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Speaker 2: We moved to this speech this morning, and of course
Speaker 2: the international economics personified by Adam Posen. He is leadership
Speaker 2: at the Peterson Institute, arguably the toughest act to follow
Speaker 2: in think tanks. He's done Yelman's duty there and we're
Speaker 2: thrilled he could summarize all the academics at Peter Institute.
Speaker 2: Doctor Posen joins us this morning, you have the advantage
Speaker 2: of a shocking set of quality, Adam. In international economics,
Speaker 2: I see Wai mckibbon and Marcus Nolan, the giant Marcus
Speaker 2: Nolan writing about tariffs, the Adam Posen summary, If we
Speaker 2: get a certain magnitude of tariff, what does it mean
Speaker 2: for our listeners and viewers?
Speaker 3: Thanks Tom, thanks for monitoring our work. And the new
Speaker 3: piece by mckibbon and Noland is the latest best thing
Speaker 3: on what a tariff concentrated on China, Mexico, Canada, would do.
Speaker 3: I think your viewers, your listeners should think about three
Speaker 3: sets of magnitudes. First is negotiating tools small and for
Speaker 3: the most part, limited to a bunch of other countries,
Speaker 3: a bunch of countries, but not all across the board.
Speaker 3: That's annoying, a burden on US households, not a huge
Speaker 3: deal macro economically or market terms. The second level is
Speaker 3: what they're talking about, which is potentially putting on tariffs
Speaker 3: across the board at ten or fifteen percent across almost
Speaker 3: all countries, almost all industries. That's a genuine large tax increase,
Speaker 3: and it's a particularly just stortionary tax increase. That's going
Speaker 3: to be meaningful inflation for American households, and it's going
Speaker 3: to be more like shortages felt in a lot of areas.
Speaker 3: So it's not just a question of what percentage of
Speaker 3: what part of the economy. And that's part of what
Speaker 3: the modeling way of Peterson and others are trying to
Speaker 3: do is tease that out. That also is a world
Speaker 3: in which you get retaliation almost certainly from China, Europe, Canada, Mexico, everybody.
Speaker 3: And that's a world in which everything shrinks. Sorry. Third
Speaker 3: last version, they overdo it we get a recession.
Speaker 2: I look at them at the work here, folks. I
Speaker 2: really want to emphasize the academics here of say William
Speaker 2: Klein at Peterson was foundational to moving away from President
Speaker 2: Trump's unilateral and bilateral as Paul would say, transactional discussion,
Speaker 2: and William Klein said, we don't understand the multilateral ramification
Speaker 2: of what we do. What would William Klein say, Adam
Speaker 2: Posen about the multilateral impact of these tariffs.
Speaker 3: Well, I hope you'll have bill on soon. But the
Speaker 3: fact is this is reversing ninety plus years of history
Speaker 3: in which the US has both as enforcer and as
Speaker 3: exemplar said, you don't get rich by closing your markets,
Speaker 3: and other countries have cheated, and it's mostly harmed them
Speaker 3: more than it's harmed the US, certainly, and more than
Speaker 3: it's hard the rest of the world. But in general,
Speaker 3: we've gone to a world where, for the last twenty
Speaker 3: five years, the rest of the world keeps integrating and opening,
Speaker 3: even China and the US has been standing still in
Speaker 3: terms of integrating and opening. And so this now tips
Speaker 3: us backwards. And you know, this is a world where
Speaker 3: things are going to be more expensive, Innovation is going
Speaker 3: to be less widely shared, conflict and uncertainty for business,
Speaker 3: investment is going to be up, and the developing countries
Speaker 3: of the world will be getting more shut out except
Speaker 3: for the few very big ones like India and Brazil.
Speaker 3: And in the end, it's not going to serve any
Speaker 3: of the goals that President Trump claims he wants. It's
Speaker 3: not going to close the trade deficit. It's not going
Speaker 3: to weaken the dollar. It's not going to lead to
Speaker 3: better US technology, it's not going to lead to more
Speaker 3: than a few hundred thousand more manufacturing jobs and most
Speaker 3: and it probably is going to lead to inflation.
Speaker 4: Adam, giving that backdrop here, what's your view of China
Speaker 4: these days, and given the challenges they face, and given
Speaker 4: kind of some of the policies we're starting to see
Speaker 4: coming out of the Trump administration.
Speaker 3: You're absolutely right, again in the same spirit of it's
Speaker 3: a general equilibrium. Other people exist world. China's got deep,
Speaker 3: deep problems. And you and I started talking about this,
Speaker 3: you know, eighteen twenty months ago when I was writing
Speaker 3: in Foreign Affairs that China is economic long COVID, It's
Speaker 3: not just a real estate problem. It's not just that
Speaker 3: they're going through a short term downturn. This is fuldamentally
Speaker 3: about demographics and distrust of the government, and she pushing
Speaker 3: too far with intervention, leaving a side. What I know
Speaker 3: you've talked about in this program many times the irony
Speaker 3: of the US emulate China just as China is blowing
Speaker 3: itself up. The real issue is does this make them
Speaker 3: more desperate to dump goods on you borest of the world.
Speaker 3: If the US shuts them out, does this make them
Speaker 3: more desperate to pursue self sufficiency, which will be a
Speaker 3: vicious cycle downwards for them, but also encourage the US
Speaker 3: and others to shut up their markets. I think the
Speaker 3: bottom line is China. There's a lot of ruin in China,
Speaker 3: especially in a communist run state, but they're not going
Speaker 3: to be growing anything like what they were growing at
Speaker 3: and their moves towards so called self sufficiency are hurting them.
Speaker 4: So, Adam, is globalism dead or is it just kind
Speaker 4: of on pause here?
Speaker 3: I think it was on pause. I think we're going
Speaker 3: through a setback, but it's not one of the most
Speaker 3: important things about globalization, meaning the not just trade, but
Speaker 3: the crossing of people, ideas, goods, investment, capital across borders
Speaker 3: is it's always been with us. You go back thousands
Speaker 3: of years in ancient China and ancient Rome, they were trading.
Speaker 2: With each other.
Speaker 3: You go back hundreds of years, and even in the
Speaker 3: Middle Ages, even in the times of backwardness, there were
Speaker 3: great amount of trade and interaction because the gains are
Speaker 3: so large, because people want variety, they want new ideas,
Speaker 3: they want entrepreneurship and possibility. I don't mean to get
Speaker 3: teary eyed, but this is the reality. So nobody's going
Speaker 3: to kill globalization. What they are going to do is
Speaker 3: make things bad for.
Speaker 2: One Adam City. I actually traveled with this. I think
Speaker 2: I read a couple chapters at Jackson Hole Doug Irwin
Speaker 2: and Maurice Obsfield floating exchange rates at fifty. I got
Speaker 2: way too much peace, love and dope on the show.
Speaker 2: Right now. Nobody's looking for Ecuador, nobody's looking for Mexico.
Speaker 2: To you and the team at Peterson Field, not to
Speaker 2: harp on nineteen ninety eight, but are we set out
Speaker 2: there for the headaches that Stanley Fisher faced in the nineties.
Speaker 3: I think Tom, it's good to be looking at these
Speaker 3: historical analogies, but I think we're set out there for
Speaker 3: the headaches that we're faced in the eighties, that the
Speaker 3: US gets so caught up in this mismatch macro policy
Speaker 3: of loose fiscal tiding belatedly type money and a huge
Speaker 3: upscore dollar cycle that just continues and that leads to debt.
Speaker 3: Gracis around the world now again India, Brazil, possibly Mexico
Speaker 3: depending on how badly Trump treats them, Indonesia, Turkey now
Speaker 3: that it's getting attacked together, the largest dm are actually
Speaker 3: going to do okay, especially in a world of geopolitics.
Speaker 2: But the rest of.
Speaker 3: The developing world, almost all of Africa, South Asia outside
Speaker 3: of India, Central America, large parts of South America, outside
Speaker 3: of Brazil, these are going to be suffering. As the
Speaker 3: IMF and the World Bank keep talking about that, there's
Speaker 3: huge amounts of debt that just keeps accumulating because there's
Speaker 3: not the growth, not the options and goes in. The
Speaker 3: AB keeps talking about open trade is the way to
Speaker 3: development for these countries, and the world's shutting down.
Speaker 2: Adam. One final question, speaking of trade, do the Red
Speaker 2: Sox have a prayer? I mean, did they participate in
Speaker 2: the off season.
Speaker 3: It's amazing, Tom. I know you keep track of the
Speaker 3: Bruins and everything, watching the Celtics, watching the New England
Speaker 3: Patriots actually have a revival of hope, and seeing the
Speaker 3: Red Sox just sort of go eh, I don't get it.
Speaker 3: I don't get it.
Speaker 2: Did you buy any Walker Bueler Merch yet? No. Adam
Speaker 2: and I are on the same pigeon, Doctor Posen, Thank
Speaker 2: you so much, the gentlemen from Brookline Manchuse. It's Adam
Speaker 2: pos and of course what a job at the Peterson Institute.
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Speaker 2: Ted pic just brilliant in Davos. Why was he brilliant
Speaker 2: because he reads Sarah Wolf. That's why Sarah Wolf joins
Speaker 2: us now. Mister Pick starts every morning listening and reading
Speaker 2: his thematic and macro investing team at Morgan Stanley as well.
Speaker 2: You're sitting and having a beverage of your choice with
Speaker 2: mister Pick. What do you say about tariffs? Am I right,
Speaker 2: that this is a study of magnitude more than anything
Speaker 2: else to.
Speaker 5: Study of magnitude, and it's a study of timing. If
Speaker 5: we look back to the x axis. The x axis,
Speaker 5: of course, if we look back to the twenty eighteen,
Speaker 5: twenty nineteen tariffs, and you read the transcripts among the
Speaker 5: FMC participants, they were brought looking through the tariffs right
Speaker 5: that it was a one off price effect, that it
Speaker 5: wasn't going to be inflationary for the longer run, and
Speaker 5: they were more worried about the following hit to growth
Speaker 5: after the tariffs. Can we do the same thing this time?
Speaker 5: Not necessarily, it's a little bit more complicated. If we're
Speaker 5: phasing in tariffs over the course of this year, it's
Speaker 5: going to be a lot more difficult to discern the
Speaker 5: effects of tariffs versus the effects of, you know, just
Speaker 5: real inflation. It's also going to be a price level
Speaker 5: increase that's occurring over a longer period of time than normal.
Speaker 5: So it's going to be more inflationary than what we
Speaker 5: saw back in twenty eighteen twenty nineteen, and so the
Speaker 5: FED might be in a position where they're going to
Speaker 5: have to take cuts off. If that's the case or
Speaker 5: not cut at all and kind of be on hold
Speaker 5: until they see all the tariffs play out and what
Speaker 5: it means for economic activity.
Speaker 4: So the Fed's really really going to be looking at
Speaker 4: this tariff news coming out of the next several months.
Speaker 5: Yeah, I mean right now, we were thinking that tariffs
Speaker 5: were going to be more of a back half of
Speaker 5: twenty twenty five story and start to phase in. But
Speaker 5: as we heard from Trump in the last couple of
Speaker 5: days February first, we could already be seeing tariffs on China,
Speaker 5: tariffs on Mexico and Canada. Mexico and Canada we're watching
Speaker 5: very closely. That could be pretty detrimental to US manufacturing.
Speaker 5: Our auto supply chains are incredibly interlinked with Canada up
Speaker 5: in the North computers, electronics, all the type of manufacturing,
Speaker 5: and so not only is eighty percent of Mexico and
Speaker 5: Canadian trade with the US, but twenty percent of our
Speaker 5: trade is with them as well. So this is a
Speaker 5: bigger deal on.
Speaker 2: A game theory basis. Down at Laredo, I've actually been there,
Speaker 2: folks at the border at the Windsor Bridge over to
Speaker 2: Detroit's where the hoard comes over from Ontario to watch
Speaker 2: the Detroit Lions and the Detroit Tigers on a game
Speaker 2: theory basis, they're going to respawd, then what do we do?
Speaker 5: So I think this is all going to be a
Speaker 5: game leading up to the renegotiation of the USMCA right,
Speaker 5: which is in twenty twenty six. And so if we
Speaker 5: put tariffs on Canada and Mexico, they retaliate and put
Speaker 5: tariffs on the US and that's going to hurt US
Speaker 5: economic activity. And then I think probably within six months
Speaker 5: to a year, we pull back the tariffs and that
Speaker 5: helps the US get some of the things that they
Speaker 5: want out of Canada in Mexico as we go into
Speaker 5: twenty twenty six negotiations. So what does the US want?
Speaker 2: Right?
Speaker 5: They want Canada Mexico to be stricter on immigration from
Speaker 5: their side of the border. They want the countries to
Speaker 5: be stricter on fentanyl, so drugs entering the US. And
Speaker 5: they want to be stricter on Chinese foreign direct investment
Speaker 5: that's filtering through Mexico and then back into the US.
Speaker 4: So has all of this from the Trump administration from
Speaker 4: the election, has it changed your view of kind of
Speaker 4: the economy, how to invest, where to invest? Has it changed.
Speaker 5: Yeah, it definitely has. I mean, we're looking for more diversification.
Speaker 5: We think that valuations are a little bit bloated right
Speaker 5: now for the US and there's some downside risk economic activity.
Speaker 5: We should be looking to diversify, possibly in Europe. There's
Speaker 5: some big policy changes happening in France, Germany in the
Speaker 5: UK this year. We also are looking to emerging markets
Speaker 5: for opportunity, and so we do think that even though
Speaker 5: there is the story of US exceptionalism, that things are
Speaker 5: a little bit too expensive here. The other thing we're
Speaker 5: looking at within US stocks is to be selective. So
Speaker 5: the consumer for example, which we talk a lot about
Speaker 5: on the show, Internationally sourced consumer goods are going to
Speaker 5: have a tough year between a strong dollar, between tariffs,
Speaker 5: and so consumer services might be a nice place to
Speaker 5: hide again for twenty twenty five.
Speaker 2: But Sarah, we're nowhere near job banks or and your
Speaker 2: team Subercarpenter, Ellen, Zenner, Keeping and Alle until the job
Speaker 2: market breaks. It's a solid.
Speaker 5: Economy, right, Yeah, there's nothing really concerning here in the
Speaker 5: claims data right initial claims are basically low moving sideways,
Speaker 5: which is reflecting that we're not seeing layoffs continue claims
Speaker 5: are trending higher, and we saw that in the report
Speaker 5: this morning, but that's just because we're not hiring as much.
Speaker 5: And so if I look at the totality of the data,
Speaker 5: labor demand seems to be solid and actually stabilizing. Into
Speaker 5: the fourth quarter, there was actually a reacceleration in labor income,
Speaker 5: and so that's really benefiting consumers and consumer spending, and
Speaker 5: that momentum is carrying through into twenty twenty five. I
Speaker 5: think the bigger question for this year, right is labor supply,
Speaker 5: not labor demand. And that's the immigration story that we're
Speaker 5: watching very closely. Immigration was adding over one hundred thousand
Speaker 5: to payrolls the last two years, and so what does
Speaker 5: that mean for this year? If we close down the border,
Speaker 5: if we have deportations, we're likely going to see a
Speaker 5: pretty sharp slow down in payrolls because of losing that
Speaker 5: labor supply. What can that mean for wages? What can
Speaker 5: that mean for inflation? And then, as we all care
Speaker 5: about most, what does that mean for the Fed?
Speaker 4: So given that backdrop, how do you expect the FED
Speaker 4: to proceed this year? I mean, you know there's been
Speaker 4: if you look at the work function on the Bloomberg journel.
Speaker 4: It's been all over the place in the past six
Speaker 4: to nine months. Now, I think we're out of pricing
Speaker 4: maybe a couple of rate cuts this year.
Speaker 2: But yeah, again, people.
Speaker 4: Seem to be all over the place. How do you
Speaker 4: guys think that's going to play out?
Speaker 5: I mean, we still think that the Fed's going to
Speaker 5: be able to deliver about two cuts. Of course, we're
Speaker 5: a little bit more focused on the risk of tariffs
Speaker 5: coming earlier and curbing that. So we're a bit more
Speaker 5: long duration than perhaps what markets are pricing in right now.
Speaker 5: Right now, right there's a fifty percent chance for a
Speaker 5: second cut. We think that that can move high or
Speaker 5: to fully price in two cuts. Yeah, because you know,
Speaker 5: we're a little bit more optimistic that the inflationary effect
Speaker 5: is not going to be as aggressive and that there's
Speaker 5: going to be that negative growth effect from immigration and
Speaker 5: higher tariffs, because right now we're seeing that consumers can't
Speaker 5: really take that much price.
Speaker 2: I got to get this in January flies By. We're
Speaker 2: getting near a February jobs report. Yesterday I saw a
Speaker 2: nice study of potential revisions. Yeah By BLS model it
Speaker 2: in for us. How much does it bring it down.
Speaker 5: Yeah, this is a huge catalyst. So probably it's going
Speaker 5: to revise down twenty twenty four payrolls by about eighty
Speaker 5: six thousand a month, So bringing that number down to
Speaker 5: closer to a one hundred and ten to one hundred
Speaker 5: and twenty thousand jobs a month.
Speaker 2: Wow, what's okay to me? That's a wild number, Am
Speaker 2: I wrong?
Speaker 5: No, it's going to be significant. I think that More
Speaker 5: important is probably what we see on the household survey, though,
Speaker 5: because the payroll survey, the establishment survey, is being pretty
Speaker 5: muddied by this immigration story. What you're seeing in the
Speaker 5: revisions is that they're really they're benchmarking to the QCW report,
Speaker 5: which tracks initial jobless names.
Speaker 2: Okay, I got I got thirty seconds left. I got
Speaker 2: to make some news. When do we get five percent unemployment?
Speaker 5: Not in our base case? And I think unemployment rate
Speaker 5: can actually not in our base case, not even in
Speaker 5: the barecase. No, listen, if we lose labor supply from immigration,
Speaker 5: that's down on the unemployment rate.
Speaker 4: Yeah, that's right.
Speaker 2: So how do we think that I so flunk that
Speaker 2: on the example.
Speaker 3: I know exactly, I mean, I don't know.
Speaker 4: It's interesting. So I have to see how that plays
Speaker 4: through time with the labor market because people me telling
Speaker 4: us it's been in the immigration okay, Park, So are
Speaker 4: you going to.
Speaker 2: Give me a three to nine out unemployment if we
Speaker 2: get major revisions.
Speaker 5: Which you know, yeah, I think for February, what we're
Speaker 5: going to want to be watching is what happens the
Speaker 5: unemployment rate. We're going to get changes to the number
Speaker 5: of people unemployed, changes to the labor force because it's
Speaker 5: rebunchmarking to new immigration numbers. We just want to know
Speaker 5: how tight the labor market is, so we want the
Speaker 5: unemployment sare well.
Speaker 2: Thank you so much with MORGANA. Shelly. That was brilliant, folks.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: Greg Peters, with his leadership in fixed income, leads the way. Greg,
Speaker 2: am I clipping a coupon? Or can I dream of
Speaker 2: total return?
Speaker 6: Thanks?
Speaker 7: Tom, I think it's a little bit of both. But
Speaker 7: you talked about before I joined back to normal. This
Speaker 7: is what normal looks like. So I think what the
Speaker 7: expectation should be is clip the coupon, earn the yield,
Speaker 7: and this is what fixed income was ultimately designed for.
Speaker 6: Right.
Speaker 7: The era of zero interest rates and hoping for toal
Speaker 7: return is the abnormality.
Speaker 6: This is normal.
Speaker 2: Bronze, that exactly, Paul, and I was equity guys were
Speaker 2: just saying, bronze what he just.
Speaker 4: Said exactly, So Greg in the fixed income market, now
Speaker 4: it feels like I got some options here. I mean,
Speaker 4: I can send it to your treasury with the US
Speaker 4: government four point three percent, or I can think about
Speaker 4: taking some credit risk. Where are you guys these days?
Speaker 6: Yeah, so you know, credit risk is a little more tricky.
Speaker 7: So the way I think about credit is that it's
Speaker 7: an affirmation of the growth story, meaning that credit spreads
Speaker 7: are quite quite tight. You know, the richest decile that
Speaker 7: we've seen over the past you know, thirty years, and
Speaker 7: that basically reaffirms the strong macro. Right, so the underlying
Speaker 7: economy is quite good, the corporate fundamentals equally as good,
Speaker 7: and so credit spreads reflect that from an investing perspective.
Speaker 7: From our perspective, at PGM is are you really getting
Speaker 7: paid for the risk and the uncertainty and if things
Speaker 7: do go awry, And the answer is not really, So
Speaker 7: we're quite cautious on the credit side. And it's not
Speaker 7: a statement of fundamentals, it's a statement around valuations.
Speaker 4: So Greg, for you guys at did you change your outlook,
Speaker 4: your philosophy, your return expectations after the election? Did anything
Speaker 4: change for your one way or the other now with
Speaker 4: a new administration.
Speaker 6: Come in not decidedly.
Speaker 7: I think the story that gets lost in here is
Speaker 7: that you know, before the election the economy was pretty strong,
Speaker 7: so this is a very different macro environment than Trump
Speaker 7: two point zero versus one point zero, at least from
Speaker 7: the starting place.
Speaker 6: So no, not a lot has changed.
Speaker 7: What has changed, though, is the move way from the
Speaker 7: focus around central banks and the FED and that policy
Speaker 7: and more around the uncertainty of government policy, and if
Speaker 7: you put it all together, I do think it has
Speaker 7: had an effect on the markets clearly, but from a
Speaker 7: bond market perspective, I think it has on the margin
Speaker 7: pushed up yields because of the concern around inflationary effects
Speaker 7: and then growth effects too, So you know, the big
Speaker 7: move in the bond market hasn't been around inflation. It's
Speaker 7: been around real yields. I know you love that measure, Tom,
Speaker 7: and real yields are up, you know, almost seventy five
Speaker 7: basis points.
Speaker 6: From the you know, end of the third quarter.
Speaker 7: So it's been a real yield move which comports really
Speaker 7: well to the equity story. So it's the rerating of
Speaker 7: growth that you're seeing across the bond market and the equity.
Speaker 2: You can come on anytime, Greg Peters with us, with Peach,
Speaker 2: and we will continue here. We welcome all of you
Speaker 2: on your commute. Huge response College Station, Texas. Just men
Speaker 2: were the fans started say good morning to all of
Speaker 2: you in Texas and of course on YouTube across the nation.
Speaker 2: After your commute in your office at home YouTube subscribe
Speaker 2: to Bloomberg Podcast. Greg and my ute, A guy named
Speaker 2: John Templeton took me by myself. I was so honored,
Speaker 2: and he said in a Tennessee accent, Tom, there will
Speaker 2: be a shortage of bonds. I saw the French oat
Speaker 2: auction the other day and was flabbergasted at the interest,
Speaker 2: Greg Peters, is there a shortage of bills, notes and bonds?
Speaker 7: There is what we call the opposite of a shortage,
Speaker 7: So there's just a deluge and that's what you're seeing
Speaker 7: across the globe, honestly, is that you're seeing this on
Speaker 7: lenting supply of sovereign debt hitting the market. There's lots
Speaker 7: of chatter within the bond market around this notion of
Speaker 7: term premium, which is really, if you distill it, it is.
Speaker 6: Supply and demand.
Speaker 7: How much additional premium do investors require? And you know
Speaker 7: that's on the rise, and the reason why it's on
Speaker 7: the rise is because there is this legitimate and growing
Speaker 7: concern around the debt and deficit and quite frankly, there's
Speaker 7: just so much supply hitting the global bond market that
Speaker 7: there has to be a repricing in term premium. So no,
Speaker 7: sir John, you know, we kind of have the opposite issue.
Speaker 7: The real question that you know we're pondering and it
Speaker 7: doesn't seem to have any effect, is this potential crowding
Speaker 7: out effect. Right, So the theory is there's just so
Speaker 7: much sovereign paper hitting the market that crowds out of
Speaker 7: corporate paper. But we haven't seen that either. So there's
Speaker 7: such a demand for fixed income securities globally that we
Speaker 7: haven't seen any sense of crowding out.
Speaker 2: Greg.
Speaker 4: We hear a lot about US exceptionalism as it relates
Speaker 4: to economic matters. How do you guys think about fixed
Speaker 4: income opportunities outside the United States.
Speaker 7: Yeah, so I'm definitely been on this US exceptionalism story.
Speaker 7: The opportunities this year are actually pretty broad, and so
Speaker 7: what's different about this year versus the previous few years,
Speaker 7: I think is the dispersion, the disparity and the various dislocations.
Speaker 7: So we're in a different macro than we were, So
Speaker 7: you're seeing different inflation regimes, you're seeing different growth regimes,
Speaker 7: and of course as a response, different kind of central
Speaker 7: bank actions. So there's actually better opportunities to go global
Speaker 7: today than.
Speaker 6: It's been in some time.
Speaker 7: Right, So you know the curves are priced differently, they
Speaker 7: should be priced differently.
Speaker 6: So you know, the opportunities in.
Speaker 7: The UK relative to the US, relative to parts of
Speaker 7: the Eurozone at all, is quite robust. It's just not
Speaker 7: one single market. It is truly a global market, and
Speaker 7: I think there's alpha to be sourced there.
Speaker 2: Greg. Maybe a Robert Tripper tem Percelly question, but I'll
Speaker 2: go to you on it. Do you stay up at night,
Speaker 2: worried about the debt and the deficit or do we
Speaker 2: have a growth rate that can sustain this madness?
Speaker 6: I do worry about it.
Speaker 7: The scary part about the debt and deficit is that
Speaker 7: there's no magical number. There's there's no you know, one
Speaker 7: hundred and fifty percent debt to DP whatever you want
Speaker 7: to call, and the markets wake up and say this
Speaker 7: is a p problem. And you're getting a whiff of
Speaker 7: it globally, right. You clearly got it from the Minji
Speaker 7: mini budget crisis in the UK. You got it again
Speaker 7: in the UK in the fall. You're seeing it in France.
Speaker 7: So when you're in such an indebted society, these things matter,
Speaker 7: you just don't know when it matters. So I do
Speaker 7: believe that the risk on the table for the global markets,
Speaker 7: the US market is a debt and deficit, and so
Speaker 7: it's really important for policy makers to not ignore it.
Speaker 6: I know that's a double negative, but.
Speaker 7: To focus on it, to say, hey, this does matter,
Speaker 7: because I do worry about, you know, the.
Speaker 6: Bond market taking over here.
Speaker 7: So I think this is the number one issue on
Speaker 7: the table going forward, and it just cannot be ignored.
Speaker 4: So what are the right now where do you see
Speaker 4: just the best value in the marketplace? Great, because I
Speaker 4: know we've talked that. You mentioned credit spreads are so
Speaker 4: tight here, where's value if anywhere?
Speaker 7: Yeah, So, I mean I do think it's back to normal,
Speaker 7: which is a carry market. So we're not looking for
Speaker 7: this fantastic full return type of marketplace. So it's about carry,
Speaker 7: and so we're building portfolios based on carry. And so
Speaker 7: we want to just own what we call kind of
Speaker 7: safe credit that just rolls down the curve, flip the coupon,
Speaker 7: and not take a tremendous amount of credit risk just
Speaker 7: because we don't think we're getting paid for it. Structured
Speaker 7: products is an area that really fits that bill well.
Speaker 4: And then.
Speaker 7: You know, even though we're tactical, but if you kind
Speaker 7: of zoom out and think about what fixed income does
Speaker 7: in an overall acid alloication scheme, it is the protective measures, right,
Speaker 7: and so if the world does, you know, go pair shaped,
Speaker 7: things don't play out fundamentally as we think, having duration
Speaker 7: in a balance portfolio is critically important and really helpful.
Speaker 7: So we really think there's scope for that in.
Speaker 6: A balance way. And so that's that's where we see
Speaker 6: the value.
Speaker 2: Very cool, Greg we're going to zoom in and know
Speaker 2: we see this on YouTube, folks, Gregor and Peters with
Speaker 2: arsenal Merch in the office. I mean, Greg, do they
Speaker 2: have a chance of catching Liverpool here? What do you think?
Speaker 7: I don't think so, Tom, but I think they're a
Speaker 7: better position than the Tots the.
Speaker 2: Edge of relegation. I mean, get out they called do
Speaker 2: you know, Paul, they call the standings of tables the
Speaker 2: tables the tables if you're informed you look at the
Speaker 2: NFL tables, or that the Tots are on the edge
Speaker 2: of relegation. I mean, it's like an outrage to say,
Speaker 2: at least Greg Peters, thank you with I learned a
Speaker 2: lot there that was really wonderful.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also watch
Speaker 1: us live every weekday on YouTube and always on the
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Speaker 2: Or say good morning to you, and of course the
Speaker 2: front pages. It's a Lisa Matteo Hour. Lisa, what do
Speaker 2: you have this morning?
Speaker 3: All right?
Speaker 8: This one actually is some good news. So a new
Speaker 8: study says college enrollment rebounded since the pandemic. This was
Speaker 8: a study the National Student Clearinghouse Research Center, so the
Speaker 8: data says undergraduate enrollment neared sixteen million in the fall
Speaker 8: of twenty twenty four. But this really stood out. Freshman
Speaker 8: headcounts grew five point five percent. A big part of
Speaker 8: that enrollment of students over the age of twenty one,
Speaker 8: so I'm not sure if those who were putting it
Speaker 8: off are now going back. And then the traditional freshmen
Speaker 8: that come right out of high school a lot of them,
Speaker 8: the biggest rate were from students from low income neighborhoods,
Speaker 8: particularly community colleges. But what really stands out to me
Speaker 8: is this is the time where the fast form was
Speaker 8: such a headache. It was a nightmare for parents, and
Speaker 8: despite ile that, the college enrollment is still going up.
Speaker 4: And because it comes at a time when people really
Speaker 4: are questioning the value of a college education, given the
Speaker 4: cost is a worshiper the debt that a lot of
Speaker 4: kids have to take on to get that degree. Is
Speaker 4: it better to go to a trade school or to
Speaker 4: do some on the path or the community college community
Speaker 4: country exactly.
Speaker 2: I don't look at Reddit too much, but a little
Speaker 2: bit of the Reddit feed that comes in to my
Speaker 2: my email feed. The angst of kids having to pay
Speaker 2: these tuitions sixty seventy ninety thousand years. Yep. Sometimes it's
Speaker 2: out of control.
Speaker 3: It is.
Speaker 8: And there's actually there's an article in the terminal too
Speaker 8: if you look it up, that says financial aid is increasing,
Speaker 8: so hopefully that's going to help. But I've been my
Speaker 8: daughter's on the college and we've been to open houses
Speaker 8: and they are packed, like official the administries are saying
Speaker 8: this is like some of the highest rates.
Speaker 2: COVID thing is it.
Speaker 8: Is exactly okay, this is also post COVID thing. The
Speaker 8: wall streets are has this article here. Their screens are
Speaker 8: taken over classrooms right kindergarten through high school. But educators
Speaker 8: are starting to wonder and question if this is really
Speaker 8: helping or hurting kids learning. So there's a debate, right
Speaker 8: the teachers saying that they help create more engaging lessons,
Speaker 8: but then you have others are saying it's distracting, it's
Speaker 8: burning out teachers because now teachers have to find a
Speaker 8: way from stopping students playing the online games and watching
Speaker 8: videos in between when they're in the classroom. So they're
Speaker 8: saying it's distraction. Parents are trying to take their kids
Speaker 8: opt out of technology. Some students are just tired of
Speaker 8: it in general.
Speaker 4: So it justs this debate.
Speaker 2: Yeah, same, do you think like I have trouble taking
Speaker 2: an exam on the screen. I flunk the last thirty
Speaker 2: Bloomberg exams. But but do you think you retain us
Speaker 2: much off an iPad? I don't think so.
Speaker 8: I think no. I think when I write, I retain it.
Speaker 2: That's mine.
Speaker 8: Yes, I totally agree with that, and I keep trying to,
Speaker 8: you know, tell my doy like you're still doing the
Speaker 8: flash cards and writing it out, and you know, because
Speaker 8: I feel like it helps you remember it a lot better.
Speaker 4: For each company I covered on Wall Street for thirty years,
Speaker 4: I had a notebook for each company for all my notes,
Speaker 4: for all the earnings releases. I had like fifty notebooks
Speaker 4: for Disney, fifteen notebooks for and all my notes were done,
Speaker 4: I felt like when you wrote it down, but that's
Speaker 4: just me.
Speaker 2: Maybe can we have five second audible?
Speaker 4: Yes?
Speaker 2: Afterthought, just got our best report card. Oh goodness, there
Speaker 2: you go.
Speaker 8: No chromebook in his home. Continue And this one I
Speaker 8: found interesting because remember Tuesday when Larry Ellison you know,
Speaker 8: co founder of Oracle shared the stage of White House
Speaker 8: President Trump. They announced that Stargate deal. Well now sources
Speaker 8: telling New York pos that that backing it could save
Speaker 8: his son David Skydance Media to gain that approval that
Speaker 8: it needs to merge with Paramount. They're saying, maybe that's
Speaker 8: some of the reason behind it. Paramount also considering settling
Speaker 8: a ten billion dollar lawsuit President Trump filed against the
Speaker 8: company over bias ahead of the merger, so that kind
Speaker 8: of stood out when he.
Speaker 2: Sat up there.
Speaker 4: There's no regulatory problem for Skydance buying Paramount, but to
Speaker 4: the extent that there's any litigation out there, maybe currying
Speaker 4: favorite with the president's not the worst thing we've seen
Speaker 4: it time and again.
Speaker 2: Thank you so much too, Thank you so much on
Speaker 2: the newspapers. Thank you.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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