1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,320 Speaker 2: I mean may not have an overall recession, We're having 3 00:00:04,360 --> 00:00:06,640 Speaker 2: a rolling recession to kind of role looks pretty strongly 4 00:00:06,640 --> 00:00:07,600 Speaker 2: it is when it comes to jobs. 5 00:00:07,640 --> 00:00:09,760 Speaker 1: The financial story is that shape our word. 6 00:00:09,840 --> 00:00:13,480 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,560 --> 00:00:15,360 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,440 --> 00:00:17,160 Speaker 2: generative AI through. 9 00:00:17,000 --> 00:00:19,120 Speaker 1: The eyes of the most influential voices. 10 00:00:19,239 --> 00:00:22,200 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,320 --> 00:00:25,040 Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of 12 00:00:25,040 --> 00:00:26,040 Speaker 2: the Columbia Business School. 13 00:00:26,040 --> 00:00:29,840 Speaker 3: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,200 --> 00:00:33,360 Speaker 2: A whole lot of smoke and fires to match, some 15 00:00:33,479 --> 00:00:36,599 Speaker 2: being started and some being put out. This is Bloomberg 16 00:00:36,600 --> 00:00:40,440 Speaker 2: Wall Street Week. I'm David Weston. This week Bridgewater founder 17 00:00:40,520 --> 00:00:44,240 Speaker 2: Ray Dalyio and economic historian Neil Ferguson on where China 18 00:00:44,440 --> 00:00:44,920 Speaker 2: is headed. 19 00:00:45,120 --> 00:00:47,120 Speaker 1: There is not a winner or a loser. 20 00:00:47,320 --> 00:00:51,040 Speaker 4: I'm not saying there's any guarantee that the United States 21 00:00:51,080 --> 00:00:52,640 Speaker 4: is assigned that winds Cold War two. 22 00:00:52,760 --> 00:00:56,200 Speaker 2: Pete Savros of KKR on a different approach to private equity. 23 00:00:56,520 --> 00:00:59,160 Speaker 3: This is a superior way of operating a company in 24 00:00:59,200 --> 00:01:00,000 Speaker 3: every perspective. 25 00:01:00,120 --> 00:01:03,280 Speaker 2: And Bank of America CEO Brian moynihan, I'm saving money 26 00:01:03,400 --> 00:01:04,880 Speaker 2: with ai Way. 27 00:01:04,959 --> 00:01:07,600 Speaker 5: I really think his near term helpful is a computer 28 00:01:07,880 --> 00:01:08,880 Speaker 5: programming development. 29 00:01:21,360 --> 00:01:23,920 Speaker 2: Whatever the rest of Global Wall Street was doing this week, 30 00:01:23,959 --> 00:01:26,720 Speaker 2: all of us in New York were looking skyward at 31 00:01:26,720 --> 00:01:30,200 Speaker 2: the worst air quality in the entire world, all because 32 00:01:30,200 --> 00:01:31,840 Speaker 2: of forest fires in Canada. 33 00:01:32,040 --> 00:01:35,520 Speaker 1: This is an unprecedented in our city. 34 00:01:36,040 --> 00:01:39,640 Speaker 5: In all New York should limit outdoor activity to the 35 00:01:39,680 --> 00:01:41,200 Speaker 5: greatest extent possibly. 36 00:01:41,400 --> 00:01:43,840 Speaker 2: And while firefighters in Canada were trying to put out 37 00:01:43,880 --> 00:01:46,440 Speaker 2: the fires there, things were heating up in the South 38 00:01:46,520 --> 00:01:49,560 Speaker 2: China Sea as a Chinese Navy warship came close to 39 00:01:49,600 --> 00:01:53,000 Speaker 2: colliding with the US destroyer in the Taiwan Strait, even 40 00:01:53,080 --> 00:01:55,920 Speaker 2: as Secretary of State Blincoln planned that delayed trip to 41 00:01:55,960 --> 00:01:58,720 Speaker 2: Beijing to try to take the temperature down a bit. 42 00:01:59,080 --> 00:02:02,120 Speaker 4: So since I think has A Russians could involve President 43 00:02:02,240 --> 00:02:06,600 Speaker 4: changing because the United States looks to resume high level communication. 44 00:02:06,480 --> 00:02:09,600 Speaker 2: The PGA shocked everyone by trying to put out the 45 00:02:09,600 --> 00:02:12,840 Speaker 2: fire in its relationship with Saudi Arabia's live Golf, leaving 46 00:02:12,840 --> 00:02:15,800 Speaker 2: people like Mark Lazry wondering why. 47 00:02:15,880 --> 00:02:20,520 Speaker 6: Why did the PGA to do this? It's clear why 48 00:02:20,520 --> 00:02:23,000 Speaker 6: I lived in it. A week ago, day ago, a 49 00:02:23,080 --> 00:02:27,000 Speaker 6: year ago. That was the devil, and today they're your partner. 50 00:02:27,320 --> 00:02:30,200 Speaker 2: But while so many were trying to tamp the fires down, 51 00:02:30,440 --> 00:02:33,760 Speaker 2: some were getting new fires started, like sec Shared, Gary 52 00:02:33,800 --> 00:02:37,720 Speaker 2: Gensler going after crypto platforms Finance and coinbase and likening 53 00:02:37,760 --> 00:02:40,960 Speaker 2: what's going on to the huge scandal with Sam bankman 54 00:02:41,040 --> 00:02:42,440 Speaker 2: Fried's FTX. 55 00:02:42,680 --> 00:02:47,600 Speaker 5: There's parallels here to the FTX fraud manipulation that we saw. 56 00:02:48,080 --> 00:02:50,919 Speaker 2: And two new contestants edited the Republican side of the 57 00:02:51,000 --> 00:02:53,359 Speaker 2: race for president in twenty twenty four trying to light 58 00:02:53,440 --> 00:02:55,519 Speaker 2: some fires under their campaigns. 59 00:02:56,160 --> 00:02:58,760 Speaker 6: I know we can bring this country back, but it'll 60 00:02:58,760 --> 00:03:04,320 Speaker 6: require new leadership in the White House and the Republican Party. 61 00:03:04,600 --> 00:03:09,200 Speaker 7: We have leaders who have shown us over and over again, 62 00:03:09,760 --> 00:03:13,200 Speaker 7: but not only are they devoid of character, but they 63 00:03:13,240 --> 00:03:13,840 Speaker 7: don't care. 64 00:03:14,400 --> 00:03:17,360 Speaker 2: And then late Thursday, the leader in the Republican field, 65 00:03:17,360 --> 00:03:20,160 Speaker 2: Donald Trump, added his own fuel to the fire as 66 00:03:20,160 --> 00:03:23,440 Speaker 2: he was indicted for holding onto classified documents after we 67 00:03:23,520 --> 00:03:24,520 Speaker 2: left office in. 68 00:03:24,560 --> 00:03:26,760 Speaker 8: Selection interference at the highest level. 69 00:03:26,800 --> 00:03:30,079 Speaker 9: There's never been anything like what's happened. I'm an innocent man. 70 00:03:30,120 --> 00:03:31,200 Speaker 10: I'm an innocent person. 71 00:03:33,080 --> 00:03:35,920 Speaker 2: Despite all the heat and smoke from the week, markets 72 00:03:35,960 --> 00:03:38,080 Speaker 2: came through it all relatively on scathed, with the S 73 00:03:38,120 --> 00:03:39,960 Speaker 2: and P five hundred ending the week in a bull 74 00:03:40,080 --> 00:03:42,920 Speaker 2: market by a mere five points at forty two ninety 75 00:03:42,920 --> 00:03:45,560 Speaker 2: eight of four tenths of a percent. On the week, 76 00:03:45,720 --> 00:03:48,480 Speaker 2: the Nansdaq was up just over one tenth of a percent, 77 00:03:48,680 --> 00:03:51,120 Speaker 2: while the yield on the tenure went up five basis 78 00:03:51,160 --> 00:03:53,600 Speaker 2: points to end up at three point seventy four. To 79 00:03:53,600 --> 00:03:55,520 Speaker 2: take us through the week in the markets, we welcome 80 00:03:55,560 --> 00:04:00,640 Speaker 2: now Julian Salisbury, Golden Sacks, CIO of Wealth and Asset Management, Erickson, 81 00:04:00,760 --> 00:04:01,800 Speaker 2: US Bank, head. 82 00:04:01,640 --> 00:04:02,360 Speaker 1: Of Public Markets. 83 00:04:02,400 --> 00:04:04,280 Speaker 2: Please let me start with you about this so called 84 00:04:04,320 --> 00:04:06,560 Speaker 2: bull market. Is it for real? Is it going to 85 00:04:06,560 --> 00:04:08,400 Speaker 2: be sustained? I must say, we have our elves here 86 00:04:08,440 --> 00:04:12,120 Speaker 2: that follow these things for Bloomberg, various securities analysts, and 87 00:04:12,160 --> 00:04:14,160 Speaker 2: they think we're gonna end up the year around four thousand. 88 00:04:14,240 --> 00:04:15,720 Speaker 2: We're now pushing forty three hundred. 89 00:04:15,760 --> 00:04:16,120 Speaker 1: Is it real? 90 00:04:17,279 --> 00:04:21,400 Speaker 9: Well, we're what we call a skeptical participant in the market, 91 00:04:21,480 --> 00:04:24,760 Speaker 9: really with a neutral position on US equities and really 92 00:04:24,800 --> 00:04:27,839 Speaker 9: the reason why is you've got a conflicting set of 93 00:04:27,839 --> 00:04:30,560 Speaker 9: signals going on as far as what may happen with 94 00:04:30,800 --> 00:04:33,719 Speaker 9: the stock market. So on the one side, we certainly 95 00:04:33,760 --> 00:04:36,000 Speaker 9: know that fundamentals have been slowing, whether it's on the 96 00:04:36,040 --> 00:04:40,200 Speaker 9: top down corporate basis or on the bottom up, top 97 00:04:40,240 --> 00:04:43,400 Speaker 9: down macro basis or the bottom up corporate basis, and 98 00:04:43,440 --> 00:04:48,920 Speaker 9: we have headwinds of continued a tight policy in monetary factors. 99 00:04:49,000 --> 00:04:51,480 Speaker 9: On the other hand, however, we have seen some green 100 00:04:51,520 --> 00:04:55,279 Speaker 9: shoots starting to come up recently, and technicals certainly have 101 00:04:55,360 --> 00:04:58,919 Speaker 9: been pushing on a relative basis the US equity market higher. 102 00:04:59,080 --> 00:05:01,480 Speaker 9: So are we in a new bamarket? We think it 103 00:05:01,600 --> 00:05:03,760 Speaker 9: still remains to be seen, but certainly there is some 104 00:05:03,920 --> 00:05:07,200 Speaker 9: momentum right now towards an upward trajectory. 105 00:05:07,400 --> 00:05:09,080 Speaker 2: Julie, We're going to hear from the Fed next week, 106 00:05:09,200 --> 00:05:11,160 Speaker 2: and we talked about that tight monufterry buzz. Is that 107 00:05:11,240 --> 00:05:13,479 Speaker 2: one of the things you could actually take this bullmarket 108 00:05:13,520 --> 00:05:14,160 Speaker 2: back away. 109 00:05:13,920 --> 00:05:14,520 Speaker 1: From us again? 110 00:05:15,400 --> 00:05:17,800 Speaker 11: Look, I think, just out to Lisa's points, I think 111 00:05:17,839 --> 00:05:21,080 Speaker 11: the technicals here are certainly being very supportive of this run. 112 00:05:21,160 --> 00:05:23,360 Speaker 11: People came into the year very nervous, sort of concerned 113 00:05:23,400 --> 00:05:26,279 Speaker 11: about the outlet for earnings earnings surprise to the upside, 114 00:05:26,279 --> 00:05:29,479 Speaker 11: I think substantially in Q one, and people are sitting 115 00:05:29,480 --> 00:05:30,960 Speaker 11: there along a lot of cash, and I think, you know, 116 00:05:30,960 --> 00:05:33,160 Speaker 11: you're going to see risk assets continue to perform here 117 00:05:33,200 --> 00:05:35,960 Speaker 11: because of the you know, the amount of amount of 118 00:05:36,000 --> 00:05:39,200 Speaker 11: cash at along sidelines looking to get invested. You know, 119 00:05:39,320 --> 00:05:41,960 Speaker 11: it's interesting that you talked about a bullmarket. Yes, I 120 00:05:41,960 --> 00:05:44,640 Speaker 11: guess it is now technically a bull market up until 121 00:05:44,720 --> 00:05:46,279 Speaker 11: you know, just a few weeks ago, it's a fairly 122 00:05:46,279 --> 00:05:50,760 Speaker 11: concentrated bullmarket. So it's it's you know, with the whether 123 00:05:50,800 --> 00:05:52,720 Speaker 11: it's the top seven, eight nine stocks have driven a 124 00:05:52,800 --> 00:05:54,400 Speaker 11: large amount of that. But I'd say that started to 125 00:05:54,400 --> 00:05:56,680 Speaker 11: become more broad based. So you know, you've seen the 126 00:05:56,680 --> 00:06:00,240 Speaker 11: small cap mid cap industrials starting to catch up. So 127 00:06:00,360 --> 00:06:02,400 Speaker 11: it's starting to look like a slightly healthier run as 128 00:06:02,400 --> 00:06:04,520 Speaker 11: well than the very concentrated run we were seeing just 129 00:06:04,560 --> 00:06:05,160 Speaker 11: a few weeks ago. 130 00:06:05,279 --> 00:06:06,320 Speaker 2: Is there a lot of dry powder? 131 00:06:06,480 --> 00:06:06,800 Speaker 1: Jullian? 132 00:06:06,920 --> 00:06:09,240 Speaker 2: Right now we see over five trillion I think now 133 00:06:09,240 --> 00:06:10,760 Speaker 2: in money market funds. It could come back to the 134 00:06:10,800 --> 00:06:11,480 Speaker 2: equities market. 135 00:06:11,560 --> 00:06:14,640 Speaker 11: Yeah, there's about five point two trillion in US money 136 00:06:14,640 --> 00:06:17,800 Speaker 11: markets alone, around six point five trillion on a global basis. 137 00:06:18,440 --> 00:06:20,719 Speaker 11: It's interesting that, you know, the flow into those is 138 00:06:20,760 --> 00:06:23,320 Speaker 11: still modestly positive, nowhere near the rate that we were 139 00:06:23,400 --> 00:06:26,159 Speaker 11: seeing money coming into those money market funds around the 140 00:06:26,200 --> 00:06:29,400 Speaker 11: events of SVB a few months ago, but it's still 141 00:06:29,400 --> 00:06:33,760 Speaker 11: gradually trickling in. You know, an interesting phenomena there, there's 142 00:06:33,760 --> 00:06:35,919 Speaker 11: a lot of stress in the money market complex ahead 143 00:06:35,920 --> 00:06:37,880 Speaker 11: of the debt ceiling without being resolved. That's really kind 144 00:06:37,880 --> 00:06:40,120 Speaker 11: of gone out of the system now, you know, there's 145 00:06:40,120 --> 00:06:41,880 Speaker 11: a lot of treasury assurance coming up for the next 146 00:06:41,880 --> 00:06:43,800 Speaker 11: few weeks, and our expectations, you know, the money market 147 00:06:43,800 --> 00:06:45,599 Speaker 11: funds are really going to take up a lot of 148 00:06:45,640 --> 00:06:46,120 Speaker 11: that supply. 149 00:06:46,400 --> 00:06:48,240 Speaker 2: Well, So a week or two ago, we were all 150 00:06:48,279 --> 00:06:50,240 Speaker 2: concerned about the banks as we had that series of 151 00:06:50,240 --> 00:06:52,159 Speaker 2: bank failure starting in March. There's a lot of concerned 152 00:06:52,160 --> 00:06:55,440 Speaker 2: about liquidity, willingness to land. Are we through that at 153 00:06:55,440 --> 00:06:57,800 Speaker 2: this point? Do we still have risks of a lack 154 00:06:57,839 --> 00:07:00,240 Speaker 2: of liquidity, particularly as we have to issue all those 155 00:07:00,279 --> 00:07:02,120 Speaker 2: T bills to make up for what we drew down 156 00:07:02,120 --> 00:07:03,440 Speaker 2: because of that debt seiling problem. 157 00:07:04,320 --> 00:07:07,680 Speaker 9: We are still really carefully watching the liquidity To your point, 158 00:07:07,760 --> 00:07:10,280 Speaker 9: David and The reason why is while we've had a 159 00:07:10,320 --> 00:07:14,360 Speaker 9: fortunate reprieve in what's going on with financial sector stresses, 160 00:07:14,440 --> 00:07:20,800 Speaker 9: certainly they are facing potential increased regulatory requirements as well 161 00:07:20,840 --> 00:07:23,760 Speaker 9: as really just dealing with general economic slowdown, and so 162 00:07:23,800 --> 00:07:27,480 Speaker 9: you've got some tightening conditions there. In addition, as you mentioned, 163 00:07:27,520 --> 00:07:31,040 Speaker 9: the Treasury General account really has to rebuild because they 164 00:07:31,040 --> 00:07:33,480 Speaker 9: were spending down all of that money during the debt 165 00:07:33,520 --> 00:07:36,440 Speaker 9: ceiling debate, and they need to rebuild up the reserve. 166 00:07:36,560 --> 00:07:38,440 Speaker 9: So as they do that, they're going to pull money 167 00:07:38,440 --> 00:07:41,000 Speaker 9: out of the system. What's interesting is we did just 168 00:07:41,080 --> 00:07:44,840 Speaker 9: have some options starting to rebuild that reserve this week, 169 00:07:44,920 --> 00:07:47,840 Speaker 9: and the good news is as we monitored some of 170 00:07:47,880 --> 00:07:51,040 Speaker 9: the yield activity around those auctions, we didn't see any 171 00:07:51,680 --> 00:07:54,239 Speaker 9: concerning signs at this point. But it is very early 172 00:07:54,320 --> 00:07:57,280 Speaker 9: days and there's almost about a trillion that's expected to 173 00:07:57,280 --> 00:08:00,880 Speaker 9: come into the TJA coffers and out of the market 174 00:08:00,920 --> 00:08:03,040 Speaker 9: really over the next several months, so that's something we'll 175 00:08:03,080 --> 00:08:04,239 Speaker 9: just continue to monitor. 176 00:08:04,800 --> 00:08:07,160 Speaker 11: I think this part of the rally we've seen in 177 00:08:07,200 --> 00:08:09,480 Speaker 11: the last few weeks it's people getting increasingly comfortable that 178 00:08:09,560 --> 00:08:12,680 Speaker 11: the banks this situation seems to have stabilized somewhat, and 179 00:08:12,680 --> 00:08:14,160 Speaker 11: that's certainly been true in the near town. I think 180 00:08:14,440 --> 00:08:17,800 Speaker 11: the short term liquidity issues have been somewhat put to bed, 181 00:08:17,880 --> 00:08:20,360 Speaker 11: but I think we're not out of the woods yet. 182 00:08:20,440 --> 00:08:22,560 Speaker 11: I think there's still going to be continued pressure on 183 00:08:22,640 --> 00:08:24,720 Speaker 11: the banks on a whole variety of levels. I think 184 00:08:25,040 --> 00:08:28,440 Speaker 11: new interest margins will remain under pressure. I think credit 185 00:08:28,560 --> 00:08:30,520 Speaker 11: quality is going to continue to become under pressure. We're 186 00:08:30,560 --> 00:08:31,880 Speaker 11: still in the early innings there. 187 00:08:31,760 --> 00:08:34,040 Speaker 2: And Julian, you're just fresh back from Berlin, a big 188 00:08:34,080 --> 00:08:36,839 Speaker 2: conference over there, and it was more private oriented. I think, 189 00:08:37,120 --> 00:08:39,120 Speaker 2: what about private credit? Is it going to step in 190 00:08:39,440 --> 00:08:40,760 Speaker 2: wherever we needed for the banks. 191 00:08:41,080 --> 00:08:44,080 Speaker 11: Look, I think a lot of questions around this topic everyone, 192 00:08:44,240 --> 00:08:45,880 Speaker 11: you know, as I go around the world, not just 193 00:08:45,960 --> 00:08:49,079 Speaker 11: in Berlin, but Middle East, Far East, there's a lot 194 00:08:49,080 --> 00:08:51,080 Speaker 11: of interest in private credit. Of course here in the US, 195 00:08:51,960 --> 00:08:54,160 Speaker 11: questions being asked about, you know, is that getting over 196 00:08:54,200 --> 00:08:56,280 Speaker 11: inflated now? Is there too much excitement, too much money 197 00:08:56,320 --> 00:08:59,200 Speaker 11: going into that? And I would say, look, it's great 198 00:08:59,200 --> 00:09:01,280 Speaker 11: that it's there as an alliternative source of capital at 199 00:09:01,280 --> 00:09:04,400 Speaker 11: a time like this, when the banks the broadly syndicated, 200 00:09:04,520 --> 00:09:07,120 Speaker 11: broadly syndicated market, that CLO market's not really there to 201 00:09:07,160 --> 00:09:09,959 Speaker 11: provide liquidity, so they're able to step in, and I 202 00:09:10,000 --> 00:09:11,600 Speaker 11: think there's still a long way to run. I mean, 203 00:09:11,600 --> 00:09:15,120 Speaker 11: it's still only about you know, about seven percent of 204 00:09:15,160 --> 00:09:17,640 Speaker 11: the fixed income market is private credit, only about two 205 00:09:17,640 --> 00:09:21,160 Speaker 11: percent of global AUM, only seventeen percent even of alternatives. 206 00:09:21,320 --> 00:09:24,120 Speaker 11: So we still think that private credit market has an 207 00:09:24,120 --> 00:09:28,720 Speaker 11: opportunity to continue compounding circut twenty percent plus growth rates 208 00:09:28,720 --> 00:09:29,480 Speaker 11: over the next few years. 209 00:09:30,040 --> 00:09:31,719 Speaker 2: Even apart from the private credit mark, Where do you 210 00:09:31,720 --> 00:09:33,959 Speaker 2: see opportunities in fixed income right now particularly? 211 00:09:34,840 --> 00:09:37,480 Speaker 9: Well, we think there's actually a number of interesting opportunities 212 00:09:37,559 --> 00:09:40,440 Speaker 9: in fixed income and while overall yields really are much 213 00:09:40,480 --> 00:09:42,720 Speaker 9: higher than they were a year ago, if you look 214 00:09:42,720 --> 00:09:47,680 Speaker 9: into specific sectors, there really are some very additional opportunities 215 00:09:47,679 --> 00:09:49,920 Speaker 9: to pick up yields. So one area, for example, that 216 00:09:49,960 --> 00:09:53,240 Speaker 9: we are advocating heavily with our clients is an area 217 00:09:53,320 --> 00:09:57,360 Speaker 9: called reinsurance, where basically, as an investor you're really helping 218 00:09:57,440 --> 00:10:00,240 Speaker 9: to pick up some of that insurance risk and in 219 00:10:00,240 --> 00:10:04,480 Speaker 9: turn get paid a hefty premium. The property and casualty area, 220 00:10:04,520 --> 00:10:06,640 Speaker 9: and what we're seeing right now is really not only 221 00:10:06,679 --> 00:10:09,520 Speaker 9: that nice incremental yield, but there's actually just a lot 222 00:10:09,559 --> 00:10:13,880 Speaker 9: of pressure for those prices to continue to be very 223 00:10:13,920 --> 00:10:17,600 Speaker 9: attractive for investors simply because there's a lack of capital 224 00:10:17,640 --> 00:10:20,440 Speaker 9: in the sector. So that's really one area we're interested in. 225 00:10:20,840 --> 00:10:24,240 Speaker 9: Another one really is an area called non agency mortgages, 226 00:10:24,280 --> 00:10:27,640 Speaker 9: and so here what you have is actually still fairly 227 00:10:27,679 --> 00:10:32,040 Speaker 9: strong fundamentals underpinning some of these borrowers for very large 228 00:10:32,080 --> 00:10:36,080 Speaker 9: mortgages that are not necessarily guaranteed by the agencies, but 229 00:10:36,280 --> 00:10:40,160 Speaker 9: again very strong yields that are supported by borrower repayments. 230 00:10:40,640 --> 00:10:42,920 Speaker 2: Many thanks to Lisa Erickson of US Bank and also 231 00:10:43,000 --> 00:10:47,280 Speaker 2: Julian Salisbury of Goldman Sachs. Coming up the all important 232 00:10:47,320 --> 00:10:51,280 Speaker 2: and all two strained relationship between the world's two largest economies. 233 00:10:51,520 --> 00:10:54,080 Speaker 2: We hear from Bridgewater founder Ray Dalio about the US 234 00:10:54,200 --> 00:10:56,679 Speaker 2: relationship with China, and then we're going to hear from 235 00:10:56,720 --> 00:10:58,520 Speaker 2: the economic historian Neil Ferguson. 236 00:10:58,559 --> 00:10:59,360 Speaker 1: We're going to hear what. 237 00:10:59,280 --> 00:11:02,079 Speaker 2: He has to say about Ray Dalio thinks about US 238 00:11:02,160 --> 00:11:04,839 Speaker 2: China relations Oh that is coming up next on Wall 239 00:11:04,880 --> 00:11:07,079 Speaker 2: Street Week, and we are on Bloomberg. 240 00:11:09,640 --> 00:11:13,840 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 241 00:11:13,960 --> 00:11:15,040 Speaker 3: Bloomberg radio. 242 00:11:15,440 --> 00:11:18,440 Speaker 2: However you measure it. The economic relationship between the United 243 00:11:18,480 --> 00:11:21,640 Speaker 2: States and China is the most important in the world. 244 00:11:21,920 --> 00:11:25,120 Speaker 2: Bridgewater founder Ray Dalio has been an important observer of 245 00:11:25,320 --> 00:11:28,959 Speaker 2: and participant in that relationship as China has emerged to 246 00:11:29,000 --> 00:11:32,440 Speaker 2: become the global economic superpower that it is today with 247 00:11:32,559 --> 00:11:35,200 Speaker 2: tensions rising. This week, we spent some time with Ray 248 00:11:35,320 --> 00:11:37,760 Speaker 2: at Bloomberg at VEST and talked with him about where 249 00:11:37,880 --> 00:11:41,560 Speaker 2: US China relations are today and where they are headed. 250 00:11:42,040 --> 00:11:42,760 Speaker 1: Right now. 251 00:11:43,400 --> 00:11:52,120 Speaker 12: There are irreconcilable differences on a number of topics Taiwan, Russia, 252 00:11:54,280 --> 00:11:58,480 Speaker 12: revers Ifius, chips and so on. They're kind of at 253 00:11:58,480 --> 00:12:04,480 Speaker 12: the edge and there's an inability to talk, so there's 254 00:12:04,800 --> 00:12:08,360 Speaker 12: quite a bit of brinksmanship. And we are also heading 255 00:12:08,400 --> 00:12:11,880 Speaker 12: into a political year here in which there's going to 256 00:12:11,920 --> 00:12:21,000 Speaker 12: be more pressuring pressure. Both sides are very worried about this. 257 00:12:22,480 --> 00:12:26,520 Speaker 12: So I think you're going to see restraint. I don't 258 00:12:26,559 --> 00:12:31,680 Speaker 12: think it's going to lead to a terrible situation in 259 00:12:31,760 --> 00:12:35,440 Speaker 12: terms of but it is leading. But you're going to 260 00:12:35,440 --> 00:12:38,240 Speaker 12: see restraint in a period of time where you're going 261 00:12:38,280 --> 00:12:43,240 Speaker 12: to see more tangents. There's the Mike Allagher's Commission, and 262 00:12:43,320 --> 00:12:46,880 Speaker 12: so on more pressure with chips and so on and so forth. 263 00:12:47,120 --> 00:12:49,319 Speaker 12: I don't think that that's going to cross the line, 264 00:12:49,440 --> 00:12:52,080 Speaker 12: but it is going to raise tensions. You will see 265 00:12:52,280 --> 00:12:58,520 Speaker 12: also more attempts Tony Blincoln's going over. You'll see more 266 00:12:58,520 --> 00:13:02,080 Speaker 12: attempts to try to smooth things out, because both sides 267 00:13:02,120 --> 00:13:05,880 Speaker 12: are afraid of where we are. In any case, While 268 00:13:05,920 --> 00:13:10,000 Speaker 12: it'll be that kind of bringsmanship, most likely there is 269 00:13:10,080 --> 00:13:15,199 Speaker 12: a building of self sufficiency. In other words, efficiency was 270 00:13:16,000 --> 00:13:17,640 Speaker 12: the game before everything was global. 271 00:13:17,720 --> 00:13:19,040 Speaker 1: You produce it in wherever. 272 00:13:18,800 --> 00:13:22,560 Speaker 12: The cheapest place was mostly cost effective, and we became 273 00:13:22,760 --> 00:13:27,199 Speaker 12: very intertwined with each other. Now in this global world, 274 00:13:27,679 --> 00:13:30,360 Speaker 12: there's the worry about being cut off, cut off in 275 00:13:30,440 --> 00:13:34,439 Speaker 12: all sorts of things, and so you're having that dynamic play, 276 00:13:35,160 --> 00:13:39,360 Speaker 12: you know, a negative role in economics and inflation. 277 00:13:39,679 --> 00:13:42,439 Speaker 2: In thinking about the US relationship with China, which I 278 00:13:42,480 --> 00:13:45,640 Speaker 2: think is probably the most important geopolitical economic relationship for 279 00:13:45,679 --> 00:13:49,720 Speaker 2: the next generation, I would venture to say many people 280 00:13:49,760 --> 00:13:51,880 Speaker 2: have made much of the fact that China is going 281 00:13:51,920 --> 00:13:53,679 Speaker 2: to overtake the United States in the terms of the 282 00:13:53,720 --> 00:13:55,679 Speaker 2: size of its economy, the strength of this economy. There 283 00:13:55,679 --> 00:13:58,040 Speaker 2: are some questions about that. Now, where are you on 284 00:13:58,120 --> 00:14:01,160 Speaker 2: that question, and if in fact is not as strong 285 00:14:01,200 --> 00:14:04,240 Speaker 2: as we have thought it is economically, I'm talking about now, 286 00:14:04,559 --> 00:14:06,160 Speaker 2: how does that affect the relationship. 287 00:14:07,920 --> 00:14:10,320 Speaker 12: I think it's almost like splitting hairs. 288 00:14:10,440 --> 00:14:11,720 Speaker 1: There are two great powers. 289 00:14:12,320 --> 00:14:16,400 Speaker 12: And you know the. 290 00:14:15,440 --> 00:14:16,760 Speaker 1: Difference of overtake. 291 00:14:17,920 --> 00:14:20,720 Speaker 12: If you take purchasing power parody the size of GDP, 292 00:14:21,200 --> 00:14:23,760 Speaker 12: they have slightly overtaken us if you take the other, 293 00:14:24,480 --> 00:14:28,280 Speaker 12: who knows they're going to the main thing is they're comparable. 294 00:14:27,760 --> 00:14:31,000 Speaker 1: Powers in many ways, having strains in them. 295 00:14:31,080 --> 00:14:33,720 Speaker 12: They can do a lot of They have a lot 296 00:14:33,720 --> 00:14:36,600 Speaker 12: of dependency with each other, and they can do a 297 00:14:36,640 --> 00:14:40,600 Speaker 12: lot of harm. So the most important thing I think 298 00:14:40,760 --> 00:14:43,400 Speaker 12: is how we take care of ourselves. Can we get strong? 299 00:14:43,880 --> 00:14:48,960 Speaker 12: Can we raise productivity? Can we be politically and economically 300 00:14:49,040 --> 00:14:52,760 Speaker 12: cohesive so that we can be effecient, effective and strong? 301 00:14:53,200 --> 00:14:58,280 Speaker 12: Because you know, you can't rule out China. Since I 302 00:14:58,360 --> 00:15:02,560 Speaker 12: started to go to China, you know, nineteen eighty four 303 00:15:03,520 --> 00:15:07,200 Speaker 12: per capita income increased by twenty eight times. It's a 304 00:15:07,200 --> 00:15:10,720 Speaker 12: power and it's a smart power. So it's going to 305 00:15:10,800 --> 00:15:14,080 Speaker 12: be it's going to be like that. No, there's not 306 00:15:14,160 --> 00:15:16,960 Speaker 12: a winner or a loser. There were only either. 307 00:15:17,200 --> 00:15:19,760 Speaker 1: You're gonna have both winners, or you're gonna have both losers. 308 00:15:19,880 --> 00:15:22,360 Speaker 2: I mean, you founded Bridgewater, and for everything I've read 309 00:15:22,360 --> 00:15:24,880 Speaker 2: about Bridgewater, I mean you put a great emphasis on 310 00:15:25,160 --> 00:15:28,800 Speaker 2: the systems involved, the mechanics involved, the engine. It seems 311 00:15:28,800 --> 00:15:31,280 Speaker 2: to me, without knowing about it, having done this for 312 00:15:31,320 --> 00:15:34,400 Speaker 2: twenty five years or so, that AI might apply to 313 00:15:34,480 --> 00:15:36,960 Speaker 2: that fairly easily. Is that your sense? Where are we 314 00:15:37,040 --> 00:15:37,920 Speaker 2: going with artificiality? 315 00:15:37,960 --> 00:15:38,160 Speaker 1: Yeah? 316 00:15:38,160 --> 00:15:41,480 Speaker 12: I'm so excited because, as you say, for twenty five years, 317 00:15:42,440 --> 00:15:46,640 Speaker 12: I would always write down my investment principles, all my principles, 318 00:15:46,880 --> 00:15:49,720 Speaker 12: and then I would convert them to algorithms, which became 319 00:15:49,800 --> 00:15:54,040 Speaker 12: decision rules, which became systems, and everything would run and 320 00:15:54,080 --> 00:15:56,520 Speaker 12: they would like setting up a computer chess game. 321 00:15:57,120 --> 00:15:57,880 Speaker 1: It would play. 322 00:15:58,160 --> 00:16:00,800 Speaker 12: I would play next to it, and we would then 323 00:16:00,920 --> 00:16:02,240 Speaker 12: reconcile differences and. 324 00:16:02,200 --> 00:16:03,120 Speaker 1: We would learn together. 325 00:16:04,720 --> 00:16:10,280 Speaker 12: Now what's happening with generative AI is that I can 326 00:16:10,360 --> 00:16:13,440 Speaker 12: one can take all of that knowledge and have it 327 00:16:13,480 --> 00:16:16,560 Speaker 12: there and then go beyond that to have it as 328 00:16:16,560 --> 00:16:25,120 Speaker 12: a partner, a thought partner, because the intelligence has capacities 329 00:16:25,160 --> 00:16:27,760 Speaker 12: that the human mind doesn't have. We don't, you know, 330 00:16:27,800 --> 00:16:30,640 Speaker 12: the ability to process so much and everything at the 331 00:16:30,680 --> 00:16:35,640 Speaker 12: same time. So I'm extremely excited. I think that this 332 00:16:35,920 --> 00:16:43,480 Speaker 12: is the greatest revolution, bigger than the Internet revolution. But 333 00:16:43,920 --> 00:16:49,080 Speaker 12: like technology, it really depends. The problem isn't with the technology. 334 00:16:49,480 --> 00:16:52,400 Speaker 12: The problem is with the people who use the technology. 335 00:16:52,800 --> 00:16:58,200 Speaker 12: Will that technology be used to raise humanity's living standards 336 00:16:58,760 --> 00:17:02,120 Speaker 12: or will that be used for war in a sense, 337 00:17:02,160 --> 00:17:05,320 Speaker 12: for hurting each other? And so, but any way we're 338 00:17:05,320 --> 00:17:08,240 Speaker 12: going to cut it. If you take those five we're 339 00:17:08,280 --> 00:17:12,080 Speaker 12: going to go through a time warp. If we take 340 00:17:12,160 --> 00:17:15,320 Speaker 12: the next five to ten years, In the next five 341 00:17:15,400 --> 00:17:17,640 Speaker 12: to ten years, it's going to go through a time warp. 342 00:17:17,840 --> 00:17:19,880 Speaker 12: We're going to come out the other side, and you're 343 00:17:19,920 --> 00:17:23,000 Speaker 12: going to see a very completely different world. 344 00:17:23,600 --> 00:17:27,280 Speaker 2: Ray Dalio always puts his analysis of finance, markets and 345 00:17:27,320 --> 00:17:30,840 Speaker 2: the economy into a broader historical perspective, and so we 346 00:17:30,880 --> 00:17:34,480 Speaker 2: ask noted economic historian Neil Ferguson, Senior fellow at the 347 00:17:34,520 --> 00:17:38,359 Speaker 2: Hoover Institution and Bloomberg Opinion colonists for his reaction to 348 00:17:38,520 --> 00:17:39,720 Speaker 2: raise analysis. 349 00:17:40,200 --> 00:17:45,480 Speaker 4: There are certainly irreconcilable differences, and there's certainly not enough 350 00:17:45,680 --> 00:17:50,880 Speaker 4: communication going on. Ray Dalio talks about their being restraints. 351 00:17:51,400 --> 00:17:54,879 Speaker 4: I think that's pretty clear on the US side, right now, 352 00:17:55,000 --> 00:17:59,880 Speaker 4: because there's been quite a diplomatic charm offensive by Jake Sullivan. 353 00:18:00,400 --> 00:18:03,760 Speaker 4: Tony Blinkin is going to China after they had to 354 00:18:03,760 --> 00:18:07,560 Speaker 4: reschedule his last trip because of the balloon over in Montana. 355 00:18:07,680 --> 00:18:11,280 Speaker 4: But I'm not sure just how receptive or how restrained 356 00:18:11,720 --> 00:18:13,200 Speaker 4: the Chinese side is being. 357 00:18:13,800 --> 00:18:17,600 Speaker 2: Neil, do you share ray Alio's view about the ultimate 358 00:18:17,640 --> 00:18:21,320 Speaker 2: resolution of this conflict? Call it Corld War two as 359 00:18:21,359 --> 00:18:24,040 Speaker 2: you have called it. He said, one side will not 360 00:18:24,200 --> 00:18:26,360 Speaker 2: win and the other lose. Either both sides will win 361 00:18:26,520 --> 00:18:28,720 Speaker 2: or both sides will lose. Do you share that view? 362 00:18:30,040 --> 00:18:33,560 Speaker 4: No, and I don't understand it to be perfectly honest. 363 00:18:34,160 --> 00:18:36,960 Speaker 4: In Cold War one, I don't think there's any controversy 364 00:18:37,080 --> 00:18:40,160 Speaker 4: that one side won the United States and its allies, 365 00:18:40,640 --> 00:18:43,040 Speaker 4: and the other side lost the Soviet Union, which of 366 00:18:43,080 --> 00:18:47,320 Speaker 4: course disintegrated in nineteen ninety one. And why shouldn't there 367 00:18:47,359 --> 00:18:51,480 Speaker 4: be a similar outcome to a second Cold War? Now? 368 00:18:51,560 --> 00:18:55,280 Speaker 4: I'm not saying there's any guarantee that the United States 369 00:18:55,359 --> 00:18:57,520 Speaker 4: is the side that wins Cold War two. China's a 370 00:18:57,680 --> 00:19:02,720 Speaker 4: much more formidable opponent than the Soviet Union was, and 371 00:19:02,920 --> 00:19:05,439 Speaker 4: I sometimes think that the United States isn't in the 372 00:19:05,480 --> 00:19:09,239 Speaker 4: same kind of domestic internal shape that it was in 373 00:19:09,280 --> 00:19:12,639 Speaker 4: Cold War One. But I think the key point about 374 00:19:12,640 --> 00:19:16,040 Speaker 4: a cold water remember is that if it stays cold, 375 00:19:16,119 --> 00:19:19,520 Speaker 4: he doesn't escalate into hot war, at least not at 376 00:19:19,520 --> 00:19:23,000 Speaker 4: the global level. You can have hot wars in spaces 377 00:19:23,119 --> 00:19:25,720 Speaker 4: like say Ukraine, but if it doesn't escalate into World 378 00:19:25,800 --> 00:19:28,639 Speaker 4: War three, then the United States and its allies are 379 00:19:28,680 --> 00:19:31,280 Speaker 4: probably better placed to wins. 380 00:19:31,880 --> 00:19:34,800 Speaker 2: That was Bloomberg Opinion commist Neil Ferguson of the Hoover 381 00:19:34,960 --> 00:19:40,560 Speaker 2: Institutions coming up, improving your investment by sharing some of 382 00:19:40,600 --> 00:19:43,840 Speaker 2: the upside. We'll talk with Pete Stabbers A Kkar about 383 00:19:43,840 --> 00:19:47,679 Speaker 2: his approach to private equity with a decidedly different tilt. 384 00:19:48,359 --> 00:19:51,159 Speaker 3: You've got a better opportunity to deliver our value creation. 385 00:19:51,640 --> 00:19:53,760 Speaker 2: That's next down Watery Week. I'm Bloomberg. 386 00:19:56,320 --> 00:20:00,560 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 387 00:20:00,680 --> 00:20:01,600 Speaker 3: Bloomberg Radio. 388 00:20:02,359 --> 00:20:06,199 Speaker 2: Stakeholder capitalism. Milton Friedman famously wrote in The New York 389 00:20:06,240 --> 00:20:09,840 Speaker 2: Times over fifty years ago that the social responsibility of 390 00:20:09,880 --> 00:20:12,840 Speaker 2: a business is to increase its profits. I think we've 391 00:20:12,880 --> 00:20:16,120 Speaker 2: had fifty years, let's say, of Milton Friedman, some good 392 00:20:16,480 --> 00:20:20,399 Speaker 2: right in terms of competitiveness and innovation, some bad, and 393 00:20:20,440 --> 00:20:22,879 Speaker 2: this became something of a gospel for many in the 394 00:20:22,920 --> 00:20:23,760 Speaker 2: business community. 395 00:20:23,840 --> 00:20:27,600 Speaker 10: For years, all of us are Ohana that our local communities, 396 00:20:27,640 --> 00:20:31,159 Speaker 10: plus our employees and our customers and our partners, all 397 00:20:31,200 --> 00:20:33,199 Speaker 10: of them are key stakeholders, and that we're trying to 398 00:20:33,240 --> 00:20:34,920 Speaker 10: practice stakeholder capitalism. 399 00:20:35,000 --> 00:20:38,879 Speaker 2: But recently there's been a new initiative dubbed stakeholder Capitalism, 400 00:20:39,160 --> 00:20:41,679 Speaker 2: trying to make sure corporations are doing their best to 401 00:20:41,760 --> 00:20:47,520 Speaker 2: serve all stakeholders, including shareholders, employees, customers, suppliers and communities. 402 00:20:47,840 --> 00:20:50,480 Speaker 2: As set out in a Business Roundtable statement signed by 403 00:20:50,480 --> 00:20:53,960 Speaker 2: two hundred of its CEOs in twenty nineteen, you. 404 00:20:53,960 --> 00:20:57,080 Speaker 13: Have to produce for your customers, your teammates and your shareholders, 405 00:20:58,000 --> 00:21:01,119 Speaker 13: and you have to produce for society because if you 406 00:21:01,119 --> 00:21:03,760 Speaker 13: don't have and if that's the core, I won't be 407 00:21:03,760 --> 00:21:04,439 Speaker 13: sitting here. 408 00:21:04,560 --> 00:21:07,919 Speaker 2: And after that, mentions of purpose driven actions in S 409 00:21:07,960 --> 00:21:11,359 Speaker 2: and P five hundred company earnings calls jumped, but recently 410 00:21:11,480 --> 00:21:13,880 Speaker 2: it's been the subject of some debate, with as many 411 00:21:13,920 --> 00:21:17,920 Speaker 2: as fifteen states taking the side against ESG investing. 412 00:21:18,240 --> 00:21:21,359 Speaker 4: The facts show that when you have a diverse workforce 413 00:21:21,560 --> 00:21:25,320 Speaker 4: with inclusive leadership that listens to those employees, that takes 414 00:21:25,359 --> 00:21:28,600 Speaker 4: into account their views, you actually add value. 415 00:21:28,320 --> 00:21:29,000 Speaker 10: To the company. 416 00:21:29,240 --> 00:21:33,199 Speaker 2: Whenever you think about stakeholder capitalism overall, it hasn't historically 417 00:21:33,240 --> 00:21:36,400 Speaker 2: been associated with the rough and tumble business of private equity, 418 00:21:36,760 --> 00:21:39,760 Speaker 2: the kind that made presidential candidate Mitt Romney's running bain 419 00:21:39,880 --> 00:21:43,120 Speaker 2: capital an issue in twenty twelve. It's a very healthy 420 00:21:43,240 --> 00:21:44,080 Speaker 2: and positive debate. 421 00:21:44,160 --> 00:21:46,240 Speaker 7: That doesn't mean the private equity world is going to 422 00:21:46,320 --> 00:21:47,440 Speaker 7: enjoy it very much. 423 00:21:47,240 --> 00:21:53,040 Speaker 2: But all that may be changing. To take us through 424 00:21:53,160 --> 00:21:56,280 Speaker 2: how stakeholder capitalism may be changing the face of private equity, 425 00:21:56,280 --> 00:22:00,520 Speaker 2: we welcome noized Pete Stavros. He's KKR cohed of Global 426 00:22:00,680 --> 00:22:01,480 Speaker 2: Private Equity. 427 00:22:01,520 --> 00:22:02,120 Speaker 1: So welcome to Pete. 428 00:22:02,119 --> 00:22:03,560 Speaker 2: Great to have you here, Thank you for having me. 429 00:22:03,600 --> 00:22:06,040 Speaker 2: So let's start with the basics for you, because you're 430 00:22:06,080 --> 00:22:08,439 Speaker 2: actually doing it rather than talking about it. What is 431 00:22:08,480 --> 00:22:09,639 Speaker 2: stakeholder capitalism? 432 00:22:10,160 --> 00:22:14,919 Speaker 3: Well, stakeholder capitalism for me is finding a way to 433 00:22:15,040 --> 00:22:19,160 Speaker 3: not only deliver great outcomes for shareholders, but doing right 434 00:22:19,240 --> 00:22:21,920 Speaker 3: by workers and the climate. And I have to say 435 00:22:21,920 --> 00:22:25,440 Speaker 3: there's tons of brilliant people working on climate issues. Obviously 436 00:22:25,480 --> 00:22:29,320 Speaker 3: it's critical, there's not enough people focused on labor, and 437 00:22:29,400 --> 00:22:31,439 Speaker 3: so that's really my passion. A lot of it has 438 00:22:31,480 --> 00:22:33,080 Speaker 3: to do with how I grew up. My dad was 439 00:22:33,119 --> 00:22:36,679 Speaker 3: a construction worker for forty years, earned an hourly wage, 440 00:22:36,840 --> 00:22:39,399 Speaker 3: and really taught my sister and I around the dinner 441 00:22:39,440 --> 00:22:41,840 Speaker 3: table what it's like being an hourly worker. You know, 442 00:22:41,880 --> 00:22:44,760 Speaker 3: you don't have a voice, nobody listens to you, there's 443 00:22:44,760 --> 00:22:47,800 Speaker 3: no incentive alignment, and you have no stake in the outcomes. 444 00:22:47,880 --> 00:22:51,680 Speaker 3: So that ignited a passion in me from a very 445 00:22:51,680 --> 00:22:54,080 Speaker 3: early age to think about these labor issues. And then 446 00:22:54,080 --> 00:22:56,840 Speaker 3: when I became an investor, you know, wow, what an 447 00:22:56,840 --> 00:22:59,679 Speaker 3: opportunity because you're responsible for all of these companies with 448 00:22:59,720 --> 00:23:02,840 Speaker 3: all of these many employees, and if you can cascade 449 00:23:02,920 --> 00:23:06,640 Speaker 3: change through a variety of a number of companies, which 450 00:23:06,680 --> 00:23:09,879 Speaker 3: private equity is well suited to do, you can impact 451 00:23:10,040 --> 00:23:12,720 Speaker 3: you know, thousands, if not hundreds of thousands of people. 452 00:23:12,760 --> 00:23:15,080 Speaker 2: So that sounds fine, but you'll forgive me if many 453 00:23:15,080 --> 00:23:17,280 Speaker 2: of us who don't understand private equity the way you do, 454 00:23:17,280 --> 00:23:20,040 Speaker 2: don't associate that approach with private equity. You tend to 455 00:23:20,040 --> 00:23:21,720 Speaker 2: think you go and you buy the company, you strip 456 00:23:21,760 --> 00:23:22,840 Speaker 2: out costs, you'll leverage it up. 457 00:23:22,880 --> 00:23:23,800 Speaker 1: You sell it. Yeah. 458 00:23:23,840 --> 00:23:28,560 Speaker 3: Well, look, private equity is not perfect, Capitalism's not not perfect, 459 00:23:29,119 --> 00:23:32,119 Speaker 3: but this is a superior way of operating a company 460 00:23:32,160 --> 00:23:35,760 Speaker 3: in every perspect You can align incentives not just of 461 00:23:35,840 --> 00:23:38,960 Speaker 3: the senior team, but of all of the employees, help 462 00:23:39,040 --> 00:23:41,560 Speaker 3: them create wealth for themselves and create a better culture. 463 00:23:41,640 --> 00:23:44,879 Speaker 3: I mean, if you can figure out a way and 464 00:23:44,920 --> 00:23:47,560 Speaker 3: we think we're on the right path here to have 465 00:23:47,600 --> 00:23:50,320 Speaker 3: employees less likely to quit their jobs, more engaged on 466 00:23:50,359 --> 00:23:53,320 Speaker 3: the job, you've got a better opportunity to deliver on 467 00:23:53,400 --> 00:23:56,320 Speaker 3: value creation initiatives, which is the core of private The 468 00:23:56,320 --> 00:23:59,600 Speaker 3: core of private equity is transformation. Take a good business, 469 00:23:59,600 --> 00:24:01,960 Speaker 3: make it right, and you're not going to be as 470 00:24:01,960 --> 00:24:04,320 Speaker 3: effective as you could be in that effort if you 471 00:24:04,320 --> 00:24:05,440 Speaker 3: don't have everyone aligned. 472 00:24:05,760 --> 00:24:09,040 Speaker 2: So that sounds great, also sounds fairly simple, is it 473 00:24:09,080 --> 00:24:11,960 Speaker 2: when you actually do it, because often the implementations were 474 00:24:12,000 --> 00:24:12,520 Speaker 2: the tricky part. 475 00:24:12,560 --> 00:24:15,639 Speaker 3: Lot Ye, it's incredibly difficult. Let me just define the program. 476 00:24:16,000 --> 00:24:18,520 Speaker 3: The program that we've been working around around employee ownership 477 00:24:18,600 --> 00:24:21,240 Speaker 3: is about much more than handing out stock. If it's 478 00:24:21,320 --> 00:24:24,000 Speaker 3: just handing out stock, then we're in a compensation discussion, 479 00:24:24,000 --> 00:24:27,160 Speaker 3: which is important, but that's not going to change cultures. 480 00:24:27,760 --> 00:24:29,840 Speaker 3: As my friend Dove Seideman always says, you can triple 481 00:24:29,880 --> 00:24:33,560 Speaker 3: people's compensation and not get ownership behaviors, which I think 482 00:24:33,600 --> 00:24:37,280 Speaker 3: is very true. So we are taking ownership as the foundation, 483 00:24:37,400 --> 00:24:39,919 Speaker 3: as an ethos, and then on top of that, we 484 00:24:40,000 --> 00:24:44,200 Speaker 3: are building a robust employee engagement effort, teaching financial literacy, 485 00:24:44,720 --> 00:24:47,960 Speaker 3: opening up the business plan to all employees, financial information, 486 00:24:48,040 --> 00:24:51,800 Speaker 3: sharing financials with all employees, and teaching basic corporate fans 487 00:24:51,840 --> 00:24:54,320 Speaker 3: so they can understand the information being shared with them. No, 488 00:24:54,440 --> 00:24:56,359 Speaker 3: it's not easy, but it's worth the effort. 489 00:24:56,440 --> 00:24:57,320 Speaker 1: It's a great report. 490 00:24:57,359 --> 00:24:59,359 Speaker 2: Pete, thank you so much for joining us to bring 491 00:24:59,359 --> 00:25:02,840 Speaker 2: it to Let's the in starbs of KKR. This is 492 00:25:02,880 --> 00:25:06,040 Speaker 2: Wall Street Week. I'm David Weston. We talked with Brian moynihan, 493 00:25:06,160 --> 00:25:09,119 Speaker 2: chair and CEO Back of America this week at Bloomberg 494 00:25:09,200 --> 00:25:12,080 Speaker 2: Invests about a range of topics, but we started with 495 00:25:12,119 --> 00:25:15,159 Speaker 2: the possible increases in capital requirements for the banks and 496 00:25:15,200 --> 00:25:17,920 Speaker 2: how that might affect his ability to make loans. 497 00:25:18,920 --> 00:25:21,479 Speaker 5: It's a fairly straightforward. If our capital ratios go up 498 00:25:21,480 --> 00:25:25,560 Speaker 5: by one hundred basis points, we basically, you know, simply put, 499 00:25:27,240 --> 00:25:29,320 Speaker 5: you can't make about one hundred fifty million dollars loans. 500 00:25:29,760 --> 00:25:33,199 Speaker 5: And because people say, well, you have more capital, make 501 00:25:33,200 --> 00:25:34,840 Speaker 5: more loans. But if we took risk on that capital, 502 00:25:34,840 --> 00:25:36,760 Speaker 5: we wouldn't have that capital ratio. So it has to 503 00:25:36,760 --> 00:25:39,360 Speaker 5: be a riskless build. A capital can't be out there 504 00:25:39,359 --> 00:25:41,200 Speaker 5: taking risks. See, the only thing you really do is 505 00:25:41,280 --> 00:25:44,480 Speaker 5: leave it in cash or buy treasury securities. And that's 506 00:25:44,520 --> 00:25:48,760 Speaker 5: not a very productive use of money. So and if 507 00:25:48,760 --> 00:25:51,520 Speaker 5: you had it, and that's the problem. And so every 508 00:25:51,520 --> 00:25:54,040 Speaker 5: time capital goes up, there's a there's a countervailing effect 509 00:25:54,080 --> 00:25:55,119 Speaker 5: to it impacts lending. 510 00:25:55,440 --> 00:25:57,159 Speaker 2: Is that a gating function of here right now? Over 511 00:25:57,200 --> 00:25:58,840 Speaker 2: the last couple of weeks, you've been saying, in effect, 512 00:25:59,160 --> 00:26:01,080 Speaker 2: some of your lending is slowing down anyway, just because 513 00:26:01,119 --> 00:26:03,800 Speaker 2: the economy is slowing down. Is it a demand? Is 514 00:26:03,840 --> 00:26:06,240 Speaker 2: there demand enough for the loans that you can't make. 515 00:26:06,600 --> 00:26:09,800 Speaker 5: That ebbs and flows all the time. So the loans, 516 00:26:10,840 --> 00:26:13,600 Speaker 5: the loan demand is more product of customer activity. And 517 00:26:13,640 --> 00:26:18,119 Speaker 5: so our team has a recession predicted beginning in the 518 00:26:18,160 --> 00:26:21,359 Speaker 5: third quarter, fourth quarter or first quarter. Bank American Research team, 519 00:26:21,359 --> 00:26:24,000 Speaker 5: which Candae Browning Plot leads, is tremendous and they have 520 00:26:25,359 --> 00:26:27,160 Speaker 5: that has moved out a little bit as a consumer 521 00:26:27,200 --> 00:26:30,480 Speaker 5: and activities stayed stronger even in light of the fastest 522 00:26:30,800 --> 00:26:35,479 Speaker 5: FED rate increase in long time. But it's still the prediction. 523 00:26:35,600 --> 00:26:39,280 Speaker 5: And so I think companies are having gone through the 524 00:26:39,280 --> 00:26:42,840 Speaker 5: inflation and then it's sort of flattening out and thinking 525 00:26:42,880 --> 00:26:45,280 Speaker 5: about the future. Just be more careful because they realize 526 00:26:45,320 --> 00:26:48,000 Speaker 5: that some are able to move prices, some are able 527 00:26:48,000 --> 00:26:50,200 Speaker 5: to do it. They're getting relief on the commodity side, 528 00:26:50,520 --> 00:26:52,280 Speaker 5: on the price side, but are they be able to 529 00:26:52,280 --> 00:26:54,680 Speaker 5: hold price demands its final demand and the construction it 530 00:26:54,760 --> 00:26:56,080 Speaker 5: just will be a stronger year from now it is 531 00:26:56,280 --> 00:26:58,679 Speaker 5: today and housing. All this is on people's mind, so 532 00:26:58,680 --> 00:27:01,680 Speaker 5: they tend to pull in, and so that means line 533 00:27:01,760 --> 00:27:03,879 Speaker 5: used to just flatten back out. So line usage was 534 00:27:04,160 --> 00:27:06,800 Speaker 5: here before the pandemic and then fell and moved up, 535 00:27:06,920 --> 00:27:09,040 Speaker 5: and it was kind of moving up, you know, incrementally 536 00:27:09,080 --> 00:27:10,760 Speaker 5: back to where the pandemic sort of flatten out the 537 00:27:10,840 --> 00:27:14,080 Speaker 5: last couple of months, which means that your companies are 538 00:27:14,119 --> 00:27:15,000 Speaker 5: just being a little more careful. 539 00:27:15,119 --> 00:27:16,920 Speaker 2: Let's talk about something that's very much in the news 540 00:27:16,920 --> 00:27:21,080 Speaker 2: these days. That's artificial intelligence, particularly generative artificial intelligence, large 541 00:27:21,119 --> 00:27:24,040 Speaker 2: language model. You and I've talked in the past about Erica, 542 00:27:24,480 --> 00:27:26,720 Speaker 2: which is a form of I think machine learning you've 543 00:27:26,760 --> 00:27:27,320 Speaker 2: been using. 544 00:27:27,200 --> 00:27:28,720 Speaker 1: For some years now five years. 545 00:27:29,119 --> 00:27:31,320 Speaker 2: We've never really talked about what that is. So it 546 00:27:31,440 --> 00:27:33,840 Speaker 2: take us through what Erica is for Bank of America 547 00:27:33,920 --> 00:27:35,560 Speaker 2: right now, and then we can talk about where it's going. 548 00:27:36,040 --> 00:27:40,560 Speaker 5: So what Erica is is a product capability that's in 549 00:27:40,640 --> 00:27:43,720 Speaker 5: the mobile banking app and other that you can go 550 00:27:43,840 --> 00:27:46,919 Speaker 5: into and type either type in or say, you know, 551 00:27:47,280 --> 00:27:50,960 Speaker 5: pay my landscape or pay my you know, school tuition, 552 00:27:51,080 --> 00:27:53,320 Speaker 5: whatever it is, you know, and it will then say 553 00:27:54,040 --> 00:27:56,040 Speaker 5: pay and I'll say the name of the of the 554 00:27:56,119 --> 00:27:58,280 Speaker 5: provider and how much you want to pay, and then 555 00:27:58,359 --> 00:28:00,160 Speaker 5: it'll go pay it. You'll just run through the bill 556 00:28:00,200 --> 00:28:02,080 Speaker 5: paying systems, so instead of going the bill payment, going 557 00:28:02,080 --> 00:28:03,800 Speaker 5: down the list and do all the stuff and do it. 558 00:28:03,880 --> 00:28:06,320 Speaker 5: Or what's the routing number? What's my routing number? Because 559 00:28:06,359 --> 00:28:08,280 Speaker 5: that's a topic that people call us and ask us 560 00:28:08,320 --> 00:28:09,520 Speaker 5: about five million times a year. 561 00:28:09,560 --> 00:28:10,159 Speaker 2: They used to call us. 562 00:28:10,240 --> 00:28:12,920 Speaker 5: Now they don't have the routing numbers on the base 563 00:28:12,960 --> 00:28:14,600 Speaker 5: of your check and routing number for all of you 564 00:28:14,680 --> 00:28:19,080 Speaker 5: is the same, so it's not but people call because frankly, 565 00:28:20,200 --> 00:28:22,080 Speaker 5: judging by the age of the people laughing. We were 566 00:28:22,119 --> 00:28:23,639 Speaker 5: taught some point or how to write a check and 567 00:28:23,640 --> 00:28:25,600 Speaker 5: how the numbers were and what was your account number. 568 00:28:26,320 --> 00:28:29,040 Speaker 5: That's no longer in the system, so when somebody's doing 569 00:28:29,080 --> 00:28:33,160 Speaker 5: ah and stuff. So really, like seven or eight years ago, 570 00:28:33,280 --> 00:28:35,879 Speaker 5: we said, let's build something that can do that kind 571 00:28:35,920 --> 00:28:39,160 Speaker 5: of language processing, the LP part of a thing, and 572 00:28:40,120 --> 00:28:43,440 Speaker 5: then predict what the question was, use our data and 573 00:28:43,520 --> 00:28:46,400 Speaker 5: our information and come back with the answer to them. 574 00:28:46,520 --> 00:28:48,040 Speaker 5: And so we started to do that, and the first 575 00:28:48,080 --> 00:28:50,360 Speaker 5: thing we realized is the language that was out there 576 00:28:50,360 --> 00:28:54,280 Speaker 5: for these natural language recognition type things was not written 577 00:28:54,280 --> 00:28:56,840 Speaker 5: for banking. So what's my balance? Do you want to 578 00:28:56,840 --> 00:28:57,840 Speaker 5: go to a yoga class? 579 00:28:58,040 --> 00:28:58,200 Speaker 2: You know? 580 00:28:59,360 --> 00:29:01,240 Speaker 5: It thinks about it had So the first thing I 581 00:29:01,240 --> 00:29:04,320 Speaker 5: had to do is we went to outside and got 582 00:29:04,320 --> 00:29:08,200 Speaker 5: them to write a banking language program and things, and 583 00:29:08,200 --> 00:29:09,600 Speaker 5: then we had to pair it with our data and 584 00:29:09,600 --> 00:29:13,760 Speaker 5: our information. And so that's now five years old, and 585 00:29:13,840 --> 00:29:15,760 Speaker 5: you know, twenty million people use it, and they use 586 00:29:15,800 --> 00:29:17,680 Speaker 5: one hundred and fifty too, and million times. We're just 587 00:29:18,120 --> 00:29:20,880 Speaker 5: right across a billion interactions with it. We'll get another 588 00:29:20,920 --> 00:29:23,520 Speaker 5: billion and another twelve eighteen months. It's growing that fast. 589 00:29:24,400 --> 00:29:26,000 Speaker 5: And it just saves a lot of time for the 590 00:29:26,000 --> 00:29:29,080 Speaker 5: customer and client, and the experience is great. And yet 591 00:29:29,120 --> 00:29:31,520 Speaker 5: people I think we'll start using even more now because 592 00:29:31,560 --> 00:29:33,560 Speaker 5: they're playing around with chat to ept and doing other 593 00:29:33,640 --> 00:29:35,440 Speaker 5: things that this was sort of foreign to them. They 594 00:29:35,480 --> 00:29:38,080 Speaker 5: were what is Erica like, you asked? But what we've 595 00:29:38,080 --> 00:29:39,760 Speaker 5: seen is it just continues to grow. 596 00:29:40,760 --> 00:29:43,480 Speaker 2: That was Brian moynihan, Chair and CEO of Bank of 597 00:29:43,520 --> 00:29:48,040 Speaker 2: America coming up. The perils are trying to do good 598 00:29:48,120 --> 00:29:50,280 Speaker 2: and do well at the same time, all while you're 599 00:29:50,320 --> 00:29:52,720 Speaker 2: trying to run a business. That's the next on Wall 600 00:29:52,720 --> 00:30:05,560 Speaker 2: Street read on Bloomberg. Finally, one more thought, doing well 601 00:30:05,680 --> 00:30:09,800 Speaker 2: by doing good. Corporate social responsibility is nothing new, but 602 00:30:09,880 --> 00:30:12,240 Speaker 2: it's come a long way since the days of Google 603 00:30:12,320 --> 00:30:16,080 Speaker 2: claiming its corporate code of conduct was simply don't be evil. 604 00:30:16,600 --> 00:30:20,600 Speaker 2: Today a range of companies embrace values like protecting the environment. 605 00:30:20,960 --> 00:30:24,920 Speaker 5: We've certainly incorporated ESG SO environmental social and governance, risk 606 00:30:25,040 --> 00:30:27,680 Speaker 5: management and thinking into our analysis. 607 00:30:27,440 --> 00:30:31,720 Speaker 2: Or promoting diversity, equality and inclusion. You need workplaces that 608 00:30:31,760 --> 00:30:34,800 Speaker 2: are truly inclusive and guess what, that makes all our 609 00:30:34,840 --> 00:30:37,840 Speaker 2: businesses more profitable in the long run. But once you 610 00:30:37,960 --> 00:30:41,080 Speaker 2: dip your corporate tow into the waters of social values, 611 00:30:41,240 --> 00:30:44,160 Speaker 2: it's sometimes hard to get it back out again. Considered 612 00:30:44,200 --> 00:30:47,080 Speaker 2: this week, for example, the story of the Professional Golf Association, 613 00:30:47,400 --> 00:30:50,160 Speaker 2: which asks its members to take a principled stance against 614 00:30:50,200 --> 00:30:53,200 Speaker 2: Saudi Arabia and its live golf because of the murder 615 00:30:53,240 --> 00:30:57,320 Speaker 2: of Jamal Kashoji, only to reverse course and merge with 616 00:30:57,400 --> 00:30:59,640 Speaker 2: a live without so much as an explanation. 617 00:31:00,120 --> 00:31:03,120 Speaker 7: Let's be honest, the Saudis aren't buying the PGA because 618 00:31:03,160 --> 00:31:08,120 Speaker 7: they love golf. They're buying the PGA because they want 619 00:31:08,120 --> 00:31:13,080 Speaker 7: to erase their dizzying campaign of political repression. 620 00:31:13,320 --> 00:31:15,640 Speaker 2: Or as the Walt Disney Company about the way out 621 00:31:15,680 --> 00:31:17,720 Speaker 2: of its fight with the State of Florida after the 622 00:31:17,840 --> 00:31:20,720 Speaker 2: largest entertainment company in the world took a stance on 623 00:31:20,840 --> 00:31:25,680 Speaker 2: legislation restricting talk about same sex relationships and schools, rising 624 00:31:25,720 --> 00:31:27,760 Speaker 2: the ire of Governor DeSantis. 625 00:31:27,800 --> 00:31:31,640 Speaker 7: You know, this idea of one corporation having its own 626 00:31:31,720 --> 00:31:35,520 Speaker 7: government in Central Florida is something that is no longer 627 00:31:35,520 --> 00:31:37,440 Speaker 7: in the best interest of the State of Florida. 628 00:31:37,520 --> 00:31:40,440 Speaker 2: It's all being grouped under the heading of woke. That's 629 00:31:40,480 --> 00:31:43,080 Speaker 2: a term dating back to the nineteen forties when black 630 00:31:43,120 --> 00:31:47,120 Speaker 2: Americans referred to being woken up to injustice, but that 631 00:31:47,320 --> 00:31:50,120 Speaker 2: history has largely been lost on current day leaders, such 632 00:31:50,120 --> 00:31:52,880 Speaker 2: as for example, our former president and I don't like 633 00:31:52,920 --> 00:31:54,800 Speaker 2: the term woke because I hear woke, woke, woke. 634 00:31:54,840 --> 00:31:56,400 Speaker 1: You know, it's like just a term that use. Half 635 00:31:56,400 --> 00:31:58,120 Speaker 1: the people can't even define it. They don't know what 636 00:31:58,160 --> 00:31:58,440 Speaker 1: it is. 637 00:31:58,600 --> 00:32:01,360 Speaker 2: Josh Bolton of the Business round Table asks simply the 638 00:32:01,400 --> 00:32:04,680 Speaker 2: companies be left alone to serve their customers and employees, 639 00:32:04,840 --> 00:32:06,600 Speaker 2: whether or not that is woke. 640 00:32:07,120 --> 00:32:13,920 Speaker 8: Our message to policymakers is let business do business, and they, 641 00:32:14,160 --> 00:32:16,880 Speaker 8: you know they they should get to decide how they 642 00:32:16,880 --> 00:32:19,800 Speaker 8: treat their customers and their employees. 643 00:32:20,200 --> 00:32:22,640 Speaker 2: And some companies find they have no choice but to 644 00:32:22,680 --> 00:32:25,120 Speaker 2: consider things like climate change if they're going to stay 645 00:32:25,120 --> 00:32:29,000 Speaker 2: in business, for example, ensuring homes in the state of California. 646 00:32:29,040 --> 00:32:32,520 Speaker 2: But never fear whether you personally like companies going so 647 00:32:32,600 --> 00:32:35,640 Speaker 2: called woke or not. You can always vote with your 648 00:32:35,640 --> 00:32:39,440 Speaker 2: own purse, as purchasing a bud Light apparently did recently 649 00:32:39,640 --> 00:32:42,880 Speaker 2: when sales dipped after some marketing person sent a trans 650 00:32:42,960 --> 00:32:46,120 Speaker 2: influencer beer cans with her face on them, and she 651 00:32:46,240 --> 00:32:48,000 Speaker 2: then posted it on Instagram. 652 00:32:48,240 --> 00:32:49,920 Speaker 9: A Ken with my face on it. 653 00:32:50,160 --> 00:32:52,920 Speaker 2: But those customer boycounts may not be as easy as 654 00:32:53,000 --> 00:32:56,800 Speaker 2: they sound, as Congressman Dan Crenshaw of Texas recently found 655 00:32:56,800 --> 00:32:57,920 Speaker 2: out for himself. 656 00:32:58,320 --> 00:33:00,320 Speaker 3: So guess what we're gonna do with throughout every little 657 00:33:00,320 --> 00:33:07,960 Speaker 3: bud light we've got in the fridge? 658 00:33:08,840 --> 00:33:10,600 Speaker 1: Alright, Well, I guess that was easy. 659 00:33:11,000 --> 00:33:12,800 Speaker 2: That does it for this episode of Wall Street Week. 660 00:33:12,800 --> 00:33:15,440 Speaker 2: I'm David Weston. This is Bloomberg. See you next week.