1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jai Lely. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,840 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Where's 5 00:00:27,880 --> 00:00:29,800 Speaker 1: Bill Lee? And one of the last things Vice Chairman 6 00:00:29,840 --> 00:00:31,720 Speaker 1: Clara has said to me, please say hello to Bill 7 00:00:31,800 --> 00:00:35,320 Speaker 1: Lee again with all his good academic work at Columbia's 8 00:00:35,320 --> 00:00:38,480 Speaker 1: public service to the i m F, particularly in Hong Kong. 9 00:00:38,800 --> 00:00:41,280 Speaker 1: Bill Lee with us on the comments of the Vice 10 00:00:41,360 --> 00:00:44,559 Speaker 1: Chairman and the choice set forward. Let me start right 11 00:00:44,640 --> 00:00:47,319 Speaker 1: with the immediate on a Friday, which is there will 12 00:00:47,320 --> 00:00:49,560 Speaker 1: be a Friday soon, doctor Lee, where we get another 13 00:00:49,640 --> 00:00:54,120 Speaker 1: jobs report in America. Alan Ruskin and Deutschebek really emphasizing 14 00:00:54,440 --> 00:00:58,000 Speaker 1: in his note the importance of this next print on 15 00:00:58,040 --> 00:01:02,240 Speaker 1: a weaker labor economy. How we is the American labor economy. 16 00:01:02,320 --> 00:01:04,280 Speaker 1: That's the key question, and that's the one that that 17 00:01:04,360 --> 00:01:06,200 Speaker 1: I think Rich tried to dodge, but hinted to you 18 00:01:06,280 --> 00:01:08,600 Speaker 1: that they were very concerned with because right now the 19 00:01:08,640 --> 00:01:11,440 Speaker 1: weaknesses in the trade of sector and in investment of 20 00:01:11,680 --> 00:01:13,920 Speaker 1: business fixed investment, and those are the things that are 21 00:01:13,959 --> 00:01:16,399 Speaker 1: weakening around the world because of these trade uncertainties. The 22 00:01:16,440 --> 00:01:19,080 Speaker 1: service sector is really struck quite strong, and that's the 23 00:01:19,120 --> 00:01:21,840 Speaker 1: bifacate economy we have. And what Riches was trying to 24 00:01:21,840 --> 00:01:23,720 Speaker 1: say was, you know, even though we're not meeting our 25 00:01:23,720 --> 00:01:27,880 Speaker 1: inflation targets, were still concerned about backstopping the economy. And 26 00:01:27,880 --> 00:01:29,600 Speaker 1: and and they think that he said that was really 27 00:01:29,600 --> 00:01:32,120 Speaker 1: interesting that you got him to say was our models 28 00:01:32,120 --> 00:01:35,840 Speaker 1: are linear, but we the policymakers recognized nonlinarities. That to 29 00:01:35,880 --> 00:01:37,840 Speaker 1: me says they'reybody to do fifty basis points. They just 30 00:01:37,880 --> 00:01:39,800 Speaker 1: need the right clue and the right hint and the 31 00:01:39,880 --> 00:01:42,600 Speaker 1: right nudge. Let's go a little Matthew here. Then we 32 00:01:42,720 --> 00:01:47,280 Speaker 1: talk about anertial forces physics. Envy in your world of 33 00:01:47,360 --> 00:01:52,680 Speaker 1: PhD economis Clarada is definitive on this. Okay, that's the physics. 34 00:01:53,640 --> 00:01:58,320 Speaker 1: Our listeners aren't living physics. They're living in the American reality, 35 00:01:58,360 --> 00:02:02,080 Speaker 1: which is they want some need to do something. Can 36 00:02:02,120 --> 00:02:05,520 Speaker 1: the Fed do anything? Or there are other institutions. You know, 37 00:02:05,640 --> 00:02:08,560 Speaker 1: it's not the cost of capital that matters for business 38 00:02:08,560 --> 00:02:10,320 Speaker 1: to invest. They want to say I want to invest 39 00:02:10,320 --> 00:02:12,920 Speaker 1: because I'm gonna make money, and I don't have growth. 40 00:02:12,960 --> 00:02:15,000 Speaker 1: I'm not gonna make money. So they want to fit 41 00:02:15,080 --> 00:02:17,680 Speaker 1: to backstop the economy and give them confidence that no 42 00:02:17,720 --> 00:02:21,200 Speaker 1: matter what happens, they're gonna put the floor the pedals 43 00:02:21,240 --> 00:02:23,480 Speaker 1: of the metal and and and also make sure the 44 00:02:23,560 --> 00:02:27,000 Speaker 1: US economy and the global economy grows and to overcome 45 00:02:27,040 --> 00:02:30,000 Speaker 1: the trade tensions and the restraint on investment. The FED 46 00:02:30,120 --> 00:02:33,720 Speaker 1: is going to do whatever it takes, including multiple rate cuts. Well, 47 00:02:33,720 --> 00:02:36,040 Speaker 1: they're gonna do multiple rate cuts as well. What what 48 00:02:36,240 --> 00:02:39,959 Speaker 1: is the what is the impact of a first rate 49 00:02:40,040 --> 00:02:43,520 Speaker 1: cut and then that second rate cut, whether together or separate, 50 00:02:43,680 --> 00:02:46,840 Speaker 1: What actually will happen? In order to build a confidence 51 00:02:46,919 --> 00:02:49,200 Speaker 1: you can't be temped And so I think what what 52 00:02:49,440 --> 00:02:52,239 Speaker 1: riches saying by saying that the policy makers are nonlinear 53 00:02:52,400 --> 00:02:55,760 Speaker 1: means we've got to do something big to confirm the 54 00:02:55,800 --> 00:02:58,400 Speaker 1: sense that we have the economy backstop. So we're going 55 00:02:58,440 --> 00:03:01,799 Speaker 1: to do a major confidence is building gesture. Well, they're 56 00:03:01,800 --> 00:03:05,000 Speaker 1: gonna do a confidence building Jester. That's all great and well, 57 00:03:05,040 --> 00:03:07,840 Speaker 1: but as he opened our discussion, he thinks it's a 58 00:03:07,840 --> 00:03:10,400 Speaker 1: two percent economy. Now others think it may come down. 59 00:03:12,120 --> 00:03:15,560 Speaker 1: It was and has been a two percentage looking forward, 60 00:03:16,080 --> 00:03:19,200 Speaker 1: somebody listen to the interview, I didn't know. We're not 61 00:03:19,280 --> 00:03:21,000 Speaker 1: sure where the economy is going in I think, and 62 00:03:21,120 --> 00:03:23,280 Speaker 1: that's the key to the order. The first question, which 63 00:03:23,320 --> 00:03:25,480 Speaker 1: is if employment starts to kick over, that means that 64 00:03:25,520 --> 00:03:28,359 Speaker 1: the metastasists into the service sector is showing up in 65 00:03:28,360 --> 00:03:30,640 Speaker 1: the labor markets, and that will get them to move. 66 00:03:30,840 --> 00:03:35,760 Speaker 1: Explain the internationalist moment I mean, I mean that special library, 67 00:03:35,760 --> 00:03:39,040 Speaker 1: that little room with the original Federal reserved tables stuck 68 00:03:39,040 --> 00:03:42,960 Speaker 1: in a corner. The books are overwhelming in that library, 69 00:03:43,000 --> 00:03:48,560 Speaker 1: first editions of VVLEN, etcetera. Just extraordinary, um uh library. 70 00:03:49,040 --> 00:03:51,440 Speaker 1: None of the stuff in that library is what we're 71 00:03:51,480 --> 00:03:54,120 Speaker 1: dealing with now right as as rich that we have 72 00:03:54,240 --> 00:03:57,560 Speaker 1: that history, but boy, those tactics, that strategies they recommend 73 00:03:57,640 --> 00:03:59,320 Speaker 1: no longer apply. When I was on the board staff, 74 00:03:59,360 --> 00:04:01,320 Speaker 1: I used to sneak into that library to look around him. 75 00:04:01,320 --> 00:04:04,200 Speaker 1: It is so impressive. But all those theories give us 76 00:04:04,200 --> 00:04:06,520 Speaker 1: the framework, but we now have to change the strategies 77 00:04:06,560 --> 00:04:08,840 Speaker 1: of how to implement that framework in order to get 78 00:04:08,840 --> 00:04:11,920 Speaker 1: the economy going, especially in the globalized economy where the 79 00:04:11,960 --> 00:04:14,000 Speaker 1: e c B is is saying we're gonna do whatever 80 00:04:14,000 --> 00:04:16,400 Speaker 1: it takes. The b o J has got negative rates. 81 00:04:16,640 --> 00:04:20,680 Speaker 1: What do we as the US Federal Reserve do? We'll 82 00:04:20,720 --> 00:04:23,599 Speaker 1: I I have like eight more questions, bill Leye, but 83 00:04:23,640 --> 00:04:25,799 Speaker 1: I've got to go to the moment in Hong Kong. 84 00:04:26,120 --> 00:04:30,080 Speaker 1: You were one of the definitive experts on the actual 85 00:04:30,279 --> 00:04:33,800 Speaker 1: business and economy of Hong Kong with your leadership at 86 00:04:33,800 --> 00:04:36,400 Speaker 1: the I m F and basically setting up their Hong 87 00:04:36,480 --> 00:04:40,240 Speaker 1: Kong Watch years ago. Your thoughts on the protests in 88 00:04:40,320 --> 00:04:43,400 Speaker 1: Hong Kong. This is a Hong Kong that has been 89 00:04:43,440 --> 00:04:47,160 Speaker 1: catalyzed and galvanized to worry about their independence. It wasn't 90 00:04:47,160 --> 00:04:49,520 Speaker 1: there when I was there and has suddenly developed. And 91 00:04:49,560 --> 00:04:51,880 Speaker 1: one thing that you should notice is that people doing 92 00:04:51,920 --> 00:04:54,320 Speaker 1: this are the young people, and they are concerned about 93 00:04:54,320 --> 00:04:56,640 Speaker 1: what their future is going to be a generational so, Phili, 94 00:04:56,720 --> 00:04:58,880 Speaker 1: thank you so much with the Milk and Institute. Their 95 00:04:58,920 --> 00:05:01,799 Speaker 1: chief economis of are more than that out of Columbia 96 00:05:01,920 --> 00:05:19,760 Speaker 1: and the good work of economics. This is an important 97 00:05:19,800 --> 00:05:23,800 Speaker 1: interview on any given Friday, because over the weekend we 98 00:05:23,920 --> 00:05:26,200 Speaker 1: do what we do. It may be on a kitchen, 99 00:05:26,800 --> 00:05:29,960 Speaker 1: maybe on the back deck, maybe in the car watching 100 00:05:30,120 --> 00:05:35,080 Speaker 1: offspring play sports. You speak to Leslie Falconio or your 101 00:05:35,160 --> 00:05:39,120 Speaker 1: reader literature and that of the UBS about what to do. 102 00:05:39,240 --> 00:05:43,200 Speaker 1: It's this asset allocation game and it's important always and 103 00:05:43,360 --> 00:05:47,479 Speaker 1: even more important now Leslie Falconio with UBS Wealth Management 104 00:05:47,480 --> 00:05:50,640 Speaker 1: trying to figure out how to move the money around. Leslie, 105 00:05:50,760 --> 00:05:56,120 Speaker 1: quite a week. Is this week adjusted your core asset belief? 106 00:05:57,320 --> 00:05:58,880 Speaker 1: Let's say, I mean you you really hit the nail 107 00:05:58,880 --> 00:06:01,039 Speaker 1: on that. It's been quite a week, and you know, 108 00:06:01,360 --> 00:06:05,240 Speaker 1: the market although was do wish going into the FED, 109 00:06:05,520 --> 00:06:08,600 Speaker 1: you know, there's no question that the out the outcome 110 00:06:08,640 --> 00:06:11,039 Speaker 1: was even more dovish than that we had anticipated. So 111 00:06:11,080 --> 00:06:14,040 Speaker 1: this was the a dovish snow cut um in the 112 00:06:14,040 --> 00:06:16,400 Speaker 1: scenario that we had had seen. And I think that 113 00:06:17,040 --> 00:06:18,919 Speaker 1: for us that UBS, I mean, we would be the 114 00:06:18,920 --> 00:06:22,120 Speaker 1: first to admit that initially we didn't anticipate the FED too. 115 00:06:22,240 --> 00:06:24,600 Speaker 1: We knew that they wouldn't do anything in June, but 116 00:06:24,680 --> 00:06:26,680 Speaker 1: we also didn't expect them to do anything really for 117 00:06:26,720 --> 00:06:28,719 Speaker 1: the majority of the year, given the fact that our 118 00:06:28,760 --> 00:06:31,520 Speaker 1: second second quarter GDP was much higher. So you know, 119 00:06:31,600 --> 00:06:33,520 Speaker 1: I think that the mark was definitely caught off a 120 00:06:33,520 --> 00:06:36,640 Speaker 1: big guard in terms of the amount of the decline 121 00:06:36,680 --> 00:06:40,120 Speaker 1: the doctrine, even though the median stayed stayed the same. Um, 122 00:06:40,160 --> 00:06:43,599 Speaker 1: you know, what do I do with my money this week? 123 00:06:44,080 --> 00:06:46,919 Speaker 1: Is it's it is its steady as she goes for UBS? 124 00:06:47,360 --> 00:06:52,680 Speaker 1: Or do you actually make a bond equity reallocation given 125 00:06:52,760 --> 00:06:56,080 Speaker 1: price up, yield down in bonds. So we've we've an 126 00:06:56,120 --> 00:06:58,880 Speaker 1: overweight equity to fixed income and we continue to be 127 00:06:58,960 --> 00:07:01,880 Speaker 1: overweight equity to fixed income, you know, because because again 128 00:07:02,000 --> 00:07:04,600 Speaker 1: our our outlook is for you know, slower growth but 129 00:07:05,000 --> 00:07:07,120 Speaker 1: can continued fundamental growth in the US. So we like 130 00:07:07,160 --> 00:07:10,480 Speaker 1: the equity or fixing. We've also, however, had this overlay 131 00:07:10,600 --> 00:07:12,720 Speaker 1: in terms of, if you want to call it, the 132 00:07:12,760 --> 00:07:16,040 Speaker 1: quote unquote equity hedge that you know, the investors have 133 00:07:16,080 --> 00:07:18,720 Speaker 1: in terms of just as as as a sharp protection 134 00:07:18,760 --> 00:07:21,920 Speaker 1: against a you know, a business cycle that has is 135 00:07:21,960 --> 00:07:25,360 Speaker 1: reaching World War two historical expansions that you know, we 136 00:07:25,440 --> 00:07:27,560 Speaker 1: had this heage. So this has actually worked out quite 137 00:07:27,560 --> 00:07:30,000 Speaker 1: well for UBS because we've had this equity long and 138 00:07:30,080 --> 00:07:33,080 Speaker 1: we've had a long treasury hedge. And given what we've 139 00:07:33,080 --> 00:07:36,440 Speaker 1: seen with raids, you look like geniuses. I tell you, 140 00:07:36,920 --> 00:07:39,240 Speaker 1: I mean, I mean he said, I want to get 141 00:07:39,280 --> 00:07:42,320 Speaker 1: Matthew here folks on a Friday. So let me translate 142 00:07:42,360 --> 00:07:45,040 Speaker 1: what the pro just said. I'm in the stock market, 143 00:07:45,480 --> 00:07:51,280 Speaker 1: but I'm buying fixed income paper to hedge my enthusiasm 144 00:07:51,320 --> 00:07:56,040 Speaker 1: about the stock market. You got Leslie price up, yield down. 145 00:07:56,640 --> 00:08:00,600 Speaker 1: How many basis points of performance did you get from 146 00:08:00,680 --> 00:08:04,200 Speaker 1: bonds nailing this call? Did you actually pick up a 147 00:08:04,280 --> 00:08:07,800 Speaker 1: hundred basis points? Again? Close to that? Yeah, I mean 148 00:08:07,840 --> 00:08:09,760 Speaker 1: we did. Actually we've done very well with that. And 149 00:08:09,760 --> 00:08:12,040 Speaker 1: actually what's interesting about this is if you look at, 150 00:08:12,160 --> 00:08:14,280 Speaker 1: you know, how many people sort of you know x 151 00:08:14,640 --> 00:08:18,280 Speaker 1: the correlation between you know, equity and and fixed income 152 00:08:18,320 --> 00:08:21,960 Speaker 1: because post Brexit, as industrates normalized, you had yields going 153 00:08:22,080 --> 00:08:26,280 Speaker 1: up right and equities going down. So at that point 154 00:08:26,320 --> 00:08:28,520 Speaker 1: in time, such such as we thought it was a 155 00:08:28,520 --> 00:08:31,600 Speaker 1: difficult allocation. But as things do, they mean revert and 156 00:08:31,600 --> 00:08:35,320 Speaker 1: over the longer term, the longer treasury is the best 157 00:08:35,360 --> 00:08:39,920 Speaker 1: hedge against equity. Okay, equity, let's talk about the stock marketing. 