The Pound Could Drop 5 to 10 Percent If May Loses Vote (Podcast)

of the United Kingdom, against her plan for Brexit. Not surprising, however, it was surprising the magnitude of her loss. Today she faces a no confidence vote. The pound up against the euro and the dollar. Go figure on that one. Joining us now to explain what we should look for and whether we're going to soon come out of this Brexit malaise. Dr Sam nap President of em Are Global Ventures, joining us here in our BLOOMBERGNNA Active Brokers Studios. So, Dr

and natapoff, what do you think will happen today? Well, remember what happened yesterday, Prime Minister Theresa May suffered an historic political defeat. Today she in about four hours she's going to have a vote of no confidence and these don't happen very often. The last one happened twenty four years ago, and the last time someone lost one was forty years ago. If she loses the vote today, which is very unlikely, she'll probably win it by about ten votes.

If she loses it today, the pound could drop by between five and ten percent. This is a totally unpredictable, unpredicted event, and the capital and financial markets would go and say, so, let's say that she does win, as you say, by ten or twelve votes. Boy, where do we go next here? Well, now there are only three there's only three options for Britain right now. There's a

modified deal Brexit, a no deal Brexit, or no Brexit. Now, the problem is in Britain is that each one of these groups thinks that they have victory within their grasp. There reason may think that, you know, as we get closer to March twenty nine, the day that Britain actually formally leaves the EU, recalcitrant MPs will come back to her side and vote her deal through in some form.

The Brexiteers who want Britain to go back to their pre lapse arian form they are are desperate for this, you know, purifying no deal Brexit until they can go back and be Britain of the nineteenth century. And the remainders are desperate to redo the referendum, and they're thinking this is a huge step forward towards a second referendum.

Do you think that's going to happen. I actually think that Britain will stay in the European Union in some form, whether it's a Norway Plus which is a lesser version of membership, or there'll be a second referendum. But that brings us back to the vote of no confidence today again. The Labor Party in Jeremy Corbyn, it's leader, brought this brought this vote today, which is the first one in

twenty four years. It's very rare. His party said they're open to bringing more of them in the near future. What that means is that the Labor Party has committed more towards trying to get a new general election than pushing for a second referendum. For some reason, I've always felt a second referendum is kind of where the country should go, given the greater knowledge of what is really entails. But that doesn't that may may not happen what side

do you think of? This argument will move first towards accommodation. The problem with Brexit is that it has only two constants. It's totally irrational and totally unpredictable. Uh. A lot of the opponents of a second referendum UM have an argument that Trump supporters here would would would support, which is, we had to vote, the country spoke, we got an outcome, and now you want to revisit it. Donald Trump is president,

get used to it. Well, hold on, if you if they did hold another referendum, do you think that most people in the United Kingdom would vote against Brexit? Now there seems to be in in polling and people have pulled this extensively, about a fifty one percentage in favor of remain. Now now that the the the facts are coming out. The amazing thing about the Brexit referendum was that the Leave folks campaigned on things that weren't true and rubbish the things that were. Now we are in

exactly the reverse situation. So what is your sense of timing here? I see discussions about delays and delays? Is that the mode written now? Or do you expect something quickly to happen? One way or the other. Theresa May is required on Monday to provide her Plan B for

what comes next. Uh. In many ways, Theresa May is no longer in charge of this process because she's Prime Minister in name only, with enormously diminished powers of executive office, much the same way that Donald Trump is as president after the election. Now he's balanced by the House of Representatives led by nance Dallassandro Pelosi. So we're not going to explain all that right now, but there's a backstory.

But um on Monday, Theresa May will put out a new plan and it won't be terribly relevant because she's already so damaged and in a normal year she would have been she would have resigned yesterday. But we're not in a normal year. This isn't in a normal situation, and no one can predict what comes next. Here's my question, at what point will the European Unions say we want to be negotiating with Prime Minister May. She has shown her grit, she has shown stomach through all of the

jeers and the and the rowdy meetings in Parliament. We want to deal with them, so so let's throw her a bone. We don't want to be dealing with Corbin. Is that likely? No, it's not, You're like, no, that not because the European Union doesn't want to get involved in internal British politics, because not even Britain's understand internal

British politics. And I'll just remind you that back in when Margaret Thatcher went under a leadership challenge, she won the first vote, the first out, but not by that much and she said, I fight on, I fight to win. Twenty four hours she resigned. Theresa May's on very thin nice. Is there any scenario where the EU would accommodate anything at this point just to get a deal done? Are

they just gonna let the Britain's figure it out? They probably want this to fail, right as sort of an example to the rest of the Nation's Well, yeah, you have to remember what Britain brings to the table for the EU, which is considerable. One is Britain as a net contributor to the EU budget. They give more money to Brussels than they take and that's not true of

a lot of the members of the European Union. Secondly, Britain is the second largest economy and an important economic part and home to the europe to the European capital Um, the European financial capital. But also important, let's just say still is and is moving. But the final thing is there are social and legal issues within the European Union. Their Eastern European members are becoming a little bit more authoritarian.

And Britain has long been a pillar of the rule of law and and it's importance that EU wants to keep Britain in. If Britain wants to stay in. It's just Brussels has no idea what Britain wants right now. Wow, this is something. Uh, you know we're gonna be talking about this, We've been talking about for over two and a half years. It's just it's not gonna go away. And here we go. All I know is I think we're gonna be having Sam uh Not in our studios

more often going forward, just because it's never gonna end. Uh. Thanks Dr Sam not a president Empire Global Ventures. Uh here with us in the Bloomberg Interactive Broker studio. So let's talk a little Netflix. Netflix is reporting earnings tomorrow after the close. Stocks had a phenomenal run. What else is new? It's up? Uh, I guess you know, thirty percent year to date, up about six over the last

twelve months, so stock continues to perform extremely well. The company announced yesterday a significant price increase, the four one we've seen recently. Uh and stock traded up on that news. So let's get some more color on Netflix with Mark Douglas Marcus the CEO of Steelhouse. It's based in Los Angeles, California, but Marcus with us is here at the Bloomberg eleven three oh Studios. Mark, welcome. What do you make of the price increase? That was an aggressive price increase yesterday.

What does it tell you about the company and its future? Yeah, so, I think in the immediate literally tomorrow, I think it's an indicator, a pretty strong indicator that they're gonna report really good numbers. I don't think. I don't think most people would basically report something that could make people think that maybe they might the growth might slow, and then report slower numbers. So I'm betting that they report really

good earnings. I think. The other thing is is that I think there's no place else for you to go as a consumer. Netflix is the for everyone I know, Netflix and in their numbers, the first place to go. Second, I want to because I want to push back Disney coming out with their own streaming service, supposedly the Netflix killer right this year, and they're gonna take some of their movies off of Netflix rotation. Is that going to matter or you think no, it doesn't matter that Disney

is now irrelevant. I think that basically the consumers have a short list and starts with Netflix. That's where the money goes first. A monthly subscription is less than the cost of a single movie. It's increasingly all new, all original content. They crushed it with bird Box at the end of the year. Another reason why I think they're going to report really good numbers and then everything after that is where do I go next? Do I go to Hulu? Do I go to Disney? You don't have

kids to you? I actually do. But they're not Disney age, the Netflix age. So from the computer, from the competitive lent landscape perspective, You're right. Netflix has been it. They've been first to market. They've got the market share a hundred thirty seven million subscribers globally. Everybody else is playing catchup. But I'll come back to what I heard from some of the Redstone thirty years ago, where content is king

the big media companies are pulling their content off of Netflix. Uh, Disney doubles down the twenty one century Fox acquisition, so it loads up it's it's content. It does feel like the competitive landscape in ten is going to be materially more difficult for Netflix, and it's been in the past. Yeah, but I think they look, you know, Toyota and Ferrari don't compete right the the you can it's where money goes to a number of these companies. Where does it

go from consumers? Where does it go first? Where's it go second? Where does it go third? Until you see people saying I'm going to cancel my Netflix subscription to get a Disney subscription, then not really competing. So you think there's a the marketplace can support two or three or four. Yeah. I would be concerned about NBC Universal, like I wouldn't be concerned about Hulu. I wouldn't be concerned about Disney. I wouldn't be concerned about Netflix. So

let's talk about, um my fixed expenses. How much can Netflix raise prices before people push back? In other words, a year from now, could they say, you know what, you love our stuff so much? A month? I think that their next price increase is very quiet. There was a meme, so bird Box spawned all these memes on Instagram and other social media. One of the funniest ones was how those forty five million people watch bird Box with twelve Netflix accounts? Right, so everyone knows is sharing accounts.

I think Netflix's next price increases to start locking down the ability to share the accounts starting to drive consumers who are borrowing accounts to buy. How do they do that and why haven't they done it already? Well, because it's a form of free trial to to basically allow accounts to be as easily shared. There's a little bit of control on it, but for the most part, every you can easily get access to Netflix account without paying for it. The locking it down technically is is pretty easy.

Hulu does it. So I think their next price increases not announced. It's just it's harder to share, which creates more subscribers. I would I'm bullish on Netflix. I would be that that that's a whole another increase in revenue that's not accounted for. They still have so many levels to push. They're basically the biggest production company in the world. Let's go to that point. That you know, on the other side of the income statement, where it's not just

a revenue story, it's a call story. And they're spending like drunken sailors in Hollywood. The Ted Serrando's checkbook is open, nobody spends more money. Nobody's got a bigger check book is there, and they have no free cash flow. By the way, they can't pay for it, so they're going to the bond market. Is there a point where you get concerned that they're spending too much? Um, Well, they just generated another billion dollars in cash annually with the

price increase they announced yesterday. I mean, that's the that's the that is the long term concern they I think they have twelve billion dollars in debt um they're negative cash flow three billion dollars a year. But they're expanding their user bay rapidly. And you know that they added a billion dollars in cash all jess with Essay's announcement, assuming that there's no consumers don't leave, so you know they're managing it for now. Two or three years from now,

I might be a little more concerned. I think for the foreseeable future, they have a lot of levers to continue to generate subscriptions and generate cash in literally ten seconds. Who's their biggest competitor. I think Disney is the biggest competitors, so they're not they can't really compete, but they can compete. They can compete, but I don't think they take subscriptions away yet. But they are the number two. They become the number two choice. Mark Douglas, thank you so much

for being with us. Always a pleasure. Mark Douglas is chief executive of Steelhouse based in Los Angeles, but he joins us here in our Bloomberg Interactive Broker's studios. You know, one of the fastest growing segments of the consumer products business has been the cannabis sector. UH. We have thirty eight states approximately in the US right now that have legalized cannabis. There's companies coming public, much greater awareness and

acceptance of legal cannabis. UH. Joining us today is Kevin Hart, founder and CEO of green Check Verified out of New Haven, Connecticut. He joins us in the Bloomberg eleven three oh studios to talk to us a little bit about what how his company is playing in the food chain, if you will, of the legal cannabis business. So, Kevin, thanks for being here with us real quick, you give us our listeners kind of the thirty second elevator pitch for what your

company doesn't, how you fit into the ecosystem. Sure, we recognize three years ago that you know, the banking for the cannabis industry was believed to be illegal, and that's simply not true. It's it's legal within the states where those programs are compliant and they're recognized to the number that you said. The challenges, it's just very complex and very expensive for state charter banks and financial institutions, which means it's impossible for a cannabis business to actually be

able to do this. So you have these two independent, highly regulated industries that really don't know much about each other but would love to work together. That screams the opportunity for technology. So we developed the technology framework of platform and web AP that integrates all the rules and regulations at the local level that the cannabis business operates on.

We monitor their them for compliance. We monitor every individual transaction at the dollar level, and therefore that information has passed along to the financial institutions so they can review the money bring it into deposit accounts and financial institutions, state charter banks and credit unions are dying for new deposit dollars. It's a challenged industry because of the bigger banks.

