WEBVTT - Surveillance: Citi Picks Fraser To Be Next CEO 0:00:02.600 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.520 Bloomberg dot Com, and of course on the Bloomberg Ken 0:00:27.600 --> 0:00:30.080 Leon joins us Now and Banking of course helping out 0:00:30.200 --> 0:00:34.080 always with c f R A on this historic day 0:00:34.120 --> 0:00:38.240 of Jane Fraser taking over from Michael Corbett at City 0:00:38.280 --> 0:00:41.000 and she has moved many many a time, Ken Leon, 0:00:41.080 --> 0:00:47.320 were you surprised by this announcement? Uh, there's always a 0:00:47.400 --> 0:00:51.400 surprise when you have a change of leadership of this magnitude. 0:00:51.440 --> 0:00:55.760 And it is historic because we have a world class executive, 0:00:55.800 --> 0:00:58.760 a woman taking over one of the largest banks in 0:00:58.800 --> 0:01:02.680 the world. Uh, this is exciting. She's got a stellar resume. 0:01:03.520 --> 0:01:07.480 Um what Jane Fraser, She's a known entity. So you know, 0:01:07.600 --> 0:01:11.319 City internally is not a troubled bank. But Tom and 0:01:11.360 --> 0:01:15.759 all our conversations, of course, with the impact of COVID nineteen, 0:01:16.240 --> 0:01:18.800 you know, banks are just fighting their way up in 0:01:18.920 --> 0:01:24.080 terms of the troubled consumer market. Before Paul jumps in 0:01:24.120 --> 0:01:27.119 here in the short time, was Mr Corbett forced out. 0:01:30.440 --> 0:01:34.160 I don't have insight into that. Um. You know, clearly 0:01:34.600 --> 0:01:40.840 we've seen difficulty in terms of cities performance, especially in 0:01:40.920 --> 0:01:43.280 the consumer area, which is one of the strengths of 0:01:43.360 --> 0:01:48.520 Jane Fraser. Additionally, you know, for investors looking at share 0:01:48.560 --> 0:01:53.200 price movement, City has come back from its more slows, 0:01:53.240 --> 0:01:56.680 but it's really been about around fifty dos UM. You know, 0:01:56.760 --> 0:02:02.920 we think that's an opportunity. Really it's not Michael Corbett's fault. 0:02:03.000 --> 0:02:06.200 But there's two factors that drive City's outlook and why 0:02:06.280 --> 0:02:10.520 we have a by recommendation. The US economy going back 0:02:10.560 --> 0:02:15.600 to a normal market gained City for credit cards, and City, 0:02:16.240 --> 0:02:19.959 unlike any other large US bank, is a global play 0:02:20.000 --> 0:02:24.359 on strength in Southeast Asia or Latin America. Those markets 0:02:24.400 --> 0:02:28.440 come back, cities going to outperform. What Jane Fraser brings 0:02:28.480 --> 0:02:31.720 to the table was CEO in both Southeast Asia and 0:02:31.880 --> 0:02:34.880 Latin America. So I think the board is thinking about 0:02:35.160 --> 0:02:37.640 we've got a tough road over the next six months, 0:02:38.360 --> 0:02:42.320 trying to get back to a new normal, and Jane 0:02:42.320 --> 0:02:45.520 Fraser has skill sets to bring on a new generation 0:02:45.600 --> 0:02:49.400 of leadership. Ken, what do you think the top of 0:02:49.680 --> 0:02:55.919 Jane Fraser's to do list here. I think it's bringing 0:02:56.440 --> 0:03:03.000 greater integration of the businesses, particularly on the consumer side, 0:03:03.040 --> 0:03:06.280 which should be easy for her. We just haven't seen 0:03:06.880 --> 0:03:12.399 um strength across the board, and consumer for example, appears 0:03:12.440 --> 0:03:16.560 like JP Morrigan, Bank of America, Morgan Stanley very strong 0:03:16.600 --> 0:03:20.800 in wealth management. City really hasn't put a strategy and 0:03:20.840 --> 0:03:23.840 a business together to compete with that, and that's a 0:03:23.840 --> 0:03:29.080 big growth opportunity for City. Secondly, obviously there's a sensitivity 0:03:29.120 --> 0:03:32.080 to regulation, but risk taking. Where do you want to 0:03:32.120 --> 0:03:35.440 take risk is at the capital markets, it's looking at 0:03:35.520 --> 0:03:39.800 specific areas of commercial loans or possibly do you want 0:03:39.800 --> 0:03:41.840 to make an acquisition in the US? Do you know 0:03:42.280 --> 0:03:45.560 as large as City is only in like four states 0:03:45.720 --> 0:03:49.240 New York, Florida, California, and they're in South Dakota because 0:03:49.280 --> 0:03:52.760 that's where they do all their credit card processing. So 0:03:53.440 --> 0:03:56.680 ken one. Obviously, the key issues with this announcement is 0:03:56.720 --> 0:03:59.400 it's a the first woman to the top of a 0:03:59.480 --> 0:04:03.520 major globe investment bank. This is your sense of how 0:04:03.800 --> 0:04:06.600 Wall Street or financial services, of these sectors that you cover, 0:04:06.680 --> 0:04:09.800 how are they doing on diversity? From your perspective, they'd 0:04:09.800 --> 0:04:12.600 be getting a lot of pushback for many, many years 0:04:13.800 --> 0:04:16.160 I think it's top of lists for the whole industry, 0:04:16.440 --> 0:04:19.599 and um, we have certainly seen examples of it, but 0:04:19.640 --> 0:04:22.520 there's more that can be done. And when you think 0:04:22.560 --> 0:04:26.120 of the C suite where the major decisions are made 0:04:26.120 --> 0:04:29.680 for an entire enterprise or bank, UM, this is a 0:04:29.760 --> 0:04:31.880 great step. I think we're going to see more of 0:04:31.880 --> 0:04:35.640 this again. Look at we're talking to. Jane Fraser was 0:04:35.680 --> 0:04:38.520 the Mackenzie partner. She was at Goldman Sachs, m and A. 0:04:39.080 --> 0:04:42.800 She's covered the globe for city with the experiences I've mentioned, 0:04:43.200 --> 0:04:46.920 and she's a senior leader today. What a terrific opportunity 0:04:47.440 --> 0:04:50.720 for city to have her leads to Bank and Trump. 0:04:51.320 --> 0:04:53.080 I don't want to interrupt you. We're gonna rune out 0:04:53.080 --> 0:04:55.479 of time here again, Lean and thank you so much 0:04:55.480 --> 0:04:58.640 for coming out in short notice. Did they make this 0:04:58.800 --> 0:05:01.600 change because they were rate a losen er? I mean, 0:05:01.720 --> 0:05:03.800 is this no different than the starting pitcher for the 0:05:03.839 --> 0:05:09.520 New York mets. Well, given the current environment and what 0:05:09.760 --> 0:05:12.440 needs to be done for city, that reminds me of 0:05:12.760 --> 0:05:16.360 an interview of this founder of Netflix, which is who 0:05:16.520 --> 0:05:18.880 is right for the times we have and where we're 0:05:18.880 --> 0:05:23.440 going to lead? So I think after eight years Mike Corbit, 0:05:23.880 --> 0:05:26.880 you know he was basically City was a punching bag 0:05:27.400 --> 0:05:30.120 six eight years ago, not able to make the bank 0:05:30.240 --> 0:05:33.479 stress US. Bottom line is I think there's a smart 0:05:33.560 --> 0:05:36.320 move by the board and Michael Corbett's and gentleman and 0:05:36.320 --> 0:05:38.480 did a great job. Ken Leon, thank you so much. 0:05:38.480 --> 0:05:40.840 On short notice. Just a beautiful overlay, folks. Is that 0:05:40.920 --> 0:05:48.080 we love to do on Bloomberg surveillance. We get perspective 0:05:48.520 --> 0:05:50.920 from Carston. Rescue were thrilled that he could join us. 0:05:51.360 --> 0:05:56.400 UH this morning, Carston, good morning, Good morning, Tom good 0:05:56.400 --> 0:05:59.640 wonderful to have you with us. I guess it's as expected, 0:05:59.760 --> 0:06:03.440 but there was the money question right away on euro 0:06:03.760 --> 0:06:08.080 and this goes down to the need for continental and 0:06:08.120 --> 0:06:12.039 global trade for Europe to hold up the economy. Can 0:06:12.080 --> 0:06:18.080 world trade save the day for Europe? I think this 0:06:18.160 --> 0:06:20.000 is this time around, it's not going to be global 0:06:20.040 --> 0:06:22.800 trying saying the European economy when I have to come 0:06:22.880 --> 0:06:26.440 from from domestic demand, and that there are still so 0:06:26.480 --> 0:06:30.200 many problems out there outside of the yuro y'ar, look 0:06:30.240 --> 0:06:33.120 at the US, look at the U k UM. So 0:06:33.560 --> 0:06:36.400 this is I think why we also heard luck Guard 0:06:36.640 --> 0:06:40.320 only talking about the impact on inflation. She didn't mention 0:06:40.400 --> 0:06:42.840 the euro as a concern for the e CP. S 0:06:42.880 --> 0:06:47.080 Glow tut, look, look, excuse me. Of course it is 0:06:47.680 --> 0:06:50.560 the growth outlook. But to me, as I mentioned Paul Sweeney, 0:06:50.920 --> 0:06:52.520 it's sort of a euro that wants to have it 0:06:52.600 --> 0:06:56.160 both ways or guarding against weak tempered economic growth. And 0:06:56.240 --> 0:07:00.600 yet they're trying to set the template for higher inflation. 0:07:00.680 --> 0:07:04.159 Did that surprise you that they were so specific about 0:07:04.200 --> 0:07:10.640 an inflation to come in two thousand one? Um, No, 0:07:10.840 --> 0:07:14.200 because we have so many say, distortions in two thousand 0:07:14.240 --> 0:07:16.480 twenty one, don't don't forget. We have the reversal of 0:07:16.600 --> 0:07:19.200 the German v A reduction this year, so that's going 0:07:19.240 --> 0:07:21.760 to be reversed Enuary next year. So we should push 0:07:21.880 --> 0:07:26.080 up the inflation forecast. We we we had the so 0:07:26.160 --> 0:07:29.600 we have to the all pure and price development. Myself, 0:07:29.600 --> 0:07:33.160 I was not too concerned. What struck me was more 0:07:33.280 --> 0:07:37.240 the fact that the two thousand two inflation forecasts remained 0:07:37.320 --> 0:07:41.240 unchanged at one point um there. If you just would 0:07:41.280 --> 0:07:45.240 apply the technical assumption like the ECP does with with 0:07:45.360 --> 0:07:48.240 the stronger Europe, it should have normally pushed out the 0:07:48.320 --> 0:07:50.920 inflation production and then this is well what is it 0:07:51.000 --> 0:07:53.760 did the odd thing here? So the the you're not 0:07:54.000 --> 0:07:58.040 mentioned as a downside risk for growth, only mentioned as 0:07:58.080 --> 0:08:01.480 a dampening factor for inflation. So the ECB is indeed 0:08:01.760 --> 0:08:06.360 still try treating carefully and probably asked to keep some 0:08:07.200 --> 0:08:10.560 vocal or verbal iman via left. Well you taking notes 0:08:10.640 --> 0:08:12.840 on what you just said because I got lost about 0:08:12.840 --> 0:08:15.560 it halfway through. We're about to a one nineteen on 0:08:15.720 --> 0:08:18.160 euro Paul, absolutely, so Carson, just give us a sense 0:08:18.200 --> 0:08:20.680 of what you think the ECB is likely to do 0:08:20.800 --> 0:08:22.640 over the next six to twelve months. What do you 0:08:22.680 --> 0:08:27.480 think is going to be their strategy here? Strategy here 0:08:27.560 --> 0:08:29.640 is that having another one or two months in the 0:08:29.840 --> 0:08:33.240 verbal intervention right that guard is trying to currently and 0:08:33.320 --> 0:08:35.600 then towards the end of the year, I would still 0:08:35.640 --> 0:08:39.160 see an increase in the indecuity program b be it 0:08:39.280 --> 0:08:42.679 an increase of the PEPT program so the pandemic quity, 0:08:43.400 --> 0:08:46.880 or it could actually eas be reverting back to the 0:08:47.040 --> 0:08:50.240 old Q program which is currently this twenty billion per 0:08:50.320 --> 0:08:54.440 months um so, but there will be so in order 0:08:54.520 --> 0:08:58.680 to ensure that the ECB will be actively purchasing bonds 0:08:58.760 --> 0:09:02.720 at least until the two one and not as currently 0:09:02.840 --> 0:09:06.400 unvisited on until it's two Carston, thank you so much. 0:09:06.480 --> 0:09:15.360 Carston Braski with his chief economist, with Iron G. Ken 0:09:15.480 --> 0:09:21.680 Hartman runs Wells Fargo Asset Management, their chief investment officer. 0:09:22.400 --> 0:09:24.920 And within that he writes notes and they're, you know, 0:09:24.960 --> 0:09:26.640 they're sort of short. They're like the way a C. 0:09:26.840 --> 0:09:29.640 I over you know, writes ball, you know, like short's 0:09:29.679 --> 0:09:33.360 not like a forty two page themistic ring. And he 0:09:33.559 --> 0:09:38.640 absolutely nails in paragraph too. What all of us have 0:09:38.840 --> 0:09:42.719 to focus on, which is the G and the R 0:09:43.559 --> 0:09:46.559 and the bottom line is with this fiscal ginormity that 0:09:46.679 --> 0:09:50.840 we're doing kennon Good Morning, is we've got to get 0:09:51.040 --> 0:09:55.679 the growth rate to sustain above some form of interest rate. 0:09:55.800 --> 0:10:01.920 Discussed that, well, it's very important that the growth rate 0:10:02.000 --> 0:10:04.439 is above the real rate of interest. UM. It's the 0:10:04.480 --> 0:10:06.839 way we can grow out of our debt problem. So 0:10:07.280 --> 0:10:10.480 the feed is very um focused on keeping the real 0:10:10.640 --> 0:10:13.480 rate very low so we can grow our way out. UM. 0:10:13.640 --> 0:10:16.400 The problem will be whether that in fact will happen. 0:10:16.800 --> 0:10:18.439 And then the other thing that I'm very interested in 0:10:18.600 --> 0:10:20.920 is if it does happen, do we then get inflation? 0:10:22.000 --> 0:10:24.439 This is really important and Paul I have to apologize. 0:10:24.480 --> 0:10:26.679 I was out front on Kennerley and will join us 0:10:26.679 --> 0:10:29.719 in a bit with Michael Corbett. So I sent apologies 0:10:29.760 --> 0:10:32.240 to Kirk, and you know, Kirk, as Paul knows, I'm 0:10:32.280 --> 0:10:35.120 not focused because the Red Sox have the worst record 0:10:35.160 --> 0:10:37.839 in the American League. Paul, save me, I will save 0:10:38.000 --> 0:10:41.280 your tom so Kirk. It's interesting here we're hearing Madame 0:10:41.360 --> 0:10:45.160 Legard this morning again UM mentioning kind of the need 0:10:45.360 --> 0:10:48.079 to keep liquidity into the market place. What do you 0:10:48.120 --> 0:10:51.200 think the read through will be, uh for the US 0:10:51.240 --> 0:10:53.160 Federal Reserve is a parse kind of what they're hearing 0:10:53.200 --> 0:10:56.480 out of the our European friends today. Well, I think 0:10:56.520 --> 0:10:59.160 the Federal reservedly very pleased to see that. Um. They're 0:10:59.240 --> 0:11:02.040 following in ing with the Federal Reserve, and just the 0:11:02.160 --> 0:11:05.160 amount of stimulus is enormous. The money supply in the 0:11:05.320 --> 0:11:08.840 U S. Euro over year is up or more. And UM, 0:11:09.040 --> 0:11:11.319 I think that they will be very pleased to see that. 0:11:12.880 --> 0:11:16.200 Pleased enough uh that Again, I think the Fed has 0:11:16.280 --> 0:11:18.440 done each job. I think most market participants would say 0:11:18.440 --> 0:11:22.440 they were early, they were firm, They message very clearly 0:11:22.559 --> 0:11:26.199 their intent. Now I are turning back to Washington, d 0:11:26.320 --> 0:11:29.319 d C. And there's much less clarity coming out of 0:11:29.360 --> 0:11:32.920 Washington as it relates to stimulus. How do you think, Uh, 0:11:33.120 --> 0:11:35.760 those in Congress that are pointing to more stimulus may 0:11:35.800 --> 0:11:37.920 think about it given what we're seeing out of Europe 0:11:37.960 --> 0:11:41.160 and out of the US, Well, we clearly need more 0:11:41.240 --> 0:11:45.000 fiscal stimulus. The central banks are so to speak, pretty 0:11:45.080 --> 0:11:47.160 much out of AMMO. So I think the things that 0:11:47.200 --> 0:11:50.199 we're all watching is, you know, can that continue? Um. 0:11:50.360 --> 0:11:52.079 The other thing I think that we're all focused on, 0:11:52.160 --> 0:11:54.559 obviously is whether there's going to be a second way, 0:11:54.679 --> 0:11:56.800 so to speak, of the virus. And you know, I'm 0:11:56.880 --> 0:12:00.319 very concerned, as is everyone about the winner. So you know, 0:12:00.360 --> 0:12:03.000 we'll have to see how this plays out. But this 0:12:03.160 --> 0:12:07.080 goal stimulus is very important. This is really important. Kirk 0:12:07.120 --> 0:12:10.080 Folks I mentioned this earlier on television, very icon Green 0:12:10.640 --> 0:12:13.400 writing for Project Syndicate. I put it on Twitter. This is, 0:12:13.480 --> 0:12:17.079 of course the economic historian of the University of Berkeley 0:12:17.679 --> 0:12:21.920 and used to California at Berkeley, and Kirk he absolutely 0:12:22.040 --> 0:12:26.079 agrees with you that we're going into a period that 0:12:26.240 --> 0:12:29.400 maybe will not be is medically traumatic, but will be 0:12:30.160 --> 0:12:34.439 economically traumatic than what we've seen in the past six months. 0:12:34.760 --> 0:12:39.800 How is Wells Fargo stealed for that. In investment management, Well, 0:12:39.840 --> 0:12:43.080 I think you have to be cautious here. Clearly, Uh, 0:12:43.400 --> 0:12:47.280 the markets are are betting on a very strong recovery 0:12:47.320 --> 0:12:50.520 in and um I think it's prew them to head 0:12:50.559 --> 0:12:52.920 your better bit. The thing that's very interesting me is 0:12:53.000 --> 0:12:56.160 the disparity between growth and value. I've never seen uh, 0:12:56.280 --> 0:13:01.520 this disparity before. You have a growth it's ahead of value. Value, 0:13:01.880 --> 0:13:04.559 you know, is down nine on the large caps and 0:13:05.040 --> 0:13:08.559 growth is up something like so on a lot of 0:13:08.600 --> 0:13:12.280 these mega techniques. So I think that gap has to close. 0:13:12.360 --> 0:13:15.199 So my view would be I'd be cautious about the 0:13:15.320 --> 0:13:18.040 mega text. I think they've had their run. They obviously 0:13:18.160 --> 0:13:20.680 will do well in a low rate environment because they've 0:13:20.679 --> 0:13:24.800 got good earning streams. But to really see these markets 0:13:25.240 --> 0:13:28.160 sustain and continue to move, you've got to see the 0:13:28.240 --> 0:13:32.079 value sectors come back. So, Kirk, again we talk about 0:13:32.160 --> 0:13:34.920 the big tech names driving this market, and you know, 0:13:35.000 --> 0:13:38.720 some market participants, namely myself among them, are concerned about 0:13:38.760 --> 0:13:41.720 the lack of breath within the equity market. How concerned 0:13:41.800 --> 0:13:44.079 are you about that? Or can we just shrug it 0:13:44.120 --> 0:13:47.480 off given where we are in terms of low interest rates, Well, 0:13:47.520 --> 0:13:49.240 I don't think you can shrug it off. And what 0:13:49.400 --> 0:13:52.120 we're looking at is other areas of growth. So I 0:13:52.200 --> 0:13:55.040 think there's a little bit of a misunderstanding that it's 0:13:55.080 --> 0:13:57.439 only the mega tech names. There are a lot of 0:13:57.520 --> 0:14:00.719 other good growth names and uh, you know many of 0:14:00.840 --> 0:14:03.360 your guests that come on the program, So there are 0:14:03.360 --> 0:14:07.599 many other um uh companies that have good growth and 0:14:07.640 --> 0:14:10.800 they aren't necessarily the mega growth And that's where we're 0:14:10.840 --> 0:14:14.040 really looking at all. Right, So, Kirk, if someone's in 0:14:14.120 --> 0:14:17.920 the triple all leverage cash funds and and they're looking 0:14:18.000 --> 0:14:22.000 to kind of wedge themselves into the market, here, where 0:14:22.040 --> 0:14:25.840 should they be looking. Well, I looked internationally. I think 0:14:25.920 --> 0:14:28.520 what's very interesting is the dollar. And my view is 0:14:28.640 --> 0:14:31.000 the dollar and it already has a starting to weaken. 0:14:31.120 --> 0:14:34.160 So I think there are a lot of opportunities internationally. Uh. 0:14:34.400 --> 0:14:37.120 Anytime you see a mess, you want to look at that. 0:14:37.320 --> 0:14:39.440 So I think Europe right now is a bit of 0:14:39.520 --> 0:14:42.880 a mess. And I think that uh, Europe has value. UM, 0:14:42.960 --> 0:14:46.400 I think that Asia has value. You've seen China rebound, 0:14:46.800 --> 0:14:49.440 so um, you know we will get through this, and um, 0:14:49.600 --> 0:14:53.560 I think you want to look internationally. That's fascinating to me. 0:14:53.720 --> 0:14:56.400 Let's let's let's let's call it this. I mean, Nestley 0:14:56.560 --> 0:14:59.040 is first of all out of Switzerland, so it's in 0:14:59.160 --> 0:15:03.320 some ways not Europe, and it's amazing the discount. Kirk 0:15:03.360 --> 0:15:07.240 Hartman of the Pe of Nestley called up twenty five 0:15:07.440 --> 0:15:11.640 ish versus so many of its equivalences here at thirty ish. 0:15:12.000 --> 0:15:16.000 I mean that it's tangible, isn't it? Well, very much so. 0:15:16.120 --> 0:15:18.920 And if you look at the PE ratios of Europe 0:15:19.120 --> 0:15:23.080 or Asia versus the US, it's a lot less. So um. Again, 0:15:23.200 --> 0:15:24.960 that gets to I look at two things. I think 0:15:25.000 --> 0:15:28.040 the growth of value gap is going to close, and 0:15:28.160 --> 0:15:31.560 I think that with a weaker dollar, Europe and Asia 0:15:31.680 --> 0:15:36.440 have value. Interesting Kirk, I mean, would you go so 0:15:36.680 --> 0:15:40.480 far as to consider emerging markets? I know there's a 0:15:40.680 --> 0:15:44.480 lot of discussion around when people should really start taking 0:15:44.480 --> 0:15:48.960 a look there. Well, emerging markets, UH are very much 0:15:49.000 --> 0:15:51.360 dependent on China, and I think China got the message 0:15:51.400 --> 0:15:53.920 that they can't depend for a lot of reasons on 0:15:54.040 --> 0:15:57.280 the US supply chain. So um, what's interesting to media 0:15:57.360 --> 0:16:00.600 is China is really diversifying. You look at the companies 0:16:00.640 --> 0:16:04.280 in Korea and Japan and Taiwan. And it's very clear 0:16:04.400 --> 0:16:07.280 that China is going to build its own semi conductor 0:16:07.480 --> 0:16:10.240 industry and chips, and that's why I would look to 0:16:10.320 --> 0:16:15.920 value is the extended UH periphery outside of UH Japan. 0:16:16.200 --> 0:16:18.440 Excuse me, China, Okay. Kirk Hartman with US Folks. We 0:16:18.520 --> 0:16:20.160 gotta let him go or that market will go down. 0:16:20.280 --> 0:16:26.880 Kirk Hartman with Wells Fargo, thank you. Right now, we 0:16:26.920 --> 0:16:29.680 want to get to this important interview. The Johnson family 0:16:29.800 --> 0:16:34.160 runs Fidelity and they've always done inspired hiring around the 0:16:34.240 --> 0:16:36.760 street to bring in the troops with the Boston Bread. 0:16:37.200 --> 0:16:40.880 They did that two years ago with Vadim Zlotnikov, who 0:16:40.960 --> 0:16:44.480 was definitive in Alliance Bernstein. If you were on the street, 0:16:44.920 --> 0:16:48.240 you had to read the quantitative and market UH letters 0:16:48.280 --> 0:16:51.840 and research pieces from Mrs Slatnikov. He joins US now 0:16:51.920 --> 0:16:56.240 with Fidelity, their institutional asset management president, voting. The rules 0:16:56.280 --> 0:16:59.920 have changed. Fidelities lived at, Schwab's lived at. Everybody I'll 0:17:00.080 --> 0:17:03.120 has lived it. I want you to first discuss the 0:17:03.400 --> 0:17:07.600 overtrading disease we are we have right now. Are you 0:17:07.800 --> 0:17:13.320 in Fidelity facilitating and overtrading disease that will lead to 0:17:13.560 --> 0:17:18.040 losses and ill return. Look, Fidelity has always been about 0:17:18.119 --> 0:17:20.440 long term and and you know as well as I do, 0:17:22.680 --> 0:17:25.600 of the investment outcomes comes from the underlying product design, 0:17:25.760 --> 0:17:28.720 not from the trading, and the emphasis has always been 0:17:28.880 --> 0:17:32.080 on making sure you have the appropriate product design to 0:17:32.200 --> 0:17:36.960 achieve the particular investment goals. Very importantly in your heritage, 0:17:36.960 --> 0:17:39.400 and this goes back to the great Paul Handros as well. 0:17:39.880 --> 0:17:43.600 Fidelity is at a mandate to be on perspectus what 0:17:43.840 --> 0:17:47.320 is working right now in terms of total return, narrow 0:17:47.600 --> 0:17:53.280 on perspective investment or are more broader tone. The last 0:17:53.320 --> 0:17:56.080 ten years have been very much about a very narrow 0:17:56.160 --> 0:18:00.840 market ut product that emphasized US at the expense of 0:18:00.920 --> 0:18:05.280 international equities has delivered very very strong results. The key 0:18:05.400 --> 0:18:07.960 issue is is this going to change? And we believe 0:18:08.359 --> 0:18:10.359 that it will, and that there are a number of 0:18:10.480 --> 0:18:15.560 drivers that are conspiring to argue for significantly greater degree 0:18:15.560 --> 0:18:18.520 of diversification as we move forward. That is going to 0:18:18.640 --> 0:18:21.280 be we believe, a critical decision. And just to be 0:18:21.359 --> 0:18:24.600 absolutely clear, I'm not speaking on behalf of Fidelity, but 0:18:24.800 --> 0:18:27.119 rather on the on behalf of my group and the 0:18:27.200 --> 0:18:31.399 economic research team that developed the paper. But they built 0:18:31.440 --> 0:18:33.240 on that a little bit and move away from the 0:18:33.280 --> 0:18:35.960 sixty forty because it's the forty that it's got a 0:18:36.080 --> 0:18:38.119 ton of attention in the last month or so. Can 0:18:38.160 --> 0:18:41.560 you speak to that, Dame, Absolutely. So. Look, one of 0:18:41.600 --> 0:18:44.399 the basic premises we have is that you want to 0:18:44.440 --> 0:18:46.760 invest in the basis of something that is at least 0:18:46.840 --> 0:18:49.840 noble or at least very likely about the future. And 0:18:49.920 --> 0:18:52.399 the one thing that is very likely is that the 0:18:52.600 --> 0:18:55.439 levels of death in the economy relative to GDP are 0:18:55.480 --> 0:19:00.480 going to continue to escalate. Demographics, policy, everything is inspiring 0:19:00.520 --> 0:19:02.800 to make it happen. The issue is, and this is 0:19:02.840 --> 0:19:06.520 where really the big question is, is that going to 0:19:06.680 --> 0:19:09.399 drive inflation? And we believe it will. That is a 0:19:09.560 --> 0:19:12.440 huge departure from where we've been in the past. Not 0:19:12.600 --> 0:19:17.159 only will it drive inflation, it will also alter the 0:19:17.320 --> 0:19:21.359 type of assets that are likely to under outperform in 0:19:21.440 --> 0:19:25.960 that environment. Okay, so what's likely to outperform? So there 0:19:26.000 --> 0:19:27.439 are a number of things. So, first of all, one 0:19:27.480 --> 0:19:29.879 of the interesting things, if you look back at before 0:19:29.920 --> 0:19:33.800 even two thousand three, luxury goods had the same essential 0:19:33.880 --> 0:19:37.040 inflation as the CPI following two thousand three, and if 0:19:37.080 --> 0:19:41.400 you remember the aspirational consumer using your house is getting account. 0:19:41.760 --> 0:19:47.000 All of those cliches that we've had drove massive inflation 0:19:47.080 --> 0:19:51.480 and luxury goods. We likewise we've seen asset inflation. The 0:19:51.600 --> 0:19:54.480 future inflation is going to be somewhat driven by the policy, 0:19:54.760 --> 0:19:57.400 for example, to the extent we start to see policies 0:19:57.480 --> 0:20:02.200 aimed at wealth redistribution, narrowing the income inequality gap. Many 0:20:02.280 --> 0:20:05.000 of the areas that have high elasticity to the lower 0:20:05.080 --> 0:20:08.280 and consumer spending are likely to see inflation. They've been 0:20:08.359 --> 0:20:11.399 left for dead their undervalue, and we do think some 0:20:11.520 --> 0:20:14.560 of those could I'll perform over a long term. This 0:20:14.720 --> 0:20:17.040 is not a one year forecast about him. This will 0:20:17.040 --> 0:20:19.920 be a question for you an alliance. Burnstand certainly with 0:20:20.080 --> 0:20:23.320 you a serious money at fidelity. When we read about 0:20:23.359 --> 0:20:26.440 the gamma, well, when we read about the nastack, well, 0:20:26.520 --> 0:20:30.840 when we read about fancy derivative strategies, it it destroys 0:20:30.960 --> 0:20:34.480 trust on the street. How do we regain the trust 0:20:34.560 --> 0:20:37.880 on the street if everybody's trying to outdo Soft Bank 0:20:37.920 --> 0:20:42.480 of Japan. Yeah, look, there there will always be investors 0:20:42.560 --> 0:20:46.800 that are interested in shorter horizon trading that believe they 0:20:46.880 --> 0:20:49.840 might have a point of view on things like gamma 0:20:50.119 --> 0:20:54.280 or delta. Honestly that that is a relatively small minority. 0:20:54.760 --> 0:20:56.760 I do see, you know it is happening. It is 0:20:56.880 --> 0:20:59.520 I think a function of significant liquidity if we've seen 0:20:59.520 --> 0:21:01.720 in the mark it as well as well as low 0:21:01.800 --> 0:21:04.480 interest rates, so there is a propensive Just try to 0:21:04.600 --> 0:21:08.359 seek out incremental investments. I really want to keep coming 0:21:08.400 --> 0:21:10.840 back to the point. If you really believe the statement 0:21:10.880 --> 0:21:15.159 that eighteent of your outcome is about product design, that's 0:21:15.200 --> 0:21:19.280 where people should spend eight of their time. I just 0:21:19.359 --> 0:21:21.720 got an email in All anybody wants to know is 0:21:21.800 --> 0:21:24.280 how does will dan Off do it? What's the dan 0:21:24.400 --> 0:21:27.280 Off message that has made Contra Fund do that for 0:21:27.359 --> 0:21:32.400 all these years? Hard work and natural talents, those those 0:21:32.440 --> 0:21:35.600 are generally pretty good recipe for our success. He's done 0:21:35.600 --> 0:21:39.040 a remarkable job. It's truly truly aspiring. I believe it's 0:21:39.040 --> 0:21:41.680 his thirty a year of fidelity this year, so it's 0:21:41.800 --> 0:21:44.800 it's it's been a remarkable run. It's been a remarkable run. 0:21:44.840 --> 0:21:47.000 I want you to take us back to George Vanderheid 0:21:47.040 --> 0:21:49.239 and Jeff Finnick and the rest of them, who from 0:21:49.320 --> 0:21:51.680 time to time would make bets in the bond markets. 0:21:51.840 --> 0:21:54.960 Are your equity guys using zero coupon bonds and such 0:21:55.240 --> 0:21:58.000 to make big bets now on fixed income or is 0:21:58.040 --> 0:22:01.080 that from the past. I think it's mostly from the past. 0:22:01.600 --> 0:22:03.880 I think, look there there are so many products of fidelity. 0:22:03.920 --> 0:22:07.120 There may be somebody doing uh investing in some pot 0:22:07.240 --> 0:22:09.480 but no, that's within the group that I run, which 0:22:09.560 --> 0:22:13.320 is really what I'm most familiar with. We we don't 0:22:13.359 --> 0:22:16.920 do that now, which it's mostly multi asset products, balanced 0:22:17.000 --> 0:22:21.120 products that aimed at satisfying a particular investment outcome, particular 0:22:21.200 --> 0:22:26.720 regulatory requirement, particular tax requirement, with a fantastic to catch up, 0:22:26.800 --> 0:22:28.400 going to see you again, but names at a cuff 0:22:28.480 --> 0:22:37.159 that vitality, institutional asset management. President. We move on to 0:22:37.280 --> 0:22:40.119 the depression of Washington. We can always do that with 0:22:40.240 --> 0:22:45.200 Henrietta treys Veda, Partners Director of Economic Policy Research. I 0:22:45.240 --> 0:22:47.760 guess the battle over the stimulus, Henriette is sort of 0:22:47.840 --> 0:22:50.960 like the Boston Red Sox. It's not going well. My 0:22:51.160 --> 0:22:55.639 major question is there's a huge perception among our guests 0:22:56.240 --> 0:23:00.080 of the urgency for Washington to act. Does Wash you 0:23:00.160 --> 0:23:04.120 didn't have any of that urgency? No, they really don't. 0:23:04.440 --> 0:23:07.320 Um you can see that as far back is July 0:23:07.480 --> 0:23:10.880 thirty one, when the unemployment insurance benefits expired, and nothing 0:23:10.960 --> 0:23:13.480 has changed since we passed the August eighth date with 0:23:13.520 --> 0:23:16.000 the p p P And here we are over a 0:23:16.119 --> 0:23:19.000 month after that event even and we don't have a 0:23:19.000 --> 0:23:20.720 bill that can pass the Senate, even with just the 0:23:20.760 --> 0:23:24.320 Republican conference. So today there's a vote scheduled and we'll 0:23:24.320 --> 0:23:26.359 see if it actually happens, but it will fail, and 0:23:27.200 --> 0:23:29.639 we'll see what happens after that. Not much is my expectation. 0:23:29.800 --> 0:23:34.399 What are the consequences of no stimulus bill? Unfortunately, the 0:23:34.440 --> 0:23:37.480 consequences for the Republican Party and the Democratic Party are 0:23:37.720 --> 0:23:41.600 good for the political side, bad obviously for the state 0:23:41.640 --> 0:23:45.000 of further stimulus and the potential for more unemployment checks 0:23:45.040 --> 0:23:48.400 and other fiscal stimulus for the investors or markets um. 0:23:48.560 --> 0:23:51.440 But for both parties, I see benefits on the political side. 0:23:51.480 --> 0:23:53.359