1
00:00:00,320 --> 00:00:04,160
Speaker 1: Who you put your trust in matters. Investors have put

2
00:00:04,200 --> 00:00:07,640
Speaker 1: their trust in independent registered investment advisors to the tune

3
00:00:07,640 --> 00:00:12,240
Speaker 1: of four trillion dollars. Why learn more and find your

4
00:00:12,240 --> 00:00:28,240
Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.

5
00:00:28,640 --> 00:00:32,360
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

6
00:00:32,400 --> 00:00:37,440
Speaker 1: insight from the best in economics, finance, investment, and international relations.

7
00:00:37,840 --> 00:00:42,440
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and

8
00:00:42,520 --> 00:00:49,280
Speaker 1: of course on the Bloomberg I've gotta say it's my

9
00:00:49,320 --> 00:00:51,400
Speaker 1: fourth day here on Bloomberg Surveillance and we've had two

10
00:00:51,400 --> 00:00:56,600
Speaker 1: Nobel Laureates in. That speaks wonderfully, I think to the

11
00:00:56,600 --> 00:00:58,600
Speaker 1: the quality this year. I want to bring in at

12
00:00:58,720 --> 00:01:01,240
Speaker 1: Edmund Phelps. He's McVicker pre is your political economy at Columbia,

13
00:01:01,240 --> 00:01:03,560
Speaker 1: also the head of the Center on Capitalism and Society.

14
00:01:03,600 --> 00:01:05,720
Speaker 1: The rewarded the Nobel in two thousand six for his

15
00:01:06,200 --> 00:01:10,680
Speaker 1: analysis of intertemporal tradeoffs in macro economic policy. Let me

16
00:01:10,760 --> 00:01:12,600
Speaker 1: kick things off just with a bit of news. We

17
00:01:12,640 --> 00:01:17,440
Speaker 1: got these five minutes yesterday, some intelligence, some insight here

18
00:01:17,480 --> 00:01:20,640
Speaker 1: into what the committee is thinking about inflation. When you

19
00:01:20,680 --> 00:01:24,280
Speaker 1: look at the inflation target. Today at the FED is

20
00:01:24,280 --> 00:01:26,800
Speaker 1: wrestling with what what do you see there? Are are they?

21
00:01:26,920 --> 00:01:28,600
Speaker 1: Are they making sense to you what they're trying to do?

22
00:01:29,959 --> 00:01:34,080
Speaker 1: And well, I did hate to say yes or no.

23
00:01:34,800 --> 00:01:41,119
Speaker 1: I'd like to straddle a bit on that. Uh, they

24
00:01:41,160 --> 00:01:46,240
Speaker 1: are well meaning and in being concerned that money remain

25
00:01:46,840 --> 00:01:52,920
Speaker 1: easy enough to uh facilitate people getting back into the

26
00:01:53,040 --> 00:01:57,880
Speaker 1: labor force. As I'm sure you know, um participation rates,

27
00:01:58,480 --> 00:02:02,760
Speaker 1: rate of participation of people in the labor force, employed

28
00:02:02,840 --> 00:02:06,640
Speaker 1: or unemployed, it has been going down and down and

29
00:02:06,720 --> 00:02:09,320
Speaker 1: down and down and down for for four or five

30
00:02:09,320 --> 00:02:15,000
Speaker 1: decades now, and took another bump down with the financial crisis.

31
00:02:15,320 --> 00:02:19,000
Speaker 1: So the FED is very hoping that that they're easy

32
00:02:19,040 --> 00:02:24,919
Speaker 1: money policy will will uh facilitate a flow of these

33
00:02:24,919 --> 00:02:27,760
Speaker 1: people who are not in the labor force back into it.

34
00:02:28,440 --> 00:02:31,440
Speaker 1: But I think that I think that that you know,

35
00:02:31,480 --> 00:02:35,000
Speaker 1: some of that may be possible, but um, there's just

36
00:02:35,040 --> 00:02:38,280
Speaker 1: a mountain of people who have left the labor force

37
00:02:38,320 --> 00:02:40,040
Speaker 1: and have been out of it for a long time.

38
00:02:40,680 --> 00:02:44,440
Speaker 1: Despicial rates, as as said, have been falling for four

39
00:02:44,560 --> 00:02:47,320
Speaker 1: or five decades. I don't think in the space of

40
00:02:47,320 --> 00:02:49,760
Speaker 1: a year or two the FED can unwind that you've

41
00:02:49,760 --> 00:02:54,040
Speaker 1: written about the difficulty the FED faces targeting an unemployment

42
00:02:54,080 --> 00:02:56,320
Speaker 1: rate and targeting the participation rate at the same time.

43
00:02:56,320 --> 00:02:59,239
Speaker 1: They can't have both. Well, yeah, it didn't. It doesn't

44
00:02:59,240 --> 00:03:01,680
Speaker 1: make any sense to me. I commented on that in

45
00:03:01,840 --> 00:03:05,920
Speaker 1: a Well Street Journal piece I wrote last month that

46
00:03:06,480 --> 00:03:11,600
Speaker 1: it's it's uh paradoxically to the extent that they're successful

47
00:03:12,240 --> 00:03:17,480
Speaker 1: in in and and getting more participation, that's that's going

48
00:03:17,560 --> 00:03:22,720
Speaker 1: to involve folks who are relatively unemployment prone, and so

49
00:03:23,919 --> 00:03:27,839
Speaker 1: the FED will be raising the measured unemployment rate as

50
00:03:27,880 --> 00:03:32,040
Speaker 1: they reduce as they increase the labor force participation rate.

51
00:03:32,680 --> 00:03:34,960
Speaker 1: I got we could go to NED for like two

52
00:03:34,960 --> 00:03:38,640
Speaker 1: hours here on productivity and dynamism. I want to talk

53
00:03:38,680 --> 00:03:41,080
Speaker 1: to you about a newly minted word which is not

54
00:03:41,400 --> 00:03:46,520
Speaker 1: in the Phelps a language, which is evidence. We have

55
00:03:46,640 --> 00:03:53,040
Speaker 1: central banks looking for evidence or data dependency or forward guidance.

56
00:03:53,160 --> 00:03:58,120
Speaker 1: In your wonderful Nobel Prize speech and memo, there's a

57
00:03:58,200 --> 00:04:02,000
Speaker 1: discussion you have in a footnote about ex post in

58
00:04:02,200 --> 00:04:06,320
Speaker 1: ex ante, what does central banks do? If you're teaching

59
00:04:06,600 --> 00:04:10,400
Speaker 1: with the glorious Phelp simplicity, You got your graph paper,

60
00:04:10,720 --> 00:04:13,880
Speaker 1: your number two pencil and you're the king of basics.

61
00:04:14,400 --> 00:04:19,480
Speaker 1: Can a central bank get out front x ante or

62
00:04:19,520 --> 00:04:23,800
Speaker 1: are they by definition x post After the fact, Well,

63
00:04:23,839 --> 00:04:30,000
Speaker 1: I the FED has some pretty powerful weapons at its disposal.

64
00:04:30,600 --> 00:04:33,040
Speaker 1: It can make a mess of things with those weapons

65
00:04:33,360 --> 00:04:36,800
Speaker 1: if it's not careful. The question is to what extent

66
00:04:36,880 --> 00:04:40,360
Speaker 1: can it do good? After all, markets are pretty clever

67
00:04:40,800 --> 00:04:44,920
Speaker 1: at at allocating people, and there's usually a fair amount

68
00:04:44,920 --> 00:04:48,240
Speaker 1: of sense in the way things are, so that the

69
00:04:49,920 --> 00:04:54,320
Speaker 1: FED cannot achieve a whole lot of good. It can

70
00:04:54,400 --> 00:04:59,840
Speaker 1: just nudge the economy in the right direction. Um, but

71
00:05:00,040 --> 00:05:03,040
Speaker 1: I but I would regard to the situation right now.

72
00:05:03,600 --> 00:05:06,920
Speaker 1: I think the FED is just about shot at spolts

73
00:05:06,920 --> 00:05:10,200
Speaker 1: and won't be able to do very much to reducee

74
00:05:10,200 --> 00:05:16,520
Speaker 1: to to to increase boost participation, and and and it

75
00:05:16,560 --> 00:05:20,320
Speaker 1: has to be careful that it doesn't feed uh a

76
00:05:20,440 --> 00:05:23,520
Speaker 1: speculative collapse in the economy of the thing. We have

77
00:05:23,560 --> 00:05:27,159
Speaker 1: things like commercial housing, we commercial real estate. I'm sorry,

78
00:05:27,440 --> 00:05:31,440
Speaker 1: commercial real estate prices are are through the roof. A

79
00:05:31,480 --> 00:05:35,919
Speaker 1: lot of people will probably go broke. Uh. So that

80
00:05:36,120 --> 00:05:38,320
Speaker 1: kind of thing can be going on that we don't

81
00:05:38,320 --> 00:05:40,640
Speaker 1: really notice that a lot of there's a lot of

82
00:05:40,680 --> 00:05:43,800
Speaker 1: detail all sorts of things can go wrong here and

83
00:05:43,880 --> 00:05:51,480
Speaker 1: there and snowball into a financial crisis and the recession.

84
00:05:51,600 --> 00:05:54,159
Speaker 1: So the FED has to be very careful not to

85
00:05:54,240 --> 00:05:56,640
Speaker 1: push too hard. I don't mean to digress here too much,

86
00:05:56,640 --> 00:05:59,440
Speaker 1: but we have some breaking news, Tom law it's my right.

87
00:06:00,200 --> 00:06:03,560
Speaker 1: It is. Spel Prize in Literature two thousand sixteen goes

88
00:06:03,600 --> 00:06:07,200
Speaker 1: to Bob Dylan for having created new poetic expressions within

89
00:06:07,240 --> 00:06:10,400
Speaker 1: the Great American song Traditional. We can get back on

90
00:06:10,440 --> 00:06:16,159
Speaker 1: track there. This will be the first thing I did,

91
00:06:16,160 --> 00:06:18,839
Speaker 1: folks when I saw this news as I sent ken

92
00:06:18,839 --> 00:06:24,200
Speaker 1: Flio a single line for the musical utros that we do.

93
00:06:24,040 --> 00:06:27,560
Speaker 1: I don't think twice it's all right, don't mean, I

94
00:06:27,560 --> 00:06:30,640
Speaker 1: mean and And there could have been fifteen other lines

95
00:06:30,760 --> 00:06:33,960
Speaker 1: on how Mr Dylon changed our language. We'll talk about

96
00:06:34,000 --> 00:06:36,960
Speaker 1: this more right now. We talk about the change language

97
00:06:37,240 --> 00:06:42,279
Speaker 1: of economics with Edmund Phelps of Colombia ned on productivity.

98
00:06:42,600 --> 00:06:47,640
Speaker 1: Tell us your interpretation of technology today is that our

99
00:06:47,680 --> 00:06:55,440
Speaker 1: listeners friend or enemy? Uh? I think it's on on

100
00:06:55,440 --> 00:06:59,880
Speaker 1: on the whole. It's our friend, but it rubs a

101
00:07:00,000 --> 00:07:03,360
Speaker 1: lot of people the wrong way. I'm sure. I think

102
00:07:05,000 --> 00:07:07,680
Speaker 1: what happened in the US is that we lost a

103
00:07:07,720 --> 00:07:11,560
Speaker 1: lot of UH innovation that used to be going on

104
00:07:11,800 --> 00:07:17,440
Speaker 1: in the traditional industries UH industries that are mostly located

105
00:07:18,000 --> 00:07:22,000
Speaker 1: UH in the heartland of the country, and that brought

106
00:07:22,040 --> 00:07:26,760
Speaker 1: on the rust belt, and so you, innovation was drying

107
00:07:26,880 --> 00:07:32,120
Speaker 1: up in those traditional industries. At the same time, I

108
00:07:32,320 --> 00:07:36,160
Speaker 1: like to argue that these industries were keeping out newcomers,

109
00:07:36,600 --> 00:07:40,840
Speaker 1: making it hard for outsiders to innovate in those industries.

110
00:07:42,320 --> 00:07:48,280
Speaker 1: Enter Silicon Valley, they started creating new industries, mostly capital

111
00:07:48,360 --> 00:07:52,760
Speaker 1: goods industries, and and that was wonderful for a while.

112
00:07:53,160 --> 00:07:56,280
Speaker 1: That made up for the loss of innovation in the heartland.

113
00:07:56,760 --> 00:08:00,480
Speaker 1: But the trouble is, so to speak, their run into

114
00:08:00,520 --> 00:08:04,240
Speaker 1: diminishing returns. As they keep on grinding out more and

115
00:08:04,320 --> 00:08:08,360
Speaker 1: more of this UH techie output, they drive down the

116
00:08:08,440 --> 00:08:12,440
Speaker 1: prices of that stuff. So the contribution to the g

117
00:08:12,560 --> 00:08:16,800
Speaker 1: d P and the contribution to wage rates is diminishing

118
00:08:16,800 --> 00:08:20,440
Speaker 1: and diminishing and diminishing. And Phelps, thank you so much

119
00:08:20,440 --> 00:08:23,160
Speaker 1: that crazy morning. Love to have you in me. Phelps,

120
00:08:23,160 --> 00:08:25,920
Speaker 1: thank you so much. And well, I have a professor

121
00:08:25,960 --> 00:08:29,280
Speaker 1: Felis back. I would say it's highly likely my chart

122
00:08:29,320 --> 00:08:31,600
Speaker 1: of the year will be my Phelps chart. On the

123
00:08:31,720 --> 00:08:36,600
Speaker 1: collapse in American product. We're not there to the decision yet,

124
00:08:36,679 --> 00:08:47,120
Speaker 1: David Girra, but extraordinary Who you put your trust in matters.

125
00:08:47,760 --> 00:08:51,640
Speaker 1: Investors have put their trust in independent registered investment advisors

126
00:08:51,640 --> 00:08:56,000
Speaker 1: to the tune of four trillion dollars. Why they see

127
00:08:56,040 --> 00:08:59,800
Speaker 1: their role is to serve, not sell. That's why Charles S.

128
00:09:00,000 --> 00:09:02,520
Speaker 1: Bob is committed to the success of over seven thousand

129
00:09:02,559 --> 00:09:07,680
Speaker 1: independent financial advisors who passionately dedicate themselves to helping people

130
00:09:07,720 --> 00:09:11,880
Speaker 1: achieve their financial goals. Learn more and find your independent

131
00:09:11,920 --> 00:09:21,600
Speaker 1: advisor dot com. I want to continue conversation. We started

132
00:09:21,720 --> 00:09:24,679
Speaker 1: yesterday with the ultraly. We were looking at the health

133
00:09:24,760 --> 00:09:27,760
Speaker 1: of emerging markets, especially in light of demographic trends. I

134
00:09:27,800 --> 00:09:29,640
Speaker 1: want to bring in now. Unless you're the longest he's

135
00:09:29,640 --> 00:09:32,880
Speaker 1: portfolio managing the Global multi asset group at Oppenheimer Funds,

136
00:09:32,920 --> 00:09:34,559
Speaker 1: unless you're good to have you with us, good morning.

137
00:09:35,400 --> 00:09:39,640
Speaker 1: We were talking about the weight of demographic change on

138
00:09:39,760 --> 00:09:41,880
Speaker 1: emerging markets. I know that you were overweight on emerging

139
00:09:41,920 --> 00:09:44,040
Speaker 1: markets when it comes to equities, when it comes to currencies.

140
00:09:44,040 --> 00:09:46,360
Speaker 1: How concerned are you about what we're seeing in terms

141
00:09:46,360 --> 00:09:49,760
Speaker 1: of demographics in emerging markets right now? So the demographic

142
00:09:49,760 --> 00:09:53,000
Speaker 1: speech in emerging markets is really hitterogeneous. Right, you have

143
00:09:53,320 --> 00:09:57,400
Speaker 1: a very good, uh, a much better picture for example

144
00:09:57,480 --> 00:10:01,480
Speaker 1: in Latin America or in Indian particular versus um, China

145
00:10:01,559 --> 00:10:04,000
Speaker 1: and the rest of developed Asia that looks much more

146
00:10:04,040 --> 00:10:07,520
Speaker 1: like developed markets. So the question there is really um.

147
00:10:08,240 --> 00:10:11,000
Speaker 1: What's important is to to break down the borders. To

148
00:10:11,120 --> 00:10:13,640
Speaker 1: break down that concept of looking at emerging versus developed

149
00:10:13,640 --> 00:10:16,480
Speaker 1: when you invest is really uh, not only at the

150
00:10:16,520 --> 00:10:19,640
Speaker 1: company level, but but also in terms of the macroeconomic exposures.

151
00:10:20,120 --> 00:10:24,400
Speaker 1: Is how each company or economy is really exposed with

152
00:10:24,480 --> 00:10:28,560
Speaker 1: diversified set of global forces. So in many ways you

153
00:10:28,600 --> 00:10:31,520
Speaker 1: want to avoid companies that are overly dependent on a

154
00:10:32,040 --> 00:10:37,160
Speaker 1: on a domestic story because you don't have, so to speak,

155
00:10:37,559 --> 00:10:41,559
Speaker 1: business and economic diversification. So but on a global basis,

156
00:10:41,600 --> 00:10:44,920
Speaker 1: of course, we know that the only comforting demographic picture

157
00:10:45,000 --> 00:10:49,800
Speaker 1: comes from certain emerging markets. UM. The overall trend, however,

158
00:10:50,400 --> 00:10:53,600
Speaker 1: is one on a global basis, is one where it's

159
00:10:53,640 --> 00:10:57,640
Speaker 1: hard to see rising inflationary pressures. I think the the

160
00:10:57,720 --> 00:11:02,160
Speaker 1: excess savings picture that is caused by the demographic trends,

161
00:11:02,240 --> 00:11:07,880
Speaker 1: partially by the demographic trends. UM, this overall plentiful savings

162
00:11:08,040 --> 00:11:11,600
Speaker 1: picture ar used for a very low interest rate environment

163
00:11:12,040 --> 00:11:14,840
Speaker 1: for a very long period of time. Stand in Latin

164
00:11:14,880 --> 00:11:17,040
Speaker 1: America and something I heard while I was there is

165
00:11:17,080 --> 00:11:19,400
Speaker 1: you can assess the health of an economy by how

166
00:11:19,440 --> 00:11:22,080
Speaker 1: well it's able to weather both the ups and the downs.

167
00:11:22,120 --> 00:11:24,720
Speaker 1: You look at the weight that low energy prices have

168
00:11:24,760 --> 00:11:26,560
Speaker 1: had on a lot of these economies for some time.

169
00:11:27,840 --> 00:11:29,800
Speaker 1: How well positioned are they in light of that for

170
00:11:29,840 --> 00:11:31,760
Speaker 1: the next down turn? How much have they sort of

171
00:11:31,840 --> 00:11:35,959
Speaker 1: changed the trajectory of their economies to move away from

172
00:11:35,960 --> 00:11:39,920
Speaker 1: relying so heavily on oil and energy side. Unfortunately, they

173
00:11:39,960 --> 00:11:45,439
Speaker 1: really haven't yet. So every new down, meaningful downside UH

174
00:11:45,840 --> 00:11:51,400
Speaker 1: moving commodity prices, particularly oil, would would provide additional risks

175
00:11:51,600 --> 00:11:55,000
Speaker 1: to somewhat these economies. However, it's the kind of credit

176
00:11:55,080 --> 00:11:58,240
Speaker 1: shocks that we have seen late last year early this

177
00:11:58,400 --> 00:12:01,160
Speaker 1: year does a lot of the en up in that sense.

178
00:12:01,320 --> 00:12:04,920
Speaker 1: I think when you have a major economic shock like

179
00:12:04,960 --> 00:12:08,720
Speaker 1: what we had six months ago, hedging activity and more

180
00:12:08,840 --> 00:12:13,240
Speaker 1: prudent balance sheet management UH takes place. Compared to the

181
00:12:13,480 --> 00:12:17,160
Speaker 1: somewhat good times, where it's it's difficult for from a

182
00:12:17,200 --> 00:12:20,240
Speaker 1: business purpose to even imagine a type of economic shop

183
00:12:20,320 --> 00:12:22,640
Speaker 1: like the one we saw in energy prices. So I

184
00:12:22,679 --> 00:12:26,520
Speaker 1: think large largely the downs the worst downside scenario has

185
00:12:26,520 --> 00:12:34,800
Speaker 1: been addressed. But um, have have these economies reformed and

186
00:12:34,880 --> 00:12:39,600
Speaker 1: transformed enough to really move away from the classic emerging

187
00:12:39,720 --> 00:12:45,000
Speaker 1: markets equal commodities trade. Um, I don't think we're there. Um,

188
00:12:45,280 --> 00:12:48,040
Speaker 1: these countries are still very much dependent on these external shocks.

189
00:12:48,880 --> 00:12:51,480
Speaker 1: If our listeners said, I know I'm supposed to be

190
00:12:51,520 --> 00:12:56,200
Speaker 1: in international stocks, but I'm scared stiff, etcetera, etcetera, etcetera,

191
00:12:56,440 --> 00:13:00,160
Speaker 1: how would you respond. I think that's a mistake. I

192
00:13:00,160 --> 00:13:03,280
Speaker 1: think look at evaluations. I think, particularly in emerging markets,

193
00:13:03,320 --> 00:13:07,360
Speaker 1: evaluations are far more compelling than in developed markets. And also, uh,

194
00:13:07,760 --> 00:13:13,000
Speaker 1: just there is an enormous investable universe that is far

195
00:13:13,080 --> 00:13:16,720
Speaker 1: bigger than your home bias makes you realize. I think,

196
00:13:16,760 --> 00:13:20,360
Speaker 1: particularly in the US, there is a very large home

197
00:13:20,400 --> 00:13:25,280
Speaker 1: bias towards domestic stocks, and um, you just want to

198
00:13:25,320 --> 00:13:28,400
Speaker 1: be exposed. To go back to the earlier point, I

199
00:13:28,440 --> 00:13:32,079
Speaker 1: think the important thing is to be exposed to companies

200
00:13:32,280 --> 00:13:35,360
Speaker 1: that have global reach, whether they're domicile in the US

201
00:13:35,520 --> 00:13:38,920
Speaker 1: or domicile is emerging markets. It's that that is not

202
00:13:39,080 --> 00:13:43,040
Speaker 1: relevant where are you more internationally exposed if you own

203
00:13:43,080 --> 00:13:45,559
Speaker 1: a US company that has revenue sources from all over

204
00:13:45,559 --> 00:13:48,040
Speaker 1: the world, or by buying an emerging market company that

205
00:13:48,120 --> 00:13:51,679
Speaker 1: is entirely exposed to say India. We have to think

206
00:13:51,679 --> 00:13:54,960
Speaker 1: in it's it's a globalization of your thinking that has

207
00:13:55,000 --> 00:13:57,800
Speaker 1: to change. And I really know something in the blur

208
00:13:57,920 --> 00:14:01,600
Speaker 1: of the day and particularly the Brexit focus is Chinese

209
00:14:01,679 --> 00:14:05,319
Speaker 1: trade or lack thereof. Unless you're the longest with this

210
00:14:05,440 --> 00:14:09,600
Speaker 1: with Appenheimer Funds, you know it's all export, export, export.

211
00:14:10,160 --> 00:14:13,280
Speaker 1: Are you just as concerned about the dynamic the changes

212
00:14:13,559 --> 00:14:21,960
Speaker 1: of Chinese imports? You're seeing a rise in uh uh sorry,

213
00:14:22,560 --> 00:14:25,520
Speaker 1: a decrease in imports. But really I think what what

214
00:14:25,680 --> 00:14:28,720
Speaker 1: is more concerning is the is the export picture, because

215
00:14:28,840 --> 00:14:33,640
Speaker 1: it confirms the fact that in the emerging markets growth

216
00:14:33,680 --> 00:14:36,960
Speaker 1: model is still broken in the sense that with with

217
00:14:37,040 --> 00:14:41,360
Speaker 1: slowing global trade, with lack of demand from from developed

218
00:14:41,400 --> 00:14:44,520
Speaker 1: markets in particular and even emerging markets in general, you

219
00:14:44,600 --> 00:14:48,160
Speaker 1: cannot have a recovery for emerging markets and China in particular,

220
00:14:48,160 --> 00:14:51,840
Speaker 1: that is still dependent on export investments China and all

221
00:14:51,880 --> 00:14:55,760
Speaker 1: of Asia. Really, the idea that the next transition is

222
00:14:55,800 --> 00:14:59,920
Speaker 1: to reduce domestic savings and increase the level of domest

223
00:15:00,040 --> 00:15:04,800
Speaker 1: the consumption to sustain that a transition into a different growth.

224
00:15:04,840 --> 00:15:06,840
Speaker 1: I've heard that for I'm going to say ten years,

225
00:15:06,840 --> 00:15:09,200
Speaker 1: and I agree with you with great respect that the

226
00:15:09,360 --> 00:15:14,320
Speaker 1: urgency is immediate. The trend is ugly. Are they hoping

227
00:15:14,440 --> 00:15:18,600
Speaker 1: for a cyclical recovery or would you suggest that these

228
00:15:18,640 --> 00:15:23,480
Speaker 1: are structural issues of China. Not to get back to growth.

229
00:15:23,520 --> 00:15:25,760
Speaker 1: I mean that we get that, but just to get

230
00:15:25,800 --> 00:15:31,520
Speaker 1: back to something normal. So with the cyclical they need to,

231
00:15:31,880 --> 00:15:35,920
Speaker 1: they need to um to, They need a cyclical recovery. However,

232
00:15:36,000 --> 00:15:38,720
Speaker 1: that is the lever but that doesn't change the structural trend,

233
00:15:38,920 --> 00:15:43,360
Speaker 1: right you you you what's happening in China is the

234
00:15:43,440 --> 00:15:46,080
Speaker 1: mirror image of the de leveraging that is happening in

235
00:15:46,080 --> 00:15:48,720
Speaker 1: the developed world. Remember ten years ago we were talking

236
00:15:48,760 --> 00:15:53,200
Speaker 1: about unsustainable consumption in the US, in the UK unsustainable

237
00:15:53,240 --> 00:15:57,800
Speaker 1: current account deficits, unsustainable propensity to level up and consume

238
00:15:57,880 --> 00:16:01,320
Speaker 1: beyond our means. The mirror image was of dead was

239
00:16:01,520 --> 00:16:07,120
Speaker 1: China capitalizing on that trend as the healthy trend of

240
00:16:07,240 --> 00:16:11,760
Speaker 1: de leveraging and normalization occurs in the developed world. Again,

241
00:16:11,840 --> 00:16:14,760
Speaker 1: the mirror image of that is the necessity for China

242
00:16:14,880 --> 00:16:18,200
Speaker 1: to transition and emerging markets in general to transition to

243
00:16:18,320 --> 00:16:24,160
Speaker 1: a different model of self dependent growth. Is the Remember

244
00:16:24,200 --> 00:16:27,760
Speaker 1: ten years ago we kept on talking about the emergence

245
00:16:27,800 --> 00:16:31,520
Speaker 1: of the of the emerging markets consumer, right, the consumers

246
00:16:31,520 --> 00:16:35,280
Speaker 1: from the emerging world. That transition is happening, but is

247
00:16:35,320 --> 00:16:39,440
Speaker 1: happening very very slowly. I look at the u N

248
00:16:39,520 --> 00:16:41,800
Speaker 1: I see it weakening here over these last few days.

249
00:16:41,880 --> 00:16:45,680
Speaker 1: The government seemingly content to let that happen. What does

250
00:16:45,720 --> 00:16:48,240
Speaker 1: that tell us about the attitude of the Chinese government

251
00:16:48,360 --> 00:16:52,080
Speaker 1: right now towards its economy. Is it letting the currency float?

252
00:16:52,680 --> 00:16:54,560
Speaker 1: Is it pursuing a path of openness that it says

253
00:16:54,560 --> 00:16:58,640
Speaker 1: it's going to pursue. The currency is one of the

254
00:16:58,680 --> 00:17:01,120
Speaker 1: only levels really that they have left. I think the

255
00:17:01,120 --> 00:17:04,879
Speaker 1: the the need for a gradual depreciation of the currency

256
00:17:04,920 --> 00:17:07,800
Speaker 1: continues to be there, and also the willingness to do that.

257
00:17:07,920 --> 00:17:11,520
Speaker 1: I think they are not resisting that process. But for them,

258
00:17:11,560 --> 00:17:15,000
Speaker 1: what is paramount is to control the volativity, control the

259
00:17:15,119 --> 00:17:18,480
Speaker 1: sentiment that is associated to the currency. The currency is

260
00:17:18,480 --> 00:17:22,359
Speaker 1: the biggest barometer of sentiment in that market and globally

261
00:17:22,480 --> 00:17:26,920
Speaker 1: in general. Right, so, um, it's just a very difficult

262
00:17:26,960 --> 00:17:29,399
Speaker 1: transition and a very gradual one, and for them is

263
00:17:29,400 --> 00:17:34,119
Speaker 1: paramount to manage the the extremes of that transition. We

264
00:17:34,200 --> 00:17:36,800
Speaker 1: talked about the weight of commodities on a lot of

265
00:17:36,840 --> 00:17:40,040
Speaker 1: these economies. Let's talk a little bit about political risk.

266
00:17:40,040 --> 00:17:43,200
Speaker 1: We're certainly seeing that play out in South Africa right now.

267
00:17:43,680 --> 00:17:45,280
Speaker 1: Over the last few months, we were seeing it play

268
00:17:45,280 --> 00:17:48,440
Speaker 1: out in Brazil as well. Has that become the new

269
00:17:48,480 --> 00:17:50,680
Speaker 1: downside risk? Is? Is political risk now the thing that's

270
00:17:50,680 --> 00:17:54,520
Speaker 1: the greatest way on these emerging market economies? I wouldn't.

271
00:17:54,800 --> 00:17:57,360
Speaker 1: I wouldn't be too concerned about it. I think what

272
00:17:57,400 --> 00:18:01,040
Speaker 1: we have seen in Turkey was definitely uh concerning. What

273
00:18:01,040 --> 00:18:04,879
Speaker 1: we're seeing in South Africa is uh disappointing, But unfortunately

274
00:18:05,119 --> 00:18:09,199
Speaker 1: is emerging markets business as usual, right so uh. What

275
00:18:09,280 --> 00:18:11,359
Speaker 1: I think is more concerning, to be honest, is the

276
00:18:11,400 --> 00:18:15,560
Speaker 1: fact that developed markets are converging to that political uncertainty.

277
00:18:15,960 --> 00:18:19,959
Speaker 1: Now we're not talking about jailing finance ministers or or coups,

278
00:18:20,320 --> 00:18:23,720
Speaker 1: but on a global scale, I think what is more

279
00:18:23,760 --> 00:18:27,600
Speaker 1: concerning is the level of political uncertainty and economic policy

280
00:18:27,640 --> 00:18:31,000
Speaker 1: uncertainty that we're seeing in the Eurozone, in the UK,

281
00:18:31,400 --> 00:18:34,040
Speaker 1: obviously Brexit there is part of the nexus. But also

282
00:18:34,080 --> 00:18:36,720
Speaker 1: in the United States unless the longest thank you so much,

283
00:18:36,720 --> 00:18:53,800
Speaker 1: greatly appreciated, you get lucky you could stand calendar with

284
00:18:53,880 --> 00:18:57,280
Speaker 1: you amid the political madness, or maybe we can actually

285
00:18:57,280 --> 00:19:01,480
Speaker 1: talk about our fiscal policy. But first, as we're doing

286
00:19:01,520 --> 00:19:06,520
Speaker 1: through the morning. Stanley Collender on Bob Dylan, I'm guessing

287
00:19:06,640 --> 00:19:09,680
Speaker 1: stand there was a point across the four or five

288
00:19:09,800 --> 00:19:12,560
Speaker 1: or six Bob Dylan's that we all know where you

289
00:19:12,680 --> 00:19:16,399
Speaker 1: listened early and often. Oh look on the general on

290
00:19:16,440 --> 00:19:19,080
Speaker 1: the on that generation when he was, you know, making

291
00:19:19,119 --> 00:19:21,399
Speaker 1: it big for the first time, and everybody was you know,

292
00:19:21,440 --> 00:19:23,920
Speaker 1: I was in school. Um, I can't tell you the

293
00:19:24,000 --> 00:19:26,000
Speaker 1: number of nights we sat around in the dorm litening.

294
00:19:26,600 --> 00:19:29,000
Speaker 1: I had someone say to this morning, I don't get it.

295
00:19:29,080 --> 00:19:32,439
Speaker 1: Why is it literature? Explained to us from where you

296
00:19:32,480 --> 00:19:36,000
Speaker 1: set and where I said where it was the cadence

297
00:19:36,280 --> 00:19:40,200
Speaker 1: in the pace. There were many other people doing what

298
00:19:40,240 --> 00:19:44,200
Speaker 1: Bob Dylan did, but he did it with a certain cadence,

299
00:19:44,280 --> 00:19:47,480
Speaker 1: particularly in the two early Bob Dylan's. Well you know,

300
00:19:47,520 --> 00:19:51,159
Speaker 1: I look, I started school at a small college in Pennsylvania.

301
00:19:51,160 --> 00:19:53,520
Speaker 1: Frankly to Marshall and remember going to the English teacher

302
00:19:53,600 --> 00:19:57,000
Speaker 1: with lyrics from Bob Dylan song because we were discussing

303
00:19:57,040 --> 00:20:00,240
Speaker 1: the poetry and the teacher had never seen any thing

304
00:20:00,240 --> 00:20:02,640
Speaker 1: from Bob Dylan before, and he just sat there stunned

305
00:20:02,680 --> 00:20:05,159
Speaker 1: by by the beauty. And like you said, the cadence

306
00:20:05,160 --> 00:20:08,440
Speaker 1: to the rhythm, um and and the feeling, the emotion

307
00:20:08,480 --> 00:20:11,040
Speaker 1: that was behind the world. And we'll get here to

308
00:20:11,080 --> 00:20:13,520
Speaker 1: the fiscal policy in a moment. I would just suggest,

309
00:20:13,600 --> 00:20:17,040
Speaker 1: folks within that era, the only thing that approaches it

310
00:20:17,080 --> 00:20:20,119
Speaker 1: was Mr Simon and Mr Garfuncle's book Ends, which was

311
00:20:20,160 --> 00:20:24,000
Speaker 1: the same cadence in pace stem calendar. We need to

312
00:20:24,040 --> 00:20:28,520
Speaker 1: book end an election into the morning after in the

313
00:20:28,560 --> 00:20:31,160
Speaker 1: morning after, are we going to shut our government down?

314
00:20:32,240 --> 00:20:36,920
Speaker 1: Probably not the morning after, but excuse me, um, but

315
00:20:37,400 --> 00:20:39,960
Speaker 1: you could be within about four weeks of the election.

316
00:20:40,000 --> 00:20:43,840
Speaker 1: That is, you know, the next next continuing resolution expires

317
00:20:43,920 --> 00:20:46,280
Speaker 1: December ninth, and it's not clear that they're gonna have

318
00:20:46,359 --> 00:20:48,800
Speaker 1: enough time to do much of anything. So I would

319
00:20:48,840 --> 00:20:51,080
Speaker 1: be willing to bet they do a one week continuing

320
00:20:51,119 --> 00:20:53,719
Speaker 1: resolution to get to about the sixteenth of December. At

321
00:20:53,800 --> 00:20:57,800
Speaker 1: that point one week um and and at that point, um,

322
00:20:57,840 --> 00:20:59,960
Speaker 1: that's when all hell will break loose in Washington again.

323
00:21:00,000 --> 00:21:01,760
Speaker 1: And if there's going to be a big budget fight

324
00:21:01,840 --> 00:21:04,720
Speaker 1: this year, let's talk about the definition of progress. Stand.

325
00:21:05,440 --> 00:21:07,879
Speaker 1: We almost had a government shutdown, but we averted it

326
00:21:07,920 --> 00:21:12,040
Speaker 1: by a matter of days a few weeks ago, not hours.

327
00:21:12,080 --> 00:21:15,960
Speaker 1: I guess you can call that progress. Um, I suppose, David.

328
00:21:16,000 --> 00:21:17,840
Speaker 1: How come every time you and I talk it's always

329
00:21:17,880 --> 00:21:23,200
Speaker 1: about a shutdown. I'm happy for the Dilan news infusing this, yes, yeah, um,

330
00:21:23,280 --> 00:21:26,080
Speaker 1: but you know what they did was basically punted the

331
00:21:26,160 --> 00:21:29,879
Speaker 1: decision to December. Um, so you know, we're we're not

332
00:21:29,960 --> 00:21:32,200
Speaker 1: out of the wood yet, especially if they're going to

333
00:21:32,280 --> 00:21:34,760
Speaker 1: be some longer term decisions. A lot will depend on

334
00:21:35,200 --> 00:21:39,480
Speaker 1: the election results. If the Democrats take over the House

335
00:21:39,520 --> 00:21:42,320
Speaker 1: and Senate and the White House, Republicans may decide they

336
00:21:42,359 --> 00:21:45,240
Speaker 1: want to try to do something in you know, in December,

337
00:21:45,320 --> 00:21:48,480
Speaker 1: to to get their point across. So while they's way,

338
00:21:48,520 --> 00:21:56,399
Speaker 1: they've still got control of both houses. Excuse me again, Um, yeah, no,

339
00:21:56,440 --> 00:21:58,560
Speaker 1: I'm not going to sniff into a microphone, I promise you.

340
00:21:58,640 --> 00:22:01,960
Speaker 1: But um, this this is very much up in the air.

341
00:22:02,040 --> 00:22:06,040
Speaker 1: I mean, the uncertainty. In fact, I did a tweet

342
00:22:06,080 --> 00:22:08,480
Speaker 1: the other day saying, you know, I'm grateful that there's

343
00:22:08,480 --> 00:22:10,960
Speaker 1: only three weeks until the election or so, but I'm

344
00:22:10,960 --> 00:22:12,960
Speaker 1: not sure it's going to be much better after the election.

345
00:22:13,000 --> 00:22:15,119
Speaker 1: I think the uncertainty coming out of Washington is going

346
00:22:15,160 --> 00:22:18,320
Speaker 1: to be bad unless there's a way that no one's anticipating.

347
00:22:18,320 --> 00:22:21,400
Speaker 1: It's going to be narrow majorities in both houses with uh,

348
00:22:21,440 --> 00:22:23,800
Speaker 1: you know, with the president who may not be able

349
00:22:23,840 --> 00:22:26,000
Speaker 1: to control what's going on. So it's gonna be probably

350
00:22:26,000 --> 00:22:29,479
Speaker 1: two more years of talking shutdowns and periodic debt ceiling

351
00:22:29,480 --> 00:22:31,480
Speaker 1: fights in those types of things. Twenty five days, Stan,

352
00:22:31,560 --> 00:22:34,040
Speaker 1: but who is counting? Let me ask you lastly here

353
00:22:34,080 --> 00:22:36,480
Speaker 1: just about whether or not we will see a return

354
00:22:36,520 --> 00:22:39,680
Speaker 1: to regular order when it comes to budgeting anytime soon,

355
00:22:39,760 --> 00:22:41,520
Speaker 1: no matter what happens here in the election. Is there

356
00:22:42,040 --> 00:22:44,119
Speaker 1: is there a way you see us getting back to

357
00:22:44,160 --> 00:22:47,159
Speaker 1: a place where Congress is going through the budget process

358
00:22:47,200 --> 00:22:49,760
Speaker 1: as it's supposed to go through the budget process. Well, look,

359
00:22:49,800 --> 00:22:51,520
Speaker 1: I hate to sound like Bill Clinton, but it depends

360
00:22:51,560 --> 00:22:55,280
Speaker 1: what you mean by regular order. This is regular order now.

361
00:22:55,520 --> 00:22:57,800
Speaker 1: I don't think you're going to see regular appropriations done

362
00:22:57,800 --> 00:23:00,679
Speaker 1: anytime soon, um or I mean, look, it's been two

363
00:23:00,720 --> 00:23:02,840
Speaker 1: decades since we've had all the appropriations done by the

364
00:23:02,840 --> 00:23:05,400
Speaker 1: time the fiscal year began, and I'm not sure you're

365
00:23:05,400 --> 00:23:07,359
Speaker 1: ever going to see a budget come out of Congress again.

366
00:23:07,720 --> 00:23:09,280
Speaker 1: I guess we're gonna have to leave that. There's too

367
00:23:09,280 --> 00:23:11,680
Speaker 1: short stand. We gotta do long. We gotta have longer time.

368
00:23:12,359 --> 00:23:15,919
Speaker 1: Next time we're gonna talk about the fiscal derby coming up.

369
00:23:15,960 --> 00:23:19,280
Speaker 1: Stand calendar with the Corvus communication, David, that's sober like

370
00:23:19,359 --> 00:23:24,240
Speaker 1: he's got it right down to December nine on a date. Unfortunately,

371
00:23:24,280 --> 00:23:26,920
Speaker 1: I've seen a few reports that agree with Mr Colinder.

372
00:23:27,280 --> 00:23:32,639
Speaker 1: Thanks to Greg Valier a scathing note yesterday about oh yeah,

373
00:23:32,680 --> 00:23:36,399
Speaker 1: there's after the first Tuesday of November. Mr Vlier, you

374
00:23:36,440 --> 00:23:39,919
Speaker 1: didn't have a lot of joy to share on that moment.

375
00:23:45,880 --> 00:23:50,240
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

376
00:23:50,320 --> 00:23:55,399
Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform

377
00:23:55,520 --> 00:23:59,040
Speaker 1: you prefer. I'm out on Twitter at Tom Keene. David

378
00:23:59,119 --> 00:24:02,760
Speaker 1: Gura is at David Gura. Before the podcast, you can

379
00:24:02,880 --> 00:24:19,360
Speaker 1: always catch us worldwide. I'm Bloomberg Radio. Who you put

380
00:24:19,359 --> 00:24:23,280
Speaker 1: your trust in matters? Investors have put their trust in

381
00:24:23,280 --> 00:24:27,520
Speaker 1: independent registered investment advisors to the tune of four trillion dollars.

382
00:24:27,960 --> 00:24:34,600
Speaker 1: Why learn more and find your independent advisor dot com