Bloomberg Talks
00:06:29 · Emmanuel Roman, Yvonne Man, David Ingles
[00:06:29] S0: Is it still liquidity? Is it still market? I think if you're a central bank, you're counting in hundreds of billions of dollars, not in billions. And so that is the key advantage of the dollar. Wow. [00:06:43] S1: Speaking of Hong Kong, we were going to get this later, but I'll bring it up now. I mean, the event, what stood out to you? [00:06:48] S0: Because everyone... Everyone's here. [00:06:50] S1: Everyone is here. [00:06:51] S0: I think this is the only one where everyone's in the same room. I think one has to pay an enormous amount of tribute to Eddie Hu and his team and the event they bring and the amount of people that want to come. as a support for Hong Kong and as a gateway to China. And the fact that, you know, the HKMA has done an amazing job. And it started in COVID. And I just cannot believe how well Hong Kong is doing. And if you had told me five years ago that the city would be at full speed doing great, I think it's wonderful. And I think it has exceeded a lot of people's expectation, rightly or wrongly. But I think the energy here is second to none. And once again, this is an absolutely fabulous event. [00:07:42] S2: It's interesting how, I think it was Jenny Johnson from Franklin Templeton said, people are very excited about Hong Kong. It's different on the other side of the border in China, where you continue to see sentiments quite weak. [00:07:52] S0: Yeah. [00:07:53] S2: I mean, how do you look at the China market here right now?
00:07:53 · David Ingles, Emmanuel Roman, Yvonne Man
[00:07:53] S2: I mean, how do you look at the China market here right now? [00:07:56] S0: It seems like... It's incredibly tight. We're bond investors, so we look at China and say, not much to do. Even in a global bond portfolio, we find a much better place to put money. Nothing wrong with China, but as you said, rates are very low. But, you know, things change. Look at Japan. Japan was incredibly quiet for 20 years. We have a big full-fledged operation in Japan. As a joke, I often say, our partner there, Tomoya Masano, wasn't too busy for 20 years. And then all of a sudden, it works. And then rates go back up. And there's all this arbitrage to be done. And then all of a sudden, we have a great business in Japan. And there's just a lot of alpha to generate. So it's exciting. [00:08:37] S1: Well, there was a narrative that China was headed in the direction of Japan. You know, the Japanification of Chinese rates. Where do you stand on that sort of argument? [00:08:47] S0: The economy is so different. I mean, I think the Japanese experiment, at first, it wasn't so clear that it was going to work. But ultimately, it did work. Yes. I don't know. I don't know what will happen to China in terms of rates. I mean, it's not an easy question. Sure. Because it's about consumption and whether they are nudged, which would change consumption in terms of spending more, savings less. Right. [00:09:13] S1: And, you know, it's come up on our show a lot. You know, people talk about the confidence issue there. [00:09:18] S0: And if one points to a crisis.
00:09:18 · Emmanuel Roman, Yvonne Man, David Ingles
[00:09:18] S0: And if one points to a crisis. [00:09:21] S1: I simply have to go, it's really not a crisis because all the money is just sitting in the bank. It's a crisis when there's nothing in the bank. [00:09:27] S0: There's plenty in the bank. There's plenty in the bank. And I think it's key to deployment. [00:09:30] S1: Speaking of deployment, you know, the strategies that you oversee at PIMCO. So what's been popular this year? What do people like to get into? [00:09:39] S0: I think people look at what we do and say, with rates where they are, I can deliver on a blended basis 7% to 8% return. And given what the equity markets are, that looks really attractive on a risk-adjusted basis. And I fully understand the exceptions. about the AI company from a stock standpoint. You can make an argument the stocks are cheap. You can make an argument that no one quite knows what the earnings will be five years from now. But when you look at the S & P as a whole, the S & P is not cheap. And so, as I think David Solomon said this morning, there is a lot of cash in the system. A little bit of this cash will go and buy the Anthropic IPO. A lot of cash is going into fixed income to rebalance portfolio and basically take some chips off the table and buy more fixed income. And it's true in the U.S., it's true in Europe, it's true in Asia. We see the trend pretty strongly. [00:10:53] S2: I'm sure you've been waiting for this moment for some time, Manny, the value to come back into bond markets here.
00:10:53 · David Ingles, Emmanuel Roman, Yvonne Man
[00:10:53] S2: I'm sure you've been waiting for this moment for some time, Manny, the value to come back into bond markets here. [00:10:58] S0: You know, the macro and the economy gives you what you can do. You don't control the world and sometimes it's great and sometimes it's harder. [00:11:08] S2: Where do you see the most value right now when it comes to solving curves and the like? [00:11:17] S0: The U.S. looks very attractive. Mortgages looks very attractive. EM, there's a lot to do in EM. We have a very big and successful EM business. Global bonds look attractive. Asset-backed and structure finance on the private side is very attractive. You can generate 12% to 15%. We're building data center in Europe. I mean, there's a lot of things which are attractive. You know, there's... It's feast and famine. Sometimes there's not much to do, and sometimes there's a lot, and now we are in an environment where there's a lot to do. [00:11:49] S1: What do you think next year looks like? Because we've seen a backing up in yields going into the end of this year. If the Fed, in fact, just has one more in its tank, does next year look to be the year of the bond market?
00:11:49 · Yvonne Man, Emmanuel Roman, David Ingles
[00:11:49] S1: What do you think next year looks like? Because we've seen a backing up in yields going into the end of this year. If the Fed, in fact, just has one more in its tank, does next year look to be the year of the bond market? [00:12:00] S0: Well, I will. I think we'll know at the end of next year, but... That's not helpful, though. No, no, no, no. Look, I think it's looking reasonably good. Okay. You know, there's so many uncertainty. I mean, I think if I had come here a year ago, I would not have predicted that there would be a war in Iran. And so I think, once again, I think one has to be careful about making too many prognoses because there's things which are so much out of our control that... They're hard to call. Vice versa, if tomorrow morning we announce a full and substantive peace treaty with Iran where there's free circulation of gas after three months, oil will be 40% lower. And then all of a sudden, bonds look incredibly attractive. [00:12:53] S2: How, then, should we look at inflation for next year? I mean, depending on the oil price, I mean, how.
00:12:53 · David Ingles, Emmanuel Roman, Yvonne Man
[00:12:53] S2: How, then, should we look at inflation for next year? I mean, depending on the oil price, I mean, how. [00:12:59] S0: Does AI drive inflation as well? Probably lower. Okay. The beauty of AI is it is capex-intensive from very strong hands, but long-term deflationary. And deflationary, we were talking before we came on air, what it does to the labor market... We had last night an incredibly exciting presentation on robotics in China. There are a lot of changes with a wide range of outcome that I think will change the labor market over the years to come. And it's very hard to predict what will happen. The rise of the robots. The rise of the robots. But I learned one thing last night is that it takes an enormous amount of time. to train the robot. So the robot is good at doing one thing and doing it very, very well. But you want the robot to interact with the human being and that seems to be more complicated. Okay. Our jobs are intact. We're safe. We're safe here. According to Manny, yeah. [00:14:04] S1: Manny, thank you so much. [00:14:04] S0: Manny Roman. Thank you very much for having me. CEO of PIMCO.