WEBVTT - UBS's Harford: We're In 4th Inning of Consolidation 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul Swinge. You. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits, each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.040 at Bloomberg dot com. Well, the asset management business is 0:00:22.040 --> 0:00:25.480 certainly facing meaningful headwinds to its business, including the move 0:00:25.600 --> 0:00:29.080 the passive management and pressure on fees as it looks 0:00:29.120 --> 0:00:32.320 for additional areas of growth. To help us get up 0:00:32.320 --> 0:00:34.320 to speed on what is going on with the asset 0:00:34.320 --> 0:00:37.239 management business, we're pleased to welcome Sunny Hartford. She has 0:00:37.280 --> 0:00:40.200 a head of Investments for UBS Asset Management. She joins 0:00:40.280 --> 0:00:41.959 us here live in New York. Sonny, thanks so much 0:00:41.960 --> 0:00:44.239 for joining us. Thanks for having me so we know 0:00:44.360 --> 0:00:46.960 about fee pressures, we know about to move the pass it. 0:00:47.040 --> 0:00:49.479 What are the big challenges that are you're facing right 0:00:49.560 --> 0:00:52.120 now at UBS, Well, I think they're not unique to 0:00:52.200 --> 0:00:54.560 u BS. I think the entire industry, as you say, Paul, 0:00:54.760 --> 0:00:57.600 is going through a massive shift and change and how 0:00:57.680 --> 0:01:00.440 we deliver value to our clients, the transparent see that 0:01:00.560 --> 0:01:03.760 is apparent and delivering that value UM and the opportunities 0:01:03.880 --> 0:01:08.640 so fortunately, demographics and some of the world UM tail winds, 0:01:08.720 --> 0:01:11.840 if you will, in terms of the number of retirees, 0:01:12.000 --> 0:01:16.240 the fact that sixty of UM retirees say that they 0:01:16.240 --> 0:01:18.880 will have to invest and live on their investment proceeds 0:01:18.880 --> 0:01:21.720 as opposed to their portfolios themselves. Going forward, there's a 0:01:21.760 --> 0:01:24.039 tremendous amount of money that will need to be managed 0:01:24.520 --> 0:01:26.959 UM and opportunities for us that managers to add value 0:01:27.000 --> 0:01:30.200 to their clients. Headwinds against us, of course, are the 0:01:30.240 --> 0:01:33.120 transparency and the passive products that are there delivering what 0:01:33.200 --> 0:01:36.640 in the last decade has been really terrific returns. But 0:01:36.760 --> 0:01:40.240 I would suggest that the volatility that we're seeing now UM, 0:01:40.319 --> 0:01:43.800 the change in the demand for alternative products, for example, 0:01:43.880 --> 0:01:46.440 the interest in markets like China where passive doesn't do 0:01:46.480 --> 0:01:49.400 nearly as well, where you need some real expertise, provide 0:01:49.400 --> 0:01:52.600 opportunities for those Asset managers are going to be prepared 0:01:52.640 --> 0:01:54.800 to take advantage and bring those skills to bear. How 0:01:54.840 --> 0:02:00.960 far along in this consolidation are we that's a great question, UM. 0:02:01.240 --> 0:02:05.000 I probably in the fourth inning. If I use a 0:02:05.040 --> 0:02:08.359 baseball analogy, right, I think we've got a ways to go. 0:02:08.600 --> 0:02:10.920 But I think who is going to survive and who 0:02:10.960 --> 0:02:13.240 the winners are is not as simple as the assets 0:02:13.280 --> 0:02:16.440 under management. Okay, so that's my question. What will the 0:02:16.480 --> 0:02:19.200 asset management industry look like, say ten years from now, 0:02:19.280 --> 0:02:22.960 for in the fourth inning of investment firms consolidating. I 0:02:23.000 --> 0:02:26.560 think those that change to go with the market uh 0:02:26.600 --> 0:02:30.040 and can affect real change in their technology in their 0:02:30.120 --> 0:02:32.600 use of data overstated statement, but it's still a true 0:02:32.600 --> 0:02:35.440 one um I think will survive. But those that really 0:02:35.440 --> 0:02:37.160 don't think they need to change and they can stick 0:02:37.160 --> 0:02:39.480 with the status quote might not be here. I don't 0:02:39.520 --> 0:02:41.560 think it's as simple as saying a trillion dollars assets 0:02:41.639 --> 0:02:43.840 under management. Is that scalability and that level that you 0:02:43.840 --> 0:02:45.160 need to be at. I think you can have a 0:02:45.160 --> 0:02:48.240 boutique firm that focuses saying on alternatives or focuses on 0:02:48.280 --> 0:02:50.919 the liquid products that so many are demanding right now. 0:02:51.600 --> 0:02:54.560 I think if you can deliver solutions multi asset where 0:02:54.600 --> 0:02:57.120 you can pull out beta, do that very cost effectively 0:02:57.160 --> 0:02:59.600 for a client so they don't go elsewhere for that, 0:02:59.680 --> 0:03:02.400 and then add an active overlayer, drivetive overlays something too 0:03:02.440 --> 0:03:05.959 specific to their outcome demands or where their solution for 0:03:06.000 --> 0:03:08.200 their problem happens to be. Those are going to survive. 0:03:08.480 --> 0:03:11.320 But that's very, very different than what the traditional lasset 0:03:11.320 --> 0:03:13.920 manager is doing today. So what is in your mind 0:03:14.240 --> 0:03:18.760 what the traditional asset manager is doing today, presuming that 0:03:18.800 --> 0:03:21.160 their money can come in and stay, that they don't 0:03:21.160 --> 0:03:23.799 have to be competitive on fees, that they don't have 0:03:23.919 --> 0:03:27.360 to do anything different than what a passive can do 0:03:27.520 --> 0:03:30.520 for them. UM, I think it's problematic because at some 0:03:30.639 --> 0:03:32.560 point when the fees are as high as they have 0:03:32.600 --> 0:03:35.560 been historically. UM, if you can get close to that, 0:03:35.640 --> 0:03:37.920 you don't have to worry just about out performance. You're 0:03:37.920 --> 0:03:40.640 not just trying to beat the passive index. You've got 0:03:40.640 --> 0:03:43.400 to do more than that too, you know, make sure 0:03:43.440 --> 0:03:45.800 that you're getting your fee and you're earning your fee 0:03:45.800 --> 0:03:48.800 if you will. And I think the the onselte of 0:03:48.800 --> 0:03:52.600 technology where so many individual investors, even institutional investors, can 0:03:52.640 --> 0:03:54.520 do a lot of this stuff on their computer, and 0:03:54.560 --> 0:03:55.880 they can play with e t f s and they 0:03:55.880 --> 0:03:59.680 can play with passive products to build portfolios themselves. There's 0:03:59.720 --> 0:04:02.640 a lot of uh intelligence if you will available to 0:04:02.720 --> 0:04:05.000 these folks. Now you have to do something different, and 0:04:05.040 --> 0:04:07.720 it has to be the unique brain power maybe of 0:04:07.760 --> 0:04:10.400 your investment teams to deliver something they can't do on 0:04:10.440 --> 0:04:12.600 their own. Just to stick with some of the things 0:04:12.640 --> 0:04:14.480 that have been in the news recently, talked about some 0:04:14.520 --> 0:04:16.760 of the big tech companies that have come under a 0:04:16.839 --> 0:04:20.719 scrutiny both by regulators and individuals worried about privacy concerns. 0:04:20.839 --> 0:04:23.719 As head of investments overseeing six hundred and thirty four 0:04:23.760 --> 0:04:27.280 billion dollars, have you personally pressured anyone or would you 0:04:27.600 --> 0:04:30.720 change allocations as the results of some of these regulatory issues. 0:04:31.200 --> 0:04:33.400 I have not. I have a really good team and 0:04:33.440 --> 0:04:35.440 I'm going to let them allocate as they see fit. 0:04:35.560 --> 0:04:37.920 But I will suggest there's a short term view on tech, 0:04:38.040 --> 0:04:40.839 which would be around things like the regulation and whatnot, 0:04:41.040 --> 0:04:44.159 and then there's a long term view. Technology is where 0:04:44.200 --> 0:04:47.680 the world is going. Everything that isn't tech driven is 0:04:47.720 --> 0:04:50.320 going to be. I have three children heading into college. 0:04:50.320 --> 0:04:53.960 I hope they all study computer science and math and programming. 0:04:54.240 --> 0:04:56.920 Glad my son played well at Minecraft. Right, we need 0:04:56.960 --> 0:05:00.280 to be focused on tech so um that the long 0:05:00.400 --> 0:05:02.520 term play is to be to be into that sector 0:05:02.600 --> 0:05:05.239 and into it big. But you have to pick and choose, 0:05:05.480 --> 0:05:07.359 and I think there's timing and that is one of 0:05:07.400 --> 0:05:09.720 the dynamic natures of what you do. An active management 0:05:09.800 --> 0:05:12.360 is figuring out how to play mean Google. No one 0:05:12.400 --> 0:05:14.960 would have seen that coming necessarily long term. Would you 0:05:14.960 --> 0:05:17.839 be a a Google buyer? Of course you would, But 0:05:18.240 --> 0:05:20.719 should you be coming in and out based on the 0:05:20.760 --> 0:05:23.640 things that are hitting it as an industry in the meantime? Absolutely, 0:05:24.160 --> 0:05:26.159 Sunny Harford, I wish we had an hour with you. 0:05:26.200 --> 0:05:27.720 Thank you so much for being Thanks for having me. 0:05:27.760 --> 0:05:29.600 It's great to talk to you guys. Sunny Harvard has 0:05:29.600 --> 0:05:32.039 head of Investments at UBS Asset Management, over seeing six 0:05:32.400 --> 0:05:34.760 and thirty four billion dollars, talking about some of the 0:05:34.800 --> 0:05:53.320 massive changes underway in the investment management industry. We are 0:05:53.480 --> 0:05:56.800 broadcasting live from the Bloomberg Investor New York conference at 0:05:57.080 --> 0:05:59.880 the company's headquarters here at seven thirty one, lexing to 0:06:00.040 --> 0:06:03.960 in a big question hanging over all of the attendees 0:06:04.000 --> 0:06:06.160 here is what is going on with trade? Why are 0:06:06.200 --> 0:06:10.440 we seeing such tensions rising at this point in escalating 0:06:10.600 --> 0:06:13.200 at this moment in time. I am so pleased to 0:06:13.279 --> 0:06:16.280 welcome somebody who worked with the World Bank for many years. 0:06:16.320 --> 0:06:18.960 Somebody who worked at JP Morgan UH and founded her 0:06:18.960 --> 0:06:22.760 own firm. We're talking about Asfana best Loss and she 0:06:22.839 --> 0:06:26.159 is founder and chief executive officer of Rock Creek Group. 0:06:26.320 --> 0:06:30.960 Joining us here, Assana, it's really interesting to me that 0:06:31.120 --> 0:06:35.840 these trade tensions are ramping up now why. I think 0:06:35.839 --> 0:06:38.520 it's very interesting what you said. Just historically, I was 0:06:38.600 --> 0:06:41.360 teaching international trade a long time ago at Talksford many 0:06:41.400 --> 0:06:43.960 many years ago, and I was still a student, and 0:06:44.040 --> 0:06:46.960 it's the theory of trade was about comparative advantage. That 0:06:47.080 --> 0:06:49.320 we all sell goods to each other based on comparative 0:06:49.360 --> 0:06:51.280 advantage in the world will be a better place. Where 0:06:51.279 --> 0:06:53.359 we are in a very different place today. And I 0:06:53.360 --> 0:06:55.840 think what has been really interesting is how in the 0:06:55.920 --> 0:07:01.120 last twenty years China has um basically been incredibly smart 0:07:01.160 --> 0:07:05.480 in taking advantage of trade laws to grow its economy 0:07:05.640 --> 0:07:08.240 and it's trade with the rest of the world. Now 0:07:08.279 --> 0:07:12.920 where we are today is a world where UM China 0:07:13.080 --> 0:07:19.760 has a lot of unilateral advantages one way UH. And therefore, 0:07:19.960 --> 0:07:22.320 I think we look at the US right now and 0:07:22.360 --> 0:07:25.920 a lot of the presses about the US China trade war, 0:07:26.360 --> 0:07:28.800 but if you look at it that same sort of 0:07:29.040 --> 0:07:31.520 quiet wars going on in Europe, it's going on in 0:07:31.560 --> 0:07:36.240 emerging markets where really the same issues are in existence, 0:07:36.840 --> 0:07:39.840 and so U it's the one topic that seems to 0:07:39.840 --> 0:07:43.360 be unifying the world against China. What do you think 0:07:43.480 --> 0:07:46.280 China is really looking for as they sit down with 0:07:46.320 --> 0:07:48.040 the United States or not sit down right right right 0:07:48.040 --> 0:07:50.120 now in terms of trade, um, what do you think 0:07:50.200 --> 0:07:52.920 is realistic from Chinese perspective that they want to get 0:07:52.960 --> 0:07:56.840 from the US. I think China would, in an ideal world, 0:07:57.120 --> 0:07:59.120 do things the way they have been doing for a 0:07:59.120 --> 0:08:02.280 long time, which is make the right sounds, make the 0:08:02.360 --> 0:08:06.520 right noises, imply that they're going to agree, but continue 0:08:06.680 --> 0:08:09.720 with the way they have always done things, which is 0:08:09.760 --> 0:08:12.920 their way. And it doesn't appear that that's that is 0:08:13.000 --> 0:08:15.200 that can be the status quot aly longer, it's exactly. 0:08:15.240 --> 0:08:17.400 I think they tried that in the last meeting and 0:08:17.480 --> 0:08:19.960 that did not work. I think also trade seems to 0:08:20.000 --> 0:08:24.480 be covering also intellectual property rights, which is sort of 0:08:24.640 --> 0:08:28.360 a huge topic obviously for the US UH, but it's 0:08:28.440 --> 0:08:30.640 kind of subsumed when we talk about trade. I think 0:08:30.680 --> 0:08:32.679 that a lot of the discussions that are going on 0:08:32.880 --> 0:08:36.760 between the leaders in China and the US is about 0:08:36.800 --> 0:08:40.000 that topic as well. So your background is fascinating because 0:08:40.000 --> 0:08:43.640 if you advised central bankers and for administers, you've invested 0:08:43.720 --> 0:08:45.960 assets on behalf of the World Bank. And I'm wondering 0:08:46.000 --> 0:08:48.559 if there's an irony baked in to these trade tensions 0:08:48.559 --> 0:08:50.320 that the more they heat up, the more likely it 0:08:50.400 --> 0:08:52.719 is the central banks will cut rates, and that will 0:08:52.760 --> 0:08:55.760 be great for emerging markets, It'll be great for riskier 0:08:55.800 --> 0:08:58.680 assets on a longer period of time. What do you 0:08:58.720 --> 0:09:01.560 say to that argument, um, I think we are now 0:09:01.600 --> 0:09:04.079 at the point in the um in the U s 0:09:04.120 --> 0:09:08.480 economy where it might be too early to to start 0:09:08.559 --> 0:09:12.280 cutting rates. Um. Given where we are with employment and 0:09:12.760 --> 0:09:15.040 given where we are with the rest of our economic growth, 0:09:15.040 --> 0:09:18.720 recession is a possibility. We're starting to slow down. But 0:09:18.840 --> 0:09:22.560 as we heard also this morning from Governor Powell, he's 0:09:22.600 --> 0:09:25.280 being very careful. He's watching the same thing everybody else 0:09:25.400 --> 0:09:28.000 is watching. And he did not, at least I didn't 0:09:28.040 --> 0:09:30.000 hear him commit one way or another. He was very 0:09:30.000 --> 0:09:32.520 careful in what he said. I think a lot of 0:09:32.559 --> 0:09:36.000 what the market is thinking is that to rate cuts 0:09:36.080 --> 0:09:39.880 in the US are baked in, and uh, it seems 0:09:39.920 --> 0:09:42.480 to a lot of people. Uh, you know, there is 0:09:42.520 --> 0:09:45.320 sort of a theory being floated out there. Why are 0:09:45.360 --> 0:09:49.160 we having these discussions about trade UM and having the 0:09:49.160 --> 0:09:52.920 tweets on Mexico having having the trade war with Europe 0:09:52.960 --> 0:09:56.000 going on at the same time as with UM with China, 0:09:56.640 --> 0:09:59.720 And would that be something that the president might be 0:09:59.720 --> 0:10:02.600 trying to get interest rates down a little faster because 0:10:02.640 --> 0:10:06.240 since the Fed is an independent decision maker, but would 0:10:06.280 --> 0:10:08.720 lower rates? If the Fed does cut rate, will that 0:10:08.800 --> 0:10:11.760 be supportive of equities at this point in the credit cycle. 0:10:12.320 --> 0:10:15.040 It could in the very very short run, But it's 0:10:15.160 --> 0:10:19.280 I think if you're looking at UM, why UM? Why UM? 0:10:19.320 --> 0:10:21.520 If you are a presidential candidate, you would want the 0:10:21.640 --> 0:10:24.280 rates to be lower? Is that Obviously it will impact 0:10:24.320 --> 0:10:27.600 equity markets, but also it's a very big positive marks 0:10:27.640 --> 0:10:31.640 for other things in industry and people who are hiring UM. 0:10:31.720 --> 0:10:36.960 So it helps UM hiring policies, It helps the broader 0:10:37.000 --> 0:10:41.280 investment income by companies, and of course UM equity markets 0:10:41.280 --> 0:10:44.040 which are all interconnected, one on the one with the other. 0:10:44.400 --> 0:10:46.680 So I've sound is there any call here? I know 0:10:46.760 --> 0:10:49.559 you're from new firm. Rock Crey Group has an interest 0:10:49.600 --> 0:10:53.199 in emerging markets, but given all the trade uncertainty, is 0:10:53.240 --> 0:10:55.120 it too risky to kind of go to emerging markets 0:10:55.200 --> 0:10:58.720 these days? I think emerging markets still are among the 0:10:58.760 --> 0:11:01.600 best places for value you and for investing. The reason 0:11:01.679 --> 0:11:04.760 for that is that two things. One is growth is 0:11:04.800 --> 0:11:07.880 fastest in emerging markets right now, whether we're looking at 0:11:07.920 --> 0:11:12.560 financial sector, energy sector, technology, etcetera. And a lot of 0:11:12.600 --> 0:11:14.680 the things that are holding us back here, you know, 0:11:14.679 --> 0:11:17.360 whether it's our infrastructure, whether it's our banking system, whether 0:11:17.400 --> 0:11:20.760 it's our payment systems that are very rigid and very old, 0:11:21.360 --> 0:11:25.280 um and very underdeveloped. When you go to emerging markets, 0:11:25.280 --> 0:11:27.880 they're setting all these things up there, not just building roads, 0:11:27.960 --> 0:11:31.320 they're also setting up payment systems. So if their banks 0:11:31.360 --> 0:11:35.920 can be um leap frogging and jump ahead, UH, they 0:11:35.960 --> 0:11:38.840 will be very interesting. And there are actually very interesting 0:11:38.880 --> 0:11:43.560 places to invest, whether it is an education company in India, UH, 0:11:43.679 --> 0:11:48.640 serving the rural poor by the way and making returns um. So, 0:11:48.679 --> 0:11:51.079 I think what you will see in emerging market is 0:11:51.080 --> 0:11:53.600 a move away from just sort of a flow of 0:11:53.720 --> 0:11:57.360 assets into ETFs and much more looking for really good 0:11:57.400 --> 0:12:02.679 local companies UH that have potential growth outstanding Asana bush Laws, 0:12:02.800 --> 0:12:05.120 thank you so much for joining us. We really appreciate 0:12:05.160 --> 0:12:07.559 you taking the time here. Asana is a founder in 0:12:07.640 --> 0:12:10.520 chief executive officer of Rock Creek Group. Joining us here 0:12:10.600 --> 0:12:31.560 live in Bloomberg. Well. Earlier today, FED Chair Jerome Powell spoke, 0:12:31.679 --> 0:12:34.720 and traders heard what they wanted to hear. He said, uh, 0:12:34.760 --> 0:12:38.520 that he remained open to anything that was necessary to 0:12:38.559 --> 0:12:41.320 support the economy. People took that as either a rate 0:12:41.360 --> 0:12:44.480 cut or holding steady. Basically, Marcus had a little blip 0:12:44.480 --> 0:12:46.400 and then went back to where they were before. Here. 0:12:46.400 --> 0:12:48.719 Did it pass through all of the Fed speak we've 0:12:48.760 --> 0:12:51.520 been hearing and what that means for federate cuts? Chris Low, 0:12:51.880 --> 0:12:56.400 chief economist for FTN Financial, joining us from New York. Chris, 0:12:56.440 --> 0:13:00.320 you have almost three decades of experience watching them markets 0:13:00.320 --> 0:13:03.160 and listening to FED officials. What do you take from 0:13:03.160 --> 0:13:07.160 Fed chaired room palace comments today That they remain open, 0:13:07.240 --> 0:13:09.680 that they're they're watching, that they're paying attention, that they're 0:13:09.679 --> 0:13:13.319 listening to markets. But ultimately the economic data is what's 0:13:13.320 --> 0:13:18.760 going to drive their decisions. Yeah. I think that nails it. Really. Uh. 0:13:19.040 --> 0:13:23.200 Most important thing is that the door at least is 0:13:23.280 --> 0:13:26.640 open to a discussion. I think the FED has gotten 0:13:26.679 --> 0:13:30.040 into a funny place in the last couple of years 0:13:30.280 --> 0:13:34.600 where they feel constrained in what they can do in 0:13:34.640 --> 0:13:39.520 these meetings based on their own commentary, which you know, 0:13:39.720 --> 0:13:45.040 establish as expectations for the meeting in advance. Uh, we're 0:13:45.080 --> 0:13:47.960 not expecting a rate cut in June, because no one 0:13:48.040 --> 0:13:51.720 other than Jim Bullard is talking about the possibility. But 0:13:52.360 --> 0:13:54.720 you know, if you look at the yield curve, they're 0:13:54.960 --> 0:13:59.040 way behind the curve like I've never seen in the 0:13:59.160 --> 0:14:03.120 thirty years been doing this behind the curve, which means 0:14:03.160 --> 0:14:05.360 if they don't cut at this meeting, they'll have to 0:14:05.400 --> 0:14:08.680 cut it one of the next couple of meetings. And 0:14:08.800 --> 0:14:12.719 in the meantime, we heard from Jim from Charles Evans 0:14:12.720 --> 0:14:17.719 this morning, he's the Chicago FED president, told CNBC, I 0:14:17.800 --> 0:14:23.160 just don't see what the market sees, and you know, 0:14:23.160 --> 0:14:27.680 I think that pretty well sums it up. Although in fairness, Chris, 0:14:28.160 --> 0:14:30.720 I'm sorry, but it's really interesting going because this is 0:14:30.760 --> 0:14:32.880 another instance where you can hear what you want to hear, 0:14:32.880 --> 0:14:35.840 because Charles Evans, Charlie Evans, he came out and he said, 0:14:36.080 --> 0:14:39.000 we're not seeing what the market seeing, but the market 0:14:39.040 --> 0:14:41.840 may be signaling something important to us. We're paying attention. 0:14:41.880 --> 0:14:43.680 I mean again, you can take what you want to 0:14:43.680 --> 0:14:46.040 take from all of these comments. No one that that's 0:14:46.080 --> 0:14:50.160 exactly right. But at the same time, how can they 0:14:50.240 --> 0:14:52.760 not see it? You know, one and a half percent 0:14:52.800 --> 0:14:57.840 inflation here, inflation falling in China, falling through Asia, falling 0:14:57.920 --> 0:15:04.080 in Europe. UH. Of Australia cutting rates this morning because 0:15:04.120 --> 0:15:08.840 of fallout from the China slowdown. The global p m I, 0:15:08.960 --> 0:15:12.840 according to Bloomberg this morning, fell below fifty for the 0:15:12.920 --> 0:15:15.760 first time in years. Uh. You know that there is 0:15:15.800 --> 0:15:21.080 a hard slowdown, partly because of you know, the trade 0:15:21.120 --> 0:15:24.360 fight that's been ongoing for a couple of years. It's 0:15:24.520 --> 0:15:27.000 very unlikely we're going to get a resolution at the 0:15:27.080 --> 0:15:30.920 G twenty UH. And the Fed has sort of raised 0:15:30.960 --> 0:15:36.760 the bar right low inflation is no longer enough reason 0:15:36.840 --> 0:15:41.560 to cut rates. Mary Daily, San Francisco FED President, suggesting 0:15:41.640 --> 0:15:45.840 yesterday the bar is preventing recession and she doesn't see 0:15:45.840 --> 0:15:50.560 a recession yet, so no need to cut. So you 0:15:51.320 --> 0:15:56.080 wonder this happened to the two percent inflation target, right? So, 0:15:56.200 --> 0:15:58.160 I mean so one of the criticisms on this FED 0:15:58.280 --> 0:16:01.320 is that it has been beholden to the markets are 0:16:01.320 --> 0:16:02.800 being led by the markets. Do you think that's a 0:16:02.840 --> 0:16:09.640 fair criticism. Uh? No, I think what what's going on 0:16:09.800 --> 0:16:14.360 is there behind the markets. So, for example, when Evans said, hey, 0:16:14.840 --> 0:16:18.920 you know, consumers are still in great shape. We had 0:16:19.000 --> 0:16:22.640 real income growth X transfers in the first quarter of 0:16:22.720 --> 0:16:25.760 point one percent at an annual rate. We had the 0:16:25.800 --> 0:16:31.760 weakest consumption since April, retail sales for negative what's great 0:16:31.760 --> 0:16:39.000 about that? I think unfortunately they're just not really paying attention. Uh. 0:16:39.080 --> 0:16:41.280 And as a result, they're not being led by the 0:16:41.400 --> 0:16:45.160 markets so much as that the markets beating them over 0:16:45.200 --> 0:16:49.160 the head until they pay attention to the data. So, Chris, 0:16:49.320 --> 0:16:52.720 you know you've been an incredibly accurate forecaster of where 0:16:52.760 --> 0:16:54.880 industrates are going to go. And right now we're looking 0:16:55.160 --> 0:16:58.320 at the market pricing in an eighty eight percent chance 0:16:58.360 --> 0:17:01.880 at the Federal Reserve will cut by their September eight meeting. 0:17:01.880 --> 0:17:03.720 I'm looking right now at a two year yield at 0:17:03.760 --> 0:17:07.280 one Where do you see that two year olds going 0:17:07.640 --> 0:17:11.280 by your end? Well, you know what's what's really interesting 0:17:11.560 --> 0:17:15.600 is the move today when uh Powell opened the door, 0:17:16.640 --> 0:17:19.359 as you said, to a discussion of the possibility of 0:17:19.400 --> 0:17:24.720 maybe thinking about right uh And and we see the 0:17:24.840 --> 0:17:29.560 two year yield is eight basis points higher today. Um. Now, 0:17:29.600 --> 0:17:32.480 that's that's partly reflecting, you know, a four hundred and 0:17:32.680 --> 0:17:36.639 twenty five point rise in the Dow. But both of 0:17:36.640 --> 0:17:39.040 those together, along with the move that you see in 0:17:39.119 --> 0:17:43.280 oil in gold, is the market saying okay, at least 0:17:43.280 --> 0:17:46.119 they're thinking about it. That means recession risk is a 0:17:46.160 --> 0:17:50.200 little bit lower. Uh. I think if they do actually cut, 0:17:50.800 --> 0:17:54.160 than what we'll see is that market interest rates will 0:17:54.240 --> 0:17:57.159 start to rise. They probably have to cut fifty to 0:17:57.359 --> 0:18:03.840 effectively move move the market in a significant way. Um, 0:18:03.880 --> 0:18:06.640 But I think fifty basis points this year now is 0:18:06.640 --> 0:18:11.439 is a pretty reasonable expectation. Paul. It's so incredible the 0:18:11.600 --> 0:18:15.840 cut rates, which will lead to higher rates. That's right. Well, 0:18:16.160 --> 0:18:18.600 and think about it. The refusal to cut is why 0:18:18.720 --> 0:18:21.880 rates are false. Right? Rates so so so, Chris. I mean, 0:18:22.119 --> 0:18:24.280 you know they've been talking about that, the low inflation 0:18:24.320 --> 0:18:26.680 that you mentioned earlier, the fet is insisting that it's 0:18:26.720 --> 0:18:29.680 not real, that it's transitory. What do you think forms 0:18:30.400 --> 0:18:35.080 the basis of that argument? Well, I think it's actually, 0:18:35.200 --> 0:18:37.399 on the face of it, it's kind of reasonable. What 0:18:37.440 --> 0:18:41.119 they do is they divide up all the thousands of 0:18:41.240 --> 0:18:44.919 components that go into the price measure into cyclical and 0:18:45.200 --> 0:18:48.960 a cyclical things. Uh, the price declines this year are 0:18:49.040 --> 0:18:52.840 mostly a cyclical. The problem with the logic is it 0:18:52.960 --> 0:18:56.639 falls apart if you look back. We've got seven years 0:18:56.720 --> 0:19:00.760 now with only one month at two per sent Everything 0:19:00.800 --> 0:19:05.240 else is below. And last year the cyclical components fell 0:19:06.200 --> 0:19:10.320 while the acyclical components rose. The average is running at 0:19:10.359 --> 0:19:13.439 about one seventy five. The target is supposed to be 0:19:13.520 --> 0:19:18.840 symmetrical at two. So I understand where Powell is coming from, 0:19:18.880 --> 0:19:21.360 but I think it's it's kind of a short, uh 0:19:21.680 --> 0:19:25.440 decided argument, right, Chris Low, thank you so much for 0:19:25.520 --> 0:19:27.919 joining us. Chris is the chief economist for FT and 0:19:27.920 --> 0:19:45.160 Financial based in York, joining us on on the phone. Yesterday. 0:19:45.280 --> 0:19:48.320 The NASDAC in particular was tumbling, and it wasn't because 0:19:48.359 --> 0:19:51.680 of trade concerns. It was because US regulators were said 0:19:51.720 --> 0:19:53.879 to be setting their sights on a big tech for 0:19:54.119 --> 0:19:58.120 possible antitrust lawsuits. Join us now to discuss what those 0:19:58.160 --> 0:20:01.320 could potentially look like. Is US or Chris Sakers? He 0:20:01.520 --> 0:20:05.760 is the professor at Cleveland State University focusing on the law. 0:20:06.160 --> 0:20:08.639 Professor Sakers, thank you so much for joining us. You know, 0:20:08.720 --> 0:20:13.200 given your experience, what would a potential antitrust suit against 0:20:13.280 --> 0:20:19.480 Google or Facebook look like? Yeah, Hi, thank you. Um So, Uh, 0:20:19.760 --> 0:20:21.560 let me just say, first of all, I think everything 0:20:21.640 --> 0:20:24.640 is so hard to predict uh in this news that's 0:20:24.640 --> 0:20:27.360 come out over the weekend. Um. You know, I've been 0:20:27.400 --> 0:20:29.800 watching this law for a long time, and it used 0:20:29.840 --> 0:20:32.040 to feel like the agencies were at least a little 0:20:32.040 --> 0:20:35.119 bit predictable. After the last couple of years with the 0:20:35.119 --> 0:20:39.760 Trump administration, I have found the agencies uh pretty inscrutable, 0:20:39.760 --> 0:20:42.320 pretty hard to say exactly what they're gonna do or 0:20:42.359 --> 0:20:45.480 where they're heading. Um, on these cases, let's just say 0:20:45.520 --> 0:20:47.760 they do bring an antitrust case. I mean, I presume 0:20:48.280 --> 0:20:51.520 we're looking at what in in u s antitrust law 0:20:51.560 --> 0:20:56.399 we call monopolization case, meaning, uh, the government would sue 0:20:56.440 --> 0:21:01.520 Facebook or Google or another platform claim that through unilateral conduct, 0:21:01.600 --> 0:21:06.720 just through its own, uh deliberate conduct to exclude other competitors, 0:21:06.800 --> 0:21:11.600 it's gotten a monopoly position. Um. You know. The uh 0:21:12.240 --> 0:21:14.520 so far as I'm where, nobody knows exactly what the 0:21:14.520 --> 0:21:19.200 government's theory against say, Google would be, but everybody's presuming 0:21:19.240 --> 0:21:22.760 it's the same theory that the FTC wants looked at 0:21:22.840 --> 0:21:26.240 with respect to Google, that the European Commission UH looked 0:21:26.240 --> 0:21:30.000 at and actually found found a violation on UM, and 0:21:30.040 --> 0:21:34.800 that is that Google tweaks its search results to disadvantage 0:21:34.800 --> 0:21:38.040 its own competitors. So I think that's what it's going 0:21:38.080 --> 0:21:41.399 to look like. UM. I don't think anybody could really 0:21:41.480 --> 0:21:44.840 say right now whether a lawsuit like that could win, 0:21:45.720 --> 0:21:49.640 but probably most people agree that it's UH somewhat unorthodox. 0:21:49.680 --> 0:21:52.960 Would be a pretty pretty tough road to home. So, Professor, 0:21:53.000 --> 0:21:54.840 one of the issues that I know investors are are 0:21:54.920 --> 0:21:57.800 asking is just one of timing. It seems historically the 0:21:57.880 --> 0:22:00.639 U s regulars have taken a very light touch to 0:22:01.240 --> 0:22:04.520 US technology, whereas maybe some of the European counterparts have 0:22:04.560 --> 0:22:07.720 been more aggressive. Why do you think we're getting so 0:22:07.800 --> 0:22:10.560 many calls from so many different areas within the the 0:22:10.680 --> 0:22:12.120 US to take a look at some of these big 0:22:12.160 --> 0:22:15.160 tech companies. Yeah it, UM, I mean again, it's it's 0:22:15.240 --> 0:22:17.000 kind of a mystery to me. I don't know what's 0:22:17.040 --> 0:22:21.200 going on. UM. I humbly believe that there may be 0:22:21.320 --> 0:22:25.080 a bit of an overreaction to news over the weekend. UM. 0:22:25.119 --> 0:22:27.280 You know, the government itself has not said that it's 0:22:27.359 --> 0:22:32.520 investigating anybody, that it's even begun an investigation. Um, And 0:22:32.760 --> 0:22:35.120 I'm just not sure what's going to happen. But there's 0:22:35.160 --> 0:22:39.440 no obvious reason that it should be these suits, uh now, 0:22:40.280 --> 0:22:44.440 particularly given that this administration really hasn't brought much anti 0:22:44.440 --> 0:22:49.959 trust enforcement against anybody else. So, Professor Sagers, you've testified 0:22:50.560 --> 0:22:54.000 extensively about anti trust cases in front of Congress and 0:22:54.000 --> 0:22:57.879 different regulatory authorities. What would you recommend? I mean, do 0:22:57.920 --> 0:23:01.639 you think there is a legitimate anti trust case that 0:23:01.760 --> 0:23:05.199