Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Very
Speaker 1: happy that we could talk about the day, and now
Speaker 1: we can. Head of it's a Michael McKee. He's in
Speaker 1: conversation with a form of Fete President William Dudley. Thank
Speaker 1: you very much, and welcome to all of our viewers
Speaker 1: and listeners on Bloomberg Television and radio worldwide. We're joined
Speaker 1: by William Dudley. He's the former president, of course of
Speaker 1: the New York Federal Reserve, now in semi retirement as
Speaker 1: senior scholar at Princeton University for the time being. Till you, uh,
Speaker 1: until you come up with something more interesting to do.
Speaker 1: There is press. It's plenty interesting. Well, you're keeping up,
Speaker 1: I know, with everything that has been going on. One
Speaker 1: of the questions that comes up here as people look
Speaker 1: forward to what monetary policy is going to be the
Speaker 1: rest of the years, where is neutral Because the Feds
Speaker 1: seemed to think it was another fifty basis points are
Speaker 1: so higher, but now we've got to pause, so maybe
Speaker 1: it's come down a little. Maybe we're right at neutrals.
Speaker 1: Where do you think we are like, I don't think
Speaker 1: that anybody knows was any certainty. I mean, this has
Speaker 1: been an unusual business cycle. Think about how long it's
Speaker 1: taken us to get back to full employment. I think
Speaker 1: generally what the FED is saying that in the language
Speaker 1: of being patient is that they're going to take a
Speaker 1: pause and wait for more data. I think there are
Speaker 1: a number of things that push them off moving to
Speaker 1: more tightening moves. Number one, you had a tightening of
Speaker 1: financial conditions. Stock prices went down, credit spreads widened, so
Speaker 1: that was one concern. Second, foreign growth looked a lot weaker,
Speaker 1: especially in China and Europe. Number three, there wasn't any inflation.
Speaker 1: You know, the inflation was the story of the dog
Speaker 1: that did embark. Even though the unemployee rate was low,
Speaker 1: you weren't seeing any acceleration much of much of an
Speaker 1: acceleration in wages, and that wasn't feeding into prices. My
Speaker 1: own personal view is that as long as inflation stays coiescent,
Speaker 1: FED will probably be on hold. If though the economy
Speaker 1: keeps growing at above trem pace, more pressure on resources,
Speaker 1: inflation probably will start to drift back up again. So
Speaker 1: my best judgment is the Fed's probably not done yet.
Speaker 1: Well how far did they go? Uh, at what point
Speaker 1: do you risk an accident? Well, that's why I think
Speaker 1: they're being patient right now. They don't want to call
Speaker 1: inadvertently cause a recession with inflation this law because people say, well,
Speaker 1: what you do that for? If inflation actually were to
Speaker 1: accelerate a bit, then they at least have a motivation
Speaker 1: for why they're moving to a tighter monetary policy stance. Well,
Speaker 1: once you did that for was to prevent downturn in
Speaker 1: the economy, which this group here, according to a survey
Speaker 1: of NAB members, suggests may come in two thousand twenty
Speaker 1: or two thousand twenty one. But the FED doesn't have
Speaker 1: a lot of ammunition if there's point to fight it. Well,
Speaker 1: that's one concern that the FED is wrestling with is
Speaker 1: if the peak federal funds rate in the cycle is
Speaker 1: you know, two and a half three, three and a
Speaker 1: half percent, there's not that much room between that and zero,
Speaker 1: and so there's been a lot of discussion among FED
Speaker 1: officials and other market observers on does the FED have
Speaker 1: enough firepower to get us out of the next economic downturn.
Speaker 1: My own view is I think there's more firepower than
Speaker 1: people realize, because they FED has invented a whole bunch
Speaker 1: of new tools to use if they're ever at the
Speaker 1: zero or body again for guidance asset purchases, open ended
Speaker 1: asset purchases, We'll just keep buying assets until we actually
Speaker 1: achieve our objection objectives of an actual recovery. But one
Speaker 1: of the arguments there is that a lot of that
Speaker 1: success that the FED had with those tools came from
Speaker 1: the announcement value. Now people know the tools are there,
Speaker 1: so they may not have as much of effect. Well,
Speaker 1: I think that if you let's imagine that we were
Speaker 1: in an economic downturn and the FED had reduced interest
Speaker 1: rates to zero, if the FED announced that we're going
Speaker 1: to do by treasuries an agency mortgage backed securities until
Speaker 1: we achieve us a given unemployment rate objective, that would
Speaker 1: be also a good commitment strategy. Would make people realize
Speaker 1: that rates are going to stay low for a long
Speaker 1: time until the FED actually has success. That's actually quite
Speaker 1: powerful in terms of supporting economic activity. Has the fact
Speaker 1: gotten too intertwined with the markets. Now, one of the
Speaker 1: reasons that the Fed, as you just said, when on
Speaker 1: hold is the market problems and dislocations we saw in December.
Speaker 1: And now everybody's back to the Powell put, Well, can
Speaker 1: you disentangle yourse? Well, it's tricky, right, because the Fed
Speaker 1: doesn't care about the stock market for the stock market's sake,
Speaker 1: cares about the stock market because of the stock market
Speaker 1: wad to go to down a lot and stay down,
Speaker 1: it would have consequences for the economy. So there isn't
Speaker 1: a put in the sense that the Fed is trying
Speaker 1: to support the stock market at given level, But there
Speaker 1: is a point in the sense that the stock market
Speaker 1: gets very weak that has consequences for the outlook and
Speaker 1: therefore for monetary policy. Well, they also were worried about
Speaker 1: the balance sheet. The balance sheet was supposed to be
Speaker 1: watching paint dry. Did Wall Street get that wrong? Well,
Speaker 1: I think all that happened there with the FED decided
Speaker 1: that the banks have a greater demand for reserves, and
Speaker 1: the FED had thought so. That just means that the
Speaker 1: stopping point for when you stop shrinking the ballantree is
Speaker 1: a little bit earlier in time than what they anticipated.
Speaker 1: It's not a big policy adjustment. They never knew how
Speaker 1: many banks, how many reserves banks we're going to demand,
Speaker 1: and now they're finding out the banks look like they
Speaker 1: are going to be in a little bit more reserves
Speaker 1: than they thought. That just means the stopping point is
Speaker 1: gonna be a little bit sooner, But it doesn't have
Speaker 1: a huge consequences for does QT though, have the same
Speaker 1: effect on the downside that it had. It doesn't seem
Speaker 1: to be having the same effect at this point. Part
Speaker 1: of the reason, I think is that people still are
Speaker 1: worried about inflation being too low rather than inflation being
Speaker 1: too high. So if you look at what what what
Speaker 1: the market participants called bond term pre and the spread
Speaker 1: between bonds and the spected path of short term rates,
Speaker 1: that's very very tiny. That's quite different than in past
Speaker 1: economic cycles. And let me ask you about a point
Speaker 1: that both the Chairman Powell and Vice Chairman Clarative made
Speaker 1: in the last couple of days, and that is that
Speaker 1: the federal deficit is just way too high and it's
Speaker 1: going to have an impact on the country. And yet
Speaker 1: we've talked about that for decades and bond rates are
Speaker 1: not going up. Well, I think it's partly because you
Speaker 1: have to look at the US bond rates in the
Speaker 1: context of rates elsewhere in the world, and we have
Speaker 1: very very low rates in Europe and Japan, so that's
Speaker 1: obviously a factor. And two people, Yeah, I think you're
Speaker 1: absolutely right. People anxiety about budget devis has going down
Speaker 1: a lot, but I'm sorry where they are. The budget
Speaker 1: devs is not only going to keep increasing, the debt
Speaker 1: service costs is going to start to climb very very rapidly,
Speaker 1: because not only is debt growing, interest rates are higher
Speaker 1: than they've been over the last ten years. So I
Speaker 1: think that that it is going to be a problem.
Speaker 1: It's not a problem right now. Well, what do you
Speaker 1: think of the modern monetary theory mm T argument that
Speaker 1: is getting so much attraction these days, particularly up on
Speaker 1: Capel Hill lately, that if you print money in your
Speaker 1: own currency you don't have to worry about deficits for
Speaker 1: a while. At least, I know it's the squishy definition.
Speaker 1: I think they're overstanding that it's true that if you
Speaker 1: print currency, print issue debt in your own currency, you
Speaker 1: don't have to default, so there's no default risk, but
Speaker 1: they're definitely an inflation risk. If you have too much
Speaker 1: money through chasing too few goods and services, you're gonna
Speaker 1: get inflation and that would be the consequence. So there,
Speaker 1: you know, as in economics, there is no free lunch,
Speaker 1: So this modern monetary theory I'm not buying a lot
Speaker 1: of Last question on the inflation and that is where
Speaker 1: do you think it goes from here? It disappeared in
Speaker 1: the fourth quarter. Does it start to come back? Well,
Speaker 1: I think it'll probably come back a little bit because
Speaker 1: obviously oil prices have recovered, so that's something that you know,
Speaker 1: moves in and out pretty quickly into the inflation numbers.
Speaker 1: I think underneath the service you're seeing a very gradual
Speaker 1: firming of inflation, driven really by the tightness of the
Speaker 1: labor market and the firmness that was finally seeing in
Speaker 1: wages enough for the FED to have to react. Well,
Speaker 1: we'll see it's gonna you know, all this stuff is
Speaker 1: slow moving, so we'll see. I don't think the Fed
Speaker 1: is gonna do anything in the near term. Second half
Speaker 1: of the year, maybe FED starts hiking rates again. Bill Dudley,
Speaker 1: thank you very much for joining us this morning. Bloomberg
Speaker 1: Television and Radio worldwide. We'll send it back to you. Oh,
Speaker 1: Michael McKee, thank you so much. For the former president
Speaker 1: of the New York Fellow Reserved ACAS, Bill Dudley at
Speaker 1: Goldman Saxon. I should say he wrote with Ed mcclvie
Speaker 1: a wonderful chapter in my book. This was Mike John Farrell.
Speaker 1: This was forty five years ago. This was after, you know,
Speaker 1: just sort of early Thatcher when that book came out.
Speaker 1: One of the stories off the mark today Brexit. There's
Speaker 1: really not much there. You're a sterling. Rather one thirty
Speaker 1: three is weaker one? Two thirty nine right now? And
Speaker 1: yeah wow, would a move on five? John? I missed
Speaker 1: that Japanese Yeah, weaker one. I just flat out and
Speaker 1: missed that. It was yields right, US. Yields are right
Speaker 1: up against resistance. Had a bit of a drift free
Speaker 1: this week, a bit of a drift. Why don't you
Speaker 1: bring our wonderful guests in on the yields. I'm very
Speaker 1: happy to catch up with pre Misery till Security's head
Speaker 1: of Global interest rates Strategy. One of my guiding lights
Speaker 1: for the bond market, the real yields. Look for it
Speaker 1: this afternoon. Great summer there on Bloomberg. Thank you Tom,
Speaker 1: and thank you Prere. Let's start Prere with the range
Speaker 1: that we've been in for treasuries, a very tight range.
Speaker 1: We're actually still in it, but this week we've started
Speaker 1: to drift higher. Your thoughts, Hi, Johan uh and I Toma,
Speaker 1: thanks for having me on. So yes, I think we
Speaker 1: have drifted a little bit higher. Um. I think what's
Speaker 1: been interesting is over the last couple of months we've
Speaker 1: had a significant risk on move and yet interest rates
Speaker 1: have stayed in this extremely narrow range like two sixty
Speaker 1: to seventy. We've been, you know, very tightly bound there,
Speaker 1: and I think it's it's a function of the macro
Speaker 1: market sort of move from a policy mistake or a
Speaker 1: FED policy mistake perception in the fourth quarter to now
Speaker 1: de wish fed um and and which is why even
Speaker 1: though equities were able to rally, uh, you know, credit
Speaker 1: spreads compressed interestrates were unable to sell off because essentially
Speaker 1: the market raced in the stubbish FED. I think now
Speaker 1: going forward it has to come back to fundamentals, and
Speaker 1: that's where we might have more of a moving interest
Speaker 1: rates rather than uh than risk asset. So if we
Speaker 1: start seeing the first look of February data in the
Speaker 1: US and we start seeing that actually growth is not decelerating,
Speaker 1: we're still growing above potential, I think we should be, uh,
Speaker 1: you know, back to talking about FED hikes and then
Speaker 1: on the global growth front um, you know, if we
Speaker 1: do get a China trade deal, if we do see
Speaker 1: China stimulus, I think we're then talking about a little
Speaker 1: bit of an upside moving rates. So we are we
Speaker 1: are actually short duration here, looking for a small increase
Speaker 1: in rates, you know, closest level at the moment. I
Speaker 1: think most people would conclude it's far too premature to
Speaker 1: call the turn in the global economy with any real conviction.
Speaker 1: But how encouraged are you by some of the data
Speaker 1: points this week when the headline data has been terrifically underwhelming.
Speaker 1: But we're just clinging to these little elements, these little
Speaker 1: components of p M I that show a bit of
Speaker 1: encouragement right now, that's fair. I think it's it is
Speaker 1: too early to say whether it's we're actually turning. I
Speaker 1: think we're looking for momentum, though, is the momentum decelerating?
Speaker 1: And I think the early read is that maybe the
Speaker 1: momentum is stabilizing, and we're also looking at policymakers globally
Speaker 1: that seem to have changed their stands for normalization, tightening
Speaker 1: to now, you know, being accommodative. What are people doing
Speaker 1: with their money? It's tough. I mean I think, um,
Speaker 1: you know, they're staying in cash. Cash is king in
Speaker 1: the US front end. Cash is giving you positive real rates.
Speaker 1: So I think you keep risk light. Um, you know,
Speaker 1: you certainly have some cash for liquidity reasons, and then
Speaker 1: you start dipping back into risks. And this is where
Speaker 1: I think it's hard to say that you should just
Speaker 1: be buying all risk asses. You start doing more credit work,
Speaker 1: and you you pick you know, sectors or issues that
Speaker 1: or other issuers that that still may look fundamentally strong.
Speaker 1: But it's a tough market. I'm hearing this from every
Speaker 1: investor I meet. The tight range in the fact that
Speaker 1: risk is valid, I think, you know, means that it's
Speaker 1: it's hard to work now putting money to work. This
Speaker 1: is fascinating. And someone that would agree with pre a
Speaker 1: miserable TV securities is Daniel Fuss, who was just on
Speaker 1: Bloomberg Television, the acclaimed really the giant of total return investing.
Speaker 1: Bill Gross has always said that Mr Fuss at Lomas
Speaker 1: Sales was out front on this. Can you exist now
Speaker 1: after the last ten years we've experienced investing like Mr
Speaker 1: Fuss or you grabbed the coupon and wait for credit
Speaker 1: recovery and price appreciation of a note or bond. Is
Speaker 1: that game still out there? Or all the young turks
Speaker 1: like you become so sophisticated you can't do what Damn
Speaker 1: Fuss did. Um. I appreciate you calling me young, so
Speaker 1: we but we won't talk about that. UM. But I
Speaker 1: do think there's you know, that trade still exists. The
Speaker 1: very trade is there. You look at demographics in the
Speaker 1: U S so globally, I think demand for fixed income
Speaker 1: should be there. Now you have to diversify your portfolio.
Speaker 1: I think the difference in what I was recommending, you know,
Speaker 1: ten years ago, was to be out the curve. I
Speaker 1: don't think you're getting paid up that much more to
Speaker 1: interociation risk, so I think the front end actually is
Speaker 1: more attractive. I would mention John that Mr First, the
Speaker 1: history of like buying all of Ontario's utility bands or
Speaker 1: buying all of New Zealand's paper huge bets fast and
Speaker 1: i'd continue with pretty much. So I pray something you
Speaker 1: touched on earlier that I think it's quite interesting. A
Speaker 1: lot of people have been quite bearish the global economy
Speaker 1: and encouraged to take on juration pick up at the
Speaker 1: long end of say the treasury curve. What I hear
Speaker 1: from you is not that creer. Why is your view
Speaker 1: so different? I think you know, if you look at
Speaker 1: a risk adjusted return, you're taking on a lot more
Speaker 1: risk and not really earning that much more. I mean,
Speaker 1: if I look at the two year at two fifty
Speaker 1: versus the ten year at two seven, if you have
Speaker 1: any interest rate increase, you're much more at risk the
Speaker 1: further out the curve you are. So I would say,
Speaker 1: you know, if you have some risk assets on on
Speaker 1: the front and own bills or twos, rather than you know,
Speaker 1: taking on all that duration risk for not earning that
Speaker 1: much more. Let me speak for our audience. That's all great,
Speaker 1: and it sounds brilliant, except I need yield. If I
Speaker 1: need yield, where do I get it? So I think credit,
Speaker 1: there are there are pockets of credit where I think,
Speaker 1: you know, you can dip your toes back in um
Speaker 1: and you know, take some credit, take on some front
Speaker 1: end duration, keep risk light because I think, um, you know,
Speaker 1: this is an environment where we're going to get these
Speaker 1: stale events. I mean just look at the fourth quarter,
Speaker 1: and you know that's when if you have some powder dry,
Speaker 1: you can go back and invest. The moment that some
Speaker 1: you know risk off, that's the time to you know,
Speaker 1: go back in. It's hard to say you should be
Speaker 1: hundred percent invested right now, just given that all risk
Speaker 1: premiums have compressed. So I think keep some keep some
Speaker 1: powder dry, and invest in some mix within the fixed
Speaker 1: in compole that I that I look at credit versus
Speaker 1: some front end bills, I think it's attractive. John Farrell,
Speaker 1: John Herman just publishes at m U f J. I'd
Speaker 1: love to have pre a comment on this. Mr Herman
Speaker 1: pre n notices a little bit of inflation stickiness within
Speaker 1: his micro analysis. Do you agree? Do you see inflations
Speaker 1: stickiness out there that bears a close watch through March
Speaker 1: and particularly to the March twenty meeting. Um, you know,
Speaker 1: by stickiness you mean in the fundamental data or the
Speaker 1: market price, the fundamental data leading to a misjudgment by
Speaker 1: the disinflation crew. As John Farrell mentioned, early in the segment, right,
Speaker 1: So I think, yes, there's even the data suggests that
Speaker 1: there's significant inflation in Ussia. And we're in an environment
Speaker 1: where none of these models have done a great job
Speaker 1: predicting inflation, and so are we at some inflection point
Speaker 1: where there's going to be a big pick up an inflation.
Speaker 1: I think the market has sort of is in the
Speaker 1: show me mode, and so unless we start seeing that
Speaker 1: pick up an inflation, I don't know if the market
Speaker 1: is going to say or or that even the Fed
Speaker 1: seems to be losing a little bit of faith in
Speaker 1: this big pick up inflation. So I would have to agree, yes,
Speaker 1: there is just wonderful premise that we're going to thank
Speaker 1: you for their TV security is just wonderful perfect. I mean,
Speaker 1: you know, it's Friday, we're looking at the themes that
Speaker 1: matter from Seattleton, New York, which can only mean Amazon,
Speaker 1: and you know the quality of the guests we have,
Speaker 1: you know, John, in America, I don't know about in England,
Speaker 1: you have to take Western of one oh one when
Speaker 1: you go to school if you go to that common institution,
Speaker 1: have a for down in Pennsylvania that com wired requirement
Speaker 1: you need to take socialism one oh one, just to
Speaker 1: get in the door from Haverford. Sure overdate joins us.
Speaker 1: What is it like freshman year at Haverford. I do
Speaker 1: not remember any communist propaganda. Oh, freshman year of courses.
Speaker 1: If that's the question. It's a great school. It's a
Speaker 1: fabulous Quaker institution and wildly eclectic. But it's great preparation
Speaker 1: for the Battle of Queens, which is the class, cultural
Speaker 1: and political battle. Let's just frame it between the gentlewoman
Speaker 1: from the Bronx and the governor in Albany. Give us
Speaker 1: an update, I'm Bezos and Queens given the cultural battle
Speaker 1: of the New York Times this morning. Yeah, well, the
Speaker 1: New York Times is reporting that Andrew Cuomos, the governor
Speaker 1: of the state of New York, has basically made overtures
Speaker 1: to Amazon executives, including Jeff Bezos himself, to get Amazon
Speaker 1: to reconsider their decision to pull back from this HQ
Speaker 1: two or whatever HQ one and a half that Amazon
Speaker 1: was opiniata a second time. That's what's gonna happen. Yeah,
Speaker 1: I mean, it does seem, at least from the reporting,
Speaker 1: that the conversation is rather one sided. It's basically Quomo
Speaker 1: making assurances that if Amazon reconsiders that, Cuomo will sort
Speaker 1: of shepherd the political, the messy political process himself, and
Speaker 1: take some more responsibility over that. Sure, I make jokes
Speaker 1: about it. You are wired into this store like no
Speaker 1: one can that happen. Can the governor in Albany tell
Speaker 1: the state senator what to do and and the others
Speaker 1: that have driven forward this exit of plans? I don't
Speaker 1: think so. So. The the issue here is that both
Speaker 1: Amazon and local political leaders, including Cuomo and mayor build
Speaker 1: the Blasio, they botched this right. It was this complicated,
Speaker 1: secretive process for for a year, highly public and secretive,
Speaker 1: kind of a toxic mix involving one of the world's
Speaker 1: most valuable come bunize, and I think it just left
Speaker 1: a bitter taste in everyone's mouth, including local politicians, local residents,
Speaker 1: Amazon executives. And it doesn't seem like there's a do over.
Speaker 1: And it's very public this morning once again with this
Speaker 1: big letter in the New York Times, dear Mr Bezos,
Speaker 1: please come back, essentially share My issue is this whole HQ,
Speaker 1: as you put at one point five, Why did they
Speaker 1: do this both so publicly and then so privately to
Speaker 1: get the states to fight with each other, as you say,
Speaker 1: it's toxic. Why didn't they just do what Google are
Speaker 1: doing in Manhattan, pick somewhere by it invest Yeah, I
Speaker 1: I I wonder I hope that Amazon learned their lesson
Speaker 1: from this process that they basically set up a reality
Speaker 1: television competition saying, please all US cities, all North American
Speaker 1: cities come and um, you know, lay flowers at our
Speaker 1: feet and tell us why your city should be graced
Speaker 1: with Amazon's presence. And that might have been a good
Speaker 1: idea in late when Amazon kicked off that process, but
Speaker 1: it just kind of got more and more distasteful as
Speaker 1: the process went on. And also, look Amazon, the story
Speaker 1: of Amazon also got a little bit more complicated in
Speaker 1: in that year that the process took Amazon became more valuable,
Speaker 1: more powerful, Bezos became the world's richest person. And then
Speaker 1: when they kind of decided, oh, we're not going to
Speaker 1: make an HQ two, We're going to make two or
Speaker 1: three HQ two's, I think it just it just seemed
Speaker 1: a little gross. So share going forward. I mean, so
Speaker 1: much work has been done here in New York City
Speaker 1: to attract tech firms, some tremendous work has been done
Speaker 1: and you can see the results. Does this episode spill
Speaker 1: over into anything more broadly or is it just an Amazon,
Speaker 1: uniquely Amazon episode. I think it's mostly a uniquely Amazon episode.
Speaker 1: The reason that the tech community, that the tech hiring
Speaker 1: has flourished in New York City is not necessarily about
Speaker 1: you know, tax breaks and showy political press conferences. It's
Speaker 1: because this city has a lot to offer the tech industry,
Speaker 1: including highly talented people in good infrastructure. At least in theory,
Speaker 1: this is a place that a lot of people still
Speaker 1: want to live and that isn't changing just because Amazon
Speaker 1: kind of got its fingers burned on the stove. Share
Speaker 1: I get to see you, You've got to come back happy.
Speaker 1: I was happy to be here overday Bloomberg opinion columnist
Speaker 1: and Tom Kine with quite an introduction that it's it's true.
Speaker 1: I mean, I'm jealous. I wish can I go to
Speaker 1: Haverford Domains of knowledge, analysis of the social world, individuals, institutions,
Speaker 1: and cultures. You're trying to say that communist. She is
Speaker 1: not comic meaning interpretation. Have you read anything but I've
Speaker 1: taken analytical geometry and shar is diving into meaning in
Speaker 1: terms I think. I think that I don't know. It's
Speaker 1: analytical geometry. Really I'm the one that geometry. And but
Speaker 1: you know it's great good morning down in Philadelphia and Hamford.
Speaker 1: Would you think the Phillies picked up a good player there.
Speaker 1: I'm excited about Bryce Bryce Harbor in Philadelphia. See that
Speaker 1: she could do it all. Share overthing on Amazon, on socialism,
Speaker 1: on Bryce Harper mint. This is a joy. We're scheduled
Speaker 1: here to talk to Eric Shatzker about one William Gross.
Speaker 1: You'll recall that Mr Gross move bonds, made coupon did
Speaker 1: a total return act of PIMCO, went to Janice. He
Speaker 1: decided to retire a couple of weeks ago. We chatted
Speaker 1: him up then and this is a really important conversation.
Speaker 1: But before we get to that, we gotta do what's important.
Speaker 1: That we have Eric Shatzker in the studio who believes
Speaker 1: Toronto maple lice blue. For those of you globally, here's
Speaker 1: you need to know. The giant of the New York
Speaker 1: Islanders just east of Manhattan, left the Islanders and joined
Speaker 1: up with the excitement of the iconic Toronto maple leaves,
Speaker 1: and for the first time last night, I went home.
Speaker 1: You happen to be wearing Islanders blue and orange today.
Speaker 1: But he has met John tavarrus is Phill emails in
Speaker 1: and says is a total class act in the game
Speaker 1: of hockey. What does tavirus meant for the Maple Leafs
Speaker 1: and all those young kids that they have? Oh wow,
Speaker 1: that's an interesting point place for us to start the conversation. Look,
Speaker 1: he's got experience. He's this is gonna sound like locker
Speaker 1: room talk. He's got to do that all day here.
Speaker 1: He's got experience. Obviously he has faced adversity like last night. Yes, yes,
Speaker 1: fair enough, fair enough, But it's a young team. So
Speaker 1: a guy with not just his skill set but his disposition,
Speaker 1: his humility is going to help those young kids play hockey.
Speaker 1: And there's the difference that you grew up with that
Speaker 1: I had, folks when I was I mean little, a
Speaker 1: sweater hockey jersey used to be sweaters and I had
Speaker 1: a Toronto Maple Leaves blue sweater. And there's something magical
Speaker 1: about the leafs. What do the original what do the
Speaker 1: leafs mean for Canada? Everything? I mean that on Montreal right,
Speaker 1: well sure not Montreal is look the the the rub
Speaker 1: if you will about Montreal is that it's in Quebec,
Speaker 1: and teams in Quebec just don't inspire the rest of
Speaker 1: the country the way, very nice team. You could be
Speaker 1: running for Mr Trudeau slot. Oh and and there may
Speaker 1: be somebody else running for that slot in the not
Speaker 1: too distant future. That's the issue, right If the Leafs
Speaker 1: end up winning the cup, the whole country celebration sat
Speaker 1: with us. This conversation with Bill Gross was important. Why
Speaker 1: was it important? Well, it was an opportunity to ask
Speaker 1: Bill Gross, as he has one foot out the door.
Speaker 1: Today is his last day at Janie Henderson, the end
Speaker 1: of an unbelievable forty eight your career, Uh what we
Speaker 1: don't yet know? And you talked to him a couple
Speaker 1: of weeks ago the day he announced his retirement. I
Speaker 1: went out there to see what was still left to
Speaker 1: learn from Bill Gross and to ask the kinds of
Speaker 1: questions that we may not have asked yet. We have
Speaker 1: all read about the trials of his nasty divorce, right
Speaker 1: it was tabloid fodder thousands of miles away here in
Speaker 1: New York City. And so one of the questions I
Speaker 1: asked Bill was you know to what degree if any
Speaker 1: did that distract you, because it's the burden is heavy
Speaker 1: to manage hundreds of millions of dollars of client money,
Speaker 1: not to mention hundreds of millions of dollars of your
Speaker 1: own money when you're going through that kind of thing.
Speaker 1: And here is what Bill Gross had to say in response,
Speaker 1: It was really surprising my personality, um, not to get personal.
Speaker 1: I'm an Asperger, uh, and Aspergers can compartmentalize, they can
Speaker 1: operate um in in different universes with the other universes
Speaker 1: affecting them as much. And so, yeah, I had a
Speaker 1: nasty divorce and uh, I still had you know, feelings
Speaker 1: about temko um, but I think he did pretty well
Speaker 1: um and compartmentalize them. Not that I didn't wake up
Speaker 1: in the middle of night and start damning one side
Speaker 1: or the other. But but when I came to work,
Speaker 1: it was all business and I don't think it affected
Speaker 1: me is that much. But you know, it's hard to
Speaker 1: know you are not your best witness when it comes
Speaker 1: to trying to figure out whether something is affecting you
Speaker 1: or not. And so that's a possibility. I didn't know
Speaker 1: you have Asperger's. Is that what you meant in February
Speaker 1: of two thousand sixteen, in one of your outlooks, you
Speaker 1: wrote about Michael Lewis's book and the movie it spawned
Speaker 1: The Big Short, and you said that you shared an
Speaker 1: attribute or an affliction I think, with one of the heroes,
Speaker 1: if you will, of that book, Michael Berry, Dr. Michael Burry.
Speaker 1: And it wasn't his glass eye exactly. Um, if you
Speaker 1: got a minute and a half is a fascinating story.
Speaker 1: And so I read that book and and Lewis is
Speaker 1: a great writer, and he within that chapter about Michael Berry,
Speaker 1: he listed ten things um that Asperger's have, um, that
Speaker 1: Michael had as well. And I read them and I
Speaker 1: go and some of them were not being able to
Speaker 1: look somebody in the eye, which I'm not doing very
Speaker 1: well well at the moment. Um. Uh, you know, singular
Speaker 1: hobbies like stamp collecting, Etcetera's under etcetera. Um, And I go, alright,
Speaker 1: that's me, I go. Um. And so I took the
Speaker 1: book out to my ex wife. I said, um, I
Speaker 1: read this, and she read it. I think Asperger's and
Speaker 1: she said you do not not you do? But she
Speaker 1: said you do. I said, how would you know that?
Speaker 1: She said, well, you know when we were having dinner
Speaker 1: with Bill Gates and Melinda, and that was like five
Speaker 1: years before, at a Duke reunion fundraiser at his home.
Speaker 1: She said, we were sitting at the table and I
Speaker 1: looked at Gates and I looked at you. And I
Speaker 1: looked at Gates and I looked at you. I said,
Speaker 1: you were doing exactly the same thing at the same time.
Speaker 1: Her mannerisms are all the same. And so I had
Speaker 1: heard that he had Asperger's in a mild for him.
Speaker 1: So I went to a psychologist and I described it
Speaker 1: and the psychologist said, he has Asperger's. So I said, Uh,
Speaker 1: why didn't you tell me? And she said, because I
Speaker 1: thought it might hurt your feelings. Ah, you didn't know
Speaker 1: this about yourself. M hm. So I read it in
Speaker 1: a book, Um, until you were in your early seventies. Yeah,
Speaker 1: but it explained a lot. Not not that I'm I'm
Speaker 1: sort of proud of it, or else I wouldn't be
Speaker 1: telling you. Um, I'm sort of proud of it because
Speaker 1: it explains a lot about me. Not that you know,
Speaker 1: all Aspergers are not geniuses. You know, the intelligence thing
Speaker 1: is not necessarily a big part of it. But you know,
Speaker 1: my personal behavior and ability to relate to people. My
Speaker 1: singular hobbies stand collecting this and this and this and this. UM. Yeah,
Speaker 1: I said, hey, uh, and so maybe I do UM.
Speaker 1: And so I did go to a psychiatrist. And on
Speaker 1: the first meeting, at the end of it, I just
Speaker 1: through it. I said, do you think I have Aspergers?
Speaker 1: And she said, oh yeah. Imagine finding out seven decades
Speaker 1: into your life, a rich life and exciting life, a
Speaker 1: life of extraordinary achievement, but a complex life that some
Speaker 1: of it maybe explained by what is termed, if if
Speaker 1: not fairly, a disorder. And and you heard him say
Speaker 1: it there. He says, it explains a lot. One of
Speaker 1: the great things I've seen Eric over the years is
Speaker 1: people that struggle with total return and they get moved
Speaker 1: out of institutions for whatever reason. There's a guy named
Speaker 1: Jeffrey Vinnick who happens to run the most successful franchise
Speaker 1: in hockey now that down in Tampa Bay, who's an
Speaker 1: absolute textbook example. Weeks or months or quarters later, whatever
Speaker 1: their theory was or bet pays off in spades. Is
Speaker 1: does Bill have any feeling of he's leaving the game
Speaker 1: now and that it could all turn around in a
Speaker 1: Bill gross manner. Yeah, he does. He thinks that his
Speaker 1: trades are still good, but it's going to take too
Speaker 1: long for them to be money good. And and that's
Speaker 1: the issue. He said, he needs to give his clients
Speaker 1: a break. They've been hanging on for too long. He's
Speaker 1: going to continue managing his own money. He's going to
Speaker 1: do it more conservatively. He's going to continue selling volatility,
Speaker 1: which he acknowledges may now and then look like a mistake.
Speaker 1: But he's going to be investing in closed and funds.
Speaker 1: He's going to be investing in muni's for example. Um,
Speaker 1: he's not going to be uh making levered bets on
Speaker 1: the convergence of you know, German buns and U S treasuries.
Speaker 1: You've been done two things today successfully. You're wonderful interview
Speaker 1: with Mr Gross And also four twenty two New York
Speaker 1: Rangers fans have emailed in on your leafs Islanders and
Speaker 1: it's all about conversion, we said, Jonathan, good morning out there.
Speaker 1: And then many other Ranger fansitive looking for their tavirus
Speaker 1: if you will, Eric Shaftsker, and look for that tonight
Speaker 1: on Bloomberg Television nine pm and much through the weekend,
Speaker 1: as well as Shaftsker in conversation with Close. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Winter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.