They can bring that money in and they can pass their rules and their risk profile internally, and then they can pass that information back all the way through to the exam cycle on the back end. So it is a holistic, integrated, horizontal approach to attacking the banking challenge. And we work within the banking system, not around it. Okay, So rather than just saying we'll use bitcoin, right, you're saying, actually, here is an ecosystem that can that can perhaps be

sustainable within the existing financial world. What I'm trying to understand is first of all, how you make money, who pays you? And then second of all, is it just state and local UH financial firms that adhere to this sort of local guidance from the rules or can it be the JP Morgan to Bank America On the back end here, the larger financial institutions aren't going to get involved in this industry yet, it's not worth the reputational risk.

And you know candidly, they just don't have the monitoring ability of those individual transactions and the rules and regulations at that local level. Um. You know, at some point in time is laws change and regulations evolve. I think we'll see the bigger banks getting involved. You can't deny the size of the industry and the growth, but not today. And so this is a ripe opportunity for those state

charter banks, great unions that are looking for new deposit dollars. Um. You know there are the reason why Bitcoin and the others don't participate is, you know, it's it's complex enough. You take non regulated currencies and you add that to the mix, and that's just gonna push people farther and farther away. So you know, this is about monitoring cash. You know, it's eight plus percent of the transactions are still done in cash. This is an essentially cash intensive business.

Where do you get your cash? Our fee structure is based upon the dispensary. They pay a nominal fee structure. It's cheaper than the cost of a debit or credit card transaction fee. And we also have a tiered pricing structure with the financial institutions, so we do collective fee on both ends, but it's still cheaper than the cost of cash. So how are the local financial institutions viewing the cannabis business. Are they receptive to it? Are they

still resistant to it? Does your presence and your regulatory framework help ease that? Where are they in the general? Okay, I'll do business with the local cannabist company. It's a fascinating process that we've been involved with so far. We knew we had to not convince, but we knew we had to be able to position our value to the financial institution. And to date, the street will end. And you know, I'm a sports person. I believe in hot streaks.

The street will end. Every financial institution that we've had conversations with and demo this platform too, has asked us for an exclusive on the product and the geography there. And I've been selling enterprise software for forty years and been involved. Nobody's ever done that before. So this is compliance software, but it's compliance that comes with new business. It actually comes with the deposit dollars attached to it, and they see those opportunities, so they're very excited about it.

So what's the longer term plan for green check Verified. I'm just wondering, do you see this is eventually being acquired by a major bank when the reputational risk goes away, or will there be an I p o UM. We look at all those options. I'm a big believer to begin with the end of mind and you always have to keep your options open as to what you might do from a company perspective. But our goal right now is to continue our growth trajectory. We started our national

launch that's rolling out. We're in fifteen states right now, and for levels of conversation and implementation, we'll see where the market goes. There will be some changes as things involve in Washington, but legalization and State's Right Act actually are going to become an accelerant for us because the Treasury is never going to turn a green line onto banking and all the black market money that's out there.

And I wonder if actually federal law legalizing marijuana fight her no, and it will actually help Okay, it will actually help us. All right, Well, we'll have to continue exactly how that would help you at another time. Unfortunately out of time. But Kevin Hart, really interesting having you on. Thank you for being with us. It's important to kind

of look at the infrastructure of the cannabis industry. I speak to so many people on Wall Street who say, Gosh, I coul should have gotten into cannabis, not training play and consumer. Kevin Hart is a founder and chief executive officer of green Check Verified, which is based in New Haven, Connecticuty choices here in our New York City headquarters of Bloomberg LP. Lisa, I think we're on day if I'm not mistaken of this partial government shutdown. And obviously, in

addition to the question of how long will it last? Uh? And is there any end in sight? The question is can it get any worse than what we're seeing right now? It looks like President Trump has ordered thousands of federal employees back to work, most notably without pay. But let's bring in Chris Flavel, Bloomberg policy reporter for Bloomberg News. He's at studio in Washington, d C. And he's out with a story on this topic. So, Chris, thanks so

much for joining us. You know, where do you think, uh, this shutdown goes maybe over the near term, the next week or so. Yeah. So we've got a story where we put that to people who follow this stuff and to people inside and around government. And there's a list and I would, you know, I'd be folly to try and say here are the scariest things. But one that certainly is alarming is what happens to government workers who decide they just no longer want to be working for free.

