1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:29,600 Speaker 1: and of course on the Bloomberg terminal. We try to 6 00:00:29,640 --> 00:00:32,560 Speaker 1: summarize all this and of course the summary as well. 7 00:00:32,560 --> 00:00:35,919 Speaker 1: Wrapped around sixty six pages from James Diamond. Right now, 8 00:00:36,040 --> 00:00:39,360 Speaker 1: Jim Bianco joins us with Bianco Research in Chicago with 9 00:00:39,520 --> 00:00:42,440 Speaker 1: a wonderful overview on the market. Jim, I assume you 10 00:00:42,440 --> 00:00:46,760 Speaker 1: haven't read the sixty six pages of uh of Mr Diamond. 11 00:00:46,760 --> 00:00:49,400 Speaker 1: It's wide ranging as you would imagine. Let's look right 12 00:00:49,400 --> 00:00:52,000 Speaker 1: now at one of the quotes from Jamie Diamond. Let's 13 00:00:52,040 --> 00:00:55,360 Speaker 1: zoom in on a quote on Zoom. Jim Bianco's lived 14 00:00:55,400 --> 00:00:58,760 Speaker 1: with Zoom. Lisa Bramowitz has lived with Zoom. I am 15 00:00:58,920 --> 00:01:02,520 Speaker 1: zoom free. I'm really please to say that, but let's 16 00:01:02,520 --> 00:01:06,160 Speaker 1: look at Jamie Diamond on Zoo. Most professionals learn their 17 00:01:06,240 --> 00:01:09,720 Speaker 1: job through an apprenticeship model, which is almost impossible to 18 00:01:09,800 --> 00:01:13,720 Speaker 1: replicate in the Zoom world. Over time, this drawback could 19 00:01:13,800 --> 00:01:20,000 Speaker 1: dramatically undermine character and culture. Remote work virtually eliminates spontaneous 20 00:01:20,120 --> 00:01:24,720 Speaker 1: learning and creativity because you don't run into Jim Bianco 21 00:01:24,840 --> 00:01:28,480 Speaker 1: at the coffee machine. I mean there it is old school, Uh, 22 00:01:28,560 --> 00:01:31,240 Speaker 1: Jim Bianco. Do you think we returned to our offices 23 00:01:31,280 --> 00:01:35,679 Speaker 1: of old Uh? Sort of. I'm gonna push back on 24 00:01:35,720 --> 00:01:39,880 Speaker 1: that quote a little bit. I'm gonna say, yes, um, 25 00:01:39,920 --> 00:01:43,280 Speaker 1: it is. You know, human interaction. Human contact is important, 26 00:01:43,840 --> 00:01:45,800 Speaker 1: but not I don't think in the form that Jamie 27 00:01:45,840 --> 00:01:49,280 Speaker 1: Diamond is suggesting that, you know, ten hours a day 28 00:01:49,440 --> 00:01:52,520 Speaker 1: in an office, sitting in a little room by yourself, 29 00:01:52,640 --> 00:01:55,440 Speaker 1: working at a computer in a service sector job. I 30 00:01:55,480 --> 00:01:58,160 Speaker 1: think that we're gonna have to rethink what the office 31 00:01:58,360 --> 00:02:01,520 Speaker 1: is and rethink I we go to the office we've 32 00:02:01,560 --> 00:02:04,320 Speaker 1: just shown as an economy over the last year, we 33 00:02:04,440 --> 00:02:09,080 Speaker 1: can produce the economy just fine, all working remotely, and 34 00:02:09,160 --> 00:02:11,679 Speaker 1: I agree we need more human contact. Look, I want 35 00:02:11,800 --> 00:02:14,320 Speaker 1: nothing more than to go to a weekly field game again. 36 00:02:14,800 --> 00:02:17,520 Speaker 1: But I also recognize that maybe I don't need to 37 00:02:17,560 --> 00:02:20,359 Speaker 1: go to one of those gigantic buildings in the center 38 00:02:20,360 --> 00:02:23,760 Speaker 1: of a major city and spend forty fifty hours a 39 00:02:23,800 --> 00:02:26,359 Speaker 1: week there as well too, there's going to have to 40 00:02:26,400 --> 00:02:29,079 Speaker 1: be a rethink is to what exactly does the office mean? 41 00:02:29,560 --> 00:02:32,520 Speaker 1: And it sounds like some people are not there yet 42 00:02:32,520 --> 00:02:35,840 Speaker 1: as far as having that conversation, what does the bianco 43 00:02:36,040 --> 00:02:39,720 Speaker 1: creative destruction then? And how do you prosper from it? 44 00:02:40,000 --> 00:02:44,760 Speaker 1: What is your investment strategy given what this pandemic has wrought? 45 00:02:44,760 --> 00:02:48,760 Speaker 1: And in the boom economy recovery, I think the biggest 46 00:02:48,800 --> 00:02:52,440 Speaker 1: thing with the boom economy has been all of this stimulus. Uh, 47 00:02:52,639 --> 00:02:55,200 Speaker 1: you know, the mailing of checks that we've had. We've 48 00:02:55,240 --> 00:02:58,679 Speaker 1: got the savings rate at a sixty year high. We've 49 00:02:58,720 --> 00:03:01,480 Speaker 1: got everybody itching to get out. That's what everybody says 50 00:03:01,600 --> 00:03:04,079 Speaker 1: right now, and I think it's very true. And when 51 00:03:04,120 --> 00:03:06,799 Speaker 1: they do, I think we're going to start to see 52 00:03:06,919 --> 00:03:10,360 Speaker 1: spending go. That's what everybody says, and then we'll have 53 00:03:10,440 --> 00:03:13,760 Speaker 1: to have a real conversation about inflation. It's too early 54 00:03:13,840 --> 00:03:17,280 Speaker 1: to have that conversation about inflation. The base effect of 55 00:03:17,720 --> 00:03:20,280 Speaker 1: dropping off March and April of last year and seeing 56 00:03:20,280 --> 00:03:22,360 Speaker 1: the year over year numbers go up a lot is 57 00:03:22,440 --> 00:03:25,960 Speaker 1: literally going to start next week. And the checks that 58 00:03:26,000 --> 00:03:28,640 Speaker 1: we just recently mailed out have only been a couple 59 00:03:28,639 --> 00:03:31,600 Speaker 1: of weeks old. So I think as we move forward, 60 00:03:31,639 --> 00:03:34,640 Speaker 1: we're going to have a conversation about inflation and whether 61 00:03:34,720 --> 00:03:36,480 Speaker 1: or not we see it. If we see it, it's 62 00:03:36,520 --> 00:03:39,240 Speaker 1: going to have to accelerate the FED. If we don't 63 00:03:39,280 --> 00:03:42,960 Speaker 1: see inflation, it's going to open the conversation to modern 64 00:03:43,000 --> 00:03:46,840 Speaker 1: monetary theory and more money being spent at a higher 65 00:03:46,920 --> 00:03:48,800 Speaker 1: rate than we're already doing it right now, what's the 66 00:03:48,880 --> 00:03:51,600 Speaker 1: nature of the pickup in inflation that you're looking for? 67 00:03:51,760 --> 00:03:54,280 Speaker 1: And this is important because we've seen inflation of certain 68 00:03:54,360 --> 00:03:57,760 Speaker 1: key goods. But what is the important increase in inflation 69 00:03:57,760 --> 00:04:00,480 Speaker 1: that you need to see to say this the sign 70 00:04:00,560 --> 00:04:04,520 Speaker 1: of something different. I think it's probably going to be 71 00:04:04,680 --> 00:04:07,880 Speaker 1: that companies are going to raise their prices. Look, we've 72 00:04:07,920 --> 00:04:10,280 Speaker 1: known now for the last twenty five years. If you're 73 00:04:10,320 --> 00:04:13,440 Speaker 1: a manager of a real company, not a Wall Street company, 74 00:04:13,520 --> 00:04:16,719 Speaker 1: let's define those two uh and you raise your price. 75 00:04:16,800 --> 00:04:18,680 Speaker 1: You raise your price for washing machines, or you raise 76 00:04:18,720 --> 00:04:20,880 Speaker 1: your price for sweaters. You're on the second page of 77 00:04:20,880 --> 00:04:22,960 Speaker 1: a Google search on lowest the highest price. You don't 78 00:04:22,960 --> 00:04:25,960 Speaker 1: sell anything, you lose market share. Everybody has been droned 79 00:04:25,960 --> 00:04:29,960 Speaker 1: into don't ever raise your price because of that, uh consequence, 80 00:04:30,360 --> 00:04:32,679 Speaker 1: If we get to the point where there's a demand 81 00:04:32,760 --> 00:04:36,039 Speaker 1: pull that so many people are wanting stuff that we 82 00:04:36,120 --> 00:04:39,200 Speaker 1: start seeing prices start to reraise, then in FED speak, 83 00:04:39,560 --> 00:04:43,000 Speaker 1: we've unanchored inflation and we could then start to talk 84 00:04:43,000 --> 00:04:45,800 Speaker 1: about whether or not it is actually here for the 85 00:04:45,800 --> 00:04:48,159 Speaker 1: first time in a quarter century. I think that's a 86 00:04:48,240 --> 00:04:51,120 Speaker 1: real possibility as we move forward, that we could see 87 00:04:51,120 --> 00:04:54,479 Speaker 1: that unanchoring of inflation. So we're seeing tenure yields today 88 00:04:54,520 --> 00:04:58,880 Speaker 1: go down there, well down their recent highs, which raises 89 00:04:58,920 --> 00:05:01,960 Speaker 1: a question a whether they are under pricing this reality 90 00:05:02,000 --> 00:05:04,799 Speaker 1: that you're talking about. Where could tend your treasury yields 91 00:05:04,800 --> 00:05:08,520 Speaker 1: conceivably go if you see those inflationary pressures that you're 92 00:05:08,520 --> 00:05:11,760 Speaker 1: talking about, Well, I think they could go higher now. 93 00:05:11,839 --> 00:05:14,560 Speaker 1: I'm not surprised that they're falling right now because they've 94 00:05:14,560 --> 00:05:16,640 Speaker 1: had a relentless rise for the last several months and 95 00:05:16,640 --> 00:05:19,680 Speaker 1: have been you know, over sold in terms of prices, 96 00:05:19,680 --> 00:05:22,480 Speaker 1: and that we're seeing a correction in there. But I 97 00:05:22,520 --> 00:05:26,120 Speaker 1: also would argue that when interest rates go up, it's 98 00:05:26,120 --> 00:05:28,840 Speaker 1: neither bullish or bearsh for the stock market. It depends 99 00:05:28,839 --> 00:05:32,479 Speaker 1: on why if they're going up, because the nartive right 100 00:05:32,480 --> 00:05:36,200 Speaker 1: now is we're reopening, We're gonna have massive real growth, 101 00:05:36,240 --> 00:05:39,039 Speaker 1: We're gonna have more earnings. That's fine. Interest rates could 102 00:05:39,040 --> 00:05:41,279 Speaker 1: go up and it won't bother the economy or the 103 00:05:41,279 --> 00:05:43,680 Speaker 1: financial or the stock market, if you will. But if 104 00:05:43,720 --> 00:05:46,840 Speaker 1: interest rates are going up because of inflation, and that's 105 00:05:46,880 --> 00:05:49,480 Speaker 1: a loss of purchasing power, your dollar buys less than 106 00:05:49,520 --> 00:05:52,560 Speaker 1: a year than it buys, now, that's a problem for 107 00:05:52,600 --> 00:05:55,080 Speaker 1: the economy and for the stock market. And we're going 108 00:05:55,120 --> 00:05:57,520 Speaker 1: to continue to have that debate. The meantime, I think 109 00:05:57,640 --> 00:06:00,920 Speaker 1: rates are gonna go higher like they have over the 110 00:06:00,960 --> 00:06:03,440 Speaker 1: next several months, like they like they have over the 111 00:06:03,480 --> 00:06:05,520 Speaker 1: previous several months, and we're going to continue have this 112 00:06:05,600 --> 00:06:08,520 Speaker 1: debate whether it's reflation or real growth or inflation. I mean, 113 00:06:08,560 --> 00:06:11,160 Speaker 1: I hate to say it to James Diamond, Jim Bianco, 114 00:06:11,279 --> 00:06:13,960 Speaker 1: but the read of the morning is Brian Schapatta Bloomberg, 115 00:06:14,000 --> 00:06:17,400 Speaker 1: not Jamie Diamond and JP Morgan. Where Chapatta tears apart 116 00:06:17,480 --> 00:06:20,120 Speaker 1: the idea of wages aren't going up? Are you seeing 117 00:06:20,120 --> 00:06:23,880 Speaker 1: wage inflation in Chicago? And to the point, is that 118 00:06:23,960 --> 00:06:26,720 Speaker 1: really what's gonna happen here? A surprise into the end 119 00:06:26,720 --> 00:06:29,960 Speaker 1: of the year, finally wage inflation gets back to three 120 00:06:30,040 --> 00:06:34,120 Speaker 1: is percent. Yeah, you know, it's hard to say whether 121 00:06:34,200 --> 00:06:36,359 Speaker 1: or not you're seeing it right now, but that's gonna be. 122 00:06:36,400 --> 00:06:38,880 Speaker 1: The question is whether or not you do see wage 123 00:06:38,880 --> 00:06:41,920 Speaker 1: inflation as we move forward. If you do, then you 124 00:06:42,040 --> 00:06:45,280 Speaker 1: might see a bigger robust job market because a lot 125 00:06:45,320 --> 00:06:47,800 Speaker 1: of people are sitting on the sidelines. They don't need 126 00:06:47,839 --> 00:06:50,080 Speaker 1: to go back to work. They are being they've been 127 00:06:50,400 --> 00:06:53,480 Speaker 1: given stimulus checks, they've been given an extra kicker in 128 00:06:53,600 --> 00:06:57,680 Speaker 1: unemployment insurance, so they're sitting around waiting until all of 129 00:06:57,720 --> 00:07:01,720 Speaker 1: that runs out. If we do see wage inflation, I 130 00:07:01,760 --> 00:07:04,320 Speaker 1: think then, like I said, it would would fast forward 131 00:07:04,360 --> 00:07:07,000 Speaker 1: everything like the FED and the thinking in the market. 132 00:07:07,560 --> 00:07:09,360 Speaker 1: But right now it's too early to say that we've 133 00:07:09,400 --> 00:07:11,480 Speaker 1: seen it. But I think that's gonna be the second 134 00:07:11,520 --> 00:07:14,400 Speaker 1: half of the year question. Jim Biako, thanks so much. 135 00:07:14,440 --> 00:07:22,600 Speaker 1: Go cubs Bianco Research in Chicago. We planned on doing 136 00:07:22,640 --> 00:07:24,640 Speaker 1: this and we didn't understand that it would be a 137 00:07:24,640 --> 00:07:27,960 Speaker 1: sixty six page letter by Mr Diamond. Certainly a tour 138 00:07:28,040 --> 00:07:30,280 Speaker 1: de force, but you need the right guest at the 139 00:07:30,400 --> 00:07:33,040 Speaker 1: right time, and that can always be Robert Albertson on 140 00:07:33,160 --> 00:07:37,360 Speaker 1: banking with Piper Sandler his leadership at Goldman Sachs decades ago, 141 00:07:37,560 --> 00:07:40,720 Speaker 1: and Bank Research out of Carnegie Mellon and Harvard. Were 142 00:07:40,800 --> 00:07:44,440 Speaker 1: honored that Robert Albertson could join us this morning. Robert Albertson, 143 00:07:44,800 --> 00:07:46,720 Speaker 1: you and I used to look at M D n 144 00:07:46,800 --> 00:07:48,840 Speaker 1: A and it was a good way to fall asleep. 145 00:07:49,320 --> 00:07:52,000 Speaker 1: Where did we go from Robert Williams of M and 146 00:07:52,000 --> 00:07:56,240 Speaker 1: T Bank to a sixty six page missive from James Diamond? 147 00:07:56,440 --> 00:08:00,680 Speaker 1: How did we get to these long letters? I think it, Uh, 148 00:08:00,760 --> 00:08:04,520 Speaker 1: it's a personality. Partly. He is a very analytical person, 149 00:08:05,040 --> 00:08:07,320 Speaker 1: and yet he has a way with words, and he 150 00:08:07,440 --> 00:08:12,960 Speaker 1: recognizes analysis towards limits and the possibility of analysis paralysis 151 00:08:13,160 --> 00:08:15,520 Speaker 1: if I would suggest it. But he is a tune 152 00:08:15,560 --> 00:08:19,440 Speaker 1: to so many different things and has pretty reasonable comments 153 00:08:19,480 --> 00:08:22,280 Speaker 1: about all of them. Within the comments you mentioned to 154 00:08:22,400 --> 00:08:25,440 Speaker 1: us before this conversation, you were zeroing in on his 155 00:08:25,560 --> 00:08:29,080 Speaker 1: view back to the nineties seventies. Why is now for 156 00:08:29,240 --> 00:08:33,600 Speaker 1: James Diamond like the nineteen seventies. Well, he's it's sort 157 00:08:33,600 --> 00:08:36,360 Speaker 1: of unlike the nineteen seventies. He's basically saying we had 158 00:08:36,400 --> 00:08:41,439 Speaker 1: a recovery out of the seventies recessions. Without quantitative easy 159 00:08:42,160 --> 00:08:45,320 Speaker 1: and uh, we've had quantitative easying this time around her 160 00:08:45,360 --> 00:08:47,880 Speaker 1: and hasn't done much. So I think he's pointed to 161 00:08:48,080 --> 00:08:52,240 Speaker 1: the wash with liquidity mistake in terms of monetary policy. 162 00:08:52,760 --> 00:08:55,560 Speaker 1: There also is a question here of what his political 163 00:08:55,559 --> 00:08:58,480 Speaker 1: ambitions are given the tone of this letter. He is 164 00:08:58,520 --> 00:09:01,440 Speaker 1: talking about dysfunction. He said, Americans know that something has 165 00:09:01,440 --> 00:09:04,640 Speaker 1: gone terribly wrong, and they blame this country's leadership, the elite, 166 00:09:04,679 --> 00:09:08,200 Speaker 1: the powerful, the decision makers. This is completely appropriate for 167 00:09:08,200 --> 00:09:09,840 Speaker 1: who else to blame? A lot of people have looked 168 00:09:09,880 --> 00:09:12,640 Speaker 1: to the financial sector. Is this just a defense of 169 00:09:12,720 --> 00:09:16,119 Speaker 1: the banking industry or is this something more an engagement 170 00:09:16,160 --> 00:09:19,440 Speaker 1: that goes beyond just from the c suite into government. 171 00:09:20,960 --> 00:09:22,720 Speaker 1: I think you have two ways to look at it. 172 00:09:22,800 --> 00:09:25,480 Speaker 1: First of all, I would not be surprised to see 173 00:09:25,559 --> 00:09:28,600 Speaker 1: him turn up somewhere in government in a high roll, 174 00:09:28,679 --> 00:09:30,880 Speaker 1: and I think he would be excellent at it. The 175 00:09:30,960 --> 00:09:33,120 Speaker 1: second point is he is from banking, which has been 176 00:09:33,160 --> 00:09:36,160 Speaker 1: the most criticized sector I can think of, and and 177 00:09:36,200 --> 00:09:39,720 Speaker 1: we have just gone through the most shocking recession in memory, 178 00:09:40,120 --> 00:09:44,200 Speaker 1: and the banking industry has shown no credit problems. Uh. 179 00:09:44,200 --> 00:09:46,840 Speaker 1: It is it is remarkable. Uh, that the underwriting of 180 00:09:46,840 --> 00:09:48,400 Speaker 1: this business has gotten to where it is and the 181 00:09:48,480 --> 00:09:51,800 Speaker 1: risk control. So he's proven something in a very tough area. 182 00:09:51,880 --> 00:09:53,240 Speaker 1: I think he'd like to prove it in a more 183 00:09:53,240 --> 00:09:56,360 Speaker 1: public policy way. He also talked about his Fortress balance 184 00:09:56,400 --> 00:09:58,840 Speaker 1: sheet to your point about how it emerged very much 185 00:09:58,880 --> 00:10:01,960 Speaker 1: as a stalwart during this pandemic. There's a question also 186 00:10:02,040 --> 00:10:04,320 Speaker 1: of what's next. And he made a big point about fintech. 187 00:10:04,400 --> 00:10:06,960 Speaker 1: How about is the big competitor going forward? And he 188 00:10:07,000 --> 00:10:10,800 Speaker 1: actually talked about potential acquisitions in that space. What kind 189 00:10:10,840 --> 00:10:12,920 Speaker 1: of tie up could you see with JP Morgan? What 190 00:10:13,040 --> 00:10:16,320 Speaker 1: kind of fintech company? Well, frankly, it's a little hard 191 00:10:16,360 --> 00:10:18,040 Speaker 1: to come up with that because they have their own 192 00:10:18,040 --> 00:10:23,960 Speaker 1: budget on their own syntech operation, which which is pretty powerful. Um, 193 00:10:24,200 --> 00:10:26,720 Speaker 1: they're also a complex organization and a lot of what 194 00:10:27,120 --> 00:10:30,839 Speaker 1: without eric fintech isn't really appropriate for JP Morgan. Having 195 00:10:30,880 --> 00:10:34,160 Speaker 1: said that, uh, I think he's very focused on what 196 00:10:34,200 --> 00:10:37,440 Speaker 1: it can do in retail banking number one, UH, and 197 00:10:37,480 --> 00:10:39,160 Speaker 1: I think that's kind of obvious to all of us, 198 00:10:39,400 --> 00:10:41,440 Speaker 1: but also number two in terms of what what what 199 00:10:41,520 --> 00:10:45,040 Speaker 1: can be done with artificial intelligence. Mr Diamond making clear 200 00:10:45,080 --> 00:10:47,600 Speaker 1: he's not a fan of Zoom meetings is Robert Albertson 201 00:10:47,720 --> 00:10:51,000 Speaker 1: is not a fan of zoom meetings. Robert Albertson, let's 202 00:10:51,000 --> 00:10:54,280 Speaker 1: go there right now. As Mr Diamond talks about fortitude. 203 00:10:54,640 --> 00:10:58,200 Speaker 1: This is a scathing statement, folks. On leadership. It goes 204 00:10:58,240 --> 00:11:01,560 Speaker 1: on for two pages. For order to this attribute often 205 00:11:01,679 --> 00:11:04,040 Speaker 1: is missing in leaders. They need to have a fierce 206 00:11:04,080 --> 00:11:08,319 Speaker 1: resolve to act. It means driving change, fighting bureaucracy and politics, 207 00:11:08,600 --> 00:11:11,960 Speaker 1: and taking ownership and responsibility. Mr Diamond goes on to 208 00:11:12,040 --> 00:11:16,040 Speaker 1: say ability to face facts in a cold blooded, honest way. 209 00:11:16,120 --> 00:11:20,240 Speaker 1: Leaders emphasize and negatives at management meetings and focus on 210 00:11:20,240 --> 00:11:24,360 Speaker 1: what can be approved. That Robert Albertson sounds like best 211 00:11:24,400 --> 00:11:28,440 Speaker 1: practices for every leadership out there right now. How do 212 00:11:28,480 --> 00:11:31,200 Speaker 1: you move forward with that negative statement? How do you 213 00:11:31,240 --> 00:11:36,280 Speaker 1: go into a bank management meeting with negative analysis to 214 00:11:36,400 --> 00:11:41,199 Speaker 1: come to a positive outcome? That's a good question. Um, 215 00:11:41,240 --> 00:11:43,680 Speaker 1: I think, uh, I think the real answer is embedded 216 00:11:43,720 --> 00:11:46,440 Speaker 1: in what he's done and what he's achieved and why 217 00:11:46,520 --> 00:11:49,720 Speaker 1: he's achieved it. And uh, if you look at the 218 00:11:49,760 --> 00:11:54,360 Speaker 1: importance of analysis and facts in almost any industry, they 219 00:11:54,360 --> 00:11:57,240 Speaker 1: are critically important. We all know that they seem to 220 00:11:57,240 --> 00:12:04,240 Speaker 1: be absolutely uh devoid in the political sector. Uh, taking positions, 221 00:12:04,679 --> 00:12:09,360 Speaker 1: making arguments that are financially wrong. Uh. You almost need 222 00:12:09,360 --> 00:12:12,840 Speaker 1: a pop out there to control what the politicians are 223 00:12:12,840 --> 00:12:16,000 Speaker 1: allowed to say. Robert elbertson a two part question, how 224 00:12:16,040 --> 00:12:19,959 Speaker 1: does banking respond to James Diamond? How does American banking 225 00:12:20,040 --> 00:12:24,960 Speaker 1: respond to this juggernaut, and very importantly, how does European 226 00:12:25,080 --> 00:12:29,880 Speaker 1: banking respond to James Diamond. I'm not sure the European 227 00:12:29,920 --> 00:12:34,080 Speaker 1: banking system will ever respond to the American banking system successes. 228 00:12:34,480 --> 00:12:36,480 Speaker 1: They seem to be mired in their own history and 229 00:12:36,559 --> 00:12:38,120 Speaker 1: legacy and they don't seem to be able to get 230 00:12:38,120 --> 00:12:40,560 Speaker 1: out of it. But having said that, in terms of 231 00:12:40,600 --> 00:12:42,719 Speaker 1: the U. S. Banking system, I think most people look 232 00:12:42,800 --> 00:12:45,200 Speaker 1: up to him. Uh. They know they're not him in 233 00:12:45,280 --> 00:12:48,520 Speaker 1: terms of their vehicle, but they recognize what he says 234 00:12:48,679 --> 00:12:50,880 Speaker 1: is critical. And if you if you want to talk 235 00:12:50,880 --> 00:12:53,440 Speaker 1: about being a good corporate citizen, all you have to 236 00:12:53,480 --> 00:12:55,720 Speaker 1: do is go into some small community bank and see 237 00:12:55,720 --> 00:12:58,560 Speaker 1: what they're really doing in that market that is community 238 00:12:58,559 --> 00:13:01,520 Speaker 1: oriented to recognize their they're pretty much singing the same 239 00:13:01,559 --> 00:13:04,800 Speaker 1: songs he is. In terms of giving back, there's a 240 00:13:04,880 --> 00:13:07,680 Speaker 1: question of whether banks are going to take more risk 241 00:13:07,840 --> 00:13:10,240 Speaker 1: right now given their fortress balance sheets and given the 242 00:13:10,360 --> 00:13:13,360 Speaker 1: robust economic outlook, or whether they'll pare it back to 243 00:13:13,440 --> 00:13:16,720 Speaker 1: avoid getting ahead of the economic cycle. And this really 244 00:13:16,800 --> 00:13:19,240 Speaker 1: seems to be attention beneath Jamie Diamond's letter as well, 245 00:13:19,280 --> 00:13:22,080 Speaker 1: because he talks about the dynamism of the economy, the 246 00:13:22,120 --> 00:13:25,360 Speaker 1: economic boom pop possibly lasting till the end of three 247 00:13:25,400 --> 00:13:28,600 Speaker 1: with all the spending and q E, but also talking 248 00:13:28,640 --> 00:13:31,680 Speaker 1: about pockets of froth that he didn't specify. Can you 249 00:13:31,720 --> 00:13:34,360 Speaker 1: talk about how banks are handling this, How high is 250 00:13:34,400 --> 00:13:37,360 Speaker 1: the pressure to push further into risk to get returns 251 00:13:37,400 --> 00:13:40,520 Speaker 1: at a time of economic dynamism a norm as high 252 00:13:40,520 --> 00:13:42,800 Speaker 1: as you would think. They are very proud of coming 253 00:13:42,800 --> 00:13:45,640 Speaker 1: out of what we went through in one piece, and 254 00:13:45,720 --> 00:13:47,560 Speaker 1: I don't think they wanted to spoil that. I don't 255 00:13:47,559 --> 00:13:50,640 Speaker 1: think underwriting standards are going to change. They are starved 256 00:13:50,640 --> 00:13:53,520 Speaker 1: for long growth. The key here is if we have 257 00:13:53,559 --> 00:13:57,079 Speaker 1: an infrastructure package that plus the last bill we have, 258 00:13:57,520 --> 00:14:00,080 Speaker 1: we have enough trillions in the economy to dry have 259 00:14:00,160 --> 00:14:04,800 Speaker 1: a huge capital expenditure cycle, investment cycle. Everything so far 260 00:14:04,840 --> 00:14:07,719 Speaker 1: has been on the consumer side, UH, and the stimulus 261 00:14:07,720 --> 00:14:10,080 Speaker 1: has been aimed at that. Now we're shifting it to 262 00:14:10,200 --> 00:14:13,800 Speaker 1: the commercial side that has great power that could really 263 00:14:13,840 --> 00:14:19,320 Speaker 1: make even better year than most people. Don't look look 264 00:14:19,360 --> 00:14:21,680 Speaker 1: that far and see that yet. But if we get 265 00:14:21,680 --> 00:14:24,760 Speaker 1: this infrastructure package, Uh, it's it's right, It's right up 266 00:14:24,880 --> 00:14:28,160 Speaker 1: Jamie's alley of fiscal spending. It could really, it could 267 00:14:28,200 --> 00:14:30,160 Speaker 1: really knock the cover off the ball. Could drive our 268 00:14:30,160 --> 00:14:32,800 Speaker 1: economy into the eight or nine percent range. It could 269 00:14:32,880 --> 00:14:37,360 Speaker 1: drive rates up for sure, and inflation all understood and accepted. 270 00:14:37,880 --> 00:14:39,680 Speaker 1: Can you talk about where rates would have to go 271 00:14:39,720 --> 00:14:41,920 Speaker 1: to make this as lucrative as you expect for banks? 272 00:14:41,960 --> 00:14:44,200 Speaker 1: Because this is something Jamie Diamond has been very clear about. 273 00:14:44,440 --> 00:14:47,480 Speaker 1: He sees benchmark ten year treasury yields going a lot higher. 274 00:14:47,600 --> 00:14:50,480 Speaker 1: He's been wrong year after year. What's your view in 275 00:14:50,560 --> 00:14:52,800 Speaker 1: terms of how high they have to go to make 276 00:14:52,800 --> 00:14:56,760 Speaker 1: this equation makes sense? Well, I'm wrong with him and 277 00:14:56,800 --> 00:14:59,720 Speaker 1: have been wrong for years. Uh. The history of the 278 00:15:00,080 --> 00:15:02,760 Speaker 1: long term interest rate cycle is that it averages about 279 00:15:02,800 --> 00:15:06,240 Speaker 1: what nominal GDP growth is. And if we got six 280 00:15:06,320 --> 00:15:10,640 Speaker 1: or seven percent GDP growth and two or three percent inflation, Uh, 281 00:15:10,840 --> 00:15:12,840 Speaker 1: you come up with a crazy number for the tenure. 282 00:15:13,320 --> 00:15:15,240 Speaker 1: I would argue that it's going to get to at 283 00:15:15,320 --> 00:15:18,080 Speaker 1: least a three percent level UH in fairly short order. 284 00:15:18,480 --> 00:15:21,120 Speaker 1: The banks really care more about what happens to the 285 00:15:21,160 --> 00:15:23,560 Speaker 1: short end of the spectrum. They need the FED funds 286 00:15:23,640 --> 00:15:28,240 Speaker 1: rate to get moving UH and and not stay at zero. 287 00:15:28,800 --> 00:15:31,200 Speaker 1: And I think that's actually going to occur this year, 288 00:15:31,280 --> 00:15:33,160 Speaker 1: not next year. A lot of people think it won't happen. 289 00:15:33,880 --> 00:15:35,920 Speaker 1: And I don't blame him, because that's what the sharing 290 00:15:36,440 --> 00:15:39,680 Speaker 1: that keeps saying. Robert Albertson, thank you so much, Good 291 00:15:39,720 --> 00:15:41,960 Speaker 1: health to you. With Piper Sandler, of course on this 292 00:15:42,080 --> 00:15:44,560 Speaker 1: day of Mr Diamond's letter, wonderful to get decades of 293 00:15:44,640 --> 00:15:54,120 Speaker 1: perspective from uh. Mr Albertson, Right now we reset and 294 00:15:54,200 --> 00:15:56,680 Speaker 1: we can do that with Christen Bitterly of City Group 295 00:15:56,680 --> 00:16:00,240 Speaker 1: Private Bank, someone who has to explain to people to 296 00:16:00,360 --> 00:16:03,440 Speaker 1: find the courage. Kristin, thank you so much for joining. 297 00:16:03,520 --> 00:16:06,000 Speaker 1: I really want to go right away to a wonderful 298 00:16:06,080 --> 00:16:10,160 Speaker 1: phrase you have, which is the du that cash is punitive, 299 00:16:10,880 --> 00:16:14,320 Speaker 1: and yet I know cash is punitive. I don't want 300 00:16:14,360 --> 00:16:17,640 Speaker 1: to be in it, but I'm afraid to go. How 301 00:16:17,680 --> 00:16:20,440 Speaker 1: do you move from this wall of cash and the 302 00:16:20,480 --> 00:16:23,000 Speaker 1: fear of missing out to get into the market. What's 303 00:16:23,040 --> 00:16:25,760 Speaker 1: the first step. It's so hard. So I think the 304 00:16:25,800 --> 00:16:28,200 Speaker 1: first step is actually looking at the data. The reason 305 00:16:28,280 --> 00:16:31,760 Speaker 1: that we have this association that cash is safe and 306 00:16:31,760 --> 00:16:33,440 Speaker 1: and cash is where I go when I don't know 307 00:16:33,440 --> 00:16:36,480 Speaker 1: what to do, kind of predates the global financial crisis, right, 308 00:16:36,520 --> 00:16:39,160 Speaker 1: So if you look at pre global financial crisis, if 309 00:16:39,160 --> 00:16:42,120 Speaker 1: you were sitting in cash on a post inflationary basis, 310 00:16:42,120 --> 00:16:45,000 Speaker 1: you were earning about three percent per anum, not knocking 311 00:16:45,000 --> 00:16:47,200 Speaker 1: it out of the park, but that's all right. Post 312 00:16:47,200 --> 00:16:52,240 Speaker 1: global financial crisis, you're basically losing one per annum. And 313 00:16:52,280 --> 00:16:55,400 Speaker 1: that's where we're at right now. So holding onto cash 314 00:16:55,600 --> 00:17:00,000 Speaker 1: is basically guaranteed to lose value over the next twelve months. 315 00:17:00,280 --> 00:17:02,200 Speaker 1: So do you assume do you assume on a real 316 00:17:02,320 --> 00:17:06,440 Speaker 1: yield analysis that other asset classes are inflated? I mean, 317 00:17:06,480 --> 00:17:09,080 Speaker 1: do you carry it right over to say not so 318 00:17:09,160 --> 00:17:11,000 Speaker 1: much that you know, I don't want to be inflammatory. 319 00:17:11,000 --> 00:17:14,520 Speaker 1: There's an equity bubble, but elements of the equity market 320 00:17:14,520 --> 00:17:18,080 Speaker 1: are bubblelicious because I can't get a real yield in 321 00:17:18,160 --> 00:17:21,320 Speaker 1: punitive cash. I think there's so I think if you 322 00:17:21,359 --> 00:17:24,359 Speaker 1: look at the overall levels of equity markets, it doesn't 323 00:17:24,400 --> 00:17:26,600 Speaker 1: really tell the full story. So when we're talking about 324 00:17:27,040 --> 00:17:29,280 Speaker 1: the level of the SMP five dred being north of 325 00:17:29,480 --> 00:17:32,000 Speaker 1: four thousand, which seems pretty incredible given the year that 326 00:17:32,040 --> 00:17:34,720 Speaker 1: we've had, it doesn't tell you what's going on beneath 327 00:17:34,760 --> 00:17:37,240 Speaker 1: the surface. And this is pretty intuitive, but one of 328 00:17:37,280 --> 00:17:40,000 Speaker 1: the induseries that we track at City is called Pure Value. 329 00:17:40,040 --> 00:17:42,119 Speaker 1: So it's one of our indicaes that what it does, 330 00:17:42,160 --> 00:17:44,520 Speaker 1: in a very simple sense, is it takes the stocks 331 00:17:44,520 --> 00:17:46,760 Speaker 1: that are in the SNP five hundred and it basically 332 00:17:46,840 --> 00:17:50,600 Speaker 1: ranks them according to their exposure to value as a factor. 333 00:17:50,880 --> 00:17:53,359 Speaker 1: It's long the top fifty percent of those stocks, short 334 00:17:53,359 --> 00:17:56,600 Speaker 1: the bottom fifty. So it's a it's a basic outperformance 335 00:17:56,680 --> 00:17:59,320 Speaker 1: in terms of value. And so what we saw in 336 00:17:59,400 --> 00:18:02,520 Speaker 1: March was that was the strongest performance It was north 337 00:18:02,560 --> 00:18:05,439 Speaker 1: of six percent that we've seen since second quarter of 338 00:18:05,480 --> 00:18:08,960 Speaker 1: two thousand nine. So that to me is when you're 339 00:18:09,000 --> 00:18:12,240 Speaker 1: looking at what's going on under the surface, is very 340 00:18:12,280 --> 00:18:15,240 Speaker 1: different in terms of opportunities to put capital to work 341 00:18:15,440 --> 00:18:18,440 Speaker 1: and delineating between those winners and losers in this environment. 342 00:18:18,520 --> 00:18:21,280 Speaker 1: So Christian, you're not just saying that cash is more 343 00:18:21,280 --> 00:18:24,280 Speaker 1: punitive than game stop shares. You're saying that people need 344 00:18:24,359 --> 00:18:27,639 Speaker 1: to be investing in equities on an active level. This 345 00:18:27,720 --> 00:18:29,480 Speaker 1: is everybody coming on and saying this is the year 346 00:18:29,480 --> 00:18:34,119 Speaker 1: of active investment. Okay, great, but when you talk about allocations, 347 00:18:34,240 --> 00:18:37,720 Speaker 1: what are you recommending. So there's a couple of things 348 00:18:37,720 --> 00:18:39,239 Speaker 1: that I think we need to keep in mind this 349 00:18:39,320 --> 00:18:42,240 Speaker 1: battle between as I was just saying value and growth. 350 00:18:42,480 --> 00:18:44,720 Speaker 1: There's two trends that are driving the market right now. 351 00:18:44,840 --> 00:18:47,000 Speaker 1: One is the mean reversion, right, so this is that 352 00:18:47,119 --> 00:18:50,200 Speaker 1: catch up trade, that idea that you had COVID defensives 353 00:18:50,200 --> 00:18:53,760 Speaker 1: COVID cyclicals, and basically the COVID cyclicals are catching up 354 00:18:53,800 --> 00:18:56,800 Speaker 1: because of this reopening of the economy. The question there, 355 00:18:56,800 --> 00:19:00,240 Speaker 1: which is why earnings are super important, is how much 356 00:19:00,280 --> 00:19:02,440 Speaker 1: further can they go? So looking at some of these 357 00:19:02,440 --> 00:19:05,640 Speaker 1: factors in value in these COVID cyclicals that have had 358 00:19:05,720 --> 00:19:08,960 Speaker 1: tremendous performance, how much higher can they go? So an 359 00:19:08,960 --> 00:19:12,359 Speaker 1: area that we like there is actually global healthcare. So 360 00:19:12,440 --> 00:19:15,400 Speaker 1: global healthcare is one of those sectors. And it's ironic, right, 361 00:19:15,440 --> 00:19:19,880 Speaker 1: it's underperformed the past twelve months from a PE standpoint, 362 00:19:20,040 --> 00:19:23,480 Speaker 1: It's basically at its lowest levels on a relative basis 363 00:19:23,520 --> 00:19:26,280 Speaker 1: to global equities and over ten years, it has an 364 00:19:26,280 --> 00:19:30,040 Speaker 1: attractive dividend yield. So that's an area that we like. Um, 365 00:19:30,040 --> 00:19:32,000 Speaker 1: But I think what's going to happen going into earnings 366 00:19:32,000 --> 00:19:34,919 Speaker 1: is people are really going to pay attention to fundamental factors. 367 00:19:34,920 --> 00:19:37,800 Speaker 1: They're going to pay attention to has inflation actually creeped 368 00:19:37,840 --> 00:19:40,320 Speaker 1: into any of these earnings? So I think we could 369 00:19:40,320 --> 00:19:43,720 Speaker 1: get some surprises which would create some buying opportunities. Okay, 370 00:19:43,760 --> 00:19:45,720 Speaker 1: next couple of weeks. So in other words, you're saying, 371 00:19:45,840 --> 00:19:49,080 Speaker 1: wait for the pullbacks and their potentially be some opportunities 372 00:19:49,200 --> 00:19:52,680 Speaker 1: to get some potential returns that are bigger. I'm wondering 373 00:19:52,760 --> 00:19:55,359 Speaker 1: on credit, we're looking right now at credit spreads that 374 00:19:55,400 --> 00:19:57,800 Speaker 1: are the tightest they've been since two thousand and seven, 375 00:19:57,880 --> 00:20:00,640 Speaker 1: certainly in the high yield space. And when you start 376 00:20:00,680 --> 00:20:03,480 Speaker 1: talking talk about petitive cash, do you start to talk 377 00:20:03,520 --> 00:20:06,760 Speaker 1: about people taking perhaps more risk than they're getting banged 378 00:20:06,760 --> 00:20:09,080 Speaker 1: for their buck? Are you recommending that people follow this 379 00:20:09,160 --> 00:20:12,399 Speaker 1: trade or pull back and go perhaps they're into equities 380 00:20:12,520 --> 00:20:16,240 Speaker 1: or into treasuries and nothing in between. And so yeah, 381 00:20:16,320 --> 00:20:19,360 Speaker 1: so that that three hundred basis points spread right kind 382 00:20:19,359 --> 00:20:22,200 Speaker 1: of going through that was something that that is is 383 00:20:22,240 --> 00:20:25,160 Speaker 1: pretty symbolic and significant. I think a lot of people 384 00:20:25,160 --> 00:20:27,880 Speaker 1: are looking at this in terms of comparing it overall 385 00:20:27,960 --> 00:20:30,760 Speaker 1: high yield to equities and saying, well, if we're looking 386 00:20:30,760 --> 00:20:33,360 Speaker 1: at on a relative basis, there could be an additional 387 00:20:33,440 --> 00:20:36,280 Speaker 1: fifty basis points, are a hundred basis points. We're not 388 00:20:36,400 --> 00:20:39,200 Speaker 1: quite there yet. We're definitely delineating in terms of the 389 00:20:39,520 --> 00:20:43,800 Speaker 1: sector analysis within high yield. But another area, just talking 390 00:20:43,840 --> 00:20:47,880 Speaker 1: about equities again, so UK equities is another area that's 391 00:20:47,880 --> 00:20:51,080 Speaker 1: been largely ignored. We're looking outside the US in terms 392 00:20:51,119 --> 00:20:53,440 Speaker 1: of trying to create some of this yield where you 393 00:20:53,480 --> 00:20:55,920 Speaker 1: can get three and a half percent there. And again, 394 00:20:56,000 --> 00:20:59,320 Speaker 1: valuations look very attractive, Christen, enough that you and Lisa 395 00:20:59,359 --> 00:21:01,679 Speaker 1: would know this. But the longer you're going far away. 396 00:21:01,720 --> 00:21:04,359 Speaker 1: You bought Dominion of Richmond, Virginia. You bought it, you 397 00:21:04,520 --> 00:21:06,560 Speaker 1: held it, you never sold it, and it's been a 398 00:21:06,600 --> 00:21:10,679 Speaker 1: solid thirty ten year high single digit return. I just 399 00:21:10,800 --> 00:21:16,160 Speaker 1: request Dominion Energy of Richmond, seventeen thousand employees, big three 400 00:21:16,160 --> 00:21:19,920 Speaker 1: percent dividend yield, not with much dividend growth, and it's 401 00:21:20,000 --> 00:21:23,399 Speaker 1: below the thirty year regression trend line. Our utilities of 402 00:21:23,520 --> 00:21:29,240 Speaker 1: vailue here for those scared stiff. I think there's a 403 00:21:29,320 --> 00:21:32,440 Speaker 1: place for it, but I honestly think within dividends and 404 00:21:32,760 --> 00:21:36,160 Speaker 1: looking at dividends, this is not about just searching out 405 00:21:36,200 --> 00:21:39,240 Speaker 1: for high dividend paying companies, because what you want to 406 00:21:39,280 --> 00:21:41,719 Speaker 1: do is look through to the underlying balance sheet and 407 00:21:41,760 --> 00:21:43,919 Speaker 1: make sure that they have a strong balance sheet. So 408 00:21:44,160 --> 00:21:46,840 Speaker 1: when we build global dividend portfolio is what we're looking 409 00:21:46,840 --> 00:21:49,680 Speaker 1: at is not just historical dividends, but also the ability 410 00:21:49,680 --> 00:21:53,160 Speaker 1: to continue paying those dividends and grow those dividends going forward, 411 00:21:53,359 --> 00:21:55,520 Speaker 1: which really gets into more of a credit and free 412 00:21:55,520 --> 00:21:58,280 Speaker 1: cash flow analysis than anything else. And you get some 413 00:21:58,359 --> 00:22:02,000 Speaker 1: pretty broad diversification part of this energy and utilities, but 414 00:22:02,040 --> 00:22:06,480 Speaker 1: you actually get financials, healthcare, even technology. I feel so anciently. 415 00:22:06,600 --> 00:22:08,879 Speaker 1: So I was trying to go Graham, Dot and Coddle, 416 00:22:08,920 --> 00:22:12,159 Speaker 1: and Kristen just crushed me with the modern free cash 417 00:22:12,160 --> 00:22:15,600 Speaker 1: flow analysis. I was just totally crushed their. Lisa, Well, 418 00:22:15,640 --> 00:22:18,399 Speaker 1: hopefully you can recover in the next few minutes and 419 00:22:18,440 --> 00:22:19,960 Speaker 1: hopefully we can drag you out of the whole. I 420 00:22:20,000 --> 00:22:22,679 Speaker 1: will say, Kristen, we got to end the conversation, perhaps 421 00:22:22,760 --> 00:22:25,919 Speaker 1: crushing Tom even more in talking about taxes. Uh, you 422 00:22:25,920 --> 00:22:27,879 Speaker 1: know that you deal with a lot of wealthy individuals 423 00:22:27,880 --> 00:22:30,159 Speaker 1: and right now are looking at potential policy changes in 424 00:22:30,200 --> 00:22:34,040 Speaker 1: the US, the increased taxes on the wealthiest, particularly in 425 00:22:34,080 --> 00:22:36,960 Speaker 1: New York State, but beyond on a federal level. How 426 00:22:37,080 --> 00:22:40,320 Speaker 1: is this affecting the investment strategies of the people who 427 00:22:40,359 --> 00:22:43,760 Speaker 1: you work with. You know what's interesting, it's not priced 428 00:22:43,760 --> 00:22:45,920 Speaker 1: into the market at all. So another thing, and this 429 00:22:46,040 --> 00:22:48,440 Speaker 1: goes back several years ago, when we have the tax reform. 430 00:22:48,800 --> 00:22:51,560 Speaker 1: We started monitoring basically kind of the tax winners and 431 00:22:51,600 --> 00:22:54,760 Speaker 1: tax losers in terms of the tax reform, and so 432 00:22:55,160 --> 00:22:57,560 Speaker 1: looking at the reversion of that trade in terms of 433 00:22:57,600 --> 00:23:01,120 Speaker 1: increasing the corporate tax rate. Basically you haven't seen anything 434 00:23:01,240 --> 00:23:03,760 Speaker 1: play out within the market. So for people who are 435 00:23:03,840 --> 00:23:07,280 Speaker 1: interested as these talks progress in terms of expressing a 436 00:23:07,359 --> 00:23:10,840 Speaker 1: view from an entry point standpoint, that's actually pretty attractive 437 00:23:11,119 --> 00:23:13,760 Speaker 1: in terms of what it could mean from a personal 438 00:23:13,800 --> 00:23:17,600 Speaker 1: standpoint and how you invest. I think putting it into context, 439 00:23:17,680 --> 00:23:20,640 Speaker 1: when we did have those tax hikes, and I think 440 00:23:20,640 --> 00:23:24,040 Speaker 1: we have to go back to nineteen seven and the 441 00:23:24,160 --> 00:23:27,000 Speaker 1: impact of that on the overall market, and it looked 442 00:23:27,000 --> 00:23:30,240 Speaker 1: like on average it was about five percentage points. So 443 00:23:30,560 --> 00:23:32,919 Speaker 1: in that sense, kind of putting it into perspective as 444 00:23:32,960 --> 00:23:35,520 Speaker 1: to what that impact could be. I think is helpful. 445 00:23:35,760 --> 00:23:38,560 Speaker 1: And then in the larger rates environment, we don't see 446 00:23:38,600 --> 00:23:41,119 Speaker 1: a lot of either trading around that or investing around 447 00:23:41,119 --> 00:23:43,400 Speaker 1: that at this point in time. Kristin, thank you so much. 448 00:23:43,440 --> 00:23:50,640 Speaker 1: Christin Biddley, they're sharp from City Group Private. Thanks right now. 449 00:23:51,000 --> 00:23:53,399 Speaker 1: And I guess this is an important discussion. This is 450 00:23:53,440 --> 00:23:55,399 Speaker 1: something that Lisa and I are in our pre show 451 00:23:55,480 --> 00:23:58,280 Speaker 1: meeting said is really top of pile. Forget about the 452 00:23:58,320 --> 00:24:01,199 Speaker 1: I m F. Forget about James Diamond. How do you 453 00:24:01,280 --> 00:24:05,119 Speaker 1: travel with the young Hellian's Mercedes Carna Phone is in 454 00:24:05,280 --> 00:24:08,720 Speaker 1: charge of family psychiatry for the Brando, Wits and Keene 455 00:24:08,720 --> 00:24:14,120 Speaker 1: households and joins us this morning from Chicago. You know, Mercedes, 456 00:24:14,200 --> 00:24:16,440 Speaker 1: let's cut to the chase here, and this is important. 457 00:24:16,440 --> 00:24:19,320 Speaker 1: We make a joke about it, uh, ill mannered brats 458 00:24:19,400 --> 00:24:23,520 Speaker 1: that they are. But you say traveling with children is risky. 459 00:24:23,560 --> 00:24:27,240 Speaker 1: I don't understand that. Why is that risky in this pandemic? 460 00:24:28,200 --> 00:24:30,560 Speaker 1: You know, it's really tough. I think we're all eager 461 00:24:30,600 --> 00:24:32,640 Speaker 1: to get out. I mean, I've been home with these 462 00:24:32,720 --> 00:24:35,880 Speaker 1: children now for you know, fourteen or fifteen months. I'd 463 00:24:35,920 --> 00:24:38,760 Speaker 1: like to go um and you know where is. My 464 00:24:38,840 --> 00:24:42,000 Speaker 1: husband and I are vaccinated, and our older adult family 465 00:24:42,040 --> 00:24:46,320 Speaker 1: members are now vaccinated. My children aren't. So if I 466 00:24:46,480 --> 00:24:49,960 Speaker 1: take them with us, then I'm exposing them to risk 467 00:24:50,080 --> 00:24:53,440 Speaker 1: of these new variants which seem to really infect children. 468 00:24:55,119 --> 00:24:57,479 Speaker 1: Then what do we do on that? I mean everything 469 00:24:57,480 --> 00:25:00,760 Speaker 1: we've talked about today and frankly this week on the show, Mercedes, 470 00:25:01,240 --> 00:25:05,480 Speaker 1: that is the single boldest statement I've heard. Are you 471 00:25:05,600 --> 00:25:09,280 Speaker 1: saying we cannot open up this nation because of true 472 00:25:09,480 --> 00:25:14,840 Speaker 1: medical risk to our children? Well, you know, I think 473 00:25:14,840 --> 00:25:18,760 Speaker 1: an estimate was that of our population is children. We're 474 00:25:18,800 --> 00:25:23,040 Speaker 1: all racing towards this heard immunity, and we're estimating that 475 00:25:23,080 --> 00:25:26,639 Speaker 1: we need to get sent of our population vaccinated. We 476 00:25:27,880 --> 00:25:32,679 Speaker 1: are not currently eligible for vaccination. And children do contract COVID, 477 00:25:32,760 --> 00:25:36,200 Speaker 1: and children do spread COVID. You know, while they don't 478 00:25:36,560 --> 00:25:40,520 Speaker 1: have as severe of outcomes as adults, they do get it, 479 00:25:40,560 --> 00:25:42,960 Speaker 1: and so we're going to continue to see it circulate. 480 00:25:43,240 --> 00:25:45,840 Speaker 1: I want the nation to open up. I want out 481 00:25:45,880 --> 00:25:48,760 Speaker 1: of my basement. I want out, you know, I want 482 00:25:48,760 --> 00:25:52,040 Speaker 1: to go somewhere warm, But there still remains a risk 483 00:25:52,160 --> 00:25:54,280 Speaker 1: to me taking the children with us. All right, so 484 00:25:54,359 --> 00:25:56,400 Speaker 1: let's talk about what works. I mean, can you stick 485 00:25:56,400 --> 00:25:58,840 Speaker 1: a mask on them, bring them into the plane, and 486 00:25:59,160 --> 00:26:01,920 Speaker 1: basically say, wash your hands a lot and you'll be fine. 487 00:26:01,920 --> 00:26:04,000 Speaker 1: I mean, what do we actually know still at this 488 00:26:04,119 --> 00:26:07,400 Speaker 1: point about how to prevent it in order to live 489 00:26:07,400 --> 00:26:10,080 Speaker 1: your life to some degree as more people get vaccinated. 490 00:26:10,920 --> 00:26:14,240 Speaker 1: You know, absolutely, you know the mitigation measures that have 491 00:26:14,240 --> 00:26:19,320 Speaker 1: have held us up this long masking distancing. Um, you 492 00:26:19,359 --> 00:26:21,760 Speaker 1: know those those measures are still in effect. And so 493 00:26:21,840 --> 00:26:24,440 Speaker 1: it is fine. You know, you can make sure your 494 00:26:24,480 --> 00:26:26,879 Speaker 1: children wear a mask, make sure they know not to 495 00:26:27,000 --> 00:26:30,600 Speaker 1: lick the back of the plane seat in front of them. Um. 496 00:26:30,680 --> 00:26:33,680 Speaker 1: And you can make the trip, yeah, don't do that. Um, 497 00:26:33,720 --> 00:26:35,800 Speaker 1: you can make the trip as safe as possible. But 498 00:26:35,880 --> 00:26:38,560 Speaker 1: you have to be adherent to this and and and 499 00:26:39,119 --> 00:26:42,280 Speaker 1: you know, if your state has travel quarantine rules when 500 00:26:42,280 --> 00:26:46,520 Speaker 1: you go somewhere whereas vaccinated individuals don't have to quarantine, 501 00:26:46,840 --> 00:26:49,280 Speaker 1: you may not send your children back to school or 502 00:26:49,359 --> 00:26:51,600 Speaker 1: on play dates after they come back from a state 503 00:26:51,640 --> 00:26:53,359 Speaker 1: on a quarantine. So let's talk about some of the 504 00:26:53,359 --> 00:26:55,480 Speaker 1: science behind this first. I'd like to get your sense 505 00:26:55,560 --> 00:26:57,880 Speaker 1: on how severe the diseases some of these variants could 506 00:26:57,920 --> 00:27:00,840 Speaker 1: be for children. And also the idea of kids aged 507 00:27:00,880 --> 00:27:04,320 Speaker 1: twelve to fifteen getting vaccinated before the school year starts. Again, 508 00:27:04,600 --> 00:27:12,160 Speaker 1: how likely is that? Given our advisor for the key 509 00:27:12,200 --> 00:27:14,720 Speaker 1: to the Brahm Boys households, there you go, were Sad's 510 00:27:14,880 --> 00:27:18,119 Speaker 1: help us. Yeah, you know, um, I think we do 511 00:27:18,200 --> 00:27:22,040 Speaker 1: have to keep the risks in perspective. Children contract COVID, 512 00:27:22,080 --> 00:27:24,600 Speaker 1: they do become ill from COVID, but by and laws, 513 00:27:24,680 --> 00:27:27,720 Speaker 1: the leading cause of hospitalization and death and children are 514 00:27:27,840 --> 00:27:32,040 Speaker 1: unintentional injuries. So let's think about that. Certainly your child 515 00:27:32,080 --> 00:27:35,719 Speaker 1: can contract COVID, the likelihood that they'll be hospitalized from 516 00:27:35,720 --> 00:27:40,199 Speaker 1: a car accident, a bicycle accident remains higher. So you know, 517 00:27:40,280 --> 00:27:43,080 Speaker 1: it is all in perspective, but you know, you never know. 518 00:27:43,320 --> 00:27:46,359 Speaker 1: You don't want your child to be that child. I 519 00:27:46,400 --> 00:27:48,919 Speaker 1: do look forward to the progress that we're making in 520 00:27:49,400 --> 00:27:53,359 Speaker 1: vaccination of younger children. The twelve to fifteen year olds 521 00:27:53,400 --> 00:27:56,160 Speaker 1: are soon to become eligible. You think about sports leagues 522 00:27:56,320 --> 00:27:59,399 Speaker 1: and performance theater and the things that are really important 523 00:27:59,400 --> 00:28:04,480 Speaker 1: to the mental health of children. Mercedes, I just want 524 00:28:04,520 --> 00:28:06,760 Speaker 1: to know if they can do a day trip to Sephora. 525 00:28:07,000 --> 00:28:11,560 Speaker 1: I mean, that's all aslutely I got. You know, we 526 00:28:11,680 --> 00:28:13,920 Speaker 1: talked to all sorts of muckety MUCKs on this show. 527 00:28:14,040 --> 00:28:18,120 Speaker 1: You get more mail than anyone. This in from Western Indiana, 528 00:28:18,359 --> 00:28:21,640 Speaker 1: Baby Charles, is not a hell you in. We were 529 00:28:21,680 --> 00:28:25,600 Speaker 1: sorry if we insulted anybody in West Indiana. And also 530 00:28:25,640 --> 00:28:28,199 Speaker 1: they go on to say Baby Charles must see Turks 531 00:28:28,200 --> 00:28:32,040 Speaker 1: and Caikos. Mercedes cut to the chase. I need to 532 00:28:32,080 --> 00:28:35,199 Speaker 1: travel this weekend. It's on the Gulf Stream. I'm taking 533 00:28:35,240 --> 00:28:38,240 Speaker 1: Baby Charles to the Turks and Caikos. Is that a 534 00:28:38,280 --> 00:28:42,680 Speaker 1: wise thing to do? Seriously? You know what, Everything was 535 00:28:42,720 --> 00:28:46,400 Speaker 1: a calculated risk, and I would never deign to say 536 00:28:46,600 --> 00:28:49,760 Speaker 1: somebody absolutely shouldn't do something. And it's a terrible idea. 537 00:28:50,040 --> 00:28:53,800 Speaker 1: The likelihood of your child becoming severely ill is low, 538 00:28:54,080 --> 00:28:57,120 Speaker 1: but it does happen, you know if and just be aware, 539 00:28:57,200 --> 00:28:59,360 Speaker 1: you know, you could end up getting quarantined down in 540 00:28:59,400 --> 00:29:01,640 Speaker 1: Turks and Coast and not be able to come back 541 00:29:01,720 --> 00:29:06,720 Speaker 1: if somebody tests positive down there. Well, because then you 542 00:29:06,760 --> 00:29:10,520 Speaker 1: get locked in your room. Oh that's terribly pool. Yeah, 543 00:29:10,920 --> 00:29:14,200 Speaker 1: they'll send an email back, Mercedes, go away, and you're 544 00:29:14,240 --> 00:29:18,320 Speaker 1: giving them away. You're giving them away too many ideas. Oh, 545 00:29:18,440 --> 00:29:22,120 Speaker 1: I'm sorry, Charles, is a headache. I can't come back, 546 00:29:22,360 --> 00:29:25,240 Speaker 1: you know, doing my public health best and I was 547 00:29:25,600 --> 00:29:29,960 Speaker 1: I had to quarantine. In the accounts, I read a 548 00:29:30,080 --> 00:29:35,240 Speaker 1: not fun Mercedes Carnathan go away with Northwestern and seriously 549 00:29:35,280 --> 00:29:40,200 Speaker 1: their university professor of profunitive medicine. She is literally best 550 00:29:40,240 --> 00:29:44,560 Speaker 1: in class. I'm talking about the social aspects, the hardcore 551 00:29:44,680 --> 00:29:53,920 Speaker 1: medical data aspects of what this means for society. David 552 00:29:53,960 --> 00:29:56,840 Speaker 1: Rubenstein joins the Carlisle Group and of course is a 553 00:29:56,920 --> 00:30:00,680 Speaker 1: claim peer to peer conversations. I'm Bloomberg, I believe tonight 554 00:30:00,720 --> 00:30:03,800 Speaker 1: at nine pm and David, thank you, thank you for 555 00:30:03,840 --> 00:30:06,720 Speaker 1: so doing this interview. Because Westmore is one of the 556 00:30:06,760 --> 00:30:09,760 Speaker 1: great screw ups of all time. His father died at 557 00:30:09,800 --> 00:30:13,560 Speaker 1: three years old, He had a really difficult childhood, finally 558 00:30:13,680 --> 00:30:17,400 Speaker 1: ended up in military academy, and a switch went off 559 00:30:17,480 --> 00:30:21,400 Speaker 1: at Johns Hopkins. What did Westmore do in that path? 560 00:30:21,760 --> 00:30:24,640 Speaker 1: And when he finally got to Johns Hopkins, what was 561 00:30:24,680 --> 00:30:28,680 Speaker 1: the switch that got him going? He decided to turn 562 00:30:28,760 --> 00:30:33,200 Speaker 1: his life around and became a Rhodes scholar at Johns Hopkins, 563 00:30:33,200 --> 00:30:35,800 Speaker 1: went to Oxford, got a degree at Oxford, and then 564 00:30:35,880 --> 00:30:39,680 Speaker 1: just started to give his time to the military, and 565 00:30:39,680 --> 00:30:44,080 Speaker 1: he went to Afghanistan as a officer there, served in 566 00:30:44,120 --> 00:30:48,200 Speaker 1: several years in Afghanistan, came back and got involved with 567 00:30:48,240 --> 00:30:50,520 Speaker 1: another other activities. But now for the last four years 568 00:30:50,600 --> 00:30:53,000 Speaker 1: been running robin Hood and he will at the end 569 00:30:53,040 --> 00:30:55,280 Speaker 1: of May. And then he was playing the run for 570 00:30:55,360 --> 00:30:58,680 Speaker 1: governor of Maryland. I mean this is absolutely extraordinary, folks, 571 00:30:58,680 --> 00:31:00,920 Speaker 1: to all of you on radio and television. This is 572 00:31:00,960 --> 00:31:03,800 Speaker 1: the kid that turned it around and made good of it. 573 00:31:04,160 --> 00:31:06,640 Speaker 1: What has he done at robin or the foundation, Let's 574 00:31:06,680 --> 00:31:10,240 Speaker 1: be cleared, David. I believe robin Hood every year gives 575 00:31:10,440 --> 00:31:15,440 Speaker 1: all the money away. It's a true conduit for charity. Yes, 576 00:31:15,560 --> 00:31:18,240 Speaker 1: the financial community basically puts up all the money for 577 00:31:18,280 --> 00:31:22,240 Speaker 1: the administrative costs. All the donations of them are actually 578 00:31:22,280 --> 00:31:24,760 Speaker 1: go are given away every year. It's about four or 579 00:31:24,760 --> 00:31:27,840 Speaker 1: five hundred million dollars a year. And uh, this is 580 00:31:27,880 --> 00:31:31,640 Speaker 1: going to largely uh deal with the poverty problems in 581 00:31:31,680 --> 00:31:35,320 Speaker 1: New York City and the environment and the environment environs 582 00:31:35,400 --> 00:31:38,560 Speaker 1: around New York City. UM, and it has been replicating 583 00:31:38,600 --> 00:31:40,880 Speaker 1: other parts of the country as well. And robin Hood 584 00:31:40,880 --> 00:31:43,760 Speaker 1: has been the the i'd say, the signature type of 585 00:31:44,040 --> 00:31:48,320 Speaker 1: anti poverty action that the financial community can claim a 586 00:31:47,920 --> 00:31:50,440 Speaker 1: good deal of credit for for helping to get started. 587 00:31:50,840 --> 00:31:58,280 Speaker 1: Is Westmore electable? No African American has been elected statewide 588 00:31:58,360 --> 00:32:01,600 Speaker 1: in Maryland, uh um, other than his lieutenant governor on 589 00:32:01,920 --> 00:32:05,080 Speaker 1: a governor's ticket. So you know, Maryland's a democratic state, 590 00:32:05,160 --> 00:32:07,600 Speaker 1: has a large black population. Obviously you would appeal to 591 00:32:07,680 --> 00:32:11,239 Speaker 1: more than than blacks. But he's a Democrat and I 592 00:32:11,320 --> 00:32:13,000 Speaker 1: there are a lot of people seeking the nomination, So 593 00:32:13,040 --> 00:32:15,160 Speaker 1: too early to say. He's never run for office before, 594 00:32:15,400 --> 00:32:18,560 Speaker 1: but he was certainly a strong, articulate candidate, no doubt 595 00:32:18,560 --> 00:32:22,560 Speaker 1: about that. James Diamond today, David Rubinstein kiss six. I'd 596 00:32:22,560 --> 00:32:26,280 Speaker 1: love to see you David Rubinstein sixties six page annual letter. 597 00:32:26,360 --> 00:32:29,160 Speaker 1: That would be great. David. Mr Diamond out with a 598 00:32:29,240 --> 00:32:33,160 Speaker 1: letter and he talks about fortitude is being part of leadership. 599 00:32:33,400 --> 00:32:37,600 Speaker 1: What is the fortitude you've observed from Westmore? Well, he's 600 00:32:37,640 --> 00:32:41,000 Speaker 1: overcome some some real disadvantages of life. He was handed 601 00:32:41,120 --> 00:32:43,920 Speaker 1: hand handcuffed by police when he was eleven or twelve, 602 00:32:44,520 --> 00:32:47,800 Speaker 1: sent to a military academy. Was you know, had some 603 00:32:47,840 --> 00:32:50,000 Speaker 1: real challenges as a youth, but then turned it around 604 00:32:50,000 --> 00:32:53,040 Speaker 1: it at Johns Hopkins and went on to Rhodes Scholarship, 605 00:32:53,080 --> 00:32:55,000 Speaker 1: and now at the age of forty three, I think 606 00:32:55,080 --> 00:32:57,560 Speaker 1: he has a pretty promising political career ahead of him 607 00:32:57,560 --> 00:32:59,400 Speaker 1: if he wants to pursue that, and I think he will. 608 00:32:59,640 --> 00:33:01,760 Speaker 1: David of was down on this day where Mr Diamond 609 00:33:01,800 --> 00:33:04,760 Speaker 1: writes his annual letter. There's been lots of discussion about 610 00:33:04,880 --> 00:33:10,520 Speaker 1: Jamie Diamond is appointed or elected political official? Can CEOs 611 00:33:10,600 --> 00:33:15,680 Speaker 1: like James Diamond become politicians in this modern America? It's 612 00:33:15,680 --> 00:33:19,280 Speaker 1: tough because now everything you've ever done over twenty years 613 00:33:19,360 --> 00:33:22,000 Speaker 1: or so has looked at every business deal, every transaction. 614 00:33:22,080 --> 00:33:24,960 Speaker 1: So it's more complicated to to do that as an 615 00:33:25,400 --> 00:33:27,800 Speaker 1: elected official. Maybe as an appointed official it might be 616 00:33:27,840 --> 00:33:31,280 Speaker 1: a little bit easier. What do you see, David right now? 617 00:33:31,320 --> 00:33:33,760 Speaker 1: On travel? The other great thing we see and Mr 618 00:33:33,760 --> 00:33:36,800 Speaker 1: Diamond was talking about this the opening up of America, 619 00:33:37,360 --> 00:33:42,080 Speaker 1: the international economy much delayed as well. What does Carlisle 620 00:33:42,200 --> 00:33:45,600 Speaker 1: observe in the opening up of America as we end 621 00:33:45,640 --> 00:33:49,360 Speaker 1: this pandemic. Let me just give you my own observation. 622 00:33:49,920 --> 00:33:53,480 Speaker 1: My observations are that people want to go back and 623 00:33:53,720 --> 00:33:56,560 Speaker 1: to their office, maybe not five days a week. People 624 00:33:56,600 --> 00:33:58,800 Speaker 1: want to go back and travel, maybe not as much 625 00:33:58,840 --> 00:34:02,480 Speaker 1: as before. I think vacation travel and leisure travel will 626 00:34:02,520 --> 00:34:05,440 Speaker 1: come back ahead of business travel. Business travel will come back, 627 00:34:05,480 --> 00:34:07,320 Speaker 1: but probably not at the pace that it once was, 628 00:34:07,600 --> 00:34:09,439 Speaker 1: where you would fly around the world for a half 629 00:34:09,440 --> 00:34:11,640 Speaker 1: hour meeting. I think that probably can be done through 630 00:34:11,760 --> 00:34:14,040 Speaker 1: zoom or the equivalent. But I do think people have 631 00:34:14,080 --> 00:34:16,239 Speaker 1: a pent up desire to go back and meet with 632 00:34:16,280 --> 00:34:17,880 Speaker 1: other people and see the rest of the world they 633 00:34:17,920 --> 00:34:19,960 Speaker 1: haven't seen for last year or so. What is the 634 00:34:20,080 --> 00:34:23,200 Speaker 1: character of higher yields that you see I've done so much, 635 00:34:23,280 --> 00:34:25,960 Speaker 1: you know, the narrowness of internal rates to return on 636 00:34:26,080 --> 00:34:29,600 Speaker 1: a transaction or a combination. But what do higher yields 637 00:34:29,680 --> 00:34:32,040 Speaker 1: due to the mindset of C e O s and 638 00:34:32,080 --> 00:34:36,800 Speaker 1: C class officers. Well, higher yields, uh, you know, obviously 639 00:34:36,840 --> 00:34:39,800 Speaker 1: make people a little bit nervous because it means that, uh, 640 00:34:39,840 --> 00:34:42,040 Speaker 1: you know, inflation might be around the corner, and we 641 00:34:42,080 --> 00:34:45,040 Speaker 1: haven't had serious inflation for for quite a while. People 642 00:34:45,040 --> 00:34:47,360 Speaker 1: are worried about modest inflation relative to what we have 643 00:34:47,440 --> 00:34:49,600 Speaker 1: in the nineteen seventies. I do think the U. S 644 00:34:49,640 --> 00:34:51,880 Speaker 1: economy is in pretty good shape because of the stimulus 645 00:34:51,960 --> 00:34:55,359 Speaker 1: we've had. Within the enormous amount of stimulus we've had. 646 00:34:55,600 --> 00:34:57,680 Speaker 1: It's difficult for the US economy not to grow at 647 00:34:57,680 --> 00:35:00,120 Speaker 1: five or six percent this year, and I suspect next 648 00:35:00,200 --> 00:35:02,040 Speaker 1: year I'll be in pretty good shape as well. Who 649 00:35:02,040 --> 00:35:04,000 Speaker 1: can predict two or three years down the road. We'll 650 00:35:04,000 --> 00:35:05,919 Speaker 1: probably have some inflation, but I don't think it's gonna 651 00:35:05,920 --> 00:35:08,160 Speaker 1: be reflation. It's gonna be anything close to what we've 652 00:35:08,200 --> 00:35:10,960 Speaker 1: seen in the companies. David rubin Stein, thank you so much, 653 00:35:11,000 --> 00:35:15,400 Speaker 1: greatly appreciated. Congratulations on a spirited original interview with Westmore 654 00:35:15,440 --> 00:35:19,880 Speaker 1: of Robin Hood the charity. Westmore really a unique person. 655 00:35:19,920 --> 00:35:23,160 Speaker 1: Look for that tonight. Peer to Peer Conversations. Nine pm, uh, 656 00:35:23,360 --> 00:35:28,560 Speaker 1: this evening. This is the Bloomberg Surveillance Podcast. Thanks for listening. 657 00:35:28,920 --> 00:35:32,280 Speaker 1: Join us live weekdays from seven to ten am Eastern 658 00:35:32,520 --> 00:35:36,520 Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from 659 00:35:36,600 --> 00:35:41,880 Speaker 1: six to nine am for insight from the best in economics, finance, investment, 660 00:35:42,000 --> 00:35:47,040 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 661 00:35:47,120 --> 00:35:50,920 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 662 00:35:51,040 --> 00:36:01,640 Speaker 1: the terminal. I'm Tom Keene and this is bloomberg S