Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg John
Speaker 1: Fifth AVENU are really down towards New York University in
Speaker 1: the offices John of your Raisia group, And of course
Speaker 1: that always means our annual first of the year visit
Speaker 1: with Ian Bremer and their top risk for two thousand
Speaker 1: and nineteen, we've had a spirited discussion through the morning, John,
Speaker 1: Why don't you kick it off with Dr Bremer and
Speaker 1: I Speagan shadowy with the tough risk that you guys
Speaker 1: are looking at. You put out this list every single year,
Speaker 1: and we have the privilege of opening some of our
Speaker 1: overage up with you when you do do that. And
Speaker 1: I think it's interesting that you mentioned what could transpire
Speaker 1: over the coming years because of what is happening now,
Speaker 1: the bad seats that we're planting. Just walk us through
Speaker 1: that thinking again, sure, I mean you know there are
Speaker 1: so if you look at the major things that are
Speaker 1: happening in the world today, the geopolitical trends, both domestically,
Speaker 1: within countries and internationally, all of them are trending in
Speaker 1: the negative directions. The first time since we started the
Speaker 1: company twenty one years ago when we could say that
Speaker 1: none of them are urgent. Whether we look at the
Speaker 1: erosion of US political institutions, whether we look at challenges
Speaker 1: inside Europe as a whole and inside those individual countries,
Speaker 1: whether we look at the system of global alliances US Russia,
Speaker 1: US China, Transatlantic and within the Middle East, or the
Speaker 1: rise of populism and nationalism, none of these things are urgent.
Speaker 1: All of them trend in negative direction. All of the
Speaker 1: mean that we won't respond effectively to the next crisis
Speaker 1: when it comes. Your team is so good a calculus
Speaker 1: the first and second derivative rates of change of international relations.
Speaker 1: I love your word. I gotta pronounce it right here. Escalatory.
Speaker 1: We are escalatory right now. What is our movement towards
Speaker 1: escalatory crisis? Well, I guess I would say, with the
Speaker 1: global economy doing well, it doesn't feel like twenty nineteen
Speaker 1: is your challenge. But if you think about when the
Speaker 1: big recession hit in two thousand eight, everyone responded constructively
Speaker 1: so that we avoided depression the United States, there was
Speaker 1: a lot of strength nine eleven. The response came from
Speaker 1: the United States. The whole country came together behind the
Speaker 1: coalition of Russians. No, no, whatever the next shock is,
Speaker 1: whether it's cyber or terror or more likely the next
Speaker 1: economic downturn, the reaction inside our country and internationally is
Speaker 1: gonna be toxic. And I think that that's what's under
Speaker 1: appreciated issue. What measure for is the confidence of the
Speaker 1: system right now in the markets, in all of global
Speaker 1: Wall Street that listens to us every day, they're hard
Speaker 1: wired to the confidence for investment, the confidence to find
Speaker 1: the bid in various markets as well. What is our
Speaker 1: I our confidence right now? Yeah, I mean the confidence
Speaker 1: in the economy is I would say reasonably strong. The
Speaker 1: i R. The international relations confidence is low and trending
Speaker 1: worse on a daily basis. Now A lot of that,
Speaker 1: A lot of the reason that I our confidence isn't
Speaker 1: high in the markets is because of Trump. But it
Speaker 1: shouldn't be that. It should be much more structural. It
Speaker 1: should be that the forces that got Trump elected in
Speaker 1: the United States, it should be the forces that led
Speaker 1: to Brexit in the UK. It should be the forces
Speaker 1: that have led to the Italian government as well as
Speaker 1: the rise of China. Is here one off? I mean,
Speaker 1: that's the question. I see you out doing all the
Speaker 1: media for your raising group and all that, they never
Speaker 1: ask you that, just the pregnant question. Is President Trump
Speaker 1: a one off phenomenon? I think of William James Bryant
Speaker 1: when I see Alexander your Ocasio Cortez on sixty minutes
Speaker 1: yesterday saying, uh, I may get the facts wrong, but
Speaker 1: you need to focus on the underlying morality of what
Speaker 1: I'm saying. Right, That's exactly what Trump was saying. Take
Speaker 1: him seriously but not literally. That's exactly why the Brexit
Speaker 1: is the Is the liberal progressive new confidence that we
Speaker 1: see in the House, will that be a one off?
Speaker 1: Or is there a real sustained move back to a
Speaker 1: more liberal theology in America? I get what I'm saying
Speaker 1: is I think the center not holding is not a
Speaker 1: one off. And while Trump himself, in terms of his
Speaker 1: volatility is character or lack thereof that that is indeed
Speaker 1: an extreme outcome in the US, the likelihood that the
Speaker 1: next president or series of leaders would come from the
Speaker 1: farther right and farther left I think is growing. Do
Speaker 1: you have an optimism that we can do in practice
Speaker 1: democracy given this polarity, I mean, George Herb Walker Bush
Speaker 1: was one of our great losses for two thousand and eighteen,
Speaker 1: That middle ground seems to be gone. I have an
Speaker 1: optimism that American political institutions are surprisingly strong and resilient
Speaker 1: and they can withstand whatever Trump and his administration has
Speaker 1: to offer against it. But that's different from saying that
Speaker 1: democracy fundamentally is working for a majority of Americans. I
Speaker 1: think that when Trump says the system is rigged against you,
Speaker 1: and people respond to that, it's because he's right. Now.
Speaker 1: Trump hasn't made the system less rigged against them, but
Speaker 1: he did identify the problem. And a lot of people
Speaker 1: out there are telling their constituents liberal democracy has been
Speaker 1: gained to create much greater inequality and to give access
Speaker 1: to power and speak power to truth. And that's not
Speaker 1: a useful thing for most of those. When I look
Speaker 1: at bad seas, US, China, cybergloves off europopulism, Mexico, Ukraine
Speaker 1: and the rest. I want to go back to the
Speaker 1: arching theme of surveillance for last year, and I don't
Speaker 1: think I nailed this of months ago, which is technology.
Speaker 1: What all of our listeners global Wall Street people just
Speaker 1: wired into Wall Street, in the great professional group of
Speaker 1: all ages that listen to us, they're all affected by technology.
Speaker 1: And you're calling for an innovation winter. What is that?
Speaker 1: Innovation winter means that a combination of a fragmentation of
Speaker 1: the most important technology trend. So five G, which is
Speaker 1: going to be the backbone not just of smartphones, but
Speaker 1: the Internet of things smart cities, is not going to
Speaker 1: be one system like four G was. It's gonna be
Speaker 1: a China lead system and a Western lead system and
Speaker 1: they won't interact. That's one part, and the second part
Speaker 1: is the growing tech lash, the political trends against the
Speaker 1: big tech firms in the West. To ask you this question,
Speaker 1: and does technology enhance or accentuate the guilded age so
Speaker 1: many of our listeners feel we're living in. It makes
Speaker 1: uh those that don't participate in the guilded age age
Speaker 1: more aware of the fact that they're left behind. It
Speaker 1: makes it easier for them to connect with others that
Speaker 1: feel the same way. UM. It also speeds up the
Speaker 1: ability of those in the Gilded Age UM to build
Speaker 1: walls that effectively differentiate these people. What will the Democratic Party,
Speaker 1: or you're a great student of domestic politics, what will
Speaker 1: the new Democratic Party look like? Um? Because they are
Speaker 1: all um focused on twenty twenty after these midterm elections,
Speaker 1: and focused on April of this year and Trump, Well,
Speaker 1: I mean they're they're gonna be focused on impeachment proceedings
Speaker 1: as well. And I have a hard time seeing Pelosi
Speaker 1: uh keeping that off of the agenda. But I do
Speaker 1: think that it helps to coalesce the Democrats when they
Speaker 1: are all kind of on message against the American president.
Speaker 1: But let's be clear, seventeen Republican candidates, most of them
Speaker 1: were pretty establishment in the middle. You're gonna have freny
Speaker 1: to thirty Democratic candidates and they're going to be some
Speaker 1: in the middle, some on the left, and some complete outsiders.
Speaker 1: And that does make from the Democratic perspective, much more
Speaker 1: of a crapshoot. What you get, Brower, Thank you so much.
Speaker 1: Top Risks of two thousand nineteen at euris your group
Speaker 1: as we visit his office is here, unfit there having
Speaker 1: I want to bring it in Pria Misra, now TV
Speaker 1: Securities head of Global Race Strategy, to talk about the
Speaker 1: bond market, Priya, A big change in tone from the chairman.
Speaker 1: Just to go through some of his recent comments, listening
Speaker 1: carefully to market risks, prepared to be patient, flexible, even
Speaker 1: open to balance sheet policy change, Priya, the Chairman seems
Speaker 1: to be all over the place the last couple of months. Hi, John, Um, Yes,
Speaker 1: So I think the market interpretation of the chairman's comments
Speaker 1: has changed now. I do think in in the December
Speaker 1: press conference, he was trying to signal this flexibility, but
Speaker 1: we were we sort of went into that meeting expecting
Speaker 1: a lot. Uh. There were certainly people expecting no hikes there, uh,
Speaker 1: and the Chairman did hike. I think it's very hard
Speaker 1: to hike and then sound extremely nervous or panicky. So
Speaker 1: I think, you know, the hikes sort of set him
Speaker 1: up to sound somewhat hawkish. But what we heard from
Speaker 1: him on Friday was this idea that they're flexible, nothing
Speaker 1: is on autopilot. Um. You know, I think the fact
Speaker 1: that he's listening to financial conditions actually tells me that,
Speaker 1: you know, he's setting up somewhat for a pause here.
Speaker 1: So um, you know, whether it's a pause, whether um
Speaker 1: it's it's the end of the hiking cycle. I think
Speaker 1: that only data will tell us. But at least we
Speaker 1: have the FED now suggesting that they are watching uh,
Speaker 1: the tightening and financial conditions much more closely than they
Speaker 1: were earlier, uh, you know, the last few months. So
Speaker 1: let's begin by talking about potential for a pause, and
Speaker 1: then we can explore this tension between the market and
Speaker 1: the economic data. I think for many people, for now,
Speaker 1: many investors are going to run with the idea that
Speaker 1: Poal is going with the twenty sixteen FED playbook. Can
Speaker 1: we take a page out of the playbook in I
Speaker 1: think we can. I mean, the similarity of is is
Speaker 1: pretty high right now. Now. It is ultimately going to
Speaker 1: depend on whether we get the global growth rebound that
Speaker 1: we did see in twenty six we saw significant China easing.
Speaker 1: I'm not sure that the triple our cut is enough,
Speaker 1: but but if we do get you know, significant fiscal
Speaker 1: easing in China, if global growth rebounds, I think then
Speaker 1: twenty six uh is the reasonable uh you know thing
Speaker 1: to um sort of watch for. If growth starts to decelerate,
Speaker 1: so we actually don't get that rebound, then I think
Speaker 1: we're you know, I'll be looking more at two thousand seven.
Speaker 1: So I think right now, just given that we don't
Speaker 1: know enough, the US economy still seems to be you know,
Speaker 1: powering true. I think we really have to look at
Speaker 1: what happens to global growth, what happens on the trade front,
Speaker 1: to say whether this is or this is two thousand
Speaker 1: seven had some really extreme price action on the Thursday,
Speaker 1: never mind the Friday. In fact, maybe Friday told us
Speaker 1: more about the extreme positioning after Thursday than it did
Speaker 1: anything else. Prayer, I just wander your thoughts on the
Speaker 1: on the tension right now between financial markets where things
Speaker 1: are a little bit darker relative to twelve months ago,
Speaker 1: maybe a whole lot darker in your view, compared to
Speaker 1: the data. Whether data seems to be okay, especially here
Speaker 1: in the United States. Softer, yes, in some parts, but
Speaker 1: the labor market still looking very strong, right. I think
Speaker 1: the tension that you're talking about is also you know,
Speaker 1: in the data front, a lot of the forward looking
Speaker 1: measures are looking uh, you know, more worrisome. I think
Speaker 1: the Bureau report is still somewhat of a backward looking
Speaker 1: data point we still have for still using in the
Speaker 1: system in the US. So I think what we're seeing
Speaker 1: is that the US economy, at least backward looking, seems
Speaker 1: to be pretty strong. We sort of knew that. I
Speaker 1: think the fear is that the China I s M,
Speaker 1: the U s I s M, all of these forward
Speaker 1: looking measures are suggesting some slowdown. Now, if we slow
Speaker 1: down from a three and a half the cent GDP
Speaker 1: to let's say two and a half the cent GDP,
Speaker 1: that is the slowdown, But then two and a half
Speaker 1: is still well above potential. So I think that can
Speaker 1: allow the market to sort of stabilize. I think if
Speaker 1: we're slowing down much more than that, and that's what
Speaker 1: we really don't know, that's where the tension is. I
Speaker 1: think all forward looking measures are going to be extremely
Speaker 1: strutinized by the market because I think now the Fed
Speaker 1: policy mistake issue that should go in the background. I
Speaker 1: think now it's all going to be does the US
Speaker 1: economy slow down above potential or do we go below potential?
Speaker 1: And how is the global growth backdrop here? I think
Speaker 1: that's where you know, what's what's going to become extremely
Speaker 1: important as we analyze data. It's really going to be
Speaker 1: the forward looking versus backward looking different. So we need
Speaker 1: to analyze the soft data versus the hard dates are
Speaker 1: once again, and the tension between that and not just
Speaker 1: the tension between the data of the market. Preyer, I
Speaker 1: want some final thoughts on what your base cases right
Speaker 1: now for the US economy and for US rates. How
Speaker 1: difficult is it to construct a base case? It is
Speaker 1: very difficult, Um, I say, you know, what we're suggesting
Speaker 1: is for investors to stay somewhat in the front end.
Speaker 1: You know, when the two year old or three month
Speaker 1: treasury builds are giving you two forty or um. You know,
Speaker 1: basis points versus the tenure that's giving you to sixty,
Speaker 1: you're not getting a whole lot more to take on
Speaker 1: the additional duration risk. So I'm actually still suggesting that
Speaker 1: investors stay in the front end and then start looking
Speaker 1: at parts of the fixed in markets where risk premium
Speaker 1: has been adequately repriced. So some of the markets have
Speaker 1: seen significant widening in spreads, I think it might make
Speaker 1: sense to start dipping in your tours. They're keeping an
Speaker 1: eye on the data because if if the data does
Speaker 1: start to deteriorate significantly, then you want to move out
Speaker 1: of risk asses. But something we have that signal just yet.
Speaker 1: Pre always great to catch you out with your TV
Speaker 1: Security's head of Global Rights Strategy and bringing in Meredith
Speaker 1: Sumter of ERAISA Group head of Research, Strategy and Operations.
Speaker 1: I was a bit surprised for him. It's the first
Speaker 1: time I've brought it up. President of Trump, the huge
Speaker 1: distraction in Davos last year, and he goes for re
Speaker 1: DUX this year if he can get through the t
Speaker 1: s A at the airport to fly there. I mean
Speaker 1: President Trump against speaking to the international community. Yes, Davos
Speaker 1: is certainly a critical stage for him and for his
Speaker 1: brand globally. Like that his brand, his brand for sure,
Speaker 1: and I think he also his speech at last year's
Speaker 1: Davos played fairly well according to the White House, so
Speaker 1: look for a repeat performance there. But also watched for
Speaker 1: President Trump to have a sideline meeting with Chinese Vice
Speaker 1: President Wong she Sean at Davos. That is something that
Speaker 1: all of us will be watching for signs as to
Speaker 1: how the ongoing round of negotiations between the US and
Speaker 1: China are faring. We've spent a lot of times to
Speaker 1: the morning was really up top your Chinese risk as well.
Speaker 1: I want to dress right now your lengthy essay on
Speaker 1: Europe populism, which is decidedly different than it was twelve
Speaker 1: months ago. What is the threat to democracy in Europe
Speaker 1: right now? Well, twenty nineteen is really the year when
Speaker 1: the populace will take center stage in Europe and begin
Speaker 1: to erode the EU from within. We've written for several
Speaker 1: months now about the lives of populism and populist leaders
Speaker 1: and uh, you know Europe's third and fourth largest market
Speaker 1: economies in other countries such as Hungary and Poland. But
Speaker 1: what's critical now is that we expect that populists their
Speaker 1: numbers are going to fare even better in twenty nine
Speaker 1: and keep an eye on the May parliamentary elections. We
Speaker 1: expect that their numbers are going to grow following those elections,
Speaker 1: which will put them at center stage in Europe's most
Speaker 1: important democratic institution. In the dominant countries as well. Your
Speaker 1: age group was so out front on the fractures of
Speaker 1: Germany one and two and even three years ago, and
Speaker 1: of course Mr mccrawl with the challenges Now, how does
Speaker 1: that readdound back to Brussels, where I was just two
Speaker 1: weeks ago. I guess when when I look at Brussels,
Speaker 1: what is the strength of this European Union within the
Speaker 1: media frenzy of Brexit. Well, look the Brussels it's it's
Speaker 1: dealing both with Brexit, but it's going to have to
Speaker 1: deal with the growing voice and the growing influence of
Speaker 1: the Populace not only in the European Parliament following May's elections,
Speaker 1: but tom if if the Populace get enough of a
Speaker 1: strong showing in the May parliamentary elections, you combine that
Speaker 1: with their fairly solid basis of support and several Keys states,
Speaker 1: and you have a risk of uh, you know, euroskeptic
Speaker 1: populist having a voice not only in the parlor meant,
Speaker 1: but also in the European Commission, which oversees the day
Speaker 1: to day operations of Europe, as as well as the
Speaker 1: European Council. This affords them real decision making power. Is
Speaker 1: this within all of your top risks your Asia group?
Speaker 1: Is the system fractured? To steal a word from Franci
Speaker 1: Laquois earlier this morning, is the system fractured? Are you
Speaker 1: optimistic with Dr Bremer that we can see a healing
Speaker 1: If not in two thousand nineteen, then on through twenty
Speaker 1: after the presidential cycle. In the ensuing years so is
Speaker 1: the question more so with Europe or broadly spec Broadly speaking,
Speaker 1: I think our listeners are you know, they're they're interested
Speaker 1: in Europe, and they're interested in Wall Street and that.
Speaker 1: But it's sort of a broad feeling of Okay, when
Speaker 1: does this heal? Right, Look, it's going to take several
Speaker 1: more years of healing. But but the length of time
Speaker 1: that it takes for us to actually heal depends upon
Speaker 1: the ability of leaders from largely industrialized economies tackling head
Speaker 1: on the reforms that are necessary to bring more of
Speaker 1: their popular ations into the economy of the future. A
Speaker 1: lot of the geopolitical flux that we're seeing now part
Speaker 1: of it. It's a long term process of evolving from
Speaker 1: the post World war to order to what that new
Speaker 1: world war, what that new world order? Will know that
Speaker 1: this is critical. Do we know that new order that's
Speaker 1: out there? Cicaria, post American order, bremer g zero world,
Speaker 1: your own writings, Merit of the Sumter as well, and others.
Speaker 1: What's the new consensus after the Washington Consensus? I don't
Speaker 1: see it. Well. Part of that will depend upon what
Speaker 1: role Washington decides to play in this post world war
Speaker 1: to order and to what extent Washington can get along
Speaker 1: with other key power brokers, even if they don't agree
Speaker 1: with them, even if they don't agree with him. This
Speaker 1: this fundamentally includes China Beijing. So regardless of whatever tariff
Speaker 1: deal is agreed to, our call is that that relationships
Speaker 1: between the two that these two world powers, is going
Speaker 1: to get even huffer and he will. Let's bring the
Speaker 1: immediacy of a shutdown where the president's made clear it's
Speaker 1: his way or the highway. Is that his relationship with China.
Speaker 1: Is that what we're going to see in the talks
Speaker 1: this week, the talks maybe at Davos, and the talks
Speaker 1: and the talks and the talks after that. Is it
Speaker 1: a Trump lateral world. It would be a Trump lateral
Speaker 1: world if we had an unending US economic growth and strength,
Speaker 1: but that's not necessarily what we're seeing right now. Trump
Speaker 1: is fairly confident in the U s economy, but we're
Speaker 1: all watching the increased market volatility. We're all watching signs
Speaker 1: of a potential slowdown in the US economy, and that
Speaker 1: could force his hand earlier than than he would like.
Speaker 1: But the key question is whether it's Trump or post
Speaker 1: Trump to what extent is America going to lead and
Speaker 1: what does that mean for the post world order? You,
Speaker 1: more than any other guest we speak to, is hardwired
Speaker 1: for distance from capital. You did your academics at the
Speaker 1: University of Washington. You where were you? You and the
Speaker 1: grizzly bears up an anchorage? Right, something like that. I'm
Speaker 1: from Alaska, but it did my my graduate work at LSE.
Speaker 1: I know you went to London for your graduate work.
Speaker 1: I get that. But nobody I know spent more time
Speaker 1: distance from a capital than you. What does Wanhington not
Speaker 1: get about what's out there? The rest of the world
Speaker 1: is moving on regardless of what that's right, that's right,
Speaker 1: And if you if you're in Washington circles and you
Speaker 1: listen to the kind of discussions happening there, to me,
Speaker 1: it's not apparent. That reality is not yet apparent to
Speaker 1: the key thought leaders and decision makers in Washington, and
Speaker 1: the faster they realized that, the faster that they're able
Speaker 1: to turn away from this high levels of partisanship and
Speaker 1: internal naval gazing and really focus on, no kidding, what
Speaker 1: does it really take for America and the American workforce
Speaker 1: to be competitive and global economy? Then take it over
Speaker 1: to your wheelhouse of international relations. We're not getting along
Speaker 1: with their allies. Is that one off of this distrust
Speaker 1: with our this limited US, as you say, with our allies,
Speaker 1: or is there can there be a recovery towards some
Speaker 1: trust with our core ellis it's going to be a
Speaker 1: bit of an apphole battle to get a recovery of
Speaker 1: the kind of trust that we saw pre Trump. In
Speaker 1: other words, I think we're going to have to see
Speaker 1: a refashioning of the US related commitment to its alliance relationships,
Speaker 1: not only with traditional allies but also with new emerging
Speaker 1: partners with with whom Washington will need to partner to
Speaker 1: be an effective and strategic power in person, Meredith Sumter,
Speaker 1: thank you so much with your raising group, Head of Research,
Speaker 1: Strategy and Operations. Folding in the state of our capitalism
Speaker 1: and particularly the state of our technology, which means it's
Speaker 1: a wonderful time to speak to Sally craw Check. You
Speaker 1: know her from Wall Street, you know her from Elevant, uh,
Speaker 1: Elevate and Elavesta should say and all that she's done
Speaker 1: within digital, particularly with a thrust towards how women should
Speaker 1: adapt to the markets and to capitalism and she joins us.
Speaker 1: This morning, Sally, what have you and Albus learned about
Speaker 1: how the digital platforms, the digital technologies will deal with volatility.
Speaker 1: You enjoyed February, then you enjoyed October and on to
Speaker 1: the end of the year. It's different than Smith Barney,
Speaker 1: isn't it. Well, it is different than Smith Barney and
Speaker 1: different from Merrill Lynch and everybody told me. And the
Speaker 1: conventional wisdom is if you have a digital first investing
Speaker 1: platform and we get into some tough markets, your clients
Speaker 1: will leave you. There won't be a person there to
Speaker 1: either sue them or grab them around the ankles and
Speaker 1: keep them from leaving. And Tom, that's it, not at
Speaker 1: all what we saw that you know, we have built
Speaker 1: a product platform here at Labs that shows our clients
Speaker 1: are they on or off track for achieving their goals.
Speaker 1: We built in plenty of down markets as we project
Speaker 1: there and eating their goals, buying that home, starting that business,
Speaker 1: retiring at the age of six, and can show them
Speaker 1: on a day by day, moment by moment basis are
Speaker 1: they on track or off? And so what we found
Speaker 1: was attrition ary actually went down during the periods of
Speaker 1: volatility because our clients were able to log in and
Speaker 1: see I'm fine, okay, back to living my life. This
Speaker 1: is incredibly important, folks. And of course the age old
Speaker 1: idea here is everybody's talking their book. The constant themes
Speaker 1: Sally has been low interest rates, where the fees have
Speaker 1: been compressed. We saw Abby H. Johnson up at Fidelity
Speaker 1: having to go to two funds I believe index funds
Speaker 1: that were completely free of fees as well. Fold in
Speaker 1: the fee micro economics that you see for the future
Speaker 1: of personal investment, Well, the fees are coming down, an Tom.
Speaker 1: What's interesting is since you and I were since you
Speaker 1: were a little kid and I was a baby. Um,
Speaker 1: everybody has said the pressure, feed pressure, feed pressure, but
Speaker 1: it didn't really show up. In fact, you know, in
Speaker 1: the fifteen years before I took responsibility for Merrill Lynch
Speaker 1: Wealth Management, the r o A revenue on assets had
Speaker 1: been flat for that fifty years. Now, there were certain
Speaker 1: products where there was seed pressure, but overall that business
Speaker 1: continued to earn. And you've seen the research that says
Speaker 1: that the cost of financial intermediation is you know called
Speaker 1: one and a half or two percent. All in technology,
Speaker 1: we're able to UM bring that cost substantially down to
Speaker 1: really the first time, and the benefit of the cost
Speaker 1: coming down goes straight into the pods of the consumers.
Speaker 1: So you're giving them highly customized investment portfolios put together
Speaker 1: through investing algorithms that don't panic when the market goes down.
Speaker 1: You're able to to you know, feed them information on
Speaker 1: or off track, and you're able to do it in
Speaker 1: much lower price than having a thick layer of person
Speaker 1: in their lead to what do I mean thick layer
Speaker 1: the person who's doing all the you know, not only
Speaker 1: the client relationship, but also the investing right also the planning.
Speaker 1: By using technology to do what technology does best, in
Speaker 1: using people to do what people do best, the ultimate
Speaker 1: end client is better off both emotionally and when it
Speaker 1: comes to dollars and then slid crow check. I'm wondering
Speaker 1: if you could just expand a little bit on the
Speaker 1: algorithm that LVEST uses because it's tailored specifically to women's
Speaker 1: incomes and also to their life cycles, and this is
Speaker 1: something that no one else has really been able to do. Well. Look,
Speaker 1: if you are planning to um you know, you're saving
Speaker 1: and investing for retirement, and you put together plan and
Speaker 1: you assume in your plan that you die on average, UM,
Speaker 1: and you assume in your plan that your earnings grow
Speaker 1: on average for an industry. That works really well. If
Speaker 1: you're a man, because I hate to say a gentleman,
Speaker 1: but you know, you die earlier. UM. It also works
Speaker 1: really well because you earn more. For a woman, you know,
Speaker 1: the chances of being left without you know, an income
Speaker 1: at the end or without wealth at the end are
Speaker 1: much higher unless you take it into account. And so
Speaker 1: l of us was really the first two things we
Speaker 1: do to you know, really, um customize this to either gender,
Speaker 1: but to women. They are about a thousand other things
Speaker 1: that we do based off of hundreds and hundreds of
Speaker 1: hours of research that women said they were looking for
Speaker 1: one as goals based investing. And by the way, I
Speaker 1: know many of your listeners, what an investing platform for women?
Speaker 1: That is so dumb? I thought so too, up until
Speaker 1: I realized that women weren't investing nearly as much as
Speaker 1: men were. It costs typical woman hundreds of thousands a
Speaker 1: million plus over the course of her life, and what
Speaker 1: the industry was doing, which was telling her to change,
Speaker 1: telling her she needed more financial education, telling her she
Speaker 1: needed to just buy a mutual fund. We can keep
Speaker 1: trying to do that, but it wasn't working before. So
Speaker 1: we saw no reason that was work going forward, and
Speaker 1: so we built an investing platform completely around her. And
Speaker 1: by the way, there are a lot of guys who
Speaker 1: love it too. I would imagine, can you tell us
Speaker 1: all about something called the risk quiz and why that's
Speaker 1: not enough and why it's about reaching the goal, not
Speaker 1: necessarily what happens in the market on a day to
Speaker 1: day or even month to month basis. It's a great question.
Speaker 1: So most investment providers out there ask client potential clients
Speaker 1: their list tolerance. What we found when we did the
Speaker 1: research is many will answer that question. Men on typically
Speaker 1: will answer that question. They don't know the answer to it,
Speaker 1: but they will answer it. Women typically will not answer
Speaker 1: the question, and we'll leave and say, I gotta go
Speaker 1: figure this out, I gotta go buy a book, I
Speaker 1: gotta read about it, and I'll come back, and then
Speaker 1: they never come back. The truth is, no one really knows.
Speaker 1: The research shows you, and my my years in the
Speaker 1: business tell me no one really knows what their risk
Speaker 1: tolerances until they face up to a down market, and
Speaker 1: then they figure it out. And asking the question and
Speaker 1: then investing based on that. We as a producer at
Speaker 1: all of us, uh no, what we do instead it
Speaker 1: tell us what you want to achieve. And if you
Speaker 1: don't have an emergency fund, I don't care if you
Speaker 1: think you're going to take on it. You want to
Speaker 1: take on a lot of risks, you're not. We're not
Speaker 1: letting you. And by the way, if your twenties five
Speaker 1: and your only goal is retirement, we're going to build
Speaker 1: you a portfolio with quite a bit more risk there
Speaker 1: because you'll have the time to earn the returns and
Speaker 1: recover for interns. So we give a risk budget rather
Speaker 1: than hey, what do you want? And then you know,
Speaker 1: act the act in that way, Sally, the top risk
Speaker 1: of two thousand nineteen lead us to the top risks
Speaker 1: of a generation, whichever that generation may be. And to me,
Speaker 1: it comes down to actual assumption. We've had the gift
Speaker 1: of a bull market which has made not all but
Speaker 1: a select group look pretty smart. Do you just assume?
Speaker 1: And I go and folks, this is with Sally's iconic
Speaker 1: work at Sanford Bernstein in math and securities analysis years ago.
Speaker 1: Do you just assume? Finally, the single digit world is
Speaker 1: upon us. That's what that's what we project and so
Speaker 1: that and if it isn't fantastic, but at l of
Speaker 1: US we project that and if the returns end up
Speaker 1: being better, so be it. So not only do we
Speaker 1: project single digit returns, but then we also project to
Speaker 1: try to get her to the quantitative goal she wants
Speaker 1: to achieve in the substantial majority of markets, so we
Speaker 1: try to build in a layer of conservatism to conservatism
Speaker 1: to conservatism, which can make the initials sell hard time
Speaker 1: because we're not out there saying it will be a millionaire,
Speaker 1: but we believe it a prudent way to help her
Speaker 1: plan for her future and look for the For the women,
Speaker 1: this is important. You know, you hit an important point.
Speaker 1: Women live longer than men do. Therefore, if we do
Speaker 1: not have enough money as a country for retirement savings,
Speaker 1: it is a gender issue. It is a gender issue,
Speaker 1: and so our goal at Elvest is to help close
Speaker 1: this gender investing gap, to help close the retirement savings gap.
Speaker 1: And if you think about it, if we could get
Speaker 1: more money in the hands of women, close the gender
Speaker 1: pay gap, close the gender investing gap, that helps the
Speaker 1: it's good for everybody, helps the economy grow, It puts
Speaker 1: money into the markets, It helps the women have more resources,
Speaker 1: it helps there their families. You know, it's not a
Speaker 1: zero sum game by any means. And so for Elvest,
Speaker 1: we are an investing firm for women, but we're really
Speaker 1: mission driven to try to you know, at our core
Speaker 1: is to try to help women live and better live.
Speaker 1: So I'm gonna leave it there. Thank you so much.
Speaker 1: Sally called check of ls to helping out Ian Bremmer
Speaker 1: today with a top risk of two thousand nineteen. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keene before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.