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Speaker 2: A joy to have an extended conversation with Kenneth Grogoff
Speaker 2: of Harvard University. The scope and scale of his literature,
Speaker 2: from textbooks the classic Maurice Sobsfeld of Berkeley and International Economics,
Speaker 2: over to every effort Carmen Reinhardt and him changing the
Speaker 2: dialogue of America with this time is different. I love
Speaker 2: the subtitle Paul eight Centuries of Financial follow We've enjoyed
Speaker 2: them all. The bravest book I've ever seen in doing
Speaker 2: this act. The Curse of Cash was an exceptionally brave book,
Speaker 2: going ahead out against corruption, crypto and negative interest rates.
Speaker 2: And now we celebrate. And it is my book of
Speaker 2: the summer in economics, Our dollar, Your problem. It's a
Speaker 2: bright green cover, Ken, I probably Natasha picked out the
Speaker 2: green cover. Kenneth Rogoff joins us right now, Ken, what
Speaker 2: a well timed book to say the least is the
Speaker 2: US dollar resilient.
Speaker 3: Well, it's resilient, but maybe it might not be as
Speaker 3: dominant as at once was.
Speaker 2: I look ken at the scope and scale of your work,
Speaker 2: and everybody dovetails it in to your look at our
Speaker 2: fiscal space. We were just talking with way Leah Blackbrock
Speaker 2: about this exploding debt, these exploding deficits. As you bring
Speaker 2: out our dollar, your problem is it the same old
Speaker 2: story of angst and worry about the debt and deficit?
Speaker 2: But we move forward or are we at a tipping point?
Speaker 3: Well, I mean, the book is a sweeping history of
Speaker 3: the rise of the dollar after World War Two, all
Speaker 3: the competitors, how hard it is to live with crypto
Speaker 3: and many other things. And by the way, I hope
Speaker 3: I've made it entertaining enough that people will get through it.
Speaker 3: But certainly Dad is a big piece of it. If
Speaker 3: we think of the future, and Tom, you've had all
Speaker 3: kinds of people on the program. I remember you had
Speaker 3: Olivier Blanchard and Larry Summers and many others who were
Speaker 3: convinced that the interest rates were for a long time,
Speaker 3: we're just going to keep declining forever. So Dad is
Speaker 3: a free lunch that was Olivier's American Economic Association presidential
Speaker 3: address in twenty nineteen. It's a great piece of work,
Speaker 3: but I'm not sure it's a good prediction. I've been
Speaker 3: arguing for a very long time that they're real interest rates,
Speaker 3: something about the ten year rate, not the Fed funds rate,
Speaker 3: that real interest rates have some convergence to mean, reversion
Speaker 3: to mean, what do you know? And that's happened. That's
Speaker 3: what the panic about the debt is now. It always
Speaker 3: was going to happen. So I think people had their
Speaker 3: head in the sand to think that we were safe
Speaker 3: from that. Maybe AI will save us, but I don't
Speaker 3: think so. That's why the debt's filing up. Our interest
Speaker 3: bill has more than doubled, it's about to triple, and
Speaker 3: it's more than our defense budget now. So yes, that is,
Speaker 3: and that and the deficit. And by the way, I'm
Speaker 3: just amazed at how few people really understand deficit and
Speaker 3: debt aren't the same thing. I mean, I know most
Speaker 3: of your listeners do, but you'd be so surprised. You know, obviously,
Speaker 3: the deficits, how much you're spending, and the debts, what
Speaker 3: your credit card bill has gotten to. And I think
Speaker 3: the problem with the United States is not Trump, and
Speaker 3: it's not Biden. It's not the right, it's not the left.
Speaker 3: It's the American people right now just don't believe in
Speaker 3: any need for reigning things in and until we have
Speaker 3: I think another inflation crisis or some kind of crisis,
Speaker 3: I don't think anybody's going to be able to achieve that.
Speaker 2: Kenneth Rogoff for this and extended conversation Yale University Press
Speaker 2: called me up to DiCaprio is playing Rogueff in the
Speaker 2: movie coming out in twenty twenty seven. I need to
Speaker 2: sell the book, folks. It's wonderfully brief, but very deep,
Speaker 2: and it's wonderfully, wonderfully accessible. This is the book you
Speaker 2: throw at your brady college kid this summer and say
Speaker 2: shut up and read it. He opens and this goes
Speaker 2: back to Rochester, New York, when he and I used
Speaker 2: to go up to house the guitars years ago. He
Speaker 2: opens with the economist Grace Slick and Jefferson here played
Speaker 2: in Sarajebel. This book is accessible when you got Jefferson
Speaker 2: here Blaine in the first key pages.
Speaker 4: Paul Sweeney, Professor, I think most of our listeners, most
Speaker 4: of our viewers over the last several months have kind
Speaker 4: of brushed up on their knowledge of tariffs. Here we've
Speaker 4: all tried to figure out what it all means. How
Speaker 4: do you present the concept of tariffs to your students.
Speaker 3: Well, I mean, I think we when we teach tariffs,
Speaker 3: we're not necessily teaching crazy, wild tariffs going all over
Speaker 3: the place. We teach suppose country A, but it's a
Speaker 3: five percent tariff on and country B retaliates by putting
Speaker 3: a five percent tariff. And frankly, if that had been
Speaker 3: all along, what was going on. It's a tax. I
Speaker 3: don't agree with it. I don't think it's well conceived,
Speaker 3: but you know, it wouldn't be the end of the world.
Speaker 3: We can cut other taxes. What has been, you know,
Speaker 3: so destabilizing to markets was this idea tariff could be
Speaker 3: used to solve every problem. I just came back from
Speaker 3: the UK. I don't know if you followed this that
Speaker 3: Trump wanted the British to have more free speech as
Speaker 3: part of his condition for releasing tariffs and things like
Speaker 3: that all over the world. And you know, I think
Speaker 3: one of the things that's probably cheered markets up is
Speaker 3: the I think one of Trump's better qualities is he
Speaker 3: is a pragmatist, and when something doesn't work, he finds
Speaker 3: a way to back out. And I think everyone sees
Speaker 3: that's what's going on. He played some clips of him
Speaker 3: from a cutter recently, him using the word beautiful constantly.
Speaker 3: Tariffs were beautiful. It's going to be a beautiful thing. No,
Speaker 3: it's not. It was a disaster. It's probably the worst
Speaker 3: policy in my five decades as an economist. But you know,
Speaker 3: even though he won't admit that it was so dumb,
Speaker 3: he's retreated, which is smart, and so I think that's
Speaker 3: probably why the markets are cheered up.
Speaker 4: The markets are cheered up, a professor. We've seen the
Speaker 4: stock market RaSE, you know, most of the losses here
Speaker 4: were now flat for the year. But we haven't seen
Speaker 4: that in the dollar. The dollar's really taken a pound here,
Speaker 4: a pounding here. How do you feel about the US
Speaker 4: dollar here?
Speaker 3: Well, it's up a shade in the last few days.
Speaker 3: I think I think the dollar's way over valued. So
Speaker 3: not for the reasons the administration saying it's just very high.
Speaker 3: It's not high because the dollars a reserve currency, the
Speaker 3: mar A Lago plan, the dollar has been very low,
Speaker 3: and the dollar's been a reserve currency. You know, throughout
Speaker 3: this the dollar goes in roller coaster waves. It's on
Speaker 3: a super high. I would have to go back to
Speaker 3: two thousand and two and before that to nineteen eighty
Speaker 3: five to see anything like it. And what do I
Speaker 3: mean by high, I mean looking at the purchasing power
Speaker 3: of the dollars. So very simplistically, you know, think of
Speaker 3: yourself as a Japanese tourist in the United States or
Speaker 3: an American tourist in Japan. You're going to have very
Speaker 3: different experiences right now than you might have, you know,
Speaker 3: even ten years ago. So Japan's had almost no inflation.
Speaker 3: We've had buckets of inflation making prices high. And yet
Speaker 3: and yet the dollar's gone way up against the end,
Speaker 3: and the Euro has had a bit of inflation, but
Speaker 3: less than us. And again the dollar's gone up against zero.
Speaker 3: It's very hard to predict exchange rates. If I go
Speaker 3: back to my long career, more than forty years ago,
Speaker 3: my first really well known paper was about how hard
Speaker 3: it was to understand, much less predict exchange rates. However,
Speaker 3: over the years, an exception to that has become clear
Speaker 3: when something's way out of line. The end right now
Speaker 3: is really low, the dollars really high. Over a couple
Speaker 3: of years, it's going to come down. So I think,
Speaker 3: you know, Trump may take credit for it. I wrote
Speaker 3: a piece about this a year ago. I said, that
Speaker 3: doesn't matter whose president, gravity is going to bring the
Speaker 3: dollar down.
Speaker 2: Ken Rogoff with his folks who celebrate my economic book
Speaker 2: of the summer on YouTube, take a look, Break Green
Speaker 2: cover our dollar, Your problem, Kenneth Rogoff hugely accessible for
Speaker 2: those of you on Bloomberg Radio. It's just simple. It's
Speaker 2: very very readable, and I want to go to one
Speaker 2: of the chapters where there's a bit of heavy lifting.
Speaker 2: Ken Rogoff, you go back to values you started to
Speaker 2: staying in France. Who gave us the phrase exorbitant privilege?
Speaker 2: Berry Keon Green has written about it many other worthies
Speaker 2: is well, are we losing our exorbitant privilege? Are we
Speaker 2: losing the American advantage we've had for decades?
Speaker 3: Well, I think it peaked about a decade ago. By
Speaker 3: my reckoning. The footprint to the dollar, by some measures,
Speaker 3: has risen, but I think by really some key ones.
Speaker 3: In particular, the one I look at is how foreign
Speaker 3: central banks regulate their economies and their currencies against the dollar.
Speaker 3: I think it was in decline, and my book argues
Speaker 3: at the end of it. It's not the whole book,
Speaker 3: but my book argues at the end of it that
Speaker 3: in addition to the fact that China needs to break free,
Speaker 3: that's just happening, and Asia is half the dollar block,
Speaker 3: so that lowers our footprint. The fact the Europeans also
Speaker 3: hated and if they hadn't screwed up by bringing Greece
Speaker 3: into the European the eurosystem way prematurely, the euro might
Speaker 3: be doing better today. And that's all back on track.
Speaker 3: But I think the biggest problems are from within, which
Speaker 3: is that our deficits are out of control, and I
Speaker 3: don't think we're bringing them under control. And I also
Speaker 3: feel fatal reserve independence from both the left and the
Speaker 3: right is under assault. Tom, I want to go back.
Speaker 3: I'm so glad you noticed Grace slick by the way
Speaker 3: I bring it in early to show how much other
Speaker 3: countries love the United States and yet they hate the
Speaker 3: United States. And I'll mention you know I was seventeen
Speaker 3: years old. I think when that I was in a
Speaker 3: bar in Sarajevo people are singing to the Jefferson airplane
Speaker 3: and I was completely oblivious because I just was so
Speaker 3: close minded that my best someone who's become my best
Speaker 3: friend in chess, was actually giving chess lessons to Grace Slick.
Speaker 2: We should mention here that mister Rugoff inter Ut and
Speaker 2: we all knew this in Western New York was esteemed
Speaker 2: in the effort of chess and has kept at it
Speaker 2: for years and is well. His affiliation with one B.
Speaker 2: Fisher is noted from his childhood. Oh, let's do this, Paul.
Speaker 2: Let's jump in here with a couple more questions with
Speaker 2: Professor Rogoff. We're going to go to news on an
Speaker 2: incredibly busy day rebrief you on the markets, and we're
Speaker 2: thrilled to Ken Rogoff will join us on the state
Speaker 2: of America in another section here in a moment.
Speaker 4: Paul Sweeney, Professor, I think most of our listeners and
Speaker 4: yours grew up at a time where globalization was the
Speaker 4: backdrop for economically.
Speaker 2: Thank you for bringing this up.
Speaker 4: Where is globalization over? I can't think of a world
Speaker 4: where we're not just thinking on a global basis about
Speaker 4: global economics, global politics, global defense.
Speaker 3: Well, we're definitely in a different era than we were.
Speaker 3: I mean, it had been changing before Donald Trump. So actually,
Speaker 3: economists referred to the period up to the financial crisis
Speaker 3: two thousand and eight two thousand and nine as the
Speaker 3: period of hyper globalization. And then it really did slow
Speaker 3: down a lot. Trade growth, slowed down on other measures,
Speaker 3: and you sometimes maybe heard the expression slobalization. And now
Speaker 3: we're definitely in retreat, introducing the tariffs, the war, and
Speaker 3: the Ukraine, the great cyber Wall of China that's going up,
Speaker 3: and I think that has dramatic effects for the global economy,
Speaker 3: for interest rates, for inflation. It's a big thing. I
Speaker 3: had a paper Brookings just over a year ago of
Speaker 3: a couple of papers with some very talented young co
Speaker 3: authors Hassan Afruzi, Marina Hollick, and Pierrard. They joke that
Speaker 3: they don't think they're young, because the two of them
Speaker 3: are in the mid forties. But I think they're young.
Speaker 3: And Piers on Trump's consul of Economic Advisors now, by
Speaker 3: the way, and we argued that this period where it
Speaker 3: was easy sledding for the central banks because globalization made
Speaker 3: it easier to deliver good outcomes it's over and they're
Speaker 3: in a tougher period.
Speaker 2: Kind I want to get this in. I think it's
Speaker 2: too important as we wait for Michael Barr and then
Speaker 2: it's kind of throwing off from the great moments of
Speaker 2: my act. Was you and Joe Stiglitz together in Davos.
Speaker 2: I thought it was a miracle to get you two
Speaker 2: warring over the years in a collegial way. Joe Stiglitz,
Speaker 2: change the dialogue as you did with this time is
Speaker 2: different with our discontent over globalization, Ken Rogoff, what does
Speaker 2: our next globalization look like?
Speaker 3: I mean, I think we're going to go through a
Speaker 3: period where we're breaking up more. Donald Trump initiated it.
Speaker 3: The Chinese we're doing a lot. So I think we're
Speaker 3: in a period of retreat. I mean, it's very political.
Speaker 3: It's hard to know. I think it'll unfold slowly. The princident.
