1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,800 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,320 --> 00:00:25,640 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,720 --> 00:00:27,040 Speaker 1: us live on YouTube. 6 00:00:27,400 --> 00:00:31,840 Speaker 2: David libs with us right now, JP Morgan Asset Management, Paul. 7 00:00:31,880 --> 00:00:34,599 Speaker 2: There's like twenty degrees in America that are Pixie does. 8 00:00:35,280 --> 00:00:38,760 Speaker 2: One of them is leadership Studies Williams College. Like it's 9 00:00:38,760 --> 00:00:41,000 Speaker 2: like liberal arts, but it's like you have to actually work. 10 00:00:41,479 --> 00:00:44,479 Speaker 2: You have to read everything on FDR. FDR, you read 11 00:00:44,479 --> 00:00:49,120 Speaker 2: everything on FDR. It's like cottage industry. There. Let's take 12 00:00:49,200 --> 00:00:54,160 Speaker 2: leadership studies, David over to the markets right now. Where's 13 00:00:54,200 --> 00:00:57,520 Speaker 2: the leadership is their new leadership in the market. 14 00:00:57,840 --> 00:01:00,880 Speaker 3: So up until this point, the leadership obviously has been 15 00:01:00,920 --> 00:01:04,360 Speaker 3: concentrated in the tech trade and more specifically the hardware 16 00:01:04,360 --> 00:01:07,360 Speaker 3: side of things, the chip side of things. When we 17 00:01:07,480 --> 00:01:10,119 Speaker 3: zoom out and we take a twelve to eighteen month view, 18 00:01:10,400 --> 00:01:13,520 Speaker 3: we do think that this rotation is going to begin 19 00:01:13,600 --> 00:01:16,680 Speaker 3: to materialize in a more durable way. I think part 20 00:01:16,720 --> 00:01:19,119 Speaker 3: of what you're seeing in the market today is investors 21 00:01:19,160 --> 00:01:22,440 Speaker 3: differentiate between the different parts of the AI supply chain, 22 00:01:22,480 --> 00:01:24,480 Speaker 3: and so they think about the chips one way and 23 00:01:24,480 --> 00:01:27,480 Speaker 3: the hyper scalers another way. But you know, every company 24 00:01:27,520 --> 00:01:30,280 Speaker 3: is an AI company in this environment, and so as 25 00:01:30,280 --> 00:01:33,560 Speaker 3: you see these productivity benefits begin to accrue more broadly, 26 00:01:34,080 --> 00:01:35,600 Speaker 3: that's when I really think you're going to see this 27 00:01:35,680 --> 00:01:37,840 Speaker 3: rotation materialize in a more durable way. 28 00:01:38,800 --> 00:01:41,560 Speaker 4: Are we at the point now where it used to 29 00:01:41,560 --> 00:01:45,880 Speaker 4: be the more you spend on capex visa VAI, the 30 00:01:45,880 --> 00:01:47,560 Speaker 4: better it is for your stock. Now it feels like 31 00:01:47,600 --> 00:01:49,840 Speaker 4: that's not the case anymore, and the market maybe is 32 00:01:49,880 --> 00:01:52,320 Speaker 4: discerning winners and losers. How do you think about that? 33 00:01:52,560 --> 00:01:54,639 Speaker 3: So I think it all comes back to the idea 34 00:01:54,680 --> 00:01:56,440 Speaker 3: that if you look at what's happened to free cash 35 00:01:56,480 --> 00:01:58,920 Speaker 3: flow for the hyper scalers, it's efectively gone to zero. 36 00:01:59,400 --> 00:02:03,120 Speaker 3: Andoni Miller tells you that capital structure doesn't really matter, 37 00:02:03,120 --> 00:02:05,000 Speaker 3: but it's how you use that capital structure. And so 38 00:02:05,320 --> 00:02:07,880 Speaker 3: we're going from a world where all of this AI 39 00:02:08,000 --> 00:02:11,400 Speaker 3: spend was internally financed to one where the capital markets 40 00:02:11,440 --> 00:02:13,639 Speaker 3: need to play a role. You've seen debt markets obviously 41 00:02:13,680 --> 00:02:16,480 Speaker 3: play a significant role up until this point, you're seeing 42 00:02:16,480 --> 00:02:18,560 Speaker 3: equity markets begin to play more of a role as 43 00:02:18,600 --> 00:02:20,840 Speaker 3: well as we've seen increasing issuance. I do think you 44 00:02:20,880 --> 00:02:23,799 Speaker 3: will continue to see that equity story going forward. It's 45 00:02:23,840 --> 00:02:25,919 Speaker 3: not just going to be about debt. The good news 46 00:02:25,919 --> 00:02:27,320 Speaker 3: here is that's going to allow some of the free 47 00:02:27,320 --> 00:02:29,200 Speaker 3: cash flow to come back. And so I think what 48 00:02:29,240 --> 00:02:32,240 Speaker 3: we're moving into is arguably a world of more balance. 49 00:02:32,680 --> 00:02:34,280 Speaker 3: After being in a world for the past couple of 50 00:02:34,360 --> 00:02:36,800 Speaker 3: years where it just felt like one big, one way trade. 51 00:02:36,919 --> 00:02:39,160 Speaker 2: You have a single sentence that you're like, you're thinking 52 00:02:39,240 --> 00:02:41,840 Speaker 2: for and you're looking in Japan, et cetera. What do 53 00:02:41,919 --> 00:02:44,320 Speaker 2: you do with a Korea given this IPO today? You 54 00:02:44,360 --> 00:02:46,560 Speaker 2: forget about the IPO. I don't, I'm saying your remed 55 00:02:47,120 --> 00:02:50,560 Speaker 2: But what do you do with the semiconductor juggernauts of 56 00:02:50,600 --> 00:02:54,200 Speaker 2: the Pacific? Rim just observe it or do you actually 57 00:02:54,240 --> 00:02:54,680 Speaker 2: own it? 58 00:02:55,080 --> 00:02:58,600 Speaker 3: So I think that again we see value in that trade. 59 00:02:58,639 --> 00:03:01,120 Speaker 3: We've seen value in that trade, but we're also not 60 00:03:01,400 --> 00:03:04,080 Speaker 3: ignorant to the fact that you are a better investor 61 00:03:04,120 --> 00:03:06,160 Speaker 3: if you trim your winners and you know, maybe add 62 00:03:06,160 --> 00:03:08,200 Speaker 3: to some of your losers. And so as we've seen 63 00:03:08,240 --> 00:03:11,520 Speaker 3: that outperformance in the hardware space. We've brought some of 64 00:03:11,560 --> 00:03:13,960 Speaker 3: that exposure down and we're leaning into other markets that 65 00:03:13,960 --> 00:03:16,480 Speaker 3: the frankly or cheaper, you know, one part of em 66 00:03:16,560 --> 00:03:19,200 Speaker 3: that is still kind of unloved is China. We see 67 00:03:19,240 --> 00:03:21,840 Speaker 3: opportunity there because of the tech exposure. It's a cheaper 68 00:03:21,880 --> 00:03:24,080 Speaker 3: way of playing the AI story because it just hasn't 69 00:03:24,120 --> 00:03:25,880 Speaker 3: run as hard as say the careers of the world, 70 00:03:25,919 --> 00:03:27,880 Speaker 3: are the hyperscalers, so on and so forth. 71 00:03:27,919 --> 00:03:30,639 Speaker 4: As it relates to China, there is that China risk 72 00:03:30,720 --> 00:03:33,640 Speaker 4: that's been there for my entire investing career, and we 73 00:03:33,680 --> 00:03:37,520 Speaker 4: saw it most recently when they, you know, crack down 74 00:03:37,560 --> 00:03:40,520 Speaker 4: on the technology names five, six, seven years ago. How 75 00:03:40,560 --> 00:03:43,080 Speaker 4: do you get comfortable with that China risk broadly defined? 