Surveillance: Optimistic On China's Eco Growth, Fisher Says

So let's make the most of it. Cathy, great to have you with us. Things aren't as bad as they seem, at least certainly not so compared to three weeks ago. That's right, um, Although I don't want to read too much into the back and forth on things like interim trade deals. Yes, it's good news, but we all know it can change tomorrow. Right. I think that's what the

market has recognized. We're going to have ups and downs the trade talks, and as I was saying before, I think a much more realistic recognition that lower interest rates

are not a panacea. We are trying to figure out how to deal in a world where global trade has been unmoored by these tariff issues, and countries are doing what they can to offset it, but interest rates alone cannot do it, which is why the topic of fiscal stimulus is back on the table, because countries are going to try to do what they can at their own levels to adjust to a very different environment than we've seen.

Many people have come on this program and said, these tariffs aren't going anywhere regardless of who is in the White House, and I think we've got a real flavor of that last night yesterday evening. It was about one hour and about thirty minutes into the debates with the Democratic presidential candidates, the moderator asked the candidates essentially one simple question, and your first day in office, would you unwind remove the tariffs. I didn't hear a single candidate

come out firmly and say they would do that. Caine. Remember, the Democrats have always been the party that was anti global trade, so of course the Democrats cannot protest what's going on with tariffs. Absolutely, so we do have to expect that this is a new reality that's going with us for quite some time, and the rishes between the US and and China are quite existential very much how you operate your economy. They're not just buying soybeans. So these things are going to be with us for a

long time. When you work every day in wealth management, what do you rationalize as economic growth? I mean, if it's tariff induced, and by definition tariffs will reduce economic growth. Let's go with that core idea. What is the Canthy Fisher run rate of the American economy for investment? Is it sub three percent? Is its subs It's a very good question. It is certainly closer to two than three.

And we we cannot ignore the bigger trends, which are demographics, which our technology, these are These are positives and negatives. But we are clearly in a slower growth environment and the deterioration and growth because of ter in recent quarters has been quite Let me dovetail the four percent. Now we're Joyce Chanin of JP Morgan with a four and

a half percent out there for Chinese economic growth. And the other four percent was the bombshell in the cover of the Times yesterday or the day before the Times of London of an actual annuity of four point one percent on a life annuity that's in your Wheelhouse. I mean, these are all lower numbers than any of our listeners comprehend what I mean. It's back up saying we're a little more optimistic on China. We think so something in the closest six is still possible in China that still

matters a great deal. But um Japan, Germany, these numbers are are notably weak, and we have to accept that this is that we will have lower growth going forward for quite some time. Populism is part of it. There's a lot of big trends that are going to change the dynamics we've been accustomed to. But remember, companies adjust, and that's what I say all the time. Companies figure out how to deal in a different environment, whether it's tariffs,

whether it's technology, whether it's changing changing consumer behaviors. And that's what we're trying to decipher. Final question on policy, and we're going to get a fiscal response in Europe. You know, the tolerance for deficit spending is much greater than it's been ever And while Germany in particular will be the last one to want to do that, I think there's more tolerance now than we've seen before for any kind of fiscal stimulus that could indeed cause greater deficits.

It's it's a very broad based trend in every part of the globe. Cathy, thank you so much. With a lot of break thanks helping on today. We've had a lot of news flow, and particularly on Europe. So we are advantaged with Meredith Sumter of e Ray your group to go right to China, right to trade, and we can do this with their definitive knowledge of domestic China and particularly how language is perceived. What will be the domestic language Bear Sumter of the idea they're gonna let

soybeans and much needed pork into China. How does that play in the Chinese press? Great question, Tom, Well, certainly Si Jumping will position this as providing relief to China's domestic market more so than any sort of concession that he's looking to to provide to President Trump. He's got, as you know, you know, he's got a very important political anniversary coming up on October one. This is a sevenoth anniversary of the founding the People's Republic of China.

So everything is gonna be very carefully stage managed. Uh And for that reason, actually more so than it was strategically a move to to get back to talks Beijing. Let to know that moving forth with a hike in in tariff rates on October one would be politically unpalatable

to present She on such an anniversary. And that provided that first opening, that uh, that got us to where we are now, with Chinese negotiators working on the negotiators coming over mid this month, followed by cabinet level negotiators meeting in October. Meredith to understand whether the softening of

stances is sustainable. We need a better understanding of what underpins it and if it all comes down to October first in a national celebration, I don't see that it's sounding too sustainable, because once you get beyond that, we back to square one. What are your thoughts about what underpends it beyond on October first celebration. Certainly we're moving towards a mini deal. This is not going to be a structural improvement to the ballad of relationship. More so,

it's going to be both sides. Trump and She both have in sentenced to avoid an escalation and to seek economic relief when it's politically feasible to do so, but neither side is desperate enough to make the political concessions

necessary to reach a comprehensive agreement. And I think despite the slight lift that we've seen this morning in markets, slight optimism, you know, I think underlying this there is a broader realization among investors that even if you do get some kind of deal or many deals what we're calling it, UH this autumn, this is not going to result in a structural realignment of the of the two largest economies. The President went on the record yesterday evening

gets said that he would be open to an interim deal. Meredith, What would that include and what would it exclude? This is a great question because what you hear from the Chinese side and versus what you hear from the Washington side, there's some slight, slight differences there, UH, In that President Trump yesterday had mentioned i P as possibly being part

of a mini deal. In order for Beijing to agree to any kind of significant P concessions, they would expect that President Trump would not just delay onward tariff escalation, but actually roll back some existing tariffs, which is something that we judge at this stage President Trump is not interested in moving forth with But you know, again, the the uptick and agg purchases in exchange for a delay of on word teriff escalation and maybe some a few

licenses given to Huawei. UH. That's pretty much what we expect, Meredith. We learned last night that the Democrats and Republicans, or at least the Democrats and President Trump, I should say, are on the same page against China, doubtful of any trade fairness and reciprocity UH. As well for the Communist Party in China that Mr G has to attend to for the seventieth anniversary. Is the Communist Party all on the same page? I mean, does he have sort of

a national uniform mistrust as does the president? Well, there

are she domestically has his detractors. There are many within policy circles in China that that believe that she has made some very big mistakes, such as being too assertive, being too confident coming out, and being too aggressive UH in it's it's it's aims for global leadership, but also its plans for for made in China UH and moving aggressively in ways that not just put the US gave the US pause, but also other major trading UH partners pause.

So there's some criticism there. But this is what Trump's that criticism is that when you have an outside power that is looking to, in Beijing's views, gang up on China and forced China to to make moves that she, jumping is saying, is going to undermine that country's ability to transform its economy in a way that is suitable only to China being ganged up on by an outside imperial power. You can see where this is going. Um

so he is. We do see that she is using that nationalist card, that nationalist sentiment in a way to shore up more domestic support for his pathway moving forward. Let's talk about what may or may not happen at the back end of next year in the White House. It was really interesting watching the Democratic presidential debates last night, and the views of the Democrats, I have to say, didn't seem too different from the view of the President when it comes to China and the objective of leveling

the playing field. There was a great Washington Post piece recently, a great article in public opinion towards trade, and Democratic voters are moving towards increasingly a favorable view of trade. Now, some people might just say that the partisan shift. The article admits to that might be just a shallow view. Yet not a single candidate is willing to weaponize it.

Why not? This is something also that we need to watch us more closely, because if you look at the Democratic Party and what the Canada's all said last night, not a single one of them came out and said that they would roll back the protectionist measures that President Trump has put in place. They all agreed we need to do more to negotiate with China and more to

realign the two economies. I think it's still too early to say that the Democrats or Democratic voters are moving toward free trade, but rather what they're saying is they're recognizing that President Trump's trade agenda has really not come up with any concrete winds that is impacting them positively, and patience is beginning to run out. One European question, Uh, Meredith, and then we'll let you go, Midge Raman, on all

we've observed in the last twenty four hours. You're you're great, midman. What do you think? What do you think on on

Brexit Europe? You know, the fiscal fiscal policy to the rescue. Yeah, so you know, really that the relevant upshot from a politics perspective with the ECB easing is that the environment caused by such easy money means that markets are going to be in a more forgiving mood for political risk and you know, talking to Midge, when it comes down to is that investors need to remain focused on the stability or fragility of individual countries in case that risk

appetite reverses quickly. Okay, mere something, thank you so much. Thank you, just hugely valuable there and China. Do you want to bring in Simon? I would love to love to get his reaction quite clearly, not his name, Simon friendship chan Will Gordon, the chief of karmis over there joining the sound of London. Sim In your view on the data that just dropped a minute or so ago, I think you're right to focus on the inflationary aspect

of that. It's um I think markets had a bit of a shocked and they stay with the core CPI print and the at least on the three months annualized breaking north of three percent, so that caused some anxiety. I think this would reassure people that at least in the net that feels like a healthcare related blip per seasonal blip rather than a significant push forward on on import cost inflation. But it's look at all is playing into the fact that J. Powell has and the rest

of them have plenty to absorb. Next week in terms of trying to tack a path between quite conflicting inflationary data, we can it's in manufacturing, but ongoing resilience as we see in the headline retail sales in the US consumption, and just keep adjusting the federal funds right low assignment. They call it a mid cycle adjustment. Typically what we've seen at recent history at least, does that suggest over the last couple of decades that's about seventy five basis

points of cuts from the federal reserve? Something is that how you characterize frame things for clients right now, that that's what we're going to get. That is a mid cycle adjustment, just three cuts. What I'm saying to clients is that this is not a FED whether it likes it or not, that is entirely data dependent. They may

like to continue to use that terminology. It's beloved of many central bankers, but it's it's politically influenced, whether it's politically compromised as a separate point, but it's certainly politically influenced, and I think at the moment there is there is more inflation in the US economy than the President likes

to believe. And therefore the delicate path I need to be set out is it will just be a mixed cycle adjustment of the type we saw perhaps last in where you try and provide some support to underlying demand given some sectoral weakness, or will it be something more perverse and ulter the answer that lies in the White

House rather than the Federal Reserve. John I want to point out in the tenure, because we're so used to quoting yielded on a price basis, the tenure US is now down three point that's not quite two years of Cooper and forty basis points on a ten year. In ten days, we've had a big move. It's a huge move.

It's a huge move in the context of positioning, and I think that's key here, is that what you're seeing in terms of the kind of our performance of value versus momentum or inequities, which has been triggered by a re assessment on the bond market, means that positioning was very much skewed towards I mean I lost count the number of analyst notes that came out of talking about potential zero percent tenure treasury. They they came out in

a flurry, didn't they. Your positioning set up for that, and then you recognize that it is not that simple. Then you have to do somewhat of a handbrake turn, and I think that is what we're now seeing in terms of the price action on the ten year rather than just looking at the yields. Simons very quickly here, I've got one European question. How did madamal guards Jab change yesterday? I mean, what does she do November one, in November two, in November three of what we observed yesterday?

I mean, great question. I think the regional banker, the governor's national banks have have alluded to this point during the last twenty for hours. Madame Legarde has been given a state dependent set of policies from Mario Jargy, that is his legacy, and it moved away from time dependent

forward guidance. Will she try and pull back from that and say that things will change or will she hold that that is the key element that she has to get across in the first couple of weeks well said in John I literally wrote down in the heat of the press conference when he said time dependent has done. I can't remember the exact language, but really important concept there same in French or Gordon the American economy, John,

what do you think of the data? I mean yells higher and look put it together with the data this week inflation came in a little bit hotter as well. It looks like the tone is improved around the trade story. I'm not sure how the mood music will adapting. Giles turn joins us to talk a little. We works, Giles covers a technology in Europe. Joins us on the phone from London. Giles, thanks so much for being with us.

You know again, as Tom was suggesting, a lot of these high profile I p O s this year have really underperformed and underwhelmed. What is the thinking going here for WE Works? This is this is not without a lot of hair on it. Just to start with, now, we work thinking a lot different from any other I PO. Just that this company seems to be a lot of different from any other company. And you've got to remember that we work has to IPO. That's the feeling from

inside the company. It needs cash when the IPOs, it needs to raise about three billions, and if it does that then it gets the further six billion from credit lines from the bank and needs all this stuff to keep growing at the pace is going. If it doesn't IPO, then it needs to find capital from the big dove dove chill. What you just said with fifteen dollars a share are chief financial course, Aponent Bass says, that's the chip chat right now, what you just said about three

billion in cash. Does that equate to anything in the vicinity of fifteen dollars this year plus or minus seven cents. Well, I've done, I'm done the math. It needs to be honest, but it looks it needs to It needs to get evaluation of above about really like that's kind of the cap. Fifteen billion is two low basin investor in all types of the bankers trying to push this IPA want to

invest it. Paul Sweeney thirty Churchill Place, five Merchants Square to Minster Court, the Monument, n Hackney Road, twelve Bore Gate, seventy seven Levenhall Street, Short Ditch near some Tide Place, thirteen Mirrored Street, the Stage fifty two Bedford Row one, twenty more Gate, forty one, Black Friars ten fen Church one. I can't even get there. They gotta we work at

Buckingham Palace. They're everywhere in the big market. So, Charles, you know, one of the what has been some of the pushback that you've heard in the marketplace as related to we work and kind of walking down the valuation and what have you been hearing. Well, there's two kind of two threats to this. The first obviously evaluation. I mean, you can forgive a lot of government problems with tech companies. It seems you've certainly seen it in the past. A

lot of people are making money. The problem is that evaluation is too low. People are losing money. But no one really everyone will talk to talk about governance. We've seen today there's plenty of change in the government structure, and investors obviously will make a big deal about this. But when it really comes down to if it was going to list the forty seven billion evaluation, no one's

going to be talking about governance issues. The fact is it's still hovering around fifteen and will wait and see what happens today if it gets up to twenty full disclosure number one poultry right next to where Gail Turners coming from Queen Victoria's Street as well, Giles, do the commercial landlords of London, in New York and the other cities, is we worked their friend? Well, I don't know. It's

hard to say at the moment. It's certainly their friend at the beginning because it's taken up a lot of demand for for rental based The problem is we workers managed to sign very long leases, which obviously looks good in the short term, but obviously is trying to um not pay much rent to begin with and signing very profitable deal for we work for her three years or it doesn't have to pay much that's rent. There's this

huge rent cliff coming. You know when that comes, if we work can't pay his bills, then it's gonna be no one's trends. I just noticed in New York is that we work in my living room exactly running out the space. So, Giles, you kind of bring up a big fundamental issue for the real estate folks, which is you know, going out and leasing long as we worked as long term and then you know leasing out the space to its tennis on a short term basis. That's not the way good real estate works, is it. No,

But that's the argument that we were making. Is not going to be like every other company. The idea is that the attitude of people's work environment is changing. People don't want to do job, you know, jobs to life anymore. People are happy to work. The startups have to have high turnover. That the argument is pushing very quickly. Gil. What happens Monday? I mean they get to the weekend, everybody regroups. Are you waiting to hear in London or

New York from soft Bank or what's the next next? Yeah? I mean if that'd be the key thing. I mean what soft Bank thinks about this being one with may Shihold is just going to be key. Um. Well, if it's happy with this, then fine, I can spect to my get away twenty. But if it's not, then they'll be more arguments to come over the weekend. I bet Gail's turner brilliant update, thank you, thank you out of London as well, and we forget that the wee company

is uh truly international. This is a good Friday conversation, which is after we saw yesterday Qui infinity, Paul. It's open to debate how far out that goes. Let's talk about financial repression Infinity Brain Railings with Wells Fargo, Institute of St. Louis and Brian thrilled to have you with us here in the New York studios. And I want to go back to a Bill Gross phrase, which is financial repression, which can be either the negative real rates we have are the very low nominal real rates that

investors face in the United States? Does it go on forever? Do we do we have to invest assuming forever this low rate environment? Well, for the time being, it certainly appears that way. I think what you saw out of the e c B and you're seeing from the other central banks is this strong desire to see fiscal policy try to pull us out of UH. But who's gonna help the savor? I mean it, Wells Fargo, with all of your sprawl, the saver is flat under back, not

like in Europe. I get that. That's terrible. What does a savor do on a September weekend when they have to find a real yield? Well, I think, and this has been my thought for a while here. I think what we're going to see, and we have been seeing, is this demand for yields. So the savers are going to start taking a little bit more risk because they

have to find yields. So you're gonna have UM securities like preferred securities that one of the best performing fixed income sectors this year, UH dividends stocks, MLPs, reats UM. I mean, those are the type of securities I think these savers are going to gravitate to UM. You're causing savers to take more risk than they should otherwise probably be taking, but they really don't have any other choice if they want some income here. So, Brian, I mean

Wells Fargo fifteen thousand brokers all over the country. I know you probably spend a lot of your time on the road visiting with those financial advisors and their clients. Are they when you go to those offices across the country, are they willing to take that risk or do you think they maybe taking too much risk here as they search for yield And we could be getting in a little bit the specuative situation. I mean, it all depends on the client's situation, and I think this is what

you're seeing in the broader market to right. So for those clients that have accumulated enough wealth, right they're not going to take the risk. You know, they're gonna hang out in short term securities, safe securities For clients that are maybe inner approaching retirement, that maybe having saved uh the amount they need to save and they need that income,

they're gonna be forced to take the risk. And so we're trying to find ways for those types of clients, uh to take a little bit more calculated risk, but it's still risk, don't get me wrong. So what are some of the areas that you're finding or you're suggesting that your private wealth clients look for enhanced yield? Well, I mean I kind of go back to prefers again. This is an area we've been pretty favorable on. They're getting more expensive, Um, no doubt. I think they're up

over fourteen percent this year. And uh, really these securities bought for the income, not for the totally return right. Um, but I mean still five to five and a half percent, where the underlying credit is a quality credit and you're getting the dividends treated dividend treatment, right. Major shoutout in New York to Chris Whalen has been way out front as you have in the preferred story as well. I mean I don't think well as far Ago is gonna advocate for a hundred year bond, and we know what

the Austrian pieces done in the yield back up. But I got a forty seven year French piece with a one in three quarters percent coupon. They're giving it away today, Paul, with a hundred and thirty two price that's enough to make El Goldman choke. Uh. And and the yield is point eight eight point eight nine percent And Brian, I have enjoyed an eleven percent decline in this puppy over the last three or four weeks as well. Are we set in retail up to get killed with this bond

extension of a US fifty year piece. At some point they're all gonna roll over and take an eleven percent hitting a cup of coffee. I don't think a retail is buying these types of who's buying cur who's buying them uh, ascid liability matchers, right, pension funds, UM institutions UH and UH clients or institutions that need to have

index exposure where these are there? So, but retails not buying government elongated big story in your life, in my life, in Paul's life, is in the Times of London this week. The life annuity yield in the United Kingdom is in the vicinity of four point one percent. I got a forty seven year French coupon trading under one percent. We're given out four point one percent. What's the actual assumption for our listeners in the Brian Railey world. I don't know.

I mean be four I mean, honestly, you know, four or four percent type of returns over the long term doesn't sound so bad these days, right, I mean I don't I don't know when what's the what's the driver to get um grow moving and returns moving fair, fair, to go right to productivity and economic It just means you have to work longer, Tom. That's all Tom thought today, was it. He was just gonna, you know, right off and go to in Jamaica. But no, you gotta keep working.

You have to earn that return. Brian, What's when you go out and talk to people at Well's far ago? What do you hear from people that you know that's not they romantically want the old days of nine c d s or nine percent annuities, seven percent city or that.

But what do people actually say about the mill you we're in well, I think, I mean we've been here for a while now, so people have kind of become accustomed to So we used to get a lot more questions, you know, five, seven, eight years ago than we do today. So people have adjusted. I'd say the bulk of the questions we get today. UM, take it to the extreme. People are actually working about rates going negative. Right, so

you know these two two and a half percent type yields. Um, you know they're more worried about the extremes here than really I mean, if you become accustomed to this little as well, Fargo have a belief on this vector. Moving down to JP Morgan Young always making a huge splash with a model, not a forecast, but a model. They could drive us under one percent ten year yield even lower. Oh, I think certainly we could see you know, the ten

year fall below one percent. What would it take it would take, yeah, I mean probably a recession and probably um, you know, of somewhat meaningful slowdown, but we can definitely get there. I mean we're kind of do for one right, Okay, Brian, really, thank you so much. With Wills Fargo their institute talking about the world of fixed income 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 Winter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio