Speaker 1: This is the Bloomberg Surveillance Podcast.
Speaker 2: I'm Tom Keene, along with Jonathan Farrell and Lisa Abramowitz.
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Speaker 3: Mike Wilson, Morgan Stanley.
Speaker 4: He's been making a lot of warnings recently, the latest
Speaker 4: saying that risks are building for US consumer stocks, writing quote,
Speaker 4: this price action is picking up on slowing consumer spend,
Speaker 4: student loan repayments resuming, rising delinquencies to certain household cohorts,
Speaker 4: higher gas prices, and weakening data in the housing sector,
Speaker 4: the quinfecta of threats or however money you want to
Speaker 4: say that. Mike Wilson of Morgan Stanley joining us now, Mike,
Speaker 4: how much pushback we talked about this before. Do you
Speaker 4: still get the same degree of pushback that you did
Speaker 4: a month ago? Or are more people listening and saying
Speaker 4: wait a second. In the anecdotal data, this is starting
Speaker 4: to make sense.
Speaker 5: Yeah, look, I mean, I think the question for investors
Speaker 5: is always price. I mean, we're in a late cycle environment.
Speaker 5: Let me just set the table a little bit, right,
Speaker 5: So we're in a late cycle environment for the last year,
Speaker 5: and when you're in a late cycle environment, there's a
Speaker 5: lot of uncertainty, right, I mean, people erroneously called for
Speaker 5: recession in the first half of this year, it didn't happen,
Speaker 5: and now they may be erroneously believing in like this
Speaker 5: beautiful soft landing with some reacceleration next year.
Speaker 6: They probably overpriced that.
Speaker 5: In the summer. So what happens is investors get whipped
Speaker 5: around by price action. And I would say what's happened
Speaker 5: in the last two months is we are seeing a
Speaker 5: breakdown again in a.
Speaker 6: Lot of the stock market.
Speaker 5: Okay, yeah, the overall averages are down four five percent,
Speaker 5: not a big deal, but some of these consumer stocks
Speaker 5: are really really struggling. And I think that reflects kind
Speaker 5: of what we were talking about a minute ago before
Speaker 5: we get on the air, which is that the middle
Speaker 5: lower end consumer definitely is out of excess savings. That's
Speaker 5: starting to bleed a little bit into the higher end
Speaker 5: now as well. We have the student loan moratorium, and
Speaker 5: I just think it's that's the wildcard, that is the
Speaker 5: risk for the fourth quarter is can the consumer continue
Speaker 5: to surprise on the upside?
Speaker 4: Can you see some of these retail and consumer facing stocks,
Speaker 4: these small cap stocks get blown out, have their valuations
Speaker 4: completely decimated, and the rest of the markets hug along
Speaker 4: and no one noticed because the Magnificent seven keep heralding
Speaker 4: all of the cautious votes of confidence from a lot
Speaker 4: of the consumers that see them as cash cows in perpetuity.
Speaker 5: Well, it can continue if you don't have that heart landing. Okay,
Speaker 5: if you have a heart landing, then even the big
Speaker 5: winners will feel that, right, And I think that's what
Speaker 5: the market's betting on. The market's betting there is no recession.
Speaker 5: And we taught you know, the bomb market. Is that signaling,
Speaker 5: you know, greater strength or is that signaling that maybe
Speaker 5: the bond market's pushing back on the fiscal you know,
Speaker 5: kind of spending.
Speaker 6: I think it's a little bit of both.
Speaker 5: And if we don't have a hard landing, then the
Speaker 5: big names are probably going to continue to lead because
Speaker 5: they have scale and they have better bantle treets.
Speaker 1: Let's go back to Graham dud cottle one oh one.
Speaker 2: Mike Wilson, how can you be as cautious as you've
Speaker 2: been and not have a massive cash position? What is
Speaker 2: your cash position? How invested are you within your caution?
Speaker 5: Yeah, I mean we're we're basically ninety five percent invested.
Speaker 5: You know, we're like five percent underweight equities. And we've
Speaker 5: talked about this before. We never go one hundred percent cab.
Speaker 2: Yeah. What the financial media does, of course, great theater
Speaker 2: of course.
Speaker 5: Now what we can do, Tom is we can be
Speaker 5: positioned more defensively within our equity exposure, which is what
Speaker 5: we've done, right, So we're skewed more towards kind of
Speaker 5: defensive growth. You know, late cycle cycle calls as the
Speaker 5: post to that. We're not grabbing for beta, we're not
Speaker 5: grabbed for small caps. We're not grabbing for the stuff
Speaker 5: that's really kind of vulnerable if things go sideways.
Speaker 2: Okay, you're with James Gorman. He's saying, Mike, I don't
Speaker 2: care about it in this blather. Just tell me about
Speaker 2: the damn banks. I've been remiss on this Keith Friett Index.
Speaker 2: You and I know it, we love it, And the
Speaker 2: answer is it's a grim chart. You go back to
Speaker 2: pre California, pre idiocy out there with one.
Speaker 1: You know, you know the game that they went through.
Speaker 2: It's one of the barest charts I've seen in years.
Speaker 2: When do you know to load the boat on banks?
Speaker 5: Well, look, it's the same story as the broader market time,
Speaker 5: the bigger getting bigger. There's concentration, you know, in the winners. Again,
Speaker 5: it's it's like the higher quality banks are performing. So
Speaker 5: you long Apple, Well, I mean we are in many
Speaker 5: portfolio was obviously because it's such a big part of
Speaker 5: the index. But Apple's another category of stock where people
Speaker 5: are paying up for the quality of the barel sheet,
Speaker 5: the lack of need for financing.
Speaker 6: But the banks are representative of the broader market.
Speaker 5: Okay, the higher quality banks are outperforming the lower quality banks.
Speaker 6: That's just that's just where we are for everything.
Speaker 2: Lisa Shallon emails in and she says, ask Mike Wilson
Speaker 2: with his easy day job, she's got the real job
Speaker 2: managing money. Do you buy an R squared tyke to
Speaker 2: the S and P five hundred or if I'm active.
Speaker 1: Managed, do I want to be idios? Who did we
Speaker 1: talk to in London? Kathy?
Speaker 2: Kathy said, who Kathy would arc?
Speaker 4: Oh, Kathy would Kathy would arc?
Speaker 2: I mean, do I want to buy an R squared
Speaker 2: tyke to S and P five hundred or do I
Speaker 2: want to get more idiosyncratic?
Speaker 6: You want to be more idiosyncratic? For sure? This whole year, right,
Speaker 6: I mean, even though the.
Speaker 5: SMP is outperformed, it's been ten stocks that's idios And
Speaker 5: I mean, if you pick those ten stocks, you did
Speaker 5: really really well. If you pick the you know, if
Speaker 5: you pick the other four hundred and ninety three, you
Speaker 5: didn't do very well. So it's been the dispersion is
Speaker 5: really really high. And it makes sense right now. The
Speaker 5: market's paying up for what I would call operational efficiency
Speaker 5: cost leaders. It's paying up for good balance sheets, paying
Speaker 5: up for scale. Okay, will that change? Can we broaden
Speaker 5: out to the lower end of the market. If the
Speaker 5: market starts to believe that not only do we avoid
Speaker 5: a recession, but there's a reacceleration, that's what we need
Speaker 5: to see. That's what the market's trying to figure out.
Speaker 5: Hard landing reacceleration. This purgatory land is we're just going
Speaker 5: to kind of slot back and forth and the markets
Speaker 5: to continue to gravitate to the lifeboats.
Speaker 4: What does it mean to be defensive? And I keep
Speaker 4: asking this because some people say it's tech stocks, some
Speaker 4: people say it's consumer staples.
Speaker 6: What do you say, Well, I think it's both.
Speaker 5: I think I mean obviously, the market this year has
Speaker 5: voted with its feet saying they want to buy large
Speaker 5: cap growth stocks, not just tech, but growth stocks with
Speaker 5: good balance sheets that have scale.
Speaker 6: And I will just want to I want to point.
Speaker 5: Something out that's really important for these seven or eight
Speaker 5: stocks this year now X one or two. Most of
Speaker 5: the earnings recovery for these stocks has been a result
Speaker 5: of cost cutting.
Speaker 6: Right.
Speaker 5: They all got over their skis on too much spending
Speaker 5: last year. They rained that in and so they've kind
Speaker 5: of manufactured and earnings recovery if they don't see top
Speaker 5: line reacceleration. This is where we're starting to see a
Speaker 5: separation now, even in those seven and I think that's
Speaker 5: going to be another story for the fourth quarter and
Speaker 5: next year's. The market wants revenue growth, not just cost
Speaker 5: cutting stories.
Speaker 4: What we're talking about right now is the bottom line.
Speaker 4: We're not talking about the rates picture and what that
Speaker 4: does overall to some sort of macro call on equities.
Speaker 4: Bank of America Strategies came out today and said, do
Speaker 4: rates matter for stocks? And if so, it's not priced.
Speaker 3: Do you agree?
Speaker 5: Well, for once again, for some stocks it's mattered a ton, right.
Speaker 5: I mean, I just think, look, we said this at
Speaker 5: the end of the year. This is the most difficult
Speaker 5: part of the economic cycle when you are late We
Speaker 5: know we're late cycle for one reason, because we got
Speaker 5: full employment. So you can't argue we're mid cycle or
Speaker 5: early cycle.
Speaker 6: That's silly.
Speaker 5: What you can argue is that the late cycle period
Speaker 5: can persist for a lot longer than people expected. And
Speaker 5: that's what's going on. Rates are the one while because
Speaker 5: the rates have really surprised everybody, vond investors and stock investors. Normally,
Speaker 5: in the late cycle environment, rates come down. Why because
Speaker 5: the Fed's done As you not well know, this cycle
Speaker 5: is unique. That's the tricky part of the cycle because
Speaker 5: the FED can't be proactive in.
Speaker 6: Cutting rates ahead of the recession.
Speaker 5: So we're just gonna ride this until basically you run
Speaker 5: out of gas, and that could be another year.
Speaker 6: You don't know the answer to that yet.
Speaker 2: I mean, I find it absolutely fascinating here. Let me,
Speaker 2: I want to touch on this through the next number
Speaker 2: of minutes, Mike Wills, So, Mike Wilson and Morgan Stanley
Speaker 2: with US folks, dovetail your revenue line, your animal spirit
Speaker 2: in the equity market with Zetner's Ellen Zenner's nominal GDP
Speaker 2: bringing in a real GDP. Who knows what disinflation is
Speaker 2: even Jim Karen doesn't. He Karen doesn't have a clue.
Speaker 2: But the answer is model out nominal GDP and how
Speaker 2: it affects your revenue line.
Speaker 5: So this is really interesting. This is where Ellen and
Speaker 5: I are kind of aligned. I mean, I think we're
Speaker 5: the only bank industry where we called for soft landing
Speaker 5: and an earnings recession both turned out to be true.
Speaker 5: So why is that, Well, because revenue growth and pricing
Speaker 5: has been actually not as good as the the sort
Speaker 5: of pricing and the inflation numbers in the government statistics. Now,
Speaker 5: Ellen is, I would say, far from excited about economic growth.
Speaker 5: I mean, she's not calling for recession, right, but she's
Speaker 5: looking for basically one percent GDP growth, real GDP.
Speaker 1: Growth three point eighty four percent.
Speaker 5: Nominal exactly, And so you know, three to four percent
Speaker 5: nominal GDP growth. I mean, could that lead to three
Speaker 5: to five percent revenue growth. Maybe here's the risk the
Speaker 5: economy is not the is not company with companies. See
Speaker 5: what companies are seeing in pricing is very very different
Speaker 5: than what the economic statistics will tell you. Very similar
Speaker 5: in twenty twenty one when companies were getting twenty percent
Speaker 5: price when CPI and Core CPI were saying six seven eight.
Speaker 5: So now if you have CPI three four, you actually
Speaker 5: have companies seeing deflation.
Speaker 1: Mike Wilson with this. Here at.
Speaker 2: Jonathan Faraoh staying in London in conversation with the former
Speaker 2: Prime Minister of the United Kingdom, Gordon Brown, Mohammed Alarian
Speaker 2: of the University of Cambridge, and the Nobel Prize winning
Speaker 2: economist Michael Spence of New York University.
Speaker 1: The book is.
Speaker 2: Perma Crisis, A Plan to Fix a fractured World, Brown,
Speaker 2: Alarian and Spence an AI and crisis to manage in
Speaker 2: the future. Here is Professor Spence.
Speaker 7: When jen AI came along, then I saw it sort
Speaker 7: of multi domain capability, the fact that you can use
Speaker 7: it with no technical training, just a little bit of
Speaker 7: a you know practice, you know, creating prompts, and its
Speaker 7: applicability pretty much everywhere. I thought. You know, even though
Speaker 7: it's early days and we're in a period of exploration
Speaker 7: and experimentation, I think it's a reasonable forecast that this
Speaker 7: tool is an important part of a future productivity surge,
Speaker 7: and if it comes, it'll make it a lot easier
Speaker 7: to do inclusive growth patterns because it won't be a
Speaker 7: zero sum game. It'll be easier to invest multi trillions
Speaker 7: of dollars in the energy transition. It's going to be
Speaker 7: terribly difficult to get that done with fiscal's space declining,
Speaker 7: the rising debt levels and rising interest rates. So that's
Speaker 7: why we spend a fair amount of time. It's not
Speaker 7: that the growth by itself is the only thing, it's
Speaker 7: that it enables an awful lot of what we want
Speaker 7: to accomplish.
Speaker 2: It.
Speaker 8: Yeah, I think we're heading for a low growth decade
Speaker 8: if we don't have the productivity surge that AI can
Speaker 8: give us. And I think what Mike is pointing out
Speaker 8: is it can transform a whole range of industries. You'll
Speaker 8: never see the accountancy or legal or even medical professions
Speaker 8: or teaching profession be the same. Again, if EI has
Speaker 8: the impact that I think and Mike thinks it will have,
Speaker 8: but equally We've got to have that productivity search because
Speaker 8: without that, the inflation, the fiscal space being narrow, the
Speaker 8: debt that we're running, and of course the supply side
Speaker 8: shocks and constraints that are in existence mean that as
Speaker 8: things stand, we're heading for a low growth decayed AI
Speaker 8: is the way forward to take us out of growth,
Speaker 8: and I think Muhammad agrees with that totally.
Speaker 9: And it's critical because we have a debt issue that
Speaker 9: has to be resolved with an inequality issue. We need
Speaker 9: resources for critical transitions. So you know the notion, as
Speaker 9: Mike and Gordon correctly said, that higher, more inclusive growth
Speaker 9: and most sustainable growth is a massive enabler to deal
Speaker 9: with all these other problems.
Speaker 10: All three of you understand the risks involved.
Speaker 1: Though.
Speaker 10: If globalization hollowed down manufacturing bases domestically in places like America,
Speaker 10: in the United Kingdom to some extent as well, and
Speaker 10: I'm asking the question, why wouldn't AI do the same
Speaker 10: thing to services? My question, if I'm a member, a citizen,
Speaker 10: someone who's got to vote, is why would I trust
Speaker 10: the same people? Loll over again, who should I trust
Speaker 10: to manage that transition, that integration of those technologies.
Speaker 8: That's what my children say, My young teenagers say, you
Speaker 8: guys have messed it up. And it is true that
Speaker 8: we tried to create a more inclusive system. We tried
Speaker 8: to deal with the problems of environment, but we couldn't
Speaker 8: get the agreement that we needed, and we tried to
Speaker 8: have more equity and better jobs. But I do think
Speaker 8: when I talk to young people, they want to see
Speaker 8: this change. You know, the issue is not whether you
Speaker 8: have change or not now the issue the issue, the
Speaker 8: issue is what kind of change, And we've got to
Speaker 8: make that change inclusive.
Speaker 7: Mike agree. I mean, you know, Eric Brynolfsen talked about
Speaker 7: the touring crap. You know, the touring test basically pushes
Speaker 7: you in the direction of automation. We want to push
Speaker 7: in policy should be pushing in the direction of augmentation,
Speaker 7: of giving people powerful tools that make them more productive.
Speaker 7: So this is the journey we're setting on. But it's
Speaker 7: not it's not I don't think right to just capitulate
Speaker 7: and say productivity produces employment problems. It's at least more
Speaker 7: complicate than that, Jonathan.
Speaker 8: But our global institutions have got a reform to be
Speaker 8: capable of dealing with this. They're not for purpose at
Speaker 8: the moment, and the IMF has got to be a
Speaker 8: crisis prevention mechanism to proper surveillance of the world economy.
Speaker 8: It can't just be there for a crisis resolution. The
Speaker 8: World Bank has got to become a global public goods
Speaker 8: bank and deal with the energy transition as well as
Speaker 8: human capital. The World Trade Organization's got to find a
Speaker 8: way of diplomacy and negotiation and arbitration working better than
Speaker 8: it has in the past. And we need a better
Speaker 8: concept of burden sharing. I mean, I cannot understand why
Speaker 8: when you have a humanitarian crisis, and we have many
Speaker 8: around the world at the moment, all we seem to
Speaker 8: be able to do is pass the begging ball around
Speaker 8: and hope that someone's going to produce some money. We've
Speaker 8: got a system of burden sharing, whether it's for the environment,
Speaker 8: or whether it's for public health, or whether it's for
Speaker 8: some of the other global public goods we want to do. Now,
Speaker 8: if you talk to people around the world. I've just
Speaker 8: come back from the United Nations, they all want this
Speaker 8: to happen. So what we need to do is show
Speaker 8: that this can yield the best results and then create
Speaker 8: the political will for this to happen.
Speaker 10: As I'm listening to I'm getting the same feeling that
Speaker 10: I got when I read the book. This makes a
Speaker 10: lot of sense, and then I end up in the
Speaker 10: same place. Is there any evidence that people are willing
Speaker 10: to vote for it?
Speaker 6: Now?
Speaker 10: You say it's incredibly popular, you go around, you speak
Speaker 10: to people, and they're convinced by it. I don't see
Speaker 10: any evidence from recent general elections that anyone wants this
Speaker 10: vision that the three of you have.
Speaker 8: I think people want hope. I think the lesson of
Speaker 8: COVID and of the energy and food crisis and people's
Speaker 8: reaction to the war in Ukraine is that things have
Speaker 8: got to be better than this, and I think those
Speaker 8: leaders that can show that there's a hopeful future. Now
Speaker 8: you see me and Motley in the Caribbean producing her
Speaker 8: plan for global growth. You see now politicians in Africa
Speaker 8: talking about green growth. I do think that there's a
Speaker 8: movement now that says, look, we cannot have politics just
Speaker 8: as a negative sport where people are just attacking each
Speaker 8: other and it's all so of about sound bites. I
Speaker 8: think people want politicians that can give them hope, and
Speaker 8: that's the next generation Mahmot.
Speaker 9: I think he's absolutely right. I mean, there's a people
Speaker 9: want hope. I think there's a world recognition that the
Speaker 9: world we're on is unsustainable and it's getting more and
Speaker 9: more bumpy. And third, we're dealing with a loss of trust,
Speaker 9: and if we don't directly re establish trust in our
Speaker 9: institutions and our policy making in global cooperation, things.
Speaker 1: Are going to go and get worse.
Speaker 9: I think the reason why we wanted to put this
Speaker 9: down is hoping to start a conversation on a set
Speaker 9: of steps, and we keep on saying there is no
Speaker 9: silver bullet. This is not a big bang, you do
Speaker 9: something tomorrow and then everything's fine. This is building a
Speaker 9: foundation that turns vicious cycles into virtuous ones.
Speaker 10: Well, let's take the Feederal Reserve as one example. You've
Speaker 10: written about this extensively over the last eighteen months. I
Speaker 10: still remember a conference we did together in the summer
Speaker 10: of twenty twenty one when you warned about what could
Speaker 10: possibly becoming. How ill prepared the institution that is the
Speaker 10: Federal Reserve was for this moment. How do they recover
Speaker 10: from the mistakes they've made in the last eighteen months
Speaker 10: to help contributes the vision the three of you have.
Speaker 9: So the recovery is starting. I think there's much broader
Speaker 9: recognition now that has been five failures, analysis, transit or
Speaker 9: inflation forecasts consistently too optimistic, action too late, communication modeled,
Speaker 9: and regulation had We almost had a big banking crisis
Speaker 9: just six months ago. So I think that's now there's
Speaker 9: more understanding, and what we propose is a few steps
Speaker 9: that reduce the chances of that happening, things that minimize groupthink,
Speaker 9: things that increase accountability. And without accountability, the independence of
Speaker 9: the FED is going to be challenged going forward. So
Speaker 9: the FED has huge interest in embracing the few things
Speaker 9: we propose in order to restore trust in an institution
Speaker 9: that's absolutely critical and that must have political autonomy.
Speaker 2: Elarian, Elaron Brown, and Spence Prima Crisis is the book,
Speaker 2: John Farewell, just a wonderful effort there joining us now
Speaker 2: Kathy Jones, chief fixed income strategists.
Speaker 1: Here on a higher yields, on the real yield.
Speaker 2: I'm sorry even to schwab Lisa, it's been an adjustment.
Speaker 4: Yeah, I mean, honestly, right now people are looking at
Speaker 4: these yields and saying can they last? And you are
Speaker 4: even saying yesterday, as you looked at them, why so why.
Speaker 3: Yeah, you know, I do think that we are adjusting
Speaker 3: to this new world where we have a positive term
Speaker 3: premium and we have a stronger growth outlook and certainly
Speaker 3: you know, higher for longer yields. The question is, you know,
Speaker 3: what is the endpoint of all that, and so when
Speaker 3: we look at it, what we say as well, the
Speaker 3: FED might hold here for a while, but it's very
Speaker 3: difficult to see why they want to go a lot
Speaker 3: higher from here. So inflation is falling. Get a couple
Speaker 3: more zero point two percent month over month prints in
Speaker 3: PCE and will be at two to and a quarter
Speaker 3: on core PCE, so we're almost there on inflation. The
Speaker 3: economy is slowing down, the housing market is basically frozen.
Speaker 3: You've got risks in the commercial real estate market that
Speaker 3: could spread back into banking. I mean, there's a lot
Speaker 3: of indicators here to suggest that they've done enough. So
Speaker 3: I'm curious to understand why some of the FED members
Speaker 3: are still talking about raising rates even further.
Speaker 4: Partly because the economic data keeps surprising to the upside.
Speaker 4: It's part of the reason why we keep hearing from
Speaker 4: different CEOs Jamie Diamond, David Solomon talking about resilience, and
Speaker 4: they're seeing it. They would see it first if they
Speaker 4: were seeing it really start to crack. Consumers are still
Speaker 4: able to spend, albeit not at the levels they previously were.
Speaker 4: So what point do you lean into that and say, no, Actually,
Speaker 4: maybe it's a screaming buy if you take a ten
Speaker 4: year yield at four and a half percent and you
Speaker 4: will to clip the coupon for the next ten years.
Speaker 4: But are you really going to see that appreciation with
Speaker 4: some sort of massive decline in yield increase in price
Speaker 4: that people were previously expecting.
Speaker 3: Yeah, I think that we will see a decline in yield.
Speaker 3: Obviously we're not going back to zero or one percent
Speaker 3: or two percent or whatever. But I do think we'll
Speaker 3: see a decline in yield. So consumers are spending, but
Speaker 3: they're filing for bankruptcy, you know. That's that's kind of
Speaker 3: the two sided issue here. We're seeing a lot of
Speaker 3: delinquencies on credit cards, on auto loans, We're seeing defaults
Speaker 3: in the corporate sector. The speculative default rate is starting
Speaker 3: to pick up. I mean, there's a lot of evidence
Speaker 3: that higher rates are biting. It takes time to work
Speaker 3: its way through. The question is, you know, does the
Speaker 3: fad really want to send it over the edge or
Speaker 3: do they want to try for this soft landing. But
Speaker 3: you know, we think there's value in fixed income. You
Speaker 3: don't have to go all the way to tens. But
Speaker 3: we think there's plenty of value in just clipping the
Speaker 3: coupon here. I mean, you look at the egg. You
Speaker 3: can look at positive returns going forward because you've got
Speaker 3: a higher coupon and you don't have that much duration.
Speaker 2: Ren Okay, bring up the chart you just put up there,
Speaker 2: Amy and nailed it with that ten year chart on radio, folks.
Speaker 1: It's just the ten year chart in the yield here.
Speaker 2: I'm gonna get a little fancy here with Kathy Jones
Speaker 2: because she's a fancy at person.
Speaker 1: I have nice log convexity, I have.
Speaker 2: A beautiful two standard deviation trend in a higher yield.
Speaker 2: I've got elegancy on my climb in moving averages, I
Speaker 2: have a trend in place.
Speaker 1: How do you know when the yield turns and goes lower.
Speaker 1: I don't see that here. I see higher ten year yield.
Speaker 3: Oh, you're right, I mean I pick trying to pick
Speaker 3: the peak is really really hard. It is in every cycle,
Speaker 3: and this cycle has been you know, particularly unusual dynamics
Speaker 3: because of the pandemic and the fiscal stimulus and you know,
Speaker 3: all the special things that have happened.
Speaker 2: I have an inertial force in the yield space to
Speaker 2: higher e ELD.
Speaker 1: How do I respond to that?
Speaker 2: Do I stay wicked short term money market fund cash
Speaker 2: and that or am I a brave fall on a knife
Speaker 2: and dive in here? Dollar costs to average into it?
Speaker 3: Yeah, we don't fall on knives typically, that's usually not
Speaker 3: our yeah exactly, but yeah, we leave that for the
Speaker 3: equity folks. They can try that. But you know, we're
Speaker 3: dollar cost averaging in. So you know, we're looking at
Speaker 3: the agg with a duration of six and a yield
Speaker 3: of five and a quarter, and so mimicking something in
Speaker 3: that space, having a barbell perhaps to do that. Because
Speaker 3: you do get a lot in cash, You do get
Speaker 3: a lot in the short end, but you don't want
Speaker 3: to ride the cycle up and down because you're not
Speaker 3: getting any of the benefits and you want to lock
Speaker 3: in some of the income. I mean, this is a
Speaker 3: huge opportunity for people investing for income right now. We
Speaker 3: haven't had this in fifteen twenty years.
Speaker 4: The concern that some people have is that bon vigilantes
Speaker 4: are getting a little bit stronger, and there are many
Speaker 4: more of them, and there are many fewer of the
Speaker 4: international banks that might step in, say from Japan.
Speaker 3: How do you respond to that?
Speaker 4: Are you seeing the mix of buyers change and become
Speaker 4: more aggressive in their demands?
Speaker 3: You know, we still seeing foreign inflows are pretty pretty attractive,
Speaker 3: have pretty steady, so it's it's hard to parse the
Speaker 3: numbers because of the way they're reported through different agencies,
Speaker 3: but foreign investments still pretty strong, so not too worried
Speaker 3: about that. I think a lot of it is the
Speaker 3: Fed's pulling back in QT right. The FAD was our
Speaker 3: big backstop, and now the Fed's not buying the FEDS
Speaker 3: allowing to roll off, and I think that that's one
Speaker 3: of the drivers of this. You know, this last leg
Speaker 3: up here is you just don't have them stepping in,
Speaker 3: and that's going to be a factor that's going to
Speaker 3: keep rates higher than they would otherwise have been.
Speaker 2: Kathy, I'm asking for a friend, folks. The Austrian ninety
Speaker 2: seven year I've enjoyed from a one thirty four I
Speaker 2: bought it just below that, like one thirty one to
Speaker 2: thirty six. I'm down seventy two percent on a ninety
Speaker 2: seven year piece of paper, and on a stochastic basis, again,
Speaker 2: how do you know when that's going to reverse and
Speaker 2: be the distressed debt.
Speaker 1: By of all time? When do you go long Austria?
Speaker 3: You know, Tom, I wish I had the answer to that.
Speaker 3: I think that you're gonna put on.
Speaker 2: A technical basis, we haven't seen this in seventeen years, right,
Speaker 2: I mean this is you know, Lisa has no memory
Speaker 2: of this. What percentage of Wall Street has no memory
Speaker 2: of going? Okay, when do I go long Austria? That
Speaker 2: question hasn't been asked for seventeen years.
Speaker 3: Yeah, when you go along super long duration, I think
Speaker 3: you're going to have to wait for a pivotal moment
Speaker 3: such as you know, such as a big recession or
Speaker 3: some sort of crisis.
Speaker 4: Kathy, that was such a diplomatic way of answering a
Speaker 4: question where Tom is basically like, please let me offload
Speaker 4: by Austrian piece finally cash out.
Speaker 3: That's essentially what you're saying.
Speaker 2: Yeah, no, it's not potentially what I'm saying, folks. This
Speaker 2: is the dumbest investment I've ever made. I mean, I'm
Speaker 2: not kidding here it But Lisa, this brings up what
Speaker 2: Kathy and Lazanne have to deal with every day. These
Speaker 2: are markets that what percentage of the public in their
Speaker 2: adult lives have never even listened to this surveillance dialogue.
Speaker 3: And I'll take that a step further.
Speaker 4: The concept of distressed debt investing probably wasn't thinking about
Speaker 4: sovereign debt from top rated governments, and suddenly we are
Speaker 4: thinking about top rated gooddet from sovereign governments, because.
Speaker 3: That's the kind of yield that you're getting.
Speaker 2: Kathew Jones, thank you for briefing me on the Austrian
Speaker 2: at Peace. Right now on presidents in history across the
Speaker 2: American fabric. Aline Comark joins us right now to say
Speaker 2: she's senior fellow at Brooking's former Clinton administration official. Doesn't
Speaker 2: touch upon her wonderful books which are really richly researched
Speaker 2: and written on the foibles of our presidents. Olaine, thank
Speaker 2: you so much for joining us. You are you know,
Speaker 2: I think of you and Michael Bachelots of the two
Speaker 2: I want to talk to you this morning. What is
Speaker 2: the significance of a resident on a picket line.
Speaker 1: Harry Truman wouldn't have done.
Speaker 3: That, right, right.
Speaker 11: I think it's a big deal, and it's say it's
Speaker 11: probably long overdue. You know, the American labor movement has
Speaker 11: gotten weaker and weaker since Harry the days of Harry Truman.
Speaker 11: In fact, it used to be that thirty three percent
Speaker 11: of the American labor force was unionized. It's now down
Speaker 11: to nineteen percent and I mean nine percent sorry of
Speaker 11: the industrial unions and a little bit more of the
Speaker 11: government unions. And at the same time, what we've had
Speaker 11: is this enormous ballooning in executive pay. There was going
Speaker 11: to be a come to Jesus moment with this, and
Speaker 11: I think now is the come to Jesus moment where
Speaker 11: the President of the United States is saying, if a
Speaker 11: company does so well that you are paying executives in
Speaker 11: the hundreds of millions of dollars, you got to do
Speaker 11: something for the workers.
Speaker 2: Who has the voice of Coolidge and the rest of them?
Speaker 2: Who has the voice of business across America?
Speaker 11: Oh, I think that the I think the President is
Speaker 11: very concerned about business across America, There's no doubt about it.
Speaker 11: And the old Republican Party. Okay, the traditional Republican Party
Speaker 11: used to be the party concerned with business across America.
Speaker 11: Now this Republican Party is off in La La Land
Speaker 11: and can't even get a budget, right, can't even keep
Speaker 11: the government open. So you've sort of lost that balance
Speaker 11: we used to have between the Party of workers and
Speaker 11: the Party of owners, and now we're at a crisis
Speaker 11: point in both situations.
Speaker 4: Elaine, How complicated is this issue at a time where
Speaker 4: the Democrats have been trying to transition away from fossil
Speaker 4: fuels and lean into electric vehicles, at a time when
Speaker 4: a lot of the electric vehicle battery manufacturers do not
Speaker 4: have unions, and this is part of what spurred a
Speaker 4: lot of the discontent among the unions. How confused is
Speaker 4: the messaging right now?
Speaker 11: Well, it's pretty confusing, and it's pretty it's pretty difficult.
Speaker 11: But it is the price of progress, right, I mean,
Speaker 11: we are going to move away from fossil fuels. We
Speaker 11: are moving to electric vehicles. You see more and more
Speaker 11: of them on the road here on the East Coast
Speaker 11: between Washington and Boston, where I travel a lot, there's
Speaker 11: a ton of ev charging stations at all the rest stops.
Speaker 11: So it's it's coming, and I think the unions need
Speaker 11: to cope with that and try to organize as much
Speaker 11: as they can. But the bottom line is we're out
Speaker 11: of whack here. I mean, we're seriously out of whack
Speaker 11: in terms of worker pay versus CEO pay. That's what's
Speaker 11: driving this and that is why, by the way, the
Speaker 11: American public is on the side of the UAW and
Speaker 11: not on the side of business in this situation.
Speaker 4: Is this enough of a headwind or rather a tailwind
Speaker 4: for President Biden to get him over a hurdle that
Speaker 4: is increasingly big in terms of popularity, which is cost
Speaker 4: of living, which is his age. Which is a question
Speaker 4: around some of these kind of confused messages coming out
Speaker 4: supporting labor but also having the energy policy that kind
Speaker 4: of goes against someone what he's talking about.
Speaker 11: Well, good, that's a great question. And what you have
Speaker 11: to remember is presidential elections are not about the whole country.
Speaker 11: It's about certain states wining certain states. This is going
Speaker 11: to be a big deal, a big EFI deal, as
Speaker 11: the President himself says, in those states that are swing states.
Speaker 11: It's going to be important in Michigan, important in Wisconsin,
Speaker 11: important in a lot of those Midwest industrial states, and
Speaker 11: I think it's going to be huge in terms of
Speaker 11: his reelection.
Speaker 2: For a Republican and Democrat listeners and viewers eline comer.
Speaker 2: Does a president need a new vice president? There's such
Speaker 2: a tradition second term to recharge, reinvigorate, and figure out
Speaker 2: the politics of the next vice president. What's president what's
Speaker 2: he do with the president vice president as he moves forward?
Speaker 11: I think she stays exactly in place. And one of
Speaker 11: the things that's missing and all the discussion about Kamala
Speaker 11: is guess what she does really well among young voters,
Speaker 11: voters under the age of forty five. And one of
Speaker 11: the things that is always forgotten in these discussions is
Speaker 11: that by the time of this election, people under forty
Speaker 11: five are going to be practically fifty percent of the electorate.
Speaker 11: By twenty twenty eight, people who are today under forty
Speaker 11: five will be fifty four percent of the electorate. There
Speaker 11: is a new generation taking place here, and they are
Speaker 11: a different generation than us baby boomers and the President's
Speaker 11: silent generation, and their politics are different and guess what
Speaker 11: they like Kamala Harris That she's there, and that's why
Speaker 11: I don't think you're going to see any movement at all.
Speaker 4: There is a debate between Gavin Newsom, governor of California,
Speaker 4: coming up with Rond De Santis of Florida, a very
Speaker 4: unusual kind of debate at a time where Gavenusom is
Speaker 4: not running. Do you think that it would be a
Speaker 4: good thing if there were some other options out of time?
Speaker 4: When a lot of voters are very concerned about Joe
Speaker 4: Biden's age and have said so in polls.
Speaker 11: Well, they do say so in polls, but guess what,
Speaker 11: they don't vote that way. They said so in polls
Speaker 11: in twenty twenty two, they voted for Democrats. Every special
Speaker 11: election in twenty twenty three has seen a growth in
Speaker 11: the Democratic vote. So I think, yes, people are concerned
Speaker 11: about Biden's age. You have to be You have to
Speaker 11: be concerned about Trump's age too. He's not a spring chicken.
Speaker 11: He looks like a walking heart attack. Okay, you got
Speaker 11: to be concerned about age. But the fact of the
Speaker 11: matter is that is not related to votes, and they're
Speaker 11: two separate decisions that the electorate is making.
Speaker 2: Elaine, thank you, someone's the next book out, Elaine quickly.
Speaker 11: He next book is probably out in November, and it's
Speaker 11: about disinformation in American politics.
Speaker 2: Elaine, thank you so much, Elaine Commark. Whether you're a
Speaker 2: Republican or Democrats, she speaks her mind, and every time
Speaker 2: she's on the show, folks, I learned something I had
Speaker 2: no idea. The preponderance of people under forty five.
Speaker 4: Years old in America speaks to the anger that a
Speaker 4: lot of people have that there isn't a representation that
Speaker 4: matches that at a time where the two front runners
Speaker 4: for the presidency are of a different generation.
Speaker 2: It's great when she's out. Sheila Johnson be Et co founder.
Speaker 2: She's the author of Watcher Fire, a memoir of picking
Speaker 2: herself up from her childhood, getting it done, getting totally
Speaker 2: slammed by a divorce, and keeping it going. She's of
Speaker 2: course done better than good over the years. In Washington
Speaker 2: is Mike McKay and I were talking about a modest
Speaker 2: acquaintance with the ice hockey capitals, with women's basketball and
Speaker 2: a sours and she has written an exceptionally terse mustard
Speaker 2: and I love how you end it. Nice Granola guys
Speaker 2: out in Utah and you show up to pick up
Speaker 2: Robert Redford.
Speaker 1: In a Humby.
Speaker 12: Absolutely, yeah, and he gave you a lecture. Oh you know,
Speaker 12: I got to know him because I was on the
Speaker 12: board of sun Dance and I've admired everything that he's
Speaker 12: done for the film industry, and we just got to
Speaker 12: know each other. And he came all the way to Middleburg,
Speaker 12: Virginia as I was getting ready to start construction, look
Speaker 12: down on the town and he says, you got to
Speaker 12: put a film festival here. We are now into our
Speaker 12: eleventh year of doing that.
Speaker 2: Yes, I like that you showed up at a Humbye, which
Speaker 2: speaks volumes about Sheila Johnson.
Speaker 1: I want to go back to the emotion.
Speaker 2: Of the beginning of the book, which people you know,
Speaker 2: you didn't come out of some fancy prep school and
Speaker 2: got it going with the first.
Speaker 1: Million or two million. Now take us before the first million.
Speaker 2: What was the catalyt to pick the pieces up from
Speaker 2: your childhood?
Speaker 12: Well, first of all, it was a learning area where I,
Speaker 12: for the first time in my.
Speaker 2: Life, had to grow up very fast.
Speaker 3: At the age of.
Speaker 12: Sixteen, my father suddenly left. We're a middle class family
Speaker 12: of first African American not the first, but one of
Speaker 12: eight African American neurosurgeons in the country, and so we
Speaker 12: had some sort of status in society, and for him
Speaker 12: to suddenly leave it just left my mother broke. Women
Speaker 12: did not have the wherewithal to have our own bank
Speaker 12: accounts or anything. So that is stuck with me forever,
Speaker 12: and that has been the impetus in which I have
Speaker 12: decided to leave my life and take charge of it.
Speaker 2: Would people want to know from me? I'm going to
Speaker 2: slam it forward to the present. Lisa's got a bunch
Speaker 2: of insight as well. What do you think of the
Speaker 2: expression of our culture? War now is witnessed by a
Speaker 2: corporate effort of diversity which seems to stumble on itself.
Speaker 2: Was it witness as Hollywood and mistakes made or just
Speaker 2: the general debate over this word woke? You're about as
Speaker 2: anti woke as I've ever seen. How do you synthesize that?
Speaker 12: Well, I don't quite understand woke. I just know hard
Speaker 12: work is at the bottom of everything I do. My
Speaker 12: value systems are there, and it's really really important that
Speaker 12: I continue to push on and not really focus so
Speaker 12: much on race. But I am very aware of it
Speaker 12: and the pitfalls that I just try to fight through
Speaker 12: it and I deal with the people that want to
Speaker 12: challenge me on it.
Speaker 4: What do you make of some of the recent striking activity,
Speaker 4: particularly with Hollywood, given your intimacy with that at a
Speaker 4: time where people are trying to take charge of their
Speaker 4: life and don't know what the future landscape will look
Speaker 4: like with artificial intelligence and streaming and don't have those guarantees,
Speaker 4: do you think that there are legitimate issues that are
Speaker 4: not being dealt with responsibly and in the public eye
Speaker 4: from some of these companies.
Speaker 12: Yeah. I think what what's happening is it's all media
Speaker 12: is transitioning so fast, and even in the film industry,
Speaker 12: and I know people in the film industry, they're seriously
Speaker 12: concerned about what their future is going to look like.
Speaker 12: I mean, I deal with the film festival. I have
Speaker 12: a LA Film advisory Board, and they're talking to me
Speaker 12: all the time about are we going to get films
Speaker 12: this year? Are there still films being shot? Are there
Speaker 12: in the can? But I think this is something that
Speaker 12: we've got to watch and we've got to be careful
Speaker 12: about because the landscape is changing quickly.
Speaker 1: You've got these great vignettes.
Speaker 2: I want to take a vignette and take it to
Speaker 2: business as well. You're sitting there one day, you're over
Speaker 2: your saying a coffee.
Speaker 1: You know, you're hanging out. You've probably you know, you're going.
Speaker 2: Ben's Chili bowl, U Street lunch.
Speaker 1: I think we can do that.
Speaker 2: Yeah, And Whitney Houston wonders it. What's it like when
Speaker 2: Whitney Houston comes in the door.
Speaker 12: Well, first of all, she's just one of the most
Speaker 12: beautiful women I'd ever seen. She's very thin, very talented.
Speaker 12: But I also could just set it's a little bit troubled,
Speaker 12: but I admired her. She's a great talent. And you
Speaker 12: know that was some of the fun things about Bet.
Speaker 12: You would see all these celebrities that you've heard about,
Speaker 12: talked about, and they're coming into your studio. So, I mean,
Speaker 12: we really were the core of black media back well,
Speaker 12: you were the core of it.
Speaker 2: And you know, like you said, you wanted to be
Speaker 2: Abny magazine, really high end in academic and then boom,
Speaker 2: it all changed, and you know, in some ways it
Speaker 2: blew up in that, but.
Speaker 1: I got to drag it forward.
Speaker 2: Now, Sheila Johnson another cup of coffee, except it's a
Speaker 2: fancy cup at the Sunset Teller Hotel. It's you and
Speaker 2: mister iger, what's your advice to the modern train wreck
Speaker 2: known as Disney?
Speaker 12: Oh my goodness, that's something I really can't answer, but
Speaker 12: I will tell you Disney has always been a force.
Speaker 12: It's a force in media, in entertainment, and I'm just
Speaker 12: terrified about what's going on in Florida right now. I
Speaker 12: really am.
Speaker 4: Well, if you push it forward from your BET experience,
Speaker 4: would you be able to found that company today in
Speaker 4: today's world?
Speaker 12: You know this question has been asked of me many times.
Speaker 12: I'm really concerned about where BT is now. I think
Speaker 12: we need to look at it. I have not been
Speaker 12: happy with it for years and years and years. There's
Speaker 12: not enough balance programming, and I just think that the
Speaker 12: landscape and the racial landscape of what African Americans are
Speaker 12: watching has changing. And I just think that we have
Speaker 12: got such a broad perspective of people out there that
Speaker 12: want something different, especially this younger generation. So we need
Speaker 12: to reevaluate what are the goals of black media and
Speaker 12: what are answers? What is it out there that we
Speaker 12: need to answer?
Speaker 2: The heart and soul your voice, You've got to wrap
Speaker 2: it up here, Sheila and celebration of walk Through Fire.
Speaker 2: But the heart and soul of your work is to
Speaker 2: find a middle ground and in these cultural wars. You know,
Speaker 2: I was weaned on Edmund Burke, Senator from Massachusetts.
Speaker 1: This is a long time ago.
Speaker 2: How do we get a fractured America back to a
Speaker 2: middle ground?
Speaker 12: Well, I think what we're doing through the Salamanders, through
Speaker 12: my company is we're bringing in programming. I've kind of
Speaker 12: taken it from bet and into the hospitality business with
Speaker 12: the film festival. Also, I've been able to check the
Speaker 12: box on the diversity issues where I bring in forty
Speaker 12: one of the top black chefs from all over the
Speaker 12: country to really celebrate food from the African diaspora. We
Speaker 12: talk about these issues and panel discussions. I'm doing it
Speaker 12: in a fun way, bringing the American Ballet Theater in.
Speaker 12: I like to continue the entertainment part of it into
Speaker 12: my hospitality company, and that's where we're answering a lot
Speaker 12: of the questions.
Speaker 1: Sheila, thank you so much for joining me. So welcome today.
Speaker 2: Sheila Johnson of Course of Beet Walk Through Fire, a
Speaker 2: memoir of love, loss and triumph. Deeply personal and courageous book.
Speaker 1: As well.
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