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Big Take: Xi Jinping's Capitalist Smackdown · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. All right, we are
• 0:22
  Speaker 1: going to talk about she Jing Ping's capitalist SmackDown Sparks
• 0:27
  Speaker 1: one trillion Dollar Reckoning. That's the title of the Big
• 0:29
  Speaker 1: Take today and Tom Orlick, one of the authors, joins
• 0:32
  Speaker 1: us to discuss UM. And it's been such an interesting
• 0:36
  Speaker 1: process to watch. Tom. So many people have different ideas
• 0:40
  Speaker 1: of what's going on, from the ant U I p
• 0:43
  Speaker 1: O to UM, what happened with d D and now
• 0:49
  Speaker 1: with the ed tech UM move. The question is is
• 0:53
  Speaker 1: it about you know, Uh Jing Ping's grip on power
• 0:58
  Speaker 1: or is this really about UM data security? Or could
• 1:02
  Speaker 1: it be about supporting the middle class? What do you see?
• 1:05
  Speaker 1: I think it's all of the above. UM Si Jinping
• 1:10
  Speaker 1: in twenty two will be looking for the NOD to
• 1:14
  Speaker 1: take a third term as president, the term as chair
• 1:19
  Speaker 1: of the Communist Party so building public support ahead of
• 1:23
  Speaker 1: that is crucial. At the same time, I think this
• 1:26
  Speaker 1: is a Chinese government which is willing to wield the
• 1:30
  Speaker 1: kind of the big stick of authoritarian power in order
• 1:35
  Speaker 1: to try and deliver on some social priorities. So that
• 1:38
  Speaker 1: includes national security, making sure that sensitive data isn't leaking
• 1:43
  Speaker 1: over oversure. It also means taking a big swing at
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  Speaker 1: the monopoly power of companies like Ali Baba, ten Cent,
• 1:51
  Speaker 1: making sure that workers, making sure that smaller startups get
• 1:55
  Speaker 1: a fair shake. So there's kind of the crackdown within
• 1:59
  Speaker 1: the market targeting private sector companies. How does that then
• 2:03
  Speaker 1: translate into the Chinese economy? So I think what we're
• 2:08
  Speaker 1: seeing is a Chinese government which is willing to take
• 2:11
  Speaker 1: a short term blow to the markets, maybe even a
• 2:14
  Speaker 1: short term blow to growth, in order to deliver on
• 2:18
  Speaker 1: what they see as more important long term development priorities.
• 2:23
  Speaker 1: They'll take a swing at some of the biggest tech
• 2:26
  Speaker 1: entrepreneurs in the country, Jack mar of Ali Baba first
• 2:31
  Speaker 1: among them, because they think that having a having big
• 2:35
  Speaker 1: monopolies strangling competition in the economy is not going to
• 2:39
  Speaker 1: be good for China's longer term growth, not going to
• 2:42
  Speaker 1: be good for China's squeezed middle class. How do we
• 2:46
  Speaker 1: know when this is over? I mean, or what's the
• 2:50
  Speaker 1: next shooter drop? That's a really good question. So we've
• 2:55
  Speaker 1: already had China's regulators come out swinging against the big
• 2:59
  Speaker 1: tech companies Ali Baba, May Juan, the giant delivery company
• 3:05
  Speaker 1: d D China's answer to Uber. We've seen them coming
• 3:09
  Speaker 1: coming out swinging against property. One of the big frustrations
• 3:12
  Speaker 1: for China's middle class is that property prices too expensive.
• 3:16
  Speaker 1: They can't get their first hand on the bottom rung
• 3:18
  Speaker 1: of the property ladder, and they've come out swinging against
• 3:21
  Speaker 1: ed tech. The concern there is that children are spending
• 3:24
  Speaker 1: too much time and parents are spending too much money
• 3:28
  Speaker 1: on the educational rat race. Where do they go next, Well,
• 3:32
  Speaker 1: one possibility could be the private medical industry. China's households
• 3:38
  Speaker 1: they want to educate their children, they want to buy
• 3:40
  Speaker 1: a house, they want to be healthy, and so I
• 3:42
  Speaker 1: think it's quite likely that China's policymakers, China's regulators will
• 3:47
  Speaker 1: take a close look at private healthcare providers next, try
• 3:50
  Speaker 1: and make sure they're not gauging Chinese households, trying to
• 3:53
  Speaker 1: make sure they're delivering quality care. How does the US
• 3:57
  Speaker 1: fit into all of this time? So historically, for the
• 4:02
  Speaker 1: last forty years, we had a trajectory where China was
• 4:05
  Speaker 1: moving towards being a more market based economy and a
• 4:08
  Speaker 1: more open economy, and that meant closer ties with the US.
• 4:13
  Speaker 1: What's happened in the last four or five years, especially
• 4:17
  Speaker 1: since the Trump administration had their turn in the White House,
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  Speaker 1: is that China has realized, you know what, we're facing
• 4:24
  Speaker 1: a more hostile global environment. We're facing a US which
• 4:28
  Speaker 1: is going to impose trade tariffs, impost sanctions, try and
• 4:33
  Speaker 1: ally with other countries to sort of put limits on
• 4:36
  Speaker 1: our tech development. And what that's done is it's put
• 4:40
  Speaker 1: China into kind of defense mode. And so we're seeing
• 4:44
  Speaker 1: China saying, you know what, maybe we don't want our
• 4:47
  Speaker 1: tech companies to I p O in the United States.
• 4:50
  Speaker 1: Maybe we need to do more to boost self sufficiency
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  Speaker 1: at home in terms of our ownership of key technologies
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  Speaker 1: and in terms of who's financing our develop so and
• 5:01
  Speaker 1: I mean the the for me, the most interesting thing
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  Speaker 1: is that one man, or at least the head of
• 5:07
  Speaker 1: the party, can do this right. He doesn't have to
• 5:10
  Speaker 1: deal with all the special interests and lobbyists that we'll
• 5:15
  Speaker 1: keep will hold America back, possibly in trying to improve
• 5:19
  Speaker 1: what we've we've got going on here. Same I'm sure
• 5:21
  Speaker 1: it's two in the UK, etcetera across Western democracies. How
• 5:25
  Speaker 1: powerful is j Ping? Do I just see it that
• 5:28
  Speaker 1: way or is he really the man? Well? I mean,
• 5:33
  Speaker 1: she who must be obeyed was the kind of the
• 5:35
  Speaker 1: joke when she Jinping came into power and sort of
• 5:39
  Speaker 1: started wielding the big stick of authoritarian governance to get
• 5:43
  Speaker 1: things done. I mean, certainly she is an incredibly powerful leader,
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  Speaker 1: probably the most powerful leader China has had since chair
• 5:50
  Speaker 1: and Mao. But that comparison with Chairman Marrow, of course,
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  Speaker 1: also highlights some of the risks with an authoritarian governance system. Yes,
• 6:00
  Speaker 1: we might look enviously at a Chinese system that can
• 6:03
  Speaker 1: get things done really quickly, pushed past vested interests that
• 6:08
  Speaker 1: try and block reforms, but let's not forget that authoritarian
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  Speaker 1: governments can get things right really quickly. They can also
• 6:15
  Speaker 1: get things wrong really quickly as well, just quickly. Because
• 6:20
  Speaker 1: we did get p M I s from China over
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  Speaker 1: the weekend, What do you make of the deceleration in
• 6:27
  Speaker 1: growth there has it been over exaggerated. So there's a
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  Speaker 1: couple of things going on, Caylee. So the first one
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  Speaker 1: is kind of a normalization of China's growth. China was
• 6:37
  Speaker 1: first into the COVID shock, also first out of the
• 6:40
  Speaker 1: covid shock. They had their period of rapid acceleration at
• 6:44
  Speaker 1: the end of twenty and the beginning of now great
• 6:48
  Speaker 1: is steadying back towards a more normal level. The more
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  Speaker 1: troubling thing, though, is that we've also now got the
• 6:54
  Speaker 1: virus coming back in different parts of China, some cases
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  Speaker 1: in Nanjing, some cases in Wuhan, which you remember was
• 7:01
  Speaker 1: the epicenter of the virus last year. That return of
• 7:05
  Speaker 1: the virus is prompting more controls on what people can do,
• 7:09
  Speaker 1: more social distancing, and that is also weighing on growth
• 7:12
  Speaker 1: heading into the second half. All right, Tom, thanks very much.
• 7:16
  Speaker 1: Tom Warlock joining us there with his story Jumping's capitalist
• 7:20
  Speaker 1: SmackDown sparks a trillion dollar reckoning. That is our big
• 7:24
  Speaker 1: take for the day. You can check that out in
• 7:26
  Speaker 1: the Bloomberg terminal if you like, Just type NI big
• 7:29
  Speaker 1: take Go Now. I want to bring in David Cats
• 7:36
  Speaker 1: right now. He joins us from Matrix Asset Advisors, where
• 7:41
  Speaker 1: he is the chief investment officer, and David. We're just
• 7:44
  Speaker 1: hearing from Dave Wilson about the optimism in this market.
• 7:48
  Speaker 1: We're seeing targets raised left and right. Earnings are are
• 7:53
  Speaker 1: proving out eighty nine percent growth from the same quarter
• 7:56
  Speaker 1: last year. What do you think, I mean, how much
• 7:59
  Speaker 1: for there can we see stocks continue to run well?
• 8:03
  Speaker 1: We think the underlying environment is quite positive. The economy
• 8:07
  Speaker 1: is very much on the mend. As you just said,
• 8:09
  Speaker 1: Earnings for companies have been very strong. That level of
• 8:13
  Speaker 1: beating consensus is probably the best we've seen in over
• 8:16
  Speaker 1: a decade. And interestingly the beats have been in ten
• 8:20
  Speaker 1: and twenty cents per share rather than one and two cents.
• 8:23
  Speaker 1: So there are a lot of good things out there,
• 8:24
  Speaker 1: and interest rates are low. Having said that, you've had
• 8:27
  Speaker 1: an enormous rally over the last twelve and fifteen months,
• 8:31
  Speaker 1: so we think a lot of those good things are
• 8:32
  Speaker 1: priced into the market. From here. We're expecting a good
• 8:36
  Speaker 1: deal of volatility, both good and bad. We think you
• 8:39
  Speaker 1: probably will have some delta scares and some other geopolitical scares.
• 8:43
  Speaker 1: We'd be buyers into the weakness. We would not chase
• 8:46
  Speaker 1: rallies like today. We think ultimately stocks and the year
• 8:50
  Speaker 1: higher than they are today, but we do expect some
• 8:53
  Speaker 1: rotations of things that haven't worked to do better and
• 8:55
  Speaker 1: some of the hottest areas to slow down. So, David,
• 8:58
  Speaker 1: when you're thinking about the puity market outlook, do you
• 9:01
  Speaker 1: just have to make a decision to ignore whatever bonds
• 9:03
  Speaker 1: are doing. I'm looking at a tenure yield now down
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  Speaker 1: around one. Yeah, we don't get it. On the bond side.
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  Speaker 1: The economy is robust, inflation is picking up, and we
• 9:14
  Speaker 1: think that the bond rates and yields lower is an outlier.
• 9:17
  Speaker 1: And if anything, if you own intermediate or long term bonds,
• 9:21
  Speaker 1: we think this is a great time to be selling,
• 9:24
  Speaker 1: locking in your profit and shortening maturities. From a stock
• 9:27
  Speaker 1: market perspective, on one hand, it's very good when you
• 9:30
  Speaker 1: have low interest rates like this because it makes stocks
• 9:33
  Speaker 1: that much more competitive, and we don't think the bond
• 9:36
  Speaker 1: market is really for telling a slowdown in the economy
• 9:40
  Speaker 1: or really any significant issues. Let's talk about some of
• 9:43
  Speaker 1: your top stock picks. Um, what are you most excited
• 9:47
  Speaker 1: about when you come to the office or when you
• 9:49
  Speaker 1: when you're talking to a client. What what gets you
• 9:53
  Speaker 1: going well, it's an odd thing. The things that have
• 9:55
  Speaker 1: worked over the last year are probably what we're least
• 9:58
  Speaker 1: excited about because a lot of the good things are
• 10:00
  Speaker 1: already in their stock prices. So we've got a lot
• 10:02
  Speaker 1: of technology that's had a great run. We're less enthusiastic
• 10:06
  Speaker 1: from here. So what we're most excited about our companies
• 10:09
  Speaker 1: that really haven't done a lot in terms of the
• 10:11
  Speaker 1: stock price, but the businesses are very good. So we
• 10:13
  Speaker 1: like the financials a lot here. They've had a good
• 10:16
  Speaker 1: run in the first six months, they slowed down in
• 10:18
  Speaker 1: the last month. We think that's a poise that refreshes,
• 10:20
  Speaker 1: and we think you can buy companies like Bank of
• 10:22
  Speaker 1: New York, M and T Bank, p n C, Truest
• 10:25
  Speaker 1: all very good. We also like healthcare, which has been
• 10:28
  Speaker 1: an absolute dog in the last seven months. We think
• 10:31
  Speaker 1: that's boys to do better. And there are a few
• 10:34
  Speaker 1: overlooked technology companies like a Cisco or a five Serve
• 10:38
  Speaker 1: that we think of good long term prospects um but
• 10:41
  Speaker 1: really haven't had this type of rally that technology overall has.
• 10:45
  Speaker 1: How do you think about pricing power when factoring you
• 10:48
  Speaker 1: know what stocks you want to own, what you're going
• 10:50
  Speaker 1: to put in a portfolio, especially considering the pretty serious
• 10:54
  Speaker 1: input cost elevation we are seeing a number of companies
• 10:57
  Speaker 1: talking about in their earning skulls. Well, it looks like
• 11:00
  Speaker 1: most companies feel that they can raise prices. They're just
• 11:04
  Speaker 1: as a one or two quarter legs. So if you
• 11:06
  Speaker 1: look at the consumer staples, for example, many of them
• 11:09
  Speaker 1: have lowered expectations for the year because prices rose quicker
• 11:14
  Speaker 1: than they were able to raise their own prices. We
• 11:18
  Speaker 1: think ultimately there's going to be a catch up there,
• 11:20
  Speaker 1: so you just want to be aware of it. But again,
• 11:22
  Speaker 1: even in terms of some of the consumer staples, we
• 11:25
  Speaker 1: think you can put money in, uh, simply because the
• 11:28
  Speaker 1: stocks haven't done a lot and they're cheaper than they've
• 11:30
  Speaker 1: been in a very long time. So a company like
• 11:32
  Speaker 1: Coca Cola or Kimberly Clark or Kellogg, we think are
• 11:36
  Speaker 1: very fairly priced with good prospects over the next eighteen months,
• 11:40
  Speaker 1: and again when the economy ultimately slows down, those stocks
• 11:44
  Speaker 1: could become attractive to investors. Again, what about Viacom, You've
• 11:47
  Speaker 1: got that on your list, um, And I'm just wondering
• 11:51
  Speaker 1: if the reopening has anything in store for Viacom because
• 11:56
  Speaker 1: you know, obviously we were all stuck inside watching their content,
• 12:00
  Speaker 1: but now we can actually get out. Well, we think
• 12:02
  Speaker 1: that certain players will not do as well as people
• 12:05
  Speaker 1: get out, But in terms of Viacom, they have a
• 12:07
  Speaker 1: robust movie business, and that movie business is going to
• 12:10
  Speaker 1: get a lot better, So we don't think they're hurt
• 12:14
  Speaker 1: by the reopening play. We think on the margin is
• 12:16
  Speaker 1: probably a little bit better and it's a very interesting company.
• 12:19
  Speaker 1: Here stock said about ten times earnings. We think they
• 12:22
  Speaker 1: definitely are going to be a winner in the streaming space.
• 12:26
  Speaker 1: You get CBS, which is a great business, uh and
• 12:30
  Speaker 1: Paramount which is a great business, and you're not paying
• 12:32
  Speaker 1: a whole lot for it, so we think ultimately somebody
• 12:35
  Speaker 1: could buy them or the stock is worth sixty to seventy,
• 12:38
  Speaker 1: so we think it's a low risk investment. We had
• 12:40
  Speaker 1: owned Viacom earlier this year. We had bought it um
• 12:43
  Speaker 1: a year or two ago. We sold it anywhere from
• 12:45
  Speaker 1: sixty to a hundred. When the stock came down in
• 12:49
  Speaker 1: the end of March, we rebought our entire position and
• 12:51
  Speaker 1: continue to add to it. Here, David, thanks very much,
• 12:54
  Speaker 1: David Katz. They're talking to us from Matrix Asset Advisors,
• 12:58
  Speaker 1: where he is chief investment Officer. David Kats and the
• 13:03
  Speaker 1: Cats family also own those stocks that we were talking about.
• 13:06
  Speaker 1: Just in the interest of full disclosure, this is Bloomberg.
• 13:13
  Speaker 1: Let's talk a little bit. What's going on in European markets.
• 13:16
  Speaker 1: We're looking at UM. Well, we saw bigger gains I
• 13:19
  Speaker 1: guess in European markets across the board than we than
• 13:22
  Speaker 1: we have in US markets today. UM. But the question
• 13:27
  Speaker 1: is are there bigger gains to come, especially if you
• 13:30
  Speaker 1: believe the reopening trade UM has yet to really hit.
• 13:33
  Speaker 1: Tim craig Head joins US. He is a senior strategist,
• 13:36
  Speaker 1: Senior European strategist, also the director of Research Content for
• 13:40
  Speaker 1: Bloomberg Intelligence. So, Tim, Um, what's your read through what
• 13:44
  Speaker 1: especially when you look at earnings in Europe versus earnings
• 13:46
  Speaker 1: in the US. So Matt Um, We're we're pretty constructive
• 13:53
  Speaker 1: if you look towards you look out towards the end
• 13:55
  Speaker 1: of the year, the next several months, UM set August decide, UM,
• 14:01
  Speaker 1: we think that you've got global economic recovery UM that
• 14:05
  Speaker 1: transitions to expansion. We we are in the transitionary inflation
• 14:12
  Speaker 1: camp as opposed to the persistent inflation camp. We think
• 14:15
  Speaker 1: companies can manage through it, and that sets up a
• 14:20
  Speaker 1: pretty good backdrop, especially for companies that are cyclically oriented. Um.
• 14:25
  Speaker 1: You know, two Q results themselves are fed into a
• 14:29
  Speaker 1: lot of good evidence supporting this sort of construct in
• 14:32
  Speaker 1: our mind. Well, and earnings growth has been really solid
• 14:35
  Speaker 1: to tim on the stocks that centered. I'm looking at
• 14:38
  Speaker 1: average earnings growth of the companies reported thus far of
• 14:41
  Speaker 1: a hundred and seventy six percent. I mean that is wild,
• 14:44
  Speaker 1: and you're seeing revisions upward, revisions accelerating as well. How
• 14:49
  Speaker 1: big of a drop off are we going to see
• 14:51
  Speaker 1: in the third and fourth quarter? Though? Yeah, Um, it's
• 14:55
  Speaker 1: it's a good it's a good point. Um, we're about
• 14:58
  Speaker 1: it on our account. Um. Uh, we're about three quarters done.
• 15:04
  Speaker 1: If you look at market cap um having reported, Um,
• 15:09
  Speaker 1: you know our number, and we're calculating it slightly differently
• 15:13
  Speaker 1: as a hundred. But the important point is that when
• 15:16
  Speaker 1: we started the earnings reporting period that number was a
• 15:20
  Speaker 1: hundred and thirties. So it's accelerated through the results period.
• 15:24
  Speaker 1: And interesting another stat for you, UM, we're looking at
• 15:28
  Speaker 1: roughly sixty having beat estimates having missed now European earnings
• 15:35
  Speaker 1: are are typically a lot more blocked than in the US,
• 15:40
  Speaker 1: where you know, US companies moved to to keep expectations
• 15:45
  Speaker 1: low and beat UM. That doesn't happen so much over here.
• 15:49
  Speaker 1: So these are these are extraordinary. UM, there is no doubt.
• 15:53
  Speaker 1: You have to see a slowdown and as you get
• 15:56
  Speaker 1: into three Q and four Q. But it's not so
• 15:59
  Speaker 1: much the slowdown because the market already knows that. UM.
• 16:03
  Speaker 1: In our mind, it's that revisions continue to tick up.
• 16:07
  Speaker 1: And it's not only revisions to overall two thousand, twenty
• 16:11
  Speaker 1: one and twenty two earnings. They are up UM. And
• 16:14
  Speaker 1: that's true costs most of the European major markets. But
• 16:18
  Speaker 1: actually even margin expectations are rising, which is particularly surprising
• 16:24
  Speaker 1: giving some of the concerns that others have been voicing
• 16:27
  Speaker 1: about inflation, and you know it's going to hit margins,
• 16:31
  Speaker 1: It's true, except for consumer staples. That's a problem. UM.
• 16:36
  Speaker 1: What's the problem with consumer staples? Yeah? From yeah, I'm well,
• 16:42
  Speaker 1: I mean, from our perspective, they just don't have the
• 16:44
  Speaker 1: economic leverage to be able to manage through UM rising costs. UM.
• 16:50
  Speaker 1: I mean to to us, that's the one segment of
• 16:54
  Speaker 1: the market UM, where the whole sort of cost inflation
• 16:59
  Speaker 1: higher or raw material costs is more problematic and interesting enough,
• 17:04
  Speaker 1: if we look at two Q results, that's the one
• 17:08
  Speaker 1: place that actually are showing negative earnings growth, I mean
• 17:11
  Speaker 1: through down one percent as opposed to the overall market
• 17:14
  Speaker 1: up whatever D sixty UM. So they stand out and
• 17:20
  Speaker 1: evaluations aren't cheap either. Can we talk about buy boxing dividends.
• 17:25
  Speaker 1: Are we going to keep seeing those increased? Yeah? Quick
• 17:31
  Speaker 1: answer is we think so UM and yes, you'll see
• 17:35
  Speaker 1: what the results were seeing show UM better free cash flow,
• 17:41
  Speaker 1: better cash generation UM. Importantly, then you've got to think
• 17:47
  Speaker 1: about where is that being utilized and M and A
• 17:51
  Speaker 1: is going to happen. We've done some interesting work on that.
• 17:55
  Speaker 1: Capex is gonna happen. We need that to have a
• 17:58
  Speaker 1: sustained economic recovery UM. In addition to some of these
• 18:02
  Speaker 1: policy measures like the European Recovery Fund or the US
• 18:05
  Speaker 1: Infrastructure Plan, et cetera. But importantly, shareholder renumeration is coming
• 18:12
  Speaker 1: back to dividends, buy backs are on a rising. A
• 18:15
  Speaker 1: big thing in Europe has been the restriction on financials,
• 18:20
  Speaker 1: specifically banks um UH dividends and buy backs and that's
• 18:25
  Speaker 1: being lifted by the ECB. Um. You know, nice announcement
• 18:28
  Speaker 1: by HSBC just today with their results um actually bringing
• 18:35
  Speaker 1: forward um uh their announcement relative to what we had
• 18:40
  Speaker 1: not thought was going to happen until next year. So
• 18:43
  Speaker 1: I think it's a good news. The other one I
• 18:45
  Speaker 1: would mention to you that I think it's interesting are
• 18:48
  Speaker 1: the commodities um, the miners and the oils which are
• 18:52
  Speaker 1: so big. For example, for the foot see um, they're
• 18:56
  Speaker 1: still being restrained on their capex, their bump ben dividends
• 19:00
  Speaker 1: and buy back, which is great. And if they can
• 19:03
  Speaker 1: restrain the capex, then you've got an opportunity for a
• 19:07
  Speaker 1: more sustained UM sort of price environment for them, as
• 19:11
  Speaker 1: opposed to thinking it's going to be bloom bust. All right, Tim,
• 19:14
  Speaker 1: thanks very much for joining us. Really appreciate Tim Craighead,
• 19:17
  Speaker 1: their senior European Strategy director of Research content for Bloomberg Intelligence,
• 19:22
  Speaker 1: talking to us about the earnings landscape in Europe. This
• 19:28
  Speaker 1: is Bloomberg. That would have been the big take, but
• 19:35
  Speaker 1: we are talking now to Marcus Ashworth. Excuse me, Marcus, pleasure.
• 19:40
  Speaker 1: I can be a big take if you want me
• 19:41
  Speaker 1: to be, or even a big fake. No, no, no,
• 19:45
  Speaker 1: you're the real deal. And now I remember we're gonna
• 19:48
  Speaker 1: talk about the stay at home economy to stay at
• 19:51
  Speaker 1: home recovery. Are we stuck there? What is your big
• 19:55
  Speaker 1: take on that issue? Well, I'm I'm actually getting an
• 19:59
  Speaker 1: increased worried, as I say, sitting at home rather than
• 20:02
  Speaker 1: in the office. And I was in the office on Friday,
• 20:05
  Speaker 1: but you know, it shocked me how empty everything was
• 20:09
  Speaker 1: around the city of London. The tubes, the the subway,
• 20:12
  Speaker 1: that the trains, shops which are closed. I mean, this
• 20:16
  Speaker 1: is I know it's summer, and I know it's still
• 20:19
  Speaker 1: theoretically in some pandemic, but we're supposed to have had
• 20:21
  Speaker 1: Freedom Day in the UK. It really hasn't happened. It's
• 20:25
  Speaker 1: been a damp squib and I think what worries me
• 20:27
  Speaker 1: is that damp I have heard that phrase more times
• 20:32
  Speaker 1: in the last week, considering that I never does everybody
• 20:35
  Speaker 1: know what a dance squib is? I'm not sure our
• 20:37
  Speaker 1: American listeners necessarily do, and I think a lot of
• 20:41
  Speaker 1: British people don't even really know what a dance squib is. Marcus,
• 20:44
  Speaker 1: care to explain something it doesn't like very well? Should
• 20:47
  Speaker 1: we say squire is something you used to like something else,
• 20:50
  Speaker 1: say firewoks like that. No, it just means that you know,
• 20:53
  Speaker 1: it's not going to go off. It's not gonna go bang,
• 20:55
  Speaker 1: and nothing's gonna happen. And you know, we've we've got
• 20:57
  Speaker 1: to worry here because you know, the train lines are empty,
• 21:02
  Speaker 1: the cities are are empty, and that's because people are
• 21:05
  Speaker 1: not going back into into the city centers, which means restaurants, hospitality, etcetera.
• 21:10
  Speaker 1: None of it flows, none of it works. Now we're
• 21:13
  Speaker 1: seeing a lot of sectors doing better than they were before.
• 21:16
  Speaker 1: That's because you know, but they will mean revert back
• 21:18
  Speaker 1: to normal. Normal restaurant bookings are going to stay high
• 21:21
  Speaker 1: forever um all the zoom meetings, etcetera. But it's the
• 21:24
  Speaker 1: stuff which isn't going to get back to it's that
• 21:27
  Speaker 1: stuck at ninety or now and they need an extra
• 21:30
  Speaker 1: boost and they're not getting it. And the government ought
• 21:33
  Speaker 1: to get a bit clever. Well, isn't this just the
• 21:35
  Speaker 1: idea of the new normal that we can never go
• 21:38
  Speaker 1: back to pre COVID. Well, I mean that's what we
• 21:41
  Speaker 1: want to try and avoid. I'm not saying anything should
• 21:42
  Speaker 1: go back to how it was. I'm saying a better
• 21:44
  Speaker 1: way of doing it. We can all talk forever about
• 21:46
  Speaker 1: build back better and all the other platitudes, but you're
• 21:50
  Speaker 1: gonna get people back into the city mostly, and you've
• 21:52
  Speaker 1: got to get people away from hunkering down and feeling
• 21:55
  Speaker 1: scared of going back into society and a normal life.
• 21:57
  Speaker 1: Otherwise there will be permanent scarring and you won't be
• 22:00
  Speaker 1: able to get that back, and that's a mistake. I
• 22:02
  Speaker 1: think that there are better things that can be done,
• 22:04
  Speaker 1: particularly even if it minds subsidizing commuter fairs and e g.
• 22:09
  Speaker 1: Tourists coming into the center of London. It can be
• 22:11
  Speaker 1: done for the rest of this year or for a
• 22:13
  Speaker 1: few months. They did a thing would eat Out to
• 22:15
  Speaker 1: help out last summer. It perhaps they worked too well,
• 22:18
  Speaker 1: being a super spreader event, but it got people back
• 22:20
  Speaker 1: into restaurants and bars, and the government needs to do
• 22:23
  Speaker 1: something similar. I'm sure where London goes it will be
• 22:25
  Speaker 1: exact the same in New York City from what everyone
• 22:27
  Speaker 1: tells me. So there's there there. Surely there are pieces
• 22:32
  Speaker 1: of this that are going to stay with us forever, right,
• 22:34
  Speaker 1: I mean, are people going to be masking forever? Are
• 22:37
  Speaker 1: we going to be getting boosters forever. That's not your concern.
• 22:41
  Speaker 1: Your concern is, uh, I'm trying to think of a
• 22:45
  Speaker 1: corner shop in London. Gregg's will no longer be open
• 22:48
  Speaker 1: for sausage rolls all day. It's it's not just that,
• 22:52
  Speaker 1: it's just that we're not careful. We're going to end
• 22:54
  Speaker 1: up with a halfway house whereby it's not going to
• 22:58
  Speaker 1: satisfy and then enclosed the econom me recovery we could
• 23:02
  Speaker 1: and should be having, and that the ends days get
• 23:04
  Speaker 1: the engine of the economy going, which means people moving
• 23:06
  Speaker 1: around doing things. You sure the store means you can
• 23:09
  Speaker 1: do a three day week, or you can work from home.
• 23:12
  Speaker 1: Sometimes that doesn't mean we lose all the benefits of
• 23:14
  Speaker 1: what of what we've seen in the last year or two,
• 23:16
  Speaker 1: but we really ought to get the economy functioning as
• 23:19
  Speaker 1: best we can, and that means transportation, it means well.
• 23:23
  Speaker 1: But if we're working, we're only working three days a
• 23:26
  Speaker 1: week in the office. And I've noticed here, Marcus, the
• 23:29
  Speaker 1: same things that you noticed there. Um, it's much worse
• 23:32
  Speaker 1: than in Berlin. I say, I walk around our headquarters
• 23:35
  Speaker 1: here at one Lexington Avenue, which used to be surrounded
• 23:40
  Speaker 1: by businesses that we're always you know, full of you know,
• 23:46
  Speaker 1: workers that were here for the day. So many of
• 23:49
  Speaker 1: these businesses have closed down, not just like clothes for now,
• 23:52
  Speaker 1: but empty and store for rent signs on the windows
• 23:56
  Speaker 1: that that doesn't seem like it's going to come back
• 23:58
  Speaker 1: very quickly. If you're a real estate landlord. This is permanent,
• 24:02
  Speaker 1: permanent scarring. We're not gonna see the end of the
• 24:04
  Speaker 1: song of five or six years. And that's I think
• 24:06
  Speaker 1: where people aren't understanding, they aren't thinking through this fully,
• 24:10
  Speaker 1: is that people have their circle quality of life and
• 24:12
  Speaker 1: there's there is a happy medium, and we're not at
• 24:15
  Speaker 1: the happy medium. We need to get stop hunkering down
• 24:18
  Speaker 1: and get some semblance of normality back, get the economy
• 24:21
  Speaker 1: movie again, and we will all benefit for it. But
• 24:23
  Speaker 1: if we don't, we will we will miss out, I think,
• 24:26
  Speaker 1: particularly the in the cities, not just but particularly in
• 24:29
  Speaker 1: the cities. So Marcus, there's getting people using transportation and
• 24:32
  Speaker 1: going out doing things. There's also getting people to deploy
• 24:35
  Speaker 1: their savings. And as you point out in your piece,
• 24:37
  Speaker 1: the savings ratio is nearly three times the pre pandemic level.
• 24:41
  Speaker 1: What entices consumers to start, you know, emptying their bank account. Well,
• 24:47
  Speaker 1: it's it's propensially to spend, and the people who are
• 24:50
  Speaker 1: saving the money are the old or wealthier people who
• 24:52
  Speaker 1: have less prepensive to spend anyway. So we're just we're
• 24:55
  Speaker 1: just confounding, and these people may never come back into
• 24:58
  Speaker 1: the economy in the way they were before. If don't
• 25:00
  Speaker 1: go into the inner cities, they don't go to the theater,
• 25:02
  Speaker 1: they don't go to the restaurants or let alone go
• 25:05
  Speaker 1: to work in offices. But you know, there is there's
• 25:07
  Speaker 1: a knock on effect which I think is is something
• 25:10
  Speaker 1: which the government will end up permanently missing out on
• 25:13
  Speaker 1: on on a percentage point or two of g d
• 25:16
  Speaker 1: P and that has knock on effects for taxes and
• 25:18
  Speaker 1: a whole raft of different stuff. So you know, there's
• 25:20
  Speaker 1: been some intelligent stuff done, the furlough schemes, whole raft
• 25:24
  Speaker 1: other things. They've missed a trick in the UK, certainly
• 25:27
  Speaker 1: particularly with subsidizing rail fair to get people back into
• 25:31
  Speaker 1: the office and not feel sticker shock, which is I
• 25:34
  Speaker 1: don't know a you I walk around in restaurants and
• 25:36
  Speaker 1: bars in the city now I am shocked about how
• 25:39
  Speaker 1: much you know, food costs, a glass of wine costs
• 25:41
  Speaker 1: a beer. It's it's a it's a people are price gouging,
• 25:45
  Speaker 1: and that is putting people off even coming into this.
• 25:47
  Speaker 1: It is unbelievable. I went to J. G. Mellen's the
• 25:49
  Speaker 1: other day, which is I think seventy four and Lex,
• 25:52
  Speaker 1: you've been there somewhere on the Upper East Side. I
• 25:54
  Speaker 1: have the best burgers in New York. They're they're up there.
• 25:57
  Speaker 1: I mean, I know, everybody has his own idea of
• 25:59
  Speaker 1: what the best burger in New York is. I ordered
• 26:01
  Speaker 1: a bacon cheeseburger with my kid brother. We both had
• 26:04
  Speaker 1: fries and a beer. Ninety dollars with the fries extra. Yeah,
• 26:10
  Speaker 1: but ninety dollars for a burger and fries. Um, it was.
• 26:15
  Speaker 1: It was pretty insane. Marcus, thanks so much for joining us.
• 26:17
  Speaker 1: Marcus Ashworth. There Bloomberg opinion columnists talking to us about
• 26:21
  Speaker 1: what needs to be done in order to get the
• 26:24
  Speaker 1: economy back to full speed. Um, we're not there yet,
• 26:28
  Speaker 1: and especially with these delta spikes, it seems like it
• 26:31
  Speaker 1: could take a while longer than you may have thought
• 26:34
  Speaker 1: as well. This is Bloomberg. Thanks for listening to the
• 26:38
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• 26:42
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• 26:47
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• 26:51
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• 26:54
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• 26:56
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