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Speaker 1: This is the Bloomberg Surveillance podcast. I'm Tom Keene, along

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

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

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

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. In the

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Speaker 1: equity space, we heard it from the technical analysis giant,

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Speaker 1: Ralph Ankompora, Edward Yardenni of Yale CJ. Lawrence is his

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Speaker 1: own shop. On top of it, get into the stock

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Speaker 1: market in October of last year, and on the economic

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Speaker 1: side of why weel C plus I plus G plus NX.

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Speaker 1: Was Neil dudda very lonely at Renaissance Macro a year ago.

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Speaker 1: We're really coming out a year ago, Neil, from your

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Speaker 1: arch call, let's review. What did you see in September

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Speaker 1: of twenty twenty two.

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Speaker 2: Well, thanks for that intro, Tom.

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Speaker 3: You always make me look better than I actually do,

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Speaker 3: so I appreciate it, but you know, I think it

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Speaker 3: was for me. It boiled down to something very simple,

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Speaker 3: which is wage inflation. Was hanging in there while price

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Speaker 3: inflation was coming down. I mean, that was the principal

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Speaker 3: risk of the economy. In the spring of twenty twenty two,

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Speaker 3: you had a very aggressive FED. You had rising food

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Speaker 3: and energy prices that shocked household incomes due to the

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Speaker 3: Russian invasion of Ukraine. Of course, as we got towards

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Speaker 3: the end of the year, a lot of that shock

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Speaker 3: had gone away, while the labor markets were still kind

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Speaker 3: of hanging in there, So real incomes were climbing, and

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Speaker 3: that meant stronger consumer spending ultimately, and that's why the economy.

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Speaker 4: Sort of.

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Speaker 3: Remember early in the year, tom everyone was betting on

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Speaker 3: a FED pivot and we saw a very you know,

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Speaker 3: we saw a modest decline in mortgage rates as a

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Speaker 3: result of that, but that modest drop elicited a fairly

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Speaker 3: robust response in housing market activity. So there's a lot

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Speaker 3: of pent up demand there for housing, and so I think,

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Speaker 3: you know, when housing is working, it's difficult to be

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Speaker 3: very verish on the economy.

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Speaker 1: If we have disinflation or leveling of inflation. What does

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Speaker 1: nominal GDP do, Because top line GDP, your real GDP

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Speaker 1: optimism with whatever inflation is linked into revenues of corporations.

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Speaker 1: What's the data nominal GDP call.

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Speaker 3: I mean, it's at least six percent if you believe

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Speaker 3: the If you believe the last employment report. When you

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Speaker 3: look at aggregate weekly income, aggregate weekly payrolls sort of

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Speaker 3: the sum product of jobs, hours and earnings over the

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Speaker 3: last three months, that number is upset seven percent at

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Speaker 3: an annual rate. So you know, the labor market sort

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Speaker 3: of impulse phenomenal growth is quite strong as well. So

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Speaker 3: we have an unsustainably strong economy still, and this is

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Speaker 3: happening at a time when the FED is taking, you know,

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Speaker 3: steps to the exit door. So you know, to me,

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Speaker 3: I think the risk and this is what I think

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Speaker 3: makes me not an optimist, is that the risk is

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Speaker 3: that you know, the FED is prematurely declaring victory. I

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Speaker 3: do see a lot of cyclical momentum in the economy

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Speaker 3: right now, and the FED stepping back. I think that

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Speaker 3: could set ups up for a problem as we go

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Speaker 3: into twenty twenty four.

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Speaker 4: Yeah, the fact that you said an unsustainably hot economy,

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Speaker 4: an unsustainable level of growth in the US raises this

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Speaker 4: real question, what's going to make it unsustainable? Is it

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Speaker 4: the inflation story that you see as researching. We've talked

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Speaker 4: about this before and the fact that the Fed's not

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Speaker 4: there or is it just that you cannot continue in

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Speaker 4: a vacuum, So at some point it's going to implode

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Speaker 4: on itself.

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Speaker 3: Well, I don't know that it will implode on itself

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Speaker 3: without the FED doing something about it. And of course,

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Speaker 3: you know, the problems for markets are always when there's

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Speaker 3: a disconnect between what the FED wants to do and

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Speaker 3: what they should do. That's when the problems come up.

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Speaker 3: And you know, I think the FED should not be

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Speaker 3: signaling rate cuts next year. I mean that to me

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Speaker 3: is a bear. You know, that's like an easy first

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Speaker 3: thing that they should do is not signal rate cuts.

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Speaker 3: They need to maintain a tight monetary stance because frankly,

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Speaker 3: real GDP growth is running last I checked six percent

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Speaker 3: at an annual rate over the last three months. Now,

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Speaker 3: you can talk about revisions, you can talk about you know,

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Speaker 3: that's not where the underlying growth rate is. But if

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Speaker 3: you look at monthly GDP as of July, over the

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Speaker 3: last three months ending in July, it's up six percent

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Speaker 3: at an annual rate.

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Speaker 2: I know that's not the underlying trend. It's above trend growth.

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Speaker 4: Well, and this is the reason why a lot of

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Speaker 4: people are talking about the same thing that you are.

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Speaker 4: We heard from Katie Kaminski over at Alpha Simplex basically

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Speaker 4: saying the same thing that you are, in different ways,

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Speaker 4: and she's bearish on bonds because she sees this coming

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Speaker 4: to the foe and yields having to remain higher for longer.

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Speaker 4: There is a question, though, embedded in Goldman Sachs's discussion

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Speaker 4: of the long and variable lags, and maybe this is

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Speaker 4: an economy that can shrug off a five percent FED

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Speaker 4: funds rate and it's not going to matter. So at

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Speaker 4: what point do you see higher bond yields as not

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Speaker 4: inconsistent with higher stock prices, with higher valuations, with it

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Speaker 4: a continue rally in the equity market.

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Speaker 2: Well, I mean, I think right now the.

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Speaker 3: Combination is reasonably good for stocks, right because the FED

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Speaker 3: is backing off and you have strong growth and that's

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Speaker 3: you know, so the Fed's sort of off your neck.

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Speaker 3: I think at least through the end of the year.

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Speaker 3: I mean, if they're going to hike again, it'll probably

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Speaker 3: be in December. So I don't really think we have

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Speaker 3: to worry about the FED you know, until then, and

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Speaker 3: this is happening at a time when there's cyclical momentum

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Speaker 3: in the in the economy. The fact is is that

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Speaker 3: goods spending, consumer spending on goods is up over three

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Speaker 3: percent against last year, and during that time, non farm

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Speaker 3: inventories have been contracting around half a percentage point on

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Speaker 3: average per quarter. Again, that's an unsustainable draft on an inventory.

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Speaker 3: So what are you going to se You're gonna see

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Speaker 3: inventory's restock. That's going to booy manufacturing production again cyclical industries.

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Speaker 3: So that should be good for equities. The question is

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Speaker 3: when does the FED wake up and realize that, you know,

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Speaker 3: long and variable lags are not working out as neat

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Speaker 3: and cleanly as they have in their in the Fervist model.

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Speaker 4: Based on they.

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Speaker 2: May have to step on the brakes even more.

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Speaker 4: So what does that mean?

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Speaker 5: Right?

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Speaker 4: And that's exactly where I was going to go. How

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Speaker 4: high do rates have to go in order to curtail

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Speaker 4: some of what you see as unsustainable growth in the US?

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Speaker 3: Yes, I mean to me, I think that they you

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Speaker 3: need to keep the possibility on there for them to

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Speaker 3: start to hike again in the first half of next

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Speaker 3: year at a minimum, they're.

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Speaker 2: Going to price.

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Speaker 3: I mean, I think they have four rate cuts priced

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Speaker 3: into the summary of economic projections right now. It's hard

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Speaker 3: to see that surviving in September. So, you know, I

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Speaker 3: think let's start there.

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Speaker 1: Neil in an economics textbook, chapter twenty three or twenty

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Speaker 1: four links all of Ziconobabbel into the stock market. Take

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Speaker 1: the Dutta optimism and the corporations they are going to

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Speaker 1: have to deal with an improved real rate, they're going

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Speaker 1: to have to deal with a high nominal rate, you

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Speaker 1: know it, three years, five years as well. How does

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Speaker 1: a stock market respond to that? How does a stock

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Speaker 1: market react to an overweighted optimistic Dutta world.

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Speaker 3: Well, so I think you could call it sort of

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Speaker 3: an inflationary boom. I think that might be what we're

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Speaker 3: returning to. And if that's the case, that's an environment

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Speaker 3: where stocks can work. But I mean, it's unambiguously bad

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Speaker 3: for bonds, but for stocks, I think it's an environment

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Speaker 3: where you should see continued positive returns, maybe not, you know,

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Speaker 3: somewhat below the historical norm. Obviously, if you have higher

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Speaker 3: real interest rates that hurts equities, But if you have

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Speaker 3: continued growth in the economy, that means that actual and

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Speaker 3: projected earnings will hang in there.

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Speaker 1: So just because of time, you know, I got to

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Speaker 1: get this in. How is an inflationary boom different now

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Speaker 1: from the horror of the sixties.

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Speaker 3: Well, that was obviously well the horrors of the sixties

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Speaker 3: and the sixties were a reasonably good good period for

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Speaker 3: stock market turns in the economy. An inflationary boom again,

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Speaker 3: as I say, is something that where equities can work.

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Speaker 3: What you don't want is is stagflation like conditions where

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Speaker 3: productivity is coming down, where you have repeated supply shocks.

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Speaker 3: That's an environment where bond returns are horrible, but but

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Speaker 3: stock returns are is because you know, companies can't can't

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Speaker 3: find a way to make to make money in.

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Speaker 1: That Neil, your Q four GDP number right now, we

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Speaker 1: got to get Bramo going, what's your Q four real

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Speaker 1: GDP number.

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Speaker 3: I mean, we're running so strong right now, I mean,

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Speaker 3: but I think we've probably slow to something like two

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Speaker 3: and a half in Q four. I think what the

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Speaker 3: consensus is missing right now is that we're going to

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Speaker 3: have a very robust inventory restocking on our hands that's

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Speaker 3: going to bleed into measures of factory activity.

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Speaker 1: You'll go to congratulations on your economic works of the

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Speaker 1: renaissance macro research as well.

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Speaker 6: Katy Commitsky chief Research strateg just to Alpha Simplex joins us.

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Speaker 6: Now Katie, short question, just to open up. Are you

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Speaker 6: still show at the treasury market?

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Speaker 1: Yes, first time guests, you gotta got.

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Speaker 6: No, no, no, there is a follow up. It's okay, we welcome

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Speaker 6: short answers. Kitie. Let's elaborate on that. We saw four

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Speaker 6: thirty six on a ten year, we got back to

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Speaker 6: five point one percent on a two year. What exactly

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Speaker 6: you're looking for? Why is the juice worth the squeeze?

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Speaker 7: Well, I love that.

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Speaker 8: You asked this because everyone keeps saying, let's be bullish

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Speaker 8: the bond market.

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Speaker 7: But look at the price. Look at the price all summer.

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Speaker 8: It has continued to go up and yield so yields

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Speaker 8: even though they pulled back last week, they continued on

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Speaker 8: Friday and they're continuing today.

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Speaker 7: And what we're seeing is we need to see a

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Speaker 7: flatter yield curve.

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Speaker 8: And everyone's really much, really really ready for there to

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Speaker 8: be a pause, and there's probably a pause, but I

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Speaker 8: think it's going to take a while before we see

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Speaker 8: a flatter yield curve and before we see a situation

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Speaker 8: where inflation has come down, thus we're going to see

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Speaker 8: higher yields for a little bit longer.

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Speaker 4: What does it mean to be bearish at a time

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Speaker 4: or yields are jumping all over the place. Are you

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Speaker 4: outright short or are you just not buying the stuff?

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Speaker 8: So in the futures markets, the techechnical signals have been

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Speaker 8: outright short for two years, and that sounds interesting, but

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Speaker 8: it really means that they're in some sense in contrast

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Speaker 8: to what you would think about most fundamental traders have

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Speaker 8: been thinking about the bond market.

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Speaker 7: But we've started to.

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Speaker 8: See a lot of fundamental traders as well saying that

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Speaker 8: they're also short at the bond market, which means that

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Speaker 8: they're shorting bonds expecting that we're going to need to

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Speaker 8: see a flatter yield curve, that we're going to need

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Speaker 8: to see a higher yield return on longer term debts.

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Speaker 8: And this makes sense because maybe we need a duration

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Speaker 8: premium back in the curve.

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Speaker 7: For the short term.

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Speaker 4: When people ask you for some sort of fundamental explanation

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Speaker 4: for why longer term bond yields to remain high, putting

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Speaker 4: to the idea that we're probably going to go back

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Speaker 4: to some sort of normal that we saw pre pandemic

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Speaker 4: of slow growth and slow inflation. What do you say,

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Speaker 4: is it just technical, is it foreign buying? Is it

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Speaker 4: something about just the debtload of this nation.

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Speaker 7: That's a really good question.

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Speaker 8: I mean, I think it's a combination of either a

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Speaker 8: preference for holding that long term debt either as a

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Speaker 8: hedge for potential deterioration and financial conditions. A view that

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Speaker 8: we could have rate cuts faster than they might occur.

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Speaker 7: Is the two common ones I'm thinking about.

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Speaker 8: So a lot of people are thinking, well, hey, things

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Speaker 8: look good, the.

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Speaker 7: Fed's going to come in and cuts.

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Speaker 8: But my concern is that they think that, but now

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Speaker 8: it's looking like twenty It was originally going to be

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Speaker 8: twenty twenty three. Now they're saying twenty twenty four. Who

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Speaker 8: knows when it's going to be twenty twenty five. My

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Speaker 8: view is that we're going to take time to get

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Speaker 8: to that point with the Fed, and thus interest rates

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Speaker 8: have to stay higher for longer, and if you're going

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Speaker 8: to hold a long term bond, you need to have

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Speaker 8: that duration premium over the shorter term return of holding

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Speaker 8: shorter term debt.

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Speaker 7: So in that sense, it's a fundamental view.

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Speaker 6: In that sense, Catchy, that might be an argument for

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Speaker 6: why YO should stay high. What's the argument for why

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Speaker 6: they will be higher.

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Speaker 8: So why they will be higher is that I think

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Speaker 8: that it's not priced in that it could take longer

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Speaker 8: to get to cuts, and so people are assuming that

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Speaker 8: you know, things are going to go back to normal,

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Speaker 8: and thus shorter term rates will go down and we'll

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Speaker 8: have a healthier curve. But if in fact they have

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Speaker 8: to stay higher for longer in the short end, that

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Speaker 8: means that longer term rates have.

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Speaker 2: To go up.

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Speaker 8: And it's a simple question when people start to realize,

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Speaker 8: wait a minute, I'm getting five something percent for two years.

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Speaker 8: If I'm going to hold something for ten, maybe I want.

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Speaker 2: A little bit more.

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Speaker 1: Catherine, let's talk trending. Let's talk Katie on the great

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Speaker 1: Giant Wells Wilder. If I look at Brent Crode, I

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Speaker 1: have a nascent up trend like I had three four

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Speaker 1: years ago as well on ADXDMI, on parabolic SAR, on

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Speaker 1: exponential climate moving averages. Is Brent crude trending higher?

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Speaker 7: Yes, And that's the biggest thing we've been focusing on.

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Speaker 8: So if we want to connect this inflation story, the

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Speaker 8: thing we're watching is the oil mark it because we're

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Speaker 8: looking for catalysts, something that might give us another wave

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Speaker 8: of uptick for upside risk in the inflation numbers. Those

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Speaker 8: are the things that are going to cause the FED

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Speaker 8: to be more cautious.

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Speaker 7: And also we're.

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Speaker 8: Seeing signs of that outside the US. Of course, we

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Speaker 8: saw it right, yeah, exactly, Katie.

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Speaker 1: Come on, it's the beginning of the year, the beginning

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Speaker 1: of the business year. What's your point figured target on

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Speaker 1: brent crude right now? Over one hundred.

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Speaker 8: I don't have the exact number, but we're definitely seeing

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Speaker 8: that's one of the biggest growing trends in terms of

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Speaker 8: our signals. The signal, the signal strength for brent crude

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Speaker 8: has been one that's been ticking up lately. It did

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Speaker 8: revert a little bit in August based on some data

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Speaker 8: on China and other The dollar also weakening a little bit,

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Speaker 8: so we started to see some dollar strength dollar weekening

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Speaker 8: messing with some of that trend. But in general, that

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Speaker 8: has been the trend to watch more recently. And the

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Speaker 8: reason that is important is because that is one of

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Speaker 8: the indicators at least when we i've seen inflation data

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Speaker 8: down the pipeline. Brent crude has been one, for example,

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Speaker 8: in twenty twenty two. That tends to be something to

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Speaker 8: follow as a catalyst into where you start to see

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Speaker 8: inflation numbers take up later in the year.

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Speaker 6: Catty, thank you for the update. Kady Kaminski Alpha simplex

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Speaker 6: on a bond market.

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Speaker 1: We're going to be complete right now with Wendy Scheller,

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Speaker 1: director of the Tubbin Center of American Politics and Policy

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Speaker 1: at Brown truly one of our most popular guests. We

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Speaker 1: get a huge response when she's on. Wendy, let's go

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Speaker 1: to the images that we saw on radio. It was

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Speaker 1: the President doing what it does, marching around the mic

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Speaker 1: baseball cap on hearkening to a union that he knew

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Speaker 1: in eastern Pennsylvania long ago and far away. Don't they

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Speaker 1: vote for Trump? Now?

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Speaker 5: Well, there's a lot of mixed voting in terms of unions,

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Speaker 5: right So if you think about the Team Stairs, for example,

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Speaker 5: they lean a little bit more Republican in their voting,

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Speaker 5: but a lot of other private unions built in the

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Speaker 5: local level vote for Democrats because they believe Democrats will

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Speaker 5: spend money on things like infrastructure, which means construction, which

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Speaker 5: means jobs for them. So it depends on the sort

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Speaker 5: of local balance on where.

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Speaker 9: The jobs are.

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Speaker 5: In terms of private unions, You're absolutely right, that's seven percent.

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Speaker 5: A little over seven percent of the private sector is unionized,

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Speaker 5: but public sector is still in the thirties in terms

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Speaker 5: of the unionization, and that can really matter in.

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Speaker 9: Some of those key swing states.

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Speaker 5: When Republicans go after unions, go after labor, they go

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Speaker 5: after public employee unions, you know, that can cost the votes.

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Speaker 5: So Biden' sort of skirting a line private labor but

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Speaker 5: also public labor unions are very important coming down.

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Speaker 2: To the election politically.

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Speaker 1: Do you see a rekindling or rejuvenation of unions moving

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Speaker 1: from that seven percent statistic hire or is that just

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Speaker 1: wishful thinking on the part of union types.

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Speaker 5: Well, I think there seems to be a concerted strategic

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Speaker 5: effort for unions to branch out things like college campuses,

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Speaker 5: for example, unionizing undergraduates, unionizing graduate students.

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Speaker 9: You may they go, well, that may not matter on

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Speaker 9: the margins. However, that's a group that.

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Speaker 5: Is still really ripe for picking in terms of votes,

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Speaker 5: and it's certainly a group that the Democrats need more

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Speaker 5: than the Republicans to get out the door. So every

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Speaker 5: time you have a new union agreement or a new

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Speaker 5: new people coming into the union sphere, you know, that's

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Speaker 5: a pretty much guaranteed vote because unions are excellent still

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Speaker 5: at getting out their.

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Speaker 9: Base to vote.

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Speaker 4: Wendy, it seems like yesterday's speech did a number of things.

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Speaker 4: It did highlight the union membership. It also highlighted the

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Speaker 4: fact that there has been more union action recently without

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Speaker 4: the strikes that could potentially be a liability. But this

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Speaker 4: is also what Biden said, We're turning things around because

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Speaker 4: of you. When the last guy was here, you are

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Speaker 4: shipping jobs to China. Now we're bringing jobs home from China.

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Speaker 4: How much is President Biden trying to galvanize his campaign

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Speaker 4: by going after former President Trump with the assumption that

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Speaker 4: he will be the person he's facing off, Well, Lisa.

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Speaker 9: I he hasn't done that enough yet.

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Speaker 5: And also, just to show Biden out on the trail,

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Speaker 5: you know, you can walk, you can talk.

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Speaker 9: He's clear, he was energetic.

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Speaker 5: I mean, you know, given the most recent polling that

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Speaker 5: has people really doubting his age and doubting his capability,

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Speaker 5: the more he can get out and show that he's

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Speaker 5: still vibrant.

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Speaker 9: You know, the more he can mitigate those kinds of concerns.

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Speaker 5: So I think that's a really important part of this strategy.

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Speaker 5: And also, if you think about some of the things

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Speaker 5: in the most recent polling about Trump's job performance in office,

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Speaker 5: it's relatively positive. So you know, the COVID after effect,

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Speaker 5: which some people argue costs Trump the presidency in twenty twenty,

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Speaker 5: that seems to be diminishing for Trump. So you know,

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Speaker 5: absent the indictments, there might be a rosier glow on

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Speaker 5: how Trump's presidency went among average voters or independent voters.

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Speaker 5: That's a real concern for the Democrats that real conserve

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Speaker 5: Pi Biden. He's got to remind people of what the

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Speaker 5: administration really was like and why they rejected it in

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Speaker 5: twenty twenty.

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Speaker 4: Does President Biden have any chance of winning if he's

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Speaker 4: not facing off with the former President Trump?

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Speaker 9: At LISTA? That is, you know, that is the Republican

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Speaker 9: Party essential question.

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Speaker 5: You have to believe that the negatives associated with Trump,

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Speaker 5: particularly among independent voters in swing states. I remember some

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Speaker 5: of these swing states have swung a little more of

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Speaker 5: the Democrats in recent elections. At least at the couventorial

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Speaker 5: level and the Senate level. When you think about that,

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Speaker 5: that's their issue. You know, would they do much better

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Speaker 5: if Nicki Haley is the head of the ticket, or

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Speaker 5: even Ron DeSantis even if he looks shaky, or even

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Speaker 5: Tim Scott.

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Speaker 9: I'm not sure if a.

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Speaker 5: Brahmaswamy is the guy to go to sort of Trump light.

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Speaker 5: So I'm not sure that doesn't for them. But if

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Speaker 5: they didn't have the liability of Trump, would they be

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Speaker 5: doing and polling much more strongly among independence than they

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Speaker 5: are now?

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Speaker 1: Professor Shawer Jeff Stein with the article of the weekend

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Speaker 1: on the nation's deficit again burgeoning out x number of trillion. Ever,

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Speaker 1: Dirkson and I have lost track of the billions and trillions.

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Speaker 1: Is the debt of concern to an academic like you?

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Speaker 1: Or is it just the usual debt angst not understanding

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Speaker 1: the mass, the size, the scale of America.

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Speaker 5: Well, I think the parties have long abandoned really seriously

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Speaker 5: worrying about the debt.

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Speaker 9: The Republicans and the Democrats, all the Republicans use it.

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Speaker 5: I think solving the debt limit crisis, I think that

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Speaker 5: was as we saw something that both parties understood they

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Speaker 5: had to finish and had to get done.

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Speaker 9: But you'll see this rhetoric tom absolutely.

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Speaker 5: In the next four weeks while the Republican Party they're

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Speaker 5: gonna claim we spend too much money. They're gonna want

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Speaker 5: big cuts, and Biden's gonna have to hold the line,

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Speaker 5: which may lead to a government shutdown a couple of

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Speaker 5: days after the second Republican Party debate.

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Speaker 9: And that hurts in the end of the day. It

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Speaker 9: hurts Biden.

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Speaker 5: In a lot of ways because he's the incumbent, and

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Speaker 5: because the incumbent is supposed to run the government smoothly.

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Speaker 5: If you couple that with another strike, another union strike,

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Speaker 5: if we see the autoworker strike, I think that creates

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Speaker 5: real uncertainty and concern among voters about the Biden administration.

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Speaker 9: So it's a real risk for them.

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Speaker 6: Wendy Schiller at Brand University.

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Speaker 1: Right now, we're going to burst into tears of David Rubenstein.

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Speaker 1: He joins us, of course, of the Carlisle Group, his philanthropy,

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Speaker 1: including completely stacking the Duke football. We have to stop

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Speaker 1: the show. After talking to guard Jay Pulaski, Duke twenty eight,

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Speaker 1: Clemson seven, how did you contribute to this win.

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Speaker 10: I was calling the signals in from the sideline, and

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Speaker 10: that's what Duke did. They if they listened to my

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Speaker 10: hand signals earlier, they would have been a better team

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Speaker 10: all along. But they just started listening to him.

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Speaker 1: Is this Rubenstein making Duke football a new d one

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Speaker 1: resurgence story.

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Speaker 10: It's great. We haven't had victory as big as this.

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Speaker 7: We're kind of hand signals.

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Speaker 10: That's how coach k won all of his championships. I

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Speaker 10: was sending hand signals from the sidelines. He didn't want

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Speaker 10: to tell people that.

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Speaker 1: David Rubinstein, Jeremy Green. I know Jeremy for Ages. I

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Speaker 1: have a huge respect for him in his philanthropy speaks volumes.

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Speaker 1: In your conversation with mister Grantham, how did you address

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Speaker 1: the three year the four year caution he's had on

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Speaker 1: the American financial experiment.

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Speaker 10: For those who don't know, Jeremy Grantham is a man

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Speaker 10: who is a very distinguished an analyst financial analyst, and

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Speaker 10: he's been quite prescient in predicting bubbles bursting, and he's

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Speaker 10: really good at that, and he's predicted many bubbles that

441
00:22:18,960 --> 00:22:21,640
Speaker 10: actually subsequently burst as a result. He's got a really

442
00:22:21,720 --> 00:22:25,760
Speaker 10: terrific record as an investor, but now he's spending most

443
00:22:25,800 --> 00:22:30,000
Speaker 10: of his time investing in climate change, in climate tech.

444
00:22:30,000 --> 00:22:32,600
Speaker 10: He thinks the greatest challenge in the world now is

445
00:22:32,640 --> 00:22:35,639
Speaker 10: the climate problem we have, so most of his money

446
00:22:35,640 --> 00:22:38,360
Speaker 10: isn't a foundation that goes towards that. But he likes

447
00:22:38,400 --> 00:22:41,879
Speaker 10: to call bubbles, and he's said, maybe artificial intelligence is

448
00:22:41,880 --> 00:22:44,119
Speaker 10: a mini bubble, but we're now coming out of the

449
00:22:44,119 --> 00:22:47,600
Speaker 10: tech bubble, and that tech bubble he forecast and he

450
00:22:47,680 --> 00:22:50,359
Speaker 10: was not involved in tech, and therefore he did pretty

451
00:22:50,400 --> 00:22:53,680
Speaker 10: well for his investors. He built GMO many years ago.

452
00:22:53,720 --> 00:22:57,120
Speaker 10: He's a British citizen initially, but lived in the United

453
00:22:57,119 --> 00:22:59,720
Speaker 10: States after Harvard Business School, and he built one of

454
00:22:59,720 --> 00:23:02,040
Speaker 10: the better money management firms in the Boston area. And

455
00:23:02,080 --> 00:23:05,399
Speaker 10: he's quite well known for his philanthropy, but also for

456
00:23:05,520 --> 00:23:09,320
Speaker 10: predicting bubbles. And he also says the FED is almost

457
00:23:09,359 --> 00:23:12,560
Speaker 10: always wrong in predicting recessions. The FED is not predicting

458
00:23:12,560 --> 00:23:15,160
Speaker 10: recession now, but he thinks we will have a recession

459
00:23:15,200 --> 00:23:15,639
Speaker 10: for sure.

460
00:23:16,160 --> 00:23:18,880
Speaker 4: Does he think that it's harder to see a bubble

461
00:23:19,000 --> 00:23:22,560
Speaker 4: now than in the past. Is it more difficult to

462
00:23:22,640 --> 00:23:25,119
Speaker 4: spot bubbles in an arrow where people have been grown

463
00:23:25,200 --> 00:23:29,200
Speaker 4: up have been raised through the financial crisis and through

464
00:23:29,240 --> 00:23:32,040
Speaker 4: the big short and all the glory around bubbles.

465
00:23:32,440 --> 00:23:34,359
Speaker 10: Well, you don't really know you're in a bubble to

466
00:23:34,440 --> 00:23:38,280
Speaker 10: it bursts typically, and he's actually pretty good at predicting bubbles,

467
00:23:38,320 --> 00:23:40,520
Speaker 10: but nobody's perfect at it. And the reason we have bubbles,

468
00:23:40,560 --> 00:23:43,240
Speaker 10: he would say, is that there's the phenomenon that everybody

469
00:23:43,320 --> 00:23:45,000
Speaker 10: is afraid that their neighbor's going to get rich and

470
00:23:45,000 --> 00:23:47,320
Speaker 10: they're going to miss out on it, so they pile

471
00:23:47,400 --> 00:23:51,160
Speaker 10: in when things keep going up, and ultimately at burst,

472
00:23:50,840 --> 00:23:54,600
Speaker 10: they they're disappointed. Pointed out for example, Sir Isaac Newton,

473
00:23:54,600 --> 00:23:57,840
Speaker 10: one of the smartest men ever. He got into an investment,

474
00:23:57,960 --> 00:24:00,760
Speaker 10: thought it was pretty good, made doubled, his money, got out,

475
00:24:00,840 --> 00:24:02,320
Speaker 10: and then he saw it kept going up and up,

476
00:24:02,400 --> 00:24:04,320
Speaker 10: so he mortgage his house, took all of his money,

477
00:24:04,359 --> 00:24:06,919
Speaker 10: put it back in, and he lost at everything. He

478
00:24:06,960 --> 00:24:07,600
Speaker 10: went bankrupt.

479
00:24:07,840 --> 00:24:11,119
Speaker 4: Physics and market timing maybe don't go exactly together all

480
00:24:11,160 --> 00:24:13,479
Speaker 4: the time. I let's just say that, right, But there

481
00:24:13,520 --> 00:24:15,800
Speaker 4: is this question going forward, especially at a time where

482
00:24:15,840 --> 00:24:18,080
Speaker 4: people are trying to game out where the fed is

483
00:24:18,480 --> 00:24:21,360
Speaker 4: of just the cross currents and the uncertainties and how

484
00:24:21,440 --> 00:24:24,960
Speaker 4: much the US can continue to diverge from other places.

485
00:24:25,320 --> 00:24:27,960
Speaker 4: Does he seem to think that that's overplayed based on

486
00:24:28,000 --> 00:24:30,520
Speaker 4: the AI bet that that sort of people are not

487
00:24:30,640 --> 00:24:32,679
Speaker 4: looking at history and that they need two more to

488
00:24:32,720 --> 00:24:33,880
Speaker 4: really understand this well.

489
00:24:33,960 --> 00:24:35,760
Speaker 10: I think looking at history would be something he thinks

490
00:24:35,800 --> 00:24:37,480
Speaker 10: is a good idea, because if you look at history,

491
00:24:37,520 --> 00:24:40,720
Speaker 10: you'll see that when you have these kind of inflated bubbles,

492
00:24:40,840 --> 00:24:43,120
Speaker 10: they are inevitably they're going to burst. And so we've

493
00:24:43,119 --> 00:24:45,240
Speaker 10: had many bursts at dot com bubbles where he really

494
00:24:45,240 --> 00:24:48,520
Speaker 10: made his name because he was in effect predicting that

495
00:24:48,520 --> 00:24:51,360
Speaker 10: would happen in nineteen ninety eight, nineteen ninety ninety two thousand,

496
00:24:51,480 --> 00:24:53,959
Speaker 10: and his firm did quite well avoiding the tech bubble

497
00:24:54,240 --> 00:24:58,399
Speaker 10: that existed. Then he's actually a legendary least smart person

498
00:24:58,480 --> 00:25:02,480
Speaker 10: about predicting follies of the markets. And he's not afraid

499
00:25:02,520 --> 00:25:05,200
Speaker 10: of telling you that you're not smart, you're stupid, you're

500
00:25:05,200 --> 00:25:08,560
Speaker 10: doing something wrong. He's not afraid of actually going against

501
00:25:08,600 --> 00:25:11,119
Speaker 10: the conventional wisdom. Very often people don't want to offend

502
00:25:11,160 --> 00:25:13,119
Speaker 10: other people by telling them they're not that smart. But

503
00:25:13,160 --> 00:25:15,000
Speaker 10: he's willing to say you're wrong about this.

504
00:25:15,200 --> 00:25:17,840
Speaker 1: But this is why this conversation is so important, folks,

505
00:25:17,960 --> 00:25:20,639
Speaker 1: nine pm tonight. Rubinstein Grantham, David, you're one of the

506
00:25:20,640 --> 00:25:23,920
Speaker 1: congenital optimists out there. You have put money where mouth

507
00:25:24,040 --> 00:25:28,200
Speaker 1: is on the artifacts, the heritage of the American financial experiment,

508
00:25:28,240 --> 00:25:31,120
Speaker 1: the magnet cart purchase that you made, any others. I'm

509
00:25:31,119 --> 00:25:33,480
Speaker 1: not going to say you're the polar opposite of mister Grantham,

510
00:25:33,640 --> 00:25:37,240
Speaker 1: but there's a built in Rubinstein optimism. Do you maintain

511
00:25:37,359 --> 00:25:41,160
Speaker 1: that even with the not perma bear but the perpetual

512
00:25:41,359 --> 00:25:44,080
Speaker 1: caution that we witness with Jeremy Grantham.

513
00:25:43,800 --> 00:25:47,080
Speaker 10: Well, he is much more bearish and much more negative

514
00:25:47,119 --> 00:25:49,879
Speaker 10: on things than I am personality wise. Probably, but you

515
00:25:49,920 --> 00:25:51,560
Speaker 10: know that takes a lot of courage. When you're telling

516
00:25:51,600 --> 00:25:53,720
Speaker 10: people they're wrong all the time. That's not easy to do.

517
00:25:54,119 --> 00:25:55,960
Speaker 10: So I am probably not as good at telling people

518
00:25:56,000 --> 00:25:58,040
Speaker 10: they're wrong to their face as he is. But he's

519
00:25:58,080 --> 00:26:00,760
Speaker 10: willing to tell people you're wrong. Can a big mistake.

520
00:26:00,960 --> 00:26:04,439
Speaker 1: All of us rocked by the climate change stories of

521
00:26:04,480 --> 00:26:07,679
Speaker 1: the summer. You know this that the other thing? What

522
00:26:07,880 --> 00:26:14,880
Speaker 1: is his prescription to have America address facts of climate change?

523
00:26:15,000 --> 00:26:17,280
Speaker 10: Well, he thinks we're not doing enough for sure. Now

524
00:26:17,320 --> 00:26:19,480
Speaker 10: he can't solve all that problem himself. But what he's

525
00:26:19,480 --> 00:26:22,000
Speaker 10: doing is taking most of his money now and investing

526
00:26:22,080 --> 00:26:25,240
Speaker 10: in green tech companies, venture capital kind of company, small ones,

527
00:26:25,400 --> 00:26:27,440
Speaker 10: hoping that one thing will come along that will actually

528
00:26:27,440 --> 00:26:29,920
Speaker 10: make a big difference. But he's not trying to influence

529
00:26:29,920 --> 00:26:33,280
Speaker 10: our government policy by going down lobbing. He's past that.

530
00:26:33,400 --> 00:26:36,520
Speaker 10: But he's actually a very very clever person who now

531
00:26:36,760 --> 00:26:39,800
Speaker 10: has made his main focus in life climate tech and

532
00:26:40,840 --> 00:26:43,880
Speaker 10: investing in things that are going to maybe help with climate.

533
00:26:43,720 --> 00:26:45,920
Speaker 4: You've said several times he's not afraid to tell people

534
00:26:45,960 --> 00:26:47,200
Speaker 4: to their face that they're wrong.

535
00:26:47,520 --> 00:26:48,360
Speaker 6: Has he said that to.

536
00:26:48,320 --> 00:26:52,080
Speaker 10: You, Well, he hasn't said to me, I'm wrong, but necessarily,

537
00:26:52,119 --> 00:26:57,119
Speaker 10: but I think generally when you're predicting people, you're predicting

538
00:26:57,160 --> 00:26:59,600
Speaker 10: bubbles are going to burst. You're telling people ninety percent

539
00:26:59,600 --> 00:27:01,960
Speaker 10: of the people they're wrong. And he's not afraid of

540
00:27:02,000 --> 00:27:03,520
Speaker 10: telling people they're wrong's you got to have to have

541
00:27:03,560 --> 00:27:05,919
Speaker 10: a certain kind of personality. Probably he's better at it

542
00:27:05,920 --> 00:27:06,439
Speaker 10: than I would be.

543
00:27:06,880 --> 00:27:10,000
Speaker 4: The idea of investing in niche companies sort of what

544
00:27:10,040 --> 00:27:12,119
Speaker 4: thom is talking about, whether it's climate change or whether

545
00:27:12,160 --> 00:27:14,600
Speaker 4: it's some of the venture capital the other people are doing.

546
00:27:15,119 --> 00:27:17,080
Speaker 4: Is that a more sure bet from your point of

547
00:27:17,160 --> 00:27:19,480
Speaker 4: view now, at a time where there is such a

548
00:27:19,560 --> 00:27:21,440
Speaker 4: high degree of uncertainty on a.

549
00:27:21,359 --> 00:27:25,240
Speaker 10: Macro level, well on climate tech just.

550
00:27:25,200 --> 00:27:28,439
Speaker 4: In general broadly, this sort of niche concept of just

551
00:27:28,600 --> 00:27:32,240
Speaker 4: going at things very specifically with a smaller pool of money,

552
00:27:32,280 --> 00:27:34,840
Speaker 4: is that a sure bet to make bigger returns.

553
00:27:35,240 --> 00:27:37,679
Speaker 10: There's no sure bets anywhere, of course. I think the

554
00:27:37,680 --> 00:27:40,919
Speaker 10: biggest concern that I would have is that we're not

555
00:27:41,080 --> 00:27:43,119
Speaker 10: quite past the point where we know there's not going

556
00:27:43,160 --> 00:27:45,399
Speaker 10: to be a recession. I don't think we will have

557
00:27:45,440 --> 00:27:47,600
Speaker 10: a recession, but nobody knows for certain. You don't know

558
00:27:47,600 --> 00:27:49,960
Speaker 10: it until you get into it. Right now, the conventional

559
00:27:50,000 --> 00:27:53,200
Speaker 10: wisdom in Washington is that we've gone past the likelihood

560
00:27:53,200 --> 00:27:55,919
Speaker 10: of a recession. And there are some people like Jeremy

561
00:27:55,920 --> 00:27:58,200
Speaker 10: Grant and who thinks that we may have a recession,

562
00:27:58,200 --> 00:28:00,399
Speaker 10: but it maybe next year, not this year. As you

563
00:28:00,440 --> 00:28:02,679
Speaker 10: know what, there was a prediction of a hard landing

564
00:28:02,920 --> 00:28:04,920
Speaker 10: maybe by the end of this year, but now most

565
00:28:04,960 --> 00:28:06,720
Speaker 10: people would say, probably not going to be a hard

566
00:28:06,760 --> 00:28:08,560
Speaker 10: landing by the end of the year, but as the

567
00:28:08,600 --> 00:28:10,639
Speaker 10: next year, that's when Jerry mcgrantham thinks there will be

568
00:28:10,680 --> 00:28:14,840
Speaker 10: a recession sometimes next year. And again, predicting recessions is

569
00:28:14,920 --> 00:28:17,120
Speaker 10: a fool's err and it's very difficult to do.

570
00:28:17,119 --> 00:28:18,800
Speaker 1: They have a good time for one more question, it's

571
00:28:18,840 --> 00:28:22,080
Speaker 1: really important. The quarterback for Duke is just totally irresponsible.

572
00:28:22,080 --> 00:28:24,080
Speaker 1: He had late homework and they had to do a

573
00:28:24,119 --> 00:28:27,399
Speaker 1: whole video asking the professor to delay. Is, you know,

574
00:28:27,520 --> 00:28:29,320
Speaker 1: to get his homework in so you get a quality

575
00:28:29,400 --> 00:28:32,240
Speaker 1: see Riley Leonard of Duke University. I mean, is he

576
00:28:32,440 --> 00:28:36,000
Speaker 1: destined for Carlisle Internship? I mean where are we on this?

577
00:28:36,600 --> 00:28:38,080
Speaker 1: I need to make some news today. Help me?

578
00:28:38,440 --> 00:28:42,440
Speaker 10: Well, I think in college football and college basketball today

579
00:28:42,480 --> 00:28:45,680
Speaker 10: you can make more money playing college basketball and college

580
00:28:45,720 --> 00:28:48,680
Speaker 10: football then going to private equity fund.

581
00:28:48,720 --> 00:28:51,680
Speaker 1: Did you think of the Citadel internship the salaries there again?

582
00:28:51,760 --> 00:28:53,440
Speaker 1: Did you see that last week they were making Jane

583
00:28:53,480 --> 00:28:54,440
Speaker 1: Norms money.

584
00:28:54,760 --> 00:28:57,200
Speaker 10: Well, Citadel is a great firm and that's got a

585
00:28:57,200 --> 00:28:58,760
Speaker 10: great leader and they're making a lot of money, and

586
00:28:58,800 --> 00:29:00,400
Speaker 10: I guess they're paying out a lot of monye. They

587
00:29:00,400 --> 00:29:01,960
Speaker 10: want to get really smart people and they can pay

588
00:29:02,000 --> 00:29:02,360
Speaker 10: up for it.

589
00:29:02,520 --> 00:29:04,720
Speaker 1: But this what was the first what was your first

590
00:29:04,720 --> 00:29:07,040
Speaker 1: internship in finance? You walked in the door and said,

591
00:29:07,040 --> 00:29:08,000
Speaker 1: I'm just glad, can I get you?

592
00:29:08,440 --> 00:29:10,680
Speaker 10: I didn't have an internship in finance. I think my

593
00:29:10,760 --> 00:29:13,120
Speaker 10: first job was probably selling magazines door to door or

594
00:29:13,160 --> 00:29:17,280
Speaker 10: something like that, but I didn't have a finance internship.

595
00:29:17,280 --> 00:29:20,640
Speaker 1: Really, David Rubinstein here, Riley Leonard, if you're listening this morning,

596
00:29:20,720 --> 00:29:23,640
Speaker 1: called one eight hundred Rubinstein and you get that Carlile

597
00:29:23,680 --> 00:29:27,840
Speaker 1: internship going. Subscribe to the Bloomberg Surveillance podcast on Apple,

598
00:29:28,000 --> 00:29:32,240
Speaker 1: Spotify and anywhere else you get your podcasts. Listen live

599
00:29:32,360 --> 00:29:36,760
Speaker 1: every weekday starting at seven am Eastern. I'm Bloomberg dot Com,

600
00:29:36,800 --> 00:29:41,000
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.

601
00:29:41,440 --> 00:29:45,080
Speaker 1: You can watch us live on Bloomberg Television and always

602
00:29:45,480 --> 00:29:49,320
Speaker 1: I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen,

603
00:29:49,520 --> 00:29:51,320
Speaker 1: and this is Bloomberg