1
00:00:02,640 --> 00:00:05,320
Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,

2
00:00:05,360 --> 00:00:07,680
Speaker 1: along with my co host Lisa Brahma wits. Each day

3
00:00:07,720 --> 00:00:10,240
Speaker 1: we bring you the most noteworthy and useful interviews for

4
00:00:10,280 --> 00:00:12,520
Speaker 1: you and your money, whether at the grocery store or

5
00:00:12,560 --> 00:00:15,480
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple

6
00:00:15,520 --> 00:00:17,960
Speaker 1: podcast or wherever you listen to podcasts, as well as

7
00:00:17,960 --> 00:00:25,120
Speaker 1: at Bloomberg dot com. So it seems like there are

8
00:00:25,360 --> 00:00:30,160
Speaker 1: new funds being raised every day to invest in private credit.

9
00:00:30,200 --> 00:00:33,040
Speaker 1: Angelo Gordon is expanding further into distressed debt with a

10
00:00:33,080 --> 00:00:36,199
Speaker 1: new fund UH that has a billion dollars That is

11
00:00:36,320 --> 00:00:40,479
Speaker 1: the latest today. Bain Capital among the most active with

12
00:00:40,560 --> 00:00:44,839
Speaker 1: respect to raising money UH successfully and deploying it. Joining us.

13
00:00:44,880 --> 00:00:47,360
Speaker 1: We are so lucky to have Jonathan Levine, co managing

14
00:00:47,400 --> 00:00:51,239
Speaker 1: partner of Bain Capital, normally based in Boston, but gracing

15
00:00:51,320 --> 00:00:55,120
Speaker 1: us with his presence here in our Bloombgood Active Brokers Studios. Jonathan,

16
00:00:55,360 --> 00:00:59,960
Speaker 1: your firm overseas so much of this debt billion dollar

17
00:01:00,000 --> 00:01:03,960
Speaker 1: there's an assets under management. Are you concerned about the

18
00:01:04,000 --> 00:01:08,160
Speaker 1: amount of money being raised given the fact that there

19
00:01:08,200 --> 00:01:13,880
Speaker 1: really aren't that many assets to buy? Well, I think

20
00:01:13,959 --> 00:01:17,759
Speaker 1: you have to think about, uh, the world more globally.

21
00:01:18,480 --> 00:01:21,040
Speaker 1: You know, ten years ago, if somebody were to ask

22
00:01:21,200 --> 00:01:24,479
Speaker 1: us about the market, or were to ask us about credit,

23
00:01:24,880 --> 00:01:27,600
Speaker 1: they would really be asking about the US buyout business

24
00:01:27,800 --> 00:01:32,120
Speaker 1: and the US credit business. And really, UM, we actually

25
00:01:32,160 --> 00:01:34,679
Speaker 1: manage a hundred and eight billion dollars, of which forty

26
00:01:34,720 --> 00:01:38,720
Speaker 1: one billion is in credit. But that credit is UM

27
00:01:39,200 --> 00:01:45,440
Speaker 1: senior and junior, it's over, it's it's in UM Europe, US, Asia, Australia,

28
00:01:45,920 --> 00:01:49,840
Speaker 1: and the credit asset class has become quite nuanced in

29
00:01:49,960 --> 00:01:52,680
Speaker 1: terms of the types of risk you can take, the

30
00:01:52,720 --> 00:01:55,240
Speaker 1: types of liquidity you can take in the geographies you

31
00:01:55,320 --> 00:01:59,280
Speaker 1: participate in, and those are not as correlated as they

32
00:01:59,320 --> 00:02:02,360
Speaker 1: were ten years ago, when the story was whatever happened

33
00:02:02,400 --> 00:02:06,520
Speaker 1: in US high yield was the entire story. So, Jonathan,

34
00:02:06,560 --> 00:02:11,079
Speaker 1: were ten plus years into this economic cycle, you're the chief,

35
00:02:11,840 --> 00:02:15,000
Speaker 1: I guess you know, chief credit investment officer. You need

36
00:02:15,040 --> 00:02:18,960
Speaker 1: to really think about the quality of the credit where investment.

37
00:02:19,000 --> 00:02:21,160
Speaker 1: When you think about the credit quality and deals that

38
00:02:21,280 --> 00:02:25,400
Speaker 1: you're seeing, Now, how's it looking? So I think that

39
00:02:25,639 --> 00:02:29,320
Speaker 1: the degree of difficulty has gone up. There's clearly larger

40
00:02:29,440 --> 00:02:32,480
Speaker 1: use of proformas. But I've you know, made it clear

41
00:02:32,520 --> 00:02:35,920
Speaker 1: that not all proformas are are good or bad and

42
00:02:36,280 --> 00:02:38,960
Speaker 1: pro performers. What are you talking about because forecast by

43
00:02:38,960 --> 00:02:44,120
Speaker 1: the company forecast adjustments in earnings almost always for the positive. Okay, UM,

44
00:02:44,320 --> 00:02:46,399
Speaker 1: So I have yet to see one where somebody said

45
00:02:46,440 --> 00:02:48,560
Speaker 1: our numbers are going to be worse in the future

46
00:02:48,560 --> 00:02:51,720
Speaker 1: than they are today. And they really take three types.

47
00:02:51,760 --> 00:02:55,760
Speaker 1: They take tangible um upside to earning that you can

48
00:02:55,800 --> 00:02:59,640
Speaker 1: achieve and quantify. There's things that are dependent on growth,

49
00:03:00,040 --> 00:03:01,960
Speaker 1: and then there's things what that I would call are

50
00:03:02,120 --> 00:03:06,760
Speaker 1: highly ambitious market top type of behavior. So consolidating two

51
00:03:06,800 --> 00:03:11,320
Speaker 1: factories clearly quantifiable UM. A software company that's growing quickly,

52
00:03:11,720 --> 00:03:15,160
Speaker 1: you can't take last year's earnings and just grow, you know,

53
00:03:15,240 --> 00:03:18,400
Speaker 1: run it out because there is some obvious growth things

54
00:03:18,480 --> 00:03:22,360
Speaker 1: like proform of future revenue synergies. I don't even know

55
00:03:22,360 --> 00:03:23,880
Speaker 1: what that is, but I have seen that in a

56
00:03:23,919 --> 00:03:27,959
Speaker 1: perform and you don't You don't take that um because

57
00:03:28,320 --> 00:03:30,440
Speaker 1: there is some margin of safety in there. And if

58
00:03:30,440 --> 00:03:32,600
Speaker 1: you take every possible good thing that can happen to

59
00:03:32,639 --> 00:03:35,520
Speaker 1: the company, and then the sponsor pays for that in

60
00:03:35,560 --> 00:03:38,800
Speaker 1: their purchase price, and then you borrow against that UM,

61
00:03:39,040 --> 00:03:41,400
Speaker 1: your margin of safety if the economy slows down has

62
00:03:41,440 --> 00:03:44,760
Speaker 1: gone away. So one thing that people have said is

63
00:03:44,880 --> 00:03:50,080
Speaker 1: that private equity sponsors, of which BANE counts itself among them.

64
00:03:50,120 --> 00:03:52,880
Speaker 1: I know that that's not necessarily your day to day focus.

65
00:03:52,960 --> 00:03:56,160
Speaker 1: As much as perhaps the credit investments UH that their

66
00:03:56,240 --> 00:04:01,320
Speaker 1: sponsorship has led to a deterioration the a quality of

67
00:04:01,520 --> 00:04:03,600
Speaker 1: some of the credit in particularly at the bonds and

68
00:04:03,640 --> 00:04:07,320
Speaker 1: loans that companies are are issuing. Do you find that

69
00:04:07,680 --> 00:04:11,680
Speaker 1: from the credit investor standpoint, I think that it is

70
00:04:11,960 --> 00:04:17,520
Speaker 1: very much industry specific, company specific and sponsor specific. UM

71
00:04:17,640 --> 00:04:20,680
Speaker 1: sponsors like us have a hundred people who go in

72
00:04:20,720 --> 00:04:24,600
Speaker 1: and work with companies and really only invest in companies

73
00:04:24,600 --> 00:04:27,760
Speaker 1: where we can add value and help change the answer

74
00:04:28,279 --> 00:04:32,159
Speaker 1: versus other types of investors who may be participating in

75
00:04:32,200 --> 00:04:36,679
Speaker 1: the upside beta of the market. And UM. At this

76
00:04:36,960 --> 00:04:41,440
Speaker 1: stage in in any cycle, UM, the marginal deal is

77
00:04:41,440 --> 00:04:44,400
Speaker 1: probably not the best deal. UM. That does not mean

78
00:04:44,440 --> 00:04:46,960
Speaker 1: that all the deals being done are troublesome, all the

79
00:04:47,000 --> 00:04:50,200
Speaker 1: deals being done are are are bad. You just need

80
00:04:50,279 --> 00:04:53,320
Speaker 1: to make sure that you're investing in areas that can

81
00:04:53,360 --> 00:04:56,040
Speaker 1: weather a cycle. Because I'm not saying whether there will

82
00:04:56,120 --> 00:04:58,000
Speaker 1: or will not but it's certainly more likely than it

83
00:04:58,000 --> 00:05:00,880
Speaker 1: would have been ten years ago. UM. Two, you want

84
00:05:00,880 --> 00:05:04,320
Speaker 1: to make sure that you're in industries and business models

85
00:05:04,360 --> 00:05:07,680
Speaker 1: that are sustainable. UM. And three, you want to make

86
00:05:07,720 --> 00:05:10,960
Speaker 1: sure that you have a capital structure that can weather

87
00:05:11,000 --> 00:05:13,960
Speaker 1: a storm. So which which industries are sustainable in the

88
00:05:14,040 --> 00:05:18,120
Speaker 1: next cycle and which aren't. Well, it's interesting, UM, it

89
00:05:18,279 --> 00:05:21,240
Speaker 1: used to be that technology was something everybody was scared of,

90
00:05:21,440 --> 00:05:26,080
Speaker 1: and technology everybody viewed as vaporware or internet concepts like

91
00:05:26,160 --> 00:05:29,040
Speaker 1: from a one when the bubble happened. And really, when

92
00:05:29,080 --> 00:05:32,360
Speaker 1: you think about technology, there's lots of different types of technology.

93
00:05:32,440 --> 00:05:36,440
Speaker 1: As a lender, software businesses that are subscription business is

94
00:05:36,760 --> 00:05:40,560
Speaker 1: really good. Razor and razor blade types of technology business

95
00:05:40,680 --> 00:05:43,880
Speaker 1: is really good. Um. What you have to watch out

96
00:05:43,960 --> 00:05:47,560
Speaker 1: for is where people are taking equity risk with debt,

97
00:05:47,880 --> 00:05:50,960
Speaker 1: business models that have to reinvent themselves, where there's massive

98
00:05:50,960 --> 00:05:54,240
Speaker 1: amounts of capital expenditures that are required and you have

99
00:05:54,360 --> 00:05:56,800
Speaker 1: to refresh the product on a very short life cycle.

100
00:05:59,760 --> 00:06:02,680
Speaker 1: I'd know that. I just I don't know, go ahead

101
00:06:02,680 --> 00:06:05,200
Speaker 1: fall no, So, Jonathan, I mean, you know what are

102
00:06:05,200 --> 00:06:07,480
Speaker 1: the issues? You know, Geopolitical risk I know was always

103
00:06:07,480 --> 00:06:09,680
Speaker 1: a part of the credit checklist you have to deal with.

104
00:06:09,720 --> 00:06:12,039
Speaker 1: But it just seems like maybe in the last couple

105
00:06:12,080 --> 00:06:14,640
Speaker 1: of years of geopolitical risk, whether it's trade tensions with

106
00:06:14,720 --> 00:06:18,760
Speaker 1: China or European risks with Brexit, how are you how

107
00:06:18,800 --> 00:06:20,800
Speaker 1: are the folks at bane kind of factory that into

108
00:06:20,800 --> 00:06:24,440
Speaker 1: your credit analysis? UM So, I think there's two things.

109
00:06:24,600 --> 00:06:29,600
Speaker 1: One is, the requirement for imagination almost exceeds the requirement

110
00:06:29,760 --> 00:06:34,920
Speaker 1: for UM analysis because the sort of standard bell curve

111
00:06:35,080 --> 00:06:40,039
Speaker 1: of what economic policy, trade policy, UM international treaties look

112
00:06:40,120 --> 00:06:44,360
Speaker 1: like has gone out the window, and therefore outcomes I mean,

113
00:06:44,360 --> 00:06:47,520
Speaker 1: if I'm sure you remember, you know, early on people

114
00:06:47,520 --> 00:06:50,240
Speaker 1: were like, there is no way brexit will pass UM,

115
00:06:50,279 --> 00:06:52,640
Speaker 1: and that was the operating assumption. And then once bregg

116
00:06:53,040 --> 00:06:57,839
Speaker 1: bregsit passed, the markets created for half hour and then

117
00:06:58,040 --> 00:07:01,640
Speaker 1: bounce back because they're like, well it'll it won't get implemented,

118
00:07:01,680 --> 00:07:04,359
Speaker 1: and it hasn't been implemented. So what we try to

119
00:07:04,400 --> 00:07:08,599
Speaker 1: do is think of a um an array of outcomes

120
00:07:08,800 --> 00:07:12,080
Speaker 1: and test our hypothesis against that. And obviously you can't

121
00:07:12,120 --> 00:07:17,320
Speaker 1: protect against every downside, but certainly being more broadly being

122
00:07:17,600 --> 00:07:23,680
Speaker 1: UM more broadly UM analytical about tariffs, trade wars, UM

123
00:07:24,440 --> 00:07:27,960
Speaker 1: immigration things like that are just a new requirement. So

124
00:07:28,360 --> 00:07:31,120
Speaker 1: just in in about thirty seconds, which areas in the

125
00:07:31,160 --> 00:07:34,400
Speaker 1: world do you see as the potentially most fruitful when

126
00:07:34,400 --> 00:07:38,880
Speaker 1: it comes to distress opportunities? So uh, over the last

127
00:07:38,960 --> 00:07:42,200
Speaker 1: several years, eight percent of our investing has actually taken

128
00:07:42,240 --> 00:07:47,920
Speaker 1: place globally outside the United States. UM. The the ways

129
00:07:47,960 --> 00:07:52,120
Speaker 1: that UH, different economies work through the crisis has resulted

130
00:07:52,160 --> 00:07:55,160
Speaker 1: in very different opportunities. And we've spent a lot of

131
00:07:55,200 --> 00:07:58,600
Speaker 1: time working on non performing loan portfolios coming out of

132
00:07:58,600 --> 00:08:02,240
Speaker 1: European banks which are ill um in need of capital

133
00:08:02,720 --> 00:08:06,920
Speaker 1: UM and the Asian capital markets which UM as I

134
00:08:06,960 --> 00:08:09,320
Speaker 1: said earlier about technology, it's not a thing, it's a

135
00:08:09,360 --> 00:08:12,160
Speaker 1: lot of things provide a lot of diversity, whether it's

136
00:08:12,200 --> 00:08:17,280
Speaker 1: distressed debt in in India, npls in China, or private

137
00:08:17,360 --> 00:08:19,920
Speaker 1: landing in Australia. Right right, Jonathan Levine, and thank you

138
00:08:19,920 --> 00:08:21,320
Speaker 1: so much that we have to leave it there, but

139
00:08:21,320 --> 00:08:23,720
Speaker 1: we're gonna definitely get you back in the studio next

140
00:08:23,760 --> 00:08:25,960
Speaker 1: time you're in New York. But we understand happens often.

141
00:08:26,360 --> 00:08:29,360
Speaker 1: Jonathan Levine, co Managing Partner and credit Chief Investment Officer

142
00:08:29,440 --> 00:08:32,520
Speaker 1: at Bain Capital talking to us about the private equity world,

143
00:08:32,520 --> 00:08:50,400
Speaker 1: in the credit side of private equity investment. Well, when

144
00:08:50,400 --> 00:08:53,600
Speaker 1: trade tensions between the US and China really began to

145
00:08:53,720 --> 00:08:56,120
Speaker 1: escalate several weeks ago, one of the U S names

146
00:08:56,120 --> 00:08:59,640
Speaker 1: that came right into focus was Apple. Apples certainly exposed

147
00:08:59,640 --> 00:09:04,280
Speaker 1: to China, getting almost revenue from China. Plus they also

148
00:09:04,360 --> 00:09:07,480
Speaker 1: manufacture a lot of their phones and iPads and things

149
00:09:07,559 --> 00:09:10,440
Speaker 1: in China, so clearly some risks there. Let's get the

150
00:09:10,480 --> 00:09:13,959
Speaker 1: latest from John Butler Johnson, senior Telecom Services and Equipment

151
00:09:13,960 --> 00:09:16,600
Speaker 1: annals from Bloomberg Intelligence. He joins us on the phone

152
00:09:16,679 --> 00:09:21,200
Speaker 1: from Princeton, New Jersey. John, there's actually growing discussion that

153
00:09:21,640 --> 00:09:25,160
Speaker 1: maybe Apple can source a lot of its products that

154
00:09:25,240 --> 00:09:27,640
Speaker 1: were in China outside of China. How feasible is that

155
00:09:27,679 --> 00:09:31,599
Speaker 1: do you think? Yeah, thanks, Paul, I think it's very feasible.

156
00:09:31,679 --> 00:09:36,400
Speaker 1: The question is how much time does uh Apple's main

157
00:09:36,760 --> 00:09:40,800
Speaker 1: UM manufacturer, called fox Con, how much time does fox

158
00:09:40,920 --> 00:09:44,680
Speaker 1: Con really need to make that move? Um? In fact,

159
00:09:44,800 --> 00:09:48,880
Speaker 1: I suspect the move is already underway. You know, Apple

160
00:09:49,040 --> 00:09:51,679
Speaker 1: is long overdue to kind of spread its bets, so

161
00:09:51,760 --> 00:09:56,200
Speaker 1: to speak. And and there are regions like Vietnam, for example,

162
00:09:56,320 --> 00:10:00,240
Speaker 1: which are lower costs to produce a good like the

163
00:10:00,280 --> 00:10:04,600
Speaker 1: iPhone than China. How long would it take for Apple

164
00:10:04,640 --> 00:10:08,560
Speaker 1: to move its supply chain, Well, it's hard to say, Lisa.

165
00:10:08,640 --> 00:10:11,360
Speaker 1: I would say to really move a hundred percent of

166
00:10:11,400 --> 00:10:14,400
Speaker 1: the iPhone production out of China would probably take at

167
00:10:14,480 --> 00:10:17,600
Speaker 1: least a couple of years, would be my guest. So

168
00:10:17,640 --> 00:10:21,720
Speaker 1: wouldn't immunize them from some sort of very near term

169
00:10:21,760 --> 00:10:26,160
Speaker 1: move by China? Not immediately, but again I suspect there's

170
00:10:26,200 --> 00:10:29,439
Speaker 1: been some movement behind the scenes that we're not seeing.

171
00:10:30,400 --> 00:10:33,040
Speaker 1: You know, the comment was made by a senior Fox

172
00:10:33,120 --> 00:10:36,160
Speaker 1: con officials, so they probably he probably got the green

173
00:10:36,240 --> 00:10:40,040
Speaker 1: light to say something suggesting to me the move is

174
00:10:40,080 --> 00:10:44,240
Speaker 1: already underway. Lisa, just, you know, just to kind of

175
00:10:44,280 --> 00:10:46,600
Speaker 1: go and show how the supply chain for Apple, how

176
00:10:46,720 --> 00:10:49,240
Speaker 1: intense it is, and how expansive it is. On the

177
00:10:49,240 --> 00:10:51,840
Speaker 1: Bloomberg terminal, you can just type in the symbol for Apple,

178
00:10:52,360 --> 00:10:55,240
Speaker 1: then put in the function SPLC for supply chain, and

179
00:10:55,360 --> 00:10:59,080
Speaker 1: it is just it's amazing how many suppliers supply Apple

180
00:10:59,120 --> 00:11:02,280
Speaker 1: than how many customs. Apple has truly a global company.

181
00:11:02,480 --> 00:11:04,640
Speaker 1: So John, I think that one of the risks, you know,

182
00:11:05,600 --> 00:11:07,960
Speaker 1: when you think about it. You know that. I guess

183
00:11:07,960 --> 00:11:10,160
Speaker 1: a real concern would be, at least the most immediably

184
00:11:10,400 --> 00:11:14,000
Speaker 1: would be sales into China. Is there any sense that

185
00:11:14,480 --> 00:11:18,280
Speaker 1: Chinese consumers, maybe just for nationalistic perspectives, might be pulling

186
00:11:18,280 --> 00:11:21,400
Speaker 1: away from Western goods and Apple? Yeah, I mean that

187
00:11:21,559 --> 00:11:24,200
Speaker 1: is spot on, Paul. I mean that's really what I

188
00:11:24,320 --> 00:11:27,280
Speaker 1: worry about most right now. When I look at Apple

189
00:11:27,480 --> 00:11:32,400
Speaker 1: and their risk um China. They don't break out sales

190
00:11:32,480 --> 00:11:36,880
Speaker 1: by country, but I believe China is Apple's largest country

191
00:11:36,920 --> 00:11:42,920
Speaker 1: by sales by iPhone sales. Um, my guess because it's

192
00:11:42,920 --> 00:11:45,920
Speaker 1: probably um that's a that's a good point. It could

193
00:11:46,000 --> 00:11:48,840
Speaker 1: be second to the US. It's hard to say. Again,

194
00:11:48,920 --> 00:11:52,720
Speaker 1: they don't they break out sales by region, not country,

195
00:11:52,800 --> 00:11:58,480
Speaker 1: So by region Greater China is just shy of of sales.

196
00:11:58,600 --> 00:12:02,080
Speaker 1: It's around nine on of sales in the latest calendar year.

197
00:12:02,280 --> 00:12:06,440
Speaker 1: So there's a lot at risk there, and there is

198
00:12:06,520 --> 00:12:12,360
Speaker 1: I imagine there is rising um nationalist sentiment among Chinese consumers,

199
00:12:12,520 --> 00:12:15,920
Speaker 1: and that can really dent sales of not just the

200
00:12:15,960 --> 00:12:20,880
Speaker 1: iPhone but other Apple products. So I want to ask you, John,

201
00:12:21,080 --> 00:12:24,520
Speaker 1: we were talking earlier about how the tech sector text

202
00:12:24,559 --> 00:12:28,160
Speaker 1: shares in the United States have rallied the most in

203
00:12:28,200 --> 00:12:32,840
Speaker 1: the past six days since two thousand and eleven. And

204
00:12:32,840 --> 00:12:36,040
Speaker 1: I'm trying to understand how much of this is driven

205
00:12:36,160 --> 00:12:42,520
Speaker 1: by fundamental improvements in the backdrop geopolitical otherwise, and how

206
00:12:42,600 --> 00:12:45,840
Speaker 1: much this is just a knee jerk response too. Well,

207
00:12:45,920 --> 00:12:48,960
Speaker 1: I guess people have stopped freaking out now, you know.

208
00:12:49,040 --> 00:12:51,960
Speaker 1: My thought on that is a couple of things. Number One,

209
00:12:52,000 --> 00:12:57,720
Speaker 1: Wall Street tends to look beyond the abyss a little bit, right, So, uh,

210
00:12:57,760 --> 00:13:01,600
Speaker 1: this latest announcement by Fox con tells us that Apple

211
00:13:01,720 --> 00:13:05,640
Speaker 1: can make moves to limit its exposure, and other tech

212
00:13:05,679 --> 00:13:09,520
Speaker 1: companies can as well. That's number one, And I think

213
00:13:09,600 --> 00:13:13,600
Speaker 1: number two, there's probably some hope that at the G twenty,

214
00:13:13,679 --> 00:13:16,560
Speaker 1: the U. S And China can come to maybe even

215
00:13:16,559 --> 00:13:19,959
Speaker 1: a short term agreement to take some of the pressure off, because,

216
00:13:20,880 --> 00:13:23,640
Speaker 1: as you know, the US is as reliant on China

217
00:13:23,720 --> 00:13:26,480
Speaker 1: as China is reliant on US. It's a two way

218
00:13:26,600 --> 00:13:29,719
Speaker 1: street and it's in no one's best interest to let

219
00:13:29,760 --> 00:13:33,240
Speaker 1: this escalate beyond where we are. John, just real quick,

220
00:13:33,480 --> 00:13:36,240
Speaker 1: what's the next thing that Apple investors should be looking

221
00:13:36,240 --> 00:13:38,640
Speaker 1: for in terms of new product launches or anything like that?

222
00:13:39,960 --> 00:13:43,080
Speaker 1: Also a great question. So this they tend to do

223
00:13:43,120 --> 00:13:46,640
Speaker 1: the fall refresh event they introduce all the new iPhones

224
00:13:46,720 --> 00:13:51,120
Speaker 1: in September. I think this refresh will be okay but

225
00:13:51,240 --> 00:13:54,920
Speaker 1: not great. But I'm really looking to for that new

226
00:13:55,000 --> 00:13:58,559
Speaker 1: five G I phone, So I think next year is

227
00:13:58,600 --> 00:14:01,160
Speaker 1: going to be a really big year for Apple. Would

228
00:14:01,160 --> 00:14:04,000
Speaker 1: be my guest on the iPhone front, John Butler, thank

229
00:14:04,000 --> 00:14:06,600
Speaker 1: you so much for being with us as always. John Butler,

230
00:14:06,840 --> 00:14:11,000
Speaker 1: Senior Telecom Service as an equipment analyst for Bloomberg Intelligence.

231
00:14:27,720 --> 00:14:31,200
Speaker 1: One area of the US equities that have underperformed are

232
00:14:31,240 --> 00:14:35,280
Speaker 1: the A d R, the depository receipts of Chinese companies.

233
00:14:35,320 --> 00:14:37,400
Speaker 1: I'm looking at Ali Baba a d R s which

234
00:14:37,440 --> 00:14:41,040
Speaker 1: are down nearly twenty percent. Our next guest says, that's

235
00:14:41,040 --> 00:14:43,800
Speaker 1: a buying opportunity. Let's bring him in, Danton Goie. He

236
00:14:43,840 --> 00:14:47,640
Speaker 1: has a portfolio manager of at Davis Funds, which overseas

237
00:14:47,640 --> 00:14:49,920
Speaker 1: about two billion dollars, and he joins us here in

238
00:14:50,080 --> 00:14:54,760
Speaker 1: our Bloomberg Interactive broker's studios. So you actually are starting

239
00:14:54,760 --> 00:14:58,640
Speaker 1: to see opportunities emerge in these Chinese stocks, even though

240
00:14:58,920 --> 00:15:01,960
Speaker 1: people are very concerned earned about the corollary effects of

241
00:15:02,000 --> 00:15:05,960
Speaker 1: trade wars in addition to a slowing Chinese economy. Why, yes,

242
00:15:06,080 --> 00:15:08,160
Speaker 1: good morning, Thanks for having me. Yes, I think they

243
00:15:08,160 --> 00:15:11,120
Speaker 1: are very interesting, specifically because of the worries now how

244
00:15:11,240 --> 00:15:15,040
Speaker 1: depressed valuations and the stock prices are down, even though

245
00:15:15,360 --> 00:15:17,920
Speaker 1: the businesses continue to be very strong, and it makes

246
00:15:17,960 --> 00:15:21,080
Speaker 1: sense these businesses are focused on the Chinese consumer. They're

247
00:15:21,080 --> 00:15:24,720
Speaker 1: not export driven, very little international sales, almost d percent

248
00:15:24,800 --> 00:15:29,760
Speaker 1: domestic sales, and the Chinese consumer remains a very strong tailwind,

249
00:15:29,880 --> 00:15:32,320
Speaker 1: a very strong story. Uh. And the business confuses to

250
00:15:32,360 --> 00:15:34,320
Speaker 1: be very strong even in the recent quarters when there's

251
00:15:34,320 --> 00:15:37,520
Speaker 1: been worries about the U S trade friction. Revenues have

252
00:15:37,560 --> 00:15:41,720
Speaker 1: been up two cours ago last quarter revenues at Ali Baba,

253
00:15:41,800 --> 00:15:47,200
Speaker 1: for example, we're up fifty, so business is great. The

254
00:15:47,240 --> 00:15:50,120
Speaker 1: balance sheets continue to be very strong, long term demand

255
00:15:50,320 --> 00:15:54,200
Speaker 1: forecast remain good. UH. And right now the valuations are down,

256
00:15:54,240 --> 00:15:56,680
Speaker 1: so to us as value investors at Davis, we think

257
00:15:56,680 --> 00:15:59,240
Speaker 1: it's a great buying opportunity. So give us a sense

258
00:15:59,240 --> 00:16:03,440
Speaker 1: of how you think Chinese consumers are thinking about the

259
00:16:03,520 --> 00:16:07,440
Speaker 1: trade issues as it go into consumer sentiment consumer confidence.

260
00:16:07,480 --> 00:16:09,680
Speaker 1: Are you seeing any of those types of data points

261
00:16:09,720 --> 00:16:12,400
Speaker 1: coming that might cause your consumer centric story to a

262
00:16:12,400 --> 00:16:14,280
Speaker 1: little bit of a pause. Yeah, I think from the

263
00:16:14,280 --> 00:16:17,160
Speaker 1: consumer point of view, it's not a huge worry. It's

264
00:16:17,160 --> 00:16:21,400
Speaker 1: probably a bigger worry for Chinese investors UH and maybe

265
00:16:21,400 --> 00:16:24,080
Speaker 1: taking a pause and investment. But at the margin of

266
00:16:24,120 --> 00:16:27,080
Speaker 1: course it is negative UH and so it's not a positive.

267
00:16:27,560 --> 00:16:30,400
Speaker 1: We do think though, that in the sort of short terms,

268
00:16:30,400 --> 00:16:33,200
Speaker 1: sort of the next two to four quarters, there will

269
00:16:33,280 --> 00:16:35,960
Speaker 1: be a resolution UH to the trade war. Mean, of course,

270
00:16:36,000 --> 00:16:39,360
Speaker 1: no one knows the future perfectly, but in this case,

271
00:16:39,400 --> 00:16:43,240
Speaker 1: there's strong reasons why both parties, the US and China

272
00:16:43,640 --> 00:16:46,120
Speaker 1: want a trade of resolution. We are seeing a little

273
00:16:46,120 --> 00:16:50,200
Speaker 1: bit of a slowdown in both economies UH being impacted,

274
00:16:50,360 --> 00:16:53,200
Speaker 1: and this is something that they can both UH resolve

275
00:16:53,280 --> 00:16:55,320
Speaker 1: on their own by coming to an agreement. So we

276
00:16:55,360 --> 00:16:57,280
Speaker 1: do think that eventually there will be an agreement and

277
00:16:57,320 --> 00:16:59,880
Speaker 1: this will be behind them. In the meantime, the companies,

278
00:17:00,160 --> 00:17:03,160
Speaker 1: despite this are doing well. So some of the other

279
00:17:03,240 --> 00:17:07,240
Speaker 1: companies other than Ali Baba, New Oriental Education and Technology

280
00:17:07,280 --> 00:17:10,080
Speaker 1: trades onto the A d r H ticker e d

281
00:17:10,320 --> 00:17:13,080
Speaker 1: U and then j D dot Com UH. Those shares,

282
00:17:13,119 --> 00:17:14,720
Speaker 1: by the way, the A d R s have lost

283
00:17:15,160 --> 00:17:19,080
Speaker 1: nearly thirty percent year to date, UH, so d U

284
00:17:19,440 --> 00:17:22,000
Speaker 1: the new Oriental Education is sort of the outperformer here,

285
00:17:22,080 --> 00:17:26,119
Speaker 1: only losing about twelve I'm just wondering. One question people

286
00:17:26,160 --> 00:17:30,080
Speaker 1: have is the transparency of Chinese companies and concerns about

287
00:17:30,160 --> 00:17:33,520
Speaker 1: really being able to dig into the finances given this

288
00:17:33,600 --> 00:17:37,200
Speaker 1: sort of different accounting standards. How do you deal with that? Yes,

289
00:17:37,280 --> 00:17:39,080
Speaker 1: that's a good question. You know. One of the ways

290
00:17:39,200 --> 00:17:41,800
Speaker 1: we deal with that, and that's with any company that

291
00:17:41,840 --> 00:17:44,760
Speaker 1: we look at, UH. But in China specifically, we only

292
00:17:44,800 --> 00:17:46,959
Speaker 1: invest in US listed A d R S or Hong

293
00:17:47,040 --> 00:17:50,600
Speaker 1: Kong listed stocks and no local A share companies. The

294
00:17:50,640 --> 00:17:53,240
Speaker 1: reason being that here in the US, of course, we

295
00:17:53,280 --> 00:17:56,560
Speaker 1: have US GAP and in Hong Kong they use International

296
00:17:56,680 --> 00:18:01,840
Speaker 1: GAP UH. And so the listing standards, the acquire accounting standards, UH,

297
00:18:02,000 --> 00:18:05,280
Speaker 1: the transparency requirements, the corporate governance requirements are much higher

298
00:18:05,760 --> 00:18:08,720
Speaker 1: because they're listed here in the US or in Hong Kong.

299
00:18:09,040 --> 00:18:11,240
Speaker 1: And so that's one way that you can. The other way,

300
00:18:11,280 --> 00:18:13,440
Speaker 1: of course, is doing very in depth due diligence, which

301
00:18:13,480 --> 00:18:15,879
Speaker 1: is what we're known for. And so we'll go and

302
00:18:15,960 --> 00:18:18,080
Speaker 1: been following these companies for well over a decade now,

303
00:18:18,320 --> 00:18:20,359
Speaker 1: so we know all the key individuals. We've talked to

304
00:18:20,359 --> 00:18:24,080
Speaker 1: all their competitors and suppliers, their customers, UH and get

305
00:18:24,080 --> 00:18:26,240
Speaker 1: a good sense of who they are as well. But

306
00:18:26,400 --> 00:18:29,560
Speaker 1: you know, of course there's always UH risks there and

307
00:18:29,600 --> 00:18:33,000
Speaker 1: so we're always trying to match the numbers compared to

308
00:18:33,040 --> 00:18:35,560
Speaker 1: what we are hearing out there in the broad economy

309
00:18:35,800 --> 00:18:38,920
Speaker 1: or other companies, and so that's one good way, UH

310
00:18:38,960 --> 00:18:41,919
Speaker 1: to kind of minimize risk. So, Danton, you mentioned the

311
00:18:42,040 --> 00:18:44,840
Speaker 1: as one of the supports for investing in China down

312
00:18:44,840 --> 00:18:47,679
Speaker 1: addition to evaluation the these strong Chinese economy. We know

313
00:18:47,760 --> 00:18:51,080
Speaker 1: it's slowing, but still I guess the the government is

314
00:18:51,080 --> 00:18:52,880
Speaker 1: still talking about six six and a half percent growth.

315
00:18:52,960 --> 00:18:54,959
Speaker 1: What is your sense of the economy in China right

316
00:18:54,960 --> 00:18:57,560
Speaker 1: now in the next year or so. Yeah, it um it.

317
00:18:57,760 --> 00:18:59,639
Speaker 1: It definitely is slowing and it's been on a sort

318
00:18:59,680 --> 00:19:00,800
Speaker 1: of a down and trying. You know, used to be

319
00:19:00,800 --> 00:19:03,359
Speaker 1: double digits, of course, then highest single digits. Now we're

320
00:19:03,400 --> 00:19:06,200
Speaker 1: approaching sort of more mid single digits. And even if

321
00:19:06,560 --> 00:19:08,400
Speaker 1: you know, some people always want to put a haircut

322
00:19:08,440 --> 00:19:10,679
Speaker 1: on it, and I think that's reasonable in terms of

323
00:19:11,080 --> 00:19:13,520
Speaker 1: how much you believe the numbers. It's still is still

324
00:19:13,600 --> 00:19:15,560
Speaker 1: good you know, everything you look at, and even if

325
00:19:15,600 --> 00:19:18,679
Speaker 1: you look at uh, non government reported numbers, if you

326
00:19:18,680 --> 00:19:24,040
Speaker 1: look at sort of trainloadings or electrical production or uh

327
00:19:24,080 --> 00:19:26,840
Speaker 1: you know, miles driven or things like that, Uh, those

328
00:19:26,880 --> 00:19:30,040
Speaker 1: are all still very strong. And so all the sort

329
00:19:30,040 --> 00:19:33,080
Speaker 1: of the non GDP numbers sort of correlate with still

330
00:19:33,119 --> 00:19:36,399
Speaker 1: a growing UH economy in our senses that the government

331
00:19:36,400 --> 00:19:38,719
Speaker 1: still has quite a bit of firepower in terms of

332
00:19:38,720 --> 00:19:41,280
Speaker 1: helping the economy along its way. Meaning they have the

333
00:19:41,320 --> 00:19:44,200
Speaker 1: ability cut rates, which are you know, tourner basis points

334
00:19:44,240 --> 00:19:46,960
Speaker 1: higher than ours. They also have the ability to cut

335
00:19:47,000 --> 00:19:49,480
Speaker 1: the reserve requirement at banks, which is the the amount

336
00:19:49,480 --> 00:19:51,360
Speaker 1: of banks amount of money the banks that the cap

337
00:19:51,480 --> 00:19:54,679
Speaker 1: keep uh, and so it increases their lending ability. So

338
00:19:54,680 --> 00:19:57,240
Speaker 1: they have quite a bit of firepower to help the economy.

339
00:19:57,240 --> 00:19:59,879
Speaker 1: They've been doing that. It has had an impact, and

340
00:20:00,000 --> 00:20:02,480
Speaker 1: so they do have that impact that ability over the

341
00:20:02,520 --> 00:20:04,680
Speaker 1: next new year or two to continue doing that. Very

342
00:20:04,720 --> 00:20:08,200
Speaker 1: good Danton Goie, Thank you so much. Danton's portfolio manager

343
00:20:08,240 --> 00:20:10,480
Speaker 1: for Davis Funds, joining us here in a Bloomberg Interactive

344
00:20:10,520 --> 00:20:29,320
Speaker 1: Broker Studio week. Well, the markets are discounting at least

345
00:20:29,320 --> 00:20:32,760
Speaker 1: two rate cuts this year and maybe more in But

346
00:20:32,880 --> 00:20:35,320
Speaker 1: just recently we've had a couple of Wall Street economists say,

347
00:20:35,560 --> 00:20:38,520
Speaker 1: not so fast to kind of square that circle. There.

348
00:20:38,520 --> 00:20:41,720
Speaker 1: We welcome our next guest, Ira Jersey, chief US interest

349
00:20:41,800 --> 00:20:45,200
Speaker 1: rate strategist for Bloomberg Intelligence, joining us from Princeton, New Jersey. Ira,

350
00:20:45,280 --> 00:20:47,399
Speaker 1: thanks so much for joining us again. A couple of

351
00:20:47,440 --> 00:20:50,119
Speaker 1: economists came out and said, gee, maybe the traders are

352
00:20:50,119 --> 00:20:52,440
Speaker 1: a little bit ahead of themselves. What are your thoughts? Yeah,

353
00:20:52,640 --> 00:20:56,480
Speaker 1: I'm I'm very uh in that camp. Actually, I think

354
00:20:56,520 --> 00:20:58,800
Speaker 1: that the market has gotten a bit of ahead of itself.

355
00:20:58,800 --> 00:21:02,600
Speaker 1: I think that the UM, no, the Fed it while

356
00:21:02,640 --> 00:21:05,080
Speaker 1: it doesn't want to disappoint the markets, it also has

357
00:21:05,119 --> 00:21:08,280
Speaker 1: to focus very strongly on the incoming data, both here

358
00:21:08,320 --> 00:21:11,520
Speaker 1: in the US and abroad. And while we've seen, you know,

359
00:21:11,560 --> 00:21:14,679
Speaker 1: a few disappointing data prints, it's not obvious that the

360
00:21:14,720 --> 00:21:17,199
Speaker 1: economy is falling out of bed and is likely to

361
00:21:17,240 --> 00:21:20,679
Speaker 1: do so going forward. So I think the market pricing

362
00:21:20,760 --> 00:21:24,800
Speaker 1: right now for for a July cut is you know,

363
00:21:25,000 --> 00:21:27,600
Speaker 1: is setting itself up for disappointment. I think, so, what

364
00:21:27,880 --> 00:21:30,639
Speaker 1: in the data will the federals are point to to

365
00:21:30,840 --> 00:21:35,080
Speaker 1: justify not cutting rates right now? And defying market expectations. Sure,

366
00:21:35,160 --> 00:21:38,000
Speaker 1: so you know, I'm not saying that this is true, right,

367
00:21:38,280 --> 00:21:41,000
Speaker 1: there's certainly a scope for some of the data to

368
00:21:41,040 --> 00:21:43,840
Speaker 1: weaken over the next six or seven weeks before the

369
00:21:44,240 --> 00:21:46,679
Speaker 1: before the July FED meeting. But if you look at

370
00:21:46,880 --> 00:21:49,640
Speaker 1: at where we are on trends and things like retail

371
00:21:49,680 --> 00:21:53,240
Speaker 1: sales running above four percent year on year, that's reasonably solid,

372
00:21:53,240 --> 00:21:55,680
Speaker 1: although not at the five percent it was last year,

373
00:21:55,720 --> 00:21:58,720
Speaker 1: but it's still at a solid reading. Um. You look

374
00:21:58,720 --> 00:22:01,760
Speaker 1: at a lot of the the inflation data we got

375
00:22:01,760 --> 00:22:04,639
Speaker 1: this morning, for example, you still have a p p

376
00:22:04,760 --> 00:22:07,080
Speaker 1: I X food and energy up two point three percent,

377
00:22:07,200 --> 00:22:09,600
Speaker 1: and if you get you know, cp I tomorrow, that's

378
00:22:09,680 --> 00:22:13,000
Speaker 1: you know, close to two. Um. You know, those aren't

379
00:22:13,040 --> 00:22:16,040
Speaker 1: the type of designer type of numbers that will give

380
00:22:16,080 --> 00:22:19,159
Speaker 1: the Fed too much pause. I think the key and

381
00:22:19,280 --> 00:22:21,520
Speaker 1: all of this, and and again they're going to be,

382
00:22:21,640 --> 00:22:24,080
Speaker 1: you know, as data dependent as they can possibly be.

383
00:22:24,200 --> 00:22:26,879
Speaker 1: I think in this intermeding period from the June to

384
00:22:26,960 --> 00:22:29,560
Speaker 1: July meeting winds up being the June payrolls report, Right,

385
00:22:29,560 --> 00:22:31,359
Speaker 1: you got a rebound into the hundreds of thousands, So

386
00:22:31,359 --> 00:22:34,080
Speaker 1: you get a hundred and fifty thousand pay rolls and

387
00:22:34,119 --> 00:22:36,960
Speaker 1: suddenly everyone's like, okay, maybe you know, May was a

388
00:22:37,000 --> 00:22:39,600
Speaker 1: blip and and we're really on this more hundred and

389
00:22:40,680 --> 00:22:43,640
Speaker 1: fifty thousand trend, which is fine. That's what you need

390
00:22:43,680 --> 00:22:46,359
Speaker 1: in order to continue to have the unemployment rate stable,

391
00:22:46,400 --> 00:22:49,040
Speaker 1: if not falling a little bit. Further, So, Eira, when

392
00:22:49,080 --> 00:22:52,679
Speaker 1: the Fed does finally begin to ease, how do you

393
00:22:52,720 --> 00:22:56,320
Speaker 1: think it will look? Yeah, so, so I think when

394
00:22:56,320 --> 00:22:59,920
Speaker 1: they ease, you know, the I think the rates mark

395
00:23:00,040 --> 00:23:03,560
Speaker 1: it in particular, is set up to uh to potentially

396
00:23:03,640 --> 00:23:06,399
Speaker 1: steepen a little bit. And typically what happens when the

397
00:23:06,440 --> 00:23:09,639
Speaker 1: Fed does start to cut interest rates um, the yield

398
00:23:09,640 --> 00:23:12,280
Speaker 1: curve steepens and you wind up with some optimism that

399
00:23:12,320 --> 00:23:14,680
Speaker 1: you're going to have inflation going up at some point

400
00:23:14,720 --> 00:23:17,440
Speaker 1: in the future because of the easier monetary policy. But

401
00:23:17,760 --> 00:23:20,800
Speaker 1: I think at this this time we might not get

402
00:23:20,800 --> 00:23:23,840
Speaker 1: the type of typical curve steepening that we've gotten in

403
00:23:23,880 --> 00:23:27,080
Speaker 1: the past. So in the past you've had curves that

404
00:23:27,080 --> 00:23:31,280
Speaker 1: that's steepened a hundred two hundred two fifty basis points um.

405
00:23:31,560 --> 00:23:34,160
Speaker 1: I think that we get significantly less than that this time,

406
00:23:34,240 --> 00:23:37,680
Speaker 1: probably probably about half of that. And the reason being

407
00:23:37,720 --> 00:23:41,359
Speaker 1: that we're starting from a much different uh point in

408
00:23:41,480 --> 00:23:44,600
Speaker 1: terms of how much the Fed could actually cut. They

409
00:23:44,640 --> 00:23:48,200
Speaker 1: haven't made the typical policy mistake of continuing two hike

410
00:23:48,280 --> 00:23:51,280
Speaker 1: interest rates when the curve inverts. In fact, they stopped

411
00:23:51,600 --> 00:23:54,440
Speaker 1: basically as soon as the curve inverted. So um, so

412
00:23:54,760 --> 00:23:56,880
Speaker 1: they're not making some of the mistakes that that they've

413
00:23:56,880 --> 00:23:59,360
Speaker 1: typically made the past. So therefore there's not as much

414
00:23:59,400 --> 00:24:02,080
Speaker 1: to go the other the other direction. And you also

415
00:24:02,119 --> 00:24:04,680
Speaker 1: mentioned in your recent research piece that people are starting

416
00:24:04,680 --> 00:24:07,239
Speaker 1: to price in another round of quantitative easing. Did I

417
00:24:07,280 --> 00:24:11,199
Speaker 1: read that correctly? Yeah? So, so the the one of

418
00:24:11,200 --> 00:24:13,680
Speaker 1: the things that j. Powell mentioned last week was that

419
00:24:14,280 --> 00:24:16,440
Speaker 1: we will at some point get to the zero lower

420
00:24:16,480 --> 00:24:18,280
Speaker 1: bound again, which just makes sense. I mean, if we

421
00:24:18,320 --> 00:24:20,720
Speaker 1: do have any type of kind of meaningful and prolonged

422
00:24:20,760 --> 00:24:23,879
Speaker 1: economic downturn, the Federal Reserve cuts interest rates, you know,

423
00:24:24,040 --> 00:24:25,679
Speaker 1: eight times, and the next thing you know, we're at

424
00:24:25,680 --> 00:24:28,199
Speaker 1: the zero lower bound again. So what is then the

425
00:24:28,240 --> 00:24:31,920
Speaker 1: next action. It seems that that um, quantitative easing would

426
00:24:31,960 --> 00:24:34,639
Speaker 1: wind up being one of the first things that that

427
00:24:34,760 --> 00:24:38,000
Speaker 1: the market would expect the Fed to do after cutting

428
00:24:38,000 --> 00:24:40,399
Speaker 1: interest rates. So therefore, you know, again it's one of

429
00:24:40,400 --> 00:24:41,840
Speaker 1: these things where if they're gonna be buying a whole

430
00:24:41,840 --> 00:24:44,399
Speaker 1: lot of tenure notes and thirty year bonds, is going

431
00:24:44,440 --> 00:24:47,399
Speaker 1: to be harder for the curve to significantly steep in

432
00:24:47,440 --> 00:24:49,960
Speaker 1: an environment where the FED might be buying a whole

433
00:24:50,000 --> 00:24:53,040
Speaker 1: lot of of treasury securities. So I hate to ask

434
00:24:53,080 --> 00:24:55,440
Speaker 1: you this question, but I'm going to ask it anyway. Ira.

435
00:24:56,359 --> 00:24:59,199
Speaker 1: The President this morning once again was tweeting about the

436
00:24:59,240 --> 00:25:02,520
Speaker 1: FED and trust rate policies. Just give us a sense,

437
00:25:02,600 --> 00:25:05,200
Speaker 1: once again, kind of how you think the FED, if

438
00:25:05,280 --> 00:25:09,520
Speaker 1: at all, pays attention to such tweeting. I have a

439
00:25:09,520 --> 00:25:11,600
Speaker 1: funny feeling that they put their hands on their forehead

440
00:25:11,640 --> 00:25:14,000
Speaker 1: and lean forward on their desks and say, oh, my goodness,

441
00:25:14,000 --> 00:25:17,200
Speaker 1: not again. Um. But at the end of the day,

442
00:25:17,280 --> 00:25:19,840
Speaker 1: you know, the FED wants to be as independent as

443
00:25:19,920 --> 00:25:22,240
Speaker 1: it can be. We know from there's a lot of

444
00:25:22,240 --> 00:25:26,359
Speaker 1: academic studies, both from conservative and liberal think tanks and

445
00:25:26,359 --> 00:25:30,200
Speaker 1: and and academians that suggests that an independent central bank

446
00:25:30,280 --> 00:25:33,879
Speaker 1: has better long term economic outcomes than central banks that

447
00:25:33,920 --> 00:25:38,680
Speaker 1: are influenced by policymakers. Because the thing is elected policymakers, um,

448
00:25:38,720 --> 00:25:40,879
Speaker 1: you know, like a president or like members of the

449
00:25:40,880 --> 00:25:43,679
Speaker 1: House of Representatives. They care about the next election. They

450
00:25:43,720 --> 00:25:45,359
Speaker 1: don't care so much about you know, where are we

451
00:25:45,440 --> 00:25:47,760
Speaker 1: going to be in five or ten years? So um so,

452
00:25:48,440 --> 00:25:50,960
Speaker 1: rather than worrying about the short term gains that you

453
00:25:51,040 --> 00:25:53,880
Speaker 1: might get from you know, interest rate cuts, the FED

454
00:25:53,960 --> 00:25:55,919
Speaker 1: is going to look through that and say, Okay, what

455
00:25:55,920 --> 00:25:58,600
Speaker 1: what policies can do we need to do in order

456
00:25:58,640 --> 00:26:01,480
Speaker 1: to sustain the current recovery and then at the same

457
00:26:01,520 --> 00:26:04,280
Speaker 1: time don't overheat. So we have to you know, maybe

458
00:26:04,280 --> 00:26:06,520
Speaker 1: step on the brakes even faster in the future, which

459
00:26:06,640 --> 00:26:09,560
Speaker 1: which would be a concern potentially in some situations. Now,

460
00:26:09,840 --> 00:26:11,919
Speaker 1: you know, the current situation might be a little bit different,

461
00:26:12,040 --> 00:26:14,040
Speaker 1: but certainly a year ago when they were hiking interest rates,

462
00:26:14,040 --> 00:26:15,919
Speaker 1: it seemed that that that was a risk that was

463
00:26:15,920 --> 00:26:17,960
Speaker 1: on the table at the time I read. Jersey, thank

464
00:26:18,000 --> 00:26:20,359
Speaker 1: you so much for being with us as always. IROD Jersey,

465
00:26:20,440 --> 00:26:24,000
Speaker 1: chief US interest rate strategist for Bloomberg Intelligence. Thanks for

466
00:26:24,040 --> 00:26:26,720
Speaker 1: listening to the Bloomberg pen L podcast. You can subscribe

467
00:26:26,720 --> 00:26:29,520
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast

468
00:26:29,600 --> 00:26:32,360
Speaker 1: platform you prefer. I'm Paul Sweeney, I'm on Twitter at

469
00:26:32,359 --> 00:26:35,040
Speaker 1: pt Sweeney. I'm Lisa bram Woyds I'm on Twitter at

470
00:26:35,080 --> 00:26:38,040
Speaker 1: Lisa bramwoits one before the podcast. You can always catch

471
00:26:38,160 --> 00:26:39,960
Speaker 1: us worldwide on Bloomberg Radio