Brexit, Trade, Consumer Tech

phone from Brussels. Maria, thank you so much for joining us. Give us your thoughts on what we heard from uh

speaker bark How this morning. That's right, So essentially there was a lot of hype build into this, but I think it's not been surprising that he's decided the vote cannot happen today, just purely on the basis that is so similar to what was presented and delayed on Saturday, and therefore there is no meaningful vote today, which, to kind of distripboy the jargon, it basically means the Brexit deal which was agreed between the UK and the EU

last week Thursday, after a very long, very difficult negotiation, cannot be voted today. And of course the tricky bit on this is that that deal between the EU and the UK is worth nothing unless it can clear the House of Commons. We've been here before many times, It's been rejected many times. And the issue here, of course is that we're running up against a very hard deadline, which is thirty one for the UK to crash out

without a deal. Indeed, this does seem like the expected outcome, as the pound is now basically unchanged from before the vote. So I guess that Maria, what will it take for markets to be surprised here? Because it seems to be baked in that Parliament will debate this, some people might raise a couple issues, it might get tweaked, and then people will vote and it will go through as planned exactly. And I think there's a number of things, um that

are being priced in and to sterling now. And based on the analysts that I've spoken to today, they point to two things. And want is the fact that it does seem that the Prime Minister UH may not have the votes he needs now, but they do feel he will get them at one point, So this is the

closest we've actually ever been to the deal passing. And then the other issue, which is also very apparent now is the fact that the threat of a no deal brexit also seems very unlikely because the Europeans could deny time, they could deny an extension, and principle they all have to agree to it, and if they didn't want to, they would say, well, I'm sorry, but you don't get

more time and you crash out. But the reality is, when you look at every single European summit that we've covered every time we've been here, the Europeans don't want to be blamed for a no deal breakfit. They don't want to push a prime minister who's close to perhaps getting this deal and force everyone into a chaotic exit from the EU. They Alvays said the best way to leave is with a deal. So the market is looking

at those two things. The prime minister that is edge and closer to winning the vote, even if it was delayed on Saturday, is then delayed again today, but also the fact that the EU will probably give more time and they don't want to go no deal either. So Marian, what we did not get a vote today, clearly, Um, what our next steps would you say over the next

several days. Well, there's a huge bill that the government needs to put forward, which is all the legislation going into Brexit, and then's also a possibility for other MPs to try to amend that deal, and that's perhaps when it gets difficult for the government because one of the things that the poor Johnson said is that he does not want to be put in a position where his deal gets amended so many times that it becomes meaningless.

So that is perhaps a source of tension there. And of course we also know that he's trying to push for a general election, and that is again another factor that the market has priced in and to stern, which is the fact that if we do go to a new election, although the situation is very volatile, the polls would suggest that he would increase his majority and that makes passing anything much more easy. So I want to talk about the theatrics of this, because John Burco is

a genius when it comes to the theatrics. His voice absolutely has the inflections. I loved how right before he made the decision, he paused, he castigated someone for for for for for delaying him, but he paused, and he you know, really laid it out. Uh and and you know with perfect timing. How how has this sort of event risen him in a way that he hadn't previously been I mean, who is John Burko? I mean he he has definitely become a star and and and everyone

knows who this man is. But also I think the fact that he has become so well known has also put him on the spot. And there is a lot of criticism in terms of what is driving his decisions and his motivations. And I'm sure you know just as well as I do that in many occasions he has been criticized for being seen as to remaining is allowing the remaining side of the parliament. You should, by the way,

you should trademark that remaining but go on. But um and and that has become an istion and and it's and it's obviously an obstacle today for the premise to put this vote um quickly to vote, which he wants to do. But it was also an issue for the reason may And you're right, there's a lot of optics.

There's a lot of theatrical moves that we see and we saw also a lot of UM optics on Saturday when the Prime Minister sent out three letters which essentially contradicted each other to the EU, one of which he asked for more time than another one which he said I actually don't want more time, and then a third one in which he said if I do get an extension,

it's going to be bad for us both. So I think we're used to this, and what it highlights is aid this is still a country is very divided, but to h there's many scenars that could still play out, and of course you have the the the general alection, which is still very much looming on everyone. So everyone wants to be seen as fighting for something and for the EU. I guess at this point, after three years of a lot of back and forth, they're just not

surprised by any of this anymore. They do think that this is almost a country that has become so difficult to read and there is no clarity coming out of UM the Parliament. Which is interesting for for the EU side, however, is that the perception around Brexit has really changed. At the start of the year, you could hear many voices is still felt Brexit could be undone who's still pushed

