1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: And we may not have an overall recession, we're having 3 00:00:04,400 --> 00:00:06,760 Speaker 2: a rolling recession. Econm of roll looks pretty strongly. It 4 00:00:06,800 --> 00:00:07,640 Speaker 2: is when it comes to jobs. 5 00:00:07,720 --> 00:00:09,840 Speaker 1: The financial stories that shape our world. 6 00:00:09,960 --> 00:00:13,640 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,440 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,000 Speaker 2: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 1: Through the eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,560 --> 00:00:25,279 Speaker 2: Debro Lair of the Paulson Institute, well then Hubbard of 12 00:00:25,280 --> 00:00:26,280 Speaker 2: the Columbia Business School. 13 00:00:26,280 --> 00:00:31,000 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio Momentum. 14 00:00:31,360 --> 00:00:34,320 Speaker 2: Donald Trump has it, Netflix has it, US economy has it, 15 00:00:34,560 --> 00:00:36,920 Speaker 2: and China is trying to get it back. This is 16 00:00:36,920 --> 00:00:40,800 Speaker 2: Bloomberg Wall Street Week. I'm David Weston. This week former 17 00:00:40,840 --> 00:00:43,360 Speaker 2: Treasury Secretary Bob Rubin on the need to get the 18 00:00:43,479 --> 00:00:45,160 Speaker 2: US fiscal house in order. 19 00:00:45,360 --> 00:00:48,360 Speaker 3: Once you get to legislating, there isn't the will. There's 20 00:00:48,400 --> 00:00:52,520 Speaker 3: a lot of talk, but the talk is always divided politically. 21 00:00:52,720 --> 00:00:55,800 Speaker 2: We're him a POORI of HPS Investment Partners on private 22 00:00:55,840 --> 00:00:58,840 Speaker 2: credit trees growing to the sky, and Charmine most of 23 00:00:58,880 --> 00:01:15,640 Speaker 2: our rock money investing into a rising market. Golal Wall 24 00:01:15,640 --> 00:01:19,000 Speaker 2: Street saw some impressive performances this week, as former President 25 00:01:19,000 --> 00:01:22,600 Speaker 2: Trump continued his march to the Republican presidential nomination with 26 00:01:22,680 --> 00:01:26,040 Speaker 2: a big win in New Hampshire, even as his remaining rival, 27 00:01:26,160 --> 00:01:29,120 Speaker 2: former UN investor Nikki Haley, said, not so fast. 28 00:01:29,880 --> 00:01:32,320 Speaker 4: This race is far from over. 29 00:01:32,480 --> 00:01:35,000 Speaker 5: There are dozens of states. 30 00:01:34,560 --> 00:01:35,240 Speaker 6: Left to go. 31 00:01:35,840 --> 00:01:39,360 Speaker 2: Netflix showed that not all streaming businesses are troubled as 32 00:01:39,360 --> 00:01:43,240 Speaker 2: it posted big fourth quarter wins on subscribers and on revenue. 33 00:01:43,360 --> 00:01:46,840 Speaker 7: We're really thrilled with our engagement trends domestically, Anglibly, our 34 00:01:46,920 --> 00:01:50,400 Speaker 7: engagement is a bit impacted by our paid sharing. Think 35 00:01:50,440 --> 00:01:54,440 Speaker 7: about it, like fewer households using the same account. So 36 00:01:54,560 --> 00:01:56,560 Speaker 7: as those folks spin off and get their own accounts 37 00:01:56,560 --> 00:01:59,760 Speaker 7: and we win them over with our programming, that will 38 00:02:00,080 --> 00:02:01,440 Speaker 7: normalize and continue to grow. 39 00:02:01,840 --> 00:02:04,200 Speaker 2: Even as the streaming giant moved into the world of 40 00:02:04,360 --> 00:02:07,680 Speaker 2: live entertainment with a big deal with the WWE. 41 00:02:07,840 --> 00:02:09,880 Speaker 8: We're pleased with the deal and we love the fact 42 00:02:10,120 --> 00:02:12,120 Speaker 8: that Netflix was willing to take a bet on us 43 00:02:12,280 --> 00:02:14,880 Speaker 8: for us with raw it was yet another test of 44 00:02:14,960 --> 00:02:16,600 Speaker 8: someone new in the space. 45 00:02:16,520 --> 00:02:18,560 Speaker 2: Obviously an established. 46 00:02:17,960 --> 00:02:21,520 Speaker 8: Streaming entity, the streaming entity, if you will. It was 47 00:02:21,560 --> 00:02:23,639 Speaker 8: a good bet by us, and we think a good 48 00:02:23,680 --> 00:02:24,239 Speaker 8: bet by them. 49 00:02:24,919 --> 00:02:28,320 Speaker 2: China recognized that it needed to get some momentum back 50 00:02:28,560 --> 00:02:31,440 Speaker 2: by cutting its bank reserve requirement ratio in a bid 51 00:02:31,480 --> 00:02:32,799 Speaker 2: to boost its economy. 52 00:02:33,240 --> 00:02:35,919 Speaker 9: There is still a sufficient room for China's monetary policy 53 00:02:35,960 --> 00:02:37,800 Speaker 9: in the next stage, and we will. 54 00:02:37,639 --> 00:02:40,480 Speaker 10: Continue to strike a balance between short term and long term, 55 00:02:40,639 --> 00:02:42,600 Speaker 10: between stable growth and risk prevention. 56 00:02:42,880 --> 00:02:46,120 Speaker 2: But the US economy continued to show its strong momentum 57 00:02:46,120 --> 00:02:49,959 Speaker 2: with surprisingly robust GDP growth numbers for the fourth quarter. 58 00:02:50,440 --> 00:02:52,919 Speaker 6: Well, we got to look at GDP first, because that's 59 00:02:52,960 --> 00:02:56,360 Speaker 6: what everybody has been watching, up by three point three percent, 60 00:02:56,400 --> 00:02:57,880 Speaker 6: a significantly. 61 00:02:57,280 --> 00:02:59,480 Speaker 4: Higher number than anticipated. 62 00:03:00,760 --> 00:03:03,400 Speaker 2: Equity markets spent most of the week marching higher, with 63 00:03:03,560 --> 00:03:05,359 Speaker 2: just a little bit of a sell off on Friday. 64 00:03:05,520 --> 00:03:07,160 Speaker 2: For the week, the S and P five hundred was 65 00:03:07,200 --> 00:03:10,240 Speaker 2: up just over one percent, ending up at forty eight ninety, 66 00:03:10,320 --> 00:03:13,440 Speaker 2: which is only sixty points away from the median consensus 67 00:03:13,560 --> 00:03:16,160 Speaker 2: estimate of the Bloomberg else for the end of the year, 68 00:03:16,480 --> 00:03:19,440 Speaker 2: the NASAC roads just under one percent, and the yield 69 00:03:19,440 --> 00:03:22,080 Speaker 2: on the tenure rose just two basis points, tanned up 70 00:03:22,080 --> 00:03:25,120 Speaker 2: at four point one four. Welcome back now, Sarah Malik, 71 00:03:25,320 --> 00:03:27,880 Speaker 2: CIO of neuven to help us sort all this out. So, Sarah, 72 00:03:27,880 --> 00:03:29,760 Speaker 2: thanks so much for being back with us. I guess 73 00:03:29,760 --> 00:03:31,760 Speaker 2: my question is when it comes to equities, what is 74 00:03:31,840 --> 00:03:33,880 Speaker 2: causing all this momentum? It just keeps coming. 75 00:03:35,240 --> 00:03:36,400 Speaker 4: Good to see you, David Well. 76 00:03:36,440 --> 00:03:39,320 Speaker 9: The January effect is in full force CISPA, and it's 77 00:03:39,320 --> 00:03:42,120 Speaker 9: been driven by the Bellweather technology sector. 78 00:03:42,160 --> 00:03:44,480 Speaker 4: There's been three reasons for the rally. 79 00:03:44,800 --> 00:03:49,440 Speaker 9: First, inflation is moderating, Second, the economy remains surprisingly strong, 80 00:03:49,680 --> 00:03:52,040 Speaker 9: and third, expectation for rate cuts. 81 00:03:52,240 --> 00:03:53,960 Speaker 4: Now, we got two out of points this week that 82 00:03:54,040 --> 00:03:55,160 Speaker 4: support that narrative. 83 00:03:55,400 --> 00:03:59,000 Speaker 9: PCEE, which is the Fed's preferred barometer of inflation, came 84 00:03:59,040 --> 00:04:03,120 Speaker 9: as in naziks expected and GDP blue Pass expectations coming 85 00:04:03,120 --> 00:04:05,560 Speaker 9: in at three point three percent. So where do we 86 00:04:05,640 --> 00:04:06,320 Speaker 9: go from here? 87 00:04:06,480 --> 00:04:09,040 Speaker 4: But we have an FMC meeting next week. I think 88 00:04:09,040 --> 00:04:11,040 Speaker 4: the Fed continues to watch and wake. 89 00:04:11,320 --> 00:04:13,880 Speaker 9: There's no reason for them to start talking about rate 90 00:04:13,920 --> 00:04:17,039 Speaker 9: cuts at this point with the economy so strong and 91 00:04:17,200 --> 00:04:20,360 Speaker 9: also with inflation while it's moderating, I'd like I think 92 00:04:20,360 --> 00:04:22,480 Speaker 9: they'd like to see more of a consistent trend. So 93 00:04:22,760 --> 00:04:25,719 Speaker 9: while when we're going past earning season, with forty percent 94 00:04:25,760 --> 00:04:28,159 Speaker 9: of marketcap reporting next week, I think it's going to 95 00:04:28,160 --> 00:04:30,360 Speaker 9: be tough to find a catalyst after that. S and 96 00:04:30,440 --> 00:04:34,039 Speaker 9: P evaluations that are about a twenty percent premium to average. 97 00:04:34,080 --> 00:04:36,279 Speaker 9: I think that's going to be your headwind going forward, 98 00:04:36,480 --> 00:04:38,560 Speaker 9: and that'll cause the rally to peter out eventually. 99 00:04:38,800 --> 00:04:41,120 Speaker 2: So, Sarah, before we get to what comes after, let's 100 00:04:41,120 --> 00:04:43,760 Speaker 2: talk about next week and tech. You mentioned technology being 101 00:04:43,760 --> 00:04:45,800 Speaker 2: a big driver. We've got some big tech names out 102 00:04:45,880 --> 00:04:47,440 Speaker 2: next week. What are you expecting? 103 00:04:47,600 --> 00:04:50,000 Speaker 4: But it's a high bar for earning season in general, 104 00:04:50,120 --> 00:04:51,480 Speaker 4: where consensus. 105 00:04:50,920 --> 00:04:53,800 Speaker 9: Expects earnings to grow by about five percent, And what 106 00:04:53,839 --> 00:04:55,840 Speaker 9: we're seeing is the haves and the have not. So 107 00:04:55,880 --> 00:04:58,719 Speaker 9: the halves are the companies beating sales and earnings, those 108 00:04:58,720 --> 00:05:01,680 Speaker 9: socks are going up two percent. When that happens to 109 00:05:01,800 --> 00:05:04,599 Speaker 9: have nots companies missing on sales and earnings, they're dropping 110 00:05:04,600 --> 00:05:08,960 Speaker 9: by about five percent. So next week, all the megacap companies, Amazon, Apple, 111 00:05:09,040 --> 00:05:11,359 Speaker 9: Alphabet report, I think they are going to be the 112 00:05:11,440 --> 00:05:12,760 Speaker 9: leaders for Ernie's growth. 113 00:05:12,920 --> 00:05:13,920 Speaker 4: But we prefer. 114 00:05:13,960 --> 00:05:17,000 Speaker 9: Amazon and Alphabet over Apple Apple I think still has 115 00:05:17,040 --> 00:05:20,279 Speaker 9: headwinds while Wee coming back into the market could cause 116 00:05:20,320 --> 00:05:23,240 Speaker 9: them to lose market share, and importantly iPhone it fifty 117 00:05:23,240 --> 00:05:26,400 Speaker 9: percent of their profitability has been normalizing to flat unit 118 00:05:26,480 --> 00:05:29,360 Speaker 9: growth hosts the COVID bump. Also, we're worried about their 119 00:05:29,400 --> 00:05:33,120 Speaker 9: app store and the profitability there given regulations. Now Alphabet 120 00:05:33,160 --> 00:05:36,880 Speaker 9: and Amazon, they're benefiting from a cyclical upturn and advertising. 121 00:05:37,040 --> 00:05:39,960 Speaker 9: Also Amazon finally bearing the fruits of their investments in 122 00:05:40,000 --> 00:05:41,080 Speaker 9: their retail business. 123 00:05:41,240 --> 00:05:43,760 Speaker 4: All of that I think positive for Alphabet and Amazon. 124 00:05:44,240 --> 00:05:46,719 Speaker 2: So what about some of the risks, the downside risks 125 00:05:46,720 --> 00:05:49,440 Speaker 2: for equities and particularly are those expectations about raid cuts. 126 00:05:49,640 --> 00:05:51,320 Speaker 2: I mean, there's been a back and forth between the 127 00:05:51,320 --> 00:05:53,400 Speaker 2: Fed and the markets here about what's coming up. What 128 00:05:53,520 --> 00:05:55,480 Speaker 2: is the risk here that, in fact the markets may 129 00:05:55,480 --> 00:05:56,400 Speaker 2: be disappointed. 130 00:05:56,800 --> 00:05:59,480 Speaker 9: I think that's a good risk that is definitely out there. 131 00:05:59,600 --> 00:06:02,320 Speaker 9: Came in twenty twenty four with the market expecting six 132 00:06:02,400 --> 00:06:05,320 Speaker 9: to seven rate cuts this year starting in March. As 133 00:06:05,360 --> 00:06:07,400 Speaker 9: of today, the March rate cut is now a fifty 134 00:06:07,400 --> 00:06:10,040 Speaker 9: to fifty chance, So we're already starting to push those out. 135 00:06:10,160 --> 00:06:12,239 Speaker 9: I don't think we're going to get six rate cuts 136 00:06:12,279 --> 00:06:14,360 Speaker 9: with the economy functioning so strongly. 137 00:06:14,640 --> 00:06:16,599 Speaker 4: Second risk for the market is valuations. 138 00:06:16,640 --> 00:06:19,400 Speaker 9: We came into this year with SMP valuations at about 139 00:06:19,440 --> 00:06:21,200 Speaker 9: twenty percent above average. 140 00:06:21,240 --> 00:06:23,159 Speaker 4: That's going to be a headwin for the markets. And 141 00:06:23,240 --> 00:06:24,640 Speaker 4: also let's take a look at yields. 142 00:06:24,720 --> 00:06:27,280 Speaker 9: The ten year yield now backing up to about four 143 00:06:27,320 --> 00:06:28,239 Speaker 9: point two percent. 144 00:06:28,520 --> 00:06:29,840 Speaker 4: That's a headwind for equities too. 145 00:06:29,920 --> 00:06:32,680 Speaker 9: So that's why I said host earnings a catalyst for 146 00:06:32,720 --> 00:06:33,600 Speaker 9: the next leg up for. 147 00:06:33,560 --> 00:06:36,280 Speaker 4: Equities to cross five thousand on the SMP is hard 148 00:06:36,320 --> 00:06:36,719 Speaker 4: to find. 149 00:06:37,040 --> 00:06:38,599 Speaker 2: Sarah's always such a treat to have you with us 150 00:06:38,640 --> 00:06:40,280 Speaker 2: on Wall Street Week. Thank you for being here at 151 00:06:40,320 --> 00:06:44,400 Speaker 2: Sarah Mallick of neuvene US Equity has had a pretty 152 00:06:44,400 --> 00:06:46,600 Speaker 2: good run in twenty twenty three, which has led some 153 00:06:46,680 --> 00:06:49,040 Speaker 2: people to think about taking some money off the table 154 00:06:49,240 --> 00:06:52,240 Speaker 2: at those high valuations. For a different view, We welcome 155 00:06:52,279 --> 00:06:55,159 Speaker 2: back now Charmin most of aur Rokwani. She's chief investment 156 00:06:55,200 --> 00:06:57,560 Speaker 2: officer of Goldman Sachs Wealth Manager. Great to have you 157 00:06:57,600 --> 00:07:00,280 Speaker 2: back with the Charmine. So let's look at your out 158 00:07:01,240 --> 00:07:03,800 Speaker 2: your outlook, America powers out. We're going to put the 159 00:07:03,880 --> 00:07:05,359 Speaker 2: image up for those who can see it on the 160 00:07:05,360 --> 00:07:09,039 Speaker 2: screen nineteen fifty nine Cadillac one of my favorite cars 161 00:07:09,040 --> 00:07:11,360 Speaker 2: of all time. So give us your sense about why 162 00:07:11,440 --> 00:07:15,000 Speaker 2: you think, boy, it's time to stay with US equities. 163 00:07:14,640 --> 00:07:18,200 Speaker 10: First and foremost. Our view of US pre eminence is intact, 164 00:07:18,440 --> 00:07:20,760 Speaker 10: and that's why we chose that car. It is such 165 00:07:20,800 --> 00:07:23,720 Speaker 10: an American looking car. It's so clear it can't be 166 00:07:23,760 --> 00:07:26,960 Speaker 10: confused with cars from any other place. It also shows 167 00:07:27,360 --> 00:07:31,080 Speaker 10: that America's been pre eminent for quite some time. We 168 00:07:31,160 --> 00:07:34,560 Speaker 10: have a great quote from Bruce Springinstein's song Pink Cadillac 169 00:07:34,640 --> 00:07:38,760 Speaker 10: there where people are saying, oh, after the global financial crisis, 170 00:07:38,800 --> 00:07:42,280 Speaker 10: this was the end of the American century and if 171 00:07:42,280 --> 00:07:44,720 Speaker 10: the century belonged to China. And our view is actually no, 172 00:07:45,200 --> 00:07:48,119 Speaker 10: US pre eminence is going to continue for the long run, 173 00:07:48,560 --> 00:07:50,880 Speaker 10: and that's driven by a number of factoris. But that 174 00:07:50,920 --> 00:07:55,120 Speaker 10: results in great earnings per share growth, very consistent, persistent, 175 00:07:55,200 --> 00:07:57,679 Speaker 10: reliable growth, and that's why one should stay invested. 176 00:07:57,920 --> 00:08:00,560 Speaker 2: So if you look backwards, which you do in your outlook, 177 00:08:00,680 --> 00:08:03,160 Speaker 2: actually you have remarkable numbers. If you take one hundred 178 00:08:03,160 --> 00:08:05,320 Speaker 2: million dollars you correct me if I'm wrong here, back 179 00:08:05,360 --> 00:08:07,440 Speaker 2: in two thousand and nine, it would be worth just 180 00:08:07,520 --> 00:08:11,320 Speaker 2: under a billion dollars today invested in US docs as 181 00:08:11,360 --> 00:08:16,360 Speaker 2: opposed to if you took a developed markets equities non US, 182 00:08:16,760 --> 00:08:20,400 Speaker 2: it would be four hundred million, I believe, and if 183 00:08:20,400 --> 00:08:22,960 Speaker 2: you did it in developing markets it'd be three hundred 184 00:08:22,960 --> 00:08:25,400 Speaker 2: and eighteen. China two hundred and twenty nine million as 185 00:08:25,400 --> 00:08:28,239 Speaker 2: opposed to just under a billion dollars. That's a pretty 186 00:08:28,240 --> 00:08:29,280 Speaker 2: extraordinary performance. 187 00:08:29,960 --> 00:08:32,920 Speaker 10: When we show these numbers to our clients, they are 188 00:08:33,040 --> 00:08:36,400 Speaker 10: so surprised because, as you say, one hundred million would 189 00:08:36,480 --> 00:08:40,040 Speaker 10: be just under a billion dollars just in US equities 190 00:08:40,080 --> 00:08:42,520 Speaker 10: and not even a quarter of that in China. And 191 00:08:42,559 --> 00:08:45,040 Speaker 10: for everybody who thinks of China's growth rate, it goes 192 00:08:45,080 --> 00:08:49,679 Speaker 10: to show that economic growth alone doesn't drive equity markets 193 00:08:49,760 --> 00:08:52,800 Speaker 10: or earnings per share growth. And so that's why when 194 00:08:52,880 --> 00:08:56,280 Speaker 10: we tell clients stay overweight US equities from a strategic 195 00:08:56,320 --> 00:08:59,480 Speaker 10: long term perspective, they look at that data and it's 196 00:08:59,520 --> 00:09:01,320 Speaker 10: easier to persuade them to do that. 197 00:09:01,440 --> 00:09:04,440 Speaker 2: Such an important thing. You said, stay in they could. 198 00:09:04,440 --> 00:09:06,080 Speaker 2: One of the questions is is it time to take 199 00:09:06,120 --> 00:09:08,360 Speaker 2: the money off the table. Because we always hear that 200 00:09:08,400 --> 00:09:12,160 Speaker 2: disclaimer about past performance in future, Why isn't this the 201 00:09:12,160 --> 00:09:13,439 Speaker 2: time to say, oh, you know what I did pretty 202 00:09:13,440 --> 00:09:15,440 Speaker 2: well in equities, I should put the money someplace else. 203 00:09:16,320 --> 00:09:18,760 Speaker 10: So there'd be three places people could put their money. 204 00:09:18,760 --> 00:09:20,679 Speaker 10: One would be you could put your money in non 205 00:09:20,840 --> 00:09:23,920 Speaker 10: US equities. And that is a function of whether you 206 00:09:24,000 --> 00:09:27,280 Speaker 10: think earnings per earnings per share growth will be faster. 207 00:09:27,480 --> 00:09:30,239 Speaker 10: Do you think economic growth is going to be more sustainable. 208 00:09:30,559 --> 00:09:34,640 Speaker 10: Does one think that evaluations are more attractive. Another place 209 00:09:34,640 --> 00:09:37,000 Speaker 10: would be bonds, and another would be cash. And we 210 00:09:37,080 --> 00:09:40,000 Speaker 10: actually make the case that even though the returns for 211 00:09:40,200 --> 00:09:43,640 Speaker 10: US equities relative to all these other assets has been 212 00:09:43,760 --> 00:09:48,000 Speaker 10: outsized since the global financial crisis, we still recommend stay 213 00:09:48,040 --> 00:09:51,200 Speaker 10: with US equities. And the argument there is that, first 214 00:09:51,200 --> 00:09:53,160 Speaker 10: of all, when you're looking at cash and bonds, you're 215 00:09:53,200 --> 00:09:55,760 Speaker 10: going to have substantially lower returns over the long growth. 216 00:09:56,240 --> 00:09:58,880 Speaker 10: Second one is you look at other parts of the world. 217 00:09:59,040 --> 00:10:03,600 Speaker 10: Even though valueations look expensive, you need to adjust for 218 00:10:03,720 --> 00:10:08,720 Speaker 10: sector weights, meaning US SMP five hundred benchmarks have a 219 00:10:08,760 --> 00:10:12,600 Speaker 10: lot more earnings from technology stocks, so you have faster 220 00:10:12,720 --> 00:10:16,280 Speaker 10: growing companies, faster growing earnings for share relative to for example, 221 00:10:16,760 --> 00:10:20,000 Speaker 10: the UK equity market. It's really remarkable s and P 222 00:10:20,160 --> 00:10:23,680 Speaker 10: five hundred when you look at the earnings about thirty 223 00:10:23,679 --> 00:10:27,760 Speaker 10: percent comes from technology. In the UK equity market only 224 00:10:27,840 --> 00:10:31,080 Speaker 10: one percent. So when you're looking at benchmarks, you need 225 00:10:31,120 --> 00:10:34,040 Speaker 10: to adjust for sector weights and then the US is expensive, 226 00:10:34,080 --> 00:10:36,199 Speaker 10: but not that expensive relative to other market. 227 00:10:36,200 --> 00:10:37,920 Speaker 2: That was one of the things I got from your report. 228 00:10:37,920 --> 00:10:40,760 Speaker 2: I had that, folks, because I hear it's expensive. It's expensive. 229 00:10:40,760 --> 00:10:44,120 Speaker 2: It is fully valued. If you look at price earnings 230 00:10:44,240 --> 00:10:46,840 Speaker 2: ratios and things. It's pretty historically it's up there, right, 231 00:10:47,080 --> 00:10:49,360 Speaker 2: it's going to worry bit historically, but you're saying, if 232 00:10:49,400 --> 00:10:50,719 Speaker 2: you really look at the right way, it's not as 233 00:10:50,720 --> 00:10:51,720 Speaker 2: expensive as you think it is. 234 00:10:52,440 --> 00:10:54,720 Speaker 10: Yes, it is correct that it's expensive. So if we 235 00:10:54,720 --> 00:10:57,240 Speaker 10: look at its own history, it's what we call in 236 00:10:57,280 --> 00:11:00,840 Speaker 10: the tenth decign meaning equities have been cheaper ninety percent 237 00:11:00,880 --> 00:11:03,000 Speaker 10: of the time. But when you look at it relative 238 00:11:03,040 --> 00:11:05,920 Speaker 10: to other markets, you can't just look at the price 239 00:11:06,000 --> 00:11:08,760 Speaker 10: to forward earnings. For example, you need to say, well, 240 00:11:09,160 --> 00:11:14,280 Speaker 10: if index has a lot more technology versus another index 241 00:11:14,320 --> 00:11:16,880 Speaker 10: that has a lot more energy and financials, the one 242 00:11:16,920 --> 00:11:19,280 Speaker 10: with a lot of energy and financials will look cheaper, 243 00:11:19,520 --> 00:11:22,320 Speaker 10: but that's only because it has slower earnings growth. Once 244 00:11:22,360 --> 00:11:25,400 Speaker 10: you make that adjustment, these other markets don't appear as cheap. 245 00:11:25,600 --> 00:11:28,280 Speaker 10: Of course China is the exception, but we actually don't 246 00:11:28,280 --> 00:11:31,160 Speaker 10: recommend client clients invest in trying to no matter how cheap. 247 00:11:31,000 --> 00:11:33,720 Speaker 2: It looks, it's not too good. So there are some 248 00:11:33,840 --> 00:11:36,400 Speaker 2: risks in your outlook, and it struck me in looking 249 00:11:36,440 --> 00:11:38,520 Speaker 2: at them, it looks like they're pretty much all either 250 00:11:38,559 --> 00:11:40,480 Speaker 2: geopolitical or straight up political. 251 00:11:41,120 --> 00:11:44,840 Speaker 10: That is correct. We start with the all the things 252 00:11:44,880 --> 00:11:46,880 Speaker 10: going on in the Middle East, so we start with 253 00:11:46,920 --> 00:11:50,200 Speaker 10: the Israel Hamas, or we look at Iran. We're saying, 254 00:11:50,200 --> 00:11:53,000 Speaker 10: what is the risk there? What about Iran Russia relationships? 255 00:11:53,040 --> 00:11:56,560 Speaker 10: What does that mean? So everything related to the Middle 256 00:11:56,600 --> 00:11:59,199 Speaker 10: East is on that list, and fears of escalation. It's 257 00:11:59,200 --> 00:12:01,600 Speaker 10: not as if there's zer or probability of even further 258 00:12:01,720 --> 00:12:05,160 Speaker 10: escalation beyond what we've seen. Obviously, with what's going on 259 00:12:05,240 --> 00:12:08,199 Speaker 10: in the region, risk of terrorism goes up, and then 260 00:12:08,280 --> 00:12:11,840 Speaker 10: domestically in the US we have it as our lowest risk, 261 00:12:11,880 --> 00:12:14,480 Speaker 10: even though people are very concerned about it. We don't 262 00:12:14,520 --> 00:12:18,160 Speaker 10: think this kind of pessimism is warranted. They'll be volatility 263 00:12:18,240 --> 00:12:20,400 Speaker 10: around the elections, but at the end of the day, 264 00:12:20,840 --> 00:12:23,240 Speaker 10: the system of checks and balances in the US and 265 00:12:23,280 --> 00:12:26,080 Speaker 10: the strength of the institutions is what makes the country 266 00:12:26,080 --> 00:12:28,199 Speaker 10: pre eminent. So we think clients need to look past 267 00:12:28,240 --> 00:12:29,880 Speaker 10: that and past that volatility. 268 00:12:30,200 --> 00:12:31,840 Speaker 2: Thank you so much, Sherman. Really great to have you 269 00:12:31,840 --> 00:12:34,280 Speaker 2: back with us as charmian. Most of our ROCKMANI of 270 00:12:34,360 --> 00:12:41,120 Speaker 2: Goldman Sachs coming up. They say US deficits are unsustainable. 271 00:12:41,520 --> 00:12:43,880 Speaker 2: We talk with the man who helped design the last 272 00:12:43,920 --> 00:12:46,959 Speaker 2: serious attempt to deal with the debt and deficits, former 273 00:12:47,000 --> 00:12:51,920 Speaker 2: Treasury Secretary Bob Rubin. That's next on Wall Street Week 274 00:12:52,120 --> 00:12:52,760 Speaker 2: on Bloomberg. 275 00:12:54,280 --> 00:12:58,480 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 276 00:12:58,600 --> 00:13:01,360 Speaker 1: Bloomberg Radio. 277 00:13:06,640 --> 00:13:10,360 Speaker 2: Thirty four trillion dollars. That's what the US government owes 278 00:13:10,400 --> 00:13:14,440 Speaker 2: its creditors, foreign and domestic, and it's only getting worse. 279 00:13:15,160 --> 00:13:17,520 Speaker 4: The problem is that's led us to years and years 280 00:13:17,559 --> 00:13:18,400 Speaker 4: of borrowing too much. 281 00:13:18,480 --> 00:13:20,600 Speaker 9: We now have a debt that's about to be at 282 00:13:20,640 --> 00:13:23,839 Speaker 9: record levels, interestatements that are the fastest growing part of 283 00:13:23,880 --> 00:13:25,960 Speaker 9: the budget, about to be larger than defense. 284 00:13:26,760 --> 00:13:29,520 Speaker 2: Some say that the problem is that we're spending too much. 285 00:13:29,960 --> 00:13:33,199 Speaker 5: Do you have to start cutting what you spend? Why 286 00:13:33,360 --> 00:13:36,480 Speaker 5: is it everybody in this room balances a budget. I 287 00:13:36,600 --> 00:13:39,079 Speaker 5: balanced a budget as governor of South Carolina. Why is 288 00:13:39,160 --> 00:13:41,920 Speaker 5: Congress the only group that refuses to balance a budget? 289 00:13:42,440 --> 00:13:44,600 Speaker 2: Others point to the Trump tax cuts. 290 00:13:45,120 --> 00:13:47,800 Speaker 11: There are a lot of people who basically on Wall Street, 291 00:13:47,800 --> 00:13:50,240 Speaker 11: who you and I would know, who voted for Trump 292 00:13:50,280 --> 00:13:52,680 Speaker 11: once or even twice, and basically, look, I don't like 293 00:13:52,679 --> 00:13:54,640 Speaker 11: the guy, but I like the policies, and they got 294 00:13:54,679 --> 00:13:57,200 Speaker 11: what they wanted, the tax of the TCGA the Tax 295 00:13:57,200 --> 00:13:59,880 Speaker 11: Cutting Jobs Act being the most prominent. 296 00:14:00,200 --> 00:14:03,480 Speaker 2: And the answer likely is both, which was why President 297 00:14:03,559 --> 00:14:07,320 Speaker 2: Clinton both raised taxes and cut spending in his nineteen 298 00:14:07,400 --> 00:14:11,200 Speaker 2: ninety three omnimous Budget Reconciliation Act, the last time that 299 00:14:11,240 --> 00:14:14,760 Speaker 2: the federal government really got serious about addressing the debt. 300 00:14:15,320 --> 00:14:18,600 Speaker 6: I think he laid out the case. He brought people together. 301 00:14:19,160 --> 00:14:23,160 Speaker 6: He was willing to do things that were painful for 302 00:14:23,240 --> 00:14:28,440 Speaker 6: the people who were his friends. He was able to 303 00:14:28,520 --> 00:14:32,160 Speaker 6: explain the case to the American people. 304 00:14:37,200 --> 00:14:38,840 Speaker 2: And to explain to us where we are in the 305 00:14:38,840 --> 00:14:41,160 Speaker 2: debt and deficit and where we were back in nineteen 306 00:14:41,240 --> 00:14:43,480 Speaker 2: ninety three. We welcome now one of the architects of 307 00:14:43,520 --> 00:14:46,280 Speaker 2: that plan that President Clinton pursued. He is Bob Ruin, 308 00:14:46,360 --> 00:14:48,720 Speaker 2: former Treasury Secretary. So, Bob, thank you, so much for 309 00:14:48,760 --> 00:14:49,760 Speaker 2: being on Wall Street week. 310 00:14:49,960 --> 00:14:50,960 Speaker 3: David, happy to be with you. 311 00:14:51,400 --> 00:14:53,680 Speaker 2: So at the time, you actually were Director of National 312 00:14:53,720 --> 00:14:55,880 Speaker 2: Economic Council and you helped put together a plan with 313 00:14:55,960 --> 00:14:59,080 Speaker 2: Lloyd Benson the Treasury, but President Clinton really pushed it through. 314 00:14:59,240 --> 00:15:02,240 Speaker 2: Give us a cent of how bad the problems were 315 00:15:02,280 --> 00:15:04,200 Speaker 2: you were facing. Then what caused you to do what 316 00:15:04,360 --> 00:15:05,760 Speaker 2: you did in ninety three Act. 317 00:15:06,240 --> 00:15:10,000 Speaker 3: David, We met with the president elect Governor of Arkansas 318 00:15:10,240 --> 00:15:13,800 Speaker 3: in Little Rock after the election the economic theme the 319 00:15:13,840 --> 00:15:16,920 Speaker 3: Income Economic Team, and we talked to him about what 320 00:15:17,000 --> 00:15:20,560 Speaker 3: kind of an strategy he should have, and he said, 321 00:15:21,200 --> 00:15:24,720 Speaker 3: listening to all this, our deficit is a threshold issue 322 00:15:24,840 --> 00:15:26,920 Speaker 3: and we want everything else. We've got to do that 323 00:15:27,000 --> 00:15:28,840 Speaker 3: because we have to get our fiscal house in order, 324 00:15:29,080 --> 00:15:31,720 Speaker 3: and that was really our focus. Now we did it 325 00:15:31,760 --> 00:15:35,080 Speaker 3: in the same time we did public investment. But the pressures, 326 00:15:35,280 --> 00:15:37,640 Speaker 3: I think were very substantial. There was a lot of 327 00:15:37,640 --> 00:15:39,040 Speaker 3: concern in the business community, there was a lot of 328 00:15:39,040 --> 00:15:41,320 Speaker 3: concern in the markets, and there was a real public 329 00:15:41,320 --> 00:15:44,840 Speaker 3: political environment which unfortunately we don't have today to address these. 330 00:15:45,320 --> 00:15:47,120 Speaker 3: He not only had the substance of it, which is 331 00:15:47,160 --> 00:15:48,720 Speaker 3: President Clinton, the few that this was the rest of 332 00:15:48,880 --> 00:15:52,360 Speaker 3: issue at threshold issue. We also have a political environment in. 333 00:15:52,360 --> 00:15:55,160 Speaker 2: Which it was doable if we can try to tease 334 00:15:55,200 --> 00:15:57,400 Speaker 2: those two things out. How much of it was the 335 00:15:57,440 --> 00:16:00,400 Speaker 2: market reaction what you were seeing. Basically, we have the 336 00:16:00,440 --> 00:16:02,920 Speaker 2: incidents supposedly where Jim Carvell said, I want to come 337 00:16:02,920 --> 00:16:03,800 Speaker 2: back as the bond market. 338 00:16:03,920 --> 00:16:06,400 Speaker 3: Well that was James said that he wanted to come well, 339 00:16:06,480 --> 00:16:08,800 Speaker 3: because what happened there was we were having a debate 340 00:16:08,800 --> 00:16:12,520 Speaker 3: within the administration should we focus on fiscal matters or 341 00:16:12,560 --> 00:16:14,760 Speaker 3: should we focus on public investment. We end up doing both, 342 00:16:14,880 --> 00:16:17,560 Speaker 3: but with a program, the ninety three Deaths Production program 343 00:16:17,600 --> 00:16:19,760 Speaker 3: that was very heavily focused on death reduction. And that's 344 00:16:19,760 --> 00:16:22,120 Speaker 3: when James said he want Because we argued, and I 345 00:16:22,160 --> 00:16:24,280 Speaker 3: think rightly argued, and it turned out to be correct 346 00:16:24,520 --> 00:16:27,160 Speaker 3: that markets would react very favorably if we were serious, 347 00:16:27,480 --> 00:16:30,120 Speaker 3: and also the better reserve would react very favorably. So 348 00:16:30,240 --> 00:16:32,280 Speaker 3: James and responses all that said he would like to 349 00:16:32,320 --> 00:16:34,080 Speaker 3: come back into the next life is the bond market. 350 00:16:34,560 --> 00:16:37,040 Speaker 2: So that is a somewhat market oriented approach. I mean, 351 00:16:37,040 --> 00:16:38,960 Speaker 2: you'd come out of Goldman Sachs, you knew the market's 352 00:16:39,040 --> 00:16:42,720 Speaker 2: terribly well, you took that sort of approach the whole question. 353 00:16:42,800 --> 00:16:44,320 Speaker 2: How much of that drove what it was? Was it 354 00:16:44,320 --> 00:16:46,600 Speaker 2: really just almost dollars and cents in what was going 355 00:16:46,640 --> 00:16:47,960 Speaker 2: on in the markets. 356 00:16:47,600 --> 00:16:49,160 Speaker 3: Well, it was more than it was more than just 357 00:16:49,200 --> 00:16:51,360 Speaker 3: the markets, And I think this is something unfortunately it 358 00:16:51,360 --> 00:16:54,120 Speaker 3: hasn't been focused on, but it was the market's David, 359 00:16:54,200 --> 00:16:57,760 Speaker 3: and when we got serious about Death's reduction, it was 360 00:16:57,800 --> 00:17:00,600 Speaker 3: very favorable for the markets. And also Green's been reacted 361 00:17:00,680 --> 00:17:06,919 Speaker 3: very well in terms of maintaining a relatively livable would 362 00:17:07,000 --> 00:17:10,679 Speaker 3: a practical speaking a rate, a FED Fund rate that 363 00:17:10,800 --> 00:17:13,199 Speaker 3: was consistent with growth, but it went way beyond that. 364 00:17:13,240 --> 00:17:15,399 Speaker 3: We wanted to have the resilience after if you're going 365 00:17:15,440 --> 00:17:17,520 Speaker 3: to have, if you have an economic or anir security 366 00:17:17,760 --> 00:17:19,560 Speaker 3: emergency of some sort, you want to be able to 367 00:17:19,600 --> 00:17:23,000 Speaker 3: deal with it without creating fiscal havoc. And another thing, 368 00:17:23,080 --> 00:17:25,119 Speaker 3: when I was at Goldman Sachs and Steve Freeman and 369 00:17:25,160 --> 00:17:28,359 Speaker 3: I were the co CEOs of Coleman Sacks in ninety 370 00:17:28,359 --> 00:17:32,120 Speaker 3: one and in ninety two, one thing that I had 371 00:17:32,119 --> 00:17:35,320 Speaker 3: the impression was that business was very concerned about our 372 00:17:35,320 --> 00:17:38,240 Speaker 3: fiscal position, not only because the fiscal position per se, 373 00:17:38,520 --> 00:17:40,400 Speaker 3: but also because it gave them the feeling government wasn't. 374 00:17:40,600 --> 00:17:43,359 Speaker 3: It was incapable of dealing with our problems. So business 375 00:17:43,400 --> 00:17:46,680 Speaker 3: confidence I think was a very important factor. And once 376 00:17:46,720 --> 00:17:48,920 Speaker 3: we acted, I think it had a really positive effect 377 00:17:49,000 --> 00:17:49,840 Speaker 3: on business confidence. 378 00:17:50,040 --> 00:17:52,280 Speaker 2: Well, giving me a sense of what that means as 379 00:17:52,280 --> 00:17:55,000 Speaker 2: a practimatory, is that does that translate into investment or 380 00:17:55,119 --> 00:17:55,760 Speaker 2: lack of investment? 381 00:17:55,800 --> 00:18:00,560 Speaker 3: Yeah, that's exactly what it. Well, investment plan in terms 382 00:18:00,600 --> 00:18:05,360 Speaker 3: of expansion and generally just John Maynor Kaines famously referred 383 00:18:05,359 --> 00:18:07,639 Speaker 3: to animal spirits in his letter, his famous letter to 384 00:18:07,920 --> 00:18:11,880 Speaker 3: President Roosevelt, and animal spirits make a new confidence makes 385 00:18:11,920 --> 00:18:14,560 Speaker 3: a very big difference. And yeah, it does in terms 386 00:18:14,600 --> 00:18:18,040 Speaker 3: of hiring plans, expansion plans, investment, And that absolutely is 387 00:18:18,080 --> 00:18:18,520 Speaker 3: what happened. 388 00:18:18,720 --> 00:18:20,640 Speaker 2: Give me a sense of what was going on politically 389 00:18:20,640 --> 00:18:23,399 Speaker 2: in the country that obviously President Clinton was reflecting to 390 00:18:23,400 --> 00:18:25,040 Speaker 2: some extent what he thought that people felt. 391 00:18:25,400 --> 00:18:27,840 Speaker 3: Yeah, I think there was the people. I think there 392 00:18:27,840 --> 00:18:30,639 Speaker 3: was a feeling there was a broad public concern about 393 00:18:30,640 --> 00:18:35,040 Speaker 3: our fiscal position. And then Songus ran, Paul Songus ran 394 00:18:35,080 --> 00:18:38,639 Speaker 3: for president on a fiscal unfortunately died as you know 395 00:18:39,000 --> 00:18:45,119 Speaker 3: in that process, but on a fiscal discipline plank, if 396 00:18:45,160 --> 00:18:47,280 Speaker 3: you want to call it. That our programs say, and 397 00:18:47,320 --> 00:18:49,760 Speaker 3: that attracted a lot of favorable attention. Then ross Borough 398 00:18:49,840 --> 00:18:55,240 Speaker 3: came along and he ran also on a fiscal discipline theory, 399 00:18:55,560 --> 00:18:57,119 Speaker 3: and he got about nineteen percent of the vote, if 400 00:18:57,119 --> 00:18:59,760 Speaker 3: I remember correctly. President Clinton believed it to begin with. 401 00:19:00,400 --> 00:19:04,439 Speaker 3: But then you had the politics I guess you'd call 402 00:19:04,520 --> 00:19:07,359 Speaker 3: converge around this point of view as you saw songis 403 00:19:07,640 --> 00:19:10,520 Speaker 3: and then as I said, Perro and President Clinton made 404 00:19:10,520 --> 00:19:12,400 Speaker 3: that central to his economic problem. 405 00:19:12,680 --> 00:19:14,680 Speaker 2: Now let's bring it forward to today, because there's a 406 00:19:14,720 --> 00:19:16,639 Speaker 2: lot of talk about the debt and deficit, which is 407 00:19:16,680 --> 00:19:19,879 Speaker 2: frankly a lot larger both in nominal dollars and in 408 00:19:19,960 --> 00:19:22,720 Speaker 2: comparative dollars than it was back then. Let's talk about 409 00:19:22,720 --> 00:19:24,520 Speaker 2: what you learned in ninety three, what you did in 410 00:19:24,640 --> 00:19:27,880 Speaker 2: ninety three that could considably be applied to twenty twenty four. 411 00:19:27,920 --> 00:19:29,800 Speaker 3: It's also a lot bigger, David, And this is the 412 00:19:29,800 --> 00:19:32,080 Speaker 3: really important thing as a percentage of GDP and the 413 00:19:32,080 --> 00:19:34,720 Speaker 3: pen of our economy, and that I think is the 414 00:19:34,760 --> 00:19:38,640 Speaker 3: critical point. I think that the risks that we identified then, 415 00:19:38,720 --> 00:19:41,240 Speaker 3: the multiple risks, that the same as they are today. 416 00:19:41,680 --> 00:19:43,840 Speaker 3: I think that the risks are even greater today because 417 00:19:43,880 --> 00:19:46,720 Speaker 3: our debt GDP Radio Simbio estimates at about one hundred percent 418 00:19:46,840 --> 00:19:48,760 Speaker 3: right now. It's the highest in the history of the 419 00:19:48,760 --> 00:19:51,040 Speaker 3: country except for nineteen forty six and forty seven we 420 00:19:51,040 --> 00:19:53,200 Speaker 3: were coming back out of World War Two. I think 421 00:19:53,240 --> 00:19:56,320 Speaker 3: the risks are enormous, and some of them are materializing already, 422 00:19:56,359 --> 00:19:58,560 Speaker 3: like higher interest rates and effect on inflation in part 423 00:19:58,680 --> 00:20:02,000 Speaker 3: not full. Others haven't materialized yet, but I think they're 424 00:20:02,000 --> 00:20:04,360 Speaker 3: out there and sooner related will materialize if we don't 425 00:20:04,359 --> 00:20:05,840 Speaker 3: correct our our physical trajectory. 426 00:20:06,280 --> 00:20:08,720 Speaker 2: You talked about some of the market indicators and even 427 00:20:08,760 --> 00:20:10,600 Speaker 2: forces that you saw in ninety three that sort of 428 00:20:10,600 --> 00:20:12,720 Speaker 2: pointed you in a direction quite at President Clinton, in 429 00:20:12,720 --> 00:20:15,280 Speaker 2: the direction of really making the death set of special issue. 430 00:20:15,280 --> 00:20:17,520 Speaker 2: Are we seeing those indicators of the forces today in 431 00:20:17,560 --> 00:20:18,120 Speaker 2: the markets. 432 00:20:18,560 --> 00:20:21,880 Speaker 3: I think that we are seeing the effects, but it's 433 00:20:21,960 --> 00:20:24,800 Speaker 3: unfortunately from a political point of view, David, I don't 434 00:20:24,800 --> 00:20:28,640 Speaker 3: think they're getting connected in a meaningful way with deficit reduction. 435 00:20:28,800 --> 00:20:31,720 Speaker 3: The tenure was about I think one and a half percent, say, 436 00:20:31,800 --> 00:20:33,680 Speaker 3: two years ago, and now it's about four and a 437 00:20:33,720 --> 00:20:34,240 Speaker 3: half percent. 438 00:20:34,880 --> 00:20:34,960 Speaker 10: Now. 439 00:20:35,040 --> 00:20:37,040 Speaker 3: That's a lot of factors that go into that, but 440 00:20:37,160 --> 00:20:39,359 Speaker 3: I think part of it is our fiscal situation and 441 00:20:39,359 --> 00:20:41,479 Speaker 3: the effect that's had on inflation. I think it's been 442 00:20:41,520 --> 00:20:45,480 Speaker 3: an aggravator over if you will, an effect on inflation. 443 00:20:46,480 --> 00:20:49,800 Speaker 3: And I think there's a general concern about the imbalance 444 00:20:50,560 --> 00:20:53,760 Speaker 3: between supplying demand for savings and the excess demand that's 445 00:20:53,760 --> 00:20:58,520 Speaker 3: created by our deficits. Unfortunately, from political point of view, 446 00:20:58,680 --> 00:21:00,480 Speaker 3: I don't think the dots are being connected the way 447 00:21:00,480 --> 00:21:02,960 Speaker 3: they were back in ninety two to three when we acted. 448 00:21:03,160 --> 00:21:06,080 Speaker 3: Ninety three we acted, but ninety two when Predident Clinton 449 00:21:06,119 --> 00:21:07,080 Speaker 3: was putting his plans together. 450 00:21:07,119 --> 00:21:08,560 Speaker 2: There's a lot of talk these days when we talk 451 00:21:08,560 --> 00:21:12,280 Speaker 2: about the FED about the neutral rate and debate about 452 00:21:12,280 --> 00:21:14,600 Speaker 2: whether it is the neutroid higher. And I guess my 453 00:21:14,720 --> 00:21:18,399 Speaker 2: question is does the deficit and the debt normally, all 454 00:21:18,440 --> 00:21:20,800 Speaker 2: the things being equal, drive the neutroid higher? 455 00:21:21,440 --> 00:21:24,240 Speaker 3: I think over time, But I think you can also 456 00:21:24,359 --> 00:21:25,760 Speaker 3: have a long period of time, and we had a 457 00:21:25,760 --> 00:21:27,640 Speaker 3: long period of time, David. We had actually a long, 458 00:21:27,680 --> 00:21:29,760 Speaker 3: long period of time during which all of this was 459 00:21:29,800 --> 00:21:33,199 Speaker 3: having little effect, and then all of a sudden, the 460 00:21:33,240 --> 00:21:34,800 Speaker 3: ten ure went, as I said, a moment ago, from 461 00:21:34,880 --> 00:21:37,320 Speaker 3: roughly one and a half to roughly four and a half. 462 00:21:37,720 --> 00:21:40,439 Speaker 3: And there's certainly our periods when you can have a 463 00:21:40,560 --> 00:21:44,040 Speaker 3: long time what's happening is out of sync with reality, 464 00:21:44,600 --> 00:21:47,600 Speaker 3: but that doesn't go on forever, and when it corrects, 465 00:21:47,600 --> 00:21:51,280 Speaker 3: it can correct savagely. A good example was the Eurozone, 466 00:21:51,520 --> 00:21:55,080 Speaker 3: the sovereign Eurostone crisis. For years, a Greek bondstrated roughly 467 00:21:55,119 --> 00:21:58,399 Speaker 3: speaking parody with ghiblier take with German buns, and then 468 00:21:58,440 --> 00:22:00,679 Speaker 3: all of a sudden it exploded. And I think it's 469 00:22:00,680 --> 00:22:06,639 Speaker 3: a good example of how what isn't sensible ultimately doesn't continue. 470 00:22:06,920 --> 00:22:08,760 Speaker 2: There's the politics of it, which I want to talk about. 471 00:22:08,760 --> 00:22:11,320 Speaker 2: Before that, Let's talk about the approach taken to it. 472 00:22:11,400 --> 00:22:13,639 Speaker 2: Let's talk about, for example, the Biden administration. We can 473 00:22:13,680 --> 00:22:15,840 Speaker 2: talk about the Trump ininstration. If you walk with the bidminstration. 474 00:22:16,400 --> 00:22:18,480 Speaker 2: When you were there back in the nineties, you came 475 00:22:18,480 --> 00:22:20,720 Speaker 2: from Golden Sachs, you had other people there who knew 476 00:22:20,720 --> 00:22:23,560 Speaker 2: the markets pretty well. There was a healthy dose of 477 00:22:23,600 --> 00:22:25,280 Speaker 2: how are the markets reacting this? What does that do 478 00:22:25,400 --> 00:22:27,840 Speaker 2: for us? Do we still have that or is it 479 00:22:27,880 --> 00:22:30,719 Speaker 2: more ideologically driven? Because some people think we've sort of 480 00:22:30,760 --> 00:22:34,880 Speaker 2: shifted the orientation, particularly the Democratic Party, more toward protectionism, 481 00:22:35,119 --> 00:22:36,199 Speaker 2: more toward populism. 482 00:22:36,359 --> 00:22:38,560 Speaker 3: Well, you've asked multiple questions. I'll give you I'll give 483 00:22:38,560 --> 00:22:39,920 Speaker 3: you my view. I've given a lot of thought to this, 484 00:22:40,000 --> 00:22:42,320 Speaker 3: and I know the people there pretty well. If you 485 00:22:42,320 --> 00:22:46,000 Speaker 3: look at the proposals, the major policy proposals that President 486 00:22:46,040 --> 00:22:49,440 Speaker 3: Biden made, they were all paid for in the proposals. Now, 487 00:22:49,520 --> 00:22:51,240 Speaker 3: ultimately they had to go through Congress, and when they 488 00:22:51,240 --> 00:22:53,120 Speaker 3: went through Congress, they came out, some of them paid 489 00:22:53,160 --> 00:22:56,560 Speaker 3: forwards and some of them not. I think he's actually 490 00:22:56,640 --> 00:22:58,560 Speaker 3: pretty good on this. I think there are other issues 491 00:22:58,600 --> 00:23:01,240 Speaker 3: were I might have a different view than he does, 492 00:23:01,400 --> 00:23:03,520 Speaker 3: but I think on fiscal stuff, actually he's got a 493 00:23:03,520 --> 00:23:06,240 Speaker 3: pretty good sense of it. I think on the proposals 494 00:23:06,320 --> 00:23:11,200 Speaker 3: that they had three major bills, IRA, Chips and infrastructure, 495 00:23:11,400 --> 00:23:13,359 Speaker 3: and in the original propos and then of course for 496 00:23:13,520 --> 00:23:17,200 Speaker 3: that build back better. The proposals were fully paid for 497 00:23:17,800 --> 00:23:19,680 Speaker 3: dad to go through Congress, and in Congress they in 498 00:23:19,720 --> 00:23:21,960 Speaker 3: some cases they lost the pay for us. You know 499 00:23:22,000 --> 00:23:26,200 Speaker 3: you mentioned populism or progressive Yeah, populism. If you look 500 00:23:26,200 --> 00:23:29,000 Speaker 3: at what is referred to as industrial policy, and they 501 00:23:29,000 --> 00:23:32,600 Speaker 3: referred to as industrial policy, it's their label, but it's 502 00:23:32,680 --> 00:23:34,879 Speaker 3: not picking winners and losers. Now, it may be in 503 00:23:34,920 --> 00:23:36,280 Speaker 3: the minds of some of those people. But if you 504 00:23:36,280 --> 00:23:38,320 Speaker 3: look at those proposals, and I've talked to their people 505 00:23:38,320 --> 00:23:40,639 Speaker 3: about this a lot, I think they actually make a 506 00:23:40,680 --> 00:23:43,680 Speaker 3: lot of sense on a purely economic basis. Their externalities 507 00:23:43,920 --> 00:23:48,560 Speaker 3: they basically dealt with shortfall with insecurities in our system, 508 00:23:48,760 --> 00:23:51,960 Speaker 3: in our excuse me, in our economic system with respect 509 00:23:51,960 --> 00:23:55,199 Speaker 3: to our economic security or economic functioning, are geopolitical or 510 00:23:55,320 --> 00:23:58,880 Speaker 3: national security functioning that markets were not going to meet 511 00:23:58,880 --> 00:24:00,960 Speaker 3: and had to be met by government. So that I 512 00:24:01,000 --> 00:24:04,119 Speaker 3: think is not industrial policy in the traditional sense, and 513 00:24:04,200 --> 00:24:06,560 Speaker 3: let's pick winners and losers. It was let's fill holes 514 00:24:06,760 --> 00:24:09,080 Speaker 3: that the private sector simply isn't filling, and those are 515 00:24:09,080 --> 00:24:10,880 Speaker 3: holds of economic and incial security. 516 00:24:11,000 --> 00:24:14,119 Speaker 2: So from your perspective, the overall approach, you don't take 517 00:24:14,240 --> 00:24:16,280 Speaker 2: much issue with. No, really, do we end up with 518 00:24:16,280 --> 00:24:19,560 Speaker 2: where we are, where we have increasing deficits in increasing debts? 519 00:24:19,640 --> 00:24:23,520 Speaker 3: Oh weud a minute. What I talked about was the proposals. No, 520 00:24:23,680 --> 00:24:26,640 Speaker 3: I think we're in a terrible place because, unfortunately, once 521 00:24:26,640 --> 00:24:29,840 Speaker 3: you get to legislating, there's a lot of talk, but 522 00:24:29,880 --> 00:24:34,399 Speaker 3: the talk is always divided politically between the Republicans who 523 00:24:34,400 --> 00:24:37,520 Speaker 3: refuse to raise taxes, and the Democrats who won't deal 524 00:24:37,520 --> 00:24:39,880 Speaker 3: with titlements. Now, I think there was a reality to this. 525 00:24:41,080 --> 00:24:44,800 Speaker 3: About sixty percent or something of the increase in the 526 00:24:44,880 --> 00:24:48,720 Speaker 3: debt from thousand to twenty twenty two was because of 527 00:24:48,760 --> 00:24:51,120 Speaker 3: the tax cuts. So if it hadn't been for that, 528 00:24:52,040 --> 00:24:54,120 Speaker 3: the debt, instead of being one hundred percent CDP would 529 00:24:54,160 --> 00:24:57,639 Speaker 3: about sixty percent. Another way to look at it is 530 00:24:57,720 --> 00:25:00,600 Speaker 3: exactly what I just said, which is what one percentage 531 00:25:00,600 --> 00:25:03,840 Speaker 3: of what percent would the debt be of GDP. We 532 00:25:03,880 --> 00:25:05,480 Speaker 3: had those two tax cuts, and you come out to 533 00:25:05,480 --> 00:25:07,359 Speaker 3: this about the same number, around sixty three percent or 534 00:25:07,400 --> 00:25:10,200 Speaker 3: something like that. So I think in very large measure, 535 00:25:10,480 --> 00:25:12,760 Speaker 3: what happened is we had two very big tax cuts, 536 00:25:12,880 --> 00:25:14,840 Speaker 3: neither what we paid for, so we decided not to 537 00:25:14,840 --> 00:25:16,679 Speaker 3: pay for what we were spending, and that's how we 538 00:25:16,720 --> 00:25:18,680 Speaker 3: got where we are. But looking forward, we're gonna have 539 00:25:18,720 --> 00:25:20,840 Speaker 3: to deal with both spending and taxes. So I think 540 00:25:20,880 --> 00:25:22,960 Speaker 3: for the reasons I just said, when you get realistic 541 00:25:23,000 --> 00:25:25,240 Speaker 3: about it, I think you're going to have to be 542 00:25:25,400 --> 00:25:26,680 Speaker 3: largely on the tax side. 543 00:25:26,800 --> 00:25:28,640 Speaker 2: Bob, it's really been great having on wallstret Grieg. Thank 544 00:25:28,640 --> 00:25:32,560 Speaker 2: you so much. That's Bob Ruben. He's the former Treasury Secretary. 545 00:25:33,240 --> 00:25:36,160 Speaker 2: Coming up, Private credit continues. It's March to the Sky 546 00:25:36,480 --> 00:25:38,639 Speaker 2: and we talk about how far you can go with 547 00:25:38,760 --> 00:25:42,760 Speaker 2: Pornaba Pori out of Liquid Credit and HPS Investment Partners. 548 00:25:45,000 --> 00:25:47,160 Speaker 2: That's next on Wall Street Week on Bloomberg. 549 00:25:48,160 --> 00:25:52,400 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 550 00:25:52,520 --> 00:25:53,440 Speaker 1: Bloomberg Radio. 551 00:26:00,000 --> 00:26:02,520 Speaker 2: This is Wall Street Week. I'm David Weston. Credit drives 552 00:26:02,560 --> 00:26:05,040 Speaker 2: the US and global economies, and we've gone for a 553 00:26:05,040 --> 00:26:07,800 Speaker 2: world where somewhere there was too much credit, and now 554 00:26:07,840 --> 00:26:10,719 Speaker 2: some people are questioning whether there's enough to help us 555 00:26:10,800 --> 00:26:13,520 Speaker 2: understand the issues. We welcome back port of a Portie. 556 00:26:13,720 --> 00:26:17,960 Speaker 2: She's HPS Investments head of Liquid Credit. So great to 557 00:26:18,000 --> 00:26:20,280 Speaker 2: have you back on Wall Street Week. I never thought 558 00:26:20,320 --> 00:26:22,200 Speaker 2: I'd be talking about this because we thought we don't 559 00:26:22,280 --> 00:26:24,520 Speaker 2: too much money. Now people are saying there's not enough supply. 560 00:26:24,640 --> 00:26:26,600 Speaker 2: People are looking for it. Where are we in the 561 00:26:26,640 --> 00:26:28,000 Speaker 2: supply demand for credit? 562 00:26:29,080 --> 00:26:31,280 Speaker 12: Yeah, so there was no supply last year, or very 563 00:26:31,280 --> 00:26:34,160 Speaker 12: little supply anemic as they like to say. I think 564 00:26:34,160 --> 00:26:37,160 Speaker 12: what happened is that you saw big bond mackert rally. 565 00:26:37,200 --> 00:26:39,640 Speaker 12: Obviously sort of in the fourth quarter of last year. 566 00:26:39,840 --> 00:26:42,680 Speaker 12: We came into this year and the capital markets opened 567 00:26:42,720 --> 00:26:45,960 Speaker 12: up for business again, people feeling a lot better about 568 00:26:46,000 --> 00:26:48,760 Speaker 12: the world. People felt like the FED had sort of 569 00:26:48,840 --> 00:26:53,160 Speaker 12: landed this soft landing, I guess, and you can see 570 00:26:53,200 --> 00:26:55,560 Speaker 12: it in the markets. Price priced quite nicely for lots 571 00:26:55,560 --> 00:26:57,520 Speaker 12: of cuts, and so you've seen a lot of supply. 572 00:26:57,960 --> 00:26:59,960 Speaker 12: You've seen most of that supply in the high old 573 00:27:00,119 --> 00:27:02,840 Speaker 12: loan markets and really high quality assures. You've seen a 574 00:27:02,880 --> 00:27:05,120 Speaker 12: lot of investment grade supply, and you've seen a lot 575 00:27:05,119 --> 00:27:08,480 Speaker 12: of treasury supply. And I think that there's a couple 576 00:27:08,440 --> 00:27:12,840 Speaker 12: of reasons. I think one is that most folks are 577 00:27:12,880 --> 00:27:16,360 Speaker 12: worried about the economy slowing towards the middle of the year. 578 00:27:16,520 --> 00:27:20,080 Speaker 12: So the Q two bottom is sort of the what 579 00:27:20,119 --> 00:27:22,960 Speaker 12: the narrative looks like now, So getting in front of 580 00:27:23,000 --> 00:27:25,840 Speaker 12: that is number one. I think Number two is there 581 00:27:25,880 --> 00:27:28,000 Speaker 12: is a lot of demand for credit right now because 582 00:27:28,400 --> 00:27:32,280 Speaker 12: absolute yields are are relatively high, and so the market's 583 00:27:32,320 --> 00:27:35,080 Speaker 12: open back up. And three, people are worried about the 584 00:27:35,160 --> 00:27:37,440 Speaker 12: election cycles you sort of move forward in the course 585 00:27:37,440 --> 00:27:39,000 Speaker 12: of the year and whether that's going to create a 586 00:27:39,040 --> 00:27:42,719 Speaker 12: lot of volatility which will impact the ability to bring 587 00:27:43,000 --> 00:27:45,560 Speaker 12: high yod asurres and loans to market. 588 00:27:45,800 --> 00:27:48,640 Speaker 2: So as a practical matter, if you have more demand 589 00:27:48,760 --> 00:27:51,240 Speaker 2: for the credit, that drives the price up of the 590 00:27:51,280 --> 00:27:54,040 Speaker 2: credit and it drives the yield down. It gets cheaper, 591 00:27:54,080 --> 00:27:56,320 Speaker 2: as it were, are you getting paid these days for 592 00:27:56,359 --> 00:27:57,560 Speaker 2: the risk you're taking credit? 593 00:27:58,880 --> 00:28:01,000 Speaker 12: So spreads and credit, But if you sort of go 594 00:28:01,160 --> 00:28:02,959 Speaker 12: up and down the stack, you know, investment grade are 595 00:28:03,000 --> 00:28:05,520 Speaker 12: sort of one hundred over and high yield is three 596 00:28:05,640 --> 00:28:08,960 Speaker 12: fifty three sixty over. Loans are low five hundreds over. 597 00:28:09,880 --> 00:28:13,840 Speaker 12: Spreads are pretty tight, and investment grade and in high yield 598 00:28:14,840 --> 00:28:17,800 Speaker 12: I think, actually I think I saw a statistic today 599 00:28:18,160 --> 00:28:20,119 Speaker 12: that high yield spreads were as tight as they have 600 00:28:20,240 --> 00:28:24,720 Speaker 12: ever been post the GFC. Wow, So they're tight. Loans 601 00:28:24,720 --> 00:28:26,400 Speaker 12: are not. Loans are sort of in the middle, you know, 602 00:28:26,560 --> 00:28:29,600 Speaker 12: non recessionary average loan spreads are in the low five hundreds. 603 00:28:29,640 --> 00:28:32,840 Speaker 12: That's where it sits today. I think the difference, and 604 00:28:32,960 --> 00:28:35,960 Speaker 12: this is kind of the the problem is that yields 605 00:28:35,960 --> 00:28:39,080 Speaker 12: are yields are high, and spreads are tight, and so 606 00:28:39,120 --> 00:28:40,680 Speaker 12: when yields are that high, you have a little bit 607 00:28:40,680 --> 00:28:42,560 Speaker 12: of cushion if you're a little bit wrong on spreads 608 00:28:42,560 --> 00:28:44,520 Speaker 12: and spreads back up a little bit and go up 609 00:28:44,520 --> 00:28:46,479 Speaker 12: by fifty basis points or one hundred basis points over 610 00:28:46,520 --> 00:28:48,440 Speaker 12: a couple of years. So you're not making you know, 611 00:28:49,680 --> 00:28:52,200 Speaker 12: eight to nine percent in highield bonds, you're making seven 612 00:28:52,200 --> 00:28:53,280 Speaker 12: and a half to eight and a half percent in 613 00:28:53,360 --> 00:28:55,720 Speaker 12: HIGHO bonds. So I think I think that in the 614 00:28:55,880 --> 00:28:58,120 Speaker 12: in the context of what what are the options in 615 00:28:58,160 --> 00:29:02,360 Speaker 12: the market today, credits far more compelling than equities for 616 00:29:02,400 --> 00:29:07,680 Speaker 12: a variety of reasons. Yields are pretty high, and rates, 617 00:29:07,720 --> 00:29:10,560 Speaker 12: despite the short end coming in, are likely to stay 618 00:29:10,560 --> 00:29:13,920 Speaker 12: somewhat elevated on the back end, So that spread plus 619 00:29:13,960 --> 00:29:16,360 Speaker 12: the base rate gets you to a yield that kind 620 00:29:16,400 --> 00:29:17,360 Speaker 12: of makes sense for people. 621 00:29:17,600 --> 00:29:19,800 Speaker 2: There's been something of a conversation going on between the 622 00:29:19,840 --> 00:29:22,400 Speaker 2: markets and the FED about exactly what they're going to 623 00:29:22,480 --> 00:29:24,680 Speaker 2: do in terms of cutting, how much they cut, how 624 00:29:24,720 --> 00:29:27,840 Speaker 2: fast they cut, what is the market pricing in right 625 00:29:27,880 --> 00:29:29,840 Speaker 2: now on that, and what happens if they're disappointed. 626 00:29:29,960 --> 00:29:33,760 Speaker 12: Yeah, we have two different conversations. So the FED dot 627 00:29:33,800 --> 00:29:36,200 Speaker 12: flat is, you know, three twenty five basis point cuts. 628 00:29:36,240 --> 00:29:38,600 Speaker 12: The market is pricing in five or six cuts this year, 629 00:29:39,680 --> 00:29:40,720 Speaker 12: and that's a lot. 630 00:29:41,280 --> 00:29:41,440 Speaker 6: You know. 631 00:29:41,480 --> 00:29:44,640 Speaker 12: Our view is that the market is kind of priced 632 00:29:44,640 --> 00:29:47,080 Speaker 12: for perfection. So you know, if the FED were to 633 00:29:47,120 --> 00:29:50,239 Speaker 12: deliver six cuts, the question is why, And if it's 634 00:29:50,280 --> 00:29:54,000 Speaker 12: a recession, that's not great. If the FED doesn't deliver it, 635 00:29:54,080 --> 00:29:56,760 Speaker 12: the market's expecting it and expecting it in the context 636 00:29:56,760 --> 00:29:59,400 Speaker 12: of a soft landing. So there's not a little there's 637 00:29:59,400 --> 00:30:00,360 Speaker 12: not a lot of room error. 638 00:30:00,600 --> 00:30:03,120 Speaker 2: What about that possibility of a troubled economy that would 639 00:30:03,160 --> 00:30:05,560 Speaker 2: require that many cuts. I mean, we spent a lot 640 00:30:05,600 --> 00:30:07,880 Speaker 2: of last year with econdents of people saying we're gonna 641 00:30:07,880 --> 00:30:10,440 Speaker 2: have a recesion, We're going to recession. Didn't happen. Now 642 00:30:10,480 --> 00:30:12,120 Speaker 2: it seems like we're saying, no, not going to have 643 00:30:12,160 --> 00:30:15,120 Speaker 2: a recession. Where is the credit market right now and 644 00:30:15,240 --> 00:30:18,200 Speaker 2: pricing in the possibility of a recession, not just a 645 00:30:18,240 --> 00:30:19,320 Speaker 2: slowdown of a recession. 646 00:30:19,680 --> 00:30:22,400 Speaker 12: The credit market is not pricing in a recession. Spreads 647 00:30:22,400 --> 00:30:25,560 Speaker 12: are as tight as they've been and in fact, you know, 648 00:30:25,680 --> 00:30:28,520 Speaker 12: I was looking at some numbers. It's just an interesting 649 00:30:28,600 --> 00:30:32,520 Speaker 12: notable that if you look back to the beginning of 650 00:30:32,760 --> 00:30:36,440 Speaker 12: last year, spreads were close to five hundred over on 651 00:30:36,440 --> 00:30:38,440 Speaker 12: the high yod market. I want to say, versus kind 652 00:30:38,440 --> 00:30:42,160 Speaker 12: of we said three sixty ish. Today, treasures are exactly 653 00:30:42,240 --> 00:30:42,840 Speaker 12: the same place. 654 00:30:44,480 --> 00:30:47,080 Speaker 2: When people are financing these days, are they moving over 655 00:30:47,160 --> 00:30:48,520 Speaker 2: to credit away from equity. 656 00:30:48,920 --> 00:30:50,960 Speaker 12: It seems like there's a decent amount of demand for 657 00:30:51,040 --> 00:30:53,640 Speaker 12: credit right now for sure, across the board. I mean, 658 00:30:53,840 --> 00:30:57,240 Speaker 12: ranging from treasuries to investment grade because that's another way 659 00:30:57,480 --> 00:30:59,920 Speaker 12: to play that rate trade, to high yield, to loans, 660 00:31:00,120 --> 00:31:02,280 Speaker 12: to private credit. There's a lot of demand. 661 00:31:02,640 --> 00:31:04,280 Speaker 2: I don't know if it's a conversation where there's more 662 00:31:04,280 --> 00:31:08,080 Speaker 2: of a tug of war between private credit and liquid credits, 663 00:31:08,080 --> 00:31:11,160 Speaker 2: syndicated things like that, with reports that the banks are 664 00:31:11,160 --> 00:31:13,640 Speaker 2: trying to get back into that business take some business 665 00:31:13,640 --> 00:31:15,440 Speaker 2: back away from private credit, are you seeing that? 666 00:31:15,960 --> 00:31:16,160 Speaker 6: Yeah? 667 00:31:16,160 --> 00:31:18,480 Speaker 12: I mean, look the markets. The supply in the markets 668 00:31:18,480 --> 00:31:21,480 Speaker 12: has been there's been a lot of supply across loans 669 00:31:21,480 --> 00:31:26,600 Speaker 12: and HYO bonds and investment grade. In January, that supply 670 00:31:26,720 --> 00:31:29,200 Speaker 12: has come through the banks. That's come through the banks 671 00:31:29,240 --> 00:31:32,840 Speaker 12: because there are buyers that are back that are buying 672 00:31:32,840 --> 00:31:37,200 Speaker 12: liquid credit. So you're definitely definitely seeing that today and 673 00:31:37,680 --> 00:31:40,920 Speaker 12: if that trend continues, some of those big, big, mega 674 00:31:40,960 --> 00:31:42,720 Speaker 12: I mean there are mega deals that were done in 675 00:31:42,720 --> 00:31:47,120 Speaker 12: the private credit space, you know that were three billion, 676 00:31:47,240 --> 00:31:50,280 Speaker 12: five billion dollars in size last year that were really 677 00:31:50,320 --> 00:31:56,760 Speaker 12: really megacap deals. I suspect that if this trend continues, 678 00:31:56,800 --> 00:31:59,160 Speaker 12: you won't see as many of those mega trend deal 679 00:31:59,280 --> 00:32:03,080 Speaker 12: megacap deals. The rub is if it doesn't and if 680 00:32:03,120 --> 00:32:07,040 Speaker 12: there is volatility, and if the FED doesn't deliver six 681 00:32:07,080 --> 00:32:10,680 Speaker 12: cuts and they deliver three cuts, and if their slower growth, 682 00:32:11,080 --> 00:32:12,719 Speaker 12: this is going to go back the other way. Because 683 00:32:13,120 --> 00:32:16,560 Speaker 12: there's one one variable, which is that there's a lot 684 00:32:16,600 --> 00:32:20,520 Speaker 12: of companies in twenty five that need to refinance their debt. 685 00:32:20,560 --> 00:32:22,720 Speaker 12: And what that means is that they oftentimes come to 686 00:32:22,840 --> 00:32:26,239 Speaker 12: market a year in advance of twenty twenty five. So 687 00:32:26,320 --> 00:32:28,760 Speaker 12: you're going to see a lot of paper that actually 688 00:32:28,800 --> 00:32:31,600 Speaker 12: needs to start to get refinanced in the marketplace. And 689 00:32:31,680 --> 00:32:34,800 Speaker 12: so this question of whether whether the markets are going 690 00:32:34,840 --> 00:32:36,960 Speaker 12: to sort of stay open, if you will, to allow 691 00:32:37,000 --> 00:32:40,120 Speaker 12: for that to happen in the syndicated space is really 692 00:32:40,160 --> 00:32:42,680 Speaker 12: the question that will happen. And that's the relevant question 693 00:32:42,720 --> 00:32:45,200 Speaker 12: for whether this private credit trend will continue. 694 00:32:45,320 --> 00:32:48,520 Speaker 2: How much market share can private take away from the banks? 695 00:32:48,720 --> 00:32:51,240 Speaker 12: Well, I mean, the estimates are that private credit is 696 00:32:51,240 --> 00:32:53,120 Speaker 12: going to grow by fifteen plus percent a year. 697 00:32:53,640 --> 00:32:56,000 Speaker 2: So but it's still a relatively small portion. If you 698 00:32:56,040 --> 00:32:58,240 Speaker 2: look at total amount of loans, right. 699 00:32:58,520 --> 00:33:01,720 Speaker 12: It's five percent of all back now exactly totally. 700 00:33:01,960 --> 00:33:04,040 Speaker 2: So even if it's growing fifteen percent, it takes a 701 00:33:04,080 --> 00:33:04,600 Speaker 2: long time. 702 00:33:04,720 --> 00:33:07,560 Speaker 12: It takes a long time. But remember, private credit is 703 00:33:07,560 --> 00:33:10,000 Speaker 12: not I mean, there's been this narrative about it. It's 704 00:33:10,040 --> 00:33:12,000 Speaker 12: not sort of credit out of thin air. I mean, 705 00:33:12,040 --> 00:33:14,560 Speaker 12: as you said, it's credit that was underwritten by banks, 706 00:33:14,640 --> 00:33:17,360 Speaker 12: So that's one place. It's credit that was underwritten by 707 00:33:17,640 --> 00:33:20,760 Speaker 12: syndicated investors. That's another home that it's coming from. And 708 00:33:20,800 --> 00:33:23,000 Speaker 12: there's even and we're seeing in some of the insurance companies, 709 00:33:23,040 --> 00:33:24,960 Speaker 12: you know, private investment, right, I mean, there's a lot 710 00:33:24,960 --> 00:33:27,520 Speaker 12: of flow that's going to the land of private credit. 711 00:33:27,520 --> 00:33:28,960 Speaker 12: I don't see what's going to make that stop. 712 00:33:29,280 --> 00:33:30,360 Speaker 2: What's miss price right now? 713 00:33:30,440 --> 00:33:30,760 Speaker 1: Quickly? 714 00:33:31,360 --> 00:33:33,560 Speaker 12: I think treasuries are going to stay. We're anchored in 715 00:33:33,560 --> 00:33:35,520 Speaker 12: a sort of tenure or four four and a half percent, 716 00:33:35,560 --> 00:33:38,000 Speaker 12: which means that I think credit generally is a pretty 717 00:33:38,040 --> 00:33:41,200 Speaker 12: good place to be. I would say probably loans are 718 00:33:41,520 --> 00:33:43,560 Speaker 12: more interesting just because we don't believe that that's going 719 00:33:43,600 --> 00:33:46,320 Speaker 12: to cut that much. So that's probably an interesting place. 720 00:33:46,560 --> 00:33:48,000 Speaker 2: It was great to have you on Walter Rereeve, Thank 721 00:33:48,000 --> 00:33:52,640 Speaker 2: you so much. That's part of a PORTI of HPS investment. Finally, 722 00:33:52,800 --> 00:33:56,040 Speaker 2: one more thought. A goal without a plan is just 723 00:33:56,160 --> 00:33:59,760 Speaker 2: a wish, so wrote and Twant Descent Exuberrie in The 724 00:34:00,200 --> 00:34:04,120 Speaker 2: Prince eighty years ago. There's no shortages of wishes these days, 725 00:34:04,160 --> 00:34:07,360 Speaker 2: from wishing to become president again to wishing to win 726 00:34:07,400 --> 00:34:10,319 Speaker 2: a Super Bowl, some maybe for the first time. But 727 00:34:10,400 --> 00:34:12,080 Speaker 2: the question is whether we can come up with a 728 00:34:12,120 --> 00:34:15,520 Speaker 2: plan to make our wishes come true. Benchair J. Powell 729 00:34:15,600 --> 00:34:18,600 Speaker 2: certainly had a wish to bring inflation down. That's after 730 00:34:18,680 --> 00:34:20,439 Speaker 2: his wish that it not be there in the first 731 00:34:20,440 --> 00:34:21,680 Speaker 2: place didn't come true. 732 00:34:22,000 --> 00:34:26,120 Speaker 13: I think we're experiencing a big uptick in inflation, bigger 733 00:34:26,680 --> 00:34:29,680 Speaker 13: than many expected, bigger than certainly than I expected. 734 00:34:29,920 --> 00:34:32,319 Speaker 2: But he promised that if it did come the FED 735 00:34:32,400 --> 00:34:34,200 Speaker 2: had the tools it needed to handle it. 736 00:34:34,440 --> 00:34:36,680 Speaker 13: We will do what it takes to get inflation down, 737 00:34:36,800 --> 00:34:40,960 Speaker 13: and in principle that could mean that if finisher conditions 738 00:34:41,000 --> 00:34:41,759 Speaker 13: get looser, we have. 739 00:34:41,800 --> 00:34:44,160 Speaker 2: To do more. And as of right now, it looks 740 00:34:44,160 --> 00:34:45,520 Speaker 2: like his plan is working. 741 00:34:46,000 --> 00:34:48,840 Speaker 13: You see that people are not writing down rate hikes. 742 00:34:48,160 --> 00:34:52,440 Speaker 13: That's us thinking that we have done enough, but not 743 00:34:53,040 --> 00:34:55,879 Speaker 13: feeling that really strongly confidently and not wanting to take 744 00:34:56,120 --> 00:34:58,000 Speaker 13: the possibility of a rate hike off the table. 745 00:34:58,280 --> 00:35:01,279 Speaker 2: Florida Governor Ron DeSantis had a big wish to be 746 00:35:01,360 --> 00:35:04,640 Speaker 2: the next president. I'm Rondie Santis, and I'm running for 747 00:35:04,680 --> 00:35:08,879 Speaker 2: president to lead our great American comeback. But it looks 748 00:35:08,880 --> 00:35:10,839 Speaker 2: like he didn't have enough of a plan to get there, 749 00:35:10,960 --> 00:35:14,080 Speaker 2: so he dropped out of the race last Sunday. I 750 00:35:14,120 --> 00:35:18,000 Speaker 2: am today suspending my campaign. I'm proud to have delivered 751 00:35:18,040 --> 00:35:20,760 Speaker 2: on one hundred percent of my promises, and I will 752 00:35:20,760 --> 00:35:24,080 Speaker 2: not stop now. Bob Iger had a plan, as well 753 00:35:24,120 --> 00:35:26,680 Speaker 2: as a wish, to make the Walt Disney Company the biggest, 754 00:35:26,719 --> 00:35:29,360 Speaker 2: most successful entertainment company in the world. 755 00:35:29,840 --> 00:35:32,880 Speaker 14: Disney has a unique ability to grow strong brands and 756 00:35:32,960 --> 00:35:37,279 Speaker 14: expand fantastic creative content, as we've proven with our successful 757 00:35:37,320 --> 00:35:40,399 Speaker 14: acquisitions of both Pixar and Marvel, and. 758 00:35:40,440 --> 00:35:43,280 Speaker 2: For years, his plan worked better than just about anyone 759 00:35:43,320 --> 00:35:44,080 Speaker 2: could have expected. 760 00:35:44,360 --> 00:35:49,480 Speaker 13: They are the number one company today as an entertainment 761 00:35:50,080 --> 00:35:52,000 Speaker 13: media company without peer. 762 00:35:52,000 --> 00:35:54,640 Speaker 2: But the plan to move into streaming proved more difficult 763 00:35:54,640 --> 00:35:58,800 Speaker 2: than people thought, leaving Bob. Like other entertainment CEOs, searching 764 00:35:58,840 --> 00:36:01,400 Speaker 2: for a new plan for a new age. 765 00:36:01,520 --> 00:36:04,760 Speaker 14: Originally, when all these services launched, it was the library 766 00:36:04,800 --> 00:36:07,520 Speaker 14: that brought people there, and the originals kept them. 767 00:36:07,719 --> 00:36:09,320 Speaker 7: It's now flipped the other way. 768 00:36:09,480 --> 00:36:12,680 Speaker 2: Even as Netflix moved into the live entertainment or sports 769 00:36:12,719 --> 00:36:16,440 Speaker 2: arena with its deal this week with the WWE. On 770 00:36:16,480 --> 00:36:18,600 Speaker 2: the other hand, I'm not sure how many people had 771 00:36:18,640 --> 00:36:21,880 Speaker 2: a plan for Generative AI to transform the world. Chipmaker 772 00:36:21,920 --> 00:36:24,560 Speaker 2: and Vidia's plans started out to make the gaming industry 773 00:36:24,560 --> 00:36:26,799 Speaker 2: come alive, but it turned out to be just what 774 00:36:26,880 --> 00:36:30,440 Speaker 2: the doctor ordered for AI, and right now Nvidia's wishes 775 00:36:30,560 --> 00:36:34,200 Speaker 2: as well as its shareholders, are coming true, which of 776 00:36:34,280 --> 00:36:37,440 Speaker 2: course brings us to Detroit Lions, the team I grew 777 00:36:37,520 --> 00:36:40,120 Speaker 2: up rooting for back in Flint, Michigan. No matter how 778 00:36:40,160 --> 00:36:42,840 Speaker 2: bad it got, and believe me, it got bad, we 779 00:36:43,000 --> 00:36:45,839 Speaker 2: Lions fans clung to our wish, never mind that they 780 00:36:45,840 --> 00:36:48,799 Speaker 2: posted the worst eight year run in NFL history from 781 00:36:48,800 --> 00:36:51,160 Speaker 2: two thousand and one to tho eight, and never mind 782 00:36:51,160 --> 00:36:54,400 Speaker 2: that they accumulated more losses cumulative than any other team 783 00:36:54,480 --> 00:36:57,960 Speaker 2: apart from the Arizona Cardinals. But that was then, and 784 00:36:58,120 --> 00:37:00,760 Speaker 2: this is now. Is the Lions place for a slot 785 00:37:00,760 --> 00:37:03,719 Speaker 2: in the super Bowl this coming Sunday. Sure they have 786 00:37:03,800 --> 00:37:05,600 Speaker 2: a franchise quarterback in Jared Goff. 787 00:37:06,040 --> 00:37:06,239 Speaker 6: Yeah. 788 00:37:06,239 --> 00:37:08,120 Speaker 2: I think the quarterback is often a. 789 00:37:10,160 --> 00:37:13,440 Speaker 15: Product of what's around them. And you know, obviously I've 790 00:37:13,520 --> 00:37:14,960 Speaker 15: got a lot of confidence in myself, but I got 791 00:37:14,960 --> 00:37:16,839 Speaker 15: a lot of great players around me who have helped 792 00:37:16,880 --> 00:37:18,680 Speaker 15: me out this year and made things easier. 793 00:37:19,040 --> 00:37:20,800 Speaker 2: Sure they have a one of a kind coach in 794 00:37:20,920 --> 00:37:21,640 Speaker 2: Dan Campbell. 795 00:37:21,960 --> 00:37:23,680 Speaker 15: This is where we wanted to get it right, This 796 00:37:23,760 --> 00:37:26,880 Speaker 15: is where we wanted to go. This is you know, 797 00:37:27,000 --> 00:37:31,880 Speaker 15: for for all the lines fans, this was the whole idea, 798 00:37:32,000 --> 00:37:35,640 Speaker 15: right And I know it's you know, everybody been dying 799 00:37:35,719 --> 00:37:37,720 Speaker 15: for it for so long that this is the point. 800 00:37:37,960 --> 00:37:40,759 Speaker 2: But it all started with a wish to win and 801 00:37:40,840 --> 00:37:43,359 Speaker 2: a plan to get there. And that wish and that 802 00:37:43,440 --> 00:37:46,480 Speaker 2: plan came from Sheila Ford Hamp, a scion of the 803 00:37:46,520 --> 00:37:49,239 Speaker 2: Ford family who took over as principal owner when her 804 00:37:49,280 --> 00:37:52,680 Speaker 2: mother passed away. By all accounts, Ms ford Hamp brought 805 00:37:52,719 --> 00:37:55,240 Speaker 2: to the owner suite something that had been sorely lacking, 806 00:37:55,680 --> 00:37:59,520 Speaker 2: a single minded, passionate quest to win whatever it took, 807 00:38:00,040 --> 00:38:02,440 Speaker 2: and surrounding herself with the team she needed to get 808 00:38:02,520 --> 00:38:05,600 Speaker 2: us there. Maybe the motor City truly is on its 809 00:38:05,600 --> 00:38:06,440 Speaker 2: way back. 810 00:38:07,560 --> 00:38:11,600 Speaker 3: You see, it's the hottest fires that make the hardest steel. 811 00:38:14,560 --> 00:38:18,440 Speaker 6: Add hard work and conviction and then know how that 812 00:38:18,600 --> 00:38:21,759 Speaker 6: runs generations deep in every last one of us. 813 00:38:24,960 --> 00:38:30,160 Speaker 2: That's we are, that's our story that does it. For 814 00:38:30,239 --> 00:38:32,839 Speaker 2: this episode of Wall Street Week, I'm David Weston. This 815 00:38:32,920 --> 00:38:40,000 Speaker 2: is Bloomberg. See you next week.