We Need To Feel Each Other's Pain: Northern Trust's Thomas

president of Northern Trust Asset Management. Typically we'd sit down with shun Drawn and talk about markets where he thinks our opportunities, but today we'll do something a little bit different. Recently, shun Drawn UH composed a letter UH addressed to Corporate American early September entitled I Can't Feel my Pain talking about combating systemic racism, Sun Drown. Thank you so much for joining us. We really appreciate your time. Give us a sense of what you were trying to accomplish with

your letter entitled again, I Can't Feel my Pain. Well, first of all, Paul, Bonnie, thank you so much for having me on this morning. You know, I've been very engaged in the dialogue that's been taking place both not only within our company, but within the broader marketplace. And you know, it was born out of both you know, my own personal reflections and then the experiences of others that that often don't uh well I would say, going stated, because they don't have the same kind of platform that

I do. But as this had progressed, one of the things that I reflected on was the challenge as a black executive over the course of my career, because when you're dealing with issues of race that proverbial is I like to say third real topic. It's not one that you can honestly comfortably engage in uh in in in the in the workplace. And often it's just because of the nature of the cultural dynamic in terms of dealing

with that kind of issue. And so one of the challenges that you have, particularly as a black professional is uh you have to in some ways sort of bottle the natural emotions when you say, for instance, in your community or external environment, see things like what happened with George Floyd, or you see instances of what occurred more recently uh in uh Wisconsin that's right next door to me, and so um that was one of the things I was really seeking to to to give a voice too,

and really to share some some honest and earnest perspective on what's been the response so far Chandon, Well, you know, it's it's been really incredible to me because for me, you know, over the course of this year, I've actually had a number of open letters that have offered on key issues, whether it's my thought around compassionate leadership uh in the pandemic. But the response to this, you know,

really has been overwhelming. I think for a couple of reasons. Uh. Number one, UH is when when people can really identify with someone in their business, UM that's actually experiencing these kind of things. And I think the the the the axiom that I used, pain hurts because it should um, has really been a powerful metaphor because we realize in the same way that our brains really tell us, you know, when something in our environment is dangerous or provides a

threat to our physical and mental health. What I suggested in the letter is, you know, our hearts in an emotion and a spiritual sense, do the same thing, and both for the individual, we need the capacity and ability to be able to process and feel that pain, but

importantly in social relationships in an organization. We need to be able to understand, empathize and feel one another's pain if we're going to work effectively together and to have a strong culture central on what role do you think corporate America should play in dealing with this diversity issue or race issue and all these things. What role do you think corporate America should play? Well? First of all, from a very practical standpoint, corporate America has a principal

role to play. So so think about many of our experiences. I spend the majority of my waking hours engage in my work and with the professionals that I deal with in the workplace, and so anything that affects me right in this case, you know, the construct of race, which has been around for half a millennium, is one of the most pervasive and impactful social constructs that we know, particularly in the Western world, certainly here in the US,

and so affects every aspect of life. And so it's not like we get to go to work and we have, say a work life that is separate from our real life. We bring all of those things with us into the workplace. And so to the extent, working as part of a cooperative means that we come together as individuals for a common mission and a common purpose and a common vision,

which shared values. How can you not, in the context of the workplace, then address something like systemic racism our mandates the answer, I mean, it feels like there shouldn't be a need for mandate, but it also feels like it's not getting done without them. Chandon, Well, it's interesting because, um, there's some in some corners a reflective, reflexive rejection to

quote unquote say mandates or targets. But I find that ironic because if I think about my responsibilities, I have the privilege of leading a global business, and so anything of import that we are focused on. Not only do we have priorities around, we have targets and we have measurements against And although those are common in our business, in fact, not only are the common, they're expected, and to the extent in any of my areas of primary responsibility I didn't have those, I would be viewed to

be profligated my responsibility. But when it comes to advancing something that we in many aspects say is very important to us, like diversity inclusion, Uh, then there is often a pushback on saying we should have a target or a specific expectation or clear and transparent measurements. But I think it should be just the same as everything of import we do in a business context. Chandra, is this

time different? It feels, at least to certain observers that the what's happened in the country over the last six months as it relates to police brutality against certain members of UH minority communities, that it is different this time. Do you think it might be different? UH, well, I'll tell you, um So, I have a mixed perspective on that.

If you go over the last um call it six seven decades, We've we've seen multiple periods in our history where we've had um social unrest UH and it's usually been led by young, courageous people of diverse groups and backgrounds, and we're seeing that again today. So if you ask me, when I look at history, that's something that that in a sense rhymes what I feel like when people say

is different. And I would acknowledge this if I think about, you know, my twenty six years working in financial services in the business that i've a d and then doing that in a corporate context. The nature of the dialogue in recent decades has not been this transparent um and

has not been as engaging. So I think our challenge at this point is to say, what I call this moment that we have, how do we translate it into a sustainable movement, because again, this is not the first time in history that we've had meaningful um discourse and even meaningful social movement on issues as it pertains to race and racial quality. Schandron, thank you for bringing us this letter. It is a September letter. I can't feel

my pain. But if you go to the Northern Trust website you can see other writings from Schandron Thomas on the subject, and we appreciate him. Today President at Northern Trust, but it is time to check in on Homberg Opinion now. Ellen Wold is president of Transversial Consulting and an nonresident Senior Fellow at the Atlantic Council's Global Energy Center. For our Purposes today, She's also Bloomberg Opinion columnist and has written a column on OPEC's power over the oil market.

As we celebrate, I suppose that's the right way to put it, the sixtieth anniversary of OPEC this week, Ellen, thanks for joining. Has OPEC been a force for good in the world. Well, I think that OPEC has certainly

been a force in the world. Um Initially, really, when OPEC was sounded in nineteen sixty, nobody really paid it much notice at all, and it wasn't until nine seventy three that it actually became a household name or political talking point, because that was really the first time that OPEC was able to have any real effects over the markets. And for consuming nations, this was a very big shock because suddenly their energy prices basically quadruples almost overnight, and

there were mass shortages. So OPEC was seen very negatively. But for the producing countries, for Venezuela, for Saudi Arabia, for a rock, for iron, these were countries that for many years had really been producing oil at prices that

were probably below what they should have been. And so for these countries, the rise in oil prices did provide them with cash that they used for divine So so in that sense, uh, the rise and prices did help, you know, assist in the development and economic development of

some of these countries which traditionally had been somewhat poor. So, Ellen, I'm old enough to remember seventy three and the looking at your license plate and if you had an odd number, you would go on certain days and get it even number, you'd go on other days to the pumps OPEC. Since then, how is it evolved? This is essentially Saudi Arabia and Russia and maybe a couple other people that we have to worry about. How was it really evolved as a

market setting mechanism. That's a really good question because initially it seemed like OPAQUE was kind of this boogeyman at this enemy that existed to basically, uh control consumers and extract money out of them. And over the years it's definitely changed. At first, there was this kind of heaty enthusiasm for wow, we can basically charge whatever we want. And since then OPEC has evolved to take a much

more balanced view of the market. And I think Saudi Arabia really did lead the way in this, because Saudi Arabia was always concerned at setting prices for oil too high would lead to demand destruction, and so they were always very sensitive about really managing the market, taking a long term view, and I think over time OPEK evolved

into a much more technocratic and professional organization today. In fact, they issue in the demand forecasts they do a lot of really great data collection and analysis uh that analysts find very very useful. Now that they've expanded this group to include Russia, it really very much is a Saudi Russian show because they're the biggest producers, they have the

most spare capacity to wield in this situation. And yet at the same time, players like Iraq and Nigeria are always a thorn in the side and they can have an effect on the market simply by kind of defying uh, the group. So it's not just a Saudi Russian show. Yeah, it's really stunning. I was going to say a more inclusive OPEC, but that was a little tongue in cheek. I mean, the idea that Russia has huge sway now

in this OPEC plus group is pretty phenomenal. Is Russia a good actor in terms of its oil dealings with the world, because certainly some countries don't believe that Russia is a good actor in other areas well. I think that one of the things that that OPEC has to realize that Russia is that Russia is always going to put Russia first. They're never going to put the group first. And that was actually one of the reasons why Ali

on that you meet. The former Saudi oil minister was very wary of getting into some kind of larger deal with Russia because he'd seen Russia basically make promises, make agreements and then turn around and do exactly the opposite, and so if he didn't trust them at all. I think that Russia has definitely shifted in that respect somewhat, but it's still a constant challenge to make sure that there's enough incentive for Russia to stay as part of the group and not you know, go off and do

its own thing. And still it's always been one of the big laggards in terms of compliance with its promised quotas. Right now it happens to be doing much better than say Iraq, but it's always it's always a gamble as to whether they can keep Russia in. In fact, the whole thing practically fell apart in March, so it's very much kind of a thin line here, alright. So Ellen,

that's this supply side of the equation. I'm looking at w T I crude here just under thirty eight dollars a barrel had been in that forty three dollar range for most of August. Is this really being is this really is that Take a look at the global UH crude market, demand driven market, and markets telling us we don't see much demand out there. Yeah, demand is the big picture today and that's really I think what markets

are coming to terms with today. Over the summer, I think there were absolutely a lot of signs that demand wasn't as strong as people thought it was. There. We were seeing good increases in demand all throughout the summer, But really I think those are hiding some of the or kind of covering over some of the larger weaknesses. And now that the summer is basically over, people have stopped trying to go on whatever vacations they could have.

We're now seeing these weaknesses come to light in a much stronger way and realizing that, uh, there there's going to be serious weaknesses and demand for the rest of not into and the market is just going to have to take that into account. And so I think we're seeing a price correction with this realization in mind. Now, is there a forecast for when the world is no

longer dependent on hydrocarbons? Well, if you ask yeska vp uh, they forecast that data come much sooner than than other people I think that there's definitely a hope that you know, at some point between that that might that might be true.

But I think that that's very much dependent on technology and the pace of technological development, and I don't think that we have really seen the kind of innovation that will lead to mass adoption of non hydrocarbon sources across the globe, and so those forecasts are very much are very much hope rather than a realistic prediction. Ellen Wall, thank you so much for joining us. Dr ellen Wald. She's president a Transversal Consulting. She has also a Bloomberg

Opinion contributor. You can read her work and all the work for the good folks of Bloomberg Opinion at Bloomberg dot com, slash Opinion or on the terminal by typing an O, P, I, N GO and vannie. You know, as Dr Wald was suggesting here, it seems to be a demand driven market. In the market participants seem to be saying, I just don't see a big pickup in demand. Well, airlines certainly don't need any products and vehicles on the road for sure, but probably not as much as before

with people not just doing their daily commute. But it's pretty amazing that it's the sixtieth anniversary of OPEC, which is literally a global household name. I would I would just imagine there isn't a single household that you could go in to in the world and not know that

OPEC would be recognized there. Yeah, and I certainly remember back to those early seventies waiting in line at the gas station forecas before we have green on the screen yet again, and yet again, Tex stocks are leading the way tech investors, seemingly shrugging off that nearly ten percent pullback we saw just last month to get a sense of is there still room to move with these tech stocks? That's welcome. David Coudla, founder, CEO and chief investment strategist

of Mainstake Capital Management. They've got three billion dollars under management. David, thanks so much for joining us. Again, we always appreciate your perspective here. So again, tech investors got a little bit of a you know, a scared last month with that pullback, uh and nearly a ten percent correction in tech stocks, yet seems to not have scared many people away.

How are you viewing that sector of the market. It was, it was a scary three days certainly, you know, uh, a sharp correction over those three days, you know, and then the days that ensued and from peak to trough on the NASTAC one hundred INCHRA day. The low actually came last Friday, so about a little over a week that tech stocks were in trouble. But you know, uh, if I said that evaluations had become frosty, that was

that's an understatement for sure. And they've been frosy for for months, you know, even before we came into the bear market. But so so certainly you know that the that correction was needed. And I say that correction was needed because I think it was a correction that we're now already coming out of. We've got two strong days for the nasdac A tech stocks yesterday and today. And you know, it is our our favored sector in our portfolios.

