Speaker 1: This is the Bloomberg Surveillance podcast. I'm Tom Keene, along
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Speaker 1: equity space, we heard it from the technical analysis giant,
Speaker 1: Ralph Ankompora, Edward Yardenni of Yale CJ. Lawrence is his
Speaker 1: own shop. On top of it, get into the stock
Speaker 1: market in October of last year, and on the economic
Speaker 1: side of why weel C plus I plus G plus NX.
Speaker 1: Was Neil dudda very lonely at Renaissance Macro a year ago.
Speaker 1: We're really coming out a year ago, Neil, from your
Speaker 1: arch call, let's review. What did you see in September
Speaker 1: of twenty twenty two.
Speaker 2: Well, thanks for that intro, Tom.
Speaker 3: You always make me look better than I actually do,
Speaker 3: so I appreciate it, but you know, I think it
Speaker 3: was for me. It boiled down to something very simple,
Speaker 3: which is wage inflation. Was hanging in there while price
Speaker 3: inflation was coming down. I mean, that was the principal
Speaker 3: risk of the economy. In the spring of twenty twenty two,
Speaker 3: you had a very aggressive FED. You had rising food
Speaker 3: and energy prices that shocked household incomes due to the
Speaker 3: Russian invasion of Ukraine. Of course, as we got towards
Speaker 3: the end of the year, a lot of that shock
Speaker 3: had gone away, while the labor markets were still kind
Speaker 3: of hanging in there, So real incomes were climbing, and
Speaker 3: that meant stronger consumer spending ultimately, and that's why the economy.
Speaker 4: Sort of.
Speaker 3: Remember early in the year, tom everyone was betting on
Speaker 3: a FED pivot and we saw a very you know,
Speaker 3: we saw a modest decline in mortgage rates as a
Speaker 3: result of that, but that modest drop elicited a fairly
Speaker 3: robust response in housing market activity. So there's a lot
Speaker 3: of pent up demand there for housing, and so I think,
Speaker 3: you know, when housing is working, it's difficult to be
Speaker 3: very verish on the economy.
Speaker 1: If we have disinflation or leveling of inflation. What does
Speaker 1: nominal GDP do, Because top line GDP, your real GDP
Speaker 1: optimism with whatever inflation is linked into revenues of corporations.
Speaker 1: What's the data nominal GDP call.
Speaker 3: I mean, it's at least six percent if you believe
Speaker 3: the If you believe the last employment report. When you
Speaker 3: look at aggregate weekly income, aggregate weekly payrolls sort of
Speaker 3: the sum product of jobs, hours and earnings over the
Speaker 3: last three months, that number is upset seven percent at
Speaker 3: an annual rate. So you know, the labor market sort
Speaker 3: of impulse phenomenal growth is quite strong as well. So
Speaker 3: we have an unsustainably strong economy still, and this is
Speaker 3: happening at a time when the FED is taking, you know,
Speaker 3: steps to the exit door. So you know, to me,
Speaker 3: I think the risk and this is what I think
Speaker 3: makes me not an optimist, is that the risk is
Speaker 3: that you know, the FED is prematurely declaring victory. I
Speaker 3: do see a lot of cyclical momentum in the economy
Speaker 3: right now, and the FED stepping back. I think that
Speaker 3: could set ups up for a problem as we go
Speaker 3: into twenty twenty four.
Speaker 4: Yeah, the fact that you said an unsustainably hot economy,
Speaker 4: an unsustainable level of growth in the US raises this
Speaker 4: real question, what's going to make it unsustainable? Is it
Speaker 4: the inflation story that you see as researching. We've talked
Speaker 4: about this before and the fact that the Fed's not
Speaker 4: there or is it just that you cannot continue in
Speaker 4: a vacuum, So at some point it's going to implode
Speaker 4: on itself.
Speaker 3: Well, I don't know that it will implode on itself
Speaker 3: without the FED doing something about it. And of course,
Speaker 3: you know, the problems for markets are always when there's
Speaker 3: a disconnect between what the FED wants to do and
Speaker 3: what they should do. That's when the problems come up.
Speaker 3: And you know, I think the FED should not be
Speaker 3: signaling rate cuts next year. I mean that to me
Speaker 3: is a bear. You know, that's like an easy first
Speaker 3: thing that they should do is not signal rate cuts.
Speaker 3: They need to maintain a tight monetary stance because frankly,
Speaker 3: real GDP growth is running last I checked six percent
Speaker 3: at an annual rate over the last three months. Now,
Speaker 3: you can talk about revisions, you can talk about you know,
Speaker 3: that's not where the underlying growth rate is. But if
Speaker 3: you look at monthly GDP as of July, over the
Speaker 3: last three months ending in July, it's up six percent
Speaker 3: at an annual rate.
Speaker 2: I know that's not the underlying trend. It's above trend growth.
Speaker 4: Well, and this is the reason why a lot of
Speaker 4: people are talking about the same thing that you are.
Speaker 4: We heard from Katie Kaminski over at Alpha Simplex basically
Speaker 4: saying the same thing that you are, in different ways,
Speaker 4: and she's bearish on bonds because she sees this coming
Speaker 4: to the foe and yields having to remain higher for longer.
Speaker 4: There is a question, though, embedded in Goldman Sachs's discussion
Speaker 4: of the long and variable lags, and maybe this is
Speaker 4: an economy that can shrug off a five percent FED
Speaker 4: funds rate and it's not going to matter. So at
Speaker 4: what point do you see higher bond yields as not
Speaker 4: inconsistent with higher stock prices, with higher valuations, with it
Speaker 4: a continue rally in the equity market.
Speaker 2: Well, I mean, I think right now the.
Speaker 3: Combination is reasonably good for stocks, right because the FED
Speaker 3: is backing off and you have strong growth and that's
Speaker 3: you know, so the Fed's sort of off your neck.
Speaker 3: I think at least through the end of the year.
Speaker 3: I mean, if they're going to hike again, it'll probably
Speaker 3: be in December. So I don't really think we have
Speaker 3: to worry about the FED you know, until then, and
Speaker 3: this is happening at a time when there's cyclical momentum
Speaker 3: in the in the economy. The fact is is that
Speaker 3: goods spending, consumer spending on goods is up over three
Speaker 3: percent against last year, and during that time, non farm
Speaker 3: inventories have been contracting around half a percentage point on
Speaker 3: average per quarter. Again, that's an unsustainable draft on an inventory.
Speaker 3: So what are you going to se You're gonna see
Speaker 3: inventory's restock. That's going to booy manufacturing production again cyclical industries.
Speaker 3: So that should be good for equities. The question is
Speaker 3: when does the FED wake up and realize that, you know,
Speaker 3: long and variable lags are not working out as neat
Speaker 3: and cleanly as they have in their in the Fervist model.
Speaker 4: Based on they.
Speaker 2: May have to step on the brakes even more.
Speaker 4: So what does that mean?
Speaker 5: Right?
Speaker 4: And that's exactly where I was going to go. How
Speaker 4: high do rates have to go in order to curtail
Speaker 4: some of what you see as unsustainable growth in the US?
Speaker 3: Yes, I mean to me, I think that they you
Speaker 3: need to keep the possibility on there for them to
Speaker 3: start to hike again in the first half of next
Speaker 3: year at a minimum, they're.
Speaker 2: Going to price.
Speaker 3: I mean, I think they have four rate cuts priced
Speaker 3: into the summary of economic projections right now. It's hard
Speaker 3: to see that surviving in September. So, you know, I
Speaker 3: think let's start there.
Speaker 1: Neil in an economics textbook, chapter twenty three or twenty
Speaker 1: four links all of Ziconobabbel into the stock market. Take
Speaker 1: the Dutta optimism and the corporations they are going to
Speaker 1: have to deal with an improved real rate, they're going
Speaker 1: to have to deal with a high nominal rate, you
Speaker 1: know it, three years, five years as well. How does
Speaker 1: a stock market respond to that? How does a stock
Speaker 1: market react to an overweighted optimistic Dutta world.
Speaker 3: Well, so I think you could call it sort of
Speaker 3: an inflationary boom. I think that might be what we're
Speaker 3: returning to. And if that's the case, that's an environment
Speaker 3: where stocks can work. But I mean, it's unambiguously bad
Speaker 3: for bonds, but for stocks, I think it's an environment
Speaker 3: where you should see continued positive returns, maybe not, you know,
Speaker 3: somewhat below the historical norm. Obviously, if you have higher
Speaker 3: real interest rates that hurts equities, But if you have
Speaker 3: continued growth in the economy, that means that actual and
Speaker 3: projected earnings will hang in there.
Speaker 1: So just because of time, you know, I got to
Speaker 1: get this in. How is an inflationary boom different now
Speaker 1: from the horror of the sixties.
Speaker 3: Well, that was obviously well the horrors of the sixties
Speaker 3: and the sixties were a reasonably good good period for
Speaker 3: stock market turns in the economy. An inflationary boom again,
Speaker 3: as I say, is something that where equities can work.
Speaker 3: What you don't want is is stagflation like conditions where
Speaker 3: productivity is coming down, where you have repeated supply shocks.
Speaker 3: That's an environment where bond returns are horrible, but but
Speaker 3: stock returns are is because you know, companies can't can't
Speaker 3: find a way to make to make money in.
Speaker 1: That Neil, your Q four GDP number right now, we
Speaker 1: got to get Bramo going, what's your Q four real
Speaker 1: GDP number.
Speaker 3: I mean, we're running so strong right now, I mean,
Speaker 3: but I think we've probably slow to something like two
Speaker 3: and a half in Q four. I think what the
Speaker 3: consensus is missing right now is that we're going to
Speaker 3: have a very robust inventory restocking on our hands that's
Speaker 3: going to bleed into measures of factory activity.
Speaker 1: You'll go to congratulations on your economic works of the
Speaker 1: renaissance macro research as well.
Speaker 6: Katy Commitsky chief Research strateg just to Alpha Simplex joins us.
Speaker 6: Now Katie, short question, just to open up. Are you
Speaker 6: still show at the treasury market?
Speaker 1: Yes, first time guests, you gotta got.
Speaker 6: No, no, no, there is a follow up. It's okay, we welcome
Speaker 6: short answers. Kitie. Let's elaborate on that. We saw four
Speaker 6: thirty six on a ten year, we got back to
Speaker 6: five point one percent on a two year. What exactly
Speaker 6: you're looking for? Why is the juice worth the squeeze?
Speaker 7: Well, I love that.
Speaker 8: You asked this because everyone keeps saying, let's be bullish
Speaker 8: the bond market.
Speaker 7: But look at the price. Look at the price all summer.
Speaker 8: It has continued to go up and yield so yields
Speaker 8: even though they pulled back last week, they continued on
Speaker 8: Friday and they're continuing today.
Speaker 7: And what we're seeing is we need to see a
Speaker 7: flatter yield curve.
Speaker 8: And everyone's really much, really really ready for there to
Speaker 8: be a pause, and there's probably a pause, but I
Speaker 8: think it's going to take a while before we see
Speaker 8: a flatter yield curve and before we see a situation
Speaker 8: where inflation has come down, thus we're going to see
Speaker 8: higher yields for a little bit longer.
Speaker 4: What does it mean to be bearish at a time
Speaker 4: or yields are jumping all over the place. Are you
Speaker 4: outright short or are you just not buying the stuff?
Speaker 8: So in the futures markets, the techechnical signals have been
Speaker 8: outright short for two years, and that sounds interesting, but
Speaker 8: it really means that they're in some sense in contrast
Speaker 8: to what you would think about most fundamental traders have
Speaker 8: been thinking about the bond market.
Speaker 7: But we've started to.
Speaker 8: See a lot of fundamental traders as well saying that
Speaker 8: they're also short at the bond market, which means that
Speaker 8: they're shorting bonds expecting that we're going to need to
Speaker 8: see a flatter yield curve, that we're going to need
Speaker 8: to see a higher yield return on longer term debts.
Speaker 8: And this makes sense because maybe we need a duration
Speaker 8: premium back in the curve.
Speaker 7: For the short term.
Speaker 4: When people ask you for some sort of fundamental explanation
Speaker 4: for why longer term bond yields to remain high, putting
Speaker 4: to the idea that we're probably going to go back
Speaker 4: to some sort of normal that we saw pre pandemic
Speaker 4: of slow growth and slow inflation. What do you say,
Speaker 4: is it just technical, is it foreign buying? Is it
Speaker 4: something about just the debtload of this nation.
Speaker 7: That's a really good question.
Speaker 8: I mean, I think it's a combination of either a
Speaker 8: preference for holding that long term debt either as a
Speaker 8: hedge for potential deterioration and financial conditions. A view that
Speaker 8: we could have rate cuts faster than they might occur.
Speaker 7: Is the two common ones I'm thinking about.
Speaker 8: So a lot of people are thinking, well, hey, things
Speaker 8: look good, the.
Speaker 7: Fed's going to come in and cuts.
Speaker 8: But my concern is that they think that, but now
Speaker 8: it's looking like twenty It was originally going to be
Speaker 8: twenty twenty three. Now they're saying twenty twenty four. Who
Speaker 8: knows when it's going to be twenty twenty five. My
Speaker 8: view is that we're going to take time to get
Speaker 8: to that point with the Fed, and thus interest rates
Speaker 8: have to stay higher for longer, and if you're going
Speaker 8: to hold a long term bond, you need to have
Speaker 8: that duration premium over the shorter term return of holding
Speaker 8: shorter term debt.
Speaker 7: So in that sense, it's a fundamental view.
Speaker 6: In that sense, Catchy, that might be an argument for
Speaker 6: why YO should stay high. What's the argument for why
Speaker 6: they will be higher.
Speaker 8: So why they will be higher is that I think
Speaker 8: that it's not priced in that it could take longer
Speaker 8: to get to cuts, and so people are assuming that
Speaker 8: you know, things are going to go back to normal,
Speaker 8: and thus shorter term rates will go down and we'll
Speaker 8: have a healthier curve. But if in fact they have
Speaker 8: to stay higher for longer in the short end, that
Speaker 8: means that longer term rates have.
Speaker 2: To go up.
Speaker 8: And it's a simple question when people start to realize,
Speaker 8: wait a minute, I'm getting five something percent for two years.
Speaker 8: If I'm going to hold something for ten, maybe I want.
Speaker 2: A little bit more.
Speaker 1: Catherine, let's talk trending. Let's talk Katie on the great
Speaker 1: Giant Wells Wilder. If I look at Brent Crode, I
Speaker 1: have a nascent up trend like I had three four
Speaker 1: years ago as well on ADXDMI, on parabolic SAR, on
Speaker 1: exponential climate moving averages. Is Brent crude trending higher?
Speaker 7: Yes, And that's the biggest thing we've been focusing on.
Speaker 8: So if we want to connect this inflation story, the
Speaker 8: thing we're watching is the oil mark it because we're
Speaker 8: looking for catalysts, something that might give us another wave
Speaker 8: of uptick for upside risk in the inflation numbers. Those
Speaker 8: are the things that are going to cause the FED
Speaker 8: to be more cautious.
Speaker 7: And also we're.
Speaker 8: Seeing signs of that outside the US. Of course, we
Speaker 8: saw it right, yeah, exactly, Katie.
Speaker 1: Come on, it's the beginning of the year, the beginning
Speaker 1: of the business year. What's your point figured target on
Speaker 1: brent crude right now? Over one hundred.
Speaker 8: I don't have the exact number, but we're definitely seeing
Speaker 8: that's one of the biggest growing trends in terms of
Speaker 8: our signals. The signal, the signal strength for brent crude
Speaker 8: has been one that's been ticking up lately. It did
Speaker 8: revert a little bit in August based on some data
Speaker 8: on China and other The dollar also weakening a little bit,
Speaker 8: so we started to see some dollar strength dollar weekening
Speaker 8: messing with some of that trend. But in general, that
Speaker 8: has been the trend to watch more recently. And the
Speaker 8: reason that is important is because that is one of
Speaker 8: the indicators at least when we i've seen inflation data
Speaker 8: down the pipeline. Brent crude has been one, for example,
Speaker 8: in twenty twenty two. That tends to be something to
Speaker 8: follow as a catalyst into where you start to see
Speaker 8: inflation numbers take up later in the year.
Speaker 6: Catty, thank you for the update. Kady Kaminski Alpha simplex
Speaker 6: on a bond market.
Speaker 1: We're going to be complete right now with Wendy Scheller,
Speaker 1: director of the Tubbin Center of American Politics and Policy
Speaker 1: at Brown truly one of our most popular guests. We
Speaker 1: get a huge response when she's on. Wendy, let's go
Speaker 1: to the images that we saw on radio. It was
Speaker 1: the President doing what it does, marching around the mic
Speaker 1: baseball cap on hearkening to a union that he knew
Speaker 1: in eastern Pennsylvania long ago and far away. Don't they
Speaker 1: vote for Trump? Now?
Speaker 5: Well, there's a lot of mixed voting in terms of unions,
Speaker 5: right So if you think about the Team Stairs, for example,
Speaker 5: they lean a little bit more Republican in their voting,
Speaker 5: but a lot of other private unions built in the
Speaker 5: local level vote for Democrats because they believe Democrats will
Speaker 5: spend money on things like infrastructure, which means construction, which
Speaker 5: means jobs for them. So it depends on the sort
Speaker 5: of local balance on where.
Speaker 9: The jobs are.
Speaker 5: In terms of private unions, You're absolutely right, that's seven percent.
Speaker 5: A little over seven percent of the private sector is unionized,
Speaker 5: but public sector is still in the thirties in terms
Speaker 5: of the unionization, and that can really matter in.
Speaker 9: Some of those key swing states.
Speaker 5: When Republicans go after unions, go after labor, they go
Speaker 5: after public employee unions, you know, that can cost the votes.
Speaker 5: So Biden' sort of skirting a line private labor but
Speaker 5: also public labor unions are very important coming down.
Speaker 2: To the election politically.
Speaker 1: Do you see a rekindling or rejuvenation of unions moving
Speaker 1: from that seven percent statistic hire or is that just
Speaker 1: wishful thinking on the part of union types.
Speaker 5: Well, I think there seems to be a concerted strategic
Speaker 5: effort for unions to branch out things like college campuses,
Speaker 5: for example, unionizing undergraduates, unionizing graduate students.
Speaker 9: You may they go, well, that may not matter on
Speaker 9: the margins. However, that's a group that.
Speaker 5: Is still really ripe for picking in terms of votes,
Speaker 5: and it's certainly a group that the Democrats need more
Speaker 5: than the Republicans to get out the door. So every
Speaker 5: time you have a new union agreement or a new
Speaker 5: new people coming into the union sphere, you know, that's
Speaker 5: a pretty much guaranteed vote because unions are excellent still
Speaker 5: at getting out their.
Speaker 9: Base to vote.
Speaker 4: Wendy, it seems like yesterday's speech did a number of things.
Speaker 4: It did highlight the union membership. It also highlighted the
Speaker 4: fact that there has been more union action recently without
Speaker 4: the strikes that could potentially be a liability. But this
Speaker 4: is also what Biden said, We're turning things around because
Speaker 4: of you. When the last guy was here, you are
Speaker 4: shipping jobs to China. Now we're bringing jobs home from China.
Speaker 4: How much is President Biden trying to galvanize his campaign
Speaker 4: by going after former President Trump with the assumption that
Speaker 4: he will be the person he's facing off, Well, Lisa.
Speaker 9: I he hasn't done that enough yet.
Speaker 5: And also, just to show Biden out on the trail,
Speaker 5: you know, you can walk, you can talk.
Speaker 9: He's clear, he was energetic.
Speaker 5: I mean, you know, given the most recent polling that
Speaker 5: has people really doubting his age and doubting his capability,
Speaker 5: the more he can get out and show that he's
Speaker 5: still vibrant.
Speaker 9: You know, the more he can mitigate those kinds of concerns.
Speaker 5: So I think that's a really important part of this strategy.
Speaker 5: And also, if you think about some of the things
Speaker 5: in the most recent polling about Trump's job performance in office,
Speaker 5: it's relatively positive. So you know, the COVID after effect,
Speaker 5: which some people argue costs Trump the presidency in twenty twenty,
Speaker 5: that seems to be diminishing for Trump. So you know,
Speaker 5: absent the indictments, there might be a rosier glow on
Speaker 5: how Trump's presidency went among average voters or independent voters.
Speaker 5: That's a real concern for the Democrats that real conserve
Speaker 5: Pi Biden. He's got to remind people of what the
Speaker 5: administration really was like and why they rejected it in
Speaker 5: twenty twenty.
Speaker 4: Does President Biden have any chance of winning if he's
Speaker 4: not facing off with the former President Trump?
Speaker 9: At LISTA? That is, you know, that is the Republican
Speaker 9: Party essential question.
Speaker 5: You have to believe that the negatives associated with Trump,
Speaker 5: particularly among independent voters in swing states. I remember some
Speaker 5: of these swing states have swung a little more of
Speaker 5: the Democrats in recent elections. At least at the couventorial
Speaker 5: level and the Senate level. When you think about that,
Speaker 5: that's their issue. You know, would they do much better
Speaker 5: if Nicki Haley is the head of the ticket, or
Speaker 5: even Ron DeSantis even if he looks shaky, or even
Speaker 5: Tim Scott.
Speaker 9: I'm not sure if a.
Speaker 5: Brahmaswamy is the guy to go to sort of Trump light.
Speaker 5: So I'm not sure that doesn't for them. But if
Speaker 5: they didn't have the liability of Trump, would they be
Speaker 5: doing and polling much more strongly among independence than they
Speaker 5: are now?
Speaker 1: Professor Shawer Jeff Stein with the article of the weekend
Speaker 1: on the nation's deficit again burgeoning out x number of trillion. Ever,
Speaker 1: Dirkson and I have lost track of the billions and trillions.
Speaker 1: Is the debt of concern to an academic like you?
Speaker 1: Or is it just the usual debt angst not understanding
Speaker 1: the mass, the size, the scale of America.
Speaker 5: Well, I think the parties have long abandoned really seriously
Speaker 5: worrying about the debt.
Speaker 9: The Republicans and the Democrats, all the Republicans use it.
Speaker 5: I think solving the debt limit crisis, I think that
Speaker 5: was as we saw something that both parties understood they
Speaker 5: had to finish and had to get done.
Speaker 9: But you'll see this rhetoric tom absolutely.
Speaker 5: In the next four weeks while the Republican Party they're
Speaker 5: gonna claim we spend too much money. They're gonna want
Speaker 5: big cuts, and Biden's gonna have to hold the line,
Speaker 5: which may lead to a government shutdown a couple of
Speaker 5: days after the second Republican Party debate.
Speaker 9: And that hurts in the end of the day. It
Speaker 9: hurts Biden.
Speaker 5: In a lot of ways because he's the incumbent, and
Speaker 5: because the incumbent is supposed to run the government smoothly.
Speaker 5: If you couple that with another strike, another union strike,
Speaker 5: if we see the autoworker strike, I think that creates
Speaker 5: real uncertainty and concern among voters about the Biden administration.
Speaker 9: So it's a real risk for them.
Speaker 6: Wendy Schiller at Brand University.
Speaker 1: Right now, we're going to burst into tears of David Rubenstein.
Speaker 1: He joins us, of course, of the Carlisle Group, his philanthropy,
Speaker 1: including completely stacking the Duke football. We have to stop
Speaker 1: the show. After talking to guard Jay Pulaski, Duke twenty eight,
Speaker 1: Clemson seven, how did you contribute to this win.
Speaker 10: I was calling the signals in from the sideline, and
Speaker 10: that's what Duke did. They if they listened to my
Speaker 10: hand signals earlier, they would have been a better team
Speaker 10: all along. But they just started listening to him.
Speaker 1: Is this Rubenstein making Duke football a new d one
Speaker 1: resurgence story.
Speaker 10: It's great. We haven't had victory as big as this.
Speaker 7: We're kind of hand signals.
Speaker 10: That's how coach k won all of his championships. I
Speaker 10: was sending hand signals from the sidelines. He didn't want
Speaker 10: to tell people that.
Speaker 1: David Rubinstein, Jeremy Green. I know Jeremy for Ages. I
Speaker 1: have a huge respect for him in his philanthropy speaks volumes.
Speaker 1: In your conversation with mister Grantham, how did you address
Speaker 1: the three year the four year caution he's had on
Speaker 1: the American financial experiment.
Speaker 10: For those who don't know, Jeremy Grantham is a man
Speaker 10: who is a very distinguished an analyst financial analyst, and
Speaker 10: he's been quite prescient in predicting bubbles bursting, and he's
Speaker 10: really good at that, and he's predicted many bubbles that
Speaker 10: actually subsequently burst as a result. He's got a really
Speaker 10: terrific record as an investor, but now he's spending most
Speaker 10: of his time investing in climate change, in climate tech.
Speaker 10: He thinks the greatest challenge in the world now is
Speaker 10: the climate problem we have, so most of his money
Speaker 10: isn't a foundation that goes towards that. But he likes
Speaker 10: to call bubbles, and he's said, maybe artificial intelligence is
Speaker 10: a mini bubble, but we're now coming out of the
Speaker 10: tech bubble, and that tech bubble he forecast and he
Speaker 10: was not involved in tech, and therefore he did pretty
Speaker 10: well for his investors. He built GMO many years ago.
Speaker 10: He's a British citizen initially, but lived in the United
Speaker 10: States after Harvard Business School, and he built one of
Speaker 10: the better money management firms in the Boston area. And
Speaker 10: he's quite well known for his philanthropy, but also for
Speaker 10: predicting bubbles. And he also says the FED is almost
Speaker 10: always wrong in predicting recessions. The FED is not predicting
Speaker 10: recession now, but he thinks we will have a recession
Speaker 10: for sure.
Speaker 4: Does he think that it's harder to see a bubble
Speaker 4: now than in the past. Is it more difficult to
Speaker 4: spot bubbles in an arrow where people have been grown
Speaker 4: up have been raised through the financial crisis and through
Speaker 4: the big short and all the glory around bubbles.
Speaker 10: Well, you don't really know you're in a bubble to
Speaker 10: it bursts typically, and he's actually pretty good at predicting bubbles,
Speaker 10: but nobody's perfect at it. And the reason we have bubbles,
Speaker 10: he would say, is that there's the phenomenon that everybody
Speaker 10: is afraid that their neighbor's going to get rich and
Speaker 10: they're going to miss out on it, so they pile
Speaker 10: in when things keep going up, and ultimately at burst,
Speaker 10: they they're disappointed. Pointed out for example, Sir Isaac Newton,
Speaker 10: one of the smartest men ever. He got into an investment,
Speaker 10: thought it was pretty good, made doubled, his money, got out,
Speaker 10: and then he saw it kept going up and up,
Speaker 10: so he mortgage his house, took all of his money,
Speaker 10: put it back in, and he lost at everything. He
Speaker 10: went bankrupt.
Speaker 4: Physics and market timing maybe don't go exactly together all
Speaker 4: the time. I let's just say that, right, But there
Speaker 4: is this question going forward, especially at a time where
Speaker 4: people are trying to game out where the fed is
Speaker 4: of just the cross currents and the uncertainties and how
Speaker 4: much the US can continue to diverge from other places.
Speaker 4: Does he seem to think that that's overplayed based on
Speaker 4: the AI bet that that sort of people are not
Speaker 4: looking at history and that they need two more to
Speaker 4: really understand this well.
Speaker 10: I think looking at history would be something he thinks
Speaker 10: is a good idea, because if you look at history,
Speaker 10: you'll see that when you have these kind of inflated bubbles,
Speaker 10: they are inevitably they're going to burst. And so we've
Speaker 10: had many bursts at dot com bubbles where he really
Speaker 10: made his name because he was in effect predicting that
Speaker 10: would happen in nineteen ninety eight, nineteen ninety ninety two thousand,
Speaker 10: and his firm did quite well avoiding the tech bubble
Speaker 10: that existed. Then he's actually a legendary least smart person
Speaker 10: about predicting follies of the markets. And he's not afraid
Speaker 10: of telling you that you're not smart, you're stupid, you're
Speaker 10: doing something wrong. He's not afraid of actually going against
Speaker 10: the conventional wisdom. Very often people don't want to offend
Speaker 10: other people by telling them they're not that smart. But
Speaker 10: he's willing to say you're wrong about this.
Speaker 1: But this is why this conversation is so important, folks,
Speaker 1: nine pm tonight. Rubinstein Grantham, David, you're one of the
Speaker 1: congenital optimists out there. You have put money where mouth
Speaker 1: is on the artifacts, the heritage of the American financial experiment,
Speaker 1: the magnet cart purchase that you made, any others. I'm
Speaker 1: not going to say you're the polar opposite of mister Grantham,
Speaker 1: but there's a built in Rubinstein optimism. Do you maintain
Speaker 1: that even with the not perma bear but the perpetual
Speaker 1: caution that we witness with Jeremy Grantham.
Speaker 10: Well, he is much more bearish and much more negative
Speaker 10: on things than I am personality wise. Probably, but you
Speaker 10: know that takes a lot of courage. When you're telling
Speaker 10: people they're wrong all the time. That's not easy to do.
Speaker 10: So I am probably not as good at telling people
Speaker 10: they're wrong to their face as he is. But he's
Speaker 10: willing to tell people you're wrong. Can a big mistake.
Speaker 1: All of us rocked by the climate change stories of
Speaker 1: the summer. You know this that the other thing? What
Speaker 1: is his prescription to have America address facts of climate change?
Speaker 10: Well, he thinks we're not doing enough for sure. Now
Speaker 10: he can't solve all that problem himself. But what he's
Speaker 10: doing is taking most of his money now and investing
Speaker 10: in green tech companies, venture capital kind of company, small ones,
Speaker 10: hoping that one thing will come along that will actually
Speaker 10: make a big difference. But he's not trying to influence
Speaker 10: our government policy by going down lobbing. He's past that.
Speaker 10: But he's actually a very very clever person who now
Speaker 10: has made his main focus in life climate tech and
Speaker 10: investing in things that are going to maybe help with climate.
Speaker 4: You've said several times he's not afraid to tell people
Speaker 4: to their face that they're wrong.
Speaker 6: Has he said that to.
Speaker 10: You, Well, he hasn't said to me, I'm wrong, but necessarily,
Speaker 10: but I think generally when you're predicting people, you're predicting
Speaker 10: bubbles are going to burst. You're telling people ninety percent
Speaker 10: of the people they're wrong. And he's not afraid of
Speaker 10: telling people they're wrong's you got to have to have
Speaker 10: a certain kind of personality. Probably he's better at it
Speaker 10: than I would be.
Speaker 4: The idea of investing in niche companies sort of what
Speaker 4: thom is talking about, whether it's climate change or whether
Speaker 4: it's some of the venture capital the other people are doing.
Speaker 4: Is that a more sure bet from your point of
Speaker 4: view now, at a time where there is such a
Speaker 4: high degree of uncertainty on a.
Speaker 10: Macro level, well on climate tech just.
Speaker 4: In general broadly, this sort of niche concept of just
Speaker 4: going at things very specifically with a smaller pool of money,
Speaker 4: is that a sure bet to make bigger returns.
Speaker 10: There's no sure bets anywhere, of course. I think the
Speaker 10: biggest concern that I would have is that we're not
Speaker 10: quite past the point where we know there's not going
Speaker 10: to be a recession. I don't think we will have
Speaker 10: a recession, but nobody knows for certain. You don't know
Speaker 10: it until you get into it. Right now, the conventional
Speaker 10: wisdom in Washington is that we've gone past the likelihood
Speaker 10: of a recession. And there are some people like Jeremy
Speaker 10: Grant and who thinks that we may have a recession,
Speaker 10: but it maybe next year, not this year. As you
Speaker 10: know what, there was a prediction of a hard landing
Speaker 10: maybe by the end of this year, but now most
Speaker 10: people would say, probably not going to be a hard
Speaker 10: landing by the end of the year, but as the
Speaker 10: next year, that's when Jerry mcgrantham thinks there will be
Speaker 10: a recession sometimes next year. And again, predicting recessions is
Speaker 10: a fool's err and it's very difficult to do.
Speaker 1: They have a good time for one more question, it's
Speaker 1: really important. The quarterback for Duke is just totally irresponsible.
Speaker 1: He had late homework and they had to do a
Speaker 1: whole video asking the professor to delay. Is, you know,
Speaker 1: to get his homework in so you get a quality
Speaker 1: see Riley Leonard of Duke University. I mean, is he
Speaker 1: destined for Carlisle Internship? I mean where are we on this?
Speaker 1: I need to make some news today. Help me?
Speaker 10: Well, I think in college football and college basketball today
Speaker 10: you can make more money playing college basketball and college
Speaker 10: football then going to private equity fund.
Speaker 1: Did you think of the Citadel internship the salaries there again?
Speaker 1: Did you see that last week they were making Jane
Speaker 1: Norms money.
Speaker 10: Well, Citadel is a great firm and that's got a
Speaker 10: great leader and they're making a lot of money, and
Speaker 10: I guess they're paying out a lot of monye. They
Speaker 10: want to get really smart people and they can pay
Speaker 10: up for it.
Speaker 1: But this what was the first what was your first
Speaker 1: internship in finance? You walked in the door and said,
Speaker 1: I'm just glad, can I get you?
Speaker 10: I didn't have an internship in finance. I think my
Speaker 10: first job was probably selling magazines door to door or
Speaker 10: something like that, but I didn't have a finance internship.
Speaker 1: Really, David Rubinstein here, Riley Leonard, if you're listening this morning,
Speaker 1: called one eight hundred Rubinstein and you get that Carlile
Speaker 1: internship going. Subscribe to the Bloomberg Surveillance podcast on Apple,
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