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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple car Play or Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube with that question.

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Speaker 2: This is the interview of the day for Global at

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Speaker 2: Wall Street. Paul, Can I dare say it's the interview

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Speaker 2: of the month.

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Speaker 3: I'll go with that.

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Speaker 2: We'll go with that. Gary Gensler has a sterling effort

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Speaker 2: of hard work and academic excellence across his career, spanning

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Speaker 2: from a look at media and mergers and acquisitions with

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Speaker 2: Golden Sachs onto his public service, wearing numerous hats for

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Speaker 2: the United States of America, recently a chairman of the

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Speaker 2: Securities and Exchange Commission, and he joins us in studio.

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Speaker 2: Thank you for joining Bloomberg.

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Speaker 4: To Tom Paul, it's wonderful to be with you. You're a

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Speaker 4: little exaggerating about me, but I'll take it.

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Speaker 2: We'll take it. Well, we do that as we can.

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Speaker 2: You have the privilege of a podcast with one of

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Speaker 2: my favorite people. Simon Johnson was my book of the

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Speaker 2: summer two thousand and eight, two thousand and nine is

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Speaker 2: little monograph thirteen Bankers distilled your chaos. It was your fault.

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Speaker 2: We had the credit glose seven and Simon Johnson, Nobel

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Speaker 2: Laureate did it. Here is Simon Johnson in thirteen Bankers,

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Speaker 2: And I will take credit for really making this public.

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Speaker 2: The SEC Final Rule Alternative net Capital Requirements for Broker

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Speaker 2: Dealers August twenty, two thousand and four, and three years later,

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Speaker 2: that third week of August oh seven, libor Ois went

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Speaker 2: out four standard deviations. Are we doing it again with

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Speaker 2: private credit?

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Speaker 3: Look?

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Speaker 4: I won thank you so much, and it's one wonderful

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Speaker 4: to be partnered up with Simon Johnson on our new podcast,

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Speaker 4: Power and Consequences. A little audacious because in the world

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Speaker 4: of economic minstrels, do we need another two folks, you know,

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Speaker 4: out there doing podcasts. But we're going to have some

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Speaker 4: fun with it and speak about that. Look, in terms

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Speaker 4: of private credit, I think that it's there's some risks there,

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Speaker 4: but it's a small part of our overall capital markets.

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Speaker 4: For US capital markets what one hundred and fifty trillion

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Speaker 4: or so, and this is a two trillion dollar corner.

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Speaker 4: But there are some risk and I'm sure we'll get

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Speaker 4: into it, particularly because they've offered to retail investors, high

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Speaker 4: net worth individuals what's called the wealth channel, to be

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Speaker 4: part of this, and the wealth channel is turning on it.

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Speaker 4: They're saying, we don't want to we don't want to

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Speaker 4: be in here as much can we redeem out?

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Speaker 5: And that's a little hard.

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Speaker 2: How do you respond to people that you, as SEC

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Speaker 2: chairman for opening up the door to this retail investment

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Speaker 2: in esotery things like bigcoin and others, but also, Paul,

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Speaker 2: how would you phrase it a liquid.

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Speaker 3: Private credit or less liquature?

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Speaker 2: They blamed Gary Gainst the chairman, Gainstler, it's your fault.

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Speaker 2: How do you respond to that?

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Speaker 5: That's a new one. I hadn't heard that top.

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Speaker 2: It's in the Zeist. It's like Gunsler and Biden. Let

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Speaker 2: this happen. I respond to.

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Speaker 4: Firms, alternative asset managers and private equity and private credit

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Speaker 4: and hedge funds, real estate and so forth have been around,

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Speaker 4: you know, really for fifty years in the direct lending space.

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Speaker 4: That started in two thousand and eight to twenty twelve.

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Speaker 4: Mark Rowan started Apollo Schwartzman with Blackstone. They were building

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Speaker 4: big engines, and it was already probably when I got there,

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Speaker 4: at least approaching a trillion dollars. So I just think

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Speaker 4: that that that was something.

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Speaker 2: That was was it. You haven't your four owin k right.

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Speaker 3: Of course.

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Speaker 6: One of the things I noticed, Rob is when we

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Speaker 6: do go out and talk to registered investment advisors, and

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Speaker 6: we do that a lot in Bloomberg Radio, we go

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Speaker 6: out to our sponsors, I'm shocked at the ras at

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Speaker 6: the allocation to alternative investments. I would have thought it

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Speaker 6: was five percent. They're talking twenty thirty, forty percent. They're

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Speaker 6: talking like they're in an endowment.

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Speaker 4: Look, I think that's where we have the risk. It's

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Speaker 4: a structural risk. Alternative asset managers private credit amongst them,

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Speaker 4: are bringing in institutions, sovereign wealth funds like insurance companies,

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Speaker 4: and then about.

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Speaker 5: A third of private credit the.

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Speaker 4: Investors are every day investors. Lloyd Blankfine said it well.

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Speaker 4: He was asked recently about it. He says, I don't

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Speaker 4: care why they're doing this, it's when when this goes

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Speaker 4: down the institutions Washington, No, I don't care about, but

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Speaker 4: when it goes down for private individuals, it's going to

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Speaker 4: be bad.

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Speaker 2: If you said, with the celebration of mister Blankfin's book,

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Speaker 2: how many book parties is he having? You been to them? All? Right?

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Speaker 4: No, But but Lloyd and I we were at going

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Speaker 4: and Sackson, we were honored to make partner together.

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Speaker 2: So he.

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Speaker 5: He's a very clever and funny individual.

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Speaker 3: So I just preferred to Gary as Rob. You know

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Speaker 3: why I did that? His twin brothers, Rob. That's the right.

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Speaker 3: He's a body of marketing.

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Speaker 5: Today, my identical twin brother Rob. Yes, he's a.

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Speaker 3: Price, he's the he's the guest.

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Speaker 2: Across America with this. Gary guns to the former chairman

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Speaker 2: of the SEC and celebration of his podcast with the

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Speaker 2: Laureate Simon Johnson. It's Sloan Paul Sween.

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Speaker 6: So, Gary, the investors have been dealing over the last

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Speaker 6: three four weeks with all this issues going on in

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Speaker 6: a rants, whipping around energy markets, whipping around all kinds

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Speaker 6: of risk markets.

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Speaker 3: How do you view that?

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Speaker 6: When we talk to investors, I'm sure they come up

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Speaker 6: to you and.

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Speaker 3: Say, what do I do here?

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Speaker 6: Because it's so much stuff I don't understand.

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Speaker 5: Perhaps, Look, it's it's a multiple shocks. It's shocked to.

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Speaker 4: Energy market, says we know, and I would look at

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Speaker 4: energy markets, not at the current price. I'd look at

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Speaker 4: the September and December prices for both oil and for

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Speaker 4: natural gas. I'd look at fertilizer pricing, and right now,

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Speaker 4: probably we're going to have higher prices for agriculture in

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Speaker 4: the fall because the fertilizer pricing has gone up doubled

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Speaker 4: in the last few weeks and this is spring planting time.

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Speaker 4: I think it's also is going to hollow out some

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Speaker 4: of our longer term growth. Like we've remarkably resilient economy.

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Speaker 4: Jason Furman just wrote about this in the New York Times,

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Speaker 4: but I do think that our longer term growth rate

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Speaker 4: is now clinked down a little bit more. And so

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Speaker 4: i'd be worried about multiples in the equity markets when

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Speaker 4: you have lower growth.

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Speaker 6: If you're at if you were back at the SEC,

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Speaker 6: what would be your primary issue worry to do item?

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Speaker 4: Maybe, so I would be getting the team together and say,

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Speaker 4: what do we know and can you pulse the various

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Speaker 4: large banks, the JP Morgans and Goldman's about what's called

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Speaker 4: prime brokerage, where they have trillions of dollars loaned out

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Speaker 4: to hedge funds. And then also I'd ask the bank regulators,

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Speaker 4: how does it look about their loans to private credit.

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Speaker 4: We recently saw JP Morgan remarking those loans to private credit.

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Speaker 4: I'd want those interconnections to prime brokerage, hedge funds, and

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Speaker 4: the banks to the private credit space.

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Speaker 2: Tell me about the hedging risk here I brought up

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Speaker 2: the last couple of days, and all of this works off.

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Speaker 2: At New York University, Professor Roman Friedman has been wonderful.

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Speaker 2: There's a hedging and Greenspan would speak about this and

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Speaker 2: celebration folks of his one hundredth birthday. We have hedging.

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Speaker 2: There's a price to hedging always and then oops, things

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Speaker 2: go bad and within a hedge or out there a

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Speaker 2: rehdge or Darius say out again, what is our risk

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Speaker 2: right now of there's a point where you have to rehadge,

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Speaker 2: you have to restructure all these derivative instruments.

