Ranking executive to leave amidst the 737 max crisis. Nike names a new ceo. John donahoe will take over next year as the Company Looks to sharpen its technological edge. Shery first, lets get you started with a quick check of the markets. We are continuing to see pressure on u. S. Futures which are down 1 10 of 1 . This after we had the major indices finishing in the red. The s p 500 lost 4 10 of 1 . We had some weakness for the tech sector offsetting the rally we saw in energy companies. Oil jumped after the report of the opec plus discussing their cuts. The dow down to tenths of 1 , while the nasdaq lost 7 10 of 1 . We have uncertainty over what happens with brexit. We had key votes happen in the u. K. Parliament. We will discuss that later in the show. We also have a mixed bag of earnings when it came to those results out of the u. S. 1 5 of s p 500 companies are reporting this week. We have some solid performance out of united technologies, Harley Davidson but also disappointment from Companies Like mcdonalds and ups. Lets see out things are shaping up in asia. Sophie asian stocks are set for a mixed start with earnings in focus. Off 1. 2 after the latest trade data for september. The deficit narrowing more than forecast. Also on the agenda, we have Inflation Numbers from singapore and malaysia due today. Outputaiwans factory from 2. 28 . Japan is back online. Thailand is offline for a Public Holiday this wednesday. The cabinet approved a second phase of stimulus in thailand. In hong kong, the finance chief announced a third round of relief measures on tuesday. What is announced so far is too small. This as speculation builds over carrie lams future. Haidi Sophie Kamaruddin in hong kong. This get the first word news with ritika. Ritika the Financial Times says china is drafting a plan to replace hong kongs carrie lam with an interim chief executive. The report cites unidentified people briefed on the deliberations in beijing. Lams successor will be installed by march if president xi jinping decides to carry out the plan. The interim chief executive may not stay for a full fiveyear term. Hong kong says taiwan plan to send personnel to the territory to bring back unacceptable. The hong kong citizen who allegedly murdered his girlfriend in taiwan prompted the controversial extradition bill that led to months of hong kong protest. Taiwan wants the suspect to stand trial there, but hong kong says it cannot extradite him because the bill is being withdrawn. Russia and turkey have struck a deal to create a buffer zone in northern syria. President erdogan talked with Vladimir Putin for more than six hours before announcing the agreement, which includes joint patrols and court and needed action with Syrian Forces to remove kurdish fighters from border areas. The kurdish ypg fought for years besides u. S. Forces, but turkey labels them separatists and terrorists. Form of military chief will be asked to try to form israels next government after Prime MinisterBenjamin Netanyahu failed to bring a coalition. A draw in septembers election and will now be given the parliamentary majority. Hes expected to struggle as he lacks the backing of more than half of israels. Parliament global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Shery thank you. Downing street says delaying brexit until 2020 means calling and election, that is after mps voted against Boris Johnsons fast timetable to get the bill passed by october 31. The European Council president donald tusk says he would recommend the eu accept the u. K. s request for an extension. We had an initial victory for the Prime Minister but that was reversed by the second vote. It is an extension of brexit inevitable at this point . Yes, it certainly is at the moment. Pause according to the government. It is another delay yet again. Initially, Boris Johnson had a pretty big victory. This is the furthest the u. K. Has come to exiting from the European Union in the history since the 2016 referendum but he really wanted to get that timetable endorsed, the three days of debate. Mps were not happy with that. They didnt think it was enough time. He won on one issue but did not win on the other. Eu is likely to give that delay until january 31. The big question now for Boris Johnson, with that time, does he try to push this deal through which he won by a good margin on, or does he use that time to push for a general election where he could potentially come back with a majority and get the deal through how he wants, or you could potentially lose his power to the labour government. Haidi the result in that first round of voting, does it suggest he could potentially push through any deal without the support of the dup . Did not reallyup vote for him in the first deal or the second deal but he was able to pick up some others, including the opposition party, some labor mps. What happens now is it will come down to the amendments. There are two big amendments that many in the labor side want to see in this deal. One is keeping the u. K. In the Eu Customs Union and the second is labour wanting second referendum on this deal. If those amendments were to be voted into this Withdrawal Agreement bill, it is likely Boris Johnson will want to pull the deal in its entirety and again push for a general election. For me, the most important moment of this evening was the tone Boris Johnson struck following the vote. It was very conciliatory. He was threatening a general election, threatening