IMF's Adrian on Tackling the Uneven Global Recovery

and World Bank they're holding their spring meetings virtually. Uh, let's get a sense of what might be on the agenda. We welcome to Bias Adrian. He's a financial counselor and director of the International Monetary and Capital Markets Department for the i m F. Tobias, give us a sense what is on the agenda at the IMF this week. Um, you know, as we start to emerge from this pandemic. Yes, thanks so much for this important question. So what we are seeing is that there's a recovery that is taking

place globally, but it isn't a synchronous recovery. UM. So we have all followed the fiscal package in the US, and of course that has shifted expectations about the about the recovery in the US forward. But the recovery is not as fast and as strong elsewhere in the world. So uh, this is why a synchronous is the word

of the day. And when we look out two years into the future, what we see is that the most advanced economies in the world have the lowest output gaps, while emerging markets and low income countries have larger output gaps relative to the pre pandemic expectations of where these economies would be. So basically, uh, the more advanced you are, the more uh the expectation is that the recovery will take place, will get to healing. So what can be done out of what can the I m F and

World Bank recommend or or even do in terms of action? Yeah, absolutely, So of course we are doing three things. So number one, we are lending two countries that our need. So last year we did rapid financing was about a hundred countries around the world. We have never covered so many countries in terms of help with the rapid financing. Secondly, we also have programs where we basically, uh, you know, lend money and help economies to get back on track. And

then lastly we give policy advice. So this is what it's called our surveillance, and we give very granular policy advice to our entire membership of one ninety countries. Tobias. What impact, if any at all, Kennedy, I, m F and the World Bank have on um countries ability to get inoculation, to get vaccines into the market here from the States. Uh, you know, we're just you know, shocked and at the delays that we're seeing. Uh in Western Europe?

Is there anything that can be done from your perspective, Yeah, that's a that's an excellent question. Of course, this crisis will only be over once the pandemic is in check, and this is where the vaccines are so important. Uh. And yes, the rollout in the US has been has been very effective and very fast, and you know, we're getting to numbers that are that are getting reassuring, but the rollout is much slower in Europe. We do expect that this is going to accelerate, but it is somewhat

disappointing how long it has taken so far. But Pabe, it is important too to keep in mind is that in between Europe and the US, we have less than a billion people in the world. Out there are seven billion doll in total and Uh, you know, really, the end of this pandemic is going to happen once the pandemic is conquered everywhere. And uh, the US and Europe is only a very small share in terms of total numbers.

And you know, as long as COVID is alive, there will be mutations, and mutations can be threats to everybody. It's still kind of shocking that the famously efficient Germans still haven't managed to get it off the ground. They don't even seem to have any kind of plan as to how they're going to vaccinate their people. I saw today that the US has now fully vaccinated almost as many people as there are adults in Germany. And this isn't you know, unique to Germany. The French also are

failing miserably at this effort. Why is such an advanced economy doing so poorly when it comes to getting shots and putting them in arms. Yeah, that's the next question. And let me let me uh step back for a moment and just point out that, you know, the FISA vaccine, which is one of the predominant vaccines around the world.

It's produced in both the US and Germany, and of course it was developed by by German scientists here, and so I happened to be in Germany just now I'm German originally, I'm also about it and absolutely absolutely and it is indeed, uh Morris some and I think there are two things that come together. So number one, the US is just very good, even the US government is very good as writing contracts and making sure that their

population is getting the vaccines. First, and uh, the European politicians, including the Germans, but also more broadly, you know, the the c as well, has have not been quite as aggressive in terms of the way in which the contracts were structured. And secondly, I mean the US did not allow any shipment outside of the US until the vaccinations are are sufficient in the US, whereas in Europe, including

in Germany, actually shipments have gone to poorer countries. And you know that is of course a good thing for the rest of the world, but it is to the detriment of the German population. So you know, there's some balance here that needs to be struck very interest that is fascinating. So I mean it is I guess in holding with the kind of multilateral approach that Chancellor Miracle has embraced. Um, it's just frustrating, I guess for the

people of Germany. But if it's helpful for the world, that's that's got to be good news in the end, and I guess we can take it a little bit. Um. Tobias, thanks so much for joining us and answering my kind of left field questions there. Tobias Adrian is the director of I m F Capital Markets. He is not responsible for the back seeing rollout in Germany or the U i m F meetings kick off. We'll be following them

very closely. Matt. Back in the day, I worked at Credit Swiss First Boston, did a stint there, um boy, and in the media space we killed it. We made tons of money. We had great equity platform, great high yield, some of the best bankers on the street, and we made lots of money. It was a great place to work. But at year end, there was always something that would muddy up the bonus works. It was a bad trade here, a bad private investment there. Uh. It seemed like there's

always something that is still the case. Credit Swiss today taking a four point seven billion dollar hit. Let's break it down with a couple of experts. Nalie Basket, Wall Street reporter for Bloomberg News and Alison Williams Uh senior banks analyst for Bloomberg Intelligence who's covered the sector four decades. Um Ernali, want to start with you. What's the latest here? We've got some management changes, We've got a big hit

to the earnings. What's the latest? Yeah, you have a eight of management changes, really more than a half dozen out the door, Paul. That's a staggering amount of change at one time for one of the largest banks in the world. You have the chief risk officer out, you have the head of investment banking out um and a new guard taking shape at a time where they still have some clean up work to do. So what do we know about the new guard, Allison? So I think that you know, the new guard is sort of I

think an interim policeholder at the moment. I think the most important thing was that management, when they came out and announced to this big loss, had to at least show that they were starting the process to make change. So the management changes are part part of it. Um. It's it's probably not surprising that that the business had um as well as the chief of risk. UM are those that are departing the firm. Given given the circumstances um.

But I do think, especially given all the numerous issues there, there needs to be sort of a deeper postmortem, not just on this situation, but there still situation, and then sort of broadly what are the risks, um and controls that are in place? After we were just talking about

a post mortem. I feel like last year and bringing in a new CEO to make changes, so has he avoided the acts somehow stionally investors are trying to give him a grace period, it looks like to to make the changes, to give him time to make the changes of the bank needs. Here's the thing to Allison's point, a lot of these people are interim, right. You have a man who's taking over as chief risk officer in

the interim who was previously the chief risk officer. That the other person you have taking over the investment bank who is particularly interesting as Christian Meisner, who is a former executive at Bank of America. He's new to the bank. And you know, Credit Suite was actually doing our right

in investment banking until all of this had happened. This archago scandal happened in the prime brokerage division and the Green still issue happened in the asset management division largely where we saw the saw the head of asset management really um, you know take accountability for this too, right, So you're seeing many divisions of this bank face issues in regard to risk management, and you know the investors

now are paying for it. Allison, you've covered this stock, this company for decades currently at Bloomberg Intelligence, but before that, when you're an analyst at Morgan Stanley Investment Management, you've seen, uh, this company's performance versus piers. What is it about Credit Swiss where they always seemed to find themselves in trouble one way or another. Well, there there are I mean there is something different in terms of credit suites and

their mix. So they do generally excel in products such as leverage, finance, UM and and things that you know a year ago when we saw a big marks that credit suite versus some others, that to me is something you would expect given its mix because um in in you know, a quarter like March of when spreads are

blowing out. Um. You know, that's the nature of the business that will be profitable over time but can be more volatile in you know, sitting sitting here today UM with a much more significant loss UM, which which I think has different meaning. I think this does go more towards UM, you know, the d n A of the bank and and that's and that's what will be interesting to address. And I'm sure that the bank is already working with regulators with regard to this issue. Obviously, legal

risk are going to be something to linger. But I think what's going to be important is is working with the regulators UM to get the processes in place. And you know, there could be some some sort of trailing impacts I think with regard to UM capital and making sure that they shored up UM financially. I mean, the good news is that they had the money to withstand this hit UM, but what are the operational safeguards and

then what are the financial safeguards going forward? Sonale, are you hearing from prime brokerage is that they are going through their books looking for other potential wangs. Well, you know what's funny about this also, you're you're worried about other clients. Of course, I mean, who's taking on a lot of risks? Do we need to clamp down on them? But the other thing about it is credit suite it was,

you know, not in the top top tier of prime brokerage. Generally, when these kinds of things happen, clients look around, everyone looks around and says, okay, do we flocked to safety? And so at the end of the day, do Morgan Stanley and Goldman Sachs come out even stronger from this? Do they gain more clients? Uh? That's that's the big question moving forward. What type of reputational hit is credit sweet is going to take among clients for these losses.

And then also there's a financial reason for clients to keep an eye out. They are their outlook is negative for Fitch and S and P. If they are downgraded, it makes counterparty risk that much more of an issue, right, So that's something to watch for moving forward. All right, Hinale, thanks very much for joining U. Shonalie Bastik. There are Wall Street reporter for Bloomberg Television Alison Williams, r B

I Bloomberg Intelligence Banks Analysts. Get over down to Marvin Lowe, senior global macro strategist at State Street to talk about Well. First off, Marvin, the U S economy has really caught my eye lately. Um. The jobs number was amazing. We had the best I s M number manufacturing number in March since three and then we just got the best services p M I number of all time. Um, how much growth do you expect out of the US and

how much inflation? Yeah? I mean, UM, you know, we're finally getting to a point where UM prospects are certainly brightening. And UM, you know, we're we're we're we're getting to

a point where the reopenings are starting to really accelerate. UM. I think I think the numbers, I think the numbers that are expected are are are reasonable given UM everything that we know, so six and a half percent GDP for the year and an inflation rate that UM will certainly spike in the short term, but start to come back once those space effects get lower. UM. And I think the challenge for all of us looking at the markets and various asset classes is trying to determine what's

priced in. And a lot has been priced in, I mean a lot of good news UM since the beginning of the year, and it's and it's coming to fruition, which is which is you know, really encouraging. Yeah, Marvin, That's kind of where I wanted to go I mean, I think the bull case is very well known on the street. With the accommodative, fed with the fiscal stimulus, with the reopening trade and all of those issues, and obviously the vaccination, the metrics are trending very positively here.

How do you get a sense of what is in fact priced in? Do you look at evaluation? Do you look at a pe ratio for the SMP? How do you that or what do you look at to get a sense of kind of where we are in terms of evaluation? Yeah, I I look at the world from a from a cross asset class perspective. UM. You know what happens in the rates market and what happens in the currency markets, UM matter I think to how you

approach risk assets. UM. And you know, since last Friday, since the near million jobs posts, since some the record p M I s that that that that you were UM that you were referencing, we've had very little movement on those other markets. Certainly, equities are supportive by the accommodative, fed by the fiscal stimus by the fact that, um, we we're talking about more fiscal spending. But um, the stability in those other markets I think points to a

lot of the good news already in there. UM and with still negative UM real guild in other words, of repressive UM interest rate environment, equities wind up being one of those asset classes that can that can continue to benefit from this kind of broader supportive environment. So when does that turn around? UM, you know what we have to get Marvin, Yeah, I think I think interesting. I think interest rates are are are going to be the key.

You know, once once UM you wind up with a rates market that is not repressive, once you get UM really yield closer to neutral rather than the minus sixty basis points that we're in, it's it's a legitimate substitute for UM UH for other risk assets at that point. UM. I look at it from from from that perspective, multiple expansion can certainly continue to occur and and and you know, I would make that part of my thought process as I look at risk assets over the course of the

next few quarters. Marvin, You know, a lot of folks are are are looking for yield, They're looking for return, They're willing to take maybe more risk as as we come out on the other side of this pandemic, and certainly willing to take more risk what's that. Certainly Bill Wang was willing to he was a constant at a risk at that Bill market. Just wondering what your thoughts are on emerging markets for returns? Yeah, UM, you know,

I do. I do think that, UM, we have to parcel the emerging markets into those that might benefit from reflation versus those that are, you know, potentially looking at higher inflation. UM, the backdrop, the backdrop is still is still positive kind of given UM again that reach for yield and UM the positive risk environment that you're talking about.

But UM, each one of those emerging markets are unique, and I think you have to ultimately analyze the ones that might benefit more in a reflationary environment, where we start layering in infrastructure discussions as part of UM, as part of the summer to early fall action items that come out of Washington. In the dollar plays a huge role in e M investments, of course, and at the beginning of the year one thought the dollar was on

its way down. It's turned out to have a fantastic quarter and it's doesn't look like it's gonna let up anytime soon. How does that, how does that play a role in what you look at globally. Yeah, yeah, absolutely so so, so the dollar winds up being the most UM, you know, one of the most important UM factors in

in how well the emerging market discussion occurs. UM. We had an adjustment that occurred in the first quarter with regard to how US growth was going to UM really beat expectations, you know, whether it was fiscally driven UM as well as kind of the better vaccine UM news. If in fact a lot of that is priced in, we could start getting back to looking at the dollar as a more stable type of asset class, which I think the market, which I think is encouraging for the

market at this point. UM. If if we've priced in UM as much as we can from a fad rate hight perspective UM, and we you know, need catalyst to get it a little bit further, we could start building other scenarios around e M eventually UM finding you know, finding some traction where where it's been a struggle for the for the past few months. Marvin, thirty seconds as you talk to your pms at State Street, what's the most exciting area that you're hearing from your fund managers? UM?

You know, I I still I still from broad risk is is something that is something that's that's encouraging for folks. There is a lot more discussion about alternative investments. You know, certainly, certainly the the crypto spaces is interesting, um as a potential as a class to think about. But um it really is trying to continue along with this with this risk discussion that's been going on. Marvin low thank you so much for joining us. We was appreciate chatting with

you and getting your perspective on global markets. Marvin Lowe, Senior at Global macro Strategists at State Street. They're located in Boston. They are one of the mega players matt up in Boston. You go up there and you see the big utual fund complexes as I did for many years as an annaly. State Street is an absolute anchor meeting. Uh. They have a certainly a global view. I'm super pumped

for our next guest on us right now. He's senior vice president for Global Strategy and Innovation at the Berkeley College of Music. What does music have to do with innovation? You ask, Well, he's a co author of Two Beats Ahead, What Musical Minds teach Us about Innovation? His co author on that book, Michael Hendrix, I'm assuming no relation to

the great guitarist Um Pano. Thanks so much for joining us. Interestingly, I was just reading about will I am Um from the Black from the Black Eyed Peas teaming up with Um Honeywell to bring out a supermask high tech you know, COVID mask essentially, and I thought, Wow, that's so cool, and how come no one else thought of that already? What what is your book, um telling us in terms of musicians and innovation? Thank you so much. That is

a fascinating pairing, I think very illustrated. Well, the book is all about the mindset that musicians have that we believe are trans terrible and applicable in other other domains. The way that musicians collaborate, the way that they listen to the environment around them, the way that they create through experimentation or remixing, or even the way that they're able to go out there and connect with audiences. I believe these are all mindsets and skills that we can

all learn from. All right, Panos, It's interesting here as we continue to deal with this pandemic of so many groups, so many people have seen their lives disrupted. Gives a sense of how the average professional musician, what has he or she had to do to kind of make it to this pandemic? What's it? What's been fascinating about musicians the music industry is, if you think about it, whether it's pandemics, or whether it's technological shifts, or whether it's

societal shifts. Uh, the music industry and musicians in general have a history of going through massive disruption but somehow being the first to often embrace new technologies and new

means of connecting with audiences. And this goes back to the earlier days of radio, television, cable TV, social media, Have Your A Member Musicians were the first to embrace social media, subsequently streaming and even the subscription models, and now with COVID, worth seeing musicians embrace all kinds of new platforms like clubhouse, TikTok, Twitch and really taking their art form in ways of connecting with audiences in a different in a different way. We see a level of

resilience that I believe we can all learn from. And absolutely the music community has been devastated by COVID with respect to losing in some ways the last fashion of income that they had by performances um. But on the other hand, we're seeing this creativity, imagination and the desire to connect really siding their choices. I think we can

blown lots from them. I'd say, my kid brother is a guitarist and a musician producer in in New York, and I've always been struck by his electrical engineering skills, right, same is true for for Hendricks and a number of other guitars. They have to understand the science of amplification and they play with it to to kind of blow our minds. But I've also been struck by you know, his whole crew. Um. The way that they've innovated to

create new revenue streams has been astounding. And are we going to see the music industry change in any significant way due to the pandemic? Oh? Absolutely, you are already seeing it change. Uh. First of all, you're seeing growth for five consecutive years in a row, so that's a new chapter that's being written when it comes to music. But you're also seeing again all kinds of new platforms being embraced by the music the music industry as a

means of connecting with audiences. I mentioned a few a few before, but they were also seeing all these amazing collaborations that are recurring that just never happened before. So we're seeing a community calless UH be able to be giving in ways that we haven't seen before UH and I am convinced that it's not just new technologies, but new creative expressions that will come out of this pos Talk to us about the ability of musicians and songwriters

to get to get paid. That's always been a challenge, and even more so in this digital area. But I know Apple's invested in something called United Masters. Talk to us about that and how that might help musicians and artists actually get compensated for their work. Absolutely well, we're obviously with a migration to streaming the music community has um UH lost a significant amount of its its revenue that it used to earn from c D Ease as

well as other sources. Now with streaming, I think it takes about three thousand streams and hour on Spotify for the average musician to earn an equage, so clearly that has that has to change. We have sixty thousand songs a day that are uploaded to Spotify. I mean that's

a staggering amount of music. So not only is it more difficult to be discovered, but also because of the way that UH the streaming services pay in in in the paradoxical way, the more users and the more music is there, the less money is distributed, especially to musicians at the lower at the lower end, or or the

tail at the thinner end of the tail. So with united masters from the end the Apple deal, that's an interesting move by Apple ineffectively investing in this new uh, new independent artist community if you will, that's emerging and really showing faith. Then the music industry has growth beyond the major superstars. Were really seeing the independent music sector for the first time breaking the billion dollar revenue stream UH,

and I believe this will continue to accelerate. I think something that we have not seen yet with streaming is the creation of what many people had termed of an artistic middle class. I'm very hopeful that gradually with companies like Apple UH coming into the freight through investments like the one they're doing. If you're not masters of this, this will change the game and frankly changed the experience of discovering music for all of us is consumers in

terms of musicians, that change the way we live. I mean, I'm in Berlin, right, um, where David Bowie spent a large part of his life, and he's kind of a generational um you know force uh radio Head. I listened to the Okay Computer Record for the first time when I lived here about twenty years ago, and that is just, um, you know a band that's up there, you know, on the on the mountain with the Stones and Zeppelin. Who is the new Who are the new kids that are

gonna be like the new radio Head? Is there such a thing anymore? Or is it just so diverse um, due to the democratization of you know, the Internet. Frankly,

I think it's I think it's both. I think that um, we're seeing maybe a plethora of choices, but there are so many amazing artists that are coming about that are really using all this new media to again create new expressions, in new ways of connecting with fans or even seeing right now the rise of non funcible tokens or n f t s. And I know that right now a lot of people are dismissing them as a fad, But I think the story that's not been written yet is

how are artists creating uh or or embracing this new me the invest for the first time to the advoct of the digital era. You can actually have limited coffees, whether it's one or ten or twenty um that our audio visual in nature, how are they embracing them to create again new kinds of connections and new kinds of of of art forms. So for me, I'm very hopeful about the the industry. Uh the artistry that's coming out of it. You're seeing collaborations. Even if you just saw

the Grammy Awards, look at the diversity that exists. They're right, you would have not ever seen even just a few years ago. Uh Duo Lipa is part Albanian. You have a Bruno Mars teaming up with Anderson pack And and he's part Korean uh and and as is Bruno Mars

part of the Latino UM. So I actually am very hopeful of of the industry, not just in terms of growth, but in terms of diversity and discovery of all kinds of new amazing artists that would be interesting to see and it's fascinating to see how this industry is evolving. Senior Vice president IT for Global Strategy and Innovation at the Berkeley College of Music, and thank you so much afford joining us. We appreciate that. Thanks for listening to

the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller y three and on Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio