WEBVTT - Bloomberg Businessweek Weekend - May 6th, 2022 0:00:01.040 --> 0:00:05.440 This is Bloomberg Business Week inside from the reporters and 0:00:05.600 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.160 global business, finance and tech news as it happened. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messier and Bloomberg Quick Takes. Tim 0:00:16.800 --> 0:00:21.480 Stinovic on Bloomberg Radio. Hi, everyone, welcome to the weekend 0:00:21.600 --> 0:00:24.880 edition of Bloomberg Business Week. We've got a special program 0:00:25.000 --> 0:00:27.440 as we bring you highlights from our coverage of the 0:00:27.480 --> 0:00:30.600 Milk and into two global conference just held in Beverly Hills. 0:00:30.720 --> 0:00:34.520 There was the installment of the annual Convening of Global Leaders. 0:00:34.560 --> 0:00:37.760 Everyone was there, government officials, we had people from finance, health, 0:00:37.840 --> 0:00:41.479 academia and philanthropy, and we were there just ahead of 0:00:41.479 --> 0:00:44.880 the Federal Reserve's first fifty basis point interest rate hike 0:00:45.000 --> 0:00:46.920 since the year two thousand. Got to say the world 0:00:46.960 --> 0:00:48.559 was open, I mean it was packed. There were a 0:00:48.560 --> 0:00:52.680 few celebrities floating around everywhere at all. Right, that's for 0:00:52.840 --> 0:00:56.840 big broader topics that we got to rising rates, storing inflation, 0:00:57.080 --> 0:00:59.120 and the health of the U S. Consumer. They were 0:00:59.200 --> 0:01:01.960 among the big subjects that we talked about with the 0:01:02.000 --> 0:01:04.720 likes of former Bank of England governor Mark Carney, Low 0:01:04.800 --> 0:01:09.319 CEO Marvin Ellison, and Stitch Fixed CEO Elizabeth Spalding, among 0:01:09.600 --> 0:01:12.120 many more. All of that to come. We begin, though 0:01:12.160 --> 0:01:15.240 with Bloomberg News editor at Large and Bloomberg New Economy 0:01:15.319 --> 0:01:18.520 editorial director Eric Shatzker, always talking to the heavy weights 0:01:18.520 --> 0:01:20.720 when it comes to the world of finance, and he 0:01:20.800 --> 0:01:23.480 joined us Fresh often in depth discussion with Apolo co 0:01:23.600 --> 0:01:26.880 founder and CEO Mark Rowan. The thing that makes Apollo interesting, 0:01:26.920 --> 0:01:31.480 different from Blackstone, different from Carlisle, different from KKR pure firms, 0:01:31.520 --> 0:01:35.440 if you like, is that the overwhelming percentage of its 0:01:35.440 --> 0:01:38.880 assets is in fixed income and not just fixed income. 0:01:38.920 --> 0:01:41.959 You think fixed income, you think bonds, you think loans, 0:01:42.560 --> 0:01:46.320 publicly traded loans. No, what they do is what you 0:01:46.360 --> 0:01:48.600 know we call private credit. In fact, they have what 0:01:48.640 --> 0:01:50.600 they call a yield business that has three and sixty 0:01:50.640 --> 0:01:52.800 billion dollars of private credit and it and as a 0:01:52.840 --> 0:01:55.920 result of that, they have a slightly different perspective on 0:01:56.000 --> 0:01:59.040 the world. They don't get stressed out by days like 0:01:59.080 --> 0:02:01.040 the one we've seen. Try inspired today in the stock 0:02:01.080 --> 0:02:03.360 market where the Dow is down five and then it's 0:02:03.440 --> 0:02:06.640 up fifty. They can sleep through that stuff quite easily 0:02:06.720 --> 0:02:10.600 because they for the most part, don't manage daily liquidity vehicles. 0:02:11.400 --> 0:02:16.400 And his view is that, um, the correction is not 0:02:16.520 --> 0:02:21.079 over the you know, he sees what everybody sees, right. 0:02:21.120 --> 0:02:24.720 He's concerned about inflation, is concerned about rates. UM. If 0:02:24.760 --> 0:02:29.200 you were in a again, a daily liquidity vehicle, or 0:02:29.240 --> 0:02:32.040 an individual bond or an individual loan, you'd be more 0:02:32.040 --> 0:02:35.520 concerned about these things, um, because you have to take 0:02:35.560 --> 0:02:38.880 that daily hit if the market is weakening. If you're 0:02:38.919 --> 0:02:42.440 in these vehicles, the funds, for example, I don't have 0:02:42.480 --> 0:02:44.880 the vehicle. Sounds like it's a car. It's a fund, right, 0:02:45.840 --> 0:02:50.760 or a product um where you can't cash out immediately. 0:02:51.120 --> 0:02:53.000 It's actually much easier to sleep at night, both the 0:02:53.040 --> 0:02:56.160 managers and for the clients because you can ride out 0:02:56.200 --> 0:02:58.720 these storms. Right. This is a storm of volatility that 0:02:58.720 --> 0:03:01.760 we're living through in the market. And it's one of 0:03:01.800 --> 0:03:04.520 the reasons why the mood here at Milken isn't darker 0:03:04.560 --> 0:03:07.080 because most of the people here come out of the 0:03:07.120 --> 0:03:11.760 Mike Milkin, Drexel, Burnham Lambert legacy, and they are managers 0:03:11.760 --> 0:03:14.600 of private equity, private credit. Those are the people who 0:03:14.680 --> 0:03:16.440 can for the time being, we see it with the 0:03:16.440 --> 0:03:18.720 guests that we talk to in private equity. It's just 0:03:18.760 --> 0:03:21.280 a very different fel They're not stressed. They aren't stressed 0:03:21.760 --> 0:03:24.040 as much. Eric. One of the most fascinating parts about 0:03:24.240 --> 0:03:26.800 the conversation that you had earlier with Mark Rowan was 0:03:26.840 --> 0:03:28.799 what he said happens over the next five years when 0:03:28.800 --> 0:03:31.440 it comes to retail investors and the idea that he 0:03:31.520 --> 0:03:33.440 thinks that within the next five years or five years 0:03:33.440 --> 0:03:38.320 from now, we will see retail investor portfolios made up 0:03:38.360 --> 0:03:41.680 of alternative investments because and a lot of this will 0:03:41.720 --> 0:03:46.800 be fixed income replacement. These vehicles that I've been talking 0:03:46.800 --> 0:03:51.360 about because um their belief Well, first of all, they're 0:03:51.400 --> 0:03:54.920 designing products that will appeal to the retail investor. Right now, 0:03:54.920 --> 0:03:58.800 the retail investor only has access to products that resemble 0:03:58.960 --> 0:04:02.200 institutional products, and the retail investors needs are different from 0:04:02.240 --> 0:04:05.800 the institutional investors needs. So first it's about product development, 0:04:05.840 --> 0:04:09.880 but secondly, it's about the retail investor, particularly at a 0:04:09.920 --> 0:04:12.680 time like this, waking up to the reality that there's 0:04:12.720 --> 0:04:16.800 no point paying for public market liquidity if you don't 0:04:16.839 --> 0:04:19.719 need public market liquidity. This is the same realization that 0:04:19.800 --> 0:04:24.440 institutional investors like pension funds and endowments came to over 0:04:24.480 --> 0:04:26.920 the past thirty years, led by the now late David 0:04:26.960 --> 0:04:30.080 Swenson from Yale, who pioneered the endowment model. If you 0:04:30.160 --> 0:04:33.000 don't need the money, now, why put it into a 0:04:33.120 --> 0:04:36.479 vehicle that gives you access to liquidity? Now it doesn't 0:04:36.480 --> 0:04:38.440 make sense. You're paying for something you don't need. It 0:04:38.560 --> 0:04:42.520 is the evolution of a theme. It's not like a 0:04:42.640 --> 0:04:45.480 switch flipped and all of a sudden we went from 0:04:45.480 --> 0:04:48.000 a world of public markets to a world of private markets. 0:04:48.040 --> 0:04:51.080 As I say, this has been slowly building. It starts 0:04:51.080 --> 0:04:55.160 with the most sophisticated participants, the Yale endowments, for example, 0:04:55.240 --> 0:04:59.840 the Harvard Endowments, smart sovereign wealth funds like Norwegian Sovereign 0:04:59.839 --> 0:05:02.640 well Fun, the Singaporeans for example. They figured this stuff 0:05:02.640 --> 0:05:05.440 out a long time ago, and now the wisdom of 0:05:05.480 --> 0:05:10.760 that choice is becoming apparent to other people and this 0:05:10.839 --> 0:05:14.000 becomes more urgent for them. If we're living through a 0:05:14.040 --> 0:05:19.080 time of high inflation, rising rates, declining equity valuations, widening 0:05:19.080 --> 0:05:23.440 credit spreads, where you're you're losing money, uh due to 0:05:23.480 --> 0:05:26.120 the fact that you're in a public market. I want 0:05:26.120 --> 0:05:30.960 to get to Citadel Security, Ken Griffin Big takeaways from 0:05:31.000 --> 0:05:33.160 your discussion. I must confess part of it happened while 0:05:33.200 --> 0:05:34.680 we were on Bloomberg Radio, so I didn't get to 0:05:34.680 --> 0:05:38.200 tune in. Well, I would say this. Ken also says that, well, 0:05:38.839 --> 0:05:41.160 the sort of the macro headline out of the conversation 0:05:41.279 --> 0:05:45.600 is that this is the most uncertain period since two 0:05:47.040 --> 0:05:51.320 and uncertainty doesn't necessarily mean things have a leg to 0:05:51.320 --> 0:05:55.840 go lower, but it does mean more volatility. Um, specifically 0:05:55.839 --> 0:05:58.200 as it concerns Citadel. He said, these are the toughest 0:05:58.240 --> 0:06:00.800 four months since two thousand eight. He said, in fact, 0:06:00.880 --> 0:06:02.240 when we got off the panel and he told me 0:06:02.279 --> 0:06:06.920 he cracked three teeth wo stress, Yes, because of the 0:06:06.960 --> 0:06:13.640 stress um and uh like what an anecdote, right, Um, 0:06:13.760 --> 0:06:16.839 there isn't a nut. He's he's waking up to the 0:06:16.880 --> 0:06:19.719 reality of crypto. For a long time, Ken was a 0:06:19.760 --> 0:06:24.440 skeptic and he's still skeptical on the usefulness of crypto 0:06:24.520 --> 0:06:26.440 and even blockchain. Is it going to matter? Is it 0:06:26.440 --> 0:06:29.440 going to change the world? Um, But they're building a business. 0:06:29.480 --> 0:06:32.520 They're building a big market, making an exchange business around crypto. 0:06:32.839 --> 0:06:35.840 Fascinating conversation as always, well, both of those conversations. Check 0:06:35.880 --> 0:06:37.480 him out on the Bloomberg Termol and of course our 0:06:37.560 --> 0:06:39.480 Eric Shatsker here of bloom Bank. If you're having me, 0:06:39.640 --> 0:06:42.240 that was Eric Shatsker. He's Bloomberg News Editor at Large 0:06:42.240 --> 0:06:45.280 and Bloomberg New Economy Editorial Director. Check out his full 0:06:45.320 --> 0:06:48.599 interviews with Apollo's Mark Rowan and Citadel's Ken Griffin. You 0:06:48.640 --> 0:06:51.000 can do that at Bloomberg dot com. Coming up next, 0:06:51.120 --> 0:06:54.640 much more from Milk in two, including a four dred 0:06:54.720 --> 0:06:57.360 million dollar question for the team over at Goldman Sachs 0:06:57.440 --> 0:07:01.600 Asset Management. You're listening to Bloomberg Business Week. This is Bloomberg. 0:07:07.400 --> 0:07:11.360 This is Bloomberg Business Week with Carol Messer and Bloomberg 0:07:11.400 --> 0:07:16.400 Quick Takes. Tim Stinovik from Bloomberg Radio. Our latest trip 0:07:16.440 --> 0:07:18.800 to the West Coast where the Milk and Institute Global Conference. 0:07:18.920 --> 0:07:21.000 It gave us a chance to catch up with company 0:07:21.080 --> 0:07:23.840 leaders and policymakers alike. It also allowed us to take 0:07:23.880 --> 0:07:27.280 the pulse of individual investors. Katie Coach is the Chief 0:07:27.320 --> 0:07:30.720 Investment Officer of Public Equity at Goldman Sachs Asset Management. 0:07:31.000 --> 0:07:34.160 Her group oversees some four billion dollars in assets, and 0:07:34.240 --> 0:07:36.080 she's trying to get her clients used to the level 0:07:36.120 --> 0:07:39.080 of volatility not seen since the Great Recession. We talked 0:07:39.080 --> 0:07:41.680 with her just ahead of the FED decision. The public 0:07:41.720 --> 0:07:44.080 markets have already priced some of this in. So the 0:07:44.120 --> 0:07:47.080 fact that markets are down already for the year, and 0:07:47.160 --> 0:07:50.760 tech assets are down and UM some of the growthiest 0:07:50.760 --> 0:07:54.520 parts attack down fifty UM actually suggests to me that 0:07:54.600 --> 0:07:57.080 while it is a tough operated environment, some of it 0:07:57.120 --> 0:07:59.000 has been priced in. That's the first thing I would 0:07:59.000 --> 0:08:01.040 say in just a quick second thing is that I 0:08:01.080 --> 0:08:04.480 think people have to moderate their return expectations. And that's 0:08:04.480 --> 0:08:06.360 something I really worry about for a lot of our 0:08:06.400 --> 0:08:09.280 clients because most of what we're doing at Goldman Successet 0:08:09.320 --> 0:08:13.040 Management is help people retire with security and dignity. It's 0:08:13.080 --> 0:08:16.560 also that capital preservation a percent and especially if you're 0:08:16.560 --> 0:08:18.400 on a fixed income, and I just think it's gonna 0:08:18.480 --> 0:08:23.280 be the sixty portfolio that returned eight percent real returns 0:08:23.320 --> 0:08:26.760 in the last cycle has returned negative eight percent this year. 0:08:27.120 --> 0:08:29.040 I don't think that we're going to have a lost 0:08:29.080 --> 0:08:31.200 decade like the seventies, but I think return is going 0:08:31.240 --> 0:08:34.200 to be harder to come by, and we're working really 0:08:34.200 --> 0:08:36.320 hard to find those opportunities for clients where we can 0:08:36.320 --> 0:08:39.240 get some return. What's more realistic returns at this because 0:08:39.240 --> 0:08:41.640 I do think investors have gotten spoiled a bit. Well, 0:08:41.640 --> 0:08:45.040 the hundred year return is for that portfolio is about 0:08:45.080 --> 0:08:48.760 five So I think that's real, right, five percent real returns, 0:08:48.760 --> 0:08:52.720 And I think that's a reasonable expectation. Hopefully, you know, 0:08:52.760 --> 0:08:54.400 we can get to over the next decade. But it's 0:08:54.400 --> 0:08:56.040 gonna take a it's gonna take a lot of hard 0:08:56.080 --> 0:08:58.680 work and looking in new places too. That's a that's 0:08:58.679 --> 0:09:00.560 really moderating from what we saw just in the s 0:09:01.400 --> 0:09:03.400 the last three years. Yeah, well, it's a little bit 0:09:03.400 --> 0:09:07.400 harder to generate returns when capital costs something. Inflation is 0:09:07.440 --> 0:09:13.000 back and investors are wanna like have and and profitabilities moderating, 0:09:13.000 --> 0:09:15.439 and investors are not willing to buy growth at any price. 0:09:15.480 --> 0:09:17.640 It's it's it's a tougher environment. So where are we 0:09:17.679 --> 0:09:19.560 in the cycle? When when would we see a return 0:09:19.600 --> 0:09:23.319 to what we saw over the last you know, fifteen years. 0:09:23.640 --> 0:09:25.520 I think it's going to take a while for us 0:09:25.559 --> 0:09:28.280 to to work ourselves out of this. I will say 0:09:28.320 --> 0:09:30.360 that you know, just most of what we do in 0:09:30.400 --> 0:09:32.439 our business as we look at the world bottom up 0:09:32.440 --> 0:09:35.640 for opportunities and I want to acknowledge my bias and 0:09:35.679 --> 0:09:37.520 saying this because I run an active business. But if 0:09:37.520 --> 0:09:40.480 you have a more difficult operating backdrop and capital is 0:09:40.520 --> 0:09:43.040 not free as an example, actually you should get a 0:09:43.080 --> 0:09:45.880 lot of differentiated returns at the company levels and picking 0:09:46.160 --> 0:09:49.080 sectors and spots. So I'll just end by saying, you know, 0:09:49.280 --> 0:09:51.439 people are throwing in the towel on growth. I think 0:09:51.480 --> 0:09:53.760 this would be a very inopportune moment, and we're not 0:09:53.840 --> 0:09:55.840 doing that for our clients to give up on growth 0:09:56.040 --> 0:09:58.719 if growth is scarce, which we are probably headed into 0:09:58.840 --> 0:10:02.320 environment where that's true, it will eventually rerate and you 0:10:02.360 --> 0:10:05.120 can buy some amazing growth opportunities in the tech space 0:10:05.400 --> 0:10:08.040 at actually valuations that are two thirds cheaper than they 0:10:08.040 --> 0:10:11.360 were six months ago. But in software in particular. Um So, 0:10:11.480 --> 0:10:14.320 there's a very famous quote from Robert Smith. He says 0:10:14.360 --> 0:10:17.720 software is better than first lean debt um, which meaning 0:10:17.760 --> 0:10:20.480 that these these this software is so central to the 0:10:20.520 --> 0:10:24.079 running of a business that these management teams are going 0:10:24.120 --> 0:10:27.400 to absolutely continue to pay that that software build, maybe 0:10:27.400 --> 0:10:29.600 even before the means. It's a it's a great phase. 0:10:29.920 --> 0:10:32.520 When I we meet lots of management companies across the 0:10:32.600 --> 0:10:35.000 sorry management teams and CEOs across the world. I have 0:10:35.080 --> 0:10:36.760 yet to meet one that says, you know what, when 0:10:36.760 --> 0:10:39.600 this environment becomes difficult, I'm cutting my tech bill. I 0:10:39.600 --> 0:10:41.360 think they'll cut back on T and A, but I 0:10:41.400 --> 0:10:43.679 don't think they're gonna stop digitalizing their business if they 0:10:43.679 --> 0:10:45.199 want to win in their categories. So I like to 0:10:45.240 --> 0:10:47.480 own things for my clients that my other CEOs are 0:10:47.520 --> 0:10:52.640 buying and software, digitalization of businesses, working, moving workloads to 0:10:52.679 --> 0:10:56.040 the cloud. Obviously cyber incredible space to be because the 0:10:56.080 --> 0:10:59.120 current geopolitical backdrop is creating big tail winds around that. 0:10:59.160 --> 0:11:01.240 We're talking with Katie Cotch. She's the CEO of Public 0:11:01.240 --> 0:11:03.480 Equity of our Goldman Successet Management. It's so funny that 0:11:03.520 --> 0:11:05.440 you say that about technology. I did a panel here 0:11:05.480 --> 0:11:07.800 at milk and yesterday about retails new reality. So it 0:11:07.840 --> 0:11:10.520 was the CEO of Lows, it was the CEO of Kroger, 0:11:10.640 --> 0:11:13.319 the CEO of stitch Fits. Authentic brands keep saying wrong, 0:11:13.360 --> 0:11:17.360 authentic brands, thank you. But what's interesting is the theme 0:11:17.520 --> 0:11:19.720 was technology incluse of it and we saw it even 0:11:19.760 --> 0:11:22.320 increasingly so right during the pandemic. And they all said, 0:11:22.360 --> 0:11:25.240 like that's top of mind for you, Like nobody right, 0:11:25.320 --> 0:11:27.120 like they've got to be there and they're not like 0:11:27.400 --> 0:11:31.600 first companies they check enabled. Because what did they say 0:11:31.600 --> 0:11:34.240 about the consumer where they worried about consumers? I have 0:11:34.320 --> 0:11:36.760 to say there was like out of the gate cautious optimism. 0:11:37.080 --> 0:11:38.560 That was like kind of the theme. Um, they are 0:11:38.559 --> 0:11:42.160 still seeing consumers spend in terms of authentic brands, said, 0:11:42.240 --> 0:11:44.839 you know, consumers are buying a larger ticket, but they're 0:11:44.840 --> 0:11:47.319 spending less time on platforms and they're buying less stuff. 0:11:47.320 --> 0:11:50.839 So there may be spending on a fewer items and stuff. Um, 0:11:51.240 --> 0:11:54.080 but Roger still seeing people eat at home and buy 0:11:54.120 --> 0:11:56.760 food and all that stuff, and and Lows is still 0:11:56.800 --> 0:11:59.120 busy in terms of the home improvement market. But I 0:11:59.160 --> 0:12:01.440 do felt like they're is like everybody's sitting in a 0:12:01.480 --> 0:12:03.760 little bit on the you know. I mean I think 0:12:03.760 --> 0:12:05.719 that's the I think that's the right takeaway from that. 0:12:05.760 --> 0:12:07.839 I mean, the right now data on the consumer is 0:12:07.920 --> 0:12:10.679 very strong. I run in addition to a fundamental business, 0:12:10.720 --> 0:12:13.080 a quant business, and we're ingesting that credit card data 0:12:13.160 --> 0:12:15.559 all day long. And the right now data suggests that 0:12:15.600 --> 0:12:19.079 consumers strong spent has shift to experience over things, which 0:12:19.080 --> 0:12:21.560 you alluded to. Carol that's for sure. Travel right now 0:12:21.640 --> 0:12:24.640 strong be like concerts as and experience. But I have 0:12:24.720 --> 0:12:27.000 to say at the margin, I'm a little bit more 0:12:27.040 --> 0:12:29.480 concerned about the next six and twelve months for the consumer. 0:12:29.640 --> 0:12:31.320 I don't know if you guys filled up your gas tank. 0:12:31.360 --> 0:12:33.000 Well you've been out here and just talking about it 0:12:33.160 --> 0:12:35.439 six dollars ago. And and actually you said the low 0:12:35.480 --> 0:12:37.080 CEO was on that. We met with the low CEO 0:12:37.160 --> 0:12:39.840 Home Depot CEO. They said, once gas gets, you know, 0:12:40.120 --> 0:12:43.400 meaningfully over four dollars, which six is, it really starts 0:12:43.400 --> 0:12:45.680 to to hit their their core consumer. I love that 0:12:45.720 --> 0:12:47.240 you said who you talk to? I mean, who do 0:12:47.280 --> 0:12:49.480 you talk to? What metrics are you following? That gives 0:12:49.520 --> 0:12:51.720 you some clues. I mean, obviously there are a lot 0:12:51.760 --> 0:12:53.320 of metrics we all follow, but I do feel like 0:12:53.360 --> 0:12:55.920 it's the nuances and data that will tell us be 0:12:56.040 --> 0:12:57.960 much richer. I think you have to look at a 0:12:57.960 --> 0:13:00.920 cross sections. So for example, you know Visa MasterCard had 0:13:01.040 --> 0:13:04.560 great earnings last week. You know these in particular revenues 0:13:04.600 --> 0:13:06.920 up five percent, as I said, showing consumer very strong. 0:13:07.240 --> 0:13:10.200 But if you look at PayPal um, which is actually 0:13:10.200 --> 0:13:13.200 more e commerce space and generally targets a lower end consumer, 0:13:13.360 --> 0:13:15.600 it wasn't as good, and so I think you do 0:13:15.679 --> 0:13:17.160 have to be nuanced about it. You have to be 0:13:17.200 --> 0:13:19.120 looking at all a cross sections of the consumer, and 0:13:19.400 --> 0:13:21.960 I think we have to be prepared for some weakness there. 0:13:21.960 --> 0:13:25.280 And so pulling that together from yeah, I mean we're 0:13:25.280 --> 0:13:27.800 gonna I mean I want, um, I want people to 0:13:27.840 --> 0:13:30.160 stay invested because that's the best thing to do for 0:13:30.240 --> 0:13:33.120 building wealth long term. UM. And so I don't want 0:13:33.120 --> 0:13:35.959 to do any fearmongering. But of course, essentially this country 0:13:36.040 --> 0:13:38.800 is going to have a recession. The world, it's cyclical, 0:13:38.840 --> 0:13:40.840 and I hope it's a shallow one and I hope 0:13:40.840 --> 0:13:43.120 the impact on humans is very low, and I hope 0:13:43.120 --> 0:13:45.760 people stay invested through it because it's really difficult to time. 0:13:45.800 --> 0:13:49.240 And actually historically markets have rallied very aggressively once we 0:13:49.320 --> 0:13:51.800 realized that we were in the in the early innings 0:13:51.840 --> 0:13:54.320 of a of a recession. So let's you know, stay 0:13:54.320 --> 0:13:56.600 calm and balanced about that and then own assets that 0:13:56.600 --> 0:13:58.760 can perform. And I would just end by saying, you know, 0:13:58.760 --> 0:14:00.959 what are the consumer things that can perform? I already 0:14:01.000 --> 0:14:04.640 said concerts, that's an affordable experience. I would say beauty, um, 0:14:05.160 --> 0:14:07.120 you'll appreciate this, Carol, I had this. This s much 0:14:07.120 --> 0:14:09.840 a ton of makeup, because you look good, even for 0:14:09.880 --> 0:14:14.080 a lady on radio. You're looking amazing. But like I 0:14:14.200 --> 0:14:16.600 got my hair cut two weekends ago, and I asked 0:14:16.600 --> 0:14:19.200 my hairdresser this question, how do you perform, you know, 0:14:19.280 --> 0:14:23.280 through recessions? And she said, never, never went negative in 0:14:23.280 --> 0:14:25.440 two thousand and eight. I mean, that's that's an incredible business. 0:14:25.520 --> 0:14:27.560 We we don't, we don't, we can't. We can't invest 0:14:27.600 --> 0:14:30.280 in my hairdresser as amazing as she is. Shout out 0:14:30.320 --> 0:14:33.800 to sheer love and Truthsburry in New Jersey. Um, but 0:14:33.800 --> 0:14:36.000 but actually, alta beauty is something that we own. So 0:14:36.000 --> 0:14:37.640 we're gonna wear a lipstick in a recession. I mean, 0:14:37.680 --> 0:14:40.960 I'm not trying to be flipping it back. Yeah, and 0:14:40.960 --> 0:14:42.960 that stuff will do that. That stuff can do well 0:14:43.000 --> 0:14:46.400 against even a tougher economic backdrop. That was Katie Cotch. 0:14:46.600 --> 0:14:49.160 She's c I O of Public Equity at Goldman Sachs 0:14:49.240 --> 0:14:52.120 Asset Management. Still ahead on Bloomberg Business Week, the former 0:14:52.120 --> 0:14:54.840 head of the Bank of England says central banks can 0:14:54.880 --> 0:14:57.800 tame inflation. The question is do they have the will 0:14:58.080 --> 0:15:00.520 Brookfield Vice chair Mark Arney breaks it down on the 0:15:00.560 --> 0:15:07.200 other side. This is Bloomberg Broadcasting from the financial capital 0:15:07.200 --> 0:15:10.880 of the World, Bloomberg eleven Rio in New York to Washington, 0:15:10.920 --> 0:15:14.840 d C. Bloomberg to Boston, Bloomberg one O six one 0:15:14.960 --> 0:15:18.240 to San Francisco, Bloomberg nine six to the country Sirius 0:15:18.400 --> 0:15:21.440 XM number one ninety and around the globe the Bloomberg 0:15:21.440 --> 0:15:25.800 Business and Bloomberg Radio dot Com. This is Bloomberg Business 0:15:25.880 --> 0:15:29.480 Week with Carol Matter and Bloomberg Quick Takes Tim Stenovan 0:15:29.800 --> 0:15:33.320 on Bloomberg Radio. For the first time since two thousand, 0:15:33.400 --> 0:15:35.960 we saw the US Federal Reserve jack up interest rates 0:15:36.000 --> 0:15:38.960 by fifty basis points, and similar hikes could be in 0:15:39.000 --> 0:15:41.880 the offing if inflation doesn't taper off soon. We were 0:15:41.920 --> 0:15:44.000 at the milk In Institute Global Conference just ahead of 0:15:44.040 --> 0:15:46.280 the f O m c's announcement, and we asked Brookfield 0:15:46.280 --> 0:15:48.760 Asset Management Vice chair and former Bank of England Governor 0:15:48.800 --> 0:15:51.800 Mark Karney if rising prices should be more than a 0:15:51.840 --> 0:15:55.400 short term concern for policymakers. Central banks ultimately can get 0:15:55.440 --> 0:15:58.600 on top of inflation if they want to. Now they're 0:15:58.680 --> 0:16:00.360 behind the curve. I think we all wreck guys at 0:16:00.400 --> 0:16:02.480 all the central banks, in different ways of saying it, 0:16:02.560 --> 0:16:05.080 are admitting that they would prefer to have been in 0:16:05.120 --> 0:16:07.960 that position that end up in a deflationary spiral because 0:16:08.000 --> 0:16:09.920 of COVID. So we are where we are, the waters 0:16:10.000 --> 0:16:12.280 under the bridge. They've got to catch up. Um Now, 0:16:12.400 --> 0:16:15.800 they have to have the determination to get inflation back 0:16:15.800 --> 0:16:18.880 to those targets somewhere around two percent over the course 0:16:18.920 --> 0:16:21.120 of the next couple of years. The other half of 0:16:21.160 --> 0:16:23.720 your question, so there, But the importance of your question, 0:16:23.720 --> 0:16:29.240 Tim is there are some longer term forces that are inflationary. 0:16:29.360 --> 0:16:33.400 So this element of whether you call it deglobalization, globalization, 0:16:33.520 --> 0:16:37.600 fragmentation of global economy, that's gonna add costs. Whether you 0:16:37.680 --> 0:16:40.240 look at elements of the energy transition, not just the 0:16:40.240 --> 0:16:42.760 short term energy crisis, but the restructuring of a lot 0:16:42.800 --> 0:16:45.080 of industries because of that, that's gonna add costs. Where 0:16:45.120 --> 0:16:48.440 you look at government spending because of additional for spending 0:16:48.440 --> 0:16:50.720 on defense or healthcare, that adds costs. So all of 0:16:50.720 --> 0:16:53.120 those things add costs. You need to react to those 0:16:53.320 --> 0:16:55.640 and by the way, you need you know, better policy 0:16:55.920 --> 0:16:58.720 um on the fiscal side, on the climate policy side 0:16:58.920 --> 0:17:02.640 to help smooth that um. So look, we can get ultimately, 0:17:02.800 --> 0:17:04.919 inflation is a choice. We can get the level of 0:17:04.960 --> 0:17:09.120 inflation that we deserve, uh, when central banks do their job, 0:17:09.359 --> 0:17:12.639 But they are leaning against some pretty big forces that 0:17:12.640 --> 0:17:14.480 have really built up in the last couple of years. Mark, 0:17:14.480 --> 0:17:16.359 are you concerned about, especially when it comes to climate 0:17:16.359 --> 0:17:18.960 initiatives and you know, promises in goals that have been 0:17:19.000 --> 0:17:21.840 laid out, that if the economy seems to get into 0:17:21.880 --> 0:17:25.360 a trickier state and a tougher situation, that those positions 0:17:25.359 --> 0:17:28.080 and those policies are pushed aside. Again, well, Carol, I 0:17:28.080 --> 0:17:31.120 think we got again distinguished between the short and the 0:17:31.160 --> 0:17:33.879 medium term. Now, on the short term side, there's a 0:17:33.920 --> 0:17:37.800 scramble for energy, particularly in Europe. Many of the sources 0:17:37.840 --> 0:17:39.800 and and in the emerging world as well, and