1
00:00:02,600 --> 00:00:12,960
Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

2
00:00:13,480 --> 00:00:17,560
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,

3
00:00:18,000 --> 00:00:23,520
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

4
00:00:23,600 --> 00:00:27,960
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg the

5
00:00:28,040 --> 00:00:31,040
Speaker 1: Federal Reserve as well. Looking ahead to a year, well,

6
00:00:31,120 --> 00:00:34,640
Speaker 1: we might not get a single rate move whatsoever, according

7
00:00:34,680 --> 00:00:36,680
Speaker 1: to some people out there at least joining us now

8
00:00:36,760 --> 00:00:38,000
Speaker 1: to weigh in on that. I'm pleased to say, as

9
00:00:38,080 --> 00:00:40,320
Speaker 1: Randall crows In, a former FED governor and University of

10
00:00:40,400 --> 00:00:43,919
Speaker 1: Chicago Booth School of Business professor, good morning to professor.

11
00:00:44,000 --> 00:00:48,360
Speaker 1: Your thoughts on that a year of the FED doing nothing, Well,

12
00:00:48,400 --> 00:00:50,440
Speaker 1: we could hope that would be the case, because if

13
00:00:50,440 --> 00:00:53,360
Speaker 1: they do nothing, that will suggest that inflation will be

14
00:00:53,400 --> 00:00:56,400
Speaker 1: staying around their goal of two and the economy will

15
00:00:56,440 --> 00:01:00,520
Speaker 1: be continuing to move along at about two percent. Everything

16
00:01:00,520 --> 00:01:04,800
Speaker 1: seems to be a too for so Randy. One thing

17
00:01:04,800 --> 00:01:06,800
Speaker 1: I'm struggling with is how much the Federals are is

18
00:01:06,840 --> 00:01:09,040
Speaker 1: actually supporting risk assets right now. And there was a

19
00:01:09,040 --> 00:01:11,880
Speaker 1: story on the Bloomberg yesterday talking about how uh the

20
00:01:11,920 --> 00:01:16,039
Speaker 1: FED is going to be purchasing I think about of

21
00:01:16,120 --> 00:01:18,920
Speaker 1: net issuance of US treasuries next year, and this is

22
00:01:18,920 --> 00:01:21,760
Speaker 1: because they're allowing the mbs, the mortgage bonds to roll

23
00:01:21,800 --> 00:01:25,360
Speaker 1: off and they're reinvesting the proceeds in treasuries. How much

24
00:01:25,640 --> 00:01:29,959
Speaker 1: is that going to support risk assets? Well, I think, um,

25
00:01:30,040 --> 00:01:33,479
Speaker 1: it's it's more that rather than the specifics of find

26
00:01:33,520 --> 00:01:36,839
Speaker 1: the treasuries, just that what they're doing with their portfolio

27
00:01:37,560 --> 00:01:40,640
Speaker 1: that they are moving out of the mortgage backed securities,

28
00:01:40,680 --> 00:01:43,520
Speaker 1: trying to get to a more traditional portfolio of of

29
00:01:43,560 --> 00:01:45,959
Speaker 1: all treasury securities, because that's the way that the FED

30
00:01:46,040 --> 00:01:49,600
Speaker 1: had worked for ninety years before the financial crisis. And

31
00:01:49,880 --> 00:01:54,520
Speaker 1: um Also, an important piece of this is that they

32
00:01:54,640 --> 00:01:57,680
Speaker 1: are going to be gradually increasing the balance sheet to

33
00:01:57,760 --> 00:02:00,880
Speaker 1: provide liquidity into the system. And i've that helps to

34
00:02:00,920 --> 00:02:06,720
Speaker 1: provide some confidence and support that the liquidity will be there. So, Professor,

35
00:02:06,760 --> 00:02:08,720
Speaker 1: one of the areas that the FED is certainly focused on,

36
00:02:08,760 --> 00:02:11,280
Speaker 1: aside from the benchmark rate, is kind of the short

37
00:02:11,400 --> 00:02:13,520
Speaker 1: term end of the curve the repo market. We had

38
00:02:13,520 --> 00:02:16,240
Speaker 1: that hiccup back in September. Where is the FED right now?

39
00:02:16,240 --> 00:02:17,680
Speaker 1: Where do you think they are in terms of coming

40
00:02:17,720 --> 00:02:22,000
Speaker 1: up with a more permanent solution. Well, I think they've

41
00:02:22,000 --> 00:02:24,240
Speaker 1: done a good job with the temporary solutions because they

42
00:02:24,320 --> 00:02:27,480
Speaker 1: just had another auction of some of the recruditive that

43
00:02:27,480 --> 00:02:30,240
Speaker 1: they were providing and there wasn't a complete take up

44
00:02:30,280 --> 00:02:32,840
Speaker 1: of it. So there's been concerns about disruption over the

45
00:02:32,880 --> 00:02:35,600
Speaker 1: end of the year, and I think, um, this suggests

46
00:02:35,639 --> 00:02:38,200
Speaker 1: that they've now provided enough we'd have to worry about that.

47
00:02:38,480 --> 00:02:41,079
Speaker 1: But going forward, I think there should be a solution.

48
00:02:41,320 --> 00:02:43,440
Speaker 1: It is closer to what most central banks around the

49
00:02:43,440 --> 00:02:46,040
Speaker 1: world have. It's sort of it's sometimes called the tap

50
00:02:46,120 --> 00:02:50,560
Speaker 1: facility that whenever more liquidity is needed, anyone can just

51
00:02:50,680 --> 00:02:54,720
Speaker 1: tap that facility and be able to get a provision

52
00:02:54,760 --> 00:02:58,840
Speaker 1: of funds and that can effectively put ceiling on the

53
00:02:58,840 --> 00:03:01,720
Speaker 1: short term ingistrate rather than it's spiking up two over

54
00:03:01,760 --> 00:03:05,320
Speaker 1: ten percent, which we saw during one of those periods

55
00:03:05,320 --> 00:03:07,639
Speaker 1: of tumult. If you can just turn to the FED

56
00:03:07,720 --> 00:03:10,119
Speaker 1: and know that at any time you can just turn

57
00:03:10,160 --> 00:03:13,080
Speaker 1: on the tap uh and just tap it and it

58
00:03:13,160 --> 00:03:17,320
Speaker 1: will provide liquidity neat that I can then provide a

59
00:03:17,400 --> 00:03:20,600
Speaker 1: ceiling and confidence that interest rates will spike in the

60
00:03:20,600 --> 00:03:23,440
Speaker 1: short run. Professor, it is late December which means that

61
00:03:23,480 --> 00:03:25,400
Speaker 1: it's time to start worrying about what we should be

62
00:03:25,440 --> 00:03:29,160
Speaker 1: worrying about. Uh. And one thing that you noted that

63
00:03:29,200 --> 00:03:32,320
Speaker 1: we're worrying about heading into the new year is bond

64
00:03:32,440 --> 00:03:36,040
Speaker 1: vigilantes making a comeback. Basically, people saying, if you're going

65
00:03:36,080 --> 00:03:38,640
Speaker 1: to deepen your deficit, we're going to demand hire interest

66
00:03:38,760 --> 00:03:41,560
Speaker 1: rates to be compensated to lend to you. Do you

67
00:03:41,600 --> 00:03:44,320
Speaker 1: really think this is a risk. It hasn't been for years,

68
00:03:46,400 --> 00:03:49,320
Speaker 1: that is right, and it may not happen this year.

69
00:03:49,440 --> 00:03:52,160
Speaker 1: At some point it will happen, um. But I think

70
00:03:52,160 --> 00:03:55,000
Speaker 1: it is. Japan has shown UM where they have moved

71
00:03:55,040 --> 00:03:57,680
Speaker 1: from a density DP ratio that's sort of close to

72
00:03:57,840 --> 00:03:59,880
Speaker 1: where we are in the US now about eight percent,

73
00:04:00,560 --> 00:04:05,720
Speaker 1: to now being about three. The bond vigilantes have not

74
00:04:05,720 --> 00:04:09,360
Speaker 1: not risen up against against them, but it could be

75
00:04:09,400 --> 00:04:11,080
Speaker 1: in some of the other markets where there are more

76
00:04:11,160 --> 00:04:15,400
Speaker 1: questions UM. For example, Italy, which has just issued a

77
00:04:15,400 --> 00:04:18,479
Speaker 1: lot more debt as a populist government. There there are

78
00:04:18,520 --> 00:04:22,359
Speaker 1: questions about how strongly European economy is and there's a

79
00:04:22,400 --> 00:04:25,320
Speaker 1: lot of Italian debt outstanding. So I think it's a risk.

80
00:04:25,480 --> 00:04:28,200
Speaker 1: Do I think it's something likely to to happen now.

81
00:04:28,760 --> 00:04:31,600
Speaker 1: But um, you know you want to look at you

82
00:04:31,760 --> 00:04:34,240
Speaker 1: you want to do your stress test and scenario analysis,

83
00:04:34,480 --> 00:04:37,119
Speaker 1: looking at those kinds of things. Looking forward to twenty

84
00:04:37,200 --> 00:04:39,360
Speaker 1: at the Federal Reserve a special thanks to Randall Croston,

85
00:04:39,400 --> 00:04:42,040
Speaker 1: their former Fed Governor and University of Chicago boss, called

86
00:04:42,040 --> 00:04:58,400
Speaker 1: the business Professor Looking ahead at the epicenter of political

87
00:04:58,440 --> 00:05:01,279
Speaker 1: debates worldwide at the moment a debate about the future

88
00:05:01,600 --> 00:05:05,080
Speaker 1: of capitalism and what a timely edition of Foreign Affairs

89
00:05:05,200 --> 00:05:09,039
Speaker 1: magazine The Future of Capitalism, the January February edition, and

90
00:05:09,080 --> 00:05:11,760
Speaker 1: I'm placed to say that the editor, Gideon Rose joins

91
00:05:11,800 --> 00:05:13,880
Speaker 1: us on this program. Good morning to Gideon. Good to

92
00:05:13,880 --> 00:05:15,640
Speaker 1: be here. So let's talk about that the range of

93
00:05:15,760 --> 00:05:18,280
Speaker 1: arguments within this pace just lay them out for us.

94
00:05:18,400 --> 00:05:20,800
Speaker 1: So basically the way I would think frame this is

95
00:05:21,640 --> 00:05:24,240
Speaker 1: in for the last couple of centuries, in the nineteen

96
00:05:24,320 --> 00:05:28,360
Speaker 1: and twentieth centuries, capitalism has competed against other kinds of

97
00:05:28,360 --> 00:05:31,680
Speaker 1: systems of political economy, and it basically one because it

98
00:05:31,760 --> 00:05:34,560
Speaker 1: was better on balance than those. Now that it's one,

99
00:05:34,640 --> 00:05:37,159
Speaker 1: now that it dominates the world, that the entire economic

100
00:05:37,400 --> 00:05:40,600
Speaker 1: system of the vast major players in the world economy

101
00:05:40,640 --> 00:05:43,560
Speaker 1: is driven by private markets, private sectors in a capitalist

102
00:05:43,640 --> 00:05:47,400
Speaker 1: kind of way. It now is facing a reckoning because

103
00:05:48,080 --> 00:05:51,520
Speaker 1: it does have downsides. It provides net benefits rather than

104
00:05:51,680 --> 00:05:55,200
Speaker 1: absolute benefits, and everybody is now trying to figure out

105
00:05:55,200 --> 00:05:59,599
Speaker 1: how do we get the benefits of capitalism, markets, dynamism, growth,

106
00:05:59,640 --> 00:06:02,920
Speaker 1: product ativity, all the wonderful positive goods and freedoms that

107
00:06:03,000 --> 00:06:07,920
Speaker 1: capitalism generates, but protect societies from the downsides that come

108
00:06:07,920 --> 00:06:11,359
Speaker 1: along with that turbulence, the loss of community, the loss

109
00:06:11,360 --> 00:06:14,599
Speaker 1: of tradition, and am me, a sort of commodification of everything,

110
00:06:14,640 --> 00:06:17,800
Speaker 1: and increasingly lots of inequality. And so right now you

111
00:06:17,880 --> 00:06:21,320
Speaker 1: have essentially lots of people who are fighting about how

112
00:06:21,400 --> 00:06:27,440
Speaker 1: to balance out the controlling capitalisms downsides while harnessing its upsides.

113
00:06:27,560 --> 00:06:28,920
Speaker 1: This is not a new debate, and this is the

114
00:06:28,960 --> 00:06:32,800
Speaker 1: reason why no capitalist society has ever been purely capitalist, right.

115
00:06:32,800 --> 00:06:34,840
Speaker 1: I mean, it's sort of a spectrum with certain level

116
00:06:35,160 --> 00:06:38,400
Speaker 1: of sort of built in social systems to sort of

117
00:06:38,440 --> 00:06:41,240
Speaker 1: catch people at the bottom levels. How much are people

118
00:06:41,279 --> 00:06:45,560
Speaker 1: addressing where the pendulum should swing in terms of incorporating

119
00:06:46,200 --> 00:06:49,400
Speaker 1: more or less of the capitalistic principles. Well, that's a

120
00:06:49,400 --> 00:06:52,440
Speaker 1: great question, because essentially what has happened is over the

121
00:06:52,520 --> 00:06:57,920
Speaker 1: last couple of generations, over the last forty years or so, UH,

122
00:06:58,080 --> 00:07:01,400
Speaker 1: a system that had seemed to be somewhat stable in

123
00:07:01,400 --> 00:07:04,640
Speaker 1: a mixed economy way, generated a whole lot of returns,

124
00:07:04,680 --> 00:07:07,560
Speaker 1: but that went to the very top of the pyramid

125
00:07:07,720 --> 00:07:10,800
Speaker 1: in disproportionately, And so there is now a sense that

126
00:07:11,200 --> 00:07:15,000
Speaker 1: in the last couple of generations, in the heart beating

127
00:07:15,280 --> 00:07:18,080
Speaker 1: living the central places of capitalism in the West, the

128
00:07:18,160 --> 00:07:22,960
Speaker 1: system is working not to rise good prospects for everybody,

129
00:07:23,120 --> 00:07:25,280
Speaker 1: but to benefit a few small people at the top

130
00:07:25,280 --> 00:07:28,120
Speaker 1: who are basically disproportionately rapping the rewards. As now we

131
00:07:28,160 --> 00:07:31,800
Speaker 1: have American oligarchs as well as Russian oligarchs, and the

132
00:07:31,840 --> 00:07:33,560
Speaker 1: world seems to be We were just talking in an

133
00:07:33,600 --> 00:07:37,360
Speaker 1: earlier segment on TV about private space programs that Jeff

134
00:07:37,400 --> 00:07:41,040
Speaker 1: Bezos has one and uh Elon Musk has one, and

135
00:07:41,120 --> 00:07:43,920
Speaker 1: we're literally in a situation in which the the future

136
00:07:43,960 --> 00:07:46,840
Speaker 1: of the economy and the political system is being determined

137
00:07:46,880 --> 00:07:51,320
Speaker 1: by which oligarch UH is on your side. And that's

138
00:07:51,320 --> 00:07:55,120
Speaker 1: not a long term success for a stable, healthy democracy

139
00:07:55,200 --> 00:07:58,000
Speaker 1: with true mass democratic legitimacy. But the question is, how

140
00:07:58,040 --> 00:08:01,240
Speaker 1: do you get from where we are something better, and

141
00:08:01,440 --> 00:08:04,000
Speaker 1: a lot of the remedies are often crazy ones or

142
00:08:04,040 --> 00:08:07,560
Speaker 1: ones that are obviously impractical, like the wealth taxes and

143
00:08:07,600 --> 00:08:10,440
Speaker 1: things like that. So what does capitalism have in its

144
00:08:10,560 --> 00:08:14,320
Speaker 1: arsenal to deal with income inequality? Well, it could and

145
00:08:14,360 --> 00:08:17,360
Speaker 1: should have a set of rules by which the game

146
00:08:17,640 --> 00:08:21,840
Speaker 1: isn't distorted and there aren't fingers on the scales that

147
00:08:21,880 --> 00:08:23,960
Speaker 1: push things in certain ways. So if you had a

148
00:08:23,960 --> 00:08:26,720
Speaker 1: tax system that was freer of loopholes, if you had

149
00:08:27,160 --> 00:08:31,760
Speaker 1: public policies that weren't disproportionately skewed to special interests via

150
00:08:31,840 --> 00:08:34,760
Speaker 1: various kinds of either campaign systems or lobbying or whatever,

151
00:08:34,880 --> 00:08:37,880
Speaker 1: then you might get a system that what designed to

152
00:08:38,040 --> 00:08:42,760
Speaker 1: set rules for everybody that basically worked for the system

153
00:08:42,800 --> 00:08:45,760
Speaker 1: as a whole, rather than increasingly one in which there's

154
00:08:45,800 --> 00:08:48,880
Speaker 1: carve outs for that. But the most interesting and dangerous

155
00:08:48,960 --> 00:08:52,559
Speaker 1: question is is the nature of the global economy that

156
00:08:52,600 --> 00:08:55,240
Speaker 1: we're moving into. Is the digital economy is an increasing

157
00:08:55,280 --> 00:08:57,640
Speaker 1: globalized one one in which there are winner take all

158
00:08:57,679 --> 00:09:00,560
Speaker 1: advantages or returns that it who to the tops, so

159
00:09:00,640 --> 00:09:03,480
Speaker 1: that no matter what you do, it would actually just

160
00:09:03,640 --> 00:09:06,760
Speaker 1: keep redounding to the top. And if that's the real situation.

161
00:09:07,080 --> 00:09:09,400
Speaker 1: Then you get to a situation in which people are

162
00:09:09,400 --> 00:09:12,680
Speaker 1: wondering is the is a remedy like a wealth tax

163
00:09:12,840 --> 00:09:18,360
Speaker 1: or confiscatory taxication necessary to redistribute the massive stuff going

164
00:09:18,360 --> 00:09:20,520
Speaker 1: to the top. Um that's a big question for the

165
00:09:20,520 --> 00:09:22,520
Speaker 1: twenty one century. But we'll just have to see what's

166
00:09:22,559 --> 00:09:26,840
Speaker 1: the strongest defensive capitalism within this pace. There's a wonderful

167
00:09:26,840 --> 00:09:31,160
Speaker 1: piece by Jerry mueller Um who basically takes on the

168
00:09:31,200 --> 00:09:34,920
Speaker 1: neo socialist moment, the craze for sort of uh new

169
00:09:35,040 --> 00:09:39,120
Speaker 1: kinds of UH measures that are radically redistributionist wealth tax

170
00:09:39,160 --> 00:09:41,520
Speaker 1: included and things like that, and he basically argues that

171
00:09:41,800 --> 00:09:47,200
Speaker 1: you need what has. Critics of capitalism have often been

172
00:09:47,240 --> 00:09:52,840
Speaker 1: correct about the downsides, but they have been their wisest selves,

173
00:09:53,000 --> 00:09:56,880
Speaker 1: like social democrats when they have used the resources that

174
00:09:57,000 --> 00:10:01,600
Speaker 1: capitalism provides to address the problem. As it generates. Social

175
00:10:01,600 --> 00:10:06,200
Speaker 1: democracy and related kinds of progressive reform movements try to

176
00:10:06,400 --> 00:10:11,400
Speaker 1: harness markets and their benefits, like a farm of chickens

177
00:10:11,400 --> 00:10:14,199
Speaker 1: which laid golden eggs, which you then distributed the gold

178
00:10:14,200 --> 00:10:18,560
Speaker 1: to lots of different people. The neo socialists don't seem

179
00:10:18,600 --> 00:10:21,440
Speaker 1: to be interested in chicken, in animal husbandry. They don't

180
00:10:21,440 --> 00:10:25,040
Speaker 1: care about the chickens. Their economists assume that golden eggs

181
00:10:25,080 --> 00:10:27,280
Speaker 1: come out of nowhere and there's a steady stream, and

182
00:10:27,360 --> 00:10:30,480
Speaker 1: so if you focus just on cutting, you know, reaping

183
00:10:30,520 --> 00:10:32,560
Speaker 1: the eggs, then you don't basically have any chickens. And

184
00:10:32,600 --> 00:10:34,959
Speaker 1: so the danger here is that that's what's gonna happen,

185
00:10:34,960 --> 00:10:37,000
Speaker 1: getting gonna kill the beasts. A really smart pace and

186
00:10:37,120 --> 00:10:39,559
Speaker 1: very timely to get them rose. Their Foreign Affairs magazine

187
00:10:39,679 --> 00:10:43,040
Speaker 1: edits a atmy pace head of an important election, with

188
00:10:43,080 --> 00:10:45,440
Speaker 1: this debate, very much of the epicenter of it, the

189
00:10:45,520 --> 00:11:02,600
Speaker 1: future of capitalism, with foreign affairs, the rough things going on.

190
00:11:02,600 --> 00:11:04,920
Speaker 1: I'm pleased to say that joining us. Kevin Seretti is

191
00:11:05,000 --> 00:11:07,040
Speaker 1: on the phone. He joins us from Los Angeles, bloom

192
00:11:07,040 --> 00:11:10,240
Speaker 1: Blag News chief Washington correspondent. After a set of debates

193
00:11:10,520 --> 00:11:12,560
Speaker 1: in l A for the Democrats, Kevin told to me

194
00:11:12,559 --> 00:11:15,959
Speaker 1: about the response, who came out on top? Good morning, Jonathan. Look,

195
00:11:15,960 --> 00:11:18,199
Speaker 1: I I think that when you look at who came

196
00:11:18,200 --> 00:11:20,880
Speaker 1: out on top, I'm not sure really anybody won, but

197
00:11:21,000 --> 00:11:24,000
Speaker 1: I do think it was a night where South Bend

198
00:11:24,000 --> 00:11:26,840
Speaker 1: Mayor Pete Bruta Judge took it from all sides. I mean,

199
00:11:26,880 --> 00:11:29,560
Speaker 1: you had Senator Elizabeth Warren going after him on the

200
00:11:29,600 --> 00:11:33,280
Speaker 1: issue of transparency, Senator Amy Klobuchar going after him on

201
00:11:33,320 --> 00:11:37,120
Speaker 1: the issue of experience, and so from here, Uh, really

202
00:11:37,360 --> 00:11:41,079
Speaker 1: you you had a night where Warren and Clobachar's campaigns

203
00:11:41,360 --> 00:11:44,880
Speaker 1: made calculation that they felt that by going after Bruta

204
00:11:44,920 --> 00:11:47,440
Speaker 1: jedgea could help us send them to the top tier.

205
00:11:47,600 --> 00:11:50,320
Speaker 1: What's interesting is, in some ways this is sends Pete

206
00:11:50,360 --> 00:11:53,560
Speaker 1: Bota Edge very much to the top tier. No, no,

207
00:11:53,800 --> 00:11:55,400
Speaker 1: I think that's a great point. And and and in

208
00:11:55,520 --> 00:11:58,240
Speaker 1: terms of the dynamics of the race, you look at

209
00:11:58,240 --> 00:12:00,920
Speaker 1: Iowa polls and he it's really his to lose. I

210
00:12:00,960 --> 00:12:04,480
Speaker 1: think actually, to some extent, he's been doing so well

211
00:12:04,520 --> 00:12:07,400
Speaker 1: in Iowa that should he not perform strongly there, it

212
00:12:07,440 --> 00:12:10,000
Speaker 1: could end up hurting his campaign. Uh. And and the

213
00:12:10,040 --> 00:12:13,079
Speaker 1: expectations now are so high for him to perform well

214
00:12:13,080 --> 00:12:16,880
Speaker 1: in Iowa. Kevin, what what what is that about? He

215
00:12:16,920 --> 00:12:18,439
Speaker 1: would have thought that would be the headline that came

216
00:12:18,440 --> 00:12:21,120
Speaker 1: out of this something about going back. I felt like

217
00:12:21,160 --> 00:12:23,240
Speaker 1: I was back to Catholic prep school, where we're learning

218
00:12:23,520 --> 00:12:27,480
Speaker 1: about all of the different uh, you know, teachings of

219
00:12:27,640 --> 00:12:30,360
Speaker 1: the past you know, I thought it was a really

220
00:12:30,520 --> 00:12:34,880
Speaker 1: telling moment. I also thought it was because it's showcase

221
00:12:35,160 --> 00:12:39,319
Speaker 1: how Elizabeth Warren is going to navigate the next couple

222
00:12:39,320 --> 00:12:41,200
Speaker 1: of months, and she's going to be taking it head

223
00:12:41,240 --> 00:12:45,560
Speaker 1: on to draw that contrast and how to personalize in

224
00:12:45,640 --> 00:12:50,280
Speaker 1: political attacks her populist progressive message. I do want to

225
00:12:50,320 --> 00:12:53,679
Speaker 1: mention Senator Bernie Sanders because there was that NBC News

226
00:12:53,720 --> 00:12:57,160
Speaker 1: Wall Street Journal poll that came out. He's the only

227
00:12:57,200 --> 00:13:01,240
Speaker 1: other candidate besides Biden. Of course, is polling among likely

228
00:13:01,280 --> 00:13:06,440
Speaker 1: Democratic voters higher than that is no small feat. And

229
00:13:06,440 --> 00:13:10,840
Speaker 1: Andrew Yang also performing strongly, he and Tom Steyer. But

230
00:13:10,920 --> 00:13:13,720
Speaker 1: for for Yank's perspective, had to had to prove that

231
00:13:13,800 --> 00:13:17,120
Speaker 1: he is a contender for the for a mainstream UH

232
00:13:17,440 --> 00:13:20,040
Speaker 1: candidate either way, even if he doesn't end up getting

233
00:13:20,080 --> 00:13:24,600
Speaker 1: the nomination, and Washington doesn't think he will, but his

234
00:13:24,600 --> 00:13:28,760
Speaker 1: his supporters are so incredibly loyal, similarly to how Bernie

235
00:13:28,840 --> 00:13:32,199
Speaker 1: Sanders supporters are so incredibly loyal, and that's why you're

236
00:13:32,200 --> 00:13:35,760
Speaker 1: hearing chatter of a potential broker convention. So Kevin Bloomberg

237
00:13:35,800 --> 00:13:38,640
Speaker 1: News was reporting that that Joe Biden had strongest debate

238
00:13:38,800 --> 00:13:41,280
Speaker 1: yet what did he get right last night? Well, he

239
00:13:41,360 --> 00:13:44,319
Speaker 1: was measured. You know. I was talking to his to

240
00:13:44,440 --> 00:13:47,200
Speaker 1: Simone Sanders, to KP. Bettingfield, as well to some of

241
00:13:47,240 --> 00:13:50,640
Speaker 1: his campaign advisors in the spin room last night, and

242
00:13:50,800 --> 00:13:53,360
Speaker 1: you know, they spoke after the debate about how this

243
00:13:53,440 --> 00:13:56,559
Speaker 1: was the first time that Americans would be hearing largely

244
00:13:56,600 --> 00:13:59,400
Speaker 1: from Joe Biden and the other candidates following the impeachment,

245
00:13:59,640 --> 00:14:02,360
Speaker 1: and that it was such a serious week in American

246
00:14:02,440 --> 00:14:04,920
Speaker 1: politics that they wanted to make sure that the former

247
00:14:05,040 --> 00:14:08,199
Speaker 1: vice president struck that tone. Beyond that, he had a

248
00:14:08,240 --> 00:14:11,400
Speaker 1: strong first hour performance but then largely disappeared. I mean,

249
00:14:11,559 --> 00:14:14,000
Speaker 1: you talk to strategists you talked to they would argue,

250
00:14:14,280 --> 00:14:15,960
Speaker 1: you really only need to perform well, and there's so

251
00:14:15,960 --> 00:14:18,240
Speaker 1: many debates in that first hour. Kevin, looking ahead to

252
00:14:18,320 --> 00:14:20,360
Speaker 1: next year, I've been asking market participants when do you

253
00:14:20,360 --> 00:14:23,440
Speaker 1: start to care about and a lot of the responses

254
00:14:23,480 --> 00:14:25,480
Speaker 1: I get it basically, well, I'll care when I know

255
00:14:25,560 --> 00:14:27,280
Speaker 1: what the nominee is, who the nominee is, and then

256
00:14:27,280 --> 00:14:30,880
Speaker 1: I'll start to look at their policies. Kevin Broke could convention.

257
00:14:31,160 --> 00:14:32,920
Speaker 1: I think that's something a lot of people understand here

258
00:14:32,920 --> 00:14:35,640
Speaker 1: in the United States, But outside of America. It's just

259
00:14:35,680 --> 00:14:37,640
Speaker 1: a phrase that they're not familiar with. What is a

260
00:14:37,720 --> 00:14:41,160
Speaker 1: broken convention? And when would that happen? Well, I will

261
00:14:41,240 --> 00:14:43,640
Speaker 1: keep it very simple. It would it would happen during

262
00:14:43,680 --> 00:14:47,280
Speaker 1: the Democratic Convention, when the when the party formally dominates

263
00:14:47,720 --> 00:14:51,280
Speaker 1: a nominee to take on the incumbent, in this case,

264
00:14:51,320 --> 00:14:54,040
Speaker 1: President Trump. And what it specifically means is we're heading

265
00:14:54,080 --> 00:14:57,280
Speaker 1: into a phase where there's Iowa and Hampshire, South Carolina

266
00:14:57,280 --> 00:15:01,040
Speaker 1: and Nevada the Super Tuesday primary states. But there people

267
00:15:01,080 --> 00:15:04,120
Speaker 1: go to the polls, they're actually voting to win delegates,

268
00:15:04,520 --> 00:15:08,800
Speaker 1: and the delegates and the portions of delegates. It's proportionality,

269
00:15:09,160 --> 00:15:13,520
Speaker 1: uh proportionality divided, so if you get a certain percentage,

270
00:15:13,520 --> 00:15:16,200
Speaker 1: you get a certain amount of delegates. The campaigns at

271
00:15:16,200 --> 00:15:20,240
Speaker 1: the debate, let's say one candidate has a certain percentage

272
00:15:20,240 --> 00:15:23,560
Speaker 1: of delegates, then gets to decide where those delegates would go.

273
00:15:24,160 --> 00:15:28,360
Speaker 1: And that's where behind the scenes, wine caves and cigar bars,

274
00:15:28,760 --> 00:15:31,920
Speaker 1: that's where it gets interesting. Kevin, really appreciate your time.

275
00:15:31,960 --> 00:15:33,440
Speaker 1: And now you've been up all night and getting up

276
00:15:33,440 --> 00:15:35,800
Speaker 1: early for us this morning to Kevin sty their Bloomlag

277
00:15:35,800 --> 00:15:50,720
Speaker 1: News Chief Washington correspondent Bloomer News out with a really

278
00:15:50,760 --> 00:15:53,120
Speaker 1: cool story today. It's actually a scoop, as a say

279
00:15:53,160 --> 00:15:57,120
Speaker 1: in the trade, that Apple is exploring satellites to beamed

280
00:15:57,120 --> 00:15:59,360
Speaker 1: direct to devices to get the latest. We welcome our

281
00:15:59,360 --> 00:16:01,880
Speaker 1: good friend at On Butler. John Butler covers Apple and

282
00:16:01,920 --> 00:16:05,400
Speaker 1: all things telecom for Bloomberg Intelligence. He joins us on

283
00:16:05,440 --> 00:16:07,440
Speaker 1: the phone. John, thanks so much for joining us. So

284
00:16:07,560 --> 00:16:10,240
Speaker 1: interesting story out of Bloomberg News talking about Apple getting

285
00:16:10,240 --> 00:16:13,320
Speaker 1: in maybe into the satellite deployment business. What do you

286
00:16:13,320 --> 00:16:17,040
Speaker 1: think their strategy is here? Yeah, I have to admit

287
00:16:17,120 --> 00:16:21,360
Speaker 1: I didn't see this one coming, Paul. This really surprised me,

288
00:16:21,440 --> 00:16:24,400
Speaker 1: but it it does make sense. So if you look

289
00:16:24,440 --> 00:16:28,480
Speaker 1: at where Apple is really investing right now, it's all

290
00:16:28,520 --> 00:16:32,360
Speaker 1: about content in many ways. And so if you look

291
00:16:32,360 --> 00:16:36,480
Speaker 1: at satellite, it's a great point to multipoint technology. It's

292
00:16:36,480 --> 00:16:42,520
Speaker 1: a great broadcast platform. Uh. And so my first thought

293
00:16:42,760 --> 00:16:47,520
Speaker 1: was they're looking at it for content distribution, to be clear,

294
00:16:47,600 --> 00:16:51,120
Speaker 1: content distribution. How feasible is it that they're going to

295
00:16:51,200 --> 00:16:53,120
Speaker 1: become a real player in this, I mean, is this

296
00:16:53,200 --> 00:16:55,880
Speaker 1: basically just to support their own network or is it

297
00:16:55,960 --> 00:16:59,360
Speaker 1: to also potentially compete with the likes of Verizon and

298
00:16:59,440 --> 00:17:03,960
Speaker 1: a T N T. So I great question. I think

299
00:17:04,000 --> 00:17:08,160
Speaker 1: that wireless operators are are safe for now. UM. I

300
00:17:08,200 --> 00:17:12,560
Speaker 1: think satellite again, is really good at point to multipoint

301
00:17:12,600 --> 00:17:17,560
Speaker 1: broadcasting information. It's very good at tracking, but when it

302
00:17:17,600 --> 00:17:20,440
Speaker 1: comes to that round trip, you can't get around the

303
00:17:20,480 --> 00:17:24,160
Speaker 1: physics of a long delay. And so satellite phone has

304
00:17:24,240 --> 00:17:28,040
Speaker 1: never really taken off. And I don't look at this

305
00:17:28,200 --> 00:17:31,560
Speaker 1: and think, wow, Apple is thinking about using this to

306
00:17:31,640 --> 00:17:34,880
Speaker 1: set up its own wireless network. So, John, we've talked

307
00:17:34,880 --> 00:17:37,440
Speaker 1: about this in the past. UM. You know, two billion

308
00:17:37,480 --> 00:17:39,879
Speaker 1: dollars of cash on the balance sheets, sixty billion dollars

309
00:17:39,880 --> 00:17:42,520
Speaker 1: a year free cash flow coming out of Apple. Should

310
00:17:42,560 --> 00:17:44,159
Speaker 1: we just think of this is just one of the

311
00:17:44,200 --> 00:17:48,400
Speaker 1: many potential moonshots that they're dabbling in. And maybe it's

312
00:17:48,400 --> 00:17:52,760
Speaker 1: not that much more than that. I think so, Paul,

313
00:17:52,880 --> 00:17:55,960
Speaker 1: you know, if you look at if you read the

314
00:17:56,160 --> 00:17:59,600
Speaker 1: article carefully, it said it's five years out, or at

315
00:17:59,680 --> 00:18:04,640
Speaker 1: least that's the estimated timeline for this. UM and so

316
00:18:04,680 --> 00:18:06,960
Speaker 1: I think, like Google and some of the other big

317
00:18:07,040 --> 00:18:10,240
Speaker 1: tech companies, they always have a lot of things cooking

318
00:18:10,240 --> 00:18:14,720
Speaker 1: and not all of them make it to the finish line. UM. Again,

319
00:18:14,760 --> 00:18:17,760
Speaker 1: I think satellite is interesting for Apple. They have a

320
00:18:17,840 --> 00:18:21,600
Speaker 1: large and growing device base out there. There are definitely

321
00:18:22,400 --> 00:18:27,560
Speaker 1: applications and potential services that could use accurate device tracking,

322
00:18:28,160 --> 00:18:32,320
Speaker 1: particularly Apple Maps. And again I go back to the

323
00:18:32,400 --> 00:18:35,719
Speaker 1: content play here. It's early days for Apple, but I

324
00:18:35,760 --> 00:18:38,800
Speaker 1: think three to five years out they're going to be

325
00:18:38,840 --> 00:18:42,240
Speaker 1: a real player and content and having a satellite network

326
00:18:42,280 --> 00:18:46,240
Speaker 1: can be a real asset in that scenario. John, there's

327
00:18:46,240 --> 00:18:49,480
Speaker 1: sort of an interesting question embedded in this move by Apple.

328
00:18:49,760 --> 00:18:53,120
Speaker 1: Is this a signal that Apple is trying to diversify

329
00:18:53,480 --> 00:18:58,800
Speaker 1: from essentially being an iPhone maker and seller to a

330
00:18:58,840 --> 00:19:02,320
Speaker 1: content provider, as you suggest, and that the satellite push

331
00:19:02,400 --> 00:19:05,639
Speaker 1: is just merely support that, or are they looking to

332
00:19:06,080 --> 00:19:09,680
Speaker 1: plow into other areas of the infrastructure. And I'm wondering

333
00:19:09,960 --> 00:19:12,399
Speaker 1: if that's the case, well we start talking about the

334
00:19:12,440 --> 00:19:16,520
Speaker 1: potential for them to acquire one of these, uh, these

335
00:19:16,560 --> 00:19:21,680
Speaker 1: telecom companies. So I've had the thought right as the

336
00:19:21,760 --> 00:19:25,560
Speaker 1: device base grows, the you look at it in the

337
00:19:25,600 --> 00:19:29,560
Speaker 1: middleman as the wireless player, but really in the broader

338
00:19:30,840 --> 00:19:34,040
Speaker 1: I think the broader play for Apple is that move

339
00:19:34,119 --> 00:19:39,239
Speaker 1: in general into services, not just content. But you know,

340
00:19:39,359 --> 00:19:44,200
Speaker 1: Apple Music is an example iCloud, Apple Pay and so

341
00:19:44,840 --> 00:19:48,720
Speaker 1: you know, having the ability to broadcast information to your

342
00:19:48,760 --> 00:19:53,359
Speaker 1: device base or tract devices not only gives you the

343
00:19:53,400 --> 00:19:58,480
Speaker 1: ability to enhance existing services but also potentially developed new ones.

344
00:19:58,600 --> 00:20:03,480
Speaker 1: So I did this news in that context as opposed

345
00:20:03,520 --> 00:20:07,959
Speaker 1: to boy it it's maybe the first baby steps towards

346
00:20:08,080 --> 00:20:13,080
Speaker 1: Apple sidestepping the wireless carriers. I'm not seeing that yet,

347
00:20:13,720 --> 00:20:15,639
Speaker 1: So John, I'm I'm looking at the Apple stock. This

348
00:20:15,760 --> 00:20:20,560
Speaker 1: your up seventy seven and a half percent. It's just extraordinary. Um.

349
00:20:20,760 --> 00:20:23,000
Speaker 1: Is that kind of a vindication or is that the

350
00:20:23,040 --> 00:20:28,200
Speaker 1: market saying we buy off on your pivot too services.

351
00:20:30,000 --> 00:20:33,760
Speaker 1: I think it's it's hard to say what the move

352
00:20:33,880 --> 00:20:36,639
Speaker 1: is all about, Paul, but I I do and talking

353
00:20:36,680 --> 00:20:40,880
Speaker 1: to clients, you can hear a lot of excitement building

354
00:20:40,920 --> 00:20:44,040
Speaker 1: around the five G I phone coming next year, and

355
00:20:44,119 --> 00:20:46,800
Speaker 1: I I think there's a lot of merit to that.

356
00:20:46,880 --> 00:20:49,240
Speaker 1: I think there's a lot of potential for Apple to

357
00:20:49,400 --> 00:20:54,480
Speaker 1: really upgrade its space to five G. So I can't

358
00:20:54,520 --> 00:20:58,040
Speaker 1: really comment on stock price moves per se, but if

359
00:20:58,080 --> 00:21:00,800
Speaker 1: I had to guess, that would be one actor, one

360
00:21:00,920 --> 00:21:05,560
Speaker 1: area of great optimism for Apple. They also, like a

361
00:21:05,560 --> 00:21:08,480
Speaker 1: lot of big stocks started the year at a fifty

362
00:21:08,520 --> 00:21:11,040
Speaker 1: two week low or near a fifty two week low,

363
00:21:11,080 --> 00:21:15,080
Speaker 1: which didn't hurt. So yeah, John Butler, thank you so

364
00:21:15,160 --> 00:21:17,680
Speaker 1: much for being with us today as always and as

365
00:21:17,680 --> 00:21:19,119
Speaker 1: we head toward the new year. Thank you so much

366
00:21:19,160 --> 00:21:22,640
Speaker 1: for all your contributions to Bloomberg Radio. We love having

367
00:21:22,640 --> 00:21:25,840
Speaker 1: you on. John Butler of Bloomberg Intelligence joining us on

368
00:21:25,880 --> 00:21:43,840
Speaker 1: the Apple satellite story. Certainly a time to look back

369
00:21:43,840 --> 00:21:47,200
Speaker 1: on what a year it's been. Equity markets on the SMP,

370
00:21:47,760 --> 00:21:50,840
Speaker 1: we've got investment great bonds up close to fifteen percent.

371
00:21:50,920 --> 00:21:54,600
Speaker 1: The question now is as we look towards what kind

372
00:21:54,600 --> 00:21:56,800
Speaker 1: of encore can the markets give us. Our good friend

373
00:21:56,800 --> 00:21:59,880
Speaker 1: Margie Patel joins us. She's well as far senior port

374
00:22:00,000 --> 00:22:02,280
Speaker 1: folio manages joins us on the phone market. Thanks so

375
00:22:02,400 --> 00:22:05,560
Speaker 1: much for joining us again. You know, a great, great

376
00:22:05,640 --> 00:22:08,400
Speaker 1: year for a lot of the financial markets out there.

377
00:22:08,440 --> 00:22:12,800
Speaker 1: How are you framing twenty as you look ahead? I

378
00:22:12,800 --> 00:22:16,080
Speaker 1: think is going to be a continuation of the great

379
00:22:16,119 --> 00:22:18,920
Speaker 1: trends we saw this year, and in fact, I think

380
00:22:18,920 --> 00:22:21,560
Speaker 1: there's a chance we may see the economy we saw

381
00:22:21,640 --> 00:22:25,920
Speaker 1: GDP this morning two point one actually begin to accelerate,

382
00:22:26,160 --> 00:22:28,800
Speaker 1: so we could actually see the equity market do even

383
00:22:28,880 --> 00:22:31,920
Speaker 1: better than say, mid high single digits, which I'm expecting

384
00:22:31,920 --> 00:22:35,439
Speaker 1: in Markie, how concerned are you that that is the

385
00:22:35,560 --> 00:22:39,919
Speaker 1: solid consensus that people expect the economy to keep improving,

386
00:22:40,160 --> 00:22:42,760
Speaker 1: not go too crazy to the point of igniting inflation

387
00:22:42,840 --> 00:22:45,080
Speaker 1: and having a pond sell off. But everything will just

388
00:22:45,160 --> 00:22:47,080
Speaker 1: continue to do well. I'll be it, perhaps not as

389
00:22:47,240 --> 00:22:49,600
Speaker 1: not as well as this year. Well. I think a

390
00:22:49,600 --> 00:22:52,760
Speaker 1: lot of people are nervous, because after you've had basically

391
00:22:52,760 --> 00:22:56,480
Speaker 1: a decade of the market advancing, people are naturally nervous.

392
00:22:56,520 --> 00:22:58,600
Speaker 1: But to me, the big change is the FED is

393
00:22:58,680 --> 00:23:02,000
Speaker 1: fundamentally changed how they operate. We can count on them

394
00:23:02,040 --> 00:23:04,399
Speaker 1: not slamming on the brakes the way they have previously,

395
00:23:05,040 --> 00:23:08,160
Speaker 1: and as long as the fundamentals are solid, which they are,

396
00:23:08,240 --> 00:23:10,760
Speaker 1: I think the market should expand. The only knock on

397
00:23:10,880 --> 00:23:13,680
Speaker 1: next year is I do think that the absolute returns

398
00:23:13,680 --> 00:23:16,119
Speaker 1: will be more modest than this here, in other words,

399
00:23:16,480 --> 00:23:19,840
Speaker 1: low single digit for equities, mid single digit for fixed

400
00:23:19,880 --> 00:23:22,440
Speaker 1: income only earning the coupon and fixed income, rather than

401
00:23:22,560 --> 00:23:25,080
Speaker 1: what turned out to be a truly spectacular year for

402
00:23:25,119 --> 00:23:28,320
Speaker 1: the bond market. We're speaking with Margie Patel Wells Fargo,

403
00:23:28,400 --> 00:23:32,280
Speaker 1: sen your portfolio management. But Margie, let's think about you know,

404
00:23:33,080 --> 00:23:35,160
Speaker 1: look back to it seems like we had a couple

405
00:23:35,200 --> 00:23:38,199
Speaker 1: of periods where people were rotating in from the growth

406
00:23:38,280 --> 00:23:42,280
Speaker 1: to more maybe conservative, defensive sectors, and then cycling back

407
00:23:42,359 --> 00:23:46,600
Speaker 1: into growth. As we think about how out there on

408
00:23:46,640 --> 00:23:49,080
Speaker 1: the risk spectrum do you think we should be in

409
00:23:49,160 --> 00:23:53,399
Speaker 1: terms of you know, growth versus maybe more value. I

410
00:23:53,400 --> 00:23:56,360
Speaker 1: think we still have to stick with growth because growth,

411
00:23:56,840 --> 00:23:59,399
Speaker 1: uh will be slowing down, and so those companies that

412
00:23:59,440 --> 00:24:03,000
Speaker 1: can produce some kind of say double digit earnings growth

413
00:24:03,080 --> 00:24:06,320
Speaker 1: will be more and more valuable. So I'm not looking

414
00:24:06,400 --> 00:24:09,840
Speaker 1: to find the undervalued areas. Certainly, it's frustrating when every

415
00:24:09,920 --> 00:24:11,600
Speaker 1: good company you look at that you don't know and

416
00:24:11,600 --> 00:24:15,280
Speaker 1: it's probably years a date. So naturally people want to

417
00:24:15,280 --> 00:24:17,199
Speaker 1: look more at the bottom of the barrel. But I

418
00:24:17,240 --> 00:24:20,520
Speaker 1: think it's better to stick with growth at this point, Marko,

419
00:24:20,600 --> 00:24:25,479
Speaker 1: what will be the worst performing asset class in I

420
00:24:25,520 --> 00:24:29,760
Speaker 1: think commodities are going to continue to be disappointing on

421
00:24:29,840 --> 00:24:32,760
Speaker 1: balance because where you don't have inflation, where you don't

422
00:24:32,800 --> 00:24:35,760
Speaker 1: have explosive growth from China, that period is done. I

423
00:24:35,800 --> 00:24:40,119
Speaker 1: think commodities will be rather disappointing. How about emerging markets?

424
00:24:40,160 --> 00:24:42,880
Speaker 1: I think you know, one area that people are suggesting

425
00:24:42,880 --> 00:24:46,240
Speaker 1: as emerging markets has been a chronic underperformer, and maybe

426
00:24:46,240 --> 00:24:47,919
Speaker 1: if you get some type of trade deal, even if

427
00:24:47,960 --> 00:24:50,200
Speaker 1: it's a phase one deal, that might be the catalyst

428
00:24:50,280 --> 00:24:53,520
Speaker 1: for emerging markets broadly defined. What do you think, Well,

429
00:24:53,800 --> 00:24:58,200
Speaker 1: virtually all emerging markets are commodity based, so I don't

430
00:24:58,320 --> 00:25:01,400
Speaker 1: see that there's really any draw were there to accelerate that,

431
00:25:01,640 --> 00:25:04,080
Speaker 1: And in particular because the commodity base they have been

432
00:25:04,200 --> 00:25:07,720
Speaker 1: very dependent on China. China's growth is clearly slowing down,

433
00:25:08,119 --> 00:25:12,000
Speaker 1: so I'm even less in lukewarm on emerging markets. They

434
00:25:12,200 --> 00:25:16,320
Speaker 1: spent the last ten years doubling tripling their debt. Internally,

435
00:25:16,440 --> 00:25:19,040
Speaker 1: they haven't made fundamental changes in their economy. Now you

436
00:25:19,040 --> 00:25:22,800
Speaker 1: have commodity price and demand uh flatter going down, So

437
00:25:22,880 --> 00:25:25,600
Speaker 1: that's not an attractive picture for me, Margie. This year

438
00:25:25,840 --> 00:25:29,840
Speaker 1: the sixty portfolio is amazing. It crushed it on every level.

439
00:25:29,880 --> 00:25:32,200
Speaker 1: There was a bond rally, there was a stock rally.

440
00:25:32,240 --> 00:25:35,480
Speaker 1: Would absolutely have been the right way to go. Why

441
00:25:35,520 --> 00:25:37,399
Speaker 1: would not not be the case next year? I mean,

442
00:25:37,440 --> 00:25:39,480
Speaker 1: it sounds like we're setting up for more of the same,

443
00:25:39,520 --> 00:25:43,199
Speaker 1: albeit less high. Well, I would say, when you just

444
00:25:43,240 --> 00:25:46,160
Speaker 1: look at the bond math is how much price appreciation

445
00:25:46,240 --> 00:25:48,760
Speaker 1: can you have when a lot of bonds are running

446
00:25:48,760 --> 00:25:51,560
Speaker 1: into their call price. That's especially a problem in high yield.

447
00:25:51,920 --> 00:25:56,639
Speaker 1: The absolute coupons are very low to three in other words,

448
00:25:56,720 --> 00:26:00,199
Speaker 1: right on top of equity dividends and uh. And I

449
00:26:00,240 --> 00:26:02,919
Speaker 1: think that even if the stocks are only up you know,

450
00:26:03,080 --> 00:26:06,040
Speaker 1: say eight, ten, twelve percent, that will still be better

451
00:26:06,080 --> 00:26:08,520
Speaker 1: than any part of the bond market can produce, just

452
00:26:08,600 --> 00:26:11,760
Speaker 1: because of low coupon and the lack of price appreciation.

453
00:26:12,000 --> 00:26:14,359
Speaker 1: I when you talk about high yield debt, I know

454
00:26:14,400 --> 00:26:18,120
Speaker 1: you've been cautious in the past about it. I'm wondering

455
00:26:18,359 --> 00:26:21,440
Speaker 1: you think that, given the call price and where we are,

456
00:26:22,280 --> 00:26:24,320
Speaker 1: does this seem like an area that's right for for

457
00:26:24,359 --> 00:26:25,919
Speaker 1: a correction or do you think that it will just

458
00:26:26,080 --> 00:26:29,919
Speaker 1: cap cap potential upside. I think the big criticism of

459
00:26:29,960 --> 00:26:33,040
Speaker 1: how yield two things. Actually. One is you just aren't

460
00:26:33,040 --> 00:26:35,080
Speaker 1: going to be able to make double digit returns next

461
00:26:35,160 --> 00:26:38,680
Speaker 1: year just because of the low coupon and so many

462
00:26:38,720 --> 00:26:41,120
Speaker 1: bonds are already training at their call price. So total

463
00:26:41,200 --> 00:26:43,679
Speaker 1: returns three or four or five or six or the

464
00:26:43,720 --> 00:26:47,560
Speaker 1: maximum that you can make their uh. Secondly, there's actually

465
00:26:47,720 --> 00:26:50,439
Speaker 1: rather a scarcity of good quality how yield bonds, and

466
00:26:50,480 --> 00:26:52,400
Speaker 1: I'd say that's going to be the big challenge next

467
00:26:52,480 --> 00:26:55,919
Speaker 1: year is what do you buy this acceptable quality. A

468
00:26:55,960 --> 00:26:58,000
Speaker 1: lot of the lower tier and even some of the

469
00:26:58,000 --> 00:27:00,280
Speaker 1: good names have been sucked off into the low more market.

470
00:27:00,480 --> 00:27:04,040
Speaker 1: They've financed in private equity, and so the demand is

471
00:27:04,160 --> 00:27:06,600
Speaker 1: very very high, and I think next year the supply

472
00:27:06,880 --> 00:27:09,480
Speaker 1: of decent names will be very limited. So that will

473
00:27:09,520 --> 00:27:13,199
Speaker 1: be the challenge for investors. MARKT Btell how about leverage

474
00:27:13,240 --> 00:27:15,200
Speaker 1: loan market? Is that too much risk here? The risk

475
00:27:15,200 --> 00:27:17,919
Speaker 1: reward is not there? How do you think about that market? Again,

476
00:27:18,200 --> 00:27:21,520
Speaker 1: levered loans have pulled off a lot of the bottom

477
00:27:21,600 --> 00:27:24,320
Speaker 1: tier supply. The would come to the high old market.

478
00:27:24,320 --> 00:27:26,760
Speaker 1: They've got the levered loan market because they've got much

479
00:27:26,800 --> 00:27:31,080
Speaker 1: better terms, even lower coupon rates. And so if there's

480
00:27:31,200 --> 00:27:33,400
Speaker 1: risk in the fixed income market, and I think that's

481
00:27:33,680 --> 00:27:36,680
Speaker 1: very very modest, I'm looking not looking for any big explosion.

482
00:27:37,000 --> 00:27:39,919
Speaker 1: I think the levered loan market might be disappointing because

483
00:27:39,920 --> 00:27:42,520
Speaker 1: of some of those lower tier names that turn out

484
00:27:42,600 --> 00:27:45,159
Speaker 1: have too much leverage, don't have a great business model.

485
00:27:45,560 --> 00:27:47,520
Speaker 1: Markt Bittel, thank you so much for being with us,

486
00:27:47,520 --> 00:27:50,520
Speaker 1: and happy holidays to you. Markt. Patella is well as

487
00:27:50,520 --> 00:27:54,560
Speaker 1: Fargo Asset Management senior portfolio manager, joining us by phone.

488
00:27:54,800 --> 00:27:58,280
Speaker 1: Interesting to see how the consensus really is solidifying heading

489
00:27:58,280 --> 00:28:01,359
Speaker 1: into UH that the risk gusts are going to do

490
00:28:01,359 --> 00:28:05,960
Speaker 1: pretty well. Thanks for listening to the Bloomberg Surveillance podcast.

491
00:28:06,320 --> 00:28:11,240
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

492
00:28:11,400 --> 00:28:15,720
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

493
00:28:15,800 --> 00:28:19,680
Speaker 1: Keene before the podcast. You can always catch us worldwide.

494
00:28:20,119 --> 00:28:21,240
Speaker 1: I'm Bloomberg Radio