Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amerie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. As traders look for
Speaker 2: clarity on the path ahead for raid cards, the team
Speaker 2: of Morgan Stanley writer the following. We maintain our call
Speaker 2: for an additional twenty five basis point cut in December,
Speaker 2: but the key question is what the data the FED
Speaker 2: will actually have before December. A prolonged shutdown as a
Speaker 2: risk to our view of more consecutive cuts. Mike Gape
Speaker 2: of Matt Hornback of Morgan Stanley join us now for more.
Speaker 2: Jent's going to see you both from here morning. Michael's
Speaker 2: going to come to you first. The data we don't
Speaker 2: have my right now, dis government shutdown, it makes it
Speaker 2: less likely we get right cuts in December?
Speaker 3: Is that right?
Speaker 4: Well, I think we're just reflecting what Powell said that
Speaker 4: if you're driving a car in the fog, should you
Speaker 4: should slow down? So he was saying there is a
Speaker 4: case to be made where if you don't have the data, maybe.
Speaker 5: You can't act.
Speaker 4: My view would be that if we're still in December
Speaker 4: and the shutdowns in play and we don't have the data,
Speaker 4: I'd be really surprised if the FED doesn't cut. I
Speaker 4: think the drag from a government shutdown at that point
Speaker 4: could mean growth is essentially zero in the quarter, and
Speaker 4: I would be surprised if there weren't some spillovers in
Speaker 4: the limited data that we see. So I think if
Speaker 4: we don't have data, it's because the government shut down,
Speaker 4: and I think that probably still justifies a cut.
Speaker 1: Well, good to Matt in just one second.
Speaker 6: But Michael, from the economic perspective, do you get the
Speaker 6: sense of this is an economy that needs right cuts,
Speaker 6: especially give the fact that the slow growth, slow higher
Speaker 6: low fire kind of churn has been going on for
Speaker 6: quite a while and may have a lot to do
Speaker 6: with other factors outside of just a trajectory of US economy.
Speaker 4: So We came into the year thinking, no, you probably
Speaker 4: don't need to cut rates this year, that you would
Speaker 4: want to ensure that any inflation rise from tariffs's transitory,
Speaker 4: and then we thought the rate cuts would come in
Speaker 4: twenty twenty six. So my view is, maybe we don't
Speaker 4: need it. There's certainly a discrepancy between the data and attention,
Speaker 4: between the activity and the labor market data, but I'm
Speaker 4: not on the committee. I don't get to make the choice.
Speaker 4: The view is the balance of risks shifted and policy
Speaker 4: needs to be recalibrated.
Speaker 5: So they've made that decision.
Speaker 4: They want to move closer to neutral, and I'm just
Speaker 4: thinking that the data will justify another step in that
Speaker 4: direction in December, Matt, are you.
Speaker 1: Already seeing that?
Speaker 6: Is with respect to how the bond market is responding
Speaker 6: to recent weakness and this idea that it seems as
Speaker 6: though everyone's buying the transitory story again, they're just not saying.
Speaker 1: The T word.
Speaker 7: Well, it feels to me as if the market had
Speaker 7: to adjust its pricing for the December meeting based on
Speaker 7: what we got out of the.
Speaker 5: Meeting last week.
Speaker 7: But the market is also at the same time hesitant
Speaker 7: of completely taking the December meeting off of the table,
Speaker 7: because I think investors are starting to look at the
Speaker 7: bigger picture. They're saying, hey, twenty twenty six might be
Speaker 7: a better year, but we have to get through the
Speaker 7: end of twenty twenty five first. And the government shutdown
Speaker 7: is starting to slowly creep into the mindset of investors
Speaker 7: and they're thinking, gosh, if the data do come in
Speaker 7: on the weaker side going into the December meeting, then
Speaker 7: the Fed should very well continue its gradual move back
Speaker 7: to a neutral stance.
Speaker 1: Day thirty six, longest in history.
Speaker 8: The President is now talking to Senate Republicans saying they
Speaker 8: should just blow up the filibuster in order to do this.
Speaker 8: Is there a line in the sand where the government
Speaker 8: shutdown would need to end for you to really think
Speaker 8: that December's back on the table because all that data
Speaker 8: will start flowing through again.
Speaker 7: Well, I think to the point that Mike made, they're
Speaker 7: going to get some data. Even if the government does
Speaker 7: stay shut down for the next couple of weeks.
Speaker 5: We might not get as.
Speaker 7: Much official government data as we would like to get,
Speaker 7: but we will still get a set of economic data
Speaker 7: like the data that we got this morning. We'll get
Speaker 7: another round there, and we're going to get of course
Speaker 7: the state unemployment claims data as well, so they're going
Speaker 7: to have something to work with, and so you know,
Speaker 7: to us, it's ultimately it's going to be the totality
Speaker 7: of whatever they have in hand.
Speaker 3: That will lead them to decide what to do in December,
Speaker 3: Mikae and week on the annex.
Speaker 2: That's what we can go on, and we can talk
Speaker 2: to corporate executives, and we've spoken to a fue already
Speaker 2: this morning. One bank executive come on the program and
Speaker 2: said things are okay, better than okay, there's no real
Speaker 2: damage in our loan book, and we expect reacceleration into
Speaker 2: the new year. This runs counter to the view that
Speaker 2: you have on the labor market. Can you just flesh
Speaker 2: out what you do expect to see in the labor
Speaker 2: market the months to come.
Speaker 4: Yeah, So there's certainly a tension in the data. The
Speaker 4: activity data solid AI related spending, you know, off the charts,
Speaker 4: upper income households doing well. You were emphasizing that in
Speaker 4: the previous segment, but the labor market data looks different.
Speaker 4: So our view is we're maybe a third of the
Speaker 4: way through the process of firms passing tariffs onto the consumer,
Speaker 4: so that's going to extend at least into the first.
Speaker 5: Quarter of next year.
Speaker 4: While that's happening, I think there'll be great reluctance higher.
Speaker 4: We've seen that the low higher, low fire labor market.
Speaker 4: The ADP report's very consistent with that. So while that's
Speaker 4: going on, we think the unemployment rate creeps higher. And
Speaker 4: we have the federal workers who took the early retirement
Speaker 4: package who will be rolling off payrolls in October to
Speaker 4: the tune of about one hundred and fifty thousand. So
Speaker 4: we think the unemployment rate could finish this year around
Speaker 4: four five, four six. And if that's you know, it's
Speaker 4: not a meaningfully higher move. That's still a very low
Speaker 4: unemployment rate. But the direction of that move I think
Speaker 4: is enough for a FED chaer who says he now
Speaker 4: a little more data dependent to say, let's take another step.
Speaker 4: So modest deterioration, modest continued cooling is what we think
Speaker 4: that message will be out of the labor market.
Speaker 2: Give me for referencing your world, colleagues. I want to
Speaker 2: talk about Bank for America just a little bit. I
Speaker 2: want to talk about what Brian Moynahan's going to be
Speaker 2: discussing later on this morning. He's talking about less labor
Speaker 2: intensive revenue growth, and I wonder if we need to
Speaker 2: focus on less labor intensive GDP growth, And I just
Speaker 2: wonder what that means for the Federal Reserve. And I'm
Speaker 2: going to get to what it means for the bond
Speaker 2: market too, because I don't know if fixed incomes should
Speaker 2: trade on the jobs numbers or GDP. What's it going
Speaker 2: to mean for the Federal Reserve in the quarters to
Speaker 2: count well?
Speaker 5: It's this is also part of the fog story.
Speaker 4: This rolling in is a difficult thing to understand and
Speaker 4: manage in real time. I'm not sure in the short
Speaker 4: run it changes there thinking all that much, it'll have
Speaker 4: an implication on the labor market. If it's a supply side,
Speaker 4: productivity driven story. It'll also be something that brings inflation
Speaker 4: down right, so that it would reinforce that I'll use
Speaker 4: the T word, the transitory inflation story. It would reinforce that.
Speaker 4: I think it would give you more confidence that inflation
Speaker 4: should be coming back down. And if anything, it would
Speaker 4: leave this kind of load dynamic labor market in place.
Speaker 4: I think both of those would say the Fed will
Speaker 4: have a gradual easing bias.
Speaker 2: If this has market consequences, of course, yes, if you
Speaker 2: look at payros, there should be some kind of loose
Speaker 2: relationship between what happens with jobs and what happens with earnings.
Speaker 2: But this year, at least, we've managed to have a
Speaker 2: massive step down in jobs growth and earnest growth has
Speaker 2: been obsolutely fantastic. So equity lands can ignore what happens
Speaker 2: with jobs? Can the bond market? What should the bond
Speaker 2: markets right on jobs? So GDP, Well, the bond market
Speaker 2: typically trades on the Fed. So if the Fed is
Speaker 2: going to continue to lower its policy rate, then you
Speaker 2: would expect the bond market to trade in kind. Now
Speaker 2: we all know that the bond market is priced for
Speaker 2: a very gradual easing of policy.
Speaker 5: The issue, though, is if the Fed delivers.
Speaker 7: On what the market forwards are telling you today about
Speaker 7: the path of Fed policy. It's not as if the
Speaker 7: market forwards are just going to sit there and shrug
Speaker 7: their shoulders. They're going to move and that's the typical
Speaker 7: behavior in the bond market. When the Fed follows the forwards,
Speaker 7: the forwards don't sit there. They keep moving in that
Speaker 7: same direction. So from our vantage point, if the FED
Speaker 7: delivers an easing cycle in line with what Mike believes
Speaker 7: and in line with close to what the market forwards
Speaker 7: are pricing, the forwards are going to keep moving and
Speaker 7: that's going to continue to weigh on bond yields. Already,
Speaker 7: we have a your yield right around four percent. We're
Speaker 7: the only house on the street that I thought that
Speaker 7: would happen this year. So as the FED continues to deliver,
Speaker 7: we do think that bond yields will continue to fall.
Speaker 6: At what point are you starting to get more concerned
Speaker 6: about longer term inflation and a longer term pushback.
Speaker 1: In US treasuries? I'm looking right now.
Speaker 6: Mike pointed out Michael McKee parsing through the auctionary funding announcement,
Speaker 6: pointing out that they do plan to increase their T
Speaker 6: bills and their low duration instruments, and there's this feeling
Speaker 6: that the Fed's going to monetize, that the Fed's going
Speaker 6: to increasingly buy that debt, call it whatever you will,
Speaker 6: in order to keep rates low while also pegging rates
Speaker 6: to a fairly low level. At what point does that
Speaker 6: pose a risk to longer term treasuries and the potential
Speaker 6: for this to backfire in terms of some investor appetite.
Speaker 5: Yeah, I think.
Speaker 7: I think you're talking about the bond vigilantes that show
Speaker 7: up every now and again and typically lose money at
Speaker 7: the end of the day. You know, from my vantage point,
Speaker 7: you know, we're going to have to see in the data. Okay,
Speaker 7: if the FED is lowering interest rates and inflation is
Speaker 7: moving higher, that would be the type of environment that
Speaker 7: I think would get bond investors very, very nervous. We're
Speaker 7: not really seeing that, right, We're seeing a committee that
Speaker 7: is divided on what to do in this inflationary environment.
Speaker 7: But if the inflationary environment turns out as we're forecasting,
Speaker 7: people should be very relaxed about owning high quality duration
Speaker 7: and the bond market. And by the way, just on
Speaker 7: the Treasury refunding that happened this morning, that's very much
Speaker 7: in line with our projections, not just for this refunding,
Speaker 7: but for the next several refundings. We don't believe that
Speaker 7: the US Treasury is going to increase their coupon issuance
Speaker 7: until February of twenty twenty seven.
Speaker 5: I mean, for all.
Speaker 7: Intents and purposes, that's a lifetime away. And a lot
Speaker 7: of things will happen between now and then, so we
Speaker 7: don't really see an issuance problem for the investor base
Speaker 7: and for the bond market.
Speaker 6: Mike, I'm just wondering what's the fuzz mandate right now,
Speaker 6: because if the man date is low unemployment, then right
Speaker 6: now you could make an argument that maybe it is
Speaker 6: a positive thing for them to ease, but if it's
Speaker 6: for financial stability and the idea of inflation acid price
Speaker 6: inflation will at some point trickle into the real economy,
Speaker 6: especially in AI and energy costs and some of these
Speaker 6: other kinds of issues. How do you square whether they're
Speaker 6: potentially adding fuel to the fire.
Speaker 4: Well, and they're risking that right They are taking out
Speaker 4: insurance right now against what they see is downside risk
Speaker 4: to employment, and insurance comes at a cost, and that
Speaker 4: cost is what you just mentioned, the risk of higher
Speaker 4: inflation over time, that you're a more inflation tolerant fed
Speaker 4: or you fuel animal spirits and asset markets. But Powell
Speaker 4: has said many times we do not have good choices
Speaker 4: right now. So they think risks are higher to the
Speaker 4: unemployment rate, to the upside of inflation, and there are
Speaker 4: concerns about animal spirits and financial markets. So they're taking
Speaker 4: out in insurance against the labor market. They're betting that
Speaker 4: the cost of that won't materialize. But that's what markets
Speaker 4: and investors are concerned about.
Speaker 2: Mat can we finish on the FX market? But it's
Speaker 2: not a strength come back in the last five days.
Speaker 2: How does your medium term view snack out with your
Speaker 2: shield term view on the US dollar?
Speaker 7: Indeed, Yeah, so we came into this year very barished
Speaker 7: on the dollar. We held that view until last week.
Speaker 7: So given what we're seeing from the Committee at this
Speaker 7: moment in time, in the absence of a full set
Speaker 7: of economic data, we decided to peel back on that
Speaker 7: view temporarily. It's a tactical adjustment in what we think
Speaker 7: will be a trend that extends into twenty twenty six.
Speaker 1: It doesn't have.
Speaker 5: To play out that way.
Speaker 7: One of the things that we're debating as a house
Speaker 7: today alongside my colleagues in economics is what does twenty
Speaker 7: twenty six and twenty twenty seven look like That can
Speaker 7: be a game changer for the US dollar. We're still
Speaker 7: debating that. But in the meantime, if the FED continues
Speaker 7: to cut rates, the dollar should have a little bit
Speaker 7: more room to move left or before possibly swinging higher
Speaker 7: in the second half of next year.
Speaker 2: Stay with us more Bloomberg Surveillance coming up after this
Speaker 2: Democratic Socialist so rum Mumdowney winning the New York City
Speaker 2: mayoral race with fifty point four percent of the vote.
Speaker 2: Catherine Wild, CEO of the Partnership for New York City,
Speaker 2: writing the following. Ultimately, the impact of the election on
Speaker 2: business will depend on the extent to which Mumcdowney appoints
Speaker 2: competent deputies and commissioners to run city agencies.
Speaker 3: Catherine joins us now for more. Catherine Gimmrnic Good.
Speaker 2: Morning, Thank you for being here with us in New
Speaker 2: York City. Let's talk about some of this. What did
Speaker 2: New York just vote for?
Speaker 9: Well, I think number one, we have to look at
Speaker 9: the fact that more voters came out to vote for
Speaker 9: mayor than we've seen in the fifty six years since
Speaker 9: nineteen sixty nine, which was my first election in New
Speaker 9: York when John Lindsay was elected on the Liberal line. Actually,
Speaker 9: so this was a big turnout, and I think it
Speaker 9: reflects the frustration of the New York City voters with
Speaker 9: a couple of things. Number one the high cost of
Speaker 9: living and doing business in New York City, and which
Speaker 9: Zoram Mamdanni.
Speaker 1: Spoke very effectively to and it.
Speaker 9: Reflects a frustration with a series of politicians who have
Speaker 9: disappointed New Yorkers.
Speaker 8: Those high marks in terms of the how many people
Speaker 8: came out to vote was fueled by support of mam
Speaker 8: Donni but also those that were against him. There's a
Speaker 8: lot in the business community, have a lot of concerns.
Speaker 8: Has he assuaged those concerns yet?
Speaker 9: I cannot say that he has asswaged those concerns completely.
Speaker 9: After the primary election, when everybody was shocked that he
Speaker 9: beat Andrew Cuomo by thirteen points in that primary in June,
Speaker 9: he reached out, actually called me right away and said,
Speaker 9: tell me which business leaders I should meet with to
Speaker 9: learn from them and to show them that I'm not
Speaker 9: going to socialize their business.
Speaker 1: What did you advise he meet with.
Speaker 9: I gave him a number of I gave him a
Speaker 9: long list of people. I mean, our co chairs of
Speaker 9: the partnership, Rob Spire and Albert Burla and Jamie Dimond,
Speaker 9: obviously Larry Fink. Leaders from across come from across the
Speaker 9: industry as well as the small business representatives, the borough
Speaker 9: Chambers of Commerce, the Restaurant Hospitality Association, so a mix.
Speaker 8: We have a lot of reporting that what business leaders
Speaker 8: wanted to see was to him to tap Jessica Tish
Speaker 8: to continue to lead the NYPD be the commissioner.
Speaker 1: There is it your understanding that she's going to stay.
Speaker 9: Well, I think she's going to stay, and I will
Speaker 9: say that that was the number one priority. It was
Speaker 9: an important signal both to the business community about the
Speaker 9: public safety. As employers, they want the city to be safe,
Speaker 9: and jesse has done a great job. They just announced
Speaker 9: this week that crime is down again this month another
Speaker 9: six and a half percent on her watch, so that
Speaker 9: was a big app And the fact that her family
Speaker 9: is iconic in the city's Jewish community. I think it
Speaker 9: was also another important piece of that. Mom Donnie did
Speaker 9: say that he would retain her. I know they have spoken,
Speaker 9: and she was not going during the campaign. She was
Speaker 9: not going to make it commitment one or the other
Speaker 9: because she doesn't think it's professional in her job as
Speaker 9: police commissioner to participate in campaigns. But I'm hopeful and
Speaker 9: optimistic that she will stay. She loves her job, she
Speaker 9: says her mission is not finished. So I'm very hopeful.
Speaker 6: You've been in the city a long time tracked its
Speaker 6: politics have been in exus between business and the political sphere,
Speaker 6: and I'm just wondering if you've seen real evidence of
Speaker 6: people leaving the city in fear of higher taxes or
Speaker 6: some sort of regime that makes it less desirable for them.
Speaker 1: Well, people are.
Speaker 9: Leaving the city because of high costs in general, and
Speaker 9: taxes are part of that. And for those who think
Speaker 9: and a big concern about our incoming mayor is that
Speaker 9: he may think that somehow spending more government money is
Speaker 9: going to make the city more affordable, when in fact
Speaker 9: it's exactly the opposite. City and state budget spending has
Speaker 9: gone up over fifty percent in the past decade, and
Speaker 9: that's driving.
Speaker 1: Our affordability crisis.
Speaker 9: So hopefully we will be successful in finding other ways
Speaker 9: to fund some of the new mayor's priorities.
Speaker 6: Is there any evidence that that's on his docket because
Speaker 6: he talked about raising taxes on the wealthiest individual as
Speaker 6: he talked about paying for it that way. Is there
Speaker 6: any sense that there is some sort of awareness of
Speaker 6: the debt and sort of the debt cycle that cities
Speaker 6: can get into that can make things less affordable.
