Surveillance: We Have Reached Peak Globalization, Bremmer Says

then we we'll hear from the Senate impeachment trial. That will be twelve pm New York time, tenderly scheduled for their We're thrilled that Dr Bremmer begins our Tuesday here in Dabba's Ian. Wonderful to have you here today. Why did you make the US a top risk for this year? Well, size, the market's massive, and the precedented nature of the election coming up, where half of the population is going to think that it is rigged, is going to think it's delegitimized.

I mean that is important. You're gonna have, you know, a period of time, whether it's weeks and months when we've had the election, but all likelihood, we haven't agreed on who the next president is. I haven't had that since Bush Gore and Bush Core. At least both sides were prepared to see what the Supreme Court was gonna rule that this is more unprecedented. People are prepared to Who was the president going to speak to here roughly thirty thirty five minutes. Who's he talking to as he

comes to Davos? Oh no, he Look, he loves it here right when he Remember he was here three years ago and everyone thought it was going to be a disaster and he had a great time and the c e O s were extremely nice to him. And the lunch remember the lunch were absolutely And I mean, so did you go to the ch I did it, But actually I remember, like you know, billionaires trying to fight to go and listen to the president. Absolutely. Look, I mean you gotta understand, first of all, the delegates here

may not like Trump. They like his policies, um, they like the regulatory rollback, they like his cabinet, um, they like his tax policy. I did informal poll last night about delegates on balance. I would say they think he's gonna win a second term. And there was a zero panic about the prospect that might happen. So, I mean, you can have Greta here, and you can have a bunch of people talking about climate sustainability. But the reality is that Trump doesn't drive people crazy at Davos the

way he does in the United States. And people should hear that, they should know what the power brokers in the room in the closed door actually thinking. And in President Trump does his you know, the inaugural address for the World Economic from on the day where his impeachment trial starts. Is he going to be fighting and he's he going to say, look, Europeans, you're not doing enough. I'm going to post Harroffs because he needs an adversary to distract. Or is he going to try and keep

everyone on side. I'd be very surprised, Um, if he's adversarial with this group. I expect this is gonna be Trump saying victory lap I'm the greatest ever. My economy is doing well, my markets are taking off. Look how much money I'm making you guys. I got rid of Sulimani, I'm killing ice in al Quaeda. He may go off script and talk about how bad and how unfair the impeachment is but this is going to be a triumphal

list unilateralist president. Do people in the state's care? So does the voter care about what President Trump says in donals? I mean they care for a day, sure, and then they move on to the next thing. I mean, did we care when neuron crisis hit? We did? You're not asking me about it now. I mean, these these cycles are incredibly short, but it's interesting to see how the global markets, in the global investor community actually orient. You've

got Steve Schwartzman coming up. You know how close he's been to Trump over the course of the last couple of years. I mean generally speaking as a group that wants access, they pay for access, and please when that happened, And we'll talk to Steven Schwartzman about that, about the fundraisers and all his support of the president, which just been somewhat controversial. Say I, and you've been studying this for decades. How alone is America right now because of

this president and this president's policies? Is it an America or not only a Davos, but just generally worldwide in the Eurasian world? How alone are we? It's more alone because of this president. Certainly he doesn't care as much for traditional alliances or multilateral institutions the Americans have created. But let's be clear, the United States is in decline

visa East China. The Chinese are spending a lot of money internet China on a per capita basis, and they've got what is one, They've got a major health scare going on in China. Worldly it is very clear that Belton Road is a bigger event than Dabos. It attracts more heads of state, it dispenses more cash. But America's relationship visa these American allies, the US is not only not in decline, it's increasing in power in the role of the dollar in military expenditure and its strength in

production of oil and gas and food. And and if Trump's not president next year, that's still gonna be true. And allies don't want to deal with that reality. But it is the case. And He's figured out what kind of capitalism China will have in five ten years from now. Uh. The fact that the Chinese are not in any way aligning with or integrating with Western style capitalism is something that these CEOs are having a hard time coming to terms.

With This is the fiftieth year anniversary of Davos, and for fifty years the message that has come from this platform has been winning globally globalization and free market capitalism. It's not anymore, and the reason for that is because the Chinese are not aligned with that. What are we peak globalization? So it's just going to be declined from now. It's not the end of globalization, but we're peak globalization.

I mean the decision of the United States and the Chinese to decouple from each other in terms of technology. It's the single biggest step away from globalization we've seen in the fifty years since Davos has been created. Absolutely, the Edleman Trust Barometer on Richard Edelman's schedule to join us, I can't say enough about this important document, the Edelman Trust Barometer. I was stunned at the separateness on capitalism

of general society and the elites. Does that surprise you in what's the solution for the anointed up this happy valley? To reattach to the rest of American frankly, to the rest of the developed economies. It's hard to claim that the average American as capitalists when the average American doesn't have capital I mean, certainly that's the way I was raised, right, I mean, my my mom said, they're not taking care

of you. Only they're all gonna lie and they being governed a single sense for Richard Edelman, where he says CEOs have to become much more activist about explaining how everybody gets inclusive. Do we need Jamie Diamond, Michael Corbett, and the others to be more assertive about distributing the benefits of capitalism to American No, no, we don't. We don't need them to explain. We need the problem to start being resolved. We need less inequality in the United States.

We need people that are being left behind and feel the system is riged to feel less that way. And there's nothing that CEOs can say. There is no document they can sign, there is no advertisement they can take out in the paper that is going to change that reality if the reality doesn't change. And let's keep in mind, not only is global inequality and American inequality increased over the last several years, but also now we have an economy that's starting to soften globally. The i m F

just yesterday exactly. So, I mean, one has to think that in that environment, ceo is are gonna be more laser like focused on returns irrespective of what they're saying. Agree with that. I know, I know that a loss can happen from now until November in the U S election. But the popularity of President Trump, I think is plateauing at it's not there it is that Is that enough to to win? I mean it's first of all, depends on who the Democratic nominee is That Bernie Sanders worth

the nominee. I don't think that's gonna happen. I think it's enough to win. UM, if it's you know, Joe Biden, it it might not be. But let's keep in mind this is an unprecedented election, not only because it's about Trump and turnout is likely to be very high, also because there's massive amounts of money that Bloomberg is planning

on spending irrespective of who the Democratic nominee is. Apt to say that um, And because the role that Trump is likely to play in terms of his willingness to abuse power when impeachment has been broken, is also going to be new. So it's hard to make that call. One more questionnaire with Dr Breimer before we move on. Through this important Now in the president Michael Bloomberg is for a president. We're fighting over who's going to do the disclaimer. Well, I want to do it. No, I

could do it. Michael Bloomberg is running for president. There's a undertime we should be. He's a founder of Bloomberg LP and also uh this TV and radio operation as well. Bremer, this is so important. You say, CEOs cannot affect an attachment to the American public with words and with lip service. What is the prescriptive policy that is going to reattach America to capitalism. What's the to do list for Washington

to get this done? Well, I mean I would say that almost every American CEO I know tells me in the next five ten years that they can make more money with fewer people. Um, that reality somehow is going to need to be changed by coming up with jobs for more people. They're going to have to invest much more in training. They're going to have to hire more, not less. They're gonna have to raise wages for the

working in the middle class. They have to do that as a reality when the government is not stepping in, and it doesn't again, it doesn't really matter what they say, and they're they're gonna be fighting upstream member the fourth Industrial Revolution that has come up with here by claud Schwab a few years ago. But for the average worker that says capitalism doesn't work, it's not fourth Industrial Revolution, it's a post industrial revolution because they are not part

of it. Ian Bremer, thank you so much for starting us off in this important hour. Here's with Eraser group. I can't say enough about their top ross. Dr Bremer here where this all this week as well? Steve Schwartzman of Blackstone, who was that speech too? Was it for the U. S Citizens back home so they get him reelected or was it for the participants of devils? I think it was for several different constituencies. I think here here's somebody who is having the impeachment process start with

the trial today. And I think this was a speech to basically say, I think we need some perspective, uh, and let's look at what's happened under this administration. And I think that's not just for domestic consumption. I think it's it's it's meant to be heard in a broader context. Could the US China Phase one deal have been signed twelve months ago. Um, it would have been if it

could have been, but that it couldn't have been done. Uh. And you know, part of the issue on the trade agreement Fran saying is is that you know, you need two countries, and each country has its own politics and and China is not a monolithic country in that sense. They have their hardliners, they have their reformers, and and what's happened over the last it's actually been three years that the the US and China have been discussing changes

uh in trade. That it takes a while, uh for a country that's got a very particular system like China to basically make a decision to start changing the system that's been very successful for them. So so I think that the fact that a phase one deal was done meant that both parts in China have come together, along with the U. S side itself had ambitions uh that ranged from from exceptionally comprehensive uh to not so much so uh. And so everybody met in the middle. C

Shrunkesman with us with Blackstone, our chief executive officer. And I might point out author the Belvedere Hotel was the ancient hotel here. It's where you came years ago, if you were to have for the tuperculosis treatment and all, there's a wonderful photograph of Robert Louis Stevenson in the background of that. And to get to the rub the Magic mount the Thomas Man, the Magic Mountain, and to get to uh, those photographs of Robert Louis Stevenson, you've

got to walk through the lobby and the bookstore. Notice the Steven Schwartzman bookstore is well, how are book sales here in Davos. Well, you know, actually, uh, we're giving them away. That sounds like private equity is just your idea over here. You let him give away books. There goes a profit margin, is what they wouldn't let us sell them, And I wanted people to read them. So it's interesting Tom. This morning I always said something. At seven o'clock, four or five people walked up, said could

you please sign my book? Uh, you know, I just picked it up. I'm excited to read it. Just Tim Cooker's Bezos read your book. If you're run into Tim Cooker Jeff Bezos about the Schwartzman theme, Well, it's interesting. Um. I saw Jeff before the book was published, and I said, Jeff here's what I'm doing, here's the theme. Could you be helpful with Amazon? And he said, sure, send it to me h and we'll take care of it. This is so important, Steven, I want to make this point.

I went down to the offices of Jeff wins LinkedIn the other day at the Empire State Building and you're stuck in traffic and you look over and you're right as you go down Fifth Avenue is a Schwartzman Library, the New York Public Library. You, more than anybody in America know the new technology of cook in Bezos versus the old technology of what you've donated millions of dollars to. What is what is the focus of technology that you see right now? Is it a benefit to Americans or

all of the tension of the selection and all. Is it because they're technological halves and there are too many technological have nots. Well, we've got to get everybody to be a technological have. Technologies is benefiting American enormous number of ways. For example, you know, you take your smartphone. You know YouTube would be lost without that, as would I, uh and uh we're also lost with it. But that's the whole of your state you want to go back.

There's that track photo of you running around doing a three minute mile a few years ago. I want to go back long agoing far away. You supported this president because the Republicans had the vision with Democrats to build the interstate highway system in the fifties. Can't you help the president support an interstate highway of technology in America where we take the whole country and get all this fixed.

I think that they're is enormous need and it's bipartisan, uh, Tom that you know, Chuck Schumer, for example, along with many people in Congress, want to make a major step forward, as does the administration UM in terms of providing money for AI UH and UH what made me even more

consequential quantum UH in the future. UH. And and you know, the universities that are doing this advanced research, the companies who are who are sort of the American flagship carriers UH in technology all want more research funds UH to increase competitiveness. Now, this really will end up benefiting regular people, whether it's with diagnoses of illnesses with much more reliability, UH, development of drugs which could end up being half the

cost as a result of it. UH. Huge breakthroughs in education where you'll be able to to instruct students of all different types of backgrounds. So so technology uh has gotten some enormous benefits. What's the biggest unknown for the markets? Is it the U S election? Is it global growth or is it geopolitics? Well, it's not global growth. I think global growth will continue. The biggest risk uh. You know,

for for markets are are two types of things. One is US domestic politics and the second is the black swan effects that can happen. I mean, we just had an incident for example, Uh in in Iraq, I was watching television. Almost everyone who's declaring World War three starting. They all happened to be wrong. But if they were right, uh, and the straits of hormones were closed, and we ended up uh. You know, with a huge dislocation. You could

get thrown accidentally into a slow growth to recession. But it's quite amazing how the market quickly discounted once there there was no immediate threat of war. They kind of moved on. We have asset prises really priced to perfection. So how do the two kind of match up? Well, usually perfection doesn't last. Uh. And you know this has

been an amazing run. Usually you expect some type of adjustment. Uh. But but if if, if, if we don't have a really um discontinuest event with US politics and we avoid um the kinds of major international type of of risks, geopolitical risks. I think we'll go on with variability up and down over today's levels. Do you think out what time for one more question? Because I know you're going off to go skiing on this perfect day, and I'm going to ask you the same question I would ask

Mr Rubinstein and the others. Richard Edelman's come out with a study that that would be the president leading right now. Those sirens you here in the background. Richard Edelman's come out with a study of how capitalism is removed from so many people in America. Is it time for private equity, Time for private equity to change its text treatment that's

been in place over the years. Like I leave that one tom to uh uh to to the political people, uh, every one of whom has their own unique solution uh for the ills of the world. What I'd say is part of the Edelman's study also had to do with overall trust in institutions, And I think there's a real need to address what's going wrong with our society where so many people question almost every every institution in society.

How much pressure are you feeling? One final question, because we couldn't hear Tom's questions, it was the last question. It doesn't count. How much pressure are you feeling from investors to put cash to use? We don't have that kind of pressure. They don't They don't want to go in now. We've We've invested a lot of money over the years. When when when prices are high, you're trying and invest less um, when they're low, you try to invest more. We we sell a lot of things. When

prices are high, we try and find things. It's harder. So I got to make some sty Are you buying or selling right now? I mean the market watch we got we gotta go. The ski lift is waiting for Mr Schwartzman, But quickly, are you buying or selling? We do both, Tom, we do Bothett have the stage. I'm unplugged him and throwing a money right now. What is the an economist on the one hand and on the other hand, ste thank you so much. We'll go sell a book with Blackstone. This morning City Group at the

most original path is arguably our most international bank. We begin our banking coverage here, John and I of Michael Corbett. He's the chief executive officer of City Group, and we need a most timely update. Now give me an international view from our most international bank. What is the state of City Group globally? Stated? City Group, Tom, is that you know, we're coming off of a strong year and a strong close to the year. And if you look at both at a product level, at a geography level,

solid performance across our consumer and institutional businesses. And as you go to Latin America, as you go to Europe, Asia, around the globe, strong uniform performance. The happy talk of Davos is best practices. What is the worst practice you're trying to avoid? Now as you look back at the heritage of OH seven from a Davos perspective or from a city from a City Group perspective, what's the worst practice you're trying to avoid each and every day is to we You know, we don't come to work. We

can't be No one can be everything to everybody. So the financial supermarket mentality, I think that permeated the first part of the two thousand to two thousand seven era, and to come to work to do the things that we can do best. And as you say, we are the most international, certainly of the U S. And we're in fact probably the most international of really any list

of banks in the world. And as we think about the fact that today, around the things the President discussed, the trade deals and things that have gone on, our clients need just more than every well, let's talk about that. You hear it from the President this morning through the afternoon, optimism,

I hear it from you Upbate optimism. I don't feel that walking around the wholes of this particular event at the moment, there is some real pessimism that despite the fact unemployments of multi decade lowest, despite the fact we have the longest recovery on record, why not, what are we missing here? Well, if we were here, and we were here a year ago, there was pessimists of them.

If you remember the way that ended. I talked about a real fundamental disconnect between what the consumers behaviors were saying and what the markets were saying. The markets as we were here, we're giving pretty strong shigns of forthcoming downturn, and in fact we didn't see it. We're here a year later, UM, the smps up, city stocks up, the markets had pretty broad based good performance, and by the way, the consumers still in good shape. The consumer has been

the backbone of this recovery. He's standing up for capitalism this week. I think, I think all the firms, do you get that sense? I don't get that sense at the moment. I get a sense that things are changing, that the guardians of the States has quite realized they can't protect it anymore and they need to change before someone changes them. Do you not get that feeling? Mike, Well, you know again, I think we get we were We

get in this nuance between capitalism and what's responsible. And I think today what you're hearing from companies around stakeholders right is something I think in many cases that's been embraced for years. It just wasn't necessarily talked about. You think in today's age is coming to work as a company, UM, one of your stakeholders, your employees. If your employees don't feel good about who you are and what you do,

you're not going to keep him. If your customers and clients don't feel good about what you do, you're not gonna come, Michael. I want to go back to a Harvard discussion your folks, and I've been told Corbette will walk off the set if I bring up Harvard Yale football, which is beyond ugly, uh this past November. I want to go back to Michael Porter one on one. I'm sure you've been in many classrooms of the wonderful Michael Porter over the years, and that is too many Americans

feel a barrier to entry to prosperity. They feel a barrier of entry to society. People are looking. Richard Edelman clearly sees that people are looking to elites and are too big to fail banks to assist those people to get through those barriers. How do you affect that, Well, it's a real problem and in there when you think of the fact that we're eleven twelve years into quantitative easing, quantitative easing adds to queie is for the elite. Ben Bernanke said, we had to save the banks. We saved

the banks. You were advantaged by that. Every bank was different. I get that. What do we do for the people out there that there's at City Group retail they're worried about fees and that what do we do to help them get to within society Now, well, I think all the pieces that not just City but the industry is

working on in terms of inclusive finance. Right if you look at the programs were out there, we're getting ready to launch a program probably in the springtime with Google goal in terms of being able to bring more people in the digitization of banking, compression, removal of fees, frictions in people's lives. And by the way, it's the mindset in the mantra of being able to create for people

best in life experiences. And that's not best in banking, but that's how do we create that best in life experience and bring more people in to have the access. And if you look at what's going on at City, not just in the US, but around the world, we're bringing people, were bringing business, We're bringing small business, we're bringing women, were bringing all of those things to bear in terms of inclusive finance. I'm gonna ask the question

that I know really winds up. CEO is on Wall Street at the moment, so forgive me for doing it. Eighteen billion that's how much was saved by the six biggest banks on Wall Street for last year. Because of the tax cut, and people keep passing the same question. And I'm not sure that big banks on Wall Street have done a great job of telling us where the

money's gone. Where's it gone? Well, one is we are a taxpayer, in a significant taxpayer off of our twenty billion dollars of net income that we earned in it's gone into our infrastructure, it's gone into technology, it's gone into people, it's gone into lending. Yep, it's gone into investing. We just announced a initiative where we're going to be

actually investing around clean and green technology. Uh. And you know, we just announced launched a hundred and fifty million dollar program over the next few years in terms of putting some of those money's back returns to shareholders. Last year, what were the point three billion. I'm not sitting here a post to buy backs. That's not my position. It's

not my job to have a position. I'm just wondering how we reconcile some of the things we hear at an event like this from CEOs on Wall Street about moving away from shareholder primacy. When we see record profits and monster returns to shareholders year after year, how do we reconcile those two things in the years to come. One as I think the holders accountable for what we do.

And in there, yes, we did return twenty two billion dollars to shareholders, but we also grew our loan at four LEO at a pace faster than Global GDP, and I think we did it systemically responsible. You know, if you were to take that twenty two billion dollars and be forced to reinvest it. Tommy asked the question about what you do different. You've got to be you've got to be scaled to serve your market. And if you're putting all those moneys back in, I would argue that

it's it's tough to keep your responsibility in that. We welcome all over your here for the meetings of the World Economic Forum. I'm Bloomberg Radio and I'm Bloomberg Television or with Michael Corbett. He's the chief executive officer of City Group. Within City Group, and you mentioned earlier technology you just brought in dragged in, I should say, a new head of retail. What a challenge five and ten years forward is you and every other bank, regional banks,

the small banks survived the technological demands of retail. What's the Corbette strategy for retail. What are the marching orders to your new guy running retail banking. Well, we've got a new gal running retail, excuse me, And the marching orders are to make sure that we are pushing ourselves

to be offering tom that best in life experience. It's not about being best in bank, but if you can match the ride hailing app, the retail app, whatever is exactly take frictions out of people's lives and reimagine what banking can bes. Frictions mean job cuts, No, not at all. What are you gonna do with all those bodies and retraditional retail banking? Um One is that the pace of change is probably slower than people think, meaning that we cover a continuum of people and we are today running

an analog any digital bank. That will change over time. But um we have a large cohort of people that actually want there, I want it now mentality in terms of their digital banking on their app. They want to come in our branch. They want to speak to people, and when you can provide that and segment that in the right way, it's very powerful. So it's not necessarily using less people, it's being smarter about how and where

and the ways that you use. How proud would you be to hand over the reins to Jane Fraser and be the first bank on wall straight to break the glass the link? How proud would you be to do that? Of course I'd be very proud. But you know two things is that you know, One is that that decision is not mine. It's the boards, my job and my

responsibilities to make sure that we're preparing people. And you know, you know, Jane has had a phenomenal career with us, and you know we continue that that role of making sure that if and when the time comes, she's ready and and it might be in your hands. Mike, you felt good now the five years So we hear from Jamie Diamond all the time it's a five year rolling Well, isn't it? Just keep just keep going? Mind is mine?

Is is that I'm a I'm a believer in term limits and I did every every horse has its course? Is the term limit? Um? What do you think? Again? I think that's dictated by the environment and the strengths and skill sets of the person in the job and the applicability. And at some point my course will have run and then it's somebody else's turned to grab the Briton and go. This day, we had President Trump speaking. You and I did a panel two or three years

ago here. It was hugely invigorating about global banking and global finance. Do you need a Trumpian unilateral America or do you need to get back to a more multilateral global system? Does that assist you for which way do

you cut on that? Well, one is I would I wouldn't necessarily describe it as Trumpian, But you know, any time that we can move towards across the aisle bipartisanship to get things done, I think that's healthy because when you think of the business community, the business community just doesn't want lower rates like certainty, likes clarity, and I think the more divide you have, not just in the US but around the world and political parties, the more

uncertainty you have. Just got an email in from New York, John, I have to apologize for the brain freeze on Miss Fraser. It's sitting room that was Can I explain why that occurred? Folks had a little bit to do with the sequence of one Am and the piano party, you know, but it looks I got a text from Tom Kine last night at about one I am I think just said Ballavadere and I woke up and I replied, one of us is in bed. I've done the reading. You're gonna

get an early night. No, no, it's exciting. Thank you. If you say Tom on the streets, please look after it might go about that. And I'm to show you know from the Harvard game it was a spectacular fifty eight minutes and thirty Was it wonderful? Truly one of the greatest games for those of you globally Harvard and Yale in November? Was it everything sport needs to be about in America? Michael, thank you, Thank you very much. As always talking about commercial bankers and central bankers, there's

other people in investment. Why don't you bring in the steam guest any place to say, we can bring in Marty Flanagan, the investo. See mighty great to see you. I want to read out a quote from you at the end of last year because it really jumped out to me. We're going through a once in a generation change. Every single client we deal with around the world is using fewer and fewer money managers. What does that mean

to you, Well, yeah, I've been in the industry. There's been a discussion that is going to consolidate since that period. It just hasn't until right now. And I'd say this is really a post crisis phenomena driving it. Just the cost for money managers through technology regulation is much higher. But also clients are demanding much more from their money managers. They want a broad range investment, keep it at least, but also more, they want thought leadership, they want support

in anything that they might be doing, and ultimates. A good news story for those managers that can deliver that, but it's a great news story for the clients. They get more, they'll get economies to scale a lot of it. It's a win win story. It's been tough for you. Last year was tough, stock cut in half, bleeding money, a u M sliding. What can you do this year to start to stabilize things. Yeah, so we're on that track right now. It's early into the year, but we're

looking forward to a very good year right now. Much of that is we talked a minute ago. We went through the third largest combination in the industry, and typically what happens is that when you're going through that combination the the clients. Until the combination is done, they step back so mighty for our audience, just so they can follow if they're not familiar with the story. Integrated Oppenheimer

around about two billion dollars of the sets. Traditionally, what we see when you start to absorb that size, you start to get some money, go out swhere. Things stopped for a little while. It's exactly does this remind you of what happened with the company at the tournament the millennium when you absorb perpetual it took a couple of years just to get things going. Will this be the same story? There's no question about it. So what's the measure? So who are you talking to? The clients that we

talked to, they're very supportive the transaction. They say, what you all are doing is exactly what should be happening in the industry. And you know, very much supportive of us. And we completed in a very short period of time with yesterday. We're really on January one. We're off to the races. I want to go to those moments in a year where you just stop. One of them was, of course, the headline of the ECB saying that they're gonna stay on hold forever. Another one was sitting on

the set in New York and opening one newspaper. The first ad we're giving it away for free. I turned the page. It was another discount broker, we're giving it away for free. And then there was a third ad, three ads in a row in the in that retail space saying we're gonna give it away for free. Is a bond house of your great distinction? And frankly with the Oppenheimer equity management internationally, how are you going to make profit knowing you're gonna give it away for free? Industry? Yeah,

so nothings for free. First of all, I think that's one point to make. But when we look at the range of capabilities and we're they were those focuses were on were CAPUITD indexes, and uh, they've grown enormously post the crisis. And when you look at the spectrum of how people build portfolios, cap waited indexcess earn it, they're very cheap. But as you keep goin up to factors active alternatives, you get better returns, excess returns, you get

downside protection. You're going to pay more for that. So clients are literally using the spectrum of assets classes like they've never had before to get the outcome. Are you going to affect this with a close approach, we said Lawrence Fincon from black Rock. Are you gonna do with so called our squared folks, which is a statistic on this tight up against what the indexes are doing? Are you going to bring that our square down and really differentiate?

So that's really been what's been going on here, and this also was really coming out of i'd say regulation and really the focus on there were active managers that really index huggers, right, So you're paying an active fee for not much I did. That's the surveillance by exclusive folks. I did not know that occurred. Okay, there you go.

So the point is, you know you're seeing a lot of you know, this movement of money away from that to those people that can generate excess returns and and you can, but you really want the full range of capabilities when you're building those portfolios. Might we want to talk about some of the problems that you have as an index provider as well. There's a lot of concern that paper start to think there's liquidity and set in indexes that the underlying securities that they track aren't very

liquid at all. Leverage Alliance, big leverage alone house, you've got the A t F. Does that not concern you? Yeah, so when you talk about at that level, you would. But when you have to look into the portfolio, what happens in the in the bank loan portfolio, there is probably liquidity and there's backstops to it. So it is not an illiquid portfolio that is open ended in the market.

But John went right where I wanted to go. Is your true expertise and overslones I should point out, folks that the investor has been a huge support of what I've done for years and has been a supporter of Bloomberg surveillance in the old days. I go back to David Gouldan at Bank of America. It wasn't the garbage trenches that god us in trouble, it was the quality trunch. Just coming from nine two down to an eighty nine or an eighty five. Are we setting ourselves up for

that same risk? Again, it's hard for me to answer that question. But again that's the world of the portfolio managers, right, And if you have high quality portfolio managers, they're the ones that are making that assessment. Don't you worry, though, Marty that those portfolio managers at the moment are being forced into quite a liquid parts of the markets into private markets. Wood Foot former colleague, if your South got cota out of early legendary investor pushed into the wrong stuff. So, uh,

that is probably one of the current concerns. When I look at the market, all the money is going into uh, private credit at the moment, it is sort of it's everybody's answered to the question. And I've been in the industry long enough now too. When everybody's going the same way, good things don't happen with that. That's a sweeping comment. The reality is you have to look at a manager by manager, the quality of the managers, their expertise, the ones have been doing it for a long time that

are thoughtful and highly talented, they'll do okay. John and I are humbled by the success of our podcast. Folks were targeting a million downloads a month. We're not theory trying, We're trying to get there. If I look at them, invest next do a shameless plugs plug us go to sponsor podcast so we can get home. Is it free? But it won't be free if you help us. With the people that listen to the podcast, there's an intellectual group that want to be in your business, but they

want to know. Is there a future to the cif A institute. Is there a future to active managers? Is there a future to security research? What do you see? Thank you for saying happiness. So all people talk about is a change in the industry now and they look at the downside, right, So there's no absolutely this industry is gonna thrive. What's happening. It continues to grow, It's gonna be It's almost a hundred trillion dollar industry right now.

Who's talked about that. It is not going away. And the need for cf as and smart people who do the work, it's always going to exist. Okay, it's gonna be there with the Nappenheimer combination. How do you meld those two cultures together? Because I'm sorry, I remember the open I'm a target fund from a few years ago, folks, it's like decades old and their international excellence. How do you culturally mild all those egos together? Yeah, so that's

a very good question. So I've been through a number of transactions in my career and the first conversation. Everything looks good on a piece of paper, that's not what matters. It's spending time with the people understanding the culture in our you cultural a line, that's the If you don't get that right, you have a problem. I don't when you do, but you will. Each team is separate and distinct. They continue to do do exactly what they did when they

came to invest go and that will not change. Our whole goal has given greater resources to do what they've done in the past, is to make them even better than Let's get some targets if we can aum how much of that is passive about a quarter? Yeah, it's two billion of it in and around any targets to get that up to a certain level. What's the ultimate balance for an asset manager at the moment? So I get asked that all the all the time. So the

answers clients determine that. Okay. So at the other hand, we have amost two hundred billion dollars in alternatives, and it really is your expertise and where the clients are are moving in. So I feel really good about the talent that we have, and it's really us spending time with our clients and making that drift different. What about the international mix? What are you seeing in flows of fun Q four was finally an Oppenheimer and Invesco Oppenheimer quarter.

Is that from where you sit with your knowledge base, is the international joy of the last quarter are going to continue? So it's a fundamental strength of the firm right now. You talk about emerging markets, are expertise in China, uh, you know, staying on China loan. Just the growth in China for the money management industry and the interest in China is at peak level as you would imagine, and we see that. It's again it's early in the year.

That's what's going on right now. Well, it's gonna going on right now. But the strategy forward here to compete in you you're you're in Everybody likes to talk about scale and we do touchy philia Davos. You're in a brutal industry right now. What's gonna be your best practice forward? So international pus this one E merchant markets, very very talented China for us, you know, just a fundamental strength of us. We managed seventy billion dollars in Chinese securities.

We have fifty billion dollars of money that we managed for local Chinese. Uh. The alternative business, the factor business where the second largest factor provider in the world. These are all areas that are going to continue to grow. And you talk to the issue about active management, those that generate ALFAR can do very fine and it's going to be an asset classes like a merchant markets and global. In two thousand and six, everybody was running around trying

to make fourteen basis points on every transaction. Are we back to that right now? Within the traditional investco bunch up? Are we back to oh six where everybody's getting stupid about fourteen point one four percentage points? Itsy bitsy amounts. Oh boy, I succeeded. Are we back to this? I hope not? And look, I think you know when you

put on the business. At first of all, we're legal fiduciaries, So you've got to be responsible your clients in the first place if you're not game over at some point in time. So it's literally making sure that you know your your in line with your clients when you have those conversations. Flag. Thank you so much for joining us today Investco as well. What a perfect time to bring in the Director General of the w c O, Robertto as a Vedo. Great to see Robetto. It's a pleasure.

Can we talk about phase one? Absolutely? I want to understand whether there's going to be any complaints sent to the w t O about the agreement between the United States and China that was secured in the last couple of weeks. What's your first take on that, Well, there is that first take is good. I think it's good that you see some degree of they don't between the two. It's about time that we see some of those tensions,

you know, at least contained and hopefully rolled back. I think this is a kind of agreement that is going to be looked into by all do W two members with very very carefully, with magnifying lenses and checking whether everything is in accordance with the two disciplines and multilateral agreements. UM. They will be watching very closely. So if there's something that is a miss, will know, well, you're the DJ, So let's talk about it. Some of the content and

the agreement. The optics might be encouraging that we settle some of the issues between the two biggest economies in the world. The detail agreeing to increase trade by two billions and basically targeting a fixed amount of agricultural product imports out of the United States into China at a level of forty billions. What's Brazil going to say to that? What do what the suppliants of Soy being city, You'll

have to you have to ask Brazil. But I would suppose that to the extent that some of those tariffs are rolled back and some of the impedments are taken away, it is natural that those imports are going to go on. But it's the Director General I'm asking you, how do you reconcile everything that w t O stands for and a deal between the United States and China that has socialist style central planning elements to it between the United States and China depends on how you implement that as

Director General. I'm not going to be pointing fingers, so you know that. But I suppose that, for example, if you're buying food or products under state contracts, that's okay. That's not governed by w t rules. They have a special agreement that is valid only to the signatories. China is not part of that, but the other double two members cannot complain with what happens in terms of government purchases, however, UM most Favored Nation UH, tariff supply and nondiscrimination and

applies UM. So people will be looking at that very carefully. Now, the agreement is very general, Uh, it doesn't specify how those purchases are going to happen, what mechanisms are going to use, what kind of preference is going to be granted to US products of US origin vis a vis the others. I suppose Brazili and the others are going to be looking very closely at all that. But we're pretty familiar with the enforcement mechanism. If the Chinese don't

reached those targets, the tariffs gut back on don Night. Well, that's very unusual mechanism actually, because it's normal that in these agreements to have some kind of dispute settlement vision, something that looks at whether the two sides are complying with what has been agreed. This one, however, doesn't have any kind of arbitration or any kind of third party oversight. It is about, you know, directly dealing with perceived shortcomings.

So if one side is not happy happy with what the other is doing, it will complain, they will have consultations, and at the end of the day, unilaterally, the party that is complaining if it if it's not satisfied with the actions of the other side corrective actions of the other side, it may, you know, impose sanctions of whatever it is. It's very Um, it's not very usual to see something like that. I can see that it hasitant taken if you wanted at the moment you did mention

dispute resolution. Now, let's talk about the dispute resolution mechanism at the w t O. For our audience right now, who maybe haven't been following this very carefully, walk us through what's happened and what's happening with the dispute resolution mechanism at the w t R. Well, they're two things are separate. I think what's happening between the US and China, it's US that doesn't affect the W two dispute settlement

mechanism at all. Um. What is happening now is that clearly the US um that has been complaining for quite some time. So this is not a Trump administration complaint. This has been there before about the appellate body and the way that the appelloate body has been conducting itself. Whether you agree or not with those complaints, that's a different conversation. But they have been complaining for quite some time that in this administration that said enough, it's enough,

we need to change this. I think that's where we are now. We are now sitting in Geneva with others and say, okay, so we need to change the system. How is it doable? Do do the changes that the US want to see? Would the others live with it or not? I mean, this is this is where we are at this point in time. We cannot take too long though we talk about some of the issues. They think that some of the people on that Dispute Resolution Body that WUS have a paid too much there what

they are paid too much? They are too much money. They're incentivized to drag on some of the disputes because they can earn more money. That's one of the issues out there. And so you're aware if it's an important issue, but I think it's a small Do you think they paid too much? I think it was agreed by members. I mean I didn't decide that the United States pushback at the United States agreed to that the United States

agreed to that. The EU and all the other members one and sixty four of them decided these are the terms of the payments. But over time inefficiencies were introduced. I mean those spots were supposed to be taken care of in ninety days. Now the Appealate Body has been taking six months sometimes more to to to finalize it's appreciation. My understanding is that only ap Palate body at the moment. But I don't think they're doing that because of the money.

I think they're doing the money. The money is a feature of this administration. The US administration under President Donald Trump, as you know, have been very unhappy about the way some of these bodies have been run. And as I understand that you can earn north of three thousand Swiss Franks sitting on the Appaliate body, you can, can't you Now for the US administration, they're looking at that situation

right now and saying that's too much. We need a more efficient mechanism, and we need to incentivize it to be more efficient as well. What's your thoughts as the director and along that particular issue, what if if that were the only issue, we could do it like that that's easy, not a problem. That is not a problem.

What do you think the bigger issue is. The bigger issue is how to make it run faster, how to make it more efficient, how to make it responsive to those disputes in a way that they're not setting precedents or they're not according to the US, for example, they do not behave as a court where you have five or seven seven guys there who believe that they are international judges. They're above you know, they above right or wrong, whatever they decide, it's it's the divine rule or something

that that's the way the US sees it um. So I think we have to change that kind of perception. That's that's for me. Is is the trickiest part. Let's run things up by into one of the disputes the United States getting together with the European Union, the Japanese to complain to you guys that China is subsidizing its industries unfairly. Can you deal with these kind of issues? Absolutely?

How easy make the rules? One of the one of the problems we have is that the US and Japan and the EU claim, and rightly so, by the way, that the rules are not perfect. That for example, the exports subsidies or prohibited subsidies rules, they don't capture many of the things that are happening out there, and therefore we need to update the rules to begin to be more responsive to today's reality. Now, the problem with that

is that why do we not have that. We do not have those rules as as perfect as they wish they were, because in the past, before China even got into the scene, the big powers, the US, the EU, Japan, Canada, Australian and the other they could not agree amongst themselves on those rules. So they said, you know what, put the put that aside for the moment. Let's let's go

on and do other stuff. China came in the two two thousand and one and since then they have been doing things that others are saying, well, that's not what what the what we were expecting before? We need to I think if members are unhappy with that, they have to talk about it. And I don't think that China is against having this conversation. I think they already told me directly that they're fine with negotiations. If the people want to change the rules, exchange the rules, but let's

sit down and have a conversation about that. As your experience has been, as many people's experience has been over the last twenty years. The Chinese often talk about getting around the table to do things. We don't get the

follow up. Are you really confident that the Chinese would agree to the pressure that the US, EU and China is putting on them right now to pull back from subsidizing their industries when they've been pretty clear over the last few years that they've got a plan dominate certain interest industries by it doesn't matter to the expense of any expense of anyone else, and we're going to subsidize those industries until it happens. Why would they sign up to any rules at the w t O when we

know that's their mission. We've got things change, and I think that the degree of of rejection that you see today, uh in the international community, for you know, against certain practices that are happening in China, whether they are true

accusations or not, that's a different conversation. Uh, those are real and I don't think China can close their eyes on this, and they realize that it's better to have a negotiated solution and deal than to be subject to unilateral you know, terroriffs the way that they have been in the recent past. It's been great to catch up with you. A lot of topics to get fress and I know you've got a busy way ahead better. Thank you very much. That was Rebetta as a data they

will Tried Organization director General. 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.