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Speaker 2: We have Kevin Gordon and Lizzie Saunders together.
Speaker 3: I don't know they're in speaking to them. It's amazing
Speaker 3: as it works out, we'll get to that in a moment.
Speaker 3: Ready green in the screen. We welcome all of you
Speaker 3: across your America, across Charles Schwabs America as well on YouTube.
Speaker 3: Subscribe to Bloomberg Podcast. Did you have a YouTube brief?
Speaker 3: We've sort of all thesting in the night. I know,
Speaker 3: I know, it's pretty This internet thing's here to stay
Speaker 3: on it is.
Speaker 2: It's like this. It's not going away.
Speaker 4: Exactly, so we'll take it. People are good.
Speaker 2: Listen.
Speaker 3: Do you have an ETF you're bringing out to everybody
Speaker 3: else is flogging a new ETF? Okay, we're gonna get
Speaker 3: to Josh Swab here and you know, Paul your observation
Speaker 3: two days deep into the year.
Speaker 5: Yeah, I think people trying to digest some kind of
Speaker 5: what we learned over the weekend with some geopolitical risk,
Speaker 5: putting that on the front burner. But it seems like
Speaker 5: looking at the market action. You know, folks are looking
Speaker 5: past it a little bit at least at this point.
Speaker 5: And for somebody who's going down to a room in
Speaker 5: a few days, I'm paying attention to what's going on
Speaker 5: in Venezuela.
Speaker 2: Seriously, it's like closer than Cuba.
Speaker 5: To my cost airspace in the Caribbean Saturday. So people
Speaker 5: got stranded all through the Caribbean, not just okay, you
Speaker 5: see islands.
Speaker 2: So this is special.
Speaker 3: We've done this a few times during the year, and
Speaker 3: with this quality, we can do it. Liz Ane Saunders
Speaker 3: is definitive on Wall Street. Literally, her public service and
Speaker 3: allowing Americans to develop their fur own case is noted
Speaker 3: a few years.
Speaker 2: Ago she had to go out. She's on a college tour.
Speaker 3: You know, she's like, she's like talking to like, you know,
Speaker 3: people that actually went to class.
Speaker 2: You show up at Pepper and the thug.
Speaker 3: Walks in the room. How did you hire Kevin Gordon?
Speaker 3: Tell us about how you find someone that damn smart?
Speaker 6: That question.
Speaker 7: So SCHWAB has a huge conference every year called Impact.
Speaker 6: A lot of Bloomberg folks.
Speaker 7: Come out, Carol and Tim and they broadcast from there.
Speaker 7: Kevin's mom was in the business for thirty eight years.
Speaker 6: Thirty eight years.
Speaker 7: He's not in but on a firm platformed with us,
Speaker 7: and she brought Kevin to Impact when he was still
Speaker 7: Pepperdine and I met with him and I was had
Speaker 7: had conversations within Schwab about needing to build the bench
Speaker 7: and I met with him and I said, this is
Speaker 7: the guy the only rub is he still in college?
Speaker 4: Can we wait?
Speaker 6: And the answer was yes, we can wait.
Speaker 3: What was your first day Schwab, Like, you know, you're
Speaker 3: hired by it. You know she's thirty nine, but.
Speaker 4: She's a legendary was what was it like to.
Speaker 2: Be hired by liz Anne Sanders, who was iconic on
Speaker 2: Wall Street Week a few years ago?
Speaker 8: You know, I still pinched myself every day. It's a dream.
Speaker 4: We have a ton of fun.
Speaker 8: We work really hard, but it's from from day one,
Speaker 8: I mean, it's been this really fun, you know, just
Speaker 8: sort of grind and figuring out how to make sense
Speaker 8: of all this and and at the end of the day,
Speaker 8: it's you know, can be used to make sense of
Speaker 8: the ecomom.
Speaker 4: Lezanne sitting in your very seat.
Speaker 5: Earlier today, we had a Joan come in and he
Speaker 5: has a new ETF and it's basically hedging. You can
Speaker 5: take all your mag seven stuff, all your stuff that's
Speaker 5: just ripped, do an exchange, put it into this ETF
Speaker 5: and they're.
Speaker 4: Going to hedge it for you.
Speaker 5: Capture, you know, top yeat on the top, cover your
Speaker 5: bottom a little bit.
Speaker 4: I looked at Thomas.
Speaker 5: Is that representative how the market's thinking is our investors
Speaker 5: that you talked to, Are they concerned that we've gone
Speaker 5: too far, too fast and they'd like to hedge, or
Speaker 5: maybe they're asking me this should I get out?
Speaker 4: What are those conversations like?
Speaker 7: I would say that is a bit of the vibe.
Speaker 7: When I'm out on the road doing client events, I
Speaker 7: do get a lot of questions about how do I
Speaker 7: protect some of these gains or how do I mitigate
Speaker 7: what might have been a concentration that developed in their
Speaker 7: own portfolios in a way other than having to trim
Speaker 7: positions have the tax implications associated with it. Yeah, so
Speaker 7: there's a lot more generic lowercase H hedge in questions
Speaker 7: that we're getting.
Speaker 2: I mean, Kevin.
Speaker 3: Lizzie Saunders is too young to remember eighty seven or
Speaker 3: ninety eight.
Speaker 2: Seven.
Speaker 3: What does a young stud like you do about worrying
Speaker 3: about the thirty percent down event we can't see coming.
Speaker 8: Well, I think what's really interesting, I've spent a lot
Speaker 8: of time thinking about this in the post pandemic world,
Speaker 8: where you know, the gen z and the young, young
Speaker 8: millennial cohortive investors for the most part, actually has not
Speaker 8: really experienced what I think of as a real bear market.
Speaker 8: I mean, everything has been sort of conditioned on. As
Speaker 8: soon as you fall into bear market territory, there will
Speaker 8: be some sort of stimulus or eight that comes in
Speaker 8: right away, and then you get this launch.
Speaker 2: Off of the bottom.
Speaker 8: You had that in twenty twenty, you had that in
Speaker 8: twenty twenty five, even in twenty twenty two. Yes, the
Speaker 8: bear market was a little bit longer, but it wasn't
Speaker 8: that spirit. It was twenty five percent from peak to trough.
Speaker 8: So there has been this conditioning where you know it's
Speaker 8: by the dip and just keep holding on, and that's
Speaker 8: been that's been sort of the right call. But I
Speaker 8: think that you know, moving forward, especially if there is
Speaker 8: going to be a little bit of a broader rotation
Speaker 8: outside of the megacaps that is going to weigh a
Speaker 8: little bit more on index level.
Speaker 3: I'm going to give the younger crew major cred they're
Speaker 3: way more serious about starting retirement earlier.
Speaker 2: Yeah, we're just seventy four.
Speaker 7: Weren't even four one k is when I started working.
Speaker 8: But I was also getting pushed though into the market,
Speaker 8: whether they and I think there is a desire to
Speaker 8: do so, which is good, but especially when you go
Speaker 8: down the age spectrum, there is a sense that the
Speaker 8: so called American dream of housing is becoming sort of
Speaker 8: a lost opportunity. So it is pushing more people into
Speaker 8: the stock market for better or worse.
Speaker 7: But that traditional retirement, even social security may not be
Speaker 7: available now. I think one of the rubs right now
Speaker 7: is the gambling mentality. Yes, and that's something that we're
Speaker 7: at CHUAB very focused on. Is the differentiation between investing
Speaker 7: and gambling. One of the ways I think of it
Speaker 7: as investing as owning gambling is hoping and there is
Speaker 7: that blending of the trading and the gambling side.
Speaker 6: That is something that we worry a little bit about.
Speaker 5: So, Lizen, how do you set up the conversation here
Speaker 5: for just equity investors after we've had three years of
Speaker 5: double digit returns very rare.
Speaker 4: Do we have a fourth one here? But how do
Speaker 4: you set up that conversation for twenty twenty six.
Speaker 7: I think this could be a year where maybe index
Speaker 7: level gains are a bit more muted, but opportunity continuing
Speaker 7: to present itself outside of just the megacap names. So
Speaker 7: you know, one of the things that happened last year
Speaker 7: the market, you know, air quotes around the market is
Speaker 7: more than just a cohor like the Magnificent seven big
Speaker 7: drivers until the latter part of the year in performance,
Speaker 7: but a lot of churn in rotation under the surface,
Speaker 7: sub level bear markets in terms of maximum drawn down
Speaker 7: on a rotational basis, And I think that was one
Speaker 7: of the setups for this more recent environment of broader
Speaker 7: participation action down the cap spectrum. And I think that
Speaker 7: has legs, maybe not in a linear fashion, but has
Speaker 7: legs this year.
Speaker 3: Across the nation from Pepper into the University of Delaware.
Speaker 3: Charles Schwab is with us today, Lizzane Saunders in Kevin Gordon,
Speaker 3: Decades of excellence from Lizanne Sounders Kevin Gordon. You know,
Speaker 3: there's a lot of work from home going on. I
Speaker 3: did that, and so we welcome all of you on YouTube.
Speaker 3: Subscribe to Bloomberg Podcast. We're thunderstruck by our digital exercise.
Speaker 2: What are you doing to do the message digitally?
Speaker 8: I mean, we've got a really strong presence on YouTube,
Speaker 8: and I think it's sort of an underappreciated, maybe underplayed,
Speaker 8: unknown undernown aspect of of Schwab's digital for print. But
Speaker 8: you know, also it was in social media, you know,
Speaker 8: Lizanna and I not to I guess, you know, I
Speaker 8: don't know toot our own horns too much, but we
Speaker 8: try to be as active as possible across formerly Twitter,
Speaker 8: x LinkedIn.
Speaker 2: Do you, Kevin? Do you make all the charts? Not
Speaker 2: all of them?
Speaker 7: Not all of them, But you don't want me making
Speaker 7: my own shots. Honestly, it's crayons and construction figures.
Speaker 8: But it's been a good way to interact with people.
Speaker 8: And I think that, you know, the more so these days.
Speaker 8: Everybody wants those kind of shorter form quick takes, but
Speaker 8: things that are meaningful to you don't want, you know,
Speaker 8: meetingless stuff.
Speaker 5: Hey, Kevin, we were all patting ourselves on the back
Speaker 5: because the US had a pretty good twenty twenty five
Speaker 5: in terms of equity return. Now where you go outside
Speaker 5: the US even better, what are those conversations you have
Speaker 5: with your clients, because quite frankly, I've never really thought
Speaker 5: about investing outside of the US and my career.
Speaker 4: I'm sure some of my mutual fund somewhere have got
Speaker 4: me there. But are you having more and more of
Speaker 4: those conversation?
Speaker 8: You know, I'm just now reads starting to get and
Speaker 8: I think probably the same for Lazan, and we rarely
Speaker 8: speak at the same events. We're really kind of a
Speaker 8: divide and conquered crew when we travel, so you know,
Speaker 8: I'm just starting now to get questions about, hey, should
Speaker 8: I consider this? What is the opportunity to look like?
Speaker 4: And that tends to happen.
Speaker 8: You get the big swings in performance first in favor
Speaker 8: of a certain asset class, whether it is international, and
Speaker 8: then the you know, the performance chasing tends to kick
Speaker 8: in and then the flows start to move in that direction.
Speaker 9: So we found that it tends to work in.
Speaker 8: Maybe three year, you know, with a three year lag
Speaker 8: where it starts to kick in three years after international
Speaker 8: starts to outperform. It's not always the you know, textbook case,
Speaker 8: but I have been starting to get more questions about that,
Speaker 8: especially because you know Lazan mentioned earlier.
Speaker 9: There is a little bit more of.
Speaker 8: A concern now about concentration in portfolios, specifically with tech
Speaker 8: and tech like parts of the market, just by virtue
Speaker 8: of their size over the past ten years. If you
Speaker 8: sort of set it and forget a portfolio, you know
Speaker 8: ten years ago and didn't do much tech, and those
Speaker 8: parts of your portfolio have grown to an immense portion.
Speaker 8: So there has been more of a concern about how
Speaker 8: do I trim that and add into to what might
Speaker 8: work better.
Speaker 7: We've been joking that recommending international diversification has been about
Speaker 7: constantly saying I'm sorry, and now it's your welcome.
Speaker 10: Exactly.
Speaker 4: Europe Asia just extraordinary in particularly.
Speaker 3: Does it have legs or is it just a dollar
Speaker 3: dynamic where they requirement of a week now.
Speaker 4: Well maybe yes to both of those.
Speaker 7: I think there's the currency dynamic and that will probably
Speaker 7: be a function or it will dry volatility in swings,
Speaker 7: so I don't I think the international app performance is
Speaker 7: probably not linear in nature, but for the most part,
Speaker 7: I think.
Speaker 6: It has legs. If you look at the.
Speaker 7: Traditional fundamentals of the trajectory of earnings that represents a support.
Speaker 7: A lot of at least developed economies don't have the
Speaker 7: same inflation problem with which the US is still dealing,
Speaker 7: so it means a different monetary policy backdrop.
Speaker 3: WELLZ, I have family members who have been hoping and
Speaker 3: enjoying losing money, most of it are on bitdog.
Speaker 2: And all these are the young tucks. You know, they
Speaker 2: don't talk.
Speaker 6: They're not in the triple leverage all cash.
Speaker 3: No, their parents are, but you know they go through
Speaker 3: that bill to talk to me when they've lost that
Speaker 3: much money. How does someone who lost it hoping rebuild?
Speaker 3: How do they become an adult?
Speaker 11: Boy?
Speaker 6: That's a good question. You know.
Speaker 7: Sometimes the answers to questions like that are really boring.
Speaker 2: Which is boring.
Speaker 7: Investing should never be about a moment in time, get in,
Speaker 7: get out.
Speaker 6: Neither of those are investing strategies.
Speaker 7: So where a strategy needs to be employed for somebody
Speaker 7: that maybe made that mistake and got out is don't
Speaker 7: try to time the get back in. Do it slowly,
Speaker 7: develop a process over time dollar cost averaging. Again, the
Speaker 7: stuff that is fairly boring to talk about. I also
Speaker 7: use the analogy of a jigsaw puzzle, which I love
Speaker 7: doing jigsaw puzzles, and you know, sort of pose the
Speaker 7: question what's the most important piece and usually people will
Speaker 7: say the last one, or the corner or any of
Speaker 7: the side pieces, and we often say it's the picture
Speaker 7: on the box. Try doing a complicated jigsaw puzzle without
Speaker 7: the picture on the box.
Speaker 6: That's the plan.
Speaker 7: So the first thing is actually have a plan. Too
Speaker 7: many investors and not just young investors, but they're just
Speaker 7: sort of winging it, and have that actual plan and
Speaker 7: use that as the base for Okay, how do I
Speaker 7: get re engaged?
Speaker 5: And at a lot of I'm just going to use
Speaker 5: my household. For young adults, it's all online, a lot
Speaker 5: of digital and I'm like, who are you talking to?
Speaker 5: Who's giving you advice about allocation and things like Well, Matt,
Speaker 5: I think that matters a lot more in the context
Speaker 5: of I mean, the macro environment today is I mean,
Speaker 5: it's quite precarious.
Speaker 8: It's unique relative to history. I mean, you look at
Speaker 8: just this year in many ways, I think of it
Speaker 8: as being the year of the courts, not just from
Speaker 8: a tariff standpoint, but also from Alisa Cook, you know,
Speaker 8: a fed independence and the integrity of the fed in
Speaker 8: the structural you know, soundness of it moving forward in
Speaker 8: terms of making policy. All of that has carries a
Speaker 8: lot of macro risks with it. But to hedge against
Speaker 8: that are to guard against that, you do need some
Speaker 8: extent somebody to talk to or at the very least,
Speaker 8: to Zant's point, having a plan to help safeguard against.
Speaker 8: Especially with what's happened over the weekend. I mean so
Speaker 8: many questions, you know, I was sort of fielding a
Speaker 8: ton from friends and family over the weekend about what
Speaker 8: does this mean for portfolios? But you know, often you
Speaker 8: get those kind of more panicky questions when it's somebody
Speaker 8: who hasn't done something, you know, the sort of prep
Speaker 8: work not to criticize. But that's why it matters a lot.
Speaker 2: O wise one, did you know where Keana was in
Speaker 2: the map?
Speaker 8: Well, yes, but only because I did so, only because
Speaker 8: I like I like geography, and I'm a little obsessed,
Speaker 8: so well I.
Speaker 3: Like it too when I thought it was western Colombia,
Speaker 3: which shows you what I know.
Speaker 2: Lizzie and Sunder is Kevin Gordon with this, This is a.
Speaker 3: Special moment there with Charles Schwab where the equity franchise
Speaker 3: has been noted. This is out on the Left coast
Speaker 3: decades and decades ago, long before Lizzie got there, And
Speaker 3: it was Charles Schwab up in San Francisco building.
Speaker 2: Remember how original it was.
Speaker 10: Yep.
Speaker 2: It was like, you're kidding these and they're in San Francisco,
Speaker 2: they're not for real.
Speaker 3: And down in La was Capitol Group with Robert Kirby
Speaker 3: and John Lovelace and all that, and they'd put out
Speaker 3: these studies which said, if you miss the ten biggest days. Ready, folks,
Speaker 3: the jargon Gordon jargon has five hundred beeps. You give
Speaker 3: up five percentage points of performance by missing the ten
Speaker 3: biggest days in the year.
Speaker 8: Kevin Gordon discuss, Yes, And actually a lot of those
Speaker 8: biggest days come in pretty significant volatility moments when you're
Speaker 8: in bear markets, and it happens, you know, when you
Speaker 8: kind of feel that panic settle in and it's, oh
Speaker 8: my gosh, we're down x percent from the top. Should
Speaker 8: I just get out and sell everything? And that's when
Speaker 8: you tend to give up a lot of that future
Speaker 8: return because you get these what Zanletes to call rip
Speaker 8: your face off rallies. Sometimes in the middle of these
Speaker 8: bear market moments, and it happened in April last year.
Speaker 7: And not only that, but some of the the biggest
Speaker 7: single updates immediately followed some of the single biggest down days.
Speaker 2: The rebound right, And what's important your folks, I got
Speaker 2: to know. I'm talking to Kevin Court Luzanne. I speak English.
Speaker 3: It's a four box solution. You mentioned one of the boxes,
Speaker 3: which is you're out of the market, You've got to
Speaker 3: get back in. The hard part is getting back in.
Speaker 2: It's nons a some wildly log normal.
Speaker 7: But I'll say again, neither get in nor get out,
Speaker 7: if it's all or nothing is an investing strategy. That's
Speaker 7: just gambling on moments in time, and I think that's
Speaker 7: one of the mistakes that investors make.
Speaker 4: Louzanne, I'm going on forty years in this business. Coming
Speaker 4: up in June.
Speaker 5: One of the biggest developments for me has been ETFs.
Speaker 5: I mean, the money flowing into those is just extraordinary.
Speaker 5: How does that factor into your discussion with plans?
Speaker 3: Oh?
Speaker 7: Yeah, And I think you know, we do a lot
Speaker 7: of work on investor sentiment and that in the buckets
Speaker 7: of attitudinal measures of sentiments. Some of the traditional indicators
Speaker 7: like aaii market Association and investors intelligence ones I've been
Speaker 7: following since I started forty years ago in this business.
Speaker 7: But there's the behavioral side of investor sentiment, and one
Speaker 7: key metric associated with that fun flows. When I started
Speaker 7: in the business, it was all about mutual fund flows.
Speaker 6: Traditional mutual fund flows.
Speaker 7: Now completely served in terms of what's going on with ETFs,
Speaker 7: and it is a really valuable way to kind of
Speaker 7: proxy the behavioral measure of investor sentiment.
Speaker 2: Two thousand and four, you were like twenty seven years
Speaker 2: old or something like that.
Speaker 10: I have a.
Speaker 3: Photo which is proved forty years old, Elizabeth Saunders at
Speaker 3: the table with the bush, the younger in the fiscal policy.
Speaker 3: Our fiscal policy now is way more moldy than it
Speaker 3: was in.
Speaker 2: Two thousand and four? What should investors do? Should they
Speaker 2: worry about that?
Speaker 7: So we get this question all the time. The number
Speaker 7: one theme of questions that I get at client events
Speaker 7: is around deficits, and.
Speaker 6: And often it's followed.
Speaker 7: By sort of an addendum to the question, what's the
Speaker 7: tipping point? Is there going to be some sort of crescendo?
Speaker 7: Is the dollar going to lose its reserve currency sets?
Speaker 7: Are we going to default on our debt is China
Speaker 7: literally or figurally going to wake up one day and
Speaker 7: decide to dump all all treasuries, and we don't have
Speaker 7: those sort of draconian worries. There's no replacement for the dollars,
Speaker 7: the world's reserve currency. We are not going to default
Speaker 7: on our debt. China dumping treasuries on mass, they'd be
Speaker 7: aiming the guns squarely at their own economic foot. Now
Speaker 7: they've been diversifying away from such a heavy weight in
Speaker 7: dollar denominated securities, but that's been.
Speaker 6: A ten year process. That's not a recent thing.
Speaker 7: The biggest implication of a hind rising burden of debt,
Speaker 7: in addition to the interest costs associated with that, is
Speaker 7: it acts as a bit of a wet blanket on growth.
Speaker 7: It constrains growth. And that's not a new phenomenon. That's
Speaker 7: not a respective phenomenon. That's a phenomenon we've been living
Speaker 7: with for quite some time, as are other countries that
Speaker 7: experience that same groom.
Speaker 2: This has been wonderful.
Speaker 3: Elizabeth Saunders, Kevin Gordon, thank you always and forever with
Speaker 3: shab stay with us. More from Bloomberg Surveillance coming up
Speaker 3: after this.
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Speaker 3: Riccardo Housman is definitive on his Venezuela. Ricardo, I want
Speaker 3: to go back before your acclaim at Harvard, before your
Speaker 3: public service decades ago, to your Venazuela. How did the
Speaker 3: Houseman family get from a World War two Europe over
Speaker 3: to Venezuela. How did your family emigrate to Venezuela a
Speaker 3: lifetime ago?
Speaker 11: Well, a Jewish family, my father, they both went through
Speaker 11: the Holocaust. My father lost both his parents. He arrived
Speaker 11: at Venezuela at age seventeen with some He managed to
Speaker 11: get himself to Spain, and then everybody in Spain thought
Speaker 11: that Hitler was going to take over Spain, so he
Speaker 11: ended up with another relative in Venezuela. And my mother
Speaker 11: lived through the German occupation in Belgium and she was
Speaker 11: freed by the USGIS in September nineteen forty four. She
Speaker 11: was living with a Catholic family in a village in
Speaker 11: the south of Belgium until they were liberated. She lived
Speaker 11: for over a year thereafter after, as you know, they
Speaker 11: got the papers to go to the train station in
Speaker 11: nineteen forty two. So that's how they ended up in Venezuela. Venezuela,
Speaker 11: they had a you know, they created a really really
Speaker 11: nice life for themselves. And so when I grew up,
Speaker 11: Venezuela was this heaven and well I had this image
Speaker 11: of Europe. That's this horrible place where my parents had
Speaker 11: come from.
Speaker 3: Right, I look Professor Hausman and against This is part
Speaker 3: of the story, folks, from Venezuela to the tip of Rgin. Tina,
Speaker 3: your economist essay written yesterday for zenniment in Betters is
Speaker 3: absolutely scathing. You say the president of the United States
Speaker 3: is quote delusional. What does President Trump get wrong?
Speaker 11: Well, he thinks that extracting oil from the ground is
Speaker 11: a technical issue. But extracting oil from the ground, if
Speaker 11: it was a technical issue, Venezuela.
Speaker 10: Would be a powerhouse.
Speaker 11: But the reason why oil production in Venezuela collapsed, that's
Speaker 11: so many other things collapsed, is because oil is a
Speaker 11: long term investment proposition. You have to part with a
Speaker 11: lot of money and wait until you know you get
Speaker 11: a cash flow to recover that money over a very
Speaker 11: long period of time. And in that long period of time,
Speaker 11: you have to be assured that you have some property
Speaker 11: rights that are going to be respected. And if he
Speaker 11: thinks that right now, he's going to recover oil production,
Speaker 11: because he's going to tell us major companies to go
Speaker 11: out and part with billions of dollars in Venezuela in
Speaker 11: the context of an illegitimate government because Malula stole an election.
Speaker 11: But this woman who's now president of Venezuela, she didn't
Speaker 11: even win pretend to win an election.
Speaker 10: She was appointed by a guy who stole an election.
Speaker 11: And he's going to get concessions that have no approval
Speaker 11: in law by any national Assembly that was elected by anybody.
Speaker 11: And you would expect at the moment they will go
Speaker 11: back to democracy, that any of those conditions are going
Speaker 11: to be respected by a new by a new political majority.
Speaker 11: So I think that there is the Democracy is not
Speaker 11: a goal to be put after economic recovery. Democracy is
Speaker 11: an instrument of economic recovery. It's the way of telling
Speaker 11: Venezuelans your rights will be protected. Go back and and
Speaker 11: and you know, dream, go back to.
Speaker 3: Camp where you knew as a kid, Ricarda. Housman with
Speaker 3: us of Harvard University. Folks were thrilled that he could
Speaker 3: be with the Shannon O'Neil coming up. We welcome all
Speaker 3: of you around the world. Please subscribe to YouTube. Paul
Speaker 3: and I humbled by the digital success this year. Paul
Speaker 3: Sweeney with Riccardo Housman, Professor.
Speaker 5: Do we know or what can you tell us about
Speaker 5: what the average Venezuelan really on the ground once from
Speaker 5: this government going forward or from any government?
Speaker 11: Well, I mean Venezuelans voted massively in favor of a
Speaker 11: change of direction. Right they when they were allowed to
Speaker 11: have a primary that the government tried to prevent. Well,
Speaker 11: Mariacarina Machallo won with ninety plus percent of the vote
Speaker 11: when she was not allowed to run and she anointed
Speaker 11: somebody to run instead.
Speaker 10: They voted.
Speaker 11: You know, this guy won with a margin of forty points,
Speaker 11: and he didn't want buy more because they didn't not
Speaker 11: let us Venezuelants abroad vote and they did not let
Speaker 11: three million young Venezuelans to register.
Speaker 10: Had that happened, we would have won with an even
Speaker 10: larger margin.
Speaker 11: So Venezuelans are unified politically in a new direction. If
Speaker 11: you allowed venezuelants to choose, they would choose a very
Speaker 11: competitive legal.
Speaker 10: Framework for oil and they would engineer on oil boom.
Speaker 10: We don't need.
Speaker 11: A you know, American help to engineer an oil boom
Speaker 11: because the world is full of oil companies that would
Speaker 11: want to quit back into Venezuela under the right conditions,
Speaker 11: and we have a political majority to create the right conditions.
Speaker 11: But this system that they have described right now, it's
Speaker 11: not workable. It's something that works on one on a
Speaker 11: day to day basis that they're saying, well, we leave
Speaker 11: the same bad guys that were empowered before, the guys
Speaker 11: who are indicted. I mean the guys who are in
Speaker 11: the same indictment as Nicolas malulu Are. One is the
Speaker 11: Minister of Defense and the other one is the Minister
Speaker 11: of the Internal Police.
Speaker 10: So it's the same guys.
Speaker 11: We're there and they pretend to say, well, we are
Speaker 11: going to tell them what to do and they're going
Speaker 11: to do our bidding.
Speaker 10: But when they say our bidding, they think that they.
Speaker 11: Can get a recovery of Venezuela without empowering Venezuelan citizens
Speaker 11: with rights.
Speaker 10: That's not going to work.
Speaker 5: Professor Isert, do you think of there's a scenario where
Speaker 5: the Trump administration can in fact exert control over this
Speaker 5: government like.
Speaker 4: I think they think they can.
Speaker 11: Well, I mean what they think they again is to
Speaker 11: say either you do what I tell you or I
Speaker 11: kill you because I have drones. I don't want to
Speaker 11: put boots on the ground. I have drones, I have missiles.
Speaker 11: I can kill you, So you better do what we want.
Speaker 11: But we dinner rupt Ricardo. But Paul nailed it with
Speaker 11: that question.
Speaker 3: What this is about is in is direct community violence,
Speaker 3: whether it's Cuba or Venezuela. I mean President Trump in
Speaker 3: his advocates have to decide if they want to participate
Speaker 3: with people who are violent. How do you in your
Speaker 3: Venezuela how do we move forward to a constructive end?
Speaker 3: What's the Houseman process? In January, February, in March of
Speaker 3: this year.
Speaker 11: Well, you want to empower the people who have strategic
Speaker 11: interests that are aligned with you, and that is all
Speaker 11: the Venezuela Democrats.
Speaker 10: So this idea that you.
Speaker 11: Can do your thing without having to deal with the
Speaker 11: organized Venezuelan opposition that, under enormously difficult situations, was able
Speaker 11: to win an election. When you want you want to
Speaker 11: You want to empower them to help you do you
Speaker 11: want a strategic alliance with them?
Speaker 10: But you don't want to hear this dismissive.
Speaker 11: Description of Maria Acorina Machau as as somebody who's not
Speaker 11: respected in Venezuela. I challenge you to mention somebody in
Speaker 11: the world who's more respected than Maria Acorna Matchau. Obviously
Speaker 11: she's super respected in Venezuela. That's why she can win
Speaker 11: elections in Venezuela. Now that's different from saying she has
Speaker 11: the command over troops.
Speaker 3: We're gonna share O'Neil with this, Professor Hausman. But let
Speaker 3: me ask you this Viscal. This came up Paul, last
Speaker 3: side of the dining room table. Where does the military
Speaker 3: Venezuela fit in? I mean, if I look at the
Speaker 3: Philip means and the shift from diu Terte to the
Speaker 3: younger Marcos, the military play a part there. Instability is
Speaker 3: the military of your Venezuela stable or unstable.
Speaker 11: The military of Venezuela is led by an arco terrorist
Speaker 11: organization and they're still in power.
Speaker 10: But below that there's a lot of people who would
Speaker 10: be willing, who.
Speaker 11: Would want to go back to a more democratic regime
Speaker 11: under a civilian rule. But they cannot they're not allowed
Speaker 11: to organize. They're being spied by the military, secret police,
Speaker 11: and they're being put in prison, they're being tortured. So
Speaker 11: what we need if Trump is going to demand something
Speaker 11: from from Delci Rodriguez, is that she.
Speaker 10: Delivered josdal Cavego, the head.
Speaker 11: Of the police, Bladimir Padrino, the Minister of Defense. Those
Speaker 11: are the heads of the Cartel of the Suns, the
Speaker 11: Cartel Deloslis. They are the narco traffickers. They are now
Speaker 11: in charge of the country, and they are the ones
Speaker 11: who yesterday put in prison twelve journalists, so that the
Speaker 11: number of political prisoners in Venezuela is.
Speaker 10: Going up, knock down. Okay, So.
Speaker 11: You want you want to fix the country, you need
Speaker 11: to get rid of this leadership, this corrupt, criminal leadership
Speaker 11: that is in control of the army, and to empower
Speaker 11: the bulk of the army to go back to civilian rule.
Speaker 2: Paul, get one more questions in your professor.
Speaker 5: Professors, are scenario where the people of Venezuela rise up
Speaker 5: and force change.
Speaker 11: I think that you know everybody now is willing to
Speaker 11: give a line of credit because you know, we've tried
Speaker 11: so hard to get rid of Maluro and we weren't
Speaker 11: able to do it on our own. So everybody is
Speaker 11: very happy that that the US was able to get
Speaker 11: rid of Maluro. But and and they're hoping that this
Speaker 11: is the beginning of a good process. But you know,
Speaker 11: the statements of Trump after you at Madlago and afterwards
Speaker 11: were extremely disempowering and concerning. They described a vision for
Speaker 11: the future that I do not think is going to work,
Speaker 11: and I don't think that Venezuelans are going to feel
Speaker 11: that that is there is the right frame.
Speaker 3: Professor Hausman, thank you so much for leading our coverage
Speaker 3: this morning. Ricardo Housman with the Kennedy School, Harvard, and
Speaker 3: of course look to his piercing essay and the economists
Speaker 3: stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
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Speaker 2: YouTube anticipated here.
Speaker 3: Of course, with all the geopolitics and international relations put
Speaker 3: to the wayside, to a Tuesday Troy Gyski.
Speaker 2: One of our first conversations of.
Speaker 3: The year with Future Standard is well, one of the
Speaker 3: great charms of Troy Gyski is you need to be
Speaker 3: in the market.
Speaker 2: I never hear you saying go to cash. Have you
Speaker 2: ever said go to cash?
Speaker 12: Well, I think if you look historically, it's I honestly
Speaker 12: can't remember, Tom, because if you think of the post
Speaker 12: GFC era, right, hoarding cash is tipically been a losing bet,
Speaker 12: and initially so much of that was driven by que
Speaker 12: and Montrey, Splyby and pump Top. And even though you
Speaker 12: used to joke around about tripper level cash, I don't
Speaker 12: know if you remember the triple what are you laughing
Speaker 12: about it?
Speaker 2: They took one hundred and eighty basis points this year.
Speaker 9: Levern cash at cash barring rates is a trade.
Speaker 12: But really like you, but you know, putting cash to work,
Speaker 12: and we do think that's one of the biggest challenges
Speaker 12: for investors now is how do you put those massive
Speaker 12: cash hoards and money markets, savings accounts, et cetera to
Speaker 12: work where it can meaningfully increase total return and income
Speaker 12: without taking uncomfort levels of risk. And that's one of
Speaker 12: the key attributes of alternatives is you know, whether it's
Speaker 12: private credit, private real estate lending, or even private equity.
Speaker 9: If you have more of a growth bend, and.
Speaker 5: I know you have a focus these days on private markets,
Speaker 5: private equity, private credit. That is, an average investor, what's
Speaker 5: the best way to get exposure to that asset class.
Speaker 12: Yes, So the way the industry has evolved, right is
Speaker 12: we've democratized to some extent. So it used to be
Speaker 12: really all about large sovereign wealth funds or large pension
Speaker 12: funds or endowments, and so we've created these evergreen vehicles,
Speaker 12: which are registered investment corporations, which allows smaller investors to
Speaker 12: also partake. And to put it in the big picture,
Speaker 12: if you look at the major wealth firms, you're somewhere
Speaker 12: between one and a half and seven percent penetration and
Speaker 12: all their targets are somewhere between twenty and thirty. So
Speaker 12: we're really in the very early evenings of this democratization wave.
Speaker 5: What do you think is a reasonable allocation for alternatives
Speaker 5: in an average investors portfolio? Like I used to think
Speaker 5: it was low single digits, but I hear Rias tell
Speaker 5: me much higher than that.
Speaker 12: Yeah, much higher I think most firms are guiding folks
Speaker 12: meeting wealth management firms that ultimately control the acid allocation decisions.
Speaker 12: So somewhere around twenty to thirty percent. You don't want
Speaker 12: to go to eighty or ninety per se because you
Speaker 12: need liquidity, and the whole idea is to increase that
Speaker 12: efficient frontier, have that better risk adjuster return truck, I
Speaker 12: asked you where.
Speaker 2: This was fifture with us this morning.
Speaker 3: We welcome all of you across the nation the way
Speaker 3: you listen to Bloomberg's Surveillance. Good morning on Serious XM
Speaker 3: on Spotify. I didn't realize this, Like we're a podcast.
Speaker 2: Yeah, on Spotify. It's huge in the Pacific rip absolutely.
Speaker 2: We have a consultant.
Speaker 3: Ray.
Speaker 2: YouTube has really helped us with all this and races.
Speaker 2: It's like ginormous.
Speaker 3: We say good morning and on YouTube subscribe to Bloomberg Podcast.
Speaker 3: I got a new thing. I'm trying to figure out
Speaker 3: how to put out the three big interviews of the
Speaker 3: day the next day. Sera are YouTube's helping me. Oh
Speaker 3: she's smart, She's gone down in flames so far. But
Speaker 3: I'll get there and get there, Troy.
Speaker 5: A lot of folks are wondering, can we have a
Speaker 5: fourth consecutive year of double digit growth in public equity returns?
Speaker 4: How do you think about that?
Speaker 12: Yeah, so it's gonna be a little more challenging this year,
Speaker 12: mainly given where starting multiples are and the fact that
Speaker 12: money supplied isn't as excessive relative to nomenal GDP as
Speaker 12: it had been. You know, that was one of the
Speaker 12: things from a multiple expansion standpoint I was starting to
Speaker 12: get a little.
Speaker 2: More concerned about.
Speaker 12: And then tom as you know, when you know it,
Speaker 12: the FED comes in and pumps in one hundred and
Speaker 12: twenty billion dollars.
Speaker 9: The fresh liquidity. You know, so you have this spread compressing.
Speaker 12: But if you look at Ernie's growth, it's hard to
Speaker 12: figure out how you get less than twelve, you know,
Speaker 12: market served?
Speaker 2: Really, you're your twelve? Is your's on?
Speaker 12: Yeah, well, twelve would arguably be even more of a
Speaker 12: bare case. Right, So the estimate is fifteen roughly give
Speaker 12: for the SMP. And when you think about how strong
Speaker 12: nominal GDP growth continues to be, you know, real GDP
Speaker 12: plus inflation, revenue.
Speaker 9: Should be strong, Earning should be strong, and so.
Speaker 12: Whether it's public equity or private equity, it looks like
Speaker 12: good upside.
Speaker 3: So it's good upside and you're all in, like Belski is,
Speaker 3: I mean, what does he know?
Speaker 9: It's not get carried away, but.
Speaker 3: You're all in on the stimulus in the June and
Speaker 3: July and August. Pray tell what happens after the Trump
Speaker 3: stimulus into the mid terms. Well, so go to cash
Speaker 3: labor Day.
Speaker 9: I would not recommend triple ever cast.
Speaker 12: It's for the record, but if you think of the seasonality,
Speaker 12: obviously January December of strong months. But it's very difficult
Speaker 12: for an average investor to time that, even institutions time that.
Speaker 9: So you want to be fully invested.
Speaker 12: The question is how much do you have an alternatives
Speaker 12: to complement any downside that you could get you in.
Speaker 2: Do you buy this kool aid? Well, I think that's
Speaker 2: credit equity private credit in my IRA.
Speaker 4: Yeah, it's just the allocation. I don't have a problem
Speaker 4: with that.
Speaker 5: Somebody alltions that you guys are talking about it much
Speaker 5: higher than I would have thought. But I mean from
Speaker 5: evaluation perspective, you can get arguably much better evaluations in
Speaker 5: a private.
Speaker 4: Market than you can a public market.
Speaker 13: In these dases.
Speaker 12: Yeah, I mean that's one of the biggest disconnects right now,
Speaker 12: particularly in the Russell two thousands. So if you think
Speaker 12: of the use case for middle market private equity in particular,
Speaker 12: it's really been a substitute or compliment for the Russell,
Speaker 12: because the Russell is roughly nineteen times evd BA dah,
Speaker 12: middle market private equity is roughly eleven. Now our books
Speaker 12: priced a little more expensively because the better growth prospects,
Speaker 12: but you're effectively getting that growth at a reasonable price.
Speaker 12: And not only do you have better convexity and upside,
Speaker 12: but you also have less downside in the event we
Speaker 12: get that correction scenario.
Speaker 2: He doesn't talk to Randall Forsyth at barons like this.
Speaker 2: What did you say? Convexity?
Speaker 12: Yeah, convexity so more upside than downside, right, that's the
Speaker 12: second derivative, as you know of the delta. But yeah,
Speaker 12: convexy's hard to find in a market right now. But
Speaker 12: when you're at eleven times forward or eleven times forward ebitdah,
Speaker 12: and you have ten to twelve percent revenue growth, that
Speaker 12: tends to lead strong outcomes.
Speaker 3: Amid all this jargon, folks, Lisa just threw a gluten
Speaker 3: free role at him.
Speaker 2: Amid all this jargon. What you talked about, This key
Speaker 2: is revenue growth. Yes, if we have nominal GDP popping
Speaker 2: like it's popping.
Speaker 3: The normal industrial company making four percent five percent revenue growth,
Speaker 3: maybe they one year they get seven percent. Everybody gets paid.
Speaker 3: All those numbers are bigger now right.
Speaker 12: Well, that's one hundred percent, Tom, that's such a big
Speaker 12: shift from the period after the GFC where one and
Speaker 12: a half percent real and one and a half percent
Speaker 12: inflation was. It was not necessarily the new normal, but
Speaker 12: remember it was the new normal for a long time.
Speaker 12: Post pandemic, we've been more like six seven eight percent
Speaker 12: annualized nominal GDP growth Q three blockbuster eight percent annualized
Speaker 12: GDP growth from a nominal standpoint, and that's what drives revenue.
Speaker 12: So if you're if you're long private credit, you're long
Speaker 12: public credit, you're long private equity, you're a.
Speaker 9: Long public equity.
Speaker 12: Nominal GDP is what drives revenue growth, and it all
Speaker 12: starts there.
Speaker 5: So we've got twelve thirteen, fourteen percent EPs growth and
Speaker 5: the S and P five hundred for twenty twenty six.
Speaker 4: Is that enough for this market in this valuation?
Speaker 2: You think so?
Speaker 9: Twenty two point one times S and P. That's obviously
Speaker 9: on the richer end of the range.
Speaker 12: The main driver of multiple expansions since October of twenty
Speaker 12: two or even prior to that is excess money supply
Speaker 12: relative to nominal GDP sorry relative nomal GP and also
Speaker 12: the extraction of public equity share buybacks always outstrip you know,
Speaker 12: any IPOs or secondary offerings, plus run a big merger
Speaker 12: wave definitice merger wave. So that should continue. But given
Speaker 12: that the excess and money supply isn't as great, I
Speaker 12: think you'd be a little aggressive to expect multiples to
Speaker 12: go from twenty two point one to twenty three unlikely
Speaker 12: to get multiple depression smadge a multiple expansion plus the
Speaker 12: earnings growth I mean.
Speaker 3: Here, I just bring up a representative tooth based company
Speaker 3: times earnings yep, yeah, for stuff that comes out of
Speaker 3: it too.
Speaker 12: Grows less, you know gross g and by the way, tom,
Speaker 12: if I may back to growth at a reasonable price,
Speaker 12: you know, typically companies like that are only grown revenue
Speaker 12: like one to five percent exactly, and so you know,
Speaker 12: true in a nominal GDP environment, you'll get that's higher,
Speaker 12: you'll get better revenue growth. But these stable mature companies
Speaker 12: can't do ten, twelve, fourteen, fifteen percent GF revenue growth.
Speaker 2: GFC is not about no more Garcia party. It's about,
Speaker 2: you know the thing.
Speaker 3: So I'm in this bar and Davos years ago, and
Speaker 3: Scaramucci's pouring me a wine from the Rhan Valley, some
Speaker 3: common hermitage thing that I couldn't afford, best glass of
Speaker 3: wine I've ever had, And I turned around in Gaysky's there.
Speaker 3: We didn't see eighth nine coming. We were sitting in
Speaker 3: that star in Davos. We didn't see it coming. For
Speaker 3: our listeners and viewers who are going, Okay, it's gonna
Speaker 3: happen again, we can't see it coming. What do you
Speaker 3: tell them besides have a glass of overpriced Scaramuci wine.
Speaker 12: Well, it's never bad to have good wine to start with,
Speaker 12: especially in the evening at Davos. However, when you look
Speaker 12: at the conditions that are necessary and sufficient for a
Speaker 12: global financial crisis, remember you had a dramatically over levered
Speaker 12: consumer one hundred and thirty one hundred and thirty one
Speaker 12: debt to income. Now it's roughly ninety four percent. Not
Speaker 12: only have we declined dramatically, but since the end of
Speaker 12: twenty two, consumer debt to nominal income has dropped by
Speaker 12: eight percent. That's a huge number, so you have a
Speaker 12: much more stable consumer. Obviously, the housing market's much more
Speaker 12: stable as well, and the banking system is completely delevered.
Speaker 12: So periodically this concern comes up. We think it's sub
Speaker 12: one percent probability.
Speaker 2: I got to get this in Ned Ludlow rocking it
Speaker 2: today out at CES. Have you been to CES? I
Speaker 2: have not been?
Speaker 3: Yeah, either, having the Belajio breakfast right now. He has
Speaker 3: mister Wang at the one o'clock Goward at eleven o'clock,
Speaker 3: he has what your MIT is all about, the leadership
Speaker 3: of AMD. Miss Sue grew up in Queen's really basic,
Speaker 3: ended up with three. She did better at MIT than
Speaker 3: you did.
Speaker 9: Okay, she's probably smarter than me, you know, But.
Speaker 2: Tell us what it's like as a kid coming out
Speaker 2: of Queens, New York, the intimidation of Robert Solo and
Speaker 2: Edgerton's MIT. It just must be I can't. I can't
Speaker 2: imagine that.
Speaker 12: Well, I'll say it's a humbling experience, tom right, because
Speaker 12: typically when you go there, you've always done well in school,
Speaker 12: You've had good board scores. I hate to use this term,
Speaker 12: but you used to be at least one of the
Speaker 12: smarter people in the room, and then you show up
Speaker 12: on MIT and it's like everybody's a genius and you're
Speaker 12: getting like overwhelmed by just the workload.
Speaker 10: Right.
Speaker 12: That was, and I think particularly public schools prepare people well,
Speaker 12: but you're just not used to that NonStop intense activity
Speaker 12: in Yeah, and then it's also very competitive, right, because
Speaker 12: everything's graded on a curve, so it's like, whoa, you
Speaker 12: have to really mature fast.
Speaker 4: And engineering I would have done like English Lit.
Speaker 2: That's no, she did, and Lisa soon shaped electrical engineering.
Speaker 9: Yeah, challenge Yeah, CORSEIX so course six.
Speaker 10: Yeah.
Speaker 3: She she used to take the Wheatstone bridge across from
Speaker 3: Queen's I ask you, thank you.
Speaker 2: So much for wisdom her stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch us live on YouTube.
Speaker 3: She is Senior Vice President of the Consul and Foreign Relation.
Speaker 3: She is my most definitive voice on Latin America. Shannon,
Speaker 3: I have tattooed to my brain the last time you
Speaker 3: were with us, and you were hugely skeptical that we
Speaker 3: could write and that the Venezuelan people could quote unquote
Speaker 3: do it themselves to rebuild. Give us an update after
Speaker 3: these events. What do the people of Venezuela need to do?
Speaker 2: Well?
Speaker 13: This is the real challenge, right. We've seen just in
Speaker 13: the last seventy two hours, the new regime led by
Speaker 13: the previous vice president now the president of Venezuela, cracking
Speaker 13: down on journalists on any sort of opposition. We really
Speaker 13: haven't seen many protests or return to the streets, in
Speaker 13: part because many of those people have left. We have
Speaker 13: over eight million Venezuelans who have left in our elsewhere,
Speaker 13: including Nobel Laureate Maria Corina Machado, including the man who
Speaker 13: stood up for president and by all accounts won the
Speaker 13: twenty twenty four elections.
Speaker 4: So it's been quite subdued.
Speaker 13: And the guns, the you know, repressive forces are out
Speaker 13: on the streets.
Speaker 4: So what do they need to do.
Speaker 13: They need to rally, but it's very hard to do given.
Speaker 2: This hardarell for guns pointed at your head.
Speaker 13: That's the challenge, right, Hey.
Speaker 2: Ricardo Houseman, cut right to it, right, Paul, Yeah, absolutely So.
Speaker 5: I mean, I guess one of the questions this seems
Speaker 5: like that Trump administration believes they can exert some influence
Speaker 5: on this Venus whaling government.
Speaker 4: How do you do you think that can play out?
Speaker 13: I mean, I think they can exert some influence, but
Speaker 13: we really haven't heard from the Trump administration and interest
Speaker 13: in return to democracy, right, Those haven't been the words
Speaker 13: coming from the President, from the.
Speaker 4: Secretary of State.
Speaker 13: They've talked about reviving the oil industry. They have talked about,
Speaker 13: you know, bringing stability to Venezuela, but they haven't really
Speaker 13: talked about democracy.
Speaker 3: I got to get this question into because I need
Speaker 3: to be rude to doctor O'Neil this morning. Have you
Speaker 3: spoken to anyone within the Trump administration of your expertise
Speaker 3: on Venezuela, Guyana and everything South.
Speaker 13: I have not been speaking to them these last few days.
Speaker 2: That's half the problem probably, So I don't know.
Speaker 4: Open ending question here, how do you think this plays out?
Speaker 4: I mean, I'm not sure much is going.
Speaker 5: To change here, I guess is what a lot of
Speaker 5: people are starting to come to the conclusion and maybe
Speaker 5: not a lot it's going to change here.
Speaker 13: I think there's sort of two scenarios. One is that,
Speaker 13: as you say, not a lot changes. We have a
Speaker 13: new leadership head, but not a regime change. Lots of
Speaker 13: the other pieces stay in place as they are now,
Speaker 13: you know, oil and others. You know, there may be
Speaker 13: US players who come in though it's still kind of
Speaker 13: a shaky market and the infrastructure is very weak after
Speaker 13: years and years of sort of degradation.
Speaker 6: So one is sort of.
Speaker 13: As you say, stability, continuing, new figurehead, but not alloted changed.
Speaker 13: The other is that, you know, the current president, Delcia Rodriguez,
Speaker 13: she isn't able to keep all of these forces right,
Speaker 13: the various different groups with guns together and we get
Speaker 13: sort of a fragmentation, disintegration and a lot of violence.
Speaker 2: Vinstaville, you met with Elcia Rodriguez.
Speaker 13: I haven't no, because you're the.
Speaker 3: One person I think what Delcia Rodriguez is like twenty
Speaker 3: eight to thirty years old. She and her mother take
Speaker 3: over the Venezuelan embassy in London a million years ago.
Speaker 2: Is part of the Socialist protest. I mean, she's like
Speaker 2: the real deal.
Speaker 4: Within the Socialist she was chief of staff to Ugo Chavez.
Speaker 13: I mean she has a long history with this movement.
Speaker 2: And she knows all the players.
Speaker 13: Is yeah, and she's been a player for a long time.
Speaker 3: Right, Shannon on you know, with us the Console Foreign
Speaker 3: Relations after Ricardo Hausman of Harvard Tip brief Global Wall
Speaker 3: Street on these events in Venezuela.
Speaker 2: Paul screening with doctor O'Neill.
Speaker 5: So, one of the expectations of the Trump administration is
Speaker 5: that major global.
Speaker 4: Oil companies will go into Venezuela.
Speaker 5: And revive their energy infrastructure, creating more supply in.
Speaker 4: The marketplace, keeping oil energy prices down.
Speaker 5: But we've spoken to people saying I'm not so sure
Speaker 5: because that's a it's a lot of money, and B
Speaker 5: it's a long term investment, which means you're banking on
Speaker 5: political stability in that country. It's a tough bet to
Speaker 5: make these days.
Speaker 10: Isn't it.
Speaker 13: I think it's a really tough bet to make, and
Speaker 13: especially if you're a public company, if you have shareholders.
Speaker 13: You know, what we've seen in Venezuela for the last
Speaker 13: twenty five years is really the solidifications of the consolidation
Speaker 13: of crony capitalism. So if you're going in there, and
Speaker 13: we're not yet disrupting some of the you know, the
Speaker 13: bad players, the corruption, the back and forth. So one
Speaker 13: is you need hundreds of billions of dollars in investment
Speaker 13: just to get oil out of the ground and out
Speaker 13: of the ports. Right, there aren't ports that can actually
Speaker 13: do now. But two, who are you working with? You know,
Speaker 13: if we can to a place again in the United
Speaker 13: States where foreign corrept practices act, where other things are
Speaker 13: being enforced, do you really want to be involved with
Speaker 13: some of these characters.
Speaker 3: So you didn't talk to the Trump administration, I have
Speaker 3: no idea what that's about. Have you spoken to mister
Speaker 3: Worth over at Chevron.
Speaker 13: I haven't spoken with him, but I have talked with
Speaker 13: some of the people in the general energy industry.
Speaker 2: How do they ask you?
Speaker 13: So they care about what's going to happen. Chevron has
Speaker 13: been in Venezuela for the long haul, right, and they
Speaker 13: have gotten, you know, exemptions to continue operating. So for them,
Speaker 13: this is a good turn, right, they won't have to
Speaker 13: worry so much about these ongoing exemptions for licenses. But
Speaker 13: I do hear from others who are in this general space,
Speaker 13: both the oil companies, but also the logistics companies, right,
Speaker 13: those who build rigs, those who do other parts.
Speaker 4: There is a worry.
Speaker 13: You know, we're only three days into this. There's a
Speaker 13: worry about this stability and really does it last? And
Speaker 13: you know, oil companies others, they make long, multi year,
Speaker 13: decades long bets.
Speaker 5: What is the news over the last seventy two hours
Speaker 5: meant for just Latin America in general? I mean, is
Speaker 5: everybody else looking over their shoulder these days? We think Cuba, Cuba,
Speaker 5: maybe Columbia and maybe even some other countries.
Speaker 13: I mean, this is a real break in US policy
Speaker 13: writ large for Latin America, for the world.
Speaker 4: Right, we had a policy.
Speaker 13: In the post World War two period that was really about,
Speaker 13: you know, if not loved America wanted to be admired. Right,
Speaker 13: we were a shining city on a hill. And now
Speaker 13: we're back to gunboat diplomacy literally, right, is that we are,
Speaker 13: you know, the mighty We are going to use coercive
Speaker 13: power and it's going to be transactional. So all of
Speaker 13: the countries around Venezuela are thinking about that.
Speaker 2: Globally, no sparks are coming off the wall.
Speaker 3: When Elliott Abrams and Shannon O'Neill are going out of
Speaker 3: the sea, afarre. What is the distinction in the debate
Speaker 3: between you and Elliott Abrams?
Speaker 13: You No, I think the distinction here, And you know,
Speaker 13: Elliott's one of my great colleagues, so you know, I
Speaker 13: have a lot of respect for him.
Speaker 4: I think the.
Speaker 13: We love Elliott, come on, you know, I think the
Speaker 13: distinction here is right. He has worked in the first
Speaker 13: Trump administration. He worked on Venezuela policy in the first.
Speaker 2: Did they call as I hope? So what's the distinction?
Speaker 9: I hope they did too.
Speaker 13: You know, I think the difference here is probably where
Speaker 13: we get and how we get there, right, And there
Speaker 13: is sort of this use of maximal force.
Speaker 2: America wants to get to the weekend? Right, Paul stop,
Speaker 2: stop the show? Should Paul Sweeney keep his reservation in Aruba?
Speaker 13: I think you're good to go now right, the airspace
Speaker 13: is back open.
Speaker 5: I think you're good to weekend? Was a little dicey, yes,
Speaker 5: So what's the next step here? I mean for Venezuela,
Speaker 5: I'm not sure who's who's gonna make the next step?
Speaker 5: Is the US going to try too some policy here?
Speaker 5: Is Venezuela going to react to the US.
Speaker 4: What should we be looking for?
Speaker 13: So I'd be looking for whether Delcia Rodriguez actually consolidates power.
Speaker 13: Right we saw, you know, last night there were videos
Speaker 13: of a gunfight happening near the you know, the presidential Palace.
Speaker 13: You know, is that just you know, a one particular thing,
Speaker 13: a drone that was flying, or is that sort of
Speaker 13: a bit of a breakdown of these various I mean
Speaker 13: there's four or five different types of groups and militia's
Speaker 13: have guns in Venezuela. Up until recently, they've all been
Speaker 13: working together. We'll see if that continues. So I would
Speaker 13: be watching what happens on the ground there and then
Speaker 13: from Washington, I would be watching, you know, do we
Speaker 13: see any appetite to go beyond just the snatch and
Speaker 13: grab that we saw?
Speaker 3: Ricardo Housman spoke emotionally about his family coming from Europe
Speaker 3: to Venezuela and all the hardships of World War two
Speaker 3: for Americans like me, Like literally, I'm so intimidated by
Speaker 3: Shannon O'Neil, Like I didn't.
Speaker 2: Get a map out.
Speaker 3: So Caracas is on the water waving at a Ruba
Speaker 3: and Currissou in Trinidad.
Speaker 2: And to Bason right, you go to these places, I
Speaker 2: have no life. Okay, what's the rest of Venezuela think
Speaker 2: of all this? You've got the oil to.
Speaker 3: The west, the oil to the east, and then Guiana. Okay,
Speaker 3: along the water, I get it. But up in the
Speaker 3: Andes and then down to the plains and then the
Speaker 3: tropical nothingness towards Brazil. What do the rest of Venezuela think?
Speaker 13: What you have seen, especially of these last couple of
Speaker 13: decades too, especially on the borders, is really lawlessness. And
Speaker 13: on the Colombian border you've seen you know, the E
Speaker 13: l N, which is a gorilla group from Columbia really
Speaker 13: move in and solidify. So there's a lot of contraband
Speaker 13: and illegal goold and mineral mining and the like. So
Speaker 13: there's some of those areas that are really lawless. There
Speaker 13: are other areas that you know, really aren't under central control.
Speaker 13: So I think a question here. It's worked well under
Speaker 13: Maduro because they've all sort of worked together, these various
Speaker 13: arm groups, and there's a live and let live sort
Speaker 13: of you know, kleptocratic model. The question is what happens now?
Speaker 13: Does that continue and this you know, business as usual,
Speaker 13: or do we see a breakdown, Teddy Rouseveld.
Speaker 9: But maybe it is, you know, but it's not funny.
Speaker 3: You've just described with all of your professionalism the violence
Speaker 3: of Venezuela.
Speaker 2: We're going to drop our men and women into this.
Speaker 3: Is marines or green berets er what are the modern
Speaker 3: green berets, seals or whatever.
Speaker 13: I don't think we are going to drop them in.
Speaker 13: And that's the thing, right, I think what we have
Speaker 13: done is is take out Maduro. But I don't see
Speaker 13: US troops moving in for any long term.
Speaker 5: What I'm learning, I think a lot of other folks
Speaker 5: have been learning over the last several days, is there's
Speaker 5: a large number of people who have left Venezuela. Is
Speaker 5: there any kind of I know, organization around those people?
Speaker 5: Is there any movement of those people? There is there
Speaker 5: any maybe drive from some of that population that drive
Speaker 5: change in Venezuela? Or those are the folks that just
Speaker 5: wash their hands.
Speaker 13: Look, I think you know Ricardo Hasman perhaps and his
Speaker 13: family is one of these. You know, there are many
Speaker 13: people who would love to go back to Venezuela. Right,
Speaker 13: There's there's sort of you know, educated upper classes. Many
Speaker 13: live in Miami, you live in other parts of the
Speaker 13: United States. There's millions who are across Latin America, especially
Speaker 13: South America, Columbia, Peru, Chile, Argentina and the like. I
Speaker 13: think many would like to go back, but I don't
Speaker 13: yet in talking to some of this diaspora in the
Speaker 13: last few days, I don't yet see anybody thinking that
Speaker 13: this is the moment.
Speaker 3: Okay, one final question, audible, we got ism yesterday Michael
Speaker 3: McKee here at Bloomberg or Expert says we're on the
Speaker 3: cusp of a manufacturing recession.
Speaker 2: Give us a Shannon O'Neill tariff's.
Speaker 3: Update on not you know, the emotion and the politics,
Speaker 3: but on American output. Are tariffs diminishing our output? Is
Speaker 3: McKinley faced in eighteen ninety eight.
Speaker 13: Yes, they are diminishing our output. And I think the
Speaker 13: biggest challenge is that while you know, tariffs create a
Speaker 13: wall that create protection and a reason to produce here,
Speaker 13: all of the inputs to create those factories here are tariff,
Speaker 13: and some of them tariff at very high rates. Aluminum, steel, copper,
Speaker 13: the things to build the physical infrastructure, and the machines
Speaker 13: that might be imported from China from other places. So
Speaker 13: it's hard to stand up. It's more expensive today to
Speaker 13: stand up a factory, so it's slower coming in.
Speaker 2: We got to go to the market. Shannon. You know, folks,
Speaker 2: I'm a member of the Council on Foreign Relations, so I'm.
Speaker 3: Talking my book. Don't let Kurtz Phelim know this. Okay,
Speaker 3: but you guys are rocking the magazine. I open the
Speaker 3: magazine up, okay, Li's economies in the magazine. Yeah. Yeah,
Speaker 3: And then the woe that replaced Liz sends me a
Speaker 3: text on LinkedIn and says, hey, stupid, I've got an
Speaker 3: article out too, back to back in Foreign Affairs, two
Speaker 3: must reads on China. I mean, folks, get a subscription
Speaker 3: to Foreign Affairs. Throw it at your brady twenty two
Speaker 3: year old and say shut up and read it. Bonus, Lisa,
Speaker 3: It's in a bigger font for you and me who
Speaker 3: can actually read it.
Speaker 6: Excellent.
Speaker 2: Can you come back sometime soon, like.
Speaker 13: You know, anytime. I'm just up the road, Shanna.
Speaker 3: Thank you so much doctorning a off of Park Avenue
Speaker 3: with Consol and Foreign Relations. I can't say enough about
Speaker 3: her commitment to Latin America and making us wiser and brighter.
Speaker 2: Over the recent years.
Speaker 3: Stay with us more from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 3: We welcome back, seriously, Lisa, the lightness of newspapers.
Speaker 2: What do you have?
Speaker 4: Okay, we do? I want to talk more.
Speaker 14: It kind of flows into what we've been talking about
Speaker 14: about Madodo, about the breaking news that happen and all
Speaker 14: of the deep fakes that came out when the news broke,
Speaker 14: and it kind of yes, AI and all the fake
Speaker 14: fake pictures everything that came out because a lot of
Speaker 14: AI generators they have rules against, you know, doing things
Speaker 14: like this, for people creating images like this, but the
Speaker 14: problem is that you can't control it some of the time.
Speaker 3: So that we are tearing the fancy billionaires for the
Speaker 3: foot yacht.
Speaker 2: It's small, right, one hundred.
Speaker 4: Foot they control it and they can't.
Speaker 14: They can't because it's sometimes there's there's these workarounds for it.
Speaker 14: So what the New York Times did did is that
Speaker 14: they actually went on so they went onto like open AI.
Speaker 4: They went on to Gemini.
Speaker 14: They went onto the X platforms to see if they
Speaker 14: could generate an image of my Doudo, and it turns
Speaker 14: out they did so, so it can be done. But
Speaker 14: it's this whole question of you know, these companies are saying, well,
Speaker 14: you know, it can't be done, but it's happening. And
Speaker 14: so this is the whole question behind this article is
Speaker 14: what to believe?
Speaker 2: What's not unbelievable?
Speaker 3: Like I'm looking at Duke winning a college football ball game.
Speaker 4: I thought it was a hey, fake news exactly, it
Speaker 4: was real.
Speaker 5: So but yes, it's tough to and this is the
Speaker 5: first time we've seen with real time bigness.
Speaker 4: Yeah, real time big news.
Speaker 14: I mean there's been other stories too about you know,
Speaker 14: fake crowds, you know in Venezuela, Like you see these
Speaker 14: pictures on let's say your Instagram, theed or or wherever,
Speaker 14: and a lot.
Speaker 4: Of this is not real.
Speaker 14: So it's hard to determine what to believe when you're
Speaker 14: working news.
Speaker 2: Let's have to say about the show.
Speaker 14: Okay, Paul, I have a question for you to the
Speaker 14: next story. Is golf exercise? It's exercise, yes, because I walk?
Speaker 2: You do walk?
Speaker 4: Yes, you know I'm going to call. No, we have caddies.
Speaker 4: We have the jocks. So you don't hop in the
Speaker 4: golf cart and go right.
Speaker 5: Now, I walk unless there are no caddies. But we
Speaker 5: have a great caddy program.
Speaker 2: Show play slow.
Speaker 4: I played as quickly as possible. I'm ready golf. So
Speaker 4: you get your ball, take a look and swack it.
Speaker 14: Okay, So okay, it's exercise in your case.
Speaker 9: I got it.
Speaker 14: But there's a lot of people, well they especially the
Speaker 14: head of like Equinox, this book the Wall Street Journal,
Speaker 14: who says, you know what, it's really not because you're
Speaker 14: hopping in a golf cart. You're having like a beer
Speaker 14: like the ninth.
Speaker 4: True, that's true. Get you're drinking ie, we do some Yeah.
Speaker 5: Swing oil is involved oil yep. Oh swing a little
Speaker 5: transfusion going there, yep, that's how you roll.
Speaker 9: Well, they talked about this.
Speaker 14: He's basically saying, you know what, golf is not real exercise.
Speaker 14: But he talked about the whole longevity market and how
Speaker 14: big it's becoming for especially they're their top clients, how
Speaker 14: they're paying like tens of thousands of dollars for these
Speaker 14: top things.
Speaker 3: Twenty second audible. Here do you believe Lisa, that's society
Speaker 3: has actually dramatically decreased it's consumption and alcohol.
Speaker 4: Oh, actually everywhere.
Speaker 14: No, most definitely, because even when I hang out with
Speaker 14: a group of friends, you notice how some people order
Speaker 14: the the mocktails because they think I'm not drinking anymore.
Speaker 14: It's dry January, you know, like some people do that.
Speaker 4: How many took a gummy before that?
Speaker 2: So what is it?
Speaker 4: That's the web February February.
Speaker 9: Yeah, come back February.
Speaker 2: You know, Jenny Kreamhills are a mock too. Yeah. Next, okay, okay.
Speaker 14: This is the quick one, a five and thirty five
Speaker 14: pound bluefin tuna smash reference.
Speaker 4: Okay.
Speaker 14: It's sold for more than two million dollars. It's Tokyo's
Speaker 14: first fish auction of the year. It was bought by
Speaker 14: this company, Kio Moricorp. They operate Sushi San my restaurant chains.
Speaker 14: But the head of the company, he's like known as
Speaker 14: the tuna King. Okay, and he says, the first fish
Speaker 14: brings good luck.
Speaker 4: There's a picture here in the Telegraph. This is monster
Speaker 4: tuna fish.
Speaker 12: It is a.
Speaker 14: Monster tuna fish. And within hours it was already being
Speaker 14: sliced up and serve. Sure out at the restaurant. But
Speaker 14: I'm a big sushi fan. Yes, I'm pretty basic. I
Speaker 14: don't go you know, the eel and all that.
Speaker 2: Yeah, do you have like three times a day you
Speaker 2: have sushi?
Speaker 4: Like it could rot to the tune out Yeah, protein, yes,
Speaker 4: the newspapers.
Speaker 2: Lisa Manteo, Thank you so much.
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