to pull the bill going into the vote. Afterwards, he did not mention either of things. It looks like you want to give this deal a try. Annmarie with the latest on another eventful day for brexit. Lets bring in pimco Global Economic advisor. He joins us now from newport beach, california. Great to have you. Is there a risk that we have an extension until january, that is a long time what potentially could unravel given that this week, it felt like the Prime Minister had momentum behind him . Yeah, i think the uncertainty continues, but it looks increasingly unlikely that we get some sort of no deal hard brexit. Think an extension is seen as a positive sign with more time to negotiate. The expectations of markets and our expectation would be during that extension, we can either negotiate or parliament would actually agree on this deal, or Boris Johnson goes for the new election, wins the election, because that is what the opinion polls say at the moment and we then get brexit using this deal. Up this want to throw chart of the pound and get your view on what happened to u. K. Assets is what we tend to see is sterling reacting in a binary matter to whatever brexit outcome becomes more likely. If we have this gap between now and january and we have the potential of a general election, that sort of throws the options wide open. What does that mean for sterling and u. K. Assets more broadly . Joachim i think you would see more volatility because even if tories looky the likely to win, that is certainly not a given. Tories have been wrong before. It could lead to additional volatility. Eventually, i think you will see a brexit that involves a deal. Our view would be that sterling is more likely to strengthen a little bit further than weekend. Again, under heightened volatility. Otherwise, we think u. K. Banks look quite attractive. They are attractively priced. There is still a relatively high brexit premium priced in. That is the sector, u. K. Financials, that we quite like. It probably will not do much during that period of uncertainty, but eventually, we think of the u. K. Leaves with a deal, you are more likely to see deals rising then falling, similar to sterling. Shery are there any sectors you should stay clear given the uncertainty of when brexit will happen . Joachim i think what we should keep in mind is that even if a brexit with a deal happens, it will still be significant uncertainty about the future trade relationship between the eu and the u. K. , because then that will have to be negotiated in the transition period during which the u. K. Remains in the Customs Union and the single market. That period should last until the end of 2020. In that uncertainty, i dont think companies would be willing to invest a lot in the u. K. Capx should remain weak. That means the export sector, the industrial sector in the u. K. Will probably not do particularly well even if we get a brexit with a deal. Shery what are the implications for gdp numbers . Because we have seen the u. K. Log one quarter of negative growth. Joachim i think with the probability of a no deal brexit, a chaotic brexit, i think you will see some recovery of growth. We would expect Something Like roughly 1 gdp growth next year. The uncertainty about the future trade relationship will still weigh on it and investment sending. You will see expansionary fiscal policy, almost irrespective of who will form the government next year. Whether we have this government or a new tory government or even a labor government. You are likely to see more fiscal expansion. That will support the consumer. The net effectiveness is likely to be lackluster growth up around 1 next year, but with a very high band of uncertainty around that. Haidi as you pointed out, the relationship when it comes to trade and negotiations with europe remains one of the sources of uncertainty. Does that leave the concern that we see this dragon not just on the u. K. Economy, but across broader europe . Joachim i think it is certainly a drag on European Growth overall. But the main drag will be on the u. K. Economy. The eu is the largest trading partner for the u. K. That uncertainty will weigh down much more on u. K. Growth than on growth and the rest of europe. The rest of europe has all kinds of problems. Growth has slowed a lot. This certainly does not help. It is a drag, but again, the biggest impact, the biggest negative impact from this uncertainty will be on the u. K. Haidi do stay with us. We will have more with joachim fels, speaking of the drag on the global trade war. Shery later, we will get the latest on boeing and Kevin Mcallister steps down as the head of the jetline division. The first highranking division to go due to the 737 max crisis. This is bloomberg. Shery the latest brexit votes in the u. K. Parliament have added to the global uncertainty facing investors, through the trade war and government changes and now protests over inequality. The economic implications amount to what pimco has dubbed a window of weakness. A low growth period of vulnerability over the next several quarters. Still with us is pimcos Global Economic advisor. Thank you for sticking around. A key question is whether this is a window to Global Recovery or global recession, and what would define that. Joachim that is the trillion dollar question. Window to recession or window to recovery. It is really hard to say. Normally, we economists like to express confidence in a particular forecast. This is a time where uncertainty is high, where any baseline forecast is less likely. Where you have relatively large left tail but right tail risks to the outcome. Our baseline is this window of weakness will give way to some sort of recovery in the course of next year because we are seeing global monetary easing, fiscal policy likely to become more supportive. But again, a lot can go wrong if the economy is in this window of weakness. If growth is slowing to globaling like stall growth falls below 3 , u. S. Economic growth, gdp growth falls to Something Like 1 in the first half of next year, that is what we would call stalled speed. It does not take you much to push you over. We are watching the most of factor which remains trade policy. Yes, it looks like we get a truce in the near term between the u. S. And china, a phase one deal. We have learned over the past few years that these things, particularly on trade, can turn on a dime or a tweet by the president. That is the first risk. The second Downside Risk is the fed actually disappoints markets. Markets are price for another two to three rate cuts. This is not what the fed is talking about, at the moment. There is a risk the fed falls short of Market Expectations and that means risk assets, which i think are based were supported by the idea of easing might correct and that could push the economy over. Shery you are talking mostly about risks to the downside but what about risks to the upside . When you get Monetary Policy combined with monetary support so how do you position in the market in this environment . Joachim people call economics the dismal science because economists like to focus on recession. There are upside risks. The main upside risks is that not only do we do get a better deal, not only a phase one deal, but that a phase two deal that rolls back tariffs. That is one upside risk, the most obvious one. The second one is that fiscal policy actual becomes even more active that it looks likely to do at the moment. There is a chance that in europe, we finally see more fiscal action, particularly out of germany. China could open the floodgates even more to physical easing. They have already done quite a lot in the first half of this ifr, but more be becoming the recent stabilization of growth does not prove permanent. Fiscal policy is something we are watching very closely. Haidi what about the limitations to conventional or even unconventional monetary theory . We are the are been egov rba governor talk about the needs to explore other policy that perhaps we have not looked at before because of the limitations of effectiveness that we are starting to see across Major Economies . Joachim Monetary Policy is running into diminishing returns and there is not that much leeway for most major Central Banks because rates are either already negative or there is very low positive territory. Also, Balance Sheets are pretty bloated. This is where fiscal policy comes in because if you really want to go unconventional, then you have to get rid of the division between or the separation between Monetary Policy and fiscal policy. What this means is more direct Monetary Policy in the sense of supporting, or actually, giving governments money directly to spend. Not by buying bonds, but by crediting the finance ministries, the treasuries and the central bank and the government then goes out to distribute the money directly. This is really unconventional. I think it is a big hurdle for Central Banks to take. Haidi i am keen to get your talks on this risk of global unrest we are seeing. Everything from lebanon, cross chile, hong kong as well. In a lot of ways, it is on this broader theme of nationalism and discontent, particularly among young people globally that we have seen with trump, with brexit. We can bring up this map we put together to take a look at the global hotspots where we are seeing this civil unrest. Is this a pretty major aspect of macro risk we should be paying more attention to . Joachim absolutely. This has been one of our secular or longerterm themes. We think we are in an age of disruption. Economy andw the Financial Markets are being disrupted, but politics, the rise of populism which we think has not peaked yet, increasing polarization. All of that provides a lot of reasons to expect more disruption, political upheaval around the world. I think what is feeding this is the longterm impact of globalization which has left many people behind. It has not only created winners, but also a lot of losers. The same could be said of new technologies which create winners, but also losers leading to higher technological unemployment. And you are seeing the polarization of the populism. Rhymes with protectionism. We are looking at age of not only disruption, but potentially the new age of deglobalization. That could turn a lot of the things that investors got used to over the last 20, 30 years on their head. Haidi thank you so much for your insights. Shery later on bloomberg tv, imf Deputy Director asiapacific department will be on Global Markets after the latest asiapacific outlook. That is at 11 10 a. M. In hong kong, to 10 p. M. In sydney. This is bloomberg. Shery President Trump is set to privately test the idea of replacing is acting chief of staff Mick Mulvaney for several weeks now. Among the potential replacements, treasury secretary Steven Mnuchin and counselor kellyanne conway. For more, lets go to greg sullivan. I cant imagine last weeks press conference on the ukraine quid pro quo must not have helped. Greg it certainly didnt and one is the few things that bolsters the argument that trump is looking to replace mulvaney. We have the press conference will roll veiny seem to undermine the White House Defense of the impeachment probe, mainly that was not a quid pro quo were the july phone call with the ukrainian president. There are other things as well. For one, some trump allies have been critical of mulvaney over the white house response to the impeachment probe in general. There is also the fact we can point to mulvaney is dylan acting chief of staff, not a permanent one. That is a change President Trump could make quite easily and he has not yet. Some people familiar have cautioned this behavior of testing these names mnuchin, kellyanne conway, and deputy chief of staff Chris Flavelle it is not new behavior. He test a lot of new ideas this way. When he is asked about whether he will replace mulvaney on monday, trump chose not to respond. Haidi the top u. S. Envoy to ukraine what did we learn in this impeachment probe . Greg we learned quite a bit today. William taylor, the top envoy to ukraine for the u. S. , they clear diplomat. Taylor took when it meticulous notes and some of his interactions with colleagues and his concerns over Foreign Policy and how it is being conducted with ukraine. Taylor told lawmakers he became concerned when a senior diplomat told him in Early September that u. S. Military aid to ukraine was contingent upon a public promise for an investigation into President Trumps political rivals. Taylor became concerned over what he called in proper channels for policy to ukraine. He understood that those channels will being led by rudy giuliani. Haidi greg sullivan, thank you so much the latest from washington. Shery if you are away from a screen, you can find indepth analysis and todays big newsmakers on bloomberg radio. Bloomberg radio plus or bloombergradio. Com. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. Haidi it is 9 30 a. M. In sydney. The market open is 30 minutes away. The futures session shaping up. Looking like a flat open. Developmentsrexit with Boris Johnson losing the second vote in his attempt to push through his brexit deal in the fasttrack manner. We are looking at an extension into next year. Im haidi stroudwatts in sydney. Shery im shery ahn in new york. Lets get the first word news. Ritika thanks. A u. K. Official says Prime MinisterBoris Johnson will call an election if brexit is delayed until january 31 next year. Johnsons push to take a u. K. Out of the European Union this month was derailed with parliament blocking its plan to rush the deal into law. The house of commons back johnsons deal but the defeat will leave brexit in limbo with the eu to decide how long of a delay to offer. My disappointment in the. Ouse has voted for delay rather than a timetable that would guarantee the u. K. Leaving the eu with a deal. Now we face further uncertainty. The eu now must make up their mind. Answering parliaments request for a delay. Ritika the top u. S. Envoy to ukraine has directly contradicted President Trumps assertion there was no quid pro quo behind his july 25 phone call conversation with the ukrainian president. Ambassador William Taylor made a statement to the congressional committees. The president tweeted that the impeachment inquiry is a lynchi ng, but added that we will win. India is considering curbs on some imports on turkey and malaysia in response to the leaders on the autonomy. We are told the modi is exploring tariffs and nontariff measures. Holdy urged india to negotiations in pakistan. The malaysian might Prime Minister says india has invaded and occupied kashmir. Protests have continued in chile while the president met with political leaders to explore solutions to the crisis. The government says 15 people have been killed in five days of writing and violent clashes. About half the country remains under an emergency decree or military curfew. The unrest was sparked by an increase in subway fares that spread into nationwide antigovernment protests. Global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Shery thank you. Australia opens at the top of the hour. Lets turn to sophie for what to watch. To highlight this group that voluntarily suspended its shares pending the announcement of the Trading Outlook which the company says it is not in position to make. The afr reports the company is concentrating funding positions, including equity raising with the potential downgrade. Expect it will be required up to five days. We are watching wise tech which has until the start of trading to release the statement in terms of the report which focuses on its acquisitions, alleging it is a frantic effort to maintain the narrative this is a fastgrowing tech business. The firsts far from aussie firm to be targeted by shortsellers. Even after losing 22 over the past two trading sessions, the stock is outperform the benchmark, up 56 yeartodate. A quick word on the pound. Boris Johnsons Brexit deal on hold. Now staying near overnight session lows. Cable has broken out of the range after a rally of more than 8 since early december. From here, strategist say it will rely on a win from the government and in the event of a defeat with no uptick and no deal pricing. Told us to expect more sterling volatility ahead and wells fargo warning of a 2 or so selloff if we see a longer delayed scenario. Haidi Sophie Kamaruddin. Lets get more on what we are watching us trading gets underway in asia. Adam haigh is here. Playing into Risk Appetite given so far this earnings season has seen a pretty upbeat picture. Adam we are seeing brexit rubble on now for a couple of years. Yet, largely markets have been able to take it in stride. What we saw in the past 12 hours of trading is evident that these kinds of issues are still very much reflecting not just in the currency market and u. K. Assets, but they also have the potential to upset a cast far wider. We had a move in treasury yields and u. S. Equities came up on the close with much do with the brexit develop it. With the earnings season looking pretty reasonable now, and the technical set up still looking pretty good as this chart shows in your library. The overall indicator still looking, certainly not in a stretch fashion. We got some big heavyweights coming. Microsoft, amazon later in the week. About an 80 hit rate on earnings beating on the top line. It still suggests there potentially is a little bit of further upside for equity markets in the u. S. Maybe testing fresh alltime highs very soon. The point is there is nothing else out there, and certainly nothing on the trade front for people to want to add to risk positions and get it more overweight on risk assets. Shery we are seeing the very popular short volatility trade become less profitable. What are the implications for markets . A strategy that has sunken plenty of money losing steam. Adam that has taken a lot of money, especially when we think about some of the events at the start of january last year with the big spike in volatility. Shortlly, the trade a volatility so selling options that benefit when volatility comes down has generally been a winning strategy. Having said that, this chart shows it on a longterm basis. Is it still to the main gains on the s p 500 that many things have lost out to the broad trait of being heavily overweight u. S. Equities. Really, the implication for markets here is it is starting to lose steam which new research shows. You are losing one of those pillars that underlies, plays into the hands of the long equities, almost as a proxy. When that is taken away, that perhaps gives you one less reason to push markets higher from here. Considering we are bit of an inflection point, testing ,lltime highs for u. S. Markets we will see how performance deteriorates. Shery adam haigh, thank you so much. You can find his charts on the library on the bloomberg. The head of the boeing unit in charge of the troubled 737 max jetline has stepped down after less than three years on the job. Su keenan has more on this story. Given the max 737 crisis at the moment, perhaps not that surprising but this did come on the eve of that Third Quarter results. Su which is likely to overshadow the results. Board meeting on monday in which this change of leadership was discovered as the highest ranking executive to step down. Kevin mcallister, if we can take a look, he is leaving his role as the head of the union that was head of the max jet. He came in just as it was being released. Hes being replaced by another division. Many say it is a fine executive, but one analyst said this will only continue to raise questions over boeing. They are far from out of the clear. The stock is up just a bit call it a relief rally but the decline is clear. If we look at some of the issues that are facing boeing, the S P Ratings Agency downgraded them, citing specifically the max jet issues taking them from stable to negative. What we are seeing with the crisis, the concern and reports that perhaps they misled regulators on the max jet and it has Lasting Impact on their profitability, their ability to compete. Meantime, boeing is set to report earnings later on wednesday. We saw some optimism on that. Su we did. We saw some positive comments again. It had been a schedule to bring the max jet back to service. That is in question because of these recent revelations. Lets go directly to the big picture for the max jet and the woes many believe are likely to overshadow the Earnings Report which may have been a sort of comeback story for boeing. Lets take a look at some of the big issues that are facing boeing. Lets take a look at the expectations for the earnings. What is important to note is there is also going to be a lot of questions of the ceo who will be testifying later tuesday and wednesday of next week before the senate and a house committee. The questions will be but did boeing know and when did they know it about the problems with this max jet . That is clearly going to affect the Company Going forward and will be a big focus likely on the conference call. It is important to note that some of these rather revelations are very damaging to the company in the view of analysts and the analysts have been downgrading the company even though it has been making progress in winning approval from regulators up until this point and again getting some of their contract issues sorted out, this new development is probably going to get better before it gets worse. That is the view of some of the analysts so far. Su keenan with the latest on billing. Lets take a look at the oil patch. Wti retreating in the asian trading session. We are seeing futures lower in new york now. This after it jumped to the most in more than a week in new york on a report that opec and its allies will discuss deepening supply cuts but we are seeing a lower picture in the asian picture after u. S. Inventory higher. Bloomberg Energy Reporter is joining us now with more. This is whatever it takes. They are really worried about 2020 growth. That is right. The whole move in new york was basically on a report that opec and its allies would consider deepening those production cuts already in place to meet that challenge of rising supply that they are facing which has put Downside Pressure on prices this year. As you mentioned, we have seen ever treat and prices this morning and that is on the back of the American PetroleumInstitute Report which currently shows stockpiles for six week in a row. It is that pressure from u. S. Production which is really putting opec in a bit of a spot. Market power in terms of the impact is diminished by the u. S. Shale revelation. U. S. Supply running pretty high. It puts them in a bit of a bind and limits the price impact they can have. Shery we are hearing again from aramcos onagain, offagain ipo. Looking set to be back on for december. What are the chances of this actually happening before the year is out . James as you say, it has been an onagain, offagain process this year. The latest report is that aramco is focusing its efforts on local institutions to back this ipo. It has been a very lofty valuation. Looking to value the company around 2 trillion and International Investors were balking at that price tag. Now it is shifting to get cornerstone investors on their doorstep, maybe saudi institutional funds and maybe some allied states close to saudi arabia. If they can get them to back it apparently, they are less price sensitive that some of the international funds. They are still hoping to get that deal away in december. The focusing, they have davos in the desert coming up in late october. I am sure they would love to have a big announcement to make of that particular event. It is looking slightly more promising that they can get this deal in december but it depends very much on Market Conditions at the time. Who knows what happens with the u. S. China trade war over the next month or so. We could get more disruptions that affect the demand picture for oil. I would not say the book is closed on the ipo getting done before the end of the year. Shery james thornhill, our Energy Reporter joining us on the oil price as well as aramco. Coming up next, how this fund manager is challenging his inner fbi agent to see through a corporate smokescreen. He joins us next to talk about how techniques work in the world of investing. This is bloomberg. Shery i am shery ahn in new york. Haidi i am howdy strike wants haidi stroudwatts in sydney. In an era of computerdriven investment strategies, human judgment is still paramount in reaping results. Our next guest took a course from fbi agents on how to interrogate sussed suspects and bringing that skill to his fund. Pegana Senior Fund ManagerRhett Kessler joins us now from melbourne. I cannot help but to find this incredibly fascinating. What are the questions you ask and what are the red flags you are looking for when you are vetting ceos and companies . Rhett so, it is part of what we do every day, but the kind of , forions we are asking is every question weve got, we know the answer to three or four of them. Two or three of them will show the cfo or ceo in a good light. We see how much they exaggerate, the cadence, use of pronouns. The pace of speaking when they are seeing themselves in a good light and a couple of questions with issues that show them in the bad light. We calibrate the difference in the kind of answers. We are much better prepared so we can ask questions where we dont know the answers to gauge the authenticity or the integrity of the answers. That is just a part of what we do every day. We interview company management. Haidi the expectation is, interestingly, that most individuals will embellish or exaggerate to some extent . I guess some element of that is still acceptable . Rhett absolutely. I think everybody tries to put their best foot forward and tries to show their company in as good a light as possible. And we expect that. You want a ceo to represent his company in a good light but you also want some honesty and moderation. You get that from a lot of good people. We Love Companies where not only do we get the good, but we get the bad and the ugly in the same answers. It helps us calibrate the answers when we dont know the information that we are seeking. Our job is almost, we try to put a big puzzle together, the mosaic theory. Try to put all the different pieces together is very important. I must stress that we dont always find the person is lying, but we do know sometimes when there is something missing and we know we need to dig further. We will circle around and come back to the same issue. Sometimes they will go and see their competitors, suppliers and customers and ask questions to put the story together. The real purpose is to find businesses that are run by competent management, good businesses and they have the right price. That is really what we are about. Shery it seems what you are trying to do is get to the essence of those businesses. What do you do then if there are parts of the equation you cannot really predict or see uncertainties we have this days . Whether it is political boards related to trade for the Macro Economic fundamentals. Rhett right. So, we are not trying to pick every winter. We have this wonder ability when we dont know, we dont play. At the end of the day, we are trying to find 20 to 25 stocks which can reserve our capital and give us a decent return for the risk we are taking on. Some examples of companies where we dont know, trying to predict hthe global oil price. We have no idea what is going to happen to the oil price in the next week, let alone the next couple of years, so we steer away from companies that is the major profit driver. We focus on toilet paper and toothpaste type businesses. Businesses that sell things to people that they use every day. Medical, health care. Or its groceries or somebody filling up, etc. Make your job a lot easier. Shery does that mean you are also a bit more defensive . I do see you have substantial cash holdings. Rhett so, i guess what is unique about our mandate is we dont have to be fully invested. Whenly deploy cash if and we can find businesses that are defensive, at the right price, run by competent management. When the stars align. I must say over the past 10, 11 years, probably our biggest discipline has been the ability not to have to be invested. We dont hide in stock. Cash is a riskfree, interestearning option to buy value if and when it emerges. That is a very valuable tool. Rather than being forced to be fully invested at all times. Haidi rhett, given that we spend our day talking about global macro risks, a great deal of uncertainty over trade which will play into some of the themes you invest around. Consumer demand. You have to wonder how quickly that is going to be taking the impact as well. I am wondering if you are comfortable with the level of casualties you have or do you think and more risk off approach would be serving you well in the coming approach in the coming months . Rhett that is a great question. We have three or four tools we use to preserve capital. One is as we mentioned is the focus on the defense of companies. Two, you picked up on, which is high cash holdings. If we cannot find things that offer us what we are looking for. Thirdly, what we have done recently is we have bought 5 as a way to protect and writing in an Insurance Premium against the market. We dont know if the market is going to fall. We dont know when it is going to fall, but it is like buying an Insurance Premium. We are at a time when vols, quite low prices, and we managed to get set. It is not pray worthless but at the end of the day, it is really nice to have Insurance Premium against the downturn. Views i want to get your on an issue i know this is not a stock you hold in your portfolio, but we have seen by theh being take down shortsellers saying the company overstated its profit in organic growth. Does this surprise you . And line of work, investing doing Due Diligence into these companies, is there a governance problem more broadly that you see daytoday . Rhett i am not sure there is a governance problem. Buyer beware. If you want to play in a stock that is a very risky multiple, that is doing a big roll up, then you have the right to do that if you choose to put your money into it. We take a different view, and that we look for off the tax cash earnings yield. If it is on 200 times off the cash earnings yield is too low for us. We think the business is a wonderful business model. The question whether they can execute on that business model, the jury is still out. They appear to be doing pretty well but when you have a runup, it is hard to see through the numbers. We have chosen not to play their because the valuation takes away the capital preservation protection. Are up to those risky multiples, you have to have buyer beware at the forefront. If it is on the 200 multiple, i have no idea if it should be 50 or 250. It is where you have to take a very long view. Haidi great to have you on with us. Rhett kessler, pengana cio and Senior Fund Manager. You can watch us live and see our past interviews under interactive tv function on the bloomberg. You can dive into any of the securities or bloomberg functions we talk about. You can also become part of the conversation by sending us instant messages during our shows. This is for bloomberg subscribers only. Check it out. This is bloomberg. Haidi that is almost it for daybreak australia. Trading in new zealand getting underway. Australia set to open in five minutes. Lets take a look at how we are faring so far. All roads lead back to brexit when it comes to sentiment overnight. U. S. Stocks finishing lower. New zealand off 6 10 of 1 . The kiwi dollar trading pretty flat. We are looking at a pretty flat to slightly lower start when it comes to the start of trading in sydney. Earnings season largely on the impressive side, but once again, Global Investors finding themselves distracted by geopolitics, brexit, trade. Daybreak asia is up next. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of Wireless Network, designed to save you money. Switch and save up to 400 a year on your wireless bill. Plus, get 250 back when you buy an eligible phone. Thats simple. Easy. Awesome. Call, click, or visit a store today. A very good morning. I am haidi stroudwatts in sydney. Good evening from bloombergs Global Headquarters in new york. I am shery ahn. Sophie i am Sophie Kamaruddin in hong kong. Welcome to daybreak asia. Shery our top stories this wednesday, the brexit turmoil continues. Boris johnson threatens to call an election as parliament refuses to let him rush his divorce deal into law. A big departure at boeing