Speaker 3: Historic economic historian Harold James actually wrote a book, I
Speaker 3: think around twenty ten, noting that globalization goes in ways,
Speaker 3: goes off, that goes down just because it's booming. We've
Speaker 3: had periods what that's happened before, and this kind of
Speaker 3: populous discontent. He it's normal, and you got a retreat.
Speaker 3: I think the long term is more, but over the
Speaker 3: next couple decades maybe not.
Speaker 2: If we celebrate my book of the summer, our dollar
Speaker 2: your problem. And as you know, always with Ken Rogoff,
Speaker 2: there has to be a money chapter on our gross debt.
Speaker 2: The money chart is on page two sixty six, near
Speaker 2: the end of the book, and it is on the
Speaker 2: all in debt. He and Carmen Reinhardt codified this a
Speaker 2: decade ago, with this time as different. Ken, that chart
Speaker 2: is absolutely jaw dropping of our gross debt. I guess
Speaker 2: full faith and credit, corporate and hidden debts as well.
Speaker 2: Is the rest of the world concerned about our gross debt?
Speaker 3: Well, excuse me. The United States accounts for roughly half
Speaker 3: of all advanced country debt, we public debt, we account
Speaker 3: for more than half, perhaps of all corporate bonds. So
Speaker 3: we're big. And I think what's hitting the United States
Speaker 3: now more than the you know, gradual loss of exorbit
Speaker 3: and privilege. What's hitting us is the normalization of interest rates.
Speaker 3: If you're the world's biggest debtor, it hurts.
Speaker 2: I mean, I look Ken at the real yield. I say,
Speaker 2: Ken in a simplistic way, as we look in the
Speaker 2: Bloomberg terminal. I look at the ten year real yield
Speaker 2: as a keel absolutely, I got it. I got a
Speaker 2: C plus. He gives out He's like Steve roach a yield,
Speaker 2: he gives out no aser bees. I'm looking Ken rogoff in.
Speaker 3: A ten year you must be taking another class than mine.
Speaker 2: But anyway, I look at the ten year real yield
Speaker 2: two point one. Where is a rogue off normal ten
Speaker 2: year real yield?
Speaker 3: Well, it's very volatile. It'd probably think of one to
Speaker 3: five is where it'll settle after all of this. I
Speaker 3: mean it had gone to minus one. There is a
Speaker 3: slight trend, although it's a little bit hard to know
Speaker 3: if it's up or down. What was so like crazy
Speaker 3: after the financial crisis is the ten year that you're
Speaker 3: looking at the real inflation adjusted interest rate. It fell
Speaker 3: by more than three hundred basis points, even three hundred
Speaker 3: and fifty basis points. And that's when Larry Summers came
Speaker 3: out with secular stagnation. We're never going to grow again
Speaker 3: the interest rate. It's always going to be low. And
Speaker 3: all this stuff about data is a free lunch. Modern
Speaker 3: monetary theory, I argued way back when it was happening.
Speaker 3: That this is normal after a financial crisis. Don't think
Speaker 3: that this is going to last forever. Happened in the
Speaker 3: Great Depression, interest rates collapse, it happens in many countries
Speaker 3: in the in the aftermath of a financial crisis. So
Speaker 3: I mean a lot of what's going on. It's I
Speaker 3: think the most that chart you're looking at, it's only
Speaker 3: one way to capture the real interest rate. There others,
Speaker 3: But I think it's the most important variable in the
Speaker 3: world if you believe that it's going to stay on
Speaker 3: the higher side, as I do. You know, debt is
Speaker 3: very high, and it does gradually push up interest rates.
Speaker 3: The whole world, for better or for worse, is remilitarizing. Populism. Deglobalization,
Speaker 3: which we discussed earlier, also pushes up interest rates. All
Speaker 3: of these things. I think we could easily see the
Speaker 3: ten year at that now I'm talking about the nominal,
Speaker 3: which is now for four or something like that. We
Speaker 3: could see it at five, five, six within a couple
Speaker 3: of years. Given how things are going. There are some
Speaker 3: very smart people, young economists, who think, nope, this is
Speaker 3: a aberration. We're going to go back on that downward
Speaker 3: ride and debt is a free lunch after all. That
Speaker 3: is seems to me a very risky thing to bet
Speaker 3: the farm on.
Speaker 4: Well, that's I mean, professor, that's what a lot of
Speaker 4: folks will come into the studio and tell Tom and
Speaker 4: me that, Hey, as long as investors, both domestic and international,
Speaker 4: continue to show up and buy us treasure securities, there's
Speaker 4: nothing to worry about. How do you respond to that?
Speaker 2: But let's not.
Speaker 3: Confuse that with what interest rate they want. So, yes,
Speaker 3: the market's liquid, but the interest rate we're paying it's
Speaker 3: been rising, and I predict it's going to keep rising.
Speaker 3: We're not going to have an Argentina situation. We may
Speaker 3: commit Harry Carrie, you know, somehow and refuse to pay
Speaker 3: a debt. We can always inflate, we can use financial repression.
Speaker 3: My book discusses the stuff at length. An that prints
Speaker 3: its own money doesn't need to default, sorry about my coughing,
Speaker 3: doesn't need to the fault. But of course inflation is
Speaker 3: a form of default. We had an access ten percent
Speaker 3: inflation the last few years, maybe twelve, and that was
Speaker 3: a partial default on us dead in real terms. So
Speaker 3: I actually think we're going to get something like that
Speaker 3: or even a little bigger over the certainly the next
Speaker 3: five to seven years is what I say in my book.
Speaker 3: I maybe would pull it back to four years now
Speaker 3: that I've seen the opening salvos of the Trump administration.
Speaker 2: Ken, at the time, we've got left, I got eight
Speaker 2: ways to go here. You've been more than generous this morning,
Speaker 2: canceling all your classes, and they got you know, I
Speaker 2: want to talk about X ten and what Furman's doing
Speaker 2: up at Harvard. I want to talk about the state
Speaker 2: of western New York as a wasteland of a former
Speaker 2: industrial might. I got other things to talk about. Ken.
Speaker 2: When you look at American exceptionalism in the path of
Speaker 2: our decade, in the past forward, do you see a
Speaker 2: continued American exceptionalism after whatever the tenure is of President Trump.
Speaker 3: I think it was fading somewhat already in some dimensions,
Speaker 3: but peaking and others. I think we've hit the peak,
Speaker 3: and I think, you know, I don't. I'm not an investor,
Speaker 3: but I would say this is a moment to think
Speaker 3: about diversification more. I see Europe with its forced remilitarization,
Speaker 3: with its ketchup probably doing outperforming the United States. China
Speaker 3: not so much. But it's going to break away from
Speaker 3: the United States. Thank you for mentioning Western New York
Speaker 3: as a wasteland, because I actually talk a lot about
Speaker 3: our joint hometown of Rochester quite a bit in the book.
Speaker 3: But I see certainly the dollars staying on top, but
Speaker 3: less on top. You mentioned Barry Ikbread. I mean he
Speaker 3: wrote and many of us thought twenty years ago that
Speaker 3: we were headed to a more tripolar world. I think
Speaker 3: we're back on course to that. We'll lose some of
Speaker 3: our exceptionalism. It will hurt in national security too. There
Speaker 3: will be other pathways to do transactions. Our sanctions won't
Speaker 3: be as effective, our spying won't be as effective, and
Speaker 3: a number of other things. I think Americans are going
Speaker 3: to happen to adjust. But I think we're going to
Speaker 3: have a bit a crisis of some sort first, because
Speaker 3: no politician can rein it in until we do that.
