WEBVTT - Bloomberg Businessweek Weekend - June 9th, 2023 0:00:00.400 --> 0:00:03.960 You're listening to the Bloomberg Business Week podcast. Catch us 0:00:04.000 --> 0:00:07.360 live weekday afternoons from three to six Eastern Listen on 0:00:07.400 --> 0:00:11.440 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:00:11.720 --> 0:00:13.560 or watch us live on YouTube. 0:00:14.080 --> 0:00:16.959 Hy Everyone. Welcome to the weekend edition of Bloomberg Business Week. 0:00:17.000 --> 0:00:19.159 I'm Carol Masser with Matt Miller, who is in for 0:00:19.239 --> 0:00:22.439 Tim Stenovick, who is on lead. Now, one storyline that 0:00:22.480 --> 0:00:24.759 caught our attention this past week that didn't involve the 0:00:24.760 --> 0:00:28.000 FED or talk of a recession, or that mega merger 0:00:28.000 --> 0:00:30.920 between the PGA Tour and Live Golf. Instead, it was 0:00:30.960 --> 0:00:33.360 about the future of crypto. We're going to have more 0:00:33.400 --> 0:00:36.000 on that in just a moment. Also ahead, we'll hear 0:00:36.040 --> 0:00:38.480 from the head of the one point five trillion dollar 0:00:38.600 --> 0:00:42.120 asset manager Pigum, David Hunt, stopping by the Bloomberg invest 0:00:42.120 --> 0:00:44.919 conference here at our company headquarters and talked about why 0:00:44.960 --> 0:00:47.959 he's not yet ready to believe in bulls. Plus our 0:00:48.000 --> 0:00:50.600 cover story on how the US lost the electric vehicle 0:00:50.640 --> 0:00:54.240 battery race to China, and our very belated attempt to 0:00:54.320 --> 0:00:56.560 catch up. All of that to come. We begin with 0:00:56.640 --> 0:00:59.760 news this past week the US Securities and Exchange Commission 0:01:00.320 --> 0:01:04.560 its sweeping crackdown on cryptocurrencies by accusing coinbased Global of 0:01:04.600 --> 0:01:06.960 running in a legal exchange, a move that could make 0:01:06.959 --> 0:01:09.399 it harder for the industry to operate and for US 0:01:09.480 --> 0:01:12.400 citizens to trade now. The move coming one day after 0:01:12.400 --> 0:01:16.760 the regulator sued rival Binance Holdings alleging a slew of violations. 0:01:17.080 --> 0:01:19.040 This was all top of mind when Matt and I 0:01:19.080 --> 0:01:21.960 sat down with former SEC chairman Jay Clayton, who was 0:01:22.040 --> 0:01:25.520 non executive chair at Apollo Global Management and senior policy 0:01:25.520 --> 0:01:28.840 advisor at Sullivan and Cromwell, along with Dan moorehead founder 0:01:28.840 --> 0:01:31.960 and CEO of the crypto venture fund Pantera Capital. They 0:01:32.080 --> 0:01:34.440 joined us just after a panel discussion that I did 0:01:34.680 --> 0:01:37.640 on the same topic during our Bloomberg Live invest conference 0:01:37.760 --> 0:01:40.600 at Bloomberg Global headquarters in New York. First of all, 0:01:40.640 --> 0:01:41.960 let's just do some of the stuff that we went 0:01:42.000 --> 0:01:44.240 on in the panel, and we talked about crypto specifically 0:01:44.280 --> 0:01:48.640 big week when it comes to cryptocurrencies. I know, Jay, 0:01:48.640 --> 0:01:50.440 I kind of put you on the spot about saying, 0:01:50.440 --> 0:01:54.160 do we think Charagensler is doing the right thing? How 0:01:54.160 --> 0:01:57.040 do you see chrysto crencies longer term? 0:01:57.320 --> 0:02:00.880 Well, I think we talked about that. Yeah, people refer 0:02:00.960 --> 0:02:04.320 to crypto and they think of a product. Crypto is 0:02:05.040 --> 0:02:09.120 really a technology. It's blockchain technology, distributed ledger technology that 0:02:09.200 --> 0:02:12.320 may manifest itself in many products. I believe that ten 0:02:12.400 --> 0:02:15.800 years from now there will continue to be blockchain based products. 0:02:16.000 --> 0:02:20.079 I expect the blockchain or some transformative technology like it 0:02:20.120 --> 0:02:22.760 will come to the traditional financial system and we're going 0:02:22.800 --> 0:02:24.720 to see that. I think we should be looking to 0:02:24.760 --> 0:02:27.240 accommodate that. And then at the same time, there are 0:02:27.280 --> 0:02:32.560 products that clearly have been offered, sold and traded inconsistent 0:02:32.600 --> 0:02:34.760 with our rules, and we've got to deal with that. 0:02:35.040 --> 0:02:36.480 Dan, I want you to weigh in on what happened 0:02:36.520 --> 0:02:37.000 this week here. 0:02:37.080 --> 0:02:39.040 So I think Jay's points spot on is that, you know, 0:02:39.080 --> 0:02:41.399 it's a very important technology. Three or four hundred million 0:02:41.440 --> 0:02:44.160 people are already using it. We just have to establish 0:02:44.240 --> 0:02:48.880 rules that allow entrepreneurs in the space to build things 0:02:50.080 --> 0:02:52.960 so that we can keep growing the technology, especially domestically, 0:02:53.120 --> 0:02:54.400 rather than pushing it offshore. 0:02:54.880 --> 0:02:57.920 I mean, there was so much fraud, There is so 0:02:58.080 --> 0:03:00.600 much pump and dump, There is so much you know, 0:03:00.680 --> 0:03:04.000 somebody rug poles. Clearly a lot of the coins that 0:03:04.040 --> 0:03:07.320 we saw ic over the past few years should have 0:03:07.400 --> 0:03:09.880 been dealt with by the SEC. So I think, you know, 0:03:09.960 --> 0:03:12.399 even people in the industry are probably happy about that. 0:03:12.760 --> 0:03:16.880 What is left, dan, you know, aside from blockchain, what 0:03:17.000 --> 0:03:20.679 else is there that's not a security In terms of tokens. 0:03:20.919 --> 0:03:24.120 Well, anytime you have a very disruptive new technology, people 0:03:24.160 --> 0:03:27.359 try a lot of things. In hindsight, some didn't work right. 0:03:27.520 --> 0:03:30.480 And if you think back to the dot com boom, 0:03:30.520 --> 0:03:33.120 there were a lot of ideas that were tried, and 0:03:33.160 --> 0:03:34.760 I guess we didn't want to buy cans of pet 0:03:34.760 --> 0:03:36.760 food on the internet, right, But like a lot of 0:03:36.800 --> 0:03:37.920 other ideas. 0:03:37.480 --> 0:03:38.920 Not until where we are now. 0:03:39.160 --> 0:03:42.160 You know, now everybody buys literally everything for his pet 0:03:42.200 --> 0:03:43.520 on the internet exactly. 0:03:43.600 --> 0:03:45.560 And that's one of my favorite things. Nobody remembers who 0:03:45.560 --> 0:03:48.040 the dope was that was majority owner of pets dot com. 0:03:48.400 --> 0:03:51.160 There's this guy who thought the technology would be really impactful, 0:03:51.560 --> 0:03:54.280 tried pet food that didn't work. He also tried books, 0:03:54.440 --> 0:03:56.880 and so Jeff Bezos is doing fine even though he 0:03:56.960 --> 0:03:58.760 was the majority owner of pets dot com. And that's 0:03:58.760 --> 0:04:00.840 basically what's happening in the tokens. We're trying a lot 0:04:00.880 --> 0:04:04.360 of ideas, some like Ethereum, you know, workerly well and 0:04:04.440 --> 0:04:06.240 some just didn't work well well. 0:04:06.280 --> 0:04:09.200 When it comes to the regulatory framework work, Jay, do 0:04:09.240 --> 0:04:11.640 we can we compare what's going on in blockchain and 0:04:11.680 --> 0:04:14.280 crypto to the dot com era? Is it apples to 0:04:14.280 --> 0:04:15.600 apples or not? Necessarily? 0:04:16.880 --> 0:04:19.920 I think different. I think it rhymes. I think it right? 0:04:20.040 --> 0:04:20.200 You do? 0:04:20.400 --> 0:04:20.680 I do? 0:04:20.800 --> 0:04:21.000 I do. 0:04:21.480 --> 0:04:24.640 We talked a little about this before. Ye Look at 0:04:24.680 --> 0:04:26.880 the stable coin. I see the stable coins that were 0:04:26.880 --> 0:04:29.880 truly stable, truly backed. Look look at the uptake in 0:04:29.960 --> 0:04:33.400 that and the efficiencies that that created. Now, if we 0:04:33.480 --> 0:04:37.080 can have that kind of retail dollar, you know, basically 0:04:37.279 --> 0:04:40.000 digital dollar, right, people talk, that's what a stable coin, 0:04:40.320 --> 0:04:43.839 a truly well functioning, well structured, well regulated stable coin 0:04:43.920 --> 0:04:46.719 is a digital dollar. The power of that versus the 0:04:46.720 --> 0:04:49.320 power of caloring cash. Think about it. 0:04:49.320 --> 0:04:52.839 It's fantastic, but it still is like pulling teeth getting 0:04:52.839 --> 0:04:58.040 tether to properly report you know, everything that it holds. 0:04:58.640 --> 0:05:01.440 Disclosure is key, isn't it, Dan? Why don't people just 0:05:02.320 --> 0:05:03.880 come up with it? 0:05:03.880 --> 0:05:04.240 It is? 0:05:04.279 --> 0:05:06.760 And obviously I can't speak why Teather doesn't do that, 0:05:06.800 --> 0:05:10.800 but USDC that's done by Circle and coinbase incredibly transparent, 0:05:10.960 --> 0:05:14.520 incredibly stable back by you know, very short term high 0:05:14.600 --> 0:05:18.680 quality treasury debt. That is something you can really see 0:05:18.720 --> 0:05:20.880 what it is. And you know, frankly, it's a lot 0:05:20.880 --> 0:05:22.920 more transparent than a bank is. I have no idea 0:05:23.200 --> 0:05:25.160 what my bank's actually doing with my money. 0:05:25.279 --> 0:05:27.120 We learned that this year, right, I mean a lot 0:05:27.120 --> 0:05:28.640 of people didn't realize we're gonna. 0:05:28.480 --> 0:05:29.240 Let ja come in on that. 0:05:29.839 --> 0:05:30.360 No, no to me. 0:05:30.440 --> 0:05:34.120 And and the Matt's point. Look, regulation has to have 0:05:34.200 --> 0:05:36.440 all the key elements. It has to have investor protection. 0:05:36.520 --> 0:05:39.680 We learned that, right. It has to have prudential regulation, 0:05:39.760 --> 0:05:41.360 you know, for this for the system, it has to 0:05:41.440 --> 0:05:45.599 have that, and also has to have aml KYC, you know, 0:05:46.120 --> 0:05:50.600 the law enforcement, illicit activity to terrens. You've got to 0:05:50.640 --> 0:05:53.279 get those things right. But you can get those things 0:05:53.320 --> 0:05:54.359 right and still have innovation. 0:05:54.920 --> 0:05:57.919 By the way, that's another thing that's come out this year, 0:05:58.360 --> 0:06:00.800 Not that it's surprised anybody, but the number of crypto 0:06:00.880 --> 0:06:05.000 firms were like instructing clients how to use vpms in 0:06:05.120 --> 0:06:07.039 order to essentially cheat the system. 0:06:07.120 --> 0:06:07.360 Right. 0:06:07.520 --> 0:06:11.119 Does that happen on in traditional finance on Wall Street 0:06:11.120 --> 0:06:12.800 as well? Or have they learned their lesson not to 0:06:12.839 --> 0:06:14.080 mess with the SEC in that way. 0:06:14.839 --> 0:06:18.279 I think in most if I hope all, I'm going 0:06:18.360 --> 0:06:24.039 to say most retail products, activity like that is non 0:06:24.080 --> 0:06:27.159 existent or aggressively and effectively deterred. 0:06:28.960 --> 0:06:29.640 You were laughing. 0:06:30.240 --> 0:06:32.760 No, I appreciate that. You know, anybody that's committing a 0:06:32.800 --> 0:06:35.920 crime or fraud should be hammered right like that. I 0:06:35.960 --> 0:06:36.680 agree with that. 0:06:36.560 --> 0:06:39.120 But I will say, you know, our markets, one of 0:06:39.160 --> 0:06:43.000 the areas where we have the most difficulty as regulators 0:06:43.320 --> 0:06:46.800 is activity that takes place offshore that affects our markets. 0:06:47.279 --> 0:06:49.360 That is, that is one of the more difficult places. 0:06:49.360 --> 0:06:51.240 And I'll tell you that. When I was at the SEC, 0:06:51.720 --> 0:06:54.680 you know, trades came in in large batches from offshore. 0:06:55.279 --> 0:06:58.440 Large batch trades make it difficult to detect elicit activity. 0:06:58.480 --> 0:07:00.880 One of the things that we did was on batch 0:07:00.960 --> 0:07:04.599 those trades so that people couldn't couldn't combine what was 0:07:04.880 --> 0:07:09.400 fraudulent or illicit activity with otherwise you know, legitimate trading. 0:07:09.960 --> 0:07:11.080 We can kind of wonder after you left. 0:07:11.120 --> 0:07:13.400 Over the last few years, every time I interviewed Sam 0:07:13.440 --> 0:07:16.160 Bankman Freed, I was like, why is this effective altruist 0:07:16.600 --> 0:07:18.840 in the Bahamas? Is it just that he likes the Sun. 0:07:18.960 --> 0:07:21.080 Is he just a beach guy at heart? You know, 0:07:21.120 --> 0:07:21.880 he didn't seem like. 0:07:21.800 --> 0:07:22.440 A beach guy. 0:07:22.960 --> 0:07:24.760 What I'm curious is, when you look back at your 0:07:24.760 --> 0:07:27.120 time at the SEC, is there something that you wish 0:07:27.120 --> 0:07:30.080 you had done more of when it comes to crypto 0:07:30.160 --> 0:07:31.040 and blockchain. 0:07:31.520 --> 0:07:34.080 Well, look, anytime you look back, I mean, you know, 0:07:34.120 --> 0:07:35.720 you look back at this interview, you're going say, gosh, 0:07:35.760 --> 0:07:37.440 I wish I asked him that. So when you look back, 0:07:37.480 --> 0:07:39.880 you always that's human behavior. 0:07:39.960 --> 0:07:41.960 But did you look back is there something you thought 0:07:42.000 --> 0:07:42.800 you wish you had done? 0:07:42.920 --> 0:07:43.080 Oh? 0:07:43.160 --> 0:07:47.640 Sure, sure. Look I do think that a safe place 0:07:48.160 --> 0:07:51.760 for this innovation is stable coin, and I wish that 0:07:51.800 --> 0:07:55.080 we had worked together across the federal financial regulators to 0:07:55.120 --> 0:07:58.040 give a clear indication of what is a very safe, 0:07:58.560 --> 0:08:01.800 well regulated stable coin that touches all those touches, all 0:08:01.800 --> 0:08:07.400 those places, investor protection, stability, a MLKYC, deterrens of illicit activity. 0:08:07.640 --> 0:08:09.760 I think that's doable, and I wish we'd done it. 0:08:09.840 --> 0:08:13.720 So it's great that we're getting some regulatory clarity here, 0:08:13.760 --> 0:08:16.120 even if it's not the kind of clarity that everybody would. 0:08:15.880 --> 0:08:16.320 Have won it. 0:08:17.680 --> 0:08:21.040 Uh, Are we though killing the industry in this country? Dan, 0:08:21.280 --> 0:08:24.040 I mean, is it a problem that you know, we're 0:08:24.040 --> 0:08:26.600 going to talk about battery technology a little bit later 0:08:26.640 --> 0:08:31.000 on and how US regulation basically destroyed our chances of 0:08:31.120 --> 0:08:34.000 leading in that technology and now China owns it, right 0:08:34.040 --> 0:08:36.640 car batteries, electric car batteries. 0:08:36.720 --> 0:08:38.079 Are we doing the same thing right now? 0:08:38.080 --> 0:08:41.640 To crypto, Well, there has been a you know, very 0:08:41.679 --> 0:08:45.720 pronounced movement to have crypto companies based outside the United States, 0:08:46.400 --> 0:08:48.440 and so I think it is it is different than 0:08:48.480 --> 0:08:51.319 the way the US treated the Internet itself, where all 0:08:51.360 --> 0:08:53.920 the large internet companies based in the US. 0:08:55.000 --> 0:08:57.480 So that's a that's a bad thing, I mean, because 0:08:57.520 --> 0:08:59.959 that is like what San Francisco's all about. 0:09:00.080 --> 0:09:00.320 Now. 0:09:00.600 --> 0:09:02.520 Well, and I'm going to go back to go ahead. 0:09:02.280 --> 0:09:04.800 No, and look, we have a couple of recent data 0:09:04.840 --> 0:09:08.520 points and they're just recent data points, but foreign governments 0:09:08.920 --> 0:09:11.920 are using the blockchain to issue sovereign debt as a 0:09:11.960 --> 0:09:15.440 test case. And if they're doing that, they're thinking, you know, 0:09:15.720 --> 0:09:20.480 have do we have an efficiency assisting technology and enhancing 0:09:20.520 --> 0:09:24.240 technology here? And you're seeing government support that question, support 0:09:24.280 --> 0:09:25.160 the answer to that question. 0:09:25.520 --> 0:09:27.040 I think we ought to be doing that too, you know, 0:09:27.040 --> 0:09:28.000 seeing it now today. 0:09:27.800 --> 0:09:30.480 With AI as well well, we kicked off the conversation today. 0:09:30.679 --> 0:09:32.360 I was saying, you know, let's look at climate and 0:09:32.360 --> 0:09:34.240 what's going on, and you said, like, we need to 0:09:34.240 --> 0:09:36.840 have global cooperation in order for anything to be productive 0:09:36.840 --> 0:09:37.320 and get done. 0:09:37.320 --> 0:09:37.640 Correct. 0:09:37.920 --> 0:09:40.240 Yes, And it's the same thing with crypto and blockchain. 0:09:41.240 --> 0:09:44.920 Why are you worry about the climate, Carol, because I'm 0:09:44.920 --> 0:09:46.439 going to be living in the metaverse where. 0:09:46.400 --> 0:09:47.200 Because we are. 0:09:47.400 --> 0:09:49.640 When we go outside in New York City, ten percent 0:09:49.800 --> 0:09:53.000 of all you know, the United States financial activity happens 0:09:53.040 --> 0:09:55.880 like it's a big problem for the economy and for 0:09:55.960 --> 0:09:56.439 my daughter. 0:09:57.040 --> 0:09:58.840 Real quickly, because we only have about a minute left, 0:09:58.840 --> 0:10:01.240 thirty seconds on how you see the market, the broader 0:10:01.280 --> 0:10:03.920 market environment right now, there's mixed data. 0:10:04.160 --> 0:10:06.400 Yeah, so I still think that, you know, rates have 0:10:06.480 --> 0:10:09.040 to be high for longer than most people think. There's 0:10:09.080 --> 0:10:12.480 no working age person that's traded in a rising rate environment, 0:10:12.559 --> 0:10:14.439 and so we all keep thinking, oh, it's just by 0:10:14.480 --> 0:10:17.080 the dip, by the dip, and there was a forty 0:10:17.080 --> 0:10:20.120 two year Yeah, there's a forty two year pool market 0:10:20.160 --> 0:10:22.360 and rates. There might be a you know, four or 0:10:22.400 --> 0:10:25.880 five year bear market rates, and it might impact intertrate 0:10:25.960 --> 0:10:30.120 sensitive sectors like stocks, real estate. And that's why I 0:10:30.160 --> 0:10:32.720 do think blockchain's nice, because it's not interest rate sensitive. 0:10:32.840 --> 0:10:35.480 Saved you twenty five seconds outlook, broad Macro. 0:10:36.520 --> 0:10:39.360 We continue to be surprised to the upside, and we 0:10:39.080 --> 0:10:41.040 could and we should ask ourselves why. 0:10:41.160 --> 0:10:44.520 That was Former SEC chairman Jay Clayton, along with Panteric 0:10:44.559 --> 0:10:47.720 Capitals Dan moorehead with me and Matt Miller. Coming up, 0:10:47.720 --> 0:10:50.480 will hear from another event participant who offered a stark 0:10:50.520 --> 0:10:54.360 assessment of current market conditions. PGM CEO David Hunt is 0:10:54.360 --> 0:10:57.120 coming up next. You're listening to Bloomberg Business Week. This 0:10:57.360 --> 0:10:58.040 is Bloomberg. 0:10:58.880 --> 0:11:02.440 You're listening to the Bloomberg Business Week Podcast. Catch us 0:11:02.480 --> 0:11:06.600 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:11:06.679 --> 0:11:09.959 the Bloomberg Business app and YouTube. You can also listen 0:11:10.080 --> 0:11:13.199 live on Amazon Alexa from our flagship New York station, 0:11:13.640 --> 0:11:16.400 Just say Alexa play Bloomberg eleven thirty. 0:11:17.960 --> 0:11:20.160 Well, the once hot Wall Street trades of twenty twenty 0:11:20.160 --> 0:11:22.400 three are all falling apart in a fresh blow to 0:11:22.440 --> 0:11:25.600 market pros blind sided again and again ever since the 0:11:25.640 --> 0:11:28.920 pandemic broke out nearly halfway into the year, a slew 0:11:28.920 --> 0:11:31.840 of consensus bets are losing big time as the US 0:11:31.880 --> 0:11:35.960 economy defies the recession bears, the artificial intelligence craze heating up, 0:11:36.000 --> 0:11:38.720 and more so, for all you naysayers on tech, the 0:11:38.800 --> 0:11:41.840 US dollar, and for those talking up emerging markets in China, 0:11:42.120 --> 0:11:44.920 you better think again. All of this the backdrop of 0:11:44.960 --> 0:11:47.920 Bloomberg Lives invest event this week where my co host 0:11:47.920 --> 0:11:50.640 Matt Miller caught up with pgm's CEO David Hunt. This 0:11:50.760 --> 0:11:53.720 conversation from Wednesday, just after David took part in a 0:11:53.760 --> 0:11:58.040 panel discussion entitled Today's Assets From Safe and Secure to 0:11:58.160 --> 0:11:59.360 risky and Untouchable. 0:12:00.080 --> 0:12:05.280 Secure right now is pretty interesting because well, for two reasons. 0:12:05.360 --> 0:12:07.520 Number one, we didn't know how safe a lot of 0:12:07.559 --> 0:12:11.160 assets were for a moment, and number two, they're actually 0:12:12.360 --> 0:12:14.960 offering us some yield for the first time in like 0:12:15.040 --> 0:12:17.280 a decade. So what's your take on the safe and 0:12:17.320 --> 0:12:18.120 secure assets? 0:12:18.360 --> 0:12:19.880 Well, and Matt, I think that is one of the 0:12:19.880 --> 0:12:23.079 things that's the most different about today's investing environment versus 0:12:23.120 --> 0:12:25.000 a couple of years ago. I mean, you now do 0:12:25.160 --> 0:12:30.640 have secure sources of cash where you can earn a 0:12:30.800 --> 0:12:34.440 real yield nominally actually very attractive and even a positive 0:12:35.400 --> 0:12:39.319 positive real piece so it's makes a very different backdrop 0:12:39.440 --> 0:12:43.320 to a lot of fixed income investments and obviously a 0:12:43.320 --> 0:12:46.280 lot of real estate investments as well. So I think 0:12:46.360 --> 0:12:49.640 that we're in for a somewhat different investing environment over 0:12:49.679 --> 0:12:53.079 the next twenty four months. With certainly I think that 0:12:53.280 --> 0:12:55.400 some of these higher rates and higher inflation is here 0:12:55.400 --> 0:12:58.800 to stay, but also lower growth. And we can argue 0:12:58.840 --> 0:13:01.120 about whether exactly we'll go into a recession and what 0:13:01.160 --> 0:13:04.920 the probabilities and scenarios of soft landings are, but in 0:13:04.960 --> 0:13:07.600 any event, growth is going to be below two percent 0:13:07.600 --> 0:13:10.000 in the developed world, and that is well below trent. 0:13:10.200 --> 0:13:12.880 So you've got higher rates, higher inflation, and lower growth 0:13:13.120 --> 0:13:15.200 and that's the picture you're looking at as an investor 0:13:15.280 --> 0:13:15.480 right now. 0:13:15.559 --> 0:13:18.360 Yeah, I think the OECD is out with a report 0:13:18.480 --> 0:13:20.200 talking about the same thing, that we're in for a 0:13:20.280 --> 0:13:23.880 prolonged period of lower growth, higher inflation. We've heard the 0:13:23.920 --> 0:13:29.280 same thing from a number of gigantic fund managers. For example, 0:13:29.840 --> 0:13:35.480 the Norwegian Sovereign Wealth Fund CEO Nikolai Tangen came out 0:13:35.480 --> 0:13:37.400 and said that at the end of last year that 0:13:37.440 --> 0:13:39.520 we're in for a prolonged period of lower returns. 0:13:39.520 --> 0:13:41.760 Do you think that's true? As well lower returns. 0:13:42.480 --> 0:13:46.600 So lower returns is a very different idea because actually, 0:13:46.640 --> 0:13:50.439 with higher rates, a good deal of assets are actually 0:13:50.480 --> 0:13:53.160 returning better. I do think that when we hit a 0:13:53.160 --> 0:13:55.439 period where it looks like the FED has kind of 0:13:55.480 --> 0:13:58.120 maxed out and people begin to believe that they're going 0:13:58.200 --> 0:14:00.959 to move down, you're going to see an enormous amount 0:14:01.000 --> 0:14:03.760 of that money that has gone into money market funds 0:14:04.160 --> 0:14:07.800 come back into public fixed income, and a lot of 0:14:07.800 --> 0:14:11.640 those investments are going to be yielding quite attractive returns. 0:14:11.840 --> 0:14:15.400 So I would actually say that that investments who have 0:14:15.480 --> 0:14:18.600 a vintage over the next twenty four months probably are 0:14:18.640 --> 0:14:21.440 going to have somewhat higher returns than some of the ones, 0:14:21.440 --> 0:14:23.720 at least an phenomenal basis than some of the ones 0:14:23.760 --> 0:14:26.040 that we saw that were put out in say twenty 0:14:26.160 --> 0:14:27.600 and eighteen to twenty nineteen. 0:14:27.760 --> 0:14:29.920 I'm looking at the money market fund assets on the 0:14:29.960 --> 0:14:33.800 Bloomery terminal, and MFA index is something I love to 0:14:33.840 --> 0:14:35.600 pull up five point. 0:14:35.320 --> 0:14:36.600 Four trillion dollars. 0:14:36.800 --> 0:14:39.000 Still, I find it hard to believe that money would 0:14:39.000 --> 0:14:41.760 pour into two stocks, for example, right now, when you 0:14:41.760 --> 0:14:47.120 can get so much in safe or near as damn 0:14:47.160 --> 0:14:51.760 it to safe investments, right why would investors go into stocks. 0:14:51.840 --> 0:14:53.920 How much higher could we go on this market with 0:14:54.200 --> 0:14:55.600 all of the headwinds we're looking at. 0:14:55.960 --> 0:14:58.440 So I think that there's a very good reason why 0:14:58.560 --> 0:15:01.480 so much money has moved in money market funds, most 0:15:01.560 --> 0:15:04.560 recently because of the little banking blips that we had 0:15:04.960 --> 0:15:08.880 where basically a lot of money came out of regional lenders. 0:15:08.600 --> 0:15:11.320 The second and third biggest bank failures in US history. 0:15:11.560 --> 0:15:15.000 It went to some of the very larger banks into 0:15:15.080 --> 0:15:17.960 their deposits, but it also really went into money market funds. 0:15:18.120 --> 0:15:21.080 And ultimately, I don't think that money necessarily comes back 0:15:21.080 --> 0:15:23.240 into stocks, but I do think it comes back into 0:15:23.280 --> 0:15:26.520 into fixed income at very higher rates, and that I 0:15:26.560 --> 0:15:29.880 think is going to, you know, be a very attractive move, 0:15:29.920 --> 0:15:32.480 which we'll see only when people are convinced that the 0:15:32.520 --> 0:15:34.600 FED has has kind of maxed out. 0:15:35.200 --> 0:15:37.960 We saw a surprise hike from the Bank of Canada, 0:15:38.280 --> 0:15:40.920 and usually the Bank of Canada isn't kind of front 0:15:40.920 --> 0:15:45.400 and center in my on my dashboard, but they do 0:15:45.520 --> 0:15:49.920 tend to make moves before the FED rather than following 0:15:50.000 --> 0:15:51.920 as a lot of other central banks do. And the 0:15:51.960 --> 0:15:53.800 fact that you know, we expected them to hold and 0:15:53.800 --> 0:15:56.800 they raise rates, I think it's very interesting because that's 0:15:57.040 --> 0:16:01.120 kind of the outlier take on the FED right now. 0:16:01.160 --> 0:16:03.800 You know, Pria Misra who was at TD last week 0:16:03.840 --> 0:16:05.680 and this week just moved to JP Morgan, she's in 0:16:05.760 --> 0:16:08.000 her base cases for a hike in June, and she's 0:16:08.040 --> 0:16:11.680 definitely an outlier there. Right Most people are expecting a 0:16:11.720 --> 0:16:14.000 hold or a pause or a skip if you will, 0:16:14.040 --> 0:16:16.080 in June, but the markets are now pricing in a 0:16:16.120 --> 0:16:16.840 hike for July. 0:16:16.960 --> 0:16:18.280 How do you look at the FED right now? 0:16:18.520 --> 0:16:21.640 Yeah, we've you know, kind of fallen in line with 0:16:21.720 --> 0:16:25.240 the market term of the the hawkish pause, which I 0:16:25.280 --> 0:16:27.560 think is a kind of an interesting phrase, but I 0:16:27.560 --> 0:16:30.720 think it does kind of reflect a belief that the 0:16:30.720 --> 0:16:33.080 FED may want to have a little bit more data 0:16:33.120 --> 0:16:36.280 before they move. But Ben, we certainly think that either 0:16:36.360 --> 0:16:38.120 at one of the next two meetings that they will 0:16:38.200 --> 0:16:41.480 kind of have one more left in them just one more, yeah, 0:16:41.520 --> 0:16:45.040 probably one more. But it really it's really very data dependent, 0:16:45.120 --> 0:16:47.760 I think at this point, I think what's much more 0:16:47.800 --> 0:16:52.240 important is how that relates to how long rates have 0:16:52.320 --> 0:16:55.320 to stay high, and I think that's where the market 0:16:55.320 --> 0:16:56.920 has it wrong. So if you look at the FED 0:16:57.000 --> 0:16:59.600 funds futures, you're going to see that. You know, the 0:16:59.640 --> 0:17:02.240 market still believe so that these rates are coming down 0:17:02.240 --> 0:17:03.680 towards the end of this year and certainly in the 0:17:03.680 --> 0:17:05.680 first quarter of next year that they are. I think 0:17:05.720 --> 0:17:08.280 that's where the market actually has it wrong. I think 0:17:08.320 --> 0:17:11.439 these rates are going to stay higher for longer than 0:17:12.320 --> 0:17:15.040 what's priced in right now, and that's certainly how we're positioned. 0:17:15.080 --> 0:17:16.280 So you want to take the other side of that 0:17:16.280 --> 0:17:16.680 trade out. 0:17:16.720 --> 0:17:19.760 A listener who wrote in and was asking, you know, 0:17:19.800 --> 0:17:22.440 how do you invest in this market? Trade uncomfortably long 0:17:23.119 --> 0:17:25.120 and then really what is the moment that you can 0:17:25.119 --> 0:17:27.040 put a stake in the ground and have conviction? 0:17:27.160 --> 0:17:30.159 And I guess and that trade at least you are 0:17:30.200 --> 0:17:30.920 doing it now. 0:17:31.680 --> 0:17:34.960 Yes, But I think obviously for any investor, it depends 0:17:35.000 --> 0:17:37.680 on your risk tolerances and your time Horizon's a whole 0:17:38.040 --> 0:17:40.000 sorts of different things. I think as a as a 0:17:40.040 --> 0:17:43.600 market overall, when you're going to see money moving out 0:17:43.600 --> 0:17:45.760 of the money market funds is when there is belief 0:17:45.800 --> 0:17:49.719 that the FED has peaked and is now basically started 0:17:49.840 --> 0:17:53.119 a decline, and that's when that that that kind of 0:17:53.119 --> 0:17:54.679 big move will will happen. 0:17:54.720 --> 0:17:57.160 But how long do you expect the pause to last. 0:17:57.200 --> 0:17:59.159 And surely I'm saying, I think the pause is going 0:17:59.200 --> 0:18:01.160 to be longer than what the market is priced in 0:18:01.200 --> 0:18:02.680 for now for sure. 0:18:02.560 --> 0:18:06.640 And so we have to wait till what four you've 0:18:06.680 --> 0:18:07.159 been doing. 0:18:07.040 --> 0:18:08.920 The next year. We could easily be into next year 0:18:08.920 --> 0:18:10.560 before we really we really see that. 0:18:10.680 --> 0:18:12.919 Yeah, what do you think, David about the earnings picture 0:18:13.760 --> 0:18:16.679 we had? Everyone comes on the program and says, hey, 0:18:16.760 --> 0:18:19.480 first quarter earnings weren't bad, but they weren't great, you know, 0:18:19.600 --> 0:18:22.880 and we're not expecting them to be fantastic in Q 0:18:22.960 --> 0:18:25.800 two either, And then we get into the second half 0:18:25.840 --> 0:18:30.119 where that's where people have their recession forecast, right, So 0:18:30.200 --> 0:18:32.640 what do you expect from American companies? 0:18:33.400 --> 0:18:35.400 So we would we would say that that the that 0:18:35.400 --> 0:18:39.320 the earnings outlook will begin to gradually come down. You 0:18:39.800 --> 0:18:43.960 always see the expectation game being set now, even with 0:18:44.040 --> 0:18:46.720