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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 2: Go to Lizzie Saunders. Now the inflation report here in

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Speaker 2: four minutes with John Tucker and then finished strong with

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Speaker 2: Lizen as we can full disclosure, folks, in honor of

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Speaker 2: the Los Angeles Angels, we're playing nickelback at the end

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Speaker 2: of the hour. We're giving Lizanna warnings down here, turn

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Speaker 2: it down and choose us listen, and I want to

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Speaker 2: go to the heart of the matter. And you have

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Speaker 2: had leadership on this in the industry, going back to

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Speaker 2: your days with lou Rukaiser. In the last ten years,

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Speaker 2: a given blended stock fund is up twelve percent per year.

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Speaker 2: In the last ten years, a given blended bond fund

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Speaker 2: is up two percent per year. Inflation is a friend

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Speaker 2: of stock investors right.

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Speaker 3: In fact, a lot of people think of asset classes

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Speaker 3: like gold is sort of the ultimate inflation hedge, but

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Speaker 3: the over the very long term, the only asset class

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Speaker 3: that has consistently outperformed inflation is us equity. So you're

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Speaker 3: absolutely right, Tom, And.

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Speaker 4: Where are we now in that continuum?

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Speaker 2: I mean, in honor of pictures and catchers las in

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Speaker 2: you know, Ger has given us the innings metaphor, where

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Speaker 2: are we in the confidence to be in equities with

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Speaker 2: inflation and all.

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Speaker 4: The other noise.

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Speaker 3: Well, here's here's the tricky thing about inflation. When you're

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Speaker 3: in a more volatile inflation backdrop, like was the case

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Speaker 3: in the mid sixties to the mid nineteen nineties, that's

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Speaker 3: an era where we've been calling the temperamental era. That

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Speaker 3: was an era when bond yields and stock press were

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Speaker 3: inversely correlated. And that's because inflation was more voladyle you

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Speaker 3: had bigger swings in inflation, there was more heightened concern

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Speaker 3: about some of those swings in inflation, so as of

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Speaker 3: for instance, higher yields and that backdrop often meant inflation

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Speaker 3: was reigniting negative for equities. Fast forward to the period

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Speaker 3: from the mid nineties up until the first year or

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Speaker 3: two of the pandemic, the so called Great Moderation era,

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Speaker 3: that relationship was completely opposite, and bond yields and stock

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Speaker 3: prices moved consistent with one another, and that was because

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Speaker 3: we had very little inflation volatility, not a lot of

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Speaker 3: inflation risks, So higher yields was typically a sign of

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Speaker 3: stronger growth without the attendant problem of inflation. We're back

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Speaker 3: in that negative correlation territory right now, and I do

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Speaker 3: think it could mean we're in a different secular backdrop.

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Speaker 4: David Girl squeeze one in the ear before CPI.

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Speaker 5: Yeah, Lizanne.

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Speaker 6: In these data, we're not going to get an indication

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Speaker 6: of what Donald Trump's policies might mean for inflation in

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Speaker 6: this country. But I wonder if we can go back

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Speaker 6: to twenty eighteen when we had the first kind of

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Speaker 6: round of a Trump trade war, what can we learn

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Speaker 6: sort of from that experience that might be applicable here.

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Speaker 3: If anything, Well, we didn't see overall inflation pick up.

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Speaker 3: You didn't see it in PCE and PCE goods. But

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Speaker 3: if you pull out the tarift goods and track them

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Speaker 3: in twenty eighteen into twenty nineteen, a significant amount of

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Speaker 3: inflation in those tarifft goods. I think, by the way, guys,

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Speaker 3: I think the PPI report might be a better tell

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Speaker 3: in terms of terriflated stuff than the CPI report.

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Speaker 5: I took tomorrow off time. I'm not going to be

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Speaker 5: here for PBI crushed.

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Speaker 4: Lizianne and I are prose, We'll be here.

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Speaker 2: Lizzie Ane Saunders with US was schwab two point one

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Speaker 2: three percent is a seven basis point move there to

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Speaker 2: a higher yield regime. Lizzie Sanders, it's unfair to go

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Speaker 2: into the minuti here because you know you're doing this

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Speaker 2: in real time, and you know I understand that. But

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Speaker 2: across the board, Allah what Anna Wang said, This is

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Speaker 2: not just one statistic month, critically month over month, which

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Speaker 2: is what Mike McKee really looks at.

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Speaker 4: Year over year.

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Speaker 2: Jason furmaning to give us an ecumenical study in about

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Speaker 2: an hour.

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Speaker 4: All inflation boats rise here, don't they?

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Speaker 5: They do?

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Speaker 3: You're right, the core headline, the month over month, the

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Speaker 3: year over year, the overall headline all hotter than expected.

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Speaker 3: And it's in keeping with some of what we've seen

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Speaker 3: in inflation expectations. Now. The University of Michigan version of

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Speaker 3: inflation expectations had an extreme divide in terms of along

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Speaker 3: party lines, Democrats having a huge expectation for higher inflation

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Speaker 3: vice versa for Republicans, but given has gone from one

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Speaker 3: point nine percent or so last fall up to you

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Speaker 3: in the well end of the mid two. So you're

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Speaker 3: seeing it in other areas, and I think this it's

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Speaker 3: certainly supportive of what we heard from Powell yesterday, which

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Speaker 3: is there in no rush nice to move back to

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Speaker 3: easy pology.

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Speaker 2: I said the vix would lag. We just had a

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Speaker 2: seventeen print in the VIX up a stick. A stick

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Speaker 2: is Lizanne Saunders talk for one big figure.

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Speaker 4: I have to use that jargon.

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Speaker 2: I appreciate that, Lizan here even a bitdog down fifteen

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Speaker 2: hundred bitdog now at ninety four thousand is well. David Gerden,

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Speaker 2: Tim Keen on YouTube, thank you so much for being

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Speaker 2: with us across the nation and your commute and your

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Speaker 2: living room and office.

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Speaker 4: Honored dev liz Enne Saunders with this. Charles Schwab, David.

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Speaker 6: Lizen, let's pull back a little bit here because we

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Speaker 6: see the immediate market reaction. It's something I wanted to

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Speaker 6: ask you about because we had the Michigan survey last

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Speaker 6: week and saw the reaction there. There has been a reaction,

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Speaker 6: dare I say, at times an overreaction to some of

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Speaker 6: these most recent data points. As you look at it

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Speaker 6: more holistically, how is the market processing sort of the

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Speaker 6: broader view that we're getting of the US economy.

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Speaker 3: Yeah, one of the interesting things, and you're picking this

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Speaker 3: up in some surveys of institutional managers engaging what is

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Speaker 3: driving stocks? And I think we've actually moved a little

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Speaker 3: bit away from things like monetary policy and brawl macro

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Speaker 3: trends and more of the connectivity to what stocks are

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Speaker 3: doing are the specific fundamentals. But there is that policy

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Speaker 3: component too. I think the NFIB data out yesterday was

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Speaker 3: pretty compelling, engagingly small businesses reaction to the manner by

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Speaker 3: which we get these terror related announcements, and everybody is

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Speaker 3: now trying to dig in using the fine tooth comb

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Speaker 3: figuring out which industries, which companies are hurt or benefited

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Speaker 3: on the import side of things, on the export side

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Speaker 3: of things. And I think that's going to come into

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Speaker 3: play more and more at the individual stock level because

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Speaker 3: of that shift to fundamentals and things like earnings now

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Speaker 3: that we're an earning season driving stock prices more than

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Speaker 3: just broad monetary policy or just valuation expansion. So I

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Speaker 3: think that's an important shift relative to last year.

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Speaker 6: I put out to worp Here on the Bloomberg toime.

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Speaker 6: I see traders shifting their next FED rate cut prediction

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Speaker 6: to December from September, so pushing it back even farther.

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Speaker 7: Still.

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Speaker 4: Yeah, and you know we're the economist, Lizanne Saunders.

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Speaker 2: I mean, are we ready with it in stock market,

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Speaker 2: lizan for the shock of stability and rate cuts or

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Speaker 2: even the parlor game of rate increases. We're nowhere mentally

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Speaker 2: near ready for that, are we.

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Speaker 3: I think we're mentally ready for a pause that lasts

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Speaker 3: throughout the course of the year. There's been you know,

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Speaker 3: even before the CPI report, you had only a little

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Speaker 3: more than one cut priced in. Now that's gotten pushed out.

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Speaker 3: I think that is the parlor game because a data

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Speaker 3: dependent FED, and added to that the policy uncertainty. To say, yeah,

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Speaker 3: we're confident that the Fed's going to cut in December,

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Speaker 3: that's just the fools errand to do that. I think

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Speaker 3: you're absolutely right, though I don't think the market is

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Speaker 3: prepared if the Fed feels they actually have to turn

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Speaker 3: back into tightening model.

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Speaker 4: Right.

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Speaker 2: I want to go to Nominal GDP Jason Furman's essay.

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Speaker 2: There's the new Foreign Affairs as lights out. Steven Levitsky

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Speaker 2: with a great article, David, and I will talk about

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Speaker 2: that in a bit, Firman, look take it a look

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Speaker 2: back twenty twenty Hindsight on the Biden administration and Liz

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Speaker 2: n He mentions nominal GDP. If I get a higher

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Speaker 2: or stable inflation component, do you model out ample real

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Speaker 2: GDP to keep the corporate animal spirits going well?

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Speaker 3: I think nominal GDP is important. That feeds into revenue growth,

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Speaker 3: which is a little bit more correlated to things like

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Speaker 3: employment trends and also pricing power. So it's the I

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Speaker 3: think it's the volatility in the inflation component that matters

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Speaker 3: a little bit more than the level because of the

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Speaker 3: uncertainty factor that creeps in when you have when you're

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Speaker 3: in an era of volatility. In terms of that that deflator.

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Speaker 2: Right now reporting on Twitter with a real job, see

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Speaker 2: Saunders has an entire team to do Twitter. She hasn't

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Speaker 2: done a tweet since I led Zeppelin announcers summer too.

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Speaker 2: Catherine Jones out on Twitter, wishwab oof CPI up over

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Speaker 2: up court up not what the market was hoping for.

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Speaker 2: That report. David Gura from Kathy Jones.

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Speaker 6: Well, you've given me a great segue here, because I

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Speaker 6: know that Kathy and Lizen have a podcast together on

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Speaker 6: investing in Rich Clarita was on that most recent episode.

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Speaker 6: He won't return our calls, but he was on with them.

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Speaker 6: What did you take away, Lezann from what he had

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Speaker 6: to say about inflation? What was the headline from his

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Speaker 6: commentary on how he's seeing inflation today.

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Speaker 3: There's a tremendous amount of uncertainty, and adding in the

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Speaker 3: policy uncertainty makes it a difficult exercise. There certainly is

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Speaker 3: a slight bias on the upside, and there's the stickiness

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Speaker 3: component of it. But you know he's no longer at

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Speaker 3: the FED. But don't I don't envy the folks there,

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Speaker 3: Powell coming out yesterday saying we don't take that into consideration,

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Speaker 3: but we know some FED members are taking that policy

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Speaker 3: uncertainty into consideration and trying to gauge their own outlooks.

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Speaker 6: As we wrap up here, I go back to my

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Speaker 6: first question to you, that is just noting the fact

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Speaker 6: that this isn't reflective of what we've seen in this

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Speaker 6: new administration. We've talked this morning all week about the

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Speaker 6: kind of inherent inherently inflationary policies we could see put

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Speaker 6: in place here, chief among them the terrorist policy from

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Speaker 6: this administration. How do you think about that visa v

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Speaker 6: inflation going forward here and how that's going to color

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Speaker 6: this market in the months to come.

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Speaker 3: Well, if we go to sort of the maximum end

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Speaker 3: of what's been proposed, and then for what that means

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Speaker 3: for inflation, you can look at data out of folks

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Speaker 3: like Peterson Institute. You're talking about a close to a

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Speaker 3: one percent jump in inflation, but that is really not

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Speaker 3: as a step up in prices more so than a

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Speaker 3: trigger for ongoing year over year or month over month

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Speaker 3: higher inflation rates. I think though, that's important because consumers

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Speaker 3: tend to think and level terms, specifically, what were prices

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Speaker 3: back in twenty nineteen pre pandemic, what are they now?

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Speaker 3: So it is important in the sense that the average

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Speaker 3: person thinks in level terms, whereas books like us get

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Speaker 3: into the weeds of month over month and year over

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Speaker 3: year and core course services x housing. So I think

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Speaker 3: the level step up is going to be felt, even

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Speaker 3: if it doesn't translate into an ongoing higher inflation rate.

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Speaker 2: Lizanne, just you give us a pro tip here. Where

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Speaker 2: are you able to buy eggs?

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Speaker 4: Right now? Where's Lezianne Saunders buying eggs?

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Speaker 3: I really want to know at the supermarket? I just hey,

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Speaker 3: what I need to pay for eggs?

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Speaker 4: That's it you need to be.

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Speaker 3: I haven't gone out and bought my own chickens to.

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Speaker 4: Range.

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Speaker 2: Yeah, Luzianne Saunders, thank you so much to pick up

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Speaker 2: from where Luzanne was, Gina Martin Adams. If we get inflation,

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Speaker 2: is it a constructive inflation that can solidify revenue growth

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Speaker 2: across the Bloomberg Intelligence world.

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Speaker 8: It does look like we're going to see revenue recovery

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Speaker 8: in the index. The pace of revenue recovery is probably

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Speaker 8: somewhat grim relative to expectations. I think that the really

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Speaker 8: big key to twenty twenty five is not that we

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Speaker 8: continue to recover. It's that we may not be able

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Speaker 8: to recover at the pace that is expected by the

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Speaker 8: equity market. There's this really interesting dichotomy in the equity

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Speaker 8: market right now as you're seeing it play out real time,

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Speaker 8: and that is we're expecting not only very strong revenue growth,

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Speaker 8: very strong earnings growth to emerge, but we're also expecting

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Speaker 8: the FED to cut and that environment is inconsistent, and

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Speaker 8: so that's why you see the market reacts so negatively

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Speaker 8: to CPI. But also when we look at the average

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Speaker 8: price reaction to earnings growth when stocks are reporting, even

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Speaker 8: when they're reporting beats, their price reaction has been fairly grim.

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Speaker 8: So I think we've got to work that dichotomy out.

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Speaker 8: We've got to work that friction out of the system.

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Speaker 8: The market's got to get more rational expectations and also

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Speaker 8: generally get in line with what the FED is doing,

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Speaker 8: and the FED is saying, we're on hold.

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Speaker 5: Can you help me?

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Speaker 6: This is a dumb question, but I note the dichotomy

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Speaker 6: and wonder why it's persisted as long as it has.

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Speaker 6: So Tom asking a very good question. Are we going

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Speaker 6: to hear anything different from the FED chairman today? We

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Speaker 6: heard him say yesterday a lot of what he said

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Speaker 6: the last press conference. He's been sort of reading from

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Speaker 6: the same hymnal over and over and over again. How

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Speaker 6: has this dichonomy persisted? What's going to be the catalyst

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Speaker 6: that gets the market to kind of move away from

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Speaker 6: what seems like a fool's expectation that there are going

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Speaker 6: to be cuts.

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Speaker 5: In the near term.

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Speaker 9: Right?

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Speaker 8: I think it's a great question, and I think that

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Speaker 8: dichotomy can be explained by what's happening in the segments

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Speaker 8: inside the equity market. So the greatest expectations really are

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Speaker 8: centered around AI tech TMT industries, where we've seen the

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Speaker 8: greatest degree of earnings growth. These also tend to be

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Speaker 8: less inflation sensitive groups, right, They're more thematic. It's all

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Speaker 8: based on AI and our anticipation of AI really changing

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Speaker 8: the productivity outcomes for the world, and that is deeply

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Speaker 8: embedded in tech expectations. We're seeing those expectations reverse somewhat,

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Speaker 8: especially as a result of deep seak, but we've really

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Speaker 8: seen he expectations in a process of rationalizing since June

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Speaker 8: of last year when MAG seven peaked in terms of

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Speaker 8: their performance relative to the S and P five hundred.

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Speaker 8: But it's just slowly getting dismantled. People aren't really giving

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Speaker 8: up on that. At the same time, the rest of

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Speaker 8: the market has been very slow to recover, and the

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Speaker 8: rest of the market outside of TMT industries is really story.

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Speaker 8: Has really started to count on the FED getting their

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Speaker 8: back enabling that recovery, so that two of the two

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Speaker 8: story two speed market is still a big story into

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Speaker 8: twenty twenty five and.

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Speaker 2: Gida Martin Adam's with us here off the inflation report

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Speaker 2: with a VICS out over six seventeen point zero five.

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Speaker 2: I want to emphasize folks out on Twitter the series

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Speaker 2: of charts from our guest Kathy Jones.

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Speaker 4: We were just busting our chops.

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Speaker 2: She does brilliant work at Schwab and she's got a

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Speaker 2: wonderful chart showing the inflation stasis since the kids went

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Speaker 2: back to school in September. Michael McDonough owns a high

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Speaker 2: ground on this. Everyone in the industry uses Michael McDonough's

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Speaker 2: colorful bar charts of the makeup and it's just as

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Speaker 2: simple as this. David Gurrol McDonagh goes right to the

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Speaker 2: Gurray Index. Super course, CPI month over month is a

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Speaker 2: spike up, but further than what many people expected.

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Speaker 6: I'm noting here as I think about all of this,

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Speaker 6: and Tom, maybe you want to pick up on this.

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Speaker 6: As we were talking about sort of what fed chair

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Speaker 6: Drumpell might have to deal with. We've talked about the

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Speaker 6: tweet from the President this morning, and we've seen this

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Speaker 6: FED chair so expertly. Tom bat Away suggestions from reporters

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Speaker 6: outside analysts that it could kind of succumb to political pressure.

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Speaker 6: Safe to say, this makes this job much more difficult

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Speaker 6: that that tweet this morning, coupled with the inflation data today,

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Speaker 6: makes it harder still for this fed shair to weather

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Speaker 6: that kind of political The.

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Speaker 2: Political absolutely, and the question is we know this president's

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Speaker 2: beliefs from his business career, and it was only a

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Speaker 2: matter of time till we got the kind of tweets

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Speaker 2: that we got today is as well, Jane, do businesses

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Speaker 2: can they adapt and adjust? My core theme is corporations

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Speaker 2: always adapt. Can they adapt given a leveling of inflation

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Speaker 2: and not a true disinflation?

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Speaker 8: Yeah, I think it's a great question. And what we

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Speaker 8: tend to see is that really depends upon the degree

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Speaker 8: to which producer prices accelerate. This, I think is the

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Speaker 8: crux of the problem for corporations right now, is, at

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Speaker 8: least until this data point, producer prices we're accelerating at

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Speaker 8: a faster pace than consumer prices. Producer prices of course

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Speaker 8: are littered with energy products, but also industrial goods sort

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Speaker 8: of those core imports are a huge and input to

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Speaker 8: ultimate company costs. So it really is not just necessarily

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Speaker 8: about a acceleration or stabilization of inflation. But it's the

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Speaker 8: difference between the costs that they're paying for inputs and

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Speaker 8: what they can charge the consumer on the other end

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Speaker 8: that's been working against them now for two months. We'll

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Speaker 8: see the course of this week if it continues to

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Speaker 8: work against corporate margin outcomes. But it is a very

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Speaker 8: different climate than we've been in for the last two years. Admittedly,

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Speaker 8: we not only had disinflating inflation, but we also had

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Speaker 8: producer prices decelerating faster than consumer prices. That was the

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Speaker 8: idyllic environment for corporates. We're moving past that, and so

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Speaker 8: you should expect a period of give and take at

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Speaker 8: the very least to emerge. On top of that, you've

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Speaker 8: got a lot of business uncertainty right now.

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Speaker 5: Even in small.

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Speaker 8: Businesses, which vastly celebrated the election post November, have started

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Speaker 8: to pull back expectations because they don't know what the

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Speaker 8: rules of the road are, and so we need some

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Speaker 8: stabilization and policymaking to help enable growth.

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Speaker 5: There got to run.

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Speaker 4: Let's do this again. Let's get her in the studio again.

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Speaker 2: Gina Martinatams Bloomberg Intelligence, Brilliant and double digit earnings growth

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Speaker 2: David Kelly's schedule to be with us here with JP Morgan,

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Speaker 2: but we're going to e squeeze this sit in right

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Speaker 2: now as best we can again. Futures in negative fifty

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Speaker 2: six off the CPI report, the vicx's of seventy level,

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Speaker 2: I'm gonna call it stasis, but a huge yield reset

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Speaker 2: out nine basis points and a ten yure yield four

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Speaker 2: point sixty two percent.

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Speaker 4: I watched a ten year real.

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Speaker 2: Yield as Christi Alcunian does at Blackrock.

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Speaker 4: Two point one to three percent is well.

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Speaker 2: Joining us now from Blackrock is Christie Acullian, head of

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Speaker 2: I Shares Investment Strategy. So you go home and blow

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Speaker 2: up the year view because a higher inflation? Are you

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Speaker 2: going like, why am I here? I got to go

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Speaker 2: back and rewrite forty pages.

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Speaker 7: Well, I'm certainly wishing I was on twenty minutes ago,

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Speaker 7: but not right now. We all I'd say, you know,

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Speaker 7: I think that you know, we came into this year

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Speaker 7: pretty bullish. We've been overweight US equities, but I feel

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Speaker 7: really good and confident about the places that we've chosen

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Speaker 7: to allocate to within that as opposed to just broad based.

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Speaker 7: So we've been talking for a long time about the

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Speaker 7: need to stay up in quality. We've been staying away

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Speaker 7: from small caps. What you saw in the inflation data

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Speaker 7: today is that it's on a relative basis, at least,

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Speaker 7: it's those higher quality companies that we think can outperform.

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Speaker 7: Small caps are going to face the head winds of

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Speaker 7: higher exposure to those higher interest rates.

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Speaker 2: What is you and guardy when you're a black rock,

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Speaker 2: they're on speaking terms when you're.

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Speaker 4: A g I hope so boet.

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Speaker 2: What is the marginal appetite for equity ETFs right now?

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Speaker 4: Is every day like OMG, the money's coming in? Or

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Speaker 4: are people scared stiff?

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Speaker 5: No?

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Speaker 7: I think people are still very much allocating to the

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Speaker 7: equity markets. It's been an incredible year for fixed income

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Speaker 7: as well, so that's been certainly breaking records. But one

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Speaker 7: thing that was so interesting to us is that even

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Speaker 7: in a twenty five percent positive year for equity markets

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Speaker 7: last year, we saw three times more money allocated to

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Speaker 7: cash funds money markets. So we still think there's a

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Speaker 7: lot of money on the sidelines. We're still talking to

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Speaker 7: investors about putting money to work. And interestingly, even though

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Speaker 7: we saw growth underperform value in January we saw one

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Speaker 7: of the largest spreads in terms of allocation to growth

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Speaker 7: ETFs relative to value. So people are still convicted in

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Speaker 7: this market. They're still convicted in the AI theme. Again,

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Speaker 7: we just think that it's important to do so in

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Speaker 7: a high quality way. So something like qua L has

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Speaker 7: been what kind of our top ticker? What is qua

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Speaker 7: L is our our quality ETF. So it's it's an

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Speaker 7: equity market sector neutral. You get the top quality coming

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Speaker 7: from it's eighty.

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Speaker 4: Percent of triple leverage dot cash fund. That's how you

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Speaker 4: do it. I talked to Larry about its registration.

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Speaker 6: Jean Martin Adams a moment ago was talking about this

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Speaker 6: different environment that you know, what we've seen here in

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Speaker 6: terms of an idyllic environment for corporates is changing, and

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Speaker 6: I saw you nodding out of the corner of my eye.

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Speaker 6: How do you see that challenge manifesting itself here in

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Speaker 6: the months ahead.

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Speaker 7: Yeah, absolutely, and certainly it is an environment where we

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Speaker 7: see and expect to see a lot of uncertainty, and uncertainty,

403
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Speaker 7: as we know, is bad for markets, it can be

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Speaker 7: bad for consumers, it can be bad for companies. But

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Speaker 7: we're still really grounded in what we're seeing in terms

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Speaker 7: of earning. So you know, broadly, I think the macro

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Speaker 7: picture still looks positive and that growth is still really strong.

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Speaker 7: Corporate earnings have come back stronger than expected, so we're

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Speaker 7: really focused on those fundamentals.

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Speaker 4: Tell me about leverage. I keep bringing this up and

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00:21:09,440 --> 00:21:11,399
Speaker 4: I make jokes about it, folks, but it's not funny.

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Speaker 4: Leverage kills you. And the answer is it's all the.

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Speaker 2: Rage right now, double leverage, triple leverage, mag seven whatever.

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Speaker 2: What do you actually see from people buying or selling leverage?

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Speaker 2: And also what do you see in your research.

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Speaker 7: Yeah, it's not a space that we play, so you know,

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Speaker 7: we are not in the runt director.

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Speaker 4: Play triple leverage.

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Speaker 7: We like to, you know, we think about the appropriate

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Speaker 7: nature of funds for all types of investors. So we

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Speaker 7: like to launch institutional quality funds that can be used

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Speaker 7: by end investors and direct investors as well. So again

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Speaker 7: we're focusing on portfolio building blocks, not necessarily trade.

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Speaker 10: So that's that's just not our space.

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Speaker 6: Trying to get his triple leverage, don't Cashlio trying to.

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Speaker 2: Talk about quality of what I said, it would be

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Speaker 2: a perfect blackrock product.

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Speaker 6: He's thinking of going to think about that one. I

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Speaker 6: do hear still a chorus among managers and advisors talking

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Speaker 6: about small caps. This is a moment for small caps.

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Speaker 6: Are you singing from that him mill? Are you in

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Speaker 6: that chorus as well? Or are you steering clear?

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Speaker 7: We have been pushing back against that for a while,

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Speaker 7: and I think the modal question we get from investors

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Speaker 7: that we speak to is now finally the moment for

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Speaker 7: small caps. We saw and sort of anticipated we were

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Speaker 7: going to get a short, sharp rally after the election,

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Speaker 7: but it wasn't something that we wanted to chase, and

439
00:22:32,520 --> 00:22:34,960
Speaker 7: specifically we didn't want to chase it because we think

440
00:22:35,000 --> 00:22:37,880
Speaker 7: the fundamentals are still against that trade. So small caps

441
00:22:37,880 --> 00:22:41,439
Speaker 7: are more exposed to higher interest rates, and also they

442
00:22:41,480 --> 00:22:43,840
Speaker 7: tend to need accelerating growth, and even though we think

443
00:22:43,840 --> 00:22:45,480
Speaker 7: growth is going to stay positive, we do think it's

444
00:22:45,480 --> 00:22:48,359
Speaker 7: going to decelerate this year. So the sad answer for

445
00:22:48,440 --> 00:22:49,800
Speaker 7: a lot of the folks that we see a lot

446
00:22:49,800 --> 00:22:52,600
Speaker 7: of the positioning data that we look at, investors are

447
00:22:52,720 --> 00:22:55,680
Speaker 7: very overweight small caps. We still don't think that it's

448
00:22:55,720 --> 00:22:56,760
Speaker 7: the moment for that just now.

449
00:22:56,800 --> 00:22:58,639
Speaker 4: This is brilliant. We got to have you back here.

450
00:22:58,640 --> 00:23:01,240
Speaker 2: I want to sign absolutely not yeah, absolutely, Really David

451
00:23:01,280 --> 00:23:03,840
Speaker 2: Kelly with this year in a bit Christy as simple

452
00:23:04,000 --> 00:23:08,879
Speaker 2: as I can the MAG seven in the loveer. Are

453
00:23:08,960 --> 00:23:11,560
Speaker 2: people buying at the margin or is there a new

454
00:23:11,640 --> 00:23:13,200
Speaker 2: test here to the MAG seven.

455
00:23:13,440 --> 00:23:16,479
Speaker 7: I think investors are looking for the broadening out trade,

456
00:23:16,520 --> 00:23:19,840
Speaker 7: but they're still looking for large cap growth. So you know,

457
00:23:19,880 --> 00:23:22,520
Speaker 7: again we're not seeing as many flows into small caps,

458
00:23:22,560 --> 00:23:25,280
Speaker 7: not into index value at least, I think there's opportunity

459
00:23:25,320 --> 00:23:28,120
Speaker 7: in the active space. But you know, when we look

460
00:23:28,160 --> 00:23:30,840
Speaker 7: at the composition of returns last year from twenty to

461
00:23:30,880 --> 00:23:34,040
Speaker 7: twenty four, you know we saw about half of the

462
00:23:34,080 --> 00:23:37,040
Speaker 7: S and P five hundred returns were due to earnings

463
00:23:37,080 --> 00:23:39,800
Speaker 7: per share growth to fundamentals, and half was due to

464
00:23:39,960 --> 00:23:43,479
Speaker 7: valuation expansion. If you look at large cap growth, eighty

465
00:23:43,560 --> 00:23:46,320
Speaker 7: percent of that was driven by fundamentals. If you look

466
00:23:46,320 --> 00:23:49,560
Speaker 7: at at value, it was less than half driven by fundamentals,

467
00:23:49,560 --> 00:23:52,840
Speaker 7: and small cap zero of it driven by fundamentals. So again,

468
00:23:52,840 --> 00:23:55,560
Speaker 7: people are following the earnings, people are following the growth.

469
00:23:55,680 --> 00:23:58,120
Speaker 7: We like the corporate profitability story and where we're saying

470
00:23:58,119 --> 00:24:00,440
Speaker 7: of it away from small guts are you basing I'm

471
00:24:00,440 --> 00:24:01,480
Speaker 7: based in San Francisco.

472
00:24:02,280 --> 00:24:07,359
Speaker 5: It's better there's a time.

473
00:24:08,080 --> 00:24:12,199
Speaker 4: Can you get us good Giants tickets? Take care of you.

474
00:24:12,480 --> 00:24:14,000
Speaker 6: He's going to go over just a little rock to

475
00:24:14,040 --> 00:24:17,400
Speaker 6: French Shields minor league stadium and then hop.

476
00:24:17,240 --> 00:24:19,919
Speaker 2: On over goes back friend Carl did. He went to

477
00:24:20,040 --> 00:24:23,399
Speaker 2: every major league stadium. That's so cool for a summer.

478
00:24:24,160 --> 00:24:25,280
Speaker 2: I think it was several summers.

479
00:24:25,720 --> 00:24:27,919
Speaker 7: You know, you don't want to come in the summer,

480
00:24:27,960 --> 00:24:29,880
Speaker 7: September sometime.

481
00:24:29,840 --> 00:24:34,080
Speaker 2: Early, Christie, thank you, don't be a stranger. Christian with

482
00:24:34,200 --> 00:24:37,920
Speaker 2: Blackrock is well right now. The sixteen point eight three

483
00:24:38,280 --> 00:24:39,560
Speaker 2: and a lot more red on the screen.

484
00:24:39,760 --> 00:24:42,800
Speaker 4: It's like, you nailed that. I mean, my.

485
00:24:42,840 --> 00:24:46,160
Speaker 2: Word, g what he sponds currencies come on and he's

486
00:24:46,200 --> 00:24:49,640
Speaker 2: just absolutely nailing it here. But yields are higher. Seriously,

487
00:24:49,640 --> 00:24:53,159
Speaker 2: the tenure yield out nine basis points. I'm going to

488
00:24:53,240 --> 00:24:54,720
Speaker 2: get right to it now. We're what we're going to

489
00:24:54,800 --> 00:24:57,359
Speaker 2: do here, This is so important. We're going to blow

490
00:24:57,400 --> 00:25:01,440
Speaker 2: out the show open and the song ending here. Nickelback

491
00:25:01,480 --> 00:25:04,639
Speaker 2: to David Kelly or Nickelback.

492
00:25:04,960 --> 00:25:06,760
Speaker 6: Succeeded in getting us to scuttle.

493
00:25:06,760 --> 00:25:09,240
Speaker 4: That's you know, and David knows where I'm going on this.

494
00:25:09,440 --> 00:25:12,639
Speaker 2: When David Kelly and I met, we were younger, to

495
00:25:12,680 --> 00:25:15,280
Speaker 2: say the least. And one of the great moments of

496
00:25:15,320 --> 00:25:19,400
Speaker 2: this bullmarket and the oddities of equities, bonds, currencies, commodities

497
00:25:20,040 --> 00:25:22,960
Speaker 2: is there's not a lot of people with bull market

498
00:25:23,240 --> 00:25:27,919
Speaker 2: experience when it ends. David Kelly joins us now with

499
00:25:28,200 --> 00:25:32,160
Speaker 2: JP Morgan. I just can't say enough about the team

500
00:25:32,280 --> 00:25:37,280
Speaker 2: he's put together there of thinking responsibly about investment. And

501
00:25:37,320 --> 00:25:40,439
Speaker 2: you were weaned on this in Boston at Putnam. You

502
00:25:40,520 --> 00:25:44,520
Speaker 2: and I have tattooed to our soul the collapse of

503
00:25:44,600 --> 00:25:46,360
Speaker 2: the Putnam Voyager Fund.

504
00:25:46,720 --> 00:25:48,680
Speaker 4: It was the go Go fund.

505
00:25:48,760 --> 00:25:50,639
Speaker 2: Now I'm going to suggest, David, we don't have that

506
00:25:50,720 --> 00:25:53,520
Speaker 2: exuberance right now that I don't see it.

507
00:25:53,960 --> 00:25:58,440
Speaker 4: But what's the radar you and your team use so

508
00:25:58,480 --> 00:25:58,920
Speaker 4: that we.

509
00:25:58,840 --> 00:26:02,440
Speaker 2: Can avoid the the Voyagers of this decade.

510
00:26:02,800 --> 00:26:06,400
Speaker 11: You know, there's a there's a very old saying that

511
00:26:06,400 --> 00:26:08,800
Speaker 11: that you don't make the same mistake twice. The problem

512
00:26:08,840 --> 00:26:12,000
Speaker 11: about the family mistakes is a very broad family, and

513
00:26:12,040 --> 00:26:14,640
Speaker 11: there's always some cousin or relative of the mistake you made.

514
00:26:15,680 --> 00:26:18,840
Speaker 11: That's actually, that's actually, that's actually a quote from from

515
00:26:18,880 --> 00:26:21,760
Speaker 11: the book Reminiscences of a Stock Operator, which means which

516
00:26:21,800 --> 00:26:24,720
Speaker 11: everyone should read every five years actually, But if you

517
00:26:24,760 --> 00:26:28,320
Speaker 11: look at the megacap tech companies, it's not the same

518
00:26:28,359 --> 00:26:30,760
Speaker 11: thing as a dot com bubble, of course, but you

519
00:26:30,800 --> 00:26:34,639
Speaker 11: still have very high valuations and you still got and

520
00:26:34,680 --> 00:26:36,800
Speaker 11: you've got more concentration in the S and P five

521
00:26:36,800 --> 00:26:38,200
Speaker 11: found it now than you had back in the dot

522
00:26:38,200 --> 00:26:41,120
Speaker 11: com bubble. So there are bubbly aspects to this market.

