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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 2: Joining us now.

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Speaker 3: Francis Donald, Chief Economist RBC, the Royal Bank of Canada

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Speaker 3: and just outstanding work on the equation that is gross

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Speaker 3: domestic product. I'm fascinated by the Coca Cola earnings where

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Speaker 3: they basically had no unit growth and it seemed like

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Speaker 3: good organic revenue growth was all pricing power. Is pricing

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Speaker 3: power going to evaporate? Is nominal GDP evaporates.

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Speaker 4: Pricing power is already becoming more difficult, and that's because

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Speaker 4: the general state of the consumers becoming more difficult, and

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Speaker 4: most importantly, the general state of the low and middle

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Speaker 4: income consumers is becoming more difficult. Very little excess savings

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Speaker 4: left much less real wage growth, especially because that group

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Speaker 4: is spending more on the higher inflation areas like food

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Speaker 4: and energy, and those low and middle income households just

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Speaker 4: haven't had that boom coming from stock market gains. They

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Speaker 4: have less than five percent of their portfolio there, So

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Speaker 4: back two years ago you could have pricing power because

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Speaker 4: there was money to go through. That money is evaporating,

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Speaker 4: and the spread between the haves and the have nots

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Speaker 4: is becoming much larger, depending on what you sell and

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Speaker 4: to who. That's either good news or bad news.

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Speaker 5: Well, the federal government seems to be responding. They're cutting

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Speaker 5: interest rates. From a fiscal perspective, lots of spending plans

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Speaker 5: out there from the government. Is that enough to sustain

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Speaker 5: to lift this economy, including I know you're bringing back

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Speaker 5: the K shaped economy discussion for the folks that have

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Speaker 5: not been participating. Is that enough to help those folks?

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Speaker 3: Do you think?

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Speaker 4: Well, it depends where it goes. And I can't believe

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Speaker 4: we don't talk every single day about federal spending. It

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Speaker 4: has been so extraordinarily disruptive to every single economic model

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Speaker 4: that exists, and it has changed the way that we

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Speaker 4: have to evaluate the cycle. But problematically, we see these

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Speaker 4: deficits rise in spending increase, but net interest spending is

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Speaker 4: now larger than defense spending. And if we're spending government

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Speaker 4: money and it's going to pay treasury holders outside of

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Speaker 4: the United States, that's not helping everyday Americans. It's not

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Speaker 4: boosting growth, and it's not actually inflationary either. So it

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Speaker 4: isn't just about the amount of government spending, which is

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Speaker 4: just chaotic in terms of how it's changing the way

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Speaker 4: the economy operates. It's where it's going, and defense, net

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Speaker 4: interest spending, even entitlements is not going to be the

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Speaker 4: juice that fuels this extended, continuous, resilient aggregate economy.

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Speaker 5: I agree with a concern about the federal debts and

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Speaker 5: deficits and all that, but a lot of folks will

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Speaker 5: come back to me and say, hey, interest rates are

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Speaker 5: still relatively low. People are buying our debt like crazy.

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Speaker 5: Don't worry about it.

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Speaker 4: Well, I don't worry about it so much from the oh,

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Speaker 4: there's going to be a bond market collapse moment. I mean,

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Speaker 4: the risk of that just empirically has to be higher

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Speaker 4: now than it was when we didn't have mere record

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Speaker 4: levels of debt to GDP. What concerns me is that

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Speaker 4: at a certain point we're going to hit up against

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Speaker 4: limits and if the main support, the main pillar that

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Speaker 4: is driving the so called soft landing is government spending,

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Speaker 4: sometime in the next four years, we're going to have

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Speaker 4: to take a step back. And if the FED is

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Speaker 4: not focusing on this and the fact that they actually

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Speaker 4: probably can't keep rates super high it will lower future

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Speaker 4: government spending, then I would do really.

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Speaker 2: But are they two data dependent?

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Speaker 3: You and I shared a stage and I think it

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Speaker 3: was Toronto, I can't remember, but you know, the bottom line,

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Speaker 3: Francis Donald is we're addicted to the parlor game. We're

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Speaker 3: addicted to data dependency. And all I can say, Paul,

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Speaker 3: that hasn't worked out.

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Speaker 4: No, it hasn't aproach. We cannot be month to month

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Speaker 4: data dependent. And I know the market runs off of this,

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Speaker 4: but there's a couple reasons why. First, we have huge

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Speaker 4: election uncertainty. It has paused business decision. We see this

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Speaker 4: in surveys, small business surveys, ism manufacturing companies are saying

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Speaker 4: we're just holding off, so that's a pause. We have

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Speaker 4: really low response rates on a range of our economic data.

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Speaker 4: And then related we have sizeable revisions. So we're seeing

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Speaker 4: these sizeable market moves, perhaps even policy decisions that are

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Speaker 4: coming off of month to month movement. We are in

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Speaker 4: the dark, or at least the moment of the day

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Speaker 4: where the dusk comes in we cannot see fully, So

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Speaker 4: the Federal Reserve is going to have to focus on

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Speaker 4: that six to twelve month view, and what they're likely

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Speaker 4: seeing is the unemployment rate has been creeping higher since

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Speaker 4: January of twenty twenty three. Inflation looks relatively contained, Inflation

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Speaker 4: expectations are all right, low income, medium income consumers expressing

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Speaker 4: concern about the labor market. They have to calibrate policy

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Speaker 4: back to that more neutral level. And I hope they're

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Speaker 4: not looking at month to month data and that they're

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Speaker 4: looking more at three to six month trends. If they are,

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Speaker 4: it's a continued easing cycle, at least down to four percent,

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Speaker 4: maybe beyond that towards.

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Speaker 5: Three what's your view of the US economy here? Is

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Speaker 5: it resilient or do we really still have to think

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Speaker 5: about a recession?

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Speaker 4: Can I be bold and ask which US economy? Because

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Speaker 4: I'm having trouble just thinking about one US economy right now.

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Speaker 4: If I aggregate all of the parts, real difficult to

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Speaker 4: get two quarters of negative GDP, in part because of

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Speaker 4: how much government spending is coming through. So I can't

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Speaker 4: be in the recession camp because that's not formally a recession.

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Speaker 4: But if I look at manufacturing. Manufacturing has been contracting

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Speaker 4: in the US since twenty eighteen. Industrial production is smaller.

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Speaker 4: Existing home sales are thirty percent below where they were

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Speaker 4: before COVID. They're at the level they were in the

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Speaker 4: Great Financial Crisis. Small businesses, who employ eighty percent of

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Speaker 4: the population are the most negative they've been since the

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Speaker 4: Great Financial Crisis. So on aggregate things look good, supported

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Speaker 4: by a really strong high end and CEOs, but the

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Speaker 4: rest of the economy is nice.

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Speaker 2: Here Francis, we don't care.

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Speaker 3: All we care is that the Rangers scored with fifty

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Speaker 3: four seconds and that Brazinski scored.

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Speaker 2: At two oh five.

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Speaker 3: That clocked years in my Montreal Canadians seven to two.

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Speaker 3: It's another difficult year, isn't it. It's a rebuilding year.

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Speaker 4: A rebuilding year is a good way to think about it.

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Speaker 4: I would agree with.

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Speaker 5: You, Tom.

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Speaker 3: You should see the RBC tickets at the forum. Oh

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Speaker 3: it's why she went to RBC.

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Speaker 4: Yeah, I couldn't possibly comment, Francis.

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Speaker 2: Thank you so much with RBC.

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Speaker 3: I can't say enough about her at research get that

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Speaker 3: from the Royal Bank of Canada RBC. At Capital Markets,

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Speaker 3: we protect the copyright of all of our guests.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch US Live

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Speaker 1: weekday afternoons from seven to ten am. Easter Listen on

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Speaker 1: Apple car Play and androyd Otto with a Bloomberg Business app,

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Speaker 1: or watch US Live on YouTube.

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Speaker 3: David Kelly joins Chief Global Strategist at JP Morgan Asset

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Speaker 3: Manage you with decades of experience, David, eighteen months ago,

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Speaker 3: you established a responsible vector that we would see non

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Speaker 3: farm payrolls come down various employment statistics in the emotion

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Speaker 3: of maybe a negative non farm payrolls.

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Speaker 2: We didn't get there.

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Speaker 3: But can we revisit this and say we're in the

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Speaker 3: process of worser labor statistics.

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Speaker 6: Well, the problem, Tom is you've got a very good

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Speaker 6: memory for bad forecasts. There was always a risk that

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Speaker 6: we would see a negative employment number because really we've

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Speaker 6: seen very great deal volatility in payrolls, and so asian

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Speaker 6: months ago we did see some weakness. We still never thought.

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Speaker 6: We didn't quite call for recession last year. We're still

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Speaker 6: calling for a recession right now, and we could you know,

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Speaker 6: the payroll report we get at the end of next

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Speaker 6: week that's going to be also because of weather issues also,

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Speaker 6: But to me. The most important thing, please, is it

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Speaker 6: next week we're going to publish a GDP number of

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Speaker 6: about three percent or maybe more than three percent in

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Speaker 6: annualized growth in the third quarter, following a quarter of

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Speaker 6: three percent growth annualized in the second quarter. And that

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Speaker 6: tells me the comm's got plenty momentum, and so an

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Speaker 6: average should still generate positive player growth. So I'm a

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Speaker 6: little bit more optimistic than that old headline would suggest.

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Speaker 2: This is I love about the show, Paul, the classics

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Speaker 2: that come out. It's a tough business.

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Speaker 3: You got to make a call, and David made a

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Speaker 3: call in first fire. I'm concerned out the X axis.

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Speaker 3: He's going to be right at some point. But just

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Speaker 3: three percent GDP. No one saw this coming.

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Speaker 5: No one saw this coming. So David, let's think about this.

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Speaker 5: I mean, when I you know, JP Morgan asset Management,

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Speaker 5: nobody more global than you. Guys, where do you see

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Speaker 5: kind of the best opportunities here? When you sit down

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Speaker 5: with your clients and you sit down on your portfolio managers,

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Speaker 5: where you seeing the best opportunities globally here?

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Speaker 6: Well, I think it's I think this is a time

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Speaker 6: when people all need to think about protecting the down side.

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Speaker 6: And it's not because of any concern about the economy,

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Speaker 6: global economy or the US economy. I mean, and you

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Speaker 6: know there are global economies mixed. The US economy is

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Speaker 6: doing pretty pretty well, but valuations are very high, so

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Speaker 6: you know, I think the opportunity is in diversifying into

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Speaker 6: areas that are not overly expensive right now.

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Speaker 2: But really that is more.

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Speaker 6: It's also much about finding another way to goose out returns,

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Speaker 6: which honestly have been great. It's really a way of

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Speaker 6: protecting portfolios of this stage by making sure you're not

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Speaker 6: too concentrated after such an extraordinary bill market of the

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Speaker 6: last two years.

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Speaker 5: What needs what do we need out there to sustain

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Speaker 5: this bull market? I've got it fit a reserve that

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Speaker 5: is cutting rates on U sure to what degree or what?

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Speaker 5: You know, how quickly? I think I've got a pretty

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Speaker 5: decent earnings outlook here, at least here in the US.

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Speaker 5: Is that enough to continue to push risk assets higher?

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Speaker 2: Not quite.

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Speaker 6: I think we need a relatively benign outcome from the

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Speaker 6: election because there is a danger. I mean, obviously it's

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Speaker 6: greater potential for a Republican sweep than Democratic sweep, but

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Speaker 6: a sweep in either side would mean more aggressive fiscal policy,

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Speaker 6: which could push up long term interustrates, and already seeing

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Speaker 6: that to some extent, in as former President Trump's polling

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Speaker 6: numbers have improved slightly, we've seen long term rates go

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Speaker 6: up because there's the thought that if you have a

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Speaker 6: Republican sweep, you're going to have a much more aggressive

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Speaker 6: fiscal policy along with the trade war, which could push

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Speaker 6: up higher could cause higher inflation. So I think there

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Speaker 6: is a danger of a policy mistake, not so much

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Speaker 6: of the Federal Reserve, but from the federal government here,

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Speaker 6: and that I think is an investgy to think about.

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Speaker 3: Why did we all get three percent GDP wrong?

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Speaker 2: What of Why will C plus.

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Speaker 3: I plus G plus net exports? What got us from

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Speaker 3: two point x out to a legitimate six months of

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Speaker 3: three percent?

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Speaker 6: There are two things going on here. The most important

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Speaker 6: is consumer spending. Consumer spending sixty eight percent of demand.

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Speaker 6: We think that it's going to go up by more

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Speaker 6: than three percent in the third quarter, maybe three and

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Speaker 6: a half percent. What's going on is two things. One,

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Speaker 6: the wealthy are doing extremely well here. We've seen a

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Speaker 6: fifty point one trillion dollar increase in net worth in

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Speaker 6: the last five years, just explosive gains in wealth, both

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Speaker 6: in terms of housing wealth and stock market wealth, and

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Speaker 6: that is fueling the spending of upper income consumers. And second,

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Speaker 6: we've actually seen some better real income gains for our

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Speaker 6: lower middle income households. We've seen just in the last month,

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Speaker 6: we've seen average hourly earnings growth exceed CPI growth for

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Speaker 6: the seventeenth straight month. So even though the public mood

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Speaker 6: is pretty grumpy, actually lower middle income households are also

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Speaker 6: seeing gains. And that's shopping up in higher food spending

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Speaker 6: and higher clothing spending and the retail sales report. So overall,

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Speaker 6: the consumer still has got some fuel here, and that's

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Speaker 6: the biggest thing. And then the other thing is is

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Speaker 6: just a lot of core spending on AI, which I

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Speaker 6: think is helping investment spending overall.

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Speaker 3: So when you read Michael Feroli, which I know is torture,

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Speaker 3: but when you read JP Morgan economics, are they telling

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Speaker 3: you it's a productivity overlay?

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Speaker 6: Well, yeah, I read it very closely, but there is

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Speaker 6: some productivity gains also going on. I don't think the

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Speaker 6: productivity gains are really AI driven here, but if you

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Speaker 6: look at the GDP numbers, productivity gains since the start

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Speaker 6: of this decade have actually better than the last decade,

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Speaker 6: so that's going well too. So you know, in the

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Speaker 6: big aggregate numbers, the US economy is doing fine. I mean,

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Speaker 6: four point one on the unemployment rate, two point four

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Speaker 6: on CPI. That sums to six point five, which I

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Speaker 6: used to call the misery index, to some of unemployment innovation.

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Speaker 6: That's better than it's been eighty seven percent of the

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Speaker 6: time over the last fifty years. So the economy is

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Speaker 6: doing fine. I just worry that individual investors may be

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Speaker 6: sort of caught off side here if they're overweight the

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Speaker 6: overpriced within these markets.

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Speaker 2: You know, yeah, I mean just sorry, sorry, Paul.

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Speaker 5: No, I was just gonna say, that's exactly how I feel.

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Speaker 5: I mean, it seems like things are generally pretty decent

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Speaker 5: out there, but that's probably tom to a reasonable level

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Speaker 5: reflecting in.

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Speaker 3: The markets, and it folds right into the election, yep,

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Speaker 3: of an election of politics of habs and have not.

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Speaker 3: Look to Kaylee Lines and Joe Matthew for their coverage

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Speaker 3: of that heating up here in three hours. David Kelly,

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Speaker 3: thank you so much. With JP Morgan can't say enough

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Speaker 3: about the bodywork.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on applecar Play and Android

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Speaker 1: Auto with the Bloomberg Business App. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.

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Speaker 3: Let us dig into the tariff debate Ernie Tedesky. First

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Speaker 3: of all, Ernie came out of the Stanford combine, and

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Speaker 3: he's of course been at the White House CEA and

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Speaker 3: he's written an incredibly historic treatment on tariffs. Ernie, first

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Speaker 3: of all, did you study with John Taylor? Like when

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Speaker 3: you and as Stanford. Did you have to sit there

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Speaker 3: in a lecture hall with John Taylor dressed up like

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Speaker 3: a raisin?

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Speaker 7: I missed out. I demanded my tuition back. I was

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Speaker 7: there when John Taylor was on sabbatical.

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Speaker 2: There you go.

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Speaker 7: My econ one was taught by somebody else.

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Speaker 3: Unfortunately, when you look at the foundations of economics, you

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Speaker 3: look at history, and you have nailed it with your

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Speaker 3: Bloomberg opinion piece. Right now, the average tariff is two

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Speaker 3: point five percent. I would think most Americans to get hire.

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Speaker 3: We could go back to World War two eighteen ninety nine,

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Speaker 3: or dare I say, to the shocking tarriffs of about

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Speaker 3: eighteen twenty, what are Harris and Trump going to do? So?

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Speaker 7: I think Harris is going to basically keep business as

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Speaker 7: usual right now, very much like Biden has done. Biden

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Speaker 7: kept the Trump tariffs, increased a few of them, but

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Speaker 7: you know, basically rearranged some of the tariffs, mainly on

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Speaker 7: national security grounds. What Trump has done or has proposed,

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Speaker 7: and what we looked at in our Budget lab report

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Speaker 7: that was the basis of my Bloomberg opinion column is

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Speaker 7: he's proposed, you know, a bunch of different expansion ideas

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Speaker 7: for tariffs, and they've been all over the place. And

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Speaker 7: so what we did in our report was we you know,

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Speaker 7: we listened to his remarks over the course of the campaign,

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Speaker 7: and we tried to piece together twelve different scenarios that

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Speaker 7: captured the spirit of what President Trump has talked about,

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Speaker 7: and we created a range of different proposals, you know,

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Speaker 7: on the low end, ten percent on all countries, sixty

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Speaker 7: percent on China but exempting all countries with which the

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Speaker 7: United States currently has a free trade agreement, and on

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Speaker 7: the high end, twenty percent on all countries, sixty percent

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Speaker 7: on China and two hundred percent on Mexico. So that

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Speaker 7: gave us a bookend of ranges for different ideas.

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Speaker 5: So, Ernie, what did the textbooks tell us that tariffs

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Speaker 5: are designed to do? And then the question is do

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Speaker 5: they work?

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Speaker 2: Ok?

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Speaker 7: Yeah, so the textbook tells us that tariffs are designed

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Speaker 7: to protect domestic industry from outside influence and to let

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Speaker 7: domestic industry grow. I think that there has been this

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Speaker 7: sort of historic argument that tariffs were good when America

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Speaker 7: was young, like in the eighteen hundreds, and that was

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Speaker 7: sort of accepted wisdom. I will say that over the

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Speaker 7: last twenty years there's been more and more challenges to

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Speaker 7: that accepted wisdom. You know, you've seen more and more

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Speaker 7: historic American economic research that says that America grew in

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Speaker 7: the eighteen hundreds despite our really high tariffs. Tariffs in

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Speaker 7: the eighteen hundreds were upwards of forty or fifty percent

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Speaker 7: in average effective rates back then. But that was sort

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Speaker 7: of the rationale. But then the textbook tells you that

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Speaker 7: as you know, as your country matures, as its domestic

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Speaker 7: industry becomes more competitive of with global markets, you know

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Speaker 7: the advantages of having you know, having inputs and and

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Speaker 7: and and capital and labor, you know, compete on a

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Speaker 7: on an even playing field in a global market. Outweigh

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Speaker 7: the protectionism of of of throwing up uh protectionist tariffs

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Speaker 7: on your border. And you know the what we have,

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Speaker 7: you know, the evidence of what we have seen is

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Speaker 7: that you know, tariffs nowadays, you know, don't work as

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Speaker 7: advertised in terms of creating jobs. And that doesn't mean

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Speaker 7: that if you throw up a tariff, you know, we're

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Speaker 7: not saying that in no cases, you know, no jobs

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Speaker 7: are created. What we're saying is that net net you know,

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Speaker 7: the you know, the bad outweigh the right that that

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Speaker 7: the you know exactly that that that the cost to

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Speaker 7: factories of you know of of increased part parts coming in,

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Speaker 7: you know, for laying off workers outweighs you know, any

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Speaker 7: actory that creates it.

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Speaker 3: Okay, Ernie, because the time, I want to cut to

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Speaker 3: the chase here. President Trump, in his conversation with John

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Speaker 3: mickels Wade of Bloomberg News, was adamant that he's talking

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Speaker 3: about a magnitude of tariffs that will create a jump

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Speaker 3: condition of labor formation in America. I don't want to

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Speaker 3: go politics on this.

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Speaker 2: I want to go.

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Speaker 3: Is there any history taught it's Stanford or Berkeley, that

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Speaker 3: is Barry Keen Green or Brad DeLong going to tell

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Speaker 3: me that if I get a magnitude tariff leap, I

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Speaker 3: will create American jobs. Is there any evidence? No?

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Speaker 7: You know, what we found in this report is the

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Speaker 7: magnitude of tariffs that President Trump has proposed means number one,

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Speaker 7: higher prices, you know, on the order of one and

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Speaker 7: a half to five percent for consumers. So that's two

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Speaker 7: thousand dollars to seventy six hundred dollars for consumers. So

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Speaker 7: that creates hard choices for consumers. Have the substitute to.

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Speaker 3: But is there any evidence? Is there any evidence that

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Speaker 3: it will create jobs in America? My problem, and I'm

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Speaker 3: thinking of William Klein. If the Peterson Institute is definitive

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Speaker 3: on this, Paul, it's feel simple. They're going to raise

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Speaker 3: tariffs to go after Mexico, so the jobs are gonna

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Speaker 3: move to Vietnam.

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Speaker 5: I don't yeah, I know, I don't know how that

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Speaker 5: plays out. I don't have but yeah, no, no, And

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Speaker 5: Ernie's probably the other thing we hear probably most often,

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Speaker 5: and I don't know if this is true. Are tariffs

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Speaker 5: a tax on the US consumer.

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Speaker 2: That's right.

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Speaker 3: Now.

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Speaker 7: There's probably nothing else more studied in trade literature than

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Speaker 7: who bears the burden of tariffs. And it's very clear

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Speaker 7: it's it's the US consumer and businesses that pay the

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Speaker 7: tariffs in the end, so it's not the other country.

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Speaker 7: US consumers pay it at the end of the day.

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Speaker 7: And so you know, that's what US consumers need to weigh.

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Speaker 7: You know when they hear this rhetoric about consumers is

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Speaker 7: that they're going to end up paying it.

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Speaker 6: At the end of the day.

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Speaker 7: And it's net. It's not going to create a job. Okay,

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Speaker 7: huge clarity, Ernie, Thank you so much, Ernie.

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Speaker 2: Today Shi.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on applecar Play and Android

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Speaker 1: Auto with the Bloomberg Business app. You can also watch

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Speaker 1: us live every weekday on YouTube and always on the

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Speaker 1: Bloomberg terminal.

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Speaker 3: This is the most important interview of the day. Look

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Speaker 3: in the mirror tomorrow morning and say.

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Speaker 2: Hey, where am I with my wealth?

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Speaker 3: Creation in the trench? Is Alicia Manel the giant at

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Speaker 3: Boston College announcing a retirement. Were efforting doctor Manell to

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Speaker 3: have her on just a huge victory lap for all

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Speaker 3: of her retirement work. Pulling the short straw for Jane

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Speaker 3: Fraser at City Group was Kristin Bitterly. They said, Kristen

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Speaker 3: go out there to professional organizations and help them try

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Speaker 3: to get retirement. Kristin Biddley had a wealth at work.

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Speaker 3: It's City Group. How bad is it you walk into

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Speaker 3: a fancy law firm they're hiring City Group. What percentage

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Speaker 3: of partners associates? What percentage are behind the eight ball?

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Speaker 8: Well, I would say the good news is that we

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Speaker 8: have been covering law firms for over fifty five years.

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Speaker 8: So we're celebrating our fifty fifth anniversary just in a

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Speaker 8: couple of weeks, and so we have long history working

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Speaker 8: with over nine hundred firms, many of the am law

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Speaker 8: two hundred firms, and so I think where we're involved,

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Speaker 8: the strategy has always been we're following people through their

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Speaker 8: career journey, starting from entry level associates through two senior

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Speaker 8: partners standing right now.

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Speaker 3: Alexia Minel would say, Roger Ferguson would say, we've completely

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Speaker 3: screwed this up. How many fancy people at fancy law

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Speaker 3: firms are behind the eight ball.

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Speaker 8: I'm going to offer another angle on this. I would

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Speaker 8: say not behind, but I think what happens is we

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Speaker 8: don't teach financial litter in this country. So you what

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Speaker 8: we see very commonly, whether it's at law firms, whether

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Speaker 8: it's at corporations, whether it's at you know, professional services firms.

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Speaker 8: You're someone who's been focused so much on your career,

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Speaker 8: so much on your family, and then you basically find

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Speaker 8: yourself in a situation where you have all of your

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Speaker 8: savings in a savings account and you're underinvested. So the

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Speaker 8: question there is it's never too late to start. But

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Speaker 8: the first thing you have to start with is making

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Speaker 8: sure that one do I have the right estate plan

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Speaker 8: in place? Only one out of three Americans have a

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Speaker 8: will in place? And two do I have a financial plan?

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Speaker 8: Only one out of three Americans have a financial plan

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Speaker 8: in place. So when you combine that, Tom with your

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Speaker 8: question around okay, retirement assets, you have around sixty seven

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Speaker 8: percent of Americans with some type of retirement asset. However,

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Speaker 8: only thirty percent feel prepared. So there's a big.

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Speaker 3: Seventy percent of America, seventy percent of Sullivan and Cromwell,

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Speaker 3: I'm just picking on them.

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Speaker 2: I mean, Paul, it's amazing. It's like the national topic.

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Speaker 2: It is a big topic.

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Speaker 5: So where do you start if you have your initial

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Speaker 5: meeting with that client, where do you start?

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Speaker 8: So you have to meet them where they're at in

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Speaker 8: their journey, first of all, and it's never too soon

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Speaker 8: to start. So the reason why a lot of people

440
00:23:11,400 --> 00:23:14,000
Speaker 8: fail to plan is they think they're not wealthy enough,

441
00:23:14,000 --> 00:23:16,159
Speaker 8: they're too busy. We could come up with all of

442
00:23:16,200 --> 00:23:19,200
Speaker 8: the various excuses, and so early on in your career,

443
00:23:19,240 --> 00:23:21,920
Speaker 8: it's really creating that financial plan to say, when can

444
00:23:21,960 --> 00:23:24,080
Speaker 8: I be prepared to buy a house? How am I

445
00:23:24,080 --> 00:23:26,880
Speaker 8: thinking about taking on debt to do that? A lot

446
00:23:26,880 --> 00:23:30,000
Speaker 8: of purchases, this is another kind of shocking stat. Seventy

447
00:23:30,040 --> 00:23:33,359
Speaker 8: percent of purchases are emotional. People will go in and

448
00:23:33,440 --> 00:23:37,480
Speaker 8: buy a home or a vespa or a vespa. Yes, Tom,

449
00:23:37,600 --> 00:23:39,199
Speaker 8: that too, I saw that photo.

450
00:23:39,240 --> 00:23:39,879
Speaker 4: That was great.

451
00:23:40,520 --> 00:23:43,439
Speaker 8: But I think, like you know, when you have that

452
00:23:43,560 --> 00:23:45,560
Speaker 8: plan and you kind of then say, okay, where should

453
00:23:45,560 --> 00:23:49,280
Speaker 8: I be investing? How should I be maximizing certain accounts?

454
00:23:49,359 --> 00:23:52,120
Speaker 8: How can I take advantage of actually the structuring and planning.

455
00:23:52,440 --> 00:23:55,199
Speaker 8: So we talk about financial literacy within this country, but

456
00:23:55,240 --> 00:23:58,440
Speaker 8: we've also added a lot of complexity in the sense that.

457
00:23:58,760 --> 00:24:01,280
Speaker 3: Okay or zag over at Lazard now when he was

458
00:24:01,280 --> 00:24:02,760
Speaker 3: at Brookes, he said, look, we got to do an

459
00:24:02,800 --> 00:24:05,239
Speaker 3: automatic buy in on four oh one K.

460
00:24:05,680 --> 00:24:07,520
Speaker 2: I mean, it's all there is to it.

461
00:24:07,600 --> 00:24:11,240
Speaker 3: Are we getting anywhere nearer to where we approximate Paul

462
00:24:11,280 --> 00:24:15,960
Speaker 3: Sweeney's dinormous multi eight figure four oh one K?

463
00:24:16,359 --> 00:24:18,600
Speaker 8: I mean, look, I think we One of the other

464
00:24:18,680 --> 00:24:20,760
Speaker 8: data points that is important is I do think we're

465
00:24:20,760 --> 00:24:22,960
Speaker 8: getting closer in the sense when you look at the

466
00:24:23,000 --> 00:24:26,280
Speaker 8: boomer generation and you look at the anticipated wealth transfer

467
00:24:26,280 --> 00:24:29,040
Speaker 8: that we're going to experience over the next two decades,

468
00:24:29,080 --> 00:24:32,160
Speaker 8: it's anticipated it's going to be ninety trillion dollars over

469
00:24:32,160 --> 00:24:35,720
Speaker 8: the next twenty years. So there is massive wealth creation

470
00:24:35,920 --> 00:24:38,600
Speaker 8: and generation for those who are homeowners, for those who

471
00:24:38,600 --> 00:24:42,000
Speaker 8: have exposure to the stock market. Clearly there's been benefits

472
00:24:42,000 --> 00:24:44,760
Speaker 8: within that. But I think the key thing for our

473
00:24:44,880 --> 00:24:49,080
Speaker 8: clients is the unifying factor is they're busy professionals who

474
00:24:49,119 --> 00:24:51,120
Speaker 8: are trying to make it in their career, and they're

475
00:24:51,119 --> 00:24:54,040
Speaker 8: trying to take care of their families simultaneously, and sometimes

476
00:24:54,040 --> 00:24:55,879
Speaker 8: what's best for you takes the back seat, So just

477
00:24:55,920 --> 00:24:58,600
Speaker 8: taking that moment to come up with a plan and discipline,

478
00:24:58,720 --> 00:24:59,960
Speaker 8: you will be way ahead of the game.

479
00:25:00,480 --> 00:25:00,920
Speaker 2: What are you.

480
00:25:00,920 --> 00:25:06,159
Speaker 5: Telling your clients these days about where to go? Stocks, bonds, alternatives?

481
00:25:06,240 --> 00:25:07,520
Speaker 2: I mean, the.

482
00:25:07,520 --> 00:25:10,280
Speaker 5: Markets had a great year this year, bonds have actually

483
00:25:10,280 --> 00:25:13,480
Speaker 5: had a positive return. What are you telling them about

484
00:25:13,480 --> 00:25:14,040
Speaker 5: these markets?

485
00:25:14,119 --> 00:25:16,040
Speaker 8: So the first thing is I think when you're looking

486
00:25:16,040 --> 00:25:19,120
Speaker 8: at what was, what is what could drive markets right now?

487
00:25:19,160 --> 00:25:21,320
Speaker 8: You could say the economy, you could say elections, you

488
00:25:21,320 --> 00:25:24,800
Speaker 8: could say earnings, and geopolitics to a certain extent, I

489
00:25:24,840 --> 00:25:27,800
Speaker 8: think there's a lot of people trying to trade around elections.

490
00:25:28,560 --> 00:25:32,080
Speaker 8: Our advice is policy, not politics, is going to drive markets.

491
00:25:32,280 --> 00:25:35,199
Speaker 8: So we are not making any significant portfolio changes on

492
00:25:35,280 --> 00:25:37,439
Speaker 8: the back of that. I think there are and I

493
00:25:37,520 --> 00:25:39,520
Speaker 8: know a lot of people have been discussing this. There's

494
00:25:39,560 --> 00:25:42,000
Speaker 8: always an excuse not to invest. There's always something to

495
00:25:42,000 --> 00:25:44,440
Speaker 8: be worried about. But when you look at the tailwinds

496
00:25:44,480 --> 00:25:47,000
Speaker 8: that we have right now, cash on the sideline six

497
00:25:47,040 --> 00:25:49,760
Speaker 8: and a half trillion dollars, you have a fed that okay,

498
00:25:49,760 --> 00:25:52,400
Speaker 8: whether it's another twenty five basis points to twenty five

499
00:25:52,440 --> 00:25:56,080
Speaker 8: basis points. They are cutting rates, their strengthening the consumer

500
00:25:56,160 --> 00:25:59,520
Speaker 8: based on stock market prices, home prices. So I think

501
00:25:59,520 --> 00:26:02,760
Speaker 8: there's actually a lot of positive tailwinds for risk assets.

502
00:26:02,840 --> 00:26:05,440
Speaker 3: Christ and Biddley with your experience at City Group, what's

503
00:26:05,480 --> 00:26:09,560
Speaker 3: the level of exuberance right now? I am thunderstruck by

504
00:26:09,600 --> 00:26:12,320
Speaker 3: the lack of taxicab talk over what do I do

505
00:26:12,400 --> 00:26:13,080
Speaker 3: with Nvidia?

506
00:26:13,640 --> 00:26:14,600
Speaker 2: I don't see And.

507
00:26:14,520 --> 00:26:17,680
Speaker 3: There's some mathematics on this YARDNNY and others have said, Look,

508
00:26:17,680 --> 00:26:20,439
Speaker 3: the exuberance just isn't there. When you go into a

509
00:26:20,480 --> 00:26:24,600
Speaker 3: given institutional client to do wealth at work, are they

510
00:26:24,680 --> 00:26:26,720
Speaker 3: foming at the mouth to buy the mag seven?

511
00:26:27,720 --> 00:26:30,000
Speaker 8: No, I think they're looking actually for much more balanced

512
00:26:30,000 --> 00:26:30,879
Speaker 8: approaches to it.

513
00:26:31,400 --> 00:26:35,240
Speaker 3: Well that actually will that balanced approach get it done.

514
00:26:35,720 --> 00:26:38,080
Speaker 8: So what I will say is it's better than not

515
00:26:38,160 --> 00:26:41,159
Speaker 8: being invested. So the first step get invested, right. You

516
00:26:41,160 --> 00:26:44,520
Speaker 8: could have a debate around passive versus active. It's first

517
00:26:44,920 --> 00:26:47,840
Speaker 8: being invested is better than not being invested. I think

518
00:26:47,880 --> 00:26:51,160
Speaker 8: when it comes to the balance of conservative assets versus

519
00:26:51,280 --> 00:26:54,680
Speaker 8: risk assets, you've seen a skew towards cash with rates

520
00:26:54,680 --> 00:26:58,200
Speaker 8: where they met massive skew towards cash. So that's another

521
00:26:58,240 --> 00:27:01,320
Speaker 8: common conversation. Let's ship some of that risk if.

522
00:27:01,160 --> 00:27:03,879
Speaker 2: David Baylan was its city group and he aged.

523
00:27:04,160 --> 00:27:08,000
Speaker 3: David Balin aged because everybody stayed in cash.

524
00:27:08,720 --> 00:27:10,560
Speaker 2: He said, Tom, I'm pulling my hair out.

525
00:27:10,720 --> 00:27:13,560
Speaker 3: I mean it's I mean, how do we get from

526
00:27:14,080 --> 00:27:19,040
Speaker 3: from where we are to optimism to enthusiasm about owning

527
00:27:19,160 --> 00:27:21,200
Speaker 3: a balanced SPX portfolio?

528
00:27:21,680 --> 00:27:23,080
Speaker 2: Even away from Microsoft?

529
00:27:23,119 --> 00:27:24,520
Speaker 8: I think you have to get away from the market

530
00:27:24,520 --> 00:27:27,000
Speaker 8: time and conversation. You and I have talked about this,

531
00:27:27,280 --> 00:27:30,520
Speaker 8: and it is something that market people believe. Just like

532
00:27:30,520 --> 00:27:32,440
Speaker 8: I said, there's always a reason not to invest, There's

533
00:27:32,440 --> 00:27:34,000
Speaker 8: always a reason that there could be a risk. It

534
00:27:34,040 --> 00:27:36,880
Speaker 8: feels good to stay in cash on the sidelines, but look,

535
00:27:36,880 --> 00:27:38,600
Speaker 8: if you stayed in cash on the sidelines year to

536
00:27:38,640 --> 00:27:42,000
Speaker 8: date and you miss this twenty percent plus rally with inequities,

537
00:27:42,040 --> 00:27:45,159
Speaker 8: you are significantly underperforming. I think another thing that is

538
00:27:45,200 --> 00:27:47,280
Speaker 8: actually a really positive We talk about this all the

539
00:27:47,320 --> 00:27:51,480
Speaker 8: time longevity. People are living longer. The population over eighty

540
00:27:51,520 --> 00:27:54,000
Speaker 8: is expected to triple, the population over sixty five is

541
00:27:54,040 --> 00:27:56,359
Speaker 8: expected to double. What does that mean in terms of

542
00:27:56,400 --> 00:27:58,640
Speaker 8: how your money has to work for you? It has

543
00:27:58,680 --> 00:28:01,720
Speaker 8: to work longer. Not just about risk assets, it's actually

544
00:28:01,760 --> 00:28:05,160
Speaker 8: about and your previous guests spoke about this alternatives as well.

545
00:28:05,560 --> 00:28:07,360
Speaker 8: You need those assets to work harder for you.

546
00:28:07,800 --> 00:28:11,320
Speaker 5: Why it's still working? What how about you go to

547
00:28:11,320 --> 00:28:12,840
Speaker 5: some of your associates, to some of these law firms.

548
00:28:12,880 --> 00:28:15,359
Speaker 5: I'm guessing they have a lot of debt that maybe

549
00:28:15,359 --> 00:28:19,439
Speaker 5: we didn't have from education. That's got to make it

550
00:28:19,480 --> 00:28:20,439
Speaker 5: tough on the younger folks.

551
00:28:20,800 --> 00:28:22,440
Speaker 8: I think it makes it tough on younger folks in

552
00:28:22,920 --> 00:28:25,480
Speaker 8: all industries. And so you have to look at your

553
00:28:25,520 --> 00:28:28,400
Speaker 8: balance sheet analysis. And I'm bringing this full circle to planning,

554
00:28:28,760 --> 00:28:31,359
Speaker 8: looking at any type, looking at the interest rate on

555
00:28:31,440 --> 00:28:33,720
Speaker 8: that debt. Not all debt is bad, right, So I

556
00:28:33,720 --> 00:28:35,280
Speaker 8: mean if you were someone who locked in one of

557
00:28:35,280 --> 00:28:38,280
Speaker 8: those thirty rate fixed mortgages, you won the lottery. So

558
00:28:38,640 --> 00:28:41,720
Speaker 8: looking at debt not as necessarily bad in and of itself,

559
00:28:42,040 --> 00:28:44,880
Speaker 8: but in terms of high rate, low rate, and trying

560
00:28:44,880 --> 00:28:48,240
Speaker 8: to optimize your balance sheet and then finding liquidity for

561
00:28:48,320 --> 00:28:50,240
Speaker 8: where you can invest and where you can make those

562
00:28:50,280 --> 00:28:52,640
Speaker 8: those important investments for your family as well, such as

563
00:28:53,200 --> 00:28:53,880
Speaker 8: owning your home.

564
00:28:54,120 --> 00:28:56,240
Speaker 3: I mean, I got to look back here. Notre Dame

565
00:28:56,320 --> 00:28:58,280
Speaker 3: be produced sixty six to seven.

566
00:28:58,480 --> 00:28:59,880
Speaker 2: They're good. I thought it was a fluke.

567
00:29:00,080 --> 00:29:03,440
Speaker 3: We'red is a powerhouse this year I don't think there's

568
00:29:03,480 --> 00:29:06,240
Speaker 3: any other football team other than the Notre Dames.

569
00:29:06,280 --> 00:29:09,240
Speaker 2: Kristin Bitterly that won as big as they've won this year.

570
00:29:09,240 --> 00:29:12,120
Speaker 3: They ranked twelfth in the country, but they're ginormously.

571
00:29:12,160 --> 00:29:14,880
Speaker 8: We had an unfortunate loss early on in our season,

572
00:29:14,920 --> 00:29:19,240
Speaker 8: which was a little heartbreaking. But you know, I'm an

573
00:29:19,240 --> 00:29:21,920
Speaker 8: avid Notre Dame fan, and yeah, I'm going to be

574
00:29:21,960 --> 00:29:23,000
Speaker 8: an optimist here.

575
00:29:24,120 --> 00:29:25,720
Speaker 3: Northern Illinois.

576
00:29:25,960 --> 00:29:30,360
Speaker 8: Yeah, Northern Illinois. Yeah, it happened our second game, tom

577
00:29:30,840 --> 00:29:33,720
Speaker 8: It was after beating Texas A and M.

578
00:29:33,480 --> 00:29:35,480
Speaker 2: So after that was shots at tequila.

579
00:29:35,160 --> 00:29:36,440
Speaker 8: Right, mescal for me.

580
00:29:36,520 --> 00:29:39,280
Speaker 3: But yeah, ok, yes, I mean, I mean the work

581
00:29:39,280 --> 00:29:41,880
Speaker 3: you're doing, this is God's work, folks. I mean, this

582
00:29:42,040 --> 00:29:45,640
Speaker 3: is really serious stuff. Listen to Roger Ferguson, the former

583
00:29:45,720 --> 00:29:49,360
Speaker 3: vice chairman Tia Kraft. I mean, I'm sorry, this is

584
00:29:49,360 --> 00:29:51,080
Speaker 3: the most important interview of the day.

585
00:29:51,360 --> 00:29:52,240
Speaker 2: The percentage of.

586
00:29:52,200 --> 00:29:57,160
Speaker 3: Americans cratering in retirement and financial planning is off the chart.

587
00:29:57,440 --> 00:30:00,360
Speaker 3: Christian Bitterly with Jane Frasier at City Group welt it.

588
00:30:00,360 --> 00:30:01,280
Speaker 2: We're Christian, Thank you.

589
00:30:01,840 --> 00:30:06,280
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

590
00:30:06,440 --> 00:30:10,560
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591
00:30:10,680 --> 00:30:13,720
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592
00:30:13,840 --> 00:30:17,640
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593
00:30:17,680 --> 00:30:20,960
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594
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