Surveillance: Stimulus Not Debatable, Hochul Says

the Empire State. Kathy, I want to go right to the stimulus and the great contention that aid is necessary for states, cities, and towns, and there's a debate about this. The only thing that's going to catalyze that are furloughs in layoffs. How close are you and Governor Cuomo to furloughs and layoffs? Well, first, thanks for having me on the show, but let me first address even why there's

even debate as to whether that we need stimulus. I don't understand how anyone would conclude that we cannot survive without a stimulus package. Here's why we never anticipated having to deal with the global pandemic when our budget was put together. Not New York, not any other state in the nation. We have incurred extraordinary expenses. We've had a huge hit to our sales tax revenues. Income taxes are

going to be plumbering. So all of our traditional revenue sources are not there for us in the way that we have projected them to be. So we will need this stimulus plan. It's not debatable. New York State cannot be left on its own. This is a national crisis, a federal disaster, and if we had real leadership out of Washington, they would understand that. Fortunately, the Democrats in the House understand it, Chuck where understand that, but we're not getting the support we need and they were going

to suffer. We should state to our global audience at the persuasion of the lieutenant governors towards the Bocracy and Mr Biden and the Democratic Party, can you wait out to an inauguration? Can you wait out to a President Biden? Can you get that far without furloughs and layoffs. I don't have a projection on that at this point. We have been going, you know, day to day, trying to back Back in May, we had a plan passed by the House that we thought could really address our needs.

We're asking for five billion dollars for states and local governments. And that's not just the fund government operations. We're talking about funding the health care workers, funding teachers, funding first responders, funding critical programs, infrastructure. So this is these are all the functions of government that have been direly affected because of the loss of money coming in that we had expected to be there this year. So we need this help.

Can we wait till Biden President? I don't know that we'll have much choice, but hope springs eternal. I know there's conversations uh with Secretary Treasumunution Lead Speaker Alsie, and we hope that common sensal reign and they'll say, you know what, we cannot leave these states to starve and if not good for them politically, either lieutenant governor more locally. There's been a lot written about the power struggle between Governor Cuomo and Mayor du Blasio of New York City.

Does Governor Cuomo see di Blasio as part of the problem or part of the solution at this point? Well, you'd have to ask Governor Cuomo how we've used that relationships. But I do know that we work with our local partners. There's a lot of collaboration that goes on behind the

scenes that does not make the headlines. And uh, you know, we need each other in this and but also you know, just the recognition that it is the state that has the ultimate decision as to whether or not, you know, when and how you shut down during a pandemic, and

the same thing with when we reopen. And you know, lately it's been referred to, you know, the hotspots and how the governor had to step in to fill the void because we're seeing areas of the state and specific neighborhoods where the infection rate went up to five six seven.

That's not acceptable. The rest of the state today is at one percent, and we cannot risk our recovery and getting our economy back on all cylinders by having hotspots because the issues weren't addressed early enough and in a in a smart way, so the state has had to step in. Kathy, there's also a question about quality of

life concerns. There's a question about trash collection given some of the budget cuts, and there's very much a question about making sure that the uptick in crime does not continue. As an anecdote, there were helicopters over my building last night. In general, it's not dangerous, but there was a shooting more than ten blocks away. What are you guys doing

on that front now? And certainly that's all very unsettling for the New Yorkers who stayed in The vast majority did stay and they're weathering this out, and they also know we've been through a lot before and we will get through this. But in the day to day life for people like yourselves and others, it's tough. But I get back to Washington here. You want more money for law enforcement, you want money for trash pick up. You cannot starve the cities in the while expecting those services

to continue. The City of New York will have less money to work with to fund those essential services than they have predicted, and that money has to be replenished by the federal government. Do you see, Cathy, a change towards a more ecumenical, are more compromising two parties over the next number of years or is there a permanence to these rigidities between Washington and the Democrat Party states

With President Trump? Is there a permanence to that theme or do you revert back to something more collegial it reverts back. And I'll tell you why. I have been a student of history. I'm old enough to have watched the Watergate hearing that a kid, you know, watched a gavel to gavel. I knew all the players like they're part of my family. So I thought that our democracy was imperiled back when I was just a teenager. And I have seen the resiliency of this country. I have

seen that, yes, we can go to extremes. There were nineteen six eight was a very tough year in our nation and people, you know, cities were burnings. Remember being a little kid going to visit Washington and seeing it burning and the protests and what people was, what was happening, you know, the division over the Vietnam War that divided family against family. But we always swing back, the pendulum swings back toward normalcy in the middle. And right now

we have a cult of personality around one individual. I don't think that would have been the case if someone, you know, let's say, Admit Romney or someone had been elected instead of Donald Trumpets. So I think this is all related to an individual who has promoted himself to attract individuals who are extremists. That is going to go back into the bottle and back underground where it belongs

when we have Joe Biden as president. But also he understands we have to have relationships with Republicans and that's how the two party system will continue to thrive in our country. Still got an election to God, that election underway, that result a little more than two weeks away. Kathy, thanks for coming on the program, Kathy how New York

Lieutenant governor. Thank you very much. John. We've got to go on to more important things here because with James Anthy of Everdeen Standard, we can dive into the investment space and talk a lot about it. But right now, I mean Prime Minister Johnson, pandemic, Prime Minister Johnson Brexit. Of course, we're looking at the race here and I'm sorry, James. All eyes are on Sunday. I mean John and I have been going back and forth on this and all eyes on Sunday is for the Todds. Gareth Bale is

gonna come back. What's it gonna mean for Tottenham? I think we've just put together the best front three and world football, so I'm pretty excited. As his first fan myself I'm looking forward to gold s galore. I mean, John, are your eyes all on Sunday? My eyes are on Saturday, As he sighed, Darthy, Liverpool Everton just gonna be fiery. We got that shut down too. This is a big

we done that. Can we move on? Yeah? I mean, I don't know what I'm talking about, but James is right, this is a huge deal for the two minutes ago. I get this shows guys coming from space or whatever the pharaoh's golf stream up to England to help the chart. So they'll do that on Sunday. Okay, under the markets right now, James, ain't you with us? With everything? Stander? James, things have changed. How do you structure? How do you

have a strategic investment plan for Q one two thousand one? Yeah? With great difficulty, because you've got obviously a huge, well known, well advertised risk event where I think there are genuinely probably three possible outcomes which have relatively high likelihood each of them. Um and probably the world looks looks somewhat, if not vastly different further down the line depending on

the outcome. Then obviously I'm talking about US election. I think it's very difficult to see the House switching back to the Republicans, so you're talking about Biden verse is Trump and then does the Senate switch to the Democrats? And you know, if it's a split Congress, I don't think that's great for for risk you know, whoever's in the White House. But if if, if, if there is a blue wave of blue sweet, whatever you want to call it, I think the market wants to run with

that as being gross inflation, reflation bad for treasuries. And that's a very different world to something where risk assets have to price that out, have a bit of a wobble and treasuries rally. So truly looking through that event,

it's very difficult. We're in such a such a difficult strategic macro environment anyway, in my opinion, there is you know, we've seen huge, huge holes blown in global economies and now we're trying to patch them up, and and real time data is is not a huge use in guiding you as to what the medium term trajectory is. So huge uncertainty, very difficult, James, I just don't know how

you invest around this. Going into year end, you've gone through all the different outcomes we could get from the election. The difference between a blue wave and a divided government could be too trillion dollars in stimulus. How do you invest around that? James, Yeah, it's difficult. I mean two trillion dollars in stimulus today as we sit here, it feels kind of like a small number. That's how crazy things have got. As I say it is, It is

difficult because you have bimodal sort of scenario. You have two very different outcomes and a reasonably close probability between the two. So I think we're going to be running a lot less risk into that risk event. Then we're running at the moment for exactly that reason. I don't you know, if I were to game in our probability adjust the outcomes, you get something that looks quite neutral, because there's a reasonable chance of something going up on

a reasonable chance of they're going down. I do think there are still a few places that you can feel somewhat comfortable having a position. But I don't think, you know, the FEDS policy is going to be changed in any way, shape or formed by the outcome, And so if you want to hunker down in five year treasuries, maybe even a little bit further out. I don't think you're going

to see a huge amount of volatility there um. But but you know, other than that, it's difficult to have a strategic view as we sit here, and I think there's technical things like I kind of want to talk about stuff, some of the technical stuff that was going on,

I don't. You know, we don't use options heavily, and I'm not a massive sort of options expert or what have you, but we've still got this massive situation where huge option buying is going on in ecuty markets, in the market general and single name tech tech stocks, and we have option expiry today, and therefore the gamma that you get from from those options getting closer to out the money and then further away from out the money.

You know, these are the things I think which are actually driving markets a lot more than the macro environment on a day to day basis. And that's something that can be both an opportunity and a huge risk. So James, can you quantify how much you've wrote down risk, how much you've gone into five Your treasury is to hunker down and prepared to be liquid and nimble when things change.

I mean, that's a process that's not something that we're you know that we've done a huge amount of at this stage because we're still reasonably far from the election. And to be honest, you know where if you look at polling experts, if I were to just pick five thirty eight and say that's somewhat symptomatic of broadly speaking the polling experts for you, you know that that's suggesting Biden has roughly a chance of winning the White House and maybe the Senate has a chance of switching over

to the Democrats. Obviously, those two probabilities are closely connected. You can't see the chances of the Dems switch in the Senate going up without Biden's chances going up. I look at eighty five, and I say, in a two horse race this far out, with the polling's problems, shall we say that we've had in the last two elections where actually, you know, Romney was leading at this stage, in Clinton was leading at this stage, and neither of

those one that looks to me like that's overpriced. So we're happy to oppose that for now because it looks like too much a probability of Biden, and by extension, a blue wave has been priced into the market. And we expect other investors to de risk going into the election, and that's likely to be there for the most heavily positioned assets which see some unwind and risk assets definitely

fits the bill. Big tech definitely fits the bill. So you know we're positioned in opposition to that for now, and we will look for opportunities to just take the overall risk level down quite considerably, to be honest, into the risk of vent itself. James Covery is for a second, I'm going to talk about the B word. Here's a covered Brexit cable turning around one nine un changed on the session. The Prime Minister about forty minutes ago basically

signal think he's ready to walk away from negotiations. And guess what an EU official thinks. According to our reporting, the EU expecting Brexit talks to continue with the United Kingdom next week. Tom, we talked about this, the posturing around this story. It's a prime minister trying to put some pressure on the EU. I'm not sure the European Union feels it right now, and Sterling is capturing that story. Okay, it's a game of blood. But John, I remember you

planted in the chair the first morning after Brexit. What's changed? I mean, I don't understand what's changed from that moment when you were on our old set over in Finsbury Square talking about Brexit versus where we are right now. I know what's really changed in the power game between these two parties, two prime ministers and not much house. That's what's changed before and a half years, James fe how on earth do you trade this one? And for me around the negotiations, how do you know what is

real negotiation and what is just posturing? Yeah, really good question, really difficult questions. Some of this comes from just the nature of negotiating as the EU or with the EU, you're talking about twenty odd countries that have to compromise with each other just to get to an EU position. And then obviously if there's somebody on the other side of the table, they've got their own views about what prioritizing, what they can sacrifice, and therefore as an incredibly complex negotiation.

I would just agree broadly with the idea that for possibly not as long as as going back to sixteen, but certainly for the last twelve months, nothing really has changed both sides of talking past each other. This is a game of chicken. The politics has changed dramatically in the UK such that their view of how to negotiate has changed dramatically, and therefore it's a more robust, more

politically supported, shall we say, hard and negotiating position. No deal is better than a bad deal on the EU side, I don't think they're quite there, but again, the political reality of the negotiations is that doing a deal where the compromises necessary in advance of an absolute drop dead deadline is an unsatisfactory political outcome because you can't then go back to domestic audiences who you might have had to sacrifice a little bit to get the deal over

the line and say you fought as hard as you possibly could. So it has to go to the wire. You have to dangle people over the edge, make them look into the abyss, and that's then and only then will you get some sort of compromise that the headlines you described today, I mean that tells you all you need to know in terms of how you invest. I think you can be long guilts because I don't think there's a huge sell off in the guilt market if

there is a deal. I think that you know the economic situation the virus situation, the global duration situation more broadly is supportive for owning guilts. You know, we're tactically short sterling, as we've talked about before. One observation from today it's a bit disappointing for me as somebody who is short sterling on a tactical basis. The downside to cable when that first headline hit was relatively small and

quickly reversed. But then when you get a positive headline on the other side, the market wants to run with that. So I still think there is a sentiment um sort of asymmetry that the market really isn't prepared to believe that the UK will walk away, which means actually short sterling increasingly looks like a position that is will only really benefit on the outcome if we are December thirty one have walked away and there is no deal, So that that changes the dynamics a little bit. And that's

that something I've been observing more recently. But again I don't think you can have high conviction. I would make it fifty fifty that we either get a deal of some sort or all. We don't. I don't know what you can have our conviction on at all right now, James, great to catch up, Sir James Athley talks about there right now. It is the advantage if you were a successful a hundred years ago. There was Lever Brothers and

then Uni Lever and all the rest of that. There is a trust of the Lever family and Jeffrey Howard at University College London is writing new books thinking about our dangerous dialogue are dangerous discourse in politics? Were thrilled that Professor Howard could join us. Uh, this morning, You've got a new book coming out, Jeffrey Howard on dangerous discussion? Is that what we observed last night? Well, I think

we observed quite a bit of it last night. It was a quite striking moment, I think when Savannah Guthrie was pressing the President of the United States about whether he would disown this extremely fringe conspiracy theory known as Q and on one that alleges that top Democrats are inco hoots with pedophiles and sex traffickers, and that Donald Trump is really a secret agent aiming to save the world from these nefarious villains. And of course Trump wouldn't

disown it. In fact, he claimed that he didn't know anything about it before then jumping in and say, oh, but there against pedophiles and that's a good thing. Clearly he's lying. Clearly he knows quite a bit about it. Doesn't mean I mean, Professor Howard. What's important here is

Lisa Bramwints and John Farroll get the love notes. I've gotten the hate mail, and I've already gotten hate mail this morning from Trump supporters who separate his discourse from policy and from what they believe are the attributes they can vote for. Is that appropriate? Is that going to be something new to American politics? Look, we're going to the polls. It's always a lesser evil justification, right, and we never have candidates that line perfectly with our deepest values.

And of course, sometimes it would be appropriate to support someone even though you disagreed with their language or their rhetoric, if you thought they were good in terms of the content they delivered for the country. The problem with the president, however,

is that his language actually does have consequences. It has implications for the kind of country we're living in, for the coarseness of public dialogue, and as we get closer to the election, I think it's very reasonable to worry about the ways in which his unhinged rhetoric might, in some occasions leads to violence. In the town hall last night, he again mentioned Governor Gretchen Whitmer of Michigan by name, despite the attack, the plot by militia terrorists to Kidnapperr

only recently. And I think we need to be extremely alarmed about that. And people who say, don't worry about the language, it doesn't make a difference, you need to realize that sometimes it does make a difference. Professor. Let's talk about the polls right now where the president is really struggling several demographics, including an older demographic, particularly in Florida, which is a huge change from four years ago, at suburban females as well. How can you make inroads into

those demographics with a little more than two weeks to go. Well, there's not a lot of time, and Trump is spending time in places that he traditionally or Republican candidates traditionally wouldn't have to be spending time in places like Georgia. So I think it's I'd be extremely alarmed if I was inside the Trump campaign right now. Um. Now, it's easy to look at the national polls and say that Biden's got it in the bag. But of course we need to remember that in the swing states it's still

pretty closed and anything could happen. So that's why I think Biden is being very true to spend time in places like Pennsylvania making sure that he's making those conversations and contacts with the kind of suburban women voters that Trump has been a lot to turn off in the last few years, and certainly they showed up in droves at the polls during the mid terms to repudiate Trump, and it seems overwhelmingly likely that that will happen again.

Just the other night, Trump directly appealed to suburban women, saying that it's really important that they like him, but he didn't proceed to give any compelling argument about why they could support a Trump administration. And that's problem, although in fairness, he was doing that a little bit uh in a self deprecating way. But Jeffrey, let's look forward the idea that perhaps the polls are not vastly wrong

and Joe Biden does in the election. What happens after that, in the months before January, when there is a transition of power, how messy, could things get well? I think that there are a number of different scenarios that might play out. One kind of scenario, of course, is the president continuing to capt doubt on the validity of the election, but it actually not making a difference to what ultimately

transpires in January. It's entirely conceivable that Trump will continue to um degrade the legitimacy of the election without any intention of actually trying to stay in office. This could be simply a way of keeping its supporters with him in January as he looks ahead to perhaps set up a Trump TV station, so he retains a sizable portion of the electorate who stays on his side and is willing to to watch his television programs. But that's I

think the most optimistic projection. I think it seems at least conceivable that he could inspire his supporters to go into the streets to engage in violence. We could imagine Trump supporters um making a big scene about the election in the streets where who knows left wing counter protesters show up uh to agitate against those Trump supporters, and that really would be a powder kig that would could

be extremely extremely supporting stop that's really inflammator. Are you predicting that we could see that kind of response from people or in this nation? Do we move on in a more peaceable way? Oh? So, the cast when we're being for cautious is to play out all the different scenarios. Now, clearly, the optimistic, the hopeful scenario is one in which everyone accepts the legitimacy of the election, regardless of who wins.

If the president is re elected, we want people on the political left to accept the legitimacy of his reelection, and of course, if the president loses, we want his supporters to accept the legitimacy of an income Biden administration. But I think given the repeated attempts by the President to cast doubt on the legitimacy of the election um and the way in which he seems to be leaning into divisive, inflammatory rhetoric, it would be foolish not to

take seriously the possibility that violence could ensue. If only so we're on guard board, and so we make a concerted effort to reach out to the people in our lives, our friends, our family, and remind people of the importance of respecting the outcomes of the election and of rebutting the kind of disinformation that the President has been sewing about the unreliability of mail in ballots, which really doesn't have any serious basis in evidence. Jeffrey Howard, the Associate

Professor of Political theory at University College London. Right now, we have an understanding that each house has its own character. The legacy of Morgan Stanley is Stephen Roach literally modernizing modern market economics through the digital through the idea of actually publishing on retail sales. The moment it was done,

it was a miracle fifteen and twenty years ago. Carrying that legacy for this chat Naya, he's Morgan Stanley, Chief Economist, Global head of Economics and among other things, writing heard on a wonderful group of economists worldwide, including Ellen Setner Shatan, Thank you so much for joining us at this morning. You see retail sales with a nice abdard. Are we miss judging Q four and Q one worldwide where they could actually outperform the caution That's what we have been

actually highlighting. As you know, we've been making this call that we will see this reshape recovery, and the data just continues to confirm that we are on that path and there is no stalling, especially for US and China, which are the two big parts of the world. The data continues to surprise on the up side, and we're expecting something similar out of China when we get the GDP data on Monday. How much does the increase in

virus cases challenge your assumption of a v shaped recovery. Look, I think I've mentioned this on this show before, that what we have been highlighting is that the equation between virus and the economy is changing. So as we keep seeing this new cases rising again, we have to temper

down the expectation of its impact on the economy. We've been of the view that growth will moderate in the next three months, but it will still continue to make progress towards that we shap recall that we had made, which is that we will see that US economy will reach pre COVID levels by second quarter of twenty one.

And just look at today's retail sales data if you kind of try and do some backward maths on where it will take the personal consumption spending number, the person consumption spending number could be as much as nine of pre COVID levels by end of September, and that just tells you that how much progress we have made so far, So the v SHAP recovery path looks very much secure.

Well okay, but this is all predicated on this idea that the balance sheet of homes have been bolstered by the stimulus that we'd already gotten from Washington, d C. If we don't get that re upt how many more months can consumers continue to sustain the recovery. Well, that's a very good question. So what we have been highlighting is that the underlying strength of the consumer balance sheet

as well as income standing, has been quite good. So, for example, personal income as of August, and this is not for September, but as of August, personal income for household is already about my big COVID levels by two And the excess savings stock that the consumers have built in the last five months because of the stimulus and the fact they couldn't spend in the initial months is one point one trillion dollars. So the consumers have enough

room to continue they're spending into this winter months. Chilling. You've been very bold and quite published on the economy, and you've been an outlier and Morgan Stanley have led that call over the last several months, coming out of that huge contraction earlier this year. Every economic house though, looks at their called their base case and acknowledge is a key vulnerability in their forecast. What is it for you, Chettam right now? Well, I think the key vulnerability is

essentially the new cases. If they force aggressive shutdown, that will be the rest to our podcast. I think the stimulus is less of a risk because of the math that I mentioned to you on the household strength, but it's really this rise in new cases. If they really forced aggressive shutdown, that would be the near term risk. But again that's going to be a short term risk because as we head into a spring, we should again get an environment where virus itself begins to dissiplinate it.

What do you think about the question that what is playing out in Europe right now is in America's future well, in terms of the virus cases, Yeah, Look, I think europe situation is very similar to what you saw in the US in June July. You are seeing ukses rising, hospitalizations are not rising in the same strength, and what you're seeing policymakers is taking a more pragmatic approach of

not shutting down the economy across the board. I mean, if you just look at the actual facts of how much restrictions they have imposed, they're not really shut down restaurants all through. They've just decided to shut down restaurants late in the evening. So that just tells you that that point that I was making to you earlier, that

the equation between virus and the economy is changing. So you think the recovery can continue even as cases built, because this would also imply chat and the consumers don't disengage, the companies don't lose confidence. Yeah, that's right, and I think at least in the US, we saw that that did not happen in June July, so we're more confident of the US. In Europe you could see some confidence impact. But look, as of now what we have isn't in the data, is not showing any big dent in the

European economic numbers too. The most important number I look at is the restaurant activity um sorect to restaurant activity in Europe. For the data for the country that we have, Germany and UK had picked up a lot, but they're still back to like hundred percent levels, so they're not really showing a huge decline in retail activity in terms of restaurants spending, cheting. Great to catch up as always and what a cold so far is not over yet

but it's looking good. Chat and I Morgan Stanley, chief Economist and Global Ahead of Economics, working alongside at the Center of course, the chief US Economist. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple podcast, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio