Latest / Bloomberg Intelligence / Ten-Year Yield Could Fall Before Rising, Bianco Says

Transcript

Ten-Year Yield Could Fall Before Rising, Bianco Says · Bloomberg Intelligence

• 0:00
  Speaker 1: P and L is brought to you by proper Cloth,
• 0:02
  Speaker 1: a leader in men's custom shirts, with proprietary smart sized
• 0:05
  Speaker 1: technology and top rated customer service. Ordering a custom shirt
• 0:08
  Speaker 1: has never been easier. Visit proper cloth dot com to
• 0:11
  Speaker 1: order your first custom shirt today. Welcome to the Bloomberg
• 0:20
  Speaker 1: P and L Podcast. I'm Pim Fox. Along with my
• 0:22
  Speaker 1: co host Lisa Abramowitz. Each day we bring you the
• 0:25
  Speaker 1: most important, noteworthy, and useful interviews for you and your money,
• 0:29
  Speaker 1: whether at the grocery store or the trading floor. Find
• 0:32
  Speaker 1: the Bloomberg P and L Podcast on iTunes, SoundCloud and
• 0:36
  Speaker 1: at Bloomberg dot com. Bonds what to do with the
• 0:44
  Speaker 1: bond market, We've got Jim Bianco. James Bianco is the
• 0:47
  Speaker 1: president of Bianco Research, joining us from Chicago. Boy, you know,
• 0:52
  Speaker 1: Jim Bianco, I think of the bond market continues the
• 0:55
  Speaker 1: way it's going, they're not gonna be any people in
• 0:56
  Speaker 1: the bond market much longer. No, I think they're in
• 0:59
  Speaker 1: the sleeping You guys were talking about that. Yeah, they
• 1:03
  Speaker 1: got their blankets, you know, they pull it up, they
• 1:05
  Speaker 1: get that little pillow out from Tim. I'm so glad
• 1:08
  Speaker 1: that you could join us. I don't know if you
• 1:09
  Speaker 1: saw that the Feds Jim Bullard came out today and
• 1:13
  Speaker 1: said that there's no need to discuss the Fed's balance sheet.
• 1:16
  Speaker 1: People have been talking about when the Federal stopped reinvesting,
• 1:19
  Speaker 1: what they get from their four point five trillion dollars
• 1:22
  Speaker 1: of investments that they're holding. Um, what's your take on this?
• 1:26
  Speaker 1: Do you think that they're going to have to talk
• 1:27
  Speaker 1: about it given the amount of money that they're receiving
• 1:31
  Speaker 1: from bonds being paid out and maturing. Yeah, I think
• 1:34
  Speaker 1: they're going to have to talk about it. Um, the
• 1:36
  Speaker 1: feds balance sheet has got trillions of dollars of Treasury
• 1:40
  Speaker 1: securities on it. In simple terms, the bond market believes
• 1:45
  Speaker 1: that all those bonds that are on the Fed's balance
• 1:47
  Speaker 1: sheet are permanently out of circulation. They're never going to
• 1:51
  Speaker 1: come back into circulation. So Bullet is saying, and what
• 1:55
  Speaker 1: Bill Dudley has said and some others have said, be
• 1:57
  Speaker 1: very very careful when you talk about reintroduced those bonds
• 2:00
  Speaker 1: back into the market, because then you could have a
• 2:03
  Speaker 1: shock in the market if they believe that. We have
• 2:06
  Speaker 1: to make room and private accounts now you know, banks
• 2:10
  Speaker 1: and and endowments and trusts inspectative accounts for trillions of
• 2:14
  Speaker 1: dollars of securities which are locked away, which we think
• 2:17
  Speaker 1: is forever in the Fed's balance sheet, can be very disruptive.
• 2:21
  Speaker 1: To date, I don't think the market has listened much
• 2:23
  Speaker 1: to that conversation because it's not going to until the
• 2:27
  Speaker 1: two big architects of the balance sheet, Bill Dudley and
• 2:30
  Speaker 1: Janet yell And speak on the subject. And they haven't.
• 2:32
  Speaker 1: And now that Bullard has come out on the other side,
• 2:34
  Speaker 1: it's going to reinforce that idea that man, that's just
• 2:37
  Speaker 1: Fed talk. We don't really have to listen to it.
• 2:39
  Speaker 1: Do you think we have to listen to it? I mean,
• 2:41
  Speaker 1: aren't the mandates for the FED. Price stability and employment
• 2:45
  Speaker 1: has nothing to do with protecting people against bond losses. Right?
• 2:49
  Speaker 1: Price stability is another word for inflation. Since two thousand nine,
• 2:54
  Speaker 1: when the recession ended, the Great Recession ended, what have
• 2:56
  Speaker 1: we not had is inflation. So when the FED has
• 2:59
  Speaker 1: this giant sheet and they run these extreme policies, they're
• 3:02
  Speaker 1: allowed to get away with it, if you will, because
• 3:05
  Speaker 1: we haven't had inflation. Now you get Donald Trump being elected,
• 3:09
  Speaker 1: and you see consumer confidence at the seventeen year high,
• 3:11
  Speaker 1: you see business optimism at forty year high. You see
• 3:15
  Speaker 1: all of these numbers going through the roof, the stock
• 3:17
  Speaker 1: markets at a new high, and there's talk of reflation,
• 3:21
  Speaker 1: and part of that reflation talk is inflation as opposed
• 3:25
  Speaker 1: to real growth. Maybe now, for the first time in
• 3:28
  Speaker 1: seven years, eight years, we might actually get a pulse
• 3:31
  Speaker 1: out of inflation, and it might force the Fed to
• 3:34
  Speaker 1: have to deal with that. Up until now, they could
• 3:36
  Speaker 1: just discuss ignore, you know, you know, trying out smart
• 3:40
  Speaker 1: everybody about it, but they didn't have to do anything
• 3:41
  Speaker 1: about it. But if we get inflation, they do have
• 3:44
  Speaker 1: to start thinking about it. Jim, I don't know if
• 3:46
  Speaker 1: you caught this, but yesterday Black Rocks Larry Fink was
• 3:48
  Speaker 1: talking about his outlook on the bond market, and he
• 3:51
  Speaker 1: said that he actually thinks that there's a higher likelihood
• 3:54
  Speaker 1: of the ten year Treasury yelled going down from here,
• 3:57
  Speaker 1: possibly going below two, rather than rising. So it sort
• 4:00
  Speaker 1: of goes against this idea that we're actually going to
• 4:03
  Speaker 1: see some inflation. I actually do agree with that. I
• 4:07
  Speaker 1: think that the problem is, and this gets into the
• 4:09
  Speaker 1: technicals of the bond market, I think we're going to
• 4:12
  Speaker 1: see a bump up in inflation and I think that
• 4:14
  Speaker 1: by two eighteen we're going to see higher yields. Now,
• 4:17
  Speaker 1: that is the most consensus thing you can say, so
• 4:20
  Speaker 1: much so that almost everybody in the bond market is
• 4:23
  Speaker 1: positioned for that. So if the market does go to
• 4:26
  Speaker 1: three percent by the by the spring of next year,
• 4:28
  Speaker 1: everybody makes money. And it was we found with contrarian opinion.
• 4:31
  Speaker 1: When everybody's lined up one way in the market, it
• 4:33
  Speaker 1: tends to go the other way. So that's why I
• 4:35
  Speaker 1: wouldn't be surprised if we do go below two percent.
• 4:38
  Speaker 1: Like Larry said, first question, that idea that there's going
• 4:42
  Speaker 1: to be inflation, and then we have the big rise
• 4:44
  Speaker 1: of rates after that going and you know, finding out
• 4:48
  Speaker 1: that Yett was there. It's just the problem is everybody's
• 4:51
  Speaker 1: positioned for it right now, and usually when that happens,
• 4:54
  Speaker 1: the market has a tendency to go the other way.
• 4:56
  Speaker 1: So if every if everyone's wrong and the market goes
• 4:59
  Speaker 1: the other way, who's going to suffer the biggest losses?
• 5:02
  Speaker 1: And will this be something that everyone's talking about how
• 5:04
  Speaker 1: there's a lot of hurt going on. Yeah, I think
• 5:06
  Speaker 1: that you know right now, if you were to look
• 5:09
  Speaker 1: at who is the biggest bet on rates going to
• 5:13
  Speaker 1: three percent. It's the more speculative hedge fund accounts by
• 5:17
  Speaker 1: some of the measures in the futures market. And uh
• 5:19
  Speaker 1: they have the biggest short position ever ever in the
• 5:23
  Speaker 1: in the bond market, betting on higher rates because they
• 5:26
  Speaker 1: think Trump is going to bring back a reflation. They're
• 5:29
  Speaker 1: on the firing line that they're going to be the
• 5:33
  Speaker 1: most hurt by some kind of a fall in interest
• 5:36
  Speaker 1: rates as opposed to arise. Jim, how long can they
• 5:39
  Speaker 1: hold that position until the leverage starts to hurt? Oh?
• 5:42
  Speaker 1: I think that if you start pushing rates down, you know,
• 5:45
  Speaker 1: run under say twenty We're around two thirty four right now,
• 5:52
  Speaker 1: right and we were at highest to sixty in mid December,
• 5:54
  Speaker 1: so we're halfway there. I think that that's when the
• 5:57
  Speaker 1: pain threshold will start to kick in, and then as
• 6:00
  Speaker 1: you go underneath two it really kick in. Well, I
• 6:03
  Speaker 1: thought about the spread though. I'm looking at the spread.
• 6:05
  Speaker 1: Let's say the two ten uh spread one point one
• 6:09
  Speaker 1: seven on the two year and the as you just said,
• 6:13
  Speaker 1: the tenure two point three eight, so one, you know,
• 6:17
  Speaker 1: one one versus two and a quarter, right, I think
• 6:21
  Speaker 1: that you know, as you were to push the tenure
• 6:23
  Speaker 1: down to two twenty or maybe down to two, you
• 6:26
  Speaker 1: would see the YEO curve spread you write it's one seventeen,
• 6:29
  Speaker 1: probably continue to narrow two and that would not bold
• 6:33
  Speaker 1: well for financial stocks. And they've actually hit a little
• 6:35
  Speaker 1: bit of turbulence yere recently because a wider spread they
• 6:39
  Speaker 1: borrow shortland long benefits them and a narrow spread would
• 6:43
  Speaker 1: hurt them. So if if everybody's two lined up for
• 6:45
  Speaker 1: three percent rates, which would be good for the banks,
• 6:47
  Speaker 1: and we wind up going to two, they could stumble
• 6:49
  Speaker 1: in that environment as well. Okay, so let's say what
• 6:51
  Speaker 1: what happens that you just said, Let's say it plays
• 6:54
  Speaker 1: out or all of a sudden, you've got yields on anten,
• 6:57
  Speaker 1: your treasury is plunging against everybody's senses. Mortgage rates do
• 7:01
  Speaker 1: you think that they could continue to rise despite this
• 7:04
  Speaker 1: or they also fall in tandem? I mean, are they
• 7:07
  Speaker 1: basically linked at the hip at this point? Um? No,
• 7:11
  Speaker 1: I think mortgage rates would there. They would fall on
• 7:14
  Speaker 1: an absolute basis, but I would agree with you that
• 7:17
  Speaker 1: the spread would white. They would not fall as much
• 7:20
  Speaker 1: as treasuries would fall. Uh, So they wouldn't the couple
• 7:23
  Speaker 1: all the way that one would go up in the
• 7:25
  Speaker 1: other would would go down. And and I think that
• 7:27
  Speaker 1: the reason that mortgage rates would fall is one thing
• 7:30
  Speaker 1: the FED is working off of. There is the mortgage
• 7:34
  Speaker 1: holdings are really working off their balance sheet fast. That
• 7:37
  Speaker 1: means they're more in private sector. If we do get
• 7:40
  Speaker 1: a reflation and that does get a bump up in
• 7:43
  Speaker 1: housing starts and in refinancing, you could seem demand for
• 7:46
  Speaker 1: mortgages and that could also keep their rates um higher
• 7:50
  Speaker 1: than they would from a treasury, So you could see
• 7:52
  Speaker 1: the widening spread. That's really interesting. So even if we
• 7:54
  Speaker 1: see treasury yields decline, borrowing costs for people who are
• 7:58
  Speaker 1: looking to borrow money to by a house might stay elevated.
• 8:02
  Speaker 1: Thank you so much, Jim Bianco, always a pleasure speaking
• 8:04
  Speaker 1: with you, President and founder of Bianco Research, longtime veteran
• 8:09
  Speaker 1: of the bond market. Expecting that just like Larry Fink
• 8:13
  Speaker 1: of Black Rock thinks possibly it's more likely for tenure
• 8:17
  Speaker 1: treasure yields to fall before they rise. We've been talking
• 8:34
  Speaker 1: a lot about the anti globalist trend, uh the populist
• 8:39
  Speaker 1: wave that we've seedwash over really the entire world. We
• 8:45
  Speaker 1: haven't heard as much about what this will do for travel,
• 8:48
  Speaker 1: But now we have someone who can give us some insight.
• 8:50
  Speaker 1: Alex Sosiah, chief executive officer of Apple Leisure Group, which
• 8:54
  Speaker 1: is based in Philadelphia. Alex, do you have a sense
• 8:57
  Speaker 1: that people will try novel less internationally given the populist
• 9:03
  Speaker 1: backdrop in sort of the anti globalist sentiment that we've seen. Yeah,
• 9:08
  Speaker 1: thank you. I I am concerned about that. What we
• 9:11
  Speaker 1: see the trends in the short term is that we
• 9:14
  Speaker 1: have stronger numbers for Americans traveling outside of the country,
• 9:17
  Speaker 1: particularly to Mexico and the Caribbean, versus a year ago
• 9:20
  Speaker 1: for traveling within this year, but it could be affecting
• 9:24
  Speaker 1: soon if the territory continues to be the one to
• 9:26
  Speaker 1: protect protectionism and uncertainty of what's going on in the
• 9:29
  Speaker 1: airports and stuff like that. So, yeah, it is a
• 9:31
  Speaker 1: concern that we have, although the big trends still shows
• 9:34
  Speaker 1: very positive. Well, you've been doing this for what thirty
• 9:37
  Speaker 1: more than thirty years? Can you sort of run down
• 9:40
  Speaker 1: for us the destinations where you think investments at least
• 9:43
  Speaker 1: in the actual infrastructure of hospitality our best our best
• 9:49
  Speaker 1: looked at, whether it is Mexico, Costa Rica, Panama, where
• 9:52
  Speaker 1: would you look. Yeah, well, that's the places that we're looking,
• 9:55
  Speaker 1: that we're investing. And indeed, the places that you mentioned
• 9:59
  Speaker 1: now that we are UH totally focused on on resorts,
• 10:02
  Speaker 1: and on the resorts, the most profitable destinations happen to
• 10:05
  Speaker 1: be the ones that have the biggest connectivity, the best
• 10:08
  Speaker 1: natural resources, are lowest payroll, and and and and the
• 10:12
  Speaker 1: avocation of tourism, particular to certain American tourism, the American
• 10:16
  Speaker 1: tourism UM oriented destinations are the most profitable ones. And yes,
• 10:21
  Speaker 1: the beaches in Mexico and Country Amaya, Loscaos, Portoa, that
• 10:24
  Speaker 1: all those are great places. But also in the Caribbean
• 10:26
  Speaker 1: there's great there. There are great opportunities at Jamaica, UH
• 10:30
  Speaker 1: Talks and Cacos. Domerican Republic is growing very rapidly and
• 10:33
  Speaker 1: with great returns. And and then we see opportunities in
• 10:37
  Speaker 1: Central America, not just in contact in Costa Rica that
• 10:40
  Speaker 1: it's been there for a longer period of time, but
• 10:42
  Speaker 1: now we see emerging places in UH in Panama as well,
• 10:45
  Speaker 1: hopefully so Nicaragua. And then we go south place like Colombia,
• 10:50
  Speaker 1: it's also growing very rapidly with good returns and and
• 10:52
  Speaker 1: good respond and great customer satisfaction Alex. In addition to
• 10:57
  Speaker 1: some of the protection as to rhetorict that we've globally,
• 11:01
  Speaker 1: there also is this feeling that generally people are feeling
• 11:05
  Speaker 1: better about their economic wherewithal, particularly in the United States.
• 11:09
  Speaker 1: Are you seeing that sort of trickle into plans for
• 11:13
  Speaker 1: more expensive vacations or just more vacation plans in general. Yes,
• 11:18
  Speaker 1: of course we see that that that that of course
• 11:20
  Speaker 1: helps a lot. People are feeling better. The prices of
• 11:24
  Speaker 1: flying outside of the United States in general is is
• 11:27
  Speaker 1: cheaper than before. We have a tropic about four to
• 11:31
  Speaker 1: the destination that we work with versus a year ago.
• 11:34
  Speaker 1: So I think that the Americans are seeing more value
• 11:36
  Speaker 1: for the morning one side and the other side. They
• 11:39
  Speaker 1: are comfortable with their um with the with the overall economy,
• 11:42
  Speaker 1: and I think that obviously helps the people to travel
• 11:46
  Speaker 1: and we seek that. We see the number of new
• 11:48
  Speaker 1: passports issuing in the United States now at fifteen million
• 11:52
  Speaker 1: per year, about fifty percent or those so seven point
• 11:55
  Speaker 1: seven seven point five million are reissuing passports renewals. But
• 11:59
  Speaker 1: the other side point five our brand new passports. So
• 12:02
  Speaker 1: in ten years you're talking about almost eighty million new
• 12:05
  Speaker 1: passports in the United States, and it's still only forty
• 12:08
  Speaker 1: percent of the population. We still have sixty percent of
• 12:10
  Speaker 1: population in the United States without passports. So I do
• 12:12
  Speaker 1: see a big trend of people getting passports, getting passports
• 12:15
  Speaker 1: of course to travel outside of the country. And the
• 12:17
  Speaker 1: biggest region that it's utilize for the utilization of those
• 12:20
  Speaker 1: passports is a Mexican and Caribbean. So I see a
• 12:23
  Speaker 1: big growth, a big trends traveling internationally. It's becoming more
• 12:28
  Speaker 1: for everyone, more a commodity. But within those experienced travelers,
• 12:31
  Speaker 1: certainly they're spending more money and looking more sophistication. There's
• 12:34
  Speaker 1: also much better product. Well, when you talk about product,
• 12:37
  Speaker 1: alex I wonder if you could tell us is there
• 12:39
  Speaker 1: an opportunity for an investor in Mexico. Are there hotel
• 12:43
  Speaker 1: projects that are looking for investors that maybe have been
• 12:47
  Speaker 1: stymied because of the change or the parent change in
• 12:51
  Speaker 1: policy because of the Trump administration. I don't, I don't.
• 12:55
  Speaker 1: I don't think that because of the Trump administration has
• 12:57
  Speaker 1: slowed down any of the projects that are down there.
• 12:59
  Speaker 1: But certainly there's always an opportunity for American investors to
• 13:03
  Speaker 1: go and invest in in places in Mexico or you know,
• 13:06
  Speaker 1: or in other destinations in the Caribbean. In this case, Uh,
• 13:10
  Speaker 1: the American investors. In the case of our company, we
• 13:13
  Speaker 1: just had KKR and CASEL investing big time in our company. Uh,
• 13:18
  Speaker 1: they're being very shy so far. The Americans have not
• 13:20
  Speaker 1: very active in this In this sector is mainly dominant
• 13:24
  Speaker 1: by regional and local investors as well as European investors.
• 13:29
  Speaker 1: So there's not so much activity so far for the
• 13:32
  Speaker 1: for the for the for the U S investors and
• 13:34
  Speaker 1: particularly for the U S banks to participate in the
• 13:36
  Speaker 1: leisure sector. On the hospitality in Mexico. But I see
• 13:39
  Speaker 1: a lot more appetite and a lot more oppenness of
• 13:43
  Speaker 1: going and compete and start investing there. So I don't
• 13:45
  Speaker 1: see any projects slowing down. H. But what I do
• 13:48
  Speaker 1: see is a create opportunity to spit that up. We
• 13:51
  Speaker 1: gotta leave it there. I want to thank you very much,
• 13:53
  Speaker 1: Alex Dosiah. He's the chief executive of Apple Leisure Group
• 14:07
  Speaker 1: P and L is brought to you by proper Cloth,
• 14:09
  Speaker 1: a leader in men's custom shirts. At proper cloth dot com,
• 14:13
  Speaker 1: ordering custom shirts has never been easier. Create your custom
• 14:16
  Speaker 1: shirt size, by answering ten easy questions, select from over
• 14:19
  Speaker 1: five fabrics to suit your personal taste. Shirts start from
• 14:23
  Speaker 1: eighty five dollars and are delivered in just two weeks
• 14:26
  Speaker 1: with proper Cloths perfect fit guarantee. Remakes are completely free
• 14:30
  Speaker 1: and expert staff are standing by to help. For premium quality,
• 14:34
  Speaker 1: perfect fitting shirts, visit proper cloth dot com Custom shirts
• 14:38
  Speaker 1: made Smarter. You know who did some innovation. Theresa May,
• 14:49
  Speaker 1: Prime Minister of the United Kingdom. She innovated by convincing
• 14:54
  Speaker 1: the Parliament to uh pass her plan to exit the
• 14:59
  Speaker 1: europe Pian Union. It comes with a catch, though. Let's
• 15:03
  Speaker 1: stay a little bit more into that with Sarah Jane Mahmoud,
• 15:06
  Speaker 1: government analyst with Bloomberg Intelligence in London. So, Sarah, can
• 15:10
  Speaker 1: you first just give us a rundown on what exactly
• 15:14
  Speaker 1: Parliament past giving Theresa May the ability to go ahead
• 15:18
  Speaker 1: and start the process of excuting the European Union. Hi? There, Yes, sure,
• 15:24
  Speaker 1: And so yesterday and MP's in the House of Commons
• 15:28
  Speaker 1: passed the bill that gives Raiser May permission to activate
• 15:32
  Speaker 1: Article fifty of the Lisbon Treaty, effectively kickstarting exit talks
• 15:36
  Speaker 1: for Brexit with EU leaders and however she doesn't have
• 15:40
  Speaker 1: a free pass as yet because the bill now goes
• 15:43
  Speaker 1: to the House of Lords. I'm who from the twentieth
• 15:46
  Speaker 1: of February will start considering whether or not Traiser May
• 15:50
  Speaker 1: can activate Article fifty by the end of March as
• 15:53
  Speaker 1: she wants to. What is the outlook for the House
• 15:56
  Speaker 1: of Lords vote? Um, Well, the House of Lords um
• 16:00
  Speaker 1: mainly opposed to activating Article fifty and to Brexit. However,
• 16:04
  Speaker 1: as they're an unelected body, they would be unlikely to
• 16:07
  Speaker 1: block the bill itself, but they could take their time
• 16:10
  Speaker 1: to consider it and make possible amendments, for example, make
• 16:15
  Speaker 1: the activation of Article fifty contingent on the government considering
• 16:21
  Speaker 1: staying in the European Economic Area or securing continued access
• 16:25
  Speaker 1: to the EU Single Market for UK based financial services companies.
• 16:29
  Speaker 1: So in other words, um, this might become a pretty thorny,
• 16:34
  Speaker 1: sticky issue. Just because this means that Theresa May can
• 16:37
  Speaker 1: start the process, it doesn't necessarily mean that it will
• 16:39
  Speaker 1: speed it up by any means, and it sort of
• 16:41
  Speaker 1: remains to be seen whether Parliament will work with her
• 16:44
  Speaker 1: on some kind of constructive basis to get through a
• 16:47
  Speaker 1: plan that is palatable for for everybody involved exactly. I mean,
• 16:51
  Speaker 1: it's likely that the House of Lords will ultimately pass
• 16:56
  Speaker 1: the bill allowing the government to activate Article fifty um.
• 17:00
  Speaker 1: And it's also likely that because tres and May wants
• 17:03
  Speaker 1: to activate Article fifty start exit talks of the leaders
• 17:07
  Speaker 1: by the end of March, a self imposed deadline. Um.
• 17:10
  Speaker 1: I think ultimately she wants to do this during the
• 17:13
  Speaker 1: next European Council meeting that's set for March the ninth, UM.
• 17:17
  Speaker 1: So she's hoping that the bill will get approval before them. Sarah,
• 17:22
  Speaker 1: you know, just assooming out a little bit as as
• 17:26
  Speaker 1: a member as somebody who lives in London. How has
• 17:29
  Speaker 1: the conversation changed. I mean, when you go out to dinner,
• 17:32
  Speaker 1: you go to the pub, is everybody still talking about
• 17:35
  Speaker 1: Brexit and Brexit negotiations? So people still care? Are they
• 17:38
  Speaker 1: paying close attention to all of these machinations or are
• 17:40
  Speaker 1: they kind of separating themselves from it, kind of assuming
• 17:44
  Speaker 1: that things are going to keep going. I mean, I think,
• 17:46
  Speaker 1: to be honest, there is a lot of Brexit fatigue
• 17:49
  Speaker 1: at the moment um in professional and social circles. But
• 17:53
  Speaker 1: a key issue looking at the financial services sector is
• 17:56
  Speaker 1: whether or not banks fund managers, insurers, payment service providers
• 18:01
  Speaker 1: and more. M can continue to access the EU market
• 18:05
  Speaker 1: at once the UK exits the EU, which gift RAISU
• 18:09
  Speaker 1: may can activate Article fifty by the end of March. UM.
• 18:12
  Speaker 1: It would be likely the UK would leave the European
• 18:15
  Speaker 1: Union around about April two thousand and ninety. What are
• 18:18
  Speaker 1: people in London worried about losing their jobs? I think
• 18:22
  Speaker 1: that there is a big concern that many financial institutions
• 18:25
  Speaker 1: are likely to move their operations into another EU member state. UM.
• 18:31
  Speaker 1: But I guess until there's more clarity, until Article fifty
• 18:36
  Speaker 1: is activated and negotiations start taking place, UM, there's just
• 18:40
  Speaker 1: a lot of uncertainty here. How does passporting relate directly
• 18:45
  Speaker 1: to the sales that financial companies currently enjoy? Okay, So
• 18:50
  Speaker 1: under the passporting regime, the companies financial services companies that
• 18:54
  Speaker 1: are based in the UK, regardless of where they are incorporated. UM,
• 18:58
  Speaker 1: they have free access to over twenty seven European countries,
• 19:03
  Speaker 1: and they're allowed to establish a branch or provide cross
• 19:06
  Speaker 1: border services without needing local authorization in every single country,
• 19:10
  Speaker 1: and they generally only have to comply with one rule
• 19:13
  Speaker 1: book rather than up to twenty eight for example, um
• 19:16
  Speaker 1: Tresa May's plan is basically a hard Brexit, which means
• 19:20
  Speaker 1: to leave the EU without continued access to the Single Market,
• 19:25
  Speaker 1: or rather continued membership of the Single Market. Um So
• 19:28
  Speaker 1: with that passporting rights would be lost and financial services
• 19:33
  Speaker 1: companies that have their base in the UK would need
• 19:35
  Speaker 1: to seek alternative ways to access the EU market. Now,
• 19:39
  Speaker 1: the white paper that the government published last week didn't
• 19:42
  Speaker 1: really give any clarity on what special deal they're looking
• 19:45
  Speaker 1: to to make with EU leaders, and similarly EU leaders
• 19:49
  Speaker 1: won't really show their cards and they won't indicate what
• 19:52
  Speaker 1: they might be able to offer the UK until Article
• 19:55
  Speaker 1: fifty is activated. I want to thank you very much
• 19:58
  Speaker 1: for your insight in your time. Sarah Mahmwood is a
• 20:01
  Speaker 1: government analyst for Bloomberg Intelligence based in London. Of course,
• 20:05
  Speaker 1: Bloomberg Intelligence providing unique in real time research in a
• 20:09
  Speaker 1: variety of industries and also government as well as market
• 20:12
  Speaker 1: factors that affect business. Just type B I go on
• 20:15
  Speaker 1: the Bloomberg to get all of that Bloomberg Intelligence research.
• 20:20
  Speaker 1: You know, every time I see that a bank or
• 20:22
  Speaker 1: firm is moving their operations out of London elsewhere in
• 20:25
  Speaker 1: the in the United the European Union or the U S.
• 20:28
  Speaker 1: I have to think, is this because of Brexit? Is
• 20:30
  Speaker 1: this become of Brexit? But perhaps perhaps it's just people
• 20:32
  Speaker 1: are sitting and waiting. I guess we'll have to say
• 20:35
  Speaker 1: it could be. I want to call on Sharudi sing,
• 20:49
  Speaker 1: our agriculture Companies reporter for Bloomberg News, joining us from Chicago. Sharudi,
• 20:56
  Speaker 1: I'm wonder if you could describe for US an industry
• 20:59
  Speaker 1: that many people may not know the details of but
• 21:02
  Speaker 1: are the recipient of. This is the meat packing industry,
• 21:06
  Speaker 1: and uh, maybe you could give us the sort of
• 21:10
  Speaker 1: rundown on how a steak actually arrives on the plate
• 21:13
  Speaker 1: of a diner and how that is connected to foreign policy. Sure, absolutely,
• 21:20
  Speaker 1: so good to be with you. Um, the meat industry
• 21:23
  Speaker 1: in the US UM employs a lot of different people,
• 21:27
  Speaker 1: and um, it's it's a long supply chain that starts
• 21:31
  Speaker 1: with a farmer that you're talking specifically about steak. You've
• 21:34
  Speaker 1: got farmers who raise cows and calves. Those cattle go
• 21:38
  Speaker 1: onto feed lots, and then those cattle that are battened
• 21:42
  Speaker 1: up at feed lots then eventually go to the meat
• 21:45
  Speaker 1: packing plants. And the meat packing plants are where we
• 21:49
  Speaker 1: have a number of different types of workers. They're one
• 21:53
  Speaker 1: of the larger segments is the immigrant population. Particularly over
• 21:57
  Speaker 1: the last few decades, the immigrant workers increased um and
• 22:02
  Speaker 1: more recently, in the last decade or so, we've seen
• 22:05
  Speaker 1: refugees become a fixture in these plants. So, shrewd I
• 22:09
  Speaker 1: was just looking at your story and you say that
• 22:11
  Speaker 1: immigrants hold more than one third of these jobs in
• 22:15
  Speaker 1: the United States and wondering, shrewdly from your sources, what
• 22:18
  Speaker 1: are you hearing as far as what recent immigration policies
• 22:22
  Speaker 1: and proposals, what effect they would have on their business? Well,
• 22:28
  Speaker 1: right now, I think a lot of the companies are
• 22:30
  Speaker 1: monitoring the situation that when we talk to some of
• 22:33
  Speaker 1: the industry groups, um, they're telling us that they want
• 22:36
  Speaker 1: the administration to really um consider what ramifications the policy
• 22:41
  Speaker 1: changes would have on businesses as well as the foreign
• 22:44
  Speaker 1: born workers. Well, I wonder if you could get the
• 22:47
  Speaker 1: details for us in terms of the companies affected, Tyson,
• 22:50
  Speaker 1: for example, Cargil, j B S. Are they all exposed equally. Well,
• 22:58
  Speaker 1: you know, one area that we looked at was Fort
• 23:01
  Speaker 1: Morgan in Colorado, where Cargill has a large beef plant,
• 23:05
  Speaker 1: and that is an area where UM, there are a
• 23:07
  Speaker 1: lot of immigrants and a lot of UM refugees that
• 23:11
  Speaker 1: are working in that particular plant where there are these
• 23:14
  Speaker 1: people from. Just to give us as much detail as
• 23:16
  Speaker 1: you have, sir, so, Cargill actually told us that about
• 23:19
  Speaker 1: twelve percent of the employees at the Fort Morgan beef
• 23:22
  Speaker 1: plant come from East Africa. UM. And a lot of
• 23:26
  Speaker 1: these workers have come for a variety of different reasons,
• 23:29
  Speaker 1: but UM. You know, one of the ways that they
• 23:32
  Speaker 1: can find employment UM in the US through placement agencies,
• 23:36
  Speaker 1: has been at these plants. And over the last decade,
• 23:40
  Speaker 1: Cargill and other meat packers have relied on or had
• 23:44
  Speaker 1: turned to refugees as a source of UM a labor
• 23:48
  Speaker 1: pool basically, and UM. Even so, Cargill has told us
• 23:52
  Speaker 1: that it is still a challenge to be able to
• 23:56
  Speaker 1: fully staff those plants. And just to give you a
• 23:58
  Speaker 1: little bit of an idea, Cargil Fort Morgan plant in
• 24:01
  Speaker 1: Colorado UM starts workers at an hourly wage about fourteen
• 24:06
  Speaker 1: dollars and nineties cents, and that's about higher than Colorado's
• 24:10
  Speaker 1: minimum wage, and they offer health care and benefits. But UM,
• 24:14
  Speaker 1: it's still a challenge for Cargill to fully staff that plant.
• 24:17
  Speaker 1: So UM to play devil's advocate, somebody could say, well,
• 24:20
  Speaker 1: the reason why they can't find enough people to fill
• 24:23
  Speaker 1: those jobs is because it's a difficult job and it's
• 24:25
  Speaker 1: one that people aren't drawn to you unless they're paid
• 24:28
  Speaker 1: substantially more. And you know, there's a question of would
• 24:31
  Speaker 1: they be paying even higher wages and employing a sort
• 24:36
  Speaker 1: of broader range of people if they didn't have access
• 24:42
  Speaker 1: to people who were escaping war zones. I mean, I'm
• 24:45
  Speaker 1: just wondering, is that is that really what's going on here?
• 24:48
  Speaker 1: Because before two six, right, they there were a lot
• 24:50
  Speaker 1: of illegal immigrants UM that these plants employed, and after
• 24:54
  Speaker 1: a crackdown, they turned to refugees. So one person we
• 24:58
  Speaker 1: talked to who tracks refugew resettlement program really carefully, she
• 25:03
  Speaker 1: actually suggested that maybe the meat packers UM could draw
• 25:07
  Speaker 1: for Native born applicants for these particular jobs and these
• 25:11
  Speaker 1: meat packing plants if they raised their wages. And then
• 25:14
  Speaker 1: she even acknowledged that, you know, that could potentially lead
• 25:16
  Speaker 1: to higher prices for consumers, but she said, you know,
• 25:19
  Speaker 1: I'd be happy to eat less meat. Well, I want
• 25:22
  Speaker 1: to thank you very much for being with us A
• 25:24
  Speaker 1: Sharudi Sing is our Agriculture Companies reporter, joining us from Chicago.
• 25:34
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 25:37
  Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,
• 25:41
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 25:45
  Speaker 1: out there on Twitter at pim Fox. I'm out there
• 25:48
  Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
• 25:52
  Speaker 1: You can always catch us worldwide on Bloomberg Radio. M
• 26:03
  Speaker 1: P and L is brought to you by proper Cloth,
• 26:05
  Speaker 1: a leader in men's custom shirts with proprietary smart sized
• 26:08
  Speaker 1: technology and top rated customer service. Ordering a custom shirt
• 26:11
  Speaker 1: has never been easier. Visit proper cloth dot com to
• 26:14
  Speaker 1: order your first custom shirt today