many 0:17:39.800 --> 0:17:42.360 of the sources are higher emission emitting sources, in some 0:17:42.400 --> 0:17:44.399 cases coal, and that's going to use up more of 0:17:44.400 --> 0:17:46.320 our carbon budget in the short term. So that's you know, 0:17:46.400 --> 0:17:50.600 unequivocally bad news for the climate transition. However, what this 0:17:50.760 --> 0:17:54.080 crisis is doing is concentrating the minds of companies of 0:17:54.160 --> 0:17:57.960 countries to say, um, well, maybe the system we have 0:17:58.119 --> 0:18:01.720 right now isn't that great it's highly volatile, it's expensive, 0:18:01.800 --> 0:18:04.640 it has issues in terms of reliability, um, and it's 0:18:04.680 --> 0:18:07.679 destroying the climate at the same time. And any major 0:18:07.720 --> 0:18:11.680 decision on climate takes about five years to have an impact. 0:18:12.040 --> 0:18:15.119 So whether you're putting in a new L and G train, um, 0:18:15.160 --> 0:18:18.320 whether you're constructing large gale off store wind, when you're 0:18:18.359 --> 0:18:20.720 doing something the nuclear side or hydrogen, it takes that 0:18:20.800 --> 0:18:23.359 amount of time. So governments and we're seeing this, if 0:18:23.400 --> 0:18:26.520 I may, just in Europe, we're seeing them take a 0:18:26.560 --> 0:18:28.520 step back and say, Okay, where do we want to be? 0:18:30.320 --> 0:18:33.320 And their answer thus far has been we're gonna triple hydrogen, 0:18:33.440 --> 0:18:36.040 We're gonna aggressively ramp up offshore wind, we're gonna ramp 0:18:36.160 --> 0:18:38.399 up solar, we're gonna move on storage. So the answers 0:18:38.440 --> 0:18:41.000 are all falling on the clean energy side. That's good news. 0:18:41.040 --> 0:18:43.040 That helps balance the bad news in the short term. Well, 0:18:43.040 --> 0:18:45.199 and I do think about in the pandemic right that 0:18:45.240 --> 0:18:47.760 we see, you know, the increasing in digitization, whether it 0:18:47.800 --> 0:18:50.040 was the embracing of e commerce or telemedicine, like so 0:18:50.080 --> 0:18:52.400 many things happen in a much shorter time frame. Will 0:18:52.440 --> 0:18:54.320 we see that it's that's like in terms of energy 0:18:54.359 --> 0:18:56.959 and the transition because of what's happening. Like Carl, it's 0:18:57.000 --> 0:18:59.440 a hugely important point. I agree absolutely with everything you said, 0:18:59.440 --> 0:19:03.360 because we did see that acceleration. It was forced, you know, necessity. 0:19:03.400 --> 0:19:05.760 It's out of necessity. Companies had to keep going. We 0:19:05.800 --> 0:19:08.480 saw the acceleration and there's no turning back from that. 0:19:08.680 --> 0:19:10.879 UM And actually it's not good for economy. We and 0:19:10.960 --> 0:19:13.439 for people's livelihoods right where they get better service and 0:19:13.600 --> 0:19:15.760 more flexibility and work. I see you can't work from home, 0:19:15.840 --> 0:19:20.240 but others can. UM seven months from home. Fantastic with 0:19:20.320 --> 0:19:24.239 your own Bloomberg perfect. But on the energy transition, we've 0:19:24.240 --> 0:19:26.960 aren't seen this acceleration. I gave you the numbers for Europe. Uh, 0:19:27.040 --> 0:19:30.560 we've seen a similar thing in the UK. The question though, is, 0:19:30.640 --> 0:19:32.720 and this is where the jury is still out. There 0:19:32.840 --> 0:19:34.879 is a knee because of Russia. We're not we we 0:19:34.920 --> 0:19:37.199 are you know, they don't deserve it. I mean that's 0:19:37.200 --> 0:19:40.199 an understatement, but we cannot rely on Russian hydrocarbons. We 0:19:40.240 --> 0:19:43.120 need to bring other hydrocarbons on stream, and the challenge 0:19:43.200 --> 0:19:44.520 is going to be to do that in a way 0:19:44.560 --> 0:19:46.600 that you know that those are going to transition off 0:19:46.600 --> 0:19:49.520 in time not to lock in a bunch of committed carbon. Well, look, 0:19:49.520 --> 0:19:51.360 we know the transition is going to be boppy, it's 0:19:51.359 --> 0:19:53.000 going to be a challenge, it's going to take years. 0:19:53.000 --> 0:19:56.240 When is it no longer a transition? When have we transitioned? Well, 0:19:56.240 --> 0:20:00.240