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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We

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Speaker 1: have come to a deal pretty much subject to getting

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Speaker 1: it written. It will take probably three weeks, four weeks

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Speaker 1: or five weeks. That's five weeks ago Friday. We still

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Speaker 1: don't have a deal on paper substantially. I don't know

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Speaker 1: what that means, whether or not the mathematics of that is.

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Speaker 1: But you know, finally it's a pause. I mean I

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Speaker 1: looked at the chart log chart SPX is basically a

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Speaker 1: moonshot from the first week of October, and today's sort

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Speaker 1: of a pause. We have stilled Lisa Brambits with us

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Speaker 1: as well in here in New York City, and Lisa,

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Speaker 1: I just wonder whether we're starting to test the patience

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Speaker 1: of some people out there. It's close, it's close, but

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Speaker 1: it's still not here. Well, if you look at the

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Speaker 1: at credit, it's very much risk on and so if

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Speaker 1: you look at credit as a leading indicator, then perhaps

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Speaker 1: people might be losing patients with it. It's on, it's off,

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Speaker 1: it's on, it's off. But risk on is still sort

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Speaker 1: of the sort of bias underneath the market right now.

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Speaker 1: You know, the people next door Veppel's barking all the time.

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Speaker 1: They got a cat named Beta, and you know it's

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Speaker 1: just out of control. Rip up the couch. Beta is

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Speaker 1: all the rage right now? Is that. I don't know,

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Speaker 1: the guy used to run a hedge funny why not

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Speaker 1: you blew up? But but you know, I look at

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Speaker 1: the hedge fund story that Bloomberg is out today about

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Speaker 1: somebody's modeling up and as you mentioned with Lisa Shallatt,

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Speaker 1: brilliant yesterday, Morgan Stanley, fantastic, it's pile on the beta.

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Speaker 1: That's the call, Lisa shan the relationship to the broader

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Speaker 1: market behid the beta letters we may phone should get

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Speaker 1: Michael Sheller market Field Asset Management, CHAM and Michael, great

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Speaker 1: to see you, Nice to be here. Let's talk about

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Speaker 1: that at least a shadoda Morgan Stanley saying I want

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Speaker 1: a high beta trade related to that trade story related

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Speaker 1: to global growth bottoming gown, and I wanted out of Europe,

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Speaker 1: out of international markets. Does that resonate with you. You know, Yes,

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Speaker 1: so I said to you last time, last time we spoke.

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Speaker 1: But I thought that Rex said also matters a great deal.

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Speaker 1: But I think we're heading towards a period in which

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Speaker 1: our geopolitical conflicts are you know, put on hold, and

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Speaker 1: I think the deep pessimism of the summer um, you know,

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Speaker 1: as being the verse back to a more normal, leasonable

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Speaker 1: view of the world. We've had a huge sentiment shift

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Speaker 1: in the last couple of months. The debate that I

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Speaker 1: keep hearing again and again over the last couple of

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Speaker 1: weeks just how much oxygen is left in this big

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Speaker 1: rotation into cyclical trade? How much oxygen is left? What's

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Speaker 1: your time arising for this to play out? Michael months?

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Speaker 1: You know, I mean it's it's it's been at least

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Speaker 1: eighteen months in which um, you know, you've had this

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Speaker 1: sort of anti cyclical trade in place, and and and

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Speaker 1: for certain things like emerging markets that they have chronically

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Speaker 1: under be formed for you know, eight years, and you know,

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Speaker 1: eight years and counting. So you know, I think this

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Speaker 1: is the start of a pretty important change. I think

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Speaker 1: a lot of what you saw September October was simply

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Speaker 1: short covering and only now you're started to see people

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Speaker 1: start to engage their long books. They're shure you, of course,

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Speaker 1: with your claim at OSKAR grows over the years that

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Speaker 1: there's an international view here. The great debate John for

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Speaker 1: and I are hearing is the idea of stay in

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Speaker 1: US or by international Where are you on that? And

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Speaker 1: if it is international, what flavor? You know? I think

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Speaker 1: global developed um. You know again, people were sort of

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Speaker 1: chronically pessimistic about that. I I think Japan quietly is

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Speaker 1: having a reasonable cycle. I think Japan is having something

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Speaker 1: of a domestic revolution that you know, it's it's unlocked

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Speaker 1: its female population and has a participation RDE of more

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Speaker 1: than fifty, which doesn't sound like much, but it's a

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Speaker 1: lot for Japan. So you know, I think Japan has

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Speaker 1: been consistently underestimated and that's a good starting point. I'm

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Speaker 1: okay with Europe UM. And as far as the m

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Speaker 1: is concerned, you know, I'm of the you that the

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Speaker 1: Chinese economy has slowed mostly because of domestic reasons UM,

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Speaker 1: and it is within their power to be accelerated if

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Speaker 1: they feel like it should we should we unlikely in

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Speaker 1: so clear of this competition, you too, have gotten the

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Speaker 1: next ten minutes. Go ahead. Oh I just I just

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Speaker 1: knew it. I saw that twinkle in your eye and

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Speaker 1: I said, oh, this is going straight south. Well, I

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Speaker 1: do have to wonder, though, when you talk about the

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Speaker 1: developed world, how much has the trade skirmish held back

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Speaker 1: as sid appreciation versus the sort of new normal that

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Speaker 1: people talk about, the Japanification, if you will, pre the

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Speaker 1: female population coming unlocked. You know how real is that?

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Speaker 1: I think there is certainly true to the central idea

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Speaker 1: that the Europe was sort of sclerotic and doesn't grow

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Speaker 1: in the same way as the United States. And I

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Speaker 1: think it's equity indexes have suffered because they don't have

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Speaker 1: a lot of technology and it. So, you know, all

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Speaker 1: of his things are true. But it's also true that

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Speaker 1: by the end of August, people were ridiculously pessimistic about

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Speaker 1: where the global economy was going, including an especially Europe. Well,

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Speaker 1: let's talk about that. How do you want to allocate

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Speaker 1: to that story? Because if you do it at the

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Speaker 1: index level in Europe right now, just looking at the

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Speaker 1: stock six hundred, the highest waiting on the stock six hundred,

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Speaker 1: healthcare at almost fifteen percent of the index, do I

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Speaker 1: want to allocate capital to Europe at the index level,

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Speaker 1: the broader index level. You know, I think it's better

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Speaker 1: to allocate it at the index level than than than

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Speaker 1: not to allocate it at all. I think the first

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Speaker 1: money that goes back in when you have a rotation

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Speaker 1: like this does happen at the index level. So I'm

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Speaker 1: not against the index level. But but I think for

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Speaker 1: those able to do you more work, I think for

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Speaker 1: more cyclical portions of of of Europe of interesting Well,

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Speaker 1: let's talk about that. Does that include European banks. European

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Speaker 1: banks are essentially a play on interest rates that they've

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Speaker 1: become entirely captured by by by macro flows and and

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Speaker 1: you know, I think people spent a great deal time

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Speaker 1: talking about the state of the banking system. It's it's

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Speaker 1: really your view on on rates. If you think European

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Speaker 1: rates are going up, you could short the books all

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Speaker 1: or you could go long European banks. I don't think

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Speaker 1: it'd be a great deal of difference. What about German automakers, Um, again,

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Speaker 1: I think people got too pessimistic. I think that you're

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Speaker 1: buying German automakers. I am not buying German automakers, but

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Speaker 1: because I have lots of other cyclicality in my portfolio,

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Speaker 1: but I I probably wish I did a few weeks ago.

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Speaker 1: The great person here, and this goes back to your

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Speaker 1: worker over the years, Michael on commodities and the ability

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Speaker 1: to make money in commodity or to not lose money

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Speaker 1: in commodities. What do you do within a global commodity

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Speaker 1: disinflation and outright deflation? How do your reposition there? Well,

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Speaker 1: I mean it's all supply driven, really, the commodity stories

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Speaker 1: a combination of supply driven and financial flows being being

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Speaker 1: very negative over over recently, over recent years. You know,

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Speaker 1: we haven't yet seen sort of key inflection points in

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Speaker 1: something like copper. You know, I think that is sort

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Speaker 1: of a one negative macro trade which stubbornly, stubbornly stayed

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Speaker 1: in place. I think to me the biggest questions of

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Speaker 1: in commodities. Is gold simply a safe haven, in which

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Speaker 1: case it's not interesting, Or is gold in fact just

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Speaker 1: sensitive to the growth of global liquidity, in which case

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Speaker 1: which I think it is, in which case gold still

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Speaker 1: is interesting in the mid fourteen hundreds. One final question,

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Speaker 1: what do you do? Is the gold bulls are in here?

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Speaker 1: Go long gold, and that was an outwire call until

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Speaker 1: it wasn't. Is it still a long gold call by you?

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Speaker 1: I think so yeah. I mean I I you know,

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Speaker 1: I do think you have a bit of a safe

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Speaker 1: haven shakeout. I do think yields go higher and gold

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Speaker 1: goes lower for a period of time. But I think ultimately,

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Speaker 1: you know, we are in a time of access to

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Speaker 1: equidity and that's good for gold. Very good, Michael Shure,

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Speaker 1: Thank you so much. Management always interesting, fabulous work, and

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Speaker 1: the Chinese financial system will do that with him here

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Speaker 1: as soon as well. Alicia Levine with us on the

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Speaker 1: watch of London right now with B and Y Melon.

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Speaker 1: She's not going to Claridge is she's looking at investment

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Speaker 1: strategy for B and Y Melon clients. Uh in London

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Speaker 1: as well. Alicia tell us the spirit of London right now,

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Speaker 1: You and I are foreign for and foreign What is

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Speaker 1: the election spirit you glean? So people here are are pensive,

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Speaker 1: and they're tired, and they wanted to be done. That's

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Speaker 1: what John Farrell says exactly. Yeah, they're they're they're they're

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Speaker 1: they're distraught, they're tired of the conversation. And at this

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Speaker 1: point it feels as if they'd accept any outcome just

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Speaker 1: to be done with the conversation. It's been three and

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Speaker 1: a quarter years with you know, with with endless debate,

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Speaker 1: with endless headlines, and so that's the feeling here. Lucky

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Speaker 1: for the people of the UK, their election cycle is

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Speaker 1: much much shorter than ours is, and so thank goodness

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Speaker 1: for them, their election is in four weeks and for

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Speaker 1: for us, we've got another you know, eleven months of

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Speaker 1: this which you know, if we all survived, it would

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Speaker 1: be great. Do you go long United Kingdom multinationals off

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Speaker 1: of all this gloom and pensiveness. So that's a great question,

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Speaker 1: and the short, clean answer is more yes than no.

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Speaker 1: So the answer is yes. If you look at assets

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Speaker 1: slow data since June of two thousand and sixteen, since bregsit,

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Speaker 1: there's been a massive outflow from UK equities, massive outflow.

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Speaker 1: When you see that kind of one sided trade, it

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Speaker 1: is typically very profitable to take the other side of

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Speaker 1: that trade. I think any resolution of the uncertainty will

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Speaker 1: lead to further investment here and ultimately growth. You may

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Speaker 1: have a couple of quarters where it's all flat. Both

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Speaker 1: parties here, both Labor and the Tories, seem to want

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Speaker 1: to spend a lot of money in a fiscal boost.

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Speaker 1: So I think that that really the u Hey equities

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Speaker 1: look very interesting here, and I think it's time to

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Speaker 1: build a position. Well, Alicia, let's talk about it a

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Speaker 1: little bit more. Let's hand some way to this conversation.

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Speaker 1: How important is the Sterling dimension to this conversation and

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Speaker 1: what's your basic foreign exchange assumption? So the thing about

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Speaker 1: sterling is that the entire breggsit will be expressed through Sterling.

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Speaker 1: So in the very small event of a hard Brexit,

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Speaker 1: I mean it has not been fully taken off the table,

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Speaker 1: but mostly off the table, you're probably going to see

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Speaker 1: about a dollar ten to a dollar fifteen on that

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Speaker 1: A negotiated and more integrated Briggs, it gets you closer

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Speaker 1: to a dollar forty. And so right now, what you

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Speaker 1: have priced into sterling is Briggs a negotiated Brexit, and

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Speaker 1: that's what's priced in. So if if you are betting

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Speaker 1: on either way, that's what you're getting a temper set

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Speaker 1: on either side, So you would be exposed to foreign

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Speaker 1: exchange going into this move. This wouldn't be hedged into

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Speaker 1: UK equities coming out of the United States. So just

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Speaker 1: want a better idea of this for our listeners that

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Speaker 1: might be based here in America, thinking about Alakin in

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Speaker 1: some camp to that story, Alicia, So I think that

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Speaker 1: so in terms of multinationals, I think the the direction

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Speaker 1: of sterling is higher, so to that you probably want

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Speaker 1: to hedge a little bit, but direction of sterling is hired, certainly.

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Speaker 1: But I just think I think that the it's been

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Speaker 1: such a terrible conversation for investment and for corporates here

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Speaker 1: that it has to turn. It has to turn. The

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Speaker 1: certainty is going to move it. How long do you

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Speaker 1: think this trade could go on? How much conviction is

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Speaker 1: there behind this trade? So right now you have aside

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Speaker 1: from today, today's one of those risk off days and

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Speaker 1: so it's just feel ugly, and it was going to

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Speaker 1: be ugly. We're gonna all want to go home early,

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Speaker 1: but um or you know, normal time here in the UK.

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Speaker 1: But the thing is that what's happening now is you

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Speaker 1: have a reversion to the mean in terms of valuation.

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Speaker 1: So you have global ten year yields off their loads

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Speaker 1: almost across across the globe, even if central banks are

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Speaker 1: cutting right, which essentially tells you the central bank impulse

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Speaker 1: to cut has more or less been successful because you've

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Speaker 1: re steepen curves everywhere, particularly here in the US, and

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Speaker 1: and the dollar has broken through the two day moving

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Speaker 1: average on the downside, suggesting there's some movement down and

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Speaker 1: that's that's very positive for global assets, and there's some

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Speaker 1: evidence of bottoming. The question is, are you just going

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Speaker 1: to get a reversion to the mean in terms of valuations,

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Speaker 1: in which case you do want to buy em you

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Speaker 1: do want to buy Europe because they're are moefully undervalued

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Speaker 1: compared to US valuations, or this really the next leg

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Speaker 1: of the bull market, the next leg of cyclical global growth.

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Speaker 1: It feels like it's the latter, but we have to

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Speaker 1: see the fundamental data comes through. Either way, the trade

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Speaker 1: is there. Alicia, thank you so much. Safe travels Alicia

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Speaker 1: leving B and Y Melon. We're thrilled that she comes

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Speaker 1: to us from her studios in London. John and I

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Speaker 1: really have talked about, you know, our in depth coverage

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Speaker 1: of the impeachment hearings, and we wanted to wander by

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Speaker 1: with that, so we dragged in off the street out

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Speaker 1: of Washington. Terence Haynes, he's with Panji, of course policy

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Speaker 1: and he writes blistering blistering detailed pieces on policy. Did

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Speaker 1: you escape Washington to join us in our interactive broker

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Speaker 1: studios just to get away from the impeachment derby? I

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Speaker 1: decided to go somewhere where it was colder. Actually that

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Speaker 1: that was good. That'll be good. I love what you

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Speaker 1: say about China tariffs that we've heard all about this.

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Speaker 1: You've got that key operative word which you're famous for,

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Speaker 1: which is, somebody has to enforce this. Well's the enforceability

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Speaker 1: of whatever? What's it called? Phase one? Phase one, phase five?

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Speaker 1: Where's enforceability? I don't see it in any discussion. I

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Speaker 1: don't see it in any discuss either, which leads me

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Speaker 1: to the conclusion that it's that that it's real and

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Speaker 1: it's serious. This is law school. They call this a

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Speaker 1: negative evidence problem. And you know what the United States

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Speaker 1: has wanted all along fundamentally is enforceability. They they they

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Speaker 1: assess that for the last decade or so, the big

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Speaker 1: problem with US China negotiations has been nothing is enforceable,

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Speaker 1: and therefore China can be let off the hook, etcetera,

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Speaker 1: etcetera from their point of view. So what ends what

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Speaker 1: needs to happen fundamentally is enforceability. And so what I've

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Speaker 1: said is I think you get an inflection point here

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Speaker 1: in the next couple of weeks where either you see

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Speaker 1: an enforceable deal of some sort being done, which ought

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Speaker 1: to show markets that there is a positive transtor trajectory

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Speaker 1: here that will continue up if the Chinese agree to this,

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Speaker 1: and it is the Chinese that have to agree to this,

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Speaker 1: but without it, what you're gonna get is, UH is

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Speaker 1: sort of this cold piece trade war stalemate that's going

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Speaker 1: to continue on for quite a while with no significant

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Speaker 1: tariff diminution, none of that. So, to be clear, Hit Terry,

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Speaker 1: you think the biggest sticking point to a face one

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Speaker 1: agreement at this point is not the request to roll

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Speaker 1: back tariffs, but the lack of enforceability. Absolutely, UH, enforceability

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Speaker 1: from the United States perspective is the lynchpin up to

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Speaker 1: doing an entire deal without enforceability. From the United States perspective,

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Speaker 1: there's no point in doing a deal. UH. To me,

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Speaker 1: the teriff rollback is a bit of a a bit ephemeral,

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Speaker 1: and UH what will end up happening is that tariffs

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Speaker 1: will if there is a good deal from the US perspective. Therefore,

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Speaker 1: an enforceable deal. There will be some rollback of tariffs,

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Speaker 1: but tariffs aren't going to go away. Exactly what the

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Speaker 1: President has said all along, and he's been consistent in this.

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Speaker 1: Now they have a terrible uh, messaging arm in the

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Speaker 1: White House, and that gets taken as having no message

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Speaker 1: at all, and that's that's not the case. You just

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Speaker 1: have to look for it. But they've said all along

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Speaker 1: is that, uh, they put harriffs on in order to

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Speaker 1: force people to the table. Once they get a deal

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Speaker 1: that they think they like, the tariffs come back off.

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Speaker 1: So what you'll get in a phase one deal is

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Speaker 1: some stopping of future tariffs and maybe a rollback of

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Speaker 1: some existing tariffs, but they're not going to come off completely. Sarry,

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Speaker 1: I want to give you the Wall Street narrative, and

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Speaker 1: then you can give me the Washington d c. Critique

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Speaker 1: of that narrative. The Wall Street story, the story that

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Speaker 1: we get told day after day after day is the

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Speaker 1: President needs a deal gun into twenty. He'll ultimately give

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Speaker 1: the Chinese what they want. We get some MAC purchases,

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Speaker 1: we move on. We put a flaw in the U. S. Economy.

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Speaker 1: What do you make of that argument? I've never thought

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Speaker 1: that was accurate, and I still don't think that is accurate.

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Speaker 1: What is it about what you see that you think

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Speaker 1: that is inaccurate? Uh? What I see is that is

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Speaker 1: consistency in the American government's negotiating position. Uh. If they

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Speaker 1: wanted a deal like that, they could have had it

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Speaker 1: quite a while ago. If they wanted a deal like that,

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Speaker 1: they'd already be signaling that the that they're ready to

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Speaker 1: to zag in the in a different action. They haven't

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Speaker 1: done that so far. After a year and a half

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Speaker 1: of this, I very much doubt they will. So the

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Speaker 1: bottom line for me is, uh, they are focused on

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Speaker 1: making real improvements in the US Chinese relationship through enforceability.

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Speaker 1: One of their uh, one of their touchstones all along

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Speaker 1: has been the China needs to join the Community of Nations,

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Speaker 1: live up to agreements, etcetera. And that's what they're pushing for.

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Speaker 1: I think right now markets are kind of taking headlines

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Speaker 1: and responding to them less and less because they've seen

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Speaker 1: this movie before. For me once, uh, you for me twice?

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Speaker 1: Shame on me. What are you looking for in terms

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Speaker 1: of headlines that actually would matter nothing? I think the

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Speaker 1: headlines by and large are are are are based on

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Speaker 1: wishful thinking of the moment, positive or negative. And and

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Speaker 1: one thing, one thing that I've I've long thought and

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Speaker 1: continue to think, is that both of these countries, the U.

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Speaker 1: S And China together have tried to manage the news

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Speaker 1: cycle to make sure there is not too high highs

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Speaker 1: or two low lows. There's an agricultural lobby. It's your fault,

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Speaker 1: terry that the milk industry is flat on its back.

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Speaker 1: We saw that with the Dean Foods bankruptcy yesterday and

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Speaker 1: real challenges for dairy farmers coast to coast uh Pat

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Speaker 1: Roberts of Kansas, Mr Morando Kansas as well to senators

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Speaker 1: that are buffeted by the lobbies. How powerful are the

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Speaker 1: agricultural lobbies to sell to the president they're flat on

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Speaker 1: their back? Uh? I think they're they're powerful enough to

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Speaker 1: sell to the President that they're flat on their back.

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Speaker 1: I think that gets taken into account by the White

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Speaker 1: House at this juncture. Do I think that the White

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Speaker 1: House makes a serious move in a different direction and

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Speaker 1: on negotiations, I don't they want it. It's very clear

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Speaker 1: that they want agricultural sales as part of a deal. Uh.

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Speaker 1: And I think they get that. But whether or not

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Speaker 1: that deal is anything more than a blip in a large,

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Speaker 1: larger Chinese US confrontation, we just don't know. So then

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Speaker 1: one of the Democrats do moving forward on trade, Let's

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Speaker 1: assume we get John, are we getting a phase one

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Speaker 1: year in the know, we're getting a Phase one deal?

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Speaker 1: You want me to give you a definitive answer, the

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Speaker 1: President said, in writing, perhaps in five weeks. It's five

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Speaker 1: weeks Friday. Let's talk about it Friday. You see, that's

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Speaker 1: the third time he's brought that up. Today. He's got

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Speaker 1: October eleven to his brain. What's Phase two look like?

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Speaker 1: A wise one? Uh? Phase two looks like the rest

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Speaker 1: of the story. Phase two looks like dealing with the

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Speaker 1: with intellectual property restrictions. It's like gap talks. It's out

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Speaker 1: five years. Well, yeah, it'll be a while. It'll be

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Speaker 1: a while. Won't be quick, certainly. But I think the

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Speaker 1: White House's hope is that if they can get China

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Speaker 1: to agree on enforceability, then what they can do is

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Speaker 1: begin to move forward on those those more difficult questions,

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Speaker 1: knowing that the Chinese are actually intend to live up

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Speaker 1: to them. Good terry to thank you, Pangea. What's I

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Speaker 1: just thought, I just assumed I saw the list that

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Speaker 1: you were in Washington. This is wonderful to have Terry

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Speaker 1: with us. Terry Haynes Appachia Policy Advisory. Looking at the

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Speaker 1: latest in Hong Kong this morning as well term the

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Speaker 1: government announcing for the first time that it would close

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Speaker 1: public schools. We've had officials from Hong Kong and Chinese

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Speaker 1: state media warning of consequences if violence continued. What are

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Speaker 1: those consequences from Hong Kong currently joined us now Bloomberg

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Speaker 1: Greater China editor. Great to have you with us, Karen,

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Speaker 1: So let's talk about it. What are the potential consequences

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Speaker 1: if violence does indeed continue. Well, you know, this is

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Speaker 1: a question that everybody is asking, and I think I've

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Speaker 1: talked about this before over the course of the last

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Speaker 1: five months, but every couple of months is a new

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Speaker 1: question that really hovers over these protests, and at the moment,

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Speaker 1: it's what could the consequences be and would China get

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Speaker 1: more directly involved in trying to calm these protests if

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Speaker 1: the violence continue news and earlier in the summer, we

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Speaker 1: had the same question, was trying to going to get

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Speaker 1: more directly involved. They didn't that you choose some strong

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Speaker 1: warnings of cautions UM, and they're doing that again today.

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Speaker 1: But we haven't seen any direct note from China that

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Speaker 1: it would get involved. So far, it's stuck to these

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Speaker 1: kind of cautious um, these kind of cautious overtures and

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Speaker 1: state media. It continues to support Carrie Lamb and her

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Speaker 1: government here. It continues to stand by the police to

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Speaker 1: say that we think that they can handle it. So

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Speaker 1: at this point we don't have anything concrete to go on,

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Speaker 1: but the city is on edge. There have been a

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Speaker 1: few days of pretty intense violence. UM, some very jarring

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Speaker 1: images that we've seen coming out. UM, So people are

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Speaker 1: a bit more on edge than they usually are. Karen.

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Speaker 1: The images of the university, the Chinese University of Hong Kong, Folks,

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Speaker 1: this is one of the great success stories of late

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Speaker 1: twentieth century academics. Founded in ninety three. They've got a

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Speaker 1: huge program they do with Yale University in the United States,

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Speaker 1: and they are definitive in physics. I mean, this is

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Speaker 1: the real deal university and it is shut down the

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Speaker 1: end of the semester. What is the reaction of the

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Speaker 1: people of Hong Kong when they see one of their

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Speaker 1: prestigious universities shut down. You know, tom it was almost

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Speaker 1: a bit of a domino effect with the school of

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Speaker 1: today um where you have these really intense clashes yesterday

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Speaker 1: at c u h K and it almost looked like

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Speaker 1: a battle zone. You had protesters and students battling with

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Speaker 1: police and they were throwing petrol bombs and the police

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Speaker 1: were throwing tear gas. And then today we woke up

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Speaker 1: to more distractions. And you know, I think with the

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Speaker 1: with schools closed and and the entire school system, the

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Speaker 1: public school systems spend it tomorrow, I think people are

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Speaker 1: looking at academia now and at schools and the campuses,

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Speaker 1: and c u h K at the front of that

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Speaker 1: really is possibly like the new grounds zero of this

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Speaker 1: protest and where it goes. And all along the protests

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Speaker 1: have been led by students. They've been really used to driven,

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Speaker 1: especially these kind of later months where they've gotten more

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Speaker 1: and more intense. So I think in a way some

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Speaker 1: people might have been waiting for it to come to

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Speaker 1: this for a bit, for these to the universities to

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Speaker 1: become these hotbeds of activism and really be in the

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Speaker 1: spotlight the way that they have been. But at the

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Speaker 1: same time, the protests that we saw yesterday in this

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Speaker 1: the imagery coming out was jarring to see that coming

428
00:23:10,880 --> 00:23:13,960
Speaker 1: from one of the premier academic institutions in Hong Kong.

429
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Speaker 1: It's not just academia, it's also the financial sector, and

430
00:23:17,160 --> 00:23:21,320
Speaker 1: we have banks issuing warnings to their staff to stay home,

431
00:23:21,680 --> 00:23:25,720
Speaker 1: stay safe. Uh there was a City Group banker ostensibly

432
00:23:26,080 --> 00:23:30,040
Speaker 1: who was arrested amid some of the protests, and all

433
00:23:30,119 --> 00:23:34,399
Speaker 1: staff should exercise do care while commuting, remain vigilant of

434
00:23:34,440 --> 00:23:36,800
Speaker 1: their surroundings and travel plans before leaving the offices of

435
00:23:37,160 --> 00:23:40,920
Speaker 1: Deutsche Bank. Meanwhile, UH Farragamo's sales in Hong Kong fell

436
00:23:41,040 --> 00:23:43,560
Speaker 1: forty five percent during the third quarter. This is what

437
00:23:43,680 --> 00:23:46,360
Speaker 1: they said in response to some of the turmoil. How

438
00:23:46,480 --> 00:23:50,720
Speaker 1: big of a hit has this been economically? Yeah, well,

439
00:23:50,760 --> 00:23:53,280
Speaker 1: retail and travel in particular have taken a hit in

440
00:23:53,400 --> 00:23:55,480
Speaker 1: recent months, and now you're starting to see some of

441
00:23:55,560 --> 00:23:57,640
Speaker 1: these same big banks that have been in Hong Kong

442
00:23:57,760 --> 00:24:00,760
Speaker 1: for a long time start to grapple with In the

443
00:24:00,880 --> 00:24:03,879
Speaker 1: last couple of days, literally stepped from their doors. We

444
00:24:03,960 --> 00:24:06,520
Speaker 1: saw tear gas being inspired in the city center and

445
00:24:06,600 --> 00:24:11,560
Speaker 1: we saw people at lunchtime, businessmen, um by standers, protesters,

446
00:24:11,600 --> 00:24:14,240
Speaker 1: all fling from tear gas really close to the Bloomberg

447
00:24:14,280 --> 00:24:17,080
Speaker 1: office and an area of town that usually kept free

448
00:24:17,160 --> 00:24:19,040
Speaker 1: from this kind of thing, especially in the middle of

449
00:24:19,119 --> 00:24:21,840
Speaker 1: the day. UM. And so these thanks that have been

450
00:24:22,080 --> 00:24:24,160
Speaker 1: you know, giving people a bit of a flexible work

451
00:24:24,240 --> 00:24:27,520
Speaker 1: hour situation, they're they're starting to hint at a bit

452
00:24:27,600 --> 00:24:31,320
Speaker 1: more caution, and I think people now having a harder time, um,

453
00:24:31,480 --> 00:24:34,040
Speaker 1: keeping that distance from it when it comes so close

454
00:24:34,119 --> 00:24:36,359
Speaker 1: to you physically, and when it's suddenly right outside the

455
00:24:36,400 --> 00:24:38,639
Speaker 1: door and you have to worry about staff safety. I

456
00:24:38,760 --> 00:24:40,840
Speaker 1: think that that gives it a whole new dimension beyond

457
00:24:41,359 --> 00:24:45,200
Speaker 1: wins and losses. Currently, thank you so much reporting from

458
00:24:45,359 --> 00:25:02,800
Speaker 1: Hongkong this morning. Let's get some thoughts on what we're

459
00:25:02,920 --> 00:25:05,080
Speaker 1: seeing from that Chairman pell here and what we may

460
00:25:05,160 --> 00:25:07,920
Speaker 1: hear from him at eleven am Eastern. Welcome Chris Rupkey,

461
00:25:08,000 --> 00:25:11,280
Speaker 1: Managing Director, Chief Financial Economists at m u f G

462
00:25:11,600 --> 00:25:14,000
Speaker 1: Union Bank. Chris, thanks so much for joining us. What

463
00:25:14,119 --> 00:25:16,639
Speaker 1: do you expect to hear from Chairman Powell as he

464
00:25:16,760 --> 00:25:20,600
Speaker 1: testifies today at eleven am Eastern. Well, luckily for us,

465
00:25:20,720 --> 00:25:25,880
Speaker 1: he uh spilled beans already and put out the his statement.

466
00:25:26,920 --> 00:25:30,800
Speaker 1: I was a little surprised. It sounded to me as

467
00:25:30,920 --> 00:25:34,520
Speaker 1: if in the press conference just two weeks ago that

468
00:25:35,119 --> 00:25:37,520
Speaker 1: he had said the risks one of the reasons that

469
00:25:37,680 --> 00:25:40,399
Speaker 1: they were pausing in the rate cuts was that the

470
00:25:40,560 --> 00:25:46,000
Speaker 1: risks from Brexit and the China trade talks had diminished.

471
00:25:46,800 --> 00:25:50,399
Speaker 1: But now, I mean, the headlines make it sound as if, um,

472
00:25:51,440 --> 00:25:54,040
Speaker 1: you know, the risk is still out there in terms

473
00:25:54,119 --> 00:25:56,879
Speaker 1: of what could happen with the trade. So that was

474
00:25:58,119 --> 00:26:00,720
Speaker 1: interesting to me. And I'm paid three to get to

475
00:26:00,800 --> 00:26:04,400
Speaker 1: the point of the elevated I'm looking for that headline again.

476
00:26:04,560 --> 00:26:09,359
Speaker 1: Elevated in some asset classes, Chris Ruppgi. He moves forward

477
00:26:09,400 --> 00:26:11,440
Speaker 1: to the end of this week where the Fed will

478
00:26:11,480 --> 00:26:15,000
Speaker 1: be quote releasing our third financial Stability Report. I mean,

479
00:26:15,359 --> 00:26:17,200
Speaker 1: it's like the Green Book at the I m F.

480
00:26:18,440 --> 00:26:22,120
Speaker 1: What I'm hearing is things are okay. Which asset classes

481
00:26:22,160 --> 00:26:25,840
Speaker 1: are elevated? I don't know. I I guess I agree

482
00:26:27,680 --> 00:26:33,040
Speaker 1: collateral lived loan obligations. I guess uh or having some problems,

483
00:26:33,160 --> 00:26:37,160
Speaker 1: maybe some the high yield market. So you don't think

484
00:26:37,200 --> 00:26:39,920
Speaker 1: he's talking about the stock market. I don't think I

485
00:26:40,000 --> 00:26:42,239
Speaker 1: don't think he means the stock market. Well, I mean,

486
00:26:42,359 --> 00:26:46,560
Speaker 1: look at the Dow is up eighteen point four percent. Uh.

487
00:26:47,240 --> 00:26:50,080
Speaker 1: I hope they're not pointing to the stock market as

488
00:26:50,359 --> 00:26:55,160
Speaker 1: uh an asset class. I think, go ahead, Chris, please, yeah,

489
00:26:55,160 --> 00:26:57,320
Speaker 1: I don't. I don't think it's a broader stock market

490
00:26:57,400 --> 00:26:59,680
Speaker 1: this time. I was in the triple levers of cash

491
00:26:59,840 --> 00:27:02,800
Speaker 1: and rupt. He was in the triple apple fun. Absolutely,

492
00:27:02,920 --> 00:27:06,240
Speaker 1: that's triple leverage. Triple leverage apples. I think I like

493
00:27:06,359 --> 00:27:09,240
Speaker 1: his returns. I'm in the top tier of it though,

494
00:27:09,720 --> 00:27:12,560
Speaker 1: So Chris, I mean, the market seems to be discounting again,

495
00:27:12,680 --> 00:27:15,840
Speaker 1: kind of one rate cut coming out of this federal

496
00:27:15,880 --> 00:27:17,639
Speaker 1: reserve over the next six and twelve months. Do you

497
00:27:17,760 --> 00:27:22,720
Speaker 1: think that's reasonable? Well, I mean, give, it really comes

498
00:27:22,800 --> 00:27:25,920
Speaker 1: down to what's happening with trade. I mean, listening to

499
00:27:27,440 --> 00:27:31,200
Speaker 1: the President at the Economic Club of New York yesterday,

500
00:27:31,520 --> 00:27:34,800
Speaker 1: it sounded like he's still taking a hard line. Maybe

501
00:27:34,880 --> 00:27:38,720
Speaker 1: that's his negotiating stance as we know, but it sounds

502
00:27:38,760 --> 00:27:40,760
Speaker 1: like he's taking a hard line and he wants to

503
00:27:40,800 --> 00:27:44,919
Speaker 1: see some material changes with China and the way they

504
00:27:45,200 --> 00:27:48,720
Speaker 1: do business kind of China ink. So that didn't sound

505
00:27:48,840 --> 00:27:50,280
Speaker 1: very good to me, because I don't think we're going

506
00:27:50,320 --> 00:27:52,760
Speaker 1: to get a lot of movement there for on their

507
00:27:52,880 --> 00:27:55,959
Speaker 1: part for that. So we'll see. I mean, this Phase

508
00:27:56,080 --> 00:28:00,640
Speaker 1: one agreement could still kind of turn out to less

509
00:28:00,680 --> 00:28:03,920
Speaker 1: than what the market is hoping and expecting for. What

510
00:28:04,119 --> 00:28:07,400
Speaker 1: is your GDP view twelve months forward? I mean, you're

511
00:28:07,400 --> 00:28:10,560
Speaker 1: having a cup of coffee in the uh, the parlor

512
00:28:10,680 --> 00:28:13,680
Speaker 1: before the chairman comes out to testify. What would you

513
00:28:13,920 --> 00:28:18,200
Speaker 1: suggest that the chairman would be g DP twelve months forward? Well,

514
00:28:18,320 --> 00:28:20,359
Speaker 1: I mean, I guess I don't want to go too

515
00:28:20,440 --> 00:28:24,040
Speaker 1: far from what the Federal Open Market Committee is saying themselves.

516
00:28:24,160 --> 00:28:26,840
Speaker 1: And they have a number, that's what do they have?

517
00:28:26,960 --> 00:28:30,400
Speaker 1: Two point two percent this year? I'm pretty much close

518
00:28:30,480 --> 00:28:33,280
Speaker 1: to that than two percent next year? Yeah, I think it.

519
00:28:33,800 --> 00:28:37,280
Speaker 1: I mean that's the FMC two percent next year in

520
00:28:38,320 --> 00:28:40,560
Speaker 1: I wouldn't go too far from that. I think the

521
00:28:40,720 --> 00:28:43,120
Speaker 1: idea that we're going to flow to the stall speed

522
00:28:43,200 --> 00:28:46,160
Speaker 1: of one percent, where bad things can happen, like we

523
00:28:46,280 --> 00:28:49,880
Speaker 1: can flip over and go into the ditch. That's not

524
00:28:50,000 --> 00:28:52,360
Speaker 1: we're not going to see the one Why are we

525
00:28:52,440 --> 00:28:54,200
Speaker 1: not going to see the gloom it's out there? Well,

526
00:28:54,320 --> 00:28:56,520
Speaker 1: I think it's really got to be the it's got

527
00:28:56,640 --> 00:28:59,200
Speaker 1: to be trade, you know, it's got to be the

528
00:28:59,360 --> 00:29:02,600
Speaker 1: stock mark going down thinking the trade agreement is on

529
00:29:03,160 --> 00:29:06,360
Speaker 1: on track. And also I was thinking that the hit

530
00:29:06,480 --> 00:29:10,160
Speaker 1: to GDP would be almost a percentage point if all

531
00:29:10,240 --> 00:29:14,760
Speaker 1: the tariffs on five billion roughly of China imported goods

532
00:29:15,080 --> 00:29:18,440
Speaker 1: go to But we're not there yet, you know, we're

533
00:29:18,480 --> 00:29:22,040
Speaker 1: just at the September goods and who knows what's going

534
00:29:22,120 --> 00:29:26,160
Speaker 1: to happen at at December. Just not there yet. Thank

535
00:29:26,200 --> 00:29:28,040
Speaker 1: you so much, Chris Roffie, Thank you so much. M

536
00:29:28,200 --> 00:29:32,040
Speaker 1: u f G greatly appreciate it. With quick analysis. Thanks

537
00:29:32,080 --> 00:29:36,280
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

538
00:29:36,560 --> 00:29:41,880
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

539
00:29:42,000 --> 00:29:46,240
Speaker 1: you prefer. I'm on Twitter at Tom Keane. Before the podcast,

540
00:29:46,360 --> 00:30:00,240
Speaker 1: you can always catch US World one. I'm Bloomberg Radio one.