WEBVTT - Bloomberg Surveillance: When the Fed Should Cut 0:00:05.080 --> 0:00:07.200 This is the Bloomberg Surveillance Podcast. 0:00:07.680 --> 0:00:10.799 I'm Lisa abrahmoids along with Tom Keen and Jonathan Ferrell. 0:00:11.160 --> 0:00:15.280 Join us each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:16.440 finance and investment. 0:00:16.760 --> 0:00:18.760 Subscribe to Bloomberg Surveillance. 0:00:18.320 --> 0:00:21.840 On demand on Apple, Spotify and anywhere you get your podcasts, 0:00:22.160 --> 0:00:25.200 and always on Bloomberg dot com, the Bloomberg Terminal, and 0:00:25.200 --> 0:00:26.440 the Bloomberg Business App. 0:00:26.640 --> 0:00:28.880 I've been looking forward to this conversation. Liz An Son 0:00:28.960 --> 0:00:30.720 is the chief Investments trying to just a chold swap 0:00:30.800 --> 0:00:32.839 joins us right now. Lizan, I've been looking forward to 0:00:32.920 --> 0:00:34.720 it because we're not going to talk about self landing, 0:00:34.760 --> 0:00:37.080 hard landing, no landing, none of that. We're going to 0:00:37.159 --> 0:00:38.839 talk about what you and a team have been focused 0:00:38.880 --> 0:00:41.720 on now for a while, and that's rolling recessions. That 0:00:41.840 --> 0:00:44.320 is a framework, Lizen. Why is that so important for you? 0:00:44.640 --> 0:00:45.280 That nuance? 0:00:46.440 --> 0:00:48.319 Well, first of all, this is a unique cycle. That's 0:00:48.320 --> 0:00:51.760 the ultimate understatement. I think taking a nuanced approach is important, 0:00:51.760 --> 0:00:54.160 and we've been using that term for quite some time. 0:00:54.200 --> 0:00:56.760 I think the only other person that I know that's 0:00:56.800 --> 0:00:59.400 been using as long as we have is Ed yard Denny, 0:00:59.480 --> 0:01:01.560 and not that we want to rehash the last three 0:01:01.560 --> 0:01:03.240 and a half years, but if you think about the 0:01:03.400 --> 0:01:06.560 stimulus fuel demand surge coming out of the worst part 0:01:06.560 --> 0:01:09.720 of the pandemic, all of that demand and money associated 0:01:09.760 --> 0:01:11.600 with it was funneled into the good side of the 0:01:11.600 --> 0:01:14.600 economy because we had no access to services. That was 0:01:14.640 --> 0:01:17.200 where the inflation problem first began on the good side 0:01:17.200 --> 0:01:20.959 of the economy, exacerbated by the supply chain disruptions. But 0:01:21.080 --> 0:01:23.440 fast forward to the more recent period, we've gone into 0:01:23.480 --> 0:01:27.960 hard landing recessions for housing, manufacturing, a lot of housing related, 0:01:28.280 --> 0:01:31.760 many of the consumer product areas that were big beneficiaries 0:01:31.800 --> 0:01:35.240 of the lockdown, and we've gone from inflation to disinflation 0:01:35.319 --> 0:01:38.319 to deflation in many of the goods categories. We've just 0:01:38.400 --> 0:01:41.920 had the later offsetting strength on the services side. Same 0:01:41.920 --> 0:01:45.320 thing as rolled through in terms of inflation. So to me, 0:01:45.440 --> 0:01:47.960 best case scenario is not really soft landing that Schuberti 0:01:48.040 --> 0:01:50.280 sailed for many important segments of the economy. 0:01:50.560 --> 0:01:52.600 It's a continued roll through where if. 0:01:52.440 --> 0:01:54.720 In when services in the labor market get hit, you 0:01:54.800 --> 0:01:58.320 have found stability and maybe even some improvement in those 0:01:58.360 --> 0:01:59.800 areas that have already taken their hit. 0:02:00.080 --> 0:02:02.200 Lezan, love your nuance. Let's build on that. 0:02:02.560 --> 0:02:06.040 Where are you seeing opportunities that might have hit bottom 0:02:06.120 --> 0:02:08.360 that you want to be investing in now, In particular 0:02:08.400 --> 0:02:11.400 sectors that you think already have rolled through, they're hard 0:02:11.480 --> 0:02:12.840 landing and are now buys. 0:02:14.160 --> 0:02:16.840 I still think that investors are better off taking a 0:02:16.880 --> 0:02:20.240 factor based approach as opposed to a monolithic sector based approach, 0:02:20.600 --> 0:02:22.520 But we have made some adjustments in terms of the 0:02:22.520 --> 0:02:24.480 foot factors that we're focused on. As you know we've 0:02:24.520 --> 0:02:28.040 talked about it on this program. We have been emphasizing 0:02:28.280 --> 0:02:31.079 stay up in quality with factors like interest coverage and 0:02:31.160 --> 0:02:34.400 strong return on equity and strong balance sheet, but also 0:02:34.440 --> 0:02:38.440 growthy factors like positive earnings, revisions and surprises. But I 0:02:38.440 --> 0:02:41.640 think you want to now add kind of evaluation kicker 0:02:41.800 --> 0:02:45.560 into the mix because this year was characterized by all 0:02:45.639 --> 0:02:49.200 multiple expansion, no earnings growth. We see in the last 0:02:49.240 --> 0:02:51.720 month that there is money itching to move out of 0:02:51.720 --> 0:02:55.200 the Magnificent seven to find opportunities down the cap spectrum. 0:02:55.440 --> 0:03:00.280 And you have seen some lower quality characteristics to of 0:03:00.320 --> 0:03:02.880 what has rallied. I think you want to fade that 0:03:03.360 --> 0:03:06.560 and continue to lean into quality. But you can find 0:03:06.600 --> 0:03:10.560 it across the spectrum of sectors and also outside that. 0:03:11.000 --> 0:03:12.560 Group of just the Magnificent seven. 0:03:12.720 --> 0:03:15.359 So you said something Lezen talking about how people are 0:03:15.440 --> 0:03:17.480 itching to take the money that they've put into the 0:03:17.480 --> 0:03:20.520 Magnificent seven and put it to work elsewhere that might 0:03:20.600 --> 0:03:23.919 be at a lower valuation. How big is that wave 0:03:23.960 --> 0:03:26.640 of people is to get out of the Magnificent seven. 0:03:26.760 --> 0:03:29.160 Is this something that could cause an underperformance or is 0:03:29.160 --> 0:03:31.760 it just simply there's just been so much money people 0:03:31.800 --> 0:03:33.880 are looking for other ideas well. 0:03:34.120 --> 0:03:37.520 So far, so good in terms of the rotational nature 0:03:37.760 --> 0:03:41.160 of this easing of some of the excesses, You've seen 0:03:41.520 --> 0:03:43.880 some pullback in the Magnificent seven. The rest of two 0:03:43.960 --> 0:03:47.520 thousand SMP equal weight is outperforming the SMP over the 0:03:47.520 --> 0:03:48.800 past month or so. 0:03:48.840 --> 0:03:50.600 It's happened in kind of a stealth way. 0:03:50.880 --> 0:03:54.440 That's obviously the best way to go through a corrective 0:03:54.480 --> 0:03:56.520 phase of excesses versus. 0:03:56.280 --> 0:03:57.640 The bottom falling out all at once. 0:03:57.720 --> 0:04:01.360 What concerns me, particularly once we get past the year 0:04:01.480 --> 0:04:05.120 end seasonality, is that there is an incredible amount of overlap, 0:04:05.240 --> 0:04:08.520 especially in the large institutional world and the hedge fund world, 0:04:09.000 --> 0:04:12.040 in terms of ownership of not just the magnificent seven 0:04:12.280 --> 0:04:13.320 but up. 0:04:13.160 --> 0:04:16.280 The cap spectrum, and that you know. 0:04:16.200 --> 0:04:18.760 If we get some sort of catalyst and it unleashes 0:04:19.600 --> 0:04:23.400 more frenzy around selling, I think maybe the hit would 0:04:23.400 --> 0:04:26.159 have to be larger, but I do think absent that 0:04:26.200 --> 0:04:30.360 we could continue to see a broadening out via rotation 0:04:31.080 --> 0:04:36.159 again as opposed to some significant crack occurring in the market. 0:04:36.240 --> 0:04:38.440 Lasan, can you help us gauge sentiment? Just sort of 0:04:38.440 --> 0:04:41.640 a bit wittold, least from myself repeatedly that the money 0:04:41.720 --> 0:04:42.720 money market funds. 0:04:42.520 --> 0:04:43.600 Is really really sticky. 0:04:44.000 --> 0:04:46.000 As you look across clients, to the people you speak 0:04:46.040 --> 0:04:49.360 to daily, have they been moving into equities over the 0:04:49.440 --> 0:04:49.920 last month? 0:04:49.920 --> 0:04:51.560 What was that move in November? 0:04:51.680 --> 0:04:55.240 So you've seen some move in equities, But it's actually, 0:04:55.279 --> 0:04:59.000 interestingly within the US equity market been toward areas like 0:04:59.120 --> 0:05:02.320 real estate utilities, and I think that is in keeping 0:05:02.360 --> 0:05:06.000 with expectations of sooner rather than later fed cuts. I'm 0:05:06.000 --> 0:05:09.320 skeptical about that, but that's where the money has gone. 0:05:09.320 --> 0:05:13.120 But sentiment is really interesting because attitudinal sentiment measures have 0:05:13.160 --> 0:05:16.920 gone off the charts of bullishness and very little bearishness. 0:05:17.040 --> 0:05:20.840 Yet even the AAII survey that we get those attitudinal 0:05:20.920 --> 0:05:25.120 bullish bearish readings, the equity exposure of that same cohort 0:05:25.200 --> 0:05:28.640 of investors has actually been coming down. On the other hand, 0:05:29.320 --> 0:05:35.080 active institutional managers have actually been significantly increasing exposure. So 0:05:35.480 --> 0:05:38.599 much like cross currents in the economy, there's even a 0:05:38.600 --> 0:05:41.880 lot of cross currents in terms of sentiment data, and 0:05:41.920 --> 0:05:44.839 it's really a mixed picture, and sentiment is hard to 0:05:45.320 --> 0:05:47.520 It's always hard to use as some market timing tool, 0:05:47.560 --> 0:05:51.520 even at extremes, but it's particularly murky in this environment 0:05:51.600 --> 0:05:51.880 right now. 0:05:51.960 --> 0:05:53.159 Lizen, just a put a bow on it. You did 0:05:53.279 --> 0:05:55.440 just mentioned that that you're skeptical about right cuts. Can 0:05:55.480 --> 0:05:58.159 you just explain that a little bit more, Well. 0:05:58.080 --> 0:06:00.839 The inflation is still above the FEDS target, the labor 0:06:00.880 --> 0:06:03.600 market is hanging in there, the economy is hanging in there. 0:06:04.000 --> 0:06:07.080 How that justifies a pivot from the most aggressive tightening 0:06:07.160 --> 0:06:09.560 cycle to easing as soon as the first quarter of 0:06:09.600 --> 0:06:10.080 next year. 0:06:10.520 --> 0:06:11.239 I don't get it. 0:06:11.240 --> 0:06:13.600 It's possible to find to be easy, but probably because 0:06:13.640 --> 0:06:17.279 there's more economic dislocation between now and then. In addition, 0:06:17.680 --> 0:06:20.359 you had the Fed and Powell specifically pointing to the 0:06:20.400 --> 0:06:22.440 bond market doing a lot of the tightening for the 0:06:22.480 --> 0:06:24.400 FED when you were in the surge and yields up 0:06:24.440 --> 0:06:26.880 to five percent. To me, what would be interesting to 0:06:26.920 --> 0:06:29.359 hear is if they start to say, well, the loosening, 0:06:29.360 --> 0:06:32.200 which is a record one month loosening in financial conditions 0:06:32.200 --> 0:06:35.520 in November, maybe that does some of the loosening for 0:06:35.600 --> 0:06:38.120 the FED. And it wouldn't surprise me if Powell has 0:06:38.160 --> 0:06:42.160 to yet again reinforce the notion that they're not at 0:06:42.160 --> 0:06:44.520 this point considering rate cuts. 0:06:44.640 --> 0:06:46.640 That's the conversation for a week today. Listen. 0:06:46.800 --> 0:06:49.120 Thank you Lizanne Sunders, a child swab one of the 0:06:49.200 --> 0:06:56.360 very best joining us at Amandelinum, head of macro credit 0:06:56.400 --> 0:06:58.000 research at Black Crock Andmanic good. 0:06:57.839 --> 0:06:59.599 Morning, good morning, Thank you both for having me. 0:06:59.640 --> 0:07:01.480 How much money is shift into private markets. 0:07:01.720 --> 0:07:04.480 So our forecast calls for that asset class to grow 0:07:04.520 --> 0:07:07.280 from one point six trillion globally to three and a 0:07:07.320 --> 0:07:09.680 half trillion by the end of twenty twenty eight. So 0:07:09.720 --> 0:07:14.760 that implies a pretty significant continued growth pattern through the 0:07:14.800 --> 0:07:17.760 next five years. There are really four drivers behind that. 0:07:17.920 --> 0:07:21.240 The increase in the addressable market is one of them, 0:07:21.240 --> 0:07:24.680 but it's really investors looking for diversification, borrowers looking for 0:07:24.720 --> 0:07:28.320 certainty of execution, structural shifts in the public markets which 0:07:28.320 --> 0:07:31.160 are now serving larger and larger borrowers, so that renders 0:07:31.440 --> 0:07:34.520 small middle market debt deals ill liquid. And then fourth 0:07:34.640 --> 0:07:38.160 is the opportunity for banks to partner with non banks. 0:07:38.200 --> 0:07:41.280 And also just given the well telegraphed contraction in bank 0:07:41.360 --> 0:07:44.560 lending and tightening of bank lending standards to really fuel 0:07:44.560 --> 0:07:46.400 that growth. And so that's our forecast. 0:07:46.600 --> 0:07:49.120 Was that a really nice way of saying D banking 0:07:49.320 --> 0:07:51.679 that basically private credit is stealing banks lunch. 0:07:52.640 --> 0:07:55.360 I watched all of your great coverage yesterday, and I 0:07:55.400 --> 0:07:58.640 did see the D Banking dialogue. I actually think I 0:07:58.680 --> 0:08:01.080 agree with the comments that banks will remain at the 0:08:01.120 --> 0:08:04.320 center of the lending universe. That said, I think the 0:08:04.360 --> 0:08:08.800 important takeaway is that as private credit has become sizeable 0:08:08.880 --> 0:08:12.800 and scalable in its own right, it can now compete 0:08:13.000 --> 0:08:16.160 against other parts of the market where it wasn't historically. 0:08:16.560 --> 0:08:19.160 And so what we've actually seen are some companies with 0:08:19.320 --> 0:08:22.880 demonstrated access to the public markets choosing to refinance in 0:08:22.920 --> 0:08:26.400 the private markets. I think there's an opportunity for banks 0:08:26.400 --> 0:08:28.880 to partner with non banks in terms of in an 0:08:28.960 --> 0:08:32.880 environment where capital and liquidity rules may change, to partner 0:08:33.120 --> 0:08:36.120 and maybe move some of that lending into other parts 0:08:36.160 --> 0:08:39.440 of the non bank system. Doesn't mean that the risk 0:08:39.480 --> 0:08:41.920 transfer is a negative. It just means that capital is 0:08:41.960 --> 0:08:44.480 being reallocated, just like it did after the financial crisis. 0:08:44.520 --> 0:08:46.520 So there is this sort of larger question when you 0:08:46.559 --> 0:08:49.640 say banks will still be the center of the lending universe, 0:08:50.200 --> 0:08:52.600 it raises this question about what that means. There'll be 0:08:52.640 --> 0:08:55.559 the center in terms of maybe organizing some of these transactions, 0:08:55.840 --> 0:08:58.560 but not necessarily the center of profits, not necessarily the 0:08:58.600 --> 0:09:01.560 center of deploying risk and then getting that outsize return 0:09:01.640 --> 0:09:03.640 for some of these private loans. Is that what we're 0:09:03.640 --> 0:09:05.520 saying that they're going to be the center of sort 0:09:05.559 --> 0:09:08.960 of some of the transactional aspects, but that private credit 0:09:09.040 --> 0:09:11.160 firms are going to really get the upside from these 0:09:11.200 --> 0:09:12.440 loans that banks used to capture. 0:09:12.840 --> 0:09:16.719 I mean, I think from the side of the banking relationship, 0:09:16.760 --> 0:09:20.120 they really have a lot of the client relationships, a 0:09:20.200 --> 0:09:25.760 lot of the underwriting expertise. But in an environment where 0:09:26.160 --> 0:09:29.080 risk weighted assets are going up, does it make sense 0:09:29.120 --> 0:09:31.920 to hold all of that capital on the bank balance 0:09:31.960 --> 0:09:34.760 sheet or is there a more capital efficient way to 0:09:34.880 --> 0:09:38.640 do it? I think that's really the shift that we're 0:09:38.679 --> 0:09:41.120 seeing now. Some of these factors have been in place 0:09:41.120 --> 0:09:43.360 for a really long time, going back to the Financial crisis. 0:09:43.400 --> 0:09:46.960 After Dodd Frank was enacted, the public syndicated leverage loan 0:09:47.000 --> 0:09:49.280 markets grew because banks didn't want to keep those loans 0:09:49.280 --> 0:09:51.800 on their balance sheet. Instead they syndicated them out to 0:09:51.840 --> 0:09:54.560 a wide range of investors. That's how the public debt 0:09:54.559 --> 0:09:56.560 markets have been growing for so long. So I think 0:09:56.679 --> 0:10:01.440 that's just it's another sort of iteration of this capital 0:10:01.520 --> 0:10:05.480 allocation that's shifting in response to the regional banking disruption 0:10:05.559 --> 0:10:08.360 in March, in response to the potential rules for Basle 0:10:08.360 --> 0:10:11.000 three endgame, and I think it's probably a longer term shift. 0:10:11.040 --> 0:10:12.560 By the way, I would say, you know, our three 0:10:12.559 --> 0:10:15.240 and a half trillion forecast, it assumes a fifteen percent 0:10:15.320 --> 0:10:18.240 compound annual growth rate. That's actually below the growth rate 0:10:18.280 --> 0:10:20.800 that we've seen over the past five years, and it's 0:10:20.800 --> 0:10:22.920 consistent with the growth rate over the past decade. 0:10:23.000 --> 0:10:25.040 So it sounds large. 0:10:24.720 --> 0:10:27.320 But it's actually a continuation of the trend that's already 0:10:27.320 --> 0:10:27.760 been in place. 0:10:27.840 --> 0:10:29.560 Let's talk about big moves out of the last month. 0:10:29.679 --> 0:10:31.720 Credit spread so much tighter on high yield. I think 0:10:31.760 --> 0:10:34.400 three sixty seven right now, I just want it from 0:10:34.440 --> 0:10:36.199 your perspective, still up in quality, and what do you 0:10:36.240 --> 0:10:36.840 make of this move? 0:10:37.040 --> 0:10:39.960 So, I mean, I think the move it's very It's 0:10:40.000 --> 0:10:44.280 consistent with this kind of year end rally that has 0:10:44.360 --> 0:10:49.320 been fueled by pretty favorable technicals. We've seen issuance pick up, 0:10:49.520 --> 0:10:52.440 but not to a significant extent that it's interfering with 0:10:52.520 --> 0:10:56.200 that tightening. From our perspective, yes, up in quality still 0:10:56.240 --> 0:10:56.960 makes a lot of sense. 0:10:57.000 --> 0:10:58.280 For this really important reason. 0:10:58.760 --> 0:11:00.920 Most of the issuance in twenty twenty three, and I'm 0:11:00.920 --> 0:11:03.520 talking about the left in market has been up in 0:11:03.640 --> 0:11:07.040 quality within that market, so double bes and high single bees. 0:11:07.360 --> 0:11:10.200 The low low end of the quality spectrum, so triple 0:11:10.240 --> 0:11:13.120 c's and low single bees, has really been untested. There's 0:11:13.120 --> 0:11:15.679 been a lot of talk about rate cuts. That's not 0:11:15.720 --> 0:11:17.840 really our base case in the first half. But even 0:11:17.880 --> 0:11:19.640 if we do get a few modest rate cuts, just 0:11:19.640 --> 0:11:23.320 to put that in perspective, the implied refinancing cost on 0:11:23.400 --> 0:11:26.080 average for triple C's is above six hundred basis points. 0:11:26.320 --> 0:11:29.240 For the distressed universe it's above fourteen hundred basis points. 0:11:29.360 --> 0:11:31.640 So this low end of the quality spectrum. Even if 0:11:31.679 --> 0:11:34.480 we get some rate relief, they're still going to be 0:11:34.520 --> 0:11:37.120 refinancing into a much higher cost of capital regime. 0:11:37.200 --> 0:11:39.560 How long can goldilocks lost goldilocks last? 0:11:39.559 --> 0:11:39.719 Then? 0:11:40.120 --> 0:11:42.559 I think it's the title of our one Q outlook 0:11:42.600 --> 0:11:45.600 was a widening divide, and I really think it speaks 0:11:45.640 --> 0:11:48.200 to the dispersion that's evident under the surface and a 0:11:48.200 --> 0:11:52.160 lot of these markets. So for goldilocks, investment grade goldilocks, 0:11:52.679 --> 0:11:55.400 you know, high quality, high yield, they're in a pretty 0:11:55.400 --> 0:11:57.839 good spot, especially if we can achieve the soft landing. 0:11:57.960 --> 0:12:00.000 If you're a triple C rated credit that has refined 0:12:00.080 --> 0:12:02.800 nancing to do and you're looking at your current coupon 0:12:02.960 --> 0:12:04.959 and then the six hundred basis points that it may 0:12:04.960 --> 0:12:07.880 cost you to refinance in today's market or more much 0:12:07.880 --> 0:12:10.080 different story. It's part of the reason why we expect 0:12:10.080 --> 0:12:12.960 defaults to continue to march higher through the first half 0:12:12.960 --> 0:12:15.480 of next year. It's not not a spike, not a 0:12:15.520 --> 0:12:18.840 significant increase. But I don't think we ask a lot 0:12:19.240 --> 0:12:21.160 have we seen the last of this transition to a 0:12:21.240 --> 0:12:22.000 higher cost of capital. 0:12:22.040 --> 0:12:22.959 I don't believe that we have. 0:12:32.880 --> 0:12:35.000 With us around the table. I'm really placed society brilliant. 0:12:35.040 --> 0:12:37.760 Libby Cantroll, the managing director and head a public policy 0:12:37.840 --> 0:12:38.400 over at PIMCO. 0:12:38.440 --> 0:12:41.240 Libby, good morning. Another big debate for Republicans. 0:12:41.440 --> 0:12:41.880 Big debate? 0:12:42.240 --> 0:12:44.640 Yes, is this the big one? The difference? 0:12:45.000 --> 0:12:46.400 This is the big one? So this may be the 0:12:46.480 --> 0:12:46.960 last one. 0:12:47.000 --> 0:12:51.360 Actually, there's not another debate schedule before Iowa, when voters, 0:12:51.360 --> 0:12:53.200 of course on the Republican side, will go to the 0:12:53.280 --> 0:12:58.360 polls on January fifteenth. Viewership has declined since the first debate. 0:12:58.679 --> 0:13:01.320 That's when we saw sort of top tick of thirteen million. 0:13:01.679 --> 0:13:04.360 The last debate was around seven million, So we'll see 0:13:04.360 --> 0:13:06.439 if people are even paying attention to this. I think 0:13:06.440 --> 0:13:10.160 the real question, though John is does can Nicky Haley 0:13:10.240 --> 0:13:13.200 have another breakout moment? Does this sort of sustain the 0:13:13.240 --> 0:13:15.600 momentum that she has both in terms of the polling 0:13:15.679 --> 0:13:18.800 but very importantly in terms of the donors, And that 0:13:18.840 --> 0:13:21.000 remains an open question. I think that the other three 0:13:21.040 --> 0:13:22.959 folks on the debate stage will be sort of attacking 0:13:23.040 --> 0:13:26.560 Nicki Haley. I think Nicki Heley will be attacking President Trump, 0:13:26.679 --> 0:13:30.439 so it should be raucous as usual. But does it 0:13:30.480 --> 0:13:32.480 actually make a difference. I think that's the open question. 0:13:32.600 --> 0:13:35.640 What's the chance that you see another Biden Trump matchup. 0:13:35.800 --> 0:13:38.240 Well, so you know, what we're guiding our clients too, 0:13:38.520 --> 0:13:40.800 is one is that Biden will be the nominee. 0:13:41.200 --> 0:13:42.960 This sort of idea that there. 0:13:42.880 --> 0:13:47.640 Is some great cabal at the convention that will unseat him. 0:13:47.679 --> 0:13:49.199 We just do not think as founded. 0:13:49.640 --> 0:13:53.000 Senator bros from Louisiana, who had served with Joe Biden 0:13:53.040 --> 0:13:56.400 in the Senate, said, as long as President Biden is breathing, 0:13:56.480 --> 0:13:58.280 he is running. And I think that is something we 0:13:58.280 --> 0:14:01.760 should just you know, take take for what it is. 0:14:02.080 --> 0:14:04.360 You know, on the Republican side, obviously, if. 0:14:04.240 --> 0:14:07.080 The primaries were held tomorrow, it looks like Trump would 0:14:07.160 --> 0:14:10.000 be the nominee. They're not going to be held tomorrow. 0:14:10.040 --> 0:14:12.960 They're held in around forty days. And what we've seen 0:14:13.000 --> 0:14:15.560 with Iowa and New Hampshire is that things can change. 0:14:16.160 --> 0:14:18.719 They haven't really changed in terms of dictating who the 0:14:18.760 --> 0:14:22.320 nominee is since two thousand and eight when Obama, who 0:14:22.360 --> 0:14:24.600 was sort of underperforming all of the polls, that really 0:14:24.600 --> 0:14:26.840 outperformed in both Iowa and New Hampshire and was able 0:14:26.880 --> 0:14:29.840 to get the momentum to the nomination. So a lot 0:14:29.920 --> 0:14:33.360 can still happen, but as of now, if you were saying, 0:14:33.400 --> 0:14:35.760 if the primaries were held tomorrow, it would be another 0:14:35.800 --> 0:14:39.000 Biden Trump rematch, and you know, ironically, I'll just say, 0:14:39.040 --> 0:14:41.120 is that seventy percent of Americans don't want that. 0:14:41.880 --> 0:14:43.480 So that's the reason why I think it got so 0:14:43.560 --> 0:14:47.040 much attention yesterday when Joe Biden said if it wasn't 0:14:47.080 --> 0:14:49.000 for Donald Trump, he wouldn't be running again. 0:14:49.640 --> 0:14:50.520 What do you make of that? 0:14:50.560 --> 0:14:53.120 Do you make that if NICKI Haley is the nominee 0:14:53.120 --> 0:14:56.320 for the Republican side, that there is a chance that 0:14:56.400 --> 0:14:58.240 Joe Biden would step down and pave the way for 0:14:58.320 --> 0:14:58.880 somebody else. 0:14:59.280 --> 0:15:02.600 So his his pressure ap really watched that back last 0:15:02.680 --> 0:15:04.640 night after those comments were made. They were made, of 0:15:04.640 --> 0:15:07.680 course in private at a fundraiser, so was maybe I 0:15:07.680 --> 0:15:11.040 think they're saying taken out of context. You know. However, 0:15:11.560 --> 0:15:13.760 you know, this is something that President Biden has been 0:15:13.800 --> 0:15:15.920 saying since he was a candidate in twenty twenty, that 0:15:15.920 --> 0:15:18.800 that's why he was running the first time, and so 0:15:18.840 --> 0:15:23.000 this is somewhat consistent with that messaging. However, if Trump 0:15:23.080 --> 0:15:26.040 does not get the nomination, I still think that President 0:15:26.080 --> 0:15:30.000 Biden is the incumbent president. He believes that he really 0:15:30.040 --> 0:15:33.000 has a record both on the economy and then foreign 0:15:33.080 --> 0:15:36.520 policy to feel confident to run on. So we are 0:15:36.520 --> 0:15:39.480 not getting sort of any indication from folks close to 0:15:39.520 --> 0:15:42.520 the Biden world that he is, that he's not running. 0:15:42.560 --> 0:15:43.160 He is running. 0:15:43.280 --> 0:15:44.080 We've been all appreciate. 0:15:44.120 --> 0:15:46.600 I think we could all benefit from a delegation oudication 0:15:46.760 --> 0:15:48.000 rules clinic from you. 0:15:48.640 --> 0:15:51.520 How have things changed for Republican primary. 0:15:51.240 --> 0:15:54.560 Especially as a non Yes, a US citizen, So I 0:15:54.640 --> 0:15:56.160 appreciate you on that question. 0:15:57.000 --> 0:15:59.000 Yeah, so this is important. 0:15:59.120 --> 0:16:01.440 It's like very wants and a lot of our client's 0:16:01.480 --> 0:16:03.000 eyes understandably glazed over. 0:16:03.440 --> 0:16:05.920 But to get the nomination, it's just a delegate game. 0:16:05.960 --> 0:16:08.040 You need to get fifty percent of the delegates at 0:16:08.080 --> 0:16:10.680 stake on the Republican side and the Democratic side. The 0:16:10.720 --> 0:16:13.160 Republican side is the real story here, though, because the 0:16:13.560 --> 0:16:17.560 Trump campaign much more organized than it was in twenty sixteen. 0:16:17.560 --> 0:16:21.960 By their own emission, they have now systematically changed the 0:16:21.960 --> 0:16:25.480 way that states allocate delegate rules to benefit him as 0:16:25.520 --> 0:16:28.120 long as it's a crowded field, meaning that he They've 0:16:28.240 --> 0:16:30.760 changed the rules to what's called winner take all, So 0:16:30.960 --> 0:16:33.600 as long as President Trump is winning a plurality of 0:16:33.640 --> 0:16:35.960 the vote in many states, he will get one hundred 0:16:36.000 --> 0:16:38.840 percent of the delegates, and the punchline for all of 0:16:38.920 --> 0:16:41.320 us is that that makes it much easier for him 0:16:41.320 --> 0:16:43.920 to get the nomination much more quickly. So I would 0:16:44.040 --> 0:16:46.920 argue that by March fifth, which is Super Tuesday, we'll 0:16:46.960 --> 0:16:49.520 have had forty five percent of the delegates at stake 0:16:49.560 --> 0:16:52.240 being voted on, we likely will have a very good 0:16:52.240 --> 0:16:54.960 idea of who's going to be the nominee or whether. 0:16:54.760 --> 0:16:56.800 It's going to be more of a competitive two person race. 0:16:56.840 --> 0:16:58.320 As you said, so we know there's four people on 0:16:58.360 --> 0:17:01.240 the stage. Later is on the calendar where that for 0:17:01.600 --> 0:17:03.760 needs to become one to change the outcome of this. 0:17:03.840 --> 0:17:05.199 Well, I think there are a lot of folks on 0:17:05.200 --> 0:17:06.760 both the Republican side and then also some of the 0:17:06.760 --> 0:17:09.159 Democratic side. As you've seen, there's some now Democratic donors 0:17:09.200 --> 0:17:13.600 who are you know, donating to Nicki Haley sort of interesting, 0:17:14.200 --> 0:17:18.320 unprecedented in many ways, who are trying to argue for 0:17:18.359 --> 0:17:20.600 a Chris Christy to say drop out of the race 0:17:21.000 --> 0:17:23.840 before Iowa. You know, John, I think what we've seen 0:17:23.840 --> 0:17:26.280 though before is that again so much can change. That 0:17:26.359 --> 0:17:30.440 much of this is unprecedented, particularly given what we might 0:17:30.480 --> 0:17:34.240 be facing, which is you know, two incumbent presidents effectively 0:17:34.280 --> 0:17:36.639 running against each other. So you know, I don't think 0:17:36.680 --> 0:17:39.359 there's a drop dead date, but I do think that 0:17:39.400 --> 0:17:41.520 it needs to become a two person race sort of 0:17:41.520 --> 0:17:42.560 by South Carolina. 0:17:42.640 --> 0:17:45.320 That's February twenty fourth. So I think the bottom. 0:17:45.040 --> 0:17:47.359 Line for kind of the markets and for investors is 0:17:47.359 --> 0:17:49.600 that the next seventy five days really matters. 0:17:49.640 --> 0:17:50.840 We will have a very good. 0:17:50.640 --> 0:17:53.920 Idea by sort of South Carolina by Super Tuesday, which 0:17:53.920 --> 0:17:56.520 is March fifth, whether this is going to be President 0:17:56.560 --> 0:17:58.440 Trump Biden or whether it's going to be more of 0:17:58.480 --> 0:18:01.439 a two person race between Nicky Haley and Trump. 0:18:01.560 --> 0:18:03.040 In those seventy five days, we're going to be dealing 0:18:03.080 --> 0:18:05.600 with a couple of deadlines for funding the government. Before 0:18:05.640 --> 0:18:07.359 I let you go, we keep talking about where is 0:18:07.400 --> 0:18:09.919 the leverage. The leverage is in the US government. I 0:18:09.920 --> 0:18:12.679 then you figure something out in order to keep operating. 0:18:13.359 --> 0:18:16.040 How are you advising people in the market to understand 0:18:16.400 --> 0:18:19.240 what's happening, what the likelihood of a shutdown is, what 0:18:19.280 --> 0:18:21.840 that means in terms of the growing risk frankly that 0:18:21.840 --> 0:18:23.800 it's been attributed to in markets. 0:18:24.040 --> 0:18:26.280 Yeah, So mean I think that two things. One is 0:18:26.280 --> 0:18:27.880 that this is not the dead ceiling, right. The debt 0:18:27.920 --> 0:18:31.959 ceiling was existential for the markets that has been fortunately 0:18:31.960 --> 0:18:36.359 addressed until January or February of twenty twenty five. This 0:18:36.440 --> 0:18:39.480 is really the most foundational function of Congress is just 0:18:39.480 --> 0:18:43.160 to keep the lights on. They keep kicking the can 0:18:43.240 --> 0:18:45.439 down the road, Lisa, does it really matter if they 0:18:45.480 --> 0:18:48.359 shut down the government? Probably not if it's not for 0:18:48.359 --> 0:18:50.600