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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, financing, investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Steve Hegley

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Speaker 1: okay with thrilled he could join us now senior advisor.

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Speaker 1: Bank Capital not an acquaintance, were the only franchise in

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Speaker 1: basketball Boston Celtics as well, and most importantly with Jim Zelter,

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Speaker 1: who we spoke to yesterday. The card to rule is

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Speaker 1: you can't do fixed income, you can't do debt. If

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Speaker 1: you went to Duke University. You gotta go to Duke

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Speaker 1: or you can't do this. Steve, what was in the

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Speaker 1: air at Duke University that got you and Zelter into

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Speaker 1: the debt game? Well, I'm not really that came out

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Speaker 1: in the private equity business actually borrow up. But Duke's

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Speaker 1: a fantastic place. I'm on the board today and uh,

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Speaker 1: it's uh, it's just a great environment and a great

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Speaker 1: learning environment and doing great things this moment right now,

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Speaker 1: the jumble that we're in, the day to day grind

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Speaker 1: that Bloomberg's surveillance does give us the vision you have

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Speaker 1: about one year on the application of all that money

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Speaker 1: and private equity, what are people like you going to

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Speaker 1: do well? I think you've got to step back and

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Speaker 1: and and we're really seeing I think, as you've talked

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Speaker 1: about today, uh, the unwinding of quantitative easing, and and

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Speaker 1: we're back to more normalized interest rates. If if we

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Speaker 1: look back at my career in the last forty years,

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Speaker 1: thirty of those years we had interest rates Tea bills

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Speaker 1: were four and a half five. It's only as of

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Speaker 1: the crisis that we've had this very cheap money. And

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Speaker 1: now that's being kind of unwind, you know, due to

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Speaker 1: the fact when you increase the money supply so much

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Speaker 1: and have so low interest rates, you get speculative behavior

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Speaker 1: and you get inflation. And so now we're we're probably

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Speaker 1: probably a ten year cycle of going back to what

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Speaker 1: i'll call normalized interest rates. In the process of that,

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Speaker 1: I'm curious about the phases of private equity, the phases

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Speaker 1: of taking a company and building it and then uh

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Speaker 1: cashing in and spinning it off in an I P O?

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Speaker 1: Is it getting harder to cash in and more important

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Speaker 1: to do the due diligence of building up right now

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Speaker 1: at a time when the I p O market hasn't

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Speaker 1: fully recovered, well, private equity hasn't hasn't throw it totally

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Speaker 1: relied on the IPO market, and the IPO markets are

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Speaker 1: very slow right now. Um yeah, if I stepped back,

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Speaker 1: I said, a private equity model, since I've been doing

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Speaker 1: it for I think thirty five years now, has been

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Speaker 1: a very durable, successful model in in bad times and

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Speaker 1: good times, because fundamentally, what private equity is trying to

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Speaker 1: do is inject capital in businesses and and and then

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Speaker 1: grow them. It's a misnumber I think starting maybe back

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Speaker 1: to the dark days of the private equity that it

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Speaker 1: was just about taking costs out. The really successful private

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Speaker 1: equity companies have driven a growth into the technology sector,

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Speaker 1: the medical sector, industrial sector, globalized companies, and and the

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Speaker 1: model has really worked well. Um So again, when when

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Speaker 1: I started out, interest rates were we were borrowing money

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Speaker 1: at eleven or twelve percent um. So you're seeing corrections

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Speaker 1: and prices now and you're you're you're still able. We're

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Speaker 1: still in the finance companies were still a to grow companies,

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Speaker 1: you just have to become more selective and and more fundamental,

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Speaker 1: and the and the and and now it's a more

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Speaker 1: fundamental market versus the speculative market that was created by

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Speaker 1: the by the best increase of the money supply. Over

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Speaker 1: the past decade, a lot of people have talked about

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Speaker 1: private equity and private investment firms in general taking market

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Speaker 1: share from the bigger banks. And we were speaking with

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Speaker 1: Apollo about the potential acquisition of a credit suite arm.

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Speaker 1: Do you see that increase in taking market share? Do

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Speaker 1: you see that likely to continue over the next few years.

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Speaker 1: I do. Uh. You know, when they when they broke

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Speaker 1: Glass Eagle and changed all the rules, banks have had

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Speaker 1: to be much more conservative, and banks used to be

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Speaker 1: merchant banks, and now they're really just banks. And large

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Speaker 1: five equity firms are becoming more like the merchant banks

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Speaker 1: of the old and branching out into into debt services,

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Speaker 1: branching out into UH selling and buying of companies, and

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Speaker 1: so so I think those those private equity firms will

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Speaker 1: continue to go on that drink. I'm Bloomberg RADI on

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Speaker 1: Bloomberg Television. Stephen peg Lukla with us right now, of course,

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Speaker 1: the owner of the Boston Celtics. We'll get the sport

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Speaker 1: here at a moment and all the different rumors out there,

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Speaker 1: but we stay on Global Wall Street. Steeve, I love

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Speaker 1: what you say about the merchant banks have become regular banks,

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Speaker 1: whether it's Goldman Sacks or frankly every other bank. There's

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Speaker 1: a competitive effort to keep the spirit going. Some would

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Speaker 1: say Mr Solomon at Goldman Sachs has stumbled. Did he

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Speaker 1: overreach by doing something that culturally didn't fit Goldman Sachs

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Speaker 1: when he and others invented Marcus and consumer banking efforts? Well,

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Speaker 1: I think, I think I think the the you know,

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Speaker 1: nobody can get it perfectly. Um. I think they identified

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Speaker 1: that the wealth management market was a great market. Um.

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Speaker 1: And part of the issue is is we've we've seen

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Speaker 1: this great change in interest rates right now and made

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Speaker 1: that a tougher strategy. UM. But Goldman has a very

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Speaker 1: good name and a very good reputation, and I'm sure

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Speaker 1: they'll they'll sort that out and be a factory the

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Speaker 1: money measumed business because they have the course skills to

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Speaker 1: do that. Steve, you're just barely old enough to remember

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Speaker 1: when dire Straits took over the zeitgeist with money for nothing.

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Speaker 1: And as you mentioned in your last answer, all of

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Speaker 1: a sudden, money costs something. The dire Straits rate structure

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Speaker 1: is so over. How does the private equity market change.

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Speaker 1: To speak to the young Turks now in private equity,

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Speaker 1: how does their world change now that money costs something? Well,

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Speaker 1: I think the world changes in that. UM. There was

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Speaker 1: in the last five to ten years, as we've talked,

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Speaker 1: there was a speculative bubble where people people believe that

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Speaker 1: everything could be Amazon, that the weight of money and

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Speaker 1: putting money into growth capital companies UH would would gain

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Speaker 1: share and you could lose you could lose money. UM

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Speaker 1: for a long period of time. When money is cheap,

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Speaker 1: you probably can do that. And there were successful investments

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Speaker 1: like Uber and and UH and Amazon. But for every

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Speaker 1: one of those, there's been a lot of ones that

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Speaker 1: are just will never achieve the potential. And when you

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Speaker 1: change interest rates, the value plummets, and you've seen that

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Speaker 1: now in the tech markets. So I think we're to

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Speaker 1: go back to the future when when I started interest

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Speaker 1: rates where tebos or five percent. As I told you,

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Speaker 1: we were borrowing at ten and eleven percent and we're

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Speaker 1: very successful. But you have to kind of go back

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Speaker 1: to fundamentals and have companies that gain share and and

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Speaker 1: become profitable, because you can't take the strategy of of

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Speaker 1: losing money for for five to ten to fifteen years

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Speaker 1: to then create a great business at the end. It

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Speaker 1: doesn't work in the world where money costs something. Over

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Speaker 1: the past decades, Steve, we were talking about companies that

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Speaker 1: would borrow money to pay their stockholders right. There was

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Speaker 1: a lot of discussion around that, and it seems like, uh,

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Speaker 1: the debt side was less valuable than the equity side

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Speaker 1: in many ways because you would get rewarded by the

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Speaker 1: bond side even an equity space. Has that balance shifted?

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Speaker 1: Do you see a greater opportunity on the bond side

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Speaker 1: now on the credit side of the companies that you

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Speaker 1: invest in than the equity or is it just more balanced.

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Speaker 1: He's more balanced. There's always gonna be uh bigger returns

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Speaker 1: where you you have you create more outlet in equity

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Speaker 1: by driving and increasing company's market share and profit. But

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Speaker 1: I would say we are joining kind of a Golden

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Speaker 1: Age of credit. Uh, where now credits being appropriately priced

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Speaker 1: and people are getting great returns on that credit and

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Speaker 1: uh and it's it's it's really I wouldn't even say

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Speaker 1: it's expensive, it's it's more normal goal behavior now. Um,

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Speaker 1: you know, we we looked at this at beying capital

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Speaker 1: that all economies where the money supply increased kind of

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Speaker 1: or more, which is what what's happened in most of

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Speaker 1: the Western world. Uh. After a period of time you

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Speaker 1: see large inflation and it's got to be corrected. It's

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Speaker 1: got to go back to kind of where where the

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Speaker 1: cost of capital is more normalized. And that's what we're

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Speaker 1: seeing right now, and that's going to be a tenure trend.

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Speaker 1: Steven on the Super Bowl weekend. It's just wonderful that

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Speaker 1: you've agreed to stay with us in our next segment, folks,

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Speaker 1: this will be really most most interesting. I want to

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Speaker 1: touch on sports here. I think of Malcolm Glazer, what

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Speaker 1: he did out of Rochester, New York, buying the Tampa

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Speaker 1: Bay Buccaneers years ago. That was an entrepreneurial guy starting

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Speaker 1: with his father with next to nothing, who made it

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Speaker 1: big in sports. The allusion today is or the reality

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Speaker 1: I should say is there's the haves and have nots

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Speaker 1: of sports, A big, big, big money, whether it's Petro

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Speaker 1: dollar money or American tycoon money taking over sports. How

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Speaker 1: you would adapt and adjust to that to do the

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Speaker 1: social good of what a domestic economy wants. Let's take

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Speaker 1: English football. How do the big guys come into English

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Speaker 1: football like the Saudi's and Newcastle and yet support the

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Speaker 1: domestic people of the United Kingdom. Well, that's a that's

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Speaker 1: a long, you know, complicated answer. I have experience having

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Speaker 1: been the own a Rota Lanta and Italy, and sports

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Speaker 1: can actually be a fantastic change for social good. UM.

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Speaker 1: In terms of specifically the structure of of soccer in

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Speaker 1: in or what they call football in Europe, it is

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Speaker 1: much more grassroots, it's much more UM. Teams can kind

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Speaker 1: of kind of come up and down, and I think

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Speaker 1: what these new owners have to do is recognize their

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Speaker 1: community asset and both try and win, but share the

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Speaker 1: spoils with the teams on the on the bottom. And

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Speaker 1: you're I think the UK just came out with a

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Speaker 1: large regulatory report in terms of reforming the system where

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Speaker 1: more money will go to the smaller teams so they

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Speaker 1: can feed the larger teams. And then and then secondly,

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Speaker 1: what's been great about the USA as a as a

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Speaker 1: leading model is that the NBA has NBA Cares the

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Speaker 1: Boston Celtics. We formed the Boston Celtics United for Social

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Speaker 1: Justice and the Boston Celtic Shamrack Foundation, and we've given

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Speaker 1: millions of dollars back to the community and work with

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Speaker 1: communing how our players go out and go out there

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Speaker 1: as well. So so sports franchises can be a real

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Speaker 1: impact for for for social good. And then specifically, and

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Speaker 1: the question on on the European leagues, it is different

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Speaker 1: than the US. It's a grassroots spaces and they're looking

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Speaker 1: at the at the rules and regulations to to to

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Speaker 1: really make it be more fair and really support those

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Speaker 1: those teams. We're talking to Steve Palauka right now, of

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Speaker 1: course as being capital and co owner of the Boston Celtics,

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Speaker 1: Lisa Brownlinson time King doing a little bit of a

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Speaker 1: wonderful sports vampire. We'll do this right now with Steve.

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Speaker 1: And with that we need to bring in someone encyclopedic

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Speaker 1: on Pag's Boston Celtics, which of course for me all

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Speaker 1: he's Michael McKee is the romance of Mr Arbuck and

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Speaker 1: an absolutely original floor and Bob Cuzy and what he

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Speaker 1: did long ago and far away. But you are way

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Speaker 1: up to speed on the new Celtic. A couple of

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Speaker 1: piercing questions here right now. Well, let's just get this

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Speaker 1: out of the way and ask you about yesterday, uh,

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Speaker 1: Mike Mscona coming to the Celtics. You guys didn't do

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Speaker 1: much beyond that, and there was sort of an expectation

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Speaker 1: you might package some of the players or draft picks

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Speaker 1: and and pick up some of the stars that have

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Speaker 1: been floating around. You're satisfied just being the best team

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Speaker 1: in the NBA right now? I guess, well, we have

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Speaker 1: a great group of players, high character, probably one of

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Speaker 1: the tightest groups we've had in the twenty years that

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Speaker 1: that that we've been involved with the Celtics um and

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Speaker 1: made it to the almost one the NBA Finals last year.

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Speaker 1: We added Malcolm Brogden, who has been a major plus UM. So,

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Speaker 1: so that group is leading the NBA right now, and

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Speaker 1: and now we've got some more help with my Muscala

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Speaker 1: excited about him. So I think we're in pretty pretty

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Speaker 1: good position. Um, as long as we stay healthy and

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Speaker 1: pretty good position for the rest of the season. A

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Speaker 1: very quick question here, just because everybody wants to know

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Speaker 1: Jalen Brown. How long is he out? You know, he's

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Speaker 1: still being evaluated. Hopefully, hopefully he'll be back in a

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Speaker 1: few weeks. And you know, we'd be basically won't put

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Speaker 1: players out there if they can be injured. So the

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Speaker 1: doctors are looking at the best course of action. But

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Speaker 1: he'll he'll be back at some point soon. I gotta

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Speaker 1: ask this question. Um. Matt Ashiba walks out of the

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Speaker 1: Board of Governors meeting, shaking hands, new owner of the

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Speaker 1: Phoenix Suns and a couple hours later mortgages that franchise

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Speaker 1: to get Kevin Durant. Uh. Is that the kind of

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Speaker 1: move that is good for the NBA. I think it's exciting.

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Speaker 1: You can see it's caused a national start. It's created

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Speaker 1: a powerhouse out out in Phoenix. Um. The issue in

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Speaker 1: the balancing act that you always have to do as

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Speaker 1: a as a sports franchise on a is the long

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Speaker 1: term versus the short term. And it sounds like, you know,

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Speaker 1: Matt has a philosophy that they have a team that's

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Speaker 1: on the custom and adding a star like Kevin Durant,

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Speaker 1: it's worth it the mort in the future and we'll see,

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Speaker 1: we'll see how that, how that pans out. Steve Agota

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Speaker 1: turned to all the rumors that are out there and

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Speaker 1: drive the conversation forward, and of course been briefed by

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Speaker 1: Jonathan Farrell, who truly brings real expertise here. There is

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Speaker 1: an American interest in the Premier League, which I'm speaking

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Speaker 1: as an amateur, is the best running league in the

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Speaker 1: world or the most effective league in the world. It

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Speaker 1: seems like every Saturday is a World Cup on NBC

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Speaker 1: and I'm looking at Manchester United and all the turmoil there.

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Speaker 1: I'm looking at the new ownership of Chelsea as you

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Speaker 1: look as rumored to Liverpool. What did you learn from

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Speaker 1: the Chelsea Ballet? What did you learn in the last

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Speaker 1: number of months about how a guy like you from

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Speaker 1: Bain approaches the Premier League of the United Kingdom. I

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Speaker 1: learned a lot of a great learning experience. That it

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Speaker 1: is a fantastic league, as you know in the co

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Speaker 1: owner and chairman of of Atalanta, which is in Series Syria,

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Speaker 1: which is a fantastic league as well. UM, so we've

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Speaker 1: learned a lot from that. Um In the Premier League. Uh.

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Speaker 1: I think the Premier League has very high values because

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Speaker 1: it's a it's a fantastic product that the television revenues

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Speaker 1: are high, tracks, great players. UM. Now the Chelsea situation,

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Speaker 1: the price was really a very very full price, and

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Speaker 1: I think that's motivated some other teams as you seem

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Speaker 1: to to try and sell UM and I don't know

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Speaker 1: if if that that value is going to be justified

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Speaker 1: for for all the other teams. Long term, sports is

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Speaker 1: a great investment because you've seen it go up the

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Speaker 1: year after year after year. It's the only property on

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Speaker 1: television that is must see TV. And as as the

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Speaker 1: whole TV market has changed from linear to digital and

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Speaker 1: now bundling and unbundling and streaming U, these sports products

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Speaker 1: have become even more valuable. So there's a bright future ahead.

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Speaker 1: I see a viewer question, John from Milan emails in

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Speaker 1: and says, can at Atlanta can they can they really

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Speaker 1: do better than a C Milan through the rest of

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Speaker 1: the season. Your thoughts on that please? Uh, We're very

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Speaker 1: excited about Atlanta. The Picassi family and the scouts had

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Speaker 1: done a fantastic job bringing in a lot of young

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Speaker 1: players who were very held with the second leading goal

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Speaker 1: scorer in Syria in Lookman Autamoto, Lookman, uh And and

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Speaker 1: Hoyland as a young and now now just turned twenty player.

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Speaker 1: That's that's making an impact as well. So hopefully we

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Speaker 1: can be better, very competitive and be the top of

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Speaker 1: the league. We have a big game on on this

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Speaker 1: weekend and hopefully we'll win that one. You know, I

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Speaker 1: feel like at least so it's like when the manager

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Speaker 1: in baseball's banished from the dugout and they're calling on

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Speaker 1: the phone to tell what the players are Farrells in

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Speaker 1: my ear, ask about alan you're can have on them,

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Speaker 1: make them better? You want to just build on what

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Speaker 1: your saying. Steve, this idea that words products are really

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Speaker 1: attractive to you and that the asset class is growing.

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Speaker 1: And I'm curious what the analog is in terms of

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Speaker 1: owning a sports team, whether it's for the revenues, whether

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Speaker 1: it's for the advertising, whether it's for the social presence,

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Speaker 1: and how you evaluate that, what kinds of investors are

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Speaker 1: appropriate for this area. Well, you've seen a massive increases

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Speaker 1: in in U sports franchise values across the board, uh And,

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Speaker 1: and really that's because they hold value and because the

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Speaker 1: promise of television revenues and and basically branding has been

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Speaker 1: fulfilled over a long period of time. They've created large

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Speaker 1: fan bases. Technology has really changed. Everything is globalized these

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Speaker 1: four franchises. So when we were growing up, you really

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Speaker 1: couldn't see a soccer game in London. Now you can

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Speaker 1: see it all over the world. And the big sports

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Speaker 1: teams including the NBA and and and Soccer, which are

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Speaker 1: both global sports, are now counting fans in the hundreds

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Speaker 1: of millions rather than in the in the millions um

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Speaker 1: and you can use that brand power to monetize it

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Speaker 1: for the sports clubs. Secondly, there is a a almost

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Speaker 1: Picasso painting like aspect of this. It's a it's say,

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Speaker 1: there are only thirty proteins in every sport in the US,

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Speaker 1: and there's four or five big leagues, so it's a

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Speaker 1: very scarce asset globally. UH franchises companies like Chelsea. Clubs

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Speaker 1: like Chelsea are very unique in the middle of London

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Speaker 1: there and and so there is a intrinsic scarcity value

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Speaker 1: plus an economic value of of of the properties because

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Speaker 1: of the television revenues and and and the central role

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Speaker 1: they play in and attracting viewers in the larger competition

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Speaker 1: as you see YouTube, Apple and other tech companies now

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Speaker 1: encroaching on the broadcast space. Just real quick here, Steve,

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Speaker 1: I'm curious with the Middle East money has pushed out

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Speaker 1: other bidders right now for the London clubs. Uh, you're

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Speaker 1: seeing institutional capital will come in and with these kind

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Speaker 1: of values and said that is that is going to happen. Um.

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Speaker 1: And they have strategic interest in and I think building

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Speaker 1: the brands of those countries, um. And so they're just

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Speaker 1: another another factor, another factor, another source of capital. Steve,

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Speaker 1: I gotta ask one more delicate questionnaire, and I say

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Speaker 1: it with great respect for the way you've done sports.

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Speaker 1: There's a massive uproar about man City. I was making

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Speaker 1: jokes the other day. It was far more serious than

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Speaker 1: anything we saw with the Houston Astros. How did guys

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Speaker 1: like you help with the arms race and the outcomes

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Speaker 1: that are alleged at Manchester City. Well, I'm not involved

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Speaker 1: in the perim prayorly, but but if I step back

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Speaker 1: in general, I think a good model of the NBA

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Speaker 1: where where Adam Silver and previously teamed David Stern have

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Speaker 1: done a fantastic sick job in enforcing you know, fair

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Speaker 1: play rules and making sure everybody has a level competitive

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Speaker 1: field and UH, and that's really the way to do it.

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Speaker 1: And I applaud the Premier League and UH and Syria

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Speaker 1: for doing the same thing and and really enforcing everybody

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Speaker 1: playing by the rules because at the end of the day, UM,

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Speaker 1: no one wants to have unfair competition, or watch unfair competition,

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Speaker 1: or have people who are who are bending the rules,

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Speaker 1: are violating the rules succeed, And that's fundamental to fairness

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Speaker 1: and us, Steve I got all of ten seconds Eagles

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Speaker 1: or chiefs. Uh, I love mahomes, I say chiefs. Very good,

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Speaker 1: Steve VEX, thank you so much, greatly appreciate it. With

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Speaker 1: bank Capital and with the Boston Celtics, let gets absolutely

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Speaker 1: globe ahead of f strategy for obvious. So can we

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Speaker 1: just out there briefly the next bo j head your

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Speaker 1: thoughts on the recent reports that have come through all

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Speaker 1: of this morning. Yeah, absolutely, I mean, I think it's

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Speaker 1: been an interesting trade for many since the y CC

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Speaker 1: band was widened in December. Gotta be honest, feels like

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Speaker 1: people have overtraded it a little bit, you know, keep

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Speaker 1: getting excited about who it might be, what that might

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Speaker 1: lead to in terms of movement, But as you say,

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Speaker 1: the Bank of Japan moves very slowly, and so I

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Speaker 1: think traders right now weighing up their options. We saw

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Speaker 1: that kind of over baking of the move It went

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Speaker 1: dollygan down, back up again, and now pretty much i'd say,

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Speaker 1: close to flat. Also, your your academics in mind is simple.

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Speaker 1: There's disinflation, there's deflation, there's inflation, and then there's a

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Speaker 1: cosmic undefined ability of reflation. Mr Corona is doing the

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Speaker 1: ultimate reflation experiment. How's it going? I mean, honestly speaking,

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Speaker 1: it's been a long time and it's hard to see

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Speaker 1: tangible effects. Yes, there is an inflation right now in Japan,

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Speaker 1: but we've seen across the world global supply chain issues,

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Speaker 1: commodity price effects, and what we see when that fades

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Speaker 1: away is the underlying core inflationary dynamic, which is stronger

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Speaker 1: in some countries than it is in others. And I've

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Speaker 1: got to be honest, I find it hard to imagine

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Speaker 1: a world where the US is in disinflation as we're

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Speaker 1: pricing at the moment, and Japan is seeing aggressive inflation.

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Speaker 1: That would require much higher rates. It just it's not

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Speaker 1: a world that adds up. So you're basically pushing back

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Speaker 1: against the idea that perhaps next Tuesday is going to

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Speaker 1: be rather explosive because we get both cp I and

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Speaker 1: then we also get the Bank of Japan nominee and

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Speaker 1: some notes overnight. We're saying this is going to be explosive,

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Speaker 1: especially for all the pain trade and people that are

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Speaker 1: a position in different ways. You disagree with that? Is

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Speaker 1: that correct? Look? I think CPI is going to be interesting.

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Speaker 1: That's obviously huge focus on spots CPI in the US

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Speaker 1: at the moment, the Bank of Japan governor perhaps less so.

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Speaker 1: You know, for me, the big change going on at

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Speaker 1: the moment, it's not what's happening in Japan, but what's

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Speaker 1: happened in the rest of the world. The increase in

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Speaker 1: hedge and costs for Japanese investors. I know we've discussed

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Speaker 1: it before. That's not gone away, and even if the

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Speaker 1: FED were to be cutting in the back half of

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Speaker 1: the year, it will still be very expensive for your

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Speaker 1: average Japanese investor. That's the sea change, not the y

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Speaker 1: c C. Also, how does your world change if we

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Speaker 1: now have where money costs something. Cash has value, the

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Speaker 1: one your Treasury bill is outward it is how does

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Speaker 1: that exchange the foreign exchange the world where you can

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Speaker 1: advantage early profit from it. I think that's a great question, Tom,

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Speaker 1: because we're kind of an environment where ball seems to

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Speaker 1: be falling across the board. You see it in equity

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Speaker 1: markets and fixed income markets. Um a little bit more

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Speaker 1: mixed in effects, but it's an environment that is actually

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Speaker 1: conducive to considering not just great dynamics, but also the

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Speaker 1: level of breaks you know, static yield. And in that context,

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Speaker 1: it's very difficult to imagine we're going to see the

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Speaker 1: dollar collapse, like I think a lot of people are

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Speaker 1: forecasting if it remains the highest deal dur in due ten.

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Speaker 1: You know, it does matter when cash costs something. It

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Speaker 1: costs something to short the currency. You earn something for

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Speaker 1: just holding onto it. It does mean that holding onto

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Speaker 1: a short dollar yang position, unless we see a dramatic

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Speaker 1: ball in interest rates is just not going to pay off.

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Speaker 1: So just quickly, I just want to finish on Europe,

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Speaker 1: the euro and what's taking place in the energy patch

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Speaker 1: today with crude rallying. There's a piece of Financial Times

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Speaker 1: this morning and it's on Pierre Underrand, who I'm sure

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Speaker 1: everyone is aware of the commodity trader, runs a commodity

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Speaker 1: hedge fund. He says Putin has lost the energy war.

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Speaker 1: Do you agree with that? Is that you're working assumption

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Speaker 1: three given what we've seen playing out this morning. It's

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Speaker 1: interesting because you actually mentioned the Inflation Reduction Act earlier

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Speaker 1: and in one of the discussions they're having at the

430
00:23:43,440 --> 00:23:45,639
Speaker 1: European Council today is what the response is going to be.

431
00:23:46,440 --> 00:23:49,800
Speaker 1: The reality is that structurally cheap gas that Europe used

432
00:23:49,840 --> 00:23:52,840
Speaker 1: to get is no longer there, and that might not

433
00:23:52,920 --> 00:23:56,080
Speaker 1: benefit Putin, but it certainly will benefit the US in

434
00:23:56,200 --> 00:23:59,720
Speaker 1: relative terms. So going forward, this is not a three

435
00:23:59,720 --> 00:24:01,359
Speaker 1: month six months trade, but if you look at it

436
00:24:01,400 --> 00:24:04,000
Speaker 1: on a two to three horizon, they are big incentives

437
00:24:04,000 --> 00:24:06,880
Speaker 1: for European companies to be investing in the US. Interesting

438
00:24:06,920 --> 00:24:10,960
Speaker 1: how said thank you as always, thank you very much.

439
00:24:15,200 --> 00:24:17,200
Speaker 1: The Grettery Stables joins us now I had a fixed

440
00:24:17,200 --> 00:24:20,160
Speaker 1: income North America DWS group and with a very trench

441
00:24:20,240 --> 00:24:23,040
Speaker 1: at note, it takes us back to a previous speaker,

442
00:24:23,320 --> 00:24:29,119
Speaker 1: John Williams. You say this our Star discussion has serious merit,

443
00:24:29,720 --> 00:24:34,800
Speaker 1: and you really extend out your view because of the

444
00:24:34,800 --> 00:24:38,159
Speaker 1: the neutral rate mystery that we have in two thousand

445
00:24:38,240 --> 00:24:40,760
Speaker 1: twenty three. That's right, Simon. I'll tell you it seems

446
00:24:40,800 --> 00:24:42,440
Speaker 1: like a lot of the dialogue right now is early

447
00:24:42,440 --> 00:24:44,639
Speaker 1: over whether the peak rade in the next six months

448
00:24:44,680 --> 00:24:46,760
Speaker 1: is four eighty to five oh five and so for

449
00:24:46,840 --> 00:24:48,359
Speaker 1: and I'm not sure it matters that much where they

450
00:24:48,359 --> 00:24:50,359
Speaker 1: did one hike or two hikes. I think the FETE

451
00:24:50,400 --> 00:24:52,560
Speaker 1: is pushing back against an amplitude higher than that. I

452
00:24:52,600 --> 00:24:54,720
Speaker 1: think with they're really trying to emphasize in the FETE

453
00:24:54,720 --> 00:24:57,080
Speaker 1: speak that we're hearing. We heard it from Williams this week,

454
00:24:57,119 --> 00:24:59,359
Speaker 1: we heard it from Waller is that one emphasized the

455
00:24:59,440 --> 00:25:02,560
Speaker 1: duration of a not interest rate sensitivity, but how long

456
00:25:02,600 --> 00:25:04,800
Speaker 1: they're going to stay at that peak rate, whatever number

457
00:25:04,800 --> 00:25:07,399
Speaker 1: it is. They're pushing back hard against the concept of

458
00:25:07,400 --> 00:25:09,399
Speaker 1: a pivot, the idea that they they're gonna have to

459
00:25:09,480 --> 00:25:11,680
Speaker 1: ease in July or August, and I think they want

460
00:25:11,680 --> 00:25:12,840
Speaker 1: to make that true. And I think that's what the

461
00:25:12,840 --> 00:25:14,720
Speaker 1: markets listening to right now, and that's why you're seeing

462
00:25:14,880 --> 00:25:16,840
Speaker 1: two years at four and a half percent. Long term

463
00:25:16,880 --> 00:25:19,680
Speaker 1: for the financial media is maybe three months. What you're

464
00:25:19,720 --> 00:25:23,199
Speaker 1: suggesting is you've got to extend out your view away

465
00:25:23,240 --> 00:25:27,520
Speaker 1: from the consensus call. What does DWS suggest you do

466
00:25:27,920 --> 00:25:31,880
Speaker 1: if you're extending out the FED dynamics very much. Our

467
00:25:31,880 --> 00:25:33,879
Speaker 1: clients are long term investors, were not looking for the

468
00:25:33,920 --> 00:25:35,960
Speaker 1: next tick in the tenure, and so what we're looking

469
00:25:36,000 --> 00:25:38,399
Speaker 1: at is not what we do call terminal peak. We're

470
00:25:38,440 --> 00:25:40,719
Speaker 1: looking at terminal floor. Where are we in the end

471
00:25:40,720 --> 00:25:43,480
Speaker 1: of twenty four What level does the FED get down

472
00:25:43,480 --> 00:25:46,600
Speaker 1: to and stop? And the model, Well, it was three

473
00:25:46,880 --> 00:25:49,320
Speaker 1: The market was talking about through three percentages recently as

474
00:25:49,320 --> 00:25:51,280
Speaker 1: a week ago, and with the unemployment number, and now

475
00:25:51,280 --> 00:25:53,639
Speaker 1: they've pushed that up maybe to three three and a quarter,

476
00:25:53,880 --> 00:25:55,920
Speaker 1: we think it's actually probably more like three and a half.

477
00:25:55,920 --> 00:25:58,280
Speaker 1: And then you layer in a seventy five basis point

478
00:25:58,320 --> 00:26:00,800
Speaker 1: two stands and you're talking about a tenure that's appropriately

479
00:26:00,800 --> 00:26:02,639
Speaker 1: more four four and a quarter. Okay, well, that's exactly

480
00:26:02,680 --> 00:26:04,199
Speaker 1: where I wanted to go, because this is really one

481
00:26:04,200 --> 00:26:05,720
Speaker 1: of the biggest shifts that I've seen in the past

482
00:26:05,720 --> 00:26:08,080
Speaker 1: couple of weeks. Every guest coming on and saying duration

483
00:26:08,119 --> 00:26:10,920
Speaker 1: has been overbid, and perhaps you want to fade that

484
00:26:10,960 --> 00:26:12,720
Speaker 1: a little bit, and you're seeing that on the margins.

485
00:26:12,720 --> 00:26:16,080
Speaker 1: We've got Deutsche Bank on the private bank side coming

486
00:26:16,080 --> 00:26:19,159
Speaker 1: out with a four point two percent tenure yield on

487
00:26:19,240 --> 00:26:22,560
Speaker 1: the treasury. You think it's the same. What's the path

488
00:26:22,600 --> 00:26:24,840
Speaker 1: to get there? Is it sudden or is it gradual?

489
00:26:24,960 --> 00:26:26,760
Speaker 1: I think it's gradual. I think a lot of it

490
00:26:26,800 --> 00:26:28,919
Speaker 1: is actually really If you're a leverage tenure player and

491
00:26:28,960 --> 00:26:31,200
Speaker 1: you're buying the current tenure, it's it was for a

492
00:26:31,240 --> 00:26:33,800
Speaker 1: fifty now four seventy, and you're gonna be financing that

493
00:26:33,840 --> 00:26:35,520
Speaker 1: at the sofa rate, which is going to be four

494
00:26:35,520 --> 00:26:38,320
Speaker 1: eighty after the March meeting. That's negative carry for persistent

495
00:26:38,359 --> 00:26:40,359
Speaker 1: period of time. You can do that if you believe

496
00:26:40,359 --> 00:26:42,240
Speaker 1: that the tenure rate is going to go down very quickly,

497
00:26:42,240 --> 00:26:45,240
Speaker 1: and you can get that negative carry back in price appreciation.

498
00:26:45,280 --> 00:26:47,359
Speaker 1: But if you're looking at several months of holding onto

499
00:26:47,359 --> 00:26:49,680
Speaker 1: that negative cary instrument, it only makes sense if you

500
00:26:49,720 --> 00:26:52,360
Speaker 1: see the tenure moving up to four percent at a minimum.

501
00:26:52,400 --> 00:26:54,679
Speaker 1: What does that mean for riskier credit? What does that

502
00:26:54,720 --> 00:26:56,919
Speaker 1: mean for safer credit? What does that mean for all

503
00:26:57,000 --> 00:26:59,240
Speaker 1: these instruments that have been priced off some sort of

504
00:26:59,280 --> 00:27:02,440
Speaker 1: stability yields that might not be so stable? Well from

505
00:27:02,440 --> 00:27:04,800
Speaker 1: one perspective, at least we're seeing volatility to come in

506
00:27:04,840 --> 00:27:10,520
Speaker 1: a lot. Ten year range was seventy basis points. We

507
00:27:10,520 --> 00:27:12,720
Speaker 1: think it's probably more like seventy five. You know. I

508
00:27:12,720 --> 00:27:14,520
Speaker 1: think three and a quarter to four percent is the range.

509
00:27:14,520 --> 00:27:16,520
Speaker 1: So the volatility coming down has always been supportive of

510
00:27:16,600 --> 00:27:19,240
Speaker 1: risk assets. That being said, we've had a very strong

511
00:27:19,320 --> 00:27:22,000
Speaker 1: rally in January, probably gone a little bit too far,

512
00:27:22,320 --> 00:27:24,720
Speaker 1: coming from two things. I think it's portfolio managers were

513
00:27:24,960 --> 00:27:27,720
Speaker 1: under positioned and risk at year end. Plus we're seeing

514
00:27:27,720 --> 00:27:30,160
Speaker 1: more economic strength than we expected. The market was expecting

515
00:27:30,160 --> 00:27:32,520
Speaker 1: a recession to start as soon as January, and it's

516
00:27:32,560 --> 00:27:34,199
Speaker 1: clear the data is coming in and saying no, we're

517
00:27:34,200 --> 00:27:37,000
Speaker 1: actually having a pretty decent January. There's a philosophical question

518
00:27:37,040 --> 00:27:39,000
Speaker 1: that when you start talking about a terminal rate around

519
00:27:39,000 --> 00:27:41,240
Speaker 1: three and a half percent for a prolonged period of time,

520
00:27:41,720 --> 00:27:43,880
Speaker 1: of the fate of companies that grew up in an

521
00:27:43,880 --> 00:27:48,120
Speaker 1: era of free money and it rationalization around their business

522
00:27:48,119 --> 00:27:50,840
Speaker 1: model at a time when people still expect default rates

523
00:27:50,880 --> 00:27:53,160
Speaker 1: to remain so low, do you think that people are

524
00:27:53,280 --> 00:27:57,480
Speaker 1: under estimating the level of defaults not necessarily later this year,

525
00:27:57,760 --> 00:28:00,760
Speaker 1: but next year the year after. If in straits remain

526
00:28:00,920 --> 00:28:03,040
Speaker 1: at the place where you expect them to be. I'm

527
00:28:03,080 --> 00:28:05,639
Speaker 1: not sure. Additional Hunter basis points, it's really going to

528
00:28:05,680 --> 00:28:08,480
Speaker 1: crush some some business models. Remember this is the way

529
00:28:08,520 --> 00:28:10,840
Speaker 1: things were for much of history until we got to

530
00:28:10,840 --> 00:28:14,200
Speaker 1: the Great Financial Crisis of two thousand and ten. Overall,

531
00:28:14,240 --> 00:28:16,600
Speaker 1: we're actually still still pretty sanguine abound around credit, and

532
00:28:16,600 --> 00:28:18,479
Speaker 1: that's one of the reasons why they think the economy

533
00:28:18,480 --> 00:28:21,000
Speaker 1: has done so well so far. Corporate balance sheets still

534
00:28:21,040 --> 00:28:23,240
Speaker 1: have some decent cash. Any treasure who didn't foresee this

535
00:28:23,280 --> 00:28:25,359
Speaker 1: recession ought to be taken out in a shot because

536
00:28:25,359 --> 00:28:28,719
Speaker 1: it's been so well advanced. I mean, seriously, we've been

537
00:28:28,760 --> 00:28:31,280
Speaker 1: talking recession for what six months now, and if you

538
00:28:31,320 --> 00:28:34,480
Speaker 1: haven't battened down the hatches, you should be out of

539
00:28:34,480 --> 00:28:40,840
Speaker 1: your job quite frankly. Right, let's rip up the script

540
00:28:40,960 --> 00:28:43,680
Speaker 1: right now, because it's just stables with the decades of

541
00:28:43,760 --> 00:28:49,120
Speaker 1: its day been there. But this is really important, and

542
00:28:49,120 --> 00:28:51,040
Speaker 1: I allude to this when I asked guys like you

543
00:28:51,200 --> 00:28:55,880
Speaker 1: about issuance. What's the Lemmings over the cliff attitude now

544
00:28:56,440 --> 00:28:59,720
Speaker 1: of CFOs in a meeting and they've got a restructure,

545
00:29:00,000 --> 00:29:03,240
Speaker 1: they're heavily debted, lightly indebted. What I forget about Warner

546
00:29:03,320 --> 00:29:07,120
Speaker 1: Brothers Discovery, which is a train wreck. What does CFOs

547
00:29:07,280 --> 00:29:10,560
Speaker 1: do here is Lemmings over the cliff right now, I'll

548
00:29:10,560 --> 00:29:12,880
Speaker 1: tell you what. Right now, the window is still open

549
00:29:12,920 --> 00:29:16,040
Speaker 1: for issuance. I know prices are still high exactly, but

550
00:29:16,480 --> 00:29:18,840
Speaker 1: they should be taking advantage of the market right now.

551
00:29:19,080 --> 00:29:21,120
Speaker 1: The high yeld market that we did eight billion this

552
00:29:21,160 --> 00:29:23,640
Speaker 1: week of issuance, that was a market that was shut down.

553
00:29:23,800 --> 00:29:26,400
Speaker 1: I think our audience doesn't understand this. And the idea

554
00:29:26,560 --> 00:29:30,640
Speaker 1: is the stuff is actually issued out. What's the dynamic

555
00:29:30,720 --> 00:29:34,960
Speaker 1: now on issuance of credit dynamic and duration dynamic. There's

556
00:29:35,120 --> 00:29:37,760
Speaker 1: there's an incredible bid. Retail money is flowing into high old,

557
00:29:37,800 --> 00:29:39,760
Speaker 1: institutional money is flowing into hig yield. Again, I think

558
00:29:39,760 --> 00:29:42,400
Speaker 1: it's a repositioning from being way short at your end.

559
00:29:42,640 --> 00:29:44,600
Speaker 1: But that window can shut fairly quickly. It was a

560
00:29:44,600 --> 00:29:46,960
Speaker 1: bias market and no one wanted sound the sound, and

561
00:29:47,000 --> 00:29:49,320
Speaker 1: now he's seeing the leftage start to move. Just in

562
00:29:49,400 --> 00:29:51,280
Speaker 1: terms of who's got the leftage, the bias or the

563
00:29:51,280 --> 00:29:55,360
Speaker 1: sound is absolutely absolutely we're seeing obviously deals come price

564
00:29:56,160 --> 00:29:59,880
Speaker 1: basis points through initial price stalk allocated at fifteen in

565
00:29:59,880 --> 00:30:01,840
Speaker 1: the they're breaking five return tighter at the break. This

566
00:30:01,880 --> 00:30:03,520
Speaker 1: is a credit market that's almost a little bit for

567
00:30:03,560 --> 00:30:05,920
Speaker 1: our thing. Wow, that's a massive change in the last

568
00:30:06,000 --> 00:30:07,920
Speaker 1: month or so huge. So when we started this year

569
00:30:07,920 --> 00:30:10,880
Speaker 1: and everyone said let's go, let's get ready juicy yields,

570
00:30:11,240 --> 00:30:13,520
Speaker 1: where are we a month later, same story or has

571
00:30:13,520 --> 00:30:15,640
Speaker 1: it changed much? Well? I think people are still looking

572
00:30:15,640 --> 00:30:18,000
Speaker 1: for five percent yields in the investment grade space, obviously

573
00:30:18,040 --> 00:30:19,640
Speaker 1: more like seven or eight and high yields. So there's

574
00:30:19,640 --> 00:30:22,200
Speaker 1: still a bit for it. But you were you were

575
00:30:22,200 --> 00:30:24,160
Speaker 1: the people raised lemmings, I think you could. You could

576
00:30:24,160 --> 00:30:26,400
Speaker 1: completely do a need degree turn if you see an

577
00:30:26,440 --> 00:30:28,360
Speaker 1: l P go down five return percent? Do you think

578
00:30:28,400 --> 00:30:30,600
Speaker 1: this speaks to the rate cut story that people see

579
00:30:30,640 --> 00:30:33,680
Speaker 1: this as a once in a once in a generation

580
00:30:33,720 --> 00:30:36,960
Speaker 1: opportunity to get five and just hold onto it for

581
00:30:37,000 --> 00:30:38,760
Speaker 1: a number of years. Does it speak to that they

582
00:30:38,800 --> 00:30:40,840
Speaker 1: just don't think this high rate ratime is gonna last.

583
00:30:40,880 --> 00:30:42,840
Speaker 1: I think for a lot of investors that's true. And

584
00:30:42,880 --> 00:30:45,400
Speaker 1: I think actually five percent longer term is a pretty

585
00:30:45,400 --> 00:30:47,720
Speaker 1: good yield. It disappeared probably two weeks ago, and now

586
00:30:47,760 --> 00:30:49,840
Speaker 1: it's coming back with the backup in the tenure. But

587
00:30:49,880 --> 00:30:51,680
Speaker 1: it looks pretty attractive long term. I have to think

588
00:30:51,680 --> 00:30:54,760
Speaker 1: that's that's true. Fascinating Greg Staples, thank you if DW

589
00:30:54,880 --> 00:31:07,480
Speaker 1: S Grip just bringing the bum market a lifetime. Emily

590
00:31:07,560 --> 00:31:10,920
Speaker 1: Rowland joins his co chief Investment Strategies that John Hancock Investment.

591
00:31:11,160 --> 00:31:13,400
Speaker 1: Are you going to rewrite this week in Emily or

592
00:31:13,440 --> 00:31:17,160
Speaker 1: do you have to wait till Tuesday one am to

593
00:31:17,240 --> 00:31:20,080
Speaker 1: do the rewrite? I feel like I should have some

594
00:31:20,160 --> 00:31:24,040
Speaker 1: good Valentine's Day puns ready for the inflation print on Tuesday,

595
00:31:24,040 --> 00:31:25,640
Speaker 1: So come back to me on that one. But it

596
00:31:25,720 --> 00:31:27,760
Speaker 1: is going to be really critical. And this week it

597
00:31:27,800 --> 00:31:30,760
Speaker 1: feels like there's been a big shift in the mood

598
00:31:30,840 --> 00:31:33,880
Speaker 1: music as you would say, Tom, and we've had higher

599
00:31:33,920 --> 00:31:37,720
Speaker 1: bond yields, we've had oil prices rising, and most importantly,

600
00:31:37,760 --> 00:31:40,640
Speaker 1: the dollar strengthening. You know, you think about these moves

601
00:31:40,680 --> 00:31:44,400
Speaker 1: and currency, the dollar has been at the epicenter of

602
00:31:44,640 --> 00:31:47,160
Speaker 1: every move in the markets. The weaker dollar trend that

603
00:31:47,240 --> 00:31:50,560
Speaker 1: started in the fourth quarter really spurring this risk on rally.

604
00:31:50,960 --> 00:31:53,320
Speaker 1: And over the last week that narrative has changed a

605
00:31:53,360 --> 00:31:55,560
Speaker 1: bit here. So we think that that's gonna be really

606
00:31:55,600 --> 00:31:58,320
Speaker 1: critical to watch. Inflation is going to be huge on

607
00:31:58,360 --> 00:32:01,240
Speaker 1: Tuesday in terms of the way it impacts bond yields.

608
00:32:01,280 --> 00:32:04,400
Speaker 1: From here, you look at corporate earnings differently, but the

609
00:32:04,440 --> 00:32:09,520
Speaker 1: basic idea here of corporate earnings and the resiliency forward

610
00:32:09,680 --> 00:32:12,760
Speaker 1: isn't there. By the way, I want to make a

611
00:32:12,800 --> 00:32:15,120
Speaker 1: comment on what John just said about earnings. It is

612
00:32:15,160 --> 00:32:19,440
Speaker 1: amazing that some of the huge earnings misses of some

613
00:32:19,520 --> 00:32:22,160
Speaker 1: of the world's largest companies like hasn't even been a

614
00:32:22,200 --> 00:32:25,120
Speaker 1: big story um over the last few weeks. This has

615
00:32:25,160 --> 00:32:28,800
Speaker 1: been an entirely macro driven market. So when we look

616
00:32:28,800 --> 00:32:31,920
Speaker 1: at earnings underneath the hood, yeah, negative five cent se

617
00:32:32,680 --> 00:32:36,800
Speaker 1: companies having now reported for the fourth quarter, it's okay,

618
00:32:36,840 --> 00:32:39,360
Speaker 1: but some of the themes are really critical. You know,

619
00:32:39,640 --> 00:32:42,840
Speaker 1: revenue growth was the major driver of earnings. It's sort

620
00:32:42,880 --> 00:32:46,080
Speaker 1: of saved the day for earnings in two. But now

621
00:32:46,080 --> 00:32:49,520
Speaker 1: we're hearing more about margin pressure. We're hearing about companies

622
00:32:49,560 --> 00:32:52,960
Speaker 1: dealing with that via layoffs. You know, buy backs are

623
00:32:53,000 --> 00:32:55,200
Speaker 1: sort of back in the narrative. So you know, we

624
00:32:55,280 --> 00:32:57,240
Speaker 1: think this is going to be a tough environment for

625
00:32:57,280 --> 00:33:01,040
Speaker 1: companies going forward. Costs or elevated, especially the cost of

626
00:33:01,120 --> 00:33:04,040
Speaker 1: capital having risen a lot that is yet to be

627
00:33:04,080 --> 00:33:08,280
Speaker 1: absorbed and top line growth slowing meaningfully. Is consumers start

628
00:33:08,320 --> 00:33:11,560
Speaker 1: to retrench, companies have too much stuff. We think there's

629
00:33:11,600 --> 00:33:15,120
Speaker 1: going to be a major war on margins in so Emily.

630
00:33:15,120 --> 00:33:17,560
Speaker 1: What explains the rally today? And you think we all

631
00:33:17,600 --> 00:33:20,120
Speaker 1: run the risk of assigning some kind of fundamental narrative

632
00:33:20,160 --> 00:33:23,560
Speaker 1: to a story that doesn't deserve one. It's just so hard.

633
00:33:23,680 --> 00:33:26,760
Speaker 1: It's not based on fundamentals. It's so hard to identify.

634
00:33:26,800 --> 00:33:28,880
Speaker 1: And you all have been talking a lot about Europe

635
00:33:28,920 --> 00:33:31,440
Speaker 1: this morning. It's like, you know, I think about it before,

636
00:33:31,600 --> 00:33:34,640
Speaker 1: higher inflation seemed good for Europe because it was better

637
00:33:34,680 --> 00:33:37,440
Speaker 1: for the euro and better for European businesses. Then we

638
00:33:37,520 --> 00:33:41,480
Speaker 1: get this miss on German inflation, and that's good for Europe.

639
00:33:41,880 --> 00:33:45,560
Speaker 1: You know, stocks are reacting positively either way. It's sort

640
00:33:45,560 --> 00:33:49,240
Speaker 1: of this odd win win situation that's hard to pin down.

641
00:33:49,240 --> 00:33:51,840
Speaker 1: And there could be an element here of a technical rally.

642
00:33:52,240 --> 00:33:56,400
Speaker 1: Positioning changes, you know, investors realizing that they didn't known

643
00:33:56,480 --> 00:33:59,960
Speaker 1: enough Europe. They're short covering, and now sentiments taken whole,

644
00:34:00,160 --> 00:34:03,600
Speaker 1: momentums taken hold, and a lot of investors moving to

645
00:34:03,720 --> 00:34:05,840
Speaker 1: that part of the market. You know, we haven't fully

646
00:34:05,840 --> 00:34:10,040
Speaker 1: embraced that trade. Admittedly, we've been overweight domestic equities like

647
00:34:10,080 --> 00:34:13,000
Speaker 1: your previous guests, and that's the reason for that. It's

648
00:34:13,040 --> 00:34:16,399
Speaker 1: because it's just a higher quality market, better earning more

649
00:34:16,480 --> 00:34:19,279
Speaker 1: companies with great balance sheets, lots of cash on their

650
00:34:19,280 --> 00:34:22,320
Speaker 1: balance sheets, a limited need to tap the capital markets

651
00:34:22,320 --> 00:34:24,279
Speaker 1: in order to grow. That's where we want to be

652
00:34:24,360 --> 00:34:27,320
Speaker 1: positioned in this environment. Coming into Emily, A lot of

653
00:34:27,320 --> 00:34:28,640
Speaker 1: people are saying this is going to be the year

654
00:34:28,680 --> 00:34:31,000
Speaker 1: of active management. We've been hearing about that a lot.

655
00:34:31,520 --> 00:34:35,240
Speaker 1: I'm wondering about the messaging around an active portfolio, about

656
00:34:35,239 --> 00:34:38,120
Speaker 1: whether this is about avoiding losses or about whether this

657
00:34:38,239 --> 00:34:41,480
Speaker 1: is delivering outsized gains and what that tells us about

658
00:34:41,480 --> 00:34:46,359
Speaker 1: where the sentiment on the risk reward continuum really has shifted. Yeah,

659
00:34:46,480 --> 00:34:49,640
Speaker 1: to us, it's all about risk management and this environment.

660
00:34:49,680 --> 00:34:53,080
Speaker 1: And it's amazing to see the kind of re emerging,

661
00:34:53,120 --> 00:34:55,880
Speaker 1: the emergence of the risk on trade, whether it's you know,

662
00:34:55,960 --> 00:34:59,560
Speaker 1: small cap equities, cyclical stocks in Europe. You know, waking

663
00:34:59,640 --> 00:35:02,000
Speaker 1: up in the morning and hearing the headlines around meme

664
00:35:02,120 --> 00:35:04,920
Speaker 1: stocks rallying again, you've got to thank yourself, Oh my gosh,

665
00:35:04,960 --> 00:35:07,839
Speaker 1: we're doing this again. Uh, you know, so investors are

666
00:35:07,880 --> 00:35:10,759
Speaker 1: really moving back in this direction of taking risk, and

667
00:35:10,800 --> 00:35:15,080
Speaker 1: there's always a sort of celebration of the FED pivot

668
00:35:15,200 --> 00:35:18,719
Speaker 1: or this idea that the inflation is receding in the

669
00:35:18,800 --> 00:35:20,520
Speaker 1: in the FED can kind of see the light at

670
00:35:20,560 --> 00:35:23,000
Speaker 1: the end of the tunnel in order to pause. And

671
00:35:23,120 --> 00:35:26,200
Speaker 1: and that's really kind of emblematic of every cycle. You

672
00:35:26,280 --> 00:35:28,680
Speaker 1: sort of see this play out again and again where

673
00:35:28,719 --> 00:35:31,960
Speaker 1: soft landing hopes get priced in and then ultimately they're

674
00:35:32,080 --> 00:35:34,960
Speaker 1: dashed and and and unfortunately, we think that is the

675
00:35:35,080 --> 00:35:38,319
Speaker 1: narrative this time is the lagged impact of central bank

676
00:35:38,360 --> 00:35:41,120
Speaker 1: tightening globally is going to start to bite here. So

677
00:35:41,200 --> 00:35:44,320
Speaker 1: we would be careful about reaching for the riskier corners

678
00:35:44,400 --> 00:35:47,040
Speaker 1: or pockets of the market here, and we would be

679
00:35:47,160 --> 00:35:53,239
Speaker 1: redeploying assets and higher quality, more defensive areas. Put a

680
00:35:53,280 --> 00:35:55,239
Speaker 1: Super Bowl pick for some day. I don't know what

681
00:35:55,320 --> 00:35:58,480
Speaker 1: I'm doing. Oh my gosh, I don't, but I have

682
00:35:58,600 --> 00:36:01,680
Speaker 1: really good squares, so excited. I got all the heroes

683
00:36:01,719 --> 00:36:09,440
Speaker 1: and threes. Yeah, I'm the bracket. And what you need

684
00:36:09,480 --> 00:36:13,000
Speaker 1: to know is Johnny Hancock has two skyscrapers. There's New

685
00:36:13,080 --> 00:36:16,680
Speaker 1: Johnny Hancock and old john Hancock. Everybody working in old

686
00:36:16,760 --> 00:36:19,759
Speaker 1: John Hancock has no clue what they're talking about. And

687
00:36:19,760 --> 00:36:21,879
Speaker 1: a new John Hancocks where all the young hit people

688
00:36:21,920 --> 00:36:25,759
Speaker 1: like Emily and they do these betting pools where it's

689
00:36:25,760 --> 00:36:28,840
Speaker 1: a sheet of paper and it's squares, you know, and

690
00:36:29,160 --> 00:36:31,840
Speaker 1: then you bet and they're all very little bit. But

691
00:36:31,920 --> 00:36:33,319
Speaker 1: it's like, where are we at the end of the

692
00:36:33,320 --> 00:36:35,560
Speaker 1: first quarter? Where are we at the end? They're all

693
00:36:35,719 --> 00:36:38,040
Speaker 1: very little bit and you put up, you know, a

694
00:36:38,080 --> 00:36:41,400
Speaker 1: small amount of money. Emily's popping what a thousand dollars

695
00:36:41,400 --> 00:36:45,080
Speaker 1: per square? I think she's that last year. I think

696
00:36:45,120 --> 00:36:48,200
Speaker 1: I still have them. So how much was it? It

697
00:36:48,320 --> 00:36:57,800
Speaker 1: was a hundred bucks of square? Oh my goodness. Nice

698
00:36:57,880 --> 00:37:01,440
Speaker 1: compliance Save Emily on a rod and at John Hancock

699
00:37:01,520 --> 00:37:07,120
Speaker 1: Investment Management. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify,

700
00:37:07,200 --> 00:37:11,120
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701
00:37:11,160 --> 00:37:15,200
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702
00:37:15,320 --> 00:37:18,799
Speaker 1: the I Heart Radio app, tune In, and the Bloomberg

703
00:37:18,840 --> 00:37:22,880
Speaker 1: Business app. You can watch us live. I'm Bloomberg Television

704
00:37:22,960 --> 00:37:27,239
Speaker 1: and always on the Bloomberg Terminal. Thanks for listening. I'm

705
00:37:27,280 --> 00:37:29,840
Speaker 1: Tom Keane and this is Bloomberg,