Surveillance: Deutsche Bank Will Survive, Albertson Says

on equities as well. Lan Zettner has been below you on g d P. But you just flat out in a claridean way push against us. You think, if anything, we could get neutrality out of chairman political Yeah, I think. I mean I haven't. I thought all along that they were not going to ease in July, and I still

feel that way. Um, and I think it's time. You know, the f has been, in my view, has been very coy, uh, particularly the leadership and kind of letting things play out and hoping that the data would kind of push the market away from the aggressive easing expectations. Perhaps and we've gotten some movement, but uh, I think with three weeks ago to the meeting, Uh, if if they are thinking they might not move, they're gonna need to tell us that. John.

This brilliantly sets up the polarity that's out there. We've got Steve Stanley on the edge of solid. Maybe you diminished GDP, but not. And then what Morgan Stanley is saying is jaw dropping. The chairman of the fete's uncomfortable with the outlook. He's communicated that too, is Steven. I just wonder whether the outlook and the risks around it have diminished somewhat sufficiently enough over the last couple of weeks to say we don't need a right cut at

the end of this month. Is that your view? That's my view. I mean, I think the number one risk obviously is the trade situation. And um, we were just coming off of the Mexico thing at the at the last FED meeting, and we were still waiting for the G twenty, And while there was certainly no final solution to the US China talks at the G twenty, I think, um, you know we we we got probably the best we can hope for. And I think since then you've also

seen some improvement in the data. Obviously, after a week may pay all number. We got a better number in June. UM, it seems to me that the Q two GDP expectations are probably, if anything, a little better now than they were in the middle of June. UM. The inflation numbers still a little below two percent, but the latest readings on core inflation have been a little less soft than

the numbers that we got earlier in the year. So at the margin, it seems to me that the risks are still there, but they're not quite as acute as they were, uh the last time they fed met. Being somewhat familiar with Morgan Stanley's thinking around the Federal Reserve, I think there's a belief that because there is limited ammunition, there is an incentive there to get ahead of a potential down term, because if you wait for it to materialize,

you don't have the ammunition to address it. You need to do less with more, you need to be preensitive. So I'm just wondering whether that's a justification to go early and go big, even if the economic dates with the mode, but the realized states that may not warrant's hit you thought on that argument statement, Yeah, I think if if you believe that a downturn or even a significant slowing is is likely. Uh. Then I think that's

exactly the FED playbook is to go hard, go early. UM. And I think there's there's no question that the market has kind of latched onto that way of thinking. But at the same time, I guess what I would you know look at is that the FED has acknowledged that their base case is still pretty pretty positive at this point. They see downside risks, but until unless or until they are more confident that those risks are likely to materialize, I just don't see them acting than this data dependency.

What is the data that matters that gets them to some form of decision, whether it's some Morgan Stanley Barkley's fifty beeps or something more optimistic like where Steve Stanley is. I think most importantly at this point is growth because interesting, Yeah, the downside risks are around the growth, Uh, implications of trade uncertainty. I think so Q two GDP I've always thought was going to be a really important number, which and then within that, is it the consumption dynamic or

is it really business dynamic off of the President's trade war? Right? Well, the risk the downside risks at this point are mainly related to the business sector. But if the consumer holds up, then we could probably afford to see a pause in business investment, which is I think what we're seeing. So it's really you know, I think that's why in some ways the labor report last Friday was pretty important because it tells us that the underpinnings for the consumers should

remain solid. Stephen, It's a question for you if at the end of this month we don't get an interest right cut, but it's priced by the market at the moment, if they hold, will that be the equivalent of a hike for financial conditions? Well, there's there's definitely gonna have to be an adjustment, whether it occurs the day of the meeting or between now and then. I think, you know,

certainly some of it could have could occur today. One thing that that I encouraged by was so last Friday we had a pretty significant adjustment in rates and in FED expectations, and the start market was down, but it really wasn't down that much. So I think what the FED is really concerned with is a big drop in stock prices, and you know, at least so far, it doesn't feel like that's necessarily in the cards, sound TRUMPI and Steve Stanley with us on the stock market and

Sherman chief investment strategist Amer's Pierpont. We are thrilled in our studio to talk about the future of New York Wall Street. Robert Albertson of Sandler O'Neill, his decks of investment strategy for Sandler O'Neill our legendary. But John Farrow, as you mentioned yesterday, it was a legendary day as Sandler O'Neil taken out by Piper, Jeffrey and Mr Dunn at an emotional moment, marketing back to the courage of him and you. And there's to move forward off of

September eleventh. What did you do yesterday? Look, I wasn't there, uh. I came after September eleventh, and I can tell you this is a firm with probably the deepest culture I've ever come across. UM. I always feel like an outsider. Frankly, it is a very solid place. We didn't get taken out. I think the better way to say this is we recognize change has to come to and it's tough, tougher for us, a private firm than most and very successful at what we do. But it made a lot of sense.

You've gotta broad you gotta do two things. You gotta broaden your base, uh, products and services and contacts, and then you've got to make the most of them with very strong push on productivity, not cutting costs, but but but really finding ways to cross sell. And this Piper is the best. It really is the best match for those two things. And that's what you're going to see

on Wall Street in general. Uh, shrinky just reliance on trading, shrinky, John reliance some balance sheet, Um, you've already seen it. And and then deeper deeper into the advisory with more balance Robert, this is a great story that came out of yesterday that Jimmy went across to the local Brooks Brothers store and just bought all the duck ties, all the times with ducks that he could get his hands on.

Talk to me about his significance of doing just that yesterday. Well, his longtime friend and head of banking, um who perished. That was one of his favorite things, and that was in honor of him. Uh, and very touching, and it's an inside thing you need to know, but it tells you how although we can be as a firm as hard nosed anyone else on Wall Street, when it comes to competing and doing their own thing, there's a really soft spot based on that sad blemish that happened twenty

years ago. Let us talk about the news you and I have seen. We showed film of Lehman Brothers earlier and embarrassed turns, and you and I talked about cotton in Illinois. How grave is the situation at Deutsche Bank. I can't tell because I no longer as an analyst follow it anymore. I'm on an analyst UM. I think it's been there for a long time, and my simple view is when they brought on bankers Trust, it was

a big shift in their type of product. UM they stayed with it too long since because you look at the trendlines. I'm gonna send you those log hurts you go back ten fifteen years ago. Trading was the only thing you should ever consider doing. It was the strongest, most predictable voltile but most predictable revenue source that has

changed dramatically and everyone has to adjust. I think that's a bigger part of their adjustment process than most UM and I would guess that they're going to survive and pull it off because they're finally facing the big elephant in the room, so to speak. And some good news for people affiliated with Deutsche Bank that the fixed in come trides this morning, we're tell that they will be keeping their jobs. This market has changed, Robert, I would

love you're insight on it. It is crazy what I'm seeing in European markets right now, Emerging market Europe, so the likes of Poland, the Eastern European nations, the runny that we've seen in a fixed income market. Poland's note is very close to dropping below zero on the yield. Just think about that, we could have negative yields in

Poland on ten year pages easter. They're they're doing like fops, just real, absolutely unreal centry bonds, some of the big centry bonds, some of the well known issues of them. They're returning almost through What do you make of this massive clamoring for fixed income income wherever you can get it, and the idea that the bond market is providing capital

returns north of what the equity market is offering. Here, you gotta go back and look at how long we've been in abnormal interest rates, whether you want to call them abnormal or not, whatever, But um, there's been an obsession. Um, it is an addiction, and therefore nobody wants to change it. And everyone's frightened. And even the President thinks twenty the

basis points will make or break as economy. It's silly. Um, that's not going to change whether you're an industrialized or an emerging market for for a while, that's for sure. Number two. The emerging market side of the world, let's call Poland and those um more like that, not that they're not industrialized, are much more focused on infrastructure, growth, good things that we all remember twenty fifty years ago. Uh, and it's gonna work. So they're a different world entirely, um,

completely decoupled. Put those all into a bunch of folks called Europe EU. Oh my gosh, you really are setting it up. In the third thing, you break this thing potentially by all this nationalism hopefully dies down, but it's a global trend. Obviously I've got any more questions, but we don't at the time. Robert Albertson, thank you so much.

With Sandal O'Neil. Congratulations to all of Sandal O'Neill. Thank you on their announcement yesterday with UH Piper Jeffrey Pipe, Piper Sandler is that we're going to call it per Sandler Companies. Very good. You have to get new business cards. Very good coming Robert Albert, thank you so much, greatly appreciated. Henrietta trust joins us one of our most popular guest director of Economic Policy Research UH and and thrilled that she could be with us. She's really got a with

Veda and she's got a real visceral knowledge here. Henrietta I got is a great Washington watcher. How much does Washington roll up in the summer? I mean, before air conditioning, it was a total roll up. But like, is Washington like half asleep in July or is it like more bustling than it used to be? One of guys, July tends to be pretty busy. They do start work after the sun goes down. In a lot of cases, a lot of this stuff happens at night. But August is

what everybody has definitely gone. So your calendars for July, I want to say it's the last day of session, then they'll be out. That's what John and I are doing we're booking, so we're gonna be on holidays. Okay, we need to get a serious update. We haven't done this in a while, folks, with all the distractions. Let's do it now, Henrietta, seriously, the position now of the United States of America against the threat of Huawei, How has it changed in the last number of days. It

has not changed meaningfully at all. I think in the in the readout of the G twenty, there were two options.

We could either assume that President Trump had reached a deal with President she and he was no longer serious about extracting systemic reformat of China, he wasn't concerned about the national security threat post by companies like Bawei and others in the high tech space, or the read out of the G twenty was overly optimistic to Rosie, and in fact, nothing had substantially changed in the last ten days. We've got a lot of evidence for the second scenario

and not very much for the first. So Secretary Rob speaking at an export control restrictions conference, which is basically the future of the U S. China trade war, he said, look, we're gonna be relaxing a little bit of the restrictions mostly steered towards US sales of semi conductor chips and things that go into their tangible components that Huawei produces, but nothing that is associated with the future of Huawei, So their five gene networks, their ongoing efforts to expand

into further visual and audio UH surveillance, the cyber security component, all that is still very much front and center um and I think there's actually a lot more to come, not just focused on Huawei, but on any high text sector that has business with China, so biotech, nanobiology, synthetic biology, um AI, anything in the future of the communications is what we're about to roll out with these export control restrictions and is becoming really complex are called with the

National econom accoun SO Director Larry Cudlow on Friday, various members of the administration for quite a while said the Huawei issue was a separate issue from the trade discussion, and Henrietta Larry Caudlo said on Friday that it was the same story now part of the same negotiation. What do you think of that. I think it's very much something we saw with the Ztevan UH this time last year, earlier,

even earlier than this last year. Um, the qu s China negotiations are so wide ranging, and the export control piece the future of high tech is what it's really all about. You know, we talked about tariffs a lot, but they're the window dressing to the underlying trade war, which is not just limited to um you know you don't buy enough soybeans from US, but about how you see China forcing transfer for sing I p sfts and to have a conversation where Huawei one of the main

instigators and one of the areas of concern. You know, some other folks at the conference yesterday we're saying, look, we need to be on offense against China. We need to be proactive unless they're going to continue to steal our I P and advanced in a global fashion that in a way that leaves our high tech industry behind. Henry, we just seem to be blowing the lines between the job of the Commerce Secretary, the job of the Secretary of State, the job of the Treasury secretary. It seems

to becoming one job. Absolutely. I'm so glad you mentioned that. So there's the executive order if you read it closely, that doesn't even mention Huawei but addresses the communications technology and systems going into the future, and has all these specific date for as you mentioned, the Department of Homeland Security to weigh in later this month. All these agencies, CEPIST, the SEC, the FCC, UM, you know, anybody with an axiom they're involved in this. I want to ask, can

I ask your first or of condition? I'm the dumbest member of Congress and I'm asking Henry the treas an important question. What is Huawei actually done? And I'm using this word as an amateur criminal. I mean is it Are we worried about the future or have they actually done something bad? Now, Well, it depends on who you talk to. They they have sixty eight separate entities, so they do a lot of things, so it's not like

there's just one. UM. Probably most concerning would be UM the fact that they provide surveillance that allows China to have its human rights abuses perpetuated, specifically with Muslim minorities in the Nations human rights. So it's a human rights angle on Western China, which is completely tangible. Is that

all you have? No, certainly not. And then you have UM the fact that Huawei is trying to build out its future of wireless and that is something that the United States and our defense agencies have a big problem with. If Huawei is selling its hand sets and it's UM components not just to Iran, but to other nations, and then they're incorporating their potentially um sort of cyber security threat components to the general public, that becomes a major Now.

But what I'm hearing there, jump in. But what I'm hearing their folks, is it's a future worry. It's not like a present tense. It's a persistent worrying, a persistent worry not just for the US government, for US as well and Riet. So we're creeping up to the campaign has already begun, really started a while ago, and I'm just wondering if this a story that's just going to drag on now with no real conclusion going into the

back end of next year. That is absolutely my thesis, and frankly it has been since we passed the tax bill in December of two thousand seventeen. This administration will not be passing any other major legislation. They obviously kick at the U S m c A through, We're going to have a fight over the debt ceiling and the budget in the fall. That's going to eat up the last half of this year. The President won't get an

infrastructure bill, he won't get a healthcare reform bill. What can he do on his own that doesn't require Congress? Two things, immigration and trade. They go hand in hand, and as as a president is better served to per spetuate the trade war going into he is to resolve it. Now. Are the people of Capitol Hill engage in the census citizenship question? You know? I think a lot of folks are.

It's definitely not my wheelhouse, but is an area where if you are UM focused on jerrymandering, if you are focused on the election and who gets to vote, which I think a lot of folks are, from President former President Obama and Eric Holder um on down to the rank and file members UM and particularly the newer members of Congress in the House and the Democratic Caucus and folks like Elizabeth Warren. This is a major issue. It's about who gets to vote, and I think if you

have time to spend on that, you definitely do. Not every member is super involved. It has become harshly part of it, but it is obviously very important question. This is great Harriet Trust, thank you for the briefing on WAWI is with Veta Partners. There was a company in the twenties very quiet on Fifth Avenue in New York.

It was the Allen brothers and particularly Herbert Allen Sr. And then there wasn't now Herbert Allen Jr. And what they have done is quietly affect transactions in communication in media. You can go back four years to Time Warner, Charter Communications, Verizon, Senteen, HealthNet and on and on our Paul Sweeney knows is cold and he is with Allen and Company as Sun Valley Paul. Instead of the media confab today, what is accomplished by Allan here? Is it a Davos for media

or is that off the mark? No, that's absolutely right on the mark. Tom. I think just this morning, sitting out here by the hotel where they're having the first sessions, John Malone, Barry Diller, Tim Armstrong, just you know, a whole host of media, telecom and UH technology executives have just passed biased and Uh it's really a place like it's Barry Diller's that he comes here to be stimulated to learn new ideas, new technology, and people speak and

all that right. Yeah, people speak and and uh you know these I think a lot of these executives come here to just to just learn to think about new technologies where their businesses may be going. Um and then of course, um, you know, to really talk about deals. Should we be doing business with you, should we be merging with you, should we be acquiring you? Uh so

a lot of that takes place at this point. I mean, Lisa, if I go out there, do I need to wear my wool rich Men's flannel over shirt John Richard Brothers, you need to wear that tomorrow with your bow tie. You need to. I will be tweeting that out big Red and Black check. I cannot wait. Very it's very Tom Keene, I love it. Please, I love Mumfords. All right, I'm revealing too much about myself. Paul Sweeney, I do

want to talk a little bit about the urgency. Have you ever heard a higher degree of urgency among media

executives than now? Yeah, it's a great question, because you know what these media executives are dealing with really over the last couple of years that they've never had to deal with, UM, is the likes of these big technology companies, whether it's Google or Facebook or Amazon or Apple really taking a very hard look at the media communications that entertainment businesses, and so you know, they've been encroaching those technology companies have been encroaching upon you know, the businesses

that have historically been Time Warner, you know, Viacom, CBS, and these executives here really need to figure out how they react, how they adapt, Uh, do they partner, do they acquire? Do they sell? Many of the media companies like Time Warner, like twenty one century Fox, you know, in fact, they're the last couple of years have decided to sell their businesses instead of trying to go head to head. So they're winners and their losers. Here. I'm

looking right now at Netflix bonds and they're up the most. Uh, they're they're at the highest levels on record because Netflix is a decided winner. Is it becoming clear who the losers? Maybe who in the media landscape may not exist five years from now? Um, well, I'm gonna utter Tom Keane's favorite word as relates to the M and A and not a scale. Um. You know a lot of the smaller companies out there, whether it's the lions Gate or uh an MGM or even a Sony Studios, you know,

one of the main studios in Hollywood. Um, they're all thinking about their businesses and they're saying, we're just not big enough. And when we think about it relative to a Google or Facebook or Amazon, we're just not big enough. And I think the big big deal here this year is CPS and viacomp. People, are you know, really taking a look at what Sherry Redstone wants to do with those two companies that her family and her company control.

What's going to happen there? At the very least, investors here believe that those two come but it's need to get together, need to merge. Then the question becomes what does the merged company do? So it's all about if you don't have it. People are concerned what have they learned in the last twelve months, particularly from the A T and T follies. I mean what a debt build up? I mean, are these guys talking about you know, are they having serious discussions about being overdebted or is that

okay debt debt go go go? Yeah, go go go is signed for the media sector right now? Um, you know, so the bond market, the bank credit market really is supportive of the media, communications technology sectors. So there's plenty of capital available to these companies, and particularly these low historic rates that we're at right now, so there's no

real concern right now for debt. But of course, if you were to run into recession and advertising order to take a serious blow, then company that have a lot of that, like an A T and T, like a Comcast, they might have What are you seeing in advertising? I mean Hulu is cutting back. NBC has talked about cutbacks as well. I mean, do the advertising people show up and are they wearing the men's flannel over shirt genre Rich Brothers sons already ordered check. I like the white check.

I think, would you think? I think it's got to be more of a grizzly brown grizzly. How many brown bow ties do you have? I have three of those? I got my my. My big question right now is definitely about the tech companies and you know how significant their involvement will be. In other words, when we talk about the media space, will the media space be big tech in five years and all of the other all of the other standalone companies will just get rolled in

with them. Yeah, you know, we haven't really seen it to date. We've seen a lot of the tech companies kind of dip their toe, um, you know, make um some investments in programming, um, you know, whether it's you know, Google with with YouTube and so on and so forth, or Facebook may maybe you know, putting some football games on Facebook. But we haven't seen them really jump into the deep end of the pool and maybe acquire a big media company to say, you know, we really want

to be in the content business. We haven't seen that in quite frankly, this conference here at Allen Company and stun Valley. They've been expecting that for really the last four or five six years and they just haven't seen it yet. So to be interesting to see whether these tech companies really want to go and out get a lot of capital to the contents. Sonia, thank you so much for reporting from all and Company and his media world. We're looking forward to his return. There's an auspicious time

to speak to David Rubinstein of the Carlisle Group. David, I want to speak about your wonderful conversation on unicorns with the leadership of Uber. Of course disappeared appear, but at this moment, David, I'm honored to ask you about the resiliency of American capitalism with the print of three thousand on the SPX. I mean that long term trend of American capitalism has been extraordinary, hasn't it. It's hard to understand completely because typically we have processions every seven years.

Were now ten years into a growth cycle, and there doesn't seem to be any evidence that we're going to go into any recession any time in the foreseeable future. So the economy is really defying gravity and history. But that's good for American investors. We have had a number of conversations that corporate officers have come to a halt because of the president, because of trade war, because of

manufacturing uncertainty. Do you see that at Carlisle. No. I would say that corporate investment has slowed a little bit, but I would say generally we see pretty good growth in the economy, not three and four percent, but two percent or so. And I would say that I do expect there will be a trade agreement before the end of the year in China, and I expect the U s m c A will in time get confirmed by

the Congress. And I expect, uh we'll have some rate cuts sp X three thousand and four right now, where with David Rubinstein, of course, a peer to peer conversation, and this one is interesting. You went out and found a unicorn. David yes Um Uber Uh, the CEO of Uber is the person I was interviewing, and he's an

incredible person. He's an immigrant from Iran, came to work uh in the United States at Bizarre and then ultimately came to work for Barry Dealer, and then ultimately was was running a company for Barry to Barry Dealer's company owns. And Um was recruited away to run Uber after the previous CEO stepped down. Uh. While people say the i p O was not that successful in some respects, I

thought it was pretty successful. While there was some uh uncertainty, But the pricing of the first day or so it was below the I p O prisis back pretty much to where it was at the I p O. But this is the most important point. This company is probably has the second highest market value of any company in the United States that when public uh some other words, Uh, the only company has a higher market cap. He after when public, I'm aware of his Facebook Google, wasn't this high.

Microsoft wasn't as high, Amazon wasn't as high, So people can say that it wasn't all as successful. If people wanted that, they wanted a hundred higher valuation, a hundred twenty billion or whatever it was. But still, when you think about this company, it's not that old, and to have this kind of valuation so soon after it was started, and relatively so soon after the I p O, I think it is still amazing. It's a it's a fascinating conversation.

Let's listen to a clip of Daro Kasar Shahi, he is the chief executive of Ubert, speaking with David Rubinstein in the episode three of the new season of The David Ruinstein Show Peer to Peer Conversations. What's the biggest challenge you currently see the company facing. I mean, the biggest challenge that that we have is a is a common challenge that you see with some of the large technology companies out there, which is there is an increasing regulatory burden UH that is coming on some of the

tech company some of it deserved. I don't suppose I have some extra money and I wanted to buy into a company like yours. Why should I buy you? I think you have some extra money. Don't you never have enough. There's no doubt that there's a sentiment in Washington that there should be more regulation of some of these companies, and some of the CEOs of these companies have said

there should be more regulation. Congress moves slowly. I wouldn't expect any epic legislation in this area quite some time. It's easier to get things done in the regulatory area if you do them administratively, so I expect more likely there will be enforcement or examinations by agencies UH of

the operations of these tech companies more than legislation. Legislation could take many years um and when Microsoft was investigated, for example, years ago, it was an antitrust action that was taken against it, and I expect that there's probably likely to be something in the future U in terms of administrative action against these tech companies more than legislation.

You know. One thing that I find interesting is that a lot of these companies, including Uber, relied heavily on private markets for a very long time before going public, and a lot of people are concerned that basically that that the that the potential dynamism of these companies is sort of over once they get to I p O stage. What's your view on that. What it used to be that people needed capital to grow their companies. Now there's so much capital that you can stay private for a

long time, as Facebook did and as Uber did. But in the end, most of these tech companies, with very few exceptions, want to go public to provide greater liquidity for the investors and the employees. I do think that you have to recognize people aren't as interested in going public. There were there were companies that were publicly traded the

United States. Now there about half that, So there's clearly a bias against taking your company public or not taking a public as rapidly as you would in the old day. David would final question Allen and Company, of course, as their sare in Idaho and Paul Tweeney has made clear

everything is about scale. How does David Rubinstein define scale? Well, today you want to accompany that is global um Today, building a nice company in the United States or in China or in Europe doesn't mean as much unless it's gonna scale around the world. And scale means you've got the ability to uh invest large sums of money. So scale means multibillion dollar UH capabilities rather than multimillion dollar

capabilities in this day and age. David, thank you so much, greatly greatly appreciated fascinating conversation UH Tonight peer to peer conversations David ruben Stein with the Uber team. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Winter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio