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

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Speaker 2: Joining us.

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Speaker 3: Nancyl is our chief global economist, Hyper Sandler. You killed

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Speaker 3: it in July about we can't get private enterprise to

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Speaker 3: employ people. Has the song changed in the last six months?

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Speaker 4: Near term?

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Speaker 5: No, employment's going to be on the week side. Companies

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Speaker 5: are still really focused on their profit margins, but employments

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Speaker 5: a lagging indicator quite quite frankly, the government did crowd

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Speaker 5: out employment earlier over the past couple of years, the

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Speaker 5: healthcare industry crowded out the private center education, so we're

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Speaker 5: kind of.

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Speaker 4: Unwhining that right now.

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Speaker 5: So that's also a headwind along with the private sector

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Speaker 5: still a little bit focused on protecting their profit margins.

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Speaker 2: When do we get.

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Speaker 3: Back to job formation that doesn't involve healthcare workers and bartenders.

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Speaker 5: Probably in mid twenty mid twenty twenty six. You're seeing

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Speaker 5: green shoots for the labor markets. You have profits improving

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Speaker 5: across the board, both s and p. Five hundred s

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Speaker 5: and P. Six hundred Russell two thousand, So you're getting

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Speaker 5: the breadth of now profits companies are willing to spend.

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Speaker 5: They always first spend on technology to further improve their

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Speaker 5: productivity and their profitability. And then you get employment. Employment

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Speaker 5: is a lagging indicator, so you're setting the stage for

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Speaker 5: employment as you move into the second third quarter of

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Speaker 5: twenty twenty six, and you are getting some indications that

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Speaker 5: it is incrementally improving. Small businesses have stopped firing, which

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Speaker 5: is again the first step in getting job job hiring.

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Speaker 5: As we go through twenty twenty six.

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Speaker 6: We've had a little bit of hindsight here, Nancy with tears.

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Speaker 4: What happened with tears?

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Speaker 6: How did they kind of impact the economy?

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Speaker 7: How are they?

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Speaker 6: How are they impacting the economy?

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Speaker 5: So first they are attacks. Tariffs are attacks. How much

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Speaker 5: as a share of a share of GDP you're about

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Speaker 5: over ten percent as a hit, up from two percent

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Speaker 5: at the beginning of the year, And it's really a

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Speaker 5: regressive tax on that lower end consumer, on smaller on

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Speaker 5: smaller businesses. There have been some offsets where some durable

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Speaker 5: good prices have gone up, other service prices have gone down.

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Speaker 5: Some food prices have gone down, but net they have

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Speaker 5: kept inflation. They have kept inflation sticky, sticky, sticky this.

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Speaker 6: Year going forward here, I mean, I'm looking at some

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Speaker 6: of the early retail sales we got from Black Friday,

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Speaker 6: Cyber Monday, whatever it's called, and so on. Seems like

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Speaker 6: the consumer is still okay out there.

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Speaker 2: How do you view the consumer?

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Speaker 5: So a consumer out of a slump, consumer spending always

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Speaker 5: turns up. I went back and looked at all cycles

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Speaker 5: since nineteen sixty. Consumer spending always turns up before jobs

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Speaker 5: turn up. Why they're highly sticklical. Interests are down, banks

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Speaker 5: are willing to make loans, they're refinancing their credit card debt,

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Speaker 5: they're using helock, going from something over twenty percent to

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Speaker 5: something less than less than ten percent. So it's not

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Speaker 5: jobs that actually drive consumer spending. It's it's the FED.

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Speaker 5: And then as you go into twenty twenty six, we're

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Speaker 5: going to get a big booster shot to disposable income

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Speaker 5: from these tax from these tax refunds.

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Speaker 3: Nancy Lazar, where this folks across the nation, We welcome

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Speaker 3: all of you finishing out the year. Are we drowning

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Speaker 3: in outlooks? Sam row has like forty seven outlooks to read.

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Speaker 3: Just today he's in charge of reading outlooks. We listen

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Speaker 3: to Sam row Ro look for him on substack as well.

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Speaker 3: But when Nancy Lazar, we have someone steeped in the

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Speaker 3: linkage here of a nation's history into our economy. I

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Speaker 3: look at ken Burns's magisterial American Revolution. There's a little

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Speaker 3: bit of grievance there which they highlight versus just simply

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Speaker 3: you know, Philadelphia against the King is a little more

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Speaker 3: complicated than that. The Element Trust Barometer this year the

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Speaker 3: high level of grievance towards government, business and the rich.

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Speaker 3: And it's his daily carrievance in agony within the news media.

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Speaker 3: You fought that for decades. Yeah, is it morning in

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Speaker 3: America and we just don't know it. Oh.

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Speaker 5: I think that's been unfolding for fifteen years. We've called

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Speaker 5: it the US manufacturing Renaissance started back in twenty ten

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Speaker 5: Middle America as our favorite emerging market.

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Speaker 4: You're seeing it certainly.

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Speaker 5: Within unemployment rates around individual states that are more business

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Speaker 5: are more business friendly. So in current policies certainly are

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Speaker 5: going to reinforce bringing back blue collar jobs to the

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Speaker 5: United States. And so we're quite excited.

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Speaker 4: At first.

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Speaker 5: The private sector started back in twenty ten, the corporate

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Speaker 5: tax cut in seventeen reinforced it, and now full capex

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Speaker 5: appreciation is going as another major booster shot for the

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Speaker 5: kind of reindustrialization of the of the United States, which

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Speaker 5: is a necessary backbone for every economy. I worry about

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Speaker 5: Germany Europe in general by allowing I need to come

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Speaker 5: in and dump cars. You need a diverse source of

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Speaker 5: jobs because we have a diverse labor force and we

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Speaker 5: need a big, big consumers need to have a choice

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Speaker 5: of what kind of job. Not every wants to go

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Speaker 5: to college. Nothing wrong with blue collar jobs, nothing wrong

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Speaker 5: with getting.

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Speaker 3: Out of nothing wrong with blue collar jobs. Paul missus

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Speaker 3: Keenan sists, we're hanging wallpaper. Have you priced out wallpaper hangers?

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Speaker 2: Oh?

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Speaker 7: Yeah, absolutely, I mean.

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Speaker 2: I mean, yeah, there's physicians. It mounts cinide.

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Speaker 4: Don't make that Sis's up.

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Speaker 6: So, I mean, is the give us a sense of

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Speaker 6: kind of the labor market here, because we it seems solid.

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Speaker 6: The unemployment rate, the headline number that we all look

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Speaker 6: at seems fine, seems kind of full employment ish.

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Speaker 4: Is it as strong as it looks?

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Speaker 3: Well?

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Speaker 4: Under the hood.

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Speaker 5: You have had some significant layof announcements here in the

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Speaker 5: fourth quarter, and so there is a chance that the

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Speaker 5: unemployment rate does grind higher as we go into the

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Speaker 5: first part of twenty twenty. Twenty twenty six, maybe around

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Speaker 5: five sent some of the leading indicator's point to about

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Speaker 5: five percent, But that's historically, as you just said, still

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Speaker 5: not high, and the labor market is a lagging indicator,

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Speaker 5: and as we go through twenty six, I think it

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Speaker 5: is incremently going to start to heal.

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Speaker 2: Tell me about it. I'm looking.

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Speaker 3: Paul taught me this screen to Wi screens, s and

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Speaker 3: P up sixteen percent year to date, nasdak full nastack

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Speaker 3: up twenty one percent year to date. I'm going to suggest, Nancy,

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Speaker 3: that's on the back of a sprightly nominal GDP.

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Speaker 2: I see all sorts of opinions our government shutdown.

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Speaker 3: I get that, But do you just assume we can

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Speaker 3: sustain four percent plus nominal GDP and at least okay

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Speaker 3: real GDP.

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Speaker 5: Oh I think to be sure, policy is very supportive

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Speaker 5: of growth, and our corporate backbone is very very healthy

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Speaker 5: from a productivity perspective. So combination of the FED cutting

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Speaker 5: rates one hundred and fifty basis points over the past

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Speaker 5: over a year now, banks easing lending standards, very productive

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Speaker 5: fiscal policy, not government spending, but tax and centers for

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Speaker 5: the private sector to invest, tax refunds for the consumer.

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Speaker 5: I think four percent is actually probably on the low side,

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Speaker 5: could be stronger than that.

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Speaker 6: Corporate earnings they seem to be pretty good. I mean

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Speaker 6: the third quarter numbers, the low double digits. Second quarter

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Speaker 6: was strong, and.

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Speaker 2: Now it's off for cliffs. Yes, terrible, exactly. I have

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Speaker 2: no idea where we'll be in January exactly.

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Speaker 5: No, no, no, what's happened with the corporate profit backdrop.

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Speaker 5: It's definitely broadening out, which is what we needed. It

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Speaker 5: was led by you know, the mag seven or eight

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Speaker 5: or nine or whatever. And now it's into the smaller

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Speaker 5: cap space, which is crucial because that's where the jobs

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Speaker 5: are created. And so again with that healing. In with

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Speaker 5: with that healing in small cap earnings, you are setting

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Speaker 5: the stage for a healthier labor market as you go

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Speaker 5: into twenty three.

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Speaker 3: The way we rolled this morning at the nine o'clock hour,

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Speaker 3: Michael Green will be with us. His sub stack on

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Speaker 3: the poverty line created a firestorm across the nation.

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Speaker 2: Michael Green will join.

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Speaker 3: Us for first extended comments on this, and we start

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Speaker 3: here with Nancy Lazar of a Piper Sandler as well.

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Speaker 3: Michael Green says, a poverty line, you know, it's constructed,

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Speaker 3: it's a formula and all that. But there's a lot

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Speaker 3: of Americans struggling at a higher income level than the

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Speaker 3: poverty line.

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Speaker 2: Do you buy it.

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Speaker 5: I'm not that school on his analysis. I think that's

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Speaker 5: probably a little bit of an exaggeration. I grew up

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Speaker 5: in Middle America. The cost of living there is a

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Speaker 5: lot lower than it is in the East Coast.

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Speaker 2: He based it on cool Paul helped me Caudwell, New Jersey.

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Speaker 5: Yeah sure, yeah, yeah, I would agree that the low

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Speaker 5: end consumer has been squeezed. I think that's going to

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Speaker 5: change as we go into how is it going to

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Speaker 5: change that you are going to see a broader and

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Speaker 5: broader footprint of industries hiring, making it possible for people

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Speaker 5: with many different skills actually to get a job.

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Speaker 2: She's too optimistic to be in the show, Paul, do

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Speaker 2: something exactly given that back job, Nancy.

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Speaker 6: I guess we're going to hear from our fed next

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Speaker 6: week a week from today and presumably the market's discounting

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Speaker 6: a rate cut. How aggressive does a FED need to

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Speaker 6: be in cutting race?

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Speaker 4: Do you think?

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Speaker 5: I don't think they need to be aggressive. They probably

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Speaker 5: will continue to to cut given the sluggishness in the

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Speaker 5: labor market. They classically even when the economy picks up again.

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Speaker 5: I went back and looked at all cycles. Even when

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Speaker 5: the economy picks up, the FED tends to continue to

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Speaker 5: cut rates because they are focused on the labor market,

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Speaker 5: and the labor market is a lagging is a lagging indicator.

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Speaker 5: I'd be careful in cutting too aggressively, because you do.

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Speaker 5: They've already cut one hundred and fifty basis points, and

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Speaker 5: you have this fiscal sport.

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Speaker 3: Years ago it was Hymen Lazarre. Everybody thought Hymen could

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Speaker 3: be chairman. Everybody thought Lazarre could be chairman. Let's take

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Speaker 3: that perspective. If you look at Nancy Lazar, now.

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Speaker 2: Are you threat? Is there a threat to FED independence?

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Speaker 4: I don't think so.

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Speaker 5: I think the bond vigilani is going to make sure

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Speaker 5: of that. We saw the bond chairman.

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Speaker 2: Hasse it's going to be told what to do by

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Speaker 2: the bond market.

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Speaker 5: I think so. I think last year we It's something

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Speaker 5: that happened often in the sixties and seventies. It happened

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Speaker 5: last fall when the FED cut too aggressively when inflation

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Speaker 5: was still too was still too still too sticky. So yes,

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Speaker 5: I think the bond market will be that vigilanti.

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Speaker 6: So what's the opportunity here for We're talking about a

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Speaker 6: lot of this reshoring and the growth of manufacturing in

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Speaker 6: the US. Is that going to fundamentally change our economy

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Speaker 6: in any way shape for big time?

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Speaker 4: I mean, how is it?

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Speaker 5: It's again, you need labor force participation to continue to increase,

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Speaker 5: and the only way you do that is through offering

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Speaker 5: a broader footprint of industries hiring. With this on shoing,

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Speaker 5: you also have a huge job multiplier. It's not just

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Speaker 5: people complain to me, well, not many people work in

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Speaker 5: factories today. It's like I know that I grew up

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Speaker 5: in that environment. It's changed dramatically over the decades. At

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Speaker 5: the end of the day, though, it's the multiplier supporting

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Speaker 5: these these these these factories, smaller businesses, restaurants, grocery stores.

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Speaker 3: Right, the industry we're guilty of this, Lisa is the

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Speaker 3: only one who's not. We're based on the three zip

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Speaker 3: codes in Manhattan. Lisa has a much broader perspective than that.

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Speaker 3: Piper will always in forever be the right northwest. It

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Speaker 3: will be Minneapolis as well. What are the fancy people

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Speaker 3: in New York City and Washington not get about business

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Speaker 3: formation north of the Mayo Clinic.

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Speaker 4: That you do need.

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Speaker 5: I'm being very redundant here, and I and I and

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Speaker 5: I apologize.

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Speaker 2: We like that it's so retired.

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Speaker 5: It's it's it's that you you do need a diverse

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Speaker 5: set of jobs. You don't need to go to college.

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Speaker 5: I was tickled Pallunteer announced that they are hired a

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Speaker 5: bunch of high school kids to to to to you know,

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Speaker 5: check out the work, the work of the work ethic

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Speaker 5: and do you want to go to college or do

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Speaker 5: you want to stay dose?

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Speaker 2: AI help the kids that go. I just don't want

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Speaker 2: to take Shakespeare in one O two. AI help those kids.

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Speaker 5: Technological innovation has always made education better, from you know,

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Speaker 5: using my Bomar brain to eventually going to to Excel,

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Speaker 5: et cetera. So absolutely, technological innovation is great for kids

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Speaker 5: as long as it's properly used.

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Speaker 2: Yep.

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Speaker 6: So going forward here, I'm thinking about kind of where

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Speaker 6: we need to go here. I mean, it seems like

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Speaker 6: this economy is in pretty good shape. Is that your consensus?

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Speaker 6: I mean, I know there's some crosswinds and headwinds out there,

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Speaker 6: but I mean I'm seeing growth out there. I'm seeing

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Speaker 6: and instrates coming down. I'm seeing corporate profits pretty darn steady.

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Speaker 6: It seems like it's a pretty solid position.

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Speaker 5: I've been listening to people talk about the dollar and

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Speaker 5: how the dollar is going to go down, and I

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Speaker 5: just tend to disagree with that. I mean, I think

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Speaker 5: your growth will be okay in twenty twenty in twenty

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Speaker 5: twenty six because of the stimulus that they've put in place,

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Speaker 5: both monetary and physical. But if we can get to

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Speaker 5: one and a half percent, that's good news.

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Speaker 2: We got you here. We've got a breaking headline.

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Speaker 3: This was made for Nancy Lazar Automatic data Processing.

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Speaker 2: Nobody knows that's like Minnesota May mining and manufacturing. Thanks right,

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Speaker 2: Automatic Data Processing. US.

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Speaker 3: November private employment falls thirty two thousand.

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Speaker 2: The estimate was plus ten thousand.

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Speaker 3: What happens emotionally when we go over four point five

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Speaker 3: percent unemployment rate?

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Speaker 2: Is that critical? Or do I need to get to

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Speaker 2: five point zero?

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Speaker 5: I think five percent is worth. I think I give

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Speaker 5: you earlier that you know something with a fore handle

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Speaker 5: is still pretty on the tame side. But we do

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Speaker 5: think you could move above above five as you go

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Speaker 5: into early twenty early twenty twenty six. But again that

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Speaker 5: is a lagging indicator. It's not going to change our

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Speaker 5: outlook where we think growth is going to reaccelerate. We're

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Speaker 5: two percent GDP growth this year with all the headmans

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Speaker 5: that we had, the shutdown the tariffs. Next year it's

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Speaker 5: going to be stronger than that given all the stimulus.

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Speaker 3: Is I said in my intro, like I don't remember

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Speaker 3: who was on the show two hours ago. Lisa has

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Speaker 3: to remind me. I certainly don't remember who was on

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Speaker 3: the show three days ago. I remember Crystal Clear with

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Speaker 3: the Sun coming through in July when Nancy Lazaar talked

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Speaker 3: to us about the American labor Absolute true, truly Nancy

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Speaker 3: one of the great insights of Bloomberg Surveillance this year.

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Speaker 2: She is a Piper Sandler.

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Speaker 3: Stay with us more from Bloomberg Surveillance coming up after this.

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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 Eastern, Listen on

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Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 2: Joining us now, Michael Green, pinata a c management. How

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Speaker 2: the hell are you?

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Speaker 7: I definitely have taken a few waks with the baseball

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Speaker 7: at this.

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Speaker 2: Point, I'm going to defend you.

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Speaker 3: Okay, I get it. There's people Michael Green's an idiot.

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Speaker 3: How dare you think one hundred and forty thousand is

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Speaker 3: a poverty line? You say, up front, it's where you live.

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Speaker 3: And you go and Paul, you know this better than me.

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Speaker 3: You go to Caldwell, New Jersey, near Cedar Grove, just

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Speaker 3: south of Little Falls Township and say, I'm sorry, the

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Speaker 3: poverty line in Cardwell, New Jersey is not the way

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Speaker 3: it is eighty miles south of Louisville.

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Speaker 8: Discuss Yeah, this really is the underlying story. First, there

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Speaker 8: are multiple poverty lines right across the country. In a

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Speaker 8: high cost region, you're going to have a very different

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Speaker 8: experience than if you live in a low cost region.

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Speaker 8: But the overall point was when you start thinking about

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Speaker 8: what we define as the poverty line currently at about

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Speaker 8: thirty one two hundred dollars for a family for two

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Speaker 8: earners two children. That doesn't come anywhere close to meeting

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Speaker 8: the needs of a family that is living in a

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Speaker 8: place like called Well, New Jersey, where the calculation works

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Speaker 8: out to about one hundred and thirty six thousand, five

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Speaker 8: hundred dollars needs to be made before you can even

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Speaker 8: start saving a dime. Wow, that's an extraordinary feeling of

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Speaker 8: percarity when we talk about the dynamic that most American

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Speaker 8: households can't afford something to break, can't afford an emergency expense,

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Speaker 8: et cetera.

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Speaker 7: That's why.

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Speaker 6: So who sets the poverty line? Again, it's around thirty

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Speaker 6: two thousand nationally in the US. Who sets up poverty line?

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Speaker 6: And how does that impact policies and support group levels

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Speaker 6: and policies?

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Speaker 8: Yeah, I think this is one of the really critical

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Speaker 8: things that keeps coming out. Right, many people will point

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Speaker 8: out that poverty lines are arbitrary. Right, we can define

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Speaker 8: twenty percent of the population as or its, et cetera.

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Speaker 8: It really doesn't matter where it is unless it affects policy.

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Speaker 8: And that number, which is maintained by the Department of

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Speaker 8: Health and Human Services, is updated by the CPI from

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Speaker 8: the BLS is used to define the point at which

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Speaker 8: we begin withdrawing benefits for many types of activities, things

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Speaker 8: like housing, things like healthcare, things.

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Speaker 7: Like food support.

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Speaker 8: That creates a value that I call the value of death,

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Speaker 8: but more accurately is described as the benefit cliff. Once

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Speaker 8: you start passing those thresholds of earnings, the government starts

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Speaker 8: taking away the benefits and it actually leaves you in

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Speaker 8: a position where between about forty thousand and one hundred

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Speaker 8: thousand dollars, largely on a nationwide basis, you find yourself

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Speaker 8: with marginal tax rates that can exceed one hundred percent

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Speaker 8: in some situations.

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Speaker 6: So what are some of the areas where maybe the

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Speaker 6: government numbers aren't correctly calculating the true cost of what

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Speaker 6: it means to live in? It is it housing? It

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Speaker 6: is it childcare?

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Speaker 8: It's a healthcare No, It's the crazy part is it's

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Speaker 8: all of those things.

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Speaker 7: Right.

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Speaker 8: So, the simple reality is that the CPI is devised

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Speaker 8: by the BLS. You are not going to find me

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Speaker 8: in here arguing conspiracy in an attempt to suppress it,

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Speaker 8: et cetera. But it's used to define certain types of

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Speaker 8: price changes. The CPI that we quote for policy purposes

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Speaker 8: is the CPI Urban wage journers. This is what you

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Speaker 8: would expect to experience if you are buying a representative

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Speaker 8: basket across all of the workers in the United States,

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Speaker 8: high mm, low income, et cetera. People who are at

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Speaker 8: the poverty line or near the poverty line don't have

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Speaker 8: the same choices that you and I have when they

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Speaker 8: make purchases. They don't get to decide, hey, I'm going

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Speaker 8: to wait until tires go on sale. Nor are they

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Speaker 8: benefiting from gosh, the air conditioner that I had thirty

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Speaker 8: years ago suddenly costs a lot less or works much

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Speaker 8: more efficiently.

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Speaker 7: In most situations, they.

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Speaker 8: Aren't even evaluating do I buy an air conditioner? And

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Speaker 8: so a really simple example of this is in housing,

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Speaker 8: we incorporate features like air conditioning through a quality metric,

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Speaker 8: a hedonic adjustment that basically says, look, I understand that

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Speaker 8: the apartment went from one thousand dollars to eleven hundred dollars,

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Speaker 8: but because they installed air conditioning for you, right, it's

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Speaker 8: really only one thousand dollars you actually had under.

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Speaker 3: Granite slabs in the kitchen as well. Part one, My

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Speaker 3: life is a lie. How I've broken benchmark quietly broke

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Speaker 3: America a sub stack which lit on fire across thinking

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Speaker 3: America Michael Green where this was simplify asset. We'll get

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Speaker 3: to his view on the view four to twenty six,

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Speaker 3: but this is too important discussion. My basic take off

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Speaker 3: your good work, the critics of your work, the supporters

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Speaker 3: of your work, is the poor get to a point,

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Speaker 3: as you stated moments ago, where things are taken away

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Speaker 3: from them and they have almost a discentive to work.

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Speaker 3: We talked to Hugh von steinis this sounds like United Kingdom?

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Speaker 3: One oh one? What does a mayor mam Dami do?

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Speaker 3: What does the next president, Republican or Democrat do to

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Speaker 3: incentifize people besides taking government programs away?

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Speaker 8: Well, in the most most extreme version of this right,

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Speaker 8: they are actually solving for what people are saying, which

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Speaker 8: is I'm not being listened to. So when Domi addresses

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Speaker 8: affordability and says people are struggling, they recognize that he's

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Speaker 8: telling the truth. His solutions would not be my solutions.

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Speaker 8: And that's part of my frustration with the rights perspective,

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Speaker 8: or the conservative component of this. If we're putting people

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Speaker 8: in a position which they're forced to turn to somebody

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Speaker 8: who is listening to them and offering bad solutions. We

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Speaker 8: can sit there, you know, and be uptight and basically say, well,

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Speaker 8: they're choosing socialism, we'll show them right, they're going to

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Speaker 8: have the worst possible outcome. Or we can recognize that

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Speaker 8: we're facing conditions that look an awful lot like the

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Speaker 8: French Revolution, in which we're basically saying, well, they can

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Speaker 8: always eat cake. Right, that's absurd, That's not what we

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Speaker 8: want to do. We need to actually engage the national

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Speaker 8: discussion before we hit rock bottom so we can make

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Speaker 8: the relatively easy and painless choices to reform the system,

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Speaker 8: improve the outcomes, improve the incentives, and I'm sorry to

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Speaker 8: reverse those, improve the incentives, and then improve the outcomes

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Speaker 8: so that people are able to make the choices that

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Speaker 8: allow them to pursue happiness.

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Speaker 6: Where I mean, like the poverty I'm learning so much

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Speaker 6: about this and it didn't even think about it quite frankly,

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Speaker 6: but the poverty line was created by the Social Security

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Speaker 6: Administration in nineteen sixty three, adopted in the next year

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Speaker 6: by the White House, and the person who created it

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Speaker 6: set the threshold at three times the minimum adequate food budget. Yeah,

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Speaker 6: that makes sense, it seems simple, but it kind of

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Speaker 6: makes sense. But the world's changed since then, and so

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Speaker 6: that is not a good predictor anymore.

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Speaker 7: Yeah, it's radically changed.

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Speaker 8: So, I mean the reason that the three times was

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Speaker 8: chosen was not because of the thirty two percent of

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Speaker 8: the thirty three percent, but because that was a way

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Speaker 8: of scaling up and capturing the entire budget. Okay, Right,

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Speaker 8: So they were basically saying, look, if you're spending a

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Speaker 8: third on food, you're likely spending a third on housing,

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Speaker 8: and you're likely spending a third on the other necessities

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Speaker 8: of life telephone, transportation, et cetera. Unfortunately, what has happened

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Speaker 8: is we froze that, and as I described before, sei

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Speaker 8: doesn't meaningfully capture the underlying cash increase that's actually happening.

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Speaker 8: So really, what that line is moved to the point

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Speaker 8: of which it is just basically describing starvation, right, It's

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Speaker 8: not doesn't actually mean anything anymore.

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Speaker 2: Michael Green.

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Speaker 3: With this year, we do have breaking news, and the

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Speaker 3: markets have moved on it. This is a small startup

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Speaker 3: company named Microsoft. Microsoft lowers AI software sales quotas stock

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Speaker 3: down two percent, the market was up, futures up twenty

442
00:21:30,040 --> 00:21:36,560
Speaker 3: and markets were up twenty and SMP down minus nineteen

443
00:21:36,680 --> 00:21:37,120
Speaker 3: as well.

444
00:21:37,160 --> 00:21:40,560
Speaker 2: That sources the information. We thank them for that. Microsoft

445
00:21:40,600 --> 00:21:44,119
Speaker 2: lowers AI software sales quotas and it moves the market.

446
00:21:44,480 --> 00:21:46,360
Speaker 3: Let's say a little bit more on this micro green

447
00:21:46,400 --> 00:21:48,680
Speaker 3: and then we've got to look to simplify usset management.

448
00:21:48,680 --> 00:21:53,240
Speaker 3: In the View for twenty twenty six, do you parse

449
00:21:53,440 --> 00:21:59,040
Speaker 3: a distinction between Republican and Democrats solutions to half of

450
00:21:59,080 --> 00:22:01,080
Speaker 3: America flat on their back?

451
00:22:02,920 --> 00:22:03,720
Speaker 7: You know the challenges.

452
00:22:03,720 --> 00:22:05,520
Speaker 8: I don't think either party is actually coming up with

453
00:22:05,560 --> 00:22:08,040
Speaker 8: good solutions. Instead, they both appear to be in pursuit

454
00:22:08,080 --> 00:22:12,680
Speaker 8: of power to basically prosecute their individual agendas. I would

455
00:22:12,760 --> 00:22:15,040
Speaker 8: really love to say that there is a meaningful distinguishing

456
00:22:15,119 --> 00:22:18,399
Speaker 8: characteristic largely on the right as we should cut benefits further,

457
00:22:19,000 --> 00:22:21,840
Speaker 8: and on the left as we should expand them willingly. Right,

458
00:22:21,920 --> 00:22:24,000
Speaker 8: that's part of the reason for the vitriol is is

459
00:22:24,040 --> 00:22:27,280
Speaker 8: that both sides effectively see this is either stealing ammunition

460
00:22:27,359 --> 00:22:30,160
Speaker 8: from a focus on the poor or on the right

461
00:22:30,440 --> 00:22:33,280
Speaker 8: basically creating the ammunition that could be used to meaningfully

462
00:22:33,280 --> 00:22:35,800
Speaker 8: expand benefits. In a culture of dependency, we.

463
00:22:35,840 --> 00:22:36,560
Speaker 2: Go to surveillance.

464
00:22:36,640 --> 00:22:40,760
Speaker 3: Childcare correspondent Lisa Matteo the last echo I heard through

465
00:22:40,800 --> 00:22:44,120
Speaker 3: the kitchen was empty the dishwasher as well, Lisa. The

466
00:22:44,160 --> 00:22:47,480
Speaker 3: heart of this within the list of Michael Green, within

467
00:22:47,560 --> 00:22:50,400
Speaker 3: his sub stack, what I hear from people, I don't

468
00:22:50,440 --> 00:22:53,840
Speaker 3: care what they're making childcare out of COVID.

469
00:22:54,440 --> 00:22:55,400
Speaker 2: There's no other.

470
00:22:55,280 --> 00:22:58,919
Speaker 9: Issue, Oh definitely. I mean a lot of people, I know,

471
00:23:00,480 --> 00:23:04,480
Speaker 9: because because they can't afford, they think it's better for

472
00:23:04,520 --> 00:23:06,480
Speaker 9: them to be able to just stay home and take

473
00:23:06,520 --> 00:23:08,399
Speaker 9: care of the kids and that.

474
00:23:09,840 --> 00:23:10,480
Speaker 2: And I'm surprised.

475
00:23:10,760 --> 00:23:14,000
Speaker 6: I'm surprised of all the benefit packages out there that

476
00:23:14,160 --> 00:23:18,520
Speaker 6: companies Corporate America offer their employees, whether it's healthcare or

477
00:23:18,680 --> 00:23:23,440
Speaker 6: wellness or all this other there isn't a childcare offering.

478
00:23:23,600 --> 00:23:28,000
Speaker 6: I'm just you know, I don't see that talked about enough. Yes, well,

479
00:23:28,040 --> 00:23:30,280
Speaker 6: Matt Miller came back from Germany to come back here

480
00:23:30,320 --> 00:23:32,560
Speaker 6: to Bloomberg and New York. That was the first thing

481
00:23:32,560 --> 00:23:33,160
Speaker 6: that jumped out.

482
00:23:33,359 --> 00:23:36,400
Speaker 3: Now, the first thing did was by bitcoin five thousand

483
00:23:36,520 --> 00:23:39,680
Speaker 3: dollars lost his tope. Michael Green with us here and

484
00:23:39,840 --> 00:23:41,960
Speaker 3: we're gonna move on. But are you going to write

485
00:23:41,960 --> 00:23:45,159
Speaker 3: a sequel to this substance? I mean, we're publishing today.

486
00:23:45,240 --> 00:23:47,920
Speaker 8: Can we make it enough the movie, right, I'm trying

487
00:23:47,920 --> 00:23:50,680
Speaker 8: to write this as a weekly series. The third part,

488
00:23:50,760 --> 00:23:53,600
Speaker 8: with some superposed solutions, comes out this week, and at

489
00:23:53,640 --> 00:23:56,240
Speaker 8: that point I'm sure I will kiss everybody off to

490
00:23:56,320 --> 00:23:58,720
Speaker 8: the except my name again, Michael Green.

491
00:23:58,800 --> 00:24:00,560
Speaker 2: My life is a live part. No one there. It

492
00:24:00,640 --> 00:24:01,359
Speaker 2: is a sub sketch.

493
00:24:01,520 --> 00:24:04,399
Speaker 3: It's only eight hundred dollars a year for I'm kidding,

494
00:24:04,560 --> 00:24:09,320
Speaker 3: it's extremely reasonable accessibilities. Some of the best minds out there.

495
00:24:09,320 --> 00:24:13,600
Speaker 3: Paul Krugman's out there, Adam Toos, Michael Green is well,

496
00:24:13,760 --> 00:24:17,200
Speaker 3: what is the simplify asset view to twenty twenty six.

497
00:24:18,119 --> 00:24:21,240
Speaker 8: Look, we are always somewhat cautious. Most of our portfolio

498
00:24:21,280 --> 00:24:23,920
Speaker 8: is focused around fixed income. We recognize that the growing

499
00:24:24,000 --> 00:24:26,560
Speaker 8: need for most households is income and that tends to

500
00:24:26,640 --> 00:24:31,520
Speaker 8: represent the focus in our portfolio. I'm very concerned about

501
00:24:31,560 --> 00:24:34,359
Speaker 8: the rising risks in the credit space. In particular, you

502
00:24:34,440 --> 00:24:39,080
Speaker 8: highlighted a downgrade in Microsoft's AI expenditures. An incredible amount

503
00:24:39,240 --> 00:24:41,760
Speaker 8: of capital investment is being driven off of the AI

504
00:24:41,840 --> 00:24:44,960
Speaker 8: framework that's bleeding into the credit markets. We're seeing this

505
00:24:45,040 --> 00:24:48,480
Speaker 8: with things like the deteriorating loan credit for companies like

506
00:24:48,520 --> 00:24:52,720
Speaker 8: Blue Owl, et cetera. You know I'm concerned, and I've

507
00:24:52,720 --> 00:24:55,240
Speaker 8: written about this. Unfortunately, in a world that's dominated by

508
00:24:55,240 --> 00:24:58,320
Speaker 8: passive investing, the market is largely responding to flows that

509
00:24:58,359 --> 00:25:00,840
Speaker 8: are coming in from people who are employees. That means

510
00:25:00,880 --> 00:25:04,080
Speaker 8: that the market is increasingly associated with a lagging indicator.

511
00:25:04,760 --> 00:25:06,920
Speaker 8: And if employment continues to weaken, as we saw with

512
00:25:07,000 --> 00:25:09,800
Speaker 8: today's ADP, I would expect that ultimately begins to put

513
00:25:09,800 --> 00:25:11,880
Speaker 8: pressure on the market.

514
00:25:12,400 --> 00:25:17,720
Speaker 6: And the FED cutting rates. How impactful is that? Do

515
00:25:17,760 --> 00:25:18,040
Speaker 6: you think?

516
00:25:18,359 --> 00:25:18,479
Speaker 3: Well?

517
00:25:18,520 --> 00:25:20,800
Speaker 8: I think it can actually be somewhat impactful. And the

518
00:25:20,840 --> 00:25:23,040
Speaker 8: reason why, though, is a bit confusing. If you think

519
00:25:23,040 --> 00:25:27,760
Speaker 8: about portfolios like target date funds or systematically rebalancing portfolios,

520
00:25:28,280 --> 00:25:30,640
Speaker 8: if the FED cuts rates, that causes bonds to rise

521
00:25:30,680 --> 00:25:32,760
Speaker 8: in price. The way we're supposed to think about it

522
00:25:32,840 --> 00:25:35,240
Speaker 8: is the lower interest rate is run on a discounted

523
00:25:35,280 --> 00:25:38,359
Speaker 8: cash flow analysis and gives a marginally higher value for equities.

524
00:25:38,720 --> 00:25:41,240
Speaker 8: But if I have a systematically rebalanced portfolio and my

525
00:25:41,280 --> 00:25:43,840
Speaker 8: fifty percent weight in bonds goes up two percent, well,

526
00:25:43,880 --> 00:25:46,520
Speaker 8: now I'm underweight equities and I have to buy equities

527
00:25:46,880 --> 00:25:49,879
Speaker 8: sell some bonds. I think that defines the behavior that

528
00:25:49,920 --> 00:25:53,320
Speaker 8: we've seen far more than anyone doing fundamental analysis at

529
00:25:53,320 --> 00:25:53,640
Speaker 8: this point.

530
00:25:53,840 --> 00:25:55,399
Speaker 2: That was beautifully described.

531
00:25:55,760 --> 00:26:02,000
Speaker 3: Summarize again this the bond market, folks, the marginal equity

532
00:26:02,119 --> 00:26:03,960
Speaker 3: purchasers sale.

533
00:26:04,760 --> 00:26:06,159
Speaker 7: And the reverse.

534
00:26:06,240 --> 00:26:08,760
Speaker 8: Yeah, that's the three by five, right, The two assets

535
00:26:08,880 --> 00:26:13,000
Speaker 8: in a systematically rebalanced portfolio are tied by their price behavior.

536
00:26:14,040 --> 00:26:18,600
Speaker 2: I think I get that, Yeah, Michael Green one on one, Yeah, exactly.

537
00:26:18,960 --> 00:26:21,280
Speaker 3: How are the hedge funds doing. I mean, everybody's trying

538
00:26:21,280 --> 00:26:24,040
Speaker 3: to bet the market. Everybody's trying to arbitrage and get

539
00:26:24,080 --> 00:26:27,600
Speaker 3: an edge. Did Financial Wall Street get an edge this year?

540
00:26:28,480 --> 00:26:28,640
Speaker 7: Well?

541
00:26:28,680 --> 00:26:30,679
Speaker 8: I think it depends on how you define it, right.

542
00:26:30,720 --> 00:26:33,840
Speaker 8: So many hedge funds are doing extraordinarily well, particularly those

543
00:26:33,880 --> 00:26:36,560
Speaker 8: that are focused in areas that are components of arbitrage.

544
00:26:36,560 --> 00:26:38,920
Speaker 8: We've seen an incredible growth of things like the treasury

545
00:26:38,960 --> 00:26:42,000
Speaker 8: basis trade, which is very very similar in its underlying

546
00:26:42,040 --> 00:26:45,240
Speaker 8: construction to equity index arbitrage, where you're speculating on what's

547
00:26:45,280 --> 00:26:47,360
Speaker 8: going to be in the index, what's not in the index,

548
00:26:47,359 --> 00:26:50,360
Speaker 8: et cetera. Those have been very fruitful areas for investment.

549
00:26:50,400 --> 00:26:52,080
Speaker 8: I think the macro calls have been a lot harder

550
00:26:52,119 --> 00:26:55,080
Speaker 8: this year, right, People have struggled with the direction of

551
00:26:55,119 --> 00:26:57,320
Speaker 8: interest rates. At the start of the year, we were

552
00:26:57,320 --> 00:27:00,000
Speaker 8: losing control. I was skeptical of that. It ended up

553
00:27:00,040 --> 00:27:02,880
Speaker 8: being right. But the simple reality is we've had lots

554
00:27:02,920 --> 00:27:05,880
Speaker 8: of movement in both directions with no real clear outcome yet.

555
00:27:06,000 --> 00:27:08,000
Speaker 3: I've got to get your substant going. Are you gonna

556
00:27:08,000 --> 00:27:09,520
Speaker 3: write on bitcoin?

557
00:27:09,960 --> 00:27:12,879
Speaker 8: I have written on bitcoin. I actually want to emphasize

558
00:27:12,920 --> 00:27:15,560
Speaker 8: the substack is both cheap. It is subsidized for those

559
00:27:15,560 --> 00:27:18,480
Speaker 8: who buy Simplify products, and candidly, if you call me,

560
00:27:18,520 --> 00:27:20,480
Speaker 8: if you send me a message over Subsack or Twitter

561
00:27:20,520 --> 00:27:22,320
Speaker 8: and say I simply can't afford it, I'm more than

562
00:27:22,320 --> 00:27:26,560
Speaker 8: happy to grant you.

563
00:27:23,640 --> 00:27:27,840
Speaker 7: You are fully subscribed.

564
00:27:28,119 --> 00:27:32,360
Speaker 2: You think that's funny over there, Miss Potato, that's good stuff.

565
00:27:32,800 --> 00:27:35,440
Speaker 8: But you know that ultimately puts us into a situation

566
00:27:35,560 --> 00:27:37,880
Speaker 8: where there's lots of stuff that's out there on the substack.

567
00:27:37,920 --> 00:27:40,040
Speaker 8: I encourage people to read it, and I also encourage

568
00:27:40,040 --> 00:27:42,200
Speaker 8: you to spend find better ways to spend your time.

569
00:27:42,840 --> 00:27:46,040
Speaker 3: I'm thinking about you know who did he upset the most?

570
00:27:46,560 --> 00:27:51,280
Speaker 2: Bernie Sanders or I don't know, you could go either way.

571
00:27:51,440 --> 00:27:53,120
Speaker 7: If I got them both mad, then I probably.

572
00:27:53,440 --> 00:27:55,080
Speaker 6: Then you're do a new job, right, You changed the.

573
00:27:55,119 --> 00:28:00,080
Speaker 3: Debate, cover The Washington Post Michael Green's Simplify Asset Management.

574
00:28:00,000 --> 00:28:00,640
Speaker 2: To stay with us.

575
00:28:00,880 --> 00:28:11,160
Speaker 3: More from Bloomberg Surveillance coming up after this.

576
00:28:11,160 --> 00:28:15,080
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

577
00:28:15,119 --> 00:28:18,520
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

578
00:28:18,560 --> 00:28:21,520
Speaker 1: with the Bloomberg Business App. You can also listen live

579
00:28:21,600 --> 00:28:25,159
Speaker 1: on Amazon Alexa from our flagship New York station. Just

580
00:28:25,200 --> 00:28:27,600
Speaker 1: say Alexa play Bloomberg eleven thirty.

581
00:28:27,760 --> 00:28:29,280
Speaker 2: You've seen It's a magical moment.

582
00:28:29,320 --> 00:28:32,399
Speaker 3: A couple of weeks ago, Dan Tannebaum with Oliver Wyman,

583
00:28:32,480 --> 00:28:36,240
Speaker 3: mister von Steina says all sorts of perspective. I'm banking,

584
00:28:36,720 --> 00:28:39,160
Speaker 3: but also on his United Kingdom. He has served the

585
00:28:39,240 --> 00:28:43,440
Speaker 3: nation at Treasury and also with mister Carne at Bank

586
00:28:43,520 --> 00:28:46,280
Speaker 3: of England, and Hugh joins us this morning. He ended

587
00:28:46,360 --> 00:28:50,280
Speaker 3: the year here. I want to take a step back,

588
00:28:50,880 --> 00:28:54,120
Speaker 3: and I think everyone listening in America and this morning goes,

589
00:28:54,680 --> 00:28:59,320
Speaker 3: what's it going to take for Britain to recover? The

590
00:28:59,360 --> 00:29:03,479
Speaker 3: Prime minister are going after Brexit? I believe yesterday and such,

591
00:29:04,040 --> 00:29:08,400
Speaker 3: what is this von steinas pixie dust to get Britain

592
00:29:08,640 --> 00:29:09,560
Speaker 3: to turn it around?

593
00:29:11,600 --> 00:29:13,960
Speaker 10: Well, Tom thanks for having me back on. Look, I

594
00:29:13,960 --> 00:29:16,560
Speaker 10: think it's a great question. I mean, I think one

595
00:29:16,600 --> 00:29:20,000
Speaker 10: thing we've debated before is that since Brexit, the UK

596
00:29:20,080 --> 00:29:22,840
Speaker 10: has become ever more European. In fact, as of last

597
00:29:22,880 --> 00:29:25,600
Speaker 10: week we have the same tax rates as France, but

598
00:29:26,360 --> 00:29:28,640
Speaker 10: with none of the benefits of being in the EU

599
00:29:28,720 --> 00:29:31,440
Speaker 10: from a trading block. And maybe you know, some of

600
00:29:31,480 --> 00:29:33,760
Speaker 10: the animal spirits that we so loved about the UK

601
00:29:33,880 --> 00:29:36,480
Speaker 10: being a bit dampened. So look that the thesis for

602
00:29:36,560 --> 00:29:38,600
Speaker 10: me would be how we can get back to be

603
00:29:38,680 --> 00:29:39,560
Speaker 10: more mid atlantic.

604
00:29:40,120 --> 00:29:40,239
Speaker 6: Now.

605
00:29:40,280 --> 00:29:41,520
Speaker 4: I think there are some positives here.

606
00:29:41,560 --> 00:29:44,680
Speaker 10: I think about it that we've got amazing entrepreneurs, amazing companies.

607
00:29:44,920 --> 00:29:47,280
Speaker 10: In fact, we've got three of the top universities in

608
00:29:47,760 --> 00:29:51,000
Speaker 10: the world and the clusters of development around them are

609
00:29:51,000 --> 00:29:53,600
Speaker 10: really exciting. But we need to be mid atlantic. And

610
00:29:53,640 --> 00:29:56,880
Speaker 10: so if you want to have one positive, this week

611
00:29:56,240 --> 00:30:00,000
Speaker 10: the Bank of England announced it's moving in the direction

612
00:30:00,160 --> 00:30:03,080
Speaker 10: of the FED and the Trump's policy, which is bank

613
00:30:03,160 --> 00:30:06,320
Speaker 10: regulation is going to be refined. And actually this is

614
00:30:06,320 --> 00:30:09,000
Speaker 10: probably the first mid atlantic step we've taken in the

615
00:30:09,040 --> 00:30:12,880
Speaker 10: last decade. So amidst the doom and gloom about the taxes,

616
00:30:13,200 --> 00:30:15,640
Speaker 10: there are some positives at least financial regulations heading in

617
00:30:15,680 --> 00:30:16,520
Speaker 10: the right direction, and it.

618
00:30:16,440 --> 00:30:19,280
Speaker 3: Appears McLaren rains have sent it Nabu Dhabi this week,

619
00:30:19,320 --> 00:30:23,120
Speaker 3: and Lando and piastre getting it done.

620
00:30:23,120 --> 00:30:27,320
Speaker 2: Maybe against Vince. It's just like the sixteenth century or something.

621
00:30:27,360 --> 00:30:30,880
Speaker 3: Sure, I mean it's not what's the city look like,

622
00:30:30,960 --> 00:30:33,360
Speaker 3: Paul and I want and if we visit, like, what's

623
00:30:33,360 --> 00:30:37,840
Speaker 3: the vibrancy of the city versus the boom in New York.

624
00:30:39,280 --> 00:30:40,920
Speaker 4: Well, please come over and visit.

625
00:30:40,960 --> 00:30:44,160
Speaker 10: Look, your offices in London are still in a fantastic place.

626
00:30:44,200 --> 00:30:46,840
Speaker 10: In London is busy, but no Look, as I'm in

627
00:30:46,960 --> 00:30:50,640
Speaker 10: New York, you know every six weeks's New York's booming.

628
00:30:50,920 --> 00:30:54,760
Speaker 10: London's rolling over and there's clearly some amazing entrepreneurs, but

629
00:30:54,800 --> 00:30:56,760
Speaker 10: it's just not got the same bars as New York,

630
00:30:57,000 --> 00:31:00,760
Speaker 10: where there's excitement. But that said, you know, as I

631
00:31:00,840 --> 00:31:04,400
Speaker 10: meet with the private market firms, they're very excited about

632
00:31:04,400 --> 00:31:06,760
Speaker 10: the outlook for M and A in the UK next year.

633
00:31:07,120 --> 00:31:10,240
Speaker 10: We've seen two US private market firms acquire insurers this

634
00:31:10,360 --> 00:31:13,600
Speaker 10: year because they're excited by the financial deregulation allowing them

635
00:31:13,720 --> 00:31:16,680
Speaker 10: to invest. So you know, around the edges there's still

636
00:31:16,720 --> 00:31:19,880
Speaker 10: an awful lot of excitement, but the streets don't have

637
00:31:19,920 --> 00:31:20,640
Speaker 10: the buzz of New York.

638
00:31:20,680 --> 00:31:24,240
Speaker 6: Of course, talk to us about private credit here, Hugh.

639
00:31:24,360 --> 00:31:28,080
Speaker 6: This is obviously a significant new market. Over the last

640
00:31:28,400 --> 00:31:32,280
Speaker 6: ten to fifteen years, there's been some concerns about credit

641
00:31:32,400 --> 00:31:35,280
Speaker 6: quality creeping into this part of the market. How do

642
00:31:35,320 --> 00:31:37,720
Speaker 6: you see it, because you've got so much experience looking

643
00:31:37,720 --> 00:31:39,440
Speaker 6: at the financial markets.

644
00:31:39,840 --> 00:31:42,920
Speaker 10: Look, Paul, I think I think the thing which is

645
00:31:42,960 --> 00:31:45,720
Speaker 10: misunderstood is that we've now got an asset class or

646
00:31:45,800 --> 00:31:48,720
Speaker 10: a range of assets which are almost three trillin a size,

647
00:31:49,080 --> 00:31:50,680
Speaker 10: and they're going to be the good, the bad, and

648
00:31:50,720 --> 00:31:53,120
Speaker 10: the ugly in that area. And so if I sort

649
00:31:53,120 --> 00:31:55,960
Speaker 10: of break it into let's say, you know, there's mid

650
00:31:56,000 --> 00:31:58,880
Speaker 10: market finance, there's acquisition finance, and there's obviously all this

651
00:31:58,960 --> 00:32:02,520
Speaker 10: investment grade private and I think it's very different rhythms

652
00:32:02,560 --> 00:32:06,440
Speaker 10: in the market. So in leverage finance, of course, there

653
00:32:06,440 --> 00:32:10,640
Speaker 10: are companies who borrowed before interest rates went up, probably

654
00:32:10,640 --> 00:32:13,600
Speaker 10: have the wrong capital structure and maybe if they haven't

655
00:32:13,600 --> 00:32:15,360
Speaker 10: had the cash flow to work through the debt, we'll

656
00:32:15,400 --> 00:32:18,320
Speaker 10: need to restructure. And that's the area of real focus

657
00:32:18,360 --> 00:32:20,920
Speaker 10: and tension where you're seeing, you know, the percentage of

658
00:32:20,960 --> 00:32:24,160
Speaker 10: pick being paid, you know, payment in kind instead of cash.

659
00:32:24,200 --> 00:32:26,840
Speaker 10: Interest has been picking up, and there's clearly going to

660
00:32:26,840 --> 00:32:29,240
Speaker 10: be some restructurings or highly like to be some restrucures

661
00:32:29,240 --> 00:32:29,760
Speaker 10: in that area.

662
00:32:30,200 --> 00:32:31,480
Speaker 4: We flip to the other side.

663
00:32:31,960 --> 00:32:35,960
Speaker 10: The biggest boomers we've discussed before has been insurers giving

664
00:32:36,000 --> 00:32:38,280
Speaker 10: money to private credit to get about a one to

665
00:32:38,320 --> 00:32:40,280
Speaker 10: one and a half percent pick up on what they

666
00:32:40,320 --> 00:32:43,880
Speaker 10: could in the public markets. Those loans are much more

667
00:32:43,920 --> 00:32:48,640
Speaker 10: around infrastructure, data centers, utilities. Now I'm not saying that

668
00:32:48,640 --> 00:32:50,760
Speaker 10: there couldn't be some credit events there, but that's a

669
00:32:50,880 --> 00:32:53,920
Speaker 10: very different part of economy which is booming, has huge

670
00:32:53,920 --> 00:32:58,120
Speaker 10: capital needs because as you see with the data center issuance,

671
00:32:58,520 --> 00:33:01,320
Speaker 10: they're having to tap the private markets as well as

672
00:33:01,360 --> 00:33:04,200
Speaker 10: public markets because the need for capex is so overwhelming.

673
00:33:04,280 --> 00:33:06,160
Speaker 4: So I think we've got different rhythms.

674
00:33:06,880 --> 00:33:09,000
Speaker 10: I think we there are going to be some credit events,

675
00:33:09,000 --> 00:33:11,160
Speaker 10: but I think in a way where we need to

676
00:33:11,160 --> 00:33:14,400
Speaker 10: think about this is credit overall. This isn't This is

677
00:33:14,440 --> 00:33:17,760
Speaker 10: a very diversified marketplace, and there's going to be fit.

678
00:33:17,920 --> 00:33:20,600
Speaker 10: Somethings are hot and some things which quite frankly, will

679
00:33:20,600 --> 00:33:21,520
Speaker 10: go it will fail.

680
00:33:22,360 --> 00:33:25,200
Speaker 6: So, Hugh, we're in for twenty twenty six. What are

681
00:33:25,200 --> 00:33:27,360
Speaker 6: the key themes you're looking at here? Because I mean

682
00:33:27,600 --> 00:33:30,600
Speaker 6: you could step back and say, boy, generally the economies

683
00:33:30,640 --> 00:33:33,520
Speaker 6: are generally pretty strong inflations there, but it's not too

684
00:33:33,600 --> 00:33:36,720
Speaker 6: much of a risk. We've got most central banks cutting

685
00:33:36,840 --> 00:33:39,960
Speaker 6: rates for a lot of folks, and corporate earning seem

686
00:33:39,960 --> 00:33:41,240
Speaker 6: pretty solid from a lot of folks.

687
00:33:41,280 --> 00:33:43,640
Speaker 4: That seems pretty constructive for risk assets.

688
00:33:43,680 --> 00:33:45,959
Speaker 6: Is that your view or you're a little bit different.

689
00:33:47,240 --> 00:33:48,520
Speaker 4: No, Look, I think no.

690
00:33:48,600 --> 00:33:50,640
Speaker 10: I can the aeras of the market that I know well,

691
00:33:50,680 --> 00:33:53,360
Speaker 10: I mean, let's say take European banks, I'm pretty constructive. Still,

692
00:33:53,480 --> 00:33:55,400
Speaker 10: I don't see a big pickup in bad debts. I

693
00:33:55,400 --> 00:33:58,280
Speaker 10: see the interest rate environment being conducive, but there's not

694
00:33:58,400 --> 00:34:01,200
Speaker 10: much growth here. But I think the themes. Look, I've

695
00:34:01,240 --> 00:34:05,000
Speaker 10: got three big themes the next year. So one is mercantilism.

696
00:34:05,360 --> 00:34:10,279
Speaker 10: How will the tariff policies that invest domestically. How will

697
00:34:10,320 --> 00:34:13,560
Speaker 10: mercantism not just play out in the US and China?

698
00:34:13,640 --> 00:34:15,800
Speaker 10: But what happens to Europe being the piggy in the middle,

699
00:34:16,000 --> 00:34:20,160
Speaker 10: do they really invest and take advantage someone like Norway

700
00:34:20,200 --> 00:34:24,160
Speaker 10: with all its rare arts or will they get panicked

701
00:34:24,480 --> 00:34:27,040
Speaker 10: and make some poor deals. So I think mercantilism and

702
00:34:27,080 --> 00:34:29,520
Speaker 10: how that plays out, I think is really key. I

703
00:34:29,520 --> 00:34:33,320
Speaker 10: think second is the whole AI data boom, the whole Capex.

704
00:34:34,040 --> 00:34:36,799
Speaker 10: Does that continue to have real force because in which

705
00:34:36,840 --> 00:34:40,520
Speaker 10: case that's very positive backdrop for at least banks and

706
00:34:40,560 --> 00:34:43,920
Speaker 10: financial markets because that's a huge need for credit. And

707
00:34:43,960 --> 00:34:46,000
Speaker 10: then the third is like kind of you know we've

708
00:34:46,040 --> 00:34:49,280
Speaker 10: had is then the debate about the cycle in Europe

709
00:34:49,440 --> 00:34:52,040
Speaker 10: and really will we take advantage? Is this late cycle

710
00:34:52,120 --> 00:34:54,440
Speaker 10: and we're going to go into a slight slowdown or

711
00:34:54,480 --> 00:34:57,680
Speaker 10: will Europe start to get it sort of mojo back together?

712
00:34:58,560 --> 00:35:00,479
Speaker 4: So they're for me the three big theme for twenty

713
00:35:00,520 --> 00:35:01,000
Speaker 4: twenty six.

714
00:35:01,160 --> 00:35:06,040
Speaker 3: The claim started with European banking and penetrating analysis of

715
00:35:06,080 --> 00:35:10,600
Speaker 3: income statements here von steinas with that background, your thoughts

716
00:35:10,960 --> 00:35:17,760
Speaker 3: and how private credit will clear given lower valuations than expected?

717
00:35:18,239 --> 00:35:20,040
Speaker 3: How is that process going to play out?

718
00:35:23,160 --> 00:35:25,600
Speaker 10: So Tom, I think this goes back to this multi speed.

719
00:35:26,080 --> 00:35:30,439
Speaker 10: So I think that you know, in the Capex rich

720
00:35:31,200 --> 00:35:36,719
Speaker 10: insurance supported you know quite frankly boom around Capex. I

721
00:35:36,760 --> 00:35:40,480
Speaker 10: think that the demand for capital is so high it's

722
00:35:40,480 --> 00:35:42,600
Speaker 10: actually providing a bit of a risk premium, and that's

723
00:35:42,640 --> 00:35:44,840
Speaker 10: why you're still still seeing this this extra So I

724
00:35:44,880 --> 00:35:48,160
Speaker 10: think that piece of the market absent at a major

725
00:35:48,160 --> 00:35:50,680
Speaker 10: shock is in really good shape. But I think around

726
00:35:50,719 --> 00:35:55,439
Speaker 10: acquisition finance, those deals which were written you know, five

727
00:35:55,480 --> 00:35:58,320
Speaker 10: six years ago probably over leven in terms of companies.

728
00:35:58,360 --> 00:36:00,640
Speaker 10: If they haven't had that cash flow work through, then

729
00:36:00,640 --> 00:36:02,799
Speaker 10: I suspect there will be some you know, they're clearly

730
00:36:02,840 --> 00:36:05,680
Speaker 10: going to be some restructurings and credit events. I think

731
00:36:05,840 --> 00:36:09,319
Speaker 10: what you've seen, Tom is that if you like the

732
00:36:09,360 --> 00:36:13,680
Speaker 10: continuation funds, the secondary funds, the pick that the innovations

733
00:36:13,680 --> 00:36:16,040
Speaker 10: that the credit markets have had have been trying to

734
00:36:16,120 --> 00:36:20,200
Speaker 10: help private equity owners through a cycle where they haven't

735
00:36:20,239 --> 00:36:23,480
Speaker 10: been able to sell. And so the pause, the ball

736
00:36:23,520 --> 00:36:25,759
Speaker 10: case is that the pick up an M and A

737
00:36:25,880 --> 00:36:28,640
Speaker 10: that you've had on the show, whether it's Morgan Stanley, JP,

738
00:36:28,719 --> 00:36:31,040
Speaker 10: Morgan Goldman's are expecting if that M and A and

739
00:36:31,120 --> 00:36:35,040
Speaker 10: IPO Boom picks up, that's a release alve. But if

740
00:36:35,040 --> 00:36:37,759
Speaker 10: that doesn't play out, then I still think we're going

741
00:36:37,840 --> 00:36:40,600
Speaker 10: to get you know, a couple of percent restructurings next

742
00:36:40,680 --> 00:36:43,279
Speaker 10: year of that cohort which you know are under a

743
00:36:43,320 --> 00:36:43,800
Speaker 10: lot of pressure.

744
00:36:44,160 --> 00:36:47,520
Speaker 3: Hugh, take that phone called Tot, Maam. They're looking for

745
00:36:47,560 --> 00:36:48,920
Speaker 3: a new coach. I know they are.

746
00:36:49,040 --> 00:36:49,080
Speaker 7: You.

747
00:36:49,239 --> 00:36:52,359
Speaker 3: Von Steina is the next coach of the Tots where us.

748
00:36:52,360 --> 00:36:57,120
Speaker 3: He is with Oliver Wyman there on his disunited that kingdom.

749
00:36:57,440 --> 00:37:00,839
Speaker 3: Stay with us. More from Bloomberg Survey on coming up

750
00:37:01,040 --> 00:37:08,680
Speaker 3: after this.

751
00:37:08,680 --> 00:37:12,560
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

752
00:37:12,640 --> 00:37:16,040
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

753
00:37:16,080 --> 00:37:19,040
Speaker 1: with the Bloomberg Business app. You can also listen live

754
00:37:19,080 --> 00:37:22,680
Speaker 1: on Amazon Alexa from our flagship New York station, Just

755
00:37:22,719 --> 00:37:26,040
Speaker 1: say Alexa play Bloomberg eleven thirty the newspaper.

756
00:37:26,160 --> 00:37:29,239
Speaker 2: She's been working at it diligently since for twenty two.

757
00:37:29,320 --> 00:37:31,160
Speaker 2: This morning, Lisa Mato, you got it.

758
00:37:31,239 --> 00:37:31,920
Speaker 4: Let's start with this.

759
00:37:32,600 --> 00:37:35,680
Speaker 9: San Francisco drivers are saying that waymos self's driving cars. Yes,

760
00:37:35,960 --> 00:37:39,080
Speaker 9: are behaving like New York City taxi drivers. Oh boy,

761
00:37:39,080 --> 00:37:41,799
Speaker 9: they're getting aggressive, okay, Wall Street jurn I spoke to

762
00:37:41,800 --> 00:37:42,200
Speaker 9: some of them.

763
00:37:43,160 --> 00:37:44,120
Speaker 4: She's seen it. Okay.

764
00:37:44,320 --> 00:37:47,360
Speaker 9: So they're saying they're in the tunnel and they're changing lanes,

765
00:37:47,480 --> 00:37:49,800
Speaker 9: you know. By the San Francisco yer they're making illegal

766
00:37:49,960 --> 00:37:52,839
Speaker 9: U turns and then the minute the light turns green,

767
00:37:52,880 --> 00:37:53,760
Speaker 9: theyy florid.

768
00:37:54,000 --> 00:37:56,120
Speaker 2: I saw that. I saw that.

769
00:37:56,920 --> 00:37:59,680
Speaker 3: One went by me. I'm fit the avenue. I don't

770
00:37:59,680 --> 00:38:02,600
Speaker 3: get it. I get it, Austin, I get this.

771
00:38:03,040 --> 00:38:05,040
Speaker 2: Help me. Lisa Loblaw won't speak to me.

772
00:38:05,880 --> 00:38:08,080
Speaker 9: Well there's a reason, okay. So the Wall Street Journal

773
00:38:08,080 --> 00:38:10,520
Speaker 9: spoke with their senior director of product management and they

774
00:38:10,520 --> 00:38:12,279
Speaker 9: told them about this. Right, So what he said is

775
00:38:12,280 --> 00:38:15,960
Speaker 9: that they're trying to make their cars confidently assertive.

776
00:38:16,120 --> 00:38:18,640
Speaker 4: That's how they put it, Yes, because they used to

777
00:38:18,680 --> 00:38:19,800
Speaker 4: be a little bit passive.

778
00:38:19,920 --> 00:38:22,359
Speaker 9: And then when you're passive, that can, you know, become

779
00:38:22,400 --> 00:38:24,680
Speaker 9: a little disruptive, you know, because if you have a

780
00:38:24,719 --> 00:38:28,200
Speaker 9: car who's being nicey nice, and sometimes it can disrupt things.

781
00:38:28,320 --> 00:38:30,520
Speaker 9: So they say they want them to be a little

782
00:38:30,520 --> 00:38:35,200
Speaker 9: bit more confident. I used to be confright, and then yeah,

783
00:38:35,280 --> 00:38:39,560
Speaker 9: and once you get used to drive, Yeah.

784
00:38:39,160 --> 00:38:42,920
Speaker 2: And I was confidently assertive and drove the VW Bug

785
00:38:42,960 --> 00:38:45,360
Speaker 2: into a ditch. Oh gosh.

786
00:38:46,640 --> 00:38:46,759
Speaker 3: No.

787
00:38:46,760 --> 00:38:48,759
Speaker 9: But you know, with the regular drivers, like my daughter,

788
00:38:48,800 --> 00:38:50,880
Speaker 9: she just started learning. She was two hands on the wheel.

789
00:38:50,920 --> 00:38:53,120
Speaker 9: Now she's got like a Starbucks one hand. She's like

790
00:38:53,600 --> 00:38:56,680
Speaker 9: like no, you can't get confident like that.

791
00:38:56,760 --> 00:38:58,239
Speaker 2: And here we go.

792
00:38:58,600 --> 00:39:01,480
Speaker 9: Okay, there's a new in demand job skill. Are you

793
00:39:01,520 --> 00:39:04,640
Speaker 9: ready for it? It's being an influencer on social media?

794
00:39:04,719 --> 00:39:05,040
Speaker 2: Okay.

795
00:39:05,320 --> 00:39:10,319
Speaker 9: So companies like Starbucks, Delta Airlines, they're hiring people to

796
00:39:10,440 --> 00:39:14,560
Speaker 9: be these specific positions to show how fun the company

797
00:39:14,640 --> 00:39:17,319
Speaker 9: is to work for, to give different details, all with

798
00:39:17,400 --> 00:39:20,640
Speaker 9: the approval of the company. However, so they're saying it's

799
00:39:20,640 --> 00:39:22,640
Speaker 9: a win win for the company. So it allows the

800
00:39:22,640 --> 00:39:24,920
Speaker 9: companies to show place, you know, to showcase, hey, this

801
00:39:25,000 --> 00:39:27,240
Speaker 9: is a great place to work. And then it allows

802
00:39:27,280 --> 00:39:30,000
Speaker 9: the workers a chance to bring their skills to a

803
00:39:30,040 --> 00:39:34,960
Speaker 9: bigger audience. They get, you know, work trips, professional development training,

804
00:39:35,000 --> 00:39:39,320
Speaker 9: they get to update their resume, their LinkedIn profiles, rich.

805
00:39:43,800 --> 00:39:44,800
Speaker 2: Technical director.

806
00:39:45,239 --> 00:39:51,440
Speaker 3: Can you see kind of fellow on TikTok No, I'm

807
00:39:51,480 --> 00:39:55,120
Speaker 3: not sure, as you kill it every day.

808
00:39:55,400 --> 00:39:56,000
Speaker 4: It's a big thing.

809
00:39:56,040 --> 00:39:56,640
Speaker 2: It's a big thing.

810
00:39:56,680 --> 00:39:59,880
Speaker 9: I'm not walking around my phone trying to detail.

811
00:40:00,080 --> 00:40:02,000
Speaker 4: We'll see if that comes to it. Okay.

812
00:40:02,080 --> 00:40:06,919
Speaker 9: So there's a new exclusive club okay, soho house better

813
00:40:06,960 --> 00:40:07,279
Speaker 9: look out.

814
00:40:07,320 --> 00:40:07,600
Speaker 2: Okay.

815
00:40:07,600 --> 00:40:10,960
Speaker 9: It's in New York City. It's called Moss. It recently opened.

816
00:40:11,000 --> 00:40:13,520
Speaker 9: It's five stories at five twenty fifth Avenue, right by

817
00:40:13,520 --> 00:40:16,000
Speaker 9: forty third Street, so right in midtown. It was founded

818
00:40:16,000 --> 00:40:18,279
Speaker 9: by these two sisters, and the New York Post took

819
00:40:18,320 --> 00:40:18,759
Speaker 9: a tour of it.

820
00:40:18,840 --> 00:40:18,960
Speaker 2: Right.

821
00:40:19,000 --> 00:40:22,920
Speaker 9: So you have five fancy restaurants, all this lounge space,

822
00:40:23,080 --> 00:40:26,879
Speaker 9: twenty thousand square feet of dining and social space. Here's

823
00:40:26,880 --> 00:40:30,680
Speaker 9: a good thing, twenty thousand feet of wellness space.

824
00:40:30,719 --> 00:40:35,160
Speaker 4: There's two floors cigar, yes if that's different word.

825
00:40:35,400 --> 00:40:39,040
Speaker 6: Hally and Colleen Brooks called Moss a mix of quoting

826
00:40:39,239 --> 00:40:42,560
Speaker 6: intelligent leisure and physical culture.

827
00:40:42,600 --> 00:40:45,160
Speaker 4: You have it there, you have it now. The cost

828
00:40:45,239 --> 00:40:46,160
Speaker 4: of it costs.

829
00:40:46,360 --> 00:40:49,319
Speaker 9: The costs here it is okay, monthly dues anywhere from

830
00:40:49,320 --> 00:40:52,440
Speaker 9: two eighty to seven hundred and forty five dollars, and

831
00:40:52,520 --> 00:40:55,080
Speaker 9: that's on top of the initiation fee, which can run

832
00:40:55,120 --> 00:40:58,680
Speaker 9: you from fifteen hundred to nearly four thousand dollars. So

833
00:40:58,760 --> 00:41:00,600
Speaker 9: that's just to be a member and then to get

834
00:41:00,600 --> 00:41:02,040
Speaker 9: there and to you know, pay for all your food

835
00:41:02,040 --> 00:41:02,640
Speaker 9: and drink.

836
00:41:02,640 --> 00:41:03,120
Speaker 4: Some knowledge.

837
00:41:03,640 --> 00:41:04,799
Speaker 6: That sounds like it's just.

838
00:41:06,480 --> 00:41:08,800
Speaker 9: I've been to show house and I'm like, whoom, Maybe

839
00:41:08,800 --> 00:41:11,799
Speaker 9: I have to find a friend who comes over to here.

840
00:41:12,520 --> 00:41:15,120
Speaker 9: But it's just another place that that people can spend

841
00:41:15,160 --> 00:41:16,680
Speaker 9: their money here in New York City, all right.

842
00:41:16,719 --> 00:41:19,000
Speaker 6: I mean there's the clubs everywhere. I mean the old clubs,

843
00:41:19,239 --> 00:41:21,799
Speaker 6: vintage clubs that have been around for hundreds of years,

844
00:41:21,840 --> 00:41:23,400
Speaker 6: and then some of the new clubs.

845
00:41:24,160 --> 00:41:26,080
Speaker 2: We're coming up the concept next to your folks.

846
00:41:26,120 --> 00:41:31,600
Speaker 3: Club Surveillance Lisa's living room, Lisa Mateo, thank you so

847
00:41:31,719 --> 00:41:33,360
Speaker 3: much the newspapers.

848
00:41:33,560 --> 00:41:38,400
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

849
00:41:38,520 --> 00:41:42,800
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

850
00:41:42,920 --> 00:41:46,400
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

851
00:41:46,480 --> 00:41:50,520
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

852
00:41:50,520 --> 00:41:53,920
Speaker 1: can also watch us live every weekday on YouTube and

853
00:41:54,120 --> 00:41:55,840
Speaker 1: always on the Bloomberg terminal.

854
00:42:00,760 --> 00:42:01,320
Speaker 5: Hi