Surveillance: Davos Day 2

any punitive tariffs through the end of the year. Now is the agreement lasting or merely delaying an inevitable conflict? While joining us now and delighted to say, is the French finance minister his he is is holding talks this afternoon also with Steve Nuchen and the o c D Secretary General. So Minister, thank you for joining us. How would you describe the current relationship between Europe, France specifically

and the US. I think that due to d for a good phone call between Prisident Trump and President mcn we are now in a good mood, a good mood for negotiating and try to find a compromise between the US and France, Between the US and Europe, I think that the choice is quite clear. Either we go the way of having many national taxes everywhere in the world,

especially in Europe. You already have the French national taxation on digital activities, but you also have the British, the Italian, Spanish, the Australian thinking about that possibility, or having also decided a national taxation. H you go the way of an

international solution. And I really think that this is in the interest of both the United States and Europe to pay the way for a compromise to decide about an international digital taxation by the end of twenty because it would be far more efficient and it would be fairer. But I mean, it's do you think you will get digital tax resolution and agreement whatever we call it this afternoon,

and will that avoid a trade war? Is it a you know, we either get an agreement or actually it's going to be a tough, tough environment between the EU and the US. We are working on an agreement with Stephen Menuchin. We have an excellent relationship with Stephen Menuchin, and I hope that we can get a compromise in in a few hours and turning into a trade war between the US and Europe would be foolish. It would be a stupidity, both from an economic and a political

point of view. So everyone is trying to make a move in the direction of the other for the sake of finding a compromise, working on an international solution and avoiding a trade war. Nobody wants a trade war between the US and Europe. Okay, But has France agreed to suspend digital tax until the end of the year. France has agreed on one single thing. We have a national taxation.

Under the national taxation on digital activities, all the companies, either the American but the European or the Chinese ones have to pre pay in April and in November. We are ready to postpone the pre payment of April and November till the end of the year with the view of finding an international solution. And either there is an international solution at the end of in that case we would get read of the national taxation and replaced the

national taxation by the international solution. The ministers is to avoid tariffs that President Trump has said he wouldn't pose on France and on Europe. And if it is, it is a message we're sending that actually tariffs work. The threat of tariffs from the U s work. It would be the case if we would have decided to withdraw all taxation, but we have not decided to withdraw all taxation.

We have just proposed not to have the pre payment of April, not to have the pre payment of November, and post owner all the payment till the end of December, with clearly the purpose of having an international solution by the end of twenty And you can see that this is a fair compromise. This is a move in the direction of the US concern and this paves the way

for a compromise at the o c D level. And if we are ready to go this way, we would have one single international taxation of all digital activities instead of having many national taxations all over the world. Minister, what will it take for the US to tax their companies, their tech companies fairly? But you know, this is one key point I want to make clear to our American friends that the national French taxation is not a discriminatory one. It's not against the US companies. It's a taxation on

digital activities. Because the digital companies are making huge profits and paying less TA. Nobody can accept that. But you have in the scope of the French taxation, American companies, European ones and Chinese ones. This is not a discriminary option to all countries in Europe need to spend more fiscally to get us out of this growth but slow growth that we're seeing for the trend to really take out slow glow, slow growth and the slowdown in the

Eurozona is a failure for all of us. Nobody can be satisfied with a nerverwage level of growth of around one one point two. This is not enough. It is not enough to fund the fight against climate change. This is not enough to ensure prosperity for our citizens and to create new jobs. So once again I'm calling to support the monetary policy by a more ambitious fiscal policy in all the countries that do have the fiscal space

to do so. This is the case for Germany, and I've been discussing the point with my friend or have shorts, the German finance minister many times. We have the next tent relationship. But on this very specific point, I'm just asking Germany to spend more public money because they do have the fiscal space. When France is taking very difficult decisions to improve its economic situation and to improve its economic model. I think that's also a fair and balanced dealer.

On the one hand, those who do have the fiscal space should invest more, and France that have that has to introduce strong reforms, will continue to introduce very strong reforms. But do you believe Germany will do so. When you speak to German officials, they say, well, we're already doing a lot in green barns, so they feel at this point they've done enough. I fully recognize that they have done more, and I take that into account. Of course,

this is the truth. The German government has decided to spend some more money and deeply convinced that they can do more and that it would be better for growth in Germany and growth within the Eurozone. When I'm talking to the CEOs of German companies, I think that the CEOs of German companies, many of them are waiting also for more investments from the German government. Well, when you look at Europe and France, a lot of international investors

look at the strikes that have been going on. Once the pension reform is actually dealt with, what comes next, and know you're worried that actually frances is not ready to be fully reformed. I'm not true. I think that we are on the right track. Of course, we are facing difficulties, but we are facing difficulties because we are introducing strong reforms. We have already we formed the taxation system in France with a total of the whole of the French taxation system for the sake of having more

