Traders Have Data, Fedspeak and AI to Navigate

0:00If you invest or lead a business, one-sided views aren't enough. Join me, Brad Rogoff, and my team at Barclays Research as we debate what's driving markets on the Flipside podcast. Find the Flipside wherever you get your podcasts. Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me.

0:36It's simple and free to sign up when you download the WISE app. Be smart. Get wise. T's and C's apply. Your team is on a deadline, but moving all your enterprise data will take time your business simply doesn't have. IBM Technology lets AI work with your data where it already lives. with an open hybrid cloud approach designed to build on your existing investments. It's another way IBM helps you put your data to work. Let's create smarter business. IBM. Visit ibm.com to learn more.

1:17Bloomberg Audio Studios. Podcasts. Radio. News.

1:27This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.

1:42Meredith Whitney: Yesterday, I was in Washington for a wonderful memorial service for Alan Greenspan. It was people pawed by Republicans and Democrats. Lots of media type where there are all the people covering economics and that. And, of course, also all the people wrapped around a gentleman of 100 years old who worked within government and within regulation. Gary Gensler should have been there. It was just spectacular. I thought Robert Rubin was particularly eloquent, and Al Hunt stole the show, driving all of Bloomberg News in Washington for years in the Wall Street Journal. Alhant just absolutely stole the show with his comments.

2:22Meredith Whitney: Joining us now, someone that should have been there yesterday, Gary Gensler, of course, a legendary in Wall Street and the former chairman, Securities and Exchange Commission. Gary Gensler, what did Alan Greenspan do within the ups and the downs, the right and the wrong? How did he advance the American experiment? Well, Alan was a real public servant, and I had the honor to work with him. I couldn't be there this weekend just because of things up here in Boston, where I'm at right now for MIT. But he really understood the markets and deeply understood the markets. And I think in the 1990s, he sorted through this new technology, the internet, and what it was doing to our economy.

3:09And I think a little bit before others understood how to control inflation, but still leave enough room for the, I don't know if you want to call them the animal spirits, but that investment boom in the 1990s.

3:23Meredith Whitney: I look here, then let me jump forward right away to what you and you're working on at MIT with your wonderful podcast as well. The new internet is the AI. The news flow this morning, Paul and I opened the show. Gary, I've never seen a company do a red herring like the Reuters report on anthropic. I mean, to be polite, Gary, it's bizarre. Are these companies legitimate? Well, they have a remarkable thing, how they've pulled in so many users so rapidly, anthropic, open AI and the like. But the AI trade that our capital markets is hovering on top of is an investment boom that's about twice what the Internet was.

4:12So back to Alan Greenspan, he was watching as a lot of tech companies were investing, and it added up to about one to one and a half percent of the economy. It was considered at the end a bubble. This is now two and a half percent of our economy. I'm talking about all the data centers and so forth. And here's the challenge for Anthropic and OpenAI is the Chinese models. They might not be quite at the frontier, but if they're two to six months behind us, regardless of how they do it, whether they use what's called distillation or not, and they're spending a lot less in the Chinese economy. A lot of U.S.

4:55companies are saying, look, I'll use the Chinese model to do my reasoning and maybe I won't use open AI or Anthropic. So that's the challenge for them. They're spending so much. But will it lead to the revenues to justify that spending? Gary, so much capital, as you well know, has been raised in equity markets, fixed income markets to support the growth of AI. even some of the founding voices of these companies at OpenAI and Anthropic, they are calling for some guardrails on this technology. How do you think about that? Well, I think that there are real challenges. AI's capabilities, the ability to do coding on its own, you know, write the software, the ability to replicate itself and then send agents out on the Internet.

5:49Open AI's released that report about an incident this summer where the agents multiplied to 1 ,200 different agents simultaneously looking for vulnerabilities. And they found them at Hugging Face. And the last thing I'd say is beyond their capabilities, alignment. Are the models aligned with their human overlords, if you wish? We, the humans. And more and more, they're showing that they have some reasoning on how they deceive and how they jump out of guarded sandboxes. So this is a real challenge. I know the president calls it a hoax. I differ with the president on that.

6:37Meredith Whitney: Gary Gensler with us, folks, the former chairman, I should say, of the Securities and Exchange Commission, has good work for years, Goldman Sachs noted as well. I got to get to some other matters here. It's amazing. Gensler comes on. The Bloomberg reporters in Washington are brutal. You should see the questions. I mean, they want to know what he thinks about Yankees, Red Sox. I mean, it's too much there. One more AI question, Gary. I got to go here. We've had other AIs. We didn't have guardrails on the trains. We didn't have guardrails on the miracle of pharmaceuticals and antibiotics, tetracycline, and all that.

7:14Meredith Whitney: And who in God's name is going to institute the guardrails? I don't see any institution with motivations to on an ex-ante basis get out front on AI technology. Where is it? Well, currently it's not in this administration nor in the Congress, though I would say the Congress is starting to really lean into it. But look, Tom, we put guardrails on our capital markets so that those capital markets work better. And they're not perfect. But when the Securities and Exchange Commission was created, it was about investor protection. It was about making sure that the markets worked better, created the public good that you could trust the markets.

8:03So I would say on AI, it's possible. But here's the wrinkle. And it's a big consequential wrinkle. The Chinese are competing with the U.S. The U.S. wants to stay ahead, but the Chinese are doing something called open weight models. This is a competitive challenge because U.S. companies can use it and they can use it far cheaper. And it undermines the revenue proposition for anthropic and open AI. It also undermines can you put guardrails on something that then the user, the threat actor, can maybe take off. Think about those people that sometimes say, I'll take my catalytic converter off my automobile.

8:43And it's not legal, but a threat actor could say, oh, I'm just going to take the guardrails off.

8:50Meredith Whitney: Gary, I got a whole group of reporters that do this 24-7. The Pitbull Terrier down in Washington, Nicola White. Oh, boy. She's a threat to society. She covers enforcement for us, folks. And she's got a brilliant note here to me, Gary, about the experiment of mom and pop retail access to private credit, to all this other stuff that's illiquid as well. How is that experiment going? And she wants to know, Nicola wants to know, does it keep you up at night that we're retailizing? That's my word. I just want to impress Gensler. that we're retailizing Gary retail into things they shouldn't be going into.

9:33Tom, you impress me every time you go out to that Jackson Hall conference and you have such access to everybody that's in that meeting. So don't worry about it. Look, I do think that there's a mismatch that the retail public, even high net worth retail public, is being sold private credit. And then they're also being told they can get some liquidity. And you really can't. If you want to get the higher returns, you need to put your risk capital at work for longer periods of time and not have those redemptions. Look, it's working so far, but I would say when, and it's not a question of if, but when we have a retrenchment in the big AI trade, there's a lot of debt on those data centers that is in this complex, in the private credit complex.

10:33And so to your colleague's question, that's when the retail public's going to be saying, wait, this paper is no longer worth 100 cents on the dollar. It's worth 80 or 90 cents or even lower. I'd like to get out. And what happens then? That's a real challenge. So, Gary, Torsten Slock, economist at Apollo, was out with a note recently raising some questions about how the rise of AI agents might affect the financial system. How do you think about that? We had the CEO of LPL Financial in yesterday and he was voicing some of those concerns as well. How do you think about AI in the context of just consumers and financial services?

11:15Well, I'm in the classroom teaching artificial intelligence and money, which is addressing those very questions with some terrific MIT students. And Simon and I, of course, talk about it repeatedly on our Power and Consequences podcast. My thought is three things. One is for consumers, they might actually get some better automated access to higher rate deposits. That's what Apollo's Mr. Slock was pointing out. He was saying investors might be able to find better than the very low rates that most bank deposits get. So that's that's a net plus. But two, if you're using Facebook Muse and finding those higher rate deposits, maybe moving into money market funds as well, then the banks might have deposit flight.

12:10I think it will happen slower than his note suggested. But it's real. The other risk is if all of finance starts using the similar models, then you might have hurting. And I wrote a paper on this a while back. It could lead to real systemic risk. And then thirdly, it's just the overall when we have a retrenchment. And at some point in time, this boom will plateau and even turn the other way when that occurs. Then, as Alan Greenspan would have liked to hear his friend Warren Buffett say, when the tide goes out, you see who's swimming with their trunks off. Gary, I mean, it just feels like and I'm sure you see it every day in your classroom.

12:56The young folks are just embracing AI for it's just become a part of their life as opposed to embracing it like Tom and I are trying to do. At some point, that's going to, I would think, you know, impact how they invest, how they save, how they allocate their own capital. Is that a good thing from your perspective? Absolutely. Look, I'm I'm I'm kind of bullish and optimistic that we humans will figure it out. But there's real risk we've talked about in this program. There are existential risk about AI agents misaligned or not aligned with their human users. That threat actors will use it and it will disrupt markets.

13:39And so we have to build cybersecurity and cyber resilience way better. But I also think it will transform financial markets. And that's a period of time of uncertainty. We've seen this in prior booms. You mentioned, you know, railroads and pharmaceuticals, and we've talked about the Internet. It's all there. It all has some uncertainty. And then you have the geopolitical competition with China, and China's not taking their foot off the gas pedal.

14:11Meredith Whitney: Gary, I've got to be a smart aleck at MIT in the back of the room with my hand up asking Professor Gensler a question. Gensler, the Clinton administration, the Obama administration, CFO for Hillary Clinton's campaign, working for President Biden, et cetera. From where you sit now, is there a tinge to the Democratic Party experiment of being anti-capitalist right now? Look, I think that each of the parties here in the United States, and you can say that's true in the parties in Europe are going through transitions because the economy is changing so much. And so we've talked about artificial intelligence, but also the U.S.

14:53is stepping back from its leadership on the world stage. And we're in, I would say, a war in Iran that doesn't have any clear resolution and has been very damaging to our economy and to our role in the world. I think that's what the Democratic Party is mostly looking at. But I would say that there's a deep belief in capitalism, but it's got to be responsible capitalism. And just as we put guardrails on our capital markets to make them work better, that Franklin Roosevelt did that some 90 years ago with Congress, I think we'll find our way to do that on AI. But right now, there's real risk.

15:38Meredith Whitney: Gary Gensler, thank you so much. Greatly appreciate it with Simon Johnson at the Massachusetts Institute of Technology. Thank you. Stay with us. More from Bloomberg surveillance coming up after this. If you invest or lead a business, one-sided views aren't enough. Join me, Brad Rogoff, and my team at Barclays Research as we debate what's driving markets on the Flipside podcast. Find the Flipside wherever you get your podcasts. This is the Bloomberg Tech Minute brought to you by Chachi PT. I'm Carol Masser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touchscreens and flashy software.

16:21Now they're going back to design basics, touting the return of buttons and knobs. The reintroduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology proposed updated national vehicle standards that specify certain functions, like those that control headlights or change gears, should be physical rather than digital. While door handles have been the most high-profile change resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or brake.

16:57The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at ChachiPT.com. If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity. The next investment. The next move. But sometimes what matters most is being ready for what you never saw coming. A storm damages a second home. A pipe bursts above a collection you spent decades building. An unexpected loss puts a growing business on pause. Those are the days no one sees coming.

17:36But for more than 75 years, Cincinnati Insurance has been ready when they do. With deep expertise, coverage for businesses, homes, valuables, and more, Cincinnati Insurance works with independent agents who take the time to understand what matters to you. Together, they help protect more than what you own. They help protect what you're building toward. And when a bad day does come, Cincinnati Insurance has real people there to help make things right. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better.

18:12Find an independent agent at CINFIN.com.

18:20You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

18:33Meredith Whitney: This is the interview of the day. So George Borey's with us, Allspring Global Investment. Bob emails in. Bob's a grizzled Wall Street veteran. He's a young guy. And he just bought the 22-year Microsoft AAA, popping over a 6 % yield. Should mere mortals be doing what Bob did? Should we have our S &P corporate bond book out now, reaching out for duration? Because, boy, those yields look good. Yeah. Well, what we like to say is that a bond is simple, but the bond market is complicated. And so stitching the pieces together and figuring out what to do in bonds is sometimes tricky. But right now, bond yields have been going up, prices are down.

19:22But once you get to certain yield levels, good things tend to happen to bond investors. And as bond yields in treasuries broke above 5 % and dragged other bonds along with it, as you point out, things like perhaps Microsoft at 6%, those bond yields become very, very powerful in your portfolio. That income, it works for you in nominal terms. Six percent is a good yield, but it works really, really well for you in real terms. And despite all the volatility and this sort of cyclical upswing in inflation, we're pretty confident that if we look out over the next five to 10 years, inflation should kind of drop back down to target and back down to more normal levels.

20:11So buying bonds at 6 % or above today should work pretty well for bond investors as we move through time. And then the factors themselves, while they create volatility in the near term, they actually do support bonds as we move forward. How far out the credit curve do you want to go in this bond market here? Because Tom's quoting on Microsoft. I mean, it doesn't get any better than that. But how much further out do you want to go? Yeah. Well, Paul, a little duration goes a long way in this market. And so you don't need to be a hero. You don't need to sell all your cash and rush out to the 30-year.

20:53But simple curve extensions, if you're in cash, maybe it's the two-year. If you're in the two-year, maybe it's the five-year. All spring right now, we do like intermediate duration. So that 10-year part of the curve is looking pretty attractive. And while 30-year yields also are relatively high, there's a lot of price volatility in 30-year bonds. So maybe you don't need all that volatility in your portfolio. Five, seven, 10-year bonds can do just fine. So when the Wall Street salespeople ring you up to say, hey, I've got another hyperscaler bond. What's the conversation for you guys? Because you know you're going to get that call is going to keep coming and coming and coming.

21:35Well, as we've seen in the last couple of weeks, the technical pressure. So the balance between supply and demand, you know, is pretty, pretty, pretty delicate right now. And so we know we're going to get issuance from hyperscalers. We know we're going to get issuance from municipalities. We know we're going to get issuance from the Treasury. And then there's a whole load of M &A transactions and other deals in the pipeline. It's a very good time to be a lender. We need to be selective, first and foremost. You can't buy everything. But when we do sort of our credit work, when we look at individual companies, you know, who's kind of in that sweet spot?

22:14They need to borrow. They need the funding. They're willing to pay for it. But they also have a good business plan. Their pricing is holding up and their cash flows look pretty good. So security selection dominates bond portfolios today, our bond portfolios today. And that should work for you when you go through time.

22:34Meredith Whitney: We continue with George Borey, Chief Investment Strategist, Fixed Income at Allspring, with our question, our conversation of the day here. As we look at the yields, 5.56 in the 30-year bond when I walked in the door this morning, 5.54 percent right now. So I'm doing a survey of Warhorse bond portfolios, down 4%, down 7%, you know, whatever the number is. There's some price down here. I want you to hyper-define for yield hogs right now duration. Not all spring duration, but the human condition in America duration. One year, two year, the belly of the curve. Where do you define the belly of the curve, and is it attractive?

23:20Yeah, we'd say the belly of the curve for us is between five and 10 years. You go out to 10 years as part of the belly. We would. That's the intermediate part of the curve. And, you know, as you get out to 10 plus, you're now kind of in the long end. But if you're thinking about durations that are sort of between K4 and 6, that is the belly. That would be the belly for us.

23:43Meredith Whitney: Which yield do I lose buying a six-year piece versus a 10, 15, or 20-year piece? I'd have to do that off the top of my head. You have a Bloomberg in front of you. Come on, George. I'm not logged in. Use Mike's passcode. You give up a little, but not much. The curve's been flattening. I don't think the public knows that. Yeah. You don't give up too much by just kind of coming in a little bit. So going from five to six, you pick up. Going from 10 to six, you don't lose that much. So that intermediate part of the curve, it's still positively slow, meaning for each incremental unit of duration, you're getting extra income.

24:25But it is fairly flat. So you don't, again, which is why you don't have to rush out and buy loads of duration. But legging in and creating a nice little laddered portfolio works well. There we go. That takes me right to my question. You need to step out right now. Exactly. Call my guy. Here in a high-tax municipality or area like the greater New York City area, municipal bonds are just really attractive for a lot of folks in terms of tax equivalent yield. How do you think about that market? So we like munis. I think they're good for a few reasons. One, the yield, as you mentioned, versus kind of their taxable equivalence looks very attractive.

25:07the credit quality of most municipalities is very good. Even cities like New York or states like Connecticut, where I live, you know, there's they have a lot of kind of levers to pull to preserve their credit quality and their ability to pay. So we like the fundamentals within munis. And like, again, what we like to say is regardless of what's happening in the Middle East or in Ukraine or in any other geopolitical hotspot, there's a good chance you're going to flush your toilet today. And so municipalities get paid when you flush your toilet. And it's that level of security that works really, really well in these kind of markets.

25:47So munis are a good place to be. Their yields are going to move with treasuries and others. But the yield relative to treasuries has gotten attractive. The quality is good. And the technicals should start to become more favorable as we get into the end of the year.

26:02Meredith Whitney: George, I don't care. Yankees or Red Sox? Yankees and Rangers. There you go. We have a big day today. Did you stack inside? See, in Connecticut, you never know. The whole room is stacked against me. Oh, come on. George Borey, thank you so much. A clinic there. Chief Investment Strategist. Stay with us. More from Bloomberg Surveillance coming up after this.

26:32You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

26:45Meredith Whitney: We are thrilled to have us. Right now, Meredith Whitney is with us with all sorts of different topics to talk about. Of course, her ability to scan our financial system, our banks, our fintech, and all that over the decades, as noted Meredith Whitney Advisory Group. I want to get to your wonderful notes, but James Diamond today published in The Wall Street Journal an essay screaming about the future of America. After Trump, like Jamie Diamond in his essay today, are you optimistic that we can have some form of return to what we knew or an advancement to something new that will be constructive?

27:24I hope so. You have pendulum swings, which I think you're going to see again in November, which is let's vote these guys out. Let's try these other guys. And it goes from extreme to extreme. But the underpinning of what this country is about is freedom. And it's incredible that we can we don't yet have censorship of press. We have incredible freedom and incredible meritocracy. So you can have the American dream like Elon Musk, a broke immigrant that comes and becomes a, you know, the world's wealthiest with man. So things that are possible in the United States. I had Brexit with the front. The meritocracy that I have had the benefit of, of being on Wall Street as a woman, didn't matter if you were blue, green, purple or a man or a woman.

28:10You had opportunity in this country, which is incredible. It's we've got to get over the divisiveness. Absolutely. So one of the things we're seeing in this economy for I don't care where you are in this case shaped economy, inflation is just a persistent, persistent problem. The Federal Reserve certainly recognize that and they're trying to deal with it. Where do you see inflation in your work? Because you again, with all your history with the banks, you know, the impact of changing interest rates, how it affects people and institutions. Well, I think the banks are not lending to consumers. They're lending to people who don't need the money.

28:43So banks on the credit card front are lending to non-revolvers, prime and super prime. They're lending to a lot of non-deposit financial institutions, so a lot of private credit. And so that will impact higher rates. But as far as it impacts the consumer, those consumers aren't borrowing. And the lower income consumers don't have credit lines. They do. They're extremely expensive. They'll just get more expensive. Where do, again, the lower end of the K-shaped economy, how do they finance their own personal income statements and balance sheets when prices are so much higher across the board? Gasoline, they're paying, you know, so much more for gasoline than they did a year ago.

29:26Well, what's really tremendous is, and I found this source in Brown Alumni Monthly, Brown has, in the Watson Group, has a tracker, the Iran War cost calculator. And for each household since the Iran war began, it's a$900 increase. That's almost a$40 increase from last week. So these are households that have no wiggle room. Or even if the households do have wiggle room, they've started to make choices. So the lower income have made choices. I'll fill up my tank and I won't buy groceries. Grocery spend has been flat to negative this year. And then the higher end, the super prime, the bank customers, and this is weekly data, you've seen since the beginning of the war, almost a one-for-one correlation with credit card debt outstanding, this is weekly data, and the rise or fall of gas prices.

30:18Over the last three weeks, that correlation has diverged, which means even higher income households are making choices because of this stinging psychological effect of over$4 gas prices.

30:30Meredith Whitney: Meredith Whitney with us, folks. I can't say enough about it. The stereotype here, really, she was just on Bloomberg Money with us. I mean, she shows up. Nice. You know, Mrs. Keene's emailing, did you see that Chanel necklace she had on? She's rocking it with a Burberry trench coat today and the pearls. And they don't realize the granular work you do. Every politician should have, I think it's page three of your report, figure one, paycheck to paycheck, living over time. And below it, property insurance up 73 % since the pandemic. That's classic Meredith Whitney. What do you say to a Republican and Democrat in Iowa when they see that half a page?

31:11Well, I think it's going to be tough on Republicans because they haven't addressed affordability. Now, the Democrats, you know, Hakeem Jeffries was talking about, oh, we're going to bring down prices. But he doesn't explain how. And I think at this point, because so many households are struggling, they want to know how you're going to bring down prices. I think the Republicans are going to try to go for a deal that they're going to say they have with Iran, but that may be just temporary in effect. And I don't know if that's enough to help the Republicans hold on to the Senate. I think people are just feeling so much pain and feeling so distant from the politicians that are supposed to serve them.

31:51So what's the most, I guess the typical question you get from your clients here is they think about, well, we've got a stock market at or near all time highs, but boy, we've got yields at levels we haven't seen in such a long time. What do your clients want to talk to you about? I think the most shocking thing that they want to tell me is, oh, this is temporary. And when the war is over, gas prices will go down. They also want to know, I mean, there's a lot that people don't want to hear because they want things to perpetuate. So, look, no one's arguing they have to own the U.S. banks because the U.S.

32:25banks have been overpriced for a long time. And the stock and the managements have just been buying back stock and not doing anything really with their capital. So I think it's more of a people are venting. Oh, like it has to be that has to be assumption. Gas prices can't stay this long. Some adult is going to make a rational decision to fix this real quagmire that we've gotten ourselves into because of high prices.

32:53Meredith Whitney: Quickly, with Paul's observation on price down, yield up, can you be long the big banks here? I don't think there's a strong argument. The European banks are cheaper and they've got a steeper yield curve. So it's a hard argument here, I think, to be long the banks. Some of the non-banks have been absolutely crushed. So there's value out there, but the risk is off. Such as? Oh, come on. I need a stock, Meredith. Help me. You know I love Rocket Mortgage, and I know it's rate dependent, but it's a juggernaut in terms of market share gains. And if oil comes down and rates come down, there's going to be a complete coil effect with that.

33:33Meredith Whitney: I'm hearing this. This is the new word, coil. Okay. The Red Sox coil. They're coiled. They're coiled. Meredith, thank you so much. All right. We're very good on that. I'm just looking at J.P. Morgan up 6%, 7 % year-to-date. Citigroup up 12 % year-to-date. Not great returns. I mean, people are worried about it. Yeah, I think that's well said. Meredith Whitney, thank you so much. Meredith Whitney Advisory Group. Stay with us. More from Bloomberg Surveillance coming up after this.

34:09This is the Bloomberg Tech Minute brought to you by Chachi PT. I'm Carol Masser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touchscreens and flashy software. Now they're going back to design basics, touting the return of buttons and knobs. The reintroduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology propose updated national vehicle standards that specify certain functions, like those that control headlights or change gears, should be physical rather than digital.

34:46While door handles have been the most high-profile change, resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or brake. The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at chachipt.com.

35:34no one sees coming. But for more than 75 years, Cincinnati Insurance has been ready when they do. With deep expertise, coverage for businesses, homes, valuables, and more, Cincinnati Insurance works with independent agents who take the time to understand what matters to you. Together, they help protect more than what you own. They help protect what you're building toward. And when a bad day does come, Cincinnati Insurance has real people there to help make things right. because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict.

36:08Let Cincinnati insurance make your bad day better. Find an independent agent at CINFIN.com.

36:19You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App.

36:30Meredith Whitney: or watch us live on YouTube. It was great to see everyone in Washington yesterday at the Greenspan Memorial Service. So many people at 92.9 FM listening in every morning. The traffic down there is like more than I expected. Is that right? Okay. You know, the drive time thing. Yeah. It's like it stretches back. Yeah. It goes from quadrant to quadrant. We just had in George Borey. Great conversation on bonds. This is even better. Owner Erzen joins us from Bernstein Private Wells with decades at McKinsey. and he was brought in to shape up the new wealth management as Alliance Burstyn sees it. I love how you write in your note, owner, that people just don't want 60-40.

37:12Meredith Whitney: What's the R squared? Is our beta okay? There's a new generation going on. Describe the pressures in a meeting with the children of somebody with a pot of gold, and they just don't care about 60-40, do they? Absolutely. As you point out, when the complexity goes up, the value of advice goes up as well. And it's not only measured in asset allocation. And information is everywhere as well. So everybody is in their own way informed. So to me, the whole magic here is bringing that human advice, that judgment, that trust, and bringing it all together, bringing it all together across investments, the tax, the planning, the philanthropy, particularly with the more high net worth, ultra net worth families.

38:03Meredith Whitney: Can you get Knicks tickets? Not on opening night, probably. I'm a big Knicks fan. I wish I could. Honor, what's the discussion here, big picture, about taking all the wealth that's been created by the baby boomers and then kind of getting it to the next generation, that wealth transfer that we've been hearing about for so many years. How do you guys think about that as a big picture item? Absolutely. It comes down to, again, a couple of things. One, our heritage, it goes back 60 years as planning. We take a long-term planning approach. Again, it's more holistic. We take into consideration what you want to accomplish with your wealth, what you want your wealth to do.

38:45And you need to take a more multi-generational approach to that, right? So the kids might have different objectives. The parents might have different objectives. We use family governance, family engagements to make sure we have a holistic plan for the family that basically achieves those multiple objectives.

39:02Meredith Whitney: Can you get an afterthought to empty the dishwasher? That would be good if Alliance Bernstein could do that. Well, I have a 13-year-old and a 15-year-old. I cannot make them do that. How do you guys view artificial intelligence? Is it a competitor to what you do or is it a tool for what you do? Because my kids, they feel like AI can solve all the world's issues and answer every question they have. And I wonder if that includes financial services. Look, at the end of the day, I'm sure there's going to be a segment of clients that will rely on AI. I don't believe it's going to be the majority. In our experience, AI is definitely an enabler and a scaler of what we can do.

39:47Ultimately, our goal is to provide the best seat to the advisor. We want the advisors to be the best versions of themselves. And we see AI as one of the tools in the toolbox that enable them to be the best advisor for their client's holistic needs. So it's a tool. Ultimately, again, we believe in human judgment. We believe in the relationships. We believe in trust that the clients put in us. And there's a huge human component. And I don't see AI replacing that for many families with complex needs today.

40:16Meredith Whitney: You're one of the definitive voices, I should say, of your Turkey. I think of the shades of Erdogan across the multiple decades, and to me, the foundation was a gentleman I knew quite well who came out of Maryland years ago, Mehmet Simsek, who is, I believe, still Minister of Treasury and Finance. How is he doing in guiding the idiosyncratic pressures of Turkey. How is SimSec doing? I'm not being, I have not been super close to Turkey lately. Unfortunately, I've been in New York and more closer to probably. But you're observing it. I mean, it's been. From my perspective, look, ultimately, like many emerging markets with all the different pressures around the world, the geopolitics, if you think about Turkey's location, et cetera, it's a tough zip code, if you will.

41:04and it has a relatively large population and some of the structural challenges with the economy that goes back a long time. So ultimately, it's a tough hand, but definitely there's a lot of work ahead of Turkey, including the administration.

41:19Meredith Whitney: Please let us know when you get Nick's tickets. Paul Sweeney would be curious about that. Ona Erzan has had a private wealth management in Alliance Burstein with a real different tact on what to do with the pot of gold. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

42:03Most meeting note takers get the easy words right and the important ones wrong. The client's name, the acronym. Whisper Flow Note Taker is built to get the hard words right. It takes notes on any meeting platform. Zoom, Google Meet, Teams, even WhatsApp calls. Keeps every meeting searchable and connects to Claude or Chat GPT. So you can ask, what did we agree to last Tuesday? Free to try on Mac and Windows at whisperflow.ai. That's W-I-S-P-R flow dot A-I. A business gift should do more than check a box. It should reflect your brand and show someone they're appreciated, recognized, and truly seen.

42:404imprint offers thousands of high-quality, customizable products, like premium apparel, drinkware, tech, and more, making it easy to create a gift that feels meaningful and on-brand. And with 4imprint's expert support and their 360-degree guarantee, you can be 4imprint certain your order will arrive exactly as intended. Explore gifting with confidence at 4imprint.com. 4imprint. 4certain. If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity. The next investment. The next move. But sometimes what matters most is being ready for what you never saw coming.

43:19For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict. Let Cincinnati insurance make your bad day better. Find an independent agent at CINFIN.com.