WE'RE TALKING BEFORE YOU ARRIVED ABOUT THE MOOD IN DAVOS AND 1
DON'T KNOW WHETHER YOU FEEL THE MOOD HERE IS TOO OPTIMISTIC.
WE ARE WORRIED ABOUT THE DEBT CEILING. THAT'S A HUGE DEAL.
WE ARE STILL WORRIED ABOUT INFLATION.
WHAT IS YOUR OUTLOOK FOR 2023?
RONALD: I WOULD AGREE WITH YOU THAT
IT'S MORE OPTIMISTIC THAN I EXPECTED, AND IT IS TRUE THAT
WE ARE SEEING SOME MODERATION IN INFLATION AND A SOME GOOD
SIGNS THAT SUPPLY CHAINS HAVE STARTED TO REPAIR IT
THEMSELVES, BUT IT IS STILL EARLY TO SAY THAT IT'S ALL OVER.
I THINK THAT IF YOU THINK ABOUT THE UNITED STATES, YOU STILL
HAVE A VERY, VERY TIGHT LABOR MARKET IN MOST AREAS.
THAT TENDS TO PROVIDE INFLATIONARY PRESSURE.
YOU HAVE GOT THE SITUATION IN CHINA WITH COVID, AND WE JUST
DON'T KNOW IF THAT WILL RESULT IN ANY KIND OF PRODUCTION
PROBLEMS THAT WILL BECOME INFLATIONARY.
YOU STILL HAVE A LOT OF FISCAL STIMULUS THAT IS WORKING ITS
WAY THROUGH THE SYSTEM, AND WILL RESULT IN AT LEAST -- IT
WILL HAVE GOOD IMPACT, ON THINGS LIKE INFLATION REDUCTION
ACT BUT IN MY MIND, IT'S TOO EARLY TO BE OPTIMISTIC.
LASTLY AND MAYBE MOST IMPORTANT, THERE'S A LOT OF
GEOPOLITICAL RISK OUT THERE. WE DON'T KNOW WHAT'S GOING ON
IN UKRAINE YET IN TERMS OF WHAT THE OUTCOME WILL BE.
BY THE WAY, AND THE UNITED STATES, THE POTENTIAL FOR A
DEBT CEILING FIGHT.
FRANCINE: I DO YOU VIEW THE U.S. DEBT CEILING ISSUE?
WILL IT TURN UGLY? COULD WE SEE A U.S. DOWNGRADE?
RONALD: THE IDEA THAT WE ARE EVEN
TALKING ABOUT THIS AFTER WHAT WE HAVE SEEN IN THE PAST TO ME
IS VERY DISAPPOINTING. THIS IS ABOUT MONEY THAT WE
HAVE ALREADY SPENT, MONEY THAT WE HAVE ALREADY BORROWED AND
THAT WE NEED TO ACTUALLY HONOR THAT.
THIS IS NOT THE WAY A CLINICAL FIGHT SHOULD OCCUR.
I THINK THAT MARKETS HAVE NOT PRICED IN.
THEY DON'T TYPICALLY DO UNTIL IT GETS VERY CLOSE.
BUT IT WOULD BE CATASTROPHIC IF THIS GOT PUSHED THROUGH TO AN
ACTUAL WE ARE NOT GOING TO PAY OUR BILLS. FRANCINE:
WE ALSO HAD THE KEYNOTE SPEECH FROM THE VICE FROM EUROPE CHINA
YESTERDAY AND A FEW SELECT FINANCIERS GOT TO MEET HIM ALSO
PRIVATELY. WE ARE GIVEN ASSURANCES THAT
CHINA’'S REOPENING IN THE RIGHT WAY? RONALD:
I'M ACTUALLY OPTIMISTIC ABOUT CHINA. I THINK THE BIDEN
ADMINISTRATION HAS DONE VERY GOOD WORK WITH CHINA.
I THINK THERE IS A RECOGNITION THAT WHILE THERE COULD BE SOME
SELECTED DECOUPLING AND THERE NEEDS TO BE, IF YOU THINK ABOUT
SHIPS AND THINGS LIKE THAT, THESE ARE TWO MAJOR TRADING
PARTNERS. CHINA IS AN IMPORTANT TRADING
PARTNER TO THE REST OF THE WORLD.
SO SOME OF THE PERSONNEL MOVES THAT APPARENTLY HAVE BEEN MADE
IN CHINA I THINK OUR STRONG SIGNALS.
AGAIN, IT'S FAR FROM OVER, AND IT'S NOT THE SITUATION THAT WE
ENJOYED BACK IN THE MID-OF THE LAST DECADE THAT I AM MORE
OPTIMISTIC ABOUT THAT FROM A GEOPOLITICAL PERSPECTIVE.
FRANCINE: RIGHT. WHAT DOES THAT MEAN FOR THE
ECONOMY? WE HAVE JANET YELLEN MEETING
WITH THE FOR MAYOR AND DEVILS. IS THIS GOOD NEWS? RONALD:
I THINK IT IS GOOD NEWS.
YOU'VE ALREADY SEEN DEPENDENCE ON CHINA FROM MOST PARTS OF THE
DEVELOPED WORLD, CERTAINLY THE UNITED STATES.
I THINK YOU'VE ALREADY SEEN A LOT OF SUPPLY CHAIN
RECONFIGURATION. I AM TOLD THAT IN FACT IF YOU
LOOK AT THE PORT OF L.A. FOR SEVERAL DECADES, MOST SHIPS
CAME FROM CHINA. THE LARGEST SINGLE ONE NOW IS
VIETNAM. THAT'S A SIGN, ACTUALLY A
HEALTHY ASSIGNED TO ME THAT THERE IS LESS DEPENDENCE THE WE
HAVE A LONG WAY TO GO IN A LOT OF THINGS CAN CHANGE. FRANCINE:
HOW MUCH BIGGER DO YOU WANT TO GROW THE COMPANY?
YOU TRY TO BUY A COMPANY WHICH ENDED UP NOT HAPPENING.
WHY AND DOES THAT MEAN THAT YOU HAVE THE CAPITAL TO DEPLOY
ELSEWHERE? RONALD:
STATE STREET IS A VERY DIFFERENT BANK.
WE DO TWO THINGS, MANAGE MONEY AND SUPPORT THOSE THAT MANAGE
MONEY, WHAT WE CALL INVESTMENT SERVICES.
THESE ARE BOTH SCALE BUSINESSES AND TO THE EXTENT TO WHICH WE
CAN GET MORE SCALE, THEY ARE SCALE BECAUSE THE TECHNOLOGY
INVESTMENT IS ENORMOUS. MANY BANKS HAVE DECIDED THAT IS
NOT WHERE THEY WANT TO PUT THEIR CAPITAL.
FOR US, IT'S OUR CORE BUSINESS. FOR THE EXTENT TO WHICH WE HAVE
THE OPPORTUNITY, WE WILL. HAVING SAID THAT, ORGANIC
GROWTH HAS SPENT -- WE'RE VERY PLEASED WITH OUR ORGANIC GROWTH.
FRANCINE: DO YOU THINK YOU WILL BUY
SOMETHING? ARE YOU ACTIVELY LOOKING FOR AN
OPPORTUNITY BECAUSE VALUATIONS ARE CHEAP? RONALD:
WE ARE NOT ACTIVELY LOOKING. THIS IS A SMALL MARKET SO WE
TEND TO KNOW WHAT IS GOING ON. FRANCINE:
ANY PART OF THE WORLD THAT YOU WANT TO BE MORE PRESENT IN OR
BIGGER OR IT'S REALLY OPPORTUNITIES THAT COME UP?
RONALD: WE'RE A GLOBAL CUSTODIAN AND
GLOBAL ASSET MANAGER. WHAT TENDS TO HAPPEN IS
ECONOMIES DEVELOP, FIRST IT STARTS OUT A BANKING AND
INSURANCE ECONOMY AND THEN INVESTMENT ECONOMY.
ECONOMIES ARE STILL GROWING IN THE EMERGING MARKETS.
WE WILL LOOK AT ALL PARTS OF THE WORLD FOR OPPORTUNITIES.
FRANCINE: WHAT IS YOUR TAKE ON WHAT'S
GOING ON WITH CRYPTO?
I KNOW YOU TRIED TO DO SOMETHING NOT ACTUALLY CRYPTO
PER SE BUT ON THE BACKEND. AS A CONTINUE?
DOES IT CHANGE YOUR PLANS BECAUSE OF FTX? RONALD:
I THINK WHAT'S GOING ON IN CRYPTO IS THERE IS NOT A
CONSISTENT REGULATORY FRAMEWORK OUT THERE.
SOME BASIC THINGS AS WE SAW IN FTX WERE NOT OCCURRING,
CUSTODY, RIGHT? WHAT CUSTODY MEANS IS THAT THE
ASSETS ARE SEGREGATED AND CAN'T BE USED FOR PURPOSES OTHER THAN
WHAT THE CLIENT DIRECTS. UNTIL THERE IS THAT KIND OF
FRAMEWORK, I THINK THERE WILL BE LIMITED INSTITUTIONAL
INVESTMENT INTEREST IN IT. I THINK REGULATORS RECOGNIZE
THAT SOMETHING NEEDS TO HAPPEN, BUT I THINK THEY ARE ALSO HAPPY
THAT WHAT HAPPENED WITH FTX REALLY DID NOT TRANSMIT TO THE
BANKING SYSTEM. FRANCINE: DO YOU THINK REGULATORS ARE
AFRAID OF TOUCHING CRYPTO IN CASE THEY GET IT WRONG OR THEY
JUST MISUNDERSTAND IT FOR THE MOMENT AND WANT TO BE MORE
KNOWLEDGEABLE BEFORE THEY GET INVOLVED? RONALD:
I DON'T THINK THEY'RE AFRAID, BUT I THINK -- I AM
GENERALIZING NOW, THE TECHNOLOGY MOVES SO FAST AND
THE RADIATORS TO NOT KEEP UP WITH IT.
PART OF IT WAS IT WAS MOVING SO FAST THAT NOBODY REALLY KNEW
WHERE IT WAS GOING. NOW WE HAVE A SENSE IN TERMS OF
WHAT WOULD HAPPEN WITH FTX. A LOT OF PEOPLE WERE AFFECTED,
BUT THE SYSTEM WAS NOT. FRANCINE:
HOW LONGER TO GET WILL TAKE TO REGAIN THAT TRUST MEETING THAT
YOU CAN GET INVOLVED IN TERMS OF SELLING PRODUCTS AT A BIGGER
PACE? RONALD: I WOULD SEPARATE CRYPTO FROM
DIGITAL ASSETS PROUDLY. I THINK THERE STILL IS RIGHT
FUTURE FOR TOKENIZATION. THERE'S A LOT OF CENTRAL BANKS
THINKING ABOUT CENTRAL-BANK DIGITAL CURRENCIES.
I THINK THAT IS PROCEEDING FORWARD AT PACE.
I THINK IN TERMS OF CRYPTO, IT'S A BROAD-BASED INVESTMENT
ASSET. I THINK IT WILL BE A WELL BEFORE WE SEE THAT. FRANCINE:
THANK YOU SO MUCH FOR JOINING