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Brexit Negotiators Reach Outline of Historic Trade Deal · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
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  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
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  Speaker 1: along with essential market moving news. Kind of Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. We have the breaking news.
• 0:20
  Speaker 1: There is an outline of a Brexit trade deal that
• 0:23
  Speaker 1: has been reached. This is, according to officials, the outline
• 0:26
  Speaker 1: of an historic post Brexit trade agreement reached. Now negotiators
• 0:30
  Speaker 1: still putting the finishing touches to an accord. According to
• 0:33
  Speaker 1: these officials, they spoke on condition of anonymity, and of
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  Speaker 1: course it would then need to go to a vote
• 0:38
  Speaker 1: of the twenty seven member countries. But an outline has
• 0:41
  Speaker 1: been reached. We know going into the day that there
• 0:43
  Speaker 1: were two disagreements over fish, what access EU boats would
• 0:47
  Speaker 1: have to British waters and what rights the EU would
• 0:50
  Speaker 1: have to impose retaliatory tariffs should the UK limit that
• 0:53
  Speaker 1: access in the future. Well, now it looks like those
• 0:56
  Speaker 1: conditions have been sorted out. The British pound is rebounding
• 1:00
  Speaker 1: versus the US dollar and the euro up one versus
• 1:03
  Speaker 1: the US dollar. We have a little bounce in the
• 1:07
  Speaker 1: foot seed to fifty and the Treasury is here in
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  Speaker 1: the US are also reacting. Let's get some more details. Now,
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  Speaker 1: we'll go to Brussels. Our reporter Maria to day Oh
• 1:17
  Speaker 1: has been keeping an eye on the minute by minute
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  Speaker 1: news out of the negotiations. Maria, we know that the
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  Speaker 1: Brexit negotiators, Deputy Steph Rizo and also David Frost, has
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  Speaker 1: been meeting since early morning. What else do we know
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  Speaker 1: about those meetings? Well, Vonnie, in terms of the actual
• 1:36
  Speaker 1: content that's going into this deal, what made this deal?
• 1:39
  Speaker 1: Finally pick that we don't really know. This is happening
• 1:43
  Speaker 1: behind closed doors. But when we do know, when the
• 1:45
  Speaker 1: market is reacting to this, is that there is an
• 1:47
  Speaker 1: outline to eight deals. There is now a document that
• 1:51
  Speaker 1: could become a deal. We understand that they are working
• 1:54
  Speaker 1: on some final touches and in fact they're hoping to
• 1:56
  Speaker 1: make an announcement of a deal that's been formalized. Sort
• 2:00
  Speaker 1: you know, in terms of the details, as I say,
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  Speaker 1: you know, you're dead right. This is about the fish.
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  Speaker 1: It was about the level playing field and how the
• 2:05
  Speaker 1: two would come together. It's unclear to say wouldn't make
• 2:09
  Speaker 1: this tick, but nonetheless this huge. It is the idea
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  Speaker 1: that a deal is now very much within side and
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  Speaker 1: they won't announce it in the very short hours. Maria,
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  Speaker 1: what is the sense of next steps here? At some
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  Speaker 1: point we had to come to a day like today
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  Speaker 1: where they would hammer out both sides. The various points
• 2:28
  Speaker 1: give us a sense of kind of how the next
• 2:30
  Speaker 1: steps procedurally are supposed to happen. Well, first of all,
• 2:34
  Speaker 1: of course we were going to get to a day
• 2:35
  Speaker 1: like this where where a deal was announced. But I
• 2:37
  Speaker 1: would also say it's it's now. It's easy to take
• 2:39
  Speaker 1: it for granted, but just twenty four hours ago we're
• 2:41
  Speaker 1: talking about potentially a no deal w two terms. And
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  Speaker 1: this deal is is a huge thing because it means
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  Speaker 1: that it's no protests, no terriffs, this is a very
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  Speaker 1: close partnership, and it means that, especially if you're a
• 2:52
  Speaker 1: business right now, it removes a lot of the legal eternity.
• 2:55
  Speaker 1: So it is it is huge and and and I
• 2:57
  Speaker 1: guess just just that line that of course the day
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  Speaker 1: like this is gonna come, but it was not something
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  Speaker 1: that we're taking for granted. Just a few days ago. Now,
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  Speaker 1: in terms of what happens next, when this deal is
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  Speaker 1: announced and this is at a technical level, the European,
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  Speaker 1: the EU twenty seven countries and the Member States will
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  Speaker 1: have to say they agree with it. The understanding, of
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  Speaker 1: course is that Mr Barnier is the EU negotiator, is
• 3:16
  Speaker 1: working very closely with him, so he would not agree
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  Speaker 1: to something they don't agree with already. And then after
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  Speaker 1: that this will have to be right asided by the
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  Speaker 1: UK Parliament. That's not going to be a problem in
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  Speaker 1: principle that as Prime Minister does have a majority there,
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  Speaker 1: and then it had to be good to the EU Parliament.
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  Speaker 1: That could become more complicated this time, funny, funnily enough,
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  Speaker 1: purely because I've always said they needed time to vote
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  Speaker 1: this the settled ready that they can't read the documents
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  Speaker 1: that we're looking at thousands of pages from now until
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  Speaker 1: summer twenty eight. That was the last play that were
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  Speaker 1: scheduled for this. So there could be a legal lean
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  Speaker 1: boat between the deal being agree or a technical level
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  Speaker 1: and then ratified. But we'll have to see about that.
• 3:53
  Speaker 1: An options traders had been positioning for a deal. They
• 3:56
  Speaker 1: drugged down the cost of hedging a weaker sterling over
• 3:59
  Speaker 1: the coming months. So it looks like they are looking
• 4:01
  Speaker 1: for a weaker startling, which of course is rebounding today
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  Speaker 1: on the you know, the excitement that there might actually
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  Speaker 1: be a deal and that there won't be all kinds
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  Speaker 1: of chaos at the end of the year. Now, Maria, obviously,
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  Speaker 1: you know each country has to agree with it, but
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  Speaker 1: we hear that they're standing by. They haven't gone home
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  Speaker 1: for you know what's widely celebrated across Europe, and that
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  Speaker 1: is a Christmas even Christmas Day, yes, and you know,
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  Speaker 1: the timing of this bondage it was just so difficult
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  Speaker 1: in this whole negotiation on a bigger picture to have
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  Speaker 1: been really difficult in terms of the logistics because of coronavirus.
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  Speaker 1: You know, we talked about breakfit that's happening on and
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  Speaker 1: on and never ending story. But actually, if we look
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  Speaker 1: at the details, this was a very quick deal by
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  Speaker 1: European standards, because the talk's only got theorious in the
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  Speaker 1: summer because coronavirus is a priority at the start of
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  Speaker 1: the year. Now, in terms of now we know there
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  Speaker 1: has been a very close relationship and a very close
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  Speaker 1: partnership between the unigropeting team and the EU capitals. In
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  Speaker 1: principle that should not be an issue. Everyone wants to
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  Speaker 1: get this wrapped up before the end of the year,
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  Speaker 1: purely bone be as a transition period will end on
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  Speaker 1: December thirty one. That's the legal deadline cannot be moved,
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  Speaker 1: so they wanted to remove that and certainty from business,
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  Speaker 1: and for a lot of businesses on both sides of
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  Speaker 1: the channel, the UK and Europe too, this was a
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  Speaker 1: huge clivage just to think what rules are going to
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  Speaker 1: apply in January first, how are we going to be
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  Speaker 1: able to do business? What's going to happen now? Of course,
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  Speaker 1: the coronavirus is very much a place, so this is
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  Speaker 1: for sure going to make it much easier for business.
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  Speaker 1: If something is announced today, maybe not ratified quickly, but
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  Speaker 1: a deal inside and that means that to some extent,
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  Speaker 1: when you get to January first, you've avoided that clivte.
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  Speaker 1: So Maria, as Vannie mentioned earlier, both the pound, sterling
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  Speaker 1: and the euro are rallying, kind of echoing what you're
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  Speaker 1: saying about the business communities is getting a sense of
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  Speaker 1: certainty here. Is it generally accepted that the business community
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  Speaker 1: is behind it. Or is behind kind of where the
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  Speaker 1: EU is in terms of negotiating Brexit. It has always
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  Speaker 1: had the support of the business community. It just from
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  Speaker 1: a negotiating perspective, well, to some extent, it depends on
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  Speaker 1: who you ask. If it's the UK community, the business community.
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  Speaker 1: The one thing they've said is please remove the politics
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  Speaker 1: from this. Let's just give us clarity and guidance as
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  Speaker 1: to what is going to happen. This is a huge
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  Speaker 1: relationship never been done before. What you have. The factor
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  Speaker 1: here is that right now the UK had full access
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  Speaker 1: to the European sivil market. By leaving the European Union,
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  Speaker 1: they could have gone to w two terms. This is
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  Speaker 1: a huge, huge departure from the status quo. So this
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  Speaker 1: is the business community for sure repeating this idea that
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  Speaker 1: you know, let's just move away from the Brexit narrative
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  Speaker 1: on the Brexit political language, just give us clarity for
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  Speaker 1: the European companies. It was also about clarity just what
• 6:38
  Speaker 1: is going to happen in two weeks time. Of course
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  Speaker 1: there's a story, you know, this is an incredible news
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  Speaker 1: sockat But if you've got money on the line and
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  Speaker 1: you don't know what's gonna happen in ten days time.
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  Speaker 1: For sure. That meant that there was going potentially going
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  Speaker 1: to be last investment, that smaller companies were already very
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  Speaker 1: concerned about the impact. That this is going to happen again,
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  Speaker 1: this is probably going to be a huge relief. You know,
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  Speaker 1: the terms we don't know, but the fact that you
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  Speaker 1: know you are going to have a deal in place,
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  Speaker 1: that this is not a w t O shock immediately happening,
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  Speaker 1: it does remove a lot of the incerdents. I mean,
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  Speaker 1: I really cannot stress that enough. Well, and of course
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  Speaker 1: we've got a little preview of what might happen chaos
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  Speaker 1: wise when France had to stop truckers coming in just
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  Speaker 1: the other day. That was on done at midnight last night,
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  Speaker 1: so the backlog did get going again. But this all happening,
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  Speaker 1: as you know, at the very same time as we
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  Speaker 1: were getting these headlines. The UK's Health secretary this morning,
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  Speaker 1: Matt Hancock, put more areas into the highest tier four lockdown.
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  Speaker 1: In other words, you know, Britain is getting more and
• 7:35
  Speaker 1: more locked down. Even as this is happening. Hospitalizations are
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  Speaker 1: nearing the spring COVID peak in the UK and presumably Maria.
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  Speaker 1: Even though the the the instinct in Britain might be
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  Speaker 1: to celebrate this deal. That would be a very dangerous
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  Speaker 1: thing to do right now. Well, you know, again it's
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  Speaker 1: it's you make a good point, Bunnie. The context here
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  Speaker 1: not nice and it's definitely not an easy per for
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  Speaker 1: the UK. And again going back to the question of
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  Speaker 1: the business community, it's relief to because the UK economy
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  Speaker 1: is hurting. We know this already. It's been battered by coronavirus.
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  Speaker 1: This is a situation that's not been solved. If anything,
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  Speaker 1: you have lockdown now and going back into lockdown, and
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  Speaker 1: you have an economy that clearly is not operating or
• 8:18
  Speaker 1: or cannot operate on a normal basis. If you at
• 8:21
  Speaker 1: a new deal scenario on top of a huge health crisis,
• 8:24
  Speaker 1: but the one that we have right now, you can
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  Speaker 1: imagine that for a business, for a company, this was
• 8:28
  Speaker 1: looking very very bleak. So again, you know, it's it's
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  Speaker 1: not a moment to celebrate because the context is still
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  Speaker 1: very challenging, especially for the UK economy. But again it's
• 8:38
  Speaker 1: it's this idea of relief. You know, you still have
• 8:40
  Speaker 1: the health crisis going on, but to some extent you
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  Speaker 1: do know that come januarys or the first. You're not
• 8:44
  Speaker 1: jumping into this black hole of uncertainty, Maria. Timing the
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  Speaker 1: rest of this evening, I note that it's approximately eight
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  Speaker 1: pm in Brussels. Would you expect to hear more from
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  Speaker 1: the Europeans officials? Course is something that will be developing
• 9:00
  Speaker 1: overnight into tomorrow. Yeah, look for sure, right now it's
• 9:04
  Speaker 1: about well, I believe, if I'm not wrong, it's it's
• 9:06
  Speaker 1: actually five pm right now here in Brussels. But the
• 9:09
  Speaker 1: time is or you working in strange hours. But you know,
• 9:14
  Speaker 1: there is still time for them to come out and say,
• 9:16
  Speaker 1: you know, we have this deal, just to almost make
• 9:19
  Speaker 1: the announcement, to make it formal, and then it's over
• 9:21
  Speaker 1: to the capitals, to the Prime Minister to make an
• 9:24
  Speaker 1: announcement himself and then wait for the two parliaments to
• 9:27
  Speaker 1: ratify this. But given that still, you know, there's hours
• 9:30
  Speaker 1: of working hours to this date and everyone wants to
• 9:33
  Speaker 1: get it done before Christmas. To some extent, I would
• 9:35
  Speaker 1: not be surprised from the moment this is announced, things
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  Speaker 1: will move quickly from that point on, Maria, you know,
• 9:42
  Speaker 1: did we have any kind of an idea at all
• 9:45
  Speaker 1: where the common ground might come? Because these two agreement.
• 9:49
  Speaker 1: Disagreements over fish were you know, very very substantial. What
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  Speaker 1: access will the EU boats have to British waters? I
• 9:55
  Speaker 1: mean that's a that's a that's a sovereign question. And
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  Speaker 1: also what rights that you would have to impose retaliatory
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  Speaker 1: tariffs if the UK limit those rights? That are you
• 10:05
  Speaker 1: know said in Stone now in the future. I mean,
• 10:08
  Speaker 1: these are huge and they related fisheries question, but really
• 10:12
  Speaker 1: they relate to a lot more than that. Yes, and Bonny, Uh,
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  Speaker 1: that's exactly it. You know, this was a very difficult
• 10:19
  Speaker 1: dynamic in which the United Kingdom was struggling to make
• 10:22
  Speaker 1: an offer on fish that would be acceptable to the EU.
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  Speaker 1: But again the EU was unclear about how much they
• 10:29
  Speaker 1: could move if they did not yet a guarantee that
• 10:32
  Speaker 1: the United Kingdom is to some extent willing to play
• 10:35
  Speaker 1: among common rules. Uh, to the idea that it does
• 10:38
  Speaker 1: not become an unspair and a loyal competitor to the
• 10:41
  Speaker 1: European Union. It's unclear what's meade this kick. You know,
• 10:44
  Speaker 1: I would love to be able to answer the question.
• 10:46
  Speaker 1: At this point, we really don't know exactly what the
• 10:49
  Speaker 1: precise ion which is going to look like. What I
• 10:51
  Speaker 1: can tell you though, is that yesterday was that this
• 10:53
  Speaker 1: idea that was floating and doing the rounds that the
• 10:56
  Speaker 1: United Kingdom had initially said, you have to reduce the
• 10:58
  Speaker 1: catch by alley of fish. And I know this is
• 11:01
  Speaker 1: very into the weeks, very very tiny little details, but
• 11:04
  Speaker 1: they said reduced it to six. The Europeans had said
• 11:07
  Speaker 1: they only wanted to do twenty five, but a compromise
• 11:10
  Speaker 1: bigger of around thirty to thirty five had emerged. The
• 11:13
  Speaker 1: European has also said that they wanted to attain your
• 11:15
  Speaker 1: transition to the new potus. The UK initially said they
• 11:18
  Speaker 1: were only willing to offer three, and a compromise of
• 11:21
  Speaker 1: around five years had done floating, So I guess it's
• 11:23
  Speaker 1: somewhere around those details. And you know there was another
• 11:26
  Speaker 1: issue here which was about competition. How much can the
• 11:29
  Speaker 1: United Kingdom diverged from the European standards. I mean, the
• 11:32
  Speaker 1: whole point of Brexit, of course, was taken back control
• 11:35
  Speaker 1: and being able to do your own regulations. So that's
• 11:38
  Speaker 1: that's clear and everyone understands that. But you also said,
• 11:41
  Speaker 1: if you do that, we need to be able to
• 11:43
  Speaker 1: cut access into our market and potentially retaliate with harriffs.
• 11:47
  Speaker 1: So we'll be interesting to see what the compromise on
• 11:49
  Speaker 1: that also looked like. Like it's just a few days
• 11:51
  Speaker 1: ago this was presented as being very, very difficult. Maria
• 11:55
  Speaker 1: today are amazing, Thank you so much. This is a
• 11:57
  Speaker 1: culmination really of you know, four plus years of work,
• 12:00
  Speaker 1: and Maria of course covers the European Commission, the European Council,
• 12:04
  Speaker 1: the European Presidency, the ECB, everything Europe related for US
• 12:08
  Speaker 1: out of Brussels typically, but Frankfort and other places as well.
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  Speaker 1: So Maria, thank you for jumping on the phone on
• 12:13
  Speaker 1: this news. As we know, there is help for the
• 12:18
  Speaker 1: airline industry in the pandemic relief bill that again hasn't
• 12:22
  Speaker 1: been signed yet by the President, but is out there.
• 12:25
  Speaker 1: Our next guest points this out. Taxpayers are putting up
• 12:28
  Speaker 1: almost five hundred thousand dollars for each laid off airline
• 12:32
  Speaker 1: worker to have three months of employment, while cooks and
• 12:35
  Speaker 1: waiters get nothing. In other words, airlines are outranking restaurants
• 12:39
  Speaker 1: in relief money. John oh Sarah Bloomberg opinion columnist joins us, Now, Joe,
• 12:44
  Speaker 1: did thought go into this or was it a simple
• 12:46
  Speaker 1: matter of the airline lobby being more powerful? Than the
• 12:49
  Speaker 1: restaurant lobby. Well, there there is a restaurant lobby. Let's
• 12:53
  Speaker 1: start there. Whereas airlines have been um staffed up you
• 12:58
  Speaker 1: might want to say, for for many decade, because airlines
• 13:01
  Speaker 1: have had dealings with the federal government from that many
• 13:03
  Speaker 1: decades between the f a A and um, uh you know,
• 13:07
  Speaker 1: various various airline regulations and so on and so forth.
• 13:11
  Speaker 1: So so so you know, you're shocked there. I mean, restaurants
• 13:14
  Speaker 1: are just it is a just diffused organization. They're not
• 13:19
  Speaker 1: large companies. And even you know, restaurant chains, I mean
• 13:23
  Speaker 1: putting McDonald's aside. Uh, you know, in a city like
• 13:27
  Speaker 1: New York. You know Danny Meyer who is probably the
• 13:30
  Speaker 1: best known restaurateur in the city. You know, he has
• 13:32
  Speaker 1: maybe twenty restaurants, and so that just doesn't give them
• 13:36
  Speaker 1: the cloud that the airline industry has, even though they
• 13:40
  Speaker 1: employ more people and even though their people are really
• 13:43
  Speaker 1: really hurting. So, Joe, this is a searing column by
• 13:47
  Speaker 1: you kind of comparing and contrasting the airline industry with
• 13:50
  Speaker 1: the restaurant business. So the restaurant's obviously it is a
• 13:55
  Speaker 1: you know, it's it's it's a diffuse industry. Lots of
• 13:58
  Speaker 1: independent operators. Historically, has there not been a push to
• 14:02
  Speaker 1: kind of organize better this industry that is so important
• 14:06
  Speaker 1: to many people's daily lives. Well, there is a restaurant
• 14:11
  Speaker 1: lobby of sorts UM, the National Restaurant Associations, but it
• 14:14
  Speaker 1: doesn't seem to have a lot of clout for whatever reason. UM.
• 14:19
  Speaker 1: After the pandemic, after the first round of of stimulus,
• 14:25
  Speaker 1: the p p P program, Uh, there are a bunch
• 14:28
  Speaker 1: of independent restaurateurs tried to start an organization called the
• 14:32
  Speaker 1: Independent Restaurant Coalition and they had a lot of success.
• 14:36
  Speaker 1: They got they have they have a bill that UM
• 14:40
  Speaker 1: would cost a hundred and twenty billion dollars, which is
• 14:43
  Speaker 1: a lot of money. And the idea is that instead
• 14:46
  Speaker 1: of trying to do it like the p p P,
• 14:48
  Speaker 1: you know, the restaurant industry would be get money based
• 14:52
  Speaker 1: on last year's revenues pre pre pandemic revenues UM and
• 14:57
  Speaker 1: and believe it or not, the bill passed the how
• 15:00
  Speaker 1: in October actually by quite a quite a large margin.
• 15:03
  Speaker 1: It had more than fifty UM CO sponsors in the
• 15:07
  Speaker 1: Senate bipartisan But you know, the Senators run by one
• 15:12
  Speaker 1: guy and his name is Mitch McConnell, and he was
• 15:14
  Speaker 1: more interested in that three martini lunch tax break, which
• 15:20
  Speaker 1: he claims will help restaurants. But no one in the
• 15:22
  Speaker 1: restaurant industry seems to think it will make much difference,
• 15:24
  Speaker 1: at least not in the short term. I mean, at
• 15:26
  Speaker 1: the very least. If people start flying again, they will
• 15:29
  Speaker 1: need to go out for restaurants at their destination. But
• 15:31
  Speaker 1: it's gonna be a long time before people really start
• 15:34
  Speaker 1: flying in in in numbers again, Joe, particularly since you
• 15:37
  Speaker 1: know the vaccines aren't out there yet. So you know,
• 15:41
  Speaker 1: what is the thinking behind this. There's there's two things.
• 15:45
  Speaker 1: There's two things going on here. Um uh. The first
• 15:50
  Speaker 1: is that that airlines. Um, you know, they will be
• 15:53
  Speaker 1: bringing people back to work. It's easier to give money
• 15:57
  Speaker 1: to a large company that can do one thing. They
• 16:01
  Speaker 1: can bring fifteen thousand people back to work. They can
• 16:03
  Speaker 1: bring twenty thousand people back to work. It's easier, Whereas
• 16:06
  Speaker 1: you know, giving money to restaurants is a is a
• 16:09
  Speaker 1: kind of a messier proposition because there are all so
• 16:12
  Speaker 1: many of them and they're so small, and it'll be
• 16:14
  Speaker 1: you know, there's that. But the thing you have to
• 16:17
  Speaker 1: remember about restaurants. It's not just a place to eat.
• 16:20
  Speaker 1: Every major city in the United States, restaurants are at
• 16:25
  Speaker 1: the core of their vibrancy and their downtown area. And
• 16:31
  Speaker 1: you know, if you're gonna build a new suburban area,
• 16:33
  Speaker 1: it's going to be built in large part around restaurants.
• 16:35
  Speaker 1: I mean, they play a hugely important role in the
• 16:38
  Speaker 1: life of cities, and so ignoring restaurants is really damaging
• 16:45
  Speaker 1: America cities and and that's what breaks my heart about
• 16:49
  Speaker 1: this more than anything else. So, Joe, I mean, what's
• 16:52
  Speaker 1: the I guess the fate of the US restaurants if
• 16:56
  Speaker 1: you will. I mean, you know these I'm gonna call
• 16:58
  Speaker 1: them individually owned Mama pop, if you will. But you know,
• 17:00
  Speaker 1: the non chain owned restaurants, the numbers were seeing, not
• 17:04
  Speaker 1: just New York City but kind of across the country
• 17:07
  Speaker 1: are staggering in terms of how many are likely have
• 17:10
  Speaker 1: gone out of business, are likely to go out of business.
• 17:13
  Speaker 1: How bad is it gonna get a dud estimated they
• 17:17
  Speaker 1: have going out of business in the US. That's a
• 17:19
  Speaker 1: lot you walked down. I mean, look, I'm in New
• 17:21
  Speaker 1: York or so I walked down the streets in New
• 17:22
  Speaker 1: York City and you just see them closed up everywhere. Um,
• 17:26
  Speaker 1: you know some of them will survive. You know, there's
• 17:28
  Speaker 1: certainly well, there are restaurants that will survive. There's there's
• 17:30
  Speaker 1: no question about that. Some of them have learned to
• 17:33
  Speaker 1: shift to take out, even even at the very high end.
• 17:36
  Speaker 1: I get I get notices from uh Daniel Blue, who's
• 17:40
  Speaker 1: one of the great chefs in America, saying, you know,
• 17:43
  Speaker 1: get get our Christmas dinner for you know, seventy five dollars,
• 17:46
  Speaker 1: will drop it off at your house, that kind of thing. So,
• 17:48
  Speaker 1: you know, some restaurants, restaurants will survive. But I think
• 17:52
  Speaker 1: what you're gonna see is that when the pandemic ends
• 17:55
  Speaker 1: and people can start going to restaurants again, um, you'll
• 17:59
  Speaker 1: see a lot few a restaurant. And it will take
• 18:01
  Speaker 1: I think a generation for restaurants to build up to
• 18:04
  Speaker 1: where they were, just because there will be so little
• 18:07
  Speaker 1: capital left in the industry. Right and and you know,
• 18:11
  Speaker 1: as we've been saying all week, if you've seen your
• 18:13
  Speaker 1: restaurant closed down, if you've had to lay off staff,
• 18:15
  Speaker 1: if you've worked for years to build up a successful restaurant,
• 18:18
  Speaker 1: do you really have the fortitude, never mind the capital,
• 18:21
  Speaker 1: to actually start all that whole process again. So, Joe,
• 18:24
  Speaker 1: I was listening to Carl Gadonna speaking with the guys
• 18:27
  Speaker 1: a little earlier on today, and he was talking about
• 18:29
  Speaker 1: is better to take a scattergun approach than a rifle approach.
• 18:32
  Speaker 1: And I'm paraphrasing, but in a sense, this is a
• 18:35
  Speaker 1: rifle approach, right as as you said, you can re
• 18:38
  Speaker 1: employ a lot of people if you target just even
• 18:40
  Speaker 1: one airline, whereas targeting restaurants is more scattergon. It's definitely
• 18:44
  Speaker 1: a lot more difficult to put together, absolutely that. And
• 18:49
  Speaker 1: I think that the pp the PPP experience, excuse me,
• 18:54
  Speaker 1: the pp P experience has not um then all that
• 18:58
  Speaker 1: satisfactory for Congress. I mean so many, so many uh,
• 19:03
  Speaker 1: companies got left left out. Somebody felt like, uh, you know,
• 19:07
  Speaker 1: larger companies got money that didn't really need it, and
• 19:09
  Speaker 1: so on and so forth. So it's really hard to
• 19:11
  Speaker 1: put together a program that would work. I mean, I
• 19:15
  Speaker 1: do think that the program the restaurant industry put together
• 19:18
  Speaker 1: would have worked if it had if it had been tried,
• 19:20
  Speaker 1: But of course we'll never know because it didn't get tried. Hey, Joe,
• 19:24
  Speaker 1: thanks so much for joining us. This is just a
• 19:26
  Speaker 1: fascinating column here uh Jonah Sarah Bloomberg Opinion calumnists. You
• 19:30
  Speaker 1: can read Joe's work and all the good work from
• 19:33
  Speaker 1: the folks of Bloomberg Opinion by type in Bloomberg dot Com,
• 19:37
  Speaker 1: slash opinion or OPI I n go on the Bloomberg
• 19:41
  Speaker 1: terminal and Vannie you know you think about it. And again,
• 19:43
  Speaker 1: it's not just New York cities. It's it's cities around
• 19:45
  Speaker 1: the country. Uh, small towns around the country where restaurants
• 19:49
  Speaker 1: which operate in such a razor thin margin to begin with,
• 19:52
  Speaker 1: are really really having a tough time to understandably exactly.
• 19:55
  Speaker 1: They usual only have a few weeks, you know, leg room,
• 19:58
  Speaker 1: let's say, and and that obviously run out very very
• 20:02
  Speaker 1: early on, and some of them couldn't even take the
• 20:04
  Speaker 1: PPP money because they weren't sure if they'd be able
• 20:06
  Speaker 1: to re employ there are people or if they were
• 20:08
  Speaker 1: going to be able to keep them on the books
• 20:10
  Speaker 1: that they couldn't make that that call that early on.
• 20:13
  Speaker 1: So it's it's a desperate situation. Yes. So now if
• 20:15
  Speaker 1: you're a restaurantory, you're saying, can I make it to
• 20:17
  Speaker 1: March April, May, June, because that's presumably when the light
• 20:21
  Speaker 1: at the end of the tunnel really is out there
• 20:23
  Speaker 1: for so many people. We've got a whole host of
• 20:27
  Speaker 1: economic data this morning seemed to drive home the story
• 20:31
  Speaker 1: that the economy is slowing down, the consumer is feeling
• 20:36
  Speaker 1: it in the pocketbook, whether you look at consumers, spending,
• 20:39
  Speaker 1: consumer income, all kind of challenging and I guess that
• 20:42
  Speaker 1: should not be surprising giving the unappointment that we continue
• 20:46
  Speaker 1: to see in the jobless claims that we continue to
• 20:48
  Speaker 1: see in this economy. To get a sense of what
• 20:50
  Speaker 1: this means for markets, who welcome Ben Emmon's Managing director,
• 20:53
  Speaker 1: Global macro Strategy at Medley Global Advisors. Ben, thanks so
• 20:57
  Speaker 1: much for joining us once again. Give us your take
• 20:59
  Speaker 1: on that the economic data we saw this morning and
• 21:02
  Speaker 1: how that may impact your outlook. Corey Paul, thanks for
• 21:07
  Speaker 1: having us. Uh. Yeah, it was a mixed back in
• 21:10
  Speaker 1: terms of the data. You know, if you drill into
• 21:13
  Speaker 1: the spending data, you see to the savings rate continust
• 21:16
  Speaker 1: the clients. So there is still spending happening, people drawing
• 21:19
  Speaker 1: on savings, but there's also a watch between those who
• 21:23
  Speaker 1: make income in the manufacturing sector that's actually outpacing those
• 21:28
  Speaker 1: in the services sector, and that does explain you know,
• 21:31
  Speaker 1: what's happening in the economy right We're closed down a
• 21:33
  Speaker 1: lot of places again, services are really depressed, and it's
• 21:37
  Speaker 1: all drive driven by manufacturing, which you know is really
• 21:41
  Speaker 1: the pandemic that's that's driving that. So economy is mixed
• 21:45
  Speaker 1: at the moment. It's good to see the Simnus bill
• 21:48
  Speaker 1: potentially getting larger if that actually would have happened, But
• 21:51
  Speaker 1: I think we're dealing with subdued activity for the moment,
• 21:53
  Speaker 1: which is reflecting the markets, so low yields and sideways
• 21:57
  Speaker 1: movement in stocks. Ben I'm seeing more and more notes
• 22:01
  Speaker 1: talking about inflation, and even Cameron klays this morning of
• 22:04
  Speaker 1: Bloomberg saying he's rolling the dice. He doesn't think inflation
• 22:07
  Speaker 1: will stay under the radar, and you think higher inflation
• 22:10
  Speaker 1: is on the way as well, explain the case if
• 22:13
  Speaker 1: only I think that that is certainly a case. You
• 22:16
  Speaker 1: know that there's obviously as the pandemic does get resolved
• 22:20
  Speaker 1: next year that the general viewers that we're going to
• 22:23
  Speaker 1: make up for all the lost services activity already on
• 22:26
  Speaker 1: top of this production activity I've seen, which is very
• 22:29
  Speaker 1: strong this year because of the pandemic. But then you
• 22:32
  Speaker 1: also think about the expectations. So we've pretty much normalized
• 22:36
  Speaker 1: in the markets at least expectations instinctly that you know,
• 22:40
  Speaker 1: say a five year expectations about the same as what
• 22:43
  Speaker 1: people think in ten years from now, and it tends
• 22:46
  Speaker 1: to be coinciding with sort of a point in history
• 22:48
  Speaker 1: at least that the economy does firm off as inflation
• 22:51
  Speaker 1: is what people think is better than than than what
• 22:54
  Speaker 1: it was. And I think that's important because if people
• 22:57
  Speaker 1: had an expectation will continue to see really low and
• 23:00
  Speaker 1: fish if not risk of deflation, the economy cannot really recover, right,
• 23:05
  Speaker 1: it cannot really get stronger. They also look at real
• 23:08
  Speaker 1: use to yield account for inflation. We're hitting pretty close
• 23:12
  Speaker 1: to the levels have we seen in twenty twelve. We
• 23:15
  Speaker 1: will remember from that time we rose pretty fast and
• 23:18
  Speaker 1: real yields the following years the economy firms again, probably
• 23:22
  Speaker 1: in a more in expectation that the economy will be
• 23:24
  Speaker 1: driven by a further rise in inflation in the future,
• 23:28
  Speaker 1: rather than say a major investment boom for example. So
• 23:33
  Speaker 1: I think this is why there's an anticipation and say
• 23:36
  Speaker 1: she will be a bit higher next year. Full the
• 23:38
  Speaker 1: time being. All Right, So Ben, we've seen any equity
• 23:41
  Speaker 1: markets a rotation trade, a per announced rotation trade. Really,
• 23:46
  Speaker 1: I would argue since September, um investors discounting uh opening
• 23:51
  Speaker 1: of the economy in the in the back half of
• 23:53
  Speaker 1: next year, given the economic data that we're seeing today,
• 23:57
  Speaker 1: and do you still do you still feel that's a
• 24:00
  Speaker 1: reasonable call for equity investors. I think so, Paul. I
• 24:04
  Speaker 1: think that the rotation that started in August was a
• 24:08
  Speaker 1: was a very good sign of that the market believe
• 24:11
  Speaker 1: that one week we can solve the pandemic, and the
• 24:14
  Speaker 1: science is now shown that we can, which that doesn't
• 24:18
  Speaker 1: mean that we can to an extent normalize activity that
• 24:21
  Speaker 1: we've known before. And because the market took such a
• 24:25
  Speaker 1: collapse in the traditional activity of the economy, right the
• 24:28
  Speaker 1: services in person services, that's a big gap still between
• 24:33
  Speaker 1: that sector of the market and say technology, So there's
• 24:36
  Speaker 1: formal room to rotate, so to speaking, sort of reposition
• 24:40
  Speaker 1: your portfolio for this upside in the services economy that
• 24:44
  Speaker 1: would likelihood to see next year. Um. And I would
• 24:47
  Speaker 1: point out that because you know, part of the services
• 24:51
  Speaker 1: is particularly financial services. You know, because of course a
• 24:54
  Speaker 1: nice surprise next week last week on the on the
• 24:56
  Speaker 1: Bible and dividend resumption. Because of the sister financials have
• 25:01
  Speaker 1: an opportunity to outperform, which will add to the rotation
• 25:03
  Speaker 1: I think in the first quarter. So we're almost out
• 25:06
  Speaker 1: of time then, But just give me the reason why
• 25:09
  Speaker 1: you expect demand will bounce back so substantially next year.
• 25:12
  Speaker 1: After all, we still haven't got you know, even a
• 25:14
  Speaker 1: six D check into people's pockets for the next phase
• 25:18
  Speaker 1: of relief. And it's not at all clear that we're
• 25:21
  Speaker 1: going to have business creation at the small business level.
• 25:26
  Speaker 1: And funny, I think that there's of course a sort
• 25:29
  Speaker 1: of government support needed. You know, Biden had an interesting
• 25:32
  Speaker 1: speech during the pack campaign that he really wanted to
• 25:34
  Speaker 1: put a center stage on small business, so the BATS
• 25:37
  Speaker 1: will be more initiative on his administration to revive small business.
• 25:41
  Speaker 1: Clearly that dynamic plays a big role there, obviously given
• 25:44
  Speaker 1: the shutdown activity of pre seeing I also would point
• 25:47
  Speaker 1: out the global story, it's very much a revival globally
• 25:51
  Speaker 1: to be expected to if indeed also traders, it's already
• 25:55
  Speaker 1: shown his revised this year as a leading indicator. I
• 25:57
  Speaker 1: think that's all going to that we're going to see
• 26:00
  Speaker 1: more revival actually demands as a pandemic. Hopefully guess results Well,
• 26:05
  Speaker 1: it certainly wouldn't be unwelcome and it wouldn't be unwelcome
• 26:08
  Speaker 1: inflation and that instance. Ben, So thank you much appreciate
• 26:11
  Speaker 1: your analysis and of course all of your contributions through
• 26:14
  Speaker 1: the entire year. Ben Emmons is Managing director at Global
• 26:18
  Speaker 1: Macro Strategy of Global micro Strategy at Medley Global Advisors.
• 26:22
  Speaker 1: Once again Ben Emmon's m D at Medley Global Advisors
• 26:26
  Speaker 1: joining us. Now, we got a raft of economic data
• 26:30
  Speaker 1: this morning from mortgage applications which were up point eight percent.
• 26:34
  Speaker 1: We got inflation data, durable goods orders, and initial jobless claims.
• 26:38
  Speaker 1: I mean, it was just a absolute boatload of data
• 26:42
  Speaker 1: and economist delight, Yes, exactly. Let's bring in an economist
• 26:46
  Speaker 1: who was delighted. Elena actually has he a senior economist
• 26:49
  Speaker 1: at Ford Bloomberg Economics. So, Elena, what can we take
• 26:52
  Speaker 1: away from the raft of data this morning? A broadly
• 26:55
  Speaker 1: better picture, broadly deteriorating picture, broadly deteriorating. I think there
• 27:02
  Speaker 1: are recent about of data telling us that basically thinks
• 27:06
  Speaker 1: are really getting worse, and unfortunately it will get much
• 27:10
  Speaker 1: worse before it gets better according to our projections. So
• 27:14
  Speaker 1: what really stood out for me this morning was significant
• 27:17
  Speaker 1: deterioration in personal income and spending for the month of
• 27:21
  Speaker 1: November UH as as we saw personal income dropped by
• 27:26
  Speaker 1: one point one percent in the month, and that was
• 27:30
  Speaker 1: attributable to the critics and proprieties income UH resulting from
• 27:34
  Speaker 1: the exploration of the Teachered protection program. Farmers become plunged
• 27:40
  Speaker 1: and other benefits also decreased. So this is basically telling
• 27:46
  Speaker 1: us that this new fiscal package is absolutely required and
• 27:51
  Speaker 1: it is required immediately UH to support continued spending consumer
• 27:57
  Speaker 1: spending in the economy. So unfortunately, we will see things
• 28:01
  Speaker 1: to really drop deteriorate in the coming weeks, and we
• 28:06
  Speaker 1: even expect the negative reading on pay rolls for the
• 28:09
  Speaker 1: months of December. All Right, So, Lena, I guess the
• 28:12
  Speaker 1: question for a lot of folks is the first quarter
• 28:14
  Speaker 1: of next year, the dark winter, if you will, the
• 28:17
  Speaker 1: pandemic numbers hopefully will peak. That's what we're hearing from
• 28:21
  Speaker 1: some of the folks in the health care but it's
• 28:23
  Speaker 1: gonna be a very difficult time. The question I guess
• 28:25
  Speaker 1: for an economist is are we going to have negative
• 28:28
  Speaker 1: GDP in the first quarter. You know the dreaded double
• 28:31
  Speaker 1: dip recession, right, so we still expect the fourth quarter
• 28:37
  Speaker 1: to week some positive growth in the vicinity of two
• 28:40
  Speaker 1: and a half percent. But then yes, we expect a
• 28:43
  Speaker 1: negative print on the first quarter GDP. We have long
• 28:47
  Speaker 1: forecasted half the percentage point drop. But if COVID cases
• 28:52
  Speaker 1: really accelerate and UH result in broad based blockdowns, particularly
• 28:58
  Speaker 1: in a very highly ten repopulated areas such as New
• 29:02
  Speaker 1: York and California, we may see even a bigger drop
• 29:05
  Speaker 1: in the first quarter of next year. So a lot
• 29:07
  Speaker 1: will depend on what happens to consumer spending. And again,
• 29:12
  Speaker 1: this morning's data continued to show that services and deteriorating
• 29:17
  Speaker 1: and that will certainly continue into the first quarter. We
• 29:21
  Speaker 1: saw a restaurant spending and transportation really really declining. And
• 29:27
  Speaker 1: what what really was worrying to me is that drop
• 29:30
  Speaker 1: in groubal good spending. So and that comes despite a
• 29:35
  Speaker 1: significantly high savings that consumers still have. So we'll see
• 29:39
  Speaker 1: where it goes. But UH, if consumer sentiments consumer confidence
• 29:44
  Speaker 1: declined significantly going into the next year, then we may
• 29:48
  Speaker 1: see some decline and consumer spending and overall growth as well.
• 29:54
  Speaker 1: To me, take any heart and the fact that housing
• 29:56
  Speaker 1: might be at least some bite s part on the economy,
• 30:00
  Speaker 1: even though today's numbers again were deterioration from the previous months,
• 30:05
  Speaker 1: right Vunny, I think the decline in both existing and
• 30:09
  Speaker 1: new homes sales this week was really a reflection of
• 30:14
  Speaker 1: shortage to be a shortage in inventories, rather than UH
• 30:18
  Speaker 1: declined interest in buying houses. I think that we will
• 30:23
  Speaker 1: continue to see strong demand for housing going into one
• 30:27
  Speaker 1: and that will be supported not only by UM low
• 30:32
  Speaker 1: interest rates, low mortgage rates, but also by shifting preferences
• 30:37
  Speaker 1: for a more suburban living for more remote living. So
• 30:41
  Speaker 1: and I dontal evidence suggests that people are even accepting
• 30:44
  Speaker 1: lower wages to be able to work from remote location.
• 30:49
  Speaker 1: And I don't think that even if we defeat the crisis,
• 30:52
  Speaker 1: even if the pandemic is taking care of UH some time,
• 30:56
  Speaker 1: you know, next year, I think this trend will probably
• 31:00
  Speaker 1: stay with us, at least partially supporting strong demantal housing. Elena,
• 31:05
  Speaker 1: thank you so much once again for joining us. Elena,
• 31:08
  Speaker 1: she let you have a senior US economists for Bloomberg Economics,
• 31:11
  Speaker 1: helping us to part through the raft of economic data.
• 31:15
  Speaker 1: We had this morning that, as Elena suggested on the margin,
• 31:19
  Speaker 1: is more negative than we had seen. But again that's uh.
• 31:22
  Speaker 1: It really so much depends upon the pandemic numbers over
• 31:25
  Speaker 1: the next several months. Thanks for listening to Boomberg Markets podcast.
• 31:29
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 31:33
  Speaker 1: or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm
• 31:36
  Speaker 1: on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm
• 31:39
  Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
• 31:42
  Speaker 1: always catch us worldwide at Bloomberg Radio.