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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hortenn. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App.

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Speaker 3: Special guest john He's called Jamie Diamond. He runs JP

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Speaker 3: Morgan and I'm delighted to speak to him. Jamie Diamond,

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Speaker 3: thank you for joining us.

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Speaker 4: It's happy to be here.

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Speaker 3: Hey, there's a lot going on. It's trade wars, markets

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Speaker 3: up and down. What did you learn in the last month?

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Speaker 5: Not much other than we have all this uncertainty, you know,

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Speaker 5: some preceded the new administration, like we had large deficits,

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Speaker 5: intro rates going up and place going up, and some

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Speaker 5: are you know, tariffs and things, and of course the

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Speaker 5: geopolitical situation is very tense, very difficult and hard to resolve.

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Speaker 3: Okay, so if you forget projections numbers, what's your hunch.

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Speaker 3: Is the UYS going to go into a recession or not.

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Speaker 5: Look, I'm going to defer to economists who give it

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Speaker 5: about a fifty percent chance. I think all these things

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Speaker 5: are probably inflationary a little bit more and slowing down

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Speaker 5: the economy. If there's a recession, I don't know how

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Speaker 5: big it'll be or how long it will last. Hopefully

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Speaker 5: we'll avoid it, but I wouldn't take it off to

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Speaker 5: the table at this point.

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Speaker 3: If you look at you know, the trade war and

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Speaker 3: then the somewhat reconciliation between the US and China, does

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Speaker 3: it hold.

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Speaker 5: I think it's the right thing to do is to

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Speaker 5: back off of some of that stuff, you know, to

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Speaker 5: have an engage in conversation. I'm grateful they did the

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Speaker 5: US UK deal. You know, it's an agreement in principle.

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Speaker 5: So you know, there's a lot of one sertaty still

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Speaker 5: and there's all of one sturdy still in the China thing.

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Speaker 5: But at least we started and obviously calms down the markets.

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Speaker 5: That's not the reason to do it, but the markets,

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Speaker 5: you know, or something like that. And so you'll tell

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Speaker 5: uncertainty to resolve the ninety day triggers a lot of

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Speaker 5: these things and hopefully they will be resolved.

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Speaker 4: What are your with your complex?

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Speaker 5: I don't expect immediate resolution, you know, it's the satisfaction

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Speaker 5: of everybody in ninety days.

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Speaker 3: But you expect markets to settle from here because we

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Speaker 3: have a little bit more of a blueprint or could

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Speaker 3: volatility pick back up in any second?

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Speaker 5: No, markets are quite unpredictable. I think there's a lot

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Speaker 5: of uncertainty out there that you can't discount, you know

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Speaker 5: when I you know, war in Ukraine, territor in the

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Speaker 5: Middle East, you know, I ran. You know, huge deficits

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Speaker 5: are tax bill, which I would like to see a

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Speaker 5: good tax bill pass, you know, the terrorists, the reaction

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Speaker 5: of country to tariffs. The EU and the UK are

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Speaker 5: about to negotiate. I think they have a chance to

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Speaker 5: actually develop a great relationship, you know, partially making up

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Speaker 5: for you know, the disaster the Brexit became, and so, yeah,

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Speaker 5: those those are unsurtgerties. You can't eliminate them because you

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Speaker 5: want to.

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Speaker 3: But what are your biggest clients saying about this market volatility?

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Speaker 3: Have they made money on the back of it?

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Speaker 4: Yeah? Some, you know, some doing some don't.

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Speaker 5: And you know, volatility volatier would be good or bad

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Speaker 5: depending on you know, who's who's facing it. So but

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Speaker 5: but I would expect continued volatility. I think it's a

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Speaker 5: mistake to think we can go through all the things

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Speaker 5: we're going through and the volatility itself will come down.

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Speaker 3: Has it been good for JP margin?

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Speaker 4: Was there?

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Speaker 6: You know trading?

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Speaker 5: Yes, because when there's volatility is a very simplistic way

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Speaker 5: to look at, spreads gap out and traders make more

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Speaker 5: money if there's more volume. So we had both this time,

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Speaker 5: more volatilely more volume, because very often you have a

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Speaker 5: lot of volatility and spreads gap out there's much less volume.

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Speaker 5: So you've seen examples where there's good volatility and there's

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Speaker 5: bad Volatilely, this just one happened to be good. The

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Speaker 5: next go around may not be so good, Jamie.

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Speaker 3: When it comes to financials, I mean, you know a

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Speaker 3: lot of I guess non bank entrants are making quite

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Speaker 3: a lot of way Citadel Jane Street, is that, you know,

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Speaker 3: a concern for the banks shouldn't be a problem for

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Speaker 3: the banks.

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Speaker 5: I would call it a problem. You know that both clients.

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Speaker 5: I'm very capable, you know, but I've always had the

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Speaker 5: view there are a lot of competitors out there, and

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Speaker 5: you know, all the major banks are back. I think

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Speaker 5: that's a good thing for the world. You know, maybe

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Speaker 5: not so much for Jamie Morgan. There's you mentioned those two,

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Speaker 5: There's Apollo, There's a lot of fintech, some very good ones.

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Speaker 5: There's Stripe, there's PayPal. Yeah, my view has always been

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Speaker 5: the same. I tell them magic, Assume competition, Assume they're

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Speaker 5: coming at you in every angle. Assume they often have

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Speaker 5: their own strength, sometimes their own weaknesses. They won't all

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Speaker 5: do great, but yeah, I think they're you know, some

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Speaker 5: of these people gaining quite a bit of shared parts

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Speaker 5: of their business. We still are too, by the way,

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Speaker 5: So you know we're in the fight. We're not losing

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Speaker 5: out very much. But that doesn't mean you won't lose

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Speaker 5: out tomorrow because you're winning today.

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Speaker 2: So what do you have to do today?

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Speaker 3: How do you see the people that are doing, you know,

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Speaker 3: well today doing even better tomorrow.

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Speaker 5: It's about us are other people both? It's quality of people.

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Speaker 5: You interviewed Pranav. I mean we have exceptional people in investment,

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Speaker 5: banking and sales and training, And I say I put

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Speaker 5: right next to that technology, but it's related because those

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Speaker 5: people deploying technology. So there are thousands of technology project,

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Speaker 5: then there are hundreds of AI projects, all of which

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Speaker 5: are meant to do a better job for customers, consumer research,

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Speaker 5: how we deliver things to people. And if you don't move,

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Speaker 5: you know you're going to be left behind. I mean,

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Speaker 5: I remind you could be a country or a company.

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Speaker 5: You do not have a divine right to success. You know,

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Speaker 5: we mentioned as management learnings as I did. You can

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Speaker 5: see it on YouTube and all that. But I put

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Speaker 5: out to people, look at the bank, look at no Keia, BlackBerry, Sears, Kmart,

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Speaker 5: Bearster Lehman, I can chapter of diverse a failed companies

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Speaker 5: usually because they're complacent, arrogant. They think they're on the

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Speaker 5: top of the top of the world and they're not.

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Speaker 5: There are competitors coming everywhere, and you should assume that's

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Speaker 5: gonna be true.

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Speaker 3: Do you see competitors coming for the US?

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Speaker 4: Yeah? Where are Europe? Are about the countries?

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Speaker 3: The countries?

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Speaker 7: Yeah?

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Speaker 4: Yeah, I think Europe.

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Speaker 5: Let me just ask. I think Keirstormer, Mers and Macrone.

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Speaker 5: I think Macron is one the best political leaders in

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Speaker 5: the planet today. Okay, I think here Stormer is smart, devoted.

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Speaker 5: They're saying the right things public and privately, all of

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Speaker 5: them talking about growing the economies, thank god, pro business,

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Speaker 5: pro capital, and they're doing all of that to improve

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Speaker 5: the lot of their citizens.

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Speaker 4: It's not about what they're doing for JP.

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Speaker 6: Morgan.

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Speaker 5: And if I was Europe, absolutely i'd want to regret

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Speaker 5: live in the UK military, economic, and I would reform

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Speaker 5: as best I can all of European things. What they're

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Speaker 5: all talking about now, deregulation, simplification, and yeah, they try

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Speaker 5: to compe America, and that would be good for America.

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Speaker 5: That doesn't make me said, it makes me happy that

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Speaker 5: they're strong. And then you know their allies. I want

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Speaker 5: our allies to be strong and powerful military and economically.

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Speaker 3: Do you worry about US supremacy actually exceptionalism, Yeah, I.

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Speaker 5: Look, I never believe here quite that exceptional. I mean, remember,

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Speaker 5: America is an unbelievable country with freedoms and the gifts

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Speaker 5: of God and you know, water, food, energy, and then

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Speaker 5: the gifts of founding fall is called freedom of religion.

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Speaker 5: A speech from an enterprise that those dwarf everything, and

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Speaker 5: so we still have the most prosperous economy of the

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Speaker 5: world's ever seen. But the American shouldn't take it as

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Speaker 5: a divine rights to succes either. We slowed ourselves down

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Speaker 5: with regulations, stupid bureaucracy. You know, we're not getting We

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Speaker 5: haven't done budgets in years, you know, So now we

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Speaker 5: shouldn't assume it's forever. I don't think our will still

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Speaker 5: be pre eminent, you know, militarily and economically for a

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Speaker 5: long time, you know.

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Speaker 4: But if we don't do everything right, we can lose

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Speaker 4: that too.

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Speaker 5: We have twenty thirty forty years from now, and I

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Speaker 5: think very important that is America. The goal of America

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Speaker 5: should be to help the military alliances of the Western

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Speaker 5: world and to help the economic alliance of the Western

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Speaker 5: world to walk side by side, like you did in

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Speaker 5: victory in Europe day the other day here, to strengthen

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Speaker 5: the Western world and hold it together, you know, not

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Speaker 5: the cause of the fragments, And so I think we

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Speaker 5: have to work hard to make sure that's the case.

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Speaker 3: Do you worry about deficits and do you worry actually

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Speaker 3: in the US, And do you worry also about the

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Speaker 3: US dollar remaining as a reserve currency. Do you think

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Speaker 3: Europe has what it takes to try and put the

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Speaker 3: euro in there.

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Speaker 5: Yeah, so I think I should have mentioned deficits up

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Speaker 5: front as being one of the issues you have to deal.

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Speaker 5: And I think acid prices are quite high too, and

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Speaker 5: those create various risks For America. Our deficit is almost

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Speaker 5: two trillion dollars, six or seven percent of GDP, the

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Speaker 5: largest peacetime deficit ever, and we have one hundred percent

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Speaker 5: debt to GDP. That one hundred percent debt to GDP

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Speaker 5: is kind of universal almost around Europe on average. But

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Speaker 5: your deficits are much smaller. Does that create a risk. Absolutely,

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Speaker 5: it creates a risk of inflation. To me, it creates

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Speaker 5: a risk of higher long term rates. Well, you know,

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Speaker 5: but America, will the dollar get week?

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Speaker 4: I don't know. That's a slightly different thing.

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Speaker 5: I think you could see rates go up, the long

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Speaker 5: bond rates go up, and you know that might slow

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Speaker 5: down to growth, and that's how we you know, kind

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Speaker 5: of a stackflation kind of scenario.

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Speaker 3: Would you, I mean, you must see President Trump regularly.

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Speaker 3: What do you tell what would you tell me?

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Speaker 5: I talked to all of us, I talked to all

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Speaker 5: of the folks there. I wrote about my Chairman's letter.

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Speaker 4: I mean we have.

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Speaker 5: First of all, America should worry about things we can

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Speaker 5: do batter you know, I call it blue tape. I

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Speaker 5: mean our regular we are out of control. We're doing

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Speaker 5: the same stuff that they did here that you know virtually,

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Speaker 5: you know, the American public and I don't know. The

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Speaker 5: GDP per person of Europe has gone from some like

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Speaker 5: ninety percent of America's to sixty five percent. And they

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Speaker 5: did it to themselves. Rules, regulations, over complication. They started

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Speaker 5: the European Union, which I think is a huge accomplishment

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Speaker 5: of mankind.

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Speaker 4: They got to finish it.

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Speaker 5: And here they told you they called the Capital Markets

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Speaker 5: Union the Banking Union. You know, they have to create

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Speaker 5: a big common market of four and fifty million people.

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Speaker 5: And so in America it's the same thing. It's regulations,

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Speaker 5: it's permitting. You know, we've overdone. We've wasted a lot

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Speaker 5: of money in the green economy. It's getting jobs back,

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Speaker 5: it's training in schools, it's fixing immigration. So we've stopped

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Speaker 5: at the border. But now we have to have a

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Speaker 5: more merit based immigration, more seasonal immigration, you know, things

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Speaker 5: that can help the country grow. And then we have

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Speaker 5: to work in our military alliances and economic alliances, and

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Speaker 5: that's for the sake of the future free and democratic role.

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Speaker 2: So on the.

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Speaker 3: Economic lines, is there a concern that actually certain countries

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Speaker 3: in Europe or elsewhere will choose non US bank for bondifferences,

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Speaker 3: will choose non US asset managers to manage their pensions.

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Speaker 5: Yeah, there'll be a little of that, you know. I mean,

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Speaker 5: you know, we irritate a lot of people, so I

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Speaker 5: wrote into them. They say, you know, like they're not

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Speaker 5: buying our you know, Kentucky bourbon or stuff like that.

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Speaker 4: There'll be some of that, And I.

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Speaker 5: Think it's perfectly reasonable for you know, I spoke to

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Speaker 5: a lot of investors here. They're thinking about the ass

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Speaker 5: allocation of the Ied States, Well, they diminished it. Possibly,

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Speaker 5: is America a bad investment destination. No, if you're going

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Speaker 5: to take all of your money and put it in

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Speaker 5: one country, it would still be America. I mean, it's

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Speaker 5: still the most prosperous nation of the planet. It's got

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Speaker 5: the best military in the planet, It's got huge amounts

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Speaker 5: of immigrant innovation. People are catching up. That's a good thing.

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Speaker 5: You know, China's doing some very good innovation and medical

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Speaker 5: and AI and we should assume they're continue to do that.

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Speaker 5: But America still got the best our gdpeople versus eighty

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Speaker 5: five thousand dollars, you know, China's fifteen thousand dollars. We

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Speaker 5: have the ashamed about we should fix our problems because

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Speaker 5: we could grow a lot faster, which help all of

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Speaker 5: our citizens.

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Speaker 3: But if you put too many tariffs and actually too

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Speaker 3: much uncertainty, does that not squander actually a lot of

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Speaker 3: the assets that that.

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Speaker 5: You answer me, I think they're doing the right thing now,

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Speaker 5: which is the back off of it. Let you know,

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Speaker 5: the Secretary of Treasury do the hard work of figuring

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Speaker 5: out what's the right thing to do. If they're unfair

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Speaker 5: trade things, do something about it, you know.

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Speaker 4: But they have backed off.

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Speaker 5: Of specific things and specific industries, and I think that's

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Speaker 5: the right thing to do. I think the first thing

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Speaker 5: is very large, that everything in everywhere all at once,

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Speaker 5: and now they're kind of backing to where I think

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Speaker 5: they should be in termally. But even at this level,

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Speaker 5: it caused that kind of uncertainty. Even this level, you

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Speaker 5: see people holding back on investment and thinking through what

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Speaker 5: they want to do, you know, thinking about, you know,

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Speaker 5: how much you're gonna put in the United States, And

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Speaker 5: I mean, we're gonna be okay, but it is causing

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Speaker 5: that uncertainty.

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Speaker 3: But we're looking at the president, of course in the

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Speaker 3: Middle East, where there were seals that you know, deals

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Speaker 3: that were signed and a lot of wall streets. Some

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Speaker 3: of your competitors, they are, what's your strategy for the

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Speaker 3: Middle East? How much do you want to grow there?

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Speaker 4: Well, we grow everywhere.

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Speaker 5: I mean, you know, we go country by country and

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Speaker 5: we look at you know, we bank country, cities, schools, states, hospitals,

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Speaker 5: big companies everywhere. We have a network effect. So when

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Speaker 5: we bank Bloomberg, we're banking the United States. We're banking

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Speaker 5: you in London, in Paris, we're banking you in Europe,

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Speaker 5: We're banking you in the Middle East. That's what we do.

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Speaker 5: So almost every one of those countries we're growing. As

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Speaker 5: they grow, we grow, we cover more of their institutions. Overseas,

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Speaker 5: we're institutional in the United States. We also have a

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Speaker 5: consumer and so you know, as you know, we're testing

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Speaker 5: consumer and chase UK to them.

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Speaker 3: Yeah, and you're growing actually that retail business a lot

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Speaker 3: in the UK.

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Speaker 2: What's next for that?

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Speaker 4: I hope too, We hope to grow more in the UK.

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Speaker 5: Add some products, and eventually we already annouced we're going

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Speaker 5: to go to Germany. But I think we have a

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Speaker 5: chance to build a great digital bank, and we have

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Speaker 5: competitive advantages. We have a brand, we have research, we

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Speaker 5: have a balance sheet, We've got capabilities we're going to add.

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Speaker 5: You know, we're not gonna announce it today. We'd add

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Speaker 5: more capabilities over time. So that and then someone like you,

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Speaker 5: if you travel the United States and to the UK,

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Speaker 5: you're gonna be a move your money between Chase US

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Speaker 5: and Chase UK on your phone. So we're add things

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Speaker 5: that make your life better as a consumer of our

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Speaker 5: banking product.

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Speaker 3: You certainly caught some waves in, you know, talking about

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Speaker 3: return to the office. I think there might have been

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Speaker 3: a little bit swearing at bit there or not.

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Speaker 2: People listened, Yeah, full time listen.

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Speaker 5: At first of all, I tried, I did emote there.

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Speaker 5: I emot you know, people know me, and I don't

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Speaker 5: really care about that.

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Speaker 4: I don't worry about it.

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Speaker 5: But I answered, I want to answer the guy asked

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Speaker 5: a legitimate question, and I gave it a very detailed

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Speaker 5: answer about why it doesn't work for young people, why

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Speaker 5: it doesn't work for management, why it doesn't work for innovation.

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Speaker 5: I completely applaud your right to not to want to

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Speaker 5: go to the office every day, but you're not going

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Speaker 5: to tell JP Moore what to do.

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Speaker 4: And I think we.

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Speaker 5: Already have ten percent of jobs at home. I'm not

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Speaker 5: against work from home. I'm against work from it doesn't work.

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Speaker 4: And then of course the.

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Speaker 5: Press made a big deal about the petition and all that.

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Speaker 5: It was like not even Mosquito. Most of it back

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Speaker 5: some people. We've had no additional attrition, you know, we

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Speaker 5: had to make some modification, you know, we didn't have

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Speaker 5: enough seats in certain areas and will be a better

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Speaker 5: company and I think our employees will be happier over time, and.

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Speaker 4: The younger people learned the right way.

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Speaker 5: It's an apprenticeship system and you can't learn working from

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Speaker 5: your basement.

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Speaker 3: Jamie Diamond, thank you so much for joining us today.

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Speaker 3: That was, of course, the chief executive officer of JP.

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Speaker 2: Morgan jim's Ouzer, the president of Apollo Global Management, wenting

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Speaker 2: in on the administration's trade regime the last time he

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Speaker 2: joined us, saying this globalization is not going to be

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Speaker 2: like we have seen it in the past. It is

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Speaker 2: a new global world order and place is say for

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Speaker 2: the next thirty minutes. Jim's outzer joins us this morning, Jim,

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Speaker 2: good morning, Good morning. It's a phrase you used last

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Speaker 2: time around that's stuck with both of us. We've been

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Speaker 2: repeating it over the last several weeks. Macro paralysis. Can

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Speaker 2: you adjust that term?

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Speaker 6: Now?

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Speaker 2: What phrase would you use to describe this moment?

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Speaker 6: First of all, I was going to be here.

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Speaker 8: I think I would frame it right now, is a

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Speaker 8: macro political pivot the administration, clearly, I agree. I think

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Speaker 8: that Monday meeting with the retail executives was a I

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Speaker 8: don't want to call it watershed, but it was a

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Speaker 8: critical moment for the administration to hear about the challenges

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Speaker 8: on the ground of their plan. And the administration certainly

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Speaker 8: is not admitted they made a mistake, but they've clearly pivoted.

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Speaker 8: And that's not a surprise. And it's not a surprise

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Speaker 8: that they're out going around the globe right now trying

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Speaker 8: to and successfully inking a lot of deals, a lot

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Speaker 8: of MOUs that are non binding. But certainly it's great

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Speaker 8: headlines and it's hundreds of billions, if not trillions. But

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Speaker 8: so that's where I think, and I think the big

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Speaker 8: question now is I'll pull back in the COVID library,

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Speaker 8: there's a big gap between confidence sentiment and the results

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Speaker 8: and confidence and sentiment is still pretty negative or concerned,

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Speaker 8: but the results have been pretty strong, and so there's

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Speaker 8: a very if you think about you know, we're all,

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Speaker 8: you know, history of the past, and we see signs

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Speaker 8: of what we've seen in the past, and pattern recognition

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Speaker 8: if you will, and you know, if you input all

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Speaker 8: the things that you see right now, you would have

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Speaker 8: been saying recession went from thirty percent to seventy eighty percent.

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Speaker 8: Now it's probably below fifty percent.

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Speaker 6: But the three questions are does the consumer do corporates.

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Speaker 8: And countries are they going to be on the V

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Speaker 8: shape recovery, the U shape recovery or the L shape recovery.

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Speaker 8: Our view it, Apollo is right now that the consumer

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Speaker 8: is still pretty strong, a bit of a V shape recovery,

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Speaker 8: corporate's a bit of a U shape recovery because a

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Speaker 8: lot of CAPEX and I've been traveling around quite a bit,

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Speaker 8: and I think the global response is a bit more

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Speaker 8: like the L And what you pointed out earlier with

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Speaker 8: Amory did with Tim Cook. I am not surprised none

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Speaker 8: of US should be surprised that this administration is going

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Speaker 8: to put their arm around all these tech titans and

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Speaker 8: other leaders and saying come to America. China was not

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Speaker 8: the plan. We didn't love the idea of going India,

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Speaker 8: come back to the US.

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Speaker 6: This is going to be a theme that they're going

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Speaker 6: to keep hitting hitting.

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Speaker 1: Is there enough of a framework that you're gleaning from

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Speaker 1: this administration that's solid to bring deal making back. We've

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Speaker 1: seen on the margins some deals being made, some IPOs,

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Speaker 1: there are just a few. Is this the beginning?

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Speaker 8: Well, I think let's separate the headlines from activity. It's

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Speaker 8: been an incredibly active time for folks that have involved

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Speaker 8: in the markets. You know, we at Apollo, we opened

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Speaker 8: up the IPO market. We brought out Aspen, one of

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Speaker 8: our reinsurance for an IPO. We did a multi billion

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Speaker 8: dollar deal for a lot of America igt every We

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Speaker 8: announced a big merger between New Home and a Land

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Speaker 8: and Sea. So there's been a lot of transactions since April.

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Speaker 6: Second.

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Speaker 8: I know the headlines may show contrary, but there's been

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Speaker 8: a tremendous amount of financing and I think it shows

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Speaker 8: the depth and breadth of the markets right now because

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Speaker 8: of private capital in the equity and the credit world.

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Speaker 8: So this idea that the markets shut down, that's actually

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Speaker 8: what happened two decades ago. Two decades ago, the high

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Speaker 8: yield market would go into periods six, eight, ten weeks

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Speaker 8: where there would be no issuance based on the flows

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Speaker 8: from retail the old AMG number. So this economy, this

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Speaker 8: capital markets is very robust. Obviously a lot of volatility.

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Speaker 8: One of the benchmarks in our market would be HyG,

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Speaker 8: the high Yield Index, the listed HyG ETF that went

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Speaker 8: from basically seventy nine to eighty down to seventy three,

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Speaker 8: seventy four, back to seventy nine. It's been a round trip,

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Speaker 8: but there's been a tremendous amount of activity underneath the headlines.

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Speaker 1: How much do you think this is because people see

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Speaker 1: the environment as being brighter than some may worry, And

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Speaker 1: how much do you see this as just simply pent

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Speaker 1: up demand that's been backed up for a long time.

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Speaker 1: There is a sort of sickle move toward industrialization, and

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Speaker 1: you have that kind of fundraising that is kind of

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Speaker 1: independent of any economic cycle.

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Speaker 8: I think the bigger long term trends of massive, massive

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Speaker 8: capex the year or two of Cappex Global Industrial Renaissance.

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Speaker 8: The demographics every asset class is higher today as we

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Speaker 8: sit here this morning than it was on Liberation Day,

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Speaker 8: except for treasuries, which have ten years basically thirty basis

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Speaker 8: points higher and the thirty year about forty basis points higher,

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Speaker 8: about five, fifteen and six percent, respectively. That's telling you

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Speaker 8: that folks think that the economic backdrop is not going

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Speaker 8: to be a recession. It's going to be slow to

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Speaker 8: moderate growth. And that's what you're seeing right now in

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Speaker 8: the market. So that's what we're seeing from our companies.

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Speaker 8: We're seeing a lot of concern, a lot of handeringing

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Speaker 8: about big strategic M and A transactions. I don't think

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Speaker 8: you're going to see a massive equity calendar except for

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Speaker 8: a few large deals here and there. But the reality

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Speaker 8: is companies need to operate, finance, and grow, and they're

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Speaker 8: positioning for an environment that the administration's putting forth.

436
00:20:03,160 --> 00:20:05,400
Speaker 2: This is what companies need. Let's spend some time talking

437
00:20:05,400 --> 00:20:08,239
Speaker 2: about what investors need. Never mind the rebound. What did

438
00:20:08,240 --> 00:20:10,840
Speaker 2: you learn from the draw down public versus private?

439
00:20:11,600 --> 00:20:14,760
Speaker 8: Well, what you saw is that the talk I come

440
00:20:14,800 --> 00:20:16,840
Speaker 8: up here a lot and talk about market structure, and

441
00:20:17,600 --> 00:20:21,320
Speaker 8: what you're finding right now is that longer dated capital

442
00:20:21,480 --> 00:20:24,840
Speaker 8: is US and many of our peers have long dated

443
00:20:24,880 --> 00:20:27,920
Speaker 8: insurance assets. Those were the folks that were the most

444
00:20:27,960 --> 00:20:30,639
Speaker 8: active during the marketplace and they were a bit of

445
00:20:30,680 --> 00:20:32,600
Speaker 8: the buffer if you would. You know, we put about

446
00:20:32,600 --> 00:20:34,960
Speaker 8: twenty seven billion to work in the IG market from

447
00:20:35,000 --> 00:20:37,840
Speaker 8: April second to last week. That's on a growth basis

448
00:20:37,880 --> 00:20:40,760
Speaker 8: about net about seventeen eighteen billion. I think in the

449
00:20:40,880 --> 00:20:45,359
Speaker 8: past that participant was not in the market as much,

450
00:20:45,840 --> 00:20:48,880
Speaker 8: and the buffer from the Wall Street Bank trading desk

451
00:20:48,960 --> 00:20:52,199
Speaker 8: taking that balance, I think that we collectively as an

452
00:20:52,200 --> 00:20:54,159
Speaker 8: industry helped out so that was you didn't see as

453
00:20:54,200 --> 00:20:56,840
Speaker 8: much folatileity. There's a lot of cash on the sidelines.

454
00:20:56,880 --> 00:20:59,640
Speaker 8: There's a tremendous amount. And again as you see what's

455
00:20:59,680 --> 00:21:02,600
Speaker 8: going on on right now around the globe with you know,

456
00:21:02,720 --> 00:21:05,920
Speaker 8: the pension assets, DC assets, other assets really trying to

457
00:21:05,960 --> 00:21:11,120
Speaker 8: get long duration, long duration assets against their liabilities, it's

458
00:21:11,200 --> 00:21:14,040
Speaker 8: really really critical. I mean, the one big overhang it's

459
00:21:14,040 --> 00:21:16,199
Speaker 8: still on the market is what's going on in the

460
00:21:16,200 --> 00:21:19,720
Speaker 8: treasury market. You know, certainly if you pivot right now

461
00:21:19,760 --> 00:21:22,440
Speaker 8: to what's going on with the budget issues, in DC.

462
00:21:23,040 --> 00:21:25,600
Speaker 8: It doesn't look like they have a clear path to

463
00:21:25,680 --> 00:21:28,560
Speaker 8: a deal that would be really de leveraging to the

464
00:21:28,680 --> 00:21:31,240
Speaker 8: US over time. Now Best and is saying a lot

465
00:21:31,240 --> 00:21:34,800
Speaker 8: of great things, but treasury rates are higher. And you know,

466
00:21:35,400 --> 00:21:39,520
Speaker 8: as we've been saying, the one real left tail risk

467
00:21:39,560 --> 00:21:41,680
Speaker 8: for this administration is the Liz Trust moment.

468
00:21:42,480 --> 00:21:43,560
Speaker 6: Is that still out there.

469
00:21:43,880 --> 00:21:46,879
Speaker 8: It's not a zero, it's not a big number, but

470
00:21:47,000 --> 00:21:49,080
Speaker 8: it's a left tail risk for this administration.

471
00:21:49,320 --> 00:21:51,119
Speaker 2: Can we ask you what you think that looks like?

472
00:21:51,400 --> 00:21:53,520
Speaker 2: What does a List trust moment look like? In the

473
00:21:53,520 --> 00:21:54,200
Speaker 2: treasury market?

474
00:21:54,280 --> 00:21:57,000
Speaker 8: You know, it's the deepest, most liquid, broadest market in

475
00:21:57,040 --> 00:21:59,239
Speaker 8: the world's and I don't really participate day to day,

476
00:21:59,280 --> 00:22:02,000
Speaker 8: so I'm not it really is. It's a confidence issue,

477
00:22:02,080 --> 00:22:06,840
Speaker 8: and it's when that stream of confidence goes from not

478
00:22:07,040 --> 00:22:09,800
Speaker 8: being substantial to being a little bit more material. And

479
00:22:10,200 --> 00:22:12,720
Speaker 8: I don't know what that number is, but certainly it's

480
00:22:12,720 --> 00:22:14,119
Speaker 8: got to be in the back of the head of

481
00:22:14,119 --> 00:22:17,720
Speaker 8: the administration. And again the prior administration did not really

482
00:22:17,800 --> 00:22:21,560
Speaker 8: extend duration in their liabilities, So there's I think, I

483
00:22:21,600 --> 00:22:23,399
Speaker 8: don't know if it's seven or nine trillion and be

484
00:22:23,440 --> 00:22:26,000
Speaker 8: financing over the next twenty four months. It's a big number,

485
00:22:26,760 --> 00:22:30,120
Speaker 8: but these rates are real. Rates are real in terms

486
00:22:30,160 --> 00:22:32,399
Speaker 8: of where they are right now, So you are finding

487
00:22:32,440 --> 00:22:35,840
Speaker 8: buyers of that paper, but it is a challenge.

488
00:22:35,840 --> 00:22:38,879
Speaker 1: In the backdrop, there is this belief that private credit

489
00:22:38,920 --> 00:22:42,000
Speaker 1: markets offer this ballast, the sort of haven from some

490
00:22:42,040 --> 00:22:44,199
Speaker 1: of the volatility that we're seeing in public markets and

491
00:22:44,200 --> 00:22:45,359
Speaker 1: in particular.

492
00:22:45,160 --> 00:22:46,360
Speaker 6: From the treasury market.

493
00:22:46,520 --> 00:22:49,199
Speaker 1: At the same time, how can you say that private

494
00:22:49,280 --> 00:22:52,399
Speaker 1: debt in particular is really immune to the fluctuations and

495
00:22:52,440 --> 00:22:55,960
Speaker 1: the sucking sound of capital into the treasury market.

496
00:22:56,320 --> 00:22:57,720
Speaker 2: Given all of that issuing, Well.

497
00:22:57,600 --> 00:22:59,520
Speaker 8: I'd say two things, and this is a longer conversation

498
00:22:59,520 --> 00:23:00,639
Speaker 8: that I do want to get into.

499
00:23:01,040 --> 00:23:03,240
Speaker 6: The real rates are higher, and if you can.

500
00:23:03,160 --> 00:23:06,639
Speaker 8: In private credit, private credit, you know, high single digits,

501
00:23:06,640 --> 00:23:10,000
Speaker 8: low double digits on a compounding basis, it's a tremendous

502
00:23:10,040 --> 00:23:13,200
Speaker 8: asset class over a decade or two. I really want

503
00:23:13,200 --> 00:23:15,320
Speaker 8: to spend some time with you both this morning talking

504
00:23:15,320 --> 00:23:18,760
Speaker 8: about you know, these comments about private credit being a bubble.

505
00:23:19,200 --> 00:23:21,160
Speaker 6: You know, that's just a mistaken comment.

506
00:23:21,320 --> 00:23:24,000
Speaker 8: And when you really break it down, as I said before,

507
00:23:24,600 --> 00:23:28,239
Speaker 8: private credit in the traditional manner, the narrow manner, is

508
00:23:28,280 --> 00:23:31,320
Speaker 8: the high ole market. The leverage loan market and now

509
00:23:31,359 --> 00:23:34,600
Speaker 8: the emerging direct lending market. When people talk about a

510
00:23:35,240 --> 00:23:38,160
Speaker 8: credit bubble, it's just not the case. What they are

511
00:23:38,280 --> 00:23:40,760
Speaker 8: talking about is there could be a credit cycle.

512
00:23:41,480 --> 00:23:44,240
Speaker 6: That's that's normal. We haven't had one in a long time.

513
00:23:44,760 --> 00:23:48,920
Speaker 8: But that credit cycle will impact debt and leverage balance sheets,

514
00:23:49,280 --> 00:23:52,760
Speaker 8: high yield leverage loans, and direct lending. It will also

515
00:23:52,800 --> 00:23:57,600
Speaker 8: affect private equity. It'll affect equity multiples. But it's not

516
00:23:57,680 --> 00:24:00,600
Speaker 8: a bubble per se. It's a good old recess and

517
00:24:00,640 --> 00:24:02,840
Speaker 8: a credit cycle. We're going to have one of those.

518
00:24:03,359 --> 00:24:05,320
Speaker 8: It may be pushed out again a year or two,

519
00:24:05,800 --> 00:24:07,800
Speaker 8: but let's not go out there. I think folks that

520
00:24:07,880 --> 00:24:11,040
Speaker 8: are not in private credit or private capital say, oh,

521
00:24:11,080 --> 00:24:14,400
Speaker 8: it's a bubble because they're not involved. But the reality

522
00:24:14,560 --> 00:24:17,960
Speaker 8: is there's lots of opportunities. There's a massive amount of opportunities.

523
00:24:18,200 --> 00:24:21,400
Speaker 8: We were very active last month Boeing decided to spin

524
00:24:21,440 --> 00:24:24,399
Speaker 8: off its aircraft one of its businesses.

525
00:24:24,760 --> 00:24:27,120
Speaker 6: We worked in conjunction with City on.

526
00:24:27,119 --> 00:24:31,119
Speaker 8: It, multi billion dollar deal, a tremendous asset heated auction.

527
00:24:31,840 --> 00:24:35,280
Speaker 8: There's opportunities for real companies, but there will be a

528
00:24:35,320 --> 00:24:36,040
Speaker 8: credit cycle.

529
00:24:36,359 --> 00:24:38,480
Speaker 2: It's always a bubble when you're not invested in it, right.

530
00:24:38,560 --> 00:24:39,800
Speaker 2: I love that our cycle.

531
00:24:40,200 --> 00:24:42,240
Speaker 1: Yeah, basically if you don't like it, it's because you're

532
00:24:42,280 --> 00:24:43,560
Speaker 1: not it in, so too bad for you.

533
00:24:43,680 --> 00:24:45,719
Speaker 2: Jim, we talked about the prospect of a credit cycle.

534
00:24:45,920 --> 00:24:47,760
Speaker 2: How can we have a credit cycle when we're running

535
00:24:47,760 --> 00:24:51,560
Speaker 2: deficits this launch in Washington, Well, I mean.

536
00:24:51,440 --> 00:24:54,000
Speaker 8: As I said before, we've been waiting for those who

537
00:24:54,040 --> 00:24:58,199
Speaker 8: have been professionals in this sector for decades would have

538
00:24:58,280 --> 00:25:00,720
Speaker 8: expected a few things right now, And I've talked about

539
00:25:00,720 --> 00:25:05,359
Speaker 8: pattern recognition. I was here several years ago talking about

540
00:25:05,800 --> 00:25:08,000
Speaker 8: the rate hike and how that would create a tighter

541
00:25:08,080 --> 00:25:10,840
Speaker 8: a period of tighter financial conditions, and many of us

542
00:25:10,880 --> 00:25:13,720
Speaker 8: that were expecting a serious credit cycle, you know, predicted

543
00:25:13,760 --> 00:25:17,679
Speaker 8: something that didn't occur because of the macro backdrop. You know,

544
00:25:17,960 --> 00:25:21,280
Speaker 8: certainly right now is we have a higher rate environment,

545
00:25:21,359 --> 00:25:23,879
Speaker 8: which means a bit of economic strength in.

546
00:25:23,880 --> 00:25:24,879
Speaker 6: The overall economy.

547
00:25:25,400 --> 00:25:29,760
Speaker 8: There always are a number of companies that just have

548
00:25:29,920 --> 00:25:31,520
Speaker 8: too much leverage and are not going to grow out

549
00:25:31,520 --> 00:25:32,399
Speaker 8: of their balance sheets.

550
00:25:32,520 --> 00:25:33,399
Speaker 6: And you're going to see that.

551
00:25:33,480 --> 00:25:35,879
Speaker 8: Last year, the last couple of years, you had actually

552
00:25:35,920 --> 00:25:39,320
Speaker 8: fairly high numbers of restructurings and non investment grade credit.

553
00:25:39,600 --> 00:25:42,199
Speaker 8: It just didn't overwhelm the headlines because of the overall

554
00:25:42,280 --> 00:25:45,399
Speaker 8: returns and the strength of the equity market. But I

555
00:25:45,440 --> 00:25:48,760
Speaker 8: do think there are you know, as I said before here,

556
00:25:48,680 --> 00:25:50,840
Speaker 8: there's a when you look at back in the last

557
00:25:50,840 --> 00:25:55,560
Speaker 8: four or five years in private credit direct lending, a

558
00:25:55,640 --> 00:26:01,280
Speaker 8: lot of the largest sector of financing was technology, enterprise software.

559
00:26:01,880 --> 00:26:04,760
Speaker 8: And I do think that there's a possibility with what's

560
00:26:04,800 --> 00:26:08,160
Speaker 8: going on with AI that many of these companies could

561
00:26:08,200 --> 00:26:11,880
Speaker 8: really have massive impact on their operating business. The renewal

562
00:26:11,960 --> 00:26:14,960
Speaker 8: rates there are seven or eighty ninety ninety five percent

563
00:26:15,400 --> 00:26:19,119
Speaker 8: could plummet dramatically, and I could see a variety of

564
00:26:19,200 --> 00:26:23,320
Speaker 8: challenges in the enterprise software tech space that have been

565
00:26:23,359 --> 00:26:27,120
Speaker 8: a big, big area of private credit. And I think

566
00:26:27,160 --> 00:26:29,600
Speaker 8: there will be those who are not involved will say, aha,

567
00:26:30,040 --> 00:26:31,760
Speaker 8: there was a problem, it's a hoax.

568
00:26:32,320 --> 00:26:33,119
Speaker 6: That's not the case.

569
00:26:33,280 --> 00:26:36,600
Speaker 8: It was just bad companies overlevered that didn't grow out

570
00:26:36,640 --> 00:26:38,800
Speaker 8: of their balance sheet, and that happens every day in

571
00:26:38,840 --> 00:26:42,119
Speaker 8: the equity market in other markets. But you know, again,

572
00:26:42,520 --> 00:26:46,760
Speaker 8: as much as we are a player in the insurance

573
00:26:46,800 --> 00:26:49,680
Speaker 8: balance sheets on safe yield, we also do play in

574
00:26:49,800 --> 00:26:53,879
Speaker 8: that riskier end. And I don't see a massive credit

575
00:26:53,920 --> 00:26:58,320
Speaker 8: cycle happening in twenty five. Certainly we've taken care of

576
00:26:58,359 --> 00:27:01,399
Speaker 8: a lot of the refinancing risk, that refinancing clip that

577
00:27:01,480 --> 00:27:03,480
Speaker 8: was pretty large in twenty six and twenty seven.

578
00:27:03,800 --> 00:27:04,760
Speaker 6: It's been pushed out.

579
00:27:05,640 --> 00:27:08,719
Speaker 8: But we're not seeing although the risk premiums have raised

580
00:27:09,000 --> 00:27:09,679
Speaker 8: have been raised.

581
00:27:10,720 --> 00:27:12,160
Speaker 6: And I will tell you there's a.

582
00:27:12,240 --> 00:27:15,840
Speaker 8: Very large US based retailer based here in New York

583
00:27:16,080 --> 00:27:21,400
Speaker 8: that has undergone a transformational merger. They had a private

584
00:27:21,440 --> 00:27:23,880
Speaker 8: credit solution in front of them, which we were quite

585
00:27:23,920 --> 00:27:27,000
Speaker 8: involved with. They decided to go to the public markets

586
00:27:27,040 --> 00:27:30,360
Speaker 8: and issue a public bond in this safe public markets,

587
00:27:30,760 --> 00:27:34,080
Speaker 8: and that bond today within six months is trading below fifty.

588
00:27:34,560 --> 00:27:37,480
Speaker 8: So again, I think there's a lot of noise about

589
00:27:38,200 --> 00:27:41,719
Speaker 8: risk and reward and various asset classes, but that's our

590
00:27:41,760 --> 00:27:42,639
Speaker 8: view of private credit.

591
00:27:42,880 --> 00:27:43,399
Speaker 6: Just quickly.

592
00:27:43,800 --> 00:27:47,760
Speaker 1: How much could hire long term US yields spur that

593
00:27:47,840 --> 00:27:50,600
Speaker 1: credit cycle. I won't call it a bubble because we

594
00:27:50,600 --> 00:27:53,080
Speaker 1: could talk about what a bubble is or what we

595
00:27:53,119 --> 00:27:55,800
Speaker 1: could see with some sort of just negative price action,

596
00:27:56,680 --> 00:27:58,879
Speaker 1: But do you see that as being a catalyst.

597
00:27:59,320 --> 00:28:03,679
Speaker 8: Well, I think that the overall listen, we having higher

598
00:28:03,800 --> 00:28:07,000
Speaker 8: real rates are good for long term investors to a

599
00:28:07,040 --> 00:28:10,399
Speaker 8: certain degree. They're good for a certain degree until we

600
00:28:10,480 --> 00:28:14,080
Speaker 8: lose confidence in the actual underlying market. Again, the US

601
00:28:14,160 --> 00:28:17,320
Speaker 8: treasure market deepest, most liquid in the world, rates of

602
00:28:17,400 --> 00:28:19,480
Speaker 8: four and a half and five percent with real rates

603
00:28:19,560 --> 00:28:22,080
Speaker 8: right now, pretty strong on a relative basis over the

604
00:28:22,119 --> 00:28:25,080
Speaker 8: last twenty five years, but I'm not seeing that in

605
00:28:25,080 --> 00:28:26,040
Speaker 8: the current zip code.

606
00:28:26,440 --> 00:28:28,520
Speaker 2: Just to wrap it up, biggest opportunity right now for

607
00:28:28,520 --> 00:28:30,239
Speaker 2: you in the team, what do you think it is?

608
00:28:30,720 --> 00:28:32,040
Speaker 6: Well, I think it's a few places.

609
00:28:32,280 --> 00:28:36,119
Speaker 8: I do think the volatility that has taken most people

610
00:28:36,160 --> 00:28:38,960
Speaker 8: on the sidelines and a bit of a paralysis just

611
00:28:39,120 --> 00:28:41,600
Speaker 8: operating day in and day out on the business that

612
00:28:41,640 --> 00:28:43,560
Speaker 8: we do. Right now, we have eight hundred and fifty

613
00:28:43,560 --> 00:28:47,360
Speaker 8: billion of capital doing a lot of refinancing with PE firms.

614
00:28:47,400 --> 00:28:50,800
Speaker 8: There's over two thousand PE situations where they've owned companies

615
00:28:50,800 --> 00:28:54,360
Speaker 8: more than five years. A lot of refinancing there. This

616
00:28:54,440 --> 00:28:57,080
Speaker 8: and the global industrial renaissance is alive and well in

617
00:28:57,120 --> 00:28:59,920
Speaker 8: the US with the delay in deploying the chips at

618
00:29:00,040 --> 00:29:03,160
Speaker 8: a lot of financing on shore of chip manufacturing and

619
00:29:03,200 --> 00:29:06,680
Speaker 8: other assets. I've been traveling around the globe quite a bit,

620
00:29:07,520 --> 00:29:12,000
Speaker 8: you know, Japan is still quite interesting from a insurance perspective,

621
00:29:12,080 --> 00:29:15,720
Speaker 8: from a global wealth perspective, and a Pe perspective. And

622
00:29:16,280 --> 00:29:18,960
Speaker 8: we cannot forget about Europe. I mean, Europe really is

623
00:29:19,000 --> 00:29:21,640
Speaker 8: what's going on there. It's a once in a generation.

624
00:29:22,160 --> 00:29:24,680
Speaker 8: I do believe that there's a variety. When you look

625
00:29:24,720 --> 00:29:27,760
Speaker 8: at a thirty trillion economy in the US twenty four

626
00:29:27,800 --> 00:29:30,800
Speaker 8: trillion in Europe, there's a massive amount of financing to occur.

627
00:29:30,920 --> 00:29:32,720
Speaker 2: You've been traveling too much. It's going to have you back.

628
00:29:32,760 --> 00:29:33,320
Speaker 6: Good to be back.

629
00:29:33,360 --> 00:29:36,480
Speaker 2: Welcome back to New York. Jym's out of Apollo Global Management, Jim,

630
00:29:36,480 --> 00:29:48,840
Speaker 2: Thank you, sir, Thank you. Port of Los Angeles executive

631
00:29:48,920 --> 00:29:52,120
Speaker 2: director Gene Soroka with a word of caution, telling the

632
00:29:52,160 --> 00:29:54,840
Speaker 2: Wall Street Journal quote, even at a thirty percent tariff

633
00:29:54,880 --> 00:29:57,680
Speaker 2: with a ninety day reprieve, it's not going to dramatically

634
00:29:57,760 --> 00:30:01,680
Speaker 2: change what we're seeing now, joins Napama. Jane, welcome back.

635
00:30:01,920 --> 00:30:02,680
Speaker 6: Good to see you. John.

636
00:30:02,760 --> 00:30:04,920
Speaker 2: Tremendous feedback the last time you run, so thank you

637
00:30:04,920 --> 00:30:06,880
Speaker 2: for your time once again, sir, Let's talk about what

638
00:30:06,960 --> 00:30:09,400
Speaker 2: you are seeing now. What do you see now compared

639
00:30:09,440 --> 00:30:11,440
Speaker 2: to what this looked like, say twelve months ago, a

640
00:30:11,520 --> 00:30:11,920
Speaker 2: month ago.

641
00:30:13,000 --> 00:30:15,880
Speaker 9: Last time we visited, I talked about a quick drop

642
00:30:16,000 --> 00:30:18,120
Speaker 9: in cargo, and we saw that last week down by

643
00:30:18,200 --> 00:30:21,000
Speaker 9: more than thirty percent. The balance of the month seems

644
00:30:21,040 --> 00:30:25,320
Speaker 9: to be holding, unfortunately, to be down maybe twenty five

645
00:30:25,560 --> 00:30:31,080
Speaker 9: percent compared to year on year stats. Canceled sailings seventeen

646
00:30:31,320 --> 00:30:34,440
Speaker 9: out of a scheduled eighty still off the books.

647
00:30:34,760 --> 00:30:37,320
Speaker 2: So you've got a twenty to forty day forward look

648
00:30:37,400 --> 00:30:40,360
Speaker 2: just based on shipping times. What leaves China now arrives

649
00:30:40,400 --> 00:30:43,080
Speaker 2: in twenty to forty days. How has that changed in

650
00:30:43,120 --> 00:30:45,200
Speaker 2: the last few days Off the back of let's just

651
00:30:45,200 --> 00:30:47,920
Speaker 2: say the easing tensions over the weekend just last night.

652
00:30:47,960 --> 00:30:50,520
Speaker 9: Talking to some of my friends in Hong Kong and Singapore,

653
00:30:50,840 --> 00:30:54,480
Speaker 9: bookings or reservations have ticked up. But it's going to

654
00:30:54,520 --> 00:30:58,480
Speaker 9: take the liner shipping companies a few weeks to reposition

655
00:30:58,720 --> 00:31:03,800
Speaker 9: vessels in places like and Shanghai, Jahmin Yantien, pick up

656
00:31:03,880 --> 00:31:06,360
Speaker 9: some of the products that have been manufactured and sitting,

657
00:31:06,720 --> 00:31:09,000
Speaker 9: and then another two weeks to get to Los Angeles

658
00:31:09,080 --> 00:31:12,520
Speaker 9: before we try to distribute throughout the country. So while

659
00:31:12,600 --> 00:31:15,240
Speaker 9: we're starting to see some momentum, a lot of what's

660
00:31:15,280 --> 00:31:18,760
Speaker 9: taking place here in the States. Is the finance game.

661
00:31:19,160 --> 00:31:23,840
Speaker 9: Does it make sense at an average of averages thirty

662
00:31:23,920 --> 00:31:26,640
Speaker 9: percent tariff to start bringing in products and what will

663
00:31:26,680 --> 00:31:29,400
Speaker 9: the American consumer's willingness be to buy?

664
00:31:29,920 --> 00:31:33,000
Speaker 1: So Ryan Peterson, a Flexport came out and said, there's

665
00:31:33,000 --> 00:31:34,880
Speaker 1: going to be a shipping boom with all these ships

666
00:31:34,920 --> 00:31:37,640
Speaker 1: coming to the four that have been waiting to come

667
00:31:38,000 --> 00:31:40,360
Speaker 1: to get some clarity on tariffs. It sounds like you disagree.

668
00:31:40,840 --> 00:31:42,480
Speaker 1: Why do you think that it's not going to result

669
00:31:42,520 --> 00:31:44,600
Speaker 1: in a shipping boom to make up for that month

670
00:31:45,320 --> 00:31:47,120
Speaker 1: with the fact that it's going to be more expensive

671
00:31:47,160 --> 00:31:48,960
Speaker 1: to make it, say in the US, rather than just

672
00:31:49,000 --> 00:31:51,280
Speaker 1: pay the thirty percent tariff from China.

673
00:31:51,560 --> 00:31:53,920
Speaker 9: Now there's a lot there, Lisa, As we've talked about before.

674
00:31:54,240 --> 00:31:56,200
Speaker 9: Number one, let's pick up some of the product that's

675
00:31:56,200 --> 00:32:00,840
Speaker 9: already been manufactured sitting on factory floors, warehouses and in containers.

676
00:32:01,120 --> 00:32:02,280
Speaker 6: Get that flow going again.

677
00:32:02,680 --> 00:32:05,160
Speaker 9: The manufacturers in China have got to get their folks

678
00:32:05,440 --> 00:32:08,920
Speaker 9: back to work, and there'll be a considerable look at

679
00:32:09,000 --> 00:32:12,280
Speaker 9: Southeast Asia, albeit at ten percent tariffs, is where we

680
00:32:12,320 --> 00:32:14,920
Speaker 9: can go. But this ninety day reprieve, as you know,

681
00:32:15,600 --> 00:32:18,320
Speaker 9: is not a long runway. That's typically the amount of

682
00:32:18,360 --> 00:32:21,600
Speaker 9: time it takes for a procurement person here in the

683
00:32:21,760 --> 00:32:24,400
Speaker 9: US to put an order in, get the goods made,

684
00:32:25,000 --> 00:32:27,120
Speaker 9: and get them on a ship in Asia.

685
00:32:27,040 --> 00:32:30,480
Speaker 1: Which raises the question, does that ninety day pause do

686
00:32:30,760 --> 00:32:33,160
Speaker 1: enough to make sure that shelves are not empty? Say

687
00:32:33,680 --> 00:32:35,800
Speaker 1: back to school sales period comes around.

688
00:32:35,840 --> 00:32:37,240
Speaker 6: We're cutting it so close.

689
00:32:37,760 --> 00:32:40,200
Speaker 9: Spring fashion has already passed a spy. Now you're talking

690
00:32:40,240 --> 00:32:44,040
Speaker 9: summer fashion. Back to school. May is typically the month

691
00:32:44,560 --> 00:32:48,080
Speaker 9: where purchase orders go in to Asia for the year

692
00:32:48,200 --> 00:32:51,520
Speaker 9: end holidays. So now folks are kind of rolling the

693
00:32:51,560 --> 00:32:54,440
Speaker 9: dice a little bit. Do I buy now at these

694
00:32:54,520 --> 00:32:56,880
Speaker 9: kind of prices? And remember when I say an average

695
00:32:56,920 --> 00:33:00,440
Speaker 9: of averages, not every commodity is a thirty percent tariff.

696
00:33:00,480 --> 00:33:03,520
Speaker 6: There are some that are extremely high compared to that.

697
00:33:04,040 --> 00:33:07,400
Speaker 9: And this is cumulative on top of tariffs that have

698
00:33:07,520 --> 00:33:10,760
Speaker 9: already been put in place. So once again, what's consumer sentiment?

699
00:33:11,000 --> 00:33:12,800
Speaker 9: How much do I buy? And how much stock do

700
00:33:12,920 --> 00:33:13,520
Speaker 9: I get out there?

701
00:33:13,680 --> 00:33:15,640
Speaker 2: This is a huge problem. Buy's down there, what's to buy?

702
00:33:16,080 --> 00:33:18,680
Speaker 2: And producers don't know how much to produce. Even though

703
00:33:18,720 --> 00:33:20,040
Speaker 2: we've moved the tower side of the weekend.

704
00:33:20,080 --> 00:33:22,880
Speaker 1: Once again, so do you avoid the paralysis that many

705
00:33:22,920 --> 00:33:25,640
Speaker 1: people were complaining about when businesses had no idea or

706
00:33:25,680 --> 00:33:28,560
Speaker 1: does this just really ease things on the margins but

707
00:33:28,680 --> 00:33:30,800
Speaker 1: still create some big lapses And that really is going

708
00:33:30,840 --> 00:33:32,120
Speaker 1: to be something that we're not going to see for

709
00:33:32,160 --> 00:33:32,680
Speaker 1: a couple of months.

710
00:33:32,840 --> 00:33:34,680
Speaker 2: Jane, as you look at tritflows, can you describe how

711
00:33:34,720 --> 00:33:37,320
Speaker 2: things have changed where the shipping routes have begun to

712
00:33:37,480 --> 00:33:39,600
Speaker 2: go somewhere else, whether people are starting to think more

713
00:33:39,640 --> 00:33:42,920
Speaker 2: about fright than they aren't just using traditional shipping. Have

714
00:33:43,040 --> 00:33:45,200
Speaker 2: things changed from your vantage point in the last few

715
00:33:45,240 --> 00:33:46,360
Speaker 2: weeks a lot?

716
00:33:46,920 --> 00:33:49,280
Speaker 9: And it's about what do we need just to get

717
00:33:49,360 --> 00:33:52,360
Speaker 9: buy over these weeks and months ahead, And going back

718
00:33:52,400 --> 00:33:56,000
Speaker 9: to twenty eighteen, China was sixty percent of our business

719
00:33:56,040 --> 00:33:58,520
Speaker 9: at the Port of Los Angeles. Then today it's forty

720
00:33:58,600 --> 00:34:01,880
Speaker 9: five percent and drop the folks on the ground in

721
00:34:01,960 --> 00:34:04,800
Speaker 9: Asia are telling me you'll start seeing even more migration

722
00:34:04,960 --> 00:34:08,839
Speaker 9: of manufacturing and sourcing to Southeast Asia beyond.

723
00:34:08,719 --> 00:34:10,920
Speaker 2: Said the likes of Malanchia, the likes of Vietnam. Is

724
00:34:10,960 --> 00:34:12,960
Speaker 2: that why why they didn't finished the Schetz highlights.

725
00:34:13,280 --> 00:34:15,520
Speaker 9: Yes, and of course a lot has been talked about

726
00:34:15,600 --> 00:34:19,680
Speaker 9: India but remember that just last year, China exported about

727
00:34:19,680 --> 00:34:24,360
Speaker 9: two hundred and fifty million container units, India about twenty million.

728
00:34:24,680 --> 00:34:27,880
Speaker 1: There's a question not only about manufacturing the goods that

729
00:34:27,960 --> 00:34:30,880
Speaker 1: will come over here, but also manufacturing the ships, and

730
00:34:30,960 --> 00:34:32,600
Speaker 1: we know that that's been a huge focus of this

731
00:34:32,680 --> 00:34:35,560
Speaker 1: administration and potential fees on ships that have been built

732
00:34:35,880 --> 00:34:39,719
Speaker 1: in places like China. How have some of the proposals

733
00:34:39,840 --> 00:34:41,720
Speaker 1: like that affected your business.

734
00:34:42,280 --> 00:34:46,000
Speaker 9: My first thing is it's another fee. It's another charge

735
00:34:46,200 --> 00:34:49,520
Speaker 9: that the liner shipping companies say will be passed on

736
00:34:49,680 --> 00:34:53,000
Speaker 9: and ultimately get to the factory level or consumer. But

737
00:34:53,280 --> 00:34:56,319
Speaker 9: I'm really pleased with the way the US Trade Representative

738
00:34:56,440 --> 00:34:59,480
Speaker 9: and that office responded. There were more than five hundred

739
00:34:59,520 --> 00:35:03,160
Speaker 9: public come letters two days of hearings in Washington back

740
00:35:03,200 --> 00:35:05,600
Speaker 9: in March to talk about what this fee would mean

741
00:35:05,800 --> 00:35:08,560
Speaker 9: if implemented based on the draft form, which was a

742
00:35:08,640 --> 00:35:11,640
Speaker 9: million and a half bucks for every port call in

743
00:35:11,719 --> 00:35:14,720
Speaker 9: the United States for a ship that was built in China.

744
00:35:15,160 --> 00:35:18,680
Speaker 9: Now it's on a tonnage basis vessel voyage. Albeit additive

745
00:35:18,760 --> 00:35:20,920
Speaker 9: to cost, it's a lot better than it was. So

746
00:35:21,040 --> 00:35:24,279
Speaker 9: the feedback was really heard by the administration.

747
00:35:24,520 --> 00:35:26,680
Speaker 1: I'm listening to everything that you're saying, and it sounds

748
00:35:26,760 --> 00:35:28,680
Speaker 1: like a lot's going to hinge on how much companies

749
00:35:28,719 --> 00:35:30,200
Speaker 1: believe they can pass along higher.

750
00:35:30,040 --> 00:35:31,040
Speaker 2: Prices to consumers.

751
00:35:31,520 --> 00:35:34,480
Speaker 1: What from their perspective, given your conversations with them, do

752
00:35:34,480 --> 00:35:36,400
Speaker 1: you think they'll be looking for in retail sales in

753
00:35:36,480 --> 00:35:40,000
Speaker 1: Walmart earnings to understand just how much power they have

754
00:35:40,400 --> 00:35:42,520
Speaker 1: to increase prices on consumers that yes or tired but

755
00:35:42,560 --> 00:35:43,160
Speaker 1: are still spending.

756
00:35:43,400 --> 00:35:44,880
Speaker 9: I don't know if I can answer all that, but

757
00:35:44,960 --> 00:35:48,360
Speaker 9: what I'm hearing on the ground is Okay, prices go up, tariffs,

758
00:35:48,480 --> 00:35:50,920
Speaker 9: other fees, etc. I'm first going to talk with my

759
00:35:51,080 --> 00:35:55,040
Speaker 9: manufacturer about the cost of those goods, the landed price,

760
00:35:55,200 --> 00:35:58,239
Speaker 9: and we'll see what we can negotiate. Second, how much

761
00:35:58,320 --> 00:36:00,960
Speaker 9: do I gain from efficiencies my company? Can I get

762
00:36:01,120 --> 00:36:04,319
Speaker 9: smarter and sharper a little bit of margin compression maybe,

763
00:36:04,440 --> 00:36:06,799
Speaker 9: but I've got to deliver on that cost saving side.

764
00:36:07,200 --> 00:36:09,480
Speaker 9: And then thirdly, what can I pass on. If I'm

765
00:36:09,520 --> 00:36:12,360
Speaker 9: a part supplier, that cost goes straight to the factory.

766
00:36:12,640 --> 00:36:15,200
Speaker 9: If I'm a retail finished goods person, it goes to

767
00:36:15,320 --> 00:36:18,279
Speaker 9: the consumer. So there's still a lot to be worked out.

768
00:36:18,719 --> 00:36:22,960
Speaker 9: Chances are with what we know, lower inventories, fewer selections,

769
00:36:23,239 --> 00:36:24,080
Speaker 9: and higher prices.

770
00:36:24,120 --> 00:36:25,800
Speaker 2: And this is why Wilmot could be some interest in

771
00:36:26,120 --> 00:36:27,040
Speaker 2: a few minutes time.

772
00:36:27,160 --> 00:36:29,520
Speaker 1: Because they've already said they want to compete on price

773
00:36:29,640 --> 00:36:32,120
Speaker 1: and they're going to take it probably somewhere else. And

774
00:36:32,200 --> 00:36:34,200
Speaker 1: it also points to how much they're going to make

775
00:36:34,239 --> 00:36:36,879
Speaker 1: their suppliers eat as well, so margins all around get

776
00:36:36,960 --> 00:36:39,600
Speaker 1: compressed in order to offset some of what gets passed

777
00:36:39,600 --> 00:36:42,000
Speaker 1: along to consumers. The fact that it comes an hour

778
00:36:42,040 --> 00:36:44,200
Speaker 1: and a half before retail sales gives you a sense

779
00:36:44,520 --> 00:36:46,800
Speaker 1: of the one two punch what companies are doing, and

780
00:36:46,840 --> 00:36:49,280
Speaker 1: then how much appetite consumers have to keep on spending.

781
00:36:49,400 --> 00:36:51,799
Speaker 2: We know how consumers fail. What if they've been doing.

782
00:36:52,040 --> 00:36:54,640
Speaker 2: We'll get resound sales at eight thirty Eastern time numbers

783
00:36:54,719 --> 00:36:56,799
Speaker 2: from Wolma that stuck is not by zero point seven

784
00:36:56,800 --> 00:36:59,600
Speaker 2: percent numbers from Wolma in about five minutes time. I'm

785
00:36:59,600 --> 00:37:02,600
Speaker 2: just shocked, I said route and not route. Been it

786
00:37:02,680 --> 00:37:03,000
Speaker 2: too long?

787
00:37:03,120 --> 00:37:03,400
Speaker 6: Welcome?

788
00:37:03,480 --> 00:37:05,240
Speaker 2: Been it too long? I think that's for you. Jane's

789
00:37:05,239 --> 00:37:08,040
Speaker 2: going to see thanks Joe. Jane Siakaba of the Port

790
00:37:08,080 --> 00:37:20,279
Speaker 2: of Los Angeles and NATA Richardson can take a look

791
00:37:20,280 --> 00:37:22,160
Speaker 2: at things. She joined us from IDP Nada. Welcome to

792
00:37:22,239 --> 00:37:24,520
Speaker 2: the program. Do your best. What's going on here? Give

793
00:37:24,600 --> 00:37:26,319
Speaker 2: us a clear picture of what's happening in the US

794
00:37:26,400 --> 00:37:28,320
Speaker 2: economy in morning.

795
00:37:28,960 --> 00:37:31,200
Speaker 7: It's mixed, and I think that's what you're seeing in

796
00:37:31,239 --> 00:37:33,759
Speaker 7: the data now. If you're looking really for some good

797
00:37:33,800 --> 00:37:37,200
Speaker 7: news on inflation, you found it today and that that

798
00:37:37,480 --> 00:37:39,440
Speaker 7: is the three line. And also if you're looking for

799
00:37:39,520 --> 00:37:42,239
Speaker 7: good news on the labor market, you see it continue.

800
00:37:42,320 --> 00:37:45,320
Speaker 7: So those initial job was claimed still at historical lows.

801
00:37:45,800 --> 00:37:50,279
Speaker 7: That is helpful for an economy built on consumption. But

802
00:37:50,400 --> 00:37:53,440
Speaker 7: when you turn to the consumer and you bring in

803
00:37:53,560 --> 00:37:57,000
Speaker 7: that soft data of consumer being down beat, and we

804
00:37:57,239 --> 00:38:00,600
Speaker 7: know that consumers went out and they stop piled on durables,

805
00:38:00,960 --> 00:38:05,600
Speaker 7: on cars and vehicles. What we're seeing in April as

806
00:38:06,480 --> 00:38:11,160
Speaker 7: a moderation from that stockpilot and maybe starting to really

807
00:38:11,480 --> 00:38:19,240
Speaker 7: reflect new economics vulnerabilities. We left the last FED meeting

808
00:38:19,400 --> 00:38:22,520
Speaker 7: with two risks at our disposal. We left the risk

809
00:38:22,640 --> 00:38:26,239
Speaker 7: of slower growth and higher inflation. And I think that's

810
00:38:26,320 --> 00:38:29,280
Speaker 7: what the markets are really focused on. That higher inflation

811
00:38:29,480 --> 00:38:32,719
Speaker 7: risk looks a little less risky today, but you know,

812
00:38:33,160 --> 00:38:35,040
Speaker 7: every day is a different day. When it comes to

813
00:38:35,160 --> 00:38:36,279
Speaker 7: this economy right now.

814
00:38:36,360 --> 00:38:38,239
Speaker 2: Later and Plase, you brought up that topic because I

815
00:38:38,239 --> 00:38:40,719
Speaker 2: think it's so important. It's been really difficult to try

816
00:38:40,800 --> 00:38:44,040
Speaker 2: and unpack what is just the front loading of purchases

817
00:38:44,080 --> 00:38:48,760
Speaker 2: by consumers versus what is genuine, authentic, durable, sustainable demand.

818
00:38:48,840 --> 00:38:50,799
Speaker 2: And as we work our way through the summer, we've

819
00:38:50,800 --> 00:38:52,640
Speaker 2: been trying to work this out all morning on this program.

820
00:38:52,760 --> 00:38:55,320
Speaker 2: Are we going to see the price increases? Is Walmart

821
00:38:55,360 --> 00:38:57,640
Speaker 2: the one to listen to as they warn this morning

822
00:38:57,719 --> 00:39:00,319
Speaker 2: they can't hold off much longer from here, new how

823
00:39:00,360 --> 00:39:01,880
Speaker 2: do you gauge that at the moment? What do you

824
00:39:01,960 --> 00:39:02,279
Speaker 2: look at?

825
00:39:03,680 --> 00:39:06,200
Speaker 7: I think the large retailer should be listened to. They

826
00:39:06,280 --> 00:39:09,320
Speaker 7: are active in this market, they are seeing the prices

827
00:39:09,360 --> 00:39:13,839
Speaker 7: in real time. So also consumers are important to listen

828
00:39:13,920 --> 00:39:16,919
Speaker 7: to in this moment. When they say they're down beat,

829
00:39:18,360 --> 00:39:21,880
Speaker 7: they mean it. We don't talk a lot about consumer surplus,

830
00:39:22,040 --> 00:39:26,000
Speaker 7: and just really quickly from your econ one oh one class,

831
00:39:26,040 --> 00:39:28,759
Speaker 7: it's the price consumers are willing to pay versus the

832
00:39:28,880 --> 00:39:32,920
Speaker 7: price they're actually paid. But if consumer surplus is being

833
00:39:33,080 --> 00:39:37,520
Speaker 7: eroded because they're seeing higher prices, that means consumers will

834
00:39:37,560 --> 00:39:41,480
Speaker 7: continue to feel down beat, and those feelings are translating

835
00:39:42,160 --> 00:39:45,560
Speaker 7: right now into what a data point we'll see on Friday,

836
00:39:45,640 --> 00:39:50,279
Speaker 7: which is consumer sentiment, and if that continues, it really

837
00:39:50,360 --> 00:39:53,920
Speaker 7: does reflect that higher risk of continued inflation that the

838
00:39:54,000 --> 00:39:56,560
Speaker 7: Federal Reserve warned about a week ago.

839
00:39:56,800 --> 00:39:58,600
Speaker 1: And this is the reason why, NILA, a lot of

840
00:39:58,680 --> 00:40:01,040
Speaker 1: people say, we don't know how relevant any of this

841
00:40:01,200 --> 00:40:03,040
Speaker 1: data is because we don't know whether this is just

842
00:40:03,120 --> 00:40:05,960
Speaker 1: April data and people feeling bad in April. But in May,

843
00:40:06,040 --> 00:40:07,560
Speaker 1: things are going to look a lot better because we

844
00:40:07,680 --> 00:40:10,000
Speaker 1: have a reprieve from some of the tariffs and things

845
00:40:10,040 --> 00:40:12,919
Speaker 1: are looking a little bit easier. The market is rebounding, Mila,

846
00:40:13,320 --> 00:40:16,239
Speaker 1: How do you look at the quickly moving policy and

847
00:40:16,320 --> 00:40:19,480
Speaker 1: then judge the relevance of any of this data that

848
00:40:19,680 --> 00:40:22,439
Speaker 1: is just a snapshot and a very quickly moving movie.

849
00:40:23,480 --> 00:40:27,040
Speaker 7: I look for the stead fast stronghold in the economy,

850
00:40:27,080 --> 00:40:29,879
Speaker 7: and right now that's the labor market. The labor market

851
00:40:30,000 --> 00:40:33,200
Speaker 7: is solid if you look at initial jobless claims, if

852
00:40:33,239 --> 00:40:35,520
Speaker 7: you look at the pace of hiring. Though we see

853
00:40:35,560 --> 00:40:38,399
Speaker 7: it at ADP to be more modest than it has

854
00:40:38,520 --> 00:40:42,440
Speaker 7: been in the past, it's still solid. We're still seeing

855
00:40:42,600 --> 00:40:45,200
Speaker 7: strength and that is the underpinning of the bulk of

856
00:40:45,280 --> 00:40:50,000
Speaker 7: the consumers. So as long as the labor market stays strong,

857
00:40:51,080 --> 00:40:55,280
Speaker 7: stays solid, we still see growth in jobs, we still

858
00:40:55,360 --> 00:40:59,600
Speaker 7: see wages above inflation, then you have an economy that

859
00:40:59,680 --> 00:41:02,200
Speaker 7: could weather some of these higher level risks.

860
00:41:02,560 --> 00:41:05,440
Speaker 1: How much Neila do you see because of that, Because

861
00:41:05,440 --> 00:41:07,880
Speaker 1: of that stability in the labor market. In addition to

862
00:41:07,960 --> 00:41:10,360
Speaker 1: what we are hearing from some of the biggest retailers

863
00:41:10,400 --> 00:41:12,440
Speaker 1: in the world that prices are going to go up,

864
00:41:12,840 --> 00:41:16,600
Speaker 1: how much is a saguflationary like environment becoming increasingly your

865
00:41:16,640 --> 00:41:18,680
Speaker 1: base case for the remainder of this year.

866
00:41:20,239 --> 00:41:20,879
Speaker 6: It's a risk.

867
00:41:21,600 --> 00:41:22,200
Speaker 2: It is a risk.

868
00:41:22,719 --> 00:41:25,759
Speaker 7: I think what we're seeing, you know, collectively in all

869
00:41:25,840 --> 00:41:29,600
Speaker 7: this data is an economy that looks to be slowing

870
00:41:29,640 --> 00:41:32,600
Speaker 7: a bit. I mean, the first quarter contraction is also

871
00:41:32,640 --> 00:41:35,680
Speaker 7: a messy given the high degree of import. So it's

872
00:41:36,000 --> 00:41:39,360
Speaker 7: again a backward looking data point that was based on

873
00:41:39,400 --> 00:41:43,600
Speaker 7: a lot of stockpiling. But looking forward, if growth slows,

874
00:41:43,880 --> 00:41:47,279
Speaker 7: not just because of US consumption and US production, but

875
00:41:47,400 --> 00:41:50,960
Speaker 7: also around the world, if growth is at risk, then

876
00:41:51,239 --> 00:41:54,160
Speaker 7: you might see slower growth and higher prices. So, yes,

877
00:41:54,880 --> 00:41:59,680
Speaker 7: statulation is an increasingly bigger concern. In my mind, it

878
00:41:59,800 --> 00:42:03,239
Speaker 7: was always a concern. I think the dynamics set kept

879
00:42:03,280 --> 00:42:07,840
Speaker 7: inflation down for for a decades going into the pandemic

880
00:42:07,960 --> 00:42:11,560
Speaker 7: have changed dramatically. We don't talk about these longer trends

881
00:42:11,600 --> 00:42:15,480
Speaker 7: that are affecting inflation. So even without trade policy, that

882
00:42:15,719 --> 00:42:19,240
Speaker 7: was always a risk. Now that risk is amplified because

883
00:42:19,280 --> 00:42:21,440
Speaker 7: of some of the uncertainty that we're still seeing on

884
00:42:21,560 --> 00:42:22,200
Speaker 7: the trade side.

885
00:42:22,360 --> 00:42:24,839
Speaker 2: Naba, thanks for jumping on. Thank you very much, Nida

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00:42:24,920 --> 00:42:29,320
Speaker 2: Richardson there of ADP. This is the Bloomberg Sevenance podcast,

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00:42:29,520 --> 00:42:33,560
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