WEBVTT - Markets Watch Middle East Tensions 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.000 us live on YouTube. 0:00:27.120 --> 0:00:30.720 The honor of going to Robert Harmatt's Ambassador. Harmat's of 0:00:30.760 --> 0:00:33.199 course a tour of duty at the State Department recently 0:00:33.680 --> 0:00:37.040 with Secretary Clinton and with Kissinger associates, where thrilled to 0:00:37.080 --> 0:00:40.279 could join us in the studios this morning. If we 0:00:40.440 --> 0:00:45.920 quote unquote take out a theocracy back to nineteen seventy nine, 0:00:46.760 --> 0:00:52.600 what's left of Persia after the Ayahtola. 0:00:53.720 --> 0:00:56.600 Well, the answer to the question is we don't know, 0:00:56.880 --> 0:00:59.720 and we don't have a very good record in the 0:00:59.760 --> 0:01:05.240 mid least of regime replacement with better regimes. If you 0:01:05.280 --> 0:01:07.600 look at all the regimes that have fallen in the 0:01:07.600 --> 0:01:11.800 Middle East over the years where we have been explicitly 0:01:11.920 --> 0:01:15.520 or implicitly involved, they have not necessarily been better, and 0:01:15.560 --> 0:01:18.800 it's very hard to predict what would happen Okay Iran. 0:01:18.920 --> 0:01:23.160 There's a strong nationalistic feeling, however in Iran, and there 0:01:23.200 --> 0:01:25.880 are a lot of people who may not support the regime. 0:01:26.240 --> 0:01:31.200 We believe Iran should have a nuclear power capability, and 0:01:31.360 --> 0:01:33.240 those people are going to still be on the game. 0:01:33.319 --> 0:01:35.360 We're gonna have Robert Hormank with us, and we're gonna 0:01:35.360 --> 0:01:37.680 come back with Ambassador Hormance here with all the news 0:01:37.680 --> 0:01:40.399 slow we've got again. We welcome you across the country. 0:01:41.040 --> 0:01:44.840 You're at Fletcher at Toughs outside Boston. You're in the 0:01:44.880 --> 0:01:48.880 classroom with Stravetas and you got admiralster vetas an ambassador 0:01:48.880 --> 0:01:51.200 of Horrormancing. You've got a piece of chalk in your hand. 0:01:51.800 --> 0:01:55.600 What are our aircraft carriers doing in the Middle East? 0:01:55.880 --> 0:01:59.240 On a diplomatic basis, not a Stravitas basis, but on 0:01:59.320 --> 0:02:02.440 a Horrmance basis, What does our show of force doing. 0:02:02.480 --> 0:02:05.720 They're projecting power, They're projecting the fact that the United 0:02:05.720 --> 0:02:10.400 States has not only the ships there, but the ability 0:02:10.440 --> 0:02:13.639 to use them. The question is how will we use them. 0:02:13.680 --> 0:02:16.519 We know that they have been used to a degree 0:02:16.880 --> 0:02:21.160 to shoot down Iranian drones aimed at Israel. The bigger 0:02:21.240 --> 0:02:25.280 question now going forward is a what is the United 0:02:25.320 --> 0:02:27.839 States going to do with respect to involvement in the war, 0:02:28.400 --> 0:02:32.920 And that would really depend less on those carriers and 0:02:33.000 --> 0:02:36.359 more on B two bombers. If the US is going 0:02:36.360 --> 0:02:38.639 to use bunker busters, those are the ones that would 0:02:38.680 --> 0:02:41.720 deliver it. And that decision has not yet been made. 0:02:42.960 --> 0:02:47.120 But I'm sure is what the Israelis are asking us 0:02:47.160 --> 0:02:50.040 to do, since they don't have the power or the 0:02:50.080 --> 0:02:55.520 ability to take out these underground enrichment facilities, and therefore 0:02:55.560 --> 0:02:59.200 they want us involved, and Trump course seems to be 0:02:59.240 --> 0:03:02.960 reluctant to do that, although of late seeming a little 0:03:03.040 --> 0:03:03.760 less reluctant. 0:03:05.200 --> 0:03:07.760 That's something that's even on the table. Do you think 0:03:08.000 --> 0:03:11.000 is the Are the Iranian people in a position that 0:03:11.639 --> 0:03:12.680 even consider. 0:03:12.320 --> 0:03:16.280 That at the moment, the Iranian people are, but they 0:03:16.320 --> 0:03:19.480 do not want foreigners to be the ones to do it. 0:03:19.760 --> 0:03:21.200 There's a history. 0:03:21.120 --> 0:03:25.200 In Iran of foreigners intervening with respect to say to 0:03:25.280 --> 0:03:28.120 most of that, they still remember that the United States 0:03:28.200 --> 0:03:31.040 was involved in the overthrow of mosedk and bringing back 0:03:32.000 --> 0:03:35.680 the Shah, the New Shaw or the old Shaw now 0:03:36.880 --> 0:03:39.880 and they do not like the idea of foreign intervention. 0:03:40.120 --> 0:03:42.520 So they're very proud people. As you pointed out, there 0:03:42.560 --> 0:03:46.960 an old three thousand plus year old empire and regime 0:03:47.080 --> 0:03:49.480 change induced. 0:03:49.040 --> 0:03:51.240 By we have no template here we do. 0:03:51.280 --> 0:03:53.000 You have no temp We have no template, We have 0:03:53.040 --> 0:03:55.800 no ability to change the regime. And the Resini and 0:03:55.800 --> 0:03:58.800 the Uranians would resist that. If Israel did it or 0:03:58.840 --> 0:04:02.280 the United States did it, they don't want foreigners to intervene. 0:04:02.640 --> 0:04:05.160 If they do it ourselves, it's a very different matter. 0:04:05.360 --> 0:04:07.160 If we do it, it's a very different matter. And 0:04:07.200 --> 0:04:07.880 a negative boy. 0:04:07.880 --> 0:04:09.120 I want to get this in now. We're going to 0:04:09.160 --> 0:04:11.600 come back with Ambassador Arvans in the state of our 0:04:11.600 --> 0:04:15.200 diplomacy in Washington. Maybe try to move a little bit 0:04:15.240 --> 0:04:19.159 away from the conflict at hand. Futures negative thirty folks, 0:04:19.240 --> 0:04:22.200 we have a seven thirty scheduled. The son of the 0:04:22.240 --> 0:04:25.839 former shah named the crown prince in nineteen sixty seven. 0:04:26.160 --> 0:04:29.920 I guess he's a crown prince in exile. But whatever, 0:04:30.839 --> 0:04:34.359 the family is gone. But is the remains there of 0:04:34.400 --> 0:04:39.599 a middle class, not a people that would seek out 0:04:39.640 --> 0:04:44.880 some form of aristocracy, but would westernize their government. I 0:04:44.920 --> 0:04:47.080 see no evidence of that. Well. 0:04:47.120 --> 0:04:49.280 I think a lot of younger people would like to 0:04:49.320 --> 0:04:52.720 see a more westernized government. I think a lot of 0:04:52.960 --> 0:04:57.120 older people might think bringing back the Shaw's son was 0:04:57.200 --> 0:04:59.279 a good thing. Don't forget They did the same thing 0:04:59.440 --> 0:05:02.240 in Spain. They when Franco left, they brought back the king. 0:05:03.120 --> 0:05:05.120 I don't think Iron's that way. There's a whole new 0:05:05.160 --> 0:05:09.240 generation that's pretty well forgotten about the Shaw, and the 0:05:09.279 --> 0:05:14.480 Shaw's son is actively urging that he be brought back 0:05:14.560 --> 0:05:18.600 to preserve continuity and bring stability. But whether you can 0:05:18.640 --> 0:05:21.880 get a large number of people to support that, predicting 0:05:22.000 --> 0:05:23.880 younger people, that's a big question. 0:05:24.000 --> 0:05:26.000 Well can you stay for the next section here? Yes, 0:05:26.560 --> 0:05:30.920 I gotta sell toothpaste. But please Bob Hormance with us today. 0:05:31.000 --> 0:05:33.800 What a joy to have Ambassador Hormance with us with 0:05:33.960 --> 0:05:37.440 just decades and decades of experience on this and speaking 0:05:37.480 --> 0:05:41.880 with authority of the generations, the decades of Persia as well. 0:05:42.279 --> 0:05:45.800 I have to go, Bob Horrmance with your not only 0:05:45.839 --> 0:05:49.320 your service to Secretary Clinton, but to Republicans over the years. 0:05:49.360 --> 0:05:52.280 You play both sides of the aisle within your diplomacy, 0:05:52.680 --> 0:05:58.000 working forever with Secretary Kissinger, with doctor Kissinger. What do 0:05:58.120 --> 0:06:02.480 you make of this State Department? Where are Alexander Hamilton? 0:06:03.040 --> 0:06:06.440 I think he's got three jobs, if not four jobs. 0:06:06.680 --> 0:06:10.360 How does the Secretary of State do that? Well? 0:06:10.440 --> 0:06:12.800 It is very difficult to do, and we've tried this 0:06:12.920 --> 0:06:16.600 experiment once and it did not work. With Kissinger, as 0:06:16.640 --> 0:06:19.600 you pointed out, he was Secretary of State and National 0:06:19.640 --> 0:06:23.440 Security Advisor at the same time. The roles are entirely different. 0:06:23.560 --> 0:06:27.120 Secretary of State represents the State Department. The National Security 0:06:27.120 --> 0:06:30.479 Advisor pulls all the agencies together and is supposed to 0:06:30.480 --> 0:06:34.080 be the intermediary for the Defense Department of the State Department, 0:06:34.279 --> 0:06:38.080 the CIA, and numerous others, and it is a very 0:06:38.120 --> 0:06:40.480 time consuming job. One is to take a longer term 0:06:40.520 --> 0:06:45.600 strategic view. The Secretary of State is more proactive and 0:06:45.680 --> 0:06:47.760 more immediate in the kinds of things he does, and 0:06:47.800 --> 0:06:48.160 he has. 0:06:48.080 --> 0:06:49.040 To travel a lot. 0:06:49.320 --> 0:06:54.240 So I think that Kissinger himself decided that it was 0:06:54.320 --> 0:06:58.440 not a sustainable thing to do, and he encouraged Brent 0:06:58.480 --> 0:07:01.800 Scocroft to take over the job of National Security Advisor 0:07:02.080 --> 0:07:04.480 while he was Secretary of State, and it worked out 0:07:04.600 --> 0:07:07.360 very well. So you need the two of them to collaborate, 0:07:07.760 --> 0:07:10.360 but you don't want them to be the same whatever 0:07:10.400 --> 0:07:11.440 you're too much. 0:07:11.360 --> 0:07:16.640 Whatever your politics. Paul to mention the caliber of a Scowcraft, 0:07:17.840 --> 0:07:20.480 of a Hormant's and the others compared to some of 0:07:20.520 --> 0:07:24.680 the talent we're dealing with today is just shocking. Bob. 0:07:24.720 --> 0:07:27.920 You represented the US as a President's advisor and summit 0:07:27.960 --> 0:07:31.200 planner otherwise known as the SHERPA at six Group of 0:07:31.240 --> 0:07:34.560 seven Economic summits. What's a G seven economic summit? What's 0:07:34.560 --> 0:07:37.080 the goal of these G seven meetings? 0:07:37.080 --> 0:07:41.840 Well, actually I started out as the first CHIRPA at 0:07:41.960 --> 0:07:44.320 Rombolier in nineteen seventy five. 0:07:44.440 --> 0:07:46.600 That's because he could pronounce it. It was the only 0:07:46.640 --> 0:07:47.520 one in Americas, and I. 0:07:49.400 --> 0:07:51.880 Spoke French and English, and their igguestion was in French 0:07:51.920 --> 0:07:57.480 and English. So and the French originally didn't want note 0:07:57.480 --> 0:08:01.600 takers or shurpas. Just when we want all these four 0:08:01.680 --> 0:08:04.240 year old when one of those twenty year olds running around, 0:08:04.280 --> 0:08:06.600 we want this to be a very high level thing 0:08:06.640 --> 0:08:09.280 with they wanted only the heads of state, not even 0:08:09.320 --> 0:08:13.520 the ministers. So the answer to your question is that 0:08:13.560 --> 0:08:18.760 they can't remake the world themselves, but they can fortify 0:08:18.960 --> 0:08:25.160 or refortify the level of common commitment to democracies, to freedom, 0:08:25.400 --> 0:08:29.040 to free markets, to the kind of common values that 0:08:29.120 --> 0:08:35.319 we share among the US, France, Britain, Germany, Japan, Canada 0:08:35.320 --> 0:08:39.640 and Italy. And that is what they do for the 0:08:39.679 --> 0:08:43.640 most part by having the meetings themselves. The second thing 0:08:43.679 --> 0:08:46.640 they can do is they can be the nucleus of 0:08:46.840 --> 0:08:50.360 new ideas. How do you improve the trading system? How 0:08:50.360 --> 0:08:52.520 do you deal with all these trade issues that are 0:08:52.800 --> 0:08:55.640 circulating around they were going to talk about and Mark Carney, 0:08:56.040 --> 0:08:59.520 who would work with me at Goldman, is very interested 0:08:59.559 --> 0:09:02.920 in AI, so he wanted to have conversations about how 0:09:02.920 --> 0:09:07.640 they can work together to develop standards on AID. The third, 0:09:07.679 --> 0:09:10.400 they wanted to strengthen, at least almost all of them 0:09:10.440 --> 0:09:16.840 except one. US wanted to strengthen sanctions against Russia, and 0:09:17.040 --> 0:09:19.960 Russia was actually a member for a period of time. 0:09:20.040 --> 0:09:24.480 And Trump started out this meeting complaining that Russia was 0:09:24.559 --> 0:09:27.040 kicked out and should be brought back. They were kicked 0:09:27.040 --> 0:09:32.480 out because they annexed Crimea and the notion that if 0:09:32.520 --> 0:09:36.880 they were in there now, they wouldn't have invaded Ukraine 0:09:37.320 --> 0:09:40.719 while they were in it. They annexed Crimea. So this 0:09:41.920 --> 0:09:45.240 and also how do you deal with a resurch in China? 0:09:45.559 --> 0:09:47.440 How do you deal with all the trade issues and 0:09:47.480 --> 0:09:48.000 other issues. 0:09:48.080 --> 0:09:49.840 That's a good point of that China is a whole 0:09:49.880 --> 0:09:50.800 overlay here that. 0:09:51.960 --> 0:09:54.840 The most of are European or Atlantic. But Japan's in 0:09:54.880 --> 0:09:58.000 there and China's affecting everyone. So how do we deal 0:09:58.040 --> 0:09:58.319 with them? 0:09:58.360 --> 0:10:01.160 Professor Romance, I've got a call see in the hormants 0:10:01.160 --> 0:10:03.400 one oh two. So Paul, we got to impress him 0:10:03.480 --> 0:10:06.720 right now. If you look at the Imperial War Museum 0:10:06.760 --> 0:10:12.319 in London, they've got that map of Lawrence of Arabia, Yes, 0:10:12.480 --> 0:10:15.400 with Sykes Pecot exactly. And the answer is to French 0:10:16.080 --> 0:10:19.959 go from Syria in some vicinity of Persia. The British 0:10:20.000 --> 0:10:23.120 have the Persian Gulf Uae. There's all that tension down 0:10:23.200 --> 0:10:27.160 there where in God's name of the French. In this debate, 0:10:27.600 --> 0:10:31.720 compared to what my childhood of Charles de Gaul dominant, 0:10:32.120 --> 0:10:36.040 I'm thunderstruck how tentative the French seemed to be. 0:10:36.280 --> 0:10:41.400 Am I right, well, I would have a somewhat different 0:10:41.800 --> 0:10:45.440 perspective on that. I actually totally agree with you. The 0:10:45.480 --> 0:10:47.920 Gaul made himself a presence. He was the head of 0:10:47.960 --> 0:10:52.920 the free French by force of will and his strong personality. 0:10:53.160 --> 0:10:56.240 I just got back from Paris, where I had conversations, 0:10:56.320 --> 0:10:59.600 from France, where I had conversations with the French and 0:10:59.640 --> 0:11:04.880 actually with the German national security people and Macron, who 0:11:04.920 --> 0:11:07.240 actually was a Sherpa when I was a sherpist, so 0:11:07.280 --> 0:11:11.679 we worked together very closely. He does want to strengthen 0:11:11.679 --> 0:11:14.480 the role of the G seven. After all, it was 0:11:14.480 --> 0:11:17.640 a creation of the French just started to saying, So 0:11:17.720 --> 0:11:20.040 he wants to strengthen and I think he will play 0:11:20.679 --> 0:11:24.079 a very effective role, as certainly will Mark Carney and 0:11:24.480 --> 0:11:28.680 Mertz the new German bundes Chancellor. So I think that 0:11:28.800 --> 0:11:32.840 you will see him playing a very active role in this, 0:11:32.960 --> 0:11:36.559 both because he believes in it, he is committed institutionally 0:11:36.600 --> 0:11:39.800 to it, and I think he wants to strengthen first 0:11:39.800 --> 0:11:45.280 of all Europe's unity amongst itselves and second to demonstrate 0:11:45.320 --> 0:11:49.160 to the United States that Europe actually does have an 0:11:49.200 --> 0:11:51.839 interest in and the capability of playing an active role 0:11:51.920 --> 0:11:54.720 visa of the Russia and made all these other issues. 0:11:55.120 --> 0:11:57.199 Thank you so much coming in. This is just really 0:11:57.200 --> 0:12:00.160 well timed and we very fortunately have you Robert Man 0:12:00.200 --> 0:12:03.280 as always the former ambassador. Of course, this wonderful book 0:12:03.280 --> 0:12:08.120 on America's fiscal policy, which needs an update, Bob. We 0:12:08.200 --> 0:12:11.400 need an update on your book on our debt our 0:12:11.480 --> 0:12:14.120 deficit in our foreign policy. See to do that we'll 0:12:14.160 --> 0:12:16.680 try to get there in two thousand and twenty six. 0:12:22.160 --> 0:12:25.720 You're listening to the Bloomberg Surveillance Podcast. Catch US Live 0:12:25.800 --> 0:12:28.960 weekday afternoons from seven to ten am Eastern. Listen on 0:12:29.040 --> 0:12:32.680 Applecarplay and Android Auto with the Bloomberg Business app, or 0:12:32.840 --> 0:12:34.360 watch US live on YouTube. 0:12:34.480 --> 0:12:37.360 The Sun Arises in New York with Stuart Kaiser. He's 0:12:37.360 --> 0:12:40.880 out of US equity trading strategy. It's city. It is 0:12:40.920 --> 0:12:43.200 so confusing right now. I'm just going to ask the 0:12:43.240 --> 0:12:48.360 basic trading question, where's the bet? Where's the speculation? On 0:12:48.400 --> 0:12:52.040 Wall Street? Is the street lawn? Is the street short? 0:12:52.480 --> 0:12:54.080 Is the street missed this rally? 0:12:54.640 --> 0:12:56.840 I would say positioning probably seven out of ten, so 0:12:56.880 --> 0:12:59.120 that would put the street pretty long, Probably not quite 0:12:59.120 --> 0:13:01.559 as long as we were late February. In terms of 0:13:01.600 --> 0:13:04.040 missing the rally, you know, probably a little bit. You know, 0:13:04.120 --> 0:13:06.040 the first seventeen percent of the rally. I think we 0:13:06.120 --> 0:13:08.160 chatted you only needed to hold the market for sixty 0:13:08.200 --> 0:13:11.120 total minutes to get the first seventeen percent, so you know, 0:13:11.160 --> 0:13:13.240 you really needed to be invested at the right time. 0:13:13.280 --> 0:13:15.080 So yeah, I think we probably missed a little bit 0:13:15.120 --> 0:13:17.600 of the rally, But positioning is pretty full right now, 0:13:17.640 --> 0:13:18.600 I'd say seven out of ten. 0:13:18.760 --> 0:13:22.120 So what are people you know, the flow you see 0:13:22.120 --> 0:13:24.840 on your desk Stewart from institutional investors. Are they what 0:13:24.880 --> 0:13:26.720 are they buying these days? Are they buying the big 0:13:26.840 --> 0:13:29.440 tech stocks that seems to be the easy trade. Are 0:13:29.440 --> 0:13:31.400 they trying to be a little bit smarter, trying to 0:13:31.400 --> 0:13:33.320 find some value out there? What are they doing here? 0:13:33.640 --> 0:13:35.480 I'd say the core of the rally was definitely in 0:13:35.520 --> 0:13:38.520 that large cap growth at tech stock, without a doubt, 0:13:39.280 --> 0:13:42.560 a tremendous re engagement in the AI trade post earnings 0:13:42.559 --> 0:13:44.960 when those hyper scalers really doubled down on cap X 0:13:45.200 --> 0:13:47.400 and I think the theme that's really resonated recently is 0:13:47.440 --> 0:13:50.800 power generation. So it's these utilities that are incredibly levered 0:13:50.840 --> 0:13:53.600 to the AI trade. All of that said, the last 0:13:53.640 --> 0:13:56.040 two weeks, that theme has changed a little bit. We 0:13:56.120 --> 0:13:58.680 started to see kind of smaller cap stocks, some lower 0:13:58.800 --> 0:14:02.480 quality stocks, the shore getting squeezed a little bit. The 0:14:02.520 --> 0:14:06.360 Middle East tensions obviously stopped that kind of pro risk rotation, 0:14:06.480 --> 0:14:09.160 and we're kind of back into where we started starting. 0:14:09.640 --> 0:14:12.640 I just I've never seen I think I can say 0:14:12.640 --> 0:14:17.440 this the retail all in bed and the confusion of 0:14:17.559 --> 0:14:22.600 institutions sitting in the turret at City Group. What's the 0:14:22.760 --> 0:14:26.120 tone that you see among I'm gonna use this word 0:14:26.160 --> 0:14:28.400 with quotes pros. Yeah. 0:14:28.400 --> 0:14:30.920 Look, I think Tommy, the difference there is just holding period, 0:14:31.000 --> 0:14:33.080 you know, like the pod shops and a lot of 0:14:33.080 --> 0:14:36.440 institutional investors are so sensitive to you know, weekly returns, 0:14:36.480 --> 0:14:39.360 if not daily, that the volatility we saw kind of 0:14:39.360 --> 0:14:41.880 pulled them out of the market. Retail doesn't really suffer 0:14:41.920 --> 0:14:43.600 that that kind of marked to market risk, and they've 0:14:43.640 --> 0:14:45.640 been willing to kind of stay engaged in the markets. 0:14:45.760 --> 0:14:48.920 If you look at data, though, retail did reduce their 0:14:48.960 --> 0:14:51.400 their margin loans in their in their personal trade accounts 0:14:51.400 --> 0:14:54.240 by about ninety billion in April, So retail did pull 0:14:54.320 --> 0:14:56.360 back a little bit, but to your point, for the 0:14:56.400 --> 0:14:59.400 most part, they stayed invested, suffered the pain of the 0:14:59.440 --> 0:15:02.040 way down also caught, you know, the entire rebound. 0:15:02.480 --> 0:15:04.560 What are your hedge fund clients doing here are they 0:15:05.520 --> 0:15:08.520 Are they trying to be smart money and finding value 0:15:08.560 --> 0:15:12.800 outside of the just the market or they just playing SBX. 0:15:13.160 --> 0:15:15.280 Yeah, I think they're trying to They're trying to be 0:15:15.280 --> 0:15:17.360 smart about stock picking it. The hedge fund community, I 0:15:17.400 --> 0:15:20.000 think got hurt during the initial ten percent draw down 0:15:20.040 --> 0:15:22.320 February to mid March. They kind of got their risk 0:15:22.440 --> 0:15:24.800 right after that, and for that reason, we're actually able 0:15:24.800 --> 0:15:27.320 to play a little bit offense like in April going 0:15:27.360 --> 0:15:30.240 into May. But yeah, I mean it's it's initially it's 0:15:30.480 --> 0:15:32.400 just get my beta on, but but right now it. 0:15:32.520 --> 0:15:34.840 Is picking the right stocks. And now for the question 0:15:34.960 --> 0:15:38.280 of the day with Stuart Kaiser City Group, do hedge 0:15:38.280 --> 0:15:41.960 funds hedge anymore? Are they just as simple? Do they 0:15:42.000 --> 0:15:45.920 actually hedge or is it just basically guys running money 0:15:45.920 --> 0:15:47.920 for two and twenty they used to do it for 0:15:47.960 --> 0:15:48.720 eighty five. 0:15:48.520 --> 0:15:51.800 Beeps, Well, they do hedge, and I think after February 0:15:51.840 --> 0:15:53.760 the other they're gonna they're gonna be hedging a little bit, 0:15:54.320 --> 0:15:56.720 a little bit more aggressively. Look, I think if you 0:15:56.720 --> 0:15:58.440 look back at the beginning of the year, Deep Seek 0:15:58.520 --> 0:16:01.560 actually in hindsight, when that news came out, people think, 0:16:01.560 --> 0:16:03.440 oh my good this, this is horrible for a video, 0:16:03.680 --> 0:16:05.880 and then three weeks later we'd a new all time high, 0:16:06.000 --> 0:16:07.880 and I think it kind of gave people a false 0:16:07.920 --> 0:16:10.360 sense of security and perhaps to your point, on the 0:16:10.360 --> 0:16:13.000 hedges weren't on as as deeply as they needed to 0:16:13.000 --> 0:16:15.520 be in late February, but today they are after that 0:16:15.600 --> 0:16:17.160 drawnoun So we're gonna. 0:16:16.960 --> 0:16:20.240 Hear from the Fed tomorrow at two pm press conference 0:16:20.240 --> 0:16:23.440 two two thirty. Do your clients put trades on in 0:16:23.480 --> 0:16:25.640 front of that or around that or they do not 0:16:25.720 --> 0:16:26.320 do that anymore? 0:16:27.000 --> 0:16:28.680 Definitely do definitely do if you have if you have 0:16:28.720 --> 0:16:31.280 a view on you know, in this case, there's they're 0:16:31.280 --> 0:16:32.920 not going to cut rates, so you know that's not 0:16:32.960 --> 0:16:35.560 a trade. I think in this particular meeting two things 0:16:35.560 --> 0:16:38.080 will matter. One will be the economic projections we have. 0:16:38.160 --> 0:16:41.520 They haven't updated their economic projection since since the tariff news. 0:16:41.720 --> 0:16:44.320 And secondly, a little more qualitative is going to be 0:16:44.320 --> 0:16:46.640 what is the messaging from pal during the press conference? 0:16:46.680 --> 0:16:47.720 How devilish does he sound? 0:16:47.800 --> 0:16:51.160 So yeah, you'll you'll get directional views on equities, but 0:16:51.200 --> 0:16:53.480 you also get people trading the rates outlook, which in 0:16:53.520 --> 0:16:54.760 this case is not really relevant. 0:16:54.800 --> 0:16:57.200 I have no clue on this. The answer to this question, 0:16:57.440 --> 0:17:00.120 are there losses out there? Are we going to see 0:17:00.600 --> 0:17:03.160 into the end of the quarter? Oops, we really had 0:17:03.160 --> 0:17:06.960 a bad quarter in trading losses or our losses if 0:17:07.000 --> 0:17:07.600 you will. 0:17:07.840 --> 0:17:10.760 You know this quarter hopefully not just given the degree 0:17:10.760 --> 0:17:13.240 of the rally we've seen and volatility coming down. But 0:17:13.320 --> 0:17:15.959 you know, to your point, people make mistakes. It wouldn't 0:17:15.960 --> 0:17:17.760 surprise me if you did see some losses. But by 0:17:17.800 --> 0:17:20.360 and large, in the type of rally we've had, I think, 0:17:20.440 --> 0:17:23.080 you know, most institutional investors are feeling good, and to 0:17:23.119 --> 0:17:26.160 your point earlier, the regret is maybe not capturing enough 0:17:26.200 --> 0:17:28.399 of the rally as opposed to having lost money. 0:17:28.520 --> 0:17:30.840 Stuart Kaiser will be with us again soon ahead of 0:17:30.920 --> 0:17:34.920 US Equity Trading Strategy at the City Group. 0:17:35.080 --> 0:17:38.960 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:17:39.000 --> 0:17:42.280 starting at seven am Eastern on Applecarplay and Android Auto 0:17:42.400 --> 0:17:45.400 with the Bloomberg Business app. You can also listen live 0:17:45.440 --> 0:17:49.040 on Amazon Alexa from our flagship New York station, Just 0:17:49.080 --> 0:17:51.520 say Alexa Play Bloomberg eleven thirty. 0:17:51.720 --> 0:17:55.199 Someone that talks in does in the short term paper 0:17:55.200 --> 0:17:59.040 market is Jerome Schneider. The miracle of his performance at 0:17:59.080 --> 0:18:01.439 pinmpcoint I looked at your on your track record a 0:18:01.480 --> 0:18:03.520 while back, and you're just done a role. How are 0:18:03.520 --> 0:18:07.600 you creating? I love this alpha in the short term space. 0:18:07.840 --> 0:18:10.720 Yeah, alpha is one of those things that basically means 0:18:10.720 --> 0:18:14.960 how do you obviously create outperformance. And here's the interesting thing, Tom. 0:18:15.119 --> 0:18:18.439 You know, we're an environment right now, where as we 0:18:18.560 --> 0:18:21.560 just heard fixed income is very poignant, it's very topical. 0:18:21.880 --> 0:18:24.600 We're finding ourselves in a transition, perhaps of a market 0:18:24.600 --> 0:18:28.199 orientation which has been dominated by equities for years, and 0:18:28.240 --> 0:18:32.280 now the income generation that's been focused on more recently 0:18:32.560 --> 0:18:35.680 is quite real. Literally real is in terms of inflation 0:18:35.720 --> 0:18:38.879 adjuster returns. But more importantly, how people are thinking about, 0:18:39.040 --> 0:18:42.040 you know, surviving the volatility the marketplace, it's income and 0:18:42.080 --> 0:18:45.359 how they're doing that has been most importantly beginning to 0:18:45.359 --> 0:18:47.439 consider fixed income. And the first place they do that 0:18:47.560 --> 0:18:50.280 is cash. And so when you talk about return and 0:18:50.880 --> 0:18:54.840 alpha and relative returns, Tom, you know, we're really thinking 0:18:54.880 --> 0:18:57.600 about ways to actively manage your cash in this environment, 0:18:57.640 --> 0:19:01.359 given the uncertainty of outlook, given the opportunities to earn 0:19:01.800 --> 0:19:05.800 above market infleetion adjusted returns and doing so in a 0:19:05.840 --> 0:19:09.960 lower volatility output that doesn't necessarily underwrite equity risk. And 0:19:10.160 --> 0:19:13.320 that's really exciting right now for us in those cash markets. 0:19:13.359 --> 0:19:15.679 And doing so requires a bit of skill, a bit 0:19:15.760 --> 0:19:19.439 diversification obviously the backbone of PIMCO resources, but all that 0:19:19.480 --> 0:19:23.080 put together doesn't necessarily mean that you're doing and actively 0:19:23.119 --> 0:19:25.240 managing your cash if you're sitting simply in a money 0:19:25.240 --> 0:19:27.840 market fund. So the era of being in T bills, 0:19:28.359 --> 0:19:30.960 sweep accounts, you know, certificates, a deposit that we have 0:19:31.000 --> 0:19:33.280 seen for the past few years as rates moved higher 0:19:33.760 --> 0:19:37.119 is rapidly changing and where our job is really to 0:19:37.200 --> 0:19:39.719 sort of alert clients that they need to be more 0:19:39.760 --> 0:19:42.720 adaptive to the changes and subtleties in these markets. 0:19:43.280 --> 0:19:45.080 How short is short term for you. 0:19:45.080 --> 0:19:47.560 Guys, that's a great question, and you know we cater 0:19:47.640 --> 0:19:49.960 to a wide variety of clients at this point in time. 0:19:50.280 --> 0:19:52.679 Obviously retail investors are a good deal, but you know, 0:19:52.920 --> 0:19:56.520 family offices, central banks, et cetera. These are all clients 0:19:56.560 --> 0:19:59.359 who are focused on three things. One capital preservation. The 0:19:59.400 --> 0:20:02.760 second is liquidity management. And in that regard, how they 0:20:02.760 --> 0:20:06.440 think about it is they want relative returns based upon benchmarks, 0:20:06.440 --> 0:20:09.679 and those benchmarks are relatively money market funds. We're finding 0:20:09.680 --> 0:20:12.440 more and more clients are adapting and shifting their focus 0:20:12.720 --> 0:20:15.479 on moving out that space, finding ways to be more adaptive, 0:20:15.520 --> 0:20:18.719 and that requires flexibility, meaning not just buying teap and 0:20:18.720 --> 0:20:21.919 buying corporate bonds, et cetera. And that flexibility adds to 0:20:22.080 --> 0:20:25.160 adds to the potential for returns. And so that's really 0:20:25.200 --> 0:20:27.520 where we're finding more engagement with clients. 0:20:27.520 --> 0:20:30.360 So you didn't ask, you didn't answer the question. I mean, 0:20:30.480 --> 0:20:33.480 are they I can't wait for the Giants to play 0:20:33.480 --> 0:20:37.520 the Dodgers where Mookie Monsters going up against Devers with 0:20:37.640 --> 0:20:39.760 the Giants. I mean it's going to be painful to 0:20:39.840 --> 0:20:42.720 say the least. How far out is out? Is it out? 0:20:42.880 --> 0:20:46.240 To Paul's question, Yeah, out two years, out, two weeks, 0:20:46.640 --> 0:20:47.120 that's great. 0:20:47.160 --> 0:20:50.080 So ultimately is it's more than overnight. And so what 0:20:50.119 --> 0:20:53.120 we're saying is if you have a need for overnight liquidity, 0:20:53.160 --> 0:20:55.640 stay in your traditional money market funds. If your liquidity 0:20:55.680 --> 0:20:58.440 horizons a week, a month, a year, two years, think 0:20:58.480 --> 0:21:02.680 about segmenting your liquidity into additional tiers of cash. And 0:21:02.720 --> 0:21:06.919 that's the power that managing liquidity is incredibly powerful to 0:21:07.000 --> 0:21:09.280 earning additional turns of one hundred to two hundred basis 0:21:09.280 --> 0:21:11.280 points more than the cash benchmark rates. 0:21:11.359 --> 0:21:16.439 Jerom Schneider with US economist Short Term Paper Guy, is, well, 0:21:16.560 --> 0:21:19.439 is there a disinflationary vector? Like when you show up 0:21:19.440 --> 0:21:22.120 and you look at your three Bloomberg terminals the two 0:21:22.240 --> 0:21:24.480 Monroe traders you've got in front of you. Do you 0:21:24.520 --> 0:21:25.440 see disinflation? 0:21:25.680 --> 0:21:27.560