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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz Jay Ley, we bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg

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Speaker 1: dot Com, and of course on the Bloomberg terminal. Shimbus

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Speaker 1: with his chief equity and quantitative strategist of a coras I, Jennie,

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Speaker 1: and you call this the gray zone. One of that's

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Speaker 1: just the gray zone. The gray zone is. Look, we

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Speaker 1: had a reasonably epic bear market from January to June

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Speaker 1: that was not only the epitome of don't fight the Fed,

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Speaker 1: but the markets took the hawkish narrative and ran with

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Speaker 1: it in an unprecedented way, causing you know, if you

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Speaker 1: look at the stock bond quadrant, uh, you know, the

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Speaker 1: biggest losses in the combined sixty forty portfolio we've seen

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Speaker 1: in years. And then it all turned in June and

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Speaker 1: into a few weeks ago. Uh. And now we're at

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Speaker 1: a point where do we go back to the don't

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Speaker 1: fight the Fed mantra or do we think about it

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Speaker 1: and we think about the unfolding, you know, perhaps the

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Speaker 1: FED easing off, which is not at all in the

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Speaker 1: script right now, even though people this is important to

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Speaker 1: that point. In the last twenty two hours, we've heard

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Speaker 1: here David Rosenberg and Looked till You of Wilmington Trust

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Speaker 1: both scream the disinflation story. Edward Hyman screams. Ed Hyman says,

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Speaker 1: we're going from eight ish nine ish and we're going down,

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Speaker 1: not to two, but we're going to four percent. What

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Speaker 1: does your world do if we get an ed Heiman disinflation?

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Speaker 1: Stocks do well? Stocks they do double digit well? Like

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Speaker 1: do they roar? Not in this environment, not yet, because

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Speaker 1: that likelihood is that if that happens. Ed's view of

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Speaker 1: one percent GDP is probably where we are in and

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Speaker 1: that's still a constrained environment. But I want to make

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Speaker 1: a point here. Okay, you've got three FED speakers today, Okay,

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Speaker 1: and if you think about it, going back to the

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Speaker 1: first hike in March, every time there was an extreme

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Speaker 1: sort of market response to anything that Pal said, both

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Speaker 1: either hawkish or dubbish. The FED speakers come out and

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Speaker 1: have moderated the tone. It's going to be very informative

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Speaker 1: what they say. Can we give him on every day

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Speaker 1: the other day, I mean, just to lighten it up here,

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Speaker 1: people can talk to his people. So far, Julian, to

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Speaker 1: your point, the other FED officials have absolutely double down.

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Speaker 1: They have not watered down j Powell's message at all.

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Speaker 1: They've gone quite the other way. How does that inform

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Speaker 1: your assertion, which is rather dramatic, that the growth led

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Speaker 1: rally is over. You're basically repudiating this idea that big

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Speaker 1: tech can rally in the face of perhaps more economic weakness,

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Speaker 1: even with a FED that is determined to high grades. Well.

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Speaker 1: And again, it's surprising to the extent in the last

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Speaker 1: couple of days how much the other FED officials have

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Speaker 1: doubled down. But what it does is it just when

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Speaker 1: you when you look at yields, you know they're going

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Speaker 1: up on the short end rates, but also when you

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Speaker 1: think about the fact that tomorrow we're gonna start billion

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Speaker 1: a month in QT, it's hard not to make the

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Speaker 1: case that yields on the long end or going up

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Speaker 1: as well. And again, as we've seen in this positively

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Speaker 1: correlated stock bond world, that's a massive headwind for stocks,

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Speaker 1: particularly for growth stocks. What kind of downside are you

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Speaker 1: seeing Julian. I would say the key here is does

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Speaker 1: the consumer hold in in September? If you think about it,

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Speaker 1: one of the anomalies of this year is that consumer

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Speaker 1: sentiment has been absolutely abysmal the entire year, and spending

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Speaker 1: has been fine. Obviously, that's one of the strangeness is

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Speaker 1: about a new inflationary environment. But if you think about it,

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Speaker 1: you know, could you get into this idea where back

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Speaker 1: to the office, we're back to school Septembers is challenge?

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Speaker 1: That is the kind of environment. If the consumer holds in,

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Speaker 1: we could be okay, we you know, but if not,

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Speaker 1: there's a potential retest of the lows and store. Well,

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Speaker 1: that's just a bigger question, Jenny. And it's not about

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Speaker 1: whether inflation comes down to four percent, it's what price

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Speaker 1: you're wanting to pay to get inflation down to four percent?

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Speaker 1: Was unemployment when inflation comes down to four percent? What's

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Speaker 1: happened at g d P when inflation comes down to

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Speaker 1: four percent? Jenny? It's not that easy, is it just

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Speaker 1: to say we come down to four percent, that's good

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Speaker 1: for stocks? No, not at all. And and look, if

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Speaker 1: we've learned anything this year, or I'd argue the last

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Speaker 1: two and a half years, is that the tail outcomes.

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Speaker 1: You know, when people talk about black swans, they happen

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Speaker 1: a heck of a lot more frequently than we would

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Speaker 1: have ever imagined. And that's really what you've seen to

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Speaker 1: a large extent this year. And and so you know,

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Speaker 1: there's a lot of different potential outcomes. As we had

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Speaker 1: into the fall, wet trying to say, super super open

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Speaker 1: minded about this, Judy, and can you help us do

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Speaker 1: that the short and shadow consensus around a recession in America?

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Speaker 1: How are you being the team thinking about maybe the

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Speaker 1: tail risks here? So we continue to think that you're

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Speaker 1: not likely to have a recession. But if Ed's view

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Speaker 1: of one percent GDP next year is correct and we

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Speaker 1: see asymmetrical pardon me, symmetrical risks around that number, it's

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Speaker 1: still going to feel for asset markets from time to

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Speaker 1: time as if there's a recession that argues for higher volatility.

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Speaker 1: And then again, you know Ed said it a couple

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Speaker 1: of days ago, it argues for humility and forecast. As

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Speaker 1: that sent out the memo, everyone get back to the office.

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Speaker 1: There's a real question did he do a Solomon the memo?

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Speaker 1: You know, day after labor day. We're we're we're we're

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Speaker 1: guns blazing. Get back in that ties a backup notice

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Speaker 1: as wold something, did you notice that a message when

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Speaker 1: was with us from government? I noticed the tie was back,

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Speaker 1: but only after the interview. But the tie was the

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Speaker 1: time pandemic. Yean took it off both times. Gone Tom,

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Speaker 1: the tie is gone. No, Jillian, thank you. It's got

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Speaker 1: to see you on the open. Christian Nodding joins its

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Speaker 1: collobal chief investment officer at Deutsche Bank Private Bank. Christian,

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Speaker 1: we have taken out the June highs on a two

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Speaker 1: year year old. And the question a lot of people

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Speaker 1: are asking is whether they secuity market has to test

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Speaker 1: that June loves your thoughts well. From from our point

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Speaker 1: of view, if you think from a gross perspective, we

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Speaker 1: do think there is at least my procession coming in

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Speaker 1: the US, and there's also a recession unavoidable for US

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Speaker 1: in the Eurozone. And from that perspective, I wouldn't be

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Speaker 1: surprised if equity markets going on a bit further from here.

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Speaker 1: And we have been calling um saying the June Judy

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Speaker 1: uptick is probably not is a bear market. Relly is

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Speaker 1: probably not. Where we end we've been arguing for by

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Speaker 1: the next tip, and I wouldn't be surprised if we

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Speaker 1: see and if you look at the the markets, is

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Speaker 1: another three four or five six percent depending on the

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Speaker 1: markets downside, I wouldn't pull out that we get there

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Speaker 1: from from our point of view, Christianity, what do you

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Speaker 1: do with bands? The chart that I put up earlier,

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Speaker 1: price flat yield, I guess up a little bit. Global

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Speaker 1: bonds on an aggregate basis are back eleven years? What

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Speaker 1: do you do with that institution? Like? Well, from all

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Speaker 1: point of you, it has been right to be short duration,

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Speaker 1: and we kept it. So from that perspective, at least

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Speaker 1: you can avoid to be super long duration, as as

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Speaker 1: many investors sometimes have to be. I think that's number one.

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Speaker 1: And then you really need to look at quality from

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Speaker 1: our point of view, So um you had discussed before.

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Speaker 1: If there's a recession, what doesn't mean to credit spreads?

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Speaker 1: I think we also need to look a little bit ahead,

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Speaker 1: as we don't expect, at least in the US sustained

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Speaker 1: long recession. Maybe it's two quarters, three quarters. I think

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Speaker 1: if spreads are widening, there is an opportunity if you

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Speaker 1: look into investment grade. I would be a bit more

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Speaker 1: careful on on the high yield side from our point

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Speaker 1: if we don't think these levels which seem attractive but

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Speaker 1: from our point of view, is not where we want

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Speaker 1: to go in right now. Christian, is is European a

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Speaker 1: toxic place to invest in right now based on the

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Speaker 1: energy backdrop and some of the volatility there? Or are

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Speaker 1: you still seeing perhaps some opportunities even ahead of the US.

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Speaker 1: But I wouldn't call it toxic place to be very honest.

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Speaker 1: But of course it's tough to be very optimistic about

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Speaker 1: you at this point in time. Let's call it like this.

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Speaker 1: I think there are opportunities. If you think the e

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Speaker 1: c B is is doing quite a lot, as we do,

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Speaker 1: we can imagine over the next twelve months the ECB

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Speaker 1: is moving from zero now to two, which is quite something.

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Speaker 1: I would say. There is I think opportunities in European

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Speaker 1: financials which could profit from that. But for the overall market,

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Speaker 1: it depends really on the energy crisis and how the

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Speaker 1: winds plays out to be, and from that perspective, it's

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Speaker 1: not going to be easy for Europe the next month.

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Speaker 1: I think, Christian, did you just say that you're investing

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Speaker 1: in European banks. Yeah, I think European financials have upside because,

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Speaker 1: as I said, if the e c B is moving,

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Speaker 1: they can profit from from a higher interest rate level.

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Speaker 1: And from that perspective, now we are at zero and

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Speaker 1: I would expect the ECB not to look so much

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Speaker 1: at growth because their targets really price stability and to

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Speaker 1: move up in increasing rates. And from that perspective, I

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Speaker 1: think that would be positive for them. Yes, the Christian

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Speaker 1: how can it to a recession? What's more important here?

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Speaker 1: It's the right hikes, So they came a backdrop. Yeah,

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Speaker 1: but I think yeah, recession, yes, but also here in Europe,

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Speaker 1: I think it's not a recession which is a deep recession,

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Speaker 1: which which takes quarters and quarters. From that perspective, yes,

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Speaker 1: there is some implication and you have not seen a

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Speaker 1: massive movement upwards. Although the market is pricing some of

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Speaker 1: the s B hikes, not all. I think the e

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Speaker 1: CB is doing more and from that perspective, I think

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Speaker 1: there could be some positives being overgrowth looking at rate hikes.

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Speaker 1: From our point of view, well that's the try for

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Speaker 1: the Brive Christian, Thank you, sir Christian. Now in their

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Speaker 1: bank private bank. Deborah Cunningham wakes us up for September

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Speaker 1: Global liquidity markets officers Federated rome As were thrilled she

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Speaker 1: could join us this morning. What does CFOs do in September?

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Speaker 1: I get the idea of equities, everybody comes back, They recalibrate,

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Speaker 1: blah blah blah. What does CFOs do about the issuance

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Speaker 1: of UH bills, notes and bonds come September? Well, I

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Speaker 1: think they look at what the plans are for the

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Speaker 1: rest of the year, where they're going into the next year,

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Speaker 1: and decide on short term, long term how much UM

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Speaker 1: you know, in in what secretary of the market they're issuing.

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Speaker 1: We'll see debt come come into the marketplace. I agree.

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Speaker 1: Robert Schiffman has a stunning essay out on Amazon at

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Speaker 1: Bloomberg Intelligence this morning of the financing that they could

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Speaker 1: do for a one billion dollar possible transaction just to

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Speaker 1: get the firepower in year world. Is a lot of

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Speaker 1: debt going to be issued just to get the firepower ready?

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Speaker 1: You know, I think there have been companies that have

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Speaker 1: UM have have already termed out some debt taking advantage

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Speaker 1: of what they think are the shortest or the lowest

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Speaker 1: rates that are going to be UM, you know, available

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Speaker 1: to them for a while as inflation continues to be

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Speaker 1: an issue. UM. But I don't think it's everyone. I

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Speaker 1: think you've still got you know, asset backed issuers. I

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Speaker 1: think you have corporates. I think you have financials that

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Speaker 1: are all looking still for additional debt financing in the

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Speaker 1: short term sector as well as maybe the you know,

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Speaker 1: short to intermediate area of the bond curve over the

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Speaker 1: next UM, over the rest of this year and into

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Speaker 1: two thousand and twenty three, debor you've got a front

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Speaker 1: row seat and to one of the biggest questions in

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Speaker 1: markets coming up, particularly starting this week, with the acceleration

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Speaker 1: of the runoff and the balance sheet and what that

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Speaker 1: will do with respect the removal of liquidity in up markets,

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Speaker 1: how much that will inject volatility, UH into a lot

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Speaker 1: of the banking sphere in particular, what's your view in

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Speaker 1: terms of what you're seeing on the ground with liquidity

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Speaker 1: exiting certain aspects of the market that really have been

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Speaker 1: fueling some of the frontier areas well. Certainly, you know,

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Speaker 1: it's been going on since June. Now it's gonna double,

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Speaker 1: you know, starting next month, starting starting tomorrow, UM and

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Speaker 1: it's been masked by other issues in the economy. So

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Speaker 1: you know, what we have seen so far from a

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Speaker 1: roll off of treasury and mortgage backed securities has already

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Speaker 1: been overshadowed by the increasing rate environment that we've experienced

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Speaker 1: and the sell off in those securities UM in response

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Speaker 1: to that. Uh, you know, the expectation would be as

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Speaker 1: they double it, you're looking at something that has an

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Speaker 1: impact of probably another twenty five or fifty basis point,

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Speaker 1: like tightening by UM, by the f O m C.

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Speaker 1: And as such, you know where where where are the buyers?

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Speaker 1: Who are the buyers? UM? We have, from at least

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Speaker 1: a treasury perspective, however, been in you know, sort of

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Speaker 1: a supply demand imbalance where there hasn't been enough in

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Speaker 1: supply in the marketplace. So it's really gonna be welcomed,

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Speaker 1: I think to some degree, for you know, the most

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Speaker 1: highest quality treasury securities in the marketplace. From an MBS standpoint,

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Speaker 1: there may be a little bit more resistance, but it's

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Speaker 1: smaller volume there as well. Debra, gotta leave it there,

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Speaker 1: thank you, Debora. Kind of federated. I think it's coming back,

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Speaker 1: and obviously a lot of this is just gonna have

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Speaker 1: to the macro environment. You know, if we see markets

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Speaker 1: crash again, we're going to see crypto crash along with it.

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Speaker 1: I see a market recovery, we're going to see a

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Speaker 1: crypto recovery along with it. But I think this is

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Speaker 1: you know, it's flushed out a lot of the things

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Speaker 1: that needed to be flushed out from the crypto space anyway.

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Speaker 1: It wasn't dead, dead, bath and beyond. But go from

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Speaker 1: billion dot eight billion network net worth makes it difficult.

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Speaker 1: Two thousand four Sam Bankman free with David Rubens and

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Speaker 1: this is an extremely important conversation for all wired up

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Speaker 1: to crypto like me and Lisa. Mr Rubinstein joins us

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Speaker 1: this morning. Look for that nine pm tonight. Um, this

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Speaker 1: guy's controversial, to say the least. What is his cred

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Speaker 1: What is the thing that he has that makes people

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Speaker 1: in crypto listen to him? Well, he's very smart and

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Speaker 1: he's made a lot of money. When you make a

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Speaker 1: lot of money, that's still a lot of money to David.

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Speaker 1: But at the age of thirty he was worth twenty

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Speaker 1: two billion dollars. He became the youngest person to sign

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Speaker 1: the Giving Pledge, and he's committed to giving away all

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Speaker 1: his money. He basically spends nothing on himself. He lives

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Speaker 1: in to Bahamas, basically has no clothes of any consequency,

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Speaker 1: wear shorts and T shirts and tennis shoes all the time,

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Speaker 1: listen to dorm with eight a friends or so. He

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Speaker 1: only cares about certain public issues and public policy. But

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Speaker 1: he's very unusual. How does he control or what does

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Speaker 1: he believe the price of bitcoin will do? How does

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Speaker 1: it discover a bid at whatever level? Well, I didn't

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Speaker 1: ask him that because he's basically he operates f t X,

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Speaker 1: which is an exchange, so it gives everybody the opportunity

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Speaker 1: to buy or sell bit coin or other cryptocurrencies. He

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Speaker 1: doesn't know what the right price should be. He recently

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Speaker 1: bailed out a lot of companies that had troubles. He

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Speaker 1: might lose money on all that, but he feels it

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Speaker 1: was good for the industry. So why is this industry

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Speaker 1: important from a social benefit kind of way? If he

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Speaker 1: is David incredibly idealistic and looking for the em betterment

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Speaker 1: of a social order, Well, his view is that people

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Speaker 1: who have money should give away that money or do

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Speaker 1: things for good social purposes. And that's what he's always

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Speaker 1: believed and he now has a fair amount of money,

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Speaker 1: and he's giving away a good deal of money. He's

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Speaker 1: also involved in politics, and he gives a lot of

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Speaker 1: money the politicians. He thinks it's good to get good

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Speaker 1: public servants in government, and so he's trying to back

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Speaker 1: the ones he thinks are good. He has an unusual

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Speaker 1: lifestyle in that he's really not buying any of the

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Speaker 1: accouterments of wealth that you normally get when you have,

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Speaker 1: you know, multi billion dollar fortune. I have to pivot

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Speaker 1: a little bit because David Rubinstein. I caught an article

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Speaker 1: that was written about you a couple of days ago

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Speaker 1: about your potential bid for the Nationals, possibly the Orioles

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Speaker 1: should they come up for offer. Is this is this

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Speaker 1: a moment of passion or is this something that's actually

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Speaker 1: an investment at a time when a lot of people

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Speaker 1: are looking for alternative assets. Well, um, you know, I

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Speaker 1: realized when I was young, I wasn't going to be

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Speaker 1: a professional baseball player. I thought I was a great

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Speaker 1: star at six or seven, but when I got the

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Speaker 1: eight or nine, I realized I probably wasn't going to

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Speaker 1: make the major leagues. So I figured if I ever

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Speaker 1: get the major leagues, I probably have to do it

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Speaker 1: as an investor or an owner. So I have I

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Speaker 1: am from Baltimore. I have looked at, uh whether buying

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Speaker 1: a baseball team makes some sense, but that's too early

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Speaker 1: to say. What's going to happen now? I at least

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Speaker 1: that was a very dangerous question. Why is it dangerous, David?

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Speaker 1: It was a dangerous question. Gonna come back again. UM

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Speaker 1: to the point of baseball and sports the stereotype of

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Speaker 1: big hitters as they can buy any sports team and

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Speaker 1: it never goes down, It just always goes up. Why

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Speaker 1: is that it's hard to lose money on a sports

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Speaker 1: team generally when you own them. The NFL teams they

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Speaker 1: make money as hand over fist um, Baseball, basketball, um.

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Speaker 1: Other teams they make money when you tend to sell

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Speaker 1: the team UM. And so people rarely lose money selling

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Speaker 1: a team. In the end, if you you can support

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Speaker 1: the team without current income from the team, you can

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Speaker 1: do quite well just holding it for quite some time.

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Speaker 1: But if you look at most people who have made

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Speaker 1: money in baseball is by selling the team, not operating

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Speaker 1: a daily On the other hand, some teams are very

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Speaker 1: profitable on cash flow basis. Where are you and Carlisle

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Speaker 1: with the investments over the years on public investment in stadium. Now,

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Speaker 1: you don't need to do that in Baltimore because Camden

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Speaker 1: Yards is truly one of our jewels. But but should

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Speaker 1: public funds be spent I'm trying to think of the

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Speaker 1: city right now where this is a raging debate should

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Speaker 1: we buy new baseball stadiums? Well, every every government official

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Speaker 1: presumably is elected by people, and they make the decisions

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Speaker 1: that hopefully reflect what their population wants. So populations tend

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Speaker 1: to want these things. People like the sports teams. You

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Speaker 1: have such an enduring place in philanthropy. If Mr Sam

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Speaker 1: Bankman Freed enjoys going from twenty two billion down to

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Speaker 1: eight billion, and let's say bitcoin cracks and goes down

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Speaker 1: to whatever, twelve thousand, whatever, does he change? I don't

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Speaker 1: think he changes a lot. He's remember, he's not spending

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Speaker 1: this on his personal kind of uh needs. He's not

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Speaker 1: buying homes or planes or things like that. And I

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Speaker 1: think whether he's worth eight billion, twenty two billion, or

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Speaker 1: one billion, I don't think he's going to change very much.

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Speaker 1: He's very young, he's only thirty years old. I'd like

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Speaker 1: you to come back and talk to me for one

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Speaker 1: hour about the National Archives, which is being dragged for

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Speaker 1: the mud right now. I know this is a third

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Speaker 1: rail for you, and if you find the time and

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Speaker 1: the energy, I would love to do a half hour

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Speaker 1: non stop on what is anytime, heart and soul. The

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Speaker 1: National Archives is a great institution in Washington and has

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Speaker 1: all of the records of the federal government and it's

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Speaker 1: been around from the nineteen twenties. Um, they don't have

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Speaker 1: a current head because uh, David Ferry O resigned, were tired,

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Speaker 1: but there will be somebody who is likely to be

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Speaker 1: confirmed soon, the first woman to be the chief arcibus

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Speaker 1: United States. She talked right around me there. What if

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Speaker 1: the right wing part of America goes after your National

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Speaker 1: Archives with your philanthropy on magnet card and the rest, Well,

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Speaker 1: there are people in Congress, so I think we'll prevent

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Speaker 1: that from happen. System will prevent it, I hope, so, right, David,

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Speaker 1: Thank you so much, David Rubinstein. We know tonight with

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Speaker 1: f t X CEO Sam Bankman Fried and as Lisa

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Speaker 1: Bramwitz said to me in my ear, Orioles three games

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Speaker 1: behind in the wild card race as well. Thank you

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Speaker 1: for that information. You keep throwing me under the bus, right,

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Speaker 1: and you have the badge words tomorrow. This is the

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Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

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Speaker 1: from seven to ten AMI Eastern on Bloomberg Radio and

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

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Speaker 1: Bloomberg dot com, and of course on the terminal. I'm

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Speaker 1: Tom Keene, and this is Bloomberg