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Speaker 4: Well, that is always a risk, particularly if a firm fails,

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Speaker 4: and that's what we would look at when I was

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Speaker 4: at the US Treasury many years ago and long term

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Speaker 4: capital management failed.

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Speaker 5: So everybody has to rehadg.

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Speaker 4: So when there's breakage in the system, it's as you

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Speaker 4: just said, the rehadch for the listeners. A bank is

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Speaker 4: counting on its counterparty to be there tomorrow, but when

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Speaker 4: the counterparty disappears, then they have to take that whole

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Speaker 4: position right and rehadge.

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Speaker 2: The certitude of the street. Gary Gunsler, is we fix

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Speaker 2: this in seven eight? The big banks are not exposed,

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Speaker 2: but then they're the others. What are the shadows of

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Speaker 2: the others that you're focused on.

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Speaker 4: I do think that the big banks have better capital position,

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Speaker 4: are more resilient twenty twenty six than two thousand and

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Speaker 4: in seven, But I do look at the significant leverage

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Speaker 4: that's the borrowing in the hedge fund community, and yes,

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Speaker 4: the interconnection between the banks and the alternative investors of

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Speaker 4: the private credit space. And now back to this private credit,

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Speaker 4: we are going to see some disruptions. I mean, AI

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Speaker 4: is changing the world right now right, and if it's

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Speaker 4: a fast change, that means valuations are going to change

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Speaker 4: a lot. This is like a Barbell economy. If AI

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Speaker 4: goes really well, that means some valuations, whether it's in

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Speaker 4: software other fields, have to decline.

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Speaker 6: Crypto, have we gained more any clarity on who is

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Speaker 6: regulating it, who should regulate it to what's the Greece

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Speaker 6: Should it be regulated where we'll net.

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Speaker 4: I think those are going to be questions that you'll

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Speaker 4: have for my honored successor, Paul Atkins and others. But

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Speaker 4: the American public, you know, they seem to be even

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Speaker 4: more focused.

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Speaker 5: On prediction markets than crypto right now.

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Speaker 4: So the investing public, I'm not saying they've moved on yet.

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Speaker 4: There's been a new darling at this little casino.

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Speaker 6: One of our colleagues of Bloomberg Television was just interviewing

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Speaker 6: the CEO of one of these prediction markets and adamant

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Speaker 6: that it is not gambling.

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Speaker 4: Okay, yeah, there's no gambling in this town right now about.

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Speaker 2: It, And I'm not going to blame this on you,

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Speaker 2: but I'm sorry, there's this huge thing I've got to

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Speaker 2: make some news this morning. Do you look at these

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Speaker 2: prediction markets as gambling, mister Gonsler.

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Speaker 5: Well, parts of it are.

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Speaker 2: Sure.

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Speaker 5: Look there's parts of it that is just hedging right

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Speaker 5: economic risk. But now you go all the way over

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Speaker 5: to the sports world, and the sports world that's just gaming.

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Speaker 2: It is I'm going to go mental here. Raphael Hour

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Speaker 2: at the Bank of International Settlements has written the smartest

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Speaker 2: stuff I've seen. On a broader statement of bitcoin. They

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Speaker 2: did a page or eight single sentence, single spaces, eight

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Speaker 2: pages of detail on the speculation within these markets. I

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Speaker 2: mean it's basically a casino like people voting against Duke

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Speaker 2: and basketball. I don't see penn in the Did you

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Speaker 2: see the University of Pennsylvania in the bracket? Wait?

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Speaker 5: Wait, wait, that's my am my mind.

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Speaker 7: I know.

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Speaker 3: Are you eating Yellen?

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Speaker 2: Did you see this? I saw that? Are you in

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Speaker 2: the second or third row at the game?

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Speaker 4: I don't want to give that up, Tom, But look,

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Speaker 4: I mean, investors can be taking a bet on things,

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Speaker 4: even when they're betting on an individual stock. But there

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Speaker 4: are parts of the prediction markets, and they're parts of

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Speaker 4: the cryptocurrency markets that are just pure, pure speculation. And

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Speaker 4: so you know, how do we protect the investing public

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Speaker 4: in those worlds? How do we protect the investment public

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Speaker 4: and prediction markets or in the cryptocurrency markets, And importantly,

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Speaker 4: how do we protect the integrity of the underlying the elections?

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Speaker 4: How do we protect the integrity that government actors aren't

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Speaker 4: leaking information so that you can make a bet in prediction?

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Speaker 8: Mark?

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Speaker 2: Okay, So Lexis's great grandmother took bitcoin from thirty thousand

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Speaker 2: up to one hundred and ten thousand.

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Speaker 5: Your great grandmother that is about three years old.

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Speaker 2: Yeah, Gary, come on, we've gone from one hundred and

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Speaker 2: ten thousand whatever on bitdog back down to where are

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Speaker 2: we seventy four thousand today? Should should for one case,

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Speaker 2: should Ira? Should grandmas be playing with these fancy things

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Speaker 2: where we question the underlying.

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Speaker 4: Look, we we let the investing public invest. We're merit neutral.

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Speaker 4: That's our system. I believe that's a that's a good system. However,

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Speaker 4: we sort of have to have transparency. We have to

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Speaker 4: have market integrity right, and we have to make sure

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Speaker 4: that people protect those investors that they're not getting picked off.

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Speaker 2: Okay, Paul wants to jump in. I got one more question.

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Speaker 2: I'm going to shut up, Gary Gensel. You mentioned transparency.

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Speaker 2: How should we mark the market private? I mean, is

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Speaker 2: it by appointment? I mean, help me here.

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Speaker 4: That's the challenge at this If it were just a

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Speaker 4: pure institutional market, it was some sovereign wealth run from

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Speaker 4: Qatar investing in private credit.

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Speaker 5: And by the way, that might also change the valuations.

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Speaker 4: What's happening in Iran could be a little less money

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Speaker 4: from sovereign wealth months. But to your question, I think

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Speaker 4: it's hard when you have the general investing public, as

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Speaker 4: you said in four to one K's or rias, and

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Speaker 4: I think that's a very challenging and I would say

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Speaker 4: problematic part of this private credit space.

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Speaker 6: Bloomber News was had a good story yesterday about quarterly

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Speaker 6: reporting for financial results for public companies.

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Speaker 3: Europe and other parts of the world do it twice

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Speaker 3: a year. We do a quarterly. What's your view there.

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Speaker 5: I'm very clear on this.

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Speaker 4: I think it's one of the parts of the US

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Speaker 4: capital exceptionalism, our capital market since nineteen thirty nine. New

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Speaker 4: York Stock Exchange put this at in the nineteen thirties.

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Speaker 4: And you're saying, not everything in the nineteen thirties.

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Speaker 5: Mister Genser is good.

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Speaker 3: This is good.

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Speaker 4: And yes, it's a little bit for the c suite, Yeah,

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Speaker 4: is it a little bit of friction? Is it a

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Speaker 4: little bit like, oh, I have to meet with the analysts,

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Speaker 4: I have to hear Tom Keane talk about my company.

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Speaker 4: But overall, it creates so much public good. It helps

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Speaker 4: our economy, it helps investors, it helps the media.

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Speaker 5: It does. But it's really an important piece I wouldn't

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Speaker 5: want to give that up.

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Speaker 6: Yeah, you know it's a former self side equity research channels,

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Speaker 6: so it was four times a year you had to

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Speaker 6: gear up up. But arguably that is a backline the

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Speaker 6: transparency one of the reasons that our capital markets are

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Speaker 6: as deep as they are.

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Speaker 2: You did media years ago, right.

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Speaker 4: Yeah, I just advise the companies, yees, so help. I

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Speaker 4: helped media companies buy and sell each other, the big

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Speaker 4: newspaper companies, the new houses.

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Speaker 2: Yes, okay, so ZEVs loves Pocket and seven hundred million

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Speaker 2: office transaction. Sweeney's expert is I'm the dumbest one in

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Speaker 2: the room.

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Speaker 9: Your thoughts here on the media roll up, in the

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Speaker 9: politics of it, the idea of the White House directly involved,

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Speaker 9: mister Atkins, I don't think is weighted on this, which

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Speaker 9: is I know you don't want to comment on that,

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Speaker 9: but just Gary Gensler media thoughts on our media roll up.

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Speaker 4: I think it's we were in a better system and

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Speaker 4: a better rule of law when these decisions were not

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Speaker 4: made in the White House, they were made at a

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Speaker 4: federal Communications Commission. If they're made at all, a lot

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Speaker 4: of buying and selling of newspapers aren't done at the

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Speaker 4: federal level, buying and selling of radio stations technically are,

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Speaker 4: but they're really done away from that. I think that's

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Speaker 4: a much better way. And you have rules of the

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Speaker 4: road and you stick to them. The idea of a

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Speaker 4: white house picking winners and losers, that's not good for

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Speaker 4: the rule of law nor for our economy.

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Speaker 6: One of the when President Trump his second term began,

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Speaker 6: one of the themes was, boy, this is going to

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Speaker 6: be really good for the financial services industry writ large,

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Speaker 6: maybe taking down some of the regulatory risk, maybe allowing

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Speaker 6: some consolidation, of.

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Speaker 5: Lowering, lowering taxes on that company.

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Speaker 6: Since actually, how do you view the regulatory overview of

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Speaker 6: the financial services industry today? Does anything need to changes

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Speaker 6: that need to be loosing tightened?

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Speaker 5: Look, there's an EBB and flow.

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Speaker 4: Elections have consequences, as they should, and so there's that

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Speaker 4: EBB and flow. I more am concerned and the longer

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Speaker 4: term that as the US has stepped back from our

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Speaker 4: leadership around the globe, that our capital markets stay the

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Speaker 4: sweet spot that everybody wants to be at.

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Speaker 2: Gary Guesser, one final question here before we let you

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Speaker 2: start your morning here in Manhattan. You have so much

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Speaker 2: experience at this you've seen the good in the bad.

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Speaker 2: We had Disney with a succession yesterday two days ago.

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Speaker 2: How do you do executive succession correctly? With all that

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Speaker 2: you've you know, Goldman section others frankly at the SEC.

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Speaker 2: How do you do executive succession look correctly?

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Speaker 5: Look it's hard.

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Speaker 4: Simon Johnson and I just started this podcast, Power and Consequences.

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Speaker 4: We don't know who would step in behind Simon or me.

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Speaker 4: Is just a small little podcast. But when you're at

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Speaker 4: a big company, you really have to have succession planning.

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Speaker 4: And Tom you're terrific at the show. You have to

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Speaker 4: have succession planning, even for this show, and that's a

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Speaker 4: responsibility you have to your shareholders and to have that

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Speaker 4: set up. But then it's hard because some of the

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Speaker 4: most talented C suiteters don't want to stick around. You know,

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Speaker 4: Jamie Diamond terrific run that firm for a long time.

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Speaker 5: Well you've seen loads of really good folks in his

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Speaker 5: senior suite.

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Speaker 4: Saint No, I'm going to I want that opportunity in

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Speaker 4: my mid fifties to go run something. So that's but

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Speaker 4: you have to start with that. The board of directors

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Speaker 4: also has to be very involved and say we need

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Speaker 4: this succession.

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Speaker 2: Should we have more people writing an annual note like

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Speaker 2: mister Diamond, I have a very strong feeling or we should.

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Speaker 5: But let me ask you, well, look, aren't you off

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Speaker 5: at Jamie? Right now?

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Speaker 2: I hear the CEOs of this managed PR event with

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Speaker 2: forty seven people around a massaging a two paragraph message blooney,

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Speaker 2: we need it's better to know what they think.

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Speaker 4: And they're using AI now so sometimes as messages or

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Speaker 4: AI slop too.

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Speaker 5: But do you I.

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Speaker 2: Got AI in your class at MIT?

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Speaker 3: Oh? Good question.

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Speaker 5: Oh it's everywhere, Tom. The students are using it.

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Speaker 4: And I don't use it to grade students, but I

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Speaker 4: do use our official intelligence to do research, to challenge

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Speaker 4: to to so I don't think you can say in

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Speaker 4: a classroom, oh oh we're going to ban it. No,

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Speaker 4: this is the calculator came along when I was a kid.

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Speaker 5: We use it.

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Speaker 4: The Internet came along, we use Here's the thing, students,

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Speaker 4: if you're listening, you have to command it. You have

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Speaker 4: to challenge it. Don't let AI command you. Uh you

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Speaker 4: You have to stay ahead of that. I call it

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Speaker 4: the AI bear will get you unless you really run

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Speaker 4: faster and challenge the AA.

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Speaker 10: Can I do one final final final question yep O

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Speaker 10: the time final Final final question with Gary Goensler. Are

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Speaker 10: we going to see an AI roll up? There's just

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Speaker 10: too many smart people running around not making money. Axios

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Speaker 10: was brilliant on this yesterday. Are we going to see

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Speaker 10: an AI roll up?

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Speaker 4: I think it's gonna it is a field while you

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Speaker 4: see winner take most, meaning there's going to be one

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Speaker 4: to two big Michael Molbinson models in the US and

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Speaker 4: one to two big Consequence models in China. I'd be

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Speaker 4: worried about China because China is doing more and open

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Speaker 4: weight open We're going to have wide distribution of this

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Speaker 4: and dispersion of this. So my eye on the geopolitical

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Speaker 4: thing is to never count China out.

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Speaker 2: One final final, final final question. Is Rubinstein doing okay

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Speaker 2: with the Oriols? I mean bringing in Alonza went on.

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Speaker 4: I don't have a view on that, but no, David's

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Speaker 4: had a lot of fun with the Oarls.

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Speaker 5: I know that he sits down front.

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Speaker 2: You look at the game and he's down front of

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Speaker 2: the cheap seats.

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Speaker 6: I'll tell you, Bark stands the test of time still.

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Speaker 4: And there is David who's run a big alternative asset

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Speaker 4: management firm, Carlisle. He hasn't sort of been as troubled

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Speaker 4: in that private credit space.

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Speaker 5: He has the Oarls.

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Speaker 4: He has kind of this version of a podcast where

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Speaker 4: he does his interviewers, I mean talk about and he

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Speaker 4: served in the American public.

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Speaker 5: He served the public. So there's David.

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Speaker 4: If you're listening, a kind of hot tip to you,

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Speaker 4: you're like a savant.

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Speaker 2: Yeah. People are saying Tom, put a cork in it.

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Speaker 2: Gary Gensler, thank you so much, the former chairman the

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Speaker 2: Securities Exchange Commission, a great supporter of all we do

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Speaker 2: here at Bloomberg, Surveyllance and the course podcasts.

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Speaker 3: Look for it with the Lorid.

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Speaker 2: Simon Johnson out of MIT. I'll put that out on

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Speaker 2: LinkedIn and Twitter to stay with us. More from Bloomberg

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Speaker 2: Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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00:21:20,480 --> 00:21:23,639
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 2: Ian Lincoln joins us now driving all over eight Strategy.

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Speaker 2: There's not an award, hasn't won within the market, how

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Speaker 2: get done recently? How's your track record? Are you getting

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Speaker 2: it right or not?

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Speaker 7: Well, I'll tell you this. I came into this year,

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Speaker 7: like most people, expecting that the FED would resume normalization

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Speaker 7: at some point, and then the war happened, so it

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Speaker 7: has thrown a bit of a wrench into everyone's expectations.

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Speaker 7: My own included. However, I will make the observation we're

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Speaker 7: still in early stages. We don't know how this is

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Speaker 7: going to be impact the real economy. We don't know

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Speaker 7: how it will ultimately impact the FED. And at the

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Speaker 7: end of the day, two year yields close to four percent.

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Speaker 7: That seems like a pretty attractive buying opportunity for our.

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Speaker 2: Listeners who aren't sophisticated like Tom Keen, not sophisticated for

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Speaker 2: mere mortals like us. Is catching a falling knife in

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Speaker 2: the dark right now to bet on yield in price.

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Speaker 7: It does seem to be as though we could have

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Speaker 7: another leg higher in rates, but eventually we're going to

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Speaker 7: have a FED that needs to address the realities of

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Speaker 7: the real economy. If this war continues and elevated energy

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Speaker 7: prices persist, that's going to have a negative impact for

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Speaker 7: the consumer, and that's going to refocus the FED on

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Speaker 7: the employment aspect of its mandate eventually.

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Speaker 3: What did you hear from FRED chairman J Powell yesterday?

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Speaker 7: Of note first, he's going to stay on as long

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Speaker 7: as he needs to, And the market's been interpreting that

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Speaker 7: as somewhat bond bearish because he has been an advocate

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Speaker 7: of central banking independence. He has been a more hawkish

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Speaker 7: than Dubbish at times, all of which I think is

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Speaker 7: good for central banking credibility. He also made it clear

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Speaker 7: that he and the committee have no idea how this

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Speaker 7: is going to impact the US economy. We don't know

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Speaker 7: how long it's going to go on, we don't know

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Speaker 7: what's going to happen to the strait of her moves,

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Speaker 7: and so the prudent thing, and I think they're right,

440
00:23:24,200 --> 00:23:26,639
Speaker 7: is to wait and see, wait and see.

441
00:23:26,680 --> 00:23:29,840
Speaker 6: And I'm looking at the warp function. The market's kind

442
00:23:29,840 --> 00:23:31,480
Speaker 6: of saying we're not going to get any rate cuts

443
00:23:31,520 --> 00:23:33,359
Speaker 6: this year. I mean, is that kind of how you

444
00:23:34,080 --> 00:23:34,760
Speaker 6: interpreted it?

445
00:23:36,040 --> 00:23:39,280
Speaker 7: That's certainly what the market is says. I don't think that.

446
00:23:39,960 --> 00:23:43,240
Speaker 7: My takeaway at least from Powell's comments, where there's no

447
00:23:43,440 --> 00:23:46,719
Speaker 7: path to lower rates the takeaway was that there's no

448
00:23:46,880 --> 00:23:50,240
Speaker 7: path to lower rates until there's uncertain until the uncertainty

449
00:23:50,240 --> 00:23:53,160
Speaker 7: has been removed, and so that might not be until

450
00:23:53,200 --> 00:23:55,520
Speaker 7: the second half of the year. I'm on board with

451
00:23:55,560 --> 00:23:57,879
Speaker 7: the idea that the Fed has told us they're going

452
00:23:57,920 --> 00:24:00,680
Speaker 7: to move twenty five, and if it happened, it's probably

453
00:24:00,720 --> 00:24:02,200
Speaker 7: going to be maybe the last quarter.

454
00:24:02,359 --> 00:24:04,680
Speaker 2: Let me ask you the same question I asked Gary Gensler.

455
00:24:05,000 --> 00:24:07,800
Speaker 2: If there wasn't a war, Ian Lingen, there would be

456
00:24:07,840 --> 00:24:11,320
Speaker 2: no topic other than private credit. I mean, it would

457
00:24:11,320 --> 00:24:15,439
Speaker 2: be top of pile for everybody within economics, finance, frankly,

458
00:24:15,560 --> 00:24:20,359
Speaker 2: investment in international relations. Ian Langen, with an award winning

459
00:24:20,400 --> 00:24:24,000
Speaker 2: full faith and credit perspective on the shadows that we

460
00:24:24,119 --> 00:24:26,639
Speaker 2: see within private equity and private credit.

461
00:24:27,840 --> 00:24:31,040
Speaker 7: So you make a very good point. If it wasn't

462
00:24:31,080 --> 00:24:33,600
Speaker 7: for the war, we'd be trading off of private credit.

463
00:24:33,840 --> 00:24:37,080
Speaker 7: We'd be trading off of the weaker payrolls number, the

464
00:24:37,240 --> 00:24:40,879
Speaker 7: increasing the unemployment rate. And we're not talking about the

465
00:24:40,880 --> 00:24:45,080
Speaker 7: fact that labor force participation rate dropped by half a percent,

466
00:24:45,400 --> 00:24:47,720
Speaker 7: and if it wasn't for that, we'd have a much higher.

467
00:24:47,440 --> 00:24:50,120
Speaker 2: So you're still calling your sub four percent yield I mean,

468
00:24:50,280 --> 00:24:52,480
Speaker 2: forget about the war and the uncertainty and all that,

469
00:24:52,520 --> 00:24:54,040
Speaker 2: and I want to go basing it on you. But

470
00:24:54,760 --> 00:24:56,840
Speaker 2: is I and Lingcoln still modeling out a sub four

471
00:24:56,880 --> 00:24:57,880
Speaker 2: percent ten year yield.

472
00:24:58,119 --> 00:24:59,920
Speaker 7: Yes, by the end of the year ten year year

473
00:25:00,240 --> 00:25:03,800
Speaker 7: will be below the four percent. It's been delayed, obviously,

474
00:25:04,040 --> 00:25:06,359
Speaker 7: but I do think the path is it lower and

475
00:25:06,440 --> 00:25:06,960
Speaker 7: rates from here?

476
00:25:07,080 --> 00:25:10,720
Speaker 6: You mentioned the labor market one of the two mandates

477
00:25:10,720 --> 00:25:14,000
Speaker 6: of this Felter Reserve. How do you view the labor

478
00:25:14,040 --> 00:25:14,840
Speaker 6: market these days?

479
00:25:16,119 --> 00:25:17,399
Speaker 7: In a word, confusing?

480
00:25:17,560 --> 00:25:17,879
Speaker 3: Okay?

481
00:25:18,080 --> 00:25:20,359
Speaker 7: And the reason that I say that is because we

482
00:25:20,400 --> 00:25:24,800
Speaker 7: don't know what break even job replacement is. Powell doesn't know.

483
00:25:24,960 --> 00:25:27,680
Speaker 7: We've been talking about it. Is it fifty thousand a month?

484
00:25:28,000 --> 00:25:31,800
Speaker 7: Is it seventy five? Maybe it's fifteen, all of which

485
00:25:32,359 --> 00:25:36,040
Speaker 7: kind of reiterates the difference between the household survey and

486
00:25:36,200 --> 00:25:39,280
Speaker 7: the establishment survey, and the FED has been focused on

487
00:25:39,359 --> 00:25:42,080
Speaker 7: the household survey at this stage, which I think is

488
00:25:42,119 --> 00:25:44,720
Speaker 7: interesting because that's a shift because we don't know how

489
00:25:44,960 --> 00:25:48,720
Speaker 7: immigration is truly impacting the labor market. So I'm a

490
00:25:48,760 --> 00:25:51,840
Speaker 7: bit more cautious about the labor market over the course

491
00:25:51,880 --> 00:25:54,320
Speaker 7: of the next several months than I think the FED

492
00:25:54,440 --> 00:25:55,040
Speaker 7: is at the moment.

493
00:25:55,560 --> 00:25:58,159
Speaker 2: I Lincoln's folks to bring us up to this press

494
00:25:58,160 --> 00:26:01,040
Speaker 2: conference with the Pentagon Paul and I can see what

495
00:26:01,160 --> 00:26:02,840
Speaker 2: we have seen now in what Paul, this will be

496
00:26:02,880 --> 00:26:05,600
Speaker 2: the fourth press conference. I'm guessing and just guessing.

497
00:26:05,880 --> 00:26:08,400
Speaker 6: Eight eight o'clock am.

498
00:26:08,520 --> 00:26:10,520
Speaker 2: Yeah, it's not like you know, Bill Clinton sliding in

499
00:26:10,640 --> 00:26:13,080
Speaker 2: forty minutes late. But we're going to stay with you

500
00:26:13,160 --> 00:26:15,760
Speaker 2: and lingoln here. We welcome all of you across America,

501
00:26:15,800 --> 00:26:19,359
Speaker 2: across Canada. We welcome all of you, Paul, across the

502
00:26:19,440 --> 00:26:23,800
Speaker 2: spectacular Square in Old Montreal where there's the dark Grand

503
00:26:23,920 --> 00:26:27,639
Speaker 2: it looks like Mary Poppins Bank of Montreal. Awesome. And

504
00:26:27,680 --> 00:26:31,720
Speaker 2: across from it is the most spectacular church in North America.

505
00:26:31,840 --> 00:26:35,960
Speaker 2: It is. It's it's like San Chapelle in Paris, beauty.

506
00:26:36,200 --> 00:26:38,639
Speaker 2: And Lincoln was Paul Sweeney with mister Lincoln.

507
00:26:38,760 --> 00:26:42,400
Speaker 6: Ye, I mean all our listeners, all our viewers, they're

508
00:26:42,400 --> 00:26:44,520
Speaker 6: paying a lot more at the gas pump just in

509
00:26:44,560 --> 00:26:46,119
Speaker 6: the last several weeks.

510
00:26:46,280 --> 00:26:46,600
Speaker 2: Thank you.

511
00:26:47,480 --> 00:26:48,840
Speaker 3: Boy, that feels like inflation.

512
00:26:49,000 --> 00:26:53,080
Speaker 6: How do you think the Fed's viewing energy inflation in

513
00:26:53,119 --> 00:26:55,480
Speaker 6: the overall inflation picture, because boy, a lot has changed

514
00:26:55,480 --> 00:26:56,160
Speaker 6: over the last month.

515
00:26:57,240 --> 00:27:00,200
Speaker 7: So traditionally, the FED would be willing to look through

516
00:27:00,520 --> 00:27:05,359
Speaker 7: energy inflation as a volatile series that does have an

517
00:27:05,359 --> 00:27:09,120
Speaker 7: impact on consumption. It does have an impact on real spending,

518
00:27:09,520 --> 00:27:13,119
Speaker 7: but because of its volatility, monetary policy makers won't adjust

519
00:27:13,200 --> 00:27:16,959
Speaker 7: rates because of it. This time might be somewhat different,

520
00:27:17,200 --> 00:27:20,760
Speaker 7: simply because there's a clear recency bias in the market

521
00:27:20,960 --> 00:27:25,240
Speaker 7: as well as for consumers to look at all inflation

522
00:27:25,480 --> 00:27:29,440
Speaker 7: as the same, and so that could push forward inflation

523
00:27:29,560 --> 00:27:32,240
Speaker 7: expectations higher. And that's why the FED is worried. And

524
00:27:32,280 --> 00:27:35,920
Speaker 7: as we learned yesterday, the FED continues to see pockets

525
00:27:35,920 --> 00:27:39,080
Speaker 7: of tariff pass through to goods inflation, and until that

526
00:27:39,119 --> 00:27:41,359
Speaker 7: has been resolved, I don't think the Fed's going to

527
00:27:41,359 --> 00:27:42,720
Speaker 7: be comfortable cutting rates.

528
00:27:42,920 --> 00:27:44,280
Speaker 3: How long four weeks now?

529
00:27:44,320 --> 00:27:45,520
Speaker 2: Yeah, you're talking about.

530
00:27:45,400 --> 00:27:48,040
Speaker 3: Private credit, which is absolutely the case, a tariff.

531
00:27:47,760 --> 00:27:51,840
Speaker 2: Sys to it as well. Coming up on this press

532
00:27:51,840 --> 00:27:53,359
Speaker 2: conference as well, how are we going to pay for

533
00:27:53,400 --> 00:27:56,360
Speaker 2: this war? I mean, I mean, how does dovetail into

534
00:27:56,400 --> 00:27:59,479
Speaker 2: the in Lincoln space. Two hundred billion was the latest

535
00:27:59,480 --> 00:28:01,879
Speaker 2: call below, I'll beg it's double that. How are we

536
00:28:01,920 --> 00:28:03,440
Speaker 2: going to pay for this? Well?

537
00:28:03,920 --> 00:28:07,320
Speaker 7: Besant has made it clear that any funding shortfall is

538
00:28:07,359 --> 00:28:09,959
Speaker 7: going to utilize the bill market to be covered at

539
00:28:09,960 --> 00:28:12,920
Speaker 7: the moment, and we even have the FED in doing

540
00:28:13,000 --> 00:28:16,520
Speaker 7: reserve management purchases, so there's plenty of capacity in the

541
00:28:16,640 --> 00:28:19,280
Speaker 7: very front end. So in the short term, it's going

542
00:28:19,320 --> 00:28:22,919
Speaker 7: to be in the bills market. Eventually, of course, coupon

543
00:28:22,960 --> 00:28:26,800
Speaker 7: auction sizes will have to increase, probably twos, threes, and fives.

544
00:28:26,920 --> 00:28:28,760
Speaker 7: But on the flip side, we've made a lot more

545
00:28:28,800 --> 00:28:31,520
Speaker 7: money and revenues from tariffs, and I think many were expecting,

546
00:28:31,560 --> 00:28:33,640
Speaker 7: so the deficits not in as bad of a place

547
00:28:33,680 --> 00:28:34,680
Speaker 7: as it might have otherwise been.

548
00:28:34,960 --> 00:28:39,440
Speaker 2: One final question, Minnesota did not make the NC Double

549
00:28:39,520 --> 00:28:42,920
Speaker 2: A Tournament. I noticed that this year nobody's nobody's over

550
00:28:43,000 --> 00:28:47,840
Speaker 2: six feet. They were selected for the College Basketball Crown

551
00:28:48,080 --> 00:28:49,240
Speaker 2: in Las Vegas.

552
00:28:49,480 --> 00:28:50,480
Speaker 3: That sounds like a fun time.

553
00:28:51,160 --> 00:28:53,320
Speaker 2: Are you going to Las Vegas to see the University

554
00:28:53,320 --> 00:28:56,840
Speaker 2: of Minnesota April one? We played basketball?

555
00:28:56,960 --> 00:28:59,560
Speaker 7: Now that you mentioned it, I might, I mean, well.

556
00:28:59,440 --> 00:29:02,200
Speaker 2: You know, there it is. I mean, is the n

557
00:29:02,360 --> 00:29:05,440
Speaker 2: T still a think, Paul, Yes, it is. It's it's

558
00:29:05,520 --> 00:29:06,840
Speaker 2: you know, it's like a big deal.

559
00:29:07,160 --> 00:29:08,440
Speaker 3: It's still a big deal.

560
00:29:08,440 --> 00:29:10,200
Speaker 6: I mean, it's obviously it's number two but you know

561
00:29:10,280 --> 00:29:12,320
Speaker 6: it's still if you win the NIT, that's that's.

562
00:29:12,160 --> 00:29:13,040
Speaker 3: A pretty good thing.

563
00:29:13,160 --> 00:29:18,320
Speaker 2: When do you know to buy price yield down, price up?

564
00:29:18,400 --> 00:29:20,840
Speaker 2: I mean, how do you do that within a war?

565
00:29:21,320 --> 00:29:23,120
Speaker 2: You just have to wait for the headline the war.

566
00:29:23,000 --> 00:29:27,800
Speaker 7: Is over, or a de escalation on off ramp for

567
00:29:27,880 --> 00:29:32,680
Speaker 7: the administration. It's a and meaningful development around the strait

568
00:29:32,680 --> 00:29:34,400
Speaker 7: of our moods. I think all of those are what

569
00:29:34,440 --> 00:29:34,960
Speaker 7: we're watching.

570
00:29:35,760 --> 00:29:37,920
Speaker 2: Thank you so much for the brief in LinkedIn with us,

571
00:29:37,960 --> 00:29:43,320
Speaker 2: the Bank of Montreal, BEMO Capital Markets. Stay with us.

572
00:29:43,560 --> 00:29:46,800
Speaker 2: More from Bloomberg Surveillance coming up after this.

573
00:29:54,040 --> 00:29:57,640
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

574
00:29:57,680 --> 00:30:01,680
Speaker 1: weekday afternoons from seven to ten ams. Listen on Applecarplay

575
00:30:01,720 --> 00:30:04,960
Speaker 1: and Android Otto with the Bloomberg Business app, or watch

576
00:30:05,040 --> 00:30:06,360
Speaker 1: us live on YouTube.

577
00:30:06,560 --> 00:30:08,640
Speaker 2: We'll pick up the debris here with Anna Wong off

578
00:30:08,640 --> 00:30:12,920
Speaker 2: of yesterday's press conference, and help us here with the

579
00:30:13,000 --> 00:30:17,360
Speaker 2: Mackenzie Mcki article here. They've just given up on a

580
00:30:17,400 --> 00:30:21,400
Speaker 2: FED rate cut. Do you have confidence we will not

581
00:30:21,560 --> 00:30:23,240
Speaker 2: see a rate cut this year?

582
00:30:24,600 --> 00:30:27,160
Speaker 8: I don't have confidence we won't have a rate cut.

583
00:30:27,480 --> 00:30:32,959
Speaker 8: I think I think the Fed was doing a you know,

584
00:30:33,320 --> 00:30:36,400
Speaker 8: there's a strategy and how the Fed communicates what they

585
00:30:36,440 --> 00:30:41,360
Speaker 8: want to communicate. One thing is that they cannot possibly

586
00:30:42,680 --> 00:30:47,320
Speaker 8: strongly communicate that they will cut when inflation is drifting up. However,

587
00:30:47,520 --> 00:30:51,280
Speaker 8: economic models would say they should be holding an easing bias.

588
00:30:51,480 --> 00:30:52,560
Speaker 5: So what do they do.

589
00:30:52,920 --> 00:30:56,480
Speaker 8: They sound really hawkish so that they can quash This

590
00:30:56,800 --> 00:31:00,800
Speaker 8: is called jaw boning. Basically, they jaw boned markets into

591
00:31:00,840 --> 00:31:04,800
Speaker 8: thinking they won't cut, and as a result, financial conditions

592
00:31:04,800 --> 00:31:08,480
Speaker 8: will tighten and will partly help them bring down inflation.

593
00:31:09,000 --> 00:31:11,560
Speaker 8: And by the time around mid year, I think the

594
00:31:12,200 --> 00:31:16,000
Speaker 8: economy will be in a different place after six months

595
00:31:16,080 --> 00:31:18,080
Speaker 8: of no rate cuts. I think what we will see

596
00:31:18,080 --> 00:31:20,920
Speaker 8: by June of this year is that the labor market

597
00:31:21,000 --> 00:31:25,800
Speaker 8: will start deteriorating again. Unemployment rate will be rising. I

598
00:31:26,640 --> 00:31:29,840
Speaker 8: think the Fed not cutting right now and jab owning

599
00:31:29,840 --> 00:31:32,560
Speaker 8: the market with all these talkish talk can help bring

600
00:31:32,600 --> 00:31:35,000
Speaker 8: down inflation, and that's what they're trying to achieve.

601
00:31:35,080 --> 00:31:38,840
Speaker 6: Yesterday, what did you take away, I mean, were you

602
00:31:38,880 --> 00:31:41,840
Speaker 6: surprised by anything j Pale said yesterday? Maybe out of

603
00:31:41,840 --> 00:31:42,720
Speaker 6: con census.

604
00:31:43,960 --> 00:31:48,480
Speaker 8: Well, I was surprised mostly by the summary of economic projections,

605
00:31:49,000 --> 00:31:53,640
Speaker 8: how the median participant has revised up the GDP growth

606
00:31:53,840 --> 00:31:57,760
Speaker 8: across twenty twenty six, twenty seven, twenty twenty eight and

607
00:31:57,840 --> 00:32:02,239
Speaker 8: also long term GDP growth. And this is in the

608
00:32:02,280 --> 00:32:05,760
Speaker 8: context of JPAL talking about how the weak labor market

609
00:32:05,800 --> 00:32:10,280
Speaker 8: is mostly due to immigration, which is a supply shock, right,

610
00:32:10,320 --> 00:32:14,120
Speaker 8: and typically the way that I think about immigration is

611
00:32:14,120 --> 00:32:19,240
Speaker 8: that that will that should bring brought down potential GDP

612
00:32:19,440 --> 00:32:24,800
Speaker 8: growth by a couple percentage point. Instead, despite this immigration shock,

613
00:32:24,960 --> 00:32:27,480
Speaker 8: which they have highlighted as a cost of the labor

614
00:32:27,480 --> 00:32:30,920
Speaker 8: market weakness, they actually revise up GDP growth and also

615
00:32:31,000 --> 00:32:33,520
Speaker 8: our star. So that is quite puzzling to me.

616
00:32:34,320 --> 00:32:37,840
Speaker 6: So, Anna, given what's going on in Iran and the

617
00:32:37,960 --> 00:32:43,320
Speaker 6: resulting increase in energy costs globally, how has that impacted

618
00:32:43,360 --> 00:32:45,520
Speaker 6: any of your forecasts, if at all.

619
00:32:45,400 --> 00:32:45,920
Speaker 2: At this point.

620
00:32:47,720 --> 00:32:53,440
Speaker 8: So first we raise our headline PCE and headline CPI forecast.

621
00:32:54,120 --> 00:32:57,600
Speaker 8: So right now you're over year CPI is clocking at

622
00:32:57,640 --> 00:33:01,360
Speaker 8: two point four percent in February, but in March we

623
00:33:01,400 --> 00:33:06,160
Speaker 8: are going to see a headline CPI print that's probably

624
00:33:06,240 --> 00:33:09,719
Speaker 8: close to one percent. We haven't seen a one percent

625
00:33:09,880 --> 00:33:13,400
Speaker 8: monthly change in CPI since twenty twenty two, and that

626
00:33:13,440 --> 00:33:16,880
Speaker 8: will boost year over year to over three percent in

627
00:33:17,000 --> 00:33:20,360
Speaker 8: March and in April that will continue to move up

628
00:33:20,400 --> 00:33:26,800
Speaker 8: and we probably we'll see three point six headline CPI

629
00:33:27,040 --> 00:33:27,800
Speaker 8: in April.

630
00:33:29,080 --> 00:33:33,320
Speaker 2: Yeah, And in your thoughts on TSA, people say, in

631
00:33:33,440 --> 00:33:37,959
Speaker 2: Houston paying it Hobby Airport twenty five to thirty dollars

632
00:33:38,000 --> 00:33:41,200
Speaker 2: a day parking, they get some kind of reimbursement if

633
00:33:41,200 --> 00:33:44,680
Speaker 2: they take public transportation. Would you show up at the

634
00:33:44,680 --> 00:33:47,040
Speaker 2: Federal Reserve if you weren't getting a paycheck?

635
00:33:48,680 --> 00:33:48,880
Speaker 7: Yeah?

636
00:33:48,960 --> 00:33:49,520
Speaker 2: I would.

637
00:33:49,720 --> 00:33:56,800
Speaker 8: I mean I was in several federal federal shutdown in

638
00:33:57,240 --> 00:34:01,880
Speaker 8: my years at Treasury. The FED still has to work

639
00:34:01,920 --> 00:34:05,240
Speaker 8: because the FED budget is not based on the uh

640
00:34:05,360 --> 00:34:09,799
Speaker 8: you know, typical budgetary congress the process. This is why

641
00:34:09,920 --> 00:34:12,840
Speaker 8: the FED is usually not affected by any shutdown. But

642
00:34:12,960 --> 00:34:18,600
Speaker 8: in the Treasury, uh you, I mean, only essential workers

643
00:34:18,920 --> 00:34:22,520
Speaker 8: will work. I think most most employees and Treasury would

644
00:34:22,520 --> 00:34:25,080
Speaker 8: be very happy to work if I mean, it's better

645
00:34:25,160 --> 00:34:33,360
Speaker 8: to be deemed essential than not essential, right, So so yeah, yeah.

646
00:34:32,760 --> 00:34:35,320
Speaker 2: I mean, what is your thoughts on the cacophony of

647
00:34:35,440 --> 00:34:39,399
Speaker 2: labor issues of the United States of America right now,

648
00:34:39,880 --> 00:34:43,440
Speaker 2: whether it's Voice of America, some judges saying bring everybody

649
00:34:43,440 --> 00:34:45,160
Speaker 2: back to Voice of America. I don't have it in

650
00:34:45,160 --> 00:34:47,960
Speaker 2: front of me, folks, but but an along is, have

651
00:34:48,040 --> 00:34:50,880
Speaker 2: you ever seen our labor economy this nuts?

652
00:34:52,360 --> 00:34:56,560
Speaker 8: Yeah? So I think the federal government is quietly starting

653
00:34:56,600 --> 00:35:01,440
Speaker 8: to hire again. If you looked at your LinkedIn feats

654
00:35:02,239 --> 00:35:04,839
Speaker 8: and Tommy you have I think you have over three

655
00:35:04,920 --> 00:35:08,600
Speaker 8: hundred thousand or one hundred thousand followers on LinkedIn, right,

656
00:35:08,840 --> 00:35:12,320
Speaker 8: So I see BLS is posting to hire People's senses

657
00:35:12,400 --> 00:35:16,560
Speaker 8: is posting to hire people. Treasury is posting to hire people.

658
00:35:17,239 --> 00:35:20,560
Speaker 8: And I actually ask one of our journalist colleagues, Creig

659
00:35:20,560 --> 00:35:25,080
Speaker 8: Gregory Corte, who actually has been for Foyer federal government,

660
00:35:25,160 --> 00:35:27,719
Speaker 8: to ask for the payrolls in the last you know year,

661
00:35:28,680 --> 00:35:32,440
Speaker 8: whether there's any signal coming from the federal government that

662
00:35:32,480 --> 00:35:36,279
Speaker 8: they might be hiring again. And I think, I think so.

663
00:35:36,440 --> 00:35:39,600
Speaker 8: We haven't gotten the player yet, but I think there

664
00:35:39,600 --> 00:35:43,480
Speaker 8: are some signs that the freeze of the federal federal

665
00:35:43,560 --> 00:35:46,880
Speaker 8: government hiring is starting to thaw.

666
00:35:47,120 --> 00:35:50,400
Speaker 2: Right now, Anawom, we didn't do enough FED questions. Paul's

667
00:35:50,400 --> 00:35:53,560
Speaker 2: looking at me like we didn't ask her about the FED. Anaalom,

668
00:35:53,640 --> 00:35:58,440
Speaker 2: thank you so much, Stay with us. More from Bloomberg

669
00:35:58,560 --> 00:36:00,600
Speaker 2: Surveillance coming up after this.

670
00:36:07,840 --> 00:36:11,439
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live

671
00:36:11,520 --> 00:36:14,640
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

672
00:36:14,760 --> 00:36:18,400
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

673
00:36:18,560 --> 00:36:20,120
Speaker 1: watch us Live on YouTube.

674
00:36:20,360 --> 00:36:24,480
Speaker 2: A perfect time to speak with Daniel Morris, Chief market strategist,

675
00:36:24,520 --> 00:36:27,359
Speaker 2: B and P. Perry Baugh And I'm not going to mince.

676
00:36:27,600 --> 00:36:30,959
Speaker 2: What's it like working with Isabelle Mateo Lagos? This must

677
00:36:31,000 --> 00:36:33,480
Speaker 2: be fun? Yeah, No, I mean it's fun.

678
00:36:33,640 --> 00:36:33,879
Speaker 3: Yeah.

679
00:36:34,080 --> 00:36:37,960
Speaker 11: Fantastic economists, great, great vision and insight that she has

680
00:36:38,000 --> 00:36:40,640
Speaker 11: been bringing with everything that's going on with the random

681
00:36:40,680 --> 00:36:41,200
Speaker 11: old prices.

682
00:36:41,880 --> 00:36:44,320
Speaker 2: Yeah, my insight. John Farreo had to pay a utility

683
00:36:44,320 --> 00:36:46,399
Speaker 2: bill at some point in London. He's got like six

684
00:36:46,440 --> 00:36:49,480
Speaker 2: thousand square feet in Mayfair and he says, Todd, look

685
00:36:49,480 --> 00:36:53,919
Speaker 2: at TTF. I have no idea, folks across America Brent

686
00:36:54,000 --> 00:36:59,560
Speaker 2: crude West Texas. TTF is Netherlands natural gas. And I'm sorry, Daniel,

687
00:37:00,000 --> 00:37:03,120
Speaker 2: from the beginning of the war, it's up one hundred percent.

688
00:37:03,680 --> 00:37:07,799
Speaker 2: Give us the global sense Americans are missing now in

689
00:37:07,840 --> 00:37:09,400
Speaker 2: the pricing of markets.

690
00:37:09,880 --> 00:37:13,040
Speaker 11: Well, I think there is Fortunately, maybe a bit of

691
00:37:13,040 --> 00:37:13,880
Speaker 11: its sense here.

692
00:37:13,680 --> 00:37:14,920
Speaker 2: That you know it's far away.

693
00:37:15,440 --> 00:37:18,440
Speaker 11: Clearly, the US is a much different country than it

694
00:37:18,560 --> 00:37:20,479
Speaker 11: was saying nineteen ninety, which, if we think of Middle

695
00:37:20,480 --> 00:37:24,399
Speaker 11: East crisis, is probably the closest parallel frankly, in terms

696
00:37:24,400 --> 00:37:26,799
Speaker 11: of how the markets are reacting so far, that didn't

697
00:37:26,840 --> 00:37:29,200
Speaker 11: really go very well, either for the US economy or

698
00:37:29,200 --> 00:37:33,120
Speaker 11: for the US market. This time we're seeing the declines,

699
00:37:33,160 --> 00:37:35,480
Speaker 11: but nowhere to the same degree. So I think it

700
00:37:35,600 --> 00:37:39,800
Speaker 11: is being received and felt much more in Europe. Certainly

701
00:37:39,800 --> 00:37:42,480
Speaker 11: when you mentioned natural gas prices, that brings back somewhat

702
00:37:42,520 --> 00:37:44,520
Speaker 11: unpleasant memories of what happened with the outbreak of the

703
00:37:44,560 --> 00:37:47,080
Speaker 11: war between Russia and Ukraine. So yeah, I think there's

704
00:37:47,120 --> 00:37:50,799
Speaker 11: more nervousness, always having a bit more pessimism frankly on

705
00:37:50,800 --> 00:37:52,520
Speaker 11: that side of the ocean than there is in the US.

706
00:37:53,120 --> 00:37:56,360
Speaker 11: But weren't potentially justified at this point.

707
00:37:56,560 --> 00:38:00,720
Speaker 6: So have you changed your views your outlook risk reward

708
00:38:00,760 --> 00:38:02,280
Speaker 6: here in the last three or four weeks.

709
00:38:02,600 --> 00:38:05,400
Speaker 11: Well, yeah, risk reward certainly in terms of the allocation

710
00:38:05,560 --> 00:38:08,879
Speaker 11: so far we came into this overweight equities. I think

711
00:38:08,880 --> 00:38:11,360
Speaker 11: a lot of people you had, generally speaking, an optimist

712
00:38:11,520 --> 00:38:13,719
Speaker 11: view for the air equity should go up. So now

713
00:38:13,760 --> 00:38:17,040
Speaker 11: that we've had our surprise, which we could maybe discuss

714
00:38:17,080 --> 00:38:19,680
Speaker 11: why was it a surprise, because it maybe shouldn't have been.

715
00:38:20,000 --> 00:38:23,440
Speaker 11: But so far we've reduced the degree of the overweight

716
00:38:23,480 --> 00:38:26,319
Speaker 11: to equities but are still overweight, and that was more

717
00:38:26,440 --> 00:38:32,319
Speaker 11: risk management move than anything else. And anticipate that, I think,

718
00:38:32,320 --> 00:38:34,680
Speaker 11: as everyone does, once things settle down, that you would

719
00:38:34,760 --> 00:38:38,360
Speaker 11: go back to and overweight further overweight equities position. Fundamentally,

720
00:38:38,400 --> 00:38:40,520
Speaker 11: you don't think the macro picture will have changed that much,

721
00:38:40,560 --> 00:38:41,560
Speaker 11: but remains to be.

722
00:38:41,520 --> 00:38:43,680
Speaker 3: Seen US versus non US.

723
00:38:43,680 --> 00:38:46,319
Speaker 6: In twenty twenty five, obviously non US many of those

724
00:38:46,360 --> 00:38:49,720
Speaker 6: markets outperformed the US, in part due to the weakening dollar.

725
00:38:50,320 --> 00:38:52,640
Speaker 6: How do you think about that out geographic allocation?

726
00:38:52,880 --> 00:38:55,120
Speaker 11: Yeah, well, I think really the way to assess it,

727
00:38:55,800 --> 00:38:57,759
Speaker 11: particularly in terms of the US, is you need to

728
00:38:57,800 --> 00:38:59,719
Speaker 11: separate the US into two markets. I think if you

729
00:38:59,800 --> 00:39:02,080
Speaker 11: just look at the SMP, it gets a bit mixed

730
00:39:02,160 --> 00:39:04,880
Speaker 11: up because to me, that's a combination of NANSDAK and

731
00:39:04,920 --> 00:39:07,160
Speaker 11: all the tech themes that we know very well. But

732
00:39:07,200 --> 00:39:09,960
Speaker 11: then the kind of essentially the non text talks in

733
00:39:09,960 --> 00:39:12,719
Speaker 11: proxy i'd say by Russell value and If you do that,

734
00:39:13,480 --> 00:39:16,920
Speaker 11: the US didn't necessarily outperform. That is, NANSDAC outperformed in

735
00:39:16,920 --> 00:39:20,239
Speaker 11: a lot of cases, but Russell Value didn't. But if

736
00:39:20,280 --> 00:39:22,319
Speaker 11: you combine the two and go with SMP, you think

737
00:39:22,360 --> 00:39:25,480
Speaker 11: you underperformed. But therefore you miss that opportunity to get

738
00:39:25,480 --> 00:39:27,320
Speaker 11: the outperforming bits, or at least you did over the

739
00:39:27,400 --> 00:39:29,440
Speaker 11: last couple of years. If you just go to the SMP.

740
00:39:29,480 --> 00:39:32,439
Speaker 2: Daniel Morris with the chief market strategist being prepared about

741
00:39:32,520 --> 00:39:36,560
Speaker 2: asset management? Where are the Daniel Morris shadows? With Gary

742
00:39:36,560 --> 00:39:41,040
Speaker 2: Gensler in for spirited conversation this morning? And I thought

743
00:39:41,040 --> 00:39:43,080
Speaker 2: he was very He gave me more than I thought, Bob.

744
00:39:43,800 --> 00:39:46,759
Speaker 2: You know, shadows. He tore Rubinstein department what.

745
00:39:46,640 --> 00:39:49,000
Speaker 6: He's doing with the Orioles exactly.

746
00:39:48,560 --> 00:39:51,520
Speaker 2: Separate thing here, But Daniel Morris, where are the Daniel

747
00:39:51,560 --> 00:39:54,120
Speaker 2: Mooris shadows in this market? I don't want you know,

748
00:39:54,160 --> 00:39:56,920
Speaker 2: I don't want you get in trouble with compliance in Paris.

749
00:39:57,440 --> 00:39:59,600
Speaker 2: You know, you know what happens to Daniel Morris If

750
00:39:59,600 --> 00:40:02,000
Speaker 2: he gets trouble with compliance, he can't go to tour

751
00:40:02,040 --> 00:40:04,560
Speaker 2: do jeon for lunch. Oh okay, that's that's what happens.

752
00:40:04,840 --> 00:40:07,520
Speaker 2: So help me here with with the shadows that you

753
00:40:07,560 --> 00:40:09,240
Speaker 2: see out there? Is it private credit?

754
00:40:10,239 --> 00:40:13,839
Speaker 11: Well, so, our view on private credit generally speaking is

755
00:40:13,880 --> 00:40:18,399
Speaker 11: that the concerns are certainly nonsystemic at this point, and

756
00:40:18,600 --> 00:40:20,960
Speaker 11: particular to the funds that we're aware of that we

757
00:40:21,000 --> 00:40:22,640
Speaker 11: don't have problems. We don't see it canary in the

758
00:40:22,640 --> 00:40:26,160
Speaker 11: coal mine or anything like that. So I isolated not

759
00:40:26,400 --> 00:40:30,080
Speaker 11: large from Again, this isn't the global financial crisis, This

760
00:40:30,160 --> 00:40:32,400
Speaker 11: isn't mortgage debt or anything like that. So it's an

761
00:40:32,440 --> 00:40:35,080
Speaker 11: issue certainly going to be an issue for the lenders

762
00:40:35,080 --> 00:40:38,279
Speaker 11: that maybe didn't have quite good enough risk management and

763
00:40:38,400 --> 00:40:41,279
Speaker 11: credit evaluation when they made these loans, but not something

764
00:40:41,320 --> 00:40:42,560
Speaker 11: that we think is going to turn out to be

765
00:40:42,640 --> 00:40:43,600
Speaker 11: a problem for the markets.

766
00:40:43,600 --> 00:40:44,520
Speaker 2: More broadly, what.

767
00:40:44,560 --> 00:40:47,319
Speaker 6: Is your broader view of fixing company these days? How

768
00:40:47,360 --> 00:40:50,480
Speaker 6: much credit risk should investors be taking here because they

769
00:40:50,480 --> 00:40:53,279
Speaker 6: could sit in two your treasury are near three point

770
00:40:53,360 --> 00:40:53,880
Speaker 6: nine percent?

771
00:40:54,080 --> 00:40:57,239
Speaker 11: Well, yeah, certainly right now taking a lot is a

772
00:40:57,239 --> 00:40:59,239
Speaker 11: bit brave. I mean, it's analogous to what you think

773
00:40:59,280 --> 00:41:01,400
Speaker 11: is going to happen with equities. You know, your meaning

774
00:41:01,440 --> 00:41:04,280
Speaker 11: from you is still positive, but that's not the position

775
00:41:04,320 --> 00:41:06,800
Speaker 11: you're taking today. Because we don't know when when this ends.

776
00:41:07,600 --> 00:41:10,600
Speaker 11: Kind of again going into this, we're broadly neutral on credit.

777
00:41:10,760 --> 00:41:13,799
Speaker 11: I'd say fortunately, given how low spreads were and just

778
00:41:13,840 --> 00:41:15,759
Speaker 11: having the view you don't know what's going to go wrong,

779
00:41:15,840 --> 00:41:18,359
Speaker 11: but more or less something always does, and you didn't

780
00:41:18,360 --> 00:41:20,800
Speaker 11: seem to be getting compensated enough for that. That's turned

781
00:41:20,800 --> 00:41:22,960
Speaker 11: out to be the case in spates and now we

782
00:41:23,080 --> 00:41:24,799
Speaker 11: just want to wait to settle down. But given how

783
00:41:24,840 --> 00:41:27,840
Speaker 11: far they've moved out, I think it's likely to be

784
00:41:27,880 --> 00:41:28,839
Speaker 11: attractive at that point.

785
00:41:28,920 --> 00:41:32,200
Speaker 2: A holistic question for this dominant bank in Paris. I

786
00:41:32,239 --> 00:41:34,640
Speaker 2: make jokes about it, folks, and you know, I mean,

787
00:41:34,680 --> 00:41:36,359
Speaker 2: they do have the best lunch in New York.

788
00:41:36,480 --> 00:41:39,200
Speaker 6: It's pretty good, and their London offices are literally like

789
00:41:39,360 --> 00:41:39,960
Speaker 6: right around the corner.

790
00:41:40,000 --> 00:41:43,239
Speaker 2: F you think JP Market's trying to take the steam away,

791
00:41:43,239 --> 00:41:46,520
Speaker 2: I mean, Bob Michael's talking about Morgan's, their English pub

792
00:41:46,560 --> 00:41:49,239
Speaker 2: on Saint Patrick's Day. They're not going to do a

793
00:41:49,280 --> 00:41:52,759
Speaker 2: French restaurant at JP Market. I mean, now, mon Dieu, Yeah,

794
00:41:52,960 --> 00:41:54,839
Speaker 2: that would be terrible, right, Daniel.

795
00:41:54,640 --> 00:41:57,200
Speaker 11: I haven't been so I can possibly comment.

796
00:41:57,280 --> 00:42:00,279
Speaker 2: Okay, well we have it either, so there we there.

797
00:42:00,560 --> 00:42:04,959
Speaker 2: I look at where we are BMP perryba on how

798
00:42:05,040 --> 00:42:08,960
Speaker 2: Europe catches up in tech. I mean, I think if

799
00:42:09,040 --> 00:42:12,319
Speaker 2: Christine Legard as Trade Minister, with all of her work

800
00:42:12,360 --> 00:42:16,520
Speaker 2: with sarcosey around Charles de gall all the hopes about

801
00:42:16,560 --> 00:42:22,080
Speaker 2: a tech development Daniel Morris, when does Europe get the

802
00:42:22,160 --> 00:42:23,160
Speaker 2: tech act together?

803
00:42:24,200 --> 00:42:27,320
Speaker 11: Yeah, I'd like to know. And we don't necessarily see

804
00:42:27,320 --> 00:42:30,160
Speaker 11: that as a theme for European equities. At least we're

805
00:42:30,239 --> 00:42:34,280
Speaker 11: focusing much more on the strategic autonomy initiative from Europe.

806
00:42:34,600 --> 00:42:36,840
Speaker 2: I just got I don't know that the only strategic

807
00:42:36,880 --> 00:42:40,719
Speaker 2: autonomy I know is afterthoughts New Independence.

808
00:42:40,600 --> 00:42:43,479
Speaker 11: Well what they're trying to do. And honestly, this started

809
00:42:43,520 --> 00:42:45,040
Speaker 11: the way back in COVID and it was probably a

810
00:42:45,040 --> 00:42:47,160
Speaker 11: little bit in the US. You realized during lockdowns you

811
00:42:47,160 --> 00:42:49,440
Speaker 11: couldn't make a lot of the things that gosh, you

812
00:42:49,520 --> 00:42:52,040
Speaker 11: actually maybe needed to be able to make and have

813
00:42:52,080 --> 00:42:54,160
Speaker 11: access to quickly, so you know, was it drugs or

814
00:42:54,280 --> 00:42:57,120
Speaker 11: was a vaccines, ppe equipment and so on. So he

815
00:42:57,280 --> 00:42:59,720
Speaker 11: already then thinking about, you know, you need to reshore

816
00:42:59,840 --> 00:43:03,719
Speaker 11: some that capability and then now honestly, with Trump, it's

817
00:43:03,800 --> 00:43:06,959
Speaker 11: just reinforced this idea that Europe needs to be able

818
00:43:07,040 --> 00:43:08,799
Speaker 11: to be able to produce more on its own. So

819
00:43:08,840 --> 00:43:10,840
Speaker 11: it's a big initiative. It's much more than just the

820
00:43:10,880 --> 00:43:14,319
Speaker 11: defense spending, more than the infrastructure spending in Germany, it

821
00:43:14,320 --> 00:43:15,160
Speaker 11: goes to healthcare.

822
00:43:15,200 --> 00:43:16,240
Speaker 3: I mean really quite broadly.

823
00:43:16,480 --> 00:43:18,680
Speaker 11: So what really they're trying to focus on. I mean, yes,

824
00:43:18,719 --> 00:43:21,000
Speaker 11: it'd be nice to have a better startup culture, you

825
00:43:21,000 --> 00:43:22,719
Speaker 11: want to have a silicon valley in Europe. But I

826
00:43:22,719 --> 00:43:25,080
Speaker 11: think the really the emphasis and where you see the

827
00:43:25,120 --> 00:43:30,640
Speaker 11: money being spent please, is on these areas like infrastructure, defense, healthcare,

828
00:43:30,840 --> 00:43:35,320
Speaker 11: you know, all these things that make Europe more self sufficient.

829
00:43:35,520 --> 00:43:37,799
Speaker 2: Do you take all of August off? I mean it's

830
00:43:37,840 --> 00:43:40,640
Speaker 2: a reason for the tech failure of Europe is Daniel

831
00:43:40,640 --> 00:43:42,959
Speaker 2: Morris takes the entire month of August off.

832
00:43:43,160 --> 00:43:45,520
Speaker 11: Well, it's all work life balance, isn't that the idea?

833
00:43:45,640 --> 00:43:48,080
Speaker 2: There we go. There's the smartest sign I've heard of

834
00:43:48,080 --> 00:43:50,719
Speaker 2: the show today. Daniel Morris, thank you, thank you, thank

835
00:43:50,760 --> 00:43:53,520
Speaker 2: you for coming in. He's a BMP paring about Paris.

836
00:43:53,560 --> 00:43:54,279
Speaker 2: Can't say enough.

837
00:43:54,560 --> 00:43:59,400
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

838
00:43:59,520 --> 00:44:03,319
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839
00:44:03,360 --> 00:44:07,160
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840
00:44:07,320 --> 00:44:11,120
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841
00:44:11,440 --> 00:44:14,560
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842
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