WEBVTT - Stocks Extend Highs as Traders Await Truce Update 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.240 or watch us live on YouTube. 0:00:27.560 --> 0:00:32.040 We have an esteem guest who has serious knowledge about 0:00:32.080 --> 0:00:36.560 these tensions across Eurasia. His name is Daniel Tannebaum. He's 0:00:36.560 --> 0:00:39.000 been a wonderful support of the show and we feel 0:00:39.040 --> 0:00:42.879 that his time is so important versus the Q and 0:00:42.920 --> 0:00:46.479 A that we've been hearing. He is with Oliver Wyman, 0:00:46.520 --> 0:00:50.479 a senior fellow Atlantic Council dead tan Obaum, you are 0:00:50.640 --> 0:00:56.680 encyclopedic on sanctions and the economic tensions with Moscow. No 0:00:56.720 --> 0:00:59.600 doubt Vladimir Putin and his team is listening to. 0:00:59.560 --> 0:01:03.280 This press conference. How does it translate in Moscow? 0:01:04.800 --> 0:01:08.080 I mean, I think Moscow has been the winner for 0:01:08.120 --> 0:01:10.680 the last few weeks, tom because of the increasing oil 0:01:10.800 --> 0:01:13.320 prices through this conflict, and as we saw, there was 0:01:13.360 --> 0:01:17.440 about a month period where the Trump administration authorized the 0:01:17.480 --> 0:01:21.400 purchase of Russian oil pretty much by the world. So 0:01:21.840 --> 0:01:25.160 I think Russia has certainly been a beneficiary of this 0:01:25.280 --> 0:01:29.839 conflict also China. But I'm not sure there's anything new 0:01:29.880 --> 0:01:32.920 that Russia is gleaning here because obviously the US hasn't 0:01:32.920 --> 0:01:36.160 been involved in any sort of kinetic activities directly on 0:01:36.200 --> 0:01:40.280 the Russia front Visa VIV, the conflict in Ukraine. Dan. 0:01:40.319 --> 0:01:42.920 We just heard from the Secretary Defense as well as 0:01:42.959 --> 0:01:46.720 military leaders about the tremendous military success the US Armed 0:01:46.720 --> 0:01:50.400 Forces is having in that in Iran, which has led 0:01:50.480 --> 0:01:53.520 in large part to this seasfire. What are next steps 0:01:53.520 --> 0:01:55.400 do you think? How do you think this really plays out? 0:01:56.400 --> 0:01:58.440 So, I mean again, I think it also depends on 0:01:58.720 --> 0:02:01.520 success is dictated by what was the objective. You know, 0:02:01.560 --> 0:02:04.160 we've heard a message about regime change, bringing back my 0:02:04.200 --> 0:02:08.440 political science education from GW. Regime change is really a 0:02:08.560 --> 0:02:11.880 change in government, which I'm not sure we've seen here. 0:02:12.360 --> 0:02:14.639 Where I think this is going is I think it's 0:02:14.639 --> 0:02:18.000 a reversion to a deal similar to what President Obama 0:02:18.040 --> 0:02:21.200 hammered out in twenty fifteen under the Joint Comprehensive Plan 0:02:21.240 --> 0:02:26.560 of Action. We heard talks from Vice President Vance's negotiations 0:02:26.600 --> 0:02:29.120 over the weekend where the talks were really hinging around 0:02:29.440 --> 0:02:33.000 Iran's nuclear and Richmond capability, which again there was a 0:02:33.040 --> 0:02:35.920 deal that President Trump walked away from in twenty eighteen 0:02:36.280 --> 0:02:39.800 that did keep Iran further away from a nuclear weapons program. 0:02:40.320 --> 0:02:42.400 I mean, I looked in at where we are, and 0:02:42.440 --> 0:02:44.840 I think the lynchpin of so many conversations I have 0:02:45.080 --> 0:02:48.760 is China coming to the rescue of Iran. I believe 0:02:49.280 --> 0:02:52.560 the leadership in Beijing yesterday said that may not happen. 0:02:53.160 --> 0:02:57.560 What does Oliver Wyman know about the support Iran can 0:02:57.639 --> 0:02:59.880 receive from China. 0:03:00.040 --> 0:03:03.079 I mean, China's been providing support, but really inso much 0:03:03.200 --> 0:03:06.480 is continuing to buy Iranian oil throughout this crisis, and 0:03:06.520 --> 0:03:09.080 there have been tankers that have transited the Strait, albeit 0:03:09.120 --> 0:03:12.040 at a far smaller clip than what we've seen in 0:03:12.080 --> 0:03:16.360 the one hundred plus ships a day that was Iranian 0:03:16.440 --> 0:03:19.560 oil bound for China. Now there's an interesting moment with 0:03:19.639 --> 0:03:24.160 this blockade. Of the blockade, oil is not going to 0:03:24.280 --> 0:03:26.400 China at this point, but it takes time for this 0:03:26.480 --> 0:03:29.480 to flow through. We have not seen China act out 0:03:29.560 --> 0:03:32.600 much in support of Iran here other than being a consumer. 0:03:32.919 --> 0:03:35.600 I don't expect to see much more support along those lines. 0:03:35.640 --> 0:03:38.160 I've been dyinga ask this because d'An Tannabaum's the only 0:03:38.200 --> 0:03:40.960 one who I know who read Patrick O'Brien twenty one 0:03:41.040 --> 0:03:46.160 volumes Napoleonic War three times. Dan Tannabaum, Is a blockade 0:03:46.560 --> 0:03:49.200 like a sanction? Is it just as simple as that? 0:03:49.920 --> 0:03:53.280 Well, I mean it's another use of hard power. I 0:03:53.360 --> 0:03:57.520 mean we've obviously used blockades in different forms of American history. 0:03:58.000 --> 0:04:01.119 Is in another form of sanction. I mean the sanctions 0:04:01.120 --> 0:04:04.280 are trying to use economic warfare to force a change 0:04:04.320 --> 0:04:07.400 in behavior. Obviously, the blockade is more direct interaction with 0:04:07.480 --> 0:04:11.560 the threat of seizure, of boarding, of potentially interdicting vessels 0:04:11.880 --> 0:04:15.040 that are moving in contravention of this blockade, which thus 0:04:15.120 --> 0:04:17.839 far we haven't seen. Is in another form of sanctions. 0:04:17.880 --> 0:04:20.880 It's another cudgual tool in the foreign policy arsenal to 0:04:21.000 --> 0:04:24.000 try and force Iran back to the negotiating table. The 0:04:24.120 --> 0:04:26.320 frustration in this is essentially I think we're going to 0:04:26.320 --> 0:04:29.120 be back where we were eleven years ago, and potentially 0:04:29.120 --> 0:04:30.720 in a worse position than we were then. 0:04:30.880 --> 0:04:33.960 And we hear that from Admiral Bolton on Bloomberg this weekend, yep, 0:04:34.000 --> 0:04:35.160 just four or five. 0:04:35.120 --> 0:04:35.880 Days ago as well. 0:04:35.920 --> 0:04:38.599 Paul Sweeney with Dan Tanemam Hey, Dan, we kind of 0:04:38.640 --> 0:04:41.880 went into this war with Iran with effectively an open 0:04:42.440 --> 0:04:46.200 straight of Hormuz, which obviously benefits countries all around the world. 0:04:46.360 --> 0:04:49.240 That is not the case today. Do you think we 0:04:49.279 --> 0:04:52.640 can get back to an open straight Because it's not 0:04:52.720 --> 0:04:54.640 just the US and Ran here. This is countries all 0:04:54.680 --> 0:04:57.360 around the world depend upon goods and that flow through 0:04:57.360 --> 0:04:57.760 that straight. 0:04:58.279 --> 0:05:00.839 And it's pretty clear that Iran didn't realize the full 0:05:00.839 --> 0:05:02.960 extent of what they could do. Obviously, when your back 0:05:03.000 --> 0:05:05.920 is against the wall. Iran has never attacked other Gulf states. 0:05:06.240 --> 0:05:09.760 They've never militarily blockaded the Strait. I don't know if 0:05:09.800 --> 0:05:11.920 we go back to where we were unless there is 0:05:11.960 --> 0:05:14.960 a deal that both sides feel comfortable with. And if 0:05:15.000 --> 0:05:19.599 you'll remember, the negotiations were ongoing as the attacks began 0:05:19.680 --> 0:05:22.120 against Iran. And not to say that the Iranian regime 0:05:22.120 --> 0:05:24.640 should remain in place, because obviously it is a threat 0:05:24.680 --> 0:05:28.159 to safety and security around the world, but they have 0:05:28.240 --> 0:05:30.400 a lot more leverage now than they did a few 0:05:30.440 --> 0:05:32.960 months ago. And so if we revert back to this 0:05:33.040 --> 0:05:36.680 deal where they trade nuclear enrichment for sanctions relief for 0:05:36.839 --> 0:05:39.880 the release of blocked assets, similar to what President Obama 0:05:39.920 --> 0:05:43.360 did a decade ago. They have more leverage going into 0:05:43.400 --> 0:05:45.400 it this side. I don't know how we account for that. 0:05:46.400 --> 0:05:48.960 So I guess that one of the questions then will become, 0:05:49.040 --> 0:05:51.799 I to what extent do other countries come and become 0:05:51.800 --> 0:05:54.760 involved in this and maybe securing this straight? I mean, 0:05:54.800 --> 0:06:00.159 Secretary Hexit was raised that point several times, So I do. 0:06:00.000 --> 0:06:01.880 I think that will come over time. I've spent a 0:06:01.920 --> 0:06:04.320 substantial amount of time this week in DC with a 0:06:04.360 --> 0:06:07.120 number of European government officials, and the message is this, 0:06:08.080 --> 0:06:11.320 we agree with the objectives of what we believe the 0:06:11.320 --> 0:06:14.560 Trump administration is trying to do with Iran. But had 0:06:14.600 --> 0:06:18.200 they just consulted with US as this conflict began, this 0:06:18.279 --> 0:06:20.960 might have been a different situation, either for pushing diplomacy 0:06:21.120 --> 0:06:24.080 or a multilateral approach to dealing with the threat. I 0:06:24.120 --> 0:06:27.479 do believe there's kind of a waiting for some sort 0:06:27.520 --> 0:06:29.800 of a reach out in a more diplomatic matter to 0:06:29.920 --> 0:06:32.640 the allies to try and bring them on. 0:06:32.560 --> 0:06:35.159 Board, because obviously, to your point, Paul, the world. 0:06:34.880 --> 0:06:38.320 Suffers from this. This is not an American issue, but 0:06:38.360 --> 0:06:42.760 it's certainly been an initiated conflict for the US against Iran. 0:06:42.839 --> 0:06:46.600 Here I look, Dan at your study of this for 0:06:46.640 --> 0:06:49.600 thirty forty years, and I'm going to ask a really 0:06:49.680 --> 0:06:53.120 serious question because whether it's the treatment of the Secretary 0:06:53.120 --> 0:06:56.160 of Defense, the Chairman of the Joint Chiefs of Staff, 0:06:56.480 --> 0:06:58.960 or the new guy in the press conference, Edminal Cooper 0:06:59.000 --> 0:07:03.440 of Sentcom, with great respect to Tanabam, are we at 0:07:03.560 --> 0:07:05.760 war or are we at conflict? 0:07:06.640 --> 0:07:09.880 So look, I am not a kinetic warfare expert. I 0:07:09.920 --> 0:07:13.760 think historically and I worked in Congress when there was 0:07:13.800 --> 0:07:18.280 a vote on the Iraq war definitely declared war. Congress 0:07:18.480 --> 0:07:22.240 voted on it. I do think we are at war 0:07:22.280 --> 0:07:28.320 at this point. We've got a substantial amount of American soldiers, aviators, 0:07:28.800 --> 0:07:32.720 sailors in the Middle East to combat this crisis. Obviously, 0:07:32.760 --> 0:07:34.720 we're in a ceasefire at the moment where there is 0:07:34.760 --> 0:07:38.960 no active warfare happening, but they are on standby, as 0:07:39.000 --> 0:07:41.920 we heard in that press conference, so are I don't 0:07:41.920 --> 0:07:44.680 know the textbook definition of war, but if it kind 0:07:44.680 --> 0:07:46.520 of walks like a duck in quacks like a duck. 0:07:46.640 --> 0:07:51.560 Right, Thank you so much for coming into our studios 0:07:51.560 --> 0:07:54.920 in Washington. It is the meetings of the International Monetary 0:07:54.920 --> 0:07:59.240 Fund and World Bank and of course the if obam 0:07:59.240 --> 0:08:01.360 where this is a p with Oliver Wyman. 0:08:03.200 --> 0:08:03.920 Stay with us. 0:08:04.160 --> 0:08:07.400 More from Bloomberg Surveillance coming up after this. 0:08:14.640 --> 0:08:18.239 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:08:18.280 --> 0:08:21.480 weekday afternoons from seven to ten am Eastern Listen on 0:08:21.520 --> 0:08:24.920 Apple Karplay and Android Otto with the Bloomberg Business app, 0:08:25.120 --> 0:08:26.840 or watch us live on YouTube. 0:08:27.040 --> 0:08:32.040 Robert Dahl joined just CEO CIO at Crossmark Global Investments. 0:08:32.120 --> 0:08:34.160 Who's the only one of my rolodex who was there 0:08:34.200 --> 0:08:35.800 in nineteen twenty eight when. 0:08:35.640 --> 0:08:38.320 The last time this happened, Bob, you and I had 0:08:38.440 --> 0:08:40.439 never ever seen this. 0:08:40.720 --> 0:08:42.440 It's amazing. Why is this happening? 0:08:42.760 --> 0:08:45.520 Because good news is good news, bad news is good news, 0:08:45.559 --> 0:08:46.720 and no news is good news. 0:08:46.720 --> 0:08:49.120 You buy stocks, but look, you buy stocks. 0:08:49.120 --> 0:08:51.960 But we had a guest earlier who said, the structure 0:08:52.040 --> 0:08:56.480 here is what's changed. The retalization is Barry eichen Green 0:08:56.559 --> 0:09:01.080 would say, the financialization of the system is when you 0:09:01.120 --> 0:09:03.040 and I had a standard and pours outlook book. 0:09:03.080 --> 0:09:04.280 And that's fair enough. 0:09:04.280 --> 0:09:08.320 There are a lot new buyers that have significant buying 0:09:08.400 --> 0:09:12.439 power and volume power, if I can use that term, individuals, 0:09:12.720 --> 0:09:19.560 young people, hedge funds, quantitative tools. So the traditional quote 0:09:19.640 --> 0:09:23.640 unquote investor that looks at companies, we're shrinking tom as 0:09:23.679 --> 0:09:25.800 a percentage of what's going on. 0:09:26.360 --> 0:09:28.480 So what do you think is driving just kind of 0:09:28.480 --> 0:09:31.920 marketing trends here? Is it maybe just momentum trend trading? 0:09:32.160 --> 0:09:33.640 Is that becoming a bigger part of it. 0:09:33.520 --> 0:09:35.679 All the above, Paul, There's no question about it. But look, 0:09:35.760 --> 0:09:39.320 let's let's be fair. Prior to this war, the economy 0:09:39.400 --> 0:09:42.480 was pretty good, YEP. Earnings were better than pretty good. 0:09:43.000 --> 0:09:45.640 This war has been brief, and if it really is 0:09:45.800 --> 0:09:49.240 over or close to over, we'll go back to those tailwinds. 0:09:49.280 --> 0:09:50.959 And that's what the market is focusing on. 0:09:51.400 --> 0:09:55.600 So one of the big themes has just been you know, AI, 0:09:55.640 --> 0:09:57.720 and I'm not sure that I think when this war 0:09:57.800 --> 0:09:59.800 winds down, a lot of those themes got to come 0:09:59.840 --> 0:10:03.560 right to the forefront again, AI, private credit, those TEP 0:10:03.600 --> 0:10:04.080 types of things. 0:10:04.120 --> 0:10:05.000 What are you focusing on? 0:10:05.640 --> 0:10:08.600 You're absolutely right. Look, let's be short termed for a minute. 0:10:08.600 --> 0:10:11.680 Earnings have just started so far, so good. I talked 0:10:11.679 --> 0:10:14.080 a lot of analysts during the war and they said, I. 0:10:14.040 --> 0:10:15.520 Don't know what to do with my estimates. 0:10:15.840 --> 0:10:17.719 I'm gonna wait because the company is gonna report in 0:10:17.760 --> 0:10:20.600 a couple of weeks. See what they say about the 0:10:20.800 --> 0:10:24.400 first quarter and projected going forward. Then I'll deal with 0:10:24.440 --> 0:10:27.440 my estimates. My guess is there's some NIX out there 0:10:27.480 --> 0:10:29.559 and estimates have to come down a bit. I don't 0:10:29.600 --> 0:10:33.040 think it's a disaster, but enough to be a little worried. 0:10:33.040 --> 0:10:35.680 At twenty one times, yes, down from twenty three times 0:10:35.800 --> 0:10:38.199 and up from nineteen times, but I'd like a lower 0:10:38.280 --> 0:10:39.880 multiple with all this uncertainty. 0:10:39.960 --> 0:10:42.520 So a brilliant adults scattered out chart. 0:10:42.559 --> 0:10:45.480 This is Matt s Manaro with zero hedgehop thank you 0:10:45.520 --> 0:10:48.200 for their market year is a real good compendium of 0:10:48.240 --> 0:10:49.439 what's going on out there. 0:10:49.600 --> 0:10:51.040 Since nineteen twenty eight. 0:10:51.440 --> 0:10:53.440 When the S and P is up like this five 0:10:53.440 --> 0:10:56.520 percent verst fifteen days of April, the market is up 0:10:56.600 --> 0:10:59.080 thirty two percent on average the rest of the year. 0:10:59.480 --> 0:11:02.560 Where do I? Yeah, where are you signed? Bob Dahl? 0:11:02.600 --> 0:11:05.200 You and I know it's just not that easy, And 0:11:05.240 --> 0:11:08.200 I'm going to go to Frankly, James Kramer over at 0:11:08.240 --> 0:11:11.120 the Death Star has been very good about this in 0:11:11.280 --> 0:11:17.000 Time memorial. The answer is, very few stacks drive us higher. 0:11:17.600 --> 0:11:21.360 What are those very few stocks? In July or in. 0:11:21.280 --> 0:11:23.760 October A great, great question. Of course, I don't know 0:11:23.920 --> 0:11:26.920 for sure. I do observe in the market the last 0:11:26.960 --> 0:11:29.839 couple of days, as we've moved now to a new 0:11:29.880 --> 0:11:32.720 all time high, breadth has been pretty mediocre. 0:11:32.760 --> 0:11:33.720 It's not convincing. 0:11:33.760 --> 0:11:33.880 Now. 0:11:33.920 --> 0:11:35.959 I'm not gonna I'm not gonna poop poop a new high. 0:11:36.080 --> 0:11:37.679 I believing, I love it. 0:11:37.920 --> 0:11:39.600 But I think I think you're gonna see some of 0:11:39.600 --> 0:11:43.920 the technology stocks software coming back from the dead. I 0:11:43.960 --> 0:11:46.400 don't think the semis are over. They need a correction. 0:11:46.480 --> 0:11:48.760 They're going through that right now, and I think you 0:11:48.840 --> 0:11:53.520 will see then other cyclicals do reasonably well as long 0:11:53.559 --> 0:11:54.520 as the economy. 0:11:54.200 --> 0:11:58.280 Is okay, which it is. Joe Eisenthal saves Bloomberg surveillance today. 0:11:58.320 --> 0:12:00.840 Thank you Joe with a tweet out without Life. Us 0:12:01.120 --> 0:12:04.640 JAB has claims to zero seven two hundred seven thousand 0:12:04.720 --> 0:12:08.320 in April eleven week. The estimate was two thirteen, so 0:12:08.360 --> 0:12:11.440 they came in better, more optimistic than expected. 0:12:11.559 --> 0:12:11.760 Yep. 0:12:11.880 --> 0:12:15.200 So you know it's an interesting bob. I mean, coming 0:12:15.400 --> 0:12:18.080 late last year kind of into this new year, we 0:12:18.120 --> 0:12:19.880 had a rotation in the marketplace, getting out of some 0:12:19.920 --> 0:12:22.640 of those high multiple named high growth names into some 0:12:22.760 --> 0:12:24.960 value some small mid caps. How do you see that 0:12:25.080 --> 0:12:25.600 playing at. 0:12:25.480 --> 0:12:28.840 These I think that will come back. You know, value 0:12:28.880 --> 0:12:31.600 tends to do better when growth is pretty good, and 0:12:31.720 --> 0:12:36.120 growth seems they'd be pretty good. Look the the trade 0:12:36.240 --> 0:12:41.800 around AI got concerning first it was we got all 0:12:41.800 --> 0:12:43.600 the money we need in cash, and then we'll give 0:12:43.600 --> 0:12:47.160 it to you in inequity. Then we'll raise fixed income 0:12:47.200 --> 0:12:50.400 to do all the capital expenditures. Post labor day was 0:12:50.480 --> 0:12:52.880 kind of trust us. We'll find it somewhere. The Oracle 0:12:52.880 --> 0:12:54.600 AI deal, I'll never forget. 0:12:54.880 --> 0:12:56.160 That still has me concerned. 0:12:56.200 --> 0:12:58.760 I think some of those CAPEX numbers have to come in. 0:12:59.240 --> 0:13:01.360 Is the use of CA I mean, when was the 0:13:01.440 --> 0:13:04.520 last time, Lisa, Oh, you weren't here, Lisa, excuse me, 0:13:04.880 --> 0:13:11.160 Lisa today for Alexis Christopher's Bob Dahl. I look at 0:13:11.200 --> 0:13:15.160 this and I'm just saying to myself, it still comes 0:13:15.200 --> 0:13:18.320 down to c IFA one, two and three, which is 0:13:18.400 --> 0:13:23.760 revenue growth down the income statement, cash generation and use 0:13:24.040 --> 0:13:24.840 of cash. 0:13:25.000 --> 0:13:26.440 It's not broken, is it. 0:13:26.640 --> 0:13:29.560 I totally agree with you. People are not spending enough time, 0:13:29.559 --> 0:13:34.760 in my judgment, focusing on cash flow, use of cash, 0:13:34.800 --> 0:13:38.199 price to cash frow, price to free cash flow. These 0:13:38.240 --> 0:13:39.559 are the instruments that will get us through. 0:13:39.760 --> 0:13:40.960 Is this bond issue? 0:13:41.000 --> 0:13:46.120 Ince Martin mcdigliani, doll nailed this, you know depends the Pennsylvania. 0:13:45.559 --> 0:13:48.920 School in nineteen twenty eight. Remind me which school were 0:13:48.960 --> 0:13:49.960 you at? Allenton? 0:13:50.120 --> 0:13:51.400 No, that don't make that mistake. 0:13:51.480 --> 0:13:53.520 I mean, you know, I'm sorry. Lehigh. 0:13:55.000 --> 0:13:58.200 It's like the home of Stephanie Rule, right, I think so? Yeah? 0:13:58.240 --> 0:13:59.480 I think you get them mixed up. 0:14:00.320 --> 0:14:03.480 Can you imagine Stephanie Rules in the student union at 0:14:03.480 --> 0:14:06.000 ten am after calculus class? 0:14:06.080 --> 0:14:09.360 Yeah? Too much, Bob out of Lehigh? You studied. 0:14:09.360 --> 0:14:14.160 This is the bond issue, Ince An alternative to use 0:14:14.200 --> 0:14:16.959 the cash to me a portion of it. 0:14:16.760 --> 0:14:18.880 Is no question about it. 0:14:18.920 --> 0:14:21.360 I agree with you, But I come back to it's 0:14:21.440 --> 0:14:23.960 just not where the cash is coming. It's free cash 0:14:24.000 --> 0:14:27.160 flow and the growth of it. You know, I try 0:14:27.200 --> 0:14:29.640 to run portfolios that have priced the free cash flow 0:14:29.880 --> 0:14:34.000 that's well below my benchmark and roe above my benchmark. 0:14:34.280 --> 0:14:36.720 That trade off tells me I've got quality and I've 0:14:36.760 --> 0:14:40.440 got growth. And if I can do that in combination, 0:14:40.640 --> 0:14:41.920 I think I went in the long term. 0:14:41.960 --> 0:14:44.200 What screens well for you under that scenario? 0:14:44.240 --> 0:14:48.040 The financials Okay, I mean Look how much they've been 0:14:48.080 --> 0:14:50.480 pummeled since the first of the year. Yeah, they had 0:14:50.480 --> 0:14:52.600 a great year last year, so they gave some back 0:14:52.640 --> 0:14:54.600 starting towards the end of last year. The numbers so 0:14:54.680 --> 0:14:55.480 far are pretty good. 0:14:55.560 --> 0:14:56.000 Yeah they are. 0:14:56.360 --> 0:15:00.680 So I would on this weakness year to date add 0:15:00.680 --> 0:15:01.680 to my financial position. 0:15:02.000 --> 0:15:03.760 Bo I got to bring this up, and I'm going 0:15:03.840 --> 0:15:05.840 to do with you. And it's such such such a 0:15:05.840 --> 0:15:06.360 great honor. 0:15:06.400 --> 0:15:10.120 We lost Mark Mobius at a wonderful age of eighty nine. 0:15:10.200 --> 0:15:12.000 For John Templeton and John Gilbraith. 0:15:12.160 --> 0:15:17.000 Years ago, he invented emerging market analysis. 0:15:17.040 --> 0:15:19.080 You used to be Paul, you're too. 0:15:18.960 --> 0:15:22.440 Young to remember this bow and I remember emerging market 0:15:22.480 --> 0:15:26.520 investment was by the telephone company and by the concrete company, 0:15:26.880 --> 0:15:30.240 and then you moved on to Anaconda, Cooper and Johnson 0:15:30.280 --> 0:15:34.680 and Johnson. Mark Mobius changed the language of. 0:15:34.640 --> 0:15:35.320 What we did. 0:15:35.520 --> 0:15:35.960 Sure did. 0:15:36.000 --> 0:15:39.920 Look, the planet in the developed world is not growing 0:15:39.960 --> 0:15:43.080 in population. So if the planet's going to grow, the 0:15:43.120 --> 0:15:47.080 emerging market consumer has to carry the day. And I 0:15:47.120 --> 0:15:49.760 think that's a great long term plate. Yeah, it's volatile. 0:15:49.800 --> 0:15:51.320 You have to have your seat belt and shoulder arn 0:15:51.480 --> 0:15:54.560 is on. But if the emerging market consumer does not 0:15:54.840 --> 0:15:59.920 buy stuff. The planet's doomed because population shrinking. China and Japan, 0:16:00.160 --> 0:16:01.160 we're not too far from that. 0:16:01.320 --> 0:16:02.680 Can you do this more often? 0:16:02.760 --> 0:16:06.280 I would kill for Bob Dolan Victoria Fernandez together. 0:16:06.480 --> 0:16:07.320 Oh, let's do it? 0:16:07.400 --> 0:16:07.640 Are you? 0:16:07.680 --> 0:16:11.160 In speaking terms? Many of most days? Most days? Okay? 0:16:12.160 --> 0:16:16.040 Thank you, thank you so much, just greatly, greatly appreciate it. 0:16:16.080 --> 0:16:19.240 This morning and this wrapped around waiting for the press 0:16:19.280 --> 0:16:23.239 conference and all that. He's a Crossmark Global investor. 0:16:25.040 --> 0:16:25.760 Stay with us. 0:16:26.000 --> 0:16:29.240 More from Bloomberg Surveillance coming up after this. 0:16:36.480 --> 0:16:40.040 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:16:40.120 --> 0:16:43.640 weekday afternoons from seven to ten am Eastern Listen on Apple, 0:16:43.680 --> 0:16:47.000 Karplay and Android Otto with the Bloomberg Business app, or 0:16:47.160 --> 0:16:48.680 watch us live on YouTube. 0:16:49.120 --> 0:16:50.600 I think she was supposed to be with us like 0:16:50.640 --> 0:16:52.400 a couple of days ago and the world blew up 0:16:52.480 --> 0:16:53.040 or whatever. 0:16:53.600 --> 0:16:55.760 But I'm sorry, this is like a big deal. 0:16:55.880 --> 0:16:59.680 This is Lauren Hackfelder with Morgan Stanley, and what this 0:16:59.720 --> 0:17:02.520 is a is real estate. So I'm going to start 0:17:02.520 --> 0:17:05.200 with a dumb question. The tone I got four or 0:17:05.240 --> 0:17:08.240 five months ago is well, that was harsh. It's over 0:17:08.920 --> 0:17:13.120 except on Twitter at cranes in your world. I'm still 0:17:13.160 --> 0:17:15.560 seeing all sorts of challenges in real estate. 0:17:16.080 --> 0:17:18.119 Is it not over? Well? 0:17:18.160 --> 0:17:20.879 We are four years into this real estate correction. It 0:17:20.960 --> 0:17:23.119 is a little bit like that line in The Godfather, 0:17:23.400 --> 0:17:26.320 just when you thought you were out with everything going 0:17:26.359 --> 0:17:29.720 on and are on right now. But real estate, actually 0:17:29.760 --> 0:17:32.719 an infrastructure for that matter as well, is set up 0:17:32.760 --> 0:17:37.600 pretty darn well today. So there is a lot of unknowns, obviously, 0:17:38.840 --> 0:17:41.879 But what we do know is that energy price is 0:17:42.000 --> 0:17:45.400 likely to stay higher, geopolitical risks likely to stay elevated. 0:17:45.680 --> 0:17:48.199 And while those create some headwinds for real estate we 0:17:48.240 --> 0:17:52.159 don't like higher borrowing costs, it really actually sets up 0:17:52.200 --> 0:17:54.640 real estate pretty well for a few reasons. You were 0:17:54.640 --> 0:17:58.480 just talking about elevated oil prices. Well, guess what that 0:17:58.760 --> 0:18:02.359 impacts construction costs. And as we've talked about many times 0:18:02.359 --> 0:18:05.560 on this show, one of the key bullish indicators is 0:18:05.560 --> 0:18:09.640 that new construction is way down. Okay, construction costs up. 0:18:09.760 --> 0:18:10.960 Push that out longer. 0:18:11.440 --> 0:18:13.359 I think of real estate, I throw it into the 0:18:13.440 --> 0:18:17.639 group of alternative investments, and I think about non correlated returns. 0:18:18.359 --> 0:18:20.240 Is that what your clients are thinking about these days, 0:18:20.280 --> 0:18:22.520 are thinking about? There's too much risk out there in 0:18:22.520 --> 0:18:24.400 a stock and bond market, at least in the near term. 0:18:24.480 --> 0:18:27.280 I'm looking for some non correlated risk in return. 0:18:27.440 --> 0:18:31.360 It's a really important point you're raised, so particularly when 0:18:31.400 --> 0:18:34.879 we've seen the breakdown of some of the classic correlations, 0:18:34.960 --> 0:18:39.000 right when when equities and bonds are, you know, moving 0:18:39.040 --> 0:18:43.080 in tandem. For example, real estate has continued to show 0:18:43.520 --> 0:18:47.560 its lower correlation. And in fact, when we've seen periods 0:18:47.560 --> 0:18:51.560 of equity pullback, private real estate tends to outperform. And 0:18:51.640 --> 0:18:54.160 when you're talking about real estate at a cyclical low, 0:18:54.560 --> 0:18:57.199 still down twenty to twenty five percent, with the S 0:18:57.240 --> 0:19:01.399 and P at all time by, it's certainly showing that benefit. 0:19:01.520 --> 0:19:03.080 So I get in the Bellety this morning and I'm 0:19:03.119 --> 0:19:04.200 coming down Fifth Avenue. 0:19:04.200 --> 0:19:05.720 I turn left of fifty ninth Street. 0:19:05.720 --> 0:19:07.879 The potholes are you know they're doing The mayor is 0:19:07.920 --> 0:19:10.920 doing a good job in the potholes good I could say. 0:19:11.000 --> 0:19:15.000 I slide by Steve Ross's new mega project tucked behind 0:19:15.000 --> 0:19:15.960 a GM buildings. 0:19:16.000 --> 0:19:16.600 I can't remember. 0:19:16.880 --> 0:19:19.600 It's Madison and something and it's going to be umpteen 0:19:19.720 --> 0:19:22.879 stories high. In all that, I think that's a class 0:19:22.920 --> 0:19:26.639 A property. Those are no brainers. Right now, like people 0:19:26.640 --> 0:19:29.639 with money are lined up to support Steve Ross and 0:19:29.680 --> 0:19:31.640 related on a project like that. 0:19:31.960 --> 0:19:36.680 I think you're still seeing a real bifurcation between the 0:19:36.720 --> 0:19:39.600 best and the rest. And that's true on office that's 0:19:39.600 --> 0:19:40.640 true and residential. 0:19:40.800 --> 0:19:42.040 Okay, So for you and. 0:19:42.160 --> 0:19:45.960 Morgan Stanley at the margin, which is your choice that 0:19:46.440 --> 0:19:47.680 the rest or the. 0:19:47.600 --> 0:19:51.040 Best generally speaking? The best generally? 0:19:51.200 --> 0:19:52.840 What do you? I mean, but some of the values 0:19:52.840 --> 0:19:54.720 out there. I guess there's a class of investors out 0:19:54.720 --> 0:19:58.040 there in real estate, like there's in every asset class 0:19:58.440 --> 0:20:00.919 that wants to take go in into the bottom and 0:20:00.920 --> 0:20:03.119 try to turn something around it. Do we have people 0:20:03.119 --> 0:20:04.840 like that in real estate that says I'm going to 0:20:04.840 --> 0:20:07.320 go take the Lipstick building just for example, at forty 0:20:07.359 --> 0:20:09.280 cents on the dollar because I can make a return 0:20:09.320 --> 0:20:10.440 on that entry price. 0:20:10.600 --> 0:20:10.760 Yeah. 0:20:10.800 --> 0:20:11.399 Absolutely. 0:20:11.440 --> 0:20:14.640 Look, let me say it this way. What we want 0:20:14.920 --> 0:20:19.320 is really attractive entry point but still really high quality 0:20:19.359 --> 0:20:22.760