1
00:00:00,120 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:11,600 --> 00:00:15,440
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,440 --> 00:00:18,680
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

4
00:00:18,720 --> 00:00:22,239
Speaker 2: for insight from the best in markets, economics, and geopolitics

5
00:00:22,400 --> 00:00:24,880
Speaker 2: from our global headquarters in New York City. We are

6
00:00:24,920 --> 00:00:27,640
Speaker 2: live on Bloomberg Television weekday mornings from six to nine

7
00:00:27,680 --> 00:00:31,280
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

8
00:00:31,280 --> 00:00:33,919
Speaker 2: anywhere else you listen, and as always on the Bloomberg

9
00:00:34,000 --> 00:00:37,400
Speaker 2: Terminal and the Bloomberg Business App. Peter Cheer of Academy

10
00:00:37,640 --> 00:00:40,400
Speaker 2: saying there is still risk ahead, writing quote, I'm looking

11
00:00:40,440 --> 00:00:42,919
Speaker 2: to take out the August lows. I really think there

12
00:00:42,920 --> 00:00:45,599
Speaker 2: has been a major disconnect between people believing that we

13
00:00:45,640 --> 00:00:50,680
Speaker 2: had capitulation versus having seen any actual capitulation. Pete joins

14
00:00:50,720 --> 00:00:53,040
Speaker 2: us now for more pink and monitor. Taking out the

15
00:00:53,080 --> 00:00:55,160
Speaker 2: August lows seems absolutely terrible. And then I look at

16
00:00:55,160 --> 00:00:58,360
Speaker 2: the August lows on August fifth, of about fifty one hundred,

17
00:00:58,400 --> 00:01:01,280
Speaker 2: about eight percent south of right now, it doesn't sound

18
00:01:01,560 --> 00:01:03,600
Speaker 2: so bad. What was it about August fifth that you

19
00:01:03,600 --> 00:01:05,560
Speaker 2: wouldn't describe as capitulation?

20
00:01:05,680 --> 00:01:05,840
Speaker 1: You know.

21
00:01:05,920 --> 00:01:07,360
Speaker 3: I think a lot of people looked at the VIC

22
00:01:07,480 --> 00:01:10,120
Speaker 3: hit sixty five at eight thirty in the morning. It

23
00:01:10,200 --> 00:01:12,440
Speaker 3: was a calculation, right, It's no one actually traded Vic's

24
00:01:12,440 --> 00:01:15,520
Speaker 3: futures much above forty. So I think people really took comfort,

25
00:01:15,520 --> 00:01:19,040
Speaker 3: Oh we had this VIC hit sixty five, everything calmed down.

26
00:01:19,200 --> 00:01:21,520
Speaker 3: There was never really panic in the futures market. There

27
00:01:21,520 --> 00:01:23,640
Speaker 3: was never panic during the actual trading hours of the

28
00:01:23,720 --> 00:01:26,680
Speaker 3: US market. So I think people started reloading the boat

29
00:01:26,720 --> 00:01:29,199
Speaker 3: and saying, Oh, we're good. We've had this wash out trade,

30
00:01:29,280 --> 00:01:31,200
Speaker 3: we had the capituation. I don't think we've got that.

31
00:01:31,440 --> 00:01:33,400
Speaker 3: And as we start hearing this, the Nasdaq one hundred

32
00:01:33,440 --> 00:01:35,880
Speaker 3: is already back close to those August lows. I think

33
00:01:35,920 --> 00:01:38,880
Speaker 3: we pushed through this. We've got another maybe ten percent downside.

34
00:01:38,880 --> 00:01:40,520
Speaker 3: I don't think we get back to the March lows,

35
00:01:40,720 --> 00:01:42,520
Speaker 3: but I think there is room for further downside.

36
00:01:42,600 --> 00:01:44,600
Speaker 2: You suggest there was no panic, I would suggest in

37
00:01:44,680 --> 00:01:47,080
Speaker 2: Japan there was panic. The biggest one day moved since

38
00:01:47,120 --> 00:01:49,920
Speaker 2: eighty seven. At one point that morning, Dolly Enna dropped

39
00:01:49,920 --> 00:01:52,040
Speaker 2: down to about one forty one seven set. That was

40
00:01:52,040 --> 00:01:54,960
Speaker 2: a three percent move. We suggesting for the global picture,

41
00:01:55,120 --> 00:01:57,760
Speaker 2: that was the tremor and not the earthquake correct.

42
00:01:57,520 --> 00:01:59,400
Speaker 3: I think really it's the US market that matters, and

43
00:01:59,440 --> 00:02:02,640
Speaker 3: the US we watched what happened in Tokyo overnight. We

44
00:02:02,720 --> 00:02:04,640
Speaker 3: got that little bit of panic in the morning, futures

45
00:02:04,640 --> 00:02:07,440
Speaker 3: are down, but it actually opened fairly stable, started turning

46
00:02:07,440 --> 00:02:09,480
Speaker 3: around by the end of the day. Then next day

47
00:02:09,520 --> 00:02:11,840
Speaker 3: we rallied, went probably further than I think we should have,

48
00:02:12,080 --> 00:02:14,400
Speaker 3: but that was kind of obvious. But that everyone just

49
00:02:14,480 --> 00:02:17,000
Speaker 3: feels like, Oh, we've washed out all the bad longs,

50
00:02:17,240 --> 00:02:19,320
Speaker 3: this is all good. We can really rebuild from there.

51
00:02:19,440 --> 00:02:20,720
Speaker 3: And I don't think we had that sort of a

52
00:02:20,880 --> 00:02:22,840
Speaker 3: wash out trade, and I don't think we can rally

53
00:02:22,919 --> 00:02:24,880
Speaker 3: much further until we get that wash out trade.

54
00:02:24,960 --> 00:02:27,480
Speaker 1: What's the catalyst for that, for that ten percent downside

55
00:02:27,560 --> 00:02:29,080
Speaker 1: and for that wash out of those lungs.

56
00:02:29,120 --> 00:02:30,520
Speaker 3: You know, I think as usual, part of it's just

57
00:02:30,520 --> 00:02:33,239
Speaker 3: going to be positioning. People have got them positions very long.

58
00:02:33,280 --> 00:02:35,799
Speaker 3: People have been reloading in the all sorts of ball

59
00:02:35,919 --> 00:02:36,880
Speaker 3: selling strategies.

60
00:02:37,000 --> 00:02:37,520
Speaker 1: You know.

61
00:02:37,560 --> 00:02:40,200
Speaker 3: The one thing I keep watching is ENVDL, which is

62
00:02:40,200 --> 00:02:43,600
Speaker 3: a two times levered Nvidia ETF. I don't understand why

63
00:02:43,600 --> 00:02:45,880
Speaker 3: we have leverage single stock ETFs to make no sense

64
00:02:45,919 --> 00:02:48,280
Speaker 3: to me, there's a huge drag on performance just the

65
00:02:48,280 --> 00:02:50,639
Speaker 3: way they're set up, and yet that keeps getting inflows,

66
00:02:50,760 --> 00:02:52,880
Speaker 3: and to me, until we see something kind of shake

67
00:02:52,919 --> 00:02:55,240
Speaker 3: the faith of that trading crowd, that's when I think

68
00:02:55,240 --> 00:02:57,880
Speaker 3: we kind of see the bottom and it's not getting

69
00:02:57,919 --> 00:03:00,000
Speaker 3: the inflows now, and we're having a lot more questions

70
00:03:00,200 --> 00:03:02,840
Speaker 3: about AI. I think that's going to be the catalyst,

71
00:03:02,880 --> 00:03:05,320
Speaker 3: Like is the promise got ahead of itself?

72
00:03:05,520 --> 00:03:07,000
Speaker 1: So this is going to be led by big tech?

73
00:03:07,040 --> 00:03:08,519
Speaker 1: From what you're saying that you think that this is

74
00:03:08,560 --> 00:03:11,800
Speaker 1: going to be an ongoing kind of deterioration from the

75
00:03:11,840 --> 00:03:14,800
Speaker 1: beta trade that we saw earlier. I'm just wondering what

76
00:03:14,919 --> 00:03:17,720
Speaker 1: the economic backdrop is for this, because some people might

77
00:03:17,760 --> 00:03:21,320
Speaker 1: say overly bullish, overly complacent. You're saying the Skuy's falling

78
00:03:21,360 --> 00:03:22,320
Speaker 1: and a recession is imminent.

79
00:03:22,400 --> 00:03:23,000
Speaker 4: Is that the case?

80
00:03:23,120 --> 00:03:24,960
Speaker 3: No, I think we're kind of I think the one

81
00:03:24,960 --> 00:03:27,080
Speaker 3: thing we've now done is actually priced out. The soft

82
00:03:27,160 --> 00:03:29,200
Speaker 3: landing is guaranteed, right, so now I think there's at

83
00:03:29,280 --> 00:03:33,000
Speaker 3: least some possibility of a harder landing. So I've been

84
00:03:33,000 --> 00:03:34,560
Speaker 3: looking for a bumpy landing. I think you're going to

85
00:03:34,639 --> 00:03:37,800
Speaker 3: see bits and pieces of data showing you know, positives negatives.

86
00:03:37,920 --> 00:03:39,560
Speaker 3: It's going to be by industry, it's going to be

87
00:03:39,680 --> 00:03:41,800
Speaker 3: you know, regional. This to me is really again just

88
00:03:41,880 --> 00:03:45,000
Speaker 3: about valuations. You know, when I started on Wall Street,

89
00:03:45,080 --> 00:03:47,720
Speaker 3: we first training day, they talked about options. They said,

90
00:03:47,720 --> 00:03:48,960
Speaker 3: you know, if you buy an option, it gives you

91
00:03:49,040 --> 00:03:50,960
Speaker 3: the right to sell high, right to buy low. You

92
00:03:50,960 --> 00:03:52,840
Speaker 3: get to trade the gam and like, what's everyone want

93
00:03:52,880 --> 00:03:54,680
Speaker 3: to do? And like we all raise our hand buy options.

94
00:03:54,920 --> 00:03:57,200
Speaker 3: They're like, no, it depends on the price, right, depending

95
00:03:57,200 --> 00:03:59,160
Speaker 3: on the price you want to sell those options because

96
00:03:59,200 --> 00:04:01,080
Speaker 3: you're getting paid more than that. So I think that's

97
00:04:01,080 --> 00:04:03,040
Speaker 3: where we've hit on a lot of these stocks. We've

98
00:04:03,040 --> 00:04:05,720
Speaker 3: moved beyond what's rational in terms of what they can generate.

99
00:04:05,920 --> 00:04:09,160
Speaker 3: And it's disappointing and sadly we talk about markets and

100
00:04:09,240 --> 00:04:11,680
Speaker 3: these broad markets, but fifty percent of the indices are

101
00:04:11,680 --> 00:04:13,760
Speaker 3: really just a handful of companies. So it really does

102
00:04:13,840 --> 00:04:16,160
Speaker 3: matter what these tend to twenty companies do.

103
00:04:16,400 --> 00:04:19,520
Speaker 5: Where's this concern about the election and politics play into

104
00:04:19,520 --> 00:04:20,360
Speaker 5: your bumpy landing?

105
00:04:20,640 --> 00:04:24,880
Speaker 3: You know, I'm kind of really concerned, confused, what are

106
00:04:24,920 --> 00:04:26,719
Speaker 3: we even going to see tonight? Like at this point.

107
00:04:26,760 --> 00:04:29,000
Speaker 3: I haven't bothered spending any time really trying to figure

108
00:04:29,000 --> 00:04:32,440
Speaker 3: out what either party's policies are going to be, because

109
00:04:32,560 --> 00:04:34,400
Speaker 3: I don't think we've had any sort of definition. Where

110
00:04:34,400 --> 00:04:35,960
Speaker 3: I've been working is what I think is going to

111
00:04:35,960 --> 00:04:38,080
Speaker 3: stay the same, and that is really going to be

112
00:04:38,279 --> 00:04:41,040
Speaker 3: no matter who wins. This friction with China, this tech

113
00:04:41,080 --> 00:04:43,240
Speaker 3: battle is going to continue. We are going to see

114
00:04:43,240 --> 00:04:46,880
Speaker 3: more and more protectionism around AI, the semiconductor business. I

115
00:04:46,880 --> 00:04:48,680
Speaker 3: think it goes back to one thing you were talking

116
00:04:48,680 --> 00:04:51,039
Speaker 3: about earlier. Europe. Europe is not going to be good

117
00:04:51,040 --> 00:04:53,080
Speaker 3: for AI. Europe's not going to be a good investment

118
00:04:53,160 --> 00:04:56,920
Speaker 3: vehicle because it's all about constricting and constraint and rules

119
00:04:56,960 --> 00:04:59,200
Speaker 3: and regulations. So I don't think that's going to be

120
00:04:59,200 --> 00:05:01,040
Speaker 3: a hotbed of this. I think ultimately the US is

121
00:05:01,040 --> 00:05:02,479
Speaker 3: going to do well, but we are going to see

122
00:05:02,480 --> 00:05:04,799
Speaker 3: friction with China on that, and I think whoever wins

123
00:05:04,839 --> 00:05:08,160
Speaker 3: is going to have to rebuild Europe, the US's reputation globally.

124
00:05:08,400 --> 00:05:10,520
Speaker 3: Where do we stand with our enemies and more importantly,

125
00:05:10,560 --> 00:05:12,200
Speaker 3: where do we stand with our allies? Do we have

126
00:05:12,320 --> 00:05:14,880
Speaker 3: ten twenty year thirty year commitments or do we live

127
00:05:14,960 --> 00:05:17,760
Speaker 3: election cycle through election cycle. So I don't think anything

128
00:05:17,800 --> 00:05:20,000
Speaker 3: that is going to come out tonight on that, but

129
00:05:20,040 --> 00:05:21,479
Speaker 3: those are things I'm going to start looking for as

130
00:05:21,520 --> 00:05:22,240
Speaker 3: we near the election.

131
00:05:22,480 --> 00:05:25,040
Speaker 5: A lot of people's base cases is gridlock in Washington.

132
00:05:25,160 --> 00:05:27,720
Speaker 5: But some of the issues that Trump talks about, like terror,

133
00:05:27,720 --> 00:05:29,440
Speaker 5: spent a lot of time in this program talking about

134
00:05:29,480 --> 00:05:32,320
Speaker 5: that he could do unilaterally on day one so have

135
00:05:32,360 --> 00:05:34,680
Speaker 5: a massive impact on what's going on in China. Do

136
00:05:34,720 --> 00:05:37,800
Speaker 5: you think China is basically waiting to find out what

137
00:05:37,839 --> 00:05:41,440
Speaker 5: happens with the election because their economy is suffering before

138
00:05:41,480 --> 00:05:43,440
Speaker 5: they really have set policy moves.

139
00:05:43,480 --> 00:05:45,120
Speaker 3: I think everyone's on hold a little bit. They want

140
00:05:45,120 --> 00:05:46,720
Speaker 3: to see how this plays out. I think everyone has

141
00:05:46,720 --> 00:05:49,039
Speaker 3: a decent understanding of what Trump does or doesn't do.

142
00:05:49,279 --> 00:05:51,520
Speaker 3: He says a lot and then he tends to back down.

143
00:05:51,720 --> 00:05:53,320
Speaker 3: We're not sure what Kama is going to do. I

144
00:05:53,320 --> 00:05:55,039
Speaker 3: think people want to see what's going to be like

145
00:05:55,480 --> 00:05:57,720
Speaker 3: and will she be easier to negotiate with right Will

146
00:05:57,760 --> 00:05:59,960
Speaker 3: people prefer to negotiate with her or will they prefer

147
00:06:00,000 --> 00:06:01,680
Speaker 3: to stick to Trump? So right now, I'm kind of

148
00:06:01,680 --> 00:06:04,919
Speaker 3: discounting everything both sides say, and that is probably I

149
00:06:04,920 --> 00:06:06,960
Speaker 3: think you One thing is we are kind of assuming

150
00:06:07,000 --> 00:06:09,400
Speaker 3: split tickets. If there's something that comes out that one

151
00:06:09,480 --> 00:06:12,880
Speaker 3: side is really going to, you know, win completely, then

152
00:06:12,920 --> 00:06:14,760
Speaker 3: I think that changes the narrative for Wall Street. Then

153
00:06:14,760 --> 00:06:16,760
Speaker 3: we have to pay a lot closer attention to the risks.

154
00:06:16,800 --> 00:06:18,480
Speaker 2: Let's just park the politics just for a moment, just

155
00:06:18,520 --> 00:06:20,760
Speaker 2: to wrap this up. When I walk away from listening

156
00:06:20,760 --> 00:06:23,920
Speaker 2: to this conversation, Lisa correctly identified that you see tech

157
00:06:23,960 --> 00:06:26,320
Speaker 2: and the AI trade, it's the biggest risk a fighting

158
00:06:26,320 --> 00:06:28,760
Speaker 2: hat to demonstrate whether this return on investment is going

159
00:06:28,800 --> 00:06:30,600
Speaker 2: to come from. Was the Apple and Vanu in the

160
00:06:30,640 --> 00:06:33,000
Speaker 2: beginning of that yesterday do you think it was?

161
00:06:33,440 --> 00:06:35,719
Speaker 3: You know, it did not seem to give that excitement.

162
00:06:35,760 --> 00:06:37,720
Speaker 3: But you've seen some of the earnings come out. Oracle

163
00:06:37,720 --> 00:06:39,440
Speaker 3: had great earnings last night. They're up, but yet the

164
00:06:39,520 --> 00:06:41,560
Speaker 3: Nasdaq one hundreds down a little Futures are down a

165
00:06:41,600 --> 00:06:43,280
Speaker 3: little bit this morning. So I think it's taking more

166
00:06:43,279 --> 00:06:45,360
Speaker 3: and more to get that story. The one positive thing

167
00:06:45,360 --> 00:06:47,160
Speaker 3: I'll say that I keep an eye on is Walmart

168
00:06:47,279 --> 00:06:50,160
Speaker 3: did come out and say that AI really helped them

169
00:06:50,160 --> 00:06:52,520
Speaker 3: with their quarter and then they're planning. So I need

170
00:06:52,520 --> 00:06:54,479
Speaker 3: to see more of that to believe in right now,

171
00:06:54,839 --> 00:06:56,320
Speaker 3: you know, what I'm seeing is a lot more people

172
00:06:56,320 --> 00:06:59,359
Speaker 3: I think we've been struggling through using these lams or

173
00:06:59,400 --> 00:07:02,359
Speaker 3: generative AI and I'll keep coming back like, oh, is

174
00:07:02,400 --> 00:07:05,679
Speaker 3: it there yet? And since the cost rose so quickly

175
00:07:05,680 --> 00:07:08,760
Speaker 3: with the cost of chips, the cost of getting data centers, electricity,

176
00:07:09,200 --> 00:07:12,280
Speaker 3: that I think the risk reward or the cost benefits

177
00:07:12,320 --> 00:07:13,880
Speaker 3: not there right now. And I think that's what we'll

178
00:07:13,880 --> 00:07:14,920
Speaker 3: see some slowing down on.

179
00:07:15,000 --> 00:07:17,240
Speaker 2: Peter Cheer looking to take out the August Low's Peter

180
00:07:17,320 --> 00:07:29,520
Speaker 2: Cheer Acountaby Securities paid to tank you. Evan ross Smith

181
00:07:29,520 --> 00:07:33,080
Speaker 2: of Slinkstart Strategies, writing Harris heads into Tuesday's debates, still

182
00:07:33,120 --> 00:07:36,040
Speaker 2: searching for a durable advantage in the states that will

183
00:07:36,040 --> 00:07:39,280
Speaker 2: decide the election, but with important openings she can press.

184
00:07:39,520 --> 00:07:41,720
Speaker 2: Evan joined us now for more. Evan, good morning, sir.

185
00:07:41,720 --> 00:07:42,200
Speaker 3: Good morning.

186
00:07:42,280 --> 00:07:45,600
Speaker 2: Let's talk about the very specific, highly specific pre debate

187
00:07:45,640 --> 00:07:48,040
Speaker 2: polling that you've been conducting. Can you just walk us

188
00:07:48,040 --> 00:07:49,240
Speaker 2: through it to begin, Well.

189
00:07:49,160 --> 00:07:52,080
Speaker 6: The selection is increasingly becoming focused on the handful of

190
00:07:52,160 --> 00:07:54,320
Speaker 6: voters really only about five hundred thousand voters who are

191
00:07:54,320 --> 00:07:56,680
Speaker 6: going to decide the outcome. Right, These are swing voters,

192
00:07:56,960 --> 00:08:00,600
Speaker 6: largely independent in six states right, swing states in the

193
00:08:00,640 --> 00:08:02,480
Speaker 6: Ross Belt and the Sun Belt that we all know about,

194
00:08:03,280 --> 00:08:05,600
Speaker 6: and this debate is largely about them. What do they

195
00:08:05,640 --> 00:08:07,600
Speaker 6: want to hear, what do they need to hear, and

196
00:08:07,880 --> 00:08:10,240
Speaker 6: particularly what does Kamala Harris need to tell them to

197
00:08:10,240 --> 00:08:12,000
Speaker 6: get them over the edge and make this more than

198
00:08:12,080 --> 00:08:14,840
Speaker 6: just a knife sedge election where she's clawed back out

199
00:08:14,840 --> 00:08:17,600
Speaker 6: of the hole that Joe Biden was in and reached

200
00:08:17,920 --> 00:08:21,200
Speaker 6: basically parody with Donald Trump, where this election could go

201
00:08:21,280 --> 00:08:23,680
Speaker 6: either way, as just about any analyst or polster would

202
00:08:23,680 --> 00:08:27,160
Speaker 6: tell you. And really, what these swing voters in these

203
00:08:27,160 --> 00:08:29,600
Speaker 6: swing states want to hear, at least in our polling

204
00:08:29,600 --> 00:08:32,480
Speaker 6: that that we just released this week, is you know,

205
00:08:32,520 --> 00:08:34,920
Speaker 6: they want to hear her continue to gain ground on

206
00:08:34,960 --> 00:08:39,040
Speaker 6: the economy to press her advantage on prices. Right, Donald

207
00:08:39,080 --> 00:08:41,800
Speaker 6: Trump still has a very narrow advantage, a two point

208
00:08:41,840 --> 00:08:46,120
Speaker 6: advantage and overall in these swing states on inflation and jobs,

209
00:08:46,160 --> 00:08:48,640
Speaker 6: but with independence in these swing states, Harris has a

210
00:08:48,640 --> 00:08:51,319
Speaker 6: four point advantage. These are very close to margin of error,

211
00:08:51,360 --> 00:08:54,679
Speaker 6: but it means these critical voters are looking to hear

212
00:08:54,720 --> 00:08:58,040
Speaker 6: on the economy and here on prices specifically, and she

213
00:08:58,080 --> 00:09:00,720
Speaker 6: has to mitigate concerns on immigration, where she still down

214
00:09:00,960 --> 00:09:03,360
Speaker 6: in these swing states to Donald Trump.

215
00:09:03,400 --> 00:09:04,559
Speaker 5: And then when you look at the New York Times

216
00:09:04,600 --> 00:09:06,600
Speaker 5: Santa Paul for the weekend, more than sixty percent of

217
00:09:06,760 --> 00:09:09,520
Speaker 5: likely voters. So the next present represent a major change

218
00:09:09,520 --> 00:09:12,440
Speaker 5: from Biden. Do you see that in this polling group

219
00:09:12,440 --> 00:09:14,080
Speaker 5: that you're going after in the swing states?

220
00:09:14,160 --> 00:09:17,440
Speaker 6: So it's interesting we pulled this with independent voters in

221
00:09:17,480 --> 00:09:20,800
Speaker 6: swing states, who represents change, who represents the right kind

222
00:09:20,840 --> 00:09:24,160
Speaker 6: of change? And voters in these swing states independent voters

223
00:09:24,400 --> 00:09:26,959
Speaker 6: by ten points say that Kamala Harris is a breath

224
00:09:26,960 --> 00:09:29,240
Speaker 6: of fresh air, and she is. It's undeniable. She has

225
00:09:29,240 --> 00:09:32,319
Speaker 6: a breath of fresh air in this race, but by

226
00:09:32,400 --> 00:09:34,720
Speaker 6: only about seven points to voters say that she's the

227
00:09:34,800 --> 00:09:37,920
Speaker 6: right kind of change. She's still more or less more

228
00:09:38,040 --> 00:09:40,640
Speaker 6: or less tied with Donald Trump on being a change candidate.

229
00:09:40,920 --> 00:09:45,040
Speaker 6: And that's because she hasn't yet broken in a meaningful

230
00:09:45,040 --> 00:09:48,959
Speaker 6: way rhetorical or policy wise with the administration. She isn't

231
00:09:49,000 --> 00:09:51,960
Speaker 6: a change candidate beyond the literal change of who the

232
00:09:52,000 --> 00:09:56,040
Speaker 6: candidate is. And now that slight advantage on the right

233
00:09:56,120 --> 00:09:59,240
Speaker 6: kind of change with independent swing state voters is very good,

234
00:10:00,200 --> 00:10:02,400
Speaker 6: but she needs to do more. She can do more.

235
00:10:02,440 --> 00:10:04,959
Speaker 5: Does she need to completely break with Biden in your

236
00:10:05,000 --> 00:10:06,840
Speaker 5: polling to win over those voters.

237
00:10:07,679 --> 00:10:09,480
Speaker 6: I don't know that it's a complete break with Biden.

238
00:10:09,520 --> 00:10:10,000
Speaker 1: She doesn't need to.

239
00:10:10,120 --> 00:10:13,200
Speaker 6: He's the sitting present, he's her sitting president, her running

240
00:10:13,240 --> 00:10:16,880
Speaker 6: mate in twenty twenty. You know, there is some merit

241
00:10:16,920 --> 00:10:18,840
Speaker 6: to the idea that she could draw a greater distance,

242
00:10:19,400 --> 00:10:23,559
Speaker 6: particularly on immigration. There's very little downside to drawing distance.

243
00:10:23,840 --> 00:10:26,520
Speaker 6: But on policy, most of the Biden policy agenda, when

244
00:10:26,520 --> 00:10:29,439
Speaker 6: it's not tied to Joe Biden, is very popular when

245
00:10:29,440 --> 00:10:32,960
Speaker 6: you pull it. So how do you break with the present.

246
00:10:33,000 --> 00:10:35,080
Speaker 6: You can't break with him on policy. You have to

247
00:10:35,080 --> 00:10:38,640
Speaker 6: break with him in more subtle rhetorical ways, and we'll

248
00:10:38,640 --> 00:10:41,120
Speaker 6: see what she does. We'll see how she manages that.

249
00:10:41,160 --> 00:10:42,400
Speaker 6: And you also want to continue to be able to

250
00:10:42,440 --> 00:10:44,880
Speaker 6: take credit for things that the administration does that is

251
00:10:44,960 --> 00:10:49,080
Speaker 6: very popular, like Medicare and negotiation and prescription drug prices,

252
00:10:49,120 --> 00:10:52,520
Speaker 6: which is enormously popular, including in these swing states. With

253
00:10:52,559 --> 00:10:53,280
Speaker 6: these swing.

254
00:10:53,120 --> 00:10:56,720
Speaker 1: Voters, how engaged are some of the independents and perspective voters,

255
00:10:56,880 --> 00:10:58,920
Speaker 1: those five hundred thousand people that are going to determine

256
00:10:58,920 --> 00:11:01,760
Speaker 1: the election I mean, awmuch. Are they watching every iteration

257
00:11:01,920 --> 00:11:04,679
Speaker 1: looking for policy, trying to understand the two candidates.

258
00:11:04,880 --> 00:11:07,480
Speaker 6: Well, that's really what's critical tonight, because those voters are

259
00:11:07,520 --> 00:11:13,360
Speaker 6: looking to learn a lot of people who follow politics closely, journalists, practitioners,

260
00:11:13,400 --> 00:11:14,920
Speaker 6: the kind of people who get up at six in

261
00:11:14,960 --> 00:11:16,440
Speaker 6: the morning to watch the news and get a little

262
00:11:16,520 --> 00:11:20,560
Speaker 6: edge on everyone else, we know a lot about what's

263
00:11:20,600 --> 00:11:22,440
Speaker 6: going to come out of their mouths. These swing voters

264
00:11:22,480 --> 00:11:24,400
Speaker 6: who haven't made up their mind, they're watching to learn.

265
00:11:24,520 --> 00:11:27,520
Speaker 6: They're not necessarily watching for the reparte the zingers. And

266
00:11:27,559 --> 00:11:30,280
Speaker 6: that's why I discount the mics being on or off

267
00:11:30,320 --> 00:11:32,280
Speaker 6: or anything like that. The voters who will determine this

268
00:11:32,320 --> 00:11:36,120
Speaker 6: selection really really care about what these candidates are saying.

269
00:11:36,120 --> 00:11:38,679
Speaker 6: They're looking for substance, they're looking to be educated. They

270
00:11:38,720 --> 00:11:42,400
Speaker 6: have open questions largely about Kamala Harris, very much less

271
00:11:42,400 --> 00:11:44,600
Speaker 6: so about Donald Trump, and they want answers to those questions,

272
00:11:44,679 --> 00:11:47,440
Speaker 6: particularly on the economy, particularly on her immigration policy and

273
00:11:47,440 --> 00:11:49,160
Speaker 6: how she's going to be different than the status quo.

274
00:11:50,040 --> 00:11:53,960
Speaker 6: And an important mission for Harris is also to raise

275
00:11:54,000 --> 00:11:56,920
Speaker 6: the salience of abortion and reproductive rights in this selection.

276
00:11:57,000 --> 00:11:58,280
Speaker 1: That's what I was going to say, how do you

277
00:11:58,320 --> 00:12:01,040
Speaker 1: sort of pair those two ideas? Is social versus the economic?

278
00:12:01,160 --> 00:12:03,280
Speaker 1: Especially to a time where frankly, there isn't that much

279
00:12:03,360 --> 00:12:06,800
Speaker 1: daylight when it comes to certain policies, particularly with China

280
00:12:06,880 --> 00:12:11,479
Speaker 1: versus a US and other international issues between Trump and Harris.

281
00:12:11,800 --> 00:12:14,000
Speaker 6: Well in foreign policy, you know, Harris is very fortunate

282
00:12:14,000 --> 00:12:17,800
Speaker 6: in that the part of the Biden administration agenda and

283
00:12:18,320 --> 00:12:20,840
Speaker 6: policy said that she has tied the least to is

284
00:12:20,880 --> 00:12:23,200
Speaker 6: foreign policy, so she can kind of do it and

285
00:12:23,240 --> 00:12:24,880
Speaker 6: say whatever she wants and feels she needs to do

286
00:12:24,880 --> 00:12:27,800
Speaker 6: and is politically advantageous. It's also true that the vice

287
00:12:27,840 --> 00:12:30,000
Speaker 6: president has had very little to do with American foreign

288
00:12:30,040 --> 00:12:32,480
Speaker 6: policy over the last four years, you know, sort of

289
00:12:32,559 --> 00:12:34,240
Speaker 6: Dick Cheney. It's hard to find a vice president who

290
00:12:34,240 --> 00:12:38,319
Speaker 6: has ivan Can we pick up on who she is too? Independence?

291
00:12:38,360 --> 00:12:40,480
Speaker 2: At least? Is this the person that ran back in

292
00:12:40,520 --> 00:12:44,959
Speaker 2: twenty nineteen, twenty twenty? Is she progressive? In moderates closing

293
00:12:45,360 --> 00:12:47,319
Speaker 2: here in twenty twenty four, how do they see her?

294
00:12:48,760 --> 00:12:51,000
Speaker 6: She's not. I mean when she ran in twenty nine teen,

295
00:12:51,040 --> 00:12:53,079
Speaker 6: it was in a Democratic primary where she didn't even

296
00:12:53,080 --> 00:12:54,960
Speaker 6: make it die ulis she never saw the voters in

297
00:12:55,000 --> 00:12:58,120
Speaker 6: twenty twenty, she's a vice president on a presidential ticket.

298
00:12:59,200 --> 00:13:01,240
Speaker 6: And also it should be noted in a year where

299
00:13:01,280 --> 00:13:04,280
Speaker 6: campaigning was different than any other presidential election in our lifetime, right,

300
00:13:04,280 --> 00:13:07,719
Speaker 6: she wasn't barnstorming. The swing state's media consumption was very

301
00:13:07,720 --> 00:13:11,880
Speaker 6: different during COVID, and so she is very much doing

302
00:13:11,880 --> 00:13:15,720
Speaker 6: her first introduction to voters. We're now several months, a

303
00:13:15,720 --> 00:13:18,040
Speaker 6: couple months into that introduction, so things are starting to

304
00:13:18,120 --> 00:13:20,520
Speaker 6: firm up. But this is you know, we did this

305
00:13:20,679 --> 00:13:25,640
Speaker 6: test on what policies, what campaign promises that Harris has made.

306
00:13:25,880 --> 00:13:28,720
Speaker 6: Do you believe she will try and succeed on try

307
00:13:28,760 --> 00:13:31,319
Speaker 6: and fail and not even try? Right? So these are

308
00:13:31,360 --> 00:13:33,360
Speaker 6: all These are all policies that she is that the

309
00:13:33,440 --> 00:13:36,680
Speaker 6: campaign has promised to pursue. And on some things like

310
00:13:36,720 --> 00:13:39,000
Speaker 6: the child tax credit, voters really believe she will try

311
00:13:39,040 --> 00:13:41,760
Speaker 6: and get it done. On other things like deficit reduction,

312
00:13:42,880 --> 00:13:44,480
Speaker 6: she's underwater by a couple points.

313
00:13:44,640 --> 00:13:46,000
Speaker 2: Right, She's not the only one.

314
00:13:46,440 --> 00:13:48,040
Speaker 6: She's not the only one. She's not the only one.

315
00:13:48,080 --> 00:13:50,320
Speaker 6: I mean, where's the candidate who hasn't promised to some

316
00:13:50,360 --> 00:13:53,360
Speaker 6: form of deficit reduction? But so there are still elements

317
00:13:53,400 --> 00:13:55,280
Speaker 6: of her record and the border, by the way, her

318
00:13:55,280 --> 00:13:58,280
Speaker 6: promises to following up, you know, trying to get the

319
00:13:58,320 --> 00:14:00,760
Speaker 6: bipartisan border deal done. Voters more or less buy that

320
00:14:00,800 --> 00:14:04,120
Speaker 6: from her surging resources to the border, which is a

321
00:14:04,160 --> 00:14:06,880
Speaker 6: popular idea that her campaign has promised to do, you know,

322
00:14:06,920 --> 00:14:10,120
Speaker 6: more border agents. Voters aren't quite sure that she means

323
00:14:10,160 --> 00:14:13,559
Speaker 6: that promise, so there's reassuring to do. It's less about

324
00:14:13,559 --> 00:14:16,560
Speaker 6: new promises. It's more about affirming that the things she

325
00:14:16,600 --> 00:14:19,280
Speaker 6: has promised voters are real and something she will try.

326
00:14:19,200 --> 00:14:21,280
Speaker 2: As something you imagine the former president will be pushing

327
00:14:21,320 --> 00:14:23,280
Speaker 2: on pretty hard. A little bit. Lengster on the Savenik.

328
00:14:23,400 --> 00:14:24,600
Speaker 1: I think they're all just going to be watching the

329
00:14:24,600 --> 00:14:26,480
Speaker 1: fifty eight billion dollar action at one pm.

330
00:14:26,600 --> 00:14:28,960
Speaker 2: Is that right? Yeah, because the very focused exit on

331
00:14:29,000 --> 00:14:31,960
Speaker 2: def sent reduction. It's great again, Evan, Thank you sir.

332
00:14:31,960 --> 00:14:33,600
Speaker 2: It's going to see. Let's do it again soon, Evan

333
00:14:33,680 --> 00:14:46,200
Speaker 2: rod Smith. Then the limits of this bond market rally.

334
00:14:46,400 --> 00:14:48,440
Speaker 2: We've had a big move last week of almost thirty

335
00:14:48,440 --> 00:14:51,160
Speaker 2: basis points lower on a two year yield. The tended

336
00:14:51,200 --> 00:14:53,720
Speaker 2: year dropped by close to twenty basis points had a

337
00:14:53,760 --> 00:14:55,640
Speaker 2: single week. We see a big move lower through the

338
00:14:55,680 --> 00:14:57,680
Speaker 2: summer as well. Are we've reaching the limits of this

339
00:14:57,720 --> 00:14:58,600
Speaker 2: bond market rally?

340
00:14:59,000 --> 00:15:01,960
Speaker 4: I think so. I think we maintain models and we

341
00:15:02,000 --> 00:15:05,840
Speaker 4: think it's overshot on the downside pretty much. If you

342
00:15:06,000 --> 00:15:09,080
Speaker 4: have a FED funds rate of three and a half percent,

343
00:15:09,120 --> 00:15:11,520
Speaker 4: which is which I think is close to the natural

344
00:15:11,680 --> 00:15:18,400
Speaker 4: neutral rate on the nominal side and typically post cutting cycles,

345
00:15:18,440 --> 00:15:21,640
Speaker 4: if you have the youth cur of pricing in another

346
00:15:21,720 --> 00:15:24,840
Speaker 4: fifty basis points on the ten or four percent, anything

347
00:15:24,920 --> 00:15:27,520
Speaker 4: lower than that seems to be like overdone.

348
00:15:27,680 --> 00:15:29,600
Speaker 2: You mentioned three fifty. Do you think we're actually quite

349
00:15:29,640 --> 00:15:32,080
Speaker 2: well priced already for two hundred basis points with.

350
00:15:32,160 --> 00:15:34,720
Speaker 4: The basin I think on the last couple of years,

351
00:15:34,720 --> 00:15:39,080
Speaker 4: the markets pricing any kind of move in the market

352
00:15:39,080 --> 00:15:41,600
Speaker 4: in an extreme way. So we are really well priced

353
00:15:41,640 --> 00:15:44,640
Speaker 4: on that, I think, and what I think is important.

354
00:15:44,920 --> 00:15:47,760
Speaker 4: On the inflation side, a lot of our work is

355
00:15:47,800 --> 00:15:52,160
Speaker 4: suggesting that the next few months, INFATIONI the pace and

356
00:15:52,280 --> 00:15:54,640
Speaker 4: path of inflation is going to get a little more

357
00:15:54,640 --> 00:15:58,200
Speaker 4: difficult in terms of the disinflationary stent trend. So it

358
00:15:58,280 --> 00:16:01,680
Speaker 4: may just stabilize, so you may not see consistent print

359
00:16:01,880 --> 00:16:04,920
Speaker 4: prints down. What's going to happen beginning of next year

360
00:16:05,280 --> 00:16:07,920
Speaker 4: the two thousand and four beginning had a very high

361
00:16:07,960 --> 00:16:11,440
Speaker 4: base effect because of high infationion. So beginning of next

362
00:16:11,480 --> 00:16:13,760
Speaker 4: year in Fatian is actually going to be better and

363
00:16:13,840 --> 00:16:14,560
Speaker 4: trend down more.

364
00:16:14,640 --> 00:16:14,720
Speaker 1: So.

365
00:16:14,720 --> 00:16:18,080
Speaker 4: I think that's the path I'm working with. And from

366
00:16:18,160 --> 00:16:22,200
Speaker 4: that perspective, you know, Treasury seem to have overdone.

367
00:16:22,240 --> 00:16:24,960
Speaker 1: They might have overdone, but that doesn't mean not to

368
00:16:25,000 --> 00:16:26,520
Speaker 1: earn them the same kind of way. You have an

369
00:16:26,520 --> 00:16:29,440
Speaker 1: interesting point about sixty forty that we're going to see

370
00:16:29,480 --> 00:16:31,800
Speaker 1: kind of a reversion back to that kind of balance

371
00:16:32,760 --> 00:16:37,520
Speaker 1: in terms of opposite reaction to stocks. How much can

372
00:16:37,560 --> 00:16:40,320
Speaker 1: you lean into that story, given the fact that you

373
00:16:40,400 --> 00:16:42,680
Speaker 1: have already seen this huge rally, does it still stand?

374
00:16:43,120 --> 00:16:47,480
Speaker 4: It still stands because the most important reason the sixty

375
00:16:47,480 --> 00:16:50,600
Speaker 4: to forty did so terribly in twenty twenty three, when

376
00:16:50,920 --> 00:16:54,760
Speaker 4: this combination was down seventeen percent, was because stocks and

377
00:16:54,840 --> 00:16:59,040
Speaker 4: bonds correlation got positive. And history suggests that whenever inflation

378
00:16:59,160 --> 00:17:02,240
Speaker 4: is above to and azo half percent, stocks and bonds

379
00:17:02,280 --> 00:17:04,720
Speaker 4: this is for the last seventy five years, stocks and

380
00:17:04,760 --> 00:17:08,680
Speaker 4: bonds correlation gets positive, which is taking away the diversification

381
00:17:08,760 --> 00:17:12,919
Speaker 4: benefits of bonds. Now, with infasion coming down below that level,

382
00:17:13,440 --> 00:17:18,399
Speaker 4: that correlation will resert its negative relationship, And I think

383
00:17:18,920 --> 00:17:22,399
Speaker 4: in an overall asset allocation portfolio, that's a more structural,

384
00:17:22,440 --> 00:17:26,840
Speaker 4: long term portfolio that gives you the benefit of having

385
00:17:26,880 --> 00:17:30,720
Speaker 4: that hedge with the duration in case the outcome on

386
00:17:30,760 --> 00:17:33,639
Speaker 4: the economy is worse than the consensus soft landing.

387
00:17:33,840 --> 00:17:35,879
Speaker 1: How hard of a cell is that right now? Given

388
00:17:35,920 --> 00:17:38,399
Speaker 1: how scarred people were over the past few years and

389
00:17:38,440 --> 00:17:40,640
Speaker 1: some of the losses that you saw on bond portfolios,

390
00:17:40,640 --> 00:17:43,680
Speaker 1: and some of the questions people have around the deficit,

391
00:17:43,880 --> 00:17:46,560
Speaker 1: around some of these other sort of structurally higher inflation

392
00:17:46,680 --> 00:17:49,000
Speaker 1: types of regimes that some people are talking about.

393
00:17:49,080 --> 00:17:51,960
Speaker 4: Yeah, you know, I think the question on the sixty

394
00:17:52,080 --> 00:17:55,199
Speaker 4: forty was a bigger question in twenty twenty four because

395
00:17:55,200 --> 00:17:58,679
Speaker 4: twenty twenty three was such a worse worst outcome for

396
00:17:58,760 --> 00:18:02,440
Speaker 4: that combination. I think at this point there is more

397
00:18:02,840 --> 00:18:05,880
Speaker 4: recognition that that may be a good allocation. But what

398
00:18:05,920 --> 00:18:09,600
Speaker 4: people are doing and what act owners are looking to

399
00:18:09,640 --> 00:18:12,520
Speaker 4: do is you know, take you know, think about what

400
00:18:12,720 --> 00:18:16,480
Speaker 4: in that sixty forty, right whether if it's forty in

401
00:18:16,960 --> 00:18:20,040
Speaker 4: US treasuries, Oh, let's look at emerging market debt if

402
00:18:20,200 --> 00:18:22,919
Speaker 4: ed if the dollar is weak and interest rates are

403
00:18:22,960 --> 00:18:25,520
Speaker 4: coming down, then the local bonds and the emerging market

404
00:18:25,560 --> 00:18:28,399
Speaker 4: world will do well. So what within that forty is

405
00:18:28,960 --> 00:18:33,520
Speaker 4: an interesting question? And what within that sixty interst rate differentials,

406
00:18:33,680 --> 00:18:36,879
Speaker 4: growth differentials that have worked in favor of the US

407
00:18:37,080 --> 00:18:40,720
Speaker 4: all along now seem to be peaking in favor of

408
00:18:40,760 --> 00:18:43,960
Speaker 4: the U in favor of the non US world because

409
00:18:44,880 --> 00:18:48,000
Speaker 4: pricing in the US interest rates is much more aggressive

410
00:18:48,280 --> 00:18:51,160
Speaker 4: than many other markets in terms of rate cards. So

411
00:18:51,200 --> 00:18:54,440
Speaker 4: how do we look at the x US universe even

412
00:18:54,720 --> 00:18:59,239
Speaker 4: in the equity space is another important consideration within that

413
00:18:59,320 --> 00:18:59,920
Speaker 4: broader alley.

414
00:19:00,480 --> 00:19:03,159
Speaker 5: So quicker deeper into that idea, what do you like

415
00:19:03,400 --> 00:19:04,840
Speaker 5: within the sixties in the forty?

416
00:19:05,040 --> 00:19:08,080
Speaker 4: Yeah, So, I mean, I'll start with the US. You know,

417
00:19:08,760 --> 00:19:11,840
Speaker 4: clearly we've liked the equal Weighted Index because we think

418
00:19:11,840 --> 00:19:16,359
Speaker 4: concentrations extreme peak multiples, peak earnings, and some of these

419
00:19:16,760 --> 00:19:21,000
Speaker 4: technology stocks within that. Within US, we do like pockets

420
00:19:21,000 --> 00:19:26,159
Speaker 4: of industrials, financials with the eel curve steepening. We we

421
00:19:26,359 --> 00:19:30,760
Speaker 4: really like pockets of Europe because there are idiosyncratic reasons

422
00:19:30,800 --> 00:19:34,840
Speaker 4: but also structured reasons. The world is industrializing. A lot

423
00:19:34,880 --> 00:19:38,760
Speaker 4: of the industrial companies are in Europe trading at very

424
00:19:38,800 --> 00:19:42,440
Speaker 4: cheap multiples. We like pockets of Japan that are leveraged

425
00:19:42,440 --> 00:19:45,560
Speaker 4: to an appreciating yen because we think that the parts

426
00:19:45,600 --> 00:19:48,760
Speaker 4: for the yen is up. We do like several emerging

427
00:19:48,800 --> 00:19:53,480
Speaker 4: markets like India Southeast Asia that are also more consistent.

428
00:19:53,920 --> 00:19:55,640
Speaker 5: You're not mentioning China.

429
00:19:55,920 --> 00:19:58,720
Speaker 4: Yes, I've been a bear on China for a while.

430
00:19:58,760 --> 00:20:03,840
Speaker 4: I think China has three problems. It has the excessive debt,

431
00:20:04,119 --> 00:20:07,960
Speaker 4: it has a demographic headwind, and it has a deglobalization headwind.

432
00:20:08,160 --> 00:20:10,240
Speaker 4: I mean, look at what it's doing, like it wanted

433
00:20:10,280 --> 00:20:14,119
Speaker 4: to raise consumption, but it's ending up following the industrial

434
00:20:14,200 --> 00:20:17,919
Speaker 4: policy again dumping goods in the world because that's the

435
00:20:17,960 --> 00:20:21,280
Speaker 4: only engine for growth in terms of the exports side.

436
00:20:21,600 --> 00:20:26,840
Speaker 4: The domestic economy is laden with unproductive debt which is

437
00:20:26,880 --> 00:20:30,080
Speaker 4: slushing around the system without a cleanup act. So that

438
00:20:30,560 --> 00:20:35,280
Speaker 4: continues to be something that may have some tactical runs,

439
00:20:35,320 --> 00:20:38,440
Speaker 4: but not a structural story. For acid Alkin, can.

440
00:20:38,400 --> 00:20:41,600
Speaker 2: You reconcile that with your more constructive view on Europe?

441
00:20:41,720 --> 00:20:44,240
Speaker 2: If you don't like China, how can we like Europe?

442
00:20:44,280 --> 00:20:46,080
Speaker 2: Isn't that just a play on China?

443
00:20:46,600 --> 00:20:49,639
Speaker 4: So you know Europe? Of course, the consumer story in

444
00:20:49,720 --> 00:20:52,680
Speaker 4: Europe and the brands, you know, the luxury brands that

445
00:20:53,160 --> 00:20:55,679
Speaker 4: has a problem, and some of it is getting priced

446
00:20:55,680 --> 00:20:59,760
Speaker 4: in pretty decently with respect to current valuations. But I

447
00:20:59,800 --> 00:21:03,480
Speaker 4: think in some of the global themes today, which is

448
00:21:04,320 --> 00:21:09,960
Speaker 4: whether it's defense gapics, it's industrial automation gapics, it's resilience gapics,

449
00:21:10,960 --> 00:21:15,080
Speaker 4: substitution capecks, some of the European stories are linked to that,

450
00:21:15,240 --> 00:21:19,840
Speaker 4: and you know, pockets of energy materials. UK has a

451
00:21:19,920 --> 00:21:23,879
Speaker 4: large part of metals and materials kind of companies. So

452
00:21:24,480 --> 00:21:28,080
Speaker 4: I think scattered around it's an active time for active management.

453
00:21:28,200 --> 00:21:32,160
Speaker 4: You really need to kind of pull the thematic leaders

454
00:21:32,200 --> 00:21:33,320
Speaker 4: from these different We've.

455
00:21:33,160 --> 00:21:35,000
Speaker 2: All heard these arguments a million times, of course, and

456
00:21:35,200 --> 00:21:37,040
Speaker 2: the question I always sort of go back to is

457
00:21:37,160 --> 00:21:40,520
Speaker 2: valuation gap or valuation trap? What are they doing right

458
00:21:40,520 --> 00:21:43,600
Speaker 2: now that deserves the premium you think these companies demand.

459
00:21:43,720 --> 00:21:45,400
Speaker 2: How are we going to attract that kind of capital

460
00:21:45,640 --> 00:21:48,080
Speaker 2: back to Europe, back to the UK given how they've

461
00:21:48,080 --> 00:21:50,640
Speaker 2: squandered it for most of the last few decades.

462
00:21:50,760 --> 00:21:54,840
Speaker 4: So in certain pockets of you know, Europe, the earnings

463
00:21:55,720 --> 00:21:59,440
Speaker 4: infection is happening, So it's not a valuation trap when

464
00:21:59,720 --> 00:22:03,240
Speaker 4: they're a catalyst to unlock that value, right, So that's

465
00:22:03,240 --> 00:22:06,080
Speaker 4: what we're focusing on. And I think when you talk

466
00:22:06,160 --> 00:22:11,560
Speaker 4: about valuation, you really have to think about equity valuations

467
00:22:11,600 --> 00:22:15,920
Speaker 4: and currency valuations. So the dollar now is really extended.

468
00:22:16,000 --> 00:22:19,439
Speaker 4: And as I said, the great differentials and the growth

469
00:22:19,480 --> 00:22:22,560
Speaker 4: differentials that have favored the dollar all along in the

470
00:22:22,640 --> 00:22:26,240
Speaker 4: last few years, that's now going to favor the x

471
00:22:26,440 --> 00:22:30,960
Speaker 4: US universe. And work suggests that nearly a third of

472
00:22:31,040 --> 00:22:37,159
Speaker 4: returns on average come from currency. So taking that nuanced

473
00:22:37,200 --> 00:22:41,439
Speaker 4: currency view across international markets is another big part of

474
00:22:41,600 --> 00:22:42,160
Speaker 4: Wait for that.

475
00:22:42,160 --> 00:22:44,600
Speaker 2: Just one step further. If that big dollar long there's

476
00:22:44,640 --> 00:22:47,560
Speaker 2: been accumulating over the last few years, which essentially that's

477
00:22:47,560 --> 00:22:49,760
Speaker 2: what it is. It's a massive dollar long at the

478
00:22:49,800 --> 00:22:53,080
Speaker 2: expense of the rest of the world into dollar denominated assets.

479
00:22:53,080 --> 00:22:55,040
Speaker 2: If that begins to unwind, there's a whole host of

480
00:22:55,040 --> 00:22:57,840
Speaker 2: people out there, deep thinkers who think that maybe you

481
00:22:57,960 --> 00:23:01,040
Speaker 2: engineer moves of like ten percent in the Chinese currency,

482
00:23:01,400 --> 00:23:03,639
Speaker 2: big move site in the Euro as well. Do you

483
00:23:03,640 --> 00:23:05,520
Speaker 2: think about it the same way and what kind of

484
00:23:05,560 --> 00:23:07,800
Speaker 2: destruction would that cause for the US assets that that

485
00:23:07,880 --> 00:23:09,159
Speaker 2: money was originally in.

486
00:23:09,640 --> 00:23:12,280
Speaker 4: Yeah, so dollar is not an emerging market currency, right,

487
00:23:12,359 --> 00:23:14,680
Speaker 4: it's not that, you know, it's not a currency that

488
00:23:14,680 --> 00:23:17,520
Speaker 4: that's so volatile. I think if you plot a long

489
00:23:17,640 --> 00:23:21,960
Speaker 4: term dollar price, it trades between that ten to fifteen

490
00:23:22,040 --> 00:23:25,600
Speaker 4: percent ban So I think there will be countertrend rallies.

491
00:23:25,640 --> 00:23:28,000
Speaker 4: We probably probably you know, at a point on the

492
00:23:28,040 --> 00:23:31,760
Speaker 4: tactical side where the dollar a little more weakness could

493
00:23:31,880 --> 00:23:34,520
Speaker 4: get a counter trend rally on the upside. But I

494
00:23:34,560 --> 00:23:40,040
Speaker 4: think the home bias in the US, with just US assets,

495
00:23:40,200 --> 00:23:45,360
Speaker 4: US domiciled assets, that probably that shift, if that were

496
00:23:45,520 --> 00:23:50,560
Speaker 4: to come, should lead to some assets moving away from

497
00:23:50,560 --> 00:23:54,480
Speaker 4: the dollar, not something that dislocates and calls for a

498
00:23:54,520 --> 00:23:58,040
Speaker 4: demise of the dollar, because it still is the reserve currency,

499
00:23:58,320 --> 00:24:01,240
Speaker 4: it still has the exorbitant drivial. But I do think

500
00:24:01,280 --> 00:24:04,080
Speaker 4: that dollar weaknesses have happened, like in the two thousand

501
00:24:04,119 --> 00:24:07,359
Speaker 4: decade when international markets did better. I think we're getting

502
00:24:07,400 --> 00:24:08,040
Speaker 4: to that point.

503
00:24:08,280 --> 00:24:10,840
Speaker 2: We used to come over here and basically chop everything

504
00:24:10,880 --> 00:24:13,359
Speaker 2: in half. Do to remember that fifty percent off. You

505
00:24:13,400 --> 00:24:15,840
Speaker 2: won't remember that as a brick coming to America. Used

506
00:24:15,840 --> 00:24:17,399
Speaker 2: to come here and just do fifty percent off. It

507
00:24:17,440 --> 00:24:19,600
Speaker 2: was two for one. Great times. It's great times. Obviously

508
00:24:19,600 --> 00:24:20,159
Speaker 2: I live here now.

509
00:24:20,359 --> 00:24:21,280
Speaker 1: It was the other way around.

510
00:24:21,600 --> 00:24:24,080
Speaker 2: Yes, I was speaking to our producer Jamie about that,

511
00:24:24,119 --> 00:24:25,879
Speaker 2: and Jamie was talking about the other way around, how

512
00:24:25,880 --> 00:24:27,320
Speaker 2: expensive eating was in London.

513
00:24:27,320 --> 00:24:29,280
Speaker 1: It was back the dice. It was absolutely absurd. And

514
00:24:29,320 --> 00:24:31,560
Speaker 1: then now that's why the US can't get enough of

515
00:24:31,640 --> 00:24:34,080
Speaker 1: everything European exactly because John Seal.

516
00:24:34,280 --> 00:24:36,240
Speaker 2: Yeah, in a big way. You I live here. I'm

517
00:24:36,240 --> 00:24:38,480
Speaker 2: one of you to tell you can Dowry of Morgan Stanley,

518
00:24:38,520 --> 00:24:41,119
Speaker 2: it's got to see you. Thank you. This is the

519
00:24:41,160 --> 00:24:45,399
Speaker 2: Bloomberg Survenants podcast, bringing you the best in markets, economics,

520
00:24:45,440 --> 00:24:48,400
Speaker 2: antient politics. You can watch the show live on Bloomberg

521
00:24:48,440 --> 00:24:51,600
Speaker 2: TV weekday mornings from six am to nine am Eastern.

522
00:24:51,880 --> 00:24:55,240
Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else

523
00:24:55,280 --> 00:24:57,919
Speaker 2: you listen, and as always on the Bloomberg Terminal and

524
00:24:57,960 --> 00:24:59,320
Speaker 2: the Bloomberg Business Out