1 00:00:05,040 --> 00:00:08,880 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa Abram Woyd's 2 00:00:08,920 --> 00:00:11,879 Speaker 1: along with Tom Keane and Jonathan Farrow, join us each 3 00:00:11,920 --> 00:00:15,720 Speaker 1: day for insight from the best in economics, geopolitics, finance 4 00:00:15,760 --> 00:00:19,480 Speaker 1: and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:19,560 --> 00:00:22,759 Speaker 1: Spotify and anywhere you get your podcasts, and always on 6 00:00:22,840 --> 00:00:26,360 Speaker 1: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:26,960 --> 00:00:29,640 Speaker 1: In the bond space right now, it is always important 8 00:00:29,640 --> 00:00:32,320 Speaker 1: to check in with Greg Peters. He's the co cio 9 00:00:32,400 --> 00:00:35,440 Speaker 1: at PIGEM Fixed Income and far more has a mantle 10 00:00:35,520 --> 00:00:38,640 Speaker 1: at home with all sorts of investment managers of the 11 00:00:38,760 --> 00:00:42,279 Speaker 1: year in fixed income. Greg, thank you for joining us. 12 00:00:42,320 --> 00:00:46,280 Speaker 1: Just as you rewrite the twelve thirty one outlook for PIGIM, 13 00:00:46,360 --> 00:00:49,120 Speaker 1: you do this on March thirty one. What do you 14 00:00:49,320 --> 00:00:54,880 Speaker 1: adjust to look forward within a fixed income portfolio? Yeah, so, 15 00:00:55,000 --> 00:00:59,240 Speaker 1: I think what you adjust is the probability of our recession. 16 00:00:59,400 --> 00:01:03,440 Speaker 1: So we were actually reasonably optimistic that the fit could 17 00:01:03,440 --> 00:01:07,120 Speaker 1: achieve a soft landing as still possibility Tom, for sure, 18 00:01:07,240 --> 00:01:12,080 Speaker 1: but I think the probability of a recession is much 19 00:01:12,120 --> 00:01:16,480 Speaker 1: higher today, just given what's occurring in the banking space. 20 00:01:16,720 --> 00:01:20,080 Speaker 1: So you know, I think the theme that continues from 21 00:01:20,160 --> 00:01:23,640 Speaker 1: last year into this year is one of uncertainty that 22 00:01:23,720 --> 00:01:28,199 Speaker 1: you basically have a set of scenarios and bimodal trimodal 23 00:01:28,240 --> 00:01:31,600 Speaker 1: type of outcomes and makes it a very difficult space 24 00:01:31,760 --> 00:01:36,400 Speaker 1: to navigate. And I think as a consequential see volatility 25 00:01:36,480 --> 00:01:41,160 Speaker 1: quite pa which actually great opportunities at the same time. 26 00:01:41,200 --> 00:01:44,040 Speaker 1: So it's one of these things with overall macro pictures cloudy, 27 00:01:44,080 --> 00:01:46,679 Speaker 1: but we're seeing a lot of opportunities within the space. 28 00:01:46,920 --> 00:01:49,560 Speaker 1: Greg Peters, a global law Street wants to know from you, 29 00:01:49,800 --> 00:01:51,800 Speaker 1: and I guess it's pjam in general. But let's go 30 00:01:51,840 --> 00:01:55,320 Speaker 1: to Greg Peters, what's the new duration forward? I mean, 31 00:01:55,360 --> 00:01:59,000 Speaker 1: what point? And the maturity curve is a comfortable place 32 00:01:59,080 --> 00:02:06,200 Speaker 1: to be given endless algebraic epsilon given the reality of uncertainty. Well, 33 00:02:06,280 --> 00:02:09,120 Speaker 1: so you know, it is continued on your outlook, of course, 34 00:02:09,240 --> 00:02:13,280 Speaker 1: but I do believe that rates are too high over 35 00:02:13,320 --> 00:02:19,760 Speaker 1: the medium long term that will be remedied over time. Effectively, 36 00:02:19,800 --> 00:02:23,720 Speaker 1: if you're worried about a recession, then adding duration, having 37 00:02:24,080 --> 00:02:27,000 Speaker 1: risk out the curve via duration is a very good 38 00:02:27,000 --> 00:02:29,560 Speaker 1: place to be and The question you have to ask 39 00:02:29,600 --> 00:02:33,200 Speaker 1: yourself as an investor is do you think the tenure 40 00:02:33,320 --> 00:02:35,640 Speaker 1: yield will be this called three and a half percent 41 00:02:35,760 --> 00:02:40,200 Speaker 1: five years forward? Three years forward? And if the answer 42 00:02:40,280 --> 00:02:43,200 Speaker 1: is no, I think will be lower than you know 43 00:02:44,160 --> 00:02:49,200 Speaker 1: whether the volatility and ad duration. So what do you 44 00:02:49,200 --> 00:02:50,560 Speaker 1: make greg if you think that rates are going to 45 00:02:50,600 --> 00:02:53,919 Speaker 1: be longer higher? For our brother acts to say, if 46 00:02:53,960 --> 00:02:55,400 Speaker 1: you think that rates are going to be lower for 47 00:02:55,440 --> 00:02:57,880 Speaker 1: a longer period of time, then what is the FED 48 00:02:57,960 --> 00:02:59,920 Speaker 1: getting wrong? How do you push back against the Fed 49 00:03:00,040 --> 00:03:02,280 Speaker 1: to reserve? It keeps saying we're going to keep rates 50 00:03:02,320 --> 00:03:06,440 Speaker 1: elevated and we see inflation as a serious concern. Yeah, 51 00:03:06,520 --> 00:03:08,880 Speaker 1: but inflation is a serious concern. So one of the 52 00:03:08,960 --> 00:03:13,519 Speaker 1: gets the other. So in order to get rates lower 53 00:03:13,560 --> 00:03:18,040 Speaker 1: over time, central banks have to be viewed as inflation fighters. 54 00:03:18,080 --> 00:03:22,440 Speaker 1: If they lose that credibility and then rates will just 55 00:03:22,720 --> 00:03:26,239 Speaker 1: naturally rise. So one big gets the other Lisa, And 56 00:03:26,320 --> 00:03:29,240 Speaker 1: so it's really critical for the FED and other central 57 00:03:29,240 --> 00:03:34,280 Speaker 1: banks to be viewed as vigilant around inflation because credibility 58 00:03:34,680 --> 00:03:37,960 Speaker 1: is based off that, and if central banks lose that credibility, 59 00:03:38,120 --> 00:03:41,720 Speaker 1: they lose the ability to actually kind of manage the 60 00:03:41,800 --> 00:03:44,600 Speaker 1: yield curve if you would, so, so it's really important 61 00:03:44,640 --> 00:03:46,640 Speaker 1: to get it right or the near term and if 62 00:03:46,680 --> 00:03:52,520 Speaker 1: anything air on the side of you know, reducing eliminating 63 00:03:52,520 --> 00:03:56,800 Speaker 1: inflation in the system, I think that's a job number one. Okay. 64 00:03:56,800 --> 00:03:59,320 Speaker 1: So given that, do you think that rates are too 65 00:03:59,440 --> 00:04:01,880 Speaker 1: high on the longer end or on the shorter end? 66 00:04:01,920 --> 00:04:03,920 Speaker 1: In other words, do you think that this market has 67 00:04:03,920 --> 00:04:07,400 Speaker 1: been overly aggressive with pricing out rate hikes and basically 68 00:04:07,440 --> 00:04:09,720 Speaker 1: saying to the Fed you're done and oh yeah, you're 69 00:04:09,720 --> 00:04:11,720 Speaker 1: going to cut rates by almost one hundred basis points 70 00:04:11,720 --> 00:04:14,640 Speaker 1: in the next twelve months. I do. I think the 71 00:04:14,800 --> 00:04:18,520 Speaker 1: markets are way too optimistic around the notion of rate cuts. 72 00:04:19,200 --> 00:04:23,720 Speaker 1: To me, I don't see that playing out precisely because 73 00:04:23,800 --> 00:04:26,640 Speaker 1: inflation remains quite high. So I don't see the scope 74 00:04:26,680 --> 00:04:31,080 Speaker 1: for central banks, namely the FED here cutting rates in 75 00:04:31,160 --> 00:04:35,400 Speaker 1: the manner that the markets are suggesting. So that seems 76 00:04:35,440 --> 00:04:39,760 Speaker 1: oft to me, quite frankly, and we're leaning against that notion, 77 00:04:39,839 --> 00:04:44,400 Speaker 1: so we don't necessarily see the rate cuts being pricings 78 00:04:44,520 --> 00:04:47,599 Speaker 1: the market coming to fruition. So that's one error the 79 00:04:47,600 --> 00:04:52,159 Speaker 1: market that we think it's completely are. So based on 80 00:04:52,200 --> 00:04:54,839 Speaker 1: what you're saying, which is a short end rates it 81 00:04:54,880 --> 00:04:56,880 Speaker 1: could stay high and even be much higher, and long 82 00:04:57,000 --> 00:05:00,279 Speaker 1: term rates could fall much lower. We're talking about really 83 00:05:00,320 --> 00:05:03,559 Speaker 1: substantial inverted yield curve, perhaps even more than a hundred 84 00:05:03,560 --> 00:05:08,200 Speaker 1: basis points that we saw earlier this year. Is that correct, Greg? Yeah, 85 00:05:08,240 --> 00:05:11,800 Speaker 1: so I think that is the path forward unless you 86 00:05:11,920 --> 00:05:17,840 Speaker 1: really get this harsh recession with inflation coming down pretty 87 00:05:17,960 --> 00:05:21,400 Speaker 1: rapidly than I expect the yield curve to remain inverted 88 00:05:21,880 --> 00:05:25,720 Speaker 1: and continue to get even more inverted. So I still 89 00:05:25,760 --> 00:05:29,680 Speaker 1: have this triple digit target between two tens. I think 90 00:05:29,720 --> 00:05:34,680 Speaker 1: that's where where we land, and that's what we're forecast. Well, yeah, 91 00:05:34,680 --> 00:05:37,640 Speaker 1: I got four questions, Greg, but no time for it. 92 00:05:37,760 --> 00:05:40,599 Speaker 1: Where's the ten year yield a year from now off 93 00:05:40,640 --> 00:05:45,000 Speaker 1: of that triple digit inverted curve? I think there's a 94 00:05:45,120 --> 00:05:49,400 Speaker 1: very good chance that, you know, the tenure just kind 95 00:05:49,400 --> 00:05:52,760 Speaker 1: of moves around, you know, plus or minus twenty basis points. 96 00:05:52,760 --> 00:05:54,880 Speaker 1: So I don't see at this point in time given 97 00:05:54,960 --> 00:05:58,320 Speaker 1: the data, and you guys mentioned how we're so data dependent, 98 00:05:58,640 --> 00:06:00,640 Speaker 1: so it makes it hard to port. But I don't 99 00:06:00,680 --> 00:06:03,680 Speaker 1: really see your radical shift over the near term twelve months. 100 00:06:04,200 --> 00:06:06,680 Speaker 1: But on the ten year part of the firm unless 101 00:06:06,839 --> 00:06:11,520 Speaker 1: you get a real change in the economy, including inflation. 102 00:06:11,720 --> 00:06:14,400 Speaker 1: So those are the big caveats. Of course, Greg Peters, 103 00:06:14,440 --> 00:06:17,279 Speaker 1: thank you so much. With PGIM and PJAM fixed income. 104 00:06:22,279 --> 00:06:25,440 Speaker 1: He is with Renaissance Macro. He is aware we moved 105 00:06:25,480 --> 00:06:28,359 Speaker 1: from an Atlanta GDP NOW number of three point x 106 00:06:28,440 --> 00:06:32,280 Speaker 1: percent under two percent as well, the world turning against 107 00:06:32,279 --> 00:06:35,120 Speaker 1: the optimism of Neil Datta. Neil Dutta, do you like 108 00:06:35,240 --> 00:06:40,400 Speaker 1: the Atlanta GDP NOW statistic? Is it a value? Oh? 109 00:06:40,480 --> 00:06:45,320 Speaker 1: Of course it's a value, Tom. But like anything, your 110 00:06:45,360 --> 00:06:50,240 Speaker 1: assumptions drive your conclusions, and the Atlanta FED number had 111 00:06:50,279 --> 00:06:53,760 Speaker 1: a sharp downward revision yesterday because of the ism manufacturing 112 00:06:53,880 --> 00:06:59,279 Speaker 1: PMI now. The ism manufacturing PMI last I check doesn't 113 00:06:59,279 --> 00:07:04,320 Speaker 1: formally get looked into the GDP calculation. So it's important 114 00:07:04,360 --> 00:07:06,960 Speaker 1: to remember that the GDP NOW estimate is not a 115 00:07:07,120 --> 00:07:11,800 Speaker 1: pure GDP sort of beam counting exercise. Um what does 116 00:07:11,840 --> 00:07:14,480 Speaker 1: go into GDP, by the way, is unit auto sales. 117 00:07:14,480 --> 00:07:16,280 Speaker 1: And auto sales came in a little bit better than 118 00:07:16,320 --> 00:07:21,320 Speaker 1: expected in March, and that tells me that motor vehicles 119 00:07:22,800 --> 00:07:25,400 Speaker 1: consumption on motor vehicles will be a significant boost to 120 00:07:25,920 --> 00:07:30,720 Speaker 1: first quarter GDP and remember that because of the ISM number, 121 00:07:30,800 --> 00:07:33,000 Speaker 1: the Atlanta fe has, you know, had a sharp down 122 00:07:33,040 --> 00:07:36,720 Speaker 1: revision to their durable goods consumption estimates for Q one, 123 00:07:36,880 --> 00:07:39,600 Speaker 1: So you know, it's important to kind of understand how 124 00:07:39,640 --> 00:07:42,440 Speaker 1: these numbers work as opposed to just sort of finally saying, 125 00:07:42,480 --> 00:07:45,480 Speaker 1: look it's down. You know that's not right. It's not 126 00:07:45,520 --> 00:07:48,840 Speaker 1: that easy. Well, we appreciate the analysis of it versus 127 00:07:48,880 --> 00:07:52,120 Speaker 1: it's down or it's up as well. What is the 128 00:07:52,240 --> 00:07:55,560 Speaker 1: state of the American consumer? Now, there's so many cross currents, 129 00:07:55,640 --> 00:08:01,000 Speaker 1: many of us witnessing packed airplanes, buoyant travel, and yet 130 00:08:01,120 --> 00:08:06,200 Speaker 1: real worry about different deciles of the American people. What 131 00:08:06,400 --> 00:08:10,680 Speaker 1: is the state of that consumer? Well, I think the 132 00:08:10,720 --> 00:08:13,640 Speaker 1: most important thing is that the real incomes have been 133 00:08:13,640 --> 00:08:17,600 Speaker 1: climbing and ultimately that is going to plant the seeds 134 00:08:17,600 --> 00:08:20,760 Speaker 1: of future consumer spending. To me, it's really that straightforward. 135 00:08:21,800 --> 00:08:25,320 Speaker 1: And I expect real consumer spending real incomes to continue 136 00:08:25,320 --> 00:08:28,840 Speaker 1: climbing into the second quarter. Remember, natural gas prices have 137 00:08:28,960 --> 00:08:32,160 Speaker 1: come down. That's going to bleed into household utility bills 138 00:08:32,160 --> 00:08:34,880 Speaker 1: over the second quarter. Given the state of the labor market, 139 00:08:34,960 --> 00:08:39,560 Speaker 1: which is still okay, that's going to mean stronger real 140 00:08:39,559 --> 00:08:42,040 Speaker 1: income growth in the second quarter, which will in turn 141 00:08:42,080 --> 00:08:46,480 Speaker 1: support real consumer spending. So I know there's a lot 142 00:08:46,480 --> 00:08:49,480 Speaker 1: of angst around the consumer. And you know, we've gone 143 00:08:49,559 --> 00:08:54,760 Speaker 1: from kind of talking about weird seasonal adjustment factors. Maybe 144 00:08:54,760 --> 00:08:57,000 Speaker 1: it was the warm weather, but you know, at the 145 00:08:57,120 --> 00:09:00,480 Speaker 1: end of the day, when you look at consumer spending 146 00:09:00,480 --> 00:09:05,040 Speaker 1: relative to where it was for the pandemic, it's off 147 00:09:05,040 --> 00:09:07,720 Speaker 1: the charts. So I think the Bears still have a 148 00:09:07,760 --> 00:09:10,760 Speaker 1: lot of explaining to do, and you know, I don't 149 00:09:10,800 --> 00:09:13,080 Speaker 1: really think the consumer is about to fall off the 150 00:09:13,080 --> 00:09:15,240 Speaker 1: cliff here. Well, Neil, we've got to make note here 151 00:09:15,240 --> 00:09:17,920 Speaker 1: you've been dead on about the lack of recession and 152 00:09:17,920 --> 00:09:21,160 Speaker 1: the resiliency of the American consumer. The zeitgeist right now, 153 00:09:21,200 --> 00:09:24,400 Speaker 1: Neil Datta is you know, off Adam two's's essay in 154 00:09:24,440 --> 00:09:28,319 Speaker 1: the Financial Times is a new respect for nominal GDP, 155 00:09:28,520 --> 00:09:32,320 Speaker 1: which is at real GDP with a movable dynamic of 156 00:09:32,360 --> 00:09:36,560 Speaker 1: inflation overlaid on top of it. Now you've got nominal GDP, 157 00:09:36,760 --> 00:09:40,280 Speaker 1: you've got incomes, whether real or top line, and then 158 00:09:40,280 --> 00:09:43,880 Speaker 1: it boosts right into corporate revenues as well, maybe giving 159 00:09:43,960 --> 00:09:47,640 Speaker 1: us a buoyant stock market. What does nominal GDP do 160 00:09:48,040 --> 00:09:51,680 Speaker 1: over the next nine months. I think the underlying trend 161 00:09:51,679 --> 00:09:54,320 Speaker 1: of nominal growth is around five to six percent, which 162 00:09:54,360 --> 00:09:57,800 Speaker 1: makes you know, these sort of calls that basically overlay 163 00:09:57,960 --> 00:10:02,120 Speaker 1: like corporate earnings over on the im sort of pointless. 164 00:10:02,240 --> 00:10:05,959 Speaker 1: I mean, um, it's all in the market. I mean 165 00:10:06,000 --> 00:10:08,240 Speaker 1: the sort of earnings recession that the bears have kind 166 00:10:08,280 --> 00:10:09,959 Speaker 1: of been talking about. I mean, to me, it's very 167 00:10:10,000 --> 00:10:13,400 Speaker 1: difficult to get a steeper earnings recession from this at 168 00:10:13,440 --> 00:10:16,640 Speaker 1: this point, because nominal incomes are running, nominal growth is 169 00:10:16,720 --> 00:10:19,400 Speaker 1: running five to six percent. At the same time, keep 170 00:10:19,440 --> 00:10:21,560 Speaker 1: in mind that the dollar is off about six and 171 00:10:21,559 --> 00:10:25,920 Speaker 1: a half percent over the last six months or so. 172 00:10:26,840 --> 00:10:29,880 Speaker 1: That's also a teal one for corporate earnings. And importantly, 173 00:10:29,880 --> 00:10:31,800 Speaker 1: in my world, it's a it's a tale went for 174 00:10:31,840 --> 00:10:34,920 Speaker 1: real export activity over the next year. So, um, a 175 00:10:34,960 --> 00:10:37,800 Speaker 1: lot of what's traded in the markets are you know, 176 00:10:37,920 --> 00:10:40,640 Speaker 1: large multinationals that do a lot of business overseas. And 177 00:10:40,679 --> 00:10:43,120 Speaker 1: if the global economy is looking a bit better than 178 00:10:43,120 --> 00:10:44,960 Speaker 1: it did last year, and which I think is really 179 00:10:44,960 --> 00:10:49,559 Speaker 1: frankly undeniable, then then that's gonna that's gonna bleed into 180 00:10:49,559 --> 00:10:52,560 Speaker 1: corporate earnings, which should support you know US equity price. 181 00:10:52,840 --> 00:10:54,840 Speaker 1: Now done to one more question, we've better run after 182 00:10:54,880 --> 00:10:58,960 Speaker 1: Brussels here in the historic moment for Europe. But first 183 00:10:59,240 --> 00:11:02,880 Speaker 1: to you, finally here on the fed derby all of 184 00:11:02,880 --> 00:11:06,040 Speaker 1: the gloom that's out there, the FED has to adapt 185 00:11:06,120 --> 00:11:11,120 Speaker 1: in a responsible, data dependent way. What data matters for 186 00:11:11,200 --> 00:11:15,600 Speaker 1: them on the road to May. Third, Well, I mean 187 00:11:15,640 --> 00:11:18,080 Speaker 1: this is going to sound, you know, pretty obvious, I think, 188 00:11:18,120 --> 00:11:21,440 Speaker 1: But to me it's it's employment and inflation. And remember 189 00:11:21,480 --> 00:11:23,720 Speaker 1: we only get one jobs number between now and the 190 00:11:23,760 --> 00:11:26,920 Speaker 1: May meeting, and I think that's really not enough time 191 00:11:26,960 --> 00:11:29,199 Speaker 1: for them to assess the fallout from what we saw 192 00:11:30,040 --> 00:11:32,679 Speaker 1: in the middle of March with the banking stresses that 193 00:11:32,679 --> 00:11:37,200 Speaker 1: that flared out. Now that being said, the consensus and 194 00:11:37,280 --> 00:11:40,640 Speaker 1: the FED are assuming a sudden stop in the economy. 195 00:11:41,160 --> 00:11:44,000 Speaker 1: Recession is imminent. We're about to fall off the cliff. 196 00:11:44,040 --> 00:11:45,280 Speaker 1: I mean, these are the sort of things that you 197 00:11:45,320 --> 00:11:49,200 Speaker 1: hear about, you know, from the consensus economics community. I 198 00:11:49,320 --> 00:11:53,960 Speaker 1: utterly reject that view. I think the economy is not collapsing. 199 00:11:54,120 --> 00:11:58,360 Speaker 1: We're probably growing at potential, and that's going to mean 200 00:11:58,360 --> 00:12:00,440 Speaker 1: that the unemployment rate is not going to rise in 201 00:12:00,440 --> 00:12:05,079 Speaker 1: a way that everyone expects and that ultimately leaves inflation 202 00:12:05,200 --> 00:12:10,960 Speaker 1: I think unresolved, frankly, and that's why I think, you know, 203 00:12:11,080 --> 00:12:13,520 Speaker 1: give it till June. We got a couple more jobs numbers. 204 00:12:13,520 --> 00:12:15,840 Speaker 1: At that point we'll see that, you know, we're still 205 00:12:15,840 --> 00:12:18,920 Speaker 1: cranking out a number of jobs, and ultimately I think 206 00:12:19,000 --> 00:12:20,920 Speaker 1: that's going to mean the next FED move will be 207 00:12:20,920 --> 00:12:23,000 Speaker 1: a hike. Neil Dada, thank you so much for joining 208 00:12:23,080 --> 00:12:24,880 Speaker 1: us too brief a visit this morning. He is with 209 00:12:25,000 --> 00:12:39,360 Speaker 1: Renaissance and Macro Research. She's been a resilient bull Lean 210 00:12:39,440 --> 00:12:43,520 Speaker 1: forward and listen to Barbara Reinhard of Voya Investment Management. 211 00:12:43,600 --> 00:12:45,440 Speaker 1: Are you still bullish? You have to the move off 212 00:12:45,440 --> 00:12:48,240 Speaker 1: of October? We are. We still bullish because we believe 213 00:12:48,360 --> 00:12:52,920 Speaker 1: that the SPB banking crisis really gave the central banks 214 00:12:52,920 --> 00:12:56,680 Speaker 1: an opportunity to reassess they have muscle memory on what 215 00:12:56,720 --> 00:12:59,920 Speaker 1: a systemic crisis looks like. While the FED raised race 216 00:13:00,040 --> 00:13:02,199 Speaker 1: said its last meeting, we think this gives it an 217 00:13:02,200 --> 00:13:05,559 Speaker 1: opportunity to slow down some of its hawkishness, who were 218 00:13:05,640 --> 00:13:08,680 Speaker 1: only talking about fifty basis points hyke just a month ago. 219 00:13:09,480 --> 00:13:12,040 Speaker 1: They only did twenty five. And you're seeing some relief 220 00:13:12,080 --> 00:13:15,280 Speaker 1: on inflation, Jamie Diamond in his letter this morning, and 221 00:13:15,320 --> 00:13:17,360 Speaker 1: I've just skimmed through it, folks, We're all right, you know, 222 00:13:17,559 --> 00:13:20,079 Speaker 1: I'll go and read the whole thing tonight over a 223 00:13:20,120 --> 00:13:23,600 Speaker 1: beverage of my choice. Mister Diamond says, maybe with SVB 224 00:13:24,120 --> 00:13:26,720 Speaker 1: we have some form of and these are my own words, 225 00:13:26,760 --> 00:13:31,360 Speaker 1: paradigm shift. How do you shift your equity investment given 226 00:13:31,400 --> 00:13:34,960 Speaker 1: the shock that we had systemically. It may seem peculiar, 227 00:13:35,040 --> 00:13:37,240 Speaker 1: but you know what, the big rally off of the bottom, 228 00:13:37,240 --> 00:13:40,760 Speaker 1: it was participated on very strongly by the international equity markets, 229 00:13:40,840 --> 00:13:44,840 Speaker 1: so developed international Europe and emerging markets were some of 230 00:13:44,840 --> 00:13:47,240 Speaker 1: the big gainers off of that bottom of the October low. 231 00:13:47,640 --> 00:13:49,880 Speaker 1: But what we saw in March, we think is an 232 00:13:49,880 --> 00:13:53,520 Speaker 1: important shift. The US outperformed the rest of the world, 233 00:13:53,559 --> 00:13:56,520 Speaker 1: and pretty strongly. So we think that the seven hundred 234 00:13:56,520 --> 00:13:59,760 Speaker 1: basis points of the international markets outperformance of the US 235 00:14:00,080 --> 00:14:03,280 Speaker 1: the past year is largely behind us, and we think 236 00:14:03,280 --> 00:14:05,040 Speaker 1: it's going to be the US that's going to be 237 00:14:05,080 --> 00:14:08,800 Speaker 1: the leader going forward. Barbara, what data are you looking 238 00:14:08,840 --> 00:14:11,200 Speaker 1: at the suggests that the US is doing so much 239 00:14:11,280 --> 00:14:13,760 Speaker 1: better than other nations? And I ask this because George 240 00:14:13,760 --> 00:14:16,000 Speaker 1: Saravellos over at Deutsche Bank put out a note saying 241 00:14:16,400 --> 00:14:19,600 Speaker 1: that European wages are outpacing those in the US for 242 00:14:19,600 --> 00:14:21,800 Speaker 1: the first time in more than a decade. Right, Well, 243 00:14:21,800 --> 00:14:24,280 Speaker 1: that's the thing is, it gives the opportunity, the slowing 244 00:14:24,280 --> 00:14:27,160 Speaker 1: inflation scenario that you have in the US gives the 245 00:14:27,280 --> 00:14:30,560 Speaker 1: central Bank the opportunity to slow their rate hikes even 246 00:14:31,040 --> 00:14:34,840 Speaker 1: possibly pause at their next meeting, and that means that 247 00:14:34,880 --> 00:14:37,040 Speaker 1: the US is likely to be one of those first 248 00:14:37,080 --> 00:14:39,280 Speaker 1: in to fight inflation and one of the first ones 249 00:14:39,640 --> 00:14:43,120 Speaker 1: also to start pausing and then potentially cutting sometime in 250 00:14:43,120 --> 00:14:46,840 Speaker 1: the next year. Remember that first rate pause. When the 251 00:14:46,880 --> 00:14:50,720 Speaker 1: Fed pauses, there's usually a very big counter trend rally 252 00:14:51,160 --> 00:14:55,840 Speaker 1: in equities. You have that also coincidence with very high 253 00:14:55,880 --> 00:14:59,400 Speaker 1: cash levels at mutual funds and also somewhat depress sentiment, 254 00:14:59,600 --> 00:15:02,400 Speaker 1: and it is a very important kind of push forward 255 00:15:02,440 --> 00:15:06,440 Speaker 1: for equities, likely onto new highs. Barbara, I absolutely love 256 00:15:06,480 --> 00:15:08,960 Speaker 1: how you troll all the bears out there and successfully 257 00:15:09,000 --> 00:15:12,080 Speaker 1: because frankly, you have been right basically saying, what's been 258 00:15:12,080 --> 00:15:14,160 Speaker 1: the biggest pain trade since last October? The answer is 259 00:15:14,200 --> 00:15:16,960 Speaker 1: being short stocks for long cash. What do you think 260 00:15:17,480 --> 00:15:19,440 Speaker 1: is going to be the leadership here. Is it going 261 00:15:19,520 --> 00:15:22,480 Speaker 1: to continue to be tech on the heels of that pause, 262 00:15:22,680 --> 00:15:24,200 Speaker 1: or is it going to be broad based? Is this 263 00:15:24,360 --> 00:15:28,040 Speaker 1: really something more holistic and longer lasting. Look, for sure, 264 00:15:28,080 --> 00:15:29,840 Speaker 1: there are parts of the market that are more affected 265 00:15:29,840 --> 00:15:31,920 Speaker 1: by SVB than others. Right there's going to be a 266 00:15:31,960 --> 00:15:35,800 Speaker 1: continued tightening of credit conditions that affects US smallcaps, US 267 00:15:35,880 --> 00:15:38,400 Speaker 1: midcaps much more than it does large caps. But I 268 00:15:38,440 --> 00:15:41,080 Speaker 1: would say they've been so beaten down at this point, 269 00:15:41,480 --> 00:15:44,000 Speaker 1: you're likely to see a broadening out of the equity market. 270 00:15:44,040 --> 00:15:46,240 Speaker 1: And it's going to broaden out from leadership, not only 271 00:15:46,280 --> 00:15:49,000 Speaker 1: from US growth, but take some of the other parts 272 00:15:49,000 --> 00:15:52,160 Speaker 1: of the market, likely the lower cap size along with it. 273 00:15:52,480 --> 00:15:54,760 Speaker 1: I think it's difficult to mount the sustainable rally in 274 00:15:54,800 --> 00:15:58,560 Speaker 1: the early cyclicles at this point, but we do think 275 00:15:58,560 --> 00:16:01,920 Speaker 1: that it's likely indeed to have a very much bigger, 276 00:16:02,000 --> 00:16:05,480 Speaker 1: broader base in terms of capsize. I want to address 277 00:16:05,520 --> 00:16:07,880 Speaker 1: this from Jamie Diamond's letter released an hour ago. I 278 00:16:07,920 --> 00:16:10,200 Speaker 1: assume you did not get an advanced copy. Now I 279 00:16:10,240 --> 00:16:13,040 Speaker 1: did not. There's a banking Numbers's joke, folks, there's a 280 00:16:13,120 --> 00:16:16,760 Speaker 1: banking numbers as well, and down at the bottom. It 281 00:16:16,200 --> 00:16:21,000 Speaker 1: was the next Secretary of Treasury talking about policy, diplomacy 282 00:16:21,000 --> 00:16:24,040 Speaker 1: and that, and in the middle he says, there are 283 00:16:24,080 --> 00:16:26,800 Speaker 1: storm clouds ahead because of the shock we had from 284 00:16:26,960 --> 00:16:30,720 Speaker 1: SVB deposit flows and things. Maybe we don't know right now. 285 00:16:31,280 --> 00:16:33,720 Speaker 1: How do you stay a bull? How do you stay 286 00:16:33,720 --> 00:16:37,320 Speaker 1: in the market on a Friday afternoon? If mister Diamond 287 00:16:37,320 --> 00:16:40,320 Speaker 1: and you suggest there are storm clouds ahead, there are 288 00:16:40,360 --> 00:16:43,240 Speaker 1: always storm clouds ahead. Right You've had this expansion going 289 00:16:43,240 --> 00:16:45,720 Speaker 1: for quite some time in the US if you count 290 00:16:45,760 --> 00:16:49,760 Speaker 1: that the COVID reset in the COVID recession that we 291 00:16:49,800 --> 00:16:54,800 Speaker 1: had wasn't necessarily a classic business cycle contraction. So yes, 292 00:16:54,960 --> 00:16:57,720 Speaker 1: we're further along in the cycle, but there's always storm 293 00:16:57,720 --> 00:17:00,280 Speaker 1: clouds ahead. When you have a five hundred basis point 294 00:17:00,280 --> 00:17:03,480 Speaker 1: tightening in rates like you've had from the Fed over 295 00:17:03,480 --> 00:17:06,440 Speaker 1: the past year, things start to break. We've had things 296 00:17:06,480 --> 00:17:09,560 Speaker 1: breaking for over a year. However, if you do not 297 00:17:09,680 --> 00:17:12,680 Speaker 1: believe the recession is upon us in the next six months, 298 00:17:12,720 --> 00:17:15,440 Speaker 1: and we do not think that there is, equity markets 299 00:17:15,440 --> 00:17:17,440 Speaker 1: tend to do very well in the year up to 300 00:17:17,560 --> 00:17:21,520 Speaker 1: your recession. The raging theme over the weekend, Adam two 301 00:17:21,640 --> 00:17:24,359 Speaker 1: is leading a debate in the FT is the power 302 00:17:24,359 --> 00:17:30,720 Speaker 1: of nominal GDP. Does an inflation juicd nominal GDP mean 303 00:17:30,760 --> 00:17:34,040 Speaker 1: a surprise and revenue growth for American corporations, Well, it 304 00:17:34,080 --> 00:17:37,040 Speaker 1: makes everybody feel better to have faster GPP growth, right. 305 00:17:37,320 --> 00:17:40,080 Speaker 1: The margin compression story is a real concern, of course 306 00:17:40,080 --> 00:17:43,240 Speaker 1: in the US, But we do believe that there's enough 307 00:17:43,680 --> 00:17:45,760 Speaker 1: that the Fed's going to be able to pause, that 308 00:17:45,840 --> 00:17:49,399 Speaker 1: they've done enough to get inflation under control. And you 309 00:17:49,400 --> 00:17:51,520 Speaker 1: start to see it. You had a much better core 310 00:17:51,560 --> 00:17:54,560 Speaker 1: PC number that was just released, and if you had 311 00:17:54,840 --> 00:17:58,600 Speaker 1: and in South Korea today we saw disinflation there as well, exactly, 312 00:17:58,640 --> 00:18:00,280 Speaker 1: So it could be a world that's going to be 313 00:18:00,320 --> 00:18:03,560 Speaker 1: a wash in slowing inflation at least through the second 314 00:18:03,600 --> 00:18:06,080 Speaker 1: quarter of this year. What we're gonna do here, folks, 315 00:18:06,119 --> 00:18:08,400 Speaker 1: is through all of twenty twenty three, we're gonna put 316 00:18:08,400 --> 00:18:11,240 Speaker 1: Bramo and Reinhard on the desk together here to have 317 00:18:11,840 --> 00:18:15,560 Speaker 1: a dueling debate on the tone of our economic polity 318 00:18:16,359 --> 00:18:26,360 Speaker 1: moving forward. Barbara Reinhard is with Voi Investment Management this morning. 319 00:18:26,560 --> 00:18:29,800 Speaker 1: Where our heads are spinning home in a way. It's 320 00:18:29,800 --> 00:18:32,760 Speaker 1: the name of his new sub stack effort. Richard hass 321 00:18:32,840 --> 00:18:35,120 Speaker 1: joins us on the home and the way, Richard, Let's 322 00:18:35,160 --> 00:18:37,440 Speaker 1: go to the away first. And the way is what 323 00:18:37,520 --> 00:18:39,600 Speaker 1: you when you were at Oberlin a million years ago, 324 00:18:40,119 --> 00:18:43,360 Speaker 1: you were falling asleep on a two pm Thursday afternoon, 325 00:18:43,760 --> 00:18:47,560 Speaker 1: and somebody said, Finland will forever remain neutral. And here 326 00:18:47,600 --> 00:18:50,359 Speaker 1: you and I are looking at Finland to enter NATO. 327 00:18:50,520 --> 00:18:53,800 Speaker 1: How did we get here? Oh, if you had asked 328 00:18:53,800 --> 00:18:55,320 Speaker 1: me that when I was in college, I would have 329 00:18:55,320 --> 00:18:58,440 Speaker 1: said the Cold War was permanent. So much has happened 330 00:18:58,840 --> 00:19:02,160 Speaker 1: that I didn't quite anticipate. I think this is part 331 00:19:02,200 --> 00:19:06,480 Speaker 1: of the unintended consequence of mister Putin's war. People thought 332 00:19:06,520 --> 00:19:11,320 Speaker 1: after the Cold War ended, NATO lacked a rationale. It's one. 333 00:19:11,480 --> 00:19:14,959 Speaker 1: It's old rationale has come back on stilts. And the 334 00:19:15,000 --> 00:19:17,879 Speaker 1: fact that Finland is in NATO, Sweden's moving in that 335 00:19:17,960 --> 00:19:21,000 Speaker 1: direction again. This is what mister Putin has wrought. We 336 00:19:21,119 --> 00:19:23,080 Speaker 1: never could have done it, shall we say? Without him? 337 00:19:23,680 --> 00:19:25,679 Speaker 1: When I look at the map and I don't have 338 00:19:25,760 --> 00:19:27,800 Speaker 1: it in front of me, folks, you know I flunked 339 00:19:27,800 --> 00:19:30,920 Speaker 1: finished geography. But if you come down to the bottom 340 00:19:31,000 --> 00:19:34,479 Speaker 1: near Helsinki and you move over to the east, NATO 341 00:19:34,720 --> 00:19:38,160 Speaker 1: is not all that far from Saint Petersburg, is it? 342 00:19:38,160 --> 00:19:43,880 Speaker 1: It's remarkable we worried about Ukraine being close Condoleeza, Rice, Bill, 343 00:19:44,240 --> 00:19:48,320 Speaker 1: Robert Gates and others pushing back on Ukraine and NATO. 344 00:19:48,760 --> 00:19:53,120 Speaker 1: My word, NATO to Saint Petersburg now is a quick ride, Ambassador, 345 00:19:53,200 --> 00:19:56,480 Speaker 1: isn't it that? And you've also got far more a 346 00:19:56,560 --> 00:20:00,640 Speaker 1: border for Russia to worry about again. Strategically, this makes 347 00:20:00,720 --> 00:20:03,720 Speaker 1: zero sense. I think what it shows from Plutin's point 348 00:20:03,720 --> 00:20:05,639 Speaker 1: of view, either he didn't see this happening, or if 349 00:20:05,640 --> 00:20:08,080 Speaker 1: he did, he didn't much care. Tom he puts he's 350 00:20:08,119 --> 00:20:11,040 Speaker 1: put so much of an emphasis on Ukraine, he's in 351 00:20:11,080 --> 00:20:14,800 Speaker 1: some ways rolled the dice. His own presidency depends upon it. That. 352 00:20:15,000 --> 00:20:17,480 Speaker 1: My guess is, whatever costs he has to pay, whether 353 00:20:17,480 --> 00:20:21,880 Speaker 1: it's manpower, economically, strategically, he's prepared to pay because he's 354 00:20:21,880 --> 00:20:25,040 Speaker 1: put at risk his own political future and the future 355 00:20:25,080 --> 00:20:28,240 Speaker 1: of authoritarian Russian Chris, thank you for the headline. Across 356 00:20:28,280 --> 00:20:33,320 Speaker 1: the Bloomberg Terminal. Finland officially joins NATO is thirty first member. 357 00:20:33,520 --> 00:20:36,280 Speaker 1: Maria too is in Brussels and will be looking for 358 00:20:36,400 --> 00:20:39,320 Speaker 1: ceremony there. I believe in the next hour let us 359 00:20:39,359 --> 00:20:42,360 Speaker 1: turn home of your home and away sub stack effort. 360 00:20:42,520 --> 00:20:46,680 Speaker 1: Retired Ambassador hass Here from the Council on Ford Relations. 361 00:20:47,040 --> 00:20:49,200 Speaker 1: The home event, Well, I've got to go down Fifth 362 00:20:49,280 --> 00:20:52,920 Speaker 1: Avenue plass Trump Tower, and maybe down into Center Street 363 00:20:52,960 --> 00:20:56,520 Speaker 1: as well. Your comments on the bills and the obligations, 364 00:20:56,520 --> 00:21:01,200 Speaker 1: the obligations Richard, the president Trump has to this process 365 00:21:01,240 --> 00:21:06,000 Speaker 1: of indictment and arrangement. Well, Tommy, it's more than an 366 00:21:06,040 --> 00:21:10,359 Speaker 1: obligation to follow the law. Obligations or things you should 367 00:21:10,359 --> 00:21:12,479 Speaker 1: do but don't have to do. And Donald Trump has 368 00:21:12,520 --> 00:21:17,640 Speaker 1: been a serial violator of obligations. The idea of norms, 369 00:21:17,680 --> 00:21:21,160 Speaker 1: the peaceful transfer of political power, the most basic defining 370 00:21:21,240 --> 00:21:26,760 Speaker 1: norm of American democracy. He violated that. Civility he violates 371 00:21:26,760 --> 00:21:31,720 Speaker 1: on a daily basis, is signaling about political violence. Another 372 00:21:31,960 --> 00:21:35,000 Speaker 1: violation the idea of putting country before party or person. 373 00:21:35,440 --> 00:21:37,639 Speaker 1: I would say, in many ways, his whole career is 374 00:21:37,640 --> 00:21:41,120 Speaker 1: a violation of that obligation. The law, though, is something else, 375 00:21:41,119 --> 00:21:43,400 Speaker 1: so we have a system for dealing with it. That's 376 00:21:43,400 --> 00:21:46,840 Speaker 1: why we have courts and the light. Obligations though, or 377 00:21:46,920 --> 00:21:49,800 Speaker 1: something citizens have to insist upon, and that brings it 378 00:21:49,840 --> 00:21:52,119 Speaker 1: all back to the ballot Box. He could well be 379 00:21:52,200 --> 00:21:55,360 Speaker 1: the Republican nominee. I think what this indictment has done 380 00:21:55,359 --> 00:21:58,679 Speaker 1: in some ways is frozen the other Republican candidates. It 381 00:21:58,760 --> 00:22:02,240 Speaker 1: increases the odds Nonald Trump is the Republican nominee. And 382 00:22:02,359 --> 00:22:05,840 Speaker 1: let's be brutally honest. If Donald Trump is the Republican nominee, Tom, 383 00:22:05,880 --> 00:22:07,919 Speaker 1: he's one of the two most likely people to be 384 00:22:07,960 --> 00:22:11,480 Speaker 1: the next president of the United States. Richard Hass I 385 00:22:11,480 --> 00:22:13,439 Speaker 1: don't want to be inflammatory here, and I want to 386 00:22:13,440 --> 00:22:16,760 Speaker 1: take the arc up to eighteen sixty. It can be Kansas, 387 00:22:16,800 --> 00:22:20,119 Speaker 1: Nebraska and the rest. But there's a mood there now 388 00:22:20,280 --> 00:22:23,520 Speaker 1: of disunion of a nation. Not that would break up. 389 00:22:23,560 --> 00:22:26,040 Speaker 1: I just don't want to go there, but of this 390 00:22:26,280 --> 00:22:30,280 Speaker 1: absolute polarization we see with the president former president's poll 391 00:22:30,400 --> 00:22:34,960 Speaker 1: ratings and such, with your people at CFR, how close 392 00:22:35,119 --> 00:22:40,360 Speaker 1: are we to a dialogue of disunion, if not outright disunion. 393 00:22:41,560 --> 00:22:44,240 Speaker 1: I'm not worried about formal disunion. I agree with you, Tom, 394 00:22:44,320 --> 00:22:47,720 Speaker 1: but we already have very shepherd Americas. The red versus 395 00:22:47,720 --> 00:22:51,000 Speaker 1: blue look at life expectancy, the differences between red and 396 00:22:51,080 --> 00:22:54,119 Speaker 1: blue states. You look at him. People now are really 397 00:22:54,160 --> 00:22:58,240 Speaker 1: separated by geography, by religion by what cable shows they watch. 398 00:22:58,520 --> 00:23:02,160 Speaker 1: That really worries me. Increasingly America, which is a country 399 00:23:02,200 --> 00:23:05,440 Speaker 1: founded on ideas, we no longer have a common set 400 00:23:05,440 --> 00:23:07,840 Speaker 1: of ideas. It's one of the many prices we pay 401 00:23:07,920 --> 00:23:12,200 Speaker 1: for not teaching civics in our schools. We're not requiring civics. 402 00:23:12,400 --> 00:23:14,800 Speaker 1: I'm not worried about a civil war, Tom, but I 403 00:23:14,840 --> 00:23:17,359 Speaker 1: am worried about something else. You were teasing me about 404 00:23:17,400 --> 00:23:21,000 Speaker 1: my ambassadorial hot I was the us envoid in Northern Ireland. 405 00:23:21,280 --> 00:23:24,240 Speaker 1: This spring we marked twenty five years since the so 406 00:23:24,400 --> 00:23:27,760 Speaker 1: called Troubles. The political and violence in Northern Ireland pretty 407 00:23:27,800 --> 00:23:30,400 Speaker 1: much came to an end. I worry about an American 408 00:23:30,560 --> 00:23:33,800 Speaker 1: version of the Troubles, where we could have fairly frequent, 409 00:23:34,119 --> 00:23:38,480 Speaker 1: decentralized political violence in this gunloaded country of ours. That 410 00:23:38,680 --> 00:23:42,000 Speaker 1: is not something we can dismiss. How would the troubles 411 00:23:42,040 --> 00:23:44,480 Speaker 1: of Ireland been different? And of course this is with 412 00:23:44,560 --> 00:23:48,040 Speaker 1: a wonderful Irish movie that was Oscar Worthy this year. 413 00:23:48,480 --> 00:23:52,480 Speaker 1: How would the troubles Richard Hass have been different if 414 00:23:52,520 --> 00:23:57,280 Speaker 1: we'd had Twitter at the time, would have been much worse. 415 00:23:57,280 --> 00:24:00,320 Speaker 1: What Twitter does is it's called social media, Tom, It's 416 00:24:00,400 --> 00:24:04,280 Speaker 1: not serious media. It's not factual media. So Twitter allows 417 00:24:04,359 --> 00:24:08,560 Speaker 1: people to traffic in thissinformation or selective information. That's what 418 00:24:08,640 --> 00:24:12,639 Speaker 1: social media does, and it's really dangerous. It reinforces the 419 00:24:12,640 --> 00:24:16,359 Speaker 1: tribalism of any society. And you know, our democracy is 420 00:24:16,359 --> 00:24:19,040 Speaker 1: two and a half centuries old. We're celebrating the declaration 421 00:24:19,119 --> 00:24:22,480 Speaker 1: of independence in three years. It's two US or fiftieth anniversary. 422 00:24:22,760 --> 00:24:24,879 Speaker 1: We were not made in some ways for the age 423 00:24:24,880 --> 00:24:28,240 Speaker 1: of social media. I look where we are, Richard Haas, 424 00:24:28,359 --> 00:24:31,919 Speaker 1: And of course the import today in a toggle switch. 425 00:24:31,960 --> 00:24:36,399 Speaker 1: Here a president that will go to arrayment, be peaceful, quiet. 426 00:24:36,440 --> 00:24:40,280 Speaker 1: But he speaks tonight from our lago. What would you 427 00:24:40,320 --> 00:24:46,080 Speaker 1: want to hear from President Trump tonight from mara lago. Look, 428 00:24:46,160 --> 00:24:47,520 Speaker 1: what I would want to hear him do is put 429 00:24:47,600 --> 00:24:50,160 Speaker 1: country first, to talk about the importance of the law 430 00:24:50,160 --> 00:24:53,000 Speaker 1: of the legal process, that he'll respect it, not to 431 00:24:53,080 --> 00:24:57,960 Speaker 1: attack judges, not to attack prosecutors, to basically part of 432 00:24:57,960 --> 00:25:00,760 Speaker 1: what makes America America is the rule, rule of laws. 433 00:25:00,840 --> 00:25:03,960 Speaker 1: Basic Tom. For all the business people watching your show, 434 00:25:04,200 --> 00:25:07,440 Speaker 1: this is it's the oxygen of American society. What I 435 00:25:07,440 --> 00:25:09,720 Speaker 1: would like to see Donald Trump do is respect the 436 00:25:09,800 --> 00:25:13,400 Speaker 1: rule of law. Richard to finish up here, Let's come 437 00:25:13,480 --> 00:25:16,160 Speaker 1: full circle here as we looked away and then home. 438 00:25:16,760 --> 00:25:19,960 Speaker 1: The center tendency of two twenty two was a shock 439 00:25:20,000 --> 00:25:25,199 Speaker 1: of February, and Vladimir Putin he has to be thunderstruck today, 440 00:25:25,520 --> 00:25:27,600 Speaker 1: and not only what he sees in the United States 441 00:25:27,640 --> 00:25:30,359 Speaker 1: and the events in the island of Manhattan, but what 442 00:25:30,440 --> 00:25:33,920 Speaker 1: he sees in Finland as well. How would you presume 443 00:25:34,840 --> 00:25:38,520 Speaker 1: someone so cloistered in the Kremlin, how would you presume 444 00:25:38,600 --> 00:25:42,400 Speaker 1: he will respond to these new twenty twenty three shocks. 445 00:25:43,720 --> 00:25:46,119 Speaker 1: Obviously unhappy about Finland, but he will be in some 446 00:25:46,200 --> 00:25:50,200 Speaker 1: ways feeling good about events here reinforces his sense Tom 447 00:25:50,240 --> 00:25:53,280 Speaker 1: that time is on his side, that the United States 448 00:25:53,280 --> 00:25:58,160 Speaker 1: and European support for Ukraine is eventually weak. It will 449 00:25:58,200 --> 00:26:01,760 Speaker 1: cause Putin to dig in his heels. You had, Leslie, 450 00:26:01,840 --> 00:26:03,800 Speaker 1: were even talking about it before. A lot of our 451 00:26:03,840 --> 00:26:07,400 Speaker 1: allies are uneasy about a return of Trump or trumps 452 00:26:07,480 --> 00:26:10,199 Speaker 1: Um and all that means. But for somebody like Putin, 453 00:26:10,280 --> 00:26:13,359 Speaker 1: for Sheej and Ping for some others in the Middle East, 454 00:26:13,640 --> 00:26:16,960 Speaker 1: they will welcome the possibility of our going on back 455 00:26:16,960 --> 00:26:19,280 Speaker 1: to the future. Here. I said this a couple of 456 00:26:19,320 --> 00:26:22,200 Speaker 1: years ago folks. Richard hass The World was the book 457 00:26:22,240 --> 00:26:24,600 Speaker 1: of the summer. It was the summer book you threw 458 00:26:24,720 --> 00:26:27,760 Speaker 1: in an older child and said, shut up and read this. 459 00:26:28,080 --> 00:26:31,399 Speaker 1: And a bill of obligations follows right behind. It is 460 00:26:31,560 --> 00:26:36,000 Speaker 1: first class on civics needed in America. Richard hass is 461 00:26:36,160 --> 00:26:38,840 Speaker 1: with a Council on Foreign Relations in his sub stack 462 00:26:38,920 --> 00:26:51,920 Speaker 1: effort is home in a way, Lisa, how'd your bracket 463 00:26:51,960 --> 00:26:55,360 Speaker 1: work out? I think I failed. March Madness took over 464 00:26:55,400 --> 00:26:57,800 Speaker 1: in a very different way. Considering the past couple of 465 00:26:57,800 --> 00:27:01,040 Speaker 1: weeks and everything we've been will dealing with Tom feel better? Lisa, 466 00:27:01,240 --> 00:27:04,600 Speaker 1: Your bracket was better than my bracket. We have a 467 00:27:04,640 --> 00:27:08,639 Speaker 1: wonderful annual ritual here at Bloomberg within Brackets, which is 468 00:27:08,720 --> 00:27:12,520 Speaker 1: various worthies commit to charity and support and there's always 469 00:27:12,520 --> 00:27:15,320 Speaker 1: a winner. It's something to do with a parquet floor. 470 00:27:15,440 --> 00:27:19,320 Speaker 1: Steve Paliuca's senior advisor at Bank Capitol, co owner of 471 00:27:19,440 --> 00:27:22,879 Speaker 1: the Boston Celtics. Mister Paliuca was the winner of the 472 00:27:22,880 --> 00:27:26,359 Speaker 1: Bloomberg Brackets for a cause. He corrected, How did the 473 00:27:26,440 --> 00:27:29,720 Speaker 1: hell did he do this? He picked Ukon to win 474 00:27:30,400 --> 00:27:34,200 Speaker 1: March Madness. The Huskies dazzled seventy six to fifty nine 475 00:27:34,640 --> 00:27:37,359 Speaker 1: and a win over San Diego State, and of course 476 00:27:37,480 --> 00:27:40,680 Speaker 1: of one million dollar brackets for a cause pot will 477 00:27:40,720 --> 00:27:45,280 Speaker 1: go to mister Paliuca's charity, Reform Alliance, a charity helping 478 00:27:45,320 --> 00:27:48,240 Speaker 1: people get out of prison and move on to constructive 479 00:27:48,600 --> 00:27:50,520 Speaker 1: at jobs. I do have to note here in a 480 00:27:50,520 --> 00:27:54,639 Speaker 1: careful review, because we provide transparency here at Bloomberg. We 481 00:27:54,720 --> 00:28:00,399 Speaker 1: went from grower to Pallyuca A Peter Grower, Lisa Peter Rour. 482 00:28:01,480 --> 00:28:06,360 Speaker 1: It came in here underperforming. I guess is how well 483 00:28:06,400 --> 00:28:10,040 Speaker 1: constructively put that Bill Ackman Jay Clayton together. That's the 484 00:28:10,080 --> 00:28:14,160 Speaker 1: first time they've ever been together. Underperforming, as they say, 485 00:28:14,359 --> 00:28:19,639 Speaker 1: dazzling up higher. Cliff assess respectable one, Michael Bloomberg, Lisa 486 00:28:19,960 --> 00:28:23,360 Speaker 1: did better than good and we noticed Jonathan Gray at 487 00:28:23,400 --> 00:28:27,720 Speaker 1: Blackstone among others, all aced out by Steve Paliuca. Steve, 488 00:28:27,800 --> 00:28:30,320 Speaker 1: what in the ether did you do to win this bracket? 489 00:28:30,520 --> 00:28:32,240 Speaker 1: What did you see? Is it like the day to 490 00:28:32,320 --> 00:28:35,080 Speaker 1: day grind of the Celtics means that you've got it 491 00:28:35,119 --> 00:28:37,920 Speaker 1: all figured out? I wish I was the case. I 492 00:28:38,320 --> 00:28:41,520 Speaker 1: think I was just lucky and happy to have the 493 00:28:41,520 --> 00:28:43,360 Speaker 1: money go to the inform Alliance. As you said, it's 494 00:28:43,360 --> 00:28:47,440 Speaker 1: an amazing charity set up by Robert Kraft and Michael 495 00:28:47,480 --> 00:28:50,960 Speaker 1: Rubin to get prisoners work. And we have four million 496 00:28:51,760 --> 00:28:54,880 Speaker 1: people on parole in the system and really needs to 497 00:28:54,880 --> 00:28:58,840 Speaker 1: be reformed and rehab So I'm very grateful to Bloomberg 498 00:28:58,880 --> 00:29:02,680 Speaker 1: and grateful to the basketball gods that helped me this year. 499 00:29:02,800 --> 00:29:06,000 Speaker 1: The basketball gods gave us as well. And I'm not 500 00:29:06,160 --> 00:29:08,760 Speaker 1: up to speed on this, Stevens. If I'm out of turn, 501 00:29:08,920 --> 00:29:13,960 Speaker 1: say so. Boy did the women to deliver Attorney this year? 502 00:29:14,240 --> 00:29:17,480 Speaker 1: It seemed to be a real turning point where America 503 00:29:17,560 --> 00:29:23,400 Speaker 1: paid attention in a new way to women's NCAA basketball. Absolutely, 504 00:29:23,600 --> 00:29:26,240 Speaker 1: I think all the women's sports are getting more attention. 505 00:29:26,920 --> 00:29:29,440 Speaker 1: People love to watch sports, and the level of competition 506 00:29:29,520 --> 00:29:31,360 Speaker 1: was probably the best ever in the women's tournament. The 507 00:29:31,840 --> 00:29:37,120 Speaker 1: woman Clark was just just electric out there. Fantastic final, Steve, 508 00:29:37,200 --> 00:29:39,640 Speaker 1: an important day for all of the global Wall Street 509 00:29:39,680 --> 00:29:42,560 Speaker 1: and particularly American Wall Street. James Diamond and team at 510 00:29:42,640 --> 00:29:45,960 Speaker 1: JP Morgan publish a letter They speak there of the 511 00:29:46,040 --> 00:29:49,080 Speaker 1: storm clouds to come. This is mister Diamond and his 512 00:29:49,120 --> 00:29:52,280 Speaker 1: team looking at SVB in the banking crisis, how did 513 00:29:52,280 --> 00:29:56,840 Speaker 1: the storm clouds look from Boston this morning. Well, as 514 00:29:56,840 --> 00:30:00,960 Speaker 1: you know time, we've talked about this before, lots of 515 00:30:01,120 --> 00:30:04,040 Speaker 1: lots of tough dynamics right now, the war in Ukraine, 516 00:30:04,400 --> 00:30:08,160 Speaker 1: oil prices going up, interest rates gapping up, which has 517 00:30:08,200 --> 00:30:11,160 Speaker 1: caused some of these problems, so you know, we're definitely 518 00:30:11,200 --> 00:30:15,920 Speaker 1: heading into murky waters. The good news is there's still 519 00:30:15,920 --> 00:30:19,240 Speaker 1: a lot of jobs out there. Technology is coming back, 520 00:30:19,560 --> 00:30:22,920 Speaker 1: biotech is growing, so we have some pockets of good 521 00:30:22,960 --> 00:30:25,680 Speaker 1: things happening. But we're in the midst of a correction 522 00:30:26,400 --> 00:30:28,840 Speaker 1: where we basically had a ten year kind of growth 523 00:30:28,840 --> 00:30:31,120 Speaker 1: bubble based on cheap money, and it's going to be 524 00:30:31,160 --> 00:30:34,600 Speaker 1: painful to come out of that. What's the distinction, Steve, 525 00:30:35,000 --> 00:30:39,200 Speaker 1: between a credit crunch and just credit tightening as many 526 00:30:39,240 --> 00:30:45,040 Speaker 1: people see ongoing right now. Well, a credit crunch would 527 00:30:45,040 --> 00:30:47,520 Speaker 1: be that just a total lack of liquidity, and I 528 00:30:47,520 --> 00:30:50,640 Speaker 1: think right now you're just seeing tightening and again we're 529 00:30:50,640 --> 00:30:54,600 Speaker 1: getting back to normalized interest rates. For most of my career, 530 00:30:55,480 --> 00:30:57,680 Speaker 1: interest rates have been four and a half to five percent. 531 00:30:57,760 --> 00:31:00,520 Speaker 1: Only in the last twelve or thirteen years have they 532 00:31:00,560 --> 00:31:04,400 Speaker 1: gapped down. And that cheap money has brought a lot 533 00:31:04,400 --> 00:31:06,680 Speaker 1: of prosperity, But now we're kind of paying the price 534 00:31:06,720 --> 00:31:09,320 Speaker 1: for having that long time cheap money. But we're seeing 535 00:31:09,360 --> 00:31:11,560 Speaker 1: a tightening now. I don't think we're seeing a crunch 536 00:31:12,240 --> 00:31:15,320 Speaker 1: the banks, given that Bank of America, we're very well 537 00:31:15,360 --> 00:31:18,880 Speaker 1: capitalized today, which is the reason why a lot of 538 00:31:18,880 --> 00:31:21,040 Speaker 1: people are saying they can still take out credit cards, 539 00:31:21,040 --> 00:31:23,160 Speaker 1: they can still take out loans, especially if they have 540 00:31:23,280 --> 00:31:26,800 Speaker 1: good credit, and banks are continuing to lend to businesses, 541 00:31:26,840 --> 00:31:30,760 Speaker 1: they continue to hire in a major way. As an investor, 542 00:31:31,080 --> 00:31:34,560 Speaker 1: does this make debt look much more valuable than even 543 00:31:34,600 --> 00:31:37,120 Speaker 1: the equity side of the balance sheet as an investor, 544 00:31:37,200 --> 00:31:40,240 Speaker 1: simply because they can pay back their debts. But perhaps 545 00:31:40,320 --> 00:31:46,000 Speaker 1: equity needs a reevaluation. Well, again, it's to me, I 546 00:31:46,040 --> 00:31:49,200 Speaker 1: step back. It's basically based on the price you pay 547 00:31:49,320 --> 00:31:53,160 Speaker 1: for the asset. So so we've been in periods in 548 00:31:53,240 --> 00:31:57,840 Speaker 1: private equity where debt levels are ten percent equitycent debt. 549 00:31:57,880 --> 00:32:01,560 Speaker 1: Those days are gone. Deals are much more conservatively financed, 550 00:32:01,960 --> 00:32:03,760 Speaker 1: so the dead bird is not as high these days. 551 00:32:03,800 --> 00:32:08,360 Speaker 1: These are sixty debt fifty percent is common in today structures. 552 00:32:09,200 --> 00:32:13,760 Speaker 1: Debt is still available for good deals, and deals have repriced, 553 00:32:13,800 --> 00:32:16,520 Speaker 1: so you're now seeing some opportunities in tech sector and 554 00:32:16,600 --> 00:32:21,080 Speaker 1: other companies that are backed down to reasonal evaluations based 555 00:32:21,080 --> 00:32:22,680 Speaker 1: on what you're seeing in the day to day of 556 00:32:22,720 --> 00:32:24,760 Speaker 1: the companies that you work with and that you see 557 00:32:24,800 --> 00:32:27,240 Speaker 1: and the fans that go in droves to all of 558 00:32:27,280 --> 00:32:30,040 Speaker 1: the games and continue to spend money. Do you feel 559 00:32:30,040 --> 00:32:33,200 Speaker 1: like people who are calling for a recession are perhaps 560 00:32:33,360 --> 00:32:35,960 Speaker 1: misguided or do you think that you are seeing a 561 00:32:36,000 --> 00:32:41,080 Speaker 1: real softening that's borne out by empirical data. We have 562 00:32:41,160 --> 00:32:46,800 Speaker 1: not seen the empirical data yet showing dramatic softening. Air 563 00:32:46,840 --> 00:32:51,000 Speaker 1: airlines are still full, restaurants are still full. So we've 564 00:32:51,040 --> 00:32:54,120 Speaker 1: not seen that in our in our companies. You know, 565 00:32:54,760 --> 00:32:57,560 Speaker 1: it can be to common, especially with the expensive money 566 00:32:57,600 --> 00:33:00,400 Speaker 1: out there and pull back into credit markets. But but 567 00:33:00,600 --> 00:33:04,440 Speaker 1: right now consumers are still out there and uh, and 568 00:33:04,520 --> 00:33:07,880 Speaker 1: we haven't seen highly highly negative data. I'm worried about 569 00:33:07,920 --> 00:33:10,320 Speaker 1: the recent oil price increasing that that is going to 570 00:33:10,400 --> 00:33:12,560 Speaker 1: increase inflation and is that going to bring us even 571 00:33:12,640 --> 00:33:15,320 Speaker 1: higher interest rates? But but right now we're I think 572 00:33:15,320 --> 00:33:17,880 Speaker 1: in an uncertain period and maybe heading towards obsessions, but 573 00:33:17,880 --> 00:33:20,480 Speaker 1: hopefully it's soft landing. Steve, I got to go back 574 00:33:20,480 --> 00:33:23,480 Speaker 1: for a number of days here, the basic the basic 575 00:33:23,600 --> 00:33:26,960 Speaker 1: idea here of what the Celtics did to the box. 576 00:33:27,120 --> 00:33:29,000 Speaker 1: I mean this is on the edge of what Yukon 577 00:33:29,160 --> 00:33:32,760 Speaker 1: did throughout this entire tournament. Are the Celtics destined this 578 00:33:32,840 --> 00:33:36,880 Speaker 1: year like University at Connecticut? I certainly hope. So we 579 00:33:37,320 --> 00:33:41,640 Speaker 1: have a great bunch of players, really great on and 580 00:33:41,680 --> 00:33:43,959 Speaker 1: off the court, and they really pulled together and had 581 00:33:44,000 --> 00:33:47,640 Speaker 1: fantastic game against Milwaukee. Milwaukee is a great team. Um So, 582 00:33:48,040 --> 00:33:49,640 Speaker 1: as they say in the in the in the in 583 00:33:49,720 --> 00:33:51,720 Speaker 1: the in the K one hundred years sports analogy, he's 584 00:33:51,760 --> 00:33:53,880 Speaker 1: got to take one game at a time, and that's 585 00:33:53,880 --> 00:33:56,560 Speaker 1: what they're doing and having fun together and hopefully winning 586 00:33:56,560 --> 00:33:58,280 Speaker 1: out the rest of the season and doing great playoffs. 587 00:33:58,280 --> 00:34:01,680 Speaker 1: So we're excited. We're really excited to step Paleoka there 588 00:34:01,960 --> 00:34:05,200 Speaker 1: with the charity of Robert Craft of the New England Patriots. 589 00:34:05,240 --> 00:34:07,960 Speaker 1: Here is he is the winner of our bracket this year. 590 00:34:08,560 --> 00:34:11,960 Speaker 1: Subscribes to the Bloomberg Surveillance podcast on Apple, Spotify and 591 00:34:12,080 --> 00:34:15,480 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 592 00:34:15,520 --> 00:34:18,080 Speaker 1: starting at seven am Eastern on Bloomberg dot Com, the 593 00:34:18,160 --> 00:34:21,920 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You 594 00:34:21,960 --> 00:34:25,279 Speaker 1: can watch us live on Bloomberg Television and always on 595 00:34:25,320 --> 00:34:28,719 Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz, and 596 00:34:28,840 --> 00:34:29,719 Speaker 1: this is Bloomberg