WEBVTT - Bloomberg Wall Street Week - June 9th 2023 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.320 I mean may not have an overall recession, We're having 0:00:04.360 --> 0:00:06.640 a rolling recession to kind of role looks pretty strongly 0:00:06.640 --> 0:00:07.600 it is when it comes to jobs. 0:00:07.640 --> 0:00:09.760 The financial story is that shape our word. 0:00:09.840 --> 0:00:13.480 Three major regional bank failures send shockwaves through the banking system. 0:00:13.560 --> 0:00:15.360 We're all trying to figure out what to make of 0:00:15.440 --> 0:00:17.160 generative AI through. 0:00:17.000 --> 0:00:19.120 The eyes of the most influential voices. 0:00:19.239 --> 0:00:22.200 Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 0:00:22.320 --> 0:00:25.040 deebro Lair of the Paulson Institute, well then Hubbard of 0:00:25.040 --> 0:00:26.040 the Columbia Business School. 0:00:26.040 --> 0:00:29.840 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.200 --> 0:00:33.360 A whole lot of smoke and fires to match, some 0:00:33.479 --> 0:00:36.599 being started and some being put out. This is Bloomberg 0:00:36.600 --> 0:00:40.440 Wall Street Week. I'm David Weston. This week Bridgewater founder 0:00:40.520 --> 0:00:44.240 Ray Dalyio and economic historian Neil Ferguson on where China 0:00:44.440 --> 0:00:44.920 is headed. 0:00:45.120 --> 0:00:47.120 There is not a winner or a loser. 0:00:47.320 --> 0:00:51.040 I'm not saying there's any guarantee that the United States 0:00:51.080 --> 0:00:52.640 is assigned that winds Cold War two. 0:00:52.760 --> 0:00:56.200 Pete Savros of KKR on a different approach to private equity. 0:00:56.520 --> 0:00:59.160 This is a superior way of operating a company in 0:00:59.200 --> 0:01:00.000 every perspective. 0:01:00.120 --> 0:01:03.280 And Bank of America CEO Brian moynihan, I'm saving money 0:01:03.400 --> 0:01:04.880 with ai Way. 0:01:04.959 --> 0:01:07.600 I really think his near term helpful is a computer 0:01:07.880 --> 0:01:08.880 programming development. 0:01:21.360 --> 0:01:23.920 Whatever the rest of Global Wall Street was doing this week, 0:01:23.959 --> 0:01:26.720 all of us in New York were looking skyward at 0:01:26.720 --> 0:01:30.200 the worst air quality in the entire world, all because 0:01:30.200 --> 0:01:31.840 of forest fires in Canada. 0:01:32.040 --> 0:01:35.520 This is an unprecedented in our city. 0:01:36.040 --> 0:01:39.640 In all New York should limit outdoor activity to the 0:01:39.680 --> 0:01:41.200 greatest extent possibly. 0:01:41.400 --> 0:01:43.840 And while firefighters in Canada were trying to put out 0:01:43.880 --> 0:01:46.440 the fires there, things were heating up in the South 0:01:46.520 --> 0:01:49.560 China Sea as a Chinese Navy warship came close to 0:01:49.600 --> 0:01:53.000 colliding with the US destroyer in the Taiwan Strait, even 0:01:53.080 --> 0:01:55.920 as Secretary of State Blincoln planned that delayed trip to 0:01:55.960 --> 0:01:58.720 Beijing to try to take the temperature down a bit. 0:01:59.080 --> 0:02:02.120 So since I think has A Russians could involve President 0:02:02.240 --> 0:02:06.600 changing because the United States looks to resume high level communication. 0:02:06.480 --> 0:02:09.600 The PGA shocked everyone by trying to put out the 0:02:09.600 --> 0:02:12.840 fire in its relationship with Saudi Arabia's live Golf, leaving 0:02:12.840 --> 0:02:15.800 people like Mark Lazry wondering why. 0:02:15.880 --> 0:02:20.520 Why did the PGA to do this? It's clear why 0:02:20.520 --> 0:02:23.000 I lived in it. A week ago, day ago, a 0:02:23.080 --> 0:02:27.000 year ago. That was the devil, and today they're your partner. 0:02:27.320 --> 0:02:30.200 But while so many were trying to tamp the fires down, 0:02:30.440 --> 0:02:33.760 some were getting new fires started, like sec Shared, Gary 0:02:33.800 --> 0:02:37.720 Gensler going after crypto platforms Finance and coinbase and likening 0:02:37.760 --> 0:02:40.960 what's going on to the huge scandal with Sam bankman 0:02:41.040 --> 0:02:42.440 Fried's FTX. 0:02:42.680 --> 0:02:47.600 There's parallels here to the FTX fraud manipulation that we saw. 0:02:48.080 --> 0:02:50.919 And two new contestants edited the Republican side of the 0:02:51.000 --> 0:02:53.359 race for president in twenty twenty four trying to light 0:02:53.440 --> 0:02:55.519 some fires under their campaigns. 0:02:56.160 --> 0:02:58.760 I know we can bring this country back, but it'll 0:02:58.760 --> 0:03:04.320 require new leadership in the White House and the Republican Party. 0:03:04.600 --> 0:03:09.200 We have leaders who have shown us over and over again, 0:03:09.760 --> 0:03:13.200 but not only are they devoid of character, but they 0:03:13.240 --> 0:03:13.840 don't care. 0:03:14.400 --> 0:03:17.360 And then late Thursday, the leader in the Republican field, 0:03:17.360 --> 0:03:20.160 Donald Trump, added his own fuel to the fire as 0:03:20.160 --> 0:03:23.440 he was indicted for holding onto classified documents after we 0:03:23.520 --> 0:03:24.520 left office in. 0:03:24.560 --> 0:03:26.760 Selection interference at the highest level. 0:03:26.800 --> 0:03:30.079 There's never been anything like what's happened. I'm an innocent man. 0:03:30.120 --> 0:03:31.200 I'm an innocent person. 0:03:33.080 --> 0:03:35.920 Despite all the heat and smoke from the week, markets 0:03:35.960 --> 0:03:38.080 came through it all relatively on scathed, with the S 0:03:38.120 --> 0:03:39.960 and P five hundred ending the week in a bull 0:03:40.080 --> 0:03:42.920 market by a mere five points at forty two ninety 0:03:42.920 --> 0:03:45.560 eight of four tenths of a percent. On the week, 0:03:45.720 --> 0:03:48.480 the Nansdaq was up just over one tenth of a percent, 0:03:48.680 --> 0:03:51.120 while the yield on the tenure went up five basis 0:03:51.160 --> 0:03:53.600 points to end up at three point seventy four. To 0:03:53.600 --> 0:03:55.520 take us through the week in the markets, we welcome 0:03:55.560 --> 0:04:00.640 now Julian Salisbury, Golden Sacks, CIO of Wealth and Asset Management, Erickson, 0:04:00.760 --> 0:04:01.800 US Bank, head. 0:04:01.640 --> 0:04:02.360 Of Public Markets. 0:04:02.400 --> 0:04:04.280 Please let me start with you about this so called 0:04:04.320 --> 0:04:06.560 bull market. Is it for real? Is it going to 0:04:06.560 --> 0:04:08.400 be sustained? I must say, we have our elves here 0:04:08.440 --> 0:04:12.120 that follow these things for Bloomberg, various securities analysts, and 0:04:12.160 --> 0:04:14.160 they think we're gonna end up the year around four thousand. 0:04:14.240 --> 0:04:15.720 We're now pushing forty three hundred. 0:04:15.760 --> 0:04:16.120 Is it real? 0:04:17.279 --> 0:04:21.400 Well, we're what we call a skeptical participant in the market, 0:04:21.480 --> 0:04:24.760 really with a neutral position on US equities and really 0:04:24.800 --> 0:04:27.839 the reason why is you've got a conflicting set of 0:04:27.839 --> 0:04:30.560 signals going on as far as what may happen with 0:04:30.800 --> 0:04:33.719 the stock market. So on the one side, we certainly 0:04:33.760 --> 0:04:36.000 know that fundamentals have been slowing, whether it's on the 0:04:36.040 --> 0:04:40.200 top down corporate basis or on the bottom up, top 0:04:40.240 --> 0:04:43.400 down macro basis or the bottom up corporate basis, and 0:04:43.440 --> 0:04:48.920 we have headwinds of continued a tight policy in monetary factors. 0:04:49.000 --> 0:04:51.480 On the other hand, however, we have seen some green 0:04:51.520 --> 0:04:55.279 shoots starting to come up recently, and technicals certainly have 0:04:55.360 --> 0:04:58.919 been pushing on a relative basis the US equity market higher. 0:04:59.080 --> 0:05:01.480 So are we in a new bamarket? We think it 0:05:01.600 --> 0:05:03.760 still remains to be seen, but certainly there is some 0:05:03.920 --> 0:05:07.200 momentum right now towards an upward trajectory. 0:05:07.400 --> 0:05:09.080 Julie, We're going to hear from the Fed next week, 0:05:09.200 --> 0:05:11.160 and we talked about that tight monufterry buzz. Is that 0:05:11.240 --> 0:05:13.479 one of the things you could actually take this bullmarket 0:05:13.520 --> 0:05:14.160 back away. 0:05:13.920 --> 0:05:14.520 From us again? 0:05:15.400 --> 0:05:17.800 Look, I think, just out to Lisa's points, I think 0:05:17.839 --> 0:05:21.080 the technicals here are certainly being very supportive of this run. 0:05:21.160 --> 0:05:23.360 People came into the year very nervous, sort of concerned 0:05:23.400 --> 0:05:26.279 about the outlet for earnings earnings surprise to the upside, 0:05:26.279 --> 0:05:29.479 I think substantially in Q one, and people are sitting 0:05:29.480 --> 0:05:30.960 there along a lot of cash, and I think, you know, 0:05:30.960 --> 0:05:33.160 you're going to see risk assets continue to perform here 0:05:33.200 --> 0:05:35.960 because of the you know, the amount of amount of 0:05:36.000 --> 0:05:39.200 cash at along sidelines looking to get invested. You know, 0:05:39.320 --> 0:05:41.960 it's interesting that you talked about a bullmarket. Yes, I 0:05:41.960 --> 0:05:44.640 guess it is now technically a bull market up until 0:05:44.720 --> 0:05:46.279 you know, just a few weeks ago, it's a fairly 0:05:46.279 --> 0:05:50.760 concentrated bullmarket. So it's it's you know, with the whether 0:05:50.800 --> 0:05:52.720 it's the top seven, eight nine stocks have driven a 0:05:52.800 --> 0:05:54.400 large amount of that. But I'd say that started to 0:05:54.400 --> 0:05:56.680 become more broad based. So you know, you've seen the 0:05:56.680 --> 0:06:00.240 small cap mid cap industrials starting to catch up. So 0:06:00.360 --> 0:06:02.400 it's starting to look like a slightly healthier run as 0:06:02.400 --> 0:06:04.520 well than the very concentrated run we were seeing just 0:06:04.560 --> 0:06:05.160 a few weeks ago. 0:06:05.279 --> 0:06:06.320 Is there a lot of dry powder? 0:06:06.480 --> 0:06:06.800 Jullian? 0:06:06.920 --> 0:06:09.240 Right now we see over five trillion I think now 0:06:09.240 --> 0:06:10.760 in money market funds. It could come back to the 0:06:10.800 --> 0:06:11.480 equities market. 0:06:11.560 --> 0:06:14.640 Yeah, there's about five point two trillion in US money 0:06:14.640 --> 0:06:17.800 markets alone, around six point five trillion on a global basis. 0:06:18.440 --> 0:06:20.719 It's interesting that, you know, the flow into those is 0:06:20.760 --> 0:06:23.320 still modestly positive, nowhere near the rate that we were 0:06:23.400 --> 0:06:26.159 seeing money coming into those money market funds around the 0:06:26.200 --> 0:06:29.400 events of SVB a few months ago, but it's still 0:06:29.400 --> 0:06:33.760 gradually trickling in. You know, an interesting phenomena there, there's 0:06:33.760 --> 0:06:35.919 a lot of stress in the money market complex ahead 0:06:35.920 --> 0:06:37.880 of the debt ceiling without being resolved. That's really kind 0:06:37.880 --> 0:06:40.120 of gone out of the system now, you know, there's 0:06:40.120 --> 0:06:41.880 a lot of treasury assurance coming up for the next 0:06:41.880 --> 0:06:43.800 few weeks, and our expectations, you know, the money market 0:06:43.800 --> 0:06:45.599 funds are really going to take up a lot of 0:06:45.640 --> 0:06:46.120 that supply. 0:06:46.400 --> 0:06:48.240 Well, So a week or two ago, we were all 0:06:48.279 --> 0:06:50.240 concerned about the banks as we had that series of 0:06:50.240 --> 0:06:52.159 bank failure starting in March. There's a lot of concerned 0:06:52.160 --> 0:06:55.440 about liquidity, willingness to land. Are we through that at 0:06:55.440 --> 0:06:57.800 this point? Do we still have risks of a lack 0:06:57.839 --> 0:07:00.240 of liquidity, particularly as we have to issue all those 0:07:00.279 --> 0:07:02.120 T bills to make up for what we drew down 0:07:02.120 --> 0:07:03.440 because of that debt seiling problem. 0:07:04.320 --> 0:07:07.680 We are still really carefully watching the liquidity To your point, 0:07:07.760 --> 0:07:10.280 David and The reason why is while we've had a 0:07:10.320 --> 0:07:14.360 fortunate reprieve in what's going on with financial sector stresses, 0:07:14.440 --> 0:07:20.800 certainly they are facing potential increased regulatory requirements as well 0:07:20.840 --> 0:07:23.760 as really just dealing with general economic slowdown, and so 0:07:23.800 --> 0:07:27.480 you've got some tightening conditions there. In addition, as you mentioned, 0:07:27.520 --> 0:07:31.040 the Treasury General account really has to rebuild because they 0:07:31.040 --> 0:07:33.480 were spending down all of that money during the debt 0:07:33.520 --> 0:07:36.440 ceiling debate, and they need to rebuild up the reserve. 0:07:36.560 --> 0:07:38.440 So as they do that, they're going to pull money 0:07:38.440 --> 0:07:41.000 out of the system. What's interesting is we did just 0:07:41.080 --> 0:07:44.840 have some options starting to rebuild that reserve this week, 0:07:44.920 --> 0:07:47.840 and the good news is as we monitored some of 0:07:47.880 --> 0:07:51.040 the yield activity around those auctions, we didn't see any 0:07:51.680 --> 0:07:54.239 concerning signs at this point. But it is very early 0:07:54.320 --> 0:07:57.280 days and there's almost about a trillion that's expected to 0:07:57.280 --> 0:08:00.880 come into the TJA coffers and out of the market 0:08:00.920 --> 0:08:03.040 really over the next several months, so that's something we'll 0:08:03.080 --> 0:08:04.239 just continue to monitor. 0:08:04.800 --> 0:08:07.160 I think this part of the rally we've seen in 0:08:07.200 --> 0:08:09.480 the last few weeks it's people getting increasingly comfortable that 0:08:09.560 --> 0:08:12.680 the banks this situation seems to have stabilized somewhat, and 0:08:12.680 --> 0:08:14.160 that's certainly been true in the near town. I think 0:08:14.440 --> 0:08:17.800 the short term liquidity issues have been somewhat put to bed, 0:08:17.880 --> 0:08:20.360 but I think we're not out of the woods yet. 0:08:20.440 --> 0:08:22.560 I think there's still going to be continued pressure on 0:08:22.640 --> 0:08:24.720 the banks on a whole variety of levels. I think 0:08:25.040 --> 0:08:28.440 new interest margins will remain under pressure. I think credit 0:08:28.560 --> 0:08:30.520 quality is going to continue to become under pressure. We're 0:08:30.560 --> 0:08:31.880 still in the early innings there. 0:08:31.760 --> 0:08:34.040 And Julian, you're just fresh back from Berlin, a big 0:08:34.080 --> 0:08:36.839 conference over there, and it was more private oriented. I think, 0:08:37.120 --> 0:08:39.120 what about private credit? Is it going to step in 0:08:39.440 --> 0:08:40.760 wherever we needed for the banks. 0:08:41.080 --> 0:08:44.080 Look, I think a lot of questions around this topic everyone, 0:08:44.240 --> 0:08:45.880 you know, as I go around the world, not just 0:08:45.960 --> 0:08:49.079 in Berlin, but Middle East, Far East, there's a lot 0:08:49.080 --> 0:08:51.080 of interest in private credit. Of course here in the US, 0:08:51.960 --> 0:08:54.160 questions being asked about, you know, is that getting over 0:08:54.200 --> 0:08:56.280 inflated now? Is there too much excitement, too much money 0:08:56.320 --> 0:08:59.200 going into that? And I would say, look, it's great 0:08:59.200 --> 0:09:01.280 that it's there as an alliternative source of capital at 0:09:01.280 --> 0:09:04.400 a time like this, when the banks the broadly syndicated, 0:09:04.520 --> 0:09:07.120 broadly syndicated market, that CLO market's not really there to 0:09:07.160 --> 0:09:09.959 provide liquidity, so they're able to step in, and I 0:09:10.000 --> 0:09:11.600 think there's still a long way to run. I mean, 0:09:11.600 --> 0:09:15.120 it's still only about you know, about seven percent of 0:09:15.160 --> 0:09:17.640 the fixed income market is private credit, only about two 0:09:17.640 --> 0:09:21.160 percent of global AUM, only seventeen percent even of alternatives. 0:09:21.320 --> 0:09:24.120 So we still think that private credit market has an 0:09:24.120 --> 0:09:28.720 opportunity to continue compounding circut twenty percent plus growth rates 0:09:28.720 --> 0:09:29.480 over the next few years. 0:09:30.040 --> 0:09:31.719 Even apart from the private credit mark, Where do you 0:09:31.720 --> 0:09:33.959 see opportunities in fixed income right now particularly? 0:09:34.840 --> 0:09:37.480 Well, we think there's actually a number of interesting opportunities 0:09:37.559 --> 0:09:40.440 in fixed income and while overall yields really are much 0:09:40.480 --> 0:09:42.720 higher than they were a year ago, if you look 0:09:42.720 --> 0:09:47.680 into specific sectors, there really are some very additional opportunities 0:09:47.679 --> 0:09:49.920 to pick up yields. So one area, for example, that 0:09:49.960 --> 0:09:53.240 we are advocating heavily with our clients is an area 0:09:53.320 --> 0:09:57.360 called reinsurance, where basically, as an investor you're really helping 0:09:57.440 --> 0:10:00.240 to pick up some of that insurance risk and in 0:10:00.240 --> 0:10:04.480 turn get paid a hefty premium. The property and casualty area, 0:10:04.520 --> 0:10:06.640 and what we're seeing right now is really not only 0:10:06.679 --> 0:10:09.520 that nice incremental yield, but there's actually just a lot 0:10:09.559 --> 0:10:13.880 of pressure for those prices to continue to be very 0:10:13.920 --> 0:10:17.600 attractive for investors simply because there's a lack of capital 0:10:17.640 --> 0:10:20.440 in the sector. So that's really one area we're interested in. 0:10:20.840 --> 0:10:24.240 Another one really is an area called non agency mortgages, 0:10:24.280 --> 0:10:27.640 and so here what you have is actually still fairly 0:10:27.679 --> 0:10:32.040 strong fundamentals underpinning some of these borrowers for very large 0:10:32.080 --> 0:10:36.080 mortgages that are not necessarily guaranteed by the agencies, but 0:10:36.280 --> 0:10:40.160 again very strong yields that are supported by borrower repayments. 0:10:40.640 --> 0:10:42.920 Many thanks to Lisa Erickson of US Bank and also 0:10:43.000 --> 0:10:47.280 Julian Salisbury of Goldman Sachs. Coming up the all important 0:10:47.320 --> 0:10:51.280 and all two strained relationship between the world's two largest economies. 0:10:51.520 --> 0:10:54.080 We hear from Bridgewater founder Ray Dalio about the US 0:10:54.200 --> 0:10:56.679 relationship with China, and then we're going to hear from 0:10:56.720 --> 0:10:58.520 the economic historian Neil Ferguson. 0:10:58.559 --> 0:10:59.360 We're going to hear what. 0:10:59.280 --> 0:11:02.079 He has to say about Ray Dalio thinks about US 0:11:02.160 --> 0:11:04.839 China relations Oh that is coming up next on Wall 0:11:04.880 --> 0:11:07.079 Street Week, and we are on Bloomberg. 0:11:09.640 --> 0:11:13.840 This is Bloomberg Wall Street Week with David Weston from 0:11:13.960 --> 0:11:15.040 Bloomberg radio. 0:11:15.440 --> 0:11:18.440 However you measure it. The economic relationship between the United 0:11:18.480 --> 0:11:21.640 States and China is the most important in the world. 0:11:21.920 --> 0:11:25.120 Bridgewater founder Ray Dalio has been an important observer of 0:11:25.320 --> 0:11:28.959 and participant in that relationship as China has emerged to 0:11:29.000 --> 0:11:32.440 become the global economic superpower that it is today with 0:11:32.559 --> 0:11:35.200 tensions rising. This week, we spent some time with Ray 0:11:35.320 --> 0:11:37.760 at Bloomberg at VEST and talked with him about where 0:11:37.880 --> 0:11:41.560 US China relations are today and where they are headed. 0:11:42.040 --> 0:11:42.760 Right now. 0:11:43.400 --> 0:11:52.120 There are irreconcilable differences on a number of topics Taiwan, Russia, 0:11:54.280 --> 0:11:58.480 revers Ifius, chips and so on. They're kind of at 0:11:58.480 --> 0:12:04.480 the edge and there's an inability to talk, so there's 0:12:04.800 --> 0:12:08.360 quite a bit of brinksmanship. And we are also heading 0:12:08.400 --> 0:12:11.880 into a political year here in which there's going to 0:12:11.920 --> 0:12:21.000 be more pressuring pressure. Both sides are very worried about this. 0:12:22.480 --> 0:12:26.520 So I think you're going to see restraint. I don't 0:12:26.559 --> 0:12:31.680 think it's going to lead to a terrible situation in 0:12:31.760 --> 0:12:35.440 terms of but it is leading. But you're going to 0:12:35.440 --> 0:12:38.240 see restraint in a period of time where you're going 0:12:38.280 --> 0:12:43.240 to see more tangents. There's the Mike Allagher's Commission, and 0:12:43.320 --> 0:12:46.880 so on more pressure with chips and so on and so forth. 0:12:47.120 --> 0:12:49.319 I don't think that that's going to cross the line, 0:12:49.440 --> 0:12:52.080 but it is going to raise tensions. You will see 0:12:52.280 --> 0:12:58.520 also more attempts Tony Blincoln's going over. You'll see more 0:12:58.520 --> 0:13:02.080 attempts to try to smooth things out, because both sides 0:13:02.120 --> 0:13:05.880 are afraid of where we are. In any case, While 0:13:05.920 --> 0:13:10.000 it'll be that kind of bringsmanship, most likely there is 0:13:10.080 --> 0:13:15.199 a building of self sufficiency. In other words, efficiency was 0:13:16.000 --> 0:13:17.640 the game before everything was global. 0:13:17.720 --> 0:13:19.040 You produce it in wherever. 0:13:18.800 --> 0:13:22.560 The cheapest place was mostly cost effective, and we became 0:13:22.760 --> 0:13:27.199 very intertwined with each other. Now in this global world, 0:13:27.679 --> 0:13:30.360 there's the worry about being cut off, cut off in 0:13:30.440 --> 0:13:34.439 all sorts of things, and so you're having that dynamic play, 0:13:35.160 --> 0:13:39.360 you know, a negative role in economics and inflation. 0:13:39.679 --> 0:13:42.439 In thinking about the US relationship with China, which I 0:13:42.480 --> 0:13:45.640 think is probably the most important geopolitical economic relationship for 0:13:45.679 --> 0:13:49.720 the next generation, I would venture to say many people 0:13:49.760 --> 0:13:51.880 have made much of the fact that China is going 0:13:51.920 --> 0:13:53.679 to overtake the United States in the terms of the 0:13:53.720 --> 0:13:55.679 size of its economy, the strength of this economy. There 0:13:55.679 --> 0:13:58.040 are some questions about that. Now, where are you on 0:13:58.120 --> 0:14:01.160 that question, and if in fact is not as strong 0:14:01.200 --> 0:14:04.240 as we have thought it is economically, I'm talking about now, 0:14:04.559 --> 0:14:06.160 how does that affect the relationship. 0:14:07.920 --> 0:14:10.320 I think it's almost like splitting hairs. 0:14:10.440 --> 0:14:11.720 There are two great powers. 0:14:12.320 --> 0:14:16.400 And you know the. 0:14:15.440 --> 0:14:16.760 Difference of overtake. 0:14:17.920 --> 0:14:20.720 If you take purchasing power parody the size of GDP, 0:14:21.200 --> 0:14:23.760 they have slightly overtaken us if you take the other, 0:14:24.480 --> 0:14:28.280 who knows they're going to the main thing is they're comparable. 0:14:27.760 --> 0:14:31.000 Powers in many ways, having strains in them. 0:14:31.080 --> 0:14:33.720 They can do a lot of They have a lot 0:14:33.720 --> 0:14:36.600 of dependency with each other, and they can do a 0:14:36.640 --> 0:14:40.600 lot of harm. So the most important thing I think 0:14:40.760 --> 0:14:43.400 is how we take care of ourselves. Can we get strong? 0:14:43.880 --> 0:14:48.960 Can we raise productivity? Can we be politically and economically 0:14:49.040 --> 0:14:52.760 cohesive so that we can be effecient, effective and strong? 0:14:53.200 --> 0:14:58.280 Because you know, you can't rule out China. Since I 0:14:58.360 --> 0:15:02.560 started to go to China, you know, nineteen eighty four 0:15:03.520 --> 0:15:07.200 per capita income increased by twenty eight times. It's a 0:15:07.200 --> 0:15:10.720 power and it's a smart power. So it's going to 0:15:10.800 --> 0:15:14.080 be it's going to be like that. No, there's not 0:15:14.160 --> 0:15:16.960 a winner or a loser. There were only either. 0:15:17.200 --> 0:15:19.760 You're gonna have both winners, or you're gonna have both losers. 0:15:19.880 --> 0:15:22.360 I mean, you founded Bridgewater, and for everything I've read 0:15:22.360 --> 0:15:24.880 about Bridgewater, I mean you put a great emphasis on 0:15:25.160 --> 0:15:28.800 the systems involved, the mechanics involved, the engine. It seems 0:15:28.800 --> 0:15:31.280 to me, without knowing about it, having done this for 0:15:31.320 --> 0:15:34.400 twenty five years or so, that AI might apply to 0:15:34.480 --> 0:15:36.960 that fairly easily. Is that your sense? Where are we 0:15:37.040 --> 0:15:37.920 going with artificiality? 0:15:37.960 --> 0:15:38.160 Yeah? 0:15:38.160 --> 0:15:41.480 I'm so excited because, as you say, for twenty five years, 0:15:42.440 --> 0:15:46.640 I would always write down my investment principles, all my principles, 0:15:46.880 --> 0:15:49.720 and then I would convert them to algorithms, which became 0:15:49.800 --> 0:15:54.040 decision rules, which became systems, and everything would run and 0:15:54.080 --> 0:15:56.520 they would like setting up a computer chess game. 0:15:57.120 --> 0:15:57.880 It would play. 0:15:58.160 --> 0:16:00.800 I would play next to it, and we would then 0:16:00.920 --> 0:16:02.240 reconcile differences and. 0:16:02.200 --> 0:16:03.120 We would learn together. 0:16:04.720 --> 0:16:10.280 Now what's happening with generative AI is that I can 0:16:10.360 --> 0:16:13.440 one can take all of that knowledge and have it 0:16:13.480 --> 0:16:16.560 there and then go beyond that to have it as 0:16:16.560 --> 0:16:25.120 a partner, a thought partner, because the intelligence has capacities 0:16:25.160 --> 0:16:27.760 that the human mind doesn't have. We don't, you know, 0:16:27.800 --> 0:16:30.640 the ability to process so much and everything at the 0:16:30.680 --> 0:16:35.640 same time. So I'm extremely excited. I think that this 0:16:35.920 --> 0:16:43.480 is the greatest revolution, bigger than the Internet revolution. But 0:16:43.920 --> 0:16:49.080 like technology, it really depends. The problem isn't with the technology. 0:16:49.480 --> 0:16:52.400 The problem is with the people who use the technology. 0:16:52.800 --> 0:16:58.200 Will that technology be used to raise humanity's living standards 0:16:58.760 --> 0:17:02.120 or will that be used for war in a sense, 0:17:02.160 --> 0:17:05.320 for hurting each other? And so, but any way we're 0:17:05.320 --> 0:17:08.240 going to cut it. If you take those five we're 0:17:08.280 --> 0:17:12.080 going to go through a time warp. If we take 0:17:12.160 --> 0:17:15.320 the next five to ten years, In the next five 0:17:15.400 --> 0:17:17.640 to ten years, it's going to go through a time warp. 0:17:17.840 --> 0:17:19.880 We're going to come out the other side, and you're 0:17:19.920 --> 0:17:23.000 going to see a very completely different world. 0:17:23.600 --> 0:17:27.280 Ray Dalio always puts his analysis of finance, markets and 0:17:27.320 --> 0:17:30.840 the economy into a broader historical perspective, and so we 0:17:30.880 --> 0:17:34.480 ask noted economic historian Neil Ferguson, Senior fellow at the 0:17:34.520 --> 0:17:38.359 Hoover Institution and Bloomberg Opinion colonists for his reaction to 0:17:38.520 --> 0:17:39.720 raise analysis. 0:17:40.200 --> 0:17:45.480 There are certainly irreconcilable differences, and there's certainly not enough 0:17:45.680 --> 0:17:50.880 communication going on. Ray Dalio talks about their being restraints. 0:17:51.400 --> 0:17:54.879 I think that's pretty clear on the US side, right now, 0:17:55.000 --> 0:17:59.880 because there's been quite a diplomatic charm offensive by Jake Sullivan. 0:18:00.400 --> 0:18:03.760 Tony Blinkin is going to China after they had to 0:18:03.760 --> 0:18:07.560 reschedule his last trip because of the balloon over in Montana. 0:18:07.680 --> 0:18:11.280 But I'm not sure just how receptive or how restrained 0:18:11.720 --> 0:18:13.200 the Chinese side is being. 0:18:13.800 --> 0:18:17.600 Neil, do you share ray Alio's view about the ultimate 0:18:17.640 --> 0:18:21.320 resolution of this conflict? Call it Corld War two as 0:18:21.359 --> 0:18:24.040 you have called it. He said, one side will not 0:18:24.200 --> 0:18:26.360 win and the other lose. Either both sides will win 0:18:26.520 --> 0:18:28.720 or both sides will lose. Do you share that view? 0:18:30.040 --> 0:18:33.560 No, and I don't understand it to be perfectly honest. 0:18:34.160 --> 0:18:36.960 In Cold War one, I don't think there's any controversy 0:18:37.080 --> 0:18:40.160 that one side won the United States and its allies, 0:18:40.640 --> 0:18:43.040 and the other side lost the Soviet Union, which of 0:18:43.080 --> 0:18:47.320 course disintegrated in nineteen ninety one. And why shouldn't there 0:18:47.359 --> 0:18:51.480 be a similar outcome to a second Cold War? Now? 0:18:51.560 --> 0:18:55.280 I'm not saying there's any guarantee that the United States 0:18:55.359 --> 0:18:57.520 is the side that wins Cold War two. China's a 0:18:57.680 --> 0:19:02.720 much more formidable opponent than the Soviet Union was, and 0:19:02.920 --> 0:19:05.439 I sometimes think that the United States isn't in the 0:19:05.480 --> 0:19:09.239 same kind of domestic internal shape that it was in 0:19:09.280 --> 0:19:12.639 Cold War One. But I think the key point about 0:19:12.640 --> 0:19:16.040 a cold water remember is that if it stays cold, 0:19:16.119 --> 0:19:19.520 he doesn't escalate into hot war, at least not at 0:19:19.520 --> 0:19:23.000 the global level. You can have hot wars in spaces 0:19:23.119 --> 0:19:25.720 like say Ukraine, but if it doesn't escalate into World 0:19:25.800 --> 0:19:28.639 War three, then the United States and its allies are 0:19:28.680 --> 0:19:31.280 probably better placed to wins. 0:19:31.880 --> 0:19:34.800 That was Bloomberg Opinion commist Neil Ferguson of the Hoover 0:19:34.960 --> 0:19:40.560 Institutions coming up, improving your investment by sharing some of 0:19:40.600 --> 0:19:43.840 the upside. We'll talk with Pete Stabbers A Kkar about 0:19:43.840 --> 0:19:47.679 his approach to private equity with a decidedly different tilt. 0:19:48.359 --> 0:19:51.159 You've got a better opportunity to deliver our value creation. 0:19:51.640 --> 0:19:53.760 That's next down Watery Week. I'm Bloomberg. 0:19:56.320 --> 0:20:00.560 This is Bloomberg Wall Street Week with David Weston from 0:20:00.680 --> 0:20:01.600 Bloomberg Radio. 0:20:02.359 --> 0:20:06.199 Stakeholder capitalism. Milton Friedman famously wrote in The New York 0:20:06.240 --> 0:20:09.840 Times over fifty years ago that the social responsibility of 0:20:09.880 --> 0:20:12.840 a business is to increase its profits. I think we've 0:20:12.880 --> 0:20:16.120 had fifty years, let's say, of Milton Friedman, some good 0:20:16.480 --> 0:20:20.399 right in terms of competitiveness and innovation, some bad, and 0:20:20.440 --> 0:20:22.879 this became something of a gospel for many in the 0:20:22.920 --> 0:20:23.760 business community. 0:20:23.840 --> 0:20:27.600 For years, all of us are Ohana that our local communities, 0:20:27.640 --> 0:20:31.159 plus our employees and our customers and our partners, all 0:20:31.200 --> 0:20:33.199 of them are key stakeholders, and that we're trying to 0:20:33.240 --> 0:20:34.920 practice stakeholder capitalism. 0:20:35.000 --> 0:20:38.879 But recently there's been a new initiative dubbed stakeholder Capitalism, 0:20:39.160 --> 0:20:41.679 trying to make sure corporations are doing their best to 0:20:41.760 --> 0:20:47.520