WEBVTT - Trump Warns Iran of New Strikes, Private Credit Concerns 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.600 --> 0:00:31.600 Zayad Wood is Chief Emerging market Economists for Bloomberg Economics. 0:00:31.640 --> 0:00:36.640 Think about an em mission like what analog does for 0:00:36.680 --> 0:00:40.080 the United States. In his essay, over the last twenty 0:00:40.080 --> 0:00:43.800 four hours on one hundred and sixty dollars, oil went 0:00:44.000 --> 0:00:48.400 around the world. Say, let's do first principles. First, the 0:00:48.479 --> 0:00:52.960 Strait of Malacca twenty nine percent of seaborn trade Urmus 0:00:53.080 --> 0:00:58.040 Shockingly almost as much twenty six percent of seaborn trade. 0:00:58.200 --> 0:01:02.120 The sue Us Canal where t Laurarance was barely is there. 0:01:02.400 --> 0:01:06.240 How large is the Strait of Hormus? Do we understand 0:01:06.720 --> 0:01:09.559 the substantial trade that goes through there? In oil? 0:01:11.880 --> 0:01:15.200 It is large, and it's larges its concentrated. If you 0:01:15.280 --> 0:01:19.000 think about it, what it transports. It transports aill in 0:01:19.080 --> 0:01:22.240 gas and energy from the Middle East to the rest 0:01:22.280 --> 0:01:23.959 of the world, and the rest of the world sends 0:01:24.080 --> 0:01:26.520 almost everything else of the Middle East needs through that strait, 0:01:27.000 --> 0:01:28.680 So it is a lot of trade that goes there 0:01:28.720 --> 0:01:31.480 and is concentrated in a crucial commodity that is ail 0:01:31.520 --> 0:01:34.200 in gas. And the other thing with the strait of hormones, 0:01:34.240 --> 0:01:37.040 which is different than sus Canalis, not just the size, 0:01:37.360 --> 0:01:40.040 this is not alternative. So most of the oil that's 0:01:40.040 --> 0:01:43.720 going from Saudi Arabia, from Iraq, from the UAE goes 0:01:43.760 --> 0:01:47.120 through Hormus. All the energy that goes from Kuwait, Bahrain 0:01:47.400 --> 0:01:51.040 and Katar goes through Hormus. It's a big shock, twenty 0:01:51.040 --> 0:01:54.200 percent of global oil supplies. I can't think of a 0:01:54.320 --> 0:01:56.640 larger oil shock in recent history. If this is not 0:01:56.720 --> 0:01:58.720 the largest, then it's one of the largest for sure. 0:01:58.920 --> 0:02:02.520 Explain that dyne of a searge to one twenty as 0:02:02.600 --> 0:02:06.040 Bruce Kasmn just models, or to your shock of one 0:02:06.200 --> 0:02:09.880 sixty out there and then a quick retreat. How does 0:02:09.880 --> 0:02:11.240 that dynamic work out? 0:02:12.919 --> 0:02:16.480 So let's start from first principles. Right, we have a 0:02:16.560 --> 0:02:19.560 shortage of supply, we lose twenty percent of global supply. 0:02:19.639 --> 0:02:22.760 The question is then what happens to prices. So even 0:02:22.800 --> 0:02:26.000 before the war began, we looked at recent episodes of 0:02:26.200 --> 0:02:29.560 supply outages. We looked at the academic studies and the 0:02:29.560 --> 0:02:33.560 typical multiplier that we got was somewhere between say three 0:02:33.600 --> 0:02:36.560 and five. So we use four for our multiplier. You 0:02:36.639 --> 0:02:39.600 use twenty percent of supplies, you get a multiplier of four. 0:02:39.840 --> 0:02:42.680 That's an eighty percent increase in prices from a pre 0:02:42.720 --> 0:02:45.200 war price of around sixty dollars per barrel. That takes 0:02:45.200 --> 0:02:47.320 you two hundred and eight dollars per barrel. So that 0:02:47.440 --> 0:02:50.440 is our first thing, and this is where we are now. 0:02:50.520 --> 0:02:52.680 There is a lot of intensity in the war that 0:02:52.800 --> 0:02:55.320 is closing the straight of formless. But it's no longer 0:02:55.320 --> 0:02:58.440 a question about intensity. It's now a question about duration. 0:02:58.760 --> 0:03:01.080 It's no longer about you know, are we going to 0:03:01.080 --> 0:03:03.680 get negative number of ships going through homeless It is zero. 0:03:03.800 --> 0:03:05.800 Now that's not going to happen. It's a question of 0:03:05.840 --> 0:03:08.400 how long will Hormess be shot. And that's what our 0:03:08.520 --> 0:03:12.079 latest piece was about. It's about modeling duration. What happens 0:03:12.120 --> 0:03:14.519 if Hormus is shut for one month, for two months 0:03:14.639 --> 0:03:15.960 or three months. 0:03:15.639 --> 0:03:18.160 And what was your worst case scenario there in all 0:03:18.160 --> 0:03:18.880 of that modeling. 0:03:20.000 --> 0:03:22.320 Well, obviously it's shut for three months, so you get 0:03:22.320 --> 0:03:24.080 a higher price. So you get a price of around 0:03:24.080 --> 0:03:27.040 one hundred and sixty four dollars per barrel. Now you 0:03:27.120 --> 0:03:30.280 might think with a huge, you know, one of the 0:03:30.360 --> 0:03:33.440 largest energy supply shocks, you might think you might get 0:03:33.720 --> 0:03:36.240 a higher price as a result of this, But the 0:03:36.280 --> 0:03:39.440 model takes into account of other things. Because economies adapt, 0:03:39.480 --> 0:03:42.600 they don't stay static. So with higher oil prices, people 0:03:42.640 --> 0:03:46.480 consume less energy and demand comes down. With higher oil prices, 0:03:47.480 --> 0:03:53.000 producing more oil and other energy becomes profitable to supply increases, 0:03:53.480 --> 0:03:57.000 Inventory starts drowing down, people start taking more risk use 0:03:57.040 --> 0:03:59.320 in that shipping route. And even if you go outside 0:03:59.360 --> 0:04:01.960 the model such hot old price, the war may end 0:04:02.280 --> 0:04:04.080 and the waterway may reopen. 0:04:04.400 --> 0:04:05.000 Doctor David. 0:04:05.040 --> 0:04:07.680 A personal question here, and we say good morning to 0:04:07.800 --> 0:04:11.320 all of our reporters. Our economists are teams in the 0:04:11.360 --> 0:04:14.880 Greater Middle East, Ethan Browner in Tel Aviv and Jumana 0:04:14.920 --> 0:04:19.920 in Dubai with Zayoud. What is the conversation a family 0:04:20.040 --> 0:04:23.839 and friends in Dubai right now? Is it one big 0:04:23.920 --> 0:04:28.000 exit this weekend? What is the mood and the ground 0:04:28.040 --> 0:04:30.919 Not so much bloomberg people, but just in general in 0:04:31.000 --> 0:04:35.479 Dubai about getting through the weekend, getting the April. 0:04:36.520 --> 0:04:39.120 So I was in Dubai last week. I came from 0:04:39.200 --> 0:04:43.160 Dubai to London actually on Monday, on a pre plan 0:04:43.279 --> 0:04:46.120 trip before the war. What it felt like in Dubai. 0:04:46.160 --> 0:04:50.119 It felt the headlines felt worse than real life for sure, 0:04:50.440 --> 0:04:52.680 so it felt better than headlines, but it had that 0:04:52.760 --> 0:04:56.160 COVID feel to it, where you didn't feel an imminent 0:04:56.279 --> 0:04:59.080 threat to physical safety, but you didn't know that there 0:04:59.120 --> 0:05:03.040 was an extern danger out there. Things work quieter, and 0:05:03.080 --> 0:05:05.600 at some point because people were moving less, people were 0:05:05.640 --> 0:05:08.360 working from home. At some point the airport was shot. 0:05:09.040 --> 0:05:11.640 That had the COVID feel to it. It didn't feel 0:05:11.640 --> 0:05:14.720 as dangerous as I think back. Now i'm outside, I 0:05:14.839 --> 0:05:16.680 see the headlines and it feels like it's a bit 0:05:16.680 --> 0:05:18.679 more dangerous. But when I was there, it didn't feel 0:05:18.680 --> 0:05:19.320 so threatening. 0:05:19.920 --> 0:05:23.200 So thank you so much. Saying with us with Bloomberg 0:05:23.240 --> 0:05:27.120 Economics out of London and of course always out of Dubai. 0:05:29.120 --> 0:05:33.280 Stay with us. More from Bloomberg Surveillance coming up after this. 0:05:40.520 --> 0:05:44.120 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:05:44.200 --> 0:05:47.320 weekday afternoons from seven to ten am Eastern Listen on 0:05:47.440 --> 0:05:51.080 Applecarplay and Android Otto with the Bloomberg Business app or 0:05:51.240 --> 0:05:52.719 watch US live on YouTube. 0:05:53.040 --> 0:05:56.200 Leslie vin Ja Murray. She's with the Chicago Council of 0:05:56.279 --> 0:06:02.880 Global Affairs, of Wesleyan, of LS and of Columbia. Doctor 0:06:02.960 --> 0:06:08.279 ven Jam Murray is definitive on conflict, Leslie. It's a war, 0:06:08.560 --> 0:06:10.120 not a conflict, isn't it. 0:06:11.400 --> 0:06:13.160 Yes, I think it's safe to say it's a war. 0:06:14.040 --> 0:06:16.359 You know, we could double down on definitions, but I 0:06:16.360 --> 0:06:19.120 think anybody looking at the Middle East is looking at 0:06:19.160 --> 0:06:21.680 not only a war, but a widening war and an 0:06:21.680 --> 0:06:24.279 asymmetric war if you look at what Iran is doing 0:06:24.320 --> 0:06:28.039 and the Persian Gulf and the Strait of Hormuz. Not 0:06:28.120 --> 0:06:31.560 a war that I think President Trump well self admittedly, 0:06:31.800 --> 0:06:34.560 you know, according to today's news, hadn't planned for the 0:06:34.600 --> 0:06:39.080 possibility that Iran might close the Strait of Hormuz. It's 0:06:39.160 --> 0:06:41.679 it's kind of it's sort of difficult to even. 0:06:41.520 --> 0:06:42.080 Say the words. 0:06:42.120 --> 0:06:45.440 Does it seem such an obvious thing even to people 0:06:45.480 --> 0:06:48.839 just reading the papers that it was always stability. 0:06:48.360 --> 0:06:51.360 Into the press conference in eighteen minutes, the news conference 0:06:51.400 --> 0:06:54.680 at the Pentagon, the Secretary of Defense, a chairman of 0:06:54.720 --> 0:06:59.040 the Joint Chiefs of Staff. How alone is America? Where 0:06:59.080 --> 0:07:04.840 are our l eyes. Besides the Charles de Gaulle steaming East. 0:07:04.880 --> 0:07:10.080 Look, America's you know, European allies are lending their bases 0:07:10.160 --> 0:07:17.320 for defensive purposes. America's non treaty allies in the in 0:07:17.360 --> 0:07:22.640 the Gulf are being hit and are under attack. The 0:07:22.800 --> 0:07:26.520 new Iatolas has said that he will go after American 0:07:26.600 --> 0:07:32.000 interests in the region. So America's allies and partners were 0:07:32.040 --> 0:07:35.880 not asked to come along until after the strikes began. 0:07:36.000 --> 0:07:40.040 There was no real process of building a consensus or 0:07:40.080 --> 0:07:44.040 making the case for war, laying out what might lie ahead, 0:07:44.560 --> 0:07:47.560 and so now they're scrambling. I think the latest in Europe, 0:07:47.600 --> 0:07:52.760 of course, is a deep frustration, probably behind closed doors, 0:07:52.840 --> 0:07:56.520 anger that the US is effectively, you know, lifting sanctions 0:07:56.560 --> 0:07:58.760 on Russia's oil exports. 0:07:58.800 --> 0:08:01.520 Well we heard that from the leadership in Germany. 0:08:01.680 --> 0:08:03.160 Well exactly, exactly. 0:08:04.040 --> 0:08:06.600 Yeah, I'm so great to bring that up, Leslie. Yeah, 0:08:07.600 --> 0:08:09.680 because I wanted to talk about what all of this 0:08:09.800 --> 0:08:12.960 means for Putin and for Russia. We heard yesterday that 0:08:13.040 --> 0:08:17.760 Russia has been giving Tehran some intelligence. And now, of course, 0:08:17.920 --> 0:08:21.840 you know these sanctions, people countries can buy sanctioned Russian 0:08:21.840 --> 0:08:25.120 crew that's already at Sea. What is this doing for 0:08:25.480 --> 0:08:30.240 Putin's empire. Well, in the short term, it's certainly helping him. 0:08:30.640 --> 0:08:34.240 I mean indirectly and directly, directly with the sale of oil, 0:08:34.640 --> 0:08:40.880 for sure, but indirectly in that America has its focus elsewhere. 0:08:42.320 --> 0:08:45.000 That's not only helping Russia, that's also helping China. You know, 0:08:45.040 --> 0:08:47.600 this isn't this is an old story, not a news story. 0:08:47.679 --> 0:08:52.280 When America has its eyes off the prize, China benefits 0:08:52.320 --> 0:08:55.840 from the disruption, from America's distraction from seeing the West 0:08:55.920 --> 0:08:59.920 at odds with itself, if not torn apart Russia also, 0:09:00.000 --> 0:09:04.720 so I think for America's European allies, which quite frankly 0:09:04.760 --> 0:09:09.040 have gotten very little bandwidth or playtime in this war, 0:09:10.200 --> 0:09:13.760 this is a terrible turning up the tide. They will 0:09:13.800 --> 0:09:16.920 be impacted much more by gas than by the US, 0:09:17.000 --> 0:09:20.560 as we know a gas prices, but it really is 0:09:20.720 --> 0:09:22.920 it's coming out of time when they're squeezed at home, 0:09:23.120 --> 0:09:26.199 when you know, the war with Ukraine continues. So we're 0:09:26.240 --> 0:09:28.240 not even talking about the war in Ukraine right now, 0:09:28.240 --> 0:09:30.520 We're only talking about the Middle East. 0:09:30.920 --> 0:09:34.600 The rising sun across Lake Michigan, leslie Ven Jamine in Chicago. 0:09:34.640 --> 0:09:38.160 We will continue, whether we welcome all of you fifteen 0:09:38.160 --> 0:09:40.920 minutes from a press conference of the Pentagon. Of course 0:09:40.960 --> 0:09:43.680 Michael Barro will be along with the news, including this 0:09:43.760 --> 0:09:48.120 horrific clash crash I should say, of a flying tanker 0:09:48.160 --> 0:09:52.640 for the Air Force Alexis CHRISTOPHERUS with Leslievingerburry. 0:09:53.440 --> 0:09:57.559 Thank you, Leslie. Now we're shifting the talk about this 0:09:57.640 --> 0:10:01.960 war from intensity to duration. What are you going to 0:10:01.960 --> 0:10:05.120 be listening for during this press conference that we're awaiting 0:10:05.120 --> 0:10:07.240 here at the top of the hour from the Defense Secretary. 0:10:08.040 --> 0:10:10.000 I have some sort of plan for what to do 0:10:10.040 --> 0:10:13.600 about the build up and the Persian Gulf, of how 0:10:13.640 --> 0:10:17.520 to manage the global political economy, whether they're going to 0:10:17.720 --> 0:10:21.280 seriously consider escorting ships through the Strait of Hormues, and 0:10:21.360 --> 0:10:25.040 what conditions would need to be met in order for 0:10:25.080 --> 0:10:28.720 that to be safe. I think you know, more importantly, 0:10:28.760 --> 0:10:31.920 what is the plan for ending the war under what conditions? 0:10:33.000 --> 0:10:36.280 And what we really need to straight talk on the 0:10:36.840 --> 0:10:39.600 reality that even when the United States ends the war, 0:10:39.640 --> 0:10:44.320 the war won't be ended, and so what will the 0:10:44.480 --> 0:10:48.319 plan be for the period when America is no longer 0:10:48.520 --> 0:10:53.480 directly striking but Iran is certainly likely to continue the war. 0:10:54.960 --> 0:10:59.480 What conditions might Iran ask from the United States and 0:10:59.520 --> 0:11:04.160 from Israel in order to help stabilize the global political 0:11:04.160 --> 0:11:08.800 economy and flows of ships through that strait, and what 0:11:08.840 --> 0:11:10.920 would the US be willing to give. 0:11:11.080 --> 0:11:12.320 I don't think we're going to hear. 0:11:12.320 --> 0:11:14.520 Very much about that last point, but it is clearly 0:11:14.559 --> 0:11:15.840 what needs to be discussed. 0:11:16.280 --> 0:11:18.680 President Trump seems to be digging in his heels. He's 0:11:18.679 --> 0:11:20.679 not a man who likes to lose or to admit 0:11:20.679 --> 0:11:23.320 that he's losing. So I'm wondering what an exit ramp 0:11:23.440 --> 0:11:26.200 might even look like, because we know many lawmakers are 0:11:26.200 --> 0:11:29.600 now calling for an exit to this war, especially in 0:11:29.640 --> 0:11:34.560 the year with midterm elections, What might that even look like? Leslie. 0:11:35.720 --> 0:11:38.679 I think with President Trump, it's, you know, he's going 0:11:38.720 --> 0:11:40.520 to be in a quandary. This is not a president 0:11:40.559 --> 0:11:43.080 that will be in any way, shape or form please 0:11:43.200 --> 0:11:48.160 to see rising oil prices and perpetual instability. If there 0:11:48.200 --> 0:11:52.120 isn't some sort of negotiation, I think them more likely 0:11:52.160 --> 0:11:56.079 that he will declare, you know, a success in depleting 0:11:56.120 --> 0:12:03.160 and diminishing Iran's ability to project power externally and signal 0:12:03.200 --> 0:12:07.160 that he's going to end strikes, but maybe not you know, 0:12:07.320 --> 0:12:10.840 very hard to predict what will happen. I doubt that 0:12:10.880 --> 0:12:14.360 he will get into this question of Iran's ongoing leverage. 0:12:15.160 --> 0:12:17.160 Even after that moment, Leslie. 0:12:16.880 --> 0:12:18.800 You and I were inflicted with the eight hundred and 0:12:18.880 --> 0:12:22.320 fifty pages of Henry Kissinger. You had to read Diplomacy 0:12:22.960 --> 0:12:25.680 just to show up with the course. Venjaminy did better 0:12:25.720 --> 0:12:27.559 than me in class, Alexis, I don't know if you 0:12:27.720 --> 0:12:31.520 do that. At the back end of that book, Secretary 0:12:31.559 --> 0:12:36.040 Kissinger talks about the new World Order reconsidered. What does 0:12:36.080 --> 0:12:41.240 the new world order look like when this war ends? 0:12:42.600 --> 0:12:45.680 You know, at the moment, we're not moving into another order. 0:12:45.800 --> 0:12:49.880 We've clearly abandoned. The United States has abandoned many of 0:12:49.920 --> 0:12:54.280 the norms and the laws for you know, how we govern. 0:12:54.360 --> 0:12:58.080 It's certainly abandoned the principle that you work very closely 0:12:58.160 --> 0:13:02.720 with a certain set of pre agreed We are much 0:13:02.760 --> 0:13:06.560 more into might makes right, into a heavy transactionalism. But 0:13:06.679 --> 0:13:08.800 I think the real concern is that we're moving into 0:13:08.800 --> 0:13:13.360 a period where there isn't an alternative order, where alliances 0:13:13.400 --> 0:13:15.480 aren't going to be permanent. You're not going to know 0:13:15.600 --> 0:13:18.959 exactly who your friend or who your enemy is where 0:13:19.000 --> 0:13:23.440 deals are done with a variety of partners, some more 0:13:23.559 --> 0:13:28.839 seemly and less unseemly than others. So unfortunately we are 0:13:28.880 --> 0:13:32.240 not seeing our leaders map out an alternative version. We 0:13:32.320 --> 0:13:35.560 know that Mark Karney has talked about middle powers. I 0:13:35.760 --> 0:13:38.920 was just in India at the Razina Dialogue, where you know, 0:13:39.000 --> 0:13:42.960 India is talking about, as it has been, multiple alignments 0:13:43.000 --> 0:13:47.839 in order to protect its strategic autonomy and enable it 0:13:47.880 --> 0:13:49.680 to do what it wishes to do, which is to 0:13:49.720 --> 0:13:54.600 focus on development and poverty alleviation. I think many countries 0:13:54.600 --> 0:13:58.719 across Europe are going to be adopting a similar, similar strategy. 0:13:58.760 --> 0:14:03.720 How do you I develop multiple alignments with other Middle 0:14:03.880 --> 0:14:07.360 powers on the economic front. I think on the strategic 0:14:07.440 --> 0:14:10.040 consecurity front, the West is still going to try to 0:14:10.160 --> 0:14:14.480 lean into itself, but when the US behaves like this, 0:14:15.600 --> 0:14:19.600 that makes it very much harder for its Western allies 0:14:19.880 --> 0:14:20.520 to go along. 0:14:20.760 --> 0:14:23.320 Doctor Vinja, Mary, thank you so much in Chicago with 0:14:23.440 --> 0:14:29.120 the Chicago Council on Global Affairs. Stay with us. More 0:14:29.240 --> 0:14:32.120 from Bloomberg Surveillance coming up after this. 0:14:39.400 --> 0:14:42.960 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:14:43.040 --> 0:14:46.200 weekday afternoons from seven to ten am Eastern. Listen on 0:14:46.280 --> 0:14:49.920 Applecarplay and Android Otto with the Bloomberg Business app, or 0:14:50.080 --> 0:14:51.560 watch us live on YouTube. 0:14:51.760 --> 0:14:58.040 Michael Durremberger's deeply experienced in multi syllable titles and phrases 0:14:58.880 --> 0:15:07.440 that we're invented three security structures, Ago, securitized, securitization and that, 0:15:07.560 --> 0:15:11.360 and he joins us this morning Michael uh in Nierrenburger's 0:15:11.600 --> 0:15:16.120 chief executive officer, chairman and president of Rhythm Capital over 0:15:16.200 --> 0:15:21.920 cocktail conversation, how do you respond to OMG private credit? 0:15:22.080 --> 0:15:23.000 It's a disaster. 0:15:23.360 --> 0:15:27.440 How do you respond to this? I, you know, listen, 0:15:27.480 --> 0:15:30.000 there's going to be pockets of private credit that are 0:15:30.120 --> 0:15:33.920 that are going to you know, right now. Obviously in 0:15:33.960 --> 0:15:37.000 the news private credit is negative. I don't think all 0:15:37.040 --> 0:15:40.200 private credit is negative, to be totally honest. I think 0:15:40.200 --> 0:15:43.760 there's been some obviously there's been some headlines with some 0:15:43.800 --> 0:15:48.000 of the other larger asset managers that have put up gates, 0:15:48.160 --> 0:15:49.880 and I think a lot of that has to do 0:15:50.000 --> 0:15:53.520 with what we what we've seen the distribution of private 0:15:53.560 --> 0:15:58.280 credit into retail and when you take products that may 0:15:58.320 --> 0:16:02.880 not be one hundred percent suited for retail and retail 0:16:02.920 --> 0:16:05.840 wants their money out because equity markets have turned over 0:16:06.040 --> 0:16:09.560 and folks are looking for liquidity. It creates a little 0:16:09.600 --> 0:16:11.080 bit of what what we'll call it is a so 0:16:11.200 --> 0:16:12.080 called run on the bank. 0:16:12.160 --> 0:16:15.280 Michael, you have a resume here that you know, like 0:16:15.520 --> 0:16:18.080 literally he could have written the screenplay for Margin Call. 0:16:18.440 --> 0:16:23.760 I mean, you have so much experience here institutionally. What 0:16:24.000 --> 0:16:27.880 was your response when you first heard about private credit 0:16:27.920 --> 0:16:32.280 for that matter of private equity and retail accounts? 0:16:32.320 --> 0:16:35.040 You know, it's first of all, when you look at 0:16:35.040 --> 0:16:38.280 our franchise, we don't have we don't really have private 0:16:38.280 --> 0:16:41.200 credit going into retail at this point. And I think 0:16:41.240 --> 0:16:43.040 where you're going to see and you've heard it from 0:16:43.040 --> 0:16:45.920 some of the larger banks UH such as JP Morgan, 0:16:45.920 --> 0:16:49.360 where folks are going to reevaluate the distribution of private 0:16:49.360 --> 0:16:50.960 credit into the retail. 0:16:51.120 --> 0:16:54.640 From you von steinas this morning my art. 0:16:54.480 --> 0:16:57.360 Our view, and when you when you look at the 0:16:57.360 --> 0:17:00.920 private credit markets, take take for example, to take for 0:17:00.960 --> 0:17:04.360 example Sculptor, we have a large multistrat fund where there's 0:17:04.400 --> 0:17:06.879 a fair amount of credit in there. It's liquid credit, 0:17:06.920 --> 0:17:09.840 it's marked, it's marked. When you take some of the 0:17:09.880 --> 0:17:12.560 private credit that goes into retail, and it's not liquid 0:17:12.880 --> 0:17:15.159 private credit, and folks want their money out there not 0:17:15.200 --> 0:17:16.600 going to be able to get their money out and 0:17:16.640 --> 0:17:18.960 that that's what you're seeing now in the marketplace. You're 0:17:18.960 --> 0:17:21.159 seeing folks put up the gates. I looked at the 0:17:21.200 --> 0:17:24.040 market reaction yesterday, and you looked at the treasury market, 0:17:24.119 --> 0:17:26.359 which you know, the front end of the treasury market 0:17:26.400 --> 0:17:29.720 really sold off pretty dramatically, and it seemed to me 0:17:29.840 --> 0:17:33.560 that it was really a liquidation event that you're seeing 0:17:33.560 --> 0:17:36.000 with a lot of a lot of folks in the marketplace. 0:17:36.080 --> 0:17:39.240 But when I look at private credit, you know, it's 0:17:39.520 --> 0:17:42.040 a huge market. You know, we don't look at these 0:17:42.119 --> 0:17:45.520 large club deals to be quite frank, you know, we 0:17:45.800 --> 0:17:48.440 look at our prestline business where we do direct lending there. 0:17:48.520 --> 0:17:51.760 So you know, I think private credit it has a 0:17:51.800 --> 0:17:54.639 bad it's getting a bad name right now. Not all 0:17:54.680 --> 0:17:56.040 private credits band is whatever. 0:17:56.080 --> 0:17:59.280 There's some jargon liquidation event. That's when the kid goes 0:17:59.320 --> 0:18:00.000 on spring Bright. 0:18:00.880 --> 0:18:05.320 Just so you know, very Michael, you say servicing is 0:18:05.359 --> 0:18:09.560 the key differentiator. Why do they have such a huge advantage. 0:18:09.280 --> 0:18:12.360 Because you could you could affect an outcome, take take 0:18:12.400 --> 0:18:15.960 a homeowner, take a mortgage. If you go out and 0:18:15.960 --> 0:18:18.000 you take out a mortgage. You know, one of the 0:18:18.000 --> 0:18:19.919 things we do at our company, we own one of 0:18:19.920 --> 0:18:22.960 the largest mortgage servicers in the US, were the fourth largest, 0:18:23.160 --> 0:18:25.280 including all the large banks we work with it. 0:18:25.440 --> 0:18:26.159 I did not know that. 0:18:26.280 --> 0:18:29.200 Yeah, we have a you know, for example, eight hundred 0:18:29.200 --> 0:18:31.880 and fifty billion dollars and mortgage servicing rights. We touch 0:18:31.960 --> 0:18:35.040 four million consumers. So what happens a mortgage or has 0:18:35.080 --> 0:18:38.160 an issue, we work with that consumer. You figure out 0:18:38.160 --> 0:18:40.760 a modification or some kind of plan to keep them paying. 0:18:41.040 --> 0:18:43.480 That's a huge advantage versus somebody that's going to go 0:18:43.520 --> 0:18:46.800 out into the public markets buy an asset, let someone 0:18:46.800 --> 0:18:48.080 else control the service thing. 0:18:48.160 --> 0:18:50.520 So you say you have options when you're in servicing. 0:18:50.280 --> 0:18:52.640 Yeah, and you could affect an outcome and you could 0:18:52.640 --> 0:18:55.520 work with a homeowner, which I think is extremely important. 0:18:55.760 --> 0:18:57.720 And we've seen that over the years and that's one 0:18:57.720 --> 0:18:59.480 of the one of the ways that we actually built 0:19:00.000 --> 0:19:01.320 built our business. 0:19:01.359 --> 0:19:03.240 Just I got to ask you about mortgage rates then, 0:19:03.280 --> 0:19:06.439 I mean, because we're starting to tick higher. Spring buying 0:19:06.480 --> 0:19:09.679 season has begun, even though the weather doesn't feel like 0:19:09.680 --> 0:19:12.240 it in New York City, What is this really going 0:19:12.320 --> 0:19:13.800 to be a downer for the housing market. This was 0:19:13.800 --> 0:19:16.040 supposed to be the year things bounced back and possibly 0:19:16.080 --> 0:19:17.480 swing to being a buyer's market. 0:19:17.560 --> 0:19:20.679 Dare I say, yeah, you know, I looked at mortgage 0:19:20.720 --> 0:19:23.480 rates this morning, mortgage rates today or in and around 0:19:23.480 --> 0:19:25.480 where we close the end of the year. If you 0:19:25.520 --> 0:19:27.320 look at the treasury market, the ten year has been 0:19:27.359 --> 0:19:29.240 in a range of give it a take a low 0:19:29.320 --> 0:19:31.480 force to kind of four and a quarter. Where we 0:19:31.520 --> 0:19:35.240 sit right now. I think mortgage rates will continue that 0:19:35.359 --> 0:19:37.560 the administration is doing all they can to bring mortgage 0:19:37.600 --> 0:19:40.560 rates lower. Whether they're able to achieve that or not. 0:19:40.760 --> 0:19:43.879 I don't think you can control such a large market, 0:19:43.960 --> 0:19:45.960 but I think, you know, we're going to sit here. 0:19:45.960 --> 0:19:48.520 I think the housing market is okay. You look at 0:19:48.520 --> 0:19:52.119 our data around the consumer right you know it's actually 0:19:52.720 --> 0:19:54.720 in pretty good The consumers in pretty good shape. 0:19:54.800 --> 0:19:57.239 One more question, with great respect and great honor, we're 0:19:57.240 --> 0:19:58.919 going to go to Breaking News and then to Michael 0:19:58.920 --> 0:20:04.560 Barr here, folks, micro leader. When all over the zeitgeist 0:20:04.640 --> 0:20:08.160 right now, everybody's playing clips of mister Irons and margin Call. 0:20:08.720 --> 0:20:12.080 When a grizzled pro like you sees those clips, or 0:20:12.119 --> 0:20:15.520 when you first saw margin call, is that even remotely 0:20:16.080 --> 0:20:17.879 real or was it just Hollywood? 0:20:18.480 --> 0:20:21.480 Now listen, margin call. You know, we've seen it during 0:20:21.480 --> 0:20:24.240 twenty twenty, the COVID period. Then we've saw it during 0:20:24.280 --> 0:20:26.720 the Great Financial Crisis. I think the difference today is 0:20:26.720 --> 0:20:31.440 folks that have experienced, like ourselves, understand how to one 0:20:31.520 --> 0:20:33.959 navigate the navigate the system, but also work with your 0:20:34.040 --> 0:20:36.840 large lenders around getting rid of margin calls on the 0:20:36.840 --> 0:20:37.960 assets that you financed. 0:20:37.960 --> 0:20:41.160 Where's your shadow right now? Where's your mystery shadow within 0:20:41.200 --> 0:20:42.680 the depth system right now? 0:20:43.720 --> 0:20:47.040 I'm concerned a little bit about liquidity. I do think 0:20:47.080 --> 0:20:48.879 when you look at some of the you know, some 0:20:48.920 --> 0:20:51.080 of the folks out there, you sorry, Like I brought 0:20:51.119 --> 0:20:53.119 up yesterday's price action in the front end of the 0:20:53.119 --> 0:20:55.400 treasury market. Yeah, should to your treasury be at three 0:20:55.440 --> 0:20:57.840 and three quarters when we when we saw we got 0:20:58.600 --> 0:21:03.040 employment report before. I don't. I don't think so. I 0:21:03.080 --> 0:21:05.920 do think that, you know, the the market's taken out 0:21:05.960 --> 0:21:08.800 any not any chance, but the market's taken out that 0:21:08.840 --> 0:21:10.560 the Fed is not going to cut rates this year. 0:21:11.080 --> 0:21:13.280 I don't agree with that. I think Goldman came out 0:21:13.320 --> 0:21:15.600 as well and said that you know, they're still calling 0:21:15.680 --> 0:21:17.560 from one or two rate cuts I look at the 0:21:17.680 --> 0:21:19.439 I look at forward rates. I do think we're going 0:21:19.520 --> 0:21:22.280 to see rates come come down, particularly in the front end. 0:21:22.280 --> 0:21:24.480 I think the back end is troubled, right because we 0:21:24.560 --> 0:21:26.679 got to fund this war, we got you know, we 0:21:26.760 --> 0:21:29.160 have this massive deficit which we still have to issue 0:21:29.160 --> 0:21:31.520 a lot of debt. So I think long rates, you know, 0:21:31.560 --> 0:21:32.639 could be a little bit challenged. 0:21:32.640 --> 0:21:34.879 Here we're in a four ninety eighty nine right now, 0:21:34.880 --> 0:21:38.040 in a thirty year bond. Michael Darrenburg, don't be a stranger. 0:21:38.160 --> 0:21:40.680 Love having you, and thank you so much. Rhythm Capital 0:21:42.400 --> 0:21:46.600 Stay with us. More from Bloomberg Surveillance coming up after this. 0:21:53.840 --> 0:21:57.440 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:21:57.480 --> 0:22:00.639 weekday afternoons from seven to ten am Eastern Listen on 0:22:00.720 --> 0:22:04.399 Applecarplay and Android Otto with the Bloomberg Business app, or 0:22:04.560 --> 0:22:06.040 watch us live on YouTube. 0:22:06.200 --> 0:22:10.440 This is the perfect guest to frame out why equals 0:22:10.480 --> 0:22:15.040 C plus I plus G plus NX. Kathleen bus Johnsion 0:22:15.160 --> 0:22:19.320 nails it each and every day as chief economist at Nationwide, 0:22:19.320 --> 0:22:22.640 and we're thrilled that she could join us today. All 0:22:22.680 --> 0:22:26.240 the secondary stuff, the noise at the back end of March. 0:22:26.880 --> 0:22:29.679 Kathy where we try to frame out our guestimate of 0:22:29.800 --> 0:22:34.679