tv Bloomberg Surveillance Bloomberg December 1, 2021 7:00am-8:01am EST
>> pent-up demand and disrupted supply chains are leading to inflation worldwide. >> we might even see corporal say should -- we might even see core inflation at 6% in february. >> economic data is going to be hard to trade on at the moment. >> we are looking like the 1960's where we have higher inflation, higher growth. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: the t word is dead. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market up 58, advancing a little more than 1%, bouncing back from yesterday. how much of a pivot have we seen from the federal reserve chair? tom: we are going to see it again today with the house.
he's talking his book, and his book is the data. tenant ought this morning, ism manufacturing. the survey is for a nice tick up in this economy. we will see. jonathan: day two for the chairman if you hours away. lisa: my take away is listen to fed vice chair rich clarida, who seemed to signal this about a week ago. how much will we see him push back against market volatility, saying that they will remain the put should things get too wild? this is a key question. what constitutes tight financial conditions? jonathan: peter tchir started this over the weekend. tom: it is his fault. jonathan: he said, how durable is that fed put? when you think about the last test we got in the back end of 2018, inflation was in and around 2%. now it is in and around 6%. they have the space to do what they have done repeatedly over
the last 10 years in the era of activist central banking. tom: peter would say look at the movement of data, and the answer is off 6% inflation, we have had a crushed equity market, down 3%. jonathan: we are spoiled. tom: i'm got a nice response on twitter this morning. on radio and tv, the adults are looking at the data, including the science data to come from the uncertainty of omicron. jonathan: they are looking at credit as well. your equity market this morning up 58 on the s&p, advancing a little more than 1%. yields lower at the long end yesterday, higher at the front end. this morning, higher through the whole curve to 1.4851%. a meeting on december 16 you don't want to forget at the ecb. before that we have to deal with the federal reserve. crude approaching $69.11. lisa: throughout the morning, i
am sure we will be talking about positioning and what this means in terms of how much conviction there was built into the market versus people trying to risk managing to year end. day two on capitol hill, fed chair jay powell, treasury secretary janet yellen testifying before the house financial services committee. the p word, transitory -- the t word, transitory, dead. how much are they going to respond to exactly that dynamic you were just talking about, the contracting yield curve? the gap between five-year and 30 year treasury yields now the lowest going back to the height of the pandemic, march 2020. does this indicate a policy error? is this just people closing out of positions? today, add data at of that really important report. i know you were looking at this. the expectation is for improvement, but what's the commentary. how much do a lot of executives come out and say these supply
chain disruptions are getting worse? we're just learning how to manage them better. today we get motor vehicle cells. this is the question. how are they grappling with supply chain disruptions come with price hikes that have led the sentiment index around vehicles falling to the lowest levels since the 1970's, given the fact that this is such an important part of the consumer autonomy? jonathan: the eu commission president ursula von der leyen and speaking right now, saying 77% of adults in the eu have been vaccinated, and she wants to see more. here's the headline. mandatory vaccination needs to be discussed. we need a common approach to vaccination. and dori vaccination needs to be discussed. -- mandatory vaccination needs to be discussed. tom: this is really important. the apples to oranges here, 70% eu, 59% america.
40 to 50, 60 9% at america. 20 nafta 39, 60 1% in america. i believe we are -- 25 to 39, 61% in america. i believe we are behind europe. jonathan: imagine if we were having a conversation like the one in europe right now. tom: these are the politicians reacting to the deep it market -- to the deepest market we have, which is fixed income. jonathan: we are hearing from the european commission president that mandatory vaccination needs to be discussed. lisa: you could are usually private sector has been leading the charge and doing the same thing. in new york city, you have to show your vaccine card to get in anywhere. increasingly with airlines, there's a similar type of policy. even then, there is testing. you wonder whether governments will follow or whether the court system won't let them in the united states. jonathan: you have got a bond market with yields higher on
tens by four basis points to about 1.48%. joining us to discuss his marilyn watson, head of global fundamental fixed income strategy at blackrock. that's start with chairman powell and work our way into this bond market. did you since a big shift yesterday from the chairman? marilyn: we did since a shift -- we did sense a shift. we had a much more risk off tone with the variant coming through, leading to a huge amount of uncertainty back in the market. i think that has led to investors feeling a bit more cautious going into chair powell and his testimony. we have been saying for some time that we think the fed really is in a position now where they can accelerate the taper and start to maybe raise rates to our even three times -- rates two or even three times. but i think the market was caught offguard given the
volatility of the past few days with the negative news around covid. but i think in terms of the overall trajectory of the market, that is where it has been heading. i think it was just surprising given the context of the past few days. jonathan: qe has been very important for signaling to economies and financial markets. i wonder what an accelerated taper would mean for this market. you have made the point that a lot of this would be canceled out by the taper of the treasury , but if we accelerate things, does it have a bigger impact? marilyn: i think on the margin, it has a small impact. but the fact is when they are still continuing to purchase assets, even as they wind down the amount that they hold, they are still providing very loose accommodative monetary policy. so even if they act little bit, we have seen accommodation at the moment so high. particularly yesterday, we did
start to hear a lot more caution from jay powell around the very high levels of inflation that are potentially becoming more persistent, and thinking about the factors that the fed are now starting to include in their forward guidance, i thing maybe it is such a shift of tone as we do go into the fomc meeting a couple of weeks, i think it will be key for market participants to really see the timing around the qe tapering, but also around any potential rate increase as well. so i think, given the high levels of inflation we talked about a lot, given the fact that the tone has shifted around that it could be more persistent than we have been so far hearing from the fed, i do think it is supportive. lisa: markets are letting him make these moves, make these signals, without getting disrupted too much. i take a look at credit. nothing like the taper tantrum going back to 2013, but nonetheless, you are seeing money get withdrawn from the high-yield debt market and you slowly see yields creep higher,
the worst performance going back to september 2020. is this a buying opportunity or a warning sign for what is to come? marilyn: i think potentially, if you exclude the new covid variant, it could be a buying opportunity where you think that, of course, as you expect to see monetary policy normalize a little bit, and we have seen obviously the yield in treasuries increase, we started to see spreads widen, we are seeing now better opportunities and better valuations in higher-quality credit, so we have seen some investors go up the credit quality spectrum. we have also, when you're talking about high-yield, continued to see investment as well continue for the loan market in many cases. so again, the market has really started to position itself for a little bit of normalization, although it is far from normal, and as we do see these underwood levels of inflation that are
persisting through the next year , i do think we are seeing more dispersion, also in sectors that are seeing better prices, better valuations. so i think it is a buying opportunity, but investors are being particularly cautious as we go into year end. look what he isn't particularly great at the moment, and as we have this higher uncertainty around the new covid variant, round potentially measures to limit restrictions on movement, etc., there are lots of unknowns , but there could be buying opportunities. jonathan: fantastic to catch up with you. send our best to the team, as always. arlen watson of black rock. i am so pleased -- marilyn watson of blackrock. i'm so pleased marilyn closed the conversation with normal. what is normal in this environment? tom: global wall street understands marilyn watson word for word. we have a couple of other audiences that may be heard some greek there. that was absolutely brilliant on what you do in fixed income when
you are not making the coupon, you have forgotten about total return, and you are managing to not have price go down. the keyword word she said was dispersion. there's a dispersion of choices you have to make to try to be sure yield up, price down, bad outcome. jonathan: what did we call it, risk management into year end? lisa: people have made so much money in 2021. tom: have they and bonds? lisa: they have not in bonds. that is probably why you are seeing government debt outperform. but in credit, they have, and in credit, certainly the riskiest credits, perhaps people are ticking the chips off the table. jonathan: it is that line that always annoys me, the easy money has been made. i don't get ever feels easy. tom: never easy. lisa: i am telling you, my outlook is going to come out next year, at the end of the year.
bullish on the economy is different than bullish on markets. jonathan: futures up 55 on the s&p. bob michele in the next hour. it is coming up, right here on bloomberg tv and radio. this is "bloomberg surveillance ." ♪ ritika: with the first word news, i'm ritika gupta. federal reserve chair jerome powell has given a clear sign that the central bank is shifting to tighter monetary policy. he told congress it is time to quit using the word transitory when talking about inflation. howlett knowledged that the trend of rising prices has proven more persistent than expected. u.s. and japan are amongst the countries ready to impose new travel restrictions to restrict the spread of the omicron variant. president biden is expected to require all air travelers to the u.s. to be tested within a day of their departure. japan will deny reentry to foreign nationals returning from 10 african nations. japanese airlines have halted
new inbound bookings for this month. a u.s. advisory panel has narrowly recommended approval of merck's coronavirus pill. the pill is intended to treat mild to moderate covid in adults at risk of developing severe illness. tel aviv has moved past hong kong and singapore to become the world's most expensive place to live, according to the economists intelligence unit. the soaring israeli shekel and price hikes for food and transport were the main factors in tel aviv taking the top spot. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
very strong and inflationary pressures are high, so it is therefore in my view to begin tapering perhaps a few months sooner. i think it is probably a good time to retire that word and try to its plain more clearly what we mean. jonathan: a man looking to secure a second term. the federal reserve chairman, jay powell in front of the senate banking committee. he goes in front of the house a little bit later. you can draw your and conclusions, tk. futures on the s&p advancing by 2.18%. yields higher to 1.48 present. a lot has changed since that november meeting. tom: have some more eggnog. we talked about this yesterday, before we get to jack fitzpatrick in washington. euro swissie touched down under 104 and got down to 103 something. that showed the emotion you saw yesterday. jonathan: and the whole way down
on euro swiss, everything will time we talk about the currency, he would say it was too strong. what are you going to do about it? it is too strong at 110, too strong at 104. tom: jack fitzpatrick is in washington then going, what are they talking about? he joins us now, or bloomberg government reporter launching into december. this president launches into december. what does he want to celebrate new year's eve? jack: december i think in washington is less going to be about celebrations than getting by. yes, democrats want to get their main social tax and spending bill done by the end of the calendar year. is that realistic? it is looking very challenging. what they need to do is fund the government, and they likely need to address the debt limit. that is a fuzzy deadline that maybe could go into january. they are also struggling to get
their main defense authorization bill going. they are cutting it very close with the government funding deadline that is friday night, so really, this month is going to be an extremely hectic month on capitol hill, meeting deadlines that are going to be difficult, and that could push back the main legislative agenda the democrats have and make it tougher to get that big bill done in december because they have so much going on. tom: what is the power of republicans at this moment? jack: right now, in order to avoid a shut down friday night after midnight, any republican could hold this up and seemingly cause a shut down. it is a little close, but they are going to rely on unanimous consent requests to skip some procedural stuff in the senate because if they don't have unanimous consent, they would probably take five or six days to get this done, so any republican right now, if they really wanted to, probably could shut the government down. they are trying to amend the defense authorization bill.
one of the primary things they are looking at is reinstating the sanctions over nord stream 2. that is something republicans want to attach to that bill. they can slow things down and have significant changes because bipartisanship is necessary for funding and for defense authorization, if not the tax and spending bill. lisa: has a new strain of covid change the conversation at all in d.c.? marilyn: not these conversation -- jack: not these conversations. there are questions as to whether they will need to change policies and funding measures to respond specifically to this omicron variant, but they are not really talking about that right now in terms of what is going into these bills, and really, the conservatives in the senate who are talking about holding up the funding bill are doing so in opposition to vaccine mandates, so there's really not a push by anybody to change the legislative agenda as it stands right now in response to this variant. lisa: the reason why i ask is
because initially, in a conversation still ongoing in capitol hill, people talk about how the first round of stimulus was good, the one earlier this year was overkill, and what led to the inflation resurge we are seeing. has that conversation shifted around more stimulus, based on the fact this pandemic may be kicking around for a lot longer than people previously expected? jack: we are definitely past the point of even democrats saying that a true stimulus is necessary. that is why there is so much talk about how to pay for and offset the cost of the provisions in this social tax and spending bill. the question is whether they really do pay for it and how much of the spending is frontloaded, and how much of an inflationary impact that would have. everything that has led up to this, including the current concerns about the new variant, have definitely affected the fiscal approach that democrats are taking. but you hear from people who say
even as it stands, this bill would probably add a quarter-point in its first year of enactment to inflation. democrats are not backing off of their agenda because of that, but it has change the outlooks. lisa: i think about yesterday's testimony from jay powell and treasury secretary janet yellen, a heated controversy between the senators and treasury secretary yellen about whether this bill pays for itself. can you talk a little bit about what the messaging is here and what the truth is? ritika: the method -- jack: the messaging from democrats is that it pays for itself. that relies on some assumptions that are not concrete, and definitely some gimmickry. there are major provisions that would expire that they plan to re-up in the future. whether they would pay for those extensions, that usually doesn't happen, so that artificially reduces the cost.
aside from whether it is paid for in this 10 year window they discussed is the fact that the spending is frontloaded to an extent that, according to the cbo, it would add somewhere around $800 billion in the first five years, and then the taxes would sort of start to reverse that if they don't extend these measures. so the truth is yes, there could be an inflationary impact because of how it is structured, and future legislation to build on this would probably exacerbate that, so there are economists who say this is not the biggest issue with inflation, this one bill. jonathan: i take very little satisfaction in asking this question. is the ministry should happy with the job secretary yellen is doing at the moment? what is the latest in washington? jack: there hasn't been a lot of negative feedback on secretary yellen. the powell/yellen combo has proven reasonably popular.
to be honest, there has been so much on lawmakers' plates, figuring out exact what their stance is with powell on the monetary side and the debate over this legislation, that yellen, who was respected coming in, maybe has almost flown under the radar, at least to the extent that she hasn't been the main point of criticism, at least. jonathan: good to catch up. jack fitzpatrick, thank you, sir. of course, that question is being asked, and it is a port to address it. lisa: and frankly, she came under a lot of heat from congress members yesterday, senators basically saying come are you telling us the truth? there was a lot of disagreement but what the truth was, as you see the dueling messaging and play. jonathan: a search for the truth . how philosophical. let's talk about the search for opinion right now. that is easy to find on the push back the transitory debate in the capitulation. can we call it that yet? tom: no, we cannot call it that
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♪ jonathan: we've got some fantastic guests coming up. great line up through the next 30 minutes. equity futures up 60. we bounce up from the losses of yesterday. get to the bond market. i want to look at twos. we are still south of where we were last week, 65 basis points. just 60 right now. yields higher by four basis points as we start to discuss a faster taper again. did we reintroduce the rate hike debate once again at the federal reserve. there is no rate hike debate. switching the board, over in turkey, dollar effects intervention from the turkish central bank doesn't do much for this currency pair. that move about -- that move about 1% now. tom: buttressed up nicely
against intervention, we will see where that goes. in snored big -- jonathan: dollar-lira, 13.3291. let's take a look at some movers and say good morning to remain. -- to romaine. romaine: we had five occasions now this year where this and p has closed down by 2%, and on the following day, we actually open higher. that appears to be the trendline this morning. apple amongst the tech names leading the charge this morning. some of the travel stocks also getting a bid. apple has been a bit of a defensive play. it was only one of seven stocks in the s&p 500 that was higher yesterday. it has been on a pretty interesting run for 11 of the past 12 sessions. today could be 12 out of 13. nvidia and some of the chip stocks also being bid today.
a couple of individual stories to keep an eye on, marc benioff at salesforce getting a new co-ceo, but buried in that statement was an interesting forecast for the fiscal fourth-quarter that missed most analyst estimates. hewlett-packard enterprise also providing a forecast that came up well short. , rella -- and barela -- ambarella beating estimates. tom: we turn to someone who always speaks clearly, from the second congressional district of arkansas, the republican french hill joins us on a wide set of topics. want to go to the seems that we have done on omicron in the last two hours, and i know the mayo clinic has your arkansas with the arch reality for this pandemic.
18 to 64, only 54% vaccinated in your arkansas. what do republican politicians do to get america vaccinated? rep. hill: it is great to be with you and jonathan and lisa today. arkansas has worked so hard to get our vaccination rates up. governor hutchinson has been a good leader on that. he has been around the state to encourage vaccination, and we have made steady progress. we are particularly pleased that we have made steady progress. we noticed when delta was rampant in the late summer, that really was a spur to get vaccinated. perhaps the concern over omicron will do the exact same thing and we will get more vaccination rates. but we are out doing boosters now and promoting that, and we are seeing more of the population going for their third shot. tom: how do you respond to brussels stating in the last 60 minutes a possible mandate of vaccination in europe? i know that is in a theme a --
is anathema to so many republicans. do we need a description of a mandate to get this going to catch up? rep. hill: i think in america, we have nationally a very good vaccination rate compared to the world, and by encouraging people to do that and telling people it is important for their own health and letting them make that decision, and letting employers work together with their employees on the right way to keep people safe in the workplace, we are making steady progress here. i believe that i mandated, top-down mandate, i can't speak for europe, but in the u.s., has created more vaccine resistance in some parts of the country, so we are trying to do this with a carrot approach and an employer approach rather than one big sized decision from washington. lisa: to tom's point, the u.s. vaccination rate is actually lower than that in europe, which is facing all of these dramatic increases in case counts, and hospitalizations.
is there any point at which you would change your mind with respect to mandated vaccines, should things get severe enough here in the united states? rep. hill: here is my view on that. we have a huge country with a lot of differences in space concentration, urban versus rural, work conditions, and that all needs to be taken into account, where is obviously in europe, you have a much more concentrated, dense urban population, and that has to be taken into account vis-a-vis some conditions here in the u.s. that is why i think a state-by-state decisions here are the way to go in the united states. lisa: you are speaking with is ahead of day two on capitol hill for chair powell and treasury secretary janet yellen. is there a question you have that was not answered with respect to inflation, with respect to the fed's response, as we heard from powell? rep. hill: first, i was glad to hear jay powell finally, after a
year of urging him, be more excepting of the fact that inflation might not be transitory and that he was going to retire the term. first and foremost, i think that is important to accept the possibility that we have higher inflation expectations that are not being recognized in the market i either the fiscal policy is here in washington or the monetary policy leadership. that is .1. my question would be, should we have started earlier? look at the reverse repo activity by the fed since june. it has been growing weakly. it peaked around one point $6 trillion in september. that tells me they are also daily taking a lot of funding out of the system, which means there's potentially too many reserves out there, which i think is inflationary. secondly, what is your forecast for inflation given the fact that it is understated?
the cpi is understated in their look for inflation in 2022. tom: you guys own chicken. good morning to all of tyson's foods and the 2400 farms across arkansas that frankly feed this country and feed people who now can't afford meat. i want to know anecdotally from you, as banker of little rock, what is the chicken business -- what does the chicken business tell you about inflation? rep. hill: the chicken business tells me it is a very popular protein in the united states when you have wings that cost more per pound and white breast meat, so it is booming out there , both at the grocery store and in the retail restaurant business. so chicken is feeling the effects of inflation and transportation challenges, but tyson has done well, and you will see that, and my view, chicken continues to be one of the most popular sources of protein across the nation. tom: when you go to the
congressional lunchroom, do you order chicken as everyone else has a 16 ounce steak like jon ferro eats? [laughter] rep. hill: i know jonathan has extensive taste, but i am a chicken guy. chicken and rice are fine with me. [laughter] jonathan: i have just been waiting to ask you, did you watch bama-georgia this weekend? rep. hill: absolutely. these two teams are amazing. this was the battle of the sec, and i leaned georgia on this one. i think they are going to beat alabama. sam pittman is an outstanding coach, and we let notre dame and places like that export their coaches. jonathan: french hill, thank you very much. i don't think people outside the states realize just how much those college football coaches earn you we are talking serious money, close to $10 million.
tom: i didn't grow up with this, and at 17 years old, ralphie the buffalo came out on the football field, two and three in the nation, and it is unique to america. that is all i can say. it is absolutely original to america. jonathan: these interviews sometimes are pretty original. lisa: i loved that, by the way. inflation, inflation, blah blah, chicken. jonathan: "you own chicken." tom: he's selling it. i'm busting his chops, and he knows that. the bottom line is you go to the meat counter in america, people are looking at the price. jonathan: you are right to bring it up. tom: data do up a there -- do ok -- did i do ok there, jon? jonathan: you did great. you can stay. tom: james zelter joins us now from apollo.
i'm not going to ask you about chicken, but i am going to ask you what everyone in global wall street wants to know. where is apollo in five years? james: it is a great question. first of all, thank you for having me on this morning. we have an exciting growth oriented strategy. we have been very focused the last 12, 18 months laying it out. related out at our investment day about six weeks ago, and for us, we have an exciting merger that is going to happen in the first of the year between apollo and athene. we are very focused on platform origination of great, high-quality credit, as the world things about low rates. i know you are talking about inflation, but we have a view that rates will probably lower for longer. we are focused on large-scale platform origination. we are very focused on democratization of finance in terms of bringing more and more investors into the high quality investment's we are doing.
tom: not to interrupt, but we have so much time here, and i've got one more question. you guys were weaned on irr, internal rate of return. you are shifting from irr psychology too much more of a global, normal banking finance business. how tough is that shift? james: well, it is a great question. certainly for us come our pe business which is a renowned investor, that is still a key part of our business. it is $75 billion, $80 billion of our business, and it is a key asset. but women think about our platform right now, 475 billion dollars come our yield business is our biggest, and creating that spread platform, we use our pe mentality come our pe playbook in how we approach it.
but you are right, it is about creating origination machines. we are certainly broadening our playbook of how we operate, very important to us as we grow. jonathan: do you think people get frustrated when they refer to you as a pe firm? james: certainly, we do our best to make sure we are labeled as an alternative asset firm. i think in the last two years, the last year in particular, as we have gone out and broadly put forth our five-year strategy, i think the market is waking up to it. we had a great group of global investors in our funds, possibly 2000 of those, but we have several thousand more looking at our business every day, and i think the apollo global management story and strategy is much more refined, and as we communicated very clearly, i think we are getting a much greater, wider reception. it is a five-year strategy and it will take time to communicate that, but we are still very focused on getting it out quickly. jonathan: i want to talk about
the origination strategy as well. we heard a ton about this at the investor day. there's been acquisition this week of finance. how does that fit into all of this? jim: it has been very consistent. we look at rate platforms that fulfill origination, that have long track records of success, a wide pipeline, and very high quality yield with very low defaults and improvement strategy. it was just one example. we are in aviation, aircraft, cre lending, inventory finance. it is just a consistent as the fusion of the playbook. jonathan: what is it you are able to do that banks are struggling with? jim: for us, it is really the ability to finance our businesses and fund our platforms very differently. they have a liquidity challenge in terms of deposits. we fund with long-term
liabilities, so what we bring to the equation is a competitive advantage, the duration of our capital. we are not taking credit risk. we are really doing an appropriate asset liability match when we think about our liabilities. so it is a different playbook. we apply it in the same areas, but it is a very different playbook. tom: i've got one more here because i think it is just so important. if you tell me you have got long-term expertise in financing, you've got to borrow short to do it. what is your risk here of the yield structure moving higher? do these transactions get crushed if we see a higher yield regime three or five or seven years out? jim: no. to your question, our liabilities are long-term. we don't short-term finance really any of our facilities. certainly, there are a benefit of some short-term financing on
some of the higher assets we have, but we run a great liability book, so we are focused sometimes in the shape of the curve, but the duration of our liabilities is anywhere from eight to 15 years, so we would really embrace a higher rate environment. there is no when you interview that would love higher inflation in a portfolio more than myself. i'm a little skeptical that we are going to see that. there's a lot of conversation about inflation right now and a global focus on momentary information, but i think in a couple of years, we are not going to be talking about this. what we have a well inflated book is the bottom line. lisa: there's the flip side to low rates that are expected to persist for a very long time, and that is that so much money has gone into these long-duration strategies that it is getting harder to eke out the returns that are so much bigger than in public markets. how are you preparing your
clients seeking bogies well beyond what you're getting on average yield? how are you preparing them for a lower yield and duration structure going forward? jim: that is part and parcel with the key to our strategy. you nailed it. the reality is because of quantitative easing, because of these monetary policies, if it has -- on it, it is probably the liquidity function in the market today has driven those assets to negligible spread and yield, so the obvious half of success is an investor endowment pension fund global investor, finding private markets and private origination, so the hallmark to our strategy is the backdrop which you just described, which we think -- we are fortunate. every day gets a bit better with the demographics in terms of savers, and with this situation for low rates.
so from our perspective, it is all about trying to find that safe fixed income replacement instead of being in the public markets, picking out the increment of spread of 200 to 400 basis points. i mentioned earlier, we are renowned as one of the great private equity investors on the globe. we still are. but that cost of capital is a 20% business for us, and these businesses r 1% to 2%, so it is a completely different equation, but the same intellect will playbook. lisa: talking about the demographics and how much money has gone into private credit, private assets in general, have you seen anything from your competitors that gets you nervous in terms of risk-taking with this locked up capital that gets you thinking this could end badly should there be some sort of bigger structural change? jim: i think march and april of 2020 was a great test for private credit and for private credit asset managers overall.
i think collectively, obviously the fed came to our rescue or came to the market's rescue, but the fact is this is a robust asset class. it is our view that when the market thinks anywhere from a $7 trillion to $10 trillion opportunity, that is the pond. we are focused on the ocean in terms of fixed income replacement. in every environment in my 37 years, there's mistakes that are made, whether it is in debt being priced in equity or vice versa. you have to make sure you are disciplined. there are mistakes being made today, i am sure. we have been quite disciplined. it is all about saying yes to one out of every 20 or 30 opportunities. scale really runs to our benefit , and within about this origination. it is a much longer conversation i would be willing to have. but there's no doubt companies out there are being funded today that will be distressed and restructuring opportunities of
tomorrow, but our long-term track record in underwriting credit loan losses across our portfolio at apollo, but also our platforms, is standing, and our investors share that view. jonathan: you have been fantastic, giving us so much time this morning, so thank you for that. you mentioned that using grates and yields will remain low, and i wonder what gives you that conviction because we have had a big debate on that over the last several weeks in and around the comments from chairman powell yesterday. what gives you confidence that that will remain true? jim: i am no smarter than anybody else. my crystal ball is no clearer. certainly we have issues with the labor market. you have issues in the housing market. those are both tight. there's probably several years of challenges with getting that to more normal, but the great elation impact of technology is something we are going to be confronted with between demographics, between the demographics of the globe, between more and more savers,
between quantitative easing in 2024, 2025, 2026. i believe this conversation of higher inflation will be in the rearview mirror. jonathan: it is good to catch up. thank you for your time. jim's elder -- jim zelter of apollo on an important conversation. tom: a vision that goes farther than the short-term. someone who has a vision to go out farther, with futures up 58, dow futures up 317. it is back to 1990, when david wilson. the s&p up on your watch as you exit today from bloomberg. dave: indeed. it was an opportunity to kind of take a career summation, looking at markets and really trying to get a sense of how they performed over my time at bloomberg. what is interesting is when you look at u.s. stocks, and i chose the russell 3000 index for a broad look, relative to any of
the other nasdaq classes that i focus on, international stocks, u.s. bonds, international bonds, money markets, commodities, there is just no contest. no wonder the phrase there is no alternative, known by tina, became so popular over the last few years. you are talking about a 3000% increase in the russell 3000. of course, that reflects reinvested dividends, very much part of that vix, four times the gains we saw internationally in the ex-us. lisa: this does highlight the divergence and global economies. i wonder from your perspective how much this is really just a change in tech and the predominance of it, really led by the united states. dave: that is a big piece of it, no doubt you'd given the influence of the biggest companies now in the sb that hundred, and even if you were to look at the russell 3000, you
would see the same thing. you can make the distinction between larger company indexes and smaller company indexes at the influence of technology, but what you can't deny is really, going back to the 1990's, it has been tech dominance that shows up in this comparison. tom: you ran our equity shop. you invented equity coverage for bloomberg. you wrote a book in plain english, unlike my book, and actually sold, unlike my book. when you look at financial markets, it says david wilson, what are the biggest mistakes that people make about the innate angst we all have? david: perhaps acting on it too fast. if you ride out market declines, you tend to do well over time. i can remember, just from a personal perspective, 2007, 2009, our assets down something like 40% over that time, and it was really tempting to pull back
and go into cash. didn't do it, and the last 12 years, it it really justified that steadfast approach. tom: the long-term approach as well, and you are set up for retirement. what is your advice on retirement planning to our viewers and listeners? i can't retire until i think 2040 or 2050. what is your advice to get this done? david: i will tell you this. over the years, i have managed my own money, my wife's money a little bit. but when it came time to retire -- tom: bitcoin? david: i brought in some help. that is the thing, financial advisors, so you can feel confident moving forward that you would be able to live the way you want to live, even if you weren't to make another dime over the next few decades. fortunately we have been able to do that, so i suppose that is one piece of advice that we would provide. it is one thing to make money.
it is another thing to spend it. tom: is mike going to let you take your keyboard home on your desk? david: i haven't asked. tom: jon, i'm going to tear up. look at the plastic he's got. those are honored that we get for the weeks we have been at bloomberg. david: weeks. [laughter] jonathan: dave, good to catch up with you. i will catch up with you again a little bit later, so it is not happy retirement just yet. lisa: yes, he has been a stalwart of bloomberg, and we so appreciate what you have done for us. thank you. david: thank you, lisa. tom: that is from a bond person. i know you never met her. she did bonds. [laughter] david: we met a few times. tom: you make no money in them. david: remember, my chart has bonds in it, u.s. and international. i know a little. tom: david, thank you so much. 31 just killer years. there is a different persistency today to the up than what you
and i witnessed three days ago. jonathan: there's a change from yesterday morning, which is a drift higher after chairman powell into this morning as well. i think that is the conversation we've got to have with bob michele of jp morgan asset management. this belief that if rates go higher, they will peek at 1.7 5%. that is a disconnect a lot of people in fixed income have picked up on. tom: it is a conversation we are all having. we partitioned it with blanchflower and david rosenberg versus what some are talking about. it will sort out in four years, i guess. jonathan: and someone will look very silly at some point. let's be clear, this federal reserve was way off on the forecast for this year. tom: yes, i think that is fair to say now. but i would suggest we have to learn from david wilson, which as you have got to figure out how to manage the fears that we address each and every day. jonathan: and stick with it, to
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>> we are looking at a change in regime. we are looking at a fed facing real inflation. >> the fed put should be questioned when you have inflation. >> the fed is already behind the curve. >> by the time you get to the back half of 2022, things look very different. >> there's a split opinion on the fed, and if you are wrong, you find yourself in a much worse position. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, on television, two hours of economic data. at