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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. Daily we bring you

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

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course, on the Bloomberg terminal. Right down, Carl Weinberg,

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Speaker 1: where US chief economists high frequency Economics. Lisa wants to

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Speaker 1: dive into the international field. Carl, I've got to go

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Speaker 1: to your scathing Shina note. I believe it was yesterday

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Speaker 1: where you say flat out we can't trust the Chinese data.

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Speaker 1: How close to worser is China? Good morning, Tom, Good

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Speaker 1: morning Lisa. Uh. China's numbers are surprisingly strong. The trade

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Speaker 1: numbers are surprisingly strong. We can make up a story

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Speaker 1: for the imports side, perhaps points to a very very

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Speaker 1: big drop in the volume of imports, assuming that import

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Speaker 1: prices went up, But the export numbers are just over

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Speaker 1: the top. It's hard to believe that, with the reports

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Speaker 1: closed for at least half of the month of May,

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Speaker 1: that we saw a fifteen percent year over year rise

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Speaker 1: and exports. So I'm skeptical of the numbers that we're seeing.

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Speaker 1: Of course, we'll get more numbers this week. We're going

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Speaker 1: to see retail sales and industrial production and fixed investment

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Speaker 1: spending at the end of this week. Let's see if

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Speaker 1: they paint the darker picture of the economy more aligned

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Speaker 1: to what we expect to see. Carol, do you see

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Speaker 1: anything that's going to put a crimp on the inflationary

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Speaker 1: kind of pressure that we're seeing upward in the near term. Well,

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Speaker 1: the central banks are going to put a crimp in

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Speaker 1: things there adem them. Well, but that's really the core

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Speaker 1: story here. Every time central banks have gone out shooting

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Speaker 1: for inflation, they've caused the recession. And almost every time

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Speaker 1: we've seen a recession, we've seen prices fall off dramatically.

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Speaker 1: You know, a few people remember how fast inflation dropped

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Speaker 1: from us before the spring of two thousand and eight,

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Speaker 1: the economic peak, until six months later we went from

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Speaker 1: inflation to deflation, and oil went from a hundred and

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Speaker 1: forty dollars of borrow the thirty five dollars a bow

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Speaker 1: and that was a really big hit to income, really sudden,

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Speaker 1: really unexpected. But every time we look back in history

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Speaker 1: and we've seen the economy go into a recession or

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Speaker 1: a period of slow growth. We've seen prices slow rather dramatically.

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Speaker 1: So that's the that's the story here. You know, you

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Speaker 1: look at the current data, and it's very fair to

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Speaker 1: say there's no evidence in the current data that inflation

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Speaker 1: is slowing. That's true, but that assumes all other things

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Speaker 1: remain equal, and all other things will not remain equal.

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Speaker 1: The kayaking interest rates that we're seeing from all the

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Speaker 1: central banks around the world except for the Japanese is

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Speaker 1: going to slow growth and that's what's going to bring

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Speaker 1: prices down. This is incredibly important, Carl, because a lot

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Speaker 1: of people were saying that the only way for the

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Speaker 1: FED to achieve a soft landing was if other aspects

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Speaker 1: coordinated with it, exogenous risks abated and allowed weaker or

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Speaker 1: slow down inflation that was faster than some people had

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Speaker 1: been expecting. If that is not the case, Carl, is

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Speaker 1: it basically, uh, you know, they are going to cause

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Speaker 1: a recession. They need to cause a recession in order

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Speaker 1: to get price control into the market. Well, you know, Lisa,

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Speaker 1: we heard uh of Fed share Powell say a few

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Speaker 1: testimonies ago that the Fed's track record on soft landings

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Speaker 1: isn't really that good that he could only think of

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Speaker 1: one or two instances in the last fifty years when

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Speaker 1: they actually achieve one, maybe this time will be different.

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Speaker 1: But there were six episodes of interest rate hikes by

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Speaker 1: the Fed that preceded or associated with the last six

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Speaker 1: big economic downturns in the United States, and we see

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Speaker 1: the same thing for the Europeans and for the English

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Speaker 1: as well. So yeah, that's certainly going to be a factor.

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Speaker 1: The exologenists are going to go away, all right, for sure.

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Speaker 1: Oil prices are not going to continue to rise. And again,

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Speaker 1: as we saw back both in two thousand and eight,

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Speaker 1: end in if the economy gets slammed hard, oil prices

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Speaker 1: can go from a hundred and forty dollars in barrow

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Speaker 1: the thirty five was a barrel in six months, they

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Speaker 1: can fall just as fast as they went up. And

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Speaker 1: that's uh, I think to be part of everybody's thinking. Well,

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Speaker 1: the thinking goes that the care for higher prices and

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Speaker 1: the commodity complex eventually is higher prices that eventually demand

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Speaker 1: destruction will kick in. We have seen sentiment waning, Carl,

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Speaker 1: and yet you haven't necessarily seen the robust demand destruction

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Speaker 1: when it comes to actual consumption to consumers being willing

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Speaker 1: to spend their money, When does that start to more

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Speaker 1: happen in a more robust way. Yeah, Hi, good morning, Kelly. Yeah.

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Speaker 1: I mean, we just have to be a little bit

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Speaker 1: patient to see it work out. Right now, we see

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Speaker 1: evidence consumers in the United States are running up their

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Speaker 1: credit card debt. We see evidence that they're reducing their savings.

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Speaker 1: These are always the cushion the impact of a drop

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Speaker 1: in real income, which is what's being caused by the

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Speaker 1: higher energy prices and other prices that households are facing.

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Speaker 1: But that can't go on forever. And uh, I think

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Speaker 1: we just have to be patient that it's coming. Everything

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Speaker 1: you know about economics says it's in the works. It's

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Speaker 1: just not here just yet. What should they do to morrow, Carl,

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Speaker 1: You've been doing this for decades, You've got tons of experience,

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Speaker 1: back to Arthur Burns and even McChesney Martin. What should

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Speaker 1: Jerome Powell do tomorrow? Well, I think he's got to

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Speaker 1: pursue the course of convincing people that the Fed is

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Speaker 1: going to do whatever it takes to fight inflation, to

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Speaker 1: not let inflation expectations become entrenched in wage demands and

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Speaker 1: consumer spending behavior. Ben Bernanke had a piece in The

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Speaker 1: New York Times today saying exactly, and I got to

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Speaker 1: agree with a former chair Bernankey, that that's the most

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Speaker 1: important thing that the FED can do. You know, we've

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Speaker 1: been teasing high frequency readers with an article from the

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Speaker 1: Economic Bulletin of the ECB from May of ten written

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Speaker 1: by the Bundesbank explaining why Germany fared better and the

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Speaker 1: great inflation of the seventies in the United States and

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Speaker 1: there as there was, they established a credible target for

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Speaker 1: monetary growth, of credible target for inflation, and they stuck

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Speaker 1: to it. And I think that's the most important thing

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Speaker 1: that the FED can do right now. Carl Weinberg, thank

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Speaker 1: you so much. Great briefing here. As we go to

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Speaker 1: the FED show tomorrow, we'll have that for you in

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Speaker 1: the one PM our Michael McKee in Washington. We're gonna

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Speaker 1: change the show right now, and we can do that

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Speaker 1: with Katie Kaminski, chief research strategist Alpha Simplex, who's having

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Speaker 1: a killing year shorting the space. Katie, I want to

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Speaker 1: go back to what you've got tattooed your brain from

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Speaker 1: the c t a crew, which is anti Martin Gale theory,

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Speaker 1: which is, when you're successful, you increase your bets. When

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Speaker 1: you're not, you have your bets. Are you utilizing in

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Speaker 1: your record year of getting shorts right, are you utilizing

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Speaker 1: anti Martin Gale theory to take bigger short bets? I'd

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Speaker 1: have to say yes, in the sense that we do

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Speaker 1: really well when things are difficult, when there's dislocations and

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Speaker 1: when people don't know what to do, and that's exactly

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Speaker 1: what's happening this year. We have complacency, we have denial,

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Speaker 1: and we have fear. That is a perfect scenario where

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Speaker 1: markets can be a little bit more behavioral and less efficient,

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Speaker 1: and thus following the trend is actually a very diligent

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Speaker 1: and less emotional based way to actually trade such difficult markets.

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Speaker 1: Are you able? And I'm thinking of the work of

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Speaker 1: Wells Wilder of the late nineties seventies and looking at

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Speaker 1: something mumbo jumbo like a d X d M, I

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Speaker 1: does bitcoin trend? Can you guys take a short on

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Speaker 1: bitcoin and extend it out here at twenty two thousand

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Speaker 1: right now? So I have to admit I don't trade

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Speaker 1: bitcoin because I'm a risk manager and there's just a

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Speaker 1: lot of risk there. But what I would say if

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Speaker 1: you did look at a trend signal and bitcoin, is

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Speaker 1: that it's definitely gone down quite a bit, but you

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Speaker 1: might need to see a little bit of recovery before

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Speaker 1: we would actually consider that we're having a new trend.

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Speaker 1: I mean, I think that is a very difficult call it.

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Speaker 1: It has significantly reverted from what would have been its

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Speaker 1: previous highs, Katie, what do you know to close out

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Speaker 1: your shorts? So we have a process where we're very

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Speaker 1: much about focused on seem confirmation and data. So if you,

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Speaker 1: if I give you an example, people have just been

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Speaker 1: calling this peak of inflation. We say you can't call

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Speaker 1: a peak until the peak is over. And so I

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Speaker 1: think this is an example people are too early to

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Speaker 1: call the peak in inflation. We're going to start calling

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Speaker 1: those type of peaks when we actually see that the

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Speaker 1: market confirms that they are going down or that prices

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Speaker 1: are going down. So, Katie, if it's too early to

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Speaker 1: call the peak and inflation, is it too early to

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Speaker 1: call the bottom in the equity market? Certainly? Unfortunately that's

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Speaker 1: the case. We need to see more confirmation that we're

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Speaker 1: kind of starting to see some sort of recovery. UM,

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Speaker 1: I think it's easy to react on one day's moves,

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Speaker 1: particularly a day like yesterday. We may have some reversal,

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Speaker 1: but we do actually really need to see some confirmation

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Speaker 1: instead of just reacting to one day. So what are

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Speaker 1: you looking at tifically in the data to indicate that

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Speaker 1: we are seeing peak inflation. You're saying you have to

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Speaker 1: look for confirmation in markets. What are those signs? I

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Speaker 1: think the biggest things that we look are empirical trans

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Speaker 1: and asset prices. And what's interesting right now is that

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Speaker 1: you're seeing very very similar patterns to what we saw

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Speaker 1: during a rising rate environment. And I think what you

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Speaker 1: said earlier in the show about is this the true

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Speaker 1: bottom of the falling interest rate environment. What we have

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Speaker 1: seen is that we're going to tend to be short

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Speaker 1: in a rising rate environment, particularly when we're going close

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Speaker 1: to an inversion type point where we're moving into a

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Speaker 1: more recessionary environment. And those are particularly the technical signals

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Speaker 1: we've seen in bonds. And this is actually quite interesting

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Speaker 1: because during those environments, our strategies are gonna tend to

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Speaker 1: be sevent short bonds, and if we move into that environment,

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Speaker 1: we're going to see a lot more short bond signals

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Speaker 1: over the next few years. Is it a crowded trade?

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Speaker 1: I mean, you're in a trend based you know clearly

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Speaker 1: you the ball out of the park this year. But

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Speaker 1: are you concerned that everybody's on board with Katie Kaminski.

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Speaker 1: I mean that's always a question when you're a trend follower.

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Speaker 1: If you follow the trend, you gotta get out the doors. Um.

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Speaker 1: But the truth is, very few people are comfortable shorting bonds,

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Speaker 1: and very few people have been comfortable with the trade

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Speaker 1: we've had this year, and that's I think why it's

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Speaker 1: been such an interesting year to be a trend follower,

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Speaker 1: because we're doing things that haven't work since very quickly.

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Speaker 1: Are you levered up? I mean, come on, you know

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Speaker 1: nobody's listening. Katie. You can tell me. Are you three

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Speaker 1: to one twenty to one? And you do on a

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Speaker 1: ducks No. I mean we're definitely risk managers in the

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Speaker 1: sense that we run at about twelve all, which is

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Speaker 1: much lower than what you'd see in the SNP if

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Speaker 1: you looked over a long horizon. I think it's about

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Speaker 1: diversification and finding opportunities across the entire spectrum of bonds

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Speaker 1: across a large geographical region and really sort of following

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Speaker 1: macro trends with an eye to many different trades. Kati Kamitsky,

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Speaker 1: thank you so much, greatly appreciating congratulations on againting so

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Speaker 1: many facets of this market right always pression. It federated

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Speaker 1: hum as Linda Doos joins us there, senior equity strategists.

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Speaker 1: Is your team under the desk? I mean, Linda, you know,

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Speaker 1: are people hiding under the desk this morning? I have

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Speaker 1: to give my team credit because when we started this year,

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Speaker 1: we said that we thought you'd see a lot of

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Speaker 1: volatility and that cash might actually be king. It was

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Speaker 1: the first time in my career. It federated Herme's that

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Speaker 1: neither the bond representative nor the stock representative was very

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Speaker 1: excited about their areas. So I think we're going through

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Speaker 1: what we thought we would do. In our conversations at

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Speaker 1: the office, we're saying that this is going a lot

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Speaker 1: quicker about than what we thought. Linda, is this? It

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Speaker 1: is this the cathartic puke Top accused me of not

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Speaker 1: being very ladylike. But you don't want to buy when

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Speaker 1: people are scared, And yet here we are, and that

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Speaker 1: typically is the best time to buy. Is this it? No,

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Speaker 1: I don't think it said. I mean, we see what's

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Speaker 1: happening in the crypto cryptos having their puke, that's guaranteed.

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Speaker 1: But I'm still seeing and hearing too many by the

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Speaker 1: dip ideas. We only came down on the STP, and

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Speaker 1: I guess we tested it once here with a quick

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Speaker 1: ten percent bounce on really pretty poor volume. But I

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Speaker 1: don't see why we shouldn't do even more damage than

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Speaker 1: that with with all the money that was pushed into

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Speaker 1: this system, so many people buying up you know, so

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Speaker 1: many assets out there, and that does have to be

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Speaker 1: wound back, and I think it might end up being

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Speaker 1: probably a recession and probably um, maybe a couple hundred

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Speaker 1: more points downside on the STP. Linda Lisa raised this briefly,

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Speaker 1: the idea that now the market is kind of giving

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Speaker 1: the Fed permission in some sense to move seventy five

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Speaker 1: basis points, or at least it wouldn't be all too surprising.

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Speaker 1: Would the greater downside risk to equities be a FED

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Speaker 1: that acts too aggressively, is too hawkish, or is too devish,

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Speaker 1: And there's little faith that they're able to reign in inflation. Yeah,

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Speaker 1: I think you know how it works out. We're not

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Speaker 1: so concerned. I think one percent move would be a

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Speaker 1: big shock, just a big shock to the markets. The

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Speaker 1: seventy five basis points versus fifty basis points. I think

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Speaker 1: we're kind of in this situation that says, you know, whatever,

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Speaker 1: they're going to keep on going. We find it interesting

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Speaker 1: very recently the betting out there for the Fed terminal

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Speaker 1: rate is now up to almost four percent. So where

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Speaker 1: we end this is very important. And we're talking about

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Speaker 1: the p p I, how pp I and cp I

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Speaker 1: particularly come down, because we saw the M two money

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Speaker 1: growth peak in February one, and historically about thirteen months later,

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Speaker 1: the CPI the core starts to pull back down, which

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Speaker 1: you might say it did a little bit in the

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Speaker 1: last two months, so it might come down fairly quickly.

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Speaker 1: I'm not betting on that right now, but that's what

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Speaker 1: we really really have to watch. And the federal just

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Speaker 1: keep going on and being data dependent, and then QT

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Speaker 1: is you know, it's just a big mystery to all

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Speaker 1: of us. Well, Linda, you mentioned p p I, which

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Speaker 1: raises the question of input costs and margins or margin

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Speaker 1: estimates still too high for the rest of this year. Yeah,

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Speaker 1: that's that's what we're particularly concerned about, is uh, you know,

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Speaker 1: it's the news coming out of Target, was that like

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Speaker 1: just the tip of the iceberg as to what might

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Speaker 1: come next and might more and more industries have to

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Speaker 1: report even if they had a good second quarter that

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Speaker 1: their outlook is that volunteers will be squeezed because today

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Speaker 1: it was all pe multiple contraction, and if we start

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Speaker 1: to pull down our earnings estimates, you know, that's gonna

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Speaker 1: be a double whammy here for the market. So it

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Speaker 1: could be a tough couple of months here, Linda, thank

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Speaker 1: you so much, greatly appreciated. Right now from TV Securities,

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Speaker 1: someone who looks at all currencies, someone who has been

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Speaker 1: dead on about dollar resiliency. Mark McCormick is their global

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Speaker 1: head of f ext Energy. But we're gonna do something

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Speaker 1: different this time. Folks, get out your pens and paper

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Speaker 1: and take notes. Replay the video when you hear it.

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Speaker 1: Mark McCormick. A primer on Japan. Mark McCormick, what yen

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Speaker 1: level does Japan need? Where the system falls apart, this

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Speaker 1: rigged system of modern monetary theory that they have well

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Speaker 1: thanks for having me. Yeah, I don't think it's a

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Speaker 1: particular level. I think we're getting to the point now

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Speaker 1: where you think about is there a level you'd like

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Speaker 1: to fade dollar again, given the fact that g gbs

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Speaker 1: are moving, all these central banks are moving, everyone's imported

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Speaker 1: inflation around the world, and we're trying to sequence which

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Speaker 1: central banks are moving. It looks like DCB is ready

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Speaker 1: to move, the SMB is ready to move, and the

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Speaker 1: major question is when the when does the b O

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Speaker 1: J go. I think it's not coming in the next month,

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Speaker 1: It's not coming this week. But I think we should

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Speaker 1: be priming ourselves. At one thirty five is probably a

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Speaker 1: top in dollar again, and we want to think about

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Speaker 1: what level in terms of maybe medium term or longer

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Speaker 1: term for value do we get to the biggest long

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Speaker 1: term trade in terms of valuation is dollar again is

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Speaker 1: the most overvalue currency in the G ten. So if

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Speaker 1: we think about the things over quarters, I think a

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Speaker 1: level that's important is probably one fifteen to one twenty.

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Speaker 1: To think about what is an anchor priet dollar again,

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Speaker 1: relative to the policy expectations, how do you and your

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Speaker 1: Asian team and vision you will migrate from one thirty

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Speaker 1: five to one fifteen, one twenty or even stronger. Yeah,

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Speaker 1: and a lower statistic. Can it be smooth reaction functions

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Speaker 1: or is it a mess and jump conditions? It's absolutely

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Speaker 1: the latter, it's jump conditions. It's it's definitely a mess.

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Speaker 1: I would say a big part of it is we

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Speaker 1: There's there's some interesting things that are driving again that

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Speaker 1: I don't think a lot of people spend their time on.

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Speaker 1: And I think one thing most importantly is the movement

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Speaker 1: energy prices. And Japan is a massive importer of energy

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Speaker 1: and other and other commodities around the world. So Japan's

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Speaker 1: current accounts surplus has been eroded. And at the exact

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Speaker 1: same time, there's a tremendous amount of foreign direct investment

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Speaker 1: by Japanese corporates out of Japan, which is also weakening.

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Speaker 1: The end, the question is is whether or not moving

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Speaker 1: bo J paulis and they change in the US equity

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Speaker 1: markets and the markets. People leaving the United States equity

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Speaker 1: markets are looking for things that are cheap, undervalued, and

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Speaker 1: under position. This is what can help turn the ship

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Speaker 1: for the end and then say the next six months.

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Speaker 1: This is not again immediate risk, but this is kind

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Speaker 1: of that non linear effect. If the b o J

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Speaker 1: moves US equity markets rolling over and people are looking

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Speaker 1: for other places to put their money, Japan is going

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Speaker 1: to flag really well on that outlook, maybe in the

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Speaker 1: next six months or so. I can't emphasize enough, Lisa,

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Speaker 1: how this is not your father's Japan. This is not

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Speaker 1: about Toyota's and Toshiba's. It is a change Japan, and

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Speaker 1: obviously because of China. Obviously because of China, and also

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Speaker 1: because of the Bank of Japan's potentially feudal effort to

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Speaker 1: control a graun market that can no longer be considered

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Speaker 1: a market mark. At what point is the Bank of

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Speaker 1: Japan fooling itself continuing to buy bonds now at a

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Speaker 1: record pace in order to keep yields pegged at this

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Speaker 1: ultra low level. Well, they're still They're still doing it now,

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Speaker 1: I think that, and they're kind of getting to the

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Speaker 1: point where the cost benefit doesn't work in their favor.

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Speaker 1: They tried this again earlier in the year, and we

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Speaker 1: were talking about terms of trade shocks and higher interest rates,

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Speaker 1: and why would the b o G continue yield curve

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Speaker 1: control and they continue to do it. I think what

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Speaker 1: we're starting to see is the rhetor exchanging the you know,

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Speaker 1: there's mixed messages from policymakers that are trying to coordinate

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Speaker 1: a policy response between the b o J and the

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Speaker 1: Ministry of Finance. Uh So there's there's scope here that

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Speaker 1: the boat is turning and markets are sniffing it out.

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Speaker 1: So I think this is again an interesting concept that

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Speaker 1: the policy itself is broken. Markets, no, it's broken, and

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Speaker 1: they're starting to actively try to find ways to push

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Speaker 1: against it. So Mark, how big would the move be

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Speaker 1: in the end, if the Bank of Japan we're to

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Speaker 1: abandon the rate peg, it would be significant. Again, it'd

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Speaker 1: be a knee jerk. Um. Again, we're talking a lot

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Speaker 1: about people are discussing intervention. I think intervention is is

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Speaker 1: less palpable than the actual policy change. But if we

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Speaker 1: see the policy change, it could see you know, kneed

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Speaker 1: jerk could be five cent um in the very short run.

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Speaker 1: But again, a lot of it will hinge back onto

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Speaker 1: where we where we are in the global market cycle,

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Speaker 1: where's risk appetite, where we at relative to the Fed

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Speaker 1: and other central banks. But the knee jerk could absolutely

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Speaker 1: be worth a significant move in yet, Okay, so on

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Speaker 1: the subject of risk appetite market, is that more so

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Speaker 1: what has driven the recent bout of strengthen the dollar

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Speaker 1: rather than expectations of tighter federal reserve policy. I think

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Speaker 1: that's a great question because a lot of this year

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Speaker 1: people have focused on relative themes. We've talked a lot

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Speaker 1: about terms of trade, growth, relative central banks. What's happened

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Speaker 1: since April, and we've got a little uh sliver of

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Speaker 1: it last month, is people gave up on the broader themes.

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Speaker 1: And what happened is that the dollar and the Fed

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Speaker 1: became all encompassing. And what the Fed has done through

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Speaker 1: tightening financial conditions is created an equity recession, and risk

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Speaker 1: sentiment has deteriorated, along with kind of the focus on China,

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Speaker 1: zero COVID, what's going on with rushing Ukraine and how

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Speaker 1: it impacts Europe. But essentially we're at we're back to

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Speaker 1: that trade now, we're not kind of thinking about terms

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Speaker 1: of trade. You're not buying commodity exporters. You're actually just

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Speaker 1: saying I'm selling commodity importers like euro, Yen and a

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Speaker 1: couple of other currencies. But what's happening is the strengthen

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Speaker 1: the dollar is a single meta theme that is basically

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Speaker 1: deteriorating risk sentiment, and what we're doing is bringing short

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Speaker 1: term cash back into US dollars. So there's it's really

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Speaker 1: like a one trick move here where stronger FED policy,

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Speaker 1: tighter financial conditions, just as a single strong dollar with

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Speaker 1: really new other themes happening in FFX. Well, and you

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Speaker 1: mentioned the headwinds also facing the euro and Europe more broadly.

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Speaker 1: How realistic is parody? I think parodies it's definitely. Ah,

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Speaker 1: it's a lively discussion. I think again, if you were

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Speaker 1: to look at option pricing, which is an interesting way

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Speaker 1: to look at things, in next three months, it's still

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Speaker 1: only about fifteen percent chance that we hit parody. Um.

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Speaker 1: I think obviously we're looking for we have a trade on,

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Speaker 1: we're looking to revisit those lows under one oh four.

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Speaker 1: I think the prospects of parody that are challenging in

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Speaker 1: this environment because we've already seen the FED be price

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Speaker 1: now for seventy five, seventy fifty, and we're already back

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Speaker 1: at a four terminal rate to have well, I gotta

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Speaker 1: leave it there, Mark, just because of time. Mark McCormick,

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Speaker 1: thank you for the primer on Japan. Really really appreciate it.

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Speaker 1: David Rubinstein, unvenot Coasla. What to me is so important

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Speaker 1: is Ian Bremer's essay last year on the power of Technology.

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Speaker 1: You talked to Mr Kosla about technology and the tension

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Speaker 1: between China in the United States. Who holds the power? Well,

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Speaker 1: but no Coastla for those who don't know, has been

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Speaker 1: one of the leading venture capital investors in the last

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Speaker 1: several decades, first at Kleiner Perkins and now at his

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Speaker 1: own firm, Coastal Ventures. And he is an Indian immigrant.

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Speaker 1: He came to the United States, got his degree at

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Speaker 1: Carnegie Mellon and then Stanford Business School, started his Sun Microsystems,

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Speaker 1: as you said, one of the founders there and really

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Speaker 1: has made some of the most impressive venture investments over

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Speaker 1: the last several decades, making billions of dollars for his investors. Uh.

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Speaker 1: He said that he thought there was a war, perhaps

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Speaker 1: a techno economic war between China and United States that

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Speaker 1: could arise over the next twenty years, and he thinks

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Speaker 1: that his native country India could be an ally in

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Speaker 1: the United States in that war. There's no doubt that

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Speaker 1: there's technology tension now between China, the United States, and

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Speaker 1: he thinks the venture capital communitee can play a big

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Speaker 1: role in trying to moderate that tension to some extent

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Speaker 1: and maybe bringing those countries together by cooperating to some

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Speaker 1: extent if possible, on technology investments. And David, is you

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Speaker 1: as a leader on this? And I want to bring

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Speaker 1: in Dr Bremer's thoughts from his essay last year. There

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Speaker 1: has to be a responsibility on the part of the

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Speaker 1: young turks of technology in America to think internationally and

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Speaker 1: think interdependently. Are you optimistic they're able to do that? Well,

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00:22:46,040 --> 00:22:47,520
Speaker 1: I think they're more likely to be able to do

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00:22:47,560 --> 00:22:49,240
Speaker 1: it then our political leaders are gonna be able to

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Speaker 1: do it, because I think the political leaders are right

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00:22:51,200 --> 00:22:54,360
Speaker 1: now at logger heads about how to cooperate. But certainly

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00:22:54,359 --> 00:22:57,439
Speaker 1: the business people are willing to cooperate and can if

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00:22:57,440 --> 00:23:00,879
Speaker 1: they're not government challenges. Sometimes the government put blocks in

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00:23:00,920 --> 00:23:05,320
Speaker 1: between challenge between cooperation between venture investors from China or

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00:23:05,440 --> 00:23:08,720
Speaker 1: or India United States. So I think the Technology Committee

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00:23:08,720 --> 00:23:12,000
Speaker 1: recognized it has the future of the global economy in

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00:23:12,000 --> 00:23:14,280
Speaker 1: its hands of some extent, because so much of what

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00:23:14,400 --> 00:23:16,560
Speaker 1: we're now doing, the way we live is depending on

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00:23:16,640 --> 00:23:20,159
Speaker 1: technology investments. Twenty years ago, people wouldn't have said that

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00:23:20,200 --> 00:23:23,000
Speaker 1: they could. Uh, they didn't know about Google, they didn't

443
00:23:23,040 --> 00:23:26,120
Speaker 1: know about Apple, they didn't know about Facebook. And now

444
00:23:26,160 --> 00:23:28,280
Speaker 1: we can't live without some of these companies or Amazon

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00:23:28,320 --> 00:23:31,760
Speaker 1: as well. Well, we can't live without some of these companies.

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00:23:31,800 --> 00:23:34,960
Speaker 1: And yet they have seen their share prices decline rapidly

447
00:23:34,960 --> 00:23:37,879
Speaker 1: in remarkable fashion this year. Valuation is really coming in

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00:23:37,960 --> 00:23:41,400
Speaker 1: across the tech space. David what What were his thoughts

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00:23:41,480 --> 00:23:45,000
Speaker 1: around that on these valuations becoming a bit more depressed.

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00:23:46,400 --> 00:23:48,639
Speaker 1: What's one thing when you had the bubble burst in

451
00:23:48,680 --> 00:23:52,399
Speaker 1: two thousand or two thousand because you had companies and

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00:23:52,600 --> 00:23:55,600
Speaker 1: had no revenues and had and had essentially no earnings

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00:23:55,640 --> 00:23:59,680
Speaker 1: at all. Now you've got gigantic companies Apple, Amazon, Google,

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00:24:00,000 --> 00:24:02,800
Speaker 1: Ace Book on Netflix that have large amounts of revenues

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00:24:02,800 --> 00:24:05,120
Speaker 1: and earnings. So yes, maybe the valuation is a little

456
00:24:05,160 --> 00:24:08,159
Speaker 1: bit high today. I wouldn't think that these companies are

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00:24:08,200 --> 00:24:10,159
Speaker 1: going away the way that some of the companies went

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00:24:10,200 --> 00:24:14,199
Speaker 1: away in thousand. These companies are now embedded in the

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00:24:14,240 --> 00:24:17,159
Speaker 1: fabric of our society, and I just think their valuations

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00:24:17,160 --> 00:24:20,239
Speaker 1: may fluctuate, but it's not like they're going away. Okay, Well,

461
00:24:20,280 --> 00:24:23,239
Speaker 1: then let's talk about some other more nascent companies that

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00:24:23,280 --> 00:24:26,680
Speaker 1: maybe are seeking venture money. The exit maybe getting a

463
00:24:26,680 --> 00:24:28,920
Speaker 1: little bit more difficult. It would be a rough market

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00:24:29,000 --> 00:24:30,960
Speaker 1: to go public in. It is a rough market to

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00:24:31,040 --> 00:24:34,119
Speaker 1: raise capital, and I mean, how is venture changing in

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00:24:34,160 --> 00:24:38,239
Speaker 1: an environment where money is no longer free. There's no

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00:24:38,280 --> 00:24:40,960
Speaker 1: doubt that valuations have come down in the private market

468
00:24:40,960 --> 00:24:43,440
Speaker 1: as well as the public market. But these things happen

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00:24:43,520 --> 00:24:45,679
Speaker 1: from time to time. The question is whether it's a

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00:24:45,680 --> 00:24:48,439
Speaker 1: good company or not. Take SpaceX for example, it just

471
00:24:48,600 --> 00:24:52,000
Speaker 1: raised money at a very large valuation. I think evaluation

472
00:24:52,119 --> 00:24:57,000
Speaker 1: of of over a trillion dollars and um um, I

473
00:24:57,480 --> 00:24:59,920
Speaker 1: not over a trillion dollars, but they raised a built

474
00:25:00,000 --> 00:25:02,639
Speaker 1: one point seven billion dollars. I believe it was at

475
00:25:02,680 --> 00:25:05,440
Speaker 1: a very high valuation. I think the valuation was five

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00:25:05,600 --> 00:25:07,760
Speaker 1: billion dollars. I think eventually they think they might get

477
00:25:07,760 --> 00:25:10,480
Speaker 1: it to a trillion dollars. But there's a valuation where

478
00:25:10,480 --> 00:25:13,080
Speaker 1: a hundred and twenty billion dollar more or less valuation

479
00:25:13,119 --> 00:25:15,399
Speaker 1: for SpaceX is still a large amount of money to

480
00:25:15,480 --> 00:25:17,840
Speaker 1: raise in the private sector of a large evaluation. So

481
00:25:18,119 --> 00:25:21,040
Speaker 1: the technology evaluation has come down, for sure, but there's

482
00:25:21,040 --> 00:25:24,760
Speaker 1: not exactly disappearing and going to zero, David, very quickly. Here,

483
00:25:24,760 --> 00:25:27,600
Speaker 1: we've got to get back to these crazy markets. You

484
00:25:27,720 --> 00:25:31,000
Speaker 1: set a number of months ago, maybe weeks ago, that

485
00:25:31,119 --> 00:25:34,880
Speaker 1: the genies out of the bottle on crypto. We are

486
00:25:34,920 --> 00:25:40,320
Speaker 1: seeing painful losses in bitcoin right now with announcements from

487
00:25:40,520 --> 00:25:45,040
Speaker 1: people that immensely respect Carlyle and what you've done for years.

488
00:25:45,560 --> 00:25:49,600
Speaker 1: Give us an update on bitcoin and the rest. Is

489
00:25:49,640 --> 00:25:54,000
Speaker 1: it believable? Well, I'm not the leading expert on the subject,

490
00:25:54,000 --> 00:25:55,919
Speaker 1: but my view would be that when I said the

491
00:25:55,960 --> 00:25:57,640
Speaker 1: genies out of the bottle, I don't think these things

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00:25:57,640 --> 00:26:01,080
Speaker 1: are disappearing. Their values will fluctuate, for sure. But suppose

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00:26:01,160 --> 00:26:03,960
Speaker 1: you bought bitcoin at fifties, fifty cents or a dollar,

494
00:26:04,040 --> 00:26:06,560
Speaker 1: as many people did, and now it's at twenties some

495
00:26:06,640 --> 00:26:09,480
Speaker 1: thousand dollars, still still very high. So sure, if you

496
00:26:09,560 --> 00:26:12,000
Speaker 1: bought it at sixty dollars, you've lost a lot of money.

497
00:26:12,160 --> 00:26:14,280
Speaker 1: And I'm not saying these are great investments, but I

498
00:26:14,400 --> 00:26:16,800
Speaker 1: think these are investments that aren't going to go away.

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00:26:16,800 --> 00:26:19,920
Speaker 1: And I don't think the whole crypto uh economy is

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00:26:19,920 --> 00:26:22,840
Speaker 1: going to collapse, nor do I think blockchain is gonna disappear.

501
00:26:23,080 --> 00:26:26,360
Speaker 1: Blockchain is an important part of a lot of these cryptocurrencies.

502
00:26:26,359 --> 00:26:30,480
Speaker 1: So my we're obviously in a market decline, and in

503
00:26:30,480 --> 00:26:33,520
Speaker 1: a market decline everything goes down, So it's not surprising

504
00:26:33,560 --> 00:26:36,760
Speaker 1: that something that is as ephemeral as crypto would go down.

505
00:26:37,000 --> 00:26:39,240
Speaker 1: But I don't think people are gonna basically abandon the

506
00:26:39,240 --> 00:26:42,240
Speaker 1: whole concept of cryptocurrencies just because the markets down for

507
00:26:42,240 --> 00:26:44,800
Speaker 1: the last couple of weeks. David, Thank you so much.

508
00:26:44,880 --> 00:26:48,239
Speaker 1: David roosemind Stein with the node costa and looked for that.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

510
00:26:53,280 --> 00:26:56,320
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511
00:26:56,560 --> 00:27:00,960
Speaker 1: on Bloomberg Radio and Bloomberg Television each day from six

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514
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00:27:16,560 --> 00:27:19,200
Speaker 1: Tom Keene and this is Bloomberg