 0:13:33.920 yesterday by by fun, I imagine the relationship that we're 0:13:33.960 --> 0:13:36.040 going to be paying The closest attention to though, is 0:13:36.240 --> 0:13:40.640 Mr mccrowen's relationship with Angela Merkel. How well do you 0:13:40.679 --> 0:13:43.640 think they get along? How important is that relationship going 0:13:43.679 --> 0:13:48.240 to be going forward? I think it's gonna be incredibly important. 0:13:48.520 --> 0:13:51.679 Um I would, as I said, the Germans have been 0:13:51.840 --> 0:13:54.320 been longing for a French leader who is willing to 0:13:54.320 --> 0:13:58.240 to pick up joint leadership on issues with relations with 0:13:58.320 --> 0:14:01.120 Russia and Ukraine and out with the US, which is 0:14:01.120 --> 0:14:04.280 a becoming more tricky partner for sure, but to to 0:14:04.520 --> 0:14:07.520 sort of obtaking on the European economic side. I think 0:14:07.559 --> 0:14:10.360 the important thing here is that mccoon needs to do 0:14:10.440 --> 0:14:13.240 something for the Germans. First. He needs to pledge at 0:14:13.240 --> 0:14:15.800 degree of fiscal discipline, so he sort of puts the 0:14:15.840 --> 0:14:19.280 rest is constant German fear that that the French are 0:14:19.360 --> 0:14:21.880 just running away with the Fiskeland ultimately want to be 0:14:21.880 --> 0:14:24.040 paid up by Germans. He needs to make that very 0:14:24.120 --> 0:14:26.080 very clear, and he needs to address some of the 0:14:26.160 --> 0:14:30.080 labor issues we've just talked about. And once he's done that, 0:14:30.120 --> 0:14:33.400 there will be scope, probably only after the election in 0:14:33.440 --> 0:14:38.080 Germany for for further corporation, certainly on security matters, but 0:14:38.480 --> 0:14:41.480 there could also be other issues. The capital markets reform 0:14:41.520 --> 0:14:45.080 could be accelerated, the banking before banking union could be completed, 0:14:45.480 --> 0:14:48.400 and maybe maybe they're certainly talking in Berlin about it, 0:14:48.560 --> 0:14:52.120 an attempt to do something on unemployment benefits. Eric Nielsen 0:14:52.160 --> 0:14:54.080 with US. He's the chief economist at the Union Credit Group. 0:14:54.120 --> 0:14:56.240 My co host Tom Keane has traded the send in 0:14:56.280 --> 0:14:59.160 for the Thames joins us now from our bureau in 0:14:59.240 --> 0:15:02.560 London and Tom I trust the Eurostar wide was uneventful. 0:15:03.000 --> 0:15:05.760 Why can't this be in America? I think it's because 0:15:05.760 --> 0:15:07.760 it's a sinkhole of money. But I'll tell you it 0:15:07.880 --> 0:15:11.360 is a beautiful and very successful training right. Thank you 0:15:11.360 --> 0:15:15.640 yours for your care. Yesterday from London, from New York, 0:15:15.680 --> 0:15:19.800 Bloomberg Surveillance with it's Eric Nielsen from Berlin. This morning 0:15:19.800 --> 0:15:22.360 he is with Uni Credit. Eric, we talked about this, 0:15:22.440 --> 0:15:24.800 that and the other thing. But it does circle back, 0:15:24.840 --> 0:15:28.560 certainly for our American listeners to the US dollar. What 0:15:28.680 --> 0:15:32.160 is the Uni Credit call on dollars stability or do 0:15:32.240 --> 0:15:37.320 we see a trichet like brutal move in the months ahead. No, 0:15:37.520 --> 0:15:39.000 we don't have. We don't think it's going to be 0:15:39.080 --> 0:15:41.160 a bruder move, Tom. I mean I think the so 0:15:41.240 --> 0:15:44.160 we have we have just revised all your dollar a bit. 0:15:44.280 --> 0:15:47.040 But this is more a euro appreciation story than a 0:15:47.120 --> 0:15:50.480 dollar depreciation story right now. In other words, from an 0:15:50.520 --> 0:15:52.640 American point of view, we think that Trump is going 0:15:52.680 --> 0:15:56.560 to be rather ineffective and sort of talking the dollar weaker. 0:15:57.440 --> 0:15:59.520 But but in trade way to terms, it will be 0:15:59.560 --> 0:16:02.880 a bit because you're seeing quite a bit of interest 0:16:02.920 --> 0:16:05.800 in European ass now that drives the euro stronger obviously, 0:16:05.800 --> 0:16:07.800 and and on the trade with the trip that will 0:16:08.200 --> 0:16:10.280 get the dollar a little bit weaker. But we don't know. 0:16:10.320 --> 0:16:14.240 We don't expect very dramatic books. When you when you 0:16:14.320 --> 0:16:17.880 look here at the future of the European project, Russia 0:16:17.920 --> 0:16:20.720 has to loom large. We had Angela Merkel in Russia 0:16:20.800 --> 0:16:24.120 last week meeting with Vladimir Putin. How how much of 0:16:24.600 --> 0:16:27.000 the strength of the European Union right now has to 0:16:27.040 --> 0:16:30.359 do just with the the change in in in political trajectory, 0:16:30.560 --> 0:16:33.560 policy trajectory that we've seen in Russia. Is that is 0:16:33.560 --> 0:16:38.120 that leading to more strength in the European Union? Eric, Yeah, 0:16:38.200 --> 0:16:40.200 without a sount, but it's not the only one, right, 0:16:40.240 --> 0:16:43.520 I mean, I think you contract the European relationship with 0:16:43.640 --> 0:16:47.520 Pruting back to his re emergence as president was in 0:16:47.600 --> 0:16:50.240 two thousand and twelve, right where and and he's handling 0:16:50.240 --> 0:16:53.880 on the demonstrations where people starts a question whether he 0:16:54.040 --> 0:16:55.800 was how much of a democratic it was. Then we 0:16:55.840 --> 0:16:58.400 have this shock of Crimea and Ukraine, we have the 0:16:58.400 --> 0:17:01.120 shock of of Syria and in the shock of the 0:17:01.240 --> 0:17:04.639 apparent as almost proven right interference in the American election 0:17:04.720 --> 0:17:08.239 and messing around in France apparently, so there's so this 0:17:08.320 --> 0:17:11.119 is an interest. But your point is very interesting because 0:17:11.200 --> 0:17:14.160 I think what you have seen from a European perspective 0:17:14.240 --> 0:17:16.960 now is anybody who wanted to flirt with the idea 0:17:17.359 --> 0:17:20.600 of sometimes these same politicians you know, in effective we 0:17:20.640 --> 0:17:22.679 need a strong guy. So I think you look at 0:17:22.680 --> 0:17:24.800 putting little ergon and you look at at least the 0:17:24.840 --> 0:17:28.600 one want to be strong guy Trump and Europeans, the 0:17:28.720 --> 0:17:32.320 vast majority majority of Europeans do not see something they like. 0:17:32.880 --> 0:17:36.320 So you so these events outside Europe have for sure 0:17:37.080 --> 0:17:40.560 is strengthened the ability of things being. Politicians say, this 0:17:40.640 --> 0:17:42.359 is not where we're going, Eric, we gotta leave it there. 0:17:42.440 --> 0:17:51.040 Eric Nielsen, chief economist of the UniCredit Group. Brought you 0:17:51.200 --> 0:17:55.280 by Bank of America. Marylynch dedicated to bringing our clients 0:17:55.400 --> 0:17:59.520 insights and solutions to meet the challenges of a transforming world. 0:18:00.080 --> 0:18:03.920 That's the power of global connections. Mary Lynch, Pierce Federan 0:18:03.960 --> 0:18:13.520 Smith Incorporated, Member s I p C. There's something new 0:18:13.560 --> 0:18:16.919 from Bloomberg. It's called Lens. Starting right now, you can 0:18:17.040 --> 0:18:20.840 use the Bloomberg Io s app off your iPhone or iPad, 0:18:21.440 --> 0:18:25.320 or our new Google Chrome extension to read any news 0:18:25.400 --> 0:18:29.720 story on any website, scan it, and then instantly see 0:18:29.760 --> 0:18:33.840 the news stories relevant market data from Bloomberg. In addition, 0:18:34.200 --> 0:18:37.280 see all the bios of the key people mentioned in 0:18:37.359 --> 0:18:40.399 the story. It's called lens, and it is just that, 0:18:40.720 --> 0:18:43.760 a lens into the people and the data of any 0:18:43.880 --> 0:18:47.720 story you may be reading. Again, Lens brings you the 0:18:47.800 --> 0:18:51.320 power of Bloomberg's news and data. Download or io s 0:18:51.359 --> 0:18:54.639 app or search for the Bloomberg extension at the Chrome 0:18:54.760 --> 0:18:58.200 Store to try lens out. Learn more at Bloomberg dot 0:18:58.240 --> 0:19:06.240 com slash lens. Let's go to Steve Whiting. Now he is, 0:19:06.320 --> 0:19:08.600 as I said, the global Chief Investment Strategic City. I've 0:19:08.600 --> 0:19:10.320 probably been great to have you with us against Steve 0:19:10.520 --> 0:19:13.159 un surveillance. Let's start with that. Your your read of 0:19:13.200 --> 0:19:16.399 what's going on in Washington. The President chalked up a 0:19:16.520 --> 0:19:21.040 legislative victory. Does that give you, as an investor any 0:19:21.160 --> 0:19:23.040 any better sense of what's to come? In other words, 0:19:23.200 --> 0:19:25.320 what did that signify to you? Getting that healthcare vote 0:19:25.359 --> 0:19:28.359 through the House? You know, I tend to have a 0:19:28.440 --> 0:19:31.480 little bit higher confidence that at the end of the day, 0:19:32.240 --> 0:19:36.000 Congressional Republicans and the President will manage to cut taxes, 0:19:36.680 --> 0:19:39.480 whether that will be a full blown reform or not 0:19:39.640 --> 0:19:41.840 as to be seen. But you have to remember that 0:19:42.080 --> 0:19:44.680 with all of the either failed votes or votes that 0:19:44.800 --> 0:19:48.560 don't take place, it will take only one successful vote 0:19:48.760 --> 0:19:51.480 to change the fiscal outlook in two thousand eighteen. As 0:19:51.640 --> 0:19:54.280 late as that may come, um, you know, it could 0:19:54.320 --> 0:19:56.840 come at the end of the August session, it could 0:19:56.880 --> 0:19:59.800 come later. But you know, we think of this as 0:20:00.000 --> 0:20:02.840 mostly a two thousand eighteen effect. And you know this 0:20:03.040 --> 0:20:06.920 is one sign that ultimately they with a majority or 0:20:07.240 --> 0:20:13.119 not in a single party gridlock. I saw Steve Whiting 0:20:14.000 --> 0:20:16.760 once again. Earnings I think did better than good. You 0:20:16.840 --> 0:20:22.200 are wonderfully skilled folding earnings dynamics into the economy. Do 0:20:22.280 --> 0:20:27.120 you just equate over great earnings great g d P. Well, 0:20:27.240 --> 0:20:29.520 I think that there's this translation issue, and you know 0:20:29.600 --> 0:20:32.480 it's worth mentioning. It looks like first quarter EPs for 0:20:32.640 --> 0:20:36.400 large CAPUS companies has grown fifteen percent from a year ago. 0:20:36.960 --> 0:20:39.280 I have to remember g d p s typically not 0:20:39.440 --> 0:20:41.399 in the United States reported on a year at a 0:20:41.480 --> 0:20:45.560 year basis. Uh it's inflation adjusted, so reduced by the 0:20:45.720 --> 0:20:49.000 rise of inflation, and we did have an excessive two 0:20:49.080 --> 0:20:52.639 percent headline inflation in the first quarter, so it's not 0:20:52.760 --> 0:20:54.960 a nominal figure. So you have to adjust for all 0:20:55.000 --> 0:20:57.640 of those things. And you have to remember that profits 0:20:57.680 --> 0:21:00.639 are just more cyclical than the economy. You know, they 0:21:00.720 --> 0:21:04.879 boom and bust around a relatively steady, steady economy. You know, 0:21:05.080 --> 0:21:08.480 laundromats and hair salons are in GDP, but not in 0:21:08.680 --> 0:21:11.600 you know, S and P profits. See, we just had 0:21:11.640 --> 0:21:13.119 actual work on the show a few minutes ago and 0:21:13.160 --> 0:21:15.600 Tom asked him how he plays Asia. How do you 0:21:15.680 --> 0:21:17.600 regard or look at Asia right now? Where is the 0:21:17.640 --> 0:21:22.680 opportunity in Asia? Well, we've upgraded our view of emerging 0:21:22.760 --> 0:21:26.359 Asia in particular, and you know, I would note that, 0:21:26.600 --> 0:21:31.240 you know, we have seen uh decreased sensitivity in Asia 0:21:31.720 --> 0:21:35.000 to rising US rates. Now you can couple that with 0:21:35.480 --> 0:21:39.399 at least the feds U forecasts that it's tightening cycle 0:21:39.520 --> 0:21:42.320 this time around in real terms is likely to be 0:21:42.440 --> 0:21:46.960 only about half the average tightening cycle you have. Obviously, 0:21:47.040 --> 0:21:48.840 they are all these questions, you know, what's sort of 0:21:48.960 --> 0:21:52.000 dead is there in China? Questions all the time, But 0:21:52.240 --> 0:21:55.520