1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,720 Speaker 2: Terminal and the Bloomberg Business app. Roosevelt Barman of Bernstein 10 00:00:37,760 --> 00:00:40,920 Speaker 2: Private Wealth Management, writing, we anticipate weak US growth in 11 00:00:40,960 --> 00:00:44,400 Speaker 2: twenty five of aboutzero point five percent, given the current 12 00:00:44,479 --> 00:00:48,240 Speaker 2: higher cost of capital and the uncertainty around tariffs. Roosevelt 13 00:00:48,320 --> 00:00:50,000 Speaker 2: joins us now for more. Rizved, good morning, it's good 14 00:00:50,000 --> 00:00:50,280 Speaker 2: to see you. 15 00:00:50,360 --> 00:00:51,200 Speaker 3: Good morning, John Morriying. 16 00:00:51,400 --> 00:00:53,320 Speaker 2: Thank you for being kit step down in US growth 17 00:00:53,520 --> 00:00:56,280 Speaker 2: from around three percent too point five. Can you walk 18 00:00:56,320 --> 00:00:58,800 Speaker 2: us through how our price bond markets are at the 19 00:00:58,840 --> 00:01:01,520 Speaker 2: moment For a lot of growth in the US at 20 00:01:01,600 --> 00:01:03,520 Speaker 2: least of zero point five percent, I. 21 00:01:03,520 --> 00:01:05,160 Speaker 3: Would argue not very well priced at all. 22 00:01:05,200 --> 00:01:07,360 Speaker 4: I mean, I think when we look at where growth 23 00:01:07,440 --> 00:01:09,360 Speaker 4: is likely to move over the next couple. 24 00:01:09,080 --> 00:01:11,520 Speaker 3: Of months, and really without policy support. 25 00:01:11,560 --> 00:01:14,040 Speaker 4: You know, we're talking about the tax bill not quite 26 00:01:14,080 --> 00:01:17,080 Speaker 4: there yet, and when you think from a monetary policy standpoint, 27 00:01:17,160 --> 00:01:19,440 Speaker 4: the Fed not ready to cut because we haven't seen 28 00:01:19,560 --> 00:01:22,520 Speaker 4: enough progress on the inflation front, You're likely to see 29 00:01:22,560 --> 00:01:26,160 Speaker 4: some weaker labor and consumer data over that time that 30 00:01:26,280 --> 00:01:29,160 Speaker 4: eventually pushes yields lower. I think the reason we haven't 31 00:01:29,160 --> 00:01:31,920 Speaker 4: seen that yet is certainly that policy volatility when you 32 00:01:31,959 --> 00:01:35,000 Speaker 4: think about some of the potential legal challenges there placing 33 00:01:35,040 --> 00:01:39,080 Speaker 4: the FED chair. Thankfully that rhetoric has pulled back, but 34 00:01:39,160 --> 00:01:41,959 Speaker 4: that's certainly kept yields, I think, elevated above levels that 35 00:01:41,959 --> 00:01:44,520 Speaker 4: you would anticipate given the growth outlook going forward. 36 00:01:44,520 --> 00:01:47,360 Speaker 2: What are your assumptions on inflation with the growth outlook 37 00:01:47,360 --> 00:01:48,720 Speaker 2: you're expecting, So, I. 38 00:01:48,720 --> 00:01:51,720 Speaker 4: Mean our assumptions are inflation kind of remains elevated over 39 00:01:51,760 --> 00:01:54,200 Speaker 4: the short term, but that when you look more six 40 00:01:54,240 --> 00:01:56,680 Speaker 4: to twelve months out, that you don't have the kind 41 00:01:56,680 --> 00:01:59,360 Speaker 4: of high inflation or even the stagflation that's talked about 42 00:01:59,360 --> 00:02:01,920 Speaker 4: a lot. I think from our perspective, the reason that 43 00:02:01,960 --> 00:02:04,200 Speaker 4: so many people are worried about it's understandable you think 44 00:02:04,200 --> 00:02:07,360 Speaker 4: about tariffs pushing at prices, but from our perspective, that 45 00:02:07,440 --> 00:02:09,440 Speaker 4: only happens if consumers can meet. 46 00:02:09,280 --> 00:02:10,239 Speaker 3: The higher prices. 47 00:02:10,280 --> 00:02:13,160 Speaker 4: And you know, I would challenge the consensus view that 48 00:02:13,200 --> 00:02:16,840 Speaker 4: we've seen this dichotomy of soft data has been really 49 00:02:16,880 --> 00:02:19,320 Speaker 4: weak and that the hard data is still come in fine. 50 00:02:19,360 --> 00:02:20,919 Speaker 4: When you kind of look at some of the high 51 00:02:21,000 --> 00:02:25,320 Speaker 4: frequency consumption data, you know, credit card transactions, the ticket 52 00:02:25,360 --> 00:02:28,320 Speaker 4: sizes associated with them, it's shown some real weakness and 53 00:02:28,360 --> 00:02:30,400 Speaker 4: the consumer over the past couple of months, we're seeing 54 00:02:30,400 --> 00:02:32,800 Speaker 4: that weakness in labor demand as well. 55 00:02:32,840 --> 00:02:34,360 Speaker 3: When you look at online job. 56 00:02:34,200 --> 00:02:37,520 Speaker 4: Hostings the salaries associated with them, they're both at fifteenth 57 00:02:37,560 --> 00:02:40,800 Speaker 4: month lows. You look at Atlanta FED wage data that's 58 00:02:40,800 --> 00:02:43,080 Speaker 4: spread between those that are staying in their job and 59 00:02:43,120 --> 00:02:44,160 Speaker 4: those that are leaving their job. 60 00:02:44,280 --> 00:02:45,720 Speaker 3: It's just absolutely collapse. 61 00:02:45,880 --> 00:02:49,040 Speaker 4: So you're not getting any premium for leaving your job. 62 00:02:49,160 --> 00:02:52,200 Speaker 4: The kind of the leverage is shifted from the employee 63 00:02:52,240 --> 00:02:55,720 Speaker 4: back to the employer. That speaks the lower wages going forward, 64 00:02:55,800 --> 00:02:59,960 Speaker 4: lower consumption consumers not meeting those higher tariff induced prices. 65 00:03:00,160 --> 00:03:01,640 Speaker 5: So this morning, it seems like there are a couple 66 00:03:01,639 --> 00:03:04,520 Speaker 5: of schools of thought among investors who come on the show. 67 00:03:04,960 --> 00:03:07,880 Speaker 5: You've got Steve Shivverrode saying that actually he sees equities 68 00:03:07,880 --> 00:03:09,840 Speaker 5: as a better bet than bonds right now because he 69 00:03:09,880 --> 00:03:12,800 Speaker 5: does think that growth is going to reignite later this year. 70 00:03:13,160 --> 00:03:14,000 Speaker 6: It sounds like, and. 71 00:03:14,000 --> 00:03:16,960 Speaker 5: Correct me if I'm wrong, you actually prefer bonds later 72 00:03:17,000 --> 00:03:20,119 Speaker 5: this year to equities if you do see growth meaningfully 73 00:03:20,160 --> 00:03:23,120 Speaker 5: slowing and sending people back to what has been, and 74 00:03:23,160 --> 00:03:25,360 Speaker 5: maybe we'll continue to be a haven asset. 75 00:03:25,600 --> 00:03:27,720 Speaker 4: I actually think, Lisa, there's a pathway for both to 76 00:03:27,840 --> 00:03:29,280 Speaker 4: kind of do better TNS the end of the year. 77 00:03:29,360 --> 00:03:32,400 Speaker 4: So to your point, once we have some slowing growth 78 00:03:32,480 --> 00:03:34,519 Speaker 4: over the near term, I think that, and once we 79 00:03:34,600 --> 00:03:38,400 Speaker 4: have policy kind of more sort of knowns about what 80 00:03:38,440 --> 00:03:40,600 Speaker 4: the tax bill looks like, then you have the pathway 81 00:03:40,680 --> 00:03:41,840 Speaker 4: cleared for bonds to do well. 82 00:03:42,080 --> 00:03:43,560 Speaker 3: I think equities you're going. 83 00:03:43,400 --> 00:03:45,680 Speaker 4: To take some type of stimulus and support, and that's 84 00:03:45,680 --> 00:03:47,600 Speaker 4: more likely to be I think from the Fed than 85 00:03:47,600 --> 00:03:50,560 Speaker 4: necessarily the tax bill. And that's more of a kind 86 00:03:50,560 --> 00:03:52,720 Speaker 4: of fall and winter story where the Fed actually has 87 00:03:52,760 --> 00:03:55,240 Speaker 4: a green light to cut from both the inflation standpoint 88 00:03:55,560 --> 00:03:57,360 Speaker 4: and the weakened economic data. 89 00:03:57,440 --> 00:04:00,360 Speaker 5: So we were talking about this with Robert Sken just 90 00:04:00,560 --> 00:04:03,400 Speaker 5: how quickly we can see the negativity of bleed into 91 00:04:03,480 --> 00:04:06,120 Speaker 5: data that has been very distorted by front loading and 92 00:04:06,160 --> 00:04:09,240 Speaker 5: a whole host of other factors before people start to 93 00:04:09,320 --> 00:04:11,760 Speaker 5: question this theory of a rolling over in an economy 94 00:04:11,800 --> 00:04:14,960 Speaker 5: that has been incredibly resilient, with companies adapting and adjusting 95 00:04:15,000 --> 00:04:17,320 Speaker 5: and figuring out ways to keep on keeping on. 96 00:04:17,880 --> 00:04:19,800 Speaker 4: Well, I think we're starting to see some of that. 97 00:04:19,920 --> 00:04:22,240 Speaker 4: You know, as I mentioned, from both the consumer and 98 00:04:22,320 --> 00:04:25,640 Speaker 4: labor standpoint, and as people are still concerned about their 99 00:04:25,720 --> 00:04:28,240 Speaker 4: job prospects going forward, they're likely to pull back on 100 00:04:28,240 --> 00:04:31,360 Speaker 4: their consumption. That's typically what we've seen in history, even 101 00:04:31,360 --> 00:04:34,200 Speaker 4: if we haven't observed so much of that in retail sales, 102 00:04:34,200 --> 00:04:35,960 Speaker 4: there's been some weakness there, and again I think the 103 00:04:36,000 --> 00:04:39,760 Speaker 4: high frequency data have shown that consumers actually are pulling 104 00:04:39,800 --> 00:04:42,400 Speaker 4: back and are not as quite as resilient as maybe 105 00:04:42,440 --> 00:04:44,320 Speaker 4: the top line figures have suggested. 106 00:04:44,560 --> 00:04:47,200 Speaker 5: So there's also this theory underpitting what you're talking about, 107 00:04:47,200 --> 00:04:49,400 Speaker 5: which is that eventually money will go back into the 108 00:04:49,480 --> 00:04:53,400 Speaker 5: US and US assets that have traditionally been havens. Why 109 00:04:53,440 --> 00:04:55,479 Speaker 5: do you have that conviction to time where people are 110 00:04:55,520 --> 00:04:57,800 Speaker 5: selling the dollar and you are seeing a move out 111 00:04:57,839 --> 00:05:01,880 Speaker 5: of US assets, particularly among Youruropean and Canadian investment firms. 112 00:05:02,160 --> 00:05:04,440 Speaker 4: Well, I think there's I think we can separate, you know, 113 00:05:04,520 --> 00:05:06,440 Speaker 4: kind of fixed income and equities for a moment. So 114 00:05:06,600 --> 00:05:09,599 Speaker 4: if you think about fixed income, understandably, there's been a 115 00:05:09,640 --> 00:05:12,880 Speaker 4: premium there because of the policy volatility, so you may 116 00:05:12,920 --> 00:05:15,120 Speaker 4: not see the size of the rally in bonds that 117 00:05:15,120 --> 00:05:18,440 Speaker 4: you would normally anticipate with slower US and global growth. 118 00:05:18,760 --> 00:05:21,359 Speaker 4: I think equities from a long term perspective, that is 119 00:05:21,400 --> 00:05:24,960 Speaker 4: a tougher short because you're not just taking a geographic position, 120 00:05:25,040 --> 00:05:27,880 Speaker 4: you're taking a sector position as well. Given the US 121 00:05:27,960 --> 00:05:31,000 Speaker 4: leadership and technology, so you know, we talked to our 122 00:05:31,080 --> 00:05:33,640 Speaker 4: clients and saying, hey, do you want to be short 123 00:05:33,760 --> 00:05:36,760 Speaker 4: technology for a five to ten year period. The answer 124 00:05:36,760 --> 00:05:39,719 Speaker 4: is a resounding no, understandably. So I think that is 125 00:05:39,760 --> 00:05:42,040 Speaker 4: where we have confidence that, yes, there is a risk 126 00:05:42,080 --> 00:05:45,480 Speaker 4: premium for US assets that was not there before because 127 00:05:45,520 --> 00:05:49,000 Speaker 4: of the trade and monetary policy volatility. But the idea 128 00:05:49,000 --> 00:05:52,960 Speaker 4: that we have this mass divestment into other options, you know, 129 00:05:53,040 --> 00:05:55,039 Speaker 4: that's not our view at all, and I think that's 130 00:05:55,240 --> 00:05:57,520 Speaker 4: you know, I think number one, the depth and size 131 00:05:57,680 --> 00:06:00,400 Speaker 4: of the US bond market, and number two, the LEADLeadership 132 00:06:00,440 --> 00:06:03,560 Speaker 4: and Technology says that both US fixed income and equities 133 00:06:03,600 --> 00:06:06,560 Speaker 4: will be attractive going forward, just not as attractive as before. 134 00:06:06,680 --> 00:06:08,200 Speaker 2: What do you think that don't a witness speaks to? 135 00:06:08,279 --> 00:06:08,479 Speaker 6: Then? 136 00:06:08,640 --> 00:06:10,560 Speaker 2: What do you think is ultimately behind it over the 137 00:06:10,600 --> 00:06:11,240 Speaker 2: past few months? 138 00:06:11,279 --> 00:06:12,479 Speaker 4: Oh, I mean, I think in terms of the dollar 139 00:06:12,520 --> 00:06:16,000 Speaker 4: weakness for sure, that is where you can express more 140 00:06:16,000 --> 00:06:19,320 Speaker 4: of that concern about policy volatility. And if you're thinking 141 00:06:19,520 --> 00:06:22,240 Speaker 4: when you look at the dollar, it's undervalued over the 142 00:06:22,279 --> 00:06:25,920 Speaker 4: short term kind of based on nominal interest rate differentials, 143 00:06:26,240 --> 00:06:28,520 Speaker 4: but for longer term measures you could argue that it's 144 00:06:28,560 --> 00:06:30,800 Speaker 4: been overvalued for a while. So I think it's a 145 00:06:30,800 --> 00:06:35,080 Speaker 4: combination of long term overvaluation short term undervaluation, and you 146 00:06:35,160 --> 00:06:37,080 Speaker 4: end up with some dollar weakness. I think the other 147 00:06:37,120 --> 00:06:39,400 Speaker 4: part of it, too, is that the Fed, when you 148 00:06:39,440 --> 00:06:43,120 Speaker 4: think about the range of outcomes for FED policy, you're 149 00:06:43,120 --> 00:06:45,479 Speaker 4: more waiting for them to cut. You don't have the 150 00:06:45,560 --> 00:06:47,760 Speaker 4: other side of the distribution where you're saying, oh, could 151 00:06:47,760 --> 00:06:50,080 Speaker 4: there be price pressures that would have hikes that would 152 00:06:50,080 --> 00:06:53,359 Speaker 4: really widen the interest rate gaps enough to overcome the 153 00:06:53,360 --> 00:06:56,040 Speaker 4: policy volatility, So you end up with the dollar weakness 154 00:06:56,080 --> 00:06:56,920 Speaker 4: that we're seeing right now. 155 00:06:57,000 --> 00:06:58,920 Speaker 2: They've certainly taken those off the tank. When that's for 156 00:06:58,920 --> 00:07:00,880 Speaker 2: show rich about this was great in staid against them. 157 00:07:00,960 --> 00:07:02,480 Speaker 2: I'm going to see you. Thank you, sir, RISA vam 158 00:07:02,520 --> 00:07:15,680 Speaker 2: Palm and the Burnstain Private Wealth Management. To extend the conversation, 159 00:07:15,800 --> 00:07:18,840 Speaker 2: Terry Hines and Pangaea policy, Terry, welcome back to the program, Sir. 160 00:07:19,200 --> 00:07:23,120 Speaker 2: Why have the Europeans found themselves in such a difficult spot. 161 00:07:24,040 --> 00:07:26,360 Speaker 1: There's a couple of reasons, John. One is just the 162 00:07:26,480 --> 00:07:30,440 Speaker 1: nature of their federation. Those of you who are American 163 00:07:30,520 --> 00:07:34,080 Speaker 1: history buffs consider the EU much closer to the Articles 164 00:07:34,120 --> 00:07:38,120 Speaker 1: of Confederation. Where As one of your correspondents said, you know, 165 00:07:38,160 --> 00:07:41,640 Speaker 1: every major decision has to go back and be played 166 00:07:41,680 --> 00:07:44,600 Speaker 1: through each of the twenty seven member countries, so you know, 167 00:07:44,640 --> 00:07:48,280 Speaker 1: the structures. The structure is not great. There's also tensions 168 00:07:48,320 --> 00:07:51,640 Speaker 1: between the European Commission kind of the supremos and the 169 00:07:51,640 --> 00:07:55,160 Speaker 1: Burley Mountain, Brussels and the twenty seven member nations. So 170 00:07:55,240 --> 00:07:58,240 Speaker 1: that makes for a very complicated group, you know, and 171 00:07:58,400 --> 00:08:01,040 Speaker 1: just about every other negotiation and that the United States 172 00:08:01,440 --> 00:08:04,240 Speaker 1: is pursuing, whether or whether it be with the UK, 173 00:08:04,440 --> 00:08:06,760 Speaker 1: whether it be with India, whether it be with Japan, 174 00:08:06,960 --> 00:08:09,679 Speaker 1: let's say, or even China. You know who you're dealing 175 00:08:09,720 --> 00:08:11,240 Speaker 1: with and you know what kind of response you're going 176 00:08:11,320 --> 00:08:13,080 Speaker 1: to get. So this is uniquely difficult. 177 00:08:13,200 --> 00:08:13,480 Speaker 3: Terry. 178 00:08:13,480 --> 00:08:15,720 Speaker 6: Do we have an understanding of better understanding. 179 00:08:15,240 --> 00:08:17,760 Speaker 5: After this weekend of what the ultimate goals are with 180 00:08:17,840 --> 00:08:21,000 Speaker 5: these negotiations, what the desired outcome looks like. 181 00:08:22,360 --> 00:08:24,400 Speaker 1: On the EU? I don't think we do, but. 182 00:08:25,880 --> 00:08:26,520 Speaker 3: I would. 183 00:08:27,040 --> 00:08:29,600 Speaker 1: My view of this is that you know, Ludnick and 184 00:08:29,640 --> 00:08:32,520 Speaker 1: his people at Commerce had gone out before even before 185 00:08:32,679 --> 00:08:38,280 Speaker 1: the April second date and had given various countries wish 186 00:08:38,320 --> 00:08:41,040 Speaker 1: lists of things that they wanted. So whether or not 187 00:08:41,120 --> 00:08:44,600 Speaker 1: somebody in Burllymont got a list, I think is beside 188 00:08:44,640 --> 00:08:46,520 Speaker 1: the point, because a lot of the member countries did, 189 00:08:47,000 --> 00:08:49,720 Speaker 1: almost certainly Germany did, France did. I mean, there's all 190 00:08:49,760 --> 00:08:53,000 Speaker 1: the main countries in the European Union know what the 191 00:08:53,120 --> 00:08:56,240 Speaker 1: United States ask is generally, but the EU as a 192 00:08:56,280 --> 00:08:59,120 Speaker 1: whole has to get down to it, and the scheme 193 00:08:59,160 --> 00:09:03,400 Speaker 1: of the EC is always to delay, delay, delay, as 194 00:09:03,440 --> 00:09:06,640 Speaker 1: any British Prime minister in the last ten years well knows. 195 00:09:06,960 --> 00:09:09,160 Speaker 5: Do we get a sense that the one big beautiful bill, 196 00:09:09,200 --> 00:09:12,200 Speaker 5: and the fact that it did pass in Congress gave 197 00:09:12,320 --> 00:09:16,040 Speaker 5: ammunition to the administration to focus back on trade, and 198 00:09:16,160 --> 00:09:18,679 Speaker 5: we can expect a lot more headlines to be made 199 00:09:18,760 --> 00:09:21,199 Speaker 5: about trade over the next few weeks. 200 00:09:21,640 --> 00:09:23,720 Speaker 1: Well, I think they've been doing both, but I think 201 00:09:23,760 --> 00:09:26,600 Speaker 1: there's probably a lot more headlines on trade to be had, 202 00:09:26,679 --> 00:09:32,839 Speaker 1: simply because you know, the Senate negotiations on the tax 203 00:09:32,880 --> 00:09:35,719 Speaker 1: bill are kind of, you know, much more in the can. 204 00:09:35,760 --> 00:09:36,600 Speaker 3: They're much more baked. 205 00:09:36,600 --> 00:09:40,160 Speaker 1: Everybody knows what they are. But the expectation is that 206 00:09:40,240 --> 00:09:42,199 Speaker 1: over the next month you're going to see a lot 207 00:09:42,200 --> 00:09:44,880 Speaker 1: of those major deals, and you know, one of those 208 00:09:44,920 --> 00:09:49,199 Speaker 1: is India, where the Indians have been have said quite 209 00:09:49,800 --> 00:09:52,560 Speaker 1: quite publicly that they expect a deal to be done 210 00:09:53,559 --> 00:09:56,360 Speaker 1: in the first phase by July ninth, with eighteen more 211 00:09:56,400 --> 00:09:59,640 Speaker 1: sectors by October. You know, whether or not the United 212 00:09:59,679 --> 00:10:04,199 Speaker 1: States agrees with all those that framework or not, as 213 00:10:04,240 --> 00:10:07,720 Speaker 1: another thing, I doubt that they hugely disagree with it, 214 00:10:08,200 --> 00:10:10,959 Speaker 1: but there's a lot of optimism coming from India, and 215 00:10:11,080 --> 00:10:13,520 Speaker 1: you know, I've always thought that's exactly how you have 216 00:10:13,559 --> 00:10:15,960 Speaker 1: to read what's going on with Apple is through the 217 00:10:16,000 --> 00:10:19,360 Speaker 1: Indian trade negotiations, not as anything that's been going on 218 00:10:19,440 --> 00:10:20,119 Speaker 1: with Apple. 219 00:10:19,920 --> 00:10:21,400 Speaker 2: And Serry just build on that. What do you mean 220 00:10:21,440 --> 00:10:21,840 Speaker 2: by that? 221 00:10:23,360 --> 00:10:25,800 Speaker 1: What I mean is that people tend to look at 222 00:10:25,840 --> 00:10:27,959 Speaker 1: you know, Look, I'm not an Apple analyst. Okay, I'm 223 00:10:27,960 --> 00:10:30,120 Speaker 1: not saying buy or sell Apple. What I am saying 224 00:10:30,200 --> 00:10:32,960 Speaker 1: is that the markets tend to look at Apple or 225 00:10:33,000 --> 00:10:35,240 Speaker 1: you know, Tesla or you know whatever in a very 226 00:10:35,280 --> 00:10:38,520 Speaker 1: siloed sort of way. What's going on. Trump's mad at them, 227 00:10:38,559 --> 00:10:41,440 Speaker 1: Trump loves them. Whatever it is what's going on here? 228 00:10:41,480 --> 00:10:44,840 Speaker 1: I almost certainly I think this is instinct. But you know, 229 00:10:44,920 --> 00:10:49,079 Speaker 1: there's US India negotiations way down the track. India is 230 00:10:49,120 --> 00:10:55,080 Speaker 1: a major beneficiary of offshoring from China, in this case 231 00:10:55,480 --> 00:11:00,160 Speaker 1: iPhones to India. Trump likes to shake up negotiations. Is 232 00:11:00,160 --> 00:11:03,840 Speaker 1: It's a standard negotiating tactic, not just for him. And 233 00:11:04,040 --> 00:11:05,960 Speaker 1: the shake up. Part of the shakeup is, well, I'll 234 00:11:05,960 --> 00:11:08,800 Speaker 1: introduce something new into the mix. Let me remind you, 235 00:11:08,880 --> 00:11:13,040 Speaker 1: India that you're the beneficiaries of the United States policies here. 236 00:11:13,280 --> 00:11:15,120 Speaker 1: So I'm going to put that one on the table too, 237 00:11:15,400 --> 00:11:19,959 Speaker 1: and then we'll figure out where our negotiations go from there. 238 00:11:20,280 --> 00:11:23,199 Speaker 1: So you know, I'm just looking at Apple as a 239 00:11:23,240 --> 00:11:26,600 Speaker 1: bargaining chip in the larger trade negotiations with India. 240 00:11:26,600 --> 00:11:29,240 Speaker 2: Frankly, Henry, there's also a foreign policy rinko in a 241 00:11:29,320 --> 00:11:32,080 Speaker 2: mix as well, the threat of secondary sanctions against Russia 242 00:11:32,400 --> 00:11:35,720 Speaker 2: and what that could mean for India, for China. How's 243 00:11:35,760 --> 00:11:37,600 Speaker 2: that going to plan in the next few weeks and months. 244 00:11:38,559 --> 00:11:41,280 Speaker 1: You know, I think it matters. It matters in the 245 00:11:41,760 --> 00:11:44,760 Speaker 1: U SEU negotiations. To John, it matters greatly because what 246 00:11:44,800 --> 00:11:46,800 Speaker 1: you're going to have is a situation where you know, 247 00:11:46,840 --> 00:11:49,240 Speaker 1: this is a classic watch what they do, watch not 248 00:11:49,320 --> 00:11:52,839 Speaker 1: what they say. The European Union heaped a lot of 249 00:11:52,840 --> 00:11:56,640 Speaker 1: scoring on the Trump administration and Trump personally and Vice 250 00:11:56,679 --> 00:12:01,520 Speaker 1: President Advanced personally for for their remarks over the winter, 251 00:12:01,760 --> 00:12:05,240 Speaker 1: and they're going in position on the Ukraine. But now 252 00:12:05,240 --> 00:12:11,640 Speaker 1: we're in a situation where the geopolitics are different and 253 00:12:11,800 --> 00:12:15,079 Speaker 1: the United States as well as the European Union are 254 00:12:15,120 --> 00:12:18,679 Speaker 1: taking the shackles off the use of weapons that are 255 00:12:18,720 --> 00:12:22,520 Speaker 1: provided to Ukraine by all of those countries. You know, 256 00:12:22,800 --> 00:12:24,640 Speaker 1: what you're going to see in the successing of weeks, 257 00:12:24,679 --> 00:12:28,480 Speaker 1: I think is a geopolitical ramp up that's designed not 258 00:12:28,600 --> 00:12:31,680 Speaker 1: just to put more pressure on Russia, but more importantly 259 00:12:31,720 --> 00:12:35,839 Speaker 1: put more geopolitical pressure on China to get their client 260 00:12:35,920 --> 00:12:38,559 Speaker 1: state Russia to the table. So this is yet another 261 00:12:38,600 --> 00:12:41,960 Speaker 1: example where the geopolitics is driving the economic pency. 262 00:12:42,320 --> 00:12:44,400 Speaker 2: Terry, it's got to hear from you as always, smart 263 00:12:44,520 --> 00:12:57,520 Speaker 2: Terry Hines there of Panchaea policy joining us now the 264 00:12:57,520 --> 00:13:00,680 Speaker 2: president of the New York Stock Exchange, then it's going 265 00:13:00,720 --> 00:13:01,080 Speaker 2: to see you. 266 00:13:01,600 --> 00:13:02,400 Speaker 6: Great to be here. 267 00:13:02,600 --> 00:13:05,240 Speaker 2: Before we get to these trading debuts and maybe some 268 00:13:05,360 --> 00:13:07,200 Speaker 2: IPOs coming through. I just want to talk to you 269 00:13:07,200 --> 00:13:09,480 Speaker 2: about the amount of volume that's come through your business 270 00:13:10,080 --> 00:13:12,400 Speaker 2: through the year so far. Just walk us through it. 271 00:13:12,840 --> 00:13:15,600 Speaker 7: Yeah, if I look back on this year, it's been 272 00:13:15,880 --> 00:13:19,360 Speaker 7: a year unlike any other, both from the demands on 273 00:13:19,400 --> 00:13:23,679 Speaker 7: our system and the liquidity in our system manifesting itself 274 00:13:23,720 --> 00:13:26,439 Speaker 7: in trading volumes. Now, if you look at that period 275 00:13:26,559 --> 00:13:31,880 Speaker 7: between Liberation Day and the pause, we saw records in 276 00:13:31,960 --> 00:13:36,400 Speaker 7: terms of messaging traffic hitting around one point two trillion 277 00:13:36,640 --> 00:13:40,960 Speaker 7: incoming order messages that we processed with thirty microseconds median 278 00:13:41,040 --> 00:13:45,160 Speaker 7: response time on two of those days. And then if 279 00:13:45,200 --> 00:13:49,120 Speaker 7: you look at the amount of transactions that occurred on 280 00:13:49,160 --> 00:13:52,160 Speaker 7: our platform and the equity markets as a whole. I mean, 281 00:13:52,160 --> 00:13:58,320 Speaker 7: in average days around sixteen billion trades, and now during 282 00:13:58,360 --> 00:13:59,800 Speaker 7: that period we had thirty billion. 283 00:14:00,240 --> 00:14:01,679 Speaker 6: It's just unprecedented. 284 00:14:02,000 --> 00:14:05,680 Speaker 7: It's more than two times the amount of volume both 285 00:14:05,920 --> 00:14:11,120 Speaker 7: from execution, from actual trades as well as from messaging 286 00:14:11,200 --> 00:14:14,480 Speaker 7: then we saw during COVID. Now you remember how active 287 00:14:14,679 --> 00:14:18,880 Speaker 7: COVID was. There's been a variety of reasons why we've 288 00:14:18,920 --> 00:14:19,360 Speaker 7: seen that. 289 00:14:19,600 --> 00:14:21,600 Speaker 2: I think, do you think it's something we take for 290 00:14:21,680 --> 00:14:24,360 Speaker 2: grants it the infrastructure holding gump and the way it 291 00:14:24,360 --> 00:14:24,800 Speaker 2: has done. 292 00:14:24,880 --> 00:14:28,880 Speaker 7: I think it's something that we at the NYS spend 293 00:14:28,920 --> 00:14:33,160 Speaker 7: a tremendous amount of time thinking about and planning for. 294 00:14:33,800 --> 00:14:36,040 Speaker 7: We hope you take it for granted, because that means 295 00:14:36,040 --> 00:14:38,240 Speaker 7: we're doing our job. Our job is to ensure that 296 00:14:38,280 --> 00:14:43,080 Speaker 7: the markets are open and efficient so you can manage risk, 297 00:14:43,200 --> 00:14:48,160 Speaker 7: particularly during those incredibly uncertain times like we saw in April. 298 00:14:48,400 --> 00:14:50,760 Speaker 5: We saw an incredible amount of volume on the seconding 299 00:14:50,800 --> 00:14:55,320 Speaker 5: markets of existing companies that have existing shares. This was 300 00:14:55,320 --> 00:14:59,000 Speaker 5: supposed to be the year of IPOs, of deals, of 301 00:14:59,080 --> 00:15:01,720 Speaker 5: all sorts of capital markets activity. 302 00:15:02,320 --> 00:15:03,400 Speaker 3: Where are we in that? 303 00:15:03,520 --> 00:15:05,720 Speaker 5: Are we seeing a revival of that as people get 304 00:15:05,720 --> 00:15:08,640 Speaker 5: a little bit more confidence around trade or is it 305 00:15:08,720 --> 00:15:10,200 Speaker 5: still really kind of being iced. 306 00:15:10,480 --> 00:15:13,160 Speaker 7: Yeah, so initially this year when I was with you 307 00:15:13,320 --> 00:15:16,760 Speaker 7: both in Davos, I was incredibly excited. You know, I 308 00:15:16,840 --> 00:15:20,720 Speaker 7: still am really excited about the IPO markets. I think 309 00:15:20,960 --> 00:15:26,640 Speaker 7: Mountain and Hinge last week going and doing so incredibly well, 310 00:15:26,680 --> 00:15:30,040 Speaker 7: both pricing at the high end of the range, both 311 00:15:30,120 --> 00:15:33,840 Speaker 7: up significantly over their IPO prices just in their first 312 00:15:33,840 --> 00:15:38,520 Speaker 7: two days of trading. Are the sign of what I 313 00:15:38,560 --> 00:15:41,120 Speaker 7: was talking about with you both in Davos, and that 314 00:15:41,160 --> 00:15:45,040 Speaker 7: there's a tremendous amount of demand for new issuance in 315 00:15:45,080 --> 00:15:48,320 Speaker 7: the market. Portfolio managers I talk to, long only funds 316 00:15:48,320 --> 00:15:52,240 Speaker 7: I talked to they want new issues in the market. 317 00:15:52,600 --> 00:15:55,720 Speaker 7: So I think you're starting to see these companies now 318 00:15:55,760 --> 00:15:58,920 Speaker 7: come to market now that the vis has come back 319 00:15:58,960 --> 00:16:04,080 Speaker 7: to earth, back to that twenty ish level, and you're 320 00:16:04,160 --> 00:16:07,840 Speaker 7: not seeing as much of the intra day swings as 321 00:16:07,880 --> 00:16:08,400 Speaker 7: a result. 322 00:16:08,600 --> 00:16:10,120 Speaker 6: Can you talked about Davos. 323 00:16:10,360 --> 00:16:12,400 Speaker 5: I'm just wondering the enthusiasm you had. 324 00:16:12,440 --> 00:16:13,480 Speaker 3: Then, can you. 325 00:16:13,400 --> 00:16:16,840 Speaker 5: Give a sense of how much lower the volume of 326 00:16:16,880 --> 00:16:19,320 Speaker 5: IPOs or deals you expect to be for the remainder 327 00:16:19,360 --> 00:16:23,040 Speaker 5: of this year now, then, say in January, based on 328 00:16:23,080 --> 00:16:26,480 Speaker 5: the uncertainty, and based on what hasn't gotten done over 329 00:16:26,520 --> 00:16:27,200 Speaker 5: the first half the. 330 00:16:27,240 --> 00:16:30,560 Speaker 7: Year, I'm actually still optimistic that the same amount. 331 00:16:30,320 --> 00:16:33,080 Speaker 6: Of IPOs will go. It's just shifted out. 332 00:16:33,080 --> 00:16:35,160 Speaker 7: If I look in the case of Mountain and Hinge, 333 00:16:35,200 --> 00:16:38,480 Speaker 7: they were targeting early April. You've seen stub Hub flip, 334 00:16:38,520 --> 00:16:40,960 Speaker 7: You've seen clarin a flip Circle went on the road 335 00:16:41,040 --> 00:16:45,320 Speaker 7: this morning, which is an IPO. We're incredibly excited about 336 00:16:45,360 --> 00:16:49,000 Speaker 7: happening just next week. So I think you're starting to 337 00:16:49,160 --> 00:16:54,760 Speaker 7: see that group of companies that was public market ready 338 00:16:55,120 --> 00:16:56,200 Speaker 7: get out of the gates. 339 00:16:56,600 --> 00:16:57,520 Speaker 6: So I'm optimistic. 340 00:16:57,560 --> 00:17:00,280 Speaker 7: I'm optimistic that the second half of this shar year 341 00:17:00,680 --> 00:17:03,440 Speaker 7: is going to be when you start to see these 342 00:17:03,880 --> 00:17:05,600 Speaker 7: bigger names come to market. 343 00:17:05,720 --> 00:17:08,199 Speaker 2: Do we need clarity on the policies in Washington first, 344 00:17:08,480 --> 00:17:10,840 Speaker 2: and how disruptive has that been for your business? I 345 00:17:10,880 --> 00:17:14,320 Speaker 2: remember the President on the stock exchange floor alongside you. 346 00:17:14,880 --> 00:17:16,720 Speaker 2: This is not what we all expected. This has been 347 00:17:16,800 --> 00:17:18,560 Speaker 2: chaotic for a lot of people. Do we need some 348 00:17:18,600 --> 00:17:21,159 Speaker 2: clarity on those issues to see the Canada plant and 349 00:17:21,160 --> 00:17:22,120 Speaker 2: the way that you expect. 350 00:17:22,520 --> 00:17:23,680 Speaker 6: So I think there's just. 351 00:17:23,640 --> 00:17:26,560 Speaker 7: Been some uncertainty in the market. You can you can't 352 00:17:26,720 --> 00:17:29,200 Speaker 7: argue that if you're a good company, though, if you're 353 00:17:29,240 --> 00:17:34,040 Speaker 7: a company that has made the plans to go public, 354 00:17:34,200 --> 00:17:39,399 Speaker 7: which many have their public company ready, I think they 355 00:17:39,440 --> 00:17:42,760 Speaker 7: can go in any market, particularly when you look at 356 00:17:42,800 --> 00:17:47,119 Speaker 7: certain sectors. Crypto is certainly a sector where there's a 357 00:17:47,160 --> 00:17:51,360 Speaker 7: lot of optimism. Still, some companies are still trying to 358 00:17:51,440 --> 00:17:56,040 Speaker 7: weigh the benefits or the issues associated with tariffs, and 359 00:17:56,200 --> 00:17:59,040 Speaker 7: that's going to be a moveable feast throughout the course 360 00:17:59,119 --> 00:17:59,600 Speaker 7: of the year. 361 00:18:00,000 --> 00:18:03,040 Speaker 2: Everyone around this table is incredibly pro America. You and 362 00:18:03,119 --> 00:18:05,600 Speaker 2: I were on a panel together. You mentioned Davos, and 363 00:18:05,640 --> 00:18:09,280 Speaker 2: we've been talking about American exceptionalism, and then all of 364 00:18:09,320 --> 00:18:12,240 Speaker 2: a sudden people are talking about peak American exceptionalism and 365 00:18:12,280 --> 00:18:13,560 Speaker 2: the rest of the world. Can I ever find a 366 00:18:13,600 --> 00:18:15,879 Speaker 2: word from you on that the future of America and 367 00:18:15,920 --> 00:18:17,040 Speaker 2: American exceptionalism. 368 00:18:17,119 --> 00:18:20,439 Speaker 7: There's nothing that beats our capital markets. There's no substitute 369 00:18:20,440 --> 00:18:24,080 Speaker 7: for our capital markets. They're the deepest, most liquid in 370 00:18:24,200 --> 00:18:27,479 Speaker 7: the world. They continue to be the envy of a world. 371 00:18:27,960 --> 00:18:32,040 Speaker 7: The geopolitical situation, though, is a conversation. 372 00:18:32,480 --> 00:18:33,840 Speaker 6: I think that's where I'll leave it. 373 00:18:34,160 --> 00:18:36,719 Speaker 2: That's a diplomatic way of putting bit Lynn. It's good 374 00:18:36,720 --> 00:18:39,679 Speaker 2: to see you. Good to see Lynn Martin. There the 375 00:18:39,800 --> 00:18:52,440 Speaker 2: president of the New York Stock Exchange. Amandalaline of a 376 00:18:52,440 --> 00:18:54,240 Speaker 2: black Rock Join just around a table, Amanda, good to 377 00:18:54,280 --> 00:18:55,040 Speaker 2: see you, Good morning. 378 00:18:55,080 --> 00:18:55,600 Speaker 3: Thank you for having me. 379 00:18:55,680 --> 00:18:58,520 Speaker 2: You've been focusing on the interplay between margins and the 380 00:18:58,560 --> 00:19:00,720 Speaker 2: labor market. Let's get an update. Where are we now? 381 00:19:00,920 --> 00:19:03,760 Speaker 8: Yeah, I think Neil Cashcari said it well to your 382 00:19:03,800 --> 00:19:06,600 Speaker 8: colleagues over in Asia. There time is of the essence here. 383 00:19:06,720 --> 00:19:08,639 Speaker 8: Companies are in a bit of a weight and see mode. 384 00:19:08,720 --> 00:19:10,359 Speaker 8: This is something that's been coming up in our client 385 00:19:10,400 --> 00:19:13,719 Speaker 8: conversations over the past few weeks, including some conferences. Corporates 386 00:19:13,720 --> 00:19:15,520 Speaker 8: are signaling that they're in a weight and see mode. 387 00:19:15,560 --> 00:19:18,080 Speaker 8: But there's an expiration date on that weight and see 388 00:19:18,080 --> 00:19:20,080 Speaker 8: and I think that's really what we're focusing on. This 389 00:19:20,160 --> 00:19:22,560 Speaker 8: really just hinges on the labor market. You heard Stephanie 390 00:19:22,600 --> 00:19:25,240 Speaker 8: say consumers can spend so long as their employment situation 391 00:19:25,359 --> 00:19:28,159 Speaker 8: is solid. It's really that interplay between margins and the 392 00:19:28,240 --> 00:19:29,960 Speaker 8: layoff rate that I think is going to determine the 393 00:19:30,000 --> 00:19:30,600 Speaker 8: path from here. 394 00:19:30,640 --> 00:19:31,880 Speaker 6: So when's the expiration date? 395 00:19:32,200 --> 00:19:36,080 Speaker 8: Well, I think the FED is almost laying the groundwork 396 00:19:36,200 --> 00:19:39,679 Speaker 8: for focusing the market on September and even going forward 397 00:19:39,680 --> 00:19:41,399 Speaker 8: from that, I think if we can get through the 398 00:19:41,400 --> 00:19:44,560 Speaker 8: next earning season. This earning season, I think positively surprised. 399 00:19:44,720 --> 00:19:46,280 Speaker 8: If we can get through the next earning season, I 400 00:19:46,320 --> 00:19:48,399 Speaker 8: think that will provide some clarity. But I kind of 401 00:19:48,400 --> 00:19:49,040 Speaker 8: take a step back. 402 00:19:49,080 --> 00:19:49,520 Speaker 6: If I'm a. 403 00:19:49,440 --> 00:19:52,480 Speaker 8: Corporate CFO and I thought your conversation with Lynn Martin 404 00:19:52,600 --> 00:19:54,920 Speaker 8: was great, at some point they just have to move 405 00:19:54,960 --> 00:19:57,480 Speaker 8: on with it and kind of go through kind of 406 00:19:57,480 --> 00:19:59,920 Speaker 8: the strategic initiatives that they need to enact. So for EXAM, 407 00:20:00,680 --> 00:20:03,680 Speaker 8: we've actually seen strategic m and A rebound a bit. 408 00:20:03,760 --> 00:20:06,040 Speaker 8: It wasn't that depressed to begin with, but I think 409 00:20:06,080 --> 00:20:08,959 Speaker 8: corporates that are looking to do transactions to bolster their 410 00:20:09,000 --> 00:20:10,560 Speaker 8: business are actually moving. 411 00:20:10,320 --> 00:20:10,800 Speaker 2: Ahead with it. 412 00:20:10,920 --> 00:20:13,399 Speaker 8: Where we've seen some lagging is on the private equity 413 00:20:13,440 --> 00:20:16,840 Speaker 8: sponsor related m and A, where financial economics are a 414 00:20:16,840 --> 00:20:17,400 Speaker 8: bigger part. 415 00:20:17,320 --> 00:20:17,840 Speaker 6: Of the equation. 416 00:20:17,960 --> 00:20:20,919 Speaker 8: But I think to a certain extent, there's almost a 417 00:20:21,000 --> 00:20:25,000 Speaker 8: level of optimism that no matter the path, corporates can 418 00:20:25,040 --> 00:20:27,240 Speaker 8: manage through it. And to a certain extent, we're actually, 419 00:20:27,320 --> 00:20:29,040 Speaker 8: I think starting to see a bit more of that. 420 00:20:29,200 --> 00:20:31,359 Speaker 5: So if you talk to corporate executives, you get a 421 00:20:31,400 --> 00:20:33,520 Speaker 5: sense of optimism. You get a sense that they're going 422 00:20:33,560 --> 00:20:36,399 Speaker 5: to keep on going, that there's certain levels of demand 423 00:20:36,400 --> 00:20:38,199 Speaker 5: that are just going to be sticky, and that they 424 00:20:38,240 --> 00:20:40,679 Speaker 5: can plan their business around that. Where the cracks are 425 00:20:40,680 --> 00:20:42,720 Speaker 5: going to come as the consumers. That's what everyone has 426 00:20:42,720 --> 00:20:45,800 Speaker 5: been saying. How much do you really believe in that 427 00:20:46,000 --> 00:20:49,679 Speaker 5: given that you see real contradictory types of data on that. 428 00:20:49,760 --> 00:20:52,560 Speaker 8: Yeah, and I think it's a great point. Sometimes folks 429 00:20:52,720 --> 00:20:54,760 Speaker 8: describe it as mixed signals to us, but what I 430 00:20:54,800 --> 00:20:57,000 Speaker 8: actually think is happening is that just like there's been 431 00:20:57,040 --> 00:21:00,560 Speaker 8: dispersion in corporate credit, liquid private commercial real estate, there's 432 00:21:00,600 --> 00:21:03,000 Speaker 8: also dispersion in the consumer One of the things that's 433 00:21:03,080 --> 00:21:05,639 Speaker 8: jumping out in the recent data is that those consumers 434 00:21:05,640 --> 00:21:08,199 Speaker 8: with student loans, now that those are actually impacting their 435 00:21:08,240 --> 00:21:11,040 Speaker 8: credit scores and the delinquencies are coming under more pressure. 436 00:21:11,119 --> 00:21:14,720 Speaker 8: So there's a bifurcation that has always existed amongst consumer 437 00:21:14,760 --> 00:21:17,240 Speaker 8: income cohorts, but we believe in this cycle it matters 438 00:21:17,280 --> 00:21:21,840 Speaker 8: more because the rate environment is really a forcing factor 439 00:21:22,000 --> 00:21:25,119 Speaker 8: for affordability. So if you have floating rate exposures, you 440 00:21:25,160 --> 00:21:28,399 Speaker 8: have high mortgage rates. These I would say differences in 441 00:21:28,480 --> 00:21:32,159 Speaker 8: consumer strength are becoming more prominent in this cycle versus 442 00:21:32,200 --> 00:21:34,840 Speaker 8: previous cycles. I think what we really need to focus 443 00:21:34,880 --> 00:21:37,440 Speaker 8: on is does that weakness that is so far confined 444 00:21:37,440 --> 00:21:39,840 Speaker 8: to the low end consumer extend more broadly up into 445 00:21:39,920 --> 00:21:42,959 Speaker 8: the higher income consumer. We're not seeing it yet, but 446 00:21:43,000 --> 00:21:45,239 Speaker 8: that doesn't mean that that risk isn't out there. So 447 00:21:45,280 --> 00:21:47,480 Speaker 8: we're finally attuned to kind of what does that labor 448 00:21:47,480 --> 00:21:48,560 Speaker 8: market dynamic look like? 449 00:21:48,800 --> 00:21:50,800 Speaker 2: And if we see that migration, that certainly poses a 450 00:21:50,800 --> 00:21:53,160 Speaker 2: threat to the headline data, that's for sure. I wanted 451 00:21:53,160 --> 00:21:54,639 Speaker 2: to talk to you about the price of credit at 452 00:21:54,680 --> 00:21:56,560 Speaker 2: the moment. We've had a lot of guests come on 453 00:21:56,880 --> 00:21:59,840 Speaker 2: and talk about the riskiness of government debt, and how 454 00:22:00,160 --> 00:22:03,399 Speaker 2: any talk about the riskiness of corporate credit. How are 455 00:22:03,400 --> 00:22:05,480 Speaker 2: the two trading relative to each other at the moment. 456 00:22:05,960 --> 00:22:06,840 Speaker 3: So I would say. 457 00:22:06,880 --> 00:22:08,600 Speaker 8: Let's use high heel as an example because it's a 458 00:22:08,600 --> 00:22:11,480 Speaker 8: bit more growth sensitive. The tights for HYLD spreads were 459 00:22:11,480 --> 00:22:13,359 Speaker 8: two fifty six earlier in the summer. 460 00:22:13,359 --> 00:22:14,200 Speaker 6: We're at three point. 461 00:22:14,040 --> 00:22:17,040 Speaker 8: Thirty, so we're not back to that kind of euphoor 462 00:22:17,520 --> 00:22:20,399 Speaker 8: period of mid February, but we're certainly well below the 463 00:22:20,440 --> 00:22:23,520 Speaker 8: post financial crisis average. So I think where there is 464 00:22:23,640 --> 00:22:25,760 Speaker 8: for sure some room for spreads to widen. I think, 465 00:22:25,800 --> 00:22:28,199 Speaker 8: going back to your pointly so though, there's almost a 466 00:22:28,280 --> 00:22:32,240 Speaker 8: sense of front footed behavior amongst investors as well, that 467 00:22:32,560 --> 00:22:36,119 Speaker 8: they're cognizantive of the fact that they cannot time these developments. 468 00:22:36,160 --> 00:22:38,320 Speaker 8: I think what happened over the weekend is a great example. 469 00:22:38,520 --> 00:22:40,800 Speaker 8: We left Friday, it seemed like a bit of a 470 00:22:40,880 --> 00:22:42,800 Speaker 8: risk off tone. We come in this morning. It's very 471 00:22:42,880 --> 00:22:45,760 Speaker 8: risk on corporates, just like investors don't want to be 472 00:22:45,920 --> 00:22:48,239 Speaker 8: on the sidelines, and so there's almost a kind of 473 00:22:48,359 --> 00:22:52,480 Speaker 8: just move forward and kind of invest with the assumption 474 00:22:52,520 --> 00:22:54,040 Speaker 8: that there will be some volatility from here. 475 00:22:54,119 --> 00:22:57,240 Speaker 2: Thank Formerica points out that some microsolf credit some maturities 476 00:22:57,280 --> 00:23:00,920 Speaker 2: at trading through the treasuries. I want to understand from 477 00:23:00,920 --> 00:23:03,199 Speaker 2: your perspective whether you are seeing some investors begin to 478 00:23:03,200 --> 00:23:06,639 Speaker 2: treat certain corporate credits that's more safe than maybe the 479 00:23:06,760 --> 00:23:09,920 Speaker 2: US Treasury, which sounds bizarre saying out loud. So you've 480 00:23:09,920 --> 00:23:10,960 Speaker 2: seen that take place, so. 481 00:23:10,880 --> 00:23:13,000 Speaker 6: I would say that part of the market. 482 00:23:13,040 --> 00:23:14,920 Speaker 8: So when I started in corporate credit in two thousand 483 00:23:14,920 --> 00:23:16,520 Speaker 8: and five, there were actually a fair amount of triple 484 00:23:16,560 --> 00:23:18,840 Speaker 8: A corporates left there are really only two triple A 485 00:23:18,920 --> 00:23:22,159 Speaker 8: corporates and then a handful of universities. That whole segment 486 00:23:22,200 --> 00:23:25,119 Speaker 8: of the market is about ninety billion US dollars triple. 487 00:23:24,880 --> 00:23:25,680 Speaker 6: A rated corporates. 488 00:23:25,760 --> 00:23:29,320 Speaker 8: It's very technical, it trades very tight. It also depends 489 00:23:29,400 --> 00:23:31,240 Speaker 8: upon where are you on the curve where your spread 490 00:23:31,320 --> 00:23:33,119 Speaker 8: is getting calculated. So I wouldn't take that as an 491 00:23:33,200 --> 00:23:35,720 Speaker 8: arbiter of this is a better credit than the US. 492 00:23:35,760 --> 00:23:36,920 Speaker 6: I think what it is is just the. 493 00:23:36,840 --> 00:23:39,560 Speaker 8: Fact that over time, over the past fifteen years, there's 494 00:23:39,560 --> 00:23:41,600 Speaker 8: been a migration down in credit quality in the US. 495 00:23:41,680 --> 00:23:44,040 Speaker 8: A lot of corporates are just happy to be triple B. 496 00:23:44,160 --> 00:23:45,679 Speaker 8: They don't need to be double A or triple A 497 00:23:45,680 --> 00:23:47,639 Speaker 8: anymore like they were in two thousand and five. And 498 00:23:47,720 --> 00:23:49,040 Speaker 8: I think that's really what you're seeing. 499 00:23:49,160 --> 00:23:52,120 Speaker 5: Is there a lesson also, though about who the buyers 500 00:23:52,160 --> 00:23:55,800 Speaker 5: are at any given time of the treasury market versus 501 00:23:55,800 --> 00:23:58,240 Speaker 5: the corporate debt market, that there are two distinct buyer 502 00:23:58,320 --> 00:24:02,080 Speaker 5: bases with different metrics to understand when to come in 503 00:24:02,200 --> 00:24:02,720 Speaker 5: and when not. 504 00:24:02,800 --> 00:24:05,479 Speaker 8: Too Absolutely, I do think that there's a healthy amount 505 00:24:05,480 --> 00:24:08,119 Speaker 8: of market segmentation that has been in place since and 506 00:24:08,200 --> 00:24:11,400 Speaker 8: remains in place between those two market cohorts. I really 507 00:24:11,440 --> 00:24:13,919 Speaker 8: just think, though, if I'm an investor looking to deploy 508 00:24:13,960 --> 00:24:16,399 Speaker 8: money in the corporate credit market, I see more scope 509 00:24:16,440 --> 00:24:19,320 Speaker 8: for balance sheet deterioration amongst triple A and double A 510 00:24:19,440 --> 00:24:22,160 Speaker 8: rated corporates in this environment than I do in triple b's. 511 00:24:22,440 --> 00:24:26,000 Speaker 8: And you know our view, we like selectively moving down 512 00:24:26,000 --> 00:24:28,399 Speaker 8: in credit quality. So for choice, I would prefer to 513 00:24:28,440 --> 00:24:30,400 Speaker 8: be in the low end of investment grade, where I'm 514 00:24:30,400 --> 00:24:32,560 Speaker 8: pretty sure those companies will want to stay investment grade. 515 00:24:32,600 --> 00:24:35,240 Speaker 2: So your point, though, is that by design that deterioration, 516 00:24:35,400 --> 00:24:37,440 Speaker 2: is that because someone of the C suite is said, 517 00:24:37,720 --> 00:24:38,400 Speaker 2: we should do this. 518 00:24:38,359 --> 00:24:40,760 Speaker 8: And I think that actually, the historical experience shows that 519 00:24:40,840 --> 00:24:43,080 Speaker 8: your cost of capital as a double A rated corporate 520 00:24:43,160 --> 00:24:46,120 Speaker 8: isn't that much less less expensive, or isn't that much 521 00:24:46,200 --> 00:24:49,679 Speaker 8: cheaper than a triple B rated corporate, And so I 522 00:24:49,680 --> 00:24:51,960 Speaker 8: think over time there's been a steady migration. Now, I 523 00:24:51,960 --> 00:24:54,760 Speaker 8: think corporates use that prudently. They're not going to lever 524 00:24:54,880 --> 00:24:56,400 Speaker 8: up just to do a run of the mail buy back. 525 00:24:56,440 --> 00:24:58,439 Speaker 8: They'll wait for the right acquisition, They'll wait for the 526 00:24:58,520 --> 00:25:00,800 Speaker 8: right time to add that debt to capital structure. But 527 00:25:00,800 --> 00:25:02,400 Speaker 8: that's been a long term trend that's been in place 528 00:25:02,400 --> 00:25:04,640 Speaker 8: for the past ten fifteen years, and I think actually 529 00:25:04,720 --> 00:25:06,840 Speaker 8: those triplebee corporates are just fine, and even some of 530 00:25:06,840 --> 00:25:09,199 Speaker 8: those high yield high end of high yield corporates are 531 00:25:09,240 --> 00:25:09,800 Speaker 8: just fine as well. 532 00:25:09,920 --> 00:25:11,879 Speaker 2: Out of line of Black Crock. Thank you, good to 533 00:25:11,880 --> 00:25:15,800 Speaker 2: see you. This is the Bloomberg Surveillance podcast, bringing you 534 00:25:16,080 --> 00:25:19,560 Speaker 2: the best in markets, economics, angiopolitics. You can watch the 535 00:25:19,600 --> 00:25:22,600 Speaker 2: show live on Bloomberg TV weekday mornings from six am 536 00:25:22,720 --> 00:25:26,720 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 537 00:25:26,840 --> 00:25:29,080 Speaker 2: or anywhere else you listen, and as always, on the 538 00:25:29,080 --> 00:25:31,520 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.