for a second referendum. But at this point you do get a sense that the Europeans just want to get it done with, especially because there is a new Commission, there is a different set of priorities and in a different agenda, and they feel like right now is probably the time to move on. All right, Finally, Maria, just quickly, is a couple thirty one a real date or do you think there will be an extension beyond that? Well, the truth is when you look at Brexit, all of

these UH deadlines have become completely meaningless. They every time we've been in a make or break moment, there's been more time. Granted, if you look at the legislation now and if you look at the UK law, well, the UK would crash out without a deal in a week's time if it doesn't get that extension. The question is, with that extension, which has now been asked, would it

would that be rejected by the Europeans. Well, you heard from Eminuel Macron and Jean Call do you occur the head of the European Commission last week that they do not see a need for more time because there is a new deal that We're for everyone, but the reality is if you don't give more time, the UK would crash out, and that's something that nobody wants. I guess

the debate is around the length of the extension. Do you just go for a short technical extension and the hope that that can focus everyone's minds and get the legislation you need in order to leave, or do you actually go, well, you know, we need more time, and then that opens many other scenarios, which, as you know, the vote, the people's vote, second referendum and so on. But it's tricker for the Europeans because they do not

want to be seen as interfering in the politics. Maria today, I thank you so much for joining us, and you're very busy in Brussels right now with all that's going on. Thank you so much. Maria covers the Europe for Bloomberg Television and Bloomberg News. She joins us on the phone from Brussels. Well, it looks like the US and miner are making some headway on what is being coined Phase

one type of trade deal. To get the latest we welcome Troy Gaski, Partner co Chief Investment Officer, Senior Portfolio manager at Skybridge. So Troy again, it looks like there is sub movement. We're having trade delegations go back and forth. What is your sense of how the US China trade negotiations are going right now? Well, the good news is it looks like there's at least a short term to

ton and that was really being priced into market. So a week ago, in terms of the left tail, the probability of escalation or a significantly negative outcome went down and that's why I saw markets rally because we think what's going on here is markets are trying to focus on the fact that both for the US and China UH clearly they're both interested in having some type of uh lack of deterioration and at least a face saving deal focused on agriculture and energy and then pushing back

the thornier issues of IP STAFT and s SO support into the post election and so we don't think the coast is necessarily clear, but the probability of dramatic escalation has gone down significantly, which we think has led to the rallying markets late last week. Are you buying or selling anything based on that development? Well, yeah, so from

our perspective on the margin. You know, a trade reconciliation or at least lack of escalation should lead to a steeper yel curve, which should lead to better NIM, which should lead to better bank credit quality. So we have

a significant exposure in regional community bank credit. And when we're looking into next year, a lot of the focus on the outcome will be do interest rates continue to drop or to at least stabilize here And so certainly a right tail outcome or at least less escalation will lead to better growth, better earnings, better NIM, which means will more than likely continue to run those exposures as

opposed to cutting them. So try from the perspective of China, what do you think the calculus is for China right now? That seems like, you know, we were close to a deal earlier in the year that might have had a little bit of meat on the bone, but now both sides seem to have pulled back. You think that they are let's do a deal now, even if it's a

light deal, or let's just push it. Well, look from there's two calculus, right, There's the Trump calculus and the China perspective, right, and you know, as time has gone on. We think it's become clear and clear to China that, you know, if Trump loses reelection, right then they're gonna have to deal with Warren, Pelosi and Schumer, who are

far more hawkish on China than even Trump. And to give Pelosi and Humor credit their entire political careers, they've been hawkish on China in terms of trade and the impact on the middle of the working class. And now you know, there's basically a non elite bipartisan consensus that China has to be addressed. It's one of the few areas of bipartisan consensus that we see, you know, whether you're in the Bay Area of California or in the Midwest,

um and that China has to be addressed. So as China's economy continues to deteriorate in the contract election, you know, start to come into sharp relief, it's become more apparent, we think, to China that's in their best interests to

de escalate the conflicts sooner rather than later. That doesn't mean we have a sweeping agreement on s o E support and I p SF, but it seemed like earlier in the year they were willing to roll the dice that if enough pain was inflicted on the U. S economy, particularly the farm belt and the rust belt, that would

cause Trump in the American political system to capitulate. But as time's gone on, they're realizing that what lurks around the corner maybe a more severe confrontation if the folks like Marco Rubio or Elizabeth Warren or Human Pelosi are driving the policy discussions. So one thing that you knowed is that just simply a Phase one kind of deal that de escalates isn't really enough at this point to undo some of the damage of the uncertainty that we've

seen around trade. What would it take to reverse some of the economic damage that you see being in lected by how long the trade scribblers has carried been carried out? Yeah, I think it's at this point it's going to be more comprehensive. So we need phase one right where at least you addressed the trade balance in ways that have teeth that markets can actually analyze. It's not some vague

promise coming out of a White House meeting. And then you need to see some contours of how whether it's reconciliation panels or some type of w T O in internal w t O mechanism, meaning it would be outside the w t O but just focused on the China and US administration to address ongoing trade conflict. UM. And then from there I think we would need some Brexit resolution and then also a better understanding of how the contours of the one policy coming out of DC will

look like. UM, So it's not just a trade reconciliation at this point. UM, it would also be Brexit plus some idea of policy coming from one. If we got all three of those, which again at this stage looks unlikely, and next month or so you could see CAPEX bounce back up to roughly five percent, maybe three to five, which is a healthy growth rate, certainly much better than

the contraction we're seeing today. But it's you're really hard pressed to see what would lead to the high single digit growth rates that we enjoyed very briefly in late seventeen early eighteen, given the dramatic slowing a global growth. So, you know, I think, for the time being is a market participant. The best you can hope for us the escalation, a gradual return of investor and CEO confidence, and then some chance to grow it close to two percent again

over the next six to nine months. More than likely that will be stuck in this one and a half to two percent range for the foreseeable future. Unfortunately, Troy, I ask you, thank you so much for being with us. Troy Gayski is a partner, co chief investment Officer and senior portfolio manager at Skybridge Capital. All Right, well, the costs for the drugmakers associated with the opioid crisis are really starting to add up. We had some more news today,

some more fines. Let's get the latest from Max Neeson, Max's biotech, farm and healthcare calumnist for Bloomberg Opinion. Joins us here in our Bloomberg Interactive Broker studio. So another set of fines coming down, some litigation still out there, Max, what's the latest year? Yeah? Absolutely, So. This was a settlement for the three largest distributor drug distributors in the country and have with two Ohio counties. This is the first federal trial of you know, trying to assigned blame

and extract damages over the opioid crisis. Basically, what this does is delay a trial that that was would have been potentially um troublesome or or led to a large verdict UM and and lets them work on a large your settlement works. That's still going on, I think for for other drug makers have already settled with these two counties. It just sort of kicks the can so they can try to come up with a broader resolution that you know, there's still thousands upon thousands of these suits out there

and they still need to work that out. It seemed like they were getting close to a deal that might have been valued at as much as fifty billion dollars, but UM that kind of fell apart due to apparently some objections from from local and county governments. Do we have a sense of how big the settlement has to be to sort of remove the uncertainty? I mean, what sort of the brank breakpoint of when the settlement doesn't necessarily get received as good news by simply taking away

the uncertainty of these opioid cases. You know, I think there's there's still a good amount of room before we get there, just because I think UM shareholders are just sort of so hungry for relief when it gets to the point for some of these drug makers that have heavy debtloads that you know, it starts to make solvency or our meeting credit evidence a little little risky, then

then you might see a break point. But but I think there's some wiggle room, especially when it comes to the distributors and and uh, a company like Johnson and Johnson, which can afford pretty much anything. I think you've got a way to go before it would be seen as anything but relief. So, Max, are we at this stage now where we want to get all these thousands of suits together, wrap them all up, and then get all the companies that are on the hook here and then

assigned blame and get one massive global settlement. Is that kind of the goal here? That's exactly the goal. And and that that was sort of one of the explicit goals of the judge that they've consolidated all of these suits under just because you know, then you actually get money into communities more rapidly. Um, you know, you resolve this uncertain instead of dragging it out over you know, years and years in many cases, which there's a lot of variation and um generally you know, not not all

that productive for anybody involved. So that that's the hope, and there still seems to be a chance of it happening. It just isn't gonna come this morning, is I think some investors were hoping, which is why you see shares of the distributors and Inteva down today. So far, Where is the money going? Is it going to people who had loved ones who died or who lost productivity as a result of addictions, or is it going to municipalities. It generally will be going to municipalities, although you know,

it depends on the structure of the settlement. Um, all of that still to be worked out. Well, we'll see that in the details. Um. You know. I think that's really the fascinating thing to think about, is what comes next? How do you actually direct that money in a productive way? Um? I I hope that that happens. But what what what?

What would be productive? I mean in my opinion, and I think it would have to be coupled with some some reforms as to how we actually spend money on opio treatment the first place, and and a dramatic increase in investment in making medication assisted treatment more more available.

