WEBVTT - Markets, Ukraine, and the Economy 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.439 at Bloomberg dot com slash podcast. Let's go over to 0:00:21.680 --> 0:00:25.920 Michael Weiss. He is the founder and president of Yield Street. Michael, 0:00:25.920 --> 0:00:28.120 thanks so much for joining us here. It's it's FED day. 0:00:28.480 --> 0:00:31.080 You know, here Bloomberg we make a big big deal 0:00:31.080 --> 0:00:34.120 about it because the markets really care. What are you 0:00:34.200 --> 0:00:36.040 thinking about? What do you expect to hear from this Fed? 0:00:36.280 --> 0:00:38.720 It's good to be back in good morning. I expect 0:00:38.760 --> 0:00:40.920 to see a little bit of the same when it 0:00:40.960 --> 0:00:43.960 comes to the FED. I think the market continues to 0:00:44.000 --> 0:00:45.600 think that we have it all figured out, and the 0:00:45.640 --> 0:00:48.720 FED enjoys showing us that we don't. I expect us 0:00:48.760 --> 0:00:51.279 to see another raid hike. I think the markets are 0:00:51.280 --> 0:00:53.080 going to see a choppy day today. I think we're 0:00:53.080 --> 0:00:55.480 going to see some more volatility. I don't think the 0:00:55.480 --> 0:00:58.200 FED is done yet. I think they have resilience that 0:00:58.320 --> 0:01:02.120 we have yet to experience. Well, they share better not 0:01:02.160 --> 0:01:04.360 be done because they have five and a quarter percent 0:01:04.440 --> 0:01:06.039 as the terminal rate on the dot plot. So if 0:01:06.080 --> 0:01:09.920 they finish at four, that's a big miss. I could 0:01:09.920 --> 0:01:12.360 imagine though, that they don't go much higher than five, 0:01:12.480 --> 0:01:14.760 because I think they're a little more hawkish on the 0:01:14.800 --> 0:01:17.759 dot plot than they expect to be in real life. Plus, 0:01:17.880 --> 0:01:20.959 to be fair, a lot has changed, right Michael. I mean, 0:01:21.000 --> 0:01:25.280 we've seen inflation come down pretty substantially. We are seeing 0:01:25.319 --> 0:01:29.760 inflation come down. We are seeing the American consumers pocket dinner. 0:01:30.319 --> 0:01:34.440 We're seeing people pulling out of we we saw Vanguard 0:01:34.920 --> 0:01:38.600 published a report that the people are having hardship withdrawals 0:01:38.640 --> 0:01:40.800 out of their personal retirement accounts at a level that 0:01:40.840 --> 0:01:45.120 we haven't seen before. And so the consumer is different. 0:01:45.200 --> 0:01:49.840 Their ability to spend has dramatically decreased, and they don't 0:01:49.880 --> 0:01:52.520 have the same deposits they used to the way how 0:01:52.520 --> 0:01:55.320 does that affect How does that affect your investments at 0:01:55.360 --> 0:01:58.800 Yield Street, because you have I think a very unique 0:01:58.840 --> 0:02:03.559 situation in that UM, if I understand it correctly, you're 0:02:03.600 --> 0:02:08.040 you allow UM kind of retail investors to get in 0:02:08.160 --> 0:02:13.400 on something that until now had been really the revere 0:02:13.680 --> 0:02:17.600 of institutional clients or the ultra wealthy. Right you you 0:02:17.760 --> 0:02:21.440 let people into private credit. Correct, the old Street has 0:02:21.480 --> 0:02:27.200 been making access to alternative investments available for retail investors 0:02:27.200 --> 0:02:29.959 and credit investors. And what we have been a big 0:02:30.000 --> 0:02:33.799 proponent of is helping people build a better and more 0:02:33.840 --> 0:02:38.799 modern portfolio that includes private assets, so private credit, private equity, 0:02:39.040 --> 0:02:42.160 real estate, and a host of other investments that were 0:02:42.240 --> 0:02:45.920 usually and historically reserved for the ultra wealthy and the 0:02:45.919 --> 0:02:50.280 institutional investor and had been incredibly popular. I mean, everybody 0:02:50.360 --> 0:02:52.919 Paul and I talked to in two was like, Man, 0:02:53.680 --> 0:02:58.160 these markets are are too crazy. We're going to run 0:02:58.160 --> 0:03:00.560 for the hills. The only thing we like is either credit. 0:03:01.880 --> 0:03:04.119 So how's that turning out? How does that look this year? 0:03:05.600 --> 0:03:08.320 It still continues to look really great. I'll talk to 0:03:08.360 --> 0:03:10.200 you a little bit about some of the challenges you 0:03:10.200 --> 0:03:13.200 could expect in private markets. But for the most part, 0:03:13.400 --> 0:03:16.639 the private markets are holding their own and people continue 0:03:16.680 --> 0:03:19.280 to invest in and continue to see net inflows month 0:03:19.320 --> 0:03:22.680 over month. People want more stability, They want to get 0:03:22.680 --> 0:03:25.920 away from the volatility in the public markets. They trust 0:03:25.919 --> 0:03:27.760 the public markets for life, and it has to deliver 0:03:27.880 --> 0:03:30.640 the returns for them that they want it or the stability, 0:03:30.680 --> 0:03:33.600 whereas in the private market, for example, in private credit 0:03:33.680 --> 0:03:37.720 or in real estate debt, you are often able to 0:03:37.760 --> 0:03:40.840 invest in a sofa based or in a floater I 0:03:40.880 --> 0:03:43.680 know that's a trigger word for you your last time, 0:03:43.720 --> 0:03:47.560 I think you pulled the Caddy shock reference. But um, 0:03:47.640 --> 0:03:51.400 if if you're invested in a floating rate product, then 0:03:51.400 --> 0:03:54.800 you're going to continue to earn more as the ft 0:03:54.920 --> 0:03:58.520 increases the rate. And so for the most part, the 0:03:58.640 --> 0:04:02.080 alternative investment lands it has held its own and people 0:04:02.120 --> 0:04:06.400 continue to invest more nuanced. Where you're seeing a shift 0:04:07.040 --> 0:04:11.640 over the last twelve months is historically people were really 0:04:11.680 --> 0:04:14.720 excited over the last number of years about private equity, 0:04:14.760 --> 0:04:18.000 about venture about being growth opportunities, so I think of 0:04:18.120 --> 0:04:21.120 longer duration and limited cash flow but a bigger return 0:04:21.200 --> 0:04:25.200 in the future. Over the last number of months, investors 0:04:25.200 --> 0:04:29.680 have shifted that appetite into shorter duration, cash flowing assets, 0:04:29.720 --> 0:04:32.880 more credit based, less long term equity, and they were 0:04:32.920 --> 0:04:38.120 able to distill access those investments through our platform. And 0:04:38.160 --> 0:04:41.160 so we've shifted some of the demand as to where 0:04:41.160 --> 0:04:45.599 we're investing more heavily to cater to what people really want. Hey, Matt, 0:04:45.720 --> 0:04:49.400 you know, to the extent we do get a recession 0:04:49.720 --> 0:04:54.720 in how concerning you about the private credit business as 0:04:54.760 --> 0:04:57.520 you think about credit quality, how does that change maybe 0:04:57.520 --> 0:05:01.159 how you think about that business. I'm very bullish on 0:05:01.160 --> 0:05:04.600 the private credit business as it relates to credit quality. Obviously, 0:05:04.640 --> 0:05:08.520 that's much more specific to the strategy. Within private credit. 0:05:08.960 --> 0:05:11.880 We've mostly been focused on teen year secured or on 0:05:12.000 --> 0:05:15.560 bridge lending UM that's imagining, but on a lower loan 0:05:15.600 --> 0:05:18.000 to value basis. So when you look at our portfolio 0:05:18.120 --> 0:05:20.279 or when you look at the partners that we do 0:05:20.360 --> 0:05:22.520 business with, we feel really good about it. I think 0:05:22.560 --> 0:05:26.640 where the recession starts to hit UM in a more 0:05:26.640 --> 0:05:30.440 impactful way. Some of the private investments, for example, take 0:05:30.480 --> 0:05:33.600 of real estate equity. So a lot of the investments 0:05:33.839 --> 0:05:37.479 they have senior debt that could be on a floating rate. 0:05:37.560 --> 0:05:41.360 And so for folks that don't have recaps, that becomes 0:05:41.360 --> 0:05:44.800 a real issue because their cost of debt just skyrocketed. 0:05:45.279 --> 0:05:48.880 Our portfolio has recaps, but they're gonna roll in twenty four, 0:05:49.560 --> 0:05:52.680 l twenty three or early twenty four. And so if 0:05:52.680 --> 0:05:55.440 you look at the forward curve today, you feel comfortable 0:05:55.480 --> 0:05:57.040 saying Hey, by that time, you're going to be in 0:05:57.040 --> 0:05:59.560 a better place and you'll be fine. People who are 0:05:59.600 --> 0:06:02.960 dealing with expiring recaps now are going to have a 0:06:02.960 --> 0:06:05.640 lot of trouble because the cost of that dead is 0:06:05.640 --> 0:06:08.359 going to be way too expensive. All right, Michael, great stuff. 0:06:08.360 --> 0:06:11.520 Always appreciate checking in with you. Michael Weiss's founder and 0:06:11.640 --> 0:06:17.320 president of Yield Street talking about the credit markets. Lots 0:06:17.360 --> 0:06:21.400 of eco data, lots of earnings, but also geopolitical issues 0:06:21.440 --> 0:06:23.840 out there for the markets to take into accouncil. Let's 0:06:23.839 --> 0:06:26.440 bring on Angela Stent, she's a senior fellow at the 0:06:26.480 --> 0:06:29.120 Brookings Institute in Angela. Before we get to kind of 0:06:29.200 --> 0:06:33.480 Russia Ukraine and what that means for just geopolitical tensions, 0:06:34.160 --> 0:06:35.560 you know. The kind of the story that's just kind 0:06:35.560 --> 0:06:38.480 of hitting the tape right now is the Justice Department 0:06:38.560 --> 0:06:41.840 at President Biden's home in Rohoboth Beach, Delaware looking for 0:06:41.960 --> 0:06:45.560 more documents. What's going on with these documents for a 0:06:45.600 --> 0:06:49.000 lot of these senior level folks, Well, I think it 0:06:49.080 --> 0:06:52.040 shows that we need a better system. When people leave 0:06:52.120 --> 0:06:55.400 office and I guess it's the last days and everyone's 0:06:55.440 --> 0:06:59.000 hwying around and packing things up, that clearly mistakes were 0:06:59.040 --> 0:07:01.719 made us. So I think as a result of all 0:07:01.720 --> 0:07:04.359 of this, and I guess, uh, they've now asked the 0:07:04.440 --> 0:07:06.919 Justice Department has asked the you know, all of the 0:07:07.000 --> 0:07:10.160 former presidents and vice presidents to make sure that they 0:07:10.160 --> 0:07:12.840 don't have classified documents, that they'll have to have a 0:07:12.840 --> 0:07:15.960 better way of dealing with it, because clearly the system 0:07:16.000 --> 0:07:20.120 hasn't worked. How is the system working now? I mean, 0:07:20.640 --> 0:07:24.040 the first documents were found November two, just before an election. 0:07:24.160 --> 0:07:27.800 Fortunately for the Democrats, they didn't tell anybody until after 0:07:27.840 --> 0:07:31.080 the mid terms. But it's been quite a while. They're 0:07:31.200 --> 0:07:35.480 just searching his beach house now. Why, well, I guess 0:07:35.800 --> 0:07:38.320 you know, it takes time for them, you know, their 0:07:38.360 --> 0:07:42.400 procedures to uh, you know, to to get to all 0:07:42.440 --> 0:07:48.680 the different places you know, where the presidents life is happening. Yeah, 0:07:49.040 --> 0:07:52.720 they were scheduled. Yeah, I mean, everything's you know, it 0:07:53.280 --> 0:07:56.160 takes time. But clearly, as I said, the system isn't 0:07:56.160 --> 0:07:58.480 working properly and we need a better system. It's been 0:07:58.560 --> 0:08:01.160 three months, by the way, three months. It's I think, 0:08:01.280 --> 0:08:02.520 I don't know what's going on there. I guess the 0:08:02.520 --> 0:08:05.280 government is busy, busy, busy, And let's switch gears and 0:08:05.280 --> 0:08:07.880 get to the big issue that we want to discuss 0:08:07.920 --> 0:08:10.400 with you, that's just kind of Ukraine and Russia. Can 0:08:10.440 --> 0:08:12.600 you give us your thoughts. I mean, we're a year 0:08:13.040 --> 0:08:16.760 into this, so much suffering by the folks of Ukraine. 0:08:16.800 --> 0:08:18.320 Can you tell us kind of where we are and 0:08:18.640 --> 0:08:22.560 how this might play out? So we're really, i would say, 0:08:22.600 --> 0:08:25.920 at the moment, in a stalemate. The Ukrainians had made 0:08:26.040 --> 0:08:29.800 some games in September and October, the Russians have pushedback. 0:08:29.880 --> 0:08:33.040 There's fierce fighting going on still in the town called 0:08:33.040 --> 0:08:34.920 bah Mood. If you look at pictures of it, it's 0:08:35.160 --> 0:08:39.840 completely destroyed Um and we expect a new Russian offensive 0:08:40.120 --> 0:08:42.160 sometime in the spring. We don't know when it's going 0:08:42.200 --> 0:08:44.960 to be um And therefore, you know, the Ukrainians have 0:08:45.080 --> 0:08:48.840 really been asking for more military assistance from the West. 0:08:49.120 --> 0:08:51.600 So now you have the Germans, after a long debate, 0:08:52.160 --> 0:08:54.880 saying that they will supply them with Leopard tanks, and 0:08:54.920 --> 0:08:58.680 other European countries that have these German tanks, which top 0:08:58.720 --> 0:09:01.840 of the line, will also supply by Ukraine. The Biden 0:09:01.880 --> 0:09:05.680 and Registration has said we will send Abram's thanks to Ukraine, 0:09:05.720 --> 0:09:07.880 but they may not get there. Till at least the 0:09:08.000 --> 0:09:10.720 end of this year, um so. And now, of course 0:09:10.720 --> 0:09:14.240 the Ukrainians are asking for more fighter jets, so there's 0:09:14.280 --> 0:09:18.160 a big debate going on. So I think at this 0:09:18.240 --> 0:09:22.080 point the Ukrainians need all the military assistance they can 0:09:22.200 --> 0:09:25.880 get to push back against this new Russian offenses coming 0:09:25.880 --> 0:09:29.240 along sometime in the next few months. But this could 0:09:29.240 --> 0:09:31.760 go on, you know, for a very long time. There 0:09:31.880 --> 0:09:35.200 is no uh sign at the moment that either side 0:09:35.679 --> 0:09:39.319 is ready to sit down and talk about a peace negotiation. 0:09:39.640 --> 0:09:41.600 I mean it could be if you look at what's 0:09:41.600 --> 0:09:45.200 happened in Afghanistan and Vietnam, this could be something they're 0:09:45.200 --> 0:09:50.120 engaged in for years, if not decades. Um is it 0:09:50.240 --> 0:09:53.040 risky with a leader like Putin? I mean, he seems 0:09:53.080 --> 0:09:55.880 like he has nothing to lose, either wins or he dies. 0:09:58.040 --> 0:10:00.960 So this what's the concern about esca lation. And of 0:10:01.000 --> 0:10:03.440 course the minute that the announcement was made about the 0:10:03.480 --> 0:10:06.959 tanks for Russians threatened counter moves. On the other hand, 0:10:07.000 --> 0:10:10.000 what they're trying to do is just intimidate everybody, the 0:10:10.120 --> 0:10:13.640 Ukrainians and on all of their supporters to doing nothing 0:10:14.200 --> 0:10:17.600 so that Russia can continue this war and essentially change 0:10:17.640 --> 0:10:19.600 the government in Key of which they still want to 0:10:19.600 --> 0:10:22.640 do and take over Ukraine. So I think we shouldn't 0:10:22.640 --> 0:10:25.840 allow ourselves to be too intimidated by Putin, but I 0:10:25.880 --> 0:10:28.800 think we have to recognize our risks there um, and 0:10:28.880 --> 0:10:31.440 we have to warn the Russians as we're doing, of 0:10:31.480 --> 0:10:36.560 the consequences of escalating this any further. Angela, do you 0:10:36.600 --> 0:10:39.520 have a sense of the level of support that Mr. 0:10:39.559 --> 0:10:46.120 Putin has within Russia itself of the people for this war. Sure? So. 0:10:46.240 --> 0:10:48.640 The public opinion data that we have from the only 0:10:48.720 --> 0:10:55.120 independent polling place is that about seventy of the people 0:10:55.160 --> 0:10:58.680 who are in Russia support this war. Let's keep decent 0:10:58.760 --> 0:11:03.080 of them, uh, support it more enthusiastically, the other maybe 0:11:03.160 --> 0:11:06.800 less so. So the supporter is still there. As many 0:11:06.840 --> 0:11:10.600 as a million Russians have left Russia, including a couple 0:11:10.600 --> 0:11:12.559 of hundred thousands of young men who didn't want to 0:11:12.600 --> 0:11:15.280 be mobilized. So those people don't support the war, but 0:11:15.320 --> 0:11:19.080 they're ones who remained they do, or they're indifferent to it. 0:11:19.320 --> 0:11:22.559 On the other hand, of the Russians also say that 0:11:22.600 --> 0:11:26.880 there should be negotiations, but Putin has managed to persuade people, 0:11:26.920 --> 0:11:29.920 particularly those people who only have access to state run 0:11:30.000 --> 0:11:32.800 media that this is you know, the United States is 0:11:32.880 --> 0:11:35.800 threatening Russia. This is a Russia a war of Russia 0:11:35.840 --> 0:11:39.280 against the West, and Russia is going to defeat them. Angela. 0:11:39.840 --> 0:11:45.000 You know, we see stories of Putin letting inmates out 0:11:45.000 --> 0:11:48.079 of prison and putting them on the front lines. I mean, 0:11:48.960 --> 0:11:52.480 it looks like they're just they have nothing left. How 0:11:52.480 --> 0:11:55.719 long can they continue to go here? Well, I mean 0:11:55.720 --> 0:11:59.199 the Russians can still continue to go on for some time. 0:11:59.559 --> 0:12:03.079 So the the Mercenary Group Wagner, which isn't the regular 0:12:03.120 --> 0:12:07.720 Ministry of Defense troops, they've been recruiting prisoners, murderers, rapists, etcetera, 0:12:07.960 --> 0:12:10.040 and sending them to the front and many of those 0:12:10.040 --> 0:12:13.080 people are getting killed, but they are you know, they 0:12:13.160 --> 0:12:16.800 still have quite a lot of people that they can mobilize. Um, 0:12:17.040 --> 0:12:21.079 they do have ammunition. They're getting stuff from the North Koreans, 0:12:21.120 --> 0:12:24.319 They're getting drones from the Iranians. So the Russians can 0:12:24.360 --> 0:12:29.080 continue going. They have a history of enduring uh these things. 0:12:29.200 --> 0:12:32.600 And I think Putent's calculation is that in the end 0:12:33.000 --> 0:12:35.600 the West will cave, that we will we won't have 0:12:35.679 --> 0:12:39.240 the enthusiasm anymore for supporting Ukraine and that Russia will 0:12:39.240 --> 0:12:42.160 be able to prevail Angela. I mean, I mean we're 0:12:42.160 --> 0:12:44.559 speaking with Angela's a Stent, a senior fellow at the 0:12:44.559 --> 0:12:47.240 Brooklyn Institute. Andrew you literally wrote the book on Mr. 0:12:47.280 --> 0:12:51.240 Putin entitled Putin's World, Russia against the West and with 0:12:51.600 --> 0:12:54.080 the Rest, and that want to Fletcher School of Law 0:12:54.120 --> 0:12:57.679 and Diplomacy Prize for the best book on US Russian relations. 0:12:57.720 --> 0:13:01.320 So how you know Mr Putin's well as anyone? How 0:13:01.360 --> 0:13:06.880 did he miscalculate so badly? So? I think he was 0:13:06.960 --> 0:13:11.120 only being given information that his intelligence services knew he 0:13:11.160 --> 0:13:14.320 wanted to hear. So he was misinformed about the situation 0:13:14.360 --> 0:13:17.600 in Ukraine. He thought the Ukrainians wouldn't fight back. He 0:13:17.720 --> 0:13:21.920 was misinformed about the state of the Russian armed forces, 0:13:21.960 --> 0:13:24.439 which of course have performed much worse than he thought 0:13:24.440 --> 0:13:27.920 they would. And he was misinformed about the West. He 0:13:28.040 --> 0:13:30.840 thought that the US wouldn't react. He looked at what 0:13:30.920 --> 0:13:34.319 happened at the withdrawal from Afghanistan um and I think 0:13:34.720 --> 0:13:38.959 he had two years of COVID isolation where he really 0:13:39.040 --> 0:13:41.840 didn't meet any foreign leaders. And you know, he just 0:13:41.880 --> 0:13:44.720 talked to a small group of people who reinforced all 0:13:44.720 --> 0:13:48.720 of his ideas, all of his beliefs in paranoia. So 0:13:48.840 --> 0:13:52.360 it's been a huge miscalculation. Um, and I think it's 0:13:52.400 --> 0:13:55.720 just that he really wasn't given the information that he needed. 0:13:55.920 --> 0:13:59.640 I mean, you're also a national intelligence officer for Russia 0:13:59.640 --> 0:14:02.480 and your Asia at the National Intelligence Council. You were 0:14:03.280 --> 0:14:06.760 a member of the senior advisory panel for James Traviti's 0:14:06.760 --> 0:14:12.080 Admiral Astrivities, the Supreme Allied Commander in Europe UM, as 0:14:12.160 --> 0:14:16.040 well as others. What's your take on the relationship between 0:14:16.120 --> 0:14:19.680 Russia and especially Germany. You know, I lived in Berlin 0:14:19.760 --> 0:14:22.080 for the last five years. You've written a book about 0:14:22.080 --> 0:14:24.600 the West German relationship with Russia with the Soviet Union 0:14:24.720 --> 0:14:29.720 before the fall um angela miracle, and the Germans decided 0:14:29.800 --> 0:14:33.200 to put all their eggs in Vladimir Putin's basket, even 0:14:33.240 --> 0:14:37.240 though the US administration asked them time and time again 0:14:37.280 --> 0:14:40.480 to reconsider their reliance on that natural guess why do 0:14:40.520 --> 0:14:45.080 you think they did that? And? Um, you know, what's 0:14:45.160 --> 0:14:48.400 what's the relationship going to look like now? So they 0:14:48.440 --> 0:14:51.680 had a strong belief for about fifty years that you know, 0:14:51.760 --> 0:14:55.440 if you traded, if you had better economic relations with 0:14:55.720 --> 0:14:58.440 first of all the Soviet Union and then post Soviet Russia. 0:14:58.720 --> 0:15:03.160 If you imported that gass, that would somehow translate into 0:15:03.240 --> 0:15:07.200 better political relationships too. And in fact, you know, fifty 0:15:07.280 --> 0:15:11.280 years ago the Germans used this kind of economic relationship 0:15:11.360 --> 0:15:14.920 incentives with the Soviet Union because you know, to try 0:15:14.960 --> 0:15:17.720 and improve the situation with the East Germans. So that 0:15:17.800 --> 0:15:20.720 was their belief. And then there's all of this historical 0:15:20.760 --> 0:15:24.720 baggage that comes with it, the feelings of responsibility and 0:15:24.720 --> 0:15:27.440 guilt for what happened in World War Two. Twenty seven 0:15:27.440 --> 0:15:31.160 million Soviet citizens died, but of course those are Ukrainians 0:15:31.200 --> 0:15:34.120 as well as Russians. Um. And there was a lot 0:15:34.120 --> 0:15:37.920 of pressure from the business community on Angela Merkel for instance, 0:15:38.000 --> 0:15:42.120 to continue these natural gas deals. Um. And they have 0:15:42.240 --> 0:15:45.880 finally woke up on every four last year and realized 0:15:46.240 --> 0:15:49.520 that all of these assumptions were wrong. And that's why 0:15:49.560 --> 0:15:52.440 you had the speech from Chancellor Soaultz just a couple 0:15:52.480 --> 0:15:56.280 of days after the invasion. UM. And I think German 0:15:56.280 --> 0:15:59.600 policy has changed, you can see that of the provision 0:15:59.640 --> 0:16:02.440 of the but there's still a lot of debate in 0:16:02.520 --> 0:16:05.240 Germany about this. There's still a lot of Germans, all 0:16:05.280 --> 0:16:09.120 the Germans who still think that Germany has this responsible 0:16:09.320 --> 0:16:12.000 ability towards Russia. All right, Angela, great stuff. We wish 0:16:12.000 --> 0:16:13.360 we had more time with you, but will certainly have 0:16:13.400 --> 0:16:16.400 you back as the news warrants. Angela Stent, senior Fellow 0:16:16.440 --> 0:16:22.560 of the Brookings Institute, giving us the latest on geopolitical issues. Matt, 0:16:22.560 --> 0:16:24.320 we're talking about the FED. It's FED Day. But you 0:16:24.320 --> 0:16:26.760 know what, you and I we don't know anything. So 0:16:26.800 --> 0:16:29.320 sometimes we try to talk to smart people like Vince 0:16:29.360 --> 0:16:31.840 Signarella because he talks to traders and things like that, 0:16:32.160 --> 0:16:34.720 and that is very, very helpful. Well, let's just go 0:16:34.840 --> 0:16:36.640 right to the Vince talk to traders about what they 0:16:36.680 --> 0:16:39.240 want the FED to do. Yes, a lot, but let's 0:16:39.240 --> 0:16:40.760 talk maybe more than what they think the FED is 0:16:40.760 --> 0:16:42.920 actually going to do. But let's talk to somebody who 0:16:42.920 --> 0:16:46.800 actually does it. Who actually is in the market. Georgia 0:16:47.040 --> 0:16:50.680 joining us here in Bloomberg Interactive Broker Studios. Kat Trombone Trombone, 0:16:51.480 --> 0:16:54.200 ka Bone, ketrim Bone. He's a CEO and head of 0:16:54.200 --> 0:16:57.680 America's Trading at DWS Group. So George, you're in the market, 0:16:57.760 --> 0:17:00.200 You're in the front lines. What do you here? What 0:17:00.240 --> 0:17:02.200 are your traders telling you. What are your clients telling 0:17:02.240 --> 0:17:04.919 you about what this FEDER reserve is going to do? Well? 0:17:04.960 --> 0:17:07.359 I think they need to speak hawkish today. Quite frankly, 0:17:07.440 --> 0:17:08.920 it needs to be some sort of a power of 0:17:09.000 --> 0:17:12.720 pushback because the broader market is not believing what the 0:17:12.760 --> 0:17:15.600 Fed is saying. Nuts, right, I mean, look at financial 0:17:15.600 --> 0:17:19.000 conditions easing, your own financial conditions index and there's a 0:17:19.040 --> 0:17:24.679 plug yourself, go on. The Bloomberg terminal is actually showing easing. 0:17:24.720 --> 0:17:28.080 I mean, look at dollar weakness, look at multiples extending 0:17:28.320 --> 0:17:31.960 towards eighteen and beyond, so that those easy conditions POW 0:17:32.119 --> 0:17:33.800 is going to need to push back against. I can't 0:17:33.840 --> 0:17:36.240 believe that the market is actually talking about our pricing 0:17:36.280 --> 0:17:38.720 and two rate cuts this year, and I think that 0:17:38.720 --> 0:17:40.960 that's that has to be a concern. He told you 0:17:41.240 --> 0:17:43.520 are the market. I mean, I look at you, and 0:17:44.000 --> 0:17:46.040 you are the market. You're out there, you're buying and 0:17:46.040 --> 0:17:48.720 selling all day on behalf of your your clients. What 0:17:48.760 --> 0:17:51.120 do you think that a trillion dollars and assets under 0:17:51.119 --> 0:17:53.680 management that ws that's a lot of that's a lot 0:17:53.680 --> 0:17:55.360 of money. That's a lot of money that that's more 0:17:55.359 --> 0:17:57.399 than like the lotto. That's a lot of money. What 0:17:57.440 --> 0:17:59.280 do you do? Like, so, what do you think the FED? 0:17:59.600 --> 0:18:02.119 What's disconnect between the Fed we're gonna be hawkish and 0:18:02.320 --> 0:18:04.200 the market that you trade in every day. That's saying 0:18:04.560 --> 0:18:07.320 maybe some rate cuts momentum is hard to fight, is 0:18:07.359 --> 0:18:10.200 what it tells you. And it's also painful, uh, staying 0:18:10.240 --> 0:18:13.760 in cash and watching the market begrudgingly participate. I mean, 0:18:13.800 --> 0:18:15.960 I think the early part of this year, especially in 0:18:15.960 --> 0:18:18.200 fixed income, there's not been the amount of new issuance 0:18:18.200 --> 0:18:21.240 that you've seen before. That's keeping or forcing spreads to 0:18:21.280 --> 0:18:24.120 sort of stay in there and get reinvested again. And 0:18:24.160 --> 0:18:26.639 I think that's gonna be a difficult balancing act for 0:18:26.680 --> 0:18:28.439 the for the FED and for PAL. This is not 0:18:28.600 --> 0:18:31.120 the time, you know, to support easy. You talk about 0:18:31.119 --> 0:18:33.880 this at Jackson Hole especially, and this is the moment 0:18:33.960 --> 0:18:35.560 he's going to have to building it in and have 0:18:35.640 --> 0:18:38.159 a backbone. You know, we haven't talked about for a 0:18:38.200 --> 0:18:40.840 while now. We're so focused on the terminal rate because 0:18:41.119 --> 0:18:44.240 the market is pricing less, far less than the feds 0:18:44.760 --> 0:18:48.159 um dot plot shows, and like you said, the markets 0:18:48.160 --> 0:18:51.240 pricing and cuts in three. We haven't talked about QT 0:18:51.440 --> 0:18:53.639 for a long time, and it feels like there's already 0:18:53.640 --> 0:18:57.719 a liquidity issue out there. Is QT working. I mean, 0:18:57.760 --> 0:19:01.640 we do see inflation coming down. It's working, but at 0:19:01.680 --> 0:19:04.240 a at a I think where you're coming from, what 0:19:04.400 --> 0:19:07.640 eight or nine trillions on the balance sheet itself, So 0:19:07.960 --> 0:19:10.120 it's working, it's working at a lag. They're not actively 0:19:10.160 --> 0:19:13.320 selling either, They're letting the balance sheet roll off. So 0:19:13.440 --> 0:19:17.040 until I see mortgages actually being sold, I think it 0:19:17.200 --> 0:19:20.320 continues to exist in the background, and maybe as financial 0:19:20.359 --> 0:19:23.040 conditions do get tighter, or at least we hope or 0:19:23.080 --> 0:19:25.320 this Powell hopes from here, how could they possibly get 0:19:25.359 --> 0:19:28.600 tighter there one year? I guess high is the right 0:19:28.640 --> 0:19:30.760 word to put it. You know, they haven't been this 0:19:30.840 --> 0:19:33.000 loose and over twelve months. Correct, They're gonna need to 0:19:33.000 --> 0:19:35.439 get higher otherwise we're going to have a problem. And 0:19:35.480 --> 0:19:37.560 I'm not sure that the market is actually ready for 0:19:37.960 --> 0:19:40.920 that CPI to either plateau and or creep up a 0:19:40.960 --> 0:19:42.840 little bit. And I think that's when you start to 0:19:42.840 --> 0:19:44.920 get back to the narrative a few months ago about 0:19:44.960 --> 0:19:47.920 a terminal rate existing you know, well into five, call 0:19:47.960 --> 0:19:50.080 it five and a half, or some economists even calling 0:19:50.119 --> 0:19:52.240 for six. And I think that that will be something 0:19:52.240 --> 0:19:55.160 to watch. By the way, we've already called out basically 0:19:55.200 --> 0:19:59.320 three Bloomberg functions, right worp w I, r P go 0:20:00.040 --> 0:20:03.199 and then fed space ball go, which shows you the 0:20:03.200 --> 0:20:06.159 balance sheet. It's really cool. What do you screen for? 0:20:06.320 --> 0:20:07.919 What do you look when you get to work in 0:20:07.920 --> 0:20:10.080 the morning at DWS and you log in your name, 0:20:10.119 --> 0:20:14.240 absolutely what you have to what do you what do 0:20:14.280 --> 0:20:17.679 you look at? What's your dashboard look like? Well, I 0:20:17.720 --> 0:20:19.800 can export my jump pad to you, I think my 0:20:19.920 --> 0:20:21.719 launch pad and you're welcome to take a look at it. 0:20:21.760 --> 0:20:23.639 But yeah, I mean it's those and it's it's a 0:20:23.680 --> 0:20:25.960 bunch of other functions around currency. I mean the dollar 0:20:26.040 --> 0:20:28.879 weakness that you've seen recently is meaningful and also adding 0:20:28.920 --> 0:20:31.680 to that, we need some financial conditions, and obviously we're 0:20:31.680 --> 0:20:34.960 a global asset manager, so certainly where European markets are, 0:20:35.160 --> 0:20:37.720 it's crazy to see the foot see not one not 0:20:37.800 --> 0:20:39.879 too far off of all time highs when you think 0:20:39.920 --> 0:20:42.879 about where we were just six months ago and potentially 0:20:42.880 --> 0:20:45.320 a cold winter and shortages and things alike, and that 0:20:45.400 --> 0:20:49.040 to see those equity markets off is surprising. So it's 0:20:49.040 --> 0:20:51.520 try to call them outperforming. I mean the CAC and 0:20:51.560 --> 0:20:55.320 the decks, are up nine percent, the IBEX in Madrid 0:20:55.440 --> 0:20:57.800 is up ten and a half percent. Those are NASDAC 0:20:57.880 --> 0:21:01.560 numbers correct, and one wonders if there's that much more 0:21:01.640 --> 0:21:04.720 room to go there, um from here, But you know, 0:21:04.760 --> 0:21:07.399 it's a long year, and I would definitely exercise patient. 0:21:07.480 --> 0:21:09.760 It does seem like everything that everyone forecast to happen 0:21:09.760 --> 0:21:12.520 in three has already happened. By FED first, I think 0:21:12.560 --> 0:21:14.880 we're already at your retargets. So what do you think 0:21:14.880 --> 0:21:16.800 I mean these this first month of the year. Is 0:21:16.840 --> 0:21:19.399 that a is this a technical snap back in some 0:21:19.480 --> 0:21:21.800 of these asset classes, or is this the beginning of 0:21:21.800 --> 0:21:24.760 a turnaround. I've been wondering the same thing about equities 0:21:24.800 --> 0:21:30.280 because we've seen um, you know tech, we've seen consumer discretionary, 0:21:30.320 --> 0:21:34.520 we've seen telecoms. They've been the best performers. Meanwhile, the 0:21:34.600 --> 0:21:40.520 defensive UH industries, utilities and real estate, UM, they've been 0:21:40.960 --> 0:21:44.800 the worst performers. So either this market has some real 0:21:45.560 --> 0:21:49.760 UH bullish conviction or there's a lot of short covering 0:21:49.800 --> 0:21:52.200