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Speaker 2: The honor of going to Robert Harmatt's Ambassador. Harmat's of
Speaker 2: course a tour of duty at the State Department recently
Speaker 2: with Secretary Clinton and with Kissinger associates, where thrilled to
Speaker 2: could join us in the studios this morning. If we
Speaker 2: quote unquote take out a theocracy back to nineteen seventy nine,
Speaker 2: what's left of Persia after the Ayahtola.
Speaker 3: Well, the answer to the question is we don't know,
Speaker 3: and we don't have a very good record in the
Speaker 3: mid least of regime replacement with better regimes. If you
Speaker 3: look at all the regimes that have fallen in the
Speaker 3: Middle East over the years where we have been explicitly
Speaker 3: or implicitly involved, they have not necessarily been better, and
Speaker 3: it's very hard to predict what would happen Okay Iran.
Speaker 3: There's a strong nationalistic feeling, however in Iran, and there
Speaker 3: are a lot of people who may not support the regime.
Speaker 3: We believe Iran should have a nuclear power capability, and
Speaker 3: those people are going to still be on the game.
Speaker 2: We're gonna have Robert Hormank with us, and we're gonna
Speaker 2: come back with Ambassador Hormance here with all the news
Speaker 2: slow we've got again. We welcome you across the country.
Speaker 2: You're at Fletcher at Toughs outside Boston. You're in the
Speaker 2: classroom with Stravetas and you got admiralster vetas an ambassador
Speaker 2: of Horrormancing. You've got a piece of chalk in your hand.
Speaker 2: What are our aircraft carriers doing in the Middle East?
Speaker 2: On a diplomatic basis, not a Stravitas basis, but on
Speaker 2: a Horrmance basis, What does our show of force doing.
Speaker 3: They're projecting power, They're projecting the fact that the United
Speaker 3: States has not only the ships there, but the ability
Speaker 3: to use them. The question is how will we use them.
Speaker 3: We know that they have been used to a degree
Speaker 3: to shoot down Iranian drones aimed at Israel. The bigger
Speaker 3: question now going forward is a what is the United
Speaker 3: States going to do with respect to involvement in the war,
Speaker 3: And that would really depend less on those carriers and
Speaker 3: more on B two bombers. If the US is going
Speaker 3: to use bunker busters, those are the ones that would
Speaker 3: deliver it. And that decision has not yet been made.
Speaker 3: But I'm sure is what the Israelis are asking us
Speaker 3: to do, since they don't have the power or the
Speaker 3: ability to take out these underground enrichment facilities, and therefore
Speaker 3: they want us involved, and Trump course seems to be
Speaker 3: reluctant to do that, although of late seeming a little
Speaker 3: less reluctant.
Speaker 4: That's something that's even on the table. Do you think
Speaker 4: is the Are the Iranian people in a position that
Speaker 4: even consider.
Speaker 3: That at the moment, the Iranian people are, but they
Speaker 3: do not want foreigners to be the ones to do it.
Speaker 2: There's a history.
Speaker 3: In Iran of foreigners intervening with respect to say to
Speaker 3: most of that, they still remember that the United States
Speaker 3: was involved in the overthrow of mosedk and bringing back
Speaker 3: the Shah, the New Shaw or the old Shaw now
Speaker 3: and they do not like the idea of foreign intervention.
Speaker 3: So they're very proud people. As you pointed out, there
Speaker 3: an old three thousand plus year old empire and regime
Speaker 3: change induced.
Speaker 2: By we have no template here we do.
Speaker 3: You have no temp We have no template, We have
Speaker 3: no ability to change the regime. And the Resini and
Speaker 3: the Uranians would resist that. If Israel did it or
Speaker 3: the United States did it, they don't want foreigners to intervene.
Speaker 3: If they do it ourselves, it's a very different matter.
Speaker 3: If we do it, it's a very different matter. And
Speaker 3: a negative boy.
Speaker 2: I want to get this in now. We're going to
Speaker 2: come back with Ambassador Arvans in the state of our
Speaker 2: diplomacy in Washington. Maybe try to move a little bit
Speaker 2: away from the conflict at hand. Futures negative thirty folks,
Speaker 2: we have a seven thirty scheduled. The son of the
Speaker 2: former shah named the crown prince in nineteen sixty seven.
Speaker 2: I guess he's a crown prince in exile. But whatever,
Speaker 2: the family is gone. But is the remains there of
Speaker 2: a middle class, not a people that would seek out
Speaker 2: some form of aristocracy, but would westernize their government. I
Speaker 2: see no evidence of that. Well.
Speaker 3: I think a lot of younger people would like to
Speaker 3: see a more westernized government. I think a lot of
Speaker 3: older people might think bringing back the Shaw's son was
Speaker 3: a good thing. Don't forget They did the same thing
Speaker 3: in Spain. They when Franco left, they brought back the king.
Speaker 3: I don't think Iron's that way. There's a whole new
Speaker 3: generation that's pretty well forgotten about the Shaw, and the
Speaker 3: Shaw's son is actively urging that he be brought back
Speaker 3: to preserve continuity and bring stability. But whether you can
Speaker 3: get a large number of people to support that, predicting
Speaker 3: younger people, that's a big question.
Speaker 2: Well can you stay for the next section here? Yes,
Speaker 2: I gotta sell toothpaste. But please Bob Hormance with us today.
Speaker 2: What a joy to have Ambassador Hormance with us with
Speaker 2: just decades and decades of experience on this and speaking
Speaker 2: with authority of the generations, the decades of Persia as well.
Speaker 2: I have to go, Bob Horrmance with your not only
Speaker 2: your service to Secretary Clinton, but to Republicans over the years.
Speaker 2: You play both sides of the aisle within your diplomacy,
Speaker 2: working forever with Secretary Kissinger, with doctor Kissinger. What do
Speaker 2: you make of this State Department? Where are Alexander Hamilton?
Speaker 2: I think he's got three jobs, if not four jobs.
Speaker 2: How does the Secretary of State do that? Well?
Speaker 3: It is very difficult to do, and we've tried this
Speaker 3: experiment once and it did not work. With Kissinger, as
Speaker 3: you pointed out, he was Secretary of State and National
Speaker 3: Security Advisor at the same time. The roles are entirely different.
Speaker 3: Secretary of State represents the State Department. The National Security
Speaker 3: Advisor pulls all the agencies together and is supposed to
Speaker 3: be the intermediary for the Defense Department of the State Department,
Speaker 3: the CIA, and numerous others, and it is a very
Speaker 3: time consuming job. One is to take a longer term
Speaker 3: strategic view. The Secretary of State is more proactive and
Speaker 3: more immediate in the kinds of things he does, and
Speaker 3: he has.
Speaker 2: To travel a lot.
Speaker 3: So I think that Kissinger himself decided that it was
Speaker 3: not a sustainable thing to do, and he encouraged Brent
Speaker 3: Scocroft to take over the job of National Security Advisor
Speaker 3: while he was Secretary of State, and it worked out
Speaker 3: very well. So you need the two of them to collaborate,
Speaker 3: but you don't want them to be the same whatever
Speaker 3: you're too much.
Speaker 2: Whatever your politics. Paul to mention the caliber of a Scowcraft,
Speaker 2: of a Hormant's and the others compared to some of
Speaker 2: the talent we're dealing with today is just shocking. Bob.
Speaker 4: You represented the US as a President's advisor and summit
Speaker 4: planner otherwise known as the SHERPA at six Group of
Speaker 4: seven Economic summits. What's a G seven economic summit? What's
Speaker 4: the goal of these G seven meetings?
Speaker 3: Well, actually I started out as the first CHIRPA at
Speaker 3: Rombolier in nineteen seventy five.
Speaker 2: That's because he could pronounce it. It was the only
Speaker 2: one in Americas, and I.
Speaker 3: Spoke French and English, and their igguestion was in French
Speaker 3: and English. So and the French originally didn't want note
Speaker 3: takers or shurpas. Just when we want all these four
Speaker 3: year old when one of those twenty year olds running around,
Speaker 3: we want this to be a very high level thing
Speaker 3: with they wanted only the heads of state, not even
Speaker 3: the ministers. So the answer to your question is that
Speaker 3: they can't remake the world themselves, but they can fortify
Speaker 3: or refortify the level of common commitment to democracies, to freedom,
Speaker 3: to free markets, to the kind of common values that
Speaker 3: we share among the US, France, Britain, Germany, Japan, Canada
Speaker 3: and Italy. And that is what they do for the
Speaker 3: most part by having the meetings themselves. The second thing
Speaker 3: they can do is they can be the nucleus of
Speaker 3: new ideas. How do you improve the trading system? How
Speaker 3: do you deal with all these trade issues that are
Speaker 3: circulating around they were going to talk about and Mark Carney,
Speaker 3: who would work with me at Goldman, is very interested
Speaker 3: in AI, so he wanted to have conversations about how
Speaker 3: they can work together to develop standards on AID. The third,
Speaker 3: they wanted to strengthen, at least almost all of them
Speaker 3: except one. US wanted to strengthen sanctions against Russia, and
Speaker 3: Russia was actually a member for a period of time.
Speaker 3: And Trump started out this meeting complaining that Russia was
Speaker 3: kicked out and should be brought back. They were kicked
Speaker 3: out because they annexed Crimea and the notion that if
Speaker 3: they were in there now, they wouldn't have invaded Ukraine
Speaker 3: while they were in it. They annexed Crimea. So this
Speaker 3: and also how do you deal with a resurch in China?
Speaker 3: How do you deal with all the trade issues and
Speaker 3: other issues.
Speaker 2: That's a good point of that China is a whole
Speaker 2: overlay here that.
Speaker 3: The most of are European or Atlantic. But Japan's in
Speaker 3: there and China's affecting everyone. So how do we deal
Speaker 3: with them?
Speaker 2: Professor Romance, I've got a call see in the hormants
Speaker 2: one oh two. So Paul, we got to impress him
Speaker 2: right now. If you look at the Imperial War Museum
Speaker 2: in London, they've got that map of Lawrence of Arabia, Yes,
Speaker 2: with Sykes Pecot exactly. And the answer is to French
Speaker 2: go from Syria in some vicinity of Persia. The British
Speaker 2: have the Persian Gulf Uae. There's all that tension down
Speaker 2: there where in God's name of the French. In this debate,
Speaker 2: compared to what my childhood of Charles de Gaul dominant,
Speaker 2: I'm thunderstruck how tentative the French seemed to be.
Speaker 3: Am I right, well, I would have a somewhat different
Speaker 3: perspective on that. I actually totally agree with you. The
Speaker 3: Gaul made himself a presence. He was the head of
Speaker 3: the free French by force of will and his strong personality.
Speaker 3: I just got back from Paris, where I had conversations,
Speaker 3: from France, where I had conversations with the French and
Speaker 3: actually with the German national security people and Macron, who
Speaker 3: actually was a Sherpa when I was a sherpist, so
Speaker 3: we worked together very closely. He does want to strengthen
Speaker 3: the role of the G seven. After all, it was
Speaker 3: a creation of the French just started to saying, So
Speaker 3: he wants to strengthen and I think he will play
Speaker 3: a very effective role, as certainly will Mark Carney and
Speaker 3: Mertz the new German bundes Chancellor. So I think that
Speaker 3: you will see him playing a very active role in this,
Speaker 3: both because he believes in it, he is committed institutionally
Speaker 3: to it, and I think he wants to strengthen first
Speaker 3: of all Europe's unity amongst itselves and second to demonstrate
Speaker 3: to the United States that Europe actually does have an
Speaker 3: interest in and the capability of playing an active role
Speaker 3: visa of the Russia and made all these other issues.
Speaker 2: Thank you so much coming in. This is just really
Speaker 2: well timed and we very fortunately have you Robert Man
Speaker 2: as always the former ambassador. Of course, this wonderful book
Speaker 2: on America's fiscal policy, which needs an update, Bob. We
Speaker 2: need an update on your book on our debt our
Speaker 2: deficit in our foreign policy. See to do that we'll
Speaker 2: try to get there in two thousand and twenty six.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch US Live
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Speaker 2: The Sun Arises in New York with Stuart Kaiser. He's
Speaker 2: out of US equity trading strategy. It's city. It is
Speaker 2: so confusing right now. I'm just going to ask the
Speaker 2: basic trading question, where's the bet? Where's the speculation? On
Speaker 2: Wall Street? Is the street lawn? Is the street short?
Speaker 2: Is the street missed this rally?
Speaker 5: I would say positioning probably seven out of ten, so
Speaker 5: that would put the street pretty long, Probably not quite
Speaker 5: as long as we were late February. In terms of
Speaker 5: missing the rally, you know, probably a little bit. You know,
Speaker 5: the first seventeen percent of the rally. I think we
Speaker 5: chatted you only needed to hold the market for sixty
Speaker 5: total minutes to get the first seventeen percent, so you know,
Speaker 5: you really needed to be invested at the right time.
Speaker 5: So yeah, I think we probably missed a little bit
Speaker 5: of the rally, But positioning is pretty full right now,
Speaker 5: I'd say seven out of ten.
Speaker 4: So what are people you know, the flow you see
Speaker 4: on your desk Stewart from institutional investors. Are they what
Speaker 4: are they buying these days? Are they buying the big
Speaker 4: tech stocks that seems to be the easy trade. Are
Speaker 4: they trying to be a little bit smarter, trying to
Speaker 4: find some value out there? What are they doing here?
Speaker 5: I'd say the core of the rally was definitely in
Speaker 5: that large cap growth at tech stock, without a doubt,
Speaker 5: a tremendous re engagement in the AI trade post earnings
Speaker 5: when those hyper scalers really doubled down on cap X
Speaker 5: and I think the theme that's really resonated recently is
Speaker 5: power generation. So it's these utilities that are incredibly levered
Speaker 5: to the AI trade. All of that said, the last
Speaker 5: two weeks, that theme has changed a little bit. We
Speaker 5: started to see kind of smaller cap stocks, some lower
Speaker 5: quality stocks, the shore getting squeezed a little bit. The
Speaker 5: Middle East tensions obviously stopped that kind of pro risk rotation,
Speaker 5: and we're kind of back into where we started starting.
Speaker 2: I just I've never seen I think I can say
Speaker 2: this the retail all in bed and the confusion of
Speaker 2: institutions sitting in the turret at City Group. What's the
Speaker 2: tone that you see among I'm gonna use this word
Speaker 2: with quotes pros. Yeah.
Speaker 5: Look, I think Tommy, the difference there is just holding period,
Speaker 5: you know, like the pod shops and a lot of
Speaker 5: institutional investors are so sensitive to you know, weekly returns,
Speaker 5: if not daily, that the volatility we saw kind of
Speaker 5: pulled them out of the market. Retail doesn't really suffer
Speaker 5: that that kind of marked to market risk, and they've
Speaker 5: been willing to kind of stay engaged in the markets.
Speaker 5: If you look at data, though, retail did reduce their
Speaker 5: their margin loans in their in their personal trade accounts
Speaker 5: by about ninety billion in April, So retail did pull
Speaker 5: back a little bit, but to your point, for the
Speaker 5: most part, they stayed invested, suffered the pain of the
Speaker 5: way down also caught, you know, the entire rebound.
Speaker 4: What are your hedge fund clients doing here are they
Speaker 4: Are they trying to be smart money and finding value
Speaker 4: outside of the just the market or they just playing SBX.
Speaker 5: Yeah, I think they're trying to They're trying to be
Speaker 5: smart about stock picking it. The hedge fund community, I
Speaker 5: think got hurt during the initial ten percent draw down
Speaker 5: February to mid March. They kind of got their risk
Speaker 5: right after that, and for that reason, we're actually able
Speaker 5: to play a little bit offense like in April going
Speaker 5: into May. But yeah, I mean it's it's initially it's
Speaker 5: just get my beta on, but but right now it.
Speaker 2: Is picking the right stocks. And now for the question
Speaker 2: of the day with Stuart Kaiser City Group, do hedge
Speaker 2: funds hedge anymore? Are they just as simple? Do they
Speaker 2: actually hedge or is it just basically guys running money
Speaker 2: for two and twenty they used to do it for
Speaker 2: eighty five.
Speaker 5: Beeps, Well, they do hedge, and I think after February
Speaker 5: the other they're gonna they're gonna be hedging a little bit,
Speaker 5: a little bit more aggressively. Look, I think if you
Speaker 5: look back at the beginning of the year, Deep Seek
Speaker 5: actually in hindsight, when that news came out, people think,
Speaker 5: oh my good this, this is horrible for a video,
Speaker 5: and then three weeks later we'd a new all time high,
Speaker 5: and I think it kind of gave people a false
Speaker 5: sense of security and perhaps to your point, on the
Speaker 5: hedges weren't on as as deeply as they needed to
Speaker 5: be in late February, but today they are after that
Speaker 5: drawnoun So we're gonna.
Speaker 4: Hear from the Fed tomorrow at two pm press conference
Speaker 4: two two thirty. Do your clients put trades on in
Speaker 4: front of that or around that or they do not
Speaker 4: do that anymore?
Speaker 5: Definitely do definitely do if you have if you have
Speaker 5: a view on you know, in this case, there's they're
Speaker 5: not going to cut rates, so you know that's not
Speaker 5: a trade. I think in this particular meeting two things
Speaker 5: will matter. One will be the economic projections we have.
Speaker 5: They haven't updated their economic projection since since the tariff news.
Speaker 5: And secondly, a little more qualitative is going to be
Speaker 5: what is the messaging from pal during the press conference?
Speaker 2: How devilish does he sound?
Speaker 5: So yeah, you'll you'll get directional views on equities, but
Speaker 5: you also get people trading the rates outlook, which in
Speaker 5: this case is not really relevant.
Speaker 2: I have no clue on this. The answer to this question,
Speaker 2: are there losses out there? Are we going to see
Speaker 2: into the end of the quarter? Oops, we really had
Speaker 2: a bad quarter in trading losses or our losses if
Speaker 2: you will.
Speaker 5: You know this quarter hopefully not just given the degree
Speaker 5: of the rally we've seen and volatility coming down. But
Speaker 5: you know, to your point, people make mistakes. It wouldn't
Speaker 5: surprise me if you did see some losses. But by
Speaker 5: and large, in the type of rally we've had, I think,
Speaker 5: you know, most institutional investors are feeling good, and to
Speaker 5: your point earlier, the regret is maybe not capturing enough
Speaker 5: of the rally as opposed to having lost money.
Speaker 2: Stuart Kaiser will be with us again soon ahead of
Speaker 2: US Equity Trading Strategy at the City Group.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 2: Someone that talks in does in the short term paper
Speaker 2: market is Jerome Schneider. The miracle of his performance at
Speaker 2: pinmpcoint I looked at your on your track record a
Speaker 2: while back, and you're just done a role. How are
Speaker 2: you creating? I love this alpha in the short term space.
Speaker 6: Yeah, alpha is one of those things that basically means
Speaker 6: how do you obviously create outperformance. And here's the interesting thing, Tom.
Speaker 6: You know, we're an environment right now, where as we
Speaker 6: just heard fixed income is very poignant, it's very topical.
Speaker 6: We're finding ourselves in a transition, perhaps of a market
Speaker 6: orientation which has been dominated by equities for years, and
Speaker 6: now the income generation that's been focused on more recently
Speaker 6: is quite real. Literally real is in terms of inflation
Speaker 6: adjuster returns. But more importantly, how people are thinking about,
Speaker 6: you know, surviving the volatility the marketplace, it's income and
Speaker 6: how they're doing that has been most importantly beginning to
Speaker 6: consider fixed income. And the first place they do that
Speaker 6: is cash. And so when you talk about return and
Speaker 6: alpha and relative returns, Tom, you know, we're really thinking
Speaker 6: about ways to actively manage your cash in this environment,
Speaker 6: given the uncertainty of outlook, given the opportunities to earn
Speaker 6: above market infleetion adjusted returns and doing so in a
Speaker 6: lower volatility output that doesn't necessarily underwrite equity risk. And
Speaker 6: that's really exciting right now for us in those cash markets.
Speaker 6: And doing so requires a bit of skill, a bit
Speaker 6: diversification obviously the backbone of PIMCO resources, but all that
Speaker 6: put together doesn't necessarily mean that you're doing and actively
Speaker 6: managing your cash if you're sitting simply in a money
Speaker 6: market fund. So the era of being in T bills,
Speaker 6: sweep accounts, you know, certificates, a deposit that we have
Speaker 6: seen for the past few years as rates moved higher
Speaker 6: is rapidly changing and where our job is really to
Speaker 6: sort of alert clients that they need to be more
Speaker 6: adaptive to the changes and subtleties in these markets.
Speaker 2: How short is short term for you.
Speaker 6: Guys, that's a great question, and you know we cater
Speaker 6: to a wide variety of clients at this point in time.
Speaker 6: Obviously retail investors are a good deal, but you know,
Speaker 6: family offices, central banks, et cetera. These are all clients
Speaker 6: who are focused on three things. One capital preservation. The
Speaker 6: second is liquidity management. And in that regard, how they
Speaker 6: think about it is they want relative returns based upon benchmarks,
Speaker 6: and those benchmarks are relatively money market funds. We're finding
Speaker 6: more and more clients are adapting and shifting their focus
Speaker 6: on moving out that space, finding ways to be more adaptive,
Speaker 6: and that requires flexibility, meaning not just buying teap and
Speaker 6: buying corporate bonds, et cetera. And that flexibility adds to
Speaker 6: adds to the potential for returns. And so that's really
Speaker 6: where we're finding more engagement with clients.
Speaker 2: So you didn't ask, you didn't answer the question. I mean,
Speaker 2: are they I can't wait for the Giants to play
Speaker 2: the Dodgers where Mookie Monsters going up against Devers with
Speaker 2: the Giants. I mean it's going to be painful to
Speaker 2: say the least. How far out is out? Is it out?
Speaker 2: To Paul's question, Yeah, out two years, out, two weeks,
Speaker 2: that's great.
Speaker 6: So ultimately is it's more than overnight. And so what
Speaker 6: we're saying is if you have a need for overnight liquidity,
Speaker 6: stay in your traditional money market funds. If your liquidity
Speaker 6: horizons a week, a month, a year, two years, think
Speaker 6: about segmenting your liquidity into additional tiers of cash. And
Speaker 6: that's the power that managing liquidity is incredibly powerful to
Speaker 6: earning additional turns of one hundred to two hundred basis
Speaker 6: points more than the cash benchmark rates.
Speaker 2: Jerom Schneider with US economist Short Term Paper Guy, is, well,
Speaker 2: is there a disinflationary vector? Like when you show up
Speaker 2: and you look at your three Bloomberg terminals the two
Speaker 2: Monroe traders you've got in front of you. Do you
Speaker 2: see disinflation?
Speaker 6: Yeah, you know on the short term and the short
Speaker 6: visible horizon, the answer is yes. Is it going to
Speaker 6: remain consistently lower?
Speaker 2: No?
Speaker 6: And I think that's really what we're saying is we're
Speaker 6: dealing with a FED and hey, you know, we're going
Speaker 6: to use the word transitory once again, but they're dealing
Speaker 6: with the transitory era of inflation moving perhaps a little
Speaker 6: bit stickier and growth becoming a little bit more subdued,
Speaker 6: and that basically lends itself to be a little bit
Speaker 6: more thoughtful about how they're going to sequence out these
Speaker 6: rate cuts for the remainder of the year and push
Speaker 6: some of these into twenty twenty six. So I hate
Speaker 6: to be myopic and sort of betting on the FED,
Speaker 6: because that's not necessarily how you make money in our
Speaker 6: short term markets, oddly speaking. But I would focus on
Speaker 6: the fact that in this environment, yes, these are comforting
Speaker 6: trends for the inflationary discussion, but there's reasons to think
Speaker 6: that perhaps some of these prices aren't being passed on
Speaker 6: to the consumer. In the near term, we might see
Speaker 6: some that stickiness evolve later on this year and into
Speaker 6: twenty twenty six. That just simply means that we're not
Speaker 6: really close to that two percent FED target for inflation
Speaker 6: policy that they want to embrace. And so you're going
Speaker 6: to hear perhaps a little bit more, a little bit
Speaker 6: more compassionate plea from the FED chair, but not necessarily
Speaker 6: one that is going to give in entirely.
Speaker 2: Jerrem Schneider, thank you so much. He's had a short
Speaker 2: term portfolio management.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
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Speaker 2: Joining us down in studio today for a really important
Speaker 2: conversation in the state the finance in America. Meredith Whitney
Speaker 2: is with a CEO at Meredith Whitney Advisory Group, but
Speaker 2: far more than a student on the banking American banking system.
Speaker 2: I'm dying to ask to get this private equity private credit.
Speaker 2: I don't think it was around twenty years ago. Did
Speaker 2: it come out of two thousand and seven? In two
Speaker 2: thousand and eight and what do you think of this
Speaker 2: beast right now?
Speaker 7: I think you know, as you know in the economy,
Speaker 7: there's there's a void, it gets filled. And there was
Speaker 7: an amazing void created for private credit and private equity,
Speaker 7: but particularly private credit because the banks were charged so
Speaker 7: much for loans and they derisk they had PTSD and
Speaker 7: it's been a bonanza. I mean, how I focus on it.
Speaker 7: I've watched firms like KKR and Apollo of course, right,
Speaker 7: but the private credit side, which has now come into
Speaker 7: the consumer market, which is where it really impacts me,
Speaker 7: I think is fascinating. And so you see consumer loan
Speaker 7: market being basically taken over by private creditor.
Speaker 2: Let me cut to the chase. Is the Whitney radar
Speaker 2: up on this?
Speaker 7: Wildly up? I mean, my MoMA, what's going on now?
Speaker 7: I think is so wildly exciting in terms of remember
Speaker 7: our product that called home equity. It's back with a vengeance,
Speaker 7: and private credit is basically taking off bank balance. So
Speaker 7: banks are still the eight hundred pound gorilla, but the
Speaker 7: new entrance there's an entrance figure technology that's already number
Speaker 7: eight in terms of home equity originations. And just to
Speaker 7: put into context, home equity home equity loans, home equity
Speaker 7: lines of credit declined for seventeen years in a row,
Speaker 7: and just this past summer they started to pick up.
Speaker 7: And this is fed data. And at the same time
Speaker 7: you started to see forward purchase agreements going out to
Speaker 7: consumer lene anyone who could could originate loans private credit
Speaker 7: wanted to do a forward purchase commitment. So over forty
Speaker 7: billion dollars for purchase commitments have been made since September. Wow,
Speaker 7: that's a staggering amount for an industry that's coming into
Speaker 7: And also the securitization market is going going bonker. So
Speaker 7: you know, my source on all of this is Bloomberg and.
Speaker 2: You know the god for that and God.
Speaker 7: You look at a company like Rocket, their home equity
Speaker 7: closed down. Mortgages are up forty seven percent last year.
Speaker 2: You know, let's go back to nineteen You're too young
Speaker 2: for this. There's nineteen eighty seven. You're too young for this.
Speaker 2: There was nineteen ninety eight. My radar is up because
Speaker 2: I didn't see those things coming. Is that how Meredith
Speaker 2: Whitney feels now, Well, I.
Speaker 7: Don't know that I saw the you know, Asian debt crisis,
Speaker 7: in Russian default in ninety seven, and I was in
Speaker 7: high school in eighty seven, so I it wasn't my
Speaker 7: radar screen. What what was very much on my radar
Speaker 7: screen was that the bond market was really impacted in
Speaker 7: ninety seven and the securitization market came to a grind
Speaker 7: ending halt. So today the capital at private credit is
Speaker 7: you know, quasi permanent capital. So if the securitization market closes,
Speaker 7: there's still going to be liquidity.
Speaker 4: What is your view of the US banking system today?
Speaker 4: It feels like, since you know, the Great Financial Crisis,
Speaker 4: maybe the best shape it's ever been in. Is that fair?
Speaker 7: Yeah, there's no doubt. I mean so the European banks
Speaker 7: are incredibly well capitalized. The ny've outperformed the US banks
Speaker 7: so far this year. It's a question of how the
Speaker 7: US banks grow. And I think the bet on the
Speaker 7: US banks will be if they get capital relief from
Speaker 7: regulatory reform. I think one of the things that you.
Speaker 4: Do, you think that will happen, because President Trouble is
Speaker 4: talking about that during a campaign.
Speaker 7: Yeah, I think it'll happen. So if you look at
Speaker 7: Michelle Bowman's recent comments and even her comments on the Hill,
Speaker 7: she wants to streamline regulation. Two thirds of banks of
Speaker 7: the of the twenty six banks, so let's take Bank
Speaker 7: of America and JP Morgan out of the equation. Two
Speaker 7: thirds of the twenty six banks over to hundred billion
Speaker 7: are considered unsatisfactory in terms of regulatory so they're in
Speaker 7: a penalty box. They can't do anything. She wants to
Speaker 7: change all of that.
Speaker 2: Meredith Whitney with us this morning in studio. David Gerr
Speaker 2: waiting by in BAMF. We'll get to mister Gerry here
Speaker 2: in a moment. Thrilled to have Meredith Whitney with us
Speaker 2: on our Commute Your commute across the country on YouTube.
Speaker 2: It's our new digital distribution. Just humbled by that. At
Speaker 2: Lisa's been doing some nice YouTube stories about the reach
Speaker 2: where on Bloomberg Podcasts. Subscribe to Bloomberg Podcasts at YouTube.
Speaker 2: The joy of Meredith Whitney research, folks, is there's the
Speaker 2: whole image thing in the decades of Meredith, the controversy,
Speaker 2: if you will, But the research is bulletproof. The written
Speaker 2: research is why Global Wall Street, whether they like it
Speaker 2: or not, agree with her or not, pay attention. You
Speaker 2: have a spectacular chart back to nineteen eighty of total
Speaker 2: mortgage debt, and it's all wrapped around seniors and how
Speaker 2: everybody in the financial business wants to get seniors' money.
Speaker 2: What's the state of seniors in America? Well?
Speaker 7: As You and many other shows and written talk about,
Speaker 7: they talk about the boomers being so wealthy, and that's
Speaker 7: just not true in terms of there's a segment of
Speaker 7: the boomers that's incredibly wealthy, but only one in ten
Speaker 7: boomers seniors can afford assisted living, and they're taking on
Speaker 7: debt at a more rapid rate than any other age cohort.
Speaker 7: So seniors own twenty five percent of total consumer debt outstanding.
Speaker 7: That's that's counterintuitive because you think as you get older,
Speaker 7: you get more conservative, you have less debt, So twenty
Speaker 7: five percent compares to twelve percent.
Speaker 2: In two thousand.
Speaker 7: So it's if the economy was great, why would why
Speaker 7: would seniors be taking on debt. One thing that seniors
Speaker 7: have is they're sitting on a tremendous amount of equity
Speaker 7: and they're starting to tap into that. So seniors have
Speaker 7: at least fourteen trillion of tappable equity that they can
Speaker 7: access that could make them be able to stay in
Speaker 7: their homes longer agent place, maybe get maybe get private
Speaker 7: home care, home health care. And they're doing it. So
Speaker 7: forty four percent of home equity outstanding is held by seniors.
Speaker 2: I mean, if you let mom and dad buy private
Speaker 2: credit or private Paul helped me, or your better private
Speaker 2: credit wants to go to retail? Right?
Speaker 4: Sure?
Speaker 2: Am I right on that you have a longer term horizon?
Speaker 4: I think so, because if I've got.
Speaker 7: Five years left in my life, I mean depending upon
Speaker 7: like you just I don't think I don't you want liquidity?
Speaker 2: Right?
Speaker 7: So look at the universities that are selling their their
Speaker 7: private credit and private equity at a discount, like they
Speaker 7: need liquidity, like if you you know, I think it's
Speaker 7: for for an older audience. It's a tough for Seal Meredith.
Speaker 4: Talk about the regional banks just for a moment, because
Speaker 4: when we had the Silicon Valley Bank, I think we
Speaker 4: all got smarter about the regional banking business and maybe
Speaker 4: the risk associated. Do we need four or five thousand
Speaker 4: regional banks in this country?
Speaker 7: I don't think so. But you need community banks, so
Speaker 7: you need a presence, but you need you know, four thousand.
Speaker 7: You're the Silicon Valley situation. Was hiding in plain site.
Speaker 7: So that's on the regulators right for not addressing it.
Speaker 2: I strongly agree with that.
Speaker 7: It's a g capital now hiding in plain site.
Speaker 2: Yeah, what's your single best buy right now? We got
Speaker 2: to go.
Speaker 7: I like rocket and so far.
Speaker 2: Okay, Meredith Whitney, thank you, thank you so much, greatly
Speaker 2: appreciate it. Don't be a stranger.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 1: with the Bloomberg Business app. You can also listen live
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Speaker 1: say Alexa, play Bloomberg eleven thirty in.
Speaker 2: The newspapers here with Lisa Matteo. Always important, Just just
Speaker 2: an incredible set of stories to embarrass us by Lisa.
Speaker 2: What do you have?
Speaker 4: Okay?
Speaker 8: So this Friday, it marks a special movie anniversary. It's
Speaker 8: the fiftieth anniversary of a movie that made people afraid
Speaker 8: to go in the water. Oh you know the theme
Speaker 8: song June twentieth, nineteen seventy five, That was the day
Speaker 8: Jaws was released. It basically invented the summer blockbuster. That's
Speaker 8: exactly what it was okay. So the Wall Street Journal
Speaker 8: has this inside look into the movie kind of some
Speaker 8: fun facts that you might not have known. For example,
Speaker 8: that theme song. Steven Spielberg actually didn't like it. He
Speaker 8: really what two keys?
Speaker 1: That's it?
Speaker 8: That's all you got for me?
Speaker 4: And he was.
Speaker 8: Twenty Spielerg was twenty six when he started working on
Speaker 8: the movie. It was a disaster production. There were equipment malfunctions.
Speaker 8: They thought the audience would laugh at these mechanical sharks.
Speaker 8: They had a tight three and a half million dollar budget,
Speaker 8: no star salaries. They were using people on you know,
Speaker 8: Martha's Vineyards for extras.
Speaker 2: Yeah.
Speaker 8: No, And remember, of course, what's the most famous line
Speaker 8: from that movie, right we're going to Yes, that was improvised.
Speaker 2: It was in scripted. So all these little tidbits.
Speaker 8: Now Martha's Vineyard, it's going to be packed. They have
Speaker 8: a lot of tourists going out there, you know, for
Speaker 8: the fiftieth anniversary, and they have NBC is showing it Friday.
Speaker 2: That's scared that people will know better than me and Paul.
Speaker 2: You lived the Southern Jersey shore, the southeast of Martha's Vineyard.
Speaker 2: When your kids are in the water, you're just always
Speaker 2: watching clothes, always watching about it.
Speaker 4: Next.
Speaker 2: Thank you so much for doing that. It did scare.
Speaker 8: Okay, So did you ever say, I know you haven't,
Speaker 8: but people listening, have you ever sat in the line
Speaker 8: at the Costco gas station? It's very yes, because they
Speaker 8: have the best prices, it's cheaper gases, but the lines
Speaker 8: are really long. So Business Insider has this look that
Speaker 8: says they're planning to build a standalone forty Bay gas
Speaker 8: station in the supperb of Los Angeles, about two miles
Speaker 8: from where it is. But the problem is because it's
Speaker 8: backing up into the parking lots and people are upset.
Speaker 8: They're like, we just want to get the food, we
Speaker 8: don't want the gas, and now you know, there's this
Speaker 8: big line and I can't get to the store. So
Speaker 8: they're saying gas is really a big business. It draws memberships,
Speaker 8: you know, it's part of the reason why I get
Speaker 8: the membership too, so you can get the cheaper gas.
Speaker 4: Do you get your gas set?
Speaker 8: I do every time I go, I wait in the
Speaker 8: long line.
Speaker 2: And how much cheap there?
Speaker 8: It could be probably about ten cents or so. Yeah, yeah, yeah,
Speaker 8: it's a big it's a big difference.
Speaker 2: And a good savings doing personal I get in the
Speaker 2: voice exactly. Can you charm us with one more? Lie?
Speaker 5: Yeah?
Speaker 2: Okay.
Speaker 8: The latest Nielsen data it shows a shift in how
Speaker 8: people watch TV. This is really interesting. So in May
Speaker 8: more Americans watch TV on st than on cable and
Speaker 8: network television combined, the first time it's happened for a
Speaker 8: full month in a row. So Nielsen began comparing these
Speaker 8: two right since twenty twenty one. Younger viewers always the
Speaker 8: firus to jump in. But here's the interesting point. Boomers
Speaker 8: are the big part of it. They're streaming more those
Speaker 8: over sixty five, particularly platforms that are free, for example YouTube.
Speaker 8: They are the fastest growing age group watching YouTube off
Speaker 8: of a TV set. Those are the boomers. They like
Speaker 8: other free streaming services like two b Roku, Pluto like.
Speaker 8: Those are some other ones, but the boomers. Big thank
Speaker 8: you to them for kind of helping boosting the streaming numbers.
Speaker 2: Lisa too, Thank you so much for the newspaper. It's
Speaker 2: very informative. There's aday we should do it twice to
Speaker 2: show you think.
Speaker 1: Yes, Lisa, No, this is the Bloomberg Surveillance podcast, available
Speaker 1: on Apple, Spotify and anywhere else you get your podcasts.
Speaker 1: Listen live each weekday, seven to ten am Easter and
Speaker 1: on Bloomberg dot Com, the iHeartRadio app, tune In, and
Speaker 1: the Bloomberg Business app. You can also watch us live
Speaker 1: every weekday on YouTube and always on the Bloomberg Terminal