1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,799 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,280 Speaker 1: and of course on the Bloomberg Terminal. Dentor Amshadalga joins 6 00:00:30,360 --> 00:00:32,919 Speaker 1: us for now senior Scholar JOHNS. Hopkins Center for Health 7 00:00:33,000 --> 00:00:37,520 Speaker 1: Security with one of the most interesting academic past excellence 8 00:00:37,560 --> 00:00:41,519 Speaker 1: and epidemiology and virology, dr Adlja. Thank you so much 9 00:00:41,560 --> 00:00:44,960 Speaker 1: for joining us on this important day. Is that Bastion 10 00:00:45,080 --> 00:00:49,280 Speaker 1: and Delta Airlines correct that this is a seasonal virus 11 00:00:50,560 --> 00:00:53,080 Speaker 1: that's an ultimate destiny. That's what I'm always was going 12 00:00:53,120 --> 00:00:55,920 Speaker 1: to do. I think we're it's shocking because people haven't 13 00:00:55,920 --> 00:00:58,680 Speaker 1: really transitioned to that, and they're thinking that COVID nineteen 14 00:00:58,760 --> 00:01:01,400 Speaker 1: is becoming like other respirats or viruses. But that's what 15 00:01:01,480 --> 00:01:02,959 Speaker 1: it's going to do. It's going to join the other 16 00:01:03,000 --> 00:01:05,240 Speaker 1: members of its family and be something that it always 17 00:01:05,240 --> 00:01:08,560 Speaker 1: has a baseline number of cases, hospitalizations and deaths, probably 18 00:01:08,600 --> 00:01:11,959 Speaker 1: accelerates when it gets colder, decreases when during the summer 19 00:01:12,720 --> 00:01:15,120 Speaker 1: and become something that we can treat with with vaccines, 20 00:01:15,160 --> 00:01:18,440 Speaker 1: monoclonal lantibodies, anti virals. But so I think that foretells 21 00:01:18,800 --> 00:01:20,720 Speaker 1: what was always going to be the case, and I 22 00:01:20,720 --> 00:01:23,920 Speaker 1: think we're there. Well, we're there right now, and then 23 00:01:23,920 --> 00:01:27,160 Speaker 1: in the next step, now we're under five hundred deaths 24 00:01:27,280 --> 00:01:30,559 Speaker 1: listed by any number of surveys, including the great math 25 00:01:30,640 --> 00:01:35,279 Speaker 1: of Johns Hopkins. We were there before. Is it all 26 00:01:35,319 --> 00:01:38,560 Speaker 1: clear or do you have a trepidation like we had 27 00:01:38,680 --> 00:01:42,880 Speaker 1: under five hundred deaths before. I do think at this 28 00:01:43,040 --> 00:01:45,520 Speaker 1: point that five deaths is more sustainable than it was 29 00:01:45,560 --> 00:01:48,080 Speaker 1: in the past, because what we're dealing with now is 30 00:01:48,080 --> 00:01:50,560 Speaker 1: a population that is heavily vaccinated, has a lot of 31 00:01:50,600 --> 00:01:54,880 Speaker 1: immunity from infection, has access to anti virals, to monoclonal lantibody. 32 00:01:54,960 --> 00:01:57,880 Speaker 1: So we are in a tame or phase of this virus. Yes, 33 00:01:57,920 --> 00:02:00,680 Speaker 1: there's gonna be new variants, cases um go up again. 34 00:02:00,720 --> 00:02:03,480 Speaker 1: We may see deaths increase to some level, But I 35 00:02:03,520 --> 00:02:05,400 Speaker 1: don't think we're going to go back to the bad 36 00:02:05,480 --> 00:02:08,000 Speaker 1: old days when we didn't have tools, when we had 37 00:02:08,000 --> 00:02:11,079 Speaker 1: so many people without immunity that were high risk getting infected. 38 00:02:11,200 --> 00:02:13,760 Speaker 1: Getting hospitalized and dying. So I think that hopefully this 39 00:02:13,880 --> 00:02:16,960 Speaker 1: is where we're going to. It's in terms of a baseline, 40 00:02:17,480 --> 00:02:19,639 Speaker 1: but you know, the virus could could surprise us. But 41 00:02:19,680 --> 00:02:22,000 Speaker 1: I think that we're on much stronger ground now than 42 00:02:22,000 --> 00:02:24,240 Speaker 1: we were in the past. Jector delgia. What's the science 43 00:02:24,240 --> 00:02:27,920 Speaker 1: delineating between it needing to require masks by everyone and 44 00:02:27,960 --> 00:02:32,000 Speaker 1: not needing to well, I think that I think it's 45 00:02:32,160 --> 00:02:33,960 Speaker 1: gets bottled because we're talking about, you know, when the 46 00:02:34,000 --> 00:02:36,799 Speaker 1: government requires it versus when they recommend it. I think 47 00:02:37,000 --> 00:02:39,360 Speaker 1: if you're a high risk person, yes there's always going 48 00:02:39,400 --> 00:02:41,120 Speaker 1: to be a COVID nineteen risk and you have to 49 00:02:41,160 --> 00:02:43,799 Speaker 1: continue to think about wearing masks and high risk situations. 50 00:02:44,000 --> 00:02:46,600 Speaker 1: I don't think airplanes themselves are very high risk situations 51 00:02:46,639 --> 00:02:49,440 Speaker 1: because of the number of air exchanges that occur, but 52 00:02:49,560 --> 00:02:52,560 Speaker 1: maybe the subway a bus might be. But remember that 53 00:02:52,600 --> 00:02:54,960 Speaker 1: one way masking works. You can get access to an 54 00:02:55,000 --> 00:02:57,640 Speaker 1: end ninety five and nine equivalent and where one of 55 00:02:57,639 --> 00:02:59,639 Speaker 1: those masks if you're in one of those higher situations. 56 00:02:59,680 --> 00:03:02,080 Speaker 1: Just as the government doesn't require it, doesn't mean you 57 00:03:02,120 --> 00:03:03,919 Speaker 1: can't do it, or doesn't mean that the airlines themselves 58 00:03:04,000 --> 00:03:07,120 Speaker 1: can't require it because when I take care patients with tuberculosis, 59 00:03:07,160 --> 00:03:10,360 Speaker 1: I wear an mask. That's one way masking it works. 60 00:03:10,639 --> 00:03:12,200 Speaker 1: So I think we have to come to a point 61 00:03:12,200 --> 00:03:15,120 Speaker 1: where we know that there's some risk masks work. And 62 00:03:15,280 --> 00:03:16,799 Speaker 1: for those people who choose to wear a mask or 63 00:03:16,840 --> 00:03:18,480 Speaker 1: want to wear a masks, they can wear a mask. 64 00:03:18,600 --> 00:03:20,560 Speaker 1: And we're talking about two weeks here because the Biden 65 00:03:20,560 --> 00:03:23,040 Speaker 1: administration was set to let this expire in two weeks, 66 00:03:23,040 --> 00:03:26,000 Speaker 1: So it's not as much of a mess as people 67 00:03:26,040 --> 00:03:29,040 Speaker 1: are making it out to be. Dr ADLTA. What's the 68 00:03:29,120 --> 00:03:32,119 Speaker 1: damage to the healthcare industry and frankly to health security 69 00:03:32,160 --> 00:03:35,920 Speaker 1: going forward? That masks are more political and have become 70 00:03:36,080 --> 00:03:39,200 Speaker 1: more political than they are a tool of science as 71 00:03:39,200 --> 00:03:42,560 Speaker 1: they're originally intended to be. That's the story of the 72 00:03:42,560 --> 00:03:45,560 Speaker 1: whole pandemic. Everything we've talked about, from anti virals to 73 00:03:45,600 --> 00:03:48,880 Speaker 1: monoclonal lantibodies to masks have all become kind of looked 74 00:03:48,880 --> 00:03:51,760 Speaker 1: through a view through the lens of whatever political tribe 75 00:03:51,800 --> 00:03:55,320 Speaker 1: someone belongs to, and we're increasingly tribalous with everything we do, 76 00:03:55,400 --> 00:03:58,360 Speaker 1: and that's where masks have become what they have become. 77 00:03:58,400 --> 00:04:00,080 Speaker 1: Instead of being viewed as a tool that people can 78 00:04:00,200 --> 00:04:02,480 Speaker 1: use to decrease their risk of transmission and spread. And 79 00:04:02,480 --> 00:04:04,240 Speaker 1: I think it does make a big difference because if 80 00:04:04,280 --> 00:04:06,880 Speaker 1: the population doesn't trust public health authorities, if they think 81 00:04:06,880 --> 00:04:09,119 Speaker 1: that politics is all infused in it, they're not going 82 00:04:09,160 --> 00:04:12,080 Speaker 1: to listen time you need to make a recommendation that 83 00:04:12,160 --> 00:04:15,520 Speaker 1: people do certain protective actions for COVID ninety know, for 84 00:04:15,560 --> 00:04:18,039 Speaker 1: the next pandemic or when it occurs. And I think 85 00:04:18,080 --> 00:04:20,839 Speaker 1: that's the long tail of this pandemic that we've created, 86 00:04:20,839 --> 00:04:24,120 Speaker 1: this breach between public health professionals, infectious disease doctors and 87 00:04:24,200 --> 00:04:26,400 Speaker 1: the general public. They will never trust us to get 88 00:04:26,440 --> 00:04:27,720 Speaker 1: and trust us again, and I think it's going to 89 00:04:27,800 --> 00:04:29,800 Speaker 1: take a long time to rebuild that. Well, I'm going 90 00:04:29,839 --> 00:04:32,880 Speaker 1: to rip up the script. That's such an important statement, DRDLA. 91 00:04:33,120 --> 00:04:34,599 Speaker 1: How does it is that going to be the a 92 00:04:34,800 --> 00:04:38,200 Speaker 1: m at dinners? How does the medical community get the 93 00:04:38,240 --> 00:04:42,080 Speaker 1: trust back of the American public? I think we have 94 00:04:42,160 --> 00:04:45,400 Speaker 1: to be transparent about where the public health communication mistakes happen, 95 00:04:45,640 --> 00:04:49,839 Speaker 1: how politics got infused during two successive administrations into this response. 96 00:04:50,160 --> 00:04:52,640 Speaker 1: And people have to go back to their primary care 97 00:04:52,720 --> 00:04:55,440 Speaker 1: doctors and and and think about who they trust and 98 00:04:55,480 --> 00:04:57,360 Speaker 1: why they trust those primary care doctors. And I think 99 00:04:57,360 --> 00:04:59,880 Speaker 1: we have to take that lesson of how people in 100 00:05:00,000 --> 00:05:02,720 Speaker 1: ateract with their primary care doctors and extrapolated to us 101 00:05:02,760 --> 00:05:05,200 Speaker 1: when we're on television or when we're making when we're 102 00:05:05,240 --> 00:05:08,240 Speaker 1: pontificating about the state of the pandemic, because that it's 103 00:05:08,279 --> 00:05:10,360 Speaker 1: we see that people trust their doctors, but they don't 104 00:05:10,360 --> 00:05:12,440 Speaker 1: trust the doctors on television because they think there's a 105 00:05:12,440 --> 00:05:14,760 Speaker 1: lot of politics that's gone on. I think we have 106 00:05:14,800 --> 00:05:17,400 Speaker 1: to really rebuild the entire thing, and we have to 107 00:05:17,440 --> 00:05:21,320 Speaker 1: make public health agencies independent of the administration that they're serving, 108 00:05:21,320 --> 00:05:22,679 Speaker 1: and they have to be more like the Fed chief 109 00:05:22,960 --> 00:05:26,160 Speaker 1: than they do a political appointee that is managed through 110 00:05:26,160 --> 00:05:28,280 Speaker 1: the White House, whether the White House is Republican or 111 00:05:28,279 --> 00:05:30,960 Speaker 1: white houses are Democrat. That's what I think that the 112 00:05:31,000 --> 00:05:34,159 Speaker 1: problem is is that politics has gotten so infused into 113 00:05:34,160 --> 00:05:37,120 Speaker 1: public health now that that it becomes something that people 114 00:05:37,200 --> 00:05:39,720 Speaker 1: only think about as this is what the Democrat position 115 00:05:39,760 --> 00:05:41,280 Speaker 1: is on this, this is what the Republican position is, 116 00:05:41,320 --> 00:05:43,960 Speaker 1: and not the fact that there's a reality based position 117 00:05:44,200 --> 00:05:46,599 Speaker 1: on these issues. It do you think so to some degree, 118 00:05:46,880 --> 00:05:48,760 Speaker 1: trying to love a final fill on this that the 119 00:05:48,800 --> 00:05:51,159 Speaker 1: people that worked through the pandemic of the Rome. People 120 00:05:51,160 --> 00:05:53,560 Speaker 1: to work out of a pandemic because they just can't 121 00:05:53,600 --> 00:05:56,840 Speaker 1: move away from it. I think there is a lot 122 00:05:56,880 --> 00:06:00,000 Speaker 1: of people are sick of seeing some people's faces on television, 123 00:06:00,000 --> 00:06:02,839 Speaker 1: probably including mine. But I do think that there's a 124 00:06:02,839 --> 00:06:06,479 Speaker 1: lot of people that have the expertise in pandemic preparedness 125 00:06:06,520 --> 00:06:08,960 Speaker 1: that that are going to be who we need for 126 00:06:09,000 --> 00:06:10,760 Speaker 1: the next pandemic because many of us have been working 127 00:06:10,800 --> 00:06:12,600 Speaker 1: on pandemics prior to this. So I don't think it's 128 00:06:12,600 --> 00:06:15,839 Speaker 1: necessarily that we have to switch the team. I think 129 00:06:15,839 --> 00:06:18,040 Speaker 1: it's just that people have to think about their communications 130 00:06:18,040 --> 00:06:21,000 Speaker 1: and think about how they may be being viewed politically, 131 00:06:21,400 --> 00:06:23,080 Speaker 1: and try to see you're clear of it by being 132 00:06:23,480 --> 00:06:27,080 Speaker 1: a source to everyone. No matter what tried, they're really 133 00:06:27,080 --> 00:06:29,479 Speaker 1: really thoughtful stuff as always, don't to go they can't jump. 134 00:06:34,920 --> 00:06:36,839 Speaker 1: Joining us now to talk about some of these names, 135 00:06:36,839 --> 00:06:41,359 Speaker 1: including Netflix, Madam Mahajan, Senior investment strategist Edward Jones. Some 136 00:06:41,400 --> 00:06:43,640 Speaker 1: of these names have been cut in half. Netflix is 137 00:06:43,680 --> 00:06:47,640 Speaker 1: down here today. What are the data points you need 138 00:06:47,680 --> 00:06:49,680 Speaker 1: to see top down, not just bottom up for the 139 00:06:49,920 --> 00:06:54,160 Speaker 1: individual company story to start looking at big tech again? Yeah, 140 00:06:54,240 --> 00:06:56,320 Speaker 1: you know, John it's been a brutal year for big tech. 141 00:06:56,400 --> 00:06:57,920 Speaker 1: And you know, keep in mind, this is a year 142 00:06:58,000 --> 00:07:00,479 Speaker 1: where we went off the zero bout in the FED 143 00:07:00,520 --> 00:07:03,160 Speaker 1: funds rate. We're probably heading close to two and a 144 00:07:03,200 --> 00:07:07,200 Speaker 1: half percent. Real yields, which were deeply negative for much 145 00:07:07,200 --> 00:07:10,000 Speaker 1: of the last three years, are now starting to hit 146 00:07:10,080 --> 00:07:13,960 Speaker 1: that zero bound. When that happens, in that backdrop, what 147 00:07:14,080 --> 00:07:16,800 Speaker 1: we really see is downward pressure on the growth sectors. 148 00:07:16,880 --> 00:07:19,160 Speaker 1: And really when you look at the SMP sector performance 149 00:07:19,200 --> 00:07:22,080 Speaker 1: here to date, what we've seen is the underperformers coming 150 00:07:22,120 --> 00:07:25,360 Speaker 1: from discretionary, from tech and from calm services. So the 151 00:07:25,360 --> 00:07:28,960 Speaker 1: growth text of tech parts of the market have really underperformed. 152 00:07:29,400 --> 00:07:31,200 Speaker 1: In order for that to reverse, I think what we 153 00:07:31,320 --> 00:07:33,840 Speaker 1: really need to see is UH somewhere down the road, 154 00:07:33,840 --> 00:07:36,760 Speaker 1: perhaps in the next twelve months, when US growth slows 155 00:07:36,840 --> 00:07:40,640 Speaker 1: more meaningfully, perhaps investors start taking a look at where 156 00:07:40,760 --> 00:07:43,640 Speaker 1: is their growth in the market. But in the near term, 157 00:07:43,720 --> 00:07:46,840 Speaker 1: as real yields hit positive territory and as a FED 158 00:07:46,880 --> 00:07:49,800 Speaker 1: starts to move, we would think there will be continued 159 00:07:49,880 --> 00:07:53,080 Speaker 1: downward pressure, at least avoidance of some of these growthier 160 00:07:53,160 --> 00:07:55,480 Speaker 1: names for now. We asked this question of Steve Chevron 161 00:07:55,560 --> 00:07:58,320 Speaker 1: of Federated Hermes a little bit earlier abound this defensive 162 00:07:58,360 --> 00:08:00,160 Speaker 1: bus to script the equity market and whether it is 163 00:08:00,160 --> 00:08:02,760 Speaker 1: time to lean back in to the cyclicals. Are you 164 00:08:02,800 --> 00:08:06,240 Speaker 1: saying now is not the time? Yeah? You know, generally speaking, 165 00:08:06,480 --> 00:08:09,480 Speaker 1: a lot of investors are bracing themselves ahead of this 166 00:08:09,520 --> 00:08:11,240 Speaker 1: big FED move. You know, the FED ist poised to 167 00:08:11,240 --> 00:08:15,000 Speaker 1: move aggressively, probably fifty basis points and may probably another 168 00:08:15,000 --> 00:08:17,800 Speaker 1: fifty basis points in June. So ahead of that, how 169 00:08:17,800 --> 00:08:20,400 Speaker 1: our investor's position, you really need to position a little 170 00:08:20,400 --> 00:08:23,880 Speaker 1: bit more defensively in your portfolios. The areas that have 171 00:08:24,000 --> 00:08:27,800 Speaker 1: pricing power, and that really has been healthcare, staples, utilities. 172 00:08:27,840 --> 00:08:31,000 Speaker 1: You know, even with high inflation, consumers will have to 173 00:08:31,120 --> 00:08:33,880 Speaker 1: get their healthcare, they'll have to buy their staples, probably 174 00:08:33,920 --> 00:08:36,200 Speaker 1: have to pay their utility bills, and so those are 175 00:08:36,240 --> 00:08:38,800 Speaker 1: the areas that people have been gravitating to. We continue 176 00:08:38,840 --> 00:08:41,240 Speaker 1: to feel that there may be a value cyclical bias, 177 00:08:41,400 --> 00:08:44,080 Speaker 1: especially as we head into the spring and summer months, 178 00:08:44,080 --> 00:08:47,520 Speaker 1: and so we continue to see value out performing growth, 179 00:08:47,600 --> 00:08:50,560 Speaker 1: especially as we said, as as valuation compression is likely 180 00:08:50,880 --> 00:08:54,439 Speaker 1: as the FED starts moving, and so defensive value cyclical 181 00:08:54,480 --> 00:08:57,040 Speaker 1: tilt I think still holds over the next six or 182 00:08:57,040 --> 00:08:59,679 Speaker 1: twelve months. So what about financials? Do they count as 183 00:08:59,720 --> 00:09:03,040 Speaker 1: grow or do they count as value right now? Yeah, 184 00:09:03,120 --> 00:09:06,400 Speaker 1: you know, financials has been tough. I think within value, energy, uh, 185 00:09:06,520 --> 00:09:09,840 Speaker 1: and probably industrials are the areas that really have been 186 00:09:10,320 --> 00:09:13,959 Speaker 1: more defensive oriented. Financials have had a tougher time. The 187 00:09:14,040 --> 00:09:16,200 Speaker 1: yield curve has flattened. We saw the tend to invert 188 00:09:16,280 --> 00:09:18,959 Speaker 1: for a couple of days. In that backdrop, it's hard 189 00:09:19,000 --> 00:09:22,840 Speaker 1: for net interest income net interest margins to really rise 190 00:09:22,880 --> 00:09:25,880 Speaker 1: in financial companies. What we do see though, is as 191 00:09:25,960 --> 00:09:29,600 Speaker 1: yields start to move higher, as you know, perhaps there's 192 00:09:29,679 --> 00:09:32,920 Speaker 1: some less fresher on the consumer and consumption, or at 193 00:09:32,960 --> 00:09:38,319 Speaker 1: least more indication that the consumer will remain intact. Financials may, um, 194 00:09:38,360 --> 00:09:40,240 Speaker 1: you know, come back to some extent, but we still 195 00:09:40,320 --> 00:09:43,160 Speaker 1: favor some of the more defensively oriented and some of 196 00:09:43,160 --> 00:09:45,839 Speaker 1: the other value sectors. There's a distinction here, mona and 197 00:09:45,920 --> 00:09:49,439 Speaker 1: not necessarily wanting to lean into some of the more 198 00:09:49,480 --> 00:09:53,680 Speaker 1: economically sensitive stocks and not necessarily seeing a recession. Could 199 00:09:53,679 --> 00:09:56,880 Speaker 1: you parse that difference to basically suggest that we're not 200 00:09:56,920 --> 00:09:59,240 Speaker 1: pricing in a slowdown and a tightening to the degree 201 00:09:59,240 --> 00:10:02,200 Speaker 1: that you believe, but not necessarily heading into some sort 202 00:10:02,200 --> 00:10:05,080 Speaker 1: of big downturn. Yeah, absolutely, you know, we think for 203 00:10:06,720 --> 00:10:09,800 Speaker 1: recession is not as likely. You know, I think generally 204 00:10:09,800 --> 00:10:12,040 Speaker 1: what we've been seeing in this backdrop is that the 205 00:10:12,080 --> 00:10:14,240 Speaker 1: economic metrics have held up. You know, we talked about 206 00:10:14,280 --> 00:10:17,360 Speaker 1: earnings beings pretty solid. We have a very tight labor market. 207 00:10:17,800 --> 00:10:20,800 Speaker 1: We certainly are seeing things like consumer sentiment, industrial production, 208 00:10:21,440 --> 00:10:25,600 Speaker 1: even you know, broad economic surprise. Industries have been moving higher. 209 00:10:26,040 --> 00:10:27,920 Speaker 1: Um when you look at the fixed income market, you know, 210 00:10:28,000 --> 00:10:31,480 Speaker 1: credit spreads tell a pretty benign story as well, and 211 00:10:31,520 --> 00:10:34,800 Speaker 1: so generally we haven't seen too many major cracks in 212 00:10:34,840 --> 00:10:37,720 Speaker 1: the economy. Now. I do think as we move forward, 213 00:10:37,920 --> 00:10:41,080 Speaker 1: you know, with with perhaps two basis points plus of 214 00:10:41,160 --> 00:10:44,840 Speaker 1: FED tightening, what will really be watching is two scenarios unfold. 215 00:10:45,040 --> 00:10:48,400 Speaker 1: One would be that inflation indeed does roll over by 216 00:10:48,520 --> 00:10:50,600 Speaker 1: you know, towards your end, and we're hopeful that scenario 217 00:10:50,640 --> 00:10:53,559 Speaker 1: plays out. The other is that perhaps growth starts to 218 00:10:53,640 --> 00:10:56,920 Speaker 1: roll over more meaningfully. And so I think investors are 219 00:10:56,960 --> 00:10:59,120 Speaker 1: are still on the fence as to which direction this 220 00:10:59,160 --> 00:11:01,679 Speaker 1: could head. But in either case, you know, we could 221 00:11:01,679 --> 00:11:05,560 Speaker 1: see long term yields start to move lower at some point. Really, 222 00:11:05,559 --> 00:11:08,400 Speaker 1: if either of those scenarios play out, and so for us, 223 00:11:08,480 --> 00:11:10,839 Speaker 1: I think generally, if inflation does start to roll over, 224 00:11:10,880 --> 00:11:13,360 Speaker 1: some of that pressure is taken off the FED. Uh. 225 00:11:13,440 --> 00:11:15,520 Speaker 1: That is really how you kind of execute us off landing, 226 00:11:15,559 --> 00:11:18,360 Speaker 1: and probably much more welcomed by markets than, of course 227 00:11:18,360 --> 00:11:21,120 Speaker 1: the other scenario. Mona, thank you as a wise man, John, 228 00:11:21,160 --> 00:11:29,640 Speaker 1: that event with Jiantes This is a joy because he's 229 00:11:29,640 --> 00:11:32,520 Speaker 1: been so right, right right about the resilient dollar. Dollar's 230 00:11:32,559 --> 00:11:34,880 Speaker 1: gonna die, dollar is gonna be weak. And Mark McCormick 231 00:11:35,200 --> 00:11:37,720 Speaker 1: of TD Security said no, it's not. His global had 232 00:11:37,720 --> 00:11:40,800 Speaker 1: a foreign exchange strategy. Mr McCormick writes one of the 233 00:11:40,840 --> 00:11:44,320 Speaker 1: most nuanced research pieces on the street, Mark, I'm gonna 234 00:11:44,360 --> 00:11:47,920 Speaker 1: go to factor analysis. You have six factors that matter 235 00:11:48,000 --> 00:11:51,640 Speaker 1: within your soup, your cocktail, if you will, of strategy. 236 00:11:51,880 --> 00:11:55,199 Speaker 1: Tell me where growth fits in now and what growth 237 00:11:55,280 --> 00:12:00,719 Speaker 1: differentials say for the Japanese government. Well, thanks to you, Yeah, 238 00:12:00,760 --> 00:12:03,080 Speaker 1: it's great. What's what's quite interesting is if you think 239 00:12:03,080 --> 00:12:05,839 Speaker 1: about growth, that's kind of what was forgotten about was 240 00:12:05,880 --> 00:12:09,120 Speaker 1: all about central bank divergence. Who's hiking, who's moving forward, 241 00:12:09,120 --> 00:12:11,480 Speaker 1: who has to respond to inflation? Everyone kind of forgot 242 00:12:11,520 --> 00:12:13,760 Speaker 1: about growth. What we're seeing is if we look at 243 00:12:13,760 --> 00:12:15,720 Speaker 1: growth momentum as a factor, it is one of the 244 00:12:15,760 --> 00:12:19,000 Speaker 1: best performing strategies here to day, along with terms of 245 00:12:19,080 --> 00:12:22,480 Speaker 1: trade carry and even equity divergence. So what you're seeing 246 00:12:22,640 --> 00:12:26,400 Speaker 1: is across many countries, a divergence theme is happening across 247 00:12:26,520 --> 00:12:29,720 Speaker 1: multiple factors, which is quite important because this isn't just 248 00:12:29,760 --> 00:12:32,560 Speaker 1: about the FED, it's not just about central base, especially 249 00:12:32,600 --> 00:12:35,240 Speaker 1: in the currency market. We're thinking about how important relative 250 00:12:35,280 --> 00:12:37,840 Speaker 1: growth divergent matters, and that's gonna be a big time 251 00:12:38,000 --> 00:12:40,560 Speaker 1: I think as we've moved forward and we've got um 252 00:12:42,120 --> 00:12:43,920 Speaker 1: the I m F out the I m F report 253 00:12:44,000 --> 00:12:46,400 Speaker 1: this morning, and he's going to talk a lot about trade, 254 00:12:46,920 --> 00:12:52,000 Speaker 1: full trade and Shanghai into the weakness or the potential 255 00:12:52,040 --> 00:12:56,600 Speaker 1: weakness of e M Well. I think in terms of 256 00:12:56,640 --> 00:12:58,360 Speaker 1: if you think about where growth is like, what we 257 00:12:58,400 --> 00:13:00,880 Speaker 1: still have is the services real opening that's coming in 258 00:13:00,960 --> 00:13:03,360 Speaker 1: e EN. And what I think is a big driver 259 00:13:03,640 --> 00:13:05,800 Speaker 1: for this year is, if you think about it, the 260 00:13:05,840 --> 00:13:09,400 Speaker 1: G four central bank balance sheet shrinking, but China's credit 261 00:13:09,440 --> 00:13:12,559 Speaker 1: impulse is rising, so on net, the credit cycle is 262 00:13:12,640 --> 00:13:15,760 Speaker 1: kind of turning in delta terms, but it's still generally positive, 263 00:13:16,080 --> 00:13:18,520 Speaker 1: So it changes the landscape of which currencies can out 264 00:13:18,520 --> 00:13:20,560 Speaker 1: perform others. So if you were to think about what 265 00:13:20,640 --> 00:13:23,640 Speaker 1: happened this year, we had a massive sell off and equities, 266 00:13:23,640 --> 00:13:27,120 Speaker 1: we've seen deterioration and sharp ratios, and the best performing 267 00:13:27,160 --> 00:13:30,760 Speaker 1: currencies here to date are in Latin America, their emerging markets, 268 00:13:30,760 --> 00:13:33,439 Speaker 1: are high yield, their carry currencies. So there's still an 269 00:13:33,440 --> 00:13:36,520 Speaker 1: element here that if we still have the positive commodity story, 270 00:13:36,600 --> 00:13:39,160 Speaker 1: we still have the Carrey story, we still have growth divergence, 271 00:13:39,559 --> 00:13:42,720 Speaker 1: we don't need a unified strong dollar. So there's still 272 00:13:42,760 --> 00:13:46,360 Speaker 1: elements here that China stimulating is still good for pockets 273 00:13:46,360 --> 00:13:49,040 Speaker 1: of the world because it is pushing capital flows on 274 00:13:49,080 --> 00:13:51,319 Speaker 1: the equity side out in the United States back into 275 00:13:51,360 --> 00:13:53,760 Speaker 1: other countries. It's a narrative clear in net Mark has 276 00:13:53,800 --> 00:13:57,760 Speaker 1: basically uncertainty about the direction of certain currencies have been 277 00:13:57,840 --> 00:14:02,240 Speaker 1: somewhat removed. Yeah, I think it's clear because if you 278 00:14:02,240 --> 00:14:05,120 Speaker 1: think about in terms of like the market narratives. We 279 00:14:05,160 --> 00:14:08,640 Speaker 1: had conversations with clients in January where we really liked Ozzy, 280 00:14:08,720 --> 00:14:10,600 Speaker 1: yet it was one of our favorite trades to start 281 00:14:10,640 --> 00:14:12,760 Speaker 1: the year. Uh, there was a lot of skepticism that 282 00:14:12,800 --> 00:14:16,559 Speaker 1: Ozzien could rally given the uncertainty around Russia the global economy, 283 00:14:16,880 --> 00:14:18,880 Speaker 1: and what we had kind of disentangled is that if 284 00:14:18,920 --> 00:14:20,880 Speaker 1: you look at the two factors that we're driving Azzi, 285 00:14:21,000 --> 00:14:24,520 Speaker 1: and it wasn't risk, it was commodities and it was yields. 286 00:14:24,640 --> 00:14:27,120 Speaker 1: And so I think part of what we know that 287 00:14:27,320 --> 00:14:30,200 Speaker 1: is the market is aware of now is this commodity theme. 288 00:14:30,280 --> 00:14:33,720 Speaker 1: This terms a trade theme. This is really a prevailing 289 00:14:33,800 --> 00:14:36,320 Speaker 1: narrative along with the central bank policy. So I think 290 00:14:36,320 --> 00:14:39,320 Speaker 1: like talking about growth again and talking about valuations and 291 00:14:39,360 --> 00:14:43,200 Speaker 1: talking about equities is very critical. Where the biggest thing 292 00:14:43,240 --> 00:14:45,640 Speaker 1: that we've seen this year is real rates are got 293 00:14:45,720 --> 00:14:47,600 Speaker 1: have gone up a hundred basis points in the US. 294 00:14:48,000 --> 00:14:51,000 Speaker 1: This is what is causing the new narrative shift, which 295 00:14:51,000 --> 00:14:52,920 Speaker 1: is kind of a pivot back to Europe. And I 296 00:14:52,960 --> 00:14:56,560 Speaker 1: think that's what's very clear in the FX market is 297 00:14:56,600 --> 00:14:59,480 Speaker 1: we know yields are rising, we know which central banks 298 00:14:59,480 --> 00:15:02,000 Speaker 1: were hawker last year, we know which ones will likely 299 00:15:02,040 --> 00:15:05,040 Speaker 1: be less hawkish this year. And we're starting to see 300 00:15:05,040 --> 00:15:06,960 Speaker 1: these new trades emerge, which I think a big part 301 00:15:07,040 --> 00:15:09,640 Speaker 1: of it's going to be a divergence across Europe. Euro 302 00:15:09,880 --> 00:15:13,760 Speaker 1: Sterling Swiss stocky all those currencies are are are now 303 00:15:13,800 --> 00:15:15,480 Speaker 1: in play I think for the second half of the year. 304 00:15:15,640 --> 00:15:17,640 Speaker 1: And how much do you expect the dollar to weekend? 305 00:15:17,680 --> 00:15:19,960 Speaker 1: Just broadly considering the fact that people have baked in 306 00:15:20,520 --> 00:15:23,200 Speaker 1: what you see already as being the main and frankly 307 00:15:23,520 --> 00:15:28,240 Speaker 1: staying narrative, right, So I'd say the we're we're in 308 00:15:28,320 --> 00:15:30,280 Speaker 1: a still the point of period of time here with 309 00:15:30,360 --> 00:15:33,560 Speaker 1: the dollar strength. That's uh, it's through Q two. I 310 00:15:33,600 --> 00:15:35,600 Speaker 1: think euros still kind of holding it around, went away, 311 00:15:35,640 --> 00:15:37,080 Speaker 1: but you could see some of these e m start 312 00:15:37,160 --> 00:15:39,640 Speaker 1: to created a little bit on the hawkish rates. And 313 00:15:39,960 --> 00:15:41,360 Speaker 1: you know, part of what the FED needs to do 314 00:15:41,440 --> 00:15:44,560 Speaker 1: is tighten financial conditions, um, and they haven't really done 315 00:15:44,600 --> 00:15:46,400 Speaker 1: that too much yet, So there's still you know, we 316 00:15:46,440 --> 00:15:48,240 Speaker 1: still need to see real rates rise a little bit, 317 00:15:48,280 --> 00:15:51,240 Speaker 1: maybe another twenty five basis points. That is disruptive for 318 00:15:51,320 --> 00:15:53,320 Speaker 1: U S equities. That is what causes a lot of 319 00:15:53,360 --> 00:15:55,800 Speaker 1: the turbulence we're seeing in markets. On the other side 320 00:15:55,840 --> 00:15:59,480 Speaker 1: of this, however, if the Fed is disrupts the golden 321 00:15:59,480 --> 00:16:02,800 Speaker 1: goose at supported the dollar for the last couple of years, 322 00:16:02,840 --> 00:16:05,040 Speaker 1: it is really the equity flows into the US that 323 00:16:05,200 --> 00:16:08,080 Speaker 1: have offset the current account deficit, So we think about 324 00:16:08,080 --> 00:16:11,400 Speaker 1: this rotation, euro can revisit one fifteen to one twenty. 325 00:16:11,520 --> 00:16:14,000 Speaker 1: Especially ECB is probably gonna hype rates twice this year, 326 00:16:14,480 --> 00:16:17,600 Speaker 1: but it's too early to sequence ECB tightening because the 327 00:16:17,680 --> 00:16:19,880 Speaker 1: other factors that we're tracking for the Euro, the ones 328 00:16:19,960 --> 00:16:23,280 Speaker 1: we had already mentioned growth, terms of trade carry, they're 329 00:16:23,320 --> 00:16:25,400 Speaker 1: still negative in our framework. So we're not buying the 330 00:16:25,440 --> 00:16:27,800 Speaker 1: Euro because there's not a broad based conviction for it. 331 00:16:27,840 --> 00:16:30,760 Speaker 1: But when it happens, um you know, euro bottoming out 332 00:16:30,800 --> 00:16:32,480 Speaker 1: around one ow eight one oh seven, kind of where 333 00:16:32,480 --> 00:16:35,680 Speaker 1: we're at now, there's significant upside probably till one twenty 334 00:16:35,760 --> 00:16:37,920 Speaker 1: to start next year. And I would even say, if 335 00:16:37,920 --> 00:16:40,640 Speaker 1: you're really kind of focused on the changes around what's 336 00:16:40,680 --> 00:16:44,120 Speaker 1: happening in Europe, euro Swiss is a prime candidate right now. 337 00:16:44,120 --> 00:16:46,040 Speaker 1: It's held in around parody, it's held in at one 338 00:16:46,080 --> 00:16:48,520 Speaker 1: oh one, and most of our models are pointing towards 339 00:16:48,680 --> 00:16:50,840 Speaker 1: euro Swiss towards about one oh four, even in the 340 00:16:50,880 --> 00:16:53,440 Speaker 1: next couple of weeks. There is nothing boring about phone 341 00:16:53,480 --> 00:16:55,480 Speaker 1: exchange right now. That's for show. Momma Kim. I could 342 00:16:55,480 --> 00:17:04,480 Speaker 1: say the securities, thank you, sir. As always, this is 343 00:17:04,520 --> 00:17:06,720 Speaker 1: a joy because if you grow up in the plains 344 00:17:06,760 --> 00:17:10,440 Speaker 1: of Kansas and you go east over to Washington to 345 00:17:10,520 --> 00:17:13,919 Speaker 1: the Foreign service of this nation and truly served for decades. 346 00:17:14,320 --> 00:17:17,240 Speaker 1: That describes a former inbassador in India, Robert Blackwell and 347 00:17:17,320 --> 00:17:20,480 Speaker 1: joins us now kissing you're fellow the Council on Foreign Relations, 348 00:17:20,720 --> 00:17:23,359 Speaker 1: and of course this public service to President Bush Senior, 349 00:17:23,680 --> 00:17:27,600 Speaker 1: among other worthies. Ambassador, thank you so much for joining today. 350 00:17:28,200 --> 00:17:32,480 Speaker 1: You alive at this moment, are the definitive voice on 351 00:17:32,640 --> 00:17:37,879 Speaker 1: the hope we had of mutual and balanced force reductions 352 00:17:38,040 --> 00:17:41,000 Speaker 1: in Europe. You were there, not in the seventies, but 353 00:17:41,160 --> 00:17:44,359 Speaker 1: in the eighties. You were there the Warsaw pack and 354 00:17:44,400 --> 00:17:48,080 Speaker 1: the Allies trying to figure out how to calm Europe down. 355 00:17:48,720 --> 00:17:52,080 Speaker 1: That world has been turned upside down. Tell me how 356 00:17:52,080 --> 00:17:56,560 Speaker 1: the Allies do a mutual and balanced force increase in 357 00:17:56,640 --> 00:18:00,880 Speaker 1: Europe against Mr Putin? Well, first of all the most 358 00:18:00,920 --> 00:18:04,520 Speaker 1: important change, and it's a stunning change, UH, and few 359 00:18:04,600 --> 00:18:10,719 Speaker 1: forecasts has been this very robust European reaction to UH. 360 00:18:10,920 --> 00:18:16,560 Speaker 1: The bloody invasion of Ukraine by the Russians, led of 361 00:18:16,600 --> 00:18:21,639 Speaker 1: course by Putin. UH. It wasn't anticipated because Americans for decades, 362 00:18:21,760 --> 00:18:25,280 Speaker 1: and Secretary Panetta did his part in this has urged 363 00:18:25,359 --> 00:18:30,639 Speaker 1: Europe to increase their defense spending without very much success. 364 00:18:31,080 --> 00:18:35,600 Speaker 1: But it is European publics horrified by the brutality of 365 00:18:35,640 --> 00:18:40,040 Speaker 1: the Russian armed forces in Ukraine that are that are 366 00:18:40,119 --> 00:18:44,080 Speaker 1: driving this. And uh, there there will be two consequences, 367 00:18:44,440 --> 00:18:48,080 Speaker 1: a lot more money spent in Europe, led by the Germans, 368 00:18:48,119 --> 00:18:52,920 Speaker 1: which are doubling their defense budget on defense. At second, 369 00:18:53,600 --> 00:18:59,520 Speaker 1: a forward deployment uh much closer to Russia by NATO forces. 370 00:18:59,720 --> 00:19:02,879 Speaker 1: What's interesting here, with all the different interviews we've done, Ambassador, 371 00:19:02,960 --> 00:19:05,200 Speaker 1: I think of General Kimmitt is one of the voices 372 00:19:05,520 --> 00:19:08,280 Speaker 1: of really house to house and building the building combat 373 00:19:08,600 --> 00:19:11,840 Speaker 1: all the way out to others worried about World War three. 374 00:19:12,280 --> 00:19:15,880 Speaker 1: When you hear people in America with not a reticence 375 00:19:15,960 --> 00:19:20,000 Speaker 1: but just to worry about a larger war, how do 376 00:19:20,040 --> 00:19:23,320 Speaker 1: you respond to that. I think there's reason to worry 377 00:19:23,880 --> 00:19:28,359 Speaker 1: for sure. Uh. And we see perhaps the beginning of 378 00:19:29,000 --> 00:19:33,000 Speaker 1: an evolution of events that will accelerate that worry. That 379 00:19:33,160 --> 00:19:37,639 Speaker 1: is to say, the offensive which apparently began overnight in 380 00:19:37,720 --> 00:19:42,640 Speaker 1: the Domboss by large Russian forces. It depends on very 381 00:19:42,720 --> 00:19:46,040 Speaker 1: much on how that fighting goes. If it turns out 382 00:19:46,040 --> 00:19:50,919 Speaker 1: to be pretty much a stalemate, we need worry about estillation. 383 00:19:51,480 --> 00:19:58,400 Speaker 1: But if, against most anticipations, if the Russians are routed, uh, 384 00:19:58,560 --> 00:20:03,920 Speaker 1: Putin will not accept a defeat in Ukraine. And what 385 00:20:03,960 --> 00:20:07,960 Speaker 1: would his options then become? And it is not likely 386 00:20:08,040 --> 00:20:11,240 Speaker 1: that he would use a nuclear device, a low yield 387 00:20:11,320 --> 00:20:16,880 Speaker 1: nuclear device, but it isn't any longer impossible, and so 388 00:20:17,280 --> 00:20:22,640 Speaker 1: Americans and world citizens are right to worry about how 389 00:20:23,160 --> 00:20:26,240 Speaker 1: Ukraine could escalate. How does China plan to this is? 390 00:20:26,280 --> 00:20:28,440 Speaker 1: It is something that we should be talking about more 391 00:20:28,600 --> 00:20:33,560 Speaker 1: or less. China, of course, has Russia as its only 392 00:20:33,640 --> 00:20:38,120 Speaker 1: strategic ally. United States has about thirty five of them 393 00:20:38,680 --> 00:20:42,240 Speaker 1: through treaty commitments and arrangements, so they're going to stick 394 00:20:42,280 --> 00:20:46,280 Speaker 1: by Russia. But they're essentially a bystander on this. According 395 00:20:46,320 --> 00:20:49,920 Speaker 1: to the Administration, China at least so far, is not 396 00:20:50,560 --> 00:20:54,399 Speaker 1: providing any weapons to Russia. UH, and it'll do what 397 00:20:54,480 --> 00:20:58,720 Speaker 1: it can within the sanctions regime, but it's a it's 398 00:20:58,760 --> 00:21:03,480 Speaker 1: a bystander uh too, and of course hopes that Russia 399 00:21:03,680 --> 00:21:07,440 Speaker 1: is not humiliated. Ambassador, just to pull this all together, 400 00:21:07,560 --> 00:21:10,959 Speaker 1: are you saying that if Russia does not succeed in 401 00:21:11,000 --> 00:21:15,920 Speaker 1: its offensive against don Bass, that potentially Vladimir Putin will 402 00:21:15,960 --> 00:21:18,280 Speaker 1: start to be a little bit more rogue and expand 403 00:21:18,359 --> 00:21:22,399 Speaker 1: the fight to NATO countries. Not to NATO countries. I 404 00:21:22,440 --> 00:21:25,360 Speaker 1: think that would be an enormous step, because that would 405 00:21:25,440 --> 00:21:29,200 Speaker 1: trigger Article five in the North Atlantic Treaty and trigger 406 00:21:29,240 --> 00:21:34,320 Speaker 1: a war between NATO countries and Russia. Uh. And let 407 00:21:34,359 --> 00:21:37,160 Speaker 1: me make clear again what I'm speaking of with respect 408 00:21:37,160 --> 00:21:42,520 Speaker 1: to escalation is if Russia is defeated in the Dome Boss, 409 00:21:42,680 --> 00:21:45,679 Speaker 1: and the Ukrainians are on their way to drive in 410 00:21:45,800 --> 00:21:50,240 Speaker 1: Russia out of Ukraine. Uh. In that instance, one would 411 00:21:50,240 --> 00:21:54,840 Speaker 1: have to worry about Putin's belief that he now faced 412 00:21:55,160 --> 00:21:59,320 Speaker 1: an existential threat not just to Russia but more important 413 00:21:59,320 --> 00:22:02,880 Speaker 1: to him, say and Uh, I wouldn't rule out in 414 00:22:02,880 --> 00:22:07,120 Speaker 1: that case extreme measures on his part. Robert Blank will 415 00:22:07,320 --> 00:22:09,960 Speaker 1: awesome to catch up with you, sir, as always, Robert 416 00:22:09,960 --> 00:22:20,280 Speaker 1: Blank will that of cfl in conversation with David Rubenstein, 417 00:22:20,320 --> 00:22:23,679 Speaker 1: a full review tonight Bloomberg Wealth with David Rubinstein at 418 00:22:23,720 --> 00:22:26,080 Speaker 1: nine pm and for Global Wall Street in New York. 419 00:22:26,080 --> 00:22:30,040 Speaker 1: Wall Street an important conversation. David Rubenstein here right now 420 00:22:30,080 --> 00:22:33,520 Speaker 1: tell us why this is important. Is the company stabilized 421 00:22:33,600 --> 00:22:36,040 Speaker 1: after the uproar of the last few years. I think 422 00:22:36,040 --> 00:22:38,600 Speaker 1: Apollo is in very good shape because Apollo has the 423 00:22:38,680 --> 00:22:42,200 Speaker 1: core business that it's historically had, private equity, private credit. 424 00:22:42,400 --> 00:22:44,920 Speaker 1: But they have a theme which is broughly the same 425 00:22:45,000 --> 00:22:47,280 Speaker 1: size as the other part of Apollo, and a theme 426 00:22:47,480 --> 00:22:50,960 Speaker 1: is a cash cow. It's a retirement services business. Mark 427 00:22:51,080 --> 00:22:53,480 Speaker 1: Rowan really bought it, he built it, and now he's 428 00:22:53,480 --> 00:22:55,960 Speaker 1: in a very secure position. This is a guy who's 429 00:22:55,960 --> 00:22:59,480 Speaker 1: done it right. He's superior academics in Pennsylvania and he 430 00:22:59,520 --> 00:23:01,600 Speaker 1: goes direct so Burnam Lamberg I think at the back 431 00:23:01,720 --> 00:23:03,879 Speaker 1: end of it, and then he's built out the career. 432 00:23:03,880 --> 00:23:07,160 Speaker 1: What is distinctive about him among the private equity people 433 00:23:07,200 --> 00:23:09,360 Speaker 1: you deal with every day, of the people who are 434 00:23:09,359 --> 00:23:12,200 Speaker 1: the step good, so called second generation running these large 435 00:23:12,200 --> 00:23:14,240 Speaker 1: private equy firms, he is one of the few people 436 00:23:14,240 --> 00:23:17,480 Speaker 1: who's actually was a founder. And he's also extremely wealthy, 437 00:23:17,560 --> 00:23:19,960 Speaker 1: and he's already made his mark he by buying a 438 00:23:20,040 --> 00:23:23,720 Speaker 1: fiend for Apollo. He's made Apollo extremely successful, so he 439 00:23:23,760 --> 00:23:27,119 Speaker 1: has the luxury of being secure. He's already extremely wealthy. 440 00:23:27,400 --> 00:23:30,080 Speaker 1: He's well respected and well liked, and I think he's 441 00:23:30,160 --> 00:23:33,639 Speaker 1: enjoying the job because before he was not as visible 442 00:23:33,640 --> 00:23:35,520 Speaker 1: as others, and he was in some ways he had 443 00:23:35,560 --> 00:23:38,200 Speaker 1: a semi sabbatical. He wasn't there as much as others. 444 00:23:38,440 --> 00:23:40,880 Speaker 1: Now he's there full time. He loves the job. I've 445 00:23:40,880 --> 00:23:43,080 Speaker 1: never seen him as happy. How much does he embrace 446 00:23:43,160 --> 00:23:47,280 Speaker 1: David this idea that the shadow banking system, private equity firms, 447 00:23:47,320 --> 00:23:50,199 Speaker 1: private investors are really taking over a lot of the 448 00:23:50,240 --> 00:23:54,440 Speaker 1: banking functions of the traditional finance companies, which shaping Jamie 449 00:23:54,480 --> 00:23:57,960 Speaker 1: Diamond of JP Morgan last week was complaining about, well, 450 00:23:58,080 --> 00:24:00,000 Speaker 1: JP Morgan's in pretty good shape. I don't think they've 451 00:24:00,000 --> 00:24:02,280 Speaker 1: to worry about the private equity firms. But the private 452 00:24:02,320 --> 00:24:04,960 Speaker 1: equte firms have moved into areas like private credit, and 453 00:24:05,040 --> 00:24:07,600 Speaker 1: private credit has become a gigantic business for all the 454 00:24:07,680 --> 00:24:11,000 Speaker 1: large private equity firms. But they are not anywhere near 455 00:24:11,160 --> 00:24:14,080 Speaker 1: the point where they're threatening JP Morgan's core business. It's 456 00:24:14,119 --> 00:24:16,159 Speaker 1: just a different niche that the private equi firms have 457 00:24:16,240 --> 00:24:18,480 Speaker 1: moved into. Yeah, but how much, David, are we talking 458 00:24:18,520 --> 00:24:22,360 Speaker 1: about blockchain and some of these other types of nontraditional finance, 459 00:24:22,720 --> 00:24:26,720 Speaker 1: of codified financial tools that will become the next frontier 460 00:24:27,000 --> 00:24:30,280 Speaker 1: that perhaps traditional finance moves too slowly in and some 461 00:24:30,359 --> 00:24:33,119 Speaker 1: of these other firms can be faster. That's the bigger 462 00:24:33,119 --> 00:24:35,879 Speaker 1: threat for the large commercial banks. Whether somebody comes along 463 00:24:35,920 --> 00:24:38,320 Speaker 1: with a new technology of blockchain or some of the 464 00:24:38,400 --> 00:24:42,600 Speaker 1: kind of fintech revolution that basically changes dramatically the core 465 00:24:42,640 --> 00:24:44,960 Speaker 1: business of banks, that's what they should worry more about 466 00:24:44,960 --> 00:24:46,720 Speaker 1: than whether private equity people are getting a little bit 467 00:24:46,720 --> 00:24:51,359 Speaker 1: into their their businesses. Are guys like you taking over 468 00:24:51,480 --> 00:24:55,600 Speaker 1: real estate in America? Over cocktails on a weekend? You 469 00:24:55,680 --> 00:24:58,920 Speaker 1: must b s is six times a weekend. Is private 470 00:24:58,960 --> 00:25:04,040 Speaker 1: equity with their suppleness, with their privacy, are they taking 471 00:25:04,200 --> 00:25:09,040 Speaker 1: over forms of citizen real estate in America? I don't 472 00:25:09,080 --> 00:25:11,159 Speaker 1: really think so. I think private equity is still a 473 00:25:11,240 --> 00:25:14,879 Speaker 1: small business compared to other large commercial banks and so forth, 474 00:25:15,200 --> 00:25:17,960 Speaker 1: uh where they're growing a great deal. But private equity 475 00:25:18,040 --> 00:25:22,000 Speaker 1: is not threatening anybody. That capital input doesn't change I'm 476 00:25:22,000 --> 00:25:26,000 Speaker 1: talking Chicago here. That capital input doesn't change the price 477 00:25:26,119 --> 00:25:29,720 Speaker 1: theory of an individual home. I don't think it does 478 00:25:29,720 --> 00:25:32,440 Speaker 1: in any material way. And to be honest, private equity 479 00:25:32,560 --> 00:25:35,280 Speaker 1: is not as controversial. I think that it was ten 480 00:25:35,359 --> 00:25:38,000 Speaker 1: years ago. Ten years ago people were upset about private 481 00:25:38,000 --> 00:25:40,680 Speaker 1: eque buying companies. Now people record as a private equit. 482 00:25:40,800 --> 00:25:42,959 Speaker 1: People care about E s G. Private equly. People are 483 00:25:42,960 --> 00:25:44,960 Speaker 1: doing their things at all big companies should do so. 484 00:25:45,000 --> 00:25:46,960 Speaker 1: I don't think it's seen as a big threat in Washington, 485 00:25:47,040 --> 00:25:49,520 Speaker 1: d C. Today. Private equity is not even the top 486 00:25:49,680 --> 00:25:52,680 Speaker 1: one things that people are worried about on Capitol Hill. 487 00:25:52,760 --> 00:25:54,760 Speaker 1: Do you think it's still an opportunity though the housing 488 00:25:54,960 --> 00:25:58,040 Speaker 1: market in particular buying to rent that it was a 489 00:25:58,160 --> 00:26:01,520 Speaker 1: three years ago. Well, yeah, so I think private equity 490 00:26:01,560 --> 00:26:04,280 Speaker 1: has some challenges for sure, And I think the debt 491 00:26:04,320 --> 00:26:07,000 Speaker 1: markets are are challenging for private equity because as interest 492 00:26:07,080 --> 00:26:08,800 Speaker 1: rates go up, it's going to be more challenging to 493 00:26:08,800 --> 00:26:11,200 Speaker 1: finance some of these transactions. But there's plenty of liquidity. 494 00:26:11,359 --> 00:26:13,280 Speaker 1: I think the biggest problems that private equity people are 495 00:26:13,280 --> 00:26:16,280 Speaker 1: worried about today is is there is the economy generated 496 00:26:16,320 --> 00:26:18,679 Speaker 1: the overall economy. David, I don't want to, you know, 497 00:26:18,800 --> 00:26:21,680 Speaker 1: start any rumors here. I mean, I just I don't 498 00:26:21,680 --> 00:26:24,199 Speaker 1: want to, folks. But I saw you tweeting before we 499 00:26:24,240 --> 00:26:27,040 Speaker 1: went to air here. Do you have any comment? I mean, 500 00:26:27,119 --> 00:26:30,800 Speaker 1: you're tweeting as we went to arready coming here on 501 00:26:31,040 --> 00:26:35,760 Speaker 1: the transaction known as Twitter. Actually um that transaction, A 502 00:26:35,760 --> 00:26:37,240 Speaker 1: lot of people will look at Let me get my 503 00:26:37,240 --> 00:26:39,280 Speaker 1: phone out here so I can tweet the answer. It's 504 00:26:39,280 --> 00:26:42,680 Speaker 1: a complicated, lury large transactionally be a very large buyout, 505 00:26:43,040 --> 00:26:45,680 Speaker 1: and if it gets done by any private equity firm, 506 00:26:45,720 --> 00:26:48,160 Speaker 1: there will be many private equi firms involved, not just 507 00:26:48,240 --> 00:26:50,320 Speaker 1: on the equity but also on the debt. You have 508 00:26:50,520 --> 00:26:54,640 Speaker 1: decades of experience. Is this is Mr der Musk treated 509 00:26:54,760 --> 00:26:58,920 Speaker 1: differently by Mr Gensler and the Securities Exchange Commission than 510 00:26:59,040 --> 00:27:03,720 Speaker 1: other executive Is the six thousand executives you've had experience with. 511 00:27:04,680 --> 00:27:07,200 Speaker 1: I can't really say, because I can't say exactly what's 512 00:27:07,240 --> 00:27:08,800 Speaker 1: in his mind, But there's no doubt if you're the 513 00:27:08,840 --> 00:27:12,320 Speaker 1: wealthiest person in the world, people look at you somewhat differently. Lisa, 514 00:27:12,440 --> 00:27:16,360 Speaker 1: I'm I'm getting the I'm never coming back. Look. Well, 515 00:27:16,520 --> 00:27:21,840 Speaker 1: the Delicate Global was actually named as somebody who might 516 00:27:21,840 --> 00:27:25,280 Speaker 1: be interested in this transaction, so I'm sure is deeply relevant. 517 00:27:25,320 --> 00:27:28,200 Speaker 1: But there is this question about what the new frontier 518 00:27:28,359 --> 00:27:30,400 Speaker 1: is for social media and whether there might be more 519 00:27:30,720 --> 00:27:34,600 Speaker 1: regulatory involvement. David, I do wander going forward? What is 520 00:27:34,600 --> 00:27:38,360 Speaker 1: your strongest conviction as you look out among myriad threats 521 00:27:38,440 --> 00:27:42,920 Speaker 1: in a world that seemed highly uncertain. Well, the strongest 522 00:27:42,920 --> 00:27:45,520 Speaker 1: conviction I have now about what's where the world is 523 00:27:45,560 --> 00:27:48,680 Speaker 1: going is that we're likely to see an economic slowdown 524 00:27:48,720 --> 00:27:50,760 Speaker 1: at some point. I don't think it's a recession, but 525 00:27:50,960 --> 00:27:53,080 Speaker 1: obviously higher interest rates are coming. We're likely to have 526 00:27:53,119 --> 00:27:55,440 Speaker 1: a fifty basis point increase the next time the f 527 00:27:55,560 --> 00:27:59,199 Speaker 1: o MC meets. Until the Rush Ukraine war is resolved, 528 00:27:59,520 --> 00:28:01,439 Speaker 1: I think the markets are going to be real legit ry. 529 00:28:01,680 --> 00:28:03,200 Speaker 1: And it looks as if that war is going to 530 00:28:03,280 --> 00:28:05,440 Speaker 1: go on for another month or two at least, so 531 00:28:05,680 --> 00:28:07,359 Speaker 1: I think the markets are still be a little bit 532 00:28:07,440 --> 00:28:10,200 Speaker 1: nervous about where things are going. We appreciate your weekly 533 00:28:10,200 --> 00:28:13,960 Speaker 1: attendance here, David Rubinstein. Of course, this is the Bloomberg 534 00:28:14,000 --> 00:28:18,360 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from 535 00:28:18,400 --> 00:28:21,760 Speaker 1: seven to ten am Eastern on Bloomberg Radio and on 536 00:28:21,840 --> 00:28:26,119 Speaker 1: Bloomberg Television each day from six to nine am for 537 00:28:26,400 --> 00:28:31,320 Speaker 1: insight from the best and economics, finance, investment, and international relations. 538 00:28:31,800 --> 00:28:36,440 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 539 00:28:36,600 --> 00:28:40,200 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 540 00:28:40,240 --> 00:28:42,920 Speaker 1: Tom Keene, and this is Bloomberg