>> THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." WITH DANI BURGER AND KRITI
GUPTA. DANI: FITCH SIPC U.S. OF THEIR AAA CREDIT RATING.
THE MOVE DRAWS CRITICISM. CREDIT -- JANET YELLEN CALLS IT
ARBITRARY AND OUTDATED. FORMER PRESIDENT TRUMP CHARGED.
THE FORMER U.S. PRESIDENT HAS BEEN INDICTED IN
WASHINGTON, FEDERAL CHARGES OVER HIS EFFORTS TO OVERTURN
THE 2020 PRESIDENTIAL ELECTION. IN THE MIST OF ALL THAT DRAMA,
EARNING SEASON ROLLS ON. AI OPTIMISM, STARBUCKS SLIPS ON
DISAPPOINTING SALES. WELCOME TO "BLOOMBERG
SURVEILLANCE: EARLY EDITION." I AM DANI BURGER IN LONDON WITH
KRITI GUPTA IN NEW YORK. IT IS UGLY OUT THERE. STARTED WITH THE FITCH
DOWNGRADED BUT EQUITY MARKETS SEEM TO BE SPIRALING INTO
SOMETHING ELSE. KRITI: THEY REALLY ARE.
IT IS NOT A SIMILAR REACTION ACROSS ALL ASSET CLASSES.
LAST TIME WE HAD A DOWNGRADE FROM S&P, HE SAW A MASSIVE BID
INTO THE BOND MARKET. EVEN THE ARNIE THAT THE MARKET
MAY NOT BE AS SAFE AS BEFORE, IT IS STILL ONE OF THE MOST
SAFE RELATIVE TO ALL COUNTRIES. EVEN IF THE U.S.
-- EVEN IF THE WORLD IS LIKE TO END, HE STILL BY U.S.
TREASURIES. -- YOU STILL BUY U.S.
TREASURIES. NASDAQ TAKING A HIT. THEY ARE DOWN OFF OF THEIR LOWS
FROM PREMARKET TRADING. THE BOND MARKET IS SEEING A BIT
BUT ONLY ON THE FRONT END OF THE CURVE. FOR O2 ON THE 10 YEAR.
I THINK THAT IS SIGNIFICANT ONLY TALK ABOUT THIS ALLOCATION
OF JUST HOW MUCH PANIC IS THERE. IS THIS AN EQUITY POSITIONING
STORY? DANI: THAT IS A REALLY GOOD POINT.
IN TERMS OF EQUITY WE ARE SHORTFALL.
WE DON'T HAVE ANY HEDGES. WE HAVE TALKED BEFORE ABOUT HOW
CHEAP HEDGES ARE. NO ONE IS BUYING THEM.
WE ARE NOT REALLY LONG FURTHER OUT.
WHAT HAPPENS IF IT GETS WORSE? COULD IT SNOWBALL?
IN EUROPE WHERE SEEING ONE OF THE BIGGEST SELLOFFS.
FTSE 100 DOING WORSE THAN THE STOCKS. -- STOXX.
EVERY SECTOR IS IN THE RED. IF YOU LOOK AT WHAT IS LEADING
US DOWN IT IS GROWTH STOCKS, SIMILAR TO THE U.S.
GROWTH IS THE BEST-PERFORMING FACTOR YOUR TODAY. MAYBE IT IS TAKING PROFIT, SOME
OVER POSITIONING THAT WE ARE USING THIS VOLUME TO CORRECT
THAT. I JUST WANT TO POINT THIS OUT
BECAUSE THE YEN IS DOING WELL. IT IS OF THE SAME IN EUROPE.
THIS WAS IS FALLING. THE DOLLAR OUTPERFORMING BY .2%.
SWISS EMI CAME IN AT A 14 YEAR LOW.
THIS WAS ECONOMY NOT LOOKING SO STRONG.
IT IS NOT NECESSARILY ILLOGICAL MARKETS TODAY. KRITI: A LOT TO DIGEST. TO YOUR POINT,
IT ALL STARTED WITH THAT FITCH NEWS. IT HAS BEEN SWIFT.
TAKE A LISTEN TO WHAT SOME OF OUR GUESTS ON BLOOMBERG HAD TO
SAY ABOUT THE DECISION. >> I DISAGREE WITH
SECRETARY-TREASURER YELLEN THAT THIS WAS ARBITRARY. >> THE FITCH DOWNGRADED CAME AS
A SURPRISE. >> THERE IS A PROBLEM.
-- A GOVERNANCE PROBLEM. THAT IS A PROBLEM WE WILL FACE
GOING FORWARD. >> THIS COMES AT AN
ECONOMICALLY SENSITIVE TIME. IT IS THE LAST THING THAT
YELLEN REALLY NEEDS. >> I THINK THE MARKETS WILL
JUST BRUSH IT OFF. KRITI: WE KNOW THE U.S.
HAS HAD ITS DEBT PROBLEMS WITH THERE WAS A LOT IN FINCH'S
REASONING. WALK US THROUGH EVERYTHING THEY
COULD HAVE TOUCHED ON WHEN THEY COULD'VE CAME TO THIS
CONCLUSION . VALERIE:
THEY LABELED THREE KEY THINGS, ONE BEING THE EXPECTED FISCAL
DETERIORATION OVER THE NEXT THREE YEARS.
TAX CUTS AND THOSE SPENDING PACKAGES SPECIFICALLY.
A HIGH AND GROWING DEBT BURDEN. THEY DO SPEND A LOT OF TIME
TALKING ABOUT THE DEBT-GDP RATIO AS WELL AS THE SWELLING
DEFICIT. LASTLY, THE EROSION OF GOVERNANCE AND CONFIDENCE.
IT HAS MANIFESTED IN REPEATED TIMES. DANI: WHY NOW? THE DEBT CEILING DRAMA HAS
PASSED. THE ECONOMY IS ON SOLID PUTTING. WHY WOULD THEY DO THIS
DOWNGRADE NOW? VALERIE:
YOU RAISE SOME GREAT POINTS. S&P'S DOWNGRADE CAME DAYS AFTER
THE DEBT LIMIT CONCLUDED BACK THEN. THE U.S.
ECONOMY IS GROWING VERY STRONGLY, YOU'RE RIGHT.
IT IS HARD TO SAY WHY THEY CHOSE NOW. YELLEN CALLING IT AN ARBITRARY
AND OUTDATED DECISION. SHE SAYS THAT, YET WE NEED TO
LOOK AT SOME OF THE THINGS OF THE TREASURY ANNOUNCED THIS
WEEK. ON MONDAY, THIRD QUARTER BORROWING IS HITTING A RECORD
HIGH. $1 TRILLION TREASURY ISSUANCE
NOW EXPECTED FOR THE THIRD QUARTER.
THAT WAS WAY ABOVE ESTIMATES. IT IS ONLY A FEW WEEKS AGO WE
SAW THIS ANNUALIZED INTEREST RATE PAYMENTS NEARING $1
TRILLION FOR THE U.S. GOVERNMENT.
YOU CAN SAY THAT FINCH DOES RAISE SOME GOOD POINTS BUT IS
NOT NECESSARILY ANYTHING NEW AND FRESH. PERHAPS WE SHOULD BE CRYING
FLEETING -- HAPS WE SHOULD BE CONGRATULATING THEM ON BEING
FORWARD-LOOKING INSTEAD OF BAD WERE LOOKING IN THAT MATTER.
KRITI: YOU ARE NOT SEEING THE SAME
REACTION IN THE BOND MARKET. WALK US THROUGH KIND OF THE
MARKET FALLOUT IN TERMS OF LOGIC. VALERIE: I WANT TO BRING UP WHAT
MOHAMMED SAID, IT IS REALLY TELLING WHAT THE MARKETS ARE
DOING THIS MORNING. HE SAID THE MARKET IS MUCH MORE
LIKELY TO BE DISMISSED THAN HAVE A LARGER IMPACT ON THE U.S.
ECONOMY AND MARKETS AND THAT IS EXACTLY WHAT WE ARE SEEING THIS
MORNING. YES WE ARE HAVING A RISK OFF
BUT A LOT OF THAT WAS BAKED IN BEFORE THIS ANNOUNCEMENT EVEN
HIT YESTERDAY. THERE REALLY IS NOT A BIG BID
INTO ANY SAFE HAVEN ASSETS. I KNOW DANNY JUST POINTED OUT
THAT THE SWISSIE IS WEAKENING. WE ARE SEEING A TINY UPTICK IN
GOLD, BUT REALLY NOT THIS BIG SAFE HAVEN BID THEN MAYBE YOU
WOULD EXPECT GIVEN WHAT HAPPENED AFTER 2011.
EVEN IF WE TAKE AND I OVER TO THE TREASURY MARKET.
10 YEAR YIELDS, BASICALLY UNCHANGED ON THE DAY.
MAYBE IT IS ILL-ADVISED TO COMPARE THE MARKET REACTION
TODAY VERSUS WHAT HAPPENED IN 2011.
IN 2011, IT REALLY CAME DAYS AFTER THE DEBT LIMIT STANDOFF
WAS CONCLUDED. IT WAS THE FIRST TIME THEY HAD
SEEN THE DOWNGRADE. PERHAPS A SECOND TIME AROUND,
THE MARKETS OBSTRUCTS IT OFF EVEN MORE AND ESSENTIALLY DOES
NOT CHANGE ANY INVESTORS LONG-TERM VIEW ON THE MARKET.
MAY BECOME AT THE END OF THE DAY , THIS DECISION WILL BE
IRRELEVANT. KRITI: IT IS WORTH POINTING OUT THAT
THE NEXT DEBT LIMIT STANDOFF IS JANUARY 1, 2025.
WEEKS AFTER THE PRESIDENTIAL ELECTION IN THE U.S.
WHICH COINCIDES WITH AN ELECTION IN CONGRESS.
WE ARE SETTING OURSELVES UP FOR A LOT OF STRUGGLE.
VALERIE TYTEL, SETTING US -- WALKING US THROUGH MARKET MOVES.
FORMER PRESIDENT DONALD TRUMP HAS BEEN INDICTED ON FEDERAL
CHARGES OVER HIS EFFORTS TO OVERTURN THE 2020 PRESIDENTIAL
ELECTION. SPECIAL COUNSEL CHUCK SMITH
ANNOUNCED THE CHARGES YESTERDAY. >> -- JACKIE SMITH ANNOUNCED
THE CHARGES YESTERDAY. >> IN THE MEANTIME, I MUST
EMPHASIZE, THE INDICTMENT IS ONLY AN ALLEGATION.
THE DEFENDANT MUST BE PRESUMED INNOCENT UNTIL PROVEN GUILTY
BEYOND A REASONABLE DOUBT IN A COURT OF LAW. KRITI:
JOINING US NOW, BLOOMBERG SMART CHAMPION, SENIOR REPORTER FOR
INTERNATIONAL AFFAIRS. -- BLOOMBERG'S MARK CHAMPION,
SENIOR REPORTER FOR INTERNATIONAL AFFAIRS. MARK:
HE WILL HAVE TO APPEAR IN COURT VERY SOON.
THESE ARE BIG CHARGES. THEY COME ON TOP OF A SERIES OF
OTHER CASES. UNTIL NOW AT LEAST, THESE
CASES, IF ANYTHING, APPEARED TO HAVE HELPED HIM POLITICALLY. HE IS WAY AHEAD IN THE PULLING
-- IN THE POLLING FOR THE REPUBLICAN PRIMARIES.
WE DO NOT KNOW IF THIS WILL BE ANY DIFFERENT. WHAT HAS HAPPENED IS, THE
COUNTRY HAS DIVIDED INTO TWO CAMPS.
ONE WHICH ALL OF THESE NEW CHARGES AND EVIDENCE OF TRUMP'S
EVIDENCE OF PEOPLE DOING AND BEING UNFIT FOR PRESIDENT, AND
THE OTHER IS PROOF OF CONSPIRACY BY SOME KIND OF DEEP
STATE TO EXCLUDE HIM FROM THE PRESIDENCY.
IT IS NOT CLEAR THAT THIS WILL BE DIFFERENT POLITICALLY.
IN LEGAL TERMS, THIS IS A REALLY INTERESTING CASE IN THE
SENSE THAT IS BASICALLY A CASE SAYING, IT IS A CRIME TO
UNDERMINE DEMOCRACY IN THE U.S. AND TO DO SO THROUGH DELIBERATE
LIES. THAT IS WHAT HE IS ACCUSED OF,
A CONSPIRACY THROUGH LIES TO UNDERMINED AND UPEND THE
ELECTION RESULTS. DANI: NOW THAT WE HAVE THIS
INDICTMENT IN HAND, WHAT FOLLOWS ON THE TIMELINE AS HE
ALSO FACES ANOTHER SERIES OF LEGAL CHALLENGES? MARC:
HE HAS A NUMBER OF OTHER CHALLENGES.
THERE MAY BE A NEW CASE BY SEPTEMBER 1.
THIS IS IN GEORGIA, ABOUT THE ELECTION RESULT OF 2020, AGAIN.
ALL OF THIS IS GOING TO HAPPEN DURING THE PRESIDENTIAL
ELECTION CAMPAIGN. THEREFORE, IT WILL BE DEEPLY,
DEEPLY POLITICAL. ALSO, IT WILL HAVE A FINANCIAL
IMPACT. IT IS EXPENSIVE. HE HAS ALSO SPENT AROUND $25
MILLION DEFENDING HIMSELF IT'S CASES.
THAT MONEY WILL TAKE AWAY FROM HIS CAMPAIGN.
THAT MONEY IS BEING DIVERTED. WHILE PRESIDENT JOE BIDEN IS
ABLE TO BUILD UP -- DOES NOT HAVE TO DEAL WITH THE PRIMARY,
TRUMP HAS TO DEAL WITH THE PRIMARY AND YES TO PAY FOR HIS
LEGAL FEES FOR THESE CASES. THAT COULD HAVE A REAL IMPACT
IN EMPTYING HIS COFFERS BY THE TIME HE COMES AROUND TO
FIGHTING FOR THE PRESIDENTIAL CAMPAIGN. KRITI:
FINANCIAL TIMES REPORTS THAT BIDEN WILL ASK CONGRESS TO FIND
ARM SALES TO TAIWAN VIA THE BUDGET THAT THEY HAVE SET ASIDE
FOR AIDING UKRAINE. TALK TO US ABOUT THE
RAMIFICATIONS IF THAT DOES INDEED COME TRUE. MARC: I MEAN, ALREADY, IT IS BECOMING
POLITICALLY CONTROVERSIAL IN SOME QUARTERS. THE AMOUNT OF WEAPONS,
SOMETIMES THAT IS COMPLETED WITH MONEY.
ULTIMATELY, IT WILL END UP AS MONEY, AS ALL THEM WEAPON SEED
TO BE REPLACED. ONCE YOU START DIVERTING THAT
IN ORDER TO SPEND ON TAIWAN, IT EVEN MORE COMPLICATED. DANI:
THANK YOU VERY MUCH. BLOOMBERG'S MARC CHAMPION.
COMING UP, AND INTERVIEW WITH STEPHAN CARON OF BLACKROCK. AND, FROM THE GLOBAL CHIEF
ECONOMIST FROM SOCIETE GENERALE, KLAUS BAADER.
THIS IS BLOOMBERG. ♪ DANI: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." I AM DANI BURGER IN LONDON WITH
KRITI GUPTA IN NEW YORK. BLACKROCK IS LOOKING TO BECOME
A ONE-STOP DESTINATION PRIVATE MARKETS.
A MORE LUCRATIVE AREA FINANCE THAN JUST BONDS OR EQUITIES.
AS PART OF THAT PLACE, THE FIRM IS NOW CLOSED ITS ACQUISITION
OF CHRIS CAPITAL. -- OF KREOS CAPITAL. JOINING US NOW IS THE MAN
BEHIND THAT DEAL. AN EXCLUSIVE INTERVIEW WITH
STEPHAN CARON FROM BLACKROCK. THIS DEAL IS INTERESTING.
IT IS NOT PLAIN-VANILLA PRIVATE CREDIT.
YOU ARE LOOKING AT VENTURE DEBT. WHY VENTURE DEBT, AND WHY NOW?
STEPHAN: WE LOOK AT IT IS A VERY ATTRACTIVE AREA.
IT IS STILL VERY MUCH UNDERDEVELOPED COMPARED TO THE
U.S.. THE MARKET IS ABOUT A $7 BILLION MARKET.
EUROPE IS ONLY ABOUT 10-12% ABOUT.
THIS IS PROBABLY AN ATTRACTIVE ENTRY POINT INTO THE MARKET
EVEN EVERYTHING THAT'S HAPPENED WITH THE BROADER BANKING SYSTEM
AS WELL. WE ARE VERY EXCITED TO HAVE A
25 YEAR TRACK RECORD. IT IS TRIED AND TESTED OVER THE
CYCLE AS WELL. DANI: IT MAKES SENSE FOR A VENTURE
COMPANY GOING AND SEEKING DEBT RIGHT NOW AS YOU POINTED OUT.
SNV IS NO LONGER AROUND. VALUATIONS HAVE FALLEN.
MAYBE YOU DON'T WANT TO DO A DOWNWARD IN TERMS OF FUNDING.
HIND THAT, IS IT DIFFICULT IN THE MACRO BACK DROP?
AS A VALUATIONS ARE FOLLOWING -- AS VALUATIONS ARE FOLLOWING.
STEPHAN: WHAT WE SEE IS THAT THE
DEFAULTS OVERLY CENTERED AROUND THE CYCLICAL SECTORS.
I THINK WHAT IS IMPORTANT, WHEN YOU THINK ABOUT FORT WORTH
CONSTRUCTION IS THAT WE FOCUS ON THE MORE TO SECTORS. WE THINK THESE AREAS ARE
GENERALLY TENDING TO RESIST BETTER IN
TIMES OF HIGHER ECONOMIC VOLATILITY. DANI: DOES NOT MEAN WITH KREOS YOU
WILL ONLY BE LOOKING AT NONCYCLICAL DEALS? STEPHAN:
NOT HIS -- NOT EXCLUSIVELY. WE CONTINUE TO CENTER AROUND
HEALTH CARE. AT THE SAME TIME, WE THINK
THERE IS A VERY ATTRACTIVE OPPORTUNITY HAPPENING AROUND
SUSTAINABILITY. A LOT OF COMPANIES ARE STILL AT
THAT STAGE. THERE IS A LOT OF VENTURE
CAPITAL MONEY SUPPORTING THESE BUSINESSES.
WE THINK THERE WILL BE A VERY EFFECTIVE BUSINESS MODEL THAT
WILL EMERGE FROM THAT. KRITI: KRITI GUPTA IN NEW YORK CARE.
TALK TO US ABOUT THAT SIZE ABOUT SOME OF THE FOLKS THAT
ARE INVOLVED IN THE COMPETITIVE SPIRIT NOW, SPECIFICALLY WHEN
IT COMES TO M&A. HOW SUCCESSFUL WILL THEY BE AND
WILL THEY HAVE TO HITCH THEIR WAGON TO A BIGGER PLAYER LIKE
LIKE ROCK? -- LIKE BLACKROCK? STEPHAN:
I THINK THEY'RE TRYING TO CONSOLIDATE WITH YOUR MANAGERS.
THE OTHER THING THEY'RE SAYING IS THAT THERE IS MORE
COMPLEXITY IN MANAGING THE STRATEGIES, ESPECIALLY WHEN IT
COMES TO EUROPE. YOU NEED SOME IN THE LOCAL
COUNTRIES. IT IS DIFFERENT TO OPEN UP IF
YOU DON'T ALREADY HAVE THE INFRASTRUCTURE. THE BIGGER MANAGERS ARE BETTER
EQUIPPED TO MANAGE THESE PLATFORMS. THAT WILL DRIVE
ONGOING CONSOLIDATION ACROSS THE PRIVATE SPACE. KRITI:
ARE YOU LOOKING TO EXPAND FURTHER VIA M&A OR OTHER
VENTURES? STEPHAN: BLACKROCK HAS VERY AMBITIOUS
GROWTH TARGETS FOR ITS PRIVATE DEBT BUSINESS.
WHETHER IT IS AN OPPORTUNITY TO DO AN ORGANIC FLIP, WE WILL DO
THAT. INORGANIC PLAYERS, NEW CONSIDER
THAT AS WELL. AS TO BE THE RIGHT PLACE, THE
RIGHT CULTURE, ALL OF THESE ASPECTS ARE IMPORTANT.
THESE ARE PEOPLE BUSINESSES AND IS IMPORTANT TO FIND THE RIGHT
TEAM WITH THE BLACKROCK MODEL. DANI:
WHEN YOU ARE LOOKING AROUND FOR DEALS, YOU SAY YOU'RE STILL
LOOKING AT THIS AREA, ARE THERE A LOT OF SMALL PRIVATE CREDIT
FIRMS UP FOR SALE RIGHT NOW? ARE YOU SPOILED FOR CHOICE?
STEPHAN: THERE ARE ALWAYS SMALLER
PRIVATE FIRMS TO BE ACQUIRED. WE EXPECT THAT WILL BE AN
ONGOING TREND. WE ARE NOT GOING TO LOOK TO
ACQUIRE IN AREAS WHERE WE ALREADY HAVE A PRESENCE.
IF YOU LOOK AT CREDIT OPPORTUNITIES, THESE ARE AREAS
WE HAVE A WELL-ESTABLISHED PRESENCE AND WE HAVE A TEAM
WHERE BUILDING IN ASIA AS WELL. I THINK ACQUISITIONS COULD MAKE
SENSE IN AREAS WHERE WE DON'T HAVE A BIG PRESENCE.
WE DO NOT ALWAYS LOOK AT ACQUISITIONS AS THE ONLY ROUTE TO ENTER THE MARKET -- DANI:
WHERE DO YOU STILL SEE THE GAPS HE WOULD WANT TO FILL IN FOR --
SEE THE GAPS YOU WOULD WANT TO FILL IN FOR? STEPHAN:
LEN DRINK, SECOND GREECE. IT IS NOT TO SAY WE WILL
ACQUIRE A PLATFORM IN THOSE ASSET CLASSES.
WE LIKE TO UNDERSTAND, WE LIKE TO LOOK AT WHAT IS AVAILABLE,
WHAT MARKETS PRESENT THE MOST ATTRACTIVE ENTRY POINTS.
A LOT OF TIMES, GROWTH RATES IN TERMS OF PROFITABILITY OR
FRAGMENTATION, IN TERMS OF HOW WE CAN GET THE SCALE. DANI:
THERE IS A LOT OF COMPETITION IN THIS AREA, DRY POWDER, MONEY
BEING RAISED AND PUT TO USE. IT MAKES SENSE, IF YOU CAN GET
12% YIELD ON PRIVATE CREDIT, WHAT WOULD YOU NOT GO THERE?
WHAT ABOUT CORPORATIONS RIGHT NOW? CAN THEY HANDLE RATES AND A
HIGHER FOR LONGER RATE ENVIRONMENT? STEPHAN:
OBVIOUSLY, YOU HAVE TO BE CAREFUL AS TO HOW YOU
INCORPORATE THAT INTO YOUR CAPITAL STRUCTURE.
WE BELIEVE THAT THE CURRENT ENVIRONMENT IT IS IMPORTANT TO
COMPANIES TO GIVE THEMSELVES A BIT OF A LARGER STAKE WITH
LOWER LEVERAGE AND ALLOW FOR SLIDER -- SLIGHTLY HIGHER
INTEREST COVERAGE. 12% IS QUITE HIGH.
IN THE INTEREST VENTURE SPACE. IT IS DIFFERENT. IT IS INTEREST AND WHAT WE CALL
YIELD ENHANCERS. IT DOES NOT ALL IMPACT THE
KANDEL, IF YOU LIKE. A LOT OF IT WILL MATERIALIZE IF
AND WHEN THE COMPANY GETS SOLD. KRITI:
THERE IS A LOT OF DEBATE IN THE MARKET ABOUT WHETHER THERE HAS
BEEN A LANDING OF ANY SOURCE FOR ANY HARD OR SOFT LANDING AT
THAT POINT. IN ALL OF THOSE SCENARIOS, WHAT
WOULD HURT THE CREDIT MARKETS THE MOST? STEPHAN: GENERALLY, PRIVATE MARKETS ARE
SICK KILLER AGAINST THE BROADER MARKET.
WILL WE SEE IS THAT IN THE CURRENT ENVIRONMENT, IF YOU
FOCUS ON INVESTING AND DEFENSIVE SECTORS LIKE HEALTH
CARE, SOFTWARE, TECHNOLOGY AND PROFESSIONAL SERVICES,
GENERALLY THEY WILL BE BETTER INSULATED.
WE SEE MORE CYCLICAL SECTORS LIKE CONSTRUCTION, RETAIL,
THESE ARE THE SECTORS GETTING HAMMERED WITH THE CURRENT
ECONOMIC ENVIRONMENT. THIS IS NOT THE TIME TO BE
INVESTING IN CYCLICALS. SINCE THE TIME TO BE INVESTING
IN DEFENSIVE BUSINESSES. THERE WILL BE SOME
DIFFERENTIATION BETWEEN MANAGERS AND I THINK THAT IS A
GOOD THING. SOMETIMES, MANAGERS WILL BE
TESTED AND LPS WILL HAVE THE CHOICE BETWEEN BETTER MANAGERS
AND THOSE THAT HAVE MORE RISK IN THEIR PORTFOLIOS. KRITI:
ECONOMICS AND MARKETS 11 THAT PRIVATE MARKETS LAG ON THE
PUBLIC. IF YOU ARE BEARISH AND SOME OF
THE FOCUS -- SOME OF THE FOLKS ON WALL STREET ARE, AT SOME
POINT THERE IS AN EXIT STATION THAT WILL HIT THE PRIVATE
MARKETS AS WELL. WHERE YOU SEE THE READ THROUGH?
STEPHAN: PRIVATE DEBT PORTFOLIOS ARE NOT
IS SKEWED TOWARDS CYCLICAL. WE HAVE NO EXPOSURE TO
CYCLICALS WHATSOEVER. THE PUBLIC MARKETS ARE
GENERALLY REFLECTIVE OF THE BROADER ECONOMY AND THEREFORE,
YOU WILL HAVE MORE RISK. THE OTHER ASPECT IS THAT YIELDS
DEFINITELY -- GENERALLY HAVE CONFIDENCE.
YOU CAN TAKE PAYMENT BEFORE DEFAULT.
YOU ARE GENERALLY A DIRECT LENDER TO THE COMPANY, YOU HAVE
THE CFO AND THE COO ON SPEED DIAL. THAT WILL ALLOW YOU TO WELL
ENGAGE BEFORE THERE IS A PROBLEM.
AS MORE DIFFICULT WITH PUBLIC WHEN YOU'RE IN A BROADER CLUB.
I THINK PRIVATE MARKETS AND PRIVATE DEBT IN PARTICULAR
SHOULD FARE BETTER IN A MORE CHALLENGING ECONOMIC
ENVIRONMENT. DANI: TO THAT POINT, WE SAW,
ESPECIALLY DURING COVID AND BEFORE COVID, AND AFTER, A LOT
OF COVENANTS GETTING THROUGH. LESS RESTRICTIONS THERE.
I ASSUME THAT IS WHAT YOU'RE TALKING ABOUT WHEN YOU SAY
THERE ARE SOME MANAGERS WILL NOT DO WELL DURING A PERIOD,
AND WE HAVE YET TO BE TESTED DURING A PROPER CYCLE.
DO THINK WE WILL GET THAT PROPER TEST, AND WHAT WILL THAT
SHAKEOUT LOOK LIKE? STEPHAN: I THINK IT IS.
SOME OF THOSE COMPANIES, THEY WILL BE TESTED THROUGH THIS
CYCLE. IT IS HARD TO TELL WHAT THAT
WILL IMPLY, IN TERMS OF INVOLVEMENT.
IN THE PREVIOUS PFC, PRIVATE DEBT WAS A PRIVATE MARKET.
IT WAS ONLY A FIVE LAYER MARKET, A ONE-POINT CHILE
DOLLAR MARKET GLOBALLY. WE HAVE YET TO SEE WHAT THE
IMPLICATIONS ARE GOING TO BE. WE KNOW FROM EXPERIENCE THAT
COMPANIES THAT HAVE COVENANTS, THAT ARE MANAGED MORE
CONSERVATIVELY GENERALLY FARE BETTER IN A SLOWING ECONOMIC
ENVIRONMENT. DANI: I'M AFRAID WE HAVE TO WRAP IT
THERE. THANK YOU FOR JOINING US. LET US KNOW WHEN YOU HAVE
ANOTHER DEAL, WE WILL HAVE YOU ANY TIME.
STEPHAN CARON, THANK YOU. COMING UP, WE WILL SPEAK TO KRITI: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." FINCH STRIPS THE U.S.
OF ITS AAA CREDIT RAINING, ECHOING A MOVE FROM MORE THAN A
DECADE AGO. IT DRAWS THE SCHISM. -- IT DRAWS CRITICISM.
TREASURY SECRETARY JANET YELLEN BECAUSE IT OUTDATED. FORMER PRESIDENT TRUMP HAS BEEN
INDICTED REGARDING HIS EFFORTS TO OVERTURN THE 2020 ELECTION.
EARNINGS SEASON ROLLS ON. AND RISES ON OPTIMISM WHILE
STARBUCKS SLIPS ON DISAPPOINTING SALES.
I AM KRITI GUPTA IN NEW YORK WITH DANI BURGER IN LONDON.
A LOT TO DISCUSS. REALLY THAT FINCH DOWNGRADE
SEEMS TO BE TAKING THE CAKE. DANI:
ALL OF THE OTHER STUFF, I'M NOT SURE WE CARE ABOUT IT TODAY.
ON MY VENTURE HOW MUCH OF THIS IS ABOUT THE FINCH DOWNGRADE.
WE WERE ALREADY FINCH -- WE WERE ALREADY RISK OFF BEFORE IT.
SEEMS LIKE WE WERE MOVING INTO SOMETHING ELSE, PERHAPS
POSITIONING. HE UNPOPULAR POSITIONING FOR
THE YEAR. WE ARE OFF THE LOWS STILL DOWN
SIGNIFICANTLY. THE WORST DAY IN ABOUT A MONTH.
THE T1 HUNDRED IS DOING WORSE. A LOT OF THE HIGHER BETA TYPE
INDUSTRIES ARE DOING POORLY BUT EVERY SINGLE SECTOR, YOU WILL
SEE THAT EVERY SECTOR IS IN THE RED TODAY.
JUST TO POINT TO, IT IS MOSTLY A STOCK STORY.
EVERYWHERE ELSE IS A LITTLE CONFUSED.
SWISSIE IS NOT GETTING A LOT. IT IS WEAKER TODAY BY .25%.
THERE WAS SOME BAD SWISS ECONOMIC DATA BUT USUALLY THIS
PAIR MOVES MORE ANY MACRO CONTEXT.
PERHAPS OUR WORRY IS REALLY CONFINED TO STOCKS. KRITI:
IT SEEMS TO BE. YOU'RE RELEASING THE PAIN,
FEATURES DOWN. THEY ARE OFF OF THEIR LOWS.
IF YOU ZOOM IN, NASDAQ FUTURES, MORE PAIN.
IT REALLY COMES DOWN TO THE IDEA OF THE FINCH DOWNGRADE.
POSITIONING WILL PLAY A BIG PART OF IT. NOT THE SAME KIND OF CARNAGE WE
SAW IN 2011. FRONT END OF THE CURVE IS STILL
SEEING A LITTLE BIT. GO FURTHER OUT.
THAT CURVE IN 2011 SITE MASSIVE IT ON THE DOWNGRADE.
THIS TIME, VIRTUALLY UNCHANGED. HOW MUCH WEIGHT DOES THIS MOVE
REALLY HAVE ON THE BOND MARKET? DANI:
LET'S MORE -- LET'S GET MORE TO THAT WITH THE MOVE. NOW TO AA PLUS ONLY MOODY'S HAS
THE TRIPLE AA -- ONLY MOODY'S HAS THE AAA LEFT.
TREASURY SECRETARY JANET YELLEN CALLED THE MOVE ARBITRARY AND
OUTDATED. TO THAT CRITICISM, HERE IS WHAT
ALLIANZ CHIEF ECONOMIST HAD TO SAY IN RESPONSE. >> I THINK THAT'S FASCINATING
AS A EUROPEAN. AMERICANS FOUGHT THAT DECISION.
IT IS BIPARTISAN. THE SAME PEOPLE BEEN CALLING
THE OVERHEATING OF BIDEN-ECONOMICS OR HAVE BEEN
DISRESPECTFUL SAYING, YOU GUYS ARE WRONG, I THINK EUROPEANS
SHOULD LEARN -- A THING OR TWO. WE TEND TO SELF REGULATE A LOT
MORE. FROM THE SIDE OF THE POND, IT
LOOKS LIKE YOU GUYS ARE VERY UNITED IN THIS SITUATION.
DELISE LEASE YOU ARE TELLING FINCH THAT YOU DO NOT CARE
WHICH I THINK IS QUITE AMUSING. DANI: I LOVE THAT RESPONSE.
THE UNITY OF AMERICAN SAYING THEY DO NOT CARE. JOINING US NOW IS KLAUS BAADER,
GLOBAL CHIEF ECONOMIST AT SOCGEN. I DO WONDER HOW MUCH,
YOU LOOK AT THE CRITICISMS AND CHALK IT UP TO AMERICAN BLUSTER.
WHERE DO YOU STAND ON IT? KLAUS:
IF A COUNTRY, AGAIN AND AGAIN THREATENS TO GO INTO DEFAULT, I
THINK IT IS VERY DIFFICULT TO MAINTAIN A AAA RATING, IT IS A
SIMPLE AS THAT. LONGER TERM PROSPECTS ARE POOR
AND IN MANY EMERGING ECONOMIES, THINGS ARE NOT THAT GREAT. I NEVER LOOK AT CREDIT RATINGS.
[LAUGHTER] DANI: THEIR PUBLIC VIEW OF THE CREDIT
AGENCIES IS NOT THAT GREAT AT THIS MOMENT.
THE TIMING CERTAINLY WILL NOT HELP.
WHEN IT COMES TO THE FISCAL STANDING OF THE U.S.
WITH A BALLOONING FISCAL DEFICIT, HOW MUCH IMPACT WILL
THAT ACTUALLY HAVE? WE CAN LOOK AND SAY IT IS NOT
GREAT BUT DOES IT SPILL INTO SOMETHING WORSE? KLAUS:
WE HAVE NOT SEEN IT YET. BOND YIELDS ARE SO LOW. IT IS ONE OF THOSE THINGS, THEY
DO NOT MATTER UNTIL THEY MATTER AND WHEN THE MATTER IT IS
PRETTY MUCH ALL THAT MATTERS. AT THE MOMENT, I DON'T THINK
MARKETS ARE CONCERNED ABOUT SOVEREIGN RATINGS. THEY ARE CONCERNED ABOUT
DEFAULTS GOING FORWARD IN PRIVATE COMPANIES. KRITI: IN TERMS OF THE TONE THAT IT
SETS, CAN WE FAST-FORWARD A YEAR FROM NOW?
THIS IS ONE OF MY BIG FUN FACTS THAT WE LAST WENT THROUGH, IN
ABOUT ONE YEAR, JANUARY 1, 20 25, AFTER A PRESIDENTIAL
ELECTION WHICH WILL ALREADY INTRODUCE A LOT OF VOLATILITY,
YOU FIND THE STANDOFF THERE -- IS THERE ANY WAY FOR THE U.S.
ECONOMY TO DEAL WITH THAT AHEAD OF TIME OR IS THIS AN
INEVITABILITY IN 18 SHORT MONTHS? KLAUS: I'M NOT SURE. I FIND IT PECULIAR.
IT IS SORT OF ODD THAT U.S. CONGRESS HAS TO PANNED -- --
U.S. CONGRESS HAS TO PASS SPENDING
AND THEN MAKE A SEPARATE DECISION ABOUT HOW THAT IS
GOING TO BE FUNDED. I THINK YOU ALSO HAVE TO ACCEPT
WITHOUT A SEPARATE DECISION THE COST THAT WILL HAVE FOR DEBT.
AS FAR AS I KNOW, THERE IS NO OTHER COUNTRY THAT GOES THROUGH
THAT PROCESS. THERE IS A SO-CALLED THAT
BREAK, OTHER COUNTRIES HAVE LIMITS ON PUBLIC SECTOR DEBT OR
DEFICIT. THIS SEPARATION OF WHAT
DEFICITS DO AND WHAT THAT DENTIST IS NOT STRIKE ME AS
SENSIBLE. DANI: PERHAPS ECONOMIST AND
STRATEGIST ALIKE MAY LEAN MORE TOWARDS KEVIN WITH OUR -- KEVIN
MCCARTHY'S IS THE ONLY WAY FORWARD, PERHAPS ON WHAT IT HAS
TO OFFER WHEN IT COMES TO THE BUDGET? KLAUS: GERMANY -- IT IS VERY DIFFICULT
TO RUN FISCAL POLICY ON RULED. IT IS REALLY IMPORTANT IN THE
CENTRAL ROLE IN STABILIZING ECONOMIES.
YOU DON'T KNOW KIND OF SHOCKS ARE GOING TO COME.
I WOULD BE VERY CAREFUL ABOUT MAKING STRICT RULES WHICH MIGHT
REALLY HINDER YOUR ABILITY TO MANAGE THE ECONOMY. DANI:
CAN I GO BACK TO THE IDEA OF PRIVATE SECTOR DEBT?
WHAT ARE YOU EXPECTING THE -- TO LOOK LIKE? KLAUS:
ECONOMIC GROWTH WILL PROBABLY SLOW. IT WILL HAPPEN LATE.
THERE IS SOMETHING INTERESTING MY COLLEAGUES AND I WERE
DISCUSSING. THE NET INTEREST BURDEN ON
CORPORATE'S HAS ACTUALLY GONE DOWN. THIS IS VERY IT TYPICAL. INTEREST RATES HAVE GONE UP. IN A WAY, A LOT OF COMPANIES
HAVE TRAINED THEMSELVES WHEN INTEREST RATES WERE LOW.
EVEN THOUGH THEY DO NOT NECESSARILY NEED THAT MONEY.
NOW, THEY'RE STILL PAYING SUPERLOW INTEREST RATES ON
THOSE BONDS AND THEY ARE GETTING LOTS OF MONEY FROM
THEIR DEPOSITS. OF COURSE, THAT IS NOT GOING TO
LAST FOREVER. THEY WERE ISSUED AT DIFFERENT
TENORS, LONGER THAN USUAL. WHILE THERE MIGHT BE A DELAYED
REACTION, LABOR COSTS ARE STILL RISING, UNION COSTS ARE STILL
RISING QUICKLY. WHETHER THE PRICING POWER WILL
LAST FOREVER IS AN OPEN QUESTION BUT I DO NOT THINK IT
WILL BE OUTRAGEOUS TO ASSUME IT WILL FADE A LITTLE BIT.
IN THE BACKGROUND, YOU HAVE HIGHER INTEREST RATES.
I THINK IT WILL BE VERY DIFFICULT FOR THE DEFAULT
CYCLING. AS MY COLLEAGUES REGARDING THE
CREDIT CYCLE -- [INDISCERNIBLE] DANI:
THAT WAS A FANTASTIC ANSWER. KRITI:
KLAUS BAADER WE HAVE TO LEAVE IT THERE.
KLAUS BAADER JOINING US. COMING UP, WE GO TO THE MICRO.
ANOTHER CHIP MAKER. AMD GAINS. MORE ON THAT AND QUALCOMM.
THIS IS BLOOMBERG. KRITI: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." COMING UP, AND INTERVIEW WITH
MEB FABER. THAT'S COMING UP AT 2:00 P.M.
IN NEW YORK AND 7:00 P.M. IN LONDON. THIS IS BLOOMBERG. ♪ KRITI: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." I AM KRITI GUPTA IN NEW YORK
WITH DANI BURGER IN LONDON. A.N.D IS EDGING HIGHER, TOPPING
-- AMD IS EDGING HIGHER, TOPPING SECOND-QUARTER
ESTIMATES. SEEING QUITE A BIT OF A
TURNAROUND, IS IT ALL AI? >> IT REALLY IS.
THAT IS THE FOCUS OF THE TURNAROUND. ESSENTIALLY, AMD IS DEVELOPING
ACCELERATED CHIPS WITH OUR CRUCIAL -- CHIPS, WHICH ARE
CRUCIAL TO SPEED UP DEVELOPMENT. THAT IS A CRITICAL PART AND
THEY ARE SEEMING -- THEY ARE SEEING THEIR GAINING INTEREST,
NOT TO THE SAME EXTENT BUT THEY ARE. THIS IS PART OF THE BROADER
ADAGE THAT KEEPS BEING HEARD IN THIS AREA RIGHT NOW THAT THERE
ARE CHIPS AND THERE ARE CHIPS. A COMPANY LIKE AMD IS REALLY
BENEFITING RIGHT NOW FOR HAVING INVESTED IN THESE PRODUCTS.
DANI: WE ARE ALSO GETTING QUALCOMM
THAT WILL BE REPORTING EARNINGS. WHAT ARE WE LOOKING OUT FOR
THEIR? AGGI:
QUALCOMM HAS A HUGE FOCUS ON THE SMARTPHONE MARKET.
THE SMARTPHONE MARKET, THERE IS A QUESTION AROUND THE AMOUNT OF
CONSUMER DEMAND ON THE SMARTPHONE MARKET.
IT DOES SEEM LIKE IT IS RECOVERING SOMEWHAT, ESPECIALLY
WHEN YOU LOOK AT CERTAIN AREAS OF THE ECONOMY.
REALLY, THIS IS TWOFOLD. ONE IS REGAINING CONSUMER DEMAND, THE OTHER IS WHETHER
THESE CHIPS HAVE REDUCED THEIR STOCKPILES ENOUGH TO START
ORDERING AT A GREATER PACE. THAT IS THE GREATER ISSUE FOR
QUALCOMM. KRITI:
LET'S STICK WITH THE CHIPMAKER STORY. WE KNOW THAT SOME OF THE
COMPETITORS, INTEL AS WELL WILL BE POTENTIAL ANCHORS FOR THE
ARM IPO COMING OUT OF SOFTBANK. WE ARE GETTING SOME NEWS, WALK
US THROUGH THOSE NUMBERS. AGGI: THE CRUCIAL THING THAT I FOUND
INTERESTING IS THAT THEY WANT THIS IS SOON AS SEPTEMBER.
ESSENTIALLY, SOFTBANK IS LOOKING TO CASH IN ON THIS
BULLISH ATTITUDE TOWARDS CHIP DEVELOPERS, ESPECIALLY THOSE
MAKING THE HIGH-END CHIPS. THEY ARE PUSHING FOR THIS EARLY
IPO POTENTIALLY AS EARLY AS NEXT MONTH.
WHEN YOU LOOK AT ARM, YOU ARE ALSO SEEING A SHIFT FROM THE
PUBLIC MARKETS. WE HAVE SEEN THE BOOM FROM A
MONTH OR SO AGO AND NOW WE'RE SEEING THAT THIS VALUATION IS
POTENTIALLY BETWEEN 60 AND $70 BILLION.
EARLIER THIS YEAR, BANKERS WERE RANKING THIS AROUND $3 BILLION.
-- $30 BILLION. THIS COULD BE A BOOM AT A TIME
WHEN THEY REALLY NEED IT. DANI: AGGI CANTRILL WALKING US
THROUGH THE STORIES WE NEED TO KNOW. KRITI:
STARBUCKS QUARTER SALES FALLING. BLOOMBERG SIMONE FOXMAN ALL
OVER IT. IS THE WEAKNESS JUST OF PEOPLE
LIKE ME SAYING, SEVEN DOLLARS FOR A CARAMEL LATTE, I CANNOT
DO IT? SIMONE: OTHER SUCCESS IS BUILT ON PRICE
INCREASES. WITH THESE NUMBERS ARE
SUGGESTING, THE 7% INCREASE ON SALES ON THE YEAR END, YOUR
BASIS, CAN BE LIGHTER THAN EXPECTED.
THE ANTICIPATION WAS FOR 7.7%. ESSENTIALLY, THERE ARE
CUSTOMERS STILL LOOKING TO CUSTOMIZE THEIR ORDERS. THEY HAVE FACED A LOT OF PRICE
HIKES, ESPECIALLY AT RESTAURANTS. VALERIE TYTEL PUT A VERY
INTERESTING GRAPH TOGETHER FOR US. IT IS REALLY CONTINUING TO RISE
WE HAVE SEEN COSTS OF GROCERY STABILIZE. WHEN YOU GO AND ORDER A SEVEN
DOLLAR DRINK, THERE IS A LIMIT TO HOW MUCH OF THESE PRICES
THAT THE CONSUMER CAN TOLERATE. DANI:
IT IS THE ADAGE, WE TALK ABOUT PERSONAL FINANCES, STOP GOING
TO STARBUCKS, MAKE COFFEE AT HOME.
YOU ASSUME THAT IS THE FIRST THING A DITCH.
WHAT ELSE STOOD OUT? SIMONE:
NOT NECESSARILY DITCHING THE VENTI LATTE BUT NOT WANTING TO
BUY MORE. OTHER THINGS THAT STOOD OUT,
CHINA IS VERY IMPORTANT WHEN WE LOOK AT THE STARBUCKS STORY.
WE SAW SALES RISING 4%. THAT IS A LITTLE BIT HARDER
THAN SOME ANALYST'S ESTIMATES. I THINK THE CONCERN, THE
OUTLOOK , STARBUCKS EXECUTIVES POINTING OUT THERE IS NOT AS
MUCH PENETRATION IN THE CHINESE MARKET THAN THERE IS IN
SOMEWHERE LIKE THE UNITED STATES. THERE IS CONCERNED THAT IF YOU
ONLY SEE COMP SALES RETURN AT A HIGH SINGLE, MID SINGLE PACE,
THAT WILL BE A LITTLE BIT OF A PROBLEM. ONE THING WE ARE WATCHING IS,
HOW MUCH MONEY THE COMPANY IS SPENDING ON WAGES.
THAT IS AN IMPORTANT ONE AS WELL. KRITI:
THAT SOMETHING WE WILL KEEP OUR EYE ON.
THOSE SHARES ARE ALREADY DOWN. SIMONE FOXMAN, WALKING US
THROUGH THOSE EARNING STORIES. >> THIS IS CLEARLY NEGATIVE
PRESS FOR THE U.S. IN A FAIRLY FRAGILE TIME
INTERNATIONALLY AS YOU POINT OUT. ON THE OTHER HAND, THERE IS NO
REPLACEMENT FOR THE U.S. AS THE DOLLAR CURRENCY. DANI:
CAPITAL MARKET SENIOR ECOLOGIST -- SENIOR ECONOMIST THERE.
KRITI: JOINING US NOW, BLOOMBERG
ECONOMICS CORRESPONDENT MICHAEL MCKEE. EVEN I AM OLD ENOUGH TO
REMEMBER THE LAST DOWNGRADE. HIS NORMAL THAT MEMBERS OF
CONGRESS AND ECONOMICS ARE SAYING THAT THIS IS UNJUSTIFIED.
IS IT? MICHAEL: YOU CAN ARGUE IT IS.
IT IS A SOVEREIGN COUNTRY, IT CAN DEAL WITH ITS DEBTS.
THEY HAVE NEVER FAILED TO PAY, DESPITE THE DRAMA WE HAVE SEEN. WE TALK ABOUT THE FUTURE
TRAJECTORY, THE REPEATED DEBT LIMIT AND STANDOFFS,
LAST-MINUTE RESOLUTIONS HAVE ERODED CONFIDENCE IN FISCAL
MANAGEMENT AND THE GOVERNMENT LACKS A MEDIUM-TERM FISCAL
FRAMEWORK, UNLIKE MOST PEERS AND HAS A COMPLEX BUDGETING
PROCESS. THE QUESTION IS, DOES IT MATTER
TO ANYBODY? NOT REALLY. FINCH IS GETTING VERY NEGATIVE
REVIEWS. THE SAME SORT OF THING THAT
HAPPENED BACK IN 2011. JANET YELLEN CALLING IT
ARBITRARY AND BASED ON OUTDATED DATA. JASON FURMAN SAYING IT IS VERY
HARD TO UNDERSTAND. DANI: WE ARE LOOKING THERE AT SOME OF
THE CRITICISMS. I THINK A LOT OF IT SEEMS TO BE AROUND THE
TIMING OF THIS. WHEN S&P DID THIS, THAT
HAPPENED MONTHS AFTER THINGS WERE RESOLVED.
WE ARE MONTHS AFTER HERE. MICHAEL:
MAYBE THIS MIGHT HAVE PUT A LITTLE PRESSURE ON REPUBLICANS
AND DEMOCRATS DURING THE DEBT CEILING FIGHT. NOW THAT IS OVER, SUSPENDED FOR
A FEW YEARS, WE WILL NOT REVISIT THAT UNTIL 2025.
WHEN YOU LOOK AT WHAT HAPPENED AFTER, THAT CAME OUT JUST A DAY
OR TWO AFTER THE DEBT CEILING WAS SOLVED -- WE HAD A BRIEF
REACTION IN ALL MARKETS. YOU CAN SEE STOCKS WENT UP, THE
DOLLAR WENT UP, AND BOND YIELDS WENT DOWN. THAT KIND OF FITS THE OLD
SHAKESPEAREAN LINE ABOUT SOUND AND FURY SIGNIFYING NOTHING.
KRITI: JUST TO PLAY DEVILS ADVOCATE,
IT SEEMS LIKE THERE MAY BE A POINT THAT IF YOU ARE LOOKING
AT THIS NEXT DEBT FEELING -- NEXT DEBT STANDOFF, RIGHT OFF
THE HEELS OF A PRESIDENTIAL ELECTION, HOW ARE YOU SUPPOSED
TO FIX THE NET DEBT PROBLEM IF YOU'RE NOT EVEN ENTERTAINING
THOSE IDEAS? MICHAEL: THIS IS GOING TO BE FORGOTTEN
BY THEN. NOBODY ON CAPITOL HILL REMEMBERS S&P DOWNGRADING.
WHEN YOU LOOK AT WHAT HAPPENED TO THE MARKETS AFTER THAT,
THERE WAS NO IMPACT. IF THE IDEA THAT DEFAULTING ON
U.S. DEBT DOES NOT MOVE PEOPLE TO DO
SOMETHING, FINCH PILING ON IS NOT GOING TO MOVE PEOPLE TO DO
ANYTHING EITHER. A LOT OF THIS WILL REVOLVE
AROUND THE TRUMP TAX CUTS WHICH EXPIRE IN 2025.
THEN, YOU COULD SEE SOME ADDITIONAL PRESSURE IF THEY
AREN'T RENEWED AND NOTHING IS DONE TO UPSET THEM.
THAT IS A PROBLEM FOR ANOTHER DAY.
WASHINGTON LOVES NOTHING MORE THAN TO KEEP CAN DOWN THE ROAD. KRITI: BLOOMBERG'S MICHAEL MCKEE
WALKING US THROUGH EVERYTHING. LOOKING AT THE BOND MARKET, IT
IS NOT DOING MUCH. S&P DOWNGRADE STORY, YOU SAW
THIS MASSIVE BID INTO THE DOWN CURVE.
YOU'RE NOT SEEING THAT THIS TIME.
LITERALLY UNCHANGED WHEN IT COMES TO THE EQUITY MARKET
TAKING THE BRUNT OF THE HIT. DANI:
ALLIES DIFFERENT THIS TIME THEN IN 2011.
THERE WAS ALSO THE SOVEREIGN DEBT CRISIS THAT PUSHED US INTO
U.S. SOVEREIGN DEBT. AT THE SAME TIME, THE WORRY FOR
THE BOND MARKET. IT SEEMS TO BE THE TREASURY
SAYING IT WOULD HAVE TO BORROW ABOUT $1 TRILLION FOR THAT
DEFICIT.
