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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Joining us in the last forty eight hours the Great

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Speaker 2: Bullmarket Pinata Edward. You heard Denny Chiness. How are your

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Speaker 2: Denny research? How the last forty eight hours been? When

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Speaker 2: I believe you just shifted probabilities? Absolutely have your roaring thesis?

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Speaker 2: Well has it been?

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Speaker 3: I got to be a bit of a realist, given

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Speaker 3: what is going on. I'm still sticking with sixty percent

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Speaker 3: for what I call the Roaring twenty twenties. However, I

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Speaker 3: had given twenty percent to a melt up because things

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Speaker 3: kind of I've had that potential. Still it's not a

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Speaker 3: high probability, and twenty percent to melt down or recession

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Speaker 3: kind of a bucket for everything that could go wrong. Well, now,

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Speaker 3: just five percent for a melt up that's very unlikely, am,

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Speaker 3: and thirty five percent for things going wrong, which they are.

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Speaker 2: Amazon does a thirty seven to forty two billion dollar

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Speaker 2: bond offering Damien tells me it's going to be six

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Speaker 2: phone calls. Heath Terry brilliant over at City Group publishes

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Speaker 2: and reaffirms ai viability in revenue, in profit, in getting

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Speaker 2: things done. With all this, I agree with it. Kep

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Speaker 2: X synthesize in as you mentioned, spreads have a move

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Speaker 2: the bond market screaming stability. These other news items screen

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Speaker 2: fold them into your roaring twenties theme.

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Speaker 3: Well, I mean, we've we've done pretty well with a

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Speaker 3: thesis so far. We've got a few more years here

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Speaker 3: left in the decade. I think this will pass.

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Speaker 4: You're short selling yourself, folks.

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Speaker 2: It's the Yardeni and campooral low of October a few

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Speaker 2: years ago, and in Ralph and comportant, Thank you, Niled

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Speaker 2: it continued, thank you very much.

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Speaker 3: So look, I think in the short term we clearly

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Speaker 3: have an issue with the strait of our moves. It's

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Speaker 3: it's it's hard to get optimistic here unless we see

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Speaker 3: some tankers actually going through there without any incident. I

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Speaker 3: know the President would sounds like he wants to declare

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Speaker 3: victory here pretty shortly, but you know, I think I

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Speaker 3: think our and lost the war. They just don't really

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Speaker 3: know it, and they're not acting like it. The problem

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Speaker 3: with this country is that it's a terrorist state with

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Speaker 3: a terrorist organization that basically spreads terrorism around the world,

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Speaker 3: and they're professional terrorists, and so it's very hard to

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Speaker 3: kind of beat them just by blessing them with the bombs.

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Speaker 5: And back in December, you correctly, I'm going to give

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Speaker 5: Ed a softball here. He correctly called for an underway

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Speaker 5: position in the Max seven and the baskets now down

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Speaker 5: in six point three percent year to date. I'm curious,

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Speaker 5: do you see further weakness in US textocs right here

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Speaker 5: right now? Or is this a buying opportunity.

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Speaker 3: Well, I think it's becoming very bifurcated. The companies that

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Speaker 3: still have moats, the companies that you know are basically

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Speaker 3: competing in still fairly stable marketplaces, I think are fine.

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Speaker 3: The problem for the Magnificent Seven is that they used

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Speaker 3: to be kind of like the Game of Thrones. You know,

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Speaker 3: it was like seven independent kingdoms that had moats and

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Speaker 3: didn't really bother each other. But ever since AI, they're

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Speaker 3: competing like mad and it's you know, it's a AI

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Speaker 3: arms race.

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Speaker 2: We're ready continue with that, your denty doctor, your DENTNY

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Speaker 2: of your Denny research, can't say enough about his research.

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Speaker 2: It's going exceptionally value your Denny report that you get

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Speaker 2: from him, literally on a daily basis. Damian says, are

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Speaker 2: in time king with edit YARDNNY. We'll move forward here

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Speaker 2: in a bit too further discussion of what we saw

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Speaker 2: in the Secretary of Defense's press conference here a bit ago,

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Speaker 2: but it is about the Martin markets. Here's the summary

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Speaker 2: for those of you across this nation waking up. The

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Speaker 2: Vicks was thirty five. That is painful. We've come in

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Speaker 2: dramatically to a twenty four point five point seven with

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Speaker 2: red and green on the screen, but a decidedly better

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Speaker 2: tape today than what we witnessed in the last forty

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Speaker 2: eight hours.

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Speaker 4: With the market opening, Alexis christopherus.

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Speaker 6: All right, thanks very much, Tom, and investors continuing to

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Speaker 6: try to assess how long this war with Iran will

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Speaker 6: go on and what its global impact will be, especially

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Speaker 6: on the oil market. So we have a mixed start

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Speaker 6: here to the morning. The S and P five hundred

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Speaker 6: down three points at sixty seven to ninety three, Dow

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Speaker 6: Jones Industrial Average down about twenty five points, but the

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Speaker 6: Nasdaq and the green right now by about forty two points,

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Speaker 6: so Russell two thousand is a just fractionally. We've got

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Speaker 6: Brent crude at ninety one forty four, the barrel down

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Speaker 6: seven and a half percent, WTI crewed down about to

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Speaker 6: seven percent now to eighty eighth four the barrel, and

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Speaker 6: the Bloomberg dollar spot indecks at eleven ninety seven eighty

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Speaker 6: four spot gold by the way, bouncing back up one

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Speaker 6: and a half percent at fifty two to fifteen the ounce,

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Speaker 6: and Amazon returning to the bond market, selling the debt

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Speaker 6: and as many as eleven tranches ranging from two to

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Speaker 6: fifty years. It's the latest in a series of jumbo

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Speaker 6: bond sales by hyperscalers as they gear up to invest

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Speaker 6: in what else but AI. That's your Bloomberg opening bell report,

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Speaker 6: Tom and Damien.

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Speaker 2: Alexis, thank you so much again, Ready green in the screen,

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Speaker 2: nas deck with a little bit of the bid twenty

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Speaker 2: four point twenty five and.

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Speaker 4: The viks ed you're denning with us.

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Speaker 2: Always associated with Professor Tobin at Yale, but before that

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Speaker 2: high above Cayugas Waters at Cornell University, as our prosad

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Speaker 2: is one of the great optimists of International Economics. His

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Speaker 2: new book out of Cornell is The Doom Loop on

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Speaker 2: the Economic Order. He even gets Game of Thrones to

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Speaker 2: the first chapters. It's serusely doing and economics you, more

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Speaker 2: than anyone I know ed, pushes against the concept of

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Speaker 2: a doom loop. What do you say to the people

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Speaker 2: that feel the gloom feel the doom?

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Speaker 3: Well, you know, there are a fair amount of perma

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Speaker 3: bears out there, and a lot of people listen to

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Speaker 3: the perma bears, and that perma bears very often sound

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Speaker 3: very logical. The problem is they don't provide a balance.

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Speaker 3: And perma bears will get you out at the top

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Speaker 3: of the stock market, they'll get you out in the middle,

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Speaker 3: they'll get you at the bottom at the bottom. You'll

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Speaker 3: never be in the stock market if you'd have a

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Speaker 3: pessimistic attitude. Also, politics sometimes gets in the way of

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Speaker 3: clear and clear headed investing. The market tends to go

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Speaker 3: up as long as earnings are going up, as long

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Speaker 3: as the economy is doing well, and that's been the

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Speaker 3: case for a long long time. So I have this

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Speaker 3: view that corrections and bear market start buying opportunities rather

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Speaker 3: than reasons to panic.

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Speaker 5: Well, and you talk about the economy doing well in

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Speaker 5: all seriousness, does economic did they even matter at this point?

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Speaker 7: I mean, look at last week's payrolls.

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Speaker 5: I mean, the market looks straight through that for like

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Speaker 5: three seconds, and then tomorrow we're going to get a

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Speaker 5: CPI print that, by definition, after the last week's events,

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Speaker 5: is already stale.

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Speaker 7: So you know, talk to.

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Speaker 5: Us a little bit about the economic touch points that

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Speaker 5: you're going to be most focused on here.

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Speaker 3: Well, Look, I think that the economy still matters, because

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Speaker 3: earning still matters. One of the I used to be

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Speaker 3: just an economist and also a strategist, and being a

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Speaker 3: strategist is a lot easier. All you got to do

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Speaker 3: is forecast pe time Z, and that's very easy to do.

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Speaker 3: Getting it right, of course, is the challenge, but it's

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Speaker 3: still it's still those two variables, and the earnings outlook,

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Speaker 3: I think remains quite strong because I think the economy

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Speaker 3: will remain resilient.

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Speaker 2: I mean, in.

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Speaker 3: Twenty twenty two, we had an oil price shock and

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Speaker 3: the economy made through it just fine. I think I

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Speaker 3: think the data that the stock market is looking at

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Speaker 3: is not just the employment numbers that they're looking at,

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Speaker 3: the productivity numbers. And that's really the bullish story is

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Speaker 3: that the productivity is making a huge comeback.

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Speaker 5: And we began our conversation Tom mentioning that you had

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Speaker 5: upped your probability from a market meltdown from twenty to

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Speaker 5: thirty five percent for the balance of this year. You know,

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Speaker 5: my question is this. You know, when I think of meltdown,

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Speaker 5: I think of something on the order of a systemic

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Speaker 5: liquidity shock. And this is a different sort of shock

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Speaker 5: than we've witnessed, you know, in two thousand and another.

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Speaker 5: You know, kind of what funding and financing metrics are

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Speaker 5: you most focused on here? Like, what kind of a

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Speaker 5: liquidity shock do you think can happen?

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Speaker 3: Well, clearly, when you look at history, you find that

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Speaker 3: more often than not, it's a shock in the credit

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Speaker 3: system that causes problems for the stock market, and you

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Speaker 3: get a financial crisis because of FED tight and something

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Speaker 3: blows up and that becomes a credit crunch. It's credit

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Speaker 3: crunch is the cause of recessions this time around. I

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Speaker 3: think we have to recognize remember that the Fed's are

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Speaker 3: awfully good at playing whack a mole in the credit markets.

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Speaker 3: You know, as soon as something blows up, they move

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Speaker 3: in pretty quickly. March at twenty twenty three, we had

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Speaker 3: a banking crisis. There's only three banks that it was

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Speaker 3: solved over the weekend.

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Speaker 2: Yeah, I got fifteen ways to go here. But let

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Speaker 2: me just go to the experience I mentioned earlier, this

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Speaker 2: modest drawdown we had in nineteen eighty seven. In my memory,

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Speaker 2: I don't have it in front of me, folks, is

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Speaker 2: what a rebound from October twenty seventh to the end

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Speaker 2: of the year December of nineteen eighty seven. I remember

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Speaker 2: the sweat in August of nineteen ninety eight, and off

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Speaker 2: we went to the race to the rage of nine.

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Speaker 2: What's different now in tech versus the collapse of March

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Speaker 2: of two thousand and one earnings.

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Speaker 3: We had a lot of dot coms back then that

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Speaker 3: they weren't making any money. We had a lot of

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Speaker 3: telecom companies that were solar financing, so they're kind of

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Speaker 3: creating their own magic. Until these companies, these seven started

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Speaker 3: to kind of finance each other, we didn't really have

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Speaker 3: that issue. But they're huge cast generators. I think their

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Speaker 3: expenditures are going to prove to be very profitable, So

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Speaker 3: I'm not particularly worried about the earning side of the

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Speaker 3: text story.

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Speaker 2: It's part of the show this morning, commercial free the

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Speaker 2: conversation too important, ed your Donndnesfendari coming on here in

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Speaker 2: a moment. Damien sas Are and Tom Kane with Alexis,

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Speaker 2: Christopherus and Michael Barr across this nation on YouTube. What

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Speaker 2: a couple of days on YouTube. Thank you so much.

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Speaker 4: For this new digital distribution.

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Speaker 2: I can't say enough about it. Subscribe at Bloomberg Podcasts

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Speaker 2: for all that we do here in the New York

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Speaker 2: Morning Damien Sasaur with ed your Denny.

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Speaker 5: So and we talk about the Roaring twenties theme. We

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Speaker 5: talk about, you know, the potential for market mail down

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Speaker 5: and market meltop. Talk to me about your stagflationary nineteen

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Speaker 5: seventies redux theme, red reducts, reducs, ducks, it's reduced.

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Speaker 4: We call that reducts.

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Speaker 5: I mean, I mean the stag fleationary. You know, you

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Speaker 5: know that word's coming back. So tell to us a

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Speaker 5: little bit about you're seeing there.

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Speaker 3: Yeah, there is a certain amount of deja vous all

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Speaker 3: over again. You know, every time we've had oil shocks

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Speaker 3: in the past, we've typically gotten recessions and bear markets.

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Speaker 3: The one near term exception was what happened in twenty

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Speaker 3: twenty two. We got a bear market, but we didn't

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Speaker 3: get a recession. I don't think we're going to get

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Speaker 3: a recession this time. The recessionary expectations have gone up,

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Speaker 3: but the US is much less energy intensive, and all

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Speaker 3: by the way, we're an exporter, yeah, of oil and gas,

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Speaker 3: which is a huge difference for what happened in the

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Speaker 3: nineteen seventies. On the other hands, shutting the Strait of

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Speaker 3: Hermus is a radically different historical development just hasn't happened before.

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Speaker 3: And so my short term caution bearishness is totally predicated

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Speaker 3: in this geopolitical development. I want to see some tankers

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Speaker 3: get through the strait without giving a shout out.

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Speaker 5: Well, I mean you just mentioned that, and that's where

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Speaker 5: I was going to go. I mean, golf traffic is

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Speaker 5: basically all or not right. I mean, there's nothing going through.

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Speaker 5: And you know, and we just saw last week US

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Speaker 5: Treasury Secretary and Scott Bess and basically slamming you know,

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Speaker 5: JP Morgan for putting out research about maritime insurance and

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Speaker 5: things of that nature.

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Speaker 7: You know, how focused do you on some of those

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Speaker 7: alternative data sets?

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Speaker 5: You know, kind of trying to gauge out, you know,

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Speaker 5: whether or not shipping you know, companies even want to

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Speaker 5: you know, pass through the street of removes now, and

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Speaker 5: it's funny to back it.

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Speaker 2: I mean, who knows it's funny you ask that.

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Speaker 3: One of the reasons I'm I'm very positive on AI

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Speaker 3: is because we're using it all the time, and we've

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Speaker 3: become real fans of Claude and so Claude is is

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Speaker 3: in our staff now and we're toying around. We're just

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Speaker 3: asking Claude to follow the shipping lanes in the Strait

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Speaker 3: and there there's actually data, so but we only started

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Speaker 3: doing it yesterday, so I do it. The other thing

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Speaker 3: is I also want to see the data on drones.

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Speaker 3: I mean, it's fine for the president, you know, to

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Speaker 3: declare that we're almost there, almost mission accomplished, but that's

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Speaker 3: not going to be the case unless the drones stopped

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Speaker 3: flying into the neighbors, into the straits, into you know,

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Speaker 3: aiming at our ships.

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Speaker 2: And in March thirty one, I believe it's another end

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Speaker 2: of the quarter if we can get there, and then

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Speaker 2: into April and JP Morgan reporting and off we go

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Speaker 2: to the Q one earning season. What does Edger Denny

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Speaker 2: c with a broader sense of use of cash.

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Speaker 3: Well, you know, right now, the earning story has been

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Speaker 3: phenomenally strong, and that's really what's been driving the market.

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Speaker 3: The valuation multiple, you know, got up to about twenty two.

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Speaker 3: It's come down because of this pullback so far, which

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Speaker 3: is it's not a correction yet, but I think it

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Speaker 3: has that.

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Speaker 4: Why are we this is too important?

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Speaker 2: Since when are we hysterical about your Denny pullback that,

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Speaker 2: as you state, is not a correction as we learned

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Speaker 2: it in school.

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Speaker 3: Well, you know, a pullback is a drop that isn't

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Speaker 3: a correction. A correction is ten to twenty percent decline.

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Speaker 3: A bear market is more than twenty percent. I happen

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Speaker 3: to think that there is a thirty five percent the

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Speaker 3: probability of things going badly, and that would lead to

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Speaker 3: a correction of ten to fifteen percent. I'm actually amazed

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Speaker 3: by the resilience of the economy, of the not just

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Speaker 3: the economy, but the stock market.

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Speaker 2: The stock market.

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Speaker 3: Wants to believe that all will be well, very very shortly.

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Speaker 3: We saw this amazing reversal also in the price of oil,

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Speaker 3: as though you know, what were we thinking there's plenty

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Speaker 3: of oil out there. Well, there is plenty of oil

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Speaker 3: out there. We just got to get it, get to it.

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Speaker 2: Damian quick one in here, quick one.

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Speaker 5: Well, I mean ed what you sound It sounds like

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Speaker 5: you're talking about just cleaner positions, right, And I mean,

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Speaker 5: if this is really what this amounts to, where you

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Speaker 5: basically we are giving a lot of you know, risky

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Speaker 5: investors the opportunity to kind of you know, pair back

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Speaker 5: their positions and clean them so to speak. Does that

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Speaker 5: mean we might look for another leg higher into the

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Speaker 5: you know, second half of this year. And can we

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Speaker 5: really even see that?

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Speaker 3: Well, I haven't given up on seventy seven hundred by

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Speaker 3: the end of the year. I can so yeah, I'm

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Speaker 3: I'm arguing that it's not necessarily going to be a

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Speaker 3: few more days of the war, but it could be

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Speaker 3: a few more weeks. And that again, I have this

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Speaker 3: tendency to look at solofsa's buying opportunities rather than reasons

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Speaker 3: to panic.

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Speaker 2: Thank you for coming in my pleasure always. You can't

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Speaker 2: say enough about it, folks. I enthusiastically support the work

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Speaker 2: of doctor or Denny. We protect the copyright of all

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Speaker 2: of our guests. Please don't call us to get his research,

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Speaker 2: go to your Denny Research for his fabulous daily synthesis

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Speaker 2: of economics. Stay with us more from Bloomberg's Surveillance coming

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Speaker 2: up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Part of what we do here is a conversation with

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Speaker 2: interesting experts. Damian Sasaur in time King Now with Patrick

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Speaker 2: Murphy and the title is Executive Director Geopolitical Advisory at

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Speaker 2: Hillco Global. That barely describes his public service. After serving

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Speaker 2: in the Army in Iraq with the eighth Congressional District

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Speaker 2: in Pennsylvania, he was known to move the puck like

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Speaker 2: Markau of the Philadelphia Flyers up the ice for King's

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Speaker 2: College years ago. Has lectured at West Point, I should

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Speaker 2: say taught at West Point and has a really legit

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Speaker 2: army career, and of course was a former Undersecretary of

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Speaker 2: the Army. Honor to have you this today, without question,

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Speaker 2: our conversation of the day. As you look at the

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Speaker 2: media portrayal of this one of our competitors called it

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Speaker 2: a conflict. I went nuts because Vietnam was a conflict.

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Speaker 2: This war as you look at the coverage, you sit

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Speaker 2: there and you say, what are we getting wrong? What

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Speaker 2: it informed Damien Sasawur, Alexis, Christophers and myself. What's the

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Speaker 2: thing we're getting wrong about this war right now in

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Speaker 2: our coverage?

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Speaker 8: Well, the video doesn't match the audio, Tom Damian Alexis

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Speaker 8: and that they could say, Hey, we decimated the Iranian navy.

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Speaker 8: Fifty ships are now under the sea, but the strait

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Speaker 8: is still a choke point. There are ships not going through.

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Speaker 8: You look at seven countries have been counterattacked by Iran

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Speaker 8: on sixty five percent of those attacks are an Abu

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Speaker 8: Dhabi and Dubai. Yesterday it was an oil tanker that

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Speaker 8: was hit. The day before it was the Dubai International Airport.

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Speaker 8: They're hitting civilian targets. There are people dying in that region.

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Speaker 8: And I hear about the resolve of not letting Iran

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Speaker 8: get a nuclear weapon and we should never have let

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Speaker 8: them have a nuclear weapon. But the reality of it

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Speaker 8: is we had a nuclear deal done that we walked

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Speaker 8: away from.

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Speaker 2: How do we I shouldn't say how I'm editorialize and

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Speaker 2: excuse me, folks. Is the White House listening to the Pentagon?

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Speaker 8: Of course they're listening to them. And God gave us

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Speaker 8: all two ears, two eyes, and only one mouth for

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Speaker 8: a reason. But I think great generals like General Colin

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Speaker 8: Powell is one of my role models who I get

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Speaker 8: to know. We followed after Vietnam what's called the Powell doctrine,

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Speaker 8: where you have a clear mission, you use overwhelming forced

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Speaker 8: accomplishment mission, and you have a clear extra strategy.

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Speaker 9: There is no extra strategy here.

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Speaker 8: The mission is yet let's deestimate the Iranian ballstic missiles, etc.

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Speaker 8: I get it, but you can't necessarily do that with

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Speaker 8: just airpower. And they keep saying it's not gonna be

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Speaker 8: a protractive war. Well, why was the eighty second airyone just.

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Speaker 9: Put on alert? The light entre unit that I serve

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Speaker 9: with an evasion in Iraq?

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Speaker 8: Why is it that you know every military expert will

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Speaker 8: say you can't win this thing by airpower. And again,

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Speaker 8: my brother's in the Air Force. I have a lot

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Speaker 8: of respect for airpower, but you can't win regime change

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Speaker 8: or wars just by airpower alone.

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Speaker 5: Well, Patrick, I love that you're focused on logistics, because

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Speaker 5: when I'm driving up the Palsaden and State Parkway to

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Speaker 5: visit you and my good friend John melconnup at West

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Speaker 5: Point and we're sitting there gaming out what this really

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Speaker 5: looks like. And we're talking about you know, golf traffic

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Speaker 5: down one hundred percent since the conflint began and two hundred.

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Speaker 7: Vessels effectively trapped there.

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Speaker 5: You know, President Trump is talking about US Navy escorts,

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Speaker 5: So logistically speaking, will that work? I mean, will that

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Speaker 5: really get you know, firms who have suspended transit through

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Speaker 5: the straight up ore moves to like like NYK and

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Speaker 5: to two EOSK to start you know, shipping again.

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Speaker 7: Is that is that? Is that gonna work?

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Speaker 9: Yeah? I mean listen, we say it in kind of gotten.

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Speaker 8: You know, was helping lead the army amateurs talk strategy,

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Speaker 8: experts talk logistics, and the logistics there in that region

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Speaker 8: in the Strait is there's about five to twelve six

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Speaker 8: thousand minds underwater mines that Iran has that might be

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Speaker 8: in that water right now, five thousand not not and

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Speaker 8: again they may went out sea. And you know beside

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Speaker 8: the you know, there are almost six thousand bustic missiles

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Speaker 8: and there are ten thousand drones that they can you know,

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Speaker 8: produce a month, so you know it's not And again,

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Speaker 8: our military is the best military world I don't doubt that,

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Speaker 8: but we should be humble in our greatness and not

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Speaker 8: just in cert our young men and women in harms way.

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Speaker 8: We just lost our seventh service member and another dignified transfer.

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Speaker 8: I mean, I've been there at Doingver Air Force Base, Welcomar,

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Speaker 8: you know, troops home that gave the ultimate sacrifice. It

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Speaker 8: is heartbreaking for those families, and I'm glad the presidents,

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Speaker 8: you know, I give him credit that he that he

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Speaker 8: showed up. But you know, I can't help, but was

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Speaker 8: this war necessary when we were at the one yard

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Speaker 8: line with the piece deal in Geneva just a weekend prior, you.

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Speaker 5: Know, Patrick, I just like to expand on that, you know,

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Speaker 5: sticking with logistics here. Just last week we heard US

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Speaker 5: Treasury Secretary Scott Besson slam JP Morgan chief commodity strategist

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Speaker 5: Natasha kind of a for basically making irresponsible comments about

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Speaker 5: maritime insurance and about you know, three hundred and fifty

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Speaker 5: two billion of coverage needed to you know, protect these

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Speaker 5: ships in order for people to start chipping again.

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Speaker 7: Mean, what are your thoughts on that.

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Speaker 5: You know, how does that play in to you know,

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Speaker 5: the bottleneck, the supply bottleneck that's coming through the market data.

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Speaker 9: Listen. That's why I said my opening comment was the

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Speaker 9: audio is not matching a video.

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Speaker 7: That's right.

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Speaker 8: An oil tanker was just blown up yesterday. I mean

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Speaker 8: UAE is getting sixty five percent of these attacks.

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Speaker 9: And why is that?

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Speaker 8: Because they're probably the least defendant and they're going after Civilly.

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Speaker 8: And you know, as I mentioned that Dubai International Airport

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Speaker 8: and or oil tanker.

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Speaker 9: Yesterday, it is shut down. It is a choke point.

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Speaker 8: And when you talk about twenty percent of the world's

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Speaker 8: oil natural gas goes through there, that is a problem.

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Speaker 9: And people in America.

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Speaker 8: Yet, when I got gas yesterday in the Jersey turn

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Speaker 8: bike ride coming up here, I was at paid four

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Speaker 8: point fifty.

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Speaker 9: You know, I didn't get the ninety three. I got

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Speaker 9: ninety four.

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Speaker 8: I got the ninety one to save a couple cents

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Speaker 8: per galling and I'm doing pretty well for myself. But

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Speaker 8: I'm cheap, right, And Americans already last year had a

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Speaker 8: thirty percent increase in electricity bills. It's going to get worse,

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Speaker 8: and people don't understand electricity is based the power that

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Speaker 8: you get is from National Gas. That's what power is

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Speaker 8: at the anchor of our electrical.

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Speaker 2: Grids across the nation this morning and particularly to Pennsylvania

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Speaker 2: and Patrick Murphy with us, a former Congressman from the

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Speaker 2: eighth district. He is a geopolitical advisory at Hillcote Global

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Speaker 2: and of course the former Undersecretary of the Armor. I

436
00:22:49,680 --> 00:22:52,040
Speaker 2: want to go to your wheelhouse of what you taught

437
00:22:52,080 --> 00:22:55,879
Speaker 2: at West Point and your service to the nation, and

438
00:22:56,000 --> 00:22:59,399
Speaker 2: that is my entire knowledge. Here is Tom Cruise in

439
00:22:59,440 --> 00:23:00,879
Speaker 2: a movie with Jack Nicholson.

440
00:23:01,040 --> 00:23:03,240
Speaker 9: Oh, I figure that was one of my favorite movies.

441
00:23:03,359 --> 00:23:06,359
Speaker 2: You are in the judiciary part of the army, and

442
00:23:06,400 --> 00:23:09,040
Speaker 2: you've got an immense respect for the process of law

443
00:23:09,080 --> 00:23:14,520
Speaker 2: there versus outside and all that. How do you adjust

444
00:23:15,000 --> 00:23:17,879
Speaker 2: an executive, How do you adapt to an executive that

445
00:23:17,960 --> 00:23:21,800
Speaker 2: can do this on a whim versus legislative authority.

446
00:23:22,760 --> 00:23:26,000
Speaker 8: Yeah, for two hundred and fifty years we've had in

447
00:23:26,000 --> 00:23:28,760
Speaker 8: America that was a limited federal government. That was the

448
00:23:28,760 --> 00:23:31,280
Speaker 8: whole point of our government when we broke away from England.

449
00:23:31,760 --> 00:23:33,680
Speaker 8: And you're right, I did spend six years in the

450
00:23:33,760 --> 00:23:36,359
Speaker 8: army before it became a judge, avicate my law degree

451
00:23:36,400 --> 00:23:39,760
Speaker 8: and taught consci law at West Point. That Constitution is

452
00:23:39,760 --> 00:23:42,320
Speaker 8: the bootboard of our country. This is not a TPS

453
00:23:42,359 --> 00:23:46,560
Speaker 8: report from Office Space. This is a document that we

454
00:23:46,680 --> 00:23:48,760
Speaker 8: take a blood oath in the military to support and

455
00:23:48,840 --> 00:23:52,919
Speaker 8: offend that Constitution against all enemies, barn and domestic. And

456
00:23:52,960 --> 00:23:57,040
Speaker 8: that's a constitution that has been annored by this Congress.

457
00:23:57,440 --> 00:24:00,440
Speaker 8: I blame the Congress for ignortons. I believe that Congress

458
00:24:00,480 --> 00:24:03,680
Speaker 8: that is just basically said, mister President, you want tariffs,

459
00:24:03,720 --> 00:24:05,920
Speaker 8: you know laterally kind of thing you want.

460
00:24:06,440 --> 00:24:08,520
Speaker 2: Yeah, And by the way, what's your advice to Senator

461
00:24:08,560 --> 00:24:12,000
Speaker 2: Fetterman and others who maybe at the margin would like

462
00:24:12,040 --> 00:24:14,840
Speaker 2: to get a little bit of a decision tree back here.

463
00:24:15,040 --> 00:24:18,760
Speaker 8: Yeah, I would like the first step maybe have some

464
00:24:18,920 --> 00:24:21,639
Speaker 8: courage and a backbone to stand up to a co

465
00:24:21,720 --> 00:24:24,639
Speaker 8: equal branch of government, the executive branch that they've taken over,

466
00:24:24,720 --> 00:24:27,640
Speaker 8: support and defend that Constitution too. And they all represent

467
00:24:28,320 --> 00:24:31,359
Speaker 8: in Pennsylvania's case, twelve million Americans that want them to

468
00:24:31,359 --> 00:24:33,439
Speaker 8: do right by our men and women in uniform, to

469
00:24:33,520 --> 00:24:36,399
Speaker 8: follow the power, follow the power doctrine, to have a

470
00:24:36,480 --> 00:24:38,959
Speaker 8: clear mission and what is that? And use overwhelming force

471
00:24:39,320 --> 00:24:42,520
Speaker 8: and have a clear excess strategy. We all know there's

472
00:24:42,560 --> 00:24:46,520
Speaker 8: no strategy here. We all know that it is real

473
00:24:46,640 --> 00:24:49,560
Speaker 8: tough to go in and take out the Venezuelan leader

474
00:24:49,600 --> 00:24:52,400
Speaker 8: without Congress standing up, you know, and to do it

475
00:24:52,560 --> 00:24:55,360
Speaker 8: and violation and not just the Constitution, but the War

476
00:24:55,440 --> 00:24:59,280
Speaker 8: Powers Act that you know says that within sixty days

477
00:24:59,280 --> 00:25:00,399
Speaker 8: you got to bring it the Congress.

478
00:25:00,440 --> 00:25:01,440
Speaker 9: Otherwise you have to get out.

479
00:25:01,600 --> 00:25:04,560
Speaker 8: They haven't gotten approval from Congress, and Congress continues to

480
00:25:04,600 --> 00:25:06,120
Speaker 8: have no backbone.

481
00:25:05,600 --> 00:25:08,800
Speaker 2: Across this nation. Patrick Murphy with us with Elko Global

482
00:25:08,840 --> 00:25:11,520
Speaker 2: and of course the former Undersecretary of the Army with

483
00:25:11,600 --> 00:25:13,200
Speaker 2: Damian Saso this morning.

484
00:25:13,280 --> 00:25:17,000
Speaker 5: Damien, Yeah, you know so, Patrick, you know you mentioned Venezuela.

485
00:25:17,040 --> 00:25:18,560
Speaker 5: I think you need to kind of group that together

486
00:25:18,600 --> 00:25:20,239
Speaker 5: here with Ryan and talk to us about what this

487
00:25:20,320 --> 00:25:22,600
Speaker 5: means for the upcoming meeting with Xijian Ping, you know,

488
00:25:22,720 --> 00:25:24,639
Speaker 5: I mean, you know, we had a guest on earlier

489
00:25:24,680 --> 00:25:27,200
Speaker 5: who was basically saying that this that the President Trump

490
00:25:27,280 --> 00:25:30,240
Speaker 5: might be incentivized to extend the war that much further

491
00:25:30,359 --> 00:25:33,120
Speaker 5: in order for him to have more leverage when he's

492
00:25:33,160 --> 00:25:35,720
Speaker 5: meeting with President Chiesian Ping, you know, talk to us

493
00:25:35,720 --> 00:25:38,159
Speaker 5: a little bit about the calculus what this means for

494
00:25:38,200 --> 00:25:39,520
Speaker 5: the US negotiations with China.

495
00:25:40,240 --> 00:25:42,200
Speaker 8: Chima loves the fact that we're going back to Middle

496
00:25:42,240 --> 00:25:44,520
Speaker 8: East and nowhere to be die tied.

497
00:25:44,320 --> 00:25:44,960
Speaker 9: Down down there.

498
00:25:46,240 --> 00:25:48,040
Speaker 8: It is not in our financial rites when you look

499
00:25:48,080 --> 00:25:51,560
Speaker 8: at you know, as as Tom mentioned, you know, the

500
00:25:51,600 --> 00:25:54,879
Speaker 8: greatest greatest defenseman in the Flyers' history is Mark hal

501
00:25:54,960 --> 00:25:57,400
Speaker 8: but I say the greatest hockey forever is probably Wayne Gretzky.

502
00:25:57,840 --> 00:25:59,240
Speaker 8: You passed the park where people are going to be?

503
00:25:59,240 --> 00:26:01,200
Speaker 8: Where are people going to be to sell our American

504
00:26:01,200 --> 00:26:06,000
Speaker 8: goods in Asia? Fifty percent of consumers earn Asia. Why

505
00:26:06,040 --> 00:26:10,000
Speaker 8: are we focused on the Middle East and not strengthen

506
00:26:10,080 --> 00:26:11,760
Speaker 8: our relationships and do what we need to do to

507
00:26:11,760 --> 00:26:12,520
Speaker 8: make sure that's there.

508
00:26:12,560 --> 00:26:13,080
Speaker 9: Okay, this is.

509
00:26:13,040 --> 00:26:15,400
Speaker 2: Critical on Damien brings up China, and I go back

510
00:26:15,440 --> 00:26:18,240
Speaker 2: to Admiralstvetez, who has been such a supporter of my

511
00:26:18,320 --> 00:26:22,040
Speaker 2: work with Elliot Ackerman the Marine writing twenty thirty four,

512
00:26:22,119 --> 00:26:25,080
Speaker 2: which is They're wonderful book, my book of the Summer

513
00:26:25,280 --> 00:26:28,880
Speaker 2: a couple of years ago. Folks, where unintended consequences get

514
00:26:28,920 --> 00:26:33,600
Speaker 2: you into mess is our military, I want to call

515
00:26:33,600 --> 00:26:39,720
Speaker 2: you a congressman. Is our military Patrick Murphy, exhausted by

516
00:26:39,760 --> 00:26:42,880
Speaker 2: the multiple platforms of being in Asia, having to transfer

517
00:26:42,920 --> 00:26:46,080
Speaker 2: to the Middle East? And yet, as Damien says, worrying

518
00:26:46,119 --> 00:26:50,000
Speaker 2: about China and Taiwan, do you sense a military exhaustion

519
00:26:50,119 --> 00:26:51,440
Speaker 2: at this point?

520
00:26:51,680 --> 00:26:55,479
Speaker 8: No, in a sense that yes, No, they're not exhausted period.

521
00:26:55,480 --> 00:26:56,840
Speaker 8: Our military is the best of the world, and they

522
00:26:56,840 --> 00:26:59,639
Speaker 8: are motivated, and they're not motivated necessary to go into

523
00:27:00,040 --> 00:27:02,679
Speaker 8: unnecessary wars to motivated to do the job that they

524
00:27:02,720 --> 00:27:03,320
Speaker 8: were trained to do.

525
00:27:04,280 --> 00:27:07,200
Speaker 9: But has our military been weary.

526
00:27:06,960 --> 00:27:09,880
Speaker 8: After the longest wars in American history over twenty years,

527
00:27:09,960 --> 00:27:13,320
Speaker 8: over two decades in Iraq and Afghanistan. And what's between

528
00:27:13,400 --> 00:27:17,399
Speaker 8: Iraq and Afghanistan Iran. So that's where our troops and

529
00:27:17,480 --> 00:27:21,080
Speaker 8: our efforts are right now, with over five thousand strikes

530
00:27:21,200 --> 00:27:26,760
Speaker 8: in the last eleven days. And it is not making frankly,

531
00:27:26,800 --> 00:27:31,840
Speaker 8: our country and certainly not our economy stronger. And you know,

532
00:27:32,119 --> 00:27:35,840
Speaker 8: I know, obviously Damian mentioned Venezuela, but how about the

533
00:27:35,880 --> 00:27:39,240
Speaker 8: tough talk about Cuba. You know, we had a pistio,

534
00:27:40,560 --> 00:27:43,560
Speaker 8: we had a nuclear deal with Iran. They got rid

535
00:27:43,600 --> 00:27:46,120
Speaker 8: of the nuclear program. We walked away from it. Then

536
00:27:46,119 --> 00:27:49,240
Speaker 8: they got you know, ambitions again, we walked away from

537
00:27:49,240 --> 00:27:52,760
Speaker 8: a pistol on Cuba. And now President Trump gets there

538
00:27:52,800 --> 00:27:56,000
Speaker 8: and you know, he says, there's state sponsor of terrorism.

539
00:27:56,600 --> 00:28:00,800
Speaker 8: Right now, Again, I am not I don't lose sleep

540
00:28:00,840 --> 00:28:04,080
Speaker 8: that the toll was killed, but the new I told who,

541
00:28:04,200 --> 00:28:06,800
Speaker 8: the new Supreme leader. It was his father and his

542
00:28:06,880 --> 00:28:09,760
Speaker 8: wife that were killed and that attack that Saturday. So

543
00:28:10,160 --> 00:28:12,920
Speaker 8: again are they gonna And he's known as being even

544
00:28:12,920 --> 00:28:14,120
Speaker 8: more hard less exactly right.

545
00:28:14,200 --> 00:28:17,560
Speaker 9: So I just have Odjeda.

546
00:28:17,960 --> 00:28:21,320
Speaker 8: And it and it ticks me off when a lot

547
00:28:21,359 --> 00:28:23,800
Speaker 8: of these political leaders in Washington ce cent.

548
00:28:23,600 --> 00:28:25,480
Speaker 9: Our young men and women of Harm's Way and they

549
00:28:25,520 --> 00:28:26,199
Speaker 9: never served.

550
00:28:26,280 --> 00:28:29,000
Speaker 2: And Davian the Secretary of Defense the key quote that's

551
00:28:29,000 --> 00:28:32,560
Speaker 2: going out across media right now quote our most intense

552
00:28:32,600 --> 00:28:37,959
Speaker 2: state of strikes inside Iran is Tuesday, which is today.

553
00:28:38,200 --> 00:28:40,000
Speaker 5: You know, you know, Patrick, I have to ask you,

554
00:28:40,040 --> 00:28:41,600
Speaker 5: and you know this may be outside of your remit,

555
00:28:41,640 --> 00:28:43,240
Speaker 5: but if you had to take the temperature on the

556
00:28:43,240 --> 00:28:45,479
Speaker 5: ground and some of these other Gulf nations like Barrain

557
00:28:45,680 --> 00:28:48,960
Speaker 5: and Cutter and and and the UA, et cetera, and

558
00:28:49,000 --> 00:28:50,479
Speaker 5: how many of them do you really if they had

559
00:28:50,520 --> 00:28:52,840
Speaker 5: to pick a side between the US and around you know,

560
00:28:52,880 --> 00:28:53,920
Speaker 5: what side do you think they'd take?

561
00:28:55,320 --> 00:28:56,720
Speaker 8: I mean, I do think they would take the United

562
00:28:56,760 --> 00:29:01,280
Speaker 8: States because we have we have decades, not centuries of

563
00:29:01,960 --> 00:29:04,440
Speaker 8: our worders are bond and we're not there to take

564
00:29:04,480 --> 00:29:07,600
Speaker 8: their land, We're not there to take their oil. But

565
00:29:08,440 --> 00:29:11,160
Speaker 8: our ambitions right now are a little out of whack,

566
00:29:11,280 --> 00:29:12,880
Speaker 8: and our tough talk is a little about.

567
00:29:12,640 --> 00:29:13,080
Speaker 9: Out of whack.

568
00:29:13,240 --> 00:29:15,160
Speaker 8: Where we have to respect the world of law, we

569
00:29:15,160 --> 00:29:17,280
Speaker 8: have to respect other country's sovereignty.

570
00:29:17,760 --> 00:29:19,880
Speaker 2: I look forward to speaking to you again. Patrick Murphy,

571
00:29:19,960 --> 00:29:24,280
Speaker 2: thank us so much. Executive director Geopolitical Advisory at Kilcoke

572
00:29:24,440 --> 00:29:28,480
Speaker 2: Global and former Congressmen of the eighth District of Pennsylvania

573
00:29:28,560 --> 00:29:31,960
Speaker 2: and former Under Secretary of the Army.

574
00:29:33,360 --> 00:29:34,040
Speaker 9: Stay with us.

575
00:29:34,320 --> 00:29:37,520
Speaker 2: More from Bloomberg Surveillance coming up after this.

576
00:29:44,800 --> 00:29:48,360
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

577
00:29:48,440 --> 00:29:51,600
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

578
00:29:51,680 --> 00:29:55,360
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

579
00:29:55,520 --> 00:29:59,200
Speaker 1: watch us live on YouTube in an unusual interview with

580
00:29:59,360 --> 00:30:02,680
Speaker 1: one of our favorit people, joining us in studio, Andreas Sudermann.

581
00:30:03,120 --> 00:30:06,960
Speaker 2: Chairman of the board of directors at vantebelt Is as well,

582
00:30:07,440 --> 00:30:11,040
Speaker 2: and the back of an envelope, I think of German malaise.

583
00:30:11,120 --> 00:30:14,520
Speaker 2: I think of these key elections in Paris. A lot's

584
00:30:14,600 --> 00:30:18,440
Speaker 2: going on in Europe as well. How does Brussels, given

585
00:30:19,080 --> 00:30:23,360
Speaker 2: the arc of domestic politics in Europe, adapt to a war.

586
00:30:24,360 --> 00:30:26,880
Speaker 10: Well, that's a tough question to answer.

587
00:30:26,960 --> 00:30:27,120
Speaker 8: Tom.

588
00:30:27,120 --> 00:30:29,640
Speaker 10: By the way, thanks for having me this morning. I

589
00:30:29,640 --> 00:30:33,520
Speaker 10: think Brussels at the moment is less of a factor here.

590
00:30:33,640 --> 00:30:35,520
Speaker 10: I think it's the national capitals, as you.

591
00:30:35,480 --> 00:30:37,040
Speaker 11: Said, that need to get their act together.

592
00:30:37,760 --> 00:30:40,680
Speaker 10: And there has definitely definitely been a wake up call

593
00:30:40,760 --> 00:30:43,360
Speaker 10: over the past eighteen months since President Trump got elected

594
00:30:43,360 --> 00:30:46,120
Speaker 10: for the second time round, and the Europeans know they.

595
00:30:45,960 --> 00:30:46,719
Speaker 11: Need to shape up.

596
00:30:46,760 --> 00:30:49,680
Speaker 10: But exactly how they're going to do it and how

597
00:30:49,760 --> 00:30:51,280
Speaker 10: joined up they're going to be, that's still up in

598
00:30:51,320 --> 00:30:51,640
Speaker 10: the air.

599
00:30:52,040 --> 00:30:57,560
Speaker 2: The image of a French aircraft carrier with seven destroyers

600
00:30:57,600 --> 00:31:01,120
Speaker 2: around it, I mean, with the submarine sinking of a

601
00:31:01,120 --> 00:31:03,720
Speaker 2: boat in the Indian Ocean, I mean, what is the

602
00:31:03,800 --> 00:31:07,240
Speaker 2: symbolism to Europe of the French moving east to the

603
00:31:07,280 --> 00:31:07,880
Speaker 2: Middle East.

604
00:31:08,400 --> 00:31:10,080
Speaker 11: I think that's very significant.

605
00:31:10,200 --> 00:31:13,360
Speaker 10: I think also the offer by President Macron to make

606
00:31:13,400 --> 00:31:17,680
Speaker 10: the Force Fraut potentially available in forward deployment for allies.

607
00:31:17,800 --> 00:31:20,040
Speaker 10: I mean, that's that's a big development that happened.

608
00:31:20,080 --> 00:31:21,160
Speaker 11: What was it two weeks ago?

609
00:31:22,640 --> 00:31:24,640
Speaker 10: You know, we've talked about it, but I think one

610
00:31:24,680 --> 00:31:27,479
Speaker 10: can't talk about it enough. The Germans doubling their defense

611
00:31:27,520 --> 00:31:31,240
Speaker 10: budget very quickly and you know, moving away from their

612
00:31:31,760 --> 00:31:33,640
Speaker 10: balanced budget orthodoxy.

613
00:31:33,720 --> 00:31:34,760
Speaker 11: I think there's a big move.

614
00:31:35,640 --> 00:31:37,520
Speaker 10: All of that's happening right now, but it's not in

615
00:31:37,560 --> 00:31:39,320
Speaker 10: a joined up manner, and I think that's what we're

616
00:31:39,320 --> 00:31:41,640
Speaker 10: waiting for. That's why you asked about Brussels. But Brussels

617
00:31:41,680 --> 00:31:43,920
Speaker 10: isn't going to be the factor. He it's the national

618
00:31:43,920 --> 00:31:46,840
Speaker 10: capitals and domestic politics that got to determine.

619
00:31:46,360 --> 00:31:48,760
Speaker 2: That I should mention the ship Damien Sas or the

620
00:31:48,880 --> 00:31:52,120
Speaker 2: Charles de Gaulle. Mean, yeah, how could there be how

621
00:31:52,160 --> 00:31:55,800
Speaker 2: could there be any other ship named the French fleet Andreas.

622
00:31:56,080 --> 00:31:58,320
Speaker 5: Markets are clearly reacting to the Middle East conflict, but

623
00:31:58,360 --> 00:32:00,720
Speaker 5: relative to past events, I mean, the price action just

624
00:32:00,720 --> 00:32:02,760
Speaker 5: appears to be, you know, quite needed. To me, I'm

625
00:32:02,800 --> 00:32:05,040
Speaker 5: curious to hear your thoughts on that. You know, do

626
00:32:05,120 --> 00:32:09,040
Speaker 5: you see potential for the current conflict to fantastasize into

627
00:32:09,080 --> 00:32:11,440
Speaker 5: a full blown varshock. And I guess you know, do

628
00:32:11,480 --> 00:32:13,800
Speaker 5: you see any risks of the plumbing underneath these financial

629
00:32:13,800 --> 00:32:14,440
Speaker 5: markets right here?

630
00:32:16,720 --> 00:32:19,760
Speaker 10: Of course, it could totally spiral out of control. I mean,

631
00:32:19,800 --> 00:32:21,920
Speaker 10: we don't, we don't know, you don't know. I think

632
00:32:22,240 --> 00:32:25,240
Speaker 10: nobody really knows. The markets are certainly not discounting it.

633
00:32:25,640 --> 00:32:28,440
Speaker 10: Otherwise you'd have seen much, quite right, a much stronger

634
00:32:28,480 --> 00:32:31,360
Speaker 10: reaction downward. And it is really surprising that the markets

635
00:32:31,360 --> 00:32:34,440
Speaker 10: have been so sanguine. I have to say I agree

636
00:32:34,520 --> 00:32:38,520
Speaker 10: with the The biggest risk to the plumbing is the

637
00:32:38,560 --> 00:32:41,080
Speaker 10: potential hazards in the private credit space.

638
00:32:41,760 --> 00:32:43,760
Speaker 11: Totally sorry, I'm being right.

639
00:32:44,080 --> 00:32:44,560
Speaker 2: We want.

640
00:32:47,320 --> 00:32:51,280
Speaker 5: Tom waiting for that to I mean, come on, continuation vehicles, deteriorating,

641
00:32:51,320 --> 00:32:52,440
Speaker 5: COLO demand, come on.

642
00:32:52,800 --> 00:32:55,440
Speaker 2: And you don't know this, but on Damien's screening is

643
00:32:55,480 --> 00:32:59,680
Speaker 2: a countdown clock, given Iran, given the president, given the press,

644
00:32:59,720 --> 00:33:01,200
Speaker 2: coind of what's coming up? Tom?

645
00:33:01,240 --> 00:33:04,000
Speaker 4: When are we gonna talk about private credit?

646
00:33:04,400 --> 00:33:07,560
Speaker 10: But let's talk about these principles first, right, I mean,

647
00:33:07,600 --> 00:33:09,320
Speaker 10: I was having that conversation with a friend of mine

648
00:33:09,400 --> 00:33:11,840
Speaker 10: the other day. I said, look, I grew up a banker,

649
00:33:11,920 --> 00:33:14,880
Speaker 10: right in the eighties, you know, I saw how loans

650
00:33:14,920 --> 00:33:19,520
Speaker 10: are being made to mid and small sized corporates, commercial paper. Absolutely,

651
00:33:19,600 --> 00:33:22,000
Speaker 10: I know how how much due diligence went into all

652
00:33:22,040 --> 00:33:25,160
Speaker 10: of that, and why because the risk the capital of

653
00:33:25,200 --> 00:33:28,360
Speaker 10: the banks are at stake. That's right, right, that is,

654
00:33:28,680 --> 00:33:31,520
Speaker 10: it's real money. Right now, you move this kind of

655
00:33:31,520 --> 00:33:35,040
Speaker 10: off balance sheet with everything that's happened post Great Financial Crisis,

656
00:33:35,480 --> 00:33:39,400
Speaker 10: and who whose money is now at risk? It's sort

657
00:33:39,440 --> 00:33:42,880
Speaker 10: of anonymous savers, right, So how do you think the

658
00:33:42,960 --> 00:33:47,240
Speaker 10: due diligence compares relative to a bank that extends these

659
00:33:47,280 --> 00:33:49,440
Speaker 10: loans on their own balance sheet? And it's going to

660
00:33:49,480 --> 00:33:50,960
Speaker 10: be subpar.

661
00:33:53,280 --> 00:33:56,200
Speaker 5: More concerned with what's going on in be credit some

662
00:33:56,240 --> 00:33:58,320
Speaker 5: of these credit instruments as opposed to what's going on

663
00:33:58,400 --> 00:33:58,960
Speaker 5: in the Middle East.

664
00:33:59,000 --> 00:34:00,400
Speaker 7: I mean, I think that's what you're saying saying.

665
00:34:00,280 --> 00:34:04,920
Speaker 11: Here, Well, well, we'll know after the event. Certainly the

666
00:34:05,320 --> 00:34:07,280
Speaker 11: market should be concerned about that. Absolutely.

667
00:34:07,360 --> 00:34:11,640
Speaker 2: How large are those shadows? I mean you you guys

668
00:34:11,680 --> 00:34:14,640
Speaker 2: are way too young to remember this, but I remember

669
00:34:14,719 --> 00:34:17,880
Speaker 2: going on in October, I think Thursday with a martini

670
00:34:17,920 --> 00:34:23,600
Speaker 2: in May and oh, portfolio, what is that? What's the

671
00:34:23,640 --> 00:34:28,080
Speaker 2: fear that you have now of it? Is that pure leverage,

672
00:34:28,239 --> 00:34:28,560
Speaker 2: is it?

673
00:34:28,600 --> 00:34:30,680
Speaker 4: What's the unknown unknown.

674
00:34:30,719 --> 00:34:31,680
Speaker 2: Of private credit?

675
00:34:31,719 --> 00:34:35,880
Speaker 10: Andreas well, I don't know. I'm not smart enough to

676
00:34:35,880 --> 00:34:38,920
Speaker 10: know the unknown unknowns. But what I can tell you

677
00:34:38,960 --> 00:34:41,080
Speaker 10: is I'm slightly less concerned than I was, and I

678
00:34:41,200 --> 00:34:43,440
Speaker 10: was concerned in two thousand and seven, eight and nine,

679
00:34:43,760 --> 00:34:47,760
Speaker 10: because ultimately the transmission mechanism of this going wrong initially

680
00:34:47,840 --> 00:34:52,640
Speaker 10: is going to be probably consumers savers and not not

681
00:34:52,840 --> 00:34:56,040
Speaker 10: systemically into the banking system. Now, as you say there

682
00:34:56,080 --> 00:34:58,680
Speaker 10: might be unknown unknowns, I mean, you know, one of

683
00:34:58,719 --> 00:35:01,560
Speaker 10: our competitors in Switzerland had loans on the balance sheet

684
00:35:01,600 --> 00:35:05,520
Speaker 10: nobody knew about, and so that was an unknown and

685
00:35:05,560 --> 00:35:08,640
Speaker 10: who knows what banks have done that nobody knows about,

686
00:35:08,920 --> 00:35:10,359
Speaker 10: But right now there's no evidence of that.

687
00:35:10,440 --> 00:35:11,919
Speaker 5: You know, one of the big buyers in that market

688
00:35:11,960 --> 00:35:14,880
Speaker 5: are insurance companies, right, I mean long duration buyers. And

689
00:35:14,920 --> 00:35:16,960
Speaker 5: you know to me, I mean I look at insurance and.

690
00:35:17,120 --> 00:35:18,200
Speaker 7: You know that stuff very well.

691
00:35:18,320 --> 00:35:19,279
Speaker 11: Yeah, insurance talks.

692
00:35:19,480 --> 00:35:21,719
Speaker 5: So that's when I'm thinking, I mean, and I'm wondering

693
00:35:21,760 --> 00:35:24,040
Speaker 5: if you have any thoughts there. I mean, demand from

694
00:35:24,080 --> 00:35:26,880
Speaker 5: insurers for you know, thirty year paper for long duration

695
00:35:26,960 --> 00:35:28,600
Speaker 5: papers kind of gone down as you've moved into the

696
00:35:28,600 --> 00:35:31,080
Speaker 5: private credit market, right that short duration you know, that's

697
00:35:31,120 --> 00:35:33,239
Speaker 5: short duration stuff. You know, talk to us about the

698
00:35:33,239 --> 00:35:37,080
Speaker 5: potential for asset liability mismatching in the insurance industry. I

699
00:35:37,080 --> 00:35:38,880
Speaker 5: mean the insurance industry. By the way, Tom, for all

700
00:35:38,920 --> 00:35:41,440
Speaker 5: your for all our audience listening, is one of the

701
00:35:41,440 --> 00:35:43,200
Speaker 5: best performing sectors in the SMP this year.

702
00:35:43,239 --> 00:35:44,880
Speaker 7: So I'm just curious to hear your thoughts there.

703
00:35:45,080 --> 00:35:45,239
Speaker 2: Well.

704
00:35:45,239 --> 00:35:46,840
Speaker 10: As you know, I worked for a Lance for a

705
00:35:46,880 --> 00:35:48,719
Speaker 10: long time. I was on the asset management side, but

706
00:35:48,760 --> 00:35:51,919
Speaker 10: clearly they found out some of the some of their

707
00:35:51,960 --> 00:35:54,720
Speaker 10: investments to to audience global investors from I was Leading

708
00:35:54,760 --> 00:35:58,080
Speaker 10: and PIMCO, And you're right, I think in the in

709
00:35:58,120 --> 00:36:00,920
Speaker 10: the twenty tens, when into switched low, they went to

710
00:36:01,000 --> 00:36:06,279
Speaker 10: ultra long now to my surprise, entire surprise, though, they

711
00:36:06,280 --> 00:36:09,120
Speaker 10: didn't manage that transition extremely well. So they didn't really

712
00:36:09,160 --> 00:36:11,960
Speaker 10: take the hits that you might have expected as interest

713
00:36:12,000 --> 00:36:15,680
Speaker 10: way its rose, and so that speaks to their ability

714
00:36:15,800 --> 00:36:19,080
Speaker 10: to manage risk on their balance sheet. So I've also

715
00:36:19,080 --> 00:36:22,920
Speaker 10: seen the insurance stocks do really, really well, really well,

716
00:36:22,960 --> 00:36:24,960
Speaker 10: so that there's no real evidence at the moment that

717
00:36:25,040 --> 00:36:27,400
Speaker 10: they're not managing this appropriate. So so I'm kind of

718
00:36:28,120 --> 00:36:29,440
Speaker 10: kind of bullish on insurance.

719
00:36:29,440 --> 00:36:32,200
Speaker 2: We are three minutes away here folk from a press conference.

720
00:36:32,280 --> 00:36:36,040
Speaker 2: General Kine is always timely, but with some headlines here,

721
00:36:36,040 --> 00:36:39,279
Speaker 2: I wonder if there'll be a delay. The Pentagon press

722
00:36:39,360 --> 00:36:43,120
Speaker 2: briefing room with the two Flags prepares for this press conference.

723
00:36:43,360 --> 00:36:45,640
Speaker 2: Andrea Sertterman with his chairman of the Board of Directors,

724
00:36:45,680 --> 00:36:48,760
Speaker 2: Vuntable with us. I want to talk to you about

725
00:36:48,760 --> 00:36:52,360
Speaker 2: the voice of the elites. I advinced no words about this.

726
00:36:52,560 --> 00:36:56,799
Speaker 2: Lawrence Fink of Blackrock single handedly saved Davos this year.

727
00:36:57,200 --> 00:37:00,239
Speaker 2: Larry got upset. He said, we got to continue this

728
00:37:00,320 --> 00:37:03,680
Speaker 2: in some form, you know, the gossip leguard maybe would

729
00:37:03,719 --> 00:37:07,080
Speaker 2: go from ECB over the world economic form. Where's the

730
00:37:07,200 --> 00:37:11,959
Speaker 2: new voice of the elites moving forward the next one year,

731
00:37:12,400 --> 00:37:15,960
Speaker 2: two years, five years. Does it need to be reconstructed?

732
00:37:17,160 --> 00:37:20,320
Speaker 10: Of course, But I mean that start with a presupposition

733
00:37:20,520 --> 00:37:23,799
Speaker 10: that But you know what actually the elite is? Now

734
00:37:23,840 --> 00:37:25,680
Speaker 10: that's an interesting question, isn't it. I mean, is the

735
00:37:25,920 --> 00:37:29,680
Speaker 10: is the elite political? Is it moneyed? Is it new moneyed,

736
00:37:29,760 --> 00:37:33,680
Speaker 10: old moneyed? I think the definition applies differently to different

737
00:37:33,719 --> 00:37:35,480
Speaker 10: countries and different political systems.

738
00:37:36,160 --> 00:37:37,280
Speaker 11: I mean, you might.

739
00:37:37,160 --> 00:37:39,960
Speaker 10: Argue that, I think people will have different views as

740
00:37:40,000 --> 00:37:41,960
Speaker 10: to what the elite today in the United States is.

741
00:37:41,960 --> 00:37:43,840
Speaker 10: For example, I'd be interested if you have an answer

742
00:37:43,840 --> 00:37:44,040
Speaker 10: for that.

743
00:37:44,120 --> 00:37:47,240
Speaker 7: Tom, what's kind of asking what's an emergency market?

744
00:37:47,320 --> 00:37:47,480
Speaker 2: Right?

745
00:37:47,520 --> 00:37:49,720
Speaker 7: What's the difference between an emerging and a developed market?

746
00:37:49,760 --> 00:37:51,319
Speaker 5: You know what is you know, what is a you know,

747
00:37:51,360 --> 00:37:54,640
Speaker 5: middle income economy versus an advanced economy?

748
00:37:54,680 --> 00:37:54,839
Speaker 7: Right?

749
00:37:54,880 --> 00:37:57,040
Speaker 5: I mean it's what's a wealthy individual resil relative to

750
00:37:57,200 --> 00:37:59,360
Speaker 5: a middle income household? I mean, you know, I guess

751
00:37:59,360 --> 00:38:01,680
Speaker 5: you know, elite. He has many different I guess meanings

752
00:38:01,719 --> 00:38:02,439
Speaker 5: to make different people.

753
00:38:02,520 --> 00:38:05,480
Speaker 10: It's very different. It's very difficult. It's very interesting to

754
00:38:05,520 --> 00:38:09,520
Speaker 10: see that. You know, in the late twenty tens, it

755
00:38:09,640 --> 00:38:16,000
Speaker 10: was expected that the the the elite that expressed important views,

756
00:38:16,120 --> 00:38:20,279
Speaker 10: be it on societal issues or economic issues, would be

757
00:38:20,320 --> 00:38:24,440
Speaker 10: the leaders of large corporations, right, And that's changed quite

758
00:38:24,480 --> 00:38:25,720
Speaker 10: a bit in the past few years.

759
00:38:25,960 --> 00:38:29,320
Speaker 11: It's changed quite a bit, and that elite has become

760
00:38:30,239 --> 00:38:34,080
Speaker 11: less noisy. Let's vocal.

761
00:38:34,160 --> 00:38:37,279
Speaker 2: Can I do an audible into the press conference? I

762
00:38:37,400 --> 00:38:41,440
Speaker 2: still haven't recovered from Harry Kane going from Tottenham to

763
00:38:41,560 --> 00:38:42,719
Speaker 2: Baron Munich.

764
00:38:42,480 --> 00:38:46,040
Speaker 12: But good for him. He's finally won trophies. I mean

765
00:38:47,000 --> 00:38:51,960
Speaker 12: right now in a renegotiation. It's amazing. I mean, tell

766
00:38:52,000 --> 00:38:54,360
Speaker 12: us the response of Munich.

767
00:38:54,000 --> 00:38:57,040
Speaker 2: To the Harry King going there, Well, I'm successfully getting

768
00:38:57,080 --> 00:38:57,799
Speaker 2: it done.

769
00:38:58,080 --> 00:39:01,239
Speaker 10: I'm not a Bayern Munich fan. I'm an Arsenal and

770
00:39:01,239 --> 00:39:02,279
Speaker 10: Burdsad Dortmund fan.

771
00:39:02,320 --> 00:39:02,960
Speaker 11: So that's what we got.

772
00:39:02,960 --> 00:39:05,719
Speaker 10: And we got whooped by Bayern Munich a couple of

773
00:39:05,760 --> 00:39:07,879
Speaker 10: weeks ago. No, but Harry Kane did exactly the right thing.

774
00:39:08,120 --> 00:39:10,640
Speaker 10: I think what would be really interesting if Brian re

775
00:39:10,719 --> 00:39:13,120
Speaker 10: signed him and for how long, because Byan have history

776
00:39:13,680 --> 00:39:18,640
Speaker 10: to basically end contracts in the early thirties of a player. Now,

777
00:39:18,880 --> 00:39:21,640
Speaker 10: it is true that strikers picked the type of striker

778
00:39:21,680 --> 00:39:26,439
Speaker 10: that Harry Kane is having longer careers and certainly longer

779
00:39:26,440 --> 00:39:29,799
Speaker 10: careers than wingers. So let's see, I would if I'd

780
00:39:29,840 --> 00:39:31,200
Speaker 10: have to bet two year contract.

781
00:39:31,520 --> 00:39:34,080
Speaker 2: Okay, this has been I'm so sorry it's too short here,

782
00:39:34,120 --> 00:39:35,840
Speaker 2: but we're waiting for a press conference. We've got to

783
00:39:35,840 --> 00:39:38,480
Speaker 2: get a Lexis in with market reaction.

784
00:39:38,120 --> 00:39:39,480
Speaker 9: And thanks for having.

785
00:39:41,840 --> 00:39:43,680
Speaker 2: So put it on a calendar. We'll get our team.

786
00:39:44,440 --> 00:39:46,120
Speaker 5: I think when you define a lead at somebody who

787
00:39:46,160 --> 00:39:48,759
Speaker 5: graduated from Vandervalt University and played the middle linebacker for

788
00:39:48,840 --> 00:39:49,359
Speaker 5: the high school.

789
00:39:49,360 --> 00:39:51,120
Speaker 7: I mean that would be my definition.

790
00:39:50,880 --> 00:39:54,520
Speaker 4: That would How are they doing in March Man, it's

791
00:39:54,560 --> 00:39:54,920
Speaker 4: not going to be.

792
00:39:59,560 --> 00:40:03,279
Speaker 2: Thank you, Thank you so much, Chairman of the board

793
00:40:03,320 --> 00:40:04,480
Speaker 2: of directors at Vauntable.

794
00:40:06,360 --> 00:40:07,080
Speaker 9: Stay with us.

795
00:40:07,320 --> 00:40:10,560
Speaker 2: More from Bloomberg Surveillance coming up after this.

796
00:40:17,800 --> 00:40:21,359
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

797
00:40:21,440 --> 00:40:24,640
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

798
00:40:24,680 --> 00:40:28,360
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

799
00:40:28,520 --> 00:40:30,000
Speaker 1: watch us live on YouTube.

800
00:40:30,239 --> 00:40:33,839
Speaker 2: Courtney Rosenberger Gelman, who joins us from Statiga, she has

801
00:40:33,880 --> 00:40:36,040
Speaker 2: to put up with Dan Clifton. Ow Boy, that alone

802
00:40:36,120 --> 00:40:39,680
Speaker 2: is a heavy lift to say the least. Courtney, do

803
00:40:39,800 --> 00:40:42,680
Speaker 2: we have an oil lobby in Washington.

804
00:40:43,640 --> 00:40:44,399
Speaker 4: We certainly do.

805
00:40:44,440 --> 00:40:47,160
Speaker 13: We have a very strong oil lobby who has been

806
00:40:47,160 --> 00:40:51,200
Speaker 13: in contact with the administration. You know, had of the

807
00:40:51,320 --> 00:40:53,520
Speaker 13: June strikes that we had on Iran, so they have

808
00:40:53,560 --> 00:40:55,640
Speaker 13: been involved throughout this entire process.

809
00:40:56,160 --> 00:40:58,400
Speaker 5: Courtney talked to us a little bit about not just Iran,

810
00:40:58,440 --> 00:41:00,960
Speaker 5: but the impact of Iran and venezuel on President Trump's

811
00:41:01,000 --> 00:41:03,160
Speaker 5: upcoming meeting with Chijinping. I mean, do these two events

812
00:41:03,239 --> 00:41:05,840
Speaker 5: change the calculus at all for the upcoming negotiations between

813
00:41:05,840 --> 00:41:06,600
Speaker 5: the US and China.

814
00:41:07,600 --> 00:41:10,279
Speaker 13: The way that we're thinking about them is it's about leverage.

815
00:41:10,320 --> 00:41:12,719
Speaker 13: So I don't think it's kind of a coincidence that

816
00:41:12,800 --> 00:41:15,640
Speaker 13: the President is saying a four to six week timeframe

817
00:41:15,680 --> 00:41:19,640
Speaker 13: for this event, and March thirty first April first would

818
00:41:19,640 --> 00:41:22,799
Speaker 13: be about four and a half weeks into the US

819
00:41:22,800 --> 00:41:25,120
Speaker 13: and Israeli strikes on Iran, and we do think the

820
00:41:25,120 --> 00:41:28,160
Speaker 13: administration wants to have as much leverage going into those

821
00:41:28,200 --> 00:41:31,480
Speaker 13: talks as possible because what they're trying to do is

822
00:41:31,480 --> 00:41:34,320
Speaker 13: they're trying to show China, you know, we can remove

823
00:41:34,360 --> 00:41:36,840
Speaker 13: your proxies, we can remove your sources of cheap oil,

824
00:41:36,880 --> 00:41:40,120
Speaker 13: so that goes to Venezuela and Iran, and also showing

825
00:41:40,320 --> 00:41:43,640
Speaker 13: we're trying to kind of consolidate Western security. So that

826
00:41:43,680 --> 00:41:45,600
Speaker 13: also goes to some of the rhetoric that we saw

827
00:41:45,680 --> 00:41:48,200
Speaker 13: earlier this year on Greenland as well. This is about

828
00:41:48,239 --> 00:41:51,360
Speaker 13: getting leverage ahead of twenty twenty seven off of concerns

829
00:41:51,400 --> 00:41:54,279
Speaker 13: that China might be more aggressive in their posture when

830
00:41:54,280 --> 00:41:56,440
Speaker 13: they do have the capabilities with Taiwan well Courtney.

831
00:41:56,480 --> 00:41:58,680
Speaker 5: You make a very very interesting point there. That's an

832
00:41:58,680 --> 00:42:01,200
Speaker 5: incentive one might argue for President Trump to make sure

833
00:42:01,239 --> 00:42:03,360
Speaker 5: that the conflicting that Iran actually extends a little bit

834
00:42:03,400 --> 00:42:05,919
Speaker 5: longer than anticipated from hearing you correctly. And look, oil

835
00:42:05,920 --> 00:42:08,799
Speaker 5: supply disruptions have ruined many of president's here, and you know,

836
00:42:08,880 --> 00:42:11,319
Speaker 5: for me, you know, we have midterms coming up, so

837
00:42:11,320 --> 00:42:13,280
Speaker 5: I'm curious to hear your thoughts on which local races,

838
00:42:13,280 --> 00:42:15,520
Speaker 5: which primaries do you think you're going to you know,

839
00:42:15,719 --> 00:42:18,360
Speaker 5: catch your attention here as the focus shifts. But more importantly,

840
00:42:18,680 --> 00:42:21,080
Speaker 5: you know, how do you think the markets are reacting

841
00:42:21,080 --> 00:42:22,680
Speaker 5: to Iran and whether or not they're going to reward

842
00:42:22,719 --> 00:42:24,160
Speaker 5: or penalize the Trump administration.

843
00:42:25,440 --> 00:42:27,120
Speaker 13: Yeah, so I would say, you know, when we're thinking

844
00:42:27,120 --> 00:42:30,520
Speaker 13: about this, certainly there's there's a case for the president

845
00:42:30,760 --> 00:42:34,000
Speaker 13: having as much leverage as possible. But I do think

846
00:42:34,080 --> 00:42:36,200
Speaker 13: that there is that four to six week deadline here.

847
00:42:36,200 --> 00:42:39,000
Speaker 13: Again he wants to have the leverage going into the meeting.

848
00:42:39,600 --> 00:42:42,080
Speaker 13: And there also is, to your point, the lack of

849
00:42:42,120 --> 00:42:45,520
Speaker 13: political capital here. You know, most polls have this underwater,

850
00:42:45,680 --> 00:42:48,520
Speaker 13: including with independence who are key to the midterms. We've

851
00:42:48,520 --> 00:42:52,279
Speaker 13: seen betting market odds for a democratic suite search, you know,

852
00:42:52,360 --> 00:42:55,800
Speaker 13: ten fifteen points. Over the last month, we've also seen

853
00:42:55,960 --> 00:42:59,879
Speaker 13: all our thematic baskets leverage to a democratic administration start

854
00:42:59,880 --> 00:43:02,120
Speaker 13: to search as well. So it does seem like the

855
00:43:02,120 --> 00:43:04,920
Speaker 13: market is increasingly pricing in Democrats off of concerns with

856
00:43:04,960 --> 00:43:07,400
Speaker 13: the president is too concerned with foreign policy, not concerned

857
00:43:07,480 --> 00:43:09,040
Speaker 13: enough of affordability.

858
00:43:08,480 --> 00:43:11,640
Speaker 2: For where you said, and the cacophony of a presidential

859
00:43:11,680 --> 00:43:14,480
Speaker 2: press conference, which is its own piece. Thank you to

860
00:43:14,640 --> 00:43:16,719
Speaker 2: all of our team for companies that Cohen and I

861
00:43:16,760 --> 00:43:20,759
Speaker 2: thought was brilliant today with Nathan Hager. But Courtney, is

862
00:43:20,800 --> 00:43:24,960
Speaker 2: there a cogent energy policy in this nation right now?

863
00:43:26,560 --> 00:43:29,239
Speaker 13: I think that the energy policy is produced as much

864
00:43:29,239 --> 00:43:32,080
Speaker 13: as possible because that is key to national security. It

865
00:43:32,120 --> 00:43:34,960
Speaker 13: is not just a US energy policy. I think we're

866
00:43:34,960 --> 00:43:38,040
Speaker 13: increasingly going to hear about a US MCA energy policy.

867
00:43:38,280 --> 00:43:41,239
Speaker 13: So USMCA is up for review in July. We anticipate

868
00:43:41,280 --> 00:43:44,239
Speaker 13: that Mexican energy reforms, which have not been implemented to

869
00:43:44,400 --> 00:43:47,440
Speaker 13: either the US or Canada's standards, are already key to

870
00:43:47,520 --> 00:43:48,480
Speaker 13: these negotiations.

871
00:43:48,680 --> 00:43:51,120
Speaker 2: Okay, this is a core question, Daman. We're going right

872
00:43:51,160 --> 00:43:54,480
Speaker 2: back to the University of Kentucky with Courtney Rosenberg and

873
00:43:54,560 --> 00:43:58,200
Speaker 2: Courtney just as simple as I can. Why is the

874
00:43:58,239 --> 00:44:01,799
Speaker 2: price of oil in tex U sort of kind of

875
00:44:01,880 --> 00:44:04,600
Speaker 2: like the same as the price of oil and Abu

876
00:44:04,680 --> 00:44:07,880
Speaker 2: Dhabi discuss oil is one price?

877
00:44:09,280 --> 00:44:11,759
Speaker 13: Yeah, I mean there's been a decent kind of gap

878
00:44:11,760 --> 00:44:14,960
Speaker 13: between WTI and Brent, which I do think is notable.

879
00:44:14,960 --> 00:44:17,360
Speaker 13: But I think that that goes towards the administration's argument

880
00:44:17,400 --> 00:44:20,560
Speaker 13: of energy security, where the US is less exposed and

881
00:44:20,600 --> 00:44:24,719
Speaker 13: less susceptible because we produce so much. Certainly we are

882
00:44:24,960 --> 00:44:27,000
Speaker 13: kind of at the mercy of the global prices, but

883
00:44:27,080 --> 00:44:29,200
Speaker 13: the US is best positioned, in our view, out of

884
00:44:29,239 --> 00:44:31,800
Speaker 13: many of these other countries relying on energy imports.

885
00:44:32,040 --> 00:44:34,279
Speaker 2: Courtney, thank you, thank you, thank you. Thrilled to have

886
00:44:34,360 --> 00:44:38,680
Speaker 2: you with us today. With Jason Trennard. It's Strtiguous Research Partners,

887
00:44:38,760 --> 00:44:40,320
Speaker 2: Courtney Rosenberger, Gellman.

888
00:44:42,160 --> 00:44:42,919
Speaker 9: Stay with us.

889
00:44:43,120 --> 00:44:46,359
Speaker 2: More from Bloomberg Surveillance coming up after this.

890
00:44:53,600 --> 00:44:57,200
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

891
00:44:57,280 --> 00:45:01,240
Speaker 1: weekday afternoons from seven to ten am Eastern on Applecarplay

892
00:45:01,280 --> 00:45:04,560
Speaker 1: and Android Auto with the Bloomberg Business app, or watch

893
00:45:04,640 --> 00:45:06,920
Speaker 1: us live on YouTube shouldn't care.

894
00:45:06,880 --> 00:45:10,719
Speaker 2: And of course the physicists from Voden always and forever.

895
00:45:11,600 --> 00:45:15,000
Speaker 2: My basic take is the bond market is Damien alluded

896
00:45:15,000 --> 00:45:17,520
Speaker 2: to really is taking war? Well?

897
00:45:17,680 --> 00:45:20,920
Speaker 4: Is that a good summary?

898
00:45:21,000 --> 00:45:24,160
Speaker 14: It is from a spread perspective, right, But the issue

899
00:45:24,200 --> 00:45:26,800
Speaker 14: that I have here is that there's a high correlation

900
00:45:26,920 --> 00:45:29,800
Speaker 14: between bonds and equities at this point, meaning that bond

901
00:45:29,800 --> 00:45:33,040
Speaker 14: prices are going down, equity prices are going down. So

902
00:45:33,080 --> 00:45:36,560
Speaker 14: there's a high correlation market, meaning that typically whenever equities

903
00:45:36,600 --> 00:45:38,800
Speaker 14: take a hit like what we're seeing with the shock

904
00:45:38,840 --> 00:45:42,400
Speaker 14: with oil, typically bonds are there for a reasonable hedge.

905
00:45:42,640 --> 00:45:45,400
Speaker 14: So this high correlation that we have today with bond

906
00:45:45,480 --> 00:45:48,360
Speaker 14: prices going down, yields going up right, and equity prices

907
00:45:48,440 --> 00:45:51,080
Speaker 14: going down, means that people don't really have a very

908
00:45:51,080 --> 00:45:52,839
Speaker 14: effective hedge. So what they end up doing is they

909
00:45:52,840 --> 00:45:55,920
Speaker 14: try to move towards cash. So the question then becomes

910
00:45:56,040 --> 00:45:59,399
Speaker 14: is liquidity okay in the market? Liquidity's okay in the market,

911
00:45:59,480 --> 00:46:01,960
Speaker 14: we can trans I mean, people can move cash around.

912
00:46:02,440 --> 00:46:05,520
Speaker 14: And then the third is contagion, So we're not seeing

913
00:46:05,800 --> 00:46:09,960
Speaker 14: widespread default risks and contagion really rippling through the markets

914
00:46:09,960 --> 00:46:12,600
Speaker 14: at this point. So far, this is being viewed as

915
00:46:12,600 --> 00:46:16,520
Speaker 14: an inflation shock. It's not yet turning into a growth scare.

916
00:46:17,040 --> 00:46:18,759
Speaker 14: That's the tipping point that we have to watch.

917
00:46:18,800 --> 00:46:20,719
Speaker 2: I'm going to get the breaking news out of the way.

918
00:46:20,840 --> 00:46:24,239
Speaker 2: Amazon's going to call up Morgan Stanley trying to move

919
00:46:24,320 --> 00:46:27,800
Speaker 2: thirty seven to forty two billion dollars of paper. Maybe

920
00:46:27,840 --> 00:46:31,040
Speaker 2: it's outside your remit, but maybe it's not your thoughts

921
00:46:31,360 --> 00:46:34,600
Speaker 2: on another big tech with a big bond deal.

922
00:46:34,760 --> 00:46:37,440
Speaker 14: Look, this has been an ongoing trend, right you know,

923
00:46:37,680 --> 00:46:40,239
Speaker 14: We've seen a lot of the big technology companies coming

924
00:46:40,280 --> 00:46:42,840
Speaker 14: to the markets. There's a lot of funding for CAPEX.

925
00:46:43,840 --> 00:46:47,040
Speaker 14: We see this broadly as a very big CAPEC cycle.

926
00:46:47,080 --> 00:46:49,000
Speaker 14: This is something that we were talking about last year.

927
00:46:49,040 --> 00:46:51,200
Speaker 14: The last time we saw a CAPEC cycle like this

928
00:46:51,360 --> 00:46:53,839
Speaker 14: was the nineteen nineties. Typically, when you get this type

929
00:46:53,840 --> 00:46:57,319
Speaker 14: of investment from a CAPEX led growth cycle, you tend

930
00:46:57,320 --> 00:47:00,560
Speaker 14: to get higher productivity. That's exactly what we're seeing right now.

931
00:47:00,960 --> 00:47:04,879
Speaker 14: That should raise higher real term growth and should high

932
00:47:04,920 --> 00:47:07,719
Speaker 14: and should raise potential growth. So I think this is

933
00:47:07,760 --> 00:47:10,440
Speaker 14: part of the cycle where investments are being made, and

934
00:47:10,680 --> 00:47:13,120
Speaker 14: I think that these investments are going to pay off

935
00:47:13,120 --> 00:47:15,040
Speaker 14: and the outcome of this is going to be from

936
00:47:15,120 --> 00:47:15,880
Speaker 14: higher productivity.

937
00:47:16,040 --> 00:47:18,239
Speaker 5: Well, Jimmy, you call this an inflation shock, and I

938
00:47:18,239 --> 00:47:19,839
Speaker 5: got to just think back to the pandemic. I mean,

939
00:47:19,840 --> 00:47:21,880
Speaker 5: I got to believe central banks and governments and officials

940
00:47:21,920 --> 00:47:23,960
Speaker 5: have learned a lot from that experience, you know, and

941
00:47:24,000 --> 00:47:25,600
Speaker 5: I think you know you mentioned in some of your

942
00:47:25,640 --> 00:47:28,319
Speaker 5: work standing RePOP facilities and FX swap lines and all

943
00:47:28,360 --> 00:47:30,120
Speaker 5: the tools that are available to central banks to help

944
00:47:30,120 --> 00:47:32,520
Speaker 5: protect against you know, what is effectively of our shock.

945
00:47:33,000 --> 00:47:34,719
Speaker 7: My question is can it still happen? And what are

946
00:47:34,719 --> 00:47:35,239
Speaker 7: you looking at?

947
00:47:35,239 --> 00:47:37,759
Speaker 5: What indicators, what signals would you be most focused on

948
00:47:38,080 --> 00:47:39,600
Speaker 5: to sort of give you a little bit of advance

949
00:47:39,680 --> 00:47:41,000
Speaker 5: notice that things are getting really bad up?

950
00:47:41,080 --> 00:47:42,719
Speaker 4: Yeah, no, And it's a really good point.

951
00:47:42,760 --> 00:47:45,319
Speaker 14: I mean, look, central banks are well prepared with FX

952
00:47:45,400 --> 00:47:48,160
Speaker 14: swap lines and repo facilities, you know, to handle a

953
00:47:48,160 --> 00:47:51,360
Speaker 14: lot of liquidity shocks that they weren't in the past.

954
00:47:51,600 --> 00:47:53,320
Speaker 14: So what I'm going to look at first and foremost

955
00:47:53,440 --> 00:47:57,799
Speaker 14: is is rebel markets. If markets are functionally well functioning, well,

956
00:47:57,840 --> 00:48:00,320
Speaker 14: that's really the primary source of leverage. That means leverage

957
00:48:00,320 --> 00:48:02,640
Speaker 14: markets are going to be okay. I would look at

958
00:48:03,320 --> 00:48:05,920
Speaker 14: people have whenever there's a shock in the markets. There's

959
00:48:05,920 --> 00:48:08,480
Speaker 14: always demand for dollars because a lot of debt, particularly

960
00:48:08,480 --> 00:48:11,720
Speaker 14: in emerging markets, is dollar based debt, meaning that people

961
00:48:11,800 --> 00:48:14,320
Speaker 14: need those dollars to pay off their debt. So therefore

962
00:48:14,400 --> 00:48:17,040
Speaker 14: they tend to conserve dollars or buy dollars in advance.

963
00:48:17,080 --> 00:48:20,160
Speaker 14: So typically you get stronger dollar and then sometimes I

964
00:48:20,200 --> 00:48:22,960
Speaker 14: could create a shortage or a squeeze in the dollar markets.

965
00:48:23,239 --> 00:48:26,240
Speaker 14: We're not seeing that right now. This is good news.

966
00:48:26,239 --> 00:48:27,799
Speaker 14: I want to highlight some things that are good news.

967
00:48:27,880 --> 00:48:29,759
Speaker 14: Right We're not seeing these liquidity shocks.

968
00:48:31,480 --> 00:48:32,239
Speaker 2: News on the show.

969
00:48:32,440 --> 00:48:35,120
Speaker 7: You know, we need it sometimes.

970
00:48:34,920 --> 00:48:36,680
Speaker 2: Jim Karen with good news continue.

971
00:48:36,880 --> 00:48:39,920
Speaker 14: So so the liquidity shock is not happening, The broad

972
00:48:40,480 --> 00:48:44,360
Speaker 14: widespread contagion across markets being making this a systemic event

973
00:48:44,880 --> 00:48:48,799
Speaker 14: is not happening. But the correlation shock is happening. And

974
00:48:48,840 --> 00:48:52,040
Speaker 14: that's really a debate on the inflation metrics right now

975
00:48:52,160 --> 00:48:54,040
Speaker 14: that you know, I guess we'll find out more tomorrow,

976
00:48:54,080 --> 00:48:56,520
Speaker 14: but you know, with CPI, but that's going to be

977
00:48:56,560 --> 00:48:57,000
Speaker 14: the issue.

978
00:48:57,040 --> 00:48:58,600
Speaker 7: Well, Jim, talk to us a lot a little bit.

979
00:48:58,640 --> 00:49:00,640
Speaker 5: You had mentioned previously about the correlation and being stocks

980
00:49:00,640 --> 00:49:03,440
Speaker 5: and bonds prices up, you know, I mean, sorry, prices up,

981
00:49:03,480 --> 00:49:05,160
Speaker 5: prices down, and they go together. It doesn't matter. So

982
00:49:05,440 --> 00:49:07,800
Speaker 5: how do you build balanced into portfolios? And what assets

983
00:49:07,840 --> 00:49:10,600
Speaker 5: what seaf haven assets I guess are most attractive to

984
00:49:10,640 --> 00:49:12,480
Speaker 5: you in this environment. And by the way, we all

985
00:49:12,520 --> 00:49:14,600
Speaker 5: know what a few of them are. We're talking about gold,

986
00:49:14,600 --> 00:49:17,279
Speaker 5: the Swiss frank but they're expensive. So you know, how

987
00:49:17,320 --> 00:49:22,760
Speaker 5: do smart investors' institutions really look to diversify in this environment?

988
00:49:22,880 --> 00:49:25,600
Speaker 14: Yeah, so you said the magic word diversification, right, So

989
00:49:26,040 --> 00:49:28,719
Speaker 14: a lot of the things that we're putting together in portfolios,

990
00:49:28,719 --> 00:49:30,600
Speaker 14: and the way that we went into this is we

991
00:49:30,719 --> 00:49:35,160
Speaker 14: had defense sector related assets invested in. So from the

992
00:49:35,160 --> 00:49:37,680
Speaker 14: equity markets, we tend to invest in baskets of equities

993
00:49:37,920 --> 00:49:41,000
Speaker 14: that will look at AI defense. Even some of the

994
00:49:41,040 --> 00:49:44,720
Speaker 14: financials have actually actually been pretty have actually been pretty attractive.

995
00:49:44,760 --> 00:49:48,040
Speaker 14: The broad broadening of the markets of cyclicals, small caps,

996
00:49:48,080 --> 00:49:50,960
Speaker 14: mid caps that had been doing well recently taking a

997
00:49:50,960 --> 00:49:52,319
Speaker 14: little bit of a shock, But we think it's a

998
00:49:52,320 --> 00:49:53,239
Speaker 14: buying opportunity.

999
00:49:54,480 --> 00:49:55,480
Speaker 4: That's the way that you do it.

1000
00:49:55,520 --> 00:49:59,480
Speaker 14: You don't really think about it as owning bonds versus stocks.

1001
00:49:59,480 --> 00:50:02,920
Speaker 14: You really think about it as diversifying your portfolio into

1002
00:50:03,040 --> 00:50:06,920
Speaker 14: high quality into defensives and in income related assets.

1003
00:50:07,040 --> 00:50:10,640
Speaker 2: Jim Karen with Morgan Stanley, and we continue all sorts

1004
00:50:10,640 --> 00:50:12,800
Speaker 2: of good people coming up. I believe that your Denny

1005
00:50:13,239 --> 00:50:18,000
Speaker 2: scheduled here on the equity markets. You mentioned tomorrow's report. Folks,

1006
00:50:18,000 --> 00:50:21,320
Speaker 2: it's not Jobs Day, it's not the Fed. But between

1007
00:50:21,360 --> 00:50:25,640
Speaker 2: three eleven and three thirteen we get a mountain of data.

1008
00:50:26,400 --> 00:50:29,960
Speaker 2: Is the guestimate bouncing your economics off the skills of

1009
00:50:30,040 --> 00:50:34,239
Speaker 2: Jim Karen, and that we have a new entrenched inflation.

1010
00:50:35,640 --> 00:50:38,520
Speaker 14: So inflation is going to be higher than what we

1011
00:50:38,600 --> 00:50:40,040
Speaker 14: thought maybe two weeks ago.

1012
00:50:40,320 --> 00:50:40,560
Speaker 2: Right.

1013
00:50:40,600 --> 00:50:42,680
Speaker 14: So when I look at the oil markets, and oil

1014
00:50:42,760 --> 00:50:44,600
Speaker 14: is going to be a big factor into this whole thing,

1015
00:50:45,120 --> 00:50:47,279
Speaker 14: I don't think that we're going to go back to

1016
00:50:47,320 --> 00:50:49,879
Speaker 14: the low prices in oil this year. There has been

1017
00:50:49,920 --> 00:50:52,160
Speaker 14: some demand destruction and it's going to take a while

1018
00:50:52,200 --> 00:50:53,560
Speaker 14: to get that back, and I think that's going to

1019
00:50:53,560 --> 00:50:55,799
Speaker 14: be all of twenty twenty six. It doesn't mean that

1020
00:50:55,840 --> 00:50:59,000
Speaker 14: oil stays up at these levels or near one hundred dollars.

1021
00:50:59,239 --> 00:51:00,920
Speaker 14: It just means that they can come down, but they

1022
00:51:01,000 --> 00:51:01,799
Speaker 14: might not go back down.

1023
00:51:01,840 --> 00:51:03,719
Speaker 2: But I want to give this this is too important.

1024
00:51:03,800 --> 00:51:06,279
Speaker 2: If we have this and if we have stagflation, just

1025
00:51:06,320 --> 00:51:11,960
Speaker 2: as one phrase, does the stag save the yield? I mean,

1026
00:51:12,000 --> 00:51:14,440
Speaker 2: does the stag push against the inflation?

1027
00:51:14,800 --> 00:51:18,799
Speaker 14: Okay, so the stagflation would be very interesting. Yes, it

1028
00:51:18,840 --> 00:51:21,520
Speaker 14: could lower yields, but it could also widen spreads, so

1029
00:51:21,560 --> 00:51:24,840
Speaker 14: that might not necessarily be so friendly for credit markets.

1030
00:51:25,160 --> 00:51:28,560
Speaker 2: See that's celtech physics. Well, I mean, you know only

1031
00:51:28,640 --> 00:51:29,600
Speaker 2: Karen can do that.

1032
00:51:29,960 --> 00:51:31,799
Speaker 5: Oh, Jim, I just got to ask you before before

1033
00:51:31,800 --> 00:51:34,040
Speaker 5: we run. I mean, like, credit spreads haven't barely they're

1034
00:51:34,080 --> 00:51:35,600
Speaker 5: not moving, right, I mean they haven't really you know,

1035
00:51:35,640 --> 00:51:38,480
Speaker 5: reflected fundamentals for the better part of forever. You know,

1036
00:51:38,600 --> 00:51:40,200
Speaker 5: what do you think it would take to get spreads

1037
00:51:40,239 --> 00:51:42,080
Speaker 5: to move? And do you think there is gap risk

1038
00:51:42,120 --> 00:51:43,719
Speaker 5: here to the market of them moving from sad I

1039
00:51:43,760 --> 00:51:46,680
Speaker 5: don't know, eighty BIPs to like one fifty overnight or something.

1040
00:51:46,719 --> 00:51:47,839
Speaker 7: I mean, what are your thoughts here?

1041
00:51:48,320 --> 00:51:51,600
Speaker 14: Yeah, so I think it would take actually a pretty

1042
00:51:51,640 --> 00:51:54,680
Speaker 14: large inflation shock. So that would be effectively oil prices

1043
00:51:54,680 --> 00:51:57,000
Speaker 14: staying at one hundred or above for an extended period

1044
00:51:57,040 --> 00:51:59,000
Speaker 14: of time. I think that's when you're going to start

1045
00:51:59,000 --> 00:52:00,960
Speaker 14: to see some real demand struction. You're going to start

1046
00:52:01,000 --> 00:52:04,800
Speaker 14: to move into that stagflationary environment, and that's valuation killer,

1047
00:52:04,920 --> 00:52:07,480
Speaker 14: and that's really where people start to talk about defaults

1048
00:52:07,480 --> 00:52:10,680
Speaker 14: and demand destruction, and that's when you get wider spreads,

1049
00:52:10,800 --> 00:52:12,240
Speaker 14: and that can actually hurt the markets.

1050
00:52:12,360 --> 00:52:14,560
Speaker 2: Jim, thank you so much for coming in. Really really

1051
00:52:14,880 --> 00:52:17,759
Speaker 2: appreciate it. Jim Carron, I kind of get mortgage Stanley.

1052
00:52:17,800 --> 00:52:22,600
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

1053
00:52:22,719 --> 00:52:27,000
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1054
00:52:27,120 --> 00:52:30,600
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1055
00:52:30,680 --> 00:52:34,719
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1056
00:52:34,760 --> 00:52:38,120
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1057
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