There's sort of a stigma against it, um, you know, because we have the sort of twelves a a based model where it's abstinence or nothing, and there's been just resistance communities to having things like method o clinics or or making it really easy for doctors to to prescribe and administer that sort of medication. But it works. UM, that's the important thing. It's been shown over and over again to be one of the few things. You know,

opioddiction changes your brain chemistry. You have to account for that. UM, just going to a treatment center and and you know, just squaring off you need medication, you need to help in many cases and making that more available, making safe injection sites available, these things that that are are a little more controversial but more effective. UM. That needs to happen.

If the money goes there, then then great. But if it, UM, if it just sort of gets wrapped up, you know, goes to financing other things and municipalities, then it won't be quite as effective. So we'll see Max News and thank you so much for joining us. I'm sure we'll be talking about this repeatedly as these cases go on. If you've ever wanted to watch someone else watch a movie or a show to see their reaction, this next

guest has you covered. And we're so glad to bring in Derek Forbes chief executive officer of Stardust, which is a very cool name I have to say here in our interactive broker studios. Can you just start by saying what is Stardust? Hey, guys, thanks for having me on. Yes. So, startusts a social media app all about movies and TV shows where you can talk about the latest episodes you've been watching, find out what people had to say about movies and theaters, and figure out what you want to

watch next. So who is on it gives a sense of kind of who is on this app and who do you want to be on this app? Yeah, so, I guess there's a whole lot of entertainment fans on their passionate entertainment fans that love talking about shows they've been watching, obsessing about the latest episode. You know, think

Game of Thrones people got really into it. They like to talk about what happened on the episode, what was going to happen next week, predictions, theories, as well as just hearing analysis and figuring out what they might like to watch next. So how many people have actually downloaded the app? Yeah, so we're around about a hundred thousand

users at the moment. It's pretty new we're really just starting to get going with our marketing efforts now and hoping to get that in front of a much larger audience. And I guess that that there's sort of a flip side to this, which is the more information you get as to what people like, how they talk about films,

that it can be monetized, right, that data. Yeah, Well, the whole idea of this came from hearing from a lot of film and TV executives that every time they come out with a new title, it's a whole exercise to try and find an audience for that and then reach those people to get in front of them. What we can do with Stardust is is help connects new titles with audiences that are actually going to really like it.

And so, yes, it's using that data, but we see it as really benign way of using that data because we're helping people to find content that they're going to they like. Um. One of the new features we've just

released is really exciting. It's it uses machine learning and based on all of your ratings of movies and TV shows that you put in, it will give you a set of a few titles every week that you're going to really love watching UM and we we've found that people have been really stoked with some of the recommendations they've had. So how do you work with the content creators, the TV networks, the movie studios. What's your relationship with them, because I would think they would want to work with

you to again try to reach an audience. Absolutely. Yeah, we have great relationships with a number of the big studios and we're starting to work on some initiatives with them in terms of promoting their titles into users of the app, and then also helping to to use videos from our app of people talking about titles to to help promote their movies on other forms of social media

and platforms. How do you make money right now? We're pre revenue, so we don't right now, but we have a plan and it's going to be all about getting titles in front of audiences and and that's very valuable to studios to connect their UM their releases with an audience. So we've actually seen some pushback from investors with companies that have an idea but that don't make money yet.

How do investors handle what you're giving them? Yeah, it's a great question, and I think with a social media like this, it's all about the user numbers, and it's all about how engaged those users are and how strongly they're retained. If you have eyeballs that are regularly coming back to an app, then there is no question that there is value in that in terms of its ability to draw users attention to a product. H and UM.

And I think that you know, unlike some of these other horror stories that you've seen recently, there aren't all of the same costs associated where you're kind of like throwing money out the window wherever user you get, right, So this sounds like an advertising driven model at some point based upon audience. So that to me means you're competing against anybody else who's trying to get eyeballs and advertising and things like that. So you know, a Facebook

for example, or on Instagram. So how do you kind of position your app versus maybe some of the bigger ones. Yeah, great question. And so startus is specialized. So it's because it's all about movies and TV. UM. It's a place where you can go and get richer information about the titles that you're interested in UM and connect with people who are also interested in it and and I think that's that's at the heart of the draw. Also, we've done a really good job of making it anti troll.

And so if you want to go there and talk about The Mandalorian when that show comes out in a few weeks time, and follow it episode by episode, you can do so in a place where you're not going to get like attacked or have like random people posting hateful comments. We're going to keep the conversation about the show well. Thank you so much for being with us, Derek Forbes, I really appreciate it. Derek Forbes, chief executive officer of start US, twining us here in our interactive

broker Studios. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa Abram Woyds. I'm on Twitter at Lisa A. Bram Woods One. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio