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Speaker 2: Joining us now Edward YARDNNY for a two hour conversation.
Speaker 2: I got eight ways to go here. You have a
Speaker 2: young Turk in the green room with you this morning. Yeah,
Speaker 2: what's your number one advice to a twenty year twenty
Speaker 2: two year old kid? Who's my god? I'm sitting next
Speaker 2: to Edward Yard, Denny, what do you tell the young
Speaker 2: turks read my books?
Speaker 3: I did buy them before you read that, right, You don't.
Speaker 4: Have to buy them. They're open to the public, you know.
Speaker 4: I share the knowledge that I've gained over the years.
Speaker 4: So in twenty eighteen I wrote a book called predict
Speaker 4: in the Markets, turned out to be six hundred pages long,
Speaker 4: about what I learned in the first forty years of
Speaker 4: my career. Now I'm working in the next four.
Speaker 2: What's the maxim that's been most true across the emotion
Speaker 2: of this bull market that won't go down?
Speaker 4: Well, I think it's earnings. I mean, it won't go
Speaker 4: down because earnings won't go down. I think the reason
Speaker 4: earnings have been so resident is because the economy has
Speaker 4: been so resident. You know, it's it's every time we
Speaker 4: throw something at it, it just hangs in.
Speaker 2: There. Are we getting a free launch from a set
Speaker 2: of stimuli that have goosed revenues to generate their free
Speaker 2: cash flow?
Speaker 4: And I think there's certainly something to be said for
Speaker 4: that one and a half to two trillion dollar government deficits.
Speaker 4: Certainly are stimulative, but we've also had a very strong
Speaker 4: consumer not kind of inconsistent with the so called K
Speaker 4: economy thesis. I call it the G economy thesis. It's
Speaker 4: really about the baby boomers that are keeping spending going
Speaker 4: because they're retiring. They've got eighty nine trillion dollars of
Speaker 4: retirement as the money.
Speaker 2: Lawrence McDonald's talked about it. I mean, it's just there.
Speaker 2: It's just a wall of money.
Speaker 4: And then of course there's the AI capital spending boom,
Speaker 4: and there's a lot of controversy about whether that's going
Speaker 4: to pay off or whether it's not. And it's one
Speaker 4: big bubble that's going to burst. I think it's going
Speaker 4: to pay off.
Speaker 5: So that's kind of where I want to go ed.
Speaker 5: I mean, you've seen so many cycles, so many major
Speaker 5: themes in this marketplace, whether it's the Internet or how
Speaker 5: do you think about AI here? I mean, it seems
Speaker 5: like a lot of folks are telling us this is
Speaker 5: bigger than anything we've seen.
Speaker 4: Well, that's that's my view. And the way I put
Speaker 4: in perspective is AI is not a revolution, It's an
Speaker 4: evolution in the digital revolution. The digital revolution started in
Speaker 4: the mid nineteen sixties with the IBA mainframes, and the
Speaker 4: digital revolution is all about processing as much information data
Speaker 4: as we possibly can, as quickly as we can, as
Speaker 4: cheaply as we can. And we've made a tremendous amount
Speaker 4: of progress, growing from the IBM mainframe to be soon
Speaker 4: as laptops, the cloud, and now AIS. I kind of
Speaker 4: I think time will like this. I view us now
Speaker 4: as having four factors of production land, labor, capital, and
Speaker 4: data and data. And we never really thought of data
Speaker 4: as a factor of production. And this ties into my
Speaker 4: buzz like your theory to infinity and beyond, there will
Speaker 4: never be a shortage.
Speaker 5: Of data, right and Bloomberg, we are at our heart
Speaker 5: a data nice.
Speaker 2: And you're creating more and more data and the world
Speaker 2: that was so good you get to work tomorrow.
Speaker 5: And the analytics around all that data. This is kind
Speaker 5: of what we do here at Bloomberg.
Speaker 3: So what are we doing here?
Speaker 5: Ed? I mean, can we feel comfortable with this earnings
Speaker 5: environment out there to continue to support this market exploit
Speaker 5: we just came through the last couple of quarters have
Speaker 5: just been extraordinary for earnings.
Speaker 4: Well, let me give you some some lingo on that.
Speaker 4: I'm a believer that we're better off with a bull
Speaker 4: market based on FEMO than FOMO. Fomo is fear of
Speaker 4: missing out, and if people have fear of missing out,
Speaker 4: that'll affect the pe. You'll get the valuation multiple too high,
Speaker 4: You'll get a bubble and it's bound to burst. Femo
Speaker 4: is fabulous earnings moment them, earnings have been absolutely fabulous,
Speaker 4: and I'd rather have a melt up based on earnings
Speaker 4: than one on evaluation multiples.
Speaker 2: And that's what we have, EDJR. Denny with the Sacks,
Speaker 2: and we continue. We welcome all of you across America.
Speaker 2: So if I line up my ten most important dinners
Speaker 2: across the yark of this privilege of the Bloomberg. One
Speaker 2: of them was of the Richard Berner years ago, and
Speaker 2: it was in the vicinity of twenty twelve, fourteen years ago.
Speaker 2: This is Berner of Morgan Stanley building out that franchise
Speaker 2: with Stephen Roach and then his public service to the nation,
Speaker 2: and Dick Berner and I sat there and he was
Speaker 2: on fire at yard Denny over the dots. The dots
Speaker 2: go back to January twenty twelve. I would suggest we
Speaker 2: had a shift tectonic. Will know in time. Were the
Speaker 2: dots efficacious? Were they of Vailue?
Speaker 4: Well, I'm kind of biased. I'm a Fed watchers. So
Speaker 4: the more and the more noise they provide for me
Speaker 4: to try to interpret for people, the better. I like
Speaker 4: the dot plot. I think it's it's a good insight
Speaker 4: into where the committee's meeting in the statistic. Yeah, the
Speaker 4: medium is important, but I think so is the distribution.
Speaker 4: To me, the funniest thing about the dot plot is
Speaker 4: and when you ask them for their long term estimate
Speaker 4: for the FED funds rate, and this is often called
Speaker 4: the neutral rate, and you would think that there's some
Speaker 4: science of the neutral rate at the Fed, but no
Speaker 4: science at all. They just nineteen of them, tell them,
Speaker 4: tell us what they think it is, and sometimes the
Speaker 4: spread is between three and four percent. It's like, you
Speaker 4: know that, Well, that's really helpful.
Speaker 2: I look at where mister Worrish is taking us. Yes,
Speaker 2: that much power, I mean, chairmany have that much power
Speaker 2: to shift the dialogue, don't they.
Speaker 4: Well, I think the dialogue stays the same, But then
Speaker 4: how much of it gets communicated to the public is
Speaker 4: what he seems to be focusing on. I mean, I
Speaker 4: think the dialogue at the FED is going to actually
Speaker 4: turn out to be more independent than it had been,
Speaker 4: you know. But he's actually come around to the old
Speaker 4: view that a FED chair needs to have a consensus.
Speaker 4: I mean, he could have been the only dissenter at
Speaker 4: that meeting, but he wasn't. He joined the committee. Email
Speaker 4: comes in, Mike. He's on the parade roots somewhere. Mike,
Speaker 4: thank you so much for emailing in today. Can you
Speaker 4: reaffirm your roaring twenties scenario? And where is your SPI
Speaker 4: statistic right now? Well, I'm looking for the S and
Speaker 4: P five hundred to get the eight two hundred and
Speaker 4: fifty by the end of the year and.
Speaker 6: Still at the end of this year.
Speaker 4: Yeah, yeah, yeah, I mean seventy seven hundred. I mean
Speaker 4: we're at seventy five hundred, so we're moving the right direction.
Speaker 4: And there's still several months left. And then by the
Speaker 4: end of the decade, at the end of twenty twenty nine,
Speaker 4: I'm you're still using ten thousand, and the Roaring twenty
Speaker 4: twenties has worked out pretty well here for the first
Speaker 4: sevent you think, yeah, yeah, I think so. You know,
Speaker 4: it's getting to be more and more roaring.
Speaker 2: Ed Jo Denny, thank you so much for joining us
Speaker 2: today in historic day with signature at Versailles, Doctor Yard Denny.
Speaker 2: Look for his spectacular note. Can't say enough about it.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: Anastasia, welcome to Bloomberg Surveillance, obviously with partners seek as well.
Speaker 2: Once again, you nailed it by having the courage to
Speaker 2: stay in the market. I want you to go back
Speaker 2: and at the bottom of this war one hundred and
Speaker 2: twenty dollars a barrel, et cetera. How did you know
Speaker 2: don't go to cash?
Speaker 7: Well, I guess it was a tough call to make,
Speaker 7: or maybe a brave call to make right because a
Speaker 7: lot of people at the peak were calling for recession
Speaker 7: probabilities to go up, and there were calls for stressed
Speaker 7: test scenarios of what if we stayed one hundred and
Speaker 7: twenty plus a barrel of crude oil? And I think
Speaker 7: what we ultimately looked at is, you know, fortunately we
Speaker 7: went into this largest supply outage with buffers and whether
Speaker 7: it's the inventories that we had on hand, and we
Speaker 7: could cover two hundred days worth of net imports, and
Speaker 7: so that you know, allowed for a lot of cushion
Speaker 7: that in my view, would have prevented us from going
Speaker 7: into recession.
Speaker 3: And then the other side of that.
Speaker 7: Is, you know, we never I don't think really anybody
Speaker 7: thought that this conflict would drag on for quarters and
Speaker 7: quarters in years. We know that there's a political time clock,
Speaker 7: and you know, there's a level of market patients that
Speaker 7: was going to force a resolution at some point. So
Speaker 7: I'm glad to see that we are here and it's
Speaker 7: been a stunning turn around to the price of oil.
Speaker 7: Tom to your point, from one hundred and twenty to now,
Speaker 7: you know the forward strip pricing and seventy.
Speaker 6: Five dollars average for the back half of the year.
Speaker 7: That is a much much better backdrop fortunately for risk
Speaker 7: assets now.
Speaker 5: So I guess investors are probably you know, over the
Speaker 5: last several days, trying to reset a little bit. And
Speaker 5: what do we focus on now?
Speaker 2: Is it earnings? What do we focus at the Fed?
Speaker 5: We heard from the Fed yesterday they're not going to
Speaker 5: give us any any love there. So what are the
Speaker 5: market's focusing on these days?
Speaker 7: Well, I think it is that interplay between where we
Speaker 7: are with the state of the economy and where we
Speaker 7: are with a state of interest rates, and the focus
Speaker 7: should be on the strength of economic activity first of all,
Speaker 7: whether you look at the consumer and this continued momentum
Speaker 7: that we see there, whether you look at the corporations
Speaker 7: and the great earning season that we just came out of.
Speaker 7: You know, you look at the upsizing of Varning's estimates
Speaker 7: for example.
Speaker 3: And then there's the Cappec story.
Speaker 7: If you look at the last quarters GDP, you know,
Speaker 7: the kind of the bright object there has actually been
Speaker 7: the fixed asset investment. The capex is accelerating in the
Speaker 7: US thanks to hyperscalers, but also others. So that's the
Speaker 7: economic backdrop. That's why I think you stay in the markets.
Speaker 7: The other side is the FED. And look my take
Speaker 7: on that is the markets have interpreted this as in,
Speaker 7: you know, this is hawkage guidance where we're going to
Speaker 7: high grates. It's not guidance. As you know, there was
Speaker 7: no forward guidance. And I think a lot is going
Speaker 7: to change in the next few months.
Speaker 2: Nasty chamorroso whaus we will continue, whether Edward jar Danny
Speaker 2: to join, you know a moment futures of fifty five.
Speaker 2: The vix is surprising. I thought it'd be in it's
Speaker 2: in a stick seventeen point twenty seven, but it's screaming
Speaker 2: sixteen handled to me. The Bank of England just does
Speaker 2: a seven to two vote. Meghan Green, who's spent on
Speaker 2: the show many times, and Hugh Pill a full time
Speaker 2: a few Pill times over the years, but Meghan Green
Speaker 2: in Pill vote against it, looking for a rate increase.
Speaker 2: Bank of England stay static, Pound retreats, Guilts retreat and
Speaker 2: Paul It goes to this idea of a backdrop of
Speaker 2: fighting inflation, fighting inflation time.
Speaker 5: So, Anastasia, one of the issues for this market is
Speaker 5: AI and we're trying to figure out o've the investors
Speaker 5: how to play it other than in Vidia, and it's
Speaker 5: been an ongoing I think play for this marketplace to
Speaker 5: figure out where do we go, how do we play it?
Speaker 2: Are you guys thinking about series?
Speaker 7: I mean, look, there's actually so much more to do
Speaker 7: in both public and private markets beyond Nvidia. You know,
Speaker 7: first of all, you know, one thing that's happened, Paul
Speaker 7: is over the last few years, the total adressable market
Speaker 7: for semiconductors because of AI has expanded. So it's started
Speaker 7: with GPUs, but now as we know, the total addressable
Speaker 7: market for CPUs for memberships, all of that is being
Speaker 7: upside so that trade on its own has broadened out.
Speaker 4: You know.
Speaker 7: Then you think about the infrastructure, and you know, look,
Speaker 7: there was the first leg I would say, of the
Speaker 7: data center opportunity, and you know, there's some concern about
Speaker 7: maybe we've done too much too fast, but the reality
Speaker 7: is looking ahead, what's happening is we're transitioning from the
Speaker 7: use of chatbots, the conversational commerce to the use of
Speaker 7: agentic AI and workflow automation. And what that does is
Speaker 7: it's likely to drive much more token consumption over the
Speaker 7: next few years and that's going to require a whole
Speaker 7: lot of compute. So the next phase of the data
Speaker 7: center build out has to support this move to agentic AI.
Speaker 7: So we're absolutely looking at data centers. We have several
Speaker 7: portfolio companies in the space, and you know, they're seeing
Speaker 7: very strong appetites for their compute capacity.
Speaker 2: Partner Group is out of Switzerland. You've got to handle
Speaker 2: on continental Europe because you have to go over there
Speaker 2: and speak to people about American exceptionalism. Do they still
Speaker 2: want to buy American after all we've been through with
Speaker 2: the president in the war.
Speaker 7: Yes, the answer is yes. And look, you know there's
Speaker 7: been a kind of an evolution there, but absolutely, And
Speaker 7: I was in Europe recently and look, when you think
Speaker 7: about Europe, you've got extremely depressed consumer confidence, you have
Speaker 7: sluggish consumer spending. You have the ECB that hiked rates
Speaker 7: presumably or arguably they shouldn't have. You know, you don't
Speaker 7: have the cap X momentum, you don't have the support
Speaker 7: of corporate tax rates. And then if you flip all
Speaker 7: of that around and look at to the United States.
Speaker 7: We've checked all those boxes. So I think that's why
Speaker 7: whether in Europe, whether you're Asian Asian investor, you continue
Speaker 7: to look to the United States, not for the political
Speaker 7: backdrop that we have, but for the economic backdrop that
Speaker 7: we have.
Speaker 5: What are we doing with emerging markets here, because that's
Speaker 5: been a play really for the last I don't know,
Speaker 5: a couple of years. Your merging markets have done very well.
Speaker 7: Yeah, I think some parts of emerging markets are quite interesting.
Speaker 7: And you know, let's let's kind of extend the AI
Speaker 7: trade to Asia for example, and it was also recently
Speaker 7: in Asian you know, you look around and sixty or
Speaker 7: seventy percent of what we need to actually build out
Speaker 7: AI infrastructure is manufactured right there in Asia, whether it's
Speaker 7: you know, data center chips where, whether it's servers, you know,
Speaker 7: whether it's all the components. So so I like emerging
Speaker 7: markets that are enabling that tech trade. Then selectively, you know,
Speaker 7: I wouldn't say that you just invest in all emergent markets,
Speaker 7: but if you can identify a theme. For example, we
Speaker 7: have invested in a company in Brazil which is a
Speaker 7: fintech company, because it's what scaling in fintech is not
Speaker 7: just a US story.
Speaker 2: I don't care when you say you're in Europe, Are
Speaker 2: you really talking about lining up? And Angelina's on the
Speaker 2: root of Rivilee for that chocolate. Is that what we're
Speaker 2: really talking about?
Speaker 7: No, I'm not lining up there, but is absolutely easy.
Speaker 2: Do we predict that Europe's going to have a huge summer.
Speaker 2: I'd like some guests coming down, maybe the fair competition and.
Speaker 6: Go into parts of Europe.
Speaker 2: Parts. What does Kirby do this morning at United? His
Speaker 2: head must be spinners? Fine, All good, all good, and
Speaker 2: as as you're anam. Also, thank you so much and
Speaker 2: congratulations on an important call for the last twelve months, Scuria.
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch us live on YouTube.
Speaker 2: Julie bial has been more than patient. We extended that
Speaker 2: discussion because Sweeny was trying to get pass into the
Speaker 2: city hall areas from the Comptroller features of sixty eight
Speaker 2: Nancy Cup and now dancing in further one point six percent.
Speaker 2: Julie feel's wonderful with a very different perspective with Kane
Speaker 2: Anderson at Rodney, Julie, how do you deploy new cash
Speaker 2: this morning?
Speaker 8: I think that right now you really have to be
Speaker 8: if you're in small and MidCap, you really have to
Speaker 8: be thinking about quality.
Speaker 3: The low quality to high quality.
Speaker 8: Is kind of a pretty extreme levels right now, and
Speaker 8: so I think it's a good opportunity to be able
Speaker 8: to buy nice things for cheap. Normally we don't get
Speaker 8: to have these things, these opportunities to buy things at
Speaker 8: better prices, and so that's pretty attractive for us right now.
Speaker 5: What did you hear from our new FED chair yesterday
Speaker 5: and did that change kind of how you're thinking about
Speaker 5: asset allocation?
Speaker 3: I think, you know, it didn't really change very much.
Speaker 3: I think that what we heard was less.
Speaker 8: Which is an interesting dynamic for most of us, as
Speaker 8: the trend has really been towards more disclosure, more words, more.
Speaker 3: Graphs, more charts.
Speaker 8: And I think that this kind of austerity of words
Speaker 8: is probably a positive thing for markets, because I think
Speaker 8: a lot of that can create a lot of noise,
Speaker 8: and what really is driving most of the decision making
Speaker 8: is the data that we can all see. So I
Speaker 8: think it's an interesting posture. I think reducing the balance
Speaker 8: sheet is probably a positive thing, particularly if it gives
Speaker 8: us the opportunity if we do get into a stressful
Speaker 8: situation in the markets.
Speaker 3: To be able to add more liquidity.
Speaker 8: So I think I agree, and I'm the hawkish tone
Speaker 8: really shouldn't be surprising anyone. That was really the movement
Speaker 8: and direction that we were going in. So I think
Speaker 8: it's kind of in line with most people's expectations.
Speaker 5: Where are you the stocks, bonds, commodities, alternatives, How are
Speaker 5: you thinking about allocation these days?
Speaker 8: I think that when you are looking at a broader portfolio,
Speaker 8: the balance of it is really important. I think we
Speaker 8: continue on the equity side to struggle in part because
Speaker 8: credit looks pretty good. Parts of credit look really good.
Speaker 8: But I do think that we have to be really
Speaker 8: mindful of quality, the importance of making sure that you're
Speaker 8: exposed to businesses that have the really strong cashlows and
Speaker 8: that can withstand higher interest rates if that should happen.
Speaker 3: I think it's pretty important, right.
Speaker 8: I wouldn't want to be in a position where we're
Speaker 8: significantly overlevered. And when we think about the AI trade,
Speaker 8: now that we've moved past this point where everything was
Speaker 8: funded with free cash flows, so need to worry. Now
Speaker 8: there's a lot more debt, Now there's a lot more equity.
Speaker 8: I think that that creates an important movement towards thinking
Speaker 8: about fundamentals and earnings, not just growth.
Speaker 2: What does the East Coast not get about the world
Speaker 2: of Julie Bale. I mean, you look out at the
Speaker 2: West Coast and I think for so many psychologically, it's
Speaker 2: just really different at Julia. I mean, does this the
Speaker 2: whole tech thing, Does it just to have a permanence
Speaker 2: to you? Like you're not worried about a cyclic ending
Speaker 2: of it? No?
Speaker 3: I mean, look I was. I'm French originally, so.
Speaker 8: I worry about literally everything that's just that's a lifestyle
Speaker 8: for me, that's like a personality trade. And I think,
Speaker 8: actually that's why I've been relatively successful. But no, I
Speaker 8: think that what I really believe is that the opportunities
Speaker 8: that we're being presented in AI to me look wonderful.
Speaker 8: They look really positive, and they look like they can
Speaker 8: be really profound in terms of the nature and quality
Speaker 8: of work. But they're complicated and they're not without their
Speaker 8: own costs. So while I'm really enthusiastic and excited about
Speaker 8: AI for the very long term and the potential it
Speaker 8: has to unlock things in healthcare and all the stuff
Speaker 8: that they tell us is super important, what is a
Speaker 8: little bit different about this build out from a Capex
Speaker 8: standpoint is that what we're building and what we're spending
Speaker 8: a lot of money on has a depreciation and a
Speaker 8: utility that's much shorter than things like the big tech
Speaker 8: you know, the big buildous that we had in telecom,
Speaker 8: in railroads, et cetera. That's that creates a little bit
Speaker 8: of a different dynamic in terms of the pressure to
Speaker 8: create returns in the here and now, and I think
Speaker 8: that that's something that's a little bit different than other
Speaker 8: Capex cycles we've had.
Speaker 5: Julie, how about US versus non US? We did have
Speaker 5: a rotation I don't know, late last year early this year,
Speaker 5: but it seemed like that's reversed a little bit. How
Speaker 5: do you think about it?
Speaker 8: I think that we saw a lot of valuation opportunities,
Speaker 8: particularly outside the US.
Speaker 3: It had gotten pretty extreme.
Speaker 8: How overbought the US looked, and so I think that
Speaker 8: broadly speaking, things look more in balance to me now
Speaker 8: where you don't see the depth of the value that
Speaker 8: is being that we could really find as particularly in Europe,
Speaker 8: it's not quite as compelling to me now, particularly when
Speaker 8: you think about the growth opportunities that.
Speaker 3: Really feel like they're being unlocked in the US.
Speaker 8: But I do think you want to have a certain
Speaker 8: amount of balance, right because if our economy is over
Speaker 8: levered to AI, and there is some vulnerability to that,
Speaker 8: right anytime you're dependent on a single theme. So I
Speaker 8: think that having a little bit of exposure internationally makes
Speaker 8: sense because it is a little bit less leverage to
Speaker 8: certain of the AI themes.
Speaker 2: Julie, thank you so much. Julie bial so much. Are
Speaker 2: you going to be watching France a rock? I mean,
Speaker 2: is that what we're learning?
Speaker 3: Of course? Gotta do it, Gotta do it.
Speaker 2: I think it's on Monday. Julie Biale, thank you so much.
Speaker 2: Respecting France out there, and you can't say enough about
Speaker 2: her at work on market strategy. Stay with us. More
Speaker 2: from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast Catch US Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch US live on YouTube.
Speaker 2: Joining us now in an election effort. He's been doing
Speaker 2: this for a long time. The fifth fourth Controller of
Speaker 2: New York State. Tom, I want to talk about in
Speaker 2: America completely removed from politics. What was it? It's seventeen
Speaker 2: that said to you, I need to run for public office.
Speaker 9: Well, you know, I came of age in the late sixties,
Speaker 9: early seventies, inspired by folks like Robert.
Speaker 6: Kennedy, Sr.
Speaker 9: And you know, it was a timeer, great division in
Speaker 9: the country, a lot of issues, social issues, Vietnam War
Speaker 9: and so on.
Speaker 6: Eighteen year old vote just came in actually that I
Speaker 6: could vote, and.
Speaker 9: I said, you know what, I want to be part
Speaker 9: of making this world a little bit better.
Speaker 6: And I was very active in school issues. I went
Speaker 6: to school board meetings.
Speaker 9: I didn't like some of the things I heard, so
Speaker 9: I said, you know, i'll take my civic pleasensis and.
Speaker 6: I'll run for a school board.
Speaker 9: And I had that unique experience, Tom of my very
Speaker 9: first vote was for myself and I won.
Speaker 6: So that kind very cool a path.
Speaker 2: Yeah, the big change, Tom DiNapoli, and you know, the
Speaker 2: people running against you and your critics and all that
Speaker 2: say there's nobody watching over allbody watching over state government.
Speaker 2: Back then there were tons of media coverage and local coverage,
Speaker 2: and that now is a dearth of local coverage. Is
Speaker 2: there scrutiny on our state processes now that you've been
Speaker 2: doing this for decades?
Speaker 6: Well, it's an interesting point.
Speaker 9: You know, there's no doubt when you go to the
Speaker 9: LCA area, the Legislative correspondence area in the state capitol,
Speaker 9: it's probably got about half of the folks there that
Speaker 9: they were there when I first started in the State
Speaker 9: Assembly a number of years ago.
Speaker 6: So and you see the coverage just generally.
Speaker 9: Shrinking for many of our you know, mainstream newspapers and
Speaker 9: radio and TV. So more press attention would be helpful.
Speaker 9: But certainly in terms of our role, our oversight role,
Speaker 9: the ordered authority overseeing state finances, the controller's tradition continues.
Speaker 9: So you know, keep in mind we don't have any
Speaker 9: enforcement power. We don't order the governor of the legislature
Speaker 9: what to do. We can only comment on state fiscal practices,
Speaker 9: on debt practices, on spending on covering wasteboard for ud
Speaker 9: and abuse. We do that, and of course I always
Speaker 9: appreciate it when the press pays attention to what we're doing.
Speaker 9: But I think with everything going on in the world
Speaker 9: these days, unfortunately, state politics generally does not get attention
Speaker 9: that it should.
Speaker 5: Tom, What do you believe is the key issue for
Speaker 5: voters to focus in on as they think about the controller?
Speaker 6: Well, you know, there are a couple.
Speaker 9: I mean, one of the obvious ones is the responsibility
Speaker 9: of overseeing the state pension fund. That is the fund
Speaker 9: that is our investment fund to provide retirement security for
Speaker 9: the one point three million New Yorkers public workers all
Speaker 9: across the state. And keeping that fund safely secure and
Speaker 9: keeping politics out of managing the fund, I think is
Speaker 9: a very important responsibility, I think in terms of audits
Speaker 9: and reports and analyzing state spending priorities. Recognizing that we're
Speaker 9: going through a time of a change relationship between Washington
Speaker 9: and the states, so particularly a state like New York
Speaker 9: really starting to feel the effects of the Trump agenda,
Speaker 9: the significant constant, especially in healthcare, nutrition programs, education, and
Speaker 9: so on. So having a controller who could help identify
Speaker 9: what those trends are and how we need to respond
Speaker 9: to them, I think is a very important responsibility. And
Speaker 9: of course, as always, when taxpayer money is being wasted,
Speaker 9: you want a controller who could point out ways to.
Speaker 6: Be more efficient.
Speaker 9: And in the worst case where people are stealing public dollars,
Speaker 9: and that happens too often, we've had a laser focus.
Speaker 9: Will our investigator unit saving taxpayers money by getting restitution
Speaker 9: from those who steal from the state. So a lot
Speaker 9: of important issues this office is involved with.
Speaker 2: Can I ask you Bloomberg surveillance question, I think we
Speaker 2: can go down. We're here with Tom to Napoli. I
Speaker 2: look at your pension fund and we had some of
Speaker 2: the others in running for comptroller, and there you know
Speaker 2: their critic is critical of active and passive management, and
Speaker 2: that I'm looking at a three months return near ten percent,
Speaker 2: five year a little bit lower. There was a small
Speaker 2: matter of COVID, but I got a ten year annualized
Speaker 2: return three hundred beeps above nominal GDP. My statistic is
Speaker 2: eight point nine four percent. Mister Danapoli, maybe you have
Speaker 2: a better statistic. How are you accomplishing that? How are
Speaker 2: you getting a nominal GDP plus three hundred basis point return.
Speaker 6: We have small professional management of the fund. We have
Speaker 6: a strong belief in diversification.
Speaker 9: As part of our asset allocation, we do a series
Speaker 9: review every five years. The biggest part of the portfolio
Speaker 9: is in public equity. Much of that is passively invested
Speaker 9: through index funds, and then we have a little less
Speaker 9: than twenty five percent in fixed income. It is in
Speaker 9: the alternatives in the private markets, you know, real estate,
Speaker 9: private equity, infrastructure, credit where not completely correlated to what's
Speaker 9: happening in the public markets.
Speaker 6: That we try to have that.
Speaker 9: Balance so that even with the volatility that sometimes obviously
Speaker 9: occurs in the public markets, we could still be steady.
Speaker 9: I would say one of the things Tom, we have
Speaker 9: a very conservative assumed rate of return.
Speaker 6: So a long term assume rate of return is five
Speaker 6: point nine percent. Most public pension funds.
Speaker 9: Are much higher than that. I think we're one of
Speaker 9: only three funds that are below six percent. So we're
Speaker 9: more conservative. So therefore we don't take as much risk
Speaker 9: to chase a higher kind of return assumption. And I
Speaker 9: think that's been our strength diversification conservative firm goal and
Speaker 9: it's worked for us.
Speaker 3: Tom.
Speaker 5: You mentioned the changing relationship with Washington. Get us a
Speaker 5: sense of how that's really changed with a second Trump
Speaker 5: administration from a dollars and cents perspective.
Speaker 9: Well, I mean, just looking at the big beautiful, the
Speaker 9: big ugly, as I would prefer to call it. You know,
Speaker 9: you're talking about probably the next couple of years thirteen
Speaker 9: fourteen billion dollars in health care cuts to the meth
Speaker 9: paid program. That certainly it's a very expensive program, right
Speaker 9: been growing part of the state budget. A lot of
Speaker 9: people depend on that program, so it certainly has an
Speaker 9: impact on our state finances, particularly because we're trying to
Speaker 9: figure out how to box stop for those that will
Speaker 9: lose health insurance coverage. You know, New York State went
Speaker 9: from oh, a few years ago, about ten percent of
Speaker 9: our population without health insurance coverage to less than five percent.
Speaker 9: Now that folks are going to be moved off of MINTIC,
Speaker 9: some of them will be able to get coverage in
Speaker 9: the marketplace, some of them won't. Doesn't mean they're not
Speaker 9: going to get health care. We'll probably have to pay
Speaker 9: for it through the charity pools. So you know, these cuts,
Speaker 9: which you know may at one level sound like we're
Speaker 9: saving money in the long run is going to cost
Speaker 9: it so and hurt people as well.
Speaker 3: You know.
Speaker 2: Time one final question. You know, we talked to Governor
Speaker 2: Lamon in Connecticut every once in a while, and I
Speaker 2: would suggest that mister Lamont grew up a little different
Speaker 2: than mister Danapoli. But both of you are facing this
Speaker 2: presumed migration out of New York State to Florida, Texas
Speaker 2: and four other jurisdictions. How does New York State stop
Speaker 2: the movement to these other areas. What's the DiNapoli formula
Speaker 2: to keep New York State strong?
Speaker 9: Well, it's an important question, and I think you need
Speaker 9: to keep in mind when we look at the taxpayer
Speaker 9: migration numbers. You're right, there isn't out migration, but it's
Speaker 9: not as severe as the critics say. Are we losing
Speaker 9: some folks at the upper end because of tax policy, Yeah,
Speaker 9: a bit. What is a bigger issue is the affordability
Speaker 9: question for people at the middle and lower end. So
Speaker 9: I think it does get back to, you know, some
Speaker 9: big macro national issues that we don't necessarily control. But
Speaker 9: that's why it's important terms of the controller's role to
Speaker 9: make sure that we are not wasting any taxpayer money.
Speaker 6: Number one.
Speaker 9: Number two, many people still want to come to New
Speaker 9: York and that's where the issues of quality of life,
Speaker 9: public safety, particularly for folks in the city, access to
Speaker 9: public transit that's reliable, all of those issues I think
Speaker 9: become very very important in terms of keeping people here.
Speaker 9: But when you look at New York City, this is
Speaker 9: the place where young creative people want to be and
Speaker 9: I don't think that's changed. So we need to we
Speaker 9: need to lean into those kinds of strengths.
Speaker 2: Time to happily, Thank you so much. Love to get
Speaker 2: you in the studio here at some point Lexington at
Speaker 2: fifty ninth Street. Mister Danapoli is the New York State Controller.
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