WEBVTT - Bloomberg Surveillance TV: December 12, 2024 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:35.840 Bloomberg Terminal and the Bloomberg Business App. 0:00:36.440 --> 0:00:39.880 Peter's share of Academy Securities coming back with us, saying, 0:00:40.040 --> 0:00:42.360 bottom line, the FED cuts by twenty five at the 0:00:42.400 --> 0:00:45.760 next meeting. It should be a neutral to mildly hawkish 0:00:45.800 --> 0:00:49.279 twenty five basis points as the underlying data away from 0:00:49.280 --> 0:00:52.480 the unemployment rate based on back to back bad months 0:00:52.520 --> 0:00:55.680 in the household survey, is likely to be deemed the outlier. 0:00:55.760 --> 0:00:58.280 Peter joins us. Now, Peter, thank you so much for 0:00:58.360 --> 0:01:00.920 being back with us. Want to get a sense of 0:01:00.920 --> 0:01:04.200 what you make of yesterday's price action. I know reading 0:01:04.200 --> 0:01:06.240 the tea leaves of the market can be a fool's errand, 0:01:06.319 --> 0:01:09.120 but it seemed odd that the initial reaction was to 0:01:09.120 --> 0:01:13.000 buybonds great auction and then something changed. 0:01:13.240 --> 0:01:15.480 No, I think everyone really has these animal spirits. I 0:01:15.480 --> 0:01:17.720 think everyone's trying to look through this and say, there 0:01:17.800 --> 0:01:19.880 is a real chance that Trump cuts a lot of 0:01:19.920 --> 0:01:22.880 red tape, that he reduces regulation, that he promotes business. 0:01:23.160 --> 0:01:25.040 I think you're seeing stimulus from the rest of the world. 0:01:25.160 --> 0:01:26.520 I think at some point we might get worried that 0:01:26.560 --> 0:01:28.320 the rest of the world's going to slow down enough 0:01:28.360 --> 0:01:29.280 that it drags. 0:01:28.959 --> 0:01:29.560 The US down. 0:01:29.680 --> 0:01:31.560 But for now, I think it's just that excitement that 0:01:31.880 --> 0:01:34.040 kind of all this not in my backyard gets thrown 0:01:34.080 --> 0:01:37.840 away and we actually see progress. We see investment done, 0:01:37.840 --> 0:01:40.600 we see buildouts here, and I think that's real. And 0:01:40.640 --> 0:01:42.840 that's what's outweighing even the moving yields. 0:01:42.880 --> 0:01:45.280 Well, it might be outweighing the yield and the move 0:01:45.319 --> 0:01:48.560 it yields, but what is behind that yield, that move 0:01:48.640 --> 0:01:51.080 and yields Given the fact that basically we're counting on 0:01:51.120 --> 0:01:53.960 a federal reserve to cut rates by twenty five basis 0:01:53.960 --> 0:01:56.400 points next week, and you got central branks around the 0:01:56.400 --> 0:01:59.520 world so that are chopping away as quickly as they can. 0:02:00.160 --> 0:02:02.120 Are not going to see a much lower inflation picture 0:02:02.120 --> 0:02:04.880 in the US. Partly companies are front running some you know, 0:02:05.000 --> 0:02:07.600 tariffere so there's been buying on that. And if we 0:02:07.640 --> 0:02:09.320 are going to build things in the US, which I 0:02:09.320 --> 0:02:11.160 think there's going to be a push quite frankly, it's 0:02:11.160 --> 0:02:12.520 going to be more expensive to do it here then 0:02:12.520 --> 0:02:14.760 it would be elsewhere. Otherwise we've probably been doing it 0:02:14.800 --> 0:02:16.520 here already, so I think there's going to be some 0:02:16.520 --> 0:02:18.400 cost associated with that. There's going to be a build 0:02:18.400 --> 0:02:20.960 out and logistics. You know, we're going to need infrastructure 0:02:20.960 --> 0:02:22.080 to do all that. So I think it's going to 0:02:22.200 --> 0:02:24.200 kind of keep inflation a little bit high. You're seeing 0:02:24.200 --> 0:02:26.600 the data centers go all those things. I would say 0:02:26.680 --> 0:02:28.639 on the equity markets, I see some froth. I'm a 0:02:28.680 --> 0:02:30.200 little bit nervous, but I think, as we talked about 0:02:30.200 --> 0:02:32.760 earlier in the week, it's really hard to short anything 0:02:32.760 --> 0:02:35.240 in December, right, the seasonal you know, factors are in 0:02:35.280 --> 0:02:37.440 your adjustment. And let's also not forget the amount of 0:02:37.440 --> 0:02:39.160 money that's been made in crypto in the last few 0:02:39.160 --> 0:02:42.840 months is certainly helping spur Christmas shopping or holiday shopping. 0:02:42.880 --> 0:02:46.079 It's doing everything so well. Bitcoin kind of keeps going 0:02:46.120 --> 0:02:48.280 up and everyone's excited. I just think that feeds to 0:02:48.360 --> 0:02:50.520 that overall, we have to buy more of this stuff. 0:02:50.560 --> 0:02:50.680 Yea. 0:02:50.680 --> 0:02:52.280 I wonder with the housing market in Miami looks like 0:02:52.360 --> 0:02:54.840 right now, with after that bitcoin surge, getting back to 0:02:54.880 --> 0:02:56.040 the central banks of it all. 0:02:56.040 --> 0:02:57.480 Though on the way up on. 0:02:57.440 --> 0:03:00.000 The hiking cycle, there is this fear of diverging from 0:03:00.080 --> 0:03:02.120 the FED because you want your currency to stay strong 0:03:02.200 --> 0:03:05.040 enough that you could continue to fight inflation. The opposite 0:03:05.080 --> 0:03:07.760 is happening now, and you have concerns from different countries 0:03:07.800 --> 0:03:10.000 about the weakness and their growth. Do you think that 0:03:10.080 --> 0:03:12.880 this is going to be a divergent cutting cycle that 0:03:12.880 --> 0:03:14.800 you're going to see other central banks that want to 0:03:14.800 --> 0:03:16.680 get out in front of the FED and have bigger 0:03:16.680 --> 0:03:18.520 cuts to them. And frankly would welcome a FED that 0:03:18.560 --> 0:03:20.720 maybe goes on pause in twenty twenty five. 0:03:20.880 --> 0:03:21.640 Yeah, I think. 0:03:21.520 --> 0:03:23.360 They want to do that. I think they need to 0:03:23.360 --> 0:03:25.079 do that again. In Europe is kind of a mess 0:03:25.120 --> 0:03:27.000 right now. In that Germany, which had been the juggernaut 0:03:27.000 --> 0:03:29.720 and real the anchor and support of everything, they themselves 0:03:29.720 --> 0:03:31.400 are struggling right now. So that's going to leave the 0:03:31.440 --> 0:03:34.240 ECB job very difficult. And I've always thought that a 0:03:34.240 --> 0:03:36.680 big chunk of the tariffs, if any actually get put on, 0:03:36.840 --> 0:03:38.880 will be absorbed by a much stronger dollar, and I 0:03:38.880 --> 0:03:41.200 think that's what we're seeing right This dollar strength will 0:03:41.240 --> 0:03:43.440 offset any of the terrorf prices, and that will keep 0:03:43.480 --> 0:03:45.600 you know, that pressure lower than it would be otherwise. 0:03:45.640 --> 0:03:47.720 You also said something moments ago, though, you said that 0:03:47.760 --> 0:03:50.440 the animal spirits are dependent on everyone believe in weak 0:03:50.480 --> 0:03:53.520 growth elsewhere won't affect the US. At what point does 0:03:53.560 --> 0:03:54.280 that change? 0:03:54.760 --> 0:03:54.960 You know? 0:03:55.120 --> 0:03:57.160 Certainly probably not this month because everyone's kind of very 0:03:57.160 --> 0:03:59.120 focused on the holiday season coming up. But I think 0:03:59.160 --> 0:04:01.160 as you start looking at annual in February, okay, like 0:04:01.240 --> 0:04:03.760 how long can we continue? And again today I think 0:04:03.760 --> 0:04:05.080 I saw a headline from you that I think is 0:04:05.120 --> 0:04:06.960 going to be a bigger theme again next year is 0:04:07.120 --> 0:04:11.160 byd is Now I think outpacing Volkswagen in Brazil. And 0:04:11.320 --> 0:04:13.400 my view has all long been that China is trying 0:04:13.400 --> 0:04:15.320 to buy time to make sure they can sell their 0:04:15.360 --> 0:04:17.720 brands globally. So I think we get all excited about 0:04:17.720 --> 0:04:19.600 this growth and all the stimulus, and I think in 0:04:19.640 --> 0:04:21.560 the end we have to be much more prepared for 0:04:21.640 --> 0:04:24.799 China trying to sell their brands globally, particularly into emerging 0:04:24.800 --> 0:04:26.040 markets and more and more Europe. 0:04:26.040 --> 0:04:28.040 I think the European weakness plays. 0:04:27.680 --> 0:04:30.680 To China, right because if the walls go up on everyone, 0:04:30.760 --> 0:04:33.480 China's going to have to find a place to dump 0:04:33.520 --> 0:04:37.599 their exports. When it comes to this idea of potentially 0:04:38.080 --> 0:04:40.719 where animal spirits are trying to maybe wane, do you 0:04:40.760 --> 0:04:43.560 want to look elsewhere places like China, places like Europe. 0:04:43.720 --> 0:04:43.920 Yeah. 0:04:43.960 --> 0:04:46.240 I actually think the Chinese stock markets someone interesting. It's 0:04:46.240 --> 0:04:49.440 sold off after Trump one, but I think something that's 0:04:49.440 --> 0:04:51.119 going to be a mistake because a I do believe 0:04:51.120 --> 0:04:53.080 that they really have to continue with the stimulus. They 0:04:53.080 --> 0:04:54.720 have to get their things going, and they're going to 0:04:54.760 --> 0:04:56.520 do everything that they can to help their brands and 0:04:56.560 --> 0:04:58.080 therefore their stocks. I don't think it's going to be 0:04:58.120 --> 0:05:00.000 great for global growth. I think there was an opportunity 0:05:00.040 --> 0:05:02.680 in Chinese stocks as a trade, not as an investment, 0:05:02.960 --> 0:05:04.920 So I like that. I think around here a commercial 0:05:04.920 --> 0:05:05.680 real estate that's. 0:05:05.560 --> 0:05:06.960 Become kind of more and more of a theme. 0:05:07.000 --> 0:05:09.680 I think, you know, work from home is winding down. 0:05:09.760 --> 0:05:11.880 I think you know, the dog or whatever it's called, 0:05:12.000 --> 0:05:14.560 is one thing. The dog is very convinced that and 0:05:14.560 --> 0:05:17.360 I think rightfully, so that all federal employees are still 0:05:17.400 --> 0:05:19.440 working from home will be pushed into office. So I 0:05:19.480 --> 0:05:21.880 think you can see a resurgence in that and yields 0:05:21.880 --> 0:05:23.440 while they go higher. Maybe you get to four to 0:05:23.440 --> 0:05:25.400 fifty on tens with potential spike to five. 0:05:25.600 --> 0:05:26.440 You don't go below four. 0:05:26.520 --> 0:05:28.159 I think a lot of commercial real estate can do 0:05:28.200 --> 0:05:29.560 well in that environment if you're. 0:05:29.400 --> 0:05:32.120 A traveler and not a settler. In terms of the 0:05:32.200 --> 0:05:35.360 China stock market, how concern is if you that Congressman Wald, 0:05:35.440 --> 0:05:39.960 Senator Rubio, potential embassador Jamison Greer have all called for 0:05:40.080 --> 0:05:42.640 decoupling of China and the United States. 0:05:42.720 --> 0:05:45.240 You know, I think we should be somewhat concerned. Then, 0:05:45.320 --> 0:05:47.320 on the other hand, Trump supposing invites you to come 0:05:47.360 --> 0:05:49.800 to the inauguration. So again, I think everything with Trump 0:05:49.880 --> 0:05:50.960 is a little bit of a game and a lot 0:05:50.960 --> 0:05:53.880 of negotiations back and forth. I think it's in China's 0:05:53.920 --> 0:05:56.440 interest to remain as coupled as possible. I think long 0:05:56.480 --> 0:05:58.800 term we'd probably be better decoupling, but I think we'll 0:05:58.839 --> 0:06:01.159 get sucked into doing short term trades that actually favored 0:06:01.240 --> 0:06:02.800 China over us in the long term. 0:06:03.040 --> 0:06:04.560 Can you get into that more because you have a 0:06:04.560 --> 0:06:06.920 really fascinating view that you've been writing about for some time, 0:06:07.200 --> 0:06:09.240 that Trump could go for what looks like a win 0:06:09.320 --> 0:06:12.960 with China but actually gives China an advantage in the US. 0:06:13.279 --> 0:06:15.400 So we see all the problems that Chinese economies having 0:06:15.480 --> 0:06:17.520 right and US companies do not want to invest in 0:06:17.520 --> 0:06:19.520 their US companies are kind of running their factories at 0:06:19.520 --> 0:06:21.840 a minimum there. So China the only way they're ever 0:06:21.880 --> 0:06:23.600 going to grow is by selling their products. 0:06:23.680 --> 0:06:25.120 They need to buy time to do that, right. 0:06:25.120 --> 0:06:27.400 They're struggling right now, and I think they will come 0:06:27.440 --> 0:06:29.440 up with some deal that looks attractive to us and say, oh, 0:06:29.480 --> 0:06:32.400 this is perfect, this solves our issues, and then three 0:06:32.400 --> 0:06:34.200 to five years down the road will regret it because 0:06:34.200 --> 0:06:36.479 it'll give in China time to continue to build up 0:06:36.480 --> 0:06:38.880 their manufacturing, to build up their chip industry, which I 0:06:38.920 --> 0:06:40.680 think we should be really concerned with. I think when 0:06:40.680 --> 0:06:43.360 we talk about it from a geopolitical front, it's their chips, 0:06:43.440 --> 0:06:46.039 it's their AI focus that we need to be worried about. 0:06:46.320 --> 0:06:48.040 And I don't like any deal that kind of buys 0:06:48.080 --> 0:06:50.360 them time, takes some pressure off of that and lets 0:06:50.400 --> 0:06:52.440 them grow. And that's, to me, is the risk because 0:06:52.440 --> 0:06:54.880 they've got that longer term arise than we necessarily do. 0:06:55.000 --> 0:06:56.640 Can we talk about timeline for this? What does a 0:06:56.640 --> 0:06:57.800 longer term horizon look like? 0:06:57.920 --> 0:07:00.080 You know, I think they can think in terms of decades, 0:07:00.120 --> 0:07:02.400 But to me and something like AI and chips, this 0:07:02.480 --> 0:07:04.080 is a three to five year thing where they're trying 0:07:04.120 --> 0:07:05.080 to play catch up. 0:07:05.360 --> 0:07:06.520 They're aggressively doing it. 0:07:06.520 --> 0:07:08.280 They don't have access to ASML or some of the 0:07:08.360 --> 0:07:11.000 high technology. But two things are going on. One, they're 0:07:11.040 --> 0:07:13.480 able to make smaller chips than we would have thought possible. 0:07:13.680 --> 0:07:16.480 They make them very inefficiently, using old machines to make those, 0:07:16.480 --> 0:07:18.840 but they are getting those. And then the bigger advances 0:07:18.840 --> 0:07:20.360 that we're starting to see in the chip industry are 0:07:20.360 --> 0:07:22.720 coming from packaging and how these chips are layered in 0:07:22.760 --> 0:07:25.760 the semiconductors, and that technology is actually much easier. So 0:07:25.920 --> 0:07:27.800 China might be able to actually get some pretty good 0:07:27.800 --> 0:07:29.040 advancements even. 0:07:28.880 --> 0:07:30.040 While we're trying to restrict it. 0:07:30.200 --> 0:07:31.680 And on top of that, we're seeing how easy it 0:07:31.760 --> 0:07:32.960 is to get around restrictions. 0:07:33.360 --> 0:07:34.800 Anyways, Well, and that's. 0:07:34.640 --> 0:07:36.440 Actually what I wanted to ask you. What do you 0:07:36.480 --> 0:07:39.360 make of Nvidia expanding its staff in China at a 0:07:39.400 --> 0:07:43.080 time where there are supposedly these restrictions, and they're trying 0:07:43.120 --> 0:07:45.720 to find ways to maintain their presence and their business 0:07:45.760 --> 0:07:46.320 in the region. 0:07:46.600 --> 0:07:48.400 And I think that's going to be a really difficult thing, 0:07:48.400 --> 0:07:50.640 and I do think companies like that will unfortunately face 0:07:50.640 --> 0:07:53.560 some pressure from this administration. I think, no matter what 0:07:53.600 --> 0:07:55.560 Trump would like to do from a business side, I'm 0:07:55.560 --> 0:07:58.440 a complete believer that some high level of national security 0:07:58.920 --> 0:08:02.000 has this very high on their agenda. It's bipartisan and 0:08:02.240 --> 0:08:04.000 no matter what you might think, once you kind of 0:08:04.000 --> 0:08:06.320 really get read in on what's going on, what the 0:08:06.360 --> 0:08:08.160 fears are, I think there will be a lot of 0:08:08.280 --> 0:08:12.119 pushback to you know, keeping chips and technology out of China. 0:08:12.320 --> 0:08:14.880 You know, you look at some of these the volt typhoon, 0:08:15.280 --> 0:08:17.640 all these hacks have been done to impact our infrastructure. 0:08:17.680 --> 0:08:18.800 Potentially, this is. 0:08:18.720 --> 0:08:20.800 A real issue, and I think there that's going to 0:08:20.800 --> 0:08:22.640 be a struggle for all the companies trying to figure 0:08:22.680 --> 0:08:24.800 out what can be sold into China because it has 0:08:24.840 --> 0:08:27.000 to be and quite frankly, I've heard about eighty percent 0:08:27.000 --> 0:08:28.520 of the chips we sell into China come back into 0:08:28.520 --> 0:08:29.960 the US in various products. 0:08:30.000 --> 0:08:32.280 So it's not an easy answer. But this is strict. 0:08:32.360 --> 0:08:34.080 I think we talked about the other day China or 0:08:34.480 --> 0:08:36.320 zav starting to try and restrict some of the dual 0:08:36.400 --> 0:08:37.839 use chips that have been making their way into the 0:08:37.920 --> 0:08:40.240 Ukrainian drones. This is going to be messy and I 0:08:40.280 --> 0:08:41.440 don't see any way around that. 0:08:41.800 --> 0:08:44.000 Peter Shaer, wonderful to talk to you as always. Thank 0:08:44.040 --> 0:08:45.840 you so much for being with us, Peter share of 0:08:45.920 --> 0:08:59.600 Academy Securities. Here's the latest, President Elect Donald Trump naming 0:08:59.679 --> 0:09:04.520 and Ferguson's incoming FTC chair to replace Lena Kahan the Moon, 0:09:04.640 --> 0:09:09.320 raising expectations for mergers and acquisitions under Trump's second administration. 0:09:09.440 --> 0:09:13.280 The news coming just as grocery store chain Alberton's backed 0:09:13.280 --> 0:09:15.400 out of a merger agreement with Kroger after it was 0:09:15.400 --> 0:09:18.640 blocked by a federal judge, as well as following up 0:09:18.679 --> 0:09:21.120 with a number of vicious back and forth in the 0:09:21.240 --> 0:09:24.160 legal space. Frank Akila, Sullivant, and Cromwell joins us now, 0:09:24.160 --> 0:09:27.160 who focuses on mergers and acquisitions. Frank, we heard that 0:09:27.520 --> 0:09:31.360 incredible bullishness from Paul Taubin. How much is that what 0:09:31.400 --> 0:09:34.160 you're hearing from pretty much every single one of your 0:09:34.160 --> 0:09:35.000 clients right now? 0:09:35.640 --> 0:09:38.120 Well, I think, first of all, we are definitely hearing 0:09:38.160 --> 0:09:43.320 it from the investment banking community, and you know, Paul 0:09:43.520 --> 0:09:46.640 has somebody I've worked with for a long time, and 0:09:46.720 --> 0:09:49.920 he certainly knows, you know, what's happening in the markets. 0:09:50.160 --> 0:09:55.600 What we're hearing from clients is that deals they talked 0:09:55.600 --> 0:09:59.760 about eighteen months ago, a year ago, they are now 0:09:59.800 --> 0:10:02.360 to talking about, Okay, now's the time to do it. 0:10:02.520 --> 0:10:03.199 Because one of the. 0:10:03.200 --> 0:10:08.480 Concerns under the current administration is that even if you've 0:10:08.480 --> 0:10:11.440 got approved, because ninety eight percent of the deals go 0:10:11.559 --> 0:10:16.760 through is it was taking six, nine, twelve months for 0:10:16.840 --> 0:10:20.200 deals that had no anti competitive aspects to it. So 0:10:20.920 --> 0:10:24.720 there was a real concern that you'd get tied up 0:10:24.720 --> 0:10:27.000 in the process and it would sort of frees you 0:10:27.040 --> 0:10:30.960 from a strategic financial point of view. So the view 0:10:31.040 --> 0:10:34.120 is that things are going to happen much more quickly. Yes, 0:10:34.240 --> 0:10:37.160 certain deals will get blocked, certain deals will get challenged, 0:10:37.240 --> 0:10:38.200 but it's going to be. 0:10:40.000 --> 0:10:41.120 A distinct minority. 0:10:41.320 --> 0:10:44.280 Is there a clear sight of what will get blocked 0:10:44.440 --> 0:10:47.040 that there is a certain type of transaction that will 0:10:47.040 --> 0:10:50.320 come into focus, whether it's foreign money coming into say 0:10:50.559 --> 0:10:53.240 a steel company, or whether it's say a tech company 0:10:53.440 --> 0:10:55.400 looking to pick up another smaller firm. 0:10:55.800 --> 0:10:58.320 Well, I think we have to remember that even in 0:10:58.400 --> 0:11:01.880 the Ronald Reagan era, which was pretty wide open in 0:11:02.000 --> 0:11:06.160 terms of merger clearance and antitrust generally, you know, there 0:11:06.200 --> 0:11:10.920 were deals blocked. So anti competitive deals have been blocked 0:11:10.920 --> 0:11:14.240 in every single administration, and I'm sure we'll get blocked. 0:11:14.240 --> 0:11:17.720 Now. Which sectors will they look at more closely? 0:11:18.080 --> 0:11:23.080 Certainly tech, you know, healthcare to a certain extent, retail 0:11:23.160 --> 0:11:28.240 things of that you know directly impact the consumer. Those 0:11:28.280 --> 0:11:32.640 things are definitely going to get looked at very closely. 0:11:33.080 --> 0:11:35.480 What do you see the appetitean for foreign companies and 0:11:35.559 --> 0:11:39.400 is it driven by this carrotenstick idea of potential tariffs 0:11:39.520 --> 0:11:42.920 or is it because they want exposure to US exceptionalism. 0:11:43.559 --> 0:11:46.080 I think we were going to going to see a 0:11:46.160 --> 0:11:51.080 lot of inbound M and A from Europe and Asia, 0:11:51.120 --> 0:11:57.600 particularly Japan, even if Harris was elected. The drive is that, 0:11:58.040 --> 0:12:04.280 you know, the US is growing, the markets in both 0:12:04.320 --> 0:12:07.480 Europe and Asia are fairly stagnant. 0:12:07.720 --> 0:12:09.480 So that's first of all. 0:12:09.520 --> 0:12:12.920 The second thing is if you're producing, if you're selling 0:12:12.960 --> 0:12:16.000 in the United States, you want to be producing here 0:12:16.240 --> 0:12:21.720 because the costs and the potential disruption in the supply chain. 0:12:22.760 --> 0:12:24.880 You know, it becomes more difficult, So we would have 0:12:24.920 --> 0:12:26.840 seen it anyway, but it's going to be increased. 0:12:27.080 --> 0:12:28.839 So what would have been your advice for nip On 0:12:28.920 --> 0:12:34.040 Steel wants to overtake US steal manufacturing factories continued to 0:12:34.080 --> 0:12:36.280 be in the United States, but both Biden and Trump 0:12:36.400 --> 0:12:38.240 said that they would block this deal. 0:12:39.040 --> 0:12:43.800 I think that's pure politics. Pennsylvania was the big state 0:12:43.800 --> 0:12:45.600 in play, and that's so. 0:12:45.559 --> 0:12:48.000 Maybe just timing. Don't do it around a huge presidential 0:12:48.000 --> 0:12:50.200 election with the number one swing state in. 0:12:50.480 --> 0:12:52.640 Le Hopefully that still happens, but we'll see. 0:12:53.280 --> 0:12:57.320 I just wonder for companies that are or private equity 0:12:57.320 --> 0:13:00.800 are looking abroad and companies have international soply chains right 0:13:00.840 --> 0:13:03.760 now and they're faced with a potential reality of tariffs 0:13:03.840 --> 0:13:07.200 changing the entire cost of business. Is that putting deals 0:13:07.200 --> 0:13:09.400 on ice right now or things getting a second look 0:13:09.480 --> 0:13:12.160 because of the risks in twenty twenty five, You. 0:13:12.120 --> 0:13:16.760 Know, I think people have been focused on supply chain issues, 0:13:16.920 --> 0:13:22.080 not necessarily because of tariffs, but since the pandemic, and 0:13:22.120 --> 0:13:24.720 that's really when we saw the first disruptions, which a 0:13:24.720 --> 0:13:29.000 lot of it is what led to inflation. So companies 0:13:29.360 --> 0:13:33.240 are very much focused on that. But you know, I 0:13:33.240 --> 0:13:36.000 think it's a driver of transactions as opposed to an 0:13:36.040 --> 0:13:37.520 impediment to transactions. 0:13:37.559 --> 0:13:40.200 One of the other hopes for a driver of transactions 0:13:40.400 --> 0:13:42.440 was just a lower rate environment, and we've got that 0:13:42.520 --> 0:13:44.840 to some extent. But there's a fear right now in 0:13:44.880 --> 0:13:46.760 this market that the FED can only go so far. 0:13:46.960 --> 0:13:49.640 Maybe it's a cut next week and then a pause. 0:13:50.320 --> 0:13:52.560 What does that do to deal activity? 0:13:52.679 --> 0:13:57.240 You know, first of all, interest rates are historically at 0:13:57.480 --> 0:14:00.200 historically low levels. I mean, we think about the last 0:14:00.240 --> 0:14:03.640 couple of years when they're extraordinarily low, but if you 0:14:03.720 --> 0:14:07.080 look at the Japanese economy where they've had close to 0:14:07.280 --> 0:14:12.960 zero interest rates and very stagnant business activity. I think 0:14:13.440 --> 0:14:16.679 if the economy is growing and you can build in 0:14:16.720 --> 0:14:19.920 a four percent interest rate or whatever, you can make 0:14:20.160 --> 0:14:24.840 most transactions work from a financial point of view. And also, 0:14:25.240 --> 0:14:29.280 right now, you have a tremendous amount of cash, whether 0:14:29.280 --> 0:14:33.200 it's private equity group strategic buyers. They have cash on 0:14:33.240 --> 0:14:35.760 their balance sheets, so they don't need to borrow as much. 0:14:36.240 --> 0:14:38.360 So I think that's a driver as well. 0:14:38.560 --> 0:14:42.720 That said, valuations will basically take a hit as a 0:14:42.760 --> 0:14:45.920 result of a rate being higher now than say when 0:14:45.960 --> 0:14:48.840 companies got founded or were bought out by certain private 0:14:48.840 --> 0:14:51.400 equity companies. And arguably this is the reason why we 0:14:51.440 --> 0:14:54.360 haven't seen more exits, why we haven't seen more activity. 0:14:54.760 --> 0:14:57.880 How much will there be a reckoning and valuations even 0:14:57.960 --> 0:15:00.920 if some of these deals get back on the market. 0:15:01.640 --> 0:15:07.360 Well, you know, one question is whether or not companies 0:15:07.480 --> 0:15:10.240 are going to be valued much longer term, So not 0:15:10.400 --> 0:15:13.360 looking at sort of the next twelve months, but really 0:15:13.480 --> 0:15:17.480 you know, two four or five years out, and so 0:15:17.800 --> 0:15:20.840 to the extent that you're doing an acquisition, I think 0:15:20.880 --> 0:15:24.800 you're going to be prepared to look at it much 0:15:24.840 --> 0:15:28.560 longer term. In terms of exits, I know, talking to 0:15:29.440 --> 0:15:33.080 you know, people in the VC and private equity world, 0:15:33.280 --> 0:15:35.880 they've not had a lot of exits the last few years. 0:15:36.160 --> 0:15:41.040 They're looking forward to a number of exits next year. 0:15:41.240 --> 0:15:42.520 And I think they're also. 0:15:42.840 --> 0:15:46.160 Whether it's through sales or IPOs. And I think the 0:15:46.200 --> 0:15:48.240 IPO market's going to be hot as well. That's not 0:15:48.240 --> 0:15:49.920 my area, but I think it's going to be hot. 0:15:50.080 --> 0:15:51.800 Paul Taubman said that it's going to be the fastest 0:15:51.800 --> 0:15:53.200 semina market in ten years. 0:15:53.240 --> 0:15:55.880 Do you agree, yes, Frank Kikuila. 0:15:55.520 --> 0:15:57.080 Thank you so much for being with us. Frank, Gequila, 0:15:57.200 --> 0:16:10.040 Sullivan and cromwellcome joining us now from JP Morgan Private 0:16:10.080 --> 0:16:12.440 Bank is Sam z Pas. He sits here and watches 0:16:12.520 --> 0:16:15.000 all of these headlines crossed. Sam, what's your impression. 0:16:15.680 --> 0:16:17.120 I think you guys have really nailed it. 0:16:18.040 --> 0:16:20.560 All of these central banks, between the FED, the SMB, 0:16:21.560 --> 0:16:24.320 and the ECB now are trying to ensure that inflation 0:16:24.400 --> 0:16:27.040 stabilizes a two percent, but how they're going about it 0:16:27.080 --> 0:16:29.520 is completely different. The FED is thinking about how do 0:16:29.560 --> 0:16:32.880 they inch down towards neutral, keeping policy restrictive enough because 0:16:32.880 --> 0:16:34.680 the economy is in a really good place and they 0:16:34.680 --> 0:16:37.240 don't want inflation to reaccelerate. Or I would argue that 0:16:37.240 --> 0:16:39.040 the SMB and now the ECB, with the drop of 0:16:39.080 --> 0:16:42.920 restrictive in the terminology, is actually just arguing, well, how 0:16:42.920 --> 0:16:45.120 far below neutral might we need to go to ensure 0:16:45.160 --> 0:16:48.360 that inflation stabilizes a two percent? And that divergence between 0:16:48.360 --> 0:16:50.440 what we're seeing with these major European central banks and 0:16:50.480 --> 0:16:53.160 the FED is really what underpins our view and fts 0:16:53.200 --> 0:16:55.040 that the dollar is going to be strong, particularly against 0:16:55.080 --> 0:16:56.040 these types of currencies. 0:16:56.320 --> 0:16:58.400 Does it go far enough because Robin Brooks of the 0:16:58.400 --> 0:17:01.800 Brookings Institute has been arguing that Europe desperately needs a 0:17:01.800 --> 0:17:04.160 weaker euro, that you're not going to get instituted anything 0:17:04.200 --> 0:17:07.360 that Droggy outlined of Europe coming together and spending more. 0:17:07.600 --> 0:17:09.520 The budget stand off in France shows that they have 0:17:09.640 --> 0:17:12.160 very little fiscal room and because of that they should 0:17:12.160 --> 0:17:14.080 be decoupling from the FED at this moment and be 0:17:14.160 --> 0:17:16.639 doing larger cuts. Do you think there's any credence of 0:17:16.640 --> 0:17:17.159 that argument. 0:17:17.640 --> 0:17:20.080 Yeah, I mean whether it's because you know, I don't 0:17:20.119 --> 0:17:21.640 know if a weaker Euro is going to actually spur 0:17:21.720 --> 0:17:24.399 innovation and investment, which is what that Droggi report made. 0:17:24.440 --> 0:17:28.399 But clearly the economic trajectories are very different. 0:17:28.800 --> 0:17:31.920 The FEDS or the US's is arguably tilted to the upside. 0:17:31.960 --> 0:17:35.040 The economy is in a really strong place. European economic 0:17:35.119 --> 0:17:38.040 economic outlook is definitely tilted to the downside when it 0:17:38.040 --> 0:17:39.879 comes to growth. I don't think the Euro is the 0:17:39.880 --> 0:17:42.119 main policy tool there. I think it's interest rates. But 0:17:42.160 --> 0:17:44.440 there's room to lower interest rates, there's room to move 0:17:44.480 --> 0:17:47.720 further into accommodative territory. That's going to be the ECB's priority. 0:17:47.800 --> 0:17:49.359 Hero is the knock on effect and it's going to 0:17:49.400 --> 0:17:51.240 end up in a weaker euro, but really it's going 0:17:51.280 --> 0:17:52.639 to be the rate channel that they focus on. 0:17:52.760 --> 0:17:54.920 We do see the euro dropping after this decision below 0:17:55.000 --> 0:17:57.040 one point h five against the dollar. 0:17:57.160 --> 0:17:59.000 Do you see parody next year? 0:17:59.040 --> 0:18:01.280 Given the fact that it's a weaker growth environment in 0:18:01.280 --> 0:18:04.040 Europe and on top of that they're dealing with a 0:18:04.080 --> 0:18:05.800