Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Stephen
Speaker 1: Schwartzman has given a hundred and fifty million pounds to
Speaker 1: Oxford University, the largest contribution and it's eight hundred year history.
Speaker 1: The Blackstone Group head has emerged as a major philanthropist
Speaker 1: with donations to the New York Public Library m I. T. N. Yale.
Speaker 1: Is also close to President Donald Trump and a little
Speaker 1: bit of a scholar when it comes to China. Well,
Speaker 1: I'm very pleased to be welcoming on Bloomberg Surveillance and
Speaker 1: Blackstone Group chief executive here in London. He is Stephen Schwartzman.
Speaker 1: See welcome to the program. Thank you so much for
Speaker 1: coming in. Now. This is basically a faculty hub that
Speaker 1: brings the humanities faculties to tackle ethical questions on artificial intelligence.
Speaker 1: But who's it up to to figure out how we
Speaker 1: regulate this so that we don't displace too many workers? Right? Well,
Speaker 1: it's it's it's more than that. Uh. First of all,
Speaker 1: it's bringing together the humanities faculties where Oxford is ranked
Speaker 1: number one in the world. UH. And they've never been together.
Speaker 1: It's all been separate buildings, and now it's going to
Speaker 1: be combined so they can get the advantage of cross
Speaker 1: disciplinary kinds of stuff. We're going to have a major
Speaker 1: performing arts center uh. And UH that will enable certain
Speaker 1: themes in the humanities to get played out. UH. And
Speaker 1: then as I was learning about what Oxford was doing,
Speaker 1: I realized that their capabilities in humanities and philosophy in
Speaker 1: particular played right into my concerns about what happens when
Speaker 1: you introduce AI globally uh, and what happens to the
Speaker 1: displacement of workers all kinds of other you know, unexpected
Speaker 1: consequences and and and so using the Oxford core of
Speaker 1: Western civilization to figure out what's human as you make
Speaker 1: decisions of what should be actually implemented is I think
Speaker 1: the second piece beyond just the technical. But Steve Shorts,
Speaker 1: the politicians no longer listen to the academics, They no
Speaker 1: longer listen to the global elite. Why would they listen
Speaker 1: to anyone coming from Oxford? Well, I think the reason
Speaker 1: is that in this intersection between technology about which governments
Speaker 1: know uh pretty much next to nothing UH and and
Speaker 1: the real world where workers can be adversely affected, which
Speaker 1: changes how society works and and and can change political things,
Speaker 1: that it's important to have somebody who's an arbitrator, if
Speaker 1: you will, who can make recommendations to government UM, who
Speaker 1: have knowledge UH and and broach the two areas UH
Speaker 1: that there are naturals to do this. Just leaving this
Speaker 1: to government, as we can see in the United States
Speaker 1: with just the simple issue of privacy is quite difficult.
Speaker 1: What are the questions that you would ask about AI
Speaker 1: right now? There's so many concerns about how certain countries,
Speaker 1: including China for example, process the data and use the
Speaker 1: data to profile possibly a lot of their citizens. Well,
Speaker 1: that's China's right, UH. And the West has a different
Speaker 1: set of core values. So one of the things Francine
Speaker 1: is we're going to be running into this issue of
Speaker 1: what really are our core values that we care about
Speaker 1: UH and other other societies with different cultures, they'll do
Speaker 1: things different and we we can't make them do what
Speaker 1: our values are and vice versa. Steve Schwartzman, the Library
Speaker 1: at Oxford going back to six o two has a
Speaker 1: very modern article out on its website analyzing tweets of
Speaker 1: the President of the United States. You are one of
Speaker 1: the great advisers. You talk often to the president as well.
Speaker 1: You were the sole remaining free trader, and his ear
Speaker 1: cone is out the door. Cudlow has done a great job,
Speaker 1: but Larry has been very ill. We hope he gets
Speaker 1: better and gets his strength back. You're it on free trade.
Speaker 1: How do you nudge the first mercantilist back towards Schwartzman
Speaker 1: free trade? Well, I I think what's underlying that, Tom
Speaker 1: h And by the way, I have no responsibility for
Speaker 1: any tweet uh by him or anyone else. Uh that
Speaker 1: Uh what what? What? What I think the President is
Speaker 1: looking for? And I'm not his spokesman on this, but
Speaker 1: what he's looking for is basically equivalence in terms of
Speaker 1: open markets and tariffs and and and trade. Uh. And
Speaker 1: you know, there's not a real desire to intrench the
Speaker 1: United States in some way. It should be sort of
Speaker 1: fair competition and all of these issues um that are
Speaker 1: that are being used as as tactics, uh, if you will,
Speaker 1: are done to bring people to the table so that
Speaker 1: you can get to equal Uh. You know, so the
Speaker 1: best products win, the best price wins. If the US loses,
Speaker 1: so they lose. If the U s wins, that's good.
Speaker 1: But but I don't think there's another agenda. Uh And
Speaker 1: and so it's really just an evolution. As developed market
Speaker 1: countries like China get to parity, will they time frame? Steve, Steve,
Speaker 1: I don't mean to interrupt, but this is really really important.
Speaker 1: People don't know that you've also given not only to
Speaker 1: m I T, not only to others in America and
Speaker 1: now at Oxford, but you've donated substantial money towards the
Speaker 1: education of China, where a Schwartzman College. You are a
Speaker 1: great listener of the leadership of China. What are you
Speaker 1: hearing from the leadership of China as they go to
Speaker 1: G twenty, as they deal with this president? What's the
Speaker 1: nuance you can give us right now? Well, it's a
Speaker 1: sort of a time where things are somewhat impenetrable. Um.
Speaker 1: The negotiations that have been going on basically were stopped
Speaker 1: by by the Chinese side, and and and each of
Speaker 1: the two countries. As as you've seen, uh, and we've
Speaker 1: all seen as seems to be UH sort of bifurcated
Speaker 1: going to their corners UH and and scaring the business
Speaker 1: community and creating an adversarial situation and that will continue
Speaker 1: unless it's changed by by the two presidents. So so
Speaker 1: the meeting UH in Japan is quite important because they
Speaker 1: have the ability to reset expectations which now work hauide
Speaker 1: close but for some reason just just sort of like disappeared. UH.
Speaker 1: And if that can be put together in terms of framework,
Speaker 1: then the trade negotiators can go back to work and
Speaker 1: perhaps get something done for global audience listeners and viewers
Speaker 1: were with Stephen Swartsman. Have a Blackstone who has given
Speaker 1: a hundred and fifty million pounds to the University of Oxford.
Speaker 1: If this is a Schwartzman Center for Humanity at Oxford,
Speaker 1: what would be top of your curriculum, job displacement or ethics. Well,
Speaker 1: their variety of things. You know, they have seven off
Speaker 1: an areas, UH, ranging from English and history to to
Speaker 1: theology and the core UH curriculum of the liberal arts,
Speaker 1: if you will, and that will be taught. But in addition,
Speaker 1: we're gonna set up a new Oxford's going to set
Speaker 1: up a new AI ethics. Uh. Uh activity which won't
Speaker 1: just use the humanities, which are an unusual asset of Oxford,
Speaker 1: but we'll use the other major parts of the university.
Speaker 1: And Oxford typically is ranked in the top five in
Speaker 1: the world, one of the great universities. And if you
Speaker 1: can bring all that to bear, h, we'll have better outcomes.
Speaker 1: Do worry about breggits. You're you're giving to a university
Speaker 1: exactly at a moment where we don't know if we
Speaker 1: can still attract talent to this country, whether more students
Speaker 1: will need visas well. The UK has been around for
Speaker 1: a long time. It depends how you measure, or at
Speaker 1: least twelve hundred years. Uh. And UH, things in the
Speaker 1: short term are not nearly as important as what we're
Speaker 1: trying to do in the long term. And and you know,
Speaker 1: Brexit will take its way. That's up to the British
Speaker 1: uh and the Parliament, the government. It's so well covered. Uh,
Speaker 1: nobody knows quite how it's going to turn out. And
Speaker 1: from my perspective on this gift, UH, what's important is
Speaker 1: we set up the right structure for a hundred years,
Speaker 1: two hundred years. If you look at the program that
Speaker 1: Tom was mentioning about which was a Schwartzman Scholars program
Speaker 1: at sin Kwa in China. Has a trade war affected that? Well,
Speaker 1: it's amazing. Uh. You know that program is sort of
Speaker 1: like the Roads, except we take extraordinary people and instead
Speaker 1: of going to Oxford, which is sort of an accident, um,
Speaker 1: going to China and teaching them about how China works.
Speaker 1: It starts with the endorsement of President she and President
Speaker 1: Obama UH. And thus far we have not been affected. UH.
Speaker 1: Education were generally in China has felt somewhat of a
Speaker 1: chill uh, as as as there a variety of issues,
Speaker 1: whether their trade or other types of things affecting China, UH,
Speaker 1: leading it to a more of a nationalistic approach. I
Speaker 1: think Schwartzman scholars is viewed as a window on on
Speaker 1: on the Western world and for the West into China,
Speaker 1: and so I think it serves everyone's purpose to have
Speaker 1: Schwortzman Scholars thriving. Steve Schwartzman I got a playoff a
Speaker 1: Wall Street Journal article today on scale on the size
Speaker 1: and success of your Blackstone folks, to just give you perspective.
Speaker 1: In the last ten years, Steve Schwartzman has outdone Golden
Speaker 1: Sax by one thousand, seven undred forty two basis points.
Speaker 1: It's stunning twentysomething percent per year versus a Paul three
Speaker 1: five or whatever at Goldman Sacks per years. The stunning,
Speaker 1: stunning out performance. Are you getting too big? I mean,
Speaker 1: just simply, Steve, can you move the needle on deal
Speaker 1: transactions anymore with the scale that you've invented at Blackstone?
Speaker 1: The answer is sure, or else we wouldn't do it.
Speaker 1: We're not in the business of trying to hurt customers,
Speaker 1: and our investors were trying to help them. And the
Speaker 1: way you get bigger in our world isn't by going
Speaker 1: into one strategy and keep making it's so big that
Speaker 1: the thing can't perform anymore. Uh. The sort of approach
Speaker 1: that we've always had is to add new ideas which
Speaker 1: which manifests themselves as different funds, and they should be
Speaker 1: right sized, and we should catch an opportunity where there's
Speaker 1: really great returns, and we keep our more mature funds.
Speaker 1: They grow, the world grows. Uh. But but their job
Speaker 1: isn't to grow in an accelerated rate. We also don't
Speaker 1: need many deals in each of our funds. So in
Speaker 1: a normal year, typically maybe we would do ten transactions
Speaker 1: for a fund um, just a little range on either side.
Speaker 1: But for example, in private equity, we have two hundred
Speaker 1: and fifty people all around the world. If we can't
Speaker 1: do ten really interesting investments, we're really doing something wrong.
Speaker 1: Steve Buried in the bout at Oxford is a book.
Speaker 1: It's an ancient ancient Gothic book from about sixteen forty,
Speaker 1: What the hell do we do with Deutsche Bank? It's
Speaker 1: a great book. Let me ask you the question right now,
Speaker 1: what would you do with Deutsche Bank? Well, this one
Speaker 1: is sort of a tough one. I don't know that
Speaker 1: they were writing about it in sixteen forty, but they
Speaker 1: certainly are in uh and the issue there, And you know,
Speaker 1: I don't work at Deutsche Bank, but but you know
Speaker 1: they basically I have an investment bank and and and
Speaker 1: a consumer banking system, and the consumer bank isn't really
Speaker 1: profitable in the investment bank is suffering really from this
Speaker 1: endless questioning. It's very hard to keep any service organization together.
Speaker 1: As as as you asked that kind of question, Tom,
Speaker 1: which really reflects questions that everybody are in asking, including
Speaker 1: you know, sort of their shareholders and board people. But
Speaker 1: if you were in charge, either Deutsche Bank or regulators,
Speaker 1: would you consolidate banks in Europe? It feels like it's overbanked.
Speaker 1: I would not be in charge. Uh. There are certain
Speaker 1: things we can pick in life, and that's one pick
Speaker 1: that I wouldn't choose. Okay, would you be fedchair? And
Speaker 1: and do you believe that the world needs more stimulus?
Speaker 1: Is that right? That that we're in a devish stance
Speaker 1: or the world economy is kind of at turning points?
Speaker 1: Are we are we putting more more trouble ahead by
Speaker 1: stimulating too much? Well, you know, there's sort of three
Speaker 1: economic blocks. You've got China that's got its own issues
Speaker 1: but still growing somewhere in the five to six percent area,
Speaker 1: despite at least the current levels of tariffs. You've got
Speaker 1: the U s that's slowed down a little bit. Um.
Speaker 1: You know, my own guests, nobody ever knows these things.
Speaker 1: They all keep being revised anyhow, even if they were reported.
Speaker 1: U is somewhere around two to two and a half uh.
Speaker 1: And and and given the fact that Europe is running
Speaker 1: negative interest rates UH and slower growth, the issue is
Speaker 1: really Europe and and the currencies start adjusting, you know,
Speaker 1: to these negative rates and US slower growth, So it's
Speaker 1: sort of logical, you know that US interest rates might
Speaker 1: come down a little bit. Uh. You know, we're slowing,
Speaker 1: but we're not anywhere near approaching recession. Steve, I want
Speaker 1: to talk about We opened with the President of the
Speaker 1: Montage in Orlando, explained disaffected Republicans why they need to
Speaker 1: step up and support President Trump for a second turn.
Speaker 1: They can't turn, they can't stand him. How do how
Speaker 1: do you and the President get disaffected gop over to
Speaker 1: support him once more? Well, I think, uh, you know,
Speaker 1: I'm not a political election expert, Tom, I'm like everybody else.
Speaker 1: I watched this stuff. Uh and and I think, uh,
Speaker 1: what will drive the Republicans to come out is which
Speaker 1: Democrat uh is the nominee to the extent that that
Speaker 1: the Democratic nominees you know, proved threatening uh to to
Speaker 1: middle class or other people. Basically last election, I guess
Speaker 1: was was won pretty much by suburban women who went
Speaker 1: to the Republican in sixteen. At the moment, that's not
Speaker 1: the case. Uh. It depends, um the issues that they're facing. Uh.
Speaker 1: And if if they think that the Democrats have gone
Speaker 1: too far left, uh, that you know they'll they'll swing back.
Speaker 1: Uh and and we won't know who that person is.
Speaker 1: We don't know what they really believe until later. But
Speaker 1: what does the US economy need right now? What kind
Speaker 1: of policy policies is the US economy need from from
Speaker 1: the U S. President? Well, I think, um, the only
Speaker 1: change in policies were already running really big deficits, so
Speaker 1: so there's not a lot of room on the fiscal side. Uh.
Speaker 1: You could move interest rates down a little bit, but
Speaker 1: they're actually pretty low. Uh And whether they get a
Speaker 1: little lower is great symbolically, it's it's not going to
Speaker 1: change what business decides to do. It just gives you
Speaker 1: some confidence. So I think the type of thing that
Speaker 1: would would work is if some of the trade issues
Speaker 1: were resolved, so people could could have the confidence to
Speaker 1: know what's going to happen. That's what slows an economy.
Speaker 1: Steve Schwartzman, thank you so much. That is, of course
Speaker 1: Steve Schwartzman, the chief executive of Blackstone, with that pledge
Speaker 1: of a hundred and fifteen million pounds to Oxford University
Speaker 1: town dropping by the studio to catch up with this.
Speaker 1: Julia Coronado macro policy perspectives President and found a good
Speaker 1: morning to Julia, good morning. Where do we start? What
Speaker 1: can we expect from Chairman Pound a little bit later? Well,
Speaker 1: I think there is a sort of a confusion amongst
Speaker 1: a lot of market participants. Certainly, the survey we conduct
Speaker 1: showed that a lot of different views. Nobody's most people
Speaker 1: don't expect him to come in and announce a rate cut,
Speaker 1: although that's possible, but they do expect him to open
Speaker 1: the door to rate cuts which the market has already
Speaker 1: priced in. So the question is, we don't expect big
Speaker 1: changes in their outlook. We don't expect necessarily big changes
Speaker 1: in the dot plot. So how does he describe the situation?
Speaker 1: How does he open the door? Will it be enough
Speaker 1: for markets that are already well well ahead of the Fed?
Speaker 1: On that? Just to how difficult this has going to
Speaker 1: be for Cham and pals. Yeah, it's a tricky. It's
Speaker 1: a tricky press conference because you see, you have global risks,
Speaker 1: both a global flowing in the economy and trade risks
Speaker 1: that are just impossible to calibrate and quantify, uh, weighing
Speaker 1: heavily on their mind. Even as the data flow in
Speaker 1: the US is okay and Meanwhile, on the other hand,
Speaker 1: you've got inflation running low, inflation expectations running low. Would
Speaker 1: a rate cut do much to stimulate that. That's the
Speaker 1: debate that they're having. So what's the strategy here is
Speaker 1: the chairman, Do you lean on the triling data, say
Speaker 1: that's okay, and then lean on the uncertainty about the outlook.
Speaker 1: Is that the strategy for today? Yeah? I think there's
Speaker 1: there's two strategies. One is you say, look, there's there's
Speaker 1: risks to the outlook. Those risks are skewing to the downside.
Speaker 1: We are seeing data slow as expected, but coming with
Speaker 1: some downside risks. That's a reason to possibly take out
Speaker 1: some policy insurance. And then on the other hand, there's
Speaker 1: been a persistent issue, and that is inflation that is
Speaker 1: running too low, uncomfortably low to their objectives, and inflation
Speaker 1: expectations that are showing again some signs of slippage. And
Speaker 1: that's a risk that they have flagged over and over again.
Speaker 1: Uh as a you know, more of a structural challenge
Speaker 1: to monetary policy. Yesterday was frightening, to use a fancy
Speaker 1: financial word. The President came to the rescue with a tweet, John,
Speaker 1: would you agree with me that one single tweet lifted
Speaker 1: the markets. Yeah, I think it was responsible for a
Speaker 1: big part of the movie Yesterday's Together with or all
Speaker 1: of it whatever that can flip right now, What are
Speaker 1: the ramifications for Chairman Powell and other institutional leaders if
Speaker 1: we take another run at the low rate scary shillings
Speaker 1: talking about Yeah, it's it's it's sort of nightmare scenario
Speaker 1: to manage the monetary policy communication with this wild swings
Speaker 1: and trade policy signals. Um, what we have in hand
Speaker 1: is a trade war. We have tariffs that have been
Speaker 1: put in place that are having an effect. You are
Speaker 1: starting to see that again in the global economy. You're
Speaker 1: seeing it in business investment, which has been quite sluggish. Uh.
Speaker 1: So I think it's in addition to the noise which
Speaker 1: is extremely volatile, and the Fed is in sort of
Speaker 1: a lose lose situation no matter what they do. You
Speaker 1: do actually have trade restrictions that are starting to have
Speaker 1: an effect on the economy. So uh, you know, I
Speaker 1: think the Fed just stays in this lane. It stays
Speaker 1: focused on that outlook. But it's it's a very difficult,
Speaker 1: uh communication challenge for them. Judy. Just to raise the question,
Speaker 1: are you comfortable ruling down a right cut today's mating.
Speaker 1: I mean, I think it's a possibility that they that
Speaker 1: they move ahead, and I don't you know, I don't
Speaker 1: think it's It would be a terrible idea, given that
Speaker 1: you look, cheer Pal is gonna walk in and have
Speaker 1: to defend a dot plot he doesn't necessarily believe, defend
Speaker 1: a baseline forecast that doesn't hold as much meaning in
Speaker 1: the current form, and so the risks are that he's
Speaker 1: just goes in there and struggles. Uh. And so one
Speaker 1: possibility if you think you're going to cut in July,
Speaker 1: is to go ahead and cut in June. And then
Speaker 1: the narrative is, see, we are flexible, we are response.
Speaker 1: That's the problem with the dots, and I think it's
Speaker 1: going to be a big, big problem later today. It's
Speaker 1: very difficult to forecast the cup without actually cutting interest.
Speaker 1: So we're set to have you think, a dot plot
Speaker 1: that shows the median dot with no rate hikes for
Speaker 1: the rest of the year. That's still a spread between
Speaker 1: the market and the FED of three interest rate cuts.
Speaker 1: How difficult is it going to be to manage market
Speaker 1: expectations at this meeting. It's very difficult because because the
Speaker 1: markets are risk sentiment is sanguine in part because the Fed.
Speaker 1: The markets expect the FED to cut. So then does
Speaker 1: the Fed not cut because markets are sanguine? That's what
Speaker 1: you give your undrum. What's your run rate on g
Speaker 1: d P? I mean, Bruce Caswin and JP Morgan a
Speaker 1: major house are it is stunning? One point five percent
Speaker 1: twelve months forward? Are you there? Yeah, we're below two
Speaker 1: percent twelve months forward. For sure. We do expect we're
Speaker 1: in this moderation. We're slowing to at a minimum, slowing
Speaker 1: to trend. And you're gonna give me a bunch of
Speaker 1: terminal value? Are start blogning? President Trump doesn't care about that.
Speaker 1: Everything politician Republican or Democrat says the economic growth you
Speaker 1: just described as unacceptable, So they go Fed save us.
Speaker 1: Is there any history out there that a Fed can
Speaker 1: spur economic growth? Uh? The Fed cans for economic growth.
Speaker 1: The question is do they think that that is necessary
Speaker 1: when we are at a three point six percent unemployment rate?
Speaker 1: And the Fed will conclude no, they don't need to
Speaker 1: inject a lot of stimulus at this stage. They may
Speaker 1: need to. So if we hear some opening of the door,
Speaker 1: it would be a recalibration, taking out some insurance. It's
Speaker 1: not stimulating the economy with the objective of not seeing
Speaker 1: trend like growth. The objective for the FED is trend
Speaker 1: like growth. There is attention with politicians and no matter
Speaker 1: what the FED does, they will be the lightning rod
Speaker 1: for the president. Just to wrap things up, in the
Speaker 1: last ten years, we've had two grud scales. Twelve, we
Speaker 1: had a whole lot worse than this, right, didn't they Well,
Speaker 1: they did in part because the markets didn't expect the
Speaker 1: FED to move and and for example, markets were expecting
Speaker 1: the FED to to hike rates and that contributed to
Speaker 1: a deterioration in a correction and sentiment. So this is
Speaker 1: the conundrum we're facing right now. We are in a
Speaker 1: global slowdown, like the global data paint a very similar picture.
Speaker 1: We are starting to see energy prices slipped to the
Speaker 1: lower end of the range that could hurt the energy interesting.
Speaker 1: So we are seeing that unfold very similarly. But the
Speaker 1: markets like, oh, we know the playbook. The Fed's going
Speaker 1: to respond and recalibrate and keep us on track. We
Speaker 1: never know the playbook. Julia, thank you briefly, Christian Mamany
Speaker 1: and invest go great to see a Christner. Typically we
Speaker 1: introduced Christna and we just start the conversation on markets,
Speaker 1: and I want to do something different. Back in two
Speaker 1: thousand and nine, Christian Mmany stood there when a lot
Speaker 1: of people were looking for the Federal Reserve to hike
Speaker 1: interest rates over the next twelve months and said, no,
Speaker 1: rates are going to stay low for a whole lot
Speaker 1: longer than you think. Fifteen sixteen, we had a big
Speaker 1: growth scare. There were some people that thought we were
Speaker 1: about to drop into a real recession. Christian Mmany stood
Speaker 1: up and said, no, we're going to have the longest
Speaker 1: economic expansion on record. We're there literally a month away.
Speaker 1: Christmas standing up now and saying five more years. That
Speaker 1: this expansion can go for five more years. And Christna,
Speaker 1: that's not just a headline to get attention. You truly
Speaker 1: believe this, and I want to understand it a little
Speaker 1: bit more today. Absolutely, I believe this, And then thank you, John.
Speaker 1: You're easily bribab also yet that uh. But the fact
Speaker 1: of the matter is that when you don't have inflation,
Speaker 1: the policymakers have a great deal of flexibility to engineer outcomes,
Speaker 1: and that is what they have been doing for a
Speaker 1: reasonably long period of time. Remember one thing, the world
Speaker 1: faces lots of risks. So the best policies central banks,
Speaker 1: in their totality can implement is to make sure that
Speaker 1: we don't get into a recession. That is their objective
Speaker 1: number one. So coming into two thousand nineteen, our thesis
Speaker 1: was fed tightened, tightened too much. It shouldn't have tightened
Speaker 1: when inflation was nonexistent. At some point they're going to pivot,
Speaker 1: and they're going to pivot hard. And our thesis was
Speaker 1: growth is moderating, but it is not moderating to a
Speaker 1: very low level, not to a catastrophic level. And in
Speaker 1: that context we will have significantly far more supportive policy
Speaker 1: than we have had in a long time. And that's
Speaker 1: how things are playing out. So five more years is
Speaker 1: still our thesis, and I think there's good reason to
Speaker 1: think why things are going to be reasonably okay on
Speaker 1: from on the growth front. For quite some time, the
Speaker 1: heritage of Oppenheimer funds, going back to Oppenheimer Special Fund
Speaker 1: and Oppenheimer Tograph Fund a million years ago, truly a
Speaker 1: million seems like a million years ago. Krishna was to
Speaker 1: be opportunistic what's the opportunistic now in big cap international stocks,
Speaker 1: I get really mixed messages. Well so, I I think
Speaker 1: at the at the top level, what is opportunistic is
Speaker 1: the fact that technology is still going to do quite well.
Speaker 1: So I think the world is changing and the world
Speaker 1: is changing in a meaningful way. How do you get
Speaker 1: valuation on those big how do they catch up to America? Well, so,
Speaker 1: I think valuations overall, I'm looking at valuations to drive
Speaker 1: your investment decisions has been a bad metric for quite
Speaker 1: some time, and that is how it is going to
Speaker 1: remain And and the reason for that is very straightforward.
Speaker 1: In a growth short world, companies that can deliver growth
Speaker 1: will end up being valued significantly more than companies that
Speaker 1: deliver just okay, where is the opportunity then, in priced
Speaker 1: revenue right now? Given how starved we are for revenue growth. Well,
Speaker 1: so I would say the regular technology companies, some of
Speaker 1: these who have been reclassified as communications companies, Uh, there's
Speaker 1: tremendous opportunity there. I would say in in in in China,
Speaker 1: for example, companies like Ali Baba. The valuations are high,
Speaker 1: but they're doing all sorts of things ten cents. So
Speaker 1: there are lots of companies on a global basis that
Speaker 1: you can find who are executing as well as it
Speaker 1: can be expected in the current environment, despite tremendous amount
Speaker 1: of headwinds. When those headwinds fade slightly, I think growth
Speaker 1: prospects of those companies increased meaningfully, and investors are going
Speaker 1: to assign significant premium over and above what they have
Speaker 1: already assigned to those companies. So right now we're pricing
Speaker 1: in significant easing. The global bond market has twelve point
Speaker 1: five trillion dollars of negative yielding assets. The objective of
Speaker 1: que should be to flush us out of core government
Speaker 1: bonds and to put us into riskier pockets. That's the
Speaker 1: objective of QE for so many people, that's the objective
Speaker 1: of looser monetary policy for so many central bankers. Will
Speaker 1: it be effective? Can that happen? Can you get the
Speaker 1: asset inflation in risk assets that these central banks pushed
Speaker 1: for at the turn of the decade and going after
Speaker 1: the financial crisis? Well it has worked. And if you
Speaker 1: all for that, all you have to do is look
Speaker 1: at where S and P five is. I understand where
Speaker 1: we are now, Christian, I just mean going forward from
Speaker 1: here or are they pushing on a string now? Well,
Speaker 1: so they're they're pushing on a string to some extent
Speaker 1: in terms of engineering significantly higher levels of growth and
Speaker 1: engineering significantly our levels of inflation. From an asset price standpoint,
Speaker 1: I think they're not pushing on a string. We are
Speaker 1: close to all time highs, and I think if the
Speaker 1: policy remains supportive and we have two percent growth, that
Speaker 1: will end up at asset prisis being meaningfully higher. Your
Speaker 1: previous quest wasn't you know we are we? You know
Speaker 1: you're making fun of people being defensive. We are not defensive.