money for innovation and investments. We have also introduced a very important reform on the labor market, and now this is time to have a full of a whole and we foundation of the French pension system, which is based on solidarity. We will stick to that reform and stick to that willingness, because this is a matter of justice. You know, in our reform, all the people that are less paid will have better pensions, and that's exactly the

purpose of this reform. We are facing social difficulties, we are facing strikes, but you know, we will not spare efforts to convince the French people that this reform is a fair one and a necessary one. Can France benefit from Brexit? Have you seen? You know an attraction of talent to Paris and else west of all fronts will benefit and is already benefiting from its reforms. When you're looking at the situation, we have one of the best level of growth within the yours on one point three.

This is not enough, but we are in the right direction. We are in jobs. This is also a very good result coming from the decisions taken by President Macon and taken by the government. As far as the Brexity is concerned, we want to keep a very strong and positive political relationship with the UK. I deeply regret the decision taken by the UK to go out of the EU, but on one very specific point, which is finance or strategic purpose is to become within the euro Zone the first

financial center. We want to be very attractive. And when you're looking at the very last decision of many important banks like Jippy Morgan, the fact that they're putting some new jobs four hundred fifty for Gippy Morgan in Paris is very good news for France. But what if the UK don't follow the European regulation and you know we're going to start into this debate, but what if you if you have huge competition Course Wolls, and I've been

explaining that to the Chancellor of the Exchequare. We have once again a very good relationship. We want to be in a positive matter of the future between the UK and Phone, the UK and Europe. But everybody can understand that's the holds of the Single Market will remain the holds of the Single Market and we do not want to take any kind of decision that might jibiodize or weaken the rules of the Single market. Minister, thanks so much for your very thoughtful analysis on some of these

points were in finance, Mr Bruno. It has become an annual visitor Davos, and of course you're doing this to the President. Scheduled to have a press conference here, I'm gonna say forty five minutes, maybe a little bit longer than that. Scheduled to leave here in the New York six o'clock hour, but I'm told that may be delayed because the lane child has to get from our set back. To be sure. The President cats on Air Force one with Grace Secretary. Thank you so that you for joining

us again to be here. We have a three hour conversation with you that we're going to cram into a generous two blocks as well. I do want to speak on your Taiwan. You are the great voice of the Thai when he's in America. I want to go right now with Viviana just mentioning Boeing to the reality I and all Americans saw. This is the reality. Major US newspaper, small little article I'm going to pick on American airlines make at the airline wrong. The stewardess is a flight attendance?

Are afraid to get on a seven thirty seven Max? Did blowing? Did bowing blow it? Because they didn't realize dat emotion in that newspaper. Our concern at the Department of Transportation is always safety. Safety is number one. So when this seven thirties seven Max plane was grounded on March uh, the f a A is a data based organization, and their data showed that it as necessary to ground

that plane. To restore ground in ungrounding rights to this plane requires a great deal of preparation for us at the Department of Transportation and at the f a A. There's no timetable. The first and foremost concern always is safety. And I'll explain why because they're too What you mentioned is very important. If the consuming public, if the passenger it's there, yeah, does not have confidence in this plane,

they will not go all your conversation. Let me just finished, continued, No, let me this is important because we need to This needs to be a collaborative effort. We are working with international aviation authorities. They need to work with us. We need to work with them because if other aviation authorities don't have the confidence and don't allow the bowing seven seven fly, then we cannot fly. Boeing cannot bowing amount of Secretary, did Boeing misjudge the American public? I think

it's always always important to understand your customer. And so again I'm just gonna say, from our point of view, safety is number one. There's no timetable. We want this plane to be safe, and the issue here is safety. Secretary. I mean, we have this bizarre situation where we have the f A A saying that actually the plane will be ready to fly, and we have no The f A has never said that. Now, the f A has never said that. We have a new f A administrator.

He's just come on board in August twelve of this year. He's a very experienced pilot and he ran aviation operations for major airline. So you're right, let me rephrase it. So their countries that came out and saying even if the f a A A lets this plane fly, they may not follow suit. We understand that which has lost credibility I had other regulators, I hope not. We work. The f a A works very, very hard to still remain

the gold standard of aviation safety. You know, the FAA has traditioned been a leader and in fact, it through its practices, lifted up the record and the standard for aviation safety throughout the world. So they are very cognizant of their leadership role. And we want to work. We meaning the U. S. Department of Transportation and the f a A, want to work with our international partners because

their trust, their confidence is very critical. Secretary, Has the FAA become too differential, too many I don't think so. I don't think so. I think if you look at the raft of emails that have come out, which are actually quite disturbing, quite uncomplimentary, Yes, they show a derisive factor disdaining for the regulators, which I think is a problem.

And then I don't want to talk about the dinner table the Senate Majority leader, but I do want to speak ab what you, as a Washington pro are hearing from our legislators about giving up the great American franchise of engineering, which is the bowing of Seattle, whole debate whether they should have moved to Chicago. Are we at risk of sacrificing engineering trust to air Bus? Absolutely not. I think most airline airliners would like to have more

than one airline manufacturer number one, number two. Uh. You know, Airbus has a full backlog of orders. If you wanted to order a plane today, you would have to wait four years, and so the backlock is quite extensive. So I think we're not at that stage. We are working with the international aviation authorities and the communities, we know their opinions being a lot. I want Secretary Child to be sure that we never get rid of the Boeing seven seven. That's her major. Don't get rid of the

glorious old planes. But how close is the max? You know, when is it going to be cleared to flag? And how close are we to that? Well, again, we're not making any predictions. We're not having any timetables because again, to us, safety is number one, and the families of those who loved lost loved ones they deserve that. Have you spoken to Elon Musk about his projects. When it comes to Hyperlie, I've talked to Elon mus about many other projects. He's very interesting. So he's talked about like

flying cars, for example. I've talked to him about that. You know, he is so prescient and so far sided. He's talking about a vision that I couldn't even imagine. When we're done with the interim, guy will come back to you. Let's very important. I can talk more about

that if you want. We're gonna come back here and talk about so many other important topics including tell me what we're gonna do is go to break and I do want to come back to you and talk about transportation and particularly railroads, and also of course what we see in China. The Secretary Child, thank you so much for joining us here at Thank you to it is all very wonderful John Para and Tom Keenan. We're here

with David Rubinstein as well. Much much going on. We welcome all eve this morning, of course recovering from a length to presidential press conference. A lot of different topics here. We'll touch on that with David Rubenstein and the Carlisle Group as well, co founder and co chairman, but far more media tycoon with this peer to peer which has been on Bloomberg here it's a great success, is well, this is an interesting valley. Who in the valley is on the Rubinstein wish list of peer to peer? And

so I know you want to talk to Gretta. Everybody else does well, but who's the dream interview for Rubinstein in Happy Valley? I've never interviewed you. I think that would that would be it could be a change and I'd like to interview you. So, um, you know have some questions. Uh so does some other people you know the line? So uh, there are a lot of interesting CEOs and heads of state here. Some of them do interviews, some don't do interviews. So uh, you know we've had

I think here there's several British Prime ministers. Boris Johnson's here, Um, I think THREESA A is here, Tony Blair is here, Uh, David Cameron's here. So it'd be interesting to get all four of them on a panel, wouldn't I want to talk about a panel I would have with you right now, maybe a few others within the Carlisle world. And that is this strange words. Scale. Where is scale going within our transactions and our combinations. Well, scale has UH. For

a while. Before the Great Recession buy out, the sizes were fairly big, and some of those didn't work out. The biggest ones that we went to the recession, and people have been nervous about doing too large a pure buyout. Though the biggest buyouts have ever done, some of them have worked out. Mike saw Michael Dwll he's here and he did maybe the biggest buyout, maybe one of the most successful ever. But generally buyouts have been recent years and the big ones have been in the five to

ten billion dollar range. There have been very few fifteen twenty billion dollar one. Some are now reported to be being considered. But uh, it's harder to do a billion dollar buyout. And it talked to me about how much things have changed over the last several decades and got back to when you started and what it was like. There's more firms with more money doing more of the

things that you've always been doing. Does that make it harder? Well, if there's a bifurcation there when I started, Carl twovate equi firms in the world. Now they're eight thousand, five hundred, but there are three or four that are really at the very largest size, and there maybe another ten that can do very large deals as well, and so those are seeing the biggest deals and getting the best financing

and so forth. So it's different. The biggest changes since I started Carlisle with others is one, they're more investors interested in this retail as well as sovereign wealth funds, which didn't really exist that much before. Secondly, the large private equity firms are now publicly traded and so they have their own um public uh you know. Following you also see the large private infirms doing more than private equity, private credit, infrastructure, real estate, so they're diversified a fair

a bit. And those are some of the biggest changes. But also rates of return have come down. It used to be in private equity people want to net internal rates return. Today if you can get a net internal rates return of for Adam, people were happy with that because interest rates are so low. I'm told now that rising capital is the easy part. Deploying it is a whole lot tougher. Is that the right way thinking about

things at the moment. Well, the people that have to raise the money don't say it's easy, but it's not as hard as it has been historically. Because private equity has now been accepted as a real asset, avansis not alternative.

It's mainstream in many ways. And also the sovereign wealth funds and the US public pension must have so much money and they've made so much money on public equity returns and also private equity returns, they have to deploy it, and they're giving it to private equity firms in part because you see it as a hedge against the recession if it ever happens. People think that private firms can work through the recession the way they did last time reasonably. Well,

what is your counsel to the successful tech firms? You're wonderful interview a few years ago with Jeff Bezos and others. They have an immense challenge of ample free cash flow, above average revenue growth. As a general statement as well, what is the Rubens thing to do list for them strategically to get out ten years? Well, it's amazing what the tech companies have done. Um, just take Tim Cook when he took over, was about a three billion dollar

market cap. It's now about one point three trillion, more or less. I was adding a hundred billion a week Sadella when he took over, maybe market cap at three fifty to four hundred billion, now about one point two or three trillion UM. These sizes are just staggering. And uh of Herbstein, the famous member of the US Council Economic Advisor under President Nixon one, said if something can't keep going on forever, it won't. So at some point, at some point, I don't know when, h it probably

can't keep going on at this size. Generally, when you have something something this big, and you have it this is profitable, usually the US government comes along and says, hey, you're having too much fun here. We need to do something about that. But that doesn't seem to be happening right now. Let's talk about what has happened over the last year. Some red flags coming out of private markets as they looked become public, and the biggest one was

way work lessons learned from last year? What aren't they? Well? I think when you have a fund that is very very very big UM like the Soft Bank Fund, the Vision Fund UM, you have to deploy large amounts of capital and you can probably put too much money into one deal. And I think in that particular case it appears that a lot of money was put in at probably a higher valuation should be the case. And then there were other concerns as well about corporate governance and

so forth. But you know, they're mistakes that are made in every generation. That this wasn't the first time this kind of thing has ever happened. It won't be the last. But I think a lot of people have learned something from that deal. David Ruinstein, you are a great student of this nation's history. We had an extraordinary press conference in the president United States today. You've contributed to Ford's Theater, to the wonderful museum next to it. You've greatly contributed

to our Library of Congress as well. What is your study about this nation moves forward from the process of impeachment. Well, it's a very strange situation if you were to come into this planet from Mars and say, or from England, or from England or any place, and say you have a president of the United States who's being impeached, only the third president who's been impeached, and a trial is going on in the Senate. Yet the economy is going

along very well. The business community seems to be not affected by the what's going on in the Senate right now. I was at the breakfast with the President this morning before the press conference, and it was clear that the Business Committee is pretty supportive of his policies, you know, So I it's it's it's a hard thing to kind of uh explain that outsiders that the economy is doing so well and the president has a lot of support in the business community for sure, yet he's being impeached

and and tried in the Senate. It's hard to understand. It's fun question just quickly. You were in that matsing this morning with the President of United States, did anyone ask him about impeachment? Well, no, there was that question was not asked. A single question. Well it wasn't. There was no opportunity for questions really because the President came and made up talk and then his daughter, Ivanka made up talk about what she's doing in the jobs, job

creation area with Tim Cook and Jenny Vermetti. So when they finished that, it was you know, that was they kept the mic away from room. But I would say that that's probably not the audience that's gonna probably ask those questions. It would be my guests. And so I think the audience that would probably ask those questions, are you know, probably the press people and they weren't not

in that room, and maybe for good reason. To David, great to see you Ribinstein there, the Carlisle Group, co founder and coach most of host of pairs to pair, we should say as well, he sits in this scene quite a lot too. Great lineup of guests, ready pleased to say that. Right next to us here in Dallas, Switzerland, live on Bliemback Radio and on Bloomberg Television is James Gorman, Morgan Stanley c Mr Gorman. Good day to you, Thanks for having it's John and Tom. Great to be great

to have you with us. I'm still really from some comments we got from Bob Prince of Bridgewater thirty minutes ago, who said that the boom bust cycle as we know it, it's done, it's over. Please stay back to that, you'd have to kill fear and greed. I think for that to be true. Do you think we have done? No? I don't I think you know. I mean, listen, there's there's a reason we've had cycles going back thousands of years,

and I don't think that stops. We we happen to be in a very benign period with relatively relatively uh global stability and you know, relatively strong economic growth around the world, not spectacular well obviously Europe slower than the US, but for you know, geopolitically, this this isn't a bad decade. But no, I think, um, I don't think there's cycles are done. I want to get to the nuts and bolts of your bank, your operations strategy in a moment.

I also want your view on the Federal Reserve too, the balance sheet expansion. Is it QI or is it not QUE? That debate is raging on Wall Street at the moment. What is James Gorman's call on that? What is it? Well, you know, the fit only has two real tools that they're working with at the moment, and they're pretty much exhausted the rates, So that's that's the reality. So they've only got the balance set that they're working with, and it is a form of QUI. I mean, it

has been subsidizing process. It's been helping the markets along, and they've done it for good reason. I mean, when they raised rates, what was it months ago, the markets stoker scarce. So I think the fetters just bringing things back in line. What are the implications of that at the moment. If the Fed keeps saying it's not que but many people, including yourself, believe it is. No Kashkari the Minneapolis Fed is getting his head around it. He

doesn't understand why people are calling it QUI. You're taking a wrist free asset reserves and transferring it for another wrist free asset t bills, no duration involved, no risk involved. How is it queens providing liquidity to the market? Right? They're providing a nondepending to say we here. That's basically the message. It's a message of confidence as much as

it is of activity. I want to move to the triumph, which is Morgan Stanley of the X number of years under your tenure in wealth management, the margins you have received, your statements the other day of improving margins as well. Everybody in this valley wants to be James Gorman. Everybody I know wants to get into wealth management. They want to catch up with what you saw X number of years ago. Do you worry that we will compete away the profits in the business that if everybody gets in

like wheat farmers in Kansas. Kansas is a state James in the middle of the nation. If we if we I think is familiar with familiar with a citizen since two thousand four, Well, don't want to be made everybody,

but everybody wants to get into wealth management. Is there a risk that you compete away the margins and the Morgan Stanley margins come down, down, down, Yeah, there's a difference between wanting to do it and being able to do it exactly what cost effectively scale matters in wealth management. We made that calls and thank you we we made

that call ten years ago. There are some monster players in wealth management, whether it's on the direct side with what twelve and a Merrier Trade have now done, what Fidelity has done obviously, and what the big full service terms like ours have done. It's very hard to replicate that I mean to be I want to be in this space is a very expensive proposition. So then how does scale go? How does the great Gorman roll up go in the industry? What do you need to acquire?

If they want to be a wanna be? They go, we want to be Gorman, and you go your want to be, We're gonna take you in for value for all. When does that process begins. There are very few assets out there that you can buy, and if you're buying them from a small base, where are you going to get the scale synergies from it? So it's really the planers like House who can keep consolidating. I think again, for entrance into this space extremely expensive. I wouldn't reckon Meender.

It's easy for us to sit here now and say congratulations, James, great call. This was the right call. It was obvious, but ten years ago it wasn't. You made that call to scale up wealth management pulled back from fixed income trading as well. Ten years later. To Tom's point, do you need a new play? Does there need to be a change in strategy after you've done that for ten years, had the success or do you see the setup as

it stands as having some real durability for another decade. Yeah, it's It's a good question and something you're you're constantly got to challenge yourself. Just because you've done and it's worked, it doesn't mean it's going to work in the future. You know, somebody asked me this question on TV a couple of years ago, and I said, what about we make some money? That's a strategy that's when we're a subtemper cent r a week. Now the firm is operating

eleven r R OTC. These are good numbers, these are very solid numbers, record earnings. But now I'm constantly looking for ways to grow, particularly wealthiness in management without shrinking the Immersement bank. Investment bank is phenomenal equity sales and trading number one business in the world, air M and a business ec M phenomenal businesses, but there's not obvious ways in which you'd acquire and grow on that space. Wealth and asset management different categories. Let's take her away.

Raise the target, Yeah, gave a massive lift to the stock last week. Still some questions on how you would chieve that. How do you go about getting that target? You know we had we had questions when a wealth management margins with six percent on whether we could get to fifteen and the twenty eight, So, you know, how

did you affect that game shift? Though? Uh, you know, it's a whole bunch of It's a whole bunch of things, from restructuring the field operations to bringing more product the clients wanted to use, to providing more asset based pricing, you know, professionalized in the organization than obviously buying smot money. Let's go McKenzie and when in hindsight that looks brilliant, let's go on McKenzie right now, on you. The strategy is the following and one of them is do nothing.

Morgan Stanley, acquire banking, Morgan Stanley build banking. There's a small firm Goldman. They're trying to do that. And then the other thing is do nothing and stay focused. Which of those three is the Gorman? Uh? Well, you know I'm going to give you an unsatisfactory answer, but you can't. You have to look at what the returns would be

in the strategy. Obviously, if you could acquire a bank, but we already have a hundred and fifty billion dollars the deposits with the tent largest bank I think or eleventh in the country, if you could acquire a bank at the right price, under the right those valuations out there right now, can you a regional or superregional? And then you've got to ask it for a specific institution, what does it really bring you? So merely acquiring a bank, there are there are in this kind in the US,

there are four thousand banks. So you've got to have something that brings real scale of the institution. Doing that has to be, you know, with the right kind of economic returns versus building yourself. Currently, Tim, what we're doing is number being on that list. We're building it ourselves, and we're building the online presence. In banking. We've got, as I said, a hundred and fifty beans in deposits.

We've got a huge mortgage book because our clients want to deal with Morgan's what is your distinction versus Mr Solomon's Planet Goldman Sachs in terms of building an online presence? Well, I really want to comment on on Golden That wouldn't I want you to tell me the distinction of the Gorman way versus what others are doing. I just imagine Mr Solomon won't be commenting on Mr gold because we are Boomberg rude continue now that we've set the parameters listen.

But I won't comment on Goldman strategy obviously. But we're building both core capability throughout financial advisors. And when you open a financial advisor relationship, why wouldn't you want your banking assets in that relationship. So if you're borrowing on margin, maybe the better decision is to take out a home equity line of credit. That's a banking product, So it's mingling of that to make it easier for the client.

At the same time, we are building our digital capability to go online banking, which I guess is what's some of our committed Where there are doubts though, and we won't name names. Let's talk about your own strategy. Is whether you can build this out get scale organically. You think we can, Yeah, well we I mean we have. I mean we've got a look at the Soleumn deal we did. We've got six million clients between asset wealth Management, the asset management and then the share Works program solding.

We've got enormal scale as an organization. What we need is more product coming through it. That's really what we need. What our clients are calling what you just described as a future for American finance. How does it differ from the superstore concept that went down in Flames decades ago. Yeah, that's a that's a very good question. I think you've got to be very careful about building too much complexity

into these institutions. Number Two, you've got to have management that to deal with running, are used to running and capable of running not just products, but running organizations. And historically our industry didn't have professionalized management. They professionalized super producers. So like sitting, you better management that a G or an IBM or one of the great American companies would

have a Microsoft that kind of capability. So we're we're investing as much time time on building management capability as we are around business. What's the new superproducer look like? To go re till John the superproducers? How do you build new superproducers which are the lifeline of that huge revenue into the bigger profit. You give them teams. I mean, our best teams under our top producers have as many

as people working on them. Because how can I be the industry expert on foreign exchange, municipal bonds, growth style. That's all right, you guys can do this something modest. I can't do this and out You're in ear innique capability around you right when you go to see when you go to see a specialist, don't you see specialist? There are groups of people who have got capabilities that make up the full medical needs that we're all going to have. So I'm all about building out expertise in

a collaborative, team based approach, optimized headcountred jobs. When yeah, yeah, why James, we were setting the table for the coming year, and we're you know, we're we're we've been um, we've been cautious. That's sort of our strategy. We're disciplined and cautious. And to be finally honest, we had very little attrition the last couple of years. We've had almost no attrition. Nobody's leaving. And we got to the end of there

and we said, what does this really add up? And we were about to promote hundred and thirty We just promote a hundred and thirty new managing directors. You've got a great capacity for these. Speaking of promotions, number two at the bank, here's it gonna be. Who's going to be out? Number two? If I told you that, I'd have to kill you, John. When are we going to get getting along? Weight? So we thought that this morning

we left. I just wanted to make some news. When are we going to find that will eventually name a president or presidents? And uh, you know, I'm committed, and I think you guys have reported and others are reported. We've got we've got a tremendous team of folks are in their late forties early fifties. Are David Weston is relaunching Wall Street Week. Part of what you do, what part of what you do is to bring the fabric of what Luru Kaiser did years ago back? Can we

make investment fun again? Like lou died years ago? How did the Natian do that? He made it a conversation rather than a series of you know, he took people away from what the daily movement in the prices were and he made the conversation around thematics, around personalities, around larger trends, and that made a bit more interesting. I think just seeing the endless uh you know, series of numbers getting thrown at the public, they numb over sounds

like the surveillance manifesto. James Gorman, thank you so much. He is with Morgan standing. Thanks. Thanks Chief executive officers as well. That then interview after interview, a heated debate about what do you do after bond price up, yield down, equity prices to the moon? I mean, there's Apple up another hundred billion today, we'll know what the market opening. Let's bring a Scott Modest shower cooking him. Partners Global

ce Io. We're booke handing two radically different comments. Want from you to start the week basically saying this market was like a Ponzi scheme, and we end the week middle of the week so far with bought Prince of Bridgewater saying it's the end of the boom bust cyclist, we know it. Yeah. I find that really interesting because, first off, Bridgewater, the people there are very smart smart. But you know, look, if you take the history of the United States since the late seventies, um I would

call monetary policy a policy of bubble to bubble. For instance, you know, to save the the economy after the stock market crash, right, the Fed cut rates and overinflated commercial real estate and then we had to bail out the

banks with the Resolution Trust Corporation. So then once things calmed down again, investors no longer thought that commercial real estate was safe, and they inflated the internet bubble to the wealth effect to keep the economy going, and then of course it went bust, and so then people didn't feel safe in stock so they started buying homes and we played that out in a bust. And so where my attitude is when you look at the amount of leverage in corporate America and where we are today. You've

you definitely are inflating a bubble here in credit. Let's talk about the quote that you sent out to clients a long note. I've read it. Here's a quote from it the time. It gets heart to predict, but it reminds me a lot of the lead up to two thousand and one and two thousand and two. Then you pointed out the term palmsy scheme, where the only reason investors keep having to risk is the fair the prices

will be higher tomorrow. With that in mind, you've made this call it de risking or you're staying long risk. Do you know. I gotta tell you something. We started de risking back in two thousand eighteen. And I can tell you that I was an investment genius in two thousand eighteen, but when the FED pivoted, you had to ask yourself a question, uh and and And I'm guided a lot by behavioral finance and the work of Danny Khneman,

who won the Nobel Prize um. One of the biggest mistakes asset managers are asset allocators make is they try to do too many tactical trades and so what Danny would say is, look five years into the future, what do you see coming, and don't change what you're doing

to try to catch a tack a tactical move. So, you know, and so in nine in two thousand nineteen is an investment manager I look like an idiot because we've trailed a lot of other people who have basically just said, hey, you know, wave in corporate debt, wave in high yield. Uh you know, let's go for it, and uh, you know someday, you know, the musical stop. But is the elasticity when the music stops something anyone can manage, including smaller investors listening on Bloomberg Radio, watching

on Bloomberg TV. Is the elasticity or malieability of the system there so we can respond and react when we get that, or is it a jump condition where it's going to be ugly? You know? One of one of my colleagues at Guggenheim likes to say that asset prices go up on an escalator and they come down and

they at out in an elevator. Right. So the problem is, since no nobody I know is smart enough to figure out when the music stops, you know, I think that's a really difficult thing for people to try to time. And uh, you know, here's an example. If two days from now or early next week, Uh, there's an announcement from the Federal Reserve or in the FED meeting online see that they're thinking about tapering the bill purchase program. Remember what happened when we talked about tapering QUI in

two thousand. We didn't even eat the act the taper tantrum, and this is going to be called the minor tempertum. Carry on? Is this que then? James Stanleyaniel See said exactly the same thing. Any people disagree with you that, well, I mean, I gotta tell you something. When I talk to people at the FED and other believers that don't think this is QUEI, they say, oh, well they're the FETE isn't buying longer term duration assets to affect the

shape of the term structure of interest rates. And my response to that is, look, I think the official name of q E is large scale asset purchases, right, and this looks like large scale. I spoke to and John this is important. I spoke to Ken Rogoff two hours ago in a panel here and web and he alluded definitely to what Mr Miners saying. The idea that look is QUI, it's not q He doesn't matter. The fact is they're affecting the process which changes the behavior of

the market. No, West Scott. What I want to try and understand is what is the risk of getting it wrong? Well, what's the risk of saying it's QUI if it's not que And what's the risk of saying it's not q when it is QE? Is this just debate, a debate just a half behind closed doors. I think whatever label we put on it, the consequences are the same. And that is that when you put liquidity into the system and you create money, which is what the central bank

is doing, it doesn't matter what you buy. You could buy baseball cards, right, But that liquidity eeks out into other asset categories and so you get inflated prices in other areas. And you know, as I've talked about in the recent peace corporate bonds, uh, you know, with central banks in Europe and Asia running negative interest rates and the FED pumping out liquidity, you know, it's just the incremental stretch for yell just keeps compressing risk. Ask John

I invested in baseball cards years ago. I failed. I bought I bought oilcam BOYD where I should have bought Lenny. I want to get to the baseball John's question about the news you've made here, Scott minored about Ponzi scheme that assumes under Ponzi under what we know of Bernie made Off, there's someone ill out there, there's someone evil,

there's someone bordering on civil or criminal violation. Who is that person without a minored Ponzi school, Well, I mean, I'm not so sure that when Himan Minsky framed the comment about a Ponzi market that he was thinking that there was some nefarious activity going on. It's more of a an investor behavior which is being encouraged, if you want to find out by the Fed, because we're just you know every time. Look, there was a debate back in December. You know, do we have a power plate? Right?

We do? It was delivered silver plutter. Yeah, so we're we're operating back in that mode again. Before you go made a conviction tride, Big cost made a lot of headlines. What do you put your money? What's the number one conviction tride right now? For silver? Silver? Silver? Why not gold, because when you look at the relative values of silver and gold, UH, silver today is about, let's say, sixty

below its prior peak. Gold is getting very close to its prior peak and go exponential like we've seen in some of the non precious metals. I think there's a high probability of that. It's got fantastic conversation, a lot of headlines made this way from the cookonhut Global h Shnelli Boss joining us from UH Davos. Seems like yesterday global warming, climate change on the forefront. Today the focus moving more to markets, with monetary policy in UH in focus.

Can you give us a sense of just the mood today as people speak about the economy, which is generally good and the industry policy which still remains concerning to them. Yeah, it's funny, Lisa, because what's generally good, we're definitely seeing a lot of some of the um you know, the high minds here thinking of very significant risks in the market and credit markets in particular, a lot of bad

feelings towards central bankers here. Of course, negative interest rates are really causing a lot of European banks to bleed and offset some of these costs to consumers, and once they all set those costs of consumers, it becomes unclear year to a lot more people how good it is for the economy. Meanwhile, in the US, the federal reserves policy, a lot of folks believe that, you know, while the low interest rates have inflated asset prices, that there could

be real issues in the future. We talked to CEO of Barclays, Just sal Daley, who had said, you know, Oxford just issued a hundred year bonnet a little over two percent, and I don't think that's a good a good thing. Interesting stionally, we saw earlier this week numbers out of ubs disappointing. Once again. What's the feeling over in Davos as it relates to just kind of the

European banking sector. You're you know, talking about negative interest rates awful tough way to kind of run a bank, for sure, And it depends on who you're talking to. I had mentioned just daily before, and there's some optimism there around the investment bank, which is surprising because just a year ago everybody was a little worried across Well Street about the investment banking businesses. But the trading figures in the fourth quarter for the big US banks was

a blowout. Meanwhile, over at UBS, wealth management is tied to market sentiment. Of course, they want to expand very aggressively in lending. They're really worried about interest rates, and they're worried about growing their their net new money at a time when growth has been slowing generally around the world. Remember at UBS, their US assets have been kind of sluggish, where they really brought in a lot of these assets

in China, where we're seeing another host of issues. So right now it seems like the banking sector has been challenged by negative interest rates. Was there anything positive that people said considering the fact that we currently are facing an economy that seems to be copacetic. Oh boy, I was looking for the bad stuff. I have to be honest, and I know I'm you know, That's that's typically how it works, right People are looking for the for sort

of what what's the problem that we're not foreseeing? But I'm wondering, are we going to see an unexpected upside? I mean, honestly, that's sort of the the sort of flip side of all of the pesmas and that we've seen over past decade has been that people have been caught off guards by the positive and I'm wondering the banking sector having been so beaten up at least when

it comes to the stock price. Uh, could there be a perhaps surprise on the upside if the economy continues to stabilize or is the fundamental business model or were they basically saying the fundamental business model is so challenged by negative interest rates, by the overhang of debt that hasn't been gotten rid of or whatever from from another era, that it's going to be hard regardless. Listen, the one thing that surprising, uh, just in general, remember Trump is here.

That's changed the entire tone of Davos. People are falling around Trump. Will Barross is just sitting in the main lobby and everybody is and remember banks CEOs, we're all with Trump. Just this morning, apparently at the dinner last night with Trump, everybody was really just going around the table talking about how they use the tax cuts, that they're creating jobs. And today I heard somebody tell me they're like, you know what if Europe starts to do a fiscal stimula us to the likes of the US,

and we could be in much better place. And so you're asking the upside, It's like, yeah, we have to look for bad things here because all of these guys think things are pretty rosy. There's not a whole we we really have to dig when we talk to these folks about what the And again, there are really significant risks out there, but generally the tone here is good and people don't believe that there are huge risks. And I think that Trump frankly has been received very with

a very friendly audience here in Davos. Uh, it'snal either. I've seen reports from Bloomberg News that there are about a hundred and seventeen billionaires in Davos this week. So it's a good time nineteen okay, hundred nineteen. So it's a good time to be a private banker. And we're seeing across the global financial services business businesses focus on private wealth management. Is that a trend that when you listen to these bank CEOs that we're speaking to Bloomberg

Radio and TV this morning. Is that a trend that is likely to continue? Oh? Absolutely? Uh. And it's funny because a lot of the billionaires and Davos are not even coming to the World Economic Forum, and bankers at QBS, Credit, Speace, Colman Sex. They're all here because you can have dinners

at night or just around town. It's beautiful. It's forty degrees here right now, South fahre Kneit and so yes, private banking is still a very big business because right now the world's billionaires are also owners of major assets

and major companies. And so if you're looking at investment banking, if you buddy up with a billionaire, you're able to advise them on how they sell their company, how they take out a loan against it, are their margin loans involved, how do they structure their their their assets, what's tax efficient. There's just so many ways to use this clientele with some advice. Just buddy up with a billionaire and you should be fine. Thank you, Snell bas over In Davos

for Bloomberg Television and Bloomberg Radio. Thank you so much for being with us. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, sound Cloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio