1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,920 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,400 Speaker 2: Terminal and the Bloomberg Business App. Investors gear up for 10 00:00:37,400 --> 00:00:40,440 Speaker 2: the defence big decision on Wednesday, The Central Bank expected 11 00:00:40,440 --> 00:00:43,360 Speaker 2: account raids by these twenty five basis points, with some 12 00:00:43,479 --> 00:00:46,599 Speaker 2: traders preparing for a larger fifty basis point move. Lori 13 00:00:46,720 --> 00:00:49,559 Speaker 2: Cavicino of MBC joined us now for more. Lori, I 14 00:00:49,600 --> 00:00:52,000 Speaker 2: knowber houseview is twenty five, and I just wonder if 15 00:00:52,040 --> 00:00:53,640 Speaker 2: we get that twenty five, and of course welcome to 16 00:00:53,680 --> 00:00:55,640 Speaker 2: the program. By the way, if we do get that 17 00:00:55,720 --> 00:00:58,480 Speaker 2: twenty five, how vulnerable certain trades like the small camps 18 00:00:58,520 --> 00:00:59,280 Speaker 2: actually are. 19 00:01:00,520 --> 00:01:01,920 Speaker 3: Hi, John, So thanks for having me. 20 00:01:02,000 --> 00:01:02,160 Speaker 4: Look. 21 00:01:02,200 --> 00:01:04,160 Speaker 5: I think it's a great question. And we were watching 22 00:01:04,160 --> 00:01:07,480 Speaker 5: the small caps just surge on Friday as the renewed 23 00:01:07,520 --> 00:01:10,640 Speaker 5: optimism about the fifty basis point cut came up as well. 24 00:01:11,040 --> 00:01:13,080 Speaker 3: And look, I think small caps have a lot. 25 00:01:13,000 --> 00:01:16,240 Speaker 5: Going for them, but the reality is that valuations are 26 00:01:16,240 --> 00:01:19,680 Speaker 5: full and positioning is also full. If you go back 27 00:01:19,680 --> 00:01:22,240 Speaker 5: a few months ago, they looked under owned, they look cheap. 28 00:01:22,280 --> 00:01:24,040 Speaker 5: We're just not there anymore. And now we've got a 29 00:01:24,080 --> 00:01:26,759 Speaker 5: lot of FED optimism baked in. So I do think 30 00:01:26,760 --> 00:01:28,520 Speaker 5: in the short term, at least if we're just thinking 31 00:01:28,520 --> 00:01:30,360 Speaker 5: about the week ahead, I do worry a bit that 32 00:01:30,400 --> 00:01:32,360 Speaker 5: if we get the twenty five rather than the fifty, 33 00:01:32,440 --> 00:01:35,080 Speaker 5: which propelled small caps to these great heights on Friday, 34 00:01:35,319 --> 00:01:37,280 Speaker 5: that there could be a bit of a reversion. 35 00:01:36,920 --> 00:01:37,760 Speaker 3: In the small caps. 36 00:01:37,920 --> 00:01:40,679 Speaker 5: I think that we really have sort of more of 37 00:01:40,680 --> 00:01:43,640 Speaker 5: the fast money crowd sort of driving that trade right now. 38 00:01:43,720 --> 00:01:45,800 Speaker 5: If you look at recent flows into small cap they 39 00:01:45,840 --> 00:01:49,120 Speaker 5: have been all passive driven, and that passive money does 40 00:01:49,240 --> 00:01:51,320 Speaker 5: tend to be very, very fickle. 41 00:01:51,720 --> 00:01:53,840 Speaker 4: You have a nuance view here, Laurie, with respect to 42 00:01:54,040 --> 00:01:56,400 Speaker 4: not only how much the FED cuts, but also the 43 00:01:56,440 --> 00:01:59,080 Speaker 4: economic data behind it that needs to heap this going. 44 00:01:59,320 --> 00:01:59,760 Speaker 6: There was this. 45 00:01:59,720 --> 00:02:01,880 Speaker 4: Feeling that the FED was on track to cut by 46 00:02:01,880 --> 00:02:06,000 Speaker 4: fifty basis points without real pain visible in the US economy. 47 00:02:06,280 --> 00:02:09,440 Speaker 4: How much is any kind of weakening, even if not 48 00:02:09,520 --> 00:02:12,280 Speaker 4: a recession, sort of a bear case right now for 49 00:02:12,360 --> 00:02:13,000 Speaker 4: small calves. 50 00:02:14,240 --> 00:02:17,040 Speaker 5: So I think the small caps really need the needle 51 00:02:17,120 --> 00:02:19,400 Speaker 5: to be threaded. And what I mean by that is, 52 00:02:19,440 --> 00:02:21,680 Speaker 5: if you go back and look at past cutting cycles, 53 00:02:21,680 --> 00:02:24,080 Speaker 5: small caps do really really well and embark on a 54 00:02:24,120 --> 00:02:27,119 Speaker 5: longer term out performance cycle. If you get a recession, 55 00:02:27,200 --> 00:02:29,320 Speaker 5: if you break the economy, it's small cap one on 56 00:02:29,320 --> 00:02:30,760 Speaker 5: one to say you sell them on the way into 57 00:02:30,840 --> 00:02:32,720 Speaker 5: a recession, you buy them on the way out, and 58 00:02:32,760 --> 00:02:34,640 Speaker 5: you tend to see that pivot midway through. 59 00:02:34,880 --> 00:02:36,320 Speaker 3: But if we don't get that and we. 60 00:02:36,280 --> 00:02:38,919 Speaker 5: Get some sort of economy that's still growing, I do 61 00:02:39,000 --> 00:02:41,480 Speaker 5: think it depends on what kind of growth we get. 62 00:02:41,520 --> 00:02:43,360 Speaker 5: And if you look at the other side of the equation, 63 00:02:43,680 --> 00:02:46,600 Speaker 5: we really do need a hot economy above average GDP 64 00:02:46,760 --> 00:02:49,000 Speaker 5: for small caps to really keep going. If you look 65 00:02:49,040 --> 00:02:52,720 Speaker 5: at recent trading data since say twenty fifteen, twenty sixteen, 66 00:02:53,000 --> 00:02:54,720 Speaker 5: and if we're just you know, kind of, I guess 67 00:02:54,720 --> 00:02:56,480 Speaker 5: I think it comes downly. So what do you mean 68 00:02:56,520 --> 00:02:58,720 Speaker 5: by soft landing a soft landing that's looking at like 69 00:02:58,800 --> 00:03:01,359 Speaker 5: one and a half percent type AVP growth, maybe even two. 70 00:03:01,880 --> 00:03:03,799 Speaker 5: I don't think that quite cuts it for small cap 71 00:03:03,840 --> 00:03:05,840 Speaker 5: I think you need something more like two and a 72 00:03:05,880 --> 00:03:07,160 Speaker 5: half to three percent or better. 73 00:03:07,240 --> 00:03:09,239 Speaker 4: When you broaden out beyond small caps, you see you 74 00:03:09,360 --> 00:03:11,320 Speaker 4: remain neutral in the S and P five hundred. As 75 00:03:11,360 --> 00:03:14,040 Speaker 4: we get closer to your year end target. You talk 76 00:03:14,080 --> 00:03:16,840 Speaker 4: about sentiment and how it concerns you. Can you explain 77 00:03:16,919 --> 00:03:19,800 Speaker 4: why investor sentiment right now is a red flag? 78 00:03:21,240 --> 00:03:23,200 Speaker 5: Sure, it's a great question, Lisa, And look, I would 79 00:03:23,200 --> 00:03:25,600 Speaker 5: say if you look at aaii net bullishness, I think 80 00:03:25,600 --> 00:03:27,720 Speaker 5: that's the best barometer. It's been doing the best job 81 00:03:27,760 --> 00:03:30,200 Speaker 5: the last couple of years at calling short term inflections 82 00:03:30,200 --> 00:03:32,840 Speaker 5: in the market, and it's really flirting with danger. If 83 00:03:32,880 --> 00:03:34,840 Speaker 5: you look at where it's been recently, it's been kind 84 00:03:34,840 --> 00:03:38,040 Speaker 5: of hovering right around that one standard deviation mark, poking 85 00:03:38,080 --> 00:03:40,920 Speaker 5: above it on certain weeks, but not quite on the 86 00:03:40,960 --> 00:03:42,960 Speaker 5: four week average. And that's very similar to what we 87 00:03:43,040 --> 00:03:45,240 Speaker 5: saw back in July. That's very similar to what we 88 00:03:45,280 --> 00:03:48,080 Speaker 5: saw back in August of last year. And if you 89 00:03:48,120 --> 00:03:50,240 Speaker 5: look at CFTC data, which is going to give you 90 00:03:50,280 --> 00:03:50,480 Speaker 5: more of. 91 00:03:50,440 --> 00:03:52,920 Speaker 3: An institutional look, that data. 92 00:03:52,680 --> 00:03:55,120 Speaker 5: Just continues to make new highs, and it's above levels 93 00:03:55,160 --> 00:03:58,200 Speaker 5: that we were at in early twenty eighteen, in early 94 00:03:58,240 --> 00:04:01,000 Speaker 5: twenty twenty pre COVID, and it's well above the highs 95 00:04:01,240 --> 00:04:03,280 Speaker 5: that we've seen mark the peak in recent years in 96 00:04:03,360 --> 00:04:05,200 Speaker 5: kind of that post COVID era look. 97 00:04:05,280 --> 00:04:06,840 Speaker 3: Sentiment and position are not the. 98 00:04:06,760 --> 00:04:09,680 Speaker 5: Only thing that drives stocks, and we certainly can stay 99 00:04:09,720 --> 00:04:12,400 Speaker 5: overbought for quite some time. But I do think it 100 00:04:12,480 --> 00:04:15,760 Speaker 5: tells me that we're really not sitting here in a 101 00:04:15,760 --> 00:04:18,760 Speaker 5: position where we can absorb any kind of bad news easily. 102 00:04:19,080 --> 00:04:20,480 Speaker 3: So those are charts, frankly. 103 00:04:20,240 --> 00:04:21,960 Speaker 5: Lisa, that keep me up at night, even though we've 104 00:04:22,000 --> 00:04:24,159 Speaker 5: had a more constructive view on equities overall. 105 00:04:24,400 --> 00:04:26,760 Speaker 7: Lorie, do you still see a connection from a Trump 106 00:04:26,839 --> 00:04:28,640 Speaker 7: win and small caps rallying? 107 00:04:30,240 --> 00:04:32,040 Speaker 3: It's a great question, Anne, Marie. 108 00:04:32,120 --> 00:04:34,200 Speaker 5: So you know, if we look back to twenty twenty three, 109 00:04:34,360 --> 00:04:37,760 Speaker 5: twenty twenty four, we really just haven't seen that linkage 110 00:04:37,800 --> 00:04:39,800 Speaker 5: right where Trump's doing well in the vetting markets and 111 00:04:39,800 --> 00:04:42,599 Speaker 5: small caps are outperforming. We've really seen Trump more closely 112 00:04:42,640 --> 00:04:46,159 Speaker 5: aligned with large caps with growth. Things are starting to 113 00:04:46,240 --> 00:04:48,240 Speaker 5: change there a bit recently, so I would say we'll 114 00:04:48,240 --> 00:04:50,520 Speaker 5: have to watch the data. One of the things we 115 00:04:50,600 --> 00:04:52,720 Speaker 5: did mention in our piece this morning is that if 116 00:04:52,720 --> 00:04:56,159 Speaker 5: the Harris corporate tax increases, raising the rate from twenty 117 00:04:56,200 --> 00:04:58,479 Speaker 5: one percent to twenty eight percent, were to go through, 118 00:04:58,760 --> 00:05:00,640 Speaker 5: I do think that's a negative sick for a small 119 00:05:00,640 --> 00:05:03,599 Speaker 5: cap because if you go back into the twenty sixteen 120 00:05:03,680 --> 00:05:06,680 Speaker 5: twenty seventeen period, small caps were one of the big 121 00:05:06,720 --> 00:05:09,479 Speaker 5: beneficiaries of the rate cut. And that's not just to 122 00:05:09,520 --> 00:05:12,359 Speaker 5: simply say the historical playbook, you know, flips on its head. 123 00:05:12,600 --> 00:05:14,520 Speaker 3: We have to go back to the why. And what we. 124 00:05:14,520 --> 00:05:17,039 Speaker 5: Found back then was that small caps were more direct 125 00:05:17,120 --> 00:05:20,159 Speaker 5: payers of the headline rate. They had a tougher time 126 00:05:20,520 --> 00:05:23,440 Speaker 5: managing their taxes lower than large cap companies did. 127 00:05:23,480 --> 00:05:25,040 Speaker 3: So I think that issue may come up if. 128 00:05:24,960 --> 00:05:27,440 Speaker 5: We end up seeing Harris whin and those corporate tax 129 00:05:27,480 --> 00:05:30,120 Speaker 5: cut tax hikes rather are on the table. Of course, 130 00:05:30,160 --> 00:05:31,680 Speaker 5: I think that really only happens, you know, in a 131 00:05:31,680 --> 00:05:34,280 Speaker 5: democratic sweep scenario, which is not really our base case. 132 00:05:34,440 --> 00:05:37,280 Speaker 7: Laurie, you've been looking at both these candidates plans. I 133 00:05:37,320 --> 00:05:40,279 Speaker 7: saw you at Trump's economic speech here in New York City. 134 00:05:40,800 --> 00:05:44,159 Speaker 7: What big questions are still missing as you think about 135 00:05:44,279 --> 00:05:45,760 Speaker 7: and you put these into your models. 136 00:05:47,279 --> 00:05:50,320 Speaker 5: So look, I think it's really preliminary for both candidates, right, 137 00:05:50,360 --> 00:05:52,640 Speaker 5: I think that they've got both taken some heat for 138 00:05:52,760 --> 00:05:56,360 Speaker 5: lack of detail. From my perspective, maybe my expectations are 139 00:05:56,400 --> 00:05:57,960 Speaker 5: just low all around. I think this is maybe the 140 00:05:57,960 --> 00:06:01,320 Speaker 5: fifth or sixth presidential election I've covered as a strategist. 141 00:06:01,560 --> 00:06:04,159 Speaker 5: But I'm really just looking for kernels of where they're leaning, 142 00:06:04,200 --> 00:06:07,000 Speaker 5: of what their wish lists are, of what their impulses are. 143 00:06:07,760 --> 00:06:10,040 Speaker 5: So I think, you know, when I look going forward, 144 00:06:10,160 --> 00:06:12,080 Speaker 5: you know, I think maybe on the tax side, for 145 00:06:12,160 --> 00:06:14,320 Speaker 5: corporate taxes, at least, we have a little bit more clarity. 146 00:06:14,320 --> 00:06:15,000 Speaker 3: On the hair side. 147 00:06:15,400 --> 00:06:18,400 Speaker 5: I left the speech confused about exactly what Trump wants 148 00:06:18,440 --> 00:06:21,040 Speaker 5: to do in terms of further tax cuts. The commentary 149 00:06:21,080 --> 00:06:24,839 Speaker 5: of linking the fifteen percent rate to domestic production, I 150 00:06:24,880 --> 00:06:26,800 Speaker 5: don't exactly know how that shakes out in the S 151 00:06:26,839 --> 00:06:27,039 Speaker 5: and P. 152 00:06:27,120 --> 00:06:27,640 Speaker 3: Five hundred. 153 00:06:27,680 --> 00:06:29,480 Speaker 5: We have lots and lots of companies that are producing 154 00:06:29,560 --> 00:06:31,800 Speaker 5: things overseas. So I think it's tough for me to 155 00:06:31,800 --> 00:06:34,039 Speaker 5: sit here, when I'm looking at my earnings model, to 156 00:06:34,200 --> 00:06:36,880 Speaker 5: just bake in a fifteen percent corporate tax rate. I 157 00:06:36,880 --> 00:06:38,640 Speaker 5: think it's much more complicated than that. 158 00:06:38,720 --> 00:06:41,320 Speaker 2: We sew you paint for policy on both sides. Lori, 159 00:06:41,440 --> 00:06:54,880 Speaker 2: thank you, Lori Cavasena of Obvious. Let's continue this conversation 160 00:06:54,960 --> 00:06:57,440 Speaker 2: with Robe Cannessey of Signum Colubal advice is Rope. Good 161 00:06:57,440 --> 00:07:01,400 Speaker 2: mornings you, sir, morning. Another almost trying event over the weekend. 162 00:07:01,440 --> 00:07:03,440 Speaker 2: Two very lucky escapes over the last two months for 163 00:07:03,440 --> 00:07:06,360 Speaker 2: the former president. What is this change? Does this change anything? 164 00:07:06,440 --> 00:07:08,240 Speaker 2: It's so, you know, I don't think it changes a 165 00:07:08,240 --> 00:07:08,600 Speaker 2: whole lot. 166 00:07:08,760 --> 00:07:10,720 Speaker 6: Certainly not as much as the first assassination of attempt 167 00:07:10,760 --> 00:07:12,600 Speaker 6: where we saw, you know, photo after a photo of 168 00:07:12,600 --> 00:07:16,040 Speaker 6: Donald Trump bleeding, standing raising his fist. This a little 169 00:07:16,040 --> 00:07:18,160 Speaker 6: bit less interesting to the general public, but I think 170 00:07:18,200 --> 00:07:20,080 Speaker 6: it points to the fact that the October surprise this 171 00:07:20,160 --> 00:07:23,040 Speaker 6: year very well could be an example of political violence 172 00:07:23,400 --> 00:07:24,120 Speaker 6: when you look. 173 00:07:23,960 --> 00:07:26,480 Speaker 7: At the timeline to November fifth. Does Trump need to 174 00:07:26,560 --> 00:07:28,040 Speaker 7: change how he campaigns now? 175 00:07:28,480 --> 00:07:30,520 Speaker 6: I don't think he needs to change how he campaigns Now. 176 00:07:30,560 --> 00:07:32,240 Speaker 6: Maybe we'll see him play a little bit less golf, 177 00:07:32,360 --> 00:07:36,160 Speaker 6: but probably not. I mean, as the sitting president, you know, 178 00:07:36,360 --> 00:07:40,000 Speaker 6: he likes to travel to his golf courses. As a candidate, 179 00:07:40,000 --> 00:07:42,960 Speaker 6: he's certainly done the same thing now how he campaigns. 180 00:07:43,000 --> 00:07:45,360 Speaker 6: I think this really only plays to his advantage. Now, 181 00:07:45,360 --> 00:07:48,280 Speaker 6: obviously we're all very grateful that he's safe, but up 182 00:07:48,360 --> 00:07:50,240 Speaker 6: until that point where he's not safe, I think this 183 00:07:50,400 --> 00:07:53,400 Speaker 6: riles up his base and ensures that Republicans will turn 184 00:07:53,400 --> 00:07:54,240 Speaker 6: out in November. 185 00:07:54,520 --> 00:07:56,120 Speaker 7: Jack was just talking about what's going on with this 186 00:07:56,240 --> 00:07:59,640 Speaker 7: task force. They're still investigating what happened two months ago. 187 00:08:00,040 --> 00:08:03,920 Speaker 7: How quickly can Congress move and potentially beaming up his protection. 188 00:08:04,240 --> 00:08:06,880 Speaker 7: We heard from the Palm Beach County sheriff yesterday saying 189 00:08:06,960 --> 00:08:09,360 Speaker 7: if it was the sitting president, potentially there would be 190 00:08:09,400 --> 00:08:12,280 Speaker 7: a bigger perimeter around the West Palm Beach golf course. 191 00:08:12,800 --> 00:08:15,320 Speaker 6: Yeah, you know, unfortunately or fortunately, it's not really up 192 00:08:15,360 --> 00:08:17,960 Speaker 6: to Congress how good Trump's protection is, right, it's a 193 00:08:18,040 --> 00:08:21,480 Speaker 6: question of Secret Service. President Joe Biden vice President Kamala 194 00:08:21,520 --> 00:08:24,679 Speaker 6: Harris have assured us over the weekend that Trump's protection 195 00:08:24,840 --> 00:08:27,000 Speaker 6: is good. Right, It's as much as a candidate needs 196 00:08:27,080 --> 00:08:30,480 Speaker 6: to have. But that being said, I wouldn't be surprised 197 00:08:30,480 --> 00:08:33,160 Speaker 6: if beefed it up pretty close to essentially what the 198 00:08:33,200 --> 00:08:35,960 Speaker 6: sitting president receives. Now, Donald Trump is not the sitting president, 199 00:08:36,000 --> 00:08:38,520 Speaker 6: but he's six weeks away from potentially being re elected, 200 00:08:38,559 --> 00:08:42,320 Speaker 6: so I would not be surprised if President Biden, frankly 201 00:08:42,360 --> 00:08:44,600 Speaker 6: came out and said we're going to give Donald Trump more. 202 00:08:44,640 --> 00:08:46,400 Speaker 4: Rob you said something that I want to pick up on. 203 00:08:46,679 --> 00:08:48,920 Speaker 4: You said that the October surprise that we may see 204 00:08:49,200 --> 00:08:51,320 Speaker 4: could be an act of political violence. 205 00:08:52,040 --> 00:08:54,040 Speaker 3: What makes you say that, Well. 206 00:08:53,920 --> 00:08:56,920 Speaker 6: Of course, We've seen two attempts on formal President Donald 207 00:08:56,920 --> 00:08:59,840 Speaker 6: Trump's life, So that's the first. The second is, you know, 208 00:09:00,480 --> 00:09:03,320 Speaker 6: our country is horribly divided, and I think to a 209 00:09:03,320 --> 00:09:05,920 Speaker 6: certain extent, politicians are playing into that, and we'll play 210 00:09:05,920 --> 00:09:08,280 Speaker 6: into that between now and November. I think the example 211 00:09:08,320 --> 00:09:10,840 Speaker 6: of sort of coming from the other side is Trump 212 00:09:10,920 --> 00:09:14,400 Speaker 6: and vice presidential candidate Jade Vance, you know, talking about 213 00:09:14,400 --> 00:09:18,240 Speaker 6: these these illegal immigrants in Ohio, you know, Haitians eating 214 00:09:18,320 --> 00:09:21,400 Speaker 6: dogs and cats, things of that nature. They're actually legal immigrants, 215 00:09:22,040 --> 00:09:24,960 Speaker 6: but it's rhetoric like that that I think, you know, Frankly, 216 00:09:25,160 --> 00:09:28,080 Speaker 6: could incite this kind of lone wolf violence that is 217 00:09:28,160 --> 00:09:29,400 Speaker 6: so hard to defend against. 218 00:09:29,760 --> 00:09:30,520 Speaker 3: So what's your. 219 00:09:30,640 --> 00:09:32,280 Speaker 4: Sort of analogy, I mean, is there has there ever 220 00:09:32,320 --> 00:09:35,680 Speaker 4: been a time or any other election cycle that you 221 00:09:35,720 --> 00:09:37,520 Speaker 4: can think of, had this type of risk or is 222 00:09:37,520 --> 00:09:40,240 Speaker 4: this a new and heightened risk that requires a very 223 00:09:40,240 --> 00:09:42,599 Speaker 4: different type of security and different type of campaigning. 224 00:09:42,840 --> 00:09:44,719 Speaker 6: You know, I think it's a it's a at least 225 00:09:44,760 --> 00:09:47,560 Speaker 6: in the modern American era, this is new. Right. We 226 00:09:47,640 --> 00:09:52,280 Speaker 6: haven't seen attempted assassinations like this in my lifetime and 227 00:09:52,320 --> 00:09:54,320 Speaker 6: in all of our lifetimes. You know, you can go 228 00:09:54,400 --> 00:09:56,960 Speaker 6: back to probably the Civil War to see when our 229 00:09:56,960 --> 00:09:59,880 Speaker 6: country was most divided. I don't think we get there. 230 00:10:00,360 --> 00:10:03,000 Speaker 6: And the whole bus Secret Service is able to protect 231 00:10:03,040 --> 00:10:06,280 Speaker 6: obviously the sitting president, the former president Trump and Kamal Harrison, 232 00:10:06,400 --> 00:10:09,880 Speaker 6: and they're doing their best. And it's important to say 233 00:10:09,880 --> 00:10:12,840 Speaker 6: that none of these attempted assassinations have been successful. Now, 234 00:10:13,240 --> 00:10:16,200 Speaker 6: obviously the first one was very close and very scary. Yes, 235 00:10:16,400 --> 00:10:17,439 Speaker 6: second one not so much. 236 00:10:17,520 --> 00:10:20,720 Speaker 2: Let's talk about the Harris campaign. The first time we 237 00:10:20,760 --> 00:10:23,280 Speaker 2: had the Biden campaign, and the criticism at the time 238 00:10:23,559 --> 00:10:26,960 Speaker 2: was that it was a one dimensional campaign centered around 239 00:10:27,440 --> 00:10:30,800 Speaker 2: characterizing Trump as an existential threat to democracy. There's a 240 00:10:30,800 --> 00:10:32,920 Speaker 2: lot of criticism about that. In the middle of July. 241 00:10:33,520 --> 00:10:35,560 Speaker 2: Does the Harris campaign have enough facets too? 242 00:10:35,559 --> 00:10:35,599 Speaker 6: It? 243 00:10:35,720 --> 00:10:38,280 Speaker 2: Is it a multi faceted campaign that they're not relying 244 00:10:38,280 --> 00:10:40,199 Speaker 2: on this single issue that they can back away from 245 00:10:40,240 --> 00:10:41,520 Speaker 2: talking about this a little bit more. 246 00:10:41,960 --> 00:10:43,960 Speaker 6: Yeah, I think they can. The issue with the question 247 00:10:44,000 --> 00:10:46,800 Speaker 6: of democracy as a campaign issue is that it's you know, 248 00:10:46,840 --> 00:10:48,960 Speaker 6: one hundred percent of people are worried about it, but 249 00:10:49,000 --> 00:10:51,200 Speaker 6: it's fifty to fifty right Republicans are worried about how 250 00:10:51,240 --> 00:10:53,840 Speaker 6: Democrats are a threat to democracy. Same thing vice versa. 251 00:10:54,040 --> 00:10:57,880 Speaker 6: So a, did it insight the first attempted assassination against 252 00:10:57,920 --> 00:11:01,520 Speaker 6: Donald Trump? We're not really sure who knows. The motives 253 00:11:01,559 --> 00:11:05,240 Speaker 6: of that should have remain unclear. But you know, as 254 00:11:05,240 --> 00:11:07,800 Speaker 6: a question of you know, can the Harris campaign do more? 255 00:11:08,040 --> 00:11:09,880 Speaker 6: They better, right, because I'm not sure they're going to 256 00:11:09,960 --> 00:11:12,320 Speaker 6: win on this single question of democracy. They have to 257 00:11:12,320 --> 00:11:15,360 Speaker 6: win on abortion. You know, there's more messaging around a 258 00:11:15,360 --> 00:11:18,400 Speaker 6: middle class economy and opportunity economy than we saw from Biden, 259 00:11:18,400 --> 00:11:20,199 Speaker 6: who didn't want to talk about the economy at all. 260 00:11:20,920 --> 00:11:22,800 Speaker 6: So Harris is doing more. I think she has to 261 00:11:22,840 --> 00:11:23,200 Speaker 6: do more. 262 00:11:23,120 --> 00:11:25,199 Speaker 2: To win total us about Harris is addressed in the 263 00:11:25,280 --> 00:11:28,280 Speaker 2: US economy. Because we also had that interview gangainso the weekend, 264 00:11:28,400 --> 00:11:31,720 Speaker 2: it wasn't impressive. Some very simple questions that weren't ready 265 00:11:31,760 --> 00:11:34,559 Speaker 2: onswer it what is the opportunity economy? What are the 266 00:11:34,640 --> 00:11:35,559 Speaker 2: policies behind it? 267 00:11:35,960 --> 00:11:37,480 Speaker 6: You know, I think the policies that she wants to 268 00:11:37,520 --> 00:11:40,439 Speaker 6: highlight first and foremost are the housing policies. You know, 269 00:11:40,720 --> 00:11:42,920 Speaker 6: After that, it sort of falls off right, And I 270 00:11:42,920 --> 00:11:45,600 Speaker 6: think what's important about these policies, What many of us 271 00:11:45,679 --> 00:11:47,600 Speaker 6: know is that not a lot is going to get 272 00:11:47,600 --> 00:11:49,679 Speaker 6: through Congress. So it's not as though she can promise, 273 00:11:49,960 --> 00:11:54,199 Speaker 6: you know, huge reforms, huge changes, because if she sits 274 00:11:54,200 --> 00:11:56,280 Speaker 6: in the seat, if she wins the election, she's very 275 00:11:56,320 --> 00:11:58,839 Speaker 6: likely going to have a divide in Congress. And I 276 00:11:58,840 --> 00:12:02,439 Speaker 6: would agree John that the interview on Friday not all 277 00:12:02,440 --> 00:12:04,680 Speaker 6: that impressive. I think it's probably why we haven't seen 278 00:12:04,679 --> 00:12:06,880 Speaker 6: her do a whole lot of interviews, why we probably 279 00:12:06,920 --> 00:12:09,400 Speaker 6: won't see her do a whole lot of interviews between 280 00:12:09,400 --> 00:12:11,680 Speaker 6: now and November. On the one hand, she's a candidate 281 00:12:11,720 --> 00:12:15,040 Speaker 6: who absolutely turns out the base. On the other hand, 282 00:12:15,559 --> 00:12:17,559 Speaker 6: maybe that they want to do their best to insulate 283 00:12:17,600 --> 00:12:20,240 Speaker 6: her and just maintain the momentum that they have. Certainly 284 00:12:20,240 --> 00:12:23,200 Speaker 6: that they she won in the debate on Tuesday. 285 00:12:22,920 --> 00:12:24,720 Speaker 2: Night, Just quickly, just to wrap things up, base case 286 00:12:24,720 --> 00:12:26,439 Speaker 2: for you and the team, what is it does it. 287 00:12:26,360 --> 00:12:28,400 Speaker 6: Remain the same. It remains the same sixty five percent 288 00:12:28,480 --> 00:12:31,800 Speaker 6: chance Harris win. So we think that's base case. With 289 00:12:31,960 --> 00:12:34,840 Speaker 6: the divided government, the Senate goes red, the House goes blue, 290 00:12:35,160 --> 00:12:37,000 Speaker 6: and that really limits what Harris is able to do 291 00:12:37,400 --> 00:12:38,440 Speaker 6: at least until the midterm. 292 00:12:38,440 --> 00:12:40,480 Speaker 2: Okay, Robbie's going to see you. Thank you, sir, appreciate 293 00:12:40,520 --> 00:12:52,959 Speaker 2: the input. Rope case that signam, I'm pretty excited. The 294 00:12:53,000 --> 00:12:55,240 Speaker 2: boss over at Pinco, Manny Ratherman, joins us. Now for 295 00:12:55,280 --> 00:12:56,959 Speaker 2: the next thirty minutes or so, Maney, it's going to 296 00:12:57,000 --> 00:12:57,560 Speaker 2: see you, sir. 297 00:12:57,640 --> 00:12:59,760 Speaker 1: Good to see you. Thank you for having me put. 298 00:12:59,640 --> 00:13:00,600 Speaker 2: Us out of our misery. 299 00:13:00,640 --> 00:13:02,600 Speaker 1: Twenty five or fifty tomorrow. What's it going. Well, we're 300 00:13:02,600 --> 00:13:03,680 Speaker 1: in the camp of twenty five. 301 00:13:03,760 --> 00:13:06,120 Speaker 8: But you know, I always say we have a crystal 302 00:13:06,160 --> 00:13:09,280 Speaker 8: ball and at the end of the day, we'll see 303 00:13:09,280 --> 00:13:11,360 Speaker 8: what the market does. You know, it may very well 304 00:13:11,400 --> 00:13:13,480 Speaker 8: be that it doesn't make that much of a difference. 305 00:13:13,960 --> 00:13:16,600 Speaker 8: And our view is that there will be three cuts 306 00:13:16,640 --> 00:13:18,760 Speaker 8: of twenty five and at the end of the day, 307 00:13:18,840 --> 00:13:20,480 Speaker 8: what matters is where we are at the end. 308 00:13:20,440 --> 00:13:20,840 Speaker 6: Of the year. 309 00:13:20,880 --> 00:13:22,839 Speaker 2: Well, let's talk about the destination. This is a three 310 00:13:22,880 --> 00:13:25,400 Speaker 2: pount act on Wednesday. As you know, it's a decision, 311 00:13:25,679 --> 00:13:27,960 Speaker 2: it's a set of forecasts and a news conference and 312 00:13:28,000 --> 00:13:30,600 Speaker 2: a big conversation around this table for the last several months. 313 00:13:30,920 --> 00:13:33,080 Speaker 2: What's the destination, what are they aiming for, what are 314 00:13:33,120 --> 00:13:35,320 Speaker 2: they shooting for? Where does this land in the next 315 00:13:35,320 --> 00:13:36,200 Speaker 2: eighteen months. 316 00:13:36,400 --> 00:13:40,480 Speaker 8: Well, I think you can say that there's less inflation 317 00:13:41,000 --> 00:13:44,240 Speaker 8: right now, and that in the absence of new data, 318 00:13:44,800 --> 00:13:47,960 Speaker 8: the destination will be to have lower rates, and the 319 00:13:47,960 --> 00:13:50,400 Speaker 8: FED would be very data dependent, and I think I 320 00:13:50,400 --> 00:13:56,120 Speaker 8: think sometimes one under estimate how careful they are about 321 00:13:56,240 --> 00:13:58,600 Speaker 8: new data and how they want to be able to 322 00:13:58,679 --> 00:14:01,080 Speaker 8: change their opinion. And so if you kind of use 323 00:14:01,120 --> 00:14:03,480 Speaker 8: this framework, you sort of said, let's do twenty five 324 00:14:03,520 --> 00:14:06,000 Speaker 8: and then let's see what we are, and then probably 325 00:14:06,000 --> 00:14:07,960 Speaker 8: do twenty five and twenty five. But I think the 326 00:14:08,080 --> 00:14:11,560 Speaker 8: total sum of the rate cuts may matter more than 327 00:14:12,640 --> 00:14:14,280 Speaker 8: how they do it, which is the. 328 00:14:14,200 --> 00:14:16,600 Speaker 4: Reason why people are looking forward and saying maybe the 329 00:14:16,640 --> 00:14:18,640 Speaker 4: neutral rates three and a half percent, and oh yeah, 330 00:14:18,679 --> 00:14:20,920 Speaker 4: look at that the two year yield right now, it's 331 00:14:20,960 --> 00:14:23,720 Speaker 4: about three and a half percent. Back in June, when 332 00:14:23,760 --> 00:14:26,720 Speaker 4: you put out the outlook for PIMCO, there was a 333 00:14:26,720 --> 00:14:31,160 Speaker 4: feeling that intermediate bonds really had a fantastic investment proposal 334 00:14:31,400 --> 00:14:34,520 Speaker 4: proposition just simply because there was yield. Do they still 335 00:14:34,760 --> 00:14:37,520 Speaker 4: after the rally we've seen, We still. 336 00:14:37,280 --> 00:14:37,840 Speaker 1: Do think so. 337 00:14:38,120 --> 00:14:40,800 Speaker 8: And listen, the exciting thing about being at PIMCO right 338 00:14:40,800 --> 00:14:43,960 Speaker 8: now is that fixed income is quite attractive. And you 339 00:14:44,000 --> 00:14:47,200 Speaker 8: know we we we are in the business of fist 340 00:14:47,280 --> 00:14:49,480 Speaker 8: and family, right so when rates are very, very low, 341 00:14:49,800 --> 00:14:51,920 Speaker 8: it's harder to be that excited about fixed income. And 342 00:14:52,120 --> 00:14:54,600 Speaker 8: when you can build portfolio and get a yell of 343 00:14:54,640 --> 00:14:57,000 Speaker 8: sixty six and a half, you become very excited. 344 00:14:57,040 --> 00:14:59,600 Speaker 1: And you know, we very focused on treasury, but. 345 00:14:59,560 --> 00:15:02,200 Speaker 8: They're really is there is a lot of value in 346 00:15:02,280 --> 00:15:04,440 Speaker 8: other part of the segment, a set back being one 347 00:15:04,440 --> 00:15:09,160 Speaker 8: of them. And you know, we're excited about what we see. 348 00:15:09,360 --> 00:15:11,800 Speaker 8: And at the end of the day, the yield on 349 00:15:11,840 --> 00:15:18,240 Speaker 8: the portfolio is a good predictor of the return. 350 00:15:18,080 --> 00:15:20,760 Speaker 1: That the investor will experience. 351 00:15:21,360 --> 00:15:23,640 Speaker 8: And so what I think is exciting about fixed income 352 00:15:23,720 --> 00:15:26,120 Speaker 8: right now is you can build a portfolio and get 353 00:15:26,120 --> 00:15:28,560 Speaker 8: a return of sixty six and a half percent with 354 00:15:28,920 --> 00:15:30,200 Speaker 8: a seria of different instruments. 355 00:15:30,880 --> 00:15:33,880 Speaker 4: It used to be the bonds did better in bad 356 00:15:33,920 --> 00:15:37,120 Speaker 4: times and worse in good times. Are we heading into 357 00:15:37,200 --> 00:15:40,400 Speaker 4: a worse time where people go to bonds for safety 358 00:15:40,560 --> 00:15:44,960 Speaker 4: or is this on just an absolute basis, yields are higher. 359 00:15:44,440 --> 00:15:47,200 Speaker 8: My partner Dan ivesid and I'm going to quod him 360 00:15:47,200 --> 00:15:50,320 Speaker 8: because because actually he has a very good line, bonds 361 00:15:50,360 --> 00:15:52,960 Speaker 8: may be the most attractive asset class. And I think 362 00:15:53,000 --> 00:15:57,080 Speaker 8: that there's an absolute argument and then there's a relative argument. 363 00:15:57,200 --> 00:15:58,479 Speaker 1: And I think the relative. 364 00:15:58,160 --> 00:16:00,840 Speaker 8: Argument is to say you need to build a portfolio, 365 00:16:00,840 --> 00:16:02,880 Speaker 8: you need equity, you need fixed income, you need some 366 00:16:02,920 --> 00:16:03,600 Speaker 8: real estate. 367 00:16:03,480 --> 00:16:05,680 Speaker 1: You need some private asset. 368 00:16:06,200 --> 00:16:09,360 Speaker 8: And at the end of the day, fixed income is 369 00:16:09,480 --> 00:16:13,600 Speaker 8: much more attractive than equity, given the earning yield and 370 00:16:13,640 --> 00:16:15,840 Speaker 8: given the evaluation of the equity market. And I think 371 00:16:15,880 --> 00:16:21,120 Speaker 8: that's one of the arguments for owning a larger part 372 00:16:21,120 --> 00:16:22,920 Speaker 8: of fixed income. And I think when I travel the world, 373 00:16:23,000 --> 00:16:26,160 Speaker 8: I think that people are under invested in fixed income 374 00:16:26,200 --> 00:16:28,320 Speaker 8: and a lot of them are looking at putting more 375 00:16:28,360 --> 00:16:30,840 Speaker 8: money into fixed income. And whether they do it tomorrow, 376 00:16:30,960 --> 00:16:33,680 Speaker 8: whether they do it two weeks from now or two months. 377 00:16:33,440 --> 00:16:34,240 Speaker 1: From that, I don't know. 378 00:16:34,760 --> 00:16:39,000 Speaker 8: But the reality is people were under invested values part 379 00:16:39,000 --> 00:16:41,280 Speaker 8: of the fixed income market, and they're looking to readjust 380 00:16:41,280 --> 00:16:41,920 Speaker 8: their allocation. 381 00:16:42,600 --> 00:16:45,000 Speaker 2: Have you got confidence we've re established the invest coralinction 382 00:16:45,120 --> 00:16:46,480 Speaker 2: between bounds and stocks. 383 00:16:47,760 --> 00:16:49,280 Speaker 8: I don't know what I don't know, and I think 384 00:16:49,360 --> 00:16:53,160 Speaker 8: I think correlation fictrate over time. I think that fixed 385 00:16:53,200 --> 00:16:55,720 Speaker 8: income have a role in the portfolio construction, and I 386 00:16:55,720 --> 00:16:58,400 Speaker 8: think they're there for a reason. But of course credit 387 00:16:58,440 --> 00:17:01,080 Speaker 8: spread on the high market are correlation to equity prices. 388 00:17:01,120 --> 00:17:02,960 Speaker 8: So once again, I think one needs to be careful 389 00:17:02,960 --> 00:17:05,960 Speaker 8: about how you frame the question and how you conclude. 390 00:17:06,040 --> 00:17:07,760 Speaker 2: Well, like I said, I mean more specific by saying 391 00:17:07,800 --> 00:17:11,800 Speaker 2: do treasuries? Have treasuries re established an inverse correlation with equities? 392 00:17:11,840 --> 00:17:13,840 Speaker 2: Because one of the reasts that we've seen established over 393 00:17:13,880 --> 00:17:16,840 Speaker 2: the last few years, particularly given the central focus was inflation, 394 00:17:17,280 --> 00:17:19,720 Speaker 2: is that when bombs sold off, equities did too. Have 395 00:17:19,800 --> 00:17:22,080 Speaker 2: we changed that story if we left that Hopefully. 396 00:17:21,640 --> 00:17:22,359 Speaker 1: Hopefully we have. 397 00:17:22,440 --> 00:17:26,400 Speaker 8: But I think remember that we also saw with the pandemic, 398 00:17:27,200 --> 00:17:31,840 Speaker 8: really an unprecent, debted program of money creation, which sort 399 00:17:31,840 --> 00:17:35,359 Speaker 8: of threw everything and our economic textbook in terms of 400 00:17:35,359 --> 00:17:37,520 Speaker 8: how we thought about the correlation. And so I'm careful 401 00:17:37,520 --> 00:17:40,439 Speaker 8: about what I said because the data are just so 402 00:17:40,600 --> 00:17:42,840 Speaker 8: skewed in terms of what we sew and I think, 403 00:17:43,000 --> 00:17:45,200 Speaker 8: you know, you can make the argument, for example, that 404 00:17:45,680 --> 00:17:47,919 Speaker 8: part of the reason why the US economy has done 405 00:17:47,960 --> 00:17:51,800 Speaker 8: so much better than any other places is that the 406 00:17:51,880 --> 00:17:54,040 Speaker 8: package in terms of the pandemic has been so much 407 00:17:54,080 --> 00:17:56,960 Speaker 8: bigger than another country. And at the end of the day, 408 00:17:57,640 --> 00:18:00,240 Speaker 8: all you can do is cross sectional analysis and try 409 00:18:00,280 --> 00:18:02,200 Speaker 8: to compare a different country. But there's so many other 410 00:18:02,320 --> 00:18:06,200 Speaker 8: valuable that comes into the picture that you don't want 411 00:18:06,240 --> 00:18:09,879 Speaker 8: to understate the enormous creation of great company in the 412 00:18:10,000 --> 00:18:13,879 Speaker 8: US versus Europe, for example, and so and so. I 413 00:18:13,880 --> 00:18:16,840 Speaker 8: think we try to always be careful about making definitive 414 00:18:16,880 --> 00:18:19,760 Speaker 8: conclusion when it comes to correlation and when it comes 415 00:18:19,840 --> 00:18:22,359 Speaker 8: to cross sectional comparison between different country. 416 00:18:22,480 --> 00:18:24,920 Speaker 4: Another way to frame this question is when you travel 417 00:18:24,960 --> 00:18:27,119 Speaker 4: the world and you talk to international clients who are 418 00:18:27,200 --> 00:18:29,320 Speaker 4: under invested in fixed and come in the United States, 419 00:18:29,760 --> 00:18:31,560 Speaker 4: how many of them turn to you and say, what 420 00:18:31,680 --> 00:18:32,800 Speaker 4: about the US deficit? 421 00:18:34,280 --> 00:18:39,160 Speaker 8: Well, my my friend and partner, Richard Clarida, I used 422 00:18:39,160 --> 00:18:42,520 Speaker 8: this very American expression and says, the US is. 423 00:18:42,680 --> 00:18:44,240 Speaker 1: Let make sure to make sure I get that right. 424 00:18:44,320 --> 00:18:49,880 Speaker 1: Carry the cleanness dirty. And you know, we have. 425 00:18:49,880 --> 00:18:55,359 Speaker 8: Debated quite a bit at a forum about deficit and 426 00:18:56,240 --> 00:18:59,560 Speaker 8: you know, deficit do matter, and they do matter, and 427 00:18:59,640 --> 00:19:01,480 Speaker 8: at some one in them there's a tipping point, but 428 00:19:01,520 --> 00:19:06,520 Speaker 8: we're not there. And the reality is it's a huge 429 00:19:06,560 --> 00:19:09,840 Speaker 8: competitive advantage to be the reserve currency. People need to 430 00:19:09,880 --> 00:19:13,800 Speaker 8: own dollars. And the reality is we don't think there's 431 00:19:13,840 --> 00:19:17,200 Speaker 8: a crisis coming and that the LEVEL and the US 432 00:19:17,240 --> 00:19:22,240 Speaker 8: can have suddenly a high level of debt versus historical 433 00:19:23,640 --> 00:19:26,280 Speaker 8: precedent and be able to function just fine. 434 00:19:26,920 --> 00:19:28,399 Speaker 3: When will the US get there? 435 00:19:29,119 --> 00:19:34,480 Speaker 7: And do you see either party have any impetus to 436 00:19:34,520 --> 00:19:36,520 Speaker 7: try to reign in spending, so to. 437 00:19:36,560 --> 00:19:39,400 Speaker 8: Quote my partner once again, leave the Countrell, who comes 438 00:19:39,560 --> 00:19:42,360 Speaker 8: often here on the show. No, we see no impetus 439 00:19:42,359 --> 00:19:44,200 Speaker 8: to try to deal with the budget deficit. The only 440 00:19:44,280 --> 00:19:48,439 Speaker 8: real example we have is the United Kingdom. And I 441 00:19:48,440 --> 00:19:51,639 Speaker 8: think that the United Kingdom was actually quite interesting because 442 00:19:51,680 --> 00:19:54,760 Speaker 8: you saw a situation where the bond market reacted so 443 00:19:54,960 --> 00:19:58,720 Speaker 8: violently to the least trust proposal that all of a 444 00:19:58,760 --> 00:20:02,000 Speaker 8: sudden they had to change and had to change really 445 00:20:02,000 --> 00:20:05,040 Speaker 8: really quickly. And I think, I think that this example 446 00:20:05,080 --> 00:20:08,040 Speaker 8: of what happened in a very developed country and how 447 00:20:08,040 --> 00:20:11,320 Speaker 8: the Bank of England reacted and reacted really quickly with 448 00:20:11,960 --> 00:20:15,439 Speaker 8: the LEDI situation and the pressure in the guilt market 449 00:20:15,560 --> 00:20:18,880 Speaker 8: and in the pension market will be a textbook example 450 00:20:18,960 --> 00:20:22,800 Speaker 8: of why markets react quite strongly when something outrageous come. 451 00:20:22,960 --> 00:20:25,000 Speaker 7: Well, we have a Bloomberg survey to that point that 452 00:20:25,040 --> 00:20:28,439 Speaker 7: says Kamala Harris her a victory for her in the 453 00:20:28,440 --> 00:20:31,240 Speaker 7: White House would be better for treasuries and worse for stocks, 454 00:20:31,359 --> 00:20:33,000 Speaker 7: vice versa for the foreign president. 455 00:20:33,359 --> 00:20:35,040 Speaker 6: Would you agree with that scenario. 456 00:20:35,119 --> 00:20:38,280 Speaker 8: I think, I think there's so many unknown you know, 457 00:20:38,320 --> 00:20:40,520 Speaker 8: it depends, it depends on what happened in the House. 458 00:20:40,560 --> 00:20:41,600 Speaker 1: It depends on what. 459 00:20:42,359 --> 00:20:45,600 Speaker 8: The winner can do in terms of program how this 460 00:20:45,640 --> 00:20:49,840 Speaker 8: is all going to pan out. I would be very 461 00:20:49,880 --> 00:20:55,240 Speaker 8: careful about making any any prognosis on this on this matter, 462 00:20:55,560 --> 00:20:57,880 Speaker 8: I think, you know, when we when we think about 463 00:20:57,920 --> 00:21:00,960 Speaker 8: the world, you know, I realized politics is really important. Yeah, 464 00:21:01,040 --> 00:21:03,800 Speaker 8: but at the end of the day, that's now how 465 00:21:03,880 --> 00:21:06,760 Speaker 8: we invest. We invest because we find value and we 466 00:21:06,880 --> 00:21:09,320 Speaker 8: find opportunity, and we try to bat cheap and we 467 00:21:09,960 --> 00:21:14,000 Speaker 8: try to manage portfolio and think about risk carefully and 468 00:21:14,400 --> 00:21:21,240 Speaker 8: ride different cycle and deal with many other factor than politics. 469 00:21:21,280 --> 00:21:23,680 Speaker 8: And you know, there's a few exceptions. If you talk 470 00:21:23,760 --> 00:21:26,720 Speaker 8: to my partner Promoda one in emerging market all of 471 00:21:26,760 --> 00:21:29,639 Speaker 8: a sudden in emerging market sometimes, but its do really 472 00:21:29,680 --> 00:21:32,560 Speaker 8: matter because they are very big changes and very big 473 00:21:32,600 --> 00:21:33,280 Speaker 8: different outcomes. 474 00:21:33,280 --> 00:21:35,119 Speaker 2: The struggle, man, is you notice that some dms have 475 00:21:35,160 --> 00:21:37,480 Speaker 2: treated like ems over the last few years. And you 476 00:21:37,560 --> 00:21:39,640 Speaker 2: mentioned the UK. So I won't put words in your mouth, 477 00:21:39,720 --> 00:21:41,800 Speaker 2: I do want your views. Well, it does feel like 478 00:21:41,840 --> 00:21:44,840 Speaker 2: a self imposed debt break in the United Kingdom, and 479 00:21:44,880 --> 00:21:47,160 Speaker 2: I'm wondering whether from your perspective or even the team 480 00:21:47,160 --> 00:21:50,800 Speaker 2: that actually makes UK government a little bit more attractive here. 481 00:21:51,080 --> 00:21:53,919 Speaker 1: We think it's very attractive. We like the UK, We 482 00:21:54,040 --> 00:21:54,679 Speaker 1: like Australia. 483 00:21:54,760 --> 00:21:57,720 Speaker 8: We think that the UK fits very well in the portfolio, 484 00:21:57,720 --> 00:22:01,040 Speaker 8: and then we'll need to cut and cut rates significantly. 485 00:22:01,119 --> 00:22:02,880 Speaker 1: And so when you think of. 486 00:22:02,840 --> 00:22:06,120 Speaker 8: A global outlook, the UK looks good for a fixed 487 00:22:06,119 --> 00:22:07,120 Speaker 8: income investment. 488 00:22:06,800 --> 00:22:09,760 Speaker 2: Relative to the United States, say in terms of duration risk. 489 00:22:10,240 --> 00:22:14,520 Speaker 8: Relative to other countries in Europe, certainly compared to European bonds. 490 00:22:14,600 --> 00:22:16,960 Speaker 8: We also like the US, So you know, if I 491 00:22:17,040 --> 00:22:19,639 Speaker 8: want to kind of sum up things, you know, we 492 00:22:19,800 --> 00:22:21,720 Speaker 8: like the US, we like the UK, We like Australia. 493 00:22:21,840 --> 00:22:24,040 Speaker 2: The two year ten year segment of the yield curve 494 00:22:24,160 --> 00:22:26,640 Speaker 2: things just starting to normalize, but the stepness almost back 495 00:22:26,680 --> 00:22:29,880 Speaker 2: to double figures this morning as we get that curve normalization. 496 00:22:30,119 --> 00:22:32,080 Speaker 2: Can you walk me through how much things change in 497 00:22:32,080 --> 00:22:34,480 Speaker 2: fixed income whether you're starting to see that cash deployed 498 00:22:34,800 --> 00:22:35,520 Speaker 2: a little bit more. 499 00:22:35,720 --> 00:22:38,560 Speaker 8: Well, I think there's that, And of course people kind 500 00:22:38,560 --> 00:22:40,800 Speaker 8: of look at the cash they have on the sideline, 501 00:22:40,800 --> 00:22:44,800 Speaker 8: and there's about ten trillion dollars of money in cash 502 00:22:44,840 --> 00:22:48,040 Speaker 8: where they will think to reinvested, either by extending duration 503 00:22:48,240 --> 00:22:50,479 Speaker 8: or by going longer, or by taking a bit more 504 00:22:50,520 --> 00:22:53,080 Speaker 8: credit risk. So there is a wall of money out there, 505 00:22:53,119 --> 00:22:55,040 Speaker 8: and I keep on saying this, and of course some 506 00:22:55,080 --> 00:22:57,800 Speaker 8: of it is cash corporate and will remain cash corporate. 507 00:22:57,800 --> 00:23:00,600 Speaker 8: But I think people have been very much on the 508 00:23:00,640 --> 00:23:04,200 Speaker 8: sideline rolling short term treasury bill and this money will 509 00:23:04,280 --> 00:23:09,560 Speaker 8: get redeployed, and how fast and how remains to be seen. 510 00:23:10,119 --> 00:23:12,240 Speaker 8: The other thing which I think you may find interesting 511 00:23:12,640 --> 00:23:16,840 Speaker 8: is there are a lot of opportunity in relative value 512 00:23:17,720 --> 00:23:20,959 Speaker 8: in the fixed inker market, and in particular think of Japan. 513 00:23:21,280 --> 00:23:23,520 Speaker 8: You know, nothing happened in Japan for fifteen years and 514 00:23:23,560 --> 00:23:26,280 Speaker 8: then all of a sudden, we now have positive rates 515 00:23:26,320 --> 00:23:29,040 Speaker 8: in Japan, and there's a lot of arbitrush to be done. 516 00:23:29,160 --> 00:23:33,760 Speaker 8: It's across the curve, it's with swamp, it's with different instruments, 517 00:23:33,800 --> 00:23:36,560 Speaker 8: and all of a sudden, they are sources of alpha, 518 00:23:36,760 --> 00:23:41,159 Speaker 8: as we tend to call them, where basically they didn't 519 00:23:41,160 --> 00:23:43,679 Speaker 8: exist two years ago, which have come back to the 520 00:23:43,720 --> 00:23:46,640 Speaker 8: market in Spain. How long it lasts, we'll find out, 521 00:23:47,040 --> 00:23:50,840 Speaker 8: but it should be a very exciting opportunity in terms 522 00:23:50,880 --> 00:23:54,040 Speaker 8: of the whole market, in terms of delivering better performance. 523 00:23:54,560 --> 00:23:57,399 Speaker 4: How difficult is it to pry that cash out of 524 00:23:57,440 --> 00:24:00,919 Speaker 4: people's cold hands, given the fact that people really do 525 00:24:01,200 --> 00:24:03,760 Speaker 4: like what they're getting. And oh, by the way, there 526 00:24:03,760 --> 00:24:06,280 Speaker 4: are fifteen other fund managers out there also trying to 527 00:24:06,320 --> 00:24:08,600 Speaker 4: get them to pry that cash out of their hands. 528 00:24:08,680 --> 00:24:10,880 Speaker 8: Well, I will tell your competition is good. Is good 529 00:24:10,880 --> 00:24:14,160 Speaker 8: for everybody. And at the end of the day, there's two. 530 00:24:13,960 --> 00:24:14,880 Speaker 1: Things there is. 531 00:24:16,640 --> 00:24:19,560 Speaker 8: When the FED cuts rate, eventually the short end of 532 00:24:19,600 --> 00:24:21,880 Speaker 8: the curve becomes less attractive, and I think you'll see 533 00:24:22,119 --> 00:24:22,720 Speaker 8: cash moving. 534 00:24:23,480 --> 00:24:26,600 Speaker 1: And from a competitive standpoint, we want to. 535 00:24:26,520 --> 00:24:28,320 Speaker 8: Do the best possible job in terms of big and 536 00:24:28,359 --> 00:24:33,280 Speaker 8: fiduciary and doing a good job in terms of performance 537 00:24:33,359 --> 00:24:35,360 Speaker 8: and being there for our clients. And we compete every 538 00:24:35,359 --> 00:24:37,520 Speaker 8: single day and hopefully we'll win more than we lose. 539 00:24:38,119 --> 00:24:40,800 Speaker 1: But all we can do is trial best and were 540 00:24:40,840 --> 00:24:41,600 Speaker 1: trying very hard. 541 00:24:41,640 --> 00:24:45,359 Speaker 4: Where's the edge, where's sort of growth concentrated in or 542 00:24:45,920 --> 00:24:49,000 Speaker 4: trying to be concentrated with respect to PIMCO in the 543 00:24:49,040 --> 00:24:50,359 Speaker 4: say five years ahead. 544 00:24:50,560 --> 00:24:53,560 Speaker 8: Well, Asia has been quite exciting lately, and there's a 545 00:24:53,600 --> 00:24:56,280 Speaker 8: lot of things happening in Asia, and you can sort 546 00:24:56,320 --> 00:24:58,679 Speaker 8: of think of our business as being linked to GDP 547 00:24:58,800 --> 00:25:01,320 Speaker 8: in terms of the saving rate and people when they 548 00:25:01,320 --> 00:25:03,800 Speaker 8: save more, invest more. And so Asia has been quite exciting. 549 00:25:03,840 --> 00:25:06,439 Speaker 8: And the US is an absolutely wonderful place. I mean, 550 00:25:06,480 --> 00:25:09,000 Speaker 8: it's a big market and there's a lot to be done. 551 00:25:09,000 --> 00:25:11,119 Speaker 8: We have a very good Canadian business, we have a 552 00:25:11,280 --> 00:25:13,840 Speaker 8: very good Latin American business. There's a lot of good 553 00:25:13,840 --> 00:25:17,800 Speaker 8: things happening. But the one valuable we don't control is 554 00:25:17,840 --> 00:25:21,199 Speaker 8: of course, make the macroeconomic situation. And so if you 555 00:25:21,320 --> 00:25:24,520 Speaker 8: have a real reversal, and you have, for example of 556 00:25:24,520 --> 00:25:28,720 Speaker 8: a session, and let me just say it's not our scenario, 557 00:25:28,800 --> 00:25:30,959 Speaker 8: but if you have a real recession, people look at 558 00:25:31,000 --> 00:25:32,159 Speaker 8: more discoversed and take. 559 00:25:32,080 --> 00:25:34,160 Speaker 1: Some money away, and at the end of the day, 560 00:25:34,440 --> 00:25:34,760 Speaker 1: you know, we. 561 00:25:34,840 --> 00:25:36,639 Speaker 8: Here for the next twenty years, not for the next 562 00:25:36,760 --> 00:25:40,280 Speaker 8: twenty minutes. And so you know, we have very liquid portfolio. 563 00:25:40,320 --> 00:25:43,399 Speaker 8: People can take the money whenever they feel like, and 564 00:25:43,440 --> 00:25:45,439 Speaker 8: we invest and so on, and we understand that people 565 00:25:45,480 --> 00:25:46,920 Speaker 8: need money for all sorts of reason. 566 00:25:47,320 --> 00:25:50,800 Speaker 4: There are a number of behemoth asset managers. PIMCO overseas 567 00:25:50,840 --> 00:25:53,440 Speaker 4: one point eight trillion dollars. How much bigger could you 568 00:25:53,440 --> 00:25:54,080 Speaker 4: see it getting? 569 00:25:54,359 --> 00:25:55,520 Speaker 1: It's all about performance. 570 00:25:56,320 --> 00:25:58,760 Speaker 8: And I always say the great thing about not being 571 00:25:58,800 --> 00:26:02,159 Speaker 8: public and not having two give quality earnings is you 572 00:26:02,200 --> 00:26:06,240 Speaker 8: focus on what matter. The circle of truth is if 573 00:26:06,280 --> 00:26:07,560 Speaker 8: you perform, they will come. 574 00:26:08,400 --> 00:26:11,800 Speaker 2: You said this last one, we spoke success by assets. 575 00:26:12,080 --> 00:26:14,960 Speaker 2: We measure our success by the returns we provide. Does 576 00:26:15,000 --> 00:26:17,720 Speaker 2: it disappoint you? Is it slightly upsetting that people do 577 00:26:18,480 --> 00:26:21,000 Speaker 2: measure your success by assets because they've been pretty stable 578 00:26:21,040 --> 00:26:23,040 Speaker 2: now for the last decade, black Rock over the same 579 00:26:23,040 --> 00:26:26,400 Speaker 2: period has multiplied. Is that disappointing to you that people 580 00:26:26,520 --> 00:26:27,119 Speaker 2: junctually have that. 581 00:26:27,280 --> 00:26:29,399 Speaker 8: I think we have a very different business model. And 582 00:26:30,040 --> 00:26:33,479 Speaker 8: you know we were talking about Onemart. We don't want 583 00:26:33,480 --> 00:26:37,040 Speaker 8: to be Walmart. Onemar is a fantastic company, but we 584 00:26:37,160 --> 00:26:40,400 Speaker 8: have an opportunity set where we very carefully think about 585 00:26:40,440 --> 00:26:43,680 Speaker 8: capacity and how much money we can put to work 586 00:26:44,040 --> 00:26:48,159 Speaker 8: and what the right target return are for investors. And 587 00:26:48,200 --> 00:26:51,360 Speaker 8: I think that by definition means that we won't be 588 00:26:51,720 --> 00:26:54,119 Speaker 8: the largest asset manager, and so be it. 589 00:26:54,280 --> 00:26:57,040 Speaker 2: When it comes to asset management, private markets comes up 590 00:26:57,320 --> 00:26:59,320 Speaker 2: all the time, and everyone's trying to make their own 591 00:26:59,359 --> 00:27:01,840 Speaker 2: push pin cut fit into that big push at the 592 00:27:01,880 --> 00:27:03,240 Speaker 2: moment into private markets. 593 00:27:03,680 --> 00:27:04,080 Speaker 1: So we. 594 00:27:05,840 --> 00:27:07,399 Speaker 8: Try to focus on what we know how to do, 595 00:27:07,760 --> 00:27:11,000 Speaker 8: and what we know how to do is fixed income, 596 00:27:11,040 --> 00:27:16,280 Speaker 8: and so that includes as a matter of fact, everything 597 00:27:16,320 --> 00:27:18,359 Speaker 8: which has to do with private market and fixed income, 598 00:27:18,359 --> 00:27:22,240 Speaker 8: and it also involves real estate and there's a big 599 00:27:22,280 --> 00:27:24,879 Speaker 8: REALI state cycle that should be exciting. There will be 600 00:27:25,000 --> 00:27:29,040 Speaker 8: pieces to pick and there will be cheap investment, both 601 00:27:29,119 --> 00:27:33,960 Speaker 8: in debt and inequity and in the private credit market. 602 00:27:34,520 --> 00:27:39,040 Speaker 8: There's quite a unique opportunity in asset backed lending. That's 603 00:27:39,080 --> 00:27:42,119 Speaker 8: where my friend Dan Iverson grew up in. We have 604 00:27:42,480 --> 00:27:45,440 Speaker 8: been doing this for twenty years and the one thing 605 00:27:45,480 --> 00:27:49,240 Speaker 8: which has changed, so to speak, is the banks need 606 00:27:49,280 --> 00:27:52,879 Speaker 8: to free up capital, and so they need to sell 607 00:27:53,280 --> 00:27:57,679 Speaker 8: large portfolio of many different assets and do it fairly quickly. 608 00:27:57,800 --> 00:28:01,600 Speaker 8: That's an opportunity for us. And so if they are 609 00:28:01,680 --> 00:28:05,520 Speaker 8: good entry points and good asset to pick, we should 610 00:28:05,560 --> 00:28:06,920 Speaker 8: be able to do quite well. 611 00:28:07,000 --> 00:28:09,280 Speaker 4: What types of assets you're talking about commercial, you're going 612 00:28:09,320 --> 00:28:11,800 Speaker 4: to be on residential. 613 00:28:11,280 --> 00:28:15,120 Speaker 1: Swatch all bonds banks. 614 00:28:17,000 --> 00:28:19,119 Speaker 8: Let me just focus first on fixed income. You know, 615 00:28:19,240 --> 00:28:20,960 Speaker 8: I think in fixed income there's a lot to buy, 616 00:28:21,160 --> 00:28:23,440 Speaker 8: and there's a lot to buy because the banks need 617 00:28:23,480 --> 00:28:25,840 Speaker 8: to deliver. And so the banks, you can think about 618 00:28:25,880 --> 00:28:26,960 Speaker 8: what they have on the balance sheet. 619 00:28:26,960 --> 00:28:28,520 Speaker 1: They have loans that they've. 620 00:28:28,359 --> 00:28:30,199 Speaker 8: Given to company and they want to get rid of it, 621 00:28:30,240 --> 00:28:32,320 Speaker 8: and so they sell it to us, and that I 622 00:28:32,320 --> 00:28:35,080 Speaker 8: think is fairly straightforward. In real estate, you have a 623 00:28:35,160 --> 00:28:38,520 Speaker 8: real estate cycle, and there will be different things you 624 00:28:38,520 --> 00:28:41,440 Speaker 8: can do. There will be some will need pref equity, 625 00:28:41,560 --> 00:28:45,480 Speaker 8: some will need debts, some will need to buy equity, 626 00:28:45,520 --> 00:28:46,000 Speaker 8: and we need. 627 00:28:46,000 --> 00:28:47,640 Speaker 1: Just need to make sure that it's cheap enough. 628 00:28:47,840 --> 00:28:50,600 Speaker 8: And that we think carefully about what happens and make 629 00:28:50,600 --> 00:28:52,760 Speaker 8: sure we have an expected return which company set for 630 00:28:52,800 --> 00:28:54,760 Speaker 8: the risk and it needs to be high because it's 631 00:28:54,800 --> 00:28:56,920 Speaker 8: a lot of risk in commercial really State, for example. 632 00:28:57,000 --> 00:29:00,800 Speaker 8: But we had a pretty fast cycle and hopefully we're 633 00:29:00,800 --> 00:29:02,280 Speaker 8: going to be on the right side of the of 634 00:29:02,320 --> 00:29:03,240 Speaker 8: the trade coming. 635 00:29:03,000 --> 00:29:03,400 Speaker 1: Out of it. 636 00:29:03,520 --> 00:29:05,560 Speaker 2: We've only got sixty seconds left with you. So the 637 00:29:05,880 --> 00:29:09,400 Speaker 2: hardest question of the morning. What's more likely Arsenal winning 638 00:29:09,480 --> 00:29:12,400 Speaker 2: the title or the Federal Reserve engineering a soft landing 639 00:29:13,160 --> 00:29:16,440 Speaker 2: Arsenal winning the title. Arsenal winning the title? Should I 640 00:29:16,480 --> 00:29:18,040 Speaker 2: read into when I think about your real views on 641 00:29:18,080 --> 00:29:20,040 Speaker 2: the economy, then, based on now, you just think Arsenal 642 00:29:20,080 --> 00:29:20,520 Speaker 2: is not good? 643 00:29:21,200 --> 00:29:25,960 Speaker 1: No, you should, you should think about Arsenal. No. I think. 644 00:29:26,000 --> 00:29:28,520 Speaker 8: Look, Look, I think I think people are very people 645 00:29:28,560 --> 00:29:32,120 Speaker 8: are very sometimes criticized the FED. I think they do 646 00:29:32,160 --> 00:29:34,680 Speaker 8: a really really good job with a very difficult hand 647 00:29:34,680 --> 00:29:35,520 Speaker 8: to play, and. 648 00:29:37,120 --> 00:29:39,560 Speaker 1: You know, they don't know what they don't know at 649 00:29:39,560 --> 00:29:40,200 Speaker 1: the end of the day. 650 00:29:40,240 --> 00:29:42,600 Speaker 8: And I think, I think it has been a tremendously 651 00:29:42,640 --> 00:29:46,080 Speaker 8: complicated market to navigate for everybody. Over the past four years. 652 00:29:46,120 --> 00:29:48,560 Speaker 8: None of us, none of us have so thought we 653 00:29:48,560 --> 00:29:51,560 Speaker 8: would see a pandemic. And you know, from an investment 654 00:29:51,600 --> 00:29:55,360 Speaker 8: standpoint and from a regulatory standpoint, and from the FED standpoint, 655 00:29:55,400 --> 00:29:57,560 Speaker 8: I think we have to learn a new playbook. 656 00:29:57,680 --> 00:29:59,880 Speaker 2: It's been humbling for so Maney's good to say you 657 00:30:00,040 --> 00:30:02,400 Speaker 2: a great winning for the weekend. Thank you, sir, appreciating 658 00:30:02,400 --> 00:30:05,880 Speaker 2: Money Roman, there of film Code. This is the Bloomberg 659 00:30:05,920 --> 00:30:10,560 Speaker 2: Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. 660 00:30:10,880 --> 00:30:13,360 Speaker 2: You can watch the show live on Bloomberg TV weekday 661 00:30:13,400 --> 00:30:16,640 Speaker 2: mornings from six am to nine am Eastern. Subscribe to 662 00:30:16,640 --> 00:30:19,880 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen, 663 00:30:20,160 --> 00:30:22,760 Speaker 2: and as always, on the Bloomberg Terminal and the Bloomberg 664 00:30:22,800 --> 00:30:23,400 Speaker 2: Business app.