523
00:26:41,560 --> 00:26:44,800
Speaker 11: And the market is price for perfection. And then if

524
00:26:44,800 --> 00:26:47,439
Speaker 11: you have an imperfect number like the CPI number today,

525
00:26:47,960 --> 00:26:49,919
Speaker 11: then you take a shillacking. And the thing that the

526
00:26:50,000 --> 00:26:52,399
Speaker 11: thing that gets hit the most at the end of

527
00:26:52,440 --> 00:26:55,320
Speaker 11: a bubble of a bull market, your build markets end

528
00:26:55,400 --> 00:26:57,960
Speaker 11: up being bubble markets is the thing that is the

529
00:26:58,400 --> 00:27:00,879
Speaker 11: area that the bubble is concentrated. And that's the thing

530
00:27:00,920 --> 00:27:03,440
Speaker 11: that's most important different people to think about it. Doesn't

531
00:27:03,480 --> 00:27:06,000
Speaker 11: you know, markets will come, bear markets, building markets will

532
00:27:06,040 --> 00:27:08,840
Speaker 11: come and go, but you don't want to be overweighted

533
00:27:08,880 --> 00:27:11,680
Speaker 11: the overhyped at the peak of a bull market. And

534
00:27:11,720 --> 00:27:13,359
Speaker 11: that's what I think investors need to think about.

535
00:27:13,680 --> 00:27:15,560
Speaker 6: I keep coming back to this, and we've talked a

536
00:27:15,600 --> 00:27:18,880
Speaker 6: lot about the FED being data dependent versus data point dependent.

537
00:27:19,400 --> 00:27:21,080
Speaker 6: How do you view the data that we got today

538
00:27:21,119 --> 00:27:24,480
Speaker 6: in kind of a wider, more holistic lens. We see

539
00:27:24,480 --> 00:27:26,840
Speaker 6: the reaction in the markets thus far, but what does

540
00:27:26,880 --> 00:27:28,440
Speaker 6: it tell us that we didn't know yesterday or a

541
00:27:28,440 --> 00:27:28,840
Speaker 6: week ago.

542
00:27:28,840 --> 00:27:30,880
Speaker 11: Actually not as much as you think that. The thing

543
00:27:30,880 --> 00:27:34,040
Speaker 11: about when you have a surprise on CPI, people forecast

544
00:27:34,160 --> 00:27:38,320
Speaker 11: CPI pretty well because all the core things are pretty

545
00:27:38,320 --> 00:27:42,640
Speaker 11: easy to forecast. What causes a problem is the usual suspects,

546
00:27:42,640 --> 00:27:46,840
Speaker 11: and the usual suspects are auto insurance, airline fares.

547
00:27:46,680 --> 00:27:47,560
Speaker 4: Hotel rates.

548
00:27:47,680 --> 00:27:51,280
Speaker 11: So tail rates were up one point two percentine airline

549
00:27:51,280 --> 00:27:53,560
Speaker 11: fares were up one point four percent, and auto insurance

550
00:27:53,640 --> 00:27:54,560
Speaker 11: is up two percent.

551
00:27:54,520 --> 00:27:56,520
Speaker 5: All things that Thomas been complaining about at length in.

552
00:27:56,520 --> 00:28:02,040
Speaker 2: Recent christ Paris last night versus twelve months ago, I'm

553
00:28:02,080 --> 00:28:04,080
Speaker 2: spending two thousand more dollars.

554
00:28:04,280 --> 00:28:08,439
Speaker 4: Yep, that's a fact from X to X plus two thousand.

555
00:28:08,520 --> 00:28:14,639
Speaker 11: I mean that's the Hampton in Well, yeah, you know,

556
00:28:14,680 --> 00:28:15,360
Speaker 11: that's that's.

557
00:28:15,160 --> 00:28:15,800
Speaker 5: A wealth effect.

558
00:28:15,800 --> 00:28:17,919
Speaker 11: We've both been doing this long enough that you know

559
00:28:18,119 --> 00:28:19,920
Speaker 11: it used to be a wealth effects and consumption weren't

560
00:28:19,920 --> 00:28:22,600
Speaker 11: that important. But there is so much wealth right now

561
00:28:22,760 --> 00:28:25,160
Speaker 11: relative to twenty years ago, thirty years, forty years ago,

562
00:28:25,280 --> 00:28:26,840
Speaker 11: that when you have a wealth surge like we did

563
00:28:26,880 --> 00:28:29,320
Speaker 11: last year. Well, rich people spend money and what to

564
00:28:29,440 --> 00:28:31,320
Speaker 11: rich people spend money taking trips to Paris?

565
00:28:32,880 --> 00:28:36,040
Speaker 2: Joining us here at at the our top. David Kelly

566
00:28:36,160 --> 00:28:38,560
Speaker 2: of JP Morgan, this is so important. We're going to

567
00:28:38,600 --> 00:28:42,320
Speaker 2: forego the festivities of the market open. We forego nickelback.

568
00:28:42,840 --> 00:28:45,400
Speaker 2: You know that was my pictures and Catchers thing you

569
00:28:45,400 --> 00:28:45,840
Speaker 2: should have.

570
00:28:45,760 --> 00:28:49,440
Speaker 5: Seen years ago.

571
00:28:50,040 --> 00:28:52,240
Speaker 2: Kelly would be down to Peter Lynch would be backed

572
00:28:52,320 --> 00:28:54,440
Speaker 2: up twelve rowers back and Kelly's down.

573
00:28:54,320 --> 00:28:58,200
Speaker 4: By the third base. Doug guy, you know rock star seats.

574
00:28:58,440 --> 00:29:02,200
Speaker 2: David, I want you to talk about the moment we're

575
00:29:02,280 --> 00:29:08,520
Speaker 2: in and how people scared participate in the equity markets.

576
00:29:08,600 --> 00:29:14,000
Speaker 2: JP market is this huge platform of measured of a

577
00:29:14,120 --> 00:29:17,520
Speaker 2: measured approach within a new media frenzy you and I

578
00:29:17,520 --> 00:29:18,600
Speaker 2: did live years ago, and.

579
00:29:18,800 --> 00:29:22,000
Speaker 11: Yes, absolutely, and you've just got to watch valuations. There

580
00:29:22,000 --> 00:29:24,320
Speaker 11: are plenty of things in global equity markets who took

581
00:29:24,400 --> 00:29:27,800
Speaker 11: up perfectly reasonable price tax. There's just a few things

582
00:29:27,800 --> 00:29:30,480
Speaker 11: which dominate US markets who don't have reasonable price tags.

583
00:29:30,840 --> 00:29:31,600
Speaker 5: And you've just.

584
00:29:31,520 --> 00:29:35,200
Speaker 11: Got to be determined to focus on I'm going to

585
00:29:35,240 --> 00:29:38,920
Speaker 11: buy stuff at reasonable valuations. This makes sense both US

586
00:29:39,000 --> 00:29:42,120
Speaker 11: stocks and international stocks and I'm going to try to

587
00:29:42,280 --> 00:29:45,440
Speaker 11: do everything I can underweight the stuff that is carrying

588
00:29:45,520 --> 00:29:48,520
Speaker 11: pe ratos of thirty times or thirty five times or

589
00:29:48,680 --> 00:29:49,800
Speaker 11: one there and twenty times.

590
00:29:50,160 --> 00:29:51,719
Speaker 5: You just need to do that.

591
00:29:52,120 --> 00:29:52,480
Speaker 10: We don't.

592
00:29:53,200 --> 00:29:55,640
Speaker 11: You never know the hour or the day that a

593
00:29:55,720 --> 00:29:57,920
Speaker 11: bull market breaks and you end up in a bear market.

594
00:29:57,960 --> 00:29:59,560
Speaker 11: You just don't know how to time that. But you

595
00:29:59,640 --> 00:30:02,600
Speaker 11: do know what you know, how you position yourself before that.

596
00:30:03,160 --> 00:30:05,400
Speaker 11: He determines how you're going to go through it. So

597
00:30:05,840 --> 00:30:08,560
Speaker 11: you know, overall the economy looks good, but we've got

598
00:30:08,560 --> 00:30:11,840
Speaker 11: a lot of a lot of policy uncertainty. The problem

599
00:30:11,880 --> 00:30:15,400
Speaker 11: is the equity marketers price for perfection, and or part

600
00:30:15,440 --> 00:30:17,360
Speaker 11: of the equity marketers price for more than perfection. You

601
00:30:17,400 --> 00:30:18,320
Speaker 11: just need to be underwaigh that.

602
00:30:18,480 --> 00:30:20,720
Speaker 6: I'll show my age here. But does a bull market

603
00:30:20,840 --> 00:30:22,920
Speaker 6: end with a bang or a whimper? Customarily? You said

604
00:30:22,960 --> 00:30:23,960
Speaker 6: you'd know the nearly hour.

605
00:30:24,120 --> 00:30:26,240
Speaker 4: That's a really sophisticated question.

606
00:30:26,360 --> 00:30:29,440
Speaker 5: Seriously, No, it ends, it ends with the bank.

607
00:30:30,680 --> 00:30:31,120
Speaker 9: I'm sorry.

608
00:30:31,360 --> 00:30:32,840
Speaker 5: It's not going to just win bad.

609
00:30:33,440 --> 00:30:38,120
Speaker 11: That's we're past the point where the market can simply

610
00:30:38,160 --> 00:30:41,000
Speaker 11: slide back into a bad year or two. We're going

611
00:30:41,040 --> 00:30:43,000
Speaker 11: to have We're gonna have a significant bear market at

612
00:30:43,000 --> 00:30:44,680
Speaker 11: some stage. We don't know when it's going to start,

613
00:30:44,760 --> 00:30:47,200
Speaker 11: and you don't want to not participate. There's just just

614
00:30:47,320 --> 00:30:50,120
Speaker 11: don't participate in the stuff that looks obviously crazy in

615
00:30:50,160 --> 00:30:51,040
Speaker 11: terms of valuations.

616
00:30:51,320 --> 00:30:53,600
Speaker 2: David kellyers with a JP market, how do you fold

617
00:30:53,640 --> 00:30:57,440
Speaker 2: in Casman and Feroli's work? Michael Feroley making history. I'm

618
00:30:57,440 --> 00:30:59,520
Speaker 2: going to say, a decade eight years ago, with a

619
00:30:59,680 --> 00:31:02,880
Speaker 2: shot wucking potential GDP number under two percent?

620
00:31:03,320 --> 00:31:05,240
Speaker 4: Do you work off of JP?

621
00:31:05,360 --> 00:31:11,640
Speaker 2: Morgan economics modeling still a disinflationary tendency. John Williams yesterday

622
00:31:11,720 --> 00:31:15,000
Speaker 2: reaffirming a path back to two percent? Is that a

623
00:31:15,040 --> 00:31:16,000
Speaker 2: foundational call?

624
00:31:16,080 --> 00:31:18,480
Speaker 4: Still? I agree with them on that.

625
00:31:19,720 --> 00:31:22,440
Speaker 11: You know, I look at their stuff very very very closely.

626
00:31:22,520 --> 00:31:25,360
Speaker 11: We work independently, but I agree with them that because

627
00:31:25,360 --> 00:31:27,800
Speaker 11: if you look yes, we've got a surprising number today,

628
00:31:27,840 --> 00:31:30,720
Speaker 11: but if you look at shelter, shelter was four point

629
00:31:30,800 --> 00:31:33,360
Speaker 11: six percent year over year last month, it's four point

630
00:31:33,400 --> 00:31:35,480
Speaker 11: four percent right now, and it is still too high

631
00:31:35,480 --> 00:31:36,720
Speaker 11: based on what we know is going on in the

632
00:31:36,760 --> 00:31:40,360
Speaker 11: rental market. Auto insurance you know, saw two percent increase,

633
00:31:40,400 --> 00:31:42,120
Speaker 11: but it's a double digit year over year it's not

634
00:31:42,240 --> 00:31:44,040
Speaker 11: going to be double digit year over year by the

635
00:31:44,120 --> 00:31:46,160
Speaker 11: end of the year, so it will that part will

636
00:31:46,200 --> 00:31:48,840
Speaker 11: go away. But what I am concerned about, and I

637
00:31:48,880 --> 00:31:51,280
Speaker 11: think the FED is concerned about, is what happens if

638
00:31:51,280 --> 00:31:54,080
Speaker 11: we have more tariffs, what happens if immigration gets much

639
00:31:54,120 --> 00:31:56,440
Speaker 11: tougher you've got higher wages, And what happens if we

640
00:31:56,440 --> 00:31:58,600
Speaker 11: have physical cinemas in twenty twenty six. And that's what's

641
00:31:58,680 --> 00:32:00,160
Speaker 11: keeping the FED more nervous.

642
00:32:00,200 --> 00:32:03,680
Speaker 2: Thirty seconds, every single parent I know wants their kids

643
00:32:03,680 --> 00:32:04,920
Speaker 2: to go to school in Europe.

644
00:32:04,960 --> 00:32:07,920
Speaker 4: It's the new rage here sell Trinity right now.

645
00:32:07,960 --> 00:32:11,240
Speaker 2: Everybody's looking at Saint Andrew's this and go down to

646
00:32:11,360 --> 00:32:14,640
Speaker 2: Paris and you know the Rome and all that.

647
00:32:14,960 --> 00:32:17,320
Speaker 4: The real academics is at Dublin, isn't it.

648
00:32:17,560 --> 00:32:20,040
Speaker 11: Well it's you actually have a pretty good time there too,

649
00:32:20,080 --> 00:32:22,640
Speaker 11: but you know it, what's a college education?

650
00:32:22,720 --> 00:32:25,240
Speaker 5: Media guys, and you about life in Dublin.

651
00:32:25,800 --> 00:32:28,840
Speaker 2: David Kelly, there were wisdom on his Dublin. Thank you

652
00:32:28,880 --> 00:32:31,400
Speaker 2: so much for JP Morgan. This was a real treat

653
00:32:31,440 --> 00:32:32,240
Speaker 2: to have him in here.

654
00:32:36,640 --> 00:32:40,240
Speaker 1: You're listening to the Bloomberg Surveillance podcast Catch us Live

655
00:32:40,280 --> 00:32:43,440
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

656
00:32:43,520 --> 00:32:47,200
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

657
00:32:47,320 --> 00:32:48,840
Speaker 1: watch us live on YouTube.

658
00:32:50,760 --> 00:32:51,280
Speaker 4: I got a.

659
00:32:51,280 --> 00:32:53,640
Speaker 2: Script with Hugh von Stein is like a plan, Like

660
00:32:53,720 --> 00:32:55,600
Speaker 2: if he and Iron Davos we have a plan, We

661
00:32:55,640 --> 00:32:58,280
Speaker 2: go see Barry at the piano bar and life goes on.

662
00:32:58,720 --> 00:33:01,200
Speaker 2: The President is just got the way of my script,

663
00:33:01,640 --> 00:33:05,040
Speaker 2: President Trump putting out moments ago a tweet interest rates

664
00:33:05,080 --> 00:33:08,040
Speaker 2: should be lowered, something which would go hand in hand

665
00:33:08,080 --> 00:33:09,320
Speaker 2: with upcoming tariffs.

666
00:33:09,680 --> 00:33:12,880
Speaker 4: Let's rack and roll America. So I got to start

667
00:33:12,960 --> 00:33:13,240
Speaker 4: with that.

668
00:33:14,960 --> 00:33:17,680
Speaker 2: Yeah, joining us now the king of British rock and roll,

669
00:33:18,160 --> 00:33:21,880
Speaker 2: steins encyclopedic and banking and of course at however, whyman

670
00:33:22,400 --> 00:33:22,720
Speaker 2: it is?

671
00:33:22,880 --> 00:33:23,280
Speaker 4: Well?

672
00:33:24,120 --> 00:33:28,440
Speaker 2: Can a president force rates lower? Or Chairman Powells speaking

673
00:33:28,440 --> 00:33:29,000
Speaker 2: this morning?

674
00:33:29,640 --> 00:33:31,360
Speaker 10: Gosh, that's a great question to start.

675
00:33:31,360 --> 00:33:31,560
Speaker 9: I was.

676
00:33:31,640 --> 00:33:34,880
Speaker 12: I was happy on the skiing than this.

677
00:33:35,320 --> 00:33:35,560
Speaker 9: Look.

678
00:33:35,600 --> 00:33:38,440
Speaker 12: I think I think central bankers like to move at

679
00:33:38,440 --> 00:33:40,240
Speaker 12: their own speed, don't they, And they ought to like

680
00:33:40,320 --> 00:33:43,400
Speaker 12: to move incrementally where possible. So I think it's going

681
00:33:43,480 --> 00:33:44,160
Speaker 12: to be tough.

682
00:33:44,560 --> 00:33:46,160
Speaker 10: Look taffs it taffs.

683
00:33:46,360 --> 00:33:48,120
Speaker 12: I think the market's still pricing in that they're going

684
00:33:48,160 --> 00:33:50,720
Speaker 12: to be small and surgical rather than broad based.

685
00:33:51,040 --> 00:33:52,160
Speaker 10: If that's right, they're not.

686
00:33:52,160 --> 00:33:55,000
Speaker 12: As inflationary, so that you can see as inflation comes

687
00:33:55,000 --> 00:33:58,160
Speaker 12: down there's an opportunity to cut rates further. Look, you know,

688
00:33:58,160 --> 00:33:59,640
Speaker 12: if I think about it from the bank CEO's and

689
00:33:59,640 --> 00:34:01,760
Speaker 12: see if I as I talked to, they're actually having

690
00:34:01,760 --> 00:34:02,480
Speaker 12: a really good moment.

691
00:34:02,520 --> 00:34:03,560
Speaker 10: They're in a purple patch.

692
00:34:03,760 --> 00:34:05,760
Speaker 2: Why are they in a good moment if the rest

693
00:34:05,800 --> 00:34:06,920
Speaker 2: of us are in chaos?

694
00:34:07,080 --> 00:34:10,520
Speaker 12: Well, so it's a really great question. So look, we've

695
00:34:10,520 --> 00:34:14,400
Speaker 12: got a steeper your curve, so they love that. Deposits

696
00:34:14,400 --> 00:34:17,400
Speaker 12: are building up, so they got grit better funding. The

697
00:34:17,480 --> 00:34:20,799
Speaker 12: credit environment is still really benign. You know, there's very

698
00:34:20,800 --> 00:34:24,520
Speaker 12: few bankruptcies and actually with bars with the bars and

699
00:34:24,600 --> 00:34:28,560
Speaker 12: rules being kicked either into touch or certainly being what

700
00:34:28,680 --> 00:34:30,840
Speaker 12: I think of as a bureaucratic fudge. If there's mere

701
00:34:30,920 --> 00:34:34,120
Speaker 12: bank capital neutral whan it's BKX is up forty three

702
00:34:34,160 --> 00:34:37,240
Speaker 12: percent in the last year. That beats fangs. In fact,

703
00:34:37,520 --> 00:34:39,719
Speaker 12: you would love this. The European bankshop forty seven. The

704
00:34:39,719 --> 00:34:41,799
Speaker 12: European banks are being rehabilitated. You have to come back

705
00:34:41,800 --> 00:34:43,120
Speaker 12: to Europe to talk about them.

706
00:34:43,120 --> 00:34:46,520
Speaker 2: Sometimes in a hero these off life support out and

707
00:34:46,520 --> 00:34:49,200
Speaker 2: get a question, get a question.

708
00:34:49,680 --> 00:34:51,719
Speaker 6: As we get our popcorn and watch the second of

709
00:34:51,760 --> 00:34:54,279
Speaker 6: these two days of hearings, No doubt there will be

710
00:34:54,280 --> 00:34:57,640
Speaker 6: some questions about bars or three in Capital And as J.

711
00:34:57,800 --> 00:35:00,440
Speaker 6: Powell persists without Michael Barr, the other mic bar by

712
00:35:00,800 --> 00:35:03,160
Speaker 6: his side, what does the future look like when it

713
00:35:03,160 --> 00:35:05,520
Speaker 6: comes to sort of the regulatory remit of the Fed Reserve?

714
00:35:05,560 --> 00:35:07,760
Speaker 6: What sense do we have the contours of that post

715
00:35:07,760 --> 00:35:08,560
Speaker 6: Michael Barr.

716
00:35:08,680 --> 00:35:10,600
Speaker 12: It's a great question to look so, so Tom and

717
00:35:10,600 --> 00:35:12,680
Speaker 12: I've discussed before. If we look back in two years

718
00:35:12,680 --> 00:35:15,279
Speaker 12: ago what went wrong, it was a failure of supervision.

719
00:35:15,480 --> 00:35:17,040
Speaker 12: It wasn't actually my failure of the rules. It was

720
00:35:17,080 --> 00:35:20,640
Speaker 12: just they weren't being implemented California. Out in California. That

721
00:35:20,680 --> 00:35:22,960
Speaker 12: the four banks which went, but certainly the first three

722
00:35:23,239 --> 00:35:25,399
Speaker 12: there were just people looking somewhere else rather than looking

723
00:35:25,440 --> 00:35:29,359
Speaker 12: at proper one, good old fashioned risk management and rekignetars.

724
00:35:29,640 --> 00:35:31,960
Speaker 12: So the supervision really needs to be improved, and I

725
00:35:32,000 --> 00:35:34,120
Speaker 12: think there's some work ongoing, and you could say Flick

726
00:35:34,200 --> 00:35:34,600
Speaker 12: needs to be.

727
00:35:34,560 --> 00:35:35,000
Speaker 9: Part of that.

728
00:35:35,480 --> 00:35:36,040
Speaker 10: I think two.

729
00:35:36,400 --> 00:35:38,040
Speaker 12: I think the thing I learned was that the big

730
00:35:38,080 --> 00:35:40,759
Speaker 12: banks were in great shape. And so actually you don't

731
00:35:40,800 --> 00:35:44,560
Speaker 12: need to have bolster them with copper, gold plated, platinum plated,

732
00:35:44,680 --> 00:35:46,360
Speaker 12: you know, cryptoplated, you know.

733
00:35:46,440 --> 00:35:46,920
Speaker 10: Regulation.

734
00:35:47,360 --> 00:35:49,240
Speaker 12: But maybe there's a little bit tightness around the central

735
00:35:49,280 --> 00:35:51,359
Speaker 12: about the smaller banks. Maybe the regional banks do need

736
00:35:51,400 --> 00:35:54,600
Speaker 12: a little bit more supervision. So I think it's quite incremental,

737
00:35:54,840 --> 00:35:56,640
Speaker 12: and I think we're getting back to sanity after this

738
00:35:56,719 --> 00:35:58,160
Speaker 12: nineteen percent proposed increase.

739
00:35:58,280 --> 00:36:00,279
Speaker 6: I had a question for friendship the Congress been in

740
00:36:00,320 --> 00:36:02,160
Speaker 6: chair of the Financial Services Commante didn't have time for it.

741
00:36:02,160 --> 00:36:02,640
Speaker 5: I'll put it to you.

742
00:36:02,760 --> 00:36:05,960
Speaker 6: He talks a lot about how regulation is preventing de

743
00:36:06,040 --> 00:36:08,239
Speaker 6: novo banks from coming under the scene, that he doesn't

744
00:36:08,239 --> 00:36:10,960
Speaker 6: think there were enough kind of smaller community banks. Are

745
00:36:10,960 --> 00:36:13,239
Speaker 6: there too many banks in this country? Where is the

746
00:36:13,320 --> 00:36:16,400
Speaker 6: need for even more banks in the US banking system.

747
00:36:16,680 --> 00:36:18,959
Speaker 12: So I think it's true stateside, but the world over,

748
00:36:19,520 --> 00:36:22,879
Speaker 12: heavy duty regulations have for smaller bank it makes it

749
00:36:23,000 --> 00:36:26,200
Speaker 12: much much tougher to start up. That said, in the state,

750
00:36:26,440 --> 00:36:28,160
Speaker 12: if you think about the banking system, we got your

751
00:36:28,160 --> 00:36:31,000
Speaker 12: top eighteen twenty four banks who are in pretty good shape.

752
00:36:31,400 --> 00:36:33,920
Speaker 12: Then you've got sort of close to three thousand community banks.

753
00:36:34,440 --> 00:36:37,480
Speaker 12: They sit on one of three computer systems they're actually

754
00:36:37,560 --> 00:36:40,319
Speaker 12: have scale because they're drag and drop on a really

755
00:36:40,360 --> 00:36:43,239
Speaker 12: high quality platform. It's the belly in the middle, and

756
00:36:43,280 --> 00:36:45,799
Speaker 12: so in fact the two years ago it was the

757
00:36:45,800 --> 00:36:48,799
Speaker 12: belly which the four banks got in trouble. That's where

758
00:36:48,800 --> 00:36:49,520
Speaker 12: we need to memonade.

759
00:36:49,520 --> 00:36:51,400
Speaker 4: But let me frame this like for.

760
00:36:53,440 --> 00:36:53,760
Speaker 5: Script.

761
00:36:53,840 --> 00:36:56,560
Speaker 2: Why no, Gert, your question was brilliant. Why do we

762
00:36:56,600 --> 00:36:59,400
Speaker 2: need to lean forward here? Hugh von Stein has came

763
00:36:59,440 --> 00:37:01,920
Speaker 2: out of turn Need Oxford, PP and E and he

764
00:37:01,960 --> 00:37:04,080
Speaker 2: had to get a day job, so he went to

765
00:37:04,160 --> 00:37:07,920
Speaker 2: Morgan Stanley where he was definitive on banks in Europe

766
00:37:07,960 --> 00:37:11,240
Speaker 2: but worldwide as well, and took down trophies like twelve

767
00:37:11,320 --> 00:37:13,520
Speaker 2: years in a row or something. They had to force

768
00:37:13,600 --> 00:37:16,360
Speaker 2: him out just so somebody else could win the damn trophy.

769
00:37:16,360 --> 00:37:18,560
Speaker 2: He's herd of Mark Kearney at the Bank of England

770
00:37:18,840 --> 00:37:22,840
Speaker 2: as well. But to your question, is definitive Trump loves

771
00:37:22,920 --> 00:37:23,760
Speaker 2: Andrew Jackson.

772
00:37:23,840 --> 00:37:25,880
Speaker 6: Yes, I mean is that where we're going? Portrait is

773
00:37:25,920 --> 00:37:28,000
Speaker 6: back up on the wall. I know in the Oval office,

774
00:37:28,040 --> 00:37:30,040
Speaker 6: but I don't know if you want to talk about

775
00:37:30,040 --> 00:37:30,520
Speaker 6: Andrew Jackson.

776
00:37:30,520 --> 00:37:31,400
Speaker 5: You should feel free if you.

777
00:37:31,400 --> 00:37:34,000
Speaker 12: Want, well we get we can if you want, but

778
00:37:34,040 --> 00:37:36,319
Speaker 12: you should get Neil Ferguson On. I mean, I think, well,

779
00:37:36,520 --> 00:37:38,920
Speaker 12: Neil always taught me and she had dinner with Dick

780
00:37:38,920 --> 00:37:40,840
Speaker 12: Burner last night, who you may remember, the chief economist

781
00:37:40,880 --> 00:37:41,759
Speaker 12: and Bog and Sandy.

782
00:37:41,520 --> 00:37:42,040
Speaker 9: Back the day.

783
00:37:42,840 --> 00:37:46,960
Speaker 10: I think I owe her money or Dick some great

784
00:37:46,960 --> 00:37:47,880
Speaker 10: form and I'm sure take this.

785
00:37:48,239 --> 00:37:51,640
Speaker 12: But so he said, like, you know, the key lesson

786
00:37:51,719 --> 00:37:54,920
Speaker 12: is that these clever PhDs, they haven't done economic history.

787
00:37:55,200 --> 00:37:57,560
Speaker 12: And actually we learned that in the financial crisis. So actually,

788
00:37:57,719 --> 00:37:59,279
Speaker 12: whether it's Jackson or whether Actu, you got back to

789
00:37:59,280 --> 00:38:02,560
Speaker 12: the nineteenth century and actually, you know, think about the

790
00:38:02,600 --> 00:38:08,280
Speaker 12: impact of Tariff's about counter counters, president deficits history really matters.

791
00:38:08,600 --> 00:38:10,160
Speaker 12: I think Neil's a better guess key on that.

792
00:38:10,280 --> 00:38:11,520
Speaker 4: No, this is really important.

793
00:38:11,560 --> 00:38:14,000
Speaker 2: And to Richard Berner, folks at Morgan Stanley and with

794
00:38:14,000 --> 00:38:18,000
Speaker 2: Stephen Roach changed American economics. I think Dick Berner and

795
00:38:18,040 --> 00:38:20,319
Speaker 2: Iron this forward guidance things.

796
00:38:20,360 --> 00:38:20,600
Speaker 4: Folks.

797
00:38:20,680 --> 00:38:23,080
Speaker 2: You hear me talk about the dot plots McKee and

798
00:38:23,160 --> 00:38:25,279
Speaker 2: I are like, you know, are you kidding me? And

799
00:38:25,320 --> 00:38:27,239
Speaker 2: the answer is maybe they'll go away. A lot of

800
00:38:27,320 --> 00:38:28,080
Speaker 2: that came.

801
00:38:27,840 --> 00:38:30,759
Speaker 4: From the excellence of Richard Berner. Hugh, I got to

802
00:38:30,800 --> 00:38:31,520
Speaker 4: rip up the script.

803
00:38:31,520 --> 00:38:36,320
Speaker 2: Here we have a glorious person at Bloomberg Intelligence, Robert Schiffman,

804
00:38:36,640 --> 00:38:40,160
Speaker 2: who writes on debt and credit and MAGA.

805
00:38:40,400 --> 00:38:41,680
Speaker 4: He has just put out a.

806
00:38:41,680 --> 00:38:46,840
Speaker 2: Brilliant note suggesting that all this angst about capital raised

807
00:38:46,840 --> 00:38:48,719
Speaker 2: there could be done with.

808
00:38:48,840 --> 00:38:52,239
Speaker 4: Debt issue Ince because they don't have any debt and

809
00:38:52,280 --> 00:38:54,600
Speaker 4: they make more money than God and free Kishlow.

810
00:38:55,040 --> 00:38:57,279
Speaker 2: Do you think the bankers like you used to be

811
00:38:58,000 --> 00:39:04,000
Speaker 2: will convince MAGA raising their capital is an easy process

812
00:39:04,600 --> 00:39:08,000
Speaker 2: because of the wonderful financial position they're in, and they

813
00:39:08,080 --> 00:39:09,919
Speaker 2: can raise billions in debt.

814
00:39:11,000 --> 00:39:11,880
Speaker 10: It's a great question.

815
00:39:11,960 --> 00:39:14,240
Speaker 12: So look, let's stick on the bits which I have confidence,

816
00:39:14,239 --> 00:39:15,560
Speaker 12: and let's move to the tricky a bit.

817
00:39:15,680 --> 00:39:16,000
Speaker 4: Please.

818
00:39:16,080 --> 00:39:19,520
Speaker 12: It's raining fixed income up moment. The inflows to fixed income.

819
00:39:19,800 --> 00:39:22,640
Speaker 12: I think this year will Last year was a record

820
00:39:22,640 --> 00:39:23,920
Speaker 12: in the States. I think it's gonna be a new

821
00:39:23,920 --> 00:39:26,280
Speaker 12: record based on what I've seen in January and early February.

822
00:39:26,400 --> 00:39:29,640
Speaker 12: So it's raining fixed income. The demand for yield is huge,

823
00:39:29,719 --> 00:39:31,239
Speaker 12: and I think the way to put it is after

824
00:39:31,239 --> 00:39:33,920
Speaker 12: twenty years where people didn't look at their fixeding come portfolios,

825
00:39:34,320 --> 00:39:36,840
Speaker 12: the last three years, it's come back. So the demand

826
00:39:36,920 --> 00:39:40,160
Speaker 12: side there. But as You've debated tons of times. The

827
00:39:40,280 --> 00:39:43,560
Speaker 12: structure of markets has changed a lot, and so it's

828
00:39:43,600 --> 00:39:46,160
Speaker 12: going to be ETFs or it's private credit, and so

829
00:39:46,239 --> 00:39:48,120
Speaker 12: there's there's a following out. So I think the demand.

830
00:39:48,239 --> 00:39:50,600
Speaker 12: I think you could issue plenty more debts.

831
00:39:50,600 --> 00:39:52,960
Speaker 2: Okay, So like take a round number one hundred billion

832
00:39:53,000 --> 00:39:56,359
Speaker 2: dollars sixty seven companies. In the old days, you'd sit

833
00:39:56,400 --> 00:39:59,239
Speaker 2: at Morgan Stanley and there'd be like four phone calls, right,

834
00:39:59,400 --> 00:40:02,320
Speaker 2: that's right. Can they do one hundred billion in debt

835
00:40:02,480 --> 00:40:03,640
Speaker 2: with seven phone calls?

836
00:40:03,640 --> 00:40:05,400
Speaker 4: And the answers, yes, they could do.

837
00:40:05,480 --> 00:40:07,440
Speaker 12: But it's not necessarily the banks taking it down in

838
00:40:07,440 --> 00:40:10,000
Speaker 12: it ogre, it's actually the investor side which is taking

839
00:40:10,000 --> 00:40:12,960
Speaker 12: it down because the banks don't have that kind of capacity.

840
00:40:13,280 --> 00:40:15,279
Speaker 10: Fair or Lord just sit on it.

841
00:40:15,280 --> 00:40:16,400
Speaker 4: At least come out sovereign.

842
00:40:17,160 --> 00:40:18,640
Speaker 10: But I think let's go back to his street.

843
00:40:18,760 --> 00:40:20,640
Speaker 12: So when Neil, in fact, when Nail and I chatting,

844
00:40:21,000 --> 00:40:23,560
Speaker 12: this is a recycling of Petro dollars. Why is it

845
00:40:23,600 --> 00:40:25,720
Speaker 12: that everyone's in the Middle East? Is because those dollars

846
00:40:25,760 --> 00:40:28,040
Speaker 12: need to find a home and actually they are funding

847
00:40:28,040 --> 00:40:29,760
Speaker 12: the states and actually that could be one of the

848
00:40:29,800 --> 00:40:32,880
Speaker 12: windfalls over the next four years is actually the recycling

849
00:40:32,880 --> 00:40:33,800
Speaker 12: of these petro dollars.

850
00:40:34,040 --> 00:40:36,880
Speaker 6: As Tom Venmo's doctor, Bernard, let me ask you about

851
00:40:37,280 --> 00:40:39,400
Speaker 6: how what we've heard from Mark Rowan and his cohort

852
00:40:39,480 --> 00:40:41,640
Speaker 6: lately is resonating in the c suites of the big

853
00:40:41,680 --> 00:40:45,120
Speaker 6: banks on Wall Street. His ambition to grow private credit

854
00:40:45,120 --> 00:40:46,960
Speaker 6: and to sort of present himself as this not even

855
00:40:46,960 --> 00:40:50,279
Speaker 6: alternative but sort of driving forward for financing. What are

856
00:40:50,320 --> 00:40:52,400
Speaker 6: banks doing in the face of that to compensate or

857
00:40:52,440 --> 00:40:53,840
Speaker 6: compete with with what he's saying.

858
00:40:54,200 --> 00:40:57,080
Speaker 12: Look, so it's fascinating how many banks now talk about

859
00:40:57,080 --> 00:40:59,200
Speaker 12: are prepared to accept there is a partnership model rather

860
00:40:59,200 --> 00:41:01,439
Speaker 12: than just a counterpart. But I think there's two ways

861
00:41:01,440 --> 00:41:04,760
Speaker 12: slice it. The traditional private credit business is higher yielding,

862
00:41:04,760 --> 00:41:07,680
Speaker 12: it's leverage finance, mid market finance. And the way I

863
00:41:07,680 --> 00:41:11,319
Speaker 12: think about it is that there's a retranching or reslicing

864
00:41:11,320 --> 00:41:14,160
Speaker 12: of the banking system. The senior risk is being taken

865
00:41:14,200 --> 00:41:16,040
Speaker 12: by the banks and the junior risk is being sold.

866
00:41:16,320 --> 00:41:18,319
Speaker 12: And I think, I said to Tom, I almost think

867
00:41:18,320 --> 00:41:19,920
Speaker 12: that private credit is the a zen pic to the

868
00:41:19,920 --> 00:41:23,520
Speaker 12: banking industry. It's helping them shad weight. But and here's

869
00:41:23,520 --> 00:41:26,680
Speaker 12: a big butt. The risk now is the private credit

870
00:41:26,719 --> 00:41:30,319
Speaker 12: firms are raising so much insurance money. Over half of

871
00:41:30,360 --> 00:41:32,719
Speaker 12: all inflows to private credit last year I think came

872
00:41:32,719 --> 00:41:36,640
Speaker 12: from insurers. Well, let's we find they need investment grade.

873
00:41:36,840 --> 00:41:39,360
Speaker 12: So there you're now getting into the territory of the banks.

874
00:41:40,520 --> 00:41:43,359
Speaker 12: Private credit only has about five six percent share of

875
00:41:43,480 --> 00:41:46,080
Speaker 12: that asset back lending, right, that's where they're going next,

876
00:41:46,120 --> 00:41:48,919
Speaker 12: and that will put them into more confrontations chilling.

877
00:41:48,960 --> 00:41:51,040
Speaker 2: It's like talking to David Goldman when he was at

878
00:41:51,040 --> 00:41:53,279
Speaker 2: Bank of America in like two thousand and six or

879
00:41:53,280 --> 00:41:56,320
Speaker 2: two thousand and seven to translate this, folks, and he

880
00:41:56,360 --> 00:41:57,319
Speaker 2: will help me out here.

881
00:41:57,920 --> 00:41:59,680
Speaker 4: If private credit.

882
00:41:59,360 --> 00:42:01,400
Speaker 2: Is going to pick up the pieces from the major

883
00:42:01,480 --> 00:42:05,719
Speaker 2: banks and lesser quality what are called junior tranches, is

884
00:42:05,760 --> 00:42:09,400
Speaker 2: there an implied leverage within those tranches?

885
00:42:09,920 --> 00:42:13,359
Speaker 4: I mean, are they pure and clean or is there

886
00:42:13,400 --> 00:42:17,760
Speaker 4: a shadow leverage within the new system.

887
00:42:17,360 --> 00:42:20,960
Speaker 2: Of private credit and frankly private equity that we don't see.

888
00:42:21,719 --> 00:42:25,120
Speaker 12: Look, this is what the number one question from regulators've

889
00:42:25,120 --> 00:42:27,000
Speaker 12: always been having dealing with a lot of central bank governors.

890
00:42:27,000 --> 00:42:27,279
Speaker 1: This is.

891
00:42:32,920 --> 00:42:37,080
Speaker 12: Surveillance dire so but no, that's a great question. Actually

892
00:42:37,080 --> 00:42:40,080
Speaker 12: the banking is doing work on exactly that issue. What's

893
00:42:40,160 --> 00:42:42,680
Speaker 12: interesting though, is if you think about the insurers who

894
00:42:42,719 --> 00:42:46,160
Speaker 12: are putting money to work, they need investment grade assets, right,

895
00:42:46,160 --> 00:42:47,320
Speaker 12: and that's about forty three.

896
00:42:47,160 --> 00:42:50,560
Speaker 10: Percentage pure clean They don't.

897
00:42:50,280 --> 00:42:53,320
Speaker 12: Do let's say nad finance, so fun finance. The insurers

898
00:42:53,360 --> 00:42:55,799
Speaker 12: do none of that. That's all being done by more

899
00:42:55,880 --> 00:42:58,680
Speaker 12: than other parts of the ecosystem. So even if there

900
00:42:58,719 --> 00:43:01,720
Speaker 12: is leverage, it's in sort of hands which are prepared

901
00:43:01,719 --> 00:43:05,360
Speaker 12: to accept risky beds rather than the low risk beds.

902
00:43:05,560 --> 00:43:06,000
Speaker 10: So there is it.

903
00:43:06,120 --> 00:43:08,160
Speaker 12: Kind of It's okay in a way what the good

904
00:43:08,640 --> 00:43:12,640
Speaker 12: always thinking life. We need the right holders the right risk,

905
00:43:13,040 --> 00:43:14,359
Speaker 12: you know, in a way what we learn from let's

906
00:43:14,360 --> 00:43:16,160
Speaker 12: say G capital they had long dated loans, but with

907
00:43:16,239 --> 00:43:19,920
Speaker 12: short deposits, we want long data exactly, so we need

908
00:43:20,400 --> 00:43:22,839
Speaker 12: to pass out loans to pass out the risk.

909
00:43:23,480 --> 00:43:26,239
Speaker 2: So go to the axis with your expert on in

910
00:43:26,280 --> 00:43:30,200
Speaker 2: at private equity. They have not been able to liquidize

911
00:43:30,320 --> 00:43:35,879
Speaker 2: previous investments. Are you optimistic private equity can monetize their

912
00:43:35,960 --> 00:43:39,799
Speaker 2: successes this year and in the next year twenty twenty six,

913
00:43:40,080 --> 00:43:43,520
Speaker 2: and does private credit will? They have the same challenges

914
00:43:43,920 --> 00:43:46,640
Speaker 2: of getting out of the stuff once they get into it.

915
00:43:46,920 --> 00:43:48,760
Speaker 10: It's two great questions.

916
00:43:48,800 --> 00:43:50,439
Speaker 4: So that's a hat trick.

917
00:43:52,120 --> 00:43:53,360
Speaker 5: You guys work this out before.

918
00:43:54,000 --> 00:43:55,400
Speaker 10: This is my script obviously, isn't it.

919
00:43:55,560 --> 00:43:56,240
Speaker 4: I got to rehearse.

920
00:43:57,440 --> 00:43:57,839
Speaker 10: It's tough.

921
00:43:59,520 --> 00:44:03,400
Speaker 12: So all of the bankers that I talked to start,

922
00:44:03,480 --> 00:44:05,600
Speaker 12: we're in November, we're jumping for joy about a huge

923
00:44:05,600 --> 00:44:06,799
Speaker 12: IPO calendar for this year.

924
00:44:07,000 --> 00:44:07,879
Speaker 5: I haven't seen it though.

925
00:44:07,880 --> 00:44:09,640
Speaker 12: Maybe they did it just in time for bonuses and

926
00:44:09,800 --> 00:44:12,640
Speaker 12: they were talking it out.

927
00:44:11,480 --> 00:44:15,359
Speaker 4: Yeah, except there yesterday and said exact so.

928
00:44:15,320 --> 00:44:17,480
Speaker 10: Sorry, okay, your credittionally with that.

929
00:44:18,239 --> 00:44:21,440
Speaker 12: But obviously now they're saying in February it's it's okay,

930
00:44:21,440 --> 00:44:24,239
Speaker 12: but it's a bit slow, and it's that indigestion in

931
00:44:24,280 --> 00:44:26,280
Speaker 12: the sponsor community. In fact, if you got some great data,

932
00:44:26,360 --> 00:44:28,320
Speaker 12: if you look at M and A strategic m and

933
00:44:28,360 --> 00:44:30,640
Speaker 12: A so like company buying company, it's sort of more

934
00:44:30,680 --> 00:44:33,760
Speaker 12: average levels the last fifteen years. It's A it's bouncing.

935
00:44:33,760 --> 00:44:35,680
Speaker 12: It should be a little bit higher mid market M

936
00:44:35,719 --> 00:44:38,120
Speaker 12: and A. Again in line, it's this sponsor M and

937
00:44:38,200 --> 00:44:40,680
Speaker 12: A which is weak, and that's why the private credit

938
00:44:40,760 --> 00:44:43,719
Speaker 12: side are having to strike out for fresh pasture. So

939
00:44:43,760 --> 00:44:47,560
Speaker 12: I think, look, you know, markets are here to embarrass

940
00:44:47,560 --> 00:44:51,600
Speaker 12: and confront us at the moment, it looks like it's

941
00:44:51,640 --> 00:44:53,200
Speaker 12: going to be a reasonable but sluggish year.

942
00:44:53,280 --> 00:44:55,720
Speaker 4: David, give one more in here with Hugh von steinas.

943
00:44:55,480 --> 00:44:57,760
Speaker 6: Just ask you lastly about the kind of relationship between

944
00:44:57,880 --> 00:44:59,920
Speaker 6: public and private and partnerships that might come out of

945
00:45:00,000 --> 00:45:02,000
Speaker 6: this new administration. So we saw the scene in the

946
00:45:02,000 --> 00:45:04,520
Speaker 6: Oval Office with Larry Ellison and Sam Altman and talk

947
00:45:04,600 --> 00:45:08,360
Speaker 6: of financing a big data center project in Texas and elsewhere. Obviously,

948
00:45:08,440 --> 00:45:10,360
Speaker 6: as we talked about in Lampoon a little bit a

949
00:45:10,360 --> 00:45:12,440
Speaker 6: moment ago, there is the speculation about a sovereign wealth

950
00:45:12,440 --> 00:45:16,280
Speaker 6: fund here in the US. How do seasoned private sector

951
00:45:16,320 --> 00:45:19,680
Speaker 6: professionals look at that and navigate these proposals that you know,

952
00:45:19,680 --> 00:45:21,200
Speaker 6: admittedly don't have a lot of meat on the bone

953
00:45:21,239 --> 00:45:23,040
Speaker 6: at this point. But does the notion of a public

954
00:45:23,040 --> 00:45:24,880
Speaker 6: private partnership change under this administration?

955
00:45:25,040 --> 00:45:26,839
Speaker 12: Oh gosh, it's a great question. Well, in some ways

956
00:45:26,840 --> 00:45:28,480
Speaker 12: you do already have a several wealth fund. If I

957
00:45:28,560 --> 00:45:30,799
Speaker 12: might be so bold with Freddie and Fanny, I mean,

958
00:45:30,800 --> 00:45:36,040
Speaker 12: they effectively are for now cheap fantasy moment, So I think.

959
00:45:35,880 --> 00:45:36,560
Speaker 10: You can do that.

960
00:45:36,640 --> 00:45:40,920
Speaker 12: I mean, obviously it depends whether it's through tax credits,

961
00:45:40,960 --> 00:45:44,319
Speaker 12: through structures. How stable are the structures, what's the longevity

962
00:45:44,600 --> 00:45:47,440
Speaker 12: the partnership? But I think everyone's looking at this minute

963
00:45:47,719 --> 00:45:50,360
Speaker 12: they have you have an obligation to look at this seriously.

964
00:45:50,640 --> 00:45:53,840
Speaker 2: Thirty seconds you came up with the phrase asset management.

965
00:45:54,000 --> 00:45:57,160
Speaker 4: Barbell. Hugh von Stein is on the ETF.

966
00:45:57,280 --> 00:46:01,160
Speaker 12: Boom oh, look the fixing committee off the charts. They

967
00:46:01,680 --> 00:46:04,240
Speaker 12: infloced last year in the States, tripled.

968
00:46:03,800 --> 00:46:06,440
Speaker 10: On the free lunch.

969
00:46:07,600 --> 00:46:09,719
Speaker 12: So the bit which is growing is like, let's call

970
00:46:09,760 --> 00:46:12,719
Speaker 12: it active ETF. And it's the same discussion we had

971
00:46:12,719 --> 00:46:15,080
Speaker 12: twenty years ago. Let's say the PIMCO Total Return fun

972
00:46:15,080 --> 00:46:17,400
Speaker 12: They're saying, I'll do the index and a little bit

973
00:46:17,400 --> 00:46:20,680
Speaker 12: of Tabasco too, and the extra Tabasco gets you there.

974
00:46:21,040 --> 00:46:23,440
Speaker 12: And there are Last year there were two I'm not

975
00:46:23,440 --> 00:46:25,359
Speaker 12: doing company names this morning, but two funds who did

976
00:46:25,400 --> 00:46:28,320
Speaker 12: really well in that space. I'm I think that active

977
00:46:28,360 --> 00:46:31,720
Speaker 12: ETF space for fixed income remains really interesting.

978
00:46:31,760 --> 00:46:34,440
Speaker 4: Michael Burr wants to know use Tabasco on your full.

979
00:46:34,280 --> 00:46:42,000
Speaker 12: English right, try not.

980
00:46:41,360 --> 00:46:45,560
Speaker 5: Missus Venstein, thank you so.

981
00:46:47,480 --> 00:46:47,680
Speaker 4: Really.

982
00:46:47,760 --> 00:46:52,160
Speaker 2: With Oliver Wyman and Dante, I should mention the brilliant

983
00:46:52,200 --> 00:46:55,640
Speaker 2: and banks and there they are researching European banks.

984
00:47:00,320 --> 00:47:04,200
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

985
00:47:04,280 --> 00:47:07,680
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

986
00:47:07,719 --> 00:47:10,680
Speaker 1: with the Bloomberg Business app. You can also listen live

987
00:47:10,760 --> 00:47:14,319
Speaker 1: on Amazon Alexa from our flagship New York station, Just

988
00:47:14,360 --> 00:47:16,920
Speaker 1: Say Alexa Play Bloomberg eleven thirty.

989
00:47:17,960 --> 00:47:25,680
Speaker 2: Tina Fordham has provided phenomenal transatlantic perspective over the recent years,

990
00:47:25,960 --> 00:47:30,000
Speaker 2: and she's just continually delivered to us on international relations

991
00:47:30,440 --> 00:47:35,520
Speaker 2: and how it folds into the markets. She becomes ever stronger,

992
00:47:35,640 --> 00:47:40,160
Speaker 2: joined by Ibra Mubari who was at City Group and

993
00:47:40,280 --> 00:47:44,120
Speaker 2: legendary and Fordham and Robari together today is really what

994
00:47:44,200 --> 00:47:49,640
Speaker 2: Bloomberg Surveillance is all about. Tina, the moment that we're

995
00:47:49,680 --> 00:47:52,719
Speaker 2: in right now, I assume your five page report has

996
00:47:52,719 --> 00:47:56,919
Speaker 2: become a twenty page report. Distill it into one observation

997
00:47:57,719 --> 00:48:02,600
Speaker 2: of how, whatever our political persuasion, how we survive this

998
00:48:02,800 --> 00:48:07,520
Speaker 2: testing of an executive branch versus a legislative branch in

999
00:48:07,560 --> 00:48:08,560
Speaker 2: a judicial branch.

1000
00:48:09,880 --> 00:48:13,120
Speaker 13: Thank you for the introduction and the low pressure question.

1001
00:48:13,640 --> 00:48:19,399
Speaker 13: How do we think about these unprecedented times? We keep

1002
00:48:19,440 --> 00:48:23,279
Speaker 13: an open mind and we check our priors because we've

1003
00:48:23,280 --> 00:48:24,320
Speaker 13: never been here before.

1004
00:48:24,440 --> 00:48:26,640
Speaker 4: We've never been here before, So how do you check

1005
00:48:26,640 --> 00:48:27,320
Speaker 4: your priors.

1006
00:48:28,600 --> 00:48:34,280
Speaker 13: It's really important to constantly test your expectations, your confirmation bias,

1007
00:48:34,440 --> 00:48:36,719
Speaker 13: to seek a wide range of opinions, which is why

1008
00:48:36,719 --> 00:48:40,640
Speaker 13: I love working with Ibraham because he keeps me intellectually honest.

1009
00:48:41,160 --> 00:48:43,440
Speaker 2: Well, this is a great thank you for selling Ibram

1010
00:48:43,480 --> 00:48:45,480
Speaker 2: to us. I'm going to cut to the chase. The

1011
00:48:45,680 --> 00:48:49,239
Speaker 2: dollar is the prior. Is the great shock of what

1012
00:48:49,360 --> 00:48:53,520
Speaker 2: is to come with this Trump to administration, a fragility

1013
00:48:53,719 --> 00:48:56,400
Speaker 2: or super strength to the US dollar.

1014
00:48:57,080 --> 00:48:59,439
Speaker 14: I think eventually it'd be a frigidity, actually, and we've

1015
00:48:59,440 --> 00:49:01,359
Speaker 14: got a first taste of that over the last couple

1016
00:49:01,400 --> 00:49:03,439
Speaker 14: of weeks. So in the currency world, I actually think

1017
00:49:03,600 --> 00:49:06,960
Speaker 14: it points to that handing over to the end as

1018
00:49:07,000 --> 00:49:10,759
Speaker 14: maybe the place to hide in difficult times. But is

1019
00:49:10,800 --> 00:49:13,680
Speaker 14: it's it And as Tina mentioned, many many moving parts.

1020
00:49:13,760 --> 00:49:16,399
Speaker 14: So I keep it with Chapale, who we'll hear from

1021
00:49:16,440 --> 00:49:19,520
Speaker 14: later today. Be humble and nimble, check your priors and

1022
00:49:19,560 --> 00:49:21,520
Speaker 14: try to work out what are the preferences and what

1023
00:49:21,560 --> 00:49:23,400
Speaker 14: are the constraints of policymakers along the.

1024
00:49:23,360 --> 00:49:24,360
Speaker 5: Way A question for both of you.

1025
00:49:24,440 --> 00:49:25,840
Speaker 6: I'll start with you first over him, and that is

1026
00:49:25,920 --> 00:49:27,839
Speaker 6: during the campaign, we heard a lot from Scott Besson

1027
00:49:27,880 --> 00:49:30,000
Speaker 6: among others about the prospects that they're being a shadow

1028
00:49:30,040 --> 00:49:32,560
Speaker 6: fed share, who kind of telegraph what the next fed

1029
00:49:32,600 --> 00:49:34,120
Speaker 6: shair would think or do. And I guess we're getting

1030
00:49:34,120 --> 00:49:36,920
Speaker 6: a taste of that this morning from the President. He's

1031
00:49:37,120 --> 00:49:40,560
Speaker 6: opining on X and Truth Social about these inflation numbers.

1032
00:49:40,840 --> 00:49:44,160
Speaker 6: Biden inflation up, he tweeted this morning. He suggested the

1033
00:49:44,160 --> 00:49:46,560
Speaker 6: interest rates should be lower before this testimony that you

1034
00:49:46,640 --> 00:49:49,480
Speaker 6: just mentioned, perhaps he is the shadow fed share. There

1035
00:49:49,560 --> 00:49:52,000
Speaker 6: was so teas during the campaign trail. But in terms

1036
00:49:52,040 --> 00:49:53,320
Speaker 6: of what's on precedent, and I go back to a

1037
00:49:53,400 --> 00:49:54,960
Speaker 6: question I asked Tom a few minutes ago, and that

1038
00:49:55,120 --> 00:49:58,200
Speaker 6: is how much more difficult does it get for Jerome

1039
00:49:58,239 --> 00:50:03,040
Speaker 6: Palell to weather the commentary, the critique, the criticism, the

1040
00:50:03,040 --> 00:50:06,560
Speaker 6: politics of this moment. He's indicated over and over again

1041
00:50:06,600 --> 00:50:07,719
Speaker 6: that he's up for it, but this is going to

1042
00:50:07,760 --> 00:50:10,720
Speaker 6: become increasingly difficult for him.

1043
00:50:10,920 --> 00:50:13,680
Speaker 14: So form my vantage point, it actually is getting significantly

1044
00:50:13,680 --> 00:50:16,360
Speaker 14: more difficult. And we've seen that in J. Powell in

1045
00:50:16,440 --> 00:50:19,160
Speaker 14: his last few press conferences. And he used to be

1046
00:50:20,160 --> 00:50:23,360
Speaker 14: very effective in communicating and he's become much less effective

1047
00:50:23,400 --> 00:50:28,120
Speaker 14: and clearly the new administration is a big reason, but

1048
00:50:28,200 --> 00:50:30,680
Speaker 14: I also think it's because he holds a lot less

1049
00:50:30,680 --> 00:50:33,840
Speaker 14: effective sway over his committee. The committee seems to be

1050
00:50:33,840 --> 00:50:35,840
Speaker 14: a lot more politicized. There's a lot of talk about

1051
00:50:36,040 --> 00:50:38,680
Speaker 14: Powell being politicized, but I actually think it's other people

1052
00:50:38,719 --> 00:50:41,320
Speaker 14: in the committee and on both sides. So you see

1053
00:50:41,840 --> 00:50:45,279
Speaker 14: some unnamed governors being significantly more dubbish, and some people

1054
00:50:45,280 --> 00:50:50,000
Speaker 14: speculative they're aiming to be his successor. But maybe more relevantly,

1055
00:50:50,040 --> 00:50:53,120
Speaker 14: there are a number of people who have tilted from

1056
00:50:53,160 --> 00:50:56,080
Speaker 14: being very dubbish to much less dubbish when we have

1057
00:50:56,200 --> 00:50:58,839
Speaker 14: had very little data to speak of so far. So

1058
00:50:58,880 --> 00:51:01,480
Speaker 14: I think it is a it's a much more difficult environment.

1059
00:51:01,480 --> 00:51:03,480
Speaker 14: He is much less effective as a leader. Some people

1060
00:51:03,520 --> 00:51:04,160
Speaker 14: will speak of.

1061
00:51:04,280 --> 00:51:07,799
Speaker 6: Lame duck Christ to that point. I mean he's dealing

1062
00:51:07,840 --> 00:51:09,840
Speaker 6: with the same uncertainty that we are. He's going to

1063
00:51:09,840 --> 00:51:12,520
Speaker 6: field as many questions today as yesterday, perhaps more just

1064
00:51:12,560 --> 00:51:15,120
Speaker 6: about the tariff's policy, how that might affect the economy.

1065
00:51:15,160 --> 00:51:17,719
Speaker 6: He's going to try to bat that down, but there's

1066
00:51:17,760 --> 00:51:19,960
Speaker 6: going to be increasing demand for him to indicate how

1067
00:51:19,960 --> 00:51:21,520
Speaker 6: he's thinking through these issues.

1068
00:51:22,680 --> 00:51:26,640
Speaker 13: There's a lot of pressure for anybody in a leadership

1069
00:51:26,719 --> 00:51:31,600
Speaker 13: rule to both demonstrate their integrity but also not be

1070
00:51:31,719 --> 00:51:35,000
Speaker 13: perceived as sending the wrong signal to this administration. I

1071
00:51:35,000 --> 00:51:38,200
Speaker 13: think it's important that we don't normalize this, however, because

1072
00:51:38,280 --> 00:51:41,240
Speaker 13: what we are talking about as we think about lower

1073
00:51:41,280 --> 00:51:44,799
Speaker 13: trust and institutions that includes the FED, that includes the

1074
00:51:44,840 --> 00:51:47,319
Speaker 13: courts that in Congress was always low on that list.

1075
00:51:48,360 --> 00:51:52,680
Speaker 13: And for investors, that means that the nonlinearities that are

1076
00:51:52,760 --> 00:51:55,239
Speaker 13: present in the system make it a lot harder to

1077
00:51:55,239 --> 00:51:58,399
Speaker 13: do what market participants like to do, which is say

1078
00:51:59,000 --> 00:52:00,000
Speaker 13: signal versus noise.

1079
00:52:01,560 --> 00:52:04,399
Speaker 4: In our studios, we are thrilled to bring you this hour.

1080
00:52:04,560 --> 00:52:08,320
Speaker 2: Even Rabari and Tina Fordham of for Fordham Global Foresight,

1081
00:52:08,360 --> 00:52:10,480
Speaker 2: I can't say enough usually in London, and to have

1082
00:52:10,600 --> 00:52:13,800
Speaker 2: them in our studios. Treat it is really really a treat.

1083
00:52:14,080 --> 00:52:17,520
Speaker 2: I'm gonna can I do an audible Yeah, you are

1084
00:52:17,560 --> 00:52:19,600
Speaker 2: the one I want to talk to on this, and

1085
00:52:19,640 --> 00:52:23,320
Speaker 2: that we have a president going through a routine visit

1086
00:52:23,600 --> 00:52:28,120
Speaker 2: with the Hashemi King of Jordan, Abdullah the second folks,

1087
00:52:28,120 --> 00:52:31,320
Speaker 2: this yes, it takes you back to the movie Lawrence

1088
00:52:31,360 --> 00:52:36,040
Speaker 2: of Arabia The Ignorance of America, of where Jordan fits

1089
00:52:36,080 --> 00:52:39,279
Speaker 2: in to the matrix of the levant is there's there's

1090
00:52:39,320 --> 00:52:42,920
Speaker 2: no measurement of how dumb I am in everybody else.

1091
00:52:43,520 --> 00:52:48,759
Speaker 2: I had a very well reported interview with Elcci at

1092
00:52:48,840 --> 00:52:52,680
Speaker 2: Davos years ago. Elceci of Egypt said enough, I'm not

1093
00:52:52,760 --> 00:52:58,520
Speaker 2: even going explain to Republicans now in support of Trump

1094
00:52:59,000 --> 00:53:04,360
Speaker 2: the delicacy of how the president is treating Jordan, Egypt,

1095
00:53:04,640 --> 00:53:06,480
Speaker 2: in the rest of the broader Middle East.

1096
00:53:06,960 --> 00:53:09,720
Speaker 13: Well, it's consistent with a kind of an American approach

1097
00:53:09,760 --> 00:53:11,560
Speaker 13: to the world, which is get them in a room,

1098
00:53:11,640 --> 00:53:15,200
Speaker 13: knock heads, and you know, make a deal. And so

1099
00:53:15,400 --> 00:53:19,400
Speaker 13: Trump's logic is very, very appealing. But other countries have

1100
00:53:19,480 --> 00:53:23,560
Speaker 13: politics too. King Abdullah of Jordan has fifty percent of

1101
00:53:23,640 --> 00:53:28,319
Speaker 13: his population is Palestinian. He can't simply roll over and

1102
00:53:28,360 --> 00:53:30,880
Speaker 13: expect to stay in power, and his presence in the

1103
00:53:30,920 --> 00:53:33,320
Speaker 13: region is very important for his stability.

1104
00:53:33,440 --> 00:53:37,040
Speaker 2: And he's been holistic for America from his time at

1105
00:53:37,040 --> 00:53:40,640
Speaker 2: Eglebrooke and Deerfield years ago in Western at Massachusetts. I mean,

1106
00:53:40,719 --> 00:53:43,440
Speaker 2: this is a guy that's always been on the American team.

1107
00:53:44,040 --> 00:53:47,120
Speaker 2: Is he the buffer to Iran? I mean, on the map,

1108
00:53:47,680 --> 00:53:50,760
Speaker 2: it tells me that Jordan is the buffer to Persia.

1109
00:53:50,800 --> 00:53:51,719
Speaker 2: Am I right on that.

1110
00:53:52,600 --> 00:53:55,879
Speaker 13: I think Syria as a wild card and the kind

1111
00:53:55,920 --> 00:53:59,560
Speaker 13: of power vacuum there may be more relevant for Iran

1112
00:54:00,239 --> 00:54:02,680
Speaker 13: itself in a weak position. And what we don't know

1113
00:54:03,200 --> 00:54:06,960
Speaker 13: is what kind of discussion Natan Yahoo of Israel is

1114
00:54:07,000 --> 00:54:10,640
Speaker 13: having with the president and this move toward maximum pressure

1115
00:54:11,120 --> 00:54:15,319
Speaker 13: what that means, because making it harder for Abdullah to

1116
00:54:15,360 --> 00:54:20,160
Speaker 13: sit on that throne, pressuring Cisi in Egypt could cause

1117
00:54:20,600 --> 00:54:26,239
Speaker 13: what US political scientists called unintended consequences and make a

1118
00:54:26,320 --> 00:54:27,840
Speaker 13: difficult situation worse.

1119
00:54:28,239 --> 00:54:30,480
Speaker 4: You were sitting at Ebrahm's going top. Don't ask me

1120
00:54:30,560 --> 00:54:34,520
Speaker 4: about the Egyptian David save us.

1121
00:54:34,520 --> 00:54:36,439
Speaker 6: Please see presparent in mind what we were talking about

1122
00:54:36,440 --> 00:54:37,960
Speaker 6: a moment ago, that there is so much here that's

1123
00:54:38,040 --> 00:54:41,600
Speaker 6: unprecedented and not normal. How useful is it for you

1124
00:54:41,680 --> 00:54:43,320
Speaker 6: to go back and look at the first term to

1125
00:54:43,360 --> 00:54:46,480
Speaker 6: sort of divine what might be happening here? Is this

1126
00:54:47,280 --> 00:54:49,520
Speaker 6: Trump two point zero? Is it a revision of the

1127
00:54:49,560 --> 00:54:51,320
Speaker 6: manual that we had that first time around, or is

1128
00:54:51,320 --> 00:54:53,200
Speaker 6: it simply a very different guidebook.

1129
00:54:54,000 --> 00:54:55,240
Speaker 5: I think it's still very useful.

1130
00:54:55,320 --> 00:54:57,560
Speaker 14: Yeah, And in fact, the way to approach it is

1131
00:54:57,600 --> 00:54:59,960
Speaker 14: to think about what is similar to the first term

1132
00:55:00,080 --> 00:55:03,080
Speaker 14: and what is different, And I've continued to highlight that

1133
00:55:03,360 --> 00:55:05,280
Speaker 14: there are big macroeconomic differences.

1134
00:55:05,280 --> 00:55:05,920
Speaker 4: We are now in the.

1135
00:55:05,920 --> 00:55:08,520
Speaker 14: World where the economy is robust, stock markets are at

1136
00:55:08,520 --> 00:55:10,799
Speaker 14: all time highs, and inflation is a major concern. So

1137
00:55:10,840 --> 00:55:13,400
Speaker 14: that shakes how this administration will respond. It doesn't need

1138
00:55:13,440 --> 00:55:16,120
Speaker 14: to stimulate the economy. It will worry about inflation and

1139
00:55:16,200 --> 00:55:19,839
Speaker 14: net net that means the less fiscally expansionary than many

1140
00:55:19,840 --> 00:55:22,279
Speaker 14: people would have thought. But we've had a number of

1141
00:55:23,040 --> 00:55:25,920
Speaker 14: developments that are very much in line with how this

1142
00:55:26,040 --> 00:55:28,440
Speaker 14: administration worked the first time around, and I think the

1143
00:55:28,440 --> 00:55:31,120
Speaker 14: most relevant of them is it loves to experiment. It

1144
00:55:31,160 --> 00:55:33,680
Speaker 14: loves to take risks, it loves to send trial balloons,

1145
00:55:33,719 --> 00:55:35,160
Speaker 14: and it's very keen.

1146
00:55:35,040 --> 00:55:36,040
Speaker 5: To reverse course.

1147
00:55:36,080 --> 00:55:37,680
Speaker 10: It likes to act first.

1148
00:55:37,440 --> 00:55:39,280
Speaker 14: See what the response is and then judicate.

1149
00:55:39,520 --> 00:55:40,359
Speaker 4: In addition to that.

1150
00:55:40,360 --> 00:55:43,040
Speaker 14: It likes to as Tina likes to call it, flood

1151
00:55:43,040 --> 00:55:48,359
Speaker 14: the zone, distract and maybe divide potential opposition. So there's

1152
00:55:48,400 --> 00:55:50,680
Speaker 14: a number of and confused. So there's a number of

1153
00:55:50,800 --> 00:55:53,360
Speaker 14: lessons in the first turn that I think investors in

1154
00:55:53,400 --> 00:55:56,359
Speaker 14: the general public would be in a good position to.

1155
00:55:56,320 --> 00:55:58,880
Speaker 6: Heat Tina we're seeing that now there's this big confact

1156
00:55:58,920 --> 00:56:00,880
Speaker 6: that's going to happen in in the coming days the

1157
00:56:00,920 --> 00:56:04,120
Speaker 6: Munich Security Conference, and the Vice President has gone from

1158
00:56:04,120 --> 00:56:06,440
Speaker 6: Paris to there. He'll speak there. I look at the

1159
00:56:06,440 --> 00:56:09,600
Speaker 6: bloomberg and see a headline this morning. Ukraine NATO membership

1160
00:56:09,640 --> 00:56:11,880
Speaker 6: is not a realistic goal, according to Pete Hegseth, the

1161
00:56:11,880 --> 00:56:15,719
Speaker 6: new Defense Secretary. From where you sit, what is the

1162
00:56:15,719 --> 00:56:22,160
Speaker 6: next chapter of.

1163
00:56:20,000 --> 00:56:22,919
Speaker 13: I mean, Ukraine joining NATO, I don't think has been

1164
00:56:23,320 --> 00:56:27,719
Speaker 13: a realistic goal. But Ukraine with having a European perspective,

1165
00:56:27,760 --> 00:56:30,760
Speaker 13: as the EU likes to say, is a realistic goal,

1166
00:56:31,560 --> 00:56:35,959
Speaker 13: and that is an anchor for the European Union. I think,

1167
00:56:36,160 --> 00:56:38,919
Speaker 13: you know, the military strategists like to quote the old

1168
00:56:39,000 --> 00:56:42,280
Speaker 13: saying that no plan survives first contact with the enemy.

1169
00:56:42,760 --> 00:56:46,440
Speaker 13: When Vice President Vance gets to Munich, he'll get an

1170
00:56:46,440 --> 00:56:52,920
Speaker 13: earfull and be confronted with the European reality because Russia's.

1171
00:56:52,480 --> 00:56:53,320
Speaker 5: On our doorstep.

1172
00:56:53,880 --> 00:56:57,040
Speaker 13: We've got several NATAL member states that are very concerned.

1173
00:56:57,239 --> 00:57:00,920
Speaker 13: This isn't just about creating a d military rised zone

1174
00:57:01,360 --> 00:57:05,200
Speaker 13: in the occupied territories. If it were that simple land

1175
00:57:05,239 --> 00:57:08,280
Speaker 13: for peace, it would already have been done.

1176
00:57:08,800 --> 00:57:11,600
Speaker 6: What is your counsel to someone like me, someone listening

1177
00:57:11,640 --> 00:57:16,120
Speaker 6: who watched what unfolded yesterday in the Oval Office, Donald

1178
00:57:16,160 --> 00:57:19,880
Speaker 6: Trump talking about Gaza as a place that's not worth anything.

1179
00:57:19,960 --> 00:57:23,880
Speaker 6: It's his to buy, indicating their's, but no thought into

1180
00:57:23,880 --> 00:57:26,400
Speaker 6: sort of where people there would go if this essentially

1181
00:57:26,400 --> 00:57:29,000
Speaker 6: ethnic cleansing were to happen, people were to be moved out,

1182
00:57:29,320 --> 00:57:31,120
Speaker 6: not thinking through all of these steps. How do you

1183
00:57:31,520 --> 00:57:33,960
Speaker 6: how much weight do you give to what seemed like

1184
00:57:34,440 --> 00:57:37,080
Speaker 6: not thought out, perhaps offhand comments like that versus a

1185
00:57:37,080 --> 00:57:38,800
Speaker 6: broader kind of strategic bent when it comes to the

1186
00:57:38,840 --> 00:57:39,760
Speaker 6: Middle East or other places.

1187
00:57:39,840 --> 00:57:41,440
Speaker 13: Well, first of all, I think he's serious. I think

1188
00:57:41,440 --> 00:57:43,920
Speaker 13: he I think he is a real estate developer. He

1189
00:57:44,000 --> 00:57:47,040
Speaker 13: made similar comments about North Korea right.

1190
00:57:46,920 --> 00:57:50,960
Speaker 5: About you could be the next he sees.

1191
00:57:50,840 --> 00:57:53,960
Speaker 13: You know, waterfront, ocean front.

1192
00:57:54,160 --> 00:57:55,760
Speaker 4: Ter Putin responded that.

1193
00:57:56,480 --> 00:58:01,000
Speaker 13: Mister Putin, President Putin can watch and and wait, just

1194
00:58:01,120 --> 00:58:05,640
Speaker 13: like President She right. Remember during We've talked about this,

1195
00:58:05,760 --> 00:58:10,480
Speaker 13: during COVID, they thought America was in decline and they're

1196
00:58:10,520 --> 00:58:13,080
Speaker 13: just watching to see the chaos ensue.

1197
00:58:13,600 --> 00:58:15,800
Speaker 2: I can't say enough about Angela's stent, whether she was

1198
00:58:15,880 --> 00:58:19,560
Speaker 2: on fire her book Putin's World, she was really forceful

1199
00:58:19,600 --> 00:58:24,440
Speaker 2: about we underestimate putin at this Trump moment, Ibra Mubari,

1200
00:58:24,760 --> 00:58:28,080
Speaker 2: Tina Fordham with his foreigner of global foresighted generous amount

1201
00:58:28,080 --> 00:58:29,320
Speaker 2: of time and we're going to continue.

1202
00:58:29,400 --> 00:58:32,360
Speaker 4: We welcome all of you across the nation and worldwide

1203
00:58:32,400 --> 00:58:35,240
Speaker 4: on YouTube subscribe to Bloomberg Podcast.

1204
00:58:35,320 --> 00:58:38,360
Speaker 2: I can tell you this is what the show's about.

1205
00:58:38,800 --> 00:58:43,280
Speaker 2: Catherine Mann nailed it. She went to the bank. She

1206
00:58:43,360 --> 00:58:47,920
Speaker 2: got sick of you guys. She got sick, said Saya

1207
00:58:48,280 --> 00:58:51,040
Speaker 2: and Catherine Mann, who folks came up with a whole

1208
00:58:51,080 --> 00:58:53,400
Speaker 2: dysfunction of China, us etc.

1209
00:58:53,840 --> 00:58:56,160
Speaker 4: Doctor Mann went to the Bank of England and she

1210
00:58:56,240 --> 00:58:58,480
Speaker 4: has been a resilient, cautious hawk.

1211
00:58:58,600 --> 00:59:02,200
Speaker 2: There is that the new town Ibra Marbury is even

1212
00:59:02,240 --> 00:59:05,280
Speaker 2: with this inflation report, even the middle ground or dare

1213
00:59:05,320 --> 00:59:08,600
Speaker 2: I say the doves tilt hawkish over the next year.

1214
00:59:09,920 --> 00:59:13,600
Speaker 14: Well, I think what everybody really appreciates about Catherine is

1215
00:59:13,640 --> 00:59:15,400
Speaker 14: again that she has an open mind, but at the

1216
00:59:15,400 --> 00:59:17,840
Speaker 14: same time she is a very structured thinker. And what

1217
00:59:18,480 --> 00:59:21,600
Speaker 14: was catching my eye recently with her is she was

1218
00:59:21,640 --> 00:59:24,600
Speaker 14: an ardent hawk on the Bank of England's NPC for

1219
00:59:24,640 --> 00:59:27,280
Speaker 14: the last you know, probably two years. She was on

1220
00:59:27,320 --> 00:59:29,600
Speaker 14: the dubbish end of the spectrum when I worked with her,

1221
00:59:30,000 --> 00:59:32,360
Speaker 14: and then in the very last meeting she seemed to

1222
00:59:32,400 --> 00:59:35,920
Speaker 14: flip back again and highlighted that there are some points

1223
00:59:35,920 --> 00:59:38,560
Speaker 14: of pressure in the UK economy that in fact pulled

1224
00:59:38,600 --> 00:59:40,680
Speaker 14: her into the idea that maybe they should be cutting

1225
00:59:40,680 --> 00:59:43,520
Speaker 14: by fifty basis points, cut by fifty basis points, when

1226
00:59:43,520 --> 00:59:45,680
Speaker 14: previously she was in the you know, in the rear

1227
00:59:45,720 --> 00:59:47,760
Speaker 14: guard that suggested that the Bank of England should be

1228
00:59:47,880 --> 00:59:50,960
Speaker 14: should be very very cautious. Now the lesson in there

1229
00:59:51,040 --> 00:59:53,640
Speaker 14: for me is for somebody like her who is not

1230
00:59:53,720 --> 00:59:56,280
Speaker 14: an internal NPC member at the Bank of England, historically

1231
00:59:56,320 --> 00:59:58,320
Speaker 14: they've been treated with a bit of a discount by

1232
00:59:58,920 --> 01:00:01,000
Speaker 14: markets because they see is less influential.

1233
01:00:01,360 --> 01:00:04,000
Speaker 5: I would say, pay a lot more attention.

1234
01:00:03,880 --> 01:00:06,439
Speaker 14: To her than you normally would because it's it's times

1235
01:00:06,440 --> 01:00:08,560
Speaker 14: of great uncertainty, it's times where people don't really have

1236
01:00:08,640 --> 01:00:11,040
Speaker 14: much of an anchor, where these people have more influence.

1237
01:00:11,080 --> 01:00:12,800
Speaker 2: I got you just find a question in an honor

1238
01:00:12,880 --> 01:00:15,840
Speaker 2: Viillam Bauder, who invented modern city research.

1239
01:00:16,120 --> 01:00:19,680
Speaker 4: The debt in the deficit is tangible. Americans love to

1240
01:00:19,800 --> 01:00:21,760
Speaker 4: ignore the debt and the deficit.

1241
01:00:22,040 --> 01:00:24,200
Speaker 2: Ibra Robari Is this a time where we need to

1242
01:00:24,240 --> 01:00:28,560
Speaker 2: focus on the debt, the deficit in our interest expense.

1243
01:00:29,840 --> 01:00:32,280
Speaker 5: I think yes and yes for two reasons.

1244
01:00:32,320 --> 01:00:34,680
Speaker 14: I think one is you know the need ter One one,

1245
01:00:34,600 --> 01:00:36,840
Speaker 14: this administration has actually focused on it, and again I

1246
01:00:36,880 --> 01:00:39,960
Speaker 14: think people have been missing how focused they are on

1247
01:00:40,400 --> 01:00:43,000
Speaker 14: to some degree, managing what they see as a vulnerability

1248
01:00:43,000 --> 01:00:45,880
Speaker 14: in terms of the level of debt and deficit and how.

1249
01:00:45,840 --> 01:00:46,560
Speaker 5: Much power they have.

1250
01:00:46,680 --> 01:00:49,080
Speaker 14: I mean, the standard answer you get from anybody on

1251
01:00:49,520 --> 01:00:52,440
Speaker 14: US fiscal is well, the executive can't really do very much.

1252
01:00:52,440 --> 01:00:55,800
Speaker 14: It's Congress's job. Congress is so dysfunctional and divided. We

1253
01:00:55,840 --> 01:00:58,880
Speaker 14: are seeing them taking action. They're trying to cut spending.

1254
01:00:59,000 --> 01:01:01,240
Speaker 14: They have a lot more power over over Congress than

1255
01:01:01,280 --> 01:01:04,400
Speaker 14: previous administrations have had. So there's I think interesting fiscal

1256
01:01:04,440 --> 01:01:06,200
Speaker 14: action going on right now, which is different from what

1257
01:01:06,240 --> 01:01:08,600
Speaker 14: people expect. There's the bigger question that a lot more

1258
01:01:08,600 --> 01:01:10,360
Speaker 14: people ask about, which is, you know, when are we

1259
01:01:10,520 --> 01:01:13,000
Speaker 14: entering the period of physical crisis in the US. And

1260
01:01:13,040 --> 01:01:16,440
Speaker 14: there I think massive topic to watch, but that timing.

1261
01:01:16,760 --> 01:01:19,160
Speaker 14: You know, if anything is actually slightly pushed back relative

1262
01:01:19,200 --> 01:01:20,919
Speaker 14: to what we thought a couple of months ago, then

1263
01:01:21,160 --> 01:01:22,640
Speaker 14: you know what people were expecting.

1264
01:01:22,800 --> 01:01:24,040
Speaker 4: This is we're out of time.

1265
01:01:24,200 --> 01:01:26,320
Speaker 5: This is what We'll have many occasions to talk.

1266
01:01:28,040 --> 01:01:28,480
Speaker 4: In town.

1267
01:01:28,840 --> 01:01:31,200
Speaker 13: Yes, but I don't have to be in town, but yes,

1268
01:01:31,520 --> 01:01:32,800
Speaker 13: I will be coming more often.

1269
01:01:33,200 --> 01:01:34,680
Speaker 5: Okay, wonder the German election.

1270
01:01:34,800 --> 01:01:37,520
Speaker 4: Can we do something to a London hotel process.

1271
01:01:38,880 --> 01:01:41,080
Speaker 13: I'd like to speak to you about New York hotel.

1272
01:01:43,360 --> 01:01:45,440
Speaker 5: Sterling's unbelievable.

1273
01:01:45,840 --> 01:01:49,560
Speaker 13: It's harder, it's harder than ever. But it's wonderful to

1274
01:01:49,560 --> 01:01:53,840
Speaker 13: have these conversations. And I think the appetite for this

1275
01:01:54,000 --> 01:01:57,680
Speaker 13: kind of open minded you know, checking your priors. It

1276
01:01:57,760 --> 01:02:00,360
Speaker 13: has to be the way forward. We haven't seen this

1277
01:02:00,440 --> 01:02:02,360
Speaker 13: movie before, No, we haven't.

1278
01:02:02,680 --> 01:02:05,000
Speaker 2: And we're working on. David and I are reading as

1279
01:02:05,080 --> 01:02:07,720
Speaker 2: much as we can to stay up on this. Stephen

1280
01:02:07,760 --> 01:02:10,400
Speaker 2: Levinski and the New Foreign Affairs and Jason Furman and

1281
01:02:10,400 --> 01:02:14,240
Speaker 2: of course Tina Fordham writing every day. Tina Fordham, even Bumbari,

1282
01:02:14,760 --> 01:02:16,520
Speaker 2: thank you so much for joining Bloomberg.

1283
01:02:21,080 --> 01:02:25,000
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

1284
01:02:25,000 --> 01:02:28,040
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

1285
01:02:28,040 --> 01:02:31,080
Speaker 1: Auto with the Bloomberg Business app. You can also watch

1286
01:02:31,120 --> 01:02:34,080
Speaker 1: us live every weekday on YouTube and always on the

1287
01:02:34,120 --> 01:02:35,640
Speaker 1: Bloomberg terminal.

1288
01:02:36,640 --> 01:02:41,360
Speaker 2: After decades of service to his constituents in Arkansas, has

1289
01:02:41,400 --> 01:02:43,480
Speaker 2: the worst job in Washington. He has had a House

1290
01:02:43,560 --> 01:02:48,720
Speaker 2: Financial Services Committee, the Republican from Arkansas, and he joins

1291
01:02:48,760 --> 01:02:51,120
Speaker 2: us right now, French, I got eight ways to go here,

1292
01:02:51,640 --> 01:02:53,800
Speaker 2: but I got to look to the second third week

1293
01:02:53,800 --> 01:02:57,600
Speaker 2: of March, where the challenge is a government shutdown.

1294
01:02:57,640 --> 01:02:59,840
Speaker 4: Budget challenges. You're going to be in the heart of this.

1295
01:03:00,480 --> 01:03:02,400
Speaker 2: So I'm going to go to someone on your committee

1296
01:03:02,400 --> 01:03:07,520
Speaker 2: like Monica de la Cruz, the Latina from Texas. Fine, Okay,

1297
01:03:07,800 --> 01:03:12,120
Speaker 2: the conservative southerns that don't want to budget on the budget,

1298
01:03:12,400 --> 01:03:15,880
Speaker 2: how are mainstream Republicans like you going to convince them

1299
01:03:16,280 --> 01:03:19,360
Speaker 2: to keep the United States of America running.

1300
01:03:20,680 --> 01:03:20,880
Speaker 9: Well?

1301
01:03:20,920 --> 01:03:23,400
Speaker 15: Thomas, is such an important question. Great to be with

1302
01:03:24,040 --> 01:03:27,080
Speaker 15: you this morning. This is something we should have done

1303
01:03:27,480 --> 01:03:30,720
Speaker 15: in December, and it was a horrible mistake in my

1304
01:03:30,880 --> 01:03:35,360
Speaker 15: judgment not to complete the funding for FY twenty five

1305
01:03:35,880 --> 01:03:39,600
Speaker 15: in the previous Congress. Under the Biden administration, we would

1306
01:03:39,600 --> 01:03:42,200
Speaker 15: have had roughly the same characteristics we would have had

1307
01:03:42,200 --> 01:03:45,800
Speaker 15: an incoming Trump administration and incoming Senate. I think we

1308
01:03:45,960 --> 01:03:49,480
Speaker 15: would have gotten substantially the same deal. And now we're

1309
01:03:49,480 --> 01:03:52,680
Speaker 15: on trying to do budget reconciliation, which is a much

1310
01:03:52,680 --> 01:03:55,800
Speaker 15: more important task, and yet we face, as you point out,

1311
01:03:55,800 --> 01:03:56,800
Speaker 15: a government shutdown.

1312
01:03:57,480 --> 01:03:58,880
Speaker 9: Republicans have to stick together.

1313
01:03:59,280 --> 01:04:02,560
Speaker 15: We should use the Fiscal Responsibility Act numbers from last

1314
01:04:02,640 --> 01:04:06,280
Speaker 15: year and negotiate with the Senate now a Republican Senate

1315
01:04:06,640 --> 01:04:08,840
Speaker 15: who wants to spend a little bit more on defense,

1316
01:04:08,960 --> 01:04:12,000
Speaker 15: and get this behind us so that we could go

1317
01:04:12,040 --> 01:04:15,680
Speaker 15: to the main event of focus on reforming regulation, reforming

1318
01:04:15,960 --> 01:04:20,320
Speaker 15: productivity in the federal government, reforming spending, extending pro growth

1319
01:04:20,360 --> 01:04:21,000
Speaker 15: tax cuts.

1320
01:04:21,920 --> 01:04:24,600
Speaker 6: Give us your sense of how much optimism you have

1321
01:04:24,680 --> 01:04:26,440
Speaker 6: that's going to happen here. I know there's a lot

1322
01:04:26,440 --> 01:04:30,360
Speaker 6: of nervousness and apprehension that time is running short. There

1323
01:04:30,360 --> 01:04:32,760
Speaker 6: are different views on this. We were spending the last

1324
01:04:32,760 --> 01:04:34,680
Speaker 6: few weeks talking about will be one bill or two biller?

1325
01:04:34,720 --> 01:04:35,640
Speaker 4: Three bit three bills.

1326
01:04:35,680 --> 01:04:37,800
Speaker 6: I know you've been involved in the same game there

1327
01:04:37,800 --> 01:04:40,000
Speaker 6: on the hill. Do you see a path forward here?

1328
01:04:40,040 --> 01:04:41,520
Speaker 6: How much clarity do you have at this point?

1329
01:04:42,200 --> 01:04:42,560
Speaker 9: Yeah?

1330
01:04:42,640 --> 01:04:45,760
Speaker 15: Well, first, on Tom's question about FYY twenty five finishing

1331
01:04:45,840 --> 01:04:49,880
Speaker 15: FYY twenty five before March fourteenth, I have medium confidence

1332
01:04:50,240 --> 01:04:53,120
Speaker 15: the worst case scenario would be to continue a CR

1333
01:04:53,800 --> 01:04:56,200
Speaker 15: till like September thirtieth. First of all, once you hit

1334
01:04:56,240 --> 01:04:58,680
Speaker 15: April first, you'll have a one percent across the board

1335
01:04:58,720 --> 01:05:05,880
Speaker 15: cut twenty five spending, and crs are terrible for government management.

1336
01:05:06,120 --> 01:05:09,840
Speaker 15: We'll end up spending billions more because we operate under

1337
01:05:09,840 --> 01:05:10,320
Speaker 15: a CR.

1338
01:05:10,400 --> 01:05:11,680
Speaker 9: We won't be able to start.

1339
01:05:11,440 --> 01:05:13,800
Speaker 15: Any new programs at the Defense Department, which is a

1340
01:05:13,840 --> 01:05:17,959
Speaker 15: priority for the administration. So that makes me lean to yes,

1341
01:05:18,080 --> 01:05:21,760
Speaker 15: we'll get something done on March fourteenth, on fiscal twenty five,

1342
01:05:22,120 --> 01:05:26,200
Speaker 15: as the budget reconciliation the big game. I do support

1343
01:05:26,240 --> 01:05:28,600
Speaker 15: one bill here in the House because I think that's

1344
01:05:28,640 --> 01:05:33,200
Speaker 15: how we hold the Republican coalition together best here. And

1345
01:05:33,240 --> 01:05:35,920
Speaker 15: as you know, Senator Graham and the Senate's taking a

1346
01:05:35,920 --> 01:05:36,680
Speaker 15: different approach.

1347
01:05:37,080 --> 01:05:39,720
Speaker 6: Congressman Hill, what is the view from the Longworth House

1348
01:05:39,760 --> 01:05:41,720
Speaker 6: Office building of what we're seeing the White House do?

1349
01:05:41,800 --> 01:05:45,480
Speaker 6: Of course, the historical precedent has been that Congress controls

1350
01:05:45,480 --> 01:05:47,800
Speaker 6: the purse, makes decisions about funding. We are seeing this

1351
01:05:47,840 --> 01:05:50,280
Speaker 6: administration take a more active role, shall we say, in

1352
01:05:50,320 --> 01:05:54,240
Speaker 6: determining what gets funded and what doesn't. How much comfort

1353
01:05:54,240 --> 01:05:56,520
Speaker 6: do you have with seeding some of that power to

1354
01:05:57,200 --> 01:05:59,800
Speaker 6: your friends and colleagues in the other brands, the executive

1355
01:05:59,800 --> 01:06:01,440
Speaker 6: brand of Pennsylvania Avenue.

1356
01:06:02,480 --> 01:06:05,280
Speaker 15: Well, think you found on money that's appropriated. Congress does

1357
01:06:05,320 --> 01:06:08,040
Speaker 15: control those purse strings and they direct that spending.

1358
01:06:08,560 --> 01:06:11,040
Speaker 9: But in the broad swaths of federal.

1359
01:06:10,680 --> 01:06:15,000
Speaker 15: Spending, you have directions to agencies spend this money on

1360
01:06:15,080 --> 01:06:18,600
Speaker 15: these general topics, and that's what the appropriated money says.

1361
01:06:18,640 --> 01:06:22,240
Speaker 15: And then you have article to authority with a lot

1362
01:06:22,240 --> 01:06:24,840
Speaker 15: of discretion about how to spend it. And I think

1363
01:06:24,840 --> 01:06:27,760
Speaker 15: that's what President Trump's attempting to look at. Is the

1364
01:06:27,800 --> 01:06:30,560
Speaker 15: spending done at the end of the Biden administration and

1365
01:06:30,600 --> 01:06:33,040
Speaker 15: proposed to be spent here in the first few weeks

1366
01:06:33,040 --> 01:06:33,920
Speaker 15: of his administration.

1367
01:06:34,400 --> 01:06:38,280
Speaker 9: Is it in alignment with his goals that he.

1368
01:06:38,360 --> 01:06:42,280
Speaker 15: Has in foreign policy, for example, at USAID, And that's

1369
01:06:42,280 --> 01:06:45,440
Speaker 15: a classic Article to authority to take a look at that,

1370
01:06:45,560 --> 01:06:48,959
Speaker 15: make sure it's in alignment with their policies. With that said,

1371
01:06:49,000 --> 01:06:51,920
Speaker 15: you can't do these things without both the legislative branch

1372
01:06:51,960 --> 01:06:54,240
Speaker 15: and the executive branch ultimately working together.

1373
01:06:54,680 --> 01:06:56,440
Speaker 2: Then, Frenchchill, you know, you and I have known each

1374
01:06:56,480 --> 01:07:00,000
Speaker 2: other since time began, and I've never seen a private

1375
01:07:00,200 --> 01:07:02,880
Speaker 2: citizen in the Oval office standing there with his arms

1376
01:07:02,880 --> 01:07:03,520
Speaker 2: crossed like.

1377
01:07:03,560 --> 01:07:06,200
Speaker 4: He owned the high ground. You are one of the

1378
01:07:06,320 --> 01:07:08,040
Speaker 4: rare beasts that came.

1379
01:07:07,920 --> 01:07:12,960
Speaker 2: To Congress actually running a business in Little Rock. What's

1380
01:07:13,000 --> 01:07:17,720
Speaker 2: your advice to your fellow moderate brethren of the Democratic

1381
01:07:17,760 --> 01:07:19,560
Speaker 2: and Republican persuasion?

1382
01:07:19,720 --> 01:07:22,840
Speaker 4: What do they need to do in the coming days?

1383
01:07:24,280 --> 01:07:26,760
Speaker 15: Well, first, let's look at doje Tom. It's a good

1384
01:07:26,760 --> 01:07:29,640
Speaker 15: idea to go in and look at for efficiency and

1385
01:07:29,680 --> 01:07:32,600
Speaker 15: government in the executive branch and make recommendations to the

1386
01:07:32,680 --> 01:07:36,640
Speaker 15: legislative branch when you want to spend money differently or

1387
01:07:36,760 --> 01:07:39,840
Speaker 15: have a different number of full time equivalent positions in

1388
01:07:39,880 --> 01:07:43,360
Speaker 15: an agency. That's perfectly a good suggestion, and we haven't

1389
01:07:43,360 --> 01:07:45,800
Speaker 15: done it in years. I'd say since nine to eleven.

1390
01:07:46,160 --> 01:07:49,960
Speaker 15: The government's been focused on growing, not remotely focused on

1391
01:07:50,040 --> 01:07:53,920
Speaker 15: productivity or realigning or investing in technology or doing anything

1392
01:07:53,920 --> 01:07:56,800
Speaker 15: in a different way. We've been completely distracted by the

1393
01:07:56,800 --> 01:08:00,920
Speaker 15: war on terrorism, THEA crisis, and then recovery from that,

1394
01:08:01,040 --> 01:08:03,720
Speaker 15: and then the pandemic. So I think it's over time

1395
01:08:04,240 --> 01:08:06,960
Speaker 15: to scrape the barnacles from the ship of state when

1396
01:08:07,000 --> 01:08:10,520
Speaker 15: it comes to regulatory policy, personnel policy. But there's a

1397
01:08:10,600 --> 01:08:12,160
Speaker 15: right way and a wrong way to do it. And

1398
01:08:12,160 --> 01:08:16,919
Speaker 15: I would encourage the administration to plan, communicate, and consult

1399
01:08:16,960 --> 01:08:19,000
Speaker 15: with Congress on how the best way to do that is.

1400
01:08:19,280 --> 01:08:20,760
Speaker 6: As for the right way to do it, I think

1401
01:08:20,800 --> 01:08:22,760
Speaker 6: of you as a young man serving as a deputy

1402
01:08:22,760 --> 01:08:25,360
Speaker 6: Assistant Secretary of the Treasury departmentunder Nicholas Brady, and I

1403
01:08:25,400 --> 01:08:29,799
Speaker 6: wonder if you could have imagined you would have non appointed,

1404
01:08:29,840 --> 01:08:33,439
Speaker 6: non confirmed private sector individuals going in and looking at

1405
01:08:33,439 --> 01:08:35,720
Speaker 6: the payment system there in the Treasury Department. Does that

1406
01:08:35,760 --> 01:08:37,920
Speaker 6: make you uncomfortable having the history that you have with

1407
01:08:37,960 --> 01:08:40,439
Speaker 6: the Treasury Department to see the way that Doge has

1408
01:08:40,479 --> 01:08:45,240
Speaker 6: been approaching the sort of fiscal health the books, for

1409
01:08:45,320 --> 01:08:46,920
Speaker 6: lack of a better word, of the federal government.

1410
01:08:47,720 --> 01:08:50,040
Speaker 15: Well, when I heard about that story over the weekend

1411
01:08:50,160 --> 01:08:52,960
Speaker 15: last week, called Secretary of Assent. We talked about it

1412
01:08:53,120 --> 01:08:56,920
Speaker 15: last Monday, and he assured me that anything that Doge

1413
01:08:57,040 --> 01:09:01,400
Speaker 15: was doing was in the control of the Treasury Department,

1414
01:09:01,840 --> 01:09:05,400
Speaker 15: and that some people were working there for it review purposes.

1415
01:09:05,840 --> 01:09:09,519
Speaker 15: But he implied to me that he's got that under control.

1416
01:09:09,600 --> 01:09:12,560
Speaker 15: For making those recommendations, We're going to hold him accountable.

1417
01:09:12,560 --> 01:09:15,800
Speaker 15: He's the Treasury Secretary. So anything that Doge is doing

1418
01:09:15,800 --> 01:09:19,000
Speaker 15: in a Cabinet agency. We just need to remind the

1419
01:09:19,040 --> 01:09:23,000
Speaker 15: American people, Members of Congress, the Trump administration, we're holding

1420
01:09:23,040 --> 01:09:27,799
Speaker 15: the Cabinet Secretary accountable for, as I say, planning, efficiency changes,

1421
01:09:27,840 --> 01:09:32,480
Speaker 15: budget changes, personnel changes. We're holding them accountable here in Congress.

1422
01:09:33,080 --> 01:09:36,160
Speaker 6: We got some news overnight that Jonathan mccurnan, formerly the FDIC,

1423
01:09:36,320 --> 01:09:38,479
Speaker 6: has been picked to head the CFPB. And this has

1424
01:09:38,479 --> 01:09:40,519
Speaker 6: been an agency that's been in the crosshairs. I think

1425
01:09:40,560 --> 01:09:42,800
Speaker 6: it's safe to say you've had your criticisms with that

1426
01:09:42,840 --> 01:09:44,760
Speaker 6: agency over these last few years. And I want to

1427
01:09:44,760 --> 01:09:47,479
Speaker 6: ask you about some comments that the general lady from Cambridge,

1428
01:09:47,479 --> 01:09:50,240
Speaker 6: Massachusetts made on our heir last night, the senior Senator

1429
01:09:50,280 --> 01:09:53,080
Speaker 6: from Massachusetts, Elizabeth Warren, and she said, look, it's not

1430
01:09:53,240 --> 01:09:55,560
Speaker 6: up to the executive branch to decide whether or not

1431
01:09:55,600 --> 01:09:58,759
Speaker 6: an agency like the CFPB exists or what form it takes.

1432
01:09:58,760 --> 01:10:01,240
Speaker 6: That's up to Congress. The point that she's making is

1433
01:10:01,680 --> 01:10:04,439
Speaker 6: you and other lawmakers, if you don't like what this bureau,

1434
01:10:04,520 --> 01:10:08,320
Speaker 6: this agency is doing, you could take action yourselves. Lawmakers

1435
01:10:08,360 --> 01:10:10,400
Speaker 6: could decide whether or not it should continue to exist.

1436
01:10:10,840 --> 01:10:12,639
Speaker 6: Do you agree with the argument that she's making there

1437
01:10:12,680 --> 01:10:15,120
Speaker 6: that fundamentally it's not up to the executive branch, not

1438
01:10:15,200 --> 01:10:19,519
Speaker 6: up to this administration to decide what agencies, what parts

1439
01:10:19,520 --> 01:10:22,160
Speaker 6: of this government should stick around or be disappeared.

1440
01:10:23,760 --> 01:10:25,880
Speaker 15: Well, as a general matter, you'd have to look at

1441
01:10:25,880 --> 01:10:29,040
Speaker 15: statute by statute, agent by agency by that. But as

1442
01:10:29,040 --> 01:10:32,799
Speaker 15: a general statement, sure, I mean Congress creates agencies, Congress

1443
01:10:32,800 --> 01:10:38,000
Speaker 15: can end agencies. There's nothing so permanent though, as a

1444
01:10:38,040 --> 01:10:41,599
Speaker 15: temporary government program, as President Reagan reminded us. But let's

1445
01:10:41,600 --> 01:10:45,280
Speaker 15: talk about Elizabeth Warren. She's the founding mother of the CFPB.

1446
01:10:45,920 --> 01:10:50,320
Speaker 15: She created it to be insulated from oversighted, insulated from appropriations,

1447
01:10:50,880 --> 01:10:54,479
Speaker 15: and insulated from any meddling by Congress. And that's what

1448
01:10:54,680 --> 01:10:58,360
Speaker 15: irritated Congress, and that's why I support changing the agency dramatically.

1449
01:10:58,560 --> 01:11:02,679
Speaker 2: But Frinchell, I had a couple final questions. This is important,

1450
01:11:02,680 --> 01:11:05,960
Speaker 2: as you mentioned the senator from the Commonwealth.

1451
01:11:05,760 --> 01:11:09,360
Speaker 4: Where do we find a middle ground? You are one

1452
01:11:09,360 --> 01:11:13,879
Speaker 4: of the leaders of the middle ground in Washington. How

1453
01:11:13,920 --> 01:11:17,320
Speaker 4: does Senator Warren and someone over on the MAGA write

1454
01:11:17,439 --> 01:11:21,839
Speaker 4: find a common feature around people like french Hill.

1455
01:11:21,960 --> 01:11:24,400
Speaker 15: Well, it's a great question, and I've hearded Senator Warren

1456
01:11:24,520 --> 01:11:27,799
Speaker 15: to consider that exactly she's concerned about the big banks

1457
01:11:27,840 --> 01:11:30,759
Speaker 15: taking over the world. Well, she's created that with Dodd Frank,

1458
01:11:30,800 --> 01:11:34,639
Speaker 15: who concentrates more power into those big banks. I've encouraged

1459
01:11:34,640 --> 01:11:37,559
Speaker 15: her to consider tailoring policies for all the rest of

1460
01:11:37,600 --> 01:11:41,600
Speaker 15: the banking system, and also considering compromise on the CFPB

1461
01:11:42,200 --> 01:11:45,760
Speaker 15: but putting it under congressional appropriations and having a bipartisan

1462
01:11:45,800 --> 01:11:47,679
Speaker 15: commission right overseas its work.

1463
01:11:47,720 --> 01:11:49,120
Speaker 9: Those are middle ground points.

1464
01:11:49,280 --> 01:11:51,760
Speaker 4: French, I don't care. Here's what I care about.

1465
01:11:52,000 --> 01:11:57,720
Speaker 2: My father worshiped Bill Dickie of Little Rock, Arkansas, the

1466
01:11:57,840 --> 01:11:59,000
Speaker 2: x Yankees.

1467
01:11:58,800 --> 01:11:59,759
Speaker 4: Million years ago.

1468
01:12:00,439 --> 01:12:04,479
Speaker 2: Your minor league ball team, the Arkansas Travelers Texas League.

1469
01:12:04,720 --> 01:12:07,320
Speaker 2: They play in the Dickey Stadium. How's a state of

1470
01:12:07,360 --> 01:12:10,280
Speaker 2: minor league baseball in Little Rock? Is we have pitchers

1471
01:12:10,280 --> 01:12:11,600
Speaker 2: and catchers today.

1472
01:12:12,120 --> 01:12:14,640
Speaker 15: Boy Strong, there's no better place to be on an

1473
01:12:14,640 --> 01:12:17,599
Speaker 15: early summer night. The price is right, the fun is great,

1474
01:12:17,680 --> 01:12:20,760
Speaker 15: and it's fun to beat the teams in the Texas League.

1475
01:12:20,760 --> 01:12:22,600
Speaker 15: And it's something I love doing with not only my

1476
01:12:22,640 --> 01:12:23,759
Speaker 15: family but all my friends.

1477
01:12:25,360 --> 01:12:27,880
Speaker 2: There were the Seattle Mariners. You think I could see

1478
01:12:27,880 --> 01:12:30,000
Speaker 2: the Red Sox, you know, down in Arkansas?

1479
01:12:30,640 --> 01:12:32,599
Speaker 6: Kind of maybe every time I feel in on this show.

1480
01:12:32,600 --> 01:12:34,000
Speaker 6: We have like three trips we need to take on

1481
01:12:34,000 --> 01:12:37,320
Speaker 6: the heels of each show. Do that little baseball sounds

1482
01:12:37,320 --> 01:12:38,120
Speaker 6: like it's a plan to me.

1483
01:12:38,520 --> 01:12:41,240
Speaker 9: We'll touch you right, We'll put you right behind home plate.

1484
01:12:43,680 --> 01:12:46,160
Speaker 4: Of the beloved Barney Frank. I hope you do as

1485
01:12:46,160 --> 01:12:50,080
Speaker 4: well as Barney Frank. He's having the Financial Services Committee

1486
01:12:50,200 --> 01:12:54,200
Speaker 4: in Washington. The Republican Little Rock Friendshill joining us.

1487
01:12:54,439 --> 01:12:59,240
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1488
01:12:59,360 --> 01:13:02,840
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1489
01:13:02,920 --> 01:13:06,960
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1490
01:13:07,120 --> 01:13:10,960
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1491
01:13:11,240 --> 01:13:14,360
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1492
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