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Rising Rates, China, and Markets (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
0:04
Speaker 1: my co host Matt Miller. Every business day we bring
0:06
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
0:15
Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast Now. I'm very happy
0:22
Speaker 1: to have Neil Grossman here with me in the studio.
0:24
Speaker 1: He is the co founder UM and a former c
0:27
Speaker 1: i O of t KNNG Capital. He's spent two decades
0:31
Speaker 1: in the financial industry as a prop trader, asset manager,
0:34
Speaker 1: market maker. UM advised the Norwegian Central Bank, among other things.
0:39
Speaker 1: UM and UH, I want to just start the conversation
0:44
Speaker 1: off on what happened that we're at this point before
0:47
Speaker 1: we get to what we need to do to fix it,
0:49
Speaker 1: because a lot of people have been saying it's the
0:51
Speaker 1: COVID stimulus that drove this inflation that got us here, UM,
0:56
Speaker 1: but a new friend of mine, from an anarchist from Twitter,
0:59
Speaker 1: has suggested, and I think she's right, that it's really
1:03
Speaker 1: the original quantitative easing that got us in this spot.
1:08
Speaker 1: We've never gotten the hangover from that high. Um, I
1:12
Speaker 1: would say you have to actually go back a little further.
1:14
Speaker 1: Mat The original sin honestly was Alan Greenspan and the
1:17
Speaker 1: irrational exuberant speech and the concept and the concept that
1:22
Speaker 1: you were going to give the market a put if
1:26
Speaker 1: they weren't if the stock market went down. And so
1:28
Speaker 1: the FED moved into a situation where I call them
1:31
Speaker 1: a central asset manager, They're not a central bank, and
1:35
Speaker 1: so policy became asymmetrically accommodating, and they were very reluctant
1:42
Speaker 1: to to to to remove it. Is that over? Now?
1:45
Speaker 1: Is the Fed put done? Because that's what everyone's saying, Well,
1:47
Speaker 1: I mean it's still there right now. Seventy basis points
1:50
Speaker 1: is not? Is still? I mean they should have gone
1:53
Speaker 1: probably three yesterday. I mean, let's let's take I know
1:57
Speaker 1: we're getting off subject quickly, but um, the idea that
2:00
Speaker 1: you have a two to two and a half percent
2:02
Speaker 1: neutral rate at this point within not eight or nine
2:04
Speaker 1: percent as they quote the inflation rate. If you want
2:07
Speaker 1: to compare this to the seventies, by the way, and
2:09
Speaker 1: and use the methodology that was in place back then,
2:12
Speaker 1: this rate would be a lot higher. In any event,
2:15
Speaker 1: neutral depending on you know who you want to speak to.
2:19
Speaker 1: Using more objective measures would probably be between at this
2:23
Speaker 1: point five and seven. And given the type of inflation
2:26
Speaker 1: we have, in theory, it's supposed to be restrictive. So
2:30
Speaker 1: they are still providing accommodation. They still have not started
2:33
Speaker 1: to see their balance sheet reduced. So, you know, seventy
2:37
Speaker 1: five was nice, but it's not enough. So so neil Um,
2:41
Speaker 1: if you think about something more aggressive, you suggested maybe
2:44
Speaker 1: basis points or something along those lines. Clearly, this Federal
2:47
Speaker 1: Reserve is trying to I guess balance, you know, fighting
2:50
Speaker 1: inflation without pushing the country into a recession or two
2:54
Speaker 1: deep of a recession. How do you think about that
2:56
Speaker 1: balancing act? Well, I think the fact is that at
2:59
Speaker 1: this point it's very late to worry about the the
3:01
Speaker 1: economic concept quinces to growth and employment. As a general matter,
3:05
Speaker 1: they have a dual mandate and basically, and this is
3:08
Speaker 1: one of the things that have gone over time, they've
3:10
Speaker 1: totally thrown that out the door. We have an enormous
3:13
Speaker 1: rate of inflation and if you want to measure the
3:15
Speaker 1: impact of what eight or nine percent or I guess
3:18
Speaker 1: we'll have probably six to seven percent in place in
3:20
Speaker 1: two years in a row. I mean, that's a couple
3:22
Speaker 1: of trillion dollar consequence to this economy. And the longer
3:26
Speaker 1: you go without allowing, without removing the price pressures of that,
3:30
Speaker 1: the worstest is going to get. In my view, to
3:33
Speaker 1: be honest with you, UM, I think what they should
3:36
Speaker 1: have done yesterday would have been maybe one percent, honestly
3:40
Speaker 1: three percent someone extreme. But I think they should have
3:42
Speaker 1: started immediately reducing the balance sheet and announced it could
3:44
Speaker 1: have been done at a slower pace. Remember, they haven't
3:47
Speaker 1: even started to to indicate they're going to sell. They're
3:50
Speaker 1: gonna let it run off. At this point, the balance
3:52
Speaker 1: sheet is and that goes back to Matt's first question.
3:55
Speaker 1: Quantitative easing, which I apologize I use referred to as
3:58
Speaker 1: q s UM is a very bad idea. The only
4:03
Speaker 1: reason for for that, in my opinion, is to actually
4:06
Speaker 1: deal with a freezing of liquidity in the market. And
4:09
Speaker 1: that happened to no way, and that's fine, but they
4:11
Speaker 1: should have immediately begun to remove that as soon as
4:15
Speaker 1: as soon as the liquidity mechanism began to function. I mean,
4:18
Speaker 1: I think we can all we can appreciate, maybe not all,
4:21
Speaker 1: but Paul and I can appreciate your ideology here. However,
4:24
Speaker 1: given the political constraints that this independent FED faces and
4:29
Speaker 1: I'm using air quotes for those of you can't see me,
4:31
Speaker 1: which is all of you, given those political constraints, Uh,
4:36
Speaker 1: how do you respond as an investor? You know they're
4:38
Speaker 1: not going to raise three basis points? Now, this isn't
4:40
Speaker 1: Paul Volker, It's not the seventies or eighties, right, So
4:43
Speaker 1: what what do you do as an investor right now? Well,
4:46
Speaker 1: it's a general metal. Look, it's funny I've started that
4:49
Speaker 1: I've been short. I wasn't short enough, but I've certainly
4:52
Speaker 1: had a reasonable protection on, but not as much as
4:54
Speaker 1: I wanted. Because I call the FED the enemy of
4:56
Speaker 1: the rational, They've been very, very difficult to a is
5:00
Speaker 1: to pate if you wanted to behave and and minimize
5:03
Speaker 1: or you know, have a reasonable risk profile. At this point,
5:07
Speaker 1: I think there are things that are opportunistically available if
5:10
Speaker 1: you want a little bit of risk. Um, if you
5:12
Speaker 1: have too much risk on, you better be careful because
5:14
Speaker 1: there's certainly a reasonable chance we keep going down in
5:17
Speaker 1: the short run. How much further do you think, by
5:20
Speaker 1: the way, Neil, I mean, considering the fact that I
5:22
Speaker 1: think we're probably close to the shorter term bottom with
5:24
Speaker 1: me my view, if you want to take my view
5:26
Speaker 1: on longer term, I tell people I have a patriotically
5:29
Speaker 1: optimistic target for the for the SMP of seventeen seventy six,
5:34
Speaker 1: which is way off right, I mean, But but let
5:37
Speaker 1: me just say one thing on that mat just for
5:39
Speaker 1: listeners who don't know. Right now we're looking at SMP,
5:43
Speaker 1: so it's it's a long way down. But but you
5:45
Speaker 1: have to understand. One of the main factors and how
5:47
Speaker 1: you value with stock or an asset is the cost
5:50
Speaker 1: of money. And for equities, which are the longest duration asset. Theoretically,
5:54
Speaker 1: the twenty year bond is a very good indicator of
5:58
Speaker 1: the type of discount. Right, you can throw a spread
6:00
Speaker 1: on if you want. The long bond is still about
6:03
Speaker 1: one thirty, which means your thirty percent just a potential
6:06
Speaker 1: drop just to get to a six percent yield, which
6:08
Speaker 1: is at least where it belongs to. Now, all right, now,
6:10
Speaker 1: we gotta have you back on UM very soon. Really
6:13
Speaker 1: appreciate you coming into the Bloomberg Interactive Broker Studio. Neil Grossman,
6:18
Speaker 1: their co founder and former ciot t K A N
6:20
Speaker 1: g Capital, also advisor to the Nougust Bank. All right,
6:27
Speaker 1: let's bring in Brett Downley. He is a president of
6:30
Speaker 1: Spectr Markets. UH. A lot going on in the marketplace here, Brent.
6:34
Speaker 1: Just in the last forty eight hours we've had to
6:35
Speaker 1: central banks really moving pretty aggressively here, So let's start
6:39
Speaker 1: with this US Federal Reserve seventy five basis points yesterday
6:43
Speaker 1: can perceive by I think many market participants as a
6:45
Speaker 1: pretty bold move. But we had a recent guest on
6:48
Speaker 1: Brent that said they should have been even more aggressive.
6:51
Speaker 1: What did you make of yesterday's news? Sure, well, I
6:54
Speaker 1: agree with that, but the reason the market is not
6:56
Speaker 1: really reacting is that that was leaked, um a couple
6:58
Speaker 1: of days in advance. So it's You've actually caught me
7:01
Speaker 1: at a really interesting time because I've been bullished the
7:05
Speaker 1: dollar for about the last three months, mostly on central
7:09
Speaker 1: bank divergence. So what you had was a very hawkish
7:12
Speaker 1: FED pivoting doing q T, and then you had a
7:15
Speaker 1: lot of other central banks that were very reticent to
7:17
Speaker 1: do anything um. For example, even the Bank of England
7:21
Speaker 1: who was hiking, was doing so in a very hesitant way.
7:24
Speaker 1: You had the b O J not doing anything, Swiss
7:27
Speaker 1: National Bank not doing anything. And now actually my view
7:31
Speaker 1: has changed today. Um, I think we're we could be
7:35
Speaker 1: at the peak for the dollar as now we're getting
7:38
Speaker 1: We had divergence before and now we're getting convergence. So
7:42
Speaker 1: we had the SNB, the Swiss National Bank hiked fifty
7:45
Speaker 1: basis points overnight, which was a big surprise. And then
7:49
Speaker 1: we also have the b o J tonight potentially moving
7:52
Speaker 1: their yield curve target um. And then you also have
7:55
Speaker 1: the e c B saying they don't really want any
7:58
Speaker 1: more currency weakness and they're trying to build some kind
8:01
Speaker 1: of anti fragmentation tool so that they can high rate
8:04
Speaker 1: while keeping the peripheral debt um sell off in check.
8:08
Speaker 1: So what you have now is convergence and that that
8:11
Speaker 1: I think could be bad for the dollar. Now, did
8:14
Speaker 1: you say you've been short the dollar for three months? No,
8:17
Speaker 1: I've been bullish. Okay, okay, So you've been bullish dollar
8:20
Speaker 1: and now you might be ready to turn I'm just wondering, mechanically, Brent,
8:24
Speaker 1: how you put that trade on. So the simplest way,
8:28
Speaker 1: I mean, I've been trading spot currency since really the
8:32
Speaker 1: simplest way to do the trades is simply to just
8:36
Speaker 1: buy or sell the currency outright. UM. So you can
8:39
Speaker 1: do it through futures, through cash on retail broker systems.
8:43
Speaker 1: You know, institutions tend to do it UM in the
8:46
Speaker 1: wholesale market, in the OTC market. But you don't need
8:49
Speaker 1: to do anything complicated. You just to me. You just
8:51
Speaker 1: can simply sell dollars. People will also do it through
8:55
Speaker 1: derivatives like options. But because the moves have been so
8:59
Speaker 1: wild lately, um EFX ball is very high right now.
9:03
Speaker 1: It's it's a multi month highs so it's very expensive. UM.
9:08
Speaker 1: Just to give you a flavor. Even if this doesn't
9:10
Speaker 1: mean anything, it should mean something relatively speaking, that overnight
9:13
Speaker 1: deli and volatility usually trades around ten percent, and right
9:17
Speaker 1: now overnight it's trading at because of the Bank of
9:21
Speaker 1: Japan meeting, and because everything's just been going wild in
9:24
Speaker 1: the up. By the way, what do you expect from
9:26
Speaker 1: the Bank of Japan? This has been so fascinating to watch,
9:29
Speaker 1: And I regret getting a mortgage from my new house
9:32
Speaker 1: at three and a quarter percent. I should have just
9:34
Speaker 1: shorted ggbs. Yeah, so short g gbs is a popular
9:39
Speaker 1: trade right now. But it also makes sense because very
9:42
Speaker 1: similar to the Reserve Bank of Australia. The Bank of
9:45
Speaker 1: Japan's trying to hold interest rates at an out of
9:49
Speaker 1: equilibrium rate, So they're trying to hold the tenure rate
9:52
Speaker 1: at twenty five basis points, and really it should probably
9:55
Speaker 1: be triple that. There should be at seventy five basis points.
9:59
Speaker 1: And there's a point where the central banks eventually lose
10:02
Speaker 1: the battle. So the rb A lost the battle, the
10:05
Speaker 1: Swiss National Bank lost the battle. The central banks are
10:08
Speaker 1: very powerful, but they're not omnipotent. So I think we're
10:11
Speaker 1: at the point now where the Bank of Japan is
10:14
Speaker 1: going to have to ease off. There's no theoretical limit.
10:16
Speaker 1: They can do it forever, but the release valve if
10:20
Speaker 1: they keep rates here is a weak er en. And
10:23
Speaker 1: now they've explicitly said that they no longer favor a
10:26
Speaker 1: week or en, which is something new. I mean, we've
10:29
Speaker 1: had all kinds of historic stuff happening in central banks
10:32
Speaker 1: and and in the FX market, and so if you recall,
10:36
Speaker 1: starting in Japan was trying to weaken the end that
10:40
Speaker 1: was the abonomics plan, and they've succeeded, you know, with
10:43
Speaker 1: flying colors. They took delien from thirty five, and now
10:49
Speaker 1: they're kind of saying enough is enough, no moss. So
10:52
Speaker 1: to me that means that they need to move. Uh,
10:55
Speaker 1: they need to allow yields to go higher. And so
10:58
Speaker 1: whether that happens to night or not, I mean then
11:01
Speaker 1: it comes down to more of a tactical decision by
11:03
Speaker 1: the b o J. So there seems to be I
11:06
Speaker 1: would say about a thirty chance they do it tonight,
11:09
Speaker 1: but I think it's almost locked in that they do
11:12
Speaker 1: it in the next three months. And so the timing
11:14
Speaker 1: almost doesn't matter because even if they are pinning that
11:18
Speaker 1: one ten year yield, the rest um the rest of
11:21
Speaker 1: the market will just completely come unhinted, so people will
11:24
Speaker 1: sell g GB futures and anything that's not nailed down
11:27
Speaker 1: by the b o J. Hey, Brent, just real quick,
11:30
Speaker 1: thirty seconds. How long would a dollar weakness call be?
11:34
Speaker 1: Do you think so? I think it could be protracted.
11:38
Speaker 1: So the dollar strength started with the there is no
11:42
Speaker 1: alternative to US tech um and obviously that's over, and
11:46
Speaker 1: then it continued because US rates were moving so much
11:48
Speaker 1: more than the rest of the world. So now neither
11:51
Speaker 1: of the drivers of dollar strength really are are happening
11:55
Speaker 1: right now. So I think this could be a meaningful
11:57
Speaker 1: turn in the dollar for H. It could us all
12:00
Speaker 1: of age two. Alright, good stuff, Brent Donley, really appreciate
12:04
Speaker 1: you coming on. I learned a lot UH today Brent Donley,
12:07
Speaker 1: President UH Spector Markets. He had been bullish on the
12:10
Speaker 1: US dollar turning negative just today actually UH in response
12:15
Speaker 1: to what we've seen from a lot of the UH
12:18
Speaker 1: central banks across the world. Again, the Swiss National Bank
12:20
Speaker 1: kind of surprising the marketplace. Totally totally surprising. Yeah. Absolutely,
12:25
Speaker 1: that's kind of what I woke up to here listening
12:27
Speaker 1: to surveillance UH so again concerted effort to raise rates here.
12:32
Speaker 1: So we'll have to see how that plays out. You're
12:37
Speaker 1: alive from the Gaylord Texan Convention Center in Dallas, Texas.
12:40
Speaker 1: Ben Y Melon Pershing Insight Conference here joining us today
12:44
Speaker 1: Anthony Sessin, Senior Investment Strategistic Crane Chairs and we so
12:48
Speaker 1: happy to have Anthony here with us in the huge
12:51
Speaker 1: exhibition hall here because we want to switch gears a
12:53
Speaker 1: little bit and talk about China. We've been so focused
12:56
Speaker 1: on the US, the Federal Reserve, other central banks, what's
12:58
Speaker 1: going on with inflation. But we gotta get an update,
13:01
Speaker 1: gotta get a handle on what's going on in China,
13:03
Speaker 1: and Anthony, I love where to give us your thirty
13:05
Speaker 1: thousand foot view with what's going on in China with
13:08
Speaker 1: their economy, with COVID, with we know we have a
13:12
Speaker 1: presidential election coming up, a lot going on there. As
13:15
Speaker 1: you said, thank you Paul for having me. There's a
13:17
Speaker 1: lot going on, a lot to unpack in China. That's
13:19
Speaker 1: why you have to keep on top of it. Right. So,
13:21
Speaker 1: so all the global uh events we're seeing now with
13:25
Speaker 1: regards to rates, it's definitely impacting markets globally, especially with
13:29
Speaker 1: regards to currency. Right. But but if you look at
13:31
Speaker 1: China specifically, and China entered this year with with the
13:35
Speaker 1: world to stimulate and lift growth. It's an important here
13:38
Speaker 1: for China, and it was working. They cut rates, They
13:41
Speaker 1: did many uh stimulative actions uh throughout the year, throughout
13:46
Speaker 1: the beginning of the year to kind of lift growth
13:48
Speaker 1: in many different ways, cutting taxes, lifting property, uh, you know,
13:53
Speaker 1: giving facilities for property. But then when the lockdowns happened,
13:58
Speaker 1: it kind of uh you know, hit prog rest a
14:00
Speaker 1: little bit. So we're seeing now China stimulate even more. Right.
14:03
Speaker 1: In addition to that, uh, you know, the consumer is
14:07
Speaker 1: is now kind of rebounding a little bit. And um
14:09
Speaker 1: and uh, you know, the lockdowns has impacted growth, but
14:12
Speaker 1: now we're starting to see more pent up demand because
14:15
Speaker 1: income has not been impacted in China as much. Last
14:18
Speaker 1: year it grew at nine percent. This year is growing
14:20
Speaker 1: at six percent. So you're gonna see that money kind
14:22
Speaker 1: of trickle into the economy as lockdowns cease and at
14:27
Speaker 1: stimulus kind of trickle in. Well, Anthony, today you and
14:29
Speaker 1: I heard this Grapevine, Texas at this huge convention, lots
14:33
Speaker 1: of people, very few to no mask seems to be
14:37
Speaker 1: kind of back to normal. Yet in China, Um, they're
14:40
Speaker 1: not there. And what is the I guess the strategy
14:45
Speaker 1: behind the government's handling of COVID And how do you
14:49
Speaker 1: think it may evolve? Yeah, no, absolutely, that's the big
14:51
Speaker 1: wild card a little bit in China. Right, So China
14:53
Speaker 1: have a very strict policy with regards to to COVID.
14:56
Speaker 1: It started with a zero policy where kind of lockdown
14:59
Speaker 1: Shanghahi for sixty days or more that kind of impacted
15:02
Speaker 1: people living in the area, impact its supply chains across
15:05
Speaker 1: the board, especially with the electric vehicles and another supply
15:09
Speaker 1: chains that are located in in Chunk High. But then
15:12
Speaker 1: when it happened in Beijing, that kind of moved to
15:14
Speaker 1: this dynamic policy right where they were kind of targeting
15:17
Speaker 1: specific areas, you know, doing testing proactively, trying to be
15:22
Speaker 1: more cognizant of the economic impact. Right, But that's still
15:26
Speaker 1: still causing a lot of issues. Right. Omicron is a
15:28
Speaker 1: little bit different. It passes through very quickly. It's really hard.
15:31
Speaker 1: Like in Beijing, we had this one party at a
15:33
Speaker 1: pub that kind of uh, you know, resulting in twenty
15:36
Speaker 1: six cases, right, and that's gonna be hard to contain
15:38
Speaker 1: without a lockdown. So so, you know, it's a little
15:41
Speaker 1: bit hard situation, especially in a political year where China
15:44
Speaker 1: doesn't want to see people you know, uh sick or
15:47
Speaker 1: lined up at the hospital. Right. So but I believe
15:50
Speaker 1: they're going to have to adjust that policy soon, uh,
15:53
Speaker 1: you know, in order to be able to to meet
15:54
Speaker 1: their economic targets. How easy is it for China to
15:57
Speaker 1: control economic growth? It is, It is easier than other places.
16:04
Speaker 1: If you were right, it's a command economy. China has
16:06
Speaker 1: the ability to kind of redirect resources, redirect capital to
16:10
Speaker 1: specific industries they want in an easier way than we
16:13
Speaker 1: have it here in the US or or kind of
16:16
Speaker 1: in Europe. They have a lot of tools, huge reserves,
16:18
Speaker 1: they have a lot of policy levers to pull, right,
16:21
Speaker 1: and they have a vibrant consumer economy, right, so if
16:23
Speaker 1: they want to, they've done it in the past, they
16:25
Speaker 1: can do it in the future. Although you know, as
16:28
Speaker 1: the economy becomes bigger, it becomes harder. Right. But we've
16:31
Speaker 1: seen this year's numbers start to turn around, right, Like
16:33
Speaker 1: property prices which were declining since the summer, we started
16:37
Speaker 1: to see that turning around. We started seeing fixed acid
16:39
Speaker 1: investments turning around. We started to see you know, a
16:43
Speaker 1: lot of more interest in the economy, more people getting loans,
16:46
Speaker 1: aggregate financing turning up. So China has a lot of
16:49
Speaker 1: levers that can pull in terms of supporting its growth,
16:52
Speaker 1: but lockdowns definitely kind of shuts down these levers very
16:56
Speaker 1: quickly for an extended period of time. You know, at
16:59
Speaker 1: any global Wall Street it's been focusing right fully so
17:02
Speaker 1: on global energy prices and you know, we get w
17:04
Speaker 1: tech cood oil was it over barrel? Uh it's now
17:08
Speaker 1: pulled back here. But boy, if China fully reopens, that
17:11
Speaker 1: adds a big source of demand there. How do you
17:15
Speaker 1: view Chinese economy now in terms of how much of
17:19
Speaker 1: it is reopened? How far do we have to go
17:20
Speaker 1: to get fully reopened? Kind of where are we there? Yeah?
17:23
Speaker 1: I know so so at some point I think thirty
17:28
Speaker 1: GDP of of cities that contribute GDP was shut down, right,
17:33
Speaker 1: So now it's a lot less Shanghai reopened, Beijing is
17:36
Speaker 1: there's there are some spots there. So now we're probably
17:39
Speaker 1: at like five to ten percent of GDP kind of
17:41
Speaker 1: a little bit in in a in a lockdown, right,
17:43
Speaker 1: So how far do we have to go? One is
17:45
Speaker 1: you have to relax the policy just like here, right,
17:48
Speaker 1: you kind of have to accept that that you know,
17:50
Speaker 1: there's COVID, it's it's it's going to get people sick.
17:53
Speaker 1: But with a vaccine, uh, you know, the symptoms are
17:55
Speaker 1: going to be less. And the second thing, I think
17:57
Speaker 1: China is going to need to push a vaccine that
17:59
Speaker 1: is based on MR and a technology. Right today, their
18:02
Speaker 1: cinovac is based on the on the previous, on the
18:04
Speaker 1: past vaccine technologies, which is not as effective. And there
18:09
Speaker 1: are multiple now companies by technology companies who are working
18:13
Speaker 1: on this, but they're not there yet right. But but
18:16
Speaker 1: other than that, we're seeing a lot of work from China.
18:19
Speaker 1: Like now they're trying to under regulations on a platform economy,
18:22
Speaker 1: so that's very good for China internet companies. They're pushing
18:24
Speaker 1: with the policies green tech, green technology, They're pushing the
18:28
Speaker 1: healthcare industry. So so they're putting a lot of work
18:31
Speaker 1: into the new economy, into directing their economy to be positioned,
18:34
Speaker 1: well positioned for the future. Right. And one of the
18:37
Speaker 1: big things we're seeing now more interested it's trying to
18:39
Speaker 1: China Internet. Yeah, it's interesting. You know, a lot of
18:42
Speaker 1: US investors, through Ali Baba and through ten Cent, they
18:45
Speaker 1: became very invested in exposed to China tech. It was
18:48
Speaker 1: a great way to play the growth of the middle class.
18:50
Speaker 1: And Ali Baba for example, Boy did they get a
18:53
Speaker 1: rude awakening to what we all call China risk in
18:57
Speaker 1: the you know, on the risk section of the perspectives.
19:00
Speaker 1: That took me off guard how aggressively they clamped down
19:03
Speaker 1: on the jack Miles of the world. Are they give
19:08
Speaker 1: us a sense of where they are now? Are they
19:09
Speaker 1: gonna lighten up here materially or is this the new
19:11
Speaker 1: world order? You know? Absolutely so so look, uh, you know,
19:15
Speaker 1: if you you have to understand China's culture and China's
19:18
Speaker 1: view of how society of how they won't decide to
19:21
Speaker 1: look right, and they have a very virtuous view of
19:23
Speaker 1: how sight you should look like. They want to provide
19:25
Speaker 1: free education, they want to provide free healthcare. Uh, you know,
19:29
Speaker 1: they really care about about their their people, that want
19:31
Speaker 1: to provide fairness because the gap between rich and poor
19:35
Speaker 1: has been has been, you know, has widened a lot.
19:37
Speaker 1: And they want to control this, not control, but regularly
19:40
Speaker 1: this this digital economy that became huge, right and became
19:43
Speaker 1: kind of too big to fail at some point. We're
19:45
Speaker 1: trying to do that here right, Like we're seeing all
19:48
Speaker 1: these bills come through through antitrust against Google, Amazon, right, Facebook.
19:53
Speaker 1: We're seeing the same thing happening in Europe. But but China,
19:55
Speaker 1: as a command economy, they're able to do it. Yeah.
19:58
Speaker 1: So one thing we under estimated less or how aggressive
20:01
Speaker 1: they were going to be, right, but they wanted to
20:03
Speaker 1: go as far and get everything set up, and now
20:05
Speaker 1: it looks like work. This is concluding and we've heard
20:07
Speaker 1: it from multiple people high up to the chain to
20:10
Speaker 1: the president chooching pit Okay, that's good stuff. Good stuff
20:12
Speaker 1: in the Ali Bob and the other Chinese uh tech
20:15
Speaker 1: owners as well. Anthony Saissein, thank you so much for
20:17
Speaker 1: joining us here. Anthony Sacsen, Senior investment strategist at Crane
20:20
Speaker 1: Share sign. You come to places that put a lot
20:23
Speaker 1: of smart people together, you get to meet a lot
20:25
Speaker 1: of smart, interesting people. So that was great to have
20:27
Speaker 1: Anthony join us here. Probin, thanks so much for joining
20:33
Speaker 1: us here. This is your first interview with American media
20:35
Speaker 1: since becoming CEO elect. So congratulations there, good luck with
20:39
Speaker 1: this economy. Um, tell us about as you come into
20:42
Speaker 1: your new role here, what is your strategy? What's your
20:45
Speaker 1: to do list? We've got a boy a really volatile
20:48
Speaker 1: world out there, a lot of new things that people
20:50
Speaker 1: have to deal with, whether it's coming back to work,
20:52
Speaker 1: whether it's dealing with the remnants of the pandemic, whether
20:54
Speaker 1: it's inflation. What you're to do list? Well, you know,
20:57
Speaker 1: when you when you're when you're coming into a ce see,
21:00
Speaker 1: you don't get to choose between all those things you do.
21:02
Speaker 1: You got to do all of them. But look, let
21:03
Speaker 1: me just start by saying thanks for being here. It's
21:05
Speaker 1: great to have you here. Are being y Melon Pershing
21:09
Speaker 1: Insight Conference is one of our flagship events. It's one
21:12
Speaker 1: of the flagship events of the wealth industry. It's great
21:14
Speaker 1: to have our clients here, is great to have you
21:16
Speaker 1: here as well in Texas with us. So you think
21:19
Speaker 1: about it here um being y Melon financial services industry,
21:22
Speaker 1: it's been a great run. If if you've been an investor,
21:25
Speaker 1: I came into the market in October ninety or June,
21:29
Speaker 1: it's been nothing but up. I had a couple of
21:30
Speaker 1: little bounces along the way. But now we're in a
21:32
Speaker 1: world where it really is challenging at there when you
21:35
Speaker 1: look at the financial markets, the bond markets, the equity markets,
21:38
Speaker 1: whether you look at inflation, central banks, how do you
21:40
Speaker 1: put that into context? Well, as a firm, we touch
21:43
Speaker 1: about of all of the world's investible assets, so we
21:47
Speaker 1: have that vantage point to really see what's going on,
21:51
Speaker 1: and we're really listening to our clients. One of the
21:53
Speaker 1: reasons why I'm here is really to talk to our
21:55
Speaker 1: wealth advisors to understand what's going on in their worlds
21:58
Speaker 1: and to really push the the concept of innovation in
22:02
Speaker 1: the wealth tech space. There's so much going on listening
22:06
Speaker 1: driving forward a lot of opportunity, and these volatile markets
22:11
Speaker 1: are an important moment for us all to be saying,
22:13
Speaker 1: connected to our clients, I wonder what your take is
22:17
Speaker 1: robbing on crypto. It's been an incredible crash to watch UM,
22:23
Speaker 1: but we recently had David Rubinstein on who said, listen,
22:26
Speaker 1: this is still an asset that people are going to
22:27
Speaker 1: invest on and work with, and it's not going to zero.
22:30
Speaker 1: B and y Melon was UM one of the sort
22:33
Speaker 1: of four runners, one of the pioneers of of banking
22:38
Speaker 1: with crypto. What's your take? Well, crypto to me the
22:43
Speaker 1: at least bitcoin, and they're an asset class. We can
22:46
Speaker 1: debate whether the price you go up or down, but
22:48
Speaker 1: that's like any asset class. We can always have that debate.
22:51
Speaker 1: But the ecosystem around them, that is everything that's going
22:54
Speaker 1: on in stable coins, tokenized assets defy the world of blockchain.
22:59
Speaker 1: There's a lot of interesting opportunity there and we're investing
23:02
Speaker 1: and innovating in the space because this is part of
23:06
Speaker 1: the future of the financial markets. We had an era
23:09
Speaker 1: of paper back fifty years ago. We've been in the
23:12
Speaker 1: era of de materialized ledgers. Now we're getting into the
23:15
Speaker 1: blockchain and tokenized assets era. I think it's going to
23:18
Speaker 1: be exciting, and we've got an important role to play.
23:21
Speaker 1: This is just one of the many assets that has
23:23
Speaker 1: come tumbling down as the market realizes how high the
23:28
Speaker 1: ft is prepared to raise rates UM. On the other hand,
23:32
Speaker 1: for a bank, traditionally higher rates mean um higher profits.
23:37
Speaker 1: How how do you react to UM this rising rate environment. Look,
23:41
Speaker 1: zero rates aren't good for most people. They're not good
23:44
Speaker 1: for banks, they're not good for consumers either, and so
23:47
Speaker 1: seeing rates lift off the zero bound is a positive thing.
23:50
Speaker 1: I think it signals the that of course inflation, which
23:56
Speaker 1: is we're really seeing not only the spot inflation, the
23:59
Speaker 1: eight point six percent print that we had last Friday,
24:02
Speaker 1: but also the forward expectations for inflation, which share Powell
24:05
Speaker 1: alluded to in his remarks yesterday. Inflation is a dangerous
24:09
Speaker 1: thing in markets. It's it's it's very important to get
24:12
Speaker 1: a good grip on it. This is a difficult inflation.
24:14
Speaker 1: It's not just demand driven, it's supply side constraint driven.
24:18
Speaker 1: That makes it a little gnarly, i'd say for for
24:21
Speaker 1: the policymakers. But as chap How showed us yesterday seventy
24:24
Speaker 1: five basis points, he is on the case, Robin. One
24:27
Speaker 1: of the challenges for the financial services industry, like many
24:30
Speaker 1: other industries, has been diversity and inclusion in the workforce.
24:35
Speaker 1: I worked on Wall Street for thirty years, and I
24:37
Speaker 1: saw every incoming class of investment banking analysts very diverse.
24:41
Speaker 1: Yet by the time it came to see the list
24:43
Speaker 1: for managing directors or partners not So, how do you
24:46
Speaker 1: guys think about that? At b n Y melon critically
24:49
Speaker 1: important topic. I was just on the main stage here
24:51
Speaker 1: of this flagship conference of ours and I was talking
24:53
Speaker 1: to our clients about exactly that topic. But I'll tell
24:57
Speaker 1: you from our point of view, seventy two percent, just
25:00
Speaker 1: starting at the top of our company, seventy of our
25:03
Speaker 1: board are women and people from ethnically historically underrepresented groups.
25:08
Speaker 1: So we feel very diverse at the top. As you say,
25:12
Speaker 1: we've got a lot of intake at the bottom, and
25:14
Speaker 1: it's an important priority for us. We're really driving that culture,
25:17
Speaker 1: and it's not just about diversity and pure representation. It's
25:21
Speaker 1: about creating a sense of belonging for people in our
25:24
Speaker 1: company so that they can be themselves, they can be authentic,
25:27
Speaker 1: they can bring their whole selves to work. That culture
25:30
Speaker 1: perpetuates diversity, and it's an important part of the story. Robin,
25:34
Speaker 1: just real quickly, last question, Um, you know what we've
25:38
Speaker 1: seen over the pandemic, it's just kind of the whole
25:40
Speaker 1: change in how people think about work. Where are you
25:42
Speaker 1: at being wide melon in terms of working from home,
25:45
Speaker 1: flex time? How do you guys think about that? So
25:48
Speaker 1: hybrid for me is the future, and I think it's uh.
25:51
Speaker 1: You know, however much some folks may yearn for the
25:53
Speaker 1: five days a week of the past, I personally think
25:56
Speaker 1: that time's gone. I get that we've had a very
25:58
Speaker 1: tight labor market that does have a lot of choice
26:00
Speaker 1: to employees. But we've got all these great new technologies
26:04
Speaker 1: finding a way for people to have more flexibility in
26:06
Speaker 1: their lives, to be able to combine life and work,
26:09
Speaker 1: even if it's just spending ten minutes picking up your
26:11
Speaker 1: kids from school. Then that's actually good for employees, that's
26:15
Speaker 1: good for the employer. To us, that means several days
26:18
Speaker 1: a week, call it three in the office, a couple
26:21
Speaker 1: of days hybrid. We get a lot of benefits by
26:23
Speaker 1: having our people in the office, but we don't need
26:26
Speaker 1: all of those benefits five days a week. We can
26:29
Speaker 1: get it by having this hybrid structure. That's the future
26:32
Speaker 1: for us. All right, Robin Vince, President and CEO elect
26:35
Speaker 1: of b n Y Melon Again, we were at their
26:37
Speaker 1: flagship conference here, the b n Y Melon Pershing UH
26:40
Speaker 1: Insight Conference here in Grapevine, Texas, bringing all a lot
26:43
Speaker 1: of good financial partners together. People are here. It's packed there.
26:47
Speaker 1: They're uh, you know, they're definitely getting together. I see
26:49
Speaker 1: people sitting down in corners, you know, doing deals, talking business.
26:52
Speaker 1: It's good to see Robin. Thanks so much for joining
26:55
Speaker 1: us here. Thanks for listening to the Bloomberg Mark Kids podcasts.
27:01
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
27:04
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
27:08
Speaker 1: on Twitter at Matt Miller three. On Fall Sweeney, I'm
27:12
Speaker 1: on Twitter at pt Sweeney before the podcast. You can
27:15
Speaker 1: always catch us worldwide at Bloomberg Radio.