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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg terminal. We need to recalibrate,

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Speaker 1: as you do. We know the surveillance heads are spinning.

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Speaker 1: Over all the different opinions, it would be good to

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Speaker 1: get a strategy grounded in first order condition mathematics. That's

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Speaker 1: Alicia Levina, head of Equities and Capital Market Advisory at

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Speaker 1: b n y Mellon, with some serious math chops out

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Speaker 1: the end of the algebraic function. There's an epsilon. It's

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Speaker 1: a Greek letter. You and I used to look at

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Speaker 1: it like, what's that mean? Now it really means something.

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Speaker 1: What does the systemic risk we see right now? So

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Speaker 1: the systemic risk is that we've priced in the Goldilocks scenario,

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Speaker 1: which is that the FED manages to do the soft

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Speaker 1: landing with inflation that's coming down on its own, so

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Speaker 1: it doesn't have to go that last mile from the

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Speaker 1: four to the two percent, and that the consumer more

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Speaker 1: or less stays healthy even as the FED hits the

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Speaker 1: labor market job openings but not actual jobs. That's the

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Speaker 1: goldilocks scenario. It is possible, but that's what we're priced for.

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Speaker 1: We've now got the s Impeach rating at eighteen times

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Speaker 1: forward earnings as the tenure move lower, and you know,

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Speaker 1: the risk is, of course, that that stickiness of inflation

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Speaker 1: that you've talked about this morning is going to make

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Speaker 1: things a lot more difficult. So Alicia, how do you

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Speaker 1: want to use that strength over the last couple of months?

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Speaker 1: How do you reposition? What do you fade? Where do

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Speaker 1: you fight what's vulnerable? So I think that the what's

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Speaker 1: vulnerable here are the are the stocks that have rallied

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Speaker 1: the most. So when you think about the long duration

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Speaker 1: text sucks and the growth names, they've bounced back the most.

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Speaker 1: And they've bounced back because tens have that ten years

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Speaker 1: have moved lower. So I think there's going to be

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Speaker 1: some sort of reversion to the meme there, and I

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Speaker 1: think that's what we've seen really all year. When sectors

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Speaker 1: have become over bought or um oversold, they tend to

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Speaker 1: bounce back. We're coming into the most seasonally difficult time

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Speaker 1: of the year September and October, with the with the

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Speaker 1: Goalilocks scenario priced in. Now, our investors stayed fully invested

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Speaker 1: all the time. We don't trade around the market, so

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Speaker 1: they've participated in this rally, but we do think that

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Speaker 1: the inflation stickiness is not going away anytime soon. So

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Speaker 1: the minutes today, I don't think we're going to add

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Speaker 1: anything necessarily new because you've had this panoply of FED

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Speaker 1: speakers that have come out over the last three weeks

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Speaker 1: essentially trying to talk down expectations of a pivot, and

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Speaker 1: all we've gotten is the tenure moving lower and lower

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Speaker 1: and lower, financial conditions going going, UM easier, and the

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Speaker 1: and tech stocks rallying. And find America touched on this yesterday,

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Speaker 1: and I'd like you to put it in English for us.

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Speaker 1: They talked about us no longer being apocalyptically bearish, but

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Speaker 1: we were still too bearish to get an immediate turnaround

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Speaker 1: in the bear market rally. Can you translate that west

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Speaker 1: sentiment and what does that mean for the prospect of

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Speaker 1: a further move high here? So I think this rally

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Speaker 1: took most strategists off guard. UM because the market was

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Speaker 1: and strategists were essentially pricing in a recession as the

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Speaker 1: base case scenario with earnings going lower. And what that

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Speaker 1: means is that the risk is still higher because investors

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Speaker 1: are still defensively positioned, meaning not buying duration and and

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Speaker 1: not really going all in on risk trades. And so

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Speaker 1: with that you could see a squeeze higher simply because

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Speaker 1: you've had such a huge structural shift to the defensive side.

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Speaker 1: The real pain in this market, as terrible as the

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Speaker 1: first five and a half months were, where where the

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Speaker 1: accounts that were defensively positioned starting in mid noon, because

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Speaker 1: those positions got destroyed. So, you know, we tend to

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Speaker 1: be very neutral. We tend to be you know, we

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Speaker 1: tell our clients stay, stay, stay fully invested because you

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Speaker 1: can't trade it because when it turns, you're not going

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Speaker 1: to get those upward moves. Alicia, you mentioned earnings there,

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Speaker 1: and of course we're at the tail end now of

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Speaker 1: the second quarter earning season. There's only about thirty companies

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Speaker 1: in the S and P five left to report, and

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Speaker 1: by and large, it's been pretty decent, at least relative

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Speaker 1: to expectations. Average revenue growth of fourteen percent earnings growth

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Speaker 1: of eight point four percent. Both have been surprising to

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Speaker 1: the upside more often than not. Looking forward, though, are

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Speaker 1: we too optimistic about the trajectory of earnings through the

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Speaker 1: back half of the year. So look, earning season has

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Speaker 1: definitely come in better than feared. I think some of

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Speaker 1: that was definitely um the impact of inflation, because earnings

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Speaker 1: are nominal so much better. And I think some of

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Speaker 1: the retail reports we've gotten over the last couple of

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Speaker 1: days have actually come in better than feared. And then

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Speaker 1: with some optimism looking forward, i'd say that as I

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Speaker 1: think that the falling gas prices is really something very

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Speaker 1: interesting because while in one sense it's it's disinflationary, on

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Speaker 1: the other hand, if you're putting lower gas prices on

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Speaker 1: top of an economy where workers are getting five point

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Speaker 1: five percent wage increases, you do see that there's more

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Speaker 1: spending power there um. And if July is better than

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Speaker 1: June because of falling energy prices, then you have to

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Speaker 1: wonder whether what direction inflation really is going in. If

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Speaker 1: you look at new orders on the I s M,

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Speaker 1: that tends to be predictive of where SMP earnings are going.

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Speaker 1: By about six months, we've been under fifty for a

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Speaker 1: couple of months, and at forty eight, it tends to

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Speaker 1: mean that your SMP earnings will be moving lower in

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Speaker 1: the next six months. We're just not there yet. Oh

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Speaker 1: you and I are reminiscing you were too young for it.

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Speaker 1: But when you were talking about the joys of turkey

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Speaker 1: tetrazini with a can of cream of Campbell's cream of celery.

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Speaker 1: So there's a whole analysis going on now, the Dow

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Speaker 1: Jones Industrial average of the inflation now versus the inflation

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Speaker 1: back when I was eating turkey tetrazzini at school. This

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Speaker 1: inflation is different than that inflation, right, This inflation is

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Speaker 1: different because essentially it's been driven one by commodities, but

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Speaker 1: also on the service sector and the wage side. It's

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Speaker 1: a different America, a different economy, right, totally different economy.

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Speaker 1: We're not manufacturing based anymore. We're a service based economy,

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Speaker 1: and so when the inflation is on the services side,

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Speaker 1: it's going to be harder to get it down. And

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Speaker 1: also we're more heterogeneous. I mean, back then it was

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Speaker 1: a more aggregated analysis and you can't do that now,

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Speaker 1: which is our factor analysis is more important. It is

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Speaker 1: more important I think the interesting thing to hear to

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Speaker 1: watch is, even as we've talked about the lower end

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Speaker 1: consumer struggling, it is completely obvious that the higher end

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Speaker 1: consumer is not just doing fine spending, you know, in

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Speaker 1: a profligate way, supporting the economy and supporting corporate America.

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Speaker 1: And so I think that's different that the range and

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Speaker 1: income and what that the effect of top line nine

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Speaker 1: percent inflation means is very different. John, do you know

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Speaker 1: Turkey Tutrasini? John was wasn't familiar with that something. The

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Speaker 1: big debate we had that, Yeah, the big debate with

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Speaker 1: Turkey Tutrasini is do you do put the soup in

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Speaker 1: before the parmesan cheese or after trying to wind out

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Speaker 1: what account? Which part of this is winding me up something?

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Speaker 1: The Mail of the Doubt John's reference with the mail

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Speaker 1: back then, that's all there was. In fact, still there

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Speaker 1: is no town. Wasn't down now down? Yeah, thousand within

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Speaker 1: the gloom out there. Alicia Levin is put pushed against

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Speaker 1: the gloom. We're two thousand dow points away from Nirvana.

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Speaker 1: Point change on the Doubt song, You're killing me, wag,

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Speaker 1: Turkey will kill you to have you with us in

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Speaker 1: a studio Michael Collins with us. Now this is an

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Speaker 1: important conversation senior portfolio manager at p JAM and steeped

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Speaker 1: in the mathematics of Binghamton and other good universities. Was

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Speaker 1: all Michael Love talking to you about the dynamics of

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Speaker 1: the moment. There's a major core debate on the glide

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Speaker 1: path of disinflation. How does it fold into owning and

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Speaker 1: a husbanding yield right now? Yeah? Well, Tom, one thing

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Speaker 1: we're seeing is this big tug of war between growth

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Speaker 1: and inflation, right, and growth globally actually seems to be

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Speaker 1: holding up pretty well. We've seen European GDP continue to

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Speaker 1: be actually a little bit stronger than expected. In in

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Speaker 1: the US, you know, we saw it in the labor market.

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Speaker 1: We'll get retail sales UH in an hour, and real

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Speaker 1: retail sales will probably continue to be really weak, are

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Speaker 1: slightly negative, but obviously nominal retail sales are really strong UH.

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Speaker 1: And And inflation, right, inflation, as you've all pointed out,

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Speaker 1: especially in places like Europe, in the UK, UH and

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Speaker 1: to some extent the US are really sticky. But that disinflation,

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Speaker 1: every trend is beginning to re emerge. We are seeing

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Speaker 1: goods inflation. We are seeing leading indicators of goods inflation

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Speaker 1: pointing towards zero goods inflation, and I would bet in

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Speaker 1: the next six twelve months you see zero goods inflation

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Speaker 1: globally in the US, and I think that's a big deal. Obviously,

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Speaker 1: services inflation is sticky, but I think that will give

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Speaker 1: the FED some optatism to slow down the pace of John.

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Speaker 1: This is like Michael Collins is writing the speech for

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Speaker 1: Jerome Pale, the separation your services and goods. How many

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Speaker 1: people John are expecting the massive disinflation of goods. I'd

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Speaker 1: say it's a lonely crowd. So how much more work

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Speaker 1: does this FED need to do with that in mind?

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Speaker 1: I think this is so important. Mike, You've been in

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Speaker 1: the camp that we've seen the high of the year

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Speaker 1: on a tenure yield. I wonder if that same theory

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Speaker 1: applies to the two years. Something's happening quietly here for

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Speaker 1: the two year yield. It peeps back in the middle

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Speaker 1: of June, two days before the equity market bottomed at

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Speaker 1: then it faded away and equities were off to the

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Speaker 1: racist and we ran it really hard as we faded

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Speaker 1: that real yield as well we've seen that two year Ye,

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Speaker 1: the nominal yield just pick up pick up a fair

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Speaker 1: bit as well, Mike. I just wonder what you think

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Speaker 1: about that back at three four on a two year

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Speaker 1: in America and the way US bond geeks look at it,

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Speaker 1: as you know, Jonathan and Tom and Kaylee to we

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Speaker 1: look at those forward rates and what's priced into the

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Speaker 1: market right now with this jump in in the front

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Speaker 1: end of the curve, the markets are pricing in obviously

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Speaker 1: a higher terminal funds rate of getting close to three

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Speaker 1: and three quarters. So the question is is the Fed

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Speaker 1: actually going to be able to engineer another you know,

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Speaker 1: hundred and fifty basis points of rate hikes from here

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Speaker 1: and and that is not clear. I mean, I don't

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Speaker 1: have a lot of conviction either way on that. I mean,

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Speaker 1: even if goods inflation goes to zero and services inflation

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Speaker 1: is at five, that's still a three and a half percent,

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Speaker 1: you know, core PC or core c P. I I

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Speaker 1: don't know if the Fed stops hiking at three and

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Speaker 1: a half percent unless growth is probably below two. So

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Speaker 1: I think it's this balancing act between growth and inflation.

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Speaker 1: I'd like to think about it in nominal GDP terms.

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Speaker 1: You know, if you add those two up, If those

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Speaker 1: two added up are below four, let's say, maybe that's

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Speaker 1: enough for the Fed to to pause. But if they

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Speaker 1: remain above for I think the Fed probably keeps going. Well,

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Speaker 1: John was talking about the work being done at the

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Speaker 1: short end and where that leaves to the two year

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Speaker 1: yield is about forty five basis points above that of

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Speaker 1: the ten year yield. How much further can this inversion go?

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Speaker 1: What will the depths ultimately be and how does your

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Speaker 1: assumption of what the height of the FED funds rate

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Speaker 1: factor into that? Yeah, you know that that curve inversion

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Speaker 1: has has been you know, not totally unsurprising in a

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Speaker 1: world where inflation is sticky, central banks all over the

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Speaker 1: world of raising rates and and growth is moderating and slowing,

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Speaker 1: you do see these flat inverted curves. The question is

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Speaker 1: how deep can that inversion go? It's you know, negative

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Speaker 1: call it two's tens can go to negative eighty or

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Speaker 1: negative a hundred. Sure, I mean if the funds rate

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Speaker 1: ends up at four this cycle, certain, probably, Bryan Weinstein

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Speaker 1: Morgan Stanley said the same thing last week too. Sure,

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Speaker 1: I mean, I mean we're actually thinking over the next.

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Speaker 1: You know, we're long term thinkers, as you all know,

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Speaker 1: and long term investors. Over the next three years, what

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Speaker 1: is the curve going to look like? And I think

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Speaker 1: it's gonna be back to the old you know, bull

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Speaker 1: steepener where the FED. By that point, we'll be cutting

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Speaker 1: rates and you'll have this big bull steepener. But in

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Speaker 1: the meantime, you know, it's really unclear which direction that

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Speaker 1: that curve shape is going. We're pretty flat right now

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Speaker 1: in terms of the curve positioning because of the uncertainty.

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Speaker 1: But but yeah, I mean, if the FED keeps going,

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Speaker 1: the curve continues to invert. So, Mike, given that what

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Speaker 1: business to how your spreads have being down at forms

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Speaker 1: the basis points. Yeah, where we are in the camp,

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Speaker 1: you know that that you're supposed to really take some

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Speaker 1: chips off the table here. I mean, ye, credit quality

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Speaker 1: has been sound. We've just started to see the first

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Speaker 1: sign of some downgrades, uh in the high old market

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Speaker 1: and some very specific sectors cruise lines and healthcare. But

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Speaker 1: by and large the upgrades continue to out number downgrades.

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Speaker 1: Credit quality is good. These companies are flushed with cash.

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Speaker 1: They've done a great job managing liquidity, managing the bottom lines,

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Speaker 1: but valuations I don't think right now. And maybe you

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Speaker 1: could apply this to the stock market as well. The

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Speaker 1: investment great corporate market may not be fully compensating investors

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Speaker 1: for these for these big kind of tail riffs that

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Speaker 1: are still out there, right I mean, we could have

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Speaker 1: a deepening recession globally that that is certainly in the

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Speaker 1: cards as well. Mike Colon is just awesome to get

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Speaker 1: you on the show. Let's catch up against suit. Mikelin's

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Speaker 1: there with PHM on the nicest inness bond market. Right now,

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Speaker 1: we're going to digress and move to Norway. Nicola Tangan

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Speaker 1: his chief executive officer of the Norwegian Sovereign Wealth Fund.

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Speaker 1: They are challenged by his target mentions the uncertainty that

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Speaker 1: is out there, and we are thrilled. He joins us

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Speaker 1: today with an up date. Nikolai, you know there on

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Speaker 1: the back end of the core algebraic function as a

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Speaker 1: Greek letter epsilon for uncertainty, What is the level of

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Speaker 1: uncertainty your Sovereign Wealth Fund sees as you drift to

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Speaker 1: two thousand twenty three. Well, I would say it's a

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Speaker 1: continuation of the uncertainty we've seen for for a year

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Speaker 1: or so. Now it consists of the inflation, the energy prices,

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Speaker 1: and the geopolitics, and so it's a continuation of what

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Speaker 1: we've seen for some time. With the situation that we're in.

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Speaker 1: Leads to diversification. You people are to using American phrase

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Speaker 1: ser ginormous. How do you diversify or choose bets given

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Speaker 1: this uncertainty? Well, first of all, we have a very

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Speaker 1: long term view on what we do, so we um

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Speaker 1: you know, invest with kind of a generation hats on.

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Speaker 1: We spread over investments across the world. We are we

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Speaker 1: have ownership in the nine thousand companies across the world.

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Speaker 1: We have both equities and bonds and VTA sate so

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Speaker 1: well verse of out portfolio for the long term. What

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Speaker 1: do you think of the American growth technology companies? Are

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Speaker 1: you overweighting them? Do you own too much of them?

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Speaker 1: I know the Swiss National Bank has a little bit

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Speaker 1: of Apple as well, But is there the opportunity there

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Speaker 1: in the TUMBL to reaffirm large cap growth. Well, these

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Speaker 1: companies are of course very very big parts of the index,

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Speaker 1: and so we would have big holdings in these companies. Uh.

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Speaker 1: The USA companies typically be amongst the top down holdings,

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Speaker 1: and and we continue to think the well positioned And

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Speaker 1: clearly we have seen a bit of a recovery in

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Speaker 1: the equity markets in recent weeks. Nikolai, there is a

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Speaker 1: bet on the part of the markets that we're going

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Speaker 1: to see a more devish tilt from federal reserve. How

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Speaker 1: are you positioning potentially for Fed policy and how ultimately

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Speaker 1: do you think they will react? How does that inform

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Speaker 1: your decision making going forward? Well, it's uh, that's a

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Speaker 1: really really tough one. We came into this year with

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Speaker 1: with some underweighting shares and and uh, you know, a

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Speaker 1: less risky bond portfolio. We've taken off some of that underweight,

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Speaker 1: but we remain slightly cautious on the oklak care. You know,

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Speaker 1: clearly markets don't go down in a straight line, and

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Speaker 1: and we are in certain in terms of whether we've

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Speaker 1: seen a bit of a bottoming hair or whether we'll

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Speaker 1: see a continuation of that of the tough market. And

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Speaker 1: of course, in addition to the monetary policy picture, there's

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Speaker 1: a number of risks that the market has to weigh

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Speaker 1: as well, including the ongoing war in Ukraine which is

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Speaker 1: now approaching six months. Have you come to any decisions

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Speaker 1: around strategies of what your endgame with your Russian assets is. Well,

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Speaker 1: when it comes to the Russian assets, we have been

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Speaker 1: instructed by by the government to to exit these for

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Speaker 1: the time being, they don't really trade and also we

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Speaker 1: can't be certain about where they where they end up,

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Speaker 1: so so they are still frozen and we we haven't

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Speaker 1: sold them yet. Nicola I'd like you to step away

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Speaker 1: from the huge mass and the different responsibilities you have

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Speaker 1: with your sovereign wealth fund and look at the heritage

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Speaker 1: you have of hedge funds. It has been an absolute

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Speaker 1: battle for hedge funds in timing the market. Obviously they've

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Speaker 1: got a much more shorter term mandate than what you

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Speaker 1: have now. And then there's a question of long short

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Speaker 1: and the different formulas or that is the alternative investment

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Speaker 1: game over? Is the two and twenty game over? Well,

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Speaker 1: it's a tough one to say. I mean it's over

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Speaker 1: for me personally in that by network for the Someone

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Speaker 1: Love Fund, but now it's it's it's difficult to say,

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Speaker 1: I mean the returns from that as Claus goes up

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Speaker 1: and down. Um for the moment, they are having a

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Speaker 1: tough time. They have previously bounced back from these tip

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Speaker 1: of situations. But but I haven't really got a storm

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Speaker 1: on this. I must ask Nikolai the view from Oslo

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Speaker 1: of the rest of continental Europe. I've been working through

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Speaker 1: the morning and natural gas equivalences in dollar and in

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Speaker 1: Brent crude barrels that directly involves Norway. Your comments on

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Speaker 1: how Norway and your investment fund will withstand what we're

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Speaker 1: seeing in hydrocarbon prices. Yeah, now energy prices are high,

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Speaker 1: guess price high, but unfortunately for some sad reasons. The

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Speaker 1: result is that we have big influence into the fund,

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Speaker 1: and we have big influence into the fund at a

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Speaker 1: time where bondsen and in equities are cheaper than they

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Speaker 1: have been. So from that point of view, that's a

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Speaker 1: bit of a silver lining from this fund. Nikolai always

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Speaker 1: enjoy hearing from you, and what a time to hear

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Speaker 1: from you. A wound difficult complex the future with Nikolai's

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Speaker 1: hanging there to see of the Norwegian self or in

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Speaker 1: Wealth Fund. Michael Dart joins its chief economists and micro

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Speaker 1: strategist at M Camp Partners, and what's wonderful about his

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Speaker 1: work is how he synthesizes the economic view into the

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Speaker 1: equity belief. Michael, I'm not going to mince words, and

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Speaker 1: my umpteen years of doing this, I've never seen the

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Speaker 1: raging debate about the stock market linked to the mysteries

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Speaker 1: of our economy. Do you feel the same way? Do

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Speaker 1: you see record uncertainty out there? Well, Tom. One of

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Speaker 1: the last times I was on in the dark days

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Speaker 1: of mid June, one of my messages for your retail

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Speaker 1: investors was not to get too negative, even though the

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Speaker 1: SMP five was down almost twenty four percent, and the

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Speaker 1: reason for that was it's notoriously difficult, probably impossible, to

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Speaker 1: time market bottoms, and what we were seeing with the

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Speaker 1: big decline in equity markets in the first six months

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Speaker 1: of the year was mostly a rate shock, the ten

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Speaker 1: year yield going from one and a half to almost

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Speaker 1: three and a half percent. But we're well off the

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Speaker 1: highs in terms of the ten year treasury yield, even

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Speaker 1: though the rates bumped up today with a good data

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Speaker 1: and the stock market is now up seventeen plus percent

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Speaker 1: from the lows. So the first six months of the year,

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Speaker 1: the equity market decline really wasn't about negative GDP or

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Speaker 1: recession or a big earnings crash. It was about evaluation

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Speaker 1: adjustment as the ten year yield moved up, and that

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Speaker 1: adjustment is now mostly in their rear view mirror. I

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Speaker 1: looked Michael at the view forward, and the view forwards

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Speaker 1: ends with the thud. I believe it's on Thursday or Friday,

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Speaker 1: Friday next week at Jackson Hole. What does Chairman Powell

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Speaker 1: not want to do in his speech at Jackson Hall. Well,

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Speaker 1: we've seen a bevy of recent FETE speakers out there

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Speaker 1: with essentially the same message, which is that they're going

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Speaker 1: to continue to persist in pushing the front end of

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Speaker 1: the curve up, meaning the policy rates and those rates

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Speaker 1: most closely tied to it, and they're not going to

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Speaker 1: be deterred. They expect some economics loaning, but they want

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Speaker 1: to be very certain and inflation comes down and stays down,

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Speaker 1: and that inflation expectations stay anchored at low levels. So

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Speaker 1: they're going to persist with the rate hikes. They're going

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Speaker 1: to persist at a slower pace, though, and that's what

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Speaker 1: the market has gotten wind of, and I think that's

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Speaker 1: the main reason that we've seen this big equity market

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Speaker 1: move off of the lows in the stabilization and the

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Speaker 1: long end of the curve. If that can do whatever

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Speaker 1: it wants with short rates, it doesn't mean the long

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Speaker 1: rates are going to go along with it. So we're

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Speaker 1: seeing an increasing array of yield curves move into inversion

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Speaker 1: now and that is a cautionary tale about three. But

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Speaker 1: I think the mistake that some people made with the

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Speaker 1: yield curve is that it's not an immediate indicator of

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Speaker 1: imminent recession. It tends to be a long leading indicator.

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Speaker 1: The bond market is simply saying the short rates are

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Speaker 1: going to go up above three, but they're not going

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Speaker 1: to persist there for years and years and years because

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Speaker 1: the economy to take it. So, Mike, do you think though,

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Speaker 1: that the using of financial conditions we have seen are

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Speaker 1: underminding well Fedish trying to achieve And how do you

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Speaker 1: think this fat chair is going to address some of

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Speaker 1: that next week in Jackson Hope. Yeah, that seems to

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Speaker 1: be the perception of some of the FED speakers that

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Speaker 1: are trying to push pretty hard against this idea of

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Speaker 1: rate cuts, but they really have no idea what the

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Speaker 1: economy is going to look like. I would say this,

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Speaker 1: if financial conditions are easying because credit spreads are narrowing

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Speaker 1: now from the highs, and equities are off the lows

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Speaker 1: very strongly. Does that warrant more FED tighten than what

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Speaker 1: other wise be the case? I would say only if

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Speaker 1: inflation expectations are also rising in sympathy. But bond market

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Speaker 1: inflation expectations are well off the highs, and they've recently stabilized,

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Speaker 1: and so I don't think that the recent so called

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Speaker 1: easing of financial conditions necessarily means the FED has to

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Speaker 1: be a whole lot more aggressive. If they choose to

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Speaker 1: do so, then you know, certainly that simply amplifies the

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Speaker 1: risks of a of a downturn in three You know,

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Speaker 1: that's the f O m C S see fafor m

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Speaker 1: C seems willing to take here because they really do

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Speaker 1: want to ensure that inflation comes down stays down at

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Speaker 1: the at those inflation expectations stay anchor at low levels.

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Speaker 1: Well on the point of those inflation expectations, Mike, which

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Speaker 1: you've mentioned a few times now, we know a lot

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Speaker 1: of that caters on the price of oil, which has

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Speaker 1: come down, and that is reflected in those inflation expectations

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Speaker 1: moving lower and in the retail sales data today, with

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Speaker 1: what we're seeing with the x auto and gas and

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Speaker 1: control figures, is too much predicated on pricing at the

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Speaker 1: pump staying low. When we had the OPEC new Secretary

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Speaker 1: General telling Bloomberg earlier today that he sees the likelihood

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Speaker 1: of a supply squeeze this year. Yeah, it's possible. Um.

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Speaker 1: You know, those break even spreads do move around based

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Speaker 1: on shocks on energy prices in gasoline, but it's not

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Speaker 1: entirely driven by that, so there certainly is some interplay there.

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Speaker 1: I really think the best thing the FED could do

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Speaker 1: here is to watch the evolution of nominal spending in

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Speaker 1: the second half of the year. In the first half,

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Speaker 1: nominal GDP was very strong, high single digits, but we

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Speaker 1: didn't have much real GDP growth. I think that is

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Speaker 1: going to change because it's not just energy. You see

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Speaker 1: metals down very sharply from the highs I mentioned the

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Speaker 1: break events. We have a whole array of yield curves

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Speaker 1: going into inversion, much slower money supply growth. So the

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Speaker 1: whole front edge of the reflation in inflation and nominal

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Speaker 1: GDP surge has rolled over, and so I think in

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Speaker 1: the second half of the year we're going to see

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Speaker 1: slower in more appropriate nominal GDP growth on the back

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Speaker 1: of tighter monetary policy like the path forward. What a

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00:24:37,840 --> 00:24:40,320
Speaker 1: complex one miked out of that of m campound Us,

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00:24:40,320 --> 00:24:46,359
Speaker 1: off the back of the REFS house house print. He

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Speaker 1: is the chemical Engineer of Queensland, greatly assodassiated with Brisbane

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Speaker 1: where he will lead the Olympic effort of ten years out.

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Speaker 1: Andrew Levers you know him from Dobt Chemical of course

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Speaker 1: and now and one of as many of affiliations Lucid

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Speaker 1: Group Chairman. He'll be interviewed by David Rubinstein. You'll see

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00:25:05,160 --> 00:25:08,040
Speaker 1: that tonight at nine pm peer to peer conversations with

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Speaker 1: Mr Rubinstein, and he joins us this morning to speak

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Speaker 1: of this really most interesting guy. And what's great about

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Speaker 1: Andrew liver is is he's really hardwired into the hopes

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00:25:17,960 --> 00:25:22,080
Speaker 1: and beliefs the prayers of an American renaissance in manufacturing.

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Speaker 1: Is it for real? Well, he thinks so. He thinks

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Speaker 1: that the manufacturing loss we had in textiles and other

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00:25:29,000 --> 00:25:31,720
Speaker 1: kinds of things that were dependent on labor costs is

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Speaker 1: not relevant for the future of high tech manufacturing. He

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Speaker 1: thinks we can be a leader in high tech manufacturing

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Speaker 1: because that depends on supply chain and other related things,

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00:25:42,080 --> 00:25:44,679
Speaker 1: not so much on the cost of labor. But Andrew

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00:25:44,800 --> 00:25:48,360
Speaker 1: is an incredibly diverse person in his interests. He's from

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00:25:48,400 --> 00:25:52,920
Speaker 1: Australia of Greek immigrant background. He Randal Chemical as president

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00:25:53,000 --> 00:25:56,399
Speaker 1: for and CEO for fourteen years, merged into DuPont. Now

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00:25:56,480 --> 00:25:59,120
Speaker 1: he's a chairman of Lucid Motors, which is an electric

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Speaker 1: vehicle ups ale car. He's also an advisor to the

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Speaker 1: Saudia Sovereign Wealth Fund. He's also on the board of

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Speaker 1: Saudi a Ramco and as you note, he is also

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Speaker 1: the chairman of the Olympics for a Brisbane in twenty two.

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00:26:13,840 --> 00:26:16,040
Speaker 1: And I can't think of that far right. We're gonna

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Speaker 1: be here for it though, where Kayle, you know, I

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00:26:19,720 --> 00:26:21,840
Speaker 1: I look at this and so much for me, Andrew

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00:26:21,880 --> 00:26:26,120
Speaker 1: Liver's is about process. He's the process guy in American business. Yeah,

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00:26:26,119 --> 00:26:28,639
Speaker 1: and he's trying to build something with this EV company

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Speaker 1: in particular. But David, obviously, when we talk about evs,

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00:26:31,440 --> 00:26:34,720
Speaker 1: the comparison always is to Tesla, who, in many ways

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00:26:34,880 --> 00:26:37,200
Speaker 1: Elon Musk was the first mover on this. How does

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Speaker 1: he see them competing, whether or not they realistically can well.

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00:26:40,640 --> 00:26:44,080
Speaker 1: Tesla is designed to produce cars. I won't say for

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Speaker 1: the average person, they're they're not inexpensive, but they're not

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Speaker 1: going after the luxury market at the moment. Lucid is

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Speaker 1: really going after the luxury market. It's cars begin at

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00:26:53,480 --> 00:26:56,440
Speaker 1: over a hundred thousand dollars per vehicle and they go

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00:26:56,920 --> 00:26:59,880
Speaker 1: up from there. Um. They will address the lower call

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00:27:00,119 --> 00:27:02,159
Speaker 1: market later on, but right now their focused on the

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00:27:02,280 --> 00:27:06,600
Speaker 1: upscale market and that's why they're not directly competing with Tesla. Well,

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00:27:06,680 --> 00:27:08,720
Speaker 1: and of course, the US has been looking at making

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00:27:08,840 --> 00:27:12,840
Speaker 1: more investments into the EV infrastructure space. That's part of

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00:27:13,119 --> 00:27:15,440
Speaker 1: what we see with the Clean Energy spending in the

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00:27:15,640 --> 00:27:18,720
Speaker 1: Inflation Reduction Act that the President just signed yesterday. What

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00:27:18,880 --> 00:27:22,600
Speaker 1: were his thoughts on US infrastructure policy what it ultimately

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00:27:22,880 --> 00:27:26,000
Speaker 1: needs to look like. Well, Andrew Liberes has been involved

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00:27:26,040 --> 00:27:29,639
Speaker 1: involved advising several presidents when infrastructure spending. And now that

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00:27:29,720 --> 00:27:33,080
Speaker 1: we have a bill, hopefully it'll be appropriations behind the bill.

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00:27:33,119 --> 00:27:36,000
Speaker 1: Remember the bill was early only to authorize spending. We

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00:27:36,040 --> 00:27:39,119
Speaker 1: have to actually appropriate the money. But assuming it's app appropriated,

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00:27:39,400 --> 00:27:42,200
Speaker 1: we can begin to redo some of our big bridges

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00:27:42,320 --> 00:27:45,280
Speaker 1: and roads and toll roads, airports and things like that,

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00:27:45,640 --> 00:27:49,320
Speaker 1: which should make um e V cars more accessible too,

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00:27:49,400 --> 00:27:51,159
Speaker 1: because they're going to build out a fair amount of

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Speaker 1: electric charging stations throughout the country. David, I have to

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00:27:55,400 --> 00:27:57,199
Speaker 1: turn to the issue at hand, and I know these

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00:27:57,240 --> 00:28:00,240
Speaker 1: are delicate discussions. You don't want to talk specifically about

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00:28:00,240 --> 00:28:02,560
Speaker 1: the Carlisle Group, but I do want to talk about

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00:28:02,720 --> 00:28:06,760
Speaker 1: scale and heritage. Doubt chemical of Andrew Liver's is thirty

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00:28:06,840 --> 00:28:10,000
Speaker 1: five thousand employees, and I've never bought the idea that

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00:28:10,080 --> 00:28:13,480
Speaker 1: big companies have smooth transitions. It can be as challenging

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00:28:13,520 --> 00:28:17,720
Speaker 1: as any Carlisle Group is, roughly people. One of the

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00:28:17,920 --> 00:28:24,320
Speaker 1: great challenges we've seen in smaller projects hedge funds, alternative investment,

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00:28:24,400 --> 00:28:29,880
Speaker 1: private equity, venture capital is a generational shift. What's your

510
00:28:29,960 --> 00:28:33,840
Speaker 1: best practice on that? What's the best practice to say

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00:28:34,200 --> 00:28:36,399
Speaker 1: I want to move on and do this this this

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00:28:36,680 --> 00:28:41,080
Speaker 1: this your your exceptional philanthropy to the American people and

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00:28:41,200 --> 00:28:45,240
Speaker 1: our history. How do you make a generational shift? There's

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00:28:45,280 --> 00:28:47,880
Speaker 1: no perfect model. Each of the firms have gone through

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00:28:47,920 --> 00:28:49,960
Speaker 1: it in different ways. I think a good thing to

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00:28:50,040 --> 00:28:51,560
Speaker 1: do is to have somebody who's been at a firm

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00:28:51,600 --> 00:28:53,760
Speaker 1: for a long time part of the culture, they know

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00:28:53,960 --> 00:28:56,920
Speaker 1: the ethos of the organization, and gradually they come in

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00:28:57,000 --> 00:28:59,640
Speaker 1: and take over control and the founders step back. But

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00:29:00,000 --> 00:29:02,840
Speaker 1: it's more complicated than a typical situation. So let's suppose

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00:29:02,880 --> 00:29:06,160
Speaker 1: your lou Gerstner, you're the CEO of IBM, and you retire.

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00:29:06,520 --> 00:29:09,440
Speaker 1: When you retire, you don't own twenty or thirty percent

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00:29:09,480 --> 00:29:12,200
Speaker 1: of the company still and you're not still you know,

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00:29:12,280 --> 00:29:15,360
Speaker 1: a major investor in the funds. It's a different situation.

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00:29:15,400 --> 00:29:17,960
Speaker 1: You're not a founder. So all the founders of the

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00:29:18,040 --> 00:29:22,200
Speaker 1: large privately firms are still involved, uh largely with some exceptions,

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00:29:22,240 --> 00:29:26,120
Speaker 1: still involved in as owners, investment committee members and as

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00:29:26,160 --> 00:29:28,080
Speaker 1: big shareholders. And it's a little different than the lou

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00:29:28,200 --> 00:29:31,200
Speaker 1: Gersner situation or Jack Wells situation when they retire and

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00:29:31,240 --> 00:29:34,760
Speaker 1: they don't really control the company through the ownering ownerships

531
00:29:34,840 --> 00:29:37,400
Speaker 1: large shares shares in the company. Thanks for those comments.

532
00:29:37,480 --> 00:29:41,320
Speaker 1: David Rubinstein here of course, continuing the Bloomberg coverage of

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00:29:41,360 --> 00:29:43,959
Speaker 1: what we see and all of these different firms as

534
00:29:44,000 --> 00:29:48,600
Speaker 1: they make generational moves. Mr Rubenstein with the full interview

535
00:29:48,760 --> 00:29:53,520
Speaker 1: Lucid Groups chairman Andrewlivers. This is the Bloomberg Surveillance Podcast.

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00:29:53,800 --> 00:29:57,160
Speaker 1: Thanks for listening, Join us live weekdays from seven to

537
00:29:57,280 --> 00:30:01,280
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

538
00:30:01,680 --> 00:30:05,680
Speaker 1: each day from six to nine am for insight from

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00:30:05,720 --> 00:30:10,240
Speaker 1: the best in economics, finance, investment, and international relations. And

540
00:30:10,360 --> 00:30:15,480
Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

541
00:30:15,560 --> 00:30:19,240
Speaker 1: dot com, and of course, on the terminal. I'm Tom Keene,

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00:30:19,280 --> 00:30:21,280
Speaker 1: and this is Bloomberg