WEBVTT - Surveillance: Bank Capital with PIMCO CEO 0:00:05.080 --> 0:00:08.880 This is the Bloomberg Surveillance Podcast. I'm Lisa A. Bromoids, 0:00:08.920 --> 0:00:11.879 along with Tom Keen and Jonathan Ferrell. Join us each 0:00:11.960 --> 0:00:15.760 day for insight from the best in economics, geopolitics, finance 0:00:15.800 --> 0:00:19.520 and investment. Subscribe to Bloomberg Surveillance un demand on Apple, 0:00:19.600 --> 0:00:22.840 Spotify and anywhere you get your podcasts, and always on 0:00:22.880 --> 0:00:26.360 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:26.400 --> 0:00:29.880 From a beautiful Newport Beach, California, I'm Jonathan Ferrow, PIMCO, 0:00:30.000 --> 0:00:34.159 publishing its secular outlook, The Aftershock Economy, writes, quote, we 0:00:34.159 --> 0:00:36.640 see a window to step in as a senior lender 0:00:36.640 --> 0:00:40.200 in areas once occupied by regional banks, such as consumer lending, 0:00:40.520 --> 0:00:44.440 mortgage credit, and various forms of asset based finance. I'm 0:00:44.520 --> 0:00:46.120 very pleased to say that we can have that conversation 0:00:46.159 --> 0:00:49.560 now with the man himself, the boss, Pimco CEO, Manny 0:00:49.600 --> 0:00:50.200 Roman Money. 0:00:50.200 --> 0:00:51.479 Good morning to you, Thanks for having. 0:00:51.320 --> 0:00:52.800 Us morning Tolism. Nice to see you. 0:00:52.960 --> 0:00:55.480 That quote feels like your kind of language. We're going 0:00:55.560 --> 0:00:58.040 to step in. My first thought when I read that was, 0:00:58.040 --> 0:00:59.960 why don't you just buy a bank? There's many banks 0:01:00.160 --> 0:01:01.880 sale right now. Why don't you just buy a bank? 0:01:02.160 --> 0:01:04.240 What I think there are going to be many assets 0:01:04.240 --> 0:01:06.560 to buy, and maybe the best way I have to 0:01:06.600 --> 0:01:09.200 describe it is banks are going to be tight for capital. 0:01:10.160 --> 0:01:12.440 And when the type for capital, they have two ways 0:01:12.440 --> 0:01:15.240 of solving the problem. They can either raise more capital 0:01:15.720 --> 0:01:19.039 or they can sell assets. And the most likely scenario 0:01:19.760 --> 0:01:23.400 is there will be assets to sell in area where 0:01:23.440 --> 0:01:28.600 we have a big footprint mortgagers commercial with the state bonds, 0:01:29.400 --> 0:01:34.000 municipal bonds. Dan said that earlier today that he was 0:01:35.040 --> 0:01:38.520 very keen on mortgagers. They'll be mortgagers to sell and 0:01:38.760 --> 0:01:40.559 will be there to step in and. 0:01:40.560 --> 0:01:41.240 Try to buy them. 0:01:41.360 --> 0:01:43.080 Are you looking at buying a franchise to do that 0:01:43.160 --> 0:01:44.440 or is that just something that happens. 0:01:44.160 --> 0:01:46.520 Is something that we've built over the past twenty years. 0:01:46.840 --> 0:01:49.400 And you know, there's good news and bad news when 0:01:49.440 --> 0:01:52.520 you have a tougher economic cycle. I think the better 0:01:52.600 --> 0:01:55.400 news is that the expected him goes up and they 0:01:55.440 --> 0:01:57.360 are significant block of assets to sell. 0:01:58.080 --> 0:02:00.600 You know, it could be for example, equipment loans. 0:02:00.640 --> 0:02:02.800 You know, one of the bank who was very big 0:02:02.840 --> 0:02:05.800 in equipment loans is out of business all of a sudden. 0:02:06.360 --> 0:02:07.760 There's going to be a lot for us to do. 0:02:08.120 --> 0:02:10.639 I hear this from other people too. I hear apollot 0:02:10.680 --> 0:02:12.400 side banks are going to step back. We're going to 0:02:12.440 --> 0:02:14.760 step back in. How competitive is this going to be? 0:02:14.880 --> 0:02:16.919 Can you give me some size and make the pie 0:02:16.919 --> 0:02:17.400 it's going to be. 0:02:17.600 --> 0:02:19.680 It is going to be competitive because the seller has 0:02:19.720 --> 0:02:23.840 a fiduciary duty and there will be enough for some 0:02:23.880 --> 0:02:27.640 of us to do a lot and put money to 0:02:27.800 --> 0:02:31.520 work and be patient and wait for the right opportunity 0:02:31.680 --> 0:02:33.760 to do so. And I think I think the cycle 0:02:33.880 --> 0:02:38.200 is usually long, and so there's no rush to put 0:02:38.240 --> 0:02:41.359 money to work. There is a very discipline and systematic 0:02:41.400 --> 0:02:44.000 way to look at your opportunity, and some will look 0:02:44.040 --> 0:02:46.680 better than the other. It may very well be that 0:02:46.800 --> 0:02:49.760 the single best asset turns out to be real estate 0:02:49.800 --> 0:02:51.560 where we have a big foot print, or it may 0:02:51.639 --> 0:02:55.239 very well be that it turns out to be commercial 0:02:55.280 --> 0:02:58.520 real estate. And you know mortgagers in this whole segment and. 0:02:58.680 --> 0:03:01.040 Commercial redista is something you've brought up, and I've heard 0:03:01.080 --> 0:03:02.960 it from Dan. I spoke to Mark about it just 0:03:03.000 --> 0:03:06.400 moments ago. Should I be worried about commercial real estate? 0:03:06.400 --> 0:03:08.320 Can you talk me, just take me into the halls 0:03:08.360 --> 0:03:10.800 of this place this building. Have you all sat around 0:03:10.840 --> 0:03:13.400 a table, gone through every single portfolio and thought about 0:03:13.400 --> 0:03:15.600 what you don't want exposure to right now related to 0:03:15.600 --> 0:03:16.760 this one particular sector. 0:03:17.080 --> 0:03:19.080 Well, I think we have, and I think we've seen 0:03:19.080 --> 0:03:22.120 the playbook before, and it is everything else being. 0:03:22.040 --> 0:03:22.960 Equal a slow cycle. 0:03:23.080 --> 0:03:26.079 So the banks will look at the portfolio and slowly 0:03:26.120 --> 0:03:29.600 but surely mark their books. I think you have a 0:03:29.720 --> 0:03:33.119 microstructure of the commercial real estate market, which is quite 0:03:33.120 --> 0:03:36.600 different depending on the city, depending on the places. Some 0:03:36.720 --> 0:03:40.760 places are clearly tested, some of them are doing just fine. 0:03:40.800 --> 0:03:43.280 I mean you can look at Austin, for example. You're 0:03:43.320 --> 0:03:46.720 hard praised to find an empty office in Austin. And 0:03:47.200 --> 0:03:51.480 the overall trend is going to be that people somehow 0:03:51.880 --> 0:03:54.520 come back to work one way or the other. But 0:03:54.760 --> 0:03:58.160 there's a transition period where for sure there will be 0:03:58.760 --> 0:04:01.760 distress seller and people who have the wrong financing. 0:04:01.800 --> 0:04:03.120 And I think the financing part. 0:04:03.000 --> 0:04:05.800 Is really really important because it's one of the segments 0:04:05.800 --> 0:04:09.040 where we're very involved and people have borrows shot term 0:04:10.240 --> 0:04:12.720 in the past with very low rates. All of a 0:04:12.800 --> 0:04:16.640 sudden the financing is expiring, spreads are higher, and of 0:04:16.680 --> 0:04:19.200 course rates a much higher, and so then we need 0:04:19.240 --> 0:04:22.320 to address the situation either by selling or by refunding 0:04:22.360 --> 0:04:23.560 at more attractive terms for. 0:04:23.600 --> 0:04:26.039 Us, Clearly, this business is going to change compared to 0:04:26.080 --> 0:04:29.440 what it was several decades ago. We've had a multi 0:04:29.480 --> 0:04:32.799 decade bond ballmarket. Most people assume that's now over based 0:04:32.839 --> 0:04:36.080 on the last twelve months. Can you tell me how 0:04:36.400 --> 0:04:39.000 this business will be different with that in mind? What 0:04:39.040 --> 0:04:41.440 you need to position for now versus what this firm 0:04:41.520 --> 0:04:44.200 was positioned for in the previous several decades. 0:04:44.360 --> 0:04:47.760 What a very big change, and Dan mentioned this before 0:04:48.200 --> 0:04:52.120 is generative AI and how technology can change our business 0:04:52.279 --> 0:04:56.520 and thing for example, about the real estate market. We 0:04:56.560 --> 0:04:59.479 can hire one hundred people to go from city to 0:04:59.560 --> 0:05:03.080 city and kind of look at every single lease or 0:05:03.279 --> 0:05:07.600 every single property. Or we can use technology to give 0:05:07.680 --> 0:05:11.360 us a better grasp of where the alpha is and 0:05:11.360 --> 0:05:14.039 where we think the opportunity is. When we think about 0:05:14.040 --> 0:05:19.279 communication with client, we can invest significantly in generative AI 0:05:19.400 --> 0:05:23.679 and actually give a better risk report, better customized report 0:05:23.720 --> 0:05:25.520 to clients and so on and so forth. And I 0:05:25.520 --> 0:05:29.000 think it's incredibly exciting. I see the work that we 0:05:29.080 --> 0:05:32.320 do with open AI and Microsoft as important as. 0:05:32.279 --> 0:05:34.600 The birth of the Internet. I mean, is it is 0:05:34.680 --> 0:05:35.279 that it is. 0:05:35.279 --> 0:05:37.240 You think it's that powerful, It is that powerful, and 0:05:37.279 --> 0:05:40.880 it will change your job also change your job too potentially. 0:05:41.279 --> 0:05:43.039 Yeah, no, no, of course, of course. I mean I 0:05:43.040 --> 0:05:43.800 mean in a good way. 0:05:43.880 --> 0:05:45.839 I think it will make us row up more productive 0:05:46.120 --> 0:05:47.560 and I think that's a really, really good thing. 0:05:47.680 --> 0:05:49.359 Is that a challenge to your secular outlook? 0:05:50.080 --> 0:05:55.880 I think secular on a super secular basis, everything else 0:05:55.920 --> 0:05:56.520 is being equal. 0:05:56.600 --> 0:05:58.120 I think it means rates. 0:05:57.839 --> 0:06:00.760 Are lower, but it also I think you should say 0:06:00.760 --> 0:06:03.960 that with a humongous amount of humble pie in a 0:06:04.000 --> 0:06:06.960 sense that the dispersion of events is going to be 0:06:07.040 --> 0:06:09.120 very big, and we don't know what we don't know, 0:06:09.760 --> 0:06:11.760 and it's easy for me to make prediction about what 0:06:11.760 --> 0:06:13.520 will happen ten years from that that. 0:06:13.520 --> 0:06:14.320 I'd be very wrong. 0:06:14.640 --> 0:06:18.760 Let's measure success AUM over the last ten years, and 0:06:18.839 --> 0:06:21.839 let's go back a decade. PIMCO was at about two 0:06:21.880 --> 0:06:25.120 trillion dollars AM, not too far away from the likes 0:06:25.120 --> 0:06:28.480 of Black Rock Black Rocks. AUM since then has more 0:06:28.480 --> 0:06:34.320 than doubled. The AM here is steady, steady, with some volatility, 0:06:34.400 --> 0:06:37.080 tons of volatility along the way, but it's basically unchanged 0:06:37.120 --> 0:06:38.039 in the last decade. 0:06:38.880 --> 0:06:39.960 What do you think that reflects? 0:06:41.839 --> 0:06:45.320 It reflects the decision we made is that we try 0:06:45.320 --> 0:06:47.039 to be very focused and do one thing and do 0:06:47.080 --> 0:06:49.479 it very well. And I think we went through a 0:06:49.480 --> 0:06:54.520 period of time where maybe fixed income wasn't as attractive. 0:06:53.920 --> 0:06:54.839 As it is right now. 0:06:55.960 --> 0:07:01.400 And we have the view that if we perform, if 0:07:01.440 --> 0:07:04.560 we significantly beat the passive benchmark, if we do better 0:07:04.600 --> 0:07:07.960 than appears, they will come. And we don't measure our 0:07:08.000 --> 0:07:10.520 success by the amount of assets where we have. We 0:07:10.600 --> 0:07:14.120 measure our success bet the returns we give to our 0:07:14.120 --> 0:07:17.560 investors in what is a very competitive market, and so 0:07:17.720 --> 0:07:22.280 and so and so. The real scene of asset manager 0:07:22.920 --> 0:07:25.040 is to try to be bigger for the sake of 0:07:25.080 --> 0:07:25.760 being bigger. 0:07:26.080 --> 0:07:29.120 Because of economy of scale. We don't it's not a goal. 0:07:29.200 --> 0:07:30.440 Just to be clear, it's not a goal. 0:07:30.440 --> 0:07:30.920 It's not a goal. 0:07:30.960 --> 0:07:31.560 We're here to. 0:07:31.600 --> 0:07:33.800 Perform with the money we've been trusted and if we 0:07:33.880 --> 0:07:35.120 do a good job, we'll be fine. 0:07:35.120 --> 0:07:36.920 Well, let's talk about that good job. There have been 0:07:36.960 --> 0:07:39.160 a couple of difficulties. I want to talk about one 0:07:39.160 --> 0:07:41.160 specific name, which is Columbia properly trust. 0:07:41.920 --> 0:07:44.200 What do I need to know about that? What happened. 0:07:44.200 --> 0:07:45.600 Can you just give me a better idea of what 0:07:45.680 --> 0:07:46.160 happened there? 0:07:46.280 --> 0:07:48.600 Well, I think I think for obvious reasons, we don't 0:07:48.720 --> 0:07:51.880 specifically come on names. But of course we have a 0:07:51.880 --> 0:07:55.720 big portfolio of assets across the globe, and when you 0:07:55.760 --> 0:07:59.040 have a recession, some are going to be doing less well, 0:07:59.200 --> 0:08:02.000 and we're gonna work on trying to bet to get 0:08:02.000 --> 0:08:06.160 the best possible dot com. And the reality of fund 0:08:06.200 --> 0:08:09.120 management is you have, at any point in time things 0:08:09.160 --> 0:08:12.160 doing great and things doing less great, and we focus 0:08:12.200 --> 0:08:14.240 on the one doing let's great, and making sure we 0:08:14.280 --> 0:08:15.360 have the best possible dot com. 0:08:15.400 --> 0:08:17.080 So is that just a reflection of being so big 0:08:17.120 --> 0:08:19.080 there across everything or was that a canary in the 0:08:19.080 --> 0:08:21.720 coal mine on a certain issue at a certain time. 0:08:21.960 --> 0:08:23.880 No, I think it's a reflection of us having a 0:08:23.880 --> 0:08:27.600 diverse port for you. And I think you heard one 0:08:27.640 --> 0:08:32.320 of my competitor at Milkin's saying that very yeah well, 0:08:32.440 --> 0:08:34.520 saying that when you have a big realestate port for you, 0:08:34.720 --> 0:08:37.360 at any point in time, not everything is going to 0:08:37.400 --> 0:08:40.400 do great. And I think we're willing to do that 0:08:40.480 --> 0:08:43.360 as long as the net result for our investors is. 0:08:43.320 --> 0:08:45.200 Going to be the right one. Some thing that's what matters. 0:08:45.280 --> 0:08:47.079 One last issue that we need to discuss as well. 0:08:47.120 --> 0:08:49.440 And understand that perhaps you can't offer a great degree 0:08:49.440 --> 0:08:52.520 of clarity in detail because of litigation issues, But you 0:08:52.600 --> 0:08:54.400 know what name is going to come up in conversation now, 0:08:54.440 --> 0:08:55.040 credit sweets. 0:08:55.720 --> 0:08:55.880 Now. 0:08:55.920 --> 0:08:58.360 I just wonder from your perspective the future of the 0:08:58.400 --> 0:09:02.040 at one market continued convertibles. 0:09:01.280 --> 0:09:03.480 After the events of the last couple of months. 0:09:03.520 --> 0:09:05.760 As a firm, and if you don't want to talk 0:09:05.800 --> 0:09:08.360 directly about that institution, we don't have to. But as 0:09:08.400 --> 0:09:12.920 a firm, have you rethought about that particular class of securities. 0:09:13.280 --> 0:09:17.720 Well, the banks, especially in Europe have a big need 0:09:18.160 --> 0:09:23.880 to issue eighty one as a way to raise enough 0:09:23.880 --> 0:09:27.720 equity to pass the stress test, and so there needs 0:09:27.720 --> 0:09:32.240 to be clear rule of engagement from both the banks 0:09:32.280 --> 0:09:37.360 and the regulator. And you've seen in the recent months 0:09:37.640 --> 0:09:40.839 the Bank of England and the ECB being incredibly vocal 0:09:40.920 --> 0:09:43.320 about what they think the rules of the game are 0:09:43.800 --> 0:09:48.560 and what a well functioning market has to offer to 0:09:48.600 --> 0:09:53.079 make it attractive for investors to participate. And if the 0:09:53.160 --> 0:09:55.440 rules of the game are attractive and the price is right, 0:09:56.000 --> 0:09:59.320 you'll see plenty of people coming into this market and 0:10:00.040 --> 0:10:02.800 Pinco will be one of them. And if the rules 0:10:02.840 --> 0:10:05.720 of the games are biased or unclear or at the 0:10:05.800 --> 0:10:09.760 expense of investors, then maybe we'll decide to step. 0:10:09.559 --> 0:10:10.000 Out of it. 0:10:10.120 --> 0:10:11.320 Do you think that bars an unclear? 0:10:11.360 --> 0:10:16.800 Now depends on the jurisdiction. We have welcomed the comments 0:10:16.800 --> 0:10:18.040 made by the ECB. 0:10:17.920 --> 0:10:18.920 And the Bank of England. 0:10:19.240 --> 0:10:21.000 Manley, it's good to see. It's good to see you 0:10:21.080 --> 0:10:23.280 the hostingers. I appreciate it. Thank you very much. We 0:10:23.320 --> 0:10:24.960 got to do this again next year as well. Money 0:10:25.000 --> 0:10:26.320 Rum and the pin cut. 0:10:36.840 --> 0:10:40.760 Julian Emmanuel, chief equity Derivatives and quant strategists at Evercore 0:10:40.840 --> 0:10:44.360 ISA for the ISI for the hour. And this comes 0:10:44.360 --> 0:10:46.320 in the time when we are seeing this twenty percent 0:10:46.360 --> 0:10:49.040 potential gain on the S and P since the lows 0:10:49.040 --> 0:10:51.400 that we saw in October. Is this rally real? 0:10:52.520 --> 0:10:55.480 We think it is. Actually, we don't want to put 0:10:55.679 --> 0:10:58.959 the label bull market on it, okay, because frankly, our 0:10:59.000 --> 0:11:01.640 base case is that sometime in the next twelve to 0:11:01.679 --> 0:11:04.600 eighteen months you're going to have a recession, which means 0:11:04.640 --> 0:11:07.400 you're going to have a sizeable pullback. But this is 0:11:07.440 --> 0:11:11.080 a cyclical rally where we think the hallmark of the 0:11:11.160 --> 0:11:14.000 last week or so is a broadening of participation. 0:11:14.120 --> 0:11:15.760 What is it about the labels? You don't want to 0:11:15.760 --> 0:11:17.480 call it a bull market. You don't want to call 0:11:17.520 --> 0:11:19.440 it a pause, You want to whole call it a 0:11:19.520 --> 0:11:20.880 skip Like why does it matter? 0:11:21.080 --> 0:11:23.800 Well, it matters a lot. If you go back to 0:11:23.880 --> 0:11:28.760 the two tech bubble burst bear market, you had several 0:11:28.960 --> 0:11:32.560 rallies of forty and fifty percent in the NASDAC before 0:11:32.559 --> 0:11:35.440 you made the final bottom. It is one of those 0:11:35.480 --> 0:11:39.160 things where rather than labeling, you have to think about 0:11:39.280 --> 0:11:41.920 how you want to think about the long term as 0:11:41.960 --> 0:11:45.440 either an individual investor or an active manager. And frankly, 0:11:45.520 --> 0:11:48.560 this is one of these times where those considerations are 0:11:48.600 --> 0:11:49.240 a bit different. 0:11:49.480 --> 0:11:50.400 Is this a fun time? 0:11:51.520 --> 0:11:55.680 It's a tough time, but look at the end, we're 0:11:55.720 --> 0:11:57.200 happier when equities go up. 0:11:57.240 --> 0:11:59.800 I think we're seeing also a lot of potential risks 0:12:00.080 --> 0:12:03.280 of a bigger picture scale, whether it's what we saw 0:12:03.360 --> 0:12:05.640 over in Ukraine with that dam bursting and what it's 0:12:05.679 --> 0:12:08.200 doing some of these concerns about and escalating war there, 0:12:08.520 --> 0:12:11.800 or if it's ratcheting up of tensions in China between 0:12:11.800 --> 0:12:14.760 the US and China. How much are you looking at 0:12:14.840 --> 0:12:16.880 potential tail risks or do you think that that's what's 0:12:16.960 --> 0:12:19.040 damp in some of the valuations at this point that 0:12:19.160 --> 0:12:21.120 sort of set up for what you're talking about. 0:12:21.360 --> 0:12:24.680 It's definitely damp in the valuations. And this, again, the 0:12:24.800 --> 0:12:27.520 period we believe we're entering, is one of those times 0:12:27.559 --> 0:12:30.959 where despite those risks, we do think we're going to 0:12:31.000 --> 0:12:34.360 see a little bit of multiple expansion, which is a 0:12:34.400 --> 0:12:37.800 bit counterintuitive but frankly what it does. And again going 0:12:37.880 --> 0:12:42.359 back to our options expertise, the VIX with a fourteen 0:12:42.440 --> 0:12:48.079 handle is absolutely fabulous in terms of protecting either downside 0:12:48.160 --> 0:12:51.760 risk or for some who are underperforming and may get 0:12:51.840 --> 0:12:54.120 pulled into a chase upside risks. 0:12:54.160 --> 0:12:56.080 We're kind of bearing the lead here. On Sunday. You 0:12:56.120 --> 0:12:59.120 made a pretty big move. You upgraded, you increased your 0:12:59.120 --> 0:13:01.280 expectation for the S and PAY to forty four to 0:13:01.280 --> 0:13:04.439 fifty and potentially you might see that as soon as July. 0:13:05.800 --> 0:13:09.840 Explain that's the hallmark of a momentum market, and I 0:13:09.840 --> 0:13:12.960 think look, clearly, the NASDAC has been in a momentum 0:13:13.000 --> 0:13:16.480 market essentially since the end of March, and for us 0:13:16.520 --> 0:13:19.840 the last week or so is encouraging because the S 0:13:19.880 --> 0:13:23.160 and P broadly has joined with that in its clear 0:13:23.240 --> 0:13:25.839 move above the forty two hundred level, which had been 0:13:25.840 --> 0:13:30.079 basically six or seven months versus of resistance. We're actually 0:13:30.120 --> 0:13:32.360 starting to see a little bit of broadening into the 0:13:32.400 --> 0:13:36.520 small caps, which is very encouraging. But frankly, again, this 0:13:36.600 --> 0:13:41.960 is an environment where the momentum takes on a life 0:13:41.960 --> 0:13:45.120 of its own, and that's also a function of the 0:13:45.120 --> 0:13:48.040 fact that if you look at it, sentiment, whether you're 0:13:48.120 --> 0:13:50.920 measuring it in terms of the stock market or the 0:13:50.960 --> 0:13:55.760 economy or again thinking about risk, is incredibly, incredibly poor. 0:13:56.160 --> 0:13:58.400 And yet at the same time we're seeing data that 0:13:58.520 --> 0:14:02.000 says there's a chance that this recession gets pushed out, 0:14:02.080 --> 0:14:04.559 it keeps getting pushed out, in may end up getting 0:14:04.559 --> 0:14:05.880 pushed out to twenty four. 0:14:05.960 --> 0:14:09.360 And right now we're seeing basically a range bound market 0:14:09.400 --> 0:14:12.480 ahead of yet another day of quiet period for the 0:14:12.480 --> 0:14:15.280 Federal Reserve. But anything but when it comes to some 0:14:15.400 --> 0:14:17.839 of the international fluctuations, you see about a tenth of 0:14:17.880 --> 0:14:19.720 a percent decline on the S and P forty two 0:14:19.760 --> 0:14:21.960 seventy five, still on the forty three hundred watch we 0:14:22.040 --> 0:14:25.520 didn't quite get there. Ongoing weakness over in the euro 0:14:25.600 --> 0:14:28.360 but it's basically bit around one oh six eight for 0:14:28.480 --> 0:14:30.800 quite a while, with a bit of a stronger dollar 0:14:31.040 --> 0:14:34.680 and tenyure yields lowered just to touch after those ISM 0:14:34.840 --> 0:14:38.880 services data that came out yesterday, kind of disappointing, even 0:14:38.920 --> 0:14:42.160 though still an expansion crewed a little bit off earlier lows. 0:14:42.200 --> 0:14:44.640 I want to note I said John's on the beach. 0:14:44.840 --> 0:14:48.000 He's actually in Newport Beach. He's hosting the open from 0:14:48.040 --> 0:14:50.480 pimco's headquarters, which is the reason why he ditched me 0:14:50.840 --> 0:14:53.640 along with Tom. He'll be speaking with CEO Emmanuel Roman, 0:14:54.120 --> 0:14:57.840 CIO Dan Ivison, and former FED Vice chair Rich Claredo, 0:14:57.880 --> 0:15:02.120 who's their head economic out they're at PIMCO. That's all 0:15:02.160 --> 0:15:05.120 coming up today starting at nine am Eastern today, annual 0:15:05.160 --> 0:15:08.440 shareholder meetings will happen for Zillow, Urban Outfitters, Palanteer, and 0:15:08.480 --> 0:15:11.440 Freeport macbere And I say this because we actually saw 0:15:11.600 --> 0:15:15.920 some really interesting guidance out of Taiwan Semiconductor Manufacturing Company, 0:15:15.960 --> 0:15:20.360 basically downwardly revising some of their expectations. You're seeing shares 0:15:20.400 --> 0:15:23.120 off today, so it's sort of interesting to see some 0:15:23.200 --> 0:15:25.400 of the commentary coming out of these meetings at a 0:15:25.400 --> 0:15:28.560 time of such fluctuation and today I know that you 0:15:28.640 --> 0:15:31.080 love talking politics, Julian, so I really wanted to get 0:15:31.120 --> 0:15:33.760 you on this. Former New Jersey Governor Chris Christy is 0:15:33.800 --> 0:15:36.520 expected to jump into the race to become Republican candidate 0:15:36.560 --> 0:15:39.320 for president. He has been called in one New York 0:15:39.320 --> 0:15:41.600 Times article the Trump's layer, people saying he has no 0:15:41.720 --> 0:15:43.840 chance to win, but his complete objective is to act 0:15:43.840 --> 0:15:46.320 as an attack dog on the stage in debates with 0:15:46.480 --> 0:15:49.360 the former President Trump. A pretty crowded field in the 0:15:49.400 --> 0:15:51.960 Republican race, potentially twelve candidates by July. 0:15:52.280 --> 0:15:54.920 Well, you do wonder if Governor Christy is going to 0:15:54.920 --> 0:15:58.440 announce with a pair of everlast boxing gloves on his hands. 0:15:58.640 --> 0:16:00.080 Essentially, yes, QUI. 0:16:00.040 --> 0:16:04.040 Question about it. Look, this is healthy at least I 0:16:04.080 --> 0:16:06.960 think you can call it healthy. Let's see what happens. 0:16:07.040 --> 0:16:10.160 My question is and hopefully we'll have someone help us 0:16:10.200 --> 0:16:15.360 answer it is. You know who among the field aside 0:16:15.360 --> 0:16:19.120 from Trump and DeSantis, could potentially rise to sort of 0:16:19.160 --> 0:16:22.960 create a three way race. That's the big question. 0:16:23.120 --> 0:16:26.040 And a lot of people are looking down to Virginia 0:16:26.200 --> 0:16:29.080 potentially for that, And we will get into that later. 0:16:29.400 --> 0:16:30.800 I do want to get to what we heard over 0:16:31.120 --> 0:16:35.080 in China, a recommendation that state owned banks start to 0:16:35.200 --> 0:16:39.720 reduce their deposit rates to encourage lending and to increase 0:16:39.760 --> 0:16:42.840 their margins. Joining us now is Bloomberg's Tom mackenzie, who 0:16:42.840 --> 0:16:46.320 covered China for more than a decade. He's in London, Tom, 0:16:46.480 --> 0:16:48.480 what do you make of this and also what do 0:16:48.520 --> 0:16:50.360 you make of the fact that it's not a mandate, 0:16:50.480 --> 0:16:51.440 it's a recommendation. 0:16:53.280 --> 0:16:55.000 Yeah, there's a final line between a mandate and a 0:16:55.040 --> 0:16:57.760 recommendation when it comes to official policies out of aging 0:16:57.760 --> 0:17:00.040 when they lean on those state banks. Of course, the 0:17:00.080 --> 0:17:02.280 build u when we were talking about last week, Lisa, around 0:17:02.720 --> 0:17:04.880 the measures being put in place, at least the proposals 0:17:04.920 --> 0:17:07.560 being discussed, according to Bloomberg reporting to kind of shore 0:17:07.640 --> 0:17:10.600 up the real estate market. Now you have more piecemeal 0:17:10.640 --> 0:17:13.960 efforts to try and put a floor under the growth 0:17:14.040 --> 0:17:16.359 that has come through from China, less strong, of course 0:17:16.400 --> 0:17:19.119 than many had expected. So leaning on the banks to 0:17:19.200 --> 0:17:22.160 reduce those deposit rates, it means that the banks can 0:17:22.200 --> 0:17:26.080 then look to lower the loan rates and provide more liquidity. 0:17:26.160 --> 0:17:28.719 We did see loans new un loans that credit impulse 0:17:28.760 --> 0:17:30.440 came through in the first quarter, but then it dropped 0:17:30.480 --> 0:17:33.680 on April, and clearly there was concern about the fact 0:17:33.720 --> 0:17:35.760 that there wasn't that traction going forward in terms of 0:17:35.800 --> 0:17:39.520 liquidity and that demand for loans. Households, businesses, they're shoring 0:17:39.600 --> 0:17:41.960 up their balance sheets, households are paying down their mortgages. 0:17:42.280 --> 0:17:45.399 The question really is is there the demand even if 0:17:45.440 --> 0:17:47.840 it becomes easier to take out a loan and to 0:17:47.920 --> 0:17:50.600 access to that liquidity, is that they're really the demand 0:17:50.760 --> 0:17:52.800 to kind of tap into that and then support the economy. 0:17:52.920 --> 0:17:55.240 On one hand, this is kind of stimulus light and 0:17:55.280 --> 0:17:57.879 that's positive potentially for growth. On the other hand, this 0:17:57.960 --> 0:18:00.639 indicates that perhaps the Chinese Communist Party sees a bigger 0:18:00.680 --> 0:18:02.880 problem than they're letting on, which is it. 0:18:04.440 --> 0:18:06.399 Well, it's interesting. I was speaking to How Hong, who 0:18:06.520 --> 0:18:09.800 was formerly a BOCOM, a really respected strategist there, and 0:18:10.080 --> 0:18:12.480 he said, look, this seems to me like a government 0:18:12.520 --> 0:18:17.480 that's running out of ideas. Bloomberg economics are they now 0:18:17.560 --> 0:18:20.560 view the chances of a benchmark rate cut. So for 0:18:20.640 --> 0:18:23.960 the one year and the five year medium term lending facilities, 0:18:24.400 --> 0:18:27.720 they expect those to be reduced, possibly as early as 0:18:27.800 --> 0:18:30.119 the middle of June. But there's a debate about that 0:18:30.200 --> 0:18:32.960 Jones Lang Lacel. Economists there say they actually think this 0:18:33.119 --> 0:18:35.360 action to lean on the banks to reduce deposit rates 0:18:35.400 --> 0:18:38.080 and therefore give them the scope to reduce loan rates, 0:18:38.200 --> 0:18:41.639 that that probably pushes back a benchmark rate cut for 0:18:42.000 --> 0:18:44.560 the PBOC. By the way, for the context, they've cut 0:18:44.640 --> 0:18:47.119 just fifty basis points, just half of percent since the 0:18:47.160 --> 0:18:49.040 start of the pandemic in twenty twenty, so they do 0:18:49.080 --> 0:18:51.800 have that dry powder. But again they have this massive 0:18:52.119 --> 0:18:54.800 debt pile, and there's that concern of course in terms 0:18:54.840 --> 0:18:56.600 of just adding to that if they go with a 0:18:56.600 --> 0:18:59.879 broad benchmark cut. But it's certainly something that now the 0:19:00.040 --> 0:19:02.840 buloving big economics seem things it's possibly likely. 0:19:02.680 --> 0:19:05.359 Mid Jude Tommy Kenzie, thank you so much of Bloomberg. 0:19:05.480 --> 0:19:08.920 Joining us from London, Julian Emmanuel, have evercore as Isi 0:19:09.119 --> 0:19:11.400 here with me for the hour. What do you make 0:19:11.440 --> 0:19:13.280 of what's going on in China and the fact that 0:19:13.320 --> 0:19:15.320 the growth is sort of running out of steam to 0:19:15.440 --> 0:19:17.720 such a degree. Do you feel like a lot of 0:19:17.720 --> 0:19:19.919 that story has been priced in and is really on 0:19:19.960 --> 0:19:20.920 the wayne. 0:19:20.840 --> 0:19:24.440 So we actually think that you're it's the bumpy path 0:19:24.880 --> 0:19:28.320 to a more sustainable number it's not six percent or 0:19:28.359 --> 0:19:31.399 north of six percent, but it may settle in towards 0:19:31.400 --> 0:19:34.480 five percent. The issue here is a couple of things. 0:19:34.960 --> 0:19:38.680