WEBVTT - The Fed Decides and Rate Cuts Remain Uncertain 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.120 us live on YouTube. 0:00:27.240 --> 0:00:30.400 What an honor to have with this Noural Rubini, professor. 0:00:30.600 --> 0:00:32.839 He's not emeritus. When you're you know you travel like 0:00:32.920 --> 0:00:34.760 he does. He's such a young kid. 0:00:34.800 --> 0:00:37.919 I don't know how emeritusy he is at New York University. 0:00:38.040 --> 0:00:41.640 Of course, Chairman Rubini at Global Economics. One of the 0:00:41.680 --> 0:00:44.760 great moments for me was with Professor Rubini and Davos 0:00:44.800 --> 0:00:48.640 a million years ago, where he's simply outlining two thousand 0:00:48.640 --> 0:00:50.760 and seven, eight and nine to come. 0:00:51.240 --> 0:00:52.199 No, I don't care. 0:00:52.320 --> 0:00:57.600 The reason you're here is I'm looking May thirty first, Munich, 0:00:57.840 --> 0:01:00.760 I mean a hitter like you got to be looking 0:01:00.800 --> 0:01:05.560 the private skybox on stub Hub inter Milan versus PSG 0:01:05.920 --> 0:01:09.040 for twenty nine thousand dollars. You got two seats in 0:01:09.040 --> 0:01:10.199 the private skybox. 0:01:10.240 --> 0:01:11.039 Are you gonna roll that? 0:01:12.080 --> 0:01:13.119 I'll watch it on TV. 0:01:14.760 --> 0:01:17.800 It's very exciting. He's a diehard from his youth in 0:01:17.880 --> 0:01:21.800 the old world inter Milan. I want to go back. 0:01:21.840 --> 0:01:24.480 This is really serious, folks, and it's off the radar 0:01:24.640 --> 0:01:27.280 right now. It shouldn't be bread sets or who you 0:01:27.440 --> 0:01:29.200 started has been on fire. 0:01:29.760 --> 0:01:33.639 You and Brad Setser wrote a book eleven years ago. Whatever. 0:01:33.760 --> 0:01:38.200 Fred Berxton wrote the wonderful introduction on EM. How does 0:01:38.319 --> 0:01:41.200 EM affect him? When I see Taiwan dollar go out 0:01:41.240 --> 0:01:42.600 five standard deviations? 0:01:42.600 --> 0:01:47.760 Whatever? How is emerging a market off the radar, affected. 0:01:47.240 --> 0:01:52.520 By China, US, US, Canada, US EU. 0:01:52.840 --> 0:01:55.560 What happens to your EM? Well? 0:01:55.680 --> 0:01:58.160 The good news for YM is that this time around 0:01:58.240 --> 0:02:01.800 the trade shalk have not led to a strengthening of 0:02:01.840 --> 0:02:05.640 the dollar, but rather a weakening of the dollar. With 0:02:05.800 --> 0:02:10.240 the dollar weekends, EM currencies tend to appreciate. It's also 0:02:10.280 --> 0:02:13.080 true that some of these Asian nations are sitting on 0:02:13.680 --> 0:02:18.600 trillions of dollars of US treasuries. Their fornasts are very high, 0:02:18.720 --> 0:02:23.120 and there's been some diversification because we've dented, how to say, 0:02:23.160 --> 0:02:25.720 the dollar as a major global reserve currency given our 0:02:25.840 --> 0:02:30.520 unstable policies, so people move out of US treasure and 0:02:30.600 --> 0:02:33.480 seldom and go back to their own local currency. There 0:02:33.480 --> 0:02:37.560 has been some appreciation and that has taken some momentum. 0:02:37.800 --> 0:02:39.640 There's also hope in Asia. I think that there'll be 0:02:39.760 --> 0:02:42.760 trade deals and the announce reciprocal tricks are going to 0:02:42.760 --> 0:02:46.000 be much smaller than an on April second. That's also 0:02:46.040 --> 0:02:49.240 strengthening some of these currencies, because some of them were 0:02:49.440 --> 0:02:51.640 weakening because of the risk of a trade war and 0:02:51.680 --> 0:02:54.360 so on. To think is a variety of factors leading 0:02:54.400 --> 0:02:55.160 to that happening. 0:02:55.880 --> 0:02:59.000 How concerned are you, if at all, about the US 0:02:59.040 --> 0:03:02.600 economy in the face of the uncertainty of all this 0:03:02.760 --> 0:03:05.920 trade discussion back and forth and back and forth. It 0:03:05.960 --> 0:03:08.040 seems like consumers might be pulling back. It seems like 0:03:08.240 --> 0:03:10.680 corporate executives are pulling back on guidance. I'm not sure 0:03:10.880 --> 0:03:13.200 how it's gonn to impact their businesses. Do you think 0:03:13.200 --> 0:03:14.520 that's going to affect yours economy? 0:03:15.160 --> 0:03:19.160 Well, there are some headwinds coming from trade and it's uncertainty, 0:03:19.240 --> 0:03:23.280 and there are some tailwinds coming from strong cappacks, especially 0:03:23.480 --> 0:03:28.320 aid riven and still good income growth, creation and so on. 0:03:29.400 --> 0:03:31.400 I would say that over the medium time. Actually, I'm 0:03:31.440 --> 0:03:34.560 quite bullish about US economy. I think that because of technology, 0:03:35.000 --> 0:03:36.760 US potential growth by the end of the deck it 0:03:36.800 --> 0:03:40.600 could be four percent, an increase of two underd business points, 0:03:41.120 --> 0:03:44.680 and even poor trade and migration policy can reduce growth 0:03:44.680 --> 0:03:47.520 only by fifty business points. So the ratio within the 0:03:47.520 --> 0:03:50.360 good stuff to underd business points to the bead fifties 0:03:50.400 --> 0:03:52.760 four to one. So I think we'll be onder verge 0:03:52.760 --> 0:03:55.960 of a secular boom over the next few years. So 0:03:56.000 --> 0:03:58.520 I'm quite optimistic. But then in the short rum we'll 0:03:58.520 --> 0:04:01.640 have probably a nearest by your end, there is an 0:04:01.640 --> 0:04:02.520 increasing pop. 0:04:02.680 --> 0:04:05.040 You mentioned a medium term. You gotta be from Europe 0:04:05.040 --> 0:04:07.240 to mention the medium term. We don't do that in America. 0:04:08.000 --> 0:04:11.560 My basic conundrum, Neurabini yep, is we've got the short 0:04:11.640 --> 0:04:15.400 term reality within an American political system which you live 0:04:15.440 --> 0:04:19.640 with President Clinton, out to the long term view of 0:04:19.720 --> 0:04:24.600 whatever Trump economics is and maybe a more optimistic future. 0:04:25.160 --> 0:04:27.040 How do we get is they would say up in 0:04:27.160 --> 0:04:29.719 Maine or you don't know this up in Maine where 0:04:29.720 --> 0:04:31.279 Lisa collects black flies. 0:04:31.640 --> 0:04:33.920 They get from here to there? How do we get 0:04:33.920 --> 0:04:36.600 from short term to long term success? 0:04:37.880 --> 0:04:39.440 The way we get it is this is here there'll 0:04:39.440 --> 0:04:41.680 be a massive slowdown of growth. As you point out, 0:04:42.160 --> 0:04:45.120 consumer and business confidence is down, inflation is going to 0:04:45.120 --> 0:04:48.400 go corpus y four percent by your end, and that's 0:04:48.440 --> 0:04:51.720 going to be a significant eaton real disposal income. So 0:04:51.880 --> 0:04:54.120 by Q four we're going to be in a near recession. 0:04:54.520 --> 0:04:56.840 The good news is that the FAT is now credibly 0:04:56.880 --> 0:05:00.360 committed to fight inflation. They're not cutting rates. Therefore infliction 0:05:00.440 --> 0:05:04.719 expeditions are anchored. Therefore, once infliction is higher but growth 0:05:04.760 --> 0:05:06.680 is lower and you have a beginning of increase in 0:05:06.760 --> 0:05:08.440 unemployment rate, the fact is going to be able to 0:05:08.480 --> 0:05:09.120 cut rates. 0:05:09.320 --> 0:05:09.560 The thing. 0:05:09.640 --> 0:05:12.359 It's going to be a short and shallow recession, maybe 0:05:12.360 --> 0:05:15.960 a couple of quarters a Q one, Q four and 0:05:16.040 --> 0:05:17.520 Q one of next year, and then we'll have a 0:05:17.520 --> 0:05:21.960 strong recovery because the tailweins coming from technology are massive. 0:05:22.200 --> 0:05:24.840 I guess is leading in all the technology of the future. 0:05:24.640 --> 0:05:27.920 Claims are out there on plan unit labor costs and productivity, 0:05:27.920 --> 0:05:28.560 we're elevated. 0:05:28.640 --> 0:05:31.640 That's what we'll talk about here. Unit labor costs jump. 0:05:31.480 --> 0:05:35.200 From a revised two percent up to five point seven percent. 0:05:35.600 --> 0:05:38.200 I got a terror regime of three percent. 0:05:38.320 --> 0:05:40.560 You arguably were one of the people that set up 0:05:40.920 --> 0:05:45.000 coming off the Atlantic Charter, the global trade, the globalization 0:05:45.839 --> 0:05:49.679 mantra of a lower terror regime. Even if we pop 0:05:49.720 --> 0:05:52.520 from one hundred and forty five percent drama in China 0:05:53.040 --> 0:05:55.680 and we come back down to like a blended thirteen percent, 0:05:55.800 --> 0:05:57.719 I don't get it. Is in the gap from a 0:05:57.800 --> 0:06:02.080 three percent blended terraff up to ten percent or thirteen 0:06:02.120 --> 0:06:05.200 percent blended heraf isn't that insurmountable. 0:06:05.760 --> 0:06:07.720 Probably the blend is going to be more than thirteen 0:06:07.760 --> 0:06:11.360 because my baseline is ten to fifteen percent for all 0:06:11.400 --> 0:06:14.320 the world and sixty percent for China, So the blend 0:06:14.360 --> 0:06:17.000 that could be in the high teens. It's a bad world. 0:06:17.040 --> 0:06:20.120 But let's put its way. I suppose that there is 0:06:20.120 --> 0:06:23.960 an average tariff reciprocal on Europe of ten percent as 0:06:24.000 --> 0:06:24.839 opposed to twenty. 0:06:25.480 --> 0:06:25.960 Big deal. 0:06:26.040 --> 0:06:28.080 The Europe can go up and down ten percent in 0:06:28.120 --> 0:06:29.200 a matter of months. 0:06:29.440 --> 0:06:30.680 So is it good? 0:06:30.800 --> 0:06:30.840 No? 0:06:31.200 --> 0:06:31.960 Is it terrible? 0:06:32.240 --> 0:06:34.200 It's going to something? Is that to destroy the world? 0:06:34.560 --> 0:06:37.120 Probably not, because currency can move more than ten percent 0:06:37.560 --> 0:06:40.719 in a matter of months. So, of course is a 0:06:40.839 --> 0:06:43.919 world that is fragmented. The world is the globalized. But 0:06:44.040 --> 0:06:47.400 if the average tarf were being say ten to fifteen 0:06:47.400 --> 0:06:50.240 percent rather than only three, the impact on growth is 0:06:50.279 --> 0:06:54.000 going to be how to say moderate? I would say 0:06:54.160 --> 0:06:56.480 this is will be moderate. Of course, with Chinese a 0:06:56.480 --> 0:06:59.240 different story. With China at sixty percent, we're going to 0:06:59.279 --> 0:07:02.360 de couple from China, and the shock on their growth 0:07:02.400 --> 0:07:05.160 and the shock around inflation is going to be significant. 0:07:05.160 --> 0:07:07.600 So I'm more worried about the fact we're not going 0:07:07.640 --> 0:07:10.360 to de escalate with China. You said fair extent with. 0:07:10.400 --> 0:07:14.960 All of your political economics neural regni. Do you believe 0:07:15.440 --> 0:07:18.320 common sense will come to the rescue in Washington? 0:07:19.120 --> 0:07:21.240 Well more than common sense. In December, I said there'll 0:07:21.280 --> 0:07:25.800 be four guard trades against stupid policy like tariffs, market discipline, 0:07:26.200 --> 0:07:29.880 good economic advisors, fed discipline, and thin majority in Congress. 0:07:30.160 --> 0:07:33.360 Guess what when the stock market crashed, bonding were higher, 0:07:33.440 --> 0:07:36.080 credit spreads are higher, they always hire. They blinked and 0:07:36.120 --> 0:07:38.840 they started to de escalate. Two In that game of 0:07:38.920 --> 0:07:43.040 Chicken between Trump and Powell, Trump blinked because he knew 0:07:43.040 --> 0:07:45.960 if it was a grund fire power, there'll be a 0:07:46.000 --> 0:07:48.800 shock to the market. So eblink the therefore fit fed 0:07:48.880 --> 0:07:52.640 independence was a binding constraint. Eventually, the Peter Navarro of 0:07:52.680 --> 0:07:55.240 the world were sidelines and the scot Passings of the world. 0:07:55.440 --> 0:07:58.120 At the upper end, good economic advisors and the fact 0:07:58.400 --> 0:08:00.960 the team I already mean it was boxing by Ford. 0:08:01.600 --> 0:08:02.480 That's exactly what they said. 0:08:02.600 --> 0:08:04.200 The running out of times I got. 0:08:04.320 --> 0:08:07.040 I got goosebumps because I got Nora Obini and Richard 0:08:07.040 --> 0:08:10.240 Porters back to back. I mean talk, it's an academic 0:08:10.320 --> 0:08:12.920 wonk fest here right now. Have you ever done a 0:08:12.960 --> 0:08:14.280 panel with Peter Navarro? 0:08:15.360 --> 0:08:18.080 I've not done a panel. I my team doing the 0:08:18.120 --> 0:08:21.120 Trump one administration in the White House a couple of times. 0:08:21.440 --> 0:08:26.920 So it's a strange economics from. 0:08:26.000 --> 0:08:29.120 Did you teach Navarro economics at New York University? 0:08:29.680 --> 0:08:29.880 No? 0:08:29.880 --> 0:08:32.920 No, he was at PhD at Harvard, So but we 0:08:33.000 --> 0:08:37.040 didn't overlap. Yeah, surprising a PhD economics from Harvard. But 0:08:37.120 --> 0:08:40.080 Steve Mian is also PhD in economics from Harvard, so 0:08:40.160 --> 0:08:41.800 do I How does I. 0:08:41.760 --> 0:08:45.480 Got twenty seconds? How does inter Milan be PSG? What? 0:08:45.640 --> 0:08:51.080 How does inter Milan be PSG? I don't know you're 0:08:51.080 --> 0:08:55.520 gonna be there. You spend twenty eight thousand dollars, Tobi, 0:08:55.679 --> 0:08:58.559 thank you, thank for. Lisa wants to know when's a 0:08:58.600 --> 0:08:59.200 new book out. 0:09:01.920 --> 0:09:04.800 I don't have any one. Mega Threats come out two 0:09:04.880 --> 0:09:07.200 years ago, still going and all the themes of the 0:09:07.200 --> 0:09:10.160 book Mega threats are still very important today. All the 0:09:10.200 --> 0:09:12.199 threats I talked about are materializing. 0:09:12.360 --> 0:09:16.440 Okay, So Maniel, thank you so much, greatly appreciate it. 0:09:16.520 --> 0:09:20.000 Noro Rabini, I can't say enough his commitment to what 0:09:20.040 --> 0:09:26.679 we do here on economics, finance, investment, and his international economics. 0:09:26.720 --> 0:09:30.559 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:09:30.600 --> 0:09:34.000 starting at seven am Eastern on Applecarplay and Android Auto 0:09:34.040 --> 0:09:37.000 with the Bloomberg Business app. You can also listen live 0:09:37.080 --> 0:09:40.640 on Amazon Alexa from our flagship New York station, Just 0:09:40.679 --> 0:09:43.240 say Alexa Play Bloomberg eleven thirty. 0:09:43.640 --> 0:09:46.080 Ken Shinoda joins us right now with a pedigree at 0:09:46.080 --> 0:09:50.120 TCW over to Double Tree, Double Line Capital. 0:09:50.440 --> 0:09:51.480 Thrilled to have you with us. 0:09:52.080 --> 0:09:55.440 Kenny, You've got a different gloss from southern California than 0:09:55.480 --> 0:09:57.520 the rest of us when you look at Port of 0:09:57.520 --> 0:10:02.360 Los Angeles Long Beach dynamics within the finance and investment 0:10:02.440 --> 0:10:04.240 community of LA. 0:10:04.559 --> 0:10:07.040 What's the tone on this trade where it's different than 0:10:07.080 --> 0:10:07.559 New York. 0:10:08.080 --> 0:10:10.679 Yeah, Well, you know you're seeing a slowdown in port activity. 0:10:10.840 --> 0:10:15.319 We saw a big pull forward of imports ahead of 0:10:14.360 --> 0:10:17.680 the tariffs, which is one of the things that led 0:10:17.720 --> 0:10:21.400 to the decline in GDP in the first quarter, and 0:10:21.840 --> 0:10:24.520 we're waiting, watching to see how the hard data now 0:10:24.559 --> 0:10:27.280 comes in. You know, sentiment has rolled over pretty dramatically 0:10:27.360 --> 0:10:29.440 as you look at consumer and business sentiment, and I 0:10:29.440 --> 0:10:31.440 think the market right now is just waiting and watching 0:10:31.480 --> 0:10:33.640 for what the future data holds. 0:10:34.080 --> 0:10:36.760 You know, I'm looking at the GO function the Bloomberg 0:10:36.800 --> 0:10:41.480 Index browser for fixed income US Mortgage backed securities have been. 0:10:41.600 --> 0:10:43.680 The place to be this year so far to date. 0:10:44.040 --> 0:10:45.640 How do you guys think about that part of the business. 0:10:45.720 --> 0:10:48.479 Yeah, it's been a good run. You know, mortgages struggled 0:10:49.440 --> 0:10:51.880 dramatically during the rate rise and the coming out of 0:10:52.200 --> 0:10:56.000 QE into QT. Sometime in the middle of twenty twenty three, 0:10:56.000 --> 0:10:58.360 at the peak of rate volatility, the MBS index was 0:10:58.400 --> 0:11:01.480 about two hundred basis points behind the corporate bond index 0:11:01.520 --> 0:11:02.800 annualized for five years. 0:11:02.840 --> 0:11:03.040 Wow. 0:11:03.040 --> 0:11:05.439 I mean that's hard to do in fixed income. Nobody 0:11:05.480 --> 0:11:07.840 wants to talk to Yeah, but you know, from these 0:11:07.960 --> 0:11:11.160 valuations where you know, we're over ninetieth percentile on the 0:11:11.240 --> 0:11:14.640 MBS spread, and we think that's an interesting place to be, 0:11:14.880 --> 0:11:18.040 especially when you when you're worried about kind of more 0:11:18.160 --> 0:11:21.640 risk off potentially MBS tends to outperform corporate credit. 0:11:21.920 --> 0:11:24.200 So where do you guys see value today? 0:11:24.240 --> 0:11:27.360 I think what our market probably is characterized most is 0:11:27.480 --> 0:11:30.080 just uncertainty out there in the marketplace, whether it's Corporate 0:11:30.080 --> 0:11:32.640 America pulling back some of their earnings guidance, what it's 0:11:32.640 --> 0:11:35.480 the volatility and the bond market's the equity market uncertainly 0:11:35.480 --> 0:11:37.560 seems to be the story of the day. How does 0:11:37.559 --> 0:11:40.240 that impact kind of fixed income and agency? 0:11:40.840 --> 0:11:43.920 Yeah, well, you know, fixed income finally has kind of 0:11:43.960 --> 0:11:47.600 been a stable place with the Fed, you know, not 0:11:47.600 --> 0:11:51.080 not cutting but done hiking. It's kind of been a 0:11:51.120 --> 0:11:53.959 place of stability in portfolio. So I think people are 0:11:54.080 --> 0:11:56.760 kind of understanding the value of it. Everyone's been hiding 0:11:56.760 --> 0:11:59.000 out in T bills, So I think it's maybe time 0:11:59.040 --> 0:12:01.040 to move out, okay of that tea bill trade. And 0:12:01.800 --> 0:12:04.000 you don't have to go totally out the curve out 0:12:04.000 --> 0:12:06.240 to the tenure, but kind of the belly of the curve, 0:12:06.280 --> 0:12:08.400 the two to five year portion of the curve. Find 0:12:08.400 --> 0:12:10.680 a lot of opportunities there. But as we think about 0:12:10.679 --> 0:12:13.959 the credit landscape, you know, tariff and certain he kind 0:12:13.960 --> 0:12:16.400 of hits the corporate market a little bit more companies. 0:12:16.679 --> 0:12:19.400 If you go away from companies more to assets that 0:12:19.440 --> 0:12:23.079 are backed by consumer credit, things like mortgage backed securities, 0:12:23.920 --> 0:12:27.959 even credit cards, auto loans. Parts of the securitized market 0:12:28.000 --> 0:12:30.920 like commercial mortgage backed securities, you can find sectors that 0:12:31.000 --> 0:12:33.400 aren't as exposed to tariffs. And one could argue that 0:12:34.000 --> 0:12:38.920 increased labor costs, increased material costs will inhibit the supply 0:12:39.000 --> 0:12:42.520 of new homes and that'll actually be positive for home prices. 0:12:43.160 --> 0:12:45.960 Kischanoda with his thrill that it could be with Double 0:12:46.000 --> 0:12:48.280 Line Capital, and of course you know it associated with 0:12:48.320 --> 0:12:52.160 the wonderful, handsome Jeffrey Gundlock. Good morning ninety two nine 0:12:52.280 --> 0:12:55.320 FM up in handover New Hampshire, the land of Dartmouth 0:12:55.320 --> 0:13:00.840 where mister Gundlock matriculated years ago. Give me the line 0:13:01.120 --> 0:13:04.280 from Double Line, and I know Jefferys really opinionated on this. 0:13:05.040 --> 0:13:08.560 On private equity in private credit, I'm going to state 0:13:08.640 --> 0:13:10.920 that's off your remit, this is not the. 0:13:10.880 --> 0:13:12.200 Way Double Line rolls. 0:13:12.840 --> 0:13:16.000 But where are we ending up with private equity in 0:13:16.080 --> 0:13:16.800 private credit? 0:13:17.280 --> 0:13:20.920 Well, you know, private equity is struggling to get cash 0:13:21.000 --> 0:13:23.440 back to investors because the M and A markets kind 0:13:23.440 --> 0:13:26.920 of slowed down. The IPO markets slowed down, and so 0:13:27.720 --> 0:13:30.560 you're seeing a lot of a desire to sell in 0:13:30.559 --> 0:13:32.920 the secondary market. So there's there's going to be big 0:13:32.960 --> 0:13:34.200 growth secondaries. 0:13:36.120 --> 0:13:39.120 What's a percent of haircut that you guys observe. 0:13:39.040 --> 0:13:41.680 Oh, I mean, I think you could easily get ten 0:13:41.760 --> 0:13:44.720 twenty percent discounts to the to the NAV on those sales. 0:13:44.800 --> 0:13:46.520 And then the private credit markets. I think one of 0:13:46.559 --> 0:13:49.319 the reasons we didn't go into recession in twenty twenty 0:13:49.360 --> 0:13:51.839 three was that, you know, the old school way of 0:13:52.960 --> 0:13:55.720 of these cycles is the FED hikes rates, the couple 0:13:55.720 --> 0:13:58.320 of markets kind of shut down, companies can't access the 0:13:58.320 --> 0:14:01.960 credit markets, start people off, you go into recession. Well, 0:14:02.000 --> 0:14:05.800 guess what that happened. FED hiked raakes, the high heeled market, 0:14:05.800 --> 0:14:08.160 bank loan market was effectively shut down for a little bit, 0:14:08.200 --> 0:14:10.880 but private credit came to the rescue. I think the 0:14:11.000 --> 0:14:13.280 challenge is going to be for investors is that we 0:14:13.360 --> 0:14:15.560 haven't really seen the credit cycle, and at some point 0:14:15.559 --> 0:14:19.040 in time there will be losses and we'll see how 0:14:19.960 --> 0:14:20.360 I mean, I'm just. 0:14:20.360 --> 0:14:23.040 Thinking about the mortgage related opportunities in your business, and 0:14:23.880 --> 0:14:27.760 we haven't really seen the I don't know, I haven't 0:14:27.760 --> 0:14:31.160 seen like major blow ups in the credit side of 0:14:31.240 --> 0:14:32.200 the mortgage business. 0:14:32.240 --> 0:14:35.240 I mean, banks haven't been taking huge write downs. 0:14:35.240 --> 0:14:38.880 I haven't seen small banks blow out their numbers terribly 0:14:38.920 --> 0:14:41.200 because of more mortgage loans. 0:14:41.440 --> 0:14:42.200 Where's the pain? 0:14:43.200 --> 0:14:46.800 You know, the banks healed themselves after the Global financial crisis. 0:14:46.840 --> 0:14:48.280 They took less risks. 0:14:48.280 --> 0:14:51.360 The regulators have cramped down on them, so you know, 0:14:51.400 --> 0:14:54.120 there's been some pain some banks have exposure to, you know, 0:14:54.200 --> 0:14:56.760 commercial real estate loans. But I think we did a 0:14:56.760 --> 0:14:58.400 good job in the US kind of making sure that 0:14:58.400 --> 0:14:59.600 they don't take too many risks. 0:15:00.280 --> 0:15:03.640 What do you think of Buffett's cash gazillions? 0:15:03.880 --> 0:15:06.720 Does Double Line? Do you have a sideline. 0:15:06.200 --> 0:15:08.560 Bet with a gazillion dollars of cash you'd like to 0:15:08.600 --> 0:15:09.280 tell us about? 0:15:09.560 --> 0:15:12.160 Yeah, you know, he's he's probably happy. Cash has been 0:15:12.160 --> 0:15:14.400 a good place to be, and you know, I think 0:15:14.760 --> 0:15:16.800 that there's a lot of uncertainty out there. It's going 0:15:16.840 --> 0:15:19.480 to shake the markets up as that hard data comes in, 0:15:19.520 --> 0:15:21.960 and he's going to have some good buying opportunities. 0:15:21.600 --> 0:15:24.520 Very good, really really wonderful to visit with. You don't 0:15:24.520 --> 0:15:26.760 be a stranger. Thrilled that he's with us today with 0:15:26.800 --> 0:15:27.360 Double Line. 0:15:27.720 --> 0:15:30.480 Just as simple is that they've had a huge impact, 0:15:30.560 --> 0:15:35.120 and particularly you know, following the Gunlock Shnoda view has 0:15:35.160 --> 0:15:42.120 been something a lot of people have done. 0:15:43.280 --> 0:15:46.840 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:15:46.920 --> 0:15:50.120 weekday afternoons from seven to ten am Eastern Listen on 0:15:50.160 --> 0:15:53.840 Applecarplay and Android Otto with the Bloomberg Business app, or 0:15:54.000 --> 0:15:55.440 watch us live on YouTube. 0:15:55.480 --> 0:15:59.320 Professor Porters of the London Business School with us today 0:15:59.360 --> 0:16:04.680 in studio. So the President speaking at ten o'clock, the 0:16:04.800 --> 0:16:09.320 Starmer speaking a bit later. I believe on a comprehensive 0:16:09.360 --> 0:16:12.120 trade agreement and all, and of course was sterling moving 0:16:12.120 --> 0:16:15.640 in the Bank of England. It's for our conversation, but 0:16:15.760 --> 0:16:19.360 we must start. Professor Portis with a gentleman who was 0:16:19.440 --> 0:16:22.280 so kind to me. I can't say enough about what 0:16:22.400 --> 0:16:25.720 Joseph Knight did for me, along with many other people. 0:16:26.320 --> 0:16:28.160 And all of this was wrapped. 0:16:27.840 --> 0:16:34.000 Around his invention of international relations and soft power. 0:16:34.080 --> 0:16:36.960 What is the legacy of the giant of Harvard. 0:16:37.320 --> 0:16:41.960 I'm afraid it looks rather shaky now. Sadly, Joe was 0:16:42.040 --> 0:16:46.400 a wonderful person and a terrific intellect, and the soft 0:16:46.440 --> 0:16:51.400 power concept really made headway during the day when soft 0:16:51.480 --> 0:16:56.400 power could exercise power. Now it seems that we've shifted 0:16:56.440 --> 0:17:01.880 away from that, and the environment, international environment is not 0:17:02.200 --> 0:17:04.240 conducive to the use of soft power. 0:17:04.600 --> 0:17:07.480 I see a substitution here that's off the mark. I 0:17:07.520 --> 0:17:10.439 see the chaos of Liz Trust. I see what we 0:17:10.480 --> 0:17:14.160 see out of sixteen hundred Pennsylvania Avenue. And the fallback 0:17:14.359 --> 0:17:18.320 is it's a Kissinger real politic. I don't buy it 0:17:18.440 --> 0:17:21.919 for a minute. I don't see an underlying theory towards 0:17:22.040 --> 0:17:24.720 Robert D. Kaplan and Henry Kissinger. Am I right? 0:17:25.040 --> 0:17:27.919 I think that is right. There's no underlying theory. But 0:17:28.080 --> 0:17:32.680 we are in we are in chaos mode, honestly internationally 0:17:33.240 --> 0:17:36.560 and to some extent domestically in this in this country, 0:17:36.560 --> 0:17:39.600 in the United States, and a bit in the UK, 0:17:40.359 --> 0:17:45.680 and some in Europe as well. So it's it's it's 0:17:45.680 --> 0:17:49.560 not good. The multilateral system is coming apart, and someone 0:17:49.640 --> 0:17:53.800 like Joe and I, for example, was a great proponent 0:17:53.880 --> 0:18:00.159 and advocate of multilateral stability, and it's it's going Sir. 0:18:00.200 --> 0:18:03.080 At the London Business School, when you talk about tariffs, 0:18:03.119 --> 0:18:06.080 when you teach your students about tariffs, how do you 0:18:06.480 --> 0:18:08.240 what context do you put tariffs. 0:18:07.840 --> 0:18:15.640 In Tariffs are a legitimate trade tool in certain circumstances, 0:18:16.119 --> 0:18:22.119 but the kind of wide ranging, blunt tariffs that that 0:18:22.359 --> 0:18:27.159 the current administration is imposing seemed to me to be 0:18:27.520 --> 0:18:32.200 very misguided. They will be inflationary, they will be contractionary. 0:18:33.200 --> 0:18:39.280 They the funny thing is that they've been complaining. Stephen Mirron, 0:18:39.320 --> 0:18:42.520 the chair of the Council of Economic Advisors, complained that 0:18:42.760 --> 0:18:44.920 the dollar has been too strong. Well, they've been very 0:18:44.920 --> 0:18:48.199 successful in bringing the dollar down, haven't they, right, why 0:18:48.760 --> 0:18:53.359 by causing some degree of chaos. So that's you know, 0:18:53.440 --> 0:18:57.960 they shouldn't be complaining about that anymore. And we'll see, 0:18:58.119 --> 0:19:00.679 we'll see how he adjusts that. This trade deal with 0:19:00.720 --> 0:19:03.439 the UK that is supposed to be announced in just 0:19:03.520 --> 0:19:06.880 a little while will not be any kind of comprehensive 0:19:06.880 --> 0:19:10.680 trade deal. It'll be good for us in the UK 0:19:11.200 --> 0:19:13.760 on cars and steel, and we have problems with both 0:19:13.760 --> 0:19:19.040 those industries, but really our main exports to the United 0:19:19.040 --> 0:19:25.560 States are services and the good side just isn't that important. 0:19:26.359 --> 0:19:26.960 In the UK? 0:19:27.200 --> 0:19:30.840 How are they viewing kind of our trade posture these days? 0:19:30.840 --> 0:19:32.520 Are they trying you think the UK is going to 0:19:32.520 --> 0:19:36.200 try to be accommodative, combative, what's in their best interest. 0:19:36.960 --> 0:19:41.080 I think Starmar is the Prime Minister. The UK is 0:19:41.280 --> 0:19:45.720 treading a very fine line and not quite clear which 0:19:45.760 --> 0:19:48.639 side of that line he's falling on as between the 0:19:48.640 --> 0:19:52.959 European Union and the United States, and he's trying to 0:19:53.240 --> 0:19:57.480 both have it both ways, good relationships with both. But 0:19:57.600 --> 0:20:00.199 it's not clear that that's going to be feasible, so 0:20:00.760 --> 0:20:04.040 he may in due course have to make some tough choices. 0:20:04.480 --> 0:20:07.760 If he will portray this deal with the Trump is 0:20:07.800 --> 0:20:10.200 about to announce, he will portray that as a great 0:20:10.240 --> 0:20:12.600 step forward. As I've said, I don't think it's a 0:20:12.600 --> 0:20:16.560 great step forward. It's useful, but the baseline, as far 0:20:16.560 --> 0:20:18.760 as I can, as far as I understand from the press, 0:20:18.920 --> 0:20:23.400 the baseline ten percent step tariff will stay spectacular. 0:20:23.480 --> 0:20:26.360 Thursday for you, Nora Rabinian. Richard portis with US now 0:20:26.480 --> 0:20:29.919 Professor Porters in the London Business School, Anna one, we'll 0:20:29.960 --> 0:20:31.760 get back to the markets here in the nine o'clock 0:20:31.760 --> 0:20:35.879 are Michael Nathanson with US on media and also Jen's 0:20:36.000 --> 0:20:39.280 Nordwig will be with us on a currency. I'm told 0:20:39.280 --> 0:20:41.560 doctor Wong will be in studio. Very rare for her 0:20:41.600 --> 0:20:46.639 to break away for entourage, Professor Portis. I think for Americans, 0:20:47.280 --> 0:20:50.240 if you read the British papers, it's almost a febrile 0:20:50.880 --> 0:20:55.320 political vibration if you will, across the different parts of 0:20:55.400 --> 0:20:59.320 Great Britain. When you look right now at what we're seeing, 0:20:59.359 --> 0:21:03.080 which is re form, Nigel Farage coming on, what is 0:21:03.119 --> 0:21:07.679 the character? Are they quote like Trump? Are they like 0:21:07.800 --> 0:21:11.080 Barry Goldwater from another time in place? What is the 0:21:11.200 --> 0:21:12.639 character of the Farrage? 0:21:12.720 --> 0:21:16.840 It's very Goldwater we could live with. The reform is 0:21:16.880 --> 0:21:19.680