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Speaker 1: Welcome to the Bloomberg Surveillance podcast. Name Tom Keene, Jay Leye.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Got

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Speaker 1: to talk about m and a Monday. We aren't going

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Speaker 1: to call it that because there are so many deals

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Speaker 1: to get our teeth into. Can I just have a

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Speaker 1: comment on al vm H and Tiffany Some of this

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Speaker 1: is going to be funded by debt and it will

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Speaker 1: yield zero to one percent. And the current credit rating

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Speaker 1: of LVMH right now in Europe is single A, and

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Speaker 1: I think that Tiffany's and the likes of LVMH, you're

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Speaker 1: thinking about, what's something something the US companies have thought

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Speaker 1: about for the last few years. What is the value

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Speaker 1: of running a single A balance sheet when yields are

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Speaker 1: still so low? If you run a triple B balance sheet,

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Speaker 1: you still an investment grade. The e c B will

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Speaker 1: still buy your debt and you can go and buy

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Speaker 1: some growth with a yield on your debt of what

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Speaker 1: fifty basis points for investment grade debt in Europe? Right now,

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Speaker 1: you're basically yeah, I mean you're basically being I'm sorry.

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Speaker 1: You know we end with money for nothing, you know,

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Speaker 1: dire straits. That's what it is. Yeah, I mean, it's

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Speaker 1: just that simple. It'll be interesting I should point out

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Speaker 1: and correct me if I'm wrong. It's three of the

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Speaker 1: four corners of fifty seven Street and Fifth Avenue. You

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Speaker 1: would not better than Chris MORANGI shopped at all four

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Speaker 1: stores on the corners. He's with us now, CHRISNS coach

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Speaker 1: if investment officer. We're not going to talk about your

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Speaker 1: shop and have its Chris, don't worry starts. What are

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Speaker 1: you making a deal fly that we've seen this morning? Chris? Yeah,

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Speaker 1: well both You know the thing about these two deals

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Speaker 1: where the cat was out of the bag a couple

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Speaker 1: of weeks ago on on both of them. So this

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Speaker 1: is just a confirmation of what we had speculated upon earlier. Um. Yeah,

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Speaker 1: it has been a little bit slow late this year

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Speaker 1: as there's been some uncertainty obviously globally policy in the US,

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Speaker 1: what's happening with China. Um. But you know, I think

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Speaker 1: I've said for a while, if you want to get

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Speaker 1: a deal done, now's the time. To do it and

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Speaker 1: probably have a regulatory window, and and certainly money is

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Speaker 1: almost free. Why a regulatory window now to the excess

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Speaker 1: that you've got to get approved by US regulatory agencies.

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Speaker 1: Perhaps there's a bit of a fog of war as

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Speaker 1: we head into the election. You get something done, now,

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Speaker 1: you don't know what you're going to be left with

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Speaker 1: a year from now, what what kind of administration and

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Speaker 1: its position towards mergers. A lot of macro risk over

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Speaker 1: the last year or so, A lot of hope that

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Speaker 1: that's diminishing now starting to fade. Do you share that hope? Chris? Yeah?

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Speaker 1: I think you know, the market tends to look at

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Speaker 1: things through two lines. Is one is what's happening with

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Speaker 1: the election, and the other is what's happening with China.

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Speaker 1: And as you stated earlier, I think you know a

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Speaker 1: little bit of good news perhaps on the China front.

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Speaker 1: I do think the market is pricing in a high

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Speaker 1: and increasing probability that we get a Phase one deal.

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Speaker 1: I think it's it's really changed from let's reset the

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Speaker 1: relationship with China to let's just stop things from getting worse.

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Speaker 1: You know, let's talk about what happened with China. They

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Speaker 1: said that they were going to be cracking down an

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Speaker 1: intellectual property theft a little bit more. I'm trying to

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Speaker 1: understand how real this is because this is supposed to

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Speaker 1: be the hard part of the deal. They're coming out

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Speaker 1: with something there, there's no sign of enforcement there, and

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Speaker 1: we're hearing that soybean purchases dropped to the lowest in

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Speaker 1: years by China of of US produce. So what do

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Speaker 1: you make of the the actual advancement that we've gotten here. Yeah,

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Speaker 1: I think I think you're right to be skeptical. I'm

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Speaker 1: certainly skeptical of how this actually plays out. But again

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Speaker 1: to the point, let's just stop this from getting worse.

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Speaker 1: Let's stabilize the situation that we have and and move

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Speaker 1: on from from these headlines. Where's the opportunity right now?

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Speaker 1: I don't mean to be said. You know, you guys

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Speaker 1: are running a steam value portfolio. We all know the

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Speaker 1: gabelly media mechanics. Mario started out in auto parts and

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Speaker 1: that kind of securities analysis. When you guys talk where's

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Speaker 1: the sector right now, where you go, Wow, this is

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Speaker 1: the opportunity? Yeah? So, um, you know one thing we've

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Speaker 1: been talking about recently is the uh disrupted disruptors, that is,

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Speaker 1: companies that have been Pharaoh but continue that the companies

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Speaker 1: that have been disrupted over the last decade by these

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Speaker 1: late stage venture companies now often public who you know,

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Speaker 1: work with free money and give stuff away um and

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Speaker 1: and that's spurred a lot of traditional companies to innovate.

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Speaker 1: I think a great example that is Disney Plus for example,

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Speaker 1: which I spent a lot of time with this weekend.

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Speaker 1: Um and so you know that, and you see this

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Speaker 1: throughout media um and you see it in a lot

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Speaker 1: of other industries and consumer products in others. So I

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Speaker 1: think that's an opportunity and some of these beaten down

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Speaker 1: companies uh to make some money, especially is the market

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Speaker 1: seems to be pivoting towards value from momentum. Did you

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Speaker 1: see the statistic over the weekend that Apple and Microsoft

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Speaker 1: together are now twice as large as the entire SMP

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Speaker 1: five hundred energy sector, and are larger than the entire

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Speaker 1: Russell two thousand index. Yeah, I didn't see that specifically,

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Speaker 1: but there are a lot of comparisons like that. Okay,

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Speaker 1: I'm struggling to wrap my head around this. How much

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Speaker 1: further can they go? And they've been kind of the

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Speaker 1: big driver of the whole rally that we've seen over

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Speaker 1: the past. Microsoft in particular has been We've about the fang,

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Speaker 1: but really Microsoft has been the juggernaut over the last

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Speaker 1: ten years. And um, you know, all very well managed

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Speaker 1: companies with lots of capital. Um. I think one of

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Speaker 1: the questions certainly is what happens in the regulatory framework. Um,

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Speaker 1: you've got both bipartisan pushback against all those companies. Let's

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Speaker 1: talk about this rotation to value. JP Morgan out in

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Speaker 1: the last couple of days and said it's twenty complete.

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Speaker 1: The market still in the first phase of the rotation,

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Speaker 1: largely technical shortcoming, etcetera. Complete. What do you make of that? Yeah, listen,

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Speaker 1: So you've got a few things. Uh. I've got the

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Speaker 1: market anticipating bottoming and GDP sometime next year. You've got

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Speaker 1: the steepening of the curve, and frankly, the gap invaluation

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Speaker 1: between the most expensive and the cheapest companies as wide

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Speaker 1: as it's been in twenty years. So you know that

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Speaker 1: we've seen a little bit of mean reversion. I think

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Speaker 1: that's going to continue. Chris Marange, great cant shop. But

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Speaker 1: you give at the funds Chief Investment Officer Lisa Bram,

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Speaker 1: John Farrell here as well, and with this Jeffrey Curry, Uh,

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Speaker 1: Jeffrey Curry joining us from Golden Sax season our London

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Speaker 1: offices this morning. Jeffrey Curry on oil, and it's real simple.

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Speaker 1: There needs to be an observation on demand dynamics. What

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Speaker 1: do you see right now? Well, when you look at

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Speaker 1: overall demand for oil and energy broadly, it's what we

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Speaker 1: would say, but nine it's not great, not bad, And

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Speaker 1: I think you have to dig into looking at the

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Speaker 1: different components. There is a old economy CAPEX component and

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Speaker 1: then there's a new economy op X component. Ap X

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Speaker 1: means operating the economy, so things like jet fuel, gasoline,

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Speaker 1: they're APEX oriented. Well, the capex side would be heavy industry,

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Speaker 1: which would be like diesel fuel. So we look at

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Speaker 1: the heavy industry side, the cap excite it's relatively weak,

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Speaker 1: but the new economy or op X side, it's relatively strong.

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Speaker 1: On that, it's a relatively benign outlook for jeff Let's

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Speaker 1: talk about the old economy. This is something you've written recently.

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Speaker 1: When we argued lower for longer commodity prices five years ago,

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Speaker 1: it was based upon the need to rationalize old economy capacity.

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Speaker 1: What happened, Well, the Chinese stimulated in sixteen and seventeen,

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Speaker 1: US did physical policy in seventeen and eighteen, and OPEC

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Speaker 1: cut production over that time period. What did that do? Um?

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Speaker 1: It just prolonged the rebalancing process. UM. We also added

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Speaker 1: to capacity outside of China, we added to the debt levels.

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Speaker 1: And as we got the emissions data two weeks ago,

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Speaker 1: we're at the highest level of missions ever when many

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Speaker 1: people thought the peak with two thousand fourteen. So the

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Speaker 1: net of it is we're in a worst place today

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Speaker 1: than we were five years ago. But the positive point

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Speaker 1: here is that we're beginning to see capex decline and

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Speaker 1: the rebalancing beginning, which is why we're arguing to get

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Speaker 1: long com the use Today we'll just just thinking about

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Speaker 1: the old economy though, just to take this another step further,

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Speaker 1: how does some of these issues manifest themselves elsewhere? You

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Speaker 1: mean in terms of in terms of the corporate losses

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Speaker 1: that we might see, what it might mean for the

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Speaker 1: debt market, what it means for missions, all these kind

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Speaker 1: of things. We can sit here and say the old

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Speaker 1: economy is a small percentage of overall GDP. But does

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Speaker 1: it have bigger implications elsewhere? Well, I think when you

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Speaker 1: look at the returns in the old economy space, they've

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Speaker 1: been um so weak that you've seen more capital redirected

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Speaker 1: at new economy. If you just look at a picture

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Speaker 1: of new economy stocks versus old economy stocks, the wedge

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Speaker 1: between the two is spectacular. In fact, I like to

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Speaker 1: call it a last decade of the old economy because

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Speaker 1: all the capitals being fed into the new economy. Now,

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Speaker 1: to answer your question specifically, the question is can you

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Speaker 1: see systemic risk developed out of the old economy once?

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Speaker 1: That I like to point out is of the non

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Speaker 1: financial debt globally is held by the old economy. Why

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Speaker 1: because have the physical assets he could use as collateral

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Speaker 1: to get the leverage to get the debt. So the

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Speaker 1: question is could this end up being a systemic risk?

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Speaker 1: Our basic answer to that is no, because the d

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Speaker 1: leveraging process has already begun. When you speak with David Cousten,

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Speaker 1: is there just a golden sex view of an industry

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Speaker 1: roll up not only an oil but in commodities in general. Well,

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Speaker 1: in terms of you know, he has a picture that's

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Speaker 1: similar to the one I just described, which is when

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Speaker 1: you look at the new economy, it's doing relatively well

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Speaker 1: in that wedge. As I think an outperformance is something

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Speaker 1: like UM. I. I think the key point is that

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Speaker 1: even when you look at the UM, you know the

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Speaker 1: price you know, you know EPs um um number or

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Speaker 1: price to book, a price to earnings, UM, you know

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Speaker 1: you're at the high level, but you're not at crazy levels.

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Speaker 1: And so that component will likely continue to grow next year,

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Speaker 1: even though the old economy will likely continue to struggle.

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Speaker 1: So David incorporates that. It's part of the view, but

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Speaker 1: I think again goes back to that point that the

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Speaker 1: new economies two thirds, the old economies one third. Jeff,

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Speaker 1: just real quick here, let's get some calls. We're looking

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Speaker 1: right now at oil traded on the nimax fifty and

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Speaker 1: seventy cents. Where do you see it going next year? UM?

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Speaker 1: You know our base cases UM sixty dollars a barrel

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Speaker 1: for Brent next year. But I don't want to discount

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Speaker 1: the ability for this thing to trade up into seventy

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Speaker 1: dollars a barrel. UM. It just won't be sustainable UM.

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Speaker 1: And I think we saw that a couple of weeks

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Speaker 1: ago when you had the risk on environment um equities,

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Speaker 1: rallied commodities did not follow through. And one of the

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Speaker 1: reasons why is these producers that are under financial distress

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Speaker 1: sold forward on the forward curve, keeping prices under wraps.

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Speaker 1: So the front end we'll try to spike up, but

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Speaker 1: the back end will likely be sold as producers try

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Speaker 1: to lock in those margins and that will keep it

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Speaker 1: from going too high. Jeff Curry, thank you so much.

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Speaker 1: Jesus Goldman sacks of course ahead of their commodity coverage,

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Speaker 1: and we think and we didn't have time there for

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Speaker 1: gold where he was most enthusiastic on a number of

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Speaker 1: months ago as well. Do you need a briefing? Do

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Speaker 1: you get your start out on Monday? You do that

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Speaker 1: across our set. You look at the litmus paper of

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Speaker 1: the system, which is effect which John Ferrol can only

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Speaker 1: mean Mr You from London that Jeff you joined US

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Speaker 1: now UBS private banking chief Investment obviouser Jeff is great

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Speaker 1: to catch up with you. Let's walk through some things,

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Speaker 1: shall we. You were underweight global equities. Something changed in

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Speaker 1: the last couple of weeks. What changed? Well, less negative?

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Speaker 1: I think you know that's probably the best way to

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Speaker 1: put it, you know, data showing some signs of stabilization acknowledging.

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Speaker 1: You know, this Phase one deal you know should have happened.

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Speaker 1: You know, it might just give markets a bit of

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Speaker 1: a tail wind um as well. So I'm starting to

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Speaker 1: take off some underweight to notably an emerging markets. But

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Speaker 1: let's be clear, does this mean we're positive? No, it doesn't.

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Speaker 1: You know, there is still daylight between being not negative

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Speaker 1: versus positive, and I think Marcus needs to tell the

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Speaker 1: different all right, So let's talk about what's going on

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Speaker 1: with trade, because I p the idea that China might

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Speaker 1: crack down on intellectual property theft has given a little

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Speaker 1: bit of lift to markets. Is this a meaningful development

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Speaker 1: from your perspective? Right, So let's unwind um back to

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Speaker 1: reminding back to you know, may you know when the

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Speaker 1: last deal supposed to be collapsed. You know, this is

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Speaker 1: one of the crucial points, right, So it's not about

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Speaker 1: what is being done, it's how it's being done. China

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Speaker 1: objected to um seemingly being forced by the US actually

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Speaker 1: make changes in its law rather than you know, administrative

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Speaker 1: methods and which they wanted to push forward. So you

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Speaker 1: want to see you know, what the implementation is I

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Speaker 1: think on the headlines and don't give enough meat to

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Speaker 1: that yet. So I think the two are trying to

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Speaker 1: meet half work at this point. I think what China

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Speaker 1: needs to sell to the domestic population is that protecting

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Speaker 1: I p this helps China's innovation, it helps you know, Chinese,

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Speaker 1: and then to the health holders of Chinese Chinese holders

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Speaker 1: of patterns as well. I think, you know, that can

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Speaker 1: be good for China's development and also you know, make

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Speaker 1: a deal more palpable, but again proofers in the All right,

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Speaker 1: so let's turn our focus now to Europe, because we

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Speaker 1: did say a little bit better than expected data out

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Speaker 1: of Germany that seems to be edifying this idea of

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Speaker 1: a bottoming out in the decline that we sell the

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Speaker 1: sitieration in the European economy. What do you make so far?

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Speaker 1: Do you think that this is a tipping point and

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Speaker 1: that we're going to see a steady improvement in the

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Speaker 1: figures coming out of the Eurozone. So there are two

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Speaker 1: things here. One is the relative and one is the absolute. Right.

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Speaker 1: So if data is um starting to stabilize on an

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Speaker 1: absolute basis, you know, then that's I'm you know, fair

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Speaker 1: enough but where is data performing, you know, relative to expectations.

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Speaker 1: And again you know this is more of a relative thing.

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Speaker 1: So if we look at USS and surprise indusies for example,

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Speaker 1: yes data has stabilized, but also that's because you expectations

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Speaker 1: have been so weak it actually becomes easier to surprise

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Speaker 1: to the upside or harder to surprise but downside. Right,

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Speaker 1: So I think you're putting these things together. We maybe

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Speaker 1: we've bottomed out on an absolute and relative basis, but

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Speaker 1: again we need a demand capitals to actually go up. Jeff,

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Speaker 1: You've always been flow based. The flow is cash up

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Speaker 1: to our eyeballs. Define where the cash finds a warm

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Speaker 1: spot or does it not have to? So I think

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Speaker 1: cash will still have to go into yield territory at

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Speaker 1: this point in some areas we'd like, for for example,

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Speaker 1: emerging market, hard currency, sovereign debt. But also you know,

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Speaker 1: private equity alternatives think longer term. So you pick up

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Speaker 1: the illiquidity premier. You know that is a good substitute

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Speaker 1: right now, but also a lot of how to there

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Speaker 1: as well. That's great. I'm so glad you mentioned that

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Speaker 1: that was gonna be the name of John's property. The

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Speaker 1: real yield. It was going to be called yield territory,

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Speaker 1: but the territory territory, Jeff, Can we get to the

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Speaker 1: other part of the market that we haven't really discussed

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Speaker 1: as far, what the basic assumptions are for foreign exchange

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Speaker 1: at the moment many people thinking about buying the rest

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Speaker 1: of the world. We've certainly had some performance from Europe

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Speaker 1: through the year so far. What is the assumption that

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Speaker 1: you have the core assumption on foreign exchange and the

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Speaker 1: US dollar? We're not there yet, as in the dollars

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Speaker 1: probably topped out, but doesn't mean the start of a

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Speaker 1: dollar bear trend, not yet. So we there are selective

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Speaker 1: em names we want to pick up some carry from,

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Speaker 1: but again we don't want to really fund that out

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Speaker 1: of the dollar right now. But the dollar is not

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Speaker 1: a real a low yielder anymore, right, It's not really

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Speaker 1: a funding currency. So you fund that out of Bossy,

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Speaker 1: you know, for example, where there's some recyclical trend are

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Speaker 1: the same you want to own some Swiss and perhaps

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Speaker 1: if you're still uncertain about the outlook, um, so I

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Speaker 1: think the dollar is going to be choppy. I wouldn't

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Speaker 1: add to dollar position right now, but again not really

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Speaker 1: a bad trend and something. Did you say you want

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Speaker 1: to on some Swiss. You want to go long Swiss Frank,

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Speaker 1: you want as a defensive and play. We want to

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Speaker 1: own the barbell, you know, so to speak. I'm going

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Speaker 1: to tear up or That's where I met John Ferrell

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Speaker 1: and I wanted to ask about Zurich a long long

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Speaker 1: time ago. He's pulling out his nappy and Davig at

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Speaker 1: his eyes. It's very moving, which I would love your perspective.

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Speaker 1: You know. In nineteen the sort of overarching theme was

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Speaker 1: a disinflationary kind of band you it yields all around

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Speaker 1: the world plunge. We seem to be shifting out of that,

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Speaker 1: heading into what is the driving narrative that's giving you

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Speaker 1: some focus? Well, so real yields, you know where they go?

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Speaker 1: Um So again the disinflation, if we are going to

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Speaker 1: start to price that out, then doesn't mean we're going

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Speaker 1: to start a price in inflation. I don't think central

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Speaker 1: banks are ready to go for that yet. Remember, if

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Speaker 1: monetary policy works, then yield cubs are supposed to steep

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Speaker 1: and inflation expectations are expected to go up. If we

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Speaker 1: look at a five year five year forwards right now,

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Speaker 1: that's not coming through. But if we can keep real

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Speaker 1: yield expectations relatively loads a good environment for real assets,

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Speaker 1: for commodities, them for precious metals in the even then

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Speaker 1: that could help explain some of the flow going into

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Speaker 1: private equity to capture some of those real assets as well.

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Speaker 1: So where do real yields go? And it's less about

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Speaker 1: nominal yields now, it's more about inflation expectations. Can central

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Speaker 1: bank succeed and reflating that? The jury still out there. Well,

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Speaker 1: so you know, right now you look at long term

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Speaker 1: demographics might still think you know, though the do sort

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Speaker 1: of have their backs against the wall right now. Japanification,

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Speaker 1: it's no longer a question of if. And for example,

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Speaker 1: the Europe and more and more people are you know,

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Speaker 1: saying well Europe is actually already in the throngs of that.

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Speaker 1: So you know, how can I actually make the best

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Speaker 1: out of a bad situation? Um So net net fiscal

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Speaker 1: is that going to come as well? Because now that

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Speaker 1: seems to be the last card to play kerve flatter

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Speaker 1: over the last eight days coming into today's session, Jeff,

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Speaker 1: what do you make of that? So? Um, I don't

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Speaker 1: buy the view that it's recession, you know, coming through UM,

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Speaker 1: I think some of it's in a profit profit taking

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Speaker 1: on more of the more reflationary trade that have come out.

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Speaker 1: Data stabilization, but again not data pickup. You need a

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Speaker 1: data pick up demand to get a proper steper curve.

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Speaker 1: Jeff you you you mentioned five year, five years haven't

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Speaker 1: moved indicating higher inflation. Actually, looked at those charts Friday,

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Speaker 1: It's amazing how we have stayed in a disinflation tone.

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Speaker 1: If we move out the X axis of low inflation,

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Speaker 1: how far out is Jeff you moving? Is it two

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Speaker 1: thousand twenty one or can you get out two in

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Speaker 1: three and four years of sustained low inflation? Well, look

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Speaker 1: at where you're Japan's and inflation expectations you know have

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Speaker 1: been right. So alone the numbers, the tank can surveys.

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Speaker 1: You know, you barely see a five year inflation expectation

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Speaker 1: survey result above two on the part of corporates, which

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Speaker 1: means no pricing power. So that really I think that

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Speaker 1: the onus is on the U S in particular and

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Speaker 1: emerging market to avoid going into that kind of a spiral.

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Speaker 1: So I think five years the absolute the absolute max

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Speaker 1: if you want to use the tank and the Japanese

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Speaker 1: as a reference. But again we go back to the

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Speaker 1: demand kick is it going to come from fiscal If

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Speaker 1: it is, you know, then these things can actually miss

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Speaker 1: seeping quite aggressively. So remember it's always you know, the

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Speaker 1: least position trades, reflation trades, they come to you when

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Speaker 1: you least expected. Right if we look at you know,

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Speaker 1: June two thousand sixteen, right from one two seventy in

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Speaker 1: the space of two months. So, Jeff, this down's vaguely

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Speaker 1: not terrible, but not particularly raging bull here. Yet we're

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Speaker 1: hearing that there's so much cash hanging out there to

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Speaker 1: go invest in stocks and such that it's going to

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Speaker 1: lead to a good year for risk assets. Do you

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Speaker 1: buy that? Um? So I have a lot of sympathy

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Speaker 1: with that. You know, if we look at cash ratios

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Speaker 1: and part of my private clients, on parts of institutional

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Speaker 1: clients that drive pat in private equity. UM, it seems

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Speaker 1: like there is no alternative right but to be in equities.

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Speaker 1: But I think central banks will be thinking what are

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Speaker 1: the long term especially political costs some right, if it

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Speaker 1: does mean those with assets and those without assets, that

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Speaker 1: just widens some gaps and it causes difficulty to them.

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Speaker 1: So I think that will be an ongoing force, but

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Speaker 1: maybe something they'll generly try to deter. Jeff, you thank

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Speaker 1: you so much. With you. I'm sure we're going to

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Speaker 1: talk to him before, I hope. So I think I'm

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Speaker 1: going to see him in London, So looking forward to that. Yeah, yeah,

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Speaker 1: that'll be good. I mean, we could see him in

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Speaker 1: London and it's like going out, but there's an optimistic

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Speaker 1: tone there. Right now, we have to digress. John Farrell

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Speaker 1: and I are just not qualified to speak of the

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Speaker 1: Blue Box at fifty seven Streets, so we defer to

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Speaker 1: Lisa Bramo Woods to bring in our guests from more

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Speaker 1: about Are you kidding? You know more about the Blue

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Speaker 1: Box anyone on this floor in this building. Your expression

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Speaker 1: just shows just reeks of genuine, genuine centiment. You know

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Speaker 1: more about what floor is what? Anyway, I got more

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Speaker 1: experienced bond engagement rings than all of us. All right,

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Speaker 1: So Debra a kin enjoining us now to talk about

402
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Speaker 1: not how many engagement rings Tom Keen his body. She

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Speaker 1: is senior analysts covering luxury goods and beauty uh for

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Speaker 1: Bloomberg Intelligence coming to us from London Debora. It seems

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Speaker 1: like the bet here is that that Tiffany will offer

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Speaker 1: a sort of lower entry point or at least a

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Speaker 1: range for LVMH. Can you give us a sense from

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Speaker 1: your perspective of how this will go down, what will

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Speaker 1: be the net benefit going forward for both of these

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Speaker 1: companies combined. Sure. So, if we look at Tiffany, it's

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Speaker 1: been struggling with its designer jewelry over the last couple

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Speaker 1: of years, and the last quarter that it reported was

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Speaker 1: minus three percent like for like, UM not doing so

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Speaker 1: well at the bottom end where competition is building as

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Speaker 1: one of the things strong dollar and not so much

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Speaker 1: tourism flow. So that's all been detrimental to Tiffany. But

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Speaker 1: if we look at the other end to UM and

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Speaker 1: we think about l v UMGE, they own the Bulgary brand,

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Speaker 1: much higher end starting point entry point UM and they

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Speaker 1: will be able to benefit from the low end with

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Speaker 1: Tiffany to offer the younger consumer, which they talked to

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Speaker 1: very well through its brands like Louis Vuitton and others

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Speaker 1: um into into the brand better we think that Tiffany

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Speaker 1: has done. And then also at the high end we've

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Speaker 1: heard our no on the calls this morning, so in

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Speaker 1: they will very much be able to manipulate up at

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Speaker 1: the higher end, will manipulate I know what, manipulate me

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Speaker 1: and my hands on my wallet, Deborra. The heart of

429
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Speaker 1: the matter here is the Chinese. The Chinese are gonna

430
00:22:11,280 --> 00:22:14,639
Speaker 1: buy fifty seventh Street or Band Street, or for that

431
00:22:14,800 --> 00:22:17,480
Speaker 1: matter of Heathrow or the Chinese are going to buy

432
00:22:17,600 --> 00:22:21,080
Speaker 1: in China. Do you see any indication the Tiffany Bluebacks

433
00:22:21,160 --> 00:22:27,200
Speaker 1: can work domestically in China? Yes, so Tiffany. If I

434
00:22:27,480 --> 00:22:31,040
Speaker 1: pull up market share that one of the reasons. On

435
00:22:31,119 --> 00:22:33,800
Speaker 1: the other side, the flip side, would be that lvium

436
00:22:33,920 --> 00:22:37,760
Speaker 1: H has tempercent market share in Asia, whereas Tiffany already

437
00:22:37,800 --> 00:22:41,479
Speaker 1: has sixteen percent. And what alvium H has been very

438
00:22:41,560 --> 00:22:45,359
Speaker 1: strong in doing is persuading outside of Hong Kong consumers

439
00:22:45,440 --> 00:22:49,159
Speaker 1: to purchase with its store capability across the whole of

440
00:22:49,280 --> 00:22:52,920
Speaker 1: China and several tiers of cities. And this is one

441
00:22:52,960 --> 00:22:55,720
Speaker 1: of the things. It's balance sheet allows it to be

442
00:22:55,840 --> 00:23:01,320
Speaker 1: able to market and manage and manipulate the mark more successfully.

443
00:23:01,800 --> 00:23:05,520
Speaker 1: What does manipulate mean? Sorry, well, using that word, I

444
00:23:05,640 --> 00:23:08,000
Speaker 1: think I mean it knows where the buyers are it's

445
00:23:08,000 --> 00:23:12,200
Speaker 1: able to open more stores, um to do more merchandise

446
00:23:12,280 --> 00:23:15,439
Speaker 1: in to transfer some of the designers in its portfolio

447
00:23:15,960 --> 00:23:18,880
Speaker 1: across to their brand Debora. Thank you so much. Aching

448
00:23:18,920 --> 00:23:36,399
Speaker 1: with us with Bloomberg Intelligence, probably gonna announce three topics

449
00:23:36,400 --> 00:23:39,520
Speaker 1: should Ali bask with us, our chief financial corresponding, Let's

450
00:23:39,520 --> 00:23:42,920
Speaker 1: do Schwab a Merrit trade. First, what's the regulation pushback

451
00:23:42,960 --> 00:23:45,440
Speaker 1: going to be? Do our reporters have any idea of

452
00:23:45,520 --> 00:23:48,439
Speaker 1: which agencies are gonna say? Wait a minute, Well, there

453
00:23:48,440 --> 00:23:52,000
Speaker 1: are actually semantic trust concerns here because besides the broke

454
00:23:52,040 --> 00:23:54,600
Speaker 1: awards here, what people don't realize about Schwab and TD

455
00:23:54,720 --> 00:23:57,560
Speaker 1: a merrit trade is that it would actually create one

456
00:23:57,640 --> 00:24:00,720
Speaker 1: of the top custodians, which means it would hold onto

457
00:24:00,760 --> 00:24:06,000
Speaker 1: money from registered investment advisors. So that's actually the business

458
00:24:06,160 --> 00:24:09,040
Speaker 1: that they're going to become number one and number three emerging.

459
00:24:09,440 --> 00:24:11,520
Speaker 1: And it's a big arm to trust concerned. So what

460
00:24:11,720 --> 00:24:14,240
Speaker 1: is the what are the company saying about this antitrusting?

461
00:24:14,240 --> 00:24:15,760
Speaker 1: Because I saw a number that might be half of

462
00:24:15,800 --> 00:24:18,159
Speaker 1: the assets of these r i A sounds like a

463
00:24:18,280 --> 00:24:21,399
Speaker 1: number that the regulators are really gonna have a problem with, right, Well,

464
00:24:21,440 --> 00:24:23,199
Speaker 1: it depends on what they do with that business, right,

465
00:24:23,320 --> 00:24:27,400
Speaker 1: I mean right now. The promise here is to diversify

466
00:24:27,440 --> 00:24:29,199
Speaker 1: the business. You can't just run a business where all

467
00:24:29,240 --> 00:24:31,760
Speaker 1: your fees are going to zero and trading. This custodian

468
00:24:31,760 --> 00:24:34,080
Speaker 1: business is a big one. It's a good one. Um. Also,

469
00:24:34,160 --> 00:24:36,560
Speaker 1: remember they get more than half of their and revenue

470
00:24:36,640 --> 00:24:40,760
Speaker 1: from interest income. And so what this business looks like

471
00:24:40,920 --> 00:24:42,840
Speaker 1: in a year from now, I think is a big question.

472
00:24:42,960 --> 00:24:46,280
Speaker 1: Marks still just because the time Steve Aaron's with a

473
00:24:46,400 --> 00:24:50,360
Speaker 1: spectacular article. I put it out folks on Twitter this weekend.

474
00:24:50,440 --> 00:24:54,320
Speaker 1: It's the first real look. And I say this constructively

475
00:24:54,400 --> 00:24:57,920
Speaker 1: and with respect of Mr Saving of Deutsche Bank. How

476
00:24:58,160 --> 00:25:03,320
Speaker 1: is that article rece seeved by planet Deutsche Bank. I

477
00:25:03,480 --> 00:25:07,159
Speaker 1: think even some of his own employees were interested to

478
00:25:07,240 --> 00:25:09,520
Speaker 1: read about him. Remember this guy is flying all over

479
00:25:09,560 --> 00:25:13,040
Speaker 1: the world. Well he's a German for sure, and so

480
00:25:13,160 --> 00:25:15,600
Speaker 1: the u S employees since he started have been very

481
00:25:15,720 --> 00:25:18,600
Speaker 1: very jittery. Right, And remember this paints a very strong

482
00:25:18,680 --> 00:25:22,040
Speaker 1: picture of somebody who was very scrappy rose to the top.

483
00:25:22,160 --> 00:25:24,080
Speaker 1: And it's not an investment banker in the true and

484
00:25:24,119 --> 00:25:26,840
Speaker 1: tried sense. So what is the thinking at Deutsche Bank.

485
00:25:26,880 --> 00:25:29,040
Speaker 1: I'm just in the stocks down ten percent this year.

486
00:25:29,320 --> 00:25:33,159
Speaker 1: There's a real question whether this institution can be a

487
00:25:33,240 --> 00:25:35,680
Speaker 1: global investment bank or is it simply going to be,

488
00:25:36,200 --> 00:25:40,160
Speaker 1: you know, a strong domestic German player. That's the struggle

489
00:25:40,240 --> 00:25:43,640
Speaker 1: our reporter Steve Arons had pointed out here. Remember, he's

490
00:25:43,680 --> 00:25:46,280
Speaker 1: on this very ambitious for structuring plan that nobody knows

491
00:25:46,359 --> 00:25:50,640
Speaker 1: will work yet, and so definitely there are people. Most

492
00:25:50,680 --> 00:25:53,040
Speaker 1: of his deputies have now been pushed out. There's a

493
00:25:53,200 --> 00:25:55,680
Speaker 1: heat on the chairman now itself. So the heat is

494
00:25:55,720 --> 00:25:58,240
Speaker 1: still on for the next year or so to come.

495
00:25:58,440 --> 00:26:00,960
Speaker 1: So it's by no means in the year for Christian seven.

496
00:26:01,720 --> 00:26:05,040
Speaker 1: So the senses that you know, it seems like when

497
00:26:05,040 --> 00:26:07,760
Speaker 1: you look at the plan for Deutsche Bank, let's retrench

498
00:26:08,040 --> 00:26:11,320
Speaker 1: and just focus on where we're really really good and

499
00:26:11,440 --> 00:26:14,639
Speaker 1: we have a competitive advantage. I guess the question that

500
00:26:14,800 --> 00:26:17,280
Speaker 1: I think a lot of investors have is where are

501
00:26:17,359 --> 00:26:20,720
Speaker 1: you really really competitive and where can you really drive growth?

502
00:26:20,880 --> 00:26:25,200
Speaker 1: Given how competitive the global banking businesses with the US players,

503
00:26:25,320 --> 00:26:27,120
Speaker 1: by the way, and even though they have a lot

504
00:26:27,320 --> 00:26:30,840
Speaker 1: of German leaders here, that doesn't mean the bank is

505
00:26:30,840 --> 00:26:33,679
Speaker 1: not global. And so when they're whittling down, they're focusing

506
00:26:33,720 --> 00:26:36,639
Speaker 1: on certain businesses fixed in come trading, for example, but

507
00:26:36,760 --> 00:26:38,280
Speaker 1: that is still global and they still have a big

508
00:26:38,359 --> 00:26:40,560
Speaker 1: U S operation, and they still have a big operation

509
00:26:40,600 --> 00:26:43,320
Speaker 1: in Asia as well. Should with us our chief financial

510
00:26:43,359 --> 00:26:45,680
Speaker 1: correspondhold on, I haven't seen in ages and I and

511
00:26:45,760 --> 00:26:47,320
Speaker 1: I haven't brought this up yet on here, and I

512
00:26:47,359 --> 00:26:50,159
Speaker 1: want to bring it up. Louis Bacon. I put it

513
00:26:50,200 --> 00:26:53,240
Speaker 1: in category with Henry Paulson and that these are guys

514
00:26:53,800 --> 00:26:57,960
Speaker 1: who have taken philanthropy and actually really done something with

515
00:26:58,480 --> 00:27:02,560
Speaker 1: with conservation. I'd also link him winning with Tom Secunder,

516
00:27:02,640 --> 00:27:05,680
Speaker 1: one of the founders of Bloomberg LP. Mr Secunda, with

517
00:27:05,760 --> 00:27:09,840
Speaker 1: the forest. Mr Paulson, with eagles and particularly the complete

518
00:27:09,880 --> 00:27:13,400
Speaker 1: restoration of the Philippine eagle, which is this ginormous bird

519
00:27:13,480 --> 00:27:16,440
Speaker 1: of thing Paul's I think it couldn't get in the studio.

520
00:27:17,160 --> 00:27:19,480
Speaker 1: And then there's Louis Bacon, who was a hedge fun

521
00:27:19,560 --> 00:27:22,080
Speaker 1: guy and that you and I haven't talked about this.

522
00:27:22,359 --> 00:27:24,240
Speaker 1: Who's Louis Bacon And why is he getting out of

523
00:27:24,240 --> 00:27:26,840
Speaker 1: the hedge fund game. Well, he's one of many billionaires

524
00:27:26,880 --> 00:27:28,560
Speaker 1: to do so. But yes, he is a billionaire and

525
00:27:28,600 --> 00:27:31,320
Speaker 1: he made his money in the hedge fund industry. Remember,

526
00:27:31,400 --> 00:27:33,560
Speaker 1: that's an industry that's been facing a lot of pressure

527
00:27:33,600 --> 00:27:36,000
Speaker 1: all wrong. For him, He's he's a really smart guy.

528
00:27:36,119 --> 00:27:39,119
Speaker 1: We all know that. What you know, how did he

529
00:27:39,280 --> 00:27:42,000
Speaker 1: get to the place a lot of others less experience

530
00:27:42,040 --> 00:27:43,840
Speaker 1: to get too? Well? He grew up in the heyday

531
00:27:43,880 --> 00:27:47,040
Speaker 1: of hedge funds, right and days over. The hey day

532
00:27:47,080 --> 00:27:50,160
Speaker 1: is well over. But I've got to say, with that said,

533
00:27:50,320 --> 00:27:53,920
Speaker 1: there is a new class rising here. Jack Woodruff, which

534
00:27:53,920 --> 00:27:56,800
Speaker 1: is a Citadelle alumni, raised about two billion dollars for

535
00:27:56,840 --> 00:27:58,800
Speaker 1: a new fund. And you know, even though you have

536
00:27:59,200 --> 00:28:02,160
Speaker 1: the old guard Louis Bacon stepping down, and I don't

537
00:28:02,200 --> 00:28:05,680
Speaker 1: think it means that the age is completely over. I

538
00:28:05,800 --> 00:28:10,760
Speaker 1: watch successions, not success I'm watching billions, so I get

539
00:28:10,840 --> 00:28:14,240
Speaker 1: smarter on this. Are the new guys using the same

540
00:28:14,400 --> 00:28:17,480
Speaker 1: techniques as the old guys? Some of them are, which

541
00:28:17,600 --> 00:28:20,320
Speaker 1: is the interesting part. These are not all quants sitting

542
00:28:20,400 --> 00:28:23,600
Speaker 1: behind computers and watching um, you know, certain trades and

543
00:28:23,640 --> 00:28:27,800
Speaker 1: crowding into them. This is some sandalone stock pickers that

544
00:28:27,920 --> 00:28:31,080
Speaker 1: make money through merger ARB and make money through betting

545
00:28:31,119 --> 00:28:34,240
Speaker 1: on individual technology or in the case of what rough consumering.

546
00:28:34,359 --> 00:28:39,280
Speaker 1: Excuse me, that's called buying Amazon. That's and I'll be

547
00:28:39,360 --> 00:28:41,680
Speaker 1: clear with my biaser I think the long short hedge

548
00:28:41,720 --> 00:28:45,160
Speaker 1: fund business basically peaked, has been any declined since two

549
00:28:45,200 --> 00:28:48,920
Speaker 1: thousand six at the latest, at the latest, and you

550
00:28:48,960 --> 00:28:50,520
Speaker 1: look at the returns and they just haven't there. So

551
00:28:50,600 --> 00:28:54,520
Speaker 1: for Mr Bacon, macro strategist kind of looking at everything,

552
00:28:54,680 --> 00:28:57,320
Speaker 1: and that strategy has been tough. That strategy, it's the

553
00:28:57,320 --> 00:29:00,840
Speaker 1: worst performing one this year. And then also Macro is

554
00:29:00,960 --> 00:29:03,560
Speaker 1: among the worst right now. And you see a lot

555
00:29:03,600 --> 00:29:07,000
Speaker 1: of names get hurt Ray Dalio's main fund. How's Ray

556
00:29:07,120 --> 00:29:09,400
Speaker 1: Dale you are doing? I mean, Mr, this is interest

557
00:29:09,520 --> 00:29:12,360
Speaker 1: rate parody, right, It's a different game. So betting the

558
00:29:12,360 --> 00:29:14,480
Speaker 1: wrong way on interust rates was his problem here. And

559
00:29:14,560 --> 00:29:18,959
Speaker 1: remember let me put it in personal wick. Mr Dalio,

560
00:29:19,080 --> 00:29:21,520
Speaker 1: good morning. I hope you're listening. I got your wonderful

561
00:29:21,560 --> 00:29:23,960
Speaker 1: new like he's got a kid's picture book out. It's

562
00:29:23,960 --> 00:29:27,880
Speaker 1: actually beautiful, a really beautiful book. House Dale, you and

563
00:29:27,920 --> 00:29:30,600
Speaker 1: Bridgewater doing the last year they had about a fourteen

564
00:29:30,640 --> 00:29:33,560
Speaker 1: percent returns in their main fund, but this year has

565
00:29:33,560 --> 00:29:37,520
Speaker 1: been doing a lot worse. And you have some investors complaining.

566
00:29:37,600 --> 00:29:41,760
Speaker 1: For example, there's a small pension in um Northern California.

567
00:29:41,880 --> 00:29:44,480
Speaker 1: Cathy Burton are are Bloomberg reporter has written about it.

568
00:29:44,800 --> 00:29:46,680
Speaker 1: They pulled all their money because they didn't like the

569
00:29:46,720 --> 00:29:50,040
Speaker 1: five year return and so uh, you know, over a

570
00:29:50,120 --> 00:29:52,120
Speaker 1: longer time prize. And remember this is not like the

571
00:29:52,160 --> 00:29:54,680
Speaker 1: hey day Louis Baking you were talking about. In the

572
00:29:54,720 --> 00:29:59,240
Speaker 1: heyday he was producing annualized returns about thirty percent thirty

573
00:30:00,200 --> 00:30:03,680
Speaker 1: So you're not seeing that kind of blowout performance anymore

574
00:30:03,720 --> 00:30:07,160
Speaker 1: among these guys. Final question, have you read Zuckerman's new

575
00:30:07,200 --> 00:30:10,280
Speaker 1: book on Mr s haven't? How is it? I'm asking you,

576
00:30:11,840 --> 00:30:17,040
Speaker 1: I'm dying too. It's in my in my status. It

577
00:30:17,160 --> 00:30:21,400
Speaker 1: looks exquisite. Greg's uproom with this last week talking about mrs.

578
00:30:21,520 --> 00:30:23,480
Speaker 1: Was that enough hedge fun talk Paul to keep us?

579
00:30:23,560 --> 00:30:25,240
Speaker 1: You know? I think so for a Monday of Thanksgiving.

580
00:30:25,920 --> 00:30:29,920
Speaker 1: Think Louis Bacon stepping down from the businesses is big

581
00:30:29,920 --> 00:30:32,000
Speaker 1: because he's one of the as you mentioned, the pillars

582
00:30:32,480 --> 00:30:35,040
Speaker 1: of the traditional and hedge fun business. And he's returns,

583
00:30:35,280 --> 00:30:37,920
Speaker 1: by his own admission, you know, over the last seven

584
00:30:37,960 --> 00:30:40,320
Speaker 1: eight years again not just not where he wanted to be,

585
00:30:40,520 --> 00:30:44,000
Speaker 1: and like others, like the other Paulson, John Paulson. They

586
00:30:44,080 --> 00:30:50,000
Speaker 1: have They have persistently provided philanthropy to what interests them.

587
00:30:50,040 --> 00:30:54,360
Speaker 1: In the case of Mr Bacon has clearly been American conservation.

588
00:30:54,400 --> 00:30:57,440
Speaker 1: All sorts of other things as well should ally go away.

589
00:30:57,480 --> 00:31:00,240
Speaker 1: That was wonderful. We'll see you tomorrow. Shanelli Bassa, chief

590
00:31:00,280 --> 00:31:03,520
Speaker 1: financial course bond It. Thanks for listening to the Bloomberg

591
00:31:03,560 --> 00:31:09,480
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

592
00:31:09,880 --> 00:31:14,040
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

593
00:31:14,160 --> 00:31:18,360
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.

594
00:31:18,880 --> 00:31:19,920
Speaker 1: I'm Bloomberg Radio