Speaker 2: Have one ken I've failed. We didn't talk about bitcoin
Speaker 2: in your magisterial The Curse of Cash. You got to
Speaker 2: come back at some point here in twenty twenty five
Speaker 2: and give us an update on your classic book on
Speaker 2: what I'll call your cryptic book on Crypto. Kenneth rug
Speaker 2: Off my book of the summer in Economics, Our Dollar,
Speaker 2: Your Problem. For those of you in radio, I'll get
Speaker 2: it out on Twitter and on LinkedIn today. It is
Speaker 2: a celebration of his academics for decades and also a
Speaker 2: piercing look forward to our debt.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: There is no one, and I mean no one we
Speaker 2: speak to who viscerally understands the cadence the culture of China,
Speaker 2: like Wayley of Blackrock, acclaimed in mathematics and her childhood
Speaker 2: in China and in Southern Asia as well. We're thrilled
Speaker 2: to the chief global investment strategists for Blackrock could join
Speaker 2: us this morning. Let me cut to my sort of
Speaker 2: theoretical sixty thousand foot view. What is the Chinese timeline?
Speaker 2: You've lived it, your family has lived it. Don't give
Speaker 2: me this week. They're trying to get the labor they stuff.
Speaker 2: Do they just pause in delay in this trade war? Out?
Speaker 2: One year, three years, five years?
Speaker 5: Well, certainly timeline is longer than the mid term in
Speaker 5: the US and the four year cycle in the US,
Speaker 5: which is why I guess they have longer time on
Speaker 5: their side as they engage in the in the negotiation.
Speaker 5: But the bigger picture is that as we kind of
Speaker 5: go through this period of policy uncertainty and negotiation back
Speaker 5: and forth, it's basically pointless to try to predict what
Speaker 5: the next step of policy making is going to be.
Speaker 5: It has been very very hard, close to impossible. What
Speaker 5: is more rewarding is to try to appreciate what are
Speaker 5: the rules that cannot be broken, what are the immutable
Speaker 5: laws that cannot be broken, in order to gauge what
Speaker 5: the landing spot is looking.
Speaker 2: Mutable rule for a totalitarian regime in Beijing, their labor economy,
Speaker 2: The hardcore foundational rule of China is to keep the.
Speaker 5: People employed right, and that is the contract today, is
Speaker 5: the social contract. But another immutable law is global supply chain,
Speaker 5: deeply deeply intertwined global supply chain that took decades to build.
Speaker 5: One cannot rip it out just from one day to
Speaker 5: the next without deep consequences, which is what we have seen.
Speaker 5: It's not just a matter of inflation getting higher, going higher,
Speaker 5: prices going higher. It's a matter of access, you know,
Speaker 5: things not being available on the shelf, which is obviously
Speaker 5: a problem. So I think these are the rules and
Speaker 5: and and constraint that ultimately helped guide the pace of
Speaker 5: negotiation and ultimately, in our review, will shape the landing spot.
Speaker 4: Is the view? Is your view the view of black
Speaker 4: Rock that China wants to negotiate with US, wants to
Speaker 4: have an economic relationship with the US and the West
Speaker 4: in general.
Speaker 2: Is that your view?
Speaker 4: Or do you think they're willing to kind of go
Speaker 4: it alone a little bit?
Speaker 5: What seems to have been the case is that both
Speaker 5: sides are incentivized to engage. It's a trait is bad
Speaker 5: for global growth, is taxflationary in nature, so decoupling suddenly
Speaker 5: and thoroughly is bad for both economies. So that the
Speaker 5: willingness to engage ultimately led to kind of where we
Speaker 5: are and the economic rules that cannot be broken around
Speaker 5: that and foreign funding means that we're going to get
Speaker 5: to a place there is still reasonable for risk assets
Speaker 5: to tolerate, which is why we were able to stay
Speaker 5: risk on US equities in particular, despite the fact that
Speaker 5: we have had such elevated policy uncertainty.
Speaker 4: We saw a lot of investor interest and dollars leave
Speaker 4: the US market in the last couple of months and
Speaker 4: go to Europe particularly a did you see that in
Speaker 4: your business and be do you expect it to come
Speaker 4: back now that we have the US markets kind of
Speaker 4: recovering a little bit.
Speaker 5: The answer is yes. I'm both fronts. I would say, though,
Speaker 5: you know, people look at the fact that the dollar
Speaker 5: was selling off as evidence of investors losing confidence in
Speaker 5: US exceptionalism. But I would say, you know, one thing
Speaker 5: that we heard from our investors and clients is that
Speaker 5: for a long time, international investors holding US assets have
Speaker 5: been somewhat quote unquote lazy with their currency hadgien strategy,
Speaker 5: basically leaving a lot of their US exposures unhadged because
Speaker 5: of hagien cost, but also because hadging for currency oftentimes
Speaker 5: comes as an afterthought. But the volatility in the dollars
Speaker 5: so far this year has taught them to be more
Speaker 5: rigorous around their head strategy, which is in part why
Speaker 5: dollar has been selling off, because investors are hatching their
Speaker 5: dollar dollar denominated the US exposure a bit more rigorously.
Speaker 5: So it's not a sign what it cannot be interpreted
Speaker 5: just as a sign of international investment community losing confidence
Speaker 5: in the US. I think there is still quite a
Speaker 5: lot to go for US exceptionalism, especially for US culprits.
Speaker 2: Really, you're too young to remember this, but I'm sure
Speaker 2: Lawrence Fink remembers that the debt hysteria wrapped around Peterson,
Speaker 2: Paul Sungus of Massachusetts, Sam Nunn of Georgia. To bring
Speaker 2: it forward this time around, with the numbers I'm seeing
Speaker 2: and the legislation, are we finally at a point where
Speaker 2: America must confront its debt and it's deficit.
Speaker 5: Yeah, that is the other immutable law that I didn't
Speaker 5: talk about in detail, that ultimately governed where we are
Speaker 5: now in the negotiation. Right, So, if you think about
Speaker 5: the dynamic of trade and that, if we want to
Speaker 5: close the trade deficits very very quickly, very very southernly,
Speaker 5: we're also shutting out the forum funding market by the
Speaker 5: same magnitude. And US government bonds a quarter of outstanding
Speaker 5: that is owned by international investors. So if we shut
Speaker 5: down the forum market, international investors demanding quite a lot
Speaker 5: more compensation for holding US that, then we have a
Speaker 5: dead arithmetics that do not add up and US that
Speaker 5: is higher than the combined that of the rest of
Speaker 5: G seven. And it's a it's a very real and
Speaker 5: life issue that the government needs to needs to consider.
Speaker 5: If US ten year gets to five percent, we're talking
Speaker 5: about an additional one hundred and fifty billion dollars per
Speaker 5: annum of that servicing cost, which will wipe out all
Speaker 5: the doage saving. So this is a big issue. I
Speaker 5: agree with you one hundred percent, all.
Speaker 4: Right, So I mean we're gonna have to figure it
Speaker 4: out to companies.
Speaker 2: I got the dollar.
Speaker 4: Dollars not rebounded.
Speaker 5: Dollar has not rebounded. US treasury has not rebounded. If
Speaker 5: you think about markets since April second, applet is more
Speaker 5: than recovered in the US term premier went from thirty
Speaker 5: basis point on April second for US ten year treasuries
Speaker 5: to seventy basis points right now. So that has no
Speaker 5: comeback down and dollar has not recovered, which means that
Speaker 5: corporates and companies are more exceptional in the US ware
Speaker 5: leave with.
Speaker 2: Us with black Rock, we continue our discussion. Apple did
Speaker 2: a deal the other day for tranches. Don'tated the details
Speaker 2: in front of me. They made two phone calls, one
Speaker 2: to Black rock and one to somebody else sold the
Speaker 2: thing in three seconds. Is there basically in this topsy
Speaker 2: turvy world and insatiable appetite for debt? I mean, is
Speaker 2: any corporation, any government just yes, we'll take it. That
Speaker 2: is that where we are right now.
Speaker 5: I think there's a difference between corporate debt and government
Speaker 5: that if you look the level of indebtedness in the
Speaker 5: US for government, just since pre GFC peerage level of
Speaker 5: government that was sixty percent, it's now over one hundred
Speaker 5: and twenty percent. And if we look at the equivalent
Speaker 5: for corporate exponancials, that level of indebtedness has basically gone sideways.
Speaker 5: So I think there is greater appetite for that from corporate,
Speaker 5: especially quality corporates versuss US government bonds.
Speaker 4: What do you guys, how do you think about emerging
Speaker 4: markets these days, particularly China, just emerging markets in general,
Speaker 4: because boy, the world's crazy here. There's so much uncertainty
Speaker 4: about tariffs, about trade. I would think you'd had to
Speaker 4: be really careful looking at emerging markets.
Speaker 5: Well, emerging market has a higher beta in terms of
Speaker 5: growth relative to the US, which is why when US
Speaker 5: policy trade policy was leading to kind of market volatility.
Speaker 5: Emergent markets were very much not spared right. But if
Speaker 5: we have a bit of a walk back, which is
Speaker 5: what we're experiencing right now, we could see a tactical
Speaker 5: rebound in this market because by virtual of the higher gearing,
Speaker 5: higher higher beta. But we do want to be selective
Speaker 5: in emerging markets rather than rather than across the board,
Speaker 5: because there is no such a thing as emergent market.
Speaker 5: China is very different from India, that is quite a
Speaker 5: bit more expensive, very different from Latin America as well,
Speaker 5: and we prefer emergent market that more broadly than than
Speaker 5: equities because of the income.
Speaker 2: I just looked at sign dollar. I just looked at
Speaker 2: Taiwan dollar Taiwan dollar. We clearly had a really unique
Speaker 2: four or five six standard deviation move. But is there
Speaker 2: stability on the Pacific rim around this? Just crazy news flow?
Speaker 2: Is there a bet you can make there on Singapore,
Speaker 2: a bet on Taiwan?
Speaker 5: I think the Taiwan dollar episode is another example of
Speaker 5: the debt dynamics at plate right. Like if you want
Speaker 5: to shut off the trade deficit, forum funding all of
Speaker 5: a sudden needs to also decrease in a commensary way,
Speaker 5: and currency Hagien becomes a consideration that leads to huge
Speaker 5: amount of volocility. So we actually look to the Taiwan
Speaker 5: dollar episode as another case in point for why that
Speaker 5: immutable law cannot be broken. But it can be Taiwan dollar,
Speaker 5: it could also be Mexican pestle. It's it's just immutable
Speaker 5: law that governs the pace and destination of negotiations. There
Speaker 5: are selective opportunities in Asia, Asian countries, Southeast Asia, we
Speaker 5: see it. Look at the China export data to the
Speaker 5: US significantly decreasing, but to the rest of the world,
Speaker 5: including reservation increasing.
Speaker 2: But with all your sourcing, can you just say out
Speaker 2: they're down in one eight hundred Vietnam, one eight hundred
Speaker 2: Malaysia and saying we're running it through you guys. Is
Speaker 2: it just as simple as that?
Speaker 5: Oh, we sort that in Trumpton the first term, right,
Speaker 5: like the connector country is benefiting. But I think you
Speaker 5: know that is now well understood, so that could be
Speaker 5: something that gets addressed in the ongoing discussions and negotiations.
Speaker 5: But yeah, connector countries have benefited, which is why their
Speaker 5: markets have also done well during the same period.
Speaker 4: What do you folks at black Rock think about the US,
Speaker 4: What the US will do with interest rates? What will
Speaker 4: FED Chairman j Pal do for the remainder of the year.
Speaker 4: How are you guys baking that in?
Speaker 6: Right now?
Speaker 5: We're looking at one and most two raycuts this year,
Speaker 5: which is not too far from where market's uprising. The
Speaker 5: big picture is that we're talking about an environment where
Speaker 5: tariffs are still going to be effective. Tariff ray for
Speaker 5: the US average ten to fifteen percent, which is the
Speaker 5: highest since the nineteen thirties, and five times the level
Speaker 5: compared to the beginning of the year. Higher tariffs, higher
Speaker 5: inflation as a result of that, and potentially lower growth.
Speaker 5: That's an environment where actually the fat cannot readily come
Speaker 5: to the rescue of the economy. So high rates for
Speaker 5: longer is our base case. But in addition to to
Speaker 5: kind of current lab is it.
Speaker 2: Thirty you know whatever the ridiculous in nineteen thirty seven
Speaker 2: valuation here? Do you just assume we're going to have
Speaker 2: another tranch of tariffs coming lower because the market's going
Speaker 2: to tell the president what to do.
Speaker 5: Well, what we have seen, you know, we have UK deal,
Speaker 5: we have the the posts facing off to China. Ten
Speaker 5: percent reciprocal tariffs have stayed in both cases. That's probably
Speaker 5: a floor rather than to potentially go lower from so
Speaker 5: our expectation at this current juncture is that the final
Speaker 5: destination is somewhere between ten and fifteen percent. It's lower
Speaker 5: than previously, you know, like high meet the twentieth Hi exactly.
Speaker 5: That's the big picture. And the fact that mark is
Speaker 5: a jumping to incremental positive development is the excellent really
Speaker 5: the case, really the perfect case of behavior biers of anchoring.
Speaker 3: Yeah, thank you, Salid, We're rolling it.
Speaker 2: We got way leave from Blackrock and Co. We appreciate
Speaker 2: it from Harvard. Look at her.
Speaker 4: I'm sure schedule today's book like everything, but she makes
Speaker 4: time to come in.
Speaker 5: This is the highlight of my bas.
Speaker 2: Thank you, please, thank you so much. Don't thank you
Speaker 2: Wayley with Blackrock greatly greatly appreciated.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
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Speaker 1: Just Say Alexa Play Bloomberg eleven thirty.
Speaker 2: Lindsay Rosser's age. She's had a multisector investing at Goldman
Speaker 2: Sachs with some tangible portfolio management as well. Could you
Speaker 2: manage money right now?
Speaker 6: I do? Actually I have to. That's my job. So
Speaker 6: I am managing money right?
Speaker 2: Are you doing it? I could not manage money here
Speaker 2: against the perspectus, against the mandate.
Speaker 6: I think you could. I have faith in you, Tom,
Speaker 6: But what you have to do is when you have
Speaker 6: more unpredictability, I think the bar to leave your home
Speaker 6: base asset allocation is higher. And what I mean by
Speaker 6: that is we manage portfolios for all sorts of clients.
Speaker 6: We have a long term alpha objective and tracking error
Speaker 6: for all of them. And with that you can think
Speaker 6: of a home base allocation, the kinra structure of your
Speaker 6: portfolio that should win over a market cycle. This is
Speaker 6: not a market in this moment where it pays to
Speaker 6: be dynamic. Trading policy is a losing game. And I
Speaker 6: think we've all seen that.
Speaker 2: What do you do with equities here? We've had a
Speaker 2: dearth of equity analysis today? So I got to go there.
Speaker 2: I mean, I know it's away from your heritage, but
Speaker 2: what do you do with equities here?
Speaker 6: I did start off in convertible bonds there was a
Speaker 6: twet convertible bonds. It's just it's hard. It's hard to
Speaker 6: leave where you start. But in terms of equities, I mean,
Speaker 6: I think what's going to be really important. It was
Speaker 6: the canary in the coal mine before Walmart and earnings tomorrow.
Speaker 6: I think you want to hear that to learn about
Speaker 6: what's happening with the consumer and what's going on with
Speaker 6: this backdrop of macro uncertainty and have the deals that
Speaker 6: have been I'm struck is probably the wrong word. Have
Speaker 6: they made a difference in terms of tariffs? What's happening
Speaker 6: with input prices?
Speaker 2: Oh, I'm giving a speech. I look out. Somebody asks
Speaker 2: a question and they say, what's the dumbest statistic on
Speaker 2: the Bloomberg terminal? You ready, Walmart forward pe thirty seven.
Speaker 2: I know that's just a single I don't get retail statistic.
Speaker 4: I don't get that Tom's You know, whenever we have
Speaker 4: a Princeton graduate like lindsay, come in, I say, what
Speaker 4: is your go to sandwich at Hogi Haven, which is
Speaker 4: the best Hogies in the world in my opinion, she
Speaker 4: came back with a stellar response. A heart stop. This
Speaker 4: is a cheese steik bake. In eggs ketchup and hot sauce.
Speaker 4: How about that. I didn't expect that that came out.
Speaker 2: At least one of those.
Speaker 6: No, it's in macrobiotic, you know. So it's a little
Speaker 6: bit for everyone. It's cleansing, clensing pleasant.
Speaker 4: That's all I care about. When I meet Princeton people, lindsay,
Speaker 4: what do you do here? I mean, how do you
Speaker 4: think about the markets today versus maybe January first, before
Speaker 4: we got into all this tariff's talk and all this
Speaker 4: economic uncertainty and companies pulling guidance and all that kind
Speaker 4: of stuff.
Speaker 6: Absolutely, So what we try to figure out is what
Speaker 6: is the distribution of outcomes? Because if you think you
Speaker 6: can pinpoint the exact outcome of what's going to happen
Speaker 6: with the economy or the markets, you need to do
Speaker 6: us of humility.
Speaker 2: Yep.
Speaker 6: So in the beginning of the year, the left tail,
Speaker 6: so recession risk was small, and when we looked at
Speaker 6: valuations they were tight. They were in the tenth or
Speaker 6: twentieth percentile from a spread perspective. But it all made
Speaker 6: sense given how small that left was. What has happened
Speaker 6: with the more aggressive tariff policies on Liberation Day and yes,
Speaker 6: we've backed off. Since then, that left tail has expanded,
Speaker 6: and so it really has changed the game since then.
Speaker 6: Now we're in better spot now because we have the
Speaker 6: ninety day reprieve, we've had the beginning of us UK
Speaker 6: us China deals. But things are still challenging on the
Speaker 6: forward economic outlook.
Speaker 4: So in the fixed income space, do you just sit
Speaker 4: short term treasures and clip your four percent coupon on
Speaker 4: two year Where do you take credit risk? How do
Speaker 4: you guys think about that?
Speaker 6: As you sin, Yeah, I think I do multisector fixed
Speaker 6: income portfolios. In terms of portfolio theory, the more degrees
Speaker 6: of freedom you have, the easier it is to get
Speaker 6: further out on the efficient frontier. You want to do
Speaker 6: diversified investments. That's the antidote to what's going on right
Speaker 6: now in the market. That's corporate credit. We like Triple
Speaker 6: B's for example. It's high quality structured product. Bringing them
Speaker 6: all together with some duration should win over time.
Speaker 2: I am absolutely fascinated. And this is after listening to
Speaker 2: Professor Rogoff my book of the summer, and let me
Speaker 2: bring it up one more time for you to bright
Speaker 2: green book. Here our dollar your problem. He's saying that
Speaker 2: we're going to see in his call, and this has
Speaker 2: been ken for decades, We're going to see a persistently
Speaker 2: higher inflation adjusted rate. How does our investment world change
Speaker 2: if we get a rogue off reset to what we
Speaker 2: used to know, which is a higher yield spectrum, a
Speaker 2: higher yield regime.
Speaker 6: Yeah, yields are very simply in the economy the cost
Speaker 6: of capital. So some businesses, also some countries of some consumers,
Speaker 6: it just doesn't work at that higher cost of capital.
Speaker 6: So it's figuring out how much higher it will in
Speaker 6: fact be and what can survive and thrive in that environment.
Speaker 4: So how do you think our federal reserve is going to,
Speaker 4: I guess react going forward this year? How do you
Speaker 4: guys have them trying to, you know, prop things up
Speaker 4: a little bit or are they just going to sit
Speaker 4: on the silines and let this whole thing play out.
Speaker 6: Sure, so we still think that there'll be two cuts
Speaker 6: by the end of the year, but they've been very
Speaker 6: clear in that they are not going to be doing
Speaker 6: preemptive cuts. Okay, the data will guide them. They need
Speaker 6: to see the data, and I think yesterday's muted response
Speaker 6: to CPI is case in point Normally, when you have
Speaker 6: a softer CPI, you would see movement in the forward
Speaker 6: interest rate probabilities on bed funds, and you didn't because
Speaker 6: it's one print only, and it's not inclusive necessarily of
Speaker 6: the big tariff impact. And so the data is one print.
Speaker 6: Let's wait and.
Speaker 2: See Goldvin SAX made a huge splash. I'm going to
Speaker 2: say six months ago plus or minus a month David
Speaker 2: Constant looking at MEME reversion on equities, which gave him
Speaker 2: a vector down to a single digit, even low single
Speaker 2: digit total return. Do you invest every day, Lindsey based
Speaker 2: on equities not giving us the double digit magic we've
Speaker 2: seen post pandemic?
Speaker 6: Well, I invest every day based on what I think
Speaker 6: is going to happen in the bond market. There are
Speaker 6: obviously relationships between the two. I think when you do
Speaker 6: see the volatility in the equity market and you have
Speaker 6: decent yields in fixed income, that to me is encouraging
Speaker 6: from a technical perspective. So I'm really thinking about how
Speaker 6: does capital flow as a result of what may happen
Speaker 6: in equities? And so you need significantly more growth to
Speaker 6: have continued upside, And that's kind of what Datas was
Speaker 6: speaking about bonds look good.
Speaker 2: Relatively quickly or isn't bond demanded satiable? Like, you know
Speaker 2: they make four phone calls Apple computer, you know, Lindsay,
Speaker 2: you know.
Speaker 6: Look investment great deals are four to five times over subscribe.
Speaker 6: So your point is fact, people like bonds, people want bonds.
Speaker 2: Lindsay, thank you so much. Lindsay Rosener with us. She's
Speaker 2: head a multisector investing Golden Sex Asset Management.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 2: We move right on now to what's interesting in wealth management.
Speaker 2: David Bale and iconic at City Group today like announcing
Speaker 2: today the launch of his Capital Group, which is fascinating,
Speaker 2: and some of this comes out to what you observed
Speaker 2: at City Group. I want to talk about cash in
Speaker 2: a moment, but tell us what your new operation is doing.
Speaker 2: I think it's original in terms of helping people manage money.
Speaker 7: Yeah, so the idea behind Cio Group is pretty straightforward.
Speaker 7: We take a family's aggregated data how they actually are
Speaker 7: managing their money using all of their providers all over
Speaker 7: Wall Street and elsewhere. We can look at that every
Speaker 7: single day, the valuations of what they're doing, how they're
Speaker 7: moving capital around, and then able to advise them so
Speaker 7: we can improve portfolios at each of the money managers
Speaker 7: and also run portfolios that augment what they're doing now
Speaker 7: and improve you know, their asset allocation, improve their risk profile.
Speaker 2: Within portfolio turnover increasing or portfolio turnover could decrease.
Speaker 7: Because you're looking every day, right, You're looking every day
Speaker 7: at the sort of behaviors. And then what we have,
Speaker 7: which is really interesting time, is this macro data where
Speaker 7: we can look at family offices as a group to
Speaker 7: see how they behave right. And one of the observations
Speaker 7: we talked about was the fact that they have so
Speaker 7: much cash. They tend to have too much cash. They
Speaker 7: don't view it as a strategic asset. And this year,
Speaker 7: in particular, we see cash levels, you know, families go
Speaker 7: up by two percent when it would have been far
Speaker 7: better off for them to have left them alone.
Speaker 2: I look at the management of cash now. Most of
Speaker 2: our listeners and viewers aren't in family offices. They're trying
Speaker 2: to get to the end of the month. But what's
Speaker 2: the biggest mistake we make when we quote unquote manage cash?
Speaker 7: Right, we just leave it wherever it happens to be.
Speaker 7: So you have a little bit in your brokerage account,
Speaker 7: a little bit in your bank, you know, a little
Speaker 7: bit here in there. You know, most people have five
Speaker 7: or six places where they have their cash, and some
Speaker 7: of them are earning zero or just two percent on
Speaker 7: what they're you know, what's hanging around. We think about
Speaker 7: the idea of aggregating cash in one account. You can
Speaker 7: sweep now with technology, all of your money into one
Speaker 7: cash account.
Speaker 2: It earn two or three percent.
Speaker 7: More for doing that, and we think everybody should do that.
Speaker 4: What should do you think for the average investor, maybe
Speaker 4: your average investor, what should be a cash allocation?
Speaker 7: Generally speaking, so for the average individual, you know, three
Speaker 7: to six months of cash is all they should keep,
Speaker 7: you know, sort of like emergency stack. But what happens
Speaker 7: is that most you know, most larger investors have more
Speaker 7: than a million dollars, have between three and a half
Speaker 7: and five percent in cash, but no real intention to
Speaker 7: actually use it. They claim to be opportunistic, but they aren't,
Speaker 7: and so effectively they should be putting that money back
Speaker 7: into their portfolios automatically.
Speaker 2: So that's like David Balen is going to manage Warren
Speaker 2: Buffett's cash. That would be a good job time.
Speaker 7: I think every one of us would sign up with that.
Speaker 2: But the Warren Buffett with a gajillion dollars in cash,
Speaker 2: that's the lead brick that a lot of people visit it.
Speaker 7: It is, and anyway, it's one of the big reasons
Speaker 7: why portfolios don't even meet, you know, sixty forty averages
Speaker 7: is because of that is because of the cash. And
Speaker 7: then there are other you know, there are other sort
Speaker 7: of symptoms that families have and many other investors have.
Speaker 7: For example, today they're not invested internationally at all, you know,
Speaker 7: they become wholly domestic centric at a time when there
Speaker 7: are really good opportunities overseas with the dollar foling. Well,
Speaker 7: I actually think China is going to make a bit
Speaker 7: of a comeback here. And one of the things that
Speaker 7: you know, people are afraid to talk about, right because
Speaker 7: they're thinking, well, maybe the US will restrict investing in
Speaker 7: Chinese ADRs or or in Chinese funds. But the fact
Speaker 7: is that their economy is now I think, going to
Speaker 7: grow a little bit faster, and their emphasis on technology
Speaker 7: is going to be a little bit greater, and that's
Speaker 7: very investable here in the States.
Speaker 4: How About on the other end of the risk spectrum,
Speaker 4: alternative investments. I've seen them go from five to ten
Speaker 4: percent of a portfolio. So now if I look at
Speaker 4: an endowment, it's forty fifty percent of the portfolio. And
Speaker 4: I even see some rias when we got Field, they're
Speaker 4: saying that their clients won a big allocation to alternatives.
Speaker 2: How do you think about it?
Speaker 7: Yeah, So alternatives are, you know, in an interesting subject
Speaker 7: right now because if you take a look at one
Speaker 7: of the fastest growing segments of it, it's private credit.
Speaker 7: And private credit is providing real high yields to investors.
Speaker 7: You know, nine and a half to eleven percent right now,
Speaker 7: publicly traded b DC is private you know, private investment vehicles,
Speaker 7: and these are very attractive. And one of the reasons
Speaker 7: I talk about that is, if that's the rate you're
Speaker 7: going to earn on the credit, what is the rate
Speaker 7: you're going to earn on equity? And one of the
Speaker 7: risks that investors face right now. That's very significant. Is
Speaker 7: that making long term commitments to private equity with rates
Speaker 7: this high strikes me as really risky.
Speaker 2: Celebration as Cio campbelll Group David Balen here on the
Speaker 2: first day they put this together. Of course forever it's
Speaker 2: City Group helping manage their Christmas club accounts. I'm going
Speaker 2: to go. I mean, Paul wants to go to private equity.
Speaker 2: Come on, nine to eleven percent private credit sounds too
Speaker 2: good to be true to an amateur like me. Is
Speaker 2: that a legit yield or they goosen it?
Speaker 7: No, Well, there's some leverage in some of the publicly
Speaker 7: traded vehicles, but it is a legit yield, you know,
Speaker 7: and it is something to look at, and it's a
Speaker 7: huge part of it's probably the fastest going part of
Speaker 7: the private credit thing, both public and private, for individual
Speaker 7: investors and for wealthy families, and so it's one of
Speaker 7: those things that's there.
Speaker 2: And it does.
Speaker 7: Suggest that, you know, if you can do that, and
Speaker 7: you can basically double your money in seven years, why
Speaker 7: would you not do that right rather than own equities?
Speaker 7: And that I think is the real challenge. So, yes,
Speaker 7: it's real. Those funds typically have you know, a forty
Speaker 7: five to sixty percent exposure right to a given transaction,
Speaker 7: and with the length and give time of leaving transactions,
Speaker 7: it really does suggest that private credit deserves a bigger
Speaker 7: place in portfolios that it's getting.
Speaker 4: How about this world is so much different today than
Speaker 4: the West? January First? How is your view changed of
Speaker 4: risk opportunities, asset allocation? How's kind of your view changed?
Speaker 7: Yeah, so I think that our view is really about
Speaker 7: diversification and this idea of where you can find it.
Speaker 7: So we talked a little bit about China, We've already
Speaker 7: talked a little bit about private credit. I think we
Speaker 7: have to talk about digital assets. I think they belong
Speaker 7: in portfolios now. A little bit of bitcoin and a
Speaker 7: little bit of some of the assets that we're going
Speaker 7: to hear more about, one of which Bloomberg wrote about
Speaker 7: yesterday called hyper liquid, which is the idea that there
Speaker 7: are going to be new technologies, new exchanges that are
Speaker 7: taking place in the digital world, and you can invest
Speaker 7: in those. And the reason I mentioned this is that
Speaker 7: these different investments are going to give you good equity
Speaker 7: like rates of return and potentially higher but they also
Speaker 7: don't behave like traditional US equities, and I think that's
Speaker 7: what we need to add more up to portfolio.
Speaker 2: What is the underlying what do you call it a
Speaker 2: hyper liquid? Hyper liquid is the name of what is
Speaker 2: an underlying of a hyper liquid? What is the quarterly
Speaker 2: cash flow?
Speaker 5: You know?
Speaker 2: I mean, you know where I am on this date?
Speaker 7: What's I am on tom? And what's really incredible is
Speaker 7: that when you go online you can actually see the
Speaker 7: actual revenue production of these digital assets every single day,
Speaker 7: actually how much revenue they generate. Now, it's interesting that no,
Speaker 7: meme coins and NFTs and stuff don't generate revenue, but
Speaker 7: there are a handful of companies that are online that
Speaker 7: literally generate revenue every day.
Speaker 2: And you could see it.
Speaker 7: And this is a company that if it were you know,
Speaker 7: if it were to be Robinhood or would to be coinbased,
Speaker 7: the company would probably be worth four times what its
Speaker 7: market cap is in the digital world.
Speaker 4: Just for example, what a city wealth investor seriously ask
Speaker 4: you about this stuff and say, I want exposure.
Speaker 7: You know, I have to say that six years ago
Speaker 7: I was a wild skeptic about the digital world and
Speaker 7: about cryptocurrencies in general, and I don't like even calling
Speaker 7: them that, but there are a handful of companies that
Speaker 7: are online today that I think are going to be
Speaker 7: game changing.
Speaker 2: They're literally going to be the.
Speaker 7: Next generation of banks, of the next generation of lending,
Speaker 7: and so I think that we're ignorant if we don't
Speaker 7: think we should give our clients exposure to that.
Speaker 2: Congratulations on this new effort. Thank you very much. The
Speaker 2: CIO Capital David Balen is the launch today for family
Speaker 2: offices of the real focus on cash management.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station. Just
Speaker 1: say Alexa play Bloomberg eleven thirty.
Speaker 2: Right now, the newspapers, we need this with Lisa Matteo. Lisa,
Speaker 2: what do you have?
Speaker 6: All right?
Speaker 8: So I'll start with the New York Times. They pointed
Speaker 8: out this interesting trend of how rival countries are looking
Speaker 8: to pick up American researchers. But we've seen it. Are
Speaker 8: billions of dollars federal dollars being cut from American research
Speaker 8: funding by the Trump administration. So experts are saying there's
Speaker 8: a thing the salaries are much lower in places like Europe.
Speaker 8: So in France, for example, you have a thirty five
Speaker 8: year old researcher who can earn about four thousand a
Speaker 8: month before taxes, and then you compare that to a
Speaker 8: post doctoral fellow at Stanford who can earn about sixty
Speaker 8: five hundred a month in the US. But experts are
Speaker 8: saying Europe has the better benefits, like the free social security, healthcare,
Speaker 8: university tuition. So there's a bunch of these different countries
Speaker 8: that are starting to look to these American researchers because
Speaker 8: a lot of them may be out of work or
Speaker 8: maybe they're just frustrated with how the system is working,
Speaker 8: so they're starting to kick them up.
Speaker 2: Here' j expert on as Jonathan Cole at Columbia University
Speaker 2: and he centers on the Johns Hopkins University and in Chicago.
Speaker 2: But I would really emphasize, Lisa, it puts a cloud
Speaker 2: over all the universities. I would editorialize Paul that it
Speaker 2: puts a cloud over Duke, it puts a cloud over
Speaker 2: Georgia Tech, it puts a cloud over Harvey Mudd out
Speaker 2: in California.
Speaker 4: Yeah, absolutely, I was just down at Duke for a
Speaker 4: board meeting a few weeks ago, and that was topic
Speaker 4: number one. And they've been taken ACT and they have
Speaker 4: a huge medical center, so they get the NIH funding
Speaker 4: as well. But they're the government's investing in research, which
Speaker 4: is what made America the leading country in the world
Speaker 4: since World War Two.
Speaker 3: So go figure it out.
Speaker 8: Yeah. The next one is what continue with the job market? Right,
Speaker 8: So if you remember this is in the Wall Street
Speaker 8: Journal during the pandemic, a lot of people scored these
Speaker 8: big raises right when they jump from job to job
Speaker 8: to job because you had.
Speaker 6: This talent war.
Speaker 8: But now this is interesting switch because a lot of
Speaker 8: those folks who jump from job to job are saying,
Speaker 8: you know what, we're kind of scared because they're realizing
Speaker 8: they may be getting paid too much. And what that
Speaker 8: does is that puts them at the top of the
Speaker 8: chopping block when it comes to cutting jobs. So they
Speaker 8: think they're going to be replaced by cheaper talent. So
Speaker 8: it shows that, you know, tech and other industries they're
Speaker 8: paid have been falling a little bit. That's what different
Speaker 8: stats are showing. But they're just concerned about it that
Speaker 8: you know, they could lose their jobs.
Speaker 2: It's very look at the Burbery News today. Yeah, and
Speaker 2: then that's not like a summer cut. That's like huge,
Speaker 2: that's a big cut.
Speaker 8: Give me one more, all right, So this one might
Speaker 8: be the thing that finally takes my husband off a cable. Okay,
Speaker 8: So Disney unveil this new ESPN streaming service. It's called
Speaker 8: ESPN yes, originally no plus, no plus, Nope, that's a
Speaker 8: different one. It's just under thirty bucks a month. So
Speaker 8: it's set to start later this year. But what's more
Speaker 8: is that they're going to bundle it. So Disney has
Speaker 8: the new ESPN as part of this bundle with Hulu
Speaker 8: Disney Plus for thirty six dollars in mine. Just a promotion.
Speaker 3: This is it.
Speaker 4: This is the last arrow in the Disney quiver to
Speaker 4: get everybody to go streaming. Because once you put sports, yeah,
Speaker 4: streaming or streaming primarily or streaming only, that's it.
Speaker 3: That's game.
Speaker 2: Listeno, thank you so much the newspapers this morning.
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