1 00:00:05,800 --> 00:00:08,360 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim 2 00:00:08,400 --> 00:00:11,440 Speaker 1: Fox along with my co host Lisa Bramowitz. Each day 3 00:00:11,480 --> 00:00:15,000 Speaker 1: we bring you the most important, noteworthy and useful interviews 4 00:00:15,040 --> 00:00:17,520 Speaker 1: for you and your money, whether you're at the grocery 5 00:00:17,560 --> 00:00:20,560 Speaker 1: store or the trading floor. Find the Bloomberg p m 6 00:00:20,680 --> 00:00:31,960 Speaker 1: L Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. 7 00:00:32,000 --> 00:00:35,040 Speaker 1: This is Bloomberg Markets. I'm Lisa brom Witz along with 8 00:00:35,320 --> 00:00:39,600 Speaker 1: Pim Fox, and we are going to delve deeper into 9 00:00:39,680 --> 00:00:44,440 Speaker 1: the Brexit negotiations. We're gonna talk about Scotland in particular, 10 00:00:44,560 --> 00:00:48,839 Speaker 1: which was not for Brexit but ended up getting included 11 00:00:48,880 --> 00:00:51,960 Speaker 1: in the whole thing anyway, Uh, sort of by accident 12 00:00:52,040 --> 00:00:55,000 Speaker 1: to give the fact that they're part of the United Kingdom. Um. 13 00:00:55,040 --> 00:00:58,120 Speaker 1: And you know, for example that's spending in some areas 14 00:00:58,240 --> 00:01:02,960 Speaker 1: in Scotland for key government programs could fall by about 15 00:01:03,040 --> 00:01:06,199 Speaker 1: twenty percent. Who was a new report that talked about 16 00:01:06,240 --> 00:01:09,880 Speaker 1: the aging of the population and also the rising healthcare 17 00:01:09,959 --> 00:01:12,279 Speaker 1: costs and that means that they're going to need new money, 18 00:01:12,319 --> 00:01:16,120 Speaker 1: more money for the National health service. Uh. This is 19 00:01:16,160 --> 00:01:19,720 Speaker 1: a study from the Fraser of Alander Institute, and it 20 00:01:19,760 --> 00:01:24,040 Speaker 1: calls for real debate about the sustainability of Scotland's budget, 21 00:01:24,080 --> 00:01:29,120 Speaker 1: and it says that the status quo is not an option. Yeah. Well, 22 00:01:29,160 --> 00:01:31,119 Speaker 1: and also not only that, but Scotland has also been 23 00:01:31,120 --> 00:01:35,679 Speaker 1: reaching out itself to other countries to try to cultivate 24 00:01:35,720 --> 00:01:39,800 Speaker 1: relationships and get new trade agreements once Brexit is completed. 25 00:01:39,840 --> 00:01:41,160 Speaker 1: Here to talk a little bit more about that. As 26 00:01:41,240 --> 00:01:44,320 Speaker 1: Keith Brown, Cabinet Secretary for the Economy, Jobs and Fair 27 00:01:44,360 --> 00:01:49,560 Speaker 1: Work UH for the Scottish Parliament, comes to us from Edinburgh, Edinburgh, 28 00:01:49,560 --> 00:01:52,280 Speaker 1: but is here in our Bloomberg eleven three studios in 29 00:01:52,320 --> 00:01:56,280 Speaker 1: New York. Uh, Captain Secretary, I would love to get 30 00:01:56,320 --> 00:01:59,640 Speaker 1: your take on what you think the consequences will be 31 00:01:59,640 --> 00:02:04,120 Speaker 1: to Scotland as these negotiations with respect to Brexit go on. Well, 32 00:02:04,120 --> 00:02:05,960 Speaker 1: I don't hear all of the introduction, but I heard 33 00:02:06,000 --> 00:02:08,400 Speaker 1: the phraser of Andern should be mentioned in the estimate 34 00:02:08,400 --> 00:02:10,960 Speaker 1: around an eight billion pounds loss and up to eighty 35 00:02:11,000 --> 00:02:13,600 Speaker 1: thousand jobs being lost. But that kind of estimate is 36 00:02:13,639 --> 00:02:16,600 Speaker 1: murdered by other economists across the piece. So a very 37 00:02:16,639 --> 00:02:19,560 Speaker 1: fundamental effect on the Scottish economy. So what we're trying 38 00:02:19,560 --> 00:02:21,160 Speaker 1: to do is see what we can do to minimize that, 39 00:02:21,360 --> 00:02:24,120 Speaker 1: and as you've said, making sure that we have bilateral 40 00:02:24,120 --> 00:02:27,880 Speaker 1: relationships which are improved within the EU, within Canada which 41 00:02:27,919 --> 00:02:29,480 Speaker 1: have been too hel one this week and here in 42 00:02:29,520 --> 00:02:32,440 Speaker 1: the u S as well. Minister One, if you could 43 00:02:32,440 --> 00:02:34,840 Speaker 1: just speak a little bit about healthcare in the National 44 00:02:34,880 --> 00:02:38,240 Speaker 1: Health Service, because as the name implies, it is a 45 00:02:38,360 --> 00:02:44,400 Speaker 1: national scheme. How would that fair under any kind of 46 00:02:44,480 --> 00:02:48,000 Speaker 1: changes that may happen as a result of Brexit. For 47 00:02:48,000 --> 00:02:51,000 Speaker 1: for the Scottish people, Well, of course there's lots of 48 00:02:51,000 --> 00:02:54,639 Speaker 1: bilateral relationships within the NHS in terms of medical standards 49 00:02:54,680 --> 00:02:56,320 Speaker 1: and so on as well, and that could be affected. 50 00:02:56,360 --> 00:02:59,280 Speaker 1: But Scotland has its own NHS, the National Health Services 51 00:02:59,320 --> 00:03:02,440 Speaker 1: a Scottish an CHS within UM and separate from the 52 00:03:02,440 --> 00:03:04,600 Speaker 1: rest of the UK. But you're right to see the 53 00:03:04,639 --> 00:03:09,440 Speaker 1: agreements on approvals from Edicine's UM, the agreements for medical practices, 54 00:03:09,840 --> 00:03:13,160 Speaker 1: BILA relationships, they could all be affected by Brexit, and 55 00:03:13,200 --> 00:03:16,360 Speaker 1: also crucially the staff, the people from the EU that 56 00:03:16,400 --> 00:03:19,120 Speaker 1: currently work in the NHS. We have an issue in 57 00:03:19,160 --> 00:03:22,119 Speaker 1: getting enough people in his nurses and doctors. We don't 58 00:03:22,120 --> 00:03:23,960 Speaker 1: want to cut off that supply from some of the 59 00:03:24,000 --> 00:03:26,800 Speaker 1: most valuable people in our any chess. So taking a 60 00:03:26,880 --> 00:03:29,200 Speaker 1: step back, can you give us a sense of what 61 00:03:29,360 --> 00:03:34,440 Speaker 1: proportion of the Scottish population voted in favor for Brexit 62 00:03:34,600 --> 00:03:38,160 Speaker 1: versus against and kind of how this development has affected 63 00:03:38,200 --> 00:03:42,880 Speaker 1: Scotland's relationship with Britain. Well, of course we voted differently, 64 00:03:42,920 --> 00:03:46,760 Speaker 1: so in Scotland it was voted to remain with the EU. 65 00:03:47,000 --> 00:03:49,560 Speaker 1: The polls as recently is this week's show that's increased 66 00:03:49,560 --> 00:03:52,720 Speaker 1: to sixty seven in terms of support for the EU. 67 00:03:53,040 --> 00:03:55,760 Speaker 1: We weren't unique in the UK, so London voted to remain, 68 00:03:55,920 --> 00:03:59,320 Speaker 1: Northern Ireland voted to remain um and it's interesting that 69 00:03:59,720 --> 00:04:03,960 Speaker 1: London and Scotland are both now very cosmopolitan, diverse economies, 70 00:04:04,480 --> 00:04:06,400 Speaker 1: with lots of people coming from around the world to 71 00:04:06,440 --> 00:04:10,360 Speaker 1: stay in those locations, and we have, i think realized 72 00:04:10,360 --> 00:04:12,320 Speaker 1: in Scotland some of the real benefits that we have 73 00:04:12,400 --> 00:04:14,280 Speaker 1: from being part of the EU. So we we are 74 00:04:14,360 --> 00:04:16,839 Speaker 1: very keen first of all to have stayed in the EU, 75 00:04:17,080 --> 00:04:19,279 Speaker 1: but now that that seems to be off the table, 76 00:04:19,320 --> 00:04:21,599 Speaker 1: we want to stay in the Single Market. You'd like 77 00:04:21,680 --> 00:04:24,039 Speaker 1: the UK government to stay in the Single Market as well, 78 00:04:24,480 --> 00:04:27,080 Speaker 1: because there's nothing that's implicit in the vote that we 79 00:04:27,120 --> 00:04:29,360 Speaker 1: had that said you have to lead the single market. 