tv Bloomberg West Bloomberg June 24, 2016 6:00pm-7:01pm EDT
a day of business. it is a reality. the world is coming to terms with the future. without the people of the united kingdom. the decision to leave a shocker that defied the odds. equities around the globe were hammered. points.tumbled 610 the world index dropped by 5%. treasuries, gold and the dollar rallied as investors scurried for safe havens. and it is not over yet. scotland is threatening to breakaway from the united kingdom. here on bloomberg television we capture the drama in those stunning charts.
we heard from the u.k. lytic leaders as they reacted friday morning. >> the british people have made a clear decision to take a different path. as such the country requires fresh leadership to take it in this direction. >> nothing can change over the short term except work will have to begin to extricate the country from the supranational system. >> i intend to take all possible tops and explore all options give effect to how people voted. in other words, to secure our place in the eu and in the single market. >> 70 million people have said we must leave the european union. we now need a brexit government that gets on with the job.
renegotiation of our trade relationship. spoke.ill gross i talked to earlier in the day and asked for his thoughts. have a look. successful been storming of the gains of finance. there's a growing sense of frustration about the benefits of free trade for them and immigration to them, even perhaps a statement on taxes. this is a frustration that they are sensing and they will see it grow as the year winds on. >> you sent out a tweet with an ominous morning. there will be more. what do you mean by that? thinking of there will be blood. perhaps there is blood in the
markets today but there's going to be more unrest, more protests. we can pick the individual countries that are at risk and have populist movements. it could be france, italy, in south america, could be in north america with trump and his populist stature in terms of which are related to trade and immigration. the people have stormed the gates of the city meaning london. statement that a times have to change. those statements they have made before. that mandate some sort of change. >> given what you have described
, is now the time to start betting on the outcome of populism. would you bet on a further widening of spreads between spanish or portuguese? is the logical outcome of what you are describing an unraveling of the eu at the very least? >> that's a tough one. today.ve widened that indicates bonds are less secure today relative than they were before. draghi, sense that whatever it takes is in place. if the spanish bond market experiences trouble he will double up to catch up in terms of policies. i would not go that far to start eliminating bonds but i do think
in general, certainly with germany, these interest rates offer relatively little for an investor. the investor should think in another direction in terms of their portfolio management. erik: what could drug you do beyond what he has done? do beyonduld draghi what he has done? guest: it has been announced to-three months ago, it's nothing new but it shows a progression. japanese have done the same. buy buy bonds and they stocks. we have seen two of the four , the u.k. and the u.s. have not moved into that area.
they seem to be limited to buy anything other than treasuries and near agencies. the central banks move in the direction of promoting stability. they continue to buy spanish and italian bonds to promote a sense of stability. that is what central bankers have tried to do the last 5-6 years. it has worked for them. now it is working less. that is not suggesting volatility will continue to behind. high.be that will be dependent on economic growth and the results of these policies in the past of generated. nonetheless central banks will do their darndest. i don't agree with it but you cannot fight a central bank that has been proven over the past
few years. i don't expect investors will try to. erik: more protests, more populism. how about clive crook, one of our finest columnists. you live in washington but you grow up in lancashire. you wrote britain faces an unsolvable dilemma. redditted a meeting on about the brexit. you think it says something bigger about the state of democracy in the west. erik: it is an important -- guest: it is an important point. one way to look at the brexit vote, it is a revolt of the people against the elites. that is something you see in many places including the u.s.. the political class in britain was out of touch with what
people felt about europe. cameron would never have called this referendum if he thought he would lose it. it is such a shock to the system. nobody thought this was going to happen. people making those calculations are in touch with what ordinary people think. the cluelessness of the in accountings for the trump phenomenon. you see it elsewhere in europe. there is deep resentment and aspects of the way the eu is run and growing and to eu sentiment. the political class has been semi-paralyzed. beginningexit is the of the consequences of that complacency. erik: one of the beauties or the horrors of the brexit vote was
that it was about a binary income. in or out. the u.s. elections are much more complicated. they involve many more issues. you think things will pan out differently than they did or will we see the same forces take over? people are skeptical about expert opinions these days. .hey are right to be skeptical i hesitate to make forecasts. i didn't think they would vote to leave the european union. i never thought the trump would win the nomination. it will be fair to people to ask what do i know? there is great risk year that we are finding that we don't understand quite what is going on in these political systems. severe.equences can be , thehing i would say
brexit vote is complicated. one way, it is in or out. the implication, where we go ofm here, there is a range things that need to be negotiated. it is hard to see how that will end up. bargain.ess for a hard consequencesher might be even worse. >> i will have the opportunity to check in with you later in the hour. return we will take you to the continent. what is next for the eu? plus how does he see it playing out? that is next.
here is how leaders reacted to the vote. >> i'm fully aware of how serious or dramatic this moment is politically. there is no way of predicting the consequences of this event. needed.wakening is >> more and more frequently we see ourselves confronted with the fact that people have very basic doubts about the direction the european union process has taken. >> the british people chose yesterday. now the page turns. it's an unprecedented day. >> don't play campaign games
with europe. that is the message from mario monti. they began by asking him whether his exit was the worst case in reo for europe's political leadership. >> it may lead to a more fractured europe. had decidedhe u.k. to remain, the all too general treatment given in february by the other 27 to the u.k. would toe created the temptation say ok, we want to renegotiate the ability to belong to you.
i believe honestly, much worse for the u.k. than the european union. i believe the u.k. would be disappointed in seeing how long and how adventurous would be the and partners of the the policieseak will be. just one but big positive to this drama. time it is clear to everybody that you cannot play games with europe. without running serious risks. you were at yale university. is this the moment where we change the dialogue on italy's
austerity, spain's austerity, the u.k. austerity? do we change our dialogue and decision-making? brexit is nothing to do with that. see has toe as i change in the sense that austerity first, a world without hase, fiscal discipline tuesday. prices for notge sticking to fiscal discipline. but we need to change the mind of the germans. it is not impossible.
serious investment is not a violation of fiscal discipline. this is the only change which is really needed. >> if we take a step back what does this moment mean? is this the beginning of the end of the european project? are we going to see more year at -- referendums? >> it is possible. if you follow just a second, the most serious risk of unraveling leaders more or less, all of them deal with europe, treat europe, participate in european decisions in their mind as top priority. and we cannot expect europe to
be able to take the right decisions when the most withtant body is filled persons like this. , believe the catastrophe showing that indeed you can be inflicted huge pains if you play wisdomme, may bring more , more sense of responsibility to the others. up next, we speak exclusively to u.s. national security advisor susan rice on the brexit. ♪
entrepreneurs, the president said he is confident britain is committed to an orderly transition out of the eu. my colleague set down with susan rice for an exclusive interview. david asked about the attentional risks that could stem from this decision. we respect the decision of the british people. this is not pointed change fundamentally the special relationship between the united states and britain which has endured for generations. nor will it change the nature of our relationship with the european union, which is a critical economic and security partner for the united states. we have every interest supporting the european union as they work to affect an orderly process of separation. we have an interest in maintaining the strong security
relationship we have within nato which includes not only many of the countries of the european unionut the united kingdom. the security implications need ,ot be particularly significant assuming britain and the european union continued to operate as they have for many years under the umbrella of nato. committed to the transatlantic relationship as always. playat role will the u.s. in london and brussels? >> we won't play a direct role. this is something that will be negotiated between the united kingdom and the european union itself. because we are critical partners , we will try to help them to the extent that we can as they stability support the
of europe and britain economically. we will continue as we always went to maintain our strong security ties and work together with the european union member migration,hings like dealing with refugee flows, countering terrorism. all these things are areas we would work together. our support and engagement has been critical and will continue to be. >> to you worried this will weaken nato? >> i don't see it impacting nato. erik: that was susan rice. clive, the ambassador wants us to believe to a degree not much will change. i'm not so sure. i'm asking what does this mean for multilateralism? what does it mean to the commitment to free trade? what does it mean for the
efforts to relieve poverty? for the fight against nate -- against climate change? >> i don't see it as a case of written turning inward. i know that is one possible interpretation but britain is very internationally minded. something believe campaign has stressed. they want closer trade relations with non-eu countries. much wrong to worry too about a breakdown of internationalism. this is much more about discontent with the european union. i agree with what susan rice said. there are so many common interests i would be surprised if national security interest were impacted to any significant
extent. >>on't see that happening. the europeans and the british air enough as they look east, that their future is tied together. >> i don't see any dissent in the brexit debate. erik: it's good to see you. thank you for staying with us on this special report. still to come, you hear from people with real money at risk. what the wild market swings warranted. how much should we make of the psychological contagion? coverage continues all weekend long. ♪ you guy's be good. i'll see you later
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that left deep scars around the united kingdom. remain or leave? investors around the world paid the price as the shock of the decision to exit the eu set in. stocks changed the most since the financial crisis. shot.cies were the drama isn't over. scotland is threatening to break away from the u.k.. solidarity remains in question. we cast our network across the financial world to gather opinions that matter. havee british people spoken. their decision is to be respected. it will be some time until we know the nature of the future relationship between the united kingdom and the european union. in the meantime it will be important there be clarity on
the negotiation process and it be carried in as smooth a matter as possible. >> to support the functioning market -- >> the brexit vote would lead to a downgrade in the ut sovereign brady -- u.k. sovereign rating. that is what we said. erik: the market reaction was swift and dramatic. wasapproach taken by most shoot first, ask questions later. has seen-- howard dozens of crises before. i wanted to know what he makes of the turmoil.
howard is not jumping on the bandwagon. >> there is no history for this development. i don't see how anybody can be confident they know what it means. the economies will slow down. there has been a synergistic effect on the u.k. and europe from membership in the eu. they will probably each produce less on their own than they would have together. i think there will be a psychological effect as people spend less and invest less. i would be surprised to learn this is a long-term fundamental negative. >> wide you say that? the reaction is very strong in the markets. but our people going to live differently? are people going to buy less?
you told me even when there are crashes in the stock exchange the people outside are still buying hot dogs. other than psychological contagion which should not be underestimated i don't think this is a fundamental catastrophe. i do think there will be strong societal and political and geographical ramifications but i have trouble dealing with it as a financial catastrophe. if it is not a financial catastrophe and things are going to be ok, yet at the same time confusion, which i will translate to uncertainty, should be the order of the day, what is the logical thing to do for an investor?
>> that doesn't sound like a position.ble there's an old saying i heard from many decades as long as i have been in the business. the markets of poor uncertainty. they do. that doesn't make them correct in their abhorrence. when uncertainty rises people get uncomfortable. they do sell. that doesn't make them right. i don't see why increase uncertainty in itself makes selling the right thing to do. it is always a matter of what are you selling, at what price, what are their probabilities? the mere fact uncertainty has increased doesn't mean it is time to sale -- sell. erik: the people who sold earlier, when we were at the lows, they are going to regret those decisions? >> they may. not that they will.
but they may. i don't see the math through which increase uncertainty means you should sell, and certain that you should sell at any price. the clever people who say i'm going to get ahead of everybody the by selling, they put .hing down into percent is they areans wrong. erik: that was howard marks. the brexit throws the future of london into serious doubts. perhaps it was no surprise bank stocks took a beating. marking the worst single day decline in four years.
like any good value investors he is sorting through the wreckage. >> there is considerably more short-term uncertainty in the environment. that's never good. prices have reacted quite negatively. comparison.irect the banks are in a better position to weather these uncertainties that we are now facing. we do have some positives. there's a strong global consumer out there, high employment rates, low unemployment rates,
low energy costs, consumers are doing pretty good. they are not as indebted as they were. we don't have these that overhangs. there are some negatives with the uncertainty of what is going to happen with the united kingdom and how it relates to year up but the banks are in a better position to deal with this uncertainty if you look at their leverage ratios. is perhapss overdone. wells fargo marked down 5%. stocks downk 15%. would you go shopping at these levels? wereep in mind, they already selling at low valuations before this happened. there was a rally this week that
if you look at in the last 8, 9 months in anticipation of this, if you look at the valuations, they were already reflective of something coming. i don't like to comment on current trading but our motive of operation is to determine the value of a business and price separates itself quite aggressively. i don't think the intrinsic value has fallen by anywhere near what the market has done to their prices. you can almost guess what our thoughts are right now. ondid you buy credit suisse the drop? >> i can't really talk about our current trading. i would say at this price it is attractively priced.
some of these other european financials. there is going to be short-term uncertainty. it is to be expected. the brexit debate may be resolved. one question is scotland. intland held a referendum 2014 and voted to stay in. thursday's decision may change that. >> scotland is making a lot of noise. scotland did the decisive vote for remaining in. they do not want to lose out membership. there could be a referendum. whether it will come soon, or whether they will not, it is clear. they have nothing to gain in rushing through the referendum. this will play out for months and years.
worldwide. they touchedd as lows not seen in 30 years. they begin by asking what bank of england's mark carney needs to do next. >> he needs to make sure they have enough liquidity. he needs to get on the phone like others and talk about developing a plan b that had an association agreement. to continueing is having this notion there is nothing to replace eu membership. coming up with a plan b is going to be critical. >> it doesn't look like we will have a plan b for a long time. they have not triggered article 50. there is talk of waiting for
october. we could be here until october. how significant is that? guest: that would be bad news. markets don't respond well to vacuums. if there is no clarity on what institutional arrangement could emerge next, you have the worst combination, institutional uncertainty, on top of financial fluidity. having a plan b is going to be critical in the days and weeks to come, if this financial shock doesn't develop into a bigger economic shock. >> it looks like nobody has a good hand of cards here but if you were sitting around the merkel,ou have angela who has the better hand of cards here? erik: i don't think it's about
who has the better hand of cards. everyone is holding hands and they have to work weekly to avoid a recession. it's not easy to change institutional linkages overnight. there's a reason why the european stock market is doing worse. this is a major shock for europe. if your cannot navigate this is going to be a lot of questions on who comes next. i think this is not as much who has the better hand as they should hold hands and tried to make the best out of this. this phenomenon is all over the western world. the majority of decided to go against expert opinions, to go against the political and business elites and express anger and frustration with this low growth and rising inequality.
this is an important wake-up call. already france wall on and angela merkel saying this needs to be done quickly. you seem to be comparing that view when you time to figure out what we need to do here. does either side have a plan? does other side have a plan of what comes next? >> my hope there were contingency plans. there was a plan b being discussed. if in fact a plan b wasn't discussed you are going to see a lot more financial volatility ahead. i wonder how much a financial shock it is. we can let the intraday moves the for themselves.
how much of a financial shock could this actually be with that in mind? shock.an be a financial this is not lehman. this is not a payment and settlement crisis. it is a shock to the institutional setup. it will cause major financial moves. you will see the financial sector move more than technology when the dust settles. thetill haven't seen how retail segment is going to react. what extrapolate too much you have seen so far. these are still early days. there is still an economic question. in terms ofdays yet
how markets were reacting. >> is this just the start though? donald trump is on side of the pond today. why should we extrapolate we will see more political events like this? we have french elections, german elections, so much more political upset that could come down that results from this. this is the first of many. erik: it's not even the first. -- guest: it's not even the first. is unthinkable to have become reality because people are angry and you get a protest vote without thinking about what the consequences of the protest vote is. there is a probability this be the wake-up call to politicians. member the context. what is ailing us is not an engineering problem. most economists have an idea of
what is needed to promote inclusive growth. what is alienating us is the political will to affect a handoff from the reliance on central banks to a comprehensive policy response. maybe this can serve as a wake-up call. >> he wants to be optimistic. when we return, here more brexit reaction test here more brexit -- hear more brexit reaction. >> june 23 needs to become a national bank holiday, independence day. >> the country requires fresh leadership to take it in this direction. >> britain will continue to be a great european power. ♪
erik: i'm erik schatzker. you are watching our coverage of the brexit aftermath. leaving the eu will be a messy process. already they are taking stock of the situation and trying to come to grips with an uncertain future. >> there is no doubt the consequences will be negative on all sides. saddened me the european idea has lost its attractiveness to so many of my fellow countrymen.
as a bank headquartered in are ready for the consequences. take time. years, itjust the two is the renegotiation, all these kinds of agreements. they could take up to 10 years to renegotiate. the uncertainty is to say the least troubling. >> we don't see riding on the street relating to this anger. you see digital writing. -- rioting. pay attention to the social media feeds. you can read the anger people have had.
europe needs a new playbook. it is now looking to its largest economy to take charge. >> one of shock and concern clearly. we were talking to leaders. there was a contested for for germany and the eu. pragmatic as she is the leader of germany. she has a difficult balancing act. we have the right wing parties from france, desiring that own referendum. talking about a rush through to get this deal done with the u.k. and start with preparations for an exit.
she's been the voice of reason. she already realizes the business side of the balancing act. she was to ensure the economy progresses as best it can. >> italian prime minister, the french fry minister arrives in berlin. what we expect to come from that? merkel has summoned her counterparts. and the head of the eu. he has been the president. he said member those incredible words, if we saw the eq leave -- u.k. leave it could spell the end of western political civilization itself. they will want to start to decide how they will lead the eu to be cohesive and prevent any domino effect playing out.
♪ announcer: from our studios in new york city, this is "charlie rose." charlie: we begin with this evening, the supreme court justice supreme court deadlocked. the for-four ruling leaves in place of the burkart decision the president exceeded his authority. the program would have shielded millions of undocumented immigrants from deportation. this is considered a blow to president obama's legacy on immigration. he does breast -- he expressed disappointment from the white house earlier today. president