00:00:02 Speaker 1: Bloomberg Audio Studios. 00:00:04 Speaker 2: Podcasts. 00:00:05 Speaker 3: Radio. 00:00:06 Speaker 4: News. 00:00:12 Speaker 5: This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. 00:00:27 Speaker 4: Yesterday, I was in Washington for a wonderful memorial service. For Alan Greenspan. It was people pulled by Republicans and Democrats. 00:00:36 Speaker 6: Okay, very good. 00:00:37 Speaker 4: Lots of media type where there are all the people covering economics and that. And, of course, also all the people wrapped around a gentleman of 100 years old. who worked within government and within regulation. Gary Gensler should have been there. It was just spectacular. I thought Robert Rubin was particularly eloquent and Al Hunt stole the show, driving all of Bloomberg News in Washington for years and the Wall Street Journal. Al Hunt just absolutely stole the show. 00:01:06 Speaker 7: With his comments. 00:01:07 Speaker 4: Joining us now, someone that should have been there yesterday, Gary Gensler, of course, a legendary in Wall Street and the former chairman, Securities and Exchange Commission. Gary Gensler, what did Alan Greenspan do within the ups and the downs, the right and the wrong? How did he advance the American experiment? 00:01:26 Speaker 8: Well, Alan was a real public servant, and I had the honor to work with him. I couldn't be there this weekend just because of things up here in Boston, where I'm at right now for MIT. But he really understood the markets and deeply understood the markets. And I think in the 1990s, he sorted through this new technology, the internet, and what it was doing to our economy. And I think a little bit before others, understood how to control inflation but still leave enough room for the, I don't know if you want to call them the animal spirits, but that investment boom in the 1990s. 00:02:07 Speaker 4: I look here, then let me jump forward right away to what you and you're working on at MIT with your wonderful podcast as well. The new internet is the AI technology. The news flow this morning, Paul and I opened the show. Gary, I've never seen a company do a red herring like the Reuters report on Anthropic. I mean, to be polite, Gary, it's bizarre. Are these companies legitimate companies? 00:02:38 Speaker 8: Well, they have a remarkable thing, how they've pulled in so many users so rapidly, Anthropic, OpenAI, and the like. But the AI trade that our capital markets is hovering on top of is an investment boom that's about twice what the internet was. So back to Alan Greenspan, he was watching as a lot of tech companies were investing, and it added up to about 1% to 1.5% of the economy. 00:03:07 Speaker 9: It was considered at the end a bubble. 00:03:11 Speaker 8: This is now 2.5% of our economy. I'm talking about all the data centers and so forth. And here's the challenge for Anthropic and OpenAI is the Chinese models They might not be quite at the frontier, but if they're two to six months behind us, regardless of how they do it, whether they use what's called distillation or not, and they're spending a lot less in the Chinese economy, a lot of U.S. companies are saying, look, I'll use the Chinese model to do my reasoning, and maybe I won't use open AI or anthropic. So that's the challenge for them. They're spending so much money But will it lead to the revenues to justify that spending? 00:03:59 Speaker 2: Gary, so much capital, as you well know, has been raised in equity markets, fixed income markets to support the growth of AI. Even some of the founding voices of these companies at OpenAI and Anthropic, they are calling for some guardrails on this technology. 00:04:17 Speaker 6: How do you think about that? 00:04:19 Speaker 8: Well, I think that there are real challenges. AI's capabilities, the ability to do coding on its own, you know, write the software, the ability to replicate itself and then send agents out on the internet. OpenAI's released that report about an incident this summer where the agents multiplied to 1,200 different agents simultaneously looking for vulnerabilities. And they found them at Hugging Face. And the last thing I'd say is beyond their capabilities, alignment. Are the models aligned with their human overlords, if you wish? 00:05:01 Speaker 9: We, the humans. 00:05:03 Speaker 8: And more and more, they're showing that they have some reasoning on how they deceive and how they jump out of guarded sandboxes. So this is a real challenge. I... I know the president calls it a hoax. I differ with the president on that. 00:05:22 Speaker 4: Gary Gensler with us, folks. The former chairman, I should say, of the Securities and Exchange Commission. His good work for years at Goldman Sachs noted as well. I got to get to some other matters here. 00:05:32 Speaker 7: It's amazing. Gensler comes on. The Bloomberg reporters in Washington are brutal. 00:05:37 Speaker 6: You should see their questions. 00:05:38 Speaker 4: I mean, they want to know what he thinks about Yankees Red Sox. I mean, there's too much there. One more AI question, Gary. I got to go here. We've had other AIs. We didn't have guardrails on the trains. We didn't have guardrails on the miracle of pharmaceuticals and antibiotics, tetracycline and all that. And who in God's name is going to institute the guardrails? I don't see any institution with motivations to on an ex-ante basis get out front on AI technology. Where is it? 00:06:14 Speaker 8: Well, currently, it's not in this administration nor in the Congress, though I would say the Congress is starting to really lean into it. But look, Tom, we put guardrails on our capital markets so that those capital markets work better. And they're not perfect. But when the Securities and Exchange Commission was created, it was about investor protection. It was about making sure that the markets worked better, created the public good that you could trust the markets. So I would say on AI, it's possible, but here's the wrinkle. And it's a big consequential wrinkle. The Chinese are competing with the U.S. 00:06:57 Speaker 9: The U.S. 00:06:57 Speaker 8: Wants to stay ahead, but the Chinese are doing something called open weight models. 00:07:02 Speaker 9: This is a competitive challenge because U.S. 00:07:05 Speaker 8: Companies can use it and they can use it far cheaper and it undermines the revenue proposition for Anthropic and OpenAI, it also undermines, can you put guardrails on something that then the user, the threat actor, can maybe take off? Think about those people that sometimes say, I'll take my catalytic converter off my automobile. 00:07:28 Speaker 9: And it's not legal. 00:07:31 Speaker 8: But a threat actor could say, oh, I'm just going to take the guardrails off. 00:07:36 Speaker 4: Gary, I got a whole group of reporters that do this 24-7. The pit bull terrier down in Washington, Nicola White. 00:07:43 Speaker 3: Oh, boy. 00:07:43 Speaker 4: She's a threat to society. She covers enforcement for us folks. And she's got a brilliant note here to me, Gary, about the experiment of mom-and-pop retail access. to private credit, to all this other stuff that's illiquid as well. How is that experiment going? And she wants to know, Nicola wants to know, does it keep you up at night that we're retailizing? 00:08:09 Speaker 7: That's my word. I just want to impress Gensler. 00:08:12 Speaker 4: That we're retailizing, Gary, retail into things they shouldn't be going into. 00:08:19 Speaker 9: Tom, you impress me every time you go out to that. 00:08:22 Speaker 8: Jackson Hall Conference and you have such access to everybody that's in that meeting. So don't worry about it. Look, I do think that there's a mismatch that the retail public, even high net worth retail public, is being sold private credit to And then they're also being told they can get some liquidity. And you really can't. If you want to get the higher returns, you need to put your risk capital at work for. 00:08:57 Speaker 9: Longer periods of time and not have those redemptions. 00:09:00 Speaker 8: Look, it's working so far, but I would say when, and it's not a question of if, but when we have a retrenchment in the big AI trade, there's a lot of debt on those data centers that is in this complex, in the private credit complex. And so to your colleague's question, That's when the retail public is going to be saying, wait, this paper is no longer worth 100 cents on the dollar. It's worth 80 or 90 cents or even lower. I'd like to get out. And what happens then? That's a real challenge. 00:09:37 Speaker 2: So, Gary, Torsten Slock, economist at Apollo, was out with a note recently raising some questions about how the rise of AI agents affects might affect the financial system. How do you think about that? We had the CEO of LPL Financial in yesterday, and he was voicing some of those concerns as well. How do you think about AI in the context of just consumers and financial? 00:10:00 Speaker 6: Services? 00:10:01 Speaker 8: Well, I'm in the classroom teaching artificial intelligence and money, which is addressing those very questions with some terrific MIT students. And Simon and I, of course, talk about it repeatedly on our Power and Consequences podcast. 00:10:16 Speaker 9: My thought is three things. 00:10:19 Speaker 8: One is for consumers, they might actually get some better automated access to higher rate deposits. That's what Apollo's Mr. 00:10:32 Speaker 9: Slock was pointing out. 00:10:33 Speaker 8: He was saying investors might be able to find better than the very low. 00:10:38 Speaker 9: Rates that most bank deposits get. So that's a net plus. 00:10:43 Speaker 8: But two, if you're using Facebook Muse and finding those higher rate deposits, maybe moving into money market funds as well, then the banks might have deposit flight. I think it will happen slower than his note suggested, but it's real. The other risk is if all of finance starts using similar models, then you might have hurting. And I wrote a paper on this a while back. It could lead to real systemic risk. And then thirdly, it's just the overall when we have a retrenchment. And at some point in time, this boom will plateau and even turn the other way. When that occurs, then, as Alan Greenspan said, would have liked to hear his friend Warren Buffett say, when the tide goes out, you see who's swimming with their trunks off. 00:11:38 Speaker 2: Gary, I mean, it just feels like, and I'm sure you see it every day in your classroom, the young folks are just embracing AI for, it's just become a part of their life as opposed to embracing it like Tom and I are trying to do. At some point, that's going to, I would think, you know, impact how they invest, how they save, how they allocate their own capital. 00:11:57 Speaker 6: Is that a good thing from your perspective? 00:11:59 Speaker 7: Absolutely. 00:12:00 Speaker 8: Look, I'm kind of bullish and optimistic that we humans will figure it out. But there's real risk we've talked about in this program. There are existential risks about AI agents misaligned or not aligned with their human potential. users, that threat actors will use it and it will disrupt markets. And so we have to build cybersecurity and cyber resilience way better. But I also think it will transform financial markets. And that's a period of time of uncertainty. We've seen this in prior booms. You mentioned, you know, railroads and pharmaceuticals, and we've talked about the Internet. 00:12:46 Speaker 9: It's all there. It all has some uncertainty. 00:12:50 Speaker 8: And then you have the geopolitical competition with China, and China's not taking their foot off the gas pedal. 00:12:56 Speaker 4: Gary, I've got to be a smart aleck at MIT in the back of the room with my hand up asking Professor Gensler a question. 00:13:02 Speaker 7: Gensler. 00:13:03 Speaker 4: The Clinton administration, the Obama administration, CFO for Hillary Clinton's campaign, working for President Biden, etc. 00:13:12 Speaker 6: From where you. 00:13:12 Speaker 4: Sit now, is there a tinge to the Democratic Party experiment of being anti-capitalist right now? 00:13:22 Speaker 8: Look, I think that each of the parties here in the United States, and you could say that's true in the parties in Europe, are going through transitions because the economy is changing so much. And so we've talked about artificial intelligence, but also the U.S. is stepping back from its leadership on the world stage. And we're in a I would say a war in Iran that doesn't have any clear resolution and has been very damaging to our economy and to our role in the world. I think that's what the Democratic Party is mostly looking at. 00:14:01 Speaker 9: But I would say that. 00:14:04 Speaker 8: There's a deep belief in capitalism, but it's got to be responsible capitalism. And just as we put guardrails on our capital markets to make them work better. that Franklin Roosevelt did that some 90 years ago with Congress. 00:14:18 Speaker 9: I think we'll find our way to do that on AI, but right now there's real risks. 00:14:23 Speaker 4: Gary Gensler, thank you so much. Greatly appreciate it with Simon Johnson at the Massachusetts Institute of Technology. 00:14:29 Speaker 7: Thank you. Stay with us. 00:14:33 Speaker 10: More from Bloomberg Surveillance coming up after this. 00:14:43 Speaker 5: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. 00:14:49 Speaker 1: Eastern. 00:14:50 Speaker 5: Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. 00:14:54 Speaker 1: Or watch us live on YouTube. 00:14:56 Speaker 4: This is the interview of the day. So George Borey's with us, All Spring Global Investment. Bob emails in. Bob's a grizzled Wall Street veteran. He's a young guy. And he just bought the 22-year Microsoft AAA phone. popping over a 6% yield. Should mere mortals be doing what Bob did? Should we have our S & P corporate bond book out now, reaching out for duration? Because boy, those yields look good. 00:15:27 Speaker 9: Yeah. 00:15:27 Speaker 3: Well, what we like to say is that a bond is simple, but the bond market is complicated. And so stitching the pieces together and figuring out what to do in bonds is sometimes tricky. But right now, bond yields have been going up, prices are down. But once you get to certain yield levels, good things tend to happen to bond investors. And as bond yields in treasuries broke above 5% and dragged other bonds along with it, as you point out, things like perhaps Microsoft at 6%, those bond yields become very, very powerful in your portfolio. That income, it works for you in nominal terms, 6% is a good yield, but it works really, really well for you in real terms. And despite all the volatility and this sort of cyclical upswing in inflation, we're pretty confident that if we look out over the next five to 10 years that Inflation should kind of drop back down to target and back down to more normal levels. So buying bonds at 6% or above today should work pretty well for bond investors as we move through time. And then the factors themselves, while they create volatility in the near term, they actually do support bonds today. as we move forward. 00:16:53 Speaker 2: How far out the credit curve do you want to go in this bond market here? Because Tom's quoting on Microsoft. I mean, it doesn't get any better than that, you know, at 6%. But how much further out do you want to go? Yeah. 00:17:03 Speaker 3: Well, Paul, a little duration goes a long way in this market. And so you don't need to be a hero. You don't need to sell all your cash and rush out to the 30-year. But simple curve extensions, if you're in cash, maybe it's the two-year. If you're in the two-year, maybe it's the five-year. All spring right now, we do like intermediate duration. So that 10-year part of the curve is looking pretty attractive. And while 30-year yields also are relatively high, there's a lot of price volatility in 30-year bonds. So maybe you don't need all that volatility in your portfolio. Five, seven, 10-year bonds can do just fine. 00:17:45 Speaker 2: So- When the Wall Street salespeople ring you up to say, hey, I've got another hyperscaler bond, what's the conversation for you guys? Because you know you're going to get, that call is going to keep coming and coming and coming. 00:17:58 Speaker 3: Well, as we've seen in the last couple of weeks, the technical pressure. So the balance between supply and demand is pretty delicate right now. And so we know we're going to get issuance from hyperscalers. We know we're going to get issuance from municipalities. We know we're going to get issuance from from the treasury. And then there's a whole load of M & A transactions and other deals in the pipeline. It's a very good time to be a lender. We need to be selective, first and foremost. You can't buy everything. But when we do our credit work, when we look at individual companies, who's in that sweet spot? They need to borrow. They need the funding. They're willing to pay for it. But they also have a good business plan. Their pricing is holding up. And their cash flows look pretty good. So security selection dominates everything. Bond portfolios today are bond portfolios today, and that should work for you when you go through time. 00:18:56 Speaker 4: We continue with George Borey, Chief Investment Strategist, Fixed Income at Allspring, with our question, our conversation of. 00:19:03 Speaker 7: The day here. 00:19:04 Speaker 4: As we look at the yields, 5.56% in the 30-year bond when I walked in the door this morning, 5.54% right now. So I'm doing a survey of warhorse bond portfolios, down 4%, down 7%, you know, whatever the number is. There's some price down here. I want you to hyper-define for yield hogs right now, duration. Not all spring duration, but the human condition in America duration. One year, two year, the belly of the curve. Where do you define the belly of the curve and is it attractive? 00:19:42 Speaker 3: Yeah, we'd say the belly of the curve for us is between five and 10 years. 00:19:46 Speaker 7: You go up to 10 years as part of the belly. 00:19:49 Speaker 9: Wow. 00:19:49 Speaker 6: We would. 00:19:50 Speaker 3: That's the intermediate part of the curve. You know, as you get out to 10 plus, you're now kind of in the long end. But if you're thinking about durations that are sort of between, Kate, four and six, that is the belly. That would be the belly. 00:20:05 Speaker 7: How much yield. 00:20:06 Speaker 4: Do I lose buying a six year piece versus a 10? 15 or 20 years. 00:20:13 Speaker 3: I'd have to do that off the top of my head. 00:20:16 Speaker 6: You have a Bloomberg in front of you. 00:20:17 Speaker 7: Come on, George. 00:20:18 Speaker 3: I'm not logged in. 00:20:19 Speaker 7: Use Mike's passcode. 00:20:22 Speaker 3: So you give up a. 00:20:23 Speaker 6: Little, but not much. The curve's been flattening. I don't think the public knows that. 00:20:28 Speaker 4: Yeah. 00:20:28 Speaker 3: You don't give up too much by just kind of coming in a little bit. So in that So going from 5 to 6, you pick up. Going from 10 to 6, you don't lose that much. So that intermediate part of the curve, it's still positively slow, meaning for each incremental unit of duration, you're getting extra income. But it is fairly flat. Again, which is why you don't have to rush out and buy loads of duration. But legging in and creating a nice little laddered portfolio works well. 00:21:00 Speaker 7: There we go. 00:21:01 Speaker 6: That takes me right to my question. 00:21:03 Speaker 7: You need to step out right now. 00:21:05 Speaker 4: Exactly. 00:21:05 Speaker 6: Call my guy. 00:21:07 Speaker 2: Here in a high tax municipality or area like the greater New York City area, municipal bonds are just really attractive for a lot of folks in terms of tax equivalent yield. 00:21:17 Speaker 6: How do you think about that market? 00:21:19 Speaker 3: So we like munis. I think they're good for a few reasons. One, the yield, as you mentioned, versus kind of their taxable equivalents looks very attractive. The credit quality of most municipalities is very good. Even cities like New York or states like Connecticut, where I live, you know, they have a lot of kind of levers to pull to preserve their credit quality and their ability to pay. So we like the fundamentals within munis. And again, what we like to say is regardless of what's happening in the Middle East or in Ukraine or in any other geopolitical hotspot, there's a good chance you're going to flush your toilet today. And so municipalities get paid when you flush your toilet. And it's that level of security that works really, really well. in these kind of markets. So munis are a good place to be. Their yields are going to move with treasuries and others, but the yield relative to treasuries has gotten attractive. The quality is good and the technicals should start to become more favorable as we get into the end. 00:22:24 Speaker 6: Of the year. 00:22:25 Speaker 7: George, I don't care. Yankees or Red Sox? 00:22:28 Speaker 3: Yankees and Rangers. 00:22:30 Speaker 6: There you go. We have a big day today. Did you stack it? 00:22:33 Speaker 2: I know the whole room is stacked against me. 00:22:37 Speaker 3: Oh, come on. 00:22:38 Speaker 7: George Borey, thank you so much. A clinic there. Chief Investment Strategist. Stay with us. 00:22:44 Speaker 10: More from Bloomberg Surveillance coming up after this. 00:22:55 Speaker 5: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. 00:23:01 Speaker 1: Eastern. 00:23:01 Speaker 5: Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. 00:23:07 Speaker 7: We are thrilled to have us. 00:23:09 Speaker 4: Right now, Meredith Whitney is with us with all sorts of different topics to talk about. Of course, her ability to scan our financial system, our banks, our fintech and all that over the decades, as noted, Meredith Whitney Advisory Group. I want to get to your wonderful notes, but James Diamond today published in the Wall Street Journal an essay screaming about the future of America. After Trump, like Jamie Diamond in his essay today, are you optimistic that we can have some form of return to what we knew or an advancement to something new that will be constructive? 00:23:47 Speaker 1: I hope so. 00:23:48 Speaker 11: You have pendulum swings today. which I think you're going to see again in November, which is let's vote these guys out, let's try these other guys. And it goes from extreme to extreme. But the underpinning of what this country is about is freedom. And it's incredible that we can, you know, we don't yet have censorship of press. We have incredible freedom and incredible meritocracy. So you can have the American dream like Elon Musk, a broke immigrant. that comes and becomes the world's wealthiest with man. So things that are possible in the United States. I had breakfast with a friend. The meritocracy that I had the benefit of, of being on Wall Street as a woman, didn't matter if you were blue, green, purple, or a man or a woman. You had opportunity in this country, which is incredible. We've got to get over the divisiveness. 00:24:37 Speaker 4: Absolutely. 00:24:38 Speaker 2: So one of the things we're seeing in this economy for, I don't care where you are in this K-shaped economy, Inflation is just a persistent, persistent problem. The Federal Reserve certainly recognizes that, and they're trying to deal with it. 00:24:49 Speaker 6: Where do you see inflation in your work? 00:24:51 Speaker 2: Because you, again, with all your history with the banks, you know the impact of changing interest rates, how it affects people and institutions. 00:25:00 Speaker 11: Well, I think I think the banks are not lending to consumers. They're lending to people who don't need the money. So banks on the credit card front are lending to non-revolvers, prime and super prime. They're lending to a lot of non-deposit financial institutions, so a lot of private credit. And so that will impact higher rates. But as far as it impacts the consumer, those consumers aren't borrowing. And the lower income consumers don't have credit lines. If they do, they're extremely expensive. They'll just get more expensive. 00:25:34 Speaker 2: Where do, again, the lower end of the K-shaped economy, how do they finance their own personal income statements and balance sheets when prices are so much higher across the board? Gasoline prices. They're paying so much more for gasoline than they did a year ago. 00:25:48 Speaker 1: Well, what's really. 00:25:50 Speaker 11: tremendous is, and I found this source in Brown Alumni Monthly. Brown has, and the Watson Group has, a tracker, the Iran war cost calculator. And for each household since the Iran war began, it's a $ 900 increase. That's almost a $ 40 increase from last week. So these are households that have. 00:26:12 Speaker 7: No wiggle room. 00:26:14 Speaker 11: Or even if the households do have wiggle room, they've started to make choices. So the lower income have made choices I'll fill up my tank and I won't buy groceries. Grocery spend has been flat to negative this year. And then the higher end, the super prime, the bank customers, and this is weekly data, you've seen since the beginning of the war, almost a one-for-one correlation with credit card debt outstandings, weekly data, and gas, the rise or fall of gas prices. Over the last three weeks, that correlation has diverged, which means even higher income households are making choices because of this stinging psychological effect of over $ 4 gas prices. 00:26:52 Speaker 4: Meredith Whitney with us, folks. I can't say enough about it. The stereotype here, really, she was just on Bloomberg Money with us. 00:26:57 Speaker 7: I mean, she shows up. 00:26:58 Speaker 4: Nice. 00:26:59 Speaker 7: You know, Mrs. Keynes emailing in, did you see that Chanel necklace. 00:27:02 Speaker 6: She had on? 00:27:03 Speaker 4: She's rocking it with a Burberry trench coat today and the pearls. And they don't realize the granular work you do. Every politician should have, I think it's page three of your report, figure one, paycheck to paycheck, living over time, and below it, property insurance up 73% since the pandemic. 00:27:25 Speaker 7: That's classic Meredith Whitney. 00:27:28 Speaker 4: What do you say to a Republican and Democrat in Iowa when they see. 00:27:32 Speaker 7: That half a page? 00:27:33 Speaker 11: Well, I think it's going to be tough on Republicans because they haven't addressed affordability. Now, the Democrats, you know, Hakeem Jeffries was talking about, oh, we're going to bring down prices, but he doesn't explain how. And I think at this point, because so many households are struggling, they want to know how you're going to bring down prices. I think the Republicans are going to try to go for a deal that they're going to say they have with Iran, but that may be just temporary and temporary. in effect. And I don't know that's enough to help the Republicans hold on to the Senate. I think people are just feeling so much pain and feeling so distant from the politicians that are supposed to serve them. 00:28:14 Speaker 2: So what's the most typical question you get from your clients here as they think about Well, we've got a stock market at or near all-time highs, but boy, we've got yields at levels we haven't seen in such a long time. 00:28:25 Speaker 6: What do your clients want to talk to you about? 00:28:27 Speaker 11: I think the most shocking thing that they want to tell me is, oh, this is temporary, and when the war is over, gas prices will go down. They also want to know, I mean, there's a lot that people don't want to hear because they want they want things to perpetuate. So look, no one's arguing they have to own the U.S. banks because the U.S. banks have been overpriced for a long time. And And the stock and the managements have just been buying back stock and not doing anything really with their capital. So I think it's more of a people are venting. Oh, it has to be. There has to be assumption. Gas prices can't stay this long. Some adult is going to make a rational decision to fix this, this real quagmire that we've we've gotten ourselves into because of high prices. 00:29:16 Speaker 4: Quickly, with Paul's observation on price down, yield up. 00:29:19 Speaker 7: Can you be long the big banks here? 00:29:23 Speaker 11: I don't think there's a strong argument. The European banks are cheaper and they've got a steeper yield curve. So it's a hard argument here, I think, to be long the banks. Some of the non-banks have been absolutely crushed. So there's value out there, but the risk is off. Such as? 00:29:41 Speaker 5: Oh, yeah. 00:29:41 Speaker 7: Come on, I need a stock, Meredith. 00:29:43 Speaker 6: Help me. 00:29:44 Speaker 11: You know I love Rocket Mortgage, and I know it's rate dependent, but it's a juggernaut in terms of market share gains. And if oil comes down and rates come down, there's going to be a complete coil effect with that. 00:29:56 Speaker 7: I'm hearing this. This is the new word. Coiled. The Red Sox are coiled. They're coiled. Meredith, thank you so much. 00:30:05 Speaker 6: All right, we're very good on that. I'm just looking at J.P. 00:30:07 Speaker 2: Morgan up 6%, 7% year-to-date. Citigroup up 12% year-to-date. Not great returns. I mean, people are worried about it. 00:30:16 Speaker 4: Yeah, I think that's well said. Meredith Whitney, thank you so much. Meredith Whitney Advisory Group. 00:30:24 Speaker 10: Stay with us. More from Bloomberg Surveillance coming up after this. 00:30:35 Speaker 5: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. 00:30:41 Speaker 1: Eastern. 00:30:41 Speaker 5: Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. 00:30:45 Speaker 1: Or watch us live on YouTube. 00:30:48 Speaker 4: It was great to see everyone in Washington yesterday at the Greenspan Memorial Service. So many people at 92.9 FM listening in every morning. 00:30:56 Speaker 7: The traffic down there is like more than I expected. 00:30:59 Speaker 6: Is that right? 00:31:00 Speaker 4: Okay. 00:31:00 Speaker 7: You know, the drive time thing. 00:31:02 Speaker 6: It's like it stretches back. 00:31:04 Speaker 12: Man. 00:31:05 Speaker 4: It goes from quadrant to quadrant. We just had in George Borey, great conversation on bonds. 00:31:09 Speaker 7: This is even better. 00:31:10 Speaker 4: Owner Erzin joins us from Bernstein Private Wealth with decades at McKinsey. And he was brought in to shape up the new wealth. 00:31:19 Speaker 7: Management as Alliance Bernstein sees it. 00:31:22 Speaker 4: I love how you write in your note, owner, that people just don't want 60-40. 00:31:27 Speaker 7: What's the R squared? Is our beta okay? There's a new generation here. 00:31:33 Speaker 4: I want to describe the pressures in a meeting with the children of somebody with a pot of gold, and they just don't care about 60-40, do they? 00:31:44 Speaker 6: Oh, absolutely. 00:31:46 Speaker 12: As you point out, when the complexity goes up, the value of advice goes up as well. And it's not only measured in asset allocation and information is everywhere as well. So everybody is in their own way, informed. So to me, the whole magic here is bringing that human advice, that judgment, that trust, and bringing it all together, bringing it all together across investments, the tax, the planning, the philanthropy, particularly with the more high net worth, ultra net worth families. 00:32:18 Speaker 7: Can you get Knicks tickets? 00:32:21 Speaker 6: Not on opening night, probably. 00:32:23 Speaker 12: I'm a big Knicks fan. I wish I could. 00:32:26 Speaker 6: What's the discussion here? 00:32:28 Speaker 2: Big picture about taking all the wealth that's been created by the baby boomers and then kind of getting it to the next generation, that wealth transfer that we've been hearing about for so many years. 00:32:41 Speaker 6: How do you guys think about that as a big picture item? Absolutely. 00:32:44 Speaker 12: It comes down to, again, a couple of things. One, our heritage, it goes back 60 years. It's planning. We take a long-term planning approach. Again, it's more holistic. We take into consideration what you want to accomplish with your wealth, what you want your wealth to do. And you need to take a more multi-generational approach to that, right? So the kids might have different objectives. The parents might have different objectives. We use family governance, family engagements. to make sure we have a holistic plan for the family that basically achieves those multiple objectives. 00:33:18 Speaker 7: Can you get Afterthought to empty the dishwasher? That would be good if Alliance Bursting could do that. 00:33:24 Speaker 6: Well, I'm a 13-year-old and a 15-year-old. I cannot make them do that. How do you guys view. 00:33:30 Speaker 2: Artificial intelligence, is it a competitor to what you do or is it a. 00:33:35 Speaker 6: Tool for what you do? 00:33:36 Speaker 2: Because my kids, they feel like AI can solve all the world's issues and answer every question they have. And I wonder if that includes financial services. 00:33:46 Speaker 12: Look, at the end of the day, I'm sure there's going to be a segment of clients that will rely on AI. 00:33:52 Speaker 4: Mm-hmm. 00:33:54 Speaker 12: I don't believe it's going to be the majority. In our experience, AI is definitely an enabler and a scaler of what we can do. Ultimately, our goal is to provide the best seat to the advisor. We want the advisors to be the best versions of themselves. And we see AI as one of the tools in the toolbox that enable them to be the best advisor for their clients' holistic needs. So it's a tool. Ultimately, again, we believe in human judgment. We believe in the relationships. We believe in trust. that the clients put in us and there's a huge human component and I don't see AI replacing that for many families with complex needs today. 00:34:31 Speaker 4: You're one of the definitive voices, I should say, of your turkey. I think of the shades of Erdogan across the multiple decades and to me the foundation was a gentleman I knew quite well who came out of Maryland years ago, Mehmet Simsek, who is, I believe, still Minister of Treasury and Finance. How is he doing in guiding the idiosyncratic pressures of Turkey. How is SimSec doing? 00:34:58 Speaker 12: I have not been super close to Turkey lately, unfortunately. I've been in New York and more closer to probably. 00:35:04 Speaker 7: But you're observing it. 00:35:06 Speaker 12: From my perspective, look, ultimately, like many emerging markets with all the different pressures around the world, the geopolitics, if you think about Turkey's location. 00:35:16 Speaker 7: etc. 00:35:16 Speaker 12: It's a tough zip code, if you will, and it has a relatively large population and some of the structural challenges with the economy that goes back a long time. So ultimately, it's a tough hand, but definitely there's a lot of work ahead of Turkey, including the administration. 00:35:35 Speaker 7: Please let us know when you get Nick's tickets. Paul Sweeney would be curious about that. Oner Erzana is. 00:35:40 Speaker 4: Head of private wealth management at an alliance bursting with a real different tact on what to do with the pot of gold. 00:35:48 Speaker 5: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. Thank you.