WEBVTT - Surveillance: Blackstone's Schwarzman On Lower Rates 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.520 Bloomberg dot Com, and of course on the Bloomberg Stephen 0:00:27.520 --> 0:00:30.000 Schwartzman has given a hundred and fifty million pounds to 0:00:30.000 --> 0:00:33.880 Oxford University, the largest contribution and it's eight hundred year history. 0:00:34.200 --> 0:00:37.560 The Blackstone Group head has emerged as a major philanthropist 0:00:37.560 --> 0:00:40.600 with donations to the New York Public Library m I. T. N. Yale. 0:00:40.880 --> 0:00:42.920 Is also close to President Donald Trump and a little 0:00:42.920 --> 0:00:45.000 bit of a scholar when it comes to China. Well, 0:00:45.000 --> 0:00:47.600 I'm very pleased to be welcoming on Bloomberg Surveillance and 0:00:47.640 --> 0:00:51.200 Blackstone Group chief executive here in London. He is Stephen Schwartzman. 0:00:51.240 --> 0:00:53.400 See welcome to the program. Thank you so much for 0:00:53.479 --> 0:00:56.600 coming in. Now. This is basically a faculty hub that 0:00:56.640 --> 0:01:02.400 brings the humanities faculties to tackle ethical questions on artificial intelligence. 0:01:02.440 --> 0:01:04.840 But who's it up to to figure out how we 0:01:04.920 --> 0:01:08.520 regulate this so that we don't displace too many workers? Right? Well, 0:01:08.560 --> 0:01:11.600 it's it's it's more than that. Uh. First of all, 0:01:11.680 --> 0:01:17.559 it's bringing together the humanities faculties where Oxford is ranked 0:01:17.640 --> 0:01:20.840 number one in the world. UH. And they've never been together. 0:01:20.959 --> 0:01:23.720 It's all been separate buildings, and now it's going to 0:01:23.800 --> 0:01:26.800 be combined so they can get the advantage of cross 0:01:26.880 --> 0:01:30.480 disciplinary kinds of stuff. We're going to have a major 0:01:30.560 --> 0:01:35.440 performing arts center uh. And UH that will enable certain 0:01:35.520 --> 0:01:39.000 themes in the humanities to get played out. UH. And 0:01:39.040 --> 0:01:42.360 then as I was learning about what Oxford was doing, 0:01:42.480 --> 0:01:47.160 I realized that their capabilities in humanities and philosophy in 0:01:47.200 --> 0:01:54.200 particular played right into my concerns about what happens when 0:01:54.240 --> 0:01:58.760 you introduce AI globally uh, and what happens to the 0:01:58.840 --> 0:02:04.120 displacement of workers all kinds of other you know, unexpected 0:02:04.200 --> 0:02:10.440 consequences and and and so using the Oxford core of 0:02:10.720 --> 0:02:14.959 Western civilization to figure out what's human as you make 0:02:15.040 --> 0:02:19.440 decisions of what should be actually implemented is I think 0:02:19.480 --> 0:02:23.880 the second piece beyond just the technical. But Steve Shorts, 0:02:24.240 --> 0:02:27.360 the politicians no longer listen to the academics, They no 0:02:27.520 --> 0:02:31.480 longer listen to the global elite. Why would they listen 0:02:31.480 --> 0:02:35.120 to anyone coming from Oxford? Well, I think the reason 0:02:35.280 --> 0:02:40.960 is that in this intersection between technology about which governments 0:02:41.040 --> 0:02:45.720 know uh pretty much next to nothing UH and and 0:02:46.600 --> 0:02:52.799 the real world where workers can be adversely affected, which 0:02:52.919 --> 0:02:58.560 changes how society works and and and can change political things, 0:02:58.560 --> 0:03:02.200 that it's important to have somebody who's an arbitrator, if 0:03:02.200 --> 0:03:07.359 you will, who can make recommendations to government UM, who 0:03:07.440 --> 0:03:13.119 have knowledge UH and and broach the two areas UH 0:03:13.280 --> 0:03:16.600 that there are naturals to do this. Just leaving this 0:03:16.720 --> 0:03:19.080 to government, as we can see in the United States 0:03:19.840 --> 0:03:24.640 with just the simple issue of privacy is quite difficult. 0:03:25.480 --> 0:03:27.520 What are the questions that you would ask about AI 0:03:27.680 --> 0:03:30.760 right now? There's so many concerns about how certain countries, 0:03:30.800 --> 0:03:34.080 including China for example, process the data and use the 0:03:34.160 --> 0:03:38.280 data to profile possibly a lot of their citizens. Well, 0:03:38.320 --> 0:03:42.720 that's China's right, UH. And the West has a different 0:03:43.120 --> 0:03:46.680 set of core values. So one of the things Francine 0:03:46.840 --> 0:03:49.840 is we're going to be running into this issue of 0:03:49.920 --> 0:03:53.120 what really are our core values that we care about 0:03:53.760 --> 0:03:59.200 UH and other other societies with different cultures, they'll do 0:03:59.320 --> 0:04:03.320 things different and we we can't make them do what 0:04:03.440 --> 0:04:09.040 our values are and vice versa. Steve Schwartzman, the Library 0:04:09.200 --> 0:04:11.800 at Oxford going back to six o two has a 0:04:11.920 --> 0:04:16.440 very modern article out on its website analyzing tweets of 0:04:16.480 --> 0:04:19.159 the President of the United States. You are one of 0:04:19.160 --> 0:04:23.200 the great advisers. You talk often to the president as well. 0:04:23.680 --> 0:04:26.320 You were the sole remaining free trader, and his ear 0:04:26.440 --> 0:04:29.280 cone is out the door. Cudlow has done a great job, 0:04:29.360 --> 0:04:31.400 but Larry has been very ill. We hope he gets 0:04:31.440 --> 0:04:35.560 better and gets his strength back. You're it on free trade. 0:04:36.040 --> 0:04:40.360 How do you nudge the first mercantilist back towards Schwartzman 0:04:40.480 --> 0:04:45.599 free trade? Well, I I think what's underlying that, Tom 0:04:46.160 --> 0:04:48.960 h And by the way, I have no responsibility for 0:04:49.000 --> 0:04:54.440 any tweet uh by him or anyone else. Uh that 0:04:55.240 --> 0:04:59.040 Uh what what? What? What I think the President is 0:04:59.080 --> 0:05:02.360 looking for? And I'm not his spokesman on this, but 0:05:02.680 --> 0:05:05.880 what he's looking for is basically equivalence in terms of 0:05:05.880 --> 0:05:10.000 open markets and tariffs and and and trade. Uh. And 0:05:10.320 --> 0:05:15.200 you know, there's not a real desire to intrench the 0:05:15.279 --> 0:05:18.719 United States in some way. It should be sort of 0:05:18.800 --> 0:05:24.640 fair competition and all of these issues um that are 0:05:24.720 --> 0:05:29.440 that are being used as as tactics, uh, if you will, 0:05:30.240 --> 0:05:33.520 are done to bring people to the table so that 0:05:33.560 --> 0:05:37.240 you can get to equal Uh. You know, so the 0:05:37.279 --> 0:05:41.360 best products win, the best price wins. If the US loses, 0:05:41.400 --> 0:05:44.240 so they lose. If the U s wins, that's good. 0:05:45.240 --> 0:05:48.760 But but I don't think there's another agenda. Uh And 0:05:49.080 --> 0:05:53.080 and so it's really just an evolution. As developed market 0:05:53.200 --> 0:06:00.920 countries like China get to parity, will they time frame? Steve, Steve, 0:06:00.960 --> 0:06:03.440 I don't mean to interrupt, but this is really really important. 0:06:03.600 --> 0:06:05.840 People don't know that you've also given not only to 0:06:06.040 --> 0:06:08.520 m I T, not only to others in America and 0:06:08.560 --> 0:06:12.000 now at Oxford, but you've donated substantial money towards the 0:06:12.160 --> 0:06:16.040 education of China, where a Schwartzman College. You are a 0:06:16.080 --> 0:06:20.000 great listener of the leadership of China. What are you 0:06:20.200 --> 0:06:23.479 hearing from the leadership of China as they go to 0:06:23.560 --> 0:06:26.800 G twenty, as they deal with this president? What's the 0:06:26.920 --> 0:06:32.240 nuance you can give us right now? Well, it's a 0:06:32.360 --> 0:06:37.440 sort of a time where things are somewhat impenetrable. Um. 0:06:37.560 --> 0:06:43.520 The negotiations that have been going on basically were stopped 0:06:44.080 --> 0:06:47.520 by by the Chinese side, and and and each of 0:06:47.560 --> 0:06:51.040 the two countries. As as you've seen, uh, and we've 0:06:51.040 --> 0:06:54.440 all seen as seems to be UH sort of bifurcated 0:06:54.480 --> 0:06:58.960 going to their corners UH and and scaring the business 0:06:58.960 --> 0:07:06.280 community and creating an adversarial situation and that will continue 0:07:07.080 --> 0:07:11.960 unless it's changed by by the two presidents. So so 0:07:12.000 --> 0:07:17.440 the meeting UH in Japan is quite important because they 0:07:17.800 --> 0:07:23.720 have the ability to reset expectations which now work hauide 0:07:23.760 --> 0:07:29.119 close but for some reason just just sort of like disappeared. UH. 0:07:29.160 --> 0:07:33.760 And if that can be put together in terms of framework, 0:07:34.440 --> 0:07:37.160 then the trade negotiators can go back to work and 0:07:37.240 --> 0:07:41.560 perhaps get something done for global audience listeners and viewers 0:07:41.600 --> 0:07:44.760 were with Stephen Swartsman. Have a Blackstone who has given 0:07:44.760 --> 0:07:48.400 a hundred and fifty million pounds to the University of Oxford. 0:07:48.680 --> 0:07:51.840 If this is a Schwartzman Center for Humanity at Oxford, 0:07:51.880 --> 0:07:57.200 what would be top of your curriculum, job displacement or ethics. Well, 0:07:57.680 --> 0:08:00.120 their variety of things. You know, they have seven off 0:08:00.160 --> 0:08:04.040 an areas, UH, ranging from English and history to to 0:08:05.000 --> 0:08:10.679 theology and the core UH curriculum of the liberal arts, 0:08:11.200 --> 0:08:14.480 if you will, and that will be taught. But in addition, 0:08:15.360 --> 0:08:19.280 we're gonna set up a new Oxford's going to set 0:08:19.360 --> 0:08:24.880 up a new AI ethics. Uh. Uh activity which won't 0:08:24.960 --> 0:08:30.280 just use the humanities, which are an unusual asset of Oxford, 0:08:30.320 --> 0:08:33.600 but we'll use the other major parts of the university. 0:08:33.640 --> 0:08:36.920 And Oxford typically is ranked in the top five in 0:08:36.960 --> 0:08:41.160 the world, one of the great universities. And if you 0:08:41.160 --> 0:08:45.119 can bring all that to bear, h, we'll have better outcomes. 0:08:45.520 --> 0:08:48.480 Do worry about breggits. You're you're giving to a university 0:08:48.559 --> 0:08:50.640 exactly at a moment where we don't know if we 0:08:50.679 --> 0:08:54.800 can still attract talent to this country, whether more students 0:08:54.800 --> 0:08:57.560 will need visas well. The UK has been around for 0:08:57.559 --> 0:09:00.200 a long time. It depends how you measure, or at 0:09:00.240 --> 0:09:05.480 least twelve hundred years. Uh. And UH, things in the 0:09:05.520 --> 0:09:09.680 short term are not nearly as important as what we're 0:09:09.679 --> 0:09:13.400 trying to do in the long term. And and you know, 0:09:13.840 --> 0:09:17.680 Brexit will take its way. That's up to the British 0:09:18.040 --> 0:09:23.160 uh and the Parliament, the government. It's so well covered. Uh, 0:09:23.320 --> 0:09:26.120 nobody knows quite how it's going to turn out. And 0:09:26.160 --> 0:09:30.400 from my perspective on this gift, UH, what's important is 0:09:30.480 --> 0:09:33.480 we set up the right structure for a hundred years, 0:09:34.000 --> 0:09:37.040 two hundred years. If you look at the program that 0:09:37.080 --> 0:09:40.360 Tom was mentioning about which was a Schwartzman Scholars program 0:09:40.360 --> 0:09:44.319 at sin Kwa in China. Has a trade war affected that? Well, 0:09:44.320 --> 0:09:47.200 it's amazing. Uh. You know that program is sort of 0:09:47.240 --> 0:09:51.480 like the Roads, except we take extraordinary people and instead 0:09:51.480 --> 0:09:55.559 of going to Oxford, which is sort of an accident, um, 0:09:55.600 --> 0:09:59.439 going to China and teaching them about how China works. 0:09:59.440 --> 0:10:03.480 It starts with the endorsement of President she and President 0:10:03.520 --> 0:10:08.400 Obama UH. And thus far we have not been affected. UH. 0:10:08.960 --> 0:10:12.840 Education were generally in China has felt somewhat of a 0:10:12.960 --> 0:10:16.559 chill uh, as as as there a variety of issues, 0:10:16.600 --> 0:10:20.640 whether their trade or other types of things affecting China, UH, 0:10:20.880 --> 0:10:25.400 leading it to a more of a nationalistic approach. I 0:10:25.440 --> 0:10:29.679 think Schwartzman scholars is viewed as a window on on 0:10:29.679 --> 0:10:32.880 on the Western world and for the West into China, 0:10:33.400 --> 0:10:36.480 and so I think it serves everyone's purpose to have 0:10:36.800 --> 0:10:41.400 Schwortzman Scholars thriving. Steve Schwartzman I got a playoff a 0:10:41.440 --> 0:10:44.640 Wall Street Journal article today on scale on the size 0:10:44.640 --> 0:10:48.440 and success of your Blackstone folks, to just give you perspective. 0:10:48.720 --> 0:10:52.280 In the last ten years, Steve Schwartzman has outdone Golden 0:10:52.360 --> 0:10:56.440 Sax by one thousand, seven undred forty two basis points. 0:10:56.440 --> 0:11:00.280 It's stunning twentysomething percent per year versus a Paul three 0:11:00.320 --> 0:11:04.000 five or whatever at Goldman Sacks per years. The stunning, 0:11:04.040 --> 0:11:07.439 stunning out performance. Are you getting too big? I mean, 0:11:07.480 --> 0:11:10.800 just simply, Steve, can you move the needle on deal 0:11:10.880 --> 0:11:15.679 transactions anymore with the scale that you've invented at Blackstone? 0:11:17.440 --> 0:11:20.400 The answer is sure, or else we wouldn't do it. 0:11:21.120 --> 0:11:24.640 We're not in the business of trying to hurt customers, 0:11:24.760 --> 0:11:27.600 and our investors were trying to help them. And the 0:11:27.640 --> 0:11:30.720 way you get bigger in our world isn't by going 0:11:30.800 --> 0:11:33.920 into one strategy and keep making it's so big that 0:11:34.000 --> 0:11:38.079 the thing can't perform anymore. Uh. The sort of approach 0:11:38.120 --> 0:11:41.920 that we've always had is to add new ideas which 0:11:42.280 --> 0:11:46.120 which manifests themselves as different funds, and they should be 0:11:46.240 --> 0:11:50.200 right sized, and we should catch an opportunity where there's 0:11:50.400 --> 0:11:54.040 really great returns, and we keep our more mature funds. 0:11:54.240 --> 0:11:58.160 They grow, the world grows. Uh. But but their job 0:11:58.280 --> 0:12:01.920 isn't to grow in an accelerated rate. We also don't 0:12:02.000 --> 0:12:04.960 need many deals in each of our funds. So in 0:12:05.000 --> 0:12:10.319 a normal year, typically maybe we would do ten transactions 0:12:10.440 --> 0:12:14.520 for a fund um, just a little range on either side. 0:12:15.000 --> 0:12:17.560 But for example, in private equity, we have two hundred 0:12:17.559 --> 0:12:21.160 and fifty people all around the world. If we can't 0:12:21.160 --> 0:12:26.040 do ten really interesting investments, we're really doing something wrong. 0:12:26.520 --> 0:12:29.080 Steve Buried in the bout at Oxford is a book. 0:12:29.240 --> 0:12:32.960 It's an ancient ancient Gothic book from about sixteen forty, 0:12:33.120 --> 0:12:35.240 What the hell do we do with Deutsche Bank? It's 0:12:35.280 --> 0:12:38.000 a great book. Let me ask you the question right now, 0:12:38.280 --> 0:12:42.320 what would you do with Deutsche Bank? Well, this one 0:12:43.280 --> 0:12:46.440 is sort of a tough one. I don't know that 0:12:46.520 --> 0:12:50.240 they were writing about it in sixteen forty, but they 0:12:50.360 --> 0:12:55.880 certainly are in uh and the issue there, And you know, 0:12:55.920 --> 0:12:58.760 I don't work at Deutsche Bank, but but you know 0:12:59.440 --> 0:13:01.720 they basically I have an investment bank and and and 0:13:01.800 --> 0:13:07.080 a consumer banking system, and the consumer bank isn't really 0:13:07.160 --> 0:13:12.480 profitable in the investment bank is suffering really from this 0:13:12.960 --> 0:13:19.000 endless questioning. It's very hard to keep any service organization together. 0:13:20.160 --> 0:13:23.040 As as as you asked that kind of question, Tom, 0:13:23.080 --> 0:13:28.720 which really reflects questions that everybody are in asking, including 0:13:29.000 --> 0:13:33.120 you know, sort of their shareholders and board people. But 0:13:33.240 --> 0:13:36.000 if you were in charge, either Deutsche Bank or regulators, 0:13:36.040 --> 0:13:39.400 would you consolidate banks in Europe? It feels like it's overbanked. 0:13:39.520 --> 0:13:43.760 I would not be in charge. Uh. There are certain 0:13:43.760 --> 0:13:46.920 things we can pick in life, and that's one pick 0:13:47.200 --> 0:13:50.560 that I wouldn't choose. Okay, would you be fedchair? And 0:13:50.559 --> 0:13:52.839 and do you believe that the world needs more stimulus? 0:13:52.920 --> 0:13:55.080 Is that right? That that we're in a devish stance 0:13:55.200 --> 0:13:58.080 or the world economy is kind of at turning points? 0:13:58.800 --> 0:14:02.280 Are we are we putting more more trouble ahead by 0:14:02.360 --> 0:14:08.320 stimulating too much? Well, you know, there's sort of three 0:14:08.360 --> 0:14:12.600 economic blocks. You've got China that's got its own issues 0:14:12.720 --> 0:14:16.600 but still growing somewhere in the five to six percent area, 0:14:16.679 --> 0:14:21.120 despite at least the current levels of tariffs. You've got 0:14:21.160 --> 0:14:24.240 the U s that's slowed down a little bit. Um. 0:14:24.320 --> 0:14:27.560 You know, my own guests, nobody ever knows these things. 0:14:27.960 --> 0:14:30.840 They all keep being revised anyhow, even if they were reported. 0:14:31.200 --> 0:14:34.720 U is somewhere around two to two and a half uh. 0:14:34.760 --> 0:14:38.680 And and and given the fact that Europe is running 0:14:38.840 --> 0:14:42.480 negative interest rates UH and slower growth, the issue is 0:14:42.520 --> 0:14:46.680 really Europe and and the currencies start adjusting, you know, 0:14:46.760 --> 0:14:50.960 to these negative rates and US slower growth, So it's 0:14:51.200 --> 0:14:54.680 sort of logical, you know that US interest rates might 0:14:54.760 --> 0:14:58.280 come down a little bit. Uh. You know, we're slowing, 0:14:58.400 --> 0:15:03.080 but we're not anywhere near approaching recession. Steve, I want 0:15:03.120 --> 0:15:05.600 to talk about We opened with the President of the 0:15:05.640 --> 0:15:10.080 Montage in Orlando, explained disaffected Republicans why they need to 0:15:10.120 --> 0:15:13.240 step up and support President Trump for a second turn. 0:15:13.480 --> 0:15:16.120 They can't turn, they can't stand him. How do how 0:15:16.160 --> 0:15:19.840 do you and the President get disaffected gop over to 0:15:19.880 --> 0:15:24.800 support him once more? Well, I think, uh, you know, 0:15:25.120 --> 0:15:29.360 I'm not a political election expert, Tom, I'm like everybody else. 0:15:29.400 --> 0:15:33.000 I watched this stuff. Uh and and I think, uh, 0:15:33.160 --> 0:15:36.160 what will drive the Republicans to come out is which 0:15:36.240 --> 0:15:42.480 Democrat uh is the nominee to the extent that that 0:15:42.960 --> 0:15:48.240 the Democratic nominees you know, proved threatening uh to to 0:15:49.320 --> 0:15:54.200 middle class or other people. Basically last election, I guess 0:15:54.280 --> 0:15:59.040 was was won pretty much by suburban women who went 0:15:59.160 --> 0:16:03.680 to the Republican in sixteen. At the moment, that's not 0:16:03.800 --> 0:16:09.640 the case. Uh. It depends, um the issues that they're facing. Uh. 0:16:09.680 --> 0:16:13.560 And if if they think that the Democrats have gone 0:16:13.640 --> 0:16:19.200 too far left, uh, that you know they'll they'll swing back. 0:16:19.960 --> 0:16:23.880 Uh and and we won't know who that person is. 0:16:24.680 --> 0:16:28.080 We don't know what they really believe until later. But 0:16:28.200 --> 0:16:31.320 what does the US economy need right now? What kind 0:16:31.360 --> 0:16:34.480 of policy policies is the US economy need from from 0:16:34.520 --> 0:16:39.400 the U S. President? Well, I think, um, the only 0:16:39.560 --> 0:16:43.160 change in policies were already running really big deficits, so 0:16:43.360 --> 0:16:48.200 so there's not a lot of room on the fiscal side. Uh. 0:16:48.480 --> 0:16:51.240 You could move interest rates down a little bit, but 0:16:51.320 --> 0:16:55.280 they're actually pretty low. Uh And whether they get a 0:16:55.280 --> 0:16:58.840 little lower is great symbolically, it's it's not going to 0:16:59.040 --> 0:17:03.480 change what business decides to do. It just gives you 0:17:03.520 --> 0:17:07.240 some confidence. So I think the type of thing that 0:17:07.320 --> 0:17:09.920 would would work is if some of the trade issues 0:17:10.520 --> 0:17:15.760 were resolved, so people could could have the confidence to 0:17:15.880 --> 0:17:19.320 know what's going to happen. That's what slows an economy. 0:17:19.480 --> 0:17:21.480 Steve Schwartzman, thank you so much. That is, of course 0:17:21.480 --> 0:17:24.639 Steve Schwartzman, the chief executive of Blackstone, with that pledge 0:17:24.680 --> 0:17:27.760 of a hundred and fifteen million pounds to Oxford University 0:17:27.800 --> 0:17:43.720 town dropping by the studio to catch up with this. 0:17:43.840 --> 0:17:47.960 Julia Coronado macro policy perspectives President and found a good 0:17:48.000 --> 0:17:50.679 morning to Julia, good morning. Where do we start? What 0:17:50.760 --> 0:17:54.359 can we expect from Chairman Pound a little bit later? Well, 0:17:54.400 --> 0:17:59.560 I think there is a sort of a confusion amongst 0:17:59.560 --> 0:18:02.399 a lot of market participants. Certainly, the survey we conduct 0:18:02.480 --> 0:18:05.720 showed that a lot of different views. Nobody's most people 0:18:05.720 --> 0:18:08.000 don't expect him to come in and announce a rate cut, 0:18:08.040 --> 0:18:11.840 although that's possible, but they do expect him to open 0:18:11.880 --> 0:18:14.320 the door to rate cuts which the market has already 0:18:14.320 --> 0:18:18.400 priced in. So the question is, we don't expect big 0:18:18.480 --> 0:18:21.560 changes in their outlook. We don't expect necessarily big changes 0:18:21.560 --> 0:18:24.959 in the dot plot. So how does he describe the situation? 0:18:25.000 --> 0:18:26.920 How does he open the door? Will it be enough 0:18:26.960 --> 0:18:30.000 for markets that are already well well ahead of the Fed? 0:18:30.080 --> 0:18:33.000 On that? Just to how difficult this has going to 0:18:33.040 --> 0:18:35.640 be for Cham and pals. Yeah, it's a tricky. It's 0:18:35.680 --> 0:18:39.080 a tricky press conference because you see, you have global risks, 0:18:39.119 --> 0:18:41.960 both a global flowing in the economy and trade risks 0:18:42.000 --> 0:18:47.840 that are just impossible to calibrate and quantify, uh, weighing 0:18:47.880 --> 0:18:50.560 heavily on their mind. Even as the data flow in 0:18:50.560 --> 0:18:53.400 the US is okay and Meanwhile, on the other hand, 0:18:53.400 --> 0:18:59.200 you've got inflation running low, inflation expectations running low. Would 0:18:59.200 --> 0:19:02.520 a rate cut do much to stimulate that. That's the 0:19:02.560 --> 0:19:04.800 debate that they're having. So what's the strategy here is 0:19:04.800 --> 0:19:07.240 the chairman, Do you lean on the triling data, say 0:19:07.240 --> 0:19:10.240 that's okay, and then lean on the uncertainty about the outlook. 0:19:10.320 --> 0:19:12.680 Is that the strategy for today? Yeah? I think there's 0:19:12.680 --> 0:19:16.000 there's two strategies. One is you say, look, there's there's 0:19:16.119 --> 0:19:18.800 risks to the outlook. Those risks are skewing to the downside. 0:19:18.840 --> 0:19:21.679 We are seeing data slow as expected, but coming with 0:19:21.720 --> 0:19:24.840 some downside risks. That's a reason to possibly take out 0:19:24.880 --> 0:19:28.320 some policy insurance. And then on the other hand, there's 0:19:28.320 --> 0:19:31.439 been a persistent issue, and that is inflation that is 0:19:31.560 --> 0:19:37.200 running too low, uncomfortably low to their objectives, and inflation 0:19:37.240 --> 0:19:40.600 expectations that are showing again some signs of slippage. And 0:19:40.680 --> 0:19:43.800 that's a risk that they have flagged over and over again. 0:19:44.480 --> 0:19:47.159 Uh as a you know, more of a structural challenge 0:19:47.200 --> 0:19:51.480 to monetary policy. Yesterday was frightening, to use a fancy 0:19:51.520 --> 0:19:57.000 financial word. The President came to the rescue with a tweet, John, 0:19:57.000 --> 0:20:00.399 would you agree with me that one single tweet lifted 0:20:00.400 --> 0:20:03.639 the markets. Yeah, I think it was responsible for a 0:20:03.640 --> 0:20:06.880 big part of the movie Yesterday's Together with or all 0:20:06.920 --> 0:20:10.560 of it whatever that can flip right now, What are 0:20:10.560 --> 0:20:15.480 the ramifications for Chairman Powell and other institutional leaders if 0:20:15.520 --> 0:20:18.280 we take another run at the low rate scary shillings 0:20:18.320 --> 0:20:21.240 talking about Yeah, it's it's it's sort of nightmare scenario 0:20:21.320 --> 0:20:27.080 to manage the monetary policy communication with this wild swings 0:20:27.160 --> 0:20:31.199 and trade policy signals. Um, what we have in hand 0:20:32.040 --> 0:20:34.960 is a trade war. We have tariffs that have been 0:20:35.000 --> 0:20:38.040 put in place that are having an effect. You are 0:20:38.080 --> 0:20:41.280 starting to see that again in the global economy. You're 0:20:41.320 --> 0:20:44.600 seeing it in business investment, which has been quite sluggish. Uh. 0:20:44.680 --> 0:20:48.120 So I think it's in addition to the noise which 0:20:48.320 --> 0:20:51.720 is extremely volatile, and the Fed is in sort of 0:20:51.720 --> 0:20:54.760 a lose lose situation no matter what they do. You 0:20:54.800 --> 0:20:58.280 do actually have trade restrictions that are starting to have 0:20:58.359 --> 0:21:01.560 an effect on the economy. So uh, you know, I 0:21:01.600 --> 0:21:04.119 think the Fed just stays in this lane. It stays 0:21:04.160 --> 0:21:08.320 focused on that outlook. But it's it's a very difficult, 0:21:08.760 --> 0:21:12.840 uh communication challenge for them. Judy. Just to raise the question, 0:21:12.880 --> 0:21:15.560 are you comfortable ruling down a right cut today's mating. 0:21:16.320 --> 0:21:18.560 I mean, I think it's a possibility that they that 0:21:18.880 --> 0:21:22.880 they move ahead, and I don't you know, I don't 0:21:22.880 --> 0:21:26.000 think it's It would be a terrible idea, given that 0:21:26.080 --> 0:21:29.119 you look, cheer Pal is gonna walk in and have 0:21:29.280 --> 0:21:33.399 to defend a dot plot he doesn't necessarily believe, defend 0:21:33.400 --> 0:21:36.680 a baseline forecast that doesn't hold as much meaning in 0:21:36.800 --> 0:21:41.200 the current form, and so the risks are that he's 0:21:41.240 --> 0:21:44.680 just goes in there and struggles. Uh. And so one 0:21:45.600 --> 0:21:47.680 possibility if you think you're going to cut in July, 0:21:47.880 --> 0:21:49.840 is to go ahead and cut in June. And then 0:21:49.920 --> 0:21:52.520 the narrative is, see, we are flexible, we are response. 0:21:52.520 --> 0:21:54.560 That's the problem with the dots, and I think it's 0:21:54.560 --> 0:21:56.720 going to be a big, big problem later today. It's 0:21:56.840 --> 0:22:00.200 very difficult to forecast the cup without actually cutting interest. 0:22:00.600 --> 0:22:03.800 So we're set to have you think, a dot plot 0:22:03.840 --> 0:22:06.080 that shows the median dot with no rate hikes for 0:22:06.080 --> 0:22:08.960 the rest of the year. That's still a spread between 0:22:09.000 --> 0:22:13.000 the market and the FED of three interest rate cuts. 0:22:13.000 --> 0:22:16.159 How difficult is it going to be to manage market 0:22:16.200 --> 0:22:20.240 expectations at this meeting. It's very difficult because because the 0:22:20.320 --> 0:22:24.440 markets are risk sentiment is sanguine in part because the Fed. 0:22:24.840 --> 0:22:28.080 The markets expect the FED to cut. So then does 0:22:28.119 --> 0:22:32.159 the Fed not cut because markets are sanguine? That's what 0:22:33.480 --> 0:22:35.560 you give your undrum. What's your run rate on g 0:22:35.720 --> 0:22:38.480 d P? I mean, Bruce Caswin and JP Morgan a 0:22:38.600 --> 0:22:42.560 major house are it is stunning? One point five percent 0:22:42.680 --> 0:22:46.359 twelve months forward? Are you there? Yeah, we're below two 0:22:46.359 --> 0:22:49.560 percent twelve months forward. For sure. We do expect we're 0:22:49.640 --> 0:22:52.919 in this moderation. We're slowing to at a minimum, slowing 0:22:52.960 --> 0:22:55.159 to trend. And you're gonna give me a bunch of 0:22:55.240 --> 0:22:59.040 terminal value? Are start blogning? President Trump doesn't care about that. 0:22:59.440 --> 0:23:04.679 Everything politician Republican or Democrat says the economic growth you 0:23:04.840 --> 0:23:08.800 just described as unacceptable, So they go Fed save us. 0:23:09.359 --> 0:23:12.640 Is there any history out there that a Fed can 0:23:12.800 --> 0:23:18.800 spur economic growth? Uh? The Fed cans for economic growth. 0:23:18.840 --> 0:23:21.639 The question is do they think that that is necessary 0:23:21.640 --> 0:23:24.240 when we are at a three point six percent unemployment rate? 0:23:24.560 --> 0:23:27.159 And the Fed will conclude no, they don't need to 0:23:27.200 --> 0:23:30.760 inject a lot of stimulus at this stage. They may 0:23:30.800 --> 0:23:33.760 need to. So if we hear some opening of the door, 0:23:33.800 --> 0:23:37.640 it would be a recalibration, taking out some insurance. It's 0:23:37.680 --> 0:23:41.760 not stimulating the economy with the objective of not seeing 0:23:41.800 --> 0:23:45.159 trend like growth. The objective for the FED is trend 0:23:45.240 --> 0:23:48.480 like growth. There is attention with politicians and no matter 0:23:48.560 --> 0:23:53.560 what the FED does, they will be the lightning rod 0:23:53.760 --> 0:23:56.320 for the president. Just to wrap things up, in the 0:23:56.359 --> 0:24:00.199 last ten years, we've had two grud scales. Twelve, we 0:24:00.240 --> 0:24:08.560 had a whole lot worse than this, right, didn't they Well, 0:24:08.720 --> 0:24:12.480 they did in part because the markets didn't expect the 0:24:12.520 --> 0:24:17.840 FED to move and and for example, markets were expecting 0:24:17.880 --> 0:24:20.840 the FED to to hike rates and that contributed to 0:24:21.480 --> 0:24:25.280 a deterioration in a correction and sentiment. So this is 0:24:25.320 --> 0:24:27.639 the conundrum we're facing right now. We are in a 0:24:27.680 --> 0:24:33.280 global slowdown, like the global data paint a very similar picture. 0:24:33.600 --> 0:24:35.800 We are starting to see energy prices slipped to the 0:24:35.840 --> 0:24:39.800 lower end of the range that could hurt the energy interesting. 0:24:40.800 --> 0:24:44.000 So we are seeing that unfold very similarly. But the 0:24:44.000 --> 0:24:46.600 markets like, oh, we know the playbook. The Fed's going 0:24:46.640 --> 0:24:49.240 to respond and recalibrate and keep us on track. We 0:24:49.320 --> 0:25:06.680 never know the playbook. Julia, thank you briefly, Christian Mamany 0:25:08.920 --> 0:25:11.639 and invest go great to see a Christner. Typically we 0:25:12.240 --> 0:25:14.560 introduced Christna and we just start the conversation on markets, 0:25:14.560 --> 0:25:16.960 and I want to do something different. Back in two 0:25:17.000 --> 0:25:20.119 thousand and nine, Christian Mmany stood there when a lot 0:25:20.160 --> 0:25:21.880 of people were looking for the Federal Reserve to hike 0:25:21.960 --> 0:25:24.000 interest rates over the next twelve months and said, no, 0:25:24.720 --> 0:25:26.880 rates are going to stay low for a whole lot 0:25:26.920 --> 0:25:30.120 longer than you think. Fifteen sixteen, we had a big 0:25:30.160 --> 0:25:31.919 growth scare. There were some people that thought we were 0:25:31.920 --> 0:25:34.480 about to drop into a real recession. Christian Mmany stood 0:25:34.560 --> 0:25:36.760 up and said, no, we're going to have the longest 0:25:36.800 --> 0:25:41.240 economic expansion on record. We're there literally a month away. 0:25:41.720 --> 0:25:45.080 Christmas standing up now and saying five more years. That 0:25:45.160 --> 0:25:47.680 this expansion can go for five more years. And Christna, 0:25:48.000 --> 0:25:51.080 that's not just a headline to get attention. You truly 0:25:51.160 --> 0:25:53.720 believe this, and I want to understand it a little 0:25:53.720 --> 0:25:57.640 bit more today. Absolutely, I believe this, And then thank you, John. 0:25:58.040 --> 0:26:03.880 You're easily bribab also yet that uh. But the fact 0:26:03.880 --> 0:26:07.720 of the matter is that when you don't have inflation, 0:26:07.920 --> 0:26:13.639 the policymakers have a great deal of flexibility to engineer outcomes, 0:26:13.680 --> 0:26:15.600 and that is what they have been doing for a 0:26:15.640 --> 0:26:20.760 reasonably long period of time. Remember one thing, the world 0:26:20.800 --> 0:26:24.800 faces lots of risks. So the best policies central banks, 0:26:24.840 --> 0:26:28.720