WEBVTT - Bloomberg Surveillance TV: December 2nd, 2025 0:00:02.400 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.840 Terminal and the Bloomberg Business App. 0:00:36.240 --> 0:00:38.760 Investors trying to claw their way out of recent worries 0:00:38.800 --> 0:00:43.120 about overvalued tech companies sigflation. Apollo Global Management president Jim 0:00:43.159 --> 0:00:46.440 Zelter joins us. Now, Jim, wonderful to see you. Thank 0:00:46.479 --> 0:00:47.280 you so much for being here. 0:00:47.280 --> 0:00:48.040 Always nice to be here. 0:00:48.400 --> 0:00:49.760 So let's start with the. 0:00:49.800 --> 0:00:52.200 Look ahead for next year, which is everything is awesome 0:00:52.280 --> 0:00:54.120 and what we're hearing from every single person who comes 0:00:54.160 --> 0:00:55.880 on the show, is it next year is going to 0:00:55.880 --> 0:00:58.000 be double digit gains in the S and P five 0:00:58.080 --> 0:01:00.000 hundred at the same time that you continue to get 0:01:00.080 --> 0:01:03.520 get grind out better returns from the debt space. 0:01:03.720 --> 0:01:04.880 Is there a contradiction here. 0:01:05.680 --> 0:01:08.759 Well, I would just say that the confidence sitting here 0:01:08.800 --> 0:01:13.160 in December about next year that anybody puts forth has 0:01:13.200 --> 0:01:16.119 to be taken with a little bit of skepticism because 0:01:16.160 --> 0:01:18.600 of the year we've just had. If you were here 0:01:18.640 --> 0:01:20.959 on this journey, this year obviously has been a turnis 0:01:21.040 --> 0:01:22.840 on volatility, and we've ended up in a place that 0:01:22.880 --> 0:01:25.400 many probably wouldn't have predicted. But as we sit here 0:01:25.480 --> 0:01:28.040 right now thinking about the year ahead, you're going to 0:01:28.120 --> 0:01:30.679 end this year with an extremely strong M and a 0:01:30.800 --> 0:01:33.720 calendar an M and a backlog in terms of what's 0:01:34.200 --> 0:01:37.319 actually been executed this year, but also in the pipeline 0:01:37.319 --> 0:01:41.039 of new deals. The expectations on the Bloomberg Economics page 0:01:41.080 --> 0:01:43.479 is a thirty percent chance of a recession next year, 0:01:44.080 --> 0:01:46.840 a little bit higher inflation, a little bit lower growth, 0:01:47.319 --> 0:01:49.720 And as we talked about a moment ago, one of 0:01:49.760 --> 0:01:52.520 the markets has to be wrong in this intersection right now, 0:01:52.560 --> 0:01:55.680 where many are saying we need to lower rates because 0:01:55.720 --> 0:01:59.960 of an economic slowdown and the other side saying earnings 0:02:00.120 --> 0:02:03.680 upside because of accelerating earnings from the mag seven and 0:02:03.760 --> 0:02:06.880 the four ninety three. Those both can't be correct or 0:02:06.920 --> 0:02:09.360 it's very, very unlikely that they'll both be correct. 0:02:10.280 --> 0:02:10.799 We're in the. 0:02:10.720 --> 0:02:13.880 Camp at Apollo, as Torson's been up here in many 0:02:13.919 --> 0:02:18.960 others that between the k shape economy and other demographic issues, 0:02:19.400 --> 0:02:22.520 we're going to probably see a deceleration of lower rates 0:02:23.480 --> 0:02:26.480 and a stronger economy in terms of m and a 0:02:26.720 --> 0:02:30.799 capex cycle, positive regulatory backdrop, and things of that nature. 0:02:30.919 --> 0:02:34.120 So if bonds and stocks can't both be right, and 0:02:34.160 --> 0:02:36.880 they seem to be in conflict right now, are you 0:02:37.000 --> 0:02:39.600 saying that stocks right and bonds have it wrong. 0:02:40.040 --> 0:02:42.680 I'm saying what's been surprising to all of it. If 0:02:42.680 --> 0:02:44.480 we take a big step back the last four or 0:02:44.520 --> 0:02:48.680 five years, the idea that the FED would raise rates 0:02:48.720 --> 0:02:50.840 so much that they did be starting in twenty two, 0:02:51.520 --> 0:02:55.400 we all predicted massive slow down in the US economy, 0:02:55.480 --> 0:02:59.440 tightening financial conditions, and we were all wrong. This US 0:02:59.480 --> 0:03:03.840 economy has been amazingly resilient. Now it's been resilient for 0:03:04.600 --> 0:03:07.440 organic reasons as well as a lot. 0:03:07.200 --> 0:03:08.840 Of fiscal spending. 0:03:09.919 --> 0:03:14.000 Obviously now the capex cycle, but the US economy has 0:03:14.000 --> 0:03:16.280 been in the most resilient for a variety of reasons, 0:03:16.320 --> 0:03:19.440 and our suspicion is that that will tend to continue 0:03:19.480 --> 0:03:22.160 in the year ahead. So I think if you look 0:03:22.560 --> 0:03:24.280 if you look at the gap in the last month 0:03:24.360 --> 0:03:27.400 or two of the MAG seven earnings growth and the 0:03:27.440 --> 0:03:30.480 four ninety three a year ago, it was like thirty 0:03:30.520 --> 0:03:33.600 thirty five percent. The growth rates of the MAG seven 0:03:33.600 --> 0:03:35.720 and the four ninety three in the last quarter was 0:03:35.760 --> 0:03:39.520 eleven percent, twenty two versus eleven. I believe so the 0:03:39.560 --> 0:03:42.840 rest of the US economy is doing somewhat better in 0:03:42.960 --> 0:03:44.920 light of the breadth of the AI cycle. 0:03:45.240 --> 0:03:48.480 How much is this really all predicated on the ongoing 0:03:48.520 --> 0:03:50.960 funding of the AI cycle. I mean, this is sort 0:03:50.960 --> 0:03:53.000 of the fear that you're seeing baked into markets right 0:03:53.000 --> 0:03:55.040 now is that there's a lot of debt coming into 0:03:55.120 --> 0:03:58.480 the space. Everything is leveraged to AI being the solution 0:03:58.560 --> 0:03:59.880 to absolutely every problem that we have. 0:04:00.400 --> 0:04:02.080 Well, I think you need to separate that a little 0:04:02.080 --> 0:04:06.560 bit on the equity side of the AI activity and 0:04:07.360 --> 0:04:10.040 re mentioned it at the start. Certainly, you've got the 0:04:11.320 --> 0:04:15.640 incumbents that have amazing business models, whether that's Alphabet, Meta 0:04:15.760 --> 0:04:18.240 and the other Microsoft and Amazon, and then you've got 0:04:18.240 --> 0:04:21.880 the upstart Open AI. They're all coming from a different situation. 0:04:22.040 --> 0:04:25.640 Once the four or five have incredibly strong balance sheets 0:04:25.960 --> 0:04:29.920 and incredibly strong capbex and shut me free cash flow, 0:04:30.240 --> 0:04:34.560 which they're going to allocate to the AAI equity story 0:04:34.880 --> 0:04:37.080 because for them it's an existential issue. 0:04:37.080 --> 0:04:39.240 So for that, that's the equity side of the equation. 0:04:39.640 --> 0:04:42.640 What you're really touching on is this question of the 0:04:42.800 --> 0:04:46.760 five to seven trillion that's expected to be needed to 0:04:46.839 --> 0:04:51.040 fund the data center and infrastructure capbecks of the. 0:04:50.920 --> 0:04:52.360 Next five to seven years. 0:04:52.640 --> 0:04:55.480 That's been the zip code of the numbers being being 0:04:55.520 --> 0:04:58.880 bantered around and today if you look at that number 0:04:58.920 --> 0:05:00.919 and aggregate and take us step back again, is the 0:05:01.000 --> 0:05:05.320 industry of that five trillion? About a trillion five will 0:05:05.320 --> 0:05:09.560 get funded from free cash flow of the of the hyperscalers. 0:05:10.120 --> 0:05:14.880 The next trillion five will get funded between project finance, 0:05:15.320 --> 0:05:19.080 private capital, and a variety of their debt markets. About 0:05:19.080 --> 0:05:21.400 a trillion and trillion a quarter will get done by 0:05:21.400 --> 0:05:24.480 the high grade investment grade market. So it leaves about 0:05:24.480 --> 0:05:27.880 a trillion trillion five. Where's that going to get financed? 0:05:28.120 --> 0:05:31.200 That's a question mark. What's the clearing price of that 0:05:31.320 --> 0:05:34.360 of that paper and so you know, we spent a 0:05:34.400 --> 0:05:37.000 lot of time thinking about that. That's those are the 0:05:37.080 --> 0:05:40.920 big picture moves that will really have an impact on 0:05:41.360 --> 0:05:45.359 pricing of the IG market, pricing of the high yield market, 0:05:45.680 --> 0:05:47.880 pricing of investment grade private credit. 0:05:48.200 --> 0:05:48.960 That's the big. 0:05:48.880 --> 0:05:51.320 Question that we're all grappling with if you're in these 0:05:51.360 --> 0:05:52.120 markets today. 0:05:52.279 --> 0:05:54.200 Last time you were on you talked about how financing 0:05:54.200 --> 0:05:57.159 these data centers is fundamentally different than in the past 0:05:57.240 --> 0:05:59.880 financing other technology projects. 0:06:00.279 --> 0:06:01.720 Why why are they so different? 0:06:01.920 --> 0:06:05.479 Well, the last thirty years in the US high yield 0:06:05.520 --> 0:06:08.200 and leverage finance market, for the most part, you've been 0:06:08.240 --> 0:06:13.120 financing companies that were disruptors, but they were not investment 0:06:13.120 --> 0:06:17.280 grade disruptors. Think of the cable companies, Think of healthcare companies, 0:06:17.560 --> 0:06:21.839 think of gaming, even companies like MCI in the regional airlines. 0:06:22.320 --> 0:06:25.640 This time with the hyperscalers. Again, if you look at 0:06:25.680 --> 0:06:28.880 the balance sheets of Microsoft and Google and Amazon, these 0:06:28.880 --> 0:06:32.200 are some of the greatest companies we've ever seen. Three 0:06:32.360 --> 0:06:35.360 four hundred billion in revenues, one hundred and fifty billion 0:06:35.360 --> 0:06:36.920 a year per company in. 0:06:36.920 --> 0:06:37.719 Free cash flow. 0:06:38.160 --> 0:06:42.599 So there is a counterparty to those businesses you're willing 0:06:42.640 --> 0:06:45.880 to take on much longer duration risk. If they are 0:06:45.960 --> 0:06:48.680 the tenant counterparty, then you might have been at an 0:06:48.800 --> 0:06:52.640 upstart MCI or an upstart airline. It's just a very 0:06:52.640 --> 0:06:57.480 different economic equation. It's great investment grade risk. It's challenging 0:06:57.520 --> 0:06:58.640 non investment grade risk. 0:06:58.720 --> 0:07:00.640 Now the pack of that. 0:07:01.120 --> 0:07:04.720 If you look at the investment grade market today, which 0:07:04.760 --> 0:07:08.240 is about eleven trillion, it's up from about three trillion 0:07:08.920 --> 0:07:13.560 ten years ago. That's really dominated by the financial services companies. 0:07:13.600 --> 0:07:17.800 The biggest issuers are JP Morgan, BAA, Wells, Morgan Stanley, 0:07:18.040 --> 0:07:22.760 the top seven or all banks. If the predictions about 0:07:23.160 --> 0:07:27.800 the AI data center boom are correct and the capital 0:07:27.840 --> 0:07:30.440 needs of the five trillion that I just mentioned will 0:07:30.440 --> 0:07:34.280 come through, you're going to look at the IG marketplace 0:07:34.360 --> 0:07:37.560 in the next five years. The top ten will be 0:07:37.680 --> 0:07:41.000 very different. It will have Meta, it will have Amazon, 0:07:41.120 --> 0:07:45.520 it will have Microsoft. If they do pursue that path 0:07:45.560 --> 0:07:49.320 of funding, which is one of the largest deepest markets 0:07:49.360 --> 0:07:51.160 eleven trillion, they're going to have. 0:07:51.080 --> 0:07:51.800 To access that. 0:07:51.960 --> 0:07:55.800 So when we step back and think about the next 0:07:55.800 --> 0:07:59.000 three to five years, we think about how the investment 0:07:59.040 --> 0:08:02.600 grade public mark market is going to change in context 0:08:02.640 --> 0:08:06.240 and risk. It's one thing financing some of the great 0:08:06.280 --> 0:08:11.000 financial services and banks in the world POSTGFC, our banks 0:08:11.000 --> 0:08:14.400 and our financial services companies are the strongest, healthiest in 0:08:14.440 --> 0:08:14.840 the world. 0:08:15.280 --> 0:08:17.080 You don't mind being a debt lender to those. 0:08:17.560 --> 0:08:21.480 These other companies are taking business models that have been amazing, 0:08:21.560 --> 0:08:25.360 business models that have been asset light, business models that 0:08:25.440 --> 0:08:29.240 have generated tremendous amounts of cash flow, and they're just 0:08:29.400 --> 0:08:33.360 changing the risk of being a lender to those companies. 0:08:33.640 --> 0:08:35.840 It's not bad risk, it's just different risk. 0:08:36.160 --> 0:08:39.280 It sounds like this year was the year of credit. 0:08:39.360 --> 0:08:41.679 We were talking about how the twenty twenty five banner 0:08:41.800 --> 0:08:42.560 year was credit. 0:08:43.000 --> 0:08:44.520 It sounds like next year isn't going to be. 0:08:44.720 --> 0:08:48.000 It sounds like next year the investment is in something 0:08:48.080 --> 0:08:51.400 that is more revenue stream based, that is maybe more 0:08:51.440 --> 0:08:54.440 equity driven, that isn't as leverage to the story that 0:08:54.480 --> 0:08:58.680 you're talking about, which is an increasing glut of issuance, potential, 0:08:58.760 --> 0:09:01.360 sticky inflation, and that's not that accommodative. 0:09:02.160 --> 0:09:03.920 I actually take the other side of that. I think 0:09:03.960 --> 0:09:05.920 it's actually a tremendous time to be in credit. 0:09:05.960 --> 0:09:07.439 I long there, I go. 0:09:07.800 --> 0:09:11.360 I think this is all about dispersion. It's picking the 0:09:11.440 --> 0:09:14.760 right names from the wrong names. It's about like people 0:09:14.800 --> 0:09:18.600 in credit are focused on credit, whether it's IG public, 0:09:18.679 --> 0:09:22.280 high yield private and it's the dispersion that we've been waiting. 0:09:22.280 --> 0:09:24.640 If you're if you're a forty year. 0:09:24.559 --> 0:09:27.520 Veteran of this business and it built a massive credit platform. 0:09:27.880 --> 0:09:29.000 We like dispersion. 0:09:29.080 --> 0:09:31.120 We like being in the middle of trying to pick 0:09:31.160 --> 0:09:33.400 the winners and losers because at the end of the day, 0:09:33.440 --> 0:09:35.400 that's just good credit picking. And I do think you're 0:09:35.400 --> 0:09:38.760 getting rewarded with base rates between three and four percent, 0:09:39.400 --> 0:09:42.080 and the clearing price for a lot of this capbex 0:09:42.160 --> 0:09:46.040 for these data centers going to be more challenging. That's 0:09:46.080 --> 0:09:49.080 when you can actually earn your keep by being a 0:09:49.120 --> 0:09:49.840 smart investor. 0:09:49.880 --> 0:09:51.480 Do you think we're heading into a distress cycle. 0:09:53.120 --> 0:09:53.960 I don't see it. 0:09:54.400 --> 0:09:57.720 We are one of the largest historical players in the 0:09:57.800 --> 0:10:01.839 distressed arena. You look at the numbers in the last 0:10:01.880 --> 0:10:05.160 twelve months in the loan market, in the high yield market, 0:10:05.920 --> 0:10:10.040 they've actually come down in terms of the default rates, 0:10:10.080 --> 0:10:12.320 they were a little bit north of three four percent. 0:10:12.640 --> 0:10:16.760 They've actually declined. So on a three trillion plus high 0:10:16.840 --> 0:10:19.679 yield and loan market, defaults of two and a half 0:10:19.720 --> 0:10:23.160 three percent, that's sixty to ninety billion. I don't see 0:10:23.160 --> 0:10:26.640 an overwhelming amount. Now what I do see is I 0:10:26.800 --> 0:10:32.280 think you're going to get more secular distressed than cyclical distressed, 0:10:32.440 --> 0:10:36.000 and that's very important. When we think about secular distressed, 0:10:36.520 --> 0:10:40.800 I think that the development of AI will change broad 0:10:40.960 --> 0:10:45.239 business models. If we've talked a lot about healthcare technology, 0:10:45.240 --> 0:10:49.000 we've talked a lot about the outsourcing businesses, We've talked 0:10:49.040 --> 0:10:54.080 about software, enterprise software. The AI impact can have dramatic 0:10:54.160 --> 0:10:55.760 impact on those business models. 0:10:56.320 --> 0:10:58.120 And typically, when you go. 0:10:58.160 --> 0:11:01.199 Back in the underwriting memo and you think about your 0:11:01.240 --> 0:11:04.560 base case and your downside being down five, ten, fifteen percent, 0:11:05.120 --> 0:11:10.599 when you have secular dislocation, you've missed the downside by multiples, 0:11:10.880 --> 0:11:13.319 and that's what you're probably going to have. But again, 0:11:13.559 --> 0:11:15.760 I think that what I think is a great question 0:11:15.800 --> 0:11:18.000 because I think a lot of the topics that are 0:11:18.000 --> 0:11:21.719 being discussed right now about the role of banks and 0:11:21.840 --> 0:11:26.840 private credit, or the transparency of private credit, they're legitimate questions. 0:11:27.200 --> 0:11:30.040 But the bigger questions are, it's been a long time 0:11:30.080 --> 0:11:31.400 since we've had a credit cycle. 0:11:31.600 --> 0:11:33.240 We're going to have a credit cycle. 0:11:33.600 --> 0:11:37.720 That's normal, it's natural, it's a cleansing process of capitalism. 0:11:38.120 --> 0:11:40.240 And again, I think that when you have a business 0:11:40.280 --> 0:11:42.800 like we've been in where you have many companies that 0:11:42.880 --> 0:11:45.280 are more upstarts. We've been doing this. I've been doing 0:11:45.320 --> 0:11:47.160 it for forty years. We've been doing it Apollo for 0:11:47.200 --> 0:11:50.800 thirty five years. I feel comfortable about our ability. But 0:11:50.920 --> 0:11:53.320 you've got some tourus in this space, no doubt about it. 0:11:53.360 --> 0:11:57.000 And Jim, that question of affordability very much in the 0:11:57.040 --> 0:11:59.800 focus point, not just for the veneral Reserve but also 0:12:00.240 --> 0:12:01.079 the federal government. 0:12:01.480 --> 0:12:03.800 From the FED perspective. 0:12:03.440 --> 0:12:07.480 How much is seeming like the logical step to cut 0:12:07.559 --> 0:12:11.560 rates in response to affordability concerns at the lower end 0:12:11.679 --> 0:12:12.640 of the consumer base. 0:12:14.880 --> 0:12:17.040 You know, I know you've had Torsten on recently to 0:12:17.040 --> 0:12:19.920 talk about this. I do think the K shape economy 0:12:19.960 --> 0:12:24.520 and the demographics of that, it's really having an impact 0:12:24.679 --> 0:12:29.040 on the transmission mechanism of FED policy. I do think 0:12:29.080 --> 0:12:32.280 the last three to five years you've seen, whether it 0:12:32.320 --> 0:12:34.840 was this emergence of the K shape economy and our 0:12:34.880 --> 0:12:40.959 demographic shift of income and wealth, along with the evolution 0:12:41.200 --> 0:12:46.040 of our banking system, the evolution of dispersion, securitization, private capital, 0:12:46.600 --> 0:12:51.000 I think that's blunted the impact on monetary policy. And 0:12:51.120 --> 0:12:55.920 so you know, I well, I understand the impact of 0:12:56.520 --> 0:12:58.599 the view that rates are a bit higher than the 0:12:59.240 --> 0:13:03.079 nominal rate right now or the neutral rate issues me. 0:13:03.640 --> 0:13:07.520 I just don't see a huge other than confidence in 0:13:07.559 --> 0:13:10.080 the equity market. I don't see a reason to cut 0:13:10.120 --> 0:13:12.560 rates dramatically. But I do think there's no doubt this 0:13:12.600 --> 0:13:15.400 affordability issue. We saw it in New York, we saw 0:13:15.440 --> 0:13:16.839 it in the national we saw it in the various 0:13:16.840 --> 0:13:19.920 elections around the country, Virginia in other places. It's going 0:13:19.960 --> 0:13:21.640 to be a topic for this administration to. 0:13:21.600 --> 0:13:25.000 Deal with absolutely, and we've seen them actually backtrack on 0:13:25.040 --> 0:13:28.200 some issues because of it. Torsten'thlock actually published this morning 0:13:28.240 --> 0:13:30.840 talking about significant fiscal boost coming in twenty twenty six. 0:13:30.840 --> 0:13:32.920 When it comes to the One Being Beautiful Bill twenty 0:13:32.920 --> 0:13:35.280 twenty five, it was a lot of uncertainty. At least 0:13:35.280 --> 0:13:37.640 that's how people were viewing Washington. What do you view 0:13:37.880 --> 0:13:40.440 Washington for twenty twenty six. What's most important for you? 0:13:41.800 --> 0:13:44.319 Well, I think that certainly it would be interesting to 0:13:44.360 --> 0:13:47.079 see what happens with the Supreme Court and the tariffs. 0:13:47.600 --> 0:13:52.480 I still think that there's a lot of domestic initiatives 0:13:52.520 --> 0:13:58.360 in terms of large industrial capex, But from our perspective, 0:13:59.320 --> 0:14:01.800 this administration. You know, when you look back at it, 0:14:01.840 --> 0:14:04.480 you really have nine to twelve months to really get 0:14:04.520 --> 0:14:07.280 most of your activity done, and then the activity will 0:14:07.280 --> 0:14:10.199 be on the midterms next year. So I think that 0:14:10.240 --> 0:14:14.400 their ability to move in large swath domestic activities is 0:14:14.440 --> 0:14:15.800 going to be much more limited than. 0:14:15.679 --> 0:14:16.400 It was this year. 0:14:16.640 --> 0:14:18.320 So it's more of a wait and see and see 0:14:18.320 --> 0:14:20.400 how I think Sony digest it. 0:14:20.680 --> 0:14:22.720 Do you think they'll take more equity stakes. 0:14:24.200 --> 0:14:27.360 I don't have a view on that. In particular, they've 0:14:27.400 --> 0:14:31.720 had a handful. Certainly, they need to deal with some 0:14:31.760 --> 0:14:34.880 of the domestic issues with regard to chip manufacturing in 0:14:34.880 --> 0:14:38.280 the US. A lot of the activities that were approved 0:14:38.280 --> 0:14:42.480 in the Chips Act with the prior administration have not 0:14:42.600 --> 0:14:47.680 been put to work, So that's an ongoing need for 0:14:47.840 --> 0:14:50.080 national security and other reasons for them to deal with. 0:14:51.040 --> 0:14:53.040 So that would that would be on the agenda in 0:14:53.160 --> 0:14:56.720 terms of manufacturing, But I'm not sure I see a 0:14:56.760 --> 0:14:58.920 lot of equity stakes as part. 0:14:58.840 --> 0:14:59.200 Of the plan. 0:14:59.320 --> 0:15:02.240 I know you can't and on potential live deals. There 0:15:02.280 --> 0:15:05.760 is this paramount offer Forearner Brothers. It would be financed 0:15:05.800 --> 0:15:09.520 by Apollo according to reporting. Do you see this environment 0:15:09.600 --> 0:15:13.280 the regulatory environment ripe for deals in a lot of 0:15:13.280 --> 0:15:14.040 these spaces. 0:15:15.400 --> 0:15:17.520 You know, I think there's a reason why the M 0:15:17.520 --> 0:15:21.360 and A market will have a near record performance this 0:15:21.480 --> 0:15:25.040 year in terms of volume, north of five trillion. Certainly 0:15:25.120 --> 0:15:29.560 you have an administration that's much more comfortable with large 0:15:29.600 --> 0:15:37.240 industrial mergers, and certainly those larger transactions are able to 0:15:37.280 --> 0:15:41.280 garner very large financing packages. People want to invest in 0:15:41.400 --> 0:15:47.280 high quality companies, and certainly, whether it's industrial consolidation or 0:15:47.360 --> 0:15:51.320 media consolidation, those types of activities garner a lot of 0:15:51.360 --> 0:15:53.160 attention and confidence. 0:15:53.960 --> 0:15:55.920 Is there a lot of to get done between now 0:15:55.920 --> 0:15:57.520 and the end of the year, or is everyone pretty 0:15:57.560 --> 0:15:59.480 much packing it up, putting their crystal balls on. 0:16:00.160 --> 0:16:01.280 Look, we're going to the beach. 0:16:01.880 --> 0:16:01.960 No. 0:16:02.120 --> 0:16:05.320 I think these are very robust markets. There's a lot 0:16:05.360 --> 0:16:09.640 of activity going on right now. The market will probably 0:16:09.640 --> 0:16:11.360 shut down in two and a half weeks or so 0:16:11.480 --> 0:16:14.440 for a little bit of a global respite, and the 0:16:14.480 --> 0:16:17.160 predictions and the crystal balls will come out, But there's 0:16:17.200 --> 0:16:19.240 still a fair amount of activity going on, and I 0:16:19.240 --> 0:16:23.320 think the pipelines are fairly well built into the first quarter, 0:16:23.360 --> 0:16:25.880 so I would suspect a busy first quarter as well. 0:16:25.920 --> 0:16:28.000 The crystal balls already around, Jim, come on, they already 0:16:28.000 --> 0:16:30.040 come out because people are looking for something to talk about. 0:16:30.040 --> 0:16:31.600 Twenty twenty six is already done in dusted. 0:16:31.640 --> 0:16:33.320 People are talking about twenty twenty seven at this point. 0:16:33.320 --> 0:16:35.800 Can you imagine we have to have people watch TV 0:16:35.960 --> 0:16:36.840 and sell newspapers. 0:16:36.840 --> 0:16:37.800 So it's important to all of. 0:16:37.760 --> 0:16:42.200 Us stay with us. Multiple impex saviidance coming up off 0:16:42.240 --> 0:16:42.520 to this. 0:16:51.680 --> 0:16:53.720 Sticking with the Fed ahead of next week's meeting. Lindsay 0:16:53.720 --> 0:16:57.520 p exem stiphail clearly in the inflation camp of worries, writing, 0:16:57.520 --> 0:16:59.880 while inflation held steady in September, the lack of down 0:17:00.240 --> 0:17:04.720 improvement from a still elevated level raises concerns that any 0:17:04.760 --> 0:17:08.560 further policy easing could risk an acceleration of price pressures. 0:17:08.560 --> 0:17:09.280 Lindsay joins us. 0:17:09.280 --> 0:17:11.360 Now, Lindsay, thank you so much for being with us. 0:17:11.400 --> 0:17:12.200 I want to start there. 0:17:12.240 --> 0:17:16.040 Why are you still concerned about inflation worries being the 0:17:16.080 --> 0:17:18.679 pre eminent concern at a time when it seems like 0:17:18.720 --> 0:17:21.320 the FED has moved more to the employment side of 0:17:21.320 --> 0:17:21.840 the equation. 0:17:23.080 --> 0:17:24.840 Well, it does seem at least some FED officials have 0:17:24.880 --> 0:17:28.399 shifted their focus away from price stability to full employment, 0:17:28.840 --> 0:17:31.080 But there are still a number of FED officials that 0:17:31.119 --> 0:17:35.080 have come out to highlight the need to remain focused 0:17:35.080 --> 0:17:38.760 on reinstating price stability after years of allowing price pressures 0:17:38.760 --> 0:17:41.960 to remain above that two percent target. Now we have 0:17:42.119 --> 0:17:45.720 made considerable progress in terms of reining in that growth 0:17:45.960 --> 0:17:48.280 in the aftermath of the pandemic, but we've never been 0:17:48.320 --> 0:17:50.719 able to get back to that point of price stability, 0:17:51.080 --> 0:17:54.359 And now with this lack of downward momentum, it does 0:17:54.520 --> 0:17:58.280 suggest that the FED might have reached a neutral position 0:17:58.560 --> 0:18:01.919 in policy appropriate now to take a position a sidelined 0:18:02.040 --> 0:18:07.600 position without further rate cuts, without further risk of inciting inflation. 0:18:08.040 --> 0:18:11.840 Particularly now, there are a number of upside risks as 0:18:11.840 --> 0:18:13.800 we look out to the end of the year and 0:18:13.960 --> 0:18:16.440 turn the calendar page into twenty twenty six. So now 0:18:16.560 --> 0:18:19.760 is not the time to entirely divert focus away from 0:18:19.840 --> 0:18:20.960 achieving price stability. 0:18:21.280 --> 0:18:21.920 Wenzi, do you. 0:18:21.840 --> 0:18:24.480 Think that the FED has enough information and data given 0:18:24.480 --> 0:18:25.879 what happened with the government. 0:18:25.480 --> 0:18:27.920 Shutdown to make a decision next week. 0:18:29.560 --> 0:18:31.560 I think the FED has a good read on what's 0:18:31.600 --> 0:18:34.840 happening in terms of the underlying momentum in terms of 0:18:34.880 --> 0:18:38.840 cost pressures. Again, we haven't seen necessarily all of the 0:18:38.920 --> 0:18:41.640 data moved to the upside, but we haven't seen any 0:18:41.680 --> 0:18:46.240 indications of a material downward momentum in inflation, and as such, 0:18:46.520 --> 0:18:48.920 I do think, coupled with the fact that consumer still 0:18:49.000 --> 0:18:52.760 remains on far from robust but solid footing, the economy 0:18:52.840 --> 0:18:55.200 is on track for a plus three percent growth pace, 0:18:55.560 --> 0:18:58.800 and we continue to see again not robust, but positive 0:18:58.880 --> 0:19:02.199 solid job creation, I think the Fed should air on 0:19:02.240 --> 0:19:05.040 the side of caution, moving to the sideline, allowing for 0:19:05.080 --> 0:19:08.639 a further understanding of the evolution of both the price 0:19:08.680 --> 0:19:12.800 and the labor data before making any additional policy adjustments. 0:19:12.960 --> 0:19:16.320 Lisa brought this up earlier if potentially it's a hawkish cut, 0:19:16.400 --> 0:19:19.040 but what you're describing is maybe maybe we have a 0:19:19.160 --> 0:19:20.639 dubvish pause next week. 0:19:21.240 --> 0:19:23.440 Is that correct? Not necessarily a dubbish pause. I think 0:19:23.440 --> 0:19:25.720 we're looking for more of a neutral pause. I think 0:19:25.720 --> 0:19:28.560 the FED at this point is pretty well divided between 0:19:29.200 --> 0:19:31.720 those that have that lingering fear of price pressures and 0:19:31.760 --> 0:19:34.720 those that are facing this emerging concern of weakness on 0:19:34.720 --> 0:19:37.320 the labor market front. So I do think the FED 0:19:37.320 --> 0:19:42.199 could very clearly articulate a neutral pause push policy to 0:19:42.240 --> 0:19:45.959 the sideline, say we're not going to make any unnecessary 0:19:46.040 --> 0:19:48.840 movements until we have a better read on prices and 0:19:48.880 --> 0:19:52.320 the labor market. Given there are risks to both sides 0:19:52.359 --> 0:19:53.840 of the fed s dual mandate. 0:19:53.600 --> 0:19:56.840 Lindsay, when you say inflation pressures are still in the system, 0:19:57.119 --> 0:19:59.280 there is a real question of what those inflation pressures 0:19:59.280 --> 0:20:01.240 look like percent. A lot of people say we can 0:20:01.280 --> 0:20:03.879 handle four percent, not so much. How much are you 0:20:03.920 --> 0:20:07.080 seeing an actual unmooring of inflation expectations in a way 0:20:07.080 --> 0:20:11.240 that feels unsustainable and unduly punitive rather than two and 0:20:11.240 --> 0:20:11.800 a half. 0:20:11.560 --> 0:20:13.280 Percent, say, or two point eight percent. 0:20:14.560 --> 0:20:16.560 Well, I think at the current read right around two 0:20:16.600 --> 0:20:18.920 and a half ish percent, I think the Fed would 0:20:18.960 --> 0:20:21.760 be willing to tolerate that longer term. But my concern 0:20:21.840 --> 0:20:24.760 is these upside pressures that are still coming down the pipeline. 0:20:24.920 --> 0:20:28.080 Should we see a stronger than expected growth profile at 0:20:28.160 --> 0:20:31.560 year end, or a stronger more spendy consumer as we 0:20:31.640 --> 0:20:35.000 now enter this key holiday shopping season, or turning the 0:20:35.080 --> 0:20:38.480 corner into twenty twenty six, should businesses now begin to 0:20:38.560 --> 0:20:41.320 pass through more of those cost increases to the end 0:20:41.359 --> 0:20:45.160 consumer that were previously absorbed into the bottom line now 0:20:45.160 --> 0:20:49.639 that inventories have been drawn down significantly, any one or 0:20:49.800 --> 0:20:54.000