WEBVTT - Tariff Uncertainty Ahead of Fed Meeting 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:12.560 --> 0:00:13.240 This is the. 0:00:13.200 --> 0:00:17.440 Bloomberg Surveillance Podcast. Catch us live weekdays at seven am 0:00:17.480 --> 0:00:21.240 Eastern on Apple CarPlay or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App, Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:26.960 or watch us live on YouTube. 0:00:27.160 --> 0:00:30.120 Please to start with Mike Green with a good view 0:00:30.120 --> 0:00:33.440 of the FED in economics and the system. Sort of 0:00:33.440 --> 0:00:35.440 a total all in look at what we're doing. But 0:00:35.479 --> 0:00:39.480 today we have to celebrate that is simplify asset management. 0:00:40.200 --> 0:00:45.839 High yield ETF has five stars from morning Star and 0:00:45.880 --> 0:00:49.240 that's That's what's unusual in the category that Mike plays 0:00:49.280 --> 0:00:54.040 in the pond, six hundred and thirty one investments, and 0:00:54.320 --> 0:00:56.600 I don't think I've ever seen this in umpteen years. 0:00:56.840 --> 0:01:00.720 Your single percentile, what are you doing? I mean you're 0:01:00.760 --> 0:01:04.520 not offered death style, You're to date you're one percent 0:01:04.680 --> 0:01:08.319 tile a year ago twenty two percentile, which is phenomenal. 0:01:09.120 --> 0:01:12.240 What are you doing different than others in the highyeld sandbox? 0:01:13.040 --> 0:01:14.720 Well, first of all, thank you for saying that. It's 0:01:14.760 --> 0:01:17.440 really kind of you. We are doing a couple of 0:01:17.480 --> 0:01:19.880 different things. We've designed the product to take advantage of 0:01:19.920 --> 0:01:21.480 many of the theories you've heard me talk about the 0:01:21.520 --> 0:01:24.680 impact passive investing, the strategies that are out there. The 0:01:24.760 --> 0:01:27.240 product is the way we access the high yield market. 0:01:27.800 --> 0:01:31.279 We're using a synthetic exposure all sorts of credit funds 0:01:31.520 --> 0:01:34.839 short the HyG in order to amplify their single security picks. 0:01:35.680 --> 0:01:38.520 We relieve the balance sheet from the banks when they 0:01:38.600 --> 0:01:40.240 do that, so we get the securities lending fees, so 0:01:40.280 --> 0:01:42.119 we pick up out one hundred and fifty basis points 0:01:42.120 --> 0:01:43.920 of excess returns simply by doing that. 0:01:44.600 --> 0:01:45.399 We then apply an. 0:01:45.360 --> 0:01:48.080 Overlay that I've used for the past decade that is 0:01:48.160 --> 0:01:51.120 designed to smooth out credit hedges and just find designed 0:01:51.200 --> 0:01:54.280 to smooth out credit spread widening. The impact of that 0:01:54.400 --> 0:01:56.760 in this year has been fantastic. That's really what accounts 0:01:56.760 --> 0:01:57.080 for our. 0:01:57.120 --> 0:01:58.760 Is it a one offer, is it something you can 0:01:58.880 --> 0:02:01.800 persist over three, five or ten years? We've been using it. 0:02:01.960 --> 0:02:05.160 I've been using this strategy for about ten years. The 0:02:05.240 --> 0:02:07.840 Simplify strategy has been live now. It just hit his 0:02:07.880 --> 0:02:09.760 three year track record, which is what was required to 0:02:09.800 --> 0:02:12.800 get that five star rating, and it's managed to deliver 0:02:13.000 --> 0:02:18.040 in twelve separate tightening and widening cycles. Now for credit 0:02:18.160 --> 0:02:19.760 so we've actually been really fortunate. 0:02:20.040 --> 0:02:22.560 You come out of Teal Macro as well, you know, 0:02:22.680 --> 0:02:27.720 the manage the assets of Peter Teal a few years ago. 0:02:27.800 --> 0:02:29.760 What did you learn there? What did you learn from him? 0:02:30.120 --> 0:02:32.239 Well, you know, Peter is incredibly famous for asking the 0:02:32.320 --> 0:02:34.600 key question, what do you believe that nobody else believes? 0:02:34.680 --> 0:02:36.400 Or what you believe is true that nobody else believes 0:02:36.400 --> 0:02:37.600 is true? Or what do you believe is false that 0:02:37.639 --> 0:02:40.520 everybody else believes is false? And when I met Peter 0:02:40.680 --> 0:02:43.560 several years ago, I introduced him to my ideas around 0:02:43.560 --> 0:02:46.880 the impact of passive investing, and honestly, that I think 0:02:47.040 --> 0:02:49.919 was one of the most important things that he encountered 0:02:49.960 --> 0:02:52.200 his influence, I think the dynamics of how he's taken 0:02:52.240 --> 0:02:53.840 his company's public and how he's behaved. 0:02:54.160 --> 0:02:57.120 When you say passive, do you mean traditional the way 0:02:57.160 --> 0:03:01.160 that retail investors think about passive investing? Five hundred index 0:03:01.240 --> 0:03:04.079 funds two basis points to buy vo. 0:03:04.560 --> 0:03:07.800 Absolutely, So that's really what we're hitting on. Unfortunately, there 0:03:07.800 --> 0:03:10.480 are incredible flaws in the construction and understanding of this. 0:03:10.520 --> 0:03:12.840 I've actually spoken on Bloomberg with Arry Ritholtz about this 0:03:13.000 --> 0:03:16.600 dynamic passive is not passive. The actual definition of passive 0:03:16.720 --> 0:03:18.239 is you never trade. 0:03:18.000 --> 0:03:20.760 You always hold. That means it's impossible to get in. 0:03:21.160 --> 0:03:22.600 It means it's impossible to get out. 0:03:23.080 --> 0:03:26.240 In around twenty sixteen, a very smart individual, Loss Peterson 0:03:26.280 --> 0:03:28.600 at AQR wrote a paper called Sharpening the Arithmetic of 0:03:28.639 --> 0:03:32.280 Active Management, which you noted on index reconstitution that they 0:03:32.360 --> 0:03:35.400 had to trade and therefore that created an opportunity. My 0:03:35.600 --> 0:03:38.320 contribution was to recognize that every time you, as an 0:03:38.360 --> 0:03:40.920 individual investor contributing to your four oh one K, you 0:03:41.000 --> 0:03:43.520 are creating a trading environment. So it turns out that 0:03:43.600 --> 0:03:46.960 passive is not passive at all. It's a systematic, algorithmic 0:03:47.040 --> 0:03:50.600 strategy that simply says, if you give me cash, then buy. 0:03:50.800 --> 0:03:54.000 So translate this into what our listeners and viewers are 0:03:54.080 --> 0:03:57.520 living when they buy a passive fund on a zero 0:03:57.640 --> 0:04:00.720 to one hundred scale, how active is it? Is it 0:04:00.960 --> 0:04:02.040 ten percent active? 0:04:02.600 --> 0:04:04.680 Well, it really depends on what you defind. So the 0:04:04.720 --> 0:04:06.480 minute you're putting that money in, you are one hundred 0:04:06.520 --> 0:04:10.400 percent active. Once you've transitioned in short position, you become passive. 0:04:10.920 --> 0:04:13.280 That in and of itself, though, creates its own dynamics 0:04:13.320 --> 0:04:15.920 because you're not really passive in the classic sense. You 0:04:16.000 --> 0:04:19.240 are hoddling, right. It's the same phenomenon we saw on bitcoin. 0:04:19.360 --> 0:04:22.200 If you're not willing to sell, the next player has 0:04:22.240 --> 0:04:24.560 to pay a higher price. And because what we have 0:04:24.640 --> 0:04:27.880 seen is just an extraordinary inflow into passive strategies, which 0:04:27.960 --> 0:04:30.240 now represent about forty five percent of the market cap 0:04:30.320 --> 0:04:33.480 of the United States, we've actually just seen a continual 0:04:33.640 --> 0:04:37.080 upward pressure in valuation and prices that a lot of us, 0:04:37.160 --> 0:04:39.400 unfortunately think is the up and to the right phenomenon 0:04:39.480 --> 0:04:40.240 in markets. 0:04:40.040 --> 0:04:42.600 And your community across the nation. And this fad day, 0:04:42.600 --> 0:04:45.000 a lot of good voices coming up. Kati Kaminski will 0:04:45.000 --> 0:04:48.120 be with us the absolute best on trend investing of 0:04:48.200 --> 0:04:51.720 the shattering of trends. Right now, as Tim Stenovick mentioned 0:04:52.120 --> 0:04:54.480 that we've got a nice lift to the market off 0:04:54.560 --> 0:04:59.479 a bombshell Switzerland announcement, the United States and China will 0:04:59.560 --> 0:05:02.599 meet and they will speak. Futures up thirty seven points 0:05:02.680 --> 0:05:05.400 right now, we said good morning on YouTube, Tim. 0:05:05.600 --> 0:05:09.160 Does that mean we're all handling our retirement incorrectly? If 0:05:09.200 --> 0:05:13.720 we're thinking about funds that are based on age, based 0:05:13.760 --> 0:05:17.760 on retirement, these target date funds that are mostly passive Unfortunately. 0:05:17.880 --> 0:05:20.640 I think that's correct, and I think that the first 0:05:20.640 --> 0:05:22.920 of all, I want to be very clear, all and 0:05:23.320 --> 0:05:27.560 incorrectly are very broad and subjective terms. Right, it's a 0:05:27.640 --> 0:05:32.000 system that has worked extraordinarily well, but unfortunately has Ponzi characteristics. 0:05:32.480 --> 0:05:35.080 The new entrance into the system are inflating the wealth 0:05:35.160 --> 0:05:37.960 of the existing holders. What we don't know yet and 0:05:38.080 --> 0:05:40.640 unfortunately you mentioned when we're from Peter Teel, the trade 0:05:40.680 --> 0:05:44.159 that gave me notoriety was the Vollmageddon events the XIV. 0:05:45.200 --> 0:05:47.720 What became very clear there was that was a systematic 0:05:47.839 --> 0:05:51.000 algorithmic strategy that had become too large for the market. 0:05:51.520 --> 0:05:54.360 We're seeing similar characteristics in the broader market with the 0:05:54.520 --> 0:05:57.480 S and P today. The way that that manifested itself 0:05:57.560 --> 0:06:00.440 is when a significant outflow occurred a crash. 0:06:00.520 --> 0:06:03.080 Hey, where's the shadow right now? I mean those of 0:06:03.240 --> 0:06:06.200 us of a certain vintage understand we learned how to 0:06:06.279 --> 0:06:11.560 spell portfolio insurance in October of nineteen eighty seven. There 0:06:11.680 --> 0:06:15.320 was a leverage of LTCM in that where's the shadow 0:06:15.400 --> 0:06:18.080 in the system? Now? Is it just simply and I'm 0:06:18.120 --> 0:06:21.120 speaking folks on a physics basis, the mass of the 0:06:21.240 --> 0:06:23.320 passive market that has. 0:06:23.200 --> 0:06:25.160 A huge component to it. So when I did the 0:06:25.360 --> 0:06:30.680 XIV trade the Volmageddon event, I had done the analysis 0:06:30.720 --> 0:06:34.000 that basically suggested that the passive or systematic algorithmic strategies 0:06:34.040 --> 0:06:36.920 had risen to about seventy percent of the daily trading volume. 0:06:37.440 --> 0:06:39.680 If we look at the impact of passive today and 0:06:39.720 --> 0:06:42.240 the broader market, it's very, very similar. Once you factor 0:06:42.320 --> 0:06:44.640 in the way money the way market making is done, 0:06:44.720 --> 0:06:49.320 which is effectively index arbitrage. We're trying to make ETF's work, 0:06:49.360 --> 0:06:50.880 we're trying to keep prices tight. 0:06:51.400 --> 0:06:52.839 All of that trading is tied. 0:06:52.680 --> 0:06:56.040 Around many of the same phenomenon and so you know, unfortunately, 0:06:56.120 --> 0:06:58.160 my work suggests that we're getting closer and closer to 0:06:58.240 --> 0:07:01.280 a point at which it becomes an inevitability rather than 0:07:01.279 --> 0:07:01.880 a probability. 0:07:01.920 --> 0:07:03.920 And would tell I would say, is you set yourself 0:07:04.000 --> 0:07:06.880 up for not a three standard deviation but a four 0:07:06.960 --> 0:07:11.440 or six standard deviation, surprise, some form of shock, and 0:07:11.560 --> 0:07:13.800 that's a trigger. Is it as simple as that there 0:07:13.880 --> 0:07:18.360 will be a trigger point outside our beliefs and certitudes 0:07:18.800 --> 0:07:21.120 that will allow for the magnitude move. 0:07:21.400 --> 0:07:23.680 Will you hit on a really key phase a belief? 0:07:23.960 --> 0:07:26.000 And I would argue that a key component of what 0:07:26.080 --> 0:07:29.080 we're experiencing right now is that belief right. So the 0:07:29.200 --> 0:07:32.520 up unto the right phenomenon encourages people to put money 0:07:32.560 --> 0:07:35.080 in when it's down right now, they're putting it into 0:07:35.080 --> 0:07:38.160 the industries. We saw this very specifically in the events 0:07:38.240 --> 0:07:40.680 coming after April eighth, when the market made its recent low. 0:07:41.360 --> 0:07:43.680 A trigger was hit what's called a threshold trigger within 0:07:43.800 --> 0:07:46.240 many target date funds that forced them to rebalance. 0:07:46.640 --> 0:07:47.880 When they rebalance, what do they do? 0:07:48.040 --> 0:07:51.480 They have to sell bonds by equities, And unfortunately, when 0:07:51.560 --> 0:07:54.920 that coincides with Trump making a speech, President Trump making 0:07:54.960 --> 0:07:57.360 a speech saying it's a good time to buy, it's 0:07:57.400 --> 0:07:58.200 a force Listen. 0:07:58.240 --> 0:08:00.720 Would you get the surveillance cork and it at my mouth? 0:08:00.840 --> 0:08:06.480 So Tim save me. Well, I can't say enough, folks, 0:08:06.680 --> 0:08:09.640 how I agree with mister Green. I'm rebail. It's like 0:08:09.800 --> 0:08:11.160 deaf to go. Mike. 0:08:11.280 --> 0:08:15.080 You have just a fascinating post out from your newsletter 0:08:15.840 --> 0:08:18.640 earlier this week. It talks about President Trump in the 0:08:18.800 --> 0:08:22.480 historic context of other leaders in the past. Franklin Roosevelt. 0:08:23.640 --> 0:08:26.600 You even bring up Roman leaders in there, in the 0:08:26.680 --> 0:08:29.840 context of where we are as a country, where we 0:08:29.920 --> 0:08:32.480 are as perhaps an empire. Where do you see it? 0:08:32.559 --> 0:08:34.520 What do you see this moment? As well? 0:08:34.720 --> 0:08:36.199 I've been talking about this for a long time, and 0:08:36.280 --> 0:08:38.200 as you know, I think all American men think about 0:08:38.280 --> 0:08:39.680 Rome at least five times a day, so. 0:08:39.760 --> 0:08:40.199 We've heard that. 0:08:40.720 --> 0:08:44.559 There's nothing particularly unique about my insights there. Look, we 0:08:44.679 --> 0:08:47.160 often talk about the fall of the Roman Empire. We're 0:08:47.240 --> 0:08:49.840 not an empire. We're a republic, and where we seem 0:08:49.880 --> 0:08:52.240 to sit, unfortunately, is towards the fall of the republic, 0:08:52.559 --> 0:08:54.319 And if anyone really wants to dig into it, I 0:08:54.360 --> 0:08:56.679 would strongly encourage them to read Mike Duncan's book The 0:08:56.800 --> 0:08:59.640 Storm Before the Storm, which is about that transition period 0:09:00.400 --> 0:09:04.600 between the Roman Republic and the Roman Empire. I draw 0:09:04.640 --> 0:09:07.600 analogies to the idea that Trump could be viewed as 0:09:07.640 --> 0:09:10.400 a graucus, could be viewed as the Grocy Brothers, etc. 0:09:10.760 --> 0:09:13.559 As a reformer. Unfortunately, I just think he lacks the 0:09:13.600 --> 0:09:16.079 mental plasticity at the advanced stage that he's at that 0:09:16.160 --> 0:09:20.600 a Franklin Roosevelt had. Franklin Roosevelt was not a communist 0:09:20.679 --> 0:09:23.360 and was not a socialist, and was not a redistributionist 0:09:23.440 --> 0:09:25.880 in his early stage. It was only after he saw 0:09:26.000 --> 0:09:28.640 the effects of the Great Depression in the late nineteen 0:09:28.640 --> 0:09:31.680 twenties early nineteen thirties that he saw a different path 0:09:32.040 --> 0:09:34.800 and he redefined the relationship. Now, I'm not suggesting that 0:09:34.920 --> 0:09:37.640 the answer to this is more government. The answer is 0:09:37.720 --> 0:09:40.720 more effective government, and that is a very hard challenge 0:09:40.800 --> 0:09:41.960 in this current environment. 0:09:42.080 --> 0:09:44.480 I just put it on Twitter, The Storm before the Storm, 0:09:44.600 --> 0:09:47.079 the book by Mike Green Robert T. Caplan with a 0:09:47.400 --> 0:09:49.959 book somewhat equivalent to that written last year off of 0:09:50.080 --> 0:09:53.839 Yale University Press. I'll try to get that out as well. 0:09:53.920 --> 0:09:56.640 My answers watched the what was it like fifteen twenty 0:09:56.760 --> 0:09:58.679 years ago? They had a whole It was like when 0:09:58.720 --> 0:10:02.040 they invented streamings serials and they add a TV show 0:10:02.080 --> 0:10:05.040 called Rome. You know, I don't have to read the book, 0:10:05.080 --> 0:10:06.920 do I can just watch just now. 0:10:06.960 --> 0:10:09.040 You just open chat GPT and ask it whatever you 0:10:09.120 --> 0:10:10.199 want and then it'll do it for you. 0:10:10.480 --> 0:10:12.880 Well, yeah, that's a whole separate story, you know, Mike, 0:10:13.440 --> 0:10:16.079 I think this is really really interesting. I want you 0:10:16.200 --> 0:10:20.240 to fold it over to how people should prosecute something 0:10:20.280 --> 0:10:23.079 as boring as a retirement plan. How do you bring 0:10:23.160 --> 0:10:24.280 this over to the mundane? 0:10:25.600 --> 0:10:28.120 But Tom, we could have an hour long discussion before 0:10:28.120 --> 0:10:28.360 I get it. 0:10:28.840 --> 0:10:30.760 Can we clear the deck here? Are you willing to 0:10:30.800 --> 0:10:32.600 give up newspapers for Mike Green? 0:10:34.480 --> 0:10:35.360 That's the right answer. 0:10:35.480 --> 0:10:38.640 That is the right answer. How do we bring this 0:10:38.960 --> 0:10:43.199 over to we mere mortals trying to decide what percentage 0:10:43.320 --> 0:10:44.120 to be in the market. 0:10:44.960 --> 0:10:47.480 The quick answer is there is no right percentage, right, 0:10:47.520 --> 0:10:50.600 It's going to depend on everyone's individual component. The key 0:10:50.679 --> 0:10:53.040 thing that I would highlight is that when you think 0:10:53.080 --> 0:10:56.200 about investing for retirement, when you think about those, focus 0:10:56.280 --> 0:10:59.559 on what you need, not what your neighbor wants, right, 0:10:59.640 --> 0:11:01.679 And this is a really key component. We tend to 0:11:01.720 --> 0:11:04.319 get ourselves caught up in the fomo type framework. We're 0:11:04.400 --> 0:11:06.720 in an environment in which you can if you're worried 0:11:06.720 --> 0:11:09.199 about inflation, you can buy real yielding tips with a 0:11:09.280 --> 0:11:12.280 positive yield for the first time in over a decade. 0:11:12.520 --> 0:11:12.640 Right. 0:11:12.920 --> 0:11:14.920 That is something that would argue people are ignoring. I 0:11:14.960 --> 0:11:18.120 would broadly suggest that fixed income in a lot of ways, 0:11:18.160 --> 0:11:20.760 because it has what I refer to as indogenous liquidity, 0:11:20.920 --> 0:11:24.560 significant coupon payments, and an ultimate payment of at maturity, 0:11:25.280 --> 0:11:29.400 has very different characteristics than the Ponzi like characteristics associated 0:11:29.440 --> 0:11:31.960 with equities, where you are always getting your value from 0:11:32.000 --> 0:11:34.760 what somebody else pays, and so those are ways that 0:11:34.840 --> 0:11:36.600 you can separate yourselves. They're not immune. 0:11:36.760 --> 0:11:37.400 I have to be clear. 0:11:37.480 --> 0:11:40.200 This is a systemic issue. But they are a better 0:11:40.320 --> 0:11:41.920 way to think about the opportunity. 0:11:41.960 --> 0:11:44.400 So brilliant, Mike Green, thank you so much. She's chief 0:11:44.400 --> 0:11:46.800 strategy to Simplified asset Management. 0:11:53.080 --> 0:11:56.640 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:11:56.760 --> 0:11:59.800 weekday afternoons from seven to ten am Eastern. Listen on 0:12:00.000 --> 0:12:03.599 Applecarplay and Android Otto with the Bloomberg Business app, or 0:12:03.800 --> 0:12:05.240 watch us live on YouTube. 0:12:05.360 --> 0:12:09.440 We continue forward with some huge academics from the London 0:12:09.520 --> 0:12:13.120 Business School, her doctor at Crystal Rondo. The Linz stops 0:12:13.160 --> 0:12:15.680 by when she is in America. She's a Vauntabelle asset 0:12:15.800 --> 0:12:19.200 Management of Europe. You walked in the room and you said, 0:12:19.200 --> 0:12:21.040 I don't talk about it as fed stuff. I want 0:12:21.080 --> 0:12:23.840 to talk about allocation, which is great because I don't 0:12:23.880 --> 0:12:29.240 talk enough about allocation. What's the biggest mistake, given chaos, 0:12:29.840 --> 0:12:33.920 given day to day uncertainty, what's the biggest mistake people 0:12:34.040 --> 0:12:34.920 make an allocation? 0:12:36.000 --> 0:12:38.160 Do you think that they know to be honest? Having 0:12:38.200 --> 0:12:41.200 been an active investment manager for all my Caurier before 0:12:41.240 --> 0:12:43.200 becoming the because just like. 0:12:43.200 --> 0:12:45.840 That in the English, because it wasn't there having been 0:12:45.920 --> 0:12:49.079 an active manager in enjoying losing money. 0:12:49.120 --> 0:12:52.800 And not at all, not at all, actually not at all, 0:12:52.960 --> 0:12:56.520 my friends should still be on your Bloombergh platform. No, 0:12:56.720 --> 0:13:00.160 but very seriously, there's a lot of uncertainty, and what 0:13:00.280 --> 0:13:02.800 it means is there's a lot that we don't know, 0:13:02.920 --> 0:13:05.439 and you need to recognize that and not go for 0:13:05.600 --> 0:13:10.280 extreme allocation. So neither extreme bullish, which nobody is tempted, 0:13:10.559 --> 0:13:14.079 nor extreme verish. That is the number one mistake is 0:13:14.160 --> 0:13:16.320 to actually go on the limb. 0:13:16.559 --> 0:13:18.360 Are we passed a little bit of the chaos, a 0:13:18.440 --> 0:13:22.000 little bit of the uncertainty Given what we found out yesterday, 0:13:22.080 --> 0:13:25.320 a US China meeting will take place this weekend in Switzerland. 0:13:25.360 --> 0:13:27.480 It will center on de escalation. 0:13:28.360 --> 0:13:32.000 No, I don't think we passed the uncertainty. Yeah, morehead, 0:13:32.080 --> 0:13:34.280 I think so. I think it will continue because you know, 0:13:34.360 --> 0:13:37.160 this is not a straight path to a deal, nor 0:13:37.280 --> 0:13:41.520 is it a straight path economically with the political environment, 0:13:41.880 --> 0:13:43.440 so uncertainty is here to stay. 0:13:44.160 --> 0:13:46.120 Breathing a sigh of relief that the conversations are at 0:13:46.200 --> 0:13:46.680 least happening. 0:13:46.840 --> 0:13:51.280 Yes, definitely, definitely for growth and for inflation. Right, the 0:13:51.360 --> 0:13:53.400 one thing that we do know, so let's start with 0:13:53.480 --> 0:13:56.440 what we do know now is everything else equal. If 0:13:56.480 --> 0:13:58.839 you put on tariff, however low they are, but on 0:13:58.920 --> 0:14:01.720 a large scale, you will get lower growth and higher inflation. 0:14:01.960 --> 0:14:03.680 So that is one part we know, and that again 0:14:03.760 --> 0:14:05.320 has implication for Ustelic nation. 0:14:05.480 --> 0:14:08.560 Nine point two five percent of our audience, particularly here 0:14:08.600 --> 0:14:12.120 in America Good Morning, around the world and on YouTube, 0:14:12.800 --> 0:14:16.760 looks at Europe and has basically mentally discarded it for 0:14:16.880 --> 0:14:21.560 I'll say five years or ten years in investment. Is 0:14:21.640 --> 0:14:22.880 there a new Europe? 0:14:25.400 --> 0:14:28.080 I hope I can answer yes, there's Certainly Europe has 0:14:28.120 --> 0:14:31.400 certainly gotten a wake up call. I think the proof 0:14:31.480 --> 0:14:34.800 is in the pudding. Europe has disappointed for quite a 0:14:34.880 --> 0:14:37.920 long time. So what's changing is the fiscal spending. I 0:14:38.040 --> 0:14:41.280 do believe it will happen, indeed in Germany. So that's 0:14:41.320 --> 0:14:45.000 a positive and relative term for growth. But look, some 0:14:45.120 --> 0:14:47.560 of the weakness of Europe has been the inability at 0:14:47.640 --> 0:14:50.920 times to act together and that. 0:14:51.320 --> 0:14:53.760 But then on a micro basis at the company and level, 0:14:53.880 --> 0:14:57.920 are the CEOs thinking differently in whether it's two boards 0:14:57.960 --> 0:15:01.200 in Germany or one board wherever that they have supported 0:15:01.240 --> 0:15:04.120 the board to be. You know, the stereotype is to 0:15:04.240 --> 0:15:07.560 be more anglocentric. Are we are we seeing that now? 0:15:08.320 --> 0:15:10.040 I'm not sure I understood your question. 0:15:10.240 --> 0:15:12.080 I think because you don't want to hear it. 0:15:12.200 --> 0:15:14.040 Yeah, no, no, no, no, no I do. 0:15:14.240 --> 0:15:16.840 But I mean Europe has always been quite looking towards 0:15:16.920 --> 0:15:19.240 the west, right, so Anglo centric if you want to 0:15:19.280 --> 0:15:19.640 go with that. 0:15:19.840 --> 0:15:24.000 But yeah, the stereotype of our global Wall Street audience, yes, 0:15:24.520 --> 0:15:29.960 is there's a there's a locking individual take on CEOs. 0:15:30.040 --> 0:15:33.640 Let's go at Disney at Uber this morning. Tim Uh, 0:15:34.200 --> 0:15:36.200 They're out there, they're going, let's go, let's fix this, 0:15:36.360 --> 0:15:38.640 let's fix our margins. Let's go, let's go, let's go, 0:15:39.320 --> 0:15:42.120 and everybody in years going at a slower speed. Is 0:15:42.200 --> 0:15:45.840 there a change there or is it business as usual? No? 0:15:45.920 --> 0:15:47.520 I think there is a change. I think there is 0:15:47.560 --> 0:15:50.600 a change. Whether it delivers, I don't know. That's why 0:15:50.640 --> 0:15:53.480 I said proof is in the proof is in the pudding. 0:15:53.760 --> 0:15:55.840 Is that you now we now need to go get 0:15:55.880 --> 0:15:57.680 it in Europe in a sense a line? 0:15:59.000 --> 0:16:01.040 You know the other day, fall off my chair, Royal 0:16:01.160 --> 0:16:05.080 Duchess once again looking at a British patrolum talk about dinosaurs. 0:16:05.160 --> 0:16:06.080 What's all as new again? 0:16:07.160 --> 0:16:07.320 You know? 0:16:07.520 --> 0:16:11.280 I wonder to what extent this idea of Europe being 0:16:11.360 --> 0:16:15.640 pushed close together or becoming closer is the result of 0:16:15.720 --> 0:16:19.960 the US in this America First policy? Is that what's 0:16:20.000 --> 0:16:23.080 happening here? The US is saying essentially, okay, America First 0:16:23.120 --> 0:16:25.680 is not America alone. Investors don't necessarily agree with that, 0:16:26.480 --> 0:16:29.360 but it makes Europe say, okay, we have to rely 0:16:29.680 --> 0:16:31.800 on each other more for defense spending, we have to 0:16:31.840 --> 0:16:34.280 become closer together, and we have to unite more. Is 0:16:34.320 --> 0:16:34.920 that what happening? 0:16:35.320 --> 0:16:37.520 I think that's part of it. That definitely part of 0:16:37.560 --> 0:16:39.840 it is just like I mean, that's with everything in life. 0:16:39.920 --> 0:16:42.520 You get adversity and that pulls you together. Right, So 0:16:43.720 --> 0:16:47.200 the adversity. The first thing that brought Europe together was COVID. 0:16:47.800 --> 0:16:50.880 That Ino sense really helped from that perspective in bringing 0:16:51.400 --> 0:16:53.520 the countries to pools it together. And I think, yes, 0:16:53.640 --> 0:16:57.960 there's a reaconing that that they better pull together. 0:16:59.080 --> 0:17:03.800 It didn't happen from a fiscal perspective during COVID that 0:17:03.960 --> 0:17:06.480 was a huge issue. I mean, you saw Europe as 0:17:06.480 --> 0:17:10.320 a whole recover in a more slow way than the 0:17:10.480 --> 0:17:12.520 US did. The US sort of stood out over the 0:17:12.600 --> 0:17:16.280 last three years. Yes, in its quote unquote exceptionalism compared 0:17:16.280 --> 0:17:18.239 to the rest of the world. Is that era behind us? 0:17:19.960 --> 0:17:21.800 No, I think there's I mean, there's a few things 0:17:21.840 --> 0:17:24.280 that are impacting right now. I don't think it's I mean, 0:17:24.400 --> 0:17:26.880 let's say I've been structurally bullish on the US economy. 0:17:27.000 --> 0:17:30.840 I continue to believe it's the strongest economy, but a 0:17:30.920 --> 0:17:34.040 few things are denting or impacting US assets right now. 0:17:34.160 --> 0:17:35.960 The pressure that we're seeing on the dollar, I think 0:17:36.080 --> 0:17:39.240 is a structural downward pressure. Europe has a chance to 0:17:39.359 --> 0:17:44.280 pick itself together by uniting. They see the need and 0:17:44.400 --> 0:17:46.360 that's why I come back to we need to see 0:17:46.400 --> 0:17:48.720 the proof in the pudding. Is it happening and is 0:17:48.760 --> 0:17:49.320 it delivering? 0:17:50.960 --> 0:17:54.600 With us from Vulntable this morning, thrilled with this crystal 0:17:54.800 --> 0:17:58.080 under the land all I've lived and I was in 0:17:58.200 --> 0:18:02.360 Switzerland I was fifteen years old. Magical is the appreciation 0:18:02.560 --> 0:18:07.119 of the Swiss franc. Tell us how Switzerland adapts to 0:18:07.240 --> 0:18:10.800 the new strength of Swiss franc. Will there be a 0:18:10.880 --> 0:18:14.480 different approach among the cantons and among the federal government. 0:18:14.680 --> 0:18:16.240 Well, look, I mean as a Swiss, it's almost like 0:18:16.280 --> 0:18:18.240 you're born with it, with the chocolates and the mountains, 0:18:18.280 --> 0:18:21.440 you're born with a strong Swiss franc. So it's part 0:18:21.480 --> 0:18:23.520 of it. So the SNB, it's the I mean, it's 0:18:23.560 --> 0:18:26.800 a headache for the SNB, for the companies. They've learned 0:18:26.840 --> 0:18:29.080 to be competitive, to be honest. So this this is 0:18:29.160 --> 0:18:32.399 one aspect because it's part of it. Nominally it appreciates 0:18:32.440 --> 0:18:36.120 because inflation is low and for the foreseeable future that's 0:18:36.160 --> 0:18:39.000 still going to be happening. On the real level, you 0:18:39.080 --> 0:18:42.080 see less of an appreciation trend, but you know, in 0:18:42.160 --> 0:18:44.479 the end, nominally is is a lot of what matters. 0:18:44.600 --> 0:18:50.360 You're too, unimputed deflation in Switzerland because of the appreciation. 0:18:50.440 --> 0:18:51.960 Yeah, we could drink, yes we could. 0:18:53.119 --> 0:18:56.560 We could. Apple did a coupon a couple of years 0:18:56.560 --> 0:18:59.880 ago three quarters of a percent for like a zillion year. 0:19:00.960 --> 0:19:02.840 We're all pretty much free. 0:19:03.000 --> 0:19:06.160 Are you seeing travel to Switzerland changing with the trade wars, 0:19:06.280 --> 0:19:07.120 with the terror force? 0:19:07.280 --> 0:19:08.920 Well, I mean I'm not. Let's say, I'm not on 0:19:09.000 --> 0:19:11.159 a line post to see people coming in and out, 0:19:11.240 --> 0:19:15.440 but we do read, including from from esteemed Bloomberg, that yes, 0:19:15.560 --> 0:19:19.040 we do see more, you know, more asks for for Switzerland, 0:19:19.160 --> 0:19:22.720 for people looking to come over, whether it's traveling, whether 0:19:22.840 --> 0:19:25.639 it's relocating. So that's wait for numbers. 0:19:25.760 --> 0:19:28.280 Yeah, rto keeper of the MX. Yeah, it is very 0:19:28.320 --> 0:19:30.760 big on Switzerland. He wants me there on twenty four 0:19:30.760 --> 0:19:31.120 to seven. 0:19:32.560 --> 0:19:36.879 One more question there, see I want to start and 0:19:37.040 --> 0:19:39.160 where we started. It has to do with asked allocation. 0:19:39.280 --> 0:19:41.480 Tom asked about the number one mistake people are making. 0:19:41.560 --> 0:19:43.439 If people are saying, okay, I should go look at 0:19:43.480 --> 0:19:47.320 my portfolio right now, think about its construction. Yes, where 0:19:47.320 --> 0:19:49.920 should people look closely? Is it in the equity side, 0:19:50.000 --> 0:19:52.200 is in the fixed income side? Is in the alternative side? 0:19:52.400 --> 0:19:54.560