80 00:04:29,360 --> 00:04:31,600 Speaker 1: The EU yes, but not the single market. But if 81 00:04:31,600 --> 00:04:33,400 Speaker 1: they don't want to do that, then Scotland wants to 82 00:04:33,400 --> 00:04:35,520 Speaker 1: stay in the single market. And we've got a trading 83 00:04:35,560 --> 00:04:38,400 Speaker 1: relationship going back hundreds of years in the Handsatic League 84 00:04:38,400 --> 00:04:40,520 Speaker 1: and others. So it's very important to a sus stay 85 00:04:40,520 --> 00:04:42,919 Speaker 1: in the single market. Can you stay in the single 86 00:04:42,960 --> 00:04:46,000 Speaker 1: market if say England leads, well, there are different methods 87 00:04:46,000 --> 00:04:47,359 Speaker 1: by which you can do that. So you have a 88 00:04:47,440 --> 00:04:51,039 Speaker 1: process or an organization called after the European Free Trade Association. 89 00:04:51,120 --> 00:04:53,479 Speaker 1: They have relationship in the Single Market with the other 90 00:04:53,560 --> 00:04:56,719 Speaker 1: European countries and it's always a case that the EU 91 00:04:56,800 --> 00:05:00,760 Speaker 1: can find pragmatic solutions. If the EU wants to do that, 92 00:05:00,920 --> 00:05:02,680 Speaker 1: they need to have a building partner in the UK 93 00:05:02,920 --> 00:05:05,000 Speaker 1: to have that as well, and of course be very 94 00:05:05,000 --> 00:05:08,239 Speaker 1: attractive Scotland. If it was an English speaking country within 95 00:05:08,440 --> 00:05:11,359 Speaker 1: the Single market, it would have a real advantage in 96 00:05:11,480 --> 00:05:13,360 Speaker 1: terms of investment and so and so. Yes, it is 97 00:05:13,400 --> 00:05:19,920 Speaker 1: possible to do, but it requires political will. Minister banking, investment, insurance, assets, servicing. 98 00:05:19,960 --> 00:05:25,000 Speaker 1: These are all key industries for Scotland. If there is 99 00:05:25,080 --> 00:05:28,440 Speaker 1: no agreement between the United Kingdom and the European Union 100 00:05:28,520 --> 00:05:34,680 Speaker 1: on reciprocity or domicile negotiations having to do with assets 101 00:05:34,720 --> 00:05:39,040 Speaker 1: and rules and regulations. Will will Scotland do its own version? 102 00:05:39,720 --> 00:05:41,920 Speaker 1: It will do as much as we can. So, for example, 103 00:05:42,040 --> 00:05:44,920 Speaker 1: the First Ministers announced that the Scottish Government will pay 104 00:05:45,000 --> 00:05:47,960 Speaker 1: for the costs of EU nationals who are forced to 105 00:05:47,960 --> 00:05:52,040 Speaker 1: go through a process of reapplying to have status within 106 00:05:52,120 --> 00:05:54,600 Speaker 1: the EU. So we are trying to find our way 107 00:05:54,640 --> 00:05:56,760 Speaker 1: around a different process. We've already made the offer to 108 00:05:56,800 --> 00:05:59,440 Speaker 1: the UK Government that we would take a different approach 109 00:05:59,480 --> 00:06:02,200 Speaker 1: to immigran ration. We are very keen. What's their reaction? 110 00:06:02,400 --> 00:06:06,200 Speaker 1: I been pretty much no um and there's been no 111 00:06:06,279 --> 00:06:09,040 Speaker 1: flexibility showing so far. But we're continuing that process and 112 00:06:09,040 --> 00:06:11,239 Speaker 1: it's are you surprised by that? I mean, you're surprised 113 00:06:11,279 --> 00:06:14,719 Speaker 1: that that that the conversation or even the relationship that 114 00:06:14,800 --> 00:06:16,839 Speaker 1: they seem to because you're still going to be there, 115 00:06:17,000 --> 00:06:19,800 Speaker 1: right I mean, whether you're you know, negotiate something separately 116 00:06:19,800 --> 00:06:22,599 Speaker 1: with the European Union or carve out something within the 117 00:06:22,680 --> 00:06:25,200 Speaker 1: United Kingdom, you're still going to be there and you're 118 00:06:25,200 --> 00:06:27,720 Speaker 1: still going to be an important factor in the overall economy. Well, 119 00:06:27,760 --> 00:06:29,720 Speaker 1: that's right, Scotland is not going to have a new neighbor. 120 00:06:29,720 --> 00:06:31,479 Speaker 1: Our neighbor is England and the rest of the UK, 121 00:06:31,560 --> 00:06:33,120 Speaker 1: and that's going to remain the case, and we want 122 00:06:33,160 --> 00:06:35,400 Speaker 1: to keep good relations there. But in relation to the 123 00:06:35,440 --> 00:06:38,440 Speaker 1: point of immigration, that's been the real strength of the 124 00:06:38,520 --> 00:06:41,400 Speaker 1: UK economy. Population growth has been where that strength has 125 00:06:41,440 --> 00:06:43,720 Speaker 1: come from. And the people that we've come had coming 126 00:06:43,720 --> 00:06:47,440 Speaker 1: in from the EU tend to be younger, younger, productive skilled, 127 00:06:47,680 --> 00:06:49,520 Speaker 1: So it's very important that we keep that and it 128 00:06:49,600 --> 00:06:51,400 Speaker 1: is possible to have a different system. You had it 129 00:06:51,440 --> 00:06:54,400 Speaker 1: before under initiative called the Fresh Talent Initiative. So I 130 00:06:54,400 --> 00:06:56,480 Speaker 1: don't understand why the UK come we just put the 131 00:06:56,720 --> 00:07:00,000 Speaker 1: shutters on. Captain Secretary. I imagine that you are here, 132 00:07:00,000 --> 00:07:03,640 Speaker 1: You're in New York as part of your outreach to 133 00:07:03,880 --> 00:07:06,920 Speaker 1: try to cultivate some of these relationships. Can you give 134 00:07:07,000 --> 00:07:09,480 Speaker 1: us a sense of who you're meeting with and how 135 00:07:09,640 --> 00:07:12,680 Speaker 1: you can go about negotiating when you don't have a 136 00:07:12,720 --> 00:07:17,480 Speaker 1: sense of the moving parts, and given the acrimony right 137 00:07:17,520 --> 00:07:20,840 Speaker 1: now in England, well, it's my experience that business will 138 00:07:20,880 --> 00:07:22,840 Speaker 1: find a way. So, for example, we meet with a 139 00:07:22,920 --> 00:07:27,360 Speaker 1: food distributor in New Jersey yesterday very keen to take 140 00:07:27,400 --> 00:07:31,280 Speaker 1: on products from Scotland. Cheese was primary amongst those. But 141 00:07:31,520 --> 00:07:34,520 Speaker 1: in Canada we've just seen the reintroduction of haggis to 142 00:07:34,640 --> 00:07:37,360 Speaker 1: Canada for the first time in forty six years. UM. 143 00:07:37,400 --> 00:07:40,720 Speaker 1: So we've had meetings to discuss that with retailers and distributors, 144 00:07:41,000 --> 00:07:43,560 Speaker 1: had meetings with government to make sure that people understand 145 00:07:43,600 --> 00:07:46,480 Speaker 1: the message that, as you've mentioned, Scotland voted to remain 146 00:07:46,600 --> 00:07:49,960 Speaker 1: where an outward looking internationalist country. We want to keep 147 00:07:49,960 --> 00:07:53,120 Speaker 1: and improve business links. So the meetings we've had so far, 148 00:07:53,160 --> 00:07:56,239 Speaker 1: I've been with businesses, sometimes some of the banks today 149 00:07:56,280 --> 00:07:59,720 Speaker 1: here in Manhattan, and also with the food retailers. A 150 00:07:59,800 --> 00:08:01,840 Speaker 1: huge each part of our recent success has been food 151 00:08:01,840 --> 00:08:05,360 Speaker 1: and drink. Scotch is still a massive you know, selling 152 00:08:05,440 --> 00:08:08,240 Speaker 1: a thing for us. It's one of the biggest products 153 00:08:08,240 --> 00:08:10,400 Speaker 1: that we have, So that's the nature of the businesses. 154 00:08:10,480 --> 00:08:13,240 Speaker 1: It's been with businesses and sometimes with government in Canada 155 00:08:13,320 --> 00:08:16,800 Speaker 1: and in the US. Now, as a former Royal Marine, 156 00:08:17,000 --> 00:08:21,520 Speaker 1: what are your thoughts about military cooperation between Scotland and 157 00:08:21,800 --> 00:08:25,440 Speaker 1: the United Kingdom that is outside the European Union. You 158 00:08:25,480 --> 00:08:29,320 Speaker 1: won't even be integrated perhaps in the military structure within 159 00:08:30,240 --> 00:08:33,400 Speaker 1: the Europe the euro Zone. Well, it's a very integrated 160 00:08:34,320 --> 00:08:38,040 Speaker 1: system within the EU. The Western Europe European countries in 161 00:08:38,080 --> 00:08:40,840 Speaker 1: particularly do integrate and they work very well together. I 162 00:08:40,840 --> 00:08:43,679 Speaker 1: think our biggest issue with the UK defense is the 163 00:08:43,920 --> 00:08:47,199 Speaker 1: in ordinary expenditure two and fifty billion pounds are thereabouts 164 00:08:47,200 --> 00:08:50,199 Speaker 1: on nuclear submarines, which they don't even really control in 165 00:08:50,280 --> 00:08:52,400 Speaker 1: any events, So and that has meant there's been a 166 00:08:52,440 --> 00:08:55,240 Speaker 1: real downward pressure on spending within the military. There's been 167 00:08:55,240 --> 00:08:58,959 Speaker 1: a huge number of cuts, especially and disproportionately in Scotland, 168 00:08:59,559 --> 00:09:01,640 Speaker 1: and of course so European allies linked to that that 169 00:09:01,720 --> 00:09:04,120 Speaker 1: the UK has a leadership position in terms of defense 170 00:09:04,160 --> 00:09:07,800 Speaker 1: in in the EU and Germany in particular are very 171 00:09:07,800 --> 00:09:10,240 Speaker 1: concerned of it lack of that influence. But you can't 172 00:09:10,280 --> 00:09:13,000 Speaker 1: increase that influence by pulling away from working with others 173 00:09:13,200 --> 00:09:16,679 Speaker 1: and certain up by diminishing the armed forces. Thank you 174 00:09:16,720 --> 00:09:18,640 Speaker 1: so much for joining us. It's truly a pleasure to 175 00:09:18,640 --> 00:09:21,000 Speaker 1: hear what you have to say. Keith Brown, Cabinet Secretary 176 00:09:21,040 --> 00:09:24,800 Speaker 1: for the Economy, Jobs and Fair Work for the Scottish Parliament, 177 00:09:25,120 --> 00:09:28,200 Speaker 1: coming to us from Edinburgh, Scotland. Here in our eleven 178 00:09:28,240 --> 00:09:45,640 Speaker 1: three oh studios. President Trump is picking a nominee to 179 00:09:46,080 --> 00:09:49,360 Speaker 1: helm the Federal Reserve as soon as later today. It 180 00:09:49,400 --> 00:09:52,720 Speaker 1: could come next week, anytime within the next few days. 181 00:09:52,880 --> 00:09:57,680 Speaker 1: How much does this transition of leadership top the world's 182 00:09:57,720 --> 00:10:00,959 Speaker 1: biggest and most important central bank? How important is this? 183 00:10:01,200 --> 00:10:03,360 Speaker 1: I want to bring in Matthew Freund. He's co chief 184 00:10:03,360 --> 00:10:06,199 Speaker 1: investment officer and a head of fixed income strategies at 185 00:10:06,320 --> 00:10:10,720 Speaker 1: Calamos Investments, which oversees about eighteen billion dollars of assets 186 00:10:10,760 --> 00:10:13,960 Speaker 1: and is based in Naperville, Illinois. Matt thank you so 187 00:10:14,040 --> 00:10:16,400 Speaker 1: much for joining us. How much are you paying attention 188 00:10:16,480 --> 00:10:19,880 Speaker 1: to this race to be the next FED chair? Well, 189 00:10:19,920 --> 00:10:22,520 Speaker 1: we're paying a lot of attention to the race, but 190 00:10:22,559 --> 00:10:27,720 Speaker 1: we're not changing our strategies depending on who's a head 191 00:10:27,880 --> 00:10:30,920 Speaker 1: on any given day. I think when you think about 192 00:10:30,960 --> 00:10:33,320 Speaker 1: the FED chair and the transition that's going on there, 193 00:10:33,800 --> 00:10:37,480 Speaker 1: it really is wide open, even even today. I mean 194 00:10:37,480 --> 00:10:41,960 Speaker 1: the President his um, I mean really proven that he 195 00:10:42,080 --> 00:10:46,560 Speaker 1: is not bound by tradition or consensus. And uh, I've 196 00:10:46,559 --> 00:10:50,080 Speaker 1: seen the reports that it seems to be a two 197 00:10:50,080 --> 00:10:54,720 Speaker 1: man race now between Powell and John Taylor. Uh, but 198 00:10:54,800 --> 00:10:56,959 Speaker 1: I really do. I think it's wide open and we're 199 00:10:56,960 --> 00:11:01,000 Speaker 1: not going to be changing our strategies because of it. Well, 200 00:11:01,000 --> 00:11:02,880 Speaker 1: that's why I wanted to go Matt Is. You know, 201 00:11:03,000 --> 00:11:06,120 Speaker 1: as the member of the Investment Committee, I'm wondering if 202 00:11:06,160 --> 00:11:08,640 Speaker 1: you could give us some insight into the thinking of 203 00:11:08,679 --> 00:11:12,600 Speaker 1: you and the other members about how important this selection 204 00:11:13,360 --> 00:11:16,880 Speaker 1: is and whether you are looking at something else in 205 00:11:16,960 --> 00:11:21,040 Speaker 1: order to guide your investment decisions. Yeah, well you know 206 00:11:21,240 --> 00:11:25,199 Speaker 1: we we are, so it is important. Let's again, the 207 00:11:26,280 --> 00:11:31,080 Speaker 1: FED did the absolute loot right thing um post the crisis. 208 00:11:31,480 --> 00:11:34,160 Speaker 1: So you go back to two thousand eight. Um, we 209 00:11:34,200 --> 00:11:37,880 Speaker 1: had this massive contraction and leverage and we were all 210 00:11:38,360 --> 00:11:41,760 Speaker 1: dying for liquidity. So the FED came in and flooded 211 00:11:41,800 --> 00:11:43,680 Speaker 1: the think of a swimming pool. The FED came in 212 00:11:43,760 --> 00:11:47,640 Speaker 1: and overfilled the pool. Uh. Now the FED has said, well, 213 00:11:47,679 --> 00:11:49,959 Speaker 1: we're gonna stop filling. They did that a year or 214 00:11:50,000 --> 00:11:52,400 Speaker 1: two ago. Uh, and now they said, look, we're going 215 00:11:52,440 --> 00:11:56,640 Speaker 1: to be very slowly start taking out a cup at 216 00:11:56,640 --> 00:11:59,200 Speaker 1: a time, but the levels are still really high. The 217 00:11:59,240 --> 00:12:02,640 Speaker 1: most important thing, in our view is what's going on globally, 218 00:12:02,679 --> 00:12:06,920 Speaker 1: because while the FED is slowly draining liquidity. Uh, you've 219 00:12:06,920 --> 00:12:09,160 Speaker 1: got central banks around the world that are coming in 220 00:12:09,240 --> 00:12:12,840 Speaker 1: and with gallons and dwarfing their actions. So when you 221 00:12:12,880 --> 00:12:18,280 Speaker 1: look at financial conditions, financial conditions are still easing despite 222 00:12:18,320 --> 00:12:21,600 Speaker 1: FED tightening. That's very unusual. Well, I want to just 223 00:12:21,640 --> 00:12:23,640 Speaker 1: get your sense. Given the fact that there is this 224 00:12:23,760 --> 00:12:27,679 Speaker 1: sort of flood of cash coming into markets from central 225 00:12:27,679 --> 00:12:31,840 Speaker 1: banks all over the world, everything looks pretty expensive right now. 226 00:12:31,880 --> 00:12:35,520 Speaker 1: There have been concerns raised about lofty valuations in the 227 00:12:35,559 --> 00:12:39,240 Speaker 1: stock market and certainly in high debt markets. Where are 228 00:12:39,320 --> 00:12:44,040 Speaker 1: you finding opportunity in this kind of highly valued market? 229 00:12:44,880 --> 00:12:48,440 Speaker 1: You know, that's a great question. So valuations are the 230 00:12:48,480 --> 00:12:53,160 Speaker 1: most important factor when determining long term investment returns. I mean, 231 00:12:53,160 --> 00:12:55,360 Speaker 1: we can't find a better one. So if you're that 232 00:12:55,520 --> 00:13:00,000 Speaker 1: tenant or twelve year investor, valuations matter in the short run, 233 00:13:00,000 --> 00:13:03,040 Speaker 1: and they're almost irrelevant in the short run. The markets 234 00:13:03,080 --> 00:13:08,400 Speaker 1: are really intrit more trading on momentum, and momentum trades 235 00:13:08,520 --> 00:13:12,640 Speaker 1: on narratives and how those narratives change. Silica today. Today, 236 00:13:12,679 --> 00:13:16,360 Speaker 1: we had a budget deal. We rally, we have tax cuts. 237 00:13:16,360 --> 00:13:19,120 Speaker 1: We're gonna rally. If we have a dovish ted chair, 238 00:13:19,160 --> 00:13:22,880 Speaker 1: We're gonna rally. Synchronize global growth, We rally, So what 239 00:13:22,920 --> 00:13:25,559 Speaker 1: are we doing today? We were thinking about the markets 240 00:13:25,559 --> 00:13:29,679 Speaker 1: in three ways, your core, your hedges, and your insurance. 241 00:13:29,720 --> 00:13:33,920 Speaker 1: From the core perspective, we think that non US markets, 242 00:13:33,960 --> 00:13:36,800 Speaker 1: again this is kind of consensus, but sometimes the consensus 243 00:13:36,880 --> 00:13:40,560 Speaker 1: is right. We think there's better opportunities overseas, emerging markets, 244 00:13:40,559 --> 00:13:43,800 Speaker 1: and international. Within credit, we do we do still like 245 00:13:44,000 --> 00:13:46,280 Speaker 1: high yield and spread product, not because we think it's 246 00:13:46,320 --> 00:13:49,240 Speaker 1: gonna tighten, but because we think that the carry can 247 00:13:49,280 --> 00:13:52,559 Speaker 1: go on for a while. UH. In terms of your hedges, 248 00:13:52,600 --> 00:13:54,360 Speaker 1: we do think it makes sense to have some high 249 00:13:54,440 --> 00:13:58,280 Speaker 1: quality duration things that go up when the rest of 250 00:13:58,320 --> 00:14:02,480 Speaker 1: your portfolio goes down. And then, lastly, insurance so when 251 00:14:02,480 --> 00:14:04,960 Speaker 1: you when you're buying insurance, you don't hope you're going 252 00:14:05,040 --> 00:14:07,160 Speaker 1: to get a car wreck or your house burns down. 253 00:14:07,520 --> 00:14:11,000 Speaker 1: In the same way, we think having small allocations to 254 00:14:11,800 --> 00:14:15,320 Speaker 1: things like commodities, precious metals, minors, things that will do 255 00:14:15,480 --> 00:14:19,560 Speaker 1: really well UH in a very extreme environment makes sense, 256 00:14:19,640 --> 00:14:22,480 Speaker 1: but only in very small size. Can you tell us, Matt, 257 00:14:22,560 --> 00:14:24,840 Speaker 1: what you've been taking profits on, what you've been getting 258 00:14:24,840 --> 00:14:27,760 Speaker 1: out of because you feel that the valuations have gotten 259 00:14:27,840 --> 00:14:30,560 Speaker 1: too high and you're not waiting for someone else to 260 00:14:31,320 --> 00:14:35,000 Speaker 1: take them away from you at an even higher price. Yeah, 261 00:14:35,080 --> 00:14:37,760 Speaker 1: you know, so that's really hard because we have cash 262 00:14:37,800 --> 00:14:41,400 Speaker 1: coming in every day, and by selling, we're adding to 263 00:14:41,640 --> 00:14:45,760 Speaker 1: the the cash problem that that we talked about before. 264 00:14:45,840 --> 00:14:48,840 Speaker 1: I think that's the quandary of the market. So when 265 00:14:48,880 --> 00:14:51,640 Speaker 1: we look at sectors that we think are ahead of themselves, 266 00:14:51,960 --> 00:14:55,280 Speaker 1: they're really things tied to the bond surrogate trade. So 267 00:14:55,320 --> 00:14:59,360 Speaker 1: I think things like utilities UH reads, those sectors have 268 00:14:59,480 --> 00:15:02,920 Speaker 1: gotten very far ahead of themselves. I think that when 269 00:15:02,920 --> 00:15:05,440 Speaker 1: you look at the markets, there are some pockets of 270 00:15:05,480 --> 00:15:07,880 Speaker 1: the markets that are just trading. The credit markets now 271 00:15:07,960 --> 00:15:11,560 Speaker 1: I'm sorry, that are trading tight, especially things UH in 272 00:15:11,640 --> 00:15:14,520 Speaker 1: the front end of the curve credit with UH two 273 00:15:14,680 --> 00:15:17,600 Speaker 1: or three years to go. UH, it's really assuming that 274 00:15:17,720 --> 00:15:21,200 Speaker 1: nothing bad can happen in the meantime, and we're we're 275 00:15:21,240 --> 00:15:25,720 Speaker 1: swapping out there, going into UH names that we're we're 276 00:15:25,760 --> 00:15:28,760 Speaker 1: the upside and the downside are a little bit more balanced. 277 00:15:29,120 --> 00:15:30,840 Speaker 1: And then I guess the last thing that we would 278 00:15:30,840 --> 00:15:34,800 Speaker 1: say is that we are always focusing on risk. So 279 00:15:34,840 --> 00:15:38,080 Speaker 1: the nature of risk has changed here. UH. If you 280 00:15:38,160 --> 00:15:40,560 Speaker 1: look at over the last five years, anytime you bring 281 00:15:40,640 --> 00:15:42,800 Speaker 1: up risk. People get mad at you because it just 282 00:15:42,880 --> 00:15:46,320 Speaker 1: means foregone profits. But we don't think that that's going 283 00:15:46,400 --> 00:15:50,320 Speaker 1: to continue indefinitely. In fact, it never does. So we're 284 00:15:50,360 --> 00:15:53,080 Speaker 1: looking at them, are at at areas where we're just 285 00:15:53,160 --> 00:15:55,480 Speaker 1: not being paid for the risks we're taking, and we're 286 00:15:55,560 --> 00:15:58,080 Speaker 1: lightening up in those areas. So we do think risk 287 00:15:58,120 --> 00:16:02,800 Speaker 1: matters real, real quick. What is a plausible event or 288 00:16:03,320 --> 00:16:07,680 Speaker 1: development that could cause this current bull market and risk 289 00:16:07,720 --> 00:16:13,200 Speaker 1: assets to unravel? Uh? So I'm going to give you 290 00:16:13,240 --> 00:16:17,800 Speaker 1: a very unsatisfactory answer. UM. I don't know, um, but 291 00:16:17,920 --> 00:16:20,600 Speaker 1: I guarantee you that after the fact, we're all going 292 00:16:20,680 --> 00:16:23,720 Speaker 1: to say it's obvious. I mean, we've seen this pattern 293 00:16:23,880 --> 00:16:27,080 Speaker 1: time and time again. When you have periods of very 294 00:16:27,160 --> 00:16:33,160 Speaker 1: low volatility, very of tranquility, if you will, investors bad behaviors, 295 00:16:33,240 --> 00:16:35,840 Speaker 1: so the seeds of their own de minds. And I 296 00:16:35,840 --> 00:16:38,680 Speaker 1: think that's going to happen again. It could be it 297 00:16:38,800 --> 00:16:42,920 Speaker 1: could be, uh, that there are no external events that 298 00:16:43,000 --> 00:16:46,720 Speaker 1: we have a market correction. I actually suspect it's in 299 00:16:46,800 --> 00:16:51,600 Speaker 1: the volatility trade part of the market, but I can't 300 00:16:51,640 --> 00:16:55,200 Speaker 1: prove it. But I think that there's enough unusual things 301 00:16:55,240 --> 00:16:58,600 Speaker 1: going on there that when we have a normal correction, 302 00:16:59,120 --> 00:17:02,360 Speaker 1: uh normal correct of five or ten, you're going to 303 00:17:02,440 --> 00:17:04,800 Speaker 1: find out that people are investors are going to realize 304 00:17:04,840 --> 00:17:07,480 Speaker 1: they have much more leverage in their portfolio than they thought. 305 00:17:07,840 --> 00:17:10,200 Speaker 1: They're going to take react, They're going to take actions 306 00:17:10,320 --> 00:17:12,600 Speaker 1: that are dependent on liquidity, and it's not going to 307 00:17:12,680 --> 00:17:15,440 Speaker 1: be there for Thanks very much for being here for us. 308 00:17:15,480 --> 00:17:18,080 Speaker 1: Matt Freud, head of fixed income Strategies and a member 309 00:17:18,080 --> 00:17:34,000 Speaker 1: of the Investment committee at a Calamos well. As John 310 00:17:34,040 --> 00:17:36,840 Speaker 1: was talking about the market is rising today on the 311 00:17:36,920 --> 00:17:42,480 Speaker 1: narrative that Congress is closer to getting a tax overhaul done. 312 00:17:42,560 --> 00:17:45,400 Speaker 1: Here to talk about that as Nathan dean government analyst 313 00:17:45,480 --> 00:17:48,879 Speaker 1: and an analyst and financial services for Bloomberg Intelligence. He 314 00:17:48,920 --> 00:17:53,280 Speaker 1: comes to us from our Bloomberg studios in Washington, d C. Nathan, 315 00:17:53,720 --> 00:17:55,439 Speaker 1: thank you so much for joining us. Can you just 316 00:17:55,480 --> 00:17:59,520 Speaker 1: start by explaining what exactly happened to give such optimism 317 00:17:59,520 --> 00:18:02,680 Speaker 1: to markets? So last night the budget approved I'm sorry, 318 00:18:02,720 --> 00:18:05,640 Speaker 1: the Senate approved their budget resolution. So they did their 319 00:18:05,680 --> 00:18:09,240 Speaker 1: part to kick off what's called the reconciliation process. They 320 00:18:09,240 --> 00:18:11,679 Speaker 1: passed this on a fifty one forty nine vote. Senator 321 00:18:11,760 --> 00:18:14,920 Speaker 1: Ran Paul disagreed. It was a soft disagree. He actually 322 00:18:14,920 --> 00:18:17,600 Speaker 1: could have blocked the legislation, he didn't let it go forward. 323 00:18:17,960 --> 00:18:20,440 Speaker 1: So what we have now is the Senate has passed 324 00:18:20,440 --> 00:18:23,879 Speaker 1: their resolution, the House has already passed the resolution. Now 325 00:18:23,920 --> 00:18:26,439 Speaker 1: the House is going to try and actually move the 326 00:18:26,480 --> 00:18:29,920 Speaker 1: process quicker by adopting the Senate one uh next week, 327 00:18:30,560 --> 00:18:33,680 Speaker 1: so we are going to then see uh, the tax 328 00:18:33,720 --> 00:18:37,120 Speaker 1: reform process kickoff. This is step one, uh, step two 329 00:18:37,160 --> 00:18:40,800 Speaker 1: maybe of a fifty ft fifty step process. So there's 330 00:18:40,800 --> 00:18:42,879 Speaker 1: still a lot of moving pieces that have to happen 331 00:18:42,920 --> 00:18:45,840 Speaker 1: before we actually see tax reform. Well, Bethan, maybe it 332 00:18:45,880 --> 00:18:48,800 Speaker 1: can help me here because I understand that the Senate 333 00:18:48,920 --> 00:18:52,320 Speaker 1: budget allows for tax cuts. Also they're cutting you know, 334 00:18:52,359 --> 00:18:55,360 Speaker 1: it would cut revenue and the deficit I believe would 335 00:18:55,400 --> 00:18:58,879 Speaker 1: increase to what one would include increase by one and 336 00:18:58,920 --> 00:19:03,399 Speaker 1: a half trillion dollars over over the next decade. The House, 337 00:19:03,480 --> 00:19:06,960 Speaker 1: but the House version is revenue neutral, so they've got 338 00:19:06,960 --> 00:19:09,320 Speaker 1: to resolve these two things. Well, so I think what 339 00:19:09,400 --> 00:19:11,480 Speaker 1: this is is this is kicking the cans so they 340 00:19:11,480 --> 00:19:13,639 Speaker 1: can debate another day. You know that this is not 341 00:19:13,720 --> 00:19:16,760 Speaker 1: the final bills. So what the House here is trying 342 00:19:16,760 --> 00:19:18,480 Speaker 1: to do. Is they're trying to act quickly. You know, 343 00:19:19,040 --> 00:19:21,800 Speaker 1: every policymaker on the Republican side, from Steven Minutition to 344 00:19:21,800 --> 00:19:23,760 Speaker 1: Gary Cohen, they're saying, we need to get this done 345 00:19:23,760 --> 00:19:26,000 Speaker 1: by the end of the year. So by having the 346 00:19:26,000 --> 00:19:29,080 Speaker 1: House adopt the Senate plan next week, they're gonna shave 347 00:19:29,119 --> 00:19:31,959 Speaker 1: off probably about three weeks of debate times, so they 348 00:19:31,960 --> 00:19:34,280 Speaker 1: can just speed up the process. But hang on, hang on, 349 00:19:34,400 --> 00:19:37,280 Speaker 1: is that so, for example, is is Kevin Brady the 350 00:19:37,320 --> 00:19:41,400 Speaker 1: representative from the congressman from Texas, the Republican from Texas? 351 00:19:41,480 --> 00:19:46,200 Speaker 1: Is he on board with this? So from a process standpoint, 352 00:19:46,240 --> 00:19:48,959 Speaker 1: But to your original point, you know, there are a 353 00:19:49,000 --> 00:19:51,800 Speaker 1: sizeable amount of Republicans in the House that will not 354 00:19:52,160 --> 00:19:54,600 Speaker 1: you know, that are not comfortable with raising the deficit. 355 00:19:55,040 --> 00:19:57,240 Speaker 1: And so this is literally just a plan to the 356 00:19:57,280 --> 00:20:00,119 Speaker 1: weekend debate. And the thing here is is that, you 357 00:20:00,160 --> 00:20:02,760 Speaker 1: know a lot of people are very optimistic about tax reform, 358 00:20:02,960 --> 00:20:05,040 Speaker 1: and the Republicans have agreed on a plan. They have 359 00:20:05,080 --> 00:20:08,600 Speaker 1: a nine page plan. The tax code is seventy thousand pages. 360 00:20:08,640 --> 00:20:11,439 Speaker 1: We haven't seen legislation yet, you know, the House and 361 00:20:11,480 --> 00:20:13,800 Speaker 1: the Senate, the House and Ways and Means Committee and 362 00:20:13,840 --> 00:20:16,240 Speaker 1: the Senate Finance Committee. Both of them have said that 363 00:20:16,320 --> 00:20:19,280 Speaker 1: we would like to put out legislation, draft legislation by 364 00:20:19,320 --> 00:20:22,400 Speaker 1: early November. The House could put something out here that says, right, 365 00:20:22,440 --> 00:20:24,400 Speaker 1: we're not going to increase the deficit. The Senate could 366 00:20:24,400 --> 00:20:26,320 Speaker 1: put out and say we're going to increase the deficit 367 00:20:26,359 --> 00:20:28,680 Speaker 1: by one point five trillion. You know, that is where 368 00:20:28,680 --> 00:20:31,040 Speaker 1: the fight is going to happen. And the challenge with 369 00:20:31,480 --> 00:20:33,800 Speaker 1: you know what the Republicans are facing is you know, 370 00:20:34,680 --> 00:20:36,560 Speaker 1: you know, in the Obamacare fight, it was mostly in 371 00:20:36,600 --> 00:20:38,680 Speaker 1: the Senate. The House passed their resolution and went to 372 00:20:38,720 --> 00:20:41,040 Speaker 1: the Senate. That's where the fight was. In tax reform, 373 00:20:41,080 --> 00:20:42,520 Speaker 1: you're gonna have a fight in the Senate. You're gonna 374 00:20:42,560 --> 00:20:44,480 Speaker 1: have a fight in the House. Uh, and you're gonna 375 00:20:44,520 --> 00:20:47,200 Speaker 1: have to deal with all these moving parts. And that's 376 00:20:47,240 --> 00:20:49,320 Speaker 1: part of the reason why we don't think in our 377 00:20:49,359 --> 00:20:52,280 Speaker 1: analysis that tax reform is going to happen this year. Nathan, 378 00:20:52,880 --> 00:20:56,760 Speaker 1: is this completely being driven by the GOP or are 379 00:20:56,800 --> 00:20:59,760 Speaker 1: there some Democrats that are also on board? So you 380 00:20:59,840 --> 00:21:03,480 Speaker 1: see a little bit of Democratic support from senators and 381 00:21:03,640 --> 00:21:06,080 Speaker 1: red states. You know, there were was during what's called 382 00:21:06,119 --> 00:21:09,080 Speaker 1: the voter rama. There were several amendments yesterday where uh 383 00:21:09,400 --> 00:21:12,000 Speaker 1: a few senators jumped over and joined the Republican Party. 384 00:21:12,000 --> 00:21:14,480 Speaker 1: But this is pretty much a Republican only effort. We 385 00:21:14,520 --> 00:21:18,440 Speaker 1: don't see uh, really a bipartisan process playing out here. 386 00:21:18,840 --> 00:21:22,320 Speaker 1: Uh partly just because it's it's extremely tricky. You know, 387 00:21:22,359 --> 00:21:24,639 Speaker 1: the Democratic senators would have to go up against uh 388 00:21:25,119 --> 00:21:28,880 Speaker 1: uh senate, their own Senate leadership, and so I think 389 00:21:29,280 --> 00:21:31,600 Speaker 1: I think it's just gonna be a gop uh play 390 00:21:31,640 --> 00:21:36,040 Speaker 1: for now. What about congressmen from and women from states 391 00:21:36,080 --> 00:21:40,040 Speaker 1: that would be affected by the removal of the state deduction? 392 00:21:40,480 --> 00:21:42,560 Speaker 1: Are they expected to put up a fight, even if 393 00:21:42,560 --> 00:21:45,159 Speaker 1: they are Republicans? You know, I think they're gonna have to. 394 00:21:45,480 --> 00:21:48,280 Speaker 1: The answer is yes, if they think that the middle 395 00:21:48,320 --> 00:21:50,600 Speaker 1: class is going to be harmed. You know, this goes 396 00:21:50,640 --> 00:21:53,240 Speaker 1: back to this. You know, they have a nine page framework, 397 00:21:53,520 --> 00:21:56,120 Speaker 1: they have three buckets, and Speaker Paul Ryan is saying 398 00:21:56,119 --> 00:21:58,359 Speaker 1: that they're going to add a fourth bucket for the 399 00:21:58,440 --> 00:22:02,560 Speaker 1: highest earners, you know, by doing away with the salts deductions. 400 00:22:02,600 --> 00:22:04,600 Speaker 1: You know, are they going to be harmed? Are they 401 00:22:04,600 --> 00:22:07,040 Speaker 1: going to be helped? And I think right now policymakers 402 00:22:07,080 --> 00:22:09,760 Speaker 1: just don't understand, don't understand what's about to happen, or 403 00:22:09,760 --> 00:22:11,560 Speaker 1: at least they just don't understand the plan because no 404 00:22:11,640 --> 00:22:15,160 Speaker 1: plan exists yet. So when the legislation comes out, that's 405 00:22:15,240 --> 00:22:18,720 Speaker 1: when you're gonna see policymakers actually begin to deep, you know, 406 00:22:18,800 --> 00:22:21,880 Speaker 1: dive into the details, see what's gonna happen to their constituents. 407 00:22:22,040 --> 00:22:24,120 Speaker 1: And if they think their constituents are gonna be harmed, 408 00:22:24,200 --> 00:22:25,960 Speaker 1: especially in the middle and lower class, they are going 409 00:22:26,040 --> 00:22:29,600 Speaker 1: to rebel. Is twenty two a magic number for House 410 00:22:29,600 --> 00:22:32,960 Speaker 1: Speaker Paul Ryan, I mean, because how many Republicans can 411 00:22:32,960 --> 00:22:35,280 Speaker 1: he actually lose as this goes to the House floor. 412 00:22:35,800 --> 00:22:39,239 Speaker 1: It's about that. I mean, it's and you know, I 413 00:22:39,359 --> 00:22:41,639 Speaker 1: don't think I think the challenge will be on the 414 00:22:41,680 --> 00:22:43,840 Speaker 1: Senate side. Uh, I don't think the challenge will be 415 00:22:43,840 --> 00:22:47,080 Speaker 1: on the House side per se um, you know, because 416 00:22:47,240 --> 00:22:50,119 Speaker 1: what our take is is that, you know, tax reform 417 00:22:50,200 --> 00:22:53,119 Speaker 1: is just something that's very complex. It's probably not gonna happen. 418 00:22:53,800 --> 00:22:57,119 Speaker 1: Attacks cut, on the other hand, is more likely. And 419 00:22:57,200 --> 00:22:59,360 Speaker 1: so as we go through this process and we get 420 00:22:59,400 --> 00:23:00,600 Speaker 1: to the end of the year or and if something, 421 00:23:00,640 --> 00:23:02,960 Speaker 1: if nothing happens, we're gonna start getting into the two 422 00:23:02,960 --> 00:23:05,800 Speaker 1: thousand eighteen election campaign seasons, and that is when the 423 00:23:05,800 --> 00:23:08,960 Speaker 1: Republicans want to say, especially the April fifteen because you 424 00:23:08,960 --> 00:23:11,280 Speaker 1: can imagine if we get the tax day and nothing 425 00:23:11,320 --> 00:23:13,240 Speaker 1: has happened, there's gonna be a lot of bad press 426 00:23:13,280 --> 00:23:15,560 Speaker 1: about that. So as we get closer into the one 427 00:23:15,640 --> 00:23:19,320 Speaker 1: queue of next year, I think you're gonna see ambitions 428 00:23:19,359 --> 00:23:21,600 Speaker 1: scaled down. They're gonna start talking about, right, we just 429 00:23:21,640 --> 00:23:23,920 Speaker 1: need to pass something. Maybe it's a corporate tax cut, 430 00:23:24,000 --> 00:23:26,640 Speaker 1: you know, something like that. Let's get that through, get 431 00:23:26,680 --> 00:23:28,159 Speaker 1: a good message as we go into the two thou 432 00:23:28,359 --> 00:23:30,960 Speaker 1: eighteen election cycle, and then you know see where we 433 00:23:31,000 --> 00:23:33,359 Speaker 1: go from there. Thanks very much. Nathan Dean is our 434 00:23:33,400 --> 00:23:37,000 Speaker 1: government analyst for Bloomberg Intelligence. He's going to be busy 435 00:23:37,040 --> 00:23:52,840 Speaker 1: for a long time covering tax cuts and perhaps tax reform. Well, 436 00:23:52,880 --> 00:23:55,880 Speaker 1: we have been talking a lot this week about automation 437 00:23:56,160 --> 00:23:58,399 Speaker 1: on Wall Street and how a lot of big banks 438 00:23:58,440 --> 00:24:02,119 Speaker 1: are looking to frankly use computers for as much of 439 00:24:02,160 --> 00:24:06,159 Speaker 1: their businesses as possible. And uh, there's one area that 440 00:24:06,320 --> 00:24:08,760 Speaker 1: might be a little bit more complicated when it comes 441 00:24:08,800 --> 00:24:10,800 Speaker 1: to doing that, and it is trading. Here to talk 442 00:24:10,800 --> 00:24:13,520 Speaker 1: about that is Sagel Kishan She's a hedge fund reporter 443 00:24:13,600 --> 00:24:16,480 Speaker 1: for Bloomberg News and joins us here in our Bloomberg 444 00:24:16,520 --> 00:24:19,199 Speaker 1: eleven three oh studios. You wrote an article today. It 445 00:24:19,240 --> 00:24:21,800 Speaker 1: was a fabulous piece, one in a three part series 446 00:24:21,840 --> 00:24:24,520 Speaker 1: about automation on Wall Street. UM, can you just talk 447 00:24:24,560 --> 00:24:27,840 Speaker 1: about what some of the biggest challenges are when it 448 00:24:27,840 --> 00:24:33,159 Speaker 1: comes to replicating a trader in a computer. There are 449 00:24:33,200 --> 00:24:36,520 Speaker 1: many challenges. UM. The worst thing, I guess all the 450 00:24:36,520 --> 00:24:39,040 Speaker 1: big the big issues that a lot of a lot 451 00:24:39,080 --> 00:24:42,800 Speaker 1: of Wall Street is still using old mainframe computers, very 452 00:24:42,880 --> 00:24:46,960 Speaker 1: dated technology. UM. And so sort of like trying to 453 00:24:47,119 --> 00:24:52,639 Speaker 1: like UM, sort of introduce new machine learning technologies on 454 00:24:52,760 --> 00:24:56,800 Speaker 1: these old mainframe computers is huge challenge. UM. And then 455 00:24:56,960 --> 00:24:59,360 Speaker 1: you've got a lot of banks and hedge funds they're 456 00:24:59,400 --> 00:25:04,120 Speaker 1: still using that Excel spreadsheets, so many different trading platforms UM, 457 00:25:04,280 --> 00:25:07,800 Speaker 1: and data that served on different servers that are not 458 00:25:07,880 --> 00:25:10,399 Speaker 1: talking to each other. And for AI to work, you 459 00:25:10,440 --> 00:25:13,080 Speaker 1: need the data in one place so that you can 460 00:25:13,119 --> 00:25:16,440 Speaker 1: then go through and find patterns and relationships. I want 461 00:25:16,440 --> 00:25:18,320 Speaker 1: to ask about this side that maybe this idea that 462 00:25:18,359 --> 00:25:21,199 Speaker 1: you can automate tasks, but it is more challenging to 463 00:25:21,280 --> 00:25:25,240 Speaker 1: automate decision making. And perhaps you can sort of use 464 00:25:25,320 --> 00:25:28,600 Speaker 1: the story of Paul Tudor Jones that you have in 465 00:25:28,640 --> 00:25:31,159 Speaker 1: your story just to kind of give us an anecdote 466 00:25:31,160 --> 00:25:35,760 Speaker 1: that explains technology is great, but it can't do everything. Yeah, no, 467 00:25:35,880 --> 00:25:39,120 Speaker 1: that's true. Um, you know, you can program a computer 468 00:25:39,240 --> 00:25:43,320 Speaker 1: to buy or sell gold if you know there's a 469 00:25:43,320 --> 00:25:47,000 Speaker 1: fat announcement, or stocks are at a certain level, or 470 00:25:47,040 --> 00:25:50,680 Speaker 1: there's like political strife somewhere, but you can't really program, 471 00:25:50,680 --> 00:25:53,600 Speaker 1: at least not at the moment, things like gut instinct 472 00:25:53,680 --> 00:25:57,520 Speaker 1: and having that sort of trade conviction, like you if 473 00:25:57,520 --> 00:26:00,560 Speaker 1: you're bullish, there's bullish and then being really really bullish, 474 00:26:00,640 --> 00:26:03,320 Speaker 1: like shooting, going in for the kill. And that's something 475 00:26:03,400 --> 00:26:05,720 Speaker 1: that it's a little bit harder to to introduce. But 476 00:26:05,800 --> 00:26:08,840 Speaker 1: hold on a second, because I when I talk to people, 477 00:26:09,240 --> 00:26:12,840 Speaker 1: they seem to say that about credit or less liquid assets, 478 00:26:12,840 --> 00:26:16,240 Speaker 1: things that aren't traded as frequently, that aren't as computerized. 479 00:26:16,320 --> 00:26:18,840 Speaker 1: Yet when it comes to stucks, how much of that 480 00:26:18,960 --> 00:26:21,640 Speaker 1: instinct is really left? I mean, are we just dealing 481 00:26:21,680 --> 00:26:24,480 Speaker 1: with a whole bunch of algos out there. Well, I 482 00:26:24,480 --> 00:26:29,160 Speaker 1: think it's something like equity trading is pretty much done electronically, 483 00:26:29,240 --> 00:26:32,040 Speaker 1: now so, Um, and I think there's that famous stat 484 00:26:32,080 --> 00:26:36,400 Speaker 1: about Goldman Sacks is equity trading business, Like I think 485 00:26:36,400 --> 00:26:39,600 Speaker 1: they only have like thirty people something like that. Um, 486 00:26:39,680 --> 00:26:42,840 Speaker 1: you know Dan from hundreds back in the day. Um. 487 00:26:42,920 --> 00:26:44,520 Speaker 1: But yeah, as you mentioned and as you used to 488 00:26:44,560 --> 00:26:47,320 Speaker 1: cover yourself, the credit markets are are the ones that 489 00:26:47,359 --> 00:26:51,320 Speaker 1: are going to be challenging to to automate. I've compelled though, 490 00:26:51,359 --> 00:26:55,080 Speaker 1: by the idea that a lot of the programming might 491 00:26:55,160 --> 00:26:58,199 Speaker 1: even be there. But the big banks don't have the 492 00:26:58,280 --> 00:27:01,760 Speaker 1: actual hardware. They don't have the computers that are capable 493 00:27:01,760 --> 00:27:05,399 Speaker 1: of doing this. Aren't they spending billions upon billions of 494 00:27:05,440 --> 00:27:08,520 Speaker 1: dollars every year on technology? And how much more would 495 00:27:08,560 --> 00:27:10,600 Speaker 1: they have to spend in order to like, you know, 496 00:27:10,720 --> 00:27:13,159 Speaker 1: get all new equipment that would be equipped to do this. 497 00:27:13,359 --> 00:27:16,840 Speaker 1: You No, absolutely, they are spending, as you rightly said, 498 00:27:16,880 --> 00:27:19,840 Speaker 1: billions on technology, but you also have to get the 499 00:27:19,920 --> 00:27:24,320 Speaker 1: right technolog tech. E's the code is the engineers and scientists. 500 00:27:24,840 --> 00:27:26,679 Speaker 1: And at the moment, they all want to go to 501 00:27:26,680 --> 00:27:29,880 Speaker 1: Silicon Valley. I mean, that's where they're like the stars there. 502 00:27:30,000 --> 00:27:32,320 Speaker 1: You know, they want to work for Facebook and Netflix 503 00:27:32,400 --> 00:27:35,480 Speaker 1: and what. But so here's here's the sort of ironic thing. 504 00:27:35,600 --> 00:27:39,160 Speaker 1: Back in maybe ten twenty years ago, when you went 505 00:27:39,200 --> 00:27:41,560 Speaker 1: to a great school, everybody wanted to go work for 506 00:27:41,560 --> 00:27:43,639 Speaker 1: Wall Street because they got paid the most. Now they 507 00:27:43,680 --> 00:27:45,400 Speaker 1: all want to go work in Silicon Valley because they're 508 00:27:45,440 --> 00:27:47,520 Speaker 1: going to get paid the most. Can't banks just have 509 00:27:47,600 --> 00:27:49,840 Speaker 1: fewer of them and pay them incredible salaries? Do they 510 00:27:49,880 --> 00:27:52,720 Speaker 1: pay them huge amounts or are they trying to sort 511 00:27:52,720 --> 00:27:55,120 Speaker 1: of treat them as back off, as textile? Well that's 512 00:27:55,119 --> 00:27:58,000 Speaker 1: why that that that that's the issue. I mean, you know, 513 00:27:58,119 --> 00:27:59,879 Speaker 1: you can be at Facebook and you're like, you know, 514 00:28:00,160 --> 00:28:02,879 Speaker 1: the front office star, so to speak, but going to 515 00:28:03,520 --> 00:28:05,880 Speaker 1: UM to to Wall Street, you're still sort of like 516 00:28:06,119 --> 00:28:09,600 Speaker 1: considers the tech support guy, as you quite rightly said. 517 00:28:09,800 --> 00:28:11,600 Speaker 1: But also like being in a in a in a 518 00:28:11,640 --> 00:28:16,160 Speaker 1: tech firm, you've got that sort of coleasial camaraderie sort 519 00:28:16,160 --> 00:28:18,920 Speaker 1: of everyone's like thinking and talking in your language and 520 00:28:19,320 --> 00:28:21,840 Speaker 1: going to all street people if you speak talk to 521 00:28:21,880 --> 00:28:25,520 Speaker 1: talk about you know, um, statistical inference or any like 522 00:28:25,640 --> 00:28:28,879 Speaker 1: deep learning, strategy management. I just gonna look quite blankly 523 00:28:28,880 --> 00:28:31,400 Speaker 1: at you, maybe not at common sex with multi shallows, 524 00:28:31,520 --> 00:28:35,280 Speaker 1: but what about using all of this technology inside the firm, 525 00:28:35,359 --> 00:28:38,600 Speaker 1: not necessarily to make money as trading and so on, 526 00:28:38,720 --> 00:28:43,520 Speaker 1: but just to automate or to try to use artificial 527 00:28:43,560 --> 00:28:48,040 Speaker 1: intelligence for things like fraud detection or you know, breaking 528 00:28:48,360 --> 00:28:52,280 Speaker 1: the international banking rules. Is that something that the banks 529 00:28:52,280 --> 00:28:54,720 Speaker 1: are and the people that you've spoken to feel is 530 00:28:54,720 --> 00:28:57,520 Speaker 1: going to be sort of pervasive. Yeah. I mean, and 531 00:28:57,640 --> 00:29:01,080 Speaker 1: in fact, you know they call that red tech. That's 532 00:29:01,120 --> 00:29:04,880 Speaker 1: the the equivalent of fintech. Um. Yeah, no, My colleague 533 00:29:05,440 --> 00:29:07,560 Speaker 1: Huson wrote a couple of months ago about how JP 534 00:29:07,720 --> 00:29:12,920 Speaker 1: Morgan they have automated some of the legal work that 535 00:29:12,920 --> 00:29:15,520 Speaker 1: that is done at the bank, and that would have 536 00:29:15,560 --> 00:29:19,440 Speaker 1: take teams of lawyers hundreds of hours months to do, 537 00:29:19,520 --> 00:29:22,000 Speaker 1: and they're doing it now in seconds. With the traders 538 00:29:22,000 --> 00:29:24,960 Speaker 1: that you spoke to, were they nervous about job security? Yeah? 539 00:29:25,000 --> 00:29:28,480 Speaker 1: I mean, it's it's funny there's this, Um, all the 540 00:29:28,520 --> 00:29:32,600 Speaker 1: stories that we've done all year, you know, investing in 541 00:29:32,600 --> 00:29:36,959 Speaker 1: the finance team, it's really hitting a nerve amongst our 542 00:29:36,960 --> 00:29:42,520 Speaker 1: readers and subscribers and listeners. Um, it's an exidential crisis 543 00:29:42,680 --> 00:29:46,480 Speaker 1: because we're so used to talking about blue collar workers, 544 00:29:46,560 --> 00:29:50,400 Speaker 1: like factory workers, coal miners, like being laid off and 545 00:29:50,400 --> 00:29:53,200 Speaker 1: and you know, people I guess on the on the coast, 546 00:29:53,200 --> 00:29:56,360 Speaker 1: so like, well you just retall retrain, but now it's 547 00:29:56,400 --> 00:29:59,160 Speaker 1: like climbing up sort of the pecking order, and it's 548 00:29:59,160 --> 00:30:02,360 Speaker 1: affecting them. Now, well, we're gonna see how many of 549 00:30:02,400 --> 00:30:04,640 Speaker 1: them survived this there is it gonna be a battle 550 00:30:04,680 --> 00:30:06,680 Speaker 1: between the machines and the human beings at least to 551 00:30:06,760 --> 00:30:13,000 Speaker 1: keep those jobs. Cyber battle, cyborg battle. Alright, doctor who scary? 552 00:30:13,080 --> 00:30:15,200 Speaker 1: Al right? Well done. Thank you very much for being 553 00:30:15,200 --> 00:30:19,560 Speaker 1: with us, say Jell. Much appreciated. Sajo kishan hedge fund 554 00:30:19,600 --> 00:30:25,080 Speaker 1: reporter for Bloomberg. Thanks for listening to the Bloomberg P 555 00:30:25,200 --> 00:30:28,200 Speaker 1: and L podcast. You can subscribe and listen to interviews 556 00:30:28,200 --> 00:30:32,280 Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 557 00:30:32,680 --> 00:30:36,240 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 558 00:30:36,280 --> 00:30:39,560 Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast. 559 00:30:39,600 --> 00:30:42,240 Speaker 1: You can always catch us worldwide on Bloomberg Radio.