WEBVTT - Traders Weigh CPI and Policy Eco Impact 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.560 --> 0:00:30.280 Go to Lizzie Saunders. Now the inflation report here in 0:00:30.360 --> 0:00:33.280 four minutes with John Tucker and then finished strong with 0:00:33.720 --> 0:00:37.080 Lizen as we can full disclosure, folks, in honor of 0:00:37.080 --> 0:00:40.440 the Los Angeles Angels, we're playing nickelback at the end 0:00:40.479 --> 0:00:43.960 of the hour. We're giving Lizanna warnings down here, turn 0:00:44.000 --> 0:00:47.159 it down and choose us listen, and I want to 0:00:47.200 --> 0:00:49.760 go to the heart of the matter. And you have 0:00:50.000 --> 0:00:53.240 had leadership on this in the industry, going back to 0:00:53.280 --> 0:00:56.640 your days with lou Rukaiser. In the last ten years, 0:00:56.840 --> 0:01:01.160 a given blended stock fund is up twelve percent per year. 0:01:01.840 --> 0:01:05.880 In the last ten years, a given blended bond fund 0:01:06.080 --> 0:01:10.840 is up two percent per year. Inflation is a friend 0:01:11.080 --> 0:01:13.000 of stock investors right. 0:01:15.160 --> 0:01:17.240 In fact, a lot of people think of asset classes 0:01:17.319 --> 0:01:21.280 like gold is sort of the ultimate inflation hedge, but 0:01:21.560 --> 0:01:25.040 the over the very long term, the only asset class 0:01:25.080 --> 0:01:29.600 that has consistently outperformed inflation is us equity. So you're 0:01:29.600 --> 0:01:31.040 absolutely right, Tom, And. 0:01:30.840 --> 0:01:32.520 Where are we now in that continuum? 0:01:32.520 --> 0:01:34.600 I mean, in honor of pictures and catchers las in 0:01:35.440 --> 0:01:38.160 you know, Ger has given us the innings metaphor, where 0:01:38.160 --> 0:01:41.680 are we in the confidence to be in equities with 0:01:41.800 --> 0:01:42.919 inflation and all. 0:01:42.760 --> 0:01:43.479 The other noise. 0:01:44.440 --> 0:01:47.600 Well, here's here's the tricky thing about inflation. When you're 0:01:47.640 --> 0:01:51.200 in a more volatile inflation backdrop, like was the case 0:01:51.280 --> 0:01:53.840 in the mid sixties to the mid nineteen nineties, that's 0:01:53.880 --> 0:01:56.960 an era where we've been calling the temperamental era. That 0:01:57.160 --> 0:02:00.680 was an era when bond yields and stock press were 0:02:00.720 --> 0:02:05.000 inversely correlated. And that's because inflation was more voladyle you 0:02:05.040 --> 0:02:07.840 had bigger swings in inflation, there was more heightened concern 0:02:08.320 --> 0:02:11.280 about some of those swings in inflation, so as of 0:02:11.320 --> 0:02:14.240 for instance, higher yields and that backdrop often meant inflation 0:02:14.400 --> 0:02:18.040 was reigniting negative for equities. Fast forward to the period 0:02:18.040 --> 0:02:20.840 from the mid nineties up until the first year or 0:02:20.880 --> 0:02:23.760 two of the pandemic, the so called Great Moderation era, 0:02:24.160 --> 0:02:27.160 that relationship was completely opposite, and bond yields and stock 0:02:27.200 --> 0:02:30.880 prices moved consistent with one another, and that was because 0:02:30.919 --> 0:02:33.520 we had very little inflation volatility, not a lot of 0:02:33.520 --> 0:02:36.520 inflation risks, So higher yields was typically a sign of 0:02:36.520 --> 0:02:40.399 stronger growth without the attendant problem of inflation. We're back 0:02:40.440 --> 0:02:43.280 in that negative correlation territory right now, and I do 0:02:43.320 --> 0:02:46.399 think it could mean we're in a different secular backdrop. 0:02:46.560 --> 0:02:48.960 David Girl squeeze one in the ear before CPI. 0:02:48.639 --> 0:02:49.240 Yeah, Lizanne. 0:02:49.240 --> 0:02:50.680 In these data, we're not going to get an indication 0:02:50.720 --> 0:02:53.160 of what Donald Trump's policies might mean for inflation in 0:02:53.160 --> 0:02:54.679 this country. But I wonder if we can go back 0:02:54.720 --> 0:02:56.720 to twenty eighteen when we had the first kind of 0:02:56.800 --> 0:02:59.040 round of a Trump trade war, what can we learn 0:02:59.080 --> 0:03:01.760 sort of from that experience that might be applicable here. 0:03:01.800 --> 0:03:05.000 If anything, Well, we didn't see overall inflation pick up. 0:03:05.080 --> 0:03:07.480 You didn't see it in PCE and PCE goods. But 0:03:07.480 --> 0:03:11.640 if you pull out the tarift goods and track them 0:03:12.040 --> 0:03:15.720 in twenty eighteen into twenty nineteen, a significant amount of 0:03:15.760 --> 0:03:19.120 inflation in those tarifft goods. I think, by the way, guys, 0:03:19.240 --> 0:03:22.200 I think the PPI report might be a better tell 0:03:22.280 --> 0:03:25.120 in terms of terriflated stuff than the CPI report. 0:03:25.320 --> 0:03:26.840 I took tomorrow off time. I'm not going to be 0:03:26.840 --> 0:03:28.400 here for PBI crushed. 0:03:28.840 --> 0:03:31.480 Lizianne and I are prose, We'll be here. 0:03:32.320 --> 0:03:35.440 Lizzie Ane Saunders with US was schwab two point one 0:03:35.560 --> 0:03:39.320 three percent is a seven basis point move there to 0:03:39.400 --> 0:03:44.400 a higher yield regime. Lizzie Sanders, it's unfair to go 0:03:44.520 --> 0:03:46.520 into the minuti here because you know you're doing this 0:03:46.560 --> 0:03:49.120 in real time, and you know I understand that. But 0:03:49.280 --> 0:03:54.000 across the board, Allah what Anna Wang said, This is 0:03:54.040 --> 0:03:58.240 not just one statistic month, critically month over month, which 0:03:58.280 --> 0:04:00.200 is what Mike McKee really looks at. 0:04:00.600 --> 0:04:01.400 Year over year. 0:04:01.600 --> 0:04:04.920 Jason furmaning to give us an ecumenical study in about 0:04:04.920 --> 0:04:05.440 an hour. 0:04:06.240 --> 0:04:09.280 All inflation boats rise here, don't they? 0:04:10.640 --> 0:04:11.000 They do? 0:04:11.120 --> 0:04:16.440 You're right, the core headline, the month over month, the 0:04:16.520 --> 0:04:20.600 year over year, the overall headline all hotter than expected. 0:04:20.640 --> 0:04:22.640 And it's in keeping with some of what we've seen 0:04:23.320 --> 0:04:27.080 in inflation expectations. Now. The University of Michigan version of 0:04:27.080 --> 0:04:32.440 inflation expectations had an extreme divide in terms of along 0:04:32.480 --> 0:04:36.880 party lines, Democrats having a huge expectation for higher inflation 0:04:37.080 --> 0:04:40.680 vice versa for Republicans, but given has gone from one 0:04:40.720 --> 0:04:44.960 point nine percent or so last fall up to you 0:04:45.200 --> 0:04:48.159 in the well end of the mid two. So you're 0:04:48.200 --> 0:04:50.840 seeing it in other areas, and I think this it's 0:04:50.839 --> 0:04:53.839 certainly supportive of what we heard from Powell yesterday, which 0:04:53.880 --> 0:04:56.359 is there in no rush nice to move back to 0:04:56.400 --> 0:04:57.000 easy pology. 0:04:57.120 --> 0:04:58.719 I said the vix would lag. We just had a 0:04:58.760 --> 0:05:01.320 seventeen print in the VIX up a stick. A stick 0:05:01.400 --> 0:05:04.000 is Lizanne Saunders talk for one big figure. 0:05:05.040 --> 0:05:06.279 I have to use that jargon. 0:05:06.320 --> 0:05:10.360 I appreciate that, Lizan here even a bitdog down fifteen 0:05:10.480 --> 0:05:14.039 hundred bitdog now at ninety four thousand is well. David Gerden, 0:05:14.120 --> 0:05:16.880 Tim Keen on YouTube, thank you so much for being 0:05:16.920 --> 0:05:18.840 with us across the nation and your commute and your 0:05:18.880 --> 0:05:20.000 living room and office. 0:05:20.160 --> 0:05:23.720 Honored dev liz Enne Saunders with this. Charles Schwab, David. 0:05:23.640 --> 0:05:25.600 Lizen, let's pull back a little bit here because we 0:05:25.880 --> 0:05:27.920 see the immediate market reaction. It's something I wanted to 0:05:27.920 --> 0:05:31.000 ask you about because we had the Michigan survey last 0:05:31.040 --> 0:05:33.040 week and saw the reaction there. There has been a reaction, 0:05:33.120 --> 0:05:35.560 dare I say, at times an overreaction to some of 0:05:35.560 --> 0:05:37.960 these most recent data points. As you look at it 0:05:38.000 --> 0:05:41.400 more holistically, how is the market processing sort of the 0:05:41.640 --> 0:05:43.880 broader view that we're getting of the US economy. 0:05:44.680 --> 0:05:47.240 Yeah, one of the interesting things, and you're picking this 0:05:47.400 --> 0:05:52.440 up in some surveys of institutional managers engaging what is 0:05:52.560 --> 0:05:55.640 driving stocks? And I think we've actually moved a little 0:05:55.680 --> 0:06:00.599 bit away from things like monetary policy and brawl macro 0:06:00.839 --> 0:06:04.440 trends and more of the connectivity to what stocks are 0:06:04.520 --> 0:06:08.720 doing are the specific fundamentals. But there is that policy 0:06:08.760 --> 0:06:13.080 component too. I think the NFIB data out yesterday was 0:06:13.440 --> 0:06:19.120 pretty compelling, engagingly small businesses reaction to the manner by 0:06:19.120 --> 0:06:23.159 which we get these terror related announcements, and everybody is 0:06:23.200 --> 0:06:26.560 now trying to dig in using the fine tooth comb 0:06:26.640 --> 0:06:30.599 figuring out which industries, which companies are hurt or benefited 0:06:30.640 --> 0:06:32.800 on the import side of things, on the export side 0:06:32.839 --> 0:06:34.680 of things. And I think that's going to come into 0:06:34.760 --> 0:06:37.960 play more and more at the individual stock level because 0:06:37.960 --> 0:06:42.080 of that shift to fundamentals and things like earnings now 0:06:42.080 --> 0:06:45.680 that we're an earning season driving stock prices more than 0:06:45.760 --> 0:06:50.719 just broad monetary policy or just valuation expansion. So I 0:06:50.760 --> 0:06:53.560 think that's an important shift relative to last year. 0:06:53.760 --> 0:06:55.760 I put out to worp Here on the Bloomberg toime. 0:06:55.800 --> 0:06:58.239 I see traders shifting their next FED rate cut prediction 0:06:58.320 --> 0:07:01.800 to December from September, so pushing it back even farther. 0:07:01.839 --> 0:07:02.159 Still. 0:07:02.440 --> 0:07:05.839 Yeah, and you know we're the economist, Lizanne Saunders. 0:07:05.920 --> 0:07:08.520 I mean, are we ready with it in stock market, 0:07:08.600 --> 0:07:12.320 lizan for the shock of stability and rate cuts or 0:07:12.360 --> 0:07:16.520 even the parlor game of rate increases. We're nowhere mentally 0:07:17.000 --> 0:07:18.600 near ready for that, are we. 0:07:19.600 --> 0:07:23.000 I think we're mentally ready for a pause that lasts 0:07:23.040 --> 0:07:25.640 throughout the course of the year. There's been you know, 0:07:26.080 --> 0:07:28.680 even before the CPI report, you had only a little 0:07:28.680 --> 0:07:31.200 more than one cut priced in. Now that's gotten pushed out. 0:07:31.240 --> 0:07:33.520 I think that is the parlor game because a data 0:07:33.560 --> 0:07:37.760 dependent FED, and added to that the policy uncertainty. To say, yeah, 0:07:37.800 --> 0:07:40.400 we're confident that the Fed's going to cut in December, 0:07:40.840 --> 0:07:44.720 that's just the fools errand to do that. I think 0:07:44.720 --> 0:07:47.080 you're absolutely right, though I don't think the market is 0:07:47.200 --> 0:07:49.800 prepared if the Fed feels they actually have to turn 0:07:49.840 --> 0:07:50.880 back into tightening model. 0:07:50.920 --> 0:07:51.080 Right. 0:07:51.120 --> 0:07:53.800 I want to go to Nominal GDP Jason Furman's essay. 0:07:53.800 --> 0:07:57.560 There's the new Foreign Affairs as lights out. Steven Levitsky 0:07:57.640 --> 0:07:59.520 with a great article, David, and I will talk about 0:07:59.520 --> 0:08:02.840 that in a bit, Firman, look take it a look 0:08:02.880 --> 0:08:06.280 back twenty twenty Hindsight on the Biden administration and Liz 0:08:06.360 --> 0:08:10.600 n He mentions nominal GDP. If I get a higher 0:08:10.720 --> 0:08:15.880 or stable inflation component, do you model out ample real 0:08:15.920 --> 0:08:21.240 GDP to keep the corporate animal spirits going well? 0:08:21.280 --> 0:08:25.760 I think nominal GDP is important. That feeds into revenue growth, 0:08:25.800 --> 0:08:28.000 which is a little bit more correlated to things like 0:08:28.080 --> 0:08:32.440 employment trends and also pricing power. So it's the I 0:08:32.440 --> 0:08:36.760 think it's the volatility in the inflation component that matters 0:08:36.760 --> 0:08:40.440 a little bit more than the level because of the 0:08:41.040 --> 0:08:44.680 uncertainty factor that creeps in when you have when you're 0:08:44.679 --> 0:08:49.160 in an era of volatility. In terms of that that deflator. 0:08:49.160 --> 0:08:52.840 Right now reporting on Twitter with a real job, see 0:08:52.960 --> 0:08:56.280 Saunders has an entire team to do Twitter. She hasn't 0:08:56.320 --> 0:08:59.920 done a tweet since I led Zeppelin announcers summer too. 0:09:00.720 --> 0:09:06.360 Catherine Jones out on Twitter, wishwab oof CPI up over 0:09:06.720 --> 0:09:10.000 up court up not what the market was hoping for. 0:09:10.080 --> 0:09:12.480 That report. David Gura from Kathy Jones. 0:09:12.480 --> 0:09:14.360 Well, you've given me a great segue here, because I 0:09:14.400 --> 0:09:16.760 know that Kathy and Lizen have a podcast together on 0:09:16.840 --> 0:09:19.280 investing in Rich Clarita was on that most recent episode. 0:09:19.280 --> 0:09:21.240 He won't return our calls, but he was on with them. 0:09:21.520 --> 0:09:23.200 What did you take away, Lezann from what he had 0:09:23.200 --> 0:09:25.320 to say about inflation? What was the headline from his 0:09:25.360 --> 0:09:27.800 commentary on how he's seeing inflation today. 0:09:29.240 --> 0:09:31.920 There's a tremendous amount of uncertainty, and adding in the 0:09:31.960 --> 0:09:37.440 policy uncertainty makes it a difficult exercise. There certainly is 0:09:37.800 --> 0:09:40.680 a slight bias on the upside, and there's the stickiness 0:09:40.720 --> 0:09:45.200 component of it. But you know he's no longer at 0:09:45.240 --> 0:09:48.440 the FED. But don't I don't envy the folks there, 0:09:48.600 --> 0:09:52.160 Powell coming out yesterday saying we don't take that into consideration, 0:09:52.240 --> 0:09:55.199 but we know some FED members are taking that policy 0:09:55.640 --> 0:09:59.520 uncertainty into consideration and trying to gauge their own outlooks. 0:10:00.520 --> 0:10:01.920 As we wrap up here, I go back to my 0:10:01.960 --> 0:10:03.760 first question to you, that is just noting the fact 0:10:03.800 --> 0:10:05.360 that this isn't reflective of what we've seen in this 0:10:05.400 --> 0:10:07.920 new administration. We've talked this morning all week about the 0:10:08.000 --> 0:10:11.160 kind of inherent inherently inflationary policies we could see put 0:10:11.160 --> 0:10:14.439 in place here, chief among them the terrorist policy from 0:10:14.440 --> 0:10:17.480 this administration. How do you think about that visa v 0:10:17.559 --> 0:10:20.079 inflation going forward here and how that's going to color 0:10:20.080 --> 0:10:21.200 this market in the months to come. 0:10:22.080 --> 0:10:25.280 Well, if we go to sort of the maximum end 0:10:25.280 --> 0:10:28.680 of what's been proposed, and then for what that means 0:10:28.679 --> 0:10:31.160 for inflation, you can look at data out of folks 0:10:31.240 --> 0:10:35.120 like Peterson Institute. You're talking about a close to a 0:10:35.160 --> 0:10:38.520 one percent jump in inflation, but that is really not 0:10:38.920 --> 0:10:42.760 as a step up in prices more so than a 0:10:42.880 --> 0:10:47.080 trigger for ongoing year over year or month over month 0:10:47.160 --> 0:10:51.800 higher inflation rates. I think though, that's important because consumers 0:10:52.160 --> 0:10:56.400 tend to think and level terms, specifically, what were prices 0:10:56.440 --> 0:10:59.080 back in twenty nineteen pre pandemic, what are they now? 0:10:59.160 --> 0:11:01.280 So it is important in the sense that the average 0:11:01.320 --> 0:11:05.120 person thinks in level terms, whereas books like us get 0:11:05.120 --> 0:11:07.160 into the weeds of month over month and year over 0:11:07.240 --> 0:11:10.520 year and core course services x housing. So I think 0:11:10.559 --> 0:11:12.960 the level step up is going to be felt, even 0:11:13.000 --> 0:11:16.720 if it doesn't translate into an ongoing higher inflation rate. 0:11:17.080 --> 0:11:20.280 Lizanne, just you give us a pro tip here. Where 0:11:20.280 --> 0:11:21.680 are you able to buy eggs? 0:11:21.760 --> 0:11:24.640 Right now? Where's Lezianne Saunders buying eggs? 0:11:24.760 --> 0:11:29.800 I really want to know at the supermarket? I just hey, 0:11:29.840 --> 0:11:31.320 what I need to pay for eggs? 0:11:31.400 --> 0:11:33.120 That's it you need to be. 0:11:36.240 --> 0:11:38.560 I haven't gone out and bought my own chickens to. 0:11:40.400 --> 0:11:40.880 Range. 0:11:41.640 --> 0:11:43.840 Yeah, Luzianne Saunders, thank you so much to pick up 0:11:43.880 --> 0:11:47.719 from where Luzanne was, Gina Martin Adams. If we get inflation, 0:11:48.000 --> 0:11:53.000 is it a constructive inflation that can solidify revenue growth 0:11:53.360 --> 0:11:55.600 across the Bloomberg Intelligence world. 0:11:57.240 --> 0:11:59.360 It does look like we're going to see revenue recovery 0:11:59.360 --> 0:12:02.600 in the index. The pace of revenue recovery is probably 0:12:03.559 --> 0:12:06.840 somewhat grim relative to expectations. I think that the really 0:12:06.840 --> 0:12:09.720 big key to twenty twenty five is not that we 0:12:09.800 --> 0:12:13.000 continue to recover. It's that we may not be able 0:12:13.040 --> 0:12:15.040 to recover at the pace that is expected by the 0:12:15.080 --> 0:12:17.800 equity market. There's this really interesting dichotomy in the equity 0:12:17.800 --> 0:12:20.000 market right now as you're seeing it play out real time, 0:12:20.600 --> 0:12:25.360 and that is we're expecting not only very strong revenue growth, 0:12:25.520 --> 0:12:28.720 very strong earnings growth to emerge, but we're also expecting 0:12:28.720 --> 0:12:32.640 the FED to cut and that environment is inconsistent, and 0:12:32.720 --> 0:12:35.280 so that's why you see the market reacts so negatively 0:12:35.320 --> 0:12:38.840 to CPI. But also when we look at the average 0:12:38.840 --> 0:12:42.240 price reaction to earnings growth when stocks are reporting, even 0:12:42.280 --> 0:12:46.600 when they're reporting beats, their price reaction has been fairly grim. 0:12:46.679 --> 0:12:49.040 So I think we've got to work that dichotomy out. 0:12:49.040 --> 0:12:51.480 We've got to work that friction out of the system. 0:12:51.840 --> 0:12:55.560 The market's got to get more rational expectations and also 0:12:55.800 --> 0:12:57.680 generally get in line with what the FED is doing, 0:12:57.720 --> 0:12:59.200 and the FED is saying, we're on hold. 0:13:00.080 --> 0:13:00.640 Can you help me? 0:13:00.760 --> 0:13:03.199 This is a dumb question, but I note the dichotomy 0:13:03.720 --> 0:13:05.880 and wonder why it's persisted as long as it has. 0:13:05.920 --> 0:13:07.480 So Tom asking a very good question. Are we going 0:13:07.559 --> 0:13:09.240 to hear anything different from the FED chairman today? We 0:13:09.280 --> 0:13:12.000 heard him say yesterday a lot of what he said 0:13:12.679 --> 0:13:14.440 the last press conference. He's been sort of reading from 0:13:14.480 --> 0:13:17.040 the same hymnal over and over and over again. How 0:13:17.080 --> 0:13:19.560 has this dichonomy persisted? What's going to be the catalyst 0:13:19.600 --> 0:13:21.480 that gets the market to kind of move away from 0:13:21.520 --> 0:13:23.600 what seems like a fool's expectation that there are going 0:13:23.679 --> 0:13:24.199 to be cuts. 0:13:24.040 --> 0:13:24.920 In the near term. 0:13:25.440 --> 0:13:25.640 Right? 0:13:25.720 --> 0:13:27.199 I think it's a great question, and I think that 0:13:27.320 --> 0:13:31.160 dichotomy can be explained by what's happening in the segments 0:13:31.200 --> 0:13:34.240 inside the equity market. So the greatest expectations really are 0:13:34.240 --> 0:13:38.640 centered around AI tech TMT industries, where we've seen the 0:13:38.640 --> 0:13:41.760 greatest degree of earnings growth. These also tend to be 0:13:41.840 --> 0:13:45.400 less inflation sensitive groups, right, They're more thematic. It's all 0:13:45.400 --> 0:13:48.640 based on AI and our anticipation of AI really changing 0:13:48.679 --> 0:13:52.400 the productivity outcomes for the world, and that is deeply 0:13:52.400 --> 0:13:57.120 embedded in tech expectations. We're seeing those expectations reverse somewhat, 0:13:57.200 --> 0:13:59.480 especially as a result of deep seak, but we've really 0:13:59.520 --> 0:14:04.320 seen he expectations in a process of rationalizing since June 0:14:04.320 --> 0:14:07.360 of last year when MAG seven peaked in terms of 0:14:07.360 --> 0:14:09.560 their performance relative to the S and P five hundred. 0:14:09.600 --> 0:14:12.560 But it's just slowly getting dismantled. People aren't really giving 0:14:12.640 --> 0:14:15.800 up on that. At the same time, the rest of 0:14:15.840 --> 0:14:19.240 the market has been very slow to recover, and the 0:14:19.280 --> 0:14:23.360 rest of the market outside of TMT industries is really story. 0:14:23.560 --> 0:14:25.920 Has really started to count on the FED getting their 0:14:25.960 --> 0:14:29.960 back enabling that recovery, so that two of the two 0:14:30.080 --> 0:14:33.200 story two speed market is still a big story into 0:14:33.240 --> 0:14:34.520 twenty twenty five and. 0:14:34.600 --> 0:14:37.160 Gida Martin Adam's with us here off the inflation report 0:14:37.160 --> 0:14:40.160 with a VICS out over six seventeen point zero five. 0:14:40.240 --> 0:14:43.840 I want to emphasize folks out on Twitter the series 0:14:43.880 --> 0:14:45.800 of charts from our guest Kathy Jones. 0:14:45.800 --> 0:14:47.080 We were just busting our chops. 0:14:47.280 --> 0:14:49.800 She does brilliant work at Schwab and she's got a 0:14:49.880 --> 0:14:54.160 wonderful chart showing the inflation stasis since the kids went 0:14:54.240 --> 0:14:57.640 back to school in September. Michael McDonough owns a high 0:14:57.720 --> 0:15:01.520 ground on this. Everyone in the industry uses Michael McDonough's 0:15:01.800 --> 0:15:05.640 colorful bar charts of the makeup and it's just as 0:15:05.640 --> 0:15:08.760 simple as this. David Gurrol McDonagh goes right to the 0:15:08.800 --> 0:15:13.120 Gurray Index. Super course, CPI month over month is a 0:15:13.320 --> 0:15:17.640 spike up, but further than what many people expected. 0:15:19.240 --> 0:15:22.440 I'm noting here as I think about all of this, 0:15:22.760 --> 0:15:24.400 and Tom, maybe you want to pick up on this. 0:15:24.640 --> 0:15:26.120 As we were talking about sort of what fed chair 0:15:26.160 --> 0:15:28.240 Drumpell might have to deal with. We've talked about the 0:15:28.280 --> 0:15:30.520 tweet from the President this morning, and we've seen this 0:15:30.600 --> 0:15:35.640 FED chair so expertly. Tom bat Away suggestions from reporters 0:15:35.680 --> 0:15:38.320 outside analysts that it could kind of succumb to political pressure. 0:15:38.840 --> 0:15:40.680 Safe to say, this makes this job much more difficult 0:15:40.760 --> 0:15:43.760 that that tweet this morning, coupled with the inflation data today, 0:15:44.320 --> 0:15:46.360 makes it harder still for this fed shair to weather 0:15:46.400 --> 0:15:47.400 that kind of political The. 0:15:47.360 --> 0:15:51.840 Political absolutely, and the question is we know this president's 0:15:52.360 --> 0:15:56.000 beliefs from his business career, and it was only a 0:15:56.000 --> 0:15:58.080 matter of time till we got the kind of tweets 0:15:58.080 --> 0:16:02.960 that we got today is as well, Jane, do businesses 0:16:03.040 --> 0:16:06.440 can they adapt and adjust? My core theme is corporations 0:16:06.520 --> 0:16:11.800 always adapt. Can they adapt given a leveling of inflation 0:16:12.280 --> 0:16:13.920 and not a true disinflation? 0:16:15.160 --> 0:16:17.440 Yeah, I think it's a great question. And what we 0:16:17.600 --> 0:16:20.440 tend to see is that really depends upon the degree 0:16:20.480 --> 0:16:23.840 to which producer prices accelerate. This, I think is the 0:16:23.880 --> 0:16:27.520 crux of the problem for corporations right now, is, at 0:16:27.600 --> 0:16:31.200 least until this data point, producer prices we're accelerating at 0:16:31.240 --> 0:16:35.200 a faster pace than consumer prices. Producer prices of course 0:16:35.400 --> 0:16:39.480 are littered with energy products, but also industrial goods sort 0:16:39.520 --> 0:16:43.480 of those core imports are a huge and input to 0:16:43.600 --> 0:16:47.720 ultimate company costs. So it really is not just necessarily 0:16:47.760 --> 0:16:51.160 about a acceleration or stabilization of inflation. But it's the 0:16:51.200 --> 0:16:53.720 difference between the costs that they're paying for inputs and 0:16:53.800 --> 0:16:56.320 what they can charge the consumer on the other end 0:16:56.840 --> 0:16:59.080 that's been working against them now for two months. We'll 0:16:59.120 --> 0:17:01.840 see the course of this week if it continues to 0:17:01.960 --> 0:17:05.760 work against corporate margin outcomes. But it is a very 0:17:05.760 --> 0:17:08.720 different climate than we've been in for the last two years. Admittedly, 0:17:08.760 --> 0:17:12.800 we not only had disinflating inflation, but we also had 0:17:12.840 --> 0:17:17.119 producer prices decelerating faster than consumer prices. That was the 0:17:17.200 --> 0:17:21.000 idyllic environment for corporates. We're moving past that, and so 0:17:21.119 --> 0:17:23.800 you should expect a period of give and take at 0:17:23.840 --> 0:17:26.080 the very least to emerge. On top of that, you've 0:17:26.080 --> 0:17:28.000 got a lot of business uncertainty right now. 0:17:28.480 --> 0:17:29.440 Even in small. 0:17:29.160 --> 0:17:34.639 Businesses, which vastly celebrated the election post November, have started 0:17:34.640 --> 0:17:36.960 to pull back expectations because they don't know what the 0:17:37.000 --> 0:17:38.959 rules of the road are, and so we need some 0:17:39.000 --> 0:17:41.960 stabilization and policymaking to help enable growth. 0:17:41.960 --> 0:17:42.639 There got to run. 0:17:42.720 --> 0:17:44.560 Let's do this again. Let's get her in the studio again. 0:17:44.600 --> 0:17:49.119 Gina Martinatams Bloomberg Intelligence, Brilliant and double digit earnings growth 0:17:49.200 --> 0:17:52.440 David Kelly's schedule to be with us here with JP Morgan, 0:17:52.520 --> 0:17:53.879 but we're going to e squeeze this sit in right 0:17:53.920 --> 0:17:57.040 now as best we can again. Futures in negative fifty 0:17:57.080 --> 0:18:00.320 six off the CPI report, the vicx's of seventy level, 0:18:00.320 --> 0:18:04.040 I'm gonna call it stasis, but a huge yield reset 0:18:04.400 --> 0:18:06.880 out nine basis points and a ten yure yield four 0:18:06.920 --> 0:18:08.520 point sixty two percent. 0:18:08.600 --> 0:18:09.760 I watched a ten year real. 0:18:09.680 --> 0:18:14.040 Yield as Christi Alcunian does at Blackrock. 0:18:14.160 --> 0:18:17.600 Two point one to three percent is well. 0:18:18.040 --> 0:18:22.240 Joining us now from Blackrock is Christie Acullian, head of 0:18:22.359 --> 0:18:25.840 I Shares Investment Strategy. So you go home and blow 0:18:25.920 --> 0:18:29.600 up the year view because a higher inflation? Are you 0:18:29.720 --> 0:18:31.760 going like, why am I here? I got to go 0:18:31.840 --> 0:18:33.920 back and rewrite forty pages. 0:18:34.119 --> 0:18:36.560 Well, I'm certainly wishing I was on twenty minutes ago, 0:18:36.640 --> 0:18:40.959 but not right now. We all I'd say, you know, 0:18:41.280 --> 0:18:43.320 I think that you know, we came into this year 0:18:43.320 --> 0:18:47.240 pretty bullish. We've been overweight US equities, but I feel 0:18:47.280 --> 0:18:50.280 really good and confident about the places that we've chosen 0:18:50.320 --> 0:18:53.639 to allocate to within that as opposed to just broad based. 0:18:53.720 --> 0:18:55.919 So we've been talking for a long time about the 0:18:56.000 --> 0:18:58.840 need to stay up in quality. We've been staying away 0:18:58.840 --> 0:19:01.680 from small caps. What you saw in the inflation data 0:19:01.720 --> 0:19:04.640 today is that it's on a relative basis, at least, 0:19:04.680 --> 0:19:07.640 it's those higher quality companies that we think can outperform. 0:19:07.760 --> 0:19:09.359 Small caps are going to face the head winds of 0:19:09.440 --> 0:19:11.160 higher exposure to those higher interest rates. 0:19:11.240 --> 0:19:14.120 What is you and guardy when you're a black rock, 0:19:14.200 --> 0:19:16.200 they're on speaking terms when you're. 0:19:16.080 --> 0:19:18.960 A g I hope so boet. 0:19:19.119 --> 0:19:23.400 What is the marginal appetite for equity ETFs right now? 0:19:23.480 --> 0:19:26.240 Is every day like OMG, the money's coming in? Or 0:19:26.280 --> 0:19:27.560 are people scared stiff? 0:19:27.840 --> 0:19:27.919 No? 0:19:28.359 --> 0:19:30.840 I think people are still very much allocating to the 0:19:30.840 --> 0:19:34.000 equity markets. It's been an incredible year for fixed income 0:19:34.040 --> 0:19:36.800 as well, so that's been certainly breaking records. But one 0:19:36.800 --> 0:19:38.680 thing that was so interesting to us is that even 0:19:38.720 --> 0:19:41.320 in a twenty five percent positive year for equity markets 0:19:41.440 --> 0:19:45.119 last year, we saw three times more money allocated to 0:19:45.280 --> 0:19:47.919 cash funds money markets. So we still think there's a 0:19:47.920 --> 0:19:50.359 lot of money on the sidelines. We're still talking to 0:19:50.400 --> 0:19:53.360 investors about putting money to work. And interestingly, even though 0:19:53.400 --> 0:19:57.280 we saw growth underperform value in January we saw one 0:19:57.280 --> 0:20:00.480 of the largest spreads in terms of allocation to growth 0:20:00.520 --> 0:20:03.800 ETFs relative to value. So people are still convicted in 0:20:03.840 --> 0:20:07.240 this market. They're still convicted in the AI theme. Again, 0:20:07.280 --> 0:20:08.960 we just think that it's important to do so in 0:20:09.000 --> 0:20:11.600 a high quality way. So something like qua L has 0:20:11.640 --> 0:20:14.840 been what kind of our top ticker? What is qua 0:20:14.960 --> 0:20:17.680 L is our our quality ETF. So it's it's an 0:20:17.720 --> 0:20:20.840 equity market sector neutral. You get the top quality coming 0:20:20.840 --> 0:20:21.800 from it's eighty. 0:20:21.600 --> 0:20:24.439 Percent of triple leverage dot cash fund. That's how you 0:20:24.520 --> 0:20:27.639 do it. I talked to Larry about its registration. 0:20:28.200 --> 0:20:30.879 Jean Martin Adams a moment ago was talking about this 0:20:30.960 --> 0:20:33.200 different environment that you know, what we've seen here in 0:20:33.280 --> 0:20:35.720 terms of an idyllic environment for corporates is changing, and 0:20:35.760 --> 0:20:38.320 I saw you nodding out of the corner of my eye. 0:20:38.320 --> 0:20:41.040 How do you see that challenge manifesting itself here in 0:20:41.200 --> 0:20:41.800 the months ahead. 0:20:42.119 --> 0:20:45.080 Yeah, absolutely, and certainly it is an environment where we 0:20:45.160 --> 0:20:48.760 see and expect to see a lot of uncertainty, and uncertainty, 0:20:48.760 --> 0:20:50.080 as we know, is bad for markets, it can be 0:20:50.119 --> 0:20:52.320 bad for consumers, it can be bad for companies. But 0:20:52.440 --> 0:20:54.920 we're still really grounded in what we're seeing in terms 0:20:54.920 --> 0:20:57.560 of earning. So you know, broadly, I think the macro 0:20:57.600 --> 0:21:00.680 picture still looks positive and that growth is still really strong. 0:21:01.040 --> 0:21:04.600 Corporate earnings have come back stronger than expected, so we're 0:21:04.600 --> 0:21:06.360 really focused on those fundamentals. 0:21:06.760 --> 0:21:09.119 Tell me about leverage. I keep bringing this up and 0:21:09.440 --> 0:21:11.399 I make jokes about it, folks, but it's not funny. 0:21:11.480 --> 0:21:13.840 Leverage kills you. And the answer is it's all the. 0:21:13.920 --> 0:21:17.800 Rage right now, double leverage, triple leverage, mag seven whatever. 0:21:18.200 --> 0:21:23.280 What do you actually see from people buying or selling leverage? 0:21:23.480 --> 0:21:25.840 And also what do you see in your research. 0:21:26.600 --> 0:21:28.959 Yeah, it's not a space that we play, so you know, 0:21:29.000 --> 0:21:30.680 we are not in the runt director. 0:21:30.560 --> 0:21:31.760 Play triple leverage. 0:21:32.119 --> 0:21:35.080 We like to, you know, we think about the appropriate 0:21:35.200 --> 0:21:37.720 nature of funds for all types of investors. So we 0:21:37.880 --> 0:21:40.720 like to launch institutional quality funds that can be used 0:21:40.760 --> 0:21:44.160 by end investors and direct investors as well. So again 0:21:44.200 --> 0:21:47.359 we're focusing on portfolio building blocks, not necessarily trade. 0:21:47.400 --> 0:21:48.639 So that's that's just not our space. 0:21:48.720 --> 0:21:53.080 Trying to get his triple leverage, don't Cashlio trying to. 0:21:53.000 --> 0:21:56.480 Talk about quality of what I said, it would be 0:21:56.480 --> 0:21:57.959 a perfect blackrock product. 0:21:58.640 --> 0:22:05.040 He's thinking of going to think about that one. I 0:22:05.080 --> 0:22:09.280 do hear still a chorus among managers and advisors talking 0:22:09.359 --> 0:22:11.879 about small caps. This is a moment for small caps. 0:22:12.080 --> 0:22:14.119 Are you singing from that him mill? Are you in 0:22:14.200 --> 0:22:16.440 that chorus as well? Or are you steering clear? 0:22:16.800 --> 0:22:18.840 We have been pushing back against that for a while, 0:22:18.880 --> 0:22:21.440 and I think the modal question we get from investors 0:22:21.480 --> 0:22:23.760 that we speak to is now finally the moment for 0:22:23.800 --> 0:22:27.080 small caps. We saw and sort of anticipated we were 0:22:27.080 --> 0:22:30.200 going to get a short, sharp rally after the election, 0:22:30.280 --> 0:22:32.439 but it wasn't something that we wanted to chase, and 0:22:32.520 --> 0:22:34.960 specifically we didn't want to chase it because we think 0:22:35.000 --> 0:22:37.880 the fundamentals are still against that trade. So small caps 0:22:37.880 --> 0:22:41.439 are more exposed to higher interest rates, and also they 0:22:41.480 --> 0:22:43.840 tend to need accelerating growth, and even though we think 0:22:43.840 --> 0:22:45.480 growth is going to stay positive, we do think it's 0:22:45.480 --> 0:22:48.359 going to decelerate this year. So the sad answer for 0:22:48.440 --> 0:22:49.800 a lot of the folks that we see a lot 0:22:49.800 --> 0:22:52.600 of the positioning data that we look at, investors are 0:22:52.720 --> 0:22:55.680 very overweight small caps. We still don't think that it's 0:22:55.720 --> 0:22:56.760 the moment for that just now. 0:22:56.800 --> 0:22:58.639 This is brilliant. We got to have you back here. 0:22:58.640 --> 0:23:01.240 I want to sign absolutely not yeah, absolutely, Really David 0:23:01.280 --> 0:23:03.840 Kelly with this year in a bit Christy as simple 0:23:04.000 --> 0:23:08.879 as I can the MAG seven in the loveer. Are 0:23:08.960 --> 0:23:11.560 people buying at the margin or is there a new 0:23:11.640 --> 0:23:13.200 test here to the MAG seven. 0:23:13.440 --> 0:23:16.479 I think investors are looking for the broadening out trade, 0:23:16.520 --> 0:23:19.840 but they're still looking for large cap growth. So you know, 0:23:19.880 --> 0:23:22.520 again we're not seeing as many flows into small caps, 0:23:22.560 --> 0:23:25.280 not into index value at least, I think there's opportunity 0:23:25.320 --> 0:23:28.120 in the active space. But you know, when we look 0:23:28.160 --> 0:23:30.840 at the composition of returns last year from twenty to 0:23:30.880 --> 0:23:34.040 twenty four, you know we saw about half of the 0:23:34.080 --> 0:23:37.040 S and P five hundred returns were due to earnings 0:23:37.080 --> 0:23:39.800 per share growth to fundamentals, and half was due to 0:23:39.960 --> 0:23:43.479 valuation expansion. If you look at large cap growth, eighty 0:23:43.560 --> 0:23:46.320 percent of that was driven by fundamentals. If you look 0:23:46.320 --> 0:23:49.560 at at value, it was less than half driven by fundamentals, 0:23:49.560 --> 0:23:52.840 and small cap zero of it driven by fundamentals. So again, 0:23:52.840 --> 0:23:55.560 people are following the earnings, people are following the growth. 0:23:55.680 --> 0:23:58.120 We like the corporate profitability story and where we're saying 0:23:58.119 --> 0:24:00.440 of it away from small guts are you basing I'm 0:24:00.440 --> 0:24:01.480 based in San Francisco. 0:24:02.280 --> 0:24:07.359 It's better there's a time. 0:24:08.080 --> 0:24:12.199 Can you get us good Giants tickets? Take care of you. 0:24:12.480 --> 0:24:14.000 He's going to go over just a little rock to 0:24:14.040 --> 0:24:17.400 French Shields minor league stadium and then hop. 0:24:17.240 --> 0:24:19.919 On over goes back friend Carl did. He went to 0:24:20.040 --> 0:24:23.399 every major league stadium. That's so cool for a summer. 0:24:24.160 --> 0:24:25.280 I think it was several summers. 0:24:25.720 --> 0:24:27.919 You know, you don't want to come in the summer, 0:24:27.960 --> 0:24:29.880 September sometime. 0:24:29.840 --> 0:24:34.080 Early, Christie, thank you, don't be a stranger. Christian with 0:24:34.200 --> 0:24:37.920 Blackrock is well right now. The sixteen point eight three 0:24:38.280 --> 0:24:39.560 and a lot more red on the screen. 0:24:39.760 --> 0:24:42.800 It's like, you nailed that. I mean, my. 0:24:42.840 --> 0:24:46.160 Word, g what he sponds currencies come on and he's 0:24:46.200 --> 0:24:49.640 just absolutely nailing it here. But yields are higher. Seriously, 0:24:49.640 --> 0:24:53.159 the tenure yield out nine basis points. I'm going to 0:24:53.240 --> 0:24:54.720 get right to it now. We're what we're going to 0:24:54.800 --> 0:24:57.359 do here, This is so important. We're going to blow 0:24:57.400 --> 0:25:01.440 out the show open and the song ending here. Nickelback 0:25:01.480 --> 0:25:04.639 to David Kelly or Nickelback. 0:25:04.960 --> 0:25:06.760 Succeeded in getting us to scuttle. 0:25:06.760 --> 0:25:09.240 That's you know, and David knows where I'm going on this. 0:25:09.440 --> 0:25:12.639 When David Kelly and I met, we were younger, to 0:25:12.680 --> 0:25:15.280 say the least. And one of the great moments of 0:25:15.320 --> 0:25:19.400 this bullmarket and the oddities of equities, bonds, currencies, commodities 0:25:20.040 --> 0:25:22.960 is there's not a lot of people with bull market 0:25:23.240 --> 0:25:27.919 experience when it ends. David Kelly joins us now with 0:25:28.200 --> 0:25:32.160 JP Morgan. I just can't say enough about the team 0:25:32.280 --> 0:25:37.280 he's put together there of thinking responsibly about investment. And 0:25:37.320 --> 0:25:40.439 you were weaned on this in Boston at Putnam. You 0:25:40.520 --> 0:25:44.520 and I have tattooed to our soul the collapse of 0:25:44.600 --> 0:25:46.360 the Putnam Voyager Fund. 0:25:46.720 --> 0:25:48.680 It was the go Go fund. 0:25:48.760 --> 0:25:50.639 Now I'm going to suggest, David, we don't have that 0:25:50.720 --> 0:25:53.520 exuberance right now that I don't see it. 0:25:53.960 --> 0:25:58.440 But what's the radar you and your team use so 0:25:58.480 --> 0:25:58.920 that we. 0:25:58.840 --> 0:26:02.440 Can avoid the the Voyagers of this decade. 0:26:02.800 --> 0:26:06.400 You know, there's a there's a very old saying that 0:26:06.400 --> 0:26:08.800 that you don't make the same mistake twice. The problem 0:26:08.840 --> 0:26:12.000 about the family mistakes is a very broad family, and 0:26:12.040 --> 0:26:14.640 there's always some cousin or relative of the mistake you made. 0:26:15.680 --> 0:26:18.840 That's actually, that's actually, that's actually a quote from from 0:26:18.880 --> 0:26:21.760 the book Reminiscences of a Stock Operator, which means which 0:26:21.800 --> 0:26:24.720 everyone should read every five years actually, But if you 0:26:24.760 --> 0:26:28.320 look at the megacap tech companies, it's not the same 0:26:28.359 --> 0:26:30.760 thing as a dot com bubble, of course, but you 0:26:30.800 --> 0:26:34.639 still have very high valuations and you still got and 0:26:34.680 --> 0:26:36.800 you've got more concentration in the S and P five 0:26:36.800 --> 0:26:38.200 found it now than you had back in the dot 0:26:38.200 --> 0:26:41.120 com bubble. So there are bubbly aspects to this market. 0:26:41.560 --> 0:26:44.800 And the market is price for perfection. And then if 0:26:44.800 --> 0:26:47.439 you have an imperfect number like the CPI number today, 0:26:47.960 --> 0:26:49.919 then you take a shillacking. And the thing that the 0:26:50.000 --> 0:26:52.399 thing that gets hit the most at the end of 0:26:52.440 --> 0:26:55.320 a bubble of a bull market, your build markets end 0:26:55.400 --> 0:26:57.960 up being bubble markets is the thing that is the 0:26:58.400 --> 0:27:00.879 area that the bubble is concentrated. And that's the thing 0:27:00.920 --> 0:27:03.440 that's most important different people to think about it. Doesn't 0:27:03.480 --> 0:27:06.000 you know, markets will come, bear markets, building markets will 0:27:06.040 --> 0:27:08.840 come and go, but you don't want to be overweighted 0:27:08.880 --> 0:27:11.680 the overhyped at the peak of a bull market. And 0:27:11.720 --> 0:27:13.359 that's what I think investors need to think about. 0:27:13.680 --> 0:27:15.560 I keep coming back to this, and we've talked a 0:27:15.600 --> 0:27:18.880 lot about the FED being data dependent versus data point dependent. 0:27:19.400 --> 0:27:21.080 How do you view the data that we got today 0:27:21.119 --> 0:27:24.480 in kind of a wider, more holistic lens. We see 0:27:24.480 --> 0:27:26.840 the reaction in the markets thus far, but what does 0:27:26.880 --> 0:27:28.440 it tell us that we didn't know yesterday or a 0:27:28.440 --> 0:27:28.840 week ago. 0:27:28.840 --> 0:27:30.880 Actually not as much as you think that. The thing 0:27:30.880 --> 0:27:34.040 about when you have a surprise on CPI, people forecast 0:27:34.160 --> 0:27:38.320 CPI pretty well because all the core things are pretty 0:27:38.320 --> 0:27:42.640 easy to forecast. What causes a problem is the usual suspects, 0:27:42.640 --> 0:27:46.840 and the usual suspects are auto insurance, airline fares. 0:27:46.680 --> 0:27:47.560 Hotel rates. 0:27:47.680 --> 0:27:51.280 So tail rates were up one point two percentine airline 0:27:51.280 --> 0:27:53.560 fares were up one point four percent, and auto insurance 0:27:53.640 --> 0:27:54.560 is up two percent. 0:27:54.520 --> 0:27:56.520 All things that Thomas been complaining about at length in. 0:27:56.520 --> 0:28:02.040 Recent christ Paris last night versus twelve months ago, I'm 0:28:02.080 --> 0:28:04.080 spending two thousand more dollars. 0:28:04.280 --> 0:28:08.439 Yep, that's a fact from X to X plus two thousand. 0:28:08.520 --> 0:28:14.639 I mean that's the Hampton in Well, yeah, you know, 0:28:14.680 --> 0:28:15.360 that's that's. 0:28:15.160 --> 0:28:15.800 A wealth effect. 0:28:15.800 --> 0:28:17.919 We've both been doing this long enough that you know 0:28:18.119 --> 0:28:19.920 it used to be a wealth effects and consumption weren't 0:28:19.920 --> 0:28:22.600 that important. But there is so much wealth right now 0:28:22.760 --> 0:28:25.160 relative to twenty years ago, thirty years, forty years ago, 0:28:25.280 --> 0:28:26.840 that when you have a wealth surge like we did 0:28:26.880 --> 0:28:29.320 last year. Well, rich people spend money and what to 0:28:29.440 --> 0:28:31.320 rich people spend money taking trips to Paris? 0:28:32.880 --> 0:28:36.040 Joining us here at at the our top. David Kelly 0:28:36.160 --> 0:28:38.560 of JP Morgan, this is so important. We're going to 0:28:38.600 --> 0:28:42.320 forego the festivities of the market open. We forego nickelback. 0:28:42.840 --> 0:28:45.400 You know that was my pictures and Catchers thing you 0:28:45.400 --> 0:28:45.840 should have. 0:28:45.760 --> 0:28:49.440 Seen years ago. 0:28:50.040 --> 0:28:52.240 Kelly would be down to Peter Lynch would be backed 0:28:52.320 --> 0:28:54.440 up twelve rowers back and Kelly's down. 0:28:54.320 --> 0:28:58.200 By the third base. Doug guy, you know rock star seats. 0:28:58.440 --> 0:29:02.200 David, I want you to talk about the moment we're 0:29:02.280 --> 0:29:08.520 in and how people scared participate in the equity markets. 0:29:08.600 --> 0:29:14.000 JP market is this huge platform of measured of a 0:29:14.120 --> 0:29:17.520 measured approach within a new media frenzy you and I 0:29:17.520 --> 0:29:18.600 did live years ago, and. 0:29:18.800 --> 0:29:22.000 Yes, absolutely, and you've just got to watch valuations. There 0:29:22.000 --> 0:29:24.320 are plenty of things in global equity markets who took 0:29:24.400 --> 0:29:27.800 up perfectly reasonable price tax. There's just a few things 0:29:27.800 --> 0:29:30.480 which dominate US markets who don't have reasonable price tags. 0:29:30.840 --> 0:29:31.600 And you've just. 0:29:31.520 --> 0:29:35.200 Got to be determined to focus on I'm going to 0:29:35.240 --> 0:29:38.920 buy stuff at reasonable valuations. This makes sense both US 0:29:39.000 --> 0:29:42.120 stocks and international stocks and I'm going to try to 0:29:42.280 --> 0:29:45.440 do everything I can underweight the stuff that is carrying 0:29:45.520 --> 0:29:48.520 pe ratos of thirty times or thirty five times or 0:29:48.680 --> 0:29:49.800 one there and twenty times. 0:29:50.160 --> 0:29:51.719 You just need to do that. 0:29:52.120 --> 0:29:52.480 We don't. 0:29:53.200 --> 0:29:55.640 You never know the hour or the day that a 0:29:55.720 --> 0:29:57.920 bull market breaks and you end up in a bear market. 0:29:57.960 --> 0:29:59.560 You just don't know how to time that. But you 0:29:59.640 --> 0:30:02.600 do know what you know, how you position yourself before that. 0:30:03.160 --> 0:30:05.400 He determines how you're going to go through it. So 0:30:05.840 --> 0:30:08.560 you know, overall the economy looks good, but we've got 0:30:08.560 --> 0:30:11.840 a lot of a lot of policy uncertainty. The problem 0:30:11.880 --> 0:30:15.400 is the equity marketers price for perfection, and or part 0:30:15.440 --> 0:30:17.360 of the equity marketers price for more than perfection. You 0:30:17.400 --> 0:30:18.320 just need to be underwaigh that. 0:30:18.480 --> 0:30:20.720 I'll show my age here. But does a bull market 0:30:20.840 --> 0:30:22.920 end with a bang or a whimper? Customarily? You said 0:30:22.960 --> 0:30:23.960 you'd know the nearly hour. 0:30:24.120 --> 0:30:26.240 That's a really sophisticated question. 0:30:26.360 --> 0:30:29.440 Seriously, No, it ends, it ends with the bank. 0:30:30.680 --> 0:30:31.120 I'm sorry. 0:30:31.360 --> 0:30:32.840 It's not going to just win bad. 0:30:33.440 --> 0:30:38.120 That's we're past the point where the market can simply 0:30:38.160 --> 0:30:41.000 slide back into a bad year or two. We're going 0:30:41.040 --> 0:30:43.000 to have We're gonna have a significant bear market at 0:30:43.000 --> 0:30:44.680 some stage. We don't know when it's going to start, 0:30:44.760 --> 0:30:47.200 and you don't want to not participate. There's just just 0:30:47.320 --> 0:30:50.120 don't participate in the stuff that looks obviously crazy in 0:30:50.160 --> 0:30:51.040 terms of valuations. 0:30:51.320 --> 0:30:53.600 David kellyers with a JP market, how do you fold 0:30:53.640 --> 0:30:57.440 in Casman and Feroli's work? Michael Feroley making history. I'm 0:30:57.440 --> 0:30:59.520 going to say, a decade eight years ago, with a 0:30:59.680 --> 0:31:02.880 shot wucking potential GDP number under two percent? 0:31:03.320 --> 0:31:05.240 Do you work off of JP? 0:31:05.360 --> 0:31:11.640 Morgan economics modeling still a disinflationary tendency. John Williams yesterday 0:31:11.720 --> 0:31:15.000 reaffirming a path back to two percent? Is that a 0:31:15.040 --> 0:31:16.000 foundational call? 0:31:16.080 --> 0:31:18.480 Still? I agree with them on that. 0:31:19.720 --> 0:31:22.440 You know, I look at their stuff very very very closely. 0:31:22.520 --> 0:31:25.360 We work independently, but I agree with them that because 0:31:25.360 --> 0:31:27.800 if you look yes, we've got a surprising number today, 0:31:27.840 --> 0:31:30.720 but if you look at shelter, shelter was four point 0:31:30.800 --> 0:31:33.360 six percent year over year last month, it's four point 0:31:33.400 --> 0:31:35.480 four percent right now, and it is still too high 0:31:35.480 --> 0:31:36.720 based on what we know is going on in the 0:31:36.760 --> 0:31:40.360 rental market. Auto insurance you know, saw two percent increase, 0:31:40.400 --> 0:31:42.120 but it's a double digit year over year it's not 0:31:42.240 --> 0:31:44.040 going to be double digit year over year by the 0:31:44.120 --> 0:31:46.160 end of the year, so it will that part will 0:31:46.200 --> 0:31:48.840 go away. But what I am concerned about, and I 0:31:48.880 --> 0:31:51.280 think the FED is concerned about, is what happens if 0:31:51.280 --> 0:31:54.080 we have more tariffs, what happens if immigration gets much 0:31:54.120 --> 0:31:56.440 tougher you've got higher wages, And what happens if we 0:31:56.440 --> 0:31:58.600 have physical cinemas in twenty twenty six. And that's what's 0:31:58.680 --> 0:32:00.160 keeping the FED more nervous. 0:32:00.200 --> 0:32:03.680 Thirty seconds, every single parent I know wants their kids 0:32:03.680 --> 0:32:04.920 to go to school in Europe. 0:32:04.960 --> 0:32:07.920 It's the new rage here sell Trinity right now. 0:32:07.960 --> 0:32:11.240 Everybody's looking at Saint Andrew's this and go down to 0:32:11.360 --> 0:32:14.640 Paris and you know the Rome and all that. 0:32:14.960 --> 0:32:17.320 The real academics is at Dublin, isn't it. 0:32:17.560 --> 0:32:20.040 Well it's you actually have a pretty good time there too, 0:32:20.080 --> 0:32:22.640 but you know it, what's a college education? 0:32:22.720 --> 0:32:25.240 Media guys, and you about life in Dublin. 0:32:25.800 --> 0:32:28.840 David Kelly, there were wisdom on his Dublin. Thank you 0:32:28.880 --> 0:32:31.400 so much for JP Morgan. This was a real treat 0:32:31.440 --> 0:32:32.240 to have him in here. 0:32:36.640 --> 0:32:40.240 You're listening to the Bloomberg Surveillance podcast Catch us Live 0:32:40.280 --> 0:32:43.440 weekday afternoons from seven to ten am Eastern. Listen on 0:32:43.520 --> 0:32:47.200 Applecarplay and Android Otto with the Bloomberg Business app, or 0:32:47.320 --> 0:32:48.840 watch us live on YouTube. 0:32:50.760 --> 0:32:51.280 I got a. 0:32:51.280 --> 0:32:53.640 Script with Hugh von Stein is like a plan, Like 0:32:53.720 --> 0:32:55.600 if he and Iron Davos we have a plan, We 0:32:55.640 --> 0:32:58.280 go see Barry at the piano bar and life goes on. 0:32:58.720 --> 0:33:01.200 The President is just got the way of my script, 0:33:01.640 --> 0:33:05.040 President Trump putting out moments ago a tweet interest rates 0:33:05.080 --> 0:33:08.040 should be lowered, something which would go hand in hand 0:33:08.080 --> 0:33:09.320 with upcoming tariffs. 0:33:09.680 --> 0:33:12.880 Let's rack and roll America. So I got to start 0:33:12.960 --> 0:33:13.240 with that. 0:33:14.960 --> 0:33:17.680 Yeah, joining us now the king of British rock and roll, 0:33:18.160 --> 0:33:21.880 steins encyclopedic and banking and of course at however, whyman 0:33:22.400 --> 0:33:22.720 it is? 0:33:22.880 --> 0:33:23.280 Well? 0:33:24.120 --> 0:33:28.440 Can a president force rates lower? Or Chairman Powells speaking 0:33:28.440 --> 0:33:29.000 this morning? 0:33:29.640 --> 0:33:31.360 Gosh, that's a great question to start. 0:33:31.360 --> 0:33:31.560 I was. 0:33:31.640 --> 0:33:34.880 I was happy on the skiing than this. 0:33:35.320 --> 0:33:35.560 Look. 0:33:35.600 --> 0:33:38.440 I think I think central bankers like to move at 0:33:38.440 --> 0:33:40.240 their own speed, don't they, And they ought to like 0:33:40.320 --> 0:33:43.400 to move incrementally where possible. So I think it's going 0:33:43.480 --> 0:33:44.160 to be tough. 0:33:44.560 --> 0:33:46.160 Look taffs it taffs. 0:33:46.360 --> 0:33:48.120 I think the market's still pricing in that they're going 0:33:48.160 --> 0:33:50.720 to be small and surgical rather than broad based. 0:33:51.040 --> 0:33:52.160 If that's right, they're not. 0:33:52.160 --> 0:33:55.000 As inflationary, so that you can see as inflation comes 0:33:55.000 --> 0:33:58.160 down there's an opportunity to cut rates further. Look, you know, 0:33:58.160 --> 0:33:59.640 if I think about it from the bank CEO's and 0:33:59.640 --> 0:34:01.760 see if I as I talked to, they're actually having 0:34:01.760 --> 0:34:02.480 a really good moment. 0:34:02.520 --> 0:34:03.560 They're in a purple patch. 0:34:03.760 --> 0:34:05.760 Why are they in a good moment if the rest 0:34:05.800 --> 0:34:06.920 of us are in chaos? 0:34:07.080 --> 0:34:10.520 Well, so it's a really great question. So look, we've 0:34:10.520 --> 0:34:14.400 got a steeper your curve, so they love that. Deposits 0:34:14.400 --> 0:34:17.400 are building up, so they got grit better funding. The 0:34:17.480 --> 0:34:20.799 credit environment is still really benign. You know, there's very 0:34:20.800 --> 0:34:24.520 few bankruptcies and actually with bars with the bars and 0:34:24.600 --> 0:34:28.560 rules being kicked either into touch or certainly being what 0:34:28.680 --> 0:34:30.840 I think of as a bureaucratic fudge. If there's mere 0:34:30.920 --> 0:34:34.120 bank capital neutral whan it's BKX is up forty three 0:34:34.160 --> 0:34:37.240 percent in the last year. That beats fangs. In fact, 0:34:37.520 --> 0:34:39.719 you would love this. The European bankshop forty seven. The 0:34:39.719 --> 0:34:41.799 European banks are being rehabilitated. You have to come back 0:34:41.800 --> 0:34:43.120 to Europe to talk about them. 0:34:43.120 --> 0:34:46.520 Sometimes in a hero these off life support out and 0:34:46.520 --> 0:34:49.200 get a question, get a question. 0:34:49.680 --> 0:34:51.719 As we get our popcorn and watch the second of 0:34:51.760 --> 0:34:54.279 these two days of hearings, No doubt there will be 0:34:54.280 --> 0:34:57.640 some questions about bars or three in Capital And as J. 0:34:57.800 --> 0:35:00.440 Powell persists without Michael Barr, the other mic bar by 0:35:00.800 --> 0:35:03.160 his side, what does the future look like when it 0:35:03.160 --> 0:35:05.520 comes to sort of the regulatory remit of the Fed Reserve? 0:35:05.560 --> 0:35:07.760 What sense do we have the contours of that post 0:35:07.760 --> 0:35:08.560 Michael Barr. 0:35:08.680 --> 0:35:10.600 It's a great question to look so, so Tom and 0:35:10.600 --> 0:35:12.680 I've discussed before. If we look back in two years 0:35:12.680 --> 0:35:15.279 ago what went wrong, it was a failure of supervision. 0:35:15.480 --> 0:35:17.040 It wasn't actually my failure of the rules. It was 0:35:17.080 --> 0:35:20.640 just they weren't being implemented California. Out in California. That 0:35:20.680 --> 0:35:22.960 the four banks which went, but certainly the first three 0:35:23.239 --> 0:35:25.399 there were just people looking somewhere else rather than looking 0:35:25.440 --> 0:35:29.359 at proper one, good old fashioned risk management and rekignetars. 0:35:29.640 --> 0:35:31.960 So the supervision really needs to be improved, and I 0:35:32.000 --> 0:35:34.120 think there's some work ongoing, and you could say Flick 0:35:34.200 --> 0:35:34.600 needs to be. 0:35:34.560 --> 0:35:35.000 Part of that. 0:35:35.480 --> 0:35:36.040 I think two. 0:35:36.400 --> 0:35:38.040 I think the thing I learned was that the big 0:35:38.080 --> 0:35:40.759 banks were in great shape. And so actually you don't 0:35:40.800 --> 0:35:44.560 need to have bolster them with copper, gold plated, platinum plated, 0:35:44.680 --> 0:35:46.360 you know, cryptoplated, you know. 0:35:46.440 --> 0:35:46.920 Regulation. 0:35:47.360 --> 0:35:49.240 But maybe there's a little bit tightness around the central 0:35:49.280 --> 0:35:51.359 about the smaller banks. Maybe the regional banks do need 0:35:51.400 --> 0:35:54.600 a little bit more supervision. So I think it's quite incremental, 0:35:54.840 --> 0:35:56.640 and I think we're getting back to sanity after this 0:35:56.719 --> 0:35:58.160 nineteen percent proposed increase. 0:35:58.280 --> 0:36:00.279 I had a question for friendship the Congress been in 0:36:00.320 --> 0:36:02.160 chair of the Financial Services Commante didn't have time for it. 0:36:02.160 --> 0:36:02.640 I'll put it to you. 0:36:02.760 --> 0:36:05.960 He talks a lot about how regulation is preventing de 0:36:06.040 --> 0:36:08.239 novo banks from coming under the scene, that he doesn't 0:36:08.239 --> 0:36:10.960 think there were enough kind of smaller community banks. Are 0:36:10.960 --> 0:36:13.239 there too many banks in this country? Where is the 0:36:13.320 --> 0:36:16.400 need for even more banks in the US banking system. 0:36:16.680 --> 0:36:18.959 So I think it's true stateside, but the world over, 0:36:19.520 --> 0:36:22.879 heavy duty regulations have for smaller bank it makes it 0:36:23.000 --> 0:36:26.200 much much tougher to start up. That said, in the state, 0:36:26.440 --> 0:36:28.160 if you think about the banking system, we got your 0:36:28.160 --> 0:36:31.000 top eighteen twenty four banks who are in pretty good shape. 0:36:31.400 --> 0:36:33.920 Then you've got sort of close to three thousand community banks. 0:36:34.440 --> 0:36:37.480 They sit on one of three computer systems they're actually 0:36:37.560 --> 0:36:40.319 have scale because they're drag and drop on a really 0:36:40.360 --> 0:36:43.239 high quality platform. It's the belly in the middle, and 0:36:43.280 --> 0:36:45.799 so in fact the two years ago it was the 0:36:45.800 --> 0:36:48.799 belly which the four banks got in trouble. That's where 0:36:48.800 --> 0:36:49.520 we need to memonade. 0:36:49.520 --> 0:36:51.400 But let me frame this like for. 0:36:53.440 --> 0:36:53.760 Script. 0:36:53.840 --> 0:36:56.560 Why no, Gert, your question was brilliant. Why do we 0:36:56.600 --> 0:36:59.400 need to lean forward here? Hugh von Stein has came 0:36:59.440 --> 0:37:01.920 out of turn Need Oxford, PP and E and he 0:37:01.960 --> 0:37:04.080 had to get a day job, so he went to 0:37:04.160 --> 0:37:07.920 Morgan Stanley where he was definitive on banks in Europe 0:37:07.960 --> 0:37:11.240 but worldwide as well, and took down trophies like twelve 0:37:11.320 --> 0:37:13.520 years in a row or something. They had to force 0:37:13.600 --> 0:37:16.360 him out just so somebody else could win the damn trophy. 0:37:16.360 --> 0:37:18.560 He's herd of Mark Kearney at the Bank of England 0:37:18.840 --> 0:37:22.840 as well. But to your question, is definitive Trump loves 0:37:22.920 --> 0:37:23.760 Andrew Jackson. 0:37:23.840 --> 0:37:25.880 Yes, I mean is that where we're going? Portrait is 0:37:25.920 --> 0:37:28.000 back up on the wall. I know in the Oval office, 0:37:28.040 --> 0:37:30.040 but I don't know if you want to talk about 0:37:30.040 --> 0:37:30.520 Andrew Jackson. 0:37:30.520 --> 0:37:31.400 You should feel free if you. 0:37:31.400 --> 0:37:34.000 Want, well we get we can if you want, but 0:37:34.040 --> 0:37:36.319 you should get Neil Ferguson On. I mean, I think, well, 0:37:36.520 --> 0:37:38.920 Neil always taught me and she had dinner with Dick 0:37:38.920 --> 0:37:40.840 Burner last night, who you may remember, the chief economist 0:37:40.880 --> 0:37:41.759 and Bog and Sandy. 0:37:41.520 --> 0:37:42.040 Back the day. 0:37:42.840 --> 0:37:46.960 I think I owe her money or Dick some great 0:37:46.960 --> 0:37:47.880 form and I'm sure take this. 0:37:48.239 --> 0:37:51.640 But so he said, like, you know, the key lesson 0:37:51.719 --> 0:37:54.920 is that these clever PhDs, they haven't done economic history. 0:37:55.200 --> 0:37:57.560 And actually we learned that in the financial crisis. So actually, 0:37:57.719 --> 0:37:59.279 whether it's Jackson or whether Actu, you got back to 0:37:59.280 --> 0:38:02.560 the nineteenth century and actually, you know, think about the 0:38:02.600 --> 0:38:08.280 impact of Tariff's about counter counters, president deficits history really matters. 0:38:08.600 --> 0:38:10.160 I think Neil's a better guess key on that. 0:38:10.280 --> 0:38:11.520 No, this is really important. 0:38:11.560 --> 0:38:14.000 And to Richard Berner, folks at Morgan Stanley and with 0:38:14.000 --> 0:38:18.000 Stephen Roach changed American economics. I think Dick Berner and 0:38:18.040 --> 0:38:20.319 Iron this forward guidance things. 0:38:20.360 --> 0:38:20.600 Folks. 0:38:20.680 --> 0:38:23.080 You hear me talk about the dot plots McKee and 0:38:23.160 --> 0:38:25.279 I are like, you know, are you kidding me? And 0:38:25.320 --> 0:38:27.239 the answer is maybe they'll go away. A lot of 0:38:27.320 --> 0:38:28.080 that came. 0:38:27.840 --> 0:38:30.759 From the excellence of Richard Berner. Hugh, I got to 0:38:30.800 --> 0:38:31.520 rip up the script. 0:38:31.520 --> 0:38:36.320 Here we have a glorious person at Bloomberg Intelligence, Robert Schiffman, 0:38:36.640 --> 0:38:40.160 who writes on debt and credit and MAGA. 0:38:40.400 --> 0:38:41.680 He has just put out a. 0:38:41.680 --> 0:38:46.840 Brilliant note suggesting that all this angst about capital raised 0:38:46.840 --> 0:38:48.719 there could be done with. 0:38:48.840 --> 0:38:52.239 Debt issue Ince because they don't have any debt and 0:38:52.280 --> 0:38:54.600 they make more money than God and free Kishlow. 0:38:55.040 --> 0:38:57.279 Do you think the bankers like you used to be 0:38:58.000 --> 0:39:04.000 will convince MAGA raising their capital is an easy process 0:39:04.600 --> 0:39:08.000 because of the wonderful financial position they're in, and they 0:39:08.080 --> 0:39:09.919 can raise billions in debt. 0:39:11.000 --> 0:39:11.880 It's a great question. 0:39:11.960 --> 0:39:14.240 So look, let's stick on the bits which I have confidence, 0:39:14.239 --> 0:39:15.560 and let's move to the tricky a bit. 0:39:15.680 --> 0:39:16.000 Please. 0:39:16.080 --> 0:39:19.520 It's raining fixed income up moment. The inflows to fixed income. 0:39:19.800 --> 0:39:22.640 I think this year will Last year was a record 0:39:22.640 --> 0:39:23.920 in the States. I think it's gonna be a new 0:39:23.920 --> 0:39:26.280 record based on what I've seen in January and early February. 0:39:26.400 --> 0:39:29.640 So it's raining fixed income. The demand for yield is huge, 0:39:29.719 --> 0:39:31.239 and I think the way to put it is after 0:39:31.239 --> 0:39:33.920 twenty years where people didn't look at their fixeding come portfolios, 0:39:34.320 --> 0:39:36.840 the last three years, it's come back. So the demand 0:39:36.920 --> 0:39:40.160 side there. But as You've debated tons of times. The 0:39:40.280 --> 0:39:43.560 structure of markets has changed a lot, and so it's 0:39:43.600 --> 0:39:46.160 going to be ETFs or it's private credit, and so 0:39:46.239 --> 0:39:48.120 there's there's a following out. So I think the demand. 0:39:48.239 --> 0:39:50.600 I think you could issue plenty more debts. 0:39:50.600 --> 0:39:52.960 Okay, So like take a round number one hundred billion 0:39:53.000 --> 0:39:56.359 dollars sixty seven companies. In the old days, you'd sit 0:39:56.400 --> 0:39:59.239 at Morgan Stanley and there'd be like four phone calls, right, 0:39:59.400 --> 0:40:02.320 that's right. Can they do one hundred billion in debt 0:40:02.480 --> 0:40:03.640 with seven phone calls? 0:40:03.640 --> 0:40:05.400 And the answers, yes, they could do. 0:40:05.480 --> 0:40:07.440 But it's not necessarily the banks taking it down in 0:40:07.440 --> 0:40:10.000 it ogre, it's actually the investor side which is taking 0:40:10.000 --> 0:40:12.960 it down because the banks don't have that kind of capacity. 0:40:13.280 --> 0:40:15.279 Fair or Lord just sit on it. 0:40:15.280 --> 0:40:16.400 At least come out sovereign. 0:40:17.160 --> 0:40:18.640 But I think let's go back to his street. 0:40:18.760 --> 0:40:20.640 So when Neil, in fact, when Nail and I chatting, 0:40:21.000 --> 0:40:23.560 this is a recycling of Petro dollars. Why is it 0:40:23.600 --> 0:40:25.720 that everyone's in the Middle East? Is because those dollars 0:40:25.760 --> 0:40:28.040 need to find a home and actually they are funding 0:40:28.040 --> 0:40:29.760 the states and actually that could be one of the 0:40:29.800 --> 0:40:32.880 windfalls over the next four years is actually the recycling 0:40:32.880 --> 0:40:33.800 of these petro dollars. 0:40:34.040 --> 0:40:36.880 As Tom Venmo's doctor, Bernard, let me ask you about 0:40:37.280 --> 0:40:39.400 how what we've heard from Mark Rowan and his cohort 0:40:39.480 --> 0:40:41.640 lately is resonating in the c suites of the big 0:40:41.680 --> 0:40:45.120 banks on Wall Street. His ambition to grow private credit 0:40:45.120 --> 0:40:46.960 and to sort of present himself as this not even 0:40:46.960 --> 0:40:50.279 alternative but sort of driving forward for financing. What are 0:40:50.320 --> 0:40:52.400 banks doing in the face of that to compensate or 0:40:52.440 --> 0:40:53.840 compete with with what he's saying. 0:40:54.200 --> 0:40:57.080 Look, so it's fascinating how many banks now talk about 0:40:57.080 --> 0:40:59.200 are prepared to accept there is a partnership model rather 0:40:59.200 --> 0:41:01.439 than just a counterpart. But I think there's two ways 0:41:01.440 --> 0:41:04.760 slice it. The traditional private credit business is higher yielding, 0:41:04.760 --> 0:41:07.680 it's leverage finance, mid market finance. And the way I 0:41:07.680 --> 0:41:11.319 think about it is that there's a retranching or reslicing 0:41:11.320 --> 0:41:14.160 of the banking system. The senior risk is being taken 0:41:14.200 --> 0:41:16.040 by the banks and the junior risk is being sold. 0:41:16.320 --> 0:41:18.319 And I think, I said to Tom, I almost think 0:41:18.320 --> 0:41:19.920 that private credit is the a zen pic to the 0:41:19.920 --> 0:41:23.520 banking industry. It's helping them shad weight. But and here's 0:41:23.520 --> 0:41:26.680 a big butt. The risk now is the private credit 0:41:26.719 --> 0:41:30.319 firms are raising so much insurance money. Over half of 0:41:30.360 --> 0:41:32.719 all inflows to private credit last year I think came 0:41:32.719 --> 0:41:36.640 from insurers. Well, let's we find they need investment grade. 0:41:36.840 --> 0:41:39.360 So there you're now getting into the territory of the banks. 0:41:40.520 --> 0:41:43.359 Private credit only has about five six percent share of 0:41:43.480 --> 0:41:46.080 that asset back lending, right, that's where they're going next, 0:41:46.120 --> 0:41:48.919 and that will put them into more confrontations chilling. 0:41:48.960 --> 0:41:51.040 It's like talking to David Goldman when he was at 0:41:51.040 --> 0:41:53.279 Bank of America in like two thousand and six or 0:41:53.280 --> 0:41:56.320 two thousand and seven to translate this, folks, and he 0:41:56.360 --> 0:41:57.319 will help me out here. 0:41:57.920 --> 0:41:59.680 If private credit. 0:41:59.360 --> 0:42:01.400 Is going to pick up the pieces from the major 0:42:01.480 --> 0:42:05.719 banks and lesser quality what are called junior tranches, is 0:42:05.760 --> 0:42:09.400 there an implied leverage within those tranches? 0:42:09.920 --> 0:42:13.359 I mean, are they pure and clean or is there 0:42:13.400 --> 0:42:17.760 a shadow leverage within the new system. 0:42:17.360 --> 0:42:20.960 Of private credit and frankly private equity that we don't see. 0:42:21.719 --> 0:42:25.120 Look, this is what the number one question from regulators've 0:42:25.120 --> 0:42:27.000 always been having dealing with a lot of central bank governors. 0:42:27.000 --> 0:42:27.279 This is. 0:42:32.920 --> 0:42:37.080 Surveillance dire so but no, that's a great question. Actually 0:42:37.080 --> 0:42:40.080 the banking is doing work on exactly that issue. What's 0:42:40.160 --> 0:42:42.680 interesting though, is if you think about the insurers who 0:42:42.719 --> 0:42:46.160 are putting money to work, they need investment grade assets, right, 0:42:46.160 --> 0:42:47.320 and that's about forty three. 0:42:47.160 --> 0:42:50.560 Percentage pure clean They don't. 0:42:50.280 --> 0:42:53.320 Do let's say nad finance, so fun finance. The insurers 0:42:53.360 --> 0:42:55.799 do none of that. That's all being done by more 0:42:55.880 --> 0:42:58.680 than other parts of the ecosystem. So even if there 0:42:58.719 --> 0:43:01.720 is leverage, it's in sort of hands which are prepared 0:43:01.719 --> 0:43:05.360 to accept risky beds rather than the low risk beds. 0:43:05.560 --> 0:43:06.000 So there is it. 0:43:06.120 --> 0:43:08.160 Kind of It's okay in a way what the good 0:43:08.640 --> 0:43:12.640 always thinking life. We need the right holders the right risk, 0:43:13.040 --> 0:43:14.359 you know, in a way what we learn from let's 0:43:14.360 --> 0:43:16.160 say G capital they had long dated loans, but with 0:43:16.239 --> 0:43:19.920 short deposits, we want long data exactly, so we need 0:43:20.400 --> 0:43:22.839 to pass out loans to pass out the risk. 0:43:23.480 --> 0:43:26.239 So go to the axis with your expert on in 0:43:26.280 --> 0:43:30.200 at private equity. They have not been able to liquidize 0:43:30.320 --> 0:43:35.879 previous investments. Are you optimistic private equity can monetize their 0:43:35.960 --> 0:43:39.799 successes this year and in the next year twenty twenty six, 0:43:40.080 --> 0:43:43.520 and does private credit will? They have the same challenges 0:43:43.920 --> 0:43:46.640 of getting out of the stuff once they get into it. 0:43:46.920 --> 0:43:48.760 It's two great questions. 0:43:48.800 --> 0:43:50.439 So that's a hat trick. 0:43:52.120 --> 0:43:53.360 You guys work this out before. 0:43:54.000 --> 0:43:55.400 This is my script obviously, isn't it. 0:43:55.560 --> 0:43:56.240 I got to rehearse. 0:43:57.440 --> 0:43:57.839 It's tough. 0:43:59.520 --> 0:44:03.400 So all of the bankers that I talked to start, 0:44:03.480 --> 0:44:05.600 we're in November, we're jumping for joy about a huge 0:44:05.600 --> 0:44:06.799 IPO calendar for this year. 0:44:07.000 --> 0:44:07.879 I haven't seen it though. 0:44:07.880 --> 0:44:09.640 Maybe they did it just in time for bonuses and 0:44:09.800 --> 0:44:12.640 they were talking it out. 0:44:11.480 --> 0:44:15.359 Yeah, except there yesterday and said exact so. 0:44:15.320 --> 0:44:17.480 Sorry, okay, your credittionally with that. 0:44:18.239 --> 0:44:21.440 But obviously now they're saying in February it's it's okay, 0:44:21.440 --> 0:44:24.239 but it's a bit slow, and it's that indigestion in 0:44:24.280 --> 0:44:26.280 the sponsor community. In fact, if you got some great data, 0:44:26.360 --> 0:44:28.320 if you look at M and A strategic m and 0:44:28.360 --> 0:44:30.640 A so like company buying company, it's sort of more 0:44:30.680 --> 0:44:33.760 average levels the last fifteen years. It's A it's bouncing. 0:44:33.760 --> 0:44:35.680 It should be a little bit higher mid market M 0:44:35.719 --> 0:44:38.120 and A. Again in line, it's this sponsor M and 0:44:38.200 --> 0:44:40.680 A which is weak, and that's why the private credit 0:44:40.760 --> 0:44:43.719 side are having to strike out for fresh pasture. So 0:44:43.760 --> 0:44:47.560 I think, look, you know, markets are here to embarrass 0:44:47.560 --> 0:44:51.600 and confront us at the moment, it looks like it's 0:44:51.640 --> 0:44:53.200 going to be a reasonable but sluggish year. 0:44:53.280 --> 0:44:55.720 David, give one more in here with Hugh von steinas. 0:44:55.480 --> 0:44:57.760 Just ask you lastly about the kind of relationship between 0:44:57.880 --> 0:44:59.920 public and private and partnerships that might come out of 0:45:00.000 --> 0:45:02.000 this new administration. So we saw the scene in the 0:45:02.000 --> 0:45:04.520 Oval Office with Larry Ellison and Sam Altman and talk 0:45:04.600 --> 0:45:08.360 of financing a big data center project in Texas and elsewhere. Obviously, 0:45:08.440 --> 0:45:10.360 as we talked about in Lampoon a little bit a 0:45:10.360 --> 0:45:12.440 moment ago, there is the speculation about a sovereign wealth 0:45:12.440 --> 0:45:16.280 fund here in the US. How do seasoned private sector 0:45:16.320 --> 0:45:19.680 professionals look at that and navigate these proposals that you know, 0:45:19.680 --> 0:45:21.200 admittedly don't have a lot of meat on the bone 0:45:21.239 --> 0:45:23.040 at this point. But does the notion of a public 0:45:23.040 --> 0:45:24.880 private partnership change under this administration? 0:45:25.040 --> 0:45:26.839 Oh gosh, it's a great question. Well, in some ways 0:45:26.840 --> 0:45:28.480 you do already have a several wealth fund. If I 0:45:28.560 --> 0:45:30.799 might be so bold with Freddie and Fanny, I mean, 0:45:30.800 --> 0:45:36.040 they effectively are for now cheap fantasy moment, So I think. 0:45:35.880 --> 0:45:36.560 You can do that. 0:45:36.640 --> 0:45:40.920 I mean, obviously it depends whether it's through tax credits, 0:45:40.960 --> 0:45:44.319 through structures. How stable are the structures, what's the longevity 0:45:44.600 --> 0:45:47.440 the partnership? But I think everyone's looking at this minute 0:45:47.719 --> 0:45:50.360 they have you have an obligation to look at this seriously. 0:45:50.640 --> 0:45:53.840 Thirty seconds you came up with the phrase asset management. 0:45:54.000 --> 0:45:57.160 Barbell. Hugh von Stein is on the ETF. 0:45:57.280 --> 0:46:01.160 Boom oh, look the fixing committee off the charts. They 0:46:01.680 --> 0:46:04.240 infloced last year in the States, tripled. 0:46:03.800 --> 0:46:06.440 On the free lunch. 0:46:07.600 --> 0:46:09.719 So the bit which is growing is like, let's call 0:46:09.760 --> 0:46:12.719 it active ETF. And it's the same discussion we had 0:46:12.719 --> 0:46:15.080 twenty years ago. Let's say the PIMCO Total Return fun 0:46:15.080 --> 0:46:17.400 They're saying, I'll do the index and a little bit 0:46:17.400 --> 0:46:20.680 of Tabasco too, and the extra Tabasco gets you there. 0:46:21.040 --> 0:46:23.440 And there are Last year there were two I'm not 0:46:23.440 --> 0:46:25.359 doing company names this morning, but two funds who did 0:46:25.400 --> 0:46:28.320 really well in that space. I'm I think that active 0:46:28.360 --> 0:46:31.720 ETF space for fixed income remains really interesting. 0:46:31.760 --> 0:46:34.440 Michael Burr wants to know use Tabasco on your full. 0:46:34.280 --> 0:46:42.000 English right, try not. 0:46:41.360 --> 0:46:45.560 Missus Venstein, thank you so. 0:46:47.480 --> 0:46:47.680 Really. 0:46:47.760 --> 0:46:52.160 With Oliver Wyman and Dante, I should mention the brilliant 0:46:52.200 --> 0:46:55.640 and banks and there they are researching European banks. 0:47:00.320 --> 0:47:04.200 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:47:04.280 --> 0:47:07.680 starting at seven am Eastern on Applecarplay and Android Auto 0:47:07.719 --> 0:47:10.680 with the Bloomberg Business app. You can also listen live 0:47:10.760 --> 0:47:14.319 on Amazon Alexa from our flagship New York station, Just 0:47:14.360 --> 0:47:16.920 Say Alexa Play Bloomberg eleven thirty. 0:47:17.960 --> 0:47:25.680 Tina Fordham has provided phenomenal transatlantic perspective over the recent years, 0:47:25.960 --> 0:47:30.000 and she's just continually delivered to us on international relations 0:47:30.440 --> 0:47:35.520 and how it folds into the markets. She becomes ever stronger, 0:47:35.640 --> 0:47:40.160 joined by Ibra Mubari who was at City Group and 0:47:40.280 --> 0:47:44.120 legendary and Fordham and Robari together today is really what 0:47:44.200 --> 0:47:49.640 Bloomberg Surveillance is all about. Tina, the moment that we're 0:47:49.680 --> 0:47:52.719 in right now, I assume your five page report has 0:47:52.719 --> 0:47:56.919 become a twenty page report. Distill it into one observation 0:47:57.719 --> 0:48:02.600 of how, whatever our political persuasion, how we survive this 0:48:02.800 --> 0:48:07.520 testing of an executive branch versus a legislative branch in 0:48:07.560 --> 0:48:08.560 a judicial branch. 0:48:09.880 --> 0:48:13.120 Thank you for the introduction and the low pressure question. 0:48:13.640 --> 0:48:19.399 How do we think about these unprecedented times? We keep 0:48:19.440 --> 0:48:23.279 an open mind and we check our priors because we've 0:48:23.280 --> 0:48:24.320 never been here before. 0:48:24.440 --> 0:48:26.640 We've never been here before, So how do you check 0:48:26.640 --> 0:48:27.320 your priors. 0:48:28.600 --> 0:48:34.280 It's really important to constantly test your expectations, your confirmation bias, 0:48:34.440 --> 0:48:36.719 to seek a wide range of opinions, which is why 0:48:36.719 --> 0:48:40.640 I love working with Ibraham because he keeps me intellectually honest. 0:48:41.160 --> 0:48:43.440 Well, this is a great thank you for selling Ibram 0:48:43.480 --> 0:48:45.480 to us. I'm going to cut to the chase. The 0:48:45.680 --> 0:48:49.239 dollar is the prior. Is the great shock of what 0:48:49.360 --> 0:48:53.520 is to come with this Trump to administration, a fragility 0:48:53.719 --> 0:48:56.400 or super strength to the US dollar. 0:48:57.080 --> 0:48:59.439 I think eventually it'd be a frigidity, actually, and we've 0:48:59.440 --> 0:49:01.359 got a first taste of that over the last couple 0:49:01.400 --> 0:49:03.439 of weeks. So in the currency world, I actually think 0:49:03.600 --> 0:49:06.960 it points to that handing over to the end as 0:49:07.000 --> 0:49:10.759 maybe the place to hide in difficult times. But is 0:49:10.800 --> 0:49:13.680 it's it And as Tina mentioned, many many moving parts. 0:49:13.760 --> 0:49:16.399 So I keep it with Chapale, who we'll hear from 0:49:16.440 --> 0:49:19.520 later today. Be humble and nimble, check your priors and 0:49:19.560 --> 0:49:21.520 try to work out what are the preferences and what 0:49:21.560 --> 0:49:23.400 are the constraints of policymakers along the. 0:49:23.360 --> 0:49:24.360 Way A question for both of you. 0:49:24.440 --> 0:49:25.840 I'll start with you first over him, and that is 0:49:25.920 --> 0:49:27.839 during the campaign, we heard a lot from Scott Besson 0:49:27.880 --> 0:49:30.000 among others about the prospects that they're being a shadow 0:49:30.040 --> 0:49:32.560 fed share, who kind of telegraph what the next fed 0:49:32.600 --> 0:49:34.120 shair would think or do. And I guess we're getting 0:49:34.120 --> 0:49:36.920 a taste of that this morning from the President. He's 0:49:37.120 --> 0:49:40.560 opining on X and Truth Social about these inflation numbers. 0:49:40.840 --> 0:49:44.160 Biden inflation up, he tweeted this morning. He suggested the 0:49:44.160 --> 0:49:46.560 interest rates should be lower before this testimony that you 0:49:46.640 --> 0:49:49.480 just mentioned, perhaps he is the shadow fed share. There 0:49:49.560 --> 0:49:52.000 was so teas during the campaign trail. But in terms 0:49:52.040 --> 0:49:53.320 of what's on precedent, and I go back to a 0:49:53.400 --> 0:49:54.960 question I asked Tom a few minutes ago, and that 0:49:55.120 --> 0:49:58.200 is how much more difficult does it get for Jerome 0:49:58.239 --> 0:50:03.040 Palell to weather the commentary, the critique, the criticism, the 0:50:03.040 --> 0:50:06.560 politics of this moment. He's indicated over and over again 0:50:06.600 --> 0:50:07.719 that he's up for it, but this is going to 0:50:07.760 --> 0:50:10.720 become increasingly difficult for him. 0:50:10.920 --> 0:50:13.680 So form my vantage point, it actually is getting significantly 0:50:13.680 --> 0:50:16.360 more difficult. And we've seen that in J. Powell in 0:50:16.440 --> 0:50:19.160 his last few press conferences. And he used to be 0:50:20.160 --> 0:50:23.360 very effective in communicating and he's become much less effective 0:50:23.400 --> 0:50:28.120 and clearly the new administration is a big reason, but 0:50:28.200 --> 0:50:30.680 I also think it's because he holds a lot less 0:50:30.680 --> 0:50:33.840 effective sway over his committee. The committee seems to be 0:50:33.840 --> 0:50:35.840 a lot more politicized. There's a lot of talk about 0:50:36.040 --> 0:50:38.680 Powell being politicized, but I actually think it's other people 0:50:38.719 --> 0:50:41.320 in the committee and on both sides. So you see 0:50:41.840 --> 0:50:45.279 some unnamed governors being significantly more dubbish, and some people 0:50:45.280 --> 0:50:50.000 speculative they're aiming to be his successor. But maybe more relevantly, 0:50:50.040 --> 0:50:53.120 there are a number of people who have tilted from 0:50:53.160 --> 0:50:56.080 being very dubbish to much less dubbish when we have 0:50:56.200 --> 0:50:58.839 had very little data to speak of so far. So 0:50:58.880 --> 0:51:01.480 I think it is a it's a much more difficult environment. 0:51:01.480 --> 0:51:03.480 He is much less effective as a leader. Some people 0:51:03.520 --> 0:51:04.160 will speak of. 0:51:04.280 --> 0:51:07.799 Lame duck Christ to that point. I mean he's dealing 0:51:07.840 --> 0:51:09.840 with the same uncertainty that we are. He's going to 0:51:09.840 --> 0:51:12.520 field as many questions today as yesterday, perhaps more just 0:51:12.560 --> 0:51:15.120 about the tariff's policy, how that might affect the economy. 0:51:15.160 --> 0:51:17.719 He's going to try to bat that down, but there's 0:51:17.760 --> 0:51:19.960 going to be increasing demand for him to indicate how 0:51:19.960 --> 0:51:21.520 he's thinking through these issues. 0:51:22.680 --> 0:51:26.640 There's a lot of pressure for anybody in a leadership 0:51:26.719 --> 0:51:31.600 rule to both demonstrate their integrity but also not be 0:51:31.719 --> 0:51:35.000 perceived as sending the wrong signal to this administration. I 0:51:35.000 --> 0:51:38.200 think it's important that we don't normalize this, however, because 0:51:38.280 --> 0:51:41.240 what we are talking about as we think about lower 0:51:41.280 --> 0:51:44.799 trust and institutions that includes the FED, that includes the 0:51:44.840 --> 0:51:47.319 courts that in Congress was always low on that list. 0:51:48.360 --> 0:51:52.680 And for investors, that means that the nonlinearities that are 0:51:52.760 --> 0:51:55.239 present in the system make it a lot harder to 0:51:55.239 --> 0:51:58.399 do what market participants like to do, which is say 0:51:59.000 --> 0:52:00.000 signal versus noise. 0:52:01.560 --> 0:52:04.399 In our studios, we are thrilled to bring you this hour. 0:52:04.560 --> 0:52:08.320 Even Rabari and Tina Fordham of for Fordham Global Foresight, 0:52:08.360 --> 0:52:10.480 I can't say enough usually in London, and to have 0:52:10.600 --> 0:52:13.800 them in our studios. Treat it is really really a treat. 0:52:14.080 --> 0:52:17.520 I'm gonna can I do an audible Yeah, you are 0:52:17.560 --> 0:52:19.600 the one I want to talk to on this, and 0:52:19.640 --> 0:52:23.320 that we have a president going through a routine visit 0:52:23.600 --> 0:52:28.120 with the Hashemi King of Jordan, Abdullah the second folks, 0:52:28.120 --> 0:52:31.320 this yes, it takes you back to the movie Lawrence 0:52:31.360 --> 0:52:36.040 of Arabia The Ignorance of America, of where Jordan fits 0:52:36.080 --> 0:52:39.279 in to the matrix of the levant is there's there's 0:52:39.320 --> 0:52:42.920 no measurement of how dumb I am in everybody else. 0:52:43.520 --> 0:52:48.759 I had a very well reported interview with Elcci at 0:52:48.840 --> 0:52:52.680 Davos years ago. Elceci of Egypt said enough, I'm not 0:52:52.760 --> 0:52:58.520 even going explain to Republicans now in support of Trump 0:52:59.000 --> 0:53:04.360 the delicacy of how the president is treating Jordan, Egypt, 0:53:04.640 --> 0:53:06.480 in the rest of the broader Middle East. 0:53:06.960 --> 0:53:09.720 Well, it's consistent with a kind of an American approach 0:53:09.760 --> 0:53:11.560 to the world, which is get them in a room, 0:53:11.640 --> 0:53:15.200 knock heads, and you know, make a deal. And so 0:53:15.400 --> 0:53:19.400 Trump's logic is very, very appealing. But other countries have 0:53:19.480 --> 0:53:23.560 politics too. King Abdullah of Jordan has fifty percent of 0:53:23.640 --> 0:53:28.319 his population is Palestinian. He can't simply roll over and 0:53:28.360 --> 0:53:30.880 expect to stay in power, and his presence in the 0:53:30.920 --> 0:53:33.320 region is very important for his stability. 0:53:33.440 --> 0:53:37.040 And he's been holistic for America from his time at 0:53:37.040 --> 0:53:40.640 Eglebrooke and Deerfield years ago in Western at Massachusetts. I mean, 0:53:40.719 --> 0:53:43.440 this is a guy that's always been on the American team. 0:53:44.040 --> 0:53:47.120 Is he the buffer to Iran? I mean, on the map, 0:53:47.680 --> 0:53:50.760 it tells me that Jordan is the buffer to Persia. 0:53:50.800 --> 0:53:51.719 Am I right on that. 0:53:52.600 --> 0:53:55.879 I think Syria as a wild card and the kind 0:53:55.920 --> 0:53:59.560 of power vacuum there may be more relevant for Iran 0:54:00.239 --> 0:54:02.680 itself in a weak position. And what we don't know 0:54:03.200 --> 0:54:06.960 is what kind of discussion Natan Yahoo of Israel is 0:54:07.000 --> 0:54:10.640 having with the president and this move toward maximum pressure 0:54:11.120 --> 0:54:15.319 what that means, because making it harder for Abdullah to 0:54:15.360 --> 0:54:20.160 sit on that throne, pressuring Cisi in Egypt could cause 0:54:20.600 --> 0:54:26.239 what US political scientists called unintended consequences and make a 0:54:26.320 --> 0:54:27.840 difficult situation worse. 0:54:28.239 --> 0:54:30.480 You were sitting at Ebrahm's going top. Don't ask me 0:54:30.560 --> 0:54:34.520 about the Egyptian David save us. 0:54:34.520 --> 0:54:36.439 Please see presparent in mind what we were talking about 0:54:36.440 --> 0:54:37.960 a moment ago, that there is so much here that's 0:54:38.040 --> 0:54:41.600 unprecedented and not normal. How useful is it for you 0:54:41.680 --> 0:54:43.320 to go back and look at the first term to 0:54:43.360 --> 0:54:46.480 sort of divine what might be happening here? Is this 0:54:47.280 --> 0:54:49.520 Trump two point zero? Is it a revision of the 0:54:49.560 --> 0:54:51.320 manual that we had that first time around, or is 0:54:51.320 --> 0:54:53.200 it simply a very different guidebook. 0:54:54.000 --> 0:54:55.240 I think it's still very useful. 0:54:55.320 --> 0:54:57.560 Yeah, And in fact, the way to approach it is 0:54:57.600 --> 0:54:59.960 to think about what is similar to the first term 0:55:00.080 --> 0:55:03.080 and what is different, And I've continued to highlight that 0:55:03.360 --> 0:55:05.280 there are big macroeconomic differences. 0:55:05.280 --> 0:55:05.920 We are now in the. 0:55:05.920 --> 0:55:08.520 World where the economy is robust, stock markets are at 0:55:08.520 --> 0:55:10.799 all time highs, and inflation is a major concern. So 0:55:10.840 --> 0:55:13.400 that shakes how this administration will respond. It doesn't need 0:55:13.440 --> 0:55:16.120 to stimulate the economy. It will worry about inflation and 0:55:16.200 --> 0:55:19.839 net net that means the less fiscally expansionary than many 0:55:19.840 --> 0:55:22.279 people would have thought. But we've had a number of 0:55:23.040 --> 0:55:25.920 developments that are very much in line with how this 0:55:26.040 --> 0:55:28.440 administration worked the first time around, and I think the 0:55:28.440 --> 0:55:31.120 most relevant of them is it loves to experiment. It 0:55:31.160 --> 0:55:33.680 loves to take risks, it loves to send trial balloons, 0:55:33.719 --> 0:55:35.160 and it's very keen. 0:55:35.040 --> 0:55:36.040 To reverse course. 0:55:36.080 --> 0:55:37.680 It likes to act first. 0:55:37.440 --> 0:55:39.280 See what the response is and then judicate. 0:55:39.520 --> 0:55:40.359 In addition to that. 0:55:40.360 --> 0:55:43.040 It likes to as Tina likes to call it, flood 0:55:43.040 --> 0:55:48.359 the zone, distract and maybe divide potential opposition. So there's 0:55:48.400 --> 0:55:50.680 a number of and confused. So there's a number of 0:55:50.800 --> 0:55:53.360 lessons in the first turn that I think investors in 0:55:53.400 --> 0:55:56.359 the general public would be in a good position to. 0:55:56.320 --> 0:55:58.880 Heat Tina we're seeing that now there's this big confact 0:55:58.920 --> 0:56:00.880 that's going to happen in in the coming days the 0:56:00.920 --> 0:56:04.120 Munich Security Conference, and the Vice President has gone from 0:56:04.120 --> 0:56:06.440 Paris to there. He'll speak there. I look at the 0:56:06.440 --> 0:56:09.600 bloomberg and see a headline this morning. Ukraine NATO membership 0:56:09.640 --> 0:56:11.880 is not a realistic goal, according to Pete Hegseth, the 0:56:11.880 --> 0:56:15.719 new Defense Secretary. From where you sit, what is the 0:56:15.719 --> 0:56:22.160 next chapter of. 0:56:20.000 --> 0:56:22.919 I mean, Ukraine joining NATO, I don't think has been 0:56:23.320 --> 0:56:27.719 a realistic goal. But Ukraine with having a European perspective, 0:56:27.760 --> 0:56:30.760 as the EU likes to say, is a realistic goal, 0:56:31.560 --> 0:56:35.959 and that is an anchor for the European Union. I think, 0:56:36.160 --> 0:56:38.919 you know, the military strategists like to quote the old 0:56:39.000 --> 0:56:42.280 saying that no plan survives first contact with the enemy. 0:56:42.760 --> 0:56:46.440 When Vice President Vance gets to Munich, he'll get an 0:56:46.440 --> 0:56:52.920 earfull and be confronted with the European reality because Russia's. 0:56:52.480 --> 0:56:53.320 On our doorstep. 0:56:53.880 --> 0:56:57.040 We've got several NATAL member states that are very concerned. 0:56:57.239 --> 0:57:00.920 This isn't just about creating a d military rised zone 0:57:01.360 --> 0:57:05.200 in the occupied territories. If it were that simple land 0:57:05.239 --> 0:57:08.280 for peace, it would already have been done. 0:57:08.800 --> 0:57:11.600 What is your counsel to someone like me, someone listening 0:57:11.640 --> 0:57:16.120 who watched what unfolded yesterday in the Oval Office, Donald 0:57:16.160 --> 0:57:19.880 Trump talking about Gaza as a place that's not worth anything. 0:57:19.960 --> 0:57:23.880 It's his to buy, indicating their's, but no thought into 0:57:23.880 --> 0:57:26.400 sort of where people there would go if this essentially 0:57:26.400 --> 0:57:29.000 ethnic cleansing were to happen, people were to be moved out, 0:57:29.320 --> 0:57:31.120 not thinking through all of these steps. How do you 0:57:31.520 --> 0:57:33.960 how much weight do you give to what seemed like 0:57:34.440 --> 0:57:37.080 not thought out, perhaps offhand comments like that versus a 0:57:37.080 --> 0:57:38.800 broader kind of strategic bent when it comes to the 0:57:38.840 --> 0:57:39.760 Middle East or other places. 0:57:39.840 --> 0:57:41.440 Well, first of all, I think he's serious. I think 0:57:41.440 --> 0:57:43.920 he I think he is a real estate developer. He 0:57:44.000 --> 0:57:47.040 made similar comments about North Korea right. 0:57:46.920 --> 0:57:50.960 About you could be the next he sees. 0:57:50.840 --> 0:57:53.960 You know, waterfront, ocean front. 0:57:54.160 --> 0:57:55.760 Ter Putin responded that. 0:57:56.480 --> 0:58:01.000 Mister Putin, President Putin can watch and and wait, just 0:58:01.120 --> 0:58:05.640 like President She right. Remember during We've talked about this, 0:58:05.760 --> 0:58:10.480 during COVID, they thought America was in decline and they're 0:58:10.520 --> 0:58:13.080 just watching to see the chaos ensue. 0:58:13.600 --> 0:58:15.800 I can't say enough about Angela's stent, whether she was 0:58:15.880 --> 0:58:19.560 on fire her book Putin's World, she was really forceful 0:58:19.600 --> 0:58:24.440 about we underestimate putin at this Trump moment, Ibra Mubari, 0:58:24.760 --> 0:58:28.080 Tina Fordham with his foreigner of global foresighted generous amount 0:58:28.080 --> 0:58:29.320 of time and we're going to continue. 0:58:29.400 --> 0:58:32.360 We welcome all of you across the nation and worldwide 0:58:32.400 --> 0:58:35.240 on YouTube subscribe to Bloomberg Podcast. 0:58:35.320 --> 0:58:38.360 I can tell you this is what the show's about. 0:58:38.800 --> 0:58:43.280 Catherine Mann nailed it. She went to the bank. She 0:58:43.360 --> 0:58:47.920 got sick of you guys. She got sick, said Saya 0:58:48.280 --> 0:58:51.040 and Catherine Mann, who folks came up with a whole 0:58:51.080 --> 0:58:53.400 dysfunction of China, us etc. 0:58:53.840 --> 0:58:56.160 Doctor Mann went to the Bank of England and she 0:58:56.240 --> 0:58:58.480 has been a resilient, cautious hawk. 0:58:58.600 --> 0:59:02.200 There is that the new town Ibra Marbury is even 0:59:02.240 --> 0:59:05.280 with this inflation report, even the middle ground or dare 0:59:05.320 --> 0:59:08.600 I say the doves tilt hawkish over the next year. 0:59:09.920 --> 0:59:13.600 Well, I think what everybody really appreciates about Catherine is 0:59:13.640 --> 0:59:15.400 again that she has an open mind, but at the 0:59:15.400 --> 0:59:17.840 same time she is a very structured thinker. And what 0:59:18.480 --> 0:59:21.600 was catching my eye recently with her is she was 0:59:21.640 --> 0:59:24.600 an ardent hawk on the Bank of England's NPC for 0:59:24.640 --> 0:59:27.280 the last you know, probably two years. She was on 0:59:27.320 --> 0:59:29.600 the dubbish end of the spectrum when I worked with her, 0:59:30.000 --> 0:59:32.360 and then in the very last meeting she seemed to 0:59:32.400 --> 0:59:35.920 flip back again and highlighted that there are some points 0:59:35.920 --> 0:59:38.560 of pressure in the UK economy that in fact pulled 0:59:38.600 --> 0:59:40.680 her into the idea that maybe they should be cutting 0:59:40.680 --> 0:59:43.520 by fifty basis points, cut by fifty basis points, when 0:59:43.520 --> 0:59:45.680 previously she was in the you know, in the rear 0:59:45.720 --> 0:59:47.760 guard that suggested that the Bank of England should be 0:59:47.880 --> 0:59:50.960 should be very very cautious. Now the lesson in there 0:59:51.040 --> 0:59:53.640 for me is for somebody like her who is not 0:59:53.720 --> 0:59:56.280 an internal NPC member at the Bank of England, historically 0:59:56.320 --> 0:59:58.320 they've been treated with a bit of a discount by 0:59:58.920 --> 1:00:01.000 markets because they see is less influential. 1:00:01.360 --> 1:00:04.000 I would say, pay a lot more attention. 1:00:03.880 --> 1:00:06.439 To her than you normally would because it's it's times 1:00:06.440 --> 1:00:08.560 of great uncertainty, it's times where people don't really have 1:00:08.640 --> 1:00:11.040 much of an anchor, where these people have more influence. 1:00:11.080 --> 1:00:12.800 I got you just find a question in an honor 1:00:12.880 --> 1:00:15.840 Viillam Bauder, who invented modern city research. 1:00:16.120 --> 1:00:19.680 The debt in the deficit is tangible. Americans love to 1:00:19.800 --> 1:00:21.760 ignore the debt and the deficit. 1:00:22.040 --> 1:00:24.200 Ibra Robari Is this a time where we need to 1:00:24.240 --> 1:00:28.560 focus on the debt, the deficit in our interest expense. 1:00:29.840 --> 1:00:32.280 I think yes and yes for two reasons. 1:00:32.320 --> 1:00:34.680 I think one is you know the need ter One one, 1:00:34.600 --> 1:00:36.840 this administration has actually focused on it, and again I 1:00:36.880 --> 1:00:39.960 think people have been missing how focused they are on 1:00:40.400 --> 1:00:43.000 to some degree, managing what they see as a vulnerability 1:00:43.000 --> 1:00:45.880 in terms of the level of debt and deficit and how. 1:00:45.840 --> 1:00:46.560 Much power they have. 1:00:46.680 --> 1:00:49.080 I mean, the standard answer you get from anybody on 1:00:49.520 --> 1:00:52.440 US fiscal is well, the executive can't really do very much. 1:00:52.440 --> 1:00:55.800 It's Congress's job. Congress is so dysfunctional and divided. We 1:00:55.840 --> 1:00:58.880 are seeing them taking action. They're trying to cut spending. 1:00:59.000 --> 1:01:01.240 They have a lot more power over over Congress than 1:01:01.280 --> 1:01:04.400 previous administrations have had. So there's I think interesting fiscal 1:01:04.440 --> 1:01:06.200 action going on right now, which is different from what 1:01:06.240 --> 1:01:08.600 people expect. There's the bigger question that a lot more 1:01:08.600 --> 1:01:10.360 people ask about, which is, you know, when are we 1:01:10.520 --> 1:01:13.000 entering the period of physical crisis in the US. And 1:01:13.040 --> 1:01:16.440 there I think massive topic to watch, but that timing. 1:01:16.760 --> 1:01:19.160 You know, if anything is actually slightly pushed back relative 1:01:19.200 --> 1:01:20.919 to what we thought a couple of months ago, then 1:01:21.160 --> 1:01:22.640 you know what people were expecting. 1:01:22.800 --> 1:01:24.040 This is we're out of time. 1:01:24.200 --> 1:01:26.320 This is what We'll have many occasions to talk. 1:01:28.040 --> 1:01:28.480 In town. 1:01:28.840 --> 1:01:31.200 Yes, but I don't have to be in town, but yes, 1:01:31.520 --> 1:01:32.800 I will be coming more often. 1:01:33.200 --> 1:01:34.680 Okay, wonder the German election. 1:01:34.800 --> 1:01:37.520 Can we do something to a London hotel process. 1:01:38.880 --> 1:01:41.080 I'd like to speak to you about New York hotel. 1:01:43.360 --> 1:01:45.440 Sterling's unbelievable. 1:01:45.840 --> 1:01:49.560 It's harder, it's harder than ever. But it's wonderful to 1:01:49.560 --> 1:01:53.840 have these conversations. And I think the appetite for this 1:01:54.000 --> 1:01:57.680 kind of open minded you know, checking your priors. It 1:01:57.760 --> 1:02:00.360 has to be the way forward. We haven't seen this 1:02:00.440 --> 1:02:02.360 movie before, No, we haven't. 1:02:02.680 --> 1:02:05.000 And we're working on. David and I are reading as 1:02:05.080 --> 1:02:07.720 much as we can to stay up on this. Stephen 1:02:07.760 --> 1:02:10.400 Levinski and the New Foreign Affairs and Jason Furman and 1:02:10.400 --> 1:02:14.240 of course Tina Fordham writing every day. Tina Fordham, even Bumbari, 1:02:14.760 --> 1:02:16.520 thank you so much for joining Bloomberg. 1:02:21.080 --> 1:02:25.000 This is the Bloomberg Surveillance Podcast. Listen live each weekday 1:02:25.000 --> 1:02:28.040 starting at seven am Eastern on Apple Corplay and Android 1:02:28.040 --> 1:02:31.080 Auto with the Bloomberg Business app. You can also watch 1:02:31.120 --> 1:02:34.080 us live every weekday on YouTube and always on the 1:02:34.120 --> 1:02:35.640 Bloomberg terminal. 1:02:36.640 --> 1:02:41.360 After decades of service to his constituents in Arkansas, has 1:02:41.400 --> 1:02:43.480 the worst job in Washington. He has had a House 1:02:43.560 --> 1:02:48.720 Financial Services Committee, the Republican from Arkansas, and he joins 1:02:48.760 --> 1:02:51.120 us right now, French, I got eight ways to go here, 1:02:51.640 --> 1:02:53.800 but I got to look to the second third week 1:02:53.800 --> 1:02:57.600 of March, where the challenge is a government shutdown. 1:02:57.640 --> 1:02:59.840 Budget challenges. You're going to be in the heart of this. 1:03:00.480 --> 1:03:02.400 So I'm going to go to someone on your committee 1:03:02.400 --> 1:03:07.520 like Monica de la Cruz, the Latina from Texas. Fine, Okay, 1:03:07.800 --> 1:03:12.120 the conservative southerns that don't want to budget on the budget, 1:03:12.400 --> 1:03:15.880 how are mainstream Republicans like you going to convince them 1:03:16.280 --> 1:03:19.360 to keep the United States of America running. 1:03:20.680 --> 1:03:20.880 Well? 1:03:20.920 --> 1:03:23.400 Thomas, is such an important question. Great to be with 1:03:24.040 --> 1:03:27.080 you this morning. This is something we should have done 1:03:27.480 --> 1:03:30.720 in December, and it was a horrible mistake in my 1:03:30.880 --> 1:03:35.360 judgment not to complete the funding for FY twenty five 1:03:35.880 --> 1:03:39.600 in the previous Congress. Under the Biden administration, we would 1:03:39.600 --> 1:03:42.200 have had roughly the same characteristics we would have had 1:03:42.200 --> 1:03:45.800 an incoming Trump administration and incoming Senate. I think we 1:03:45.960 --> 1:03:49.480 would have gotten substantially the same deal. And now we're 1:03:49.480 --> 1:03:52.680 on trying to do budget reconciliation, which is a much 1:03:52.680 --> 1:03:55.800 more important task, and yet we face, as you point out, 1:03:55.800 --> 1:03:56.800 a government shutdown. 1:03:57.480 --> 1:03:58.880 Republicans have to stick together. 1:03:59.280 --> 1:04:02.560 We should use the Fiscal Responsibility Act numbers from last 1:04:02.640 --> 1:04:06.280 year and negotiate with the Senate now a Republican Senate 1:04:06.640 --> 1:04:08.840 who wants to spend a little bit more on defense, 1:04:08.960 --> 1:04:12.000 and get this behind us so that we could go 1:04:12.040 --> 1:04:15.680 to the main event of focus on reforming regulation, reforming 1:04:15.960 --> 1:04:20.320 productivity in the federal government, reforming spending, extending pro growth 1:04:20.360 --> 1:04:21.000 tax cuts. 1:04:21.920 --> 1:04:24.600 Give us your sense of how much optimism you have 1:04:24.680 --> 1:04:26.440 that's going to happen here. I know there's a lot 1:04:26.440 --> 1:04:30.360 of nervousness and apprehension that time is running short. There 1:04:30.360 --> 1:04:32.760 are different views on this. We were spending the last 1:04:32.760 --> 1:04:34.680 few weeks talking about will be one bill or two biller? 1:04:34.720 --> 1:04:35.640 Three bit three bills. 1:04:35.680 --> 1:04:37.800 I know you've been involved in the same game there 1:04:37.800 --> 1:04:40.000 on the hill. Do you see a path forward here? 1:04:40.040 --> 1:04:41.520 How much clarity do you have at this point? 1:04:42.200 --> 1:04:42.560 Yeah? 1:04:42.640 --> 1:04:45.760 Well, first, on Tom's question about FYY twenty five finishing 1:04:45.840 --> 1:04:49.880 FYY twenty five before March fourteenth, I have medium confidence 1:04:50.240 --> 1:04:53.120 the worst case scenario would be to continue a CR 1:04:53.800 --> 1:04:56.200 till like September thirtieth. First of all, once you hit 1:04:56.240 --> 1:04:58.680 April first, you'll have a one percent across the board 1:04:58.720 --> 1:05:05.880 cut twenty five spending, and crs are terrible for government management. 1:05:06.120 --> 1:05:09.840 We'll end up spending billions more because we operate under 1:05:09.840 --> 1:05:10.320 a CR. 1:05:10.400 --> 1:05:11.680 We won't be able to start. 1:05:11.440 --> 1:05:13.800 Any new programs at the Defense Department, which is a 1:05:13.840 --> 1:05:17.959 priority for the administration. So that makes me lean to yes, 1:05:18.080 --> 1:05:21.760 we'll get something done on March fourteenth, on fiscal twenty five, 1:05:22.120 --> 1:05:26.200 as the budget reconciliation the big game. I do support 1:05:26.240 --> 1:05:28.600 one bill here in the House because I think that's 1:05:28.640 --> 1:05:33.200 how we hold the Republican coalition together best here. And 1:05:33.240 --> 1:05:35.920 as you know, Senator Graham and the Senate's taking a 1:05:35.920 --> 1:05:36.680 different approach. 1:05:37.080 --> 1:05:39.720 Congressman Hill, what is the view from the Longworth House 1:05:39.760 --> 1:05:41.720 Office building of what we're seeing the White House do? 1:05:41.800 --> 1:05:45.480 Of course, the historical precedent has been that Congress controls 1:05:45.480 --> 1:05:47.800 the purse, makes decisions about funding. We are seeing this 1:05:47.840 --> 1:05:50.280 administration take a more active role, shall we say, in 1:05:50.320 --> 1:05:54.240 determining what gets funded and what doesn't. How much comfort 1:05:54.240 --> 1:05:56.520 do you have with seeding some of that power to 1:05:57.200 --> 1:05:59.800 your friends and colleagues in the other brands, the executive 1:05:59.800 --> 1:06:01.440 brand of Pennsylvania Avenue. 1:06:02.480 --> 1:06:05.280 Well, think you found on money that's appropriated. Congress does 1:06:05.320 --> 1:06:08.040 control those purse strings and they direct that spending. 1:06:08.560 --> 1:06:11.040 But in the broad swaths of federal. 1:06:10.680 --> 1:06:15.000 Spending, you have directions to agencies spend this money on 1:06:15.080 --> 1:06:18.600 these general topics, and that's what the appropriated money says. 1:06:18.640 --> 1:06:22.240 And then you have article to authority with a lot 1:06:22.240 --> 1:06:24.840 of discretion about how to spend it. And I think 1:06:24.840 --> 1:06:27.760 that's what President Trump's attempting to look at. Is the 1:06:27.800 --> 1:06:30.560 spending done at the end of the Biden administration and 1:06:30.600 --> 1:06:33.040 proposed to be spent here in the first few weeks 1:06:33.040 --> 1:06:33.920 of his administration. 1:06:34.400 --> 1:06:38.280 Is it in alignment with his goals that he. 1:06:38.360 --> 1:06:42.280 Has in foreign policy, for example, at USAID, And that's 1:06:42.280 --> 1:06:45.440 a classic Article to authority to take a look at that, 1:06:45.560 --> 1:06:48.959 make sure it's in alignment with their policies. With that said, 1:06:49.000 --> 1:06:51.920 you can't do these things without both the legislative branch 1:06:51.960 --> 1:06:54.240 and the executive branch ultimately working together. 1:06:54.680 --> 1:06:56.440 Then, Frenchchill, you know, you and I have known each 1:06:56.480 --> 1:07:00.000 other since time began, and I've never seen a private 1:07:00.200 --> 1:07:02.880 citizen in the Oval office standing there with his arms 1:07:02.880 --> 1:07:03.520 crossed like. 1:07:03.560 --> 1:07:06.200 He owned the high ground. You are one of the 1:07:06.320 --> 1:07:08.040 rare beasts that came. 1:07:07.920 --> 1:07:12.960 To Congress actually running a business in Little Rock. What's 1:07:13.000 --> 1:07:17.720 your advice to your fellow moderate brethren of the Democratic 1:07:17.760 --> 1:07:19.560 and Republican persuasion? 1:07:19.720 --> 1:07:22.840 What do they need to do in the coming days? 1:07:24.280 --> 1:07:26.760 Well, first, let's look at doje Tom. It's a good 1:07:26.760 --> 1:07:29.640 idea to go in and look at for efficiency and 1:07:29.680 --> 1:07:32.600 government in the executive branch and make recommendations to the 1:07:32.680 --> 1:07:36.640 legislative branch when you want to spend money differently or 1:07:36.760 --> 1:07:39.840 have a different number of full time equivalent positions in 1:07:39.880 --> 1:07:43.360 an agency. That's perfectly a good suggestion, and we haven't 1:07:43.360 --> 1:07:45.800 done it in years. I'd say since nine to eleven. 1:07:46.160 --> 1:07:49.960 The government's been focused on growing, not remotely focused on 1:07:50.040 --> 1:07:53.920 productivity or realigning or investing in technology or doing anything 1:07:53.920 --> 1:07:56.800 in a different way. We've been completely distracted by the 1:07:56.800 --> 1:08:00.920 war on terrorism, THEA crisis, and then recovery from that, 1:08:01.040 --> 1:08:03.720 and then the pandemic. So I think it's over time 1:08:04.240 --> 1:08:06.960 to scrape the barnacles from the ship of state when 1:08:07.000 --> 1:08:10.520 it comes to regulatory policy, personnel policy. But there's a 1:08:10.600 --> 1:08:12.160 right way and a wrong way to do it. And 1:08:12.160 --> 1:08:16.919 I would encourage the administration to plan, communicate, and consult 1:08:16.960 --> 1:08:19.000 with Congress on how the best way to do that is. 1:08:19.280 --> 1:08:20.760 As for the right way to do it, I think 1:08:20.800 --> 1:08:22.760 of you as a young man serving as a deputy 1:08:22.760 --> 1:08:25.360 Assistant Secretary of the Treasury departmentunder Nicholas Brady, and I 1:08:25.400 --> 1:08:29.799 wonder if you could have imagined you would have non appointed, 1:08:29.840 --> 1:08:33.439 non confirmed private sector individuals going in and looking at 1:08:33.439 --> 1:08:35.720 the payment system there in the Treasury Department. Does that 1:08:35.760 --> 1:08:37.920 make you uncomfortable having the history that you have with 1:08:37.960 --> 1:08:40.439 the Treasury Department to see the way that Doge has 1:08:40.479 --> 1:08:45.240 been approaching the sort of fiscal health the books, for 1:08:45.320 --> 1:08:46.920 lack of a better word, of the federal government. 1:08:47.720 --> 1:08:50.040 Well, when I heard about that story over the weekend 1:08:50.160 --> 1:08:52.960 last week, called Secretary of Assent. We talked about it 1:08:53.120 --> 1:08:56.920 last Monday, and he assured me that anything that Doge 1:08:57.040 --> 1:09:01.400 was doing was in the control of the Treasury Department, 1:09:01.840 --> 1:09:05.400 and that some people were working there for it review purposes. 1:09:05.840 --> 1:09:09.519 But he implied to me that he's got that under control. 1:09:09.600 --> 1:09:12.560 For making those recommendations, We're going to hold him accountable. 1:09:12.560 --> 1:09:15.800 He's the Treasury Secretary. So anything that Doge is doing 1:09:15.800 --> 1:09:19.000 in a Cabinet agency. We just need to remind the 1:09:19.040 --> 1:09:23.000 American people, Members of Congress, the Trump administration, we're holding 1:09:23.040 --> 1:09:27.799 the Cabinet Secretary accountable for, as I say, planning, efficiency changes, 1:09:27.840 --> 1:09:32.480 budget changes, personnel changes. We're holding them accountable here in Congress. 1:09:33.080 --> 1:09:36.160 We got some news overnight that Jonathan mccurnan, formerly the FDIC, 1:09:36.320 --> 1:09:38.479 has been picked to head the CFPB. And this has 1:09:38.479 --> 1:09:40.519 been an agency that's been in the crosshairs. I think 1:09:40.560 --> 1:09:42.800 it's safe to say you've had your criticisms with that 1:09:42.840 --> 1:09:44.760 agency over these last few years. And I want to 1:09:44.760 --> 1:09:47.479 ask you about some comments that the general lady from Cambridge, 1:09:47.479 --> 1:09:50.240 Massachusetts made on our heir last night, the senior Senator 1:09:50.280 --> 1:09:53.080 from Massachusetts, Elizabeth Warren, and she said, look, it's not 1:09:53.240 --> 1:09:55.560 up to the executive branch to decide whether or not 1:09:55.600 --> 1:09:58.759 an agency like the CFPB exists or what form it takes. 1:09:58.760 --> 1:10:01.240 That's up to Congress. The point that she's making is 1:10:01.680 --> 1:10:04.439 you and other lawmakers, if you don't like what this bureau, 1:10:04.520 --> 1:10:08.320 this agency is doing, you could take action yourselves. Lawmakers 1:10:08.360 --> 1:10:10.400 could decide whether or not it should continue to exist. 1:10:10.840 --> 1:10:12.639 Do you agree with the argument that she's making there 1:10:12.680 --> 1:10:15.120 that fundamentally it's not up to the executive branch, not 1:10:15.200 --> 1:10:19.519 up to this administration to decide what agencies, what parts 1:10:19.520 --> 1:10:22.160 of this government should stick around or be disappeared. 1:10:23.760 --> 1:10:25.880 Well, as a general matter, you'd have to look at 1:10:25.880 --> 1:10:29.040 statute by statute, agent by agency by that. But as 1:10:29.040 --> 1:10:32.799 a general statement, sure, I mean Congress creates agencies, Congress 1:10:32.800 --> 1:10:38.000 can end agencies. There's nothing so permanent though, as a 1:10:38.040 --> 1:10:41.599 temporary government program, as President Reagan reminded us. But let's 1:10:41.600 --> 1:10:45.280 talk about Elizabeth Warren. She's the founding mother of the CFPB. 1:10:45.920 --> 1:10:50.320 She created it to be insulated from oversighted, insulated from appropriations, 1:10:50.880 --> 1:10:54.479 and insulated from any meddling by Congress. And that's what 1:10:54.680 --> 1:10:58.360 irritated Congress, and that's why I support changing the agency dramatically. 1:10:58.560 --> 1:11:02.679 But Frinchell, I had a couple final questions. This is important, 1:11:02.680 --> 1:11:05.960 as you mentioned the senator from the Commonwealth. 1:11:05.760 --> 1:11:09.360 Where do we find a middle ground? You are one 1:11:09.360 --> 1:11:13.879 of the leaders of the middle ground in Washington. How 1:11:13.920 --> 1:11:17.320 does Senator Warren and someone over on the MAGA write 1:11:17.439 --> 1:11:21.839 find a common feature around people like french Hill. 1:11:21.960 --> 1:11:24.400 Well, it's a great question, and I've hearded Senator Warren 1:11:24.520 --> 1:11:27.799 to consider that exactly she's concerned about the big banks 1:11:27.840 --> 1:11:30.759 taking over the world. Well, she's created that with Dodd Frank, 1:11:30.800 --> 1:11:34.639 who concentrates more power into those big banks. I've encouraged 1:11:34.640 --> 1:11:37.559 her to consider tailoring policies for all the rest of 1:11:37.600 --> 1:11:41.600 the banking system, and also considering compromise on the CFPB 1:11:42.200 --> 1:11:45.760 but putting it under congressional appropriations and having a bipartisan 1:11:45.800 --> 1:11:47.679 commission right overseas its work. 1:11:47.720 --> 1:11:49.120 Those are middle ground points. 1:11:49.280 --> 1:11:51.760 French, I don't care. Here's what I care about. 1:11:52.000 --> 1:11:57.720 My father worshiped Bill Dickie of Little Rock, Arkansas, the 1:11:57.840 --> 1:11:59.000 x Yankees. 1:11:58.800 --> 1:11:59.759 Million years ago. 1:12:00.439 --> 1:12:04.479 Your minor league ball team, the Arkansas Travelers Texas League. 1:12:04.720 --> 1:12:07.320 They play in the Dickey Stadium. How's a state of 1:12:07.360 --> 1:12:10.280 minor league baseball in Little Rock? Is we have pitchers 1:12:10.280 --> 1:12:11.600 and catchers today. 1:12:12.120 --> 1:12:14.640 Boy Strong, there's no better place to be on an 1:12:14.640 --> 1:12:17.599 early summer night. The price is right, the fun is great, 1:12:17.680 --> 1:12:20.760 and it's fun to beat the teams in the Texas League. 1:12:20.760 --> 1:12:22.600 And it's something I love doing with not only my 1:12:22.640 --> 1:12:23.759 family but all my friends. 1:12:25.360 --> 1:12:27.880 There were the Seattle Mariners. You think I could see 1:12:27.880 --> 1:12:30.000 the Red Sox, you know, down in Arkansas? 1:12:30.640 --> 1:12:32.599 Kind of maybe every time I feel in on this show. 1:12:32.600 --> 1:12:34.000 We have like three trips we need to take on 1:12:34.000 --> 1:12:37.320 the heels of each show. Do that little baseball sounds 1:12:37.320 --> 1:12:38.120 like it's a plan to me. 1:12:38.520 --> 1:12:41.240 We'll touch you right, We'll put you right behind home plate. 1:12:43.680 --> 1:12:46.160 Of the beloved Barney Frank. I hope you do as 1:12:46.160 --> 1:12:50.080 well as Barney Frank. He's having the Financial Services Committee 1:12:50.200 --> 1:12:54.200 in Washington. The Republican Little Rock Friendshill joining us. 1:12:54.439 --> 1:12:59.240 This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, 1:12:59.360 --> 1:13:02.840 and anywhere where else you get your podcasts. Listen live 1:13:02.920 --> 1:13:06.960 each weekday, seven to ten am Eastern on Bloomberg dot Com, 1:13:07.120 --> 1:13:10.960 the iHeartRadio app, tune In, and the Bloomberg Business app. 1:13:11.240 --> 1:13:14.360 You can also watch us live every weekday on YouTube 1:13:14.640 --> 1:13:16.679 and always on the Bloomberg terminal.