WEBVTT - Surveillance: Expect Volatility, Bitterly Says 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaileye. We bring you 0:00:13.320 --> 0:00:18.560 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:31.600 and of course on the Bloomberg terminal. Everybody seems to 0:00:31.600 --> 0:00:33.720 be saying this morning and over the last few weeks, 0:00:33.720 --> 0:00:37.280 expect volatility. This is the line from City Expect volatility. 0:00:37.360 --> 0:00:39.519 Because we are no longer at the beginning of this cycle. 0:00:39.640 --> 0:00:42.000 Leadership becomes less clear at this time in the cycle, 0:00:42.360 --> 0:00:44.560 and while the leadership will narrow, it can also be 0:00:44.640 --> 0:00:47.919 quite shoppy. Let's get to Christine Bitterly, City Regional head 0:00:47.920 --> 0:00:50.400 of Investments for North America's Christy, let's start there. Why 0:00:50.440 --> 0:00:55.160 should we expect volatility? So when we look at any cycle, 0:00:55.280 --> 0:00:57.400 right when you're you're looking at the beginning of a cycle, 0:00:57.800 --> 0:01:00.000 that's where you see the strongest rallies. And we've see 0:01:00.000 --> 0:01:03.000 in that over the past twelve months, we've seen essentially 0:01:03.240 --> 0:01:06.600 everything moving up and and there's been periods of different leadership, 0:01:07.080 --> 0:01:09.880 very clear periods of whether it was growth versus value 0:01:10.040 --> 0:01:13.880 COVID defenses versus COVID cyclicals. But now the leadership isn't 0:01:13.959 --> 0:01:16.440 quite clear, and so one of the things that has 0:01:16.560 --> 0:01:20.679 investors very, very nervous and why we're expecting volatility is 0:01:20.800 --> 0:01:24.280 that realized volatility in US equity markets are at the 0:01:24.319 --> 0:01:27.480 lowest end of the twenty year range, in the single digits. 0:01:27.680 --> 0:01:29.480 And you can see this through the market action that 0:01:29.520 --> 0:01:32.480 we've seen. We've not had one pullback of five per 0:01:32.520 --> 0:01:36.120 cent or more in one This has only happened twice 0:01:36.200 --> 0:01:39.120 since nineteen and well, we've had a couple of pullbacks 0:01:39.120 --> 0:01:42.800 of about three percent, they've been bought very very quickly, 0:01:43.120 --> 0:01:45.800 and so I think this has a lot of investors wondering, Okay, 0:01:45.800 --> 0:01:49.040 well we actually see realize volatility rise, and will that 0:01:49.080 --> 0:01:51.600 put us into what is actually a pretty normal equity 0:01:51.640 --> 0:01:54.080 market of a couple of pullbacks of five per cent 0:01:54.240 --> 0:01:56.000 or more and even up to one of ten percent. 0:01:56.240 --> 0:01:59.360 But Kristen, is this the same equity market as ten 0:02:00.120 --> 0:02:02.400 thirty years ago? And I'm looking at the dominance of 0:02:02.440 --> 0:02:05.280 the big names, I'm looking at the composition that has 0:02:05.360 --> 0:02:08.800 actually performed very differently depending on which sector of the 0:02:08.840 --> 0:02:11.200 market you're looking at. I mean, can we get a 0:02:11.280 --> 0:02:14.040 broad based five percent draw down given how much money 0:02:14.040 --> 0:02:19.760 and given how selective people are with respect to sector selection. Yeah, 0:02:19.840 --> 0:02:22.440 it's a great point, right when we're looking at the 0:02:22.560 --> 0:02:25.079 rally that we've seen even year to date, there has 0:02:25.120 --> 0:02:28.280 been a lot of breakdown in correlation so up until 0:02:28.320 --> 0:02:31.560 even recently, right the under performance of small caps when 0:02:31.600 --> 0:02:33.200 you look at what we went through with with the 0:02:33.280 --> 0:02:35.680 delta variant, almost like a mini kind of what we 0:02:35.720 --> 0:02:38.400 went through last year in terms of tech coming out 0:02:38.440 --> 0:02:42.080 ahead as opposed to value really dominating the first on 0:02:42.160 --> 0:02:44.200 half of the year. I think what the market is 0:02:44.240 --> 0:02:46.720 going to differentiate going forward, and this is where we're 0:02:46.760 --> 0:02:50.440 allocating in our portfolios, is to quality. So this becomes 0:02:50.560 --> 0:02:54.600 much more a conversation around those companies with strong balance 0:02:54.639 --> 0:02:57.760 sheets that have the ability to grow their earnings, have 0:02:57.880 --> 0:03:00.760 the ability to grow their dividends, which is very important 0:03:00.760 --> 0:03:03.400 in this rates environment, and so earnings are really going 0:03:03.440 --> 0:03:06.720 to drive this conversation and fundamentals going forward. So a 0:03:06.760 --> 0:03:08.760 flight to quality. You have a lot of other calls 0:03:08.800 --> 0:03:11.440 to get a little bit more defensive within this equity market, Kristen, 0:03:11.480 --> 0:03:14.560 But is it time to go to cash? So we 0:03:14.639 --> 0:03:17.000 do not believe it's time to go to cash. So cash, 0:03:17.520 --> 0:03:20.800 there's really multiple purposes of cash. Right from an investor perspective, 0:03:21.040 --> 0:03:23.480 one of course, have a safety net, have your operating 0:03:23.560 --> 0:03:26.359 cash what you need. But in terms of an investment, 0:03:26.480 --> 0:03:30.000 right now, when we look at the inflationary pressures, this 0:03:30.080 --> 0:03:33.000 is an asset that's guaranteed to lose money. And so 0:03:33.120 --> 0:03:35.960 if you want some tactical cash in your portfolio because 0:03:36.000 --> 0:03:38.520 you are there to buy the dip, you can confidently 0:03:38.560 --> 0:03:41.120 buy the dip. There's some value in that. But what 0:03:41.160 --> 0:03:43.400 we're seeing in a lot of investors portfolios, and we've 0:03:43.400 --> 0:03:46.200 seen this for several months, is a lot of cash 0:03:46.240 --> 0:03:48.840 sitting on the sidelines. So this is no longer about 0:03:48.880 --> 0:03:52.280 an investment decision. This is really someone trying to market time, 0:03:52.320 --> 0:03:55.080 which doesn't work in the short run or the long 0:03:55.200 --> 0:03:57.200 run for that matter. Christan, just to conclude, I want 0:03:57.240 --> 0:03:59.280 to go through this research report and might get really 0:03:59.280 --> 0:04:01.640 clear some of the think that you're highlighting. Lumber down 0:04:01.680 --> 0:04:04.840 sevent since May on all down thirty percent of the 0:04:04.880 --> 0:04:07.400 same time period, Chinese equities down thirty percent is the 0:04:07.400 --> 0:04:10.200 middle of February. Brasilian equities getting hammered as well. US 0:04:10.240 --> 0:04:12.880 small camps down to performing is the middle of March 0:04:13.600 --> 0:04:15.840 at the time of publishing those numbers are assume were correct, 0:04:15.880 --> 0:04:18.440 and I'm sure they're still there and they're abouts the same, 0:04:18.560 --> 0:04:22.320 christin what's the punch line here? So the punch line 0:04:22.440 --> 0:04:25.880 is despite a lot of the central bank support and liquidity, 0:04:26.040 --> 0:04:28.960 markets are differentiating, right, and that's that's quite healthy. I 0:04:29.000 --> 0:04:31.280 think what you need to do as an investor again 0:04:31.320 --> 0:04:33.800 always bringing this back to actionable ideas and what we 0:04:33.800 --> 0:04:36.320 can do within our portfolios, is this becomes a period 0:04:36.360 --> 0:04:38.760 of being selective. Right, this is not a market of 0:04:38.839 --> 0:04:41.520 everything is going to go up, everything is going to win, 0:04:41.680 --> 0:04:44.479 and so being selective not only in terms of regions 0:04:44.480 --> 0:04:46.400 of the world that you're in, as you've been discussing 0:04:47.040 --> 0:04:50.200 all morning, but also in terms of security selection because 0:04:50.240 --> 0:04:53.279 there will be winners and losers based on fundamentals and earnings. 0:04:53.320 --> 0:04:55.080 Christ and always got to cash out with you. Thanks 0:04:55.080 --> 0:05:04.120 for being with us. Christin Biddley there of city people 0:05:04.120 --> 0:05:06.720 have missed out on the upside, how much becomes above 0:05:06.760 --> 0:05:09.719 love and response where if in doubt by right and 0:05:09.760 --> 0:05:12.080 this idea that if you miss out, you will just 0:05:12.160 --> 0:05:14.120 keep missing out, because that's how it has been over 0:05:14.160 --> 0:05:17.600 the past twenty years. What breaks that paradigms brund shooting. 0:05:17.600 --> 0:05:20.279 Now we can do that with Northwestern's Mutual Wealth Management 0:05:20.320 --> 0:05:24.400 chief investment strategist Brend your words, investors and the three 0:05:24.440 --> 0:05:27.240 camps they fall into right now, Those were the economy 0:05:27.279 --> 0:05:30.720 is growing too fast, those worried growth is peaking, and 0:05:30.760 --> 0:05:34.600 those worried stock valuations are simply too high. Are you 0:05:34.640 --> 0:05:37.640 in any of those three camps right now? Brent, No, 0:05:37.800 --> 0:05:39.280 It was something we worried about. So we got to 0:05:39.520 --> 0:05:43.320 mayor June and economic growth was finally strong, COVID cases 0:05:43.320 --> 0:05:45.600 were declining, and we all set around and thought about 0:05:45.600 --> 0:05:47.520 what is next. And I think as you've kind of 0:05:47.520 --> 0:05:50.560 been tweaking, lisagested that people were worried about those three 0:05:50.600 --> 0:05:53.599 things occurring. That was where the worries were. We see 0:05:53.600 --> 0:05:55.640 each one of those subsiding as you move towards the 0:05:55.720 --> 0:05:57.360 end of the year, and that to us means a 0:05:57.440 --> 0:06:01.719 higher equity market led by more cyclical aspects of the market. 0:06:01.760 --> 0:06:05.440 So think value stocks, think uh, small cap stocks, and 0:06:05.480 --> 0:06:08.120 think the Eurozone, and so we do think there's room 0:06:08.200 --> 0:06:10.600 left to run. It's just you've had this defensive versus 0:06:10.640 --> 0:06:13.960 cyclicals defenses have really won the day over the summer. 0:06:14.000 --> 0:06:15.560 But I think it's because of those three worries, and 0:06:15.560 --> 0:06:17.520 I think each one of those three pulls back into 0:06:17.560 --> 0:06:18.880 the end of the year, and I think that's the 0:06:18.880 --> 0:06:20.920 impetus for the rally that we expect to occur. Bright, 0:06:21.000 --> 0:06:24.200 Let's try to put some quantification around how much room 0:06:24.240 --> 0:06:26.839 there is to rally. What kind of returns are you 0:06:26.920 --> 0:06:29.479 expecting are you shooting for with the likes of a 0:06:29.560 --> 0:06:32.400 small cap bet at this point in the cycle. Well, 0:06:32.440 --> 0:06:34.560 I mean, I think everything is less than it was before, correct, 0:06:34.600 --> 0:06:35.920 And so if I think back to last year, we 0:06:35.960 --> 0:06:38.279 went overweight equities with an uncertain outcome, but but the 0:06:38.279 --> 0:06:40.960 opportunities that was so wide. I think about today, I'm 0:06:40.960 --> 0:06:43.599 a bit more certain about what the economy holds pushing forward. 0:06:43.800 --> 0:06:47.280 There are still, as always uncertainties, but the opportunity set 0:06:47.279 --> 0:06:49.400 is smaller, and so I think about relative performance more 0:06:49.600 --> 0:06:51.839 and I think small caps are set to outperform their 0:06:51.960 --> 0:06:54.839 large cap counterparts, and the Eurozone is set to outperform 0:06:54.880 --> 0:06:58.400 probably both of those and so much much more muted returns, 0:06:58.680 --> 0:07:01.160 but still in the contact of a tenure treasury. As 0:07:01.160 --> 0:07:04.599 you opened the show at one two three. Whatever it 0:07:04.680 --> 0:07:09.320 is today, stocks are still a relative valuation advantage towards 0:07:09.400 --> 0:07:12.119 bonds and that isn't changing until the ten your treasury changes, 0:07:12.160 --> 0:07:14.560 and that's still where central banks are impacting the most. Well, 0:07:14.560 --> 0:07:16.160 brend I'm glad you brought that up because we were 0:07:16.160 --> 0:07:19.160 having a conversation in the previous hour about big tech 0:07:19.200 --> 0:07:21.280 and how it was kind of unusual that we had 0:07:21.320 --> 0:07:23.520 record highs for the Fang stocks yesterday on a day 0:07:23.560 --> 0:07:25.920 when yields actually rose. But when we saw the low 0:07:26.320 --> 0:07:28.200 for the NASDAC one hundred this year, it was on 0:07:28.280 --> 0:07:30.240 March eighth, and the tenure treasury yield was at one 0:07:30.320 --> 0:07:33.440 sixty on that day. We are still twenty five basis 0:07:33.520 --> 0:07:37.120 points below that. So can you make a case really 0:07:37.160 --> 0:07:41.360 against big tech if yields kind of stay in this range? Yeah? 0:07:41.400 --> 0:07:42.880 And I mean I think it's more of an economic 0:07:42.920 --> 0:07:44.680 growth and what's keeping the treasury in that range? And 0:07:44.720 --> 0:07:46.520 so is it tapering as a distortion? Is it just 0:07:46.560 --> 0:07:49.000 a lot of liquidity around the globe? Um? I just 0:07:49.040 --> 0:07:51.000 think the small cap in the cycnical trade to me, 0:07:51.040 --> 0:07:53.360 is more tied to strong economic growth that I think 0:07:53.360 --> 0:07:56.680 people were worried about or peaking. UM. If anything, it's 0:07:56.680 --> 0:07:59.120 a plateau. You have companies with huge amounts of new 0:07:59.200 --> 0:08:03.520 orders hugh backlogs order UH and low inventories. You have 0:08:03.560 --> 0:08:06.080 consumers with incredibly strong balance sheets who have probably been 0:08:06.120 --> 0:08:08.320 pushed out just a bit because of what Delta has done. 0:08:08.640 --> 0:08:11.280 And so I think you continue to see economic growth 0:08:11.320 --> 0:08:13.880 that remains strong. I'm not for sure what the tenor 0:08:13.960 --> 0:08:16.360 Treasury does. I expected to have an upward biass tapering 0:08:16.400 --> 0:08:18.760 is announced, but I think all those things point to 0:08:18.760 --> 0:08:20.920 an economic cycle that lasts just a bit longer and 0:08:21.080 --> 0:08:25.320 is a bit higher for a while. UH and valuation. 0:08:25.600 --> 0:08:28.760 We think many economic cycle investors are ignoring still points 0:08:28.760 --> 0:08:31.320 to small caps and value stocks are being cheap relative 0:08:31.320 --> 0:08:33.839 to their counterparts brand. You mentioned small caps, small caps 0:08:33.880 --> 0:08:37.240 over large caps. You mentioned cheap. A lot of people 0:08:37.280 --> 0:08:39.360 would say Europe cheap in the Owned States, and we've 0:08:39.360 --> 0:08:41.599 said that for a long long time. You touched on 0:08:41.640 --> 0:08:43.520 the euro Zone and talked about the potential for our 0:08:43.600 --> 0:08:47.000 performance there. What do you like about Europe? Bren It's 0:08:47.080 --> 0:08:49.599 much more cyclically inclined, and so they set up of 0:08:49.640 --> 0:08:52.080 the index is much more cyclical in nature. Europe has 0:08:52.080 --> 0:08:53.560 been cheap for a while. It was in need of 0:08:53.559 --> 0:08:56.240 a catalyst. It actually has that now the Central Bank 0:08:56.240 --> 0:08:58.440 there has done things quite frankly, that they hadn't done 0:08:58.440 --> 0:09:00.720 in the past. Germans have even gone on a fiscal 0:09:00.720 --> 0:09:02.720 stunding spree. And so I just think that you have 0:09:03.320 --> 0:09:05.920 strong cyclical economic growth for really the first time in 0:09:06.000 --> 0:09:08.360 ten years to twelve years, and I think that's a 0:09:08.400 --> 0:09:11.439 backdrop for yours on stock Stanley being appreciated by investors. Brent. 0:09:11.520 --> 0:09:15.199 There's a column in the Telegraph by Ambrose Evans Pritcher 0:09:15.320 --> 0:09:17.920 talking about how Germany does. Those seem to be losing 0:09:17.960 --> 0:09:21.720 patients with quantitative easing, and they're starting to indicate perhaps 0:09:21.720 --> 0:09:24.719 they don't want to keep the pedal going for as 0:09:24.760 --> 0:09:27.920 long as they have for the foreseeable future. This really 0:09:27.960 --> 0:09:30.559 bleeds into the potential for taper talk tomorrow at the 0:09:30.600 --> 0:09:33.840 ECB meeting. If they were to start talkering and talking 0:09:33.840 --> 0:09:38.080 about tapering, their QUI will that change your view on Europe? Yeah, 0:09:38.080 --> 0:09:40.160 it's certainly a risk. And I think of UM, the 0:09:40.200 --> 0:09:42.120 Central Banks right now is three yards in a cloud 0:09:42.120 --> 0:09:44.120 of dust. So sorry, Jonathan, just a different football game 0:09:44.120 --> 0:09:46.839 than you're used to, UM. But they're advancing the ball 0:09:46.880 --> 0:09:48.920 slowly to try not to get any market reaction, and 0:09:48.920 --> 0:09:51.600 I think central banks around the globe, I think people 0:09:51.640 --> 0:09:53.880 need to stop focusing on their day to day operations 0:09:53.880 --> 0:09:56.480 and focus on their action function. And it's still to 0:09:56.520 --> 0:09:58.640 do more, not to do less. Certainly the years on, 0:09:58.760 --> 0:10:01.400 probably a bit less than the US, but in general, 0:10:01.480 --> 0:10:04.880 overall central banks stand at the ready and we'll continue 0:10:04.920 --> 0:10:06.839 to do so until there's a cost on either side. 0:10:07.720 --> 0:10:09.720 Right now, I know there's talking inflation, but that cost 0:10:09.840 --> 0:10:12.560 is still relatively low. Interest rates are well behaved, and 0:10:12.600 --> 0:10:15.160 they've failed on their mandate for ten years. They're going 0:10:15.200 --> 0:10:17.079 to push as hard as they can for as long 0:10:17.120 --> 0:10:20.080 as they can, as long as inflation allows them to 0:10:20.080 --> 0:10:22.040 do so. And I just think that as you move 0:10:22.080 --> 0:10:23.439 into the end of the year, inflation is going to 0:10:23.520 --> 0:10:25.840 pull back and that taper talk and everything else going 0:10:25.880 --> 0:10:28.080 to subside just a bit. Is that football with the 0:10:28.120 --> 0:10:33.160 hands they used the hands for the hands, three yards 0:10:33.160 --> 0:10:35.760 in a cloud of dust towards the goal line. Is 0:10:35.760 --> 0:10:37.839 this good? Is this a good? Tom Keane? It's an 0:10:37.840 --> 0:10:44.600 oblong round ball. Thank your French Northwestern Mutual Wealth Management 0:10:44.640 --> 0:10:52.760 chief investment strategist. I'm pleased to say that my good friend, 0:10:52.800 --> 0:10:56.160 my old buddy Bloomberg's Manners Cranny standing by in Cairo. 0:10:56.640 --> 0:10:58.800 Mannus go to hear from you, sir, and just look 0:10:58.840 --> 0:11:00.640 at that chair. If only the could see this on 0:11:00.840 --> 0:11:08.160 radio A palatial Mannas Cranny this morning, Jonathan, New York, 0:11:08.200 --> 0:11:11.240 thank you very much for the welcome. Yes, we are 0:11:11.320 --> 0:11:15.240 in the Ministry of Foreign Affairs at a very timely moment. 0:11:15.520 --> 0:11:19.440 Were joined by his Excellency Summer Chokri, the Foreign Minister 0:11:19.600 --> 0:11:23.800 for Egypt. Sir, thank you for having us into your office. 0:11:23.920 --> 0:11:27.560 Is at a grand home. It's an interesting time in 0:11:27.559 --> 0:11:32.520 our region. Biden is delivering on Trump's plan to leave Afghanistan. 0:11:32.679 --> 0:11:36.400 That is done. What does that mean for the Middle 0:11:36.440 --> 0:11:43.200 East for you? Certainly, the ongoing conflict in in Afghanistan 0:11:43.360 --> 0:11:47.800 and Iraq has burdened the region quite substantially over the years, 0:11:47.840 --> 0:11:52.640 and the departure, of course from Afghanistan has its ramifications 0:11:52.720 --> 0:11:58.400 and will be followed and deliberated upon within the context 0:11:58.480 --> 0:12:03.320 of uh the other region. Tomorrow we have a meeting 0:12:03.360 --> 0:12:07.840 of the Ministerial Arab League and that issue will will 0:12:07.880 --> 0:12:12.800 come will be a focus of discussions between the ministers. Undoubtedly, 0:12:14.200 --> 0:12:19.280 transformation of this nature and this magnitude will have interesting repercussions, 0:12:19.320 --> 0:12:21.480 and we are wait to see what those repercussions are 0:12:21.520 --> 0:12:26.040 in terms of how the the new Taliban government will operate, 0:12:26.280 --> 0:12:29.880 how it will sustain the commitments that it has made, 0:12:29.920 --> 0:12:36.360 and and how we can have a the security and 0:12:36.400 --> 0:12:40.680 the stability of the region within the newly existing situation. 0:12:40.920 --> 0:12:44.240 But do you see this as a disengagement by the 0:12:44.280 --> 0:12:48.640 Biden administration making this region more unstable? Uh? No, I 0:12:49.080 --> 0:12:51.679 don't think the United States has a superpower, as a 0:12:52.920 --> 0:12:57.559 power with both interests and very deep relationships with the 0:12:57.600 --> 0:13:00.280 countries of the Middle East, is in a position or 0:13:00.360 --> 0:13:03.600 can disengage. I think it will continue to rely on 0:13:03.679 --> 0:13:10.439 its traditional relationships and partnerships among them with Egypt strategic ally, 0:13:10.559 --> 0:13:15.840 and will continue to extract its interests and also provide 0:13:16.200 --> 0:13:21.280 the security and the stability that the region needs. My 0:13:21.320 --> 0:13:22.960 assessment as I got on the plane to come to 0:13:23.000 --> 0:13:27.760 Carl is there is a tectonic shift in discussions between 0:13:28.160 --> 0:13:31.240 the nations here in the Middle East. Would you describe 0:13:31.280 --> 0:13:35.880 that between yourselves and and Turkey, the UAE and Turkey, 0:13:35.920 --> 0:13:39.040 there is in my mind a tectonic shift. Do you agree? 0:13:40.160 --> 0:13:44.600 Not necessarily, I agree that the region is undergoing a 0:13:44.720 --> 0:13:50.439 very turbulent and volatile situation where there has been, of course, 0:13:50.640 --> 0:13:56.400 conditions that have not been readily contributing to the peace 0:13:56.400 --> 0:13:59.640 and security of the region. We have conflicts in Libya, 0:13:59.760 --> 0:14:03.680 in Yemen, in of course, the situation of terrorism and 0:14:03.679 --> 0:14:06.720 and the threats the current situation in Syria and Lebanon. 0:14:07.240 --> 0:14:10.280 These are all issues that have to be addressed, and 0:14:10.440 --> 0:14:12.439 I think it is in the best interest of the 0:14:12.520 --> 0:14:18.439 nations of the region to uh expand the communications and 0:14:18.520 --> 0:14:22.600 the understandings that can provide for the security and stability. 0:14:22.880 --> 0:14:26.560 You're a boy to enter blind too of discussions with Turkey. 0:14:26.680 --> 0:14:31.880 Egypt Turkey upgrade bilateral relationship. What does that mean? Will 0:14:32.000 --> 0:14:35.640 you store diplomatic ties at this stage? This is the 0:14:35.680 --> 0:14:40.280 second round of exploratory talks between Egypt and Turkey. This 0:14:40.440 --> 0:14:44.000 comes at the invitation of the Turkish government. We have 0:14:45.880 --> 0:14:50.040 ben eager to find a resolution and to find the 0:14:50.120 --> 0:14:55.920 necessary formula for regaining the normal relations between the two countries. 0:14:55.960 --> 0:14:58.280 But I think at this stage we still have to 0:14:59.240 --> 0:15:02.800 evaluate the the outcome of this second round of discussions 0:15:03.400 --> 0:15:08.080 and primarily the context of the bilateral relations. The bilateral 0:15:08.120 --> 0:15:13.680 relations and certain measures that were taken by Turkey need 0:15:13.760 --> 0:15:18.600 to be somehow addressed, and when we are satisfied that 0:15:18.680 --> 0:15:22.320 those issues have been resolved, that will open the door 0:15:22.400 --> 0:15:25.080 for further progress. I have a lot to get through, 0:15:25.200 --> 0:15:28.560 and time, of course, is a natural enemy. But if 0:15:28.600 --> 0:15:30.640 I say to you in a suctinct way, what do 0:15:30.680 --> 0:15:33.840 you need to see from the text to move forward 0:15:33.920 --> 0:15:35.760 to restore a by lateral relations, what would that be. 0:15:36.000 --> 0:15:41.000 We have provided Turkey with a with our assessment and 0:15:41.120 --> 0:15:47.040 our requirements. I think they very well comprehend and can 0:15:47.800 --> 0:15:51.040 fulfill all of these issues, and we hope that they 0:15:51.080 --> 0:15:55.480 do so that we can move forward on the renaissance. Damn. 0:15:55.840 --> 0:15:59.480 It's a very contentious issue, obviously, and you've tried to 0:15:59.560 --> 0:16:02.640 arbitrate with Ethiopia, and several times President CC has said 0:16:02.680 --> 0:16:06.840 all options are on the table, including military action. Sir, 0:16:07.240 --> 0:16:10.200 are you prepared to take military action against Ethiopia? The 0:16:10.240 --> 0:16:14.240 President has never indicated that he would be taking military action, 0:16:14.360 --> 0:16:17.120 But I think the terminology has always been that for 0:16:17.200 --> 0:16:20.920 any country, all options are always open, and we have 0:16:21.240 --> 0:16:25.200 committed ourselves to the negotiating process. We have endorsed the 0:16:25.280 --> 0:16:28.720 negotiations over the last ten years, and we have supported 0:16:28.760 --> 0:16:31.880 the negotiations of the African Union under the chairmanship of 0:16:31.960 --> 0:16:35.920 Presidents Acadia, and they'll continue to seek an enhanced stroll 0:16:36.040 --> 0:16:39.560 for the observers to help the parties to find a resolution. 0:16:39.600 --> 0:16:43.000 Would you do everything to avoid conflict? Definitely. I think 0:16:43.000 --> 0:16:47.360 nobody seeks conflict. We have been committed over ten years 0:16:47.400 --> 0:16:51.840 to a peaceful resolution of this issue based on international law, 0:16:51.880 --> 0:16:55.560 based on best practice, and I think we are still 0:16:56.120 --> 0:16:59.480 would seek that the political will of the Ethiopian government 0:16:59.600 --> 0:17:03.560 is demon strated by signing an agreement. Thank you very 0:17:03.640 --> 0:17:06.240 much for joining us, Foreign Minister, thank you for the 0:17:06.280 --> 0:17:08.440 welcome to the country. I hope that we come back again. 0:17:08.640 --> 0:17:12.800 Sally Schell create the Foreign Minister for agent joining me. Uh, 0:17:12.920 --> 0:17:15.000 it's been a great trip and I've got to say 0:17:15.359 --> 0:17:17.320 when it comes to when it comes to offices, sir, 0:17:18.119 --> 0:17:20.760 I think you're on a winning trade. Thank you very much. 0:17:20.760 --> 0:17:29.400 Sick joining us now is the man himself, David Rubinstein, 0:17:29.480 --> 0:17:31.240 the co founder of the Carlisle Group, but of course 0:17:31.280 --> 0:17:33.920 the host of its fantastic show, Reid Hoffman, a really 0:17:33.960 --> 0:17:36.400 important person to be talking to at this moment where 0:17:36.440 --> 0:17:39.359 we see this tech battle really heating up between the 0:17:39.440 --> 0:17:42.760 US and China. Where did he sort of throw his 0:17:42.880 --> 0:17:46.119 hat in terms of which region had the upper hand 0:17:46.520 --> 0:17:51.200 in this tussle. There's no doubt that the Silicon Valley 0:17:51.240 --> 0:17:53.800 has had the upper hand for decades. But he does 0:17:53.880 --> 0:17:57.119 think that China is now competing effectively with the United States. 0:17:57.440 --> 0:18:01.000 And you have these two polar opposite in effect, China 0:18:01.080 --> 0:18:04.520 with one system for entrepreneurial activity and Silicon Valley with another. 0:18:04.920 --> 0:18:06.800 And he thinks that China is doing what he calls 0:18:06.800 --> 0:18:09.840 blitz scaling, which means building very large companies. That's what's 0:18:09.840 --> 0:18:13.280 happened in the United States with Amazon and Apple and Netscape, 0:18:13.359 --> 0:18:16.080 very large companies that operate at scale. And he thinks 0:18:16.080 --> 0:18:18.359 that China is doing the same thing. Well, that's the 0:18:18.640 --> 0:18:21.320 bigger picture. And yet the micro picture has been an 0:18:21.359 --> 0:18:24.040 increasing crackdown on some of these behemoths, and some of 0:18:24.040 --> 0:18:27.000 the blitz creeged companies are the companies that have benefited 0:18:27.160 --> 0:18:29.440 from their approach. How does he view that, I mean, 0:18:29.440 --> 0:18:31.480 does he believe that that will foster innovation and the 0:18:31.480 --> 0:18:36.720 potentially put a damper on it by raising regulatory uncertainty. Well, 0:18:36.760 --> 0:18:38.879 clearly in China wants to make it clear that the 0:18:39.000 --> 0:18:42.080 Chinese government is the most important thing in Chinese society, 0:18:42.440 --> 0:18:45.000 and once the entrepreneurs recognized that they can go about 0:18:45.040 --> 0:18:48.280 their business. But clearly China doesn't want companies that are 0:18:48.320 --> 0:18:51.400 more powerful than the President of China or their entrepreneurs 0:18:51.440 --> 0:18:53.679 being more powerful, so they have had some kind of 0:18:53.680 --> 0:18:57.840 crackdown or or regulatory constraints. We haven't had quite the 0:18:57.880 --> 0:18:59.960 same thing in the United States. So the American entrepreneur 0:19:00.320 --> 0:19:03.080 are free to build companies without the kind of constraints 0:19:03.080 --> 0:19:05.800 and concerns that now some people have in China. Well, 0:19:05.840 --> 0:19:08.240 talking about building companies, David, it's it's Kaylee Lines in 0:19:08.240 --> 0:19:10.880 New York. Good morning to you. You mentioned their Apple, Amazon, 0:19:10.920 --> 0:19:13.480 these behemous we have seen grow here in the US. 0:19:13.800 --> 0:19:18.359 Does he believe that those companies are getting too large? Well, 0:19:18.400 --> 0:19:20.919 he doesn't say that in part because remember he is 0:19:21.280 --> 0:19:23.639 a person I think he's still on the Microsoft board. 0:19:23.680 --> 0:19:26.480 He's sold linked In, which he built to Microsoft, so 0:19:26.560 --> 0:19:28.840 he'd be difficult for him to say that Microsoft is 0:19:28.880 --> 0:19:31.400 becoming too big and too powerful, So he doesn't really 0:19:31.400 --> 0:19:33.840 say that. He does say that we now have five 0:19:33.840 --> 0:19:36.960 of these gigantic technology companies United States, and we're gonna 0:19:37.000 --> 0:19:39.119 get ten of them soon. So a company that like 0:19:39.320 --> 0:19:42.320 say Salesforce will become one of those kind of companies, 0:19:42.560 --> 0:19:44.600 or Netflix will become one of those kind of companies, 0:19:44.720 --> 0:19:46.800 which they are are big now, but they're gonna be 0:19:46.880 --> 0:19:49.200 much much bigger. So he doesn't worry because he thinks 0:19:49.200 --> 0:19:51.160 they're gonna be more and more of these gigantic companies, 0:19:51.200 --> 0:19:53.000 not fewer and fewer of them. And are those the 0:19:53.040 --> 0:19:55.280 kind of companies he's interested in getting into now or 0:19:55.320 --> 0:19:59.200 what would you favor? Well, he's a venture investor. He's 0:19:59.200 --> 0:20:02.080 at Graylock, very good venture firm. He's an entrepreneur who 0:20:02.160 --> 0:20:04.600 built linked In and helped to build PayPal, but he's 0:20:04.640 --> 0:20:07.399 also a venture investor. He was an early investor in Facebook, 0:20:07.480 --> 0:20:10.160 an early investor in Airbnb. So he likes to find 0:20:10.200 --> 0:20:13.119 young entrepreneurs who are really talented, have a good idea, 0:20:13.320 --> 0:20:16.200 and back them. So he's an unusual mix of being 0:20:16.200 --> 0:20:19.440 an entrepreneur and a venture investor and a very successful 0:20:19.480 --> 0:20:23.560 angel investor as well. David yourself also being a pretty 0:20:23.600 --> 0:20:27.040 big investor in companies at the earlier stages. There is 0:20:27.080 --> 0:20:30.720 a question of what the structure of such dominant tech 0:20:30.760 --> 0:20:34.080 behemoths at the top does for innovation for some of 0:20:34.119 --> 0:20:36.359 the smaller companies. In other words, how much of a 0:20:36.359 --> 0:20:39.840 competitive competitive advantage can they have and how much UH 0:20:40.040 --> 0:20:42.960 can they get with respect to data, which reigns supreme. 0:20:44.160 --> 0:20:46.960 There's no doubt that the large technology companies now have 0:20:47.080 --> 0:20:49.480 a lot of data and they're using it, they would say, 0:20:49.480 --> 0:20:52.439 for their purposes, their corporate purposes. But there's always going 0:20:52.480 --> 0:20:55.479 to be entrepreneurs, always somebody with a new idea, somebody 0:20:55.480 --> 0:20:57.720 that is very creative. And he likes to back people 0:20:58.000 --> 0:21:00.080 who he thinks have a vision of where they to 0:21:00.160 --> 0:21:02.520 go and have the capability of getting there. And it's 0:21:02.520 --> 0:21:04.639 a different skill set than being an entrepreneur, where you 0:21:04.640 --> 0:21:06.880 have to have the vision yourself and build a company. 0:21:07.160 --> 0:21:10.080 But reen Hoffman is a very talented individual, and when 0:21:10.119 --> 0:21:12.080 he's in the room, it's pretty clear he's always the 0:21:12.119 --> 0:21:14.679 smartest person in the room. But he doesn't tell people that, 0:21:14.960 --> 0:21:16.800 and so he has a certain modesty that I think 0:21:16.880 --> 0:21:19.080 reflects the fact that he's very secure in who he 0:21:19.200 --> 0:21:21.720 is and he's very well respected by his colleagues. Lots 0:21:21.720 --> 0:21:24.040 of times you have very bright people and behind their back, 0:21:24.080 --> 0:21:26.600 people are snickering about them because their egos too big, 0:21:26.680 --> 0:21:28.600