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Speaker 2: Concerts Hunter, just Beck, I gotta do this thirty seconds.
Speaker 2: Latin America. You just visited three countries. What was your
Speaker 2: take on the prosperity of South America?
Speaker 3: So I hadn't been to Argentina since twenty eighteen, and
Speaker 3: the city felt less vibrant and that some people pointed
Speaker 3: out to me that could be a COVID effect. I
Speaker 3: think everybody's very bullish on what the Malay administration is
Speaker 3: doing in terms of deregulation, in terms of trying to
Speaker 3: get the economy back on track. But as you know,
Speaker 3: first quarter GDP was weak, and so I think that's
Speaker 3: that's not going to be a straight line up for Argentina.
Speaker 3: They've they've got a lot of work to do to
Speaker 3: deregulate that economy. Brazil is doing better, doing stronger. The
Speaker 3: one thing that Latin America really has going for it
Speaker 3: is that it is not energy dependent on the Middle East,
Speaker 3: and they produce lots of agricultural commodities.
Speaker 2: Just because the time I got to get the CPI,
Speaker 2: I got a three point seven percent year over year
Speaker 2: survey number. Here, could we come in at four percent
Speaker 2: on this report?
Speaker 4: Yes, we absolutely could.
Speaker 3: We absolutely could. And there's some there's some wild there's
Speaker 3: some of those factors are things we should look through.
Speaker 3: So some of it we expect Shelter to add back
Speaker 3: some a couple of percentage points to CPI because of
Speaker 3: some technicalities of the way that that survey is done
Speaker 3: and the timing of the shutdown in October. We certainly
Speaker 3: expect to see an increase in goods prices, especially oil
Speaker 3: based goods, right, and it's the transport of those goods
Speaker 3: as well as just the I think.
Speaker 2: Did she just say she has no clue yet?
Speaker 5: Like most most people, I don't know this get it.
Speaker 6: We've had some people come in here Constance to say,
Speaker 6: you think the inflation's you know, peaking or spiking, Now,
Speaker 6: wait till the second half of the year when it
Speaker 6: really flows through the economy. We could get some startling
Speaker 6: high numbers.
Speaker 5: Are you in that camp?
Speaker 3: So one of the things I was doing in Latin
Speaker 3: America was I was intending a conference of commercial bank
Speaker 3: business economists, and we do a survey of what are
Speaker 3: the what are the biggest risks, And the biggest risks
Speaker 3: on the board were things like trade war, sort of
Speaker 3: uh debt debt profiles of developed economies, but interestingly kinetic
Speaker 3: war or the closure of the Strait of Hormuz did
Speaker 3: was not a frequent shower. And I don't think the
Speaker 3: market is properly pricing this. We're not properly pricing this
Speaker 3: into inflation, we're not properly pricing this into equity markets,
Speaker 3: and it's looking like the strait is going to stay
Speaker 3: closed through the summer.
Speaker 2: To synthesize is do you do you get value from
Speaker 2: CPI in course CPI or you like others including future
Speaker 2: chairman Wars, where you look at other series.
Speaker 3: It's not so much that I look at other series.
Speaker 3: It's that at times of inflection, data becomes a much
Speaker 3: more rear view mirror and much less an indicator of
Speaker 3: what we're going to have in the future. Because if
Speaker 3: we continue to see the straight closed throughout the summer,
Speaker 3: that's a shock that's not currently priced in.
Speaker 6: So concerts we make here it's coming in, you know,
Speaker 6: a little bit higher than expected, just the you know
Speaker 6: kind of the year of a year CPI three point
Speaker 6: eight percent. It's a lot higher than when we were
Speaker 6: last month at three point three percent, and it's probably
Speaker 6: higher than the Fed would like to see it.
Speaker 3: It's for sure higher than the FED would like to
Speaker 3: see it. And I think that's the key thing. If
Speaker 3: we take the Friday's jobs report, which admittedly was concentrated
Speaker 3: in healthcare and leisure, in hospitality, all the problems we've
Speaker 3: been seeing over the past several years with jobs growth
Speaker 3: and this sort of low higher, low fire environment, we
Speaker 3: take that, which seems in a strange equilibrium to quote J. Powell,
Speaker 3: and then we take this stronger inflation very hard to
Speaker 3: see how they will cut into this. And it is
Speaker 3: our estimation actually that they will go to a neutral
Speaker 3: bias at the next meeting.
Speaker 5: Neutral bias. Okay? Is that enough? Though?
Speaker 6: I mean, do we need to start thinking about they
Speaker 6: need to slow down this economy a little bit?
Speaker 5: Maybe? Well, I mean they slowed down the inflation here
Speaker 5: a little bit.
Speaker 3: Yeah, So the question is how much demand destruction are
Speaker 3: we going to get out of this? So this is
Speaker 3: households have spent an extra twenty eight billion dollars on
Speaker 3: gasoline since the war started. Now, that's about two hundred
Speaker 3: and sixty dollars per household. That's a very back of
Speaker 3: the envelope number. Obviously it depends on how much people drive,
Speaker 3: but still it's taking a bite out of consumption. That's
Speaker 3: a dead weight loss. It doesn't go to other consumption,
Speaker 3: so it should reduce demand in other areas. But what
Speaker 3: I'm looking at here is what's happening in services. So
Speaker 3: as we anticipated two to three tenths increase on shelter,
Speaker 3: that's going to normalize and dissipate over the course of
Speaker 3: the rest of the year. So we're looking at shelter
Speaker 3: at three point three that's probably really normalizing it a
Speaker 3: closer to three point oh two point nine. But transportation
Speaker 3: services four point three percent? Is that enough to cause
Speaker 3: demand destruction? In which case this isn't going to become
Speaker 3: a persistent problem.
Speaker 2: But Gospel Constance Hunter at the National Association for Business
Speaker 2: Economics is financial media knowns like me and Paul quote
Speaker 2: three point eight percent inflation. I am aggressively going to
Speaker 2: suggest that the inflation of the haves is different than
Speaker 2: the inflation and the have nots. Discuss that within your
Speaker 2: public policy background in Columbia.
Speaker 3: Yeah, so that's a really important factor. And going back
Speaker 3: to that doction board, right, we're looking at wages that
Speaker 3: are not keeping pace with inflation. We know that wages
Speaker 3: for college educated people are going up faster, so those
Speaker 3: those supervisory wages are going up faster than the non
Speaker 3: supervisory wages. We had some catch up after COVID that
Speaker 3: that has gone away. We're back to a more normal
Speaker 3: label market in that regard, and so this becomes an
Speaker 3: acute political issue for the Republicans, but one that the
Speaker 3: president seems immune to.
Speaker 5: Actually.
Speaker 6: Yeah, but again the three point eight the headline here.
Speaker 5: That starts to get people's attention.
Speaker 6: I think, you know, because you start thinking at four
Speaker 6: percent inflation the last time, you know.
Speaker 3: I mean, I think what gets people's attention, honestly, is
Speaker 3: what we economists call salient prices. So it's things that
Speaker 3: people buy frequently. So remember when egg prices were going up,
Speaker 3: that was all people could talk about, not because eggs
Speaker 3: are a big part of the consumer basket, but because
Speaker 3: you buy eggs on a regular basis. The same goes
Speaker 3: for gasoline. We're heading into summer vacation and travel season,
Speaker 3: so people are going to feel gasoline even more. And
Speaker 3: of course, if you're planning to travel via air, you're
Speaker 3: going to see that airfare impact your travel plan.
Speaker 2: Constance, I gotta ask you this, milk inflation is below
Speaker 2: three point eight percent? Okay, wonderful, Paul, you're buying the
Speaker 2: grass fed stuff blessed by the Dalary Lama. Sure you
Speaker 2: know that's a little more Beef inflation is not milk.
Speaker 2: Chicken inflation is not chicken. I mean, I'm sorry, this
Speaker 2: stuff is moving. I get it. How how painful is
Speaker 2: a three point eight percent statistic?
Speaker 3: It's painful and it's going to get worse. That's I
Speaker 3: think the importance.
Speaker 2: You can predict to four percent inflation?
Speaker 3: Do you think it's going to be above four point
Speaker 3: two percent average for the second quarter?
Speaker 5: Yes?
Speaker 7: Wow?
Speaker 2: What how does that change a political debate in America?
Speaker 2: All your study of the analog of presidents having to
Speaker 2: get up in front of a four point two percent inflation, right.
Speaker 3: I think it's gonna I think it's going to come
Speaker 3: back to biten. I think that's one of the reasons
Speaker 3: that people had anticipated that we would bring an end
Speaker 3: to the war in Iran because the alications are so strong.
Speaker 3: As I said, this administration seems to have its own
Speaker 3: perception of the political feedback loops, which may prove to
Speaker 3: be a bit inactive consens.
Speaker 2: Thank you, so stay with us. More from Bloomberg Surveillance
Speaker 2: coming up after this.
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Speaker 2: Edward your Denny joins us this morning. Readjusting ever higher
Speaker 2: ed with your beautiful CJ. Lawrence like charts, even with CJ.
Speaker 2: Lawrence Green in the banner you do a log extrapolation
Speaker 2: of the S and P five hundred. Is that all
Speaker 2: this is is we're climbing a wall of worry because
Speaker 2: no one else out there has a.
Speaker 8: Courage to simply extrapolate forward. Well, I think we definitely
Speaker 8: are climbing a wall of worry, and that's the best
Speaker 8: kind of bull market you can have. You don't want
Speaker 8: everybody being bullish. You want people to have concerns.
Speaker 2: I don't want.
Speaker 9: People to to worry on a personal level, but on
Speaker 9: a professional level, when I see a lot of bearishness
Speaker 9: from a contrarian perspective, it usually works. I made some
Speaker 9: of my best calls on market bottoms when my gut
Speaker 9: was hurting and everybody was was in a panic mode.
Speaker 9: So we're not in panic mode right now. But on
Speaker 9: the other hand, there are a lot of people worrying
Speaker 9: about what's going on in the Middle East, and I'm
Speaker 9: not saying that's not worrisome, but it's it's certainly adding
Speaker 9: to the concerns. They're worrying about the bond market, they're
Speaker 9: they're they're worrying about a k economy that the consumers
Speaker 9: not going to continue to spend, and they're working worrying
Speaker 9: about too much capital spending. So there's a lot of
Speaker 9: worries up there out there. But meanwhile, it's really pretty simple.
Speaker 9: Or the market is also getting kind of thrust up,
Speaker 9: but it's been a rocket ship because of earnings.
Speaker 6: And what we're starting to see once again that you know,
Speaker 6: it's a pillar of this market. I guess last year
Speaker 6: was you know, kind of a narrower breath in this marketplace.
Speaker 6: Is the big tech stocks once again leading this market
Speaker 6: high on good earnings. Certainly, are you concerned about that,
Speaker 6: I guess, narrowing breath in the market.
Speaker 9: Yeah, well again, I think people are always looking for
Speaker 9: something to worry about with regards to the market, and
Speaker 9: the breath issue is back. But however, once again I
Speaker 9: would point out that the earning story is fantastic for
Speaker 9: the S and P five hundred earnings breath is actually improving.
Speaker 9: And not only that, but we've got the small cap
Speaker 9: and MidCap earnings which had been kind of in a
Speaker 9: coma since twenty twenty two. For the past six months
Speaker 9: or so, they're starting to really perk up, and expectations
Speaker 9: are already showing a record high earnings outlook for this
Speaker 9: mid caps.
Speaker 6: So I mean, again, I guess towards the end of
Speaker 6: last year, we did have kind of a rotation out
Speaker 6: of some of those big cap growth names into some
Speaker 6: more Is there any legs left in that kind of trade,
Speaker 6: maybe a small MidCap as you suggested, maybe some other
Speaker 6: sectors here.
Speaker 9: Well, I think that other sectors will participate in this
Speaker 9: latest rally in this bull market. I think we're saying,
Speaker 9: you know, one of the problems is the magnificent seven
Speaker 9: are contributing to that. So consumer discretionary has been boosted
Speaker 9: recently by improvement in Amazon, and communications services have done
Speaker 9: well because Google and Meta dominate that space. But financials,
Speaker 9: I think as still have prospects of doing better. You know,
Speaker 9: the there's signs that the private credit situation is not
Speaker 9: get the worst might actually be be getting better as
Speaker 9: the economy continues to chuck along.
Speaker 2: As your Denny with us folks are goin to. Can't
Speaker 2: say enough about his newsletter. It's wonderful daily brief really
Speaker 2: one of the major subscriptions out there. Ed, I'm going
Speaker 2: to assume long ago and far away at Yale they
Speaker 2: didn't have econ five seventy four applied empirical methods. This
Speaker 2: is back ed your Donny folks was back in a
Speaker 2: simpler time of macro micro our Simon White this morning
Speaker 2: at Off the London Desk has a spectacular walkthrough of
Speaker 2: derivative finance, looking at the Greek letters of gamma, dispersion
Speaker 2: and correlation, and it's worry, worry, worry, OMG, things are terrible.
Speaker 2: If we created a wall of worry with our mathiness
Speaker 2: in modern global Wall Street.
Speaker 9: Well, I don't think I'm inventing a phrase here, but
Speaker 9: it's all Greek to me. I actually did an econometric
Speaker 9: dissertation for James Toubin, and I proved that his theory
Speaker 9: was right for corporations, and so he loved it and
Speaker 9: I got through, I got my PhD and moved on.
Speaker 9: But yeah, I think there's too much. I think a
Speaker 9: lot of economists start with theories, start with the models,
Speaker 9: and then look for the data to confirm it. I
Speaker 9: worked the other way around. You know, Ben bernanke in
Speaker 9: his memoir of being at the FED that when he
Speaker 9: joined the FED he had to learn something that was
Speaker 9: rather new to him, and now he called the current analysis.
Speaker 9: And I kind of like that. In other words, he
Speaker 9: had to learn how the world really works. I had
Speaker 9: to learn about markets and how markets interact with data,
Speaker 9: and data impacts the markets. And that's what I practice,
Speaker 9: I've been practicing on all long. Is current analysis? Okay,
Speaker 9: but that's a reality based economic And let.
Speaker 2: Me get to say, because Paul's got four more questions.
Speaker 2: The bottom line, ed is we have physics envy. And
Speaker 2: it started with you know, Newtonian mechanics nineteenth century, and
Speaker 2: now we've got alpha beta Gamma, Epsilon, delta the others.
Speaker 2: And I just, folks, I just think the difference, the
Speaker 2: distinction between a Yar Denny strategy and some of the
Speaker 2: quad strategy is the angst of the age. Worry, worry, OMG,
Speaker 2: Paul Gamma dispersion. We used to call it.
Speaker 9: We used to call it political economy, and then suddenly
Speaker 9: it became a social science. Uh, and it's not a science.
Speaker 9: It's uh, it's political economy. It's it's too complicated to
Speaker 9: put in a formula.
Speaker 6: So ed, I mean on that front, there, we've got
Speaker 6: the market's got a lot of cross winds as it
Speaker 6: released to geopolitics, whether it be tariffs from earlier this
Speaker 6: year and last.
Speaker 5: Year, to the war in Iran.
Speaker 6: But boy that at least the stock market seems to
Speaker 6: look through all of that and focus on maybe just
Speaker 6: the earnings, which are arguably the most fundamental.
Speaker 2: Yeah.
Speaker 9: I think what's going on in the stock market is
Speaker 9: everybody knows that based on history.
Speaker 10: That.
Speaker 9: Crises, a geopolitical crises in the past have turned out
Speaker 9: to be buying opportunities. So when we get a geopolitical crisis,
Speaker 9: we get kind of scared. For a couple of weeks,
Speaker 9: maybe four weeks, as we did in March, and then
Speaker 9: everybody remembers that that's actually a buying opportunity. And that's
Speaker 9: exactly what happened on March thirty first, is suddenly investors said, well,
Speaker 9: you know, if the president's going to be looking for
Speaker 9: an exit ramp and we're going to have a cease fire,
Speaker 9: then we can buy stocks today at a lower price
Speaker 9: with record higher earnings.
Speaker 2: And thank you so much. How's your beast doing? I
Speaker 2: don't see your dog in the background there in your
Speaker 2: couch dogs? Is Max is walking about? He's walking probably
Speaker 2: reading the Wall Street Journal or Pan on one of
Speaker 2: the two d there, Denny, thank you so much, greatly
Speaker 2: appreciate it. One of the great calls of this bull market. Again,
Speaker 2: we protect the copyright of all of our guests. Look
Speaker 2: through your Denny Global Research for their just fabulous, fabulous
Speaker 2: daily study. Stay with us. More from Bloomberg Surveillance coming
Speaker 2: up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: Mark Pinto is a grizzled veteran at Moody's of actually
Speaker 2: sifting through the bs in credit, and he is definitive
Speaker 2: on private credit. Thank you so much for joining us
Speaker 2: for this four hour conversation.
Speaker 7: Four hour conversation.
Speaker 2: Your note is b on grim. You've got ratios here
Speaker 2: that matter. It's wicked inside baseball, and at the top
Speaker 2: you say it's okay. So far, so far, define this
Speaker 2: so far that we are living?
Speaker 4: So far well, I can tell you that the market
Speaker 4: has performed quite well to date. We've been seeing a
Speaker 4: bit of a test, the liquidity test recently, but asequality
Speaker 4: still remains fairly robust, even though we're seeing some pockets
Speaker 4: of discass.
Speaker 2: Everyone we're listening on Global Wall Street says Blooney KKR
Speaker 2: came out yesterday and had to mark something down.
Speaker 4: This is when you lend, you will have right offs.
Speaker 4: This idea of no write offs, no losses doesn't exist
Speaker 4: in the lending world. The question is the materiality. We
Speaker 4: need to look at the reality and look at the materiality.
Speaker 4: So asequality is deteriorating, But the question is whether we're
Speaker 4: seeing a normalization, a reversion to the mean, or whether
Speaker 4: or not it's something more than that, and this market
Speaker 4: hasn't been tested and so we'll have to see where
Speaker 4: this goes. But at the moment they're in a decent place,
Speaker 4: although we're starting to see some deterioration.
Speaker 6: So the market has some comfort level with the public
Speaker 6: credit markets, has some comfort level or understanding of the
Speaker 6: bank lending market.
Speaker 5: What do we know about.
Speaker 6: The private credit market in terms of credit quality, standards, covenants,
Speaker 6: all that kind of stuff.
Speaker 5: We have a comfort level that we're going to be
Speaker 5: okay there.
Speaker 4: Well, in some respects, you get more information in certain
Speaker 4: pockets of private credit than you do in the banking world.
Speaker 7: So for example, with.
Speaker 4: BDCs, you'll get quarterly valuations of every single position. And however,
Speaker 4: this segment of the market is very lightly regulated, and
Speaker 4: I think a lot of people take comfort in the
Speaker 4: fact that you have very intense prudential regulation in the
Speaker 4: banking world, in the insurance world, but more really market
Speaker 4: regularly in the private credit world, which is fairly light touch.
Speaker 7: And so I think investors are.
Speaker 4: Looking at it very closely and figuring out, can I
Speaker 4: trust these numbers that are coming out of the industry.
Speaker 6: So how does an entity like Moody's who rates and
Speaker 6: really looks at the credit quality of fixed income markets
Speaker 6: broadly defined.
Speaker 5: How do you guys look at private credit?
Speaker 4: Well, the good thing about working at a rating agency
Speaker 4: is we get all the data that we need. So
Speaker 4: I like to say, I've been on the buyside, I've
Speaker 4: been on the cell side, and when you're in that
Speaker 4: part of the market, you're kind of snorkeling. When you
Speaker 4: go to a rating agency, you get to scuba dive,
Speaker 4: we get material non public information, We get all of
Speaker 4: the data that we need in order to rate overdone,
Speaker 4: I would say the worry right now is warranted. It's
Speaker 4: been intense, and I think on the other side of this,
Speaker 4: you're going to see more disclosure, You're going to see
Speaker 4: more discipline, and you're going to see more direction. And
Speaker 4: that direction may come from regulators, whether it's regulatory oversight
Speaker 4: for insurance companies and banks that are involved in this market,
Speaker 4: or whether there's slightly more market regulation on the private
Speaker 4: credit industry itself. I think that's coming and that hopefully
Speaker 4: will will will shrink the trust gap that you're starting
Speaker 4: to see in this market.
Speaker 2: Mark Pinto where this Moodies of private credits really get
Speaker 2: join us at today. Okay, so what is the exogen
Speaker 2: is shock here? If I have full faith in credit,
Speaker 2: curve stapening this that the other thing? How is private
Speaker 2: credit linked to any unexpected surprises including price down, yield
Speaker 2: up and full faith in credit?
Speaker 4: Well, I think underwriting is underwriting, and when the credit
Speaker 4: cycle turns, it's going to turn for everyone. It's going
Speaker 4: to turn for the banks, it's going to turn for
Speaker 4: the public markets, it's going to term for private credit markets.
Speaker 4: What's important, though, is how are these loans underwritten, what
Speaker 4: were the covenants, what is the collateral, and also how
Speaker 4: is this being funded. So in the banking market, we
Speaker 4: know that banks are funded by deposits and they engage
Speaker 4: in maturity transfer. In the private credit market, you tend
Speaker 4: to have your funding match the duration of your assets,
Speaker 4: so you're involved in much less maturity transformation and therefore
Speaker 4: less vulnerable to a certain amount of shocks.
Speaker 6: So some folks were suggesting that this was not a
Speaker 6: or some of the stress we've seen in the private
Speaker 6: credit market was not a credit quality problem, but a
Speaker 6: liquidity problem, particularly from the introduction of more and more
Speaker 6: retail investors.
Speaker 5: Is that accurate?
Speaker 4: Yeah, I mean from our view as well, what we
Speaker 4: just saw was a test. It was a the test,
Speaker 4: and it was a liquidity test, and it was a
Speaker 4: test in the non traded BDCs. You have both traded
Speaker 4: BDCs and non traded BDCs in the non traded BDC market.
Speaker 4: The way this works is a closed end fund effectively,
Speaker 4: and when you put your money in, whether you're an
Speaker 4: institutional investor or retail investor, you can get liquidity out
Speaker 4: on a quarterly basis, and you can quest liquidity, but
Speaker 4: it doesn't always have to be granted. And this is
Speaker 4: what we've seen of late, a significant number of requests
Speaker 4: and not all of those aggress for you granted.
Speaker 2: Would you put your Trinity College into private credit?
Speaker 4: When I put Trinity College into private credit? Well, there's
Speaker 4: private credit is not a monolith. It's very heterogeneous. You
Speaker 4: have investment grade private credit and you have non How
Speaker 4: many basis.
Speaker 2: Points do I pick up on quality private credit?
Speaker 4: You're probably picking up depending on the instrument and the structure,
Speaker 4: it could be fifty or one hundred.
Speaker 2: Based on this sounds like so much I'm sorry, this
Speaker 2: sounds like so much like two thousand and six, two
Speaker 2: thousand and seven.
Speaker 4: I don't think it's a good analogy to tell you
Speaker 4: the truth. What happened is after the Great Financial Crisis,
Speaker 4: we saw additional regulation on the banks and that created
Speaker 4: a gap in terms of lending needs. And what was
Speaker 4: interesting is that private equity guys came in, but they
Speaker 4: didn't just fill the gap, they reinvented the space. What
Speaker 4: they did is they provided spoke lending. So instead of
Speaker 4: just getting your five year, your ten year in the
Speaker 4: bond market, you were able to get.
Speaker 7: A fourteen non call to a thirteen none call one.
Speaker 2: Paul, this sounds like talking about the Red Sox in February.
Speaker 2: They were gonna do it without hitting mark. Everybody's radars
Speaker 2: up on this. Gary Gensler sat in that chair and said,
Speaker 2: everything's fine. I look at the KKUR headline yesterday, Paul,
Speaker 2: help me. Everything is not fine, right?
Speaker 4: Not everything is fine. Tom, You're going to see a
Speaker 4: greater dispersion and performance. Whereas for many years, rising tide
Speaker 4: lifted all boats. But what we're going to see now
Speaker 4: is a dispersion. And that's why you're seeing these pockets
Speaker 4: of write downs. You're seeing these pockets of losses. You're
Speaker 4: seeing pockets of deterioration, but as a group, act quality
Speaker 4: continues to be fairly strong, although we do expect it
Speaker 4: to deteriorate. Even the heads of private credit are saying
Speaker 4: this as well.
Speaker 2: Missus Keane doesn't care. She emails it. I asked Mark
Speaker 2: Pinto where he got that bow tie. It's great.
Speaker 4: It's I got it at a boot sale, probably about
Speaker 4: thirty years ago. It's from the nineteen sixties.
Speaker 7: I wanted to channel you.
Speaker 2: Very good, very cool, missus King. Ch Miss King gives
Speaker 2: it a major thumb up, Thank yous. Did we learn something?
Speaker 5: Yeah, I'm good.
Speaker 2: What do you think? Where are you on this?
Speaker 5: I think private credit is fine. I think it's a
Speaker 5: listen to you, we got management.
Speaker 4: I don't want to be Pollyanna about pollyanna Ish about this,
Speaker 4: but I also don't want to be Nuriel Rubini. I
Speaker 4: think that there is a place, there is a value
Speaker 4: proposition for private credit.
Speaker 7: And what we need to understand is whether loans have.
Speaker 4: Been underwritten in the private credit space that took into
Speaker 4: consideration the last ten years of performance or the last
Speaker 4: forty years of David.
Speaker 2: Goldman when he was at Bank of America was brilliant
Speaker 2: and as he wrote about it my book A Lifetime
Speaker 2: was it two lifetimes ago? I don't folks all my
Speaker 2: radars up, Mark Pinto Brillant, don't be a stranger. He
Speaker 2: is with Moodies on private credit. We really really that
Speaker 2: stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch us Live on YouTube.
Speaker 2: Jordan Rochester joins us in the tention for Prime Minister.
Speaker 2: Sturmer is too much, Jordan for our American audience. Explain
Speaker 2: how this government's going to collapse. But what does it
Speaker 2: collapse into and what does it mean for United Kingdom markets?
Speaker 10: Absolutely what. It's not going to collapse as a government,
Speaker 10: but the leadership could change. So it's a little bit
Speaker 10: different to the American system. We have a parliamentary democracy
Speaker 10: where they're the party who has the largest majority or coalition,
Speaker 10: et cetera. They choose their prime minister. From the party perspective.
Speaker 10: This is difficult sort of a path for kids starm
Speaker 10: to hang on. Really he's had over I think the
Speaker 10: count over eighty MP's now suggesting that he should resign
Speaker 10: and that's enough. When you get to eighty one, that's
Speaker 10: enough to trigger a leadership contest within the Labor Party.
Speaker 10: And when you replace the leader, you're essentially replacing the
Speaker 10: Prime Minister and the rest of the Parliament of Parliament
Speaker 10: doesn't really have a say, so this is really a
Speaker 10: drama within the Labor Party.
Speaker 2: Is Starmar Blair like, you know, middle of the road
Speaker 2: Clinton like or is he perceived as more liberal?
Speaker 10: That's where he positioned himself for sure, and he's definitely
Speaker 10: had inspiration from Tony Blair and so forth. But what
Speaker 10: the Labor Party has done over the past couple of
Speaker 10: years has shifted to the left. So it was quite
Speaker 10: astounding that you had a sort of centrist leading the
Speaker 10: sort of realm, but the lack of sort of political
Speaker 10: action in terms of policy. It was a manifesto back
Speaker 10: in twenty twenty four which really didn't have that much
Speaker 10: in it, quite vague. That's led to the situation case
Speaker 10: Stamus finding himself in the constant criticism from political commentators.
Speaker 10: He's lacked of political vision and that kind of shows
Speaker 10: in terms of the polling. So he's, according to public
Speaker 10: opinion polls, with the most unpopular British Prime minister in
Speaker 10: history and that's the day to going back to the
Speaker 10: nineteen seventies. So it really is a net approval rating
Speaker 10: that has led to a big lost in these local
Speaker 10: elections and the Labor Party, in an effort to try
Speaker 10: and survive, are slowly moving to remove the Prime Minister Jordan.
Speaker 6: What does the instability in the Labor Department our Labor
Speaker 6: Party reflect the economy and the economic trends in the UK.
Speaker 10: Well, it's the stagnant decline of the UK since Brexit
Speaker 10: really that has led to this sort of fragmentation of politics.
Speaker 10: We used to have very strong two party politics. Now
Speaker 10: we've got several other parties Lib DEM's Reform and Green's
Speaker 10: vying for power. So you have a very volatile political
Speaker 10: situation where we have a first past to post electoral
Speaker 10: system which you can win him a majority, as the
Speaker 10: Labor Party did, but with a very low amount of
Speaker 10: the vote share. Previously, in the past, you would win
Speaker 10: these elections with large amounts of the vote share. The
Speaker 10: rest of the public was on side of you, and
Speaker 10: that's not the case this time around.
Speaker 2: I mean one more question than this before we get
Speaker 2: to the markets. I mean, Isabella deceived Edward? I don't
Speaker 2: know what Edward it was Edward the second. I think
Speaker 2: it's like the fourteenth century it was appalling. Is Starmar
Speaker 2: going to get deceived here? I mean it's just like
Speaker 2: you know, medieval like warfare among this party or can
Speaker 2: it be adults like moving on?
Speaker 10: Well, he might still hang on, so we can't rule
Speaker 10: that out. But the sort of joke going around that
Speaker 10: he's trying to hang on until he gets to at
Speaker 10: least the champions at league final because he's an Arsenal fan.
Speaker 10: That's kind of the sort of timeline some people are highlighted.
Speaker 10: But it's kind of falling out of his power.
Speaker 5: Really.
Speaker 10: If a leadership contest is triggered, if they go ahead
Speaker 10: with that formal process, it's nothing he can do to
Speaker 10: stop it. The iron is he relaxed these rules to
Speaker 10: make it easier to remove leaders when he became leader
Speaker 10: because he had also tried to, along with other MPs
Speaker 10: been involved in the Corbyn's era, and the rules were
Speaker 10: much harder back then to change leader. But it could
Speaker 10: be the case that he's looking for a dignified exit
Speaker 10: and trying to make sure that a leadership contest, if
Speaker 10: it happens, happens over the summer rather than instantly. And
Speaker 10: as you hear a name coming up quite often called
Speaker 10: Andy Burnham, he's the Manchester mayor and he's the most
Speaker 10: popular labor figure amongst the public according to opinion polls.
Speaker 10: So he's actually an MP. So you're going to hear
Speaker 10: a lot about his name. And can he get back
Speaker 10: into Parliament to run that's the big question.
Speaker 2: We need to have a dignified interview, Paul, can you
Speaker 2: save the interview by asking something except Missoui base Jordan.
Speaker 6: President Trump is heading over to China today for some
Speaker 6: pretty high level discussions with President How do you think
Speaker 6: the markets are discounting this? What do you think the
Speaker 6: markets are looking for here or sensitive to well?
Speaker 10: Donald Trump's men summits with big leaders such as us
Speaker 10: being or Dadimir Putin and then sometimes not much that
Speaker 10: comes out of it that's market moving for rates and EFX.
Speaker 10: So my base case is probably gonna be something along
Speaker 10: those lines. Clearly taking so many big level CEOs tells
Speaker 10: me that we're going to get some deals announced that
Speaker 10: are quite close to finalizations. So that's probably what the
Speaker 10: headlines that I think will come from this. And then
Speaker 10: the big questions are on Taiwan or US Iran, and
Speaker 10: I don't think the Chinese or the US will really
Speaker 10: materially change their positions on either of those. And then
Speaker 10: of course trade tariffs, where the courts are making life
Speaker 10: tougher for Donald Trump than China when it comes to
Speaker 10: trade taris at the moment. So I think it's just
Speaker 10: going to be deals announced from CEOs, etc. But I
Speaker 10: think for broader markets such as rates and FX, it's
Speaker 10: going to be a bit of a nothing burger.
Speaker 2: Jordan quickly, here is the intervention by Japan been successful? Question?
Speaker 1: It has.
Speaker 10: I mean, you can't doubt it. We've gone from one
Speaker 10: sixty to one fifty five and DOLLI over the course
Speaker 10: of just a few days. The problem for the Ministry
Speaker 10: of final since they are leaning against the wind, oil
Speaker 10: prices are rising, which weakens the value of the end
Speaker 10: and so in between those interventions were having that slow
Speaker 10: creeppire and dolly in, which means that I will have
Speaker 10: to keep intervening, or the banks penul needs hike or
Speaker 10: just hopefully a bit of luck and oil prices fall.
Speaker 10: That's any way I can see the dolly in heading lower.
Speaker 2: Really thank you, Jordan Rochester, thank you, thank you so much,
Speaker 2: and all of Mizuo executives. We really appreciate his British
Speaker 2: perspective there on this moment. For Prime Minister is Starmer.
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