1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,560 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:23,400 Speaker 1: at Bloomberg dot com slash podcast. Moving higher in these 7 00:00:23,440 --> 00:00:26,520 Speaker 1: markets here smp U eight ten, so one percent. I 8 00:00:26,560 --> 00:00:28,960 Speaker 1: think this move, Matt has taken a lot of people 9 00:00:29,280 --> 00:00:31,400 Speaker 1: by surprise here and they're trying to figure out is 10 00:00:31,440 --> 00:00:33,879 Speaker 1: it real? Do I buy it? Do I fade it? 11 00:00:33,920 --> 00:00:36,240 Speaker 1: What do I do? Here? Let's check in with somebody 12 00:00:36,240 --> 00:00:38,600 Speaker 1: who does this stuff for living, Megan Hornum and chief 13 00:00:38,640 --> 00:00:42,560 Speaker 1: investment officer for Verdin's Capital Advisors. So what say you, Megan? 14 00:00:42,600 --> 00:00:45,120 Speaker 1: As we look at this market, equity markets bouncing, you know, 15 00:00:45,200 --> 00:00:48,479 Speaker 1: I don't know, they're teen percenters so off the bottom? 16 00:00:48,640 --> 00:00:52,479 Speaker 1: Is this real? I think for certain areas of the 17 00:00:52,560 --> 00:00:55,120 Speaker 1: market that got hit the most that yes, I think 18 00:00:55,120 --> 00:00:57,600 Speaker 1: that this is a good opportunity to maybe be adding 19 00:00:57,640 --> 00:01:00,480 Speaker 1: just some of those areas. So I mean, in that instance, 20 00:01:00,560 --> 00:01:03,200 Speaker 1: look at some things like small cap mid cap stocks, 21 00:01:03,520 --> 00:01:06,040 Speaker 1: These areas were beaten down the most and they're actually 22 00:01:06,080 --> 00:01:09,039 Speaker 1: benefiting from this rebound we've seen. But if you look 23 00:01:09,080 --> 00:01:12,920 Speaker 1: at your large cap, your technology, your growth, I'm still 24 00:01:12,959 --> 00:01:16,479 Speaker 1: a little nervous about adding and you know, getting aggressive 25 00:01:16,520 --> 00:01:19,840 Speaker 1: in that area because they also have rebounded. But I 26 00:01:19,880 --> 00:01:22,880 Speaker 1: don't think it's fully reflecting where the interst rate market 27 00:01:22,880 --> 00:01:24,959 Speaker 1: will go. And that's the one thing I think is 28 00:01:25,040 --> 00:01:29,680 Speaker 1: a head wind there to those those stocks. The path 29 00:01:29,760 --> 00:01:32,520 Speaker 1: looks like, oh sorry, my mic was off. What do 30 00:01:32,560 --> 00:01:35,640 Speaker 1: you think the FED path looks like? Megan? So, I 31 00:01:35,640 --> 00:01:37,560 Speaker 1: think between now and I know a lot of people 32 00:01:37,600 --> 00:01:39,760 Speaker 1: are focused on the September meeting, and while they go 33 00:01:39,840 --> 00:01:43,119 Speaker 1: fifty or while they go seventy five, right now, fifty 34 00:01:43,200 --> 00:01:45,840 Speaker 1: is a definite. Uh, seventy five is still up in 35 00:01:45,880 --> 00:01:48,480 Speaker 1: the air. Because keep in mind that between now and then, 36 00:01:48,880 --> 00:01:52,240 Speaker 1: we'll get two jobs reports, will get at least two 37 00:01:52,680 --> 00:01:55,640 Speaker 1: CPI reports, will get a lot more information on inflation, 38 00:01:55,680 --> 00:01:58,720 Speaker 1: and we'll also get more information on just where economy is. 39 00:01:59,280 --> 00:02:02,920 Speaker 1: We did get that second consecutive quarter of negative GDP 40 00:02:03,680 --> 00:02:06,640 Speaker 1: we um we've seen today. Like you mentioned, the services 41 00:02:06,640 --> 00:02:09,959 Speaker 1: sector was was much stronger, but manufacturing is getting weaker 42 00:02:10,320 --> 00:02:12,880 Speaker 1: pretty rapidly, So they want to look at all of 43 00:02:12,919 --> 00:02:15,840 Speaker 1: these things in way that against the future outlook for 44 00:02:15,840 --> 00:02:18,440 Speaker 1: the second half of this year before they decide that, hey, 45 00:02:18,480 --> 00:02:21,000 Speaker 1: it's going to be seventy five basis points. We'll be 46 00:02:21,040 --> 00:02:23,600 Speaker 1: looking at the Jackson Whole meeting, which also comes out 47 00:02:23,639 --> 00:02:28,519 Speaker 1: at the end of the of August. August they tend 48 00:02:28,600 --> 00:02:31,000 Speaker 1: to give some more indication during those meetings, and it 49 00:02:31,040 --> 00:02:34,040 Speaker 1: also tends to be a market mover. That's why I'm mad. 50 00:02:34,080 --> 00:02:35,600 Speaker 1: I think I need to go out the Jackson Hole. 51 00:02:35,639 --> 00:02:38,120 Speaker 1: What do you think? Have you not already got tickets? 52 00:02:38,120 --> 00:02:39,880 Speaker 1: Are you not going to Jacksonly? I don't know. I mean, 53 00:02:40,000 --> 00:02:42,960 Speaker 1: I know Michael McKee's going. I've volunteered to carry his luggage. 54 00:02:43,000 --> 00:02:44,120 Speaker 1: But I mean, I think I need to be out. 55 00:02:44,200 --> 00:02:47,000 Speaker 1: Are we broadcasting, Eric? Are we broadcasting from Jackson Hole? 56 00:02:47,040 --> 00:02:50,440 Speaker 1: Are you not? Have you not already? Can you clear 57 00:02:50,480 --> 00:02:53,120 Speaker 1: that with Colin and Anthony? Bob? I see Bob, and 58 00:02:53,120 --> 00:02:55,000 Speaker 1: are you can pull the you can pull the strings? 59 00:02:56,240 --> 00:02:58,000 Speaker 1: All right? Very good? All right? Megan. So we're thinking 60 00:02:58,000 --> 00:02:59,919 Speaker 1: about here. You know, I'm an equity person, but I 61 00:03:00,000 --> 00:03:01,880 Speaker 1: look at the fixed income and I see the negative 62 00:03:01,919 --> 00:03:05,160 Speaker 1: returns year today and you know, I listened to credit 63 00:03:05,680 --> 00:03:09,160 Speaker 1: strategists and portfolio managers saying, we've never had an under 64 00:03:09,160 --> 00:03:11,280 Speaker 1: performance like we've seen in the first six seven months 65 00:03:11,280 --> 00:03:15,200 Speaker 1: of Why don't I just jump into the deep end 66 00:03:15,320 --> 00:03:19,560 Speaker 1: and start buying bonds because I wouldn't buy a tenure 67 00:03:20,400 --> 00:03:22,880 Speaker 1: tenure treasury when it's at a two eighty two and 68 00:03:23,000 --> 00:03:26,239 Speaker 1: you have inflation at nine percent. That's why, Okay, that 69 00:03:26,240 --> 00:03:29,080 Speaker 1: that makes sense to me in the midst of an 70 00:03:29,120 --> 00:03:32,240 Speaker 1: aggressive FED tightening cycle, where I do think that the 71 00:03:32,280 --> 00:03:34,079 Speaker 1: market is getting a little ahead of itself that there's 72 00:03:34,080 --> 00:03:37,040 Speaker 1: going to be cuts next year, Will there'll be a pause? 73 00:03:37,560 --> 00:03:40,280 Speaker 1: That could quite possibly be the case, but the Federal 74 00:03:40,360 --> 00:03:43,040 Speaker 1: Reserve doesn't want to get in a system of like 75 00:03:43,120 --> 00:03:46,720 Speaker 1: the early nineteen seventies early nineteen eighties, where they would 76 00:03:47,120 --> 00:03:50,080 Speaker 1: raise rates rapidly and then have to cut quickly. They 77 00:03:50,160 --> 00:03:52,440 Speaker 1: want to try and smooth this out. So I think 78 00:03:52,480 --> 00:03:54,040 Speaker 1: the market is getting a little ahead of itself that 79 00:03:54,080 --> 00:03:57,040 Speaker 1: will be in for cuts next year, and that's why 80 00:03:57,080 --> 00:04:01,520 Speaker 1: you're seeing interest rates rally. There's really not much opportunity 81 00:04:01,680 --> 00:04:04,280 Speaker 1: or really any reward for the risk you're taking in 82 00:04:04,320 --> 00:04:07,320 Speaker 1: an interest rate environment in long term bonds now short 83 00:04:07,440 --> 00:04:10,680 Speaker 1: term bonds. They're adding a little bit of yield now. 84 00:04:10,720 --> 00:04:12,680 Speaker 1: I mean you've got about a three fifteen on on 85 00:04:12,800 --> 00:04:16,200 Speaker 1: the two year Treasury floating rate notes. They should keep 86 00:04:16,240 --> 00:04:19,080 Speaker 1: pace with what the Feds doing so in your fixed 87 00:04:19,080 --> 00:04:21,840 