Surveillance: Get Used To Low U.S. Yields, Caron Says

that actually enjoy losing money when things go wrong. This dog log normal, I mean, Jim Karen join us in New York. Morgan Stanley Investment Management, Fixed Income Portfolio Manage to Jim, Great to see you. Let's talk about some of the challenges out there at the moment. Are you happy with some of the toad has been deployed? Um? Not not from the fat not so far. I mean interest rate cutting, interest rates, it's like you know, bringing a knife to a gunfight, you know at this point,

because it's really about the credit markets. And you know, what we apply whenever these crisis events happen is what we call a triple A framework. And the triple A framework is affordability of credit, accessibility of credit, and then risk appetite. All three of these have to have to work together. Affordability, the FED can lower interest rates, and as as you're bringing up earlier, interest rates are actually lower for investment grade credit to day, so the borrowing

costs is low and that's good. Um, the accessibility. Are the capital markets open? Are they able to issue their debt that needs to get going again? And then will people actually buy those bonds? Is the other question, Jim, How worries should I be about the small to medium sized enterprises? Otherwise viable business has gone through a really, really tough time right now. Can they make it to the middle of the year. Isn't that actually a big question? So, Jonathan,

I'm glad you're talking about that. Not a lot of people are. That is the most important thing that we should talk about at this point. The large corporations and investment grade and all these indices, they can access to capital markets, plenty of liquidity. They have no problems. Small and midsized business. This is a life blood of the U. S economy. They employ six the people. This is jobs.

Jobs feeds into consumption. Consumption feeds into g D p. What we need to see is more support mechanisms for these for these businesses to get bridge loans, because these are these are as. I like to say, these are ten thousand companies that borrow from ten thousand banks that you've never heard of, that really are the lifeblood. But Jim Karen, how do you do the X axis if we're talking about a medical event. I mean, to be fair, this virus could be good news, clear itself medically from

a realological standpoint in weeks and we move on. I doubt that, but hey, that's one theory. How do you do the X axis of assistance to small business? Well, I think you overdo it to to make sure that we don't have a big problem. Right. So, so so the way that you do these things is you have to start to come up with these lending problems, Like the ECB has a nice toolkit to lend directly to

these small and midsized enterprise. The way that it works, you know, for the FED is they may have to open up certain programs where they tell the big banks, like remember remember September two thousand, A team we had a big spike and repo rates. That's the big banks, not lending to the small banks, who then lent to

the who then lent to small business. What we need to do is have some regulatory changes to make sure liquidity is flowing so that these small businesses can roll over their loans and these midsize and small banks can also continue to make these bridge loans and make sure that their backstop so that the credit can continue to flow. And if that, if that works over the next couple of months, we get through the virus, then we have a viable business to bounce back. If not, we don't

have a viable business. This is critical. It's called building the bridge to get to the middle of the year. We've got a health shock, a health crisis. It will pass, and it probably will pass by the middle of this year. It all depends on what state these small and medium sized enterprises are actually in once we get there, and that will define the shape of the recovery. Absolutely that will define the upslope. I want to get my hands

around the risk we face between now and then. If I don't see these tools deployed, are we talking about bankruptcys and sames? Are we talking about airlines going under? I don't want to lay on thick. This show has been really, really careful over the last couple of weeks, just to be very, very delicate about the position we're in. But I think that questions we need to ask you. Yeah, So so it goes back to risk, appetite and willingness to land. Right. So what we see here is that

demand is not being destroyed, but it's being delayed. I mean, we we came into this event, you know, with relatively strong footing, and I think that most people would see this as a viable opportunity to make these loans to get people to the middle of the year, because it's gonna be a good it's gonna be a good investment, it's gonna be a good opportunity. So it's not like this is ah, this is an event that took place

and we don't know what the end looks like. We believe that we do know what the end looks like. It's a question of the time and the passing the virus. Really important observation, John. This came after my six hour day yesterday. My last interview was with Alan Blinder of Princeton, the former vice chair and LISA vice chairman. Blinder was adamant Okay, it's a supply shock, it's a virus, but

guess what, it's still a demand discussion, is Mr Karen mentioned? Well, absolutely, because whether people are going to travel matters with these companies and whether they're going to survive. I'm wondering there was so much discussion about lending moving away from banks to private equity, to private credit to smaller firms, and isn't this sort of stress testing them. Aren't they supposed to be swooping in here and actually fulfilling their function.

So at least this is this is a good point here, right, So the regulatory environment has pushed these the banks out of that business and it's gone more to the private side, more to private equity and things like that to create financing. Well, these these guys are not the JP Morgan's, They're not the Bank of American's right there. Not the big banks that have to make these loans or that you can regulate to force them to make these loans. These are

private entities. So the liquidity may not be asked forthcoming. But in some senses, some of these private equity firms have so much capital that's willing to deploy that they may do it on an opportunistic basis, but not on a regulatory, you know basis. So in other words, the FED loses control as the overall regulator of the banks to actually enact this policy. So it's really now up to the animal spirits to, you know, to actually take

this on. There's also a question of how much time some of these businesses have until they run out of cash or face material debt maturities. Do we have a sense of that because in China there were statistics that a lot of companies, millions even could run out of cash in six days, right, So we don't We don't have good data on the small and midsized businesses, right because Wall Street typically you know, looks at large cap companies and that's and that's typically the way it goes.

But what I do know is that more small in mid sized businesses. You know a lot of these a lot of these businesses put you know that they're working capitals their credit card, right, they put things on their credit card, they pay off their bills at the end of the month. So really what we have to start to look for is stresses maybe in some of the asset BacT markets that you know, the credit card markets

and loan markets. In those ways, we have to start to be a little bit more creative to see how these small and midsized businesses access the credit markets and access liquidity. And that's what we need to be supportive of. So far, what I can tell you is I'm not seeing any stresses in the repo market, which is good, really really good news. So this is not looking like two thousand and eight. This is not a systemic event at this point. All I'm bringing up are the sign

posts of risk that we should start to look at. Um. So far, so good, but we also have to start to look at some of the credit card data and some of the loan defaults and things like that in the smaller sized in the smaller size banks. Jim, let's talk about these markets and get a co from you. Ny. Basis points is the yield on the US tenure treasury? Should I get used to these kind of numbers now? The treasury market, I got used to it pretty quickly

out from Germany and Europe and Japan. Do I need to get used to that hit in the United States? I think, sadly the answer is yes, especially if the FED by most economists now we're calling for another fifty basis point rate cut, you know, relatively soon. So if the Fed funds rates at you know, fifty basis points in you know, a couple of months time, or say maybe even weeks time. Um, Yeah, you're gonna be looking at the tenure note around one percent. Could the yield

curve steep? And yes, Um, is inflation going to come back in any big way to to push longer term yield higher anytime soon? Probably not so. And if we're looking at higher yields, we have to look towards the second half of the year hard to see what the path of the virus actually takes. But the answer is absolutely these are just numbers, right, one percent not imagine it's just the number ninety bass point nine bays, But

it's just a number. It could go lower, um, But but I think there are limitations before it starts to actually hurt the markets much. It's the fetes that imply, oh, absolutely, you think another twenty five. Well, I, you know, I can't make a call on whether they go twenty five or not. It's gonna depend on what's happening in all the other markets. But I I don't I don't rule that out. Jim Cannon to catch up near this morning

moldering Stanley Investment Management Fixed Incomepan folio manager. The idea tell them that the fetty still implay after the fifty extraordinary absolute extrema weeks away. I love what Mr Karen said. They're about forget full faith and credit and look at the credit markets. Is the point over the next number of weeks headline across the Bloomberg. And this really shows not the specificity of cancelations, but there are two or three different pilgrimages in Saudi Arabia and the amra Is.

It's it's considered like a secondary pilgrimage because it's not compulsory, but it's where anybody goes to Mecca. And they've canceled the entire omber pilgrimage moment in Saudi Arabia. That's a big deal. It's a broader statement than just canceling one specific thing like the I M Fringe series put together tho it's a series of gatherings that ultimately of being canceled. And this is playing into the economic impact, not just in the Middle Eas, not just in Asia, but all

little perspective. This morning, as we bring in our good guest Howard Dean of Courses, Dr Dean of Albert Einstein Medical School, the former governor of Vermont, and he and I are of a vintage where we remember the extraordinary events of ninety two, which was George McGovern and I would point out Dr Dean that it was the six Amendment where it was guaranteed that the ut of America would show up and vote. They didn't show up yesterday, did they, Dr Dean? No, they didn't. And I'm stretching

in my head and figuring out why. I've been reading Twitter as I often do, and there's a lot of young people on Twitter expressing disappointment because many of them are for Bernie, but they didn't vote. And I don't understand why. I don't get this. They have a candidate that's very exciting for them. It doesn't happen all the time. Young people elected Barack Obama in two thousand and eight, the only time in my lifetime where more people under thirty five voter than over sixty five. So I do

not understand what's going on. I would suggest Vice President Biden is not doesn't have the former president's electricity of speaking and events and all that does Vice President by need the youth vote to defeat Donald Trump? I think he does. Um, we weren't party really is young, dark, and female. I mean, if you look at the Three Paths election in two thousand eighteen, two thousand seventeen in Virginia.

In two thousand nineteen in Virginia, the legislators were transformed. Uh, and the average age I think of the Democratic Caucus went down about ten years in the single election in the House. So, but our core group is young, of color, and female, and so we need those groups to turn out. If those groups turn out, we went. If they don't turn out, we lose. It's just as simple as that. Well, how would let's talk about what was actually happening out

the former Vice president Joe Biden. It was the African American vote overwhelmingly in his faith and now two months ago it fount like that would be the story. But eight days ago it felt like that maybe some of that was slipping. What has happened in the last seven days, It's not entirely clear, but it's more than the African American But the African American votes started all this in South Carolina, but donal throughout the South. He just got

enormous numbers. And I can't conclude anything but this is this association with the only African American president we've ever had in this country. Um. But there's more to it than that. Uh to win in places like Texas. Uh and in Massachusetts, which is just shocking. In Minnesota that was not the African American vote that carried him. There

was others. UM. I think some of this is just voters saying, look, we've had enough of the drama and the corruption and the every day Let's just get somebody who's we know. And even if it's Joe, who may not be that exciting when he showed he could win in South Carolina currently struck a struck a match. I. I've never seen anything like this in eleven decades, I mean eleven cycles. Here. Do you expect in the next four hours that this race goes down to two? No,

Elizabeth is probably going to stay in. She thinks it's gonna be a broker convention and she can be the peacemaker. UM. I don't know what Mike Bloomberg is going to do, of course, Uh. I think he's considering his options. He has enough money to stay in as long as he wants to, and his goals are really broader than just becoming president. His ads have been absolutely fantastic in terms of ripping up Trump, and you know, he gets a great he gets it's a big discount on those ads

as long as he's a candidate. So I have no idea what either one of them are going to do. And so far as I've assumed, it's going to be a four person race into the next big weekend, because I've been asked about this before and I've said repeatedly, we're not going to know until two weeks and the the next week is important to Michigan and big states like that. So this is not over by any speci

of imagination. Yeah, and Dr Dean Michael Bloomberg has said he's come out and said, uh that the only way that he could win is in a contest, contested convention where the super delegates come together and meet Michael Bloomberg, founder and Geordie owner of Bloomberg LP. I'm wondering, from your perspective, what is the likelihood that we will get a candidate determined by a brokered convention which has not been used for decades, Not since nineteen fifty two. I

think it's very unlikely. Um. Frankly, the optics is that are awful. Whoever the losing candidate would be in a broken convention with their supporters would have a very hard time getting behind the winner. Um. I just am not for brokered conventions. The super delegates has never elected a president. Has always been done without this help of the super delegates. Super delegates really are only there elect will attend the convention, which they didn't used to do until they were super delegates.

Howard Dean, what kind of vice president does a seventies something year old gentleman from Delaware need? I mean, what's I mean? I know it's way too premature to talk vice president. What What's And Bernie has already said this. Bernie has said we cannot have two old white guys at the top of the ticket. He's absolutely right. I'm hoping we're gonna have a young woman of color on the ticket. I can think of a number in the

governor of New Mexico is a Hispanic. As a Senator from Nevada, Stacy Abrams, of course, is highly well thought of. So there are plenty of well qualified women. I think it's important that we have a woman and I think it's probably what's your okay, great, but you know some people listening this would say you're gonna hand President Trump a second term. I mean, maybe that's President Trump's greatest hope. What is the evidence America will actually elect a woman

as president or vice president? This is not just about winning, it's also about change in the country and if we have to be run fear of voters who won't vote for women, and this country is in deep trouble. All those people are already voting for Trump and we're not going to get their votes back. I've never thought that the way of winning this election is to take to

a few Trump votes back. There will be some. The way of winning this election is to gin up our base like crazy and give young people, people of color, and women are reason to vote. Now, that's what's so disturbing about yesterday. That's really remarkable with Joe Biden did, but it's incredibly disturbing the young people didn't vote, and it didn't just hurt Bernie Sanders, that hurt everybody. It's sat or even having this conversation. I'm used to female

leaders in the UK. We've had female prime ministers, we've had leading Dr Dean has got decades. It's a simple observation. I think it's satur revenues conversation. Howard, let's talk about drumming up the base. I thought the base was fired up. I thought it has been for the last three or four years. Have we got to get the guys in the middle. The guys in the middle are going to probably vote with us, especially with the candidate like buying

because they're sick of Trump. But I don't again, I don't. I think you win races by firing up your base. That's how Obama one um, you know so, I I think that's the key. Now, the guys in the middle, you know, they'll they'll they make up their own decisions. Look, we can't stand for nothing as a party. I don't want to be like Jeremy Corban because that was obviously a disaster, but we do have to stand for something.

Dr Dean. I have to wonder. One big question has been turnout and how much can we read into the levels of turnout that we've gotten within these uh these early votes A lot. I am stunned and thrilled with the turnout among African Americans were stunned and thrilled by Bernie's turnout in Nevada among Latinos. So this is clearly really important part. I'm not worried about turnout among people

of color. I am worried about people young people. Uh. And this is that yesterday's result made me, makes me very nervous, and I think we have some work to do. How do we greatly value your Thank you so much? He's a former chairman of the d n C. The consensus for the private sector Friday is a hundred and sixty thousand. I love this. We can just about throw that out the window too. So there you go from Peter book far to get an excellence on which part of this we should throw out the window, we go

to Julia Cornado, of course, how to give us perspective? Julie, I thought of you yesterday, I mean the historic moment of an emergency FED rate cut, with your work at the FED and with your wonderful academics at Texas, how did you frame the historical moment of that fifty basis point cut? Well? Come, it was, you know, we had anticipated and given the signal of the G seven call,

we thought they wouldn't want to not deliver um. It's it's I think we saw the market reaction was not Uh, it's a panasy monetary policy in this situation is not going to fix the problem. The laryngitis at your fighting fighting, Julia, is it kinesiean or monitorist laryngitis? Well, but I'm hoping he's not coronavirus. Well, we'll get a test it. We'll get official surveillance test kit for your Thank you for

being a trooper and being out with us. Let's go here a bit more dr Coronado and then we'll cut it short so you can go have a drama scotch to get through the morning. Julia. When we when we look at the economics of the moment, how do you extrapolate forward? I mean, your timeline becomes so changed. How do you look forward one week or to the Friday jobs report or even at one quarter. Well, as you mentioned, the job report is going to be a little bit stale.

Um and you know, the sectors that we're gonna look for in the coming months will be say, leisure and hospitality, travel. These sectors are going to be tremendously hit in the next few months, both in spending probably bleeding into hiring. So we are going to see us slowdown in activity in Q two. We're going to say this in claims in the next couple of weeks that claims are going to start to lift a little bit high. Here, we

could probably see a little lifting claims. Yes, Um, you know, we think about the sectors that are going to be hit. Some of these people aren't going to be eligible for an unemployment insurance. You're going to see probably the hourly workers get laid off first. So um, it may not show up in entirely in claims, but you you know, you you probably would expect a little bit of a lifting claims. Yes, Junia, it's been such a big focus

of this program over the last couple of weeks. How do we support the small and medium sized enterprises to make sure they don't have to lay off people for what could be just a temporary economic shock. How do we do that? That's really a fiscal question. I mean, we really need a coordinated fiscal response here. We need some liquidity, maybe through the Small Business Administration, through SEMA.

You know, there's all kinds of ways that the federal government could get money in a targeted fashion to affected areas. I don't see any evidence that the administration has plans for that. Um I think we need to start talking about that, because why let this economic hit sort of spread and deep and in the way you're describing if you want to ensure this this shock Julia as a

former FED researcher at the Central Bank in Washington. I'm just trying to understand how they're modeling out the potential effects of the coronavirus, what data they're looking at, what they're responding to. Clearly they were responding to a material shift and expectations going forward stocks trying to take that and figure out whether that means recession? How likely do

you think that is the outcome here? So I think modeling the direct effects is easier, say, you know, you can think about the interruption and activity in certain sectors, what we're seeing, how it's likely to spread. The knock on effects through confidence are the things that the FED is trying to ensure again, right, the hit to consumer confidence, a broader sense of you know, pull back in business

investment in consumers ending. So I think that's what the FET is trying to keep on the tracks, which has been pretty good in recent years, very resilient to a lot of bad news. So I think that's the aim um. If that gets hit and we see consumers just sort of hunker down, then you're in trouble. Dr. Cornado and micro economics. One of the great great moments is when you have to try to figure out income and substitution effects and at least to all sorts of ambiguities. What's

the arch ambiguity for chairman power right now? Is it ambiguity about the dollar? About no inflation? Yes, inflation? I mean, what's the unknown out there for the chairman? Well, and Thomas's you know, you're you're putting your finger on it. The income and substitution effects in an older society, lower interest rates can be you know, more painful to the older generation replying on that income, and they can you know, sometimes have to save more as a result, so you

get less bang for your buck. Mine, Julia, you're you're being come on, get the piece of chalk in your hand to get some vixed vapor rub to get you through the day. Dr Coronado, you're in a classroom right now and you're looking at an actuarial assumption that's going to four percent or even three point eight percent. That's gonna turn on its head our American financial society, isn't it? It will? Yes, and we are I mean, Tom yesterday was a dramatic day. The drop in yields at the

ten year point below one per cent um. It's astonishing where we are. And of course for the FED, you know, forget the income and substitution effects. They're out of AMMO. You know, they're they're running out of tools. Uh and uh. And that's that's I think there may be that kind of existential worry in the markets, this realization that, oh my goodness, here we are now even the FED is out of AMMO. Are we questioning the Fed? Put Um? I think there's a little bit more underlying concern about

that now. I mean, obviously the Fed can do KWIE and they will if they have to. Um. You know, the impact of that is less powerful when yields are already as low as they are, so, you know, I a lot of the clients I talked to, Yeah, there's a lot more discussion about what comes next, what's the FED gonna do and what is the impact going to be? You know, we have a real shock here, this coronavirus. It's transitory, but it's real. We know it's going to hit the economy, so you know, the the ability of

the FED to ensure us against this. You know, I was hoping with the G seven announcement that we were seeing more evidence of the kind of fiscal monetary coordination that we're gonna need when we get a real shock that's the deeral lower bound. But we really didn't seem much follow through on the fiscal side, certainly not in the US. So you know, I think that's the realities that fiscal policy makers are going to have to pick up the ball here. Julia, you're a trooper to be

with today. Nurse Amy emails in Dr Coronado and suggests you go to the Joe Koi School and Hospital uh there for your your laryngitis, and she recommends you put vix on your eyelids, and that's usually a good way on your eyelid. That's from the Joe. She she's a nurse staph nurse of the front. That's from you know,

that's from Dr. Thank you. Coming out of the macro policy prospectives, President I found out our guests come on with us when they're sick, and you know, it's really because they de tended to be on a program, and I think that's a beautiful thing. Did we pair We

probably dated. Jared Burstein with us right now. And if you're curious about Vice President Biden's path forward on economics and policy, there's no one better to speak to you, senior fellow Center and Budget and Policy Administration, UM Policy Priorities, former chief economists of course, with the Vice President, Jared. Did you speak to the Vice President last night or in the recent days and how's he doing. I haven't, Uh,

he's been a little busy. I've talked to folks on the campaign, and I thought what was interesting to me is that these folks were feeling strong even before South Carolina. They believe that South Carolina was going to turn the tithes and events have proven them correct. Define establishment Democratic Party economics and how it can defeat the president of the United States. There has to be a strategy. My guess is after four years ago it will be more overt.

What will that strategy be to defeat Donald Trump? So that's a two part question. Let me start with the first part, which is easier, about the economic I think the way to think about the economics in this case is building on what exists versus introducing a lot of new things. So if you listen to Biden's agenda, he's talking about building on the Affordable Care Act, planning a path towards universal coverage, but not trying to leap frog there quickly. If you look at his progressive tax ideas,

they're building on the code as it exists. How did that beat Donald Trump? Well, it's a return to a more established, normal set of procedures, and it's a belief that what the country craves is a lot less chaos and a lot more order from someone who's had a lot of experience in government. One thing that marked the primaries was the lack of younger voters turning out. And this is the reason perhaps that some people are pointing to Sanders not performing as well as he was expected to.

And I'm just wondering, if you take this forward, and you take this idea that we're probably going to see Bernie Sanders still very much in the race, how significant is it to you that we've got a two party, two candidate race at this point where one of them ignites the younger voters, which is the key democraphic and it's not Joe Biden. What does it say about Joe

Biden's chances? I think what it says is all of the function of something nobody knows the answer to which is that if Joe Biden ends up being the nominee, and you make a great point, this is ain't done yet, will those voters switch over or will they sit on their hands. It's kind of a protest vote. I think the anxiety about Trump having four more years is enough to keep people from sitting on their hands in that context.

But that is the big question. There's another question to which is that Bernie Sanders also still has quite a bit of support and quite a few votes. How likely is it that we're heading toward a brokered convention, a sort of worst case scenario for Democrats trying to give voters conviction that they actually had a choice in who ended up being the candidate. You know, it's a fair question. I gotta say, I'm an economist that I don't know

that I have a great answer for you. I will say this, one thing that really struck me about last night's vote is that late deciders broke towards Biby. That happened even in Massachusetts state, eating campaign a lot where he beat uh Center Warren. So that leads me to believe that there is an electability case to be made.

Their people are people are just thinking that he's the one who can most reliably be Trump, and I think that probably does put some wind in the final Gared, you're not doing market economics where you're gaming tense of a percent and real GDP, etcetera. But how do you envision the economy going into it? It's you know the

folks that GDP statistics come out. I don't have it in front of me job, but Jared, but I'm going to suggest we're gonna get a g d V reports three days before the election, whatever, but we're gonna have a two percent economy or could it be gloomier to the benefit of a Democratic candidate. Certainly, the coronavirus is

a huge concern. I saw and I said pole this morning that I must admit surprise me, which is that the coronavirus impact was high on the minds of lots of voters, and by the way, that tended to break towards Biden. Uh So, it is Uh, definitely likely. I would say that the economy will be growing considerably slower, well below trend by the time when people are making up their votes. And by the way, if, if, even if we we don't have to have a recession for

unemployment to start to rise. This grossery is cut by half, which is the Goldman Sachs forecastpoy R could be closer to and that's still low, but it's half point about where we are, and we'll be watching claims tomorrow on that. Jared Bernstein, thank you so much, greatly, appreciate your time. Looking forward to seeing you in Washington again. Of course, Dr Bernstein with the Vice President a number of years ago with the Obama administration right now comments in a

well timed discussion with David Rubinstein. You know him, of course from Carlisle. Some of you will know him from some of his public service, particularly with the administration of UH President Carter. This was a few years ago, and now he has become a TV star with piercing interviews with an eclectic group of world thought leaders and decision makers. And I always bring up, of course, is I thought definitive interview with Mr Bezos. Um it will be tonight

nine o'clock on Bloomberg Television. I want to begin first with Mr Rubinstein talking to his good guest, the governor of Saudi Arabia's sovereign Well It's fund. Let's listen in. Now you have said, I think publicly you would like it to be the largest sovereign wealth fund in the world at some point, and you like it to get to a trillion dollars to trillion trillion dollars. So when do you think you'll be able to get to two trillion dollars? The number looks really big because you know

the largest Southern well fund today is about one trillion. Uh. We think that it's very much achievable by twenty thirty. All those different things require a big staff to manage. How big is the p i F staff today? When we started this was forty people today of more than seven hundred by year, and alatargetists to have more than one thousand full time employees. M P if this deserves at least a one hour conversation, it could be one

of those panels where I would discuss this in Mr Rubinstein. Instead, we've got too few minutes to talk about this, David, there's any number of ways to go here with this effort by Saudi Arabia, what makes this effort of a sovereign wealth fund different from so many others were aware of? Well, this sovereign wealth fund came out of the blue in

many respects. Some of the well known sovereign wealth funds like the Kuwait Investment Authority, the Abu Dhabi Investment Authority, the Government of Singapore Investment Company, they have been around for decades, generations in some cases. The Sovereign Wealth Fund and Saudi Arabia is relatively new, while Um the head of it, Mr Al Romanon has um been the head just for a couple of years. It actually was started p i F Fund in seventy one, but it was

relatively under his leadership. It's now becoming, as he hopes, one of the biggest in the world. He was an investment a commercial banker in Saudi Arabia. He's a native of Saudi Arabia and he was picked by MBS to leave the p i F Fund and he's built it up into a very very considerable force. Obviously, the I p O of Saudi Aramco given it more resources, and I should say he was also appointed to be the chairman of Saudi ARAMCO in addition to the job he now has as being the head of p IF, So

he's got two big jobs in Saudi Arabia. Now. Is the Sovereign Wealth Fund a bolt on to the House of Flizara, bolt onto the royal family or can it be discreet and also separate from the social debates of the kingdom. Well, they've hired a lot of investment professionals from the West, so they have a lot of people as well from Saudi Arabia. It's designed to get the highest rate of return that you can legally do without taking undue risk. But it also has a different mission.

They also want to uh uh have people come into Saudi Arabian invest there, so they might invest with people who will invest in the kingdom as well as people who will invest and get good rates returning outside. So it's got a dual mission in that sense. Just because of time, David Rue was saying, give us one vignette of this important conversation. What was something that surprised you from the governor. I think it's surprising that he doesn't seem to be under undue stress. I mean, if him

on my case. So I was running as the chairman of the Saudi Aramco and also running the p IF and and and MBS is deeply involved in both of them. You think he would have been under more stress, but he seems to be relatively relaxed about what he's doing and I think a very engaging person. He's come to be well known in the investment world in recent years. In fact, we did this interview at a large private equity conference, and um, you know he tends private equity conferences.

He's involved in a lot of investments directly. He's on the board of Uber, where the fund made a direct investment before they went into division fund, and he is the person who, with MBS, made the decision to I went to the Vision Division Fund, the first one that they committed forty five billion dollars to it. David Rubinstein one final question. You were brought up in a regime of six, seven and eight percent rates. I don't want to, you know, give away Mr Rubenstein's young age, but this

was a few years ago. How does your world spin with a ten year yield of point nine five to two. It's hard to believe because you're referring to days when I was in the cart administration, when interest rates were much much higher. It's hard to believe that the Treasury is now below one one point oh, but that's the world we live in, and I suspect it could go lower because I'm not sure we've seen the last of the interest rates declines from the from the Federal Reserve. David,

Thank you so much, David Rubinstein. Peer to peer conversations with a gentleman from the Carlisle Group. This is an extremely important interview, particularly for our global audience, Saudi Arabia's public investment funds, Yassir al Ramaya and their governor. 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 Twitter at Tom Keene before the podcast.

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