1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,160 Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,800 --> 00:00:23,799 Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,160 Speaker 1: and of course on the Bloomberg Terminal. The Chairman will 6 00:00:30,160 --> 00:00:33,560 Speaker 1: speak today. It will be a sober conversation, a sober 7 00:00:33,560 --> 00:00:36,120 Speaker 1: set of Q and A, and part of it will 8 00:00:36,159 --> 00:00:40,040 Speaker 1: be reading William Dudley's essay for Bloomberg Opinion this morning, 9 00:00:40,440 --> 00:00:43,440 Speaker 1: where Bill Dudley, former President the New York Fat of 10 00:00:43,440 --> 00:00:47,519 Speaker 1: course for decades of golden sex, simply says, learn how 11 00:00:47,520 --> 00:00:51,199 Speaker 1: to spell it. It is a hard landing, Bill Dudley. 12 00:00:51,320 --> 00:00:54,520 Speaker 1: How do you know or discern a recession coming? The 13 00:00:54,640 --> 00:01:00,240 Speaker 1: distinction of a soft landing looking at a Goldilocks reset, should, 14 00:01:00,280 --> 00:01:04,160 Speaker 1: if you will, of green span or a more difficult recession. 15 00:01:04,520 --> 00:01:08,280 Speaker 1: How do you get out front of that Intellectually? I 16 00:01:08,319 --> 00:01:10,440 Speaker 1: don't think it has to be a really deep recession. 17 00:01:10,480 --> 00:01:13,880 Speaker 1: I mean keep recessions typically occur when something breaks like 18 00:01:13,959 --> 00:01:16,080 Speaker 1: the global financial crisis is a good example of that. 19 00:01:16,560 --> 00:01:18,360 Speaker 1: I think what the Fed reserve has to do is 20 00:01:18,400 --> 00:01:21,959 Speaker 1: generated enough slack in the economy bring down inflation. That 21 00:01:22,000 --> 00:01:24,360 Speaker 1: means the unemployer rate has to go up. The problem 22 00:01:24,360 --> 00:01:26,240 Speaker 1: that the FED has it's very hard to push the 23 00:01:26,319 --> 00:01:28,959 Speaker 1: unemployer rate up only a little bit. Every time the 24 00:01:29,000 --> 00:01:31,160 Speaker 1: unemployer rates going up by more than a half a percent, 25 00:01:31,440 --> 00:01:33,920 Speaker 1: you've had a full blown reception. There's no reason to 26 00:01:33,959 --> 00:01:35,840 Speaker 1: think that it's going to be any different this time. 27 00:01:36,440 --> 00:01:40,279 Speaker 1: Will the Chairman today say what you say in your essay, 28 00:01:40,400 --> 00:01:45,360 Speaker 1: that suddenly employment is a mandate is subservient? Is that 29 00:01:45,400 --> 00:01:49,800 Speaker 1: where we're heading. Well, that's what the FIT already told 30 00:01:49,840 --> 00:01:52,440 Speaker 1: us in their FLOMC statement. They took out the reference 31 00:01:52,520 --> 00:01:55,920 Speaker 1: to the labor market remains so strong. They're very much 32 00:01:55,960 --> 00:02:00,240 Speaker 1: focused now on inflation as opposed to employment, because the 33 00:02:00,320 --> 00:02:02,559 Speaker 1: layer market is too tight as opposed to not tight enough. 34 00:02:02,840 --> 00:02:05,160 Speaker 1: So I think he'll reiterate the message that we heard 35 00:02:05,200 --> 00:02:08,320 Speaker 1: that we heard in his press conference last week. I 36 00:02:08,320 --> 00:02:10,959 Speaker 1: think also though he will not talk about a hard landing, 37 00:02:11,200 --> 00:02:13,040 Speaker 1: the FETE is still going for a soft landing, and 38 00:02:13,040 --> 00:02:15,240 Speaker 1: of course they should. The problem is it's just gonna 39 00:02:15,240 --> 00:02:17,079 Speaker 1: be very difficult for them to pull this off. But 40 00:02:17,240 --> 00:02:19,040 Speaker 1: a lot of people in the market right now are 41 00:02:19,080 --> 00:02:22,560 Speaker 1: trying to draw a distinction between a soft recession or 42 00:02:22,639 --> 00:02:25,360 Speaker 1: a shallow one, and one that is much more damaging. 43 00:02:25,560 --> 00:02:28,840 Speaker 1: What is the characteristic of the hard landing you and vision. 44 00:02:30,080 --> 00:02:32,720 Speaker 1: I think it's going to be a relatively mild recession 45 00:02:32,840 --> 00:02:36,440 Speaker 1: at this point, because the fit the financial system looks 46 00:02:36,440 --> 00:02:39,520 Speaker 1: like it's pretty solid. Household in business, balance sheets look 47 00:02:39,600 --> 00:02:42,359 Speaker 1: like they're pretty solid. You really get a deep downturn 48 00:02:42,440 --> 00:02:44,880 Speaker 1: when things in the financial system break and the ability 49 00:02:44,919 --> 00:02:48,240 Speaker 1: to supply credit to people becomes impaired. I don't expect 50 00:02:48,280 --> 00:02:51,000 Speaker 1: that they happen this time, So I would expect a 51 00:02:51,000 --> 00:02:55,520 Speaker 1: mild recession like or or two thousand and one, not 52 00:02:55,680 --> 00:02:58,760 Speaker 1: the deep recession like seventy three, seventy four, or of 53 00:02:58,760 --> 00:03:01,000 Speaker 1: course the Great Financial Price. A lot of people would 54 00:03:01,000 --> 00:03:02,560 Speaker 1: push back Bill and say that this FED has no 55 00:03:02,639 --> 00:03:05,240 Speaker 1: appetite for causing a recession, they don't seem to want 56 00:03:05,280 --> 00:03:08,480 Speaker 1: to do that, and that they will eventually pivot away 57 00:03:08,520 --> 00:03:11,520 Speaker 1: from raising rates as much as people currently expect. Why 58 00:03:11,520 --> 00:03:12,959 Speaker 1: do you think that's not the case. Why do you 59 00:03:13,000 --> 00:03:16,680 Speaker 1: think they're going to take a page from haul Ulcer? Well, 60 00:03:16,720 --> 00:03:18,840 Speaker 1: I don't think they want a recession. The problem is 61 00:03:18,840 --> 00:03:21,000 Speaker 1: that if you're going to get inflation down, you need 62 00:03:21,040 --> 00:03:23,320 Speaker 1: more slack in the economy, and it's very hard to 63 00:03:23,360 --> 00:03:27,160 Speaker 1: generate more slack in the economy without actually generating recession. 64 00:03:27,520 --> 00:03:29,960 Speaker 1: So that they're they're they're definitely going for a soft lane. 65 00:03:30,040 --> 00:03:32,400 Speaker 1: It's gonna be almost impossible for them to pull it off. 66 00:03:32,880 --> 00:03:35,080 Speaker 1: But as the assumption you're making bill that they're not 67 00:03:35,160 --> 00:03:38,120 Speaker 1: going to blink even when the data turns more dramatically 68 00:03:38,120 --> 00:03:40,400 Speaker 1: than we already have seen it having. I mean, Larry 69 00:03:40,440 --> 00:03:43,800 Speaker 1: Summers was talking about a five percent unemployment rate over 70 00:03:43,840 --> 00:03:48,080 Speaker 1: the next five years. Where do you think they're tolerances Well, 71 00:03:48,080 --> 00:03:49,680 Speaker 1: I think that I think what Larry is talking about 72 00:03:49,760 --> 00:03:51,560 Speaker 1: is certainly reasonable. I think the reason why they're not 73 00:03:51,560 --> 00:03:52,920 Speaker 1: going to blink at the end of the day is 74 00:03:52,960 --> 00:03:56,080 Speaker 1: they know that if they blink and don't get inflation down, 75 00:03:56,360 --> 00:03:59,920 Speaker 1: then they have to do even more later. Postponing procrastinate 76 00:04:00,280 --> 00:04:02,080 Speaker 1: is not a great option. We saw what happened in 77 00:04:02,120 --> 00:04:04,760 Speaker 1: the nineties, sixties and seventies and the Feeder Reserve was 78 00:04:04,840 --> 00:04:07,920 Speaker 1: slow to tackle inflation. What happened was and station got 79 00:04:07,960 --> 00:04:10,240 Speaker 1: out of hand and Paul Broker had to come in 80 00:04:10,320 --> 00:04:12,720 Speaker 1: and put the U s econmy through the ringer. So 81 00:04:12,760 --> 00:04:15,400 Speaker 1: the fact wants to do what's necessary in the near term, 82 00:04:15,560 --> 00:04:17,200 Speaker 1: so they don't have to do a lot more in 83 00:04:17,240 --> 00:04:20,080 Speaker 1: the longer term. But it is in the longer term 84 00:04:20,080 --> 00:04:22,640 Speaker 1: that you really see the full effects of monetary policy 85 00:04:22,680 --> 00:04:26,760 Speaker 1: taking shape. It operates with a lag. We all understand that. 86 00:04:26,880 --> 00:04:28,679 Speaker 1: So I guess the question is if they're front loading 87 00:04:28,680 --> 00:04:32,120 Speaker 1: and aggressive, are they going to see it reflected in 88 00:04:32,160 --> 00:04:34,640 Speaker 1: the actual data we're getting or do they risk just 89 00:04:34,720 --> 00:04:37,560 Speaker 1: moving way too aggressively and then the data turns all 90 00:04:37,600 --> 00:04:41,360 Speaker 1: at once. Well, that's that's what could actually happen, because 91 00:04:41,400 --> 00:04:44,760 Speaker 1: right now the ECMMY has considerable for momentum as the 92 00:04:44,960 --> 00:04:49,080 Speaker 1: commy reopens and imperial games are very strong. Household balance 93 00:04:49,160 --> 00:04:52,560 Speaker 1: sheets are still very solid, boosted by the fiscal stimus 94 00:04:52,720 --> 00:04:55,000 Speaker 1: that we got over the last couple of years. But 95 00:04:55,520 --> 00:04:59,680 Speaker 1: beneath that things are trouble. Uh Inflation is rising faster 96 00:05:00,040 --> 00:05:04,200 Speaker 1: and wages financial conditions have tightened a great deal. So 97 00:05:04,240 --> 00:05:05,640 Speaker 1: what I think is going to happen is the economy 98 00:05:05,760 --> 00:05:08,360 Speaker 1: be fine over the next few months, and then we're 99 00:05:08,400 --> 00:05:10,839 Speaker 1: going to see a very sharp slow down the probably 100 00:05:10,880 --> 00:05:13,520 Speaker 1: in the first half But I just want to build 101 00:05:13,560 --> 00:05:15,640 Speaker 1: on something that Kaylee was talking about with that five 102 00:05:15,680 --> 00:05:19,640 Speaker 1: percent unemployment figure from Larry Summers over the next five years, 103 00:05:19,680 --> 00:05:21,440 Speaker 1: and that that's what he thinks is necessary to bring 104 00:05:21,440 --> 00:05:23,960 Speaker 1: inflation down. What happens if you start to see the 105 00:05:24,040 --> 00:05:27,800 Speaker 1: unemployment numbers climb, but the inflation figures do not come 106 00:05:27,839 --> 00:05:30,839 Speaker 1: down because of those lag effects like rents, for example, 107 00:05:30,880 --> 00:05:33,720 Speaker 1: that are continuing to climb. How does the FED handle that? 108 00:05:33,760 --> 00:05:38,320 Speaker 1: Based on your conversations and your experience on the Central Bank, Well, 109 00:05:38,360 --> 00:05:40,280 Speaker 1: I think you're right that inflation is probably not gonna 110 00:05:40,279 --> 00:05:43,320 Speaker 1: come down that quickly because there are leads in price 111 00:05:44,040 --> 00:05:47,560 Speaker 1: in companies raising prices. Also, I think the Ukraine Russia 112 00:05:47,600 --> 00:05:51,560 Speaker 1: war complicates things enormously because it looks like the energy 113 00:05:51,560 --> 00:05:55,200 Speaker 1: price shock and the food shock is gonna last longer 114 00:05:55,240 --> 00:05:57,400 Speaker 1: because of the war. So I think that the FED 115 00:05:57,440 --> 00:06:00,160 Speaker 1: has gotten very unlucky in terms of the kind the 116 00:06:00,160 --> 00:06:03,200 Speaker 1: inflation shocks that we're seeing. They're likely to be persistent 117 00:06:03,440 --> 00:06:05,680 Speaker 1: and that's gonna make it difficult for the FED to 118 00:06:05,680 --> 00:06:09,599 Speaker 1: reverse course. Bill Dudley John Taylor's at a school you 119 00:06:09,600 --> 00:06:12,200 Speaker 1: may know it across the bay from Berkeley. It's stand 120 00:06:12,360 --> 00:06:14,760 Speaker 1: Stanford I think is what it's called. And I can 121 00:06:14,839 --> 00:06:17,840 Speaker 1: just see John Taylor with a full balloon in as 122 00:06:17,920 --> 00:06:21,120 Speaker 1: freshman economics class, letting the air out of it ever 123 00:06:21,240 --> 00:06:25,240 Speaker 1: so slowly. We have a fiscal balloon some thirty of 124 00:06:25,279 --> 00:06:28,719 Speaker 1: g d P. How long will it take to let 125 00:06:28,720 --> 00:06:31,880 Speaker 1: the air out of that fiscal balloon? Is a central 126 00:06:31,920 --> 00:06:34,800 Speaker 1: bank is at a three year project or do you 127 00:06:34,880 --> 00:06:38,280 Speaker 1: really see it out almost to a decade. I don't 128 00:06:38,320 --> 00:06:40,039 Speaker 1: think it should take as long as a decade. But 129 00:06:40,160 --> 00:06:43,080 Speaker 1: fiscal policy is a factor behind why we're probably going 130 00:06:43,120 --> 00:06:45,960 Speaker 1: to see a sharp slowdown at some point. Because fiscal policy, 131 00:06:45,960 --> 00:06:48,240 Speaker 1: while it has been very stimular over the last two years, 132 00:06:48,480 --> 00:06:51,880 Speaker 1: that steamless is over. We've also seen households begin to 133 00:06:51,920 --> 00:06:53,840 Speaker 1: pull down their savings race. So the savings rate was 134 00:06:53,920 --> 00:06:56,560 Speaker 1: very elevated as a fiscal policy stamless with being put 135 00:06:56,600 --> 00:06:59,000 Speaker 1: in place, but the savings rate now has already fallen 136 00:06:59,000 --> 00:07:01,440 Speaker 1: below it's long one app which tells you that consumers 137 00:07:01,440 --> 00:07:03,920 Speaker 1: are a little bit stressed, that are starting to experience 138 00:07:03,920 --> 00:07:06,000 Speaker 1: a little bit of stress in terms of their balance sheets. 139 00:07:06,320 --> 00:07:11,040 Speaker 1: Bill Dudley required reading folks before the testimony of Chairman Powell. 140 00:07:11,040 --> 00:07:14,840 Speaker 1: The Humphrey Hawkins testimony a monetary report by the Chairman 141 00:07:14,880 --> 00:07:17,080 Speaker 1: of the Federal Reserve, and we'll get Bill Dudley out 142 00:07:17,120 --> 00:07:19,480 Speaker 1: on social here as quick as we can. You can 143 00:07:19,480 --> 00:07:22,480 Speaker 1: see that, of course at Bloomberg dot com. He speaks 144 00:07:22,520 --> 00:07:28,040 Speaker 1: of a hard uh landing. Uh uh is Well, you know, Bill, 145 00:07:28,120 --> 00:07:30,280 Speaker 1: I look at this and I think if Jerome Powell 146 00:07:30,400 --> 00:07:34,840 Speaker 1: was to read your essay, you wonder how he would 147 00:07:34,920 --> 00:07:39,160 Speaker 1: amend his discussion today. I mean, he's not gonna say 148 00:07:39,240 --> 00:07:42,600 Speaker 1: hard landing, but how does he give up the how 149 00:07:42,640 --> 00:07:46,640 Speaker 1: does he address the probabilities the set of outcomes that 150 00:07:46,680 --> 00:07:49,560 Speaker 1: we may see. Well, he's made it more clear that 151 00:07:49,600 --> 00:07:52,360 Speaker 1: it's going to be more difficult the longer inflation stays 152 00:07:52,400 --> 00:07:54,920 Speaker 1: as high as it's been the heart of the fast jobs, 153 00:07:54,960 --> 00:07:57,480 Speaker 1: and he's he's admitted that in his his press conference. 154 00:07:57,800 --> 00:07:59,320 Speaker 1: So I think today he's going to make it clear 155 00:07:59,400 --> 00:08:02,120 Speaker 1: that this is not gonna be easy. He's gonna talk 156 00:08:02,160 --> 00:08:04,440 Speaker 1: about that there is a path of soft learning. I 157 00:08:04,480 --> 00:08:07,280 Speaker 1: think that path is extraordinarily narrow. You won't talk about 158 00:08:07,320 --> 00:08:09,200 Speaker 1: how narrow that path is. They'll just talk about that's 159 00:08:09,200 --> 00:08:11,240 Speaker 1: what the Fed Reserve is trying to seek and pull 160 00:08:11,280 --> 00:08:14,200 Speaker 1: off this time. Bill, what kind of financial breaking do 161 00:08:14,240 --> 00:08:16,640 Speaker 1: you foresee being a trigger for the Fed? And I 162 00:08:16,680 --> 00:08:19,160 Speaker 1: say this as the end weekends to the weakest levels 163 00:08:19,200 --> 00:08:22,600 Speaker 1: we've seen versus the dollar since and people are starting 164 00:08:22,600 --> 00:08:27,440 Speaker 1: to get concerned about deteriorating liquidity in certain bond markets. Well, 165 00:08:27,440 --> 00:08:29,600 Speaker 1: I think the biggest area stress, frankly is going to 166 00:08:29,640 --> 00:08:32,079 Speaker 1: be low and moderate income countries who are hurt by 167 00:08:32,240 --> 00:08:35,880 Speaker 1: want a stronger dollar, higher grain prices and higher energy prices. 168 00:08:36,360 --> 00:08:39,599 Speaker 1: For poorer countries, grain and energy is a pretty significant 169 00:08:39,600 --> 00:08:42,880 Speaker 1: portion of the household consumption basket, so they're gonna hit 170 00:08:43,080 --> 00:08:45,559 Speaker 1: be hit very severely over the next twelve to eighteen months. 171 00:08:45,679 --> 00:08:48,240 Speaker 1: So I expect a lot of sovereign debt problems in 172 00:08:48,559 --> 00:08:50,440 Speaker 1: the next year or two, and that's going to just 173 00:08:50,520 --> 00:08:53,320 Speaker 1: be more problematic for the global economy. So, Bill, at 174 00:08:53,360 --> 00:08:55,760 Speaker 1: what point does a strong dollar create a real issue? 175 00:08:55,800 --> 00:08:57,720 Speaker 1: And this is something that I was thinking about, especially 176 00:08:57,840 --> 00:09:00,160 Speaker 1: is a growing number of investors see the dollar are 177 00:09:00,200 --> 00:09:03,000 Speaker 1: as the main hedge against equity weakness. At what point 178 00:09:03,040 --> 00:09:06,240 Speaker 1: is it a trigger for the Fed? Well, the fact 179 00:09:06,360 --> 00:09:09,079 Speaker 1: actually is not unhappy with the dollar being stronger because 180 00:09:09,080 --> 00:09:11,920 Speaker 1: the stronger dollar holds down US inflation by making import 181 00:09:11,960 --> 00:09:14,800 Speaker 1: prices cheaper, and it also slows down the economy by 182 00:09:14,840 --> 00:09:18,120 Speaker 1: reducing US export competents. So when you think about the 183 00:09:18,120 --> 00:09:22,480 Speaker 1: FED once tighter financial conditions, higher bonnials, looperstock prices, stronger dollar, 184 00:09:22,800 --> 00:09:25,000 Speaker 1: the dollar is actually the most attractive of those three 185 00:09:25,040 --> 00:09:28,360 Speaker 1: things because the stronger dollar actually increases your purchasing power. 186 00:09:28,640 --> 00:09:31,040 Speaker 1: So the dollar strength is not something the Federal Reserved 187 00:09:31,120 --> 00:09:33,840 Speaker 1: views as a bug. Thank you, this is a feature. Well. 188 00:09:33,880 --> 00:09:36,679 Speaker 1: Speaking of the financial markets, we heard from Tom Barkin 189 00:09:36,800 --> 00:09:39,680 Speaker 1: yesterday we will again today, but he essentially said that 190 00:09:39,800 --> 00:09:41,199 Speaker 1: you want to get back to where you want to 191 00:09:41,240 --> 00:09:43,640 Speaker 1: go as fast as you can without breaking anything, talking 192 00:09:43,640 --> 00:09:45,880 Speaker 1: about not wanting to cause undue harm, not just to 193 00:09:45,920 --> 00:09:49,480 Speaker 1: the economy but to financial markets. What harm would that be? 194 00:09:49,640 --> 00:09:52,200 Speaker 1: What would make the FED put kicked back in Bill? 195 00:09:53,679 --> 00:09:55,960 Speaker 1: I think you'd have to see some sort of calamity 196 00:09:56,000 --> 00:09:59,720 Speaker 1: and financial markets that impeded market function, impeded the ability 197 00:09:59,720 --> 00:10:02,720 Speaker 1: of thanks to lend money to households and businesses. I 198 00:10:02,720 --> 00:10:05,000 Speaker 1: don't expect that. I think the reforms that we made 199 00:10:05,440 --> 00:10:08,240 Speaker 1: following the Great Financial Crisis, in terms of the banking system, 200 00:10:08,559 --> 00:10:12,520 Speaker 1: more capital, more liquidity, better risk management, better governance, those 201 00:10:12,640 --> 00:10:14,640 Speaker 1: have shown to work. And I think they'll work this 202 00:10:14,760 --> 00:10:16,520 Speaker 1: time as well. Bill, I just want to say, and 203 00:10:16,559 --> 00:10:19,440 Speaker 1: you're wonderful, essay. I don't know which is more important 204 00:10:19,480 --> 00:10:22,880 Speaker 1: that you quoted the great economist Claudia Sam or you 205 00:10:23,000 --> 00:10:26,480 Speaker 1: quoted the other economist, Wiley Coyote. I'll let you decide 206 00:10:26,480 --> 00:10:29,240 Speaker 1: which one. I think. That's uh great to see her, 207 00:10:29,280 --> 00:10:31,960 Speaker 1: Bill Dudley, thank you so much. The former president of 208 00:10:32,040 --> 00:10:41,480 Speaker 1: the New York Right now, Professor Abbie Joseph Cohen joins us. 209 00:10:41,520 --> 00:10:44,520 Speaker 1: She is entrenched at the Columbia Business School and of 210 00:10:44,559 --> 00:10:49,040 Speaker 1: course for decades at Golden sas is a partner. Uh, professor, 211 00:10:49,160 --> 00:10:51,800 Speaker 1: how's it going? What a shift to go from the 212 00:10:51,840 --> 00:10:55,800 Speaker 1: twenty five hour week of Goldman Sachs down to the 213 00:10:55,840 --> 00:10:59,439 Speaker 1: cushy job as a professor at one of our acclaimed schools. 214 00:10:59,600 --> 00:11:03,600 Speaker 1: How abrupt is a shift? Ban? Well, it was twenty 215 00:11:03,600 --> 00:11:08,320 Speaker 1: five hours a day, not a week. Correct that. That's 216 00:11:08,440 --> 00:11:11,120 Speaker 1: that's quite all right. Um. It has been a wonderful 217 00:11:11,480 --> 00:11:14,880 Speaker 1: adjustment for me. Frankly, you know, I was an adjunct 218 00:11:14,920 --> 00:11:17,440 Speaker 1: of Columbia for almost a decade, so I knew what 219 00:11:17,480 --> 00:11:20,800 Speaker 1: I was getting into. Um. I love the students that Columbia. 220 00:11:20,960 --> 00:11:24,600 Speaker 1: Half of them are from overseas, and it's a terrific faculty, 221 00:11:25,200 --> 00:11:27,480 Speaker 1: and I'm spending I'm spending time with a lot of 222 00:11:27,520 --> 00:11:33,160 Speaker 1: the faculty working on new curriculum materials for them, incorporating 223 00:11:33,440 --> 00:11:36,800 Speaker 1: the real world aspects into the academic work. And the 224 00:11:36,840 --> 00:11:40,240 Speaker 1: foundation here, folks, is something that the right of passage. 225 00:11:40,280 --> 00:11:43,600 Speaker 1: If you're in the racket, you must read either nineteen 226 00:11:43,720 --> 00:11:46,960 Speaker 1: thirty four Graham Dot or maybe you catch up with 227 00:11:47,040 --> 00:11:50,120 Speaker 1: Graham Dot and Coddle. Right now we look at Graham 228 00:11:50,160 --> 00:11:52,480 Speaker 1: Dot and Joseph Cohen, which is going to be the 229 00:11:52,520 --> 00:11:55,720 Speaker 1: new definitive book out of Columbia Business School. How do 230 00:11:55,760 --> 00:11:58,960 Speaker 1: you take the fundamentals that we were weaned on and 231 00:11:59,080 --> 00:12:04,680 Speaker 1: drag them forward and Jerome Powell's Modern Age, Tom, that 232 00:12:04,840 --> 00:12:07,760 Speaker 1: is a wonderful question. But first let me set the stage, 233 00:12:08,200 --> 00:12:11,000 Speaker 1: and that is to say, for the last few years, 234 00:12:11,440 --> 00:12:16,079 Speaker 1: the fundamentals have mattered less than things like momentum and 235 00:12:16,240 --> 00:12:19,480 Speaker 1: investor enthusiasm. Now you take a look, for example, of 236 00:12:19,520 --> 00:12:24,160 Speaker 1: the strong correlation between the technology stocks, cryptocurrency and so on, 237 00:12:24,559 --> 00:12:29,560 Speaker 1: and basically say, these are types of financial assets in 238 00:12:29,600 --> 00:12:34,160 Speaker 1: which valuation approaches really didn't matter very much. And I 239 00:12:34,200 --> 00:12:37,560 Speaker 1: think we're now back into a period in which it 240 00:12:37,640 --> 00:12:41,120 Speaker 1: does matter, where it's the fundamentals of earnings, the fundamentals 241 00:12:41,120 --> 00:12:45,000 Speaker 1: of margins, the fundamentals of inflation and interest rates, and 242 00:12:45,080 --> 00:12:49,720 Speaker 1: putting that all together in terms of appropriate valuation models 243 00:12:50,000 --> 00:12:52,640 Speaker 1: that will make a big difference for investors going forward. 244 00:12:52,679 --> 00:12:55,080 Speaker 1: I mean, how do you model the fundamentals at a 245 00:12:55,120 --> 00:12:57,319 Speaker 1: time when people can't come out whether we're going to 246 00:12:57,440 --> 00:13:00,560 Speaker 1: have a sanguid economy or a hard landing that looks 247 00:13:00,600 --> 00:13:03,040 Speaker 1: something like a depression. At what point do you game 248 00:13:03,080 --> 00:13:08,000 Speaker 1: out recessionary outcomes and your fundamental analysis. Yeah, you know, 249 00:13:08,080 --> 00:13:11,160 Speaker 1: there are two different ways to look at that, Leasta. 250 00:13:11,240 --> 00:13:15,520 Speaker 1: First of all, we can game out alternative scenarios, so 251 00:13:15,559 --> 00:13:18,640 Speaker 1: we have some sense of what the range of possibilities 252 00:13:18,760 --> 00:13:22,080 Speaker 1: might be, not just for equities but other financial assets. 253 00:13:22,360 --> 00:13:24,439 Speaker 1: But of course, at the end of the day, an 254 00:13:24,480 --> 00:13:28,320 Speaker 1: investor portfolio manager has to say, what do I think 255 00:13:28,480 --> 00:13:31,880 Speaker 1: is the most likely scenario. You can always plan for 256 00:13:31,920 --> 00:13:35,840 Speaker 1: the worst if you have very little risk tolerance. You 257 00:13:35,880 --> 00:13:39,319 Speaker 1: can always plan for the best if you're highly risk averse. 258 00:13:39,600 --> 00:13:42,959 Speaker 1: But I think many portfolio managers are aiming for something 259 00:13:43,000 --> 00:13:45,560 Speaker 1: in the middle, where they're trying to identify what is 260 00:13:45,600 --> 00:13:49,280 Speaker 1: the most likely scenario, And as some of your earlier 261 00:13:49,320 --> 00:13:52,240 Speaker 1: guests indicated, what seems to be priced in right now 262 00:13:52,400 --> 00:13:56,439 Speaker 1: is a mild recession. Uh, certainly not a severe recession. 263 00:13:56,480 --> 00:13:58,520 Speaker 1: When you look at the parameters, do you look at 264 00:13:58,520 --> 00:14:01,240 Speaker 1: the end of the era of money or do you 265 00:14:01,320 --> 00:14:06,079 Speaker 1: look at just simply a pause, a momentary reprieve from 266 00:14:06,120 --> 00:14:08,839 Speaker 1: the ultra low rates of more than a decade as 267 00:14:08,880 --> 00:14:11,200 Speaker 1: we try to curtail inflation, and then our aversion back 268 00:14:11,240 --> 00:14:14,920 Speaker 1: to that at the end. Yeah, let me adjust the 269 00:14:15,000 --> 00:14:18,040 Speaker 1: question just a little bit, Lisa, and to say that 270 00:14:18,320 --> 00:14:21,560 Speaker 1: money isn't free anymore, but in many cases it's not 271 00:14:21,720 --> 00:14:26,280 Speaker 1: particularly expensive, particularly by historical standards. And so while we 272 00:14:26,360 --> 00:14:29,280 Speaker 1: have seen this rise and interest rates, and the FED 273 00:14:29,480 --> 00:14:32,440 Speaker 1: is likely to continue to move those short rates higher, 274 00:14:32,680 --> 00:14:35,760 Speaker 1: we've already seen quite an increase in the intermediates and 275 00:14:35,760 --> 00:14:39,120 Speaker 1: the longs and the rates that affect consumers, for example 276 00:14:39,160 --> 00:14:42,760 Speaker 1: through mortgages. UH. And so what we have to recognize 277 00:14:42,960 --> 00:14:47,120 Speaker 1: is that when money becomes more expensive in some ways, 278 00:14:47,800 --> 00:14:53,160 Speaker 1: investors households become much more careful with it UM because 279 00:14:53,360 --> 00:14:56,680 Speaker 1: if it's no longer free, UM, you're going to see 280 00:14:56,760 --> 00:15:01,480 Speaker 1: less leverage, which is a good thing. In portfolios. For example, 281 00:15:01,600 --> 00:15:06,520 Speaker 1: we've had incredible returns, and some private equity portfolios maybe 282 00:15:06,560 --> 00:15:09,600 Speaker 1: the basic returns were good, but in some cases they've 283 00:15:09,640 --> 00:15:13,400 Speaker 1: been turbo charged by significant amounts of leverage. We sort 284 00:15:13,400 --> 00:15:17,840 Speaker 1: of hide the underlying a skill set, if you will, 285 00:15:17,880 --> 00:15:20,680 Speaker 1: of of the portfolio manager. And then, of course there 286 00:15:20,680 --> 00:15:24,640 Speaker 1: are many corporations that took advantage of very inexpensive money 287 00:15:24,880 --> 00:15:28,040 Speaker 1: to leverage up their results um and so when money 288 00:15:28,080 --> 00:15:30,680 Speaker 1: is no longer free, we get to see a better 289 00:15:30,720 --> 00:15:34,880 Speaker 1: picture of whether those corporate managers and those portfolio managers 290 00:15:35,000 --> 00:15:38,160 Speaker 1: are actually doing a good job. Well, Abby, you talk 291 00:15:38,200 --> 00:15:41,040 Speaker 1: about how people are more careful with their money in 292 00:15:41,040 --> 00:15:43,480 Speaker 1: this kind of environment, and we know that it wasn't 293 00:15:43,520 --> 00:15:47,160 Speaker 1: just you know, corporations and big institutional investors that were 294 00:15:47,160 --> 00:15:50,480 Speaker 1: moving money around during the pandemic free money area. You 295 00:15:50,560 --> 00:15:53,960 Speaker 1: also had stimulus that was fueling the retail investor and 296 00:15:54,000 --> 00:15:57,240 Speaker 1: they have been a force within these markets. What happens 297 00:15:57,280 --> 00:16:01,440 Speaker 1: when that goes away? Uh. What we are looking at, 298 00:16:01,480 --> 00:16:05,040 Speaker 1: of course, as a situation in which individuals in many 299 00:16:05,320 --> 00:16:10,080 Speaker 1: cases became overly enthusiastic about some areas of the market, 300 00:16:10,160 --> 00:16:16,040 Speaker 1: equities and elsewhere, including digital currencies that offered good momentum um. 301 00:16:16,120 --> 00:16:19,200 Speaker 1: And what we are moving into and have already gone 302 00:16:19,880 --> 00:16:23,720 Speaker 1: to see is what happens when the momentum breaks down 303 00:16:24,120 --> 00:16:28,400 Speaker 1: and you need to start looking at the valuations per se. Now, 304 00:16:28,720 --> 00:16:32,160 Speaker 1: individual investors, of course, have many different factors that they 305 00:16:32,200 --> 00:16:34,880 Speaker 1: need to be concerned about. Some of it has to 306 00:16:34,920 --> 00:16:38,600 Speaker 1: do with how much longer they have in their investment arizon, 307 00:16:39,080 --> 00:16:42,320 Speaker 1: what else they might need, uh, the capital for and 308 00:16:42,320 --> 00:16:45,880 Speaker 1: and so on, and so we in fact see less money. 309 00:16:45,920 --> 00:16:48,520 Speaker 1: And we have already seen us going into things like 310 00:16:48,640 --> 00:16:53,280 Speaker 1: cap weighted dtfs. We've not yet seen the intermediate aspect, 311 00:16:53,360 --> 00:16:55,400 Speaker 1: and I don't think it's going to be all that 312 00:16:55,440 --> 00:16:58,920 Speaker 1: bad just looking at the demograph. I say this in 313 00:16:59,000 --> 00:17:02,800 Speaker 1: great honor of your two thousand five paper, which is definitive, folks. 314 00:17:02,800 --> 00:17:08,000 Speaker 1: It's basically codified within the CIFA Institute Aristotle on Investment 315 00:17:08,040 --> 00:17:13,480 Speaker 1: decision Making. We have dragged ourselves, Professor, from the elegance 316 00:17:13,480 --> 00:17:16,880 Speaker 1: of two thousand five to a two thousand twenty two 317 00:17:16,880 --> 00:17:21,920 Speaker 1: discussion of what's called a Cathartic puke. How does catharsis 318 00:17:21,920 --> 00:17:27,920 Speaker 1: play into fundamental analysis and the confidence to own equities? 319 00:17:28,160 --> 00:17:31,720 Speaker 1: Do I need to go down substantially to find a 320 00:17:31,840 --> 00:17:36,920 Speaker 1: base to own equities. We are now, I believe tom 321 00:17:37,000 --> 00:17:40,480 Speaker 1: in a situation where beta will be less important than alpha. 322 00:17:41,200 --> 00:17:44,120 Speaker 1: And that explain that, please, that's what that's really important. 323 00:17:44,160 --> 00:17:50,040 Speaker 1: Explain that investors always think that they are smart in 324 00:17:50,080 --> 00:17:52,920 Speaker 1: a bull market, right, So if you're invested in a 325 00:17:52,960 --> 00:17:56,399 Speaker 1: bull market, almost anywhere in able market, the beta of 326 00:17:56,800 --> 00:17:59,480 Speaker 1: the market, and that has to do just with slopes 327 00:17:59,560 --> 00:18:03,760 Speaker 1: of of lines and so on. UM. Don't confuse um 328 00:18:04,359 --> 00:18:09,200 Speaker 1: basically a bowl market for genius and and so that's beta. 329 00:18:09,640 --> 00:18:14,160 Speaker 1: Alpha is security selection UM. And one of the curious 330 00:18:14,240 --> 00:18:16,840 Speaker 1: things about the last two to three years in particular, 331 00:18:17,400 --> 00:18:21,160 Speaker 1: is that there's it's been really hard to get alpha. UM. 332 00:18:21,320 --> 00:18:26,679 Speaker 1: So investors professionals who have used sophisticated approaches trying to 333 00:18:27,119 --> 00:18:31,520 Speaker 1: identify what particular securities they wanted to invest in often 334 00:18:31,760 --> 00:18:36,840 Speaker 1: stumbled because alpha didn't matter very much. With this dramatical 335 00:18:36,840 --> 00:18:40,600 Speaker 1: reset in the markets, the overall decline number one, Number 336 00:18:40,640 --> 00:18:44,320 Speaker 1: two the breakdown of the momentum orientation, and number three 337 00:18:44,480 --> 00:18:49,040 Speaker 1: the recognition that the economic cycle itself is shifting. We 338 00:18:49,160 --> 00:18:52,520 Speaker 1: see a move now, I believe towards alpha, and that's 339 00:18:52,560 --> 00:18:55,639 Speaker 1: not just within the US equity market. It's likely to 340 00:18:55,680 --> 00:18:59,520 Speaker 1: happen in other developed markets as well. And also think 341 00:18:59,560 --> 00:19:02,800 Speaker 1: of it were broadly in terms of asset categories that 342 00:19:02,880 --> 00:19:05,160 Speaker 1: are no longer all going to be moving in locks. 343 00:19:05,480 --> 00:19:07,240 Speaker 1: That's exactly where I wanted to go, abby, and we 344 00:19:07,359 --> 00:19:09,880 Speaker 1: just have about a minute left. Does this mean that's 345 00:19:09,920 --> 00:19:12,919 Speaker 1: the end of the sort of standard sixty forty in 346 00:19:13,040 --> 00:19:17,280 Speaker 1: terms of just working and needing a more nuanced, scalpeled 347 00:19:17,280 --> 00:19:22,320 Speaker 1: approach even with acid allocation. Let's recognize that that thirty 348 00:19:22,400 --> 00:19:26,680 Speaker 1: year plus period in which inflation and interest rates were 349 00:19:26,760 --> 00:19:29,840 Speaker 1: under good control and continue to move lower is over. 350 00:19:30,560 --> 00:19:32,800 Speaker 1: That doesn't mean that a year or two from now 351 00:19:33,160 --> 00:19:38,000 Speaker 1: inflation will be under incredible uncontrolled and interest rates still 352 00:19:38,119 --> 00:19:42,359 Speaker 1: dramatically rising. I don't expect that, but we are exiting 353 00:19:42,359 --> 00:19:46,240 Speaker 1: that thirty year period in which fixed income securities were 354 00:19:46,320 --> 00:19:50,000 Speaker 1: a very good place to be invested, and that rule 355 00:19:50,560 --> 00:19:53,199 Speaker 1: right now may not be uh, you know, such a 356 00:19:53,240 --> 00:19:56,000 Speaker 1: clever thing. One of the point, if I may that 357 00:19:56,160 --> 00:20:01,040 Speaker 1: Aristotle paper talks about the importance of understand ending the data. 358 00:20:01,240 --> 00:20:03,800 Speaker 1: Let me give you one example. Right now, there's so 359 00:20:03,880 --> 00:20:08,600 Speaker 1: much focus on headline CPS CPI. You guys have done 360 00:20:08,600 --> 00:20:13,800 Speaker 1: a great job of contrasting headline CPI to course cp I. 361 00:20:13,880 --> 00:20:17,760 Speaker 1: What the fit is looking at is the better message measure, 362 00:20:18,040 --> 00:20:22,040 Speaker 1: which is core PC, which is running three to four 363 00:20:22,480 --> 00:20:27,880 Speaker 1: percentage points below the headline cp I. So rather than 364 00:20:27,920 --> 00:20:31,000 Speaker 1: looking at like an eight percent number, they're looking at 365 00:20:31,000 --> 00:20:34,520 Speaker 1: a number which is five percent, maybe a little bit lower. 366 00:20:34,760 --> 00:20:37,760 Speaker 1: It's still arise in inflation. I don't mean to suggest not, 367 00:20:38,080 --> 00:20:41,280 Speaker 1: but it is not quite as awful looking as the 368 00:20:41,320 --> 00:20:44,040 Speaker 1: headlines would suggest. Daddy, Joseph Cohin, thank you so much 369 00:20:44,080 --> 00:20:48,800 Speaker 1: for joining Bloomberg and Bloomberg Surveillance today at Columbia Business School. 370 00:20:53,040 --> 00:20:57,160 Speaker 1: Lisa shallatt from the meeting of Alliance Capital and Sanford 371 00:20:57,160 --> 00:20:59,959 Speaker 1: Bernstein years ago over to her duties as chief investment 372 00:21:00,119 --> 00:21:04,120 Speaker 1: officer at Morgan Stanley Wealth Management. Been there done that 373 00:21:04,320 --> 00:21:09,160 Speaker 1: she has seen the dreaded conversation of recession. Lisa, how 374 00:21:09,280 --> 00:21:13,880 Speaker 1: foolish is it for Morgan Stanley clients to angst over 375 00:21:14,320 --> 00:21:19,560 Speaker 1: the guestimates of what recession will be? Look I I 376 00:21:20,000 --> 00:21:23,920 Speaker 1: We've always said, um that you know, it's it's foolish 377 00:21:23,960 --> 00:21:27,120 Speaker 1: for for clients to to try to guess. I mean 378 00:21:27,160 --> 00:21:29,680 Speaker 1: one of the things, uh, that we were talking about 379 00:21:29,680 --> 00:21:33,679 Speaker 1: with clients yesterday is um. You know, even you know, 380 00:21:33,760 --> 00:21:35,840 Speaker 1: some of the folks who get paid to do this, 381 00:21:36,040 --> 00:21:42,000 Speaker 1: i e. At the FED have never gotten recession forecast correct. Ever. 382 00:21:43,000 --> 00:21:46,120 Speaker 1: I think this is something that David Rosenberg also wrote 383 00:21:46,160 --> 00:21:50,359 Speaker 1: about yesterday, uh in in his wonderful piece that he 384 00:21:50,400 --> 00:21:53,760 Speaker 1: puts out daily. UM. And And the fact of the 385 00:21:53,800 --> 00:21:57,200 Speaker 1: matter is, you know, the best we can do is um, 386 00:21:57,200 --> 00:22:01,960 Speaker 1: try to ascertain direction uh and relative order of magnitude 387 00:22:02,040 --> 00:22:04,440 Speaker 1: and other than that, I don't think we can try 388 00:22:04,480 --> 00:22:07,119 Speaker 1: to you know, hand ring about you know where the 389 00:22:07,160 --> 00:22:10,280 Speaker 1: bottom is uh and you know how far will it go? 390 00:22:10,600 --> 00:22:12,879 Speaker 1: And what you know is going to be effected until 391 00:22:12,880 --> 00:22:15,360 Speaker 1: we're really you know, kind of in it well hand 392 00:22:15,440 --> 00:22:17,520 Speaker 1: ringing aside, when you look at the tea leaves and 393 00:22:17,560 --> 00:22:20,320 Speaker 1: this idea that certain tech companies in particular are starting 394 00:22:20,359 --> 00:22:23,240 Speaker 1: to lay off at members of their staff or cut 395 00:22:23,240 --> 00:22:26,120 Speaker 1: back on hiring plans, Lisa, have we entered a new 396 00:22:26,160 --> 00:22:29,880 Speaker 1: phase of the economic cycle that is beginning on the 397 00:22:30,000 --> 00:22:35,080 Speaker 1: edges and requires a shifting strategy. Look, I think that 398 00:22:35,160 --> 00:22:39,080 Speaker 1: we're actually you know, as you know, markets always you know, 399 00:22:39,320 --> 00:22:43,680 Speaker 1: are are six to nine months ahead of reality. I do. 400 00:22:43,920 --> 00:22:47,320 Speaker 1: I am in the camp UM that that the price 401 00:22:47,359 --> 00:22:51,040 Speaker 1: action we have seen us far this bear market has 402 00:22:51,200 --> 00:22:55,159 Speaker 1: probably discounted at least you know, two thirds to seven 403 00:22:55,160 --> 00:22:59,399 Speaker 1: eighths of the way there to what we're guessing, and 404 00:22:59,680 --> 00:23:02,560 Speaker 1: I use the word guessing UH is going to be 405 00:23:02,960 --> 00:23:07,160 Speaker 1: UM a shallow recession. UM. In that spirit, I think 406 00:23:07,200 --> 00:23:11,480 Speaker 1: what's different about the labor market this time, UH is 407 00:23:11,640 --> 00:23:15,320 Speaker 1: that you know, we have never had UM the number 408 00:23:15,359 --> 00:23:18,880 Speaker 1: of job openings and the ratio of job openings UM 409 00:23:18,920 --> 00:23:22,720 Speaker 1: to applicants that you know, we came into this period having. 410 00:23:23,240 --> 00:23:26,680 Speaker 1: And so while we are starting to see some modest 411 00:23:26,960 --> 00:23:31,680 Speaker 1: uptick UH in layoffs from you know, some uh handful 412 00:23:31,760 --> 00:23:35,000 Speaker 1: of companies, UM, I think that that what's going to 413 00:23:35,080 --> 00:23:38,679 Speaker 1: be different this time UH is that labor and the 414 00:23:38,760 --> 00:23:41,560 Speaker 1: unemployment rate is actually gonna hold up much better because 415 00:23:41,560 --> 00:23:44,720 Speaker 1: we have this cushion that what companies will do first, 416 00:23:45,240 --> 00:23:49,639 Speaker 1: UH is eliminate their job openings as opposed to going 417 00:23:49,680 --> 00:23:54,400 Speaker 1: immediately to firings and staff reductions. Well, on the subject 418 00:23:54,440 --> 00:23:57,080 Speaker 1: of labor, higher labor costs obviously are one of the 419 00:23:57,160 --> 00:24:00,800 Speaker 1: higher cost companies are facing. Raising the question of margin pressure. 420 00:24:00,920 --> 00:24:04,840 Speaker 1: Is there's continued kind of inflationary dynamics in this economy. 421 00:24:04,920 --> 00:24:07,840 Speaker 1: What are your thoughts on the trajectory of margins from here, Lisa, 422 00:24:07,880 --> 00:24:12,879 Speaker 1: and if if expectations of them are still too high. Absolutely. Look, 423 00:24:12,960 --> 00:24:15,720 Speaker 1: I mean, uh, you know, back in the fourth quarter 424 00:24:16,720 --> 00:24:18,760 Speaker 1: of last year, one of the things you know, that 425 00:24:18,840 --> 00:24:21,439 Speaker 1: we were you know, trying to be very loud about 426 00:24:22,280 --> 00:24:25,840 Speaker 1: was the unsustainability of margins. We felt that, you know, 427 00:24:25,880 --> 00:24:28,359 Speaker 1: when we were seeing these peak operating margins for the 428 00:24:28,440 --> 00:24:31,840 Speaker 1: SMP five well into the double digits, uh, you know, 429 00:24:31,920 --> 00:24:35,119 Speaker 1: profits as a share of GDP where they were UM 430 00:24:35,160 --> 00:24:38,840 Speaker 1: that we were witnessing, you know, record operating leverage that 431 00:24:39,000 --> 00:24:43,040 Speaker 1: was a result of this mismatch between UM, you know, 432 00:24:43,080 --> 00:24:46,800 Speaker 1: the pricing power that companies had UH at the beginning 433 00:24:46,840 --> 00:24:51,600 Speaker 1: of the reopening of the economy, and their actual costs 434 00:24:51,640 --> 00:24:54,560 Speaker 1: and their lags because of the way we account for 435 00:24:54,640 --> 00:24:58,600 Speaker 1: inventory and the way we hire UH and the way 436 00:24:58,760 --> 00:25:02,199 Speaker 1: you know we expense cap acts and thinks of that nature. 437 00:25:02,600 --> 00:25:05,200 Speaker 1: Now we're in the catch up phase and our view 438 00:25:05,320 --> 00:25:08,240 Speaker 1: is that margins are are really going to be vulnerable. 439 00:25:08,600 --> 00:25:10,439 Speaker 1: And this has been one of the you know, great 440 00:25:10,600 --> 00:25:14,200 Speaker 1: mysteries I think, UM is why the cell side has 441 00:25:14,280 --> 00:25:20,399 Speaker 1: been so so so complacent. That's earnings estimates. This is critical. 442 00:25:20,440 --> 00:25:22,120 Speaker 1: This is right where I wanted to go, running out 443 00:25:22,119 --> 00:25:24,920 Speaker 1: of time. If the cell side has been complacent, are 444 00:25:24,960 --> 00:25:27,520 Speaker 1: we going to be surprised by corporate use of cash 445 00:25:27,920 --> 00:25:32,960 Speaker 1: that shrinks potentially? And I think that that you know, 446 00:25:33,040 --> 00:25:34,840 Speaker 1: this has been the problem is that the cell side 447 00:25:34,880 --> 00:25:39,119 Speaker 1: analysts have stopped actually doing work since the era of 448 00:25:39,240 --> 00:25:41,560 Speaker 1: you know, regg f D, and you know, they just 449 00:25:41,640 --> 00:25:47,600 Speaker 1: listened to what executives say and anything until the exact 450 00:25:47,760 --> 00:25:55,080 Speaker 1: minute that their lawyers. Lisa, I've been screaming here. You 451 00:25:55,119 --> 00:25:58,280 Speaker 1: don't see this, folks off camera, but I've been screaming 452 00:25:58,440 --> 00:26:01,080 Speaker 1: about regg f D and the effect here on surprise. 453 00:26:01,320 --> 00:26:05,120 Speaker 1: I mean, Lisa, it's tangible. They can't talk until they're 454 00:26:05,240 --> 00:26:09,040 Speaker 1: right there. They can't talk until they're right there. And 455 00:26:09,119 --> 00:26:12,960 Speaker 1: the analysts have stopped doing work and they just listen 456 00:26:13,040 --> 00:26:15,160 Speaker 1: to the words coming out of the mouths of either 457 00:26:15,240 --> 00:26:21,120 Speaker 1: corporate managements or our Federal Reserve chairman. It is really awful. 458 00:26:21,359 --> 00:26:24,679 Speaker 1: And you know investors are smarter than that. Uh, And 459 00:26:24,720 --> 00:26:27,960 Speaker 1: our gases is that you know, there is a large 460 00:26:27,960 --> 00:26:32,440 Speaker 1: amount of the earnings disappointment that has been priced in. UM. 461 00:26:32,520 --> 00:26:35,560 Speaker 1: We just need to see those estimate cuts kick in 462 00:26:35,680 --> 00:26:37,760 Speaker 1: so that we can ascertain what is the real price 463 00:26:37,800 --> 00:26:41,000 Speaker 1: earnings ratio of this market? I mean, right now, I 464 00:26:41,040 --> 00:26:45,160 Speaker 1: think it's a bit artificial bottle it. Lisa Shell out 465 00:26:45,160 --> 00:26:48,080 Speaker 1: there with a quote of the week, Lisa Shell, Morgan Stanley, 466 00:26:48,119 --> 00:26:57,400 Speaker 1: thank you so much. An extraordinary time, Tim, to cut 467 00:26:57,400 --> 00:27:00,439 Speaker 1: to the chase in the I e A report. What 468 00:27:00,600 --> 00:27:04,040 Speaker 1: is the distinction that the Prime Minister, in the leader 469 00:27:04,080 --> 00:27:06,600 Speaker 1: of labor need to know. What do they need to 470 00:27:06,600 --> 00:27:10,960 Speaker 1: know right now from I e A. I think one 471 00:27:10,960 --> 00:27:12,960 Speaker 1: thing they need to know is that we simply haven't 472 00:27:12,960 --> 00:27:17,320 Speaker 1: been putting enough capital into the energy sector in recent years. 473 00:27:17,480 --> 00:27:19,560 Speaker 1: I'm and that's true whether you look at it from 474 00:27:19,560 --> 00:27:23,400 Speaker 1: the perspective of energy transitions. So we haven't been investing 475 00:27:23,520 --> 00:27:28,040 Speaker 1: enough in clean and then partially because we haven't done that, 476 00:27:28,040 --> 00:27:30,960 Speaker 1: that means that the amount of money going into the 477 00:27:31,000 --> 00:27:34,800 Speaker 1: traditional sector, so oil and gas has also been in 478 00:27:34,920 --> 00:27:37,200 Speaker 1: not enough to avoid the sort of volatility that we're 479 00:27:37,200 --> 00:27:40,080 Speaker 1: seeing today. Tim, I've got a really basic question. Has 480 00:27:40,160 --> 00:27:43,320 Speaker 1: Russian oil actually been taken off the market or just 481 00:27:43,480 --> 00:27:47,320 Speaker 1: rediverted through China, through India and the refineries they are 482 00:27:47,359 --> 00:27:52,040 Speaker 1: then sold back to the West. So there is clearly 483 00:27:52,119 --> 00:27:54,959 Speaker 1: some impacts on Russia already of the measures that are 484 00:27:55,000 --> 00:27:57,720 Speaker 1: in place. But if you look at the data for exports, 485 00:27:57,760 --> 00:28:01,639 Speaker 1: there hasn't been a huge amount of chain since the 486 00:28:01,760 --> 00:28:05,919 Speaker 1: invasion in February, and so there is that evidence of 487 00:28:05,920 --> 00:28:09,240 Speaker 1: a reorientation rather than a reduction when it comes to 488 00:28:09,320 --> 00:28:13,840 Speaker 1: Russian flows into international markets. So who's pocketing the difference? 489 00:28:13,960 --> 00:28:16,600 Speaker 1: I mean, if you're dealing with the gas and and 490 00:28:16,600 --> 00:28:19,040 Speaker 1: and and the crew that's being sold at a discount 491 00:28:19,560 --> 00:28:22,320 Speaker 1: from Russia, and then it's being sold at anything but 492 00:28:22,400 --> 00:28:26,200 Speaker 1: a discount everywhere else within the developed world, who's getting 493 00:28:26,240 --> 00:28:31,280 Speaker 1: that delta? I mean, it's it's it's an unusually profitable 494 00:28:31,320 --> 00:28:33,320 Speaker 1: moment to be in the refining business right now. I 495 00:28:33,320 --> 00:28:36,320 Speaker 1: mean there are refining margins are very high, and refining 496 00:28:36,359 --> 00:28:39,960 Speaker 1: margins are particularly high if your input crude is heavily 497 00:28:40,000 --> 00:28:43,520 Speaker 1: discounted Russian crew. Well, but quickly here, tim, there is 498 00:28:43,560 --> 00:28:46,920 Speaker 1: an allegation that some people have that actually India and 499 00:28:47,000 --> 00:28:49,640 Speaker 1: refineries there are benefiting on all sides, and a lot 500 00:28:49,680 --> 00:28:52,880 Speaker 1: of the gasoline and the refined goods the United States 501 00:28:52,880 --> 00:28:56,000 Speaker 1: and other nations in the developed world are importing are 502 00:28:56,040 --> 00:28:59,000 Speaker 1: actually Russian crewde that just have been funneled into a 503 00:28:59,040 --> 00:29:02,680 Speaker 1: form that they can use. Is that accurate? I think 504 00:29:02,720 --> 00:29:06,120 Speaker 1: it's very difficult to tell the provenance of the molecules 505 00:29:06,120 --> 00:29:08,920 Speaker 1: that come out of a refinery. There's no that there's 506 00:29:08,920 --> 00:29:13,040 Speaker 1: no way to distinguish the outputs of a refinery based 507 00:29:13,080 --> 00:29:15,480 Speaker 1: on the normally based on the on the on the 508 00:29:15,520 --> 00:29:17,400 Speaker 1: origins of the crew. So I think that's that's a 509 00:29:17,480 --> 00:29:21,000 Speaker 1: very difficult question to answer directly. Okay to him, Well, 510 00:29:21,000 --> 00:29:24,280 Speaker 1: you're an economist. And as the Buying Administration pushes Congress 511 00:29:24,320 --> 00:29:26,840 Speaker 1: to enact a pause on the gasoline tax here in 512 00:29:26,880 --> 00:29:29,360 Speaker 1: America to provide some relief at the pump, will that 513 00:29:29,400 --> 00:29:32,400 Speaker 1: actually work as intended even if it got through Congress? 514 00:29:34,200 --> 00:29:37,240 Speaker 1: I think. I mean, we're very focused on the underlying dynamics, 515 00:29:37,480 --> 00:29:40,680 Speaker 1: and the fact is that um oil and gas upstream 516 00:29:40,720 --> 00:29:45,720 Speaker 1: investment has come down by half since and that's added 517 00:29:45,760 --> 00:29:48,440 Speaker 1: to some of the pressures that we see on markets today. 518 00:29:48,480 --> 00:29:50,400 Speaker 1: So what we're focused on is which way do we 519 00:29:50,440 --> 00:29:54,360 Speaker 1: get out of today's today's crisis. And essentially there's two 520 00:29:54,480 --> 00:29:58,160 Speaker 1: baskets of options. One is around doubling down on on 521 00:29:58,240 --> 00:30:02,440 Speaker 1: fossil fuels and and the other one investing in new 522 00:30:02,520 --> 00:30:06,479 Speaker 1: areas of of of the energy economy, and certainly from 523 00:30:06,480 --> 00:30:09,640 Speaker 1: an I A perspective, we're very keen that the upswing 524 00:30:09,680 --> 00:30:13,880 Speaker 1: that we've seen in clean energy investment in two, we're 525 00:30:13,920 --> 00:30:16,800 Speaker 1: keen to see that gain further momentum because we think 526 00:30:16,800 --> 00:30:19,880 Speaker 1: that's the only lasting way out of the crisis that 527 00:30:19,920 --> 00:30:22,719 Speaker 1: we're having today. Well and tim of course, by nature, 528 00:30:22,800 --> 00:30:25,040 Speaker 1: it is a transition. We don't just arrive at a 529 00:30:25,080 --> 00:30:27,560 Speaker 1: moment in which we are entirely reliant on clean energy. 530 00:30:27,600 --> 00:30:29,680 Speaker 1: You still need fossil fuels. There is a back stop 531 00:30:29,720 --> 00:30:32,600 Speaker 1: because many of these clean energy sources are intermitted by nature. 532 00:30:32,720 --> 00:30:35,720 Speaker 1: The sun doesn't always shine, the wind isn't always blowing. 533 00:30:36,320 --> 00:30:38,719 Speaker 1: How do both of these things play together. Where we 534 00:30:38,760 --> 00:30:42,240 Speaker 1: can't wean ourselves off of fossil fuels, you can't get 535 00:30:42,240 --> 00:30:46,440 Speaker 1: to green energy at the same time. Does that make sense? Yeah? 536 00:30:46,480 --> 00:30:48,080 Speaker 1: I think. I mean that's one of the things that 537 00:30:48,120 --> 00:30:50,160 Speaker 1: we try and avoid saying, is that there's a very 538 00:30:50,160 --> 00:30:52,800 Speaker 1: sort of binary clean dirty element. You just need to 539 00:30:52,840 --> 00:30:55,160 Speaker 1: scale up one and reduce the other. There is this 540 00:30:55,240 --> 00:30:58,200 Speaker 1: sort of coexistence of energy systems for many, many years 541 00:30:58,200 --> 00:31:00,280 Speaker 1: to come, and you need to make sure at all 542 00:31:00,360 --> 00:31:02,400 Speaker 1: parts of that system of functioning in a way that 543 00:31:02,440 --> 00:31:05,840 Speaker 1: allows us to have affordable, secure energy. So I very 544 00:31:05,920 --> 00:31:08,440 Speaker 1: much agree. You know, we need to focus also on 545 00:31:08,480 --> 00:31:11,880 Speaker 1: all of the energy services, the reliability that you can 546 00:31:11,880 --> 00:31:16,640 Speaker 1: still get from traditional forms of supply. Tim Gould, the 547 00:31:16,680 --> 00:31:19,400 Speaker 1: thickness of the I e A effort here. I think 548 00:31:19,400 --> 00:31:22,440 Speaker 1: of Adam Saminski's work over the years, and then I 549 00:31:22,440 --> 00:31:24,880 Speaker 1: look at Christian Mailik and J. Fren Worrion we're in 550 00:31:25,040 --> 00:31:28,080 Speaker 1: long pages. They say the foundation of all of this 551 00:31:29,080 --> 00:31:34,760 Speaker 1: is population growth in emerging markets. You own this i e. A. 552 00:31:34,880 --> 00:31:37,600 Speaker 1: You've had the courage to go beyond the developed countries 553 00:31:37,880 --> 00:31:41,040 Speaker 1: and look at emerging markets as well. Is the case 554 00:31:41,160 --> 00:31:47,080 Speaker 1: for higher oil prices simply a burgeoning population in emerging markets? 555 00:31:48,840 --> 00:31:50,720 Speaker 1: I think it's I think it's more than that. It's 556 00:31:50,760 --> 00:31:53,920 Speaker 1: about the economic growth. It's the rising incomes. It's the 557 00:31:53,960 --> 00:31:57,440 Speaker 1: aspirations that many people in emerging markets and developing economies 558 00:31:57,440 --> 00:32:01,240 Speaker 1: have for their lifestyles that they that we have in 559 00:32:01,320 --> 00:32:05,600 Speaker 1: many advanced economies, and that is going to drive developments 560 00:32:05,600 --> 00:32:08,040 Speaker 1: in the energy sector for many years to come. But 561 00:32:08,080 --> 00:32:11,240 Speaker 1: the question is what sort of model are these countries 562 00:32:11,320 --> 00:32:13,760 Speaker 1: going to be pursuing Is it the same one, Is 563 00:32:13,800 --> 00:32:16,040 Speaker 1: it the same path that we've trodden all these years, 564 00:32:16,160 --> 00:32:19,800 Speaker 1: or is there a new lower emissions path that is 565 00:32:19,880 --> 00:32:24,120 Speaker 1: now available because of some of the increasingly accessible and 566 00:32:24,160 --> 00:32:27,000 Speaker 1: affordable clean technologies that are on the market. Tim, thank 567 00:32:27,040 --> 00:32:31,160 Speaker 1: you so much for this report from the International Energy Association. 568 00:32:31,640 --> 00:32:37,840 Speaker 1: Tim Goldwin this morning, Paul, I gotta get to this 569 00:32:37,880 --> 00:32:39,920 Speaker 1: real quickly here, because it's too important, least not. I 570 00:32:40,040 --> 00:32:43,640 Speaker 1: was watching Dodgers Reds. Really counseling is just unbelievable, Aid 571 00:32:43,720 --> 00:32:46,200 Speaker 1: and oh there's people comparing in the coffex, and I'm like, 572 00:32:46,560 --> 00:32:49,600 Speaker 1: I'm getting hard into the color. I'm getting upset. Even 573 00:32:49,640 --> 00:32:52,480 Speaker 1: though Cofax went to University of Cincinnatias a walk on 574 00:32:52,920 --> 00:32:55,760 Speaker 1: basketball player. We got to get straight on this right now, 575 00:32:55,840 --> 00:32:58,920 Speaker 1: joining us Douglas cast on the markets will get to it. 576 00:32:59,200 --> 00:33:01,280 Speaker 1: But I'm sorry this guy having a career here with 577 00:33:01,400 --> 00:33:04,720 Speaker 1: the Dodgers Dot cass He's no Sandy Kofax is he 578 00:33:04,840 --> 00:33:08,960 Speaker 1: one year? Does not a career? Making there we go. Oh, 579 00:33:08,960 --> 00:33:11,840 Speaker 1: by the way, did you see the statue? Um? Yes, 580 00:33:12,520 --> 00:33:16,680 Speaker 1: what do you think last week? Yeah? Okay, Doug, I 581 00:33:16,960 --> 00:33:18,480 Speaker 1: got to get to this because I just think it's 582 00:33:18,520 --> 00:33:21,520 Speaker 1: too important. Baseball has gotten boring. And one of the 583 00:33:21,520 --> 00:33:24,120 Speaker 1: things that co Fax to the Gonsilan is also doing 584 00:33:24,600 --> 00:33:28,400 Speaker 1: is limiting their walks per game. That's like the heart 585 00:33:28,440 --> 00:33:30,880 Speaker 1: of the matter. It's just I mean, that's what made 586 00:33:30,920 --> 00:33:35,400 Speaker 1: Sandy Kofax in three. He just cut down on the walks. 587 00:33:35,400 --> 00:33:38,040 Speaker 1: So there is to it. I'm just trying to avoid 588 00:33:38,080 --> 00:33:40,760 Speaker 1: the market, the rules doing everything. And by the way, 589 00:33:40,760 --> 00:33:44,240 Speaker 1: baseball is not boring. It's boring to you, not boring 590 00:33:44,280 --> 00:33:49,560 Speaker 1: to the York Yankees. That's true. That's right, they're killing it. Okay, Doug. 591 00:33:49,560 --> 00:33:51,800 Speaker 1: The market, let's get right to it. Is just Paul 592 00:33:51,840 --> 00:33:55,200 Speaker 1: alluded to earlier. Can you buy stocks? Can you own stocks? 593 00:33:55,400 --> 00:33:58,960 Speaker 1: Can you be long? Given the gloom? Yeah? There is 594 00:33:59,000 --> 00:34:02,800 Speaker 1: an English Russian encapsulates the markets that's claimed to be 595 00:34:02,880 --> 00:34:07,560 Speaker 1: a translation of traditional Chinese curses. That expression is may 596 00:34:07,560 --> 00:34:09,719 Speaker 1: you live in interesting times? And we certainly live in 597 00:34:09,800 --> 00:34:13,200 Speaker 1: interesting times. I think that the one has to be 598 00:34:13,280 --> 00:34:16,400 Speaker 1: struck by the change in the market side. Guys today 599 00:34:16,520 --> 00:34:19,799 Speaker 1: versus six months ago. Um, when I was negative and 600 00:34:19,840 --> 00:34:23,080 Speaker 1: now I'm substantially less cautious, and I have been solely 601 00:34:23,120 --> 00:34:26,400 Speaker 1: accumulating in that long position. Uh six months ago, if 602 00:34:26,400 --> 00:34:29,719 Speaker 1: you remember remember there was a preponderance of negative optionality 603 00:34:29,760 --> 00:34:34,040 Speaker 1: of expected outcome. Speculation was acute. Valuations were priced to 604 00:34:34,120 --> 00:34:37,040 Speaker 1: perfection and very high by his dark standards. There was 605 00:34:37,080 --> 00:34:40,800 Speaker 1: a bull marketing complacency and that was manifested by someone 606 00:34:40,840 --> 00:34:43,800 Speaker 1: you mentioned you are Danny earlier in an earlier segment, 607 00:34:44,080 --> 00:34:46,560 Speaker 1: who was looking for like Belsky in excess of five 608 00:34:46,560 --> 00:34:49,560 Speaker 1: thousand in the SMP and six months ago, bears were 609 00:34:49,680 --> 00:34:54,040 Speaker 1: ridiculed as Cassandra's Today. Uh, Cassandra's Uh. You know, the 610 00:34:54,920 --> 00:34:58,839 Speaker 1: Trojan Lioness is being lionized. UM stocks are no longer 611 00:34:58,920 --> 00:35:02,560 Speaker 1: priced to perfection. Valuations have retreated from twenty three to 612 00:35:02,640 --> 00:35:05,800 Speaker 1: sixteen times, you know the numbers, and many good stocks 613 00:35:05,840 --> 00:35:08,719 Speaker 1: have been re rated by fifty or six without a 614 00:35:08,719 --> 00:35:12,160 Speaker 1: real material change in fundamentals. And I think speculation and 615 00:35:12,200 --> 00:35:15,160 Speaker 1: froth has been rooted out of the markets. Look at Caravana, 616 00:35:15,200 --> 00:35:18,760 Speaker 1: which has gone from three seventy six to coin based 617 00:35:18,800 --> 00:35:20,479 Speaker 1: robin hood. I can you know we have a host 618 00:35:20,520 --> 00:35:23,520 Speaker 1: of companies like that. The market is literally pall littered 619 00:35:23,560 --> 00:35:27,160 Speaker 1: with an unprecedented accumulation of disasters, and even the perma 620 00:35:27,239 --> 00:35:30,960 Speaker 1: bowles have materially lowered their SMP price targets, and Yar 621 00:35:31,040 --> 00:35:33,520 Speaker 1: Danny is a very good example. He seems to have 622 00:35:33,560 --> 00:35:37,799 Speaker 1: thrown in the town the towel um. I think the 623 00:35:37,840 --> 00:35:40,160 Speaker 1: one point I want to make today is that we 624 00:35:40,200 --> 00:35:45,160 Speaker 1: don't invest in the present. Recent or coincident events don't 625 00:35:45,160 --> 00:35:49,000 Speaker 1: move stocks. The rate of future change move stocks. Good 626 00:35:49,040 --> 00:35:53,439 Speaker 1: news has permeated the market six months ago. Today bad 627 00:35:53,480 --> 00:35:56,560 Speaker 1: news surrounds us and it's spreading. And equities are a 628 00:35:56,560 --> 00:36:00,319 Speaker 1: discounting process and mechanism that helps to explain why bear 629 00:36:00,400 --> 00:36:03,040 Speaker 1: markets are born out of good news, and why bull 630 00:36:03,120 --> 00:36:05,640 Speaker 1: markets are born out of bad news, and when this 631 00:36:05,800 --> 00:36:08,239 Speaker 1: bad news, like if you recall back to February, in 632 00:36:08,280 --> 00:36:12,480 Speaker 1: March of the future was murky and we had a 633 00:36:12,600 --> 00:36:16,160 Speaker 1: humongous rally off the COVID low and I so I 634 00:36:16,200 --> 00:36:19,680 Speaker 1: think basically, to summarize, we're rapidly moving from a period 635 00:36:19,719 --> 00:36:25,520 Speaker 1: of gross uh you can say, excessive speculation, elation, complacency 636 00:36:25,560 --> 00:36:29,400 Speaker 1: on the part of most market participants, and the expectations 637 00:36:29,520 --> 00:36:33,120 Speaker 1: of only positive outcomes, to a period in which speculation 638 00:36:33,200 --> 00:36:36,920 Speaker 1: has been decimated, investors have to do risks and de 639 00:36:37,040 --> 00:36:41,800 Speaker 1: gross stock valuations and economic profit expectations have been reset 640 00:36:41,880 --> 00:36:44,160 Speaker 1: lower fear in the vix are rising. I don't know 641 00:36:44,200 --> 00:36:48,000 Speaker 1: if you saw the Bank of America's bull bear indicator yesterday. 642 00:36:48,040 --> 00:36:50,680 Speaker 1: It's a zero out of one zero, not one out 643 00:36:50,680 --> 00:36:55,200 Speaker 1: of our UM. So the general consensus of expectation now 644 00:36:55,280 --> 00:36:59,000 Speaker 1: consists of mostly negative outcomes, and I will I'm the 645 00:36:59,040 --> 00:37:03,400 Speaker 1: first one to admit that conditions are far from an ideal. 646 00:37:03,719 --> 00:37:07,320 Speaker 1: The negative headwinds have become accepted and to some degree 647 00:37:07,560 --> 00:37:10,279 Speaker 1: are in the process of being discounted. And there are 648 00:37:10,280 --> 00:37:13,440 Speaker 1: to me notable opportunities and selected stocks. Do I have 649 00:37:13,560 --> 00:37:15,200 Speaker 1: to be a stock picker here or can I just 650 00:37:15,280 --> 00:37:20,640 Speaker 1: go out and buy an SPS? I think the average investor, 651 00:37:20,760 --> 00:37:24,120 Speaker 1: retail investors should probably buy just by the spy A 652 00:37:24,200 --> 00:37:28,120 Speaker 1: passive a passive each So what are some of that? 653 00:37:28,239 --> 00:37:31,040 Speaker 1: But but you're a professional. You did this for a living. Um, 654 00:37:31,239 --> 00:37:38,239 Speaker 1: you started at Kidder Peabody way back. Uh, exactly a 655 00:37:38,320 --> 00:37:41,719 Speaker 1: Kidder Peabody as a housing analyst. What stocks are you 656 00:37:41,760 --> 00:37:46,600 Speaker 1: looking at? Well? Uh? The first thing to say is 657 00:37:46,640 --> 00:37:49,920 Speaker 1: that I have doubled my net long position decline. So 658 00:37:50,000 --> 00:37:55,160 Speaker 1: that's important to note. I'm still about only net long 659 00:37:56,080 --> 00:38:00,759 Speaker 1: and um, to quote Andy Grove, only the powernoids the five. 660 00:38:01,200 --> 00:38:04,040 Speaker 1: So I come in every day putely on the lookout 661 00:38:04,360 --> 00:38:07,840 Speaker 1: and at least to an open mind. Um I and 662 00:38:07,960 --> 00:38:11,040 Speaker 1: I as I've learned from Druck and Miller and Soros 663 00:38:11,040 --> 00:38:13,640 Speaker 1: that sizing is seven or eight percent of the equation 664 00:38:14,400 --> 00:38:17,319 Speaker 1: whether you're right, how much you make when you're write, 665 00:38:17,440 --> 00:38:20,080 Speaker 1: how much you lose when you're wrong. So the stock 666 00:38:20,800 --> 00:38:23,920 Speaker 1: the sector that I really like to answer your questions specifically, Paul, 667 00:38:24,320 --> 00:38:27,640 Speaker 1: are the banks Okay, okay, we're gonna have it relatively 668 00:38:27,719 --> 00:38:31,200 Speaker 1: sold and brief we're running out of time. We'll get 669 00:38:31,200 --> 00:38:33,360 Speaker 1: you back on to talk about the banks. Also the 670 00:38:33,400 --> 00:38:37,439 Speaker 1: co Fax trophe uh statue, which is wonderful as well. 671 00:38:37,480 --> 00:38:40,480 Speaker 1: But what he just said, they're folks, and position sizing 672 00:38:41,160 --> 00:38:46,239 Speaker 1: is gospel, absolute gospel. This is the Bloomberg Surveillance Podcast. 673 00:38:46,480 --> 00:38:49,840 Speaker 1: Thanks for listening. Join us live weekdays from seven to 674 00:38:49,920 --> 00:38:54,000 Speaker 1: ten am Eastern. I'm Bloomberg Radio and on Bloomberg Television 675 00:38:54,360 --> 00:38:58,359 Speaker 1: each day from six to nine am for insight from 676 00:38:58,360 --> 00:39:02,400 Speaker 1: the best in economics, finance, its investment, and international relations. 677 00:39:02,840 --> 00:39:07,520 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 678 00:39:07,680 --> 00:39:11,279 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 679 00:39:11,320 --> 00:39:13,960 Speaker 1: Tom Keene, and this is Bloomberg.