1
00:00:05,120 --> 00:00:07,119
Speaker 1: This is the Bloomberg Surveillance Podcast.

2
00:00:07,160 --> 00:00:11,080
Speaker 2: I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz.

3
00:00:11,280 --> 00:00:15,760
Speaker 2: Join us each day for insight from the best and economics, geopolitics,

4
00:00:15,760 --> 00:00:20,720
Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple,

5
00:00:20,960 --> 00:00:25,400
Speaker 2: Spotify and anywhere you get your podcasts, and always on

6
00:00:25,520 --> 00:00:29,880
Speaker 2: Bloomberg dot com, the Bloomberg Terminal, and the Bloomberg Business App.

7
00:00:30,200 --> 00:00:31,400
Speaker 1: We've been too long to wait.

8
00:00:31,240 --> 00:00:34,640
Speaker 2: For Dana Peterson, Chief Economists at the Conference Board. With

9
00:00:34,720 --> 00:00:37,120
Speaker 2: these market moves as well data, when you see a

10
00:00:37,200 --> 00:00:40,920
Speaker 2: report like this with consumption that is buoyant, with the

11
00:00:40,960 --> 00:00:46,000
Speaker 2: surprises in housing, do you have to shift your FED guests?

12
00:00:47,040 --> 00:00:49,440
Speaker 3: Well, I would say that the Fed, well we have.

13
00:00:49,560 --> 00:00:51,960
Speaker 3: Our guest was that there'd be one more interest rate hike.

14
00:00:52,040 --> 00:00:55,000
Speaker 3: Maybe we're looking at two or even more, especially if

15
00:00:55,040 --> 00:00:58,600
Speaker 3: inflation doesn't cool off and consumers continue to spend and

16
00:00:58,680 --> 00:01:02,520
Speaker 3: the labor market remains bus So. The problem here is

17
00:01:02,560 --> 00:01:05,720
Speaker 3: that you know, good news is bad news for the FED.

18
00:01:06,640 --> 00:01:08,679
Speaker 4: Good news is bad news for the FED. And again

19
00:01:08,720 --> 00:01:11,120
Speaker 4: you can sort of see that pricing reflected in the

20
00:01:11,200 --> 00:01:13,800
Speaker 4: two year yield right now really spiking on the back

21
00:01:14,000 --> 00:01:16,560
Speaker 4: of this print. Let's talk about initial jobless claims too,

22
00:01:16,600 --> 00:01:19,600
Speaker 4: like Mike said, actually fell and that's been sort of

23
00:01:19,600 --> 00:01:23,640
Speaker 4: the mystery of this economy is the resilience of resiliency

24
00:01:23,680 --> 00:01:25,840
Speaker 4: of the labor market. When you think about the Fed's

25
00:01:26,280 --> 00:01:29,560
Speaker 4: long path back to that two percent target, do we

26
00:01:29,800 --> 00:01:32,680
Speaker 4: need to see weakness there or is there any scenario

27
00:01:33,040 --> 00:01:36,679
Speaker 4: where okay, maybe things remain rosy on the jobs front,

28
00:01:36,680 --> 00:01:40,920
Speaker 4: but we also see inflation continue to come down well.

29
00:01:40,880 --> 00:01:43,600
Speaker 3: On the jobs front. When we ask CEOs, what are

30
00:01:43,640 --> 00:01:46,680
Speaker 3: you doing about labor markets? At least the third are

31
00:01:46,760 --> 00:01:49,680
Speaker 3: still hiring, but forty six percent are saying we're not

32
00:01:49,760 --> 00:01:52,240
Speaker 3: doing anything. So that means they're hoarding labor. They're not

33
00:01:52,360 --> 00:01:55,480
Speaker 3: letting people go because they think that if there is

34
00:01:55,520 --> 00:01:58,360
Speaker 3: a soft spot or even a recession, it's gonna be short,

35
00:01:58,440 --> 00:02:00,680
Speaker 3: it's gonna be shallow, it's not going to be that bad.

36
00:02:01,200 --> 00:02:03,680
Speaker 3: And so they're just holding onto their workers because they

37
00:02:03,720 --> 00:02:07,279
Speaker 3: spent so much time and effort and money attracting labor

38
00:02:07,320 --> 00:02:08,680
Speaker 3: and also trying to keep them.

39
00:02:09,080 --> 00:02:11,919
Speaker 4: What does that mean for wages that impulse to hoard

40
00:02:12,360 --> 00:02:15,840
Speaker 4: labor here to hang on to that workforce, are employers

41
00:02:15,840 --> 00:02:18,040
Speaker 4: having to raise wages even more from here.

42
00:02:19,160 --> 00:02:21,880
Speaker 3: Well, in the same survey if CEOs, they said, yes,

43
00:02:21,960 --> 00:02:24,160
Speaker 3: we do expect that over the next twelve months, we're

44
00:02:24,200 --> 00:02:26,640
Speaker 3: going to have to continue to raise wages. Most of

45
00:02:26,639 --> 00:02:29,240
Speaker 3: them said between three and five percent. That's a pretty

46
00:02:29,280 --> 00:02:31,720
Speaker 3: big gap. But still in all the fact that they're

47
00:02:31,720 --> 00:02:36,080
Speaker 3: even talking about raising wages is pretty critical, and certainly

48
00:02:36,080 --> 00:02:40,040
Speaker 3: that spills down into consumer prices, which the FED is

49
00:02:40,080 --> 00:02:41,440
Speaker 3: desperately trying to lower.

50
00:02:42,320 --> 00:02:44,959
Speaker 2: Dand of the Conference Board has such a heritage with

51
00:02:45,120 --> 00:02:48,799
Speaker 2: the measurement of the tone of business. What is your

52
00:02:48,880 --> 00:02:53,079
Speaker 2: reporting now the granularity of the Conference Board on the

53
00:02:53,120 --> 00:02:54,560
Speaker 2: mood of business America?

54
00:02:55,960 --> 00:02:59,840
Speaker 3: Sure, well, we talked to CEOs and CFOs and all

55
00:02:59,840 --> 00:03:03,120
Speaker 3: the seas out there, and it's really mixed. Some aer

56
00:03:03,200 --> 00:03:05,880
Speaker 3: it really depends upon their industry. Some are saying things

57
00:03:05,880 --> 00:03:08,760
Speaker 3: are bad, especially those in finance and tech, that you

58
00:03:08,840 --> 00:03:12,080
Speaker 3: need to down right size their labor markets. And then

59
00:03:12,080 --> 00:03:14,880
Speaker 3: we have others that are in consumer services and that

60
00:03:14,880 --> 00:03:18,280
Speaker 3: they're saying now is awesome, It's really great. So I

61
00:03:18,320 --> 00:03:20,239
Speaker 3: really think it depends upon the industry.

62
00:03:20,639 --> 00:03:23,240
Speaker 2: Totally agree Dana Peterson with us. We're going to continue

63
00:03:23,240 --> 00:03:25,680
Speaker 2: with her for a few more minutes as well, if

64
00:03:25,680 --> 00:03:28,119
Speaker 2: you're joining us, I thought it would be a sleepy Thursday.

65
00:03:28,280 --> 00:03:32,040
Speaker 2: Tom is wrong again, to say the least. A stunning

66
00:03:32,160 --> 00:03:35,920
Speaker 2: reassessment of the strength of the American economy off GDP.

67
00:03:36,440 --> 00:03:38,720
Speaker 2: Good morning to the optimists out there who see the

68
00:03:38,760 --> 00:03:42,600
Speaker 2: glass have full. Also claims coming in, as Katie Greifeld

69
00:03:42,640 --> 00:03:46,200
Speaker 2: mentioned as well. Features up twelve, they lifted earlier, still

70
00:03:46,280 --> 00:03:50,120
Speaker 2: up nicely, Nastak up three tenths of a percent. But

71
00:03:50,240 --> 00:03:54,600
Speaker 2: the bond market has been extraordinary with reassessment nine basis

72
00:03:54,640 --> 00:04:00,560
Speaker 2: points three point seven nine percent on the ten year yield. Peterson,

73
00:04:00,960 --> 00:04:04,040
Speaker 2: the first six months of the year have been wrong, wrong, wrong,

74
00:04:05,000 --> 00:04:08,520
Speaker 2: for so many. It's just been extraordinarily difficult. Is that

75
00:04:08,560 --> 00:04:12,000
Speaker 2: because of the pandemic. This is just is a jumble

76
00:04:12,160 --> 00:04:15,760
Speaker 2: of economics and dynamics. This is, to use a cliche,

77
00:04:15,920 --> 00:04:17,760
Speaker 2: this is original territory.

78
00:04:18,720 --> 00:04:21,680
Speaker 3: This definitely is original territory. We have two things going

79
00:04:21,720 --> 00:04:25,000
Speaker 3: on at the same time, the waterbed effect from the pandemic,

80
00:04:25,040 --> 00:04:28,800
Speaker 3: where you have strong desire to spend on services after

81
00:04:28,920 --> 00:04:31,200
Speaker 3: a lot of pent up demand when people were cooped up,

82
00:04:31,480 --> 00:04:34,960
Speaker 3: and you also have labor shortages. Labor shortages are new

83
00:04:35,040 --> 00:04:37,120
Speaker 3: in this sense, and the fact that you have so

84
00:04:37,200 --> 00:04:40,640
Speaker 3: many baby boomers with experience leaving and so that's leaving

85
00:04:40,640 --> 00:04:44,919
Speaker 3: a lot of employers short. So between strong demand for

86
00:04:45,040 --> 00:04:49,240
Speaker 3: services and a limited desire to let people go, we're

87
00:04:49,279 --> 00:04:54,280
Speaker 3: seeing the we're seeing consumer confidence and certainly consumer spending

88
00:04:54,360 --> 00:04:55,120
Speaker 3: remain buoyant.

89
00:04:55,680 --> 00:04:59,400
Speaker 1: Jobsday, July seven, what do you see.

90
00:04:59,480 --> 00:05:03,359
Speaker 3: Well, it's possible that we'll continue to see job editions.

91
00:05:03,400 --> 00:05:05,680
Speaker 3: We still have a lot of vacancies out there, which

92
00:05:05,720 --> 00:05:08,320
Speaker 3: is probably disappointing the FED because they really wanted those

93
00:05:08,400 --> 00:05:11,680
Speaker 3: vacancies to shrink. And the unemployment rate's probably still going

94
00:05:11,680 --> 00:05:12,760
Speaker 3: to remain pretty low.

95
00:05:14,640 --> 00:05:16,680
Speaker 2: He's going to remain pretty low. But come on, he's

96
00:05:16,720 --> 00:05:19,880
Speaker 2: gotten nothing done here. What's a traction here for the

97
00:05:19,880 --> 00:05:24,360
Speaker 2: Fed to meet the theory they are praying and hoping for.

98
00:05:24,760 --> 00:05:26,159
Speaker 1: What's the path on that data?

99
00:05:26,480 --> 00:05:27,640
Speaker 2: Q three, Q four.

100
00:05:28,760 --> 00:05:31,560
Speaker 3: Well, what needs to happen is consumers need to feel

101
00:05:31,560 --> 00:05:34,159
Speaker 3: that they might lose their jobs, right, so you have

102
00:05:34,200 --> 00:05:36,240
Speaker 3: to kind of scare them into thinking they're going to

103
00:05:36,240 --> 00:05:40,120
Speaker 3: become unemployed and that will cause them to pull back. Also,

104
00:05:40,200 --> 00:05:43,720
Speaker 3: this excess savings that we've been talking about in aggregate,

105
00:05:43,760 --> 00:05:45,760
Speaker 3: we think that's probably going to run out in the

106
00:05:45,800 --> 00:05:48,720
Speaker 3: fall of this year, and so once that happens, and

107
00:05:48,760 --> 00:05:51,920
Speaker 3: if consumers really believe something bad has happened is going

108
00:05:51,960 --> 00:05:55,200
Speaker 3: to happen, which our indicators keep saying, then that will

109
00:05:55,240 --> 00:05:57,480
Speaker 3: help slow the economy and thereby inflation.

110
00:05:57,800 --> 00:05:58,640
Speaker 1: Dana, thank you so much.

111
00:05:58,680 --> 00:06:01,440
Speaker 2: Dana Petersons the kind from board here off the shock

112
00:06:01,480 --> 00:06:05,279
Speaker 2: of a third look at first quarter a GDP.

113
00:06:10,120 --> 00:06:13,799
Speaker 4: Matthew Hornbach, global head of macro Strategy over at Morgan Stanley.

114
00:06:14,000 --> 00:06:16,000
Speaker 4: Great to have you on the show. Joining on a

115
00:06:16,040 --> 00:06:20,599
Speaker 4: morning where we have really a blistering column from Bill Dudley,

116
00:06:20,640 --> 00:06:23,400
Speaker 4: of course, the former New York Fed President now a

117
00:06:23,440 --> 00:06:26,720
Speaker 4: Bloomberg opinion columnist, writing that when you add up all

118
00:06:26,760 --> 00:06:29,320
Speaker 4: the forces that he sees in the economy right now,

119
00:06:29,520 --> 00:06:31,600
Speaker 4: he ends up with a four and a half percent

120
00:06:31,720 --> 00:06:35,280
Speaker 4: ten year treasure yield. You wrote a few weeks ago

121
00:06:35,360 --> 00:06:37,400
Speaker 4: that you expect ten your treasure yields to end the

122
00:06:37,520 --> 00:06:40,240
Speaker 4: year at three and a half percent, So a lot

123
00:06:40,279 --> 00:06:43,600
Speaker 4: of distance between those two numbers. Walk us through what

124
00:06:43,680 --> 00:06:46,080
Speaker 4: you see that's going to push the ten year down

125
00:06:46,120 --> 00:06:46,719
Speaker 4: to that level.

126
00:06:47,760 --> 00:06:50,080
Speaker 5: Think thanks Katie for having me on the show. It's

127
00:06:50,080 --> 00:06:53,440
Speaker 5: a pleasure to be back. Let's start with fiscal policy,

128
00:06:53,920 --> 00:06:57,680
Speaker 5: for one. I mean, I think, you know, mister Dudley

129
00:06:57,760 --> 00:07:02,279
Speaker 5: is correct in that fiscal policy had been playing a

130
00:07:02,320 --> 00:07:05,799
Speaker 5: pretty supportive role for economic activity in the United States.

131
00:07:05,839 --> 00:07:08,880
Speaker 5: In fact, just over the past twelve months, the federal

132
00:07:08,880 --> 00:07:13,200
Speaker 5: government budget deficit total two trillion dollars, which was a

133
00:07:13,360 --> 00:07:16,520
Speaker 5: one hundred percent increase from the twelve months before that.

134
00:07:17,080 --> 00:07:21,320
Speaker 5: So over the past year or so, the economy has

135
00:07:21,480 --> 00:07:27,160
Speaker 5: been supported by a fairly sizable fiscal deficit. But when

136
00:07:27,160 --> 00:07:29,880
Speaker 5: we look at the projections that are coming out of

137
00:07:29,880 --> 00:07:34,240
Speaker 5: the Congressional Budget Office and we incorporate that into our forecasting,

138
00:07:34,760 --> 00:07:38,440
Speaker 5: we actually see that the rate of change of fiscal

139
00:07:39,080 --> 00:07:43,880
Speaker 5: support is going to decelerate meaningfully over the next twelve

140
00:07:43,880 --> 00:07:46,120
Speaker 5: months or so. So by the time we get to

141
00:07:46,160 --> 00:07:49,840
Speaker 5: the middle of twenty twenty four, we're actually we're actually

142
00:07:49,880 --> 00:07:53,080
Speaker 5: going to have a fairly large decline in the deficit,

143
00:07:53,760 --> 00:07:55,960
Speaker 5: to the tune of about twenty five percent on a

144
00:07:56,000 --> 00:07:58,520
Speaker 5: year of a year basis. So, you know, we do

145
00:07:58,560 --> 00:08:02,040
Speaker 5: think that fiscal policy has been supportive of activity, probably

146
00:08:02,120 --> 00:08:06,960
Speaker 5: keeping inflation elevated. But you know, over the next twelve months,

147
00:08:07,000 --> 00:08:08,840
Speaker 5: we think that support fades pretty quickly.

148
00:08:09,440 --> 00:08:11,720
Speaker 4: It's really interesting to hear you say that, because I mean,

149
00:08:11,760 --> 00:08:14,440
Speaker 4: the narrative has been that, you know, the trillions of

150
00:08:14,480 --> 00:08:17,040
Speaker 4: dollars that we saw on stimulus from the fiscal side

151
00:08:17,120 --> 00:08:20,160
Speaker 4: during COVID really put us in the situation we're in

152
00:08:20,200 --> 00:08:23,000
Speaker 4: now with that very sticky inflation we're seeing. But it

153
00:08:23,000 --> 00:08:25,680
Speaker 4: sounds like you're making the argument that actually that's going

154
00:08:25,720 --> 00:08:27,840
Speaker 4: to turn into a tailwind of sorts for the FED.

155
00:08:29,560 --> 00:08:33,160
Speaker 5: Well, certainly with respect to bringing inflation down. I mean,

156
00:08:33,200 --> 00:08:38,600
Speaker 5: our economists have core PCE inflation ending this year at

157
00:08:38,640 --> 00:08:42,320
Speaker 5: three point four percent, which is fifty basis points below

158
00:08:43,080 --> 00:08:47,880
Speaker 5: the fed's just released economic projections for inflation. So we

159
00:08:48,200 --> 00:08:51,920
Speaker 5: do think that inflation will decelerate more meaningfully than the

160
00:08:51,920 --> 00:08:54,520
Speaker 5: FED is expecting. And I think one of the key

161
00:08:54,600 --> 00:08:58,800
Speaker 5: contributing factors there is the fading away of fiscal support.

162
00:09:00,120 --> 00:09:02,960
Speaker 2: Armback with us with Morgan Stanley. We're gonna digress here

163
00:09:03,040 --> 00:09:04,920
Speaker 2: right now, and this is Germane and we're going to

164
00:09:04,960 --> 00:09:08,600
Speaker 2: begin a third quarter conversation with him. If you're a

165
00:09:08,640 --> 00:09:12,600
Speaker 2: young Turk at Morgan Stanley, not the privilege, the pleasure,

166
00:09:13,200 --> 00:09:16,880
Speaker 2: but the honor of being in Tokyo with Robert Allan

167
00:09:17,040 --> 00:09:21,920
Speaker 2: Feldman is unmeasurable. Robbie Feldman was a huge supporter to

168
00:09:21,960 --> 00:09:25,320
Speaker 2: me over the years with his true expertise on Japan

169
00:09:25,440 --> 00:09:29,040
Speaker 2: culture and Jaman finance. And if you're Matt hornback to

170
00:09:29,120 --> 00:09:32,560
Speaker 2: show up with doctor Feldman and Tokyo is pretty cool.

171
00:09:33,120 --> 00:09:33,440
Speaker 1: Matt.

172
00:09:33,720 --> 00:09:37,120
Speaker 2: You guys own Tokyo with Doctor Feldman and with your

173
00:09:37,160 --> 00:09:39,640
Speaker 2: time there as well. Let us just get to the

174
00:09:39,679 --> 00:09:43,800
Speaker 2: wisdom of what's it mean for Americans? If I get

175
00:09:43,920 --> 00:09:47,720
Speaker 2: yen back up to one fifty, if I get week yen,

176
00:09:48,240 --> 00:09:51,400
Speaker 2: what's the sowat for our listeners and viewers?

177
00:09:52,559 --> 00:09:54,320
Speaker 5: Well, well, Tom, I think that the first thing I

178
00:09:54,320 --> 00:09:56,840
Speaker 5: would need to do is change my necktie into a

179
00:09:56,880 --> 00:10:01,960
Speaker 5: bow tie, which is of course your dress of choice

180
00:10:02,000 --> 00:10:05,360
Speaker 5: as well as as well as Robbie Feldman's dress of choice.

181
00:10:05,559 --> 00:10:08,199
Speaker 5: So I don't need to do that to start the conversation.

182
00:10:08,320 --> 00:10:10,960
Speaker 5: But given that we don't have time, what I would

183
00:10:11,000 --> 00:10:15,120
Speaker 5: say here is the takeaway for our listeners here is that, look,

184
00:10:15,240 --> 00:10:20,040
Speaker 5: Japan is a wonderful holiday destination. I mean, with dollary

185
00:10:20,040 --> 00:10:22,840
Speaker 5: in at one point fifty, it makes traveling to the

186
00:10:22,880 --> 00:10:29,000
Speaker 5: country extraordinarily affordable. But it also does I think probably

187
00:10:29,200 --> 00:10:33,400
Speaker 5: irk some policymakers in the country of Japan, and so

188
00:10:33,520 --> 00:10:37,560
Speaker 5: we certainly have to be on the lookout for any

189
00:10:37,679 --> 00:10:43,760
Speaker 5: kind of verbal or physical interaction, intervention into the currency

190
00:10:43,800 --> 00:10:44,600
Speaker 5: markets if.

191
00:10:44,440 --> 00:10:47,320
Speaker 2: We get if they're in an experiment. We saw that

192
00:10:47,360 --> 00:10:49,120
Speaker 2: with Uaita yesterday at CenTra.

193
00:10:50,120 --> 00:10:50,959
Speaker 1: There's going to.

194
00:10:50,880 --> 00:10:54,040
Speaker 2: Be an unwinding of that experiment. Are these going to

195
00:10:54,080 --> 00:10:59,920
Speaker 2: be smooth curves, continuous functions over days, weeks, months, or

196
00:11:00,320 --> 00:11:04,040
Speaker 2: do you and Robbie and Morgan Stanley Japan suggest that

197
00:11:04,080 --> 00:11:08,400
Speaker 2: we need to be aware that the failure of YCC

198
00:11:08,480 --> 00:11:10,520
Speaker 2: could lead to real instabilities.

199
00:11:11,800 --> 00:11:14,840
Speaker 5: Well, you know, so why y CC is an ongoing

200
00:11:15,160 --> 00:11:19,360
Speaker 5: uh program that you know, probably lasts a bit longer.

201
00:11:19,880 --> 00:11:24,280
Speaker 5: You know, from our perspective, the key detriment to y

202
00:11:24,320 --> 00:11:28,240
Speaker 5: CC was when it came to the market functioning of

203
00:11:28,280 --> 00:11:31,960
Speaker 5: the JGB market, the Japanese government bond market, you know.

204
00:11:32,320 --> 00:11:35,720
Speaker 5: But the good news here is that functioning in that

205
00:11:35,800 --> 00:11:38,679
Speaker 5: market has improved, and I think policy makers they are

206
00:11:38,720 --> 00:11:39,520
Speaker 5: recognized as.

207
00:11:39,600 --> 00:11:42,320
Speaker 2: I mean, this is really important, folks. There's demonstrably been

208
00:11:42,360 --> 00:11:45,960
Speaker 2: an improvement there as they've tried to impute inflation into

209
00:11:45,960 --> 00:11:50,120
Speaker 2: the into the into the mix. If we finally get

210
00:11:50,320 --> 00:11:53,280
Speaker 2: YCC to turn and we get some form of dynamics

211
00:11:53,320 --> 00:11:54,239
Speaker 2: I don't understand.

212
00:11:54,760 --> 00:11:57,520
Speaker 1: And if we have the combination of Chinese.

213
00:11:57,400 --> 00:12:01,880
Speaker 2: UH exported a disinflation, should we be shocked by an

214
00:12:01,920 --> 00:12:05,840
Speaker 2: Asian disinflationary tendency out the next twelve months.

215
00:12:07,280 --> 00:12:10,320
Speaker 5: I don't think we should be surprised at that time.

216
00:12:10,840 --> 00:12:12,680
Speaker 5: I do think that at the end of the day,

217
00:12:13,880 --> 00:12:16,840
Speaker 5: capitalism is going to try to find a way of

218
00:12:16,880 --> 00:12:20,840
Speaker 5: reducing costs, and if that's moving some production to the

219
00:12:20,840 --> 00:12:24,160
Speaker 5: country of Japan, which we've already seen in certain sectors

220
00:12:24,320 --> 00:12:28,440
Speaker 5: of the global economy, then we should expect that to

221
00:12:28,920 --> 00:12:36,040
Speaker 5: improve pricing power for consumers as they get alternative sources

222
00:12:36,080 --> 00:12:38,959
Speaker 5: of production for goods and services.

223
00:12:38,640 --> 00:12:41,800
Speaker 2: On a macro basis. Are you optimistic and equities end

224
00:12:41,800 --> 00:12:44,679
Speaker 2: of the quarter? I know, you know Allen Zenner loaded

225
00:12:44,679 --> 00:12:47,120
Speaker 2: the boat on equities here.

226
00:12:47,200 --> 00:12:48,439
Speaker 1: You know in January you.

227
00:12:48,400 --> 00:12:51,000
Speaker 2: And I didn't, Matt, But can you be optimistic about

228
00:12:51,000 --> 00:12:53,640
Speaker 2: the ownership and acquisition of equities here forward?

229
00:12:55,080 --> 00:12:59,160
Speaker 5: I think we can be relatively optimistic because but you know,

230
00:12:59,200 --> 00:13:01,280
Speaker 5: when you're talking about Japan time, which is where we

231
00:13:01,320 --> 00:13:04,360
Speaker 5: began the conversation, you know, equities in Japan look very

232
00:13:04,360 --> 00:13:07,120
Speaker 5: attractive to us as well, So when you're talking about

233
00:13:07,120 --> 00:13:10,120
Speaker 5: capital being exported out of Japan, let's say to the

234
00:13:10,200 --> 00:13:12,720
Speaker 5: United States. I would say that's probably a bit more

235
00:13:12,760 --> 00:13:16,520
Speaker 5: difficult of a move, especially with dollar yen, you know,

236
00:13:16,559 --> 00:13:20,199
Speaker 5: approaching one hundred and fifty. That's something that people will

237
00:13:20,240 --> 00:13:23,480
Speaker 5: have to think long and hard about because equities in

238
00:13:23,520 --> 00:13:24,800
Speaker 5: Japan look attractive as well.

239
00:13:25,000 --> 00:13:27,840
Speaker 2: Matt Hombach, thank you so much. A clinic there on Japan.

240
00:13:27,920 --> 00:13:41,240
Speaker 2: He is with Morgan sounding at least aw someone joins

241
00:13:41,280 --> 00:13:44,800
Speaker 2: us right now Investor Strategy to champion Morgan Global Wealth Management.

242
00:13:44,840 --> 00:13:48,240
Speaker 2: I love, love love your note because it's for all

243
00:13:48,280 --> 00:13:50,640
Speaker 2: the people out there, and you know who you are

244
00:13:51,200 --> 00:13:53,959
Speaker 2: that don't own Apple. And what you're talking about in

245
00:13:54,040 --> 00:13:58,120
Speaker 2: your note is you have to rebuild an equity portfolio?

246
00:13:58,160 --> 00:14:00,160
Speaker 2: How do you reconstructuit?

247
00:14:00,200 --> 00:14:00,400
Speaker 1: Easy?

248
00:14:00,440 --> 00:14:02,480
Speaker 2: After I'm up two percent for the first half and

249
00:14:02,520 --> 00:14:03,360
Speaker 2: that's not good enough?

250
00:14:04,040 --> 00:14:06,920
Speaker 6: That's right. We are very focused on encouraging investors to

251
00:14:07,240 --> 00:14:09,839
Speaker 6: start rebuilding the equity exposure that they want to carry

252
00:14:09,880 --> 00:14:12,480
Speaker 6: with them through the next cycle. And big reason for

253
00:14:12,520 --> 00:14:15,360
Speaker 6: that is that when we look at our anonymized kind

254
00:14:15,400 --> 00:14:18,680
Speaker 6: of aggregate client data, it shows us that half of

255
00:14:18,720 --> 00:14:21,480
Speaker 6: our clients own less equities than they did a year ago.

256
00:14:21,960 --> 00:14:25,520
Speaker 6: So right now, rather than focusing on broad index valuations

257
00:14:25,520 --> 00:14:28,160
Speaker 6: which are above their long term averages, we're looking for

258
00:14:28,200 --> 00:14:30,800
Speaker 6: those pockets of value. And it's encouraging that if you

259
00:14:30,920 --> 00:14:34,120
Speaker 6: strip out the seven biggest names, you actually find that

260
00:14:34,160 --> 00:14:35,960
Speaker 6: the rest of the S and P five hundred is

261
00:14:36,000 --> 00:14:40,800
Speaker 6: training below it's ten year forward looking price earnings.

262
00:14:40,960 --> 00:14:41,320
Speaker 2: People.

263
00:14:42,360 --> 00:14:43,520
Speaker 1: This is important, folks.

264
00:14:43,560 --> 00:14:45,480
Speaker 2: I mean Marvin low In from Stay Street, which is

265
00:14:45,520 --> 00:14:49,160
Speaker 2: a different remant than JP Morgan Global Wealth Management, but

266
00:14:49,240 --> 00:14:52,480
Speaker 2: you've both got the same message and that people really

267
00:14:52,520 --> 00:14:57,120
Speaker 2: aren't participating. They're in cash, they're cautious, they're nervous. Is

268
00:14:57,200 --> 00:15:00,400
Speaker 2: buying a consumer like General Mills up no nine percent

269
00:15:00,480 --> 00:15:04,400
Speaker 2: dividend increase yesterday, or proctoring gamble or name other things

270
00:15:04,400 --> 00:15:07,120
Speaker 2: we never talk about on this show. You've got to

271
00:15:07,160 --> 00:15:09,120
Speaker 2: hold people's hands for them to buy four hundred and

272
00:15:09,160 --> 00:15:12,400
Speaker 2: twenty two shares odd lot of proctoring gamble.

273
00:15:12,960 --> 00:15:16,040
Speaker 6: To some extent, right, But we are focused on different opportunities,

274
00:15:16,080 --> 00:15:19,200
Speaker 6: certainly within the active management space, but also things like

275
00:15:19,240 --> 00:15:22,440
Speaker 6: the overall composition of their allocation. We do think that

276
00:15:22,560 --> 00:15:25,400
Speaker 6: leadership in this next cycle is going to look different

277
00:15:25,440 --> 00:15:27,960
Speaker 6: than it did in the last, we're more focused on

278
00:15:28,000 --> 00:15:31,680
Speaker 6: some real economy sectors, but complementing those exposures with these

279
00:15:31,720 --> 00:15:35,000
Speaker 6: innovations that are kind of bubbling up, like artificial intelligence,

280
00:15:35,040 --> 00:15:37,560
Speaker 6: of course, and really looking for value right now. And

281
00:15:37,600 --> 00:15:40,840
Speaker 6: we're seeing that in other areas beyond just large cap equities,

282
00:15:41,080 --> 00:15:45,080
Speaker 6: think US midcaps, think international equities, although our views there

283
00:15:45,160 --> 00:15:49,080
Speaker 6: are shifting somewhat, and also complementing that equity risk exposure

284
00:15:49,320 --> 00:15:51,080
Speaker 6: with a core bond duration position.

285
00:15:51,440 --> 00:15:53,960
Speaker 4: I want to get to the leadership of the next cycle,

286
00:15:54,000 --> 00:15:56,640
Speaker 4: but I want to start with that call that basically

287
00:15:56,640 --> 00:16:00,680
Speaker 4: you're helping investors rebuild their equity positions. Really interesting because

288
00:16:00,680 --> 00:16:03,160
Speaker 4: coming into twenty twenty three, this was built as the

289
00:16:03,280 --> 00:16:07,440
Speaker 4: year of the bond, fixed income actually has income attached

290
00:16:07,480 --> 00:16:10,080
Speaker 4: to Now midway through the year, it feels like it's

291
00:16:10,160 --> 00:16:12,280
Speaker 4: kind of turned into a game of catchup, where those

292
00:16:12,280 --> 00:16:14,640
Speaker 4: investors who had bought into the Year of the bond

293
00:16:14,680 --> 00:16:17,160
Speaker 4: are now trying to catch up to that equity rally.

294
00:16:17,520 --> 00:16:20,360
Speaker 6: Yeah, and for us, this call is not about trying

295
00:16:20,360 --> 00:16:23,480
Speaker 6: to chase a rally. It's really about remembering what it

296
00:16:23,520 --> 00:16:25,840
Speaker 6: is we hire stocks to do in a portfolio in

297
00:16:25,880 --> 00:16:28,120
Speaker 6: the first place, and that's to be the engines of

298
00:16:28,160 --> 00:16:31,520
Speaker 6: long term capital appreciation. If we zoom back out, I

299
00:16:31,520 --> 00:16:33,840
Speaker 6: think this cool down and volatility that we have seen

300
00:16:34,040 --> 00:16:37,080
Speaker 6: is giving us an opportunity to kind of reassess and

301
00:16:37,160 --> 00:16:40,400
Speaker 6: move forward with cooler heads. So when I go back

302
00:16:40,400 --> 00:16:43,000
Speaker 6: and think about something like our long term capital market assumptions,

303
00:16:43,040 --> 00:16:45,360
Speaker 6: which suggests that over the course of the next ten

304
00:16:45,400 --> 00:16:47,520
Speaker 6: to fifteen years, you're still going to be able to

305
00:16:47,520 --> 00:16:50,120
Speaker 6: annualize total returns of seven and a half to ten

306
00:16:50,200 --> 00:16:53,800
Speaker 6: percent inequities, It's like, why not now, especially when there

307
00:16:53,880 --> 00:16:55,200
Speaker 6: is value to be found in the market.

308
00:16:55,320 --> 00:16:56,400
Speaker 1: I love Lisa.

309
00:16:56,440 --> 00:17:00,000
Speaker 2: In short terms, ten to fifteen years, it's a different.

310
00:16:59,720 --> 00:17:00,800
Speaker 7: Out, got it.

311
00:17:00,800 --> 00:17:03,960
Speaker 4: Well, let's talk about the leadership of the next ten

312
00:17:04,000 --> 00:17:06,920
Speaker 4: to fifteen years of this next cycle that you mention.

313
00:17:07,040 --> 00:17:10,359
Speaker 4: It's not going to be the previous leaders which is

314
00:17:10,400 --> 00:17:12,359
Speaker 4: big cap tech. But when you think about some of

315
00:17:12,359 --> 00:17:15,639
Speaker 4: those smaller companies, those mid sized companies, what's going to

316
00:17:15,680 --> 00:17:18,840
Speaker 4: be the AI moment for those companies? You think about

317
00:17:18,880 --> 00:17:21,160
Speaker 4: what's powered I just.

318
00:17:21,400 --> 00:17:26,040
Speaker 2: All these kids in their aizeitis. Here's my AI, got

319
00:17:26,080 --> 00:17:28,520
Speaker 2: a cut packard computer on my iPhone?

320
00:17:28,400 --> 00:17:29,840
Speaker 1: Yeah, continue zeitgeist.

321
00:17:30,040 --> 00:17:30,280
Speaker 7: Yeah.

322
00:17:30,320 --> 00:17:32,280
Speaker 4: Well, in any case, I mean you think about You

323
00:17:32,280 --> 00:17:36,080
Speaker 4: can make a lot of arguments about valuations on the fangs,

324
00:17:36,160 --> 00:17:38,600
Speaker 4: et cetera, but still it feels like almost we had

325
00:17:38,640 --> 00:17:41,159
Speaker 4: a reset when you think about again that AI moment.

326
00:17:41,400 --> 00:17:43,919
Speaker 6: Indeed, and I think that leadership and kind of that

327
00:17:44,000 --> 00:17:47,080
Speaker 6: theme will trickle down into some of those smaller cap companies.

328
00:17:47,320 --> 00:17:49,520
Speaker 6: We're focused on the mid cap space rather than small

329
00:17:49,560 --> 00:17:52,199
Speaker 6: caps because we do see a better valuation there, But

330
00:17:52,359 --> 00:17:54,760
Speaker 6: looking forward towards the next cycle, I think we have

331
00:17:54,840 --> 00:17:58,760
Speaker 6: to remember that playing AI doesn't just require picking out

332
00:17:58,840 --> 00:18:01,399
Speaker 6: the enablers of it, but really thinking through some of

333
00:18:01,440 --> 00:18:05,480
Speaker 6: the cross sector applications, whether that be you know, establishing

334
00:18:05,480 --> 00:18:08,760
Speaker 6: factors of the future or rethinking supply chains. So you've

335
00:18:08,800 --> 00:18:11,520
Speaker 6: got to kind of expand your purview and think about

336
00:18:11,560 --> 00:18:13,800
Speaker 6: all of the different types of disruption that this could

337
00:18:13,840 --> 00:18:14,760
Speaker 6: potentially buried.

338
00:18:14,800 --> 00:18:16,560
Speaker 2: In a note, there's way too much ex this and

339
00:18:16,760 --> 00:18:20,040
Speaker 2: X that, but X this and X that. Where JP

340
00:18:20,160 --> 00:18:22,360
Speaker 2: Morgan coming up with is if you take this out,

341
00:18:22,440 --> 00:18:25,680
Speaker 2: take that out, take stupid AI out, take Bitcoin out,

342
00:18:25,720 --> 00:18:28,359
Speaker 2: and the rest the market's trading in a fourteen point

343
00:18:28,359 --> 00:18:29,120
Speaker 2: eight multiple.

344
00:18:29,240 --> 00:18:30,200
Speaker 1: One hundred and twelve.

345
00:18:30,040 --> 00:18:32,960
Speaker 2: Percent of our audience doesn't agree with that statement. Give

346
00:18:32,960 --> 00:18:36,280
Speaker 2: me an example of a sector group that's trading at

347
00:18:36,280 --> 00:18:38,920
Speaker 2: a shocking multiple from twenty years.

348
00:18:38,760 --> 00:18:42,760
Speaker 6: Ago, at a relative discount. You mean, yeah, I mean

349
00:18:42,800 --> 00:18:43,880
Speaker 6: for us that's midcaps.

350
00:18:43,920 --> 00:18:47,159
Speaker 2: That's Northwestern talk. I'm just talking cheap. She's talking a

351
00:18:47,200 --> 00:18:48,240
Speaker 2: relative discount.

352
00:18:48,280 --> 00:18:48,879
Speaker 1: Continue.

353
00:18:48,960 --> 00:18:53,359
Speaker 6: Sure, so midcaps is a perfect example of that for us.

354
00:18:53,600 --> 00:18:55,240
Speaker 6: You can play a lot of the same themes that

355
00:18:55,280 --> 00:18:58,399
Speaker 6: investors are getting very excited about. But rather than fish

356
00:18:58,440 --> 00:19:01,159
Speaker 6: in this overvalued pond, look at an area of the

357
00:19:01,160 --> 00:19:02,600
Speaker 6: market that is more fairly so.

358
00:19:02,880 --> 00:19:06,320
Speaker 2: I can retail Walmart's ridiculous. I'm sorry. I look at

359
00:19:06,320 --> 00:19:08,359
Speaker 2: the single digit revenue growth the Walmart and I go

360
00:19:08,400 --> 00:19:11,240
Speaker 2: to get it. You're looking at, you know, as a generalization,

361
00:19:11,320 --> 00:19:12,800
Speaker 2: and given Walmart in MidCap.

362
00:19:13,280 --> 00:19:15,560
Speaker 6: Sure, I'm not supposed to talk about single stocks here.

363
00:19:15,600 --> 00:19:18,359
Speaker 2: I know on television trouble compliance.

364
00:19:18,480 --> 00:19:20,240
Speaker 6: Yeah, yeah, you're getting at the right idea.

365
00:19:20,280 --> 00:19:21,760
Speaker 2: I'm getting at the right end of this is I'm

366
00:19:21,760 --> 00:19:22,399
Speaker 2: going down it.

367
00:19:22,480 --> 00:19:25,240
Speaker 1: I'm going down it. Why did I get out of that?

368
00:19:25,760 --> 00:19:27,800
Speaker 1: Save Metherine, give me, give me some help here.

369
00:19:28,000 --> 00:19:30,720
Speaker 4: Let's talk quickly about duration, because you also write that

370
00:19:30,880 --> 00:19:34,440
Speaker 4: now is the time to extend duration. Bill Dudley coming

371
00:19:34,480 --> 00:19:36,479
Speaker 4: out on the other side of that trade this morning

372
00:19:36,520 --> 00:19:39,240
Speaker 4: with a great column why is now the time?

373
00:19:39,720 --> 00:19:42,840
Speaker 6: Look, I know Powell and other central bankers are talking

374
00:19:43,040 --> 00:19:46,000
Speaker 6: very hawkishly, that was certainly the case yesterday. But our

375
00:19:46,000 --> 00:19:48,760
Speaker 6: base case is still that the Fed probably only has

376
00:19:49,119 --> 00:19:52,240
Speaker 6: one more interest rate hike in their pocket. So assuming

377
00:19:52,240 --> 00:19:54,360
Speaker 6: that if you get a policy rate that's let's call

378
00:19:54,359 --> 00:19:57,080
Speaker 6: it five point three percent, our model suggests that the

379
00:19:57,080 --> 00:19:59,600
Speaker 6: fair value for the ten year yield is about three

380
00:19:59,600 --> 00:20:02,360
Speaker 6: point eight not a big stretch from where we're trading today.

381
00:20:02,680 --> 00:20:06,120
Speaker 6: But if the Fed should hike, you know, additionally, beyond that,

382
00:20:06,440 --> 00:20:09,320
Speaker 6: for every twenty five basis point hike, that's an additional

383
00:20:09,320 --> 00:20:13,280
Speaker 6: fifteen basis points of yield on the tenure. So we

384
00:20:13,400 --> 00:20:16,240
Speaker 6: don't think that right now the entry point is looking

385
00:20:16,280 --> 00:20:19,080
Speaker 6: too crazy. And our base case is that one year,

386
00:20:19,200 --> 00:20:22,160
Speaker 6: two year, three years from now, those yields are going

387
00:20:22,200 --> 00:20:24,040
Speaker 6: to be lower, and so we want to move into

388
00:20:24,080 --> 00:20:26,760
Speaker 6: that not just for the opportunity to lock in those

389
00:20:26,760 --> 00:20:31,119
Speaker 6: elevated yields, but also from the portfolio construction perspectives.

390
00:20:30,520 --> 00:20:33,119
Speaker 1: Your chod. So this is really really valuable. This is

391
00:20:33,160 --> 00:20:34,480
Speaker 1: the heart of the matter. Folks.

392
00:20:34,920 --> 00:20:37,840
Speaker 2: You don't own Apple, you don't own Nvidia. What do

393
00:20:37,880 --> 00:20:42,280
Speaker 2: you got to do? You got to rebuild this perfect language, rebuild,

394
00:20:42,560 --> 00:20:45,880
Speaker 2: reconstruct a portfolio, and takes courage.

395
00:20:45,560 --> 00:20:46,040
Speaker 1: To do that.

396
00:20:46,040 --> 00:20:48,200
Speaker 2: It's very nice, at least awesome, Bon, thank you so much.

397
00:20:48,280 --> 00:20:55,480
Speaker 2: Thank you that with JP Morgan Global Wealth Management, kna

398
00:20:55,520 --> 00:20:58,200
Speaker 2: Haeik joins US now head of Research ednf Man, who's

399
00:20:58,240 --> 00:21:02,399
Speaker 2: been wonderful about the plectic nature of commodities.

400
00:21:02,960 --> 00:21:03,679
Speaker 1: I've got to go to.

401
00:21:03,760 --> 00:21:07,560
Speaker 2: Copper is the litmus paper of the system. What does

402
00:21:07,600 --> 00:21:10,880
Speaker 2: an ED and f Man call on copper?

403
00:21:12,880 --> 00:21:14,439
Speaker 8: Yeah, I mean there's a reason why they call it

404
00:21:14,480 --> 00:21:17,840
Speaker 8: doctor Copper, right. It is a flagship. It is the

405
00:21:17,840 --> 00:21:20,600
Speaker 8: bell weather for where the economy is going. And if

406
00:21:20,600 --> 00:21:22,919
Speaker 8: you look at the copper price to date, it's been

407
00:21:23,040 --> 00:21:27,200
Speaker 8: less and spectacular. This was despite fundamentals being fairly bullish,

408
00:21:27,400 --> 00:21:32,399
Speaker 8: very low stocks, historically tight stocks. They were expecting China

409
00:21:32,440 --> 00:21:35,760
Speaker 8: to come and really sweep up demand and it just

410
00:21:35,800 --> 00:21:40,680
Speaker 8: didn't happen. China's growth has been anemic and unfortunately, despite

411
00:21:40,960 --> 00:21:44,040
Speaker 8: recent stimulus, it's not likely to grow as much as

412
00:21:44,040 --> 00:21:46,400
Speaker 8: we were originally hoping. So even into the second half

413
00:21:46,440 --> 00:21:49,880
Speaker 8: the year, I feel that copper prices could stay languishing

414
00:21:49,880 --> 00:21:52,119
Speaker 8: at around current levels, maybe a little bit higher, but

415
00:21:52,160 --> 00:21:52,879
Speaker 8: not too much.

416
00:21:53,040 --> 00:21:56,040
Speaker 2: In the modern day, do we have a better understanding

417
00:21:56,640 --> 00:22:01,960
Speaker 2: of China commodity inventories the idea of actually how much

418
00:22:02,040 --> 00:22:05,120
Speaker 2: copper they have an inventory? Or is it a mystery?

419
00:22:06,920 --> 00:22:11,000
Speaker 8: No, there is insight for sure, but you know, we

420
00:22:11,119 --> 00:22:13,000
Speaker 8: have to take the data with a pinch of salt.

421
00:22:13,320 --> 00:22:15,760
Speaker 8: I think if you for those who are maintaining supply

422
00:22:15,800 --> 00:22:18,800
Speaker 8: demand and trade data, I think you can work out

423
00:22:18,920 --> 00:22:21,320
Speaker 8: roughly how much China has got left in their in

424
00:22:21,359 --> 00:22:25,320
Speaker 8: their warehouses. Just by extrapolation from their net export and

425
00:22:25,400 --> 00:22:31,439
Speaker 8: net input situation. We we think that they probably are

426
00:22:31,800 --> 00:22:35,760
Speaker 8: they are okay because domestic real estate and industrial products

427
00:22:35,800 --> 00:22:38,560
Speaker 8: in China have not been buoyant, and that means their

428
00:22:38,560 --> 00:22:42,680
Speaker 8: off take of copper has been underperforming quite substantially compared expectations.

429
00:22:43,040 --> 00:22:44,600
Speaker 8: So I think that is the issue, you know, whether

430
00:22:44,640 --> 00:22:46,600
Speaker 8: they have stocks to draw down upon or where they

431
00:22:46,680 --> 00:22:50,639
Speaker 8: need to come to the world for more supplies. I

432
00:22:50,720 --> 00:22:52,840
Speaker 8: just think they haven't got enough. You know, we have

433
00:22:52,880 --> 00:22:54,439
Speaker 8: to wait to see the stimulus. Is there going to

434
00:22:54,440 --> 00:22:57,800
Speaker 8: be an impact, maybe a lagged one. If they come

435
00:22:57,960 --> 00:23:02,000
Speaker 8: and they can see some growth and recovery, that will

436
00:23:02,040 --> 00:23:05,119
Speaker 8: definitely be something which will help, but for now my

437
00:23:05,240 --> 00:23:06,680
Speaker 8: hopes are not too terribly high.

438
00:23:07,240 --> 00:23:10,080
Speaker 4: And when you really dissect the price action in copper,

439
00:23:10,160 --> 00:23:12,720
Speaker 4: of course, like you mentioned, it's called doctor copper for

440
00:23:12,800 --> 00:23:15,640
Speaker 4: a reason. Typically, you know, it's seen as this proxy

441
00:23:16,000 --> 00:23:18,679
Speaker 4: for global growth and the health of the economy. Is

442
00:23:18,720 --> 00:23:21,160
Speaker 4: that still the message to take or when you look

443
00:23:21,160 --> 00:23:23,879
Speaker 4: at this price action, is it more technical in nature?

444
00:23:25,680 --> 00:23:27,959
Speaker 8: Well, no, I think it is. Actually it's still valid

445
00:23:28,560 --> 00:23:31,920
Speaker 8: because it's very symptomatic at what's happening in the rest

446
00:23:31,920 --> 00:23:34,840
Speaker 8: of the world. We're in a high interest rate environment.

447
00:23:35,080 --> 00:23:40,040
Speaker 8: We've got a lot of flag suggesting recessiony environments later

448
00:23:40,119 --> 00:23:43,160
Speaker 8: in the year. PMI numbers are all coming down. These

449
00:23:43,200 --> 00:23:49,000
Speaker 8: are all data points that really fuel the copper market,

450
00:23:49,119 --> 00:23:53,280
Speaker 8: and they are symptomatic also of the broader wider economy.

451
00:23:53,280 --> 00:23:55,240
Speaker 8: It's been it's been weak, you know, it has not

452
00:23:55,320 --> 00:23:58,399
Speaker 8: been as strong as expected. And this is despite interest

453
00:23:58,480 --> 00:24:00,800
Speaker 8: rates going up. I mean, I think that's the biggest fear.

454
00:24:00,840 --> 00:24:04,720
Speaker 8: If interest rates stay high, the demand is going to suffer.

455
00:24:05,080 --> 00:24:08,720
Speaker 8: There are fears for industrial production. None of this boats

456
00:24:08,720 --> 00:24:13,000
Speaker 8: well for Chinese sorry, copper demand and also reflective the

457
00:24:13,000 --> 00:24:14,480
Speaker 8: border economy for sure.

458
00:24:14,520 --> 00:24:17,200
Speaker 4: And kinda just broadening out from copper here. I want

459
00:24:17,200 --> 00:24:19,320
Speaker 4: to get your thoughts on what happened this past week

460
00:24:19,359 --> 00:24:22,919
Speaker 4: and of course the Wagner group marching on Moscow. It

461
00:24:23,000 --> 00:24:26,200
Speaker 4: was interesting you saw a bigger reaction in wheat than

462
00:24:26,240 --> 00:24:29,200
Speaker 4: you did in oil. As we try to track these

463
00:24:29,280 --> 00:24:32,400
Speaker 4: geopolitical tensions. What is the market to watch here?

464
00:24:34,119 --> 00:24:37,480
Speaker 8: Yeah, I think well, Number one, we don't know exactly

465
00:24:37,600 --> 00:24:39,159
Speaker 8: what the situation is going to be. We had this

466
00:24:39,200 --> 00:24:43,480
Speaker 8: military uprising. Does that we can putin or not? There

467
00:24:43,480 --> 00:24:48,199
Speaker 8: are clearly some concerns there. An alternative to putin is

468
00:24:48,240 --> 00:24:52,440
Speaker 8: something which really the market is not quite ready for,

469
00:24:52,520 --> 00:24:54,840
Speaker 8: and we don't know how to process that even so

470
00:24:54,920 --> 00:24:57,480
Speaker 8: I think that's going to be throughout all kinds of things.

471
00:24:57,600 --> 00:25:01,240
Speaker 8: One thing we know is that oil is strategically important

472
00:25:01,280 --> 00:25:03,080
Speaker 8: for Russia, So no matter who is in charge, they

473
00:25:03,119 --> 00:25:06,680
Speaker 8: will make sure that they need those revenues. Wheat, Russia

474
00:25:06,800 --> 00:25:10,840
Speaker 8: has a massive crop. It's still heavily exporting the record

475
00:25:10,880 --> 00:25:13,760
Speaker 8: crop at harvested last crop and they're on track to

476
00:25:13,760 --> 00:25:15,399
Speaker 8: do another one, so they're going to need that to

477
00:25:15,600 --> 00:25:17,800
Speaker 8: come out of the country as well.

478
00:25:18,080 --> 00:25:21,040
Speaker 2: Color one final, one final question, I really want you

479
00:25:21,080 --> 00:25:22,919
Speaker 2: to sit on this and spend some time on it.

480
00:25:23,560 --> 00:25:27,000
Speaker 2: The bombshell of the first half was the IMF call

481
00:25:27,720 --> 00:25:33,000
Speaker 2: of tepid economic growth globally to twenty twenty eight. Now

482
00:25:33,000 --> 00:25:36,960
Speaker 2: we've had a disastrous commodity cycle. Someone called a broad,

483
00:25:37,359 --> 00:25:43,000
Speaker 2: lengthy structural disinflation and commodity we've been searching for a supercycle.

484
00:25:43,440 --> 00:25:46,159
Speaker 2: We had a leg up here off of twenty twenty

485
00:25:46,720 --> 00:25:50,800
Speaker 2: and then a pullback withither a broad index of commodity

486
00:25:50,920 --> 00:25:54,320
Speaker 2: right now? Given the IMF call, can you give me

487
00:25:54,440 --> 00:25:58,080
Speaker 2: any optimism and a blended commodity index right now?

488
00:26:00,520 --> 00:26:01,879
Speaker 8: I think what you're going to do. You're gonna have

489
00:26:01,880 --> 00:26:06,480
Speaker 8: to look for pockets of commodities that have individual fundamentals

490
00:26:06,480 --> 00:26:09,640
Speaker 8: and supplied amount balances for individual markets that will give

491
00:26:09,640 --> 00:26:12,720
Speaker 8: you pockets of optimism. So, for example, some of the

492
00:26:12,760 --> 00:26:17,120
Speaker 8: soft commodities where today's El Nino weather phenomenon will mean

493
00:26:17,160 --> 00:26:20,720
Speaker 8: that supply risks are heightened in the likes of sugar

494
00:26:21,000 --> 00:26:24,560
Speaker 8: or palm oil, or cocoa or cotton. On the other hand,

495
00:26:24,840 --> 00:26:27,879
Speaker 8: the issues we've mentioned before, that doesn't vote well for

496
00:26:27,920 --> 00:26:31,440
Speaker 8: a broader complex of commodities, particularly if demand is going

497
00:26:31,480 --> 00:26:35,720
Speaker 8: to start waning. Whether it's the IMF prediction or even worse.

498
00:26:37,280 --> 00:26:40,160
Speaker 8: Having said that, I think if you look at prices,

499
00:26:40,240 --> 00:26:42,080
Speaker 8: yes they've come off quite a bit, but they're still

500
00:26:42,280 --> 00:26:45,879
Speaker 8: substantially elevated from what they were pre COVID. So if

501
00:26:45,920 --> 00:26:49,320
Speaker 8: you compare twenty nineteen to current levels, requite a bit higher,

502
00:26:49,320 --> 00:26:52,680
Speaker 8: and that reflects historically low levels of stocks. So we're

503
00:26:52,680 --> 00:26:55,639
Speaker 8: not it's not a catastrophe. We are not even a

504
00:26:55,680 --> 00:26:59,680
Speaker 8: super psycho either. But markets are not as well supplied

505
00:26:59,720 --> 00:27:02,880
Speaker 8: or to us they were three years ago, and as

506
00:27:02,880 --> 00:27:05,399
Speaker 8: a result of that, we're not going to be entirely

507
00:27:05,400 --> 00:27:09,320
Speaker 8: immune to supply shocks. So whether it's copper inventories being

508
00:27:09,400 --> 00:27:13,080
Speaker 8: low or even core supplies that are historically fairly tight,

509
00:27:13,480 --> 00:27:16,639
Speaker 8: we're not really available. We're not can't really cope with

510
00:27:16,640 --> 00:27:17,360
Speaker 8: a big sup.

511
00:27:17,160 --> 00:27:19,840
Speaker 2: My shock Coniak, thank you so much, greatly appreciate it.

512
00:27:19,880 --> 00:27:22,080
Speaker 2: With Ed and f Man alluding to some of what

513
00:27:22,119 --> 00:27:36,440
Speaker 2: we heard from Wayeley and black Rock, Shehanali bask Our

514
00:27:36,480 --> 00:27:40,720
Speaker 2: Bloomberg get the most boring guy at Morgan Stanley correspondent,

515
00:27:41,240 --> 00:27:45,560
Speaker 2: who is this guy, mister whiff w ipf And we

516
00:27:45,640 --> 00:27:48,320
Speaker 2: don't hear from him because he's not a slick investment

517
00:27:48,320 --> 00:27:49,240
Speaker 2: banker is he.

518
00:27:49,160 --> 00:27:50,560
Speaker 7: But not boring at all. As you know.

519
00:27:50,640 --> 00:27:52,800
Speaker 9: The reason he's so well known is not Morgan Stanley.

520
00:27:52,880 --> 00:27:56,240
Speaker 9: Is this grateful dead cover band and so well. It's

521
00:27:56,320 --> 00:28:00,639
Speaker 9: interesting here about his move over to Credit Suez. Kalahar,

522
00:28:00,760 --> 00:28:03,760
Speaker 9: the chairman of Credit SUITESE is known on Wall Street,

523
00:28:03,760 --> 00:28:05,880
Speaker 9: known at Morgan Stanley for having one of the most

524
00:28:06,080 --> 00:28:09,560
Speaker 9: loyal bases of people who have worked for him. That

525
00:28:09,640 --> 00:28:13,080
Speaker 9: is something he's always understood. Now to bring over Tom

526
00:28:13,119 --> 00:28:16,320
Speaker 9: Whip from Morgan Stanley after almost four decades to help

527
00:28:16,400 --> 00:28:17,320
Speaker 9: lead this transition.

528
00:28:17,760 --> 00:28:19,240
Speaker 7: Remember the complications here.

529
00:28:19,160 --> 00:28:22,040
Speaker 9: Is not just a matter of bringing two behemon banks together,

530
00:28:22,359 --> 00:28:25,919
Speaker 9: but making all the businesses work together. Something Morgan Stanley

531
00:28:25,960 --> 00:28:27,800
Speaker 9: was able to do very early on was make the

532
00:28:27,800 --> 00:28:30,280
Speaker 9: wealth management work with the investment bank and make the

533
00:28:30,320 --> 00:28:33,000
Speaker 9: investment bank work for the wealth manager. That is something

534
00:28:33,040 --> 00:28:36,080
Speaker 9: that UBS and Credit Suite have been trying to work forever.

535
00:28:36,560 --> 00:28:39,240
Speaker 2: And what's so important to me is Whip had the

536
00:28:39,320 --> 00:28:41,440
Speaker 2: worst job at Morgan Stanley. I mean this was im

537
00:28:41,520 --> 00:28:45,520
Speaker 2: men's respect, folks. He's the liboard guy and more than

538
00:28:45,640 --> 00:28:48,800
Speaker 2: anybody on the street, he's the guy who said the

539
00:28:48,840 --> 00:28:53,320
Speaker 2: benchmark calculation. I think Mary Poppins, you know their railways

540
00:28:53,360 --> 00:28:57,520
Speaker 2: to India, the librar funding of everything out there. We're

541
00:28:57,520 --> 00:28:59,440
Speaker 2: going to stop doing it and we're going to have

542
00:28:59,480 --> 00:29:02,040
Speaker 2: a new thing, which only Ira Jersey understands.

543
00:29:02,440 --> 00:29:04,240
Speaker 1: And the answer is am I correct.

544
00:29:04,280 --> 00:29:07,200
Speaker 2: Whip is the guy that led the charge on the

545
00:29:07,280 --> 00:29:09,520
Speaker 2: migration up and what a boring job.

546
00:29:10,040 --> 00:29:11,640
Speaker 1: That's what he's got to do at UBS.

547
00:29:11,800 --> 00:29:13,080
Speaker 7: Boring but important and interesting.

548
00:29:13,120 --> 00:29:16,720
Speaker 9: He was on the Alternative Reference Rates Committee ARCC, and

549
00:29:16,960 --> 00:29:19,760
Speaker 9: that committee appointed somebody else from City.

550
00:29:19,520 --> 00:29:21,480
Speaker 7: Group to lead that committee as well.

551
00:29:21,520 --> 00:29:23,760
Speaker 9: So on Wall Street he was important for the Live

552
00:29:23,920 --> 00:29:26,560
Speaker 9: or transition more than that. He has such a strong

553
00:29:26,600 --> 00:29:30,000
Speaker 9: fixed income background for this reason as well. And remember

554
00:29:30,160 --> 00:29:35,479
Speaker 9: post crisis, UBS really changed the base here of fixed

555
00:29:35,480 --> 00:29:38,120
Speaker 9: income Exphich. He's at Credit suits and UBS are very

556
00:29:38,720 --> 00:29:42,840
Speaker 9: very different. The risk tolerance is night and day, and

557
00:29:42,920 --> 00:29:45,520
Speaker 9: so there are some very difficult decisions to be made

558
00:29:45,560 --> 00:29:48,040
Speaker 9: about how the combined businesses operate moving forward.

559
00:29:48,200 --> 00:29:50,120
Speaker 4: So he's got Grateful Dead, he's got the Live or

560
00:29:50,200 --> 00:29:52,720
Speaker 4: Transition under his bill. Let's talk about what he's been

561
00:29:52,800 --> 00:29:55,840
Speaker 4: tasked to do with UBS. Just going off the story,

562
00:29:55,880 --> 00:29:58,800
Speaker 4: he's going to lead the bank's effort to integrate credit Suites'

563
00:29:58,840 --> 00:30:02,880
Speaker 4: operations the Americas. When you think about that task versus

564
00:30:02,880 --> 00:30:05,400
Speaker 4: what's going on in Europe, how does it compare.

565
00:30:05,600 --> 00:30:06,840
Speaker 7: Listen, something that was interesting.

566
00:30:06,880 --> 00:30:08,680
Speaker 9: People ask a lot about credits use what was left

567
00:30:08,720 --> 00:30:11,440
Speaker 9: of the investment bank, and the reality is quite a lot.

568
00:30:11,800 --> 00:30:14,200
Speaker 9: They have a big leverage loan operation. They still had

569
00:30:14,200 --> 00:30:16,720
Speaker 9: a big trading operation, but it was kind of messy.

570
00:30:16,760 --> 00:30:20,480
Speaker 9: Remember there was very many hiccups leading into the end there.

571
00:30:20,760 --> 00:30:22,600
Speaker 9: And so if the Americas as well part of this,

572
00:30:22,800 --> 00:30:26,000
Speaker 9: Remember I think that the talent story cannot be denied here.

573
00:30:26,320 --> 00:30:28,320
Speaker 9: They're in the process of cutting a lot of jobs,

574
00:30:28,320 --> 00:30:31,400
Speaker 9: figuring out the overlap. Clearly they're bringing people on the

575
00:30:31,400 --> 00:30:33,360
Speaker 9: people that they need to kind of make this all

576
00:30:33,400 --> 00:30:37,120
Speaker 9: work for them. And remember UBS in particular, they have

577
00:30:37,320 --> 00:30:40,760
Speaker 9: a massive, massive, massive wealth management operation. They are financial

578
00:30:40,760 --> 00:30:43,920
Speaker 9: advisors across the United States, and there's plenty of investment

579
00:30:43,920 --> 00:30:46,520
Speaker 9: bankers in the US for both banks. So it is

580
00:30:46,600 --> 00:30:50,000
Speaker 9: it is a large operation in the United States with

581
00:30:50,280 --> 00:30:54,400
Speaker 9: a lot of concerns about how they bring together. Like

582
00:30:54,440 --> 00:30:56,840
Speaker 9: I was saying, those cultural differences and livers tolerance of

583
00:30:56,880 --> 00:30:57,360
Speaker 9: these banks.

584
00:30:57,720 --> 00:31:01,080
Speaker 4: Well, broadly speaking, let's talk about that timeline. As you mentioned,

585
00:31:01,240 --> 00:31:04,400
Speaker 4: they are obviously acting a lot of the credits suse

586
00:31:04,440 --> 00:31:06,600
Speaker 4: to workforce. The big news out earlier this week is

587
00:31:06,600 --> 00:31:09,720
Speaker 4: that reportedly UBS preparing to cut over half of the

588
00:31:09,720 --> 00:31:13,240
Speaker 4: Credit Suite workforce. We know that they're also bringing people on.

589
00:31:13,320 --> 00:31:15,880
Speaker 4: Is that the next phase. Should we be expecting more

590
00:31:15,920 --> 00:31:18,520
Speaker 4: headlines to the effect of who is actually going to

591
00:31:18,520 --> 00:31:19,480
Speaker 4: get this job done?

592
00:31:19,680 --> 00:31:20,080
Speaker 7: Yeah?

593
00:31:20,120 --> 00:31:22,200
Speaker 9: And you know, even just in the near term here,

594
00:31:22,280 --> 00:31:24,560
Speaker 9: the way that UBS is operating is it's kind of

595
00:31:24,560 --> 00:31:28,800
Speaker 9: a parent company to these two separate banking divisions Credits

596
00:31:28,840 --> 00:31:31,480
Speaker 9: using UBS. At the end of August, we'll see the

597
00:31:31,520 --> 00:31:35,360
Speaker 9: consolidated financial results. It's already making me kind of nauseous

598
00:31:35,680 --> 00:31:39,160
Speaker 9: to think about what that will look like. And so yes,

599
00:31:39,240 --> 00:31:41,200
Speaker 9: it's a very complicated integration.

600
00:31:41,800 --> 00:31:44,040
Speaker 7: But both of these folks.

601
00:31:43,720 --> 00:31:47,800
Speaker 9: Both Tom and con Kelleher, have seen difficult days before

602
00:31:47,960 --> 00:31:48,840
Speaker 9: and banking.

603
00:31:48,800 --> 00:31:53,080
Speaker 2: And where do you perceive UBS Credits Suite will end

604
00:31:53,240 --> 00:31:56,640
Speaker 2: up in New York City? I mean, Katie brings up

605
00:31:56,680 --> 00:31:59,960
Speaker 2: the geography of this. Let's forget about London, forget about Zurich.

606
00:32:00,280 --> 00:32:02,240
Speaker 2: I got to believe they're going to maintain Zurich to

607
00:32:02,280 --> 00:32:04,760
Speaker 2: some extent because of the politics. They don't have the

608
00:32:04,760 --> 00:32:06,520
Speaker 2: politics in New York. Do they do you there?

609
00:32:06,720 --> 00:32:07,880
Speaker 7: Politics and banking everywhere?

610
00:32:07,920 --> 00:32:09,160
Speaker 2: Well, but I mean they don't have to talk to

611
00:32:09,200 --> 00:32:12,200
Speaker 2: mayor Adams about it. You know, it's not Zurich is different.

612
00:32:12,680 --> 00:32:14,360
Speaker 2: What is this going to look like in twenty four

613
00:32:14,400 --> 00:32:15,400
Speaker 2: months in Manhattan?

614
00:32:15,440 --> 00:32:17,720
Speaker 9: You know, that's a great question because remember I think

615
00:32:17,760 --> 00:32:19,800
Speaker 9: about this a lot because Credit Sweez was in that

616
00:32:19,960 --> 00:32:24,600
Speaker 9: iconic Madison Avenue building eleven Madison, and you know, you

617
00:32:24,640 --> 00:32:27,720
Speaker 9: start to have bankers across the street really just what

618
00:32:27,880 --> 00:32:30,280
Speaker 9: maybe ten or so blocks away over at UBS on

619
00:32:30,360 --> 00:32:35,000
Speaker 9: Sixth Avenue. Different culture over there. It's starting to move over.

620
00:32:35,000 --> 00:32:36,520
Speaker 9: I I even wonder it's going to happen to that

621
00:32:36,640 --> 00:32:39,400
Speaker 9: least over in the Credit z'z building.

622
00:32:39,800 --> 00:32:41,760
Speaker 7: And so yes, I mean they have a massive New

623
00:32:41,840 --> 00:32:47,000
Speaker 7: York presence. And remember, for for both companies, Credit Switez.

624
00:32:46,800 --> 00:32:48,720
Speaker 9: Does not have large wealth manager in the United States,

625
00:32:48,760 --> 00:32:50,960
Speaker 9: to be clear, Ubs does, but they do have a

626
00:32:51,040 --> 00:32:51,920
Speaker 9: large investment bank.

627
00:32:52,120 --> 00:32:53,040
Speaker 7: I mean in the United States.

628
00:32:53,280 --> 00:32:56,120
Speaker 2: What's important here? And you know, you know we're talking

629
00:32:56,120 --> 00:32:58,440
Speaker 2: to Greifeld in Basset here. I mean they're looking out

630
00:32:58,440 --> 00:33:01,640
Speaker 2: at the Hampton's, at the lobster role. But I mean

631
00:33:01,680 --> 00:33:04,600
Speaker 2: this guy with this is a serious deadhead band. I mean,

632
00:33:04,640 --> 00:33:08,360
Speaker 2: you know, Hell or high Water. They actually play. The

633
00:33:08,440 --> 00:33:12,000
Speaker 2: guy with a blue T shirt on looks like Jerry Garcia.

634
00:33:12,040 --> 00:33:15,600
Speaker 2: I mean, he's got the lookdown cold and if we

635
00:33:15,720 --> 00:33:19,600
Speaker 2: got nothing to do. July third, rockaway Point the Sugar

636
00:33:19,640 --> 00:33:23,720
Speaker 2: Bowl they're playing. I mean, Shanali, this is Bloomberg reporting.

637
00:33:23,800 --> 00:33:27,160
Speaker 2: I think, Reddick, what do you think, folks? Retto keeper

638
00:33:27,160 --> 00:33:29,160
Speaker 2: of the amex me, you just want.

639
00:33:28,960 --> 00:33:30,120
Speaker 7: It to be very honest with you.

640
00:33:30,160 --> 00:33:31,960
Speaker 9: I did want to write a story about his cover band,

641
00:33:31,960 --> 00:33:32,880
Speaker 9: I just never got to it.

642
00:33:33,040 --> 00:33:34,840
Speaker 7: Here's a big news patch.

643
00:33:35,200 --> 00:33:37,640
Speaker 2: Report July third, on this new guy who's going to

644
00:33:37,720 --> 00:33:39,440
Speaker 2: save UBS and credit sweet Well.

645
00:33:39,480 --> 00:33:41,040
Speaker 9: Last time you got me to write about the piano

646
00:33:41,080 --> 00:33:42,520
Speaker 9: Bart Davos, I got in trouble for it.

647
00:33:42,600 --> 00:33:45,680
Speaker 1: So everyone who writes this is a cardinal.

648
00:33:45,800 --> 00:33:48,719
Speaker 2: Everyone who writes about the piano Bart does get in trouble.

649
00:33:48,800 --> 00:33:51,600
Speaker 2: This is a fact of like. This is to me

650
00:33:51,680 --> 00:33:53,960
Speaker 2: a huge announcement. And again the imprint here of Colm

651
00:33:54,040 --> 00:33:55,960
Speaker 2: Keller is extraordinary.

652
00:33:56,160 --> 00:34:00,200
Speaker 9: The kind of Morgan Stanley UBS mirroring has always has

653
00:34:00,200 --> 00:34:02,480
Speaker 9: been a big question. I remember a UBS banker once

654
00:34:02,560 --> 00:34:04,960
Speaker 9: telling me that they were afraid that Morgan Stanley would

655
00:34:05,000 --> 00:34:06,160
Speaker 9: want day by Credit Suite.

656
00:34:06,680 --> 00:34:07,840
Speaker 7: He said it kept him up at night.

657
00:34:08,239 --> 00:34:10,640
Speaker 9: And I remember when I was reporting, I covered both

658
00:34:10,680 --> 00:34:14,319
Speaker 9: banks for what maybe almost ten years now more. Cohlm

659
00:34:14,360 --> 00:34:17,840
Speaker 9: would be seen having a drink with clients at the

660
00:34:17,920 --> 00:34:22,040
Speaker 9: Solme wine bar, which is right behind UBS, while he

661
00:34:22,120 --> 00:34:24,759
Speaker 9: was at Morgan Stanley. So you know, there's a very

662
00:34:24,800 --> 00:34:28,400
Speaker 9: close tie between all these businesses. Morgan Stanley was the behemoth,

663
00:34:28,680 --> 00:34:31,920
Speaker 9: but it can't be discounted that COLMB has a tremendous

664
00:34:31,960 --> 00:34:34,680
Speaker 9: amount of relationships not only among the banking ranks, but

665
00:34:34,800 --> 00:34:36,920
Speaker 9: also among wealth management and wealth clients.

666
00:34:37,000 --> 00:34:41,080
Speaker 2: Twenty seconds, we're into the weekend, the summer begins. How

667
00:34:41,160 --> 00:34:44,080
Speaker 2: grim is it out there in Wall Street, Manhattan?

668
00:34:44,120 --> 00:34:46,960
Speaker 9: The idea that UBS Credit Suite will be cutting that

669
00:34:47,080 --> 00:34:50,080
Speaker 9: many tens of thousands of jobs at the same time

670
00:34:50,239 --> 00:34:53,640
Speaker 9: as Goldman and GP Morgan and City Group are doing

671
00:34:53,719 --> 00:34:56,000
Speaker 9: multiple rounds of layoffs is grim.

672
00:34:56,080 --> 00:34:59,360
Speaker 7: There is very little capacity to bring on new bankers

673
00:34:59,400 --> 00:34:59,960
Speaker 7: on Wall Street.

674
00:35:00,320 --> 00:35:04,360
Speaker 2: Great reporting by Alexandra Harris at Bloomberg. HERA, mister whipp

675
00:35:04,360 --> 00:35:07,279
Speaker 2: if I hope I'm pronouncing that right, He's gonna have

676
00:35:07,320 --> 00:35:09,800
Speaker 2: a getaway, not an Alabama getaway. He's gonna have a

677
00:35:09,920 --> 00:35:15,239
Speaker 2: Zurich getaway to help ubs bring in credit suite. Subscribe

678
00:35:15,280 --> 00:35:19,080
Speaker 2: to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere

679
00:35:19,080 --> 00:35:23,440
Speaker 2: else you get your podcasts. Listen live every weekday starting

680
00:35:23,480 --> 00:35:27,640
Speaker 2: at seven am Eastern on Bloomberg dot Com, the iHeartRadio

681
00:35:27,719 --> 00:35:31,520
Speaker 2: app tune In, and the Bloomberg Business app. You can

682
00:35:31,600 --> 00:35:34,800
Speaker 2: watch us live on Bloomberg Television and always.

683
00:35:35,160 --> 00:35:39,000
Speaker 1: I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen,

684
00:35:39,239 --> 00:35:41,000
Speaker 1: and this is Bloomberg