Venezuela Regroups With New Leader

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We have Kevin Gordon and Lizzie Saunders together.

I don't know they're in speaking to them. It's amazing as it works out, we'll get to that in a moment. Ready green in the screen. We welcome all of you across your America, across Charles Schwabs America as well on YouTube. Subscribe to Bloomberg Podcast. Did you have a YouTube brief? We've sort of all thesting in the night. I know, I know, it's pretty This internet thing's here to stay on it is.

It's like this. It's not going away.

Exactly, so we'll take it. People are good.

Listen.

Do you have an ETF you're bringing out to everybody else is flogging a new ETF? Okay, we're gonna get to Josh Swab here and you know, Paul your observation two days deep into the year.

Yeah, I think people trying to digest some kind of what we learned over the weekend with some geopolitical risk, putting that on the front burner. But it seems like looking at the market action. You know, folks are looking past it a little bit at least at this point. And for somebody who's going down to a room in a few days, I'm paying attention to what's going on in Venezuela.

Seriously, it's like closer than Cuba.

To my cost airspace in the Caribbean Saturday. So people got stranded all through the Caribbean, not just okay, you see islands.

So this is special.

We've done this a few times during the year, and with this quality, we can do it. Liz Ane Saunders is definitive on Wall Street. Literally, her public service and allowing Americans to develop their fur own case is noted a few years.

Ago she had to go out. She's on a college tour.

You know, she's like, she's like talking to like, you know, people that actually went to class.

You show up at Pepper and the thug.

Walks in the room. How did you hire Kevin Gordon? Tell us about how you find someone that damn smart?

That question.

So SCHWAB has a huge conference every year called Impact.

A lot of Bloomberg folks.

Come out, Carol and Tim and they broadcast from there. Kevin's mom was in the business for thirty eight years.

Thirty eight years.

He's not in but on a firm platformed with us, and she brought Kevin to Impact when he was still Pepperdine and I met with him and I was had had conversations within Schwab about needing to build the bench and I met with him and I said, this is the guy the only rub is he still in college?

Can we wait?

And the answer was yes, we can wait.

What was your first day Schwab, Like, you know, you're hired by it. You know she's thirty nine, but.

She's a legendary was what was it like to.

Be hired by liz Anne Sanders, who was iconic on Wall Street Week a few years ago?

You know, I still pinched myself every day. It's a dream.

We have a ton of fun.

We work really hard, but it's from from day one, I mean, it's been this really fun, you know, just sort of grind and figuring out how to make sense of all this and and at the end of the day, it's you know, can be used to make sense of the ecomom.

Lezanne sitting in your very seat.

Earlier today, we had a Joan come in and he has a new ETF and it's basically hedging. You can take all your mag seven stuff, all your stuff that's just ripped, do an exchange, put it into this ETF and they're.

Going to hedge it for you.

Capture, you know, top yeat on the top, cover your bottom a little bit.

I looked at Thomas.

Is that representative how the market's thinking is our investors that you talked to, Are they concerned that we've gone too far, too fast and they'd like to hedge, or maybe they're asking me this should I get out?

What are those conversations like?

I would say that is a bit of the vibe. When I'm out on the road doing client events, I do get a lot of questions about how do I protect some of these gains or how do I mitigate what might have been a concentration that developed in their own portfolios in a way other than having to trim positions have the tax implications associated with it. Yeah, so there's a lot more generic lowercase H hedge in questions that we're getting.

I mean, Kevin.

Lizzie Saunders is too young to remember eighty seven or ninety eight.

Seven.

What does a young stud like you do about worrying about the thirty percent down event we can't see coming.

Well, I think what's really interesting, I've spent a lot of time thinking about this in the post pandemic world, where you know, the gen z and the young, young millennial cohortive investors for the most part, actually has not really experienced what I think of as a real bear market. I mean, everything has been sort of conditioned on. As soon as you fall into bear market territory, there will be some sort of stimulus or eight that comes in right away, and then you get this launch.

Off of the bottom.

You had that in twenty twenty, you had that in twenty twenty five, even in twenty twenty two. Yes, the bear market was a little bit longer, but it wasn't that spirit. It was twenty five percent from peak to trough. So there has been this conditioning where you know it's by the dip and just keep holding on, and that's

I'm going to give the younger crew major cred they're way more serious about starting retirement earlier.

Yeah, we're just seventy four.

Weren't even four one k is when I started working.

But I was also getting pushed though into the market, whether they and I think there is a desire to do so, which is good, but especially when you go down the age spectrum, there is a sense that the so called American dream of housing is becoming sort of a lost opportunity. So it is pushing more people into the stock market for better or worse.

But that traditional retirement, even social security may not be available now. I think one of the rubs right now is the gambling mentality. Yes, and that's something that we're at CHUAB very focused on. Is the differentiation between investing and gambling. One of the ways I think of it as investing as owning gambling is hoping and there is that blending of the trading and the gambling side.

That is something that we worry a little bit about.

So, Lizen, how do you set up the conversation here for just equity investors after we've had three years of double digit returns very rare.

Do we have a fourth one here? But how do you set up that conversation for twenty twenty six.

I think this could be a year where maybe index level gains are a bit more muted, but opportunity continuing

Across the nation from Pepper into the University of Delaware. Charles Schwab is with us today, Lizzane Saunders in Kevin Gordon, Decades of excellence from Lizanne Sounders Kevin Gordon. You know, there's a lot of work from home going on. I did that, and so we welcome all of you on YouTube. Subscribe to Bloomberg Podcast. We're thunderstruck by our digital exercise.

What are you doing to do the message digitally?

I mean, we've got a really strong presence on YouTube, and I think it's sort of an underappreciated, maybe underplayed, unknown undernown aspect of of Schwab's digital for print. But you know, also it was in social media, you know, Lizanna and I not to I guess, you know, I don't know toot our own horns too much, but we try to be as active as possible across formerly Twitter, x LinkedIn.

Do you, Kevin? Do you make all the charts? Not all of them?

Not all of them, But you don't want me making my own shots. Honestly, it's crayons and construction figures.

But it's been a good way to interact with people. And I think that, you know, the more so these days. Everybody wants those kind of shorter form quick takes, but things that are meaningful to you don't want, you know, meetingless stuff.

Hey, Kevin, we were all patting ourselves on the back because the US had a pretty good twenty twenty five in terms of equity return. Now where you go outside the US even better, what are those conversations you have with your clients, because quite frankly, I've never really thought about investing outside of the US and my career.

I'm sure some of my mutual fund somewhere have got me there. But are you having more and more of those conversation?

You know, I'm just now reads starting to get and I think probably the same for Lazan, and we rarely speak at the same events. We're really kind of a divide and conquered crew when we travel, so you know, I'm just starting now to get questions about, hey, should I consider this? What is the opportunity to look like?

And that tends to happen.

You get the big swings in performance first in favor of a certain asset class, whether it is international, and then the you know, the performance chasing tends to kick in and then the flows start to move in that direction.

So we found that it tends to work in.

Maybe three year, you know, with a three year lag where it starts to kick in three years after international starts to outperform. It's not always the you know, textbook case, but I have been starting to get more questions about that, especially because you know Lazan mentioned earlier.

There is a little bit more of.

A concern now about concentration in portfolios, specifically with tech and tech like parts of the market, just by virtue of their size over the past ten years. If you sort of set it and forget a portfolio, you know ten years ago and didn't do much tech, and those parts of your portfolio have grown to an immense portion. So there has been more of a concern about how do I trim that and add into to what might work better.

We've been joking that recommending international diversification has been about constantly saying I'm sorry, and now it's your welcome.

Exactly.

Europe Asia just extraordinary in particularly.

Does it have legs or is it just a dollar dynamic where they requirement of a week now.

Well maybe yes to both of those.

I think there's the currency dynamic and that will probably be a function or it will dry volatility in swings, so I don't I think the international app performance is probably not linear in nature, but for the most part, I think.

It has legs. If you look at the.

Traditional fundamentals of the trajectory of earnings that represents a support. A lot of at least developed economies don't have the same inflation problem with which the US is still dealing, so it means a different monetary policy backdrop.

WELLZ, I have family members who have been hoping and enjoying losing money, most of it are on bitdog.

And all these are the young tucks. You know, they don't talk.

They're not in the triple leverage all cash.

No, their parents are, but you know they go through that bill to talk to me when they've lost that much money. How does someone who lost it hoping rebuild? How do they become an adult?

Boy?

That's a good question. You know.

Sometimes the answers to questions like that are really boring.

Which is boring.

Investing should never be about a moment in time, get in, get out.

Neither of those are investing strategies.

So where a strategy needs to be employed for somebody that maybe made that mistake and got out is don't try to time the get back in. Do it slowly, develop a process over time dollar cost averaging. Again, the

That's the plan.

So the first thing is actually have a plan. Too many investors and not just young investors, but they're just sort of winging it, and have that actual plan and use that as the base for Okay, how do I get re engaged?

And at a lot of I'm just going to use my household. For young adults, it's all online, a lot of digital and I'm like, who are you talking to? Who's giving you advice about allocation and things like Well, Matt, I think that matters a lot more in the context of I mean, the macro environment today is I mean, it's quite precarious.

It's unique relative to history. I mean, you look at just this year in many ways, I think of it as being the year of the courts, not just from a tariff standpoint, but also from Alisa Cook, you know, a fed independence and the integrity of the fed in the structural you know, soundness of it moving forward in terms of making policy. All of that has carries a

O wise one, did you know where Keana was in the map?

Well, yes, but only because I did so, only because I like I like geography, and I'm a little obsessed, so well I.

Like it too when I thought it was western Colombia, which shows you what I know.

Lizzie and Sunder is Kevin Gordon with this, This is a.

Special moment there with Charles Schwab where the equity franchise has been noted. This is out on the Left coast decades and decades ago, long before Lizzie got there, And it was Charles Schwab up in San Francisco building.

Remember how original it was.

Yep.

It was like, you're kidding these and they're in San Francisco, they're not for real.

And down in La was Capitol Group with Robert Kirby and John Lovelace and all that, and they'd put out these studies which said, if you miss the ten biggest days. Ready, folks, the jargon Gordon jargon has five hundred beeps. You give up five percentage points of performance by missing the ten biggest days in the year.

Kevin Gordon discuss, Yes, And actually a lot of those biggest days come in pretty significant volatility moments when you're in bear markets, and it happens, you know, when you kind of feel that panic settle in and it's, oh my gosh, we're down x percent from the top. Should I just get out and sell everything? And that's when you tend to give up a lot of that future return because you get these what Zanletes to call rip

And not only that, but some of the the biggest single updates immediately followed some of the single biggest down days.

The rebound right, And what's important your folks, I got to know. I'm talking to Kevin Court Luzanne. I speak English.

It's a four box solution. You mentioned one of the boxes, which is you're out of the market, You've got to get back in. The hard part is getting back in.

It's nons a some wildly log normal.

But I'll say again, neither get in nor get out, if it's all or nothing is an investing strategy. That's just gambling on moments in time, and I think that's one of the mistakes that investors make.

Louzanne, I'm going on forty years in this business. Coming up in June.

One of the biggest developments for me has been ETFs. I mean, the money flowing into those is just extraordinary. How does that factor into your discussion with plans?

Oh?

Yeah, And I think you know, we do a lot of work on investor sentiment and that in the buckets of attitudinal measures of sentiments. Some of the traditional indicators like aaii market Association and investors intelligence ones I've been following since I started forty years ago in this business. But there's the behavioral side of investor sentiment, and one key metric associated with that fun flows. When I started in the business, it was all about mutual fund flows.

Traditional mutual fund flows.

Now completely served in terms of what's going on with ETFs, and it is a really valuable way to kind of proxy the behavioral measure of investor sentiment.

Two thousand and four, you were like twenty seven years old or something like that.

I have a.

Photo which is proved forty years old, Elizabeth Saunders at the table with the bush, the younger in the fiscal policy. Our fiscal policy now is way more moldy than it was in.

Two thousand and four? What should investors do? Should they worry about that?

So we get this question all the time. The number one theme of questions that I get at client events is around deficits, and.

And often it's followed.

By sort of an addendum to the question, what's the tipping point? Is there going to be some sort of crescendo? Is the dollar going to lose its reserve currency sets? Are we going to default on our debt is China literally or figurally going to wake up one day and decide to dump all all treasuries, and we don't have those sort of draconian worries. There's no replacement for the dollars, the world's reserve currency. We are not going to default

A ten year process. That's not a recent thing.

The biggest implication of a hind rising burden of debt, in addition to the interest costs associated with that, is it acts as a bit of a wet blanket on growth. It constrains growth. And that's not a new phenomenon. That's not a respective phenomenon. That's a phenomenon we've been living with for quite some time, as are other countries that experience that same groom.

This has been wonderful.

Elizabeth Saunders, Kevin Gordon, thank you always and forever with shab stay with us. More from Bloomberg Surveillance coming up after this.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.

Riccardo Housman is definitive on his Venezuela. Ricardo, I want to go back before your acclaim at Harvard, before your public service decades ago, to your Venazuela. How did the Houseman family get from a World War two Europe over to Venezuela. How did your family emigrate to Venezuela a lifetime ago?

Well, a Jewish family, my father, they both went through the Holocaust. My father lost both his parents. He arrived at Venezuela at age seventeen with some He managed to get himself to Spain, and then everybody in Spain thought that Hitler was going to take over Spain, so he ended up with another relative in Venezuela. And my mother lived through the German occupation in Belgium and she was freed by the USGIS in September nineteen forty four. She was living with a Catholic family in a village in

Right, I look Professor Hausman and against This is part of the story, folks, from Venezuela to the tip of Rgin. Tina, your economist essay written yesterday for zenniment in Betters is absolutely scathing. You say the president of the United States is quote delusional. What does President Trump get wrong?

Well, he thinks that extracting oil from the ground is a technical issue. But extracting oil from the ground, if it was a technical issue, Venezuela.

Would be a powerhouse.

But the reason why oil production in Venezuela collapsed, that's so many other things collapsed, is because oil is a long term investment proposition. You have to part with a lot of money and wait until you know you get a cash flow to recover that money over a very long period of time. And in that long period of time, you have to be assured that you have some property

She was appointed by a guy who stole an election.

And he's going to get concessions that have no approval in law by any national Assembly that was elected by anybody. And you would expect at the moment they will go back to democracy, that any of those conditions are going to be respected by a new by a new political majority. So I think that there is the Democracy is not a goal to be put after economic recovery. Democracy is an instrument of economic recovery. It's the way of telling

Camp where you knew as a kid, Ricarda. Housman with us of Harvard University. Folks were thrilled that he could be with the Shannon O'Neil coming up. We welcome all of you around the world. Please subscribe to YouTube. Paul and I humbled by the digital success this year. Paul Sweeney with Riccardo Housman, Professor.

Do we know or what can you tell us about what the average Venezuelan really on the ground once from this government going forward or from any government?

Well, I mean Venezuelans voted massively in favor of a change of direction. Right they when they were allowed to have a primary that the government tried to prevent. Well, Mariacarina Machallo won with ninety plus percent of the vote when she was not allowed to run and she anointed somebody to run instead.

They voted.

You know, this guy won with a margin of forty points, and he didn't want buy more because they didn't not let us Venezuelants abroad vote and they did not let three million young Venezuelans to register.

Had that happened, we would have won with an even larger margin.

So Venezuelans are unified politically in a new direction. If you allowed venezuelants to choose, they would choose a very competitive legal.

Framework for oil and they would engineer on oil boom. We don't need.

A you know, American help to engineer an oil boom because the world is full of oil companies that would want to quit back into Venezuela under the right conditions, and we have a political majority to create the right conditions. But this system that they have described right now, it's not workable. It's something that works on one on a day to day basis that they're saying, well, we leave the same bad guys that were empowered before, the guys who are indicted. I mean the guys who are in

So it's the same guys.

We're there and they pretend to say, well, we are going to tell them what to do and they're going to do our bidding.

But when they say our bidding, they think that they.

Can get a recovery of Venezuela without empowering Venezuelan citizens with rights.

That's not going to work.

Professor Isert, do you think of there's a scenario where the Trump administration can in fact exert control over this government like.

I think they think they can.

Well, I mean what they think they again is to say either you do what I tell you or I kill you because I have drones. I don't want to put boots on the ground. I have drones, I have missiles. I can kill you, So you better do what we want. But we dinner rupt Ricardo. But Paul nailed it with that question.

What this is about is in is direct community violence, whether it's Cuba or Venezuela. I mean President Trump in his advocates have to decide if they want to participate with people who are violent. How do you in your Venezuela how do we move forward to a constructive end? What's the Houseman process? In January, February, in March of this year.

Well, you want to empower the people who have strategic interests that are aligned with you, and that is all the Venezuela Democrats.

So this idea that you.

Can do your thing without having to deal with the organized Venezuelan opposition that, under enormously difficult situations, was able to win an election. When you want you want to You want to empower them to help you do you want a strategic alliance with them?

But you don't want to hear this dismissive.

Description of Maria Acorina Machau as as somebody who's not respected in Venezuela. I challenge you to mention somebody in the world who's more respected than Maria Acorna Matchau. Obviously she's super respected in Venezuela. That's why she can win elections in Venezuela. Now that's different from saying she has the command over troops.

We're gonna share O'Neil with this, Professor Hausman. But let me ask you this Viscal. This came up Paul, last side of the dining room table. Where does the military Venezuela fit in? I mean, if I look at the Philip means and the shift from diu Terte to the younger Marcos, the military play a part there. Instability is the military of your Venezuela stable or unstable.

The military of Venezuela is led by an arco terrorist organization and they're still in power.

But below that there's a lot of people who would be willing, who.

Would want to go back to a more democratic regime under a civilian rule. But they cannot they're not allowed to organize. They're being spied by the military, secret police, and they're being put in prison, they're being tortured. So what we need if Trump is going to demand something from from Delci Rodriguez, is that she.

Delivered josdal Cavego, the head.

Of the police, Bladimir Padrino, the Minister of Defense. Those are the heads of the Cartel of the Suns, the Cartel Deloslis. They are the narco traffickers. They are now in charge of the country, and they are the ones who yesterday put in prison twelve journalists, so that the number of political prisoners in Venezuela is.

Going up, knock down. Okay, So.

You want you want to fix the country, you need to get rid of this leadership, this corrupt, criminal leadership that is in control of the army, and to empower the bulk of the army to go back to civilian rule.

Paul, get one more questions in your professor.

Professors, are scenario where the people of Venezuela rise up and force change.

I think that you know everybody now is willing to give a line of credit because you know, we've tried so hard to get rid of Maluro and we weren't able to do it on our own. So everybody is very happy that that the US was able to get rid of Maluro. But and and they're hoping that this is the beginning of a good process. But you know, the statements of Trump after you at Madlago and afterwards

Professor Hausman, thank you so much for leading our coverage this morning. Ricardo Housman with the Kennedy School, Harvard, and of course look to his piercing essay and the economists stay with us. More from Bloomberg Surveillance coming up after this.

You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on.

YouTube anticipated here.

Of course, with all the geopolitics and international relations put to the wayside, to a Tuesday Troy Gyski.

One of our first conversations of.

The year with Future Standard is well, one of the great charms of Troy Gyski is you need to be in the market.

I never hear you saying go to cash. Have you ever said go to cash?

Well, I think if you look historically, it's I honestly can't remember, Tom, because if you think of the post GFC era, right, hoarding cash is tipically been a losing bet, and initially so much of that was driven by que and Montrey, Splyby and pump Top. And even though you used to joke around about tripper level cash, I don't know if you remember the triple what are you laughing about it?

They took one hundred and eighty basis points this year.

Levern cash at cash barring rates is a trade.

But really like you, but you know, putting cash to work, and we do think that's one of the biggest challenges for investors now is how do you put those massive cash hoards and money markets, savings accounts, et cetera to work where it can meaningfully increase total return and income without taking uncomfort levels of risk. And that's one of the key attributes of alternatives is you know, whether it's private credit, private real estate lending, or even private equity.

If you have more of a growth bend, and.

I know you have a focus these days on private markets, private equity, private credit. That is, an average investor, what's the best way to get exposure to that asset class.

Yes, So the way the industry has evolved, right is we've democratized to some extent. So it used to be really all about large sovereign wealth funds or large pension funds or endowments, and so we've created these evergreen vehicles, which are registered investment corporations, which allows smaller investors to also partake. And to put it in the big picture, if you look at the major wealth firms, you're somewhere between one and a half and seven percent penetration and

What do you think is a reasonable allocation for alternatives in an average investors portfolio? Like I used to think it was low single digits, but I hear Rias tell me much higher than that.

Yeah, much higher I think most firms are guiding folks meeting wealth management firms that ultimately control the acid allocation decisions. So somewhere around twenty to thirty percent. You don't want to go to eighty or ninety per se because you need liquidity, and the whole idea is to increase that efficient frontier, have that better risk adjuster return truck, I asked you where.

This was fifture with us this morning.

We welcome all of you across the nation the way you listen to Bloomberg's Surveillance. Good morning on Serious XM on Spotify. I didn't realize this, Like we're a podcast.

Yeah, on Spotify. It's huge in the Pacific rip absolutely. We have a consultant.

Ray.

YouTube has really helped us with all this and races. It's like ginormous.

We say good morning and on YouTube subscribe to Bloomberg Podcast. I got a new thing. I'm trying to figure out how to put out the three big interviews of the day the next day. Sera are YouTube's helping me. Oh she's smart, She's gone down in flames so far. But I'll get there and get there, Troy.

A lot of folks are wondering, can we have a fourth consecutive year of double digit growth in public equity returns?

How do you think about that?

Yeah, so it's gonna be a little more challenging this year, mainly given where starting multiples are and the fact that money supplied isn't as excessive relative to nomenal GDP as it had been. You know, that was one of the things from a multiple expansion standpoint I was starting to get a little.

More concerned about.

And then tom as you know, when you know it, the FED comes in and pumps in one hundred and twenty billion dollars.

The fresh liquidity. You know, so you have this spread compressing.

But if you look at Ernie's growth, it's hard to figure out how you get less than twelve, you know, market served?

Really, you're your twelve? Is your's on?

Yeah, well, twelve would arguably be even more of a bare case. Right, So the estimate is fifteen roughly give for the SMP. And when you think about how strong nominal GDP growth continues to be, you know, real GDP plus inflation, revenue.

Should be strong, Earning should be strong, and so.

Whether it's public equity or private equity, it looks like good upside.

So it's good upside and you're all in, like Belski is, I mean, what does he know?

It's not get carried away, but.

You're all in on the stimulus in the June and July and August. Pray tell what happens after the Trump stimulus into the mid terms. Well, so go to cash labor Day.

I would not recommend triple ever cast.

It's for the record, but if you think of the seasonality, obviously January December of strong months. But it's very difficult for an average investor to time that, even institutions time that.

So you want to be fully invested.

The question is how much do you have an alternatives to complement any downside that you could get you in.

Do you buy this kool aid? Well, I think that's credit equity private credit in my IRA.

Yeah, it's just the allocation. I don't have a problem with that.

Somebody alltions that you guys are talking about it much higher than I would have thought. But I mean from evaluation perspective, you can get arguably much better evaluations in a private.

Market than you can a public market.

In these dases.

Yeah, I mean that's one of the biggest disconnects right now, particularly in the Russell two thousands. So if you think of the use case for middle market private equity in particular, it's really been a substitute or compliment for the Russell, because the Russell is roughly nineteen times evd BA dah,

He doesn't talk to Randall Forsyth at barons like this. What did you say? Convexity?

Yeah, convexity so more upside than downside, right, that's the second derivative, as you know of the delta. But yeah, convexy's hard to find in a market right now. But when you're at eleven times forward or eleven times forward ebitdah, and you have ten to twelve percent revenue growth, that tends to lead strong outcomes.

Amid all this jargon, folks, Lisa just threw a gluten free role at him.

Amid all this jargon. What you talked about, This key is revenue growth. Yes, if we have nominal GDP popping like it's popping.

The normal industrial company making four percent five percent revenue growth, maybe they one year they get seven percent. Everybody gets paid. All those numbers are bigger now right.

Well, that's one hundred percent, Tom, that's such a big shift from the period after the GFC where one and a half percent real and one and a half percent inflation was. It was not necessarily the new normal, but remember it was the new normal for a long time. Post pandemic, we've been more like six seven eight percent annualized nominal GDP growth Q three blockbuster eight percent annualized GDP growth from a nominal standpoint, and that's what drives revenue.

Long public equity.

Nominal GDP is what drives revenue growth, and it all starts there.

So we've got twelve thirteen, fourteen percent EPs growth and the S and P five hundred for twenty twenty six.

Is that enough for this market in this valuation?

You think so?

Twenty two point one times S and P. That's obviously on the richer end of the range.

The main driver of multiple expansions since October of twenty two or even prior to that is excess money supply relative to nominal GDP sorry relative nomal GP and also the extraction of public equity share buybacks always outstrip you know, any IPOs or secondary offerings, plus run a big merger

Here, I just bring up a representative tooth based company times earnings yep, yeah, for stuff that comes out of it too.

Grows less, you know gross g and by the way, tom, if I may back to growth at a reasonable price, you know, typically companies like that are only grown revenue like one to five percent exactly, and so you know, true in a nominal GDP environment, you'll get that's higher, you'll get better revenue growth. But these stable mature companies can't do ten, twelve, fourteen, fifteen percent GF revenue growth.

GFC is not about no more Garcia party. It's about, you know the thing.

So I'm in this bar and Davos years ago, and Scaramucci's pouring me a wine from the Rhan Valley, some common hermitage thing that I couldn't afford, best glass of wine I've ever had, And I turned around in Gaysky's there. We didn't see eighth nine coming. We were sitting in that star in Davos. We didn't see it coming. For our listeners and viewers who are going, Okay, it's gonna happen again, we can't see it coming. What do you tell them besides have a glass of overpriced Scaramuci wine.

Well, it's never bad to have good wine to start with, especially in the evening at Davos. However, when you look at the conditions that are necessary and sufficient for a global financial crisis, remember you had a dramatically over levered consumer one hundred and thirty one hundred and thirty one debt to income. Now it's roughly ninety four percent. Not only have we declined dramatically, but since the end of twenty two, consumer debt to nominal income has dropped by

I got to get this in Ned Ludlow rocking it today out at CES. Have you been to CES? I have not been?

Yeah, either, having the Belajio breakfast right now. He has mister Wang at the one o'clock Goward at eleven o'clock, he has what your MIT is all about, the leadership of AMD. Miss Sue grew up in Queen's really basic, ended up with three. She did better at MIT than you did.

Okay, she's probably smarter than me, you know, But.

Tell us what it's like as a kid coming out of Queens, New York, the intimidation of Robert Solo and Edgerton's MIT. It just must be I can't. I can't imagine that.

Well, I'll say it's a humbling experience, tom right, because typically when you go there, you've always done well in school, You've had good board scores. I hate to use this term, but you used to be at least one of the smarter people in the room, and then you show up on MIT and it's like everybody's a genius and you're getting like overwhelmed by just the workload.

Right.

That was, and I think particularly public schools prepare people well, but you're just not used to that NonStop intense activity in Yeah, and then it's also very competitive, right, because everything's graded on a curve, so it's like, whoa, you have to really mature fast.

And engineering I would have done like English Lit.

That's no, she did, and Lisa soon shaped electrical engineering.

Yeah, challenge Yeah, CORSEIX so course six.

Yeah.

She she used to take the Wheatstone bridge across from Queen's I ask you, thank you.

So much for wisdom her stay with us.

More from Bloomberg Surveillance coming up after this.

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She is Senior Vice President of the Consul and Foreign Relation. She is my most definitive voice on Latin America. Shannon, I have tattooed to my brain the last time you were with us, and you were hugely skeptical that we could write and that the Venezuelan people could quote unquote do it themselves to rebuild. Give us an update after these events. What do the people of Venezuela need to do?

Well?

This is the real challenge, right. We've seen just in the last seventy two hours, the new regime led by the previous vice president now the president of Venezuela, cracking down on journalists on any sort of opposition. We really haven't seen many protests or return to the streets, in

So it's been quite subdued.

And the guns, the you know, repressive forces are out on the streets.

So what do they need to do.

They need to rally, but it's very hard to do given.

This hardarell for guns pointed at your head.

That's the challenge, right, Hey.

Ricardo Houseman, cut right to it, right, Paul, Yeah, absolutely So.

I mean, I guess one of the questions this seems like that Trump administration believes they can exert some influence on this Venus whaling government.

How do you do you think that can play out?

I mean, I think they can exert some influence, but we really haven't heard from the Trump administration and interest in return to democracy, right, Those haven't been the words coming from the President, from the.

Secretary of State.

They've talked about reviving the oil industry. They have talked about, you know, bringing stability to Venezuela, but they haven't really talked about democracy.

I got to get this question into because I need to be rude to doctor O'Neil this morning. Have you spoken to anyone within the Trump administration of your expertise on Venezuela, Guyana and everything South.

I have not been speaking to them these last few days.

That's half the problem probably, So I don't know.

Open ending question here, how do you think this plays out? I mean, I'm not sure much is going.

To change here, I guess is what a lot of people are starting to come to the conclusion and maybe not a lot it's going to change here.

I think there's sort of two scenarios. One is that, as you say, not a lot changes. We have a new leadership head, but not a regime change. Lots of the other pieces stay in place as they are now, you know, oil and others. You know, there may be US players who come in though it's still kind of a shaky market and the infrastructure is very weak after years and years of sort of degradation.

So one is sort of.

As you say, stability, continuing, new figurehead, but not alloted changed. The other is that, you know, the current president, Delcia Rodriguez, she isn't able to keep all of these forces right, the various different groups with guns together and we get sort of a fragmentation, disintegration and a lot of violence.

Vinstaville, you met with Elcia Rodriguez.

I haven't no, because you're the.

One person I think what Delcia Rodriguez is like twenty eight to thirty years old. She and her mother take over the Venezuelan embassy in London a million years ago.

Is part of the Socialist protest. I mean, she's like the real deal.

Within the Socialist she was chief of staff to Ugo Chavez.

I mean she has a long history with this movement.

And she knows all the players.

Is yeah, and she's been a player for a long time.

Right, Shannon on you know, with us the Console Foreign Relations after Ricardo Hausman of Harvard Tip brief Global Wall Street on these events in Venezuela.

Paul screening with doctor O'Neill.

So, one of the expectations of the Trump administration is that major global.

Oil companies will go into Venezuela.

And revive their energy infrastructure, creating more supply in.

The marketplace, keeping oil energy prices down.

But we've spoken to people saying I'm not so sure because that's a it's a lot of money, and B it's a long term investment, which means you're banking on political stability in that country. It's a tough bet to make these days.

Isn't it.

I think it's a really tough bet to make, and especially if you're a public company, if you have shareholders. You know, what we've seen in Venezuela for the last twenty five years is really the solidifications of the consolidation of crony capitalism. So if you're going in there, and we're not yet disrupting some of the you know, the bad players, the corruption, the back and forth. So one is you need hundreds of billions of dollars in investment just to get oil out of the ground and out

So you didn't talk to the Trump administration, I have no idea what that's about. Have you spoken to mister Worth over at Chevron.

I haven't spoken with him, but I have talked with some of the people in the general energy industry.

How do they ask you?

So they care about what's going to happen. Chevron has been in Venezuela for the long haul, right, and they have gotten, you know, exemptions to continue operating. So for them, this is a good turn, right, they won't have to worry so much about these ongoing exemptions for licenses. But I do hear from others who are in this general space, both the oil companies, but also the logistics companies, right, those who build rigs, those who do other parts.

There is a worry.

You know, we're only three days into this. There's a worry about this stability and really does it last? And you know, oil companies others, they make long, multi year, decades long bets.

What is the news over the last seventy two hours meant for just Latin America in general? I mean, is everybody else looking over their shoulder these days? We think Cuba, Cuba, maybe Columbia and maybe even some other countries.

I mean, this is a real break in US policy writ large for Latin America, for the world.

Right, we had a policy.

In the post World War two period that was really about, you know, if not loved America wanted to be admired. Right, we were a shining city on a hill. And now we're back to gunboat diplomacy literally, right, is that we are, you know, the mighty We are going to use coercive power and it's going to be transactional. So all of the countries around Venezuela are thinking about that.

Globally, no sparks are coming off the wall.

When Elliott Abrams and Shannon O'Neill are going out of the sea, afarre. What is the distinction in the debate between you and Elliott Abrams?

You No, I think the distinction here, And you know, Elliott's one of my great colleagues, so you know, I have a lot of respect for him.

I think the.

We love Elliott, come on, you know, I think the distinction here is right. He has worked in the first Trump administration. He worked on Venezuela policy in the first.

Did they call as I hope? So what's the distinction?

I hope they did too.

You know, I think the difference here is probably where we get and how we get there, right, And there is sort of this use of maximal force.

America wants to get to the weekend? Right, Paul stop, stop the show? Should Paul Sweeney keep his reservation in Aruba?

I think you're good to go now right, the airspace is back open.

I think you're good to weekend? Was a little dicey, yes, So what's the next step here? I mean for Venezuela, I'm not sure who's who's gonna make the next step? Is the US going to try too some policy here? Is Venezuela going to react to the US.

What should we be looking for?

So I'd be looking for whether Delcia Rodriguez actually consolidates power. Right we saw, you know, last night there were videos of a gunfight happening near the you know, the presidential Palace. You know, is that just you know, a one particular thing, a drone that was flying, or is that sort of a bit of a breakdown of these various I mean there's four or five different types of groups and militia's have guns in Venezuela. Up until recently, they've all been

Ricardo Housman spoke emotionally about his family coming from Europe to Venezuela and all the hardships of World War two for Americans like me, Like literally, I'm so intimidated by Shannon O'Neil, Like I didn't.

Get a map out.

So Caracas is on the water waving at a Ruba and Currissou in Trinidad.

And to Bason right, you go to these places, I have no life. Okay, what's the rest of Venezuela think of all this? You've got the oil to.

The west, the oil to the east, and then Guiana. Okay, along the water, I get it. But up in the Andes and then down to the plains and then the tropical nothingness towards Brazil. What do the rest of Venezuela think?

What you have seen, especially of these last couple of decades too, especially on the borders, is really lawlessness. And on the Colombian border you've seen you know, the E l N, which is a gorilla group from Columbia really move in and solidify. So there's a lot of contraband and illegal goold and mineral mining and the like. So there's some of those areas that are really lawless. There are other areas that you know, really aren't under central control.

But maybe it is, you know, but it's not funny.

You've just described with all of your professionalism the violence of Venezuela.

We're going to drop our men and women into this.

Is marines or green berets er what are the modern green berets, seals or whatever.

I don't think we are going to drop them in. And that's the thing, right, I think what we have done is is take out Maduro. But I don't see US troops moving in for any long term.

What I'm learning, I think a lot of other folks have been learning over the last several days, is there's a large number of people who have left Venezuela. Is there any kind of I know, organization around those people? Is there any movement of those people? There is there any maybe drive from some of that population that drive change in Venezuela? Or those are the folks that just wash their hands.

Look, I think you know Ricardo Hasman perhaps and his family is one of these. You know, there are many people who would love to go back to Venezuela. Right, There's there's sort of you know, educated upper classes. Many live in Miami, you live in other parts of the United States. There's millions who are across Latin America, especially

Okay, one final question, audible, we got ism yesterday Michael McKee here at Bloomberg or Expert says we're on the cusp of a manufacturing recession.

Give us a Shannon O'Neill tariff's.

Update on not you know, the emotion and the politics, but on American output. Are tariffs diminishing our output? Is McKinley faced in eighteen ninety eight.

Yes, they are diminishing our output. And I think the biggest challenge is that while you know, tariffs create a wall that create protection and a reason to produce here, all of the inputs to create those factories here are tariff, and some of them tariff at very high rates. Aluminum, steel, copper, the things to build the physical infrastructure, and the machines that might be imported from China from other places. So

We got to go to the market. Shannon. You know, folks, I'm a member of the Council on Foreign Relations, so I'm.

Talking my book. Don't let Kurtz Phelim know this. Okay, but you guys are rocking the magazine. I open the magazine up, okay, Li's economies in the magazine. Yeah. Yeah, And then the woe that replaced Liz sends me a text on LinkedIn and says, hey, stupid, I've got an article out too, back to back in Foreign Affairs, two must reads on China. I mean, folks, get a subscription to Foreign Affairs. Throw it at your brady twenty two

Excellent.

Can you come back sometime soon, like.

You know, anytime. I'm just up the road, Shanna.

Thank you so much doctorning a off of Park Avenue with Consol and Foreign Relations. I can't say enough about her commitment to Latin America and making us wiser and brighter.

Over the recent years.

Stay with us more from Bloomberg Surveillance coming up after this.

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We welcome back, seriously, Lisa, the lightness of newspapers.

What do you have?

Okay, we do? I want to talk more.

It kind of flows into what we've been talking about about Madodo, about the breaking news that happen and all of the deep fakes that came out when the news broke, and it kind of yes, AI and all the fake fake pictures everything that came out because a lot of AI generators they have rules against, you know, doing things like this, for people creating images like this, but the problem is that you can't control it some of the time.

So that we are tearing the fancy billionaires for the foot yacht.

It's small, right, one hundred.

Foot they control it and they can't.

They can't because it's sometimes there's there's these workarounds for it. So what the New York Times did did is that they actually went on so they went onto like open AI.

They went on to Gemini.

They went onto the X platforms to see if they could generate an image of my Doudo, and it turns out they did so, so it can be done. But it's this whole question of you know, these companies are saying, well, you know, it can't be done, but it's happening. And so this is the whole question behind this article is what to believe?

What's not unbelievable?

Like I'm looking at Duke winning a college football ball game.

I thought it was a hey, fake news exactly, it was real.

So but yes, it's tough to and this is the first time we've seen with real time bigness.

Yeah, real time big news.

I mean there's been other stories too about you know, fake crowds, you know in Venezuela, Like you see these pictures on let's say your Instagram, theed or or wherever, and a lot.

Of this is not real.

So it's hard to determine what to believe when you're working news.

Let's have to say about the show.

Okay, Paul, I have a question for you to the next story. Is golf exercise? It's exercise, yes, because I walk?

You do walk?

Yes, you know I'm going to call. No, we have caddies. We have the jocks. So you don't hop in the golf cart and go right.

Now, I walk unless there are no caddies. But we have a great caddy program.

Show play slow.

I played as quickly as possible. I'm ready golf. So you get your ball, take a look and swack it.

Okay, So okay, it's exercise in your case.

I got it.

But there's a lot of people, well they especially the head of like Equinox, this book the Wall Street Journal, who says, you know what, it's really not because you're hopping in a golf cart. You're having like a beer like the ninth.

True, that's true. Get you're drinking ie, we do some Yeah.

Swing oil is involved oil yep. Oh swing a little transfusion going there, yep, that's how you roll.

Well, they talked about this.

He's basically saying, you know what, golf is not real exercise. But he talked about the whole longevity market and how big it's becoming for especially they're their top clients, how they're paying like tens of thousands of dollars for these top things.

Twenty second audible. Here do you believe Lisa, that's society has actually dramatically decreased it's consumption and alcohol.

Oh, actually everywhere.

No, most definitely, because even when I hang out with a group of friends, you notice how some people order the the mocktails because they think I'm not drinking anymore. It's dry January, you know, like some people do that.

How many took a gummy before that?

So what is it?

That's the web February February.

Yeah, come back February.

You know, Jenny Kreamhills are a mock too. Yeah. Next, okay, okay.

This is the quick one, a five and thirty five pound bluefin tuna smash reference.

Okay.

It's sold for more than two million dollars. It's Tokyo's first fish auction of the year. It was bought by this company, Kio Moricorp. They operate Sushi San my restaurant chains. But the head of the company, he's like known as the tuna King. Okay, and he says, the first fish brings good luck.

There's a picture here in the Telegraph. This is monster tuna fish.

It is a.

Monster tuna fish. And within hours it was already being sliced up and serve. Sure out at the restaurant. But I'm a big sushi fan. Yes, I'm pretty basic. I don't go you know, the eel and all that.

Yeah, do you have like three times a day you have sushi?

Like it could rot to the tune out Yeah, protein, yes, the newspapers.

Lisa Manteo, Thank you so much.

This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal