Surveillance: BOE Hikes, Forecasts Economic Misery

over Namura Jordan. Your reaction to this decision by the Bay a week, Well, John, it's the simple case that this wasn't a big surprise from the bank. Think we were expecting around fifty basis points. That's what we got today conversations with clients as well. Fifty basis points from the bank again is probably the last fifty basis points,

the first and the last since they became independence. Probably As for us, the view is that the situation in the energy market will decimate the incomes of UK workers, the consumer confidences going to continue to fall, consumts going to continue slow, and the Bank of Englian is going

to potentially revive down their inflation forecast. So the last rate hike of this cycle is probably going to be November, is the view from us, and that means it's very unclear to me why today the banking and doing fifty is a reason to buy the pattern that if they did seventy five, you would have seen selling head higher. But John, the problem for markets is we're just not

used to trading seventies styles stamulation. Tom was mentioning they're the thirteen percent inflation really decimating people's ability to spend. The Bank of England will reflecting this. They've already put in their forecast. Today we saw they think the price cap goes three thousand, five hundred in October. That's about right. It's going up again in January to three thousand, eight

hundred pounds per year before the average household. This is a massive amount of money coming out the system just spent on energy during I think very much different than the Fed, where we have all the different Fed presidents, including Kansas City, where we'll visit a jective, Paul. We perceived the Bank of England as the city and maybe

London as well. What does thirteen percent inflation Due to the Bank of England's relationship with the go to the Premier League this weekend, to Liverpool, to Leicester to Newcastle. What does the BOE relationship with the inflation the North will face. Indeed, you mentioned Tommy, haven't mentioned past Harrods, So one day me and John will have to take to our hometown north of Birmingham and certain Coldfield it will be felt a look in the north. Were seeing

lots of strikes being held around the UK. I was listening to one of the NHS union representatives just earlier this weekend. The pay rises they're being offered after inflation adjusted roughly ten percent real pay cut is essentially like asking workers to do a whole month of the year working for free or losing all of their statutory holidays, so that the impact would be we're gonna have more

labor market strikes. This will potentially see wages going so it puts the banking in that really strange place that they're raising rates. The consumer is being squeezed. That does lower their inflation forecast perhaps ahead, but if we do get a wage price spiral, this is very nineteen seventies like, so they're gonna be keeping an eye on that and the way the banking looks at it in the north.

They used to Bank of England agents summary. We've only just got it now, so I'll need to look for those details that came out at the same time as this meeting. But they do get a holistic picture of the rest of the country through the agents and they will be seeing this this story that I've just laid

out playing out around the country. Jordan, I want to take a little deeper into your idea that November will be the last rate hike, will be the end the rate hiking cycle of the Bank of England, raising questions about the front loading of monetary policy and monetary tightening that has been a big discussion. We have the Bank of England warning of a long recession. At what point does that pause in rate hikes lead to rate cuts?

In your view, it could happen quite quickly. The Bank of Thing was one of the first major center banks to rates rates. They started December last year whilst everyone was still talking about transitory in on the crop. So when the banking kick things off in December last year gives them sort of the ability to end their rate hiking cycle earlier than most and also introduce the idea of cuts, so we're looking for May cuts from the Bank of England. That's sort of timing and why so

inflation will still be higher than two percent. I actually think the risk reward is inflation doesn't fall down to two percent as quickly as the markets pricing, but the center banks will react to the situation in credit markets. If you look at the crossover spread, to look at the ECB systemic risk, whatever you want to look at, the credit stress in the market is roughly around the same levels as the worst moments in the coronavirus panic

of March. I suspect the energy prices ten times higher than they were on average in Germany will knock out the business models of many manufacturers. We're gonna see credit stress leads to hire defaults, lead to unemployment rising, and that's why in Q form Q one the story will change for central banks. Even though we'll have high inflation, there could be a dobbish moment. Joldan's South Sterling still

the trade for you. Indeed, I think we've had a big move high up to level not very fun for me holding a short from about that period, but the trend is lower in Starling. It has the same problems as Europe when it comes to this energy crisis. It's bank central bank has just done fifty basis points. Look back to the ECB meeting they did fifty basis points.

What did the euro do nothing? Just because central banks are doing these bigger rate hikes, not enough to defend their currency against what's a big terms of trade shock that the pounds should essentially be trading towards one fifteen down to one ten just based on terms of trade alone. The price of the UK's exports have fallen, was the price of UK's imports of skyrocketed. The UK needs a

weaker currency to help is exchange rate ugly. Jordan, just quickly, can you imagine if the Fed forecast the recession like this one, the starts in four q and runs through the whole of next year. Could you see them emtive forecasting? Could you forecasting at the mirror? So I just I can see it happening, but they'll be a bit slower than us to get that. Let's get right to at our conversation of the day on the United Kingdom with

David blanche Flower, professor of Economics of Dharmouth College. He darkened the door at the Bank of England a number of years ago. We're thrilled he could join us today. Danny, you've gone through the details and you make it very clear that A ninety seven in a path to the Eisenhower deflation. The inflation panic is overwrought. This is a bank signaling a deflation or a substantial disinflation out to two thousand twenty four. What should be policy if we

model a future disinflation? Well, obviously this the story is the forecast of a recession six quarters of negative growth they're forecasting. But if you go to that, I think it's the chart one point four and what you see there is that there's a significant risk in four of deflation.

And that's the famous chart the Bank of England produces shows you eight hundred years of inflation, and the one thing that stands out from it is the big risk when you have high inflation is that you generate deflation. And so that's obviously the worry. I mean, the truth is Johnny's right there forecasting inflation pretty soon this year, but by this thing plummets, and I think the likelihood

is actually that this forecast is overly optimistic. I think the chances are the unemployment rate is going to rise by much more. Output is probably I mean it may not last for six quarters, but output probably is going to be weaker. Um and we're probably going to see the bank having to the u turn pretty fast. I mean, this is the devastating, terrible forecast. And sorry, last point.

I remember in two thousand, an age in August, so you know a number of reports ago and the big deal then was the UK was in recession and they didn't use the word recession. The word recession is all over this report. So this is this is devastating. But I think the argument the balance of risks is balance. Lisa just talked about it. Risks are actually very strongly to the downside to this. So so why they actually raised rates sort of unclear when you read the thing. Well, Danny,

let's talk about how original this moment truly is. And can you imagine a federal reserve forecasting of recession in the way that the Bank having it has done today? And why do you think that's the case. Well, I think I think that in some ways they are under huge political pressure to try and deal with the interest rate, with the inflation rates story, I mean, trust came out this morning and said the bank should have raised rates earlier and we're going to re look at the remits.

So I think the politics of it are pretty interesting. I mean, the fact that the word was meant, the word recession is in this report. It's I don't know if any other monetary policy report that has that word. As I said, go back to the August two thousand, they didn't even use the word recession when they were in recession. So so obviously some of the questions, you know, how how quickly does recession come and how quickly does the bad data come? But we've got bad p m

s this morning, sales of UK cars down. I mean, this baby could get bad pretty quickly. And I think, as you say, the likelihood of the FED doing this is is really pretty different. But I think this is pretty unique for the NPC. I've not seen anything like

this in all my time with them watching. When you're talking about the balance of risks and how it's incredibly skewed to the downside, how do them respond to Jordan Rochester's point about a wage spiral that you're actually starting to see in a very real way, and how this bank gets ahead of that to curtail that, even if it requires some sort of recession or significant downside in

the near term. Well, we've been talking about non existent wage spiral since two thousand and eight, which we haven't seen. I mean, we've seen some some attempt to try and keep up nominal wage growth, um that we've seen big falls in real wages. I think the idea of a wage price fire in the United States and in the UK is for the birds. I mean, we're seeing settlements around four percent, We're seeing public sector workers saying, you know, we we need to try and maintain our living standards.

The chance that any of this is driven by workers there demanding and getting higher wage increases, I see absolutely none of that. None of it in the United States, none of it in Europe, none of it in the UK. We're talking about inflation and workers asking for four percent pay raises. This is not none of this is driven by by wages. So I think that whole argument is

just nonsense. Danny. A lot of people are saying that right now this is the Bank of England front loading rate hikes, that they're going to start cutting rates or at least pausing the rate hikes later. This year than cutting next year, And that seems to be this belief with the Fed as well, that yes, there are some pretty significant rate hikes, but it is a front loading

to try to get ahead of the inflationary push. Why do you think that's a bad idea to see what you can do now and then wait and then see how it, however, trickles out. Lisa, that's I mean, it's a great point, but I mean I always had the view that you say, and what we need to do is get rates up to dry and cut them later from the recession that you've caused. So obviously that seems like a problem. I mean, the bigger issue in some sense least is that, yes, you've now got rates up.

You know we're talking to globally around two or something less in the Euro Area. The problem actually is, I think back to two thousand and eight you could we could cut from five five percent of a half or zero. The room for the central Bank to cut is limited. Um, it's going to fall on fiscal authorities. Look in the UK there's there's basically no Prime minister, there's no chancel

of the exchequer. People are talking about the plans that they might have but that but the pressure is going to come on a new chancellor and a new Prime minister pretty down quickly, and the markets are going to speak and they're going to say whether they whether they think this is appropriate or not. I mean, we don't even know who the channel that would be in September

when these bad data come in. So I agree with you, but it looks to me that you front load, you flunk, your front load interest rate rises for the recession that you worsened by doing it. So I think there was a significant argument today to actually sit pat and wait, because it's unclear that these rate rises are going to do anything to bring inflation down being caused by global oil prices. What it? What it? How is these interest rates actually gonna do anything other than tank the economy?

How do they actually bring prices down? And Baby is already admitted that basically it can't. So I think there was a strong argument to sit weight and watch. But the political argument was a very strong one because the Trust was threatening the remit of the banks and it should have raised rates earlier. Well, I'm not surprised you said that at the end there, Danny, that's for sure.

Danny plans fright. Danny always good to catch up. But we've gotten here is earnings, but nobody cares because when you do a transaction of this import and symbolism to Wall Street and frankly a recovering world from the pandemic. It is good to talk to Jim's alter he's co president Apollo Asset Management, and yeah, and earnings, but I'm gonna go beyond earnings, Jim to your new transaction acquiring the leasing efforts of the largest fleet of seven forties

sevens in the world. This is a cargo business, mostly of Atlas Air. How do you dive into such a troubled industry? Is covid Asia moving cargo? And say the opportunity is now well, good morning, thanks for having me on. You know that's a that's a classic Apollo transaction. We know the industry well, we've been around it for decades.

We've successfully navigated it. No pun intended in terms of variety of other investments in the space um and it's a classic opportunity for us to use our great industry skills, are our great capital formation skills, uh and do something we think has got a lot of fundamental value where purchase price manners. So uh, you know, a lot to

talk about a pile today. That's one transaction, um, But very very happy with what we've done in the in that situation, let's talk about the inflow is thirty six billion, I think thirteen billion after quarter end in a first close your next flagship p fun Just kinda through some of these numbers, Jimmys. You look at the opportunities in front of you. Where aren't they? What can you do

that the banks can't do that you're excited about. Well, listen, as you said, Johnan, it's a very foggy environment out there, a lot a lot of dispersion on views on where rates and other things are going. And that's when we do well. You know, record record f R re Ford for the quarter, record s R E. You know, capital formation, deployment, origination strong um. You know, for us, it was a great quarter in terms of you know, investor dialogue. As

you said, thirty six billion in the quarter. We closed thirteen billion on on our new flagship funten um. And for us, you know, we we are this is the kind of markets that we thrive. When others are a bit paralyzed or markets are closed, we bring our our flexible capital or permanent capital or ingenuity uh to transactions. And you know, I know you mentioned the the Atlas era, but for us New Fortress Energy was a great transaction

Air France, you know in No Fortress Energy. Basically they we've been to this company for a couple of years. We've been a financing partner. They put their liquid lergy products vehicles into a in j V. We provided the equity, but the bank market was shut. Typically most folks would have to put their pencil down. We we really marshaled our resources and raised the billion four financing to have

a successful transaction. So for us, these are the markets we thrive, uh, you know, firms doing extraordinary and hitting on all cylinders. Jim, you said that the markets are closed, and they were for the most part until last month where they reopened with a vengeance and you saw everybody fled back to the market, money pile into even the most speculative debt people basically sounding the all clear sign. What do you make of that and how do you

sort of adjust your view? And perhaps in May when you said that recession was one third to two thirds of your base case and you were talking about not taking that durational liquidity risk. Yeah, I think you've got to differentiate between a rally and credit and the markets

being open. The reality is, it's been well publicized that, uh, you know, a lot of financing commitments have been hung if you will, nowhere near what they were in oh A, probably eighty billion plus on minus versus the four But new financing commitments are very challenging to secure today. We're a leader in private credit. We extend credit, we borrow in those markets as well. But the reality is the markets, the I G markets open, but the lower quality high

your markets still very few transactions are getting done. Very few new commitments are being made on buyouts. So it's it's not as clear as you said. Again, please don't differentiate a railly and credit versus really an open, thriving financing market. And Jim, can I ask you what you think of that rallying credit though a hundred and forty basis points of spread tight and they on high yield in the last month alone, we've got just lining up

calling that wishful thinking. What do you call it? Well, it's interesting we we we typically when when when spreads go to six hundred, we usually have to buy signal for us. Historically, they were there for just a couple of a short period of time. As you said, they rally dramatically. It feels like the rally. You know, I would say they're on the richer side of fair value than they are the attractive side of fair value. But I think it's interesting to contrast that to the private

markets right now. You can you know, a year ago high old indexes were in the mid four's, maybe touching five. You can issue a be part of a senior club in private credit right now with spreads you know a lot of so for plus six fifty, which is basically almost touching nine and a half ten percent high quality, first lean position, top of the capital structure, thirty forty LTV. So that's an interesting market, and we're open. We've been

active h at Apollo and at mid cap. The the generic on the run high your market not particularly interesting, and I suspect you're right, um, you know, at least I mentioned I was of the view that you know, a recession was in the cards in twenty three. We still believe it will be. I don't think it's going to be a deep historical recession. Um, As we all know the numbers right now, you're having you know, negative GDP numbers with four thousand uh a new employment per month.

So it's not your follows recession by any means. It's a different kind of environment um. But you know, from our perspective, if you have the ability to navigate, it is quite interesting. As many are on pause, Jim, I got twenty seconds to squeeze this in. This is the question where the person behind your camera starts wiping a handset.

Don't answer it. You were considering how being needle Musk finance that Twitter bit, given how it's falling apart, Has that left a bit of taste in your mouth around doing business with him potentially in the future. Just yes or no your thoughts on it. We're we're a big player in the bubble financing markets. We we financed lots of folks, were very thoughtful about what we do uh and we got a long term craft record to prove

that out. We begin our jobs coverage now we do it with our great Michael McKee, And then we moved to Thomas Porcelli. Tom Porcelli's chief you US economists at RBC Capital Markets, and first came to my attention with absolutely brilliant study of the wage dynamics of the United States of America. Tom Porcelli, good morning. I want to talk to you about what we just heard from Professor Blanche Flower Dartmouth, where he said, basically, a linkage of

these tumultuous times indue wage growth is unfounded. Give us your update on America's wage growth in this nine percent inflation we're facing. I completely agree with his assessment. I think the people that are comparing today to the seventies slash eight ease, I think that they're doing us a disservice. I think that this probably has much more in common

with the forties than it does the seventies. UM. I don't think that this is some wage price spiral that that the FED is is trying to or can impact. UM And I think that those that effort will will bear very little fruit. UM. I think the FED is hiking pretty aggressively into an economy that's very clearly slowing down. UM.

I don't I don't know how that ends well. UM And I think, you know, if if their thought process is what we've got to really tamp down on on wage pressures, I don't know more you want to tamp down on those I mean in negative terms, excuse me,

in real terms, they're deeply in negative territory. I mean, I I always like sort of marvel at the idea that I think very few people appreciate that disposable personal income nominally UM in nominal terms from the beginning of the year to today is really up only modestly nominal. But in real terms you're deeply in negative. So that that whole I d I think is UM is sort

of foolish. And and I would say one last thing time and then I'll stop, you know this idea And and uh, Mike was talking about Mike McKee was talking about this a moment ago UM, and you know he's right. The FED keeps on sort of, you know, hanging their hat on the idea that there's you know, people can find a job really quick and etcetera. And make no mistake in certain industries that is still true. But UM, job openings or not the thing we're supposed to be

hanging our hat on. It's a massive lagging indicator. They fall in earnest in the midst of a recession. UM. In other words, they're free option for companies um. And we're already seeing them slow now in a in a more meaningful way. So you know, this idea and by the way, sorry, one last thing on that. UM. This this idea too, that there's you know, two job openings

for every person unemployed. That that is not correct. You have to look at people also that are not in the labor force that want a job, right, a completely separate metric. Um. And when you add that to the number of unemployed, what you actually see is that the ratio is actually one for one. And actually, just to be clear, it was one for one are to the most recent job openings number. Now it's less than that. So I have no sympathy for for that view in

any way. So Tom, translate that picture into what we're expecting tomorrow with the jobs report that we get out there in the anecdotal data that we're getting from a number of companies that they are starting to cut back workers. Yeah, Lisa, I think that's exactly right. I mean, you know again, uh, you know, I know you guys were talking about jobless claims.

What and what number starts to scare you. I don't know why you're not scared now, I mean it's you know, you don't have to wait for some magical to eighty or three hundred. I mean you're up from one hundred and sixty six thousand, right, that was the low that we hit in mid March, and so from that point to today we're now up fifty percent. Now, I know, the standard retort on that is, hey, you know, but

we're coming off a really low levels. Okay, you were coming off a really low levels in oh one two, I mean they're historically low then. Um, but hey, we managed to actually lose jobs in the unemployment one uprising, so that the level thing is not compelling. It's the move, right, it's the delta, um, and the delta is incredibly compelling. You're up fifty from the low. And sorry, just to

me be clear on that. So if you look back to every other every recession we went back to the recession that started in nine nine, if you look at every recession from the low into that recession, um, you're up about Um here we are up fifty. And yes, I know there's some seasonal thing. I get all of that, but even if you adjust for that, you're still up wildly.

I mean, this is it's not a good outcome. A lot of people would argue that you're coming from a point where everybody had been taken out of the workforce and then brought back in in this sort of artificial breach as a result of the pandemic and the global economy shutting down as we look forward, is your argument that the FED should look through this and stand pat not raise rates that much or at all, and sort of wait to see what happens, even in the face

of nine point one percent headline CP I I have a lot of sympathy for lifting rates. I think you know, look and you you will have heard me say this before. I mean, I think the FED was very very late to this. I me, I would argue that today we should be a hundred basis points higher because the FED was much more aggressive, you know, sort of late last year. Um. But so I do have a lot of sympathy for that.

I just think that we have to be careful. Um And and ask aloud, do you think that these interst rate hikes are actually going to scale back on inflation? I think inflation is going to slow organically. I know that's a it's a that's a tough pill to swallow for the FED, and I know they can't stand oddly buy up and wait for that to happen, so they have to keep on raising rates. I just think we have to be careful about the level of rates that we get to. UM. I don't know that we have

to get wildly into restrictive territory. I mean, look, let's be clear. You know, prior to things starting to term pretty squishy over the last few months, and the backdrop did not need UM any accommodation. I mean, we should have been at neutral a while ago. But I think now where in so many ways, I feel like we're

fighting yesterday's war on inflation. And moreover, I would add there's certain components of inflation that have been doing some pretty heavy lifting that the FED has zero ability to control UM. Whether that's food or energy, things that are obviously now receding to some extent. But I think about some of the inflation components over the last month or two,

like UH auto insurance or or our car repair. I know that might sound like small, these small little things they added like a tenth, right, they added a tenth or more UM to the headline, on to the month on month gain. UM. That's an enormous number that again, the FEED is no ability to control. People went out and bought a bunch of used cars. They are breaking down and they need more insurance. I mean, what does

what can the FED do about that? So I just think the FED has to be honest about the things that it can cannot control. Tell I want to finish out with this. The federal seven with FED funds pakes what does it pake for the team over Ambi's sake? Yeah, so we we think you get to the midpoint, it would be three three three point three sevent five. So basically they hyked over the balance of of this year. Um,

we think that that's uh reasonable still at this point. Um, you know, I know it's probably sort of in line with what the market is saying. I don't know if I like that or not. Um, but that's where we are right now. I tell myself, somebody catch up. Thank you, said some Plocenic Capital Markets. The signal from our antenna reached to Louisburg, Pennsylvania. Louisburg, PA. And long ago she used to listen to the garbage we do every it's our fault. You you were at Scenic Bucknell in school,

and you actually were listening to Bloomberg Radio. I was actually watching Bloomberg TV when I woke up in the morning because I couldn't read financial media, didn't understand economics. So you used to watch Bloomberg I did. I did, and so I learned a thing or two. Hopefully I'm not disappointing you now. And so it's our folcus, it's our faulty bassak here of course, looking at all of our banking work, it truly has a wonderful pulse on this island of Manhattan for all of you worldwide. How

nervous is it? What's the sweat factor this first week? I don't think people realize how deep some of the cuts can start to get because on one hand, yes, of course bonuses are going to be down this year, and many many businesses, so many businesses have stalled very dramatically. I p O S Spacks Remember Spack bankers were being hired left and right last year. Even debt underwriting has dramatically slowed down, and M and A has also slowed down.

So of course bonuses will be down. But the question now becomes job cuts because you have a lot of banks, like credit suites that are an enormous amount of pressure and they you know, they are scooped. This morning from Bloomberg was that they're discussing thousands of job cuts globally. But are you equating the challenges of American Wall Street

with the huge realities of Zurk. Yes, because Credit Sweet is a huge US bank as well, and not in wealth went management, but yes, in investment banking they were top ten. So I can get a seat at eleven fine down there at the back end of Madison Avenue. Listen. The interesting thing about this, too is every conversation we have on background with executives is yes, that normal attriction will probably come back at the end of the year, that five percent, calling that usual. The question this year

is that four or five become ten. That's a possibility if things continue to go south for the rest of the year, and it's a reality that. Remember, there's playing offense and there's playing defense. And if you're an investment bank, you're playing you're gonna want to play offense, and you're gonna want to prepare for a tough time. As I remember,

A good example of this is Morgan Stanley. Remember a couple of years ago they started cutting jobs before things got bad, so that they would have capital to deploy into markets, so that they would have the ability to hire in other areas if they needed to. People like

to get prepared. Only you were just sitting here in our Bloomberg, in our active studio, I'm gonna say, nine months ago, twelve months of recording about how these investment banks couldn't hire enough people, how they couldn't pay their junior people enough, raising their pay three or four times in the course of a year, which I've never seen before.

Now it's exactly opposite. I mean, it just kind of confirmed my BELI having worked on Wall Street for twenty five years and maybe one of the worst managed businesses. I don't know that it's worst managed. I think you have to prepare on Wall Street for it to be a volatile business, right are you lecturing? Mr Sweeney? Take I need some help here, because for a whole my whole career is just managing the bonus expectations, which Tom, You're right, they started in when you got back from

Labor Day. Your every conversation you had around the water cooler was about bonus bonus out of February and suggesting this year is going to start in, Well, let's go to what Paul was talking about, which is the junior bankers, and we said good morning to all of them. Are studying for cf A level four right now, no question about it. To review mortals used to get eighty and then they went to one hundred, and then there was

a salary war, right yes. And it's so funny. This is kind of like an insider baseball a thing going on, and we can get insider baseball. It's funny because last year Liquidity, a Meme company, had started to break a lot of that news about the junior banker salaries. They themselves hired somebody, so there are two employees for this company.

That employee now split off on his own. You're still seeing young people split off on their own, a lot of realities about not only the pay not being what they would have liked, but also the perks being taken

away post pandemic. And now when I speak to young people on Wall Street, not only are they complaining about the perks and the ability not to just kind of leave and join a Meme stock company, they also are complaining about the fact that they might need to choose a new career because the hiring classes from you know, analysts are not being promoted as quickly in terms, are not being hired as often already already because Paul, what what what Ernali does on stands the perks when you

and I started was if there were ten pizzas, you could get a piece of pepperoni, and that exactly. The pizzas came in around eight o'clock at night, and you're the anchoring here. People were in the pandemic and getting free lunch and dinner. And if they came in and now they are not, they were getting their ubers paid for. Now they are not. And so there's a lot of So what's the feeling as to I mean, now we've kind of got the markets rallying here over the last

month and a half or so. I'm wondering what the rhetoric is going to be from some of these Wall Street executives when they do speak, whether it's at a conference coming up here in the fall or some earnings. I mean, how dour can they be? We've kind of got the markets rallying off of this bottom here. Yeah, I sound like a total perma bear. However, you know it's called the house of someone's got to do it.

And if you look at credit employees, if they cut thousands of employees and get to what forty nine thousand, they still have are very large banks. And so the question is what kind of cuts are we really looking at these executives normal attrition? They got to go way past Yeah, I mean, actually will you could argue that. I mean, what we've seen, it seems like over the last decade plus is that the big US banks get stronger.

USUTA bank stutsa banks an there's I gotta get to sing because she is so up to speed on everything going on. We talked to Mr Zelter today at Apollo and they have done a transaction to acquire with the team one of the most romantic companies in the world, Atlas Cargo. Atlas is the largest owner of the Miracle other than the space program of my life, the Boeing seven. Paul and I watch Cathay Pacific come in from Anchorage to JFK, you know, on our iPhones and all that.

But that's an example Shenali about private enterprises falling into what used to be normal big company for bringing it up to because private credit markets, you know, if you think about it over at Carlisle, they're a m the assets under management and credit alone, where Apolo is the biggest, doubled in six months. So they went from seventies some billion to a hundred forties some billion within six months. Why are they boxing out the big firms from transactions

like buying Atlas? It's so simple big banks these days in credit markets, in private equity markets, they are subjected things like Vulcar. They are subject to other capital requirements. The FED has clamped down and so when the economic gets into environment gets tough. By the way, they have tons of leverage loans on their books right now in which they're taking you know, an estimated billion to two billion dollars with the losses. There's still losses. There a

brain drain from a given big bank. I'm gonna pick Bank of America over to people like Apollo big time. But I have to say, even on the buy side, there is some pressure private equity marks. In the second quarter we're down uh And so with the was a massive jargon what's a private equity mark? So when you're holding private companies there's usually magic involved where you say it's privately held, it's not publicly traded. We don't lose money because of that. But that's not true. And now

you're seeing that, and you see it. You know, look at the hedge funds. Tiger Global was a huge attractor of talent. Chase Coleman. Michael Barr walks in and she just she just knows to mention the Detroit Tigers. Tiger Okay, they're they're losing worse than the Detroit Tigers. We gotta leave it. Thank you for the brief. Here it's a September brief, folks in early Augustali bask This is the

Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best and economics, finance, invest and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom keane In. This is Bloomberg