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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com,

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Speaker 1: and of course on the Bloomberg terminal. Slotting in is

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Speaker 1: a two hour conversation that we can have this morning

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Speaker 1: with Kenneth Rogoff. He's professor of economics at Harvard. He

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Speaker 1: is the former I m F Chief. Economis are far

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Speaker 1: far more than that, truly, one of our thinkers of

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Speaker 1: this moment we're in. I mentioned Professor Rogoff to Geita

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Speaker 1: Gopinath when I was at the I m F a

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Speaker 1: number of weeks ago about this moment with foreign exchange

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Speaker 1: and linking it into our greater global economy and of

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Speaker 1: course our central banks. Kenn thank you so much for

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Speaker 1: joining Surveillance. UH this morning, cannot want to go to

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Speaker 1: a quote from twenty years ago. I remember this paper

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Speaker 1: the Carnegie mel and the Freshwater School, Bennett McCollum and

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Speaker 1: the team the ones dominant I s LM framework from

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Speaker 1: mecro Economic analysis been sharply criticized excel A on of

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Speaker 1: it and the rest of it. Nevertheless, most undergraduate mecro

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Speaker 1: economics textbooks continue to feature I s LM models. Can

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Speaker 1: take us from John Hicks N. Nine through what you

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Speaker 1: and I were weaned on to where we are now.

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Speaker 1: Does any central bank have a convection a conventional theory

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Speaker 1: in two thousand twenty two, Well, they still teach I

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Speaker 1: s l M analysis and modern versions of it. But

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Speaker 1: central banks, of course, we're not expecting this inflation. They

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Speaker 1: hadn't seen inflation for a long time. They didn't know

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Speaker 1: what would cause it. They had some thoughts, and I think,

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Speaker 1: if you're honest about the academic literature, there was tremendous

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Speaker 1: uncertainty about the Phillips curve, about the long run neutral

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Speaker 1: rate of interest. So there's just massive uncertainty. And then

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Speaker 1: you get hit by the pandemic and now the war

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Speaker 1: in Ukraine, and the uncertainty is bigger than ever. It

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Speaker 1: was so important here, folks, and I speak of projects Syndicate,

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Speaker 1: I can't say enough. As a font of wisdom, led

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Speaker 1: by Kinneth Rogoff, the Laureate Michael Spence and Steve wrote

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Speaker 1: many many others. But Kenna roof you right in your

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Speaker 1: essay there on this synchronized global economy. How synchronized are we?

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Speaker 1: How synchronized is America with China and with Europe? Well,

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Speaker 1: I mean, I think the risks of having a perfect storm,

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Speaker 1: where Europe is in recession because of the war, China

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Speaker 1: is in recession because of a failed COVID lockdown policy,

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Speaker 1: in the United States, because the Fed tightens too much

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Speaker 1: too fast, or you know, however we judge it in

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Speaker 1: response to inflation, and those all feed on each other.

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Speaker 1: I mean, if China has a supply recession, which is

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Speaker 1: really what we're talking about, that's going to feed inflation,

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Speaker 1: it's going to hurt demand in Europe. Obviously, if the

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Speaker 1: United States goes into recession and hits financial markets all

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Speaker 1: over the world, I would say the risks have risen

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Speaker 1: palpably that this might happen. We could get you know,

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Speaker 1: things could work out well, and that there's a lot

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Speaker 1: of uncertainty. But it's not hard to see all of

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Speaker 1: these risks. I mean, I admit in China it's hard

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Speaker 1: to see what's going on, but I feel they might

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Speaker 1: already be bordering on recession. So Ken, do you think

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Speaker 1: that already that the risk has gotten too much, the

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Speaker 1: FED moving too far too fast, at a time when

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Speaker 1: a significant proportion of those on Wall Street think it's

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Speaker 1: the opposite, that perhaps they're poised to be overly devish

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Speaker 1: and not respond enough to inflation that surprises again and

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Speaker 1: again to the upside. Well, I don't think we'll know

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Speaker 1: for a while what they're gonna do. Because they can

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Speaker 1: raise interest right, it's a lot before they raise them

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Speaker 1: too much. I mean, the idea at this well, I

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Speaker 1: think the idea that just to three percent would be

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Speaker 1: enough really unlikely. I think they're going to have to

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Speaker 1: raise interest rates to four or five percent to bring

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Speaker 1: inflation down to two and a half or three percent.

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Speaker 1: And I don't know if that is something they're going

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Speaker 1: to decide to do. I'm not even saying that's something

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Speaker 1: they should do. We really have to see what's going on.

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Speaker 1: You know, how deep the recession is. They there's they've

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Speaker 1: dug a hole, or to be precise, the huge stimulus

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Speaker 1: in March. And I think a lot of the pressures

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Speaker 1: on the fet and uncertainty from academics and research as

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Speaker 1: dug a hole. And it's not easy to get out of.

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Speaker 1: I mean, there's no pretty picture here, Kenn. Let's sit

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Speaker 1: on that for a minute. That you think that in

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Speaker 1: order to get down to a two and a half

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Speaker 1: or two percent inflation rate, they would have to raise

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Speaker 1: rates four or five per sent. You don't know whether

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Speaker 1: they should do that. When will we know whether they

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Speaker 1: should be opting for getting back down to that kind

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Speaker 1: of target at some point in the next few years. Well,

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Speaker 1: I mean, you know, it depends on what's going on,

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Speaker 1: what the costs are. They could get lucky and some

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Speaker 1: of the inflation turns out to be transitory enough so

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Speaker 1: that they get a gentle landing. It is not impossible,

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Speaker 1: but they're you know, clearly a lot of things still

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Speaker 1: that could go wrong. Escalation in Europe, China, you know,

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Speaker 1: getting worse, and it's irrational, COVID lockdowns, and there's just

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Speaker 1: a lot of uncertainty. So I'm not you know, I'm

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Speaker 1: not gonna like to say I know exactly what needs

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Speaker 1: to be done, but it's clear that things are way

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Speaker 1: out of control. Can Rogoff, you are part of our

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Speaker 1: global interior. Confidence in the dollar. From Moundell Fleming to

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Speaker 1: Jacob Frankel to her work, Morris Hopsfeld and the rest

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Speaker 1: and on Rudy Dornbush and on. We come to a

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Speaker 1: new point. Is the dollars study availue now or is

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Speaker 1: its secondary to what it used to be? Oh? I

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Speaker 1: think the dollars more powerful than it ever was. And yes,

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Speaker 1: central bank reserves have been dir diversified a bit, although

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Speaker 1: a lot into currencies that are sort of pegging against

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Speaker 1: the dollar. Uh. The dollar is dominant in trade, in voicing,

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Speaker 1: it's dominant in uh financial markets, It's dominant and uh,

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Speaker 1: you know all kinds of transactions. Uh, it's surprising. I

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Speaker 1: think it's actually, by many measures, more dominant than it

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Speaker 1: was in the fifties when it was supposed to be

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Speaker 1: the global currency. Well in the fifties. And let me

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Speaker 1: digress then, Ken, this is so important on Germany right

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Speaker 1: now in Europe? Is Germany held back by a memory

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Speaker 1: of atmar issuing economics and such? Mean? Is Germany reticent

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Speaker 1: with the war in Ukraine? From another time in place?

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Speaker 1: Is the dollar from another time in place? I'm not

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Speaker 1: quite sure what you're asking, Tom, I mean, you know,

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Speaker 1: are you asking? Is Germany not moving more aggressively in

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Speaker 1: Ukraine because it's concerned about Dafa sits. I don't think so.

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Speaker 1: I think it's much more, you know, the concern about escalation.

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Speaker 1: How much do you push Putin to push him over

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Speaker 1: a cliff? I think that's actually a very tough call,

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Speaker 1: and the Germans don't see it the same way that

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Speaker 1: the American administration does. Yeah, I'm sorry my question there

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Speaker 1: wasn't all that clear. I fail everyone. I failed Ken

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Speaker 1: when the Red Sox are in last place, So I'm

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Speaker 1: failing right right now Ken on Germany, then in the

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Speaker 1: euro the challenge for Christine Leguard given what I'm gonna

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Speaker 1: call the German reticence, how difficult a moment is this

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Speaker 1: for the politician Leguard? Well, I think the toughest spot

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Speaker 1: is that they seem to have connected politically raising interest rates,

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Speaker 1: which they need to do, and scaling back on quantitative easing,

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Speaker 1: which is a different animal in Europe. It's really a

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Speaker 1: subsidy from north to south. If they start scaling back

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Speaker 1: on quantitative easing, given all the fragilities, we could see

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Speaker 1: spikes and interest rates in the in the south, in

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Speaker 1: Italy and Portugal and Spain. So they need to raise

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Speaker 1: interest rates, but they've really been painted into a corner

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Speaker 1: by becoming the de facto euro Treasury, and they're backing

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Speaker 1: the South. So it's a difficult political position. I think

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Speaker 1: that's the most difficult part, not so much navigating deficits.

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Speaker 1: Professor wonderful to catch up with you, sir, Professor Ken

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Speaker 1: Rogoff of Harvard. Let's get to market out of the

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Speaker 1: head of US right strategy a BF A global research mark.

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Speaker 1: Let's get the Bank of America view. It will be

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Speaker 1: hard for the Fed to out haulke the market tomorrow

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Speaker 1: run us through it. Yeah, that's right. We think, Look,

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Speaker 1: the market is pricing right now two d basis points

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Speaker 1: of rate hikes over the next four meetings. It is

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Speaker 1: pricing in around fifty five or fifty seven basis points

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Speaker 1: for the Fed in June, So some notable odds of

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Speaker 1: a seventy five basis point rate increase at that time,

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Speaker 1: and we think that, look, the Fed's gonna deliver fifty

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Speaker 1: They're gonna try and be noncommittal on the rate guidance thereafter,

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Speaker 1: and then they're gonna do QT. Now, what the market

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Speaker 1: is going to care about the most is what are

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Speaker 1: the odds of seventy five? And again we think that

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Speaker 1: Powell is not necessarily gonna fan those flames. He's gonna say,

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Speaker 1: we're data dependent, We're gonna go meeting by meeting, and

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Speaker 1: if we need to hike faster, we will very similar

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Speaker 1: message to what he delivered at the last meeting that,

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Speaker 1: given how much is priced for, the FED may end

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Speaker 1: up looking a little bit dubbish or at least neutral

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Speaker 1: to slightly dubbish. Mank where is the consensus at the FED,

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Speaker 1: and more importantly, where is the devision and how will

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Speaker 1: this cham and navigate that deficsion in that news conference.

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Speaker 1: This is a fit that's highly uncertain um. It's a

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Speaker 1: fent that's been willing to provide concrete forward guidance because

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Speaker 1: they just don't know how the world's gonna evolve. The

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Speaker 1: most importantly, they don't know how the inflation outlook is

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Speaker 1: going to evolve. So it seems like the consensus agrees

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Speaker 1: that the FED needs to be at least at the

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Speaker 1: fed's nominal neutral rate, which they believe is around two

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Speaker 1: and a quarter to two and a half by the

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Speaker 1: end of the year. But then there's a wide range

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Speaker 1: of views around where the FED goes from there. Some

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Speaker 1: want to be much higher in rate by the end

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Speaker 1: of the year, while others, it seems, are a little

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Speaker 1: less certain that the FED needs to be outright restrictive.

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Speaker 1: So over the near term, look, the Feed is going

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Speaker 1: to deliver a string of fifty basis point rate hikes

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Speaker 1: we think three, the markets pricing something closer to four.

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Speaker 1: But after that it's really gonna be data dependent, and

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Speaker 1: we think the Fed would like to provide forward guidance.

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Speaker 1: It's just that they're still very uncertain at this point

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Speaker 1: in time. So j Pal is going to give his

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Speaker 1: press conference, he's going to answer questions, and then he's

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Speaker 1: gonna walk off, and he's gonna check markets, probably and

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Speaker 1: get a sense of what the reaction was to what

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Speaker 1: he said. What will he be pleased by? In other words,

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Speaker 1: if the markets are calm, will that be a positive

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Speaker 1: result for him? I think so. I think that the

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Speaker 1: FED wants to stop being a source of volatility. Typically,

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Speaker 1: over the last three rate hiking cycles, what you've seen

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Speaker 1: is that you've seen implied rates fall come down as

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Speaker 1: the FED height This cycle is very different. Implied rates

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Speaker 1: fall has gone up, and with that markets have just

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Speaker 1: become a bit more volatile, and they're swinging around a

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Speaker 1: little bit more. I don't know that that's necessarily the

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Speaker 1: role that the FED wants to play. The FED doesn't

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Speaker 1: typically like to shock or surprise the market. They like

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Speaker 1: to have their intentions well known in advance and then

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Speaker 1: to follow through on them. And we think that that's

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Speaker 1: ultimately what they're going to be trying to achieve here

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Speaker 1: as they move closer to neutral, So calm market reaction,

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Speaker 1: a limited market reaction is probably going to be seen

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Speaker 1: as a win for Chair Power when he walks off

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Speaker 1: that stage tomorrow. Mark is keeping calm a policy error

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Speaker 1: at a time when some people are basically are saying

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Speaker 1: that they need to shock and awe a market that

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Speaker 1: is enabling the inflation rate to be and remain as

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Speaker 1: high as it is. Yeah, I don't think that they

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Speaker 1: necessarily believe that we need to shock and surprise the market.

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Speaker 1: They know that they need to tighten financial conditions, and

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Speaker 1: by many accounts, they've already been successful given the forward guidance.

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Speaker 1: Some of the market is priced to this point in time.

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Speaker 1: But do they necessarily need to be swinging around the

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Speaker 1: market um and create a lot of uncertainty. I think

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Speaker 1: that they would say that that's probably a step too

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Speaker 1: far for them. And look, if they want a surprise,

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Speaker 1: they'll keep going fifties and not stop by the end

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Speaker 1: of this year. That would certainly help tighten financial conditions.

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Speaker 1: But I don't know that the Fed is ready to

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Speaker 1: commit to that yet, nor do I think that they

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Speaker 1: really want to try and again create a bunch of

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Speaker 1: volatility in this already very uncertain marketplace. Markovna awesome as

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Speaker 1: a wife of bank americt level research right now a

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Speaker 1: really interesting person to speak to of this uproar off

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Speaker 1: of the leaked February draft of the legal aspects of

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Speaker 1: the Supreme Court on abortion. And our guest is the

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Speaker 1: Attorney General for Delaware. But what is so important about

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Speaker 1: Kathy Jennings is her prosecutorial expertise. This is someone who

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Speaker 1: didn't You didn't get Kathy. You didn't get the job

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Speaker 1: as attorney general at a country club over cocktails, did you? No?

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Speaker 1: You did not with all of your prosecutor experience on this.

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Speaker 1: What is the importance of what the Supreme Court will do?

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Speaker 1: Is it permanent or as a president said moments ago,

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Speaker 1: he's going to do this, this and this given that,

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Speaker 1: what what's the trend here? The timeline from this uproar

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Speaker 1: to whatever the Supreme Court decides, and the then what

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Speaker 1: after that? How do you see that? Well, first of all,

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Speaker 1: good morning, and here's the hard truth. If this draft

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Speaker 1: opinion and becomes the law of our country, it is

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Speaker 1: the death blow to a constitutional right that has protected

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Speaker 1: women's access to abortion for nearly half a century. That

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Speaker 1: is what some would suggest the conservative justice of the

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Speaker 1: Court and their supporters desire is well again on the process,

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Speaker 1: Attorney General, the idea of where we are with this

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Speaker 1: draft leakage to whatever the Court decides. As you mentioned,

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Speaker 1: you say a death blow, and then I want to

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Speaker 1: know what the then what is after the death blow? Sure,

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Speaker 1: it will then be up to each state in the

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Speaker 1: country to determine whether there should remain legal and safe

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Speaker 1: access to abortion. What has protected women for almost fifty

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Speaker 1: years is the constitutional requirement that no state could enact

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Speaker 1: a law that took away the right to abortion. When

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Speaker 1: a fetus is not viable, that gets tossed out the window.

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Speaker 1: And so it is going to be a state led

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Speaker 1: effort to ensure that women can access abortion in the states.

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Speaker 1: Were there is that? Where is that? Where we were

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Speaker 1: in nineteen seventy seventy two before nineteen seventy three. Is

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Speaker 1: it just as simple as we go back to what

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Speaker 1: was there one week before Roe v. Wade. It's as

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Speaker 1: simple as that. If abortion was a crime prior to

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Speaker 1: Roe v. Wade in nineteen seventy three, and a lot

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Speaker 1: of states still have that law on their books, then

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Speaker 1: abortion becomes a crime again and there is no constitutional

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Speaker 1: protection for women. Cathey, the political angles here are just

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Speaker 1: you know, uh, just vast and broad here. How do

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Speaker 1: you think this if it is in fact the ruling,

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Speaker 1: if it is the report that we've seen is is correct,

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Speaker 1: what do you think Washington is going to do as

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Speaker 1: it relates to mid term elections? Well, I can tell

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Speaker 1: you this. This is a wake up call for all

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Speaker 1: of us, for everyone, whether you are running for federal office,

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Speaker 1: whether you're running for statewide office. It's a wake up

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Speaker 1: call for voters everywhere to know that if you want

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Speaker 1: to protect what we have taken for granted as a

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Speaker 1: constitutional right, then you need to get to the ballot

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Speaker 1: box and you need to vote for attorneys general across

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Speaker 1: this country who are protecting abortion access. Because it will

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Speaker 1: be up to each state, and each states votes count,

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Speaker 1: and elections count Attorney General moments ago, publishing we think

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Speaker 1: our our wonderful top Live people for this and Anthony

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Speaker 1: Lynn are legal editor this morning. Lawrence Tribe, of course

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Speaker 1: a noted scholar. Clearly I'm going to say as a

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Speaker 1: general statement for cocktail conversation to the left. Uh. Lawrence

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Speaker 1: Tribe goes on to say, it will enable a GOP

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Speaker 1: Congress to enact a nationwide band an abortion and contraception.

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Speaker 1: So that's where I wanted to go. If we get

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Speaker 1: a Supreme Court ruling, whatever it is, a given party

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Speaker 1: can enact something in Congress later, as Tribe says, a

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Speaker 1: nationwide band, or can it go the other way where

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Speaker 1: the president can front run the legal case as he

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Speaker 1: alluded to twenty minutes ago in a release from the

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Speaker 1: White House. Sure Congress could certainly try to enact a

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Speaker 1: nationwide band. And once again, that's why this upcoming election

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Speaker 1: is so critically important to women everywhere, because we cannot

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Speaker 1: let that happen. I'm gonna have to leave it there.

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Speaker 1: Kathy Jennings, thank you so much for joining us. We

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Speaker 1: hope to speak against soon. Is the Attorney General of

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Speaker 1: the state of Delaware. Right now on the international moment,

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Speaker 1: in Ukraine. Elena Polo Covid Joins is now President CEO

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Speaker 1: of Center for European Policy Analysis. Elena, forty years ago

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Speaker 1: today the Falkland exo set, the Sheffield went down, the

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Speaker 1: Russian ship went down. It seems like Ukraine can do

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Speaker 1: the big dramatic event like the Moskva and the rest

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Speaker 1: of it. How are they doing, as you describing your note,

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Speaker 1: with conventional warfare and particularly establishing a no fly zone. Well,

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Speaker 1: Ukraine is certainly outperforming all expectations, just as the Russian

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Speaker 1: military has been underperforming all expectations. But right now Ukraine

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Speaker 1: has very little control of its air space, and that's

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Speaker 1: been the case for our probably big inning of this

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Speaker 1: whole thing. So what they really need now is the

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Speaker 1: ability to be able to prevent the missile attacks, the

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Speaker 1: bombs that have been decimating Ukrainian cities now for three months.

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Speaker 1: But in terms of their on the ground military operations

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Speaker 1: with massive weapons supplies now coming from the West, especially

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Speaker 1: from the US, they're doing incredibly well and slowing down

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Speaker 1: the Russian offensive in the east. What's the truth here,

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Speaker 1: a Lena, in terms of just how poorly Russia is doing.

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Speaker 1: There are some reports about morale being a real issue

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Speaker 1: about there being a real fear and unwillingness to experience

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Speaker 1: the casualties that the Russian troops have been experiencing. How

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Speaker 1: much is that the actuality versus a more tense battle

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Speaker 1: with more progress in the down Pass region than some

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Speaker 1: people let on. Well, the Russian military has an incredible

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Speaker 1: ability to adapt and learn with seem this now for

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Speaker 1: years with their offensive and Syria many years ago in

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Speaker 1: two thousand eight in Georgia, so they tried, uh, this

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Speaker 1: very aggressive approach to take over the capital key of

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Speaker 1: that failed and they've learned from that. Now they have

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Speaker 1: a much better understanding of Ukraine's capabilities. They know the

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Speaker 1: weapons they have, and they're adapting, and they're certainly putting

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Speaker 1: some of their top forces on the line here. Uh

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Speaker 1: Many Russian generals in a shocking number of Russian generals

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Speaker 1: have been killed during this war, a huge number that

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Speaker 1: we don't see modern warfare anymore. But they are adapting,

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Speaker 1: they're putting more on the line. But certainly, you know,

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Speaker 1: if you're Ukraining, you're defending your home, your family. You're

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Speaker 1: going to fight for that until the last breath. And

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Speaker 1: the Russian soldiers they don't really know what they're fighting

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Speaker 1: for except that they're there and they're being given order.

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Speaker 1: Some morale has been a huge issue, um in terms

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Speaker 1: of getting done what they want to get done militarily.

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Speaker 1: What's been the most accurate read you've gotten, Elina on

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Speaker 1: the casualty at numbers out of Russia. It's so hard

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Speaker 1: to tell because of course, everything the Russian government puts

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Speaker 1: out there is going to be much lower than the reality. Uh.

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Speaker 1: You know, we're assuming that tens of thousands of Russian

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Speaker 1: soldiers have either been killed or injured beyond the ability

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Speaker 1: to fight. Some of the estimates suggest it could be

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Speaker 1: up to sixty thousand at this point, but it's really

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Speaker 1: really hard to know because of course the Russian government, Uh,

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Speaker 1: the estimates there are somewhere around fifteen hundreds still, so

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Speaker 1: that gap is huge. So I'm guessing the truth is

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Speaker 1: somewhere in between. But certainly the losses have been high.

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Speaker 1: With all your skill and scholarship, are the Russians tramped

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Speaker 1: in Ukraine? There's certainly not going to pull back. I

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Speaker 1: mean Mr Putin's entire regime, his ability to stay in power,

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Speaker 1: his survival really depends on a win in Ukraine, and

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Speaker 1: he knows that, and he's not going to pull back.

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Speaker 1: So I think the war will last, unfortunately much much

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Speaker 1: longer than I think we had originally anticipated. But there's

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Speaker 1: no backing down for Prutin. He knows if he loses,

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Speaker 1: and he's seen as a loser in Russia, that's really

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Speaker 1: the end of him and the end of his regime

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Speaker 1: and potentially the end of his life, because that's how

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Speaker 1: brutal Russian politics are these days. Lena, what do you

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Speaker 1: know about his health? Because there have been so many

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Speaker 1: reports around that over the last couple of days. How

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Speaker 1: on earth do we get a read on that? And

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Speaker 1: this is always the big question with dictators, you know,

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Speaker 1: always speculating about their health and their illness. We know

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Speaker 1: that Mr Putin is certainly during COVID became quite isolated,

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Speaker 1: very paranoid. Uh, he doesn't feel comfortable people around him.

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Speaker 1: People have to look warranting before they even allowed to

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Speaker 1: see him. So we know that he's very concerned about himself,

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Speaker 1: just based on how we see him in public. And

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Speaker 1: there's been many reports that he has a crew of

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Speaker 1: physicians that travel with him everywhere, and there's even a

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Speaker 1: joke in Russia that says we know Putin is coming

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Speaker 1: to a meeting because the ambulances arrived first. I mean,

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Speaker 1: we don't know, but certainly you know he's a man

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Speaker 1: now approaching seventy you know, right, life expectancy in Russia

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Speaker 1: for men his age is much much lower. So it's

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Speaker 1: just hard to know what his health actually is. But

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Speaker 1: the speculation has certainly accelerated. Elena. Thank you for your

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Speaker 1: time and perspective this morning, and public cover that of

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Speaker 1: the Center for European Policy and NASSAS. David Rubinstein Bloomberg

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Speaker 1: Wealth looked for that tonight at nine pm and Mr

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Speaker 1: Rubinstein joins us this morning. Of course, this is not

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Speaker 1: all that well known, you know, coming out of the

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Speaker 1: Baltimore combine that basketball scholarship you got to Duke University

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Speaker 1: years ago, that worked out right, Um, I was the

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Speaker 1: last person whoever I get a basketball scholarship to Duke,

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Speaker 1: and I went to Duke on a scholarship, but it

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Speaker 1: was not a basketball it was not a basketball scholarship.

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Speaker 1: We're making news this morning, Mr last three, and it's

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Speaker 1: great and because there's so many people in successful in

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Speaker 1: business who do the sports thing. But it's really worked

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Speaker 1: out for him with his small team up in Milwaukee's

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Speaker 1: tall team. I should say, what has he learned or

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Speaker 1: how does he link in lessons from basketball into the

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Speaker 1: investment world. Mark Lazarie is a basketball player. He played

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Speaker 1: in high school, played one year in college. He loves

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Speaker 1: Basketball's kids and grandkids love basketball. And he had a

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Speaker 1: chance to buy the Milwaukee Bucks for a price that

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Speaker 1: seemed very expensive at the time, but now seems very cheap.

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Speaker 1: I think he paid about five fifty million dollars. Today

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Speaker 1: these teams are worth about two billion dollars. So while

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Speaker 1: he has a distressed debt business, that's very good. I

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Speaker 1: think he's very passionate as well. But his basketball team,

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Speaker 1: and they won the NBA championship last year. What did

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Speaker 1: he say about distressed desk? You know, with all they

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Speaker 1: Ken Rogoff just done from Harvard making clear of the

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Speaker 1: algebraic function the epsilon, we've never seen before this uncertainty.

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Speaker 1: What did he say? Well, Mark Lazarie has been a

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Speaker 1: big distress debt investor for decades, but in the last

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Speaker 1: couple of years he's really gotten out of that business

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Speaker 1: because there hasn't been that much distress that he's been

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Speaker 1: going into lending business a bit, but he's hoping. I

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Speaker 1: guess that there will be more distressed debt opportunities as

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Speaker 1: interest rates go up, and some companies aren't able to

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Speaker 1: do what they thought they were going to do well,

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Speaker 1: and these two ideas dove tailed together. The idea of

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Speaker 1: owning a sports team and alternative assets not necessarily being

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Speaker 1: as fruitful as they have been in the past is

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Speaker 1: because of the incredib demand and how how high valuations

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00:25:02,359 --> 00:25:06,119
Speaker 1: have gone. How much is that a common discussion among

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Speaker 1: owners of alternative investment firms that sports really is a

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Speaker 1: frontier that hasn't been fully tapped. It does seem that

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Speaker 1: if you own an alternative investment firm, you're not really

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Speaker 1: feeling complete unless you also own a basketball team or

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00:25:19,080 --> 00:25:21,359
Speaker 1: some kind of sports franchise. Uh So many of my

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00:25:21,440 --> 00:25:23,200
Speaker 1: friends seem to own these teams, and they seem to

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00:25:23,240 --> 00:25:26,000
Speaker 1: be doing quite well because when Steve Bomber came in

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00:25:26,080 --> 00:25:28,560
Speaker 1: and paid two billion dollars for the l A Clippers,

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00:25:28,720 --> 00:25:31,720
Speaker 1: everybody's prices went up. And now we're reading about the

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00:25:32,080 --> 00:25:34,640
Speaker 1: football teams in London maybe going for four to five

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Speaker 1: billion dollars and NFL teams going for four to five

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Speaker 1: billion dollars. So it seems to be no limit to

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Speaker 1: how much you can price these teams at and so

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Speaker 1: you kind of feel left out if you don't own

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Speaker 1: a sports team anymore. But is it a vanity project

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00:25:46,440 --> 00:25:48,879
Speaker 1: versus an investment? And this is actually a crucial question

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00:25:48,960 --> 00:25:50,560
Speaker 1: for a lot of people who are actually trying to

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00:25:50,560 --> 00:25:53,200
Speaker 1: get returns at a time when there has been so

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Speaker 1: much overvaluation in many parts of the market. Well, no

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Speaker 1: one really has lost money buying sports teams, and in decades,

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Speaker 1: I think it's very rare to find somebody's lost money

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00:26:03,160 --> 00:26:05,800
Speaker 1: buying a sports team. You make your money typically selling,

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00:26:05,880 --> 00:26:07,760
Speaker 1: not on the day to day cash flow on us

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00:26:07,760 --> 00:26:10,200
Speaker 1: you're in the NFL or something like that. But generally,

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00:26:10,359 --> 00:26:12,240
Speaker 1: I think most people who are in the alternative investment

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00:26:12,280 --> 00:26:14,760
Speaker 1: world still are focused on the alternative investment world is

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00:26:14,800 --> 00:26:17,200
Speaker 1: a better way to consistently make money on year in,

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00:26:17,359 --> 00:26:20,640
Speaker 1: year out. Sports teams are have other advantages, but they're

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00:26:20,680 --> 00:26:23,240
Speaker 1: not really being bought by people principally to make money.

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00:26:23,280 --> 00:26:25,000
Speaker 1: I think they want to have some enjoyment out of

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00:26:25,040 --> 00:26:29,040
Speaker 1: owning it. You're a student of this, and the rap

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00:26:29,480 --> 00:26:32,840
Speaker 1: is the rich guys are using the public system, the

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00:26:32,960 --> 00:26:37,520
Speaker 1: public trough tax dollars and such, and indeed law depreciation

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00:26:37,640 --> 00:26:41,480
Speaker 1: of different assets within a sports complex to get this

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00:26:41,760 --> 00:26:44,800
Speaker 1: done is a law rigged so the rich guys can

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Speaker 1: own the Chicago White Sox or whatever names named the team.

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Speaker 1: Well throughout history, UH, wealthy people have had advantages over

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00:26:52,320 --> 00:26:54,159
Speaker 1: people that are not wealthy, There's no doubt about it.

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00:26:54,200 --> 00:26:56,280
Speaker 1: In the sports world probably plays to that. On the

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00:26:56,359 --> 00:26:59,879
Speaker 1: other hand, UM voters can vote these UH we just

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00:27:00,960 --> 00:27:03,640
Speaker 1: in the causes them over the Buffalo bills, but they're

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00:27:03,680 --> 00:27:06,080
Speaker 1: not people protesting in the streets. We don't see people

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00:27:06,200 --> 00:27:08,879
Speaker 1: rioting in the streets against these sports deals, so yes,

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00:27:08,960 --> 00:27:11,080
Speaker 1: they probably do favor the owners. But on the other hand,

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00:27:11,240 --> 00:27:14,520
Speaker 1: the voters can vote the UH officials out who support

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00:27:14,600 --> 00:27:16,800
Speaker 1: these deals, and we don't seem that happening, So yes,

477
00:27:16,920 --> 00:27:20,240
Speaker 1: there's criticism that might be justified. On the other hand,

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00:27:20,560 --> 00:27:22,680
Speaker 1: I think the general public wants to see the sports

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00:27:22,720 --> 00:27:24,640
Speaker 1: teams be as good as they can. Let me get

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00:27:24,680 --> 00:27:26,680
Speaker 1: back to Mr Lessie, what did you learn about what

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00:27:26,880 --> 00:27:30,879
Speaker 1: he's learned about investment through three once in a lifetime events,

482
00:27:31,000 --> 00:27:35,280
Speaker 1: global financial crisis, a modern pandemic, and now this war

483
00:27:35,320 --> 00:27:37,760
Speaker 1: in Ukraine. What's a lesson. Well, the lesson is this

484
00:27:37,920 --> 00:27:39,800
Speaker 1: is not good for the economy. It's not good for

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00:27:39,880 --> 00:27:42,600
Speaker 1: people who want to see investments go up. Obviously, he

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00:27:42,680 --> 00:27:44,600
Speaker 1: believes that we could be in intercession. We're not in

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00:27:44,680 --> 00:27:47,920
Speaker 1: one now, and I think the combination of high energy prices,

488
00:27:48,600 --> 00:27:51,200
Speaker 1: war in Ukraine and the higher interest rates now is

489
00:27:51,240 --> 00:27:54,880
Speaker 1: not a good prescription for UH steady H investment pays.

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00:27:55,080 --> 00:27:56,560
Speaker 1: I think a lot of people who are distressed that

491
00:27:56,680 --> 00:27:58,840
Speaker 1: investors are now looking their chops saying that in the

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00:27:58,920 --> 00:28:01,119
Speaker 1: next year or so there's gonna be at opportunities. So

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Speaker 1: how are they creating the liquidity ahead of that? Do

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00:28:04,760 --> 00:28:07,480
Speaker 1: you hear from people who are getting large piles of

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00:28:07,560 --> 00:28:10,520
Speaker 1: cash on hand in order to deploy it if there

496
00:28:10,680 --> 00:28:13,200
Speaker 1: is a more severe downturn. Yes, there's a lot of

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Speaker 1: cash on the sidelines. A lot of people are waiting

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00:28:15,359 --> 00:28:18,320
Speaker 1: to see what the opportunities are. And I do think

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00:28:18,359 --> 00:28:20,200
Speaker 1: that people are will think in the next year or

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00:28:20,200 --> 00:28:22,080
Speaker 1: two they're going to be distressed that opportunities and the

501
00:28:22,160 --> 00:28:24,639
Speaker 1: markets are chopping. There's no doubt about it. It's very

502
00:28:24,760 --> 00:28:27,359
Speaker 1: rare to have interest rates go up on a consistent basis,

503
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Speaker 1: as the FED seems to be doing without having some

504
00:28:30,280 --> 00:28:32,920
Speaker 1: economic slowdown. We've seen that in the nineteen sixty on.

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00:28:33,280 --> 00:28:36,359
Speaker 1: Every time federal of the Federal Reserve races interest rates

506
00:28:36,400 --> 00:28:39,080
Speaker 1: in a consistent way, it does produce an economic slowdown,

507
00:28:39,200 --> 00:28:42,160
Speaker 1: and it does reduce inflation. It just takes a while. David,

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Speaker 1: thank you so much for joining today, David Rubinstein. Of course,

509
00:28:45,080 --> 00:28:47,880
Speaker 1: the Carlin a full interview with Mark last year. Looked

510
00:28:47,920 --> 00:28:51,360
Speaker 1: for that Bloomberg Well tonight at nine pm. Really interesting

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00:28:51,400 --> 00:28:54,280
Speaker 1: and I believe they touched on a basketball team that

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Speaker 1: has won four in a row, including crushing the Boston

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Speaker 1: Celtics and the Milwaukee Books. This is the Bloomberg Surveillance Podcast.

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00:29:03,000 --> 00:29:06,360
Speaker 1: Thanks for listening. Join us live weekdays from seven to

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00:29:06,480 --> 00:29:10,480
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

516
00:29:10,880 --> 00:29:14,880
Speaker 1: each day from six to nine am for insight from

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00:29:14,920 --> 00:29:19,400
Speaker 1: the best in economics, finance, investment, and international relations. And

518
00:29:19,560 --> 00:29:24,680
Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

519
00:29:24,760 --> 00:29:28,040
Speaker 1: dot com, and of course on the terminal. I'm Tom

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00:29:28,160 --> 00:29:30,480
Speaker 1: Keene and this is Bloomberg