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Speaker 2: Lizzie Saunders joins us, patiently awaiting here as we look
Speaker 2: at this news out of the United Kingdom. Lizzie Saunders,
Speaker 2: My radars up when someone says buy the dip.
Speaker 3: How dip are the software stocks this morning?
Speaker 4: Well, as you know, Tom and Paul, I'm not an analyst.
Speaker 4: I don't cover the software stocks, you know. I think
Speaker 4: it's a little bit more existential what they're dealing with
Speaker 4: versus some of the other stocks or groups of stocks
Speaker 4: that have been hit. As you have this sort of
Speaker 4: AI related money swirling around, everybody is looking for both
Speaker 4: the shiny new object the dull new object, who is
Speaker 4: a beneficiary who is getting disrupted, And I think that
Speaker 4: type of backdrop will continue. We haven't really seen the
Speaker 4: retail trader come back in a significant way. I think
Speaker 4: they've been supportive of lower less downside in some of
Speaker 4: these areas, but they're not proving to be the big
Speaker 4: by the dip crowd life was the case in the
Speaker 4: past couple of years, Paul.
Speaker 2: The pricing years like October of last year. Yeah, I mean,
Speaker 2: I don't even think it's a correction.
Speaker 5: Now, not yet correct me if I'm wrong, zag Liz.
Speaker 5: We have seen in this marketplace really since kind of
Speaker 5: late October early November, a rotation maybe out of some
Speaker 5: of the growth names, some of the tech names, into
Speaker 5: some of the more value maybe small and mid cap here.
Speaker 5: Give us your thoughts on that.
Speaker 4: So I think the broadening out trade definitely has legs.
Speaker 4: The initial juice provided to the small cap space was
Speaker 4: in advance of what ended up being a short lived
Speaker 4: easingcam pain on the part of the FED. But then
Speaker 4: I think more of the fundamental side kicked in. It
Speaker 4: wasn't just about rate cuts, because the trajectory for earnings
Speaker 4: broadly in the Russell two thousand looks quite a bit
Speaker 4: sharper than it does for the SMP five hundred. That said,
Speaker 4: what's been interesting is last year in the small cap rally,
Speaker 4: it was heavily driven down the quality spectrum, non profitable
Speaker 4: stocks within the Russell two thousand having twice the performance
Speaker 4: profitable stocks for full year calendar twenty twenty five. That's
Speaker 4: been turned on its head and now it's the profitable
Speaker 4: components within the Russell two thousand that are handily outperforming
Speaker 4: the nonprofitable. And that was something we were saying, you
Speaker 4: want to fade the unprofitable and lean into the profitable,
Speaker 4: and that certainly kicked into gear this year.
Speaker 5: Luzanne, we're probably I don't know about eighty percent away
Speaker 5: through earnings for the SMPE five hundred. What have you seen,
Speaker 5: what have you heard about guidance that gives you your
Speaker 5: as to where this market could go this year?
Speaker 4: Yeah, So in the aggregate, the earnings growth rate is
Speaker 4: quite a bit higher than what was expected at the
Speaker 4: start of the year. We're up at around thirteen percent
Speaker 4: and change, and that's the blended growth rate, which includes
Speaker 4: everybody that has reported and the few companies that have
Speaker 4: yet to report, and that was mid single digits at
Speaker 4: the start of earning season. I guess the difference, though,
Speaker 4: relative to the past four quarters or so, is that
Speaker 4: the beat rate both on top line and bottom line
Speaker 4: has been weaker relative to the four quarter average relative
Speaker 4: to the longer term Since mid nineteen nineties, average so
Speaker 4: that's what's been distinct about this backdrop is overall higher
Speaker 4: earnings growth, but a lower beat rate and a bit
Speaker 4: more subdued forward looking forecasts.
Speaker 5: So, Lizianne, we're thinking about this market here, valuation it
Speaker 5: seems to have faded a little bit in terms of
Speaker 5: concerns for market participants. I'm not sure I'm hearing as
Speaker 5: much concerned about valuation for this market these days. How
Speaker 5: do you think about that?
Speaker 4: Well, maybe that's because in the aftermath of the so
Speaker 4: called Liberation Day tariff announcements and then obviously the subsequent
Speaker 4: ninety day delay, obviously that move on April ninth began
Speaker 4: what was an unbelievable surge. But what was interesting is
Speaker 4: you then stopped the valuation expansion in around August of
Speaker 4: last year, and valuations have been relatively flat, yet at
Speaker 4: the same time you've had that rising earnings growth trajectory.
Speaker 4: So it was almost like the market pause and said, Okay,
Speaker 4: we need earnings now to start to do more of
Speaker 4: the heavy lifting. We're sort of past that automatic valuation expansion,
Speaker 4: and earnings indeed have begun to do more of the
Speaker 4: heavy lifting. So you've eased some of that valuation concern
Speaker 4: by virtue of the shoppiness we've seen in the equity market.
Speaker 4: Yet at the same time, earnings can a power hire Lizzie.
Speaker 2: I've done normal, Rubini, I think as long as I've
Speaker 2: known you. And he dropped a bombshell yesterday. Doctor Rubini
Speaker 2: made clear he looks at the productivity and technology of
Speaker 2: America and models a closer to four percent economy than
Speaker 2: a two percent economy. Could we miss here an exceptional
Speaker 2: moment for American growth is that modeled in?
Speaker 4: Not only do I think that it's not modeled in,
Speaker 4: but I think it's really a key ingredient in light
Speaker 4: of the very weak labor force growth that we're seeing
Speaker 4: courtesy of the crackdown on immigration. You know, we know
Speaker 4: the formula that goes into what GDP. When GDP is released,
Speaker 4: it's everything from government and private sector and consumption and
Speaker 4: the relationship between imports and exports, and business investment residential investment.
Speaker 4: But at its base level, the calculation for economic growth
Speaker 4: is productivity times labor force growth. We don't have the
Speaker 4: labor force growth piece, but we certainly have had the
Speaker 4: productivity piece, and that has been a beneficial offset and
Speaker 4: environment where we have very constrained labor force growth. It
Speaker 4: also tells you that if that productivity miracle, if we
Speaker 4: want to call it, that, fades it all absent any
Speaker 4: pickup in labor force growth, then we probably have a
Speaker 4: bigger problem from a GDP perspective. But that's certainly not
Speaker 4: been the case.
Speaker 2: Lizzene signers with a far too short interview. Thank you
Speaker 2: so much for the conversation this morning. Lazanne wrapped around
Speaker 2: the moment that we're having in London. Lizen Saunders always
Speaker 2: in Forever with Charles Schwab.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: in an American Revolution on YouTube.
Speaker 2: At Brown University and just definitive on our American history.
Speaker 2: Here Wendy a remarkable set of sentences with Helene Cooper
Speaker 2: in The New York Times this morning. It really struck
Speaker 2: me for a president ran for office promising to keep
Speaker 2: the United States out of wars. Comma, mister Trump is
Speaker 2: now considering what would be at least the seventh American
Speaker 2: military attack in another country in the past year. In
Speaker 2: his second on Iran, et cetera, et cetera, Professor Schiller,
Speaker 2: how did we get here?
Speaker 6: Well, I mean, I think Iran in the United States
Speaker 6: has been a complicated problem, as you know, for what
Speaker 6: fifty years now, just about fifty years a little under.
Speaker 6: And I think it's impossible to be the world's superpower
Speaker 6: and stay out of international conflict. It's just impossible. You
Speaker 6: inherit this edifice if you are President Trumpy at it
Speaker 6: in his first term as well well, and Biden and
Speaker 6: Obama and George W. Bush, and you know, it's very
Speaker 6: hard to unpack that or dismantle that edifice. And that
Speaker 6: edifice is frankly the beacon of freedom. It can challenge
Speaker 6: that if they want, but you know, we are a
Speaker 6: country that, since World War Two, enforces the international order,
Speaker 6: and even though Trump is pulling out of international organizations,
Speaker 6: we are.
Speaker 4: Still that country.
Speaker 6: And it's just simply impossible to avoid because the United
Speaker 6: States is so embedded in the global order that if
Speaker 6: Iran poses any kind of threat to our allies or
Speaker 6: to us, then we have to act, and that is
Speaker 6: that's the job. So I think the promises he made
Speaker 6: were I'm not going to do this, willy nilly, I'm
Speaker 6: not going to go in search of monsters to destroy
Speaker 6: as John Quincy Adams as you know, you know I've
Speaker 6: talked about that has said one hundred and fifty years ago,
Speaker 6: but more than one hundred five years ago. But he
Speaker 6: has an edifice that is still the world's supreme power
Speaker 6: and defender, and it's just impossible to walk away from
Speaker 6: that if you're the president of the United States.
Speaker 5: Given President Trump's you know, he's focusing on international affairs,
Speaker 5: and I guess that's typical of a second term president here.
Speaker 5: How concerned is the administration? Is the Republican Party with
Speaker 5: his low approval ratings here, well, you know that's sort.
Speaker 6: Of the big criticism that people like Marjorie Taylor Green,
Speaker 6: former representative in the House who just left, made about
Speaker 6: MAGA and about what Trump created. And so I was
Speaker 6: going to you know, I was going to go into
Speaker 6: office with I'm Donald Trump. I'm going to get rid
Speaker 6: of the rhinos. I'm going to get rid of this
Speaker 6: sort of Republican impetus to go to war, even though
Speaker 6: Democrats start as many wars as Republicans in the last
Speaker 6: one hundred years. But nonetheless, you know, I'm going to
Speaker 6: get rid of all that, I'm going to focus on
Speaker 6: the United States, and she what she's saying is that
Speaker 6: he's betrayed that promise and that he's deflecting.
Speaker 3: But I don't think.
Speaker 6: I think that's just more complicated than that. Because of
Speaker 6: our global interest, because we are globalized, because our economy
Speaker 6: rests on the stability of the rest of the world,
Speaker 6: we can't just sit things out. And I think that's
Speaker 6: the thing that possibly the base that voted for Donald Trump,
Speaker 6: you know, didn't want to hear or doesn't want to accept.
Speaker 6: But certainly as president, that's what he has to do,
Speaker 6: because he makes an argument that it's in his interest.
Speaker 6: Is this deflection, it'd be a very expensive, risky deflection
Speaker 6: from the economy, from affordability, from ice tactics. You know,
Speaker 6: you can do other things if you're Donald Trump, to deflect.
Speaker 6: You don't have to start a war with the wrong president.
Speaker 5: Trump has done I think a pretty good job of
Speaker 5: kind of framing the allied relationships that the United States
Speaker 5: has enjoyed or fosters into World War two. Is that
Speaker 5: going to come back and bite him here to the
Speaker 5: extent he does take some drastic moves here in our end,
Speaker 5: does he have the support of allies.
Speaker 6: Well, you know, Paul and Tom, this is a really
Speaker 6: important question. We saw the first golf for war, and
Speaker 6: we saw the second go for war, and we realized
Speaker 6: that United States went in a international community the first time,
Speaker 6: but really with Britain, i mean, on its own the
Speaker 6: second time, and it left us a twenty year commitment
Speaker 6: to war. So it becomes more expensive and more risky
Speaker 6: to do it by yourself. But you know, Trump had
Speaker 6: legitimate points about NATO. We can all agree they weren't
Speaker 6: paying their fair share of NATO and the United States
Speaker 6: was carrying the burden and that was true. And I
Speaker 6: think you have to get the president credit for saying, look,
Speaker 6: you have to stand up for yourself. We're not going
Speaker 6: to be able always able to shoulder the burdens as.
Speaker 3: We speak, Paul, should we talk economics? We can just
Speaker 3: do that.
Speaker 2: Let's digress from geopolitics for a moment. We do it
Speaker 2: with Wendy Schiller and greet all of you across the nation. Wendy,
Speaker 2: I'm reading the Morgan.
Speaker 3: One volume on William McKinley.
Speaker 2: I'm ignorant on the period of the Gilded Age, and
Speaker 2: I'm getting out I'm trying to get forward to Grover Cleveland,
Speaker 2: Alexander and Professor Schiller. What I see with McKinley is
Speaker 2: he walked back his massive protectionist tendencies. Are we seeing
Speaker 2: that with this president that he's doing a so called
Speaker 2: buffalo pivot in his own Trumpian way?
Speaker 6: Well, here's where I think this is a great example.
Speaker 6: This is where elections matter, and that the Founders put
Speaker 6: midterm elections in And you know that was supposedly a
Speaker 6: check on the House, really mostly because everybody in the
Speaker 6: House is up for reelectionary two years, but it's really
Speaker 6: a check also on partisanship and on the part of
Speaker 6: the share party between the President and Congress. This is
Speaker 6: a check on the president. He realizes that the last
Speaker 6: two years of his presidency will be quite unpleasant if
Speaker 6: the Democrats take both the House and the Senate. And
Speaker 6: what he's hearing from his party is the Senate's in play,
Speaker 6: and that's because of his economic policies and to some extent, tariffs,
Speaker 6: and he hasn't brought manufacturing back and these are overwhelming
Speaker 6: everything else he's doing. So I think that's where the
Speaker 6: urgency is coming in terms of tariffs, and of course
Speaker 6: Grover Cleveland and Donald Trump share a very important commonality. Right,
Speaker 6: they won, they lost, and they won again. McKinley. The
Speaker 6: McKinley Bill, you know of eighteen eighty nine, as you
Speaker 6: well know, was the largest ARFF protection is built ProTouch
Speaker 6: in our history. And of course by the time becomes
Speaker 6: president certainly realizes that's not the way to run the rodeo.
Speaker 6: So I think this is what's happening. At the same time,
Speaker 6: you know, things aren't kicking up the economy, and he's
Speaker 6: hearing that he could lose the Senate, which will make
Speaker 6: life very difficult for Donald Trump.
Speaker 2: Quickly or it's off your remit, but I know you're
Speaker 2: sneaking to the class with the late great William Poole
Speaker 2: or other great economists at Brown University. Kevin Hasset with
Speaker 2: an uproar yesterday folks criticizing sharply the New York Fed
Speaker 2: academics over who pays the bill? Professor Schiller enlightened us.
Speaker 2: Do we pay the tariff bill or does some company
Speaker 2: over in Vietnam pay it?
Speaker 6: Well, I mean, this is the thing about diffuse costs
Speaker 6: versus concentrated costs.
Speaker 3: This is the whole crux.
Speaker 6: Of the interception between the economy and US politics. When
Speaker 6: the calls are diffuse, it is harder to sort of
Speaker 6: get voters to pay attention when they're concentrated. I need
Speaker 6: a particular part to make another thing in the United States,
Speaker 6: and that part now costs twenty five percent more. That
Speaker 6: hurts concentrated industries. And we are economy that is so
Speaker 6: broad and diverse and service oriented now that voters and
Speaker 6: most people don't feel it as acutely as concentrated industries.
Speaker 6: But the problem for the Republicans is that some of
Speaker 6: those concentrated industries are in states that have key elections
Speaker 6: this year, so that's where this intersection happens. But it's
Speaker 6: always the battle between diffuse costs and concentrated costs, particularly
Speaker 6: when it comes to trade politics.
Speaker 5: So how aggressive can the Democrats be here in his
Speaker 5: midterm elections?
Speaker 6: Well, Paul, the Democrats can find a way to lose
Speaker 6: an election they're supposed to win. We've seen that before
Speaker 6: in the past. You know, they have to get their
Speaker 6: act together and agree on their messaging.
Speaker 4: And now they've.
Speaker 6: Got a couple of things. One is overreach, but they
Speaker 6: have to move away from you know, democracies failing democracy
Speaker 6: is failing. They're winning special elections all over the place,
Speaker 6: so in some ways democracy is not failing them. Right now,
Speaker 6: they have to go zero in on core issues healthcare, affordability,
Speaker 6: and individual security from the intrusion of the federal government,
Speaker 6: three issues. Bill Clinton always said you need three, so
Speaker 6: George Bush had three George w So they have to
Speaker 6: get their act together and decide this can't be a diverse,
Speaker 6: dispersed campaign for the Democrats. They have to zero in
Speaker 6: on a couple of issues.
Speaker 2: Professor Schuler, thank you so much for the brief this morning,
Speaker 2: much needed on our geopolitics. The economist Wendy Schuller of
Speaker 2: Brown At University.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: This is a joy with substantial physics out of the
Speaker 2: Massachusetts Institute of Technology part of it, and then he
Speaker 2: got into the totally cool and still cool physics program
Speaker 2: at Boston University. A really unknown magisterial program. Then he
Speaker 2: wandered out to JPL to put men on Mars or whatever.
Speaker 2: We could do the whole thing on space here, George,
Speaker 2: but with PGUM. Let's do it with George Patterson here
Speaker 2: on where we are right now. The leverage of nineteen
Speaker 2: ninety eight, some people knew it was there. I've had
Speaker 2: the honor of talking to Myron shuls two three times.
Speaker 2: Do we have visible leverage now within the system or
Speaker 2: do we have a discrete hidden leverage within the system
Speaker 2: that we don't understand.
Speaker 7: We spent a lot of time, First of all, thank
Speaker 7: you for being here, a great opportunity.
Speaker 3: We spent a lot of time.
Speaker 7: Worrying where like the hidden risks are.
Speaker 3: In the economy.
Speaker 7: There's really there's really no obvious excesses, right, There's no
Speaker 7: obvious areas where you know, we worry that capital is misallocated,
Speaker 7: particularly relative to like the people that can afford to
Speaker 7: take the risks, so we don't see those types of
Speaker 7: hidden leverage scenarios.
Speaker 3: You guys are Belton suspenders.
Speaker 2: I'm gonna I'm I'm front Paul sween here, this is
Speaker 2: his question, but I'm stealing.
Speaker 3: It private credit. You gotta be kidding me. They want
Speaker 3: to put it my ira.
Speaker 7: Listen, listen there. Private credit, like all private assets, has
Speaker 7: a place in portfolios. It's what's important for everyone really
Speaker 7: is to design a portfolio that meets your needs. There
Speaker 7: are substantial return opportunities, but you need to understand what
Speaker 7: you're getting involved. You need to understand the limitations, the
Speaker 7: upside and also the downside.
Speaker 3: Did that sound like the general counsel of people they
Speaker 3: memorize it? That was brilliant, exactly, George.
Speaker 5: You think about twenty twenty five performance, US equities did
Speaker 5: really well, but rest of the world did a lot better.
Speaker 5: How do you think about US versus rest of the world?
Speaker 3: Here?
Speaker 7: Exactly, in all honesty, like, many of the best opportunities
Speaker 7: I would say are probably outside the US. The US
Speaker 7: has again strong performance, but when you look at both
Speaker 7: emerging marks and even just European equities, Japanese equities, twenty
Speaker 7: five was a great year to be outside. And one
Speaker 7: of the great things about diversification is that it's one
Speaker 7: of the few free lunches that you can really have
Speaker 7: in the world of investments. You can diverse by your portfolio,
Speaker 7: you can take lower risk, and it really doesn't cost
Speaker 7: you anything to do that.
Speaker 5: So, I mean a lot of the performance in twenty
Speaker 5: twenty five outside of the US was the weakening US dollar.
Speaker 5: I'm not sure we can count on that again. So
Speaker 5: to the extent that you're I don't know, overweight rest
Speaker 5: of world or non US, what do you have to
Speaker 5: believe there?
Speaker 7: Well, part of it's just where do you think that
Speaker 7: where do you think the growth is going to be
Speaker 7: like for an emerging With regard to emerging markets, you know,
Speaker 7: I think terriffs have largely come in a little bit
Speaker 7: lighter than expected. You know, if you look at manufacturing
Speaker 7: in the US, it's not coming back. I'm not quite
Speaker 7: sure there's really an appetite for manufacturing jobs. So a
Speaker 7: lot of that is still going to happen in emerging markets.
Speaker 7: A lot of a lot of wealth created is still
Speaker 7: going to happen there. I think the fact that there
Speaker 7: are less headwinds with regards to you know, tariffs and
Speaker 7: different policies really just sets it up. I mean, we've
Speaker 7: had great performance in emerging market I think we could
Speaker 7: be at the beginning of a cycle where we see
Speaker 7: continued performance there.
Speaker 2: George Patterson with US, we're going to get to the
Speaker 2: claims report here in a moment, let me squeeze one more,
Speaker 2: and I want to come back and talk about some
Speaker 2: physics envy as we can. You're definitive on this. Are
Speaker 2: the classic curves, the Gaussian curve, the log normal curve,
Speaker 2: talleebs plus on distribution.
Speaker 3: Are they acting normal? Now? Well, the dynamics.
Speaker 7: Listen, you know those are nice analytical forms that you
Speaker 7: learn in school, but the real world is not like that.
Speaker 3: How distant is our real.
Speaker 2: World from those analytical forms.
Speaker 7: Listen, things tend to be quiet for a while and
Speaker 7: then you get much larger tails. So I think, literally,
Speaker 7: whenever we fit distributions, whenever I give internal seminars, I'm
Speaker 7: always telling my telling the young researchers. Don't assume normality,
Speaker 7: you know, you estimate something that has wider tails.
Speaker 2: So when you bring your Hinckley picnic boat down the
Speaker 2: Hudson to Pigium is an amy your boat suddenly.
Speaker 7: Not quite I'm not quite. I'm not quite at the
Speaker 7: Hinckley level.
Speaker 3: Yeah, well we'll see.
Speaker 2: Well you're all use Percelli's I mean, he's got it
Speaker 2: as well.
Speaker 3: We've got a ton. It's a Seattle slew of data pulse, sweeting.
Speaker 5: Yeah, we've got the initial job, exclaims Tom.
Speaker 3: Look at that. It's a latch monatathon number.
Speaker 6: It is.
Speaker 5: It's a two hundred and six thousand. The consensus was
Speaker 5: two hundred and twenty five thousand, Tom, And last period
Speaker 5: was revised a little bit higher to two twenty nine
Speaker 5: thousand higher, so much less much lower rate here this period.
Speaker 2: Here interesting to see here on the tenure yield, get
Speaker 2: a higher yield. I guess they're looking in that as
Speaker 2: a more buoyant economy. Four point one zero percent future
Speaker 2: is a negative twenty six right now, and the Vicks
Speaker 2: extends out from a twenty level out to twenty one
Speaker 2: point five zero. Okay, I want to talk a bit
Speaker 2: quiet here. We're gonna go looktle bit physics, folks. There
Speaker 2: are things called cross moments, which are a four box
Speaker 2: description of the dynamics of the market. Fancy people like you,
Speaker 2: George Patterson, talk about the slew rates, the rate you know,
Speaker 2: on a Newtonian basis, the rates of change. Are you
Speaker 2: worried about suddenly second derivative, suddenly first derivative, Suddenly slew
Speaker 2: rates we can't handle.
Speaker 7: Listen, we do worry when we do portfolio construction, we
Speaker 7: go way beyond mean variants, right, we look at higher moments.
Speaker 7: A lot of times it's more cokurtosis and co skewness.
Speaker 7: Oh boy, I know it's probably a little bit early
Speaker 7: in the morning for some of those.
Speaker 3: Well they cured mine at New York Pressbyterian continue.
Speaker 7: But you do. Like the challenge is is that markets
Speaker 7: are oftentimes, you know, very quiet, and then you get
Speaker 7: these large moves, and in order to get to think
Speaker 7: about how to positions for some of these large moves,
Speaker 7: you need to be able to deal with how things
Speaker 7: work in extremes. And that's that's really some of the
Speaker 7: approaches that we use is looking at things beyond just
Speaker 7: you know, kind of textbook portfolio construction that you might
Speaker 7: learn in an MBA program. It's really how do you
Speaker 7: think about robust portfolio design? How do you think about
Speaker 7: downside protection because a lot of times you might not
Speaker 7: want to own some assets that really give you the
Speaker 7: type of tail protection that you're going to get.
Speaker 5: So put all that together, sitting here early in twenty
Speaker 5: twenty six, what's my allocation here? Stocks, bonds, US, non us,
Speaker 5: what is and has it changed for you guys.
Speaker 7: So it has changed, and part of it is really
Speaker 7: the long term outlook. So you know, one of the
Speaker 7: great things about bonds now with yields where they are
Speaker 7: is you're getting paid. So you know, if you look
Speaker 7: at equities, US equities are slightly expensive. US has been
Speaker 7: a phenomenal growth market, but if you look out in
Speaker 7: like five to ten years, US equities are relatively expensive,
Speaker 7: so you get paid. You can get a lot of
Speaker 7: diversification by having some bond return, particularly when you're looking
Speaker 7: at you know, a an kind of institutional credit bond
Speaker 7: portfolio in the five percent. Also looking outside the US,
Speaker 7: that's where we see opportunities. All of our macro indicators
Speaker 7: indicate smooth sailing ahead.
Speaker 3: Well, I like to you, he's kneeled right into where
Speaker 3: I was going. Smooth sailing.
Speaker 2: The wonderful kent Osben had a book years ago, Iceberg Risk.
Speaker 2: He's done all sorts of work, folks, credit sweets and
Speaker 2: Goldman sex.
Speaker 3: I m F. He's like a horse in the quant area.
Speaker 3: It's Jack and he's out in the bow.
Speaker 2: Of the Titanic, and they're two statisticians and they just
Speaker 2: they just got it all figured out.
Speaker 3: The ability to get.
Speaker 2: Hit by an iceberg and the Titanic isn't there, And
Speaker 2: Kent Osman says, that's iceberg risk.
Speaker 3: How are those icebergs looking right now?
Speaker 7: Hey, George Fatters, Listen, you always have to be pay
Speaker 7: attention and be nimble because you never know when something
Speaker 7: can emerge. Again, We've had a lot of economic data.
Speaker 7: Some of it's a little weaker, some of it's a
Speaker 7: little stronger, but it's it's been surprisingly boring in all honesty.
Speaker 7: In terms of inflation seems to be relatively and contained.
Speaker 7: I know we've had some conversations yesterday day about FED
Speaker 7: speakers that are concerned about it. But again, the market
Speaker 7: seems to be fine with it. Unemployment seems to be good,
Speaker 7: growth seems.
Speaker 3: To be good.
Speaker 7: So there's nothing that's really breaking out to the upside
Speaker 7: or the downside.
Speaker 3: Are you? Are you in speaking terms with Greg Peters? Yes,
Speaker 3: of course. Always How do you help Greg Peters? I mean,
Speaker 3: you know he's he's got some heavy lifting to do.
Speaker 7: Listen. Bond bond investors are by their nature have a
Speaker 7: different personality, right because with bond investors you're always you're
Speaker 7: always worried about the downside. Right, I spend a lot
Speaker 7: of time focusing on equities, which is all about hopes
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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 2: Lucy White and Ellen Milligan off the desk at Queen
Speaker 2: Victoria Street this morning. The headline is sobering to anybody
Speaker 2: of the history of the United Kingdom and the fabric
Speaker 2: of the people. Former Prince Andrew arrested on suspicion of misconduct.
Speaker 2: We are advantaged to have Michelle Hussain with Bloomberg.
Speaker 3: She was with US ages ago.
Speaker 8: She was I think twelve years old when she's dark
Speaker 8: and at the door, and then a sterling career at
Speaker 8: the BBC and wonderful acclaim on understanding this Disunited Kingdom.
Speaker 8: Maybe like no one else, it helps with a affiliation
Speaker 8: with Pakistan, to be an outsiders, a family. She has
Speaker 8: a resonance with the people of Britain like no one.
Speaker 8: I just the shock of it all and whyn't you
Speaker 8: to speak to an American audience? How do the people
Speaker 8: of the United Kingdom react to this arrest this morning?
Speaker 8: That takes us back to the arrest of Charles the
Speaker 8: First in the seventeenth century.
Speaker 9: You know your history and Tom morning, Tom morning, Paul.
Speaker 9: You know I can tell you first of all the
Speaker 9: reaction in this newsroom. Then this is the kind of
Speaker 9: moment where you don't just do a sharp intake of
Speaker 9: breath with as you see the news come through, Like
Speaker 9: you know, people are standing up at their desk just
Speaker 9: wanting to make eye contact and talk about the enormity
Speaker 9: of what's happened. So it was in the morning, our
Speaker 9: time that the news first came that one of the
Speaker 9: police forces in the UK, the one that works in
Speaker 9: around the London area, in the words of their statement,
Speaker 9: had arrested a man in his sixties on suspicion of
Speaker 9: misconduct in public office. It was soon apparent that this
Speaker 9: man was the former Prince Andrew. But the key point
Speaker 9: being the idea that a member of the royal family
Speaker 9: has been arrested is in police custody, is answering questions,
Speaker 9: and that police searches of two properties the police statement
Speaker 9: told us were underway Norfolk and Berkshire. Now that means
Speaker 9: royal residences estates around Windsor and Sandringham at Norfolk, which
Speaker 9: is where Prince Andrew. Former Prince Andrew's effectively in an
Speaker 9: internal exile. So there's the enormity of that. And then
Speaker 9: it's clear from the police statement that what they're actually
Speaker 9: investigating is the period when Andrew was a UK trade
Speaker 9: envoy and what the Epstein files now appear to show
Speaker 9: about the passing of information to Jeffrey and.
Speaker 2: I know the Telegraph has an extended discussion about Icelandic
Speaker 2: material stuff off our radar in America, Michelle. The reality
Speaker 2: for alexis christaf for is Paul Sweeney and Tom Key
Speaker 2: is our knowledge is Colin Firth and Helena Bonham Carter
Speaker 2: in the King's Speech a few years ago discuss the
Speaker 2: resonance of this with the next royal family, with the
Speaker 2: Prince of Princess of Wales, the King ill with cancer
Speaker 2: doing better. In all that explain the generational dynamics here
Speaker 2: of the royal family with this shocking arrest.
Speaker 9: This is not only uncharted territory for the royal family,
Speaker 9: but it is such an immense moment because even though
Speaker 9: back in November the King acted very significantly in the
Speaker 9: wake of the publication of Virginia Guphrase posthumous memoir, even
Speaker 9: though we acted at that point to remove his Royal
Speaker 9: Highness title from Andrew, to remove prince which is his
Speaker 9: birthright as the son of the late monarch, and also
Speaker 9: to remove him from where he was living on the
Speaker 9: royal estate in Windsor, and to send him to a
Speaker 9: much more private place where he would essentially be out
Speaker 9: of the public gaze entirely in Norfolk. Even though they
Speaker 9: have done all of that, the real danger and risk,
Speaker 9: and what they'll all be contemplating and digesting today is
Speaker 9: the fact that in public, as has already happened a
Speaker 9: couple of times to the King, people may be peckling them,
Speaker 9: calling out. Certainly, it's hard to imagine a future interview
Speaker 9: in which this doesn't come up. Prince Andrew actually is
Speaker 9: just done at BBC. Prince William has just done a
Speaker 9: BBC interview in which nothing of the sort was discussed.
Speaker 9: But even though they've taken steps to distance themselves from
Speaker 9: Andrew Mountbatten Windsor, this will no doubt be a really
Speaker 9: difficult moment. You know, public support for the monarchy is
Speaker 9: widespread in this country, but it does rather depend on
Speaker 9: an unspoken assumption that everyone is going to behave really well,
Speaker 9: and when you're in this kind of territory, it obviously
Speaker 9: has implications for the institution more widely than one individual.
Speaker 5: Michelle. King Charles has issued a statement here this morning.
Speaker 5: King Charles has said that quote law must take its
Speaker 5: course in King Charles is saying that he will not
Speaker 5: comment further on this matter. What are next steps here?
Speaker 5: Not that we have any guidebook here, but what do
Speaker 5: you think are next steps from the authorities?
Speaker 9: Well and interesting, the King had already indicated that if
Speaker 9: this did become a police matter, that he would do
Speaker 9: nothing to stand in the way of an indication. So
Speaker 9: the statement follows on from that tone that was set earlier.
Speaker 9: I think it's worth reminding ourselves what this investigation is
Speaker 9: about the kind of rule that the former Prince Andrew
Speaker 9: had as a UK trade envoy, the idea that as
Speaker 9: you try and flag the fly the flag for British
Speaker 9: business around the world, that you have a Prince as
Speaker 9: he was then as a calling card with pulling power
Speaker 9: to get foreign businessman into the room when he went
Speaker 9: on a foreign trip. That was essentially the job he did,
Speaker 9: and it was that there were questions in the media.
Speaker 9: He got the nickname at that time Air Miles Andy
Speaker 9: because people weren't sure quite the value to the taxpayer
Speaker 9: that was being delivered by him flying around the world
Speaker 9: in that way. But it's that aspect of his previous
Speaker 9: role in the public eye that is at the heart
Speaker 9: of this particular investigation because there are emails in the
Speaker 9: Epstein files which appeared to show that he received, for example,
Speaker 9: an official report on a visit overseas and he forwarded
Speaker 9: it to Jeffrey Epstein within minutes. So trade envoys are
Speaker 9: supposed to be under a duty of confidentiality. So that
Speaker 9: is the specifics of what the police are looking into.
Speaker 9: But of course we don't know where this investigation goes,
Speaker 9: and it is a pr nightmare. It is reputationally personally
Speaker 9: on every level. You can see the implication for the
Speaker 9: royal family. So it's not just a development, it's a
Speaker 9: real moment in the UK.
Speaker 5: It is Michelle, do we know what rights former Prince
Speaker 5: Andrew has is simply the rights of the average or
Speaker 5: common English citizen. Is there anything different here in terms
Speaker 5: of the type of treatment he'll receive? Do we know anything?
Speaker 9: I think it's pretty clear from this development and from
Speaker 9: the police statement is no different to the way that
Speaker 9: that any other investigation would be portrayed, although they do
Speaker 9: say we recognize the significant public interest in this case
Speaker 9: and we will be issuing updates when appropriate. Now, one
Speaker 9: aspect of this for the police is that in his
Speaker 9: time as a member of the royal family and I
Speaker 9: would think even now, Andrew would always have had personal
Speaker 9: protection officers serving police officers with him. So the police
Speaker 9: are also fielding those accusations of you know what, what
Speaker 9: did those officers see or not see, or what should
Speaker 9: they have seen or what should they have said? Given
Speaker 9: the allegations that have surrounded him for some years now,
Speaker 9: He's always denied any wrongdoing in relation to his association
Speaker 9: with financier and convicted p Dephiro Jeffrey Epstein, but next
Speaker 9: steps will be what we learned from this police investigation
Speaker 9: in due course. And I should also say that he
Speaker 9: is entitled to a fair trial if that is what
Speaker 9: it comes to. I'm going to stress there are no
Speaker 9: charges at this point. This is a police investigation, but
Speaker 9: everyone will also be conscious those rights.
Speaker 3: Michelle.
Speaker 2: One final question to get on to your busy day
Speaker 2: across America. This morning in our London officers, Michelle Husain
Speaker 2: joins us here and the arrest of the former Prince Andrew.
Speaker 2: I went to and Michelle, you know this encyclopedic I
Speaker 2: have to use artificial intelligence and I typed in what
Speaker 2: does Prince Williams twenty twenty six look like? And it
Speaker 2: goes through the awards in Mumbai coming up later this year,
Speaker 2: the royal warrants in the spring of this year. Things
Speaker 2: I don't understand. And down at the bottom very quietly
Speaker 2: is I think what Americans understand. Prince George will be
Speaker 2: twelve in twenty twenty six. Michelle is saying the continuity
Speaker 2: of the Royal family is they move forward with all
Speaker 2: of this scandal out there.
Speaker 9: You know one thing that they will be thinking that
Speaker 9: was the right thing to do before this moment, and
Speaker 9: I guess in the context they will be proud of
Speaker 9: at this moment is the fact that his titles, his
Speaker 9: position as the Duke of York, all of that was
Speaker 9: removed back in November. So I think they will be
Speaker 9: probably taking some heart from the fact that as an institution,
Speaker 9: as the monarchy, as the royal family, as the soul
Speaker 9: which King Charles is, that that action was taken a
Speaker 9: couple of months ago now. But yes, you know, out
Speaker 9: and about in the public eye in the ukl squere
Speaker 9: they will have to be prepared for this coming up
Speaker 9: in ways that they would not want. The royal schedules,
Speaker 9: the protocol, the interactions that exist with the press where
Speaker 9: they exist. They'd like these to be as carefully controlled
Speaker 9: and on message as they could possibly be. And this
Speaker 9: kind of situation adds a degree of unpredictability.
Speaker 3: And Jeffardy, Michelle, thank you so much. It is the
Speaker 3: Michelle Hussein Show. Look for that.
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