Algebris' Gallo Sees Weak UK Recovery, Even If 'Remain'(Audio)

remain stay in the EU. Nevertheless, markets and central banks around the world remain on high alert. PIM and We're gonna go to look now not just at what the vote means on Friday, but but the longer term consequences will be Yes, We've got Alberto Galla, portfolio manager ahead of macro strategies at Algebra Investments. Right now, let's go to Charlie Pellet and the Bloomberg news room for a Bloomberg business flash. I thank you him, Thank you Kathleen.

Stocks fluctuating right now the now. The SMP nez dank all advancing. We do have the SMP five hundred Index up seven points to two thousand ninety, a gain of four tenths of one percent. Town Industrials up forty five, a gain of three tenths of one percent, as stack up three points to gain of point one percent. FED Chair Janet Yellen today signaling more caution on the economic outlook for comments coming in testimony that we carried live

right here on Bloomberg Radio. Equities of zig zagged as energy producers rose for a third session, the longest in two months, even as crude prices dropped. West Texas Intermediate Crew down now by fifty two cents and Barrel a drop there of one percent. Apple shares their climbing by one percent, leading tech shares higher. Now, what about the big picture in terms of the economy. Peter Orzag is managing director at Lazard and former direct sure of the

Office of Management and Budget. He's also a Bloomberg View columnist. Well, here's the thing. The economy is kind of math to use a technical term. It's not great, it's not terrible. And the problem is with growth rates that are you know, one and a half to two percent. Uh, you can have really bad offensibly really bad numbers that are close to zero, much more likely than if we were growing at three, when a bad number would then be, you know,

a one and a half percent rate. So one of the dimensions here is that we're kind of skirting effectively. The plane is just barely flying, and that's a dangerous situation. And to thirty two on Wall Street. Now, let's take a look at other news from around the world on Bloomberg Radio. Thank you Charlie from the Bloomberg News Room.

My Rami in a censio. This news update is brought to you by Willoughby Since New York City's boutique camera store for precision crafted, hustle, blood and like a cameras, plus a full selection of go pro action adventure cameras. Willoby's corner of Fifth Avenue and thirty first Street. Hillary Clinton's campaign is attacking Donald Trump's economic strategy. In a speech in Ohio today, Clinton said Trump's tax plan will

only put our country in more debt. According to the Independent Tax Policy Center, it would increase the national debt by more than thirty trillion dollars over twenty years. That's trillion. With a team, Donald Trump is making his first direct email pitch for campaign donations He's vowing to match up to two million dollars in contributions. Up until now, Trump has largely funded his Republican presidential primary campaign with his own money, spending about forty six million dollars over the

past year. The White House is slamming the Senate for rejecting a series of gun control measures in the wake over the Orlando mass shooting. Press Secretary Josh Ernest as lawmakers are all talk when it comes to keeping a

gun out of the hands of suspected terrorists. Continue to protect a loophole that allows individuals who are suspected of having ties with terrorism to be able to walk into a gun storm by gun and authorities, saying eviction warrant has led to the discovery of a massive counterfeit designer goods operation on Long Island. Newsday reports Nassau police found three thousand boxes stuffed with clothes and merchandise at a

five thousand square foot warehouse in Newcastle. Global News twenty four hours a day, powered by more than journalists and analysts in more than one hundred twenty countries. I'm Rami and Asensio. This is Bloomberg, Charlie and again recapping stocks higher smp ops seven now to two thousand ninety, a gain of four tenths of one percent. I'm Charlie Peloton. That's of Bloomberg Business Flash. This is Taking Stock with

Kathleen Hayes and Pim Fox on Bloomberg Radio. Two days to go until the United Kingdom votes on whether or not to stay or go, whether or not to leave the European Union. This is the famous Brexit vote. In fact, today the polls getting very close again between the remains and the Brexits. Those in the latest i G Servation poll in the UK put the remain vote at and leave with forty four percent. The last few days the

polls had swung more in the direction of Remain. We are now going to take an in depth look at where this vote is, where it's heading, and what it means for the UK, for the European Union and the markets with our Alberto Gallo, not only author of the Silver Bullet, a great read on the markets around the world, he is portfolio manager and head of macro Strategies at Algebra's Investments. Alberto, welcome and congratulations on your new role.

Thanks to me Hi so we're all watching the polls uh and you know, the base case we have is that there's gonna be a small victory for main but obviously the swings can be the last minute wings can be very large, as we have learned from past referendums here in the UK, So belt is there a macro credit trade to be put on in anticipation of what you describe. Look, the most people have gone on the sideline,

so there's a lot of cash and portfolios. So if there is a remain obviously you're going to have a rally in stocks, and you're probably gonna have a bit more rally and sterling towards one and a half one point five versus the dollar. But we also want to have some hedges because even though it's a low probability, you know, less than fifty percent, it's still very possible that you have a leave vote and that could unleash a series of political consequences. It would it would make

for periphery risks come back. So Greece Portugal, you know, look relatively weak fundamentally, and also especially in case of Brexit and and on, these government balls would would go up and yield by at least one percent. UH in case, but if not more so, we're you know, we're cautiously optimistic here, but we're still keeping some hedges, particularly Greece and Portual in particular, looks like the weak link in the thirty three. It's kept in the ECB Quantity Division

program only by one rating agency. Well, of course, I think that the broader fear for central banks, and of course the European Central Bank has made it clear that it's ready to take steps, and in fact there's the six currency swap arrangement is in play apparently, so there could be big steps to support the pound if the vote is to leave and the pound gets hammered. Uh, you call the relationship between you can eat you a troubled love story. You note that the UK has already

had but four opt outs if they go Alberto. This is not just they leave tomorrow. This takes a while. What does that mean for financial markets? If if Britain votes, if there's a two year period of complete uncertainty, during which there would be negotiations around the exit, which needs to be voted by EU member countries. During this period, Also, the UK will have to negotiate freight agreements with over

a hundred countries on its own. Uh and UM, you have really two scenarios here, a good friendly exit where the UK would be allowed and on some leeway by the EU, but also bad exit where Germany could and France could toughen the rules also withdraw some banks from London that d c B could not allow clearing of euro government bonds in London for example, in some other restrictions, and all of this could mean a big loss for

the UK economy. This is the most likely scenario if Leave gets voted, that you have a slow downing growth. I also have to say all these all this comes into a situation where the UK recovery is already is already slowing down. There's been a lot of spending in the first years of the of the Commeron Osborne government. But after election, Uh, there needs to be in after fifteen we're looking at austerity. We're looking at cuts and spending.

We're looking at higher taxes and slow down in housing prices. So the UK has a twin deficit, very high deficit. It relies on capital coming to the UK is a safe and the more entertainly you introduced, the more votes, the more uncertain situation is. The less capital is going to come here and and and this is going to really affect the UK economy negatively. So you know, a live vote is really bad. Even without a lead vote,

wild remain stilled, recovery is going to be weak. Albert Ill, just give you about thirty seconds here morning, if you could tell us sovereign credits, government bonds around the world that you favor for investors. Okay, I think that, um, we're gonna be in a in a que infinity low yield environment for a long time. You know, treasury is will go lower, inflation is nor where it should be.

I think Greece is on a past recovery. It's going to be volatile during the vote here in the UK as as a sort of proxy rich country, but I think Greece is recovering, and Spain as well. It has elections next weekend, but I think it's gonna be a better vote and they will be able to form a government.

Thank you very much for spending time with us. Alberto Gallop, his portfolio manager and head of a macro Strategies at Algebra's Investments, based in London, speaking about the Brexit vote, which takes place this Thursday, June the twenty three, we'll find out whether the United Kingdom will remain united with Europe or whether it will vote to leave. You're listening to Bloomberg Radio blueber Taking Stock is brought to you by Ticho Computing, a new kind of I TO solutions

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