May 15, 2025 • 42 mins
- Jamie Dimon, CEO and Chairman of JPMorgan Chase
- Jim Zelter, President at Apollo Global Management
- Gene Seroka, Executive Director at the Port of LA
- Nela Richardson, Chief Economist at ADP
Bloomberg's Francine Lacqua sits down exclusively with Jamie Dimon, CEO and Chairman of JPMorgan Chase from the JPMorgan Global Markets Conference in Paris. Jim Zelter, President at Apollo Global Management, offers his outlook for markets and inflation amid growing economic uncertainty in the US and globally. Gene Seroka, Executive Director at the Port of LA, discusses the outlook for imports and shipping as US-China trade relations ease. Nela Richardson, Chief Economist at ADP, reacts to retail sales and jobless claims and and offers her outlook for the consumer.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hortenn. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
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(00:34):
Terminal and the Bloomberg Business App.
Speaker 3 (00:36):
Special guest john He's called Jamie Diamond. He runs JP
Morgan and I'm delighted to speak to him. Jamie Diamond,
thank you for joining us.
Speaker 4 (00:43):
It's happy to be here.
Speaker 3 (00:44):
Hey, there's a lot going on. It's trade wars, markets
up and down. What did you learn in the last month?
Speaker 5 (00:49):
Not much other than we have all this uncertainty, you know,
some preceded the new administration, like we had large deficits,
intro rates going up and place going up, and some
are you know, tariffs and things, and of course the
geopolitical situation is very tense, very difficult and hard to resolve.
Speaker 3 (01:08):
Okay, so if you forget projections numbers, what's your hunch.
Is the UYS going to go into a recession or not.
Speaker 5 (01:13):
Look, I'm going to defer to economists who give it
about a fifty percent chance. I think all these things
are probably inflationary a little bit more and slowing down
the economy. If there's a recession, I don't know how
big it'll be or how long it will last. Hopefully
we'll avoid it, but I wouldn't take it off to
the table at this point.
Speaker 3 (01:30):
If you look at you know, the trade war and
then the somewhat reconciliation between the US and China, does
it hold.
Speaker 5 (01:38):
I think it's the right thing to do is to
back off of some of that stuff, you know, to
have an engage in conversation. I'm grateful they did the
US UK deal. You know, it's an agreement in principle.
So you know, there's a lot of one sertaty still
and there's all of one sturdy still in the China thing.
But at least we started and obviously calms down the markets.
That's not the reason to do it, but the markets,
(01:59):
you know, or something like that. And so you'll tell
uncertainty to resolve the ninety day triggers a lot of
these things and hopefully they will be resolved.
Speaker 4 (02:08):
What are your with your complex?
Speaker 5 (02:09):
I don't expect immediate resolution, you know, it's the satisfaction
of everybody in ninety days.
Speaker 3 (02:14):
But you expect markets to settle from here because we
have a little bit more of a blueprint or could
volatility pick back up in any second?
Speaker 5 (02:22):
No, markets are quite unpredictable. I think there's a lot
of uncertainty out there that you can't discount, you know
when I you know, war in Ukraine, territor in the
Middle East, you know, I ran. You know, huge deficits
are tax bill, which I would like to see a
good tax bill pass, you know, the terrorists, the reaction
of country to tariffs. The EU and the UK are
about to negotiate. I think they have a chance to
(02:43):
actually develop a great relationship, you know, partially making up
for you know, the disaster the Brexit became, and so, yeah,
those those are unsurtgerties. You can't eliminate them because you
want to.
Speaker 3 (02:54):
But what are your biggest clients saying about this market volatility?
Have they made money on the back of it?
Speaker 4 (03:01):
Yeah? Some, you know, some doing some don't.
Speaker 5 (03:02):
And you know, volatility volatier would be good or bad
depending on you know, who's who's facing it. So but
but I would expect continued volatility. I think it's a
mistake to think we can go through all the things
we're going through and the volatility itself will come down.
Speaker 3 (03:16):
Has it been good for JP margin?
Speaker 4 (03:18):
Was there?
Speaker 6 (03:18):
You know trading?
Speaker 5 (03:20):
Yes, because when there's volatility is a very simplistic way
to look at, spreads gap out and traders make more
money if there's more volume. So we had both this time,
more volatilely more volume, because very often you have a
lot of volatility and spreads gap out there's much less volume.
So you've seen examples where there's good volatility and there's
bad Volatilely, this just one happened to be good. The
(03:40):
next go around may not be so good, Jamie.
Speaker 3 (03:43):
When it comes to financials, I mean, you know a
lot of I guess non bank entrants are making quite
a lot of way Citadel Jane Street, is that, you know,
a concern for the banks shouldn't be a problem for
the banks.
Speaker 5 (03:55):
I would call it a problem. You know that both clients.
I'm very capable, you know, but I've always had the
view there are a lot of competitors out there, and
you know, all the major banks are back. I think
that's a good thing for the world. You know, maybe
not so much for Jamie Morgan. There's you mentioned those two,
There's Apollo, There's a lot of fintech, some very good ones.
There's Stripe, there's PayPal. Yeah, my view has always been
(04:16):
the same. I tell them magic, Assume competition, Assume they're
coming at you in every angle. Assume they often have
their own strength, sometimes their own weaknesses. They won't all
do great, but yeah, I think they're you know, some
of these people gaining quite a bit of shared parts
of their business. We still are too, by the way,
So you know we're in the fight. We're not losing
out very much. But that doesn't mean you won't lose
out tomorrow because you're winning today.
Speaker 2 (04:37):
So what do you have to do today?
Speaker 3 (04:38):
How do you see the people that are doing, you know,
well today doing even better tomorrow.
Speaker 5 (04:43):
It's about us are other people both? It's quality of people.
You interviewed Pranav. I mean we have exceptional people in investment,
banking and sales and training, And I say I put
right next to that technology, but it's related because those
people deploying technology. So there are thousands of technology project,
then there are hundreds of AI projects, all of which
are meant to do a better job for customers, consumer research,
(05:06):
how we deliver things to people. And if you don't move,
you know you're going to be left behind. I mean,
I remind you could be a country or a company.
You do not have a divine right to success. You know,
we mentioned as management learnings as I did. You can
see it on YouTube and all that. But I put
out to people, look at the bank, look at no Keia, BlackBerry, Sears, Kmart,
(05:28):
Bearster Lehman, I can chapter of diverse a failed companies
usually because they're complacent, arrogant. They think they're on the
top of the top of the world and they're not.
There are competitors coming everywhere, and you should assume that's
gonna be true.
Speaker 3 (05:41):
Do you see competitors coming for the US?
Speaker 4 (05:44):
Yeah? Where are Europe? Are about the countries?
Speaker 3 (05:47):
The countries?
Speaker 7 (05:48):
Yeah?
Speaker 4 (05:49):
Yeah, I think Europe.
Speaker 5 (05:52):
Let me just ask. I think Keirstormer, Mers and Macrone.
I think Macron is one the best political leaders in
the planet today. Okay, I think here Stormer is smart, devoted.
They're saying the right things public and privately, all of
them talking about growing the economies, thank god, pro business,
pro capital, and they're doing all of that to improve
(06:15):
the lot of their citizens.
Speaker 4 (06:16):
It's not about what they're doing for JP.
Speaker 6 (06:18):
Morgan.
Speaker 5 (06:19):
And if I was Europe, absolutely i'd want to regret
live in the UK military, economic, and I would reform
as best I can all of European things. What they're
all talking about now, deregulation, simplification, and yeah, they try
to compe America, and that would be good for America.
That doesn't make me said, it makes me happy that
they're strong. And then you know their allies. I want
our allies to be strong and powerful military and economically.
Speaker 3 (06:42):
Do you worry about US supremacy actually exceptionalism, Yeah, I.
Speaker 5 (06:47):
Look, I never believe here quite that exceptional. I mean, remember,
America is an unbelievable country with freedoms and the gifts
of God and you know, water, food, energy, and then
the gifts of founding fall is called freedom of religion.
A speech from an enterprise that those dwarf everything, and
so we still have the most prosperous economy of the
world's ever seen. But the American shouldn't take it as
(07:07):
a divine rights to succes either. We slowed ourselves down
with regulations, stupid bureaucracy. You know, we're not getting We
haven't done budgets in years, you know, So now we
shouldn't assume it's forever. I don't think our will still
be pre eminent, you know, militarily and economically for a
long time, you know.
Speaker 4 (07:24):
But if we don't do everything right, we can lose
that too.
Speaker 5 (07:26):
We have twenty thirty forty years from now, and I
think very important that is America. The goal of America
should be to help the military alliances of the Western
world and to help the economic alliance of the Western
world to walk side by side, like you did in
victory in Europe day the other day here, to strengthen
the Western world and hold it together, you know, not
the cause of the fragments, And so I think we
(07:48):
have to work hard to make sure that's the case.
Speaker 3 (07:51):
Do you worry about deficits and do you worry actually
in the US, And do you worry also about the
US dollar remaining as a reserve currency. Do you think
Europe has what it takes to try and put the
euro in there.
Speaker 5 (08:02):
Yeah, so I think I should have mentioned deficits up
front as being one of the issues you have to deal.
And I think acid prices are quite high too, and
those create various risks For America. Our deficit is almost
two trillion dollars, six or seven percent of GDP, the
largest peacetime deficit ever, and we have one hundred percent
debt to GDP. That one hundred percent debt to GDP
is kind of universal almost around Europe on average. But
(08:25):
your deficits are much smaller. Does that create a risk. Absolutely,
it creates a risk of inflation. To me, it creates
a risk of higher long term rates. Well, you know,
but America, will the dollar get week?
Speaker 4 (08:36):
I don't know. That's a slightly different thing.
Speaker 5 (08:38):
I think you could see rates go up, the long
bond rates go up, and you know that might slow
down to growth, and that's how we you know, kind
of a stackflation kind of scenario.
Speaker 3 (08:47):
Would you, I mean, you must see President Trump regularly.
What do you tell what would you tell me?
Speaker 5 (08:52):
I talked to all of us, I talked to all
of the folks there. I wrote about my Chairman's letter.
Speaker 4 (08:56):
I mean we have.
Speaker 5 (08:57):
First of all, America should worry about things we can
do batter you know, I call it blue tape. I
mean our regular we are out of control. We're doing
the same stuff that they did here that you know virtually,
you know, the American public and I don't know. The
GDP per person of Europe has gone from some like
ninety percent of America's to sixty five percent. And they
did it to themselves. Rules, regulations, over complication. They started
(09:20):
the European Union, which I think is a huge accomplishment
of mankind.
Speaker 4 (09:23):
They got to finish it.
Speaker 5 (09:24):
And here they told you they called the Capital Markets
Union the Banking Union. You know, they have to create
a big common market of four and fifty million people.
And so in America it's the same thing. It's regulations,
it's permitting. You know, we've overdone. We've wasted a lot
of money in the green economy. It's getting jobs back,
it's training in schools, it's fixing immigration. So we've stopped
(09:45):
at the border. But now we have to have a
more merit based immigration, more seasonal immigration, you know, things
that can help the country grow. And then we have
to work in our military alliances and economic alliances, and
that's for the sake of the future free and democratic role.
Speaker 2 (09:58):
So on the.
Speaker 3 (09:59):
Economic lines, is there a concern that actually certain countries
in Europe or elsewhere will choose non US bank for bondifferences,
will choose non US asset managers to manage their pensions.
Speaker 5 (10:11):
Yeah, there'll be a little of that, you know. I mean,
you know, we irritate a lot of people, so I
wrote into them. They say, you know, like they're not
buying our you know, Kentucky bourbon or stuff like that.
Speaker 4 (10:20):
There'll be some of that, And I.
Speaker 5 (10:22):
Think it's perfectly reasonable for you know, I spoke to
a lot of investors here. They're thinking about the ass
allocation of the Ied States, Well, they diminished it. Possibly,
is America a bad investment destination. No, if you're going
to take all of your money and put it in
one country, it would still be America. I mean, it's
still the most prosperous nation of the planet. It's got
the best military in the planet, It's got huge amounts
(10:43):
of immigrant innovation. People are catching up. That's a good thing.
You know, China's doing some very good innovation and medical
and AI and we should assume they're continue to do that.
But America still got the best our gdpeople versus eighty
five thousand dollars, you know, China's fifteen thousand dollars. We
have the ashamed about we should fix our problems because
we could grow a lot faster, which help all of
(11:05):
our citizens.
Speaker 3 (11:06):
But if you put too many tariffs and actually too
much uncertainty, does that not squander actually a lot of
the assets that that.
Speaker 5 (11:12):
You answer me, I think they're doing the right thing now,
which is the back off of it. Let you know,
the Secretary of Treasury do the hard work of figuring
out what's the right thing to do. If they're unfair
trade things, do something about it, you know.
Speaker 4 (11:23):
But they have backed off.
Speaker 5 (11:24):
Of specific things and specific industries, and I think that's
the right thing to do. I think the first thing
is very large, that everything in everywhere all at once,
and now they're kind of backing to where I think
they should be in termally. But even at this level,
it caused that kind of uncertainty. Even this level, you
see people holding back on investment and thinking through what
they want to do, you know, thinking about, you know,
(11:46):
how much you're gonna put in the United States, And
I mean, we're gonna be okay, but it is causing
that uncertainty.
Speaker 3 (11:51):
But we're looking at the president, of course in the
Middle East, where there were seals that you know, deals
that were signed and a lot of wall streets. Some
of your competitors, they are, what's your strategy for the
Middle East? How much do you want to grow there?
Speaker 4 (12:01):
Well, we grow everywhere.
Speaker 5 (12:02):
I mean, you know, we go country by country and
we look at you know, we bank country, cities, schools, states, hospitals,
big companies everywhere. We have a network effect. So when
we bank Bloomberg, we're banking the United States. We're banking
you in London, in Paris, we're banking you in Europe,
We're banking you in the Middle East. That's what we do.
So almost every one of those countries we're growing. As
they grow, we grow, we cover more of their institutions. Overseas,
(12:25):
we're institutional in the United States. We also have a
consumer and so you know, as you know, we're testing
consumer and chase UK to them.
Speaker 3 (12:32):
Yeah, and you're growing actually that retail business a lot
in the UK.
Speaker 2 (12:35):
What's next for that?
Speaker 4 (12:36):
I hope too, We hope to grow more in the UK.
Speaker 5 (12:39):
Add some products, and eventually we already annouced we're going
to go to Germany. But I think we have a
chance to build a great digital bank, and we have
competitive advantages. We have a brand, we have research, we
have a balance sheet, We've got capabilities we're going to add.
You know, we're not gonna announce it today. We'd add
more capabilities over time. So that and then someone like you,
if you travel the United States and to the UK,
(12:59):
you're gonna be a move your money between Chase US
and Chase UK on your phone. So we're add things
that make your life better as a consumer of our
banking product.
Speaker 3 (13:09):
You certainly caught some waves in, you know, talking about
return to the office. I think there might have been
a little bit swearing at bit there or not.
Speaker 2 (13:17):
People listened, Yeah, full time listen.
Speaker 5 (13:22):
At first of all, I tried, I did emote there.
I emot you know, people know me, and I don't
really care about that.
Speaker 4 (13:26):
I don't worry about it.
Speaker 5 (13:28):
But I answered, I want to answer the guy asked
a legitimate question, and I gave it a very detailed
answer about why it doesn't work for young people, why
it doesn't work for management, why it doesn't work for innovation.
I completely applaud your right to not to want to
go to the office every day, but you're not going
to tell JP Moore what to do.
Speaker 4 (13:44):
And I think we.
Speaker 5 (13:45):
Already have ten percent of jobs at home. I'm not
against work from home. I'm against work from it doesn't work.
Speaker 4 (13:50):
And then of course the.
Speaker 5 (13:51):
Press made a big deal about the petition and all that.
It was like not even Mosquito. Most of it back
some people. We've had no additional attrition, you know, we
had to make some modification, you know, we didn't have
enough seats in certain areas and will be a better
company and I think our employees will be happier over time, and.
Speaker 4 (14:07):
The younger people learned the right way.
Speaker 5 (14:09):
It's an apprenticeship system and you can't learn working from
your basement.
Speaker 3 (14:14):
Jamie Diamond, thank you so much for joining us today.
That was, of course, the chief executive officer of JP.
Speaker 2 (14:19):
Morgan jim's Ouzer, the president of Apollo Global Management, wenting
in on the administration's trade regime the last time he
joined us, saying this globalization is not going to be
like we have seen it in the past. It is
(14:39):
a new global world order and place is say for
the next thirty minutes. Jim's outzer joins us this morning, Jim,
good morning, Good morning. It's a phrase you used last
time around that's stuck with both of us. We've been
repeating it over the last several weeks. Macro paralysis. Can
you adjust that term?
Speaker 6 (14:54):
Now?
Speaker 2 (14:55):
What phrase would you use to describe this moment?
Speaker 6 (14:58):
First of all, I was going to be here.
Speaker 8 (15:00):
I think I would frame it right now, is a
macro political pivot the administration, clearly, I agree. I think
that Monday meeting with the retail executives was a I
don't want to call it watershed, but it was a
critical moment for the administration to hear about the challenges
on the ground of their plan. And the administration certainly
(15:24):
is not admitted they made a mistake, but they've clearly pivoted.
And that's not a surprise. And it's not a surprise
that they're out going around the globe right now trying
to and successfully inking a lot of deals, a lot
of MOUs that are non binding. But certainly it's great
headlines and it's hundreds of billions, if not trillions. But
(15:45):
so that's where I think, and I think the big
question now is I'll pull back in the COVID library,
there's a big gap between confidence sentiment and the results
and confidence and sentiment is still pretty negative or concerned,
but the results have been pretty strong, and so there's
(16:07):
a very if you think about you know, we're all,
you know, history of the past, and we see signs
of what we've seen in the past, and pattern recognition
if you will, and you know, if you input all
the things that you see right now, you would have
been saying recession went from thirty percent to seventy eighty percent.
(16:27):
Now it's probably below fifty percent.
Speaker 6 (16:30):
But the three questions are does the consumer do corporates.
Speaker 8 (16:35):
And countries are they going to be on the V
shape recovery, the U shape recovery or the L shape recovery.
Our view it, Apollo is right now that the consumer
is still pretty strong, a bit of a V shape recovery,
corporate's a bit of a U shape recovery because a
lot of CAPEX and I've been traveling around quite a bit,
and I think the global response is a bit more
(16:57):
like the L And what you pointed out earlier with
Amory did with Tim Cook. I am not surprised none
of US should be surprised that this administration is going
to put their arm around all these tech titans and
other leaders and saying come to America. China was not
the plan. We didn't love the idea of going India,
come back to the US.
Speaker 6 (17:17):
This is going to be a theme that they're going
to keep hitting hitting.
Speaker 1 (17:20):
Is there enough of a framework that you're gleaning from
this administration that's solid to bring deal making back. We've
seen on the margins some deals being made, some IPOs,
there are just a few. Is this the beginning?
Speaker 8 (17:31):
Well, I think let's separate the headlines from activity. It's
been an incredibly active time for folks that have involved
in the markets. You know, we at Apollo, we opened
up the IPO market. We brought out Aspen, one of
our reinsurance for an IPO. We did a multi billion
dollar deal for a lot of America igt every We
announced a big merger between New Home and a Land
(17:52):
and Sea. So there's been a lot of transactions since April.
Speaker 6 (17:55):
Second.
Speaker 8 (17:56):
I know the headlines may show contrary, but there's been
a tremendous amount of financing and I think it shows
the depth and breadth of the markets right now because
of private capital in the equity and the credit world.
So this idea that the markets shut down, that's actually
what happened two decades ago. Two decades ago, the high
yield market would go into periods six, eight, ten weeks
(18:18):
where there would be no issuance based on the flows
from retail the old AMG number. So this economy, this
capital markets is very robust. Obviously a lot of volatility.
One of the benchmarks in our market would be HyG,
the high Yield Index, the listed HyG ETF that went
from basically seventy nine to eighty down to seventy three,
(18:40):
seventy four, back to seventy nine. It's been a round trip,
but there's been a tremendous amount of activity underneath the headlines.
Speaker 1 (18:47):
How much do you think this is because people see
the environment as being brighter than some may worry, And
how much do you see this as just simply pent
up demand that's been backed up for a long time.
There is a sort of sickle move toward industrialization, and
you have that kind of fundraising that is kind of
independent of any economic cycle.
Speaker 8 (19:06):
I think the bigger long term trends of massive, massive
capex the year or two of Cappex Global Industrial Renaissance.
The demographics every asset class is higher today as we
sit here this morning than it was on Liberation Day,
except for treasuries, which have ten years basically thirty basis
points higher and the thirty year about forty basis points higher,
(19:28):
about five, fifteen and six percent, respectively. That's telling you
that folks think that the economic backdrop is not going
to be a recession. It's going to be slow to
moderate growth. And that's what you're seeing right now in
the market. So that's what we're seeing from our companies.
We're seeing a lot of concern, a lot of handeringing
about big strategic M and A transactions. I don't think
(19:50):
you're going to see a massive equity calendar except for
a few large deals here and there. But the reality
is companies need to operate, finance, and grow, and they're
positioning for an environment that the administration's putting forth.
Speaker 2 (20:03):
This is what companies need. Let's spend some time talking
about what investors need. Never mind the rebound. What did
you learn from the draw down public versus private?
Speaker 8 (20:11):
Well, what you saw is that the talk I come
up here a lot and talk about market structure, and
what you're finding right now is that longer dated capital
is US and many of our peers have long dated
insurance assets. Those were the folks that were the most
active during the marketplace and they were a bit of
the buffer if you would. You know, we put about
(20:32):
twenty seven billion to work in the IG market from
April second to last week. That's on a growth basis
about net about seventeen eighteen billion. I think in the
past that participant was not in the market as much,
and the buffer from the Wall Street Bank trading desk
taking that balance, I think that we collectively as an
industry helped out so that was you didn't see as
(20:54):
much folatileity. There's a lot of cash on the sidelines.
There's a tremendous amount. And again as you see what's
going on on right now around the globe with you know,
the pension assets, DC assets, other assets really trying to
get long duration, long duration assets against their liabilities, it's
really really critical. I mean, the one big overhang it's
still on the market is what's going on in the
(21:16):
treasury market. You know, certainly if you pivot right now
to what's going on with the budget issues, in DC.
It doesn't look like they have a clear path to
a deal that would be really de leveraging to the
US over time. Now Best and is saying a lot
of great things, but treasury rates are higher. And you know,
as we've been saying, the one real left tail risk
(21:39):
for this administration is the Liz Trust moment.
Speaker 6 (21:42):
Is that still out there.
Speaker 8 (21:43):
It's not a zero, it's not a big number, but
it's a left tail risk for this administration.
Speaker 2 (21:49):
Can we ask you what you think that looks like?
What does a List trust moment look like? In the
treasury market?
Speaker 8 (21:54):
You know, it's the deepest, most liquid, broadest market in
the world's and I don't really participate day to day,
so I'm not it really is. It's a confidence issue,
and it's when that stream of confidence goes from not
being substantial to being a little bit more material. And
I don't know what that number is, but certainly it's
got to be in the back of the head of
the administration. And again the prior administration did not really
(22:17):
extend duration in their liabilities, So there's I think, I
don't know if it's seven or nine trillion and be
financing over the next twenty four months. It's a big number,
but these rates are real. Rates are real in terms
of where they are right now, So you are finding
buyers of that paper, but it is a challenge.
Speaker 1 (22:35):
In the backdrop, there is this belief that private credit
markets offer this ballast, the sort of haven from some
of the volatility that we're seeing in public markets and
in particular.
Speaker 6 (22:45):
From the treasury market.
Speaker 1 (22:46):
At the same time, how can you say that private
debt in particular is really immune to the fluctuations and
the sucking sound of capital into the treasury market.
Speaker 2 (22:56):
Given all of that issuing, Well.
Speaker 8 (22:57):
I'd say two things, and this is a longer conversation
that I do want to get into.
Speaker 6 (23:01):
The real rates are higher, and if you can.
Speaker 8 (23:03):
In private credit, private credit, you know, high single digits,
low double digits on a compounding basis, it's a tremendous
asset class over a decade or two. I really want
to spend some time with you both this morning talking
about you know, these comments about private credit being a bubble.
Speaker 6 (23:19):
You know, that's just a mistaken comment.
Speaker 8 (23:21):
And when you really break it down, as I said before,
private credit in the traditional manner, the narrow manner, is
the high ole market. The leverage loan market and now
the emerging direct lending market. When people talk about a
credit bubble, it's just not the case. What they are
talking about is there could be a credit cycle.
Speaker 6 (23:41):
That's that's normal. We haven't had one in a long time.
Speaker 8 (23:44):
But that credit cycle will impact debt and leverage balance sheets,
high yield leverage loans, and direct lending. It will also
affect private equity. It'll affect equity multiples. But it's not
a bubble per se. It's a good old recess and
a credit cycle. We're going to have one of those.
It may be pushed out again a year or two,
(24:05):
but let's not go out there. I think folks that
are not in private credit or private capital say, oh,
it's a bubble because they're not involved. But the reality
is there's lots of opportunities. There's a massive amount of opportunities.
We were very active last month Boeing decided to spin
off its aircraft one of its businesses.
Speaker 6 (24:24):
We worked in conjunction with City on.
Speaker 8 (24:27):
It, multi billion dollar deal, a tremendous asset heated auction.
There's opportunities for real companies, but there will be a
credit cycle.
Speaker 2 (24:36):
It's always a bubble when you're not invested in it, right.
I love that our cycle.
Speaker 1 (24:40):
Yeah, basically if you don't like it, it's because you're
not it in, so too bad for you.
Speaker 2 (24:43):
Jim, we talked about the prospect of a credit cycle.
How can we have a credit cycle when we're running
deficits this launch in Washington, Well, I mean.
Speaker 8 (24:51):
As I said before, we've been waiting for those who
have been professionals in this sector for decades would have
expected a few things right now, And I've talked about
pattern recognition. I was here several years ago talking about
the rate hike and how that would create a tighter
a period of tighter financial conditions, and many of us
that were expecting a serious credit cycle, you know, predicted
(25:13):
something that didn't occur because of the macro backdrop. You know,
certainly right now is we have a higher rate environment,
which means a bit of economic strength in.
Speaker 6 (25:23):
The overall economy.
Speaker 8 (25:25):
There always are a number of companies that just have
too much leverage and are not going to grow out
of their balance sheets.
Speaker 6 (25:32):
And you're going to see that.
Speaker 8 (25:33):
Last year, the last couple of years, you had actually
fairly high numbers of restructurings and non investment grade credit.
It just didn't overwhelm the headlines because of the overall
returns and the strength of the equity market. But I
do think there are you know, as I said before here,
there's a when you look at back in the last
four or five years in private credit direct lending, a
(25:55):
lot of the largest sector of financing was technology, enterprise software.
And I do think that there's a possibility with what's
going on with AI that many of these companies could
really have massive impact on their operating business. The renewal
rates there are seven or eighty ninety ninety five percent
could plummet dramatically, and I could see a variety of
(26:19):
challenges in the enterprise software tech space that have been
a big, big area of private credit. And I think
there will be those who are not involved will say, aha,
there was a problem, it's a hoax.
Speaker 6 (26:32):
That's not the case.
Speaker 8 (26:33):
It was just bad companies overlevered that didn't grow out
of their balance sheet, and that happens every day in
the equity market in other markets. But you know, again,
as much as we are a player in the insurance
balance sheets on safe yield, we also do play in
that riskier end. And I don't see a massive credit
(26:53):
cycle happening in twenty five. Certainly we've taken care of
a lot of the refinancing risk, that refinancing clip that
was pretty large in twenty six and twenty seven.
Speaker 6 (27:03):
It's been pushed out.
Speaker 8 (27:05):
But we're not seeing although the risk premiums have raised
have been raised.
Speaker 6 (27:10):
And I will tell you there's a.
Speaker 8 (27:12):
Very large US based retailer based here in New York
that has undergone a transformational merger. They had a private
credit solution in front of them, which we were quite
involved with. They decided to go to the public markets
and issue a public bond in this safe public markets,
and that bond today within six months is trading below fifty.
(27:34):
So again, I think there's a lot of noise about
risk and reward and various asset classes, but that's our
view of private credit.
Speaker 6 (27:42):
Just quickly.
Speaker 1 (27:43):
How much could hire long term US yields spur that
credit cycle. I won't call it a bubble because we
could talk about what a bubble is or what we
could see with some sort of just negative price action,
But do you see that as being a catalyst.
Speaker 8 (27:59):
Well, I think that the overall listen, we having higher
real rates are good for long term investors to a
certain degree. They're good for a certain degree until we
lose confidence in the actual underlying market. Again, the US
treasure market deepest, most liquid in the world, rates of
four and a half and five percent with real rates
(28:19):
right now, pretty strong on a relative basis over the
last twenty five years, but I'm not seeing that in
the current zip code.
Speaker 2 (28:26):
Just to wrap it up, biggest opportunity right now for
you in the team, what do you think it is?
Speaker 6 (28:30):
Well, I think it's a few places.
Speaker 8 (28:32):
I do think the volatility that has taken most people
on the sidelines and a bit of a paralysis just
operating day in and day out on the business that
we do. Right now, we have eight hundred and fifty
billion of capital doing a lot of refinancing with PE firms.
There's over two thousand PE situations where they've owned companies
more than five years. A lot of refinancing there. This
(28:54):
and the global industrial renaissance is alive and well in
the US with the delay in deploying the chips at
a lot of financing on shore of chip manufacturing and
other assets. I've been traveling around the globe quite a bit,
you know, Japan is still quite interesting from a insurance perspective,
from a global wealth perspective, and a Pe perspective. And
(29:16):
we cannot forget about Europe. I mean, Europe really is
what's going on there. It's a once in a generation.
I do believe that there's a variety. When you look
at a thirty trillion economy in the US twenty four
trillion in Europe, there's a massive amount of financing to occur.
Speaker 2 (29:30):
You've been traveling too much. It's going to have you back.
Speaker 6 (29:32):
Good to be back.
Speaker 2 (29:33):
Welcome back to New York. Jym's out of Apollo Global Management, Jim,
Thank you, sir, Thank you. Port of Los Angeles executive
director Gene Soroka with a word of caution, telling the
Wall Street Journal quote, even at a thirty percent tariff
(29:54):
with a ninety day reprieve, it's not going to dramatically
change what we're seeing now, joins Napama. Jane, welcome back.
Speaker 6 (30:01):
Good to see you. John.
Speaker 2 (30:02):
Tremendous feedback the last time you run, so thank you
for your time once again, sir, Let's talk about what
you are seeing now. What do you see now compared
to what this looked like, say twelve months ago, a
month ago.
Speaker 9 (30:13):
Last time we visited, I talked about a quick drop
in cargo, and we saw that last week down by
more than thirty percent. The balance of the month seems
to be holding, unfortunately, to be down maybe twenty five
percent compared to year on year stats. Canceled sailings seventeen
out of a scheduled eighty still off the books.
Speaker 2 (30:34):
So you've got a twenty to forty day forward look
just based on shipping times. What leaves China now arrives
in twenty to forty days. How has that changed in
the last few days Off the back of let's just
say the easing tensions over the weekend just last night.
Speaker 9 (30:47):
Talking to some of my friends in Hong Kong and Singapore,
bookings or reservations have ticked up. But it's going to
take the liner shipping companies a few weeks to reposition
vessels in places like and Shanghai, Jahmin Yantien, pick up
some of the products that have been manufactured and sitting,
and then another two weeks to get to Los Angeles
(31:09):
before we try to distribute throughout the country. So while
we're starting to see some momentum, a lot of what's
taking place here in the States. Is the finance game.
Does it make sense at an average of averages thirty
percent tariff to start bringing in products and what will
the American consumer's willingness be to buy?
Speaker 1 (31:29):
So Ryan Peterson, a Flexport came out and said, there's
going to be a shipping boom with all these ships
coming to the four that have been waiting to come
to get some clarity on tariffs. It sounds like you disagree.
Why do you think that it's not going to result
in a shipping boom to make up for that month
with the fact that it's going to be more expensive
to make it, say in the US, rather than just
pay the thirty percent tariff from China.
Speaker 9 (31:51):
Now there's a lot there, Lisa, As we've talked about before.
Number one, let's pick up some of the product that's
already been manufactured sitting on factory floors, warehouses and in containers.
Speaker 6 (32:01):
Get that flow going again.
Speaker 9 (32:02):
The manufacturers in China have got to get their folks
back to work, and there'll be a considerable look at
Southeast Asia, albeit at ten percent tariffs, is where we
can go. But this ninety day reprieve, as you know,
is not a long runway. That's typically the amount of
time it takes for a procurement person here in the
US to put an order in, get the goods made,
(32:25):
and get them on a ship in Asia.
Speaker 1 (32:27):
Which raises the question, does that ninety day pause do
enough to make sure that shelves are not empty? Say
back to school sales period comes around.
Speaker 6 (32:35):
We're cutting it so close.
Speaker 9 (32:37):
Spring fashion has already passed a spy. Now you're talking
summer fashion. Back to school. May is typically the month
where purchase orders go in to Asia for the year
end holidays. So now folks are kind of rolling the
dice a little bit. Do I buy now at these
kind of prices? And remember when I say an average
of averages, not every commodity is a thirty percent tariff.
Speaker 6 (33:00):
There are some that are extremely high compared to that.
Speaker 9 (33:04):
And this is cumulative on top of tariffs that have
already been put in place. So once again, what's consumer sentiment?
How much do I buy? And how much stock do
I get out there?
Speaker 2 (33:13):
This is a huge problem. Buy's down there, what's to buy?
And producers don't know how much to produce. Even though
we've moved the tower side of the weekend.
Speaker 1 (33:20):
Once again, so do you avoid the paralysis that many
people were complaining about when businesses had no idea or
does this just really ease things on the margins but
still create some big lapses And that really is going
to be something that we're not going to see for
a couple of months.
Speaker 2 (33:32):
Jane, as you look at tritflows, can you describe how
things have changed where the shipping routes have begun to
go somewhere else, whether people are starting to think more
about fright than they aren't just using traditional shipping. Have
things changed from your vantage point in the last few
weeks a lot?
Speaker 9 (33:46):
And it's about what do we need just to get
buy over these weeks and months ahead, And going back
to twenty eighteen, China was sixty percent of our business
at the Port of Los Angeles. Then today it's forty
five percent and drop the folks on the ground in
Asia are telling me you'll start seeing even more migration
of manufacturing and sourcing to Southeast Asia beyond.
Speaker 2 (34:08):
Said the likes of Malanchia, the likes of Vietnam. Is
that why why they didn't finished the Schetz highlights.
Speaker 9 (34:13):
Yes, and of course a lot has been talked about
India but remember that just last year, China exported about
two hundred and fifty million container units, India about twenty million.
Speaker 1 (34:24):
There's a question not only about manufacturing the goods that
will come over here, but also manufacturing the ships, and
we know that that's been a huge focus of this
administration and potential fees on ships that have been built
in places like China. How have some of the proposals
like that affected your business.
Speaker 9 (34:42):
My first thing is it's another fee. It's another charge
that the liner shipping companies say will be passed on
and ultimately get to the factory level or consumer. But
I'm really pleased with the way the US Trade Representative
and that office responded. There were more than five hundred
public come letters two days of hearings in Washington back
(35:03):
in March to talk about what this fee would mean
if implemented based on the draft form, which was a
million and a half bucks for every port call in
the United States for a ship that was built in China.
Now it's on a tonnage basis vessel voyage. Albeit additive
to cost, it's a lot better than it was. So
the feedback was really heard by the administration.
Speaker 1 (35:24):
I'm listening to everything that you're saying, and it sounds
like a lot's going to hinge on how much companies
believe they can pass along higher.
Speaker 2 (35:30):
Prices to consumers.
Speaker 1 (35:31):
What from their perspective, given your conversations with them, do
you think they'll be looking for in retail sales in
Walmart earnings to understand just how much power they have
to increase prices on consumers that yes or tired but
are still spending.
Speaker 9 (35:43):
I don't know if I can answer all that, but
what I'm hearing on the ground is Okay, prices go up, tariffs,
other fees, etc. I'm first going to talk with my
manufacturer about the cost of those goods, the landed price,
and we'll see what we can negotiate. Second, how much
do I gain from efficiencies my company? Can I get
smarter and sharper a little bit of margin compression maybe,
(36:04):
but I've got to deliver on that cost saving side.
And then thirdly, what can I pass on. If I'm
a part supplier, that cost goes straight to the factory.
If I'm a retail finished goods person, it goes to
the consumer. So there's still a lot to be worked out.
Chances are with what we know, lower inventories, fewer selections,
and higher prices.
Speaker 2 (36:24):
And this is why Wilmot could be some interest in
a few minutes time.
Speaker 1 (36:27):
Because they've already said they want to compete on price
and they're going to take it probably somewhere else. And
it also points to how much they're going to make
their suppliers eat as well, so margins all around get
compressed in order to offset some of what gets passed
along to consumers. The fact that it comes an hour
and a half before retail sales gives you a sense
of the one two punch what companies are doing, and
then how much appetite consumers have to keep on spending.
Speaker 2 (36:49):
We know how consumers fail. What if they've been doing.
We'll get resound sales at eight thirty Eastern time numbers
from Wolma that stuck is not by zero point seven
percent numbers from Wolma in about five minutes time. I'm
just shocked, I said route and not route. Been it
too long?
Speaker 6 (37:03):
Welcome?
Speaker 2 (37:03):
Been it too long? I think that's for you. Jane's
going to see thanks Joe. Jane Siakaba of the Port
of Los Angeles and NATA Richardson can take a look
at things. She joined us from IDP Nada. Welcome to
the program. Do your best. What's going on here? Give
(37:24):
us a clear picture of what's happening in the US
economy in morning.
Speaker 7 (37:28):
It's mixed, and I think that's what you're seeing in
the data now. If you're looking really for some good
news on inflation, you found it today and that that
is the three line. And also if you're looking for
good news on the labor market, you see it continue.
So those initial job was claimed still at historical lows.
That is helpful for an economy built on consumption. But
(37:50):
when you turn to the consumer and you bring in
that soft data of consumer being down beat, and we
know that consumers went out and they stop piled on durables,
on cars and vehicles. What we're seeing in April as
a moderation from that stockpilot and maybe starting to really
(38:11):
reflect new economics vulnerabilities. We left the last FED meeting
with two risks at our disposal. We left the risk
of slower growth and higher inflation. And I think that's
what the markets are really focused on. That higher inflation
risk looks a little less risky today, but you know,
(38:33):
every day is a different day. When it comes to
this economy right now.
Speaker 2 (38:36):
Later and Plase, you brought up that topic because I
think it's so important. It's been really difficult to try
and unpack what is just the front loading of purchases
by consumers versus what is genuine, authentic, durable, sustainable demand.
And as we work our way through the summer, we've
been trying to work this out all morning on this program.
Are we going to see the price increases? Is Walmart
the one to listen to as they warn this morning
(38:57):
they can't hold off much longer from here, new how
do you gauge that at the moment? What do you
look at?
Speaker 7 (39:03):
I think the large retailer should be listened to. They
are active in this market, they are seeing the prices
in real time. So also consumers are important to listen
to in this moment. When they say they're down beat,
they mean it. We don't talk a lot about consumer surplus,
and just really quickly from your econ one oh one class,
(39:26):
it's the price consumers are willing to pay versus the
price they're actually paid. But if consumer surplus is being
eroded because they're seeing higher prices, that means consumers will
continue to feel down beat, and those feelings are translating
right now into what a data point we'll see on Friday,
which is consumer sentiment, and if that continues, it really
(39:50):
does reflect that higher risk of continued inflation that the
Federal Reserve warned about a week ago.
Speaker 1 (39:56):
And this is the reason why, NILA, a lot of
people say, we don't know how relevant any of this
data is because we don't know whether this is just
April data and people feeling bad in April. But in May,
things are going to look a lot better because we
have a reprieve from some of the tariffs and things
are looking a little bit easier. The market is rebounding, Mila,
How do you look at the quickly moving policy and
then judge the relevance of any of this data that
(40:19):
is just a snapshot and a very quickly moving movie.
Speaker 7 (40:23):
I look for the stead fast stronghold in the economy,
and right now that's the labor market. The labor market
is solid if you look at initial jobless claims, if
you look at the pace of hiring. Though we see
it at ADP to be more modest than it has
been in the past, it's still solid. We're still seeing
strength and that is the underpinning of the bulk of
(40:45):
the consumers. So as long as the labor market stays strong,
stays solid, we still see growth in jobs, we still
see wages above inflation, then you have an economy that
could weather some of these higher level risks.
Speaker 1 (41:02):
How much Neila do you see because of that, Because
of that stability in the labor market. In addition to
what we are hearing from some of the biggest retailers
in the world that prices are going to go up,
how much is a saguflationary like environment becoming increasingly your
base case for the remainder of this year.
Speaker 6 (41:20):
It's a risk.
Speaker 2 (41:21):
It is a risk.
Speaker 7 (41:22):
I think what we're seeing, you know, collectively in all
this data is an economy that looks to be slowing
a bit. I mean, the first quarter contraction is also
a messy given the high degree of import. So it's
again a backward looking data point that was based on
a lot of stockpiling. But looking forward, if growth slows,
(41:43):
not just because of US consumption and US production, but
also around the world, if growth is at risk, then
you might see slower growth and higher prices. So, yes,
statulation is an increasingly bigger concern. In my mind, it
was always a concern. I think the dynamics set kept
inflation down for for a decades going into the pandemic
(42:07):
have changed dramatically. We don't talk about these longer trends
that are affecting inflation. So even without trade policy, that
was always a risk. Now that risk is amplified because
of some of the uncertainty that we're still seeing on
the trade side.
Speaker 2 (42:22):
Naba, thanks for jumping on. Thank you very much, Nida
Richardson there of ADP. This is the Bloomberg Sevenance podcast,
bringing you the best in markets, economics, angiopolitics. You can
watch the show live on Bloomberg TV weekday mornings from
six am to nine am Eastern. Subscribe to the podcast
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(42:42):
always on the Bloomberg Terminal and the Bloomberg Business app.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hortenn. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App.
Speaker 3 (00:36):
Special guest john He's called Jamie Diamond. He runs JP
Morgan and I'm delighted to speak to him. Jamie Diamond,
thank you for joining us.
Speaker 4 (00:43):
It's happy to be here.
Speaker 3 (00:44):
Hey, there's a lot going on. It's trade wars, markets
up and down. What did you learn in the last month?
Speaker 5 (00:49):
Not much other than we have all this uncertainty, you know,
some preceded the new administration, like we had large deficits,
intro rates going up and place going up, and some
are you know, tariffs and things, and of course the
geopolitical situation is very tense, very difficult and hard to resolve.
Speaker 3 (01:08):
Okay, so if you forget projections numbers, what's your hunch.
Is the UYS going to go into a recession or not.
Speaker 5 (01:13):
Look, I'm going to defer to economists who give it
about a fifty percent chance. I think all these things
are probably inflationary a little bit more and slowing down
the economy. If there's a recession, I don't know how
big it'll be or how long it will last. Hopefully
we'll avoid it, but I wouldn't take it off to
the table at this point.
Speaker 3 (01:30):
If you look at you know, the trade war and
then the somewhat reconciliation between the US and China, does
it hold.
Speaker 5 (01:38):
I think it's the right thing to do is to
back off of some of that stuff, you know, to
have an engage in conversation. I'm grateful they did the
US UK deal. You know, it's an agreement in principle.
So you know, there's a lot of one sertaty still
and there's all of one sturdy still in the China thing.
But at least we started and obviously calms down the markets.
That's not the reason to do it, but the markets,
(01:59):
you know, or something like that. And so you'll tell
uncertainty to resolve the ninety day triggers a lot of
these things and hopefully they will be resolved.
Speaker 4 (02:08):
What are your with your complex?
Speaker 5 (02:09):
I don't expect immediate resolution, you know, it's the satisfaction
of everybody in ninety days.
Speaker 3 (02:14):
But you expect markets to settle from here because we
have a little bit more of a blueprint or could
volatility pick back up in any second?
Speaker 5 (02:22):
No, markets are quite unpredictable. I think there's a lot
of uncertainty out there that you can't discount, you know
when I you know, war in Ukraine, territor in the
Middle East, you know, I ran. You know, huge deficits
are tax bill, which I would like to see a
good tax bill pass, you know, the terrorists, the reaction
of country to tariffs. The EU and the UK are
about to negotiate. I think they have a chance to
(02:43):
actually develop a great relationship, you know, partially making up
for you know, the disaster the Brexit became, and so, yeah,
those those are unsurtgerties. You can't eliminate them because you
want to.
Speaker 3 (02:54):
But what are your biggest clients saying about this market volatility?
Have they made money on the back of it?
Speaker 4 (03:01):
Yeah? Some, you know, some doing some don't.
Speaker 5 (03:02):
And you know, volatility volatier would be good or bad
depending on you know, who's who's facing it. So but
but I would expect continued volatility. I think it's a
mistake to think we can go through all the things
we're going through and the volatility itself will come down.
Speaker 3 (03:16):
Has it been good for JP margin?
Speaker 4 (03:18):
Was there?
Speaker 6 (03:18):
You know trading?
Speaker 5 (03:20):
Yes, because when there's volatility is a very simplistic way
to look at, spreads gap out and traders make more
money if there's more volume. So we had both this time,
more volatilely more volume, because very often you have a
lot of volatility and spreads gap out there's much less volume.
So you've seen examples where there's good volatility and there's
bad Volatilely, this just one happened to be good. The
(03:40):
next go around may not be so good, Jamie.
Speaker 3 (03:43):
When it comes to financials, I mean, you know a
lot of I guess non bank entrants are making quite
a lot of way Citadel Jane Street, is that, you know,
a concern for the banks shouldn't be a problem for
the banks.
Speaker 5 (03:55):
I would call it a problem. You know that both clients.
I'm very capable, you know, but I've always had the
view there are a lot of competitors out there, and
you know, all the major banks are back. I think
that's a good thing for the world. You know, maybe
not so much for Jamie Morgan. There's you mentioned those two,
There's Apollo, There's a lot of fintech, some very good ones.
There's Stripe, there's PayPal. Yeah, my view has always been
(04:16):
the same. I tell them magic, Assume competition, Assume they're
coming at you in every angle. Assume they often have
their own strength, sometimes their own weaknesses. They won't all
do great, but yeah, I think they're you know, some
of these people gaining quite a bit of shared parts
of their business. We still are too, by the way,
So you know we're in the fight. We're not losing
out very much. But that doesn't mean you won't lose
out tomorrow because you're winning today.
Speaker 2 (04:37):
So what do you have to do today?
Speaker 3 (04:38):
How do you see the people that are doing, you know,
well today doing even better tomorrow.
Speaker 5 (04:43):
It's about us are other people both? It's quality of people.
You interviewed Pranav. I mean we have exceptional people in investment,
banking and sales and training, And I say I put
right next to that technology, but it's related because those
people deploying technology. So there are thousands of technology project,
then there are hundreds of AI projects, all of which
are meant to do a better job for customers, consumer research,
(05:06):
how we deliver things to people. And if you don't move,
you know you're going to be left behind. I mean,
I remind you could be a country or a company.
You do not have a divine right to success. You know,
we mentioned as management learnings as I did. You can
see it on YouTube and all that. But I put
out to people, look at the bank, look at no Keia, BlackBerry, Sears, Kmart,
(05:28):
Bearster Lehman, I can chapter of diverse a failed companies
usually because they're complacent, arrogant. They think they're on the
top of the top of the world and they're not.
There are competitors coming everywhere, and you should assume that's
gonna be true.
Speaker 3 (05:41):
Do you see competitors coming for the US?
Speaker 4 (05:44):
Yeah? Where are Europe? Are about the countries?
Speaker 3 (05:47):
The countries?
Speaker 7 (05:48):
Yeah?
Speaker 4 (05:49):
Yeah, I think Europe.
Speaker 5 (05:52):
Let me just ask. I think Keirstormer, Mers and Macrone.
I think Macron is one the best political leaders in
the planet today. Okay, I think here Stormer is smart, devoted.
They're saying the right things public and privately, all of
them talking about growing the economies, thank god, pro business,
pro capital, and they're doing all of that to improve
(06:15):
the lot of their citizens.
Speaker 4 (06:16):
It's not about what they're doing for JP.
Speaker 6 (06:18):
Morgan.
Speaker 5 (06:19):
And if I was Europe, absolutely i'd want to regret
live in the UK military, economic, and I would reform
as best I can all of European things. What they're
all talking about now, deregulation, simplification, and yeah, they try
to compe America, and that would be good for America.
That doesn't make me said, it makes me happy that
they're strong. And then you know their allies. I want
our allies to be strong and powerful military and economically.
Speaker 3 (06:42):
Do you worry about US supremacy actually exceptionalism, Yeah, I.
Speaker 5 (06:47):
Look, I never believe here quite that exceptional. I mean, remember,
America is an unbelievable country with freedoms and the gifts
of God and you know, water, food, energy, and then
the gifts of founding fall is called freedom of religion.
A speech from an enterprise that those dwarf everything, and
so we still have the most prosperous economy of the
world's ever seen. But the American shouldn't take it as
(07:07):
a divine rights to succes either. We slowed ourselves down
with regulations, stupid bureaucracy. You know, we're not getting We
haven't done budgets in years, you know, So now we
shouldn't assume it's forever. I don't think our will still
be pre eminent, you know, militarily and economically for a
long time, you know.
Speaker 4 (07:24):
But if we don't do everything right, we can lose
that too.
Speaker 5 (07:26):
We have twenty thirty forty years from now, and I
think very important that is America. The goal of America
should be to help the military alliances of the Western
world and to help the economic alliance of the Western
world to walk side by side, like you did in
victory in Europe day the other day here, to strengthen
the Western world and hold it together, you know, not
the cause of the fragments, And so I think we
(07:48):
have to work hard to make sure that's the case.
Speaker 3 (07:51):
Do you worry about deficits and do you worry actually
in the US, And do you worry also about the
US dollar remaining as a reserve currency. Do you think
Europe has what it takes to try and put the
euro in there.
Speaker 5 (08:02):
Yeah, so I think I should have mentioned deficits up
front as being one of the issues you have to deal.
And I think acid prices are quite high too, and
those create various risks For America. Our deficit is almost
two trillion dollars, six or seven percent of GDP, the
largest peacetime deficit ever, and we have one hundred percent
debt to GDP. That one hundred percent debt to GDP
is kind of universal almost around Europe on average. But
(08:25):
your deficits are much smaller. Does that create a risk. Absolutely,
it creates a risk of inflation. To me, it creates
a risk of higher long term rates. Well, you know,
but America, will the dollar get week?
Speaker 4 (08:36):
I don't know. That's a slightly different thing.
Speaker 5 (08:38):
I think you could see rates go up, the long
bond rates go up, and you know that might slow
down to growth, and that's how we you know, kind
of a stackflation kind of scenario.
Speaker 3 (08:47):
Would you, I mean, you must see President Trump regularly.
What do you tell what would you tell me?
Speaker 5 (08:52):
I talked to all of us, I talked to all
of the folks there. I wrote about my Chairman's letter.
Speaker 4 (08:56):
I mean we have.
Speaker 5 (08:57):
First of all, America should worry about things we can
do batter you know, I call it blue tape. I
mean our regular we are out of control. We're doing
the same stuff that they did here that you know virtually,
you know, the American public and I don't know. The
GDP per person of Europe has gone from some like
ninety percent of America's to sixty five percent. And they
did it to themselves. Rules, regulations, over complication. They started
(09:20):
the European Union, which I think is a huge accomplishment
of mankind.
Speaker 4 (09:23):
They got to finish it.
Speaker 5 (09:24):
And here they told you they called the Capital Markets
Union the Banking Union. You know, they have to create
a big common market of four and fifty million people.
And so in America it's the same thing. It's regulations,
it's permitting. You know, we've overdone. We've wasted a lot
of money in the green economy. It's getting jobs back,
it's training in schools, it's fixing immigration. So we've stopped
(09:45):
at the border. But now we have to have a
more merit based immigration, more seasonal immigration, you know, things
that can help the country grow. And then we have
to work in our military alliances and economic alliances, and
that's for the sake of the future free and democratic role.
Speaker 2 (09:58):
So on the.
Speaker 3 (09:59):
Economic lines, is there a concern that actually certain countries
in Europe or elsewhere will choose non US bank for bondifferences,
will choose non US asset managers to manage their pensions.
Speaker 5 (10:11):
Yeah, there'll be a little of that, you know. I mean,
you know, we irritate a lot of people, so I
wrote into them. They say, you know, like they're not
buying our you know, Kentucky bourbon or stuff like that.
Speaker 4 (10:20):
There'll be some of that, And I.
Speaker 5 (10:22):
Think it's perfectly reasonable for you know, I spoke to
a lot of investors here. They're thinking about the ass
allocation of the Ied States, Well, they diminished it. Possibly,
is America a bad investment destination. No, if you're going
to take all of your money and put it in
one country, it would still be America. I mean, it's
still the most prosperous nation of the planet. It's got
the best military in the planet, It's got huge amounts
(10:43):
of immigrant innovation. People are catching up. That's a good thing.
You know, China's doing some very good innovation and medical
and AI and we should assume they're continue to do that.
But America still got the best our gdpeople versus eighty
five thousand dollars, you know, China's fifteen thousand dollars. We
have the ashamed about we should fix our problems because
we could grow a lot faster, which help all of
(11:05):
our citizens.
Speaker 3 (11:06):
But if you put too many tariffs and actually too
much uncertainty, does that not squander actually a lot of
the assets that that.
Speaker 5 (11:12):
You answer me, I think they're doing the right thing now,
which is the back off of it. Let you know,
the Secretary of Treasury do the hard work of figuring
out what's the right thing to do. If they're unfair
trade things, do something about it, you know.
Speaker 4 (11:23):
But they have backed off.
Speaker 5 (11:24):
Of specific things and specific industries, and I think that's
the right thing to do. I think the first thing
is very large, that everything in everywhere all at once,
and now they're kind of backing to where I think
they should be in termally. But even at this level,
it caused that kind of uncertainty. Even this level, you
see people holding back on investment and thinking through what
they want to do, you know, thinking about, you know,
(11:46):
how much you're gonna put in the United States, And
I mean, we're gonna be okay, but it is causing
that uncertainty.
Speaker 3 (11:51):
But we're looking at the president, of course in the
Middle East, where there were seals that you know, deals
that were signed and a lot of wall streets. Some
of your competitors, they are, what's your strategy for the
Middle East? How much do you want to grow there?
Speaker 4 (12:01):
Well, we grow everywhere.
Speaker 5 (12:02):
I mean, you know, we go country by country and
we look at you know, we bank country, cities, schools, states, hospitals,
big companies everywhere. We have a network effect. So when
we bank Bloomberg, we're banking the United States. We're banking
you in London, in Paris, we're banking you in Europe,
We're banking you in the Middle East. That's what we do.
So almost every one of those countries we're growing. As
they grow, we grow, we cover more of their institutions. Overseas,
(12:25):
we're institutional in the United States. We also have a
consumer and so you know, as you know, we're testing
consumer and chase UK to them.
Speaker 3 (12:32):
Yeah, and you're growing actually that retail business a lot
in the UK.
Speaker 2 (12:35):
What's next for that?
Speaker 4 (12:36):
I hope too, We hope to grow more in the UK.
Speaker 5 (12:39):
Add some products, and eventually we already annouced we're going
to go to Germany. But I think we have a
chance to build a great digital bank, and we have
competitive advantages. We have a brand, we have research, we
have a balance sheet, We've got capabilities we're going to add.
You know, we're not gonna announce it today. We'd add
more capabilities over time. So that and then someone like you,
if you travel the United States and to the UK,
(12:59):
you're gonna be a move your money between Chase US
and Chase UK on your phone. So we're add things
that make your life better as a consumer of our
banking product.
Speaker 3 (13:09):
You certainly caught some waves in, you know, talking about
return to the office. I think there might have been
a little bit swearing at bit there or not.
Speaker 2 (13:17):
People listened, Yeah, full time listen.
Speaker 5 (13:22):
At first of all, I tried, I did emote there.
I emot you know, people know me, and I don't
really care about that.
Speaker 4 (13:26):
I don't worry about it.
Speaker 5 (13:28):
But I answered, I want to answer the guy asked
a legitimate question, and I gave it a very detailed
answer about why it doesn't work for young people, why
it doesn't work for management, why it doesn't work for innovation.
I completely applaud your right to not to want to
go to the office every day, but you're not going
to tell JP Moore what to do.
Speaker 4 (13:44):
And I think we.
Speaker 5 (13:45):
Already have ten percent of jobs at home. I'm not
against work from home. I'm against work from it doesn't work.
Speaker 4 (13:50):
And then of course the.
Speaker 5 (13:51):
Press made a big deal about the petition and all that.
It was like not even Mosquito. Most of it back
some people. We've had no additional attrition, you know, we
had to make some modification, you know, we didn't have
enough seats in certain areas and will be a better
company and I think our employees will be happier over time, and.
Speaker 4 (14:07):
The younger people learned the right way.
Speaker 5 (14:09):
It's an apprenticeship system and you can't learn working from
your basement.
Speaker 3 (14:14):
Jamie Diamond, thank you so much for joining us today.
That was, of course, the chief executive officer of JP.
Speaker 2 (14:19):
Morgan jim's Ouzer, the president of Apollo Global Management, wenting
in on the administration's trade regime the last time he
joined us, saying this globalization is not going to be
like we have seen it in the past. It is
(14:39):
a new global world order and place is say for
the next thirty minutes. Jim's outzer joins us this morning, Jim,
good morning, Good morning. It's a phrase you used last
time around that's stuck with both of us. We've been
repeating it over the last several weeks. Macro paralysis. Can
you adjust that term?
Speaker 6 (14:54):
Now?
Speaker 2 (14:55):
What phrase would you use to describe this moment?
Speaker 6 (14:58):
First of all, I was going to be here.
Speaker 8 (15:00):
I think I would frame it right now, is a
macro political pivot the administration, clearly, I agree. I think
that Monday meeting with the retail executives was a I
don't want to call it watershed, but it was a
critical moment for the administration to hear about the challenges
on the ground of their plan. And the administration certainly
(15:24):
is not admitted they made a mistake, but they've clearly pivoted.
And that's not a surprise. And it's not a surprise
that they're out going around the globe right now trying
to and successfully inking a lot of deals, a lot
of MOUs that are non binding. But certainly it's great
headlines and it's hundreds of billions, if not trillions. But
(15:45):
so that's where I think, and I think the big
question now is I'll pull back in the COVID library,
there's a big gap between confidence sentiment and the results
and confidence and sentiment is still pretty negative or concerned,
but the results have been pretty strong, and so there's
(16:07):
a very if you think about you know, we're all,
you know, history of the past, and we see signs
of what we've seen in the past, and pattern recognition
if you will, and you know, if you input all
the things that you see right now, you would have
been saying recession went from thirty percent to seventy eighty percent.
(16:27):
Now it's probably below fifty percent.
Speaker 6 (16:30):
But the three questions are does the consumer do corporates.
Speaker 8 (16:35):
And countries are they going to be on the V
shape recovery, the U shape recovery or the L shape recovery.
Our view it, Apollo is right now that the consumer
is still pretty strong, a bit of a V shape recovery,
corporate's a bit of a U shape recovery because a
lot of CAPEX and I've been traveling around quite a bit,
and I think the global response is a bit more
(16:57):
like the L And what you pointed out earlier with
Amory did with Tim Cook. I am not surprised none
of US should be surprised that this administration is going
to put their arm around all these tech titans and
other leaders and saying come to America. China was not
the plan. We didn't love the idea of going India,
come back to the US.
Speaker 6 (17:17):
This is going to be a theme that they're going
to keep hitting hitting.
Speaker 1 (17:20):
Is there enough of a framework that you're gleaning from
this administration that's solid to bring deal making back. We've
seen on the margins some deals being made, some IPOs,
there are just a few. Is this the beginning?
Speaker 8 (17:31):
Well, I think let's separate the headlines from activity. It's
been an incredibly active time for folks that have involved
in the markets. You know, we at Apollo, we opened
up the IPO market. We brought out Aspen, one of
our reinsurance for an IPO. We did a multi billion
dollar deal for a lot of America igt every We
announced a big merger between New Home and a Land
(17:52):
and Sea. So there's been a lot of transactions since April.
Speaker 6 (17:55):
Second.
Speaker 8 (17:56):
I know the headlines may show contrary, but there's been
a tremendous amount of financing and I think it shows
the depth and breadth of the markets right now because
of private capital in the equity and the credit world.
So this idea that the markets shut down, that's actually
what happened two decades ago. Two decades ago, the high
yield market would go into periods six, eight, ten weeks
(18:18):
where there would be no issuance based on the flows
from retail the old AMG number. So this economy, this
capital markets is very robust. Obviously a lot of volatility.
One of the benchmarks in our market would be HyG,
the high Yield Index, the listed HyG ETF that went
from basically seventy nine to eighty down to seventy three,
(18:40):
seventy four, back to seventy nine. It's been a round trip,
but there's been a tremendous amount of activity underneath the headlines.
Speaker 1 (18:47):
How much do you think this is because people see
the environment as being brighter than some may worry, And
how much do you see this as just simply pent
up demand that's been backed up for a long time.
There is a sort of sickle move toward industrialization, and
you have that kind of fundraising that is kind of
independent of any economic cycle.
Speaker 8 (19:06):
I think the bigger long term trends of massive, massive
capex the year or two of Cappex Global Industrial Renaissance.
The demographics every asset class is higher today as we
sit here this morning than it was on Liberation Day,
except for treasuries, which have ten years basically thirty basis
points higher and the thirty year about forty basis points higher,
(19:28):
about five, fifteen and six percent, respectively. That's telling you
that folks think that the economic backdrop is not going
to be a recession. It's going to be slow to
moderate growth. And that's what you're seeing right now in
the market. So that's what we're seeing from our companies.
We're seeing a lot of concern, a lot of handeringing
about big strategic M and A transactions. I don't think
(19:50):
you're going to see a massive equity calendar except for
a few large deals here and there. But the reality
is companies need to operate, finance, and grow, and they're
positioning for an environment that the administration's putting forth.
Speaker 2 (20:03):
This is what companies need. Let's spend some time talking
about what investors need. Never mind the rebound. What did
you learn from the draw down public versus private?
Speaker 8 (20:11):
Well, what you saw is that the talk I come
up here a lot and talk about market structure, and
what you're finding right now is that longer dated capital
is US and many of our peers have long dated
insurance assets. Those were the folks that were the most
active during the marketplace and they were a bit of
the buffer if you would. You know, we put about
(20:32):
twenty seven billion to work in the IG market from
April second to last week. That's on a growth basis
about net about seventeen eighteen billion. I think in the
past that participant was not in the market as much,
and the buffer from the Wall Street Bank trading desk
taking that balance, I think that we collectively as an
industry helped out so that was you didn't see as
(20:54):
much folatileity. There's a lot of cash on the sidelines.
There's a tremendous amount. And again as you see what's
going on on right now around the globe with you know,
the pension assets, DC assets, other assets really trying to
get long duration, long duration assets against their liabilities, it's
really really critical. I mean, the one big overhang it's
still on the market is what's going on in the
(21:16):
treasury market. You know, certainly if you pivot right now
to what's going on with the budget issues, in DC.
It doesn't look like they have a clear path to
a deal that would be really de leveraging to the
US over time. Now Best and is saying a lot
of great things, but treasury rates are higher. And you know,
as we've been saying, the one real left tail risk
(21:39):
for this administration is the Liz Trust moment.
Speaker 6 (21:42):
Is that still out there.
Speaker 8 (21:43):
It's not a zero, it's not a big number, but
it's a left tail risk for this administration.
Speaker 2 (21:49):
Can we ask you what you think that looks like?
What does a List trust moment look like? In the
treasury market?
Speaker 8 (21:54):
You know, it's the deepest, most liquid, broadest market in
the world's and I don't really participate day to day,
so I'm not it really is. It's a confidence issue,
and it's when that stream of confidence goes from not
being substantial to being a little bit more material. And
I don't know what that number is, but certainly it's
got to be in the back of the head of
the administration. And again the prior administration did not really
(22:17):
extend duration in their liabilities, So there's I think, I
don't know if it's seven or nine trillion and be
financing over the next twenty four months. It's a big number,
but these rates are real. Rates are real in terms
of where they are right now, So you are finding
buyers of that paper, but it is a challenge.
Speaker 1 (22:35):
In the backdrop, there is this belief that private credit
markets offer this ballast, the sort of haven from some
of the volatility that we're seeing in public markets and
in particular.
Speaker 6 (22:45):
From the treasury market.
Speaker 1 (22:46):
At the same time, how can you say that private
debt in particular is really immune to the fluctuations and
the sucking sound of capital into the treasury market.
Speaker 2 (22:56):
Given all of that issuing, Well.
Speaker 8 (22:57):
I'd say two things, and this is a longer conversation
that I do want to get into.
Speaker 6 (23:01):
The real rates are higher, and if you can.
Speaker 8 (23:03):
In private credit, private credit, you know, high single digits,
low double digits on a compounding basis, it's a tremendous
asset class over a decade or two. I really want
to spend some time with you both this morning talking
about you know, these comments about private credit being a bubble.
Speaker 6 (23:19):
You know, that's just a mistaken comment.
Speaker 8 (23:21):
And when you really break it down, as I said before,
private credit in the traditional manner, the narrow manner, is
the high ole market. The leverage loan market and now
the emerging direct lending market. When people talk about a
credit bubble, it's just not the case. What they are
talking about is there could be a credit cycle.
Speaker 6 (23:41):
That's that's normal. We haven't had one in a long time.
Speaker 8 (23:44):
But that credit cycle will impact debt and leverage balance sheets,
high yield leverage loans, and direct lending. It will also
affect private equity. It'll affect equity multiples. But it's not
a bubble per se. It's a good old recess and
a credit cycle. We're going to have one of those.
It may be pushed out again a year or two,
(24:05):
but let's not go out there. I think folks that
are not in private credit or private capital say, oh,
it's a bubble because they're not involved. But the reality
is there's lots of opportunities. There's a massive amount of opportunities.
We were very active last month Boeing decided to spin
off its aircraft one of its businesses.
Speaker 6 (24:24):
We worked in conjunction with City on.
Speaker 8 (24:27):
It, multi billion dollar deal, a tremendous asset heated auction.
There's opportunities for real companies, but there will be a
credit cycle.
Speaker 2 (24:36):
It's always a bubble when you're not invested in it, right.
I love that our cycle.
Speaker 1 (24:40):
Yeah, basically if you don't like it, it's because you're
not it in, so too bad for you.
Speaker 2 (24:43):
Jim, we talked about the prospect of a credit cycle.
How can we have a credit cycle when we're running
deficits this launch in Washington, Well, I mean.
Speaker 8 (24:51):
As I said before, we've been waiting for those who
have been professionals in this sector for decades would have
expected a few things right now, And I've talked about
pattern recognition. I was here several years ago talking about
the rate hike and how that would create a tighter
a period of tighter financial conditions, and many of us
that were expecting a serious credit cycle, you know, predicted
(25:13):
something that didn't occur because of the macro backdrop. You know,
certainly right now is we have a higher rate environment,
which means a bit of economic strength in.
Speaker 6 (25:23):
The overall economy.
Speaker 8 (25:25):
There always are a number of companies that just have
too much leverage and are not going to grow out
of their balance sheets.
Speaker 6 (25:32):
And you're going to see that.
Speaker 8 (25:33):
Last year, the last couple of years, you had actually
fairly high numbers of restructurings and non investment grade credit.
It just didn't overwhelm the headlines because of the overall
returns and the strength of the equity market. But I
do think there are you know, as I said before here,
there's a when you look at back in the last
four or five years in private credit direct lending, a
(25:55):
lot of the largest sector of financing was technology, enterprise software.
And I do think that there's a possibility with what's
going on with AI that many of these companies could
really have massive impact on their operating business. The renewal
rates there are seven or eighty ninety ninety five percent
could plummet dramatically, and I could see a variety of
(26:19):
challenges in the enterprise software tech space that have been
a big, big area of private credit. And I think
there will be those who are not involved will say, aha,
there was a problem, it's a hoax.
Speaker 6 (26:32):
That's not the case.
Speaker 8 (26:33):
It was just bad companies overlevered that didn't grow out
of their balance sheet, and that happens every day in
the equity market in other markets. But you know, again,
as much as we are a player in the insurance
balance sheets on safe yield, we also do play in
that riskier end. And I don't see a massive credit
(26:53):
cycle happening in twenty five. Certainly we've taken care of
a lot of the refinancing risk, that refinancing clip that
was pretty large in twenty six and twenty seven.
Speaker 6 (27:03):
It's been pushed out.
Speaker 8 (27:05):
But we're not seeing although the risk premiums have raised
have been raised.
Speaker 6 (27:10):
And I will tell you there's a.
Speaker 8 (27:12):
Very large US based retailer based here in New York
that has undergone a transformational merger. They had a private
credit solution in front of them, which we were quite
involved with. They decided to go to the public markets
and issue a public bond in this safe public markets,
and that bond today within six months is trading below fifty.
(27:34):
So again, I think there's a lot of noise about
risk and reward and various asset classes, but that's our
view of private credit.
Speaker 6 (27:42):
Just quickly.
Speaker 1 (27:43):
How much could hire long term US yields spur that
credit cycle. I won't call it a bubble because we
could talk about what a bubble is or what we
could see with some sort of just negative price action,
But do you see that as being a catalyst.
Speaker 8 (27:59):
Well, I think that the overall listen, we having higher
real rates are good for long term investors to a
certain degree. They're good for a certain degree until we
lose confidence in the actual underlying market. Again, the US
treasure market deepest, most liquid in the world, rates of
four and a half and five percent with real rates
(28:19):
right now, pretty strong on a relative basis over the
last twenty five years, but I'm not seeing that in
the current zip code.
Speaker 2 (28:26):
Just to wrap it up, biggest opportunity right now for
you in the team, what do you think it is?
Speaker 6 (28:30):
Well, I think it's a few places.
Speaker 8 (28:32):
I do think the volatility that has taken most people
on the sidelines and a bit of a paralysis just
operating day in and day out on the business that
we do. Right now, we have eight hundred and fifty
billion of capital doing a lot of refinancing with PE firms.
There's over two thousand PE situations where they've owned companies
more than five years. A lot of refinancing there. This
(28:54):
and the global industrial renaissance is alive and well in
the US with the delay in deploying the chips at
a lot of financing on shore of chip manufacturing and
other assets. I've been traveling around the globe quite a bit,
you know, Japan is still quite interesting from a insurance perspective,
from a global wealth perspective, and a Pe perspective. And
(29:16):
we cannot forget about Europe. I mean, Europe really is
what's going on there. It's a once in a generation.
I do believe that there's a variety. When you look
at a thirty trillion economy in the US twenty four
trillion in Europe, there's a massive amount of financing to occur.
Speaker 2 (29:30):
You've been traveling too much. It's going to have you back.
Speaker 6 (29:32):
Good to be back.
Speaker 2 (29:33):
Welcome back to New York. Jym's out of Apollo Global Management, Jim,
Thank you, sir, Thank you. Port of Los Angeles executive
director Gene Soroka with a word of caution, telling the
Wall Street Journal quote, even at a thirty percent tariff
(29:54):
with a ninety day reprieve, it's not going to dramatically
change what we're seeing now, joins Napama. Jane, welcome back.
Speaker 6 (30:01):
Good to see you. John.
Speaker 2 (30:02):
Tremendous feedback the last time you run, so thank you
for your time once again, sir, Let's talk about what
you are seeing now. What do you see now compared
to what this looked like, say twelve months ago, a
month ago.
Speaker 9 (30:13):
Last time we visited, I talked about a quick drop
in cargo, and we saw that last week down by
more than thirty percent. The balance of the month seems
to be holding, unfortunately, to be down maybe twenty five
percent compared to year on year stats. Canceled sailings seventeen
out of a scheduled eighty still off the books.
Speaker 2 (30:34):
So you've got a twenty to forty day forward look
just based on shipping times. What leaves China now arrives
in twenty to forty days. How has that changed in
the last few days Off the back of let's just
say the easing tensions over the weekend just last night.
Speaker 9 (30:47):
Talking to some of my friends in Hong Kong and Singapore,
bookings or reservations have ticked up. But it's going to
take the liner shipping companies a few weeks to reposition
vessels in places like and Shanghai, Jahmin Yantien, pick up
some of the products that have been manufactured and sitting,
and then another two weeks to get to Los Angeles
(31:09):
before we try to distribute throughout the country. So while
we're starting to see some momentum, a lot of what's
taking place here in the States. Is the finance game.
Does it make sense at an average of averages thirty
percent tariff to start bringing in products and what will
the American consumer's willingness be to buy?
Speaker 1 (31:29):
So Ryan Peterson, a Flexport came out and said, there's
going to be a shipping boom with all these ships
coming to the four that have been waiting to come
to get some clarity on tariffs. It sounds like you disagree.
Why do you think that it's not going to result
in a shipping boom to make up for that month
with the fact that it's going to be more expensive
to make it, say in the US, rather than just
pay the thirty percent tariff from China.
Speaker 9 (31:51):
Now there's a lot there, Lisa, As we've talked about before.
Number one, let's pick up some of the product that's
already been manufactured sitting on factory floors, warehouses and in containers.
Speaker 6 (32:01):
Get that flow going again.
Speaker 9 (32:02):
The manufacturers in China have got to get their folks
back to work, and there'll be a considerable look at
Southeast Asia, albeit at ten percent tariffs, is where we
can go. But this ninety day reprieve, as you know,
is not a long runway. That's typically the amount of
time it takes for a procurement person here in the
US to put an order in, get the goods made,
(32:25):
and get them on a ship in Asia.
Speaker 1 (32:27):
Which raises the question, does that ninety day pause do
enough to make sure that shelves are not empty? Say
back to school sales period comes around.
Speaker 6 (32:35):
We're cutting it so close.
Speaker 9 (32:37):
Spring fashion has already passed a spy. Now you're talking
summer fashion. Back to school. May is typically the month
where purchase orders go in to Asia for the year
end holidays. So now folks are kind of rolling the
dice a little bit. Do I buy now at these
kind of prices? And remember when I say an average
of averages, not every commodity is a thirty percent tariff.
Speaker 6 (33:00):
There are some that are extremely high compared to that.
Speaker 9 (33:04):
And this is cumulative on top of tariffs that have
already been put in place. So once again, what's consumer sentiment?
How much do I buy? And how much stock do
I get out there?
Speaker 2 (33:13):
This is a huge problem. Buy's down there, what's to buy?
And producers don't know how much to produce. Even though
we've moved the tower side of the weekend.
Speaker 1 (33:20):
Once again, so do you avoid the paralysis that many
people were complaining about when businesses had no idea or
does this just really ease things on the margins but
still create some big lapses And that really is going
to be something that we're not going to see for
a couple of months.
Speaker 2 (33:32):
Jane, as you look at tritflows, can you describe how
things have changed where the shipping routes have begun to
go somewhere else, whether people are starting to think more
about fright than they aren't just using traditional shipping. Have
things changed from your vantage point in the last few
weeks a lot?
Speaker 9 (33:46):
And it's about what do we need just to get
buy over these weeks and months ahead, And going back
to twenty eighteen, China was sixty percent of our business
at the Port of Los Angeles. Then today it's forty
five percent and drop the folks on the ground in
Asia are telling me you'll start seeing even more migration
of manufacturing and sourcing to Southeast Asia beyond.
Speaker 2 (34:08):
Said the likes of Malanchia, the likes of Vietnam. Is
that why why they didn't finished the Schetz highlights.
Speaker 9 (34:13):
Yes, and of course a lot has been talked about
India but remember that just last year, China exported about
two hundred and fifty million container units, India about twenty million.
Speaker 1 (34:24):
There's a question not only about manufacturing the goods that
will come over here, but also manufacturing the ships, and
we know that that's been a huge focus of this
administration and potential fees on ships that have been built
in places like China. How have some of the proposals
like that affected your business.
Speaker 9 (34:42):
My first thing is it's another fee. It's another charge
that the liner shipping companies say will be passed on
and ultimately get to the factory level or consumer. But
I'm really pleased with the way the US Trade Representative
and that office responded. There were more than five hundred
public come letters two days of hearings in Washington back
(35:03):
in March to talk about what this fee would mean
if implemented based on the draft form, which was a
million and a half bucks for every port call in
the United States for a ship that was built in China.
Now it's on a tonnage basis vessel voyage. Albeit additive
to cost, it's a lot better than it was. So
the feedback was really heard by the administration.
Speaker 1 (35:24):
I'm listening to everything that you're saying, and it sounds
like a lot's going to hinge on how much companies
believe they can pass along higher.
Speaker 2 (35:30):
Prices to consumers.
Speaker 1 (35:31):
What from their perspective, given your conversations with them, do
you think they'll be looking for in retail sales in
Walmart earnings to understand just how much power they have
to increase prices on consumers that yes or tired but
are still spending.
Speaker 9 (35:43):
I don't know if I can answer all that, but
what I'm hearing on the ground is Okay, prices go up, tariffs,
other fees, etc. I'm first going to talk with my
manufacturer about the cost of those goods, the landed price,
and we'll see what we can negotiate. Second, how much
do I gain from efficiencies my company? Can I get
smarter and sharper a little bit of margin compression maybe,
(36:04):
but I've got to deliver on that cost saving side.
And then thirdly, what can I pass on. If I'm
a part supplier, that cost goes straight to the factory.
If I'm a retail finished goods person, it goes to
the consumer. So there's still a lot to be worked out.
Chances are with what we know, lower inventories, fewer selections,
and higher prices.
Speaker 2 (36:24):
And this is why Wilmot could be some interest in
a few minutes time.
Speaker 1 (36:27):
Because they've already said they want to compete on price
and they're going to take it probably somewhere else. And
it also points to how much they're going to make
their suppliers eat as well, so margins all around get
compressed in order to offset some of what gets passed
along to consumers. The fact that it comes an hour
and a half before retail sales gives you a sense
of the one two punch what companies are doing, and
then how much appetite consumers have to keep on spending.
Speaker 2 (36:49):
We know how consumers fail. What if they've been doing.
We'll get resound sales at eight thirty Eastern time numbers
from Wolma that stuck is not by zero point seven
percent numbers from Wolma in about five minutes time. I'm
just shocked, I said route and not route. Been it
too long?
Speaker 6 (37:03):
Welcome?
Speaker 2 (37:03):
Been it too long? I think that's for you. Jane's
going to see thanks Joe. Jane Siakaba of the Port
of Los Angeles and NATA Richardson can take a look
at things. She joined us from IDP Nada. Welcome to
the program. Do your best. What's going on here? Give
(37:24):
us a clear picture of what's happening in the US
economy in morning.
Speaker 7 (37:28):
It's mixed, and I think that's what you're seeing in
the data now. If you're looking really for some good
news on inflation, you found it today and that that
is the three line. And also if you're looking for
good news on the labor market, you see it continue.
So those initial job was claimed still at historical lows.
That is helpful for an economy built on consumption. But
(37:50):
when you turn to the consumer and you bring in
that soft data of consumer being down beat, and we
know that consumers went out and they stop piled on durables,
on cars and vehicles. What we're seeing in April as
a moderation from that stockpilot and maybe starting to really
(38:11):
reflect new economics vulnerabilities. We left the last FED meeting
with two risks at our disposal. We left the risk
of slower growth and higher inflation. And I think that's
what the markets are really focused on. That higher inflation
risk looks a little less risky today, but you know,
(38:33):
every day is a different day. When it comes to
this economy right now.
Speaker 2 (38:36):
Later and Plase, you brought up that topic because I
think it's so important. It's been really difficult to try
and unpack what is just the front loading of purchases
by consumers versus what is genuine, authentic, durable, sustainable demand.
And as we work our way through the summer, we've
been trying to work this out all morning on this program.
Are we going to see the price increases? Is Walmart
the one to listen to as they warn this morning
(38:57):
they can't hold off much longer from here, new how
do you gauge that at the moment? What do you
look at?
Speaker 7 (39:03):
I think the large retailer should be listened to. They
are active in this market, they are seeing the prices
in real time. So also consumers are important to listen
to in this moment. When they say they're down beat,
they mean it. We don't talk a lot about consumer surplus,
and just really quickly from your econ one oh one class,
(39:26):
it's the price consumers are willing to pay versus the
price they're actually paid. But if consumer surplus is being
eroded because they're seeing higher prices, that means consumers will
continue to feel down beat, and those feelings are translating
right now into what a data point we'll see on Friday,
which is consumer sentiment, and if that continues, it really
(39:50):
does reflect that higher risk of continued inflation that the
Federal Reserve warned about a week ago.
Speaker 1 (39:56):
And this is the reason why, NILA, a lot of
people say, we don't know how relevant any of this
data is because we don't know whether this is just
April data and people feeling bad in April. But in May,
things are going to look a lot better because we
have a reprieve from some of the tariffs and things
are looking a little bit easier. The market is rebounding, Mila,
How do you look at the quickly moving policy and
then judge the relevance of any of this data that
(40:19):
is just a snapshot and a very quickly moving movie.
Speaker 7 (40:23):
I look for the stead fast stronghold in the economy,
and right now that's the labor market. The labor market
is solid if you look at initial jobless claims, if
you look at the pace of hiring. Though we see
it at ADP to be more modest than it has
been in the past, it's still solid. We're still seeing
strength and that is the underpinning of the bulk of
(40:45):
the consumers. So as long as the labor market stays strong,
stays solid, we still see growth in jobs, we still
see wages above inflation, then you have an economy that
could weather some of these higher level risks.
Speaker 1 (41:02):
How much Neila do you see because of that, Because
of that stability in the labor market. In addition to
what we are hearing from some of the biggest retailers
in the world that prices are going to go up,
how much is a saguflationary like environment becoming increasingly your
base case for the remainder of this year.
Speaker 6 (41:20):
It's a risk.
Speaker 2 (41:21):
It is a risk.
Speaker 7 (41:22):
I think what we're seeing, you know, collectively in all
this data is an economy that looks to be slowing
a bit. I mean, the first quarter contraction is also
a messy given the high degree of import. So it's
again a backward looking data point that was based on
a lot of stockpiling. But looking forward, if growth slows,
(41:43):
not just because of US consumption and US production, but
also around the world, if growth is at risk, then
you might see slower growth and higher prices. So, yes,
statulation is an increasingly bigger concern. In my mind, it
was always a concern. I think the dynamics set kept
inflation down for for a decades going into the pandemic
(42:07):
have changed dramatically. We don't talk about these longer trends
that are affecting inflation. So even without trade policy, that
was always a risk. Now that risk is amplified because
of some of the uncertainty that we're still seeing on
the trade side.
Speaker 2 (42:22):
Naba, thanks for jumping on. Thank you very much, Nida
Richardson there of ADP. This is the Bloomberg Sevenance podcast,
bringing you the best in markets, economics, angiopolitics. You can
watch the show live on Bloomberg TV weekday mornings from
six am to nine am Eastern. Subscribe to the podcast
on Apple, Spotify or anywhere else you listen, and as
(42:42):
always on the Bloomberg Terminal and the Bloomberg Business app.
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