Brought you by Bank of America, Mary Lynch. Investing in local communities, economies and a sustainable future. That's a power of global connections. Mary Lynch, Pierce Fenner, and Smith Incorporated Member s I p C. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with David Gura. Daily we bring you insight from the best of economics, finance, investment, and international relations.
Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, on the Bloomberg Born On a Monday, the eighth of May. This is Bloomberg Surveillance on Bloomberg Radio. David Gura in New York, Tom Keen in Paris, where plans are underway for the inauguration of a new president, Centrist Dimmanuel MCom on s percent of the votes yesterday. Far right candidate Marine Leapann had Th mccuonne will take
office on Sunday. In between now and then, we expect to get details on who will comprise his cabinet, and we'll be France's next Prime minister. On the show today, a host of great guests from France economists, political scientists and investors and Rocher Charma will join us here in New York, the chief global strategist at Morgan Stanley. I believe my co host Tom Keane has made his way from the TV studio to the radio. Sto, Tom, we
have Bravo yesterday. That was a marathon performance, but well done. You was wonderful to capture the moment. David Gura on the River Sin as all of our listeners know that had the privilege of coming U to France, to be on the sand by the Eiffel Tower. Uh, it was just absolutely fabulous. And then to walk over later that evening to the Chasa Lise and to see the celebration, the horns hawky and the flags waving was really something. And of course we all saw the drama the Louver
as well. David, what was the view from the U S What was your takeaway from the festivities in France? Yeah, I mean I think that we we were all looking to see obviously what this would mean domestically, what this is gonna mean for politics in France. But for those of us who watched what happened in the Netherlands unfold and wondered if we would see a similar move away
from from the populist currence in France. It was confirmation with the fact that maybe the strength of that populist movement wasn't what we thought it was just a few months ago. Let me bring in our steam Gas. I guess if you start strong, would you like to do
at Bloomberg Surveillance. You can do no better in France than Maurice Levy, his decades of experience at Publiss, his visibility within the world at Davos and other organizations, but of course, far more importantly his affection for his France more. Its wonderful to have you with us, with David Gura and in New York. You gave us a wonderful history lesson earlier of de gal through this fifth Republic, we
spoke of a sixth Republic and the generational change. How does Mr mccam bring the rest of France towards them? It is a fractuous nation, isn't it. First of all, thank you for having me. I'm very happy to share if you use and what happened. I think that imagine mccon, we disrupt everything, and they will try at least to disrupt everything. We never had a president so young in France since Napoleon, and we never had someone who has the will and the determination to change things and to
address the real issues. We are facing a lot of problems and issues, and if you look only at the internal situation of France, we need to fix an employment which is a very high, more than ten percent. We need to fix the depth which is more than one percent. We need to fix the taxes and all the social charges which are weighing too much in the growth of
our country, and we have to change liberal laws. When you look at everything that he has on his plate, you can see that it is a big, big undertaking that he has in front of him. So we all wish that it will be successful. We are all very supportive because it is hope that happened yesterday, more than
the election, more than any of the former election. Maybe the only one which is comparable and very different at the same time is when Mita has been elected in eighty one, as the Socialists have been out of government for more than twenty years, it was huge for a
lot of for half of France. Here it's something which is very different because it is first and foremost with the young generation, and you have seen that yesterday at the Louver with all these young black blob as we say, where you have the Black, the Arabs and the Caucasian the classication together and this has been the first since the World Cup of and we see that there is a momentum of hope which is quite uniquet. We're bringing David Curry in New York. David More, it's great to
speak with you once again. Of course we know of your your background in advertising. The message so important to you. What was it about this candidate's message that resonated so well and so widely in France. I think that the message was himself. I think that the message was not so much because when you go through the program, it has not been a program which came as one un solid program at the beginning of his journey. It was himself.
It was the rejuvenation and I think that the fact that it was rejuvenating and breaking down all the silos. And it was also this very important message which was negosh need what no left, not right and it didn't want to be portrayed as a representative of the right wing or the left wing. He didn't want to be seen as a socialist and no at a as only conservative, and I think that the Negosh need what is probably what has been the most important message which has been
well received by most of the young people. They didn't see with the old parties, a representation of the hopes and who they are. It was some sixty four some years ago that you came from Morocco explained to us where the ghosts of the Arab world will will go for France if we look at Algiers, the collapse of Algiers and all of the decolonization, what will happen now to that historic tension that we see in Paris and frankly polarizing around all of France. How will that change
under mcrow? When I arrived, there was a Chinda and that was the first born in Morocco because my family was a refugee because of the war. So it's I'm
not a fair representative. I understand that, but you've lived that, You've lived showing up yes, definitely, And I think that along the years we have created the situation where we opposed generation to generation, communities to other communities, and instead of trying to unite the people and to create one single country with one single community, everything that has been done, if you look at the last fifty years was to fragment the country not only between refugees and French roots people,
it is also between the people coming from the countryside and the people in the cities, the people of the universities and the people who have no education of very little education. All these has created the situation where we
have a highly fragmented country. And despite the will that a Lord of sar Cozy or even she had had to change the situation, no one has clearly a dry So I was talking to David Kerr about to see the other day David can jump in here very quickly because David, this is where Mr McCraw has to be different than these previous leaders. Yeah, you know you mentioned here more he's just a moment ago that he's going to try to disrupt everything. How difficult is it going
to be for him to do all of this. We can talk about the minutia of getting parliamentary votes and all that, but just to keep up this momentum, how hard is that everything? We start with the choice of the Prime minister, because mccon would not be able to run for election and he will not be able to do anything. Els that one or two speeches on TV to for the lationship. Would you serve as Prime Minister. I'm sure you're on the short list. I'm not because
what he needs to do first, I'm too old. And the second aspect is what he needs to do is to have somebody who is experienced with the political parties and who knows how to run elicious lative election, which is very different from a presidential and he has to have somebody who really very well versed. He has some options, and the probably that he's one of the options to leave, We've got to leave it there. Thank you so much,
Thank you generous, Thank you Bloomberg. Today, I'm Bloomberg Television, of Bloomberg Radio. He needs no introduction worldwide. Marias Lee, they of course of Boobliss, David Gurr and New York. I'm Tom Keene in Paris. Stay with us. This is Bloomberg. Continue to cover and analyze the results of the French election yesterday. Richard Datis joins us now formerly of the Booblist Group, now chairman of Richard Datius and Associates. Here in our Bloomberg eleven three oh studios in New York.
It's great to have you with us, and I wonder if we could start with just your sense of the lasting effects of this campaign For an outside observer here in New York, it lasted a long time. Just judging from that that last debate, it was at times acrimonious. Where do we go from here? How do how do
we move past the legacy of this campaign? We we definitely understood now that move than I would say to million people in France are ready to vote for an extreme And this is I think, unfoldedly the first lesson, populism is really next door. And despite the election of President mccron, we still be very cautious about what these people, these voters could represent and could also make as a constraint for the new elected president. Two, I would say,
implement what he has in mind. So this is I think. And for the first lesson, the second lesson is that France and this is the half full glass I say, which we have to think in mind. To keep in mind, is that a very young, talented man who came from the private sector, not at all from the political system, very audacious, was able to make it, which means that France is able or so to achieve great things and some people are still are now dreaming and hoping that.
I would say, in addition of the American dream, you can have the French dream. So everything is possible also in France, which I think it's very positive and and I think that the new elected president, thanks to his days, very audacious. Thanks to his I would say, he has nothing to lose at the end of that day. So I hope that he will be able to implement the reforms which are really absolutely needed in France for years
and years and years. Let's tackle those in kind. Listening to the speech by the president elect last night, he said he hoped that voters would never have to way voting for extremist candidates. Again, when you look at Marine Lapan and what happens next to her and to her party, what do you say She's she's positioning herself as the opposition figure here says that her party will be the opposition party. What what's your sense of the future of
the National Front in France. You know, she's a tough cookie, and she knew how to reinvent the party, and she knew how to attract more voters. And even yesterday she opened a window saying that maybe she will even rebrand the party. So she sees herself and she has a great window of opportunity because the Right Party is quite divided. The Socialist Party is also more than divided, so she has huge room to become, I would say, the first
party of opposition. And this is quite scary because, as you perfectly said, the presidential debate was really a demonstration that she doesn't care about even lying, even putting wrong facts on the table, just to destabilize everyone. Unfortunately, people, friends who are job less, hopeless. It's it's an easy, easy, easy, I would say, community to say, duced with his fake's arguments. Richard, good morning from your Paris. Wonderful to have your respective
uh today. This has been one of my themes here. Is there a tinge of Anglo American and Mr McCraw or is he going to be a uniquely French president? Oh no, I think he will be a global leader.
I think he is definitely and I hope that the very In two weeks, as you know, the G seven meetings happened in Sicilia, and this will be for him the best opportunity to show to his pairs from the US, including the U S President, including the Prime Minister of Canada and many others who sent him nice congratulations message yesterday that they have to count with him. And and he's a global citizen, so you know, during his campaign he did very well in the US, he did very
well in the UK with the French jas Bora. So I think he has a definitely a vision to be part of the globe. Richards will come back in just a moment, David Gura, it's a guess that we would always speak to in Paris. But you're joining his intendance in our studios in New York City's John Tucker. And I joined his company very much here in our Bloomberg eleventh three oh studis Richard Attius with us here chairman
of Richard Addis and Associates. And I was looking back reading rereading a profile by Alyssa Reubin of The New York Times of the now president elect, and she wrote, he's gambling that his postpartisan philosophy matches the national mood. What was it about politics in France at this point that encouraged voters to look outside the traditional party system? Where does the Republican Party, the Socialist Party go from here? In light of the fact that this upstart party has
seen its candidate become the next president. In fact, uh VCS was really predictable for more than one year. I would say all the French citizens were explaining that they were not anymore attracted by the traditional political parties. So definitely they have to reinvent themselves, no questions. And the reason why Emmanuel Macron was elected is that definitely he symbolized not just the fact that he's a young potential leader,
but he's really a centrist. So he's a guy who was able to be a catalyst between I would say, some leaders from the right party and some leaders from the left party. And this is happening so today, and you know, many people say it France is an unmanageable country for years, but why it was? It is an unmanageable country because the French people, frankly speaking, they want to do not to be seen as left or right. They are much more open and they want to be
seen more as a centrists. And this is what is happening. So if in six weeks from now, Emmanuel mccron is able to win the parliament elections, this will be a tremendous change in the whole political field in France because a party which was created just a year ago able
to get the majority. This will really show that the whole landscape, the political landscape, has changed, and I think this will happen, and this could happen because this is the only way to really fight and resist against the extremism, because the Front National is just not a populist party, is an extremist party, and this has to be understood.
You know, when when you watch the presidential debate a few days ago, you really realized that Marine le pen is not Maybe she customized herself with some cosmetic to be a little bit different from her the perception we had from her father, but in fact I think she's absolutely identical. She was a pathological liar during this election. I can't tell you really by saying some facts which
are absolutely wrong. It was not about fake news. It was about fake informations which were really really dangerous for people who are just watching. And you have no clue about what is really the reality of the economy, the reality of many other aspects of the French economy and the French I would say position in foreign policy, Richard, how how do you how do you keep political engagement high in France. In other words, you have enthusiasm for
a young candidate now president elect. You look though at a court of the French electric staining from voting in this election, pushing ahead of the parliamentary election. That Mr McConn is going to need people to stay engaged with what he's doing. It's it's a very important question, you know. He I think today Emmanuel mccon should do whatever is
possible to become a brand. When Prime Minister Trudeau Trudeau was elected in Canada, I remember that many people were asking is Canada could become again a brand thanks to Trudeau who would like to play a big role. Definitely. This is the same opportunity which is offered to Emmanuel mcron So he has to become a brand, and he
has to support and to make friends. Becoming back I would say on the on the global road Map, and this will I think encourage many people to come back in in supporting politics and be interested by politics because he will be a new voice, a new language, and I think he will not just reinvent the political field, but he has also to reinvent the dialogue between the society, the use and the political leaders. For me, he is
probably a potential public private partnership you know symbol. And because he knows very well the private sector, he is probably the first elected president and the first president who is really coming from a great experience in the private sector. So we need to reconsiderate the civil society and the political society, the prime minister position and friends, Richard explain to our global audience what the prime minister does in France and will it be someone like Mr McCraw or
do is he bringing someone from his diverse outside. This is, as you know, since you're in Paris, the most important question that everyone is asking today is who will be the next prime minister. Prime Minister in France is a very important job. He's a guy who is running the government. He's a guy who is implementing i would say, the strategy and the policies, and he has more less full power to run the country at the end of the day,
because he's not just a ghost of the president. And and this is why everyone is waiting to know who will be the next prime minister, which would be probably announced in one week from now, but also who will be the winning party in the parliament election in six weeks from now, because by definition the winner, the party who will win, will have to run the government. Having said that, and I would say that the French people
are expecting two things. Number one, to have the next prime minister to be someone with a solid experience, to bring a great expense on the table, next to a young leader who Emmanuel Marquin is not so experienced to be honest in politics because he started three years ago, which is yesterday. And too they need someone very solid who will be able to resist in these difficult times
of terrorism, of really dealing with Isis. And this is what people are expecting, I know, as the ugly American Richard, which you've called me three times before. In Paris, the world ends at the Arc de tree Off, I believe, to the south, there's a whole another France. How is Mr McCray to be taken in the cities like Leon
or Niece or too long? Tell me about Leon and what this election means for the second city of this nation, you know, I think when you look at different cities, Emmanuel mccron was elected with a very high ranking, except in the southeast of France, you know, and excepting Corsica, where even he was more less fifty two for for UM Marine Leepen. Why France is very divided, as you also saw during the first round, the north was really voting more for Marine Deepen, where the south and the
west was more voting for UM Emmanuel mccron. Why that, because it's depends on the demography of of the of the country. In the north you have many people who are very low income, many job less. They lost jobs because they were working in mining industries, in all these industries which are disappearing, and because they are hopeless, they think that voting for Marine Deepen they have nothing to lose. On ab she will be the one who would bring
a solution. So I have to say that in big cities like Lyon, like Bordeaux, like to lose, people will support Emanuel Macron. The problem is not about the big cities. The problem is about even some small cities where you have unemployment rate which is exceeding and this is where definitely you find a lot of silos of potential I would say populism and people ready to vote for extremism because they have nothing to do to do. And the
second point is about immigration. In France, you have a lot of immigration so it depends on where you will find this immigration. In the south east of France you find a lot of immigration issues and this is why people are voting for Mari Independent. Richard Greater speak with you. Thank you very much, Especiality Chairman of Virginalities and Associates, Joining me here in New York. Brought you by Bank
of America. Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce Feeder and Smith Incorporated Member s I p C. There's something
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of any story you may be reading. Again, Lens brings you the power of Bloomberg's news and data download or Io s app or urch for the Bloomberg extension at the Chrome Store to try lens out. Learn more at Bloomberg dot com slash lens. I am at Maison blanche, which is where executives come to die. And as they consider transactions and they consider the aesthetic of this nation.
No one at all has any perspective on this in the linkolage to government like Renault du Trey, his chairman lvmh and so much to do with design the aesthetic of this nation of course with his public service as well a member of parliament for a long time. I want to talk about your politics, uh sir, first, which is what do you imagine the parliament elections will be June eleven and j How fractious will that process be? I think the French people are going to be a recoient.
They're going to follow up, you know, yesterday's vote and gives a new president majority at you'll get a majority. That's what has been happening four years and years of the Fiefs Republic, and it totally makes sense. You don't want to have a new president if two weeks or
three weeks later you deprive him have any power. And that's exactly what would happen if the president was not in the capacity of forming a new cabinet within the technology of this nation, and by that I mean a broad sense of technology, including the world class French design technology which you've helped to invent so many of that included ERICTIONE was with us that it's simply about the labor relationship and the productivity and a better economic growth
will come from a better labor agreement. Are you optimistic that you can see a revolution and capitalism and labor relations in the nation. I think the next cabinet is going to be at war, war against terrorism, war against unemployment. Those are the two main issues. We have two copuies and of course if we want, you know, the companies to create more jobs, we have to add some flexibility
in our labor organization. That's not easy because a lot of employees consider that if the bus, you know, has more ability to get free of employees, it's bringing less security to them. But that's the way it works. You know. We have to introduce more flexibility and that's something that a lot of people are understanding. So we have to go fast to what is going to be an efficient labor system. If you're just joining us works from No Detroit with us of LVMH David please jump in from
New York City. Yeah, let me just get your perspective on why this candidate in particular was so attractive to people in the business community in France. He was young, he's untested. What what made him attractive to you and others? First, is a very pragmatic person. You know, it's not ideological, it's not sinking according to abstract patterns. He's just trying to make sure that what's going to be done is working. We need that. The two main parties of Socialist Party
and the Republican parties are dead. You know, they have not been able to fix the issues. They have been governing for years and years and people are really upset with what they've been doing. So people want something new and mc coin is embodying a fresh and innovative approach of politics, much more pragmatic, being able, you know, to gather all the people who are in favor of progress of modernisation, and that's the hope is raising today And
what what would you like him to do? There's the hope, there's the good will, there's the sense of change. But what concretely can he do for business in France. Um, First to love our taxes, you know, because we have a complex tax system. For instance, it's going to bring back the profit tax to which is much better than thirty three percent. He's going to suppress, um the main part of our I s F, which is the tax
our wealth, so that's also highly expected. He's going to introduce a flat tax for all the income coming from capital. He's going to simplify and he's going to lower the tax burden, and that's of course is highly expected from the corporations. Second, is going to find the right balance between social fairness and economic efficiency. So he wants to invest in technologies, he wants to invest in research and development. He doesn't think that the free market is able to
achieve everything. He believes in role for you know, the state and especially encouraging research. That's why he launched his call to American searcher you know, to come in France and and set it down here. So he's a very modern guy, upen to plobalization, but feeling that there are some losers in the glorization process and that something has
to be done for them. No discussion. Mr Detroit could be possible without talking to you about the French ascetic where it's whether it's Air France commercials or what you've done at LVMH explained to our world audience what it means to have the American icon. Five guys, Hamburgers on the chances are you? Are you still threatening? That's not true. It's France, it is true. Five guys on chancey, Liz, You've got I mean the Disney stores. They're fine, They've
got Disneyland here. Is there still a worry of American commerce and design invading your friends? We we I've been leaving a t in New York City and personal school, and you're just walking through Madison Avenue where you can see a lot of Italian and French brands, and all those shops are expressing our lifestyle and all the view. I'm not shocked by the fact that you can have an American brand in the chance it is. The question is is the food good? You know, that's a real question.
If people like the Hamburgers, they will buy American Hamburgers. If it's bullshit, they will get to another brand. So the question is to bring some quality food. What people are very reluctant about is to have this kind of industrial food, and sometimes it's assimilated, you know, to global companies which are not so careful about the provenance, you know, the origin of the vegetables, of the meat, of everything which makes a good French meal. And so I'm we
are in a global world. But in the same time, people in France they want to defend to protect they are the and they believe that this lifestyle and NDMH of course is a good example of that is able to be appealing to a large number of consumers all over the world. We see a transaction. I don't know if you're aware of this, but the transaction of Coach buying Kate Spain today within the United States give us
a sense of the spirit of luxury right now. I was in the Gucci store next to Mr Trump's aboat the other day and it was knee deep in people. It was the buzz they're going with this brand or the other brand. I know Selin doing well and Louis Vuton the same way with your retail. But this, but this is important, David, and that is the aspiration of Mr McCraw and the new capitalism that is out there, you know, the essence of lifestyle products. It's a mixed
between heritage and innovation, disception and heritage. When some companies are able to mix those two dimensions, which are appealing to two parts about our brain. We want to be comforted by what comes from the back us, but in the same time, we want to be excited by what is looking forward, which is presenting a new visage phase of the future. So that's exactly what those companies are able to do. Like you know, when Vito is asking to mark shack ups to come in and you know,
get the dusts maybe out. Yeah, So it's it's always a question of high quality products first and then a cultural content. What consumers too, they are looking for is mainly culture. It's functionality, price and the celebrity matter like used to sometimes it can help, but it's not the sense of those brands. The sense of those brands is his artisanal craftsmanship, know how, coming from you know, the ages which has been protected. It's part of our common
patrim one. You know, it's part of what mankind has been able to preserve over the last decades. And I think that a lot of consumers, whether it is in North American out in Asia are fond of this French and Italian lifestyle because it's it's meaning happiness, you know, a well balanced life, and I think that's the key of this success. Thank you so much. Tray with lvmh from Paris. This is Bloomberg. David Guray in New York. Tom Keene is in Paris. This is Bloomberg Surveillance on
Bloomberg Radio Pleasure. Now to be joined by Richier Sharma, author of the book The Rise and Fall of Nations, Forces of Change in a Post Crisis World, which will be available in paperback next month, I believe, contributor to the New York Times editorial page as well in chief Global strategist at Morgan Stanley. Great to have you with us in our Bloomberg eleven Trio studios. Let me start with a with a broad question here this was seen as a referendum on populism. Are our reports of its
death prematurity? You think that this was the death knell? Or you're still concerned about the degree to which it
is a current around the world. No, I think like I'm still concerned about that, but I feel that, you know, like it's very interesting, which is that of all places where populism seems to have sort of taken a break, it's in Europe, because there was so much pessimism about, um, what what happened in Europe regarding populism, and in fact, like I think it's quite remarkable that this sort of adds to the narrative that the European continent is not
a continent which is permanently doomed for crisis, but as a continent where, in fact a recovery is underway, and this political narrative is likely to change for the better. And this is something which is likely to keeping improving sentiment in Europe. I mean, for the first time, the European economy now since the crisis, is growing at a pace which is even faster than the United States. And I think that, like for me, that's the big story.
You have a person now who who has been imbuted with a lot of hope, a lot of people hope that he does change the way the economy works in France, changes the way that the tax system is structured, etcetera, etcetera. How much time do you think the people of France and investors are willing to give him to do that?
If anything, these last few months have been a cautionary tale here in the US investor enthusiasm and optimism matched by the realities of governance, the realities of Washington, you know, Like I was slightly sort of different take here, which is the fact that I think that there that expectations out of him are rather low, even though he's one
a very decisive victory in the second round. If you read much of the commentary, it is laid in with a lot of skepticism, a lot of people sort of saying that there's not much that he can do his uh, he has to now win the parliamentary elections, and so many sort of parallels being drawn with other leaders around the world, from Rerenzy in Italy to Sarkozy himself last decade, that so many leaders have come up, you know, with so much promise, and I've been able to deliver a little.
So the good news is that there's a lot of pessimism about what he can do, so the bar is quite low. And yet the mood in France seems to
be turning. As I've been saying that I think that the battle for Europe is over, but the battle for France has just begun, which is that in France there's a very strong constituency in support of a single currency of the Euro, and that's something which I think even Lepine realized and shifted her campaign in the last few weeks to being more sort of anti immigrant than anti Europe per se. But within France there's a deep divide about how much and what to do with the welfare state,
but at least that debate has begun. France has the largest welfare state of any country in the world, with the possible exception of North Korea. Right so, in terms of its government spending at the trade of GDP is a staggeringly high fifty seven percent, and on every metric, France has been losing out to the other countries, even within Europe in per capita income terms. That has trailed
the growth of other European countries. Its labor costs have gone up at a time in other countries from uh Spain to Portugal have been cutting back on their labor costs to get more competitiveness, and a lot of people are leaving France. I think that last year the largest number of millionaires that left any country in the world was France. UH some twelve th millionaires or something left France. So this is a country that is in deep need
for change. And the fact that you had Philan who managed to pull nearly twenty in the first round, and he's really a very sort of classic right winger in terms of a Thatcherite kind of person, and he would have possibly won this election had it not been for the scandal which derailed him um in the last couple of months, the personal scandal regarding his finances. So I think that this is a country which is moving in
the right direction. It remains divided, but the fact that so many French people are sort of now voting for agendas that are quite reformist is I think a major step forward for a deeply socialistic country. Tom, I want to bring you in in Paris. Yeah, we're in Paris. We think many of the uber drivers of Paris who have been shocked David Gura find us on the radio dial here in Paris. Jonas I know is listening from had he just sent me in a note as well?
For sure? Is France an emerging market? Is there just so much untapped technology and will that if they excuse me, if they do find the will are they the ultimate emerging market, But it depends how you define and like emerging market. I guess what you're trying to say is that there's a lot of growth potential for this country
if they managed to get things right. Yeah. Sure, I think that a couple of things which France has in its favor where it shares some characteristics you can argue with other emerging market says the fact that it's demographics some better than the rest of the continent. That at least that you see, it's demographics are far superior compared to Germany as far as uh birth rates are concerned.
Immigration is a is a much bigger issue because France has a pretty poor track record in terms of assimilating immigrants, let's say, compared to Anglo Saxon nations such as the United States or uh u K. But the other place I guess where you can say that France is a bit like emerging market is the fact that it's products of it is also quite high. Just the fact that people aren't allowed to work that much when you have sort of you know, like a work week which curbs
working as at thirty five hours a week. So I think that yeah, in terms of the potential for France to do better from here with superior demographics and the fact that productivity can is relatively high. Just that people don't work as much, I think, yeah, in the Africa, you can call it that. And Maurice Leevey of System was adamant about the thirty five hour work week in the need to make that a piece of history for sure.
Just because of the urgency of last week, I think we need to turn to your claim call on the commodity cycle. What did you make of the plummet in commodities iron ore and such, but particularly in hydrocarbons last week? What did it signal? Well? I think that you know, as far as oil is concerned, I've been saying that a lot of people suffer from what we call the anchoring bias, which that all because the price of oil went up two hundred and uh forty dollars a battle
last decade. We tend to often think of the fact that the price of oil today is very low compared to those highs. But as I've been pointing out that if you look at the long term price of oil in inflation adjusted terms, the price you get is around where you are today, around a battle. So from a long term historical perspective, the price of oil today is
not low. It is in line with its long term history, just that it's low compared to where we got to last decade at the fag end of a massive commodity supercycle. So in that regard, I think that oil is following the classic historical pattern, which that it had a massive boom and then a bust, and then if history is any guide, it will basically trade in a broad range for a long time to come around its historical means.
So I think the price of oil is set to trade within a thirty to sixty battle for a long time to come. And after having sort of gravitated towards the high end of the range, we are possibly now headed towards the lower end of the range. And the big surprise has been just how productive US shale is and the US oil industry is. So I think that's the one big sort of driver as far as oil is concerned, the larger commodity complex. On that, my concerns
still revolve around China. As I've said, is that China's grow trajectory has been on a downtrend since the start of a decade. The way I describe it it is that China's grow trajectory resembles a ping pong ball bouncing down the stairs, which is that the trend is down. But every time the trend tends to accelerate a bit, they inject more credit, more stimulus into the economy, so you get a bounce up and then the decline begins. I think that's exactly what's happened over the last year.
That in jan Fab of last year, UH fears that the China would have a massive hard landing were sort of uh really growing, so they injected massive amounts of credit and stimulus into the economy to rescue the economy. That led to UH some rebounded in industrial activity, and we've seen a bounce up in commodity prices on the back of that. But now as growth seems to have peaked in China, that downtrend in growth has resumed. So I think that that's really the path that commodities are
likely to follow. The broad UH point here being that after they have a big boom bus cycle, commodities tend to trade in a wide range for a long period of time and sort of don't go back to the old highs for a generation for sure. Sure. Sitting with David in New York and and share, I guess I want to talk about the correlations within the market, and not so much equities, bonds, currencies, commodities, but the correlations
of the actions of chair yelling with the market. Are we tantrum like or setting us are setting ourselves up for further tantrums? Well, it could be because I think that, you know, like the I think there are two sort of conflicting forces in the marketplace. One is the fact that now finally it seems that the US is at
full employment, and I find that fascinating. There's so much talk about robots displacing jobs and other things going on, but the fact of the matter is that the US today is uh at about full employment and that should finally lead to wages going higher. We've seen an uptick in wages, but so far wage growth has been quite disappointing compared to where it should have been at this
stage of the economic cycle. On the other hand, I think that the deflationy forces from China continue to blow, and I think that even though we have seen a secession in that in the last year, as we just discussed with commodity prices going up and Chinese sort of producer prices skyrocketing. But I think that we are seeing
a reversal of that. So I think that that play is going to continue that sort of uh conflict which on one and I see US wages going up on the other hand, because commodity prices are unlikely to do much in the foreseable future and if anything, they go to the bottom of the trading range. I think that that's what is what keeps sort of things interesting here where, you know, and that's why the tenure is barely moving
in the last few weeks. But the partition here, as you know from our reading Hans Rhetoric or your colleague at Morgan Stanley, is the dollar dynamics, which to be different between Europe and the dollar dynamics with Asia ex Japan. Is Asia ex Japan the ultimate alpha opportunity of the rest of this year. Yeah, I mean in terms of the fact that you know, like we don't like talking about regions and that way, because I think that you know,
there's we're among friends, we're among friends. But I think that But my concern is that I think emerging markets, including Asia X Japan have natural momentum going up because they're all reviving after you know, like a long sort of drought and time out in the wilderness. But the problem there, like I keep my one eye out on, is China. That's the one thing which could still derail the Asia x Japan story because China is still very
dominant in that region. And if Chinese growth so far as slowing down after sort of having peaked in the first quarter, but if that were to really slow down any further, that's the one thing which could sort of throw a monkey range into that trade. Let me bring in surveillance x Keen in New York. David, thank you. Let me ask you about the the U S relationship with China at this point. We watched the summit unfolded marl Laga more more than a month ago. Now, I
spoke with the Secretary of Commerce last week. Part David, Marlago is so April. It's so April now, I know as we push on, push on Bedminster, the new the new White House North Secretary Ross telling me last week that the strategic and economic dialogue is going to continue. What's your sense of the relationship here and as you look at the prospects for Chinese growth. How dependent are
they upon that relationship with the US. Well, I think that they are very dependent because you know, there's still very much in you know, like an export par house. They're the largest exporters in the world, and if they were ever to be any sort of trade skirmishes with the US or any sort of uh god forbid, trade war, that would have a major destabilizing effect on the global economy and particularly on China. So I think that everyone here needs to trade with care. I think that's what's
going on. I know this is like, this is the broader question, which is that in November, uh, the entire discussion was about what effect would Trump have on markets? And we think in the markets was all about the Trump administration. Here we are in me and it's amazing, you know, like how investors have moved on, which is that in the in the in the marketplace now there
is very little discussion about the Trump effect. It was all gone back to sort of assessing each asset class or each trend on its own, and very little discussion about Trump. So I find this amazing disconnect that that in the in the general political discourse, no conversation can begin or end without a discussion about what Trump is doing or what the Trump administration is doing in the marketplace.
You know, like we UH, we had a whole bunch of our team which attended the I m F World Bank Conferences in d C last months, and they came back with the impression that very few people there are now talking about Trump anymore or the effect that Trump
is having. So we've gone from this amazing sort of discussion in UH November where everything was about you know, what will happen, you know what effect will Trump have on every single relationship in the world, And now we have gone to that place where people are like, you know what, there's not that much he can make a difference to. So people have gone back to sort of looking at each trend UH individually and from a very economic standpoint. Now you're gonna watch that that menuet unfold
later this month at the G seven in Italy. You have President Trump traveling there to meet with his counterparts, his first trip trip overseas. I imagine we're going to see play out there. We've seen that play out before with his trips. The Treasury Secretary has taken trips the Secretary of State has taken there will be a lot of counterparts curious as to what this president thinks about the world order, what he's going to do, What are
you going to be watching for? Well, I think that in terms of you know, like, you know what the dynamics are, you know, how exactly like it plays itself out. But my feeling is that from a financial market standpoint, this is going to be a basic non event, which is the fact that you know, G seven meetings have long ceased to have any effect as far as investors
are concerned. And I think that I know that you will be intense focus in the in the political space and in the media about Trump and how he's interacting with other leaders and stuff at that. But from a financial market standpoint, I think that people are you know, like, uh, we've got to separate that discussion completely from the political theater. For sure. I gotta make money to get home, right now?
Do I need to go short oil? Nobody seems to be predicting forty two or even to preach forty thirty nine oil. What is that likelihood the probability of breaking out of the Mother of All ranges? Well, I think that the probability is high, which is the fact that the that the dynamic on the oil market still seems as if you know, prices want to get lower. And I think you rightly point out very few people are prepared for lower prices because everyone's been thinking that the
risk is to the upside. So yeah, I mean, if you want to buy downside sort of a breakout stuff, it's possibly better than buying an upside option. Here are you watching OPEC, what's the likelihood that production freezes continued? Well, I think that you know, I mean like they will likely continue, But I think the part of OPEC is greatly overstated. I think that you know, well that pick makes for great headlines and what happens there, but I
really feel the power is overstated. And in the end, it's back to the same discussion that uh, you know that do they want to lose more market share to US shale because it's come back in such a big way and seemed to be much more productive than people that expected. I'm not quite sure they want to do that. Your your classic reshers breakout nations in pursuit of the
next economic miracle? Where is the next economic miracle? Could it be the recovery of Venezuela, of the absolute heartbreaking bottom or is it some other story Now, I think that Latin America in general is doing much better. I think it's a continent which you know, we don't talk about that much, but it's the one continent still following the economic orthodox model. I was in Brazil last month. I was really impressed by the kind of reforms that Brazil is carrying out with it's back to the wall.
But that's the story that all countries which have their back to the wall are the countries which carry out economic reforms, because that's the only time that they seem to do, and that's what's going on. But I think the big trend in the world it is that the US market seems to be hitting a relative peak compared to the rest of the world, with the dollar also
showing signs of exhaustion. So I think the opportunities are international, whether it's Europe, it's Japan, it's parts of emerging markets. I'm finding much more opportunity international now than here in the United States. For sure. Thank you so much, as always for thank you from Paris. I'm sure David will greet us out here, but It's just wonderful, folks, to
have Mr Sherma with us of Morgan's Daddy. Global coverage continuing here on Bloomberg Surveilance for Shere Scharman, the Global head of Strategy at Morgan Stanley, the author of The Rise and Fall of Nations and Incredible Forces of Change in a post crisis world. As I said out in Hardback, now available in paperback next month. Look for his columns in The New York Times monthly as well. Thanks for
listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio, brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of
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