76 00:03:43,520 --> 00:03:45,360 Speaker 3: So you have to think about it. But I would 77 00:03:45,400 --> 00:03:47,680 Speaker 3: argue that geopolitical risk is a feature and not a 78 00:03:47,720 --> 00:03:50,240 Speaker 3: bug of the current environment. And so whether you're taking 79 00:03:50,280 --> 00:03:53,360 Speaker 3: geopolitical risk in China, whether you're taking geopolitical risk in 80 00:03:53,360 --> 00:03:56,080 Speaker 3: the US, right, it's about getting the right balance. And so, 81 00:03:56,360 --> 00:03:59,680 Speaker 3: you know, are we massively overweight China in portfolios? No, 82 00:03:59,760 --> 00:04:02,040 Speaker 3: but we're we see opportunity where we think that there's 83 00:04:02,080 --> 00:04:04,880 Speaker 3: a structural story We're comfortable leaning in because we do 84 00:04:04,960 --> 00:04:07,720 Speaker 3: think that over time, global equity markets rise together. 85 00:04:07,760 --> 00:04:10,200 Speaker 2: We're just talking about the nineteen sixty seven Red Sox. 86 00:04:10,280 --> 00:04:12,720 Speaker 2: You don't remember that, David, But what I remember is 87 00:04:12,760 --> 00:04:17,600 Speaker 2: back then international allocation was five or ten percent. Don't 88 00:04:17,600 --> 00:04:21,240 Speaker 2: give me every accounts different. Is a general idea Today? 89 00:04:21,560 --> 00:04:23,960 Speaker 2: What is the percentage of international allocation? 90 00:04:24,240 --> 00:04:26,360 Speaker 3: We tend to start with about a third of an 91 00:04:26,360 --> 00:04:28,760 Speaker 3: equity portfolio, way bigger than the past. 92 00:04:28,960 --> 00:04:32,640 Speaker 2: Exactly, you're not buying a concrete company, you're not buying 93 00:04:32,880 --> 00:04:36,080 Speaker 2: the telephone company. Then when you look at a given country, 94 00:04:36,160 --> 00:04:36,960 Speaker 2: how do you do that? 95 00:04:37,520 --> 00:04:39,640 Speaker 3: So the way we think about it is, you know, 96 00:04:39,720 --> 00:04:43,000 Speaker 3: as globalization has played out, particularly over the past twenty 97 00:04:43,000 --> 00:04:46,360 Speaker 3: five years, you've seen these themes. You've seen these stories 98 00:04:46,400 --> 00:04:49,240 Speaker 3: really kind of gain a global presence. And so you know, 99 00:04:49,279 --> 00:04:51,880 Speaker 3: if we're playing the semis, we're thinking about how do 100 00:04:51,920 --> 00:04:55,119 Speaker 3: you play the semis in Europe versus em versus the US. 101 00:04:55,160 --> 00:04:57,880 Speaker 3: If we're playing the tech software side of things, how 102 00:04:57,880 --> 00:04:59,960 Speaker 3: do you play that in different markets? I would all 103 00:05:00,000 --> 00:05:01,680 Speaker 3: also argue that you know, when you look at these 104 00:05:01,760 --> 00:05:03,720 Speaker 3: particularly the emerging markets, when you look at some of 105 00:05:03,760 --> 00:05:08,760 Speaker 3: these economies, right they're much more cyclically and manufacturing oriented 106 00:05:08,839 --> 00:05:10,560 Speaker 3: than the US, and so you can play some of 107 00:05:10,560 --> 00:05:13,159 Speaker 3: those more durable old school businesses. You don't have to 108 00:05:13,160 --> 00:05:15,200 Speaker 3: play the software the services story like you do in 109 00:05:15,240 --> 00:05:15,679 Speaker 3: the US. 110 00:05:16,120 --> 00:05:18,120 Speaker 4: What are you doing in the fixed income market these days? 111 00:05:18,279 --> 00:05:18,799 Speaker 2: High yield? 112 00:05:18,880 --> 00:05:21,640 Speaker 3: We love high yield real I think seven percent all in, 113 00:05:21,720 --> 00:05:24,080 Speaker 3: particularly as this AI debt comes to market with the 114 00:05:24,120 --> 00:05:27,039 Speaker 3: backing of the hyperscalers looks pretty attractive. But we're not 115 00:05:27,200 --> 00:05:30,960 Speaker 3: completely just focused on the corporate space. We're also diversifying 116 00:05:31,000 --> 00:05:33,640 Speaker 3: into the securitized space. We think the US consumer's in 117 00:05:33,680 --> 00:05:35,400 Speaker 3: pretty good shape, and that's a way of getting a 118 00:05:35,440 --> 00:05:39,960 Speaker 3: more diversified carry in portfolios with arguably less volatility. 119 00:05:39,360 --> 00:05:39,640 Speaker 4: Than I think. 120 00:05:39,640 --> 00:05:40,800 Speaker 3: We're going to see inequities going. 121 00:05:40,960 --> 00:05:43,080 Speaker 2: Should we get them in trouble with Mary? Oh yeah, 122 00:05:43,160 --> 00:05:47,520 Speaker 2: let's do that right now. Okay, So SpaceX is enjoying 123 00:05:47,560 --> 00:05:49,880 Speaker 2: all of a sudden the thirty year piece six point 124 00:05:50,000 --> 00:05:53,920 Speaker 2: six y five percent price down, yield up? Are you 125 00:05:54,040 --> 00:05:57,240 Speaker 2: kidding me? Seven point one percent? And it's breaking down 126 00:05:57,279 --> 00:05:59,200 Speaker 2: to a new law. We're not quite there yet. This 127 00:05:59,279 --> 00:06:03,279 Speaker 2: morning is well, when you say high yield, that's what I. 128 00:06:03,400 --> 00:06:07,560 Speaker 3: Triple b So triple B is technically investment grade. We're 129 00:06:07,560 --> 00:06:10,000 Speaker 3: more comfortable in the double B and the single B space. 130 00:06:10,360 --> 00:06:13,160 Speaker 3: The stress in triple C is really idiosyncratics, So we're 131 00:06:13,160 --> 00:06:16,039 Speaker 3: evaluating that on a one off basis. But we feel 132 00:06:16,120 --> 00:06:18,839 Speaker 3: like we're getting paid for owning this lower quality debt 133 00:06:18,920 --> 00:06:21,440 Speaker 3: that frankly is much higher quality than it was twenty 134 00:06:21,560 --> 00:06:23,960 Speaker 3: years ago, and so we think, yes, default rates will 135 00:06:24,040 --> 00:06:26,400 Speaker 3: rise over time, but we think structurally they will be 136 00:06:26,440 --> 00:06:27,760 Speaker 3: lower than they have been historically. 137 00:06:27,800 --> 00:06:29,440 Speaker 2: You know, I said it home with that bill in 138 00:06:29,839 --> 00:06:31,839 Speaker 2: a beverage of my choice, and I watch YouTube like 139 00:06:31,880 --> 00:06:34,880 Speaker 2: everybody else, and it seems like there's a condo glut 140 00:06:34,920 --> 00:06:39,160 Speaker 2: in the world. Can you play real estate internationally? Did 141 00:06:39,200 --> 00:06:41,800 Speaker 2: you see what Simon Property Group has done that I 142 00:06:41,839 --> 00:06:44,200 Speaker 2: don't own what's that? It's been like a boot shot? 143 00:06:44,240 --> 00:06:46,760 Speaker 2: Oh okay, real estate in the US? Yeah, do you 144 00:06:46,800 --> 00:06:48,640 Speaker 2: buy international real estate? 145 00:06:49,440 --> 00:06:52,360 Speaker 3: We do see opportunities in real estate markets outside of 146 00:06:52,360 --> 00:06:54,440 Speaker 3: the US. I think it's a more nuanced story than 147 00:06:54,520 --> 00:06:56,960 Speaker 3: here in the US. So, you know, in places like 148 00:06:57,040 --> 00:06:59,719 Speaker 3: Southeast Asia or Asia broadly, we think the multi family 149 00:06:59,760 --> 00:07:02,480 Speaker 3: still is one that really has legs. When we look 150 00:07:02,520 --> 00:07:04,880 Speaker 3: at Europe, I mean return to office in Europe has 151 00:07:04,920 --> 00:07:07,240 Speaker 3: been completely different than return to office in the US. 152 00:07:07,320 --> 00:07:09,280 Speaker 3: And when you look at some of those prime properties 153 00:07:09,320 --> 00:07:12,320 Speaker 3: in central business districts, we do see opportunity there. And 154 00:07:12,360 --> 00:07:14,400 Speaker 3: so I mean the short answer is, yes, we do 155 00:07:14,440 --> 00:07:16,600 Speaker 3: see opportunity in real estate globally. 156 00:07:17,240 --> 00:07:18,080 Speaker 2: But when you look at. 157 00:07:17,960 --> 00:07:20,000 Speaker 3: Those non US markets, you have to have a bit 158 00:07:20,040 --> 00:07:21,600 Speaker 3: of a sharper tip of the spear. 159 00:07:21,880 --> 00:07:22,960 Speaker 2: You don't want to own the beta. 160 00:07:23,000 --> 00:07:25,040 Speaker 3: It's really more about trying to extract the alpha. 161 00:07:25,520 --> 00:07:27,960 Speaker 4: JPMorgan Essett Management. You guys are back at work, right, 162 00:07:28,240 --> 00:07:30,720 Speaker 4: sure are five days a week? Five days? Well, they 163 00:07:30,720 --> 00:07:31,960 Speaker 4: got the new office. 164 00:07:32,120 --> 00:07:34,960 Speaker 2: It's gorgeous. I went by Madison Avenue on the backside. 165 00:07:34,960 --> 00:07:38,240 Speaker 2: It's even more gorgeous in the front side. You know, 166 00:07:38,280 --> 00:07:41,760 Speaker 2: we have somebody in from the Ohio State, is that right? 167 00:07:41,840 --> 00:07:45,280 Speaker 2: And like there's like forty bars down the juggernaut to 168 00:07:45,320 --> 00:07:48,920 Speaker 2: get to Ohio State. At Williams College, it's like the 169 00:07:48,960 --> 00:07:50,520 Speaker 2: Water Street grill and that's it. 170 00:07:50,640 --> 00:07:51,040 Speaker 4: That's it. 171 00:07:51,560 --> 00:07:53,920 Speaker 3: There was there was one other bar when I was there. 172 00:07:53,920 --> 00:07:55,800 Speaker 3: It was called the Red Herring. The Purple Pub burned 173 00:07:55,840 --> 00:07:58,040 Speaker 3: down my freshman year. The number of the plub has 174 00:07:58,080 --> 00:07:59,880 Speaker 3: since been rebuilt and so now I think we're at 175 00:07:59,880 --> 00:08:02,400 Speaker 3: like NET three, but a little different than the Ohio 176 00:08:02,400 --> 00:08:02,920 Speaker 3: state for sure. 177 00:08:03,040 --> 00:08:06,160 Speaker 2: What is the beer of choice in Williamstown. 178 00:08:05,880 --> 00:08:11,720 Speaker 3: I'd say Berkshire Brewing Company Steel steel rail, Yeah, can. 179 00:08:11,800 --> 00:08:16,040 Speaker 2: But my beer choice was Course three two beer water. 180 00:08:16,360 --> 00:08:18,800 Speaker 2: You're a canna Bugweiser. What is it called. 181 00:08:19,040 --> 00:08:22,080 Speaker 3: It's a local brewery called BBC and they make a 182 00:08:22,120 --> 00:08:24,920 Speaker 3: steel rail pale ale and that was was available. 183 00:08:25,800 --> 00:08:30,360 Speaker 5: Will you go away? Let's thank you so much. She's 184 00:08:30,400 --> 00:08:33,360 Speaker 5: Global markets. Chout it this JP Morgan and he'll be 185 00:08:33,400 --> 00:08:36,920 Speaker 5: buying us around. They probably serve that beer, Paul at 186 00:08:36,960 --> 00:08:39,920 Speaker 5: the new JP Morgan building. Some I'll look it up, 187 00:08:39,960 --> 00:08:42,040 Speaker 5: some Berkshire beer. We'll give him a shout out here 188 00:08:42,480 --> 00:08:43,080 Speaker 5: in a moment. 189 00:08:43,679 --> 00:08:47,839 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 190 00:08:55,120 --> 00:08:58,680 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 191 00:08:58,760 --> 00:09:01,760 Speaker 1: weekday afternoons from seven to ten am. He's durn Listen 192 00:09:01,840 --> 00:09:05,400 Speaker 1: on Applecarplay and Android Otto with the Bloomberg Business app, 193 00:09:05,559 --> 00:09:07,320 Speaker 1: or watch us live on YouTube. 194 00:09:07,440 --> 00:09:10,079 Speaker 4: Earlier this year, the consensus was coming in was a 195 00:09:10,160 --> 00:09:13,680 Speaker 4: weaker US dollar than of course, the war in Iran 196 00:09:13,760 --> 00:09:16,480 Speaker 4: breaks out, and then people start flooding back to the 197 00:09:16,640 --> 00:09:18,839 Speaker 4: US dollar. We've got somebody in our studio time that 198 00:09:18,880 --> 00:09:21,240 Speaker 4: does this stuff for living. He's been doing it for 199 00:09:21,280 --> 00:09:25,199 Speaker 4: a long time. People actually take his phone calls. Steve England, 200 00:09:25,280 --> 00:09:28,560 Speaker 4: our global head of g ten FX Research of North 201 00:09:28,600 --> 00:09:32,520 Speaker 4: America strategy for starting standard Charter Bank. Steve talk to 202 00:09:32,600 --> 00:09:35,080 Speaker 4: us about what's the view in the currency markets? This 203 00:09:35,160 --> 00:09:38,560 Speaker 4: sheet coming in right now, with a war that with 204 00:09:38,640 --> 00:09:42,400 Speaker 4: a world that is at war in two places, how 205 00:09:42,440 --> 00:09:46,720 Speaker 4: does that kind of in fact the view of the 206 00:09:46,800 --> 00:09:47,360 Speaker 4: US dollar. 207 00:09:49,000 --> 00:09:51,760 Speaker 6: I think unless something more dramatic happens, the war has 208 00:09:51,800 --> 00:09:55,400 Speaker 6: faded into the background. Okay, episodes like what we're seeing 209 00:09:55,400 --> 00:09:58,560 Speaker 6: this week or viewed as a distraction, and I think, 210 00:09:58,760 --> 00:10:01,240 Speaker 6: you know, most investors think it's going to fade. So 211 00:10:01,480 --> 00:10:07,320 Speaker 6: it's not really a very tradable type of issue. Obviously, 212 00:10:07,320 --> 00:10:10,280 Speaker 6: if things escalate a lot that they have to reconsider. 213 00:10:10,600 --> 00:10:12,960 Speaker 6: I think what they're looking at is, you know, what 214 00:10:12,960 --> 00:10:14,960 Speaker 6: the FED is going to do, what the US economy 215 00:10:15,000 --> 00:10:17,160 Speaker 6: is going to do, all the stuff that you guys 216 00:10:17,160 --> 00:10:21,920 Speaker 6: talk about on equity markets and AI and the technology 217 00:10:21,960 --> 00:10:25,040 Speaker 6: developments that that has been and will be the bigger 218 00:10:25,120 --> 00:10:26,000 Speaker 6: driver of the dollar. 219 00:10:26,679 --> 00:10:29,680 Speaker 4: So where is value out there in the currency world. 220 00:10:29,760 --> 00:10:32,280 Speaker 4: Where are the smart people looking these days? 221 00:10:33,160 --> 00:10:36,080 Speaker 6: Well, I think that they're looking at the dollar. But 222 00:10:36,320 --> 00:10:38,280 Speaker 6: you know, again it's a question of getting to timing right. 223 00:10:38,360 --> 00:10:42,720 Speaker 6: The issue or the problem with things like the Iran 224 00:10:44,120 --> 00:10:47,679 Speaker 6: war is that it can set you back, it can 225 00:10:47,720 --> 00:10:50,760 Speaker 6: stop you out. So you know, you might say, yes, 226 00:10:50,800 --> 00:10:53,280 Speaker 6: I have a dollar positive you in three months, but 227 00:10:53,320 --> 00:10:55,080 Speaker 6: I don't want to be stopped out in three days 228 00:10:55,120 --> 00:11:00,480 Speaker 6: because things escalate and managing that I think is kind 229 00:11:00,480 --> 00:11:03,920 Speaker 6: of the big problem that many investors are facing. 230 00:11:04,080 --> 00:11:05,880 Speaker 2: Is there a trade, is there a weight right now 231 00:11:05,920 --> 00:11:07,880 Speaker 2: or is there a bet on global Wall Street and 232 00:11:08,040 --> 00:11:08,760 Speaker 2: dollar direction? 233 00:11:11,240 --> 00:11:13,560 Speaker 6: You know, the market has shifted, you know, as you know, 234 00:11:13,600 --> 00:11:15,640 Speaker 6: at the beginning of the year, everybody hated the dollar. 235 00:11:16,320 --> 00:11:20,480 Speaker 6: Now you're seeing indications that you know, people have shifted. 236 00:11:21,160 --> 00:11:24,520 Speaker 6: I don't think the market's as long dollars as say, 237 00:11:24,640 --> 00:11:29,840 Speaker 6: the you know, futures exchange data suggests, right, because I 238 00:11:29,840 --> 00:11:32,160 Speaker 6: think there's still a reluctance to buy it. But I 239 00:11:32,440 --> 00:11:35,240 Speaker 6: think the market's beginning to think about the dollar in 240 00:11:35,280 --> 00:11:37,480 Speaker 6: a way it hasn't thought about the dollars since the 241 00:11:37,559 --> 00:11:38,360 Speaker 6: beginning of the trumpet. 242 00:11:38,400 --> 00:11:41,559 Speaker 2: Mins greg have had a beautiful treatment on Alan Greenspan, 243 00:11:41,679 --> 00:11:45,160 Speaker 2: and he was talking about how Alan Greenspan lectured him 244 00:11:45,200 --> 00:11:50,040 Speaker 2: a nude, vixel and iconic Swedish economist, just definitive in 245 00:11:50,080 --> 00:11:54,400 Speaker 2: framing out for an exchange before Mundell and dorn Bush. 246 00:11:54,640 --> 00:11:57,480 Speaker 2: And I'm given all the people that went to Harvard. Okay, 247 00:11:57,559 --> 00:12:01,200 Speaker 2: we're not talking Yale here, Steven, And the answer is 248 00:12:01,280 --> 00:12:05,240 Speaker 2: the real rate matters. What does the inflation adjusted interest 249 00:12:05,360 --> 00:12:11,319 Speaker 2: rate right now say about our dollar's future? That it 250 00:12:11,400 --> 00:12:14,040 Speaker 2: could be positive? And they agree. I agree. 251 00:12:14,240 --> 00:12:17,040 Speaker 6: What you've seen is that real interest rates have moved 252 00:12:17,120 --> 00:12:20,640 Speaker 6: up to the highest levels you know in recent years. 253 00:12:20,440 --> 00:12:21,360 Speaker 2: Come against resistance. 254 00:12:21,480 --> 00:12:25,400 Speaker 6: Fine, yeah, and it could go higher. And the key 255 00:12:25,480 --> 00:12:28,320 Speaker 6: is going higher for good reasons. Coming back to Wixcel, 256 00:12:28,840 --> 00:12:33,280 Speaker 6: the idea being that the equilibrium real interest rates reflects 257 00:12:33,280 --> 00:12:37,240 Speaker 6: the return to capital, and a positive return to capital 258 00:12:37,880 --> 00:12:41,319 Speaker 6: attacks capital. So the US is like a hedge fund. 259 00:12:41,559 --> 00:12:45,719 Speaker 6: We borrow from the places that save and we invest in. 260 00:12:45,880 --> 00:12:48,760 Speaker 2: I'm going to suggest this is nowhere in the zeitgeis. 261 00:12:48,840 --> 00:12:51,760 Speaker 2: This is John riding one oh one Bear Stearns now 262 00:12:51,760 --> 00:12:54,720 Speaker 2: at Breen, Steven Englander, with all your work at City 263 00:12:54,720 --> 00:12:58,480 Speaker 2: Group and now holding court at the standard charter bank. 264 00:12:58,960 --> 00:13:04,559 Speaker 2: Higher interest rates, higher real rates is a vote of confidence. 265 00:13:04,920 --> 00:13:08,480 Speaker 6: For the right reasons, because it reflects a positive productivity shock, 266 00:13:08,520 --> 00:13:12,240 Speaker 6: a positive supply shock. It would be if you had 267 00:13:12,280 --> 00:13:15,080 Speaker 6: higher real interest rates because the deficit was getting even 268 00:13:15,200 --> 00:13:17,800 Speaker 6: worse and you know there was no prospect of it 269 00:13:17,880 --> 00:13:20,520 Speaker 6: going down. It could be exactly the opposite, and we've 270 00:13:20,520 --> 00:13:23,480 Speaker 6: seen that in Japan, we've seen that in the UK 271 00:13:23,600 --> 00:13:26,719 Speaker 6: from time to time. But when it's being driven and 272 00:13:26,800 --> 00:13:29,520 Speaker 6: it's like your equity guys having smiles on their face 273 00:13:30,080 --> 00:13:33,440 Speaker 6: because yes, real interest rates are higher, but profits growth 274 00:13:34,040 --> 00:13:38,800 Speaker 6: is matching that, so it's perfectly fine. But it brings capital. 275 00:13:38,440 --> 00:13:41,319 Speaker 4: In yen at one's sixty two. What's the back of 276 00:13:41,400 --> 00:13:42,160 Speaker 4: Japan thinking. 277 00:13:43,280 --> 00:13:46,640 Speaker 6: Praying for rain? Look, I think they have a problem. 278 00:13:46,720 --> 00:13:52,040 Speaker 6: I mean, the boj looks stubbish. The economy doesn't look great. Yeah, 279 00:13:52,040 --> 00:13:55,280 Speaker 6: it doesn't look terrible, don't there's nothing exciting there. And 280 00:13:55,520 --> 00:13:57,920 Speaker 6: you know you can see in the market that. 281 00:14:00,120 --> 00:14:00,640 Speaker 4: It takenic call. 282 00:14:00,720 --> 00:14:05,640 Speaker 6: But the sort of market is pricing the probability that 283 00:14:05,679 --> 00:14:09,120 Speaker 6: the end goes down at very low levels. Right now, 284 00:14:09,200 --> 00:14:14,200 Speaker 6: the volve for the downside for dollar yen is really 285 00:14:15,320 --> 00:14:17,720 Speaker 6: who So they don't think it's got anywhere to go 286 00:14:17,840 --> 00:14:18,720 Speaker 6: to the downside. 287 00:14:18,800 --> 00:14:23,760 Speaker 2: I think our audience intuitally understands weak currency not good domestically. 288 00:14:24,280 --> 00:14:27,120 Speaker 2: I saw a blurb of bankruptcies in Japan are terrible. 289 00:14:27,160 --> 00:14:31,200 Speaker 2: You just mentioned the economy is all that good. Can 290 00:14:31,240 --> 00:14:34,960 Speaker 2: they come in and intervene for the third time? And 291 00:14:35,000 --> 00:14:37,280 Speaker 2: as dorm Bush lectured us, do they have to do 292 00:14:37,360 --> 00:14:41,800 Speaker 2: it with courage and a sterilized intervention where they adjust 293 00:14:41,960 --> 00:14:44,920 Speaker 2: the intervention through the domestic economy. 294 00:14:45,680 --> 00:14:47,920 Speaker 6: You know, I think it's getting harder and harder, and 295 00:14:48,040 --> 00:14:51,160 Speaker 6: half the market is waiting for them to come in 296 00:14:51,240 --> 00:14:53,960 Speaker 6: so that they can sell the end when it goes 297 00:14:54,040 --> 00:14:56,240 Speaker 6: from one sixty two and change to one fifty eight 298 00:14:56,280 --> 00:15:00,000 Speaker 6: and change. So they have to defeat that market mentality. 299 00:15:00,080 --> 00:15:02,080 Speaker 2: How do they do that? They can only do it 300 00:15:02,160 --> 00:15:04,560 Speaker 2: sterilizes the way I was lectured. 301 00:15:04,560 --> 00:15:08,840 Speaker 6: Well, if they do it in a way that allows 302 00:15:08,960 --> 00:15:12,320 Speaker 6: Japanese interest rates to go up, maybe that's going to help. 303 00:15:12,360 --> 00:15:15,280 Speaker 6: But it's clear that the boj that's that's not where 304 00:15:15,280 --> 00:15:16,080 Speaker 6: they are right now. 305 00:15:16,840 --> 00:15:18,880 Speaker 2: And you know, one. 306 00:15:18,800 --> 00:15:21,800 Speaker 6: Sixty two looks cheap for the end. But we've been 307 00:15:21,840 --> 00:15:23,560 Speaker 6: here for a while, and the question you have to 308 00:15:23,600 --> 00:15:26,560 Speaker 6: ask is you know what brought us here and what's 309 00:15:26,640 --> 00:15:29,160 Speaker 6: keeping us here? And is anything changing? And there's massive 310 00:15:29,200 --> 00:15:30,200 Speaker 6: capital outflows? 311 00:15:31,120 --> 00:15:34,280 Speaker 4: What is your market? What is the currency market? How's 312 00:15:34,280 --> 00:15:36,280 Speaker 4: it responded to this new FED chairman? We've now heard 313 00:15:36,360 --> 00:15:40,880 Speaker 4: him speak twice, You've seen the minutes. What's your market 314 00:15:41,200 --> 00:15:42,520 Speaker 4: saying about this new FED chairman? 315 00:15:43,280 --> 00:15:45,960 Speaker 6: I think they're giving him the benefit of that, as 316 00:15:46,320 --> 00:15:49,760 Speaker 6: you know, like the fixed income market that they I'm 317 00:15:49,800 --> 00:15:52,320 Speaker 6: a little bit more cautious on how hawk is she's 318 00:15:52,360 --> 00:15:55,640 Speaker 6: going to be, but I think that the FX market 319 00:15:55,720 --> 00:15:57,560 Speaker 6: is saying, Okay, he said all the right things. 320 00:15:58,640 --> 00:16:00,320 Speaker 2: Let's see what the follow up is going to be? 321 00:16:00,960 --> 00:16:03,920 Speaker 2: Can I do one like an audible face Steve Englander 322 00:16:04,040 --> 00:16:09,560 Speaker 2: kind of whackle thing? So if I'm in Singapore dollar Chinese, redmindy, 323 00:16:10,360 --> 00:16:14,440 Speaker 2: I made a huge move strong sing dollar, and I 324 00:16:14,480 --> 00:16:17,560 Speaker 2: got Chinese finally's come back around, and I got the Yuwan. 325 00:16:19,080 --> 00:16:22,120 Speaker 2: I guess doing better right now? Do you just assume 326 00:16:22,160 --> 00:16:25,440 Speaker 2: it migrates back to this center tendency? Do you do 327 00:16:25,520 --> 00:16:28,840 Speaker 2: you assume? I mean, which way does that cut? 328 00:16:28,880 --> 00:16:29,040 Speaker 4: Now? 329 00:16:29,040 --> 00:16:31,080 Speaker 2: Red Mindy or something like sing dollar? 330 00:16:33,200 --> 00:16:35,320 Speaker 6: You know, both have been driven by different things like 331 00:16:35,360 --> 00:16:38,880 Speaker 6: the sink dollars sort of like an index of Asia currency. 332 00:16:38,880 --> 00:16:42,400 Speaker 6: It's a broad index. It moves kind of, It's very typical. 333 00:16:42,040 --> 00:16:43,160 Speaker 2: For an Asian currency. 334 00:16:43,200 --> 00:16:45,600 Speaker 6: Yeah, and it's moved up and down with oil prices 335 00:16:45,680 --> 00:16:47,440 Speaker 6: and with with optimism and so on. 336 00:16:47,720 --> 00:16:49,280 Speaker 2: Remendy has been driven by more. 337 00:16:49,200 --> 00:16:56,200 Speaker 6: Specific things, huge trade surplus. The Chinese determined to show 338 00:16:56,200 --> 00:16:58,360 Speaker 6: a steady hand in FX. 339 00:16:59,560 --> 00:17:00,320 Speaker 2: Right now, we. 340 00:17:01,000 --> 00:17:04,600 Speaker 6: Don't think both of them are going to go anywhere 341 00:17:04,680 --> 00:17:10,439 Speaker 6: very fast. But depending on you know, if things change, 342 00:17:10,720 --> 00:17:13,199 Speaker 6: that can change. But the right right now, it's not 343 00:17:13,320 --> 00:17:16,800 Speaker 6: a clear picture of what's going to be the driver 344 00:17:16,960 --> 00:17:19,040 Speaker 6: for that cross to change directly. 345 00:17:19,119 --> 00:17:21,120 Speaker 2: I just want to get a window into his day 346 00:17:21,200 --> 00:17:24,720 Speaker 2: job with Stephen England. Are actually it does? It's great. 347 00:17:24,760 --> 00:17:27,040 Speaker 2: I mean on the cross rates, there's no one close 348 00:17:27,080 --> 00:17:29,680 Speaker 2: on sing dollar you want or any of the rest 349 00:17:29,680 --> 00:17:32,879 Speaker 2: of it as well. Stephen England are definitive at the 350 00:17:32,960 --> 00:17:36,840 Speaker 2: standard Charter Bank. Thank you so much this morning. Stay 351 00:17:36,840 --> 00:17:40,720 Speaker 2: with us. More from Bloomberg Surveillance coming up after this. 352 00:17:47,960 --> 00:17:51,560 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 353 00:17:51,640 --> 00:17:54,760 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 354 00:17:54,880 --> 00:17:58,520 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app or 355 00:17:58,680 --> 00:18:00,240 Speaker 1: watch us live on YouTube. 356 00:18:00,880 --> 00:18:03,480 Speaker 2: As we say, LETSI, Paltic Guzman only show up when 357 00:18:03,480 --> 00:18:06,399 Speaker 2: there's a red headline out on the Bloomberg. There's like 358 00:18:06,520 --> 00:18:09,879 Speaker 2: headlines or an amber, and if it's like an important headline, 359 00:18:10,040 --> 00:18:13,600 Speaker 2: it's in red. This is twenty minutes ago. Cutter pauses 360 00:18:13,640 --> 00:18:17,719 Speaker 2: push for quick lerg ramp up after tanker attack. We 361 00:18:17,800 --> 00:18:22,840 Speaker 2: get luckily lucky the expert. How behind is Cutter in 362 00:18:22,840 --> 00:18:23,520 Speaker 2: a rebuild? 363 00:18:24,520 --> 00:18:29,159 Speaker 7: Thanks for having me, Paul tom So. It's, you know, 364 00:18:29,760 --> 00:18:33,680 Speaker 7: a setback because a few weeks ago, Katar was already 365 00:18:33,800 --> 00:18:37,560 Speaker 7: warning its customers that it could leave the force measure 366 00:18:38,400 --> 00:18:42,600 Speaker 7: by August September, and some of Qatar's priorities are going 367 00:18:42,640 --> 00:18:44,720 Speaker 7: to be delayed. And what we're seeing is that there 368 00:18:44,800 --> 00:18:48,960 Speaker 7: is still a sword of democlets hanging over the economies 369 00:18:49,000 --> 00:18:53,120 Speaker 7: of the Gulf States and those kind of repeated cycles 370 00:18:53,160 --> 00:18:57,840 Speaker 7: of conflict are going to damage the confidence for the 371 00:18:57,920 --> 00:18:59,159 Speaker 7: customers and investors. 372 00:18:59,440 --> 00:19:03,639 Speaker 2: Missus King just emailed the surveillance correction. Okay, I said Cutter, 373 00:19:04,480 --> 00:19:08,360 Speaker 2: And it is guitar like guitar. It's guitar. I don't 374 00:19:08,359 --> 00:19:12,600 Speaker 2: know guitar. Leslie's correct. Missus King's correct, I'm wrong. 375 00:19:12,680 --> 00:19:15,679 Speaker 4: What a shock, so Lesli and Owner in a recent 376 00:19:15,760 --> 00:19:18,640 Speaker 4: research note, you kind of lay out three scenarios for 377 00:19:18,800 --> 00:19:22,320 Speaker 4: the war with their rent and I'll summarize them, you know, 378 00:19:22,760 --> 00:19:27,639 Speaker 4: comprehensive piece back to war and your scenario number one, 379 00:19:27,640 --> 00:19:30,399 Speaker 4: which is no war, no piece, which is kind of 380 00:19:30,440 --> 00:19:33,439 Speaker 4: where we seem to be. If that's in fact the 381 00:19:33,480 --> 00:19:37,600 Speaker 4: case where we have ongoing discussions, ongoing skirmishes. What's that 382 00:19:37,680 --> 00:19:39,040 Speaker 4: due to the global energy. 383 00:19:38,760 --> 00:19:42,119 Speaker 7: Market, So it creates a lot of uncertainties. You know, 384 00:19:42,160 --> 00:19:46,560 Speaker 7: when you look at demand supply, demand balances and prices 385 00:19:46,600 --> 00:19:50,600 Speaker 7: are going to remain volatile. We've seen already, you know, 386 00:19:50,760 --> 00:19:55,080 Speaker 7: for gas energy gas prices gqm TTF going back up 387 00:19:55,760 --> 00:19:59,480 Speaker 7: yesterday and the day before with the series of attacks. 388 00:20:00,560 --> 00:20:04,719 Speaker 7: So it's a lot of uncertainties. However, we've seen that 389 00:20:05,520 --> 00:20:09,360 Speaker 7: following the short MoU that we've had so far, prices 390 00:20:09,359 --> 00:20:13,360 Speaker 7: have come downe market has relaxed, and so it's kind 391 00:20:13,359 --> 00:20:16,280 Speaker 7: of the market restores its confidence pretty fast. 392 00:20:16,359 --> 00:20:20,240 Speaker 2: Yeah, when you look at your world of natural gas 393 00:20:20,280 --> 00:20:23,960 Speaker 2: and LNG, do you say that over time they can 394 00:20:24,040 --> 00:20:29,240 Speaker 2: solve hormos just with pipelines infrastructure doing it the old way. 395 00:20:29,920 --> 00:20:32,680 Speaker 7: So I think it's easier to do for the oil side. 396 00:20:33,119 --> 00:20:35,000 Speaker 7: And last time I was here, I mentioned, you know, 397 00:20:35,040 --> 00:20:38,359 Speaker 7: peak Hormos. Maybe you know Iran has less has used 398 00:20:38,440 --> 00:20:41,840 Speaker 7: its stronger card, you know, one once and for all. 399 00:20:42,760 --> 00:20:45,399 Speaker 7: On the energy side, it's more complicated for the UEE 400 00:20:45,640 --> 00:20:49,160 Speaker 7: and pipeline. Not that many alternative There is a small 401 00:20:49,160 --> 00:20:52,200 Speaker 7: pipeline from Catar to the ue but it's never wanted 402 00:20:52,280 --> 00:20:56,960 Speaker 7: to be expanded. And however, those companies those countries are 403 00:20:56,960 --> 00:21:00,119 Speaker 7: going to look for diversification of their portfolio by in 404 00:21:00,200 --> 00:21:04,959 Speaker 7: equity stakes and having supply elsewhere out of the strait. 405 00:21:05,920 --> 00:21:09,960 Speaker 7: But for now, for their molecules inside the strade, things 406 00:21:10,000 --> 00:21:10,959 Speaker 7: are very complicated. 407 00:21:11,840 --> 00:21:15,760 Speaker 4: Before the war, the Strait of Hormus was open for 408 00:21:15,800 --> 00:21:17,960 Speaker 4: all traffic, and I think we all just assume that 409 00:21:18,080 --> 00:21:20,800 Speaker 4: was the way. We can't make that assumption anymore, can we. 410 00:21:20,840 --> 00:21:23,480 Speaker 4: I mean, going forward, I don't think we can ever. 411 00:21:23,720 --> 00:21:26,240 Speaker 4: If I'm gonna sure, I'm never going to consider the 412 00:21:26,280 --> 00:21:29,480 Speaker 4: Strait of Hormus completely safe like I did before the war. 413 00:21:29,600 --> 00:21:31,639 Speaker 2: How does that impact A? Is that true? 414 00:21:31,960 --> 00:21:32,199 Speaker 1: And B? 415 00:21:32,400 --> 00:21:35,760 Speaker 4: How does that impact kind of getting molecules out of there? 416 00:21:35,960 --> 00:21:38,359 Speaker 7: Yeah, So I think unless you know, we have this 417 00:21:38,480 --> 00:21:42,680 Speaker 7: scenario of resuming the war and have very targeted objectives, 418 00:21:43,680 --> 00:21:46,760 Speaker 7: and you know, this idea of finishing the job that 419 00:21:46,960 --> 00:21:50,560 Speaker 7: some Gulf states you know, really wanted at one point 420 00:21:50,600 --> 00:21:52,760 Speaker 7: during the war because they knew that as long as 421 00:21:52,800 --> 00:21:56,560 Speaker 7: you have this bully or RGC in control, it's going 422 00:21:56,600 --> 00:22:00,720 Speaker 7: to be really hard to restore the confidence of investors. 423 00:22:00,840 --> 00:22:03,840 Speaker 7: And you know, even if some golf countries are going 424 00:22:03,880 --> 00:22:08,199 Speaker 7: solo right now and are trying to placate Iran and 425 00:22:08,480 --> 00:22:13,080 Speaker 7: having some kind of non packed aggression bilateral agreements, you 426 00:22:13,160 --> 00:22:16,359 Speaker 7: never know what's coming next tomorrow. You know, we know 427 00:22:16,520 --> 00:22:20,120 Speaker 7: from history that those non aggression pack never lasts. 428 00:22:20,880 --> 00:22:24,480 Speaker 2: Where was one final question, where does the energy from 429 00:22:24,480 --> 00:22:27,679 Speaker 2: the Persian golf go? I think our audience perceives the 430 00:22:27,760 --> 00:22:31,040 Speaker 2: oil goes around, goes around. India goes through the Straits 431 00:22:31,040 --> 00:22:33,879 Speaker 2: of lock at Asia, same thing with their energy. 432 00:22:34,080 --> 00:22:38,480 Speaker 7: So about seventy percent of Katari energies heading to Asia, 433 00:22:38,920 --> 00:22:43,960 Speaker 7: about twenty five percent to China. So those are you know, 434 00:22:44,000 --> 00:22:45,400 Speaker 7: the critical messages. 435 00:22:45,440 --> 00:22:47,080 Speaker 2: There's no other way to get it. It's got to 436 00:22:47,080 --> 00:22:47,400 Speaker 2: get out. 437 00:22:47,480 --> 00:22:50,240 Speaker 7: So the most impacted are the emerging markets in Southeast 438 00:22:50,240 --> 00:22:53,320 Speaker 7: Asia because they are the closest and Katar was you 439 00:22:53,359 --> 00:22:58,040 Speaker 7: know for them, they're they're only supplier for some of them, Bangladesh, Pakistan, India, 440 00:22:58,160 --> 00:22:59,880 Speaker 7: like the main supplier. 441 00:23:00,080 --> 00:23:01,119 Speaker 2: Have you banned the guitar. 442 00:23:01,400 --> 00:23:02,040 Speaker 7: I've never been to. 443 00:23:02,119 --> 00:23:05,600 Speaker 2: Catar Okay, they ran and they're not du bad like 444 00:23:05,680 --> 00:23:09,040 Speaker 2: nobody's been really quiet the less coma this is up 445 00:23:09,080 --> 00:23:09,600 Speaker 2: the Persian. 446 00:23:09,800 --> 00:23:12,280 Speaker 4: I think guitar suffered from what all the reporting actually 447 00:23:12,359 --> 00:23:13,359 Speaker 4: some serious damage. 448 00:23:13,359 --> 00:23:14,919 Speaker 2: So when the President of the United States says we're 449 00:23:14,920 --> 00:23:17,000 Speaker 2: going to get rid of Carge Island, We're going to 450 00:23:17,080 --> 00:23:20,199 Speaker 2: take over cars Island. This island off and ran up 451 00:23:20,240 --> 00:23:22,720 Speaker 2: by Kuwait and Iraq, how do you respond to that 452 00:23:22,800 --> 00:23:23,520 Speaker 2: as an expert. 453 00:23:25,280 --> 00:23:28,119 Speaker 7: So, you know, at one point when we were thinking about, 454 00:23:28,840 --> 00:23:30,600 Speaker 7: you know, this idea of finishing the job and the 455 00:23:30,640 --> 00:23:37,560 Speaker 7: different targets that the US military would go after, you know, critically, 456 00:23:37,800 --> 00:23:43,440 Speaker 7: was to remove access of money revenues to the IRGC 457 00:23:43,840 --> 00:23:46,919 Speaker 7: because they are the one benefiting from the oil revenues. 458 00:23:47,400 --> 00:23:49,399 Speaker 7: You know, that's their pocket money. Then they buy more 459 00:23:49,440 --> 00:23:54,040 Speaker 7: weapons and they continue the cycle of violence. So you know, 460 00:23:54,080 --> 00:23:56,480 Speaker 7: this is one of the targets to really put an 461 00:23:56,600 --> 00:23:59,680 Speaker 7: end to the money generation cash machine for the IRGC. 462 00:24:00,119 --> 00:24:01,800 Speaker 2: Thank you. Can you come back when we have other 463 00:24:01,880 --> 00:24:02,960 Speaker 2: red headlines? Yeah? 464 00:24:03,160 --> 00:24:03,480 Speaker 6: Thank you. 465 00:24:03,600 --> 00:24:06,560 Speaker 2: Thanks ch well timed. I can't say enough about it. 466 00:24:06,640 --> 00:24:11,959 Speaker 2: Leslie Paulton Guzman just wonderfully encyclopedic on liquefied natural gas 467 00:24:12,000 --> 00:24:14,760 Speaker 2: and of course all of that within the Persian Gulf. 468 00:24:15,640 --> 00:24:19,800 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 469 00:24:27,080 --> 00:24:30,680 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 470 00:24:30,720 --> 00:24:33,879 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 471 00:24:33,960 --> 00:24:37,639 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 472 00:24:37,800 --> 00:24:39,399 Speaker 1: watch us live on YouTube. 473 00:24:39,720 --> 00:24:43,200 Speaker 2: This is an incredibly important discussion for Global Wall Street. 474 00:24:43,240 --> 00:24:45,680 Speaker 2: She's the only one I know who's ever read cover 475 00:24:45,800 --> 00:24:48,800 Speaker 2: to cover White, Sandy and Freed joining us from the 476 00:24:48,840 --> 00:24:55,040 Speaker 2: CFA Institute. Sandy Peters with stunning, prodigious chops from the 477 00:24:55,280 --> 00:24:58,960 Speaker 2: Chartered Financial Analyst. Full disclosure, I'm a CFA. Over to 478 00:24:59,000 --> 00:25:01,520 Speaker 2: what I'm not, which is as a CPA as well. 479 00:25:01,960 --> 00:25:07,639 Speaker 2: Can American companies hide behind twice a year accounting versus 480 00:25:07,640 --> 00:25:08,879 Speaker 2: every ninety days? 481 00:25:09,400 --> 00:25:14,120 Speaker 8: Well, we say no. We CFA Institute has supported quarterly 482 00:25:14,160 --> 00:25:17,480 Speaker 8: reporting since the nineteen fifties, when Benjamin Graham was on 483 00:25:17,480 --> 00:25:22,679 Speaker 8: our Corporate Reporting Committee, and we have we recently did 484 00:25:22,720 --> 00:25:27,040 Speaker 8: a survey to look at what our investor members think 485 00:25:27,119 --> 00:25:30,680 Speaker 8: about quarter what do they think? They think that two 486 00:25:30,720 --> 00:25:34,080 Speaker 8: thirds of them believe that quarterly reporting is essential, that 487 00:25:34,160 --> 00:25:37,320 Speaker 8: we need to remain in remain doing quarterly reporting. 488 00:25:37,440 --> 00:25:40,480 Speaker 2: Where are you on this, Paul, I grew up on 489 00:25:40,600 --> 00:25:41,120 Speaker 2: quarter least. 490 00:25:41,160 --> 00:25:43,320 Speaker 4: But I know our friends in Europe have semi annual 491 00:25:43,400 --> 00:25:47,119 Speaker 4: and they swear by that over there. What's what are 492 00:25:47,119 --> 00:25:49,000 Speaker 4: the folks in Europe? Why did they do it in 493 00:25:49,000 --> 00:25:50,959 Speaker 4: Europe semi annual? I guess what's the advantage? 494 00:25:50,960 --> 00:25:53,159 Speaker 8: Well, you know, we our survey was global, and we 495 00:25:53,200 --> 00:25:56,919 Speaker 8: wanted to be global because investors invest globally invest in 496 00:25:56,960 --> 00:25:59,320 Speaker 8: the US, and we wanted to check whether our members 497 00:25:59,640 --> 00:26:02,880 Speaker 8: support in quarterly reporting even in semi annual jurisdictions. 498 00:26:03,200 --> 00:26:03,760 Speaker 4: And they did. 499 00:26:04,080 --> 00:26:06,840 Speaker 8: Okay, right, So I think there is a lot of 500 00:26:07,800 --> 00:26:10,760 Speaker 8: notion of it works in those markets, But those markets 501 00:26:10,760 --> 00:26:12,520 Speaker 8: are actually very much smaller. 502 00:26:12,560 --> 00:26:14,200 Speaker 2: We included in our report sort of. 503 00:26:14,480 --> 00:26:19,480 Speaker 8: A summary of that they have different continuous reporting requirements 504 00:26:19,520 --> 00:26:23,080 Speaker 8: than the voluntary quarterly reporting we might have here in 505 00:26:23,119 --> 00:26:29,400 Speaker 8: the US. And you know, just generally investors want more 506 00:26:29,440 --> 00:26:30,480 Speaker 8: timely information. 507 00:26:30,600 --> 00:26:33,800 Speaker 4: Okay, what does Corporate America say here? What do they 508 00:26:33,840 --> 00:26:36,320 Speaker 4: want to do it? Presumably it would be reduced my 509 00:26:36,400 --> 00:26:38,000 Speaker 4: costs if I didn't have to report so often. 510 00:26:38,720 --> 00:26:41,080 Speaker 8: Well, yes, I mean that's been the narrative that it 511 00:26:41,119 --> 00:26:45,240 Speaker 8: will decrease costs, increase the number of public companies, and 512 00:26:45,280 --> 00:26:49,399 Speaker 8: result in capital formation. But the SEC's economic analysis really 513 00:26:49,480 --> 00:26:55,439 Speaker 8: doesn't strongly illustrate that. They illustrate that the economic analysis 514 00:26:55,440 --> 00:26:58,359 Speaker 8: will save about two hundred thousand dollars per company, but 515 00:26:58,400 --> 00:27:02,920 Speaker 8: they don't actually quantify any of the cost to investors 516 00:27:03,080 --> 00:27:04,000 Speaker 8: of not having that. 517 00:27:04,080 --> 00:27:07,159 Speaker 2: Infratase, you're talking to somebody saying, who flunked equipment leasing 518 00:27:07,200 --> 00:27:09,600 Speaker 2: three times on the exam? And I went down? Thank god, 519 00:27:09,600 --> 00:27:14,119 Speaker 2: there wasn't a CFA level four. Which accounting statement is 520 00:27:14,240 --> 00:27:17,479 Speaker 2: most fungible from ninety days to one hundred and eighty days, 521 00:27:17,680 --> 00:27:21,360 Speaker 2: the balance sheet, the income statement, or the cash flow statement. 522 00:27:22,680 --> 00:27:25,439 Speaker 8: Well, we always say that the cash flow statement is 523 00:27:25,440 --> 00:27:28,040 Speaker 8: the most important statement, then the income statement, and the 524 00:27:28,320 --> 00:27:28,920 Speaker 8: and then the value. 525 00:27:28,960 --> 00:27:30,600 Speaker 2: So what happened, Let's go to that, Let's go to 526 00:27:30,640 --> 00:27:34,840 Speaker 2: free camp. There was an exam pall where everybody did 527 00:27:34,880 --> 00:27:37,800 Speaker 2: it and we all flipped our answer at the end 528 00:27:37,920 --> 00:27:41,359 Speaker 2: level two exam and was direct in direct cash flow 529 00:27:41,359 --> 00:27:44,720 Speaker 2: and the clouds parted and I actually passed on the 530 00:27:44,720 --> 00:27:48,000 Speaker 2: cash flow statement. How would you hide behind one hundred 531 00:27:48,040 --> 00:27:50,520 Speaker 2: and eighty days versus ninety days? 532 00:27:51,119 --> 00:27:55,480 Speaker 8: Well, the challenge will be that the SEC proposal allows 533 00:27:55,520 --> 00:28:01,160 Speaker 8: you to voluntarily elect semi annual reporting or retain quarterly reporting. 534 00:28:02,480 --> 00:28:07,680 Speaker 8: So the issue is if you elect semi annual reporting 535 00:28:07,720 --> 00:28:10,720 Speaker 8: and you don't do quarterly reporting, maybe you'll do a 536 00:28:10,720 --> 00:28:12,760 Speaker 8: press release to keep the insider trading with. 537 00:28:12,920 --> 00:28:15,160 Speaker 2: That's what European companies do, right. 538 00:28:15,480 --> 00:28:18,760 Speaker 8: And so the issue is what will the disclosure be 539 00:28:18,960 --> 00:28:22,360 Speaker 8: at that quarterly because many companies investors are asking companies, 540 00:28:22,600 --> 00:28:25,640 Speaker 8: would you go would you retain quarterly reporting? And they're 541 00:28:25,640 --> 00:28:29,879 Speaker 8: saying yes, but investors aren't asking another second, very important question, 542 00:28:30,280 --> 00:28:31,800 Speaker 8: which is when you say you're still going to do 543 00:28:31,920 --> 00:28:34,320 Speaker 8: quarterly what does that mean? Are you going to still 544 00:28:34,359 --> 00:28:36,280 Speaker 8: file a ten Q or are you going to do 545 00:28:36,320 --> 00:28:38,560 Speaker 8: an earning slease? And what is it going to include 546 00:28:38,880 --> 00:28:41,760 Speaker 8: because most earnings releases don't include a statement of cash 547 00:28:41,760 --> 00:28:42,400 Speaker 8: flow today. 548 00:28:44,200 --> 00:28:45,880 Speaker 4: Yeah, I guess that's right. You know, you don't get 549 00:28:45,920 --> 00:28:46,560 Speaker 4: that till you get. 550 00:28:46,400 --> 00:28:49,440 Speaker 8: The ten Q in many cases, Yes, some companies do 551 00:28:49,480 --> 00:28:50,320 Speaker 8: it simultaneously. 552 00:28:51,200 --> 00:28:55,760 Speaker 2: Apple kills with their clarity. Yeah, they're at four fifteen PM. 553 00:28:57,040 --> 00:28:59,360 Speaker 4: I don't know what are the what's the accounting this? 554 00:28:59,600 --> 00:29:01,480 Speaker 4: You know this c pas A, KPMG's or the word 555 00:29:01,560 --> 00:29:02,640 Speaker 4: what are they saying about this? 556 00:29:02,840 --> 00:29:05,600 Speaker 8: Well, you know there the comment letters were just due 557 00:29:05,680 --> 00:29:09,160 Speaker 8: and there's been about seventy thousand comment letters because there 558 00:29:09,160 --> 00:29:14,520 Speaker 8: have been several campaigns keep it quarterly dot org as 559 00:29:14,560 --> 00:29:18,360 Speaker 8: well as Wall Street bets that have that have caused 560 00:29:19,720 --> 00:29:23,160 Speaker 8: a lot of individual investors to say they don't want 561 00:29:23,440 --> 00:29:27,320 Speaker 8: to move to semiannual reporting. So it's actually so many 562 00:29:27,400 --> 00:29:30,680 Speaker 8: letters have been coming in, just they're they're very delayed 563 00:29:30,720 --> 00:29:32,719 Speaker 8: in posting them and it's hard to find what some 564 00:29:32,760 --> 00:29:35,680 Speaker 8: of the organizations have said. The accounting firms have been 565 00:29:36,000 --> 00:29:40,600 Speaker 8: somewhat supportive in their in their in their commentary and 566 00:29:40,720 --> 00:29:44,440 Speaker 8: not many companies are actually commenting excellent commented and support 567 00:29:44,480 --> 00:29:48,680 Speaker 8: semi annual reporting, but many other reporting well they didn't 568 00:29:48,680 --> 00:29:51,520 Speaker 8: say what they would do exactly, but they they have 569 00:29:51,720 --> 00:29:52,880 Speaker 8: they are supportive of. 570 00:29:52,920 --> 00:29:57,680 Speaker 2: The SEC's proposal. You I just don't get how American 571 00:29:57,760 --> 00:29:59,880 Speaker 2: companies well can be like French. 572 00:29:59,640 --> 00:30:02,880 Speaker 4: Company and the hitch simply is for quarterly is where 573 00:30:03,600 --> 00:30:05,720 Speaker 4: the US market is the deepest capital markets in the 574 00:30:05,760 --> 00:30:10,320 Speaker 4: world in part because of the transparency, and if you 575 00:30:10,320 --> 00:30:13,800 Speaker 4: sacrifice some of that transparency, perhaps you sacrifice some of 576 00:30:13,840 --> 00:30:16,640 Speaker 4: the vibrancy of the US capital markets. Is that kind 577 00:30:16,640 --> 00:30:18,200 Speaker 4: of the argument exactly? 578 00:30:18,240 --> 00:30:20,600 Speaker 8: And we think this might be a very expensive experience 579 00:30:20,640 --> 00:30:21,760 Speaker 8: or experiment. 580 00:30:22,440 --> 00:30:24,320 Speaker 2: You give precious time left, I got eight ways to 581 00:30:24,320 --> 00:30:26,600 Speaker 2: go here. I'm going to stand this theme. Sandra Peters 582 00:30:26,600 --> 00:30:31,560 Speaker 2: with a CFAT institute. My assumption of this, and you're 583 00:30:31,600 --> 00:30:34,680 Speaker 2: too young to remember this that I remember when earnings 584 00:30:34,720 --> 00:30:37,920 Speaker 2: were revenues, earnings, move on. In the back page of 585 00:30:37,960 --> 00:30:41,160 Speaker 2: the Wall Street Journal, word Buffet taught us along with 586 00:30:41,200 --> 00:30:44,200 Speaker 2: mister Graham, to read the damn notes. And the answer 587 00:30:44,360 --> 00:30:47,360 Speaker 2: is this whole concept is for people rush, rush, rush 588 00:30:47,760 --> 00:30:53,240 Speaker 2: in the financial media, where adults who actually read the 589 00:30:53,320 --> 00:30:58,200 Speaker 2: ten whatever and read the notes enjoy the ninety day scrutiny. 590 00:30:58,520 --> 00:31:01,800 Speaker 2: There's like two subsets, isn't there? Yeah? 591 00:31:02,280 --> 00:31:06,800 Speaker 8: I think that it it that scrutiny is particularly important 592 00:31:06,840 --> 00:31:10,800 Speaker 8: to your comment on the deepest and most liquid capital markets. Right, 593 00:31:11,240 --> 00:31:13,640 Speaker 8: we won't have in a quarterly reporting regime or a 594 00:31:13,680 --> 00:31:17,560 Speaker 8: voluntary quarterly reporting regime, we won't have those notes. Most 595 00:31:17,600 --> 00:31:19,560 Speaker 8: likely we won't have those notes. We don't know what 596 00:31:19,680 --> 00:31:24,320 Speaker 8: companies will actually produce. So you know, back in nineteen fifty, 597 00:31:24,400 --> 00:31:27,560 Speaker 8: we've drove, we dove into our archives and looked at 598 00:31:27,560 --> 00:31:30,080 Speaker 8: what we said, and the things that they were saying 599 00:31:30,120 --> 00:31:33,120 Speaker 8: are the things that investors would still say today about 600 00:31:33,120 --> 00:31:38,400 Speaker 8: the need for more timely information. And it's actually really remarkable. 601 00:31:38,400 --> 00:31:40,840 Speaker 8: And I wrote an article about this months ago, about 602 00:31:40,880 --> 00:31:46,200 Speaker 8: how the SEC would propose moving to having less information 603 00:31:46,400 --> 00:31:50,400 Speaker 8: in a world where developing the information and reporting it 604 00:31:50,440 --> 00:31:53,320 Speaker 8: has never been more or at least costly. 605 00:31:54,200 --> 00:31:56,600 Speaker 2: We got to go. But would you tell Bob ar 606 00:31:56,680 --> 00:32:00,400 Speaker 2: Nott and Cam Harvey their essay and the New Financial 607 00:32:00,440 --> 00:32:06,880 Speaker 2: Analyst Journal probably is my essay of the year. I yes, 608 00:32:07,080 --> 00:32:11,280 Speaker 2: but folks, the research they're doing is jaw dropping, and 609 00:32:12,160 --> 00:32:14,240 Speaker 2: that's the growth Inness saying, I'll cover it this fall 610 00:32:14,280 --> 00:32:16,480 Speaker 2: a lot. Well, if Cam Harvey backs, you're a good 611 00:32:16,480 --> 00:32:18,760 Speaker 2: friend of Paul's and we'll get mister on not in 612 00:32:18,760 --> 00:32:22,120 Speaker 2: here as we Cam. But I just can't say enough 613 00:32:22,200 --> 00:32:26,200 Speaker 2: about the thinking of value versus growth. Just the grunt 614 00:32:26,760 --> 00:32:29,960 Speaker 2: work of Wall Street that doesn't get enough coverage can 615 00:32:30,000 --> 00:32:33,280 Speaker 2: you come back. Are you in Charlottesville, No, I'm in 616 00:32:33,320 --> 00:32:33,720 Speaker 2: New York. 617 00:32:33,880 --> 00:32:36,640 Speaker 8: But you know, there's also the SEC is doing a 618 00:32:36,640 --> 00:32:39,959 Speaker 8: whole series of other reductions and disclosures that we need 619 00:32:40,000 --> 00:32:42,400 Speaker 8: to zoom out and talk about that as well as 620 00:32:42,080 --> 00:32:46,960 Speaker 8: they're doing a whole series of reduction of disclosures for 621 00:32:47,240 --> 00:32:52,560 Speaker 8: newly public companies as well as reprising disclosures related to regulation. 622 00:32:53,160 --> 00:32:56,680 Speaker 2: It's your false SpaceX is going down, Sander Peters. Thank you, 623 00:32:56,840 --> 00:32:59,120 Speaker 2: Thank you so much for the institute. 624 00:32:59,280 --> 00:33:04,120 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 625 00:33:04,240 --> 00:33:08,520 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 626 00:33:08,640 --> 00:33:12,120 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 627 00:33:12,200 --> 00:33:16,239 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 628 00:33:16,280 --> 00:33:19,640 Speaker 1: can also watch us live every weekday on YouTube and 629 00:33:19,840 --> 00:33:21,560 Speaker 1: always on the Bloomberg terminal.