Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
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Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. All we're
Speaker 2: gonna do is dive into earnings on a Friday. We've
Speaker 2: got three earnings coming out City Group later, which in
Speaker 2: itself will be fascinating. It was a reverse ten for
Speaker 2: when stock split fifteen years ago, and they're still trying
Speaker 2: to figure out to move forward. Wells Fargo with a
Speaker 2: very different platform, always challenged Damiens chomping at the bit
Speaker 2: to ask Allison Williams about that, But I'm gonna start
Speaker 2: with Fortress Diamond. It just keeps continuing, Allison, you have
Speaker 2: lived this. Harrison was running JP Morgan in this young
Speaker 2: Turk Jamie Diamond at Bank one and the Midwest was
Speaker 2: going to come in and save the day, Save the day.
Speaker 2: He's built a juggernaut. Let's start with the JP Morgan distinction.
Speaker 2: Why are they different this Friday morning.
Speaker 3: I think they just continue to reap the benefit of
Speaker 3: their investments. I think one of the things that JP
Speaker 3: Morgan has done is, you know, being willing to spend
Speaker 3: the money. You know, keep in mind, a couple of
Speaker 3: years ago they said, look, we need to invest. We're
Speaker 3: investing in technology. People were very upset about the operating costs.
Speaker 3: But they're proving, and they're proving that those investments are
Speaker 3: yielding results.
Speaker 2: Trading at a twelve thirteen multiple, they're up sixteen percent
Speaker 2: per year for the last ten years. Nobody's even close.
Speaker 2: And I got a headline JP Morgan notch's profit on
Speaker 2: visa gain is at the SaaS summer House north of
Speaker 2: New York City, killing it for Jamie.
Speaker 3: This is how they're paying for all the great things
Speaker 3: that Damien was just referencing. So they had they had
Speaker 3: an eight billion dollar gain related to tendering some visa shares.
Speaker 3: They announced this actually even prior to their investor day.
Speaker 3: So I think for the most part, investors saw this coming.
Speaker 3: But you know, you sometimes you don't know who's watching
Speaker 3: the stock and if they're seeing this extra billion and
Speaker 3: expenses related to that gain, and if there could be
Speaker 3: some negative reaction to that. But we think it's smart.
Speaker 3: So they have this big eight billion dollar gain, they're
Speaker 3: gonna pull forward some of their charitable contributions by you know,
Speaker 3: funding that funding those contributions with shares, So we know
Speaker 3: that that's a great tax advantage. But that is upping
Speaker 3: their costs for the year by a billion, So we
Speaker 3: think that that that's a smart move. I think on
Speaker 3: the more negative side, Wells Fargo guiding up on their
Speaker 3: cost which our investors are not going to be happy about.
Speaker 3: These operating losses or not operating losses as they refer
Speaker 3: to them, the customer remediation costs that relate to the
Speaker 3: ongoing issues the asset cap that have been sort of
Speaker 3: going on since about twenty sixteen.
Speaker 1: I mean, look, Amy, net interest margin, op X, credit quality.
Speaker 1: Who cares? All we care about are banking revenues and
Speaker 1: trading results. Talk to us about fix trading, equity trading.
Speaker 1: I mean it's been a pretty good quarter. No, I mean,
Speaker 1: what's going on at JP Morgan. My man Matty Kolakowski
Speaker 1: and securitized sales over there said he had a big quarter.
Speaker 1: Is he getting paid?
Speaker 3: Well, it is a good quarter. I mean, I think
Speaker 3: there's one of the things that investors are really keying
Speaker 3: on is the investment banking revenue. And perhaps that's just
Speaker 3: because it relates to all of our businesses, because the
Speaker 3: revenue itself, just investment banking is a huge lever for
Speaker 3: JP Morgan, but does help trading, which is a bigger lever.
Speaker 3: And we saw better than expected results two point five
Speaker 3: billion on the investment banking revenue side, and that helped
Speaker 3: fix trading better than expected, equities trading better than expected. Really,
Speaker 3: we're seeing the lift from those strong equity markets as
Speaker 3: well as credit trading on the fixed side.
Speaker 1: So you know, I'm just kidding, right, I mean, it
Speaker 1: does matter, but it matters more for Wells Fargo when
Speaker 1: we're looking at op X and we're looking at fundamentals.
Speaker 1: So talk to us a little bit about why that's
Speaker 1: different there. I mean, this is something that's been going
Speaker 1: on since twenty sixteen.
Speaker 3: No, it's been forever. I mean when we think back
Speaker 3: and they first announced these issues, and you know, for
Speaker 3: those not familiar, there was a fake account scandal. We've
Speaker 3: seen a complete turnover of management. We've seen a couple
Speaker 3: of CEOs, the board's turnover, just years and years of
Speaker 3: trying to get it right. This has never happened to
Speaker 3: a bank.
Speaker 4: This this.
Speaker 3: You know, sort of the regulatory backlash, and so no
Speaker 3: one knows when it's going to end. It just keeps
Speaker 3: getting longer and longer, and we just keep seeing these
Speaker 3: these costs and so we should be getting to the
Speaker 3: tail end of those. But the fact that you know,
Speaker 3: there's two things, so the costs are going to be
Speaker 3: more than expected. The net interest income they've been guiding
Speaker 3: down seven to nine percent, and now they're saying that
Speaker 3: it's going to be on the higher end of that range.
Speaker 3: Some of the banks that have more trading and have
Speaker 3: talked about like there's an impact there kind of goes
Speaker 3: out in the wash with fees. But we're going to
Speaker 3: want to hear more detail from Wells. Why are they
Speaker 3: a little bit more now?
Speaker 2: You brought notes in Friday, we do Bloomberg Surveillance.
Speaker 1: With Alison Williams. Come on prepared Alison. You know, look,
Speaker 1: I mean for me, you know, I'm a fixed income guy,
Speaker 1: and you know, for me, it's about credit quality. And
Speaker 1: you know, I'm curious what are your takeaways here? I mean,
Speaker 1: are they provisioning more? I mean, we're at that tail.
Speaker 1: I mean one would think we're in the eleventh inning
Speaker 1: of this of this of this cycle here in the US.
Speaker 1: I mean, does anything stand out to you in terms
Speaker 1: of credit quality on that end of the equation so far?
Speaker 3: I mean, we haven't done fully into it, but it
Speaker 3: looks like what we had expected, which is we're seeing
Speaker 3: provisions for the credit card business and a lot of
Speaker 3: that just relates to growth. You know, charge offs looked
Speaker 3: like they were in those are kind of today's cause
Speaker 3: they're as expected. But as those portfolios grow, you have
Speaker 3: to reserve for the life of the loan, and cards
Speaker 3: have the highest a loss rate of all the categories.
Speaker 2: As you know, I want to go bigger, broader here.
Speaker 2: Both of you got you know, a lot of experience
Speaker 2: on this, and of course the carnage of the Great
Speaker 2: Financial Crisis and that day where Jamie Diamond brought the
Speaker 2: bear Stearns building for what ten bucks or one buck
Speaker 2: or whatever it was, Allison Williams. JP Morgan has global aspirations.
Speaker 2: Are the governments Allison Williams going to let JP Morgan
Speaker 2: expand and be America's bank abroad.
Speaker 3: I think the key thing from a regulatory standpoint really
Speaker 3: relates to the capital standard. And you know, this is
Speaker 3: something that all the US banks have been complaining a
Speaker 3: little bit about because they look tougher than the implementation
Speaker 3: of some other regions. So after the crisis, BOSEL came
Speaker 3: out with some guidelines. All the different jurisdictions have implemented
Speaker 3: them in their own way, and the US rules are
Speaker 3: pretty tough. You know, we call it gold plating. In
Speaker 3: terms of.
Speaker 2: Five years, do you see JP Morgan dominant in Europe?
Speaker 3: I mean they're pretty strong there now. Exactly, they're pretty
Speaker 3: strong there now. So I think that the most interesting
Speaker 3: thing for JP Morgan on the international front. People don't
Speaker 3: talk a lot about, but they're looking to expand their
Speaker 3: retail presence. They're looking to span their retail presence in
Speaker 3: the UK.
Speaker 2: The digital retail experiment in the United Kingdom work.
Speaker 3: Yes, well, they haven't talked about it a lot, but
Speaker 3: from what we hear, it's been meeting their metrics.
Speaker 2: Ellison, thank you so much. We can't wait for you
Speaker 2: to publish at Bloomberg Intelligence. If you're in the money business,
Speaker 2: there is exactly one Whitney. He is Whitney Tilson. And
Speaker 2: to put things in perspective, we'll sit over a beverage
Speaker 2: of our choice and go, gee, someday I think I'll
Speaker 2: climb kill him in Jarrow. Right, he's actually climb kill
Speaker 2: him in Jarrow. The academics are bulletproof. He's a Baker scholar.
Speaker 2: Which it's like planning for Billy Clearot at Harvard Hockey.
Speaker 2: I mean yeah, it's like a Baker scholar. And he's
Speaker 2: been on fire. The author of Poor Charlie's Almanac, The
Speaker 2: witt and Wisdom of Charles T. Monger, Whitney Tilson has
Speaker 2: been on fire about his Democratic Party. Let me make
Speaker 2: clear he is a supporter of Democratic politics. Whitney, thank
Speaker 2: you so much for joining. You've been a voice of
Speaker 2: sanity for Republicans and Democrats out on Twitter. How'd the
Speaker 2: president do last night?
Speaker 5: Well, let me give you a football analogy. If I
Speaker 5: told you that, hey, your favorite quarterback your favorite team
Speaker 5: just completed a ten yard pass, you'd say great, moves
Speaker 5: the chains one step closer to victory. But what if
Speaker 5: I told you that you're down by fourteen with two
Speaker 5: minutes to play at the fifty yard line, and your
Speaker 5: quarterback has an obviously sprang dannkle if not a broken leg,
Speaker 5: then you'd say, oh my god, that's terrible news that
Speaker 5: we completed a ten yard pass. Because it's a hopeless situation.
Speaker 5: Our only chance of victory is a couple hail Mary passes,
Speaker 5: So completing a ten yard pass actually reduces our chances
Speaker 5: of victory. So I hope that's not too complex of
Speaker 5: an analogy. But Biden was solid last night. Couple little gaffs.
Speaker 5: But the problem is is it did nothing to dispel
Speaker 5: the concerns of eighty percent of American people that he's
Speaker 5: too old for the job, and basically the belief of
Speaker 5: now every single Democrat in Congress that he needs to
Speaker 5: step aside to give us any chance of beating Trump.
Speaker 2: In November, Whitney I observed first and the Kennedy Klan
Speaker 2: at a Democratic invention in Boston garden across at a
Speaker 2: senator from Illinois, a kid from Chicago take the trophy.
Speaker 2: This is when Obama rose to national presidents versus an
Speaker 2: elderly aging Ted Kennedy as well, that dialogue, that tension,
Speaker 2: Whitney Tilson of the Democratic Convention as in Chicago soon
Speaker 2: seems to have evaporated into an elite, almost tribal class.
Speaker 2: Now you're on the edges of that, you're a donor, etc.
Speaker 2: But does your party, and frankly the Republicans, do they
Speaker 2: need to get back to an older and more fractious
Speaker 2: convention process.
Speaker 5: Well, look, I'm what I'm actually looking forward to when
Speaker 5: Biden steps aside, And at this point it's a question
Speaker 5: not of if, but when I think it's now ninety
Speaker 5: five percent likely that he will step aside, And then
Speaker 5: I think it would be a disastrous decision to simply
Speaker 5: anoint Kamala Harris. I'm for supporting her if she earns
Speaker 5: it and can demonstrate that she's got the idea's vision,
Speaker 5: can capture the imagination of the American people and one
Speaker 5: beat Donald Trump and two be a great president. But
Speaker 5: they're also at least it does and if not twenty
Speaker 5: other people whose names are being tossed around, and I
Speaker 5: think there should be an incredibly exciting free for all. Yes, chaotic,
Speaker 5: but it would rivet the attention of the nation, energize
Speaker 5: the Democratic Party, and then in the next five weeks
Speaker 5: going into the convention, hopefully we've narrowed that down and
Speaker 5: what we're looking for. To your point, there is someone
Speaker 5: who catches lightning in a bottle the way Obama did
Speaker 5: and can becomes the clear front runner, can ride that
Speaker 5: to not just I don't want to just beat Donald Trump.
Speaker 5: I want to beat him like a rented mule and
Speaker 5: throw him on the dustbin of history where he belongs.
Speaker 5: So that's what I'm looking for. Now. Maybe we don't
Speaker 5: get that, but right now I think Biden's got a
Speaker 5: fifteen percent chance of beating Trump. If you just told me, hey,
Speaker 5: we can find somebody who gives makes it a jump ball,
Speaker 5: it's fifty to fifty. That's a massive improvement from sticking
Speaker 5: with the You know, I want to switch horses if
Speaker 5: I can shift the odds that much. But maybe we
Speaker 5: can get it up to eighty or ninety percent and
Speaker 5: really beat Trump.
Speaker 1: Well, Waitney Tilts, then what you're suggesting here is that
Speaker 1: the Democratic Party will not go to its backup quarterback.
Speaker 1: I mean, that's interesting. So then what do they do?
Speaker 1: Do they go to the free agency. I mean, do
Speaker 1: they go to tilt, I mean Pritzker, I mean Newsome.
Speaker 1: Who do you suggest here? Who's the favorite?
Speaker 2: You know?
Speaker 5: Honestly, I don't know, and I probably know half of
Speaker 5: the twenty candidates who might throw their hats in the
Speaker 5: ring personally, but all twenty are incredible. The Democrats have
Speaker 5: an incredible bench. So to use a football analogy, again,
Speaker 5: we've got a chance to hit the reset button and
Speaker 5: instead of being down by fourteen with two minutes to play,
Speaker 5: we can start the game all over again. So right there,
Speaker 5: that's great news. Secondly, our quarterback with a broken leg
Speaker 5: is out, so we got to find a new quarterback.
Speaker 5: Now we've got a long time backup, but a lot
Speaker 5: of questions about what there that that backup is the
Speaker 5: best quarterback. So what We've got five weeks to have
Speaker 5: a training camp and we put the word out anyone
Speaker 5: who thinks they can be quarterback of our team come
Speaker 5: to our training camp and we're gonna show us what
Speaker 5: you got. And if Kamala Harris can you know, emerge
Speaker 5: us from that process as that one most likely to
Speaker 5: beat Trump and most likely to beat the Great, the
Speaker 5: Great President, then I'm all in, But she or whoever
Speaker 5: earns that job, they have to earn it.
Speaker 2: Wait, I got to be quick here. It's a huge news.
Speaker 2: I got to get to Michael Barr. You and Michael
Speaker 2: Porter were definitive in studying how to jumpstart inner cities.
Speaker 2: The Democrats are losing black and Hispanic youth to Republicans.
Speaker 2: How does President Bidener, whoever runs, how do they get
Speaker 2: back at the margin black and Hispanic youth.
Speaker 5: Yeah, now it's a good question. At the end of
Speaker 5: the day, I think young and especially young minority voters
Speaker 5: are inclined to vote on the Democratic ticket, but they
Speaker 5: share the same concerns that eighty percent of Americans share
Speaker 5: that you know, a year ago, the majority of voters said,
Speaker 5: we don't like either of these guys. Both. The message
Speaker 5: to both parties was give us somebody fresh and new
Speaker 5: and exciting. We don't like either of these guys. And
Speaker 5: now only one party has the opportunity to deliver on
Speaker 5: to give the American people what they've asked for. So
Speaker 5: I think if we do that, a wide swath of voters,
Speaker 5: not just young and minority voters, are going to vote
Speaker 5: Democrat and carry us to victory. In November.
Speaker 2: Wennie Tilson, thank you so much for joining us today.
Speaker 2: Clearly a democratic donor and supporter of course, legendary with
Speaker 2: a hedge fund work and also is academics out of
Speaker 2: Harvard University. Right now on the equity markets in America.
Speaker 2: Thrilled to bring Cam Dawson new edge wells. She'll be
Speaker 2: spending both Saturday and Sunday at Brooklyn Crab having the
Speaker 2: Crab cakes in Brooklyn. Kim Dawson yesterday was odd. Let's
Speaker 2: not go over the details. Small caps win mag seven hammered.
Speaker 2: Was it nothing more than a constructive adjustment on the
Speaker 2: way higher?
Speaker 6: Well, we do know that positioning got incredibly skewed, where
Speaker 6: hedge funds were very positioned into large caps in tech
Speaker 6: and growth and very underweight and short in small caps.
Speaker 6: So part of this is just a positioning snap and
Speaker 6: then a chase of that short covering. The question is
Speaker 6: can it continue, and that really depends on the path
Speaker 6: of yields. It's good to remember that small caps rally
Speaker 6: twenty percent in November and December last year because the
Speaker 6: tenure yield felled one hundred basis points. If yields can
Speaker 6: continue to fall, small caps likely can continue to rally,
Speaker 6: but maybe it only lasts a month or two because
Speaker 6: there's still profitability issues, balance sheet issues, so a lot remainspeaki.
Speaker 2: Yah, that's great, but the reality is a month or
Speaker 2: two is long term for Damien.
Speaker 1: Well, Cam, you know, talk to me a little bit
Speaker 1: about you know what we just kind of take away
Speaker 1: from this latest CPI print. I mean, are we really
Speaker 1: thinking the Fed's going to move here in September? And
Speaker 1: if it does, what's the dollar going to do off
Speaker 1: the back of that.
Speaker 6: Well, now we got this PPI print this morning that
Speaker 6: came in hotter than expected, So now there's a big
Speaker 6: question mark about where PCEE comes in, which is the
Speaker 6: Fed's preferred inflation metric. So we think that the odds
Speaker 6: of a September hike certainly went up after yesterday's data.
Speaker 6: But if we have a couple more data points that
Speaker 6: look like that PPI, maybe we do get pushed out
Speaker 6: to November. So this is still a very data dependent FED,
Speaker 6: and we could see this kind of saw pattern within
Speaker 6: inflation data, which could keep us kind of in an
Speaker 6: uncertain place.
Speaker 1: Well, Kam, what I'm really asking is September December, it
Speaker 1: doesn't matter. When the FED does eventually cut, what do
Speaker 1: you think the dollar will do? Will it finally start
Speaker 1: to depreciate relative to G ten and EM.
Speaker 6: It certainly seems so, and we saw that in some
Speaker 6: of the price action yesterday of US. The dollar dropped
Speaker 6: a lot, and we saw a perking up of EM stocks.
Speaker 6: And it's still very much in a down trend if
Speaker 6: we look at EM versus S and P five hundred,
Speaker 6: but there is some movement and action there. So if
Speaker 6: there is follow through and the FEED is cutting more
Speaker 6: and being more dubvish than other central banks, then yeah,
Speaker 6: it could set up for a week er dollar. The
Speaker 6: question is, though, if other central banks are having to
Speaker 6: cut further, then the dollar may still be the best
Speaker 6: game in town.
Speaker 4: Kim.
Speaker 2: Yesterday we had some diminished organic revenue growth, right, I
Speaker 2: mean Dawson's house, it's just loaded with freedom Lake. Oh
Speaker 2: Dorito's She's like the queen we had cam Yesterday's some
Speaker 2: organic revenue growth shortfalls outside of the mag seven. Does
Speaker 2: a pro like you extrapolate that revenue shortfall over to
Speaker 2: those seven wonder stocks or is it discrete and separate.
Speaker 6: I think this is so important and maybe the most
Speaker 6: important trend or theme going into twenty twenty five is
Speaker 6: that we're seeing pricing power fade. And it's really interesting
Speaker 6: because as long as CPI remains weak, this is effectively
Speaker 6: the market or the economy saying that companies cannot pass
Speaker 6: through price increases to their end consumer. Look at the
Speaker 6: chart of shipping costs and durable goods prices in twenty
Speaker 6: twenty and twenty twenty one. They went right up together,
Speaker 6: meaning that as shipping costs went up, durable goods prices
Speaker 6: went up because it got passed through to the end customer. Now,
Speaker 6: shipping costs are soaring, but durable goods prices aren't moving higher.
Speaker 6: This means that companies are having to absorb them in
Speaker 6: their margins, which means that there is very much risk
Speaker 6: to the margin forecast in twenty twenty five.
Speaker 1: APS estimates Why I'm so happy you brought up affordability,
Speaker 1: and we know that home affordability here in the US
Speaker 1: is really really poor right now. But I mean, if
Speaker 1: you just look at some of the other other autos
Speaker 1: for example, I mean or Travel for that matter, I
Speaker 1: mean CAM talk to us about you know, just generally speaking,
Speaker 1: FT back out all of those fixed costs, all of
Speaker 1: the discretionary you know, what's left for the consumer today?
Speaker 1: Have any spending power left?
Speaker 6: We're certainly seeing or hearing anecdotes of them getting pinched.
Speaker 6: Look at Delta's earnings from earlier this week saying that
Speaker 6: they're seeing fading pricing power. I was at JFK yesterday.
Speaker 6: Certainly seemed no evidence of a waning in demand, but
Speaker 6: certainly there is signs that consumers are getting pinched. We
Speaker 6: continue to hear this wonderful word choicefulness out of the
Speaker 6: likes of.
Speaker 2: People like j Walmart.
Speaker 1: Come on, stop?
Speaker 2: Was choicefulness in Graham, Dot and Koddle when you read
Speaker 2: it in gam.
Speaker 6: Certainly not. But again this is a reflection of consumers
Speaker 6: hitting a wall as far as how much more price
Speaker 6: increases that they can take, which means that companies are
Speaker 6: taking it on the chin.
Speaker 2: In margin Cam, it's Friday. I got to quote Doug
Speaker 2: cass in a moment. Help me here, what's your new
Speaker 2: adjustment off yard Denny's fifty eight hundred on SPX? Can
Speaker 2: I get us six thousand aut of you this morning?
Speaker 6: The one thing I'd note is that if we trade
Speaker 6: to fifty eight hundred by the end of the year
Speaker 6: and assuming that the market is right for their two
Speaker 6: hundred and seventy seven dollars a share for twenty twenty
Speaker 6: five earning sestiments, you would be training at a higher
Speaker 6: pe multiple on the year head forward than you were
Speaker 6: at the peak in twenty twenty one.
Speaker 2: Thank you.
Speaker 6: Never to say never, but that's pretty high.
Speaker 2: Gotta go, Kim Dawson, Thank you so much for will
Speaker 2: talking fifty eight hundred is well. This is a joy
Speaker 2: and always an honor. Joining us. Iconic at Golden Sachs
Speaker 2: for years is Robert Hormantz. He has a book I'm
Speaker 2: going to mention here in a moment, but his work
Speaker 2: has been profound on America's relationships, particularly across the broader
Speaker 2: Middle East into China, where he'll be traveling too soon.
Speaker 2: Ambassador Horrmantes joins us and do everything I can, Bob
Speaker 2: not to say what do you have think think about Biden?
Speaker 2: We don't have time to waste on that. I got
Speaker 2: to go back to your book. It is the best
Speaker 2: book on the domestic and fiscal responsibility of this nation.
Speaker 2: Is we project a foreign policy? The only one that
Speaker 2: can tire shoelaces is Richard Haas, who reformulated the consul
Speaker 2: and foreign relations. With this debt and deficit, how do
Speaker 2: we prosecute a foreign policy?
Speaker 4: It's going to be more and more difficult. I think
Speaker 4: you've put your finger on something. It's the elephant in
Speaker 4: the room that no one wants to talk about, and
Speaker 4: that is the inexorable increase in debt and deficits is
Speaker 4: going to mean that, first of all, future generations are
Speaker 4: going to inherit a huge debt and a huge interest burden.
Speaker 4: But also the competition for money within the US government
Speaker 4: is going to intensify. And if you need more money
Speaker 4: for defense and national security, you're competing with a variety
Speaker 4: of other parts so the government who want money for
Speaker 4: their elements of their policy, like social issues, and we're
Speaker 4: going to have a social problem if we cut those programs,
Speaker 4: and we're going to have more and more security risks
Speaker 4: if we don't fund security. And our allies see this
Speaker 4: and they see us as less reliable as an ally
Speaker 4: and less reliable fiscally.
Speaker 2: Right, Bob, This is important when you and Secretary Clinton
Speaker 2: and whatever you are, folks, Republican or Democrat. Clinton and
Speaker 2: Hormet said, it's about economics, It's about our relationships across
Speaker 2: the world. You're going to need someone encyclopedic on Asian derivatives,
Speaker 2: swap rates and how they fold into the governments of Asia. Yes,
Speaker 2: so the new under secretary for you is Under Secretary Damien.
Speaker 1: Sasower, Bob, But I really want to know you were
Speaker 1: just in China and we know that centement China is weak.
Speaker 1: You know, just how weak is it? Unemployment, youth, unemployment,
Speaker 1: the property sector. You know was what was your take?
Speaker 1: Boots on the ground, well, booths on the ground.
Speaker 4: The average Chinese, I think, is suffering from a series
Speaker 4: of uncertainties that need to be cleared up. And they're having,
Speaker 4: as you know, this so called third planet. They have
Speaker 4: it every five years, and that sets policy for the
Speaker 4: next five years. The whole Central Committee of the Communist
Speaker 4: Party needs huge and brain gives a big speech, and
Speaker 4: that essentially is a policy for the next five years.
Speaker 4: They have to improve consumer confidence, They have to deal
Speaker 4: with a very difficult real estate problem. They have with
Speaker 4: huge amounts of debt, state and local debt. Foreign investment,
Speaker 4: which they need in order to create jobs, is leaving
Speaker 4: the country at a fairly rapid rate. The private sector
Speaker 4: is feeling a lot of uncertainty. Which is the most
Speaker 4: productive part of the economy is feeling a lot of
Speaker 4: uncertainty because they're not quite sure what role the government
Speaker 4: wants to play. Does it play a more involved role
Speaker 4: in the economy, or does it give more latitude to
Speaker 4: the private sector and private companies America companies and foreign
Speaker 4: companies want to know what the rules of the game are,
Speaker 4: not just today tomorrow, but over the next several years,
Speaker 4: because some of them are, as i say, are leaving.
Speaker 4: Some would be interested in coming, but they want to
Speaker 4: make sure that the rules are such that they can
Speaker 4: survive and that they're not interfered with in particularly in
Speaker 4: the technology area, where China really wants to excel. But
Speaker 4: you need not just Chinese companies, which are quite good
Speaker 4: doing research, but you need to collaborate to a degree
Speaker 4: with foreign companies and we and they are both pulling
Speaker 4: apart on technology not coming together.
Speaker 2: Well.
Speaker 1: I agree with you on the level of uncertainty in
Speaker 1: China about foreign policy, about domestic policy. But here's my
Speaker 1: question for you. If there's one certainty in China, and
Speaker 1: you begin this conversation by talking about debt levels and
Speaker 1: how high they've gotten there, I mean, they're through the
Speaker 1: roof in China. So you know, isn't president She's trying
Speaker 1: to do the right thing. And why aren't markets rewarding
Speaker 1: him for his efforts to try and bring down debt
Speaker 1: levels in China.
Speaker 4: That is one of the interesting things that doesn't get
Speaker 4: very much publicity. He is not a big spender. I
Speaker 4: knew him when he was head of Jijan Province Party
Speaker 4: secretary and he took a very conservative view of spending
Speaker 4: and what they're doing. And they used to for a
Speaker 4: while to get growth going, spend money like crazy for
Speaker 4: every kind of rose bridges. I said, they're not doing
Speaker 4: that now. What they're doing now is keeping a relatively
Speaker 4: conservative budget but spending it on a number of things
Speaker 4: which increase what he calls the dynamic productive forces of
Speaker 4: the economy, which is technology. So they're spending money, but
Speaker 4: they're much more focused. It's much more on technology, both
Speaker 4: for economic reasons and because advanced technologies like quantum and
Speaker 4: AI are good for the military too, and they want
Speaker 4: to build their military.
Speaker 2: Tape we have a three hour conversation now. I just
Speaker 2: like to talk about the new Modi and the future
Speaker 2: of India, but we can't do that. You're going to
Speaker 2: put me in the Harmatt's time out chair. But I
Speaker 2: got to go here. It's a public service and that's
Speaker 2: what we do at Bloomberg Surveillance. You've done it for
Speaker 2: multiple party people. You're maybe associated a Democrat, but you've
Speaker 2: done a lot of Republican service as well. You've been
Speaker 2: around the block. I know you're seventy nine in holding,
Speaker 2: but you're not. You're the same year as the president.
Speaker 2: Your thoughts on your colleague Joe Biden and politics when
Speaker 2: you at eighty one see Joe Biden, How do you
Speaker 2: interpret that different from Damien sass Hour and Tom Keen
Speaker 2: and all of our listeners and viewers.
Speaker 4: Well, I'm pretty well staying away from the domestic politics,
Speaker 4: and this tell us about.
Speaker 2: The medical side that you're in great shape.
Speaker 4: I mean, I would I'd make a broader point which
Speaker 4: gets just what you're saying, that age really is not
Speaker 4: the central issue. The issue for people, and I'm in
Speaker 4: my eighties is how much energy you have and how
Speaker 4: you project yourself and how well your mind works and
Speaker 4: your body works. So I would say that all this
Speaker 4: emphasis on how many, how old he is is not
Speaker 4: really the issue, and people have to judge for themselves
Speaker 4: the other elements of age. But I don't really want
Speaker 4: to get into a domestic political base on if I
Speaker 4: were a doctor, I would give you my prognosis, but
Speaker 4: I'm not.
Speaker 2: So is Secretary Blincoln running our foreign policy unit?
Speaker 4: Almost singularly, I would say that Biden actually does know
Speaker 4: farm policy quite well, and I thought gave a very
Speaker 4: good press conference yesterday at the NATO. There were some mistakes,
Speaker 4: but generally he had a pretty good command of the issues.
Speaker 4: On the second part of the point, I think he's
Speaker 4: very fortunate that he has Tony blinkoln who's the terrific
Speaker 4: Secretary of State, and Jake Sullivan. Jake and I shared
Speaker 4: offices when we worked for Hillary Clinton. He was her
Speaker 4: farm policy advisor. I was for economic policy advisors, so
Speaker 4: we worked very closely together. And he's extremely good and
Speaker 4: he's got a really good team. I met with a
Speaker 4: joint chap joint chiefs of staff about three or four
Speaker 4: months ago to discuss the interaction between geo strategic issues
Speaker 4: and geoeconomic issues, and they're very aware of the fact
Speaker 4: that economics plays a key role in our geostrategic strategy,
Speaker 4: and you need strong economic alliances to undergird political and
Speaker 4: strategic alliances, and he gets I'm sure he's getting that
Speaker 4: kind of advice from investor Harmetz.
Speaker 2: Thank you so much for joining us today. Robert Hormantz's
Speaker 2: Public service to the Nation. Vice Chairman Kissinger Associates. This
Speaker 2: is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment,
Speaker 2: and international relations. You can also watch the show live
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