Surveillance: Money Will Go Back To EM, Dennis Says

great to catch up with you, sir. Some confidence and some optimism that you have in em Tell me how you convince the investor right now who has shifting investments towards the United States to shift back international. I think there's a couple there's a couple of things that really

highlight this. First of all, um our view is that apart from one or two countries, actually three countries were Turkey, South Africa and Brazil, you have not really seen a deterioration in a key deterioration e M. Fundamentals during the course of this year. Those three countries you have seen that deterioration, and that means once you get to see global financial markets settled down, and for us that means the dollar stops going up and starts to go down again.

I think money will come back into the emerging markets. So it's a mixture of reasonably sound fundamentals and in most of the emerging market countries combined with our view the dollars going lower of the course of the rest of this year and into two thousand and nineteen, and what that will do is pull money back towards the emerging markets. Jeff, is dollar witness a prerequisite for EM equity to start performing again? That is that is my view. For sure, we do. I mean, at the very least

you need dollar stability. But you you pose the question right at the beginning by saying what gets people to move out of the US and look for emerging markets? I think the weaker dollar is part of that. And if I was sitting here in the house view was the dollar was going a lot stronger, it would be just very hard to be optimistic about a EM. So in my view, yes, it is absolutely critical to our to the view that you'll get some gains in them

over the rest of you. I think it's going to be a blowout or anything like that, but we expect marks to be hired by the end of the buy around seven from current levels dollars. Key to that from a thirty five thousand feet view, the regional shift has been quite remarkable over the last six months away from

international into the United States. If you are thinking about shaping things to pivot back, Jeff, there's some countries out there that have aggressively high interest rates, including countries like Turkey and Argentina. Let's break em down a little bit more.

Where are you looking well? As I say, I think that for example, if you if we look at Turkey, Turkey has done some dramatic things on interest rates recently, although it was obviously very much delayed, and they've still got very large fundamental issues, which is a huge current account deficit, which makes them vulnerable to any any hiccup in terms of global financial conditions, we think you should be more looking at the countries that have responded well

in terms of monetary policy to the pressures of recent months, where we think in a week of dollar environment you will get some some flows coming back in. A very good example of that is Indonesia, which has been hit very badly this year. We think the fundamentals are frankly perfectly okay, Okay, They've got a modest current account deficit, but in a week of dollar environment, I think that goes away as a concern. So Indonesia is a place we look. We look at career, which is a very

cheap market. Once again, of course there I guess the risk and careers people being concerned about what the trade war, which I guess is what we have to call up between the U S and China, what that could do for Chinese growth, and therefore a follow one for Korean exports. But the market is very cheap, and I'll give you one. In Latin America, we like Mexico a lot. We think

the currency is very oversold. Still we think that then after whatever we're gonna call it in future is going to get redone and the economy continues to tick along, you know, not very strong, but some perfectly okay. So those are some examples of markets we take a look at. Markets are their banking and their finance. Is that the opportunity to buy the established banks. We do have to be overweight financials, and we do think that is a good way to to go back into these markets for

the for the medium to long term um. Your listeners may not be aware, but basically fifty of the ms c I Emerging Market Index now is technology and banks. The text a bit banks are a bit less than so you've got to go one one to the other. We're not pushing technology dramatically, although you know we we wouldn't be underweight text shares at this point in the end, but we think the better way to play it is

through financials, and there's reasons for that. You're getting credit cycles in certain economies, but you are seeing a bit of margin improvement as interest rates have gone up around the world. And frankly, our analysts four e M banks also things. A lot of banks in EM and everything different plays as well. But Jeff, you've been doing this since time began. And where John it used to be like an act of God. You put ten percent of your money and e M and never more because it

was too risky. How much do you put in EM within a blended portfolio? Is U b s saying that the developed country and particularly the United States market is so rich that you load the boat on e M. How do you grade that? Definitely, No, you don't load the boat on the M because unfortunately, so much of how EM behaves will be determined not by what e M itself is doing, but by what global financial markets overall are doing. And that of course means fair bond deals,

UM and the dollar itself. So if we could time this right, we'd all be very much richer than we are. The problem is timing it is difficult, and so e M is about now of the of the global benchmark, and and I don't think it makes a lot of sense for investors to be putting much more than that amount of money into EM unless they're smarter than me in terms of trying to time it. I think we we still like the U S market. Are u S

strategies put out of note yesterday. We think that the high trade war could give you a short term pullback, but we're still looking at SMP at the end of the year. So actually, I think the US will be you know, a competitive place to put money of four emerging markets over the rest of the year. So I'm not sure you're going to see huge out performance, but I certainly think the time when you want to be major underway. Tom which of course would have been the

call for the first nine months of this year. I think that that time is probably beginning to come to an end now, Jeff, I just want to get to find a word and what's coming out of China at the moment. They've promised this morning not to weaponize the currency, but the data in the last tie y four hours showing their trimming their treasury holdings, now there's going to be some big conspiracy theories out there, so please dismiss them if you can give us the reality check what's

happening with China. We certainly think they're not going to use the devaluation of the currency too as a response. On the trade side, we also don't think they're going to shared if you like their um their treasury holdings. But I think it's a question of stocks versus flows.

We think what is quite lightly as China will not buy as much you stebt at the margin going forward, so I buy as much as they've done in the past, um, but when we don't believe they're going to sell less stock of debt they've already got, so I think Chinese demanded the margin may come down, but you know, for them to actually start selling aggressively what they own will just make things worse for themselves because they'll they'll have

to sell into a falling market. So weaponizing either bonds or the dollar is still or the currency, I should say, is still very unlikely. We think what China is still trying to do is to be constructive as much as possible, um considered responses to what's going on in the US and see how this plays out. Because at the end of the day, a major, major breakdown of economic relationships between China and the US is dangerous for China because

it puts the economy under more pressures. So I think cautious, considered responses by the Chinese will continue to be the most likely thing to expect. Here's Jeff Dners, thank you so much with us Life from the Bloomberg Interactive Broker Studios. I'm really pleased to say the former GE vice chair has dropped by Beth Comstock, author now of Imagine It Forward, Courage, Creativity, and the Power of Change. Beth, good morning to you,

Good morning, Thanks for having me. Can we just start by talking about the time when you you turned down Steve Jobs. It gets on the phone and gives you a call out of nowhere and you say no. Eventually, how does that work. Yeah, well, I was at NBC at the time, leading did the digital in the Digital Future, and it was a tough assignment. And I got to work with Apple and they'd reached out to me about a job. At first it was in the iTunes area and I get a call one day and it's like

Steve Jobs sort of lobbying. Hey, I'd like just want to say, we'd love to have you here, and he said something uh with the iPhone hadn't been introduced, and he said things are going to get really big here and uh. And it just didn't seem like the right job for me at the time, so I said no. Um. And then he came back a couple of months later, he was looking for something a new sort of innovation role, certainly around clean tech, and I said no again. And I did regret it for for a while for a

couple of reasons. I mean one, I remember sitting at the kitchen table with my husband. We were going through the financials, going how big could this stock ever be? Really? I mean really, um, So clearly I didn't imagine that forward um and UM. And I think I partly it was I didn't want I didn't I saw them as a technology company. I was in media, wanted to do content, so I had a clear strategic reason for not wanting to do it. But sure I regretted it. Apple went

on to become this amazing jug or not. I think I could have learned to be better. I think jobs and that team would have pushed me to be better. I regretted that, and maybe there was a bit of fear and not taking it, and I sort of regretted that. But in the end, I was very loyal to my company. I had good reasons for not wanting to move my family and taking that on a lot of people. David Brooks has been great about this. The smooth people and

and and Masters of Business Administration NBA. People always have a zeitgeist of the moment, the present MBA zeitgeist. What do they get wrong about the realities of managing? Yeah? I love that question, I I yeah, No, it's around. You're good. I m I Phara. I recruited at Gee. I would recruit up too hundred and fifty nbas every year for about a decade. So I got to work.

I didn't go to business school. You've heard every line I've and why we recruited them and why I was attracted to NBA's as they come with an amazing toolkit. What NBA's are not trained to do is to be entrepreneurial or encouraged to be entrepreneurial and put in those situations of figuring it out. And the argument I'm making in my book is that we're just in such a time of such disruptive change that there is no tool kit for that. And what's great John about her book

as they fight like cats and dogs. I mean she's you know, like page two, there's four people in the room screaming at everybody. Here's a big question that would never happen on surveillance. Now that that happens in a commercial breaks like pretty, I'm pretty sure our audience can work that out for themselves best. This year, two big corporate stories, perhaps defined by mismanagement, Facebook, Mark Zuckerberg, Tesla Elon Musk with a big question that I know that

you can answer. Can you be an entrepreneur in a company as big as Facebook, as big as Tesla? I were? I wonder, I I wonder. I think this is a challenge for every company and investors to think about. We have these few amazing leaders who seemingly do it. But there is also a time when you need, maybe need to change out the leadership from a and have them

have a different kind of role. I'm not suggesting Mark zucker Book should should step aside, but does he have enough people around him that can help him think through Really? In this case, to me, Facebook was and imagine it forward challenge, right? Were they thinking ahead of those unintended consequences that could have happened? I would say maybe there would be a need for more strategic thinking there. Elon Musk seems to me to be a good case of needing a great to old culture and a great team.

And you can't expect the leader to do everything, and maybe he's signed up to do more than he should. How difficult is it, though, to change a culture when the culture is defined by the entrepreneur who found at the company. Yeah, well, I think that is the big challenge. We expect them to be superhuman, these these business gods, and they are not. Well, then the business gods is They've got to delegate at some point, and so much of it is succession, so much of it is just

the day to day grind of delegating. How do you delegate constructively and do it with courage, creativity and truly have power to change. I mean that's the issue, isn't it. Yeah, we'll look at look at Musk and Tesla. I mean, I only know what I read, but a lot of people have left in the past six months. Obviously it's a stressful situation. But if you put the investment into the team and delegating and things, I don't know. He needs to say, I don't have all the answers. I

need you to figure it out. Here's where we're going. You help us. I gotta squeeze in this question because John's only working like a thirty eight hour week with his four properties. Are we working too long of weeks? Our parent didn't do this, did they? Well, I would say, I don't know. I think we're working maybe on the wrong things too long. I'm big on getting out and discovering, get out and seeing where trends are. And I think we're in the Yeah. That are you in the same

leadings too often having the same discussions? You probably shouldn't do that. No, but just the whole you got twenty percent of the population working, and do they are they working? Smart? I think that's the question. Maybe if it's seventy hours and ten percent of it's out and discovering trends in the future, I'd say that's worth it. Beth Conto, thank you so much. The book has imagined it forward, courage,

creativity and the power of change. And what's glorious about it, I'll be direct, is all of you that are fed up with thought leaders. This is the anti thought leader book that sounds like it is. I'm so sick I thought leadership. What does that even mean? It doesn't mean anything. And you know there's a lot of yelling and screaming and people or you know, they try to come to decisions that are constructive, like her brilliant decision not to load the boat on it will stock it fourth not alone.

Thank you. So it's always good to speak to a gentleman of the legislative branch, but even better to speak to someone who actually understands executive capabilities more important than anything. He's a former mayor of Dayton, Ohio, holding court in the tenth district of Ohio South. I'm gonna call it Southwest of Columbus. Uh. Michael Turner joins us this morning Congressman, thrilled to have you with us. What did you learn, Congressman about the special election to your northeast, the twelfth

Congressional district. How do you guys get Republican turnout for the mid term election? Well, thank you, appreciate you have me this morning, and UM for you know, focusing on Ohio. I think the issue probably for most people is is getting out to vote coming up this this November. I think that if you look across the country, people see that the economy is proving. They see that UM, the outlook is bright. You know, Ohio frequently UM leads in

recession and lags in recovery. Right now, OHI always strong. Do we know that the economy is strong? Um? You know, special elections always have different turnouts in general elections because they're scheduled at irregular times, which is what the Kurd in Columbus um for the best congressional race. I think pretty much everyone knows that the election is coming up in November is the one that's important that they need

to turn out for. And I think that's the one that UM where people are going to voice their opinion that the economy is strong. UM, we need to continue the direction we're going to build jobs. It's just one more question in the politics before we get to a year important abilities and armed services and intelligence and that is and I don't mean you and the tenth district, but as a general statement, do you want the president to show up? I mean is he helping mainstream Republicans

like you right now? Well? You know, um, I think the president in in focusing on the economy is probably the best place that we need him to be UM. And that's where um he's he's making headway. We can see it with the renegotiated NaSTA with Mexico. We can see it with the job reports. I think he's focused there. I think it's probably the one that resonates with the people, um, you know, at their kitchen tables and what's happening in

their household. And that's where his voice is probably most important. Let's talk about your abilities coming as out of mayor of dating of course with Roy Patterson there, you've always looked at armed services and protecting protection of our air force assets. Right now, there is a dialogue with Russia.

Do we risk with all the back and forth of the Russia probe and all that, do we risk giving up intelligence secrets, you know, I this is this is important debate I think with respect to overall our democracy and is there you know, three real important issues for us to address here. One obviously is Russian meddling. Um. We need to make certainly identify the ways in which they're attempting to do that. They've done it in Europe, They've done it, you know in the Baltics. Um specifically,

they're they're trying to interstere there in the politics. We saw even a mccrone's election at France. Getting an understanding of what they have undertaken to try to affect public opinion and democracies and dabble in our democracies and elections is incredibly important. The second, of course, is the the issue with respect to the presidents himself and his campaign and I think Hillary Clinton's campaign and the and the and the give a Credit National Committee. That's an important

dialogue to have, um. And you know what occurred there, I mean the fact that Hillary Clinton's campaign, the Democratic National Committee, funded a former British spy to go to the Russians define dirt on their opponents is certainly I think equally as important of an issue's review. And then then thirdly this this issue of what was happening in the Department of Justice in our intelligence community. It clearly

appears that there were abuses. There are certainly in the baser courts where um, politically funded opposition materials were used and as evidence in a court for the purposes of getting surveillance on a presidential campaign. Um, you know, all of those things I think are incredibly important for us to get within the day to day grind of you doing this in the legislative offices? Are we naive about

the Russians? To me that whatever the Republican or Democrats, Secretary Clinton, President Trump, whatever the dirt is of the moment, are we just naive about the Russia impulse into our domestic affairs? Well? I think, Um, I think perhaps the whole West is, including United States and our European allies, because we we you know, we saw even after the Berlin Waltz fell, a sense of you know, there are partner NATO declaring that we don't even have Russia as

an adversary. Um, you know, adversary self select and Russia certainly has self selected that they see both in meddling in our democracies and their aggressive invasion of Georgia Ukraine, their military build up, their monorization of the nuclear weapons, their self declaration of what their trigger is using nuclear weapons.

They are our adversary, Carson, in the time that we've got left, I really want to turn back to something I think Americans are remarkably naive about, and that we look at the Wright Brothers is being down in the Carolinas in the iconic photo of the plane and the beach, and yet your district is the heart of our original aviation at district, you're no doubt a supporter of Right Patterson, which was the Wilbur right Field of the nineteen twenties, and all that tell us about the need that we

have to husband our air force assets in a time of peace. It always slips away, doesn't it. And what is right Paterson Air Force based doing to keep that energy going? And particularly I look at the air base wing. What's the forward motion in a time of peace? And

that's a that's a great point. And I appreciate that the you know, with the Right Brothers and our innovation, you know where they uh built and did all their their research in data Ohio and as you mentioned in What's North Carolina achieved the first flight came back to the right path from that point through stealth. Our engineers

and scientists have tried to advance us with ingenuity. What happens frequently is we cut our budgets and we stopped that that learning, that that advancement of ingenuity until we

have an adversary who goes past us. And we're staying that with China with what they've done and dealing our technology for the U thirty five, but we're now looking to modernize the five instead of us challenging our engineer and scientists and saying, let's know, let's reach as far as we can, but we always say, well, let's just reach just a you know, smidgen past where our advastaries are doing. And that created So I'm at a rotary outside Washington Crossing and I'm listening to you go on

about this. I'm like, yeah, yeah, yeah, yeah, what about the wrench the costs of thousand dollars? Are we anywhere near better efficiency of budgets for the Pentagon? Absolutely? Um. We We've we've instituted um auditing. We've also in studed perform in acquisition and I think we're doing probably the probably the most important thing, and that is we're reaching past are large uh industrial defense industrial base too small companies that have innovation and being able to pull that forward.

The ability for them to be able to work with the federal government, with the Department of Defense and bring that ingenuity to the table is probably where we've not only see savings, but advancement and technology. Oh, Congress, and let's save their Michael Turner loved to talk to you always out of Dayton, Ohio, the former mayor of Dayton,

of course, representing the tenth Congressional district. I said this yesterday, folks, and I really mean it, and that all the years of Bloomberg, this is maybe the best one hour interview I've seen. It is with a gentleman who is misunderstood in a great mystery to so many within investment finance economics of America and within our corporate experiment. And that would be Jeffrey Bezos of Amazon. That must mean and

always mean David Rubinstein, The David Rubinstein Show. Peer to peer conversations of course, uh an our conversation between Mr Rubinstein and Jeff Bezos and David Rubinstein joins us. Now, David, a kid out of New Mexico, goes to Princeton, just absolutely excels and achieves, and it's remarkable. In your conversation, Nation is the set of many failures he had on the path to success. Congratulations on what I would suggest is the interview of the year. Well, thank you, m Jeff.

There's somebody I've known for quite a while, and in fact, when he was getting company started, UH, one of my companies, Carlisle was was involved a little bit. We got some stock, but we didn't think it would be that successful, so we sold it too soon. It's probably worth five billion dollars a day or so. Today. I pointed it out to him. Jeff is an extremely smart person who doesn't really want to be called the richest man in the world, which is what he now is. But because Amazon has

done so well this year, the stock is up. He is now by far the richest man the world, with a net worth of a hundred and sixty billion dollars or so. On the day that I interviewed him, in front of about two thousand people from the Washington business community, UM, he announced a two billion dollar gift UH part of a philanthropy effort that he's beginning, but his main focus in philanthropy has really been his Blue Origin, which he regards as a philanthropic effort to kind of improve our

ability to travel on outer space. The company has been done spectacularly well over the years, but he has been private. Among the movers and shakers, David I would suggest he's the one that we, as in a collective America, know the least about. What is the management method of Jeff Bezos? What's the day to day method that he uses well? He would say that his style is somewhat different than others.

He doesn't like to have meetings before ten am. Um. He likes to get eight hours of sleep, and most macho CEOs don't want to admit they need eight hours of sleep or want to get eight hours of sleep. Um. He doesn't like power point presentations in his band them. He likes memos instead of power point presentations. He likes to spend a lot of time with his family and his kids. But also he is a person who says he makes most of his good decisions by intuition, not

by detailed analysis and strategic kind of memos. He intuition that's what he said. It really has helped him. He said his best decisions are made by intuition. I asked him what his intuition wasn't where he was going to place the second headquarters, and he was laughed. He has a very famous laugh. But he demured and said that he wouldn't make that announcement until the end of the year, and no one really knows what he's going to do

is outside the company. You know, one thing that I'm struck by with the two billion dollar philanthropy announcement that he made was how long it took for him to make this move and just the scope of what he could potentially do with his riches. Did you get a sense of why he waited so long and whether he's about to unleash the floodgates of his cash or whether this is just basically the final act here. Well, remember, a lot of the wealth has coming this in the

last year or so. The stock is up so much this year that it's not nearly it's nearly doubled his net worth in the last that's a year and a half or so. So he's always wealthy in the last fifteen years. But now that the money is staggering. A second, he has been unlike many people who built these great companies. Um, he's still the CEO. Many people who are very, very wealthy at this level stepped down by the time they reach his age. But he's still focused on running the company.

So that's taken a lot of his time and energy. And Third, he regards his Blue Origin effort as philanthropy. Um. He puts in over a billion dollars a year in it, and he would regard that as philanthropy. But I sense that he's going to spend more and more time on philanthropic efforts. He made a two billion dollar announcement and it got a fair amount of attention. But you know, in the old days, two billion dollars philanthropic gift would

be staggering. Today it's not seen as his staggering when you consider the kind of wealth that has been given away by Bill Gates or Warren Buffett. But I do think that he will be increasing his efforts there. I'm afraid to ask when an all hands on meeting is like at Carlyle, have you ever done that? David? Have you ever gotten so upset that you walked out on the floor and said Hey, all you smart guys, get over here. We are now having have you ever done

in all hands meeting? Uh? Well, we have people all over the world, hard to do all together. But we just had our annual investor conference and we had got a couple of hundred people from our firm here. But look, Jeff Bezos is obviously in a different level than I am in terms of his intellect, his ability to build a company and to build something that's gonna last forever.

I think my company is very, very good. Jeff has built something that is obviously the most global phenomenon we've ever seen, and he's really reshaped so many different businesses. I think the interview is really well, we're all worth watching. And normally our show is about a half hour, but because it was so many good things in it, it's going to be a full hour show on Bloomberg. Well was saying, let's listen to Jeffrey Bezos on the all

hands meeting. Your stunk is actually up seventy this year. Um, is there one thing that you think is responsible for that is several things? Because is pretty good? Now I am it's a you know, Uh, I have been lecturing we have all hands meetings at Amazon, and for twenty years, ever since we've been twenty one years now, um, every at almost every all hands meeting, I said, look, when the stock is up in a month, don't feel smarter, because when the stock is down in a month, it's

not going to feel so good to feel dumber. And that's what happens. Never spend any time thinking about the daily stock price. I don't Jeff Bezos, Lisa Brand was just interesting. Why don't you pick it up with Mr Rubenstein? Mr Rubenstein, One thing that I'm struck by is what you said, which is most people of his wealth and his point in life would step down as CEO. How integral is Jeff Bezos to the whole zeitgeist of Amazon,

the whole future, the dynamism of this behemoth. Well, uh, I think he's pretty important to it because I don't know that there's somebody that couldmorrow could easily replace him. I mean, you know, as cemeteries are filled with indispensable people, of course, but in the end, Jeff so central to that company. I don't think he's playing a step down anytime soon. In earlier interviews I've kind of into I got the sense from him that he intended to do

this for another eight to ten years. So I'm wondering what was the one thing that stuck out to you about him and about sort of what drives him and what allowed him to create such an incredible company. He's

very smart, very driven. Um. He doesn't pay attention to what other people are saying sometimes, and you may remember stock analysts kept saying you don't have any profit, you're not worrying about profit, And of course all those people are now um, regretting that they didn't recognize how great the company was going to be. He was focused on building customers. He's very focused on customers being the most important thing in his company, and he puts customers first.

Unlike some extremely wealthy people. He doesn't show arrogance in my view at least I certainly haven't seen it. Uh. He's very modest relative to what his accomplishments are. And I said, most people that we know who built something like that not be able to be so modest about what he's thought it or have such a good sense of humor about himself. David, thank you so much in congratulations. It's just a tour to force this. Of course, is that David Rubinston Show Peer to Peer Conversations, an hour

long conversation with Mr Bezos of Amazon. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio