Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
I've never ever ever said this before. How about making a book of the year, a book that's eighteen months old and now two years old. Rushia Sharma in twenty four took every award for What Went Wrong with Capitalism? This is the book you throwed a twenty one year old brat, Paul. I'm talking to you, and you say, shut up and read this Rushia Sharma and the President's here are going to Fdr Nixon, Reagan, Biden and on to President Trump, ever more important, two years down the road.
I can't say enough about it. Rich here, thank you so much for joining us this morning. If you were to write a new epilogue for What Went Wrong with Capitalism?
How would you write it?
Well?
Tom First, thank you so much for your kind words, because nothing warms the heart of an author more than to hear it from someone like you. But yeah, that's exactly been the aim of this book, which is to sort of show that how the capitalism we have today is a very distorted form of capitalism we have can.
We even call it that?
And the main reason I wrote the book is something that you tease just now in your introduction, which is that so many young people today, when they are polled in America, say that they're disillusioned with capitalism, and in fact, many of them, particularly progressives, say that they would rather have socialism. Now, that tells you about what is the disenchantment with the cutting system.
That we have.
And what I've tried to do in the book, and I don't think I would change anything from what I wrote about this eighteen months ago when it was published, is that you've seen more of that, which is that we're seeing much wider income inequality, wealth inequality, and we are seeing a lot of the incumbents get much more entrenched.
And my point is that.
Capitalism is not supposed to work this way. Capitalism is supposed to be pro churn. It's supposed to be pro competition, and we are supposed to weed out a lot of the old players rather than have this kind of system where it gets cleroossos.
That's right, where I wanted to go wead out the old players post Trump. Whatever your politics, folks, I don't care. Russhier is great about that. Post Trump. What happens to populism is all of this solved at the ballot box.
Well, I think that, you know, the main issue that Americans have today is one of affordability, and the affordability crisis that we're facing in America, A lot of that comes because of home prices, and that goes to the heart of what went wrong with capitalism. Why are home price is so unaffordable for so many Americans that so many twenty year olds today cannot afford to buy a
home and are prefering to living in with their parents. Well, the main reason for that is that the amount of regulation we have had in the system that has made home supply in very short supply. In fact, so the number of new homes we're building in America today is roughly the same level as it was thirty forty years ago, when the population was a lot less. The kind of regulation we have today makes it very difficult to build new homes, so keeps going up, but supply just doesn't
come on the market. So I think that this is what we need to do that how do we get capitalism back to functioning the way it was, closer to what the founders had in mind. I'm not saying we return to the Dicxanian form of capitalism that we had the nineteen twenties without a welfare state. But this capitalism where you have, at least for the rich, capitalism on the upside, and then socialism on the downside, where the losses are socialized.
The government's there how to protect you.
I think that that distorted form of capitalism is something which we'll keep producing these perverse outcomes that we're getting today across America.
Rusher Shearmer with us of course, chairman at Rockefeller International, can't say enough about his work, including my book of the Year, What Went Wrong with Capitalism?
Paul Sweeney with Russier Sharma.
Sure, I think we all grew up, most of our listeners, have yourers with globalism? Is globalism dead these days?
Really?
Because if you look at what's happening in the world over the past year, the yes that America is withdrawing from the global trade system, but the rest of the world is learning to trade without America. So if you see what's happened to trade volumes over the last few quarters. America's share is declining in global trade volumes, but the rest of the world, the trade volumes are actually going up.
And as I travel the world, what I find is that more and more countries are trading with each other, signing trade agreements with each other Europe and Latin America.
Even countries that it.
Turned quite protectionous like India, are signing more trade deals with the Middle East or with New Zealands.
So at least on the trade front, what I.
Find is that globalization outside of America continues. Now, of course globalism is more imperiled has to do with immigration, and this is one of the top trains of my year that we are seeing this backlash against immigration, not only in America but across the Western hemisphere. So therefore immigration rates have collapsed in much of Europe as well, not just in America. But as far as trade is concerned, the world is really learning to trade without America.
Increasingly China.
That's one of the big wild cards I think as we think about global trade here here, what's your view on China in the West over the next several years.
I think the single biggest story of twenty twenty six which could emerge is the fact that China's dumping is causing so much pain to so many countries around the world. What exactly is going on here, which is that China's always known to be an export powerhouse, but over the last decade or so, this is beginning to shift in
one very important way. In the past, yes, China would export a lot, and it would also increase prices over time last few years, what's begun to happen and this has become more acute in the last couple of years that China's export volumes have surged, but it is done so by cutting prices. So Chinese export prices are declining by twenty percent a year, whereas export volumes are surging by forty percent, and that is leading to a flood of Chinese goods around the world, which is hurting them
manufacturing sector in places from Europe to Southeast Asia. And I suspect that that backlash will really become more intense in twenty twenty six because a lot of these countries were so focused on fighting Trump's trade battle in twenty twenty five, but that seems to have peaked now I think the attention is going to turn to what China does, and I think that the backlash against this China dumping is going to get pretty intense this year.
Rushier Sharma with a Sirockefeller International celebrating his top ten trends for twenty twenty six, published of course by the Financial at Times. Sure you got a beautiful sentence here, and I just want to get to this for twenty six, for twenty seven, for twenty eight, until the money dries up? What's the Rushier Sharma timeline? Asking for a friend? Rush here is what is the Rushier Sharma X axis look like for quote until the dries up?
Well, I think that the world is very sensitive to higher interest rates. I know that some of the previous guests are forecasting lower interest rates this year, but I think that the real surprise could be that by the end of this year we get higher interest rates, particularly long term interest rates. And when interest rates go up, that's when money really starts to dry up.
So I think that what you're alluding to here, Tom is the fact that I wrote that.
We have some sort of an AI bubble, but the bubble can keep inflating until interest rates go up and money dries up. I think that that happens possibly by the end of the year, when you end up getting higher interest rates as inflation remains sticky, and the fact that we still have, you know, like a lot of this liquidity propping up financial assets. But the moment interest rates go up particually long term interest rates, that's when money dries up.
Don't go away. Because Paul Sweet's gonna save here? Did you save me from this?
I can save good time because he's got ten big themes for twenty twenty six, and number ten jumps out of me peak alcohol.
What's going on there?
Was shre Yeah.
You know, this is one of the things which surprised me too, which is the fact that when I looked at the latest Gallop survey of the posters asking Americans that how much are they drinking? You know that since they've been asking this question since I think nineteen thirty eight or something, the lowest share of Americans today are drinking alcohol than before, right, So, which is that what
you're seeing is that people's alcohol consumption is dropping. In places like UK even Russia, alcohol consumption is close to a record low.
So I think that that's what's really going.
On, which is that there's a lot of awareness about the negative consequences of alcohol. Even the old line, which is that a drink a day is good for you.
I think that that.
Myth has also been busted, and so a lot of young people in particular are turning off alcohol, and so therefore we see the.
Consequences of that. Then, even as global.
Stocks continue to rally, one of the worst performing subsectors in the world over the last few years have been alcohol stocks, and these include wineries, distilleries.
So you know, we've seen this across the.
Board, right, So there's a negative, you know, sort of attitude towards alcohol leading to lower consumption of alcohol. Some of it is getting cannibalized by cannabis as people switch to that. But I think that that's a small part of the story. The biggest story is that due to health awareness, people are turning off alcohol, just like they did with cigarettes before that.
We have Lisametery to help us with that.
Richard Sharma, my book of the year, What Went Wrong with Capitalism, can't say enough about it, but stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance Podcast just live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
John Bilton had a global multi asset strategy at JP Morgan Asset Management.
We're thrilled you could be with us. Thank you this morning.
You nail the risk of disinflation and outright deflation. There is a raging battle now in the zeitgeist over if this disinflation is just lowering inflation or does it lead to.
Dampened output in Europe and around the world. Does Kasmin and Feroli do they see dampened output from the disinflation you talk about.
Well, I think what it does is having seen the ECB firmly on Holt probably for most of the years, some manly, some of the dates we've seen in the past couple of days suggests that just maybe, Jess, maybe the ECB might have a Midsummer gift for folks.
Adding Europe, they've done a lot.
To bring to bring rates down to what they are effectively close to zero in real terms. That's important. Remember this is the biggest consumer block on the world. I apologies to American consumers. European consumer block is twice as big. They just don't spend, they save, So it's really important how it feeds through the ECB policy. The European households are saving fifteen point three percent of their income each year.
That's the same thing docimal point, we're saving one point five exactly.
So the point is, but we just need a little bit of impetus to set some spending in train.
There Europe can look pretty good.
So these these disinflationary forces give the ECB a lot of wiggle room. But remember there's a lot of capex coming as well through into Europe over the course of twenty six, twenty seven, twenty eight under the Made for Germany plan, but also on some of the defense spending et cetera that's yet to hit the system. So do we see a return to the bad old days of disinflation even flirting with deflation? Probably not, because this is
a different picture. We've got fiscal as well as monetary right now.
We had use markets equitym marks perform very well in twenty twenty five, but rest of the world did a lot better. So what are we doing in twenty six to expect than our performance to continue.
So it's kind of an interesting one.
There's been some real changes in terms of what's driven the equity markets within If we look at the actual indices themselves in local currency terms, they're kind of level pegging if we take develop markets versus us later on the currency. And of course this has been a great period. If you've been an American investor buying European, Eurozone, UK, Swiss, you've done pretty well because of the currency move as well. We think the currency's got a bit further to go,
but the balance is changing. The differential over the long term in terms of what we see as dollar weakening against the euro, maybe about fifty sixty basis points a year. It could be two percent against the end. It could be two point two percent on average over the next ten years against the ranimby in the end. So it's really the Asian markets we're beginning to get that potential for that currency pickup.
This is what, John, I'm so happy you're here for this red sticky. This is what when we do a fancy headline Bloomberg, we color it red. Sweety demands ad Alaska Air is buying one hundred and ten Boeing aircraft in global growth push. We my currency is gloom. People don't tune in, they don't listen, they don't watch on YouTube unless Lisa, am I right, Unless we're worried.
What about our children? Yes, we're worried. We're worried.
Here's Alaska Air betting on global growth. I mean, what does your bank see of the optimists just saying no, we're not going to worry about this, We're not going to worry about disinflation. Let's go what's the John built and let's go meet right now?
Well, I think par it back to pay back to basic fundamentals. If we look from nineteen seventy three to present day, we can count the NBA recessions. We look at the economic data today, it is not pointing to a recession in the US, and we've got fiscal stimulus and monetary support in the rest of the world. Take a look at S and P total returns over those periods.
In a non.
Recession year, nine times out of ten, the S and
P five hundred gives a positive total return. So the idea that one would better against the economic momentum today when you've got everything aligned, fiscal stimulus, regulatory easing, the glagg defect of monetary stimulus all coming together in twenty twenty six, I would be betting on equity markets continuing to climb a wall of worry and some of the investments spending from companies needing to play catch up in order to stay relevant in terms of a growing global economy.
Allocations, stocks, barns, alternatives, thirty thousand foot view. Where's JP Morgan asset management these days?
So we're a little bit overweight equity.
We're conscious that valuations are kind of peaky, but at the same time we think fundamentals are good. We think broadening out is important. We're not talking about sort of going and playing around in small caps here. We're talking broadening out globally across some of those bigger, you know, recipients of that capital spending. So broadening out overweight equity. We like Hong Kong because of the Asia play. We like the UK because we've gone continuing to see some
decent yield there. We like Japan in terms of bonds. You know, we're looking for further steepening in curves. They're better likely to cut rates. We think one more time this year, and then in terms of the other markets, we're getting a little bit tight on credit, so we think it's probably equity over credit as we move into the ladder stage.
If you moved to New York or are you based in London?
So I'm based in London.
Can we take a note? Can you get mister Damon on the phone? We need God to come over there, over there.
And there are slights both ways.
Thank you so much for joining us. Thanks with the JP morgan a Bank.
Stay with those More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
This is the most important conversation of the day because you're not paying attention to your four oh one k cam. Dawson is I haven't said this in ages OMG rotation. What is the character of the rotation going on in the markets right now?
I think we have to appreciate it.
At the start of the year, we typically do see some of this last shall be first kind of rotation where the names that had lagged start to lead, at least for a short period of time. What's interesting is that actually started back in November. The rotation really kicked off in November, because that's when we saw the blowoff top and some growth shares. They'se traded to an eighty five percent premium to value at the peak in October, so there was a lot of room for valuations to
come in. And I think the character of this rotation has been one that's been very pro cyclical. If you look at what's leading, its things like banks, and you have industrials doing better, industrial commodities doing better. So it appears that this pro cyclical rotation is coming with a narrative of global reacceleration, which I think remains to be seen if the data actually supports that.
Boy, I'm thinking about my inbox over the last i don't know, six weeks from the cell side, and their twenty six outlooks almost universally positive bullish ten percent, twelve percent, fifteen percent expectations for SMP stock performance in twenty twenty six.
That makes me nervous?
Does that make you nervous at all?
There's not a single strategist who's expecting a down year in twenty twenty six.
No, do you expect I gotta make some news this Well, Look, we think that we'll have volatility along the way, but that there's still room for the markets to press higher through the end of the year.
But here the key point is that in the fourth year of the bull market. We've had twenty three bull markets that have been three years over the last fifty years fifty sixty years or so, and the conclusion is about fifty percent of the time they're able to get to that fourth year of positive returns. So we have a fifty to fifty chance of being able to deliver positive returns in twenty twenty six.
Earnings, I guess that's the good news for bulls out there because of the expectations are in twenty twenty six, again double digit growth in earning twelve thirteen percent growth in earnings. Is that enough to support this valuation this market?
That has been what has supported the valuation through twenty twenty five, the fact that you saw the vast majority of returns in twenty five driven by earnings growth, and that's expected to continue in twenty six. So if we break down the twenty twenty six earnings number, it's three hundred and ten dollars a share. That implies an acceleration in the top line. That's interesting because if you look at consensus forecasts for GDP, consensus is expecting a deceleration
in nominal GDP growth. Remember, sales are nominal. The other important point is that you have over two hundred basis points of Martian expansion that's already been baked into current forecasts. So we think if we're if we're thinking about what drive drive markets over the course of the next couple of months, it's whether or not you take the over under on that earnings number.
Karon Dawson with New ed We we welcome all of you across the nation, including her Florida.
We're doing Florida.
Music today for Cameron Dawson. Do you know who Leonards Skinner is?
Oh?
I was thinking you're gonna go with Tom Petty, but yeah.
Yeah, I just thought you were too young to know Leonard Skinner.
Yeah, yes, folks, we're gonna play free Bird.
Get over it.
I'm going to have a simple man.
Yes, yeah, okay.
I look Kim Dawson at this equity market I don't see the exuberants out there. I know there's Robin out exuberants in. You know, Lisa's kids are traded on the couch, But it's not like a three year double digit OMG. Stocks are going up field, is it?
And to support your notion of there being a lack of exuberance, you look at the Deutsche Bank and boldmin SAX positioning indicators, and they're showing that institutions are effectively neutral.
You cannot say that about households.
Though retail investors are max overweight, max all in. You've seen huge growth in marginal imbalances. AAI positioning is at seventy one point two percent.
Wow, I didn't know that.
That's that's back to the peak from twenty eighteen and twenty twenty one.
So households are all in.
So institutions under own NVIDIA.
Likely yes, simply because they have positioning size caps.
At the end of the day, when you have a.
Market that's so very concentrated, and you have certain mutual funds that cannot own positions as large as what some of these names are, by definition, they're institutionally forced to being underweight.
Some of these leaders.
Fixed income is a great performer in twenty twenty five. What do you think about the bomb market in twenty tins.
So, because we're starting this year at lower yields, we're actually in our strategic tactical acid allocations, I should say, actually taking some money out of fixed income and allocating into other areas somebody, because you're not getting as much of a return as you were at the beginning of the year, given yields are lower and the strong performance that we've had this year, so we don't think that there's a lot of room for spreads to compress that
much further. In high yield and investment grade, they're pretty darn tight. But note that they are thirty basis points wider today than they were at the start of twenty five. So really you can, in fact squeeze blood from a stone.
Cameron Dawson with us a nice lengthy interview. We're going to continue with this, Dawson. Kevin Gordon came in yesterday. Can we take a forty five second short biscuit break. Kevin Gordon came in yesterday with schwab and he brought in pumpkin honey cookie and it's all in Korean.
I can't understand it. Let's hand these these around control them, dat on them. They were looking over them a full one, you know, Lisa he our tin director turned around.
I'm going to pass it down.
It's it's just Kevin and Lazie Zanders. Thank you so much. That was really easy. We learned a lot from them. Kim Dawson at Charles Schwaz about.
This retail cooking, what do you tell retail in a famed Cam Dawson.
Seminar, Well, I think that that the key message is when we think about volatility in markets and as being an individual investor, the most important thing is to make sure that you were not positioned in a way that when volatility eventually does strike, that you were forced to sell positions that you shouldn't. That's the only way to
destroy value over the long run. So what that means is not being over concentrated to certain factors, not having too much leverage, and making sure that the overall allocation is not so extended that if you have the quick he needs during a time out of an inevitable volatility, you don't have to sell your equities.
What I mean, one of the things that investors I'm talking about is we need this market the broaden out. Do we need this market the broaden out, or can we just kind of live the way we've been living in our list of years.
Well, you do in the sense that the MAG seven is seeing a deceleration in earnings growth. So we've been in a super normal earnings growth period the last three years. MAG seven has delivered two hundred percent earnings growth. That compares to the equal Weight at just eighteen percent.
Stop this is too important, Paul Brilliant. We got double digit earnings growth coming, but it's all skewed towards twenty five stocks, right.
Well, see, consensus is expecting that to broaden out. You have this expectation by consensus that equal Weight is going to start to catch up, not quite to the point of MAG seven, but close that gap. But the thing is people were expecting that at the beginning of twenty five and guess what happened. Mag seven surprise of the upside, equal Weight surprise to the downside.
Kevin Gordon called in, Tom, how is it? And I said, it's a rice cookie. It's very Korean cookie. Dawson on the Cosby and buying Asia this year, do you buy internationals.
Do you buy Korean cookies?
Well, don't forget that Korean and the Korean Index, the COSPY is about thirty seven percent made up of just Samsung and sk Hignex, So you when you buy the cospy, you were buying that. But also remember there's a lot of casino capitalism and speculation that happens in the Korean Index, so it has very pronounced boom bus cycles.
So know that you're playing with fire.
Live by the sword, die by the sword kind of of mentality when it comes to trading in those areas.
You know that twenty four years ago when we were starting to act, that was one of the names on the list of the show Casino capitalism.
Really Yeah, we tried it.
We tried and it ended up on the cutting room floor.
Yeah we Ken Dawson, thank you so much for do it well. Seriously, stay with us. More from Bloomberg Surveys coming up after this.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
We're their newspapers, lisamit to.
Okay, this one is right up your alley because're away talking about LinkedIn, right, Okay. So apparently more people are logging onto LinkedIn, and it's not just for looking for a job. So if you look at the numbers, so revenue Microsoft phone site jumped to seventeen billion and twenty twenty five from seven billion, and twenty twenty membership doubled to one point three billion. So what the Wall Street Journal did is they spoke with a couple of people.
They said that the reason why is because people like the fact that you have to put your real name on the site.
Okay.
It says it helps with toxicity, misinformation scams, things like that, and LinkedIn is saying it's actually helping because people, you know, are more careful with what they post, you know, because a recruiter could be looking or you know, things like that. They're smarter conversations on LinkedIn.
That's what they're saying.
Major shutout.
Shaali Basek said to me like three four years ago, he's stupid, get back on LinkedIn.
She was right.
Dan Roth saved LinkedIn for Microsoft, and it's just as you describe, Lisa, the quality I can't say enough about subscribing to LinkedIn.
Not for Tom Keene, not even for Lisa Mantay or Paul Sweeney, for our guests like Tina Fordham. They're all out there, smart smart.
Smart, I do, and I just feel for me personally, I feel a more of a trust issue, like I trust things better on LinkedIn.
Major Dan Roth, who did that for Microsoft? What do you got next?
Okay?
This is an interesting question that the journal asked, what happened to happy hour?
Okay?
Because people are.
Interesting for me or for Paul, people are drinking less.
Companies are kind of reeling in those fun budgets, you know, the epic holiday parties things like that. I remember the time and the boss would come to the bar and just drop down the corporate car.
You know you do that. And I remember that.
Sparta, could we get Rotto keeper of the Ax to drop the corporate car?
Happening?
Not happening anymore.
But you know, people working from home and then those people who do go to the office, they want to be home early, like you know, by six in bed early. That's the new generation. They have to get their full eight you know, nine hours sleep. So it's a different kind and what people are saying is that they're missing out on those opportunities to schmooz with the boss.
Or this is how it worked on Pain Webber in the eighties. Imply our equity training desk market closes at four four fifteen hurlies in forty eighth and six, not.
Every day, every day, four days a week.
And you get you know, got a cocktail too. Then you go to the train and that's how you roll. But I mean, or you stayed later.
But I remember the train cars out the Gardens City and Londer Island as well.
It's cars, you're gone.
And the key thing Paul said is you stop working three thirty four, four fifteen or so.
Now everybody's ordered on pizza and working till seven.
And then I went into investment banking and that stuff. That's yeah, shoulder state on the training desk.
One more squeeze then to say.
Okay, this one, I'll go to sports.
Okay.
So the Blue Jay shortstop Bobashet, he's a free agent, right, Okay, So he's getting interest from a lot of teams, including the Yankees. I'm just saying, but a local steakhouse is actually making him an offer to stay in Toronto. They're offering free steak for life. Oh okay, that's a good cell. That's a really good set.
It's it's animal.
It's a high end steakhouse in downtown Toronto. He said it's one of his favorites, and they said, yep, no negotiations, no fine print, just reserve a table and they will give him free steak for life.
He's the kind of player of his culture and character every day.
Yep.
I mean, he's great, but it's it's about the attitude as well.
I love it.
I love that he's the way she rolls and he thank you the newspapers.
This is the Bloomberg Surveillance podcast, available on Apple, Spot, of and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal