WEBVTT - Surveillance: SoftBank's WeWork Rescue With Galloway 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.520 Bloomberg dot Com, and of course on the Bloomberg. We're 0:00:28.560 --> 0:00:31.120 gonna digressing out of one of our monthly joys, which 0:00:31.200 --> 0:00:34.280 is Foreign Affairs magazine. I don't know how Gideon Rose 0:00:34.320 --> 0:00:37.000 does it. Johnny gets out front of the zeitgeist with 0:00:37.080 --> 0:00:40.440 Trump's Middle East this month. It is a spectacular essay. 0:00:40.760 --> 0:00:43.560 And John, what is so trenchant? Here? Is? A few 0:00:43.640 --> 0:00:47.879 years back, Mr Rose wrote an essay why we always 0:00:48.040 --> 0:00:53.760 fight the last battle? And there's the news. Say, there's 0:00:53.800 --> 0:00:57.120 the news flow of the last few days, including Mr 0:00:57.200 --> 0:01:00.200 Putin and Mr Ari Juan shaking hands, not over an 0:01:00.240 --> 0:01:03.000 Olympic medal in soci So getting this talk about it. 0:01:03.040 --> 0:01:06.280 If there's one take away from this addition, what would 0:01:06.319 --> 0:01:09.560 that be? Uh? Well, that the Middle East is going 0:01:09.640 --> 0:01:14.200 back into its historical mode of a local region in 0:01:14.240 --> 0:01:17.679 which the local power powers play a great game of 0:01:17.800 --> 0:01:21.400 jockeying among each other, with occasional outsiders coming in to 0:01:21.520 --> 0:01:25.720 back them. With the US essentially signaling first with Obama 0:01:25.760 --> 0:01:27.959 and then with Trump that it was going to pull out. 0:01:28.560 --> 0:01:32.520 What we're actually seeing is the local powers adjusting to 0:01:32.560 --> 0:01:35.880 a Middle East without the United States playing a major role. 0:01:35.959 --> 0:01:38.560 And so in America this is couched as oh, the 0:01:38.600 --> 0:01:40.680 Russians are coming in, or we've a been in the 0:01:40.720 --> 0:01:43.520 curves and all that's true. But from the local powers, 0:01:43.560 --> 0:01:47.320 the larger picture is, Okay, the Americans aren't really going 0:01:47.360 --> 0:01:49.640 to be here or be able to be counted on 0:01:49.720 --> 0:01:52.600 to protect us, So we have to make our own 0:01:52.680 --> 0:01:55.480 deals with the locals in the region. And so when 0:01:55.640 --> 0:01:59.840 the Iranians send a signal to the saudiast and Americans 0:02:00.320 --> 0:02:04.960 by arranging the drone bombing of the Saudi oil fields 0:02:05.720 --> 0:02:07.720 as a signal you keep messing with us and we 0:02:07.760 --> 0:02:10.680 will can we can hurt you, then the Americans don't 0:02:10.680 --> 0:02:13.360 do anything one If the Saudis realized from that, we 0:02:13.480 --> 0:02:17.040 cannot afford to anger Iran because they can come and 0:02:17.080 --> 0:02:19.800 blow us up next time. Even worse, so the Saudis 0:02:20.160 --> 0:02:23.920 mute their response and start making an accommodation with Iran. 0:02:24.280 --> 0:02:26.840 Same thing with the Israelis, who are now making deals 0:02:26.840 --> 0:02:30.040 with the Russians to protect their interests in Syria because 0:02:30.080 --> 0:02:34.080 the United States is no longer able to protect the 0:02:34.160 --> 0:02:37.359 Israelis from the problems in Syria. So essentially what you're 0:02:37.360 --> 0:02:40.600 seeing is the emergence of a post American Middle East. Uh, 0:02:40.800 --> 0:02:43.359 even quicker than we thought would happen. Well, let's talk 0:02:43.360 --> 0:02:46.520 about that. The broadest strategy in the region hinged on 0:02:46.639 --> 0:02:50.120 two big alliances, one with the Israelis, another with the Saudis. 0:02:50.400 --> 0:02:54.760 Did the Saudis look a little lonely now, yes, exactly. So. 0:02:54.880 --> 0:02:57.680 The fact is that the Trump administration wanted to have 0:02:57.720 --> 0:02:59.480 its cake and eat it too. It wanted to continue 0:02:59.480 --> 0:03:02.120 to walk away from the region and not get Americans 0:03:02.120 --> 0:03:04.959 trapped in endless wars blah blah blah blah blah. Uh. 0:03:05.000 --> 0:03:07.400 And at the same time, it wanted to confront Iran 0:03:07.600 --> 0:03:12.000 and avoid the consequences of justicely walking away. So it 0:03:12.120 --> 0:03:16.040 tried to essentially contract out US diplomacy in the region 0:03:16.040 --> 0:03:19.400 and US strategy in the region to its two powerful proxies, 0:03:19.520 --> 0:03:22.919 Israel and Saudi Arabia, and said, well, you guys can 0:03:22.919 --> 0:03:26.560 confront Iran, Israel in the Levant and Saudi in the Gulf, 0:03:26.600 --> 0:03:28.680 and we'll back you and we'll give you whatever you 0:03:28.760 --> 0:03:31.960 want to contract out that job. The problem is that 0:03:32.040 --> 0:03:36.720 the locals were very clever, took the American UH offer 0:03:37.120 --> 0:03:40.160 and got whatever they wanted with their local conflicts. But 0:03:40.240 --> 0:03:44.240 they actually can't counter Iran because the Saudis are essentially 0:03:44.240 --> 0:03:47.080 a rich gas station without a strong military, their prey 0:03:47.240 --> 0:03:51.160 not a counterweight. And these and the Israeli's are off 0:03:51.160 --> 0:03:53.440 on the side of the region because no, the Arab 0:03:53.480 --> 0:03:57.560 powers won't allie with them formally because of the Palestinian issue. 0:03:57.680 --> 0:04:01.920 And so essentially what has happened now is the Israelis 0:04:01.960 --> 0:04:04.880 and the Saudis played the Americans got what they wanted 0:04:04.920 --> 0:04:07.520 over the last couple of years, and now see the 0:04:07.560 --> 0:04:11.880 Americans walking away, leaving them with gains they've had. NBS 0:04:11.960 --> 0:04:15.920 is strong and in power and has established authoritarian control. 0:04:16.160 --> 0:04:18.640 Netanyaho has gotten a whole bunch of things that he wanted. 0:04:19.240 --> 0:04:21.120 And yet now the question is will the US be 0:04:21.200 --> 0:04:23.360 there in the long run to protect against the Iranians. 0:04:23.360 --> 0:04:25.240 And I think the answer is now that the Iranians 0:04:25.240 --> 0:04:29.159 and sorry, the Saudis and the Israelis are starting to think, okay, 0:04:29.200 --> 0:04:31.560 we need to make deals with the Russians, with the 0:04:31.560 --> 0:04:33.520 Iranians because we can't count in the Americans. The United 0:04:33.520 --> 0:04:36.640 States is pulling back. Why is this administration sending troops 0:04:36.680 --> 0:04:41.720 to Saudi Arabia Because it can't pull back completely from 0:04:41.760 --> 0:04:45.080 the region. And what Trump would like to do is 0:04:45.320 --> 0:04:49.560 unwind American commitments. But at the heart of those commitments, 0:04:49.600 --> 0:04:53.800 the external ones seem disposable. It doesn't really bother many 0:04:53.839 --> 0:04:57.279 Americans except for the dishonor about what we're doing to 0:04:57.320 --> 0:05:00.360 the Kurds. But the point is the courage, the front 0:05:00.440 --> 0:05:02.600 line of defense. If you keep good northern Syria, if 0:05:02.600 --> 0:05:05.360 you keep going further and further away, eventually you get 0:05:05.440 --> 0:05:08.479 to Saudi Arabia, and that's the world's gas station. You 0:05:08.560 --> 0:05:11.160 have to protect it for the stability of the global economy. 0:05:11.360 --> 0:05:13.839 And so the problem is not the first places you 0:05:13.880 --> 0:05:16.960 withdraw from. It's when you start taking out those things. 0:05:16.960 --> 0:05:19.279 When you play the game of Jenga, when you're left 0:05:19.320 --> 0:05:21.320 at the bottom, if you have no other pieces there, 0:05:21.360 --> 0:05:24.640 you're screwed very quickly. Michael Durant and you're Wonderful Magazine. 0:05:24.640 --> 0:05:27.599 Why seeding land will not bring peace? Are we building 0:05:27.600 --> 0:05:30.920 a twenty mile wide new gaza strip between Syria and Turkey? 0:05:31.000 --> 0:05:34.360 So the most interesting part actually no, because we're essentially 0:05:34.400 --> 0:05:37.240 allowing the locals to deal with it. And the difference 0:05:37.279 --> 0:05:40.000 there is the outside powers aren't going to play. It 0:05:40.000 --> 0:05:45.279 will be the local powers uh Russia, Syria, Turkey. Um. 0:05:45.320 --> 0:05:47.760 The interesting thing about the Palestinian issue is that has 0:05:47.760 --> 0:05:52.280 been kept alive for several decades because of the external 0:05:52.320 --> 0:05:56.440 involvement of other powers and the international system, including Turkey, 0:05:56.680 --> 0:06:00.320 including Turkey and their refugee. The fact is that the 0:06:00.320 --> 0:06:03.120 most interesting thing we've learned from this issue, at least 0:06:03.120 --> 0:06:05.760 for me, is that nobody cares about the Palestinians anymore. 0:06:05.839 --> 0:06:09.240 Because the Trump policy has essentially given Israel everything it 0:06:09.320 --> 0:06:11.720 wanted and nobody has acted to it. We gotta leave 0:06:11.720 --> 0:06:13.680 it there. It is a triumph. Gideon Rose, in his 0:06:13.839 --> 0:06:32.160 team at Foreign Affairs magazine Trump's Middle East. We've been 0:06:32.200 --> 0:06:37.520 following Brexit since the Suez Canal crisis, and I must say, John, 0:06:37.600 --> 0:06:39.720 to cut to the chase. That was actually a good one. 0:06:39.839 --> 0:06:42.039 This is my favor. It's a good one. I watched 0:06:42.040 --> 0:06:45.320 the Crown. Come on, Anthony's a good I know, you 0:06:45.360 --> 0:06:47.240 know there's that scene in Lawrence of Arabia where he's 0:06:47.279 --> 0:06:50.200 out starving in the desert, drying and Boomy comes over. 0:06:50.320 --> 0:06:53.279 There's a screen door and the boom. There's a suisque 0:06:53.320 --> 0:06:57.200 now and then the music. My eyes just thinking of you. 0:06:58.760 --> 0:07:01.880 This is really good. I was twive years or something. UM. 0:07:01.920 --> 0:07:06.360 This is my favorite Brexit guest, my absolute favorite Brexit 0:07:06.440 --> 0:07:10.040 guest from Cambridge University, The Big Financial Launch. Katherine Barnard, 0:07:10.040 --> 0:07:13.200 The UK in a Changing Europe. Senior Fellow, Katherine, Great 0:07:13.200 --> 0:07:15.080 to have you with us on the program. Talk to 0:07:15.080 --> 0:07:17.400 me about what happened in the House of Commons in 0:07:17.440 --> 0:07:20.800 the last twenty four hours and what's happening right now. Well, 0:07:20.880 --> 0:07:25.680 it's remarkable. I mean, this is voice. Johnson became Prime 0:07:25.680 --> 0:07:27.280 Minister in the summer. He said he was going to 0:07:27.360 --> 0:07:30.560 get Brexit done. The only way he gets Brexit done 0:07:30.720 --> 0:07:35.160 was to revise the deal that Treason Maine had entered into. UM. 0:07:35.200 --> 0:07:38.920 He successfully did that last week. In facts it's primarily 0:07:38.920 --> 0:07:41.800 Treason Mains deal but with knobs On and the knobs 0:07:41.840 --> 0:07:46.280 relate to Northern Ireland. Because they have he's changed the 0:07:46.320 --> 0:07:49.560 position on Northern Ireland. It's no longer a backstop, a 0:07:49.600 --> 0:07:52.800 sort of default position, insurance position. What he's done is 0:07:52.880 --> 0:07:56.480 create a special situation for Northern Ireland and he said, right, 0:07:56.560 --> 0:08:01.280 we need to put that to a vote and that 0:08:01.880 --> 0:08:06.640 and then that vote failed. Um. But um. What did 0:08:06.800 --> 0:08:10.200 he was forced to do as a result is right 0:08:10.400 --> 0:08:13.320 to the EU and say we want an extension. He 0:08:13.360 --> 0:08:15.880 did that very grudgingly, as he was obliged to do 0:08:15.960 --> 0:08:18.440 it nder what's called the ben Act. And if you remember, 0:08:18.440 --> 0:08:21.840 he sent three letters on Saturday night to say I'm 0:08:21.880 --> 0:08:24.400 forced to ask an extension. I don't really want it, 0:08:24.440 --> 0:08:28.080 but I'm asking for one anyway. And then this week 0:08:28.160 --> 0:08:31.600 he tabled the WEB now the webs another bit of jargon, 0:08:31.680 --> 0:08:35.480 the web as the Withdrawn Implementation Bill. Um, and we 0:08:35.559 --> 0:08:38.000 got it on late Monday night. It's a hundred and 0:08:38.000 --> 0:08:43.080 ten pages long. It's eiddishly complicated, really difficult legal text. 0:08:43.280 --> 0:08:46.760 And m he said, right, MPs, you've got three days 0:08:46.840 --> 0:08:50.000 to negotiate or to to rule on this. You can 0:08:50.040 --> 0:08:53.320 discuss it for three days, and that is it. MPs 0:08:53.360 --> 0:08:56.680 were very cross and so there was what's called something 0:08:56.720 --> 0:09:00.440 really very dull but a motion on how to actually 0:09:00.520 --> 0:09:03.840 manage this process and he lost that too. But what 0:09:03.920 --> 0:09:05.880 he did win, and he doesn't have a great record 0:09:05.880 --> 0:09:07.720 of winning votes, he did win what was called the 0:09:07.760 --> 0:09:12.320 second reading vote, which basically said grudging we like this deal. 0:09:12.800 --> 0:09:15.280 That's the good news. So now we have this situation 0:09:16.040 --> 0:09:19.160 on whether they can agree on the time to discuss 0:09:19.679 --> 0:09:22.040 the overall bill, and Catherine, I wonder if they can 0:09:22.080 --> 0:09:24.920 do that. There was a suggestion before these votes yesterday 0:09:24.920 --> 0:09:27.240 that perhaps the Prime Minister just withdraws the whole thing 0:09:27.320 --> 0:09:30.599 and calls an election. That hasn't happened. What do you 0:09:30.640 --> 0:09:34.240 think the next steps are, Well, that's the question. So 0:09:34.840 --> 0:09:36.719 at the moment, if you think about this in terms 0:09:36.760 --> 0:09:39.120 of the game of ping pong, the ball is currently 0:09:39.320 --> 0:09:41.840 in the e US court because the eu've got to 0:09:41.880 --> 0:09:44.760 decide whether they'll grant the extension that for as Johnson 0:09:44.840 --> 0:09:49.640 so grudgingly and ungraciously asked for on Saturday night. All 0:09:49.720 --> 0:09:52.760 of the omens look reasonably good that they will do. Remember, 0:09:52.800 --> 0:09:58.280 they've got to act unanimously. President mcron, the a French president, 0:09:58.480 --> 0:10:01.000 is being really quite cross for about this and saying 0:10:01.080 --> 0:10:03.880 not very keen on granting an extension because the Brits 0:10:03.920 --> 0:10:06.800 can't get their house in order. As you've helpfully pointed out, 0:10:06.840 --> 0:10:10.160 that's been going on since the time of Sewers and 0:10:10.320 --> 0:10:12.559 the friendship had enough. But I think it's likely they 0:10:12.559 --> 0:10:16.720 will grant the extension till the thirty one January. Then 0:10:16.760 --> 0:10:19.400 the big question is will be won election and what 0:10:19.520 --> 0:10:22.320 effect might the fact that we haven't left had on 0:10:22.360 --> 0:10:25.720 the Tory prospects in the election. Catherine Bernard with us 0:10:25.760 --> 0:10:29.240 a British legal scholar, which barely describes her accomplishments. She 0:10:29.400 --> 0:10:34.319 is a fellow of Trinity College at Cambridge. Professor Barnard, 0:10:34.520 --> 0:10:38.800 I am looking at the complexities of the parliamentary voting 0:10:38.920 --> 0:10:44.240 system and Constituencies Act of two thousand and eleven. Is 0:10:44.360 --> 0:10:49.600 all of this insanity coming out of this revolutionary change 0:10:49.760 --> 0:10:55.760 in Parliament eight years ago? Well, partly you're right, but 0:10:55.840 --> 0:11:00.200 there's another act that has really changed the dynamics, and 0:11:00.280 --> 0:11:04.439 that's the Sixth Term of Parliament's Act. And that Act says, 0:11:04.600 --> 0:11:06.760 in order to call an election out of sequence that 0:11:06.840 --> 0:11:09.199 we know we have elections every five years, you need 0:11:09.240 --> 0:11:12.920 to have two thirds majority in Parliament. And we're in 0:11:12.920 --> 0:11:15.600 a very unusual situation because usually the Opposition are jumping 0:11:15.679 --> 0:11:17.920 up and down saying, oh, yes, we absolutely want an 0:11:17.920 --> 0:11:20.240 election because we want to replace you lot in government. 0:11:20.880 --> 0:11:23.680 But this time Labor is saying, actually, we're not very keen, 0:11:24.000 --> 0:11:26.760 one because it's good to keep Boris Johnson dangling on 0:11:26.760 --> 0:11:29.520 the string, and secondly because Labors not actually convinced it 0:11:29.559 --> 0:11:31.960 would win the election if there was one. So, Catherine, 0:11:32.000 --> 0:11:34.199 let's talk about where we have actually made some progress 0:11:34.320 --> 0:11:37.640 in the last six weeks. The Prime Minister has gone 0:11:37.640 --> 0:11:39.560 from saying that he would rather be dead in a 0:11:39.640 --> 0:11:42.920 ditch than remain in the EU but loot beyond October 0:11:42.960 --> 0:11:46.320 thirty one with or without a deal, and now he 0:11:46.440 --> 0:11:50.120 is saying that we will leave the EU with this deal. 0:11:50.480 --> 0:11:52.240 I think that's the big takeaway for a lot of people, 0:11:52.320 --> 0:11:54.640 not just for markets, but just more broadly, that the 0:11:54.720 --> 0:11:58.800 chances of a hard Brexit so to speak, may not 0:11:58.920 --> 0:12:02.000 have completely been reserve holved, but they have receded and 0:12:02.080 --> 0:12:05.080 quite marked the Catherine, would you agree with that. I 0:12:05.120 --> 0:12:09.760 agree they receded on the one of October. It's not 0:12:09.920 --> 0:12:13.319 clear when they've receded on the thirty one January, assuming 0:12:13.360 --> 0:12:16.240 that's a date for the extension. It's also not clear 0:12:16.400 --> 0:12:18.920 even if we can overcome those hurdles and the web, 0:12:18.960 --> 0:12:22.439 remember that's the domestic piece of legislation giving effect to 0:12:22.520 --> 0:12:26.560 Boris Johnson, treason may feel that even the web goes through. 0:12:26.600 --> 0:12:28.400 What we do is we go into what's called a 0:12:28.440 --> 0:12:32.080 period of transition, which is essentially status quo, but there 0:12:32.160 --> 0:12:34.600 is a big trap door at the end of that transition, 0:12:35.240 --> 0:12:38.360 and if there's no future deal concluded, that's on what 0:12:38.440 --> 0:12:41.720 the future relationship that we end up with no deal 0:12:41.800 --> 0:12:44.840 at that moment, and that's what some of the remainder 0:12:45.120 --> 0:12:48.959 orban no no deal politicians are really worried about. At 0:12:49.000 --> 0:12:53.960 this moment. Do the other parties, besides a diminished labor 0:12:54.160 --> 0:12:57.439 and the Conservatives, that all the other parties do they 0:12:57.480 --> 0:13:00.199 have quote unquote power? Do they have a a in 0:13:00.320 --> 0:13:06.480 the process forward? Well, they do because until a single 0:13:06.520 --> 0:13:10.240 party gets majority in Parliament, they hold the balance of power. 0:13:10.640 --> 0:13:13.679 And the party you need to watch particularly is the DUP, 0:13:13.840 --> 0:13:18.160 the Democratic Union because they only have ten seats. But 0:13:18.280 --> 0:13:21.040 remember they were in what's called a confidence and supply 0:13:21.160 --> 0:13:26.000 agreement with the Conservatives and that gave the Conservatives of 0:13:26.240 --> 0:13:32.600 their majority before one were thrown out of the Conservative part. 0:13:33.280 --> 0:13:37.120 What's interesting is DUP very cross with Boris Johnpson at 0:13:37.120 --> 0:13:41.079 the moment. They don't like his new deal, and yesterday 0:13:41.679 --> 0:13:45.680 on the motion they voted against to the man the 0:13:45.720 --> 0:13:49.400 Conservative position Catherine Barnard, thank you so much, from Cambridge 0:13:49.480 --> 0:14:09.240 University as well. She has prodigious math chops with black Rock. 0:14:09.679 --> 0:14:11.720 We lee with us right now and John, A lot 0:14:11.720 --> 0:14:16.120 of this is the dynamics in the known unknowns within 0:14:16.120 --> 0:14:18.319 the fixed in com market. Can we agree John before 0:14:18.320 --> 0:14:21.200 we go to Wally, that there's a new belief in 0:14:21.320 --> 0:14:24.840 a lower rate regime over the last ninety days, over 0:14:24.840 --> 0:14:27.120 the last year. I think that's been cemented in a 0:14:27.120 --> 0:14:28.840 lot of people's minds. The other story we've got to 0:14:28.840 --> 0:14:31.120 talk about it is just the amount of flows into 0:14:31.160 --> 0:14:34.000 Europe of all places. Waite joining us now black Rock 0:14:34.080 --> 0:14:38.200 head of Ice shares a mere investment strategy M E 0:14:38.320 --> 0:14:41.440 M E A you know with Mia. Yeah, they're like 0:14:41.480 --> 0:14:45.320 a but but they didn't have that. Yeah, Okay, these 0:14:45.320 --> 0:14:48.520 are conversations we can do in a commercial broke Okay, Wiley, 0:14:49.160 --> 0:14:50.920 that just don't go there. Let's talk about Europe and 0:14:50.920 --> 0:14:53.080 the inflow. Shall we your thoughts on what we have 0:14:53.120 --> 0:14:58.880 seen through September into October? And why? Um? Yeah, wish 0:14:58.920 --> 0:15:02.000 I could join your other conversation during the commercial break. Yes, 0:15:02.080 --> 0:15:06.000 we're starting to speak or maybe not. Um, Yes, we're 0:15:06.040 --> 0:15:09.480 starting to see inflows into European equities. And this is 0:15:09.560 --> 0:15:14.280 really um notable and important because on a year today basis, 0:15:14.320 --> 0:15:18.480 we're still having closed to a hundred billion dollars out 0:15:18.520 --> 0:15:20.960 of European equities and the flows are only starting to 0:15:21.080 --> 0:15:23.800 tentatively come back. In part of that have to do 0:15:23.920 --> 0:15:27.800 with the fact that some of the uh non risks 0:15:27.840 --> 0:15:31.840 to markets incrementally improving. So if you think about the 0:15:31.960 --> 0:15:36.000 US China trade, the escalation, if you think about the Brexit, 0:15:36.160 --> 0:15:39.680 incremental improvements that has boosted sentiments. But we're talking about 0:15:39.920 --> 0:15:42.880 really coming from very very low base because most of 0:15:42.880 --> 0:15:45.920 the investors that we stick to under own Europe under 0:15:45.960 --> 0:15:50.880 on European aquitis, specifically record outflows followed by record inflows. 0:15:51.280 --> 0:15:54.000 Real what does that say about how fragile sentiment is 0:15:54.200 --> 0:15:58.520 at the moment, Well, it's very junky, right, So if 0:15:58.560 --> 0:16:02.840 we have this interview yesterday, this time will be totally 0:16:02.880 --> 0:16:06.840 talking about very very different mood music compared to what 0:16:06.880 --> 0:16:09.560 we are speaking to today. So even this, like a 0:16:09.680 --> 0:16:13.480 matter of twenty four hours, can change sentiments completely, which 0:16:13.520 --> 0:16:15.960 is why we think that it is so important to 0:16:16.080 --> 0:16:19.440 build portfolio resilience no matter how good you feel, no 0:16:19.480 --> 0:16:23.960 matter how good market feel, especially given how much treasury 0:16:24.000 --> 0:16:26.800 and European government bonds have pulled back in recent weeks, 0:16:27.040 --> 0:16:30.440 they actually offer interesting entry point to build that portfolio 0:16:30.480 --> 0:16:32.320 resilience which you're going to need for a long time. 0:16:32.480 --> 0:16:34.960 We should point out a mia folks is a wonderful 0:16:35.000 --> 0:16:38.680 abbreviation actually really works for Europe, the Middle East and Africa. 0:16:38.760 --> 0:16:42.600 That's used across all of global Wall Street and Walie. 0:16:42.640 --> 0:16:47.280 Of course out of I shares that well, we're jogging free. 0:16:48.920 --> 0:16:53.480 I didn't know. That's amazing how Wikipedia can save me. Really, 0:16:53.640 --> 0:16:55.040 when I look at this and I want to go 0:16:55.080 --> 0:16:57.840 back again to this important five pages of the I 0:16:58.040 --> 0:17:01.680 m F. Everybody is a yielder had right now and 0:17:01.840 --> 0:17:05.639 other nations are loading up on US high yield and 0:17:06.160 --> 0:17:09.840 even moderate yield paper. Is that a source of concern 0:17:10.040 --> 0:17:13.320 for you? Do you see just this addiction to I've 0:17:13.359 --> 0:17:18.560 gotta own US paper? Um? Yes, we have seen a 0:17:18.640 --> 0:17:24.520 lot of demand for optically higher ulding US fixed income markets, 0:17:24.560 --> 0:17:27.480 and that applies to high but it applies to government 0:17:27.480 --> 0:17:32.080 bonds as well. Speaking to India investors here based in Europe, 0:17:32.440 --> 0:17:36.560 the level of income that one can get is significantly 0:17:36.560 --> 0:17:38.879 lower than than than than what one can get in 0:17:38.880 --> 0:17:44.280 the US. But the important UH concerned consideration here is 0:17:44.320 --> 0:17:46.920 also haging costs. Right when it comes to fixing income, 0:17:47.119 --> 0:17:50.280 especially when it comes to investing in developed market fix 0:17:50.320 --> 0:17:53.919 income exposures, clients oftentimes have to hatch back into their 0:17:53.960 --> 0:17:57.639 base currency. So the optical you'd pick up then that 0:17:57.640 --> 0:18:01.640 that one gets actually get eroded quite a lot when 0:18:01.760 --> 0:18:06.600 you convert US exposure back to your Euro based currency, 0:18:06.760 --> 0:18:13.040 which is why that the demand is there, but not crazily. 0:18:13.480 --> 0:18:18.000 So now back to US high market UH with we 0:18:18.080 --> 0:18:21.120 have seen actually influenced into the US high old market 0:18:21.320 --> 0:18:25.879 and whilst too much frost should be a source of concern, 0:18:25.920 --> 0:18:29.320 but if you look at the default profile, it's not 0:18:29.920 --> 0:18:33.040 biking even at this point in the in the in 0:18:33.080 --> 0:18:36.680 the late cycle, and given the very the nine founding environments, 0:18:37.080 --> 0:18:39.320 we definitely pay a lot of attention to it, but 0:18:39.520 --> 0:18:43.439 currently not a significant source of stress. What's the foreign 0:18:43.440 --> 0:18:47.640 bid like in European fixed income right now? What what's 0:18:47.680 --> 0:18:50.639 the foreign what's the foreign bid? The foreign demand in 0:18:50.680 --> 0:18:55.679 European fixed income strong? Yeah, absolutely, um. Some of the 0:18:55.760 --> 0:18:59.000 clients that we speak to in APEX, for example, Japanese 0:18:59.119 --> 0:19:04.080 investors have been a consistent source of the deed uh 0:19:05.119 --> 0:19:10.560 a buyer also sovereign Semichael European government bonds. Even when 0:19:10.600 --> 0:19:13.520 you converted back into Japanese, YENNI looks and it looks, 0:19:14.000 --> 0:19:19.359 it still looks attractive. And frankly, domestic investors are also 0:19:19.840 --> 0:19:23.200 buying fixed income. You think about first of November, Quey 0:19:23.359 --> 0:19:30.840 starts again. Um, that should sustain the demand for government bonds. 0:19:30.840 --> 0:19:33.000 But as a corporate bound high grade, well, thank you 0:19:33.040 --> 0:19:35.240 so much. It is with black Rock. We greatly appreciate 0:19:35.240 --> 0:19:39.960 her times this morning. We always inform here at Bloomberg Surveillance. 0:19:40.000 --> 0:19:42.400 As we look at email, we would also note ABA 0:19:42.960 --> 0:19:46.360 is the first names the letter acronymic kind of thing 0:19:46.520 --> 0:19:51.840 of Agnetha, Bjorn, Benny and Annie Freed. Why why I 0:19:52.000 --> 0:19:54.960 just we want to inform we got an email. I'm 0:19:54.960 --> 0:19:57.720 not gonna lie. Actually didn't know that. Actually I didn't 0:19:57.760 --> 0:20:13.560 know that either. Okay, here's what we're gonna do it 0:20:13.720 --> 0:20:16.800 by popular claim, we are thrilled to bring you Mr Galloway, 0:20:16.800 --> 0:20:18.600 Scott Galloway at my book of the Year a couple 0:20:18.600 --> 0:20:20.880 of years ago on before, I still recommend to throw 0:20:20.960 --> 0:20:23.480 it at the nearest smart child you have and say 0:20:23.480 --> 0:20:26.679 shut up and read this on all this technology and 0:20:26.720 --> 0:20:28.800 the way he writes and abruptly hits you over the 0:20:28.840 --> 0:20:33.200 head an Amazon, and he is needless to saying out front, 0:20:33.680 --> 0:20:36.199 what are we calling it? That we disaster, that we 0:20:35.680 --> 0:20:38.639 can do, we work whatever? Can? We give him a 0:20:38.640 --> 0:20:41.200 massive shout out before we bring him in because Scott 0:20:41.240 --> 0:20:44.480 won't say this about himself. Scott has been so so 0:20:44.600 --> 0:20:46.639 critical of this company, and I've seen the amount of 0:20:46.680 --> 0:20:49.520 abuse he's taken from the Silicon Valley guys who have 0:20:49.560 --> 0:20:53.040 tried to push back aggressively. Of the last two Unicorn crew, 0:20:53.200 --> 0:20:56.440 Scott was right, the Union crew with debt the Union, 0:20:56.680 --> 0:21:00.000 the Unicorn with debt wrong. I want to bring its 0:21:00.000 --> 0:21:02.560 got Nascot got away n y U Stone Professor, Good 0:21:02.560 --> 0:21:05.800 morning to Scott, good morning and thanks for the kind words. 0:21:05.840 --> 0:21:10.000 How do you think this ends? Uh? My guess is 0:21:10.960 --> 0:21:14.480 I think this is more a cautionary tale that's historic. 0:21:14.560 --> 0:21:16.560 I think the company will either be a nice little 0:21:16.600 --> 0:21:19.720 coat working space it's worth three to five billion, or 0:21:19.880 --> 0:21:22.760 we have some sort of restructuring in a year to 0:21:22.880 --> 0:21:25.440 eighteen months. It's still a company with forty three billion 0:21:25.440 --> 0:21:29.199 dollars in long term obligations over fifteen years, and it's 0:21:29.240 --> 0:21:33.160 difficult to see how this company survives and cuts cost 0:21:33.200 --> 0:21:36.480 cuts costs as fast as they need to, so either 0:21:36.520 --> 0:21:40.960 as much smaller company or bankruptcy. In two thousand and twenty, 0:21:41.240 --> 0:21:43.120 Scott in the blame game, a lot of people are 0:21:43.119 --> 0:21:45.240 just looking at Adam Newman. How much attention should we 0:21:45.280 --> 0:21:47.359 be paying to the likes of soft bank and the 0:21:47.440 --> 0:21:51.800 Vision Fund. Well, you know, Adam Newman makes for a 0:21:51.880 --> 0:21:54.120 more interesting story, but the reality is if you tell 0:21:54.160 --> 0:21:56.440 a thirty year old male that he's Jesus Christ, who's 0:21:56.440 --> 0:21:58.920 inclined to believe you the fiducia wait wait, wait, wait, 0:21:58.920 --> 0:22:02.560 wait do we do that? Was Pharaoh? Every day? Every day? 0:22:03.160 --> 0:22:08.680 Ignore and Scott carry on place. Yeah, look, the fiduciaries here, 0:22:08.760 --> 0:22:10.879 we're not acting as fiduciaries. And at some point the 0:22:10.920 --> 0:22:15.399 limited partners are going to ask uh Massioshi san, you know, 0:22:15.480 --> 0:22:19.840 how can you give somebody one point seven billion dollars 0:22:19.960 --> 0:22:22.560 which is more than eBay paid for PayPal to get 0:22:22.600 --> 0:22:24.160 out of the way. So that's what you could pay 0:22:24.240 --> 0:22:29.080 severance two employees. This is the big learning here will 0:22:29.119 --> 0:22:32.760 be the dual class shareholder structures combined with the idolatry 0:22:32.800 --> 0:22:36.520 of innovators needs more scrutiny that power corrupts, and they 0:22:36.560 --> 0:22:39.000 put too much power in the hands of one individual 0:22:39.080 --> 0:22:41.119 and that was out of him. Tim Colpin and Shuley 0:22:41.200 --> 0:22:43.560 Ran have a brilliant essay. Washington Post picked it up 0:22:43.560 --> 0:22:46.680 as well off Bloomberg Opinion and and and it goes 0:22:46.720 --> 0:22:49.400 to Galloway one on one, which is we work will 0:22:49.440 --> 0:22:54.080 be an associate of soft Bank. The accounting is really suspect. 0:22:54.160 --> 0:22:57.480 And the announcements of the last number of hours, including 0:22:57.480 --> 0:23:01.399 a five million dollar consultant fee, could that happen to 0:23:01.480 --> 0:23:06.040 an American corporation if soft Bank was American, given their 0:23:06.119 --> 0:23:10.280 general counsel, given their outside council, and given any kind 0:23:10.320 --> 0:23:14.640 of accountancy and regulation. You know, I don't, I don't 0:23:14.640 --> 0:23:17.000 know the accounting. This is definitely gonna be one of 0:23:17.040 --> 0:23:18.919 the history books and we'll be teaching about this in 0:23:18.960 --> 0:23:21.400 accounting classes for a long time because they figured out 0:23:21.400 --> 0:23:24.960 a way to give commissions to fill up their office 0:23:25.000 --> 0:23:27.440 and then figured out a way to turn those commissions 0:23:27.440 --> 0:23:30.760 from expenses into revenues. So the accountant here has just 0:23:30.880 --> 0:23:34.760 gotten crazy. That the cultural divider. The most interesting thing 0:23:34.800 --> 0:23:37.280 here in terms of it contrast and cultures is I 0:23:37.320 --> 0:23:40.000 do believe This will go down as the most expensive 0:23:40.200 --> 0:23:44.080 or costly exercise and saving face in the history of 0:23:44.080 --> 0:23:48.280 the private markets, because there really isn't a bowl case 0:23:48.520 --> 0:23:50.840 or an economic case for putting seven or eight billion 0:23:50.840 --> 0:23:53.640 dollars in good capital after bad here. And the reason 0:23:54.400 --> 0:23:56.600