WEBVTT - Surveillance: US Inflation with Dudley

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<v Speaker 1>This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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<v Speaker 1>with Jonathan Farrow and Lisa Abramowitz. Join us each day

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<v Speaker 1>the Bloomberg Terminal, and the Bloomberg Business App. William Dudley

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<v Speaker 1>joining us nowt the former New York Fed president and

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<v Speaker 1>Bloomberg opinion columnists Phil I got eight ways to go here.

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<v Speaker 1>I'll stand script on inflation and McKee. I'm sure we'll

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<v Speaker 1>have smarter things to say. Five percent is flat out

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<v Speaker 1>not acceptable. Everyone understands that what inflation rate is that

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<v Speaker 1>moment where Bill Dudley relaxes.

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<v Speaker 2>I think when the Fed gets the inflation rate down

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<v Speaker 2>into the twesday and there's more slack in the labor

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<v Speaker 2>market and wages are rising more like three to four

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<v Speaker 2>percent rather than five to six percent, which.

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<v Speaker 3>They're doing now.

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<v Speaker 2>The Fed is making some progress on the inflation front,

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<v Speaker 2>but they haven't made much progress yet on the labor

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<v Speaker 2>market and on the wage trend. So it's hard to

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<v Speaker 2>see inflation going all the way back to two percent

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<v Speaker 2>where the labor market's tight and wages as high, and.

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<v Speaker 1>Your studies at Berkeley, is it necessary to have unemployment

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<v Speaker 1>go up to bring inflation down? Why can't we just

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<v Speaker 1>move the inflation needle the disinflation needle and keep America employed.

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<v Speaker 3>Well, that'd be the ideal outcome.

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<v Speaker 2>It'd be great if we could operate at a three

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<v Speaker 2>point four percent unemployment rate with two percent inflation.

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<v Speaker 3>But historically that suggests that it's not happened in the past.

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<v Speaker 2>The libor market at that level of tightness generates wage

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<v Speaker 2>gains that are inconsistent with two percent inflation, and the

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<v Speaker 2>Federal Reserve doesn't think that's going to happen. The fether Reserve,

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<v Speaker 2>if you look at their last summary of economic projections,

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<v Speaker 2>expects that they're going to need to push the unemployment

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<v Speaker 2>rate up above four and a half percent to be

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<v Speaker 2>successful and bringing inflation down. So they need to push

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<v Speaker 2>the unemployer rate by more than a full percentage point in.

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<v Speaker 3>Their minds to be successful. And I think that's a

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<v Speaker 3>reasonable forecast.

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<v Speaker 1>Bill.

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<v Speaker 4>It's Mike switching to that Jobs report data. The calculations

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<v Speaker 4>people are making to get to that four and a

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<v Speaker 4>half percent by the end of the year, which the

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<v Speaker 4>Fed has forecast, we need all of a sudden to

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<v Speaker 4>start losing tens of thousands, if not hundreds of thousands

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<v Speaker 4>of jobs a month. Do you see any prospect of that?

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<v Speaker 2>Well, I think it just reiterates the tension between what

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<v Speaker 2>the Fed thinks in terms of how long I have

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<v Speaker 2>to keep greats high versus what the market thinks.

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<v Speaker 3>The FED thinks, this is all going to be a

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<v Speaker 3>very slow process.

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<v Speaker 2>It's going to take many, many months, and I think

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<v Speaker 2>when we get the next summer of economic projections from

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<v Speaker 2>the Fed in June, you'll probably see them being less

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<v Speaker 2>optimistic about how fast they can bring inflation back down

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<v Speaker 2>to two percent, and probably show a slower rise in.

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<v Speaker 3>The unemployer rate. You're absolutely right.

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<v Speaker 2>The labor market's still pretty darn strong, and the Fed

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<v Speaker 2>really hasn't.

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<v Speaker 3>Gotten the progress that they've wanted on that score. They

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<v Speaker 3>need payroll.

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<v Speaker 2>Gains of fifty thousand or less to push the unemployment

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<v Speaker 2>rate up by a meaningful amount, and they haven't gotten

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<v Speaker 2>anything like that yet.

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<v Speaker 4>Is there any way they can accurately forecast what's going

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<v Speaker 4>to happen to wages. Given this post pandemic, weird kind

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<v Speaker 4>of labor market that we have, I.

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<v Speaker 2>Think that they can see what's happening through a broad

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<v Speaker 2>set of wage indicators, and what's happening is not really

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<v Speaker 2>unusual relative to what you would expect, even the tightness

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<v Speaker 2>of the layer market. If you look at the Jolts report,

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<v Speaker 2>the job openings, the labor to turnaments report, that suggests

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<v Speaker 2>that the layer market has eased a little bit, but

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<v Speaker 2>that ratio of unfilled jobs to unemployed workers is still

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<v Speaker 2>really high. Pure Pola said that he needs to get

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<v Speaker 2>that ratio down to about one to one. Right now,

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<v Speaker 2>I think we're operating at one point six to one,

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<v Speaker 2>so we still have quite a bit of ways to go.

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<v Speaker 4>Speaking of a ways to go, which is I guess

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<v Speaker 4>kind of what policymakers are always going to say. Are

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<v Speaker 4>they there in terms of being restrictive enough or is

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<v Speaker 4>there anything in this data or the data that you've

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<v Speaker 4>seen so far since the last meeting that would suggest

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<v Speaker 4>that maybe they need to do more.

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<v Speaker 2>They think they're restrictive enough, And I think one reason

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<v Speaker 2>why they think they're restrictive enough is we're going to

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<v Speaker 2>see some credit constraints from the banking sector because of

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<v Speaker 2>the turmo we've seen in the banking area, So they're

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<v Speaker 2>thinking that credit conditions are going to be tighter as

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<v Speaker 2>banks pull back a bit. One area, though, where you

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<v Speaker 2>have to be a little bit concerned is the housing sector,

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<v Speaker 2>which is really the most interest rate sense of the

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<v Speaker 2>sector of the comic seems to be bottoming out. So

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<v Speaker 2>if entre policy is a really tight and the housing

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<v Speaker 2>market is start to recover again, and that does raise

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<v Speaker 2>a question of whether the FED is sufficiently tight.

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<v Speaker 1>Bill Dudley, I want to go to your latest essay,

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<v Speaker 1>which has a single sentence in it which is not

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<v Speaker 1>an inflammatory, but I think shocking to a lot of people.

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<v Speaker 1>And I'm going to suggest that Bill Dudley, like Stephen Roach,

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<v Speaker 1>who worked at another shop on Wall Street years ago,

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<v Speaker 1>you people are looking for a new FED mandate around

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<v Speaker 1>FED stability. Are you a financial stability Are you advocating

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<v Speaker 1>a three part FED with the responsibility of inflation dynamics,

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<v Speaker 1>jobs dynamics, and find financial stability dynamics.

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<v Speaker 2>Well, I guess I would put it is financial stability

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<v Speaker 2>is a necessary condition for.

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<v Speaker 3>An effective monitoring policy.

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<v Speaker 2>If you don't have financial stability, you lose control of

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<v Speaker 2>monitary policy. So as part of your monetary policy mandate,

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<v Speaker 2>you have to have a great close focus on financial stability.

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<v Speaker 3>And the fact is the FED missed what was going

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<v Speaker 3>to happen in the banking sector.

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<v Speaker 2>If you look back at the November Financial Stability Report,

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<v Speaker 2>there was nothing about the potential funding risk of regional banks.

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<v Speaker 2>There was nothing about the large marked to market losses

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<v Speaker 2>on their balance sheet. There was nothing about the risk

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<v Speaker 2>that uninsured depositors might leave. So the FED really, you know,

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<v Speaker 2>didn't capture that. And I get the FED a lot

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<v Speaker 2>of credit for the report that they published just recently

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<v Speaker 2>on what went wrong with Lacon Valley Bank. I think

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<v Speaker 2>they do recognize their supervisory failures, but that's not sufficient.

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<v Speaker 2>Entre policy also contributed to what happened because the FED

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<v Speaker 2>basically made interest rate very low for a very long time.

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<v Speaker 3>They flooded the banking system with deposits. Some banks took

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<v Speaker 3>those as posits and bought long datad assets that didn't

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<v Speaker 3>work out for them.

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<v Speaker 2>So the FED reserves entre policy did contribute to the

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<v Speaker 2>problems that we've seen in the banking sector.

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<v Speaker 1>Yeah, I looked Mike McKee at this and the dovetail here,

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<v Speaker 1>and it hearkens back to Stephen wrote screaming about a

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<v Speaker 1>new FED with a new mandate within a modern economy,

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<v Speaker 1>and whether it was Roach at Morgan Stanley or Bill

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<v Speaker 1>Dudley at Goldman Sachs years ago, this was the dovetail

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<v Speaker 1>of market economics into the academic discussion that Chairman Powell

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<v Speaker 1>has to face every day, and here we are looking

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<v Speaker 1>at it again. Yeah.

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<v Speaker 4>Bell raises a question of what do you think the

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<v Speaker 4>Fed's reaction function is now given that the new monetary

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<v Speaker 4>policy framework doesn't apply at the moment.

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<v Speaker 5>I think their reaction function is that they want to

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<v Speaker 5>They're going to keep rates at this level or maybe

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<v Speaker 5>a little even a little bit higher until they seekings

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<v Speaker 5>that they're confident that inflation is going to get back

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<v Speaker 5>to two percent.

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<v Speaker 3>And to be confident that inflation is going to get

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<v Speaker 3>back to two.

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<v Speaker 2>Percent, they need to see more softness in the market

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<v Speaker 2>reduction and wage inflation, and.

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<v Speaker 3>More progress on services sector inflation.

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<v Speaker 1>Bill Dudley hotsyus.

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<v Speaker 6>Some M.

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<v Speaker 1>Calvy are online too, and they just want to gustimate

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<v Speaker 1>to you, when do we get under three percent inflation?

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<v Speaker 1>Give us your market economic analysis today? Of the timeline

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<v Speaker 1>to three percent. When do we see it?

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<v Speaker 2>I think I probably see it by before the end

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<v Speaker 2>of the year because housing inflation is going to come

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<v Speaker 2>down pretty dramatically. We've seen that the housing inflation in

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<v Speaker 2>the CPI and in the pc deflator lags a lot

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<v Speaker 2>behind what's actually happening in housing, So that's going to

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<v Speaker 2>start to turn down pretty sharply, I think in the

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<v Speaker 2>second half of the year, and that will help us

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<v Speaker 2>on headline inflation.

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<v Speaker 1>Doctor Doddley, thank you so much for joining us writing

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<v Speaker 1>for Bloomberg Opinions. Superb assay, thought provoking essay for all

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<v Speaker 1>commercial banking here from Bill Dudley on the latest banking

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<v Speaker 1>crisis of financial stability. He is the ultimate bottoms up investor,

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<v Speaker 1>Mario Gabelly cut his teeth on machinery things, as Gartman says,

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<v Speaker 1>following your foot and hurt you. He is a cell

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<v Speaker 1>side analyst who's had a claim with a broader portfolio

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<v Speaker 1>over the years in entertainment and such. Mario, I've got.

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<v Speaker 3>To go to you know.

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<v Speaker 1>I couldn't do it as a diehard Red Sox fan.

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<v Speaker 1>I'm not gonna go along the Atlanta braves. But this

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<v Speaker 1>is textbook Gibelly. It was twenty something now it's on

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<v Speaker 1>the edge of forty. Explain why the Atlanta Braves are

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<v Speaker 1>gonna win the Gabelly World Series this year.

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<v Speaker 7>You know, I'm sorry about the Red Sox losing last night.

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<v Speaker 7>The Braves are doing well. Independent of that. The pitch

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<v Speaker 7>clock is having an impact on baseball by shortening it. Well,

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<v Speaker 7>we'll get the results over time. But in addition to that,

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<v Speaker 7>you have other reasons for attendance, You have other reasons

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<v Speaker 7>for revenues. There's about sixty two million shares of B

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<v Speaker 7>A t R A and B A t R at

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<v Speaker 7>the lower voting stock. Our clients own a significant piece

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<v Speaker 7>of the voting stock, and so as a result of that,

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<v Speaker 7>we are obviously cheerleaders for the Atlanta Braves. And we

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<v Speaker 7>think between Battery Park, that is the area in which

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<v Speaker 7>the stadium is in right, the value of the franchise.

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<v Speaker 7>I think you're going to get it, you know, forty

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<v Speaker 7>five to fifty five dollars a share somewhere in an

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<v Speaker 7>extra vos. That's it. It's a And if you don't

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<v Speaker 7>want to own it because you got emotional dynamics such

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<v Speaker 7>as life, that's your portfolio. But give it that everybody

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<v Speaker 7>listening should get one hundred shares from others day. For

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<v Speaker 7>someone to that they like Mario.

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<v Speaker 1>Gabelli on the Atlanta Braves, putting me in the Gabelli,

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<v Speaker 1>it'll double time out. Chare is well, there will be

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<v Speaker 1>reports on Disney, Mario, I think of you and Gordon

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<v Speaker 1>Crawford and Capitol Guardian Trust as being people that have

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<v Speaker 1>followed as entertainment idiocy. Were you surprised at the streaming

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<v Speaker 1>nonprofit in is Disney the mother of all Gabelli values?

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<v Speaker 7>Well, you've got to look at the amount of money

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<v Speaker 7>being spent on content by the companies. As an example,

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<v Speaker 7>Disney will probably be twenty eight to thirty billion. Netflix

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<v Speaker 7>is trying hard to get up to thirteen or fourteen

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<v Speaker 7>or fifteen billion. Paramounts is higher than that. Then you

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<v Speaker 7>have Apple trying to catch up. But Apple cumulively maybe

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<v Speaker 7>for the last five years, has spent thirteen billion said

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<v Speaker 7>they don't have any content. So where and how do

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<v Speaker 7>you find? You know, I love Lucy, and I love

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<v Speaker 7>Tom Keene, and I love Lisa. Those kind of contents

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<v Speaker 7>are buried in there and they come back. And for

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<v Speaker 7>example of Full Life with Jimmy Stewart. Because of the

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<v Speaker 7>bank run, people are going back and looking at that.

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<v Speaker 7>So how important is the embedded value? What is when

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<v Speaker 7>you do a theatrical box office. You had a forty

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<v Speaker 7>two billion dollar business, but the theater operators get forty

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<v Speaker 7>percent of that or higher. So now you go direct

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<v Speaker 7>to streaming. And unfortunately, because of the regulatory organizations, the

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<v Speaker 7>companies like AT and T and Verizon and T Mobile

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<v Speaker 7>don't get paid for people using the highways on a

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<v Speaker 7>super speed. I go over to George Washington Bridge and

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<v Speaker 7>I pay less than a Class A truck. So Tom,

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<v Speaker 7>from Disney's point of view, yes, you've got a learning curve,

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<v Speaker 7>You've got some dynamic short term you want to go global.

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<v Speaker 7>You know we can't be so the US has only

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<v Speaker 7>got three hundred and fifty million people. The rest of

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<v Speaker 7>the world has seven billion.

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<v Speaker 8>More plus Mari, are you still enthusiastic about Paramount? Do

0:11:55.640 --> 0:11:59.319
<v Speaker 8>you still think that Apple's going to buy them?

0:12:00.600 --> 0:12:04.000
<v Speaker 7>My own reaction is that whatever you have, Barb barersk

0:12:04.160 --> 0:12:07.680
<v Speaker 7>doing a great job running the business. You have good content.

0:12:07.800 --> 0:12:11.720
<v Speaker 7>They're obviously making the tough decisions to give them financial flexibility.

0:12:11.920 --> 0:12:14.520
<v Speaker 7>The Federal Trade Commission turned down an ability for them

0:12:14.559 --> 0:12:17.120
<v Speaker 7>to monetize Simon and Schuster to what they're going to do.

0:12:17.440 --> 0:12:20.200
<v Speaker 7>They're going to do beet They're going to try to

0:12:20.360 --> 0:12:22.880
<v Speaker 7>raise some capital there. But you know, from my point

0:12:22.920 --> 0:12:24.959
<v Speaker 7>of view, a year or two from now, they have

0:12:25.080 --> 0:12:28.880
<v Speaker 7>to sell our spin, which they've done before. They're very good.

0:12:28.880 --> 0:12:30.920
<v Speaker 7>For example, nobody appauded to them when they bought Pluto

0:12:31.000 --> 0:12:34.400
<v Speaker 7>for as New Yorkers would say, buckets, and they basically

0:12:34.440 --> 0:12:37.040
<v Speaker 7>have done a great job on that. Now, independent of that,

0:12:37.080 --> 0:12:39.640
<v Speaker 7>without getting into too much detail, you know, they were

0:12:39.640 --> 0:12:42.160
<v Speaker 7>spending six hundred million dollars a year on cash dividends.

0:12:42.400 --> 0:12:45.280
<v Speaker 7>That's going to be down to you know, twenty cents

0:12:45.280 --> 0:12:48.760
<v Speaker 7>time six fifty do you know a significant amount of less.

0:12:48.960 --> 0:12:52.640
<v Speaker 7>So over the next couple of years, put the foundations

0:12:52.679 --> 0:12:56.559
<v Speaker 7>back in place, accelerate the growth, and execute, and that's

0:12:56.600 --> 0:12:58.920
<v Speaker 7>what they're going to do. And then you ask the

0:12:59.000 --> 0:13:02.280
<v Speaker 7>simple question, Yeah, if you've got a stock selling at

0:13:02.320 --> 0:13:05.360
<v Speaker 7>thirty which is now nineteen, let's call it thirty, and

0:13:05.440 --> 0:13:08.560
<v Speaker 7>you basically multiply that by six hundred and fifty million shares,

0:13:08.559 --> 0:13:11.760
<v Speaker 7>you're talking about a twenty eive billion dollar equity value

0:13:11.760 --> 0:13:13.800
<v Speaker 7>and then you got debt will probably be down to

0:13:13.800 --> 0:13:16.000
<v Speaker 7>eight billion if they do these sale of these assets

0:13:16.040 --> 0:13:18.679
<v Speaker 7>and keep the care flow. So you're talking about a

0:13:18.760 --> 0:13:22.400
<v Speaker 7>tiny little morsel. So if Sherry, who owns thirty of

0:13:22.440 --> 0:13:25.400
<v Speaker 7>the forty million voting shares, decides that you know, hey,

0:13:25.800 --> 0:13:29.240
<v Speaker 7>you know, Apple wants to pay me you know, X

0:13:29.320 --> 0:13:32.800
<v Speaker 7>dollars and it's the minimus for them, and they don't

0:13:32.840 --> 0:13:35.240
<v Speaker 7>have the broadcast stations anymore because they're spin out of

0:13:35.240 --> 0:13:38.240
<v Speaker 7>the process of spending. You know, I love making takes

0:13:38.280 --> 0:13:40.120
<v Speaker 7>place in a variety of ways.

0:13:40.760 --> 0:13:43.880
<v Speaker 8>So Mario, on a broader level, you did just get

0:13:43.880 --> 0:13:48.120
<v Speaker 8>back from Omaha where you were at the Berkshire Hathaway

0:13:48.280 --> 0:13:52.199
<v Speaker 8>Annual Meeting shareholder meeting. Have you ever heard Warren Buffett

0:13:52.280 --> 0:13:56.280
<v Speaker 8>this negative, this gloomy, this pessimistic, unstocked. Did you take

0:13:56.320 --> 0:13:58.720
<v Speaker 8>a message from that that you obviously.

0:13:58.640 --> 0:14:02.960
<v Speaker 7>I disagree with you complete. Warren Buffett basically pounded away

0:14:03.080 --> 0:14:06.400
<v Speaker 7>at the idea that if you believe in the virtues

0:14:06.480 --> 0:14:09.280
<v Speaker 7>of the American system that allowed him for eighty years

0:14:09.480 --> 0:14:11.800
<v Speaker 7>when he first started investing at the age of thirteen

0:14:12.400 --> 0:14:15.960
<v Speaker 7>to make a lot of money, that tailwind continues to flourish.

0:14:16.120 --> 0:14:20.240
<v Speaker 7>So is he practical. Yeah, I mean, you know, he's

0:14:20.360 --> 0:14:23.200
<v Speaker 7>very patient and so as a result of that, he's

0:14:23.240 --> 0:14:25.480
<v Speaker 7>got his cash, he's waiting for it. All of us

0:14:25.520 --> 0:14:27.560
<v Speaker 7>are going to focus on a thirteen f that's coming

0:14:27.560 --> 0:14:30.720
<v Speaker 7>out by Monday and see what he bought, what he's

0:14:30.760 --> 0:14:34.200
<v Speaker 7>selling so wild. You know, he's got smart people working

0:14:34.240 --> 0:14:36.880
<v Speaker 7>for him and Greg he first announced, Greg Abel now

0:14:36.920 --> 0:14:40.000
<v Speaker 7>taking over and a jeep Jane continue to run the

0:14:40.040 --> 0:14:43.320
<v Speaker 7>insurance business. So your management session has been identified.

0:14:43.560 --> 0:14:46.440
<v Speaker 1>Everyone wants to know the value trapped. It's a banks

0:14:46.480 --> 0:14:48.600
<v Speaker 1>and your research note. You say to me that you

0:14:48.640 --> 0:14:51.800
<v Speaker 1>want to buy a Southern bank for acquisition. My theme

0:14:51.840 --> 0:14:54.480
<v Speaker 1>for the year is the great zombie roll up? Are

0:14:54.520 --> 0:14:58.320
<v Speaker 1>the smaller banks one collective zombie? And are we going

0:14:58.400 --> 0:15:01.880
<v Speaker 1>to see a massive bank roll up led by banks

0:15:01.960 --> 0:15:02.640
<v Speaker 1>in the South.

0:15:04.520 --> 0:15:07.240
<v Speaker 7>You know, look, you got all of the right dynamics.

0:15:07.280 --> 0:15:09.360
<v Speaker 7>We have a lot of banks. But you know, let's

0:15:09.400 --> 0:15:11.560
<v Speaker 7>flash back. You and I have been doing this for

0:15:11.680 --> 0:15:14.680
<v Speaker 7>a few years. You had a crisis in nineteen sixty

0:15:14.800 --> 0:15:17.840
<v Speaker 7>seven eight nine where the banks lend money to oil

0:15:17.880 --> 0:15:20.320
<v Speaker 7>tankers or whatever they were. In the seventies, you had

0:15:20.360 --> 0:15:23.160
<v Speaker 7>the Hirshta Bank had a whole bunch kind of og bus.

0:15:23.320 --> 0:15:27.640
<v Speaker 7>You had a hold and the eighties you started one

0:15:27.680 --> 0:15:30.600
<v Speaker 7>thousand banks. Tom went bust in the savings a loan

0:15:30.680 --> 0:15:33.760
<v Speaker 7>association crisis because of that, the account's put in a

0:15:33.800 --> 0:15:37.120
<v Speaker 7>rule called hold to maturity, don't amortize, And then you

0:15:37.160 --> 0:15:39.120
<v Speaker 7>had no interest rates for an extended period of time.

0:15:39.520 --> 0:15:42.160
<v Speaker 7>So somebody says, I got a deposit, I'm going to

0:15:42.240 --> 0:15:44.520
<v Speaker 7>lend it long. It costs me no money. The basic

0:15:44.600 --> 0:15:47.880
<v Speaker 7>bank problem is you borrow short and lend long. You

0:15:48.000 --> 0:15:51.600
<v Speaker 7>got a problem independent of that. You still need to

0:15:51.680 --> 0:15:54.560
<v Speaker 7>have that service for the American public, the American economy.

0:15:54.920 --> 0:15:57.480
<v Speaker 7>And I will get over this notion of how bad

0:15:57.800 --> 0:16:01.480
<v Speaker 7>the office will construct. That's it, Murra.

0:16:01.520 --> 0:16:03.960
<v Speaker 1>We got one Yankees fan. He's down in Florida, and

0:16:03.960 --> 0:16:06.440
<v Speaker 1>this Yankees fan emails it and says, the breadth of

0:16:06.440 --> 0:16:10.200
<v Speaker 1>the market is important. Broad Based rallies have the potential

0:16:10.240 --> 0:16:15.480
<v Speaker 1>to continue, while narrowing rallies are prone to a failure.

0:16:15.800 --> 0:16:18.800
<v Speaker 1>Quoting the great Bob Ferrell and Mari Lynch years ago,

0:16:19.400 --> 0:16:21.920
<v Speaker 1>if you ever seen anything as narrow as what we

0:16:21.960 --> 0:16:25.360
<v Speaker 1>see with Apple Computer and four other stocks, and what

0:16:25.400 --> 0:16:26.240
<v Speaker 1>do we do about it?

0:16:27.080 --> 0:16:30.560
<v Speaker 7>Well, you got a lot of dynamics. If I was

0:16:30.640 --> 0:16:34.600
<v Speaker 7>growing up tom playing World of Warcraft and I'm now

0:16:34.640 --> 0:16:37.840
<v Speaker 7>playing Diablo for on my machines, a very quick I

0:16:37.920 --> 0:16:42.360
<v Speaker 7>learned I want instant results. I want to play momentum clearly,

0:16:43.320 --> 0:16:45.360
<v Speaker 7>you know. And then I get on robin Hood and

0:16:45.400 --> 0:16:49.240
<v Speaker 7>then you get quants, Momo, Algos and Aiole coming together

0:16:49.320 --> 0:16:53.360
<v Speaker 7>to do trading the markets of the markets, okay, the

0:16:53.480 --> 0:16:56.800
<v Speaker 7>values of the values over the next right now. For example,

0:16:56.880 --> 0:16:59.840
<v Speaker 7>even if GDP is down two percent real and inflations,

0:17:00.680 --> 0:17:02.760
<v Speaker 7>you're going to get nominal revenues going in three and

0:17:02.800 --> 0:17:05.160
<v Speaker 7>that's a large basket for you. What you talked about

0:17:05.160 --> 0:17:08.000
<v Speaker 7>before in your show. If company is having growth margins SDNA,

0:17:08.359 --> 0:17:11.240
<v Speaker 7>they're learning how to deal with manufacturing reshoring to the

0:17:11.359 --> 0:17:14.439
<v Speaker 7>United States. Tizan is out. That is the just in

0:17:14.480 --> 0:17:17.840
<v Speaker 7>time inventory. Now you bring it closer and you get

0:17:17.840 --> 0:17:20.920
<v Speaker 7>more efficient, and you do AI and you start doing

0:17:20.960 --> 0:17:25.600
<v Speaker 7>a lot of automation, and you pray for immigration because

0:17:25.600 --> 0:17:28.000
<v Speaker 7>that's where the long term growth of this country is

0:17:28.000 --> 0:17:28.520
<v Speaker 7>coming from.

0:17:28.920 --> 0:17:32.159
<v Speaker 8>Mario, we've talked about how we are seeing an increasing

0:17:32.240 --> 0:17:34.639
<v Speaker 8>number of people go back to stock picking from just

0:17:34.680 --> 0:17:37.760
<v Speaker 8>simply indexing. Do you notice that in the day to day,

0:17:37.840 --> 0:17:40.760
<v Speaker 8>do you notice more people interested in the trade that

0:17:40.840 --> 0:17:43.760
<v Speaker 8>you've always practiced and you continue doing so now, But.

0:17:43.800 --> 0:17:45.880
<v Speaker 7>Go back one giant step. I come from a culture

0:17:45.880 --> 0:17:49.000
<v Speaker 7>where we had Graham Dodd, Roger Murray, Bruce Greenwall and

0:17:49.040 --> 0:17:53.600
<v Speaker 7>now Tolla Santo's teaching value investing. How do you do research?

0:17:54.280 --> 0:17:57.040
<v Speaker 7>What is the value of an enterprise? Who is going

0:17:57.119 --> 0:17:59.640
<v Speaker 7>to buy it is? What a would private equity pay?

0:17:59.680 --> 0:18:02.240
<v Speaker 7>What is the capital structure that they can tolerate? What

0:18:02.359 --> 0:18:05.520
<v Speaker 7>is the tax structure? How good is it? Big? Then

0:18:05.560 --> 0:18:09.600
<v Speaker 7>you cut through all the crap right, How good is

0:18:09.640 --> 0:18:13.080
<v Speaker 7>the business? How good is the management? The values after

0:18:13.240 --> 0:18:15.640
<v Speaker 7>buying of that? Are they well below what you think

0:18:15.680 --> 0:18:19.760
<v Speaker 7>the intrinsic value is? And therefore that discount you know

0:18:19.880 --> 0:18:23.000
<v Speaker 7>we'll go out and that over time you're going to do. Okay.

0:18:23.119 --> 0:18:26.040
<v Speaker 7>I think that the market tom in forty five years

0:18:26.040 --> 0:18:28.840
<v Speaker 7>will be one million under Dow. So you know that's

0:18:28.880 --> 0:18:30.160
<v Speaker 7>seven eight percent returns.

0:18:31.040 --> 0:18:33.920
<v Speaker 1>You're showing your cards. You're showing your Morning Side Heights cards.

0:18:33.960 --> 0:18:36.520
<v Speaker 1>Here in the bottom line is Columbia Business School, and

0:18:36.680 --> 0:18:38.800
<v Speaker 1>you mentioned grab Dott and Coddle, and a guy named

0:18:38.840 --> 0:18:42.080
<v Speaker 1>Buffet went there years ago as well. Do the young

0:18:42.240 --> 0:18:46.840
<v Speaker 1>Turks of Columbia Business School believe in the traditional Warren

0:18:46.920 --> 0:18:48.880
<v Speaker 1>Buffett securities analysis.

0:18:50.200 --> 0:18:52.879
<v Speaker 7>There's a lot of cultures that come in in quotes

0:18:52.920 --> 0:18:55.840
<v Speaker 7>in the financial area. You want to integrate analytics.

0:18:56.119 --> 0:18:56.399
<v Speaker 1>Tom.

0:18:56.440 --> 0:18:58.280
<v Speaker 7>If you and I were around two hundred years ago,

0:18:58.280 --> 0:19:00.760
<v Speaker 7>what we would be talking about today on this was

0:19:00.760 --> 0:19:03.600
<v Speaker 7>that the Rothschild's got a pigeon to tell them who

0:19:03.640 --> 0:19:06.040
<v Speaker 7>won the battle at Waterloo, and that they went down

0:19:06.080 --> 0:19:08.400
<v Speaker 7>and did something on the stock market. We can talk

0:19:08.400 --> 0:19:10.280
<v Speaker 7>about that at other time. Then you used to go

0:19:10.359 --> 0:19:13.359
<v Speaker 7>to have Warren Buffer go down in Washington, DC to

0:19:13.400 --> 0:19:17.199
<v Speaker 7>microfish Data or Graham then you I did it at

0:19:17.200 --> 0:19:20.080
<v Speaker 7>the New York Stock you saints today. I gave a

0:19:20.119 --> 0:19:23.679
<v Speaker 7>speech and I said chat GPT. I got my grandson

0:19:23.760 --> 0:19:28.800
<v Speaker 7>to do it and it was a brilliant speech. I

0:19:29.320 --> 0:19:30.800
<v Speaker 7>and it took him five seconds.

0:19:30.880 --> 0:19:31.040
<v Speaker 9>Yeah.

0:19:31.560 --> 0:19:34.520
<v Speaker 7>So the question is how quickly can we gather data?

0:19:34.680 --> 0:19:37.159
<v Speaker 7>How quickly can we use it? But then when you

0:19:37.200 --> 0:19:39.760
<v Speaker 7>get you got to be with some practical judgment has

0:19:39.800 --> 0:19:40.320
<v Speaker 7>to go in the mix.

0:19:40.480 --> 0:19:43.760
<v Speaker 1>Murr. One more question. Speak to the people out there

0:19:43.760 --> 0:19:46.760
<v Speaker 1>that want to be in the market, but they're scared stiff.

0:19:47.119 --> 0:19:49.480
<v Speaker 1>How do you play? How do you participate.

0:19:50.400 --> 0:19:52.560
<v Speaker 7>Well, first of all, you got to do what Buffett says,

0:19:52.560 --> 0:19:55.560
<v Speaker 7>which is patients long term, don't worry about the short

0:19:55.640 --> 0:19:58.000
<v Speaker 7>term dynamics. You for you know, if I own a

0:19:58.040 --> 0:20:00.880
<v Speaker 7>farm out in Iowa or in the Bronx, so let's

0:20:00.920 --> 0:20:02.679
<v Speaker 7>by farm into Brox. I'm not going to wake up

0:20:02.720 --> 0:20:05.040
<v Speaker 7>every day and figure out what the prices are. I'm

0:20:05.040 --> 0:20:06.399
<v Speaker 7>going to look at it and say what are my

0:20:06.480 --> 0:20:08.840
<v Speaker 7>cash flows and what are my predictability and what can

0:20:08.840 --> 0:20:11.520
<v Speaker 7>I harvest it? Same thing with good businesses. If you

0:20:11.600 --> 0:20:13.840
<v Speaker 7>buy a good bunch of business and you know whether

0:20:14.119 --> 0:20:19.800
<v Speaker 7>I have like the Tagna taxtrawn trade and television my te's,

0:20:20.160 --> 0:20:21.919
<v Speaker 7>you know, we can talk about these things. The stocks

0:20:21.920 --> 0:20:24.040
<v Speaker 7>will go down, they'll go up, but you know, five

0:20:24.080 --> 0:20:27.000
<v Speaker 7>years from now we're to make pers This.

0:20:26.960 --> 0:20:29.359
<v Speaker 1>Has been brilliant. Mario Gabelli, thank you so much for

0:20:29.440 --> 0:20:42.760
<v Speaker 1>particalarly there on banks in the South as well, joining

0:20:42.800 --> 0:20:46.800
<v Speaker 1>us now French Hill of Arkansas. He is a Republican.

0:20:47.200 --> 0:20:50.480
<v Speaker 1>Give me the morality here at Congressman the Hill. It

0:20:50.680 --> 0:20:54.480
<v Speaker 1>is a serious, serious issue no one's talking about. Is

0:20:54.520 --> 0:20:57.600
<v Speaker 1>it immoral to have a debt and deficit in the

0:20:57.680 --> 0:21:00.960
<v Speaker 1>United States? I think it's well.

0:21:00.960 --> 0:21:02.720
<v Speaker 10>First of all, good morning to both of you. I

0:21:02.720 --> 0:21:05.080
<v Speaker 10>missed Bible study this morning, so that was a great

0:21:05.400 --> 0:21:08.600
<v Speaker 10>top of the show reminder. And let me say that

0:21:09.280 --> 0:21:12.640
<v Speaker 10>it is immoral to have a debt and a deficit

0:21:12.760 --> 0:21:15.760
<v Speaker 10>that are not controlled, and that's what we have now.

0:21:15.800 --> 0:21:18.320
<v Speaker 10>We're running a forecast of over one and a half

0:21:18.400 --> 0:21:21.680
<v Speaker 10>trillion dollar deficits a year for the next ten years

0:21:21.680 --> 0:21:24.879
<v Speaker 10>in the President's budget. That's the part that's unsustainable. You

0:21:24.920 --> 0:21:29.040
<v Speaker 10>could argue that's immoral because it's substantially larger than we've

0:21:29.119 --> 0:21:31.360
<v Speaker 10>run in the past, and it doesn't show the kind

0:21:31.400 --> 0:21:33.600
<v Speaker 10>of discipline we should have to go back to a

0:21:33.640 --> 0:21:37.119
<v Speaker 10>balanced budget and not be adding to the debt indiscriminately.

0:21:37.400 --> 0:21:40.520
<v Speaker 1>Congressman, there is a photograph of you and Bush the

0:21:40.600 --> 0:21:43.760
<v Speaker 1>first in your youth, and that was back when we

0:21:43.800 --> 0:21:47.320
<v Speaker 1>had commissions I think of green Span and Social Security

0:21:47.359 --> 0:21:51.359
<v Speaker 1>that actually got something done. I'm still in disbelief that

0:21:51.440 --> 0:21:54.720
<v Speaker 1>Simpson Bulls went down in flames. Why can't we be

0:21:54.920 --> 0:21:58.720
<v Speaker 1>like any good democracy, get a commission to find an

0:21:58.760 --> 0:22:02.200
<v Speaker 1>equal ground to do something about our debt and deficit.

0:22:03.520 --> 0:22:06.080
<v Speaker 10>Well, Tom, you're right, and I do support that idea.

0:22:06.080 --> 0:22:08.080
<v Speaker 10>I thought that was one of the more effective things

0:22:08.080 --> 0:22:10.119
<v Speaker 10>in the first term of President Reagan when he was

0:22:10.160 --> 0:22:14.320
<v Speaker 10>cutting taxes and rebuilding defense. He also puts social Security

0:22:14.359 --> 0:22:17.359
<v Speaker 10>on a stable ground by the Greenspan Commission, which had

0:22:17.400 --> 0:22:19.240
<v Speaker 10>an up or down vote on how to do that.

0:22:19.840 --> 0:22:22.600
<v Speaker 10>I would support a commission like that to tackle mandatory

0:22:22.640 --> 0:22:26.000
<v Speaker 10>spending programs like Social Security, Medicare. Make sure they have

0:22:26.080 --> 0:22:29.480
<v Speaker 10>the stability and funding for the next generation. Because they're

0:22:29.520 --> 0:22:33.480
<v Speaker 10>two thirds of our spending every year, they drive the deficit,

0:22:33.480 --> 0:22:35.160
<v Speaker 10>which in turn obviously drives the debt.

0:22:35.280 --> 0:22:39.000
<v Speaker 8>Congressman, there's a really important conversation to be had about

0:22:39.000 --> 0:22:43.000
<v Speaker 8>what's sustainable and good finance for this nation. There's another

0:22:43.080 --> 0:22:45.480
<v Speaker 8>question around the manner to have it, whether we should

0:22:45.520 --> 0:22:48.440
<v Speaker 8>be having it on a brinks edge, holding the US's

0:22:48.480 --> 0:22:51.959
<v Speaker 8>credit rating hostage. Is this really the appropriate way to

0:22:51.960 --> 0:22:54.320
<v Speaker 8>be discussing this at a time when both parties have

0:22:54.480 --> 0:22:55.440
<v Speaker 8>increased the deficit?

0:22:56.480 --> 0:22:56.680
<v Speaker 1>Right?

0:22:56.960 --> 0:22:59.560
<v Speaker 10>Well, I think that's why on February one, Kevin McCarthy

0:22:59.600 --> 0:23:02.639
<v Speaker 10>met with the President and said, let's meet and have

0:23:02.720 --> 0:23:05.479
<v Speaker 10>a sensible and responsible way to raise the debt ceiling

0:23:05.520 --> 0:23:09.040
<v Speaker 10>and get spending under control. Following the pandemic. They had

0:23:09.080 --> 0:23:12.320
<v Speaker 10>a meeting the President promise to follow up, and one

0:23:12.359 --> 0:23:15.159
<v Speaker 10>hundred days have gone by, and what's happened in the

0:23:15.160 --> 0:23:18.080
<v Speaker 10>interim is only one branch of government, one portion of

0:23:18.080 --> 0:23:20.920
<v Speaker 10>a branch of government has taken action, and that's the House,

0:23:21.000 --> 0:23:24.280
<v Speaker 10>under Kevin McCarthy's leadership, to raise the debt ceiling and

0:23:24.440 --> 0:23:28.560
<v Speaker 10>propose some spending controls and regulatory policies that would make

0:23:28.640 --> 0:23:31.639
<v Speaker 10>us have a better economy and a faster growing economy.

0:23:31.720 --> 0:23:34.680
<v Speaker 8>With all due respect on their former President Trump's administration,

0:23:35.080 --> 0:23:38.000
<v Speaker 8>the deficit rose by seven point eight trillion dollars. It

0:23:38.040 --> 0:23:41.159
<v Speaker 8>brought it to World War two type financing conditions, and

0:23:41.240 --> 0:23:43.280
<v Speaker 8>yet we didn't have a question over the debt ceiling.

0:23:43.280 --> 0:23:45.280
<v Speaker 8>There wasn't this sort of pushback. We weren't brought to

0:23:45.280 --> 0:23:47.960
<v Speaker 8>the brink. Why is it so different now that we

0:23:48.000 --> 0:23:51.320
<v Speaker 8>can't have a discussion more clearly even though we have

0:23:51.440 --> 0:23:52.960
<v Speaker 8>the same kind of debt situation.

0:23:54.320 --> 0:23:56.199
<v Speaker 10>Well, I don't think that's true. First of all, the

0:23:56.200 --> 0:23:59.040
<v Speaker 10>bulk of debt spending was due to bipartisan spending to

0:23:59.040 --> 0:24:03.600
<v Speaker 10>fight the pandemic, over five trillion dollars. Shocking situation, shocking

0:24:03.640 --> 0:24:07.359
<v Speaker 10>reaction by the Congress. If we knew what we know today,

0:24:07.440 --> 0:24:09.720
<v Speaker 10>back in March of twenty twenty, we probably wouldn't have

0:24:09.720 --> 0:24:12.120
<v Speaker 10>spent that much money. But with that said, we did

0:24:12.160 --> 0:24:15.600
<v Speaker 10>have a debt ceiling fight in twenty nineteen, and it

0:24:15.720 --> 0:24:19.080
<v Speaker 10>was President Trump was forced to negotiate with Speaker Pelosi

0:24:19.359 --> 0:24:22.480
<v Speaker 10>because he was not in control of the situation, the

0:24:22.520 --> 0:24:26.800
<v Speaker 10>precise same situation that President Biden finds himself now. And

0:24:26.840 --> 0:24:29.480
<v Speaker 10>that's why Kevin McCarthy went to the President on February

0:24:29.520 --> 0:24:32.400
<v Speaker 10>first and said, let's do a sensible and responsible deal.

0:24:32.720 --> 0:24:35.600
<v Speaker 8>Comrasce Spannet, what would your response be to President Trump

0:24:35.840 --> 0:24:39.040
<v Speaker 8>if he did invoke the fourteenth Amendment to keep paying interest,

0:24:39.200 --> 0:24:42.400
<v Speaker 8>to keep paying principle on the US debt, even if

0:24:42.400 --> 0:24:45.080
<v Speaker 8>we do go over that deadline with respect to this

0:24:45.119 --> 0:24:45.639
<v Speaker 8>debt ceiling.

0:24:46.680 --> 0:24:50.080
<v Speaker 10>Well, Secretary Yellen doesn't believe that's a practical activity. I

0:24:50.160 --> 0:24:53.160
<v Speaker 10>think it's sort of a gimmick. I understand the fourteenth Amendment.

0:24:53.480 --> 0:24:56.040
<v Speaker 10>But we've also got legislation in the House that we've

0:24:56.119 --> 0:24:59.919
<v Speaker 10>passed to continue spending the principal interest payments on the

0:25:00.040 --> 0:25:03.359
<v Speaker 10>treasury and other mandatory spending programs as well. That was

0:25:03.400 --> 0:25:06.280
<v Speaker 10>passed by the House Ways and Means Committee several weeks ago.

0:25:07.480 --> 0:25:12.840
<v Speaker 1>French Hill, September of twenty fifteen. Mister Baynor fell on

0:25:12.920 --> 0:25:17.440
<v Speaker 1>a sword and exited stage right, or maybe exited stage left,

0:25:17.440 --> 0:25:19.920
<v Speaker 1>and that was the problem with the Tea Party at

0:25:19.960 --> 0:25:23.880
<v Speaker 1>the time. Explain to me the challenges Kevin McCarthy has

0:25:23.920 --> 0:25:26.240
<v Speaker 1>here not to do another John Bayner.

0:25:27.920 --> 0:25:32.240
<v Speaker 10>Well, look, I heard this morning earlier that people were

0:25:32.240 --> 0:25:35.560
<v Speaker 10>concerned Kevin McCarthy only has a one person can move

0:25:35.680 --> 0:25:39.000
<v Speaker 10>make a motion to vacate the chair. Well, every speaker

0:25:39.000 --> 0:25:41.800
<v Speaker 10>of the House except for Nancy Pelosi, has faced the

0:25:41.840 --> 0:25:45.879
<v Speaker 10>same procedural motion. It's not a new thing, and it

0:25:45.920 --> 0:25:48.720
<v Speaker 10>can still be a motion that's tabled by two hundred

0:25:48.760 --> 0:25:51.639
<v Speaker 10>and eighteen Republicans. So I don't view that as something

0:25:51.640 --> 0:25:55.320
<v Speaker 10>that Kevin McCarthy's remotely concerned about. What he's concerned about

0:25:55.359 --> 0:25:58.480
<v Speaker 10>is a responsible and sensible way of raising the dead

0:25:58.520 --> 0:26:01.600
<v Speaker 10>ceiling and curtailing spend and going back to our pre

0:26:01.680 --> 0:26:02.960
<v Speaker 10>pandemic priorities.

0:26:03.520 --> 0:26:06.359
<v Speaker 1>Congressman Hill, what do you need from Secretary Yellen? What

0:26:06.440 --> 0:26:12.879
<v Speaker 1>leadership can Janet Yellen provide in the coming days? Excellent question, Tom.

0:26:12.960 --> 0:26:15.359
<v Speaker 10>Janet Yellen could step in right now and say that

0:26:15.400 --> 0:26:19.720
<v Speaker 10>she'll be happy to work with Speaker McCarthy and develop

0:26:19.800 --> 0:26:23.560
<v Speaker 10>a responsible and sensible deal to raise the debt ceiling

0:26:24.000 --> 0:26:26.800
<v Speaker 10>and curtail a spending in the right way. And I

0:26:26.800 --> 0:26:29.320
<v Speaker 10>think it would pass overwhelmingly in the House and Senate,

0:26:29.359 --> 0:26:32.840
<v Speaker 10>and President Biden could sign it into law well ahead

0:26:32.960 --> 0:26:36.560
<v Speaker 10>of any deadline that she has set. And I would say, Look,

0:26:36.600 --> 0:26:39.879
<v Speaker 10>that's precisely what President Trump did with Speaker Pelosi. He

0:26:39.920 --> 0:26:44.080
<v Speaker 10>asked Secretary Steve Manuchin, then the Treasury Secretary, to get

0:26:44.080 --> 0:26:46.640
<v Speaker 10>that deal done, and that's what happened back in twenty nineteen.

0:26:46.760 --> 0:26:49.080
<v Speaker 1>Congressman, thank you so much. The Republicans you've met to

0:26:49.880 --> 0:26:56.560
<v Speaker 1>thank you with us today in a terrific brief. He

0:26:56.640 --> 0:26:59.639
<v Speaker 1>is in London, where he holds Corn's chief global equity

0:26:59.640 --> 0:27:03.120
<v Speaker 1>stretch just a Gold and Sacks. Peter Appeneimer has decades

0:27:03.119 --> 0:27:08.200
<v Speaker 1>of experience of extracting ourselves from the worries of the moment. Peter,

0:27:08.400 --> 0:27:10.240
<v Speaker 1>thank you so much for joining us, and I love

0:27:10.240 --> 0:27:13.800
<v Speaker 1>what you're saying your research note about finding neutrality, a

0:27:13.920 --> 0:27:17.840
<v Speaker 1>neutral view, What do you do in the stock market

0:27:17.920 --> 0:27:19.920
<v Speaker 1>when you have a neutral view?

0:27:21.800 --> 0:27:25.000
<v Speaker 9>Well, Tom, we've had that view really through the last year.

0:27:25.040 --> 0:27:26.040
<v Speaker 3>We've been calling the.

0:27:25.960 --> 0:27:30.320
<v Speaker 9>Market environment fat and flats, relatively flat returns at the

0:27:30.359 --> 0:27:35.280
<v Speaker 9>index level, with quite wide trading bands as the market

0:27:35.960 --> 0:27:41.280
<v Speaker 9>assesses at different points the relative risk between recession and inflation.

0:27:41.920 --> 0:27:44.000
<v Speaker 9>And I think we're at the top of that band

0:27:44.040 --> 0:27:46.280
<v Speaker 9>at the moment. And what we've been arguing is that

0:27:46.359 --> 0:27:48.280
<v Speaker 9>within that so you're going to get quite a lot

0:27:48.280 --> 0:27:52.160
<v Speaker 9>of our for opportunities. Generally, we've been pitching it as

0:27:54.040 --> 0:27:56.840
<v Speaker 9>a balance between some deep value where we think the

0:27:56.920 --> 0:28:00.040
<v Speaker 9>risks of valuations are very low, and quality growth g

0:28:01.040 --> 0:28:04.960
<v Speaker 9>and the combination we think is really where investors should

0:28:04.960 --> 0:28:07.720
<v Speaker 9>be in a relatively flat index environment.

0:28:08.040 --> 0:28:10.560
<v Speaker 8>Peter, over the past ten years, everyone was a macro trader,

0:28:10.720 --> 0:28:13.040
<v Speaker 8>and in the past six months everyone's become a microtrader.

0:28:13.240 --> 0:28:14.960
<v Speaker 8>And I go to Bank of America saying, for the

0:28:15.000 --> 0:28:17.200
<v Speaker 8>first time since the two thousand and eight crisis, there

0:28:17.240 --> 0:28:20.600
<v Speaker 8>is evidence of a stock pickers market, of individuals going

0:28:20.600 --> 0:28:23.760
<v Speaker 8>into stocks over ETFs. Is this something that you think

0:28:23.920 --> 0:28:26.280
<v Speaker 8>is going to be persistent, that we are actually shifting

0:28:26.320 --> 0:28:29.639
<v Speaker 8>away from some of the broad indexes and really meaningfully

0:28:29.680 --> 0:28:31.840
<v Speaker 8>clients looking at specific stocks.

0:28:32.960 --> 0:28:33.880
<v Speaker 3>Yeah, I think that's right.

0:28:33.920 --> 0:28:36.760
<v Speaker 9>Look, in the last decade, really equities and all asset

0:28:36.800 --> 0:28:39.920
<v Speaker 9>classes have been dominated by one thing and one thing only,

0:28:39.960 --> 0:28:42.480
<v Speaker 9>and that's a zero interest rate world, a very low

0:28:42.520 --> 0:28:47.120
<v Speaker 9>cost of capital, and that's really driven an environment where

0:28:47.240 --> 0:28:49.880
<v Speaker 9>valuations of assets have gone up. That's been a major

0:28:50.000 --> 0:28:53.320
<v Speaker 9>driver of returns which were not likely to see again

0:28:53.440 --> 0:28:56.760
<v Speaker 9>to the same degree. But it also generated environment was

0:28:56.920 --> 0:29:00.760
<v Speaker 9>very factor based. Everyone wanted growth because it benefited most

0:29:00.840 --> 0:29:03.480
<v Speaker 9>from that drop of very low cost of.

0:29:03.520 --> 0:29:07.000
<v Speaker 7>Capital, and everyone was neglecting value.

0:29:07.040 --> 0:29:09.360
<v Speaker 9>And I think it's much more nuance now you're seeing

0:29:09.400 --> 0:29:14.440
<v Speaker 9>some really good earnings coming through across different sectors of

0:29:14.480 --> 0:29:20.080
<v Speaker 9>the markets. We're also seeing different leadership geographically as well.

0:29:20.120 --> 0:29:22.280
<v Speaker 9>We've been arguing that Europe woul outform the US, and

0:29:22.320 --> 0:29:24.560
<v Speaker 9>it's been doing rather better in the last year.

0:29:24.600 --> 0:29:25.840
<v Speaker 3>I think that will continue.

0:29:26.000 --> 0:29:28.440
<v Speaker 9>So I think investors need to be a bit more nuanced,

0:29:28.520 --> 0:29:32.840
<v Speaker 9>more diversified across regions, across sectors and factors. And it

0:29:32.880 --> 0:29:35.840
<v Speaker 9>really is I think an environment where stop picking an

0:29:35.880 --> 0:29:40.840
<v Speaker 9>alpha creates a better opportunity for investors relative to just

0:29:40.920 --> 0:29:42.800
<v Speaker 9>beta an index investing. Well.

0:29:43.000 --> 0:29:46.480
<v Speaker 8>That makes sort of a concern around the fragility of

0:29:46.560 --> 0:29:48.400
<v Speaker 8>markets when there is a shock that people are not

0:29:48.480 --> 0:29:50.720
<v Speaker 8>prepared for. And I wonder, for example, today with the

0:29:50.800 --> 0:29:53.360
<v Speaker 8>CPI report, we end up with something that is much

0:29:53.360 --> 0:29:57.120
<v Speaker 8>harder than what people expected. If there is that vulnerability

0:29:57.240 --> 0:29:59.720
<v Speaker 8>even amid all of this sort of malaise around the

0:29:59.760 --> 0:30:02.600
<v Speaker 8>mac or a trade to suddenly say, oh my goodness, I

0:30:02.640 --> 0:30:03.800
<v Speaker 8>need to pay attention again.

0:30:05.600 --> 0:30:08.400
<v Speaker 9>Yeah, I think, look, the macro is going to be

0:30:08.440 --> 0:30:11.680
<v Speaker 9>critically important because we're close to inflection points, and it's

0:30:11.720 --> 0:30:16.760
<v Speaker 9>always an environment where investors become particularly heightened to risks

0:30:16.880 --> 0:30:20.480
<v Speaker 9>or opportunities around margin or macro data. I think, as

0:30:20.520 --> 0:30:23.920
<v Speaker 9>you described in the introduction, we're in an environment where

0:30:23.920 --> 0:30:27.600
<v Speaker 9>inflation is still pretty sticky, well above what the central

0:30:27.640 --> 0:30:31.600
<v Speaker 9>banks really want in terms of their targets, and there

0:30:31.600 --> 0:30:34.360
<v Speaker 9>are some risks still on the downside in terms of

0:30:34.400 --> 0:30:37.360
<v Speaker 9>the economy. At the moment, I think markets are really

0:30:37.440 --> 0:30:41.600
<v Speaker 9>pricing the best possible outcome on markets, pricing rate cuts

0:30:41.600 --> 0:30:44.760
<v Speaker 9>and inflation coming down. The equity markets are pretty much

0:30:44.800 --> 0:30:48.600
<v Speaker 9>pricing a soft landing. That combination is possible, but it's

0:30:48.640 --> 0:30:51.960
<v Speaker 9>really what's priced, and I think that the margin. Our

0:30:52.040 --> 0:30:55.600
<v Speaker 9>view is that interest rate expectations need to adjust to

0:30:55.720 --> 0:30:58.040
<v Speaker 9>being higher for longer to get inflation down.

0:30:58.800 --> 0:31:00.840
<v Speaker 1>Before we get back to inflation, I want to tag

0:31:00.880 --> 0:31:03.920
<v Speaker 1>team you and Jeff Curry together, and this is on hydrocarbons.

0:31:04.160 --> 0:31:07.080
<v Speaker 1>And I look at Shell PLC obviously with a higher

0:31:07.120 --> 0:31:10.680
<v Speaker 1>dividend than what I see with Exceutomobile, Goldman Sex and

0:31:10.880 --> 0:31:15.200
<v Speaker 1>owning big oil on the continent or big oil in America.

0:31:15.240 --> 0:31:16.160
<v Speaker 1>How do you choose?

0:31:17.680 --> 0:31:22.120
<v Speaker 9>Well, We like energy and commodities generally we think that

0:31:22.360 --> 0:31:25.280
<v Speaker 9>prices will rise from a fundamental perspective, as Jeff has

0:31:25.280 --> 0:31:28.960
<v Speaker 9>been arguing. But also these sectors are very very cash generative.

0:31:29.000 --> 0:31:32.400
<v Speaker 9>They're paying dividends and they got free cash flow yields,

0:31:32.640 --> 0:31:35.560
<v Speaker 9>you know, in the mid teens, particularly in Europe, so

0:31:36.160 --> 0:31:40.360
<v Speaker 9>energy and resources were overweight in Europe. We like resources

0:31:40.400 --> 0:31:43.840
<v Speaker 9>in particular in the US. But these areas of the

0:31:43.880 --> 0:31:47.000
<v Speaker 9>market we think have very low valuations. They don't have

0:31:47.080 --> 0:31:49.880
<v Speaker 9>a lot of downside risk in terms of valuation, and

0:31:49.920 --> 0:31:53.280
<v Speaker 9>they've still got an opportunity to I think, accrete returns

0:31:53.280 --> 0:31:57.080
<v Speaker 9>and compound returns for investors over time in a flat market.

0:31:57.400 --> 0:31:59.200
<v Speaker 1>Peter, if you and Jeff Curry are over in New

0:31:59.280 --> 0:32:02.080
<v Speaker 1>York City or were there, or were there in London, whatever,

0:32:02.120 --> 0:32:03.880
<v Speaker 1>we'd love to get both of you on desk with

0:32:03.960 --> 0:32:05.640
<v Speaker 1>us at the same time. That would be just a

0:32:05.640 --> 0:32:09.240
<v Speaker 1>really great moment. Mister Oppenheimer's with Golden Sex.

0:32:13.120 --> 0:32:16.480
<v Speaker 8>Joining us now, Henry to Trace, economic policy research director

0:32:16.840 --> 0:32:20.920
<v Speaker 8>at Veda Partners, really appreciate you joining us, Henrietta, your

0:32:21.040 --> 0:32:24.640
<v Speaker 8>take on the non action, the non development of yesterday's

0:32:24.720 --> 0:32:27.440
<v Speaker 8>meeting and whether any of these meetings will really gild

0:32:27.520 --> 0:32:31.360
<v Speaker 8>any fruit until someone said yesterday the eleventh hour, the

0:32:31.480 --> 0:32:33.480
<v Speaker 8>fifty ninth minute, and the fifty ninth second.

0:32:35.040 --> 0:32:36.240
<v Speaker 11>Yeah, that's exactly right.

0:32:36.320 --> 0:32:38.800
<v Speaker 6>I mean, anybody who's been through this movie before knows

0:32:38.840 --> 0:32:41.080
<v Speaker 6>that they do not get anything done until they have to.

0:32:41.440 --> 0:32:44.880
<v Speaker 6>In DC, we are functionally four weeks away from June first,

0:32:44.920 --> 0:32:47.680
<v Speaker 6>which even Treasury has not been hard and fast on

0:32:47.760 --> 0:32:51.440
<v Speaker 6>the actual deadline. The House has been out of session

0:32:51.520 --> 0:32:54.960
<v Speaker 6>for about ten days since their vote a few weeks back.

0:32:55.360 --> 0:32:58.040
<v Speaker 6>So when they had the meeting yesterday, my base case

0:32:58.080 --> 0:33:00.640
<v Speaker 6>assumption and from speaking with staff, was that nothing was

0:33:00.680 --> 0:33:02.120
<v Speaker 6>going to come a bit. There was going to be

0:33:02.360 --> 0:33:04.840
<v Speaker 6>press availability, they were going to shake hands, get a

0:33:04.840 --> 0:33:07.680
<v Speaker 6>lot of jobs in which we obviously saw from Speaker

0:33:07.760 --> 0:33:10.160
<v Speaker 6>McCarthy sometimes a little bit more aggressively than anybody would

0:33:10.160 --> 0:33:13.160
<v Speaker 6>have anticipated in an ordinary year. But he's really like

0:33:13.200 --> 0:33:15.960
<v Speaker 6>proving what he wants to be and present as speaker,

0:33:16.200 --> 0:33:18.760
<v Speaker 6>and so this is much much more about posturing. You'll

0:33:18.800 --> 0:33:21.280
<v Speaker 6>notice that the biggest takeaway was staff is going to

0:33:21.280 --> 0:33:23.959
<v Speaker 6>get involved. Now that's all I want, as a former staffer,

0:33:24.040 --> 0:33:25.160
<v Speaker 6>is to get staff involved.

0:33:25.320 --> 0:33:27.720
<v Speaker 11>They'll start meeting today at the leadership level.

0:33:28.240 --> 0:33:28.720
<v Speaker 7>One of the.

0:33:28.640 --> 0:33:31.240
<v Speaker 6>Areas to concern I hear most is, Hey, the House

0:33:31.280 --> 0:33:33.200
<v Speaker 6>and Senate are not going to be in session at

0:33:33.200 --> 0:33:36.080
<v Speaker 6>the same time for the next consecutive three weeks. Are

0:33:36.080 --> 0:33:38.280
<v Speaker 6>you concerned? And my answer is no, I don't care

0:33:38.320 --> 0:33:40.920
<v Speaker 6>what break and file members are doing. I really only

0:33:40.960 --> 0:33:43.160
<v Speaker 6>care what staff is doing, and they will be meeting tonight.

0:33:43.520 --> 0:33:45.560
<v Speaker 6>They are free to work through the weekend. They do

0:33:45.640 --> 0:33:48.040
<v Speaker 6>not need to attend every single fundraiser back in the

0:33:48.080 --> 0:33:50.600
<v Speaker 6>district the way that members do. So there really are

0:33:50.960 --> 0:33:53.560
<v Speaker 6>three full weeks to get a resolution here. And the

0:33:53.600 --> 0:33:56.080
<v Speaker 6>way that I would phrase it, just briefly, a good

0:33:56.120 --> 0:33:58.840
<v Speaker 6>rule of thumb here is look at the thursdays for

0:33:58.920 --> 0:34:01.520
<v Speaker 6>the rest of May. Thursday of this week we start

0:34:01.560 --> 0:34:03.960
<v Speaker 6>to get action out of staff. Thursday of next week

0:34:04.000 --> 0:34:05.880
<v Speaker 6>is the earliest I would expect a Senate vote, and

0:34:05.920 --> 0:34:07.960
<v Speaker 6>then Thursday of the following week is withou would expect

0:34:07.960 --> 0:34:09.520
<v Speaker 6>a House vote, So that's plenty of time.

0:34:09.680 --> 0:34:12.000
<v Speaker 8>This is like waiting for smoke signals, right, wait for

0:34:12.120 --> 0:34:14.000
<v Speaker 8>Thursday and we can get some sort of sense of

0:34:14.000 --> 0:34:20.040
<v Speaker 8>what's going on. Yeah, Pastor ket over here this morning, Henrietta.

0:34:20.120 --> 0:34:23.799
<v Speaker 8>I'm curious about this George Santos development in how it

0:34:23.840 --> 0:34:27.200
<v Speaker 8>relates to some of the close margins that Kevin McCarthy

0:34:27.280 --> 0:34:30.400
<v Speaker 8>is working with. The New York Post is reporting the

0:34:30.520 --> 0:34:34.680
<v Speaker 8>GEO representative GOP representative George Santos is going to surrender

0:34:35.080 --> 0:34:38.080
<v Speaker 8>after the indictment that we heard about yesterday. He does

0:34:38.160 --> 0:34:40.640
<v Speaker 8>plan to turn himself in, according to this report. This

0:34:40.719 --> 0:34:44.319
<v Speaker 8>highlights that Kevin McCarthy is working with a five Republican

0:34:44.680 --> 0:34:47.880
<v Speaker 8>margin of error that he has to keep on the rails.

0:34:48.160 --> 0:34:50.279
<v Speaker 8>Does this change the equation at all in your in

0:34:50.320 --> 0:34:52.560
<v Speaker 8>your view, I mean it.

0:34:52.480 --> 0:34:54.120
<v Speaker 11>Really underscores the current equation.

0:34:54.239 --> 0:34:56.319
<v Speaker 6>This is an empty shirt that you're trotting around that

0:34:56.360 --> 0:34:59.279
<v Speaker 6>has no committee assignments and is only there to vote.

0:34:59.280 --> 0:35:01.160
<v Speaker 6>The way to Kevin mc he tells him to vote.

0:35:01.640 --> 0:35:03.799
<v Speaker 6>When we were dealing with the Limit Safe Grow Act,

0:35:03.840 --> 0:35:06.799
<v Speaker 6>initially I thought it was great when Santos came out

0:35:06.800 --> 0:35:08.120
<v Speaker 6>and said he didn't know which way he was going

0:35:08.200 --> 0:35:10.400
<v Speaker 6>to vote. He's going to vote whichever way Kevin McCarthy

0:35:10.400 --> 0:35:12.800
<v Speaker 6>tells him to vote, and that is the requirement in

0:35:12.920 --> 0:35:14.320
<v Speaker 6>order for him to stay in Congress.

0:35:14.360 --> 0:35:16.520
<v Speaker 11>So I think this just underscores how.

0:35:16.719 --> 0:35:18.719
<v Speaker 6>Razor thin as you point out the margins are for

0:35:18.760 --> 0:35:21.560
<v Speaker 6>Speaker McCarthy, that you would keep someone like towards Santas

0:35:21.600 --> 0:35:23.160
<v Speaker 6>and then that the rest of the caucus has to

0:35:23.200 --> 0:35:26.279
<v Speaker 6>explain away and that's the tricky thing for them to do.

0:35:27.080 --> 0:35:30.680
<v Speaker 1>Why can't we get to a commission? Simpson Bulls or

0:35:30.719 --> 0:35:34.359
<v Speaker 1>some flavor of that? Is it, Henrietta, you're expert at this?

0:35:34.600 --> 0:35:37.640
<v Speaker 1>Is it so fractured? We can't even get to a

0:35:37.680 --> 0:35:41.680
<v Speaker 1>commission because these clowns are afraid of the outcome of

0:35:41.760 --> 0:35:42.440
<v Speaker 1>a commission.

0:35:43.880 --> 0:35:44.719
<v Speaker 11>I mean, give it time.

0:35:44.800 --> 0:35:47.440
<v Speaker 6>Alan Simpson is an all time rock star as far

0:35:47.480 --> 0:35:49.680
<v Speaker 6>as I'm concerned. Those were great days when we had

0:35:49.680 --> 0:35:52.960
<v Speaker 6>the Simpson Bulls Commission. We even had the Super Committee

0:35:52.960 --> 0:35:55.040
<v Speaker 6>and around that time, if you'll remember that group of people.

0:35:55.800 --> 0:36:00.440
<v Speaker 6>So to get a serious answer, when I started out yesterday,

0:36:00.480 --> 0:36:02.320
<v Speaker 6>I assumed that there would not be any breakthroughs and

0:36:02.400 --> 0:36:05.920
<v Speaker 6>negotiations at the White House. So my immediate next step

0:36:06.000 --> 0:36:08.480
<v Speaker 6>was to listen for any dog whistles for a fiscal

0:36:08.600 --> 0:36:11.920
<v Speaker 6>year twenty twenty four appropriations process, discussions of the budget,

0:36:12.200 --> 0:36:15.920
<v Speaker 6>discover discussions of actual government spending in those twelve approbe spills.

0:36:16.280 --> 0:36:18.680
<v Speaker 6>That is something that I spent my time with staff

0:36:18.680 --> 0:36:21.640
<v Speaker 6>collecting thoughts on, Hey, what are the odds we kicked

0:36:21.640 --> 0:36:23.640
<v Speaker 6>the can down the road? Just get a short term

0:36:23.640 --> 0:36:27.400
<v Speaker 6>suspension going from June first to September thirtieth, which is

0:36:27.400 --> 0:36:29.480
<v Speaker 6>the end of the fifth year, and see what the

0:36:29.480 --> 0:36:31.840
<v Speaker 6>odds are and whether they're rising for that sort.

0:36:31.600 --> 0:36:32.840
<v Speaker 11>Of four month bridge.

0:36:32.920 --> 0:36:36.280
<v Speaker 6>Okay, that four months period is when you'd see Simpson

0:36:36.360 --> 0:36:38.160
<v Speaker 6>bowls or Supercommittee starts it form.

0:36:38.280 --> 0:36:41.320
<v Speaker 1>Yeah, you've teed up the can like Lucy with Charlie Brown.

0:36:41.400 --> 0:36:43.800
<v Speaker 1>I mean, I know the way this goes. What happens

0:36:43.800 --> 0:36:46.480
<v Speaker 1>the first week of October if we've move us the

0:36:46.560 --> 0:36:49.560
<v Speaker 1>can to September thirty exactly.

0:36:49.600 --> 0:36:51.719
<v Speaker 6>So this is my worst case scenario and has been

0:36:51.760 --> 0:36:55.040
<v Speaker 6>since January, this situation where we never reach a conclusion.

0:36:55.120 --> 0:36:57.040
<v Speaker 6>Why because you know, we only have four vote margin

0:36:57.120 --> 0:37:00.439
<v Speaker 6>in the House and a Democratic Senate. What you start

0:37:00.480 --> 0:37:02.960
<v Speaker 6>seeing that on the risk is that we only do

0:37:03.040 --> 0:37:05.959
<v Speaker 6>these short term punts, and this sword is hanging over

0:37:06.040 --> 0:37:08.360
<v Speaker 6>us for the next two years. That's, in my opinion,

0:37:08.480 --> 0:37:11.239
<v Speaker 6>a very bad outcome, and that could very easily pass.

0:37:11.280 --> 0:37:12.600
<v Speaker 11>It happened in twenty twenty one.

0:37:13.040 --> 0:37:15.200
<v Speaker 6>We had always the federal fiscal year ends on the

0:37:15.239 --> 0:37:17.120
<v Speaker 6>September thirtieth, but at the time we couldn't agree on

0:37:17.160 --> 0:37:20.319
<v Speaker 6>the appropriations bills either, so we passed a three month

0:37:20.360 --> 0:37:23.759
<v Speaker 6>extension of those, called a continuing resolution into December third,

0:37:24.120 --> 0:37:27.040
<v Speaker 6>and then we simultaneously bumped the debt ceiling out that

0:37:27.200 --> 0:37:29.719
<v Speaker 6>same exact period. It was a four hundred and eighty

0:37:29.719 --> 0:37:33.120
<v Speaker 6>billion dollar suspension of specifically designed to get the debt

0:37:33.160 --> 0:37:36.640
<v Speaker 6>ceiling to coincide with the CR expiration, which of course

0:37:36.680 --> 0:37:38.200
<v Speaker 6>had been punted from September.

0:37:38.680 --> 0:37:40.120
<v Speaker 11>So that's a very real risk.

0:37:40.480 --> 0:37:43.520
<v Speaker 1>Henrietta Troce, thank you so much. She is chairman of

0:37:43.600 --> 0:37:47.520
<v Speaker 1>the Alan Simpson Fan Club in Washington with Ada partners

0:37:47.680 --> 0:37:51.440
<v Speaker 1>as well. Subscribe to the Bloomberg Surveillance podcast on Apple,

0:37:51.600 --> 0:37:55.840
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0:38:00.600 --> 0:38:05.120
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