• 00:00Our war continues. A strike moves toward conclusion and the US economy just keeps on keeping on. This is Bloomberg Wall Street Week. I'm David Westin. This week, Roger Altman of Evercore on the financial World coming to terms with a world of higher bond yields. The very long, roughly 15 year period of ultra low interest rates is over. And Tom Nides, former U.S. ambassador to Israel on what the Israel war with Hamas means for the rest of us. We're not at war with the Palestinian people. Quite the opposite. We're at war with Hamas. Global Wall Street spent the week dealing with the new version of the issues it faced last week, starting with Israeli military action against Hamas in Gaza. As diplomatic efforts continued to keep the war from spreading in the region. Israel has the right and I would add, a responsibility to respond to the slaughter of their people, and we will ensure Israel has what it needs to defend itself against these terrorists. And humanitarian groups struggle to get food, medicine and fuel to those in desperate need. We've seen this picture before and it doesn't look very good, particularly when you have so many civilians who are caught in the middle. Back in the United States, the UAW strike brought a tentative agreement with Ford. We reached a historic agreement, as you know, in our union. The members are the highest authority. And big tech earnings came in mixed. I think all said and done, Cloud is the major story here. But at the end of the day, it really is good numbers across all their businesses. Alphabet, the parent company of Google, pretty much only missed in its cloud division sales of 8.41 billion below street estimates of 8.6 billion or so missing on the bottom line in that unit as well. Morgan Stanley named its new CEO Ted Pick, taking over from James Gorman the first of the year. That next cycle is going to be investment banking lead. And it means that in equities you want to be one or two every quarter, as we have in the last decade. We have fixed income business. We restructured, it's now a top five business and investment bank is going to lead the next cycle. The House of Representatives, after three long weeks, finally came up with a speaker. The challenge before us is great, but the time for action is now. But through it all, the US economy continued to surprise in a good way. The GDP growth numbers way above trend, with the third quarter growing by 4.9%. It's a good strong. Number and it shows an economy that's doing very well. Let's remember, it is just one quarter's number. But as much as the economy soared this week, it did not bring the markets along with it. The S & P 500 was down over two and a half percent for the week, falling to 4117. That is well below the median year end number projected by our Bloomberg LS, which is up at 4435. The Nasdaq was down just over 2.6%. And this week we can't blame the sell off in stocks on a similar move away from bonds as the yield actually gave up nearly 15 basis points on the week. Here to help us sort it all out are Chris Harvey, Wells Fargo head of equity strategy. And Kristen, bitterly Citi global wealth head of investment solutions. Congratulations on your big promotion new movie title there. Yeah. Good for you So much. Good for you. Chris, let me start with you. What did we see in the markets this week? There were a lot of factors at play. We had the war in Israel. We had the GDP numbers. What do you think really is driving the market right now? So even though rates went down, it's still a concern. We don't know where the ceiling is on interest rates. And so as a result, it's really hard to have an equity floor. You combine that with geopolitical, which is just a complete and utter wild card. And then the reaction to earnings we had, the earnings overall were, okay, you had some good, you had some bad. But the overall guidance, the market really didn't like and you saw that all together and it was a difficult week. We've got the FOMC next week. Is that going to help us? Because most people think we know what it's going to do, which is nothing. It may help us. I have my fingers crossed. I'm hoping it'll help us. There's really two things next week. It's the Treasury refunding announcement and it's FOMC. If the Treasury announces and they don't need as much paper as people suspect or they come in line with expectations, that's a good thing. If the FOMC plays ball and says, okay, we're done, we're good here for now, that could stabilize the markets, but it's going to take a lot to really stabilize the markets. They're very jittery at this point in time. And again, I don't want to overemphasize geopolitical, but it really adds a whole new dimension to things. Christine, where are you? Do we have a sense of where the markets are going, particularly when it comes to rates and yields? Yeah, So I think I think everyone was hopeful that during this earnings season we would go back to fundamentals. It would be stories about companies. And I think what happened over the past couple of weeks, given geopolitics, given the rise in oil and just given the fact that the ten year across over 5%, it became much more about these macro conditions. And when we look at the price action, yes, it's given back some of that that increase. But when we look at the price action on the ten year and the effect of tightening that that implies. So we don't expect that the Fed's going to raise rates or do anything next week. But I think the big question here is in this environment of rates being higher for longer and the market doing some of the financial tightening for the Fed, what is really then the backdrop for corporate profitability. And how much of is it up to the Fed at this point? I mean, the Fed didn't raise rates that really drove those yields. The yields went up on their own. And Chris, you mentioned the auction coming up this week. Part of it is the supply of treasuries, Christine. Part of it is the supply. So you have to look at supply demand imbalances when it comes to the ten year. So you have the supply, you have the increased issuance, and then you have the question around who is buying. And I think one one of the things that we have seen from our investors is, yes, you have the attractiveness of the front part of the yield curve, but you also have even going out kind of 2 to 5 years, you have really attractive yields. You have corporate investment grade bonds that at five years, five years are yielding around 6 to 6 and a half percent. So there are really, really attractive parts within the fixed income market where you don't have to go out ten years. So we see a lot of the activity still concentrated on that front end of the curve. So let me just play off that because I think Christine hit onto something. It's really on a ten year. It's not so much about fundamentals, it's about technicals and it's about positioning. And the technicals aren't great, especially if the Treasury comes out with they need more paper than people expect. That's going to be a problem. The other issue is if you're further out on the curve, right, if you're a long duration buyer, you're probably underwater at this point in time. You're trying to catch a falling knife. There's lots of disincentives at this point in time. And Chris and I were talking earlier, who's that last Who's that buyer? The Treasury. Who's that buyer for long duration assets. And it's really hard to find that person at this point in time. And everyone's waiting for somebody else to step up. And that's a problem. Maybe a long duration, but you can get real return on cash or close to cash or not. The two years is that does that hurt equity sales? Because, by the way, I can get some return by just keeping it in money markets. I think it hurts all risk product. So why go out on the curve when you can get a higher yield at the front end of the curve? I don't need to take that duration risk. And then for equities, I have this stable earnings in a period where there's a lot of instability. Maybe I'll just put a portion of it there. And so, yes, to a certain degree it is hurting equities. Christine, what about that duration question? Because do I want to keep it in cash or near cash or at some point, should I lock in some of those rates even on the fixed income, because it may shift the other way. I think it's a balance. So when you look at a building, an income portfolio, I think if there's one bright spot, it is the fact that you can build really attractive fixed income portfolios. A portion of that is going to be T-bills. So the fact that you can get really high yields on the very, very short end of the curve, we are encouraging our investors to take advantage of that. But remember, you have real reinvestment risk. So depending upon what happens from here on out, you are going to have that moment in time where that yield is not going to be there. So the idea that you can get above 5% going out 2 to 5 years, you don't even have to stretch in terms of credit quality. You can get this with an investment grade corporates, you can stay within government bonds and you can actually have this very diversified portfolio that's providing income within mid to high single digit. So your earlier question, if you're an investor getting mid-to-high single digits without really stretching and credit quality, how attractive are equities at these levels? That's right. And that's the fight. Now, there is one thing that's going on, and I'm sure Christian has seen that's and talked about it is the negative carry. In other words, the yield curve has been incredibly inverted for a long time. If we go back to July, it was over a hundred basis points of inversion. Now we're only looking at 1520. That was one of the reasons why the duration players weren't stepping up is because it didn't make any sense. There was a real negative carryover. But as that curve goes to zero, it looks like it's going to go to zero. Now you can start having people move out of the curve without being penalized, but we haven't seen that yet and that's what we're looking for. And maybe that will also decide FOMC and Treasury help stabilize the bottom. So help me on that understanding because I've read about so-called pancake, right? We visually have a flat curve. It's not tilted one way or the other. Let's assume followed. It goes and stays around a flat curve for a while. But how does that change my portfolio building? So what it does, it's not it doesn't penalize you for going out on the curve. So when the curve is negative, right, when it's inverted, you're giving up a lot of cash or you're giving up a lot of yield. So you have to get duration, right? In other words, you have to get it right when interest rates start to fall. Otherwise, it's going to be a very painful process as the curve flattens out. We don't have to play around with that. That becomes less of an issue. And if you look at the macro, yes, the macro right here right now is a little bit troubling. But inflation has come down. The Fed looks like it's going to start. And if you go back to oh six when the Fed stopped their tightening, that 04206 tightening cycle, real rates dropped nominal drop once they stopped. And so there could be a catalyst here, a small one, albeit for duration buyers. But we'll see. Christine, you're an investment solution, so give us some solutions for investors right now. I'm sure you're going to say you should be balanced in your portfolio. You should be very balanced. But what incrementally is a bit more attractive or less attractive in fixed income? I mean, investment grade, high yield, I mean, what looks a little. Better than what it. Stretch in high yield? So I would say like we are staying very high in quality because remember, while the economic data has been very strong, we saw that GDP print, all of the economic data has actually shown some resiliency in terms of the economy. But we do see signs that it's slowing and we do start to see some breaks within the consumer backdrop. So you're seeing rising credit card balances, delinquencies, even the personal savings rate that came out today was at 3.4%. Remember pre-pandemic that was at 8%. And so you're seeing consumers are now dipping into savings. You're seeing savings decline. And so the question is, how long can you actually see that hot of a GDP print last? So we expect that to slow down. And so in that sense, state upward in quality investment grade government bonds and there's plenty of opportunity there. It really strikes me we've had this whole great discussion. We've never mentioned inflation once. Is inflation still a factor, Chris, Should we take into account? It's always a factor. What we worry about is oil. The policies that we have kind of sort of maybe possibly make it difficult or there's a disincentive for us companies to increase supply. And I think it's going to be higher for longer in the oil patch. And if that's true, inflation is not done just yet. For now, I think inflation is okay. As Christine alluded to before, the back end of the curve has gotten very restrictive. That should slow things down and so as a result, I'm okay with inflation for now, but I don't think it's done. And I think 2% is an aspirational level. Aspirational. Okay, Christine, literally and Chris Harvey will stay with us as we focus specifically on earnings season and what those big labor agreements may mean for corporate margins. That's next. On Wall Street Week on Bloomberg. This is Wall Street Week. I'm David West. And this week brought a tentative settlement between the UAW and Ford with reports that GM is Stellantis may not be too far behind, but it comes with a price of substantially higher wages, something we've already seen with other labor agreements this year, which always raises questions about pressures on companies profit margins. Let's talk about where we are with earnings in the middle of the season. Chris and Beverley City and Chris Harvey of Wells Fargo have stayed with us. So Chris, let me start with you. We do have this settlement. We do see labor costs going up, UPS reported it, you saw it, it affected their earnings. Are we seeing much margin pressure so far because of labor as far as you can tell from the earnings? You know what I would say this earnings season, I actually think we continue to see some resiliency within earnings and there's actually potentially a path to seeing positive earnings growth, which has not been the case for the past three quarters. I would say, though, in terms of the market reaction and what we're seeing around earnings, it's much more of a macro picture. Rates are still in the driver's seat, but the other part that's in the driver's seat is tech. And so you've seen some pretty binary reactions in terms of not only the earnings but also forward guidance in terms of their expectations. And the market is heavily reacting to that. And if you look at volatility around earnings, we are seeing a wider spread in terms of some of those movements than we have seen in prior earnings season. So, Chris, when I hear tech, I think about Magnificent Seven, right? Isn't it we call it these days, that's what we call they holding up because we saw a little bit of shakiness in some of those magnificent Seven this week. So the answer to that is the stocks aren't holding up that well. Some what it is, is some good, some bad. The underlying fundamentals fine. Right? The reaction function not so fine in some cases. That's part of guidance. But here's here's a funny thing. If you're a company, your stock's up 100%. You're looking forward. You might want to manage expectations, bring things down so your stock goes down 5%, 10%. You're already up 100. You want to lower those expectations for next year. You want to set things up for next year. And so it's not quite clear to me if it's a management of expectations or they're really saying something that we're not seeing because the results for some of the companies are actually quite good. Well, what are the patterns that you're seeing so far, Chris, in this earnings season? So surprisingly, what we're seeing is margins are holding up well. We're seeing top line beats. But the issue is or the rub is guidance hasn't been as good as it has been in the past. And and companies are being taken down a notch due to that. Whether that's because, again, they're seeing something that we're not seeing, they're being more conservative. They're managing expectations unclear. But the underlying fundamentals in the here and then now are fine. The last thing I'd say is that when we look at earnings and we we go through transcripts, we go through transcripts and we look at what the C-suite is saying, we are seeing things, the tone change get a little bit darker around the consumer, which isn't a surprise, but it's something we're watching very closely, which. Is something you mentioned earlier. Kristen Exactly. I think the other thing, too, is when you look at going back to this conversation around tech and the Magnificent Seven, those stocks are priced for perfection, right? So of course, there's going to be a little bit of an overreaction to and giving back some of the gains that we've experienced year to date, because as we all know, the market has been so concentrated in those seven stocks. So I think what is interesting is as we're kind of if we've seen the bottoming of of corporate earnings and now we're kind of pivoting into modest growth, I do think 2024 Chris, I'm not sure about your view on this, but I think 2020 for the outlook is a little bit too rosy, especially if we're at the higher for longer rates. I think that's right. But within that, there are opportunities in some of these sectors and. Some of them are enough. In fact, let's talk about defensive stocks. Let's talk about small and mid-caps, because, yeah, those are not I don't think price of perfection. So if you look at small and mid-cap, I think the interesting thing is, of course, if you're in a higher interest rate environment, this idea that are their balance sheets clean, do that, are they exposed to floating rate debt but within let's take like mid-caps within mid-caps you have parts of that market that actually are profitable. Let's take like industrials, right? So if we're looking at industrials, you're looking at infrastructure. Your defense industrials are only like 10% of large cap, but like 20% of mid-cap. Are there opportunities within there to have exposure that makes sense from a valuation perspective as well as a as well as a go forward perspective? Absolutely. So, Chris, from your point of view, are those bargains or is there a reason they're so cheap? So I think Christine has been reading a lot of our research because what we've been saying is mid-cap growth is your best risk reward. You have companies that are an index, companies that are trading at mid-teens. They've been traded on a fundamental basis. They've been traded on a price basis. But fundamentals are beginning to turn. They're not crowded. There could be some M & A as we move forward in time. And there are companies that don't really rely on the stock market or excuse me, the economy to really power through. They can power through by themselves. But if I understand it, selectively so active management, right. Stock, I would say this is key. Absolutely. You can't just buy it wholesale. Okay. Thank you so very much to Chris Harvey of Wells Fargo and Christine, bitterly of Citi. Coming up, sky high federal deficits helped drive borrowing costs up. We talk with Evercore Roger Altman about how Washington fiscal actions affect Wall Street. That's next. On Wall Street Week on Bloomberg. This is Wall Street Week. I'm David Westin. Global Wall Street is trying to come to terms with higher yields, driven in no small part by the federal deficit and the need for more borrowing, something that Fed Chair Jay Powell say they pay attention to at the Fed. But that former Treasury Secretary Larry Summers says is a bigger problem perhaps than the Fed may understand. They actually the fiscal authorities have oversight over us and not the other way around. So we stay away from that. So I would just say everyone knows that it's not a secret and that all I can say is we know that we're on an unsustainable path fiscally. There was a big Newfoundland of a dog that wasn't barking as he was speaking, and that's everything about the federal fiscal situation. For a better sense of what these deficits and Congress's difficulty in dealing with them may mean for the world of Wall Street. Welcome now back. Roger Altman. He's founder and senior chairman of Evercore. Roger, thank you so much for being back with us. To be here with. You, David. So you've had a lot of assurance in Washington, in the Treasury Department as well as here on Wall Street. First of all, explain what you think Jay Powell means when he says it's unsustainable. As well as herbicide. Once said, when something is unsustainable, it actually stops. But I know what I think when I hear that term. I'm not sure exactly what he means. But as a person who's spent so much time here in and around markets, I think that it's just a matter of time before global financial markets turn their attention to this very poor fiscal trajectory in the United States and reject it. And absent unless we change course fiscally on our own voluntarily. Before that moment, there'll be a crisis and it'll only be many would argue it would only be a crisis that will cause the authorities to adjust fiscal policy. For example, additional revenue. So that's what I think of when I hear the term unsustainable as it relates to the deficit. There will come a moment of reckoning when financial markets reject this course. We'll have a crisis and that will force the hands of the Congress and the executive branch in terms of changing policy. That's not a good way to do it. I hope we don't do it that way. We much better to, in effect, agree that we need a different path and proactively choose one. But at the moment, you'd have to be a real optimist to think it's going to. That's going to be the way it happens. We like to think of markets as anticipating the future to some extent and discounting it and really taking into account are the markets not discounting at all right now, or is that perhaps part of the reason we're seeing, for example, the yield on the 30 year, for example, go up? Is it because of some beginning of concern about repaying all that debt? It's hard to say. I would not say that right this moment. Fiscal concerns are one of the top two or three factors driving markets, whether they're affecting the 30 or debatable. The recently been a couple of very sloppy treasury auctions, although they were shorter maturity auctions than that. And that's always a sign of concern. And keep in mind we're we're at a moment we have this very poor fiscal trajectory at a moment of quantitative tightening. So the Fed has gone from buying billions of dollars of Treasury and government backed securities during that quantitative easing period, which lasted a very long time, to now selling down aggressively its bond as bond portfolio. And what that means is it's it's adding to the supply in effect of treasuries that the market has to absorb because the Fed is a seller. And then you have the Treasury itself issuing giant amounts of new securities. That's adding to the complexity. So you mentioned there are better ways that you would prefer than actually going up to a crisis. Over the course of the summer. We had Hank Paulson, the former Treasury secretary, on, and he said, actually, when you deal with these issues, you're better off dealing with them earlier rather than later because the choices get harder as they go on. From your experience in Washington, because you did serve under President Clinton, and that's the last time we sort of got our arms around the deficit, as I recall. What are the ways that we might choose right now if we wanted to? For example, the new speaker of the House, Mike Jordan, says maybe we have a bipartisan commission. Well, there have been a variety of commissions over the years, including Simpson-Bowles, of course, famously, and they haven't gotten very far. And you'd have to be really optimistic to think this one would do no matter how it's set up. Bank, of course, is right. We're much better off grappling with this voluntarily than having a crisis and having changes, in effect, forced on Washington by the markets. But we're just not on a path right now to do that. I mean, the heart of the matter and certain people would disagree with us, but I think the heart of the matter is, is the is revenues and the revenue share of GDP is just much lower than traditionally it used to be. Now, it's been much lower for a few years, but, you know, when I was serving in government, the revenue share of GDP was around 20%, sometimes a little higher. And today it's in the 17% range. And you can't solve this problem without additional revenue. Yes, there should be a role for spending restraint. Do I agree with that? But if you don't find a way to add revenue, you're not going to solve this. And right now, as you well know, the politics of anything whatsoever having to do with with tax increases, no matter who they might fall on, are toxic. I'm delighted to say that Roger Altman will be staying with us as we turn to those broader questions of what the C-suite really is concerned about today. That's coming up next. On Wall Street Week on Bloomberg. Deal flow. It's what makes the economy work, whether it's buying and selling cars and houses or buying and selling companies. After a record $5.7 trillion worth of mergers and acquisitions in 2021. We are continuing to see just tremendous momentum. And you are some of the. Things came way down in 2022 but appeared to be coming back this year. Fourth quarter of 22. You had nothing today. You actually have the markets loosening up for the right deals. IPOs look like they might be picking up as well. I definitely think hope is coming back about IPOs. There's a backlog of companies to present themselves to the markets. There's also backlog of some interest from investors. But I don't think anybody expects a snapback of a miraculous style. And then there are the two huge oil deals this month with Exxon acquiring Pioneer and Chevron buying Hess. This is about long term growth and long term value, which is what we're always seeking. But now all those buyers and sellers face another round of challenges, starting with higher rates. I'm not saying higher for longer, I'm saying just playing higher rates are going to be at 5% around this range, probably for a considerable period of time. And geopolitical risks raising questions about the tech sector in Israel. Most of the economy is an export export focus and tech is the biggest part of that. My sense so far as most of the tech companies are going to continue to operate, obviously they'll have to adjust. The tech companies are still basically working. I looked at a couple of investments where they're still fundraising. Fundraising hasn't stopped, but. Despite the risks out there, John Gray of Blackstone says things will calm down. What investors want, of course, is a bit of stability. And I think ultimately we will find at some point some stability in marketplaces, particularly in treasuries. When that happens, I think you will start to see transactions pick up again. They are at a muted level, but it doesn't stay like that forever. And Fed Chair Jay Powell says so far so good. I talked to several people this week who run companies and they each said that the economy remains strong. There are some areas where where we're spending is softening, but overall, I mean, look at the retail sales number. Consumers strong volume is not going up very much good, but companies are profitable. And help us understand what these higher rates and yields mean for corporate America today. We welcome back. Now Roger Altman. He is, of course, the founder and chairman of Evercore. So, Roger, let's go beyond the deficit and talk about other things that are affecting business today and specifically what we've seen, the yields, because goodness knows they've come up a long way really fast. Well, we've seen, to quote my friend Howard marks a sea change in the financial market environment in the sense that the very long, roughly 15 year period of ultra low interest rates, at least I would argue, is over. It's not temporally interrupted, it's over. And and now today we in round numbers, we have a 5% ten year yield and we haven't seen that for, I think since 2007. And I think a lot of market participants in particular to your question, business leaders are just beginning to grow to grasp that we are in a new era in terms of the structure of interest rates. It's a profound change because it affects not just obviously cost of capital, but it affects asset allocation, it affects returns. I mean, if you're a financial imagine you're a private equity firm and these are they are so ubiquitous, this fundamentally changes the return prospects for them because the cost of that leverage is such that they can't leverage X-Y-Z investment to the same degree today that they could have a year or two ago. So but I think I think a lot of people are just waking up to this. And I'm sure some people listening to this would disagree that we've seen the end of ultra low interest rates. But I'm convinced we have. And and it's a really a profound change. Now, how much it affects you as a CEO depends on the nature of your business, how capital intensive it is. Are you, by the nature of your business as a to generate consistent free cash flow or are you are you generating deficits instead and doing a lot of financing? So if you're if you're an apple, you actually do borrow because of your international business versus domestic and the role of share buybacks. But you're not a net borrower in terms of net debt and you know it affects you, but it doesn't affect you very dramatically. But if you are Blackstone or your KKR or your Apollo and so forth, very dramatic effect. So you say some corporate leaders are just waking up to this process. Is that at least in part, the answer to a more fundamental question? At least I have. The economy seems to be charging along. When you look at GDP numbers, you look at retail sales, you get so many indicators, even the labor market may be loosening a bit, but it's still a pretty strong labor market. What how can the economy doing this? Well, we've had this many rate hikes out of the Fed and this increase in the yields on the bonds. I think the economy is slowing. Now, you're right that it's still resilient. It's not falling off a cliff. We're not there's no evidence at the moment of an incipient recession. I mean, like next week or next month. But I think it is slowing. You look at the housing sector and of course, the sharp rise in mortgage rates always would have the effect it's having here. But new home sales, mortgage applications all sharply down, as you would imagine. And you look at a whole series of other surveys at Evercore, we do a series of proprietary surveys, trucking, temporary employment agencies, airlines, restaurants, a whole series of them. And we do them regularly. And I think it's quite a good set of data. And they're pointing to a serious slowdown. So the composite reading of our surveys is above recession levels, but has come down a lot. So I think the economy, despite the backward looking strong data, is slowing down. Are we about to have a recession? I don't think so. I don't know about next year, but not I don't think in the rest of this year, 2023. But there's definite slowdown occurring. By the way, for your data. I get Ed Hyman slides every day and I read him every day. You know what I mean? I do know exactly what you mean. I read those surveys every single day in some sci fi form. So how does a corporate CEO respond? I mean, obviously there's a lot of different corporate CEOs, a lot of different reactions. But do they just pull in their horns at this point? In part because it's more expensive, but also in part because I, as CEO, don't know exactly where it's going? Well, and of course, it depends on what your business says. So you're seeing some surprising strength given the level of interest rates giving, given how old this recovery simply is, as recovery is more than three years old. It began in the early second half of 2020. You know, you see Walmart doing very well. You see Procter and Gamble doing very well. And those are really broad based companies and they're a sign of the resilience of this economy. On the other hand, you know, you see some companies there was there have been some big earnings reports the last day or two, which have been somewhat disappointing alphabet and so forth, really depends on on on the business you're in. But if you take all these earnings reports together, they do show resilience. I say it's slowing, but there's still considerable resilience, especially businesses that depend on the day in, day out consumer, because the consumer is still has, for example, considerable excess pandemic related excess savings. And as you say, labor markets remain pretty tight. And so consumers are doing well from an employment point of view. And a lot of consumers are right about even in terms of real after tax income, but still they are resilient. We have a lot of uncertainty about exactly where the economy is going, where rates are going, things like that. We also have geopolitical uncertainty right now. We had Ukraine already, which was to many a shock that we'd have a ground war in Europe at this point. Now we have Israel and Hamas, which we've had disputes about before. There have been problems over there. But boy, this is a pretty ugly one. And that's before you get to issues with China and making sure that we're handling that situation with Taiwan especially, how does a corporate CEO internalize that if they do. Well at the very at this very moment and it could be different tomorrow, the the tragedies and they are tragedies are unfolding in Israel and Gaza. And on the other hand, as you say, Ukraine are not a major economic event for the United States of America and for most chief executives are almost any chief executives. So you're worried about it? For a lots of reasons, but probably not about what it's going to do to your next quarter or how you're going to plan your next year. Now, if, God forbid, the conflict in the Middle East becomes a wider one and I just hope this doesn't happen. But everybody's talking about the possibilities, whether it's Hezbollah opening a second front against Israel, the role of Iran and so forth, we just have to hope that doesn't happen. But if it does, that will be, I think, a different matter, because financial markets, I think, will react very negatively to that. You could see much higher oil prices, for instance, and it could go from something that you think is terrible but doesn't affect your business to something that starts affecting your business, among other things. So that frightens consumers and frightens customers. So at this very second, probably doesn't affect your business. It isn't a big economic event, but one has to worry whether that could change. So Roger, as you say so correctly, this is fundamentally a humanitarian issue. What we saw happened in Israel and what has been ongoing in Ukraine for some time, the people on the ground who are really whose lives are being affected profoundly, and we have to keep that uppermost in our minds. At the same time, there are business aspects, there are economic aspects. And so I want to ask this as delicately as I can. Are there opportunities from some of the dislocation we're seeing in the sense that if you have a strong balance sheet, if you have a strong company, some of the prices might be coming down because of increased yields, because of interest rates? Are there some companies are saying, you know, this might be my opportunity to move into some area and make an acquisition. Otherwise I could not have done well. An obvious area of opportunity that Ukraine, in effect, the conflict in Ukraine created, had to do with energy. So, you know, the United States is again, United States I'm sorry, is is at an all time high in terms of oil production and a lot of the world, you know, has has reacted to the Ukraine conflict by saying we don't want to be dependent on our prior sources of energy, especially if you're European. So I would say the energy sector as a whole in the United States has taken advantage of that and and ramped up production. You know, beyond that, probably not that much. And I think if if this conflict in Israel and Gaza becomes wider, it's not an opportunity. It's a problem. So, I mean, the whole China dynamic is creating a lot of opportunities because a lot of people, of course, are diversifying their supply chains and moving and investing in India, for example, are investing in Vietnam or Malaysia, what have you. And that's causing a lot of rethink of investment. But in terms of Ukraine and the Israeli tragedy, not quite yet. Roger. It's always such a pleasure to have you with us here on Wall Street. Thank you so much. That's Roger Altman of Evercore. Coming up, Israel's war with Hamas continues to reverberate around the world. We talk with the man who just completed his tour as U.S. ambassador to Israel. Nides So painful for every Israeli and innocent Palestinian so put out of this. Let us not let this go to waste. That's next. On Wall Street Week on Bloomberg. This is Wall Street Week. I'm David Westin. Israel's war with Hamas is entering its fourth week now with continued strikes and counter strikes on Gaza and Israel efforts to get humanitarian aid into the territory and feverish diplomatic efforts to contain the conflict. Welcome now, Tom Nides. He's a former Morgan Stanley CEO, former deputy secretary of state, and he also just stepped down as U.S. ambassador to Israel last month. So, Tom, thank you so much for joining us. Good to have you here. We all see the consequences for people living in Israel and in Gaza every day in video. But for many of the rest of us, particularly in the business world, the consequences may be determined by whether or not this conflict spreads beyond Israel and Hamas. What are the factors, from your point of view, that will determine whether it does spread? Well, let's David, appreciate you having me. It's this is the this is the question, because ultimately, one of the things that the president has been very clear about, regardless of you, you love him or hate him, the reality is he's been very clear to the Iranians because they are Iranian proxies. We're really talking about Hezbollah in particular. You is he likes to say superpowers don't bluff. And it's also help that they move the some very large ships into the Mediterranean every day. This white House is working to put pressure on the those proxies, those in in Lebanon and, yes, in Syria, but more really the Iranians don't do it. Don't do it because a two front war without question will have enormous consequences. The state of Israel, and to be clear, will have enormous consequences to Lebanon and Iran. So I think when they're sitting around thinking about this in Tehran, I think, you know, thinking long and hard about what the consequences could be of them getting involved, but it certainly is a risk. So time we see, for example, Secretary of State Blinken going to the region, we see various activities. I'm sure 9/10 of what's going on, we never see and we're not meant to see. Without revealing anything you shouldn't reveal, that's confidential. What sorts of things do you expect is going on behind the scenes? Well, first of all, they're pushing the Israelis very strongly about getting humanitarian aid into Gaza. Listen, Hamas is doing exactly what they want to do. They want to create unbelievable carnage in Israel, which they certainly did. They then really, as you know, don't really care about the Palestinian people. They're using them as human shields. You know, this is Hamas's in senior on and says let's come up with a two state solution. No, Hamas is ISIS. And their goal is destroy the state of Israel. On the other hand, the vast, vast majority of Palestinians just want to live in peace and prosperity and freedom. You know, we're not at war with the Palestinian people. Quite the opposite. We're at war with Hamas. And so I think what the what the president and Secretary Blinken is trying to do is relieve this humanitarian suffering that's going on in Gaza. It's it's terrible. I was on the phone with a very close friend of mine just this morning who has a very large business in the West Bank and has many, many, many people in Gaza with his operations there. It's heartbreaking. So I don't you know, I don't like any of this. I say the least we should keep focus on how he got here. But at the end of the day, what you're hearing, what you're not hearing is the pressure that the that Secretary Blinken and the president and the vice president is putting on not only the Egyptians and the Qataris and all the people that get into the military and aid and also to make sure the Israelis are making smart military decisions. And I think that's very important as well. You mentioned Qatar. You mentioned Egypt, one other Saudi Arabia that could play a very significant role here. What do you expect is going in Saudi Arabia? We thought we might have been on the brink, actually, of a peace agreement between Saudi Arabia and Israel. That certainly has put have been put off for the time being. Well, you know, David, as you know, you and I have spoke about this. I've been a very strong advocate of getting a deal done with Saudi Arabia, a normalized deal with Saudi Arabia in the state of Israel and with security agreements. The United States would only be better for the region, just like the Abraham Accords were. If you look at the Abraham Accords that were obviously done on the Trump administration, I praise them all the time. When I was in the region, the idea of Bahrain and Morocco and the UAE was a game changer for the region, and this situation would be even worse if that wasn't the case. Now, how grand would it be today if we had a normalization with Saudi Arabia and Israel? Because ultimately that makes the region more secure. So I am I'm actually quite confident after this is over and God knows how long it will be that the sides will, in fact, want to reengage, because, quite frankly, they see the same threat that we see and Israel sees, which is the Iranian threat. They they've seen part of it through the Houthis and Yemen. So my view this is, is that with the work of members, with the work of the White House and the Israelis, my hope is and I think strongly believe that this chance of a Saudi normalization is certainly is certainly not dead, is delayed. Yes, but certainly not dead. And arguably, the imperative ness of this is even more great than it ever was. So NBC's the crown Prince has really been intent on doing this for economic reasons, I think in large part because of the possible potential of an integration economically between Israel and Saudi Arabia. What about the attitude from Israel's point of view? I mean, after we get through this and we hope we will get through this without some conflagration, after we get through it. Will the Israeli position be altered in its dealings with Saudi Arabia and for that matter, with the Palestinian people, as you say, not Hamas, but the Palestinian people? I think there's going to be listen, are I again, not quoting Winston Churchill, but I'm quoting my friend Rahm Emanuel is now the ambassador in Japan. Don't let any good crisis go to waste out of this, out of this. And it's and it's so painful for every Israeli and innocent Palestinians. So butt out of this. Let us not let this go to waste. Let's try to figure out how we make you know, let's push forward on the possibility of a two state solution. Let's puts forward on the idea of Saudi normalized nation to a more integrated Middle East. So my hope is, is that through this crisis, through this crisis, both the Israeli public and the international community will understand why is so important and be able to push that to hopefully a conclusion. Is it going to be easy? No, of course is not going to be easy, but nothing that's worth it is easy. And I think ultimately they're going to have to to get the parties in a room together and say, okay, what's next? Tom, thank you so very much for being on Wall Street. Really appreciate. That's Tom Nides, former US ambassador to Israel. Coming up, when. Okay, Boomer is a not so subtle hint that we be getting off the stage. That's next. On a Wall Street week on Bloomberg. Finally, one more thought. The big elephant in the whole system is the baby boomer generation marches through like a herd of elephants. That's how Senator Lindsey Graham described one of the biggest fiscal challenges we face. But the problem goes way past just bankrupting Social Security and Medicare. Everywhere we look these days, we find baby boomers. And yes, that is my generation. And we remain on the stage without making room for the generations coming up behind us. There are few exceptions, to be sure. Like Ray Dalio, who has decided to step down from Bridgewater. I'm not creating my own format. Okay? I am. I have a. Family office that manages family and. Foundation thoughts. Okay. And I'm doing that. And what is. What comes next? I'm at a phase. In my life where it's very natural. I'm 74 years old and I'm not the most. Important thing for me. Is to pass along everything. But for every Ray Dalio, it seems there's a host of us boomers who are just fine staying in the limelight. We see it in network television, where the long running Bachelor series on ABC has added a golden Bachelor version, complete with an eligible widower looking for love at the Get It golden age of 72. For modern dating. What are the things that you do dating right now? It starts with your texting. You need to upgrade. To better text. To start with. Dear. Her name comma. We see it in sports as Phil Mickelson won the PGA Championship just two years ago at the age of 50 and is still competing on the tour. We even see it in real estate as the elderly hold on to their homes longer, putting even more stress on an already troubled housing market. We call that phenomenon aging in place. And what used to be is that the the homeownership rate when you hit about 65, would dropped precipitously. But like in everything else with the baby boomer generation, they're behaving differently. And so they are something like ten percentage points more likely to be homeowners. And when it comes to the economy overall, once again, it's the boomers. As Bank of America analysis this week found that boomers and traditionalists are the only groups to increase consumption. That maybe the biggest example of us boomers holding on is on the concert stage, with the Rolling Stones still touring, led by lead singer Mick Jagger at age 80. Neil Diamond going strong at 82 and the much younger Bonnie Raitt on stage at 73. And then there's the boss. This is what I presented to you all these years as my long and noisy prayer as my magic trick. Bruce Springsteen at 74 started his latest tour this year, so he'll be going at least well into 2024. But Bruce Springsteen is once again leading the way for boomers, if not quite by getting off the stage, then by taking a big step toward that, selling off his music catalog and getting a cool $500 million for it. That is a record amount with the buyers backed in part by Blackstone, KKR and BlackRock. And right now, it looks like Springsteen's timing was once again impeccable, as Bloomberg opinion columnist Lawrence lays out this week. Licensing music isn't as easy as it may have appeared, and the funds that bought those boomer catalogs are getting hit with lower valuations. Mr. Springsteen may have sold at the top of the market, but, you know, one performer who isn't worried about any of this, the very much not Boomer Taylor Swift, as we learned this week, that Ms.. Swift is now a billionaire in her own right. And, boy, has she taken over the stage from older artists. So maybe the younger generation will push us all off the stage. After all, eventually this has been the most. Extraordinary experience of my entire life. That does it for this episode of Wall Street Week. I'm David West and this is Bloomberg. See you next week.

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