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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, financing, investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Get Lucky

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Speaker 1: this Smarting Wailey's with us while kid Mornic from black

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Speaker 1: Rock Wailey, thank you for being with us here in

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Speaker 1: New York City. You came into this year conservative equities,

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Speaker 1: the equity market rally, you stayed conservative on equities, the

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Speaker 1: equity market started selling. Golf is still cautious? Can you

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Speaker 1: walk us through y I have no clue just to

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Speaker 1: add that works perfect, James. But the reason that were

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Speaker 1: cautious on aquities is really that if you look at

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Speaker 1: where evaluations are, it's pricing in still a very modest

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Speaker 1: kind of drove the outlook for the economy as well

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Speaker 1: as for earnings as well. And if you look at

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Speaker 1: where rates are, as you know, we have been off

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Speaker 1: the view that they cannot cut rates. Now markets are

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Speaker 1: moving closer to our view, but markets are still looking

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Speaker 1: at ray cuts later in twenty twenty four, and we

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Speaker 1: think that actually, given how a resilient economy has been

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Speaker 1: and how much the recession will be pushed out later

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Speaker 1: down the line, actually ray cuts also needs to be

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Speaker 1: pushed out further as well. So equity marketing developed world

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Speaker 1: are not quite appreciating some of the macro challenges that

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Speaker 1: we see happening, and that's why we have been prudent

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Speaker 1: now having said that, our time horizon is six to

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Speaker 1: twelve months, and some of that metrics that were used

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Speaker 1: to support the cautious view is valuation based. But that

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Speaker 1: is not to say that we cannot have shorter term

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Speaker 1: outs of rally which we saw in January right like

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Speaker 1: driven by technical factors, short squeeze driven by formal flows

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Speaker 1: as well. Real money investors are telling us that, you

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Speaker 1: know what, after a year like twenty twenty two, they

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Speaker 1: cannot afford to miss the rebound. So they're just going

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Speaker 1: to preposition for that even if they know or they

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Speaker 1: fear that it could get worse before it gets better.

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Speaker 1: In your beautifully elegant note, you talk about a new regime,

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Speaker 1: I'm going to label it a black rock new regime.

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Speaker 1: Larry's notice, it's a way Lee new regime. But whatever

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Speaker 1: it is, it's a new regime. If we're not going

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Speaker 1: back to securities analysis and factor analysis pre twenty twenty,

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Speaker 1: what are we going forward to? While the new regime

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Speaker 1: is predicated in terms of the Marco drivers of the

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Speaker 1: current environment, that we are moving from the Great moderation

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Speaker 1: with economic cycles shaped by US demand to the current

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Speaker 1: environment shaped by supply and supply constraint. In particular, factor

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Speaker 1: analysis is difficult because factors are time varying concepts and

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Speaker 1: factors can mean different things to different people. I interrupt,

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Speaker 1: because we got to do a mathematical clinic here right now,

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Speaker 1: We've got a tailor role is divergent from FED policy

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Speaker 1: as we've ever seen. If you do the partial differentials

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Speaker 1: of factor analysis, I get the ideas mud out there.

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Speaker 1: You have no idea visibly where you're going if you

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Speaker 1: do the partial differentials across any FED theory. Now do

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Speaker 1: they work at this juncture? No, thank you, at this

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Speaker 1: juncture not just because of how unstable some of the

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Speaker 1: forces are. Right So thinking about you know, like our star,

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Speaker 1: you know, one could see actually in moving temporarily before

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Speaker 1: settling back down. And given the kind of environment that

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Speaker 1: we see right now, so as it translates into factors,

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Speaker 1: it's it's tough to apply the old playbook to factor investing.

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Speaker 1: You know, like people say, as we head into recession,

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Speaker 1: we got to shy away from value, but we're also

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Speaker 1: in an environment where rates are going higher and curve

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Speaker 1: in our views, should steepen over that to twelve month horizon.

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Speaker 1: So we actually think that there is more room for

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Speaker 1: factor value to perform, but we want to be a

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Speaker 1: bit more selective, so we apply a quality tilt to

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Speaker 1: the factor typical factory exposures. When you talk about rates

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Speaker 1: going higher from here, HSBC is different. Major put out

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Speaker 1: a note this morning where you said the debate and

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Speaker 1: bond markets today is whether to buy and hold short

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Speaker 1: dated bonds at close to five percent or go for

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Speaker 1: the longer ones which are almost four percent. And it

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Speaker 1: goes to this belief our rates going to go higher

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Speaker 1: and stay there for a longer period of time, or

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Speaker 1: you know, do you want to capture just what you

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Speaker 1: kind you can get at this point? Where do you

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Speaker 1: fall on that debate? The former, So we like from

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Speaker 1: the end of the curve. Over the back end of

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Speaker 1: the curve, you know, you take very little duration and

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Speaker 1: credit risk, you get paid TBO is paying you almost

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Speaker 1: five percent, and commercial papers are paying you five point

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Speaker 1: five percent. You know, these are very attractive income opportunities.

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Speaker 1: And given our review that actually rates will stay longer,

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Speaker 1: for higher, for longer, we don't necess cerily want to

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Speaker 1: kind of go into the long end of the curve,

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Speaker 1: especially given how inverted curve is at this current juncture.

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Speaker 1: Turn premier should come back. It's underappreciating the degree that

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Speaker 1: we're going to have to live with inflation, and we

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Speaker 1: do want to kind of sit out when the value

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Speaker 1: proposition change. When will the long end start to look

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Speaker 1: more attractive to you, or even risk asids start to

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Speaker 1: look more attractive to you than a five percent short

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Speaker 1: term rate. I think it comes it comes down to

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Speaker 1: to what extent macro damages are being priced in by markets.

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Speaker 1: So the reason that we currently are shying away from

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Speaker 1: developed market acquity were modestly the underweight is because we

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Speaker 1: don't see the macro challenges being fully priced in, so

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Speaker 1: we're bunkering down in short end of the curve. But

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Speaker 1: if market pricing changes, getting closer to our fair value.

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Speaker 1: That would certainly change things as well. But also we're

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Speaker 1: actually on a global basis. We like emerging markets. We

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Speaker 1: have an overweight, very modest overweighting emerging market equities. So

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Speaker 1: think of our view currently as almost a bar bow

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Speaker 1: in between the short end of the government bound market

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Speaker 1: in the US and emerging market equities on the other

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Speaker 1: On the other hand, given where the pricing and evaluation

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Speaker 1: sits at its current juncture, the last thing I would

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Speaker 1: say is that this is an environment with very heighened

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Speaker 1: macro and market volatility. We have to change our views

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Speaker 1: very quickly. We've already changed our views twice and we're

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Speaker 1: still in February this year, so you know, like it's

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Speaker 1: it's very dynamic. We finish on China. Pmis the savenick,

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Speaker 1: that's the reopening comic. We have the view that actually

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Speaker 1: reopening for twenty twenty three should carry growth to something

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Speaker 1: with a six handle for twenty twenty three, and that

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Speaker 1: is off the very low basis of twenty twenty two

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Speaker 1: with a three handles. So clearly things have to be

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Speaker 1: kind of viewed together thinking about long term growth trend.

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Speaker 1: But we currently think that the growth pivot that we

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Speaker 1: got a flavor of the December A Central Economic Working

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Speaker 1: Conference actually will be further reinforced at the two sessions

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Speaker 1: that are coming up in two weeks time. And the

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Speaker 1: pm I data actually could also could also give further

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Speaker 1: evidence of the two that growth would would come through

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Speaker 1: in this reopening restart dynamics in China. But but but

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Speaker 1: over the longer term though, structural growth in China is

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Speaker 1: very challenged. You know, by the end of this decade,

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Speaker 1: we're seeing China growth stabilizing with a three handle. So

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Speaker 1: we're talking about longer term challenging but near term restart

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Speaker 1: opportunities that we want to lean take a six percent

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Speaker 1: GDP this year and then back down to levels like

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Speaker 1: three percent. Invest Just so you're aware, he's in the

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Speaker 1: final rewide and the pharaoh two hundred and seventy day outlook.

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Speaker 1: It comes out March in the first quarter, change your

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Speaker 1: view three times. So then he puts, I'm not sure

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Speaker 1: that would work if I actually did this, professor, but

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Speaker 1: you know that's what we do here at Bloomberg Surveymance.

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Speaker 1: We waited a quarter wait later, flat Ron, wait. Thank

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Speaker 1: you just awesome. As always, thank you very much, right

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Speaker 1: now and enjoy to having our studios as someone who

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Speaker 1: has immense help through the pandemic. David Page's head of

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Speaker 1: macro research at ACTS Investment Managers. Great to see you

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Speaker 1: here with us. I'm going to cut to the chase.

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Speaker 1: I love one of the words you used, asynchronous, because

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Speaker 1: that's what it feels like to me right now. Can

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Speaker 1: we have a slowdown? Maybe not an NBEER recession, but

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Speaker 1: can we have a quote media recession, whatever that phrase means,

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Speaker 1: but some parts of the economy do okay, Yeah, And

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Speaker 1: I think the point that we make with asynchronous is

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Speaker 1: that you can have slowdown in all of the economy,

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Speaker 1: but at slightly different times, and that might defy the

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Speaker 1: NBA definition of recession. So what we're thinking, and we're

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Speaker 1: getting some of it in the day to now, we've

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Speaker 1: got this sort of nuance coming through from trade, We've

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Speaker 1: got this nuance from the tree, so that's probably weak

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Speaker 1: in the first half of the year. The consumer looks

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Speaker 1: pretty solid though, and I think it's as we move

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Speaker 1: into the second half of this year, particularly if we

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Speaker 1: get the slowdown and coming through in the labor market,

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Speaker 1: that you'll see a softly in the consumer side. So typically,

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Speaker 1: and this is why recessions are so difficult to forecast,

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Speaker 1: at least in terms of timings. You get a synchronized slowdown,

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Speaker 1: and that's when you see recession. If you get it

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Speaker 1: asynchronously one quarters negative, then perhaps it's flat, then it's

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Speaker 1: negative again. You know, remember we've already had two quarters

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Speaker 1: of negative growth that the nbare looked completely through, and

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Speaker 1: that wasn't a recession in that was just last year.

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Speaker 1: So we could get a sort of saw tooth pattern

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Speaker 1: of GDP come through, which would be a muddle through

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Speaker 1: and I guess typically that would be a soft land

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Speaker 1: rounded up German yields are up up solidly today, I

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Speaker 1: might point out, I'm looking at the ten year yield.

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Speaker 1: Three point nine six is a round up and a

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Speaker 1: ten year year old. Okay, that's one story, but the

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Speaker 1: other story is the disinflation. To come model your trajectory

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Speaker 1: of US disinflation. So we think that headline inflation is

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Speaker 1: going to fall back to a round possibly just under

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Speaker 1: three and a half percent by mid year, but then

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Speaker 1: by mid year, but then by the second still by

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Speaker 1: we are a French house, but so sometime around June. Yeah,

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Speaker 1: but then as we move into continuous as we move

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Speaker 1: into the second half of this year, we're expecting it

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Speaker 1: to stay in that three and a half four passage.

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Speaker 1: And that's that's why we've always said the FED is

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Speaker 1: not going to be in a position to be able

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Speaker 1: to ease in the second half of this year, which

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Speaker 1: markets have repriced quite significantly now. But we also think

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Speaker 1: it takes a little while throughout twenty twenty four together

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Speaker 1: down and they need to crack the labor mark. Well,

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Speaker 1: here's the thing. And when you're talking about an asynchronous

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Speaker 1: recovery and a muddle through, isn't that problematic for getting

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Speaker 1: inflation down? Isn't a muddle through eventually allowing certain industries

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Speaker 1: to possibly see price games that will keep inflation higher

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Speaker 1: even as you see sort of the year of year

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Speaker 1: camps getting more complicated for the others. Yeah, So to

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Speaker 1: be clear, I mean, our view is still that we

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Speaker 1: do see a mild recession a stress mile but we

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Speaker 1: are looking at consecutive quarters to growth. But yeah, right,

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Speaker 1: I mean, if we see this asynchronous growth is just

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Speaker 1: slightly firmer than that, then the labor market doesn't loosen

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Speaker 1: by quite as much, and that'll take a little bit

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Speaker 1: longer for prices to fall ultimately an asynchronous slow down

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Speaker 1: and below trend growth. You know, this is the sort

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Speaker 1: of the baseline that Fed chair Power talks too. We

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Speaker 1: get below trend growth coming through from the economy, the

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Speaker 1: labor market eases a little bit, and that's enough to

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Speaker 1: see inflation fall back. We think it'll be more than that,

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Speaker 1: but that's exactly the risk. We were joking earlier about

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Speaker 1: how we have a show of people coming on and

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Speaker 1: saying we have no clue, and then people ask us

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Speaker 1: and we're like, we have no clue because this is

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Speaker 1: such a difficult time to really have a sense of

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Speaker 1: what's going on. But I'm wondering how we can even

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Speaker 1: be sure that that's enough to bring inflation lower? Right?

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Speaker 1: We can't. Right, So, if you have central banks that

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Speaker 1: at least vocally are adhering to a two percent target

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Speaker 1: of inflation, how do we know that we're not going

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Speaker 1: to see a six percent FED funds rate and a

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Speaker 1: four percent ECB target which is now priced into the market.

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Speaker 1: And I think that's the key risk. I mean, the

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Speaker 1: central banks are pretty clear that they don't know either.

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Speaker 1: I mean, we can roll back fifteen months, we know

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Speaker 1: the forecast erarors that we all made include in the

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Speaker 1: central banks in terms of the inflation outlook, and the

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Speaker 1: central banks seem to have learned that lesson. But the

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Speaker 1: point of that is that now central banks are using

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Speaker 1: backward looking information to judge when they've done enough with

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Speaker 1: their forward acting tools of monetary policy. So they're looking

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Speaker 1: in the rearview mirror. They're not, I don't think, looking

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Speaker 1: too much in inflation. The headline is obviously important, but

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Speaker 1: it's the labor market that gives them the long steer

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Speaker 1: as to inflation, and they're using that data to judge

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Speaker 1: when they've done enough, when they know that rate hikes

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Speaker 1: are still going to have a lagged impact on financial

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Speaker 1: conditions going further forwards, and that I think is the

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Speaker 1: biggest risk if you're using backward looking information to judge

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Speaker 1: when you've done enough with your forward acting tool. It

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Speaker 1: sounds like a recipe for overtightening. Beautifully explained, and I

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Speaker 1: guess the ex post is becoming ever more ex post.

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Speaker 1: And there's some ramifications out there we've observed just as

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Speaker 1: one theory, the tailor rules completely messed up right down

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Speaker 1: towardston slack over at Toparlo models at near nine percent,

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Speaker 1: almost ten percent. Bullard is saying of Saint Louis is saying,

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Speaker 1: let's go. There's others in the ECB saying the same thing,

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Speaker 1: let's go. Is their value to the urgency the doctor

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Speaker 1: Bullard speaks of, Yeah, I think so. And I think

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Speaker 1: the move that you would get if you followed a

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Speaker 1: Bullard type approaches is much more consistent perhaps with FED history,

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Speaker 1: that you could see the rates move a little bit

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Speaker 1: higher to peak, maybe you know, even towards a peak

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Speaker 1: of six percent, But then once you reach that, you

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Speaker 1: would break the economy. You would have to see rate

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Speaker 1: cuts follow quite quickly. And I think what the bulk

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Speaker 1: of the committee wants to achieve this time around is

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Speaker 1: a peak that isn't quite as eyewatering as that, but

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Speaker 1: it is held in place for a little bit longer,

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Speaker 1: and that provides the restrictiveness that slows the economy further

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Speaker 1: before we let you go. The belief in lagged effects.

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Speaker 1: Is that enough for the FED for the ECB to

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Speaker 1: pause at a level before they see the ramifications of

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Speaker 1: their forward tools. No, they need to see some impact

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Speaker 1: comes through, and they need to see that in the

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Speaker 1: labor market, in particularly for the US five hundred and

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Speaker 1: twelve thousand is absolutely nowhere near enough to see a

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Speaker 1: slowdown in economic activity and earnings gross Average earnings gross

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Speaker 1: needs to be closest three and a half, and they'll

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Speaker 1: need to see that before they pause. David Page, thank

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Speaker 1: you so much, greatly, greatly appreciated in our studios here

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Speaker 1: David Pages with EXA investment manager, Sarah Mouth joins us, right,

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Speaker 1: I'll just jump into it A chief investment officer Vine, Sarah,

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Speaker 1: what has changed in your outlook in the last week

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Speaker 1: or so? We have whipsaw, we are in shock back

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Speaker 1: and forth. What has changed in the nouvene placement? Markets

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Speaker 1: are adjusting to the fact that the Fed has more

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Speaker 1: work to do, and this is monetary tightening is not

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Speaker 1: taking a bite out of the economy. This is bad

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Speaker 1: news for inflation and bad news for the market. So

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Speaker 1: I think the markets generally stay in a trading range

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Speaker 1: and the FED stays in a holding pattern with rate

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Speaker 1: hikes and then a pose until we can get some

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Speaker 1: kind of break on inflation in terms of wages or

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Speaker 1: shelter or spending on services. And we're just not really

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Speaker 1: seeing that yet, and that's why we're we're generally thinking

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Speaker 1: that the market's going to have trouble, continue to move

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Speaker 1: the upside likely trading range or downside risk. From here,

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Speaker 1: let's talk about the way lead point that basically it's

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Speaker 1: not worth necessarily going into the long end of the

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Speaker 1: yield curve at four percent if you can get five

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Speaker 1: percent the short end, because you could potentially get higher

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Speaker 1: yields and you could potentially get a better opportunity elsewhere.

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Speaker 1: Do you agree with that stance. I think generally that

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Speaker 1: is going to be the case going forward, with now

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Speaker 1: about three hikes getting priced into the markets with a

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Speaker 1: FED and then again no rate cuts in the future

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Speaker 1: are likely a pause and then an inflation doesn't break

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Speaker 1: if you'd even see more hikes from there. I think

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Speaker 1: it is the short end the yield curve that's going

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Speaker 1: to continue to look more and more attractive versus the

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Speaker 1: long end. So where are you looking for in terms

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Speaker 1: of getting some sort of returns other than the short end.

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Speaker 1: Are you starting to see opportunities and industrials as we

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Speaker 1: were talking about earlier, Are you starting to see opportunities

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Speaker 1: in retail like Target that came out with expectations that

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Speaker 1: we're disappointing, but everyone still seems to be cheering. So

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Speaker 1: starting with retail, I think, you know, consumer and the

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Speaker 1: employment markets are going to be the piece of the

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Speaker 1: puzzle that determine the depth of the timing of a recession.

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Speaker 1: So consumer, I think is at risk. That's on an

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Speaker 1: area that we're incredibly interested in. We're more on the

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Speaker 1: conservative side, looking for quality companies and also some beta

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Speaker 1: outside of the US. So starting in the US with

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Speaker 1: quality companies, companies that tend to grow their dividend, they

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Speaker 1: tend to have strong balance sheets, they're more recession resilient,

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Speaker 1: provide you some income protection going forward. So this is

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Speaker 1: everything from infrastructure companies that are backed by utilities and

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Speaker 1: waste management all the way over to companies like Linda

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Speaker 1: or Coca Cola, which tend to be a bit more

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Speaker 1: defensive in a volatile market. Now, outside of the US,

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Speaker 1: we think emerging markets look attractive because evaluations There also

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Speaker 1: the dollar which may not be as strong as it

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Speaker 1: was last year, and also China continuing to reopen. I

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Speaker 1: think em finally has a tailwind. You could see some

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Speaker 1: upside there. It's kind of a balance bet there. That's

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Speaker 1: saying a little bit more conservative in the US because

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Speaker 1: of the continued rate hikes that we see and the

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Speaker 1: potential for a recession that may be delayed but likely

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Speaker 1: still comes. How does use of cash play in I mean,

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Speaker 1: the Journal's got the article out on one trillion share buybacks.

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Speaker 1: We saw cheval and mister Wirth make a statement today

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Speaker 1: define use of cash for nuvine. Well, first of all,

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Speaker 1: just going to look at energy companies, I think that

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Speaker 1: we've seen this with them for quite a number of years.

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Speaker 1: They are more focused on returning cash to shareholders than

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Speaker 1: on pulling barrels out of the ground. That's keeping supply

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Speaker 1: type for energy companies, and we agree that oil prices

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Speaker 1: likely have more upside because demand remains reasonably strong supply

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Speaker 1: remains tight. Now, cash is an interesting asset class in

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Speaker 1: the sense that it is paying good yield. My caution

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Speaker 1: in terms of cash those courses that the market send

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Speaker 1: a price in a recovery well before we see any

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Speaker 1: of the data. So it's a timing issue. And when

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Speaker 1: you're trying to time the markets usually that's generally a

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Speaker 1: loser's game. So while it's important to keep some cash

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Speaker 1: in hand, I would continue to look for areas where

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Speaker 1: you see good value and these are areas like non

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Speaker 1: US markets, particularly emerging markets. Also an alternative, private credit

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Speaker 1: tends to be more resilient during a recession. If you

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Speaker 1: look at historical down draft in the market's private credit

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Speaker 1: tends to hold up better, and then conservative equities like

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Speaker 1: dividend growers tend to be more resilient. That's where I'd

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Speaker 1: be looking to put my cash. So I'd be rude

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Speaker 1: if I didn't ask the Nuvine heritage. Should we take

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Speaker 1: advantage of municipal bonds this morning? I mean fundamentals versus

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Speaker 1: the valuations of municipal bonds are at a mismatch because

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Speaker 1: of the strength of the economy and the tightening that's

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Speaker 1: not impacted the economy. Yet municipalities still look very strong,

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Speaker 1: So fundamentals are strong, valuations look interesting. You're seeing total

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Speaker 1: returns in municipal bonds and also areas if taxabil fix

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Speaker 1: incomes such as leverage loans that still look very attractive

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Speaker 1: to us. And again that's why it's important to make

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Speaker 1: sure you use your cash wisely, because you are seeing

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Speaker 1: entry points that you haven't seen in years or even decades.

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Speaker 1: In many of these asset classes, such as fixed incomes.

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Speaker 1: Sarah I've always wanted to ask you this question. How

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Speaker 1: did Neuvine become the largest manager of farmland assets on

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Speaker 1: the planet. Yeah, this is an historical asset class that

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Speaker 1: we've been very heavily invested in all the way back

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Speaker 1: to when the TIA days as our parent company. It's

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Speaker 1: an asset class that we thought was very resilient. It's

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Speaker 1: a great asset class as a head to inflation. So

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Speaker 1: it's just a very strong asset class and important obviously

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Speaker 1: to society. We've built it over time and it's become

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Speaker 1: I think, in a world where equities and fixed income

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Speaker 1: have become very correlated, alternatives such as farmland have been

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Speaker 1: a very important piece of investors portfolios, and they continue

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Speaker 1: to be correlated this year as well, even when we

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Speaker 1: were expecting that to break. Sarah just wonderful. Us always

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Speaker 1: ceremontic that of new thing. Ken Leon joins us right now,

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Speaker 1: director of Equity Research. It's CFI truly with decades of exposure. Kenn,

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Speaker 1: is this any way to do business? I mean, you

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Speaker 1: know CFA one, you got a John Dear and your report,

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Speaker 1: maybe you've got something else and this and that, and

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Speaker 1: now we've got one hundred and eighteen page power points

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Speaker 1: with a welcome from mister Solomon, a state of the

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Speaker 1: franchise from John Waldron's Shinali basket. Will speak with mister

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Speaker 1: Waldron at twelve doing very important and then we have

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Speaker 1: one Goldman Sex. Is this a branding exercise or do

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Speaker 1: you guys like you learn anything out of these soirees. Well,

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Speaker 1: it's great to be here and Goldman is probably best

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Speaker 1: in delivering messages and road shows. I mean that's what

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Speaker 1: they do as an investment bank, and it's all about

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Speaker 1: what they're doing right first and then they're going to

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Speaker 1: get the hard questions later. They speak to client franchise

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Speaker 1: and essentially this means that everyone wants to do business

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Speaker 1: with Goldman, particularly the investment bank and also asset and

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Speaker 1: wealth management. But what's interesting here is that there's a

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Speaker 1: lot of hard questions about their strategy from three years

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Speaker 1: ago to kind of button up with shareholders. They got

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Speaker 1: a thirty billion dollar authorized buyback, and they're talking about

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Speaker 1: capital efficiency because they still are regulated, regulated bank. It's

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Speaker 1: a lot of questions today to summit from an amateur

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Speaker 1: that would be me, folks. Stephanie Cohen shows up at

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Speaker 1: page I believe fifty four, and what she basically says is,

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Speaker 1: can you give us two years to work this out?

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Speaker 1: Is that how you read it? Ken Leon is there

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Speaker 1: saying we needed twenty twenty five hope and prayer. So

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Speaker 1: the Goldman brand supposedly was going to conquer the consumer

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Speaker 1: market and it didn't, and that might have been being

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Speaker 1: too confident. And I think it's block and tackle the

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Speaker 1: next two years, which will be profitability and return of capital.

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Speaker 1: But the missing question here is that's great to be

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Speaker 1: a great investment bank, but to be a great financial

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Speaker 1: service company, you have to have recurring revenue, work through

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Speaker 1: the cyclical parts of the market. And you know we're

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Speaker 1: talking about Schwab, black Rock, these are stable Morgan Stanley

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Speaker 1: Goldman still is an agent. It is really dependent on

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Speaker 1: client servicing. That is always difficult to get a higher evaluation.

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Speaker 1: At the same time, I don't think they're going to

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Speaker 1: make any big acquisitions right now. They just want to

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Speaker 1: kind of have a calm where they can tell shareholders

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Speaker 1: we're going to be more efficient, we're going to use

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Speaker 1: less capital, and we're also going to find ways to

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Speaker 1: be profitable and be smart, because they certainly weren't smart

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Speaker 1: with their strategy before. So there is a really big

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Speaker 1: question within this, which is how are they going to

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Speaker 1: expand more into that stable kind of business, the asset

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Speaker 1: management that you're talking about, without making an acquisition, without

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Speaker 1: making major investments, and without even laying out any kind

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Speaker 1: of path to do so in this presentation. And when

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00:22:48,880 --> 00:22:53,240
Speaker 1: you look at their presentation, it's not going deeper and

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Speaker 1: bigger in terms of asset management or alternative investments because

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00:22:57,960 --> 00:23:01,480
Speaker 1: that's very choppy. It's going to be or the wealth

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Speaker 1: management side, the advisory side, or in areas like Larry

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Speaker 1: Fank had, which was from getting the eye shares with ets.

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00:23:10,760 --> 00:23:13,439
Speaker 1: So in time when they need to look for a

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Speaker 1: more predictable, recurring revenue stream and a lower source of funding,

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00:23:19,600 --> 00:23:22,200
Speaker 1: you know, it might be some of the custodial banks,

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00:23:22,560 --> 00:23:26,480
Speaker 1: or even State Street, which has a great etf franchise.

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00:23:26,720 --> 00:23:29,840
Speaker 1: Goldman would never look this way, but the market is saying,

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00:23:30,280 --> 00:23:32,879
Speaker 1: even if you execute and you have several quarters of

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00:23:33,000 --> 00:23:36,439
Speaker 1: great earnings out of the investment bank, we're not going

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00:23:36,480 --> 00:23:39,040
Speaker 1: to give you a higher multiple. So that's really the

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00:23:39,080 --> 00:23:41,879
Speaker 1: conundrum they have, and I think those are the questions

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00:23:41,880 --> 00:23:43,919
Speaker 1: that are going to come up today. There's also a

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Speaker 1: question about its existing consumer facing platforms and thinking about

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Speaker 1: Marcus as well as some of the credit card partnerships.

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Speaker 1: And right now dal Jones Welshteret Journal is reporting that

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Speaker 1: David Solomon, the CEO of Goldman Sachs, we're saying today

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Speaker 1: that Goldman sax is considering streets alternatives for its consumer

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Speaker 1: platforms businesses, including green Sky and their partnerships or credit

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Speaker 1: card purchases with Apple and General Motors. Does this mean

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00:24:09,400 --> 00:24:12,520
Speaker 1: that they're going to reduce their footprint and sell some

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00:24:12,600 --> 00:24:16,399
Speaker 1: of those businesses in the near future. I think if

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Speaker 1: it's any of the businesses that require significant capital, the

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00:24:20,000 --> 00:24:24,320
Speaker 1: answers yes. For others which are transaction driven and they

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00:24:24,359 --> 00:24:28,720
Speaker 1: can leverage with partners, they'll certainly find ways that it

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00:24:28,840 --> 00:24:32,400
Speaker 1: could be incremental revenue and profit. But the big play

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Speaker 1: is over, you know, Ken, I looked at the first

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Speaker 1: grid chart all of the paige I think it's page

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Speaker 1: five here, and they go against their leading peer, which

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Speaker 1: is a Campbell's soup. It's like a Ministrony soup of

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Speaker 1: this firm, this firm, this firm Belogny. The leading peer

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Speaker 1: group compare is Morgan Stanley. To end this conversation, what

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Speaker 1: did James Gorman get right? James Gorman basically didn't go

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Speaker 1: afar so I have. He was looking for adjacent markets

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Speaker 1: like the workforce for oh one k with e trade.

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Speaker 1: He paid premium, but he got leg Mason. He got

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Speaker 1: established businesses, versus sitting in a room and saying we

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Speaker 1: got the best brand, which is Goldman, and organically we're

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Speaker 1: gonna create businesses. It's very hard to do in financial services.

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Speaker 1: That's the difference. Tom Kenley, I'm thank you so much.

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Speaker 1: A brief there from the esteem Kennley on cf right.

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Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and

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00:25:30,800 --> 00:25:35,119
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00:25:38,880 --> 00:25:43,399
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00:25:43,480 --> 00:25:47,520
Speaker 1: can watch us live. I'm Bloomberg Television and always I'm

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Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Tom Keane and

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Speaker 1: this is Bloomberg. Will be Go