WEBVTT - How Global Political Crises are Playing Out in Markets 0:00:00.080 --> 0:00:13.160 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.200 --> 0:00:17.520 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:17.640 --> 0:00:21.240 on Apple car Player, Android Auto with the Bloomberg Business App. 0:00:21.520 --> 0:00:24.759 Listen on demand wherever you get your podcasts, or watch 0:00:24.840 --> 0:00:26.200 us live on YouTube. 0:00:26.320 --> 0:00:29.680 Joining us now for an extended conversation like we should 0:00:29.720 --> 0:00:33.200 have for three hours is way Lee of black Rock. 0:00:33.320 --> 0:00:36.519 I don't know where to begin, so Wayley, let's start. 0:00:36.600 --> 0:00:40.239 Since we're on a Pacific rim with Ross Matheson. You 0:00:40.280 --> 0:00:44.640 were acclaimed in your China from mathematic skills as a kid. 0:00:44.720 --> 0:00:48.120 You're a student of the Pacific Rim. I don't buy 0:00:48.159 --> 0:00:51.360 the idea of doom and gloom on China. There's a 0:00:51.440 --> 0:00:58.320 resiliency there. Do you detect a political an American phrase, 0:00:58.360 --> 0:01:00.600 come to Jesus where they're going to be able to 0:01:00.680 --> 0:01:02.400 assert five percent growth? 0:01:03.880 --> 0:01:07.319 As a mathematician, one number that jumped out to me 0:01:07.880 --> 0:01:13.399 just yesterday is ten year yields in China just all 0:01:13.520 --> 0:01:17.520 time low below two percent. That is really remarkable. That 0:01:17.640 --> 0:01:23.120 speaks to markets not feeling confident about China exiting deflationary environment. 0:01:23.520 --> 0:01:27.759 That speaks to markets being quite worried about jeffentification of China. 0:01:27.920 --> 0:01:31.119 So structurally there are concerns around Chinese growth. 0:01:31.200 --> 0:01:34.280 Is there an embedded deflationary vector right now? I mean, 0:01:34.400 --> 0:01:37.520 is it Clement Atlee nineteen thirties, Great Britain. Is it 0:01:37.560 --> 0:01:40.039 a deflation that we saw with Japan over the years. 0:01:40.400 --> 0:01:43.800 Well, if we look at the consumers in China, they 0:01:43.800 --> 0:01:48.480 are still quite muted and really quite depressed. There has 0:01:48.480 --> 0:01:52.760 been effort to stimulate consumption, but that remains below trend 0:01:52.840 --> 0:01:56.040 coming out of the pandemic and looking ahead well talking 0:01:56.040 --> 0:01:59.840 about environment where exports could also come under pressure. So 0:02:00.120 --> 0:02:03.080 this is why we're less positive over the longer term 0:02:03.160 --> 0:02:06.040 around where China is heading towards. We're expecting three percent 0:02:06.280 --> 0:02:08.600 growth by the end of the ROWS, which is quite 0:02:08.600 --> 0:02:11.680 a bit lower than five percent for this year, and 0:02:11.720 --> 0:02:14.799 maybe they're looking at five percent for next year. We're 0:02:14.800 --> 0:02:18.240 not expecting We're not expecting that given the uncertainty around it. 0:02:18.280 --> 0:02:21.960 But in a very very near term valuation remains quite attractive. 0:02:22.040 --> 0:02:25.200 We have events coming up around the corner, the Central 0:02:25.280 --> 0:02:31.240 Economic Working Conference and the National People's Congresses Wow, so 0:02:31.280 --> 0:02:35.240 all of that could provide kind of near term stimulous hopes, 0:02:35.240 --> 0:02:39.280 but really the longer term story is really not that encouraging. 0:02:39.280 --> 0:02:41.960 I would say, is China is the government of China? 0:02:42.000 --> 0:02:45.400 Are they to what extent are they concerned about really, 0:02:46.000 --> 0:02:49.359 I guess isolating themselves from the rest of the world. 0:02:49.400 --> 0:02:51.600 Did they see that as a material risk? Because that 0:02:51.680 --> 0:02:53.600 seems to be how it's drifting. 0:02:54.320 --> 0:02:59.560 I think geopolitical fragmentation has been happening, has been deepening, 0:03:00.000 --> 0:03:05.680 and is expected to continue going forward. So that's part 0:03:05.720 --> 0:03:09.320 of a kind of China isolating or building spheres of 0:03:09.320 --> 0:03:12.320 influence around themselves. But it's also generally the spheres of 0:03:12.360 --> 0:03:15.520 influence between US and China moving further apart, which is 0:03:15.520 --> 0:03:19.920 why geopolitical fragmentation is a key megaphones that Blackrock has identified. 0:03:20.120 --> 0:03:24.080 There is inflationary and that is why we are positioning 0:03:24.080 --> 0:03:26.320 our strategic portfolios for high for longer. 0:03:26.800 --> 0:03:28.080 I want you to come back. 0:03:28.760 --> 0:03:32.920 Let's start with this question, when should kids start learning calculus? 0:03:33.360 --> 0:03:35.720 I mean, you know, in America used to be learned 0:03:35.760 --> 0:03:38.600 at twenty two and then I was twenty. Now we 0:03:38.720 --> 0:03:42.120 got kids freshman year in high school having this you know, 0:03:42.440 --> 0:03:44.760 the product rule crammed down their throat. 0:03:45.040 --> 0:03:46.960 When should kids start learning calculus? Way? 0:03:47.480 --> 0:03:51.120 I honestly do not remember when I started learning calculus 0:03:51.160 --> 0:03:52.800 maybe in junior high school. 0:03:52.880 --> 0:03:54.320 Junior high school. That's sick. 0:03:55.080 --> 0:03:56.760 I was good in school. 0:03:57.000 --> 0:03:59.160 Did you drop that in your interview with black Rock? 0:04:00.160 --> 0:04:00.400 Listen? 0:04:00.520 --> 0:04:01.360 Seventh grade? 0:04:02.280 --> 0:04:05.560 But the point is I don't use calculus these days 0:04:05.560 --> 0:04:09.880 in my day to day job. So what exactly is 0:04:09.920 --> 0:04:12.920 going to future proof the future generation in terms of 0:04:13.000 --> 0:04:15.640 the things that they learn in school? Right? As AI 0:04:16.000 --> 0:04:19.360 changes the nature of Johnson. 0:04:19.400 --> 0:04:21.240 She gets right in the AI chat, I give it 0:04:21.320 --> 0:04:22.880 up Fallsweti and Tom Kenyan. 0:04:22.880 --> 0:04:25.560 Where there's Wayley of Blackrock to say she's. 0:04:25.440 --> 0:04:29.279 Chief, a global chief investment strategist, barely describe your duties. 0:04:29.520 --> 0:04:31.040 Look for her on LinkedIn. 0:04:31.720 --> 0:04:34.920 I think of Urine, Timerate, Fidelity, and Wayy at black Rock, 0:04:35.520 --> 0:04:38.000 like not just you know, hey, this is you know 0:04:38.040 --> 0:04:41.839 what I had for lunch, but like really serious investment stuff. 0:04:42.320 --> 0:04:44.839 Here's a drill. I'm calling it the great bull market 0:04:45.160 --> 0:04:49.120 or this great bull market we're in. There's off the 0:04:49.560 --> 0:04:53.520 December eighteen low up one hundred and forty five percent, SPX, 0:04:54.120 --> 0:04:57.960 off the October twenty two low up whatever it is, 0:04:58.000 --> 0:05:03.880 forty sixty percent. The risk of extrapolation now is front 0:05:04.000 --> 0:05:04.560 and center. 0:05:05.000 --> 0:05:08.679 How do you handle the emotion that we want. 0:05:08.520 --> 0:05:13.080 To extrapolate this good equity news with the reality of 0:05:13.560 --> 0:05:14.640 taking measured risk. 0:05:15.600 --> 0:05:18.159 I think the big picture right now is not one 0:05:18.279 --> 0:05:22.280 of mean revert. It's one of transformation. We're talking about 0:05:22.279 --> 0:05:25.599 in an environment where actually the key focus ought to be 0:05:25.880 --> 0:05:29.080 where the longer term trend is heading towards, rather than 0:05:29.120 --> 0:05:32.880 where the fluctuations are around what used to be a 0:05:32.960 --> 0:05:36.360 stable longer term trend. And that is also why we 0:05:36.440 --> 0:05:39.479 see ten year yields being so much more sensitive to 0:05:39.880 --> 0:05:43.200 months to months data releases, because we're now it is 0:05:43.200 --> 0:05:47.640 almost unprecedented environment where longer term trend is actually shifting. 0:05:47.839 --> 0:05:51.599 That means mean revert does not quite apply when we're 0:05:51.600 --> 0:05:56.159 talking about transformation and moving targets. And that also means 0:05:56.279 --> 0:05:59.960 if we think something is expensive, they can get more expensive. 0:06:00.040 --> 0:06:02.800 If we think something is concentrated, they can get more 0:06:02.839 --> 0:06:06.280 concentrated if there are good reasons for that to continue. 0:06:06.440 --> 0:06:09.400 How did you respond to what David Costin did over 0:06:09.520 --> 0:06:13.640 at Gulben Sachs modeling out since we've come so far 0:06:13.800 --> 0:06:18.000 so fast, our central tendency is a low single digit outcome. 0:06:18.680 --> 0:06:23.160 Heated complaints from the academic math community on how they 0:06:23.160 --> 0:06:26.520 went about that study, Are you that cautious on where 0:06:26.520 --> 0:06:28.720 the terminal value is of equity prices? 0:06:29.000 --> 0:06:34.680 We actually took an inspiration from that analysis to try 0:06:34.720 --> 0:06:38.360 to understand if the measure of concentration, which is to 0:06:38.839 --> 0:06:42.200 look at the market cup of the biggest the company 0:06:42.279 --> 0:06:45.840 versus the seventy fifth percent hel and look at that 0:06:46.000 --> 0:06:49.760 racial right by that measure, US Aquady market is close 0:06:49.800 --> 0:06:52.960 to the most concentrated in almost one hundred years, and 0:06:52.960 --> 0:06:55.400 we try to understand, okay, that concentration, does it have 0:06:55.520 --> 0:06:59.560 significant varying on subsequent market return over twelve months, over 0:07:00.120 --> 0:07:04.760 ten years. The verdict of the analysis inspired by the 0:07:04.600 --> 0:07:06.599 by the by the research a piece of research that 0:07:06.640 --> 0:07:10.600 you're referring to, is that over the very near term horizon, 0:07:10.680 --> 0:07:15.440 let's say investing for twenty twenty five, concentration doesn't have 0:07:15.600 --> 0:07:18.680 significant bearing. And over the longer term, in a mean 0:07:18.760 --> 0:07:21.560 revert environment, then it has significant baring. But we're not 0:07:21.640 --> 0:07:24.600 in the mean revert environment. So we continue to think 0:07:24.600 --> 0:07:26.320 that Erniest can can come through. 0:07:26.360 --> 0:07:26.960 For next year. 0:07:27.000 --> 0:07:31.440 We're looking at high single digit return expectation, and there 0:07:31.480 --> 0:07:35.480 is reason in the context of US exceptionalism for US 0:07:35.480 --> 0:07:38.120 to lean more into US equities, which is what we're 0:07:38.120 --> 0:07:39.440 doing for this outlook. 0:07:40.360 --> 0:07:43.720 Wait, I should buy my first share. 0:07:43.760 --> 0:07:45.640 I think you should judge to this market book. 0:07:47.880 --> 0:07:51.400 We should keep you one hundred shares exactly, two or 0:07:51.400 --> 0:07:52.240 three shares. 0:07:51.920 --> 0:07:53.040 Of that exactly. 0:07:53.280 --> 0:07:56.600 Welly, So it's been a month since the US presidential election. 0:07:56.720 --> 0:07:58.800 We now know we have a Republican in the White House, 0:07:58.840 --> 0:08:02.720 and we now have a pretty republic controlled Congress, orthough 0:08:02.720 --> 0:08:06.120 some you know, very tightly controlled. Did that change the 0:08:06.120 --> 0:08:07.920 outlook for you folks at black Rock did when you 0:08:08.000 --> 0:08:10.160 woke up from the election the next day, did you 0:08:10.240 --> 0:08:14.360 materially change your outlook on asset allocation, stocks, bonds, US, 0:08:14.480 --> 0:08:15.880 non US Did it change your outlook? 0:08:16.400 --> 0:08:21.160 I think in equities America first policies would support US 0:08:21.800 --> 0:08:25.600 at the expense of potentially global equities. We actually use 0:08:26.200 --> 0:08:30.160 UK equity allocation to fund the further upgrade of you 0:08:30.640 --> 0:08:32.600 as equities. This is what we did for this outlook. 0:08:32.640 --> 0:08:36.520 But in government bonds, actually the reverse is true. Given 0:08:36.559 --> 0:08:40.640 the fiscal trajectory that we now expect from well from 0:08:40.720 --> 0:08:44.000 the Trump administration, but also specifically in the in the US, 0:08:44.040 --> 0:08:46.560 we think that there is room for term premiere to 0:08:46.640 --> 0:08:49.560 come back even more in US government bonds, which is 0:08:49.559 --> 0:08:54.040 why we prefer likes of guilts over US long duration. 0:08:54.280 --> 0:08:57.880 So there is a different reader cross in risk assets 0:08:58.000 --> 0:09:01.600 and government bonds with the policy is that we now expect. 0:09:01.720 --> 0:09:04.440 The last thing I would say credit is an interesting one. 0:09:04.480 --> 0:09:08.880 Spread USIG spread is the titles since the early two thousand, 0:09:09.200 --> 0:09:14.920 but that in part reflects number one, reasonably good fundamentals 0:09:14.920 --> 0:09:21.320 of credit and corporates and number two worsening indebtedness for 0:09:21.440 --> 0:09:23.120 US government. Right, so when we look at it from 0:09:23.160 --> 0:09:26.920 a whole income total yield perspective, quality income is still 0:09:26.920 --> 0:09:28.520 a very interesting theme that we want to play. 0:09:28.559 --> 0:09:32.479 Are you concerned about here in the United States continued deficits, 0:09:32.559 --> 0:09:36.520 continued growth in the debt. There doesn't seem to be 0:09:36.600 --> 0:09:38.640 any political will to address that at all, and it 0:09:38.720 --> 0:09:40.480 may just be just don't worry about it. 0:09:40.600 --> 0:09:41.800 How do you guys think about that? 0:09:41.840 --> 0:09:44.520 I would say two things. First, it is not a 0:09:44.679 --> 0:09:47.920 US specific phenomenon, and I think what's happening in France 0:09:48.320 --> 0:09:51.040 really shows that this is really across the boat. A 0:09:51.120 --> 0:09:55.240 higher indebtedness is really a phenomenon across the boat. Number two, 0:09:55.760 --> 0:09:58.280 we are risks on for now, we're dialing up risk 0:09:58.400 --> 0:10:01.280 taking but great reprise think is the key sign post 0:10:01.360 --> 0:10:05.319 that we're monitoring as we look to dynamically dow up 0:10:05.320 --> 0:10:07.839 and dow down risk taking through the course of twenty 0:10:07.920 --> 0:10:11.199 twenty five. So that's definitely something that we pay a 0:10:11.240 --> 0:10:14.120 lot of attention to. Related to Tariff's announcement as well, 0:10:14.160 --> 0:10:17.760 because higher tariffs, higher inflation, higher rate expectations, so all 0:10:17.760 --> 0:10:22.720 of that is really under risk monitor as we keep 0:10:22.840 --> 0:10:23.800 risk for now. 0:10:24.360 --> 0:10:28.240 One final question, you were sitting in your classes, I 0:10:28.240 --> 0:10:32.360 believe at Cambridge, and you ran through productivity. The great 0:10:32.440 --> 0:10:36.840 myst call this year has been American economic growth resilient 0:10:37.120 --> 0:10:43.160 nominal GDP. Everybody got the growthiness wrong. What portion of 0:10:43.240 --> 0:10:47.240 productivity is the why we're achieving right now? 0:10:48.440 --> 0:10:55.280 I think US growth has been very resilient because this 0:10:55.320 --> 0:10:58.200 is not your typical cycle. I think there are some 0:10:58.400 --> 0:11:01.680 force alarms, especially during some looking at the sign rule, 0:11:02.040 --> 0:11:06.720 the typical recession signal not working because we are in 0:11:06.720 --> 0:11:10.560 this environment of transformation rather than standard cycle. Right. There 0:11:10.559 --> 0:11:13.719 are multiple disconnects that points to this is not your 0:11:13.840 --> 0:11:17.240 typical business cycle. We're looking at an environment where the 0:11:17.320 --> 0:11:21.280 fat is cutting rates when financial conditions are very very easy. 0:11:21.760 --> 0:11:24.720 Those traditional recession signals not working. So all of that 0:11:24.800 --> 0:11:27.560 means that we cannot use the old playbook to understand 0:11:27.600 --> 0:11:31.880 where economy is, but also to kind of think about 0:11:32.080 --> 0:11:33.280 us our location cover. 0:11:33.760 --> 0:11:36.880 So at the margin, can you buy MEG seven if 0:11:36.880 --> 0:11:39.720 we're not mean reverting and if we're going to a 0:11:39.760 --> 0:11:42.840 new way lead terminal value? Can you add the mag 0:11:42.960 --> 0:11:44.160 seven This morning. 0:11:44.520 --> 0:11:48.360 Mag seven multiple is thirty times, and at the beginning 0:11:48.600 --> 0:11:53.800 of twenty twenty two it was thirty five times. At 0:11:53.840 --> 0:11:58.400 the inception of chat GBT late twenty twenty two it 0:11:58.600 --> 0:12:01.280 was twenty five times. It is expensive, but it's not 0:12:01.440 --> 0:12:06.600 extremely expensive. There are good reasons earnings momentum that supports 0:12:06.840 --> 0:12:09.520 those valuations. You know, like me revert. If we're talking 0:12:09.520 --> 0:12:12.880 about an index that has become more growthy in nature 0:12:13.120 --> 0:12:16.720 over time, then that the meme needs to reflect the 0:12:16.720 --> 0:12:19.120 more growthy nature of the of the benchmark. So we 0:12:19.280 --> 0:12:22.680 continue to like Max seven. But we have broughtn out 0:12:22.679 --> 0:12:25.800 how we play the AI theme because we expect that 0:12:25.880 --> 0:12:29.360 to have broader read across to how economy. So public market, 0:12:29.400 --> 0:12:33.280 private market, we are building the transformation, we're financing the transformation. 0:12:33.480 --> 0:12:34.760 Really, thank you so much. 0:12:35.000 --> 0:12:44.160 With black record, you're listening to the Bloomberg Surveillance Podcast. 0:12:44.440 --> 0:12:47.680 Catch us live weekday afternoons from seven to ten am. 0:12:47.679 --> 0:12:50.520 Easter Listen on Apple car Play and and brot Outo 0:12:50.600 --> 0:12:53.760 with a Bloomberg Business app, or watch us live on YouTube. 0:12:53.840 --> 0:12:56.600 Return to the Litmus paper of the global system. We 0:12:56.640 --> 0:12:59.160 welcome out of you on YouTube on your communite quickly 0:12:59.240 --> 0:13:03.600 with George Sarahs of Deutsche Bank. George, whither the dollar 0:13:04.200 --> 0:13:06.840 in your view for not like the year end outlook, 0:13:07.200 --> 0:13:10.160 but the bet and the dollar. Is it a resilient 0:13:10.280 --> 0:13:12.720 dollar and can you model out dollar strength? 0:13:13.440 --> 0:13:14.400 Hi, morning, Tom. 0:13:15.000 --> 0:13:18.040 So it really all is about the policy mix over 0:13:18.080 --> 0:13:20.720 the next few years. That's how I think we think 0:13:20.720 --> 0:13:25.680 about it, the combination of fiscal and trade policy. And 0:13:26.280 --> 0:13:29.839 the bottom line is, if you think about what is priced, 0:13:30.040 --> 0:13:35.000 you're still not pricing an aggressive mix of physcal easing 0:13:35.320 --> 0:13:39.679 or protection is trade, which is what President Trump communicated 0:13:39.800 --> 0:13:43.000 in the election campaign. So we still see the market 0:13:43.000 --> 0:13:46.480 as pricing on a scale of one to ten, roughly 0:13:46.520 --> 0:13:49.840 a three out of ten. And therefore there is more 0:13:49.880 --> 0:13:52.400 potential I think for the dollar to strengthen over the 0:13:52.440 --> 0:13:54.280 next few months as we price more in. 0:13:55.040 --> 0:13:55.720 But over the. 0:13:55.640 --> 0:13:58.560 Medium term it really boils down to whether the rest 0:13:58.600 --> 0:14:02.560 of the world can solved some of these structural issues 0:14:02.920 --> 0:14:06.320 which are weighing on both China and Europe. And the 0:14:06.360 --> 0:14:09.720 longer these things are delayed, I think the stronger. 0:14:09.320 --> 0:14:11.840 The dollar will remain over the longer term. 0:14:12.080 --> 0:14:14.360 George, we were just trying to get getting update from 0:14:14.360 --> 0:14:17.840 from one of our reporters in Paris about the uncertainty there, 0:14:17.880 --> 0:14:21.040 the political uncertainty in France. I'm looking at the euro 0:14:21.240 --> 0:14:25.320 here as a proxy. We're now below one spot zero five. 0:14:25.760 --> 0:14:29.000 It is parody something that you think is possible for 0:14:29.080 --> 0:14:30.160 the Euro with the dollar. 0:14:30.840 --> 0:14:33.040 That's our forecast for the Euro next year. 0:14:33.720 --> 0:14:36.040 I think depending on what happens both out of Europe 0:14:36.080 --> 0:14:39.160 and the US, there are even scenarios where we could 0:14:39.160 --> 0:14:44.320 go below parity towards ninety five for example. I would 0:14:44.320 --> 0:14:47.040 say the key variable at the moment that is impacting 0:14:47.080 --> 0:14:49.920 the market and the economy is uncertainty. 0:14:50.560 --> 0:14:51.520 Especially in Europe. 0:14:51.560 --> 0:14:54.080 There are very high levels of uncertainty across the board, 0:14:54.440 --> 0:14:57.000 both in terms of the political outcomes, and we're seeing 0:14:57.000 --> 0:15:01.360 the negotiations around the budget in France, around global foreign policy, 0:15:01.880 --> 0:15:06.640 and the difficulty with uncertainties, it's very hard to model 0:15:06.920 --> 0:15:09.840 the economic impact but it's very clear that this is 0:15:09.880 --> 0:15:12.040 showing up, and I think this is one reason why 0:15:12.040 --> 0:15:14.240 the European economy is underperforming. 0:15:14.280 --> 0:15:16.800 For example, is. 0:15:16.760 --> 0:15:22.000 There a credible barecase for the US dollar. I'm hard 0:15:22.000 --> 0:15:23.680 pressed to find one, So. 0:15:23.600 --> 0:15:25.000 I would say there is. 0:15:25.320 --> 0:15:27.840 There always has to be, because if there's no way 0:15:27.920 --> 0:15:30.640 for something to go down, it must mean we're not 0:15:30.680 --> 0:15:33.560 doing our job properly in terms of thinking about the scenarios. 0:15:33.920 --> 0:15:36.440 So here are the two downside risks for the dollar. 0:15:37.120 --> 0:15:37.880 The first one. 0:15:37.760 --> 0:15:41.000 Would be if we are wrong about the fiscal policy 0:15:41.000 --> 0:15:44.080 outlook and we get a material fiscal tightening in the US, 0:15:44.560 --> 0:15:47.320 whether that is due to an inability to agree to something, 0:15:47.400 --> 0:15:50.440 although presumably that probability is low given you've had a 0:15:50.480 --> 0:15:53.400 red sweet but if you have fiscal tightening, that would 0:15:53.440 --> 0:15:55.480 lead to slower growth and the more duble shredd and 0:15:55.520 --> 0:15:56.800 I think the dollar would go down. 0:15:57.360 --> 0:15:58.480 That would be one scenario. 0:15:59.120 --> 0:16:03.479 The second would be what I would call institutional instability, 0:16:03.760 --> 0:16:07.320 a challenge of the stability of the institutions in the US. 0:16:07.800 --> 0:16:11.240 You would see that, for example, if FED independence was challenged. 0:16:11.840 --> 0:16:13.920 That would be one that would certainly hit the dollar. 0:16:14.160 --> 0:16:16.640 And I think one reason the dollar is actually strong 0:16:17.080 --> 0:16:20.240 is that the market is seeing institutional virginity outside of 0:16:20.280 --> 0:16:23.160 the US, seeing it in France, seeing it in Korea. 0:16:23.680 --> 0:16:27.400 And I think that's a key driver over recent resive dollars. 0:16:27.400 --> 0:16:30.840 Strand you tell me about the opportunity in Canada. They 0:16:30.920 --> 0:16:34.640 got a president who's unloved, they got the teriff. 0:16:34.640 --> 0:16:37.040 Wherees George, You're writing about Canada? 0:16:37.080 --> 0:16:40.360 How do you profit from week Canada? Now? Do you 0:16:40.400 --> 0:16:44.200 go Looney or do you go Canada? Remind me what's 0:16:44.240 --> 0:16:46.720 the take that Deutsche Bank has there. 0:16:47.480 --> 0:16:49.840 I think Canada is going to be an interesting test 0:16:49.920 --> 0:16:54.160 case as far as President Trump's tariff policies go. So 0:16:54.240 --> 0:16:57.760 we did see Canada being lumped together with Mexico in 0:16:57.840 --> 0:17:00.840 the post in a social media post president Trump mate 0:17:00.920 --> 0:17:06.880 just a few days ago, highlighting immigration and the fentanyl epidemic. Now, 0:17:06.960 --> 0:17:10.159 the interesting thing is when you compare the flow of 0:17:10.160 --> 0:17:14.120 immigration and fentanyl in Canada to the US and Mexico 0:17:14.160 --> 0:17:17.680 to the US, the orders of magnitude are immensely different. 0:17:18.119 --> 0:17:19.240 Now, that would. 0:17:19.080 --> 0:17:23.200 Suggest the odds of an aggressive tariff policy towards Canada 0:17:23.280 --> 0:17:26.239 are quite low. The market is indeed pricing that, and 0:17:26.359 --> 0:17:29.520 that is our assumption, which is why we have this 0:17:29.600 --> 0:17:32.720 view that Canada should be outperforming currencies such as the 0:17:32.760 --> 0:17:38.280 Europe for example. But let's see. I think if come 0:17:38.400 --> 0:17:41.760 January twentieth and there's no tariffs on Canada, we'll be fine. 0:17:42.200 --> 0:17:44.960 But there is still a very high degree of uncertainty 0:17:45.040 --> 0:17:45.960 on that front as well. 0:17:46.320 --> 0:17:49.320 George, too short a conversation, George servellos at Deutsche Bank. 0:17:49.359 --> 0:17:54.159 We need a longer conversation, soonest here is with Deutsche 0:17:54.200 --> 0:17:55.840 Bank and foreign exchange of civilies. 0:17:56.160 --> 0:18:00.440 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:18:00.520 --> 0:18:03.720 starting at seven am Eastern on applecar Play and Android 0:18:03.760 --> 0:18:06.600 Auto with the Bloomberg Business app. You can also listen 0:18:06.720 --> 0:18:09.840 live on Amazon Alexa from our flagship New York station 0:18:10.200 --> 0:18:12.920 Just Say Alexa playing Bloomberg eleven thirty. 0:18:13.000 --> 0:18:18.320 Bohen Haynes in Florida has all sorts of abilities, and 0:18:18.440 --> 0:18:20.320 one of them is a more conservative path. 0:18:20.440 --> 0:18:24.800 Joining us this morning is Jay Bowen here, too short 0:18:24.880 --> 0:18:25.320 a visit. 0:18:26.119 --> 0:18:31.440 You are basically not taking in the alternative investment kool aid. 0:18:32.400 --> 0:18:35.560 To me, this is a story for next year. Where's 0:18:35.600 --> 0:18:39.359 private equity? Where's private credit going to be? Twenty four 0:18:39.400 --> 0:18:41.440 months thirty six months from now? 0:18:42.560 --> 0:18:46.080 Yeah, with our approach. It's somewhat we say that we're 0:18:47.520 --> 0:18:51.800 unconventionally conventional. With our largest client, the Tampa Fire Police Fund. 0:18:51.840 --> 0:18:54.639 We just start our fifty first year. We've never owned 0:18:56.080 --> 0:19:00.840 private equity, private or the latest whip, so you. 0:19:00.880 --> 0:19:03.080 Got a fifty position in MEG seven. 0:19:03.240 --> 0:19:05.399 Now I will say this, which is important. One of 0:19:05.400 --> 0:19:08.960 our largest holdings and we decided this along several years ago. 0:19:09.040 --> 0:19:11.159 You can play these markets in the public markets. One 0:19:11.200 --> 0:19:15.000 of our largest holdings is Blacksman, which is the as 0:19:15.000 --> 0:19:17.280 you know, the largest private equity firm in the world, 0:19:17.440 --> 0:19:20.240 so we can we can play these markets in a 0:19:20.359 --> 0:19:24.960 very efficient liquid way, including real estate, also without having 0:19:25.000 --> 0:19:28.120 to go into the more risky corners of those areas. 0:19:28.320 --> 0:19:32.080 Tommy's you can probably tell from Jay's accent University of 0:19:32.080 --> 0:19:33.720 North Carolina at Chapel. 0:19:33.400 --> 0:19:36.800 Hill that this is Merry Christmas. 0:19:36.800 --> 0:19:40.560 Pool seems another Carolina guy coverman in here. Oh boy, Jay, 0:19:40.640 --> 0:19:43.320 talk to us about your work with the Tampa Firefighters 0:19:43.320 --> 0:19:43.679 and police. 0:19:43.880 --> 0:19:44.840 You mentioned you. 0:19:44.960 --> 0:19:48.440 Manage your pensions fund for fifty years. 0:19:48.440 --> 0:19:51.880 Correct. My father forged a relationship in nineteen seventy four. 0:19:53.440 --> 0:19:55.919 The firm was founded in North Carolina. We were in 0:19:55.960 --> 0:19:58.719 Atlanta forever now we're caught the COVID wave and then 0:19:59.720 --> 0:20:03.280 the of the Jacksville area. And yeah, it's just a 0:20:03.400 --> 0:20:07.600 very high quality, long term approach and it's proven to 0:20:07.680 --> 0:20:10.760 be The model has proven to be quite successful. And 0:20:11.080 --> 0:20:14.439 every year that goes by, we're able to show another 0:20:14.480 --> 0:20:17.520 set of twenty year rolling data, which they will do you. 0:20:18.000 --> 0:20:20.359 That's short term right here. What are you doing on 0:20:20.400 --> 0:20:21.960 a twenty year roll? Are you doing in a sixty 0:20:22.040 --> 0:20:25.000 forty split? What is the pixie dust you're doing? Like 0:20:25.040 --> 0:20:26.720 to beat USPX is at the goal. 0:20:27.800 --> 0:20:31.520 We are certainly oriented towards equities in common stocks specifically, 0:20:31.640 --> 0:20:35.720 typically we're allowed to invest sixty five percent of the 0:20:35.720 --> 0:20:39.399 portfolio in common stocks on a cost basis, not on 0:20:39.440 --> 0:20:41.400 a market value basis. So in a bull market that's 0:20:41.400 --> 0:20:43.639 going to move up close to seventy seventy five maybe. 0:20:44.000 --> 0:20:45.920 And the balance is that the bond side of the 0:20:45.960 --> 0:20:48.720 portfolio is strictly for income instability. 0:20:49.280 --> 0:20:51.280 We don't trade the bond. We gotta interrupt. 0:20:51.600 --> 0:20:55.719 You're running to find benefit program for a public sector 0:20:55.800 --> 0:21:00.879 pension fund and you're popping sixty five seventy seventy five equities. 0:21:01.000 --> 0:21:04.479 Correct, And we've been the sole manager for fifty years 0:21:04.840 --> 0:21:07.560 and according to all the public fund. 0:21:07.440 --> 0:21:12.280 Got the number one performing define benefit program in the country. 0:21:12.520 --> 0:21:15.160 That's what they say for one years through fifty years. 0:21:15.320 --> 0:21:17.240 So if you believe the database, what. 0:21:17.200 --> 0:21:20.400 Have you done since December of twenty eighteen? Our theme 0:21:20.440 --> 0:21:22.200 to the end of the year. Here is this great 0:21:22.400 --> 0:21:26.280 bull market. What are you up from Christmas Eve twenty eighteen? 0:21:26.359 --> 0:21:27.520 Is you got that number in your head? 0:21:27.800 --> 0:21:30.680 Don't I don't have that number in my head. I've 0:21:30.720 --> 0:21:33.280 got the thirty I've got the thirty one separate twenty 0:21:33.359 --> 0:21:35.679 year rolling increments, and I had that. 0:21:35.800 --> 0:21:38.960 So what's what's it? What's a type of stock you 0:21:39.000 --> 0:21:39.960 guys like to own? 0:21:40.000 --> 0:21:40.480 Are you? 0:21:40.560 --> 0:21:40.639 Do? 0:21:40.640 --> 0:21:45.040 You have a technology bent here? You're owning corporate? Corporate's financials. 0:21:45.119 --> 0:21:45.600 How do you guys do? 0:21:46.119 --> 0:21:48.400 It's top down in thematic we're trying to get ahead 0:21:48.400 --> 0:21:51.199 of these trends. Well currently one of our big trends 0:21:51.240 --> 0:21:55.720 we like finding these we call them technology companies disguised 0:21:55.760 --> 0:21:59.400 as industrial companies, companies like Eating and Corning and Teledigm. 0:21:59.720 --> 0:22:02.200 You know, you might think, oh wow, these are somewhat honey. 0:22:02.240 --> 0:22:05.280 Well they might be industrial, but they're very sophisticated from 0:22:05.280 --> 0:22:10.680 a technology standpoint. They're providing, they're helping electrify and digitize 0:22:10.760 --> 0:22:14.760 the industrial base. There's a lot of demand and massive 0:22:14.800 --> 0:22:17.119 tailwinds in that area that we see going forward. 0:22:17.160 --> 0:22:19.119 Do you guys have a value? Let me ask you 0:22:19.200 --> 0:22:21.040 put it to this. What is your valuation crates here? 0:22:21.119 --> 0:22:23.119 How do you think about valuation? Because you could look 0:22:23.119 --> 0:22:25.359