WEBVTT - Bank Stock Weakness Is Signalling Upcoming Downturn: Peabody 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:34.280 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Bank earnings, 0:00:34.360 --> 0:00:38.280 JP Morgan, Chase City Group, they top estimates, Wells Fargo 0:00:38.479 --> 0:00:41.479 misses here to tell us everything about them, as Charles Peabody, 0:00:41.680 --> 0:00:44.920 he is the president of Portalis Partners. Charles, a pleasure 0:00:44.960 --> 0:00:47.800 to hear your voice, tell us your impression about the 0:00:47.800 --> 0:00:50.360 results of three of these three banks, and then maybe 0:00:50.440 --> 0:00:53.640 extrapolate into some of the other earnings that we're going 0:00:53.680 --> 0:00:57.760 to receive. Sure, I mean there's a wide dispersion in 0:00:57.760 --> 0:01:00.240 the results. I mean JP Morgan had a very at 0:01:00.320 --> 0:01:04.320 very robust quarter, UM City was sort of weak, and 0:01:05.160 --> 0:01:10.160 Wells Fargo was disappointing. UM but on average, what you're 0:01:10.160 --> 0:01:13.679 getting out of this quarter is maybe two revenue growth 0:01:13.760 --> 0:01:17.319 year over year, which is I think pretty anemic given 0:01:17.920 --> 0:01:22.600 you know, higher interest rates, deregulation, tax cuts, four GDP etcetera. 0:01:22.920 --> 0:01:27.440 And I think that's the disappointment here. Okay, so what 0:01:27.840 --> 0:01:30.400 could they have done to show and what does this mean? 0:01:31.920 --> 0:01:33.840 I'm sorry to say that again. What does this mean 0:01:33.920 --> 0:01:35.520 for it to be for for for grows to be 0:01:35.560 --> 0:01:39.959 more nic given all of the positive headwear, positive tail wins. 0:01:39.959 --> 0:01:42.400 I mean, what does that mean to you? I think 0:01:42.440 --> 0:01:46.440 that's why we've had multiple compression over the last six months. 0:01:46.440 --> 0:01:49.040 In other ways, we had this multiple expansion last year 0:01:49.080 --> 0:01:52.920 when earings really weren't that robust. We're getting, you know, 0:01:53.360 --> 0:01:57.600 a better bottom line earrings, but not a better revenue picture. 0:01:58.240 --> 0:02:01.000 So the formula that the bank industry is using is 0:02:01.040 --> 0:02:04.840 taking low single digit revenue growth, turning it into mid 0:02:04.920 --> 0:02:08.600 single digit pretext income growth through positive operating leverage and 0:02:08.639 --> 0:02:12.040 benign credit costs, and then taking that mid single digit 0:02:12.080 --> 0:02:15.680 pretext income growth and turning into double digit net income 0:02:15.760 --> 0:02:18.800 from tax cuts and share buy backs. But the latter 0:02:18.880 --> 0:02:22.960 two items are financial engineering techniques, and no one's going 0:02:23.000 --> 0:02:25.400 to pay a premium for that. You need better revenue growth. 0:02:26.200 --> 0:02:28.640 How are they expected to do that? Charles? Is the 0:02:28.680 --> 0:02:32.600 business of banking changed and are these bankings for banks 0:02:32.639 --> 0:02:37.640 responding to it? Well? I think revenue growth is going 0:02:37.680 --> 0:02:40.240 to continue to disappoint and and so we're in what 0:02:40.320 --> 0:02:43.880 I call end of cycle economic dynamics, and that means 0:02:43.880 --> 0:02:46.440 you started to look at the second derivative, and the 0:02:46.480 --> 0:02:48.760 second river means what's happening to the rate of growth 0:02:48.800 --> 0:02:53.360 of the key line items. So revenues probably are going 0:02:53.400 --> 0:02:56.200 to slow, credit costs are going to pick up, and 0:02:56.280 --> 0:03:00.000 expenses can't be cut anymore. They're being well, you know, maintained, 0:03:00.040 --> 0:03:02.560 but it can't be cut. So I think you're at 0:03:02.600 --> 0:03:06.320 peak profitability. Well, Charles, just follow up on this then 0:03:06.680 --> 0:03:09.280 you know you've I'm sure you have seen and read 0:03:09.320 --> 0:03:13.080 about all of the different financial technology companies that have 0:03:13.160 --> 0:03:17.680 either raised money or have really created a whole another 0:03:17.840 --> 0:03:22.360 financial system in parallel to the traditional banking system. Is 0:03:22.440 --> 0:03:26.680 all of that market value value that the banks could 0:03:27.160 --> 0:03:32.080 have taken for themselves if they had been more entrepreneurial. Well, 0:03:32.120 --> 0:03:35.520 they are making a push. If you're talking about digital banking, 0:03:35.600 --> 0:03:37.480 they are making and that's where a lot of the 0:03:37.560 --> 0:03:43.760 expense growth is related to UM is their technological investments UM. 0:03:43.800 --> 0:03:47.640 So banks are trying to UM keep up with the 0:03:47.720 --> 0:03:51.160 non banks. I think over a full business cycle, you're 0:03:51.200 --> 0:03:53.200 going to see a greater fallout in the non banks 0:03:53.200 --> 0:03:55.960 than you will in the banking industry, and that's maybe 0:03:55.960 --> 0:03:58.120 where they start to regain some of the market where 0:03:58.160 --> 0:04:01.280 they've lost in the non banks. That's fascinating, by the way, 0:04:01.360 --> 0:04:02.760 because a lot of people have said that the risk 0:04:03.120 --> 0:04:05.839 has moved to the shadow banking systems. So perhaps when 0:04:05.880 --> 0:04:09.280 that risks manifests itself and the shadow banking system ends 0:04:09.360 --> 0:04:11.480 up getting a little bit more afraid than the big 0:04:11.480 --> 0:04:13.840 banks can come back in and take market share. I'm 0:04:13.880 --> 0:04:15.280 just worrying. I want to dig a little bit more 0:04:15.400 --> 0:04:18.600 into the nitty gritty, particularly with Wells Fargo, because it's 0:04:18.640 --> 0:04:23.160 shares are getting penalized more than others. Down actually up 0:04:23.160 --> 0:04:28.080 from the earlier losses, about down nearly two percent. Now, Um, 0:04:28.720 --> 0:04:31.640 do you think that we're seeing a bottom for this 0:04:32.120 --> 0:04:34.960 bank or is this sort of a signal of more 0:04:35.040 --> 0:04:39.960 pain ahead. Well, from a fundamental point of view, I don't. 0:04:40.760 --> 0:04:43.039 I've been on the side of the equation that the 0:04:43.160 --> 0:04:45.839 revenues are going to be the big disappointment, and revenues 0:04:45.920 --> 0:04:48.480 this quarter, you back out some non recurring items were 0:04:48.480 --> 0:04:52.359 down four and a half percent. Every year. Um, you 0:04:52.400 --> 0:04:56.120 know they'll execute on their expenses. Credit costs will creep up, 0:04:56.160 --> 0:04:59.360 but the revenue is where they're going to disappoint. Um. 0:04:59.400 --> 0:05:03.559 Now that said, one thing, I want to differentiate between 0:05:03.600 --> 0:05:06.839 the fundamentals of these banks and the stocks. The stocks 0:05:06.839 --> 0:05:10.400 have undergone tremendous multiple compression over the last six months. 0:05:10.839 --> 0:05:13.200 I think there's going to be a summer bounce, but 0:05:13.600 --> 0:05:17.080 that bounce is probably within a developing bear market, where 0:05:17.080 --> 0:05:21.160 the January highs were the highs. When you say developing 0:05:21.160 --> 0:05:25.159 bear market, developing bear market in all stocks are financial stocks, well, 0:05:25.279 --> 0:05:29.919 financials specifically, they tend to underperform in the last twelve 0:05:29.960 --> 0:05:32.400 months of a bowl market, and I think that's kind 0:05:32.400 --> 0:05:34.520 of where we are in the economic cycle. Last twelve 0:05:34.520 --> 0:05:37.920 months of a bowl market. Bank stocks have always underperformed 0:05:38.160 --> 0:05:40.480 in that period of time, Right, Are there any specific 0:05:40.520 --> 0:05:45.360 bank stocks that you believe will perform better than others 0:05:45.560 --> 0:05:50.200 in this perhaps relief rally that you describe. Yeah, I 0:05:50.240 --> 0:05:54.480 think JP Morgan had a very solid result, and you know, 0:05:54.640 --> 0:05:57.880 the fund a line fundamentals can be bought. I think 0:05:58.040 --> 0:06:00.560 the poor tends well and I've been wrecked coming on 0:06:00.560 --> 0:06:04.080 a trading basis buying Goldman sachs um So. I think 0:06:04.080 --> 0:06:05.919 you're going to get some kind of rebound in the 0:06:05.960 --> 0:06:09.400 capital markets part of the business over the summer. I mean, 0:06:09.440 --> 0:06:12.360 if you look at the pipeline for um M and 0:06:12.400 --> 0:06:15.479 A activity and for underwriting, it's very strong and and 0:06:15.520 --> 0:06:18.280 that's where you saw the big beat this quarter UM 0:06:18.400 --> 0:06:21.440 was on investment banking. Are you saying that you think 0:06:21.440 --> 0:06:25.400 that there's going to be an economic downturn downturn within 0:06:25.440 --> 0:06:29.599 the next twelve months. I think that's what the stocks 0:06:29.600 --> 0:06:32.040 are telling you. Um I mean, if you look at 0:06:32.040 --> 0:06:36.040 the bank stocks, they've underperformed. I'm talking about the large 0:06:36.080 --> 0:06:39.440 cap money center and even the g said regional banks 0:06:39.480 --> 0:06:41.880 like P and C and U, S, Bann Corporatewell Spargo 0:06:42.400 --> 0:06:46.200 that they've underperformed the last six and twelve and eighteen months. Now. 0:06:46.839 --> 0:06:49.080 If you if you were to do on Bloomberg, you 0:06:49.120 --> 0:06:54.080 know that comp function equity, you City Group Equity Camp, 0:06:55.480 --> 0:06:58.320 and look at how it's performed. It's been an eighteen 0:06:58.360 --> 0:07:02.640 months underperformance now. So I'm wondering just whether this is 0:07:02.760 --> 0:07:05.760 using financials is another proxy for the yield curve, Whether 0:07:05.760 --> 0:07:07.560 people are looking at the fact that the yield curve 0:07:07.600 --> 0:07:10.840 is compressing and that's what's driving bank stocks down. And 0:07:10.880 --> 0:07:12.880 both of those things are taken as the same sign. 0:07:12.880 --> 0:07:16.040 I mean, is that is that kind of what you're 0:07:16.040 --> 0:07:19.840 seeing right now? Yeah, But you know, everyone seems to 0:07:19.880 --> 0:07:22.280 be fascinated with the two tens part of the yield curve. 0:07:22.560 --> 0:07:25.240 I think the short end is the more important. Fundamentally. 0:07:25.280 --> 0:07:28.640 I can understand twos tends being a psychological and importance 0:07:28.720 --> 0:07:32.440 because of the implication of a recession, but fundamentally the 0:07:32.520 --> 0:07:35.600 short end is more important. And and towards that end, 0:07:36.080 --> 0:07:39.520 you know, Bank of Ozarks had a very interesting UM 0:07:39.680 --> 0:07:43.080 conference called yesterday and which they talked about how the 0:07:43.240 --> 0:07:47.760 deposit beta was now rising faster than the loan beta. 0:07:48.200 --> 0:07:51.679 That means deposit rates aretin rising faster than loan yields 0:07:51.680 --> 0:07:54.480 are rising, and that's squeezing the NIM. And that's what 0:07:54.600 --> 0:07:58.080 usually happens at end of cycle periods. The NIM the 0:07:58.120 --> 0:08:01.840 net interest margin correc So when I talk about rate 0:08:01.840 --> 0:08:04.720 of growth this quarter, as I said, you're gonna get 0:08:04.720 --> 0:08:08.200 maybe two revenue growth on average, but that's going to 0:08:08.280 --> 0:08:11.720 be composed of mid single digit net interest income growth 0:08:12.080 --> 0:08:15.800 but flat the income. And so it's that net interest 0:08:15.840 --> 0:08:19.400 income that's driving total revenues. But the signs are there 0:08:19.520 --> 0:08:21.800 that that net interest income growth is going to slow 0:08:21.880 --> 0:08:27.000 in future quarters as the deposit data picks up. Charles Peabody, 0:08:27.040 --> 0:08:29.440 thank you so much for being with us. Charles Peabody, 0:08:29.480 --> 0:08:48.120 president of Portala's Partners in New York. President Trump is 0:08:48.320 --> 0:08:50.560 gearing up to head over to Helsinki, where he is 0:08:50.559 --> 0:08:55.000 going to be meeting with Russian President Vladimir Putin. What's 0:08:55.040 --> 0:08:57.600 he got to talk about? Let's ask that's somebody who 0:08:57.679 --> 0:09:00.360 might have some ideas. Ariel Cohen, Senior Fellow at the 0:09:00.400 --> 0:09:03.960 Atlantic Council in Washington, d C. Joining us. Now, so, Aria, 0:09:04.000 --> 0:09:06.320 what do you think he's going to talk about? Well, 0:09:06.400 --> 0:09:10.959 there are three or four key subjects to discuss. Uh. 0:09:11.040 --> 0:09:14.960 The United States and Russia came to blows in Syria. Actually, 0:09:15.040 --> 0:09:20.120 the United States troops killed up to two hundred Russian 0:09:21.160 --> 0:09:26.360 mercenaries in Syria that crossed the red lines. This is 0:09:26.440 --> 0:09:31.199 unprecedented since the worst days of the Cold War. Uh. Secondly, 0:09:31.679 --> 0:09:34.040 we need to understand other Russians going to play ball 0:09:34.080 --> 0:09:37.600 on getting the Iranians out of Syria. This is what 0:09:37.720 --> 0:09:41.720 both the United States and our allies Saudi Arabia and 0:09:41.840 --> 0:09:47.120 Israel really want to accomplish. Furthermore, going into the former 0:09:47.200 --> 0:09:52.160 Soviet Union. UM, we have deep disagreements with Russia about 0:09:52.320 --> 0:09:56.040 Ukraine and the annexation of the part of Ukraine which 0:09:56.080 --> 0:09:59.839 is called the Crimea, the Crimean Peninsula in the Black Sea. U. 0:10:00.160 --> 0:10:04.520 Mr Trump said that Crimea is Russian because they speak Russian. Well, 0:10:04.600 --> 0:10:07.720 in fact, they speak Russian because the Russian Empire and 0:10:07.800 --> 0:10:12.720 the Soviet Union ethnically cleansed the Crimea from its indigenous population, 0:10:12.760 --> 0:10:18.040 the Crimean Tatars, and now are pouring in resources to 0:10:18.080 --> 0:10:22.520 an exit. Uh. Finally, there's plenty of issues to talk 0:10:22.520 --> 0:10:26.480 about energy and arms control. So if both leaders have 0:10:27.160 --> 0:10:30.360 the bandwidth and come to serious agreements, I will be 0:10:30.400 --> 0:10:35.520 the first one to applaud. Unfortunately, judging by previous interactions 0:10:35.559 --> 0:10:40.000 of Mr Trump with other world leaders, I'm not so optimistic. Ariel. 0:10:40.120 --> 0:10:42.240 I wonder if you could speak a little bit about 0:10:42.280 --> 0:10:46.400 the politics of energy inasmuch as Ukraine is the big 0:10:46.440 --> 0:10:51.840 transit point for European imports of Russian gas and oil, 0:10:52.480 --> 0:10:56.520 and also maybe speak about the relationship between Turkey and 0:10:56.559 --> 0:11:01.680 its energy needs. Well, you're hitting all the all the 0:11:01.760 --> 0:11:05.240 nails on their heads in two short questions. Uh, let's 0:11:05.240 --> 0:11:08.880 go north to south the Russians are constructing a pipeline 0:11:08.920 --> 0:11:14.080 called North Stream too, which will boost its exports of 0:11:14.400 --> 0:11:17.760 natural gas to Germany and other countries in Europe, like 0:11:17.920 --> 0:11:23.880 Polland by fifty five billion cubic meters a year. That's 0:11:24.000 --> 0:11:28.800 a huge amount. Currently Europe is importing hundred and sixty 0:11:28.840 --> 0:11:31.920 billion cubic meters, so this is an increase by over 0:11:32.320 --> 0:11:38.440 putting Germany at of its natural gas coming Trump Russia 0:11:38.760 --> 0:11:42.760 if and when this pipeline is UH finished. So Mr 0:11:42.800 --> 0:11:47.760 Trump told the Germans that they'll be better off um 0:11:47.800 --> 0:11:51.120 importing liquid liquid fied initial guests from the United States. 0:11:51.880 --> 0:11:55.720 Theoretically he is right. L n G is more expensive, 0:11:56.240 --> 0:12:01.000 and the German business is pushing to expand their dependence 0:12:01.040 --> 0:12:05.320 on Russia and uh frour Merkel is rolling with the 0:12:05.360 --> 0:12:11.240 blows and she is dependent on the German business. Uh. Furthermore, Ukraine, 0:12:11.679 --> 0:12:14.440 the Russians are trying to bypass it all together and 0:12:14.559 --> 0:12:17.760 stop pumping gas through the Ukrainian system. This is a 0:12:17.800 --> 0:12:20.920 system that was built during the Soviet days and for 0:12:20.960 --> 0:12:25.320 that purpose, they're also building a massive pipeline into Turkey. 0:12:25.400 --> 0:12:29.680 This is for Turkish internal consumption as well as for 0:12:30.840 --> 0:12:35.720 re export to Europe. They're also maybe building one pipeline 0:12:36.280 --> 0:12:39.800 under the Black Sea, on the bottom of the Black 0:12:39.840 --> 0:12:43.120 Sea to Bulgaria, and that's also for exporting to Europe. 0:12:43.240 --> 0:12:46.040 So there's a lot of commerce issues here. I think 0:12:46.080 --> 0:12:50.400 probably the most salicious point is will President Trump speak 0:12:50.520 --> 0:12:55.800 with Vladimir Putin about meddling in US elections, especially heading 0:12:55.840 --> 0:12:58.640 into the mid terms here? Do you think that's going 0:12:58.679 --> 0:13:01.920 to come up and pass? Believe more importantly, who's going 0:13:01.960 --> 0:13:10.080 to be in there with him? That's question? Uh. Mr 0:13:10.120 --> 0:13:14.440 Trump already made it known that he wants a he 0:13:14.480 --> 0:13:18.640 wants uh, four eyes only in the room, maybe with 0:13:18.720 --> 0:13:21.079 a translator. And then the question, of course is it 0:13:21.120 --> 0:13:24.800 going to be our translator or a Russian translator? If 0:13:24.800 --> 0:13:27.920 it's going to be only uh, putting Trump and the 0:13:27.960 --> 0:13:31.080 Russian translator, I would be very nervous, and we would 0:13:31.160 --> 0:13:35.360 need a record. Where did a tape of that? Trump? 0:13:35.440 --> 0:13:38.800 Isn't the tape? Isn't it? But this all right? I'm 0:13:38.840 --> 0:13:40.959 gonna leave that that comment there, But but I do 0:13:41.040 --> 0:13:44.920 if this sort of raises a bigger issue, which is, um, 0:13:44.960 --> 0:13:48.520 what sort of precedent is there for a US president 0:13:48.600 --> 0:13:52.480 to meet with the Russian leader who is heading a 0:13:52.520 --> 0:13:54.760 country that has had been our adversary for a while 0:13:55.120 --> 0:13:59.360 without sort of some kind of concrete security plan that 0:13:59.400 --> 0:14:01.800 we know of. I mean, how much how much of 0:14:01.920 --> 0:14:06.240 a national security concern could this pay? UM? I am 0:14:06.280 --> 0:14:11.640 actually reluctant to get into that um for different reasons. 0:14:11.679 --> 0:14:15.559 But I would say that the good governance is transparent 0:14:15.679 --> 0:14:19.360 and transparent can be transparent and classified, but it has 0:14:19.400 --> 0:14:23.080 to be transparent on the highest level of our government. 0:14:23.160 --> 0:14:26.800 So the National Security Advisor should be there, uh, probably 0:14:26.840 --> 0:14:30.040 his chief of staff, maybe their Secretary of Defense, maybe 0:14:30.040 --> 0:14:33.960 they're the Secretary of State at least just for the starters. Uh. 0:14:34.000 --> 0:14:37.000 And probably the Special Assistant of the National Security Council, 0:14:37.600 --> 0:14:40.960 Dr Fiona Hill should be there as well. But if 0:14:41.000 --> 0:14:44.960 he wants UM a one on one meeting, that it's possible. 0:14:45.040 --> 0:14:48.800 There are presidents of such meetings with other heads of 0:14:48.880 --> 0:14:52.920 state UM. But again we need to keep a record 0:14:52.960 --> 0:14:56.960 of that. It goes into the archives. Uh, and it 0:14:57.080 --> 0:15:00.440 has to be also analyzed. And I must say Mr 0:15:00.480 --> 0:15:05.120 Putchin is always very very mediculous in preparation to this summits. 0:15:05.400 --> 0:15:08.760 For example, I was told while visiting Russia that the 0:15:08.840 --> 0:15:13.640 dossier on Mr Bush President Push ran hundreds of pages, 0:15:13.760 --> 0:15:18.320 and Mr Putchin of course read all that, and then 0:15:18.480 --> 0:15:22.160 he told the Bush the story of his secret baptism. 0:15:22.240 --> 0:15:25.880 And then Bush came famously with this line about looking 0:15:25.880 --> 0:15:29.400 into Putchin's size and seeing his soul. Well turns out 0:15:29.520 --> 0:15:33.600 that that may or may not be true about the baptism. 0:15:33.640 --> 0:15:37.280 And uh, Mr Putchin, of course, by his background is 0:15:37.400 --> 0:15:40.360 an intelligence office. We got to leave it there. Ariel Cohen, 0:15:40.440 --> 0:15:44.000 thanks very much, senior fellow at the Atlantic Council. Speaking 0:15:44.040 --> 0:16:02.680 about NATO, Russia and Vladimir Putin, the President of Russia, well, 0:16:02.720 --> 0:16:06.520 President Donald Trump and British Prime Minister Theresa May hold 0:16:06.560 --> 0:16:09.680 a press conference that the tackles a variety of issues, 0:16:09.720 --> 0:16:14.440 including shared security concerns and upcoming meetings with the President 0:16:14.520 --> 0:16:18.120 of Vladimir Putin of Russia in Helsinki between the President, 0:16:18.640 --> 0:16:23.600 between Donald Trump and the Putin. Brexit also taking up 0:16:23.800 --> 0:16:26.240 quite a bit of everyone's time and thoughts. And Terres 0:16:26.360 --> 0:16:30.800 Raphael is our Bloomberg opinion editor covering European politics and economics, 0:16:30.960 --> 0:16:35.680 and you can follow Terres on Twitter at Terres Raphael one, 0:16:36.120 --> 0:16:39.560 and she joins us now from London. Terres just to 0:16:39.600 --> 0:16:43.200 put aside for a moment the news conference that we 0:16:43.200 --> 0:16:46.640 were able to listen in on what is the white 0:16:46.680 --> 0:16:53.360 paper that was published by the government of UH Theresa May. 0:16:53.360 --> 0:16:57.640 What is the White Paper specifically mean for companies such 0:16:57.720 --> 0:17:02.920 as air Bus or Rolls Royce international companies that do 0:17:02.960 --> 0:17:08.560 business and our headquartered in the UK. Well, the White Paper, 0:17:08.600 --> 0:17:13.240 as you know, is the first real detailed, uh sort 0:17:13.280 --> 0:17:17.800 of spelling out of what Theresa May's Brexit would look like. 0:17:17.880 --> 0:17:21.920 And for companies it comes as um I would say 0:17:21.920 --> 0:17:23.879 a little bit of a relief because it means that 0:17:23.920 --> 0:17:27.040 there will if it's if it's accepted by the EU 0:17:27.119 --> 0:17:29.120 now and we have to remember this as an opening 0:17:29.160 --> 0:17:32.239 position in a negotiation and that you might not accept it, 0:17:32.240 --> 0:17:35.960 but it's asking for a sort of free trade agreement 0:17:36.000 --> 0:17:38.560 in good so it would mean that manufactured projects and 0:17:38.600 --> 0:17:41.960 the supply chains that these companies rely on so much 0:17:42.040 --> 0:17:46.080 would be uninterrupted under the deal that Theresa May is seeking. 0:17:46.119 --> 0:17:48.080 Now that may not be the deal that she gets. 0:17:48.440 --> 0:17:51.800 It also doesn't apply to services and financial services. There's 0:17:51.800 --> 0:17:56.240 a whole sort of other level of uh you know, 0:17:56.359 --> 0:17:59.359 detail and complexity to this. But though a lot of 0:17:59.359 --> 0:18:02.040 companies i've it gets if if they were to get 0:18:02.040 --> 0:18:04.879 a Brexit on those terms. Um, I think they would 0:18:05.080 --> 0:18:08.080 at least feel that, you know, that that things would 0:18:08.640 --> 0:18:11.480 uh maybe be not as they were, but they would 0:18:11.480 --> 0:18:15.800 not be as catastrophically, um, you know different, and you 0:18:15.800 --> 0:18:19.200 would you find businesses at least happy to accept that. 0:18:19.760 --> 0:18:22.639 Terry's one thing that struck a lot of people is 0:18:22.720 --> 0:18:26.160 that as the UK goes through with these Brexit negotiations, 0:18:26.200 --> 0:18:31.240 President Trump has inserted himself into this and clearly tried 0:18:31.320 --> 0:18:33.960 to endure himself to Boris. Johnson had some harsh words 0:18:34.240 --> 0:18:37.600 for UK Prime Minister Theresa May and I'm just wondering 0:18:37.800 --> 0:18:41.880 you were to call him talking about why President Trump 0:18:41.960 --> 0:18:44.240 has sort of a vested interest in this? Can you 0:18:44.240 --> 0:18:46.440 give us a sense of that? Yeah, I mean, it's 0:18:46.440 --> 0:18:49.120 just been the most amazing drama because Trump has come 0:18:49.160 --> 0:18:51.600 to Britain. Even before he came here, he was sort 0:18:51.640 --> 0:18:55.800 of describing Britain is in turmoil. His ambassador has been 0:18:55.800 --> 0:18:58.919 giving interviews saying he's, you know, really disappointed in the 0:18:58.920 --> 0:19:02.120 defeatist attitude of the Brits towards Brexit and why don't 0:19:02.119 --> 0:19:05.360 they take inspiration from Trump? And you know, as an American, 0:19:05.400 --> 0:19:08.120 you might say, well, why does Trump care so much 0:19:08.160 --> 0:19:11.480 about Brexit. What's in it for him? Um? Is it? 0:19:11.560 --> 0:19:13.760 Is it a trade deal? Well, you know, the trade 0:19:13.800 --> 0:19:18.399 deal it's much more important to Britain and to the Brexitters, 0:19:18.400 --> 0:19:21.520 and it is to the United States. Britain, um, you know, 0:19:21.560 --> 0:19:24.320 only accounts for a small share of America's trade. But 0:19:24.440 --> 0:19:26.640 Trump does have an interest in Brexit, and he's had 0:19:26.640 --> 0:19:29.920 that interest from from the time of the campaign, where 0:19:29.960 --> 0:19:33.520 he followed it closely. When the Brits did vote against 0:19:33.520 --> 0:19:36.280 all odds, against all predictions, to lead the European Union, 0:19:36.440 --> 0:19:41.080 Trump immediately, uh latched onto that as a you know, 0:19:41.240 --> 0:19:44.320 vindication of his own populist policies, as a sign that, 0:19:44.680 --> 0:19:46.560 you know, things were going to go well in his campaign, 0:19:46.560 --> 0:19:48.399 and he was proved right. And he said in the 0:19:48.400 --> 0:19:51.760 press conference very interestingly he said, I think Brexit happened 0:19:51.800 --> 0:19:53.760 because of immigration, and that was one of the big 0:19:53.760 --> 0:19:57.360 reasons I got elected as well. And uh so, Trump 0:19:57.440 --> 0:20:00.719 I think identifies with the Brexit movement. Brexit is not 0:20:00.800 --> 0:20:02.879 going well, and the question is whether that sort of 0:20:02.880 --> 0:20:06.800 pre figures, um, you know, some some shakier times for 0:20:06.840 --> 0:20:11.080 Trump at home. That's that's fascinating analysis, but sort of 0:20:11.119 --> 0:20:16.639 counterintuitively Alex Wayne, who is a Bloomberg News reporter and editor. 0:20:17.359 --> 0:20:20.200 White House team leader, also came on radio earlier today 0:20:20.200 --> 0:20:24.120 and said that actually, in a sort of counterintuitive result, 0:20:24.359 --> 0:20:27.639 the more that President Trump beats up on Theresa May, 0:20:27.720 --> 0:20:31.560 the more she gained support because people in the UK 0:20:31.840 --> 0:20:34.520 really don't like President Trump. Do you see it the 0:20:34.520 --> 0:20:36.840 same way? Well, I think that's partly too. I mean 0:20:36.840 --> 0:20:41.160 there is a huge he's hugely unpopular here. However, it's 0:20:41.200 --> 0:20:44.639 it's interesting because the Brexitters are really hard Brexitters. You know, 0:20:44.680 --> 0:20:47.200 they don't really care who's saying it, but they take 0:20:47.240 --> 0:20:49.359 a lot of heart in what he said when he says, 0:20:49.680 --> 0:20:51.399 you know, you've got to close the borders. This is 0:20:51.400 --> 0:20:53.679 a really simple deal. You just say no to the 0:20:53.680 --> 0:20:56.280 EU and you walk away and you know, you take 0:20:56.320 --> 0:20:59.639 back control. That is you know, that is that's the 0:20:59.680 --> 0:21:02.840 song sheet they've been singing from. So they're very happy to, 0:21:03.280 --> 0:21:05.359 you know, have him come and say that. The Sun 0:21:05.440 --> 0:21:08.879 had this huge which is a tabloid newspaper here with 0:21:08.920 --> 0:21:10.920 a lot of a lot of readers, had a big 0:21:10.960 --> 0:21:15.400 headline you know, um May has wrecked Brexit. US deal 0:21:15.520 --> 0:21:18.000 is off and Trump then walked it back in the 0:21:18.000 --> 0:21:20.800 news conference and said no, no, you know, Theresa May 0:21:20.920 --> 0:21:23.320 is a great leader, and um so I think it 0:21:23.359 --> 0:21:25.960 could cut both ways. Um, I think it could. It 0:21:26.040 --> 0:21:28.639 could read down to maze benefit. But at the same time, 0:21:29.160 --> 0:21:31.879 you know, Brexitters like that he's saying the same kinds 0:21:31.880 --> 0:21:34.919 of things. They're saying, this is easy, we can do 0:21:34.960 --> 0:21:39.040 it clean. May's messing it up, so they like that message. Terres, 0:21:39.160 --> 0:21:43.040 just in about thirty seconds are assets in Britain on sale. 0:21:43.080 --> 0:21:45.480 The pound sterling has lost eight and a half percent 0:21:45.520 --> 0:21:51.320 against the dollar since April. I mean the uncertainty is 0:21:51.320 --> 0:21:55.800 is clearly weighing on investors minds, and I think that's 0:21:55.800 --> 0:21:59.520 going to continue for time. I would say that what 0:21:59.640 --> 0:22:02.280 we're waiting for now is what the EU responses to 0:22:02.320 --> 0:22:06.040 that white paper, and if the response is very negative, 0:22:06.359 --> 0:22:08.800 then yes, I think assets will be on sale and 0:22:08.840 --> 0:22:10.880 they'll go cheaper. I want to thank you very much 0:22:11.040 --> 0:22:13.960 for being with us. Terres Raphael is Bloomberg opinion editor 0:22:14.040 --> 0:22:17.960 covering European politics and economics, joining us from London. You 0:22:17.960 --> 0:22:36.360 can follow Terres on Twitter at Terres Raphael One. Well, 0:22:36.400 --> 0:22:39.000 it was supposed to be a done deal, a T 0:22:39.240 --> 0:22:43.000 and T, and it's a purchase of Time Warner for 0:22:43.240 --> 0:22:47.040 more than a hundred and seven billion dollars. UH. The 0:22:47.119 --> 0:22:51.040 deal was actually completed in June, but the Department of 0:22:51.119 --> 0:22:53.760 Justice may have other thoughts. Here to tell us more 0:22:54.119 --> 0:22:58.160 is Marianne Halford, a global media and entertainment strategist at 0:22:58.240 --> 0:23:01.720 O C and C stred A G Consultants. Marianne, thank 0:23:01.720 --> 0:23:03.800 you very much for being with us. Can you just 0:23:03.880 --> 0:23:05.639 explain to people? I mean, you know, you try to 0:23:05.640 --> 0:23:08.600 look up what Time Warner shares are doing and you 0:23:08.680 --> 0:23:11.520 note that, of course they don't exist anymore because the 0:23:11.600 --> 0:23:15.439 deal has already closed. Is this unprecedented? Why would they 0:23:15.480 --> 0:23:20.760 do this? Good question? Um, I think this is a 0:23:20.800 --> 0:23:26.199 long shot. I think this, though, bespeaks uh an attitude 0:23:26.320 --> 0:23:29.119 or a new attitude towards vertical mergers coming out of 0:23:29.160 --> 0:23:34.120 the Trump Justice Department. And UM, clearly they don't want 0:23:34.160 --> 0:23:36.359 to give up a fight here, even though it is 0:23:36.400 --> 0:23:40.080 a major long shot. I think it's highly unlikely that 0:23:40.119 --> 0:23:43.680 they'll be able to prevail here. I point to the 0:23:43.800 --> 0:23:47.480 General Council statement yesterday. The court's decision could hardly have 0:23:47.560 --> 0:23:52.000 been more thorough, fact based and well reasoned UM, even 0:23:52.040 --> 0:23:55.280 in an appeals court. Although I guess um they're hoping 0:23:55.320 --> 0:23:57.560 that some of the liberal judges that may be ruling 0:23:57.600 --> 0:24:02.640 on this uh might given to some UH concerns about 0:24:02.720 --> 0:24:05.080 higher prices. I still think it's going to be a 0:24:05.080 --> 0:24:08.400 long shot. I think this has more to do with 0:24:08.760 --> 0:24:11.919 UM Comcast at the end of the day in a 0:24:11.960 --> 0:24:15.680 certain way. UM. We know Mr Trump is or President 0:24:15.680 --> 0:24:19.760 Trump that is, is uh UM a good uh friend 0:24:19.880 --> 0:24:23.280 of Mr Murdoch's. We know Mr Murdoch would very much 0:24:23.359 --> 0:24:27.360 like to be acquired by Disney, not Comcast. UM. This 0:24:27.440 --> 0:24:31.320 is definitely a warning bell, if you will, to Comcast 0:24:32.119 --> 0:24:37.760 um about them continuing their fight to try to pursue Fox. UM. 0:24:37.800 --> 0:24:42.520 That's one of the things I'm musing this morning. Okay, well, so, Marian, 0:24:42.560 --> 0:24:44.720 there there two sides to this. There's the legal case 0:24:45.160 --> 0:24:48.000 and then there's sort of who is sort of calling 0:24:48.040 --> 0:24:51.880 the shots with respect to the Justice Department's decisions here. UH. 0:24:51.920 --> 0:24:55.480 There was some kind of conspiracy talk that perhaps the 0:24:55.560 --> 0:24:59.160 appeal was done specifically to get to the Appeals Court 0:24:59.240 --> 0:25:02.280 in Washington. You see where Brett Kavanaugh, the nominee for 0:25:02.320 --> 0:25:06.280 the Supreme Court, sits Um, do you do you buy 0:25:06.320 --> 0:25:08.760 any of these arguments or do you think that the 0:25:08.760 --> 0:25:11.639