Speaker 1: income allocation because you can abandon it. I mean, we've 88 00:04:21,880 --> 00:04:25,760 Speaker 1: seen that it still does have a diversification benefit even 89 00:04:25,800 --> 00:04:28,080 Speaker 1: though it isn't what it used to be. It's been 90 00:04:28,080 --> 00:04:31,200 Speaker 1: a tough year for that sixty forty portfolio, but you 91 00:04:31,200 --> 00:04:34,760 Speaker 1: should always have something stay short um, keep defensive there 92 00:04:34,800 --> 00:04:39,120 Speaker 1: from a maturity positioning, all right, In terms of UH 93 00:04:39,200 --> 00:04:41,359 Speaker 1: stocks right now, if you wanted to get into this market, 94 00:04:41,400 --> 00:04:44,400 Speaker 1: how would you get involved? Would you you know, by 95 00:04:44,400 --> 00:04:48,000 Speaker 1: an index tracker? Would you look for active management UM 96 00:04:48,120 --> 00:04:52,920 Speaker 1: other sectors that you like. It's definitely active management UM. 97 00:04:53,080 --> 00:04:54,839 Speaker 1: That's where you need to be right now, being in 98 00:04:54,880 --> 00:04:58,200 Speaker 1: an index level right now with the uncertainty, especially from 99 00:04:58,240 --> 00:05:01,520 Speaker 1: an earnings perspective. Keeping mind, we haven't seen earnings really 100 00:05:01,560 --> 00:05:05,000 Speaker 1: come down to reflect the whether you know, the economic 101 00:05:05,080 --> 00:05:09,000 Speaker 1: or session or economic slowdown. We haven't seen a pretty 102 00:05:09,040 --> 00:05:12,280 Speaker 1: move there, So I would it would definitely recommend being 103 00:05:12,279 --> 00:05:14,480 Speaker 1: in the active side of it. People that can pick 104 00:05:14,520 --> 00:05:18,400 Speaker 1: out stocks not indexing um, you know, being having dry 105 00:05:18,400 --> 00:05:20,440 Speaker 1: powder on the sidelines too to be able to put 106 00:05:20,440 --> 00:05:24,400 Speaker 1: that to work. That's what we recommend right now. So, Meg, 107 00:05:24,480 --> 00:05:27,000 Speaker 1: we just had some I S M services data come 108 00:05:27,040 --> 00:05:31,400 Speaker 1: out better than expected. I mean, is the consumer as 109 00:05:31,440 --> 00:05:36,159 Speaker 1: strong as maybe we think here she is? Right now? 110 00:05:36,200 --> 00:05:39,159 Speaker 1: The consumers shifted from that good space spending that we 111 00:05:39,200 --> 00:05:41,559 Speaker 1: saw coming out of the pandemic, and now they're spending 112 00:05:41,600 --> 00:05:45,440 Speaker 1: on services and experience, and I think that that still 113 00:05:45,480 --> 00:05:47,839 Speaker 1: has a little bit of room to go. But people 114 00:05:48,080 --> 00:05:51,480 Speaker 1: whether it's travel or vacation or going out to restaurants, 115 00:05:52,160 --> 00:05:55,960 Speaker 1: we're still seeing people that are getting trips and things 116 00:05:55,960 --> 00:05:58,080 Speaker 1: like that that they didn't use during the pandemic or 117 00:05:58,160 --> 00:06:00,400 Speaker 1: last year. So you still have a pent up amand 118 00:06:00,600 --> 00:06:03,799 Speaker 1: for that side of the economy. But how many trips 119 00:06:03,800 --> 00:06:05,960 Speaker 1: to Disney World are you gonna take? Really? You know? 120 00:06:06,120 --> 00:06:09,359 Speaker 1: I mean, this is going to fade, especially if you 121 00:06:09,440 --> 00:06:12,520 Speaker 1: look at the consumer. I don't disagree that the balance 122 00:06:12,560 --> 00:06:15,840 Speaker 1: sheet of the consumer is stronger than it's ever been 123 00:06:15,960 --> 00:06:18,240 Speaker 1: leading up to any recession. If you look at you know, 124 00:06:18,279 --> 00:06:21,600 Speaker 1: net worth, but they're taking out credit card debt at 125 00:06:21,600 --> 00:06:24,640 Speaker 1: a double digit pace, and the savings during the pandemic 126 00:06:24,640 --> 00:06:26,640 Speaker 1: has been dwindled away, so I don't think that this 127 00:06:26,720 --> 00:06:29,599 Speaker 1: is sustainable in the second half. All right, Megan, great stuff. 128 00:06:29,640 --> 00:06:32,279 Speaker 1: As always, always appreciate getting some of your valuable time. 129 00:06:32,279 --> 00:06:37,520 Speaker 1: Megan Horneman, Chief Investment Officer, Verden's Capital Advisors Again, SMP 130 00:06:37,680 --> 00:06:40,440 Speaker 1: five dred up seven tenths of one percent. How about that? 131 00:06:41,200 --> 00:06:48,960 Speaker 1: This is bloomer. Let's get to our next guest. Mc mulroy, 132 00:06:49,040 --> 00:06:52,839 Speaker 1: co founder of the Mobo Institute, Former Deputy Assistant Secretary 133 00:06:52,880 --> 00:06:54,880 Speaker 1: of Defense for the Middle East at the U S 134 00:06:54,920 --> 00:06:57,520 Speaker 1: Department of Defense. I'm gonna keep going on this resume 135 00:06:57,560 --> 00:06:59,640 Speaker 1: here because it's just lying after the line. Former Power 136 00:06:59,640 --> 00:07:02,719 Speaker 1: of mill Terry Operations officer at the CIA. I don't 137 00:07:02,800 --> 00:07:04,719 Speaker 1: know what that is, but I'm sure it was on 138 00:07:04,800 --> 00:07:08,159 Speaker 1: some TV show. Former US Marine Infantry officer. That gets 139 00:07:08,200 --> 00:07:11,360 Speaker 1: my attention. Uh. So he's had quite uh the life 140 00:07:11,360 --> 00:07:13,520 Speaker 1: so far. Mick mulroy, thank you so much for joining 141 00:07:13,560 --> 00:07:16,480 Speaker 1: us here. So much geopolitical stuff to kind of talk 142 00:07:16,480 --> 00:07:19,560 Speaker 1: about here. First, you know, our Speaker of the House 143 00:07:19,800 --> 00:07:24,920 Speaker 1: went to Taiwan, had some meetings. Left Taiwan. I guess 144 00:07:24,960 --> 00:07:29,080 Speaker 1: that's good. What do you what's your takeaway? Well, great 145 00:07:29,120 --> 00:07:32,320 Speaker 1: to be with you guys. I think I think, quite frankly, 146 00:07:32,400 --> 00:07:36,480 Speaker 1: the Chinese are obviously very angered about this. I think 147 00:07:36,520 --> 00:07:40,520 Speaker 1: they way overstated the significance. I don't see how a 148 00:07:40,720 --> 00:07:44,680 Speaker 1: civilian leader with her staff going to do meetings would 149 00:07:44,760 --> 00:07:50,600 Speaker 1: challenger territory integrity. But they obviously are very irritated by it. 150 00:07:50,680 --> 00:07:53,920 Speaker 1: And it looks like they're going to conduct more substantial 151 00:07:53,920 --> 00:07:59,280 Speaker 1: military operations. And they've done awes and that includes essentially 152 00:07:59,560 --> 00:08:03,480 Speaker 1: surround ning the island of Taiwan uh in what looks 153 00:08:03,520 --> 00:08:06,160 Speaker 1: like it could be UH. An example of what they 154 00:08:06,240 --> 00:08:08,880 Speaker 1: could do if they were to do a blockade of Taiwan, 155 00:08:08,960 --> 00:08:12,560 Speaker 1: and that is that is very troubling and quite frankly, 156 00:08:12,880 --> 00:08:16,400 Speaker 1: because it's live fire and we have multiple naval assets 157 00:08:16,400 --> 00:08:19,720 Speaker 1: in the in the area, UH, the chances of escalation 158 00:08:19,760 --> 00:08:23,920 Speaker 1: are are pretty high. So how does the US military 159 00:08:23,960 --> 00:08:27,000 Speaker 1: deal with this? I know that well. It's been reported 160 00:08:27,000 --> 00:08:31,120 Speaker 1: that the Ronald Reagan Strike Group is in the area, 161 00:08:31,440 --> 00:08:34,840 Speaker 1: which consists of a naval aircraft carrier and then a 162 00:08:34,880 --> 00:08:40,600 Speaker 1: bunch of other big, powerful, um you know, weaponry. Would 163 00:08:40,720 --> 00:08:43,280 Speaker 1: would they not want to just back up while the 164 00:08:43,360 --> 00:08:47,920 Speaker 1: Chinese do these live fire exercises just in case something 165 00:08:47,960 --> 00:08:52,600 Speaker 1: goes wrong. Yes, essentially, that'd be correct. I mean they 166 00:08:52,600 --> 00:08:56,319 Speaker 1: have to do direct military to military coordination to ensure, 167 00:08:57,120 --> 00:08:59,400 Speaker 1: uh that we know where they're going to be firing 168 00:08:59,400 --> 00:09:03,840 Speaker 1: and operating, so that we don't obviously, um get in 169 00:09:03,880 --> 00:09:06,720 Speaker 1: that space. We won't want to put it as we're 170 00:09:06,760 --> 00:09:09,160 Speaker 1: backing up to let them do this, because that would 171 00:09:09,200 --> 00:09:12,760 Speaker 1: look I think in some ways as we're facilitating this 172 00:09:13,480 --> 00:09:21,320 Speaker 1: really um significantly enhanced military exercise that is not in 173 00:09:21,400 --> 00:09:23,920 Speaker 1: line with you know, keeping the peace so to speak, 174 00:09:24,240 --> 00:09:26,000 Speaker 1: So we don't we probably will not put it as 175 00:09:26,040 --> 00:09:30,160 Speaker 1: we're moving our assets, as you said, pretty significant out 176 00:09:30,160 --> 00:09:33,120 Speaker 1: of the area, but more coordinating to ensure that there's 177 00:09:33,160 --> 00:09:37,200 Speaker 1: no mistake that could you know, cause an eruption and 178 00:09:37,320 --> 00:09:41,040 Speaker 1: in a conflict. Right, So there's a simmering cold war 179 00:09:41,080 --> 00:09:43,000 Speaker 1: there in in Asia, but we've got a hot war 180 00:09:43,679 --> 00:09:47,280 Speaker 1: uh in Europe. How do you tie all that together, 181 00:09:47,480 --> 00:09:51,079 Speaker 1: what's going on in Ukraine with maybe this visit to Taiwan. 182 00:09:51,400 --> 00:09:55,120 Speaker 1: I mean, how do you view America's kind of foreign 183 00:09:55,200 --> 00:09:59,680 Speaker 1: policies that relates to some of these really hot areas well? 184 00:09:59,679 --> 00:10:01,199 Speaker 1: I did. It's a good question. I do think they 185 00:10:01,200 --> 00:10:05,120 Speaker 1: are connected because if you look at what the what 186 00:10:05,240 --> 00:10:07,080 Speaker 1: the what the partnership of the U S it's meant 187 00:10:07,080 --> 00:10:11,360 Speaker 1: to Ukraine uh in its fight against Russia means uh. 188 00:10:11,600 --> 00:10:13,440 Speaker 1: That is also what China is looking at when it 189 00:10:13,480 --> 00:10:16,920 Speaker 1: comes to the partnership between Taiwan and the United States, 190 00:10:16,960 --> 00:10:20,120 Speaker 1: which is by law, it's not just something we wanted 191 00:10:20,120 --> 00:10:23,040 Speaker 1: to do, like in the Ukraine, but the Taiwan. There's 192 00:10:23,040 --> 00:10:27,199 Speaker 1: a specific act that requires the United States to militarily 193 00:10:27,280 --> 00:10:30,840 Speaker 1: support Taiwan, not with troops, but with you know, advanced 194 00:10:30,840 --> 00:10:34,040 Speaker 1: weapons systems, by US intelligence sharing. Those are all things 195 00:10:34,080 --> 00:10:39,760 Speaker 1: we're doing for Ukraine, and it has essentially um allowed 196 00:10:39,800 --> 00:10:44,120 Speaker 1: the Ukrainians to first repel the assault on Kiev but 197 00:10:44,200 --> 00:10:46,960 Speaker 1: now come to almost virtual standstill on the Dome Boss 198 00:10:47,000 --> 00:10:49,200 Speaker 1: and down in the south what they look like they 199 00:10:49,240 --> 00:10:51,600 Speaker 1: could even take back the Key city or Kersan. So 200 00:10:52,120 --> 00:10:54,880 Speaker 1: I think that the Chinese are looking at just what 201 00:10:55,280 --> 00:10:58,600 Speaker 1: how significant being a military partner with the United States 202 00:10:58,880 --> 00:11:02,920 Speaker 1: is for Ukraine, and highly concerned about what that could 203 00:11:02,920 --> 00:11:07,600 Speaker 1: mean for Taiwan should they want to try to actually invade, 204 00:11:07,800 --> 00:11:12,120 Speaker 1: invade Taiwan and make it Yeah. I mean when when 205 00:11:12,120 --> 00:11:19,720 Speaker 1: when Pelosi sort of vowed America America support for Taiwan. 206 00:11:20,320 --> 00:11:23,800 Speaker 1: I and I instantly thought of the support that we 207 00:11:23,840 --> 00:11:28,040 Speaker 1: had for Afghanistan, which was clearly limited. Right, we will 208 00:11:28,040 --> 00:11:30,400 Speaker 1: support you, but not for longer than twenty years. And 209 00:11:30,400 --> 00:11:34,200 Speaker 1: then we're piecing out how how do we look right now? 210 00:11:34,280 --> 00:11:36,920 Speaker 1: Mick as a as a partner globally, I mean, when 211 00:11:36,960 --> 00:11:42,360 Speaker 1: you think of Afghanistan, Ukraine, Taiwan, so I think it's 212 00:11:42,400 --> 00:11:48,800 Speaker 1: a mixed bag. So Afghanistan I disagreed, as I did 213 00:11:48,840 --> 00:11:52,400 Speaker 1: most analysts on the news and most people I know, 214 00:11:52,480 --> 00:11:55,000 Speaker 1: with the complete withdrawal. Obviously we didn't need to have 215 00:11:55,040 --> 00:11:57,240 Speaker 1: a level that we've had in the past, but having 216 00:11:57,480 --> 00:11:59,280 Speaker 1: a residual force I think was the way to go. 217 00:11:59,559 --> 00:12:02,120 Speaker 1: It did indicate that we were not the partners that 218 00:12:02,200 --> 00:12:05,920 Speaker 1: we should have been in Afghanistan. But Ukraine, I think 219 00:12:06,040 --> 00:12:09,600 Speaker 1: it's a different story. Um, it shows that having being 220 00:12:09,600 --> 00:12:12,679 Speaker 1: a partner with the United States, and we've been considerable 221 00:12:12,720 --> 00:12:15,640 Speaker 1: as as you all know, amount of resources trying to 222 00:12:15,679 --> 00:12:18,520 Speaker 1: support them, I think that shows the United States being 223 00:12:18,520 --> 00:12:21,079 Speaker 1: a better partner. And I think that's what Taiwan is 224 00:12:21,080 --> 00:12:23,400 Speaker 1: looking at right now and what future partners you're going 225 00:12:23,440 --> 00:12:25,800 Speaker 1: to look at when it comes to whether they should 226 00:12:25,920 --> 00:12:29,960 Speaker 1: throw in with the United States. Um, we need to 227 00:12:30,080 --> 00:12:32,400 Speaker 1: we need to present, and we need to be the 228 00:12:32,480 --> 00:12:34,720 Speaker 1: partner that we would want and return. And I think 229 00:12:34,720 --> 00:12:36,760 Speaker 1: going forward we need to keep that in mind every 230 00:12:36,760 --> 00:12:41,079 Speaker 1: time we make a decision on whether to withdraw forces 231 00:12:41,160 --> 00:12:43,880 Speaker 1: or support or not support. Nick talked to us about 232 00:12:43,920 --> 00:12:48,760 Speaker 1: the strike in Afghanistan Monday night, reportedly taken out a 233 00:12:49,000 --> 00:12:52,840 Speaker 1: senior al Qaeda leader. Give us what that means. I mean, boy, 234 00:12:52,840 --> 00:12:57,520 Speaker 1: it's twenty years after years after nine eleven. For those 235 00:12:57,559 --> 00:13:00,120 Speaker 1: of us in New York, it's still very very fresh. 236 00:13:00,120 --> 00:13:02,760 Speaker 1: But boy, that's a it's a long time to be 237 00:13:02,840 --> 00:13:06,360 Speaker 1: hunting somebody. Yes, it is. And I think that actually 238 00:13:06,360 --> 00:13:09,760 Speaker 1: shows that if you do harm the United States, we 239 00:13:09,800 --> 00:13:13,439 Speaker 1: will find you eventually, and we will you will, you 240 00:13:13,480 --> 00:13:16,680 Speaker 1: will face justice. And in this form it was, it 241 00:13:16,800 --> 00:13:19,920 Speaker 1: was a strike, and you know, and and that too 242 00:13:20,000 --> 00:13:23,120 Speaker 1: is a mixed bag. It does show that, uh, my 243 00:13:23,200 --> 00:13:28,920 Speaker 1: former colleagues at the CIA can facilitate operations in Afghanistan 244 00:13:29,160 --> 00:13:32,600 Speaker 1: even after withdrawal. I think personally it was a masterclass 245 00:13:32,600 --> 00:13:34,719 Speaker 1: and how to do these operations. So my hats are 246 00:13:34,840 --> 00:13:38,000 Speaker 1: off to them. But it also indicates that the Taliban, 247 00:13:38,280 --> 00:13:42,520 Speaker 1: including some of its most senior leaders uh and specifically 248 00:13:42,520 --> 00:13:46,640 Speaker 1: Sara Ja Khani felt like they were totally okay with 249 00:13:46,679 --> 00:13:49,600 Speaker 1: facilitating the leader of al Quaina, one of the plotters 250 00:13:49,600 --> 00:13:52,800 Speaker 1: in eleven, living at his house likely or one of 251 00:13:52,800 --> 00:13:57,640 Speaker 1: his houses in Cobble. So it indicates that Afghanistan is 252 00:13:57,720 --> 00:14:00,720 Speaker 1: now and that and that giadist Inc. It's going to 253 00:14:00,760 --> 00:14:03,559 Speaker 1: be a safe haven in the future. So it shows 254 00:14:03,559 --> 00:14:05,720 Speaker 1: that we can get to you, but it also shows 255 00:14:05,800 --> 00:14:08,600 Speaker 1: that we have no partner in the Taala bomb. They're 256 00:14:08,640 --> 00:14:11,719 Speaker 1: not only not helping us on our counters effort, they're 257 00:14:11,720 --> 00:14:15,040 Speaker 1: actually facilitating Mick. Thank you so much for joining us. 258 00:14:15,400 --> 00:14:17,480 Speaker 1: We covered a lot of topics that we really appreciate, 259 00:14:17,520 --> 00:14:21,080 Speaker 1: getting the perspective, the value of your experience at c 260 00:14:21,240 --> 00:14:23,520 Speaker 1: i A, at the in the Marines and then obviously 261 00:14:23,560 --> 00:14:27,080 Speaker 1: in a secretary defense as a deputy assistant there mc mulroy, 262 00:14:27,200 --> 00:14:33,000 Speaker 1: co founder of the Lobo Institute. Alright, a couple of 263 00:14:33,040 --> 00:14:37,080 Speaker 1: our hack reporters from Bloomberg News not a Rogen Max 264 00:14:37,120 --> 00:14:40,920 Speaker 1: Abelson teamed up to take a look at Goldman SAXS 265 00:14:40,920 --> 00:14:43,600 Speaker 1: and you've got a big take story out that's really fascinating. 266 00:14:43,600 --> 00:14:47,560 Speaker 1: The headline they quit Goldman Star Trading team. Then it 267 00:14:47,640 --> 00:14:50,720 Speaker 1: raised alarms. Shree, not a rogen joins us here in 268 00:14:50,720 --> 00:14:53,760 Speaker 1: our Bloomberg inactive broker studio. He's from Bloomberg News. Shree, 269 00:14:53,880 --> 00:14:57,200 Speaker 1: You and Max did this great story. Uh A pretty 270 00:14:57,240 --> 00:15:00,320 Speaker 1: a couple of pretty profitable traders left Golden sacked. But 271 00:15:00,360 --> 00:15:04,720 Speaker 1: Goldman Sacks wasn't letting them go easily, did they Look, 272 00:15:04,760 --> 00:15:08,600 Speaker 1: It's it's very rare that Goldman Sachs suspects its own 273 00:15:08,800 --> 00:15:11,240 Speaker 1: of trying to steal code on their way out to 274 00:15:11,320 --> 00:15:13,240 Speaker 1: a hedge funds. So these are traders. They're not just 275 00:15:13,280 --> 00:15:16,720 Speaker 1: some guys slinging around corporate bonds. These are like from 276 00:15:16,760 --> 00:15:20,640 Speaker 1: the block, from their prop trading desk and their program desk. 277 00:15:20,680 --> 00:15:23,880 Speaker 1: What is it prop trading? That's the word. That's definitely 278 00:15:23,960 --> 00:15:27,480 Speaker 1: not stop trading, but it is the program trading desk. 279 00:15:27,520 --> 00:15:29,920 Speaker 1: And you know, effectively, what this group does is it's 280 00:15:29,920 --> 00:15:33,520 Speaker 1: only a group of about twenty people globally. They craftedgorythms 281 00:15:33,640 --> 00:15:36,240 Speaker 1: and they are trying to position themselves. You know, one 282 00:15:36,280 --> 00:15:38,000 Speaker 1: of the key remits of this desk is to do 283 00:15:38,080 --> 00:15:41,520 Speaker 1: these index rebalance trades. In the last few decades, passive 284 00:15:41,560 --> 00:15:45,400 Speaker 1: investing is really shot through the roof. Indexes frequently changed 285 00:15:45,400 --> 00:15:48,480 Speaker 1: their composition, and when that happens, you know that will 286 00:15:48,520 --> 00:15:50,800 Speaker 1: force changes in these et s and other passive funds 287 00:15:50,880 --> 00:15:53,680 Speaker 1: that have to mirror the indexes. That gives an opportunity 288 00:15:53,720 --> 00:15:55,880 Speaker 1: for sophisticated films like Goldman Sachs or a hedge fund 289 00:15:55,920 --> 00:15:59,000 Speaker 1: like Millennium Management to move ahead of that and know 290 00:15:59,120 --> 00:16:00,800 Speaker 1: that there's going to be a man coming down the 291 00:16:00,800 --> 00:16:03,160 Speaker 1: bike and make profits. And this desk, we say in 292 00:16:03,200 --> 00:16:05,800 Speaker 1: the story, conservative estimates in the last couple of years 293 00:16:05,800 --> 00:16:08,880 Speaker 1: made about seven million dollars each by itself may not 294 00:16:09,040 --> 00:16:11,440 Speaker 1: sound like a huge figure, but then think about the 295 00:16:11,480 --> 00:16:13,960 Speaker 1: fact that this disc is only about twenty odd people. 296 00:16:14,200 --> 00:16:17,760 Speaker 1: That makes it one of the most profitable desks at 297 00:16:17,840 --> 00:16:20,080 Speaker 1: least on a purpose and basis at Goldman Sex. It 298 00:16:20,160 --> 00:16:22,600 Speaker 1: does that sound like a huge figure to me. To me, 299 00:16:23,040 --> 00:16:25,520 Speaker 1: but here's the crux of the story. Three. The part 300 00:16:25,560 --> 00:16:30,920 Speaker 1: that gets me is these guys alleged that while they 301 00:16:30,920 --> 00:16:34,560 Speaker 1: were there and everything was going well, they were beloved 302 00:16:34,840 --> 00:16:40,040 Speaker 1: and um in in their reviews. By the way, employee 303 00:16:40,080 --> 00:16:42,240 Speaker 1: reviews are like the bane of my existence. But in 304 00:16:42,320 --> 00:16:47,280 Speaker 1: their reviews, manople and they were lauded as let me 305 00:16:47,320 --> 00:16:50,520 Speaker 1: find the exact words here. They were lauded in their 306 00:16:50,560 --> 00:16:56,480 Speaker 1: reviews as exceptional, impeccable worth work, ethic, outperforming culture carrier. 307 00:16:56,800 --> 00:17:01,360 Speaker 1: So these were ideal employees. Then the moment they left, 308 00:17:02,680 --> 00:17:08,080 Speaker 1: they allege that they were warned, Hey, we're essentially going 309 00:17:08,119 --> 00:17:11,280 Speaker 1: to make you guys look really bad. And Goldman Sachs 310 00:17:11,320 --> 00:17:13,720 Speaker 1: will tell you that the two things are not mutually exclusive. 311 00:17:13,840 --> 00:17:16,399 Speaker 1: You could be a great employee and you could do 312 00:17:16,520 --> 00:17:19,240 Speaker 1: some bad things on your way out. And they say 313 00:17:19,320 --> 00:17:21,880 Speaker 1: that when someone leaves a team like this, it's it's 314 00:17:21,960 --> 00:17:24,720 Speaker 1: normal to do sort of customary checks. And they did 315 00:17:24,800 --> 00:17:27,920 Speaker 1: customary checks and they found what they believe is something alarming. 316 00:17:28,160 --> 00:17:30,760 Speaker 1: They accused them of trying to of trying to gain 317 00:17:30,840 --> 00:17:34,400 Speaker 1: improper access to their systems. Ultimately, what is it all 318 00:17:34,480 --> 00:17:37,159 Speaker 1: boiled down to? They suspected, but couldn't really prove, that 319 00:17:37,240 --> 00:17:39,600 Speaker 1: these guys are trying to steal code on their way 320 00:17:39,640 --> 00:17:41,920 Speaker 1: to a hedge fund varish and fund management. In this case, 321 00:17:42,119 --> 00:17:45,080 Speaker 1: Let's assume their standing assumption is use that code base 322 00:17:45,240 --> 00:17:47,760 Speaker 1: as reference to build a new system from scratch, and 323 00:17:47,840 --> 00:17:51,840 Speaker 1: Goldman is very very protective of it. But these guys 324 00:17:51,840 --> 00:17:54,280 Speaker 1: have also come back swinging, and that's what you normally 325 00:17:54,320 --> 00:17:56,760 Speaker 1: don't see when you have this kind of acrimony, and 326 00:17:56,880 --> 00:17:59,520 Speaker 1: it does happen often. You guys know this that banks 327 00:17:59,520 --> 00:18:02,280 Speaker 1: and their tap when they're departing. It's not always the 328 00:18:02,280 --> 00:18:06,080 Speaker 1: most amicable situation, but you'd always plays out in private. 329 00:18:06,160 --> 00:18:08,600 Speaker 1: It rarely plays out in a way where both sides 330 00:18:08,600 --> 00:18:11,439 Speaker 1: are willing to take such a public stand, not willing 331 00:18:11,440 --> 00:18:13,840 Speaker 1: to back down convinced that the other side is wrong. 332 00:18:14,520 --> 00:18:16,639 Speaker 1: The two guys who left believed that Goldman is being 333 00:18:16,640 --> 00:18:18,600 Speaker 1: heavy handed and out to embarrass them and trying to 334 00:18:18,640 --> 00:18:21,320 Speaker 1: send a message to the team effectively, this is retaliation 335 00:18:21,400 --> 00:18:24,640 Speaker 1: for them finding a more lucrative opportunity, and Goldman saying, 336 00:18:24,680 --> 00:18:28,160 Speaker 1: hold on a second, this was serious misconduct and they 337 00:18:28,280 --> 00:18:31,080 Speaker 1: must be called out for that. So both of them 338 00:18:31,080 --> 00:18:33,520 Speaker 1: are standing their ground, but only one of them can 339 00:18:33,520 --> 00:18:36,280 Speaker 1: be right well. They also alleged that as they were leaving, 340 00:18:36,440 --> 00:18:39,800 Speaker 1: their managers were begging them to stay, and when that 341 00:18:39,840 --> 00:18:43,239 Speaker 1: didn't work, said, hey, I would be concerned about your 342 00:18:43,280 --> 00:18:46,080 Speaker 1: behavior in the past. So that's not about taking code 343 00:18:46,160 --> 00:18:47,879 Speaker 1: right now on your way at the door. It's like 344 00:18:48,080 --> 00:18:50,480 Speaker 1: we're gonna make up stuff that makes you look bad 345 00:18:50,600 --> 00:18:54,119 Speaker 1: in terms of past behavior by the By the way, 346 00:18:54,200 --> 00:18:56,720 Speaker 1: let me also ask you this. It seems to me, 347 00:18:57,119 --> 00:19:00,280 Speaker 1: from reading so many of these stories and hearing from 348 00:19:01,280 --> 00:19:04,840 Speaker 1: sources in the industry that the way it's currently set 349 00:19:04,960 --> 00:19:09,800 Speaker 1: up um banks have the advantage because all of these disputes, 350 00:19:10,200 --> 00:19:12,840 Speaker 1: they don't go to court, they go to arbitration, and 351 00:19:13,040 --> 00:19:16,960 Speaker 1: arbitration is almost always, you know, a good friend of 352 00:19:17,000 --> 00:19:19,159 Speaker 1: the bank rather than the employee. Is that is that 353 00:19:19,200 --> 00:19:21,440 Speaker 1: the right way to see it? Historically, that's always been 354 00:19:21,440 --> 00:19:24,879 Speaker 1: true when when when employees are dragged through the arbitration process, 355 00:19:24,920 --> 00:19:28,760 Speaker 1: it is really difficult for for for an individual to 356 00:19:28,760 --> 00:19:31,520 Speaker 1: come out on top. And that's partly how a lot 357 00:19:31,560 --> 00:19:35,520 Speaker 1: of these employment contracts are written. Banks are extremely protective 358 00:19:35,520 --> 00:19:37,600 Speaker 1: of their talent. They do realize that there are better 359 00:19:37,600 --> 00:19:39,800 Speaker 1: opportunities on the bi set, that people are willing to 360 00:19:39,840 --> 00:19:42,560 Speaker 1: pay more and they have to do more, and therefore 361 00:19:42,640 --> 00:19:46,440 Speaker 1: these contracts are written with such great latitude that even 362 00:19:46,480 --> 00:19:49,560 Speaker 1: if you sneeze to their displeasure, they may ding you 363 00:19:49,680 --> 00:19:51,920 Speaker 1: for that. And that's why you see in most occasions 364 00:19:51,960 --> 00:19:55,360 Speaker 1: the banks and the institutions always come out on top. Sure, 365 00:19:55,359 --> 00:19:57,960 Speaker 1: you and Max did some awesome reporting here, what is 366 00:19:58,000 --> 00:20:00,760 Speaker 1: the expectation how this may play out, this is this 367 00:20:00,800 --> 00:20:02,840 Speaker 1: is a settlement type of situation. Are they going to 368 00:20:02,880 --> 00:20:05,320 Speaker 1: go to court? I mean any sense to this stage 369 00:20:05,640 --> 00:20:07,760 Speaker 1: as things stand, and we talked about it in the story, 370 00:20:08,200 --> 00:20:10,800 Speaker 1: the lawyer for the two people who's to folks are 371 00:20:10,880 --> 00:20:13,399 Speaker 1: leaving for the Hedge Fund is actually saying what Goldman 372 00:20:13,440 --> 00:20:17,120 Speaker 1: has done hurts their reputation is defammetry, and all litigation 373 00:20:17,160 --> 00:20:19,760 Speaker 1: options are open. Goldman doesn't come out and say that, 374 00:20:19,800 --> 00:20:21,840 Speaker 1: but one has to assume that they would be thinking 375 00:20:22,320 --> 00:20:24,800 Speaker 1: along the same lines because they feel these guys didn't 376 00:20:24,800 --> 00:20:28,640 Speaker 1: cooperate fully with their investigation. They are still very much 377 00:20:29,080 --> 00:20:31,440 Speaker 1: planning to go join this Hatch Fund, which by the way, 378 00:20:31,480 --> 00:20:33,639 Speaker 1: wouldn't be till much later in the year because not 379 00:20:33,760 --> 00:20:35,600 Speaker 1: only did they have to have a three month notice, 380 00:20:35,600 --> 00:20:38,680 Speaker 1: spirit on top of that, Goldman insists that even the 381 00:20:38,760 --> 00:20:41,800 Speaker 1: junior employees on the desk and somewhat mid level vice 382 00:20:41,840 --> 00:20:44,400 Speaker 1: presidents have a six month non compete. That's a nine 383 00:20:44,400 --> 00:20:49,480 Speaker 1: month gestation period, which is pretty remarkable, especially for a bank. Alright, 384 00:20:49,520 --> 00:20:52,240 Speaker 1: three some good good stuff. As I'm always jealous of 385 00:20:52,240 --> 00:20:54,880 Speaker 1: people that get gardening waves because you know that it's 386 00:20:54,920 --> 00:20:56,800 Speaker 1: always worked out so that they get comp and stage. 387 00:20:56,840 --> 00:20:58,840 Speaker 1: It's like they're not getting paid. It's not like these 388 00:20:58,840 --> 00:21:01,880 Speaker 1: guys are CouchSurfing and meantime right they're doing they've done 389 00:21:01,920 --> 00:21:04,080 Speaker 1: well enough that they can spend their gardening leave in 390 00:21:04,119 --> 00:21:06,640 Speaker 1: st Bart's. Absolutely, it's no big deal. And that's kind 391 00:21:06,640 --> 00:21:09,440 Speaker 1: of how I think most players play it out. Sure 392 00:21:09,600 --> 00:21:13,399 Speaker 1: not a rogen Max Abelson with this fantastic big take story. 393 00:21:13,440 --> 00:21:15,280 Speaker 1: I highly recommend you take a look at that Bloomberg 394 00:21:15,320 --> 00:21:17,600 Speaker 1: dot Com slash Big Take or and I Big Take 395 00:21:18,840 --> 00:21:22,560 Speaker 1: Ni Space Big Take right, just and I Big Take 396 00:21:23,000 --> 00:21:27,400 Speaker 1: and I Big Take Good Stuff Street. Thanks so much. 397 00:21:28,040 --> 00:21:29,600 Speaker 1: Let's get right to our next guest, because he's got 398 00:21:29,600 --> 00:21:32,320 Speaker 1: a awesome name. I just think it's cool, Red Bottle. Uh. 399 00:21:32,440 --> 00:21:35,320 Speaker 1: He's a founder principal of Public Private Strategies. Hey, Rett, 400 00:21:35,359 --> 00:21:38,120 Speaker 1: I want to talk to you about this Chips Act 401 00:21:38,119 --> 00:21:40,240 Speaker 1: because I remember at the beginning of this pandemic, when 402 00:21:40,240 --> 00:21:44,680 Speaker 1: this whole Mike semiconductor chip thing became something that we 403 00:21:44,720 --> 00:21:47,719 Speaker 1: talked about here on Bloomberg Radio, that people are saying, oh, 404 00:21:47,720 --> 00:21:50,879 Speaker 1: the solution is to ensure this stuff, and there you go, 405 00:21:50,960 --> 00:21:53,440 Speaker 1: we have the Chips Act. A little bit is that 406 00:21:53,480 --> 00:21:55,520 Speaker 1: does that get us where we need to be. Is 407 00:21:55,520 --> 00:22:00,320 Speaker 1: this a small first step? How do we think about this? Well, look, 408 00:22:00,359 --> 00:22:03,200 Speaker 1: as I will forego, they'll gone with the wind jokes, um. 409 00:22:03,200 --> 00:22:06,760 Speaker 1: But this, you know, this law we we just learned 410 00:22:06,760 --> 00:22:09,359 Speaker 1: today that President Biden will actually signed into law this 411 00:22:09,480 --> 00:22:13,000 Speaker 1: upcoming Tuesday, the Chips Act. It's a really good start, um. 412 00:22:13,080 --> 00:22:15,240 Speaker 1: And really, when you think about the Biden economic agenda, 413 00:22:15,320 --> 00:22:16,760 Speaker 1: you have to think about all the pieces. You have 414 00:22:16,800 --> 00:22:19,399 Speaker 1: to think about the American Rescue Plan, which was pasted 415 00:22:19,440 --> 00:22:22,320 Speaker 1: earlier this year, the Bipartisan Infrastructure Deal, and now we 416 00:22:22,359 --> 00:22:25,080 Speaker 1: have the Chips um Act, which which will be signed 417 00:22:25,119 --> 00:22:27,720 Speaker 1: in law on Tuesday. And it's a really important part 418 00:22:27,800 --> 00:22:29,919 Speaker 1: of not only bringing these jobs home, but it's an 419 00:22:29,920 --> 00:22:34,720 Speaker 1: important piece for American competitiveness in national security. The reality is, 420 00:22:34,960 --> 00:22:37,959 Speaker 1: over the past few decades, America has has been losing 421 00:22:37,960 --> 00:22:40,080 Speaker 1: sort of the race to make these sorts of things 422 00:22:40,080 --> 00:22:43,879 Speaker 1: at home. And there's the semiconductor The chips have become 423 00:22:43,920 --> 00:22:46,560 Speaker 1: such an important part of our daily live and so 424 00:22:46,880 --> 00:22:49,119 Speaker 1: this is really a good start making an investment here 425 00:22:49,160 --> 00:22:51,879 Speaker 1: at home, um, that that we really believe will create 426 00:22:52,200 --> 00:22:53,800 Speaker 1: you know, good jobs here at home as well as 427 00:22:53,840 --> 00:22:58,520 Speaker 1: make America more competitive. So how can listeners reat um, 428 00:22:58,680 --> 00:23:06,720 Speaker 1: you know, investors get involved with public private partnerships the best. Yeah. Look, 429 00:23:06,760 --> 00:23:08,639 Speaker 1: I mean I think you know, learning about what's in 430 00:23:08,680 --> 00:23:11,800 Speaker 1: the chip SACKED, I think is is really important because 431 00:23:11,840 --> 00:23:15,480 Speaker 1: it's going to have a large impact on the market. Uh. 432 00:23:15,720 --> 00:23:18,199 Speaker 1: You know everything uh that that we kind of do 433 00:23:18,240 --> 00:23:20,400 Speaker 1: in our daily lives, whether it's the car we drives 434 00:23:20,520 --> 00:23:23,360 Speaker 1: or you know, obviously the computers and the phones we're using. Um, 435 00:23:23,400 --> 00:23:26,359 Speaker 1: all of those things rely upon you know, these important 436 00:23:26,400 --> 00:23:29,119 Speaker 1: chips UM. And so you know, as the law begins 437 00:23:29,119 --> 00:23:31,840 Speaker 1: to roll out, I think we'll we'll see some guidance 438 00:23:31,920 --> 00:23:34,440 Speaker 1: come out from the government about what that would look like. 439 00:23:34,720 --> 00:23:37,879 Speaker 1: There's a number of companies, obviously, you know, large manufacturers 440 00:23:37,880 --> 00:23:41,040 Speaker 1: who already sort of making plans around sort of these investments. 441 00:23:41,240 --> 00:23:43,919 Speaker 1: But I think we'll see ripple effects as well for 442 00:23:43,920 --> 00:23:46,720 Speaker 1: for small companies and investors who are looking at it. 443 00:23:46,760 --> 00:23:48,720 Speaker 1: And so, you know, we're at the piece now, we're 444 00:23:48,760 --> 00:23:51,760 Speaker 1: sort of getting the implementation of the law is where 445 00:23:51,760 --> 00:23:54,399 Speaker 1: we are. So folcus just continue to watch and monitor 446 00:23:54,440 --> 00:23:56,840 Speaker 1: and I think that that will allow them to sort 447 00:23:56,840 --> 00:23:59,880 Speaker 1: of plan appropriately as they're they're mapping their strategy out 448 00:23:59,880 --> 00:24:02,439 Speaker 1: for how to invest in how to be integrated in 449 00:24:02,640 --> 00:24:06,600 Speaker 1: But we sort of investment. But what public I mean, um, 450 00:24:06,640 --> 00:24:11,199 Speaker 1: what public private strategies? Uh, what are you doing at 451 00:24:11,200 --> 00:24:14,040 Speaker 1: public private strategies prior to the Chips Act? You're you're 452 00:24:14,080 --> 00:24:16,679 Speaker 1: doing public private investment already, right, So what do you 453 00:24:16,680 --> 00:24:18,280 Speaker 1: think that the best opportunities are that we can get 454 00:24:18,320 --> 00:24:22,280 Speaker 1: into now? Yeah? So look, we uh you know, we 455 00:24:22,320 --> 00:24:25,160 Speaker 1: work with business leaders to get them engaged in public policy. Right, 456 00:24:25,280 --> 00:24:29,280 Speaker 1: and so the idea behind our organization is making sure that, 457 00:24:29,320 --> 00:24:31,520 Speaker 1: you know, business both large and small, has a voice 458 00:24:31,640 --> 00:24:34,639 Speaker 1: the public policy table. And I think you know, increasingly 459 00:24:34,680 --> 00:24:38,239 Speaker 1: as we've been focused on economic recovery. Um, you know, 460 00:24:38,640 --> 00:24:41,080 Speaker 1: business has played sort of a crucial role um in 461 00:24:41,160 --> 00:24:44,880 Speaker 1: particularly in the policy and the political process. We're seeing that, 462 00:24:45,320 --> 00:24:47,640 Speaker 1: you know, business has an outside voice in this moment 463 00:24:47,680 --> 00:24:52,000 Speaker 1: as people are rethinking the importance of institutions and so, uh, 464 00:24:52,080 --> 00:24:54,560 Speaker 1: you know, we are we are working with business leaders 465 00:24:54,560 --> 00:24:57,240 Speaker 1: to make sure that they're shaping not only the passage 466 00:24:57,240 --> 00:25:00,000 Speaker 1: of laws like the Chip SACK, but also the implementation 467 00:25:00,080 --> 00:25:03,840 Speaker 1: of what that looks like. So ht it. You know, 468 00:25:04,080 --> 00:25:07,440 Speaker 1: Eventually this comes down to economics, and a US made 469 00:25:07,480 --> 00:25:11,080 Speaker 1: chip will never be economically financially competitive with an Asian 470 00:25:11,359 --> 00:25:13,679 Speaker 1: made chip. Is that is that the assumption, and so 471 00:25:13,760 --> 00:25:21,640 Speaker 1: therefore this is a long term public private kind of situation. Yeah. 472 00:25:21,720 --> 00:25:24,640 Speaker 1: I don't know if that's necessarily the only assumption. I mean, 473 00:25:24,680 --> 00:25:28,200 Speaker 1: I think that the reality is is that um uh, 474 00:25:28,240 --> 00:25:30,159 Speaker 1: you know, we used to do quite a bit of 475 00:25:30,200 --> 00:25:33,440 Speaker 1: this at home, this sort of manufacturing around forty percent 476 00:25:33,480 --> 00:25:35,320 Speaker 1: in previous decades, and that has gone down to ten. 477 00:25:36,119 --> 00:25:39,040 Speaker 1: I think what this does is it allows a few 478 00:25:39,080 --> 00:25:41,720 Speaker 1: sort of things. One is it it allows companies to 479 00:25:41,760 --> 00:25:45,680 Speaker 1: take advantage of investment in a in a smart way. Um. 480 00:25:45,760 --> 00:25:49,880 Speaker 1: And I think it Uh, it creates good paying jobs, right, 481 00:25:49,920 --> 00:25:51,800 Speaker 1: these are jobs that are going to be created to 482 00:25:51,840 --> 00:25:54,119 Speaker 1: sort of create these chips here at home. Um. But 483 00:25:54,240 --> 00:25:57,440 Speaker 1: it also has national security implications because of the important 484 00:25:57,520 --> 00:26:00,560 Speaker 1: role that these chips play. And so I think, um, 485 00:26:00,600 --> 00:26:03,840 Speaker 1: you know, in the immediate uh, it sends all the 486 00:26:03,920 --> 00:26:06,720 Speaker 1: right signals to the investor community about sort of the 487 00:26:06,800 --> 00:26:09,080 Speaker 1: sort of investments we want to make here at home. 488 00:26:09,320 --> 00:26:11,200 Speaker 1: And in the long term, I think it has a 489 00:26:11,320 --> 00:26:15,240 Speaker 1: long term sort of tangible benefits for jobs and communities 490 00:26:15,320 --> 00:26:18,800 Speaker 1: as well. I wonder how I see that you've worked 491 00:26:19,200 --> 00:26:23,800 Speaker 1: not only for the who's who of the Democratic Party Obama, Clinton, Biden, 492 00:26:23,840 --> 00:26:27,639 Speaker 1: but also for Republican Governor Ald Schwarzenegger. And I was 493 00:26:27,680 --> 00:26:32,679 Speaker 1: thinking it's got to be important, especially on the private side, 494 00:26:33,240 --> 00:26:37,040 Speaker 1: that these um deals are kind of bipartisan or or 495 00:26:37,280 --> 00:26:40,280 Speaker 1: or are not partisan at least, Right, how do you 496 00:26:40,320 --> 00:26:42,560 Speaker 1: deal with that? Because, um, when I put my money 497 00:26:42,560 --> 00:26:45,359 Speaker 1: into something that's gonna last for ten or twenty years, 498 00:26:45,520 --> 00:26:50,920 Speaker 1: obviously they're gonna be different administrations in and out. Yeah. Look, 499 00:26:51,040 --> 00:26:53,479 Speaker 1: I think these sort of long term investments sort of 500 00:26:53,520 --> 00:26:56,520 Speaker 1: lived beyond politics. And I think, you know, we we're 501 00:26:56,560 --> 00:26:58,720 Speaker 1: living in as I don't need to describe to you all, 502 00:26:58,880 --> 00:27:01,720 Speaker 1: you know, in a hyperpartisan environment in Washington right now. 503 00:27:02,000 --> 00:27:04,280 Speaker 1: But the reality is this, this actually, uh you know, 504 00:27:04,320 --> 00:27:06,080 Speaker 1: it took a while to get negotiated and find the 505 00:27:06,160 --> 00:27:09,480 Speaker 1: right assentives, but this is another bipartisan you know, piece 506 00:27:09,520 --> 00:27:11,879 Speaker 1: of legislation. So we saw a lot of Democratic and 507 00:27:11,960 --> 00:27:14,960 Speaker 1: Republicans support for this. I think you see on the fringe, 508 00:27:15,200 --> 00:27:17,359 Speaker 1: you know size not a lot of uh, not a 509 00:27:17,400 --> 00:27:19,520 Speaker 1: lot of interest in something like this. But you know, 510 00:27:19,560 --> 00:27:22,960 Speaker 1: for folks who are making you know, long term investments, 511 00:27:23,280 --> 00:27:26,480 Speaker 1: I think this is the sort of piece of legislation 512 00:27:26,520 --> 00:27:28,480 Speaker 1: we want to see because it sends all of the 513 00:27:28,560 --> 00:27:30,680 Speaker 1: right signals, I think, to the business community into the 514 00:27:30,720 --> 00:27:33,480 Speaker 1: market about where we need to be investing. UM. Similarly, 515 00:27:33,520 --> 00:27:35,960 Speaker 1: we saw the same thing with the bipartisan infrastructure deal. 516 00:27:36,240 --> 00:27:38,000 Speaker 1: You know, that was one of the largest investments in 517 00:27:38,040 --> 00:27:41,000 Speaker 1: our country. So you know, there are signs, there are 518 00:27:41,040 --> 00:27:44,560 Speaker 1: signs out there that bipartisanship can't happen in the legislative process. 519 00:27:44,600 --> 00:27:46,840 Speaker 1: And I think, you know, for folks who are thinking 520 00:27:46,840 --> 00:27:51,320 Speaker 1: about investment strategies, pieces of laws like this are our 521 00:27:51,359 --> 00:27:54,600 Speaker 1: important signals. Alright, great stuff, Red really appreciate you taking 522 00:27:54,600 --> 00:27:58,720 Speaker 1: the time. Rhet Buddle, founder and principle Public Private Strategy 523 00:27:58,960 --> 00:28:04,639 Speaker 1: has also senior fellow Aspect Institute. Now we're gonna talk 524 00:28:05,560 --> 00:28:10,439 Speaker 1: about emerging markets here because the hot topic of what 525 00:28:10,640 --> 00:28:14,720 Speaker 1: happens to other economies when the dollar rises, Well, it's 526 00:28:14,720 --> 00:28:17,000 Speaker 1: a study that we can see right before our very eyes, 527 00:28:17,119 --> 00:28:21,160 Speaker 1: incredible dollar strength. UM the Fed on a hiking uh 528 00:28:21,560 --> 00:28:25,600 Speaker 1: bent right now. That looks set to continue. And UM 529 00:28:25,640 --> 00:28:28,840 Speaker 1: it's had a real effect already on emerging market assets. 530 00:28:28,880 --> 00:28:30,960 Speaker 1: Nick stap Miller is in the studio with us. He's 531 00:28:30,960 --> 00:28:34,200 Speaker 1: an emerging market strategist, the director Emerging Market Strategy at 532 00:28:34,240 --> 00:28:38,760 Speaker 1: Medley Advisors. So, nick uh, this is just such a 533 00:28:38,800 --> 00:28:44,440 Speaker 1: fascinating um uh thing to watch, phenomena to watch, and 534 00:28:44,520 --> 00:28:46,959 Speaker 1: it doesn't look like it's going to change anytime soon, right, 535 00:28:47,040 --> 00:28:51,640 Speaker 1: this dollar strength. Yeah, and the problem that emerging markets 536 00:28:51,680 --> 00:28:54,800 Speaker 1: have from that is, of course stronger dollar means a 537 00:28:54,800 --> 00:28:58,920 Speaker 1: weaker local currency and then the cost of imported goods 538 00:28:58,960 --> 00:29:01,600 Speaker 1: in the local current sea and everywhere from Brazil to 539 00:29:01,680 --> 00:29:07,080 Speaker 1: South Africa to Poland and their dollar debt, right, the 540 00:29:07,120 --> 00:29:10,040 Speaker 1: dollar debt, But that's mostly a corporate issue. A lot 541 00:29:10,080 --> 00:29:13,440 Speaker 1: of the larger emerging markets have much less effects that 542 00:29:13,600 --> 00:29:16,360 Speaker 1: at the sovereign level than they used to. That's really 543 00:29:16,400 --> 00:29:18,160 Speaker 1: more of a friends here at the Sri Lanka's Sub 544 00:29:18,200 --> 00:29:20,760 Speaker 1: Saharan Africa that are really getting hit on the sovereign 545 00:29:20,760 --> 00:29:22,960 Speaker 1: debt side. Are we still talking about bricks? Is that 546 00:29:23,040 --> 00:29:27,760 Speaker 1: Jim O'Neil's term, right, Brazil, Russia, India, China and Sri Lanka. 547 00:29:28,680 --> 00:29:30,920 Speaker 1: I don't know what the ass is for. Well, it's 548 00:29:30,960 --> 00:29:32,800 Speaker 1: kind of split up because you know, of course, China 549 00:29:33,360 --> 00:29:35,600 Speaker 1: has sort of taken a seat at the table among 550 00:29:35,640 --> 00:29:38,280 Speaker 1: the major economies. Russia's more or less cut out of 551 00:29:38,280 --> 00:29:42,960 Speaker 1: the global financial system. UH, India is still developing and 552 00:29:42,960 --> 00:29:45,840 Speaker 1: growing pretty fast. In Brazil, you know, ever since Bricks 553 00:29:45,920 --> 00:29:48,360 Speaker 1: came out, has really been a massive disappointment for a 554 00:29:48,400 --> 00:29:52,240 Speaker 1: variety of structural reasons. They've just undershot any sort of 555 00:29:52,280 --> 00:29:55,560 Speaker 1: expectations or hopes for the last fifteen twenty years. Want 556 00:29:55,600 --> 00:29:59,640 Speaker 1: you mentioned Russia? Sart you mentioned Russia? Give us a sense. 557 00:29:59,680 --> 00:30:02,440 Speaker 1: Now all we read about is the civilians, is all 558 00:30:02,720 --> 00:30:05,360 Speaker 1: the sanctions and so on and so forth. What does 559 00:30:05,400 --> 00:30:08,400 Speaker 1: it mean for you as an emerging markets investor? Can 560 00:30:08,440 --> 00:30:12,080 Speaker 1: you put money into Russia? Do you even think about it? Well? No, 561 00:30:12,240 --> 00:30:14,640 Speaker 1: it's changed a lot. Uh And you know, one of 562 00:30:14,640 --> 00:30:17,720 Speaker 1: the countries I covered pretty closely is Russia. And you know, 563 00:30:17,800 --> 00:30:20,600 Speaker 1: eight ten months ago people are actually playing the currency, 564 00:30:20,600 --> 00:30:23,080 Speaker 1: playing rates there. There was an interesting rate hikes story 565 00:30:23,120 --> 00:30:26,280 Speaker 1: at the Central Bank and then that all just disappeared overnight. 566 00:30:26,640 --> 00:30:30,000 Speaker 1: But there's huge macroeconomic implications for what they're doing because 567 00:30:30,000 --> 00:30:33,120 Speaker 1: they're still exporting energy and of course the geopolitics around 568 00:30:33,160 --> 00:30:36,840 Speaker 1: the energy, but they're also accumulating record current account surpluses, 569 00:30:37,480 --> 00:30:39,520 Speaker 1: and that money is not safe with the store in 570 00:30:39,600 --> 00:30:42,160 Speaker 1: dollars or euros so they're looking for alternative ways to 571 00:30:42,200 --> 00:30:44,000 Speaker 1: deploy that kind of point. I mean, where do they 572 00:30:44,000 --> 00:30:48,280 Speaker 1: put it? Well, the only options we really have are 573 00:30:48,480 --> 00:30:52,800 Speaker 1: no No G seven current So basically, I mean in theory, 574 00:30:52,840 --> 00:30:55,920 Speaker 1: gasprom Bank can hold dollars in Euros, but it's always 575 00:30:56,000 --> 00:30:59,240 Speaker 1: at risk of being sanctioned any day. So the Chinese 576 00:30:59,280 --> 00:31:01,760 Speaker 1: you want is one option, and you've started to hear 577 00:31:01,800 --> 00:31:05,000 Speaker 1: some discussion from Russian officials that they would like to 578 00:31:05,040 --> 00:31:07,760 Speaker 1: invest in what they call the currencies of quote unquote 579 00:31:07,760 --> 00:31:11,600 Speaker 1: friendly current countries. UM Gold is another option, but the 580 00:31:11,640 --> 00:31:13,520 Speaker 1: market is probably too small. I mean, you know, we're 581 00:31:13,520 --> 00:31:17,760 Speaker 1: talking about like twenty billion dollars a month UM, and 582 00:31:18,160 --> 00:31:21,240 Speaker 1: more recently they've actually announced a twenty billion dollar nuclear 583 00:31:21,280 --> 00:31:24,760 Speaker 1: deal to build a nuclear power station in Turkey. So 584 00:31:25,040 --> 00:31:26,640 Speaker 1: you know that's not enough. They can't build one of 585 00:31:26,640 --> 00:31:28,680 Speaker 1: those every months. But you find a country here and 586 00:31:28,720 --> 00:31:30,360 Speaker 1: there that takes some money and it starts to add 587 00:31:30,440 --> 00:31:35,440 Speaker 1: up and I guess right. Uh, My director Wan Torres 588 00:31:36,160 --> 00:31:39,080 Speaker 1: reminds me that the S is for South Africa and 589 00:31:39,440 --> 00:31:42,320 Speaker 1: UM with with respect to the other countries in the 590 00:31:42,360 --> 00:31:44,480 Speaker 1: bricks and and other emerging markets that you follow, what 591 00:31:44,560 --> 00:31:48,600 Speaker 1: are their central banks do to fight inflation when they're 592 00:31:48,640 --> 00:31:51,400 Speaker 1: importing so much from the stronger dollar. I mean, are 593 00:31:51,440 --> 00:31:54,360 Speaker 1: they just in a rush to raise rates as faster 594 00:31:54,560 --> 00:31:58,040 Speaker 1: faster than the Fed? Yeah? Well, you know the story 595 00:31:58,080 --> 00:32:00,360 Speaker 1: I think last year and this year is some of 596 00:32:00,400 --> 00:32:04,800 Speaker 1: the emerging markets, UM, Russia actually was in this boat. Chile, Brazil, 597 00:32:05,280 --> 00:32:09,320 Speaker 1: UM were much more aggressive and starting the rate hiking cycle. 598 00:32:09,560 --> 00:32:11,800 Speaker 1: And a lot of these countries, I mean, Russia has 599 00:32:11,840 --> 00:32:14,720 Speaker 1: been tossed out of the equation for a variety of reasons, 600 00:32:14,760 --> 00:32:19,440 Speaker 1: but Chile, Brazil, Hungary, UH, and a couple of others 601 00:32:19,640 --> 00:32:22,360 Speaker 1: have kind of reached close to the peak of their cycle. 602 00:32:22,400 --> 00:32:24,640 Speaker 1: Whereas the Fed, as we know, you know, they say 603 00:32:24,640 --> 00:32:27,400 Speaker 1: they still have quite a bit more to go. And 604 00:32:27,440 --> 00:32:29,480 Speaker 1: now they have this double with me because they have 605 00:32:30,040 --> 00:32:34,160 Speaker 1: essentially slowed growth through this massive hiking cycle in these 606 00:32:34,160 --> 00:32:38,400 Speaker 1: central banks in emerging markets, and now they're starting to 607 00:32:38,400 --> 00:32:42,040 Speaker 1: worry about growth. But the FED is still hiking, which 608 00:32:42,080 --> 00:32:46,239 Speaker 1: has implications for the global economy, global dollar liquidity. So 609 00:32:46,280 --> 00:32:50,360 Speaker 1: they're basically getting double tightening, uh, you know, into the slowdown, 610 00:32:50,360 --> 00:32:52,360 Speaker 1: and they don't really have as much room to cushion 611 00:32:52,400 --> 00:32:55,280 Speaker 1: their economies. Alright, staying a little bit on the Russia 612 00:32:55,280 --> 00:32:58,120 Speaker 1: things that just fascinates me. I mean for your emerging 613 00:32:58,160 --> 00:33:02,480 Speaker 1: markets in Eastern Europe, Poland, Hungry, you know, and obviously 614 00:33:02,720 --> 00:33:05,160 Speaker 1: we we talk a lot about Germany. But for some 615 00:33:05,200 --> 00:33:07,560 Speaker 1: of these emerging markets, how bad is it going to 616 00:33:07,680 --> 00:33:11,840 Speaker 1: be this winter? Are the are the markets telling you that, boy, 617 00:33:11,920 --> 00:33:13,840 Speaker 1: it's gonna be tough to to be a you know 618 00:33:14,000 --> 00:33:17,400 Speaker 1: need some of these Eastern European economies come this winter. Yeah, 619 00:33:17,480 --> 00:33:20,320 Speaker 1: Well they have you know, two risks here. One of 620 00:33:20,320 --> 00:33:24,400 Speaker 1: course is the fact that Poland, check and Hungary are 621 00:33:24,840 --> 00:33:30,240 Speaker 1: massive trading economies. Exports are like their gdp UM, so 622 00:33:30,560 --> 00:33:34,160 Speaker 1: you know, huge trade there and slowing Germany is slowing 623 00:33:34,160 --> 00:33:37,040 Speaker 1: Western Europe, that's their primary export market is going to 624 00:33:37,160 --> 00:33:40,040 Speaker 1: hit activity. But then also you have the gas dependence, 625 00:33:40,080 --> 00:33:42,200 Speaker 1: and now Poland has done a lot to lower its 626 00:33:42,200 --> 00:33:44,800 Speaker 1: dependence on Russia over the last few years, but they 627 00:33:44,800 --> 00:33:47,800 Speaker 1: still buy a lot from Germany and who buys from Russia. 628 00:33:48,720 --> 00:33:51,920 Speaker 1: Hungary is the really fascinating one because they have actually, 629 00:33:52,440 --> 00:33:55,280 Speaker 1: uh they sent the Foreign Minister to Moscow to inca 630 00:33:55,360 --> 00:33:58,720 Speaker 1: deal to buy more gas via turk Stream. So it 631 00:33:58,720 --> 00:34:01,160 Speaker 1: basically goes over the Black Sea through Turkey and then 632 00:34:01,240 --> 00:34:04,680 Speaker 1: up across Serbia and into Hungary. Now, if you get 633 00:34:04,680 --> 00:34:07,880 Speaker 1: a scenario where the Russians cut gas to Western Europe, 634 00:34:07,880 --> 00:34:10,120 Speaker 1: you know they cut nord Stream one and then the 635 00:34:10,200 --> 00:34:13,560 Speaker 1: Hungarians are getting gas through this pipeline, I cannot imagine 636 00:34:13,560 --> 00:34:15,799 Speaker 1: the Europeans are going to be happy about that one bit. 637 00:34:15,960 --> 00:34:18,120 Speaker 1: Yea yeah, I tell you this winter, Matt is going 638 00:34:18,160 --> 00:34:21,080 Speaker 1: to be just a real, real issue for all of 639 00:34:21,120 --> 00:34:23,640 Speaker 1: your Hey, Nick, thanks so much for joining us here. 640 00:34:23,719 --> 00:34:27,480 Speaker 1: Nick stat Miller, Director Merger market Strategy for Medley Global Visors, 641 00:34:27,600 --> 00:34:30,360 Speaker 1: joining us live in our Bloomberg and Actor Broker studio. 642 00:34:33,200 --> 00:34:36,279 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 643 00:34:36,320 --> 00:34:40,120 Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever 644 00:34:40,200 --> 00:34:43,840 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 645 00:34:44,120 --> 00:34:48,120 Speaker 1: at Matt Miller on false Sweeney, I'm on Twitter at 646 00:34:48,160 --> 00:34:51,000 Speaker 1: pt Sweeney. Before the podcast, you can always catch us 647 00:34:51,040 --> 00:34:52,439 Speaker 1: worldwide at Bloomberg Radio.