We've talked about it on the show many times, not only in the past few months, but the past few years, and um, we we continue to like it in in uh, continue to be overweight the sector even though you know, I think it's it's prudent at these levels and coming into the election that investors look hard at their portfolios for how much risk they do have because we'll see more volatility like that. I think between now in the election, how much of the NALTAC would you advise people to own?

It sounds stave like you think this you know move is not a pivot as such, it's just a little breather. I think it is a breather. I think that, Uh,

the NASAC will continue to be strong. When we look across all the industry sectors and we look good, you know, where are the stocks that continue to do well where the stocks did well during the lockdowns, either because you know, technology had continue to do well with their second or growth stories or technology that we're enablers for retailers or e commerce I t UM those those are the companies that have the best balance sheets, have the best free

cash flow, have tremendous growth rates. Uh. It just continues to be such a strong sector. And when we say technology, you know, that's very broad. Whether we're talking about hardware, uh, I t e commerce, other Internet, it's it's a broad sector. But uh, you know, technology is eating the world. And

we've heard that phrase many times, but it's true. And when you know technology is disrupting when it comes into an industry, when you know, the worst thing can happen is to, you know, to find out in the morning that, uh, you know, Jeff Bezos, who has leveraged technology to do what he's done with Amazon, is coming into your industry. Uh, like when he did that with UH and Kroger. The CEO of Kroger woke up one morning to find out

he's coming into the grocery industry. But the point being that that the technology is being leveraged in that way. Are there other places we can go? We want to hedge our portfolios with gold because gold is more attractive to us now than bonds. With rates so low, we think consumer discretionary looks attractive, you know, other sectors we

want to diverse by into. The technology is going to be overweighting our portfolios for some time, David, you mentioned the election, and some people started to raise some concerns about the potential for a can tested election an uncertain outcome. Uh, you know, maybe a legal process and the uncertainty that may bring into the markets. How do you af factor that into your thinking? Well, we think that this could be it could be a real problem for the markets.

You know, we could have this scenario that's shaping up where you know, we don't we we don't have election nights, and we're not gonna have an election night any longer. We're gonna have an election month where you know, we're seeing this scenario come about where we could have on election night potentially one candidate looks like the winner and maybe a clear winner, and as all the absentee ballots or the mail in ballots come in over the coming days,

that may look to change or potentially change. So that anxiety, that uncertainty. The markets hate uncertainty. So that uncertainty we have leading up the election. And again it's not as much about uh, which party wins or who wins the election as it is the uncertainty leading up to the election, so the market can price it in price in the certainty. Um,

we've only had that uncertain leading up the election. It may be very uncertain for days after, and it may be very uncertain how it gets resolved, and that could cause some incredible indigestion and volatility for the markets that that could potentially go on for the only days but weeks. So you know, we are concerned about that. David Coula always gore to get your thoughts. Thank you for joining

us today. David Coula is CEO and chief investment strategist of Mainstay Capital Management, about three billion dollars in assets under management, coming to us all the way from Michigan today. It's always interesting to speak to people around the country, but what he says Paul about uncertainty is really interesting and to some it's an obvious point, but it's going to only get more vivid as we approach the election.

Marko Kolonovitch, for example, of JP Morgan, the famed quant, talks about this a lot and how we're really only part of the way there, even though the election as well as on fifty days or fifty days or so away at this point, we will talk about this throughout the afternoon. Marco Colonovot John B TV at one pm Eastern as well, may as well get that in there. This is Bloomberg bubble, bubble toil in trouble at Credit Suits. It seems in fact Credit Suite and UBS are even

potentially investigating whether to come together. Let's bring in somebody who knows a lot more about this. Alison Williams, the senior analyst for Global Investment Banks and asset management at Bloomberg Intelligence. How realistic is it that credit suits and UBS could merge, Allison? So I would call it unlikely but not impossible. And uh, you know, normally this is the type of story that I would read and think

it was rather silly. But I think the fact that UM it does seem like the chairman has approach regulators UM and is listening to do do this gives it some haft UM. I think the key sticking point, you know, even if the local regulators agree UM, could relate to anti trust issues and their home markets. So these two banks have huge global businesses. Investment banking and trading is when we talk about where they compete with the US. Wealth management is an area where UM UBS is a

global leader. Crowds sweets is also strong. But I think the sticking point could be their home market, at least according to our anti trust analysts UM and simply just looking at how big they are UM in the Swiss business. So, Alison, even the fact that these two UH European giants are even talking to each other about this, does that suggest that the business European global banking, but particularly in Europe where the rates are negative in many key markets and

are so low around the world. Old it's just so so tough for these companies to make any money on their own. So, Paul, I think that it really just comes down to, you know, if if Europe, if the europe competitors want to compete, I do think that, um, there has to be something done to form a global competitor.

I think if we look at what's happened in the landscape over the last um, you know, let's call a decade or so, since the banks have emerged from the crisis, you know, the US banks have benefited from this virtuous

cycle of you know, technology spending and scale. They got profitable sooner they put their issues behind them, sooner they've had they had a better economy to work with, um, so they had more revenue to spend to invest to build the technology, and which has resulted in revenue share gains and thus the cycle where European competitors have been sort of this serial restructuring at all of the largest competitors or exiting businesses on by one because they just

can't be profitable and so UM. The reason why scale really matters is, you know, it's not just this concept of you know, offering all the products, which is sort of a nice to have, but you know to the extent that you have the money to make these investments, and that's you know, sort of where the war is

really being waged. And so if you look at the technology budgets and you look at credit suites and you bs and you add those budgets together, you know, that would put them in the realm of the US competitors. The one you know caution we would say is you know, it's necessary, but not sufficient, and it's not going to

be overnight. So you know, in terms of at least the global investment banking business, you know, I can figure out a way for some of these European banks to merge to create uh, someone that has the technology um to invest you know it. It gives them a chance,

but it doesn't it's not necessarily guarantee. Yeah, I want to ask you what they all do differently, or at least what these two do different and the But I do want to point out first that we had the hilarious report from I p is That, which is a German newspaper inside for atopods that UBS chairman Excel Labor had threatened to move the bank's headquarters to Frankfurt if if officials were to forbid a merger with Credit Suite, So he was deadly serious about it. It seems what

do UBS and Credit Suite do that's different? So I would I would say that their business mixes are very similar, but I would say that UBS is a bigger competitor. So from a global banking perspective, UBS is a bigger competitor in the equities business globally, they're stronger UM in Europe and Asia UM, but you know, Credit Swiss has

some strength in those businesses. But then when you turn over to the sixth income side of things, you know, UBS they're very different in terms of UBS making an early move to shrink their business years a go, much more slow trading UH currencies and raised those types of businesses. Cred Space is actually unique across all the global peers

and having more of a credit focused business. UH in Bank America also sort of sort of that way, but more us UM and so they really have sort of stuck to some leadership positions and curization trading and the like. Both banks, you know, have a strategic focus on wealth. So that's a similarity that they that that they both have UM, although UPS has perhaps a longer standing and stronger presence UM focusing on Asia, but that's something that

banks worldwide are doing. Alison, thank you so much for joining us. We always appreciate your perspective UH and global view of the global banking business. Alison Williams Senior Analysts Global Investment Banks and Asset Management for Bloomberg Intelligence. Bloomberg Intelligence is Bloomberg's investment management research business investment research UH.

Allison is one of the founding members of Bloomberg Intelligence on the global investment banks and boy, when you talk about UBS and Credit Swiss potentially getting together on paper, that suggests a very strong global competitor and one that can stick with some of these big us A global banks. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter

at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio