1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:33,040 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. There 5 00:00:33,200 --> 00:00:36,239 Speaker 1: is no one, and I mean no one who can 6 00:00:36,280 --> 00:00:40,640 Speaker 1: synthesize the Lehman moment and the direct Lehman moment like 7 00:00:40,760 --> 00:00:45,120 Speaker 1: Brad Hints, legendary at Sanford Bernstein, maker of black Books 8 00:00:45,200 --> 00:00:48,800 Speaker 1: on banking. Mr Hints for three years with CFO at 9 00:00:49,000 --> 00:00:51,720 Speaker 1: uh Lehman Brothers and has moved on to New York 10 00:00:51,800 --> 00:00:55,520 Speaker 1: University where he teaches cherubs what not to do in 11 00:00:55,600 --> 00:01:00,240 Speaker 1: the next crisis. Nobody's talking about Lehman. We're talking talking 12 00:01:00,240 --> 00:01:03,520 Speaker 1: about the moment. It's this fiction from ten years ago. 13 00:01:04,040 --> 00:01:06,280 Speaker 1: You did not live it at that moment, you were 14 00:01:06,319 --> 00:01:10,720 Speaker 1: there before. Give us a window into the Lehman distinction. 15 00:01:10,959 --> 00:01:15,160 Speaker 1: With Richard Fold what made Lehman different at that time? 16 00:01:15,440 --> 00:01:19,199 Speaker 1: I think we have an understanding of the bear Sterns distinction. 17 00:01:19,680 --> 00:01:23,400 Speaker 1: But Lehman's a mystery. What was Lehman like an oh 18 00:01:23,400 --> 00:01:27,919 Speaker 1: five oh six, oh seven? And onto the crisis. Remember, 19 00:01:28,040 --> 00:01:30,880 Speaker 1: Lehman was one of the major players in the mortgage market. 20 00:01:31,120 --> 00:01:33,959 Speaker 1: You wanted to work there, well, of course, I mean 21 00:01:34,000 --> 00:01:36,920 Speaker 1: everyone wanted to work all right, Exactly In my case, 22 00:01:36,959 --> 00:01:39,920 Speaker 1: I was a treasurer Morgan Stanley and I could be 23 00:01:39,920 --> 00:01:42,800 Speaker 1: come the CFO of Lehman. It seemed like a like 24 00:01:42,800 --> 00:01:46,479 Speaker 1: like a wonderful, wonderful move the you know, the the 25 00:01:46,520 --> 00:01:50,600 Speaker 1: issue was Lehman was this marvelous mortgage machine. Now it 26 00:01:50,680 --> 00:01:53,560 Speaker 1: was also a fixed income power around the world. Right now, 27 00:01:54,320 --> 00:01:57,360 Speaker 1: we know that one of the the the issues with 28 00:01:57,440 --> 00:02:01,040 Speaker 1: fixed income is it's not liquid. Right, The market is 29 00:02:01,120 --> 00:02:05,240 Speaker 1: inherently not liquid, which means the market makers have to 30 00:02:05,240 --> 00:02:09,320 Speaker 1: provide the capital. So Lehman was more leveraged than the rest. 31 00:02:10,080 --> 00:02:14,680 Speaker 1: Lehman relied on a lot of short term funding. They 32 00:02:14,720 --> 00:02:16,640 Speaker 1: and by the way, the rest of the street believed 33 00:02:16,639 --> 00:02:21,280 Speaker 1: that repo or the secured financing was rock solid, would 34 00:02:21,400 --> 00:02:25,520 Speaker 1: never never go away. And of course when the fire 35 00:02:25,600 --> 00:02:28,880 Speaker 1: started in mortgages, it's spread elsewhere. Well, what are the 36 00:02:28,919 --> 00:02:30,880 Speaker 1: firms that you're going to hit first? You're going to 37 00:02:31,040 --> 00:02:34,720 Speaker 1: hit the mortgage players, and those were bare and and Lehman. 38 00:02:34,960 --> 00:02:37,720 Speaker 1: In the case of as we were getting to the 39 00:02:37,960 --> 00:02:41,160 Speaker 1: to the end there. Lehman made the bet in two 40 00:02:41,160 --> 00:02:44,840 Speaker 1: thousand seven, remember the crisis they made. They made a 41 00:02:44,880 --> 00:02:49,800 Speaker 1: bet that this liquidity event, the mortgage market falling, was 42 00:02:50,000 --> 00:02:52,840 Speaker 1: a an opportunity. And you actually see if you track 43 00:02:53,200 --> 00:02:56,399 Speaker 1: that their balance sheet rises through the beginning of two 44 00:02:56,440 --> 00:03:02,440 Speaker 1: thousand eight exactly by the that would work nine times 45 00:03:02,440 --> 00:03:04,799 Speaker 1: out of ten in a liquidity event. If you have 46 00:03:04,919 --> 00:03:07,720 Speaker 1: enough liquidity, you could you could live through it, You'd 47 00:03:07,720 --> 00:03:10,919 Speaker 1: make money. They didn't. This is important. The fancy guys 48 00:03:11,000 --> 00:03:13,360 Speaker 1: like you escape the wrath. Mr Fuld I saw I 49 00:03:13,400 --> 00:03:16,639 Speaker 1: think ten days before the collapse. He was exhausted. Yes, 50 00:03:16,680 --> 00:03:19,520 Speaker 1: but you know what life went on. The image we 51 00:03:19,600 --> 00:03:22,480 Speaker 1: have are those backs against the glass wall? Is they 52 00:03:22,520 --> 00:03:25,800 Speaker 1: told the kids goodbye? And then we had the idea 53 00:03:26,160 --> 00:03:28,840 Speaker 1: of the kids walking out with one cardboard box. I 54 00:03:28,840 --> 00:03:32,040 Speaker 1: mean that's the video media images we have today. Are 55 00:03:32,040 --> 00:03:35,040 Speaker 1: those kids gonna walk out of a bank again like that? 56 00:03:35,320 --> 00:03:37,960 Speaker 1: Are we gonna move on to another Lehman where the 57 00:03:38,480 --> 00:03:42,640 Speaker 1: fancy people move on, but the kids can't. They're destroyed. Well, 58 00:03:42,680 --> 00:03:45,640 Speaker 1: I don't think the kids were destroyed. The Lehman was 59 00:03:45,680 --> 00:03:50,080 Speaker 1: a wonderful place to work in terms of the the 60 00:03:50,080 --> 00:03:52,800 Speaker 1: the front office people. They you know, if you go 61 00:03:52,920 --> 00:03:56,640 Speaker 1: to to LinkedIn you'll find you know, the this Lehman 62 00:03:56,720 --> 00:04:00,880 Speaker 1: group of alumni are just loyalists, can be even to today. 63 00:04:00,880 --> 00:04:03,400 Speaker 1: It was the The issue with Lehman was that I 64 00:04:03,960 --> 00:04:09,040 Speaker 1: landed in Milan on the Monday that Lehman filed for bankruptcy. 65 00:04:09,240 --> 00:04:12,160 Speaker 1: I was going on a marketing tour. Now I knew 66 00:04:12,240 --> 00:04:15,760 Speaker 1: Lehman was in trouble. That was the subject on everybody's lips, 67 00:04:15,760 --> 00:04:18,560 Speaker 1: and I was hitting the European markets. While I was 68 00:04:18,600 --> 00:04:21,040 Speaker 1: in the air Lehman, it became clear that Lehman. I 69 00:04:21,279 --> 00:04:26,680 Speaker 1: I landed Bernstein set up an eleven hundred client conference call. 70 00:04:27,120 --> 00:04:29,680 Speaker 1: Now remember the rest of the street is burning, so 71 00:04:29,839 --> 00:04:33,960 Speaker 1: none of the equity analysts could talk save me, which 72 00:04:34,040 --> 00:04:36,640 Speaker 1: was a wonderful thing to work at Bernstein at that moment. 73 00:04:36,920 --> 00:04:39,880 Speaker 1: So I'm on the call. What was the message that 74 00:04:40,000 --> 00:04:42,960 Speaker 1: came from from all of those eleven clients? It was 75 00:04:43,320 --> 00:04:46,400 Speaker 1: huge fear. Why did the Fed allow it to go? 76 00:04:46,560 --> 00:04:50,000 Speaker 1: So there was amazement, there was fear, there was disbelief, 77 00:04:50,600 --> 00:04:56,200 Speaker 1: and who held Lehman exposure? Was the question? And that 78 00:04:56,279 --> 00:05:00,760 Speaker 1: explains what your pore. They wrong, terribly wrong. Should should 79 00:05:00,760 --> 00:05:02,479 Speaker 1: they have come in like bear Stearns, and they didn't 80 00:05:02,480 --> 00:05:05,120 Speaker 1: have to save the Lehman equity holders, but they needed 81 00:05:05,120 --> 00:05:08,120 Speaker 1: to make it less of a crisis because if you 82 00:05:08,240 --> 00:05:11,480 Speaker 1: don't know, if I don't know whether you had Lehman exposure, 83 00:05:11,480 --> 00:05:13,480 Speaker 1: am I going to lend you money? No? And it 84 00:05:13,560 --> 00:05:16,920 Speaker 1: was that uncertainty that caused everybody to pull in. They 85 00:05:16,960 --> 00:05:20,080 Speaker 1: pulled in their financing and it led to the crisis 86 00:05:20,080 --> 00:05:23,880 Speaker 1: that that that that occurred later. You know, we have 87 00:05:23,960 --> 00:05:27,080 Speaker 1: a recent book that came out and the book was 88 00:05:28,000 --> 00:05:30,760 Speaker 1: by by Professor Ball who makes the argument that the 89 00:05:30,800 --> 00:05:34,360 Speaker 1: FED had the power to save Lehman, but certain whether 90 00:05:34,400 --> 00:05:36,320 Speaker 1: whether they had the power or not is not really 91 00:05:36,320 --> 00:05:40,280 Speaker 1: the issue. The issue is should they have and they 92 00:05:40,320 --> 00:05:42,719 Speaker 1: should have it would have they would have would have 93 00:05:42,760 --> 00:05:45,560 Speaker 1: made it a much softer crisis. You didn't have to 94 00:05:45,600 --> 00:05:47,880 Speaker 1: save the people. You didn't have to say, let's bring 95 00:05:47,880 --> 00:05:51,200 Speaker 1: in my colleague in Edwards in London. Anna, I'm glad, 96 00:05:51,240 --> 00:05:52,520 Speaker 1: I know you spent good morning to you. I know 97 00:05:52,520 --> 00:05:55,920 Speaker 1: you spent a lot of time thinking about why you 98 00:05:56,040 --> 00:06:00,400 Speaker 1: and others didn't necessarily see exactly what was coming at 99 00:06:00,440 --> 00:06:03,000 Speaker 1: the time. You mentioned how the market seized up because 100 00:06:03,040 --> 00:06:05,400 Speaker 1: nobody knew who held. What do you think now when 101 00:06:05,440 --> 00:06:07,839 Speaker 1: you look at the market, we have any firewalls in 102 00:06:07,880 --> 00:06:12,119 Speaker 1: place to prevent something similar from happening, The activities around 103 00:06:12,160 --> 00:06:14,520 Speaker 1: living wills for banks to enable things to be wound 104 00:06:14,560 --> 00:06:17,320 Speaker 1: up if they're systemically important. Has any of that really 105 00:06:17,360 --> 00:06:22,000 Speaker 1: made a difference if we had another leman to contend with? Well, yes, absolutely. 106 00:06:22,040 --> 00:06:25,160 Speaker 1: The regulators are in a much better position in terms 107 00:06:25,160 --> 00:06:27,839 Speaker 1: of understanding the linkages between the banks. They had no 108 00:06:27,920 --> 00:06:30,680 Speaker 1: information on this at the at the time in two 109 00:06:30,720 --> 00:06:33,200 Speaker 1: thousand and eight. So we're you know, the banks are. 110 00:06:33,640 --> 00:06:37,200 Speaker 1: They have a bigger liquidity reserved, their their capital ratios 111 00:06:37,240 --> 00:06:40,720 Speaker 1: are much higher, leverages down, the size of their trading 112 00:06:40,720 --> 00:06:43,120 Speaker 1: books are down, the risk taking is down. These are 113 00:06:43,160 --> 00:06:48,040 Speaker 1: all very good things. Doesn't exactly solve a tale event, 114 00:06:48,560 --> 00:06:52,320 Speaker 1: but it certainly says that we're better prepared than we 115 00:06:52,520 --> 00:06:56,880 Speaker 1: than we were at that time. So when I dropped, yes, 116 00:06:56,880 --> 00:06:59,359 Speaker 1: so we're better prepared for a regulatory perspective, Brandon, what 117 00:06:59,400 --> 00:07:03,320 Speaker 1: about in into the minds of analysts and market participants 118 00:07:03,360 --> 00:07:05,720 Speaker 1: and the dangers of group think? Has has everybody been 119 00:07:05,800 --> 00:07:09,040 Speaker 1: forced to learn the lessons and the dangers of group think? 120 00:07:09,080 --> 00:07:11,400 Speaker 1: Because that is in part what what got people into 121 00:07:11,440 --> 00:07:16,480 Speaker 1: this situation. No, the dangers of group thinks still exist. Um. 122 00:07:16,520 --> 00:07:23,520 Speaker 1: The my my worst piece of research. It was August 123 00:07:23,520 --> 00:07:29,440 Speaker 1: two thousand seven when BNP had there had said that 124 00:07:29,480 --> 00:07:34,360 Speaker 1: they could not mark the value of their two mutual funds. 125 00:07:34,400 --> 00:07:39,680 Speaker 1: I did a marvelous quantitative analysis that said this crist 126 00:07:39,680 --> 00:07:42,200 Speaker 1: the average crisis was two point two quarters long. The 127 00:07:42,280 --> 00:07:46,680 Speaker 1: street would would would drop. It was wrong. But this 128 00:07:46,760 --> 00:07:48,400 Speaker 1: is so important we have to bring it up. And 129 00:07:48,440 --> 00:07:51,360 Speaker 1: I've breached this with Henry Kaufman, the great Henry Kaufman 130 00:07:51,440 --> 00:07:55,280 Speaker 1: before nobody talks about the Lehman board. Do you hold 131 00:07:55,320 --> 00:07:58,600 Speaker 1: them at fault? Did they not partride the leadership and 132 00:07:58,680 --> 00:08:05,440 Speaker 1: governance to an exhaust Richard fooled at the time. Um 133 00:08:05,480 --> 00:08:08,600 Speaker 1: you UM, I think what you have to do is 134 00:08:08,600 --> 00:08:13,000 Speaker 1: is look at Lehman uh as a Greek tragedy. Remember 135 00:08:13,360 --> 00:08:17,360 Speaker 1: Lehman was spun off by American Express in because American 136 00:08:17,440 --> 00:08:22,000 Speaker 1: Express could not sell it. Fold took over. And if 137 00:08:22,200 --> 00:08:25,840 Speaker 1: one were to look at Lehman to Lehman two thousand 138 00:08:25,840 --> 00:08:29,920 Speaker 1: and six, you put Fold on the cover of Business Week. 139 00:08:30,160 --> 00:08:34,480 Speaker 1: I mean he he took the firm from a teetering. Uh, 140 00:08:34,559 --> 00:08:37,200 Speaker 1: it's sort of one horse firm turned it into a 141 00:08:37,200 --> 00:08:40,840 Speaker 1: global power. Now it was all taken away from him. 142 00:08:40,880 --> 00:08:46,280 Speaker 1: So were there mistakes? Yes? Absolutely, Lehman's management tended to 143 00:08:47,040 --> 00:08:52,640 Speaker 1: love short term funding and that's dangerous. Um and Lehman 144 00:08:52,960 --> 00:08:55,680 Speaker 1: relied on a couple of businesses too much, which was 145 00:08:56,040 --> 00:08:59,200 Speaker 1: they allowed mortgages to be too much. It was the 146 00:08:59,320 --> 00:09:01,840 Speaker 1: board guilt. See. I don't think the board was was 147 00:09:01,960 --> 00:09:10,280 Speaker 1: any more than than other other financial services boards. And 148 00:09:10,400 --> 00:09:13,000 Speaker 1: Brad that short term funding that that was one of 149 00:09:13,000 --> 00:09:15,360 Speaker 1: the reasons that Northern Rock it was very different business 150 00:09:15,400 --> 00:09:17,960 Speaker 1: model obviously, but short term funding and reliance on those 151 00:09:17,960 --> 00:09:21,200 Speaker 1: markets was also something that that ended Northern Rocks. Uh 152 00:09:22,360 --> 00:09:24,760 Speaker 1: life if you like here in the UK, do we 153 00:09:25,280 --> 00:09:27,160 Speaker 1: have we has that gone away? Do we need more 154 00:09:27,200 --> 00:09:29,200 Speaker 1: regulation around that or is that not part of the 155 00:09:29,240 --> 00:09:33,160 Speaker 1: story anymore? Do you see too much group think around that? Still? No, 156 00:09:33,400 --> 00:09:36,360 Speaker 1: that has been that has been improved. Um. If you 157 00:09:36,480 --> 00:09:38,880 Speaker 1: look at the funding base of the GESU, it's the 158 00:09:38,960 --> 00:09:43,760 Speaker 1: largest banks. They have much more deposits, much more core 159 00:09:43,800 --> 00:09:46,520 Speaker 1: funding in other words, long term debt than what they 160 00:09:46,520 --> 00:09:49,720 Speaker 1: had before. Now there still is for short term funding. 161 00:09:49,760 --> 00:09:52,120 Speaker 1: I think what we've learned is that repo is not stable. 162 00:09:52,400 --> 00:09:57,360 Speaker 1: We've also learned that repo counter parties um have to 163 00:09:57,400 --> 00:10:00,320 Speaker 1: be willing to take risk. That KISS can't say money 164 00:10:00,320 --> 00:10:02,640 Speaker 1: market funds and put them into repo and say that 165 00:10:02,679 --> 00:10:06,000 Speaker 1: they're they're willing to take risk of a counterparty. I mean, 166 00:10:06,320 --> 00:10:09,040 Speaker 1: that was one of the problems. I the analogy that 167 00:10:09,120 --> 00:10:13,040 Speaker 1: I use in my classes, that is that we repo 168 00:10:13,320 --> 00:10:17,560 Speaker 1: were typical repo counterparties or zebras, and what the street 169 00:10:17,640 --> 00:10:20,200 Speaker 1: was doing was taking horses and painting the painting stripes 170 00:10:20,240 --> 00:10:23,880 Speaker 1: on them and pretending you use that in the class. Yes, 171 00:10:24,640 --> 00:10:27,320 Speaker 1: maybe I think I should sign up Brandin's with US 172 00:10:27,320 --> 00:10:30,520 Speaker 1: of New York University. That was extraordinary. We'll have this 173 00:10:30,600 --> 00:10:33,880 Speaker 1: out on all of our different platforms at Bloomberg Servandes 174 00:10:34,000 --> 00:10:50,240 Speaker 1: McKinnon will get on that through the morning. Generation In 175 00:10:50,280 --> 00:10:53,439 Speaker 1: the Turkish Lira, weaker weaker lear this morning on air 176 00:10:53,480 --> 00:10:56,120 Speaker 1: to Wan headlines and then a massive move down to 177 00:10:56,200 --> 00:11:00,720 Speaker 1: six point when three stronger lira off historic high rates 178 00:11:00,760 --> 00:11:04,199 Speaker 1: by the Turkish Central Bank. Us Camil didn't is in 179 00:11:04,400 --> 00:11:09,400 Speaker 1: Istanbul right now? USAF who is Murat chatten Kaya, the 180 00:11:09,440 --> 00:11:13,040 Speaker 1: governor of the Turkish Central Bank and what is his 181 00:11:13,160 --> 00:11:18,720 Speaker 1: position today? Where does he stand within Turkish politics, economics 182 00:11:18,840 --> 00:11:21,120 Speaker 1: and finance. Tom This was always going to be a 183 00:11:21,200 --> 00:11:25,439 Speaker 1: critical test of credibility for the governor, who remains largely 184 00:11:25,520 --> 00:11:30,560 Speaker 1: untested in the new spheres of influence and power. And 185 00:11:30,600 --> 00:11:33,160 Speaker 1: so what happened in the last few minutes was the 186 00:11:33,200 --> 00:11:36,560 Speaker 1: Central Bank was able to reassert a level of confidence 187 00:11:36,559 --> 00:11:40,160 Speaker 1: among foreign investors. He was able to push back in 188 00:11:40,280 --> 00:11:42,080 Speaker 1: terms of what the central Bank thinks needs to be 189 00:11:42,120 --> 00:11:46,080 Speaker 1: done versus what Mr Urdan believes in terms of unorthodox 190 00:11:46,160 --> 00:11:49,200 Speaker 1: economic theories. And what the central Bank said is that 191 00:11:49,240 --> 00:11:52,600 Speaker 1: there are risks to the inflation outlook, there is an 192 00:11:52,600 --> 00:11:56,000 Speaker 1: issue with demand. They said, tight policy will remain until 193 00:11:56,040 --> 00:11:59,200 Speaker 1: there's an improvement in in inflation. And remember we're at 194 00:11:59,240 --> 00:12:02,120 Speaker 1: fifteen year hies right, So the weak currency is fed 195 00:12:02,360 --> 00:12:05,440 Speaker 1: enterprises here, It's been reflected in the data. And now 196 00:12:05,480 --> 00:12:08,079 Speaker 1: the Central Bank has to thank you so much from 197 00:12:08,120 --> 00:12:15,959 Speaker 1: Mtambul this morning. Joining us from Washington and plaed to 198 00:12:16,000 --> 00:12:18,840 Speaker 1: say is a former central bank official used to work 199 00:12:18,840 --> 00:12:20,839 Speaker 1: on threat NATO Street the Bank of England. His name 200 00:12:20,880 --> 00:12:24,960 Speaker 1: Adam pos and Peterson Institute for International Economics President and 201 00:12:25,000 --> 00:12:26,800 Speaker 1: he joins us now good morning to you ad him 202 00:12:26,840 --> 00:12:29,160 Speaker 1: your thoughts on a monster right hike at the Central 203 00:12:29,160 --> 00:12:32,760 Speaker 1: Banking Turkey. Thank you for having me. Uh, they didn't 204 00:12:32,760 --> 00:12:34,640 Speaker 1: really have a choice, but I'm glad they had the 205 00:12:34,720 --> 00:12:37,960 Speaker 1: guts to do it. Uh, you know, they're they're they're 206 00:12:37,960 --> 00:12:41,040 Speaker 1: caught in the proverbial between a rock and a hard place. 207 00:12:41,679 --> 00:12:47,040 Speaker 1: They have to be very active to offset the pressures 208 00:12:47,080 --> 00:12:49,960 Speaker 1: from President Urdwan, which of course erodes the credibility of 209 00:12:50,040 --> 00:12:53,320 Speaker 1: everything in turkeys economic sphere. So the central Bank has 210 00:12:53,320 --> 00:12:55,960 Speaker 1: to try to provide that credibility. But as we know, 211 00:12:56,080 --> 00:13:00,160 Speaker 1: and we saw recently with Argentina in other places, if 212 00:13:00,200 --> 00:13:04,560 Speaker 1: the central bank just keeps hiking rate at a huge amount, 213 00:13:04,760 --> 00:13:07,439 Speaker 1: it's not enough to fix the underlying problem. You can't 214 00:13:07,679 --> 00:13:11,600 Speaker 1: fix an underlying problem. If you've ever seen anything like this, 215 00:13:12,040 --> 00:13:14,319 Speaker 1: moments before a central bank decision for the President of 216 00:13:14,320 --> 00:13:16,079 Speaker 1: the Nations come out and cool on the central bank 217 00:13:16,120 --> 00:13:20,439 Speaker 1: to cut rights. Well, not in recent recollection, I mean, 218 00:13:20,559 --> 00:13:24,319 Speaker 1: but in a sense actually it is. The one heartening 219 00:13:24,320 --> 00:13:26,520 Speaker 1: thing here is that says that the Center Bank of 220 00:13:26,600 --> 00:13:31,880 Speaker 1: Republic of Turkey's independence actually is a little stronger than 221 00:13:32,280 --> 00:13:37,160 Speaker 1: some people thought. Because you're the heat that the President 222 00:13:37,280 --> 00:13:39,720 Speaker 1: Urdawan was able to do this and it they'd still 223 00:13:39,720 --> 00:13:43,079 Speaker 1: be defied. I think that's that's a huge signal. I mean, 224 00:13:43,120 --> 00:13:47,400 Speaker 1: so many institutions and government and civil society have been 225 00:13:47,440 --> 00:13:51,120 Speaker 1: thrown away by Urdawan's regime and they've jailed, you know, 226 00:13:51,200 --> 00:13:53,880 Speaker 1: tons of thousands of people. That the central bank was 227 00:13:53,880 --> 00:13:55,880 Speaker 1: still abled to do this, I think is the most 228 00:13:55,920 --> 00:13:58,840 Speaker 1: hopeful thing we've seen about Turkey for some time. John Fruill, 229 00:13:58,920 --> 00:14:00,960 Speaker 1: keep going and I'm still setting up by terminal, but 230 00:14:01,280 --> 00:14:05,280 Speaker 1: John up, three, down eight. It is now bordering on 231 00:14:05,480 --> 00:14:09,599 Speaker 1: a twelve percent round trip move in Lira. It is 232 00:14:09,600 --> 00:14:12,640 Speaker 1: amazing one too. Can we call that volatile? I could 233 00:14:12,679 --> 00:14:15,440 Speaker 1: call it somebody really want in the hedge fund space 234 00:14:15,800 --> 00:14:19,320 Speaker 1: and many lost, Yeah, some shorts out there. With a 235 00:14:19,360 --> 00:14:21,880 Speaker 1: six hundred and twenty five basis point right hike at 236 00:14:21,880 --> 00:14:25,440 Speaker 1: the Central Bank of Turkey. What's interesting about this, Adam, 237 00:14:25,440 --> 00:14:27,400 Speaker 1: as you know better than most, you have to compare 238 00:14:27,440 --> 00:14:30,640 Speaker 1: this to where inflation is. Inflation is close to eighteen 239 00:14:30,680 --> 00:14:33,280 Speaker 1: percent in Turkey, So even with rates where they were 240 00:14:33,280 --> 00:14:36,920 Speaker 1: previously at seventeen point seven five, they didn't even have 241 00:14:37,480 --> 00:14:41,640 Speaker 1: a real interest rate over in Turkey. Does positive six 242 00:14:41,720 --> 00:14:46,200 Speaker 1: hundred basis points real. How apout the situation is that enough? Well, 243 00:14:46,480 --> 00:14:48,280 Speaker 1: it depends in part on air to Wana and the 244 00:14:48,320 --> 00:14:51,080 Speaker 1: other factors going on. I think it does matter a 245 00:14:51,080 --> 00:14:54,359 Speaker 1: lot and help a lot, both for the currency credibility 246 00:14:54,480 --> 00:14:57,440 Speaker 1: and for getting the monetary offset to a lot of 247 00:14:57,480 --> 00:15:00,040 Speaker 1: crazy things are going on. But they have structure a 248 00:15:00,160 --> 00:15:04,080 Speaker 1: problems about currency mismatch in private sector loans. They have 249 00:15:04,240 --> 00:15:07,560 Speaker 1: real doubts about fiscal policy going forward because of Air 250 00:15:07,600 --> 00:15:11,320 Speaker 1: Towan's influence. They have political concerns. When I say they, 251 00:15:11,400 --> 00:15:15,840 Speaker 1: I mean the Turkish people are beset by these things. Um. 252 00:15:15,960 --> 00:15:18,480 Speaker 1: So you know, again, the central bank can only do 253 00:15:18,600 --> 00:15:21,680 Speaker 1: so much. They're doing the right thing we had talked 254 00:15:21,680 --> 00:15:25,000 Speaker 1: about on the Bloombridge Surveillance TV program. The fact that 255 00:15:25,040 --> 00:15:28,400 Speaker 1: they may have capital controls in the offing, or that 256 00:15:28,400 --> 00:15:31,240 Speaker 1: that they already have put in this announcement about having 257 00:15:31,320 --> 00:15:35,360 Speaker 1: to recontract in Lira again, that is something that the 258 00:15:35,520 --> 00:15:38,920 Speaker 1: I m F and others now recognized can be useful temporarily, 259 00:15:39,040 --> 00:15:41,440 Speaker 1: but they have to use that to do something else. 260 00:15:42,200 --> 00:15:44,840 Speaker 1: It This is all good short term, but isn't going 261 00:15:44,920 --> 00:15:46,560 Speaker 1: to fix the long term. Well, let's talk about the 262 00:15:46,560 --> 00:15:49,560 Speaker 1: economic fundamentals at the moment. Adam, what is an interest 263 00:15:49,640 --> 00:15:54,200 Speaker 1: right mean to the Turkish economy right now? Is that 264 00:15:54,280 --> 00:15:57,360 Speaker 1: a strangle on the Turkish economy? Can it work through 265 00:15:57,720 --> 00:15:59,720 Speaker 1: this problem in the same way Agentina can work through 266 00:15:59,720 --> 00:16:02,840 Speaker 1: the problem? How big is this? I mean, as you 267 00:16:02,920 --> 00:16:05,200 Speaker 1: pointed out the real interest rate? Of course, we're now 268 00:16:05,240 --> 00:16:07,400 Speaker 1: talking about a six d basis point real interest right, 269 00:16:07,480 --> 00:16:10,800 Speaker 1: which is hard, but not horrific. It is a very 270 00:16:10,840 --> 00:16:16,600 Speaker 1: big shift. Um. They Turkey went into this economically with 271 00:16:16,760 --> 00:16:21,440 Speaker 1: somewhat better fundamentals in Argentina. So again, if the underlying 272 00:16:21,560 --> 00:16:27,360 Speaker 1: large political forces at work were contained, you could think 273 00:16:27,400 --> 00:16:31,720 Speaker 1: about getting through this. But keeping interest rates that high 274 00:16:32,040 --> 00:16:35,119 Speaker 1: is not gonna work. It's just good as an alternative 275 00:16:35,160 --> 00:16:37,320 Speaker 1: to having a full capital flight. Okay, I get that. 276 00:16:37,400 --> 00:16:40,240 Speaker 1: It's it's it's inn Opsfield and rogueoff and most of 277 00:16:40,320 --> 00:16:42,600 Speaker 1: us read it. I mean, you helped write it. But 278 00:16:42,600 --> 00:16:47,520 Speaker 1: but Adam, what I find interesting to the domestic economy 279 00:16:47,760 --> 00:16:51,240 Speaker 1: is how does business get done with a one week 280 00:16:51,360 --> 00:16:55,520 Speaker 1: repo of two four? Oh no, it doesn't get it 281 00:16:55,560 --> 00:16:57,840 Speaker 1: doesn't get done. No, no, no, sorry, Tom, I didn't 282 00:16:57,840 --> 00:17:02,160 Speaker 1: mean to lose bury the point looking nault. No no, no, 283 00:17:02,400 --> 00:17:05,600 Speaker 1: it's mine mine. John's perfect but but you know it's 284 00:17:06,200 --> 00:17:09,720 Speaker 1: business doesn't get done. The question is what is business 285 00:17:09,760 --> 00:17:14,440 Speaker 1: being temporarily interrupted or having full on capital flight and 286 00:17:14,440 --> 00:17:17,879 Speaker 1: and a sudden stop in the economy. It's still better 287 00:17:17,920 --> 00:17:21,800 Speaker 1: to have an interest rate driven, domestically controlled stop that 288 00:17:21,880 --> 00:17:25,520 Speaker 1: has some chance of being pulled out than to have 289 00:17:25,840 --> 00:17:29,359 Speaker 1: a capital flight driven sudden stop. And and that's that's 290 00:17:29,359 --> 00:17:32,240 Speaker 1: what we're comparing to. It's not versus the baseline. Oh, 291 00:17:32,320 --> 00:17:34,440 Speaker 1: things would be fine if they hadn't put up interest rates. 292 00:17:34,560 --> 00:17:37,480 Speaker 1: This is Turkey adam um. And the question that we've 293 00:17:37,480 --> 00:17:40,040 Speaker 1: asked throughout the last couple of months whether what we're 294 00:17:40,040 --> 00:17:43,400 Speaker 1: seeing in them is more than just local issues idiansyncratic problems. 295 00:17:43,400 --> 00:17:45,640 Speaker 1: Do you see a broader issue for the whole complex 296 00:17:45,720 --> 00:17:48,639 Speaker 1: right now? I've been more reluctant than some people to 297 00:17:48,680 --> 00:17:51,480 Speaker 1: say that because I've seen now a few cycles where 298 00:17:51,520 --> 00:17:54,920 Speaker 1: the Fed titans and and in this case, the US 299 00:17:55,040 --> 00:17:58,359 Speaker 1: runs an irresponsible fiscal policy and money leaves em. But 300 00:17:58,520 --> 00:18:01,159 Speaker 1: usually it's the worst ones get at first. And so 301 00:18:01,200 --> 00:18:03,800 Speaker 1: one could have well argued, as Leatt Peterson did six 302 00:18:03,840 --> 00:18:07,400 Speaker 1: twelve months ago, that Turkey and Argentina were the obvious targets. 303 00:18:08,119 --> 00:18:11,240 Speaker 1: All that qualification said, I think this is where the 304 00:18:11,280 --> 00:18:15,080 Speaker 1: trade war aspect between US and China and the NAFTA 305 00:18:15,200 --> 00:18:19,840 Speaker 1: going backwards and affecting global auto production starts to hit. 306 00:18:20,359 --> 00:18:23,280 Speaker 1: This is where you may get spill over someto places 307 00:18:23,320 --> 00:18:27,280 Speaker 1: in Indonesia and Brazil and it becomes a broader im problem. 308 00:18:27,359 --> 00:18:29,600 Speaker 1: And I'm looking ahead to the European Central Bank meeting 309 00:18:29,600 --> 00:18:31,840 Speaker 1: a little bit later. I imagine it's good news the 310 00:18:31,880 --> 00:18:36,040 Speaker 1: president Drackey, the Turkeys getting its act together. Yeah, but 311 00:18:36,359 --> 00:18:39,280 Speaker 1: I don't think it's central for the ECB decision making. 312 00:18:39,440 --> 00:18:43,800 Speaker 1: I think it's very important for Europe, But for the ECB, 313 00:18:44,240 --> 00:18:46,960 Speaker 1: they don't have the tools or the political mandate to 314 00:18:46,960 --> 00:18:48,919 Speaker 1: do much about Turkey. So I think they're just going 315 00:18:49,000 --> 00:18:52,440 Speaker 1: to focus on European outlook. Set a forecast later from 316 00:18:52,440 --> 00:18:55,879 Speaker 1: the a c B set to downgrade the growth forecast, 317 00:18:55,920 --> 00:18:58,840 Speaker 1: Inflation forecasts remain the same. Have they got the data 318 00:18:58,880 --> 00:19:03,880 Speaker 1: behind them to remove policy accommodation here at him borderline? 319 00:19:04,200 --> 00:19:06,480 Speaker 1: It wouldn't be a mistake if they did remove a 320 00:19:06,480 --> 00:19:09,439 Speaker 1: little um but I think they don't need to do 321 00:19:09,520 --> 00:19:14,439 Speaker 1: anything terribly strong. Uh. There is, as always in the 322 00:19:14,440 --> 00:19:18,680 Speaker 1: euro Area, an issue of the unbalanced growth and removing 323 00:19:18,720 --> 00:19:23,160 Speaker 1: policy accommodation would probably disproportionately hit Italy at the moment. 324 00:19:23,600 --> 00:19:26,480 Speaker 1: Now that might be intentional as a warning shot to 325 00:19:26,680 --> 00:19:30,680 Speaker 1: the Italian populous government to continue to tow the line 326 00:19:30,680 --> 00:19:33,400 Speaker 1: on fiscal policy, so they might want to do that, 327 00:19:34,200 --> 00:19:38,800 Speaker 1: but uh, you know, this isn't outrageous inflation or enormous 328 00:19:38,840 --> 00:19:41,960 Speaker 1: growth in in in ecb land that they have to 329 00:19:42,040 --> 00:19:45,040 Speaker 1: raise a lot within all your perspective at him in 330 00:19:45,080 --> 00:19:48,600 Speaker 1: the an incredible staff you've got a Pierson Institute. Is 331 00:19:48,640 --> 00:19:52,200 Speaker 1: this like a predictable e M crisis? Is that overwrought? 332 00:19:52,760 --> 00:19:55,200 Speaker 1: Can it be escaped or is it just simply look 333 00:19:55,240 --> 00:19:59,119 Speaker 1: the dominant party, the US, the FED raises rates and 334 00:19:59,200 --> 00:20:02,680 Speaker 1: this is a path of tensions that you get. Is that? 335 00:20:02,800 --> 00:20:06,440 Speaker 1: Is that the observation I think by team at Peterson 336 00:20:06,440 --> 00:20:09,520 Speaker 1: and Tom which is always grateful for your shout outs. 337 00:20:09,640 --> 00:20:12,960 Speaker 1: Uh has a mixed view, as we do on most things. 338 00:20:12,960 --> 00:20:16,560 Speaker 1: But basically our view is it doesn't have to be terrible. 339 00:20:16,840 --> 00:20:18,680 Speaker 1: You know, you don't have to have the word crisis 340 00:20:18,720 --> 00:20:22,679 Speaker 1: except for countries like Turkey and Argentina. And there is 341 00:20:22,680 --> 00:20:26,919 Speaker 1: issues that are being revealed, but you know, absent some 342 00:20:27,040 --> 00:20:30,440 Speaker 1: kind of panic, it really was those two countries, maybe 343 00:20:30,440 --> 00:20:33,880 Speaker 1: South Africa, maybe a couple of others that were in trouble, 344 00:20:33,920 --> 00:20:36,200 Speaker 1: but not the Holy Um complex. I mean, think about 345 00:20:36,640 --> 00:20:39,439 Speaker 1: the Taper tantrum of a few years ago, where it 346 00:20:39,520 --> 00:20:41,840 Speaker 1: was you know, Brazil and a couple other particularly vulnerable 347 00:20:41,920 --> 00:20:45,879 Speaker 1: economies got hit, but not everybody. Everybody got a bit 348 00:20:45,880 --> 00:20:49,400 Speaker 1: of a slowing. So I don't think it's a foregone conclusion. 349 00:20:49,440 --> 00:20:51,600 Speaker 1: We have a crisis, and we might have a crisis 350 00:20:51,600 --> 00:20:53,120 Speaker 1: in the future if it's a downswen and I still 351 00:20:53,160 --> 00:20:55,480 Speaker 1: don't have a positive interest right at the c B. 352 00:20:56,080 --> 00:20:58,440 Speaker 1: How much longer did they need this cycle to continue 353 00:20:58,720 --> 00:21:01,280 Speaker 1: for them to have an appropriate interest right to deal 354 00:21:01,320 --> 00:21:05,480 Speaker 1: with the next down turn? You know, the longer the better. 355 00:21:06,920 --> 00:21:13,240 Speaker 1: But realistically, you know they this is the the ultimate dilemma, right. 356 00:21:13,320 --> 00:21:15,520 Speaker 1: You don't put the economy through a recession to make 357 00:21:15,520 --> 00:21:17,920 Speaker 1: sure that you have AMMO for the next recession. Right, 358 00:21:18,000 --> 00:21:20,600 Speaker 1: That doesn't make any sense, So you just have to 359 00:21:20,600 --> 00:21:22,359 Speaker 1: play it as it comes. I think the thing to 360 00:21:22,400 --> 00:21:26,040 Speaker 1: be said is both politically and economically, the ECB can 361 00:21:26,119 --> 00:21:29,720 Speaker 1: restart unconventional monetary policy through the banking system much more 362 00:21:29,720 --> 00:21:32,680 Speaker 1: easily than the said if needed, Dr pos and we 363 00:21:32,720 --> 00:21:35,639 Speaker 1: have to let you go. We have a presidential tweet, 364 00:21:35,960 --> 00:21:37,720 Speaker 1: so we'll let Adam pose and go. He is with 365 00:21:37,800 --> 00:21:53,640 Speaker 1: the Peterson Institute. We thank him. Megan Green, Emanuel Life 366 00:21:53,720 --> 00:21:56,159 Speaker 1: has been patient to be with us today, not on 367 00:21:56,240 --> 00:22:01,000 Speaker 1: the dryness of ECB, but as he mentioned there delicately, 368 00:22:01,520 --> 00:22:04,760 Speaker 1: the effects of a trade war. And there it is 369 00:22:04,800 --> 00:22:07,280 Speaker 1: tip for Ted, tip for that tip for Ted e 370 00:22:07,480 --> 00:22:11,840 Speaker 1: c B brings their growth projections in. His chairman Powell 371 00:22:12,040 --> 00:22:16,879 Speaker 1: going to bring his growth projections in. Yeah, so Mario 372 00:22:16,960 --> 00:22:20,400 Speaker 1: dragging weighed much more into trade than the FED actually has. 373 00:22:20,440 --> 00:22:22,200 Speaker 1: I was surprised by that because it's not really their 374 00:22:22,280 --> 00:22:25,880 Speaker 1: lane that does affect growth in inflation forecasts. And I think, um, 375 00:22:25,920 --> 00:22:28,200 Speaker 1: the FED talks about trade NonStop, if not in their 376 00:22:28,200 --> 00:22:31,160 Speaker 1: official speeches on the sidelines at conferences. So I think 377 00:22:31,200 --> 00:22:34,720 Speaker 1: that that trade is already being factored into the Fed's 378 00:22:34,760 --> 00:22:38,200 Speaker 1: growth and inflation forecast. But will they adjust again? I mean, 379 00:22:38,240 --> 00:22:40,360 Speaker 1: what's so important your Megan, and you're wonderful at this 380 00:22:40,440 --> 00:22:44,560 Speaker 1: is the gradient moving from four percent whatever and everybody agrees, well, 381 00:22:44,600 --> 00:22:46,200 Speaker 1: you know it's too good to be true that we 382 00:22:46,240 --> 00:22:51,200 Speaker 1: go down. But along that gradient path, can they maintain 383 00:22:51,320 --> 00:22:54,720 Speaker 1: control of the message in conversation or not not that 384 00:22:54,760 --> 00:22:57,399 Speaker 1: we'll see a jump condition like LEARA today, but or 385 00:22:57,440 --> 00:23:00,640 Speaker 1: do we have instabilities ahead? Is the is the FED 386 00:23:00,720 --> 00:23:04,119 Speaker 1: manages the message? Yeah? So I think that the FED, 387 00:23:04,560 --> 00:23:06,880 Speaker 1: we all agree that Q two is the best it's 388 00:23:06,880 --> 00:23:09,280 Speaker 1: gonna get. It's going to decelerate from there. We're gonna 389 00:23:09,359 --> 00:23:13,119 Speaker 1: basically converge with our potential GDP growth as stimulus starts 390 00:23:13,160 --> 00:23:15,879 Speaker 1: to peter out towards the end of next year. So 391 00:23:15,920 --> 00:23:18,159 Speaker 1: I do think that the FED will manage um to 392 00:23:18,280 --> 00:23:21,919 Speaker 1: manage that message. Um. But I also think that, you know, 393 00:23:22,000 --> 00:23:26,199 Speaker 1: the withdrawal of global liquidity from the system is partly 394 00:23:26,240 --> 00:23:28,439 Speaker 1: what's causing all this volatility and E and M, and 395 00:23:28,440 --> 00:23:31,240 Speaker 1: that's being driven by the FED. So as we have 396 00:23:31,320 --> 00:23:34,359 Speaker 1: developments with that actually could get some volatility and the 397 00:23:34,400 --> 00:23:36,360 Speaker 1: FED having to react in the time that we've got 398 00:23:36,400 --> 00:23:38,000 Speaker 1: left and we need much more. We have to get 399 00:23:38,040 --> 00:23:39,639 Speaker 1: you back. You know what's so great here, folks, is 400 00:23:39,680 --> 00:23:42,040 Speaker 1: Megan Green came in the day of a hundred winds 401 00:23:42,080 --> 00:23:45,520 Speaker 1: for the Red Sox first time since which I've been 402 00:23:45,560 --> 00:23:48,840 Speaker 1: talking about eas slaughter all day, which was before your time, 403 00:23:48,840 --> 00:23:53,639 Speaker 1: MEGANU before my time too. But but within that, Megan, 404 00:23:54,359 --> 00:23:57,560 Speaker 1: is this new phrase dollarization. And I used it my 405 00:23:57,600 --> 00:24:01,080 Speaker 1: opening script today. Lira is a which is what airdoin 406 00:24:01,200 --> 00:24:05,240 Speaker 1: wants in Turkey. What's different now is there's a lot 407 00:24:05,280 --> 00:24:08,520 Speaker 1: of dollar debt abroad, isn't there? Yes, if you look 408 00:24:08,520 --> 00:24:11,760 Speaker 1: at UM debt being issued in the UM denominated in 409 00:24:11,800 --> 00:24:15,480 Speaker 1: different currencies, Euro denominated debts flattened out. Yeen denominated debt 410 00:24:15,480 --> 00:24:19,200 Speaker 1: has actually fallen since the Financial crisis. US dollar denominated 411 00:24:19,240 --> 00:24:22,520 Speaker 1: debt has absolutely exploded since the Financial crisis because rates 412 00:24:22,560 --> 00:24:24,280 Speaker 1: have been so low, it's been so cheap, it made 413 00:24:24,320 --> 00:24:26,560 Speaker 1: it made perfect sense for these countries to be issuing 414 00:24:26,560 --> 00:24:28,600 Speaker 1: debt in U S dollars. But now that the dollar 415 00:24:28,640 --> 00:24:30,600 Speaker 1: has gotten stronger, and I think that has been driven 416 00:24:30,600 --> 00:24:32,800 Speaker 1: in large part by moves in the rem MIMBI, And 417 00:24:32,840 --> 00:24:35,200 Speaker 1: so that will continue as we continue to poke China 418 00:24:35,200 --> 00:24:37,640 Speaker 1: and the eye on trade. Um, you know, I think 419 00:24:37,640 --> 00:24:40,520 Speaker 1: the squeeze will just get tighter for the emerging marketing country. 420 00:24:40,600 --> 00:24:43,880 Speaker 1: And what is it brilliantly said, and what's so important 421 00:24:44,000 --> 00:24:48,959 Speaker 1: about this relationship is the FED wants to shift and 422 00:24:49,080 --> 00:24:53,240 Speaker 1: normalize rates, and they've got the set of things saying 423 00:24:53,720 --> 00:24:57,000 Speaker 1: not so fast I mean that they've got to confront 424 00:24:57,040 --> 00:24:59,000 Speaker 1: that at some point. Yeah, that's right. And when you 425 00:24:59,000 --> 00:25:01,520 Speaker 1: speak to the ft actually, and nobody's really looking at 426 00:25:01,600 --> 00:25:04,959 Speaker 1: em or at the global system that's or the dollarization 427 00:25:05,080 --> 00:25:07,720 Speaker 1: of the system, that's right. And Leo Brainard's the one 428 00:25:07,720 --> 00:25:09,399 Speaker 1: person who's focused on this, but no one else has 429 00:25:09,440 --> 00:25:11,760 Speaker 1: picked it up. Rich Clarida actually might pick it up 430 00:25:11,800 --> 00:25:15,040 Speaker 1: given his professional history, so we might hear more about 431 00:25:15,040 --> 00:25:16,520 Speaker 1: that out of the FED. But for the most part, 432 00:25:16,560 --> 00:25:18,800 Speaker 1: the FED is really just looking at the US indicators 433 00:25:18,840 --> 00:25:22,919 Speaker 1: domestically and is justifying it's continued gradual. Pat, are you 434 00:25:22,920 --> 00:25:24,639 Speaker 1: going to come back when the Red Sox win a 435 00:25:24,760 --> 00:25:29,600 Speaker 1: hundred in ten games in one season? Happily? Please? Megan Greed? 436 00:25:29,920 --> 00:25:32,119 Speaker 1: Whether this with manual life and the course of affiliation 437 00:25:32,160 --> 00:25:34,200 Speaker 1: there with the John Hancock company of one of six 438 00:25:34,240 --> 00:25:51,280 Speaker 1: one FM Boston. Why do you get us to Mark's 439 00:25:51,280 --> 00:25:54,240 Speaker 1: all about to talk to us about it everything about apples, 440 00:25:54,240 --> 00:25:57,119 Speaker 1: He joins us here in studio of j MP Securities. 441 00:25:57,119 --> 00:25:59,440 Speaker 1: He's the president. Mark. It's a pleasure. Let me see 442 00:25:59,440 --> 00:26:05,000 Speaker 1: how you're wearing your your watch Apple watched, No, your 443 00:26:05,320 --> 00:26:07,800 Speaker 1: your Apple Watches home. It's a it's a weekend watch. 444 00:26:07,840 --> 00:26:10,720 Speaker 1: For me, it's a weekend watch. Okay. Do you believe 445 00:26:10,720 --> 00:26:12,760 Speaker 1: that it's going to end up being an everyday watch? 446 00:26:13,320 --> 00:26:15,480 Speaker 1: I I think it already has for a lot of people. 447 00:26:15,480 --> 00:26:19,320 Speaker 1: I think the ubiquity will probably continue given some of 448 00:26:19,359 --> 00:26:24,200 Speaker 1: the health announcements as of yesterday, But it continues a 449 00:26:24,640 --> 00:26:27,960 Speaker 1: theme of Apple, which is it. It pervades our life. 450 00:26:28,080 --> 00:26:30,720 Speaker 1: And I'll give you a perfect example that for myself. 451 00:26:31,320 --> 00:26:33,840 Speaker 1: My daughter Kate moved here six weeks ago to start 452 00:26:33,880 --> 00:26:38,679 Speaker 1: her job, her first job after college, and um, I noticed, um, 453 00:26:38,720 --> 00:26:41,199 Speaker 1: as I said to her dinner last night, you haven't congratulations. 454 00:26:41,280 --> 00:26:43,719 Speaker 1: Thank you for that. And I said to her last night, 455 00:26:43,720 --> 00:26:46,280 Speaker 1: I said, you haven't taken any cash out of your 456 00:26:46,280 --> 00:26:48,639 Speaker 1: bank accounts since you moved here. She's getting paid, and 457 00:26:48,640 --> 00:26:51,040 Speaker 1: she's paying rent and all that, but she hasn't gone 458 00:26:51,040 --> 00:26:53,280 Speaker 1: to the A t M and physically taken a dollar out. 459 00:26:53,680 --> 00:26:55,520 Speaker 1: And she looked at me like I had four eyes 460 00:26:55,560 --> 00:26:59,080 Speaker 1: and said, Dad, I use Apple Pay. And it's just 461 00:26:59,240 --> 00:27:04,000 Speaker 1: telling to me how much the ecosystem of Apple, besides 462 00:27:04,040 --> 00:27:06,600 Speaker 1: the wonderful products and and and and we all saw 463 00:27:06,600 --> 00:27:10,480 Speaker 1: the announcements as of yesterday, how much that's invaded our 464 00:27:10,520 --> 00:27:14,000 Speaker 1: lives um and how much it will continue to I 465 00:27:14,040 --> 00:27:16,159 Speaker 1: want to just put the technology on hold for just 466 00:27:16,240 --> 00:27:19,119 Speaker 1: a second and get your thoughts about the retail operation 467 00:27:19,200 --> 00:27:21,879 Speaker 1: that Apple runs. Do you think that an investor in 468 00:27:22,040 --> 00:27:26,720 Speaker 1: Apple is rewarded for the quality and the vibrancy of 469 00:27:26,760 --> 00:27:30,600 Speaker 1: their retail business. That's a great question. I think over 470 00:27:30,680 --> 00:27:33,159 Speaker 1: time they have been clearly the stock has done really 471 00:27:33,200 --> 00:27:35,760 Speaker 1: well this year, and obviously over time it's been magical 472 00:27:35,800 --> 00:27:37,879 Speaker 1: as a shareholder since two thousand and two when they 473 00:27:38,000 --> 00:27:40,560 Speaker 1: launched really in the summer of two thousand and to 474 00:27:40,760 --> 00:27:45,320 Speaker 1: the their first real groundbreaking product. But I think it 475 00:27:45,359 --> 00:27:48,879 Speaker 1: will continue to because that that supply chain, that ecosystem 476 00:27:48,920 --> 00:27:51,520 Speaker 1: that they have will continue to garner more attention. And 477 00:27:51,560 --> 00:27:53,800 Speaker 1: I think as they put more and more products in 478 00:27:53,840 --> 00:27:57,199 Speaker 1: consumers hands, and obviously it will be media um continuing, 479 00:27:57,240 --> 00:27:59,720 Speaker 1: and what they're doing with health aspects, and we're going 480 00:27:59,760 --> 00:28:02,719 Speaker 1: to get into autonomous in other areas. The home. Clearly 481 00:28:02,720 --> 00:28:05,399 Speaker 1: they're invading the home um and there's that race to 482 00:28:05,400 --> 00:28:08,159 Speaker 1: the home to own the house, whether it's in security 483 00:28:08,240 --> 00:28:11,560 Speaker 1: or entertainment or wellness. And I think they're going to 484 00:28:11,640 --> 00:28:15,159 Speaker 1: continue to garner a better, better multiple. The fact is 485 00:28:15,440 --> 00:28:18,960 Speaker 1: I believe trees grow to the sky. I believe that's 486 00:28:18,960 --> 00:28:21,160 Speaker 1: a phrase from I'm going to give credit to Mr 487 00:28:21,200 --> 00:28:24,960 Speaker 1: Weinberg ages ago in Golden Sex. They come out with 488 00:28:25,000 --> 00:28:27,640 Speaker 1: a September road show. Come on, you could have written 489 00:28:27,680 --> 00:28:30,600 Speaker 1: the headline six hours before they did it. There's gonna 490 00:28:30,640 --> 00:28:35,800 Speaker 1: be an iPhone x iPhone xcess, iPhone eleven, iPhone four. 491 00:28:37,240 --> 00:28:41,680 Speaker 1: What do they do when the innovation ends? That's an 492 00:28:41,800 --> 00:28:45,600 Speaker 1: ageless Tom Watson question. What did they do when the 493 00:28:45,680 --> 00:28:51,960 Speaker 1: September Games over? I mean that's really the sixty four question. 494 00:28:52,200 --> 00:28:56,040 Speaker 1: And analysts for as far as I can tell, UM, 495 00:28:56,080 --> 00:28:59,520 Speaker 1: maybe as much as a decade since they started, have 496 00:28:59,640 --> 00:29:01,720 Speaker 1: been called on the end of that innovation and I've 497 00:29:01,800 --> 00:29:06,880 Speaker 1: yet to see it. Um. I I think, Um, if 498 00:29:06,880 --> 00:29:09,360 Speaker 1: you worry about that now, you start to trim your position. 499 00:29:09,440 --> 00:29:11,480 Speaker 1: I don't worry about that right now, because there's so 500 00:29:11,480 --> 00:29:14,000 Speaker 1: many places where I think we are our lives are 501 00:29:14,000 --> 00:29:17,280 Speaker 1: gonna be touched for the better. And given the kind 502 00:29:17,320 --> 00:29:21,280 Speaker 1: of UH ecosystem they have and given the billion embedded devices, 503 00:29:21,360 --> 00:29:22,840 Speaker 1: they're going to be the one you want to with 504 00:29:22,960 --> 00:29:25,320 Speaker 1: your magic in history in San Francisco. I hate to 505 00:29:25,360 --> 00:29:28,560 Speaker 1: say this, folks about West they actually look west across 506 00:29:28,600 --> 00:29:32,440 Speaker 1: the Pacific, unlike on the East Coast. Psychologically, there's a huge, 507 00:29:32,920 --> 00:29:36,800 Speaker 1: huge different difference in mark you will you go with her, 508 00:29:36,920 --> 00:29:39,480 Speaker 1: Samsung and Korea or the other names you know better 509 00:29:39,520 --> 00:29:45,160 Speaker 1: than me. How do they compete with this the forget 510 00:29:45,280 --> 00:29:49,160 Speaker 1: the the the sage nature, the wisdom that we see 511 00:29:49,160 --> 00:29:52,680 Speaker 1: out of Cupertino. How do they compete with it over time? Well, 512 00:29:53,280 --> 00:29:55,640 Speaker 1: it's a great question, and I think they will. There's 513 00:29:55,680 --> 00:29:58,760 Speaker 1: no lack of competition, right, there's no people who and 514 00:29:58,760 --> 00:30:00,960 Speaker 1: and and of course if you look at the number 515 00:30:01,000 --> 00:30:05,480 Speaker 1: of units the profits, right and and and because of 516 00:30:05,520 --> 00:30:09,720 Speaker 1: the aspirational nature of the product globally, and because of 517 00:30:09,760 --> 00:30:13,240 Speaker 1: the embedded billion units that they have out there already. 518 00:30:13,440 --> 00:30:15,800 Speaker 1: It's very hard to change your phone. It's very hard 519 00:30:15,800 --> 00:30:18,240 Speaker 1: to choose, like changing a bank. You don't want to 520 00:30:18,280 --> 00:30:21,920 Speaker 1: do it. And because that ecosystem is so powerful, um, 521 00:30:21,960 --> 00:30:24,320 Speaker 1: and because they continue to innovate. I mean, just that 522 00:30:24,400 --> 00:30:28,040 Speaker 1: small announcement about the about the fall detection on the 523 00:30:28,080 --> 00:30:30,959 Speaker 1: watch yesterday, it's going to change what it looks like 524 00:30:31,000 --> 00:30:33,080 Speaker 1: for somebody over the age of sixty to want to 525 00:30:33,120 --> 00:30:34,640 Speaker 1: see how he looks at me when he says that 526 00:30:35,080 --> 00:30:39,520 Speaker 1: mentioned earlier, Michael Barr help me here. Pharaoh's all over 527 00:30:39,600 --> 00:30:41,400 Speaker 1: me today because I can do like my E K 528 00:30:41,520 --> 00:30:44,520 Speaker 1: G or something off my new I. You know, I 529 00:30:44,600 --> 00:30:47,520 Speaker 1: keep telling its on what you think about the tigers 530 00:30:47,520 --> 00:30:50,120 Speaker 1: and lions. You know, well you had a heart attack 531 00:30:50,200 --> 00:30:54,800 Speaker 1: the other day. I because I'm gonna Mark Mark Mark. 532 00:30:55,480 --> 00:30:58,080 Speaker 1: Can you please disabuse Mr Keene of the notion that 533 00:30:58,120 --> 00:31:04,440 Speaker 1: people don't use those earbuds. I mean, I think they do. 534 00:31:04,640 --> 00:31:08,000 Speaker 1: And I am no um savvy technologists, but they do, 535 00:31:08,520 --> 00:31:10,880 Speaker 1: and I think and they work great, and I have 536 00:31:10,920 --> 00:31:15,000 Speaker 1: one in my head, and I think they do look 537 00:31:15,040 --> 00:31:17,720 Speaker 1: goofy right, you do walk down the street with these, 538 00:31:17,840 --> 00:31:21,040 Speaker 1: But I will tell you the quality and the ability 539 00:31:21,160 --> 00:31:24,200 Speaker 1: and and and also just the other products are just 540 00:31:24,280 --> 00:31:26,960 Speaker 1: not that good. And it's just a perfect example. They're 541 00:31:26,960 --> 00:31:29,840 Speaker 1: expensive for what they are compared to that you can 542 00:31:29,840 --> 00:31:31,680 Speaker 1: buy them for half the price for somebody else. They 543 00:31:31,720 --> 00:31:34,000 Speaker 1: just don't work worth these do. And I think that's 544 00:31:34,000 --> 00:31:36,320 Speaker 1: a perfect example of their watch. The watch and if 545 00:31:36,320 --> 00:31:37,640 Speaker 1: you have a problem, you bring it back to the 546 00:31:38,200 --> 00:31:39,880 Speaker 1: and there you can go back to the stores. There's 547 00:31:39,920 --> 00:31:42,680 Speaker 1: customer service and their ability to get things done and 548 00:31:42,760 --> 00:31:44,880 Speaker 1: have people who you walk in who do the right 549 00:31:44,880 --> 00:31:47,720 Speaker 1: by you is just unique. Never enough time, Markman, thank 550 00:31:47,720 --> 00:31:50,640 Speaker 1: you so much with j MP securities, with decades of 551 00:31:50,640 --> 00:31:55,400 Speaker 1: wisdom on San Francisco and truly the innovation of the 552 00:31:55,480 --> 00:32:05,120 Speaker 1: West Coast. Yeah. Thanks for listening to the Bloomberg Surveillance podcast. 553 00:32:05,480 --> 00:32:10,400 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 554 00:32:10,560 --> 00:32:14,880 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 555 00:32:14,960 --> 00:32:18,800 Speaker 1: Keene before the podcast. You can always catch us worldwide. 556 00:32:19,280 --> 00:32:20,400 Speaker 1: I'm Bloomberg Radio.