Speaker 9: Well, New York City has a legal debt limit, and
Speaker 9: we also, since the financial crisis of the nineteen seventies,
Speaker 9: if the mayor gets too aggressive about his spending, a
Speaker 9: financial control board comes into place and the state takes
Speaker 9: over the city finances, so we don't have to worry
Speaker 9: about New York City going bankrupt again.
Speaker 1: So that's a check on that.
Speaker 9: In the conversations with him about the danger of raising
Speaker 9: taxes in terms of New York's competitiveness, I mean, right now,
Speaker 9: those of US professionals in New York are paying fifty
Speaker 9: five percent of their income in taxes to federal, state,
Speaker 9: and city government. You move to Florida or Texas, you're
Speaker 9: paying thirty eight percent. So that's a pretty big number
Speaker 9: that we have to take into consideration. So I think
Speaker 9: that he's going to become more practical as he sees
Speaker 9: the implications.
Speaker 1: He has said, I have my goals.
Speaker 3: I want to achieve them.
Speaker 9: But I'm wide open on how to do that, And
Speaker 9: that's an opening, I think for business expertise to help
Speaker 9: him figure this out well.
Speaker 1: To achieve them.
Speaker 8: He says he's going to raise taxes, but governor, Hokles says,
Speaker 8: I can't lose any more people to Palm Beach to
Speaker 8: your point, looking at the tax differentials, So can he
Speaker 8: even attempt to raise taxes without the governor on board.
Speaker 9: He cannot raise corporate or personal income taxes without well,
Speaker 9: that's not a city prorogative, that is a state prerogative.
Speaker 9: He can raise real estate taxes, but he has said
Speaker 9: as he's thought about the implications of freezing the rent,
Speaker 9: he has said he will actually do property tax reform
Speaker 9: and try and reduce taxes on rent regulated commercial buildings,
Speaker 9: multi family buildings. So I am I think that as
Speaker 9: we see who his appointments are and how he takes
Speaker 9: input on his appointments. Last night, I was very pleased
Speaker 9: that the tax word was not mentioned in his acceptance
Speaker 9: speech as mayor, so that was a good sign. And
Speaker 9: he also started out how he's going to achieve his
Speaker 9: goals is we're going to reduce the cost of government
Speaker 9: and reduce bureaucracy. So he's sounding more and more like
Speaker 9: Mike Bloomberg.
Speaker 2: Stay with us multiple IMPEG. Savannah's coming up after this.
Speaker 2: The US Supreme Court hearing garguments today challenging the galaxy
Speaker 2: of some of President Donald Trump's tariffs. If overturned, the
Speaker 2: government may face refunding billions of dollars in a blow
Speaker 2: to the nation's finances. Lisa, This in many ways is
Speaker 2: about the bond market more than anything else.
Speaker 6: If you don't get the four hundred billion dollars of
Speaker 6: annual revenues that we seem to be on track for
Speaker 6: from the tariffs, what does that mean for the deficit picture.
Speaker 6: For some of the bond vigilantes that have gone into
Speaker 6: hiding and are covering their heads, there is this feeling
Speaker 6: that they might reassert themselves and push back against some
Speaker 6: of the recent price action. Again, it's not going to
Speaker 6: be until at the end of this year that we
Speaker 6: get a ruling, maybe the beginning of next year, and
Speaker 6: by then we might have a sense of what the
Speaker 6: cocktail of additional tariff measures might be to replace this income.
Speaker 1: This is going to be tough for the Supreme Court.
Speaker 8: They're going to look at the US Court of International
Speaker 8: Trade and they said, the US Constitution makes it clear
Speaker 8: that this authority.
Speaker 1: Of commerce is up to Congress.
Speaker 8: And they go on to say, it's not that we
Speaker 8: are not passing judgment on the wisdom or likely effectiveness
Speaker 8: of the President's policy, but just that it's not constitutional,
Speaker 8: which is why the administration is trying to make out
Speaker 8: that these are three big emergencies when it comes to fentanyl,
Speaker 8: the trade deficit, and having that ability to say have
Speaker 8: a thread against China when it comes to our Earth's
Speaker 8: that they need this authority to be within the executive brand.
Speaker 2: On the president's list of priorities this week, including what's
Speaker 2: happened in Virginia, New Jersey and here in New York
Speaker 2: City was this number one's hearing of the Supreme Court.
Speaker 8: He's called it life or death for the US economy,
Speaker 8: and he said in that CBS sixty minutes interview that
Speaker 8: the economy will go to hell his words, if AIPA
Speaker 8: does not withstand the Supreme Court.
Speaker 1: So for him this is paramount.
Speaker 8: But you talk to people in the administration, there are
Speaker 8: other ways they can act tariff palsy. It's just not
Speaker 8: going to be as clean. It's not going to be
Speaker 8: as a blunt of an instrument. But they could still
Speaker 8: use other orders like they are using right now. They're
Speaker 8: using two thirty twos, there are.
Speaker 1: Three or ones.
Speaker 8: There are other instruments they can use, but it's not
Speaker 8: as easy.
Speaker 3: Let's stay on the story.
Speaker 2: Regardless of the Supreme Court ruling, the former commis department
Speaker 2: official and azec NICACTA expecting Trump's tariffs to live on
Speaker 2: writing the administration has several other souls that they can
Speaker 2: implement to execute that trite agenda. And I was like,
Speaker 2: joins us now for more, welcome to the program. Let's
Speaker 2: just talk about that. What is it actually at state today?
Speaker 2: If the President could just make how the moves out
Speaker 2: swheat to achieve the same means, well, I.
Speaker 1: Think the g and it's good to be with you.
Speaker 10: The big question is this international Emergency Economics powers out
Speaker 10: of nineteen ninety seven, that nineteen seventy seven that allows
Speaker 10: the president to regulate imports during peacetime and take measures
Speaker 10: to address unusual and extraordinary threats. The core question is
Speaker 10: really the limitations of the president's power. Does the president
Speaker 10: have vast sweeping authority to impose tariffs in a way
Speaker 10: regulate financial aspects of the United States, or is it
Speaker 10: Congress that holds the cards there and can only delegate
Speaker 10: financial revenue raising authority to the president when it expressly
Speaker 10: says so. Those are the Coole main questions. The Supreme
Speaker 10: Court has never heard an aep A case before, It's
Speaker 10: never interpreted the language. So the main question is does
Speaker 10: this law give the president sweeping authority to regulate imports
Speaker 10: through taxes which we through tariffs which are deemed to
Speaker 10: be taxes by the judges, or is a president's authority
Speaker 10: much more restrained.
Speaker 1: Going into this?
Speaker 8: What is your base case for how the Supreme Court
Speaker 8: will rule?
Speaker 10: You know, it's really difficult to say. This is a very,
Speaker 10: very difficult question. You've got the major questions doctrine which
Speaker 10: is going to be at heart of this issue which
Speaker 10: the Supreme Court has to decide. Look constitutional interpretation. If
Speaker 10: Congress intended to give the president vast political authority over
Speaker 10: political and economic questions, does it need to expressly states? So,
Speaker 10: think about the impact of all the other statutes. How
Speaker 10: much can the executive branch read into this?
Speaker 1: Right and right now, we.
Speaker 10: Have three pillars of the US government that are at
Speaker 10: odds with one another. The President has moved in a
Speaker 10: very unusual way to read the statute very broadly. Congress
Speaker 10: and large part has remained silent, even though with respect
Speaker 10: to the care offs in Brazil, Congress has spoken up
Speaker 10: and has used its lawmaking powers to restrain the president's
Speaker 10: authority there, and now you've got the judicial branch who
Speaker 10: has to make sense of it all. And again, implications
Speaker 10: are going to be significant with this much revenue at stake.
Speaker 8: The administration has talked about why they're using AIPA emergency
Speaker 8: responses to the trade deficit, to what's going on in
Speaker 8: terms of China trying to enact export controls on rare earths,
Speaker 8: and then on fentanyl. Do you think one out of
Speaker 8: any of those others have more of a case in
Speaker 8: terms of an emergency authority needed to combat those issues.
Speaker 10: Yeah, that's a great question. And this really goes back
Speaker 10: to the sort of the history of AEPA. AIPA has
Speaker 10: traditionally been used over the decades is really sanctions authority, right,
Speaker 10: maximum economic pressure campaign on countries to do not do things.
Speaker 10: So it really depends on how the US government argues it.
Speaker 10: The tariffs on India, these AIPA tariffs on India is
Speaker 10: a maximum pressure campaign because they're buying Russian Russian energy.
Speaker 1: We have sanctions on Russia.
Speaker 10: The IEPA tariffs used against India feel like sanctions.
Speaker 1: They might for the fentanel.
Speaker 10: Crisis also feel like a maximum pressure sanctions type legal authority.
Speaker 10: But if the President just doesn't like a trade deficit
Speaker 10: with a country, can he use AIPA? I think that
Speaker 10: the courts may very likely say there's different.
Speaker 1: Legal authority for that.
Speaker 10: If Congress gaves the president distinct legal authority to address
Speaker 10: a specific fact pattern, that can he use other legal
Speaker 10: authorities that are a little bit vague to address that
Speaker 10: same fact pattern?
Speaker 1: And Azak.
Speaker 6: From a markets perspective, it's important to ask how much
Speaker 6: has actually changed since preliberation day. You're looking at an
Speaker 6: overall terrorfrate that's gone from twelve and a half or
Speaker 6: from two and a half percent to about twelve and
Speaker 6: a half versus the headline figure that something closer to
Speaker 6: twenty percent, and a lot of some of the measures
Speaker 6: with respect to China in particular have been walked back.
Speaker 6: How much have the walls truly been put up in
Speaker 6: a way that do indicate some sort of separation of
Speaker 6: the world's two biggest economies.
Speaker 10: This is the economic impact, at least first to the
Speaker 10: United States, right. I think partially what the president is
Speaker 10: thinking he's doing is really balancing fair trade, but then
Speaker 10: getting trade deals to bring countries closer into the United
Speaker 10: States orbits right, And maybe this relationship with China is
Speaker 10: still up in the air. But I really want to
Speaker 10: underscore the massive economic impact. We have ninety about ninety
Speaker 10: billion dollars collected in the AIPA tariffs alone. Think about
Speaker 10: the economic impact of either way that the court rules.
Speaker 10: If the court invalidates AIPA, you've got importers, US importers
Speaker 10: in large parts who are paying the tariffs, but they
Speaker 10: pass through those tariffs in some significant respects to their customers.
Speaker 10: So if the court invalidates i EBA, you've got the
Speaker 10: importers getting this massive sudden windfall of money, but then
Speaker 10: their customers aren't getting anything. We'll present one major shock
Speaker 10: to the economy, and it's the course uphold IEBA.
Speaker 1: Then then these.
Speaker 10: Importers are not going to get the money that they
Speaker 10: were expecting. Yet another major shock to the economy. And
Speaker 10: going back, if the court does invalidate AEBA, and now
Speaker 10: you've got importers in line to not only recover the
Speaker 10: teriffs that they've paid plus interest, because that's how this works.
Speaker 10: If you actually paid tariffs that the course have invalidated.
Speaker 10: You're not only entitled to get the tariff revenue back,
Speaker 10: you have to get the tariff revenue back plus interest.
Speaker 10: Think about the sudden shock to the economy depending on
Speaker 10: either way, based on how the Supreme Court rules.
Speaker 1: What are you advising clients?
Speaker 6: Are they lining up and figuring out how exactly to
Speaker 6: request their money back from the government.
Speaker 1: Yes, and no.
Speaker 10: There's a lot of importers who are thinking about you,
Speaker 10: watching this very closely and figuring out how they're going
Speaker 10: to line up up and what the process is because
Speaker 10: you can't have a stampede all at once for all
Speaker 10: these importers, right, ninety billion dollars trying to get the
Speaker 10: money back at the same time. So the courts are
Speaker 10: going to look for a process. We're looking very much
Speaker 10: into what kind of process is going to be set
Speaker 10: up for importers to get their revenue.
Speaker 1: But also we.
Speaker 10: Represent a lot of the businesses in the United States
Speaker 10: who've already paid those tariffs, and even if the importers
Speaker 10: of record get that revenue back, a lot of our clients,
Speaker 10: a lot of the businesses aren't going to get that
Speaker 10: revenue back because of those go to the importers and
Speaker 10: then that's a private transaction issue.
Speaker 1: Whether the.
Speaker 10: Businesses are going to demand from their importers to get
Speaker 10: some of that back very unlikely because then that becomes
Speaker 10: an accounting issue. But there's going to be a stampede,
Speaker 10: and hopefully the government figures out an orderly process only
Speaker 10: if the Supreme Court invalidates the terror. But look, the
Speaker 10: Supreme Court, is this the textual issue? Is this a
Speaker 10: constitutional issue? Is it a foreign policy issue? All of
Speaker 10: this is going to the way how the Supreme Court
Speaker 10: looks at this?
Speaker 3: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. The Pollo Global
Speaker 2: Management just posted third quarter runings that surpassed Wall Street estimates,
Speaker 2: as the firm edges closer to reaching one trillion dollars
Speaker 2: of assets. The Apollo president, Jim's out joined us now
Speaker 2: for more. Jim good Mornic, Good morning.
Speaker 5: I was good to be here.
Speaker 2: Congratulations. We choked when you walked in. What happens when
Speaker 2: you hear a trillion? Does Mark run around popping champagne?
Speaker 3: How does this work?
Speaker 5: Well?
Speaker 11: Listen, as we said yesterday, we've said before, assets under
Speaker 11: management are just a great vote of confidence for great
Speaker 11: performance and if you deliver for investors. Over time, we
Speaker 11: find ourselves that the flywheel of our business is really
Speaker 11: in place, whether it was capital formation, whether it was origination.
Speaker 11: You know, we just find that our business model is
Speaker 11: really hitting the mark right now and accelerating, and we're
Speaker 11: very happy with the quarter, but feel very good about
Speaker 11: the trajectory of the business.
Speaker 2: In runt of us, there's a phrase that you entertain used,
Speaker 2: we are what we originate. Can we talk about that
Speaker 2: a little bit more sure? Your capacity to scale? Can
Speaker 2: you just flesh them out? How things attracting at the moment.
Speaker 5: Well, they're tracking very well.
Speaker 11: But I think you know, if you go back to
Speaker 11: our investor to day six years ago, in a year ago,
Speaker 11: we really put a pin in the key attribute of
Speaker 11: success in our business. As we see the financing markets evolve,
Speaker 11: when we see the evolution of banking system, when they
Speaker 11: see the evolution of private capital. You know, many in
Speaker 11: our industry and we're guilty of it quite a bit.
Speaker 11: In fact, your first question, we're guilty of it. It's
Speaker 11: all about AUM. It's not about AUM. It's about your
Speaker 11: ability to really generate very strong, proprietary, scalable origination across
Speaker 11: the spectrum. Whether it's investment grade, private credit or private
Speaker 11: equity transactions and everything in between. And we have taken
Speaker 11: that to heart. We have invested a tremendous amount of
Speaker 11: money in terms of our origination platform. And I think
Speaker 11: that's what when investors come to us today on the
Speaker 11: institutional side, when sovereign funds come to us to partner,
Speaker 11: when insurance companies come to partner, Yes, it's because of
Speaker 11: our investor returns, but it's because of our origination.
Speaker 5: And I just think that's the bigger story here.
Speaker 11: People want to talk about this company, that company, First Brands, Tricolor.
Speaker 11: You know, it's been sixteen years since the Great GFC.
Speaker 11: The real story is the evolution of modern finance and
Speaker 11: the role that we all play. And so I think
Speaker 11: that's the thread and the theme that investors are really
Speaker 11: engaging in today. I got back from nine countries in
Speaker 11: two and a half weeks, which I'm happy to talk about.
Speaker 11: And the impact around the globe of this model evolving
Speaker 11: is really the story.
Speaker 2: We'll spend some time on that. Just for the record,
Speaker 2: you brought up First Brand and Strike Color before we did.
Speaker 2: We'll get to that in just a moment. So you
Speaker 2: want to talk about origination. Let's talk about it that
Speaker 2: you originated. You talked about this a bit yesterday. What
Speaker 2: was the average rating and are you able to maintain
Speaker 2: excess spread as you scale up.
Speaker 5: Yeah.
Speaker 11: So if you look at our we think about the
Speaker 11: world investment grade and non investment grade, not private in public.
Speaker 11: And when you think about the spreads that we garnered
Speaker 11: in terms of our non in our investment grade business,
Speaker 11: you know, it's in the mid three hundreds, and we've
Speaker 11: been able to really create that spread over the last
Speaker 11: twenty four months with a little degradation of fifteen to
Speaker 11: twenty basis points year over year. On the non investment
Speaker 11: grade side, it's in the mid four hundreds, and again
Speaker 11: we've been able to generate that spread over the last
Speaker 11: twenty four months. And again it's not just the direct
Speaker 11: private lending, but it's all the things you do to
Speaker 11: a sponsor. So our origination put foot print is about
Speaker 11: eighty percent investment grade, twenty percent non investment grade. But
Speaker 11: really it's the change of the model in the last
Speaker 11: twenty thirty years. As a credit investor or fixed income investor,
Speaker 11: you were an agent in the market whatever the origination
Speaker 11: machine wanted to deliver.
Speaker 5: You it was only price.
Speaker 11: That you actually had to negotiate, and so you were
Speaker 11: an agent, was really not a lot of the ability
Speaker 11: to really conduct and have the outcome. In our model
Speaker 11: where we're the origination principle, where we actually have an impact,
Speaker 11: it allows you really to have a much greater degree
Speaker 11: of control of documentation and return and yield, and that's going.
Speaker 5: To suit us well over time.
Speaker 11: So it's this principal agent issue, and we find ourselves
Speaker 11: really in the leading pack of the origination principal model
Speaker 11: versus the old model of an agent or vendor model.
Speaker 6: And Jim, what this does is it allows you to
Speaker 6: look at a lot of documents. It allows you to
Speaker 6: look at a lot of companies. It allows you to
Speaker 6: see a broad swath of the economy to understand exactly
Speaker 6: where the pitfalls may be. Do you find some of
Speaker 6: these arguments about cockroaches and in growing weakness in the
Speaker 6: economy credible or are you just not seeing it in
Speaker 6: what you're viewing even among the things that you're rejecting.
Speaker 11: You're fifteen sixteen years in a credit cycle right now
Speaker 11: in terms of the expansion since the GFC, You're going
Speaker 11: to find issues and challenges in the last five to
Speaker 11: seven years, you've had companies like SVB and First freeblic
Speaker 11: Bank and so yes, these are clearly idiosyncratic.
Speaker 5: We're seeing a much larger.
Speaker 11: Theme of a strong economy Towrdson talked about yesterday in
Speaker 11: terms of a K shape economy. We're seeing an administration
Speaker 11: it's very pro business anti not a very regulatory friendly,
Speaker 11: want to push rates lower, and so all of those
Speaker 11: things where you will see challenges in certain companies late
Speaker 11: in a cycle. But we are not seeing any kind
Speaker 11: of credit cycle on the horizon that's waning anytime soon.
Speaker 5: We are not seeing it.
Speaker 6: Are you seeing a scary allocation of resources?
Speaker 1: And I say this given.
Speaker 6: The fact that it has been very top heavy to
Speaker 6: AI related endeavors. Deutsche Bank this morning a story in
Speaker 6: the Financial Times looking for ways to hedge against some
Speaker 6: of their data center loans because they're worried about the
Speaker 6: overall concentration the risks that you're seeing overnight.
Speaker 1: Are you staying away from that?
Speaker 11: Well, I think what you're talking about is whenever you
Speaker 11: see a massive impulse infusion of capital into a sector
Speaker 11: dark fiber E and p shale in the US software
Speaker 11: enterprises and now AI in the brought ecosystem, you have
Speaker 11: to think about debt and equity returns on invested capital,
Speaker 11: and there's been a tremendous rise in valuations on the
Speaker 11: debt side, on the equity side in the last twenty
Speaker 11: four months, and certainly the assumptions that you're making on
Speaker 11: the debt side as an investor and a lender to
Speaker 11: those companies, you're taking more residual risks than you did six, twelve,
Speaker 11: eighteen months ago.
Speaker 5: So valuations are high, you have.
Speaker 11: To be a bit more cautious, you want to be
Speaker 11: a lot more senior, you want to be secured, and
Speaker 11: so I think there's going to be a dispersion between
Speaker 11: returns between the investment grade and non investment grade market.
Speaker 11: But that's just late cycle behavior. And when you look
Speaker 11: around the globe, as we talked about yesterday, their valuations
Speaker 11: are high, geopolitical risks are a bit greater, and we
Speaker 11: don't see rates dramatically lower in the next twenty four months.
Speaker 11: So that tells us take the risk down on subordinated credit,
Speaker 11: lean into senior investment grade opportunities.
Speaker 2: Jim, We've seen these capex cychos throughout economic history. You've
Speaker 2: lift a few of them for a long career as well.
Speaker 2: But there's something different about this one. And you're well
Speaker 2: versed in this in a way that I'm not. Some
Speaker 2: of these assets depreciate rapidly for you and the team.
Speaker 2: Does that change how you put together some of these
Speaker 2: deals that you make?
Speaker 5: It does? I mean?
Speaker 11: I think you're raising a really interesting point. Are we
Speaker 11: thinking is the right way to think about a data
Speaker 11: center utility lines and electrical lines seventy eighty ninety years
Speaker 11: ago when day one all you were doing is wiring
Speaker 11: the house for lights, and then you wired the house
Speaker 11: for a dishwasher, a TV and everything else that goes
Speaker 11: with it, And how do you think about that technology
Speaker 11: and what really is the advantage of that data center
Speaker 11: in five, ten, fifteen years with the power supply. I
Speaker 11: differentiate that with how you might finance a portfolio of
Speaker 11: chips GPUs that rapidly appreciate over three to five years.
Speaker 11: And they might still all. They might both be in technology,
Speaker 11: but how you fund and structure both of those is very,
Speaker 11: very different. And I think that's the subtlety behind behind
Speaker 11: the headlines, which is going to differentiate the winners and losers,
Speaker 11: Because in every industry. Even the last twenty years that
Speaker 11: I just mentioned, those are all sectors that grew in
Speaker 11: a tremendous amount of capital and you really don't know
Speaker 11: who the winner is from the debt and equity side
Speaker 11: for a few years. And so certainly with valuations as
Speaker 11: high as they are in this cycle right now, you
Speaker 11: have to take a step back and pause and say, Okay,
Speaker 11: do I want to be a lender? Do I want
Speaker 11: to be an equity owner? What's the residual value assumptions
Speaker 11: that I'm making. That's really what will differentiate the winners
Speaker 11: and losers.
Speaker 3: I'm not sure how many people have taken a step back, Lisa.
Speaker 3: At the moment right.
Speaker 6: Now, it seems like absolutely nobody. Those debt offerings are
Speaker 6: absolutely flooding, and frankly, there is a real question about
Speaker 6: whether there's behavior that potentially isn't as prudent as what
Speaker 6: you're doing, that could potentially pose some sort of risk
Speaker 6: the rest of the market.
Speaker 11: Well, if you think about the Meg seven, in the
Speaker 11: last five to seven years, they have been a very
Speaker 11: very small participant of the IG new issue market. In
Speaker 11: the last two months, there's been a handful of these
Speaker 11: companies that have been issued very very large benchmark transactions.
Speaker 11: And again that's not a zip code. We play in
Speaker 11: day in and day out. But you have to wonder
Speaker 11: as a CFO, are they being very strategic about accessing
Speaker 11: that financing and what's the long term return of those opportunities.
Speaker 2: Jamie Timon at JP Morgan has said, we survived build
Speaker 2: a Blasia will survive this. How do you even the
Speaker 2: tame think about this development?
Speaker 11: You know, we're committed. I've been in New York forty years.
Speaker 11: I'm a committed New Yorker. The campaign is over now
Speaker 11: it's about the action plan and he needs to bring
Speaker 11: people together. He needs to get a leadership team that
Speaker 11: can take on the challenges of the most complicated city
Speaker 11: in America. And if you're in New Yorker, you want
Speaker 11: to see success in this administration. The campaign's over all
Speaker 11: the great promises. Now it's about delivering. It's like when
Speaker 11: you buy a company, you don't celebrate the day you
Speaker 11: buy it. You celebrate the day you sell it in
Speaker 11: three to five years. So I think there needs to
Speaker 11: be a change in tone and he needs to bring
Speaker 11: the city together. That's the big objective. Bring the city
Speaker 11: together and bring the best and the brightest to city.
Speaker 5: Hall to work with him.
Speaker 8: Bill Ackman said, this is an individual who spent a
Speaker 8: lot of money trying to defeat him. Said, let me
Speaker 8: know what I can do. So that's the approach. It
Speaker 8: sounds like Apollo is taking What would you advise him?
Speaker 11: Well, again, I think number one, you've heard it. People think,
Speaker 11: you know, public safety is the number one fiscal stimulus.
Speaker 11: And there's a lot of concerns about the campaign and
Speaker 11: what was said about public safety and the focus on that.
Speaker 11: So I would focus on bringing leadership together. I would
Speaker 11: focus on really making sure that the city is safe
Speaker 11: for all citizens and then try to create a very
Speaker 11: logical engagement with all the constituents.
Speaker 5: That's day one.
Speaker 3: That's day one.
Speaker 2: Let's talk about what's happening right now in this CID economy,
Speaker 2: which is what gop Mounttowney elected. Affordability. You want to
Speaker 2: talk about the transmission of monetary policy as well. I
Speaker 2: think this is an important point. What can we do
Speaker 2: to support this economy and not exacerbate existing problems.
Speaker 5: And laid it out well yesterday.
Speaker 11: If he is right, which I believe he is, about
Speaker 11: the KA economy in terms of the differentiation between those
Speaker 11: at the highest twenty percent and the bottom twenty percent
Speaker 11: for the last fifteen Really, since a GFC around the
Speaker 11: globe and especially in the US, we've leaned politicians have
Speaker 11: sort of stood back and wanted the monetary policy to
Speaker 11: solve all the problems. There is only so much that
Speaker 11: monetary policy can do. The fiscal impact of leadership, not
Speaker 11: only in the US but in Western Europe.
Speaker 5: I was there last week.
Speaker 11: They really need to step up and have a plan
Speaker 11: about technology, investment, employment, education, and a variety of attributes
Speaker 11: that are not really monetary policy impacts. So again I
Speaker 11: think I'm not suggesting that we're not really focused on
Speaker 11: what the next move of the FED are. They are
Speaker 11: critically important, but we are skeptical that even a lower
Speaker 11: impact at any kind of lower rates, it's really just
Speaker 11: going to fuel what's going on right now in the
Speaker 11: asset frenzy, rather than having real impact on affordability and housing.
Speaker 11: Taking FED funds down twenty five d basis points, it
Speaker 11: doesn't havel your housing crisis. You have a national housing
Speaker 11: crisis with affordability. So I think there needs to be
Speaker 11: a massive pivot away from what monetary policy can do
Speaker 11: and how really executive leadership and fiscal policy will have
Speaker 11: a bigger impact.
Speaker 1: Should in will are two different things.
Speaker 6: And right now it seems like the FED is probably
Speaker 6: going to cut rates once more this year and then
Speaker 6: again several times next year, especially potentially with new leadership.
Speaker 6: Are you saying that you don't buy the argument that
Speaker 6: that's going to help the shoppers at Chipotle and the
Speaker 6: shoppers at Kava be able to afford their burritos and
Speaker 6: the Mediterranean salad bowls more efficiently, and instead it's going
Speaker 6: to exacerbate the K and cause act price inflation that
Speaker 6: leads to a potential threat to financial stability.
Speaker 5: Yeah, I don't see. I've got a couple of I've got.
Speaker 11: A couple of twenty four to twenty nine year old
Speaker 11: not suggesting that their consumer attributes are going to change
Speaker 11: by you know, what the FED does. But I just
Speaker 11: don't see how the FED policy of this quarter or
Speaker 11: the next two quarters is going to have a real
Speaker 11: impact on the accentuation of the K economy.
Speaker 5: I just don't see it. I see it. I see
Speaker 5: it much much broader.
Speaker 11: And again, I do think getting back to New York City,
Speaker 11: we have a portion of the economy and a portion
Speaker 11: of the demographics that is really focused on you know, education, jobs, employment, affordability,
Speaker 11: and I just think we've got to think a much
Speaker 11: longer perspective here.
Speaker 6: As an investor, if the FED does cut, do you
Speaker 6: lean into the bubble? Do you say, all right, well,
Speaker 6: if you can't beat it, join it. And the idea
Speaker 6: is you've got to take more risk and get more returns.
Speaker 5: That's not what we do.
Speaker 11: That's you know, there's folks who spend their day spending
Speaker 11: time about where the equity market's going this hour, this day,
Speaker 11: this week. That's just not what we do. We're much
Speaker 11: more focused on financing the global industrial renaissance transactions we
Speaker 11: announced with ORSTED last week or earlier this week, what
Speaker 11: we did in Europe with ourwe I was in Germany
Speaker 11: in the last ten days. Massive global industrial capital needs.
Speaker 11: That's what we're focusing our time today. And that's what
Speaker 11: our investors want to They want safe, robust, long duration yield.
Speaker 11: Whether the return on investing capital of XYZ Data Center
Speaker 11: in fifteen years works, that's not.
Speaker 5: What we do.
Speaker 2: There was a headline yesterday and what you didn't do,
Speaker 2: and that was take Papa John's private You probably don't
Speaker 2: want to talk about that directly, But can we talk
Speaker 2: about that broader business because ALSA mentioned Carver and what's
Speaker 2: happened with Chipottele, Like, how tough is that business right now?
Speaker 3: How difficult ethics?
Speaker 11: I think as a principal investor in equity, in private
Speaker 11: equity and private capital, you think you need to think
Speaker 11: about long term consumer trends and what's going to have
Speaker 11: an impact on various business models. And for us, you know,
Speaker 11: we've had a real value discipline purchase price matters for
Speaker 11: the last thirty five years. It served us extremely well,
Speaker 11: and so you know, I think that you have to
Speaker 11: think about the evolution of consumer sentiments, consumer behavior and
Speaker 11: what your impact is on different business models.
Speaker 3: We've got about a minute left.
Speaker 2: Can we finish on what I believe is a pr
Speaker 2: battle between you and the banks at the moment.
Speaker 3: Not you directly.
Speaker 2: It just feels like everyone's trying to say the cockroaches
Speaker 2: are somewhere else. And I was listening to you yesterday.
Speaker 2: Was something that you said about it doesn't matter whether
Speaker 2: debt originates, so the asset manager or the bank.
Speaker 3: Why is that such an important point?
Speaker 11: Because I think we've collectively lost our way. We sit
Speaker 11: on top of this amazing economy. And what we have
Speaker 11: just found is the litmus test of quality is not
Speaker 11: public or private. We sort of have collectively lost our way.
Speaker 11: The litmus test was how good the company is and
Speaker 11: how they will perform in their business model.
Speaker 5: And again, you've got.
Speaker 11: Great investors in credit, you've got great banks, you've got
Speaker 11: great insurance companies. There will be a dispersion of returns
Speaker 11: over a more challenging cycle. So we're committed to open architecture.
Speaker 11: We have amazing relationships and partnerships with many, many banks,
Speaker 11: some of which are public, many of which are private,
Speaker 11: and we're going to continue that and it really helps
Speaker 11: us our origination. But I think the longer story that
Speaker 11: gets written will really be about credit quality and the
Speaker 11: sustainability or business rather than something is public private.
Speaker 5: That's not the litmus test.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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