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Thank you all so much for joining for this conversation. Ken, thank you so much for sitting down with me this evening.
It is great to be here today and it is such a pleasure to be in Europe, particularly during this time of year.
Well, should we start with that because perhaps everyone will have noticed it's two Americans speaking in Europe. Ken, it feels like recently there's been a lot of American barbs, let's say, thrown at Europe. President Trump warning about end of civilization because of Europe's over reliance on America. Jamie Diamond saying it's a region that's anti-business, that has a lack of innovation. Are those most dire of forecasts for Europe? Are they correct?
What a cheery way to start today. And I feel like I was just handed the hot potato question.
Yes, I'm sorry, Ken. You were indeed.
So, first of all, President Trump is a bit prone to hyperbole. And having said that, there's no doubt that the Western world needs Europe to be more successful. We need to see higher economic growth in Europe. We need to see more innovation. We need to see more consumer demand for goods and services because the Western world will only be strong and prosperous if we have a strong and prosperous Europe.
What does the road ahead to get that strong and prosperous Europe look like? How do we get there?
Look, I think Mario Draghi did a fantastic job putting forth a playbook for how to revitalize Europe. And I would say that I'll agree with 80 or 90% of what he wrote. But rather than regurgitate what he wrote, and he wrote really thoughtfully, I think the sailing points are Europe needs to create a culture of entrepreneurism. Far too much of the world's innovation takes place in the United States and in China. And Europe, having such an incredibly well-educated population, should have far more entrepreneurial success stories than it does. So that's a really big issue that Europe needs to address. It's a cultural issue. And the second is that Europe's capital markets simply aren't deep and robust enough. The venture capital community in the United States, the depth of the private equity markets, the depth of the growth equity markets, the depth of the public markets makes it much easier to organize, to secure capital, and to grow a business than it is here in Europe.
Let's talk about leadership in the US because it's also been a moment of questions in the early elections, local elections, government governor elections. The trend has been very clear. When Democrats run on affordability, they have been winning. 2026 is a midterm year. Do the Republicans risk losing the American public?
So, you know, it's really quite ironic to see how the tables have turned because just 12 months ago, President Trump and the Republicans swept into office on the issue of inflation. And the Democrats have rebranded the problem of inflation as the issue of affordability. And they are now well poised to return to control of the House. And there's even discussion of them retaking the Senate on the back of how the affordability issue strikes accord with the American public. And the big picture is the American consumer is tired of the persistent and sticky inflation. They feel like they can't get ahead in a world where their savings and their wages are constantly deprecated by the impact of inflation.
Why aren't Republicans speaking to that? Is it an issue of not having the policies or not communicating the policies correctly?
So, I think it's actually fairly complicated. I think that the Republicans struggle with the reality that many of their policies, which they ran on, for example, ending illegal immigration into the United States, are actually pro-inflationary, right? When you end illegal immigration, you reduce the size of the available workforce. That's pro-inflation. And so, the Republicans are grappling with tariffs. Another case study, you impose a tariff, it's a regressive tax on consumers. It's pro-inflation. So, some of the very policies that the Republicans have put forth and have been successful in implementing are actually the very policies that tend to be pro-inflation. Some of the other policies, for example, deregulation, are just going to take longer to play out. And ultimately, deregulation, which should unleash productivity gains, will create a reduction in inflation, a very healthy reduction. But we need to get to that point in time.
It's a timing issue. And President Trump said something similar. Not exactly what you're saying, Ken, but he had spoken to the Wall Street Journal just this week saying that the reason the American public hasn't realized his policies are working is just because they take time to take effect. And what Americans are experiencing now is Democrat-led inflation. It seems like you would maybe take issue with the latter, that maybe its current policies leading to some of the stickiness.
Look, I think there's no doubt that the president inherited an environment that was still struggling with inflation, but the easiest parts of his agenda to implement were, unfortunately, when it comes to the issue of affordability or the issue of inflation, those policy choices that actually most fuel inflation, right? The curtailing of the labor markets, the clear-cut inflationary pressure of tariffs, those were easy things for the president to implement. And unfortunately, they have continued to lead to this inflationary environment that we live in.
Well, you have seen the White House try to backtrack on some of it. Be it tariffs on Brazil because of the impact on agricultural goods and the bills that Americans face in the groceries. We're looking at tariffs now going making their way through the Supreme Court. Is it too late though?
So, I think it's going to be hard to roll back tariffs at large unless the Supreme Court makes a pretty bold decision. And I only say that because the Supreme Court's going to face the challenge of does it want to take on the president with respect to one of his single most important policy wins from the perspective of the White House, right? Does the Supreme Court really want to take that issue on? As a matter of law, I hope they do and I hope they take it on with a very thoughtful and reasoned opinion, but that's going to be a tough call for the Supreme Court to make. Now, having said that, we have seen the rollback of tariffs in particular in products that consumers put in their grocery cart, right? The president's getting the message from the front lines, from the Congress people that serve our people, that the voters are angry about inflation and they're looking for ways to help address the issues of affordability. You know, it was very interesting. I was with a group of business executives and the president, he was very much listening for ideas on how to address the issues of affordability in America. He cares about this issue.
Maybe it's too late for some of the local elections though in getting to the American public. New York, a big change for the city with a Democratic socialist. Miami too, your hometown, Ken, where you had the first Democrat in three decades. You've praised the leadership of Florida many times. Does that change your outlook at all to have the local election in Florida also shift in terms of who's leading it?
Well, Miami-Dade County has had a Democratic mayor actually for quite a bit of time now. And Miami just recently elected a Democrat to be the mayor of the city of Miami. And I think there's a stark contrast between the Democratic leader-elect of Miami and the leader-elect of New York City. The leader-elect of New York City ran on a set of policies that will either be impossible to implement or that will come with a draconian long-term cost to the city of New York. You know, for example, if you want to address the issue of housing affordability, you need to build more homes. And when you're talking about rent control, all you're doing is telling developers in big neon lights, don't build in New York City. Now, contrast that with the incoming mayor of Miami. She has a long history of being pragmatic with respect to policy choices that will improve the lives of the people who live in Miami. She very much wants to accelerate the permitting process for builders to create more housing stock. She wants to help release lands into the private market to help increase available housing. She wants to address the issue of housing affordability with thoughtful, time-tested, and proven policies rather than the fantasy that's being espoused by mayor-elect for New York City.
Are you confident that Americans will continue to elect people in positions of power like you're describing with common sense policy, or do you look at New York as a red flag for 2026?
Look, I think that New York City is a red flag because people put aside good sense and common sense to elect somebody who is incredibly charismatic, who ran a really powerful campaign on social media, but who ultimately doesn't have the ability to deliver on the promises that he set forth. In contrast, I think the mayor-elect of Miami, she ran on a much less powerful set of campaign messages. But do you know what? She'll deliver on the promises that she made to the voters of Miami.
You still have a good chunk of your business in New York. Would you rethink just how much exposure you have to the city at the moment?
Look, I think every business executive is thinking through the magnitude of exposure they have to New York. And there is a very common talking point on this. We survived de Blasio.
Well, that's the talking point. And unfortunately, I think there's some truth to that. New York took a big setback during the de Blasio days. And I hope that Mayor Adams starts to think about how to pivot to a more thoughtful set of policies that will allow New York City to maintain its position not only as one of the greatest cities in America, but one of the greatest cities in the world.
You know, I'm struck that it's not just the American populace that's thinking about affordability or inflation. It's markets, too. Since the Fed started its cutting cycle, cutting 75 basis points so far this year, 30-year bond yields are up 80 basis points. 10-year bond yields are up 30 basis points or 50 rather. It's not the move that you would expect. Is there signal in that?
Well, unfortunately, the bond markets are expressing their anxiety about inflation. And when you look at the 10-year yield point or the 30-year yield point, what you're really observing is how much risk premium, how much insurance premium does the market demand for higher inflation? Because remember, you're lending the money to the US government for 10 or 30 years at a time at a fixed rate. So you want to think very long and hard about what rate do you lend money to the US government, which is running a staggering deficit, that is now running very, very easy monetary policy relative to the inflationary pressures that we're facing. What risk premium do you demand to do so? So although the Fed has brought short-term interest rates down, what it has really done is it has unnerved the bond market community that invests or commits capital for 10 years or 30 years at a time. And why does that matter? Because capital formation, building a new factory, is funded with 10 and 30-year debt. So the hope that we will stimulate the economy, that we will encourage the investments that we need in America that are all funded with long-term debt, are actually being undermined by the easy monetary policy at the Fed today.
Markets are incredibly sanguine on this idea that we're going to run it hot, we're going to cut, we're going to get stimulus. Are you essentially saying that markets are underpricing a clear risk there?
