WEBVTT - Bloomberg Wall Street Week - May 10th, 2024 0:00:00.280 --> 0:00:02.599 This is Bloomberg Wall Street Week. 0:00:02.680 --> 0:00:07.200 The global push into infrastructure, breaking the IPO logjam in tex. 0:00:07.160 --> 0:00:09.120 The financial stories that sheep. 0:00:08.880 --> 0:00:12.040 Are were cutting inflation without losing jobs. Do we need 0:00:12.119 --> 0:00:14.560 rate cuts and if so, how many? Investing in a 0:00:14.560 --> 0:00:16.120 time of geopolitical turmoil. 0:00:16.200 --> 0:00:18.560 Through the eyes of the most influential voices. 0:00:18.720 --> 0:00:22.480 Ten Rogueff Economists of Harvard, former FDIC had Shila Bert 0:00:22.680 --> 0:00:26.200 ge CEO, Larry Kulp, San Francisco FED President Mary Daily. 0:00:26.239 --> 0:00:30.520 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.440 --> 0:00:33.400 From Beverly Hills for the Milkin Institute Global Conference. This 0:00:33.560 --> 0:00:36.159 is a special edition of Bloomberg Wall Street Week. I'm 0:00:36.240 --> 0:00:40.560 David Weston. This week Karen Carneal Tambor of Bridgewater on 0:00:40.680 --> 0:00:42.559 the geopolitics of industrial policy. 0:00:42.880 --> 0:00:46.360 Everything you're seeing in industrial policy officially, it's doing something else. 0:00:46.720 --> 0:00:49.320 Former Treasury Secretary Stephing the noution on his plans to 0:00:49.360 --> 0:00:50.080 buy TikTok. 0:00:50.440 --> 0:00:53.760 I do believe the algorithms could be rebuilt. So my 0:00:53.960 --> 0:00:56.400 plan if we were to purchase it would be to 0:00:56.480 --> 0:00:59.760 rebuild the technology under US leadership. 0:01:00.160 --> 0:01:02.720 And Barry Stern like the Starward Capitol and why he's 0:01:02.760 --> 0:01:05.840 so unhappy with his alma mater, Brown University. 0:01:06.240 --> 0:01:08.399 They should be shown the door, and I don't want 0:01:08.400 --> 0:01:09.800 to pay for them, so I don't want to support 0:01:09.920 --> 0:01:23.040 university houses that language. 0:01:24.360 --> 0:01:27.440 We began the week at Milking with Mark rowan Apollo CEO, 0:01:27.600 --> 0:01:30.480 on the surge in private credit and why he believes 0:01:30.560 --> 0:01:31.880 it's a better way to go. 0:01:32.240 --> 0:01:35.319 If you look over time, we had eight thousand plus 0:01:35.400 --> 0:01:38.160 public companies in the US. We now have just over 0:01:38.200 --> 0:01:41.880 four thousand public companies. We should logically expect, therefore, to 0:01:41.880 --> 0:01:45.080 be more in the private arkets. And I don't think 0:01:45.080 --> 0:01:47.840 people actually appreciate the scale. And this is not just US, 0:01:47.920 --> 0:01:51.240 but it's US and Europe. Eighty percent of companies over 0:01:51.240 --> 0:01:55.880 one hundred million revenue are private, eighty percent of employment private. 0:01:56.520 --> 0:02:00.600 Why would we not expect a growth in the private marketplace? 0:02:01.760 --> 0:02:04.280 So why is it a better mousetrap? I mean fundamentally, 0:02:04.840 --> 0:02:07.600 I think about banks as being intermediaries, sort of between 0:02:07.680 --> 0:02:11.160 people putting capital up and people needing capital. Why is 0:02:11.240 --> 0:02:14.040 private a better intermediary than the big banks? 0:02:14.160 --> 0:02:16.840 So let's work, let's work in reverse. What needs? 0:02:16.960 --> 0:02:20.359 What are the needs for financing today? We're financing infrastructure 0:02:20.480 --> 0:02:24.680 long term, We're financing, energy transition, really long term we're 0:02:24.680 --> 0:02:29.040 financing the new economy, data centers, power really long term, 0:02:29.080 --> 0:02:32.520 long term financing needs. What a banks do well. Banks 0:02:32.960 --> 0:02:38.200 borrow short and then long. They are not ideally situated 0:02:38.200 --> 0:02:42.080 to be investors in long term assets, and so regulators 0:02:42.080 --> 0:02:44.680 when they look at the funding for the economy, they 0:02:44.680 --> 0:02:48.040 only have two choices, the banking system or the investment marketplace. 0:02:48.680 --> 0:02:52.560 Increasingly since two thousand and eight, regulators have chosen the 0:02:52.560 --> 0:02:55.680 investment marketplace to provide financing. Now you come to the 0:02:55.680 --> 0:02:58.720 investment marketplace and you have two more choices. You have 0:02:58.840 --> 0:03:03.440 daily liquid fonts or you have long term investors who 0:03:03.440 --> 0:03:06.440 are trying to match long term liabilities and long term assets. 0:03:07.160 --> 0:03:08.480 I think the choice is obvious. 0:03:09.240 --> 0:03:11.640 Do we really want to create more instability in our 0:03:11.680 --> 0:03:15.080 public markets by matching long term financing needs with short 0:03:15.160 --> 0:03:16.639 term daily liquid files? 0:03:16.880 --> 0:03:17.480 I don't think so. 0:03:18.000 --> 0:03:21.960 We are watching the logical outgrowth of changes that started 0:03:22.000 --> 0:03:25.280 in two thousand and eight, that accelerated through a zero 0:03:25.360 --> 0:03:29.680 rate environment, that were exacerbated by COVID, that were then 0:03:29.800 --> 0:03:32.080 refreshed by SVB and FRV. 0:03:32.840 --> 0:03:34.399 And this is not just happening in the US. 0:03:34.440 --> 0:03:37.560 It's happening everywhere in the world, regulators are looking at 0:03:37.600 --> 0:03:39.880 the choice of how they fund their economy, and they're 0:03:39.920 --> 0:03:43.040 choosing investors over banks. That doesn't mean bank's shrink, It 0:03:43.120 --> 0:03:45.160 just means on the margin, the growth is going to 0:03:45.200 --> 0:03:45.960 the investment market. 0:03:46.000 --> 0:03:49.160 Plitz. Are there some things that public markets do better 0:03:49.200 --> 0:03:51.400 than private markets? You've described some of the things private 0:03:51.400 --> 0:03:53.280 does better than public. Are there some things that public 0:03:53.320 --> 0:03:54.040 really does better. 0:03:54.360 --> 0:03:58.280 Look, we have in the US, in particular, a focus 0:03:58.320 --> 0:04:01.560 on daily liquidity. You want something that is daily liquid 0:04:01.640 --> 0:04:05.320 if you want pricing every single day, you can only 0:04:05.400 --> 0:04:09.160 accomplish that in public markets. Private markets are not going 0:04:09.200 --> 0:04:12.120 to give you daily pricing. They can give you an 0:04:12.120 --> 0:04:14.480 indication of pricing, nor are they going to give you 0:04:14.560 --> 0:04:18.000 immediate liquidity. So if you want something that's immediably liquid, 0:04:18.160 --> 0:04:21.320 you're talking about the public marketplace. If you want access 0:04:21.320 --> 0:04:24.240 to vast amount of capital today, because that's where the 0:04:24.279 --> 0:04:26.920 capital is, you're talking about the public marketplace. 0:04:27.279 --> 0:04:29.000 But if you're look at. 0:04:28.880 --> 0:04:32.039 Talking about matching long term capital needs, you're really talking 0:04:32.040 --> 0:04:33.400 about the private marketplace. 0:04:33.640 --> 0:04:37.640 When you talk about daily pricing. Some people here transparency. 0:04:38.200 --> 0:04:39.919 That is to say you have transparency in the public 0:04:39.960 --> 0:04:42.800 markets and not in the private markets. Is that right? 0:04:43.240 --> 0:04:45.520 I don't really think so. So let's start in the 0:04:45.520 --> 0:04:49.080 fixed income market. You own a public bond, Can you 0:04:49.120 --> 0:04:50.000 sell that public bond? 0:04:50.160 --> 0:04:50.640 Maybe? 0:04:50.920 --> 0:04:53.479 On average, it takes about five days to sell an 0:04:53.480 --> 0:04:56.960 investment grade public bond today when you see a price 0:04:57.080 --> 0:05:00.919 or a quote that's for a very small subset of 0:05:00.960 --> 0:05:03.680 the bond market. In the private market, can you sell 0:05:03.720 --> 0:05:04.119 your bond? 0:05:04.440 --> 0:05:04.760 Yes? 0:05:05.279 --> 0:05:08.039 On average, probably takes you about five days to sell 0:05:08.080 --> 0:05:11.360 your vont What we're watching is we're watching as private 0:05:11.400 --> 0:05:15.880 markets get bigger. We're actually watching increased liquidity in private markets. 0:05:16.279 --> 0:05:18.320 It's not to say it's the same as public markets, 0:05:18.320 --> 0:05:22.160 it's not. But this notion of transparency is actually itself 0:05:22.520 --> 0:05:26.280 an interesting thing. Are private market's not transparent? This is 0:05:26.320 --> 0:05:29.280 the argument that i'm the regulators make. They talk about 0:05:29.560 --> 0:05:33.080 private credit as a threat to the system. Well, every 0:05:33.160 --> 0:05:35.360 dollar that moves out of our US banking system makes 0:05:35.400 --> 0:05:38.560 the system more resilient. Banks are leveraged ten to twelve times, 0:05:38.920 --> 0:05:44.640 investors zero leverage, mutual funds zero leverage, BDC's one point 0:05:44.720 --> 0:05:48.760 five times leverage, retirement services companies eight times leverage. Everything 0:05:48.760 --> 0:05:50.680 that moves out of the banking system deleverages. 0:05:50.839 --> 0:05:54.160 So we've been talking about structural changes within the financial 0:05:54.400 --> 0:05:58.040 industry actually that have made private markets evolve. What about 0:05:58.120 --> 0:05:59.920 larger forces what we're looking at right now. We've gone 0:06:00.000 --> 0:06:02.880 through a period of extraordinarily low interest rates, a lot 0:06:02.920 --> 0:06:05.760 of liquidity. As I say, some other places have pumped 0:06:05.920 --> 0:06:07.880 a lot of money into the system for good and 0:06:07.880 --> 0:06:09.760 sufficient reason. We had a pandemic, we had a great 0:06:09.760 --> 0:06:13.440 financial crisis. As that tightens up, as I assume it will, 0:06:13.760 --> 0:06:16.360 how does that change the equation for private It. 0:06:16.360 --> 0:06:17.919 Is absolutely the driving force. 0:06:18.040 --> 0:06:21.000 I mean, this is focusing on the urgent, which is 0:06:21.080 --> 0:06:22.719 what we were talking about before we came on Era 0:06:22.960 --> 0:06:25.640 versus the important. This is the important thing that's happening 0:06:25.680 --> 0:06:28.760 in our business. At our recent partners off site, I 0:06:28.800 --> 0:06:30.760 put up a slide that said, in two thousand and eight, 0:06:30.800 --> 0:06:35.200 Apollo forty billion of AUM twenty twenty three, six hundred 0:06:35.200 --> 0:06:38.120 and fifty billion of AUM, we grew fourteen times. We 0:06:38.160 --> 0:06:43.760 outgrew Apple, We we outgrew Microsoft. Pretty impressive stat next slide, 0:06:43.839 --> 0:06:47.320 were we lucky or smart? We were lucky. You can't 0:06:47.360 --> 0:06:50.360 possibly plan on growing your business fourteen times, but you 0:06:50.360 --> 0:06:53.200 can position the business in a way that you take 0:06:53.200 --> 0:06:55.480 advantage of powerful tailwinds or trends. 0:06:56.000 --> 0:06:57.040 What were the tailwinds? 0:06:57.240 --> 0:06:59.320 Two thousand and eight, we had a financial crisis which 0:06:59.360 --> 0:07:01.479 puts most financial institutions in the. 0:07:01.440 --> 0:07:02.880 Western world on defense. 0:07:03.600 --> 0:07:07.479 People who had made promises to retirees, to pensioners, and 0:07:07.560 --> 0:07:10.320 had other obligations that were fixed all of a sudden 0:07:10.400 --> 0:07:13.920 needed to look elsewhere for rate of return. They were 0:07:13.960 --> 0:07:17.640 willing to consider that perhaps private markets offer an alternative. 0:07:17.720 --> 0:07:19.800 So Marco's turn to a different subject that you've been 0:07:19.800 --> 0:07:22.120 involved in. That's what's going on in the university and 0:07:22.120 --> 0:07:24.920 college at campuses right now. You've been involved, particularly at 0:07:25.000 --> 0:07:27.920 Pennsylvania and the Wharton School for a good long time 0:07:27.960 --> 0:07:31.200 on the board. Have things changed on college campuses or 0:07:31.240 --> 0:07:33.600 has there always been thus and it's just been triggered 0:07:33.600 --> 0:07:35.080 by this Israel Guiza Phenomona. 0:07:35.680 --> 0:07:38.200 Look, I think we've actually seen a lot of change 0:07:38.200 --> 0:07:42.239 take place over time. So I have a very favorable 0:07:42.240 --> 0:07:45.120 memory in my experience at the University Pennsylvania campus. But 0:07:45.320 --> 0:07:48.680 think more broadly, US universities were the were and are 0:07:48.840 --> 0:07:51.560 the envy of the world. We can destroy that, we 0:07:51.640 --> 0:07:54.680 can lose it. Why are kids there? Why did we 0:07:54.680 --> 0:07:58.040 think they were there? Be exposed to different points of view, 0:07:58.360 --> 0:08:03.480 learn how to think, critical reasoning, critical thinking, maturation. Is 0:08:03.520 --> 0:08:06.920 that what they're getting today. I think in some places 0:08:06.920 --> 0:08:08.760 it is what they're getting, and in some classes it 0:08:08.800 --> 0:08:11.280 is what they're getting. But what I saw at the 0:08:11.320 --> 0:08:14.080 University of Pennsylvania and when I spoke out against, was 0:08:14.120 --> 0:08:17.600 a dominant narrative that was taking hold on our campuses. 0:08:17.920 --> 0:08:21.520 Call it a post colonial education, call it what you will. 0:08:21.640 --> 0:08:24.920 It gave rise to an institutionalization of a point of view, 0:08:24.920 --> 0:08:27.920 that there were favorite groups and disfavored groups, that there 0:08:28.000 --> 0:08:31.520 was acceptable speech and non acceptable speech. I'm not sure 0:08:31.680 --> 0:08:35.120 that's the job that we all signed up for, or 0:08:35.160 --> 0:08:37.719 that's the university that we signed up for. Where we're 0:08:37.720 --> 0:08:41.160 watching today on these campuses is nothing more than the 0:08:41.200 --> 0:08:45.400 outgrowth of twenty years of bad management. If you have 0:08:45.440 --> 0:08:49.840 a dominant narrative on campus, do you have academic freedom? 0:08:50.320 --> 0:08:53.240 Do you have freedom of speech? I have seen over 0:08:53.280 --> 0:08:56.679 the past few years, as I've really stepped up my involvement, professors, 0:08:57.040 --> 0:09:00.960 department chairs who are afraid to speak their mind because 0:09:01.000 --> 0:09:05.200 their thoughts, their speech goes against the dominant narrative. What 0:09:05.280 --> 0:09:07.840 we're watching today on campus is we're told are leftists. 0:09:08.960 --> 0:09:12.640 We used to think leftists were liberal. This hardly seems liberal. 0:09:12.679 --> 0:09:16.360 This actually seems illiberal in the most extreme way. Why 0:09:16.400 --> 0:09:18.800 haven't they been cleared out? Won't listen to Ben Sas 0:09:18.800 --> 0:09:21.360 at the University of Florida. We're all about free speech, 0:09:22.200 --> 0:09:24.840 We're all about the right to protest. But there's a 0:09:24.880 --> 0:09:28.520 time and a place and a way you violate and trespass. 0:09:28.960 --> 0:09:32.400 There are consequences. Why would we not deal with them 0:09:32.440 --> 0:09:37.520 everywhere and that way. Certainly protests that were inconsistent with 0:09:37.559 --> 0:09:40.440 the narrative that we find on our campuses have and 0:09:40.520 --> 0:09:44.360 will be dealt with in that manner. Speakers are regularly 0:09:44.360 --> 0:09:49.640 shouted down, Professors, euersy administrators who did not react in 0:09:49.679 --> 0:09:52.400 that way without that kind of moral clarity. They now 0:09:52.400 --> 0:09:55.960 have encampments. Once you have encampments, you have the potential 0:09:56.000 --> 0:09:58.560 for violence. You have other considerations that come into play. 0:09:58.920 --> 0:10:04.040 But make no mistake, outside agitators, not mostly students, trespass 0:10:05.040 --> 0:10:07.439 danger to our the rest of the students and the 0:10:07.480 --> 0:10:10.719 rest of the community. This is what twenty years of 0:10:10.720 --> 0:10:12.040 a dominant narrative has done. 0:10:12.840 --> 0:10:15.120 Having seen it from the inside, where is the failure? 0:10:15.880 --> 0:10:18.080 The failures in multiple places, But I think it starts 0:10:18.120 --> 0:10:21.840 with me and with us as trustees. We were asleep 0:10:21.840 --> 0:10:24.560 at the wheel for twenty years. Part of our job 0:10:25.280 --> 0:10:29.320 was to provide balance. I do not think the popular 0:10:29.400 --> 0:10:33.319 frame of a campus today where trustees and alumni are 0:10:33.360 --> 0:10:36.040 fighting professors over academic freedom. 0:10:35.840 --> 0:10:36.760 Is actually correct. 0:10:37.559 --> 0:10:42.480 I actually think the appropriate frame is university administrators who 0:10:42.559 --> 0:10:46.520 maintain this dominant narrative are fighting professors for academic freedom. 0:10:47.400 --> 0:10:51.880 Trustees and alumni are here to provide balance. We have 0:10:51.960 --> 0:10:54.160 been asleep at the wheel. We have not done what 0:10:54.200 --> 0:10:57.520 we were supposed to do. We did not object as 0:10:57.880 --> 0:11:00.959 these dominant narratives took hold, and it is our job 0:11:01.320 --> 0:11:06.200 I believe to support long term excellence in education, academic research, 0:11:06.559 --> 0:11:10.840 freedom of expression, freedom to disagree. That's not what we 0:11:10.920 --> 0:11:13.400 have on many of our campuses today. We've got a 0:11:13.440 --> 0:11:15.000 long way from academic excellence. 0:11:15.520 --> 0:11:18.760 How is that corrected without the trustees overstepping their boundaries. 0:11:18.760 --> 0:11:20.439 I mean, you know, and I know when you sit 0:11:20.480 --> 0:11:22.079 in a board there are certain things you really need 0:11:22.120 --> 0:11:23.920 to do. You don't want to run the thing day 0:11:23.960 --> 0:11:26.559 to day. You don't have trustees there to be micromanagers. 0:11:26.800 --> 0:11:29.199 How do you have the proper role for the trustees 0:11:29.320 --> 0:11:30.720 without overstepping boundaries. 0:11:31.360 --> 0:11:32.760 There's a question of overstepping. 0:11:32.800 --> 0:11:35.600 I think the danger right now is far from trustees 0:11:35.640 --> 0:11:38.360 overstepping the bounts. I think trustees, for the most part 0:11:38.360 --> 0:11:41.560 of these big institutions, myself included, have failed to act. 0:11:42.000 --> 0:11:44.480 We have not done our job in the most fundamental way. 0:11:45.040 --> 0:11:47.079 I don't think we are anywhere close to the line 0:11:47.080 --> 0:11:50.959 of overstepping our balunts. Most universities operate in a shared 0:11:51.040 --> 0:11:56.719 governance manner. Transparency is often the best disinfectant. I do 0:11:56.720 --> 0:11:58.800 not believe at the University of Pennsylvania or a many 0:11:58.840 --> 0:12:03.160 of these campuses, the vast majority of professors actually believe 0:12:03.720 --> 0:12:08.160 in this dominant narrative. We as trustees can assure anonymous 0:12:08.160 --> 0:12:13.640 polling representation across the faculty, lots of other things that 0:12:13.679 --> 0:12:16.599 we can do to developing a strategic plan goes a 0:12:16.600 --> 0:12:18.360 long way. And as you said, it is not the 0:12:18.440 --> 0:12:20.720 job of the trustee or the alumni for that matter, 0:12:20.800 --> 0:12:21.920 to run these universities. 0:12:22.160 --> 0:12:24.520 This is best left to professional administrators. 0:12:25.880 --> 0:12:27.480 Mark, thank you so much, really great to have you 0:12:27.559 --> 0:12:30.480 on wolsterby as Mark Rowan, he is CEO of Apollo 0:12:30.520 --> 0:12:35.520 Global Management. Coming up, we've turned from the politics on 0:12:35.640 --> 0:12:39.200 US campuses to the geopolitics of industrial policy around the 0:12:39.240 --> 0:12:44.680 world with Karen Carneal Tambour of Bridgewater. That's next on 0:12:44.760 --> 0:12:46.359 Wall Street Week on Bloomberg. 0:12:47.760 --> 0:12:52.000 This is Bloomberg Wall Street Week with David Weston from 0:12:52.120 --> 0:12:53.040 Bloomberg Radio. 0:13:00.120 --> 0:13:02.160 This is a special Milk And edition of Wall Street. 0:13:02.160 --> 0:13:04.800 We're coming from Beverly Hills. One of the subjects of 0:13:04.880 --> 0:13:07.960 this year's Milk And Conference was how investors respond to 0:13:08.000 --> 0:13:11.839 an increasingly fractious world. We host a panel of major 0:13:11.960 --> 0:13:15.680 chief investment officers, including for Bridgewater and Timasik, and we 0:13:15.760 --> 0:13:19.280 start with Karen Carneal Tambour on how geopolitics may be 0:13:19.480 --> 0:13:21.680 driving the move toward industrial policy. 0:13:22.679 --> 0:13:24.600 And I think we've gone to a world where it 0:13:24.600 --> 0:13:29.599 almost seems desirable to people to see lack of convergence, 0:13:29.640 --> 0:13:33.600 to see diversions. You talk to businesses and you know 0:13:33.640 --> 0:13:35.600 there's the ups and downs every day of what's happening 0:13:35.600 --> 0:13:36.960 in the US China relationship. 0:13:37.400 --> 0:13:38.559 But they get the direction. 0:13:39.000 --> 0:13:41.560 They understand that they need to get out of having 0:13:41.600 --> 0:13:45.480 that much relies on China, and they're setting up for 0:13:45.960 --> 0:13:50.400 constantly talking about resilience. What is resilience means? It basically 0:13:50.480 --> 0:13:52.520 means you got to double do what you're doing and 0:13:52.559 --> 0:13:55.440 make it more expensive than it was before because you 0:13:55.480 --> 0:13:57.320 weren't in China for no reason. You were in China 0:13:57.360 --> 0:13:59.400 because it was the cheapest place to be, because that's 0:13:59.400 --> 0:14:01.559 where you had capital, because that's where you could set 0:14:01.640 --> 0:14:04.319 up most efficiently. So to go set up a double do, 0:14:04.679 --> 0:14:07.520 to go create resilience such that if there's a problem, 0:14:07.600 --> 0:14:09.640 you have a different way of you know, getting your 0:14:09.679 --> 0:14:12.400 goods or creating them. That's expensive. So I think the 0:14:12.440 --> 0:14:15.480 biggest implication for investors is that we were kind of 0:14:15.480 --> 0:14:18.720 in this world where there is like almost a gravitational 0:14:18.760 --> 0:14:22.000 pull like all else equal of inflation to I don't know, 0:14:22.160 --> 0:14:26.440 zero one percent, and that was that kind of underpinned 0:14:26.520 --> 0:14:29.000 a lot of the investment landscape because it meant that 0:14:29.000 --> 0:14:32.000 central banks could always be easier than usual because. 0:14:31.720 --> 0:14:32.920 They didn't really have any tension. 0:14:33.960 --> 0:14:36.080 If there's no inflation, you might as well just be 0:14:36.120 --> 0:14:38.600 as easy as you can at all times. What's the downside, 0:14:38.640 --> 0:14:41.960 there's no inflation, And this shift in geopolitics has been 0:14:42.000 --> 0:14:44.720 one of the really important drivers kind of smacking us 0:14:44.720 --> 0:14:46.800 out of that world to a new era where the 0:14:46.840 --> 0:14:51.120 gravitational pull of inflation is higher. Maybe they're more like 0:14:51.160 --> 0:14:53.560 two percent. Not a disastrous number, but one where that 0:14:53.640 --> 0:14:57.080 tension actually starts existing because you have all this structural 0:14:57.120 --> 0:15:00.360 spending that people feel they have to do whatever the price. 0:15:00.840 --> 0:15:04.040 Some of that is just remilitarization. Without some of these 0:15:04.080 --> 0:15:07.400 geopolitical pressures, you wouldn't have that. But countries around the 0:15:07.440 --> 0:15:09.600 world are basically saying I need to spend more on 0:15:09.720 --> 0:15:12.840 military activities. Some of it is corporate spending on redoing 0:15:12.880 --> 0:15:15.440 their supply chain, and the third type I'd mentioned is 0:15:15.680 --> 0:15:19.760 everything you're seeing in industrial policy. Officially it's doing something else. 0:15:19.840 --> 0:15:23.680 For example, the ira is going after climate, but I 0:15:23.680 --> 0:15:26.640 don't believe that spending would have been there without that 0:15:26.800 --> 0:15:31.280 backdrop of geopolitical competition and that sense that if China 0:15:31.360 --> 0:15:34.360 is willing to spend so much state money going after 0:15:34.440 --> 0:15:36.120 their strategic goals, why aren't we. 0:15:36.400 --> 0:15:39.160 Karen Bridgewater has been thought of in terms of China 0:15:39.200 --> 0:15:41.400 for some time. You have a long history there, and 0:15:41.440 --> 0:15:44.080 when you were talking about Asia, I don't think you 0:15:44.120 --> 0:15:44.880 mentioned India. 0:15:45.480 --> 0:15:48.640 So I'm curious about China with respect to India and 0:15:48.680 --> 0:15:51.160 for that matter, other wlads like Vietnam and Indonesia as 0:15:51.440 --> 0:15:55.400 foreign direct investment has seemed to fall in China. How 0:15:55.400 --> 0:15:57.880 do you assess India as an alternative to China and 0:15:57.920 --> 0:16:00.600 for that matter, Indonesia other Asian countries. 0:16:01.560 --> 0:16:06.720 I think India is fascinating. It is still meaningfully smaller 0:16:06.760 --> 0:16:09.160 than China, as you know, just kind of what the 0:16:09.200 --> 0:16:13.280 markets are like, and more difficult than China to transact in. 0:16:13.520 --> 0:16:15.800 So if you look at China, I don't know, seven 0:16:15.880 --> 0:16:18.360 years ago or something, it was very difficult for a 0:16:18.400 --> 0:16:22.160 global player to practically be in China. And so even 0:16:22.200 --> 0:16:24.440 if you weren't worried at all about geopolitics, about them 0:16:24.480 --> 0:16:27.640 confiscating your assets or anything, just logistically the question of 0:16:27.680 --> 0:16:29.320 like how do you buy a bond or how do 0:16:29.360 --> 0:16:31.840 you buy a stock was a challenging one to work through, 0:16:32.520 --> 0:16:36.120 and now a lot of that shifted and it's significantly easier. 0:16:36.160 --> 0:16:38.320 Though it's obviously still harder to buy a Chinese asset. 0:16:38.480 --> 0:16:40.200 I shouldn't say obviously they could have made it easier, 0:16:40.200 --> 0:16:42.640 but still easier to buy a Chinese hard to buy 0:16:42.680 --> 0:16:45.720 a Chinese asset than say a European asset, but a 0:16:45.800 --> 0:16:49.880 lot of areas have come down, so today China is accessible. 0:16:50.200 --> 0:16:53.920 You can as a global investor build up a relatively 0:16:54.000 --> 0:16:56.720 meaningful allocation if you want to, and you would get 0:16:56.760 --> 0:17:01.520 this like extremely uncorrelated exposure that, in my view, even 0:17:01.560 --> 0:17:05.439 with pretty disastrous outcomes in China, may have reasonable return 0:17:05.520 --> 0:17:07.480 because the pricing is just so pessimistic. 0:17:08.240 --> 0:17:11.240 Geopolitics went to court this week as TikTok sued the 0:17:11.359 --> 0:17:14.240 US government over its forced sale. We talked at Milkan 0:17:14.359 --> 0:17:17.160 with someone who wants to buy it. Former Treasury Secretary 0:17:17.160 --> 0:17:20.200 Stephen Minuchin, missus Sager, give us your sense of the 0:17:20.280 --> 0:17:21.480 US economy right now? 0:17:21.520 --> 0:17:22.399 How strong is it? 0:17:22.520 --> 0:17:23.600 Where do you see weaknesses? 0:17:24.280 --> 0:17:26.639 For the parts of the economy have continued to be 0:17:26.720 --> 0:17:30.920 quite strong, and obviously we're seeing inflation still being very sticky. 0:17:31.520 --> 0:17:35.240 So you know, the market has moved towards less great 0:17:35.359 --> 0:17:38.560 cuts this year. I do think we're going to continue 0:17:38.560 --> 0:17:41.280 to see a slow down of the US economy at 0:17:41.280 --> 0:17:42.800 these levels of interest rates. 0:17:43.440 --> 0:17:46.840 So you always worked for President Trump. President Biden's a 0:17:46.840 --> 0:17:49.400 different man, different economic policy. Is there anything you see 0:17:49.400 --> 0:17:51.960 in the Biden ofpal policy that you approve of you 0:17:52.000 --> 0:17:53.840 think they've done a good job with Look. 0:17:53.640 --> 0:17:55.600 I think there's certain things that they've done that have 0:17:55.760 --> 0:17:58.560 been okay, But I think there's been a very different 0:17:59.080 --> 0:18:02.760 economic adject and prior to COVID, we saw the Trump 0:18:02.800 --> 0:18:06.160 tax cuts were really working. I think to the extent 0:18:06.240 --> 0:18:09.359 that we hadn't had COVID. We were seeing an increase 0:18:09.359 --> 0:18:11.439 of the economy and the cuts would have paid for 0:18:11.520 --> 0:18:16.240 themselves and we were seeing very robust economic activity. Now, 0:18:16.280 --> 0:18:19.000 obviously in COVID we had to spend a lot of money. 0:18:19.920 --> 0:18:22.840 I think had we not spent the first two trillion dollars, 0:18:22.840 --> 0:18:26.679 we would have had a worldwide depression, not recession. But 0:18:26.760 --> 0:18:28.840 I think in hindsight, we went on to spend too 0:18:28.920 --> 0:18:32.239 much money, and I think when the Biden administration came in, 0:18:32.320 --> 0:18:35.080 they continue to spend too much money, and I think 0:18:35.119 --> 0:18:36.919 these deficits are going to come back and be a 0:18:36.920 --> 0:18:37.680 real problem. 0:18:37.960 --> 0:18:40.840 We have a very strong US dollar. Is that a 0:18:40.880 --> 0:18:42.000 good thing for the economy. 0:18:42.280 --> 0:18:44.400 I think it is a good thing. I mean, for one, 0:18:44.680 --> 0:18:47.919 the dollar is the reserve currency of the world, and 0:18:47.960 --> 0:18:51.639 that's allowed us to finance these very large deficits. But 0:18:51.800 --> 0:18:54.480 over time this is something we can't be reliant on. 0:18:55.480 --> 0:18:57.719 I think the dollar will continue to be the reserve 0:18:57.800 --> 0:19:02.400 currency before the foreseeable future, but we have a responsibility 0:19:02.400 --> 0:19:04.840 to get our financial situation back in shape. 0:19:04.880 --> 0:19:06.960 What are the issues is pending right now? Are the 0:19:07.040 --> 0:19:09.960 Russian assets central back assets that have been seized in 0:19:10.000 --> 0:19:12.600 Europe and the United States? What should be done, if anything, 0:19:12.680 --> 0:19:14.679 with those. Do you have a view about whether we 0:19:14.720 --> 0:19:18.160 actually should be taking those assets and basically giving them 0:19:18.160 --> 0:19:20.880 to Ukraine for rebuilding Ukraine because of the war. 0:19:21.840 --> 0:19:24.480 Well, first of all, I think the sanctions programs are 0:19:24.640 --> 0:19:28.720 very important, and it's a major foreign policy tool that 0:19:28.760 --> 0:19:31.480 the US has, And I've always said, because we are 0:19:31.520 --> 0:19:34.440 the reserve currency, we need to be careful about how 0:19:34.480 --> 0:19:37.000 we use it. So the first part of this is 0:19:37.000 --> 0:19:40.440 making sure we put in place sanctions and re enforce them. 0:19:41.200 --> 0:19:45.679 I'm very concerned that the Russian Oale sanctions and the 0:19:45.680 --> 0:19:50.600 Iran oil sanctions are not being enforced. We're seeing laborant 0:19:50.640 --> 0:19:53.959 violations of those, and I think that has to be 0:19:54.040 --> 0:19:56.879 enforced now. In regards to what you do with the money, 0:19:57.800 --> 0:20:01.240 the money needs to go through. They're a legal process, 0:20:01.280 --> 0:20:04.919 score a legislative process, and I think there should be 0:20:04.920 --> 0:20:07.440 a healthy debate. But I think using the Russian money 0:20:07.440 --> 0:20:10.720 to rebuild Ukraine after the war is something should be 0:20:10.840 --> 0:20:11.920 seriously considered. 0:20:12.560 --> 0:20:14.480 Since you left the government. One of the big moves 0:20:14.480 --> 0:20:16.879 you made, least the New York Community Bank buying it. 0:20:17.440 --> 0:20:19.080 I give us here says to why that was a 0:20:19.080 --> 0:20:21.160 good move. There's a lot of concern about regional banks 0:20:21.200 --> 0:20:24.680 right now, although you know regional banks personally pretty will. 0:20:24.880 --> 0:20:26.960 I've been in the banking business for a long time. 0:20:27.400 --> 0:20:30.560 During the financial crisis, I've bought three banks from the FDIC. 0:20:31.160 --> 0:20:34.720 We've branded the largest bank actually headquartered here in southern California, 0:20:34.880 --> 0:20:39.080 one West. I've known New York Community Bank for the 0:20:39.160 --> 0:20:42.639 last ten years. You know, this was a merger of 0:20:42.760 --> 0:20:47.840 three institutions, and in them coming together, they didn't tap 0:20:47.880 --> 0:20:51.119 the proper procedures for one hundred million dollar bank. They 0:20:51.200 --> 0:20:54.119