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00:00Talk to us about where you are in terms of expectations for the Fed right now. Are you pretty hawkish in the past. You expect. Jay Powell to be hawkish tonight. What do you think's gonna happen. It's pretty remarkable. I mean think back just a second to reflect what is exactly this meeting exactly two years ago March of 2020 when Powell brought down rates 100 basis points and walked on a cue to tighten it. Q Easing program that led to five trillion dollars of printing of money. And so here today we are with inflation raging out of control at 8 percent. We've never seen ever in the history of this world rates zero. With inflation raging like this having gone from sub 2 to 8 percent. So the Fed is so far behind the curve. I think what he says in his language is going to be to calm markets. But what he has to do is control inflation. And so every meeting this calendar year he's going to have to raise rates. Well Bruce if the Fed is as behind the curve as you say from a 25 basis point hike stay the job. But he's already shown his hand. He's already told you at his last correspondence that which is you know I don't think you're supposed to show the hand then. But he did. They said 25 basis points. So that's in the market. That's what we all expect. That's what we'll be. But what's more important than that is kind of what comes next which is a tightening. And every Fed meeting over the course of the next year and in one calendar year you have eight meetings and sort of several of this year. So every meeting this year and into next year a tightening expected to get Fed funds where it should be which is 2 to 3 1/2 percent. And mixed in there you'll see a couple of 50 basis point increases. And tell me you know how bad inflation is when even Tom Brady comes out of retirement. So don't get me started on that development Tom. It's just like every household's feeling. This is food fuel housing all goods all services. You know every company and every company call we talk to you know he's talking about inflation and talking about their cost of inputs. Costs may actually drive later. And so it's filling froze. And when I say also guy clearly is that when you have the first second third and fourth it's not to be problematic for the markets when you have that fifth sixth and seventh that's when the finance conditions tighten enough. And that's when the pains to be felt in the marketplace. So when I think about markets I look at the equity markets you know where they are now properly priced at say 18 multiple. I think for the high for the year we'll get you back to where you started the year at forty eight hundred. I think we'll probably get around forty five or forty six hundred is supposed to sell into that I think at some point this year later this year as conditions really tighten. You can look at wiping out all of 2021 gains which is giving S & P back down to 31 as it relates to credit is the worst start for credit and the worse for a start for fixed income that we've seen ever with high yield down 6 percent thus far for ISE down 9 percent. Emerging markets down 12 percent. And there's also really good opportunity with the coupons that they provide to be owned by credit at very very cheap valuations. Bruce when we talk to the asset managers when we talk about the idea that you should still be fully invested they say absolutely a hundred percent. You need to be fully invested in this market. When you ask them about cash and how big a part of your portfolio should be cash right now they put a face because they say that you should not be in cash. What do you think. Cash does to a portfolio right now. Do you want to be in cash. How much cash do you have. What are you thinking about when it comes to cash. Well in the public markets in the credit markets you know our our book is yielding in the liquid markets. You know 5 6 7 percent. And you take a look at emerging markets. When you take Russia out of emerging markets which comes out of all the indices at this month's end you're talking about being down 4 percent on the year with a 7 percent coupon. And so we think when that market recovers it could be up 15 20 percent until the rate of return. That's the liquid markets in the private credit markets. We provide a lot in the private credit markets in the form of lending in the form of capital solutions. And I think violence is going to be a big year because equities are down in the leverage loan market floating rate assets people like. And so we provide all kinds of financing to the buyouts. And so I think it's going to be a big big year for buyouts. And private equity is an attractive multiples. And how open the leverage loan market is. And so our campus solutions business our asset based lending business is a you know it is a double digit type return with very low volatility. And so I wouldn't be in any cash. I'd be taking any cash I have in private finding private investments both in private equity and private credit and deploying cash that way as it relates to the liquid markets. Look you have to be able to trade. I think this is trader's market. And so I think there's times to be in cash when the equity markets go wall and you're talking up 40 600 S & P is first to let go of a portion of your equities because you'll be able to buy back 15 percent lower before this whole Fed tightening cycle is over. So I think it's tougher. It is more a lot of volatility. Cash isn't going to earn you anything is going to get eaten right by. Inflation is not a very smart thing to do. All right. So if you don't want to be in cash another place where it hasn't been fun to be for the last couple of weeks is anything that touches Russia. What can you tell us about your Russian exposure. Well Russia exposure here at Marathon remains some index price. It's part of the index is coming out of index. Except we have no Russia exposure. And so we're very proud of the fact that we were defensive as links to Russia. And you know a little listen Zalewski is is is the person of the year. And you know I think you know teaches all the world leaders what it is to be brave and to have vision. And so watching him address Congress this morning to a standing ovation is amazing. But this is Putin's war. And Putin is turning Russia into a very difficult place to invest. Some characterize that as a pariah country. And we don't want to have any capital deployed in Russia. So there's other places for us to go. What I'd say is you know you just look at what happened yesterday with the nationalization of all the airlines. And so there's 523 planes that the West the U.S. and European investors have a lease with with Russian airlines. And all those planes have been seized all five hundred twenty three of them. And then on top of that Putin yesterday signed a decree to nationalize the Russian airlines. So which other industries is also going to nationalize. The whole marathon has a nice sized aircraft leasing business. And we don't have a single plane in Russia no single plane on unleashed to any Russian companies. And so I'd be very cautious with Russia. I don't think the West should be deploying capital there. And I think that defaults and we talk about this earlier today in our call with euro clearing and the freezing and sanctions and regulations and the freezing of their capital the Russian sovereign overseas the default is going to be rolling in one after another after another. It will take a few weeks yet but sometime in the second half of the second quarter. So you talking about May and June you'll see the fall after default after default here. As the West has characterized Russia is a private country. Bruce let's turn our attention to China. Chinese stocks are coming roaring back today after being blasted for quite some time. But nevertheless a massive rally is the Chinese authorities seem to get in behind the Chinese asset markets and say that they have their back. What do you think about the Chinese economy. Are you allocating cash there. What do you think of it right now. And do you think a rally like we're seeing today has legs. So yes I think the rally has legs. But I'll tell you why in just a second. So to China China's economy is growing at 5 percent. The Chinese government is lowering rates not raising rates. So you get ahead of that curve and they're making those adjustments. And hey who's the vice premier to prison. She came out made some very bold statements today and that's going to help Chinese CAC Chinese economy. You talked about the easing of regulation. He talked about the. We'll have to see when follows up with that. But these regulation and the support that the Chinese government does not provide both markets as well as economy is very clear. Vice Premier. Hey who is the second in control in charge of all economic policy in China was very clear to say nothing of the economy and housing markets. And so with that 80 or so rapid I wouldn't want to be those folks capitulating capitulated yesterday to date before selling their 80 hours selling their Chinese holdings in the hole because I think it's we're in recovery mode. They came in very very cheap on a valuation basis. And what you were worried about is geopolitical risk. And we're also worried about you know taking regulations which would further prohibit these companies from prostrate. And they've come out and made some very bold statements they have made in the past. So so I think those folks at Seoul will deathly regret that. I think this move that we're seeing this morning will have legs. But this is initial chunk of that and every trace of that. But over time I think it will prove as the Chinese government realizes that they don't want to destroy their private companies.

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Marathon's Richards on Fed Policy, Russia, China Stocks

Marathon Asset Management CEO Bruce Richards discusses his forecast for Federal Reserve monetary policy, global financial markets and his investment strategy. He speaks with Bloomberg's Guy Johnson and Kailey Leinz on "Bloomberg Markets." (Source: Bloomberg)

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