You mentioned that the president has ordered more federal employees back to work, even though they're not paid. That's certainly one way of addressing this. But the problem that we're told is really concerning people at senior levels of government is what if people in vital functions like T s

A just stop showing up. They can call in sick, they can quit, they can do anything else, but if they're not they're doing their job, really vital functions start to stop, whether that is food inspection, whether it's people getting on planes, whether it's prison guards. And we've never been here before, so we're not really sure if it goes on weeks or even months, how they'll respond. Well, And Chris, I mean, we haven't we seen that to some accent already with the lines at uh it sort

of security checkouts at airports, T S agents showing up. Yeah, that's a great example. So the latest figures I heard yesterday where I think somewhere in the neighborhood of seven percent of workers calling in sick. That's almost three times the typical number. Look at the chaos we've seen with just seven percent of workers not showing up imagines ten fifty. Uh, it's really I don't want to suggest we're predicting it.

No one knows. I think the concern is there's nothing really stopping that from happening, and if it does, I don't know what, if anything, the government can do to deal with it. What are some of the areas and your reporting that you found that you know might be you know, the most problematic for Americans. Um, you know we mentioned T s A. What are some of the other parts of government that could be impacted? Certainly if you're looking at the sort of the wide spread impacts,

food stamps are a huge issue. The administration has found a way to keep on sending food stamps for now, it's made clear that that can't continue forever, perhaps through February. There's an enormous share of American families that rely on food stamps, thirty eight million people. They account for ten of all food people buy in stores and take them to eat. If those food stands stopped it would be

catastrophic for a significant share American families housing support. There's a huge number of housing families that need help getting housing. If that couldn't be processed anymore because HUD the anecy in charge could no longer work, that be very traumatic. And then company and batch. This is a big deal because we don't really know what happens when, for example,

I p O stop, when the patent office closes. These are things that we haven't really experienced, so we're, in a sense we're speculating, but based on pretty good information. The core of it is a lot of these agencies have sort of clever workarounds that will keep them performing vital functions for a certain amount of time, but not forever, and we're approaching that limit. So I should give you

a sense of some of the numbers behind this. Ian Bremer, who is the president of your Asia group, just tweeting out this data from the New York Times. The typical federal worker has five thousand dollars in pay since the shutdown began. That's a total of two hundred million dollars and unpaid wages each work day. I'm just wondering what President Trump's power actually is to order people to go to work even though they're not being paid. So this

is before the courts. Yesterday here in d see a federal judge dismissed for now a request by a union of federal employees to insist that they be paid. So that is still winding its way through the courts. But look at a legitimate question, right what is the limit of the government's legal ability to order people to work without pay and for how long? Even if that gets worked out, you still have the issue of funding right now. One thing that we looked at in our story is

the federal government is an enormous landlord. They pay out almost half a billion dollars in rent every month to landlords around the country. That could stop as the g s A either runs out of workers to process those checks or money to pay that rent. So again, sort of a cascading effect in ways that we can guess at but won't really know until it happens. So, Chris,

and you're reporting just real quickly. Did you get any sense anywhere that these mounting, exponentially mounting problems are weighing on Congress at all one one way or the other to get a deal done. You know. It's it's so it strikes me as a black box. It's hard to see a link between how bad things are in the real world and what's happening in Congress. Uh, And and it would seem just impossible to meaningfully predict what's going to happen. The one thing we can say from our

reporting is these effects are real. Uh, They're bigger than before, and they affect really almost every facet of the economy and the country. So certainly, Uh, they are painful for a lot of people and extremely so for many and they will again just get worse. Chris, I'm shocked that you didn't want to go out there and speculate what Congress is going to do. Next time you come on, we expect you to have a full eight ball prediction of what's going to happen in Washington. Thank you. I

appreciate that. Chris Flavell is policy reporter for Bloomberg News down in the nation's capital, Washington, d C. Where at One Studios are Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio