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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Joining us now with JP Morgan with his leadership and

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Speaker 2: fixed income is Bob Michael. Why is the bond market

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Speaker 2: so calm? I look at sofur swaps recovering. I look

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Speaker 2: at the ten year real yield really coming in in

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Speaker 2: a responsible way? Why is the world turned upside down?

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Speaker 2: Accepted at Piers bonds?

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Speaker 3: Before I answer that, Tom, I have a bone to

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Speaker 3: pick with you. As a New Englander, you should know

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Speaker 3: that New Hampshire actually has the highest quality black flies.

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Speaker 3: They do the more temperate climate the lakes. Vacationers and

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Speaker 3: blackflies go there by choice and.

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Speaker 2: Now a surveillance audible as well. It is widely understood

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Speaker 2: the blackflies of Boden are far more vicious than what

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Speaker 2: you see in the burbs of Cold me. You know,

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Speaker 2: there's just no question about it. I was once in

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Speaker 2: a car. This is ancient history. I got out of

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Speaker 2: the car the flies were so bad we just got

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Speaker 2: back in the car and left. Thank you for that

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Speaker 2: vision of knowing. Michael. Why is there a Colm in

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Speaker 2: the market your world?

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Speaker 3: Because a couple of things have happened. The first thing

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Speaker 3: that happened is the deleveraging pass through the system, the

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Speaker 3: forcing of levered investors who had swap trades on who

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Speaker 3: were short Europe along the US. All these other things

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Speaker 3: got squeezed out of the system. It took yields very high,

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Speaker 3: it's deep in the curve, and then it was done.

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Speaker 3: All the false narratives out there were proven to be false.

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Speaker 3: The thought that foreign official official institutions we're selling treasuries

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Speaker 3: was just nonsense. When you look at the Fed's custody data,

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Speaker 3: they actually increase their position. And then you had some blinking.

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Speaker 3: You've had a couple FED officials acknowledge that yes, they

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Speaker 3: have a dual mandate and if something happens in the

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Speaker 3: employment market, they'd be poised to step in. And you

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Speaker 3: had the administration coming out saying, hey, you know what,

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Speaker 3: we're open to talks and we're looking to negotiate. All

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Speaker 3: those things created Colm and now have created a reversal

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Speaker 3: in the bond market.

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Speaker 4: What's the bond market saying about this US economy, Bob Azer,

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Speaker 4: I keep hearing strategies coming. Are economists raising their prospects

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Speaker 4: and their odds for recession?

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Speaker 5: What's the bond market telling you?

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Speaker 3: The bond market's telling us watch out as things stand.

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Speaker 3: If the tariffs go through as they're currently spec out,

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Speaker 3: the ninety days passes and there's only some moderate compromise,

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Speaker 3: the US is going into recession. I think our economist

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Speaker 3: Mike Faroli has made that clear. He's got the back

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Speaker 3: half of this year at minus half a percent real GDP.

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Speaker 3: When you look at things like tips break evens, they're

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Speaker 3: down below or right around two percent. They're not at

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Speaker 3: the four percent that everyone's talking about where inflation is

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Speaker 3: going to be. The market realizes that a one time

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Speaker 3: price reset and inflation will kill top line demand, aggregate

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Speaker 3: final demand, and will go barreling into recession, and then

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Speaker 3: all the pricing will fade.

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Speaker 5: So does that suggest in a fix and co market?

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Speaker 4: I really don't want to take much credit risk here today.

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Speaker 4: I want to stick to you, stick to the treasury

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Speaker 4: market and clip that coupon.

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Speaker 3: You can take good quality credit risk. It doesn't I've

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Speaker 3: heard a lot of people come on and say, no,

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Speaker 3: you've got to be high quality. We're at the top

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Speaker 3: of the capital structure. If you own any equities, then

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Speaker 3: you should be owning the debt of the companies that

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Speaker 3: you own, and a lot of them are below investment grade.

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Speaker 3: The key is to find companies that can actually make

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Speaker 3: it through a period of taxation with higher prices on

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Speaker 3: their input costs and then some loss and demand destruction

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Speaker 3: in their sales. There are a lot of companies in

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Speaker 3: the investment grade space that will be fine. There's no

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Speaker 3: aherea there, and the majority of the high yield market,

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Speaker 3: you know, ninety seven plus percent of it will be fined.

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Speaker 2: Okay, I'm going to go here because I know you're

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Speaker 2: a expert in it. Folks, they did mark to market

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Speaker 2: because that's what you did in the nineteenth century. And

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Speaker 2: they said FDR down in nineteen thirty eight and said

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Speaker 2: this ain't working out, and we changed measuring everything every day,

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Speaker 2: every Friday, every moment on Wall Street. It went away,

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Speaker 2: and then we brought it back, and we had the

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Speaker 2: same challenges within the banking system. Should we be marketing

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Speaker 2: to market private equity and private credit or did they

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Speaker 2: get a pass in the Bob Michael world.

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Speaker 3: I think there's a shadow system there that does mark

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Speaker 3: them to market. And I think this is going to

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Speaker 3: be highlighted this year because, as you well know, they're

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Speaker 3: an awful lot of plans who have expenses to pay.

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Speaker 3: Maybe you're a pension fund, you have retirey benefits, maybe

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Speaker 3: you're insurance company, you have claims to pay. Maybe your

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Speaker 3: university endowment and you've got to run your school and

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Speaker 3: your funding's been pulled. And now you're looking at your portfolio.

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Speaker 3: What was in alt and a liquid seems not to

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Speaker 3: have moved in price, and everything in the public markets

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Speaker 3: at one point was down five to fifteen twenty percent,

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Speaker 3: but the only thing you could sell was what was down.

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Speaker 3: I think you're going to see one some rebalancing and

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Speaker 3: two some calls about greater liquidity space.

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Speaker 2: Well, this is really important. And radio you don't see this,

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Speaker 2: but on YouTube cardinal rule of thumb, when a global

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Speaker 2: Wall Street leader puts their hands up and starts measuring things,

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Speaker 2: that's when you lean forward and really listen. How big

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Speaker 2: is the haircut? Can you estimate for US blended private equity,

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Speaker 2: given institution? How much? What's the hit going to be?

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Speaker 2: I haven't number in my head.

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Speaker 3: Yeah, you know the numbers that have been thrown out

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Speaker 3: there are around fifteen percent. Yes, but but there is

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Speaker 3: an awful lot of capital that's forum that's gone into

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Speaker 3: the secondary space. So I don't think there's going to

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Speaker 3: be anything near that headcut, that haircut. I think a

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Speaker 3: lot of capital is there dry powder, It will absorb it.

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Speaker 3: I know in the private credit space, we look for

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Speaker 3: opportunities in secondaries and it's very competitive.

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Speaker 2: Well said, yeah, it's Friday, General counsel for JP. Morgan's

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Speaker 2: not listening.

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Speaker 5: No, that's good chilling out on a Friday. Yeah, getting ready.

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Speaker 2: I want you to talk, Bob. And certainly every report

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Speaker 2: we've had a surveillance is liquidity's in order, the plumbings

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Speaker 2: in order within the American financial system. Where's the leverage?

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Speaker 2: The shadow of leverage out there? It amends every ten

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Speaker 2: every fifteen years we move to a new leverage. What's

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Speaker 2: the new new leverage out there you worry about?

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Speaker 3: Well, I think where some of the marginal funding has

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Speaker 3: aggregated is clearly in private credit. If you go back

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Speaker 3: to two thousand and seven, I don't really recall much

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Speaker 3: in the way of private credit except if there was

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Speaker 3: some sort of debt exchange or something like that. And

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Speaker 3: today estimates are about two trillion dollars, So it's come

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Speaker 3: from nowhere to something big. When we look at the

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Speaker 3: size of the entire US banking system, the commercial and

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Speaker 3: industrial loan book, Paul, you will be able to us

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Speaker 3: on that, but that actually is it's three trillion. So

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Speaker 3: that's two trillion in borrowing that might have historically gone

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Speaker 3: to the public high yield market, the broadly syndicated loan market,

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Speaker 3: or two banks. When we look at the public high

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Speaker 3: yield market, it looks very clean, even in a fairly

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Speaker 3: meaningful recession, thing greater than the Ferole minus half a

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Speaker 3: percent for a couple quarters, something closer to one percent.

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Speaker 3: We can only get the fault rates up to about

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Speaker 3: three percent in the public high yield market, and we

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Speaker 3: know there will be more pain. We think that gets

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Speaker 3: felt in private credit.

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Speaker 2: Now.

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Speaker 3: It remains to be seen whether that can all be

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Speaker 3: dealt with behind the scenes, but it feels like we're

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Speaker 3: about to approach the long way to shake out there.

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Speaker 4: Hey, Bob, we were, Tom and I were just talking

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Speaker 4: to Megan Graper earlier this morning. She runs Deck Capital

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Speaker 4: Markets at Barkley's. If she called you up today and

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Speaker 4: she had a new issue in the investment grade market.

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Speaker 5: Would you buy that? Are you open to that? In

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Speaker 5: all the craziness that's going out there in the world.

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Speaker 3: Absolutely, one hundred percent nice because because don't worry. I'm

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Speaker 3: sure they have. Yes, Corporate America is going into this

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Speaker 3: in really good shape. Profit margins are very compelling. Actually,

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Speaker 3: consumer balance sheets are in pretty good shape too, So

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Speaker 3: businesses and households can withstand some level of pain on

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Speaker 3: taris and investment. Great companies were not all that that

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Speaker 3: worried about, and generally they these new deals come with

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Speaker 3: a bit of a concession. We have to know what

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Speaker 3: the company is, you know what what their industry looks like.

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Speaker 3: Where are they issuing all the usual credit research things.

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Speaker 3: But yeah, we're buying.

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Speaker 2: The president just making comments. These are tape comments, folks

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Speaker 2: in Oregona's way to roam in the funeral of the

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Speaker 2: Pope gave us presidential statements on negotiations. Everything's wonderful, full everything.

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Speaker 2: I think he literally said, it's going to be a

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Speaker 2: wealthier nation. The rest of them. America's turned upside down

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Speaker 2: here worrying about shipping arrivals in Los Angeles, and that

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Speaker 2: if we almost on a Hyagen basis, if we clear

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Speaker 2: the market, Bob Michael, is it just like it used

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Speaker 2: to be? Do we go to something new here within

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Speaker 2: American Wall Street? Or do we if we clear all

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Speaker 2: these troubles, do we go back to what we knew?

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Speaker 2: What would Paul deep into January?

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Speaker 1: Yes?

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Speaker 2: I mean do we just revert back to what we knew?

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Speaker 3: So we're in an interesting couple months here. As I

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Speaker 3: was listening to Lisa talk about the bottom of the

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Speaker 3: capital structure, I think they're called equities. I'm not entirely

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Speaker 3: sure shape something. One of those markets was up a

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Speaker 3: couple tents. I think the NASDAC, you know, the specious companies.

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Speaker 3: We're in a period of a couple months where we

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Speaker 3: should see good news. Where we're in that ninety day

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Speaker 3: delay on tariffs, that pause, You've already had the administration

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Speaker 3: come out and tell us good things. Negotiations are underway,

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Speaker 3: there are paths to compromise, we're working things out. You've

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Speaker 3: got the Federal Reserve out there telling us, yeah, we're

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Speaker 3: keeping an eye on the labor market, and you've got

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Speaker 3: Secretary Besson out there saying we've got this. There are

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Speaker 3: a lot of things we can do in the treasury market.

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Speaker 3: So all of those things are calm, which didn't exist

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Speaker 3: a couple of weeks ago. The second thing is it's

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Speaker 3: too early for the hard data to turn, and we

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Speaker 3: fully expect unless there's a meaningful roll back on the

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Speaker 3: TWERF policy as it sits now, then the hard data

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Speaker 3: will turn. But for now the next couple months, everything

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Speaker 3: looks to be smooth selling. I think you could retrace

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Speaker 3: all of the selloff of thank you, of March April

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Speaker 3: thank you.

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Speaker 2: I'm letting on a Friday, we got to I think

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Speaker 2: I can get through the week.

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Speaker 3: One time I didn't expect to be positive myself.

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Speaker 2: One final question, I am so honored to ask you this.

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Speaker 2: With Pennsylvania classics including COLSD one four Roman America, we

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Speaker 2: will have a funeral this weekend in Rome. I have

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Speaker 2: stood in Santa Pudenziana Church three point thirteen AD, built

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Speaker 2: on Roman ruins, and it was literally where the Pope

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Speaker 2: slept before they built two or three churches before Saint

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Speaker 2: Peter's link in this thing that we have within the

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Speaker 2: Catholic Church back to biblical times, back to Roman times.

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Speaker 2: How do you perceive the Catholic Church back to what

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Speaker 2: you studied at Pennsylvania.

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Speaker 3: Well, that's way outside of my level of ex perceise.

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Speaker 3: I will tell you I've been to the Vatican a

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Speaker 3: couple of times, and I'm always impressed. And I do

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Speaker 3: see the classics everywhere. I see the Romans laboring away

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Speaker 3: constructing a city. It's just spectacular.

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Speaker 2: Bob Michael, thank you so much. What he really is

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Speaker 2: going to say is we're going to get a fifty

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Speaker 2: eight page and a report letter from the new Pope,

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Speaker 2: just like we get from mister Diamond. Mister Michael is

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Speaker 2: a JP Morgan.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 2: Without question, the most important conversation of the day for

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Speaker 2: Global Wall Street. Let me describe mister Adams to you

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Speaker 2: as we talk of this moment in American history. He

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Speaker 2: is a student of American history out of the University

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Speaker 2: of Kentucky. His public service to Bush Senior, his many

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Speaker 2: public services to Bush Junior into a legitimate lobbying effort

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Speaker 2: in Washington, and he is the banker's lobbyist in Washington,

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Speaker 2: President the chief executive officer of what is called THEIF.

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Speaker 2: And the other day he had a modest conversation with

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Speaker 2: the Secretary of Treasury Tim just as a general thrilled

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Speaker 2: you with us today from the meetings in Washington is

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Speaker 2: a general statement, how scared is Global Wall Street? How

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Speaker 2: scared is Manhattan Wall Street of this moment in banking? Yeah?

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Speaker 6: Sure, Tom, thank you for the intro. It's the best

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Speaker 6: intro I've had in a long time. It's such an

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Speaker 6: honorary back on your show. I listened to you every day. Look,

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Speaker 6: people are worried because of just the enormous uncertainty and

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Speaker 6: the daily changes that are coming out of Washington. Although

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Speaker 6: I will say this week was a breakout week for

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Speaker 6: Secretary Best, and I think he really established himself as

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Speaker 6: the anchor voice in this administration, a sober voice or reason.

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Speaker 6: And I think the time that the industry spent within

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Speaker 6: this week was a calming experience. And I think if

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Speaker 6: the administration in the White House will let Scott Secretary

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Speaker 6: Best and get out on the front more often, I

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Speaker 6: think that would help our industry, and I think it

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Speaker 6: would help markets.

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Speaker 2: Okay, I'll go with you there. But basically what they

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Speaker 2: did they put a cork in the mouth of selected

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Speaker 2: other Trump bites. Let's say we continue with the cork

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Speaker 2: in the mouth. That's great. Besson asks to talk to

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Speaker 2: Trump about what this nation needs first, sing Paul Sweeney

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Speaker 2: said this morning, mister Adams is shipping in Los Angeles

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Speaker 2: is off a cliff. How far off a cliff do

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Speaker 2: your bankers see the American economy?

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Speaker 6: Yeah, they're very worried. Obviously, the soft indicators of what

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Speaker 6: we've seen initially. I think about Q three, Q four,

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Speaker 6: you're going to see real indicators show that the real

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Speaker 6: economy is beginning slow. The workers that this administrations say

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Speaker 6: they want to help manufacturing factory workers are going to

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Speaker 6: get hurt. It doesn't need to happen. I think Secretary

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Speaker 6: Bessence again, sober voice or reason. I think if the

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Speaker 6: President would listen more to Scott and let him lead

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Speaker 6: on these discussions and really put in place a thoughtful policy,

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Speaker 6: I think we can avoid the worst. But right now

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Speaker 6: it hangs in the balance.

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Speaker 5: Jimmy, you're down in our Washington, DC Bureau.

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Speaker 4: As we speak, you've been in meeting with some of

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Speaker 4: the folks in the IMF, which has been in Washington

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Speaker 4: this week.

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Speaker 5: What are our global trading partners what are they telling

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Speaker 5: you these days?

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Speaker 6: Well, first, there was a sigh relief this week when

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Speaker 6: the United States and articularly about Secretary Vestent, agreed to

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Speaker 6: stay in a leadership role in the Brightwoods Institution, the IMF,

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Speaker 6: the World Bank, and other iffies. I think there was

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Speaker 6: some concern that the US was going to pull back

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Speaker 6: or downsize or try to undermine these institutions. But what

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Speaker 6: we heard from the Secretary was a reaffirmation of not

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Speaker 6: only the US a belief in these institutions, but they

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Speaker 6: want to play a leadership role. They want to get

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Speaker 6: back to factory settings. I get that. I actually agree

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Speaker 6: with it, so I think a reaffirmation. The second is

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Speaker 6: just the uncertainty over trade in tariffs, and that's really

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Speaker 6: creating turmoil around the world and enormous uncertainty about the

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Speaker 6: trajectory of growth.

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Speaker 4: Tim Again, when you talk to your counterparts in DC

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Speaker 4: and then the IMF and all our global trading partners,

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Speaker 4: is there since that globalization as kind of we've grown

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Speaker 4: up with the last I don't know, thirty forty fifty

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Speaker 4: sixty years.

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Speaker 6: Is that over Well, it certainly feels like we're moving

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Speaker 6: into a new chapter. I actually think globalization of the

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Speaker 6: last forty fifty years improved a lot of tens of millions,

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Speaker 6: if not hundreds of millions of people globally, and actually

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Speaker 6: think it was good for the US economy. But they

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Speaker 6: had that discussion the last election. Let's move on to

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Speaker 6: figure out what what does the next chapter look like?

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Speaker 6: And I think we want an outcome that works for

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Speaker 6: the United States and works for others. Alliances and trades

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Speaker 6: still mattered, David Ricardo Toad is that two hundred and

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Speaker 6: fifty years ago. We just need to stay true to

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Speaker 6: the lessons we've learned over time. But I understand that

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Speaker 6: the US wants a better deal from some countries, including China.

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Speaker 6: I get that. Let's move on to that, resolve that

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Speaker 6: dispute and then get back to basics.

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Speaker 4: Tim, you mentioned China, and obviously that's a huge trading

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Speaker 4: partner with the United States.

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Speaker 5: Any sense of.

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Speaker 4: Kind of what the administration's strategy is as it relates.

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Speaker 5: To China at this point.

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Speaker 6: Well, so far it's been to try to isolate and

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Speaker 6: bludge in a bit. You know, I've been going to

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Speaker 6: China for thirty years. I don't know that that's going

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Speaker 6: to work. I understand that the President believes in his strategy.

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Speaker 6: He's certainly a you know a history of negotiations. So

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Speaker 6: we'll see if it works. I think you've got to

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Speaker 6: find characteristics. I think that you've got to build an alliance,

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Speaker 6: and I think you've got to treat China with respect.

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Speaker 6: Trying to bludge in them to come to the table

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Speaker 6: hasn't worked in the past. I don't think it's going

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Speaker 6: to work this time.

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Speaker 2: Tim Adams with us the IF after his conversation with

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Speaker 2: the Secretary of Treasury, just a terrific perspective not only

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Speaker 2: on our banking industry and the people he represents with

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Speaker 2: the IIF, but also of course with his Kentucky and

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Speaker 2: the Republican Party. Tim Adams, let me shift gears with

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Speaker 2: you right now, and this is going to go out

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Speaker 2: of your sense of Kentucky. Kessius Marcellus Clay started a

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Speaker 2: Republican Party a few years ago in Kentucky out of

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Speaker 2: the Civil War, and you know, it was an old

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Speaker 2: style Kentucky party, and then it goes on to what

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Speaker 2: you lived with a Bush family. There was a certain

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Speaker 2: character to a Republican Party at Walker's Point in Kennebunkport

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Speaker 2: that's been blown up. Just look at the Oval office

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Speaker 2: with the gold and then you know, I probably think

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Speaker 2: got Tim adams portrait up there and all the rest

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Speaker 2: Tim Adams. What does the old Republican Party do? Do

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Speaker 2: they vote Democrat? Is there a third party here? What

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Speaker 2: does your Republican Party do in the next four years?

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Speaker 6: Well, if you remember Bush forty one, who I worked

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Speaker 6: for as a young White House staffer, talked about a kinder,

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Speaker 6: gentler country, and I think that's true. And I had

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Speaker 6: the honor working for Bush forty three as well, and

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Speaker 6: they believed in real decorum. Look, I think there are

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Speaker 6: a lot of people across the country trying to figure

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Speaker 6: out which of the two boxes they fit in. I

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Speaker 6: just would like to find a party that wants to

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Speaker 6: be pro growth, pro business, pro capital formation, pro risk taking,

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Speaker 6: that believes in trade. As I said about two hundred

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Speaker 6: fifty years of experience, that trade actually makes us wealthier. Right,

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Speaker 6: So that's what I'm looking for. And you know, there's

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Speaker 6: no reason why the Republican Party can't offer that or

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Speaker 6: the Democratic Party right now. I think the Democratic Party

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Speaker 6: is a bit lost, but there's an opportunity to reinvent themselves.

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Speaker 2: Avestant of the Treasury worked for sous years ago. He

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Speaker 2: seems to be able to work with everyone. Marco Rubio,

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Speaker 2: I would suggest Tim Adams as someone iif and the

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Speaker 2: bankers can deal with. These are more traditional Republican in

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Speaker 2: this Donning Brook around. Look at the economists covered this

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Speaker 2: week of the Bandaged Eagle. Tim Adams, are you looking

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Speaker 2: to Secretary Rubio and bestent for leadership to help the

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Speaker 2: president get back to where we were? Yes?

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Speaker 6: Absolutely, And look you've got great leadership on the Capitol Hill.

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Speaker 6: Chairman of Finished Services Committee, French Hill I spoke with

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Speaker 6: this week, known him for thirty years. Also that way,

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Speaker 6: Bill Haggerty, Dave McCormick. There are people on Capitol Hill.

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Speaker 6: They're Senators and House members that I think also believe

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Speaker 6: in engagement, free trade and just cap aformation and growth.

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Speaker 6: We need a pro growth strategy.

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Speaker 2: Yeah, I'm Paul, I got eight more quests jump exactly,

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Speaker 2: Tim and I are going to start talking about Henry

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Speaker 2: Clay in a moment.

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Speaker 4: All save this, Hey, Tim, talk to us about regulatory

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Speaker 4: policy here. How do you think this administration is kind

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Speaker 4: of just viewing how they want to regulate US commerce.

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Speaker 4: I mean, there was a belief at the election that

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Speaker 4: this is going to be a pro growth administration, maybe

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Speaker 4: a little bit light handed as it relates to regulation.

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Speaker 5: How do you think that's developing here?

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Speaker 6: Yeah, I think they do. I think philosophically that's exactly

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Speaker 6: where they want to go. Now you have to do

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Speaker 6: on a sector best sector basis, and we're seeing in

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Speaker 6: the energy sector a real push as he said, you know, drill, baby, drill,

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Speaker 6: let's find ways to increase oil and gas production on

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Speaker 6: top of the US being already the largest oil producer

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Speaker 6: at thirteen point two million barrels a day. So I

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Speaker 6: think that's true. On financial services, they're finding their way through.

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Speaker 6: I think we'll get to a good point. It really

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Speaker 6: depends on the sector. I do think they do want

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Speaker 6: to focus on the regulation.

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Speaker 2: Tim Adams is the new method of communication for bankers,

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Speaker 2: not through Tim Adams if but they have to appear

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Speaker 2: on Fox TV because that's what the president watches, is

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Speaker 2: that what we've become.

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Speaker 6: Well, Jamie is a unique individual and he's a larger

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Speaker 6: life figure, and I think he's a great voice and

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Speaker 6: a great face for not only the financial service industry,

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Speaker 6: but for industry generally. I think it was a brilliant

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Speaker 6: move of him to go where he knew the president

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Speaker 6: would be watching. And so I'm a big Jamie fan.

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Speaker 6: I think we, all of us, all of our voices

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Speaker 6: need to be heard in all variety of places. In

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Speaker 6: Gleen Bloomberg. You are such an important medium. So we're

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Speaker 6: all out there every day.

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Speaker 2: He's just looking for Red Sox tickets, Tim, Tim, I

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Speaker 2: look at this and again there's the international component. Please

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Speaker 2: tell me what the European bankers through the if what

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Speaker 2: they observe in Washington.

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Speaker 6: Well, look, they want to know where financial regulation is going.

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Speaker 6: The Basle process, the Bazle three we've been working on

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Speaker 6: for fifteen years. Is there some resolution, is it coming?

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Speaker 6: What does it mean? And what does that mean for Europe.

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Speaker 6: But I'll tell you this Trump shock I think has

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Speaker 6: been a wake up call for Europe. I actually think

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Speaker 6: there's an opportunity for Europe to seize the moment and

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Speaker 6: put in place policies they will create capital formation, job creation,

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Speaker 6: and they can grow. They certainly need a defense industrial base,

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Speaker 6: a security industrial base. Europe's moment is here. Can they

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Speaker 6: seize it? I don't know, but what I heard this

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Speaker 6: week from European officials they know it and there are

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Speaker 6: some here that want to move forward.

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Speaker 4: And tim I mean along those lines, you know, I

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Speaker 4: think a lot of folks feel like, Okay, Germany can

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Speaker 4: certainly step up and make those types of investments.

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Speaker 5: Maybe even Poland, I've heard.

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Speaker 4: Because just given their geography relative visa the Russia.

437
00:23:44,480 --> 00:23:45,639
Speaker 5: But how about the rest of Europe.

438
00:23:45,680 --> 00:23:48,720
Speaker 4: I'm thinking, you know, Italy, Spain, Portugal, I mean, what

439
00:23:48,760 --> 00:23:53,560
Speaker 4: can they realistically do in terms of, you know, investment

440
00:23:53,600 --> 00:23:55,640
Speaker 4: in their infrastructure, in their defense.

441
00:23:56,480 --> 00:24:00,080
Speaker 6: Well, you're right, Germany, after decades of a dorm and

442
00:24:00,119 --> 00:24:02,840
Speaker 6: see in terms of a new investment, is ready to spend.

443
00:24:02,920 --> 00:24:05,840
Speaker 6: I think the Chancellor Mertz will take over May seventh.

444
00:24:06,000 --> 00:24:08,320
Speaker 6: He's got a great, great vision. I was in Warsaw

445
00:24:08,440 --> 00:24:11,240
Speaker 6: two weeks ago. As you said, Poland is really a

446
00:24:11,240 --> 00:24:15,119
Speaker 6: great intellectual leader in terms of growth and capitalism, the

447
00:24:15,160 --> 00:24:19,320
Speaker 6: Baltic States, the Nordics. I met with Spanish officials yesterday.

448
00:24:19,359 --> 00:24:21,720
Speaker 6: I think Spain has an enormous story to tell. Rapid

449
00:24:21,760 --> 00:24:24,719
Speaker 6: economic growth in Spain, and so there is some upside.

450
00:24:24,880 --> 00:24:27,000
Speaker 6: Many of them have physical challenges, they have large debt

451
00:24:27,040 --> 00:24:29,320
Speaker 6: to GDP, they have large deficits, so they've got to

452
00:24:29,320 --> 00:24:31,800
Speaker 6: work through fiscal But I think there's an option for

453
00:24:31,840 --> 00:24:34,679
Speaker 6: a mindset that the private sector, not the public sector,

454
00:24:34,680 --> 00:24:37,600
Speaker 6: the private sector can play a growth leading role.

455
00:24:37,880 --> 00:24:42,040
Speaker 2: Tim Adams Kentucky rebuild to beat Paul Sweeney's Duke. I mean,

456
00:24:42,119 --> 00:24:44,639
Speaker 2: can Mark quote, can Mark Pope get it done at

457
00:24:44,680 --> 00:24:47,160
Speaker 2: Kentucky's So they finally walloped Duke?

458
00:24:48,200 --> 00:24:50,199
Speaker 6: Well, you know, we beat Duke this year in the

459
00:24:50,240 --> 00:24:53,240
Speaker 6: regular season. It was a big win for Mark Pope.

460
00:24:53,240 --> 00:24:54,800
Speaker 6: I think he's got a great team he's gonna put

461
00:24:54,800 --> 00:24:56,280
Speaker 6: on the floor next year. I like him. I think

462
00:24:56,320 --> 00:24:58,600
Speaker 6: he's a real deal, and the players like him as well.

463
00:24:58,840 --> 00:25:01,119
Speaker 2: Tim Adams generous of to spend this time with us

464
00:25:01,160 --> 00:25:04,440
Speaker 2: this morning with the IF, and of course that really

465
00:25:04,480 --> 00:25:08,680
Speaker 2: important interview conversation with Secretary Bessett here a few days

466
00:25:08,680 --> 00:25:11,359
Speaker 2: ago which truly moved the markets.

467
00:25:11,440 --> 00:25:15,320
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

468
00:25:15,359 --> 00:25:18,680
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

469
00:25:18,800 --> 00:25:21,760
Speaker 1: with the Bloomberg Business app. You can also listen live

470
00:25:21,840 --> 00:25:25,439
Speaker 1: on Amazon Alexa from our flagship New York station. Just

471
00:25:25,480 --> 00:25:28,280
Speaker 1: say Alexa play Bloomberg eleven thirty.

472
00:25:28,440 --> 00:25:33,440
Speaker 2: Filmmakers in the Full Frame Documentary Film Festival. That's a

473
00:25:33,600 --> 00:25:34,320
Speaker 2: course at.

474
00:25:34,240 --> 00:25:36,919
Speaker 5: Duke at Duke and parents paid good tition.

475
00:25:36,800 --> 00:25:39,280
Speaker 2: That pays you to study duration and convexity.

476
00:25:39,359 --> 00:25:41,800
Speaker 5: But somehow she's made a good career. I don't know

477
00:25:41,840 --> 00:25:42,280
Speaker 5: how she did it.

478
00:25:42,320 --> 00:25:45,240
Speaker 4: Meghan Graper joins, she really appreciate you coming into our studio.

479
00:25:45,359 --> 00:25:48,320
Speaker 4: Here's global head of Debt capital Markets at Barkley's.

480
00:25:48,320 --> 00:25:50,480
Speaker 5: Meghan, thank you so much for joining us here.

481
00:25:51,080 --> 00:25:54,800
Speaker 4: If I want to fund a leverage buyout in the

482
00:25:54,880 --> 00:25:57,840
Speaker 4: debt capital markets, can you do that for me?

483
00:25:58,440 --> 00:25:59,440
Speaker 5: We can? We can.

484
00:25:59,560 --> 00:26:01,879
Speaker 7: In fact, I think there are signs of life in

485
00:26:02,320 --> 00:26:05,399
Speaker 7: the investment grade world, in particular a market that seems

486
00:26:05,480 --> 00:26:08,600
Speaker 7: reasonably unshaken relative to what we're seeing play out and

487
00:26:08,640 --> 00:26:11,760
Speaker 7: other asset classes. And part of this is tied to

488
00:26:12,560 --> 00:26:14,760
Speaker 7: I think, you know, a reopening of the market. You

489
00:26:14,800 --> 00:26:17,520
Speaker 7: need to see supply to beget supply, and there is

490
00:26:17,600 --> 00:26:20,760
Speaker 7: confidence in cash to be deployed, and so the you know,

491
00:26:20,840 --> 00:26:23,040
Speaker 7: supply demand and balance. I think helping drive.

492
00:26:22,800 --> 00:26:24,960
Speaker 2: That let me get to the soap opera right now

493
00:26:24,960 --> 00:26:27,560
Speaker 2: in Rubinstein You know, do I mean there's no selling

494
00:26:27,600 --> 00:26:30,080
Speaker 2: in private equity private debt? I mean they can cool

495
00:26:30,119 --> 00:26:37,320
Speaker 2: concollect it. Other institutions are selling private equity. Now discuss

496
00:26:37,520 --> 00:26:39,119
Speaker 2: what's it mean from your desk?

497
00:26:39,720 --> 00:26:43,879
Speaker 7: It means a cash rotation and so there's ample liquidity.

498
00:26:43,880 --> 00:26:45,360
Speaker 7: You can see it in the order books we had

499
00:26:45,359 --> 00:26:48,080
Speaker 7: this week, So we've had a functional new issue market.

500
00:26:48,320 --> 00:26:51,040
Speaker 7: You sawt you know Kender Morgan deal with seventeen billion

501
00:26:51,080 --> 00:26:54,480
Speaker 7: of demand this week, Walmart topping twenty one billion. We

502
00:26:54,560 --> 00:26:56,760
Speaker 7: did a deal for the Republic of Austria and Europe

503
00:26:57,119 --> 00:27:00,440
Speaker 7: sixty three billion in demand for seven billion dollar trans

504
00:27:00,440 --> 00:27:02,800
Speaker 7: So cash is gravitating to save havens.

505
00:27:03,000 --> 00:27:05,880
Speaker 2: I hate you. She doesn't know. I bought the Austria

506
00:27:05,960 --> 00:27:08,560
Speaker 2: in one hundred year at the top of the market.

507
00:27:08,600 --> 00:27:10,080
Speaker 2: It went down seventy four percent.

508
00:27:11,480 --> 00:27:13,600
Speaker 4: What are your clients telling you these days, Megan? When

509
00:27:13,640 --> 00:27:15,240
Speaker 4: you talk to them, if you bring a new issue

510
00:27:15,320 --> 00:27:18,000
Speaker 4: to the market, how do they feel about Are they

511
00:27:18,080 --> 00:27:20,680
Speaker 4: asking for more return or are they asking for tougher covenants?

512
00:27:20,720 --> 00:27:23,520
Speaker 4: Are they concerned about just the world in general, or

513
00:27:24,240 --> 00:27:25,960
Speaker 4: is there so much money on the sidelines so they're

514
00:27:25,960 --> 00:27:27,560
Speaker 4: just throwing it at your issuers.

515
00:27:27,640 --> 00:27:29,440
Speaker 7: You know, I've yet to see an investor that would

516
00:27:29,440 --> 00:27:31,760
Speaker 7: say they're bullish here, So that is the challenge.

517
00:27:31,800 --> 00:27:32,120
Speaker 5: I think.

518
00:27:32,320 --> 00:27:36,040
Speaker 7: You know, ultimately there there is a amount of cash

519
00:27:36,080 --> 00:27:39,040
Speaker 7: coming into investors' hands that needs to be redeployed, and

520
00:27:39,080 --> 00:27:42,520
Speaker 7: they are looking for safe harbors. Investment grade is proving

521
00:27:42,520 --> 00:27:45,600
Speaker 7: to be that. You've got four hundred billion in coupon

522
00:27:45,680 --> 00:27:49,240
Speaker 7: income and the wall of COVID debt maturing. So even

523
00:27:49,240 --> 00:27:53,240
Speaker 7: as we keep monitoring these lipper data outflows, which certainly

524
00:27:53,280 --> 00:27:55,840
Speaker 7: need to be scrutinized, I think they're indicative of sort

525
00:27:55,880 --> 00:28:00,000
Speaker 7: of psychology of market and sentiment. There is a willing

526
00:28:00,240 --> 00:28:03,720
Speaker 7: and there is opportunity that volatility is presenting in the

527
00:28:03,760 --> 00:28:06,000
Speaker 7: long end of the curve. And with yields that are

528
00:28:06,040 --> 00:28:08,679
Speaker 7: now you know, upwards of six percent without having to

529
00:28:08,680 --> 00:28:09,840
Speaker 7: take a lot of credit.

530
00:28:09,640 --> 00:28:13,119
Speaker 4: Risk, I guess your world has kind of readjusted to

531
00:28:13,840 --> 00:28:16,440
Speaker 4: you know, a ten year at four thirty that type

532
00:28:16,440 --> 00:28:19,159
Speaker 4: of thing, as opposed to years for fifteen years we

533
00:28:19,200 --> 00:28:24,000
Speaker 4: had no interest rates has had issuers and investors kind

534
00:28:24,000 --> 00:28:26,720
Speaker 4: of said, Okay, this is the new normal. Now, this

535
00:28:26,840 --> 00:28:29,760
Speaker 4: is actually what a normal capital markets and the debt

536
00:28:29,800 --> 00:28:31,679
Speaker 4: side looks like, yeah, it's.

537
00:28:31,520 --> 00:28:33,480
Speaker 7: Picking and choosing your spots on the curve, so that

538
00:28:33,600 --> 00:28:36,920
Speaker 7: is certainly a choice. I think for investors, the underlying

539
00:28:36,960 --> 00:28:39,760
Speaker 7: yield is what's fueling the bid. So you're talking about,

540
00:28:39,760 --> 00:28:41,800
Speaker 7: you know, some of the highest all in yields that

541
00:28:41,840 --> 00:28:43,560
Speaker 7: you could achieve in the long end of the curve,

542
00:28:44,360 --> 00:28:47,560
Speaker 7: upwards of six percent for a single a long piece

543
00:28:48,040 --> 00:28:50,880
Speaker 7: data debt, and in triple bs is closer to six

544
00:28:50,960 --> 00:28:53,760
Speaker 7: point three. So but on the issuer side, they're looking

545
00:28:53,760 --> 00:28:56,440
Speaker 7: at spreads, they're still at all time tights. So we've

546
00:28:56,440 --> 00:28:59,480
Speaker 7: seen a ten basis point retlacement and credit spreads this week,

547
00:28:59,760 --> 00:29:02,120
Speaker 7: which just tells you that you know, there is money

548
00:29:02,320 --> 00:29:05,239
Speaker 7: pulling in at a time where yes, credit spreads are

549
00:29:05,240 --> 00:29:08,520
Speaker 7: twenty five wider on the year, but underlying rates in

550
00:29:08,520 --> 00:29:10,840
Speaker 7: the front end of the curve are forty to fifty lower,

551
00:29:10,880 --> 00:29:13,560
Speaker 7: So you're all in cost of funding Actually isn't materially

552
00:29:13,680 --> 00:29:15,240
Speaker 7: worse than you were at the start.

553
00:29:15,440 --> 00:29:18,720
Speaker 2: You're too young. But did your dad or grandpa did

554
00:29:18,720 --> 00:29:20,680
Speaker 2: they show you the SMP blue Book.

555
00:29:21,240 --> 00:29:23,640
Speaker 7: We were a medical family. I was standing over my

556
00:29:23,760 --> 00:29:27,280
Speaker 7: dad in an o R doing cardiac surgery procedures so

557
00:29:27,720 --> 00:29:32,680
Speaker 7: finance was another world from that medical Listen.

558
00:29:33,000 --> 00:29:36,480
Speaker 2: Ten, you're attained, Mimosa. Maybe get Megan Raper through this.

559
00:29:36,640 --> 00:29:39,080
Speaker 2: Megan Draper with us here in your community, rascin nation.

560
00:29:39,600 --> 00:29:42,959
Speaker 2: Good morning worldwide and particularly to the continent of Europe.

561
00:29:43,200 --> 00:29:47,240
Speaker 2: In your afternoon on YouTube, subscribe to Bloomberg Podcasts. Okay,

562
00:29:47,240 --> 00:29:52,680
Speaker 2: any equity zeitgeist right now. Institutions not Barclay's total panic.

563
00:29:53,280 --> 00:29:56,240
Speaker 2: Everybody's doing this, doing that in retails by the dip,

564
00:29:56,640 --> 00:30:01,160
Speaker 2: keep it going. Is it the same retail institution dichotomy

565
00:30:01,560 --> 00:30:02,440
Speaker 2: in fixed income?

566
00:30:02,920 --> 00:30:05,600
Speaker 7: Well, the one thing we've been monitoring is that twenty

567
00:30:05,600 --> 00:30:08,600
Speaker 7: two percent of investment grade credit is owned by non

568
00:30:08,720 --> 00:30:11,560
Speaker 7: US investors. And so the fear factor, particularly as we

569
00:30:11,600 --> 00:30:13,360
Speaker 7: looked at some of the moves in the bond market,

570
00:30:13,480 --> 00:30:16,480
Speaker 7: and you know, the the you know, suggestion was that

571
00:30:16,520 --> 00:30:19,360
Speaker 7: maybe we were seeing investors hair back. That's in fact

572
00:30:19,400 --> 00:30:19,920
Speaker 7: not the case.

573
00:30:20,240 --> 00:30:22,120
Speaker 2: We look, it's not happening.

574
00:30:22,200 --> 00:30:24,120
Speaker 7: It's not happening. You can see it in the raid auctions.

575
00:30:24,160 --> 00:30:28,240
Speaker 7: We just got the allotment data for the April auctions,

576
00:30:28,240 --> 00:30:30,600
Speaker 7: So tens and thirties actually saw a month of a

577
00:30:30,640 --> 00:30:33,640
Speaker 7: month increase in terms of foreign participation. That's true in

578
00:30:33,680 --> 00:30:35,800
Speaker 7: these new issue order books as well. So we are

579
00:30:35,840 --> 00:30:39,160
Speaker 7: bringing deals to market that twenty two percent holding is

580
00:30:39,200 --> 00:30:41,640
Speaker 7: still you know, there's no shortage of demand from Asia,

581
00:30:41,680 --> 00:30:44,440
Speaker 7: from the Middle East and from Europe helping to underpin

582
00:30:44,560 --> 00:30:46,400
Speaker 7: some of these functional markets.

583
00:30:46,920 --> 00:30:49,120
Speaker 4: How do you compete against private credit or how has

584
00:30:49,160 --> 00:30:51,440
Speaker 4: the private credit market impacted your business?

585
00:30:52,280 --> 00:30:54,400
Speaker 7: I mean private credit is a bit more opaque and

586
00:30:54,440 --> 00:30:57,280
Speaker 7: it does feel like more of a bespoke market. And

587
00:30:57,320 --> 00:30:59,320
Speaker 7: so if you're an investor in this day and age,

588
00:30:59,360 --> 00:31:02,080
Speaker 7: what's what's differ in the secondary market. Why everyone takes

589
00:31:02,120 --> 00:31:04,920
Speaker 7: their lead from the primary is you're in good company.

590
00:31:05,040 --> 00:31:07,080
Speaker 7: If you're in the new issue market, you're not a

591
00:31:07,120 --> 00:31:10,360
Speaker 7: singular investor making a singular decision. A lot of private

592
00:31:10,400 --> 00:31:13,200
Speaker 7: credit is actually more finite number of players helping to

593
00:31:13,320 --> 00:31:14,440
Speaker 7: drive activity.

594
00:31:14,600 --> 00:31:15,520
Speaker 2: If you're alongside one.

595
00:31:15,480 --> 00:31:18,120
Speaker 7: Hundred and fifty other accounts in a twenty billion dollar

596
00:31:18,280 --> 00:31:20,800
Speaker 7: order book, you're feeling more confident that at a market

597
00:31:20,880 --> 00:31:24,000
Speaker 7: that's difficult to think about where is fair value, If

598
00:31:24,040 --> 00:31:27,640
Speaker 7: you're alongside of a multitude of other savvy investors, you're

599
00:31:27,640 --> 00:31:30,080
Speaker 7: feeling greater conviction about fair value.

600
00:31:30,160 --> 00:31:33,640
Speaker 2: David from Camden Yard's emails and I'm kidding folks, But

601
00:31:33,720 --> 00:31:36,040
Speaker 2: if you were to talk to mister Rubinstein right now,

602
00:31:36,680 --> 00:31:42,360
Speaker 2: are the endowments to locked up an alternative investments? Esoteric alternatives?

603
00:31:42,560 --> 00:31:45,920
Speaker 2: Should they be looking at the joyous liquidity of Meghan

604
00:31:46,000 --> 00:31:47,120
Speaker 2: Draper at Arclay's.

605
00:31:47,720 --> 00:31:49,840
Speaker 7: I think we're seeing that rotation happen. So if you're

606
00:31:49,840 --> 00:31:52,600
Speaker 7: looking for safe have in trades, particularly in the front

607
00:31:52,680 --> 00:31:54,720
Speaker 7: end of the curve, it's an easy place to find

608
00:31:54,720 --> 00:31:58,480
Speaker 7: a cash surrogate and wait for more sustained stability because

609
00:31:58,640 --> 00:32:01,040
Speaker 7: you know, even if there's a criminal dealmaking out there,

610
00:32:01,400 --> 00:32:04,520
Speaker 7: the risk is that this growth landscape is going to contract,

611
00:32:04,680 --> 00:32:07,560
Speaker 7: particularly as you move into the second half. So it's

612
00:32:07,600 --> 00:32:09,720
Speaker 7: a good place to sort of part cash and wait

613
00:32:09,760 --> 00:32:13,240
Speaker 7: things out and still without taking much credit risk pick

614
00:32:13,320 --> 00:32:14,280
Speaker 7: up in criminal yield.

615
00:32:14,920 --> 00:32:18,600
Speaker 2: The movie of my childhood was David Lean Lawrence of Arabia.

616
00:32:18,800 --> 00:32:22,080
Speaker 2: I mean it was just it was jaw dropping as

617
00:32:22,080 --> 00:32:25,000
Speaker 2: a kid. What was the movie of your childhood that

618
00:32:25,120 --> 00:32:26,280
Speaker 2: made you do film it?

619
00:32:26,360 --> 00:32:27,480
Speaker 6: Do well?

620
00:32:27,520 --> 00:32:29,800
Speaker 7: I started out as a documentary filmmaker, and so it

621
00:32:29,840 --> 00:32:34,720
Speaker 7: was really more evaluating and critiquing different personality types, which

622
00:32:34,760 --> 00:32:37,640
Speaker 7: is actually somewhat apropos as you think about trying to

623
00:32:37,680 --> 00:32:40,960
Speaker 7: evaluate different investors and issuers and how they're approaching markets.

624
00:32:41,360 --> 00:32:41,640
Speaker 8: C Z.

625
00:32:41,920 --> 00:32:42,800
Speaker 2: The Greek movie.

626
00:32:43,600 --> 00:32:44,880
Speaker 5: You got to see that? What is that?

627
00:32:45,480 --> 00:32:48,960
Speaker 2: The one every Academy award, like nineteen seventy seventy one.

628
00:32:49,000 --> 00:32:52,960
Speaker 2: It was this incredibly it was before documentary. It's this

629
00:32:53,120 --> 00:32:56,800
Speaker 2: incredibly violent movie about one of the Greek revolutions.

630
00:32:57,040 --> 00:32:57,720
Speaker 9: All Right, I'm on it.

631
00:32:57,840 --> 00:32:58,960
Speaker 2: Yeah, very cool Z.

632
00:32:59,600 --> 00:33:02,920
Speaker 5: Just a that's like a John Tucker reference. Lisa comes

633
00:33:02,960 --> 00:33:03,520
Speaker 5: out of nowhere.

634
00:33:04,040 --> 00:33:05,720
Speaker 7: Something to watch on an international sign.

635
00:33:06,320 --> 00:33:08,360
Speaker 2: Are you based in New York or does Barkleys have

636
00:33:08,440 --> 00:33:09,880
Speaker 2: you with a British accent in London?

637
00:33:09,920 --> 00:33:11,920
Speaker 7: No, I'm based in New York, but I'm all over

638
00:33:11,920 --> 00:33:14,000
Speaker 7: the globe. I was in Texas yesterday. I'm flying to

639
00:33:14,000 --> 00:33:15,240
Speaker 7: Switzer on Sunday.

640
00:33:16,880 --> 00:33:18,520
Speaker 2: You talked to Michael They're going to move to New

641
00:33:18,600 --> 00:33:20,200
Speaker 2: York Stock Exchange to Texas.

642
00:33:20,640 --> 00:33:23,000
Speaker 7: There's a there's a you know, decent amount of conviction

643
00:33:23,160 --> 00:33:26,480
Speaker 7: that there's sort of ample, ample opportunities for you know,

644
00:33:26,600 --> 00:33:29,240
Speaker 7: high quality names where our fundamentals are in good shape

645
00:33:30,000 --> 00:33:32,640
Speaker 7: and where they have access to markets. So it's a

646
00:33:32,640 --> 00:33:35,160
Speaker 7: tale of two cities. There's definitely you know, issuers that

647
00:33:35,200 --> 00:33:37,080
Speaker 7: are cash rich and happy to sit this out for

648
00:33:37,160 --> 00:33:39,440
Speaker 7: a period of times. With some of our pipeline has

649
00:33:39,520 --> 00:33:42,440
Speaker 7: moved to late q Q two Q three, there are

650
00:33:42,440 --> 00:33:45,040
Speaker 7: others though there's a thirty five billion dollars backlog slated

651
00:33:45,040 --> 00:33:46,880
Speaker 7: for next week. So we're going to build on the

652
00:33:46,880 --> 00:33:49,600
Speaker 7: momentum we saw this week with twenty five billion getting done,

653
00:33:49,720 --> 00:33:52,160
Speaker 7: twenty five billion getting done at new issue concessions that

654
00:33:52,200 --> 00:33:55,040
Speaker 7: are three bases points, with over subscriptions that are upwards

655
00:33:55,040 --> 00:33:55,720
Speaker 7: of five times.

656
00:33:55,880 --> 00:33:59,240
Speaker 2: Megan, Thank you, Megan Graper with Barkley's driving all their

657
00:34:00,120 --> 00:34:00,920
Speaker 2: at market work.

658
00:34:06,400 --> 00:34:10,280
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

659
00:34:10,320 --> 00:34:13,320
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

660
00:34:13,360 --> 00:34:16,400
Speaker 1: Auto with the Bloomberg Business app. You can also watch

661
00:34:16,440 --> 00:34:19,400
Speaker 1: us live every weekday on YouTube and always on the

662
00:34:19,400 --> 00:34:20,360
Speaker 1: Bloomberg terminal.

663
00:34:20,480 --> 00:34:24,160
Speaker 2: This is like, you know, Leslie's in and we're going

664
00:34:24,239 --> 00:34:28,920
Speaker 2: to talk about liquefied natural gas, and all of a sudden,

665
00:34:29,040 --> 00:34:31,319
Speaker 2: you know, it's like, okay, we'll do it, and it's

666
00:34:31,480 --> 00:34:35,560
Speaker 2: interesting and all that. She's with Energy Vista and we're

667
00:34:35,560 --> 00:34:40,560
Speaker 2: gonna look at liquefied natural gas and it liquefies. It

668
00:34:40,920 --> 00:34:45,920
Speaker 2: negative two hundred and thirty degrees Fahrenheite, and the the

669
00:34:46,200 --> 00:34:50,000
Speaker 2: equation is C two h six or something. I flunked

670
00:34:50,040 --> 00:34:53,480
Speaker 2: it in chemistry. I'm sorry, except you're the most important

671
00:34:53,480 --> 00:34:54,439
Speaker 2: interview of the day.

672
00:34:55,080 --> 00:34:55,480
Speaker 5: Good time.

673
00:34:55,560 --> 00:35:00,319
Speaker 2: All of a sudden, your world is front and center

674
00:35:00,560 --> 00:35:05,240
Speaker 2: with US, China, US Europe. So the boats go to China,

675
00:35:05,719 --> 00:35:08,880
Speaker 2: but your boats with LNG may turn around and go

676
00:35:08,960 --> 00:35:10,640
Speaker 2: to Europe. Do I have that right?

677
00:35:11,120 --> 00:35:14,960
Speaker 8: So they already stopped flowing to China since February, actually,

678
00:35:15,719 --> 00:35:19,080
Speaker 8: both for economic reasons and the fifteen tariffs that happened

679
00:35:19,080 --> 00:35:22,839
Speaker 8: at that time. But we've seen that China has used

680
00:35:22,840 --> 00:35:27,160
Speaker 8: its retaliation from the beginning. It's geopolitical lever that it

681
00:35:27,239 --> 00:35:32,959
Speaker 8: has on US energy from the beginning, same as last time,

682
00:35:33,080 --> 00:35:36,680
Speaker 8: like the first trade war, China has stopped importing US

683
00:35:36,800 --> 00:35:40,240
Speaker 8: lergy for a couple of months until the trade deal happened,

684
00:35:40,640 --> 00:35:43,880
Speaker 8: and then despite their imports of US elergy. So I

685
00:35:43,920 --> 00:35:49,439
Speaker 8: think that China is using its coercive diplomacy retaliation right now.

686
00:35:49,480 --> 00:35:50,600
Speaker 8: But the deal is still on the.

687
00:35:50,600 --> 00:35:53,360
Speaker 2: Table, I should say, Leslie Poultic, Goesman, I didn't energy

688
00:35:53,400 --> 00:35:56,680
Speaker 2: so correctly, Paul put me in the timeout chair. Leslie

689
00:35:56,680 --> 00:36:02,440
Speaker 2: Poultic Gosman with US from energy. Big deal. So it is.

690
00:36:02,480 --> 00:36:05,480
Speaker 5: And how do you think when you think about the global.

691
00:36:05,160 --> 00:36:08,880
Speaker 4: Trade here we're talking about tariffs with so many different

692
00:36:08,880 --> 00:36:11,440
Speaker 4: countries and so many different products and services. How do

693
00:36:11,440 --> 00:36:17,280
Speaker 4: you see energy industry think about a world where free

694
00:36:17,320 --> 00:36:18,640
Speaker 4: trade maybe on the decline.

695
00:36:19,880 --> 00:36:22,960
Speaker 8: So, Paul, let me ask you a question. What's in

696
00:36:23,040 --> 00:36:28,760
Speaker 8: common between Alaska and shipping? So they were both mentioned

697
00:36:28,760 --> 00:36:31,160
Speaker 8: in the Speech of the State of the Union earlier

698
00:36:31,200 --> 00:36:34,480
Speaker 8: this year. And this is the card that South Korea

699
00:36:34,520 --> 00:36:36,920
Speaker 8: can play. So all the countries right now they are

700
00:36:36,960 --> 00:36:40,799
Speaker 8: looking at all cross agencies, cross sectors, what they can

701
00:36:40,880 --> 00:36:44,840
Speaker 8: come to the table with the US and infrastructure. Shipping

702
00:36:44,920 --> 00:36:46,399
Speaker 8: is going to be big on the table in South

703
00:36:46,440 --> 00:36:49,280
Speaker 8: Korea has a competitive advantage here and they can bring

704
00:36:49,400 --> 00:36:52,239
Speaker 8: they can buy also more US energy imports and potentially

705
00:36:52,320 --> 00:36:55,160
Speaker 8: from the Alaska project that everybody is talking about.

706
00:36:55,040 --> 00:36:58,040
Speaker 2: Basic one, an allergy ship that's not going to China.

707
00:36:58,120 --> 00:37:00,719
Speaker 2: Can it go through the Paramat Canal? They fit through

708
00:37:00,719 --> 00:37:01,960
Speaker 2: the Panama Canal.

709
00:37:01,960 --> 00:37:05,520
Speaker 8: Yes they can. But all twenty twenty four, most of

710
00:37:05,560 --> 00:37:08,320
Speaker 8: the LNG tankers from the US have avoided the Panama

711
00:37:08,360 --> 00:37:11,879
Speaker 8: Canal because of the bottleneck re rooted around the Cape

712
00:37:11,880 --> 00:37:16,919
Speaker 8: of Good Hope, but it made more sense anyway economically

713
00:37:17,160 --> 00:37:19,560
Speaker 8: to send it to Europe, and Europe was the largest

714
00:37:20,000 --> 00:37:21,280
Speaker 8: market for US O engerins.

715
00:37:21,280 --> 00:37:23,120
Speaker 2: Where does it come out of the East Coast is

716
00:37:23,120 --> 00:37:27,920
Speaker 2: a golf American excuse Gulf of America. Sorry, where's the

717
00:37:28,320 --> 00:37:32,920
Speaker 2: major LNG depot in Texas, Louisiana?

718
00:37:33,560 --> 00:37:35,040
Speaker 8: All around the US golf.

719
00:37:34,800 --> 00:37:37,360
Speaker 2: Coast Rotterdam or do they go to France?

720
00:37:37,400 --> 00:37:42,359
Speaker 8: From they go to France, Belgium, the UK, Turkeys like

721
00:37:42,400 --> 00:37:46,320
Speaker 8: the all along the Mediterranean, the Netherlands, Germany.

722
00:37:46,400 --> 00:37:48,560
Speaker 2: What Secretary was going to do with this?

723
00:37:48,760 --> 00:37:52,719
Speaker 8: With your world of lerg So I think that it's

724
00:37:52,760 --> 00:37:56,040
Speaker 8: a logical avenue to play this card because the US

725
00:37:56,080 --> 00:37:58,800
Speaker 8: wants to sell more of it, unleash the American gold,

726
00:37:59,400 --> 00:38:01,799
Speaker 8: and Europe needs it right now to keep Russia and

727
00:38:01,920 --> 00:38:05,600
Speaker 8: gas and energy at bay. And so there is a

728
00:38:05,640 --> 00:38:10,799
Speaker 8: common ground of understanding here and US Energy. Yes, the

729
00:38:10,880 --> 00:38:15,960
Speaker 8: permitting barrier has been removed, but US energy still needs

730
00:38:16,000 --> 00:38:18,279
Speaker 8: to be built if new projects come along, and the

731
00:38:18,360 --> 00:38:24,080
Speaker 8: financing is really challenging for this new project, and the

732
00:38:24,200 --> 00:38:26,560
Speaker 8: US needs to sell if there is no market, you know,

733
00:38:26,600 --> 00:38:27,879
Speaker 8: there is no exports, but.

734
00:38:27,880 --> 00:38:31,239
Speaker 4: Don't we I think that liquified natural gas. I came

735
00:38:31,280 --> 00:38:34,320
Speaker 4: to understand the importance of it during when Russia invaded

736
00:38:34,440 --> 00:38:37,680
Speaker 4: Ukraine and that shut off a source of energy for

737
00:38:37,880 --> 00:38:41,560
Speaker 4: Europe and so our the US. Liquified natural gas became

738
00:38:41,640 --> 00:38:44,080
Speaker 4: so much more valuable and so much more important. But

739
00:38:44,200 --> 00:38:45,880
Speaker 4: isn't the problem in the US is we don't have

740
00:38:45,960 --> 00:38:49,560
Speaker 4: necessarily the pipelines to get it to the ports in

741
00:38:49,640 --> 00:38:51,120
Speaker 4: Galveston or wherever we.

742
00:38:51,120 --> 00:38:51,719
Speaker 5: Need to get it to.

743
00:38:51,960 --> 00:38:54,880
Speaker 8: Yeah, so you're you're you know, you're raising an important

744
00:38:56,080 --> 00:38:59,400
Speaker 8: part of the equation that infrastructure in the US. More

745
00:38:59,440 --> 00:39:02,640
Speaker 8: infrastructure needs to be built on the pipeline side. So

746
00:39:02,719 --> 00:39:04,840
Speaker 8: it all depends what is the source of the gas

747
00:39:04,840 --> 00:39:08,239
Speaker 8: for this energy? Is it associated gas from you know,

748
00:39:08,360 --> 00:39:12,600
Speaker 8: oil production, or it's dry gas? So that will be

749
00:39:12,600 --> 00:39:13,560
Speaker 8: important in the future.

750
00:39:13,640 --> 00:39:16,279
Speaker 2: Well, I had twenty seconds Michael Barr's trumpet at the

751
00:39:16,280 --> 00:39:20,080
Speaker 2: BIT as clearly as I can. An energy tanker is

752
00:39:20,120 --> 00:39:23,760
Speaker 2: two football fields and there's only twenty five people on board.

753
00:39:24,840 --> 00:39:27,960
Speaker 8: No, I don't even know exactly what's the crew. But

754
00:39:28,120 --> 00:39:31,360
Speaker 8: I can give you another data points. Please, how many

755
00:39:31,560 --> 00:39:33,080
Speaker 8: US flagships do we have?

756
00:39:34,200 --> 00:39:37,319
Speaker 5: Like almost none? Right, exactly exactly.

757
00:39:37,000 --> 00:39:40,320
Speaker 8: I think we have only one new one that recently

758
00:39:40,360 --> 00:39:43,359
Speaker 8: dropped a cargo in Puerto Rico that was like the

759
00:39:43,360 --> 00:39:48,000
Speaker 8: only recent ones that we had. And globally speaking, eighty

760
00:39:48,040 --> 00:39:51,759
Speaker 8: percent of the trade is on the ocean. How many

761
00:39:51,840 --> 00:39:55,359
Speaker 8: US ships all together that we have only eighty yep

762
00:39:55,520 --> 00:39:56,800
Speaker 8: that can do global trade.

763
00:39:56,880 --> 00:40:01,240
Speaker 2: This is great. Yeah, so I've more seven minutes with Leslie,

764
00:40:01,280 --> 00:40:04,479
Speaker 2: Paul and the whole thing. Can you come back?

765
00:40:04,640 --> 00:40:05,279
Speaker 5: I can come back.

766
00:40:05,320 --> 00:40:07,600
Speaker 2: Thank you, Thank you for having me. Less Paul goes

767
00:40:07,640 --> 00:40:08,560
Speaker 2: with Ergie Vista.

768
00:40:08,920 --> 00:40:12,840
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

769
00:40:12,880 --> 00:40:15,880
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

770
00:40:15,920 --> 00:40:18,960
Speaker 1: Auto with the Bloomberg Business app. You can also listen

771
00:40:19,040 --> 00:40:22,280
Speaker 1: live on Amazon Alexa from our flagship New York station,

772
00:40:22,840 --> 00:40:26,399
Speaker 1: Just say Alexa play Bloomberg eleven thirty perfect for my.

773
00:40:26,440 --> 00:40:29,160
Speaker 2: Beverage of choice. Lisa was out on YouTube on the

774
00:40:29,200 --> 00:40:32,759
Speaker 2: live chat. She want selling the newspapers. Oh something that

775
00:40:32,760 --> 00:40:34,960
Speaker 2: we're going to get to it, not now, but something

776
00:40:35,000 --> 00:40:36,440
Speaker 2: about ice cubes.

777
00:40:37,120 --> 00:40:37,600
Speaker 6: And I love that.

778
00:40:37,719 --> 00:40:39,479
Speaker 9: Okay, First, I want to start with We've been talking

779
00:40:39,480 --> 00:40:42,480
Speaker 9: about so many companies, right industries being affected by China tariffs.

780
00:40:42,480 --> 00:40:45,160
Speaker 9: The Wall Street Journal is pointing to another one. Baby

781
00:40:45,160 --> 00:40:47,719
Speaker 9: strollers and baby products.

782
00:40:47,680 --> 00:40:48,399
Speaker 5: Not on the market.

783
00:40:48,600 --> 00:40:52,080
Speaker 9: Sorry, producer Eric, I know he's definitely in the market.

784
00:40:52,960 --> 00:40:56,600
Speaker 9: The problem is that there are strict product safety standards

785
00:40:56,920 --> 00:41:00,200
Speaker 9: with US that the US government requires, So products like

786
00:41:00,200 --> 00:41:03,040
Speaker 9: shoes and clothing they're not regulated as closely as the

787
00:41:03,040 --> 00:41:06,640
Speaker 9: baby products. So you have companies that are looking for

788
00:41:06,840 --> 00:41:09,200
Speaker 9: places where they can get one the products, but to

789
00:41:09,480 --> 00:41:11,640
Speaker 9: also meet those regulations. So that's why a lot of

790
00:41:11,680 --> 00:41:13,960
Speaker 9: them returned to China. So to give you an idea

791
00:41:13,960 --> 00:41:17,600
Speaker 9: of the impact today, ninety five percent of imported strollers

792
00:41:17,680 --> 00:41:21,280
Speaker 9: come from China. I did not realize that three quarters

793
00:41:21,280 --> 00:41:24,400
Speaker 9: of toys and infant furniture like cribs come from China.

794
00:41:24,960 --> 00:41:26,160
Speaker 2: Why is this a surprise?

795
00:41:26,280 --> 00:41:26,879
Speaker 3: We know this.

796
00:41:27,239 --> 00:41:31,239
Speaker 9: I did not realize it was ninety five percent. So

797
00:41:31,520 --> 00:41:33,239
Speaker 9: the question is, right, how much more is it going

798
00:41:33,320 --> 00:41:35,040
Speaker 9: to cost me? So you have these strollers that are

799
00:41:35,080 --> 00:41:39,080
Speaker 9: like nine hundred dollars so you could tackle stop stop.

800
00:41:39,719 --> 00:41:44,480
Speaker 2: Giuseppe has the fancy one. Giuseppe has a door best

801
00:41:44,560 --> 00:41:49,000
Speaker 2: in it and stroller combo which is seven thousand dollars.

802
00:41:49,320 --> 00:41:50,279
Speaker 5: All we'll suspension.

803
00:41:50,520 --> 00:41:52,279
Speaker 2: That's all. One of the in laws bought it. I

804
00:41:52,280 --> 00:41:54,240
Speaker 2: think it was her in law. You know her parents

805
00:41:54,280 --> 00:41:56,399
Speaker 2: bought it. What a racket they.

806
00:41:56,280 --> 00:41:58,399
Speaker 5: Could close four hundred dollars more.

807
00:41:58,480 --> 00:42:00,960
Speaker 2: Can you imagine back in the old strollers you picked

808
00:42:01,000 --> 00:42:02,879
Speaker 2: them up at Walmart for forty nine bucks.

809
00:42:02,960 --> 00:42:07,200
Speaker 5: Act, we have the twin strollers for their twins.

810
00:42:07,239 --> 00:42:09,879
Speaker 4: Okay, we had the side by side and the front

811
00:42:09,880 --> 00:42:12,560
Speaker 4: and back depending that's a big investment.

812
00:42:12,640 --> 00:42:12,759
Speaker 2: Yes.

813
00:42:15,320 --> 00:42:16,520
Speaker 6: Next, please.

814
00:42:17,920 --> 00:42:20,160
Speaker 9: Have either of you is used chat jept?

815
00:42:20,360 --> 00:42:20,960
Speaker 5: Have you used it?

816
00:42:21,239 --> 00:42:22,480
Speaker 9: Engaged with it at all?

817
00:42:23,040 --> 00:42:23,279
Speaker 2: Seen?

818
00:42:24,600 --> 00:42:26,680
Speaker 5: Okay? Well, if you do.

819
00:42:26,760 --> 00:42:28,960
Speaker 9: The question is do you put prompts in there like

820
00:42:29,000 --> 00:42:32,040
Speaker 9: please and thank you to chat chept? So if you do,

821
00:42:32,120 --> 00:42:34,760
Speaker 9: it's like an etiquette question, but it's also a money

822
00:42:34,840 --> 00:42:38,120
Speaker 9: question because apparently it costs money just for that little

823
00:42:38,160 --> 00:42:42,000
Speaker 9: extra prompt. Sam Haltman, he's the CEO of open AI.

824
00:42:42,120 --> 00:42:44,680
Speaker 9: He talked about it because someone asked him on X

825
00:42:45,000 --> 00:42:47,359
Speaker 9: you know how much money is open ai losing an

826
00:42:47,400 --> 00:42:51,359
Speaker 9: electricity costs from people adding just an extra pleaser thank you,

827
00:42:51,440 --> 00:42:54,680
Speaker 9: and he responded, tens of millions of dollars well spent,

828
00:42:54,800 --> 00:42:58,480
Speaker 9: though he said, you never know. So the reason and

829
00:42:58,520 --> 00:43:00,359
Speaker 9: this is really what because New York Time they spoke

830
00:43:00,400 --> 00:43:03,560
Speaker 9: to experts. They say every additional word and ask increases

831
00:43:03,600 --> 00:43:04,480
Speaker 9: the cost.

832
00:43:04,400 --> 00:43:05,120
Speaker 5: For a server.

833
00:43:05,480 --> 00:43:08,920
Speaker 9: So it involves like electrons moving through transitions very you

834
00:43:08,920 --> 00:43:11,359
Speaker 9: know deep, and that needs energy. So that's the whole thing.

835
00:43:11,400 --> 00:43:13,399
Speaker 9: So if you add an extra thank you, it tacks

836
00:43:13,480 --> 00:43:16,680
Speaker 9: on extra money, but you're also being kind at the

837
00:43:16,680 --> 00:43:17,160
Speaker 9: same time.

838
00:43:17,280 --> 00:43:20,880
Speaker 2: So I think when I was in college is closer

839
00:43:21,000 --> 00:43:24,360
Speaker 2: to Benjamin Franklin, yes, than it is now. I remember

840
00:43:24,400 --> 00:43:27,480
Speaker 2: the stacks and you couldn't stand You talked about Boulder

841
00:43:27,520 --> 00:43:31,279
Speaker 2: earlier in the in the Colorado Stacks. I think it

842
00:43:31,280 --> 00:43:34,520
Speaker 2: was Baker. I can't remember. You couldn't stand up, you know,

843
00:43:34,600 --> 00:43:37,799
Speaker 2: the floors, and it was musty and shaper and incense

844
00:43:37,920 --> 00:43:39,920
Speaker 2: and other things besides in.

845
00:43:40,600 --> 00:43:44,560
Speaker 9: Google, can I stop there, I'll give you you can

846
00:43:44,800 --> 00:43:45,399
Speaker 9: mast up there.

847
00:43:45,440 --> 00:43:45,760
Speaker 5: Okay.

848
00:43:45,920 --> 00:43:48,440
Speaker 9: So, if you're enjoying a fancy cocktail somewhere, maybe on

849
00:43:48,480 --> 00:43:50,640
Speaker 9: the Jersey Shore, maybe in Rome, maybe you're.

850
00:43:50,560 --> 00:43:54,800
Speaker 5: Enjoining the squad taverns, would.

851
00:43:54,680 --> 00:43:56,920
Speaker 9: You here's the question, though, would you pay an extra

852
00:43:57,080 --> 00:44:01,759
Speaker 9: seventeen dollars for an ice cube from Greenland? Because a

853
00:44:01,840 --> 00:44:05,600
Speaker 9: lot of people are doing it, Okay, entrepreneurs, they're heading

854
00:44:05,600 --> 00:44:07,920
Speaker 9: to Greenland, they're harvesting all the ice.

855
00:44:07,840 --> 00:44:10,919
Speaker 5: Is because the Trump he sees.

856
00:44:11,680 --> 00:44:11,759
Speaker 2: It.

857
00:44:11,800 --> 00:44:13,359
Speaker 5: There you go, right, Okay, I get it now.

858
00:44:13,480 --> 00:44:16,640
Speaker 9: It's they're marketing and they're saying it's cleaner, it's denser

859
00:44:17,520 --> 00:44:19,839
Speaker 9: because it's been compressing the glacier for like one hundred

860
00:44:19,880 --> 00:44:20,600
Speaker 9: thousand years.

861
00:44:21,239 --> 00:44:23,440
Speaker 5: Weather science back set up. It's up for debate.

862
00:44:23,640 --> 00:44:26,200
Speaker 9: But people are paying one hundred dollars for six ice cubes.

863
00:44:26,480 --> 00:44:27,040
Speaker 5: It's crazy.

864
00:44:27,080 --> 00:44:30,759
Speaker 9: There's also vodka being made with glacial melt water on

865
00:44:30,840 --> 00:44:33,640
Speaker 9: top of it, so it's growing. You have the government

866
00:44:33,760 --> 00:44:36,960
Speaker 9: kind of approving about thirteen licenses to certain companies to

867
00:44:37,040 --> 00:44:38,239
Speaker 9: do this, to harvest it.

868
00:44:38,320 --> 00:44:40,960
Speaker 2: Let's cut to the chase. Yes, we go to surveillance.

869
00:44:41,040 --> 00:44:44,719
Speaker 2: Tito's expert Paul Sweeney and those sugar in Tito's right,

870
00:44:45,040 --> 00:44:45,440
Speaker 2: I don't know.

871
00:44:45,480 --> 00:44:46,880
Speaker 5: It's Austin, Texas.

872
00:44:47,239 --> 00:44:49,120
Speaker 2: Yeah, how kind do you want to kid? Come up

873
00:44:49,160 --> 00:44:50,800
Speaker 2: with a tequila like George?

874
00:44:51,000 --> 00:44:53,880
Speaker 4: Yeah, exacting that I'm not saying a hundred bucks for

875
00:44:54,120 --> 00:44:54,680
Speaker 4: an ice crea.

876
00:44:55,200 --> 00:44:58,000
Speaker 2: Lisa Materio, thank you so much. Just find yourself. I

877
00:44:58,000 --> 00:44:59,120
Speaker 2: don't know today.

878
00:44:59,360 --> 00:45:04,200
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

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Speaker 1: and anywhere else you get your podcasts. Listen live each

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Speaker 1: weekday seven to ten am Eastern on Bloomberg dot com,

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Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.

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Speaker 1: You can also watch us live every weekday on YouTube

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Speaker 1: and always on the Bloomberg terminal