WEBVTT - Bloomberg Surveillance TV: April 22, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.080 Terminal and the Bloomberg Business app. We begin with our 0:00:37.080 --> 0:00:39.680 top story, hot US data pushing out rate cuts the 0:00:39.680 --> 0:00:43.080 Fed's preferred inflation gauge due on Friday, Michael O'Rourke of 0:00:43.159 --> 0:00:46.960 Jones Trading saying this, financial markets are at an inflection point. 0:00:47.080 --> 0:00:50.720 The Fed's overestimation and overconfidence as to how restrictive policy 0:00:50.800 --> 0:00:54.840 is has fueled easy financial conditions and excessive risk taking 0:00:54.880 --> 0:00:58.920 while fostering easing expectations. Michael joins us now for more 0:00:58.960 --> 0:01:01.440 So Michael bears FETA site by still on that. 0:01:01.600 --> 0:01:04.120 Yes, yes, definitely fair to say. I mean I think 0:01:04.240 --> 0:01:05.800 you've touched it, even when you talk about that ten 0:01:05.840 --> 0:01:08.920 year yield potentially going to five percent right now, For 0:01:08.959 --> 0:01:11.720 the past three weeks, the ten year yield has been 0:01:11.760 --> 0:01:13.759 higher than the S and P five hundred earning yield, 0:01:14.240 --> 0:01:16.080 even though the S and P five hundred is corrected 0:01:16.120 --> 0:01:19.040 six percent over that time, that relationship has stayed the 0:01:19.040 --> 0:01:21.920 same because yields have continued to rise. And that just 0:01:21.959 --> 0:01:24.319 shows you have a risk free instrument offering you a 0:01:24.440 --> 0:01:28.480 very attractive return versus risky instruments and equities that are 0:01:28.520 --> 0:01:29.280 pretty expensive. 0:01:29.480 --> 0:01:32.080 JRO downside five five percent from the old time heighst 0:01:32.080 --> 0:01:34.000 of match. How much down sound are you to can fall? 0:01:35.360 --> 0:01:38.160 I think there's a lot of potential. I'm not gonna 0:01:38.160 --> 0:01:41.120 sit there and say, you know, I can't put a 0:01:41.160 --> 0:01:42.920 number on it because a lot of it's driven by 0:01:42.920 --> 0:01:47.040 financial conditions. Right, We've had this easy financial condition environment 0:01:47.720 --> 0:01:52.160 that has basically fostered equity prices fawted ascer prices across 0:01:52.200 --> 0:01:54.960 the board. Even the FEDS Financial Stability Report released on 0:01:55.000 --> 0:01:58.960 Friday talked about how equity valuations are high, historically high, 0:01:59.120 --> 0:02:03.200 how credit spreads are tight. But if that relationship between 0:02:03.240 --> 0:02:08.600 treasury yields and earnings yields, it's traditionally the equity you know, 0:02:08.639 --> 0:02:11.560 the SP five hundred earns yield over the seven years 0:02:11.600 --> 0:02:14.639 prior to the pandemic was about average three hundred and 0:02:14.720 --> 0:02:18.000 forty basis points over treasury yields. Even to just get 0:02:18.600 --> 0:02:20.880 a third of that back, the S and P five 0:02:20.919 --> 0:02:23.480 hundred would drop twenty percent. And that's the type of 0:02:23.600 --> 0:02:27.079 risk we're talking about here that I'm not saying we're 0:02:27.080 --> 0:02:29.480 going right back to that relationship. It just gives you 0:02:29.480 --> 0:02:32.040 an idea of how expensive stocks are relative to bonds. 0:02:32.120 --> 0:02:32.520 I love this. 0:02:32.600 --> 0:02:34.320 Everyone who comes on the show today seems to think 0:02:34.320 --> 0:02:36.400 we're at an inflection point. Bob Michael also seeing a 0:02:36.400 --> 0:02:39.680 potential inflection point, but in the opposite direction, a potential 0:02:39.680 --> 0:02:40.680 opportunity to buy. 0:02:41.200 --> 0:02:42.040 Why is this. 0:02:41.960 --> 0:02:46.000 Inflection point in your view, going to inflect more negatively? 0:02:46.240 --> 0:02:48.320 Well, because, okay, you look at the earning situation we 0:02:48.400 --> 0:02:50.480 have earning season TOMP. We're talking about all the big 0:02:50.480 --> 0:02:53.359 earnings this week, right, Earnings this quarter is supposed to 0:02:53.400 --> 0:02:57.000 be basically sequentially flat versus Q four almost flat year 0:02:57.040 --> 0:02:59.280 of year. The big bump in earnings is supposed to 0:02:59.280 --> 0:03:02.560 come in Q two, three and four, where aggregate earnings 0:03:02.600 --> 0:03:06.720 are supposed to rise sixteen percent. Now we're analyst forecasting 0:03:06.919 --> 0:03:10.680 sixteen percent earnings jump for those three quarters in a 0:03:10.800 --> 0:03:14.040 five point three seventy five percent fed funds environment. You know, 0:03:14.320 --> 0:03:16.840 we're not getting the rate cuts we expected. We're not 0:03:17.080 --> 0:03:20.360 getting what the catalyst that should drive things. And you know, 0:03:20.400 --> 0:03:23.080 going forward in the economy, we've had an incredibly strong 0:03:23.120 --> 0:03:26.080 economy and a lot of that is fiscal monetary stimulus 0:03:26.120 --> 0:03:28.680 from the pandemic playing out of the past couple of years. 0:03:29.120 --> 0:03:31.359 So again, to expect that type of jump in earnings, 0:03:31.400 --> 0:03:34.040 it's pretty aggressive. And if you don't get that, then 0:03:34.080 --> 0:03:35.760 you realize how expensive this tape is. 0:03:35.880 --> 0:03:37.920 And do you see this idea of a sell off 0:03:38.000 --> 0:03:41.320 in stocks that comes along with an ongoing sell off 0:03:41.320 --> 0:03:44.320 in bonds sort of something that continues the divergence that 0:03:44.320 --> 0:03:46.440 you were talking about with a ten year treasure yield 0:03:46.760 --> 0:03:49.120 being above the S and P five hundred earning shield. 0:03:49.400 --> 0:03:51.600 Yeah, well, if you go back, you go back to 0:03:51.640 --> 0:03:55.880 the nineties and and you know, probably the earlier two thousands, 0:03:55.960 --> 0:03:58.520 the old saying was, you know, stocks follow bonds, right, 0:03:58.560 --> 0:04:00.720 If treasure yields were coming down on that big bond 0:04:00.760 --> 0:04:04.200 bow market, stock's rallied, right because they're competing with each 0:04:04.240 --> 0:04:07.400 other for assets for investment assets. So now we're seeing 0:04:07.440 --> 0:04:11.160 treasure yields rise and basically, which is mean bonds are 0:04:11.200 --> 0:04:15.240 going down and stocks should be following bonds lower here 0:04:15.280 --> 0:04:18.159 from a price perspective to keep that earning deal for 0:04:18.160 --> 0:04:21.159 the S and P five hundred somewhat competitive with with 0:04:21.240 --> 0:04:24.000 the risk free instrument and treasuries, and we just haven't 0:04:24.040 --> 0:04:26.440 really seen that yet except in the last three weeks. 0:04:26.440 --> 0:04:28.800 We've seen this dip, but they've moved together. 0:04:28.920 --> 0:04:31.080 Do any of these relationships still stand or have we 0:04:31.160 --> 0:04:32.000 broken all of these? 0:04:32.120 --> 0:04:32.200 No? 0:04:32.279 --> 0:04:33.599 Well, so that's that's interesting. 0:04:33.720 --> 0:04:35.880 If you go back to late nineties, the treasure you know, 0:04:35.920 --> 0:04:39.039 the treasure yield was the earning five hundred, earning deal 0:04:39.120 --> 0:04:41.919 was consistently lower than the treasure yield, but that was 0:04:41.960 --> 0:04:45.080 a that was you know, during the Great Moderation, as 0:04:45.480 --> 0:04:47.920 as inflation was you know, coming down you know, for 0:04:48.360 --> 0:04:51.640 basically decades at that point, and bonds were just you know, 0:04:51.680 --> 0:04:54.839 cautious and investments were late to follow. This is the 0:04:54.880 --> 0:04:58.000 inverse situation where we're seeing inflation is more sticky. We're 0:04:58.040 --> 0:05:01.279 seeing a structurally different economy than we've from two thousand 0:05:01.360 --> 0:05:02.360 to twenty twenty. 0:05:02.880 --> 0:05:04.839 You say that the Fed policy does not need to 0:05:04.880 --> 0:05:07.559 change this point, but communication does. What are they getting 0:05:07.560 --> 0:05:08.960 wrong when they're speaking to the market. 0:05:09.040 --> 0:05:11.000 Well, I think they're just taking what they're seeing in 0:05:11.000 --> 0:05:13.640 front of them, and they're they're being overconfident in what 0:05:13.680 --> 0:05:15.560 they're seeing. So in twenty twenty one, the story was 0:05:15.839 --> 0:05:18.599 it's transitory, and we heard that for a year. When 0:05:18.600 --> 0:05:22.120 the Fed finally raised interest rates, core PC had actually 0:05:22.160 --> 0:05:25.120 peaked in February of twenty twenty two. You know, the 0:05:25.160 --> 0:05:27.480 Fed raised rates in March, and they finally ended QE 0:05:27.520 --> 0:05:30.120 in March. They were late and they were too confident 0:05:30.240 --> 0:05:33.800 too long. So for since last summer, we've heard policies restrictive. 0:05:33.839 --> 0:05:37.039 Policy is restrictive, but it hasn't been. In Q three, 0:05:37.120 --> 0:05:39.560 we put up a five percent GDP print. At that point, 0:05:39.560 --> 0:05:41.120 the Fed has to go back to themselves and say 0:05:41.320 --> 0:05:44.320 we're missing something in this economy. And they instead of 0:05:44.400 --> 0:05:47.440 doing that, they continue to say policy is restrictive, and 0:05:47.720 --> 0:05:50.400 they keep this estimate of the long term you know, 0:05:50.440 --> 0:05:52.160 long term FED funds rate down at two and a 0:05:52.200 --> 0:05:56.320 half percent, which is only a fifty basis point, you know, 0:05:56.480 --> 0:05:59.680 real neutral rate. Whereas even the New York Fed's dsg 0:05:59.800 --> 0:06:04.279 MO has it at two percent. So they're basically going 0:06:04.320 --> 0:06:07.280 off of a you know, a forecast that interest rates 0:06:07.320 --> 0:06:09.720 are going back to lower levels, or the markets taking 0:06:09.720 --> 0:06:13.040 their forecus they don't actually even believe it anymore, and saying, oh, 0:06:13.080 --> 0:06:14.600 this is where going in the future, so we can 0:06:14.680 --> 0:06:17.640 keep equity evaluations inflated a little bit higher. 0:06:17.839 --> 0:06:21.000 We start hearing some FED officials talk about whether or 0:06:21.000 --> 0:06:24.040 not they are actually restrictive though, and Michelle Bowman last 0:06:24.040 --> 0:06:27.200 week said we're restrictive, but we might not be sufficiently restrictive. 0:06:27.400 --> 0:06:31.839 What's the difference, Oh, it's massive, because if you're underestimating 0:06:32.600 --> 0:06:36.680 or if you're overestimating how restrictive you are, then you're 0:06:36.720 --> 0:06:39.680 making a policy mistake because policy is far looser than 0:06:39.680 --> 0:06:42.159 you believe it to be. So that is why, you know, 0:06:42.279 --> 0:06:44.400 for the past three quarters, if you include what this 0:06:44.720 --> 0:06:47.200 Q one is going to look like, we've put up, 0:06:47.560 --> 0:06:49.920 I think we've averaged GDP about three point six percent, 0:06:50.279 --> 0:06:53.160 which is double the fed's long term forecast of US 0:06:53.200 --> 0:06:59.000 potential GDP. It's funny Chairman Powell talks about their risks 0:06:59.040 --> 0:07:01.839 being balanced. Now if you go back to pre pandemic, 0:07:02.240 --> 0:07:04.080 when we had one hundred. You know, one point eight 0:07:04.120 --> 0:07:06.920 percent core PCE. The FED was willing to do anything 0:07:06.920 --> 0:07:09.119 to push inflation up to two percent, and micro manager 0:07:09.200 --> 0:07:12.280 there here we're at two point eight percent PCE. We're 0:07:12.320 --> 0:07:15.240 talking about things being balanced. Meanwhile, the unemployment rates three 0:07:15.280 --> 0:07:18.880 point eight percent, which is thirty basis points lower than 0:07:18.960 --> 0:07:21.560 the Fed's long term target're at a four point one percent, 0:07:22.000 --> 0:07:25.280 So we're still in an inflationary environment per the guidance 0:07:25.320 --> 0:07:28.480 they give, per their models, per their forecast. But they 0:07:28.480 --> 0:07:30.440 don't talk about like that. All they've talked about for 0:07:30.480 --> 0:07:32.840 the past six months is cutting rates until the past 0:07:32.920 --> 0:07:33.520 couple of weeks. 0:07:33.640 --> 0:07:35.560 So why should I just buy stocks? There's nice sign 0:07:35.600 --> 0:07:39.280 of them hiking anytime soon. Growth is good, inflation sticky 0:07:39.440 --> 0:07:40.840 top li like grud it's going to be settled off 0:07:40.880 --> 0:07:42.760 the back of that. Why wouldn't I be a bye head? Well, 0:07:42.760 --> 0:07:43.200 it's funny. 0:07:43.200 --> 0:07:46.560 I know when you guys had Torston slocking and Tom 0:07:46.680 --> 0:07:49.080 King talks about he talks about it's a GDPGE driven event, 0:07:49.480 --> 0:07:51.560 and he is he is right about that, and that 0:07:51.680 --> 0:07:53.920 is that is something I agree with. I think the 0:07:54.040 --> 0:07:57.400 risk here is we've had so many people chasing these 0:07:57.480 --> 0:08:02.200 rate cuts chasing these these higher valuations that I think 0:08:02.240 --> 0:08:04.240 we're due for that correction at this point as long 0:08:04.280 --> 0:08:07.720 as these treasuryelds continue toize. If Treasury you'll stabilize, you 0:08:08.240 --> 0:08:11.720 will start to reevaluate. But once that risk free instrument 0:08:11.760 --> 0:08:14.720 starts to become more attractive, I think you do for 0:08:14.760 --> 0:08:16.000 an equity correction. 0:08:15.880 --> 0:08:17.600 Very close to five percent this morning on a two 0:08:17.680 --> 0:08:20.320 year four ninety eight sixty four, Michael enjoyed. It's good 0:08:20.320 --> 0:08:21.800 to see it. Thank you too long. It's like years 0:08:21.800 --> 0:08:24.800 in person since we've done this. Michael Rock there, Thank you, sir, 0:08:33.920 --> 0:08:36.720 Tasnim gil wadwella following the impact of those and more 0:08:36.920 --> 0:08:39.920 as City Commercial Bank Cantantinim, I please to say join 0:08:40.000 --> 0:08:42.079 us now for more Tasdin waterfol to catch up with you. 0:08:42.120 --> 0:08:44.200 I can just say a little bit about our travels. 0:08:44.240 --> 0:08:46.360 We've just got back to New York from Washington, d C. 0:08:46.800 --> 0:08:48.520 We spent a week. We thought we were going to 0:08:48.520 --> 0:08:50.520 spend a week at least talking about the economy, and 0:08:50.559 --> 0:08:52.400 what we met was a load of economists who were 0:08:52.440 --> 0:08:55.280 national security experts now Tans and I just wonder from 0:08:55.320 --> 0:08:57.280 your perspective whether you can speak to some of the 0:08:57.280 --> 0:08:59.760 trends that you've seen evolve that might speak to that 0:09:00.120 --> 0:09:02.920 worries over what's happening between China and the US, the 0:09:03.000 --> 0:09:04.760 US and maybe other countries too. 0:09:07.320 --> 0:09:09.319 Yes, of course, thank you, Fusley, thank you very much 0:09:09.360 --> 0:09:12.960 for having me. It's a real pleasure to be here. So, 0:09:13.280 --> 0:09:17.520 I mean, definitely, we are seeing a lot of activity 0:09:17.559 --> 0:09:21.520 with our clients as they try to navigate the environment, 0:09:21.559 --> 0:09:24.080 which just seems to be getting more and more intense 0:09:25.280 --> 0:09:31.120 on the macros, around inflation, around interest rates which are 0:09:31.240 --> 0:09:36.080 proving to be definitely higher for longer, and clients eagerly 0:09:36.120 --> 0:09:39.600 awaiting when the cuts are finally going to come. But 0:09:39.960 --> 0:09:42.880 you know, as you just mentioned, on the political side 0:09:42.880 --> 0:09:45.400 as well, lots of things for our clients to navigate. 0:09:45.679 --> 0:09:48.240 Desnim how much has this actually altered the view for 0:09:48.440 --> 0:09:50.720 mergers and acquisitions who are speaking with Bank from America's 0:09:50.760 --> 0:09:53.600 CEO Brian moynihan, and he said, it's very difficult for 0:09:53.640 --> 0:09:57.160 companies to get any conviction to buy another company or 0:09:57.240 --> 0:09:58.800 merge at a time or a lot of things are 0:09:58.800 --> 0:10:02.160 being rejected the name of national security concerns, the name 0:10:02.240 --> 0:10:04.840 of antitrust, the name of whatever. You can't predict it 0:10:04.880 --> 0:10:06.600 Are you seeing the same thing among your clients. 0:10:08.120 --> 0:10:11.160 Yeah, it's it is a very very difficult time on 0:10:11.200 --> 0:10:15.080 the deal deal front for companies to you know, go 0:10:15.200 --> 0:10:18.280 about and although we are seeing some deals closed, you know, 0:10:18.320 --> 0:10:22.800 we've had some cell side opportunities at City and some 0:10:22.880 --> 0:10:25.680 of our clients you know, have have been able to 0:10:26.440 --> 0:10:29.880 go through the cycle, but you know, lots of things 0:10:29.880 --> 0:10:33.000 in the way exactly as you mentioned, and also with 0:10:33.040 --> 0:10:38.400 the high interest rates, you know, capital to fund the acquisitions. Also, 0:10:38.800 --> 0:10:41.400 you know, another factor that is proving to be a 0:10:41.400 --> 0:10:43.880 sticking point for our clients that you know, it's not 0:10:44.000 --> 0:10:47.760 cheap anymore to buy another company. You've got to, you know, 0:10:47.880 --> 0:10:49.760 make sure that it's really worth it, that the valuation 0:10:50.640 --> 0:10:52.840 you're not going to overpay, and the valuations are going 0:10:52.880 --> 0:10:54.920 to be there to see you through kind of the 0:10:54.960 --> 0:10:55.720 medium in the long. 0:10:55.640 --> 0:10:58.000 Term, a lot of people are talking about this week 0:10:58.080 --> 0:10:59.840 is a pivot point. We're going to get the earnings 0:10:59.840 --> 0:11:01.880 of one hundred and seventy eight of the S and 0:11:01.880 --> 0:11:03.160 P five hundred companies. 0:11:03.440 --> 0:11:05.559 You focus on our whole host. 0:11:05.320 --> 0:11:09.000 Of smaller banks and smaller excuse me, smaller companies that 0:11:09.240 --> 0:11:12.520 have individual challenges and might have an even better view 0:11:12.760 --> 0:11:14.920 in terms of the direction of travel of both economic 0:11:15.000 --> 0:11:18.719 strength and inflation. Are the signs that you're seeing consistent 0:11:19.040 --> 0:11:21.360 with this general feeling that we're going to get a 0:11:21.400 --> 0:11:23.960 no landing with inflation that's going to run hot for 0:11:24.040 --> 0:11:25.079 the foreseeable future. 0:11:26.880 --> 0:11:29.360 So, I mean, I think one of the things that 0:11:29.440 --> 0:11:32.199 I think is interesting that we're seeing with our clients 0:11:32.320 --> 0:11:35.320 is that their ballot shoots are actually really, really quite strong. 0:11:36.720 --> 0:11:40.800 For the vast majority of our clients, we've been supporting 0:11:40.840 --> 0:11:45.480 them as they think about diversifying. You know, although the 0:11:45.600 --> 0:11:48.040 environment is very tough, I think it's also posing quite 0:11:48.040 --> 0:11:50.960 a lot of opportunities for clients as well. You know, 0:11:51.200 --> 0:11:54.320 they're really thinking very very strongly about their supply chains 0:11:55.240 --> 0:11:58.480 and how they make them more resilient, how they secure, 0:12:00.120 --> 0:12:02.600 you know, make them very very secure as well. And 0:12:02.640 --> 0:12:06.280 I think, you know, things like near shoring, things like 0:12:07.720 --> 0:12:11.640 diversifying the funding environment for our supply chain. I think 0:12:11.679 --> 0:12:13.520 these are the opportunities that our clients are kind of 0:12:13.559 --> 0:12:16.959 playing into. So I think it's not all doom and gloom. 0:12:17.000 --> 0:12:19.720 Quite frankly, where our clients are concerned. 0:12:19.960 --> 0:12:23.440 Is that near shoring due to the market or because 0:12:23.480 --> 0:12:27.679 of policies and you know, this urge by certain governments. 0:12:29.040 --> 0:12:32.280 I think it's a bit of both. I think, you know, 0:12:32.320 --> 0:12:36.439 on the supply chain side, I think clients are trying 0:12:36.480 --> 0:12:42.880 to address things like logistic costs, like ensuring that you know, 0:12:42.920 --> 0:12:47.040 their goods actually get there there's no delays, and manage 0:12:47.040 --> 0:12:48.440 it from a kind of a cost and to get 0:12:48.480 --> 0:12:50.719 a security right. And then of course there's the incentives 0:12:50.760 --> 0:12:52.720 as well. You know, last week I was in Mexico 0:12:53.760 --> 0:12:57.480 where I actually saw this, the whole phenomena of near shoring, 0:12:57.559 --> 0:13:00.440 like with my own eyes. It was quite amazing. How 0:13:00.600 --> 0:13:05.240 you know, when large companies, the big MNC's, announce either 0:13:05.440 --> 0:13:08.480 a new investment or an expansion of a factory like 0:13:08.480 --> 0:13:11.520 in Mexico, the entire supply chain kind of follows them 0:13:11.559 --> 0:13:14.440 there and the whole kind of ecosystem gets built out 0:13:15.120 --> 0:13:18.840 around those large supplies, like you know, Kia announcing the 0:13:18.840 --> 0:13:22.280 big expansion of its plant in Mexico for ev cars. 0:13:22.600 --> 0:13:24.640 There's a whole kind of tier one, tier two, tier 0:13:24.679 --> 0:13:26.880 three impacts around the supply chain. 0:13:26.960 --> 0:13:27.240 With that. 0:13:27.800 --> 0:13:30.480 Do you see Chinese firms moving into Mexico, Because that's 0:13:30.520 --> 0:13:33.439 been a big concern with lawmakers and officials in the 0:13:33.520 --> 0:13:34.480 United states. 0:13:35.960 --> 0:13:37.679 That there are a couple of Chinese firms, but I 0:13:37.720 --> 0:13:40.560 think it's wider than that. You know, we've seen Korean 0:13:41.760 --> 0:13:46.400 firms as well. We've seen other other Asian companies moving 0:13:46.679 --> 0:13:48.840 there as well, So I think it's it's more mixed. 0:13:48.960 --> 0:13:51.320 I think there's you know, what we're noticing and with 0:13:52.080 --> 0:13:55.640 these these kind of corridors is there's a big North 0:13:55.679 --> 0:14:00.360 Asia to Latin corridor that is very very vile, and 0:14:00.400 --> 0:14:02.600 it's not only into Mexico as well, it's also into 0:14:02.640 --> 0:14:05.920 Brazil and other lat Ham countries as well. 0:14:06.120 --> 0:14:09.120 Tas'tan. What it sounds like is for multinationals, it's becoming 0:14:09.120 --> 0:14:11.760 increasingly complex, and it might lead you to believe that 0:14:11.760 --> 0:14:15.640 perhaps they just stay local and avoid expanding beyond their 0:14:15.640 --> 0:14:17.800 own borders. You're not saying that, are you. That's not 0:14:17.840 --> 0:14:18.120 what I. 0:14:18.120 --> 0:14:23.600 Hear, Absolutely not. Of course, you know, companies want to 0:14:23.600 --> 0:14:26.200 make sure that they're strong, you know, in their domestic 0:14:26.280 --> 0:14:29.320 and markets, and they're operating very well. But I think, 0:14:29.840 --> 0:14:32.840 you know, the vast majority of our clients and the 0:14:32.840 --> 0:14:35.720 reason they come to city is because they have global ambitions, 0:14:36.680 --> 0:14:39.000 and so you know, as they think about how they're 0:14:39.000 --> 0:14:42.200 going to grow themselves and how they're going to succeed 0:14:42.240 --> 0:14:44.760 in the market. That more and more our clients are 0:14:44.760 --> 0:14:47.800 looking at cross border opportunities as the way in which 0:14:47.840 --> 0:14:50.920 they are going to grow and access new markets, and 0:14:50.960 --> 0:14:53.560 that's where you know, bank like House can really help them. 0:14:53.600 --> 0:14:55.680 Can we just talk about just finally how that growth 0:14:55.800 --> 0:14:59.440 is being funded with interest rates near multi decade highs 0:14:59.440 --> 0:15:01.680 in some res agents, including here in the United States, 0:15:01.720 --> 0:15:04.760 and the sources of funding shifting tasknum, Have you noticed that? 0:15:06.680 --> 0:15:07.200 Definitely? 0:15:07.240 --> 0:15:07.360 So. 0:15:07.520 --> 0:15:08.960 I think one of the first things I'm going to 0:15:09.040 --> 0:15:11.520 say with the with with such high interest rates for 0:15:11.640 --> 0:15:15.560 quite some time now is that clients are are really 0:15:15.600 --> 0:15:20.080 getting absolutely focused on their own liquidity and looking at 0:15:20.120 --> 0:15:22.560 any kind of trap cash that they may have looking 0:15:22.600 --> 0:15:25.640 at very sophisticated even mid market clients that you know 0:15:26.600 --> 0:15:29.320 probably didn't pay that much attention as closely to their 0:15:29.320 --> 0:15:32.080 liquidity as say some of the very large clients would 0:15:32.080 --> 0:15:35.800 would would would traditionally be doing. They're they're paying a 0:15:35.840 --> 0:15:38.960 lot of attention to ensuring that they're they're efficiently using 0:15:39.080 --> 0:15:43.400 all the sources of capital, that payments are like swift there, 0:15:43.480 --> 0:15:46.360 their collections are really quick as well, and that the 0:15:46.440 --> 0:15:49.520 whole cash converstion cycle is is as tight and as 0:15:49.760 --> 0:15:53.080 efficient as possible, and and of course you know, we've 0:15:53.120 --> 0:15:55.560 got lots of solutions that can help with that. But 0:15:55.840 --> 0:15:59.400 but I think you know, there's there's other pools of capital. 0:15:59.400 --> 0:16:01.320 Of course, as you know, bank funding, and then we're 0:16:01.320 --> 0:16:04.360 also seeing the rise of private credit as well as 0:16:04.400 --> 0:16:07.080 coming up as being a kind of complementary to bank 0:16:07.120 --> 0:16:09.680 funding for these clients. So lots and lots of kind 0:16:09.680 --> 0:16:12.080 of innovation happening on the financing side. 0:16:12.360 --> 0:16:15.720 Has that innovation led to basically an environment or where 0:16:15.800 --> 0:16:19.160 higher rates have not crimped the expansion plans of a 0:16:19.160 --> 0:16:21.520 lot of these companies, even though it might be more 0:16:21.640 --> 0:16:26.400 challenging you have to be innovative, it's just as available 0:16:26.440 --> 0:16:29.920 in terms of credit creation to go out and to expand. 0:16:31.760 --> 0:16:34.480 Yeah, I think so, Liza, I mean, I think you know, 0:16:34.520 --> 0:16:38.880 what we're seeing is that with companies that are strong, 0:16:39.000 --> 0:16:42.880 they are just getting stronger, and high rates and even 0:16:43.040 --> 0:16:46.360 you know, just general geopolitics don't tend to kind of 0:16:47.840 --> 0:16:50.160 take the wind out the sales of these types of companies, 0:16:50.160 --> 0:16:54.360 and they do use almost kind of volatile environments to 0:16:54.360 --> 0:16:58.440 get even stronger and look for opportunities to expand you know, 0:16:58.600 --> 0:17:00.840 pick up sort of do small. We're seeing a lot 0:17:00.880 --> 0:17:05.200 of mid market companies like doing not like big transformative 0:17:06.359 --> 0:17:09.359 kind of deals, but small bolt on em and a 0:17:09.680 --> 0:17:11.200 like you know, picking up a kind of a ten 0:17:11.240 --> 0:17:14.120 million dollar company, twenty million dollar company, you know, adding 0:17:14.200 --> 0:17:16.879 a particular expertise. You know, those are some of the 0:17:16.880 --> 0:17:19.080 things that we're hearing a lot from our clients. 0:17:19.119 --> 0:17:21.520 Interesting, Tassanium, Let's do this again next time you're in 0:17:21.560 --> 0:17:22.960 New York City. We'd love to have you with us 0:17:22.960 --> 0:17:32.720 around the table tasnim gil wand whilea there of city. 0:17:34.840 --> 0:17:37.920 European Investment Bank President Nadia Calvino is here in New York, 0:17:37.960 --> 0:17:39.800 but it's for more President Calvino, good to see you, 0:17:39.960 --> 0:17:41.880 very good to see it's greater cash up once again. 0:17:42.040 --> 0:17:44.080 You're back from Washington, d C. We are as well, 0:17:44.160 --> 0:17:46.360 so maybe we can compare notes. We've talked a long 0:17:46.400 --> 0:17:50.280 time about a lack of cooperation maybe worldwide, a breakdown 0:17:50.440 --> 0:17:52.840 between the United States and what the Europeans need and 0:17:52.880 --> 0:17:55.520 what Ukraine ultimately wance. Did you sense the same thing 0:17:55.560 --> 0:17:58.600 at all in Washington and were coming together or moving apart? 0:17:58.800 --> 0:18:01.280 Well, we're definitely coming to Indeed, I think it was 0:18:01.320 --> 0:18:05.520 a very productive Spring Meetings week. We had many exchanges 0:18:05.920 --> 0:18:08.840 and I really see a momentum in coming together and 0:18:08.880 --> 0:18:12.399 supporting Ukraine very strongly, but also deepening our cooperation within 0:18:12.440 --> 0:18:17.720 the Multilateral Development Bank family to contribute to climate change, financing, 0:18:18.640 --> 0:18:23.000 peaceful and more. How would I say, sustainable world going forward. 0:18:23.160 --> 0:18:25.159 We'll get some more details on your lending plans in 0:18:25.240 --> 0:18:27.200 just a moment. There has been a sense of fatigue 0:18:27.520 --> 0:18:30.280 in Congress around what is happening with Ukraine in its 0:18:30.280 --> 0:18:33.960 war against Russia. There are some people asking whether there 0:18:34.000 --> 0:18:36.520 is a different way, whether there should be something we 0:18:36.560 --> 0:18:39.480 continue with, stick with, continue funding what looks like maybe 0:18:39.520 --> 0:18:42.800 another runding war. What would your view on that argument be. 0:18:43.480 --> 0:18:47.679 Well, absolutely, we need to support Ukraine. It is a 0:18:47.880 --> 0:18:50.600 very serious situation that we're living. It's a threat to 0:18:50.680 --> 0:18:53.200 democracy at the end of the day, and the way 0:18:53.200 --> 0:18:55.760 we see things, I think in the US and Europe too, 0:18:56.119 --> 0:18:58.240 and so from the European point of view, there's no 0:18:58.280 --> 0:19:02.040 doubt our support to Ukraine is I think the decision 0:19:02.080 --> 0:19:05.120 that has been taken by the US to provide support 0:19:05.160 --> 0:19:08.920 for more than sixty billion dollars is very valuable and 0:19:08.960 --> 0:19:11.840 these joints. Also the previous decision of the European institutions 0:19:11.840 --> 0:19:15.080 to provide fifty billion euros in the Ukraine facility, which 0:19:15.119 --> 0:19:17.600 we will manage at the European Investment Bank, and I 0:19:17.600 --> 0:19:21.320 think it will provide much, much valuable support for the 0:19:21.359 --> 0:19:23.439 reconstruction as well as the military effort. 0:19:23.480 --> 0:19:25.960 Of course, But President, did you see the vote counts 0:19:26.000 --> 0:19:28.040 on as AID bills, So when you look at something 0:19:28.080 --> 0:19:31.240 like the Indo Pacific, it was three eighty five to 0:19:31.400 --> 0:19:33.600 thirty four in the House. When it comes to Israel, 0:19:33.640 --> 0:19:36.800 it was three eleven to one twelve. It barely got 0:19:36.840 --> 0:19:39.440 through and it came sorry, excuse me, to Ukraine. How 0:19:39.520 --> 0:19:43.720 concerned are you about how deeply divided US politicians are 0:19:43.800 --> 0:19:47.520 about AID in Ukraine oversay other issues like Israel and Taiwan. 0:19:48.440 --> 0:19:51.320 I really think that we should continue to support Ukraine, 0:19:51.400 --> 0:19:54.560 as President Zelenski was just saying on the screen, they 0:19:54.600 --> 0:19:57.560 have a chance if we continue to support them from 0:19:57.600 --> 0:19:59.959 the European point of view. You know, Ukraine is our neighbor, 0:20:00.160 --> 0:20:03.199 It is a prospective member of the family, if I 0:20:03.240 --> 0:20:05.879 can say this way, and thus we need to ensure 0:20:05.880 --> 0:20:09.080 that we keep a secure environment in the region. The 0:20:09.160 --> 0:20:11.440 other conflicts are just as important. I mean, the Middle 0:20:11.440 --> 0:20:14.640 East situation is very warring. It's a source of concern 0:20:14.720 --> 0:20:16.639 for all of us, and we should try to stop 0:20:16.640 --> 0:20:19.360 that war and that conflict, you know, as soon as possible. 0:20:19.560 --> 0:20:21.359 But Ukraine should not be forgotten. 0:20:21.840 --> 0:20:23.879 But in the numbers, it shows that Ukraine was the 0:20:23.920 --> 0:20:26.359