158 00:08:39,960 --> 00:08:43,280 Speaker 1: It's like I po frenzy and you know all that 159 00:08:43,720 --> 00:08:48,120 Speaker 1: can a conservative investor by revenue growth? I mean, is 160 00:08:48,120 --> 00:08:52,000 Speaker 1: it so overpriced that you can't buy the fangs or 161 00:08:52,040 --> 00:08:54,680 Speaker 1: the sort of fangs are the kind of like things. 162 00:08:54,720 --> 00:08:57,319 Speaker 1: I mean, are they on a valuation basis so on 163 00:08:57,480 --> 00:09:01,599 Speaker 1: a reach that it's silly for a concert investor. I 164 00:09:01,640 --> 00:09:04,200 Speaker 1: don't necessarily say it's it's it's out of reach, but 165 00:09:04,400 --> 00:09:07,480 Speaker 1: it's definitely I would call it very full. And you know, 166 00:09:07,600 --> 00:09:10,679 Speaker 1: maybe part of really the incremental gains going forward may 167 00:09:10,800 --> 00:09:14,040 Speaker 1: be as limited versus what they were, but it's it's 168 00:09:14,040 --> 00:09:15,719 Speaker 1: just at the point where it's getting definitely getting a 169 00:09:15,760 --> 00:09:18,760 Speaker 1: bit toppy. It's getting a bit toppy as well. So 170 00:09:18,800 --> 00:09:21,000 Speaker 1: then where do you go. I mean, it wasn't getting 171 00:09:21,000 --> 00:09:25,000 Speaker 1: a stock strategy from Richard clarative, but um, clearly the 172 00:09:25,040 --> 00:09:27,640 Speaker 1: street has been defensive. I know you're you're good. U 173 00:09:27,960 --> 00:09:32,320 Speaker 1: competitors at Bank of America had an exceptionally gloomy long 174 00:09:32,440 --> 00:09:35,160 Speaker 1: only by side report this week of what people are 175 00:09:35,160 --> 00:09:37,880 Speaker 1: actually doing with their money. Do you see that? Do 176 00:09:37,920 --> 00:09:42,720 Speaker 1: you see people running from equities into bonds? Um? Well, actually, 177 00:09:42,800 --> 00:09:44,520 Speaker 1: I mean when you think about it, especially over the 178 00:09:44,559 --> 00:09:46,559 Speaker 1: past this week, you know there's there's but there's always 179 00:09:46,559 --> 00:09:48,280 Speaker 1: this fear factor. But you know, we think that, you know, 180 00:09:48,320 --> 00:09:51,000 Speaker 1: fixed income is actually a bit rich to equity, particularly 181 00:09:51,040 --> 00:09:53,560 Speaker 1: with the decline of the yields of the scene. So again, 182 00:09:53,600 --> 00:09:56,520 Speaker 1: I mean, so we still prefer over the long term, 183 00:09:56,600 --> 00:09:58,880 Speaker 1: you know, equity to fixed income. Um, you know, it's 184 00:09:59,000 --> 00:10:01,000 Speaker 1: it's it's one of these stays is where for our 185 00:10:01,320 --> 00:10:03,760 Speaker 1: you know, our equity portfolios, we always have this type 186 00:10:03,920 --> 00:10:07,560 Speaker 1: of strategy where I mean we will always have this 187 00:10:07,679 --> 00:10:09,839 Speaker 1: overweight and we'll always have sort of the fixed income 188 00:10:09,880 --> 00:10:11,920 Speaker 1: against it. But when you look at how you how 189 00:10:12,040 --> 00:10:14,079 Speaker 1: much guilt have fallen, and the fact that the market 190 00:10:14,160 --> 00:10:17,480 Speaker 1: is expecting much lower growth than within what we actually are, 191 00:10:17,720 --> 00:10:20,839 Speaker 1: fundamentally better better to be able equity at this time. 192 00:10:20,880 --> 00:10:23,040 Speaker 1: You know right where I was going. Folks, this is 193 00:10:23,080 --> 00:10:26,439 Speaker 1: so important and you heard it, particularly in the first 194 00:10:26,520 --> 00:10:30,160 Speaker 1: third of the discussion, the conversation with the vice chairman. 195 00:10:30,880 --> 00:10:34,920 Speaker 1: This is the recession call of I'm not hearing that 196 00:10:35,040 --> 00:10:39,000 Speaker 1: from ubs Leslie. I certainly didn't hear it from the 197 00:10:39,080 --> 00:10:42,439 Speaker 1: vice chairman. I mean that's coloring everything on the street. 198 00:10:42,960 --> 00:10:46,839 Speaker 1: Is a certain set of our listeners believe in a recession, 199 00:10:46,880 --> 00:10:49,320 Speaker 1: don't they? They absolutely do it. I think it's a 200 00:10:49,360 --> 00:10:51,320 Speaker 1: really great point because what you when what do you 201 00:10:51,400 --> 00:10:54,720 Speaker 1: look at in terms of what's pricing in for the 202 00:10:54,840 --> 00:10:57,079 Speaker 1: FED fund futures or the FED funds you know, the 203 00:10:57,080 --> 00:10:59,559 Speaker 1: next for the rest of this year. What they're making 204 00:10:59,640 --> 00:11:03,640 Speaker 1: in is much more than what we're anticipating. So it's 205 00:11:03,679 --> 00:11:07,000 Speaker 1: much more than you know, ann ounce of protection, you know, 206 00:11:07,160 --> 00:11:09,800 Speaker 1: is a pound of cure um. But they're actually pressing 207 00:11:09,800 --> 00:11:12,720 Speaker 1: in something that we really really believe that the market 208 00:11:12,760 --> 00:11:14,760 Speaker 1: thinks is a little bit too recessionary in our view. 209 00:11:15,160 --> 00:11:17,080 Speaker 1: So it's not that as though we don't believe that 210 00:11:17,120 --> 00:11:18,760 Speaker 1: the Fed will ease, we just think the market is 211 00:11:18,800 --> 00:11:21,480 Speaker 1: pressing in too much of an ease. What does that 212 00:11:21,520 --> 00:11:23,000 Speaker 1: do to revenue goes through? And I don't want you 213 00:11:23,040 --> 00:11:26,040 Speaker 1: to be a securities analyst here, but I think this 214 00:11:26,160 --> 00:11:28,480 Speaker 1: is really important folks. You can take Oracle in the 215 00:11:28,480 --> 00:11:31,560 Speaker 1: news this week or any other company. There's a revenue 216 00:11:31,600 --> 00:11:34,440 Speaker 1: belief in growth and if you have a dooming gloom view, 217 00:11:34,840 --> 00:11:38,040 Speaker 1: you bring your top line down. Is everybody brought their 218 00:11:38,080 --> 00:11:41,440 Speaker 1: top lines down and that folds right into asset allocation, 219 00:11:41,520 --> 00:11:44,679 Speaker 1: doesn't it? Lastly, it does, It absolutely does. And I 220 00:11:44,720 --> 00:11:48,080 Speaker 1: think that you know, again, you know, the the having 221 00:11:48,120 --> 00:11:50,360 Speaker 1: interest rate is lower, and obviously having the FED move 222 00:11:50,440 --> 00:11:53,880 Speaker 1: methodically without a potential in our view recession in the 223 00:11:53,960 --> 00:11:57,360 Speaker 1: near term is very favorable for equity. Well, it's very 224 00:11:57,360 --> 00:11:59,920 Speaker 1: favorable for equity. But I mean, come on, let me, 225 00:12:00,080 --> 00:12:01,800 Speaker 1: I got to get the Bloomberg out here, leslie to 226 00:12:01,880 --> 00:12:04,800 Speaker 1: do this is too fancy math on Friday. Uh here 227 00:12:05,080 --> 00:12:07,840 Speaker 1: sp X year to date up, We're only up eighteen 228 00:12:07,920 --> 00:12:11,360 Speaker 1: percent year to day? Did that? Like? Are you out 229 00:12:11,360 --> 00:12:15,240 Speaker 1: there telling people were going up thirty six percent this year? No? 230 00:12:15,240 --> 00:12:18,760 Speaker 1: Not love, I love busting shops like that list. Can 231 00:12:18,800 --> 00:12:22,920 Speaker 1: we extrapolate out to your end? I know, if you know, 232 00:12:23,000 --> 00:12:25,000 Speaker 1: if you annualize that, that looks very trapping, But no, 233 00:12:25,120 --> 00:12:27,000 Speaker 1: we're not. We're not. We're not saying that at all, 234 00:12:27,000 --> 00:12:29,000 Speaker 1: maybe not the three to four percent going. What do 235 00:12:29,040 --> 00:12:30,920 Speaker 1: you do? I mean if I me in this, I 236 00:12:30,920 --> 00:12:33,440 Speaker 1: mean U b s. I listened to you. I listened 237 00:12:33,480 --> 00:12:39,439 Speaker 1: to uh Jeffrey, you dotta dotta everything's great. What about 238 00:12:39,480 --> 00:12:41,559 Speaker 1: going to cash right now and just sitting out the 239 00:12:41,640 --> 00:12:45,600 Speaker 1: year that we don't recommend that? Do we? No? I said, listen, 240 00:12:45,640 --> 00:12:48,400 Speaker 1: you know it's it's we don't. And we we did 241 00:12:48,440 --> 00:12:50,599 Speaker 1: have a cash position in terms of Barbell for a 242 00:12:50,679 --> 00:12:52,800 Speaker 1: fixed income meany that we had cash, and we had 243 00:12:52,840 --> 00:12:54,880 Speaker 1: long end treasuries. And the reason why we had that 244 00:12:55,000 --> 00:12:56,960 Speaker 1: was as you're well aware that you know, for a 245 00:12:57,000 --> 00:12:59,280 Speaker 1: long period of time we've had this three month ten 246 00:12:59,320 --> 00:13:01,760 Speaker 1: year in version, so going into a cash tye product 247 00:13:01,840 --> 00:13:04,600 Speaker 1: was actually yielding much more than it had previously. So 248 00:13:04,640 --> 00:13:07,720 Speaker 1: there wasn't actually a horrible allocation that that you know, 249 00:13:07,760 --> 00:13:10,320 Speaker 1: people in the industry for years know that something that 250 00:13:10,360 --> 00:13:12,320 Speaker 1: you don't want to do for a long period of time. 251 00:13:12,600 --> 00:13:14,400 Speaker 1: But given the fact that we had this barbell, it 252 00:13:14,400 --> 00:13:16,320 Speaker 1: actually worked at well because we had the yields coming 253 00:13:16,320 --> 00:13:18,400 Speaker 1: down the long end. We were actually also learning that 254 00:13:18,480 --> 00:13:21,200 Speaker 1: incremental carry because that you know, the cash and one 255 00:13:21,280 --> 00:13:23,839 Speaker 1: year bill, given the yelker was so flat, actually was 256 00:13:23,840 --> 00:13:27,600 Speaker 1: fairly attractive. Yeah, this, folks, I I hope folks, this 257 00:13:27,679 --> 00:13:32,640 Speaker 1: has been helpful on a Friday, because every pro including 258 00:13:32,760 --> 00:13:36,000 Speaker 1: I can speak for the vice chairman, everybody's head, his 259 00:13:36,080 --> 00:13:39,080 Speaker 1: spending over what we think we we've observed this week 260 00:13:39,400 --> 00:13:42,320 Speaker 1: really beginning with the Mario Draggy speech, but then you 261 00:13:42,440 --> 00:13:44,560 Speaker 1: actually got to fold it over to like, okay, what 262 00:13:44,600 --> 00:13:47,200 Speaker 1: do I do with my small pot? And the answer 263 00:13:47,240 --> 00:13:49,960 Speaker 1: is what we heard there from Ms Felconio is just 264 00:13:50,120 --> 00:13:53,880 Speaker 1: one example of one view in that case that ubs 265 00:13:53,960 --> 00:13:58,240 Speaker 1: view of I would call relative optimism. Lessie Folconio, senior 266 00:13:58,280 --> 00:14:02,400 Speaker 1: fixed income strategists, had a hectical fixed income allocation at 267 00:14:02,480 --> 00:14:19,160 Speaker 1: UPS that was just brilliant, without question. This is the 268 00:14:19,200 --> 00:14:22,640 Speaker 1: interview of the day. He is Daniel Jurgen, always joining 269 00:14:22,680 --> 00:14:25,240 Speaker 1: us in Davos, but at other select times through the 270 00:14:25,320 --> 00:14:28,080 Speaker 1: year when it truly matters, we are on and that 271 00:14:28,200 --> 00:14:32,080 Speaker 1: Dr Jurgen could join us today, the author of Commanding Heights, 272 00:14:32,560 --> 00:14:36,680 Speaker 1: the author of the Quest, and before that, the definitive 273 00:14:37,000 --> 00:14:39,560 Speaker 1: moment for so many of us in the oil crisis 274 00:14:40,080 --> 00:14:43,440 Speaker 1: is magisterial. The Prize, Dan, you're gonna I want to 275 00:14:43,480 --> 00:14:47,560 Speaker 1: talk about your underrated book, The Quest. Everybody focuses. You 276 00:14:47,560 --> 00:14:50,360 Speaker 1: have to on campus, folks, if you're cool, you have 277 00:14:50,440 --> 00:14:53,000 Speaker 1: to walk around with a copy of the Prize, just 278 00:14:53,040 --> 00:14:55,960 Speaker 1: so you're you know, like you're cool. The Quest. I 279 00:14:56,000 --> 00:14:58,520 Speaker 1: remember reading it and going, this is just as good 280 00:14:58,640 --> 00:15:02,000 Speaker 1: or better than the Prize, and through it, you know, 281 00:15:02,040 --> 00:15:04,320 Speaker 1: in the middle of the Quest, you'll go right to 282 00:15:04,360 --> 00:15:08,440 Speaker 1: where we are right now, which is the shifting sands 283 00:15:08,720 --> 00:15:12,320 Speaker 1: in the Persian Gulf. In terms of securing the supply, 284 00:15:12,840 --> 00:15:16,360 Speaker 1: let's begin with first principles, Dan Jurgen, do we need 285 00:15:16,360 --> 00:15:19,520 Speaker 1: a Rand's oil Uh, we don't need a Rand's oil 286 00:15:19,600 --> 00:15:22,080 Speaker 1: or Rand's oil has been part of the world market. 287 00:15:22,520 --> 00:15:26,160 Speaker 1: But what is surprising is how well the market has 288 00:15:26,200 --> 00:15:31,200 Speaker 1: adjusted to the cessation both of Iranian oil and Venezuelan oil. 289 00:15:31,480 --> 00:15:34,680 Speaker 1: You have always been a measured voice at the clearest 290 00:15:34,800 --> 00:15:41,600 Speaker 1: memory of the hysteria of barrel. You were like, wait thing, 291 00:15:41,800 --> 00:15:45,360 Speaker 1: you know the economics will play out. You were always common. 292 00:15:45,440 --> 00:15:48,480 Speaker 1: Can you be calm now with what you've witnessed over 293 00:15:48,520 --> 00:15:50,960 Speaker 1: the last two weeks in the Hormos and in the 294 00:15:51,000 --> 00:15:54,120 Speaker 1: Persian Gulf? Well, first time. Part of the reason for 295 00:15:54,160 --> 00:15:56,800 Speaker 1: reaction is I really do believe price actually matters. People 296 00:15:56,840 --> 00:15:59,680 Speaker 1: forget that price matters, and it affects how people make 297 00:15:59,720 --> 00:16:02,480 Speaker 1: to see Asians and what happens in the markets. UM. 298 00:16:02,520 --> 00:16:04,800 Speaker 1: I think that we are seeing a pattern of kind 299 00:16:04,840 --> 00:16:09,320 Speaker 1: of call it sporadic escalation. A number of different things happen. 300 00:16:09,360 --> 00:16:12,240 Speaker 1: It's not just in the Gulf, it's UH, it's drones, 301 00:16:12,480 --> 00:16:17,320 Speaker 1: miss hale attacks in Saudi Arabia, it's UH rockets in 302 00:16:17,680 --> 00:16:21,600 Speaker 1: Iraq and to where American companies are operating. So I 303 00:16:21,640 --> 00:16:27,720 Speaker 1: think this is a rising tension and UH. And really 304 00:16:28,240 --> 00:16:32,120 Speaker 1: the Iranians, I think are saying they're really feeling squeezed 305 00:16:32,200 --> 00:16:35,640 Speaker 1: right now, and they have many different mechanisms through which 306 00:16:35,680 --> 00:16:37,640 Speaker 1: to respond, and I think we're seeing some of them 307 00:16:37,760 --> 00:16:40,880 Speaker 1: speak to Americans, our listeners coast to coast and frankly 308 00:16:40,920 --> 00:16:43,360 Speaker 1: speak to the gentleman just down the street in our 309 00:16:43,400 --> 00:16:49,680 Speaker 1: Washington studios at Pennsylvania Avenue. When people suggest Iran as 310 00:16:49,720 --> 00:16:53,520 Speaker 1: a threat, how do you respond? I think that Iran 311 00:16:53,960 --> 00:17:00,000 Speaker 1: is continue to develop its missile programs. The Revolutionary Guards 312 00:17:00,320 --> 00:17:04,240 Speaker 1: has a program and talks about all the Arab capitals 313 00:17:04,240 --> 00:17:06,879 Speaker 1: that it's capturing. So I think there's a struggle for 314 00:17:06,920 --> 00:17:09,960 Speaker 1: influence and power and hegemony going on in the Middle East, 315 00:17:10,320 --> 00:17:15,160 Speaker 1: and Iran is is very much engaged in that. At 316 00:17:15,160 --> 00:17:17,000 Speaker 1: the heart of it right now probably comes down to 317 00:17:17,000 --> 00:17:21,000 Speaker 1: an Iranian Saudi struggle UH for pre eminence. But on 318 00:17:21,119 --> 00:17:24,040 Speaker 1: top of that, of course, is the UH ending of 319 00:17:24,080 --> 00:17:26,679 Speaker 1: the or the backing away from the nuclear agreement. And 320 00:17:26,760 --> 00:17:30,960 Speaker 1: Iran is just exporting a paltry number of barrels right now, 321 00:17:31,200 --> 00:17:32,919 Speaker 1: and I think there's a part of their response, and 322 00:17:32,920 --> 00:17:35,360 Speaker 1: they're probably also looking down the road and saying, well, 323 00:17:35,359 --> 00:17:36,520 Speaker 1: we've got about a year and a half to go 324 00:17:37,320 --> 00:17:39,840 Speaker 1: until maybe there's a new president in the United States. Well, 325 00:17:40,760 --> 00:17:42,639 Speaker 1: let's let's go. That's right where I wanted to go 326 00:17:42,800 --> 00:17:46,960 Speaker 1: with the heritage of Daniel Jurgen the Prize, those moments 327 00:17:46,960 --> 00:17:50,359 Speaker 1: in the prizals vignettes of new people showing up in 328 00:17:50,400 --> 00:17:53,840 Speaker 1: the Middle East. One of our things of Persia the 329 00:17:54,000 --> 00:17:57,080 Speaker 1: Shah that some of us older lived and then moving 330 00:17:57,080 --> 00:18:00,280 Speaker 1: on from the Shah is the separation of religion and 331 00:18:00,359 --> 00:18:05,480 Speaker 1: culture in Iran from a fairly complex and successful economy 332 00:18:05,560 --> 00:18:09,720 Speaker 1: that was in Iran. How do you partition the people 333 00:18:09,760 --> 00:18:13,720 Speaker 1: of Iran, the economy of Iran from the religious extreme 334 00:18:14,119 --> 00:18:18,280 Speaker 1: and the religious leaders of Iran. I think the understanding 335 00:18:18,440 --> 00:18:21,359 Speaker 1: is that you have a young generation that really uh 336 00:18:21,680 --> 00:18:23,840 Speaker 1: wants to be part of a different world, doesn't want 337 00:18:23,880 --> 00:18:25,399 Speaker 1: to be part of this world that was created in 338 00:18:25,480 --> 00:18:30,199 Speaker 1: nine nine with the imposition of the theocratic regime. But 339 00:18:30,440 --> 00:18:33,679 Speaker 1: the instruments of power are all in the hands of 340 00:18:33,760 --> 00:18:38,359 Speaker 1: the theocracy and they continue to wield them. And the economy, 341 00:18:38,359 --> 00:18:41,479 Speaker 1: of course is in pretty bad shape right now because 342 00:18:41,520 --> 00:18:45,159 Speaker 1: of the sanctions, and even without the sanctions, mismanagement of 343 00:18:45,200 --> 00:18:49,440 Speaker 1: the economy, corruption and everything like that. So Iran's economy 344 00:18:49,560 --> 00:18:53,399 Speaker 1: is is suffering. One final question if I could, Dr Jurgur, 345 00:18:53,480 --> 00:18:56,600 Speaker 1: and that would be to hearken back to your exquisite 346 00:18:56,640 --> 00:18:59,800 Speaker 1: effort commanding Heights. I kid you every year at Davos 347 00:18:59,840 --> 00:19:01,680 Speaker 1: at we need to see a second edition of that 348 00:19:02,119 --> 00:19:05,800 Speaker 1: as possible. How do the commanding Heights look right now 349 00:19:05,840 --> 00:19:10,480 Speaker 1: from six Pennsylvania Avenue. Well, I think that from that 350 00:19:11,280 --> 00:19:14,720 Speaker 1: it's uh, there's a question about how much of the 351 00:19:14,800 --> 00:19:19,000 Speaker 1: commanding heights does the person who's the top commander command. 352 00:19:19,480 --> 00:19:21,640 Speaker 1: And in terms of on he had and I ran 353 00:19:21,680 --> 00:19:24,520 Speaker 1: a tech going on and he brought I believe the 354 00:19:24,520 --> 00:19:27,520 Speaker 1: New York Times reports he canceled the mission while the 355 00:19:27,520 --> 00:19:30,240 Speaker 1: planes were in the air. Yeah, I stand corrected if 356 00:19:30,240 --> 00:19:32,840 Speaker 1: I'm wrong. Well, I think I'm thinking about in terms 357 00:19:32,880 --> 00:19:35,080 Speaker 1: of the economy what you've been talking about the relationship 358 00:19:35,119 --> 00:19:39,080 Speaker 1: with the FED. But I think that that he doesn't. 359 00:19:39,280 --> 00:19:43,119 Speaker 1: I mean, there there's obviously disagreement administration about what to do, 360 00:19:43,359 --> 00:19:45,760 Speaker 1: and this is an uncertain territory where you don't know 361 00:19:45,800 --> 00:19:47,840 Speaker 1: where it's gonna end up and what are your goals 362 00:19:47,840 --> 00:19:50,280 Speaker 1: At the end of the day, Daniel, You're gonna thank 363 00:19:50,320 --> 00:19:52,040 Speaker 1: you so much. Do we have a new book coming up? 364 00:19:52,160 --> 00:19:56,280 Speaker 1: Can we? Well? I did send in a manuscript yesterday, oh, yesterday, 365 00:19:56,640 --> 00:20:00,240 Speaker 1: literally about three o'clock in the afternoon. A hint. You know, well, 366 00:20:00,280 --> 00:20:02,840 Speaker 1: it's kind of some of these six themes we've just 367 00:20:02,880 --> 00:20:05,159 Speaker 1: been talking. We'll leave it there, Daniel greg In with 368 00:20:05,160 --> 00:20:08,240 Speaker 1: a top secret manuscript. It's out there somewhere, folks, and 369 00:20:08,280 --> 00:20:12,960 Speaker 1: we await that publication here six months. Maybe when you're out, Daniel, 370 00:20:12,960 --> 00:20:14,879 Speaker 1: you're gonna look for the movie Commanding Heights fourth of 371 00:20:14,960 --> 00:20:19,320 Speaker 1: July and Imax. We are thrilled they have that as well. 372 00:20:33,480 --> 00:20:36,600 Speaker 1: This has been, even by recent standards, a busy week 373 00:20:36,680 --> 00:20:41,080 Speaker 1: four market participants. We've had, of course FED comments coming 374 00:20:41,080 --> 00:20:44,200 Speaker 1: out earlier this week. Geopolitical issues always in play, including 375 00:20:44,240 --> 00:20:46,280 Speaker 1: over the last twelve to twenty four hours, and then 376 00:20:46,320 --> 00:20:49,880 Speaker 1: of course, uh the trade issues with Mexico and China 377 00:20:49,920 --> 00:20:51,639 Speaker 1: with the G twenty coming up. Do you get a 378 00:20:51,640 --> 00:20:55,760 Speaker 1: sense how one professional is factoring all these into uh 379 00:20:55,800 --> 00:20:58,760 Speaker 1: the investment outlook. We welcome our next guest, Diane Jaffee. 380 00:20:59,040 --> 00:21:02,359 Speaker 1: Diane is a group Managing director of the Relative Value 381 00:21:02,359 --> 00:21:06,119 Speaker 1: Group at TCW. Diane, thanks so much for joining us. 382 00:21:06,240 --> 00:21:09,040 Speaker 1: Let's just start with the FED. What did you make 383 00:21:09,240 --> 00:21:14,280 Speaker 1: of the FEDS comments this week? I think they acknowledge 384 00:21:14,320 --> 00:21:18,960 Speaker 1: the fact that market participants are worried about global growth, 385 00:21:19,119 --> 00:21:22,280 Speaker 1: US growth specifically, and now we have to add Iran 386 00:21:22,600 --> 00:21:26,720 Speaker 1: potentially i Ran strikes to the list of their worries exactly. 387 00:21:26,760 --> 00:21:28,760 Speaker 1: And so the the issue is do you feel I 388 00:21:28,800 --> 00:21:30,560 Speaker 1: guess the question is do you feel like the FED 389 00:21:30,640 --> 00:21:32,600 Speaker 1: is on top of this in terms of Okay, we're 390 00:21:32,600 --> 00:21:34,159 Speaker 1: gonna keep the rates kind of where we are, but 391 00:21:34,200 --> 00:21:39,960 Speaker 1: we are clearly opening the door to address rates going forward. Absolutely, 392 00:21:40,000 --> 00:21:42,239 Speaker 1: that is one of their goals is to you know, 393 00:21:42,280 --> 00:21:46,480 Speaker 1: instill confidence in the US markets, and so that's a 394 00:21:46,560 --> 00:21:49,560 Speaker 1: very important point right now. So on the geo political front, 395 00:21:49,600 --> 00:21:51,919 Speaker 1: it just obviously it just seems to be a front 396 00:21:51,960 --> 00:21:54,520 Speaker 1: burner issue all the time. And of course over the 397 00:21:54,560 --> 00:21:57,199 Speaker 1: last twelve to twenty four hours with Iran, how do 398 00:21:57,320 --> 00:22:01,680 Speaker 1: you factor the volatility that these seems to be escalating 399 00:22:01,720 --> 00:22:05,239 Speaker 1: geopolitical issues play on the markets. It does give us 400 00:22:05,560 --> 00:22:09,119 Speaker 1: more opportunity. We're bottom up fundamental investors, so we're in 401 00:22:09,160 --> 00:22:12,040 Speaker 1: it for our clients for the next one to two 402 00:22:12,119 --> 00:22:15,920 Speaker 1: years in terms of the investment prospects for the individual holdings. 403 00:22:16,160 --> 00:22:19,439 Speaker 1: Um So it does give us opportunities to uh NIT 404 00:22:19,560 --> 00:22:23,200 Speaker 1: and tuck around the edges. So it's interesting. One of 405 00:22:23,240 --> 00:22:26,359 Speaker 1: the issues, Diane is, you know, kind of the impact 406 00:22:26,880 --> 00:22:30,720 Speaker 1: that the president and UH and the President's tweets have 407 00:22:30,920 --> 00:22:33,640 Speaker 1: on short term moves in the market. Again, we had 408 00:22:34,080 --> 00:22:36,359 Speaker 1: some more tweets from President Trump this morning. How do 409 00:22:36,400 --> 00:22:39,240 Speaker 1: you factor that in? I know you're a long term investor, 410 00:22:39,280 --> 00:22:42,200 Speaker 1: but it just seems to introduce a layer of volatility 411 00:22:42,240 --> 00:22:45,119 Speaker 1: into the marketplace that can be nerving unnerving for some. 412 00:22:45,880 --> 00:22:50,200 Speaker 1: We had one of our analysts do UM scenario analysis 413 00:22:50,240 --> 00:22:53,920 Speaker 1: going back to UH early two thousand and eighteen when 414 00:22:54,080 --> 00:22:57,400 Speaker 1: Trump started tweeting quite a bit about China and tariffs, 415 00:22:57,840 --> 00:23:01,080 Speaker 1: and we noticed that UM with a high degree of 416 00:23:01,119 --> 00:23:04,639 Speaker 1: statistical significance that if the markets were down five days 417 00:23:04,720 --> 00:23:08,240 Speaker 1: proceeding UM, he was less likely to tweet about China 418 00:23:08,359 --> 00:23:11,720 Speaker 1: and hariffs. UM they has a t step score of 419 00:23:12,000 --> 00:23:14,440 Speaker 1: you know, two point six, which is quite high, and 420 00:23:14,520 --> 00:23:18,600 Speaker 1: so we would be less likely to anticipate a China 421 00:23:19,040 --> 00:23:22,800 Speaker 1: Careff tweet if the markets were down. I think this 422 00:23:22,840 --> 00:23:25,480 Speaker 1: is his long term game, as he of course has 423 00:23:25,520 --> 00:23:28,280 Speaker 1: the advantage of being the incumbent running into but he 424 00:23:28,320 --> 00:23:30,480 Speaker 1: needs the economy and he needs the markets to be 425 00:23:30,560 --> 00:23:33,639 Speaker 1: behind him, Diane, good morning, and it's just thrilled to 426 00:23:33,640 --> 00:23:36,719 Speaker 1: have you on with with decades of portfolio management and 427 00:23:37,080 --> 00:23:39,560 Speaker 1: long I mean miss Jaffee Folks doesn't want to ever 428 00:23:39,600 --> 00:23:42,479 Speaker 1: admit this, but long ago and far away, you know, 429 00:23:42,560 --> 00:23:45,160 Speaker 1: ten years ago or so, she was a security analyst 430 00:23:45,200 --> 00:23:48,760 Speaker 1: as well. And you know, Diane, that it does come 431 00:23:48,800 --> 00:23:52,680 Speaker 1: down to revenue dynamics. Just as a summary of the 432 00:23:52,760 --> 00:23:55,880 Speaker 1: last thirty days, there's gonna be a recession. We're all 433 00:23:55,880 --> 00:23:59,000 Speaker 1: gonna die. Revenue is going to be terrible. I know, 434 00:23:59,080 --> 00:24:02,520 Speaker 1: a TCW, you don't buy that. But what will be 435 00:24:02,600 --> 00:24:06,399 Speaker 1: the lessening of revenue as you look out over a 436 00:24:06,480 --> 00:24:11,399 Speaker 1: year or two in the stock market. Business uncertainty, of course, 437 00:24:11,520 --> 00:24:15,399 Speaker 1: is what will directly lead to capital expenditures being down, 438 00:24:15,520 --> 00:24:19,160 Speaker 1: and that is something that we are watching quite clearly. Um. 439 00:24:19,240 --> 00:24:23,480 Speaker 1: If you look at the small business economic um expectations 440 00:24:23,560 --> 00:24:29,119 Speaker 1: for capital expenditures, they are up um for since early January, 441 00:24:29,119 --> 00:24:31,360 Speaker 1: but they are down since last August. And I think 442 00:24:31,400 --> 00:24:36,240 Speaker 1: tariffs have created business uncertainty about where they should if 443 00:24:36,240 --> 00:24:40,720 Speaker 1: there is the demand put their manufacturing capabilities. So, Diane, 444 00:24:40,720 --> 00:24:44,480 Speaker 1: I know you're in the relative value group of TCW, 445 00:24:44,680 --> 00:24:49,040 Speaker 1: where do you folks see value Relative Value now we 446 00:24:49,280 --> 00:24:52,240 Speaker 1: um you know so. One of the unsung heroes over 447 00:24:52,280 --> 00:24:54,760 Speaker 1: the last couple of days of uncertainty, of course, have 448 00:24:54,840 --> 00:24:57,960 Speaker 1: been energy stocks. And one of our disciplines is always 449 00:24:58,000 --> 00:25:01,480 Speaker 1: to maintain exposure to all the main economic sectors. And 450 00:25:01,560 --> 00:25:04,760 Speaker 1: while sometimes um it seems like hey, you should be 451 00:25:04,800 --> 00:25:07,840 Speaker 1: completely out of energy or completely out of another economic sector, 452 00:25:07,880 --> 00:25:10,720 Speaker 1: we always trying to find the best names within every 453 00:25:10,760 --> 00:25:14,000 Speaker 1: sector and that has turned to be quite fruitful for 454 00:25:14,040 --> 00:25:17,000 Speaker 1: our clients over the last few days. Diane Jaffee, thank 455 00:25:17,040 --> 00:25:19,359 Speaker 1: you so much. Diane is a group Managing director of 456 00:25:19,800 --> 00:25:34,879 Speaker 1: Relative Value Group at TCW, joining us on the phone. 457 00:25:36,359 --> 00:25:39,320 Speaker 1: There are those that talk and there are those that do. 458 00:25:39,880 --> 00:25:42,720 Speaker 1: We were thrilled to have joining us in our studios 459 00:25:42,720 --> 00:25:47,880 Speaker 1: in New York earlier this week, General McCrystal. We now 460 00:25:47,960 --> 00:25:51,720 Speaker 1: finished the week strong with Admiral Stravidis. James Trevidiz of 461 00:25:51,800 --> 00:25:54,879 Speaker 1: course with his public service in the Navy and with NATO, 462 00:25:55,440 --> 00:25:57,720 Speaker 1: and then it toughs in their Fletcher School and now 463 00:25:57,840 --> 00:26:01,439 Speaker 1: the Carlisle Group. James trevidis at an important moment for 464 00:26:01,520 --> 00:26:06,280 Speaker 1: the nation. Ad will you always speak in grace of 465 00:26:06,320 --> 00:26:10,480 Speaker 1: the public institution, The executive the president who was also 466 00:26:10,600 --> 00:26:13,959 Speaker 1: our commander in chief. If I look at the definitive 467 00:26:14,200 --> 00:26:20,520 Speaker 1: Eric Larabie one volume on Franklin Delano Roosevelt, I just 468 00:26:20,920 --> 00:26:24,760 Speaker 1: don't think I would have seen a tweet uncocked and 469 00:26:24,920 --> 00:26:30,840 Speaker 1: loaded or locked in loaded from the gentleman from another 470 00:26:30,920 --> 00:26:35,760 Speaker 1: time and place simply your thoughts on the execution of 471 00:26:35,800 --> 00:26:43,440 Speaker 1: our military policy by tweet. It's so unhelpful, Tom, and uh, 472 00:26:43,480 --> 00:26:45,320 Speaker 1: you know, to throw another book back at you. But 473 00:26:45,440 --> 00:26:50,160 Speaker 1: the new biography of Winston Churchill, Walking with Destiny by 474 00:26:50,240 --> 00:26:54,560 Speaker 1: Andrew Roberts, I think addresses what Churchill did very well, 475 00:26:54,920 --> 00:26:58,159 Speaker 1: which was to gather his allies about him, come up 476 00:26:58,200 --> 00:27:01,880 Speaker 1: with a plan, and then rocks to carry it through. Um, 477 00:27:01,920 --> 00:27:06,119 Speaker 1: when you're taking these espresso shots of tweet after tweet 478 00:27:06,160 --> 00:27:10,000 Speaker 1: after tweet, very difficult for the military to execute, and 479 00:27:10,119 --> 00:27:13,399 Speaker 1: more importantly, it's difficult for our allies to follow, and 480 00:27:13,480 --> 00:27:16,600 Speaker 1: it encourages our opponents. I want to make clear, folks 481 00:27:16,640 --> 00:27:19,000 Speaker 1: that this is delicate for the ad Bung. He was 482 00:27:19,040 --> 00:27:22,280 Speaker 1: of course vetted as a vice presidential candidate the last 483 00:27:22,280 --> 00:27:25,280 Speaker 1: time around. There was some talk of that is, well, 484 00:27:26,040 --> 00:27:29,920 Speaker 1: how do people like you respond to this who are 485 00:27:29,960 --> 00:27:34,320 Speaker 1: still wearing the uniform. What does the joint chiefs do? 486 00:27:34,880 --> 00:27:39,399 Speaker 1: What do the line officers do on our ships on 487 00:27:39,720 --> 00:27:43,240 Speaker 1: soil in the Middle East? When they see this action 488 00:27:43,680 --> 00:27:48,359 Speaker 1: by a president, they are at this point two and 489 00:27:48,359 --> 00:27:52,720 Speaker 1: a half years into it, they recognize the unpredictability, the 490 00:27:52,920 --> 00:27:57,080 Speaker 1: variability of the decision process, and they're also concerned, Tom 491 00:27:57,080 --> 00:28:00,480 Speaker 1: about the lack of a civilian leader in the form 492 00:28:00,720 --> 00:28:04,440 Speaker 1: of a Secretary of Defense. At the moment, we don't 493 00:28:04,520 --> 00:28:10,320 Speaker 1: have a fully vetted, seated, congressionally approved secretary of Defense. 494 00:28:10,359 --> 00:28:13,080 Speaker 1: These are the moments when you really wish former General 495 00:28:13,160 --> 00:28:16,000 Speaker 1: Jim Mattis were in the chair to answer the question 496 00:28:16,080 --> 00:28:19,280 Speaker 1: what are troops do in the field? However, is operating 497 00:28:19,320 --> 00:28:23,080 Speaker 1: professionally and they will continue to do that. Admiral, let 498 00:28:23,119 --> 00:28:25,639 Speaker 1: me bring in my colleague Paul Sweeney in New York. Paul, 499 00:28:25,920 --> 00:28:28,840 Speaker 1: thank you, Tom. Admiral, what do you think a separate 500 00:28:28,840 --> 00:28:30,560 Speaker 1: from what just happened over the last twelve to twenty 501 00:28:30,560 --> 00:28:33,240 Speaker 1: four hours with the strike and then the non strike, 502 00:28:33,359 --> 00:28:38,720 Speaker 1: what do you think is a Rand's strategy here? Iran 503 00:28:39,120 --> 00:28:42,320 Speaker 1: is simply working their way up the ladder of escalation, 504 00:28:42,800 --> 00:28:47,880 Speaker 1: hoping over time to produce an effect of a reduction 505 00:28:48,080 --> 00:28:52,680 Speaker 1: in the sanctions and they will continue to do that. 506 00:28:52,720 --> 00:28:55,640 Speaker 1: They're taking a page out of Kim John Huns playbook 507 00:28:56,120 --> 00:29:00,920 Speaker 1: and deciding that, uh, the path to attend and is 508 00:29:00,960 --> 00:29:06,520 Speaker 1: to continue this type of offensive escalatory pattern. So unfortunately, 509 00:29:06,880 --> 00:29:09,520 Speaker 1: I don't see this diminishing and I think we're going 510 00:29:09,560 --> 00:29:12,760 Speaker 1: to continue to to see We're going to continue to 511 00:29:12,880 --> 00:29:16,640 Speaker 1: see challenge ahead. So given that is the case, that 512 00:29:16,760 --> 00:29:19,360 Speaker 1: is the strategy of a rent, how do you think 513 00:29:19,600 --> 00:29:21,240 Speaker 1: or what do you believe the U S strategy is 514 00:29:21,440 --> 00:29:24,000 Speaker 1: right now that we have a definitive strategy from your perspective, 515 00:29:24,640 --> 00:29:26,560 Speaker 1: I don't think we do. And that's our problem. I'll 516 00:29:26,560 --> 00:29:28,760 Speaker 1: tell you three things quickly. We ought to be doing 517 00:29:28,960 --> 00:29:32,040 Speaker 1: is working more with our allies and our partners and 518 00:29:32,080 --> 00:29:34,000 Speaker 1: our friends. We've got to get this out of a 519 00:29:34,160 --> 00:29:38,000 Speaker 1: US versus Iran and get it into a global community 520 00:29:38,120 --> 00:29:41,160 Speaker 1: versus Iran. Drums are one thing, but when you're blowing 521 00:29:41,240 --> 00:29:45,760 Speaker 1: up tankers um that ought to galvanize the international community. Secondly, 522 00:29:45,800 --> 00:29:48,440 Speaker 1: we need to give the president more options than just 523 00:29:48,520 --> 00:29:52,560 Speaker 1: a Tomahawks strike, and that means cyber activity, offensive cyber 524 00:29:52,720 --> 00:29:56,360 Speaker 1: special operations c i A. Give him more options and 525 00:29:56,440 --> 00:30:00,000 Speaker 1: tools that he can deploy. And Thirdly, and you'll under 526 00:30:00,040 --> 00:30:02,920 Speaker 1: stand this at Bloomberg, we've got to get the private 527 00:30:02,960 --> 00:30:05,520 Speaker 1: sector working with us. At the end of the day 528 00:30:05,600 --> 00:30:09,920 Speaker 1: keeping the straight open. It's gonna be escorting tankers protecting them. 529 00:30:10,280 --> 00:30:13,280 Speaker 1: That's going to require working with the international maritime community. 530 00:30:13,560 --> 00:30:16,080 Speaker 1: There's three things we ought to be doing that would 531 00:30:16,120 --> 00:30:19,080 Speaker 1: form the basis of a strategy. I don't see that 532 00:30:19,200 --> 00:30:21,640 Speaker 1: so far. So ad, We'll just give us a sense 533 00:30:21,680 --> 00:30:24,040 Speaker 1: from your experience of the U. S. Navy. There's a 534 00:30:24,040 --> 00:30:26,040 Speaker 1: carrier group over there and that part of the world 535 00:30:27,240 --> 00:30:29,120 Speaker 1: that seems like you look at it on the map, 536 00:30:29,120 --> 00:30:31,240 Speaker 1: how how narrow that straight of the hor Moves is 537 00:30:31,280 --> 00:30:33,640 Speaker 1: and it seems very close quarters. Give us a sense 538 00:30:33,680 --> 00:30:36,640 Speaker 1: of what it's like to serve in an hot area 539 00:30:36,680 --> 00:30:40,240 Speaker 1: in that part of the world. So I commanded a 540 00:30:40,240 --> 00:30:44,080 Speaker 1: carrier strike group built on the carrier Enterprise. I've commanded 541 00:30:44,120 --> 00:30:47,440 Speaker 1: destroyers and cruisers in and out of that waterway. When 542 00:30:47,480 --> 00:30:49,440 Speaker 1: you go through the straight of horn Moves, you're at 543 00:30:49,480 --> 00:30:53,040 Speaker 1: general quarters. Every man and woman in the ship is 544 00:30:53,160 --> 00:30:57,600 Speaker 1: up away, battle stations are manned. It's very very dangerous 545 00:30:57,640 --> 00:31:00,840 Speaker 1: and as the temperatures go up as the summer heats 546 00:31:00,920 --> 00:31:06,440 Speaker 1: up decision making. That's harder and harder um ahead, and well, 547 00:31:06,640 --> 00:31:08,280 Speaker 1: I want to try to take this down to a 548 00:31:08,320 --> 00:31:12,720 Speaker 1: granular moment. I may be wrong that the USS bunker 549 00:31:12,840 --> 00:31:17,560 Speaker 1: Hill c G fifty two is on service somewhere in 550 00:31:17,600 --> 00:31:20,120 Speaker 1: the vicinity of the Persian Gulf. That's one report I 551 00:31:20,160 --> 00:31:22,800 Speaker 1: have from weeks ago. A. Well, maybe that's true, maybe 552 00:31:22,840 --> 00:31:26,560 Speaker 1: it's not, but it's something. You know, the Ticonderoga class 553 00:31:26,960 --> 00:31:30,360 Speaker 1: guided missile cruiser. It's not getting the press of the 554 00:31:30,400 --> 00:31:34,360 Speaker 1: George Washington and the big aircraft carriers. What's it like 555 00:31:34,600 --> 00:31:38,280 Speaker 1: on one of those smaller ships at sea, as Paul 556 00:31:38,320 --> 00:31:41,880 Speaker 1: mentioned in the Heat of the Persian Gulf. Yeah, so 557 00:31:42,000 --> 00:31:45,800 Speaker 1: you're loaded up with Tomahawk missiles. That's principally what you have. 558 00:31:45,960 --> 00:31:50,080 Speaker 1: It's a missile that'll bill fifteen miles. It's so accurate 559 00:31:50,160 --> 00:31:52,560 Speaker 1: we can choose which window to fly it through in 560 00:31:52,560 --> 00:31:56,800 Speaker 1: a building. You are up seven, you're watching for Iranian 561 00:31:57,440 --> 00:32:00,320 Speaker 1: small boats that are harassing you. You're so are is 562 00:32:00,600 --> 00:32:03,880 Speaker 1: trying to make sure US an Iranian diesel boat doesn't 563 00:32:03,920 --> 00:32:09,640 Speaker 1: sneak up on you. Everybody's tired. It's it's extremely intense operations. 564 00:32:10,000 --> 00:32:12,360 Speaker 1: You know, you're on the forefront of defending your nation. 565 00:32:12,760 --> 00:32:16,880 Speaker 1: It is our navy and the military in general. Are 566 00:32:16,920 --> 00:32:21,600 Speaker 1: they overextended now with exhaustion or as you mentioned with 567 00:32:21,640 --> 00:32:25,920 Speaker 1: the lack of coordinated effort in Washington, is there an 568 00:32:26,080 --> 00:32:32,200 Speaker 1: urgency to get a more cohesive plan because of ship exhaustion? 569 00:32:33,400 --> 00:32:35,960 Speaker 1: There is, indeed, and we saw evidence of that last 570 00:32:35,960 --> 00:32:41,280 Speaker 1: summer with the terrible collisions the two Harley Burke class destroyers. 571 00:32:41,600 --> 00:32:46,320 Speaker 1: We lost seventeen sailors in simple collisions. That see clearly 572 00:32:46,360 --> 00:32:48,920 Speaker 1: exhaustion as part of that the Navy is trying to address. 573 00:32:48,920 --> 00:32:51,720 Speaker 1: At bottom line, Come, we don't have enough ships. We 574 00:32:51,800 --> 00:32:55,320 Speaker 1: only have two seventy five ships to cover the planet Earth. 575 00:32:55,360 --> 00:32:58,760 Speaker 1: We need at least three hundred fifty. By every study, 576 00:32:59,000 --> 00:33:00,880 Speaker 1: that is the print of a way you solve the 577 00:33:00,920 --> 00:33:03,120 Speaker 1: exhaustion problem. Lad Well, this has been an honor to 578 00:33:03,160 --> 00:33:06,360 Speaker 1: have you on with us today in general Crystal. A 579 00:33:06,400 --> 00:33:10,320 Speaker 1: few days ago Stravits of Carlisle Group where this as well. Paul. 580 00:33:10,520 --> 00:33:14,000 Speaker 1: You know we do economics, finance and investment, but I 581 00:33:14,360 --> 00:33:17,480 Speaker 1: must say it's important to have these authorities on our 582 00:33:17,520 --> 00:33:20,959 Speaker 1: military reach with us today. Yeah. Absolutely, Tom, It's an 583 00:33:20,960 --> 00:33:23,120 Speaker 1: honor to have the Admiral on and giving us a 584 00:33:23,400 --> 00:33:26,160 Speaker 1: what are clearly, you know, very well informed thoughts of 585 00:33:26,200 --> 00:33:28,840 Speaker 1: what it's like to be serving right now in the 586 00:33:28,880 --> 00:33:33,200 Speaker 1: golf at this time of uncertainty. Thanks for listening to 587 00:33:33,240 --> 00:33:37,800 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 588 00:33:37,840 --> 00:33:43,680 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 589 00:33:43,720 --> 00:33:47,000 Speaker 1: on Twitter at Tom Keane before the podcast. You can 590 00:33:47,080 --> 00:34:00,840 Speaker 1: always catch us worldwide. I'm Bloomberg Radio.