Speaker 1: Brought you by Bank of America Mary Lynch. Investing in
Speaker 1: local communities, economies and a sustainable future. That's the power
Speaker 1: of global connections. Mary Lynch, Pierce Fenner, and Smith Incorporated
Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and
Speaker 1: of course, on the Bloomberg. Rob Carnell joins us now
Speaker 1: he's e's chief International Commist. Joinings year in Bloomberg's European
Speaker 1: headquarters in London. And let's just take stock of where
Speaker 1: things that stand right now. The swoon that we've seen
Speaker 1: about the prospects for new economic policy coming from President
Speaker 1: elect Donald Trump. Are we seeing the markets treat that
Speaker 1: more soberly and now there were such wild enthusiasm after
Speaker 1: the elections. Are we seeing some reevaluation or taking stock
Speaker 1: of the fact that may not happen as people would
Speaker 1: like it to happen, or may not happen as quickly,
Speaker 1: but we certainly don't think it will happen quite as quickly,
Speaker 1: or quite to the extent that I think people thought
Speaker 1: in the immediate aftermath of the election result. However, we
Speaker 1: will over the next couple of weeks get the president's budget,
Speaker 1: you know, which is you know, kind of Christmas president
Speaker 1: wish list, which will have everything in it. I mean,
Speaker 1: you know how these were you ask for everything on
Speaker 1: the assumption that you'll only get some of it. So
Speaker 1: I think that could provide another boost. But I think
Speaker 1: in the in the very short term, we have seen
Speaker 1: a bit of a not so much a reevaluation. Just
Speaker 1: we've gone a bit too far. Let's just take stock
Speaker 1: a little bit and wait and see what happens. Now.
Speaker 1: You mentioned that Christmas list, and I just think of
Speaker 1: the fact that we haven't really had a traditional budget
Speaker 1: process in Washington, dcver so long. Now that regular order
Speaker 1: seems like a thing of the past. Do you expect
Speaker 1: that we'll see a return to it? Will have Republicans
Speaker 1: controlling both Houses of Congress and the White Houses, Well,
Speaker 1: do you expect to return to was traditionally the process
Speaker 1: in Washington regular order? Getting a budget from the White House,
Speaker 1: getting a budget from Congress, Not having all of these
Speaker 1: continuing resolutions and staff gaps. Yeah, I think that that
Speaker 1: seems to be the most likely way of it. I mean,
Speaker 1: I dare say that Donald Trump won't be totally delighted
Speaker 1: with everything that Congress suggests he can have in the end,
Speaker 1: but I think he's got room to be optimistic that
Speaker 1: at least on the tax cutting front, they'll give him something.
Speaker 1: Maybe not as much and not as quickly, and maybe
Speaker 1: it'll be more staged, but there's certainly room for improvement
Speaker 1: on taxes. And let's place it. What's not to like
Speaker 1: about lower taxes? Everybody loves that. There is so much
Speaker 1: uncertancy right now here in the UK, here in the US,
Speaker 1: especially when it comes to trade policy. We were looking
Speaker 1: at the remarks from Trees and made the Prime Minister
Speaker 1: over the weekend looking for some guidance on what trade
Speaker 1: policy in the in the UK might look like going forward.
Speaker 1: We're certainly doing that in the U S as well.
Speaker 1: You've seen the tweets is as we all have here.
Speaker 1: Do we have a better sense of what Donald Trump's
Speaker 1: trade policy is going to be going forward? What what
Speaker 1: do you look to for for evidence of that? Yeah? Well,
Speaker 1: I think we've been looking at this really long and
Speaker 1: hard over the last couple of weeks to try and
Speaker 1: get a sense of this. This is the really crucial
Speaker 1: fact that the fiscal side is interesting and it's important,
Speaker 1: and it does make it perence to domestic domestic growth,
Speaker 1: But trades the really big one, that's the one he
Speaker 1: can really mess up on um And with the appointments
Speaker 1: of four very key trade members of his his cabinet
Speaker 1: and his team, all of whom have been extremely outspoken
Speaker 1: and negative about China and Chinese trade, that the rumors
Speaker 1: that there is going to be a sort of blanket
Speaker 1: import tariff going in that is beginning to make us
Speaker 1: think or maybe it is going to be a tougher
Speaker 1: trade Trump than we thought initially, and that could also
Speaker 1: have an impact on market sentiment. I was talking with
Speaker 1: that Michael from in the US Trade Representative yesterdays of
Speaker 1: an exit interview with him as he prepares to leave
Speaker 1: that office. He's had a tough go of it, trying
Speaker 1: to push through the Trains Pacific partnership to to no avail,
Speaker 1: maybe shaking his fist at the heavens as the ship
Speaker 1: went down. And one thing we talked about was the
Speaker 1: way that his office looks to be reconfigured at going forward.
Speaker 1: You mentioned the role of commerce in the new term.
Speaker 1: It seems like Wilbur Ross might take a larger role
Speaker 1: in negotiating trade deals. There is this Trade Council chaired
Speaker 1: by Peter Navarro. Is there a risk to that and
Speaker 1: in not having it as centralized as it as it
Speaker 1: has been the negotiation of four trade deals? The person
Speaker 1: bringing about enforcement actions the w t O. Yeah, I'm
Speaker 1: not sure. I think the era of big multilateral trade
Speaker 1: deals really is pretty much over. I think a lot
Speaker 1: of countries have realized that they can actually make much
Speaker 1: quicker progress and much more more sort of substantial progress
Speaker 1: on individual, smarter bilateral trade deals. I think there's gonna
Speaker 1: be a lot more of that going on, and for
Speaker 1: that you don't need such a centralized mechanism. You look
Speaker 1: at the balance that you have to strike between free
Speaker 1: trade and security, and that's certainly in acute focus here
Speaker 1: in the UK and in Europe. When you're making that balance,
Speaker 1: is security always going to win out? How do you?
Speaker 1: How do you tew that line? And that's that's a
Speaker 1: really tough one. I mean, I think security is often
Speaker 1: an excuse that the policymakers will just fall back on
Speaker 1: for anything they don't particularly like, or anything that they
Speaker 1: don't think it's going to go down particularly well with
Speaker 1: the with the general public. I mean, it has to
Speaker 1: be a fact that you bear in mind, in particular
Speaker 1: when you're talking about energy. It's of those crucial factors
Speaker 1: that has to be taken into account. But I'm not sure.
Speaker 1: I think it is a bit of a scapegoat at times,
Speaker 1: so when they want to do what they want to do.
Speaker 1: I know Tom wants to talk a bit about FED policy.
Speaker 1: He was hearing on your knowledge of the Rob rob
Speaker 1: Is is, I consider the major London acts on actual
Speaker 1: FED policy, and you have a huge advantage of that
Speaker 1: of being distant. There's something about we've learned that over
Speaker 1: the years. It's something about an American economist in Minnesota
Speaker 1: or North Carolina's Dennis Cartman is you have a big
Speaker 1: advantage being in London too. To our American listeners. What
Speaker 1: is the major distinction between the Washington Central Bank and
Speaker 1: the London Central Bank. I would say that the FED
Speaker 1: is is a much more political animal. I think the
Speaker 1: Bank of England is is also political. But of all
Speaker 1: the central banks, I think the all the independent central
Speaker 1: banks I'd say the FED is possibly the least independent.
Speaker 1: I think it's much more a tune that it's not
Speaker 1: driven by it's not not forced by or cajoled by.
Speaker 1: But I think it's certainly influenced far more by politics
Speaker 1: than than the most of the other central banks around
Speaker 1: the G seven. Which goes to Mr Trump in the
Speaker 1: House Financial Services Committee, etcetera. Which will you watch? Will
Speaker 1: you watch Executive Bridge or the Republicans on the Hill
Speaker 1: to see a change in tone towards our central bank? Yeah,
Speaker 1: I'm not I'm not sure what the answer to that
Speaker 1: one is. I mean, I think that there's there's very
Speaker 1: definitely a sense from Donald Trump that he would like
Speaker 1: to have more control over the FED. Um. I mean,
Speaker 1: there's been the talk about auditing the FED. I mean,
Speaker 1: of course, the FED is already audited as a as
Speaker 1: a financial institution, but it's it's monetary policy decisions have
Speaker 1: not been audited. I'm interested to know how that's going
Speaker 1: to go. I mean that that clearly makes the FED
Speaker 1: a less and even less independent at central I love
Speaker 1: this David being in London and talking about Richmond, Virginia.
Speaker 1: Mr Whacker retires and there's a character to Albrons, Richmond fed.
Speaker 1: It has a certain tone. Is there a Carnels shortlist?
Speaker 1: Who will darken the door in Richmond? Marvin Goodfriends always
Speaker 1: on the list at Carnegie Mellon that there isn't. I'm
Speaker 1: I'm always fascinated whoever comes in. I mean, you go
Speaker 1: through this this ritual process where where the new b
Speaker 1: has to be evaluated, and they typically tow the line
Speaker 1: and behaving very much a sort of neutral fashion at
Speaker 1: least the first three meetings as they get their their
Speaker 1: toe under the table and work out exactly where they
Speaker 1: sit and how the process works. And then you start
Speaker 1: to see the see them throw their their weight around,
Speaker 1: and of course they are reflecting the the regional reality
Speaker 1: of of where they're coming from. And so you know,
Speaker 1: very different economist on all around the US. They're all
Speaker 1: original folks. And you really wonder how our new president will,
Speaker 1: how everyone will adapt and adjust to the demands of
Speaker 1: a new executive branch. From London, David gurn Tim Keene
Speaker 1: Bloomberg surveillance here in the United Kingdom, around the world,
Speaker 1: across America. David, you do a data check and you
Speaker 1: just migrate immediately LA to pay so and lear the
Speaker 1: emerging market stories are really something on that depreciation seemingly
Speaker 1: continuing there. You've talked about Jeff Lackard. Think he's a
Speaker 1: guy who started out at the Richmond Fed, was an
Speaker 1: economist in the research department at the Richmond Fed. That
Speaker 1: will be something that'll be difficult to replace as well
Speaker 1: as someone with that much institutional knowledge of the place.
Speaker 1: But you're right looking at currencies this morning, Sterling as well.
Speaker 1: I've been looking at that, seeing that weekend at eighteen
Speaker 1: right now in Turkish earlier. With a new leg up,
Speaker 1: it's going to go through the recent weakness that we've seen.
Speaker 1: Uh this morning, Rob Carnell with us with the I
Speaker 1: n G. As we look at the Central Bank of
Speaker 1: the United States. We're talking in the break about Bullard,
Speaker 1: a lot laquer retireant Richmond Bullard of St. Louis has
Speaker 1: had a unique impact St. Louis known as a research
Speaker 1: house with decades and of course they're great statistical and
Speaker 1: chart base that they have, But the splash last year
Speaker 1: was a short paper, a little paper. Even Bullard admitted
Speaker 1: that about the X axis and that guys like you,
Speaker 1: Rob will always look at the Y axis, the up
Speaker 1: and down or whatever the chart is, and the time
Speaker 1: function is usually ignored. Bullard says, don't ignore the chime
Speaker 1: time function. And where we're heading is regime change. We
Speaker 1: get somewhere, things change, the FED changes. Do you believe
Speaker 1: that's feasible we ever implement Bullard regime change? I think
Speaker 1: it's I think it is feasible. I think it's a
Speaker 1: very accurate description of the world we live in. We
Speaker 1: you know that the US and much of the developed world, Europe,
Speaker 1: the UK has been in this low growth, low productivity
Speaker 1: environment for a very long period now. I think Bullard's
Speaker 1: point was was along the lines of it's difficult to
Speaker 1: see how that's going to change anytime soon, but at
Speaker 1: some point it actually will, and when it does, it
Speaker 1: will happen in a fairly step like fashion. That's the
Speaker 1: point of which the FED or whatever central bank is
Speaker 1: involved will have to react very very rapidly or find
Speaker 1: itself massively behind the curve, whether or not central banks
Speaker 1: can do that in reality. As another question, I have
Speaker 1: my doubts. How do you process what what FED presidents say,
Speaker 1: what they think, what they're believing it at this point,
Speaker 1: how are you are you reading? Every speech? Is very
Speaker 1: particular present, you don't hear enough from that you'd like
Speaker 1: to hear more from. Tom and I were talking a
Speaker 1: few weeks back about how there can be a cacophony
Speaker 1: here where you're just trying to figure out if there's
Speaker 1: some consensus among all of these participants in the films
Speaker 1: of a system, how do you how do you process all?
Speaker 1: I do sometimes wonder whether it's it's worth the effort,
Speaker 1: partly because you know, I always felt that the way
Speaker 1: that the FED was structured, they're the insiders in effect,
Speaker 1: rule the roost what they want to have with the governors,
Speaker 1: the governors, the New York President, New York Fed Vice chair, etcetera. Um,
Speaker 1: they basically set policy and if the regional FED president
Speaker 1: come alongside, all well and good, because it makes it
Speaker 1: look as if everybody is unanimous. But I'm not sure
Speaker 1: that on their own, those those four rotating regional FED
Speaker 1: members can never really change policy unless it had already
Speaker 1: been agreed by by the insiders. And you know, typically
Speaker 1: just just awaiting means that's very unlikely to happen. Interesting
Speaker 1: for the debate, and often, I think in Bullard's case,
Speaker 1: gives you a sense of where the debates going, but
Speaker 1: doesn't necessarily give you any sense of exactly what's going
Speaker 1: to happen next. Tom mentioned that the politics that the
Speaker 1: Fired is having to deal with your looking ahead to
Speaker 1: to this year and beyond. How are we going to
Speaker 1: strike a balance here between what the FED wants to do,
Speaker 1: what the FED is doing, what Congress wants the FED
Speaker 1: to be doing, and the White House. I mean, it
Speaker 1: seems like this is going to be particularly thorny field
Speaker 1: for for all of these participants to have to navigate here.
Speaker 1: How difficult is it going to be? Very difficult? In short?
Speaker 1: I mean, I wouldn't want to be cheering the FED
Speaker 1: right now. You're not going to please all the people
Speaker 1: all the time. In fact, you're probably likely to upset
Speaker 1: most of the people most of the time. With FED
Speaker 1: policy this year, they are going to be at least
Speaker 1: attempting to hike rates um. If they respond to the
Speaker 1: to the macro data um, they're going to be seen
Speaker 1: as taking the punch bowl away from the party, et cetera.
Speaker 1: You know, the usual cliches. If they don't, they're going
Speaker 1: to be criticized for being behind the curve. Um. You know,
Speaker 1: they've they've been criticized in the past producing the stock
Speaker 1: market supporting politicians. Does that change under under President elector
Speaker 1: Trump wants he gets inaugurated, will he like them to
Speaker 1: choose the stock market? It's a very difficult one. How
Speaker 1: how can you how can you operate in those environments? Well,
Speaker 1: that's the unexpected that maybe we'll begin to hear about today,
Speaker 1: this press cars. When was the last press curds of
Speaker 1: David Girl? Was it her fifty days ago? D sixty seven?
Speaker 1: I believe seven? Yeah, I mean maybe it begins to
Speaker 1: do with press conference. What's Rob Colonel's unexpected for Janet
Speaker 1: Yellen and for our economics that underpins all that we
Speaker 1: do well? Her unexpected? I think it's it's it's what
Speaker 1: they deliver in the in the next couple of months.
Speaker 1: I don't think anyone's really expecting them to move in March.
Speaker 1: I'm struggling to think why they wouldn't. Can you mentioned earlier?
Speaker 1: I believe in Bloomberg Television wage growth is just the mystery.
Speaker 1: This is the one that's that's it's the dog that's
Speaker 1: finally barking. We are now beginning to see wages growth
Speaker 1: picking up and picking up in a reasonable fashion. What
Speaker 1: happens if the core rate of inflation, we know the
Speaker 1: headline headline rate of inflation is going to pay up
Speaker 1: in the next two months and push us it into
Speaker 1: the mid twos, into into sort of levels where you
Speaker 1: wouldn't expect to see rates as low as they are.
Speaker 1: If the wages continue to rise. If we start to
Speaker 1: see the core eight moving with that, and wages of
Speaker 1: course for a big factor in service sector inflation that's
Speaker 1: likely to be pushing up, then it looks as if
Speaker 1: the Fed's left it too late and they have to
Speaker 1: then respond to that with with faster responses, more tightening
Speaker 1: their three dops. We're not forecasting that ourselves, but that's
Speaker 1: not looking totally out of the realms of possibility if
Speaker 1: these things continue moving in that direction. For quickly, here
Speaker 1: help me with Paulling. How are you regarding polling now
Speaker 1: as we look ahead the political risk and in Europe
Speaker 1: going forward to tell you what's going on in France
Speaker 1: there with the Netherlands where you're gonna pay less attention
Speaker 1: to it in light of what we've seen. Ah, the
Speaker 1: politics in Europe's really really interesting right now. You've got
Speaker 1: you've got an incredibly busy political calendar. The one that
Speaker 1: everybody has really been focusing on, I think maybe inappropriately
Speaker 1: has been France. I think that's actually much less of
Speaker 1: an issue than anybody is made out. Thank you so
Speaker 1: much in a studios here in London, brought you by
Speaker 1: Bank of America Mary Lynch. Dedicated to bringing our clients
Speaker 1: insights and solutions to meet the challenges of a transforming world.
Speaker 1: That's the power of global connections, Mary Lynch, Pierce fennerin
Speaker 1: Smith Incorporated, Member s I p C. What are bringing up,
Speaker 1: Francisco Anzaga. She is a lead economist at the World
Speaker 1: Bank based here in London. The World Bank out with
Speaker 1: its latest Global Economic Prospects Report outlook for the new year.
Speaker 1: Great to have you with us here in London and
Speaker 1: Bluebrig's at European headquarters. And I just want to pick
Speaker 1: up on a quotation from your boss from Jim Came,
Speaker 1: the President of the World Bank, talking about the momentum
Speaker 1: we're seeing right now speaking of the need to increase
Speaker 1: investments in infrastructure and people looking ahead to two thousand seventeen.
Speaker 1: What's going to catalyze that and who's going to be
Speaker 1: doing that? Do you think? Yes? Thank you for having me,
Speaker 1: Thank you for sload on the emerging markets is a
Speaker 1: is a real challenge. Investment growth in emerging markets has
Speaker 1: dropped from ten percent in two thousand ten to three
Speaker 1: point four percent in two thousand and fifteen and probably
Speaker 1: below based on partial data, and that that is something
Speaker 1: that can undermine long term growth potential. For example, it
Speaker 1: is highly correlated with productivity growth, and that undermines the
Speaker 1: potential of future growth prospect, which in turn is required
Speaker 1: to live people out of poverty. What can be done?
Speaker 1: Any number of policies is available and really depends on
Speaker 1: the countries. Some can implement public investment stimulus, which we
Speaker 1: estimate does have at least over two years and benefits
Speaker 1: for private investment as well. For example, a one percentage
Speaker 1: point increase in public investment growth might lift private investment
Speaker 1: by point three percentage points. Others don't have that option
Speaker 1: because of lack of fiscal space. They might want to
Speaker 1: reallocate expenditures towards higher yielding investment, or they might want
Speaker 1: to increase tax spaces to raise the revenue it And
Speaker 1: of course all of this works most when it's a
Speaker 1: complemented with structure reforms to improve business climates. We're talking
Speaker 1: awful lot about the the uncertainty that certainly overlaid the
Speaker 1: US and the United Kingdom. You're focused on emerging markets.
Speaker 1: There's the same sort of political uncertainty persists there as well.
Speaker 1: It's the broad brush I suppose the same emerging markets. Yes,
Speaker 1: two points on this one. Yes, Global policy uncertainty is
Speaker 1: at a record high, and it is driven by all
Speaker 1: the major most of the major economies, and it is
Speaker 1: something that affects investment. We estimate, for example, if you
Speaker 1: just look back in history, if you take the pier
Speaker 1: in twenty ten to twelve to your area crisis, the
Speaker 1: policy uncertainty in the in Europe at the time may
Speaker 1: have reduced investment growth in the eco region Eastern Europe
Speaker 1: by point six to one point three percentage points. That's
Speaker 1: global uncertainty. In addition with that document in our report,
Speaker 1: a clear increase in political risk across emerging markets, which
Speaker 1: further than weighs on investment growth in them. In Washington,
Speaker 1: there's that street between in the World Bank in the
Speaker 1: I m F. I saw you once out on that
Speaker 1: street breaking up a fist fight, and you know there's
Speaker 1: this contention between the World Bank and the International Monetary Fund,
Speaker 1: where you guys don't talk that much about foreign exchange,
Speaker 1: about the dollar and dynamics. The fact is you're putting
Speaker 1: out your wonderful report on something everyone's focusing on, which
Speaker 1: is a dearth of investment amid the beginning of emerging
Speaker 1: market foreign exchange adjustment, foreign exchange weekend rates go up,
Speaker 1: growth goes down, is an investment the first order condition
Speaker 1: affected by that growth coming down. That's our concern. So
Speaker 1: we are interested in advanced economies like the US mainly
Speaker 1: because of the impact on emerging markets. So I think
Speaker 1: what you're referring to is that the potential for dollar appreciation.
Speaker 1: And it's true that foreign currency borrowing has increased a
Speaker 1: lot in emerging markets over since the crisis. However, the
Speaker 1: bulk of borrowing by corporates in emerging markets modern remains
Speaker 1: domestic currency and remains by domestic banks. So their main
Speaker 1: vulnerability is to arise in global financing condition. The only
Speaker 1: reason I'm gonna be nice to you is Dr Kim
Speaker 1: once gave me a Dartmouth bow tag, so which was
Speaker 1: which I still treasure. It was great, but but I
Speaker 1: don't want to get you in trouble with Dr Kim.
Speaker 1: You can't mention the dreaded T word, Mr Trump. I
Speaker 1: get the idea that the World Bank can't talk about them,
Speaker 1: but come on, it's a Trump reflation, call it the
Speaker 1: U S reflation in that How does that impinge on
Speaker 1: the body of your important report? The answer is it's
Speaker 1: a huge deal, right, it's the US is a big
Speaker 1: part of the global a quarter of global TODP, a
Speaker 1: tenth of global trade. So what happens what in the US,
Speaker 1: of course, does not stay in the US. It has
Speaker 1: global implications. But that said, the new administration's policies there
Speaker 1: have been there has been much discussion about them. We
Speaker 1: simply do not have enough detailed to incorporate them into
Speaker 1: our focusts. So when we say that we expect growth
Speaker 1: in the US to rise from one point six to
Speaker 1: two point two percent in t seventeen, it is excluding
Speaker 1: all these policies that are currently being promoted. This is important, David,
Speaker 1: because within the report there's more talk about the US
Speaker 1: than I've ever seen. Absolutely, let me ask you about
Speaker 1: China and you project a slowdown in growth there, Where
Speaker 1: will we see growth? Where's the most growth going to come?
Speaker 1: From is it in South Asia in the next year.
Speaker 1: Where where do you see the bright spots in the
Speaker 1: global economy right now? Clearly China is slowing gradually, just
Speaker 1: as expected. We expect six and a half percent growth
Speaker 1: in twenty seventeen, six point three in twenty eighteen and nineteen,
Speaker 1: and the authorities are conducting a careful balancing act between
Speaker 1: reducing vulnerabilities financial vulnerabilities and steering activity with the occasional stimulus.
Speaker 1: Now surprisingly there are there. There's actually a whole group
Speaker 1: of emerging markets that is doing that has done fairly
Speaker 1: well since the crisis, and those are the commodity ex
Speaker 1: in port US. It's only one third of emerging markets.
Speaker 1: Emerging market which is just Poland is done really well.
Speaker 1: Poland is one, but the others that have perhaps done
Speaker 1: best are the ones in East Africa West Africa. It's
Speaker 1: the Rwanda and the sending guys. And one of the
Speaker 1: reasons they've done well is yes, they've benefited from law
Speaker 1: and oil prices, but also they have implemented a lot
Speaker 1: of public investment to support grows. The United Kingdom and
Speaker 1: its way to becoming an emerging market under your definition,
Speaker 1: we have revised our focus downwards for the UK to
Speaker 1: one in seventeen, in line with the Treasury, but that
Speaker 1: has you have to take into account that we publish
Speaker 1: our last Focust long before the Brexit vote. The phrase
Speaker 1: new normal is probably overused, but when you look at investment,
Speaker 1: to circle back to investment, you see where it is now.
Speaker 1: Is there a risk that we're at a level that
Speaker 1: we're going to stay at that we're not going to
Speaker 1: see as high investments we've seen? Those are certainly the
Speaker 1: expectations of long term expectations of the consensus, and that
Speaker 1: that is our concern that really the the investment growth
Speaker 1: is not going to pick up absent a big policy
Speaker 1: push that is a whole package of measures. No single
Speaker 1: measure will really there's no said bullet, no single measure
Speaker 1: we lift investment. I'm interested just in the particular difficulties
Speaker 1: of putting together an outlook like this amid so much uncertainty.
Speaker 1: You write about Europe and I'm asked about poland you
Speaker 1: write about Europe, and there is the sense there that
Speaker 1: things could change radically depending on what happens in certain elections,
Speaker 1: what happens with the European Union, whether or not things
Speaker 1: stay as cohesive as they as they have. How tricky
Speaker 1: was it to assemble something like this? There's many hundreds
Speaker 1: of page long report during this particular climate. Yeah, we
Speaker 1: do try to measure risk and uncertainty in a fan chart.
Speaker 1: So we do estimate that the uncertainty around our baseline
Speaker 1: forecast has increased since the last time we published. But
Speaker 1: the way we try to get at it is by
Speaker 1: scenario analysis. For example, we do do a scenario. We
Speaker 1: estimate a scenario of what would happen if the US
Speaker 1: cut taxes the way it has been proposed. That would
Speaker 1: be Mr Trump, that would be the new administration. Yes,
Speaker 1: very good, as the new administrations suggest what would happen.
Speaker 1: So we estimate, and we're using the defens own models,
Speaker 1: So we estimate that that may raise growth in the
Speaker 1: US two up to two seventeen and up to two
Speaker 1: point nine and eighteen. But that's under many assumptions. First,
Speaker 1: that this is actually implemented as proposed, both corporate and
Speaker 1: income tax cuts, and that would be a large revenue
Speaker 1: laws sizeable revenue laws. Second, that there are no offsetting
Speaker 1: other expenditure for example extend pendision measures. Third, that the
Speaker 1: US FED does not behave in any different way as
Speaker 1: the model projects. For example, it raises interest rates faster
Speaker 1: than expected. And fourth, it does not take into account
Speaker 1: possible trade policies, and these trade policies would matter for
Speaker 1: the way that US growth feeds into global growth. Within
Speaker 1: the zeitgeist of the World Bank, very quickly here is
Speaker 1: there just an understanding that the age of multilateralism is
Speaker 1: over within the vast bureaucracy of Dr Kim's World Bank?
Speaker 1: Is it? Is it adjusting to a bilateral World Bank.
Speaker 1: So we certainly flag the risk of rising protectionism as
Speaker 1: one of the keyst The first risk actually were mentioned
Speaker 1: to global growth, but that goes beyond any individual country.
Speaker 1: If you look at the G twenty countries, the number
Speaker 1: of new trade restrictive measures in a record high. And
Speaker 1: again yet another year more trade restrictive measures implemented and
Speaker 1: liberalizing ones. That's all the time. This has been absolutely
Speaker 1: fantastic for Francesca answer Gay, thank you so much. Is
Speaker 1: with the World Bank, David Gern, Tom Keene in London worldwide,
Speaker 1: this is Bloomberg. It is a good day, if any
Speaker 1: day is a good day to speak to that gartment,
Speaker 1: but it's a particularly good day today, Mr Gartman writes
Speaker 1: a newsletter. He is one of the brave and foolish
Speaker 1: who actually put his track record at the back of
Speaker 1: the newsletter. Forced a gartment to be one of the
Speaker 1: great Pinata's business news and undeserved, I might point out,
Speaker 1: because we are all wrong it numerous and frequent moments. Dennis,
Speaker 1: let me migrate to the politics first, what would be
Speaker 1: your first question to Mr Trump this morning at the
Speaker 1: press conference? Why are you so incredibly attuned or in
Speaker 1: favor of some sort of trade protection? If you understand
Speaker 1: the history of of the modern World War, tariffs and
Speaker 1: trade protection always give way to weaker economic environ's domestically
Speaker 1: and politically. Why are you pushing ahead with that? That
Speaker 1: would be my very first question, Tom, Do you well said,
Speaker 1: do you perceive that there are adults in the room
Speaker 1: or at least budding within the administration that will amend
Speaker 1: a just adapt the Trumpian message. No, I'm fearful that
Speaker 1: there are no adults in the room. I have not
Speaker 1: seen anybody yet other than the gentleman who have been
Speaker 1: professing or promoting even greater trade protection. So I'm afraid
Speaker 1: that there are no adults in the room. And that
Speaker 1: is right, A truly a great fear on my part. Hopefully,
Speaker 1: hopefully cooler minds will prevail, hopefully adults will show up. Um,
Speaker 1: But right now I have not seen that, and that
Speaker 1: is disconcerting to me. How do you read the tweets
Speaker 1: about Ford and GM and Boeing and Lockheed. Do you
Speaker 1: see these as as one office, as uh things under themselves,
Speaker 1: not representative of some sort of larger industrial policy. What's
Speaker 1: your read on his targeting of individual companies. I think
Speaker 1: it's dangerous. I wish he wouldn't do that. In in
Speaker 1: the first edition of the Gartment Letter this year, I
Speaker 1: put out my surprises for the year, and my one
Speaker 1: hope surprise was that the president would stop tweeting. For
Speaker 1: a couple of days. It appeared that he had, But
Speaker 1: now he seems to be tweeting even more aggressively than
Speaker 1: he had in the past. I find this dangerous. Making
Speaker 1: opinion by tweets is something that simply should not be
Speaker 1: It shouldn't be done. That's like you get whips on
Speaker 1: way Olderness. I had to say. I just had to
Speaker 1: get that in there. Dennis. At least, at least you
Speaker 1: haven't said anything about my beloved wolf Pack losing by
Speaker 1: are almost two to one on a snowy night at
Speaker 1: the Dando. It was a tough loss for you. We
Speaker 1: didn't we didn't want to go there, Dennis Garment seriously, though,
Speaker 1: this has to do with stability, and there's any ways
Speaker 1: to go here. But I just put out a chart
Speaker 1: on Twitter off the Bloomberg terminal folks of Turkish lira,
Speaker 1: and as Dennis would say, it's an elegant chart. There
Speaker 1: is a persistency here. Dennis, I am dismayed by people
Speaker 1: who dismiss this oddities of Bloomberg chit chat. They're not.
Speaker 1: They're really linked in in their own unknowable way into
Speaker 1: all that we do. When you see Mexico and Turkey unraveled, well,
Speaker 1: I think take a look also what's happened to bitcoin
Speaker 1: in the past week and a half or two weeks.
Speaker 1: I mean, it's just it's astonishing what it's taking place
Speaker 1: in the foreign exchange market. Not enough people pay attention
Speaker 1: to for exchange. Thankfully this audience does, but when you
Speaker 1: get to the broad public, they pay very little attention
Speaker 1: and and and they should be paying a great good
Speaker 1: deal more. What happens in the in the lira is important.
Speaker 1: What happens uh in in in the Mexican pay so
Speaker 1: is important, what happens in bitcoin is important. What happens
Speaker 1: in goal is important, and it's not paid attention to enough.
Speaker 1: So what's going through Dennis Gartner's mind as you watch
Speaker 1: the depreciation of the lear? We had the central bank
Speaker 1: intervening yesterday trying to do something about it. Doesn't seem
Speaker 1: like that worked out that well. What are you thinking
Speaker 1: as you watch this depreciation? You know, it's not just
Speaker 1: the central bank there that has that has failed. Take
Speaker 1: a look at at probably the the one central bank
Speaker 1: that people have had a great deal of confidence in,
Speaker 1: the Swiss National Bank that has been trying to keep
Speaker 1: its own currency down and can't do that. Normally, a
Speaker 1: central bank, if they want to do anything, can always
Speaker 1: keep their currency lower, and they can't. So what we
Speaker 1: have learned from this is that central bank powers are
Speaker 1: being diminished in the modern world. I think that's the
Speaker 1: lesson to be taken away from here. You know. Uh,
Speaker 1: we're talking to Bill Dunkelberg yesterday about his n f
Speaker 1: IB Small Business Optimists Report is something that the President
Speaker 1: elect clearly took an interest in. He tweeted it out
Speaker 1: three times yesterday, flagging this is as a good sign
Speaker 1: for the economy. What's your read of that data that
Speaker 1: we got from the n f I B yesterday. Is
Speaker 1: the message from that simply the economy. Economy is doing
Speaker 1: pretty well here, don't screw it up. I think what
Speaker 1: it tells us is in the flyover States, things are
Speaker 1: doing actually quite a good deal better. The deplorables, as
Speaker 1: Mrs Clinton would have called us, seemed to be doing okay.
Speaker 1: There was a great deal of enthusiasm that has been
Speaker 1: engendered by the the the arrival or the soon to
Speaker 1: be arrival of the Trump administration. And I think that
Speaker 1: the coasts have missed, have not understood what has really
Speaker 1: taken place. I thought that was a very important bit
Speaker 1: of economic data that came out yesterday showing the the
Speaker 1: n FIB number up as dramatically as it was. That
Speaker 1: was a very impressive rise in that in that index,
Speaker 1: and I think it shows that that animal spirits, according
Speaker 1: to Mr Kean's, are in fact rising out there. I
Speaker 1: know he wants to talk about red wheat as well.
Speaker 1: He was calling that out yesterday. Before we get that.
Speaker 1: You brought up coin and I know that you haven't
Speaker 1: been a big enthusiast for a bitcoin. What's it gonna
Speaker 1: take for you to to get more interested in in cybercurrencies?
Speaker 1: Or do you think this is really a flash in
Speaker 1: the pan. I'll be at a you know, a year's
Speaker 1: long flash in the pan. At sixty six years old,
Speaker 1: I think I'm a bit too old to understand what
Speaker 1: bitcoin really is, and and and and I simply won't
Speaker 1: excuse me, I won't be able to put that a
Speaker 1: great good deal of trust in it, especially with the
Speaker 1: volatility that has been incumbent in that one currency. It's
Speaker 1: it's astonishing you cannot move a currency in a in
Speaker 1: a week and expect to see that become a usable
Speaker 1: instrument for the purchase of goods and services. Is it
Speaker 1: a currency, Dennis Gartment? Well, they call it that. What
Speaker 1: is the terminology a cryptocurrency? It's your crypto, it's a
Speaker 1: it's a thing. It's it's something to be traded right now.
Speaker 1: And that's about all it is. Thank you. We would
Speaker 1: do trading theory and Red Wheat here with Dennis Gartment,
Speaker 1: but I want to stay in theme. Dennis, Dennis, there's
Speaker 1: everyone agrees, massive and original uncertainty here, you just happen
Speaker 1: to mention your age. I put out a photo of
Speaker 1: my favorite photo of the president, which is him sitting
Speaker 1: on the Rosa Parks bus, of the history of this
Speaker 1: president and all that he stands for. I want you
Speaker 1: to speak to our listeners who are overwhelmed by the
Speaker 1: uncertainty of the times. How do you stay invested? How
Speaker 1: do you have confidence in your little pot of money
Speaker 1: given the uncertainty that we face. We always have faced uncertainty.
Speaker 1: We're going to face uncertainty tomorrow. We will face uncertainty
Speaker 1: next month, will face uncertainty next year. We've always faced it.
Speaker 1: We've always done better. That's just been the trend. There
Speaker 1: were some of my friends who were who were Clinton supporters,
Speaker 1: were obviously greatly dismayed. The country will be fine no
Speaker 1: matter who had become the president, the country will become
Speaker 1: or will be fine. My wife was very despondent thinking
Speaker 1: that Mrs Clinton was going to win, and I had
Speaker 1: to tell her, sweetheart, Margaret, it's going to be okay.
Speaker 1: Have a drink, You'll be fine. You okay with their girl?
Speaker 1: Just you know, I'm getting your Garment's got a book
Speaker 1: coming up. Have a drinking fine as a title. With that, Dennis,
Speaker 1: let's switch to uh your trading. We'll do this internet section.
Speaker 1: But to go out your Dennis, give me the why
Speaker 1: of the look back of two thousand and sixteen? Why
Speaker 1: was it so hard to take a prudent trading stance,
Speaker 1: whether it was a three month trade or or a
Speaker 1: nine month trade? Why was it so darn hard? You know?
Speaker 1: Golly day, I wish I could understand that I got
Speaker 1: stopped out of good trade so many times last year.
Speaker 1: It was terribly disconcerting. To get the major trend right
Speaker 1: and to be taken out on on on small interim
Speaker 1: corrections is the most debilitating, disturbing, soul destroying circumstance that
Speaker 1: one can go through. I wish I had the answer.
Speaker 1: If I did, I wouldn't be talking to you to
Speaker 1: I'd be out in I'd be in Monaco, or I'd
Speaker 1: be down in uh In Bali enjoying myself. It would
Speaker 1: be that that is the great that is the great
Speaker 1: uncertainty that that investors and traders have to deal with.
Speaker 1: TORTI in south of your Virginia. I know Clemson is
Speaker 1: going to Disneyland. Wasn't that a good thing to see,
Speaker 1: I mean just for the sport. Was that a good
Speaker 1: thing to see Alabama defeated? Oh? Absolutely, it was wonderful
Speaker 1: as as an Atlantic Coast conference devotee to see Clemson
Speaker 1: a land Grant university. I might here we go, we
Speaker 1: could agree, we could agree on that. Do you know
Speaker 1: that the Gartment last year made so much money in
Speaker 1: his speaking fezy about a forty eight foot Grant grand
Speaker 1: Banks and he called the puppy land Graph Just people,
Speaker 1: you're going, Dennis Gartment with us? My David, why don't
Speaker 1: you uh jump in here with that? I know you
Speaker 1: want to get into commodities. Let me stick with currencies
Speaker 1: for one minute more. We're here in London. We were
Speaker 1: wrapped with attention watching the Prime Minister Treason May speaking
Speaker 1: to Sky News this weekend writing for The Telegraph about
Speaker 1: the Brexit process. What have you learn, Dennis Gartment, about
Speaker 1: where this is headed? What have you learned about the
Speaker 1: contries of a UK EU trade policy and what that
Speaker 1: means for Sterling. I think when all of this has
Speaker 1: run its course, England will, in fact the UK will
Speaker 1: in fact leave. There will be a British removal from
Speaker 1: the continent, from the political circumstances. That's going to happen.
Speaker 1: The voters have made it clear they will accommodate or
Speaker 1: will be accommodated by Germany and France. There will be
Speaker 1: some reconciliation. Cooler heads, adult minds will prevail and all
Speaker 1: will this will all resolve itself. Will Will the pound
Speaker 1: Sterling be under pressure until that resolution comes to to
Speaker 1: to effect later sometime this year, Yes, probably Sterling shall be.
Speaker 1: But in the end, as almost all of these events
Speaker 1: avail themselves, there will be decency and good nature that
Speaker 1: will finally come to the surface. That's That's the way
Speaker 1: it always is resolved, the way it always is. Dennis
Speaker 1: and commodities, is there just a presumed chronic deflation or
Speaker 1: disinflation of price. I don't know much about red wheat.
Speaker 1: It's a reddish grain major classification of the United States
Speaker 1: hard red winter wheat as opposed to soft dread winter wheat.
Speaker 1: And I have no idea if I can tell that
Speaker 1: in my gluten free bread here in London, or yes, folks,
Speaker 1: I did eat gluten free bread last night. Dennis helped
Speaker 1: me here with the price erosion in the sauce and
Speaker 1: particularly in wheat. Is it back to the pre China
Speaker 1: disinflation for commodities, I think it's simply the fact that
Speaker 1: we are so good at producing crops around the world,
Speaker 1: whether it's whether it's wheat, whether it's soybeans, whether it's corn,
Speaker 1: whether it's cotton. If you take a look at the
Speaker 1: history of the last forty years, every time you look
Speaker 1: at how much production per acre of any of the
Speaker 1: major grains or any of the major commodities has been,
Speaker 1: it's always been higher drought in, flood out. Yes, you
Speaker 1: have problems that that can be that can occur because
Speaker 1: of weather, but on balance, we're just simply better at
Speaker 1: producing amounts of of commodities on the same amount of
Speaker 1: acreage than we were forty years ago. In fact, in
Speaker 1: the case of corn, were probably tripled what we can
Speaker 1: do what a good farmer fifty years ago would grow.
Speaker 1: We're probably producing triple that now and that's not going
Speaker 1: to stop anytime soon thanks to the Penn States, the
Speaker 1: Ohio States, Texas, Texas, A and M. Dennis. You want
Speaker 1: to get back on scriptures hoping the the the China
Speaker 1: commodity boom, then do you perceive that globally and domestically
Speaker 1: as a one off, No, I do. I think that
Speaker 1: the Chinese circumstances of the last ten years fifteen years,
Speaker 1: as China has leaped from the fourteenth century into the
Speaker 1: twenty second century, and they're not going to go back. Uh.
Speaker 1: Chinese consumers are going to be demanding carpets and rugs,
Speaker 1: and and brass plumbing fixtures, and and and wooden furniture
Speaker 1: and and and better housing. There are still some of
Speaker 1: what eight hundred million people in the Western province is
Speaker 1: that have to move to the eastern provinces and shell
Speaker 1: and that will have to be accommodated as we as
Speaker 1: they As the world gets wealthier, and the world is
Speaker 1: getting wealthier, that's going to continue. But what well, what
Speaker 1: I think shall end up happening is that as demand
Speaker 1: continues to grow, the ability to produce more will will
Speaker 1: keep track with it, and in fact, if anything, will
Speaker 1: outpace it. That's been the history of the last hundred
Speaker 1: years and I don't see that changing anytime soon. Down
Speaker 1: it's in a limited time we have left here. Let
Speaker 1: me ask you about oil. I know you've been looking
Speaker 1: at the correlation between w T I and brand at
Speaker 1: this point. What does that tell you? What does that
Speaker 1: correlation tell you about the energy market. Well, I think
Speaker 1: what's most important is that is the relationship between front
Speaker 1: month to back month w t I and front month
Speaker 1: to back month Brent. We're continuing to watch the contango
Speaker 1: the carrying charge widen, even as prices have risen. The
Speaker 1: contango has widen, which tells you that crude, as I
Speaker 1: like to say, is bidding for storage. Crude is fine,
Speaker 1: is forcing itself, or the the abundance of crude, and
Speaker 1: there is an abundance of crude is forcing back months
Speaker 1: to be stronger than front months. It's telling you that
Speaker 1: there's an oversupply. And when in a contangled market, it's
Speaker 1: very difficult to be bullish of crude oil under any circumstance.
Speaker 1: There's just simply more of it. We find more of it.
Speaker 1: We're better at producing it, we're better at finding it.
Speaker 1: And that's not gonna that's not gonna end anytime soon
Speaker 1: either quickly. Donnis if you amended your gold stance given
Speaker 1: the Trump reflation, Actually, if if anything, I have become
Speaker 1: more amenable to owning golden not in dollar terms, because
Speaker 1: I'm really quite bullish of the US dollar and a
Speaker 1: in long golden dollar terms is an implied bet against
Speaker 1: the dollar, and I'm not willing to make that. However,
Speaker 1: if you take a look at what gold did last
Speaker 1: year in terms of the euro uh and I think
Speaker 1: this is an important statistic. The stock market, the S
Speaker 1: and P was up what nine percent last year, but
Speaker 1: golden in euro terms was up much more than that.
Speaker 1: People don't understand that fact. I want to be bullish
Speaker 1: of gold, but only in terms of currencies that I
Speaker 1: think will continue to diminish in value, and I think
Speaker 1: that's primarily the Euro first and the end second. Thank
Speaker 1: you so much. The Gartman letter always interesting. I just
Speaker 1: put out on Twitter the Wikipedia and land Grant schools.
Speaker 1: I grew up in a house of land grant excellence.
Speaker 1: Is Mr Gartman has a good one. Cornell, your Cornell.
Speaker 1: They have like a split school. You got schools school,
Speaker 1: you got the architect school, engineering school plenty, so each
Speaker 1: of them with their own character. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter
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