and, so, on that note, i want to thank all of our speakers. i hope that this was helpful to you and please make sure to look at that many of of options and at least that the summary. and please -- at the whole report, because it will make bill feel so much better if you go through that over 400 pages so that they can feel really good that there -- their work is being taken seriously. and i hope that you leave this form with a better understanding . i actually think this is a very exciting time in that we are really seeing kind of the coming together of -- of officials at the state and local level who are really working together to understand each other's perspectives responsibilities, and how best to solve problems

that are really going to make sense for their state. so, join me in thanking our wonderful panel. [applause] >> [indistinct chatter] [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> [indistinct chatter]

>> just a reminder, you can see this discussion and related issues online at our beauty library at c-span.org. the employment numbers for may were released this morning. 288,000 jobs added for the month. the rate itself taking up to 5.5%. some reaction to today's news, john boehner said in a statement, it is always good news that more americans have found work, but with weak economic growth and too many still looking for is that he jobs and better pay, we can do better. you are looking at a picture from the wilmington news journal from legislative hall in dover delaware where vice president

joe biden's son was lying in honor yesterday. the former delaware attorney general that this past week from brain cancer. he was 46. we want to let you know we will be live tomorrow from wilmington delaware for the funeral services. president obama will deliver the eulogy. our live coverage gets underway tomorrow at 10:30 a.m. eastern here on c-span. >> here are some of our future programs this weekend on the c-span networks. on c-span2, booktv's life at the chicago tribune lit fest. our today coverage begins saturday at 11:00 a.m. eastern and sunday starting at noon. speakers include the senior advisor to president obama, and margaret dean on the last days of america's spaceflight. on sunday, at new, we continue our live coverage of the book

festival with our three hour in-depth program, with a lawyer's right -- lawrence wright. he will be taking your phone calls and questions from the audience. speakers include scott simon on his book shevin -- kevin schultz, and norman mailer. and on "american history tv on c-span3, join us for several featured programs on sunday. beginning at 4:00 p.m. eastern the nasa film, "the four days of gemini 4 1965." at 4:30, world war ii photographer, tony, i've his thousands of pictures capturing the war experience and the stories behind some of those images. then at 6:00, we visit with senator lamar act latter -- lamar alexander. and at 6:30, veteran journalist

bob schieffer and david hume discuss their vietnam war experiences. get our complete schedule at c-span.org. >> former navy secretary and u.s. senator jim webb is considering running for president this year. we sat down with the virginian democrats recently. this is a part of a series of interviews c-span is conducting. mr. webb talks about his military service, his time in congress, and his family history. this is just under 45 minutes. host: former senator jim webb, if you decide to run for president, why do you want to serve? jim: this country needs leadership. if you look anywhere in the country and ask what you think people are -- and ask them what you think is missing, it is leadership. that they can trust people who

have the experience. they can look across the aisle and get things done. i have had a blessing in my professional life in that i have been able to spend about half of my time in public service and half of my time doing other things, working for myself as a sole proprietor. i believe very strongly that we need to create a new environment in washington where we have leaders who can talk across the aisle and actually solve problems. mr. scully: if you look at george w. bush who said he would be a uniter, you talk about barack obama who said he would be a president for red white and blue america, this town is more partisan than ever. how do you change that? former senator webb: i think you change it with the right leadership. the best example for the present times is what ronald reagan was

able to do. people in this country than were saying that the issues were too complex to have one people leading the country -- one person leading the country. ronald reagan was the leader and he had a vision. he brought good people around him and gave them a sense of mission. he inspired the country. you could disagree with one policy or another, but he really created the right environment where we could get things done. mr. scully: you have written about reagan a lot. what made him unique to the presidency? former senator webb: i wouldn't say that he was unique, but i would say that he was a strong positive leader. in our environment here in washington, a lot of people forget that when we throw rhetorical issues around, one of the things you have to do is be able to manage the most complex byzantine bureaucracy in the world, and to communicate a sense of purpose in the country. i think president reagan did that very well.

he brought in lions., he brought in people with very strong careers and gave them the mission and let them do the job. that is what we need right now. mr. scully: you have said you want to run your campaign with a message. and issues that you care about. what would those be? and what are the key issues that are important to you? former senator webb: if people look at what we have done throughout my professional career, we have been able to get things done in and out of government. during the time i was in the senate, i personally wrote the post 9/11 bill. that was not an easy task. we developed a leadership prototype with republicans and democrats, listen to people, and

in 16 months, we put together the best g.i. bill in american history. we brought criminal justice reform into the national debate. when i first came to the senate the word was that if you were talking about over incarceration and alternate issues, you are "soft" on crime. we stood up, we took the hits, we did more than two years of hearings on this and we introduce legislation that cause d people to gravitate towards our solution across the philosophical spectrum. i warned five months before the invasion of iraq that this would be a strategic blunder that would empower iran and cause the divisive sectarian violence we have seen since then. i also warned about the situation in libya. which i think the first rule of

walking is don't let go of what you have until you have a firm grasp of where you are going. my message would be that we can sit down, innovate, take the hits, and bring the country leadership. and also, that we would be focusing on the same issues that i have been dealing with for years. economic fairness, social justice, reestablishing a sense of direction in our foreign policy and our military policy. and be very careful about the imbalance that exists between the president the and the congress. i think congress needs to take more responsibility on these issues. mr. scully: let's talk about a rock and foreign policy and iran, but let's talk about you. you were born in missouri. you moved around a lot as a child. what do you remember? former senator webb: my father was a world war ii veteran. he did not have any college. at the end of the war, he was a pilot, he spent a year and a

half in missouri where i was born and then reentered the military. was offered a commission to be a pilot again. from that period all through my early life, we moved constantly. we had a lot of family separations. i like to say to our military people today that i know what it's like to have a dad deployed, to be deployed, to have a son deployed. very much a part of how we grew up. the sacrifices that military families make in the sense of duty that so many other people who serve have. i also learned how to operate in a lot of different geographical and ethnic backgrounds. i went to nine different schools in five years at one point. we were in england and texas missouri, alabama, nebraska, california. i learned a lot about the country. i learned about duty and that i

wanted to serve. mr. scully: you have to be a native because you said missour a, not missouri. former senator webb: that's how i was raised to say it. i went to southern cal on an rotc scholarship. i had done very well in their leadership programs and they recommended there that i might give the academy a shot. at that time in my life, it was if you want to be a top intellectual, try to go to yale. if you want to learn leadership, go to the challenges of the naval academy. mr. scully: what did you learn? former senator webb: i learned accountability. i was also on the brigade honor committee for four years which had a profound effect on me, watching how our program worked at the naval academy. i learned the value of proper leadership in tough situations.

we all knew then that the country was undergoing a lot of turmoil, and that we needed to provide leadership for people who were going to go to the war in vietnam, whatever their political thoughts were. the war wasn't going to go away and it was our duty to go there. mr. scully: you graduated in 1968. talk about the turmoil of that year. lbj was not seeking another term. you had the assassination of robert f kennedy and martin luther king. you graduated at the height of the vietnam war. former senator webb: the night before we graduated, robert kennedy was assassinated. it was an incredible year. there were a lot of questions about the validity of our governmental process, the common sense of foreign policy, etc. we all knew what our duty was going to be and where we would be going. mr. scully: you are in your

early 20's, about to be deployed to a war that had a lot of questions in this country, and you were front and center. former senator webb: i had an interesting discussion with my father who really did not like the way that mcnamara was running the war. i think he supported the war itself. when your father is saying, "go in the navy, stay on the ship don't be a marine," my father was saying that, there were a lot of strong family discussions at home, but i wanted to be a marine. i wanted to do my part. the young marines over there fighting needed the kind of leadership that i thought i could bring and i wanted to go. mr. scully: what were your parents like? former senator webb: my dad has been a great hero. he went to night school for 26

years to finish college. my mother grew up in east arkansas. in i think an existence as rough as anyone in this country has experienced, out of the eight siblings, three of them died of disease in childhood. her father died when she was 10. of medical situation. and she chopped a lot of cotton and picked a lot of strawberries so i could be where i am today. mr. scully: brothers, sisters? former senator webb: i have two sisters and a brother. we cover the political spectrum when we have our discussions. mr. scully: what is that like over thanksgiving dinner? former senator webb: i use to get a lot of e-mails when i was in the senate. mr. scully: what advice do they give you? former senator webb: we have a

lot of political differences in our family, but i have always respected them. mr. scully: you served in the marine corps. then you came back to the u.s., you worked on capitol hill for a while to do what? former senator webb: i was wounded in vietnam. i tried to stay in the marine corps. i got a medical retirement from the marine corps and i went to law school at georgetown. i started writing when i was in law school. actually, i started writing my last year in the marine corps. when i was on the secretary of the navy's staff, but really found a strong passion for all i -- for it while i was in law school. i wrote on our strategic axes in the pacific. i worked as a military planner while i was in law school. i worked for the governor of guam and traveled the region. i became a committee counsel for

four years in the congress working on veteranss issu -- veterans' issues. was lucky to be mentored by the world war ii veterans who had really reshaped veterans law. the world war veterans -- world war i veterans hadn't gotten of terrific deal when they got back. the world war ii veterans were the beneficiaries of the world war i people. i learned a great deal. but i also learned that i love writing and i could make a living as an independent writer which is hard to do in our country. i started this period where i would write for a while and miss leadership challenges and go back into the government for a while. and miss writing. i began this alternate career path.

i loved both. mr. scully: you have written 10 books? you have won an emmy. you have written a screenplay that turned into a film. have we ever had a president that has done all of that? former senator webb: not yet. [laughter] mr. scully: how do you go about writing a book? former senator webb: each one is different. i have also worked on a number of film projects. books themselves, for me, a novel always starts with the theme, something that i would really like to be able to explore. then the characters fall out of the themes. as a good example, i wrote a book called "the emperor's ge -- emperors general." it always came back to me when i would read about that story, it always came back to me, why would a great man kill a great man?

which is basically what happened. so, taking that theme, i ended up writing a novel into world war ii and postwar japan, all about the complexities and what was going on. that is typically the way i would write. mr. scully: vietnam is now a close trading ally. a close economic partner. would you have thought that 40 years ago? former senator webb: this is what we were trying to do 45 years ago. i have always believed that vietnam is one of the key countries for the united dates -- united states in terms of how we approach eased and southeast -- east and southeast asia. when i came to the senate, i brought my staff together. we began the strengthening movement in asia two years before the administration came into office. i brought my staff in, i said, we are going to work to

invigorate our relations with korea, japan vietnam, thailand singapore, and change the formula in burma. we had a pretty good track record on all of those. with respect to vietnam, i started going back to vietnam in 1991. and have participated very strongly in the evolution of our relationship with their present government. it was pretty much a stalinist regime in when i first went 1991 back. they were kind of the little brother of the soviet regime. they were being subsidized by the soviet regime. when the soviets went down, they needed alternatives. that is one of the reasons i -- they started opening up. very enthusiastic, vigorous participant in bringing the not to the international community in a positive way, and also addressing the issues of our

overseas vietnamese. mr. scully: you have written that vietnam has really shaped america's foreign-policy over the last 50 years. the legacies, the mistakes. former senator webb: a lot of people have expected me to make that simple parallel. i have resisted that. i know that vietnam is kind of like a rorschach test. how people look at vietnam particularly our generation, with respect to foreign policy. but even in my first book which i wrote when i was in law school at 28 years old, i was talking more about how we should articulate our national security interests around the world and where we should be willing to be vigorous in terms of our involvement, which led me on the

one hand to say the invasion of iraq, the occupation of the -- by the united states of countries in that part of the world would be a huge strategic wonder. at the same time, i believe i have been one of the leading voices in discussing chinese expansionism and the ways we have to deal with the situation we are seeing in the south china sea. i started writing about that and speaking about that 15 years ago. mr. scully: we are seeing it right now. how worried are you about what is happening in that part of the world? former senator webb: i have been writing, speaking about the situation with chinese expansionism and how the united states must remain as the strategic balancing force in that part of the world for many years. what has come to the fore here

in the past month or so has been going on for the past 15 years. it is a classic pattern of an authoritarian expansionist nation, where they make claims of sovereignty and, in their case now, an area all the way down off the coast of malaga. 2 million square kilometers of land. in the south china sea. more land mass then japan, philippines, and vietnam put together. they make the sovereign claims, we have spats out there. and then we tend to think these are tactical claims. and over time, they have created a political jurisdiction encompassing the entire area, which reports directly to their central government.

we have to be firm that this is a violation of the international law. what they say now is, this is our land, this is our political jurisdiction. if you say anything, you are violating our internal government. it's just not true. i made a point a few days ago that i believe if i were the president, i would be directing my administration to pursue the notion of limited sanctions against china with respect to trade on defense matters. i would be reviewing defense cooperation with them. we have to be able to communicate that this is a very serious matter. mr. scully: how would you assess the foreign-policy of this president? former senator webb: he was given a pretty poor hand when it came to the situation in the middle east. i would say i think the great mistake of the administration

was the way that the arab spring was handled. i think it will take is a well to untangle the decisions that were made there particularly with respect to libya. there is no direct american interest there. they were -- they are were -- t here were no treaties in effect. no attack or threat of attack. it was not even a civil war. i have made this point over and over again. what were the consequences under which -- what were the circumstances under which that -- the president should have been able to use military authority without coming to the congress? that's the issue that is really going to have to be unraveled over time. mr. scully: has the president been a strong leader? former senator webb: i believe that, in some areas, president obama has. i believe, in terms of working

with the congress, we would be a lot better if there were more direct, sits downs with people from both sides of the aisle working through issues. mr. scully: take china, russia. how do you think they view the u.s.? former senator webb: i believe that our country needs a new and clear strategic doctrine. the last clear strategic doctrine was actually the nixon doctrine that came in 1969-1970, regarding when the united states was going to be involved in internal violence inside different countries. particularly, since the fall of the soviet union, we haven't had a clear explanation of how we are going to pursue our national interests. after 9/11, it has gotten more

difficult. i think all of these major regional powers or countries like china, which is attempting to be more than a regional power , china and russia are going to be conducting naval exercises in the mediterranean the summer, they need to hear from us that these are the areas in which we as a country will declare our national security and we will back up our concerns. not just with military confrontation, but with economic sanctions or messages as well. mr. scully: you have seen this not only through your own eyes, but also through your son who has served. what advice did you give him before he was deployed? he served in iraq, correct? former senator webb: yes. my son was -- left penn state

and enlisted in the marine corps and was a -- and was a rifle man. he was in some of the worst fighting. advice about military service is not something you can just sit down and give somebody right before they go. we have had thousands of hours of discussion, the same way that my father did with me when i was growing up. this is what we talked about at the dinner table. how do you motivate people, lead them, make hard decisions. what kind of leader would you want? do want some one who makes you do something or who makes you want to do something? by the time my son left, we had a pretty clear understanding of what our family has done for a very long time. mr. scully: you are smiling like a very proud father.

former senator webb: it was a hard time. particularly infantry combat is hard. on the one hand, you feel a great amount of pride and respect. and on the other, you know that people pay the price when they serve. it is our obligation as leaders to make sure that they are properly rewarded. mr. scully: directly behind you is a replica of that statue that is that the vietnam war memorial. not far from where we are in washington dc. you insisted that an african-american was represented in that memorial. how did that come about? former senator webb: that's a very long and complicated story. this culture here was one of only two that were ever made. this sculpture was given to me as a gift to thank me for the work that we did to get a

sculpture at the memorial and working with him over many months. he is an artist. he wanted to know different things before he put the sculpture together. sculpture there, getting a flag, at a time when they were not a part of the original design. i wrote the inscription on the flagpole. i'm very proud of that. when the sculpture was first agreed upon, it was going to be an american soldier. my father was visiting at the time. he turned around and said, "where is the black soldier going to be?" i said you you are right you , couldn't do it with one, you had to do it with three. we had a lot of confrontations on that, but it worked. mr. scully: your wife is originally from vietnam.

former senator webb: her family, like so many others, fled from the communists in 1975. the entire extended family got on a boat and were scooped up out of the ocean by the united states navy. she went to refugee camps. one on oguam, and one in arkansas. she spent most of her growing years in new orleans. she worked hard. she got scholarships, went to the university of michigan in the asian studies program. she went to cornell law school. we met when she was an attorney here in washington and i was working on a project inside vietnam. one of a number of projects inside vietnam. mr. scully: in 2005-2006, you were thinking and then announced her candidacy for the senate. most people told you couldn't win.

how did you defeat george allen? former senator webb: first, i spent a lot of time thinking about it before we announced it. people were worried. people become worried that you have to make a decision and get out there and do these things. i wanted to be clear in my head that i could put 100% of my energy into a campaign before i decided. i announced it nine months to the day before the election. we had no money. i decided to put the issues out that we cared about and to stay on the issues as best as i could, rather than getting sidetracked and a lot of the other things that are inevitable in political campaigns. we stayed on message. we never approached the money that the other side was able to raise, but we got 14,000 volunteers to come out and help us.

i think that was the difference. mr. scully: i have to ask you about the moment when george allen used the term "macaca." did you realize at the time it significance? former senator webb: for me, the key moment -- i think what happened with that moment, and george allen could probably give you more insight than i would, but i think what happened was people across the country who were dismissing the campaign started paying attention. that is only started getting -- is when we started getting money. the defining moment of the campaign, in my view, was in september when tim russert had us side-by-side and asked both of us a lot of hard questions and i was able to have a floor on which i could explain my views. that was our big turning point.

mr. scully: what did you find when you came to the senate? was it what you expected? former senator webb: it was. i spent four years as a committee counsel in the house. we used to put 20 to 25 bills through per year. i understand the process. what i didn't really expect was the way that campaign-finance drives american politics. for someone who has lived in or near washington for a very long time, written a lot of political commentary, that was a stunner to be in the middle of it and to realize that campaign-finance -- and to realize what campaign-finance did two -- to campaigns. mr. scully: what did you accomplish? former senator webb: i think we

had a lot of major compliments, despite the paralysis that infected the system. right out of our office, we brought the best g.i. bill in history, more than a million post-9/11 veterans have helped. it is very similar to the world war ii g.i. bill we brought criminal justice reform out of the shadows and into the debate. we took a lot of hits. we were a voice in foreign policy, particularly in asian policy. before this, i had been involved in the military in one way or another all my life. i made a lot of contributions of the armed services committee as well. my number one accomplishment and i've said this before, where

the people that we brought in. i said that my people would be my legacy. we brought in good people. we gave them my approach towards leadership. i used an oil slick theory. we got these people will other places right now mr. scully: i want to go back to your service in vietnam. when you came back, did you feel gratitude or scorned by americans? i ask you this because we have seemed to swung the pendulum where we say thank you for your service. what did you experience? former senator webb: the vietnam age group was sparkly -- starkly divided between those who supported the war and those who did not. those who did not support the war in many cases were among the more privileged and elite in our

generation. by the positions that they took they had made it very difficult for a lot of the people who came back from vietnam. in other words, instead of just saying, thank god i didn't have to go, the word on the street was that this was an immoral evil, genocidal war. i am not going to take part in it. that was a heavy burden for the people who came back. at the same time, the country as a whole has always loved its veterans. we had a landmark survey when i was on the house veterans committee, $6 million survey. 9.8 -- on a scale of one to ten 9.8 was where americans scored vietnam veterans.

mr. scully: you decided not to seek reelection. you said, i took the choice of turning into a perennial -- or turning back on the group nature of politics. former senator webb: if you look at the senate and the way that the larger bills come to the floor, the caucus has a tendency to neutralize a lot of strong opinions. you either end up voting on these large bills, and people still ask me about them, or you end up down on the floor like some senators who were just talking. i am very thankful for having had six years over there. but i like to get things done. there are other places where you can get things done better.

mr. scully: do you enjoy campaigning? former senator webb: i enjoy the face-to-face campaigning. i enjoy getting out in the town hall meetings and talking to people and listening to what their thoughts are and being able to clarify mine. what i don't enjoy is campaign-finance. i'm very blunt about that. i said when i announced the exploratory committee, one thing i can say is that i will never hold anything to anyone if i am elected. it's a very tough proposition to be able to raise enough funds in order to conduct a viable campaign. that is where our decision point is. mr. scully: based on that, what would potentially a jim webb campaign look like? former senator webb: we would get out and talk to people, i would say exactly what i believe in terms of the issues in the country.

whenever i go to a town hall meeting, we have big risk discussions. we had a contested primary. we were outspent i think 10 to one. we got out in a jeep. i called one of my old radio operators. a very close friend of mine who had lost his arm in vietnam. he said, i need your help. he quit his job and moved into my basement and off we went. we would go to three meetings per night, talk to people, tell them what we are about. we won the primary. mr. scully: any campaign is about a choice. your campaign, if you are to run against hillary clinton or lincoln chafee or senator sanders, what's the choice? why you and not them? former senator webb: i wouldn't be running against any of them.

i would be running for the presidency of the united states. that is my message. this country really needs leadership, not only that you can trust, but that you can look back and see a pattern of getting things done and a consistency and a willingness to listen. i think that's what we need now. mr. scully: finish this sentence. the state of america today is what? former senator webb: we remain the most unique society on earth. good leadership will enable more greatness. mr. scully: we are in your office in arlington, virginia overlooking the national mall. i know you spent some time at arlington cemetery. what do you think about? former senator webb: i have a lot of friends there. and my parents.

so it is a great place to go to think about the country and service, remember people you care about. mr. scully: do you think a lot in this office? do you write here? former senator webb: this is my writing office. mr. scully: what is your timeline in terms of a potential candidacy? former senator webb: i think soon. you have to make a decision soon. mr. scully: what do your kids tell you about a potential run? maybe your brothers and sisters? former senator webb: when i am with my kids, i talked to all of them regularly, we can talk about issues, but we do not talk about whether or not i should run. we don't talk about it. mr. scully: when you are not involved in a potential campaign or writing, what do you do to relax?

former senator webb: my oldest daughter said, make sure he is working on a creative project. part of me will always write. and i'm working on a project right now, a 10 hour series. i have always been an avid fisherman, bass fisherman. also have great connections with my brother and son. we going fishing trips and all sorts of things. mr. scully: jim webb, thank you. we appreciate it. bama the sunday on c-span's road to the white house, a conversation with former for senator and likely presence of -- likely presidential

candidate, jim webb. senator webb: this country needs leadership. when you ask people what is missing at the federal level it is leadership. it is sort of a blessing in my professional life. i have been able to spend about half of my time in public service, and half of my time doing other things, working for myself as a sole proprietor. i believe very strongly that we need to create a new environment in washington where we have leaders who can talk across the aisle and actually solve problems. bama jim webb, this sunday on "road to the white house 2016" on c-span.

bama a busy week for the u.s. house next week. they will finish up work on a bill on tuesday. friday votes may go to 3:00 p.m. the senate is back to work on fiscal policies. follow the house here on c-span and the senate on c-span two. looking out of -- looking at a picture taken from the "wilmington news journal," this is vice president joe biden and his family. his son died this past week from brain cancer at the age of 46. tomorrow we will be live from wilmington delaware for the funeral services. president obama will attend and deliver the eulogy. but cut -- live coverage gets

underway tomorrow at 10:30 a.m. on c-span. >> here are some of our featured programs on the c-span networks this week in.

>> now, a discussion on the world economy and market volatility. it includes some of the world's top financial investors and managers, looking at what is ahead for the global economy including the possibility of higher industries in the u.s. >> let me introduce our moderator of the panel. jillian has served as assistant editor of market coverage, she is a best-selling author, and her next book on the global economy will be published later this year. please join me in welcoming our host, gillian tett. [applause] ms. tett: good morning. thank you for that very kind

welcome and welcome to the first session of this years conference called the return to volatility. i think the subtitle of that could be "yikes, what is going to happen next?" by any measure, the world has been through an extraordinary decade. first we had a gigantic credit bubble and then an even more shocking financial market collapse is not battle turbulence and then we had a truly staggering policy response. it has, in many ways put the global financial markets into the equivalent of alice in wonderland. they reckon that $8 trillion to of aid was provided by banks. $10 trillion we have had a debt increase of $57 trillion according to mckenzie. much of that actually has come from china. we also live today and it rolled extraordinarily long yields.

you have a number of companies that are issuing at negative yields. it is an extraordinary unprecedented time. yet, in spite of all of the aid we still have a global economy that is at best pretty sputtering. i was noticing in this morning financial times, american companies are on track. we also have a world warning of all kinds of contagion risks like ukraine, china come in many other places as well. are we heading for significant volatility and if so, will that

be good or bad? because of course, the dirty secret about volatility is that we love volatility. it helps sell papers, create news. many of you also love volatility. it create enormous opportunity for all kinds of financial rubbish. we have a terrific panel of people to talk about where it is going. many of them are very well known to you. on my far right is alex friedman, who is ceo of gamb. next to me, josh friedman, cofounder of canyon. on my left, a man that is very well known to you, a veteran of his time. josh harris, cofounder of apollo global management. on his left, alan howard. on the very end, carey lathrop.

we have a number of asset managers and one lonely bakernker. i would like to start with alex. when you look at the year ahead, are you worried about an explosion in volatility? mr. friedman: i spoke on this panel last year and i hope no one will remember what i said a year ago because i am sure a big chunk of it is wrong. to that question, i expect that at some point over the next 4-6 months, we will see real volatility and the market will pull back to something like 10%. that will be a good buying opportunity. i think we have about two years left in this central banks supported run. when you think about the big drivers, i'm not smart enough to get beyond the big drivers. we are pretty much everybody

easing. yes, the united states is moving in the other direction, but slowly. you have cheap energy and falling currencies and some of the more worrisome areas, particularly in europe. more importantly, there is the quote from abraham lincoln -- "life is a choice and alternatives." there is not really an alternative right now. give them -- given what you just reference, volatility, yes. buying opportunities, still a couple years of this rising tide environment. ms. tett: a world where everyone is grabbing for risk. history suggests that rarely ends well. mr. friedman: every 5-8 years have been market recess. we will probably do that so to speak.

what would be the not end well story -- a lot of political risk. longer, a huge structural issue around liquidity which we will talk about. the thing that worries me the most is that as investors are further out on the risk curve you start to see the most traditional pension funds reallocating. as they reallocate, the elderly are not factored in. they have huge structural and social implications. you have indebted nations that will have to bail out their elderly. host: history suggests it is the dumbest money that jumps on the trend at the last minute. alan, do you think we are heading for another crisis? mr. howard: the market is inherently extremely off the table in the structure we have today. that is partly due to the regulatory effects of changing the way liquidity banks offer.

clearly as we know, we have a small event and a much larger one in terms of the s&p. these are examples of where the change in market infrastructures , the volatility they produce is of a mac and dude we have not seen before. the real issue is that you any of these is small events ever lead to something bigger? we will have to see if we get something more fundamental based in the future. host: josh, what do you make? are you concerned about the potential for not the shock in the next year or so? we managed to have to josh's and to friedman's. you can fight for which question your answer. i am surrounded by josh's.

mr. j. friedman: i think it is sometimes easier to prepare them to predict. when you have unnatural interference on a global basis with financial markets, you get built up imbalances and they built up and build up and is a little like that last little grain you put on the sand pile and the top of it collapses. last year, we had quite a lot of volatile events take place. there were some significant out of the ordinary, major adjustments in certain areas. you had obviously what happened with the swiss franc and i think that got most macro players by -- caught most macro players by surprise. what happened in oil was really extreme. the rise of isis was something generally not predicted by the general public. you now have the fed so intend a -- so intent on not surprising people on interest rates that they want people to the point

where they do raise rates, it will be a shock. sometimes the best thing to do is to know that eventually, all of these unnatural buildups will produce an adjustment but rather than spend to much time predicting one that will happen, maybe it is better to prepare. host: right. josh. the other josh. mr. harris: i think there's been a change of the structure of the market. a people that used to make the markets for the banks and the banks were driven out of doing that. who has replaced them? really the people on the stage. when you think about the less income market, more than a third of it is dealing with liquidity. what happens when retail decides to move out of the daily liquidity vehicles buying assets

that probably don't have daily liquidity in the event of a shock. when something bad happens, you will see an amplification of a trend down because the people that had to step in and buy will have much higher -- they will step the price of risk in a more aggressive way. there is a lot of capital on the sidelines. we ourselves have $30 billion of unspent capital. there will be volatility within a range. i don't think it is bad for the system. i think, ultimately probably , having people on the stage setting the price of risk. i think that it is what it is. the structure has changed to a more institutionalized market which will produce opportunities when things go down more aggressively and has created opportunities. you saw -- a lot of these markets are not that liquid. the high-yield market when we

had some of the fiscal issues in the u.s. are when oil crashed, you saw the high-yield market trade-off 5-10 points. you would buy a little bit of it and it will trade backup 10 or 15 points. that is the market we live in today. they are less liquid. i think there will be sort of regional ballots. there is a volatility in certain industries and structures. in natural resources commodities. there is volatility. why? the dollar is going up, china is slowing down. in retail, or the internet is remaking certain sectors, there is volatility. many energy could there is volatility. i'm not sure you will see with the central banks these i have got your back policies. i don't think you will see broad-based volatility like you

saw in the last financial crisis but you may see rolling structural volatility around different industries, different companies, different markets, different regional areas. host: let's take that issue of regulation risk. i know it is something kerry has been looking at closely. i will come unto some of the geopolitical triggers for volatility. just how bad is this mismatch in the markets today? post 2008, we have seen the -- that is a big decline. it has created mismatches and pockets of potential liquidity. we are seeing the industry squealing. those of you who have not yet read your sp this morning may not have seen we had a piece this morning about how bankers are appealing for changes in the

trace reporting system. because of concern about lack of liquidity. will this be the start of the next crisis? mr. lanthrop: i think ultimately, it will take rates rising and even if that does raise rates later this year, it is likely to be the front end that moves and is probably the -- not a longer end. the issue of regulation, i think that is something clients will throw in front of me and you will see deals go from 250 billion to roughly 50 billion depending on when you look at that. host: i think you have the chart. mr. lengthanthrop: some of that is

overstated. if you think about it, you took out bank of america and merrill. same thing with -- you took capacity out of the market but there is no doubt we have strong balance sheets. they were not there for the benefit of our clients per se. there is no question directionally that is correct. part of it is not top-down coming from a, it is bottom-up. the cost, and the inventory there's a lot more equity today then and long-term debt which is more costly. it means offers have to widen out or there has to be greater velocity in the balance sheet. there has been some element of regulation but i think some of the d structural the buy side , has grown more than the

sell side. we could double our balance sheet. you would still have this problem and i think the daily liquidity -- you have this mismatch. when you think about what happened in the crisis, it was that where are you funding long-term assets and short-term liabilities? you look at things like buying longer dated assets. when the market seized up, they couldn't roll their liabilities . that is what it was looking for -- the catalyst, the grain of sand that causes the whole system to collapse and everyone to run? the challenges are that different from the crisis were you would have large market moves -- and if you think about what drives that as a market maker because you have is in balance very quickly of high yield. if you look at last summer, it was at 5%. very quickly the market moves to 6%, 7% to try to create equilibrium so that the sellers become holders or buyers. what happens is the buyers come

in and say what can you offer. really not a lot. the industry shuts down. it takes a lot to recalibrate. it immediately snaps back and ends up at 5.5%. in an orderly market, you would watch things take from 5% to 5.5%. today, and all of us agree it is where the opportunity is, when it goes down, you have to buy whatever you can because when you look and see what actually is traded, not a lot trades when it goes down and not a lot is traded when it goes from seven to 5.5. i think the markets are very prone to that type of volatility in the future. host: it strikes me as the terrible irony of 2008. everyone agreed there was too much debt and a mismatch in terms of the duration. what happens now? we have a market with even more debt out there and even more potential miss message in terms

-- mismatches in terms of liquidity mismatches. we have all heard the banks talk about the problem of a liquid market and the regulatory changes. there's an argument to be made that markets are responding with entrepreneurial zeal to find other ways to plug that gap and we don't have to have a world dominated. mr. howard: we should ask some other points, and how i think bankers are looking at the way the market is going to structure. not only are the banks inventories coming down but the way they behave in terms of offering liquidity has changed. because they put more pressure cutting cost and making sure business is more effective, they are clearly cutting -- using much more junior people on those

training desks. second,. frank means that people really have no idea how much they are really allowed to use. a specific amount of material and will not use it anymore because he is concerned if he pre-positions for a trade or trades after, he may richard respectively -- and therefore, get in trouble. market makers are not behaving at all with underestimate. that exacerbated that time of stress. then the next thing to look at , is the idea that the central banks moved products to central ccp. what happened that is very slow in another has been a lot of pushback from the banks about the specific risk of that clearinghouse.

a lot of product goes there. it is another's thing that they are taking a long time to get to . the s&p has changed risk that things are willing to offer. after the shock, they cannot model the way they used to. we are ending up with -- it is like liquidity is forcing more and more investors to use products to hedge their portfolios. so 10 or 15 liquid products are being used even more and are of increasing interest in those products. whenever we get a small shock and positioning is one way, you get outside move in these liquid markets. we are moving towards a

structure where the banks are not going to go backwards. they are not going to let the banks take more product. we are going to go to a structure of ccp's less market , making by the banks. more standardized products. electronic exchanges. that is the way we are going and i'm not saying it is bad but it is a very different structure. it means you're going to get these large moves but we don't know if they will ever follow through to something bigger. mr. friedman: the institution that caused the last financial crisis were the banks. i totally agree, we are talking about the fact that they have been an asset, somewhat pushed out of the market in terms of the market-making function. actually they are much less elaborate, they had a lot more equity. they're getting out of the risk businesses.

i think ultimately the real , question is systematically, no big is necessarily a bad thing for the system. i think they will be volatility within a range but the month of -- amount of capital sitting on the sideline waiting on with all -- is waiting. we have all been waiting. we're often talking about the same phenomenon and when it happens, you cannot buy anything. the minute you step in and buy something, it goes right back up. the real question is, more fundamental i think. the system is like choosing your poison. if you make the banks massive to the point where they are impossible to deal with if they get in trouble, and very difficult to manage, you get -- they may be willing to step in a bit but you have created a larger systematic issue. i think we are in a better place. host: i was talking with a group of central bankers who told me back in 2008, they helped that endowments would be liquidity

providers in the crisis and that hope turned out to be completely wrong. some of them were suggesting maybe next time around, the central banks themselves will have to step in and be the market of last resort. are you concerned about what will happen? are you willing to be a big liquidity provider in a crisis? mr. friedman: you referenced the point, which is very important. central bankers hope it is an important point. we all want to think there is a force that will fix things and central bankers have stepped into the void and i've been that -- and they have been that. i was living in switzerland and i think i somehow learned they had no idea what their exit plan was. they knew they wanted to get on but did not know how they would , get off of it.

central bankers are people and they do their best but they cannot foresee all of the consequences. it gets worse when they are not driving the story so to speak. , that is the volatility we are at right now which is essential bankers have done the vast majority of what they can do so we are shifting to the fiscal side, inherently more messy at a time when there are a lot of elections coming up over europe and downstream in the u.s. you got into the unknown known donald rumsfeld thing. greece is the most analyzed known unknown there is. i don't think that is what the rails -- derails everything. will the u.k. leave the eurozone? possibly. what is happening tragically in nepal today is a reminder of the unknown unknowns. they can really derail the story and the odds are there will be one of them upscale in the next 12 to 18 months. how do you position yourself against that?

mr. j. friedman: crises come from the credit world. unless you have massive amounts of leverage at the retail level, the worst crises come from overshooting on credit. we have clearly had pressure through systematic easing globally that has caused disequilibrium and buildup. the institutional framework is so different now, maybe they have achieved the purpose they were trying to achieve which is to get instead of having all of the risk and concentrated mismatch located within the banks, you have a shadow bank that is quite functional. you have many institutions like a lot of the people represented on the stage who run very on leveraged or very lightly leveraged institutions that don't have daily liquidity but are able to provide capital to the market the moment when the mismatch institutions -- we get

worried when we see etf buying bank debt. that is a mismatch. there are so many institutions at don't have that mismatch that have longer duration capital that aren't terribly leveraged and there is plenty of people who are think learned that the -- who i think learned that providing capital to those types of institutions post crisis represented by the downdraft in prices is a good thing to do . i may be a little less worried about the systematic risks of the overshoot although i do think it is clear that we have an overshoot. host: do you feel functional? mr. harris: yes. 2008, the government was the last firewall. i think it is the same. i believe if you were to have a 2008 style crisis, that would

have to happen again but once it happened, the people that would be facing risk would be pricing it with their own money with their clients money in a much more analytical systematic way. i think that is ultimately -- i don't legal ultimately, the -- i don't think ultimately the people that would have to step in have really changed and i do think the people that would make the markets are managers at this point and not banks. mr. harris: there is one issue -- the rise of passive governments. they are a bit of a blunt instrument. often people who hold passive , instruments are not aware of what they hold. last fall, it was because they had a lot of exposure to energy .

if you ask a lot of alligators -- allocators who allocated they were a bit more surprised than they should have an. you see a version of that in china now where it has been a good investment but china is slowing and shouldn't actually be such a rising dynamic of an instrument and there will be a time when the market catches up with economics. it may be that as it management will produce. host: a bit like in 2007 when a lot of mainstream investors realized that what was sitting inside was not quite what they expected. at this point, it is quite a moment. as the loan banker on the panel, i think maybe you get four times the loan bank on the panel. let's get a word on this before we move on to the geopolitical risks.

is there anything you like to add on this issue? mr. lathrop: i think one of the challenges you have and we touched on regulation being one of the issues -- one of the challenges is the changing market structure and i think broadly defining managers is probably not right. we have touched on it here. what are the managers that have more longer term liquidity? those are the ones that can step in because whatever it is, it will not be the known unknowns it will be something we don't anticipate. unfortunately, i think with some of the change in market structure -- more of the market is return money. when prices are going down, they will tend to sell and it is not like insurance or pension or yield driven. when you go back 30 years, there was more of that type of fire.

when you say who are the asset managers that will step in? it has to be those 11 longer-term structural liquidity so if they buy -- it has to be those with longer-term structural liquidity. mr. harris: certainly we had a lot of people made a lot of money. waiting, waiting, and then stepping in. the markets did not clear. the people that ultimately cleared the markets cleared them at much lower levels than fundamental value. that was highly lucrative and very profitable for many of us. everyone saw that. everyone is waiting for that. a lot of people are saying when is the next 2008? all of the things we're pointing out. i don't believe it will be that simple this time around. i think we will have to be much smarter and opportunistic about how you play industries and i

don't think you will have this broad-based pullback. we see it today even in the stress landscape. the level of returns today are not what they were. there are many more institutional players that said -- that sit there and wait for any type of pullback energy. kind of the vocal drumbeat of hey, this is the latest thing since sliced bread. i just don't believe that we are going to have the opportunity that we all had in 2008. the flip side of that is the system won't really breakdown as much as it did. host: a good thing for a regulator or a mainstream investor. maybe not as good for you guys. let's change the conversation

and look at some of the triggers that could start this volatility. i want to check that you in the audience are still awake. i want to ask you all a couple questions. a quick show of hands for those of you who are still awake. i'm going to ask you when you first, think the next u.s. rate rise will be. june, autumn, or not at all this year? all of you think it will be in june, hands up. janet has done her work. those of you weren't looking around can see that is nobody. or you are truly asleep or very very shy. all of you who think there will be a rate rise in autumn. ok. those of you think there will not be a rate rise at all this year. wow. that is a lot more bearish than

i would've expected. any of you want to comment on that? do you think it will be one of the sparks for potential round of volatility? mr. i think -- mr. harris: i think the fed has a very difficult decision to make and i think that they're really thinking about it. i think it is unclear. they really want to get off of zero rates because they see the unemployment numbers going down and they know that eventually, the u.s. economy is going to get inflationary and they don't want to overshoot which is a pretty significant tell risk. having said that, the data more recently has been negative and i don't think that this movement in the dollar has surprised people in terms of its effect on the economy. the conventional wisdom was that

experts are pretty small number. movements of the dollar don't matter very much. i think that wisdom is being challenged right now and earnings have been pretty poor . i think ultimately -- lastly you have this on the one hand. and my guess is i think they're naturally dovish. they naturally want to be very cautious about derailing what they see as a somewhat slow u.s. recovery. my guess is they're not going to act in june. as you get closer to your end -- year end, they will be worried about christmas so my guess is ultimately, it is january. i think they will want to do this early next year. but i think there are various conditions.

everything i am saying -- if we started having 300,000 job as every month, they might move but i think that is not going to happen. i think it will move into next year. host: alex, would you agree? half of the people in the room think it will not happen until next year. mr. friedman: i would slightly differ with josh and that i do agree the fed is naturally dovish but i also think they are very cued into valuations and risk markets right now. i was struck by only 2% of the last 40 years as the s&p ever been higher. there are all these downstream implications which we have , touched on. my guess is they will make a move in the fall but that it will be smaller than expected and they will start to telegraph incremental moves which to me is janet's threading through the

data and her really desire to get the level they are on right now. host: do any of you think it can happen in june? mr. j. friedman: i think the point alex raises is one people talk about. regulators are trying to use policy to allow them to keep rates lower for longer but the point josh made about stress for the first time probably in 10 years, we are used to having stress investors saying i want to have a 20% return. then it was 15 and as returns get compressed, for the first time, you have investors saying, let me buy something that yields that i have higher confidence in to get the double-digit return i need for my clients. you're starting to see -- we all know one internal leverage turns into two. why is money flowing into

credit? why is money flowing out duration? there was an issue a couple weeks ago in europe. they issued 100 year bonds. it was 1 billion and a quarter. is there that much natural duration risk for 100 year mexican bonds? it rallied six or seven points on the break. it is trading now below 4%. at some point come it is not crazy to think that could trade at 6%. that is a 66 quarter on a dollar point. a percent is still not a crazy -- eight percent is still not a crazy number. if you're just buying it because you can use yield, what is the only thing you can do is to sell it.

you can see anyone understand why investors are moving like that is because they are getting squeezed but it sets you up for more volatility and investors are going in places in a prolonged time of low rates. whether it is retirees or it is hard to make business models work in zero rates. host: that raises the question which is the issue is really not when the rate occurs, it is how fast the rates go up. maybe what we should do is try to visualize janet yellen and a -- in a swimming pool which is a strange image, but imagine her in a swimming pool with a giant beach ball and she is standing next to you and holding a giant beach ball underwater under your chin and essentially saying not yet not yet not yet in just one

-- and just when you start to relax, she lets go of that beach ball and it shoots up out of the water and hits you hard in the face. the point being if you can imagine that sometimes things conflict to the surface very fast by way of reaction. does that worry you? never mind janet yellen and the swimming pool. [laughter] the vision of the rates suddenly shooting up much faster than people expect? mr. howard: i think there is a big difference. a lot of them have a problem with the rates of that is not a zero. hike in their mind. as they move off zero, they will make it clear by easing it to watch her conditions. i don't think they will allow the market you think they will be hiking very quickly or in any way to allow asking prices to sell off dramatically because after eight years of surveys the last thing they want is a

small hike to cause an armageddon. i don't think there is any chance of that beach ball going to high now. baby one year later we will have , to see how the rates are going with europe and japan. how does that affect the dollar and corporate america? maybe that will affect the pace and the amount they hike at. host: what about you? are you concerned about the beach ball or do you think they can keep it rising slowly and steadily? mr. j. friedman: i do find the janet yellen image disturbing on all sorts of levels. apart from that, it was interesting to see the results of the poll. the fed has managed to convince everyone they are never raising rates because we take this poll last year and you thought it was earlier and it has moved out and moved out and when the actually

raise it come i think it will surprise everybody. no one really believes they're going to raise rates and they have raised rates on a relative basis because of the negative rates we see in europe and elsewhere globally. in some sense, you can say rates are quite high relative to other places. i think it is very, very difficult for us to figure out a way to actually make money predicting rates. i think the exact timing and the speed with which they increase it are equally difficult to predict and i think the world of wooded with brilliant economists -- the world is littered with economists who have gotten this wrong so many times in the past. there are credit bubbles in the

system. if you look at the possibility of transactions. there are no comparisons to 2007. you don't have the massively leveraged institutions holding the securities. maybe there is less danger. i tend to think the fed is not going to do something to drastic , too quick, too severe. i have heard people on the other side and i don't know but i do know going out on a risk spectrum in today's environment seems like an awfully dangerous thing to do given where , high-yield is. we have just been avoiding it. host: many people are going out in the risk spectrum. let's try another poll and then. -- and risk. i'm going to vote on two things. one is will we have a greek default in the next six months? secondly, will we have grexit? those of you think greece will

default in the next six months put your hands up. those of you who don't. 50-50 on default. and on grexit? who expects to see grexit? wow. not only has a janet yellen convinced many of you but angela merkel has convinced many of you. not only have half of you not expected to see greek default, but only a small minority of you are expecting to see grexit. alan, is that too complacent? mr. howard: i think it is a bit complacent. what is going on in russia-ukraine is currently

occupying her. if you see them coming down, which may not be for a while, it could change. the worry about grweexit -- what does it mean one year down the road? once you understand that, if you are a holder in one of the southern european countries, do you really want to hold your money? now the argument is to not worry about it. everyone is behaved well so unlike the greeks, we make sure there is not a problem. i don't exact

-- on the figure to the european treasury quickly, i don't see it happening. i don't see the net. effectively, you're telling every country you are fine. i do not think that is going to work. what happens when you have an election in france? are they going to say, we saved you so now you will be ok? those countries will do nothing. this is extremely dangerous. more than the two-week event. gillian tett: angela merkel saying maybe that will get resolved. ukraine is a huge issue. my colleague wrote an article arguing that the threat is not the grtexit it is actually the

ukraine in terms of the geopolitical risk. mr. friedman: i do not think there will be a greek exit either. maybe greek should not have been in the eurozone in the first place but it is and we are in this predictable time between the articles of confederation and the constitution. you don't kick out west virginia once it is in. it is going to be a transfer recipient, that is just what it is. i don't see it happening. i think it is so overanalyzed and again monday -- and the game dynamics. gillian tett: josh, when you look at the greek exit, do you smell opportunity? go out and buy a cheap greek island? [laughter] mr. harris: it is a good place to visit. i don't think it is really significant.

in the scheme of europe or the global financial system. a lot of the greek debt which has transferred into ec or central bank will allow it to be dealt with without systematic issues. if greece were to default. i don't think -- i think is much more of a longer-term issue. i don't see it being an important factor in moving the markets. the rates are negative -- the fixed income is zero. the rates are negative. the quantitative easing going on there is as large as it was in the u.s.. i think what you see in europe is what you saw in the u.s. which is massive amounts of

euros are being put into the system, stimulating the stock market, making consumers feel better, and starting to drive asset pricing up as people who move out of traditional fixed income and get into the stock market and real estate. i think you will see a rebound in europe a bit. i think you already see it and when you look at what happened in the u.s., it makes sense. they are following -- it is following the u.s. model seven years afterwards. i think the ec is heading the other direction. joshua s. friedman: i would disagree and agree a little bit. i generally agree with the analysis. where i would disagree, for financially, greece probably has -- is a small issue but politically, a big issue.

political instability -- the consequences of the exit -- they're all sorts of unanticipated consequences that could take place beyond the economic consequence. the economic consequence is the least important. we know there'd be some unanticipated parts but the political consequences could be quite significant. we don't know what type of meddling will take place in greece if it does exit. when you have an unstable world as we see in other parts of the world, you can have very large, significant, global events take place that are completely unexpected. no one expected world war i to take place. no one expected world war ii to take place. that is why i think that while financially, greece is a bit of a rounding error, politically,

it is not a rounding error at all. gillian tett: maybe it is a geopolitical contagion rather than a financial contagion. i was very struck -- those of you at doubles this year and we know that once this year, -- last world economic service surveys the elite about what they are worried about. last year for the first time ever, income inequality jumped to the top of the list. this year, it was topped by something else, interstate conflict. to my mind, it is an astonishing finding. alex: alexander s. friedman: i am just worrying , nodding. [laughter] it is a very asymmetric global instability right now, which is very worrisome, because by definition, asymmetric means you cannot predict it and what was unpredictable about world war i was the actual trigger point. at the time, everyone thought commerce

was too connected for there to be were but there was this super- saturation moment. what could that be today? a lot of things. mr. harris: i would push back a little on greece. greece exiting is certainly not good for the world or europe but when you think about militarization of the soviet union and around ukraine and some of the other nations, when you think about what is going on in the middle east, like were israel to attack iran where some of the oil facilities to be impacted, i think that is unlikely. if you think about china being more aggressive, which china is really improving its navy and air force and military quite significantly and is acting more aggressively with new leadership. it is hard to predict. i feel

like those are much bigger. if you want to talk about geopolitical risk those are more significant to the world economy than say grexit would be. gillian tett: those issues are being discussed over the next two days. someone trained in international politics -- the degree to which macroeconomists are waking up and realizing the numbers are not always the answer. it is a wider question of political and social fabric that is driving things right now. let's have a look at some of the other risks. i like the i -- i would like to ask the audience again to raise hands. let's talk about oil. that is the key issue shaping the global economy. three questions, three choices. how many of you think the oil price will be where it is in a six months time? how many of you

think it will be $20 higher in the six months time? how many of you think it could be $10 lower? so people who think the oil price will be roughly right where it is in six months time? ok. those of you think it could be significantly higher? and those of you think it could be even lower? ok. so, those of you who cannot say. -- see the majority of you think , it will be roughly the same level. a significant minority think it will below or add very few expected to be significantly higher. mr. friedman: you are getting at the secular stagnation point. i guess. are we in the ben bernanke part? gillian tett: we have a global economy where demand is weak and they do not need much oil relative to stockpiles. josh any thoughts on what that might mean? mr. harris: we spend a lot

of time trying to get ahead of the volatility in oil. predicting oil. i think it is really difficult will stop them of the factors -- difficult. in the short run, we have a 95 million barrel per day market. that is two to 3 million barrels oversupplied to storage. it is going up a bit. you have seen the price of oil go up a little bit. if you think about that, the 2 million -- the 2% excess supply has caused oil to go from 100 to 50. that shows you that little excess supply things it wildly -- swings it wildly. what has happened is that the higher prices created an entrance into the market which was north america. the u.s. show

was adding one million barrels a day every year and the people that were taking supply out of the market -- that maybe market made the market over slide and supplied and for a number of years, opec dealt with that by taking supply off. they are the low-cost producer and the saudis are the swing market maker within opec so they have lowered their production from 12 to 10. they allowed the price stable. one day they woke up and said this doesn't make sense for us. we are the low-cost producer and if we allow this to continue instead of having a market that is oversupplied, we will have a market that is 5 million oversupplied. they change their strategy and said we will not lose any more market share which i think with economically

rational for them. it has blunted the growth of the shale. if you think about the laws of economics, the shale will still grow this year. it will go three or 4 hundred thousand is here -- it will grow three or 400,000 this year. if iran comes back into the world as a commercial partner -- or if syria were to get knocked off or a rack, it would go the other way. if you ignore all that, it will take one or two years for it to climb back. it will probably not go back to what it lives, but it will

probably go to $70. the problem is, what is saudi arabia going to do? are they going to want to teach the shale more of the lesson? what is going to happen in iran and iraq? we have something that is very difficult to predict. i think what you have to do to make money in oil is take the perspective that -- you have to take a much longer term perspective and eventually go back to the cost curve, where as most of the oil economic. most of it is economic in the $65-70 five dollars range. if you use that as the "long run, you will probably be right eventually. short run protections on the price of oil, there are so many factors to get right, so i would avoid it. gillian tett: the future is

entirely unknowable? >> demographics is one of the only things we can predict. we know where most of the growth this. some of this derivative implications from an investment perspective overtime are predictable. >> it is a commodity market with a few very chunky players who have enormous influence and chunky markets. i think the key as an investor is to realize that anytime you look at a security that is in the energy business, you have to compare across a full range of ways of making the same debt. if you decide you want to make -- by stress debt in a company that has been adversely affected by the current price, you have to compare the debts.

will it make that a successful investment? compared to buying equities, to the full range of other securities. these markets do not communicate with each other as efficiently as they should. most capital in the world is very pigeonholed. it can only buy this or that. you get pretty big disparities between buying a distressed bond and equity. sometimes they do not reflect the same future outcome probabilities that you may find in the oil curve itself. >> the market has said, we are going to ignore this and what they have done is they are now with sounding all of the quote great buying activities. many of these companies that are now losing money and cash for

negative have done equity and debt operating. they imply that it is going to where it was. the markets have said this is a temporary blip and we are going to ignore this and it has made it hard to make economically interesting. i things will eventually happen. an interesting comment in some of the ciliary and tertiary effects of people ignoring the price of risk and volatility. joshua s. friedman:alan h. howard: i think the main effect is actually for how it affects the japanese markets? i'm sure that the low price of oil and the low headline inflation helps the europeans do their qe. six to nine months

from now, inflation will be much, much higher than now. not how is the market going to react to the fact that they're not going to be doing anymore qe in the places. maybe not today but closer toward that if we reach that level, i don't see how the markets are going to have it at these levels when they understand the qes coming to an end globally. it could have an effect on markets which are risk seeking today. gillian tett: i would like to ask you each, given what you have heard about these potential for rising volatility given these mismatched liquidities

and a world where everyone is reaching for risk, what is your top favorite trade that you one would put on at the moment? what advice would you give to people in the audience? one thing that you would not touch with a barge pole? i think the most interesting part of the market is yield. where the banks are pulling back in the 8%-10% fixed income space , off the run credit. now we're talking about it. you're in a world where everything is overvalued if it has a number. if it's quoted and on bloomberg and if it is rated. so you have to get out of that

world. you have to buy issuers that may not be rated. you have to do things like shipping loans and not performing loans and other things that the market can't really absorb. the banks are pulling back. they used to be the buyers. they're not anymore. so there's an interesting opportunity in off the run credit, you know, in the sort of crossover space. but i think it's a very complicated world right now. gillian tett: right. carey lathrop: i think liquidity is going to win out. at the end of the year, economic growth is okay. it's supported for risk assets. i go to the point that joshua made, more structured products will continue to do well. you'll see

-- just fundamentally in a world where you have so much government collateral trading at negative rates. it may not sound that exciting but for the right investor who's looking for a safe, you know, less liquid but well structured, again, battle tested. it has a stigma but that's probably why it's so cheap. i think that is an attractive asset. i think u.s. assets are more attractive. we're starting to see some of those flows of european government bonds, flows of european credit. but we have to look at european credit versus american credit. not all institutions tend to move slowly and not all have that mandate. they connected currency benefit of the trade, you're going to see fund flows in that direction. gillian tett: alan?

alan h. howard: i think the main thing -- the mean event for a moment for us, the negative rate is not being written enough about, about what's going on with these negative rates and the affect that's having on portfolios. many investors cannot afford or want pond rates. -- bond rates. i don't know how long it's going to take but i think that will have an affect on currentcyicies for a while before we get out of that zone. gillian tett: you think they'll eventually rebel? alan h. howard: i think that all investors with european bonds or negative yielding assets will over time sell them out. the idea that you're giving government is not going to last. we'll have to see how long that takes. especially in the scenario such as if oil goes

out. and that's the big thing that has not played through yet. second thing, i would go with alex regarding risk asset. my favorite would still be japanese stocks. gillian tett: 70 stocks are a good buy? alan h. howard: good buy. whether you believe in them or not, they're still good. gillian tett: it's going to see what happens in the visit to washington next week. alan h. howard: i think it will go through at some point but i'm sure that will go through. i'm confident. gillian tett: that would be a good thing if that happens. josh and alex, what do you make of this? what's the best way?

josh: the flip side of having extraordinarily high equity multiples that alex referred to as well as extraordinarily low cost of debt is a record number of transactions. this causes not only event oriented uncorrelated equity price changes -- by the way we're also in a world, the overlay on that is we also have a regulatory structure where it's awfully hard to predict the outcomes to some of these transactions. we saw what happened to the time werner deal last week, the cisco foods last a few weeks before that. when you get a negative surprise to the market, all the spreads blow out. and what's interesting is you not only get merger transactions, you also get recap transactions because smart people figure out they can borrow at zero cost causing credit quality to ping pong all over the place. you have bonds that suddenly go from investment

grade to noninvestment grade. so time werner cable, charter acquisition, bondholders also. and then comcast comes in back to investment grade. and then the bonds go back south. so you get -- and you get markets that are discontinuous and don't communicate with each other. so i think there are many of these event-oriented, somewhat short duration plays that have very attractive risk rewards because of the volume of these transactions and the amount of somewhat unpredictable regulatory oversight. i would also agree with josh's comment about nontraditional lending in places where banks are not trading. there has clearly been a very significant pickup of loans in the 10%, 12%, 14% area in situations that are slightly less liquid. gillian tett: alex? alexander s. friedman: okay. so

i'll go with europe and in two parts. i think over the next kind of six to nine months european equities, particularly cyclicals, are in good position because of cheaper oil, cheaper currency, and qe support and you also have negative yields just driving people further on the risk curve. just in terms of a technical shift. related to that though i think it's coming up time to be short some of the sovereign debt in europe. particularly i think the german bund by the biggest problem. gillian tett: thank you guys. it's been a fascinating discussion. i mean, i have three or four key takeaways. firstly you are certainly bracing for a lot in the next year or two. but interestingly, not over dislocation. you are seeing more fragmentation than in 2008.

sadly, i think your comment from the regulation structure suggests to me that it's not quite as black and white as the reports just. there are the question is whether some of the money sitting on the sidelines will come in next time around. i would think the biggest point of all that comes out of the conversation to me at least is that it's not just a world of financial contagion that worries you. it is also geopolitical. it is one of the most unpredictable and alarming threat. thank you very much for this conversation. best of luck to you. [applause]

>> an update on the economy today from the bureau of labor statistics. the unpleasant numbers for may, 5.5% from 5.4%. house speaker john said in part in a statement, it is always good news that more americans have found work, but with weak economic growth and too many looking for steady jobs and more pay, we can do better. he said that is part of the statement on the trade promotion authority measure still pending in congress. what we do know about the house next week, they will work on the transportation housing bill for 2016 as reauthorize the commodity futures trading commission. in the senate, they finished the work working on the defense authorization bill, that is where they will pick up on monday. the senate is on c-span2 and the

houses here on c-span. looking at the picture posted from the wilmington news journal of vice president biden and his family in delaware where his son was lying in honor. he died this past week at the age of 46 from brain cancer. casino will come up on saturday. tamara, let coverage from wilmington -- tomorrow, live coverage from wilmington. >> here are some of our future programs this weekend on the c-span network. book tv is live at the chicago tribune printers wrote literary festival. saturday speakers include senior adviser to obama david axelrod.

our festival coverage is followed by the new york times book review. on sunday, we covered continue -- we continue our coverage of the book festival. he will take phone calls and questions from the audience. festival speakers include scott simon and norman mailer. on american history tv on c-span3, join us for several featured programs on sunday, beginning at 4 p.m. eastern on real america -- reel america. at 4:30 p.m., world war ii photographer on his expanse