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00:00So delighted to have you here with us. How are you?
00:02Great to be here. Who knew what I would say one thing in Miami, and then I'm sitting here four
00:05days later.
00:05So it's always great to follow the king, Jamie Dimon. So great. Let's go.
00:10Well, anything the king said that you thought was kind of interesting, because he did talk about private credit,
00:15which is something that's definitely on your radar.
00:16He sounded much more positive than I thought he would. He's optimistic.
00:19He's down at a leveraged finance conference, so I think he probably needs to be.
00:22I think you focus on the right things. You can't predict when we're going to have a downturn, but what
00:26might cause it.
00:26I'm in the camp that actually the stock market has added such a wealth effect to the economy
00:31that it actually could be the stock market selling off that actually slows the economy.
00:34So they're all kind of intermixed here, and the stuff we can talk about, what I said down there about
00:38private credit,
00:39I think it rhymes with previous cycles, but every cycle is different.
00:42So let's go there and talk a little bit about how it rhymes with previous cycles.
00:46Where does it rhyme specifically, and what concerns you?
00:49So the whole thing about this cycle is that it's not systemic.
00:52We don't have the risk. The banks aren't there.
00:54So we don't have to worry about depositors being at risk.
00:56The similarities are that the banks are lending to the private equity and private capital firms, right?
01:01That's going on.
01:02They did the same thing to the mortgage companies in 2004, 2005, and 2006 leading up to the crisis.
01:06What did they do?
01:07They provided warehouse lines to New Century or credit home lenders countrywide.
01:11So they went out, produced the mortgages.
01:13What did Wall Street do?
01:14They bought those mortgages, packaged them, and sent them out to CDOs, and everyone bought them.
01:17Great whole cycle, right?
01:18Same cycle.
01:19The same institutions that are now buying all this credit.
01:21And so as soon as Wall Street sees credit turn a little bit, what they'll do is, the credit lines
01:26that they're now providing into that sector, they'll tweak it a little bit.
01:29They'll pull some back.
01:30Then what happens?
01:31You get left.
01:31The reason these mortgage companies went out of business was because they couldn't sell it anymore, and it got stuck
01:36on their balance sheet.
01:36Chair got pulled.
01:37So then the real marks start happening when liquidity starts to dry up, and it exposes the leverage.
01:42So whenever liquidity dries up in any asset class, it exposes leverage, and no good asset goes unlevered is basically
01:48how it goes.
01:49It's been incredible, Danny, to see that stocks haven't been toppled by anything that has happened this year.
01:54We have so much geopolitical risk.
01:56We have AI concerns, private credit.
01:59What is going to be the headwind that actually sends us into a correction or worse?
02:03I think it's employment, unemployment.
02:04So earnings have been strong enough, I think, to carry the market.
02:07I think we've had a broadening out within the market, which has been healthy in other sectors other than tech,
02:11which is great.
02:13But I think you're starting to see trends, potentially, in employment.
02:16Now, this memo that came out last week that I'm sure you guys were talking about, this Trini memo about
02:20what AI could look like in 2020, the apocalypse, so to speak, there's some truth to it.
02:25And you have to imagine what can happen.
02:26So you get all the benefits of being efficient as a company, and your margins improve, so you get that
02:30now.
02:31But we saw already from Block what was said, firing 40% of their staff.
02:37One note literally took pages, it felt like, out of the memo and said, this is what we think we
02:41can do now to be more efficient.
02:43So those are white-collar jobs, and so that's in the economy.
02:46Well, to be fair, I think we're all trying to figure out, is that a Jack Dorsey figuring out the
02:50future of that company in terms of management and whether or not that is an indicator of what's to come?
02:55And there are a lot of people who say that's not something that, it's a reduction in force that's sort
03:00of camouflaged as an AI.
03:03Like, this is bloating.
03:04We're going to be speaking about this a little later.
03:06I mean, he's certainly overhired, probably, for this pandemic.
03:09But what he said was irrefutable in terms of why he believes there'll be more efficiency and that he doesn't
03:15need humans to do all the jobs that they were doing.
03:16I want to go back, though, to over-leverage, because I always think about who's exposed ultimately.
03:21Like, what happens when the tide rolls out?
03:24And I'm just curious how you see potentially a crisis akin to the GFC happening because of private credit.
03:33So I think in terms of it fueling the economy and economic growth, companies being able to access credit is
03:38great for employment.
03:39Right.
03:39It's great for companies, but maybe they otherwise wouldn't have gotten it.
03:42Or maybe the leverage is too high, or maybe the covenants are too light that allow these companies to keep
03:47borrowing, modifying loans.
03:48As soon as the money stopped coming in or slowed down, I should say, on the institutional side, what did
03:53we see?
03:53We saw private credit get offered on the retail channels.
03:56Well, some of these banks and brokers are incented to get it onto those channels.
04:01And that's my point.
04:01When retail investors get the opportunity all of a sudden to buy something.
04:05Right.
04:05You know, caveat emptor.
04:07Listen, we talk about this a lot.
04:09Yeah, we just talked about Mike Contopoulos.
04:11I mean, the idea that it's a signal of something that the market becomes more available, or what he said
04:18is it becomes more democratized.
04:21So in your view, not a good idea for the everyday investor to have access to these products?
04:25If I were a retail investor right now looking to get myself exposure, I would be buying Blackstone, KKR, and
04:31Apollo.
04:31I'd be buying the parent companies, the large PE firms that have permanent capital, that have, you know, a huge
04:36fee income stream.
04:37That's how I would expose myself.
04:39And guess what?
04:39I can buy it and sell it in the same day.
04:41You wouldn't be putting private credit.
04:43I wouldn't be.
04:44Private credit, you know, funds in your 401k.
04:48If I had a retail broker that called me and offered me that, I don't think he'd be my retail
04:52broker anymore.
04:53Because buying those names are liquid.
04:54As you know, like we cover, right?
04:56These firms, you can sell and buy easily.
04:59But come on in, Alex, because I know you're listening.
05:01Yeah, we're talking about retail investors.
05:03And I actually wanted to ask you, Danny, one new segment of finance that they're actually foraying into is prediction
05:08markets with kind of the excess cash that they have to spend.
05:11And what do you think that will look like later this year as prediction markets continue to grow?
05:17Well, they're regulated by the CFTC.
05:19They've taken an extreme amount of market share from the traditional online sports books that we've seen.
05:24But it's really interesting because I actually use them as a way to follow the news.
05:29Not that you guys don't provide all the news that I need here.
05:31But you want to know what's going on in the election in Brazil.
05:33And you know that you want to either buy or sell Brazilian equities as a result.
05:37Watch those.
05:38Watch what's happening there.
05:38So you don't have to trade those markets, but you need to watch it.
05:41And it's really interesting.
05:42One pops up, you're like, I never even thought of that.
05:44I mean, I've seen like Goldman Sachs, J.P. Morgan, a lot of big institutional firms citing prediction markets in
05:50their research notes really often now.
05:51Right.
05:51And they're partnering in the media.
05:52They want to get it out there more.
05:53I get it.
05:54And listen, it's growing.
05:55It's a sector.
05:56It's evolving.
05:56But, you know, sorry.
05:58Well, no, go ahead.
05:58No, no, finish.
05:59No, it's all about regulation.
06:00We talked about doing the elections, right?
06:02Go ahead.
06:02Exactly.
06:02No, it's where the regulator lies.
06:04It's not at the state level.
06:05It's at the federal level.
06:05So that use case, I think, to a lot of people makes a lot of sense.
06:08But the question, and this is a real question that is available on some prediction markets, will Jesus return in
06:122026, yes or no, doesn't necessarily carry the same weight, I think, with someone like you.
06:17That's a sign of something.
06:18Yeah.
06:19Well, you know, I think there's an entertainment value.
06:20But I want to say, like, let me give an example of something that I just talked about on my
06:23show the other day, which is, will the U.S. debt exceed $50 trillion by the end of 2028?
06:29Even the CBO, which is nonpartisan, has literally $44 trillion.
06:34I'm negative on U.S. debt.
06:35That's a whole other topic we can go into some other time.
06:38But if it hits $50 trillion, to your point, I say you take no, you trade no on that.
06:42Because if it's yes, we have a lot bigger issues.
06:45What, do we have another pandemic, another financial crisis?
06:47We bailed out private credit in the tune of $3 to $4 trillion.
06:50How did we get to $50 trillion?
06:51So when I see stuff like that, and it's trading at $0.50, so it's trading at a 50%
06:55chance right now.
06:56I watch stuff like that to tell me, and if it starts to move, then I start to dig deeper.
07:00What am I missing?
07:01You watch it, but you don't participate in it.
07:02Oh, I participate in it.
07:03Okay, how do you participate?
07:04I trade on Calshi.
07:05I mean, I trade these markets.
07:06You know, will the S&P close below $7,800?
07:10I trade yes.
07:11It will trade below $7,800 at the end of the year.
07:13Will gold outperform Bitcoin?
07:15Right.
07:15Yes, I believe it will.
07:17And it's interesting to see how they trade.
07:19Will the Fed cut?
07:20You know, CME Fed Fund Futures will match up directly what you will see on Calshi in terms
07:25of, but I don't want to set up an account and trade Fed Fund Futures, but I can just trade
07:29yes or no, the 4% chance that they're going to cut in March maybe.
07:33So it's just-
07:34How much do you allocate to a platform like that?
07:36Not a ton, but enough that it's entertaining.
07:39Yeah.
07:39So I do my NFL there now, you know, sort of football season.
07:42So there's a lot of other-
07:42I'm going to do my master's there during the golf tournament.
07:44So you use it all, but yeah.
07:46I want to ask you, you said bail out of private credit.
07:48Do you think we get to that point?
07:49Well, I would-
07:51You said it.
07:52Yes.
07:52No, if we got to that point.
07:53So let me ask you a question.
07:54Oh, if we got to it.
07:54If we got to that point.
07:55Jamie Dimon just mentioned that, you know, things are okay.
07:58My issue is that things are okay because the Fed keeps bailing us out.
08:01There's a moral hazard.
08:02Yeah.
08:02And I believe it's in the back of people's minds that actually believe, you know what, if private
08:06credit goes, the Fed's going to have no choice but to bail it out.
08:09And they're probably right.
08:10It will have an impact on everything, impact on the banking system.
08:12Right.
08:13It won't bring it down.
08:13So I'm half kidding, but I'm not.
08:15So what did the TALF go, again, a whole nother segment, but post-financial crisis, the TARP,
08:20the TALF, the PPIP, we ran out of acronyms, right?
08:22So we're going to have, we're going to come up with another one.
08:24It could be a vehicle.
08:25The government subsidizes a period of time.
08:27What did they do during COVID?
08:29They bought the HYG, but people forget pre-COVID, we were already going through an economic downturn and
08:34it's kind of resurrected companies that otherwise shouldn't have been saved.
08:37So if President Trump brings in a new Fed chair who is more comfortable with cutting rates,
08:45does this just fuel the problem or make it even bigger?
08:49You hope worse, you'll maintain some form of independence.
08:52Do you think he will?
08:53I hope he does.
08:54Okay.
08:54I don't know.
08:55Because if he doesn't.
08:56Yes.
08:56Well, then you're starting to see what will creep in.
08:58Yields will start to move higher on the longer end, anticipating that whatever they do to move short-term
09:03rates will fuel long-term rates.
09:04Potentially higher.
09:05And you start to ignore inflation.
09:07You cannot ignore right now that inflation has stopped going down.
09:09Yeah.
09:10And it's taking back up.
09:11Is it just for a period of time?
09:13We don't know yet.
09:14But with oil now moving higher, it seems so it's something really to think about,
09:17the Fed's ability to cut rates from here.
09:19Danny, Lisa asked Amy Diamond this question.
09:21I thought it was a great one.
09:22Are you worried more about inflation or about an economic downturn?
09:27He kind of said both go to that.
09:29I'm probably more, I'm not that concerned about inflation.
09:32I'm worried about the question you just asked.
09:34If the Fed starts cutting in the face of inflation, what that would look like.
09:38I think the economy's fine.
09:39But I think that we've got to watch employment really carefully.
09:42And I think that's what everyone's spooked by this AI memo that kind of came out.
09:45We're already seeing signs of that, of white-collar jobs getting lost.
09:48So we're speaking with Danny Moses, the founder of Moses Ventures, financial computer,
09:52and a host of a new weekly series, The Danny Moses Show on Scripps News.
09:55He joins us here in the Bloomberg Businessweek studio.
09:58Let's go back to what you were saying about AI and the economic effects of that and what
10:02that is on the labor market.
10:04And dig into the Citrini report a little bit.
10:07Because you did mention there are parts of it that rang true and other parts not necessarily.
10:12And we'll use the Jack Dorsey block news as sort of a jumping-off point.
10:16Those are white-collar jobs.
10:18The message was received and has been received.
10:20Is that something you see other companies doing over the next 18 months,
10:24reduction in force of 40% and more?
10:27The same way no one was allowed to say tariffs a year ago on their calls,
10:31like don't blame tariffs.
10:32They're not going to say it.
10:33But why wouldn't you as a company?
10:35You're a publicly traded company.
10:36You have shareholders.
10:37Your job is for margin expansion and to produce earnings.
10:40If you see the opportunity to do it, it's not a not-for-profit.
10:43You're going to do it.
10:44And so there's no question that these tools, if you believe the AI secular trade is real,
10:48which obviously it is, it's going to have an impact.
10:50And you're pro-NVIDIA and you're pro all this stuff.
10:52Then you have to believe there's an end-user case for it, both in the consumer and company-wise.
10:57And so if that's the case, by definition, you'll be more efficient.
11:01I think my takeaway would be we always, the U.S. consumer finds a way to make jobs around it.
11:07It could be something that helps guide that technology.
11:10So there's always going to be movement in that.
11:12And we've seen massive changes occur, the dot-com in 2000, right?
11:17We've heard there'll be no more Wall Street jobs in 2008 after that.
11:20After that, it's over.
11:21It finds a way to reinvent itself.
11:23So I do think, I just think it's a think piece to think about, okay,
11:26but there's not a CEO, a competent one, that's not already thinking,
11:29how do I be more, that's even, Jamie said it, that they use it.
11:33Now, he didn't want to say they're firing people, but.
11:35I mean, everybody's using it.
11:37And everyone is telling us that if you're not using it, you're falling behind.
11:41And I, we are planning a Bloomberg, not me, but our team,
11:45a Bloomberg Invest event that comes tomorrow.
11:47And there's a big AI thing that you and I are both involved in.
11:50And it's interesting, I've had some conversations about, you know,
11:53people say what you should do right now is talk to a 25-year-old.
11:55They get how you can use these tools.
11:57And the idea is that there will be a dislocation,
12:00whether it's five years or seven years or maybe a little bit longer,
12:04between maybe an older workforce who's not going to embrace these tools
12:07and then a younger workforce who will.
12:10And that will create, free them up from some kind of tedious tasks,
12:14but create new opportunities.
12:16Do you not buy that argument at all, that that's ultimately where we end?
12:21And it's going to be uncomfortable, perhaps,
12:22because education's maybe going to have to shift around a little bit
12:25and teach things that people maybe lose, you know,
12:28or would learn on entry jobs that they're not going to.
12:30So there's a shift.
12:32So you have lawyers, you have accountants,
12:33and now you're going to have AI tutors.
12:35So there you go.
12:35There's a whole new industry that could happen.
12:37No, but in all seriousness.
12:38No, but there are huge positives to it
12:40in terms of making every company more efficient,
12:42making U.S. consumers more efficient.
12:44So that comes with more productivity for everybody.
12:47So maybe there's an offset there.
12:48I think, again, back to this moment,
12:49we don't spend a lot of time on it.
12:51But people that are saying yes, yay, or nay on it,
12:54you've got to read it.
12:55Because, again, it's a long read.
12:57I mean, it's a 30-minute.
12:58What is everybody missing?
13:00Just that it's a think piece, and it's logic.
13:02You can't refute that that could happen.
13:04And it will happen in pieces.
13:06And like I said, yes, Dorsey example maybe is just a one-off
13:09or whatever it might be.
13:10But I do think you talk to any CEO.
13:11They're not going to tell you that necessarily.
13:14So somebody's spending capex for a reason.
13:16Somebody's plowing money into these privates for a reason.
13:18Somebody believes you wouldn't be doing that
13:20unless you thought there was an economic benefit.
13:22Well, it's a zero-sum game to a degree.
13:23So you don't just increase productivity, and everybody wins.
13:25I think there's winners and losers here.
13:28It was amazing, Danny.
13:29Just a couple of weeks ago, we saw entire sectors
13:32being sold off in tandem, just being dumped
13:34because some AI startup said that it was going to replace jobs.
13:40Have you ever seen anything like that in past crises?
13:43And if that happens again, how do traders navigate that?
13:46Well, I mean, so that's software companies, SaaS companies
13:49that always thought that was the best model ever.
13:51Yeah, I saw it.
13:51Your bank's going to close down, so go get your money out
13:53and line up around the block, right?
13:55So what did that take?
13:56It was the FDIC to come in and say, no, we're okay.
13:58TARP, the banks are going to be fine.
14:00So, yes, you see that panic happen.
14:02You saw stocks.
14:02You saw Bear Stearns go.
14:04You saw Lehman go.
14:05Things actually did happen.
14:06That even shocked us to a degree.
14:08So, yes, you will always have whatever the kind of sector trade
14:11of the time is, and you will always get an overreaction
14:15and it creates opportunity potential to buy.
14:17Well, did you trade on any of that?
14:19Which, on the software stuff?
14:20Yeah.
14:20No, I'm too negative.
14:22No, I'm kidding.
14:22No, but there are names.
14:25There's always one-offs, and I think I will end with this.
14:27We're focused on AI and all these sectors.
14:30There's so much going on outside of just the technology trades
14:33you guys talk about, and all of a sudden,
14:35everybody's energy playbook's out in the last week or so.
14:37Like, oh, wow, these stocks are cheap.
14:39If oil were to even stay at 65, these stocks are,
14:42and it's 3% of the S&P, 4% of the S&P?
14:44Right.
14:45Could be 7%.
14:45So, I just think there's always opportunity to move around,
14:48and there's certain sectors which will not get AI'd away.
14:51And so, as a Wall Street participant, I think you need to focus on it.
14:53We want to go back to risks, but what do you think,
14:56I mean, what do you find most interesting in the marketplace today?
15:00Gold and, you know, things that no one was,
15:02now everyone's on gold, but things-
15:03And you're still on gold?
15:04Oh, yeah, still on gold, along the gold miners.
15:06I think it's up trade, yeah.
15:07When do you stop that trade, yeah?
15:10Listen, it's a $35 trillion asset now.
15:12No one talks about the size of it, but it's really big.
15:14But geopolitics just reared its head again.
15:18Debasement, inflation, it works in a lot of different ways,
15:20and it's really a play that central banks are incompetent,
15:23to a degree, and they're going to do whatever they need to do.
15:25So, if you think the way out of this, potentially,
15:27I just mentioned, is the end game of this bailing out private credit
15:30at some point?
15:30I don't know.
15:31But gold kind of prices all that in.
15:32But to your point, these stocks move.
15:34The gold miners are up, you know, 100%, whatever they are.
15:37Of course, you have to take some off the table.
15:38So, what about spot gold at $5,300?
15:41I like it.
15:42But I play it through PHYS, which is a physical.
15:44Okay.
15:45But, yes.
15:45So, there's ways to express it.
15:46But just, I kind of watch the flows,
15:48watch what's going on.
15:50And you've got to be smart with it.
15:51So, I'm not giving advice here.
15:52Retail also big participants in metals markets right now.
15:55Yeah, metals, silver specifically, I think.
15:57Every metals market's a little bit different.
15:58I think the commodity trade is here to stay.
16:00I really do.
16:02We're all pulling out our old jewelry.
16:04Exactly right.
16:04I'm not joking.
16:05You can't even get on 47th Street.
16:07There's a line out the door.
16:08I'm not joking.
16:09Having said that, back to risks.
16:11Whether it's private credit, whether it's geopolitics,
16:14what do you see as, especially as we continue to see a president
16:17who seems to kind of do what he wants around the globe
16:21in terms of either taking out leaders, for lack of a better word.
16:26So, how do you factor in geopolitics?
16:28Because I'm kind of shocked at the trade today.
16:31I expected something much worse, and it was much worse overseas,
16:34but maybe that makes sense.
16:35Alex and I were just talking about that before we came in,
16:37and I think a lot of this was priced in.
16:39So, what did we see at the end of last week?
16:40Oil started to move higher, but not to the mid-70s,
16:42but West Texas moved up to, call it 68.
16:45Then you had Treasury yields lower, and it was kind of odd.
16:48Treasury yields were moving lower in the face of higher inflation prints.
16:50You're like, well, is the economy slowing?
16:51What's happening?
16:52And gold was moving higher.
16:55So, today is more of a buy-on-the-news type of event.
16:58So, what happened today?
17:00The microcosm I'm looking at today is the U.S. dollar rebounded.
17:03The belief that the U.S. is still the ultimate power,
17:05the belief that we haven't hurt all our relationships,
17:08that we can be a trusted partner.
17:09We got a little glimpse of what that could be,
17:11because war always rallies the dollar.
17:14I think it's short-lived.
17:15So, to the point you're making, I think this is kind of a false bounce.
17:18We forgot all of a sudden about the AI trade.
17:20You have this MFS in the U.K. blowing up,
17:23which would have been front-page news on Friday and today,
17:27if there's other stuff.
17:28So, that's page two right now.
17:29But here's another mortgage lending type.
17:31Again, not systemic, but also just a sign that money has been circling around the globe,
17:36trying to find a place to go.
17:37And sometimes it's too easy.
17:39It's too free.
17:40So, I just think in general, and the last thing I'll say is,
17:43I am very concerned about U.S. debt and debt to GDP.
17:47That's my big, I know it doesn't matter.
17:48No one cares.
17:49No, but it should.
17:50It matters.
17:50Because one misstep here.
17:52Yeah.
17:53Well, when does it matter?
17:54When does it matter?
17:55Well, again, I'm not going to call a failed auction in the 10-year yield,
17:58but when you start to issue more T-bills instead of 10-year notes, right,
18:03when you start to do those things,
18:04you, by definition, create refinancing and repricing risk down the road.
18:08So, if inflation does come up and the Fed's hands are tied,
18:11all of a sudden these T-bills, which you're issuing instead of 10-year,
18:13because you don't want to put pressure on 10-year bonds,
18:16just doesn't work.
18:17And so, all we did from 2008 on was just move the risk to the government balance sheet.
18:21But you're not going to outgrow it.
18:23You cannot.
18:23We're going to have, we are not going to run a surplus in this country.
18:26We're going to run a deficit.
18:27Is it $1 trillion, $2 trillion, or $3 trillion a year?
18:29I don't know.
18:30Back to the Cal sheet, $50 trillion at the end of 2028.
18:33We're under $39 trillion right now.
18:34That's almost $12 trillion from here.
18:36So, that's a big concern, because if our rates start to move higher,
18:39there's so much to worry about.
18:41Just buy U.S., I guess, just buy stocks.
18:43Honestly, I don't even know.
18:44I got cash under cash for this.
18:45Yeah, I got cash, exactly.
18:47Just got to, I'm going to, because you brought us all together.
18:50Got 30 seconds.
18:52You want to do the last question?
18:52We've got a minute left.
18:53I guess, Danny, Wall Street retail investors have this penchant to buy the dip over and
18:58over again, and at what point does that backfire on them?
19:01Because it's worked so far over the last few years.
19:03Just got about 30 seconds.
19:04I think it's self-fulfilling.
19:05I think that even through the tariff crisis of last year, ongoing tariff crisis of last
19:10year, ETF flows remain positive.
19:12So, passive has still been positive, but that comes down to one thing, employment.
19:15If people start to lose their jobs, they're not putting in monthly into 401k.
19:18So, that would be where I see the risk.
19:20Right.
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