Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Yeah, how long has this been going on? And then
Speaker 2: the question is we just talked about with our TV colleagues,
Speaker 2: this whole idea that the FED is no longer you know,
Speaker 2: talking about how high. It's more about how long? So
Speaker 2: how long do we stay at those higher rates? And
Speaker 2: you know, you look at something like the retail sales
Speaker 2: report that's out there and folks are shopping on stuff.
Speaker 3: The question I have, Carol, is is this because the
Speaker 3: long and variable lag of raid hikes have not yet
Speaker 3: hit the consumer in certain areas?
Speaker 2: So much for joining us this afternoon, or is it.
Speaker 3: Because the consumer is just so resilient having built up
Speaker 3: a cash cushion?
Speaker 2: And J Powell again, thank you so much for I
Speaker 2: could see the presco are the comments coming out of
Speaker 2: Jackson Hole next week?
Speaker 3: Those are real questions though, like why why are consumers
Speaker 3: so resilient?
Speaker 1: Still?
Speaker 2: I don't know, balance, I don't know why.
Speaker 3: Are housing price is not coming down?
Speaker 2: What are you? A two year old?
Speaker 3: Just have questions?
Speaker 2: Well, we have somebody to help us with some answers,
Speaker 2: Bloomberg News Economics editor Molly Smith. She's here in our
Speaker 2: Bloomberg Interactive Broker studio.
Speaker 4: Molly.
Speaker 2: So, let's start with the retail sales data. Since it
Speaker 2: came out this morning, we all knew that there was
Speaker 2: going to be at least initially some upside pressure on yields,
Speaker 2: and it definitely played out that way.
Speaker 5: Yeah, And I mean, really, Tim, you just I think
Speaker 5: you just stole the cake from Jay and Jackson Hole
Speaker 5: right here. So these are well I think you perfectly
Speaker 5: scripted so that only had grateful to you know, sweat
Speaker 5: shirt on.
Speaker 3: I'm going to be I am not going to be
Speaker 3: fly fishing in Jackson Hole anytime soon. I'm going to
Speaker 3: be here working all right.
Speaker 5: Jo, just like the rest of us. But you know, yeah,
Speaker 5: I mean I think it really is. It still is
Speaker 5: a question that we would all love the answer to of,
Speaker 5: like is this because like the policy lags haven't hit
Speaker 5: the consumer yet or they really just are that strong?
Speaker 5: And I think there's reasons to believe, but it could
Speaker 5: be true.
Speaker 2: Well, take a step back. How strong was the retail
Speaker 2: sales data give us some perspective because there were also
Speaker 2: some revisions right to previous reads.
Speaker 5: I think that was probably what gave me the most
Speaker 5: you know, upbeat read on this report, because you know,
Speaker 5: we always say you shouldn't look too much into one
Speaker 5: month's worth of data, but when you see that there's
Speaker 5: big upward revisions the prior to months, and it's like, okay, wait,
Speaker 5: maybe that kind of boosts some of the optimism around
Speaker 5: this and gives you some more confidence. And a big
Speaker 5: number like today's was okay.
Speaker 3: But these are goods, not services. That's another thing to
Speaker 3: keep in mind.
Speaker 5: Mostly goods. Yes, there is one services spending category here,
Speaker 5: and it's also not inflation adjusted. But the reason why
Speaker 5: that actually in this case makes it look almost better
Speaker 5: is because in the last CPI report for this month,
Speaker 5: we saw more disinflation and goods as in prices price
Speaker 5: growth being lower. So you would think, then if you
Speaker 5: see this bigger retail sales number, then that has to
Speaker 5: be also greater actual spending to combat lower prices or
Speaker 5: lesser price growth. I should say, all.
Speaker 2: Right, so I want to bring Ara Jersey into the conversation.
Speaker 2: He's Bloomberg Intelligence chief US interest rates strategist on the
Speaker 2: phone in New Jersey. So Ira, you know, Molly setting
Speaker 2: the tone in terms of what we got from the
Speaker 2: retail sales data, including those revisions, which is largely the
Speaker 2: reason why we got that kick in yields. Hired talked
Speaker 2: to us about the trade today, specifically the significance of
Speaker 2: one day's trade in the trade. We've been seeing the
Speaker 2: US government dead. I feel like I keep asking me
Speaker 2: the same question.
Speaker 6: Yeah, yeah, So we you know, started the day actually
Speaker 6: with higher yields, primarily because of better data in Europe.
Speaker 6: So we had a big sell off in Europe, and
Speaker 6: Treasury followed that, and it was you know, there was
Speaker 6: a continuation of that weakness right after the retail sales report.
Speaker 6: But then I think, you know, the market kind of
Speaker 6: woke up and said, you know, does this really change
Speaker 6: the forward outlook of what we were thinking where we're
Speaker 6: going to have a soft landing or at least a
Speaker 6: delayed recession. The Fed might not cut as aggressively as
Speaker 6: we thought, but at the same time, they're going to
Speaker 6: cut at some point, So then you wind up having
Speaker 6: a bit of a reversal and people taking advantage of
Speaker 6: four and a quarter percent ten year yields and five
Speaker 6: percent two year yields. So and the market's very over
Speaker 6: sold right now as well. So I think it was
Speaker 6: just kind of an opportunity that people took to cover
Speaker 6: some shorts, you know, at somewhat higher yields.
Speaker 3: How high do you think we'll see on the short.
Speaker 6: End, Yeah, so we could get up towards five point
Speaker 6: one percent, five point one five percent. It really depends
Speaker 6: on the scenario for the Fed and how long and
Speaker 6: if they're good, well, firstly if they're going to hike
Speaker 6: again this year, and then secondly, how long they're going
Speaker 6: to hold the gist rates at at the current level.
Speaker 6: You know, when when the market wakes up. I think
Speaker 6: eventually the market will wake up to the idea that
Speaker 6: the Fed might not be cutting interest rates until the
Speaker 6: fourth quarter of twenty twenty four. And if that's the case,
Speaker 6: you could easily get another you know, fifteen twenty twenty
Speaker 6: five base points to sell off up to around five
Speaker 6: point one percent. We put that in a note actually
Speaker 6: last week about different scenarios that could occur depending on
Speaker 6: you know, what the Fed could do. But that being said,
Speaker 6: I think at some point in the next three to
Speaker 6: six months will start to get a pretty significant rally
Speaker 6: in two year yields, and you'll see two year yields
Speaker 6: much lower on the idea that at some point in
Speaker 6: the in the future will start the price for very
Speaker 6: aggressive Federal reserve.
Speaker 3: I don't know if you got this story, but with Carolyn,
Speaker 3: I interviewed Katherin Kaminski yesterday over at Alpha Simplex and
Speaker 3: she saw ten years. She sees ten years going to
Speaker 3: six percent. What do you make of that?
Speaker 6: There's so Molly just past.
Speaker 2: Molly just passed out.
Speaker 7: Sorry, I think that I don't know if that was
Speaker 7: audible to that.
Speaker 2: That was it's all live, everybody, all right, Yeah, well
Speaker 2: go ahead.
Speaker 6: I think that's an amazing tail risk. And the only
Speaker 6: real realistic way that you get to ten year yields
Speaker 6: at six percent, firstly, is that the Federal Reserve increases
Speaker 6: interest rates more in the front end and at number one,
Speaker 6: or the FED doesn't do anything and inflation accelerates, which is,
Speaker 6: you know, not a realistic possibility in my view, at
Speaker 6: least not not with this FED or reserve. So so
Speaker 6: to get to six percent is really a hard nut.
Speaker 6: You remember, what the reason why ten year yields are
Speaker 6: so much lower than two year yields right now is
Speaker 6: just on the anticipation that even if the Fed hikes
Speaker 6: another twenty five or fifty basis points, at some point,
Speaker 6: they're going to be cutting interest rates, you know, even
Speaker 6: if it's not until twenty twenty six. So that's again,
Speaker 6: that's another scenario that we put out, like what if
Speaker 6: the Fed doesn't cut for two years, you know what,
Speaker 6: what then would the ten year be pricing? And it
Speaker 6: turns out the tenure would be pricing around three point
Speaker 6: eight five percent if they cut down to three percent
Speaker 6: in twenty twenty five, So you know, you still have
Speaker 6: you know, unless the Fed hiking ten year yields aren't
Speaker 6: going to probably break much higher than four and a
Speaker 6: half percent.
Speaker 2: Well, why we get Molly's smelling, sal smelling Molly. I'm
Speaker 2: going to continue and just at one thing I do
Speaker 2: want to ask you Ira, when the Fed you know,
Speaker 2: puts their you know, makes their rate moves and obviously
Speaker 2: what we're now at a five and a quarter to
Speaker 2: five and a half, I mean, is there something that
Speaker 2: the treasury if you take a look at the two
Speaker 2: year that it won't normally go x amount above that range.
Speaker 6: So well, yes, the correlation that we.
Speaker 2: Can assume that it can't go to that six percent, right,
Speaker 2: So well.
Speaker 6: If the Fed hikes the six percent and then two
Speaker 6: year yields will probably go a bit higher, you know,
Speaker 6: five and a half percent and something like that. So
Speaker 6: that really depends on how the market prices for the future.
Speaker 6: If you think about what the two year yield is,
Speaker 6: it's the average of the overnight rate for the next
Speaker 6: two years. So if the markets at five percent and
Speaker 6: the Fed fund rates at five and a half, then
Speaker 6: the market's telling you that at some point the market's
Speaker 6: mainly going to be pricing for at some point the
Speaker 6: Fed cutting interest rates in the future. And you know
Speaker 6: the reverse is true too, right, Like, let's imagine a
Speaker 6: scenario where the economy is falling out of bed, we
Speaker 6: see some jobs, inflation still high, and the Fed doesn't
Speaker 6: cut well, then maybe you could see two years yields
Speaker 6: above the Fed fund rate. You saw that for example
Speaker 6: in twenty twenty one when the market was preparing for
Speaker 6: the Fed to increase interest rates to so two year
Speaker 6: yields go much higher, right in anticipation of the fat
Speaker 6: actually hiking rates.
Speaker 2: All right, so let's go to the fundamentals. Molly, that's
Speaker 2: your game in terms of what we're seeing on the
Speaker 2: economic backdrop. I mean, this economy continues to surprise us
Speaker 2: in terms of its sustainability.
Speaker 5: Yeah, and I think that's you know, still feeding into
Speaker 5: a lot of this soft landing argument. And you know,
Speaker 5: people definitely saw a bit of reason to keep being
Speaker 5: optimistic on that today. But of course there is the
Speaker 5: risk on the other side of that that if this
Speaker 5: is like proving to be an economy that's too hot,
Speaker 5: that is feeding into inflationary pressures again, then the FED
Speaker 5: certainly is not going to let off and let that
Speaker 5: six percent treasury come to fruition.
Speaker 2: Doesn't the stickiness of like wages and rents or home costs,
Speaker 2: that's gonna that's what's weighing a little bit on inflation
Speaker 2: right now.
Speaker 5: Yeah, all these things, and this is why people been
Speaker 5: saying that last mile, you know, of getting from three
Speaker 5: to two is going to be the hardest and the longest.
Speaker 5: So I think that's that could be taking some of
Speaker 5: this euphoria out of this what some people are calling
Speaker 5: the immaculate disinflation story.
Speaker 3: Okay, well, speaking of euphoria being removed, US home builder
Speaker 3: sentiment declining for the first time this year. Molly, please explain.
Speaker 5: Yeah, so there's, uh, you know, the mortgage rates are
Speaker 5: still really high, and I think it's finally catching up
Speaker 5: to you know, affordability as well. That you know, we
Speaker 5: had seen some months of home prices coming down, but
Speaker 5: that seemed to be you know, not didn't really provide
Speaker 5: a whole lot of help on the affordability side. And
Speaker 5: especially since mortgage rates are now you know, staying above
Speaker 5: seven percent for a bit longer here and more talk
Speaker 5: of like the FED that it could very well hike
Speaker 5: rates again. And this discussion you guys were having as well,
Speaker 5: if not how high, but how long that that's really
Speaker 5: putting some damp or into the housing market activity. So uh, yeah,
Speaker 5: builds sentiment came down because of current sales, because future expectations, perspective,
Speaker 5: buyer traffic, all those main indices that builders look.
Speaker 2: For a right, just real quickly, thirty seconds left here
Speaker 2: next week at Jackson Hall. You think the FED is
Speaker 2: just going to work overtime to kind of get some
Speaker 2: of the volatility out of the markets or what you taking,
Speaker 2: just quickly I.
Speaker 6: Don't think volatility. I think that they'll probably focus on
Speaker 6: the how long question that we've been talking about at
Speaker 6: Bloomberg all day today. You know, we've been talking about
Speaker 6: that really since since May of this year. You know,
Speaker 6: will you know, how can they jawbone taking some of
Speaker 6: the cuffs that are priced out of the market.
Speaker 2: Any last thoughts here, Molly Jackson Hall next week.
Speaker 5: You know, I'm thinking about the US Open.
Speaker 2: Right, I know.
Speaker 8: That's okay.
Speaker 2: It's why we done one of the reasons, many of
Speaker 2: the reasons I always have to sneak it in. Mollie Smith,
Speaker 2: Economics editor at Bloomberg News. The US Open is a
Speaker 2: great indicator of the economy. I got to tell you
Speaker 2: our Jersey chief US Interest Rate Strategies at Bloomberg Intelligence
Speaker 2: on the phone in New Jersey.
Speaker 5: It is.
Speaker 2: It is a kind of ish.
Speaker 1: You're listening to the Bloomberg Business Week podcast just live
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Speaker 2: So back in early twenty twenty one, Spacks, we're really
Speaker 2: having a moment, to say, the least, but today we
Speaker 2: had a bit of a different story and environment. Of
Speaker 2: the roughly four hundred d SPACs on US exchanges, those
Speaker 2: are companies that have merged with a SPAC like we
Speaker 2: work wheels up in a few more. The median performance
Speaker 2: here to date is down fifty percent. That's according to
Speaker 2: data compiled by Bloomberg.
Speaker 3: Tim Yeah, and about fifteen percent have gone bankrupt since
Speaker 3: the peak in early twenty twenty one. So let's get
Speaker 3: a spack update and Tuck Moore, We've got Isabelle Freedheim
Speaker 3: with a CEO and founder of Athena Consumer Acquisition Corporates,
Speaker 3: an all women let's spack platform. You have recall we've
Speaker 3: talked with members of the Athena team in the last
Speaker 3: few months. Isabelle is on zoom from Aspen, Colorado. Isabelle,
Speaker 3: how are you good? Thank you well, it's good to
Speaker 3: have you with us. Carolyn and I were talking about
Speaker 3: this as we prepared for the segment, and we thought,
Speaker 3: you know, it's so interesting, becase it would make sense
Speaker 3: to be talking so much with SPACs in twenty twenty one,
Speaker 3: maybe early twenty twenty two. But today's news of the
Speaker 3: ev SPAC, notwithstanding SPACs aren't really happening much anymore.
Speaker 7: Why is that, Well, actually they are. There have been
Speaker 7: nine SPACs announcements in the last couple of weeks. That's
Speaker 7: ninety four up to ninety four now year to date.
Speaker 7: The prior year we saw about three hundred closed SPAC transaction.
Speaker 3: So big decline from even last year.
Speaker 7: So far, year to date we're at ninety four. I
Speaker 7: expect that we will see tremendous activity in the fall
Speaker 7: as well. There's no question that the IPO window remains
Speaker 7: shut for now and spacks continue to provide access to
Speaker 7: public markets. It's unquestionably challenging. That being said, for companies
Speaker 7: that want to go public, we are proving that there
Speaker 7: is a viable path through spas.
Speaker 2: Tell us what that viable path is, because, as you know,
Speaker 2: SPACs you know, in general, have been around for a
Speaker 2: long time, but they definitely have very distinct up and
Speaker 2: down cycles, up extremes and down extremes. So where are
Speaker 2: the opportunities that are actually going to create companies that
Speaker 2: are with us for the long haul and that actually
Speaker 2: you know, will ultimately provide good liquidity events for those
Speaker 2: founders and their companies.
Speaker 7: I think the supply and demand forces of the market
Speaker 7: have created a new equilibrium such that now investors are
Speaker 7: interested in companies that are generating revenues that are close
Speaker 7: enough to profitability. And that's just a result of demand
Speaker 7: on the investor side, and that is what created this
Speaker 7: abundance of SPACs in twenty twenty and twenty twenty one
Speaker 7: was really demand from investors. We saw a lot of
Speaker 7: institutional investors who were starting to invest in pre IPO
Speaker 7: companies because they wanted access to these kinds of yields
Speaker 7: that were at the time not elsewhere. So SPAX created
Speaker 7: an answer to this demand from investors. And it wasn't
Speaker 7: just institutional investors, it was also retail investors. The demand
Speaker 7: was there for earlier stage high growth.
Speaker 3: Do you think that do you think that demand comes
Speaker 3: back though from retail investors.
Speaker 7: Retail investors tend to shy away from highly volatile products, right,
Speaker 7: and what we see here we continue to see some volatility.
Speaker 7: There may be interests, and I think there are companies
Speaker 7: that continue to answer that demand, but that demand has changed.
Speaker 7: And the poor performance that we saw as a result
Speaker 7: of combinations that close in twenty twenty and twenty twenty
Speaker 7: one is really the result of investors pulling it out
Speaker 7: and going into a risk off mode. So you continue
Speaker 7: to see now transactions that are performing much better than
Speaker 7: they were in the past because the valuations have adjusted
Speaker 7: to the new reality of the market. They're often benchmarked
Speaker 7: to commps publicly traded comps, and in the companies that
Speaker 7: we see that have closed recently actually perform much better.
Speaker 7: And there's no question that SPACs are going to continue
Speaker 7: to be in the current form or in variation of SPACs,
Speaker 7: but they will continue to be an answer for companies
Speaker 7: that do want to access the public equity market because
Speaker 7: we're clearly not there with the IPO market yet and
Speaker 7: not that we compete directly with IPOs, but it continues
Speaker 7: to offer a number of advantages.
Speaker 2: So talk to us about deals that you guys have
Speaker 2: completed where you found opportunities.
Speaker 7: Yes, So, for example, we closed a combination last year
Speaker 7: or eighteen months ago with a company called Heliogen in
Speaker 7: artificial intelligence company for the solar industry. We continue to
Speaker 7: announce combinations with announcer combination with an electric vehicle company
Speaker 7: based in Germany called Ego. We have recently announced another
Speaker 7: transaction with a company based in Abu Dhabi that makes
Speaker 7: water from humidity, and we continue to see very exciting
Speaker 7: companies that are attractive, well valued, both in the US
Speaker 7: and Lebron.
Speaker 3: Do you think the spec because SPACs weren't new in
Speaker 3: twenty twenty twenty twenty one, SPACs had been around, but
Speaker 3: they've gone through cycles. Do you think this cycle is
Speaker 3: different in the sense of, like SPACs are here to stay.
Speaker 7: It's not a cycle. So what you need is to
Speaker 7: ride sponsor what happened?
Speaker 3: How is it not a cycle if you have them,
Speaker 3: you know, spike in one year and almost completely disappear
Speaker 3: in another year.
Speaker 7: They well, it was a cycle, but I wouldn't say
Speaker 7: that now we're in a cycle. I think we're in
Speaker 7: more steady states with regards to spas. And what happened
Speaker 7: is that many SPACs were launched simply because they could,
Speaker 7: and that's not a sustainable formula nor a sustainable business model.
Speaker 7: In the surviving SPAC sponsors will be platforms of true
Speaker 7: value creation for the partner companies, and that is how
Speaker 7: we have positioned ourselves with our platform of multiple SPACs
Speaker 7: as well as our fund. It's being able to provide
Speaker 7: long term assistance to the company and provide a service.
Speaker 7: So we position ourselves as service providers. Many SPACs were
Speaker 7: launched by sponsors who we're doing this part time on
Speaker 7: the side, and that doesn't work when you hire someone
Speaker 7: to do a job. When you hire an investment banker
Speaker 7: to take a company public, they don't do it part time.
Speaker 7: So it has to be that we have full time
Speaker 7: management teams and dedicated members. So in our SPACs we've had,
Speaker 7: for example, among various boards, we've had board members of
Speaker 7: Fortune one hundred companies like City Group, Comcast at now Blackrock,
Speaker 7: American Airlines, and we bring all of these resources along
Speaker 7: with a number of CEOs, operators and as well as
Speaker 7: founders of companies who have gone through the journey themselves.
Speaker 7: So the service that we can provide is completely different
Speaker 7: than what you may have seen in twenty twenty one.
Speaker 2: Isabel so like and the exit strategies are so important.
Speaker 2: Just got about twenty five seconds left here. So for
Speaker 2: something like air Water, does it go public soon or
Speaker 2: is it a twenty twenty four story?
Speaker 7: Just very quickly we've announced the transaction. I would expect
Speaker 7: it to close in twenty twenty four, but there are
Speaker 7: deals that are closing in twenty twenty three. You're a
Speaker 7: number in the pipeline and I think we will see
Speaker 7: exciting performance.
Speaker 2: Okay, well, we'll be definitely looking out for them. So
Speaker 2: good to get some time with you. Isabel Freedom. She's
Speaker 2: founder and CEO at Athena from Aspen.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: Today, in a statement from China's Taiwan Affairs Office, China
Speaker 2: called him a complete trouble maker making also because of
Speaker 2: his seeking Taiwan independence. The hymn, of course, is Lya chingd,
Speaker 2: Taiwan's vice president and a leading presidential candidate who sat
Speaker 2: down with Joel Weber, the editor of Bloomberg BusinessWeek, in
Speaker 2: an exclusive interview that is actually Business Week's international cover stories,
Speaker 2: also Today's Bloomberg Big Take, and a most read on
Speaker 2: the Bloomberg terminal.
Speaker 3: Yeah, that exclusive conversation is why China is commenting today.
Speaker 3: After the interview became public, also saying Live's comments on
Speaker 3: so called maintaining the peaceful status quo are totally a lie.
Speaker 3: The statement says such a person will only bring risk
Speaker 3: of fierce war. With more on the conversation and on Taiwan,
Speaker 3: which is one of the most prosperous places in the world,
Speaker 3: we should note is Joel Weber. Joel, good to have
Speaker 3: you with us this afternoon. Congratulations on this incredible piece.
Speaker 3: I mean, it wasn't that long ago that you were
Speaker 3: actually there doing this. Talk to us a little bit
Speaker 3: about how this came together and take us behind the scenes.
Speaker 4: So I've got amazing colleagues, We have amazing colleagues in Taipei,
Speaker 4: and they kind of had just reached out to tell
Speaker 4: me more about the overall election, which isn't until January,
Speaker 4: but in the turbulent Taiwanese politics, you kind of want
Speaker 4: to get in on this stuff early.
Speaker 3: The last time the.
Speaker 4: Presidential election happened, it was, you know, a pretty big
Speaker 4: flip actually, so we wanted to kind of establish the
Speaker 4: presence for our reporting and our bureau in the region there,
Speaker 4: and so I said, well, what do we want to
Speaker 4: talk about, and they said, well, Elai Chung Doa is
Speaker 4: the front runner, and he's the current vice president, and
Speaker 4: he's really the person that we should talk about. And
Speaker 4: I often think when there's a really chaotic or turbulent
Speaker 4: thing in the world. In this case, I think it's
Speaker 4: probably the most complicated geopolitical situation that you can imagine,
Speaker 4: and dropping into it as as I did, revealed how
Speaker 4: complicated it is. It helps to have like a little
Speaker 4: bit of a rock that you can kind of tell
Speaker 4: that story through, and that's what we were able to
Speaker 4: do with Light and I had a series of exclusive
Speaker 4: interviews with him. It's all tied to his transit, which
Speaker 4: gets to a thing that's part of the geopolitical complexity.
Speaker 1: That I mentioned.
Speaker 4: If you're a Taiwan ees official or elected official, you
Speaker 4: can't just do a round trip flight from Taiwan to
Speaker 4: anywhere in the US. You have to transit, which means
Speaker 4: that you have a stopover, which is effectively an extended layover.
Speaker 4: So he did that last weekend through New York en
Speaker 4: route to Paraguay. Paraguay happens to be one of the
Speaker 4: dwindling number of one of a dwindling number of official
Speaker 4: sort of diplomatic countries that the country that Taiwan has
Speaker 4: formal alliances with the other ones China has strategically managed
Speaker 4: to flip in recent years. So Hondura, Squadmalodes are countries
Speaker 4: that were once on Taiwan's side and have flipped to
Speaker 4: Beijing's corner. So Beijing is in Taiwan. Is really what
Speaker 4: this story is about. And you know, for a long
Speaker 4: time that prosperity that you mentioned that was because there
Speaker 4: is this really effective triangle where Taiwan would have manufacturing
Speaker 4: in China, export to the US. Everybody prospered for decades.
Speaker 4: That worked until China started to reassert itself, and that's
Speaker 4: where we come into this upcoming election because as China's
Speaker 4: asserted itself, Taiwan, which is a self governing island democratic Beijing,
Speaker 4: looks at that and says, you know, you're part of China,
Speaker 4: and Taiwan says, no, we're not.
Speaker 2: Which begs the question about war, which is something.
Speaker 4: They actually should clarify. They would say, we're the Republic
Speaker 4: of China Taiwan, which also did I mention now complicated.
Speaker 4: The geopolitical part.
Speaker 2: Of this was I can only imagine the conversation that
Speaker 2: you had with him, how careful you were in terms
Speaker 2: of how you phrase things, because.
Speaker 3: We know watch the video, you can see me checking
Speaker 3: my notes.
Speaker 2: No, you're but I mean the question of war, the
Speaker 2: potential if China invades, and that is certainly, you know,
Speaker 2: something that was obviously top of mind here big time.
Speaker 4: And and look like the stakes for this election actually
Speaker 4: couldn't be higher. I think the global economy is absolutely
Speaker 4: dependent on Taiwan, and that is large part because of
Speaker 4: the semiconductor industry. Something like ninety percent of chips come
Speaker 4: from Taiwan. We learned how important that was during the
Speaker 4: pandemic when we had the supply chain carnage, and and
Speaker 4: you know, Taiwan is just instrumental and if you if
Speaker 4: you don't have those chips, I think we look at
Speaker 4: living would be living in a version of the world
Speaker 4: that would be like nineteen eighty seven or something like that, right,
Speaker 4: like total reset. So Taiwan incredibly important to that.
Speaker 2: You're going to ask me something, No, now, can we
Speaker 2: share a little bit of your interview?
Speaker 4: Yes, let's do it.
Speaker 2: Okay, we have some of Joel's exclusive interview with Taiwan's
Speaker 2: vice president, and they talk specifically about the importance of
Speaker 2: support from the West and keeping peace with China. Check
Speaker 2: it out. Everybody us.
Speaker 3: Also way theo.
Speaker 8: We must abide by the truth, which is what I
Speaker 8: mean by pragmatism. It is that Taiwan is already a
Speaker 8: sovereign independent country called the Republic of China. It's not
Speaker 8: part of the People's Republic of China. The ROC and
Speaker 8: PRC are not subordinate to one another. It is not
Speaker 8: necessary to declare independence in Weshimbu.
Speaker 4: What is your roadmap to formal independence.
Speaker 3: Anyway? Well, it's just where is the.
Speaker 8: Tai My responsibility is to maintain the status quo in
Speaker 8: the Taiwan Strait while protecting Taiwan and maintaining democracy, peace
Speaker 8: and prosperity. So no such framework exists. We must work
Speaker 8: to maintain the peaceful status quo because Taiwan is already
Speaker 8: a sovereign country.
Speaker 4: China keeps pushing on the status quo, and it keeps pushing.
Speaker 4: It's fired and missile over Taiwan's cross the median line
Speaker 4: in the Taiwan Strait, and it's simulated a naval blockhead.
Speaker 3: What is your red line?
Speaker 8: Taii Shinzwong The Chinsu Jinzan increased tensions impacting the status
Speaker 8: quo in the Taiwan Strait have not originated from Taiwan.
Speaker 8: They are due to China's growing assertiveness. China not only
Speaker 8: seeks to annex Taiwan, it also hopes to change the
Speaker 8: international rules based order. Under these circumstances, we must be
Speaker 8: clear Taiwan's security is of international concern. Peace and stability
Speaker 8: in the Taiwan Strait is aligne with the international interest.
Speaker 8: So because challenges in the Taiwan Strait are a global concern,
Speaker 8: a global red line will also be Taiwan's red line
Speaker 8: and my personal red line.
Speaker 4: In Ukraine, President Zelenski rose to meet the challenge when
Speaker 4: Russia invaded. What did you personally learn from his leadership?
Speaker 7: Minzus?
Speaker 8: Democracy is a universal value, irrespective of borders. President Zelenski
Speaker 8: rallied his people to resist Russia's invasion. They are protecting
Speaker 8: not only their country, their land, and their people. They
Speaker 8: are also fighting on behalf of our democratic values.
Speaker 4: I'd also say, how.
Speaker 8: Will colladse Russia's unprovoked invasion of Ukraine has led us
Speaker 8: to see that dictatorships are inherently unpredictable. We must make
Speaker 8: the best preparations for a worst case scenario and inn
Speaker 8: way to We also see that President Zelenski's courage, as
Speaker 8: well as the support they sought internationally, all contributed to
Speaker 8: Ukraine's resistance against the Russian invasion. We have a deep
Speaker 8: understanding that we must avoid war in the Taiwan Strait.
Speaker 8: There are no winners in war. Peace is priceless. From
Speaker 8: the war in Ukraine, we see that we must do
Speaker 8: all we can to avoid war in the Taiwan Straits.
Speaker 4: You've said provocative things in the past that will be
Speaker 4: of interest in Washington. How have you changed?
Speaker 8: And I have been part of Presidentai's national security team.
Speaker 8: Together with the US government, we have responsible and clear
Speaker 8: channels of communication. We are able to share information effectively,
Speaker 8: understand where the issues are, and cooperate in resolving them.
Speaker 8: This election is about choosing between two roads. One way
Speaker 8: is to continue engaging and cooperating closely with the international
Speaker 8: community while deepening our democracy. The other choice is to
Speaker 8: accept the one China principle and stand together with China.
Speaker 8: I believe the US will continue to support us on
Speaker 8: the first path. One means.
Speaker 4: How confident are you that the US will have Taiwan's
Speaker 4: back should the situation with China escalate, I mean well.
Speaker 8: So Taiwanda haupong Il. The US is a close friend
Speaker 8: of Taiwan. We are partners in a number of areas,
Speaker 8: from politics, the economy, human rights, to our society.
Speaker 3: In with Taiwan, the ANJANGUNTI.
Speaker 8: Because Taiwan's security challenges are a global concern. The upkeep
Speaker 8: of peace and stability in both the Taiwan Straight and
Speaker 8: the Indo Pacific region fulfills the common interests of the
Speaker 8: international community. I believe that all democracies in the world,
Speaker 8: including the US, would be aware of how to respond
Speaker 8: if such a scenario were to take place.
Speaker 4: If the US wants TSMC to build more chip babs
Speaker 4: in the US, would you stop it.
Speaker 8: In we ban Baldi tany The semiconductor industry is not
Speaker 8: just made up of one or two fabs. There is
Speaker 8: an entire ecosystem. TSMC's advanced processes are located here in Taiwan.
Speaker 8: Their base is here in Taiwan, so if they choose
Speaker 8: to set up operations in the US or other countries,
Speaker 8: this is an expansion of Taiwan's economic power. This is
Speaker 8: also part of the restructuring of global supply chains. I
Speaker 8: would take these developments positively.
Speaker 4: What do you want the world to know about you
Speaker 4: as a person, so waziger ni Jing.
Speaker 8: I am a rational and steady leader. I know how
Speaker 8: we can respond to the challenges we face as a country.
Speaker 8: I also understand that the serious and complex nature of
Speaker 8: issues in the Taiwan Strait call for rational and steady leadership.
Speaker 8: This will enable our country to move forward amid changing
Speaker 8: geopolitical circumstances.
Speaker 2: Wango and that, of course was Taiwan's Vice President Laichingong
Speaker 2: leading presidential candidate. As we've said, for the upcoming election
Speaker 2: in Taiwan elections, I should say, of course, talking in
Speaker 2: an exclusive interview with the editor of Bloomberg Business Week,
Speaker 2: Jill Weber.
Speaker 3: Jill, one thing that I was struck with, struck by
Speaker 3: in the piece is the changing view Taiwanese people have
Speaker 3: about themselves, about their own identity in the piece and
Speaker 3: what they consider themselves. Talk to me a little bit
Speaker 3: about how that's evolved in recent years.
Speaker 4: Complicated question, But you know, Taiwan actually views itself as
Speaker 4: the Republic of China Taiwan, and that is rooted in
Speaker 4: the history of Taiwan, which basically was this military standoff
Speaker 4: and the Taiwanese left mainland China and basically have never
Speaker 4: been under Beijing's authority.
Speaker 9: Right.
Speaker 4: So the longer that this has gone on, the more
Speaker 4: that the Taiwanese identify as Taiwanese and less as Chinese.
Speaker 4: And that sort of reflected in some of the pulling
Speaker 4: that you're referring to.
Speaker 2: What struck you the most about doing this.
Speaker 4: The food is fabulous, and I just got to tell you, like,
Speaker 4: just if you ever end up there, just eat, eat,
Speaker 4: you know, this is a I expected just to feel
Speaker 4: like this cloud of war would just sort of be
Speaker 4: kind of looming over everything and that China wood factory
Speaker 4: and everything. And honestly, that is such an outsider perspective
Speaker 4: because once you get there, you realize it's been like
Speaker 4: this for decades, right, and they are prospered and made
Speaker 4: it all work. But then you'd have like this piercing
Speaker 4: reminder of like, oh, yeah, those are the stakes. And
Speaker 4: one version of that was on one of the one
Speaker 4: of the afternoons that we were there, there was an
Speaker 4: air raid drill. And this is just a fact of life.
Speaker 4: Every year they practice for it, and that tension is
Speaker 4: below the surface because it's like every everybody will ask
Speaker 4: about it eventually, So it is the predominant theme in
Speaker 4: this election. There's other things that are concern like housing,
Speaker 4: which is in demographics like those are things that are
Speaker 4: true every wellwhere else too. It's just that when you
Speaker 4: have the Taiwan straight right next to your border, you
Speaker 4: sort of are obsessed with it because that is the
Speaker 4: prevailing thing that everybody wants to talk about.
Speaker 3: Well, God of Astrol, what it was like to get
Speaker 3: the attention of China with this piece, I want to
Speaker 3: repeat for people who are just joining us now. We
Speaker 3: learned overnight that China called Taiwanese presidential front runner a
Speaker 3: quote troublemaker and says Taiwang's le Chingda brings risks of war.
Speaker 4: So to some extent it's expected they just, you know,
Speaker 4: we knew going into this that how they really felt
Speaker 4: about him, and this story goes into why that's so,
Speaker 4: and a lot of that is rooted in the DPP,
Speaker 4: which is his political party.
Speaker 5: The what what.
Speaker 4: What this particular reveals though, is that there's some some
Speaker 4: things that he said in his interview that and are
Speaker 4: in the story that reflects you know, he's he's willing
Speaker 4: to say that the door will be open for a dialogue,
Speaker 4: and and Beijing, as we say in the story, really
Speaker 4: does not believe that because it's all rooted in some
Speaker 4: sort of some of these geopolitical complexities. So to some extent,
Speaker 4: it's kind of like not a surprise that they would
Speaker 4: say that, but they said it, and it does speak
Speaker 4: to in general, uh, just how complex and why this
Speaker 4: election in January will be something that will be continuing
Speaker 4: to watch and revisit, I think in the month ahead,
Speaker 4: because the stakes of this election could not be higher.
Speaker 2: That's why he's such a great editor, because he's a
Speaker 2: reporter at heart. Editor Bloomberg Business Week, til Weber.
Speaker 10: Check it out, folks, a journal you let me drive
Speaker 10: novel I want to try.
Speaker 3: It's a good question.
Speaker 1: This is good drive to the Globe form Well da
Speaker 1: Don on Bluebird Radio.
Speaker 9: All right, everybody just.
Speaker 2: Got about seventeen and a half minutes left in today's
Speaker 2: trading session, getting ready shortly to head over to our
Speaker 2: TV colleagues and talk about a little bit about the trade.
Speaker 2: But in the meantime we've got a great guest to
Speaker 2: do that as well. Tim.
Speaker 3: Yeah, very pleased right now to be joined by Lisa Erickson,
Speaker 3: senior vice president and head of Public Markets Group at
Speaker 3: US Bank Wealth Management. She joined us on Zoom from Minneapolis, Minnesota. Lisa,
Speaker 3: how are you?
Speaker 9: I'm great? Thank you?
Speaker 3: Okay. So I don't even know if we should start
Speaker 3: with the bond market or the equity market today, Carol.
Speaker 3: I think I'm gonna start with the equity market here,
Speaker 3: because that's certainly what I'm interested in. We just heard
Speaker 3: from Charlie and from Bailey that the selling that we're
Speaker 3: seeing has increased. We're at the S and P five
Speaker 3: hundred down one point three percent right now, the nasdack
Speaker 3: down one point two in the dowddown more than one percent.
Speaker 3: Is is this just should say it's on very low volume, Lisa?
Speaker 3: But is this just a minor setback. We've seen such
Speaker 3: incredible growth in the S and P five hundred so
Speaker 3: far this year. August not looking so good.
Speaker 7: Well.
Speaker 9: We're really neutral on the US equity market right now,
Speaker 9: and the reason why is when you look at the
Speaker 9: puts in the takes, we really find them fairly balanced.
Speaker 9: So our expectation in the near term is really for
Speaker 9: more of what we would call a chop period where
Speaker 9: investors are just going to be swung a little bit
Speaker 9: more by the news flow because bottom line, really what
Speaker 9: it's looking for is some resolution on the inflation front
Speaker 9: and the policy front with where the Fed may be
Speaker 9: headed with its continued monetary tightening policy, and as of course,
Speaker 9: continued information on earnings and guidance. And while there's still
Speaker 9: uncertainty about where those three figures lie, you're just going
Speaker 9: to see stocks really move up and down both ways
Speaker 9: as again we get incremental news. So I am.
Speaker 2: Curious you guys deal with a lot of wealthy investors
Speaker 2: and what's top of mind for them because they end up,
Speaker 2: you know, I would assume make an investment, kind of
Speaker 2: sit in it for a long time, Lisa, So is
Speaker 2: that what they're doing or they're saying, listen, I'm a
Speaker 2: little nervous. There's a lot of optimism. People have backed
Speaker 2: off receession. What can we do? So give us an
Speaker 2: idea of what kind of conversations you're having with your clients.
Speaker 9: You know, really the main conversation is around again looking
Speaker 9: forward into twenty twenty four and twenty twenty five, really
Speaker 9: what the prospects are. And again, you know, our best
Speaker 9: thinking right now is for our clients to stay strategically
Speaker 9: typically where they would be in equities in fixed income,
Speaker 9: and really at this time not going big on either
Speaker 9: overweighting or underweighting those main asset classes. And again the
Speaker 9: reason why is there's still lack of clarity about again
Speaker 9: the forward growth potential, which would of course then influence
Speaker 9: both equity and fixed income returns, and with again that
Speaker 9: level of uncertainty, again, just staying more at those long
Speaker 9: term waits we think really makes the most sense.
Speaker 3: Okay, so I guess my next question really is about
Speaker 3: your outlook for the economy, separating it, of course from
Speaker 3: the stock market. We talked a lot today about retail
Speaker 3: sales that came in stronger than expected. I'm wondering, Lisa,
Speaker 3: how if you're still making a call for recession.
Speaker 9: Our base case, really based on our work with the
Speaker 9: USC Bank Economics team, is that we're going to continue
Speaker 9: to have some slowing growth, but hopefully avoid a recession,
Speaker 9: and if we do get one, it'll be of a
Speaker 9: more moderate garden variety as opposed to a very severe recession.
Speaker 9: And that economic forecast is really on the back of
Speaker 9: the fact that we've seen the consumers stay relatively resilient
Speaker 9: and companies as well be able to so far manage
Speaker 9: both their top and the bottom lines, to really manage
Speaker 9: again a more tough interest rate and potential consumer spending environment,
Speaker 9: to actually have both those top and bottom lines turn
Speaker 9: out okay. And so on the back of that, and
Speaker 9: even though we see some slowing, we see so far
Speaker 9: those engines continuing to be able to hold in there,
Speaker 9: which again gives us more of a soft landing type
Speaker 9: of outlook.
Speaker 2: So one thing I want to ask you. You are
Speaker 2: head of the Public Markets Group, Lisa, and I'm just curious.
Speaker 2: We just came off what is the most red story
Speaker 2: on the Bloomberg has to do with Blackstone obviously big
Speaker 2: and private equity, private credit, growth equity, private everything. Your
Speaker 2: investors are they more interested increasingly what's going on in
Speaker 2: the private markets?
Speaker 7: Is they?
Speaker 2: I mean, it's interesting you can get yield, like Tim
Speaker 2: you said earlier, in a simple two year treasury exactly.
Speaker 3: You're a thirty day exactly.
Speaker 2: So I'm just curious, are your investors more interested in
Speaker 2: private markets or public markets?
Speaker 9: Well, certainly we've seen an uptick of interest in the
Speaker 9: private markets over the last few years, and that is
Speaker 9: actually on the back of our advice that clients where
Speaker 9: they have the ability to handle some more I liquidity
Speaker 9: in their portfolio and longer time horizons to look at
Speaker 9: those private types of vehicles for their portfolios. Certainly when
Speaker 9: you look over time, just the fact that again you
Speaker 9: get an extra risk premium for investing out with a
Speaker 9: longer time horizon and for not being able to make
Speaker 9: flows in and out as quickly. Plus some of the
Speaker 9: additional economics sectors that are accessible via some of those vehicles,
Speaker 9: we think really make for an interesting case again for
Speaker 9: clients where that's an appropriate fit for their portfolios.
Speaker 3: I'm going to ask you the question I ask everybody, Lisa,
Speaker 3: if somebody comes to you with a big old pile
Speaker 3: of money, how are you deploying it right now?
Speaker 9: So, of course, once we do the initial financial planning work,
Speaker 9: in the initial asset allocation work, we would really again advise.
Speaker 7: Going for those strategic targets at.
Speaker 9: The time, and then again looking how policy and inflation
Speaker 9: particularly continue to play out over the next few quarters,
Speaker 9: to look at where there may be more opportunities to
Speaker 9: over and underweight on a big asset class basis. Now,
Speaker 9: within asset classes, we do have some specific interesting recommendations, uh,
Speaker 9: to deviate from just really what would be the broad
Speaker 9: index recommendation. So for example, and fixed income again for
Speaker 9: clients with the right kind of risk tolerance. We do
Speaker 9: see some extended sectors as interesting, those sectors just beyond
Speaker 9: you know, playing sort of investment grade bonds as well
Speaker 9: as non agency mortgages, and so there are some areas
Speaker 9: based on part gratulations as well as fundamental underpinning those
Speaker 9: nicer gilds that we see as at these times.
Speaker 2: All right, we're gonna leave it on that note, Helisa,
Speaker 2: Thank you so much. Lisa Ericson, Senior VP and head
Speaker 2: of Public Markets Group over at US Bank Wealth Management
Speaker 2: with the san Zoo from Minneapolis.
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