WEBVTT - Bloomberg Wall Street Week - February 9th, 2024 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 And we may not have an overall recession, we're having 0:00:04.400 --> 0:00:06.720 a rolling recession to kind of ROWL looks pretty strongly. 0:00:06.720 --> 0:00:08.840 It is when it comes to jobs, the financial stories 0:00:08.920 --> 0:00:11.960 that shape our world. Three major regional bank failures send 0:00:12.000 --> 0:00:14.680 shockwaves through the banking system. We're all trying to figure 0:00:14.680 --> 0:00:17.320 out what to make of generative AI through. 0:00:17.160 --> 0:00:19.320 The eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Ryan moynihan, am Bank of America, 0:00:22.520 --> 0:00:25.279 deebro Lair of the Paulson Institute, well then Hubbard of 0:00:25.280 --> 0:00:26.280 the Columbia Business School. 0:00:26.280 --> 0:00:30.160 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.400 --> 0:00:33.559 Making history and not always in a good way, in 0:00:33.600 --> 0:00:36.839 the Middle East, in California, in regional banking, and in 0:00:36.960 --> 0:00:40.839 sports streaming. This is Bloomberg Wall Street Week. I'm David Weston. 0:00:41.720 --> 0:00:44.760 This week, Julian Salisbury of Sixth Street on the surge 0:00:44.760 --> 0:00:46.040 and alternative investing. 0:00:46.720 --> 0:00:51.000 You've seen like a greater interest in investing in private capital. 0:00:51.560 --> 0:00:55.160 Former FDIC had Sheila Bear on the continuing struggles of 0:00:55.200 --> 0:00:55.960 regional banks. 0:00:56.240 --> 0:00:59.880 That's really more about commercial real estate than New York Community. 0:00:59.440 --> 0:01:03.040 Bank and Jonathan Karp of Simon and Schuster with Petz 0:01:03.080 --> 0:01:06.200 stavros O Kkar on an iconic publishing house in the 0:01:06.240 --> 0:01:07.720 hands of private equity. 0:01:08.000 --> 0:01:12.120 This idea of broad based ownership has really energized the company. 0:01:12.280 --> 0:01:15.600 With this unloved gem of a business inside of paramount. 0:01:28.200 --> 0:01:32.600 Living through history can sometimes try the nerves Global Wall Street. 0:01:32.640 --> 0:01:35.679 This week watch with concern as Israel's fight with Mamas 0:01:35.920 --> 0:01:39.000 threatened to spill over into the Greater Region, even as 0:01:39.040 --> 0:01:43.240 Secretary of State Blincoln continued shuttle diplomacy to contain the fighting. 0:01:43.560 --> 0:01:45.440 There's still a lot of work to be done, but 0:01:46.040 --> 0:01:49.720 we continue to believe that an agreement is possible and 0:01:49.960 --> 0:01:54.120 indeed essential, and we will continue to work relentlessly to 0:01:54.200 --> 0:01:54.680 achieve it. 0:01:55.440 --> 0:01:58.440 California spent much of the week battling rains that were 0:01:58.480 --> 0:02:02.720 truly historic, causing buildings to slide down mountains in floods 0:02:02.760 --> 0:02:06.040 of mud. Regional banks took another shot this week as 0:02:06.080 --> 0:02:08.760 New York Community Bank stock fell to its lowest level 0:02:08.800 --> 0:02:11.560 in twenty seven years after it cut its dividend and 0:02:11.639 --> 0:02:14.640 had its credit rating lowered, leading it to try to 0:02:14.680 --> 0:02:16.280 clean up its balance sheet. 0:02:16.639 --> 0:02:19.200 This is a bank that's very large and has just 0:02:19.320 --> 0:02:22.000 gone over the one hundred billion dollar. 0:02:23.520 --> 0:02:24.240 Asset level. 0:02:24.280 --> 0:02:28.480 That is, that is giving it a lot closer regulatory scrutinate. 0:02:28.760 --> 0:02:31.480 And the Walt Disney Company announced earnings that beat all 0:02:31.480 --> 0:02:34.480 expectations and drove the stock up, even as it sought 0:02:34.480 --> 0:02:37.400 to combine its sports streaming business with that of Fox 0:02:37.639 --> 0:02:41.080 and Warner Brothers Discovery in what would make sports history. 0:02:41.600 --> 0:02:43.680 The purpose of the venture is purely distribution. 0:02:44.200 --> 0:02:45.960 It's not about procurement of content. 0:02:46.040 --> 0:02:48.800 So we'll continue to compete with each other for sports rights, 0:02:48.880 --> 0:02:49.760 just as we always have. 0:02:50.200 --> 0:02:53.400 Thursday evening, President Biden made an impromptu appearance at the 0:02:53.400 --> 0:02:56.160 White House to denounce a Special Councils report that had 0:02:56.160 --> 0:02:59.520 said there would be no prosecution for misuse of classified documents, 0:02:59.639 --> 0:03:03.160 but only because no jury would convict an elderly man 0:03:03.560 --> 0:03:07.639 with a poor memory. My memory is fine, my memory. 0:03:07.760 --> 0:03:09.800 Take a look at what I've done since I've become pressive. 0:03:10.320 --> 0:03:11.760 None of you thought I could pass any of the 0:03:11.800 --> 0:03:12.760 things I got passed. 0:03:13.000 --> 0:03:13.720 How'd that happen? 0:03:14.520 --> 0:03:14.720 You know? 0:03:14.840 --> 0:03:16.240 I guess I just forgot. 0:03:15.919 --> 0:03:16.480 What was going on. 0:03:18.639 --> 0:03:21.680 The equity markets responded to an event packed week by 0:03:21.680 --> 0:03:24.440 continuing their march upward with the s and P five hundred, 0:03:24.480 --> 0:03:26.720 adding almost one point four percent to close for the 0:03:26.720 --> 0:03:29.920 first time over five thousand, already putting it over the 0:03:29.960 --> 0:03:32.480 median point for where the bloomberg Els think will end 0:03:32.560 --> 0:03:35.120 up the year. The NAZAC climb two point three percent, 0:03:35.240 --> 0:03:37.520 while the yield on the tenure also rose some fifteen 0:03:37.560 --> 0:03:40.120 basis points to end at one point four point one 0:03:40.080 --> 0:03:42.400 point seven. To give us his read on where these 0:03:42.480 --> 0:03:45.920 equities are headed. We welcome back now, Scott Kroner, City 0:03:46.080 --> 0:03:48.320 US equity strategist. Scott, great to have you back with us. 0:03:48.440 --> 0:03:50.480 So I guess the basic question is have they gone 0:03:50.520 --> 0:03:52.960 far enough? Are we overpriced now in the equity markets? 0:03:52.960 --> 0:03:54.160 Because they really marched. 0:03:53.920 --> 0:03:57.520 Up, I'd say evaluations are certainly getting to a more 0:03:57.560 --> 0:04:00.240 stretched level. What we think this really does those put 0:04:00.240 --> 0:04:01.720 an ongoing burden. 0:04:01.360 --> 0:04:02.440 On a couple of forces. 0:04:02.480 --> 0:04:05.320 First, we do need to see an ongoing tailwind from 0:04:05.320 --> 0:04:06.600 a fundamental perspective. 0:04:06.920 --> 0:04:08.000 Second, we have to keep. 0:04:07.840 --> 0:04:10.440 An eye on ten year yields, which are around the 0:04:10.480 --> 0:04:13.560 four percent level we think send a pretty decent signal 0:04:13.560 --> 0:04:14.200 for equities. 0:04:14.400 --> 0:04:15.840 But at this point it's really. 0:04:15.600 --> 0:04:18.520 The Q four earnings period that we think is supporting 0:04:18.520 --> 0:04:20.520 a lot of the action we've seen thus far, and 0:04:20.560 --> 0:04:23.320 we think of bodes well for the fundamental outlook for 0:04:23.360 --> 0:04:25.720 the SP five hundred over the course of twenty twenty four. 0:04:26.000 --> 0:04:28.280 All the talk in your equity area is about those 0:04:28.320 --> 0:04:30.679 Magnificent seven. However, many I think six ' eight whatever 0:04:30.680 --> 0:04:33.760 they are, magnificent seven, is that likely to broaden out? 0:04:33.800 --> 0:04:35.600 And are they likely to keep marching on? 0:04:36.600 --> 0:04:36.920 Well? 0:04:36.960 --> 0:04:40.200 Okay, so the big seven are magnificent seven? Really is three? 0:04:40.279 --> 0:04:41.320 This year there's three of. 0:04:41.279 --> 0:04:44.559 Those components that have contributed half of the index gained 0:04:44.600 --> 0:04:47.200 year to date. We've been arguing that they become more 0:04:47.360 --> 0:04:49.040 idiosyncratic in their behavior. 0:04:49.120 --> 0:04:50.000 That's unfolding. 0:04:50.360 --> 0:04:53.080 Our big theme, though, has been one of broadening beyond 0:04:53.640 --> 0:04:56.880 the S and p's exposure to just those megacaps, and 0:04:56.920 --> 0:04:58.799 we are seeing evidence of that as well. 0:04:58.880 --> 0:05:00.000 So from our first. 0:05:00.000 --> 0:05:05.320 Active broadening from a fundamental earnings growth perspective is mission 0:05:05.360 --> 0:05:08.320 critical to further upside for the SMP. And what we 0:05:08.400 --> 0:05:11.400 think that does is lend itself to a broadening from 0:05:11.440 --> 0:05:15.040 a performance perspective across a broader array of sectors. 0:05:15.240 --> 0:05:17.760 So you talk about fundamentals, I interpret that as earnings 0:05:18.000 --> 0:05:19.720 and telling me about earnings. Where we are in earnings. 0:05:19.760 --> 0:05:22.400 Where we're headed earnings, I mean, you're you're actually toward 0:05:22.480 --> 0:05:25.040 the top of the Bloomberg elves and your projection for 0:05:25.080 --> 0:05:26.520 where we're going to be earnings this year. 0:05:26.800 --> 0:05:29.599 Yeah, we're pretty bullish on the earnings out look and 0:05:29.640 --> 0:05:31.360 the fundamental picture for the S and B of five 0:05:31.440 --> 0:05:33.760 hundred for sure. And what I would say about that 0:05:34.320 --> 0:05:37.440 is going into the Q four reporting period, which obviously 0:05:37.480 --> 0:05:41.120 sets up for twenty twenty four, expectations had come down 0:05:41.160 --> 0:05:44.239 and so they're being easily exceeded at this point, again 0:05:44.279 --> 0:05:45.720 something that we had expected. 0:05:46.000 --> 0:05:48.240 We had also expected that we'd see a. 0:05:48.200 --> 0:05:52.359 Downward bias to full your twenty twenty four estimates, and 0:05:52.520 --> 0:05:55.400 in fact that had been occurring. But we're now seeing 0:05:55.440 --> 0:05:58.440 some signs of stabilization. We think the path higher for 0:05:58.520 --> 0:06:02.800 equities from here begins with fundamentals, and there we were quite. 0:06:02.600 --> 0:06:04.040 Constructive on the earnings picture. 0:06:04.279 --> 0:06:06.320 We're looking for the S and P earnings growth in 0:06:06.360 --> 0:06:08.400 the twenty twenty four time frame to be in the 0:06:08.400 --> 0:06:09.799 neighborhood of ten to twelve percent. 0:06:09.960 --> 0:06:11.160 When it comes to tech, does a lot to talk 0:06:11.160 --> 0:06:13.600 about AI and its effect on productivity and where we're 0:06:13.600 --> 0:06:15.520 going there. What's your take on a on how it's 0:06:15.520 --> 0:06:16.480 going to affect equities. 0:06:17.480 --> 0:06:19.960 Well, the way we've been viewing it is that it's 0:06:19.960 --> 0:06:21.920 going to affect it in two ways. First, you're going 0:06:21.960 --> 0:06:24.159 to have that subset of companies that has a direct 0:06:24.240 --> 0:06:28.599 beneficiary you can measure either via revenues or earnings. That's 0:06:28.640 --> 0:06:31.920 a small subset of the megacap growth cohort that we've. 0:06:31.800 --> 0:06:33.080 Been discussing already. 0:06:33.320 --> 0:06:37.320 But under the surface, we're looking for AI to lead 0:06:37.360 --> 0:06:41.760 to productivity enhancements across a broader swath of companies. That's 0:06:41.760 --> 0:06:44.679 going to be much harder to get one's hands around 0:06:44.839 --> 0:06:47.520 from a granular perspective, but we expect to see it 0:06:47.839 --> 0:06:49.719 in margins and profitability. 0:06:50.040 --> 0:06:51.599 I'm not sure we call it a fundamental But what 0:06:51.600 --> 0:06:54.600 about the election? I mean I keep hearing that historically 0:06:54.960 --> 0:06:57.359 in years where incumbent presidents are running for re election, 0:06:57.640 --> 0:07:00.360 whether they get, whether they win or lose, the market, Well, 0:07:00.480 --> 0:07:01.840 do you ascribe to that view? 0:07:02.400 --> 0:07:02.640 Yeah? 0:07:02.680 --> 0:07:04.920 I think the way we're approaching this election is you 0:07:04.920 --> 0:07:07.599 can throw out historic playbooks. We don't think that a 0:07:07.640 --> 0:07:12.320 lot of the performance patterns from previous presidential elections will 0:07:12.320 --> 0:07:14.840 hold out this time. We think there is a different 0:07:14.880 --> 0:07:17.840 set of issues that need to be contented with, and 0:07:17.960 --> 0:07:20.560 each of the two candidates, in our view, has some 0:07:20.720 --> 0:07:24.200 aspects of their policy stance that are not particularly a 0:07:24.320 --> 0:07:26.400 US equity friendly, and so we're going to have to 0:07:26.480 --> 0:07:30.120 monitor the way their platforms really fall into place over 0:07:30.160 --> 0:07:31.120 the next several months. 0:07:31.200 --> 0:07:33.240 As in so many elections, risks on both sides, many 0:07:33.240 --> 0:07:37.160 thanks to Scott Kroner of City. It started with private 0:07:37.200 --> 0:07:39.800 equity engineering the leveraged buyout of our Ja and Ebisco 0:07:40.080 --> 0:07:43.360 back in the mid nineteen eighties, but it's gone far 0:07:43.480 --> 0:07:47.080 beyond leverage buyouts and far beyond private equity alone, as 0:07:47.120 --> 0:07:50.280 private credit, real estate infrastructure on a range of alternative 0:07:50.280 --> 0:07:54.160 investment vehicles have blossomed. One of those is six Street Partners, 0:07:54.320 --> 0:07:57.280 now investing some seventy five billion dollars, and we welcome 0:07:57.320 --> 0:07:59.840 its new co cio, Julian Starsbury. 0:08:00.000 --> 0:08:02.000 Welcome back to Wall Street. We're good to have you, Julian, 0:08:02.080 --> 0:08:04.160 great to be here. So tell me about the move 0:08:04.280 --> 0:08:07.560 from Goldman to Six Street Partners. Not so much about 0:08:07.560 --> 0:08:09.680 why you personally did it, but what is it represented 0:08:09.720 --> 0:08:13.600 in your mind about larger trends in Wall Street and investing. 0:08:14.080 --> 0:08:16.720 Yeah, if you go back twenty or thirty years, I 0:08:16.720 --> 0:08:21.120 would say private equity was a relatively niche area. Private 0:08:21.160 --> 0:08:26.120 credit was people didn't really talk about private credit. There 0:08:26.160 --> 0:08:30.400 was middle market lending going on at banks certainly, you know, 0:08:30.440 --> 0:08:32.079 you had hedge funds out there who may do the 0:08:32.080 --> 0:08:38.720 odd private loan here and there. Infrastructure really wasn't, you know, 0:08:38.760 --> 0:08:41.120 on the tip of everybody's tongue. And what you've seen 0:08:41.200 --> 0:08:44.800 is just this gradual trend over the last twenty or 0:08:44.880 --> 0:08:47.679 thirty years. As you saw some of the early moves 0:08:47.679 --> 0:08:50.880 into alternatives back in the eighties and nineties, the endowments 0:08:50.920 --> 0:08:55.040 and the state pension plans, they were generating tremendous returns 0:08:55.080 --> 0:08:57.800 from the asset class. This was giving rise to increased 0:08:57.800 --> 0:09:01.760 allocations towards initially private equity, but then wanting to broaden 0:09:01.800 --> 0:09:06.400 into other diversifiers, and then subsequently that brought in other capital. 0:09:06.679 --> 0:09:09.920 So you've seen like a greater interest in investing in 0:09:10.200 --> 0:09:14.520 private capital, which means the roles for banks has just changed. 0:09:14.559 --> 0:09:17.480 That there's still an incredibly important role for banks to 0:09:17.559 --> 0:09:21.360 play as a financier, as an intermediary, as an advisor 0:09:21.400 --> 0:09:24.200 around these given situations, but actually the retention of the 0:09:24.320 --> 0:09:27.240 risk capital in these deals whether it's owning the private 0:09:27.240 --> 0:09:32.079 equity transaction or owning the you know, the junior debt tranchers, 0:09:33.040 --> 0:09:36.000 owning the real estate asset is increasingly just moving into 0:09:36.000 --> 0:09:40.400 the hands of long dated private capital that typically, if 0:09:40.440 --> 0:09:44.560 structured right, has a liability set which is matched against 0:09:44.600 --> 0:09:45.840 the assets that they're invested in. 0:09:45.960 --> 0:09:47.920 We were a tendency in financial media to talk about 0:09:48.000 --> 0:09:52.199 active investing passive investing. What about active management and passive 0:09:52.280 --> 0:09:54.719 management in this sense? We had Tony James on a 0:09:54.720 --> 0:09:56.600 little while ago and you said, in private agrey, it 0:09:56.640 --> 0:09:59.800 evolves from something that was basically a financial transaction. We'd 0:09:59.800 --> 0:10:01.480 love ridge things up. We can make money, you can 0:10:01.520 --> 0:10:04.320 flip it in privately. Increasingly you have to actually manage 0:10:04.320 --> 0:10:07.240 the business, make some change the business, make it more valuable. 0:10:07.280 --> 0:10:09.800 Are you seeing that with the various vehicles you're looking 0:10:09.800 --> 0:10:13.000 at that you are more involved in the business. 0:10:13.280 --> 0:10:13.760 Absolutely. 0:10:13.960 --> 0:10:17.120 I think about there's a continuum of investments that you 0:10:17.160 --> 0:10:20.600 can make somewhat where which are relatively more passive and 0:10:20.679 --> 0:10:24.800 some that require very active involvement. And one could say, 0:10:25.120 --> 0:10:28.720 you know, building a company from scratch or or scaling 0:10:28.760 --> 0:10:32.600 up a platform control. Private equity being the most active 0:10:32.640 --> 0:10:35.480 form of active management, and there's a continuum in between. 0:10:35.720 --> 0:10:37.800 And I think what you're going to see over time 0:10:38.080 --> 0:10:43.040 is areas where you're simply an intermediary between capital from 0:10:43.080 --> 0:10:46.480 a client going into a situation where it's a relatively 0:10:46.559 --> 0:10:51.400 light touch will be harder to prove value and add value. 0:10:51.400 --> 0:10:54.280 And if you you know, and whereas you. 0:10:54.200 --> 0:10:57.400 Know, the more actively managed situations, you can really demonstrate 0:10:57.440 --> 0:11:01.920 to your clients that you're value to them, but also 0:11:02.080 --> 0:11:04.280 you're a better solution provider to the company that you're 0:11:04.440 --> 0:11:05.199 that you're investing in. 0:11:05.440 --> 0:11:07.640 Given what you said, I'm not going to ask you 0:11:07.679 --> 0:11:10.880 what categories private equity versus private credit for something make 0:11:10.920 --> 0:11:12.880 the most sense, because what you said is it depends 0:11:12.920 --> 0:11:16.040 depends on the problem. We'll use different tools for different purposes. 0:11:16.200 --> 0:11:18.079 What about sectors. One of the things that we're hearing 0:11:18.080 --> 0:11:20.199 a lot about and now, for example, is infrastructure. You've 0:11:20.200 --> 0:11:22.600 seen some big deals now in infrastructure with some other 0:11:22.640 --> 0:11:25.800 investment firms. Is that a real opportunity that you're looking 0:11:25.840 --> 0:11:26.800 at going forward? 0:11:27.200 --> 0:11:31.400 Look, I think it's pretty consensus that there's some like 0:11:31.520 --> 0:11:36.199 big long term themes that everybody's spending time on. I 0:11:36.200 --> 0:11:40.160 would say infrastructure is one of those because that kind 0:11:40.160 --> 0:11:43.520 of ties into a number of themes. Digital transformation of 0:11:43.520 --> 0:11:49.280 the economy, reorienting of the energy infrastructure across the across 0:11:49.720 --> 0:11:54.920 across the globe, decarbonization. I think that the demographic shifts 0:11:55.000 --> 0:11:57.720 and then also the deglobalization trends that we're seeing with 0:11:57.760 --> 0:12:02.120 more businesses wanting to not necessarily exit on mass from 0:12:02.200 --> 0:12:07.160 certain markets, but at least to think more about supply 0:12:07.640 --> 0:12:12.120 chain certainty and security and all of those mega trends 0:12:12.200 --> 0:12:15.920 essentially necessity infrastructure investment, and that will give rise to 0:12:16.280 --> 0:12:19.040 tremendous investment opportunities, trillions of dollars that need to be 0:12:19.120 --> 0:12:21.280 invested in infrastructure in the coming decades. 0:12:21.440 --> 0:12:23.320 Okay, thank you so much. It's really great to have you. 0:12:23.360 --> 0:12:23.400 This. 0:12:23.679 --> 0:12:28.920 That's Julian Salisbury, Six Street Partners coming up anticipating a 0:12:29.000 --> 0:12:32.800 possible Trump rally if he's reelected this fall. We'll talk 0:12:32.800 --> 0:12:35.559 with Scott Vessant of Key Square Capital Management. 0:12:36.080 --> 0:12:39.439 I would say, right now, this is a Nirvana situation 0:12:40.000 --> 0:12:40.720 for the market. 0:12:42.320 --> 0:12:44.439 That's next on Wall Street Week on Bloomberg. 0:12:45.920 --> 0:12:50.160 This is Bloomberg Wall Street Week with David Weston from 0:12:50.280 --> 0:12:51.199 Bloomberg Radio. 0:12:56.960 --> 0:12:59.760 If you look at history, election years are always up heres, 0:13:00.120 --> 0:13:02.000 this is going to be a year where the economy 0:13:02.040 --> 0:13:04.320 medals along. So as Mary said, interest rates are going 0:13:04.360 --> 0:13:07.240 to stay down, stocks are going up, so they're probably, 0:13:07.280 --> 0:13:09.000 in my view, we're going to continue for the balance 0:13:09.040 --> 0:13:10.400 of the year. If you want to worry about something, 0:13:10.440 --> 0:13:11.280 I'd start to worry about. 0:13:11.360 --> 0:13:15.920 Nineteen ninety seven, that was Harvey Eisen of Wright Investors 0:13:15.960 --> 0:13:18.760 Service on Wall Street Week with Lewis Rockeiser, anticipating what 0:13:18.800 --> 0:13:21.880 the presidential election year of nineteen ninety six could mean 0:13:21.920 --> 0:13:24.600 for investors back then. For his thoughts on the twenty 0:13:24.600 --> 0:13:27.120 twenty four election and what it could mean for Wall Street. Today, 0:13:27.400 --> 0:13:30.800 we welcome now Scott's Bessen of Key Square Management. Scott, 0:13:30.880 --> 0:13:32.360 thank you so much for being here. Great to have you. 0:13:32.400 --> 0:13:33.400 Good, thanks for having me. 0:13:33.600 --> 0:13:36.720 So you have looked into this, you have an analysis. Actually, 0:13:36.800 --> 0:13:38.880 you're not just picking things out of the air about 0:13:38.880 --> 0:13:40.760 what you think is going on right now. Let's start 0:13:40.800 --> 0:13:43.000 with a so called Trump rally. We had one last 0:13:43.000 --> 0:13:45.520 time back in twenty sixteen. You think we're in one 0:13:45.600 --> 0:13:46.040 right now. 0:13:46.360 --> 0:13:47.720 We finance people are simple. 0:13:48.160 --> 0:13:52.040 In twenty sixteen, the market crashed on election eve and 0:13:52.080 --> 0:13:55.760 then took off for three four weeks after that, had 0:13:55.800 --> 0:14:01.600 a big run. So you know, Pablovian investors are anchoring 0:14:01.720 --> 0:14:06.160 to November fifth, the twenty twenty four on what a 0:14:06.280 --> 0:14:10.319 Trump win could mean, and you know they're generally market 0:14:10.360 --> 0:14:11.400 friendly policies. 0:14:11.840 --> 0:14:13.600 Well, what are this positives are we talk about taxes 0:14:13.640 --> 0:14:14.560 and regulation mainly. 0:14:14.800 --> 0:14:19.880 Yeah, so the Trump tax cuts expire in the twenty 0:14:19.920 --> 0:14:24.760 twenty five, so presumably those would be reinstated and extended, 0:14:25.480 --> 0:14:30.320 light touch regulation, energy and dependence. And I think the 0:14:30.360 --> 0:14:35.240 market thinks under Trump two that the international situation would 0:14:35.240 --> 0:14:35.920 calm down a bit. 0:14:36.240 --> 0:14:39.359 We'll talk about international situation before you talk about geopolitics. 0:14:39.360 --> 0:14:41.600 What about trade, because we've had him come out now 0:14:41.680 --> 0:14:44.240 and say this is foreign President Trump's saying ten percent 0:14:44.280 --> 0:14:47.160 traffs across the board, and Robert Leithheiser, his advisor's written 0:14:47.200 --> 0:14:48.800 a book that says we'll start at ten percent and 0:14:48.800 --> 0:14:51.680 then just keep ratching it up until we eliminate trade deficits. 0:14:51.960 --> 0:14:52.120 Right. 0:14:52.160 --> 0:14:57.360 Well, I have a contrary view or a differentiated view 0:14:57.480 --> 0:15:00.680 on that. I actually think that they're putting the gun 0:15:00.760 --> 0:15:04.000 on the table with the notion of not having to 0:15:04.040 --> 0:15:07.120 fire it is. You know, that's how you start a negotiation. 0:15:07.280 --> 0:15:10.680 You go to the most extreme position, and the world's 0:15:10.800 --> 0:15:14.760 already falling for it. Christian Leguard came out, President of 0:15:14.800 --> 0:15:18.000 the ECB, came out last week and said, almost assuredly, 0:15:18.040 --> 0:15:21.240 if Donald Trump comes back, he will put terrorists in Europe. 0:15:21.440 --> 0:15:25.360 So without having done anything, he's in a strong negotiating position. 0:15:25.600 --> 0:15:27.240 But do we want tarifts on Europe or is that 0:15:27.280 --> 0:15:29.400 going to hurt our economy? 0:15:29.520 --> 0:15:34.120 We don't know, is so what will terriffs be. 0:15:34.320 --> 0:15:40.720 Tariffs are inflationary, they tend to strengthen the dollar, but 0:15:41.280 --> 0:15:44.360 it is that it's good for domestic industry. 0:15:44.880 --> 0:15:48.120 So you say, the market's discounting the likelihood or quite 0:15:48.240 --> 0:15:50.960 distinct possibility to down trouble come back, and we saw 0:15:51.000 --> 0:15:54.480 it worked well the last time. But also is they 0:15:54.600 --> 0:15:55.880 kind of getting a little bit of help from the 0:15:55.880 --> 0:15:56.760 current administration. 0:15:57.120 --> 0:16:01.240 Well, so my thesis that this is a Trump rally 0:16:01.320 --> 0:16:05.320 is two parts. So market anchoring on Trump is ahead 0:16:05.320 --> 0:16:08.880 in the polls victory November fifth, But Janet Yellen's also 0:16:08.920 --> 0:16:11.040 looking at that Poles, So David. 0:16:11.200 --> 0:16:13.000 Since nineteen fifty. 0:16:12.680 --> 0:16:16.360 Two, the market has never had a down year when 0:16:16.400 --> 0:16:19.000 in accumu's running, never headed down year. 0:16:19.520 --> 0:16:20.600 And why is that? 0:16:20.840 --> 0:16:25.760 Because the economic apparatus in the White House is pumping away, 0:16:25.840 --> 0:16:30.280 so providing a lot of liquidity, spending a lot of money, 0:16:30.440 --> 0:16:34.120 releasing a lot of the programs that were passed last year. 0:16:34.480 --> 0:16:36.680 Maybe they've delayed, so you know, they're trying to reach 0:16:36.720 --> 0:16:40.800 some kind of crescendo this summer, and the market likes that. So, 0:16:41.000 --> 0:16:43.320 you know, I would say right now, this is a 0:16:43.440 --> 0:16:46.000 nirvana situation for the market. 0:16:46.320 --> 0:16:48.720 Trump's ahead in the polls, Marc's. 0:16:48.440 --> 0:16:52.120 Anchoring on November fifth, and Yellen sees the same poles, 0:16:52.480 --> 0:16:54.480 and she's pumping away as hard as she can. 0:16:54.600 --> 0:16:56.440 It's got One of the things I found fascinating your 0:16:56.480 --> 0:16:58.880 note is you have a chart in there that basically 0:16:59.040 --> 0:17:01.760 tracks where the S and P. Five hundred is gaining 0:17:01.880 --> 0:17:04.800 versus where Trump is versus Biden the polls, which is 0:17:04.880 --> 0:17:07.680 pretty stunning. It tends to say the more Trump gets 0:17:07.680 --> 0:17:09.560 ahead in the polls, the better the market does, and 0:17:09.600 --> 0:17:12.119 when Biden gets the poles, it's flat or even a 0:17:12.119 --> 0:17:12.760 little bit down. 0:17:13.000 --> 0:17:15.960 Yeah, so that's correct. You know, I did put the 0:17:16.080 --> 0:17:19.560 normal disclaimers. There are not a lot of episode, not 0:17:19.640 --> 0:17:20.920 a lot of observations. 0:17:21.760 --> 0:17:24.320 You know, there's a lot of serial correlation. 0:17:23.920 --> 0:17:28.880 In there, but directionally, I think it's correct, and the magnitude, 0:17:29.280 --> 0:17:33.159 as you said, is quite big. On periods when Trump 0:17:33.240 --> 0:17:36.600 is up, we've had a cumulative gain of thirty five percent. 0:17:36.920 --> 0:17:39.080 Periods on Biden's up, it's thirty percent. 0:17:39.920 --> 0:17:41.640 Scott, it's really great to have you in Willsherter. Thank 0:17:41.640 --> 0:17:44.640 you so much. That's Scott Bessent of Key Square Management. 0:17:45.840 --> 0:17:49.399 Regional and community banks. They're important to our financial system 0:17:49.600 --> 0:17:52.240 and the United States has more of them than anyone else. 0:17:53.000 --> 0:17:56.600 I think the regional banks are very important, extremely important. 0:17:56.680 --> 0:17:59.480 You know, we have forty five hundred banks, which is 0:17:59.480 --> 0:18:02.359 a lot more than any other country per capita or 0:18:02.480 --> 0:18:03.600 per dollar of GDP. 0:18:04.320 --> 0:18:06.960 As important as they are, regional banks have come under 0:18:07.000 --> 0:18:09.879 pressure in recent days. First we had the effects of 0:18:09.920 --> 0:18:12.879 a dramatic rise in interest rates leading to the closure 0:18:12.880 --> 0:18:16.320 of Silicon Valley Bank, Signature Bank, and First Republic Bank. 0:18:16.680 --> 0:18:20.119 So breaking news late Sunday, the Treasury Department, the Federal Reserve, 0:18:20.160 --> 0:18:23.320 and the FDIC said it will wind down Silicon Valley 0:18:23.320 --> 0:18:27.160 Bank in a way that quote Tom fully protects all deposits. 0:18:27.160 --> 0:18:27.560 As we know. 0:18:27.640 --> 0:18:30.360 The one question everyone was asking themselves over the weekend, 0:18:30.680 --> 0:18:32.639 why do we bank? And do we need to open 0:18:32.640 --> 0:18:33.520 a new account. 0:18:33.760 --> 0:18:36.440 Then came the decline in commercial real estate values, which 0:18:36.520 --> 0:18:38.520 hit regional banks particularly hard. 0:18:38.840 --> 0:18:41.720 Commercial real estate is not a is not a principal 0:18:41.800 --> 0:18:45.959 risk or a major risk for the very large largest banks. 0:18:46.560 --> 0:18:50.640 It is much more for regional and really the smaller 0:18:50.640 --> 0:18:54.879 banks have proportionally much larger exposure to real estate. 0:18:55.480 --> 0:18:58.040 And now we have new capital requirements proposed by the 0:18:58.040 --> 0:19:01.480 Federal Reserve which would extend to reas not covered before 0:19:02.000 --> 0:19:04.440 and that bankers say will curtail lending. 0:19:04.720 --> 0:19:07.600 We have the examinations we have on capital. They do 0:19:07.680 --> 0:19:10.400 impact our ability to drive competition the market and help 0:19:10.480 --> 0:19:14.960 America's businesses grow expand around the world, grow domestically and 0:19:15.040 --> 0:19:17.480 on a level playing field. Is a critical issue here 0:19:17.640 --> 0:19:20.240 is that these rules go through the US banking system 0:19:20.280 --> 0:19:23.879 went from being here relative to the European banking capitalization 0:19:24.000 --> 0:19:25.120 or other countries. 0:19:24.840 --> 0:19:28.040 To hear raising questions about the price will pay for 0:19:28.160 --> 0:19:29.639 higher capital requirements. 0:19:30.600 --> 0:19:34.080 Raising capital requirements spy as much as twenty percent on 0:19:34.160 --> 0:19:38.480 an industry that all participants believe is well capitalized is 0:19:38.520 --> 0:19:42.600 a bad idea in any environment, but it becomes even 0:19:42.640 --> 0:19:46.480 more problematic with economic uncertainty ahead. 0:19:47.160 --> 0:19:49.639 And whether the benefits are worth that price. 0:19:50.200 --> 0:19:52.880 I think capital requirements need to be somewhat higher. 0:19:53.119 --> 0:19:53.280