Bloomberg Surveillance: When the Fed Should Cut

Liz Ann Sonders, Charles Schwab Chief Investment Strategist, says the status of the economy doesn't justify the Fed cutting rates . Amanda Lynam, BlackRock Head of Macro Credit Research, claims banks will remain at the center of lending, but that private credit can now compete in ways it previously couldn't . Libby Cantrill, PIMCO Director of Public Policy, previews the fourth GOP presidential debate . Elliot Ackerman, US Marine Corps Veteran & Former White House Fellow, breaks down the latest on the Israel-Hamas war . David Rubenstein, Carlyle Group Co-Founder, previews a brand-new episode of Bloomberg's "The David Rubenstein Show: Peer to Peer Conversations" featuring Pershing Square CEO Bill Ackman. Get the Bloomberg Surveillance newsletter, delivered every weekday. Sign up now: https://www.bloomberg.com/account/newsletters/surveillance Full transcript: This is the Bloomberg Surveillance Podcast. I'm Lisa abrahmoids along with Tom Keen and Jonathan Ferrell. Join us each day for insight from the best in economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot com, the Bloomberg Terminal, and the Bloomberg Business App. I've been looking forward to this conversation. Liz An Son is the chief Investments trying to just a chold swap joins us right now. Lizan, I've been looking forward to it because we're not going to talk about self landing, hard landing, no landing, none of that. We're going to talk about what you and a team have been focused on now for a while, and that's rolling recessions. That is a framework, Lizen. Why is that so important for you? That nuance? Well, first of all, this is a unique cycle. That's the ultimate understatement. I think taking a nuanced approach is important, and we've been using that term for quite some time. I think the only other person that I know that's been using as long as we have is Ed yard Denny, and not that we want to rehash the last three and a half years, but if you think about the stimulus fuel demand surge coming out of the worst part of the pandemic, all of that demand and money associated with it was funneled into the good side of the economy because we had no access to services. That was where the inflation problem first began on the good side of the economy, exacerbated by the supply chain disruptions. But fast forward to the more recent period, we've gone into hard landing recessions for housing, manufacturing, a lot of housing related, many of the consumer product areas that were big beneficiaries of the lockdown, and we've gone from inflation to disinflation to deflation in many of the goods categories. We've just had the later offsetting strength on the services side. Same thing as rolled through in terms of inflation. So to me, best case scenario is not really soft landing that Schuberti sailed for many important segments of the economy. It's a continued roll through where if in when services in the labor market get hit, you have found stability and maybe even some improvement in those areas that have already taken their hit. Lezan, love your nuance. Let's build on that. Where are you seeing opportunities that might have hit bottom that you want to be investing in now, In particular sectors that you think already have rolled through, they're hard landing and are now buys. I still think that investors are better off taking a factor based approach as opposed to a monolithic sector based approach, But we have made some adjustments in terms of the foot factors that we're focused on. As you know we've talked about it on this program. We have been emphasizing stay up in quality with factors like interest coverage and strong return on equity and strong balance sheet, but also growthy factors like positive earnings, revisions and surprises. But I think you want to now add kind of evaluation kicker into the mix because this year was characterized by all multiple expansion, no earnings growth. We see in the last month that there is money itching to move out of the Magnificent seven to find opportunities down the cap spectrum. And you have seen some lower quality characteristics to of what has rallied. I think you want to fade that and continue to lean into quality. But you can find it across the spectrum of sectors and also outside that group of just the Magnificent seven. So you said something Lezen talking about how people are itching to take the money that they've put into the Magnificent seven and put it to work elsewhere that might be at a lower valuation. How big is that wave of people is to get out of the Magnificent seven. Is this something that could cause an underperformance or is it just simply there's just been so much money people are looking for other ideas well. So far, so good in terms of the rotational nature of this easing of some of the excesses, You've seen some pullback in the Magnificent seven. The rest of two thousand SMP equal weight is outperforming the SMP over the past month or so. It's happened in kind of a stealth way. That's obviously the best way to go through a corrective phase of excesses versus the bottom falling out all at once. What concerns me, particularly once we get past the year end seasonality, is that there is an incredible amount of overlap, especially in the large institutional world and the hedge fund world, in terms of ownership of not just the magnificent seven but up the cap spectrum, and that you know, if we get some sort of catalyst and it unleashes more frenzy around selling, I think maybe the hit would have to be larger, but I do think absent that we could continue to see a broadening out via rotation again as opposed to some significant crack occurring in the market. Lasan, can you help us gauge sentiment? Just sort of a bit wittold, least from myself repeatedly that the money money market funds is really really sticky. As you look across clients, to the people you speak to daily, have they been moving into equities over the last month? What was that move in November? So you've seen some move in equities, But it's actually, interestingly within the US equity market been toward areas like real estate utilities, and I think that is in keeping with expectations of sooner rather than later fed cuts. I'm skeptical about that, but that's where the money has gone. But sentiment is really interesting because attitudinal sentiment measures have gone off the charts of bullishness and very little bearishness. Yet even the AAII survey that we get those attitudinal bullish bearish readings, the equity exposure of that same cohort of investors has actually been coming down. On the other hand, active institutional managers have actually been significantly increasing exposure. So much like cross currents in the economy, there's even a lot of cross currents in terms of sentiment data, and it's really a mixed picture, and sentiment is hard to It's always hard to use as some market timing tool, even at extremes, but it's particularly murky in this environment right now. Lizen, just a put a bow on it. You did just mentioned that that you're skeptical about right cuts. Can you just explain that a little bit more, Well, the inflation is still above the FEDS target, the labor market is hanging in there, the economy is hanging in there. How that justifies a pivot from the most aggressive tightening cycle to easing as soon as the first quarter of next year. I don't get it. It's possible to find to be easy, but probably because there's more economic dislocation between now and then. In addition, you had the Fed and Powell specifically pointing to the bond market doing a lot of the tightening for the FED when you were in the surge and yields up to five percent. To me, what would be interesting to hear is if they start to say, well, the loosening, which is a record one month loosening in financial conditions in November, maybe that does some of the loosening for the FED. And it wouldn't surprise me if Powell has to yet again reinforce the notion that they're not at this point considering rate cuts. That's the conversation for a week today. Listen. Thank you Lizanne Sunders, a child swab one of the very best joining us at Amandelinum, head of macro credit research at Black Crock Andmanic good morning, good morning, Thank you both for having me. How much money is shift into private markets. So our forecast calls for that asset class to grow from one point six trillion globally to three and a half trillion by the end of twenty twenty eight. So that implies a pretty significant continued growth pattern through the next five years. There are really four drivers behind that. The increase in the addressable market is one of them, but it's really investors looking for diversification, borrowers looking for certainty of execution, structural shifts in the public markets which are now serving larger and larger borrowers, so that renders small middle market debt deals ill liquid. And then fourth is the opportunity for banks to partner with non banks. And also just given the well telegraphed contraction in bank lending and tightening of bank lending standards to really fuel that growth. And so that's our forecast. Was that a really nice way of saying D banking that basically private credit is stealing banks lunch. I watched all of your great coverage yesterday, and I did see the D Banking dialogue. I actually think I agree with the comments that banks will remain at the center of the lending universe. That said, I think the important takeaway is that as private credit has become sizeable and scalable in its own right, it can now compete against other parts of the market where it wasn't historically. And so what we've actually seen are some companies with demonstrated access to the public markets choosing to refinance in the private markets. I think there's an opportunity for banks to partner with non banks in terms of in an environment where capital and liquidity rules may change, to partner and maybe move some of that lending into other parts of the non bank system. Doesn't mean that the risk transfer is a negative. It just means that capital is being reallocated, just like it did after the financial crisis. So there is this sort of larger question when you say banks will still be the center of the lending universe, it raises this question about what that means. There'll be the center in terms of maybe organizing some of these transactions, but not necessarily the center of profits, not necessarily the center of deploying risk and then getting that outsize return for some of these private loans. Is that what we're saying that they're going to be the center of sort of some of the transactional aspects, but that private credit firms are going to really get the upside from these loans that banks used to capture. I mean, I think from the side of the banking relationship, they really have a lot of the client relationships, a lot of the underwriting expertise. But in an environment where risk weighted assets are going up, does it make sense to hold all of that capital on the bank balance sheet or is there a more capital efficient way to do it? I think that's really the shift that we're seeing now. Some of these factors have been in place for a really long time, going back to the Financial crisis. After Dodd Frank was enacted, the public syndicated leverage loan markets grew because banks didn't want to keep those loans on their balance sheet. Instead they syndicated them out to a wide range of investors. That's how the public debt markets have been growing for so long. So I think that's just it's another sort of iteration of this capital allocation that's shifting in response to the regional banking disruption in March, in response to the potential rules for Basle three endgame, and I think it's probably a longer term shift. By the way, I would say, you know, our three and a half trillion forecast, it assumes a fifteen percent compound annual growth rate. That's actually below the growth rate that we've seen over the past five years, and it's consistent with the growth rate over the past decade. So it sounds large, but it's actually a continuation of the trend that's already been in place. Let's talk about big moves out of the last month. Credit spread so much tighter on high yield. I think three sixty seven right now, I just want it from your perspective, still up in quality, and what do you make of this move? So, I mean, I think the move it's very It's consistent with this kind of year end rally that has been fueled by pretty favorable technicals. We've seen issuance pick up, but not to a significant extent that it's interfering with that tightening. From our perspective, yes, up in quality still makes a lot of sense. For this really important reason. Most of the issuance in twenty twenty three, and I'm talking about the left in market has been up in quality within that market, so double bes and high single bees. The low low end of the quality spectrum, so triple c's and low single bees, has really been untested. There's been a lot of talk about rate cuts. That's not really our base case in the first half. But even if we do get a few modest rate cuts, just to put that in perspective, the implied refinancing cost on average for triple C's is above six hundred basis points. For the distressed universe it's above fourteen hundred basis points. So this low end of the quality spectrum. Even if we get some rate relief, they're still going to be refinancing into a much higher cost of capital regime. How long can goldilocks lost goldilocks last? Then? I think it's the title of our one Q outlook was a widening divide, and I really think it speaks to the dispersion that's evident under the surface and a lot of these markets. So for goldilocks, investment grade goldilocks, you know, high quality, high yield, they're in a pretty good spot, especially if we can achieve the soft landing. If you're a triple C rated credit that has refined nancing to do and you're looking at your current coupon and then the six hundred basis points that it may cost you to refinance in today's market or more much different story. It's part of the reason why we expect defaults to continue to march higher through the first half of next year. It's not not a spike, not a significant increase. But I don't think we ask a lot have we seen the last of this transition to a higher cost of capital. I don't believe that we have with us around the table. I'm really placed society brilliant. Libby Cantroll, the managing director and head a public policy over at PIMCO. Libby, good morning. Another big debate for Republicans. Big debate? Yes, is this the big one? The difference? This is the big one? So this may be the last one. Actually, there's not another debate schedule before Iowa, when voters, of course on the Republican side, will go to the polls on January fifteenth. Viewership has declined since the first debate. That's when we saw sort of top tick of thirteen million. The last debate was around seven million, So we'll see if people are even paying attention to this. I think the real question, though John is does can Nicky Haley have another breakout moment? Does this sort of sustain the momentum that she has both in terms of the polling but very importantly in terms of the donors, And that remains an open question. I think that the other three folks on the debate stage will be sort of attacking Nicki Haley. I think Nicki Heley will be attacking President Trump, so it should be raucous as usual. But does it actually make a difference. I think that's the open question. What's the chance that you see another Biden Trump matchup. Well, so you know, what we're guiding our clients too, is one is that Biden will be the nominee. This sort of idea that there is some great cabal at the convention that will unseat him. We just do not think as founded. Senator bros from Louisiana, who had served with Joe Biden in the Senate, said, as long as President Biden is breathing, he is running. And I think that is something we should just you know, take take for what it is. You know, on the Republican side, obviously, if the primaries were held tomorrow, it looks like Trump would be the nominee. They're not going to be held tomorrow. They're held in around forty days. And what we've seen with Iowa and New Hampshire is that things can change. They haven't really changed in terms of dictating who the nominee is since two thousand and eight when Obama, who was sort of underperforming all of the polls, that really outperformed in both Iowa and New Hampshire and was able to get the momentum to the nomination. So a lot can still happen, but as of now, if you were saying, if the primaries were held tomorrow, it would be another Biden Trump rematch, and you know, ironically, I'll just say, is that seventy percent of Americans don't want that. So that's the reason why I think it got so much attention yesterday when Joe Biden said if it wasn't for Donald Trump, he wouldn't be running again. What do you make of that? Do you make that if NICKI Haley is the nominee for the Republican side, that there is a chance that Joe Biden would step down and pave the way for somebody else. So his his pressure ap really watched that back last night after those comments were made. They were made, of course in private at a fundraiser, so was maybe I think they're saying taken out of context. You know. However, you know, this is something that President Biden has been saying since he was a candidate in twenty twenty, that that's why he was running the first time, and so this is somewhat consistent with that messaging. However, if Trump does not get the nomination, I still think that President Biden is the incumbent president. He believes that he really has a record both on the economy and then foreign policy to feel confident to run on. So we are not getting sort of any indication from folks close to the Biden world that he is, that he's not running. He is running. We've been all appreciate. I think we could all benefit from a delegation oudication rules clinic from you. How have things changed for Republican primary, especially as a non Yes, a US citizen, So I appreciate you on that question. Yeah, so this is important. It's like very wants and a lot of our client's eyes understandably glazed over. But to get the nomination, it's just a delegate game. You need to get fifty percent of the delegates at stake on the Republican side and the Democratic side. The Republican side is the real story here, though, because the Trump campaign much more organized than it was in twenty sixteen. By their own emission, they have now systematically changed the way that states allocate delegate rules to benefit him as long as it's a crowded field, meaning that he They've changed the rules to what's called winner take all, So as long as President Trump is winning a plurality of the vote in many states, he will get one hundred percent of the delegates, and the punchline for all of us is that that makes it much easier for him to get the nomination much more quickly. So I would argue that by March fifth, which is Super Tuesday, we'll have had forty five percent of the delegates at stake being voted on, we likely will have a very good idea of who's going to be the nominee or whether it's going to be more of a competitive two person race. As you said, so we know there's four people on the stage. Later is on the calendar where that for needs to become one to change the outcome of this. Well, I think there are a lot of folks on both the Republican side and then also some of the Democratic side. As you've seen, there's some now Democratic donors who are you know, donating to Nicki Haley sort of interesting, unprecedented in many ways, who are trying to argue for a Chris Christy to say drop out of the race before Iowa. You know, John, I think what we've seen though before is that again so much can change. That much of this is unprecedented, particularly given what we might be facing, which is you know, two incumbent presidents effectively running against each other. So you know, I don't think there's a drop dead date, but I do think that it needs to become a two person race sort of by South Carolina. That's February twenty fourth. So I think the bottom line for kind of the markets and for investors is that the next seventy five days really matters. We will have a very good idea by sort of South Carolina by Super Tuesday, which is March fifth, whether this is going to be President Trump Biden or whether it's going to be more of a two person race between Nicky Haley and Trump. In those seventy five days, we're going to be dealing with a couple of deadlines for funding the government. Before I let you go, we keep talking about where is the leverage. The leverage is in the US government. I then you figure something out in order to keep operating. How are you advising people in the market to understand what's happening, what the likelihood of a shutdown is, what that means in terms of the growing risk frankly that it's been attributed to in markets. Yeah, So mean I think that two things. One is that this is not the dead ceiling, right. The debt ceiling was existential for the markets that has been fortunately addressed until January or February of twenty twenty five. This is really the most foundational function of Congress is just to keep the lights on. They keep kicking the can down the road, Lisa, does it really matter if they shut down the government? Probably not if it's not for a sustained period of time, But if it does go on for weeks, then we don't get some of the economic data, then it could actually start hurting the economy. But I think this is just sort of noise. But I think the punchline here from a fiscal perspective is this effectively funds of government at the same levels as last year, and what we're not We're not going to see any more physical stimulus. And I think the threshold for any sort of stimulus, even if we do go into recession. I know your previous guest was pretty sang one about the economy. I think we maybe we as as bond investors, are a little less so, but the threshold for any sort of fiscal stimus is going to be very high. So we think the government probably will be funded probably at the last moment, but again from a market's perspective, we're not sure. We're there's more noise than really anything. It's always the way, isn't it. Equities, hopes and dreams, bonds, fares and nightmassy do you know? Yeah, obviously obviously, Well yeah, thank you, thanks, good to see it. Great to catch you out let me cant with their Pimcoke. I'm pleased to say that John, I guess now is Elliot Akerman, the US Marine Corps veteran and former White House fellow. Ali wonderful to hear from you, sir. Always appreciate your perspective and your deep experience. Let's start with that experience. Can you describe for our audience the type of urban combat taking place right now, the urban commet that we're seeing in Gaza. You know, it's that happens really at a very close quarters, you know, street by street, house by house, room to room. As I think I've said on this show, eating in an urban fight is like it's like being in a knife fight in a phone booth. So it also takes away that the advantage that high tech militaries have, and I think we're seeing that play out and also oftentimes it's very very messy. And one of the greatest casualties in an urban fight is the city that the fight is taking place. And I think we're seeing that today as you know, vast parts of Gaza are are being turned to rubble and the civilians who lived there. So let's discuss that, given the type of combat that was seeing at the moment, how on earth do you prevent the tragic loss of civilian life we've seen. You know, It's extremely difficult, and that factors into the into the calculus on on both sides. A fundamental to you know, Hamas's attack on October seventh was they knew that they were going to force the Israeli's hands to fight them inside Gaza, which would lead to civilian casualties, which would lead to much more attention being placed in the Palestinian cause in the world, and also a significant international outcry to and the fighting. And so, you know, I think the one thing that we can see when we're looking at what is going on in Gaza is that, at least thus far, it would seem that it has preceded exactly according to Hamas's plan. Given that Elliott how much longer. Do you think that Israel has from a political perception standpoint as well as just their own aims before they're going to stop. You know, the aims of the Israeli government, as they've articulated, is the complete annihilation of Hamas. I think one of the things that's difficult is that's an extremely high bar to completely destroy a terrorist organization, as opposed to degrade its capabilities or make it so it's no longer a threat. So if that is their stated objective, I think they're in some ways probably setting themselves up for failure because it's difficult to see how they are going to completely destroy every single number of Hamas from the face of the earth, particularly as many of them are not in Gaza, you know. And the other issue that complicates factors that we can't forget about is there's a significant number of hostages still inside Gaza, so the Israelis can't finish this operation until those hostages have been freed. So, unfortunately, I think this is going to go on quite a bit longer, but every day that it extends, it becomes politically much more costly for the Israelis. Do you agree with Secretary of Defense to late Austin when he basically said that the fear here is that Israel setting itself up for a strategic defeat. I think that is certainly. I don't know that they are going to end up in a strategic defeat, but I think if the Israelis lose sight of the fact that war is always fought on two planes, both the tactical of the operational, what's happening on the ground, you know, how much of Gods is being taken or retaken, but also the political, how those actions are perceive and so you know, history is littered with cases of nations and armies that won the battle but lost the war. And I think the Israelis need to be very mindful that they don't place themselves in that situation. And we've been through a period of really intense diplomacy. We've seen that over the last two months, how elevated. Still, do you think the odds are they brought a conflict in the region. I think they've certainly lessened, but I think we absolutely want to keep our eye on any actions it seems that they could spread the conflict. You know, as you know, the United States, as you know, a very significant military presence there. We've surged naval assets into the Mediterranean Sea, all signaling very strongly to the Iranians not to spread this conflict or engage in those actions. But we've also seen simultaneously that the Iranians have been attacking US forces abroad, that there are many instances of provocation, and not only our leaders but also our troops on the ground had to be very very mindful that their actions could have TGIC consequences. So I don't think it does not seem as though the conflict is going to spread, but it's still on a hair trigger. This is a conversation about a direct conflict. I just wonder, from your perspective, in your opinion, Elio, whether you think we're already in a proxy war with Iran. I think we certainly are. But we've been in a proxy war with Iran for for decades now, and it is just waxed and waned. I mean, I mean, I'm a veteran of the wars in Iraq and Afghanistan, and both those conflicts we were fighting a proxy war with Iran, and about those conflicts, you know, so the American service member I was, you know, having to dodge IEDs built by Iran and having to deal with Coudes Force paramilitaries who are operating or Iranian in those theaters. So we've been fighting that war for a long long time. But it's very important that as you know, you know, it doesn't escalate into an all out conflagration across the Middle East, particularly as we have another war going on in Ukraine. So these are you know, these are dangerous times where they I'm glad you brought that up as a former American service member, as someone who's actually served and seeing the threat, what is your sense of this increasing isolationism or the increasing fight over funding for some of these conflicts. Do you think that it's a valid one or do you think that that's really our retracement from the role that you served for. Because I think that there should always be robust debate in this country about issues of war and peace, and I think that is very very healthy. However, I also think that, you know, those debates should occur in a functional as opposed to a dysfunctional way. They should occur in a way that has a very clear eyed or it takes a very clear eyed view of the world beyond our shores and isn't naive of the place of America in the world. So, you know, I don't think it's inappropriate for members of Congress to be debating how long and how much the United States is going to spend on these wars. But I also think if there's some of idea that the US can just retreat within its borders and that's going to be the best interest of this country. I mean, you know, we've seen that, we've seen that play out before, and it doesn't play out to the best interests of the United States. You're implying, Elliott that the debate right now is not healthy. What would a healthy debate look like? And why is what we're seeing right now not healthy? So I think there's a degree of brenksmanship that's going on. And I think that braksmanship of you know, buying aid packages together the much of the dysfunction that we've seen them in Congress where we no longer where Congress no longers exists with the culture, and I'm olding to remember this culture in which most people operated under a mode of that you know, America's differences ended at our shores, and we projected ourselves abroad, we projected ourselves as a unified country. I mean, now we know that our allies, you know, have different you know, they prefer republican or a democratic administration and have policies that they set for both. So I think there's the overall fractiousness in our country is hurting the efficacy of our foreign policy. So that's what I mean, Ellie, thank you, sir Vio Clarity, Ellie Aikman. I'm the latest on the situation in the Middle East and with Ukraine and rest as well. I'm so pleased to say. Joining me right now is David Rubinstein. I want to pick up on that point that Bill was saying, which is his activism as now not in a corporate boardroom but on college campuses. And we heard this yesterday from Mark Rowan of Apollo. How much you hearing that increasingly from some of your peers. Well, there's no doubt that Bill Ackman doesn't need to be an activist in investing anymore, because, as he said in the interview, he wasn't that well known when he was an activist, and therefore he had to get attention, and doing activist kind of things got people's attention. Now he's pretty well known, so he can avoid that part of his investing process. In terms of College and Harvard, he has been very active with his letter to Clouding Gay and Mark Rowan has been very active at Penn as well, and a number of other business people have been active. There's no doubt that there's a lot of concern in the business but other communities about what's going on in college campuses. And as we all know, it's not a pleasant situation to be Jewish student in some campuses these days, or to be a Muslim student some campus has been a problem as well. So I don't think there's a perfect answer. We're not going to solve it overnight. It's going to take some time for all these colleges to kind of figure out what the right balance is. Do you get a sense that there is something specific that people are asking for that goes beyond a statement on anti Semitism or Islamophobia and goes more to the nature of conversation at certain universities. Well, at certain universities, I would say on the left, far left are far right. There's not a lot of room for people who disagree. Some campuses are far left, some are maybe more conservative, and people who disagree with the conventional or the majority view, don't get the kind of support that they might want to receive from the college presidences or universities. In some cases, Harvard is seen by people in Congress who said yesterday in the hearing that is seen as far left. Maybe it is, maybe it isn't. I was on the board of Harvard for many years, and I think Harvard tries to do the best it can. But it's a very large campus, very diverse. The president of university has done as good a job as she can in a very short period of time dealing with these issues, but nobody is going to be able to solve this problem overnight. You're also on the University of Chicago board, and full disclosure, I attended there, so if I'm biased, I just want to be completely transparent. There is this question about whether it's appropriate for a university to take a stand at all on any social issue, or just to let the individual professors and students have their own voices rather than have some sort of collective voice that you have to stay within. Do you think that that is the way to go well? With the same issue CEO's face, Should corporations be taking positions on these kind of issues. Sometimes they do, sometimes they don't. Universities are places where young people are generally allowed to grow and experience what life is going to be about when they leave campuses, and they tend to be sometimes more shrill and certain things they might be when they become an adult. I think at the Universe Chicago, we've had a long standing one hundred year policy of basically letting people say what they want, has provided that they don't do anything that harms anybody else or incites violence. But there's been a lot of free speech at univer Chicago, and I think that's a great tradition there. Do you think that going forward there's going to be any change in response to some of the pressure, Given the pressure that we have seen now, I suspect something will happen, but I don't know that Congress will do anything. I think the university boards are probably going to be more sensitive to these issues. There is going to be more security for certain students there, for sure, But I think there'll be more of a move towards a University of Chicago approach where more people are allowed to say what they think without feeling that if they say something that's unpopular. They'll be criticized or harmed physically. Just besides this particular issue with Bill Lackman, he's also been vocal about investing in treasures just to shift a little bit to the investment side. And I am curious if you're starting to hear this more that certain hedge funds that maybe are struggling to get an edge in public markets are just making bull trades on the path of interest rates. How much you're hearing that well. Bill Ackman said in the interview is that he doesn't generally doesn't make big macro bets. That's not what he generally does. He generally makes bets on companies. But in a couple of times in his history he has made macro bets and some have worked out extremely well. And he's made one not two year long ago, where he made a couple of billion dollar I mean, I guess it was a two billion dollar profit on a relatively modest investment in a relatively short period of time. That's hard to do. This time, he's made a bet, in effect, that the treasury rate will go down, or the interest rate will go down, the Fed will lower interest rates sooner than the conventional wisdom thinks, and I assume he's structured it so that if they do, he'll make a fair amount of money. And I'm assuming that right now he's pretty happy with what he's seeing because the market's coming along to his view. Conventional wisdom today is that the Fed is likely to cut interest rates sooner than maybe people thought a month ago. Right now, I think the Fed doesn't want to get into the election season, So if they're going to cut rates, they're probably not going to do it too close to the presidential election, so they probably would have to do it sooner. Meanwhile, just want to bring this to you. Just Breaking City Group is reporting some figures and what they expect, and they say that fourth quarter trading revenue is expected to drop fifteen to twenty percent compared to the third quarter, and you can see as the CFO does talk, you can see shares falling. This really does speak to this sense that there isn't going to be the same kind of opportunity to make profits for some of these firms as there has been earlier in this year. That basically this is what they're going to pitch when they CEOs go down to Washington, DC and start saying, you know, maybe we earned record profits, but we're going to lose it to people like you, David Rubens, sign at private credit and private equity. What do you make of some of these arguments. I'm not worrying too much about the large banks. They can take care of themselves. I'm sure they'll do well. Interest rates go up or down. There's no doubt when interest rates go up, they tend to make more money. Historically, if interest rates go down, they're very smart. They'll find other ways to make money. Private equity firms and private credit firms have done quite well generally over the last ten twenty years or so, and we have a lot of very smart people. We'll try to figure out how to navigate whatever interest rate environment we have. David Rubenstein, it's always a pleasure. Thank you so much for being on. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern, on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can watch us live on Bloomberg Television and always on the Bloomberg terminal. Thanks for listening. I'm Lisa Abramowitz, and this is Bloomberg See omnystudio.com/listener for privacy information.