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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: After four days of losses on the S and P

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Speaker 2: five hundred, Richard Bernstein if Bernstein advises, writing the FED

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Speaker 2: is caught between a rock and a hard place. GENIP

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Speaker 2: forecasts are being revised downward, but inflation expectations seeing poised

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Speaker 2: to accelerate. Richard joined us now for more, Richard, welcome

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Speaker 2: to the program. You put it in your note. Everyone's

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Speaker 2: got a plan, and so they get punched in the face.

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Speaker 2: That famous strategist on Wall Street, Mike Tyson, how strong

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Speaker 2: is that punch this morning?

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Speaker 3: I think the punch is a real It's not a jab,

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Speaker 3: it's a real roundhouse punch. And I think John, look,

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Speaker 3: you've been talking a lot about all the different uncertainties

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Speaker 3: and all the different things that are going on. That's fine,

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Speaker 3: but I think one also has to realize that we

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Speaker 3: entered the year with investors historically confident, so this has

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Speaker 3: a magnified effect on investors' confidence that they're being shaken.

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Speaker 3: So that was my point about that everybody has a

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Speaker 3: plan until they get punched in the mouth. Because everybody

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Speaker 3: had a plan, they thought it was easy. They thought

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Speaker 3: this was like, oh, you know, it's just buy an

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Speaker 3: index funder, let's buy the MAG seven. And all of

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Speaker 3: a sudden they're realizing that was the unusual period, and

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Speaker 3: now we're going back to something that's much more uncertain,

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Speaker 3: and they're getting punched in the mouth.

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Speaker 1: Richard Scott Best in Treasure Secretary speaking with Henry our

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Speaker 1: Own here and saying that this then is not necessarily

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Speaker 1: a MAGA problem, it's a MAG seven problem.

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Speaker 2: Do agree?

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Speaker 1: Is that basically what you're seeing right now is the

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Speaker 1: unwind of an overvaluation of a crowded trade at the

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Speaker 1: end of the last year beginning of this one.

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Speaker 3: Well, well, Lisa, I understand where he's going with that question.

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Speaker 3: But my response would be, why is the Russell two

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Speaker 3: thousand and performing so dramatically here if it were just

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Speaker 3: a MAG seven point? Why are the domestic the most

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Speaker 3: domestically focused companies in America smaller companies are underperforming? Right? So?

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Speaker 3: How is this just a large cap MAGA effect. It's

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Speaker 3: clearly not seven effects. Sorry, it's clearly not the You know,

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Speaker 3: I think this is a comment the markets are are

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Speaker 3: making a comment on the broad economy in the United States,

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Speaker 3: And you know, I think also the notion that this

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Speaker 3: is an orderly process. That's fine, I would agree with that,

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Speaker 3: but the process is not a positive one the markets.

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Speaker 3: You're not giving a positive verdict on that, And that's

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Speaker 3: kind of what I think people are still sort.

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Speaker 1: Of missing here, Richard. How do you navigate a situation

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Speaker 1: like this where the rules of the world may be

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Speaker 1: be called into question over a longer period of time

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Speaker 1: and acid allocation potentially could look very different if the

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Speaker 1: trends that we're seeing in markets today would hold. So

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Speaker 1: how are you thinking about not just short term investing

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Speaker 1: but the one year, two year, five years ahead?

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Speaker 2: Right?

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Speaker 3: So, so, Lisa, I think in the short term, you know,

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Speaker 3: you're using the word uncertainty. Everybody's using the word uncertainly.

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Speaker 3: I shouldn't personalize it like that. Everybody's using the word uncertainty.

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Speaker 3: That means is the scarcity in the marketplace is certainty.

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Speaker 3: That's what will command a premium through time is certainty.

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Speaker 3: What does that mean? That means quality, That means more

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Speaker 3: certain cash flows, it means dividends, it means near you know,

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Speaker 3: really kind of focusing on near term fundamentals as opposed

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Speaker 3: to long term growth stories. The second thing is, you know,

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Speaker 3: what do you do for three years, five years, ten years,

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Speaker 3: two years, whatever. And I think, look, the goal of

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Speaker 3: what's going on, of returning industrial processing back to the

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Speaker 3: United States and manufacturing back to the United States, I

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Speaker 3: think that's a that's a great goal. In fact, we've

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Speaker 3: been talking about it in my firm at Richard Bernsty

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Speaker 3: Advisors for ten years. I wrote an op ed in

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Speaker 3: twenty eleven in the Financial Times about this topic and

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Speaker 3: how important it was. This is. The goal is real. However,

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Speaker 3: the method that they're choosing to try and get to

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Speaker 3: that goal, what personal opinion here for a second, is

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Speaker 3: incredibly ham handed. There are many better ways to do

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Speaker 3: with that. Do not place attacks on the US consumer.

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Speaker 2: Richard. We heard from one ECP official earlier on this

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Speaker 2: morning that said there's no reason for a rate cut

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Speaker 2: right now. I think you refer to fifty basis point

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Speaker 2: kunts as ridiculous. Mary Daily, the San Francisco FED president,

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Speaker 2: putting out a post on LinkedIn saying we have the

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Speaker 2: time and space to deliberate our next moves. Lisa, that's

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Speaker 2: what's different about this moment. These officials are these central

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Speaker 2: banks aren't Russian to race in, Russian to step in

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Speaker 2: and provide support like maybe they would have done a

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Speaker 2: number of years ago, and.

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Speaker 1: For the correct reasons, which is this is a very

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Speaker 1: different type of crisis that is not of the credit

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Speaker 1: markets making. This is about policy uncertainty and the potential

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Speaker 1: stagflationary shock that comes along with inflation. If you take

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Speaker 1: a look at two year break even rates, they've actually

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Speaker 1: hit the highest level going back to two thousand and

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Speaker 1: two earlier this morning. It's shifting around incredibly volatile markets,

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Speaker 1: but the signal is not so clear in terms of

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Speaker 1: how they should act, let alone.

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Speaker 2: If Richard, are you thinking about where pockets are leverage

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Speaker 2: might be. This has been a really unusual cycle here

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Speaker 2: in the United States and worldwide because of the support

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Speaker 2: that was offered through the pandemic and through the recovery

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Speaker 2: as well. When you think about where pockets of leverage

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Speaker 2: might be this time around, how do you ask that question?

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Speaker 3: So, John, it's related to what you and Lisa were

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Speaker 3: just talking about. The FED was spoiled for many, many years,

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Speaker 3: decades two to two three decades by globalization. Globalization was

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Speaker 3: a massive disinflationary force on the US economy. Why because

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Speaker 3: we were just increasing competition and we all know when

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Speaker 3: you increase competition, you put downward persure on prices, so

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Speaker 3: the FED could play the hero and ride in on

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Speaker 3: the white horse and save the day. Now what we're

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Speaker 3: seeing is deglobalization. That whole disinflationary process is now being reversed.

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Speaker 3: So it's now an inflationary process that ties the Fed's hands,

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Speaker 3: and the FED can't play the hero anymore. And I

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Speaker 3: think that's one of the things that's happening. So where

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Speaker 3: is the pocket of leverage. I don't really know. You know,

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Speaker 3: one could argue that it's in the private market somewhere,

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Speaker 3: because I think that a lot of their returns have

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Speaker 3: been boosted by by leverage and the ability to borrow

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Speaker 3: cheaply to make acquisitions. Maybe that's where it is, you

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Speaker 3: know it certainly you know not going to be I

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Speaker 3: would argue it's unlikely to be in the big banks.

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Speaker 3: The big banks, for all the all the their whining

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Speaker 3: about over regulation, big bank balance sheets are pretty strong.

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Speaker 3: It looks like the regulation has worked. But where is

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Speaker 3: that leverage. It's in things like private debt and and

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Speaker 3: all of that. So the risk hasn't gone away, it's

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Speaker 3: just moved I think from the public markets. To the

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Speaker 3: private markets. It's an interesting monetary and fiscal question, is

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Speaker 3: that if there is some kind of problem in the

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Speaker 3: private markets, they're supposed to be private, will they come

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Speaker 3: to the rescue. I would think they'd be very hesitany

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Speaker 3: to do that.

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Speaker 1: The Treasury Secretary this morning is saying really nothing to

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Speaker 1: see here. I feel like I'm going to sound like Lisa,

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Speaker 1: but how do you think this bond auction is going

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Speaker 1: to go today? For the ten year?

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Speaker 3: Well, a little outside my area of expertise, I just

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Speaker 3: don't think. I think what we are seeing is a

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Speaker 3: complete repricing of US assets with a higher risk premium.

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Speaker 3: Right if you think about it, we've taken about five,

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Speaker 3: maybe six multiple points off the S and P despite

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Speaker 3: good earnings. We're seeing in a very short period of

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Speaker 3: time the ten years self off. But certainly bond volatility

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Speaker 3: has gone up. Whether whether you agree with my statement

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Speaker 3: about the risk creamer now, certainly bond volatility has gone up.

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Speaker 3: And I think what's happening is US assets are being repriced.

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Speaker 3: You know, you mentioned before about you know, or are

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Speaker 3: we a safe haven anymore?

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Speaker 2: Maybe not?

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Speaker 3: And that's kind of what we're seeing.

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Speaker 2: I spy the Tottenham emblem right behind you as well, Richard,

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Speaker 2: super depressing stuff for you. I appreciate the time as

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Speaker 2: Alway Rough rough season. Thank you, Sir. Richard Ferns stated

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Speaker 2: Richard Ferns stand advisist. Thank you very much