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Trump's Crony Capitalism Fouls TikTok-Oracle Deal: Nocera · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day,
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
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  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
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  Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. It is time for Bloomberg Opinion.
• 0:22
  Speaker 1: John o' sarah, one of our favorites to chat with
• 0:24
  Speaker 1: Bloomberg Opinion column, is covering business and has a column
• 0:27
  Speaker 1: out today on Oracle TikTok and how that deal is pouring,
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  Speaker 1: what he's holding the Trump talks and into capitalism. Definitely
• 0:36
  Speaker 1: want to ask him about that. But first, Joe, what
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  Speaker 1: do you make of the fact, I know it's off topic,
• 0:42
  Speaker 1: but Jersey is raising taxes on people making more than
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  Speaker 1: one million dollars. We saw back in eighteen that that
• 0:49
  Speaker 1: happened to people exceeding five million dollars a year. I'm
• 0:52
  Speaker 1: just curious as to your thoughts on whether states should
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  Speaker 1: be doing this across the board in order to make
• 0:57
  Speaker 1: up for budget short holls. In know, it's a really
• 1:01
  Speaker 1: really tough situation because if they don't raise those taxes.
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  Speaker 1: The budget start falls are going to be horrible. And
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  Speaker 1: if they do raise the taxes, they're encouraging wealthy people
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  Speaker 1: to move out of the state. So uh, you know, uh,
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  Speaker 1: you know, New Jersey's got its issues, but in New
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  Speaker 1: York City, this is this is potentially um uh ruinous
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  Speaker 1: for the city. Uh and and and I think Cuomo
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  Speaker 1: in New York at least is right to uh to
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  Speaker 1: oppose it. All right, Joe, let's uh take a look
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  Speaker 1: at your calm here. We'll talk about this TikTok deal.
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  Speaker 1: It's the most fascinating deal. It seems like, you know,
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  Speaker 1: this is a government engineered transfer of assets that I
• 1:44
  Speaker 1: just didn't think i'd ever see. What's your take on it?
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  Speaker 1: Everything about it is wrong, everything it shouldn't be happening.
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  Speaker 1: It's the kind of thing that happens in Russia. Honestly. Um,
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  Speaker 1: you know, first of all, uh the idea that you
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  Speaker 1: first of all, the president actually originally wanted to band
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  Speaker 1: TikTok to punish China for the coronavirus, which is ridiculous.
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  Speaker 1: So then he comes back and says, well, we have
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  Speaker 1: national security issues. Uh, they could they could wind up
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  Speaker 1: blackmailing federal employees with the data they're going to collect
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  Speaker 1: equally ridiculous. Um, you know, are there national security issues
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  Speaker 1: surrounding TikTok? I don't know. But the way you handle
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  Speaker 1: it is you don't wake up one morning and say,
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  Speaker 1: you know you're gonna be shut down in six weeks.
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  Speaker 1: That's just not how the work. That's not that's not
• 2:34
  Speaker 1: the way America is supposed to work. At least American
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  Speaker 1: capitalism is not supposed to work there. And then it
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  Speaker 1: turns out that the guy and the woman who are
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  Speaker 1: likely to get a deal with TikTok are the ones
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  Speaker 1: to the president's buddies, which is the worst kind of
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  Speaker 1: krony capitalism the Republicans used to scream about when Obama
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  Speaker 1: was president. It's so strange, right Jo, because it just
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  Speaker 1: came out of the blue. That's not happening with any
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  Speaker 1: of a country. Do you think it's reciprocity for the
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  Speaker 1: fact that China insists on US companies having a local partner.
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  Speaker 1: I know that that would that would uh, that would
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  Speaker 1: that would imply that there's actually a method to the
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  Speaker 1: president's madness. And I don't I don't really think that's
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  Speaker 1: what's going on. Here. Um, I just think, you know,
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  Speaker 1: he saw an opportunity to whack China and he decided
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  Speaker 1: to take it. So what does it mean for a
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  Speaker 1: company like Oracle Joe. I mean, this is a huge
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  Speaker 1: global company, Larry Elson, one of the highest profile uh,
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  Speaker 1: you know, managers executives in the world, kind of playing
• 3:40
  Speaker 1: this kind of game here. What's what's kind of the takeaway? Well,
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  Speaker 1: you know, I think the takeaway really is if you
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  Speaker 1: if you are an ally of this president as a
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  Speaker 1: business person or as a business entity, you're gonna you're
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  Speaker 1: gonna get a lot of leeway. You're gonna get to
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  Speaker 1: do things that maybe their companies can't do. Another really
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  Speaker 1: good example of this, um, which I find really quite appalling,
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  Speaker 1: is the way the Antitrust Department has become kind of
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  Speaker 1: a weaponized tool for the President to try and punish
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  Speaker 1: his enemies and and and help his friends. You know,
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  Speaker 1: the greatest example of this was when he tried to
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  Speaker 1: block when they tried to block the A. T and
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  Speaker 1: T uh, the A T and T Time Warner deal
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  Speaker 1: because because the President was so uh you know, because
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  Speaker 1: of CNN. And then he lets the Fox Disney deal
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  Speaker 1: go right through even though it had a lot larger
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  Speaker 1: anti trust implications because Rupert Murdoch was Trump's ally. And
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  Speaker 1: you know, we've we've almost become numb to this. This
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  Speaker 1: is what really bothers me. You know, this is not
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  Speaker 1: how American capitalism is supposed to work. It's just not.
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  Speaker 1: This is what they do in Russia. This is what
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  Speaker 1: they do in authoritarian governments, where you have to suck
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  Speaker 1: up to the leader to get what you want as
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  Speaker 1: a business person, and if to oppose the leader, he'll
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  Speaker 1: shut you down. That's what's happening here. And and it's
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  Speaker 1: it's happened enough now in America that we kind of
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  Speaker 1: we don't we don't even we don't even blink. And
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  Speaker 1: and to me, that that that, to me, is the
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  Speaker 1: most troubling aspect of this deal. Yeah, I mean it
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  Speaker 1: started off well at the very beginning of the presidency
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  Speaker 1: with you know, good news conferences with people around boardroom tables,
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  Speaker 1: and you know, Mr my Pillow and all of these
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  Speaker 1: companies that were just sort of plucked out of nowhere
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  Speaker 1: that we're just being you know, extolled by the president
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  Speaker 1: as as as the best companies in the world. Do
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  Speaker 1: you think that business leaders have a part to play
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  Speaker 1: in this that they should have. I mean, after all,
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  Speaker 1: they're the bastions of capitalism, they're the the curators, right. Well,
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  Speaker 1: it's a it's a little hard to know what they
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  Speaker 1: should do. I mean, I I am offended that that.
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  Speaker 1: Larry Ellison, I mean I feel like Larry Allison and
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  Speaker 1: Saffracts who lead Oracle have you know, purposely sided with
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  Speaker 1: the president knowing that it could benefit them financially, um,
• 6:02
  Speaker 1: which it has. But but take a look at Amazon,
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  Speaker 1: for God's sake. I mean, this is one of the
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  Speaker 1: one of the most important companies in the country and um,
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  Speaker 1: you know, an engine of profit and an engine of jobs.
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  Speaker 1: And all Trump does is try to hammer it and
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  Speaker 1: try to punish it because Jeff Bezos owns the Washington
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  Speaker 1: Post and and you know, take a look at Pharma.
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  Speaker 1: I mean, you've got to the point where the farmer
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  Speaker 1: companies have actually signed a collective pledge not to rush
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  Speaker 1: the vaccine if the science isn't there. I mean, you
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  Speaker 1: do that? Why are they doing that? They're doing that
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  Speaker 1: because people are afraid. People don't trust this president to
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  Speaker 1: do the right thing with the vaccine. So over and
• 6:42
  Speaker 1: over and over you see companies grappling with how to
• 6:45
  Speaker 1: deal with this president? Um uh and and and it's
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  Speaker 1: hard Joe, where's Congress in all of this? That's a joke.
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  Speaker 1: Congress is Nowhere's violl Honestly, I mean the Republicans have
• 7:01
  Speaker 1: never ever, ever tried to stop Trump from doing anything,
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  Speaker 1: and the Democrats don't have the power to do to
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  Speaker 1: to stop it. I mean, what it was to surprise
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  Speaker 1: me on this deal in particular is that the Democrats
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  Speaker 1: haven't seen it for the chrony capitalism that it is
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  Speaker 1: um and and have not really said anything. Well, everybody's
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  Speaker 1: seeing it in terms of, you know, does TikTok pose
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  Speaker 1: a threat or not? Instead of seeing it as is
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  Speaker 1: this really the way American capitalism should work? Um, which
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  Speaker 1: I think should be a real focus of people. And
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  Speaker 1: it's just not. Hey, Joe, thanks so much for joining us.
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  Speaker 1: As always Jonah Sarah Bloomberg Opinion calumnist giving us his
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  Speaker 1: thoughts on his recent comment titled Oracle TikTok deal pours
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  Speaker 1: Trump talks and into capitalism, really calling into question kind
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  Speaker 1: of how this deal came about Vanni. Uh, you know,
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  Speaker 1: and is that the way uh that U s commerce
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  Speaker 1: should be UH dealt with yeah, and I mean it's
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  Speaker 1: clearly not right. But you have sort of somebody who
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  Speaker 1: who tells themselves as a businessman in the president in
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  Speaker 1: the presidency, it might be something you might expect from,
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  Speaker 1: you know, a regular businessman. Is he a regular businessman anymore?
• 8:13
  Speaker 1: I don't know, right, exactly right? You know, one of
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  Speaker 1: the biggest fallouts here economically from this pandemic has been
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  Speaker 1: the impact of small and mid sized businesses. We've seen
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  Speaker 1: some large fortune five fund of corporations have plenty ready
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  Speaker 1: access to capital to whether the storm, but the concerns
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  Speaker 1: really are for some of these smaller midsized businesses. Uh.
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  Speaker 1: We have Frank Sorrentino, chief executive officer for Connect One Bank,
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  Speaker 1: based in Englewood Cliffs, New Jersey. Uh, really dealing with
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  Speaker 1: these smaller midsized business is a great person to chat
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  Speaker 1: to get a sense of what's going on out there. Frank,
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  Speaker 1: you're based in New Jersey. We just had New Jersey
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  Speaker 1: Governor Phil Murphy talk announced a tax increase on millionaires
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  Speaker 1: and offset in part by some attack breaks for some
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  Speaker 1: middle class households. Given that you do a lot of
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  Speaker 1: business in the state of New Jersey, have a lot
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  Speaker 1: of clients in the state of New Jersey. How do
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  Speaker 1: you think what do you think the impact is going
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  Speaker 1: to be for the state of New Jersey. Well, first though,
• 9:09
  Speaker 1: thanks for having me back on the show. But you know,
• 9:12
  Speaker 1: as from this Jersey's perspective, this constant refrain about let's
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  Speaker 1: tax the rich UH, certainly doesn't motivate people to want
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  Speaker 1: to invest more dollars in the state of New Jersey.
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  Speaker 1: And so I think we need to be very careful
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  Speaker 1: as a state what we try to promote here. We
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  Speaker 1: need our businesses to be successful, we need investment dollars
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  Speaker 1: coming into the state. We need people who feel there's
• 9:36
  Speaker 1: going to be a friendlier environment as we move forward,
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  Speaker 1: as opposed to one which is going to be more
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  Speaker 1: hostile to business, more hostile to those who are wealthy
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  Speaker 1: and our affluent and who spend a lot of the
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  Speaker 1: money that gets spent and make the investments in the state.
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  Speaker 1: So I think the rhetoric, whether it comes to pass
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  Speaker 1: or not, UH is dangerous to some extent. What would
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  Speaker 1: it do to your base of deposits, Let's put it
• 10:04
  Speaker 1: that way, Frank. Well, look, New Jersey geographically is located
• 10:09
  Speaker 1: in the New York metro market. Area, and so New
• 10:13
  Speaker 1: Jersey has had one of the highest packs rates in
• 10:15
  Speaker 1: the nation. Uh certainly, there are things that I think
• 10:18
  Speaker 1: could be done that would be better for the state,
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  Speaker 1: but we can't. We're not going to change the geography,
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  Speaker 1: and this is one of the more vibrant areas of
• 10:28
  Speaker 1: the country. Notwithstanding you know, some of the things that
• 10:31
  Speaker 1: have occurred here through because of the COVID virus over
• 10:34
  Speaker 1: the last couple of months. It's still the New York
• 10:37
  Speaker 1: City metro market, and so I believe this still will
• 10:41
  Speaker 1: be strength in the market going forward. It's just a
• 10:43
  Speaker 1: question of are we going to see a recovery that's
• 10:48
  Speaker 1: very strong or something that's a little bit more on
• 10:51
  Speaker 1: the limp side. So, Frank, what are you in fact
• 10:54
  Speaker 1: seeing from your customers out there? Are they how challenged
• 10:59
  Speaker 1: is business environment? Because you have a good view of
• 11:02
  Speaker 1: the broad metro market. You know, it's a tale of
• 11:05
  Speaker 1: two cities, right There are those who are doing okay.
• 11:09
  Speaker 1: There are those that are doing well. Certain parts of
• 11:13
  Speaker 1: the real estate market in uh in and around the
• 11:15
  Speaker 1: suburbs of New York City and New Jersey as part
• 11:18
  Speaker 1: of that, are benefiting from people not wanting to live
• 11:22
  Speaker 1: in the city. Proper. There are lots of small businesses though,
• 11:26
  Speaker 1: that are suffering, and a lot of the rush to
• 11:31
  Speaker 1: deal with the COVID virus. While certainly you know was
• 11:35
  Speaker 1: apropos when the virus first reared its head in in
• 11:38
  Speaker 1: the February and March timeframe, we know so much more today.
• 11:42
  Speaker 1: I think there's so much more that we could do
• 11:44
  Speaker 1: to support those small businesses they are suffering. There are
• 11:48
  Speaker 1: a lot of arbitrary regulations and laws. I mean, the
• 11:53
  Speaker 1: last one that's pretty comical is you know, why does
• 11:55
  Speaker 1: a restaurant or a bar have to close at twelve o'clock?
• 11:58
  Speaker 1: Does COVID know that at twelve all and it becomes
• 12:00
  Speaker 1: more lethal? I don't understand. So there needs to be
• 12:04
  Speaker 1: policies here that are promoting small businesses, especially the ones
• 12:08
  Speaker 1: that are suffering. And it's the smallest ones that are
• 12:11
  Speaker 1: having the toughest struggle. How easy is it for them
• 12:14
  Speaker 1: to get a continuing line of credit with you? And
• 12:17
  Speaker 1: what kinds of things are you looking for that maybe
• 12:20
  Speaker 1: weren't looking for pre pandemic. Look, we're always looking at
• 12:24
  Speaker 1: what did that business look like prior to the pandemic
• 12:28
  Speaker 1: and it connect one. Certainly are our emphasis is to
• 12:33
  Speaker 1: try to help small businesses in every way we can,
• 12:36
  Speaker 1: so those that were successful prior to the pandemic, we
• 12:39
  Speaker 1: are able to look through what's happening today and hopefully
• 12:43
  Speaker 1: the p P P loan that they received got them
• 12:46
  Speaker 1: to this point and we can start to see some
• 12:49
  Speaker 1: light at the end of the tunnel. There are those, however,
• 12:53
  Speaker 1: that we're struggling prior to the pandemic, and so they're
• 12:57
  Speaker 1: having a tough time access in capital, and there's not
• 13:00
  Speaker 1: a whole lot out there for the smallest businesses to
• 13:04
  Speaker 1: be able to help them in any sort of stimulus. Frank,
• 13:07
  Speaker 1: if you had to tighten your lending standards here, given
• 13:10
  Speaker 1: the environment we're in, making that maybe even tougher for
• 13:12
  Speaker 1: the small businesses. I wouldn't characterize how we've looked at
• 13:18
  Speaker 1: credit as a tightening. I think it's been almost a
• 13:22
  Speaker 1: self fulfilling prophecy. As we sit here today, businesses are struggling,
• 13:27
  Speaker 1: cash flows are constrained. There are things that even under
• 13:30
  Speaker 1: our normal underwriting guidelines would would would constrict credit to
• 13:36
  Speaker 1: a certain degree, and so I do think that is
• 13:39
  Speaker 1: an issue, and we are taking the time and the effort.
• 13:43
  Speaker 1: We've stood up an SBA lending UH platform. We invested
• 13:47
  Speaker 1: in a fintech called both Fly to be able to
• 13:50
  Speaker 1: help small businesses. UH. So we're we're taking we're doing
• 13:54
  Speaker 1: things that we believe will be able to help folks
• 13:58
  Speaker 1: to get through this time, to take advantage of many
• 14:02
  Speaker 1: of the other programs that might be out there, especially
• 14:04
  Speaker 1: for small businesses. But the constraint of credit is real. Frank,
• 14:10
  Speaker 1: thanks once again for always updating us. Frank Sorrentino is
• 14:13
  Speaker 1: CEO of connect One Bank. Office is located both in
• 14:16
  Speaker 1: New York and New Jersey, and you can only imagine
• 14:18
  Speaker 1: how impacted all those offices and the business is from
• 14:22
  Speaker 1: this pandemic really hitting the Tri state area so hard.
• 14:26
  Speaker 1: Or thanks again to Frank. Well. One of many of
• 14:30
  Speaker 1: the unfortunate byproducts economic byproducts of this pandemic has been
• 14:35
  Speaker 1: once again just raising the income inequality, the wealth inequality
• 14:41
  Speaker 1: in this country. A lot of folks are taking a
• 14:43
  Speaker 1: look at this issue, including our next guest, Katherine and Edwards.
• 14:46
  Speaker 1: She's professor UH party Rant at graduate school also on
• 14:50
  Speaker 1: economists at their Rant Corporation based in Washington, d C. Katherine,
• 14:53
  Speaker 1: thanks so much for joining us here again. Income inequality,
• 14:57
  Speaker 1: wealth inequality, a growing issue in this country for seemingly decades,
• 15:03
  Speaker 1: perhaps exacerbated here by this pandemic. What did your work show?
• 15:08
  Speaker 1: Good morning, Thank you for having me. Uh. In my paper,
• 15:12
  Speaker 1: which I did with a colleague at the Rand Corporation,
• 15:14
  Speaker 1: we asked a simple question, what would income look like
• 15:20
  Speaker 1: in the United States if incomes grew apace with the economy?
• 15:24
  Speaker 1: So if GDP increases two, then income increases two. From
• 15:30
  Speaker 1: the end of World War Two, until this was the case,
• 15:35
  Speaker 1: this was the lived experience of the U. S economy,
• 15:37
  Speaker 1: and from the bottom to the top of the income distribution,
• 15:40
  Speaker 1: income grew at a similar pace to GDP. But after
• 15:46
  Speaker 1: this is when inequality and growth starts to emerge. An
• 15:49
  Speaker 1: income at the bottom stalls and it falls behind the
• 15:53
  Speaker 1: pace of GDP growth, while incomes at the very top
• 15:56
  Speaker 1: accelerated to the point where they outpace economic growth. So
• 16:01
  Speaker 1: in the paper we put numbers to that difference and
• 16:04
  Speaker 1: find had income grown after like it did after World
• 16:11
  Speaker 1: War Two, the bottom of earners would collectively be taking
• 16:16
  Speaker 1: home more than two point five trillion dollars in income today.
• 16:21
  Speaker 1: And I think it's something that resonates with many, many,
• 16:25
  Speaker 1: many families. What was you know a middle class existence
• 16:28
  Speaker 1: has sort of disappeared. It used to be you could
• 16:30
  Speaker 1: be a school teacher in a one career home and
• 16:34
  Speaker 1: be able to afford a car and home and children
• 16:37
  Speaker 1: going to good schools and so on. Now that's a
• 16:41
  Speaker 1: very that's very far from being a reality. So what
• 16:44
  Speaker 1: did your study conclude? What were the conclusions? What what
• 16:51
  Speaker 1: we aimed to do was, look, you know, we were
• 16:53
  Speaker 1: looking at consequence and less at costs, right. We didn't
• 16:57
  Speaker 1: want to we weren't trying to understand what has caused
• 17:00
  Speaker 1: this distribution to be so unequal, but to be able
• 17:03
  Speaker 1: to document the extent of it and what what what
• 17:07
  Speaker 1: basically what's missing from the bottom. So for example, you know,
• 17:11
  Speaker 1: if a worker um had the same income relative to
• 17:16
  Speaker 1: economic growth in two thousand eighteen as they did in
• 17:19
  Speaker 1: v at the media, it's a difference of almost of
• 17:23
  Speaker 1: forty dollars a year more UH in earnings. I think
• 17:27
  Speaker 1: the most important kind of foundation of our analysis is
• 17:31
  Speaker 1: that we are not, you know, fabricating some scenario that's
• 17:35
  Speaker 1: so unlikely that it doesn't really make sense. We're we're
• 17:40
  Speaker 1: basing this on thirty years of observation of the U.
• 17:43
  Speaker 1: S economy, in which they did grow in tandem. So, Catherine,
• 17:48
  Speaker 1: from your study, what was kind of what do you
• 17:50
  Speaker 1: think is the main cause of income inequality? And I
• 17:53
  Speaker 1: guess the following, carl Er, that is, you know, cannot
• 17:55
  Speaker 1: be reversed. You know, again, we we would like to
• 18:00
  Speaker 1: study that using these new metrics that we identify, but
• 18:03
  Speaker 1: we didn't in the paper. I think that unfortunately, in
• 18:07
  Speaker 1: the world around researching and measuring inequality, people will tell
• 18:12
  Speaker 1: you whatever it is they already believe is the reason,
• 18:16
  Speaker 1: and being able to say it's it has to be
• 18:18
  Speaker 1: because of export, it has to be because of why,
• 18:21
  Speaker 1: you know, we don't have the type of you know,
• 18:24
  Speaker 1: we don't have as strong of evidence as we would like,
• 18:26
  Speaker 1: and people tend to just say what they already believe.
• 18:29
  Speaker 1: So if you were to ask, you know, a conservative,
• 18:32
  Speaker 1: they would say, it's because we have too high tax
• 18:34
  Speaker 1: rates at the top, or we have too much regulation
• 18:37
  Speaker 1: on business and that's why growth isn't shared. And if
• 18:40
  Speaker 1: you were to ask a progressive, they would tell you
• 18:42
  Speaker 1: it's because the minimum wage hasn't been increased since two
• 18:45
  Speaker 1: thousand seven, which was fun fact, the year I graduated college,
• 18:48
  Speaker 1: which has always an interesting perspective for me. Because I
• 18:51
  Speaker 1: just had a kid. So, you know, I think that's
• 18:54
  Speaker 1: what makes this a really hard conversation is that, like
• 18:57
  Speaker 1: you said, Vonnie, this is an experience that so many
• 18:59
  Speaker 1: people can resonate with and understand, but the policy debate
• 19:03
  Speaker 1: gets pretty fraught pretty quickly. Well, and it really was
• 19:07
  Speaker 1: at the origin of the Occupy Wall Street movement and
• 19:10
  Speaker 1: the Occupy Will movements generally around the world was in
• 19:13
  Speaker 1: human equality, and of course the Great Financial Crisis brought
• 19:16
  Speaker 1: it into dark relief. But it's not like people haven't
• 19:18
  Speaker 1: been experiencing it before then, so effectively you now have
• 19:25
  Speaker 1: observed this and put it in writing as you know,
• 19:28
  Speaker 1: a fact that since nineteen it's been digressing. How do
• 19:33
  Speaker 1: we move the dialogue forward. You know, we can't predict
• 19:38
  Speaker 1: the future and we can't say listen, all we have
• 19:41
  Speaker 1: to do is X and the world will be better.
• 19:45
  Speaker 1: But I think that we do need to look at
• 19:47
  Speaker 1: our economy, at our spending and at our tax expenditures
• 19:50
  Speaker 1: and ask, you know, what are we investing in and
• 19:53
  Speaker 1: what kind of return are we getting, because since nineteen
• 19:57
  Speaker 1: seventy five we have not been getting a broad oddly
• 20:00
  Speaker 1: shared growth and income that it has not been the return, So,
• 20:04
  Speaker 1: you know, thinking creatively and reassessing policy has to be
• 20:08
  Speaker 1: a part of it. You know. Again, it's it's unfortunate
• 20:11
  Speaker 1: that so much of policymaking is about digging in and
• 20:14
  Speaker 1: kind of like holding on white knuckles to what you
• 20:17
  Speaker 1: already believe. But if we really want to address, you know,
• 20:20
  Speaker 1: such a large and important and paramount issue in our economy,
• 20:25
  Speaker 1: we have to just you know, you have to go
• 20:26
  Speaker 1: in with clear eyes, cold hearts and say what is
• 20:29
  Speaker 1: working and what is not. Well, I we are actually
• 20:32
  Speaker 1: out of time, but we'd love to get you back
• 20:33
  Speaker 1: on to talk a little more about this another time.
• 20:36
  Speaker 1: And our thanks to you, Catherine from the Round Corporation.
• 20:40
  Speaker 1: Fantastic study. We'll try and get our hands on a
• 20:42
  Speaker 1: copy of that. Catherine and Edwards, professor at the Party
• 20:45
  Speaker 1: Round Graduate School. Let's look at Marvin Low, Senior global
• 20:51
  Speaker 1: macro strategist at State Street Global Markets. Uh, he joins
• 20:55
  Speaker 1: us here, Marvin, you know, we're like seeing a little
• 20:57
  Speaker 1: bit of a pullback in the market place today. I'd
• 20:59
  Speaker 1: love to just get your thoughts on kind of what
• 21:00
  Speaker 1: we're seeing today, anything more than just meets the eye. Yeah,
• 21:05
  Speaker 1: you know, I find it interesting that um, you know,
• 21:07
  Speaker 1: post fed, which you know, for the most part, delivered
• 21:12
  Speaker 1: what people had expected. We're getting a flattening of the
• 21:15
  Speaker 1: curve today, and we're getting kind of a broad pullback, UM,
• 21:18
  Speaker 1: just in the equity markets. You know, there's no real
• 21:20
  Speaker 1: growth value kind of story and it there's no cyclical
• 21:22
  Speaker 1: defensive story about it. UM. It's just it's just a pullback.
• 21:25
  Speaker 1: So kind of given the cautious tone that UM, I
• 21:29
  Speaker 1: think Chair Powell provided on the economy, I think people
• 21:32
  Speaker 1: are questioning just how much longer? Um. You know, the uh,
• 21:36
  Speaker 1: recent strength in the data is going to continue, and
• 21:39
  Speaker 1: I think there are some economic concerns that are creeping
• 21:41
  Speaker 1: into the market here. What will the pivot be. Will
• 21:46
  Speaker 1: it be to value stocks, Will it be out of stocks,
• 21:48
  Speaker 1: Will it be out of the US? You know, will
• 21:51
  Speaker 1: people start keeping more in cash? Yeah, you know, I
• 21:54
  Speaker 1: think valuations are a challenge in the US. UM. So
• 21:57
  Speaker 1: I think that there's going to be a pullback from
• 21:59
  Speaker 1: that perspective. UM. But you know, what we did here
• 22:02
  Speaker 1: was that rates not only in the US, but you know,
• 22:04
  Speaker 1: for the most part within the developed world are going
• 22:06
  Speaker 1: to remain at these rock bottom levels for the extended
• 22:10
  Speaker 1: period of time. So um. You know, certainly once the
• 22:13
  Speaker 1: dust settled, if you will, and there are a lot
• 22:15
  Speaker 1: of things that are gonna happen in the next couple
• 22:17
  Speaker 1: of months between the elections, between stimulus or you know
• 22:21
  Speaker 1: or lack thereof, UM. But once that dust settles settled down,
• 22:25
  Speaker 1: I think that there's going to be a retreeal I
• 22:26
  Speaker 1: think we have to think about e m um. And
• 22:29
  Speaker 1: I still think that you know, ultimately, with rates being
• 22:31
  Speaker 1: as low as they are, you still get pushed into
• 22:33
  Speaker 1: the equity markets UM at various points in this kind
• 22:36
  Speaker 1: of discussion. So, Marvin, I guess the there's a number
• 22:41
  Speaker 1: of things we're looking towards Washington, the election, as you mentioned,
• 22:43
  Speaker 1: but the fiscal stimulus, I'll tell you the odds don't
• 22:46
  Speaker 1: look good. They're gonna get anything in the near term.
• 22:49
  Speaker 1: How much of a headwind is that when if you
• 22:52
  Speaker 1: don't get fiscal stimulus, the economic data is gonna start
• 22:54
  Speaker 1: getting a little dicey going forward. Yeah, I really do
• 22:58
  Speaker 1: think it's a headwind. And I think when we kind
• 23:00
  Speaker 1: of think about, um, you know, twenty one and you know,
• 23:02
  Speaker 1: let's just put away that's quickly as place. But but
• 23:06
  Speaker 1: when we look at twenty one and we look at
• 23:08
  Speaker 1: kind of UM the amount of stimulus, you know, whether
• 23:10
  Speaker 1: it's monetary and or fiscal on both on both sides,
• 23:15
  Speaker 1: you wind up looking you wind up UM seeing less
• 23:18
  Speaker 1: of it next year than we had this year. And
• 23:20
  Speaker 1: I think that winds up being a head when even
• 23:23
  Speaker 1: when we do get steamuless. And of course, you know,
• 23:25
  Speaker 1: today's today's UM jobs data, you know, showed stability, maybe
• 23:29
  Speaker 1: some improvements depending on where you wanted to look at,
• 23:32
  Speaker 1: but there are still twenty something million people collecting UM
• 23:36
  Speaker 1: unemployment and that's a massive number. So you are cross
• 23:40
  Speaker 1: asset and you have all sorts of experience and derivative
• 23:44
  Speaker 1: trades and and all of the ways that you can
• 23:46
  Speaker 1: hedge against everything from inflation to sort of you know,
• 23:49
  Speaker 1: retail trading. Are you doing any of that right now? Marvin?
• 23:53
  Speaker 1: You know, certainly, certainly we are seeing a lot of
• 23:57
  Speaker 1: interest of of altility hedging around elections, and not necessarily
• 24:02
  Speaker 1: just around election day, but um after election day, and
• 24:06
  Speaker 1: that kind of UH to us spells concerns around contested elections.
• 24:11
  Speaker 1: And you know a lot of the stories UM and
• 24:13
  Speaker 1: concerns that that have started to risen in terms of
• 24:15
  Speaker 1: UM how long it's going to take before we actually
• 24:18
  Speaker 1: have a uh have have ultimately the candidate that we
• 24:23
  Speaker 1: know is going to be in the White House UM.
• 24:25
  Speaker 1: And I think that that is one of the worst
• 24:27
  Speaker 1: case scenarios to potentially come out of the election if
• 24:30
  Speaker 1: it takes a while before we actually know who the
• 24:33
  Speaker 1: next president is UM. So you know, certainly hedging hedging
• 24:36
  Speaker 1: around that I think makes sense. Marvin. You know, we're
• 24:39
  Speaker 1: talking about interest rates lower for longer, lower forever, however
• 24:43
  Speaker 1: you want to phrase it, And you mentioned emerging markets earlier.
• 24:46
  Speaker 1: How do you, guys, how are you thinking about emerging
• 24:50
  Speaker 1: markets here? You know, from from a from a real
• 24:53
  Speaker 1: yield perspective and in an environment where again let's put
• 24:57
  Speaker 1: to bed and look at twenty one, look at twe
• 25:00
  Speaker 1: to UM rates in the developed world are going to
• 25:02
  Speaker 1: be near zero and or negative UM for an extended
• 25:06
  Speaker 1: period of time. And from a growth profile perspective, you
• 25:09
  Speaker 1: know em still has those advantages and from a real
• 25:12
  Speaker 1: yield perspective, they're going to have that advantage. So you know,
• 25:15
  Speaker 1: I do think, UM, you need to start thinking about
• 25:18
  Speaker 1: which parts of UM emerging economies you're most comfortable with.
• 25:23
  Speaker 1: Does it depend on COVID and how it's being handled
• 25:25
  Speaker 1: by the government. Yeah, absolutely absolutely, And and and that's and
• 25:29
  Speaker 1: and that's why, um, you know at this point, um,
• 25:31
  Speaker 1: you know a little bit more cautious around it. Um,
• 25:34
  Speaker 1: you know, taking the time again to let's let the
• 25:37
  Speaker 1: dust settle. Um. But but you know, being ready for
• 25:40
  Speaker 1: that moment when um, when there's a little bit more clarity.
• 25:43
  Speaker 1: But guess absolutely the virus is still you know, the
• 25:47
  Speaker 1: major determined into economic growth. All right, Marvin, So if
• 25:51
  Speaker 1: if people are really starting to digest well what we've
• 25:54
  Speaker 1: been hearing from Chairman Palin the FED over the last
• 25:56
  Speaker 1: several weeks about lower interest rates maybe even allowing inflation
• 26:01
  Speaker 1: to move higher, they're looking for yield. You mentioned emerging markets.
• 26:06
  Speaker 1: Where else are you guys looking for returns? And how
• 26:10
  Speaker 1: much risk are you willing to take to to get
• 26:12
  Speaker 1: those returns? Yeah, I mean, you know, we're we're forced
• 26:16
  Speaker 1: to take more risk, there's no doubt. Um, you know
• 26:21
  Speaker 1: again kind of short term trading versus more of an
• 26:23
  Speaker 1: intermediate term outlook. Um. You know, I do think, I
• 26:26
  Speaker 1: do think that growth stocks still makes sense because of
• 26:29
  Speaker 1: the way there are winners and losers kind of from
• 26:33
  Speaker 1: from this kind of uh dislocated economic recovery that we're seeing,
• 26:37
  Speaker 1: so one has to think about it from that perspective
• 26:39
  Speaker 1: as well as you know, dividends associated with that. I
• 26:42
  Speaker 1: think credit has to be part of that discussion, and
• 26:44
  Speaker 1: we're pushed further down um the credit stack and further
• 26:48
  Speaker 1: out in duration just because there is a need for
• 26:50
  Speaker 1: income and then once again kind of layering and layering
• 26:53
  Speaker 1: in that UM that emerging discussion is as part of
• 26:56
  Speaker 1: your portfolio is you know, it certainly makes sense to me.
• 27:00
  Speaker 1: There's going to be a huge change next week, I
• 27:02
  Speaker 1: believe in one of the biggest credit industries. Will that
• 27:05
  Speaker 1: affect you at all? Um, No, not really, you know,
• 27:09
  Speaker 1: I mean I think I think it's pretty I think
• 27:11
  Speaker 1: it's pretty um broadly um known in the market at
• 27:15
  Speaker 1: this point. And you know those changes are UM. You know,
• 27:18
  Speaker 1: they they generally occur on on an ongoing basis, so
• 27:22
  Speaker 1: you know, we you evaluated, you look at the changes,
• 27:24
  Speaker 1: and then you make your adjustments. Very interesting, Marvin Lowe,
• 27:28
  Speaker 1: thank you so much. We appreciate that. Very interesting. Senior
• 27:31
  Speaker 1: global macro strategists at say three Global Markets, Silovanni, it's
• 27:34
  Speaker 1: really a question here of how much risk are you
• 27:39
  Speaker 1: willing to take here? In a basically a very low
• 27:42
  Speaker 1: yielding market. Yeah, and how sophisticated are you? Obviously, the
• 27:46
  Speaker 1: more sophisticated you are, the sort of more hedgee type
• 27:50
  Speaker 1: trades you can put on around whatever you know, your
• 27:52
  Speaker 1: your main trade is. Yeah, it's really interesting here. So
• 27:55
  Speaker 1: it seems like, again as Chairman Pal has suggested, really
• 27:58
  Speaker 1: since the uh Jack and Whole speech of a couple
• 28:01
  Speaker 1: of weeks ago, this is a FED that is willing
• 28:03
  Speaker 1: to let rates stay lower for longer. I think we're
• 28:06
  Speaker 1: hearing similar things out of other central banks of the
• 28:08
  Speaker 1: e c B Bank of Japan. Uh. So that's suggests
• 28:11
  Speaker 1: a very low yielding world market that calls into question
• 28:16
  Speaker 1: that's sixty allocation of a typical portfolio. People need to
• 28:20
  Speaker 1: get creative. Thanks for listening to Bloomberg Markets podcast. You
• 28:25
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
• 28:28
  Speaker 1: whatever a podcast platform you prefer. I'm Bonnie Quinn. I'm
• 28:32
  Speaker 1: on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm
• 28:34
  Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
• 28:37
  Speaker 1: always catch us worldwide at Bloomberg Radio