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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best an economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal and the Bloomberg Business app. Who could

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Speaker 1: we speak to that could talk about the bench at

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Speaker 1: Morgan Stanley and that would be Oh, I don't know,

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Speaker 1: Ellen Zendner or you know Jim Caron will be on

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Speaker 1: with John Farrow in the next hour. No, that's not

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Speaker 1: the bench expert at the benches of Wall Street firms

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Speaker 1: is our Bloomberg Someday they'll be CEO Correspondent Shannelli bask

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Speaker 1: joins us. Is this a surprise that mister Gorman will

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Speaker 1: step aside?

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Speaker 2: The timeline is certainly a surprise. We knew that it

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Speaker 2: would be coming one day. He's been at the home

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Speaker 2: for a very long time now and we know that

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Speaker 2: more and Stanley has been prepping the bench for a while.

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Speaker 2: Think about how many people have grown up under James

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Speaker 2: Gorman have left the firm and the two men under

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Speaker 2: him right now, Andy Saperstin at the Wealth business and

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Speaker 2: Ted Pick. They're home grown. They have been there for

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Speaker 2: a long time. They have been at the most pivotal

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Speaker 2: moments of the firm up and down. That is a

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Speaker 2: Ted Pick at the institutional Securities division really helped make

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Speaker 2: this tough transition from cutting and adding to the fixed

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Speaker 2: income business, for example, help competing as the top prime

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Speaker 2: broker on Wall Street in the equities business as well.

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Speaker 2: And over at the wealth business. Andy Sapristin, former consultant,

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Speaker 2: longtime lieutenant to James Gorman. Now the question is and

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Speaker 2: waiting for the headlines on this did they at what

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Speaker 2: point are they going to announce who is taking over?

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Speaker 3: Well, let me just read the exact statement this from

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Speaker 3: Gorman at the firm's annual meeting. He said, it is

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Speaker 3: the boards and my expectation that it will occur at

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Speaker 3: some point in the next twelve months. He's talking about

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Speaker 3: his departure as chief executive officer and becoming the chair

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Speaker 3: of the board. That is the current expectation in the

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Speaker 3: absence of a major change in the external environment. Also,

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Speaker 3: a key question was this a decision that he made

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Speaker 3: independently for a lifestyle kind of issue. Was this some

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Speaker 3: sort of strategic shift by the board made basically without

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Speaker 3: necessarily his desiring this departure.

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Speaker 2: You know, I think that's an interesting question. It's hard

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Speaker 2: to have any evidence of something like that. James Gorman

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Speaker 2: has just made this firm into a behemoth. Remember when

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Speaker 2: I started covering Morgan Stanley, they were worth much less

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Speaker 2: than Goldman's acts. Now they are worth much more. That

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Speaker 2: divide has just increased despite many, many doubts. I remember

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Speaker 2: years ago there was a call, a conference call, and

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Speaker 2: you had analysts asking why he wasn't raising the bar

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Speaker 2: more for Morgan Stanley, and you had James Gorman stepping

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Speaker 2: back saying be patient, We've got this, and ultimately he

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Speaker 2: was right. And so you know, again there's been a

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Speaker 2: lot of consistency year, Lisa, when you look at the

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Speaker 2: next level of the firm, and again I think this

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Speaker 2: is very classic Morgan Stanley fashion. They announced one change,

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Speaker 2: they give you some time to absorb it, then they

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Speaker 2: announced the next big move.

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Speaker 3: So it's interesting to me the point about unless there

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Speaker 3: is some sort of shift in the market conditions at

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Speaker 3: a time when people have been talking about a financial

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Speaker 3: crisis that never transpired, and now people are talking almost

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Speaker 3: about stasis or this calm that has really percolated out.

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Speaker 3: Is this viewed as sort of a calm period, a

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Speaker 3: pond with the duck sailing cross, even if there's paddling underneath,

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Speaker 3: where they can actually make shifts like this without any

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Speaker 3: major disruption and do it easily.

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Speaker 2: Well, how fascinating to talk about this right before people

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Speaker 2: are worried about a potential recession. Morgan Stanley has seen

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Speaker 2: some of the worst days to two thousand and eight.

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Speaker 2: They remember what it felt like. So this is some calm,

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Speaker 2: isn't it. That is saying it is calm enough to

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Speaker 2: start to transition. And by the way, look how many

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Speaker 2: CEOs are changing on Wall Street. This is the time

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Speaker 2: for the next generation to step Well.

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Speaker 1: Okay, maybe Paul Davis wrote this six months ago, five

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Speaker 1: months ago for Bloomberg. Thank you to the Washington Post

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Speaker 1: for publishing Paul Davies, and he just I'll never forget

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Speaker 1: the headline, Golden Sachs is quote far far behind Morgan Stanley.

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Speaker 1: It's all about asset management, right, It's an eat advanced thing.

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Speaker 1: I don't know how he trades worked out as well.

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Speaker 1: But where does Sa Pristine fit into that? Because my

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Speaker 1: basic take here is Ted Picks sort of the older guy.

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Speaker 1: He's got the swagger of Morgan Stanley, and Sa Pristine

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Speaker 1: is watching paint dry making all the money.

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Speaker 2: Glad that right, It's a pretty good characterization of what's

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Speaker 2: going on. Listen, in the trading business. These are a

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Speaker 2: bunch of loyalists. This goes back to what true killer

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Speaker 2: was there. You worry about the traders leading without a

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Speaker 2: solid person in charge that they trust that leads the troops.

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Speaker 2: But to your point here on Andy, he also has

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Speaker 2: tens of thousands of financial advisors across the United States.

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Speaker 2: Those are less swashbuckling, let's say, than maybe the traders

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Speaker 2: and investment bankers. But it's steady and they bring in

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Speaker 2: the big.

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Speaker 1: Box besides at any firm who takes.

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Speaker 4: Over the board.

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Speaker 2: But remember, as we've been talking about, James Gorman is

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Speaker 2: on that board.

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Speaker 1: Okay, you can find he's on the board. But how

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Speaker 1: independent is on Morgan Stanley board versus a guy who

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Speaker 1: many people would suggest as a CEO of the decade

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Speaker 1: on Global Wall Street.

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Speaker 2: I think it's a great question.

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Speaker 1: It's more really good one of the day, so go

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Speaker 1: with it.

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Speaker 2: Morgan Stanley's board is pretty diverse and very committed, and

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Speaker 2: remember they it's changed quite a bit in recent years.

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Speaker 2: It has talent from the former Securities and Exchange Commission

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Speaker 2: from Japan given their deal with the MUFG during the

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Speaker 2: financial crisis. So it is quite independent relative to a

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Speaker 2: lot of what you're seeing on Wall Street. And that's

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Speaker 2: what kind of makes this succession plan successful in the

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Speaker 2: eyes of Wall Street. It's consistent, and it is broad,

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Speaker 2: and it is diverse in the way it's being sorted through.

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Speaker 3: If you're just joining right now, the news of the day,

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Speaker 3: Morgan Stanley CEO J Scoreman is playing to step down

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Speaker 3: within twelve months. This he made in an announcement at

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Speaker 3: the annual meeting. The shares of the immediately popped lower

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Speaker 3: about one point seven percent. They've retraced a lot of

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Speaker 3: that down here, just six tenths of a percent. As

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Speaker 3: people digest the news, it does seem like shnali. This

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Speaker 3: has been in the works. This has been something they've

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Speaker 3: been planning for and they pulled the trigger a bit earlier.

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Speaker 3: Is there a sense of shift within the strategy of

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Speaker 3: this company going forward, or do you think it's stay

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Speaker 3: the course, keep the homegrown talent and keep unplugging away.

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Speaker 2: It's already changed so much to your point, with the

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Speaker 2: big acquisitions. They've always had wealth as a huge driver

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Speaker 2: asset management, but the asset manager again, five six years ago,

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Speaker 2: you couldn't see Morgan Stanley becoming more than a trillion

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Speaker 2: dollars in asset management. That has changed, and it changed

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Speaker 2: quickly with acquisitions. So they've they've already changed. The question

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Speaker 2: is if they choose one man or the other, which

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Speaker 2: part of the bank could suffer from any potential electrical

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Speaker 2: in or concerns around who's.

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Speaker 1: Leader off the BQ screen glob and six zero three

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Speaker 1: price to book Morgan Stanley and James Diamond like one

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Speaker 1: point five to three and I'm sorry the guy is

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Speaker 1: so modest that he's underplayed what he did with managing money.

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Speaker 1: I mean that to me is just the massive theme hearon.

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Speaker 1: You've said that he will stay as an executive chairman.

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Speaker 4: Yeah, he's going to be chair What do they do?

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Speaker 4: What do they do?

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Speaker 1: What do executive chairman do?

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Speaker 2: They sit around and they make sure that nothing goes wrong,

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Speaker 2: and they come back if things do go wrong. I mean, listen,

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Speaker 2: the initial market reaction tells you a lot. He's a

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Speaker 2: iconic at the helm of Morgan Stanley. He's changed the

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Speaker 2: firm more than any other bank has changed.

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Speaker 4: In the last name, I thank you.

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Speaker 1: She is our chief Wall Street correspondent. There's no other

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Speaker 1: way to put it appropriate to speak Tom his misery. Now,

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Speaker 1: I had a global rates TD securities and we do

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Speaker 1: this with the two tens spread sixty basis points her

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Speaker 1: great call of curven version a good year and a

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Speaker 1: half ago. Priya, good morning. You are focused not on

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Speaker 1: ten year, not on two years, but in the belly

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Speaker 1: of the curve at five years. Why are you suggesting

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Speaker 1: dynamics in the five year would be a more attractive place?

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Speaker 4: To be sure?

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Speaker 5: So I think it's all about how far you are

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Speaker 5: from the first rate cut and where is the FED

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Speaker 5: going to cut those rates to.

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Speaker 4: You know, I still think we're about six months away

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Speaker 4: from the first rate cut.

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Speaker 5: In fact, the risks are that they don't even cut

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Speaker 5: this year, they start to cut next year. They're so

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Speaker 5: hyper focused on inflation they are looking for a slowdown,

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Speaker 5: So I think they might be a little late. But

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Speaker 5: once they start to cut we think they're going to

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Speaker 5: cut a lot more than what's priced in. I mean,

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Speaker 5: the market's pricing in the you know what we're calling

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Speaker 5: the trough rate, which is the end point of those cuts.

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Speaker 5: At three percent, I mean three percent is actually higher

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Speaker 5: than the Fed's estimate of neutral rate. So the market

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Speaker 5: is not pricing in a recession. Far from it. I

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Speaker 5: think the market's pricing in normalization if we actually do

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Speaker 5: enter a recession, and in our view, it's going to

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Speaker 5: be a recession, you know, because of the bank lending standards,

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Speaker 5: because of the lagged impact of rate hikes, as the

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Speaker 5: consumer savings buffer runs out, and now we might even

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Speaker 5: have fiscal drag. I think the only way to get

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Speaker 5: a dead seating deal is to get that fiscal drag. So,

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Speaker 5: you know, as the economy slows down, I think the

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Speaker 5: Fed's going to cut a lot more. But if the

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Speaker 5: cuts are six months out, I think it's a little

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Speaker 5: tricky to be in the very front end.

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Speaker 4: But if you're too.

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Speaker 5: Far out, then you know, there's essentially a lot of

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Speaker 5: things that can move long end rates. I think that

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Speaker 5: five years sort of the sweet spot. Three or five

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Speaker 5: year rates, I think those are actually very attractive because

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Speaker 5: they're positioning for the FED whenever they start to cut.

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Speaker 5: Just this idea that they're going to cut a lot

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Speaker 5: post pause.

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Speaker 1: Whenever that is, where is the ten year yield?

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Speaker 5: So I would say that the tenure is benefiting a

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Speaker 5: little bit from the fact that there's significant inflows into

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Speaker 5: bond mutual funds. You know, once the pause happens, I

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Speaker 5: think we all look at what's next. I don't really

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Speaker 5: buy this skip idea because the economy doesn't move, you know,

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Speaker 5: it's not that volatile. I think right now we're seeing

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Speaker 5: the slowdown as it starts to build up steam. I

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Speaker 5: think it's going to lose momentum really fast. So I

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Speaker 5: don't buy this skip and then rehike. I think we'll

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Speaker 5: be all focused on when the cuts happen. I mean,

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Speaker 5: we're looking at the tenure below three percent by year end,

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Speaker 5: at two and a half by next year, so the

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Speaker 5: tenure will also have a significant move. I just like

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Speaker 5: the five year a little bit more right now because

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Speaker 5: it's more sensitive to economic data.

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Speaker 3: We've been talking about the resilience and retailers. We've been

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Speaker 3: talking about the resilience in deer sales. We've been talking

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Speaker 3: about the fact that a lot of these companies have

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Speaker 3: been able to pass along price increases, which is one

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Speaker 3: reason why perhaps people are rethinking the view that you

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Speaker 3: just put out there that it's unlikely for the FED

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Speaker 3: to cut rates significantly in the next twelve to twenty

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Speaker 3: four months. Michael Hartner over at Bank of America said

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Speaker 3: that the biggest pain trade in the next twelve months

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Speaker 3: is a FED funds rate rising to six percent instead

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Speaker 3: of three percent. How realistic is that in your mind?

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Speaker 5: So I can see this, So we're actually looking for

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Speaker 5: one more hike, So we're looking for five and a half,

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Speaker 5: you know, just listening to FED speak, I think they

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Speaker 5: would rather pause and stay on hold for longer than

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Speaker 5: actually try and push the last you know, what's fifty

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Speaker 5: basis months among friends.

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Speaker 4: I mean, they can go from five and a half

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Speaker 4: to six.

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Speaker 5: Remember they're also doing QT, so I think it's a

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Speaker 5: high bar for them to keep going. But I think

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Speaker 5: it's also very high bar for them to start to

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Speaker 5: cut because remember they're looking for four and a half

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Speaker 5: on the unemployment rate by year end. I think if

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Speaker 5: we're at four and a half by year end, we're

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Speaker 5: in a recession. The economy is slowing, down pretty drastically,

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Speaker 5: but the FED might say, yes, this was in our forecast,

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Speaker 5: so I think they stay on whole longer.

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Speaker 4: But I would agree.

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Speaker 5: I think if inflation increases somewhere, I mean the Fed's

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Speaker 5: telling us that they want to slow things down, they

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Speaker 5: don't see the slow down. I think they're going to

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Speaker 5: keep hiking and as a result, they are going to

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Speaker 5: overdo it. I think we're already in restrictive territory. It

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Speaker 5: just takes a while for different parts of the economy

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Speaker 5: to slow down. I mean, we're not getting that big

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Speaker 5: shock that can slow down everything at the same time,

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Speaker 5: which is why I think it's so tricky to trade

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Speaker 5: this market. We move ten twenty basis points on not

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Speaker 5: a whole lot of news. I think you just have

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Speaker 5: to be nimble and sort of start to step in.

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Speaker 5: We stepped in yesterday, we were now a little bit

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Speaker 5: long duration. Here we get another sell off here. I

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Speaker 5: think the technicals right now, with all the FDIC sales, I.

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Speaker 4: Think we should think about that as well.

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Speaker 5: It's one hundred billion that the FDIC is selling fixed

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Speaker 5: income paper. That's a new supply that's coming in. I

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Speaker 5: think that's part of the reason why we've risen in rates,

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Speaker 5: but you're supposed to start to think about hedging some

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Speaker 5: of those risk assets if the economy slows down. I

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Speaker 5: think that's a pretty big pain trade as well.

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Speaker 3: If the FED does raise rates one more time, is

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Speaker 3: that enough to break the backs of some of these

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Speaker 3: regional banks that are drawing on some of the emergency

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Speaker 3: landing facilities still to this day, even though the crisis,

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Speaker 3: if it was one, has simmered off.

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Speaker 5: So you know, the deposit outflows have stabilized, but they're

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Speaker 5: still continuing to leave banks, and I think that's going

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Speaker 5: to continue to happen. It's very hard for banks to

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Speaker 5: compete with deposits when money market funds are giving you,

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Speaker 5: you know, five percent five and a quarter, and if

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Speaker 5: the FED continues to raise rates, I think that gap

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Speaker 5: continues to be wide. So I think the regional banks

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Speaker 5: are still in trouble, not so much because of massive

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Speaker 5: outflows but their entire business model. If they are funding

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Speaker 5: from the FED at five percent, it's very hard to

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Speaker 5: fund your assets which you bought at two percent. So

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Speaker 5: I think that's going to be a slow drag or

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Speaker 5: the rest of this year and beyond pre you're outrageous.

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Speaker 1: When you talk not only about inversion, but large inversion,

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Speaker 1: you're also very lonely. Can you frame out given the

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Speaker 1: cards and I, you know, let's assume optimistically we're going

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Speaker 1: to get beyond the debt idiocy. Great. Can you frame

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Speaker 1: out a six percent three month T bill, six percent

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Speaker 1: libor so for other short term rates? No one's looking

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Speaker 1: for that. All my radars up.

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Speaker 4: Now that's true.

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Speaker 5: I think the big paint trade, really another pin paint

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Speaker 5: trade is if inflation remains high. I mean the tips market,

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Speaker 5: it's the best indicator of market expectations of inflation. I

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Speaker 5: think it's extremely mispriced. It's sup two percent in the

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Speaker 5: near term, so I think the market saying some aw, magically,

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Speaker 5: inflation's going to come down, which is why the Fed

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Speaker 5: will not raise rates.

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Speaker 4: What if inflation becomes extremely sticky?

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Speaker 5: That was the biggest aspect of our inversion call was

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Speaker 5: inflation is very slow moving, extremely lagging, and so if

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Speaker 5: inflation actually stays high, there's your case for at six

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Speaker 5: percent FED funds.

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Speaker 4: But does that move the five year or the tenure.

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Speaker 5: In fact, the more the Fed raisers rates, the more

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Speaker 5: they'll have to cut because I have to think they

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Speaker 5: take rates to you know, restrictive territory. Then they keep

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Speaker 5: it there for a while till things slow down. And

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Speaker 5: that's going to mean that they're going to have to

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Speaker 5: be a lot more accommodative when they start to cut trades.

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Speaker 6: What's fifty basis points between friends? That's my takeaway from

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Speaker 6: that conversation. With fifty basis points between friends. Prayer measure

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Speaker 6: of today, Prayer one for the catchup, you solve the

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Speaker 6: dut credit.

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Speaker 1: We're in Washington, director at Vada Partners, Henrietta Treys with

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Speaker 1: serious Capitol Hill cred. Let's translate the reality of this Friday,

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Speaker 1: Henrietta Treys, and that's the idea of recess ready set.

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Speaker 1: There's a great crisis. Wait, Senator Schumer is going to say, no,

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Speaker 1: we're going to recess. So we're running out of money.

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Speaker 1: You and I've been in the cash room at the Treasury.

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Speaker 1: We're literally going to run out of gold cash notes.

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Speaker 1: And the Senator from New York is saying recess.

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Speaker 7: It's incredible.

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Speaker 8: You can really watch the Treasury Secretary, you can watch

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Speaker 8: the both bracket banks and their predictions, but you can

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Speaker 8: actually set your watch to the Congressional calendar to figure

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Speaker 8: out when they're going to pass a debt ceiling bill.

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Speaker 7: That's what I do, and it works every time.

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Speaker 8: Just pay attention to the Congressional recess schedule for sure.

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Speaker 1: What does it say right now?

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Speaker 8: Right now, it says that we're probably going to see

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Speaker 8: bill text on Sunday Monday morning. Maybe Speaker McCarthy will

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Speaker 8: file the bipartisan bill that he and President Biden's.

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Speaker 7: Team reach over this weekend.

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Speaker 8: They will hopefully not vote on a bill in the

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Speaker 8: House until Wednesday or Thursday of next week. Anything before that,

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Speaker 8: and I'm very anxious about a tarp like moment where

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Speaker 8: the bill will fail because the House is moving first here,

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Speaker 8: which means the Democrats on the House side, who historically

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Speaker 8: provide the bulk of the votes and the critical votes

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Speaker 8: for a debt ceiling hike, are not going to have

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Speaker 8: local cover from the Democrats in the Senate having voted first.

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Speaker 8: So we're going to see the House move first, and

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Speaker 8: I hope that there will not be a vote until

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Speaker 8: Wednesday or Thursday of next week.

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Speaker 7: At that point, Senator Schumer could call the caucuss back.

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Speaker 8: He is indicated that he will call them back within

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Speaker 8: twenty four hours notice, but eleventh hour in DC really

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Speaker 8: does mean the eleventh hour, and they could well not

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Speaker 8: come back until Tuesday, May thirtieth, two days before the

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Speaker 8: X date, and pass the bill on the Senate next

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Speaker 8: Tuesday or Wednesday.

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Speaker 7: Well, that's what I'm bracing our investors for. That's what

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Speaker 7: I'm expecting Henrietta.

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Speaker 3: To that point, what is the risk that there is

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Speaker 3: a technical default because there is a mistake that someone

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Speaker 3: miss times, is that there is a bill that gets

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Speaker 3: rejected or in transigent members of a party.

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Speaker 7: I do not think that there is any risk of that.

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Speaker 8: To be honest, I am afraid of a tarp like

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Speaker 8: vote in the early part of next week. If Speaker

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Speaker 8: McCarthy puts a bill on the floor Monday, Tuesday, Wednesday,

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Speaker 8: the odds of a failed vote are about forty percent.

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Speaker 8: But that's a good week before we actually need the

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Speaker 8: bill to pass. I think that's your biggest risk point.

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Speaker 8: After that, I understand there's a lot of hay being

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Speaker 8: made about, Hey, the buildings is sit for seventy two hours,

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Speaker 8: we need ten days to get it through. If you're

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Speaker 8: from the Senate, if you're from the House, you've seen

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Speaker 8: these bills come into law before they can work all

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Speaker 8: night long and get this done, and in fact they will.

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Speaker 8: I think the risk of default is two percent. I

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Speaker 8: don't blot by the hype. I have not bought the

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Speaker 8: hype this entire process. You guys know, I don't think

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Speaker 8: there's a risk of default.

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Speaker 3: So then while the hype made by Congress members, made

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Speaker 3: by the president himself, why all the discussion about how

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Speaker 3: this is not anywhere close given the fact what has

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Speaker 3: changed over the past two weeks.

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Speaker 8: I mean, quite honestly, if you want me to get

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Speaker 8: on my soapbox for just a little minute, the last

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Speaker 8: time we had a balance budget was under the Clinton administration.

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Speaker 8: And instead of using that surplus to pay down the deficit,

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Speaker 8: what do we do? In O one we pass tax cuts?

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Speaker 8: What do we do in O three we passed more

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Speaker 8: tax cuts? Who blow out the deficit? Continue doing that

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Speaker 8: into the Obama years? Did it again in the Trunk years?

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Speaker 8: Seven point eight trillion dollars worth of deficit hikes. And

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Speaker 8: now all of a sudden, we're in the Biden administration

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Speaker 8: post COVID, with looming three trillion dollars tax expirations happening

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Speaker 8: in twenty twenty six, and we're talking about five hundred

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Speaker 8: billion dollars worth of deficit reduction. It is a political

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Speaker 8: show that is designed to say, Hey, the Republican Party

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Speaker 8: cares a lot about federal spending. They are fiscal hawks,

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Speaker 8: they care about the deficit, no new taxes, and Democrats

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Speaker 8: have to explain what it is that they support spending

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Speaker 8: money on tan if our working family aid, the Energy Department,

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Speaker 8: the energy tax credits that were just passed. It's really

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Speaker 8: just about scoring political points. That's what it's always been,

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Speaker 8: and that's where we are in this charade. And now

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Speaker 8: we're at the eleventh hours, so we're going to stop posturing

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Speaker 8: and actually got on the bill.

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Speaker 1: I would suggest the charade began. I believe it was

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Speaker 1: in New Hampshire with George Bush Senior where he got

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Speaker 1: run over on the tax verbiage that we've been living

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Speaker 1: for years and years. Let's assume that TX verbiage doesn't change.

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Speaker 1: So what happens next. Obviously everybody's gonna want a tax cut.

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Speaker 1: Everybody wants a free lunch.

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Speaker 7: Right, better believe it.

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Speaker 8: So in twenty twenty five, right after this next presidential

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Speaker 8: election cycle, the entirety of the twenty seventeen tax cuts

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Speaker 8: on the individual side expire, the salt deduction comes back in,

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Speaker 8: but all of the individual tax rates go back to

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Speaker 8: their twenty seventeen levels. So at that point we're probably

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Speaker 8: going to blow out the deficit again by temporarily extending

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Speaker 8: those packages for another year or two, just like we

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Speaker 8: did in twenty ten and again in twenty twelve. If

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Speaker 8: there is a red wave in the twenty four election,

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Speaker 8: what you can see is a material reconciliation bill that

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Speaker 8: is basically a repeat of twenty seventeen. That was a

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Speaker 8: five trillion dollars tax bill one point five trillion dollars

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Speaker 8: which was definicit financed, So you could very easily see

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Speaker 8: that all over again, although this time was more expensive.

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Speaker 3: In twenty twenty six, Rinse and repeat.

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Speaker 6: Tom White, Henrita tries that invite upon it.

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Speaker 1: Joining us Jordan Rochester of number Jordan. We could do

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Speaker 1: a one hour conversation here. We don't have time for that.

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Speaker 1: I'm going to go at rapid speed. John and Lisa're

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Speaker 1: going to jump in as well. What is the significance

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Speaker 1: of ren membi our past seven? Once again, we visit

430
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Speaker 1: through seven has been ages since at seven U one

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Speaker 1: per dollar? What is a symbolism a seven point zero

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Speaker 1: one you want, CNY Well.

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Speaker 9: For market psychology it's a big deal. But for us

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Speaker 9: we think that actually maybe it's the sort of seven

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Speaker 9: twenty five to seven thirty.

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Speaker 10: Level is where the PBOC be more uncomfortable.

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Speaker 9: We have had a statement, of course today saying that

438
00:20:33,440 --> 00:20:35,720
Speaker 9: they want to reduce speculation in the currency market. We've

439
00:20:35,720 --> 00:20:38,040
Speaker 9: seen that sort of statement before, but that's kind of

440
00:20:38,040 --> 00:20:40,480
Speaker 9: why we've seen cnh rally a little bit today. But

441
00:20:40,560 --> 00:20:43,280
Speaker 9: for us, the momentum in the Chinese economy has changed

442
00:20:43,359 --> 00:20:45,919
Speaker 9: quite significantly from what we hoped it would be, what

443
00:20:45,960 --> 00:20:47,920
Speaker 9: the market hoped it would be just a few weeks ago,

444
00:20:48,200 --> 00:20:51,399
Speaker 9: and that has been really driving the remimber underperformance. But

445
00:20:51,440 --> 00:20:54,200
Speaker 9: it's also the US side of things as well. We've

446
00:20:54,200 --> 00:20:56,840
Speaker 9: had more hawkish statements from some of the regional FED governors.

447
00:20:56,920 --> 00:20:59,560
Speaker 9: John actually flagged a few of them from Logan yesterday

448
00:20:59,600 --> 00:21:02,800
Speaker 9: for example, and Mester, and that's helped the FED pricing

449
00:21:02,800 --> 00:21:05,080
Speaker 9: are just as well. So we have less rate cuts

450
00:21:05,160 --> 00:21:08,040
Speaker 9: price for the FED this year too. Combine that together,

451
00:21:08,440 --> 00:21:10,639
Speaker 9: we're looking for seven point thirty in dollars see in

452
00:21:10,840 --> 00:21:13,200
Speaker 9: H by middle of July. That's quite a quick move

453
00:21:13,200 --> 00:21:15,280
Speaker 9: in this grand scheme of things. We've been kind of

454
00:21:15,320 --> 00:21:17,600
Speaker 9: in a low volatility environment. A lot of people had

455
00:21:17,600 --> 00:21:20,000
Speaker 9: actually got quite bored at putting on sort of C

456
00:21:20,160 --> 00:21:22,480
Speaker 9: and H risk, and we're looking at other proxies for it.

457
00:21:22,640 --> 00:21:25,040
Speaker 9: In the G ten or in EM it wasn't really

458
00:21:25,040 --> 00:21:27,879
Speaker 9: the scenario for us. We think that actually it's going

459
00:21:27,920 --> 00:21:29,080
Speaker 9: to have a big move to come.

460
00:21:29,200 --> 00:21:30,960
Speaker 6: Jord And a lot of people now starting to think

461
00:21:30,960 --> 00:21:33,000
Speaker 6: about maybe going the other way in the FX market,

462
00:21:33,160 --> 00:21:36,040
Speaker 6: leaning into some dollar strength after that big consentsus you

463
00:21:36,160 --> 00:21:38,040
Speaker 6: built up over the last few months off the back

464
00:21:38,080 --> 00:21:40,199
Speaker 6: of what's happened with the data, just subtle shifts that

465
00:21:40,280 --> 00:21:43,080
Speaker 6: you've identified, Johdan, can you identify the best way to

466
00:21:43,080 --> 00:21:45,040
Speaker 6: play that through G ten at the moment?

467
00:21:45,720 --> 00:21:45,920
Speaker 4: Yeah?

468
00:21:45,920 --> 00:21:46,600
Speaker 10: Absolute, John.

469
00:21:46,600 --> 00:21:48,359
Speaker 9: And the one thing this market keeps reminding say is

470
00:21:48,359 --> 00:21:50,680
Speaker 9: you can't lean back. You can't say I've got this

471
00:21:51,000 --> 00:21:53,520
Speaker 9: long term medium view of euro upside, which we do

472
00:21:54,000 --> 00:21:56,160
Speaker 9: and relax. You can't just crack out the popcorn, get

473
00:21:56,160 --> 00:21:58,399
Speaker 9: the natchos and watch the film. You have to be

474
00:21:58,480 --> 00:22:01,720
Speaker 9: active and respond to of vents. And what's happened here

475
00:22:01,840 --> 00:22:05,320
Speaker 9: is the data in Europe has really underwhelmed. I thought

476
00:22:05,320 --> 00:22:07,240
Speaker 9: At first we could ignore it, John, I thought the

477
00:22:07,280 --> 00:22:10,000
Speaker 9: factory orders falling lower, that's something that maybe could be

478
00:22:10,040 --> 00:22:12,520
Speaker 9: corrected in the next month. But what we've actually started

479
00:22:12,560 --> 00:22:14,760
Speaker 9: to see is the more forward looking signals such as

480
00:22:14,800 --> 00:22:18,200
Speaker 9: the ZWS, those sort of centis index. In Europe, they've

481
00:22:18,240 --> 00:22:20,960
Speaker 9: also been turning lower as well. So the momentum's gone.

482
00:22:21,160 --> 00:22:23,400
Speaker 9: We're not short, you're a dollar for us. We think

483
00:22:23,400 --> 00:22:25,000
Speaker 9: the better trade is short cable.

484
00:22:25,400 --> 00:22:26,159
Speaker 10: So why is that?

485
00:22:26,200 --> 00:22:28,880
Speaker 9: It's because, first of all, next week we've got UK

486
00:22:29,000 --> 00:22:31,119
Speaker 9: CPI and we think there's gonna be a big drop

487
00:22:31,160 --> 00:22:31,800
Speaker 9: in that number.

488
00:22:31,960 --> 00:22:33,600
Speaker 10: We could actually go below eight percent.

489
00:22:33,920 --> 00:22:36,399
Speaker 9: We've been above ten percent for roughly around seven months

490
00:22:36,480 --> 00:22:38,800
Speaker 9: or so in the UK. It's been quite painful for

491
00:22:38,840 --> 00:22:42,760
Speaker 9: the consumer. Ten percent double digit inflation. Hopefully next week

492
00:22:42,800 --> 00:22:44,919
Speaker 9: we get that sign that the Bank of England has

493
00:22:44,960 --> 00:22:47,600
Speaker 9: done enough and we get that below eight percent seven

494
00:22:47,600 --> 00:22:50,800
Speaker 9: point nine percent are teams looking for. If we get that, John,

495
00:22:51,080 --> 00:22:53,280
Speaker 9: the pricing for the Bank of England, which is around

496
00:22:53,640 --> 00:22:55,919
Speaker 9: about forty five bases points for the next two meetings

497
00:22:55,960 --> 00:22:58,199
Speaker 9: or so, that might head lower. We think there's just

498
00:22:58,200 --> 00:23:01,360
Speaker 9: one more rate hike to come more towards twenty five

499
00:23:01,400 --> 00:23:01,920
Speaker 9: based points.

500
00:23:01,960 --> 00:23:02,880
Speaker 10: To thirty base points.

501
00:23:02,960 --> 00:23:03,200
Speaker 4: Jordan.

502
00:23:03,240 --> 00:23:05,280
Speaker 3: I love how you describe people getting bored as they

503
00:23:05,359 --> 00:23:07,119
Speaker 3: put on one trade for too long and then just

504
00:23:07,160 --> 00:23:09,000
Speaker 3: switched it over to something else. It sounds like basically

505
00:23:09,040 --> 00:23:12,800
Speaker 3: a junior high school virgin version of a version of

506
00:23:13,160 --> 00:23:15,840
Speaker 3: macro trading. I'm just wondering, from your perspective, whether this

507
00:23:15,920 --> 00:23:18,800
Speaker 3: is basically going to be the most painful top swipe down, John,

508
00:23:19,080 --> 00:23:22,199
Speaker 3: the most painful top that you can possibly imagine, just

509
00:23:22,240 --> 00:23:24,360
Speaker 3: because it is so tough to stick with any one

510
00:23:24,400 --> 00:23:26,480
Speaker 3: trade for a considerable period of time.

511
00:23:27,400 --> 00:23:29,520
Speaker 9: I think it's quite like twenty twenty one, which was

512
00:23:29,560 --> 00:23:31,360
Speaker 9: a really difficult year for US.

513
00:23:31,440 --> 00:23:32,480
Speaker 10: I remember it quite well.

514
00:23:32,520 --> 00:23:35,520
Speaker 9: Twenty twenty we had the vaccines invented, the euro rallied,

515
00:23:35,520 --> 00:23:38,040
Speaker 9: we got to one twenty three dollar weakness. Then we

516
00:23:38,080 --> 00:23:41,000
Speaker 9: got to the beginning of January and Joe Biden's Democrats

517
00:23:41,040 --> 00:23:43,320
Speaker 9: they won those Senate seats in Georgia, and we had

518
00:23:43,320 --> 00:23:45,200
Speaker 9: a three percent swing higher and the dollar.

519
00:23:45,359 --> 00:23:46,879
Speaker 10: It caught us off guard. It caught a lot of

520
00:23:46,920 --> 00:23:47,680
Speaker 10: people off guard.

521
00:23:47,720 --> 00:23:50,800
Speaker 9: The market was pretty much overly positioned for dollar weakness

522
00:23:50,800 --> 00:23:52,919
Speaker 9: at the time. I think that's kind of where we

523
00:23:53,000 --> 00:23:57,200
Speaker 9: got to. Most client meetings of not recently, but about

524
00:23:57,200 --> 00:24:00,240
Speaker 9: two weeks ago it was we agree, we think yurogo high,

525
00:24:00,320 --> 00:24:02,320
Speaker 9: we think the pound goes higher, we think the end

526
00:24:02,359 --> 00:24:05,680
Speaker 9: goes higher. That's now changed quite substantially with these data

527
00:24:05,720 --> 00:24:07,920
Speaker 9: surprises and market moves, and I think it's a lot

528
00:24:07,960 --> 00:24:09,600
Speaker 9: more insertion out there. It's going to be a bit

529
00:24:09,640 --> 00:24:12,240
Speaker 9: more like twenty twenty one, I think, where for nine

530
00:24:12,280 --> 00:24:14,480
Speaker 9: months of that year we had a zigzag in the dollar.

531
00:24:14,560 --> 00:24:15,560
Speaker 10: So the dollar went up.

532
00:24:15,480 --> 00:24:17,320
Speaker 9: For the first three months, and then it went down for

533
00:24:17,359 --> 00:24:19,199
Speaker 9: the next three months, then it went up again in

534
00:24:19,480 --> 00:24:20,400
Speaker 9: three months after that.

535
00:24:20,560 --> 00:24:23,520
Speaker 10: It was only in Q four twenty twenty one when

536
00:24:23,520 --> 00:24:23,920
Speaker 10: we got.

537
00:24:23,800 --> 00:24:27,399
Speaker 9: A pure sense that the gas supplies that Vladimir Putin

538
00:24:27,520 --> 00:24:31,119
Speaker 9: was essentially restricting before he invaded Ukraine really added to

539
00:24:31,160 --> 00:24:34,240
Speaker 9: that dollar strength. And also we had the inflation spike

540
00:24:34,280 --> 00:24:36,120
Speaker 9: in the US at the time as well. So we're

541
00:24:36,200 --> 00:24:38,200
Speaker 9: kind of in that sort of mean reversion place in

542
00:24:38,240 --> 00:24:40,520
Speaker 9: the GS and FX. And that's the tricky part for

543
00:24:40,520 --> 00:24:41,040
Speaker 9: this year so.

544
00:24:41,000 --> 00:24:41,520
Speaker 10: Far, Jordan.

545
00:24:41,640 --> 00:24:43,480
Speaker 6: Is that why you're only willing to make a short

546
00:24:43,600 --> 00:24:47,680
Speaker 6: term tactical call right now with regard to this strong dollar.

547
00:24:49,200 --> 00:24:52,560
Speaker 9: John, To be tactical is important. You have to make

548
00:24:52,640 --> 00:24:54,959
Speaker 9: money here and now. So yes, we always have our

549
00:24:55,000 --> 00:24:57,680
Speaker 9: eye on the next one month horizon, and then after

550
00:24:57,760 --> 00:24:59,880
Speaker 9: that we think about the long term. The long term,

551
00:25:00,160 --> 00:25:02,480
Speaker 9: I think Europe does head hirer again, John, the terms

552
00:25:02,480 --> 00:25:05,800
Speaker 9: of trade are fantastically moving in Euro's favor. It suggests

553
00:25:05,840 --> 00:25:08,560
Speaker 9: euro should be one fifteen to one twenty. So medium

554
00:25:08,600 --> 00:25:11,199
Speaker 9: term I haven't turned massively bearish on the Euro, but

555
00:25:11,240 --> 00:25:12,960
Speaker 9: in the very short term I look at those FED

556
00:25:13,000 --> 00:25:15,400
Speaker 9: cuts that are priced in John, roughly around forty five

557
00:25:15,440 --> 00:25:16,080
Speaker 9: basis points.

558
00:25:16,119 --> 00:25:17,480
Speaker 10: Now, let's say I think.

559
00:25:17,320 --> 00:25:19,720
Speaker 9: That should be more towards twenty five, and then perhaps

560
00:25:20,040 --> 00:25:21,560
Speaker 9: the market might start to fade that.

561
00:25:22,040 --> 00:25:24,320
Speaker 1: You know, my question, John is if you're with Aston

562
00:25:24,440 --> 00:25:27,280
Speaker 1: Villa and you're sitting in the cop at Liverpool, the

563
00:25:27,520 --> 00:25:29,240
Speaker 1: medium term really doesn't matter.

564
00:25:29,440 --> 00:25:31,720
Speaker 6: I'd suggest that if you were an Aston Villa fan

565
00:25:31,880 --> 00:25:33,560
Speaker 6: that you don't sit in the cop end Jordan. You're

566
00:25:33,560 --> 00:25:35,239
Speaker 6: not doing that, are you?

567
00:25:35,280 --> 00:25:35,760
Speaker 10: Maybe not?

568
00:25:37,040 --> 00:25:42,000
Speaker 6: Years you think Villa villatile, I'll be wearing I think

569
00:25:42,040 --> 00:25:43,080
Speaker 6: they'll be kicking them back out.

570
00:25:43,359 --> 00:25:45,960
Speaker 1: This is fun. I mean, Urson Villa wasn't supposed to

571
00:25:46,040 --> 00:25:47,840
Speaker 1: be fun this year and it is like now the

572
00:25:47,920 --> 00:25:49,000
Speaker 1: plans really well, it's fun.

573
00:25:49,160 --> 00:25:50,160
Speaker 6: Jordan, you must be happy.

574
00:25:51,280 --> 00:25:52,000
Speaker 10: It's fantastic.

575
00:25:52,119 --> 00:25:54,560
Speaker 9: I mean we're fighting relegation not long ago, so this

576
00:25:54,720 --> 00:25:56,280
Speaker 9: is just to be in the top end of the

577
00:25:56,359 --> 00:25:58,640
Speaker 9: table and actually look at you know, five, six, seven,

578
00:25:58,680 --> 00:26:00,199
Speaker 9: eight and think maybe we've got a chance of being

579
00:26:00,240 --> 00:26:01,080
Speaker 9: there is fantastic.

580
00:26:01,240 --> 00:26:04,639
Speaker 6: I've got to talk to Tom about championship playoff finals

581
00:26:05,040 --> 00:26:07,320
Speaker 6: in the next week of side Jordan's I wish me lot,

582
00:26:07,680 --> 00:26:09,280
Speaker 6: Jordan Rochester, I Fnamora.

583
00:26:20,240 --> 00:26:23,120
Speaker 1: Forget about the theory. Mostly for some people it's about

584
00:26:23,200 --> 00:26:26,600
Speaker 1: missing a bull market off the October lows. For others

585
00:26:26,680 --> 00:26:29,920
Speaker 1: it's recalibrating, and I'm going to suggest for many others

586
00:26:29,960 --> 00:26:33,399
Speaker 1: it's just the fear and maybe being in cash. David

587
00:26:33,440 --> 00:26:37,680
Speaker 1: Balin advises this morning, chief investment officer for City Global Wealth,

588
00:26:37,760 --> 00:26:40,320
Speaker 1: you had the courage to be in the markets throughout

589
00:26:40,440 --> 00:26:43,879
Speaker 1: all of this process. Reassess the courage right now, how

590
00:26:43,960 --> 00:26:45,440
Speaker 1: do you have the courage to be in the market

591
00:26:45,720 --> 00:26:47,720
Speaker 1: after this run to forty two two.

592
00:26:48,320 --> 00:26:51,000
Speaker 11: Well, it's not a cheap market, Tom, and that's not

593
00:26:51,119 --> 00:26:52,800
Speaker 11: really the point. If you take a look at what's

594
00:26:52,800 --> 00:26:55,160
Speaker 11: happened right over the last year, this is a perfect

595
00:26:55,200 --> 00:26:59,000
Speaker 11: example of why market timing is absolutely terrible. And it's

596
00:26:59,040 --> 00:27:01,840
Speaker 11: a question then of what you own and not when

597
00:27:01,920 --> 00:27:04,359
Speaker 11: you own it, right, So it's what's in the equity portfolio.

598
00:27:04,760 --> 00:27:07,720
Speaker 11: For a long time, last twelve months, we've been defensively

599
00:27:07,800 --> 00:27:10,399
Speaker 11: positioned right into companies that are high quality with dividends

600
00:27:10,440 --> 00:27:12,439
Speaker 11: and all of that, and that's paid off. And now

601
00:27:12,480 --> 00:27:14,359
Speaker 11: you're seeing a rotation, right, And you've talked about this

602
00:27:14,480 --> 00:27:16,800
Speaker 11: on your program into AI and tech, which makes sense

603
00:27:17,119 --> 00:27:19,720
Speaker 11: because you're going through a revolutionary period of time, right,

604
00:27:19,800 --> 00:27:23,200
Speaker 11: getting exposure to these stocks and more importantly, getting exposures

605
00:27:23,200 --> 00:27:26,199
Speaker 11: to the companies who will use these this technology, right,

606
00:27:26,520 --> 00:27:28,760
Speaker 11: is going to be extremely important and that should be

607
00:27:28,800 --> 00:27:31,520
Speaker 11: in one's portfolio. And then there are pockets of value

608
00:27:31,560 --> 00:27:32,879
Speaker 11: that are still out there, right. I mean, take a

609
00:27:32,920 --> 00:27:35,000
Speaker 11: look at what financials look like today. If you really

610
00:27:35,080 --> 00:27:37,439
Speaker 11: ask yourself a year from now whether or not financial

611
00:27:37,480 --> 00:27:39,440
Speaker 11: stocks will be hire, you have to imagine that they're

612
00:27:39,480 --> 00:27:42,200
Speaker 11: well capitalized. They're going to tolerate what's going on in

613
00:27:42,240 --> 00:27:45,280
Speaker 11: the market now and the move away from deposits. But ultimately,

614
00:27:45,720 --> 00:27:48,159
Speaker 11: this is essential to our economy and it should not

615
00:27:48,240 --> 00:27:50,640
Speaker 11: be marked down thirty percent. So there are things to buy,

616
00:27:51,119 --> 00:27:52,840
Speaker 11: and the most important thing is to look forward as

617
00:27:52,880 --> 00:27:53,679
Speaker 11: you go about buying them.

618
00:27:53,680 --> 00:27:55,760
Speaker 6: Well, let's talk about allocated to some of those themes.

619
00:27:56,359 --> 00:27:58,040
Speaker 6: The answer to this question I hear it a lot

620
00:27:58,119 --> 00:28:01,560
Speaker 6: on financial news programs. How much should allocate to one thing?

621
00:28:01,680 --> 00:28:04,080
Speaker 6: How much should allocate to another? Isn't that just highly

622
00:28:04,119 --> 00:28:07,040
Speaker 6: dependent on who you are, how old you are, where

623
00:28:07,119 --> 00:28:07,880
Speaker 6: you are in life.

624
00:28:08,119 --> 00:28:10,000
Speaker 11: Yeah, I mean obviously, when you do you know, wealth

625
00:28:10,040 --> 00:28:12,200
Speaker 11: planning and financial planning, you have to determine, you know

626
00:28:12,359 --> 00:28:14,359
Speaker 11: what your spending patterns are, and you have to actually

627
00:28:14,400 --> 00:28:14,800
Speaker 11: have a plan.

628
00:28:14,960 --> 00:28:15,040
Speaker 8: Right.

629
00:28:15,320 --> 00:28:17,840
Speaker 11: But regardless of that, if you think about how portfolio

630
00:28:17,880 --> 00:28:21,080
Speaker 11: should be constructed in equity, portfolio should be one's best

631
00:28:21,160 --> 00:28:23,720
Speaker 11: ideas right in exposure to different markets at different times,

632
00:28:24,160 --> 00:28:26,240
Speaker 11: and there are some, you know, great and obvious ideas.

633
00:28:26,320 --> 00:28:28,280
Speaker 11: A great example today which we never talk about, right

634
00:28:28,320 --> 00:28:30,520
Speaker 11: because we're so focused on the US and on AI,

635
00:28:31,040 --> 00:28:33,640
Speaker 11: is just the fact that right now you've got foreign

636
00:28:33,720 --> 00:28:36,200
Speaker 11: stocks at their cheapest level, right as cheap as they've

637
00:28:36,240 --> 00:28:39,440
Speaker 11: been back to nineteen thirty five. You've got the dollar

638
00:28:39,480 --> 00:28:41,840
Speaker 11: at its highest level and rising recently right due to

639
00:28:41,920 --> 00:28:44,520
Speaker 11: the rates, and yet no one talks about putting money

640
00:28:44,600 --> 00:28:46,680
Speaker 11: overseas right now, And I think it is a gimme.

641
00:28:47,040 --> 00:28:48,640
Speaker 11: And that's an example of where you know, you do

642
00:28:48,760 --> 00:28:51,480
Speaker 11: acid allocation, but it's not. And so what's going to

643
00:28:51,520 --> 00:28:53,360
Speaker 11: happen I think over the between now and the end

644
00:28:53,480 --> 00:28:55,840
Speaker 11: of you know, several months from now, is people who

645
00:28:55,840 --> 00:28:58,040
Speaker 11: begins focusing on twenty four and they're going to want

646
00:28:58,080 --> 00:28:59,959
Speaker 11: to have higher equity allocations than they do right now.

647
00:29:00,520 --> 00:29:04,200
Speaker 3: Have you been basically building your equity slice or are

648
00:29:04,240 --> 00:29:07,440
Speaker 3: you basically even weight when it comes to places like

649
00:29:07,480 --> 00:29:10,200
Speaker 3: private credit that still offer a tremendous amount of fields.

650
00:29:10,520 --> 00:29:12,640
Speaker 11: Let's talk about that. So we've been slowly moving up

651
00:29:12,680 --> 00:29:15,360
Speaker 11: our equities right in terms of our allocation to them.

652
00:29:15,640 --> 00:29:17,880
Speaker 11: But the point you just made is extraordinary. And again,

653
00:29:17,960 --> 00:29:19,960
Speaker 11: you know, think about it from an investment storted point

654
00:29:19,960 --> 00:29:22,640
Speaker 11: of view. If you can get in the fixed income

655
00:29:22,720 --> 00:29:25,320
Speaker 11: market an equity like rate of return and sustain that

656
00:29:25,400 --> 00:29:27,520
Speaker 11: for the next three to four years, should you do it? Absolutely?

657
00:29:27,600 --> 00:29:29,840
Speaker 11: And private credit is a great example. You know, bank

658
00:29:29,960 --> 00:29:33,120
Speaker 11: loan products, you know, a variety of mortgage related reads

659
00:29:33,200 --> 00:29:35,800
Speaker 11: things like that are yielding between twelve and fourteen percent.

660
00:29:35,880 --> 00:29:38,120
Speaker 11: Due to the illiquidity right now and the credit risk

661
00:29:38,160 --> 00:29:39,920
Speaker 11: that was there in O eight is not there. Now,

662
00:29:40,320 --> 00:29:42,000
Speaker 11: these are the kinds of things that you put into

663
00:29:42,040 --> 00:29:44,440
Speaker 11: portfolios on the fixed income side. The other thing I

664
00:29:44,480 --> 00:29:46,560
Speaker 11: wanted to mention is that, because you've touched upon this

665
00:29:46,640 --> 00:29:49,160
Speaker 11: in a variety of your programs this week, is people

666
00:29:49,160 --> 00:29:51,160
Speaker 11: who are focused on deposit rates or are focused on

667
00:29:51,320 --> 00:29:53,600
Speaker 11: one month yields are going to miss the fact that

668
00:29:53,720 --> 00:29:56,400
Speaker 11: now is the time to move their duration out and

669
00:29:56,520 --> 00:29:59,560
Speaker 11: actually build Brazilian portfolios and fixed income that hold for

670
00:29:59,640 --> 00:30:02,080
Speaker 11: their care portions, hold those rates for longer.

671
00:30:02,440 --> 00:30:05,560
Speaker 3: Given that that's your belief, you think that rates are

672
00:30:05,600 --> 00:30:08,080
Speaker 3: going to come down. Is this period of time a

673
00:30:08,160 --> 00:30:11,600
Speaker 3: golden period? Ironically, even though the chop feels not particularly

674
00:30:11,640 --> 00:30:13,920
Speaker 3: golden in any way, shape or form. But are you

675
00:30:14,040 --> 00:30:16,840
Speaker 3: seeing this period where you have an opportunity for outsized

676
00:30:16,840 --> 00:30:20,280
Speaker 3: re turns that won't come again after this period ends,

677
00:30:20,360 --> 00:30:22,239
Speaker 3: after rates return and normalize. Right?

678
00:30:22,280 --> 00:30:24,040
Speaker 11: That's right, Lisa, I mean you just talked about it

679
00:30:24,080 --> 00:30:26,000
Speaker 11: in private credit. You're going to see the same thing

680
00:30:26,040 --> 00:30:27,960
Speaker 11: in the bond market because we are investing into a

681
00:30:28,000 --> 00:30:31,360
Speaker 11: slowing economy. There's no doubt that the FED action what's

682
00:30:31,400 --> 00:30:33,840
Speaker 11: gone on with banks, you know, in fact, even the

683
00:30:33,880 --> 00:30:36,600
Speaker 11: resolution of the debt agreement that we're talking about this

684
00:30:36,720 --> 00:30:40,320
Speaker 11: coming week. Maybe that's going to be take away stimulus.

685
00:30:40,360 --> 00:30:42,440
Speaker 11: It's going to take liquidity out of the marketplace after

686
00:30:42,920 --> 00:30:45,240
Speaker 11: it happens. So all of that's going to slow the economy.

687
00:30:45,280 --> 00:30:47,840
Speaker 11: So we're now talking about investing for twenty twenty four,

688
00:30:48,360 --> 00:30:50,440
Speaker 11: looking over the horizon of the slowing economy to what

689
00:30:50,600 --> 00:30:52,960
Speaker 11: the market will look like next year. And that's really

690
00:30:53,000 --> 00:30:54,520
Speaker 11: what's going on in the markets right now as far

691
00:30:54,520 --> 00:30:55,160
Speaker 11: as we're concerned.

692
00:30:55,280 --> 00:30:57,640
Speaker 6: Deevid, you mentioned opportunities abroad, and you throw out some

693
00:30:58,080 --> 00:30:59,760
Speaker 6: interesting numbers and I just want to work through them

694
00:30:59,760 --> 00:31:02,240
Speaker 6: with you. Yeah, DAX is at a record high today.

695
00:31:02,600 --> 00:31:05,960
Speaker 6: Eurostocks fifty year today is up close to twenty percent.

696
00:31:06,280 --> 00:31:06,960
Speaker 6: Someone's buying it.

697
00:31:07,160 --> 00:31:10,680
Speaker 11: Oh No, I'm talking about emerging market equity specifically, yeah, right,

698
00:31:11,240 --> 00:31:12,840
Speaker 11: EM specifically, no obvious markets.

699
00:31:12,880 --> 00:31:15,160
Speaker 6: Right, let's go there. What's happening there? Because Chinese data

700
00:31:15,240 --> 00:31:17,520
Speaker 6: start to disappoint and some people are reluctant to chase

701
00:31:17,560 --> 00:31:19,720
Speaker 6: that story. What is it about EM for you that works?

702
00:31:19,880 --> 00:31:20,040
Speaker 1: Well?

703
00:31:20,160 --> 00:31:22,000
Speaker 11: What works is that you have a lot of companies

704
00:31:22,080 --> 00:31:24,080
Speaker 11: right that are operating, whether it's in Brazil or in

705
00:31:24,200 --> 00:31:26,400
Speaker 11: China right where their earning stories are. Actually you know

706
00:31:26,520 --> 00:31:28,680
Speaker 11: picking up markedly. You know, we saw a bunch of

707
00:31:28,720 --> 00:31:30,840
Speaker 11: good even earnings from internet stocks in China and they're

708
00:31:30,840 --> 00:31:33,640
Speaker 11: being completely ignored. Right, so we're overweight in that market

709
00:31:33,720 --> 00:31:36,920
Speaker 11: because you're buying there at an incredibly good valuation. In Brazil,

710
00:31:37,360 --> 00:31:39,120
Speaker 11: same thing you're buying when they you know, they've done

711
00:31:39,160 --> 00:31:41,080
Speaker 11: a great job, really yields there are nine percent. Their

712
00:31:41,200 --> 00:31:43,360
Speaker 11: rates are going to come down. They're a beneficiary of

713
00:31:43,400 --> 00:31:45,600
Speaker 11: the Chinese market, right and they're going to and they're

714
00:31:45,640 --> 00:31:47,480
Speaker 11: going to benefit I think in terms of their stock

715
00:31:47,520 --> 00:31:50,880
Speaker 11: price appreciation. But you have to do this in anticipation.

716
00:31:50,960 --> 00:31:53,200
Speaker 11: When it's not fun to do it, that's when you

717
00:31:53,360 --> 00:31:55,080
Speaker 11: have to do it right. And that's the same thing

718
00:31:55,080 --> 00:31:56,800
Speaker 11: you were talking about with AI, which is you have

719
00:31:56,880 --> 00:31:59,479
Speaker 11: to think about which companies are going to benefit by

720
00:31:59,640 --> 00:32:02,320
Speaker 11: by building an AI department the way they've built their

721
00:32:02,360 --> 00:32:06,040
Speaker 11: IT department. Those companies that decide to use it are

722
00:32:06,120 --> 00:32:07,719
Speaker 11: going to be the beneficiaries of it, and you can

723
00:32:07,800 --> 00:32:08,480
Speaker 11: identify them.

724
00:32:08,960 --> 00:32:09,959
Speaker 6: How do you identify them?

725
00:32:10,000 --> 00:32:10,320
Speaker 4: Right now?

726
00:32:10,560 --> 00:32:14,520
Speaker 11: Well, you think about just think about this. You think

727
00:32:14,560 --> 00:32:16,880
Speaker 11: about let's say a consulting company. I can't name the

728
00:32:17,040 --> 00:32:20,080
Speaker 11: you know, whatever I say, right, how is there how

729
00:32:20,480 --> 00:32:22,680
Speaker 11: is it that they're going to modify the business that

730
00:32:22,680 --> 00:32:24,680
Speaker 11: they're going to provide to clients. They're going to teach AI.

731
00:32:24,960 --> 00:32:26,960
Speaker 11: They're going to help companies build in AI. So in

732
00:32:27,040 --> 00:32:29,920
Speaker 11: the consulting industry, you're going to find that companies that

733
00:32:30,000 --> 00:32:32,640
Speaker 11: actually go out and you know, build models using AI

734
00:32:32,760 --> 00:32:35,640
Speaker 11: in terms of financial services, and you can identify who's

735
00:32:35,680 --> 00:32:37,240
Speaker 11: doing it because they're going to talk about it. My

736
00:32:37,600 --> 00:32:41,080
Speaker 11: joke internally is that AI will tell you who's using AI,

737
00:32:41,600 --> 00:32:43,640
Speaker 11: and and that's what I mean. Literally, you'll be able

738
00:32:43,680 --> 00:32:46,080
Speaker 11: to see which companies are actually using it, and that

739
00:32:46,240 --> 00:32:48,479
Speaker 11: to me is going to be a determinant in how

740
00:32:48,480 --> 00:32:49,360
Speaker 11: do you go out investing.

741
00:32:49,600 --> 00:32:52,000
Speaker 1: Let's go back to Walter Riston, who would say that

742
00:32:52,200 --> 00:32:56,640
Speaker 1: US multinationals have international exposure. There's a small startup in

743
00:32:56,720 --> 00:33:01,280
Speaker 1: Coopertino or something like sixty percent of revenues Apple is

744
00:33:01,440 --> 00:33:04,400
Speaker 1: foreign revenues. Can we go back to the old days,

745
00:33:04,480 --> 00:33:08,000
Speaker 1: or if people can buy US multinationals is a foreign proxy.

746
00:33:09,200 --> 00:33:11,840
Speaker 11: I'm not exactly sure because of the valuation difference. Let's

747
00:33:11,880 --> 00:33:14,280
Speaker 11: flip it around and talk about you know, energy stocks

748
00:33:14,320 --> 00:33:16,600
Speaker 11: in Europe. You know they're saying in a forty percent

749
00:33:16,640 --> 00:33:18,640
Speaker 11: discount to energy stocks in the US, which would you

750
00:33:18,720 --> 00:33:20,680
Speaker 11: rather own. They're both multi Apple, it's a big diffdend.

751
00:33:20,760 --> 00:33:22,840
Speaker 11: That's exactly correct. So my view is you have to

752
00:33:22,880 --> 00:33:25,400
Speaker 11: be conscious of valuation right right now. You know, everyone

753
00:33:25,560 --> 00:33:28,080
Speaker 11: is very focused on the US. When we look at

754
00:33:28,080 --> 00:33:30,160
Speaker 11: twenty twenty four, I think people are going to be

755
00:33:30,200 --> 00:33:32,280
Speaker 11: focused on global investing much more than they are in

756
00:33:32,400 --> 00:33:33,040
Speaker 11: US investing.

757
00:33:33,240 --> 00:33:35,560
Speaker 6: Interesting, David, this was great and waterful. I've said this

758
00:33:35,560 --> 00:33:37,160
Speaker 6: a few times this week already, but great to see

759
00:33:37,160 --> 00:33:37,640
Speaker 6: you in person.

760
00:33:37,840 --> 00:33:40,440
Speaker 11: Yeah, I love the fact that we're all together. Yes, exactly,

761
00:33:40,960 --> 00:33:43,440
Speaker 11: It's fantastic. And Jonathan, you need to invest in the

762
00:33:43,480 --> 00:33:44,840
Speaker 11: company that makes a dessert spoon.

763
00:33:45,240 --> 00:33:45,680
Speaker 6: I agree.

764
00:33:45,840 --> 00:33:47,160
Speaker 10: I think they're going to make that happen. Is that

765
00:33:47,240 --> 00:33:49,000
Speaker 10: at the top or just at the top.

766
00:33:49,040 --> 00:33:49,600
Speaker 11: You're doing good?

767
00:33:49,720 --> 00:33:50,280
Speaker 1: Yeah, that's right.

768
00:33:50,400 --> 00:33:51,240
Speaker 6: You keep doing that.

769
00:33:51,280 --> 00:33:51,880
Speaker 10: Appreciate it.

770
00:33:52,160 --> 00:33:53,000
Speaker 3: I like the small ones.

771
00:33:53,120 --> 00:33:55,600
Speaker 6: They've invanted a city glovel wat Appreciate it.

772
00:33:56,000 --> 00:33:59,760
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773
00:34:00,040 --> 00:34:04,080
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774
00:34:04,440 --> 00:34:07,880
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775
00:34:08,040 --> 00:34:12,520
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776
00:34:12,640 --> 00:34:16,640
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777
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