Speaker 1: Our outlook for S and P five hundred by your
Speaker 1: end is probably close to thirty one hundred. I'm behind,
Speaker 1: and from what I can tell from reports, most of
Speaker 1: the known world is behind. How do they catch up
Speaker 1: with your optimism? Do they slide into the market or
Speaker 1: do they acquire shares today with optimism? Well, I think
Speaker 1: they are probably going to be pushed into acquiring a position,
Speaker 1: as opposed to going in. How are you pushed into it?
Speaker 1: Pushed by Amazon? You're pushed into it by the markets
Speaker 1: going up, and you steadily following because you're afraid of
Speaker 1: falling behind. And that has been happening up there right now.
Speaker 1: All year we're up sixteen percent, I mean twenty six
Speaker 1: thousand and four six. Everyone feels behind, don't they? Well,
Speaker 1: they do, but but let's kind of take a step
Speaker 1: back and look at not just two thousand nineteen returns,
Speaker 1: but longer term returns. And what we see is in
Speaker 1: a year SMP really hasn't done much. So I think
Speaker 1: there's that's this tremendous room for SMP five or U
Speaker 1: stocks to do reasonably well. And I think if the
Speaker 1: if growth materializes at the level that we expect in
Speaker 1: the second half, things will be significantly better than where
Speaker 1: they are today. Christian momany with with us with Oppenheimer Funds,
Speaker 1: we should say that Oppenheimer Funds has been a wonderful
Speaker 1: supporter of this show, including our visits down there as Krishna. Yeah,
Speaker 1: minor correction here, Appenheimer Funds doesn't exist anymore. We got
Speaker 1: acquired by Investco, so we are investor. Excuse me, I
Speaker 1: didn't know that that transaction finally had closed. We did.
Speaker 1: We didn't change introducing Thomas f I c I O
Speaker 1: at Investco did wed Yeah, what's the official name that
Speaker 1: you're using? Investco? No, it's Investo. Should we do this
Speaker 1: in the commercial break? No? I think you want? No,
Speaker 1: it's great, It's okay with Investo. Excuse me. Let's bring
Speaker 1: in Vince Reiner of Melan right now. Wonderful day, Vince
Speaker 1: Reiner with us. Vincent Reiner, of course, head of economic
Speaker 1: research for Alan Greenspan at the FED for decades and
Speaker 1: really codified the quality of research in the modern FED.
Speaker 1: If you were at the FED today, Vincent research, which
Speaker 1: Vincent Reinhardt, which research? Nicknamed that research? That Vincent research.
Speaker 1: If you were at the FED today and not at Melan,
Speaker 1: which research piece would you reach for to advise Chairman
Speaker 1: Powell what to do? Is it or fandes? Is it others?
Speaker 1: Which is the research piece that matters? Actually, my initials
Speaker 1: are v r R, so they do work. I actually
Speaker 1: would be who nineties wrote about the predictability of the
Speaker 1: federal funds rate. If you think about it, the overnight
Speaker 1: rate doesn't really matter for long term rates that just
Speaker 1: one day out of ten years. The FED, any central
Speaker 1: bank projects an influence on longer term rates because they
Speaker 1: affect the entire path for interest rates. That's why most
Speaker 1: of your focus right now is about communication. What do
Speaker 1: they say, how what how do they get? How far
Speaker 1: out the yield curve do they influence the market? Way
Speaker 1: further than makes it much sense? Actually, I don't understand,
Speaker 1: like ten years deals move so much and why far
Speaker 1: ahead forwards moves so much, And part of it is
Speaker 1: central banks just have a hard time anchoring expectations. But
Speaker 1: if you want to look about how far a central
Speaker 1: bank and influenced things, how about President dry He's got
Speaker 1: a negative tenure rating many of his jurisdictions. Uh, same same,
Speaker 1: same as true for the Neyear zero policy rated tenure
Speaker 1: rate in Japan. Central banking does matter. It matters for
Speaker 1: the longer term in terms of how the anger inflation expectations.
Speaker 1: Let's come back this Ryner where this with Melon. We're
Speaker 1: thrilled death insive Wrayner with us. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
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Speaker 1: always catch us worldwide. I'm Bloomberg Radio