1 00:00:00,080 --> 00:00:13,040 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,960 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg to 5 00:00:33,000 --> 00:00:35,239 Speaker 1: talk about the regime, we can welcome in here in 6 00:00:35,240 --> 00:00:39,159 Speaker 1: New York, YenS Norvik, Exante data founder and CEO, who 7 00:00:39,280 --> 00:00:41,880 Speaker 1: joins us around a table right now. It's great to 8 00:00:41,920 --> 00:00:45,159 Speaker 1: have you with us. Thank you. It's still goldilocks or 9 00:00:45,200 --> 00:00:48,800 Speaker 1: a thing's changing. Well. People definitely got very worried about 10 00:00:48,880 --> 00:00:51,879 Speaker 1: the spike and wage growth the previous months, so the 11 00:00:51,880 --> 00:00:55,160 Speaker 1: fact that that's coming down is important. But obviously we 12 00:00:55,200 --> 00:00:57,120 Speaker 1: have a lot of noise in this data. There's something 13 00:00:57,120 --> 00:00:59,800 Speaker 1: about the hours work swinging up and down that is 14 00:00:59,800 --> 00:01:03,880 Speaker 1: in in these numbers in both directions. So I personally 15 00:01:03,880 --> 00:01:05,840 Speaker 1: think it's important to look ahead, like what is the 16 00:01:05,880 --> 00:01:10,640 Speaker 1: trajectory of the economy. And what is really interesting is 17 00:01:10,720 --> 00:01:13,240 Speaker 1: that they're not only have we got that the tax 18 00:01:13,319 --> 00:01:16,080 Speaker 1: cut that is sort of working its way through its economy, 19 00:01:16,120 --> 00:01:19,560 Speaker 1: but we have very very significant increases in physical spending 20 00:01:20,000 --> 00:01:22,120 Speaker 1: in the second half of that year of this year, 21 00:01:22,200 --> 00:01:24,720 Speaker 1: and actually first half from next year as well. That's 22 00:01:24,720 --> 00:01:26,400 Speaker 1: going to add a lot to growth. Right, So we're 23 00:01:26,440 --> 00:01:28,520 Speaker 1: looking at what the economy is are doing now, but 24 00:01:28,640 --> 00:01:30,759 Speaker 1: we know it's going to shift up a gear pretty 25 00:01:30,840 --> 00:01:34,080 Speaker 1: much over the next twelve months and it will be 26 00:01:34,200 --> 00:01:37,160 Speaker 1: very very interesting to see how the Fed reacts that. 27 00:01:37,240 --> 00:01:40,720 Speaker 1: Are they going to sort of be reacting slowly or 28 00:01:40,760 --> 00:01:42,240 Speaker 1: they're going to say, okay, we need to be a 29 00:01:42,280 --> 00:01:44,360 Speaker 1: bit more proactive. That that's the key. So I can't 30 00:01:44,400 --> 00:01:46,240 Speaker 1: tell you how many research nights have read this morning 31 00:01:46,280 --> 00:01:48,440 Speaker 1: with the word goldilocks in it. Kitchen Ciber at sock 32 00:01:48,520 --> 00:01:50,760 Speaker 1: Jam with the with the title of his research this morning, 33 00:01:50,800 --> 00:01:53,960 Speaker 1: who spiked goldilocks? Is Porridge and he's talking about the 34 00:01:53,960 --> 00:01:57,080 Speaker 1: fiscal stimulus that come from Washington, d C. So help 35 00:01:57,120 --> 00:01:59,440 Speaker 1: me understand what this means for the Federal Reserve. They've 36 00:01:59,440 --> 00:02:02,120 Speaker 1: had a raised for the last few years of output rich, 37 00:02:02,520 --> 00:02:05,560 Speaker 1: inflation poor, and then all of a sudden they've got 38 00:02:05,560 --> 00:02:08,680 Speaker 1: to start thinking about capacity constraints and what happens when 39 00:02:09,080 --> 00:02:11,480 Speaker 1: the fiscal stimulus really starts to buy What is the 40 00:02:11,480 --> 00:02:14,080 Speaker 1: prudent monetary policy response to that. You've got years on 41 00:02:14,120 --> 00:02:17,440 Speaker 1: your side of just output rich inflation poor, but the 42 00:02:17,440 --> 00:02:20,120 Speaker 1: real prospect that things are starting to shift. Well, I 43 00:02:20,160 --> 00:02:23,639 Speaker 1: think that the prudent monitory policy is to really keep 44 00:02:23,680 --> 00:02:26,840 Speaker 1: your options open. So we were on TV like a 45 00:02:26,880 --> 00:02:28,960 Speaker 1: couple of minutes ago, and we talked about, Okay, should 46 00:02:28,960 --> 00:02:33,040 Speaker 1: the FED really make every single FED meeting live? I 47 00:02:33,080 --> 00:02:35,000 Speaker 1: think that would be a good option here, Like they 48 00:02:35,080 --> 00:02:38,080 Speaker 1: need to have the ability to step up the pace 49 00:02:38,120 --> 00:02:41,560 Speaker 1: of tightening if they see it. And one way of 50 00:02:41,560 --> 00:02:45,360 Speaker 1: of of sort of bring that optionality into play is 51 00:02:45,400 --> 00:02:48,600 Speaker 1: to make every single meeting a line meeting with the 52 00:02:48,639 --> 00:02:51,480 Speaker 1: press conference. So that would be one thing. The other 53 00:02:51,520 --> 00:02:54,600 Speaker 1: thing I think is to do with the signals that 54 00:02:54,639 --> 00:02:57,280 Speaker 1: they send a little bit further ahead. I think increasing 55 00:02:57,320 --> 00:03:00,600 Speaker 1: the pace of hikes beyond for a year right now 56 00:03:00,639 --> 00:03:02,880 Speaker 1: will be dramatic step, but they can sick on okay 57 00:03:02,960 --> 00:03:05,920 Speaker 1: next year, next year. We want to keep our options open. 58 00:03:05,960 --> 00:03:08,400 Speaker 1: We don't know exactly where our star is. It's a 59 00:03:08,480 --> 00:03:11,240 Speaker 1: very ecademic concept, so perhaps we need to go longer 60 00:03:11,520 --> 00:03:13,680 Speaker 1: than people anticipating. I think that's the kind of forward 61 00:03:13,680 --> 00:03:16,200 Speaker 1: guidance they can send now, and I think that would 62 00:03:16,360 --> 00:03:20,800 Speaker 1: soon be appropriate. Within the forward guidance is a Fed 63 00:03:21,080 --> 00:03:24,000 Speaker 1: that has to act. Everybody seems to agree on that. 64 00:03:24,560 --> 00:03:28,280 Speaker 1: How far behind are they the real rate? The Fed 65 00:03:28,320 --> 00:03:33,200 Speaker 1: funds real rate is still negative? Right yeah? Um. I 66 00:03:33,240 --> 00:03:36,800 Speaker 1: think the problem is that we get so tied to 67 00:03:37,080 --> 00:03:42,240 Speaker 1: this very academic way of analyzing what the equilibrium rate is. 68 00:03:42,880 --> 00:03:47,520 Speaker 1: This our star concept is something that is incredibly difficult 69 00:03:47,560 --> 00:03:50,160 Speaker 1: to calculate, and it's easy to say, Okay, here's a 70 00:03:50,160 --> 00:03:52,800 Speaker 1: good academic paper. Now I'm going to believe there's number, 71 00:03:53,200 --> 00:03:56,760 Speaker 1: but reality nobody knows. So I think this is probably 72 00:03:56,800 --> 00:03:58,560 Speaker 1: one area where we can go back to the Green 73 00:03:58,600 --> 00:04:01,880 Speaker 1: Splan days and really go into the minutia and say, okay, 74 00:04:01,960 --> 00:04:06,240 Speaker 1: how is each sector really responding to these slightly higher rates. 75 00:04:06,240 --> 00:04:08,880 Speaker 1: I've heard this from other people. What what's you're reading 76 00:04:08,960 --> 00:04:10,680 Speaker 1: of that? I mean, you're not out there looking at 77 00:04:10,720 --> 00:04:14,960 Speaker 1: every sector, but what you're reading of each in every sector? 78 00:04:15,120 --> 00:04:18,839 Speaker 1: Right now? Because John and I get mail when we 79 00:04:18,920 --> 00:04:22,080 Speaker 1: say that it's a fully employed America, our our audience 80 00:04:22,160 --> 00:04:25,279 Speaker 1: thinks we're nuts. Well we can we can see the 81 00:04:26,640 --> 00:04:29,880 Speaker 1: is definitely a big move in the participation right in 82 00:04:29,880 --> 00:04:32,480 Speaker 1: the in the latest numbers. So that's very very interesting, 83 00:04:33,120 --> 00:04:38,159 Speaker 1: and I guess Yellen was was very vocal a little 84 00:04:38,160 --> 00:04:41,039 Speaker 1: while ago about saying, Okay, we need to push this 85 00:04:41,160 --> 00:04:44,280 Speaker 1: economy harder to see okay, because there's some kind of 86 00:04:44,279 --> 00:04:47,000 Speaker 1: reverses the races we can bring into play here. And 87 00:04:47,040 --> 00:04:50,960 Speaker 1: perhaps she was right, but I think in terms of 88 00:04:51,000 --> 00:04:54,320 Speaker 1: evaluating what's going on with the economy, it's aweso important 89 00:04:54,360 --> 00:04:57,159 Speaker 1: to think about, Okay, the various sectors, can they actually 90 00:04:57,200 --> 00:05:00,840 Speaker 1: cope with higher rates? And what It's very interesting if 91 00:05:00,839 --> 00:05:03,240 Speaker 1: you look at the sort of debt levels, right, there's 92 00:05:03,279 --> 00:05:05,800 Speaker 1: often a lot of focus on the fact that, Okay, 93 00:05:05,839 --> 00:05:08,479 Speaker 1: we have a fishcal problem, we have a dead problem 94 00:05:08,600 --> 00:05:11,080 Speaker 1: in in the government space. But if you look at 95 00:05:11,080 --> 00:05:14,039 Speaker 1: the household sector, we actually have less debt relative to 96 00:05:14,080 --> 00:05:16,520 Speaker 1: disposable income than we had the before the crisis. So 97 00:05:16,560 --> 00:05:18,800 Speaker 1: that's a sector that I think can be quite resilient. 98 00:05:19,839 --> 00:05:23,240 Speaker 1: So I think it's very very hard to to say okay, 99 00:05:23,440 --> 00:05:27,119 Speaker 1: or a star is real rate a little bit above zero, 100 00:05:27,839 --> 00:05:30,960 Speaker 1: maybe we can get too substantially higher normal rates than 101 00:05:30,960 --> 00:05:33,200 Speaker 1: people are anticipating. Now. Well, yes, I think there's two 102 00:05:33,240 --> 00:05:35,080 Speaker 1: ways of looking at this. And Danny blanche Flower of 103 00:05:35,160 --> 00:05:37,800 Speaker 1: Dartmouth was messaging me over the weekend. Of course he 104 00:05:37,880 --> 00:05:40,000 Speaker 1: would be very dovish if he was on the Federal 105 00:05:40,040 --> 00:05:42,560 Speaker 1: Reserve and the data backs him up. The participation rate 106 00:05:42,600 --> 00:05:46,040 Speaker 1: is rising. This is an economy still printing three hundred 107 00:05:46,080 --> 00:05:49,440 Speaker 1: thousand jobs apparently in a given month. We've been looking 108 00:05:49,440 --> 00:05:52,480 Speaker 1: at two d K every other month seemingly, and yet 109 00:05:52,520 --> 00:05:55,000 Speaker 1: wage growth isn't picking up. So there is a dovish 110 00:05:55,040 --> 00:05:56,720 Speaker 1: picture you can paint of the labor market. At the 111 00:05:56,760 --> 00:05:59,120 Speaker 1: same time, there's another way of just looking at this. Practically, 112 00:05:59,520 --> 00:06:02,120 Speaker 1: should rights at the FETE big around one and a 113 00:06:02,120 --> 00:06:05,960 Speaker 1: half percent near an emergency setting when we this late 114 00:06:06,000 --> 00:06:09,320 Speaker 1: in the psycho and GDP is as high as it is. Yeah, Now, 115 00:06:09,360 --> 00:06:13,520 Speaker 1: I think this is the big debate, Like we can 116 00:06:13,560 --> 00:06:17,000 Speaker 1: discuss the manusha about okay, what is the wage growth 117 00:06:17,120 --> 00:06:19,240 Speaker 1: number now? But the really big picture is when you 118 00:06:19,279 --> 00:06:22,599 Speaker 1: set monitored policy, are you going to set it based 119 00:06:22,720 --> 00:06:26,120 Speaker 1: on whether it's important that inflation is one point nine 120 00:06:26,200 --> 00:06:28,320 Speaker 1: or two point zero or you're gonna take a bigger 121 00:06:28,320 --> 00:06:30,720 Speaker 1: picture where you say, Okay, we have a strong economy 122 00:06:30,960 --> 00:06:32,760 Speaker 1: and we want to have real rates. That's going to 123 00:06:32,880 --> 00:06:35,159 Speaker 1: sort of create a degree of stability for the long 124 00:06:35,279 --> 00:06:38,480 Speaker 1: term in the financial system. And I think we as 125 00:06:38,480 --> 00:06:41,120 Speaker 1: you look around the world. You're seeing some extreme examples 126 00:06:41,160 --> 00:06:44,880 Speaker 1: of central banks that get extremely mathematical about getting to 127 00:06:44,960 --> 00:06:49,160 Speaker 1: two point zero, and they are actually totally not focusing 128 00:06:49,160 --> 00:06:51,680 Speaker 1: on this bigger picture. Well, the bigger picture here you 129 00:06:51,800 --> 00:06:54,200 Speaker 1: said this earlier, the idea that we're going to see 130 00:06:54,240 --> 00:06:58,119 Speaker 1: substantial currency movement. Give us an example of a pair 131 00:06:58,920 --> 00:07:02,560 Speaker 1: where we're gonna see figure movement that somebody can enjoy 132 00:07:02,839 --> 00:07:06,640 Speaker 1: making or losing money on today. Well, so we've seen 133 00:07:06,760 --> 00:07:10,000 Speaker 1: actually pretty big moves in two thousand eighteen. Right, We've 134 00:07:10,040 --> 00:07:13,280 Speaker 1: had dolly in from one thirteen down to one of six. 135 00:07:13,560 --> 00:07:16,320 Speaker 1: That's a pretty big move. And does it go further? 136 00:07:16,600 --> 00:07:19,480 Speaker 1: It means it gonna go under a hundred, I think. 137 00:07:19,880 --> 00:07:23,520 Speaker 1: So I'm obsessed with capital flows. I spent the last 138 00:07:23,560 --> 00:07:26,880 Speaker 1: week just crunching all the Japanese capital flows because this 139 00:07:26,960 --> 00:07:29,320 Speaker 1: is what our clients are very very focused on. Now, 140 00:07:30,680 --> 00:07:33,080 Speaker 1: I think we're actually going to take a bit of 141 00:07:33,080 --> 00:07:34,960 Speaker 1: a breather now. I think there's some of the forces 142 00:07:35,000 --> 00:07:36,720 Speaker 1: that pushed it very fast. They're going to take a breather. 143 00:07:36,840 --> 00:07:39,880 Speaker 1: But I think the next big pair to focus on 144 00:07:40,120 --> 00:07:43,440 Speaker 1: is sort of this thing about NAFTA versus China. We've 145 00:07:43,440 --> 00:07:46,240 Speaker 1: had all the tension around the NAFTA currency in Mexico 146 00:07:46,520 --> 00:07:49,880 Speaker 1: and Canada. The next piece of tension is going to 147 00:07:49,920 --> 00:07:52,200 Speaker 1: be China, so I think there can be some very 148 00:07:52,240 --> 00:07:55,720 Speaker 1: interesting movement there where there's relaxation around the NAFTA currencies 149 00:07:55,800 --> 00:08:16,360 Speaker 1: and more pressure on Asian currencies. With EXE data, John, 150 00:08:16,400 --> 00:08:19,720 Speaker 1: why don't you bring in our next guest who just 151 00:08:19,800 --> 00:08:22,000 Speaker 1: had he added to the g d P of the 152 00:08:22,000 --> 00:08:25,080 Speaker 1: Greater New York Area that because he had to get 153 00:08:25,120 --> 00:08:29,160 Speaker 1: a new mantle for his fireplace. His house is so big, 154 00:08:29,160 --> 00:08:31,760 Speaker 1: he has like four fireplaces in it, and we bring 155 00:08:31,760 --> 00:08:34,080 Speaker 1: it in the morning staff fixed in kind Manager of 156 00:08:34,080 --> 00:08:35,959 Speaker 1: the Year. The trophy was so big he had to 157 00:08:36,000 --> 00:08:39,120 Speaker 1: get you know, he had scaffolding up until they replaced 158 00:08:39,120 --> 00:08:44,320 Speaker 1: it with a marble buttressed. Part of that PAGM team 159 00:08:44,480 --> 00:08:48,480 Speaker 1: is Greg Paid, his managing director and senior investment officer. Greg. 160 00:08:48,480 --> 00:08:50,280 Speaker 1: It's always great to get you on a program to 161 00:08:50,280 --> 00:08:53,439 Speaker 1: to get your time. Really fascinating. The compare and contrast 162 00:08:53,559 --> 00:08:56,720 Speaker 1: between the January jobs report and a February payrolls report. 163 00:08:56,760 --> 00:08:59,679 Speaker 1: The fear that the January payrolls report put into this 164 00:08:59,720 --> 00:09:03,079 Speaker 1: mark kid next to the camp that was ejected into 165 00:09:03,080 --> 00:09:06,080 Speaker 1: this market for risk assets on Friday following the February 166 00:09:06,080 --> 00:09:08,160 Speaker 1: pay rolls report, where's the truth one of the other 167 00:09:08,200 --> 00:09:11,760 Speaker 1: somewhere in between. Greg, Yeah, the lesson is let's not 168 00:09:11,840 --> 00:09:15,960 Speaker 1: get um too excited one way or the other month 169 00:09:16,000 --> 00:09:18,360 Speaker 1: to month. I think we need to look at some 170 00:09:18,440 --> 00:09:21,240 Speaker 1: of the longer trends. And you know, January was such 171 00:09:21,280 --> 00:09:25,400 Speaker 1: an important set of data. It really kind of catalyzed 172 00:09:25,520 --> 00:09:28,840 Speaker 1: a new regime in many different respects of higher yields, 173 00:09:28,920 --> 00:09:32,439 Speaker 1: inflation getting out of controls on and so forth. UH, 174 00:09:32,480 --> 00:09:36,840 Speaker 1: and the last UH and the last release on Friday 175 00:09:37,000 --> 00:09:39,120 Speaker 1: really just threw cold water on it. So I think 176 00:09:39,120 --> 00:09:41,840 Speaker 1: the message, at least at least for us a p gym, is, 177 00:09:42,200 --> 00:09:44,360 Speaker 1: you know, let's not get overly excited one way or 178 00:09:44,400 --> 00:09:46,400 Speaker 1: the other. Let's look at the broader set of data 179 00:09:46,440 --> 00:09:49,040 Speaker 1: and the broader trends. And when you look at that, 180 00:09:49,200 --> 00:09:52,920 Speaker 1: it's clear that you're seeing some firming on the inflation side. 181 00:09:53,440 --> 00:09:57,280 Speaker 1: But as far as UH, you know, runaway wage or 182 00:09:57,480 --> 00:10:00,920 Speaker 1: kind of broad based inflation, I think it's to premature 183 00:10:01,040 --> 00:10:03,440 Speaker 1: to be called for that. So to that point, Greg, 184 00:10:03,480 --> 00:10:07,280 Speaker 1: and we're seeing the shifting into a new regime or 185 00:10:07,320 --> 00:10:09,640 Speaker 1: is it just the fear of a shift to a 186 00:10:09,640 --> 00:10:13,199 Speaker 1: new regime that has gripped markets to some extent. I 187 00:10:13,240 --> 00:10:16,000 Speaker 1: think it's more fear than reality at this point. Uh. 188 00:10:16,040 --> 00:10:19,000 Speaker 1: You know, I do know that markets trade expectations. Uh, 189 00:10:19,080 --> 00:10:22,359 Speaker 1: and so something that we watch very closely is inflation expectations. 190 00:10:22,360 --> 00:10:25,439 Speaker 1: But at some point the expectations have to match kind 191 00:10:25,480 --> 00:10:30,360 Speaker 1: of underlying hard data. Uh. And I think that became 192 00:10:30,400 --> 00:10:35,680 Speaker 1: somewhat disconnected the past several months or so. Um. So 193 00:10:36,320 --> 00:10:39,240 Speaker 1: you know, you know, to us, as steady as she goes? Uh, 194 00:10:39,400 --> 00:10:43,000 Speaker 1: you think the Fed continues to move uh, you know, 195 00:10:43,080 --> 00:10:46,559 Speaker 1: three times this year maybe for two thousand and nineteen 196 00:10:46,679 --> 00:10:49,680 Speaker 1: is the bigger question. The markets are still pricing in 197 00:10:50,360 --> 00:10:52,880 Speaker 1: just one in a quarter for two thousand and nineteen. 198 00:10:53,960 --> 00:10:56,520 Speaker 1: But um, yeah, I think it's steady as you go. 199 00:10:56,559 --> 00:11:01,160 Speaker 1: It's quite Frankly, Jonathan greg what was the distinction that 200 00:11:01,400 --> 00:11:05,920 Speaker 1: made for your outstanding two thousand seventeen? What was the 201 00:11:06,040 --> 00:11:10,800 Speaker 1: strategic decision you made within your fixed income portfolios to 202 00:11:10,960 --> 00:11:16,440 Speaker 1: outpace the easy to find average. Yeah, so last year 203 00:11:16,960 --> 00:11:19,400 Speaker 1: was uh, you know, gosh, you know, we're talking a 204 00:11:19,440 --> 00:11:21,560 Speaker 1: lot about last year. This year is much much harder. 205 00:11:21,559 --> 00:11:24,480 Speaker 1: I will say, last year, what I think the market's 206 00:11:24,480 --> 00:11:29,240 Speaker 1: got really excited over the new administration coming in, yields 207 00:11:29,280 --> 00:11:33,360 Speaker 1: really spice higher, UH and we felt like, uh, a 208 00:11:33,440 --> 00:11:36,120 Speaker 1: lot of that was not going to come to fruition, 209 00:11:36,200 --> 00:11:38,160 Speaker 1: and in fact that played out. I think this year 210 00:11:38,240 --> 00:11:41,719 Speaker 1: is very different though, as you are seeing tangible things happening. Right, 211 00:11:41,760 --> 00:11:45,400 Speaker 1: you have seen a continued firming of the labor market 212 00:11:45,200 --> 00:11:47,640 Speaker 1: at a trend that has been in place for you know, 213 00:11:47,679 --> 00:11:51,920 Speaker 1: many years of course. But but but you have more 214 00:11:51,960 --> 00:11:55,400 Speaker 1: pro growth policies and you have a tighter labor market, 215 00:11:55,480 --> 00:11:59,800 Speaker 1: even though the jobs data report UH digit suggest and 216 00:11:59,840 --> 00:12:04,800 Speaker 1: right fully so, that there's more um kind of sideline 217 00:12:04,800 --> 00:12:07,719 Speaker 1: workers than many people envisioned. But I think last year 218 00:12:07,840 --> 00:12:12,840 Speaker 1: was really easy. Obviously retrospect is, you know, much easier 219 00:12:12,880 --> 00:12:15,160 Speaker 1: to call. But if you look at the fact that 220 00:12:15,200 --> 00:12:19,800 Speaker 1: you had a really bullish environment for credit as an example, 221 00:12:20,040 --> 00:12:23,840 Speaker 1: with no volatility. I mean you were seeing sharp ratios 222 00:12:23,880 --> 00:12:29,080 Speaker 1: across many different portfolios of over ten times, they were 223 00:12:29,120 --> 00:12:32,880 Speaker 1: equity like returns almost are you managing for the coupon 224 00:12:33,000 --> 00:12:36,440 Speaker 1: this year? I think this year is much more difficult, 225 00:12:36,520 --> 00:12:38,760 Speaker 1: and so we squeezed a lot of the juice out 226 00:12:38,800 --> 00:12:41,480 Speaker 1: of the lemon last year, and I think this year 227 00:12:41,600 --> 00:12:45,640 Speaker 1: is much more difficult, and so while we're not barish 228 00:12:45,679 --> 00:12:49,600 Speaker 1: from a fundamental or economics standpoint, where we're more cautious, 229 00:12:49,640 --> 00:12:53,360 Speaker 1: there's really just valuations. As valuations have really come far 230 00:12:53,760 --> 00:12:56,400 Speaker 1: and it's hard to get too excited, and that's why 231 00:12:56,440 --> 00:13:00,120 Speaker 1: we've taken down a risk somewhat um and you to 232 00:13:00,160 --> 00:13:02,959 Speaker 1: your point, Tom, it's you know, seems like much more 233 00:13:03,000 --> 00:13:05,920 Speaker 1: of a coupon, hopefully with a little kiss to it. 234 00:13:06,520 --> 00:13:08,640 Speaker 1: But I think it's more of a coupon. You Well, Greg, 235 00:13:08,720 --> 00:13:10,959 Speaker 1: let's work our way through it from rates three to 236 00:13:11,040 --> 00:13:13,280 Speaker 1: corporates and begin with rates and talk to me about 237 00:13:13,280 --> 00:13:16,080 Speaker 1: how you express this framework in the market for rates 238 00:13:16,240 --> 00:13:19,320 Speaker 1: last year from speaking to you guys throughout the whole year. 239 00:13:19,600 --> 00:13:22,040 Speaker 1: Stay short at the front end. The long end isn't 240 00:13:22,040 --> 00:13:23,959 Speaker 1: going to drift higher in the way that people expect. 241 00:13:23,960 --> 00:13:26,560 Speaker 1: That's going to remain anchored. So you're looking for the 242 00:13:26,600 --> 00:13:29,439 Speaker 1: curve to flatten short the front end and then we're 243 00:13:29,440 --> 00:13:32,160 Speaker 1: just gonna stay anchored around tens through to through to thirties. 244 00:13:32,160 --> 00:13:34,520 Speaker 1: How has that changed for you, Greg and rates? That 245 00:13:34,679 --> 00:13:37,800 Speaker 1: is still broadly the case. I we still think that 246 00:13:38,320 --> 00:13:41,400 Speaker 1: a curve flatten er is the preferred path or the 247 00:13:41,440 --> 00:13:46,280 Speaker 1: way that uh, we see the rate curve playing out, 248 00:13:46,679 --> 00:13:49,319 Speaker 1: but the front end is increasingly more difficult to be short. 249 00:13:49,440 --> 00:13:51,600 Speaker 1: I I still think you need to be short at 250 00:13:51,640 --> 00:13:54,680 Speaker 1: the front end. Uh. And so we do have the 251 00:13:54,720 --> 00:13:58,480 Speaker 1: same flatten Er bias for sure, but but it's not 252 00:13:58,640 --> 00:14:01,880 Speaker 1: as uh as easy as it once was, as there's 253 00:14:01,880 --> 00:14:04,040 Speaker 1: a lot being pricing to the front end now. And 254 00:14:04,080 --> 00:14:07,280 Speaker 1: so we mentioned there's three full hikes priced in for 255 00:14:07,280 --> 00:14:09,880 Speaker 1: two thousan eighteen. Uh. You know, if you get the 256 00:14:09,880 --> 00:14:13,920 Speaker 1: four hikes, that's basically price for perfection. So I don't 257 00:14:13,960 --> 00:14:16,479 Speaker 1: think you want to invest in something price for perfection 258 00:14:17,080 --> 00:14:19,040 Speaker 1: until we're getting close. But I still think it's the 259 00:14:19,120 --> 00:14:23,040 Speaker 1: same trend. If you want to be long the belly uh, 260 00:14:23,040 --> 00:14:26,280 Speaker 1: and the curve will flatten. What's the yield there? I mean, 261 00:14:26,360 --> 00:14:29,480 Speaker 1: within the mix that you have at p Jim, can 262 00:14:29,520 --> 00:14:33,040 Speaker 1: I get to a four percent all in coupon? Uh? 263 00:14:33,040 --> 00:14:36,600 Speaker 1: It's it's hard, you know, I mean you know that's 264 00:14:36,640 --> 00:14:40,000 Speaker 1: the point the underlying kind of yield construct not only 265 00:14:40,040 --> 00:14:43,200 Speaker 1: here in the US, but more more so in Europe, 266 00:14:43,240 --> 00:14:46,240 Speaker 1: and we are a global manager. Uh. It's uh, it's 267 00:14:46,680 --> 00:14:52,600 Speaker 1: it's very challenging to get high yields if you would, um. Uh. 268 00:14:52,640 --> 00:14:54,760 Speaker 1: And so you know, quite frankly, speaking of high yield, 269 00:14:54,800 --> 00:14:57,480 Speaker 1: that's an area that uh, you know, we've really liked 270 00:14:57,480 --> 00:15:01,080 Speaker 1: for quite some time. We have taken in our risk 271 00:15:01,240 --> 00:15:04,640 Speaker 1: down in uh, in the high yield market broadly. But 272 00:15:04,760 --> 00:15:07,600 Speaker 1: what we're doing is that we actually think there's more 273 00:15:07,720 --> 00:15:10,320 Speaker 1: value out the risk curve, and so we see more 274 00:15:10,440 --> 00:15:13,160 Speaker 1: value in triple cs than we do double bees, which 275 00:15:13,240 --> 00:15:15,560 Speaker 1: less clear that's where the performance has been this year 276 00:15:15,560 --> 00:15:19,920 Speaker 1: as well. Is that, uh, you know, because I think 277 00:15:20,400 --> 00:15:24,120 Speaker 1: the double B market has been much more sensitive to 278 00:15:24,160 --> 00:15:26,120 Speaker 1: the selling that you're seeing on the mutual fund and 279 00:15:26,200 --> 00:15:31,680 Speaker 1: et F side, as that's more rate yield driven um. 280 00:15:32,120 --> 00:15:35,320 Speaker 1: Whereas the triple C part of the market, which we 281 00:15:35,400 --> 00:15:38,400 Speaker 1: think you're getting amply paid for, is about you know, 282 00:15:38,720 --> 00:15:42,240 Speaker 1: over three point three times the amount of spread relative 283 00:15:42,320 --> 00:15:47,320 Speaker 1: the double bees. It's more idiosyncratic. Uh, And you're not 284 00:15:47,480 --> 00:15:51,200 Speaker 1: tied to kind of rates moving up and down. Great. 285 00:15:51,200 --> 00:15:53,120 Speaker 1: Just to be clear, are you blaming the tourists for 286 00:15:53,160 --> 00:15:56,680 Speaker 1: the action and double bass No? I I just think 287 00:15:56,720 --> 00:16:00,560 Speaker 1: that's where the you know, the rate sensitive the market 288 00:16:00,680 --> 00:16:03,680 Speaker 1: is right. But to be clear, you have seen a 289 00:16:03,840 --> 00:16:08,520 Speaker 1: proliferation of these short duration high quality funds both in 290 00:16:08,520 --> 00:16:13,000 Speaker 1: investment grade UH and HI yould bonds. And so that's 291 00:16:13,040 --> 00:16:17,200 Speaker 1: the first thing to be sold pageon Managings Director and 292 00:16:17,360 --> 00:16:31,440 Speaker 1: Senior Investment Officer. This is a formal thing before we 293 00:16:31,480 --> 00:16:34,320 Speaker 1: get to a serious conversation with Chad Bound at the 294 00:16:34,320 --> 00:16:39,000 Speaker 1: Peterson Institute. This is an annual thing that happens now, folks, 295 00:16:39,360 --> 00:16:43,200 Speaker 1: we're handing the bracket to the head of my life 296 00:16:44,000 --> 00:16:46,320 Speaker 1: to the bus to let her know that we are 297 00:16:47,160 --> 00:16:49,240 Speaker 1: boiler up. Is this why I put you? Is in 298 00:16:51,120 --> 00:16:56,200 Speaker 1: for our global audience? Yes, my whiz, I actually did 299 00:16:56,200 --> 00:16:59,200 Speaker 1: pretty well last year. How are they ranked? They're like good, 300 00:16:59,240 --> 00:17:03,040 Speaker 1: They're better? They're like what okay, there are two team 301 00:17:03,480 --> 00:17:08,840 Speaker 1: say there it is provedn be nice to meets your 302 00:17:08,920 --> 00:17:10,920 Speaker 1: hands to Pharaoh so he knows what not to do. 303 00:17:11,720 --> 00:17:15,280 Speaker 1: There you go. You just do the opposite of what 304 00:17:16,040 --> 00:17:18,320 Speaker 1: Chad Bound with us for the Peterson Institute. We have 305 00:17:18,359 --> 00:17:19,880 Speaker 1: a lot of fun with the brackets and we say 306 00:17:19,920 --> 00:17:24,000 Speaker 1: good morning to allow you across the nation on serious sexption. 307 00:17:24,040 --> 00:17:27,760 Speaker 1: On one nineteen, Mr Bown is to the Peterson Institute 308 00:17:28,320 --> 00:17:31,360 Speaker 1: and we do need an update on terroriffs. Is that 309 00:17:31,359 --> 00:17:35,240 Speaker 1: that nudges away in our vision and yet it should 310 00:17:35,280 --> 00:17:37,960 Speaker 1: not Chad. What do we need to focus on now 311 00:17:38,520 --> 00:17:42,960 Speaker 1: with this huge tariff debate, Well, the first thing we 312 00:17:42,960 --> 00:17:46,000 Speaker 1: need to focus on is my buck now, Bison, my 313 00:17:46,000 --> 00:17:49,760 Speaker 1: my school number fifteen, Michigan State. Get to the important 314 00:17:49,760 --> 00:17:55,160 Speaker 1: stuff to watching them go there. But more seriously, uh 315 00:17:55,240 --> 00:17:57,280 Speaker 1: so we're still waiting to see how all this plays out. 316 00:17:57,320 --> 00:18:01,800 Speaker 1: So President Trump on Thursday tariffs on steel, ten percent 317 00:18:01,840 --> 00:18:04,840 Speaker 1: tariffs on aluminum. But the first thing he said was well, 318 00:18:04,880 --> 00:18:06,520 Speaker 1: for now, we're not going to impose these things on 319 00:18:06,600 --> 00:18:10,399 Speaker 1: Canada and Mexico. We're gonna potentially exempt them that we 320 00:18:10,480 --> 00:18:11,960 Speaker 1: may hang it over their head a little bit in 321 00:18:12,000 --> 00:18:14,600 Speaker 1: the NAFTA talk. So we'll see what happens there. But 322 00:18:14,680 --> 00:18:17,320 Speaker 1: everybody else is up for grabs. Now. He did open 323 00:18:17,359 --> 00:18:21,240 Speaker 1: the possibility that are Security Alliance partners may be able 324 00:18:21,240 --> 00:18:24,520 Speaker 1: to wiggle their way out of this somehow. So the 325 00:18:24,600 --> 00:18:28,439 Speaker 1: U S Trade Representative, Robert Leidheiser was in Brussels on 326 00:18:28,520 --> 00:18:31,720 Speaker 1: Saturday meeting with Cecilia Moms from the EU Trade Commissioner, 327 00:18:32,040 --> 00:18:35,720 Speaker 1: the Japanese Trade Commissioner. Uh you know, potentially seeking them 328 00:18:35,760 --> 00:18:38,480 Speaker 1: to get exempted. But nobody else has been exempted yet 329 00:18:38,520 --> 00:18:41,080 Speaker 1: so as of now, only Canada and Mexico are not 330 00:18:41,119 --> 00:18:42,959 Speaker 1: going to be hit by these new tariffs. So it's 331 00:18:42,960 --> 00:18:45,119 Speaker 1: the President United States has just twaited for USAULT to 332 00:18:45,160 --> 00:18:47,639 Speaker 1: say the Secretary of Commas, Wilbur Ross, will be speaking 333 00:18:47,680 --> 00:18:51,440 Speaker 1: with representatives of the European Union about eliminating the large 334 00:18:51,440 --> 00:18:54,200 Speaker 1: tariffs and barriers they use against the United States of America. 335 00:18:54,320 --> 00:18:57,280 Speaker 1: The words of the President this morning chat, this is 336 00:18:57,320 --> 00:18:59,760 Speaker 1: the time when ready the United States should be working 337 00:18:59,760 --> 00:19:04,600 Speaker 1: with Europe, with Japan to address the issue that is China. Instead, 338 00:19:04,840 --> 00:19:08,320 Speaker 1: there seems to be friction, tension between themselves at a 339 00:19:08,359 --> 00:19:11,480 Speaker 1: time that China is sort of centralizing strength within President 340 00:19:11,560 --> 00:19:13,080 Speaker 1: Shape talk to me about how difficult it will be 341 00:19:13,119 --> 00:19:15,240 Speaker 1: to take on China alone if you don't have Europe, 342 00:19:15,600 --> 00:19:19,320 Speaker 1: Europe and Japan with you. Yeah, that's exactly the issue here. 343 00:19:19,320 --> 00:19:21,800 Speaker 1: So the source of the underlying concern when it comes 344 00:19:21,840 --> 00:19:26,360 Speaker 1: to steal aluminum is global over capacity, most of which 345 00:19:26,440 --> 00:19:28,520 Speaker 1: has come out of China. Uh. And you know, the 346 00:19:28,520 --> 00:19:31,119 Speaker 1: Europeans are suffering in much the same way as U 347 00:19:31,200 --> 00:19:34,719 Speaker 1: s deal and aluminum. The Japanese are as well. So 348 00:19:34,800 --> 00:19:37,439 Speaker 1: you would think that if you're the US administration that 349 00:19:37,480 --> 00:19:40,480 Speaker 1: you would want to get the EU Japan to cooperate 350 00:19:40,520 --> 00:19:44,640 Speaker 1: with you in dealing with this, this underlying problem of China. 351 00:19:44,840 --> 00:19:46,680 Speaker 1: But that doesn't seem to be their approach. They're gonna, 352 00:19:46,680 --> 00:19:48,760 Speaker 1: you know, potentially slap tariffs on them. That EU has 353 00:19:48,800 --> 00:19:50,800 Speaker 1: already come out with their list of products over which 354 00:19:50,800 --> 00:19:53,840 Speaker 1: they're gonna have to threaten to retaliate against the United States. 355 00:19:54,080 --> 00:19:55,760 Speaker 1: And so all of this is really a side show 356 00:19:55,840 --> 00:19:58,840 Speaker 1: to the actual underlying problem. So let's get to the 357 00:19:58,880 --> 00:20:01,440 Speaker 1: underlying problem. I'm still wanting for a great answer to 358 00:20:01,480 --> 00:20:03,720 Speaker 1: this question, chat, what is the best approach for dealing 359 00:20:03,720 --> 00:20:07,520 Speaker 1: with China? Well, I do think you need cooperation. Uh. 360 00:20:07,640 --> 00:20:09,720 Speaker 1: You know, having the United States trying to go at 361 00:20:09,760 --> 00:20:13,520 Speaker 1: it alone, uh and without its key allies is really 362 00:20:13,520 --> 00:20:15,800 Speaker 1: not going to work. So you do need to get 363 00:20:15,800 --> 00:20:19,040 Speaker 1: the other major players out there to actually stand up, 364 00:20:19,080 --> 00:20:22,040 Speaker 1: stand up alongside you. Now, you know, we we can't 365 00:20:22,040 --> 00:20:24,360 Speaker 1: take that off the table completely. Uh. You know, there 366 00:20:24,480 --> 00:20:28,920 Speaker 1: was a renewed engagement by the three the US, EU 367 00:20:29,200 --> 00:20:31,639 Speaker 1: and in Japan coming out of the weekend. You know, 368 00:20:31,680 --> 00:20:33,840 Speaker 1: this was this meeting that they had on Saturday, was 369 00:20:33,920 --> 00:20:36,240 Speaker 1: long scheduled. The timing ended up being a little bit 370 00:20:36,280 --> 00:20:39,520 Speaker 1: awkward because it was right after President Trump's Triff announcement, 371 00:20:39,840 --> 00:20:41,680 Speaker 1: But this thing had been in the planning for a while, 372 00:20:41,760 --> 00:20:45,480 Speaker 1: trying to deal with China on uh steal an aluminium capacity, 373 00:20:45,720 --> 00:20:48,560 Speaker 1: the bigger intellectual property issues that that they're worried about 374 00:20:48,640 --> 00:20:51,159 Speaker 1: jointly as well. So it's going to take a cooperative 375 00:20:51,160 --> 00:20:53,600 Speaker 1: approach for for these and and all the other economies 376 00:20:53,640 --> 00:20:56,320 Speaker 1: of the world to really address this. I'll chat. I'm 377 00:20:56,359 --> 00:20:59,160 Speaker 1: sure that we'll touch upon this with you in the future. 378 00:20:59,640 --> 00:21:04,280 Speaker 1: None of this matters. After the Bucknell Bison crushed Colgate. 379 00:21:05,119 --> 00:21:08,280 Speaker 1: To get to the joy of facing Michigan State, Chad Bound, 380 00:21:08,480 --> 00:21:12,520 Speaker 1: how does the strategy change as you move from Colgate 381 00:21:12,920 --> 00:21:17,600 Speaker 1: to Michigan State. Well, Michigan State is going to be tough, um, 382 00:21:17,680 --> 00:21:21,159 Speaker 1: So I will say Bucknell does have a really good 383 00:21:21,160 --> 00:21:24,240 Speaker 1: track record in the Big Dance. You know, it wasn't 384 00:21:24,280 --> 00:21:26,800 Speaker 1: that long ago that I forget if they were at 385 00:21:27,840 --> 00:21:30,199 Speaker 1: They actually took out Kansas in the first round, So 386 00:21:30,680 --> 00:21:33,760 Speaker 1: you never know with my andh Why do I see 387 00:21:33,840 --> 00:21:36,200 Speaker 1: buck now in your bracket? Tom King? It is not 388 00:21:36,400 --> 00:21:39,040 Speaker 1: in my bracket. What I what I suggest, Chad Bound, 389 00:21:39,400 --> 00:21:42,120 Speaker 1: is you head over to the chemistry department at Bucktell 390 00:21:42,520 --> 00:21:46,520 Speaker 1: Bucknell Folks, which was world acclaimed and maybe they could 391 00:21:46,520 --> 00:21:49,119 Speaker 1: come up with some flubber or something to put on 392 00:21:49,160 --> 00:21:52,240 Speaker 1: the ball to uh get you within shouting distance of 393 00:21:52,320 --> 00:21:55,520 Speaker 1: Michigan State Chad bound in the Peterson Institute and Bucknell. 394 00:21:55,560 --> 00:21:58,520 Speaker 1: As we look at teriffs and uh, really the fund 395 00:21:58,560 --> 00:22:02,240 Speaker 1: for our global audience is just playing fun to look 396 00:22:02,280 --> 00:22:19,600 Speaker 1: at march Mandis because people know it's very simple. At 397 00:22:19,640 --> 00:22:23,400 Speaker 1: two hundred West Street downtown is the Golden Sax Tower, 398 00:22:23,520 --> 00:22:27,400 Speaker 1: forty four stories high. And of course all of Global 399 00:22:27,400 --> 00:22:32,359 Speaker 1: Wall Street repealed for Fumta Bianca or Fumta and Era 400 00:22:32,440 --> 00:22:35,639 Speaker 1: today and as Dac and Campbell knows, the ballots of 401 00:22:35,680 --> 00:22:39,640 Speaker 1: the partners were burnt and the white smoke came out 402 00:22:40,040 --> 00:22:44,000 Speaker 1: and David Solomon was annointed. I mean, you know, we've 403 00:22:44,040 --> 00:22:46,440 Speaker 1: talked a lot about these people. David. Let's talk about 404 00:22:46,480 --> 00:22:49,960 Speaker 1: the process within Goldman, or for that matter, any other 405 00:22:50,040 --> 00:22:53,520 Speaker 1: firm and what it means for Goldman Sax forward Pope 406 00:22:53,560 --> 00:22:58,760 Speaker 1: Solomon is was he selected with joy or was this 407 00:22:59,080 --> 00:23:03,360 Speaker 1: a really ugly battle. It's a good question. I think 408 00:23:03,400 --> 00:23:05,840 Speaker 1: it depends on who you ask. I think if you 409 00:23:05,960 --> 00:23:11,439 Speaker 1: talk to David or Harvey in their um in moments 410 00:23:11,440 --> 00:23:13,720 Speaker 1: when they're being real, they would say this did get 411 00:23:13,760 --> 00:23:16,800 Speaker 1: heated at times. Uh, not to the term, not to 412 00:23:16,920 --> 00:23:19,080 Speaker 1: the tune of you know, yelling at each other. But 413 00:23:19,200 --> 00:23:21,600 Speaker 1: they both took it very seriously and they both wanted 414 00:23:21,640 --> 00:23:24,600 Speaker 1: to win this. How do they compare and contrast the soul? 415 00:23:24,600 --> 00:23:27,320 Speaker 1: There's that point in a William Cohen book where the 416 00:23:27,440 --> 00:23:31,679 Speaker 1: leadership of Goldman Sex is having an excellent sandwich. I 417 00:23:31,720 --> 00:23:36,280 Speaker 1: think it was it's three guys, uh him years ago 418 00:23:36,320 --> 00:23:39,480 Speaker 1: when they did some genormous deal across a deli over 419 00:23:39,520 --> 00:23:42,399 Speaker 1: and excelled sandwich. I mean, the heritage of the firm 420 00:23:42,520 --> 00:23:47,000 Speaker 1: is conservative and basic. How did these two guys stack 421 00:23:47,119 --> 00:23:52,520 Speaker 1: up within the new Goldman Sex. Yes, so Harvey came 422 00:23:52,640 --> 00:23:55,200 Speaker 1: up through the securities division. He did spend some time 423 00:23:55,200 --> 00:23:57,840 Speaker 1: in the investment bank, but he's really thought of internally 424 00:23:57,920 --> 00:24:00,359 Speaker 1: and by a lot of people externally as a trading 425 00:24:00,440 --> 00:24:03,720 Speaker 1: as a sales and trading guy. David came up through 426 00:24:03,720 --> 00:24:07,640 Speaker 1: the investment banking division almost exclusively. He ran that division 427 00:24:07,760 --> 00:24:11,680 Speaker 1: for uh, you know, a decade or more. Uh. It's 428 00:24:11,680 --> 00:24:15,480 Speaker 1: worth noting that in seventeen the investment banking division turned 429 00:24:15,480 --> 00:24:18,639 Speaker 1: in more revenue than the traders for the first time 430 00:24:18,960 --> 00:24:23,359 Speaker 1: since two thousand, so the first time in seventeen years. 431 00:24:23,400 --> 00:24:26,919 Speaker 1: So certainly you could say the investment bank and the 432 00:24:27,000 --> 00:24:30,880 Speaker 1: people who have led the investment bank are ascended. Can 433 00:24:30,920 --> 00:24:33,960 Speaker 1: you tell us a little bit about the person who 434 00:24:34,080 --> 00:24:38,800 Speaker 1: is Mr Solomon? I mentioned earlier that his assistant I 435 00:24:38,880 --> 00:24:42,440 Speaker 1: believe it was earlier in the year, was arrested because 436 00:24:42,560 --> 00:24:46,160 Speaker 1: he was found to have been stealing wine from Mr 437 00:24:46,200 --> 00:24:49,920 Speaker 1: Solomon's wine collection. And he's got a background when he's 438 00:24:50,119 --> 00:24:54,240 Speaker 1: uh went to Hamilton's College, black belt in karate. I 439 00:24:54,280 --> 00:24:57,840 Speaker 1: believe that's harvy. I beg your pardon. Yes, So so 440 00:24:57,960 --> 00:25:01,320 Speaker 1: David went to Hamilton's College. He's been investment banker for 441 00:25:01,760 --> 00:25:04,479 Speaker 1: uh just about all of his career. Uh, and he 442 00:25:04,560 --> 00:25:07,680 Speaker 1: does have a wine collection. He is a DJ on 443 00:25:07,760 --> 00:25:10,600 Speaker 1: that's what I Yeah, I confuse DJ and black belt. 444 00:25:10,640 --> 00:25:15,240 Speaker 1: What was what about? So he plays electronic music? Uh, 445 00:25:15,280 --> 00:25:18,159 Speaker 1: he does that about once a month. It's something that 446 00:25:18,200 --> 00:25:21,680 Speaker 1: he got into several years ago. And is he considers 447 00:25:21,680 --> 00:25:26,200 Speaker 1: one of his hobbies is the the issue of diversity 448 00:25:26,359 --> 00:25:31,159 Speaker 1: and a social uh change. I guess is that a 449 00:25:31,200 --> 00:25:34,679 Speaker 1: factor in in how Goldman Sax sees its future, and 450 00:25:35,000 --> 00:25:38,679 Speaker 1: as a result, perhaps why Mr Solomon was tapped. David 451 00:25:38,720 --> 00:25:41,719 Speaker 1: when he was running the investment bank, UH did a 452 00:25:41,760 --> 00:25:45,240 Speaker 1: lot in on diversity efforts. He really tried at the 453 00:25:45,359 --> 00:25:48,600 Speaker 1: analyst level, so the incoming class, to to really get 454 00:25:48,680 --> 00:25:51,560 Speaker 1: fifty percent men and fifty percent women. And his belief 455 00:25:51,680 --> 00:25:54,600 Speaker 1: is if you can start at fifty fifty at the bottom, 456 00:25:54,640 --> 00:25:58,200 Speaker 1: then by the time people leave, or UH you ask 457 00:25:58,280 --> 00:26:00,720 Speaker 1: people to to go, by the time you get to 458 00:26:00,760 --> 00:26:03,960 Speaker 1: the top, you'll have a much broader set of choices 459 00:26:04,000 --> 00:26:07,159 Speaker 1: to make for the division or the firm senior leaders. 460 00:26:07,560 --> 00:26:11,840 Speaker 1: He took that message to the board and as I understand, 461 00:26:11,880 --> 00:26:14,840 Speaker 1: really impressed the board with those concerns and with those 462 00:26:15,320 --> 00:26:18,320 Speaker 1: what he's trying to do. There is a board removed 463 00:26:18,400 --> 00:26:21,760 Speaker 1: from the partners because I'm looking at revenue growth, which 464 00:26:21,840 --> 00:26:26,240 Speaker 1: is basically going nowhere within a general statement, and operating 465 00:26:26,240 --> 00:26:30,960 Speaker 1: income is basically going nowhere is a general statement. I mean, 466 00:26:30,960 --> 00:26:33,640 Speaker 1: this is really you know, forget about all the social stuff. 467 00:26:34,000 --> 00:26:36,720 Speaker 1: Is this just a financial exercise where Mr blank find 468 00:26:37,000 --> 00:26:41,600 Speaker 1: didn't get it done in terms of running the bank. 469 00:26:41,960 --> 00:26:44,800 Speaker 1: Running the bank, I'm looking at revenue growth, which is flat. 470 00:26:45,040 --> 00:26:47,920 Speaker 1: I'm looking at operating income over four or five years. Great, 471 00:26:47,920 --> 00:26:50,960 Speaker 1: it's a great margin thirty five cents thirty six cents 472 00:26:50,960 --> 00:26:54,960 Speaker 1: on the dollar. But there's no growthiness here. I'm sorry, Diack, 473 00:26:55,040 --> 00:26:57,439 Speaker 1: and that's what I'm seeing. Nobody's doing a James Gorman 474 00:26:57,560 --> 00:27:01,679 Speaker 1: Victory lab that what this is about understood, this is 475 00:27:02,160 --> 00:27:04,600 Speaker 1: uh it is it is. I guess you could you 476 00:27:04,600 --> 00:27:07,159 Speaker 1: could put this in terms of a vote for the 477 00:27:07,240 --> 00:27:10,000 Speaker 1: future as opposed to a vote for the past. So 478 00:27:10,359 --> 00:27:12,879 Speaker 1: if Goldman was a trading shop and they turned in 479 00:27:12,960 --> 00:27:16,480 Speaker 1: thirty three billion in trading a loan in two thousand nine, 480 00:27:17,000 --> 00:27:20,840 Speaker 1: then going forward, maybe they think that that they're not 481 00:27:20,880 --> 00:27:22,840 Speaker 1: going to be a trading shop, that it has to 482 00:27:22,840 --> 00:27:27,320 Speaker 1: be more broadly based investment banking. They're not giving up 483 00:27:27,320 --> 00:27:30,360 Speaker 1: on trading, let's not get ourselves wrong here. But they've 484 00:27:30,359 --> 00:27:33,240 Speaker 1: also got asset management and they've got this consumer lender. 485 00:27:33,280 --> 00:27:35,439 Speaker 1: I'm trying to get Henry Paulson as a DJ and 486 00:27:35,480 --> 00:27:38,719 Speaker 1: I can't get there. Is Mr Solomon essentially a uh 487 00:27:38,920 --> 00:27:42,919 Speaker 1: Paulson equivalent. Ah, he is definitely a client guy. The 488 00:27:42,960 --> 00:27:47,359 Speaker 1: two of them shared that very much. Just so everybody understands. 489 00:27:47,359 --> 00:27:50,200 Speaker 1: Henry Paulson has perceived as his high and mighty Wall 490 00:27:50,240 --> 00:27:52,520 Speaker 1: Street guy. He was out in the dregs of Chicago 491 00:27:52,920 --> 00:27:57,520 Speaker 1: taking every single airplane flight domestically out of a hair 492 00:27:58,000 --> 00:28:00,639 Speaker 1: that exists. I mean people don't know. I mean it's 493 00:28:00,680 --> 00:28:03,040 Speaker 1: all the romance of being on the Upper East Side 494 00:28:03,040 --> 00:28:05,320 Speaker 1: and deciding where to go to your second, third, or 495 00:28:05,359 --> 00:28:08,040 Speaker 1: fourth country house. And as you know, Dacon, that's not 496 00:28:08,040 --> 00:28:10,439 Speaker 1: what it's about. It's like a grind, isn't it. That's right, 497 00:28:10,720 --> 00:28:13,920 Speaker 1: it is. And and and David has been since he's been 498 00:28:13,960 --> 00:28:18,440 Speaker 1: tapped as co CEO fifteen months ago, David has really 499 00:28:18,480 --> 00:28:21,639 Speaker 1: continued the uh the schedule that he set when he 500 00:28:21,680 --> 00:28:25,520 Speaker 1: was at the investment bank, going out, seeing clients, going out. He's, 501 00:28:25,800 --> 00:28:28,400 Speaker 1: as I understand, he's introduced himself to maybe too many 502 00:28:28,480 --> 00:28:32,359 Speaker 1: partners that he hadn't met before. So uh so that 503 00:28:32,520 --> 00:28:35,160 Speaker 1: is sort of in his blood. And and uh he's 504 00:28:35,200 --> 00:28:38,400 Speaker 1: similar to Hank Paulson in that how does the decision 505 00:28:38,440 --> 00:28:41,320 Speaker 1: like this get made? And uh, are there any other 506 00:28:41,400 --> 00:28:44,680 Speaker 1: changes that you foresee happening at Goldman Sex because of 507 00:28:44,760 --> 00:28:47,480 Speaker 1: his appointment. I want to say, I want to be 508 00:28:47,520 --> 00:28:50,040 Speaker 1: careful saying I don't see any other changes, because I'll 509 00:28:50,080 --> 00:28:52,840 Speaker 1: be I could be wrong in a heartbeat. Excuse me, 510 00:28:52,960 --> 00:28:57,440 Speaker 1: Dakon Campbell wrong making note of that. But this is 511 00:28:57,640 --> 00:29:00,440 Speaker 1: this is largely a choice made by the board and 512 00:29:00,480 --> 00:29:04,120 Speaker 1: also Lloyd blank Find. So at some point the board, 513 00:29:04,320 --> 00:29:08,040 Speaker 1: as we understand, in February, came to a decision that 514 00:29:08,360 --> 00:29:11,360 Speaker 1: they had seen enough among these two and that David 515 00:29:11,480 --> 00:29:14,880 Speaker 1: was their guy, and so, uh, you know, it took 516 00:29:14,920 --> 00:29:18,120 Speaker 1: him several weeks to to come out with the announcement, 517 00:29:18,440 --> 00:29:22,400 Speaker 1: but that's what got us to today. James Johnson, Bill George, 518 00:29:22,400 --> 00:29:25,640 Speaker 1: who we've had on this show many times. Mr Mattall, 519 00:29:25,960 --> 00:29:29,840 Speaker 1: Michelle Burns, David Vinnier, we know him from another time. 520 00:29:30,320 --> 00:29:35,240 Speaker 1: Peter Roppenheimer, Ellen Coolman is is, well, what's the character 521 00:29:35,320 --> 00:29:38,720 Speaker 1: of the board. It's a good question. It's changed in 522 00:29:38,760 --> 00:29:41,040 Speaker 1: the in the last couple of years. They've added a 523 00:29:41,080 --> 00:29:49,040 Speaker 1: couple of new members. Yes, certainly, but as I understand, 524 00:29:49,120 --> 00:29:52,560 Speaker 1: these are largely people who are loyal to Lloyd blank 525 00:29:52,640 --> 00:29:57,080 Speaker 1: Find and are gonna allow Lloyd despite what you might 526 00:29:57,240 --> 00:30:02,000 Speaker 1: think Tom about revenue and earnings growth. The board is 527 00:30:02,040 --> 00:30:05,240 Speaker 1: still content, as I understand, to let Lloyd sort of 528 00:30:05,240 --> 00:30:09,120 Speaker 1: finish out his term. How that's important? How long is 529 00:30:09,120 --> 00:30:12,560 Speaker 1: that for? Yeah, they haven't said a timetable yet. It 530 00:30:12,640 --> 00:30:15,520 Speaker 1: could be a year. I will not be two years. 531 00:30:15,640 --> 00:30:17,600 Speaker 1: I have to ask a sense of question, and with 532 00:30:17,640 --> 00:30:21,040 Speaker 1: great respect to Mr blank finds wonderful health. Is this 533 00:30:21,200 --> 00:30:23,760 Speaker 1: about the fragility of his health over the last three 534 00:30:23,840 --> 00:30:26,720 Speaker 1: or four years. I don't think so. I think he's 535 00:30:26,840 --> 00:30:30,920 Speaker 1: largely covered beyond that from from that episode, from that cancer. 536 00:30:31,760 --> 00:30:34,120 Speaker 1: What's the biggest challenge that Goldman Sex has right now? 537 00:30:34,960 --> 00:30:38,640 Speaker 1: The biggest challenge I think is, as as Tom's spelled 538 00:30:38,680 --> 00:30:42,120 Speaker 1: it out, is revenue growth. With with the trading business, 539 00:30:42,160 --> 00:30:44,840 Speaker 1: which had been such a big part of the revenue 540 00:30:44,840 --> 00:30:48,560 Speaker 1: base in the past not doing well and certainly not 541 00:30:48,720 --> 00:30:51,520 Speaker 1: going back to the days of the pre pre crisis days, 542 00:30:51,720 --> 00:30:54,360 Speaker 1: they really need to figure out how to generate revenue 543 00:30:54,360 --> 00:30:57,480 Speaker 1: growth other areas. Who's quickly? Who's next? Done? Wall Street? 544 00:30:57,520 --> 00:30:59,920 Speaker 1: Do you have any idea where where there's sort of 545 00:31:00,120 --> 00:31:02,960 Speaker 1: time for a CEO to change. Mr Gorman's had a 546 00:31:03,040 --> 00:31:06,000 Speaker 1: heck of a run as he entrenched at Morgan. I 547 00:31:06,000 --> 00:31:08,160 Speaker 1: think he is. I think the next one you might 548 00:31:08,160 --> 00:31:11,800 Speaker 1: see would be Jamie Diamond. I mean that's I don't 549 00:31:11,800 --> 00:31:14,080 Speaker 1: really know anything, but that's that would be my guest 550 00:31:14,160 --> 00:31:17,440 Speaker 1: Jamie's been there a long time. I think he if 551 00:31:17,480 --> 00:31:19,840 Speaker 1: he had something else to do, and if he felt 552 00:31:19,840 --> 00:31:21,480 Speaker 1: like he was at a good point in time, he 553 00:31:21,600 --> 00:31:25,760 Speaker 1: might do something like this as well, taking Camel terrific briefing. 554 00:31:25,880 --> 00:31:36,240 Speaker 1: Thank you that that was really valuable. Thanks for listening 555 00:31:36,280 --> 00:31:40,840 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 556 00:31:40,880 --> 00:31:46,120 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 557 00:31:46,680 --> 00:31:50,000 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 558 00:31:50,040 --> 00:31:53,440 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio