Surveillance: We've Had Too Little Globalization, Mann Says

Bloomberg dot Com and of course on the Bloomberg. This is a joy anytime you see head of Global research, that's uses someone who spends a lot of time on airplanes just recruiting people and all that and talking to their investor clients, you know, and they sometimes they sort of know what they're talking about inequities, bonds, and then

sometimes they don't. JP Morgan takes a different tex their Joyce Chang is head of Global Research, Chair Global at Research, and she has prodigious abilities in the fixed in market in including tenure at Columbia University. Joyce, wonderful to have you in our London studios. Let me ask you an open question. Get started. What is the Joyce Chang observation on fixed income right now? Well, it's great to be here. Tom. Well,

first of all, we expect yields to go lower. We're seeing synchronized central bank easing, so it's not just all about the Fed in total for what we expect in central bank easing. We think that the e c B, the b o J is going to follow and thirteen emerging market central bank, So yields are going lower here UM, and so we've seen you know, the best returns and fixed income markets in about the last five years. UM. You know, there's a little bit further for this to

go as UM yields come down. So importantly, if prices up institutional retail yield down, do I want to lock in that appreciation or are you just comfortable now? You know the Joyce does as she clips coupons down in the new Park Avenue office. Jamie's got a asked down

in the basement for Joyce to clip coupons. Well, you've got to hold onto these gains because what's ahead for the rest of the year, weather it's in fixed incomeer equities, is mostly about preserving the game that we are expecting no more than like low single digit returns across any asset class in the second half of the year. And be careful in emerging markets because the f X side, actually it could be more volatile. Here. We've got to

see what happens between the U S and China. So Joyce, you mentioned kind of a global coordinated devishness by some of these central banks around the world. Does that suggest that we maybe take on a little bit more risk we think about emerging market debt, maybe US high yield. Well, if you want to achieve a five percent yield at this point, you have to look at emerging markets fixed income or at high yield bonds. Um We still think that the dollar debt is a better place to be

right now. I think there is still f X risk if you have more tensions developed between the U S and China, and you have c n y depreciation that could have an effect on other currencies. And the time, Joyce, that we've got left with you, I want to talk about your serious job. Have had a research for one

of the world's great great banks. Right now, there are people all across the world getting ready for the December exams of the c A program, and a lot of those people level one, level two, level three, people that want to get into the act are going Is there going to be a research capability five or ten or fifteen years from now? Restate the vailue of research to a major bank moving forward? Well, the CFA exam is always a big deal in research departments, in particular the

credit groups. The company analysts all as a group study for this, and we're very proud of the c F as we have at JP Morgan. But there's always going to be a need for thought leadership. Now you're gonna have to incorporate more AI, examine more alternative and high frequency data. But the thought leadership is all about the judgment. It's all about connecting the different parts of the story. And now it's about putting the geopolitical overlay on this.

And it's yeah, and much higher frequency data points are needed and much greater amounts of flash crash. I didn't ask for me. I asked for afterthought. She's twelve years old, and what you're telling telling me is she needs a double major international relations and finance. Right. Well, the geopolitics of me, a lot of my background had been in policy and so for a long time the view on geo politics is, well, it doesn't determine the trend, it's

just the volatility. Now we're getting some real questions about that and we're really seeing that play through in the way that we're looking at business confidence and that's playing out in global cat BACS, George Chang, thank you so much, Thank you so much, share of their global research. Really can't say enough about it. She took this is a huge I get goose bumps over it because the history

of Manhattan in Columbia College, Columbia University. She took the John J. Award one year, which is like super duper teacher award from the Bloomberg Interactive Worker Studios in New York. This is our China discussion of the day. She's Catherine Man, who has left a trail of debris in international economics for twenty or thirty years. Is a sympathy project. City Group picked her up a couple of years ago from

the O E. C D in Paris. How is it working out at City What a change from from brandeis and your your important academic work and then O E. C D with Anna L. Guria and all of a

sudden you're working for the animals in New York. Well, I think the you know, the issue that is most important is uh the interaction of financial markets in the real economy, and I think we're seeing that playing out right now as financial markets are trying to bet on what is going to happen at the G twenty and it even could be relatively better for the real economy or relatively worse for the Let's back up. Then, I was at a meeting with you and Michael Rosenberg of

Bloomberg a million years ago. You were like eighteen or twenty, just out of m I T where the two of you codified this idea of family dysfunction between China and the United States. Folks to be careful here. Doctor Man is acclaimed for her research on the back and forth, almost the game theory figuring, you know, Mary Tyler Moore, ordinary people bringing over to China in the US. How's

that dysfunction going right now? Well, I think we're seeing a very difficult period of time where, uh, we're trying to decide whether we're going to more deeply engage with the marriage with China that's been developing with supply chain or whether we're going to divorce because um, you know you can't break up these supply chains, uh, and and expect to continue to trade with them in the same way.

But we have a new president with a more mercantile tact, and yet to your research, we're addicted the price of those goods aren't we. Well, so I think there are a couple of things that we think about where I mean addicted to the price of the goods um, but they are. They are also addicted to our capital flows,

so it goes both ways. They've invested in in US UH businesses and and US treasuries, and where we have deeply engaged with them, both to sell products in their location as well as to sell products in terms of exports. So we're very deeply engaged with China. Our businesses are very deeply engaged. I want to continue to be deeply engaged. And yet that's not the direction that the current policy is going. The current policy is designed to divorce, so um, you kind of can't have both of those uh in

a marriage. So, doctor Man, given that we are mutually dependent with with China, clearly we know that the President later said is getting on Air Force one heading over to Osaka. What do you think is a reasonable outcome here from this weekend's talks. Well, our base case is that they shake hands and agree to UH go back to the negotiating table UH and avoid therefore putting the on the last tranche of the three billion dollars worth of trade from China, and so that's that's our base case,

and we think that that's a very important outcome. It's it's kind of minimalist in that it doesn't take off any of the tariffs, but uh, it is a better outcome and that it doesn't add to the tariffs and more deeply, uh caused discress and distress and financial markets and in business investment in the real economy. So it's it's it's a better outcome than the alternative, which is which is no, which is storming away from the table. Um. So uh. But on the other hand, you know, that's

that's pretty minimalist. Usn't reduced the uncertainty associated with maybe there will be tariffs in the future. We're not quite so sure. Um, And uh that type of uncertainty of roads business confidence and uh, if they're going to have a lower confidence in the rules of the game going forward, and that's the challenge. You know, give me some rules.

I'll play by the game and then um, you know, you end up with lower investment, you get lower trade, uh, and you get employment consequences from that well going forward. For the next step would be sitting down again and trying to close this deal. Do you think that a meaningful deal is is an option here? Can we get a meaningful deal with trying to can trying to get

a meaningful deal with the United States? So, uh, some of the issues that that started this round of of tariff, well, this whole round of trade negotiations and so forth, are very serious issues having to do with intellectual property, UM, force, technology transfer, joint ownership, and cybersecurity. Those are the elements that were put forward at the beginning of the of the whole relationship breakdown with China. Right now, um, the

strategy is not focused so much on those issues. The tools that have been used to kind of pry uh those negotiations open have been tariffs that has led to much reduced trade with China. So I think there is this there is this sort of um disconnect between the objectives is to you know, enhance thetellectual property, allow for broader joint ownership, allow for protected technology transfer that would

more deeply engage the US with China. The tariffs are to divorce our relationship with China, to break up those supply chains, make them go to some other country. So there's a real disconnect between these two different objectives. Uh, in the current policy set we are fifteen years on since your seminal work on codependency and in all of

these dysfunctions. We had on Pierre Navarro the other day, who espoused his view of economics, which to me is exceptionally static, almost in a true classical economic standpoint you work out of Harvard and M I. T. And a hugely dynamic regime. Is the dynamics now radically different from what you looked at fifteen years ago. Have we moved on to even more interdependencies and correlations where anybody's policy

is really going to have little effect. Well, actually, what's most disturbing to me is is that this, uh, this this trade situation that we have right now with with China is emblematic of ten years of stagnation in terms of global integration. Uh. We had you know, earlier in my career, we talked about deeping deep, more deeply integrated global supply chains, a greater variety of products crossing borders,

lower prices available to both businesses and consumers. And you know, all that stop about ten years ago, and so and so where we are is kind of like trying to fight the last war because we're to go. I mean, the way we got to get was a tragedy of two world wars? Have we have we just lost our collective memory of the Atlantic Charter in the early GET initiatives.

Well we can look at you know, there's slow down and you know, no multilateral trade agreement has has succeeded, and there aren't even any successful or very few successful pluralateral agreements. This is part of the sort of the need to revitalize the w t O. What should it be doing in today's world, which is which is very complex with lots of competing interests. But but the bottom line is we have ten years of very sluggish growth,

little investment um, productivity growth being slow, rising inequality. And that also is a period of time when global trade has stagnated. So you know, most people think about there was too much globalization. I think we've had two So Dr Man, you've met mentioning before we went on the air. Have you've been traveling around the world meeting with the largest institutional investors. What's number one on their issues that they want to talk to you about. Uh, They're really

concerned about where the FED is going to go. That's that's their their key issue. Um, some of them have a longer term agenda and so that you know that's uh, they're looking a bad productivity. Uh, they're looking at inequality, specifically intergenerational inequality and what the implication of that might be for wealth management issues and and that sort of thing. So some of them have a very long term perspective and are concerned about those issues. Other ones have more

short term, immediate perspective. On the on the FED actions cancer man, thank you so much with sitting group. Always just really honored to have you here in a time of extraordinary international politics and international economics that darkening the door. Timothy O'Brien Bloomberg Opinion, truly expert on the finances and much of the past of the President of the United States. Tim O'Brien the debates tonight, New York Times had that

great spread of the buttons. My first buttons were Nixon, Cabot, Lodge sixty and Kennedy for presidents sixty. What was the first button you had as a kid? Wow, the first button they had as a kid was Carter Reagan Carter right, God, he's young. Yeah, that's where I was. That's you too, I guess I came from a Nixon household. My father just went down the line of the Republicans. Does anybody do that anymore? Do people vote straight line anymore? That's a great question. I would I would think yes, I

would think the majority of voters do. But that's just based on instinct. Yeah, Chim O'Brian with Jim, I want to go to the debatement going tangentially with a House Democratic vote. Uh, Promelia jail Uh of Seattle seventh District. They voted for President Obama. They boosted it up to eight percent for Hillary Clinton. Are the liberals driving the

Democratic bus in the House? Well? I mean, I think the liberals and particularly women, are the people that put the House back into Democratic hands at the mid terms. But I think that was a very specific election. I think I think, Um, I think that what you're gonna have to see now is whether or not the issues in in at the mid terms translated into what we're gonna see in the general where we see moderation in this debate tonight, or is going to be a progressive

free for all? Um. I think you'll see a lot of both. I mean, you know, Joe Biden is obviously the moderate, traditional candidate tomorrow tonight, you're gonna have um I think a lot of people who need to differentiate themselves from one another, and they're gonna differentiate themselves from issues that um uh are going to be flashpoints for

the progressive of portion I think of the Democratic voters. So, just following up on Tom's comment, the question I have is we kind of get into these debates and we begin this long slog of Democratic debates Kenneth Centrist, what do you think the Democrats will put a central stop at the end of the day. I think there's a

big push for that to happen. I think people I think that they're there are pragmatists within the party who are saying that the party needs a ticket that can beat Trump, and that the candidates that Trump is most worried about our our white males currently. I think there's also a good argument to be made that the Democrats should show that a diverse ticket also can win in the United States. And so I think that those are

the conflicting things here. But I don't think it's inevitable, um that either a a more left leading candidate or a moderate candidate is going to come on top come out on top. Here, you've seen Elizabeth Warren, who's done great homework and really nailed down positions in a variety of issues, surge because of that. You see Biden surging because I think he's reass during, you know, to post industrial blue collar workers as someone they can relate to. And I think both of those tensions are are in

competition with one another. You know, the other big issue, which arguably President Trump raised back in twenty six is immigration. And I'll tell you the images we're starting to see. I'm just wondering how how front and center immigration will be not only in these debates over the next couple

of nights, but just in the election. Well. I think, like everything around public policy, this depends on on how uh principled and well spoken Democrats and Republicans want to be about something that's no longer about just immigration policy. This is a humanitarian crisis. You have people dying at the border, you have detention centers that are brimming with children, taking care of children in squalid, inhumane conditions, and it it screamed out for a policy solution that, in an

ideal world, would transcend politics. I want to go to your real host. It's gonna be hard to leave this, Paul. But I was had a beverage in my hand the other day and I was quoting Tim O'Brien, shocked at that would happen. You are expert on how the president rationalizes until he doesn't. How do you interpret the change, the shift in Iran, the change, the shift in Mexico, and on and on and on. You've witnessed that, am I right? You've witnessed that behavior for decades. I mean,

this has been pretty typical of Donald Trump. He I think the important thing to think about the president is that he does not think strategically. He thinks cinematically, and he's usually thinking about narratives, and he's usually thinking about his own role on the stage. So his first instinct is always going to be how does this make me appear?

And what he wants to always appear as is a man of action who finds decisive solutions in a fast and sometimes blunt, forced way, even if that doesn't achieve his goals. So you saw and and and it creates the self contradiction he wants to be, you know, carry a big stick and be very mucho on policy in the Middle East, if anyone gets in our way, we will obliterate them. But the reality is he doesn't want to engage in a in a deep seated military way.

Would you suggest he's an archise elationist. Uh, he he can't. He can't be an archive as somebody who's on Twitter is not an isolationist. What he is is I think he's an unsophisticated person who hasn't thought through the implications of his own beliefs. And what's more important to him is atmospherics and and I think it's and self promotion than policy goals. Jim O'Brien, thank you so much writing for Bloomberg Opinion. Very you know, whatever your politics, very

very important. On the finances of the private citizen Trump right now, we monitor Stephen Stanley. He has been fabulous engaging the gross domestic product of this to me, Uh, of of this nation? Stephen Stanley Amerson pierpoint, how gross is our gross domestic product right now? Are we above two? Good morning, Tom, Yes, I think we are. I mean, you know, obviously the first quarter number was very good,

although it was the mix wasn't great. I think what you've seen in the first half of the year is what we've seen in five of the last six years, which is you get a week underlying first quarter consumption as always, for whatever reason, soft in Q one, and then it roars back in Q two, and it seems like we're seeing that pattern all over again. So Stephen, Tom and I are hearing more and more economist strategist fund managers talking about the recession. Perhaps mid that something

you subscribe to. No, I think the economy has very good underlying momentum um. Obviously, the trade situation has been a bit of a drag in the short run, and and certainly you could envision a scenario where, um, you know, the trade talks totally break off, we get into a massive tariff war, and and then that that kind of changes things. But anything short of that, I think the economy has a good staying power. Steven Sally and the

President putting out extraordinary headlines in free flow. Here we miss barter Romo over at Fox Biz mentioning Japan, mentioning World War three. Forget about that. Here's the headline Steve Stanley that matters. Trump says the U. S should have draggy instead of quote our fed person unquote. What would it be like, if Mario Draggy was running the FED, based on his history, his challenges, different challenges in Europe,

what would what would Sherman Droggy look like. I mean, obviously Draggy is someone that's been very doublish over the course of his tenure. Um, you know, arguably the justified given the difficulties in Europe. It is kind of ironic because certainly Trump does want seem to want someone that's extremely doublish at the FED, and the act is he had probably the most dubbish FED chairman in the history of the institution and he, uh, he let her go, So you know, I guess, uh, maybe you get what

you deserve. I suspect it sounds like a Carol Kings from Ali here in New York years ago, the President goes down Mr Stanley to say he has high rates while President Obama had cheap money. I'm lost translate. I think he's jealous that we had zero rates throughout his predecessor's tenure. I don't know that that's a good thing, because that's indicative of a weak economy. I think he should just focus on GDP and and trying to make political hay out of the fact that the economy has

grown faster over the last few years. So, Stephen, you know we've heard and read, I think over the last several months, and you know, a growing argument that maybe global growth rates are going to be lower going forward than maybe we've seen over the last couple of decades. Is that something you think is a reasonable view? Well, yeah, I think there's not much question about that if you compare it back to say the nineties or even the two thousand's UM and there are a couple of things

going on. One is simply demographics, is the population ages, the growth in labor supply slows down. And the second thing is we've had very low productivity growth for most of this decade, something that Tom and I've talked about a lot over the last several years. And the good news there is there does seem to be some upward slope. Um. You know, we had fat somewhat faster productivity growth last year.

The the Q one number for this year was very good, So I think there's a chance that productivity growth is accelerating, which would be very good news for the economy. It would mean higher potential growth and probably higher actual growth than what we've seen the last um, you know, for through most of this expansion, but we're not going to get back to the kind of three percent potential GDP type scenario that we had in prior decades. Why is

productivity predicted to accelerate. Is it a capital ratio, a labor ratio or is it the pixie dust on the right hand side of the equation. Well, I would say it's a combination of the last two things. It's the number one is that we we've had stronger investment on the back of tax reform. And there's some cloudiness there in the short term right now because of uncertainties around trade.

But if if those are resolved, I think you should continue to better investment and that investment will provide better plant equipment for workers to be Let's do this Steve Stanley with Amber's Pierre Pott, and this is the President says he has a right to fire Powell. President Trump says Paul should have never raised rates as high as he did. Now the most dangerous interview of the day

of the week, the month, the year, and Paul. It starts with the palladium plated two thousand and eleven collection format Alligator or MEZ broken bag and what's that gonna set you? Gonna set you back forty dollars. It's just one of the small items available this paycheck on Real Real and Online, the Real Real, the Real Real and online marketplace. Who would I think it but an online marketplace for used luxury goods. Uh. This company, Real Real

is going public. I believe they're pricing their I p O tonight, So we'll see how the market feels about that. So to talk about this company, we're fortunate to have our good friend Sema Shaw. She's a analyst covering all things retail for Bloomberg Intelligence. She joins us here in our Bloomberg Interactive Brokers studio. So, seema an online market place for used luxury goods? There's such a thing as that. There is? There are actually many things like that. There's

a lot of competitors in this space. Um, they're trying to make the market for selling these use goods more efficient. But the problem with the spaces you're spending a lot of money, as Tom pointed out, so you want to make sure what you get is not counterfeit. And it's that authentication process that makes this. Uh, how how did they do that? How? Do they authenticate stuff. So if I'm going to pay forty dollars for whatever Tom was describing, I know what I'm getting. So they hire people to

specifically look at each item. So it's jewelry, there's a gemologist, and so it's a very time consuming, unhard to scale process. And should that item be returned, they will have to re authenticate it, so the margins on that second sale of the same item would be less. Is it profit making or is this like uber and Lift where we're in hope streams and the fumes of two thousand the ladder. We're on the hopes and dreams right now. There is no money to be made, and there's, as I said,

a lot of competition. So what they need to have in a marketplace to go, you need to have a lot of sellers, but you also need to have a lot of buyers. But in order to get sellers, they have to make sure that they make enough money on each product that they sell. And there's a lot of competition to even get the sellers from even people like Posh Mark Fashion file through um eBay even and they may pay the seller more than the real real I

This says Paul Sweeney if nothing ever does. Actually, says John Farrell, who the Saint laur On Jimmy twenties slide sandals estimated retail five marked down to four off now three for a pair sliders to walk that bill with, I mean that's what people are buying, right essentially. Yeah, so it is a deal on luxury. But are you getting what you paid for? That's what's costing me. This is used stuff. I mean, this is from John Farrell.

He's already worn those Saint Laurel sliders. Yes, yes, yes, somebody. So this isn't you know the thing about the you know, just the Amazons or the Ebays, it's about scale. So how do you scale this business? Like how many units

did they actually transacted? I mean just right, so they're total gmbe and ten million, and that's significantly less than obviously an Amazon or many other peers, like even far Fetch who's selling new luxury goods, which is over a billion or selling good So there it's they sold a total in the life of the company nine point four million items. But still you have to continue to get those sellers, and you have to keep driving the buyers. And I think in this case because of the sellers

can sort of jump from platform to platform. It's really hard to keep them unless you pay them a lot, so that affects your growth margin. How long has this company been around? Um? Not too long, I want to say it hours. I'm just wondering, like I was six years.

I don't have the exact because you have to build up some trust, don't you with your do And I think they have trust, but there are so many other competitors, and someone Likenshion file has it, you know, has been invested in by Name and Marcus name, and Marcus already has the stores and has the relationships with the brand, so that might give them an edge to So what do they make on a Patech Calatrava Tiffany's watched. They're

moving it out the door for fifteen dollars. Typically on an item they'll get about sevent gross margin on the first sale they resell it that the gross margin goes down to the high teens. So then, of course that depends on the product, but that's typically what it goes

after they've paid the person who sold. And I'm selling my protech there because I'm broke and and I'm going to get a hunk of it, and they get a hunk, how much do they get they get about versus someone like an eBay posh that's taking So in the movie that won the Academy Award this year, The Green Book and the guy So Broke before he goes out on tour with a guy, he takes his watch into the pawn shop and Queens of Brooklyn in the sixties, has

anything changed? Um, I guess this would be authenticated and you can sell to more people than in Queens and you can transact without talking to anybody. Interesting, So it's is this a growing market? Are they growing their business? They are growing their business from a top line perspective, as are many of their peers. But as a question is at what point will they be able to be profitable?

And how do you get this to scale so that you can authenticate these products and move them through your system at a faster rate and a less costly rate. And so how do they attract who's the typical seller? Is it someone who doesn't want to walk down to the pawn shop, or there are people who have these luxury products that they may have only used once or twice any in their closets. So they're targeting them like you monetize, monetize what you already have luxury that's already

out there. So Pharaoh is huge. I mean John Pharrell's just j enormous. He sees the Pateech World Time watch list they're moving out the door thirty five. Does he get to see it before he buys it? No? What you have to trust that the Pharaoh wouldn't do that authenticated the product, and so that is what they have built up by you know, getting their name out. So the real rule is trusted as a far but so are many of their peers. Wow, what's it? Is it? Like?

Is an average item? Is it a thousand dollar item or some of these fifty dollar items for luxury? I think it goes depending on it's jewelry, clothing, bags. I think there's a wide range. Right now, did they guarantee it if I buy something? Did they guarantee it's the authenticity? Yes? Yes, okay, all right, but that's a big risk for them. Well yeah, and if you don't like it, you send it back, they have to do it again, make sure you didn't

do anything to it, and that's the cost. All right, Tom, Yeah, I think you've got a new app for your phone here. I just I just hope Mrs Keen's not listening. Riley from St. Louis she knew all about this, she was all over it. Yeah. I mean, does it have a buzz? I mean, you know, it does have a bus. It's supposed to be a very hot from an ibo perspective, does have a buzz. A lot of these Why are they going I p O? If that's small? I mean, what's what's their motivation to go I PO? And they

could even do a direct listing? They need the money. Um. The founder of this company had been in a couple of prior companies during the dot com world, and so I think that's part of what's driving in. And also it's just a hot market for this retail consumer tech I p O s given what you saw with something like stitch fix Chewy. So they're performing much better than let's say the IPOs of Uber and Left. Their prices and watches are stunning. I mean, are people lined up

ten deep to buy this stuff? I don't know about that, but they do have buyers. But you know, you need to have increased velocity to really make any money. All right, Well, we're gonna look at this type time. We're gonna pay attention to this thing, you know, I love. I'm gonna record back on this tomorrow. How it trades, how it opens, the Aquinot uh really rare roch Patech. It's got a secondary dial on it. Estimated retail thirty four thousand. They're

selling it for four thousand more. That's interesting, we're real selling it for that's how in demand that watches. Just nothing I would ever ownly Aquinot travel Time black with a cool second drive. But there are people out there that there would be. Mike Mayo, if you're listening, I gotta watch for you. C Michelle. Thank Bloomberg Intelligence covering all things retail forced. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio a