1
00:00:00,080 --> 00:00:13,040
Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

2
00:00:13,480 --> 00:00:17,560
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

3
00:00:18,000 --> 00:00:23,520
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

4
00:00:23,600 --> 00:00:35,559
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. If

5
00:00:35,600 --> 00:00:38,479
Speaker 1: you wanted a quiet end to the year, I'm afraid

6
00:00:38,640 --> 00:00:41,080
Speaker 1: you are not getting one. Joining us to discuss the

7
00:00:41,200 --> 00:00:44,400
Speaker 1: legend of Wall Street, Abby Joseph Cowen Goldman Sachs Advisory

8
00:00:44,400 --> 00:00:48,120
Speaker 1: Director and senior investment strategist, and she joins us, Now,

9
00:00:48,200 --> 00:00:50,960
Speaker 1: good morning to you, Abby. Have we seen have we

10
00:00:51,120 --> 00:00:55,160
Speaker 1: already seen the top of this bullmarket? Um? I think

11
00:00:55,200 --> 00:01:00,880
Speaker 1: that we certainly reached stretched valuations in September or you know,

12
00:01:01,200 --> 00:01:05,039
Speaker 1: based upon the arithmetic of earnings and economic growth and

13
00:01:05,160 --> 00:01:08,240
Speaker 1: interest rates. We thought fifty for the S and P

14
00:01:08,400 --> 00:01:12,080
Speaker 1: five hundred was fair value. We got a little bit higher,

15
00:01:12,360 --> 00:01:15,880
Speaker 1: but we are of course having great difficulty holding that level.

16
00:01:15,959 --> 00:01:20,759
Speaker 1: We've now moved down to the low ends of valuation ranges. UM.

17
00:01:20,959 --> 00:01:24,240
Speaker 1: For all the obvious reasons, there's such uncertainty about the

18
00:01:24,280 --> 00:01:30,240
Speaker 1: fundamental outlook and risk tolerance perhaps most importantly has changed.

19
00:01:30,440 --> 00:01:34,600
Speaker 1: It's not that the arithmetic of earnings expectations or economic

20
00:01:34,680 --> 00:01:38,440
Speaker 1: forecast have changed very much in recent weeks. What has

21
00:01:38,560 --> 00:01:43,200
Speaker 1: changed is the perception of how willing investors are to

22
00:01:43,240 --> 00:01:47,880
Speaker 1: write out this confusion about what's happening in Washington, and

23
00:01:47,920 --> 00:01:51,720
Speaker 1: of course the deceleration we're seeing in other economies around

24
00:01:51,760 --> 00:01:54,320
Speaker 1: the world. So we've had conversations about this through the week.

25
00:01:54,360 --> 00:01:58,320
Speaker 1: The only certainty as we go into uncertainty, and as

26
00:01:58,400 --> 00:02:02,000
Speaker 1: you touch on, it's the sentiment issue that really gets

27
00:02:02,000 --> 00:02:05,320
Speaker 1: my attention. Sentiment appears to be totally battered, and I'm

28
00:02:05,320 --> 00:02:07,920
Speaker 1: trying to understand where the comfort comes from. Is it

29
00:02:07,960 --> 00:02:10,400
Speaker 1: the earnings, Will it be the data? Because even on

30
00:02:10,400 --> 00:02:12,359
Speaker 1: the morning light this morning, when the Chinese come out

31
00:02:12,360 --> 00:02:15,919
Speaker 1: and promise more tax cuts and signal looser monetary policy,

32
00:02:16,080 --> 00:02:19,560
Speaker 1: this market abbey still can't catch a bit um. One

33
00:02:19,560 --> 00:02:21,960
Speaker 1: of the issues, of course, is that we're dealing with

34
00:02:22,040 --> 00:02:27,079
Speaker 1: this major change um with regard to risk tolerance, but

35
00:02:27,200 --> 00:02:31,040
Speaker 1: it is being fueled and exacerbated by many of the

36
00:02:31,120 --> 00:02:35,080
Speaker 1: decisions underway in Washington. And I'm not talking about the FED.

37
00:02:35,440 --> 00:02:38,840
Speaker 1: I'm talking about the confusion having to do with government shutdown.

38
00:02:39,160 --> 00:02:42,520
Speaker 1: I'm talking about the confusion um in the government, in

39
00:02:42,600 --> 00:02:46,560
Speaker 1: the president's cabinet and so on, and perhaps most importantly

40
00:02:46,600 --> 00:02:51,040
Speaker 1: for investors looking at economic policy, where the recognition is

41
00:02:51,320 --> 00:02:55,440
Speaker 1: that that big fiscal stimulus through the tax cut really

42
00:02:55,680 --> 00:03:00,320
Speaker 1: was perhaps only a sugar high um and trade policy

43
00:03:00,360 --> 00:03:03,040
Speaker 1: is really at this point quite a erratic and I

44
00:03:03,080 --> 00:03:06,400
Speaker 1: think that's what investors are concerned about. They're nervous that

45
00:03:06,520 --> 00:03:10,400
Speaker 1: the arithmetic assumptions that they put into their models may

46
00:03:10,400 --> 00:03:13,639
Speaker 1: be tossed up in the air. Add that to this

47
00:03:13,760 --> 00:03:16,400
Speaker 1: change in risk tolerance, and I think you see the

48
00:03:16,480 --> 00:03:19,280
Speaker 1: ugly mix that we've were now in. If you're just

49
00:03:19,360 --> 00:03:21,920
Speaker 1: joining us John Farrell and Tom King with Abby Joseph

50
00:03:21,919 --> 00:03:24,360
Speaker 1: Cohen of Goldman Sachs, we welcome all of you across

51
00:03:24,400 --> 00:03:27,840
Speaker 1: this nation in worldwide. Abby, there is a thing called

52
00:03:27,919 --> 00:03:31,480
Speaker 1: standard deviations, which is the price movement of gold is

53
00:03:31,480 --> 00:03:34,640
Speaker 1: different than the price movement of general electric, is different

54
00:03:34,639 --> 00:03:38,760
Speaker 1: than the price movement of sterling. I've noticed high yield

55
00:03:38,840 --> 00:03:42,160
Speaker 1: is out to three point eight standard deviations price down,

56
00:03:42,400 --> 00:03:46,880
Speaker 1: yield up. How do you define catharsis or panic in

57
00:03:46,920 --> 00:03:50,480
Speaker 1: the market. Do you do it quantitatively or do you

58
00:03:50,480 --> 00:03:53,640
Speaker 1: look at crystals and pyramids down at Goldman Sachs until

59
00:03:53,640 --> 00:03:58,400
Speaker 1: you see it behaviorally. I've I've always been interested in crystallography, Tom,

60
00:03:58,440 --> 00:04:01,000
Speaker 1: I didn't know that you were aware of that. UM.

61
00:04:01,040 --> 00:04:04,560
Speaker 1: Clearly we are looking at things like UM standard deviation,

62
00:04:04,680 --> 00:04:08,680
Speaker 1: but we always begin with the fundamentals and evaluations. And

63
00:04:08,960 --> 00:04:11,560
Speaker 1: I hope I've been very clear every time I've spoken

64
00:04:11,600 --> 00:04:14,480
Speaker 1: with you for more than the past two years that

65
00:04:14,640 --> 00:04:19,479
Speaker 1: sixth incomes securities UH writ large were overpriced. UM. We

66
00:04:19,560 --> 00:04:23,440
Speaker 1: saw that in treasuries that we thought were priced too low. Clearly,

67
00:04:23,560 --> 00:04:27,480
Speaker 1: some of Chairman Powell's comments have indicated that where they

68
00:04:27,520 --> 00:04:30,159
Speaker 1: feel they're just trying to get back to normal with

69
00:04:30,279 --> 00:04:35,479
Speaker 1: regard to government yield. But the gaps the yield spreads

70
00:04:35,720 --> 00:04:40,560
Speaker 1: have been so narrow UM in corporate securities and also

71
00:04:40,880 --> 00:04:45,160
Speaker 1: it's been so narrow in term securities UM that this

72
00:04:45,279 --> 00:04:47,960
Speaker 1: was a miss pricing in the sixth income market. So

73
00:04:48,240 --> 00:04:50,239
Speaker 1: I think one of the things that happens when people

74
00:04:50,279 --> 00:04:53,000
Speaker 1: get nervous is they take a look around and they said,

75
00:04:53,279 --> 00:04:56,960
Speaker 1: we really have to price for the fundamental This is

76
00:04:57,000 --> 00:04:59,799
Speaker 1: a problem. John Abby, Joseph Cohin's on the Y axis,

77
00:05:00,080 --> 00:05:02,440
Speaker 1: going to drag her down on a Friday to an

78
00:05:02,680 --> 00:05:07,280
Speaker 1: X axis analysis Abby, this is becoming chronic. We've had

79
00:05:07,360 --> 00:05:11,200
Speaker 1: negative interest rates chronically forever. I spoke the Secretary Gightener

80
00:05:11,240 --> 00:05:16,159
Speaker 1: about this eleven years ago. How do you perceive the

81
00:05:16,480 --> 00:05:20,920
Speaker 1: X axis in the two thousand nineteen there's chronic nature

82
00:05:21,400 --> 00:05:26,039
Speaker 1: of our fixed income distortions. Much of the distortion tom

83
00:05:26,080 --> 00:05:30,640
Speaker 1: as you've already discussed previously, relates to not just the US,

84
00:05:30,640 --> 00:05:33,719
Speaker 1: but to what's going on in other countries. Um if

85
00:05:33,760 --> 00:05:38,080
Speaker 1: you look at interest rates, say two year government bonds

86
00:05:38,160 --> 00:05:41,039
Speaker 1: for countries around the world, more than half of those

87
00:05:41,080 --> 00:05:45,440
Speaker 1: developed countries have negative yields, and that of course drags

88
00:05:45,480 --> 00:05:49,559
Speaker 1: down the yield on treasury securities. Because even if our

89
00:05:49,640 --> 00:05:53,120
Speaker 1: mathematicians at Goldman Sachs say the yield on a US

90
00:05:53,200 --> 00:05:57,080
Speaker 1: government bond should be fifty basis points higher or seventy

91
00:05:57,120 --> 00:06:00,799
Speaker 1: five or whatever it might be based upon the term structure,

92
00:06:01,680 --> 00:06:06,880
Speaker 1: there is international demand coming from other countries where those

93
00:06:06,960 --> 00:06:10,880
Speaker 1: yields are dramatically lower. So we are in a world

94
00:06:10,960 --> 00:06:14,760
Speaker 1: where there has been mispricing in fixed income, and that

95
00:06:14,920 --> 00:06:18,680
Speaker 1: is part of the dilemma that we're now facing. Also

96
00:06:18,720 --> 00:06:21,040
Speaker 1: in the world seemingly appy, where our tolerance for higher

97
00:06:21,160 --> 00:06:25,280
Speaker 1: rates has diminished markedly over the last ten years. Leverages up,

98
00:06:25,320 --> 00:06:27,920
Speaker 1: debt levels are up in our tolerance is down a lot.

99
00:06:28,160 --> 00:06:30,920
Speaker 1: Appy Why every time we get to a one percent

100
00:06:31,000 --> 00:06:35,720
Speaker 1: real yield and treasuries this market just creates why. What's

101
00:06:35,760 --> 00:06:39,760
Speaker 1: fascinating is that the sensitivity is much more in markets

102
00:06:40,040 --> 00:06:43,400
Speaker 1: than it is in the economy UM. And I think

103
00:06:43,440 --> 00:06:46,640
Speaker 1: that though when the Fed makes decisions, they're thinking about

104
00:06:47,160 --> 00:06:51,479
Speaker 1: just how sensitive um interest rate sensitive sectors will be

105
00:06:52,120 --> 00:06:55,320
Speaker 1: UM in the real economy to the rise in interest rates.

106
00:06:55,520 --> 00:06:58,880
Speaker 1: But you're right, markets are responding in a very dramatic way.

107
00:06:59,160 --> 00:07:04,160
Speaker 1: I also think we may be overly concerned about corporate

108
00:07:04,200 --> 00:07:08,640
Speaker 1: debt UM. We see so many corporations that are well runned,

109
00:07:09,080 --> 00:07:13,760
Speaker 1: that are successful, have high returns on equity borrowing, and

110
00:07:13,840 --> 00:07:18,480
Speaker 1: they're borrowing because they've been taking advantage of these extraordinarily

111
00:07:18,640 --> 00:07:21,160
Speaker 1: low interest rates. You know, I sort of wonder why

112
00:07:21,160 --> 00:07:25,360
Speaker 1: the Treasury didn't borrow for fifty years out um when well,

113
00:07:25,360 --> 00:07:28,200
Speaker 1: why not, Peter Fisher that let me interrupt, that's a

114
00:07:28,360 --> 00:07:32,160
Speaker 1: critical statement. Why can't we extenderation or do we have

115
00:07:32,240 --> 00:07:36,120
Speaker 1: such a large deficit now and chronically down the road

116
00:07:36,160 --> 00:07:39,840
Speaker 1: that we can't even get out to ten years I

117
00:07:39,880 --> 00:07:44,200
Speaker 1: think that there has been this UH tendency at the

118
00:07:44,280 --> 00:07:47,400
Speaker 1: Treasury UH to say, look, we're going to continue to

119
00:07:47,440 --> 00:07:51,160
Speaker 1: do this sort of in a laddered function um and

120
00:07:51,160 --> 00:07:53,200
Speaker 1: and and that has been the approach. That's been the

121
00:07:53,200 --> 00:07:57,280
Speaker 1: cash management approach UM really for years and years. But

122
00:07:57,680 --> 00:08:02,280
Speaker 1: corporations who have shall we say less pressure, people looking

123
00:08:02,280 --> 00:08:06,200
Speaker 1: over their shoulders, etcetera, have been going extremely long and

124
00:08:06,240 --> 00:08:08,559
Speaker 1: I think that's one of the reasons the debt levels

125
00:08:08,600 --> 00:08:11,840
Speaker 1: are so high. Where I am concerned are companies that

126
00:08:11,880 --> 00:08:15,080
Speaker 1: have raised their debt levels so that they could bolster

127
00:08:15,200 --> 00:08:18,640
Speaker 1: their dividend payouts. That to me is a no win game.

128
00:08:18,880 --> 00:08:21,080
Speaker 1: Good morning to all at General Electric this morning. Oh no,

129
00:08:21,120 --> 00:08:23,400
Speaker 1: I didn't mean to say that, Abby, Joseph Cohen with us,

130
00:08:38,640 --> 00:08:40,719
Speaker 1: with us right now, William Lee of the Milk and

131
00:08:40,800 --> 00:08:44,200
Speaker 1: Institute for years at the International Monetary Fund and as

132
00:08:44,280 --> 00:08:47,120
Speaker 1: City Group and Bill Lee. We look at the American economy,

133
00:08:47,480 --> 00:08:49,760
Speaker 1: we see some revisions, but we see some negatives on

134
00:08:49,800 --> 00:08:52,520
Speaker 1: the screen for durable goods at all. What is the

135
00:08:52,559 --> 00:08:56,520
Speaker 1: animal spirit of business right now? You know it's been

136
00:08:56,600 --> 00:08:59,640
Speaker 1: made even worse where they would have to really jolt

137
00:08:59,679 --> 00:09:01,719
Speaker 1: the great optimism when trouble was elected, we had this

138
00:09:01,840 --> 00:09:04,480
Speaker 1: big jolt of expectitious for investment coming in, and we

139
00:09:04,559 --> 00:09:09,440
Speaker 1: see from these data that the uncertainty caused by the

140
00:09:09,480 --> 00:09:14,000
Speaker 1: trade on confrontations with China, the unknowns about how China's

141
00:09:14,000 --> 00:09:16,439
Speaker 1: go react, is causing everyone in the business world to say,

142
00:09:16,520 --> 00:09:19,520
Speaker 1: let's pause, let's not do our investment plans. So all

143
00:09:19,559 --> 00:09:21,720
Speaker 1: that tellne that we got is now being cut off

144
00:09:22,040 --> 00:09:24,560
Speaker 1: by these headwinds of uncertainty caused by the trade that

145
00:09:24,600 --> 00:09:27,720
Speaker 1: stuff in and that's really unfortunate because what we're hoping

146
00:09:27,760 --> 00:09:30,560
Speaker 1: for was that the investment would really lead to a

147
00:09:30,600 --> 00:09:34,160
Speaker 1: compositional change in GDP to give us the productivity gains

148
00:09:34,240 --> 00:09:36,360
Speaker 1: that would allow us to grow at a fast pace

149
00:09:36,440 --> 00:09:39,240
Speaker 1: without inflation. I think we've just got some really constructive

150
00:09:39,240 --> 00:09:41,360
Speaker 1: news from China overnight. Bill, I don't want to let

151
00:09:41,400 --> 00:09:44,480
Speaker 1: price set narrative too much. The idea that the policy

152
00:09:44,480 --> 00:09:46,640
Speaker 1: makers are looking at supporting the economy a little bit more,

153
00:09:46,640 --> 00:09:50,120
Speaker 1: cutting taxes, the idea that monety policy shifts away from

154
00:09:50,400 --> 00:09:53,200
Speaker 1: neutral and maybe towards an easy bias. This is an

155
00:09:53,240 --> 00:09:56,120
Speaker 1: important development. I think, Bill, do you share that view John,

156
00:09:56,280 --> 00:09:59,920
Speaker 1: that that's absolutely the one hope that we have. That's

157
00:10:00,000 --> 00:10:02,800
Speaker 1: blowing the wind is that China is hurting more than

158
00:10:02,840 --> 00:10:05,920
Speaker 1: we are from all this trade confrontation. And China, I think,

159
00:10:06,000 --> 00:10:08,520
Speaker 1: is ready to deal at whether they're really deal in

160
00:10:08,520 --> 00:10:11,400
Speaker 1: a structural basis or it's just more rhetoric, that's the

161
00:10:11,440 --> 00:10:13,960
Speaker 1: big unknown. And until that unknown is cleared up, I

162
00:10:13,960 --> 00:10:16,320
Speaker 1: think American basses are not going to be investing. I

163
00:10:16,400 --> 00:10:20,120
Speaker 1: have real trouble with the idea that we're gonna be

164
00:10:20,120 --> 00:10:23,200
Speaker 1: better because they're gonna be worser to borrow, you know,

165
00:10:23,320 --> 00:10:27,480
Speaker 1: sophisticated phrase for a guy like you. I mean, basically,

166
00:10:27,520 --> 00:10:30,920
Speaker 1: what you're painting is a global slowdown, right, Oh, there's

167
00:10:30,920 --> 00:10:33,120
Speaker 1: no questions. A global slowdown is whether we can come

168
00:10:33,120 --> 00:10:36,400
Speaker 1: out of that slowdown or not. And China, because it's hurt, okay,

169
00:10:36,400 --> 00:10:38,640
Speaker 1: they are more willing to deal at the table than

170
00:10:38,679 --> 00:10:41,120
Speaker 1: they were six months ago. On the edge of surveillance,

171
00:10:41,200 --> 00:10:44,240
Speaker 1: viral and break exclusive is William Lee speaking an hour

172
00:10:44,280 --> 00:10:49,000
Speaker 1: ago calling Chairman Powell's performance pathetic? Is it pathetic because

173
00:10:49,080 --> 00:10:53,480
Speaker 1: even if he raised rates, he didn't color a global slowdown. Well,

174
00:10:53,520 --> 00:10:56,880
Speaker 1: you know the F and C instructions to the chairman, right,

175
00:10:56,880 --> 00:10:59,600
Speaker 1: it was clear from the statement we're watching the world

176
00:10:59,640 --> 00:11:01,880
Speaker 1: because of the global and certain game. We are lowering

177
00:11:01,960 --> 00:11:04,560
Speaker 1: all of our forecasts of GDP and growth. How the

178
00:11:04,600 --> 00:11:08,000
Speaker 1: hell did we go from there? Too? We're on autopilot

179
00:11:08,040 --> 00:11:11,360
Speaker 1: with a balance sheet and we are looking to models

180
00:11:11,360 --> 00:11:14,200
Speaker 1: to base our analysis. From a guy who denied models

181
00:11:14,200 --> 00:11:16,960
Speaker 1: at Jackson Hall, this is a weird message, I have

182
00:11:17,040 --> 00:11:20,400
Speaker 1: to say. And and not in the markets punished him

183
00:11:20,440 --> 00:11:22,520
Speaker 1: for the doing of bad messaging. You know what, Bill,

184
00:11:22,520 --> 00:11:24,560
Speaker 1: I'm tugging with you. I think the chairman had an

185
00:11:24,559 --> 00:11:27,080
Speaker 1: absolute nightmare in that news conference. He was asked two

186
00:11:27,120 --> 00:11:31,920
Speaker 1: really simple questions. You're forecasting another undershoot for inflation next year?

187
00:11:32,440 --> 00:11:35,240
Speaker 1: Why you're raising interest rates? Gave a terrible answer. Jina

188
00:11:35,240 --> 00:11:37,520
Speaker 1: smilt a bloombacks very I'm one of our finest reports.

189
00:11:37,520 --> 00:11:40,679
Speaker 1: Some of the news conferences up it was Binion and Apple.

190
00:11:40,720 --> 00:11:44,640
Speaker 1: Bob asked the question you're talking about if it's a

191
00:11:44,679 --> 00:11:47,760
Speaker 1: symmetrical target, why are you allowing for a small overshoot

192
00:11:47,800 --> 00:11:50,320
Speaker 1: after years of undershooting it now doesn't have an answer?

193
00:11:50,320 --> 00:11:54,640
Speaker 1: Bell go ahead. All all you have to do is say,

194
00:11:54,800 --> 00:11:57,720
Speaker 1: but we are pausing. We're seeing the data is causing

195
00:11:57,840 --> 00:12:00,839
Speaker 1: us to lower the trajectory of interest rates and was

196
00:12:00,960 --> 00:12:04,680
Speaker 1: slowing down the number of increases that we think it's appropriate. Bingo,

197
00:12:04,840 --> 00:12:08,040
Speaker 1: that would have done it, but no, he said the balance.

198
00:12:08,080 --> 00:12:13,600
Speaker 1: She's on pilot Friday Clinic William Lee. What do they

199
00:12:13,679 --> 00:12:17,959
Speaker 1: mean by a symmetry? You know that they have yet

200
00:12:17,960 --> 00:12:20,360
Speaker 1: to defined that. And the condition when he was there

201
00:12:20,679 --> 00:12:23,280
Speaker 1: was trying to define a better communications for what the

202
00:12:23,280 --> 00:12:25,640
Speaker 1: goals were. I don't think he did the job. And

203
00:12:25,679 --> 00:12:27,760
Speaker 1: now it's up to Rich and I hope Rich is

204
00:12:27,800 --> 00:12:30,880
Speaker 1: going to do a better job of coming from PIMCO

205
00:12:31,000 --> 00:12:33,679
Speaker 1: and the not only a great academic career but also

206
00:12:33,840 --> 00:12:36,559
Speaker 1: a market's career. He's got to have a better sense

207
00:12:36,600 --> 00:12:40,079
Speaker 1: of what has to be communicated about the nature of symmetry.

208
00:12:40,200 --> 00:12:42,440
Speaker 1: There was now day vice Chairman Clarada has done a

209
00:12:42,520 --> 00:12:45,280
Speaker 1: much better job communicating to this market than the chairman

210
00:12:45,360 --> 00:12:48,719
Speaker 1: himself has Tom And it's been a real problem if

211
00:12:48,760 --> 00:12:50,800
Speaker 1: you change your view on what the chairman is saying

212
00:12:50,920 --> 00:12:53,040
Speaker 1: three times in the space of two months, to go

213
00:12:53,120 --> 00:12:55,960
Speaker 1: from Hawkes to divers to totally confused, then the problems

214
00:12:56,000 --> 00:13:00,319
Speaker 1: with the chairman's communication in the vice chair in from

215
00:13:00,360 --> 00:13:03,880
Speaker 1: the University of d s G. E. Fine, what's the

216
00:13:04,000 --> 00:13:08,920
Speaker 1: symmetry asymmetry Is it inflation, is it jobs? Is it output?

217
00:13:09,400 --> 00:13:12,240
Speaker 1: You know what? They have an egg salad sandwich. What's

218
00:13:12,280 --> 00:13:15,640
Speaker 1: the symmetry asymmetry debate. I don't want to put words

219
00:13:15,640 --> 00:13:18,840
Speaker 1: in Rich's mouth, but I'm guessing it kind of smells

220
00:13:18,880 --> 00:13:22,400
Speaker 1: and looks like nominal GDP targeting, because that's that's the

221
00:13:22,480 --> 00:13:25,440
Speaker 1: kind of place where you can get symmetry but at

222
00:13:25,440 --> 00:13:28,120
Speaker 1: the same time get the looseness and and and and

223
00:13:29,520 --> 00:13:31,520
Speaker 1: discretion you need to be able to put policy in

224
00:13:31,559 --> 00:13:34,800
Speaker 1: place that is controversial. Williambe will be joining us here

225
00:13:34,840 --> 00:13:37,400
Speaker 1: to a week or two and will continue this discussion

226
00:13:37,840 --> 00:13:54,880
Speaker 1: country John H. Deck with us with Brookings. John, a

227
00:13:55,000 --> 00:13:59,920
Speaker 1: single sentence from your note, the unstable behavior in erratic

228
00:14:00,120 --> 00:14:04,360
Speaker 1: decision making is likely the biggest DC based issue to

229
00:14:04,440 --> 00:14:09,080
Speaker 1: cause rockiness in markets in two thousand nineteen next year.

230
00:14:09,800 --> 00:14:13,840
Speaker 1: That was penned by Brooking's quill dipped in ink before

231
00:14:13,880 --> 00:14:19,760
Speaker 1: the Maddest resignation. Things changed yesterday, didn't they? Oh, things

232
00:14:19,760 --> 00:14:24,239
Speaker 1: definitely changed yesterday. Although the Maddest resignation is certainly connected

233
00:14:24,320 --> 00:14:28,200
Speaker 1: to that type of unstable behavior and erratic decision making

234
00:14:28,240 --> 00:14:32,920
Speaker 1: I'm talking about. His resignation came in part because of

235
00:14:32,960 --> 00:14:35,600
Speaker 1: the way that the President has been treating allies his

236
00:14:35,800 --> 00:14:40,360
Speaker 1: decision making on Theoria and now possibly Afghanistan. And the

237
00:14:40,400 --> 00:14:43,680
Speaker 1: President needs to recognize that these types of behaviors have

238
00:14:43,960 --> 00:14:47,800
Speaker 1: ripple effects beyond just the one item he's talking about

239
00:14:47,920 --> 00:14:50,280
Speaker 1: in that moment, and it's a real problem from market.

240
00:14:50,600 --> 00:14:54,720
Speaker 1: One of your great expertise is the dialogue between institutions

241
00:14:54,720 --> 00:15:01,080
Speaker 1: in Washington. Explain the ballet between the Pentagon in the Senate.

242
00:15:02,920 --> 00:15:06,080
Speaker 1: You know, the Pentagon and the Senate have typically a

243
00:15:06,200 --> 00:15:11,160
Speaker 1: very effective working relationship. These are two institutions that play

244
00:15:11,160 --> 00:15:16,680
Speaker 1: extraordinary roles, not just in foreign policy, but in keeping

245
00:15:16,960 --> 00:15:20,640
Speaker 1: really the entire administration on the same page in a

246
00:15:20,720 --> 00:15:24,320
Speaker 1: variety of areas. The Defense Department touches a lot more

247
00:15:24,360 --> 00:15:27,760
Speaker 1: than just the military. It touches issues around climate change

248
00:15:27,760 --> 00:15:31,760
Speaker 1: and energy and a variety of topics. And oftentimes the

249
00:15:31,840 --> 00:15:34,640
Speaker 1: Senate and the Pentagon are on the same page, whether

250
00:15:34,680 --> 00:15:37,280
Speaker 1: they like to admit that or not. And I think

251
00:15:37,280 --> 00:15:41,800
Speaker 1: we saw yesterday a Secretary of Defense stepping away and

252
00:15:41,960 --> 00:15:45,000
Speaker 1: the Senate being shocked and really throwing their hands up

253
00:15:45,000 --> 00:15:47,320
Speaker 1: in frustration at the President. And you know, folks, as

254
00:15:47,320 --> 00:15:48,960
Speaker 1: you know, when I get bored, I either look at

255
00:15:48,960 --> 00:15:52,840
Speaker 1: Red Sox Hot Stoves League Baseball, or I read the

256
00:15:52,880 --> 00:15:56,400
Speaker 1: Congressional Budget Office and Johnny Hudak there it was a

257
00:15:56,480 --> 00:15:59,520
Speaker 1: white paper, if you will, from the Congressional Budget Office,

258
00:16:00,160 --> 00:16:04,320
Speaker 1: the cost of replacing two days Air Force Fleet. Now

259
00:16:04,360 --> 00:16:08,400
Speaker 1: that's center tendency. General Maddis. I get that those dialogues

260
00:16:08,480 --> 00:16:12,120
Speaker 1: don't end with a shock resignation, but what kind of

261
00:16:12,200 --> 00:16:15,520
Speaker 1: Secretary of Defense are we going to have that could

262
00:16:15,600 --> 00:16:21,000
Speaker 1: drive forward the day to day mundane discussion of billions

263
00:16:21,040 --> 00:16:25,280
Speaker 1: of dollars of budgetary decision. Well, that's a great question.

264
00:16:25,320 --> 00:16:28,640
Speaker 1: The president has a variety of choices, not just in

265
00:16:28,720 --> 00:16:32,480
Speaker 1: terms of individuals, but sort of profiles of individuals. He

266
00:16:32,520 --> 00:16:35,480
Speaker 1: could ask a current or reformer senator, he could ask

267
00:16:35,520 --> 00:16:39,480
Speaker 1: another general. But it appears what this president wants as

268
00:16:39,520 --> 00:16:43,480
Speaker 1: a sycophant and not a bureaucrat. And that's the real problem.

269
00:16:43,600 --> 00:16:46,720
Speaker 1: A yes man in charge of the Defense Department is

270
00:16:46,840 --> 00:16:50,960
Speaker 1: a recipe for disaster, not dust for the President's agenda,

271
00:16:51,000 --> 00:16:53,560
Speaker 1: but for our military as well. I mean the first

272
00:16:53,600 --> 00:16:55,520
Speaker 1: I want to read this first paragraph at all. It's

273
00:16:55,520 --> 00:16:58,720
Speaker 1: a little nerdy, but folks, this is the real world.

274
00:16:59,200 --> 00:17:03,360
Speaker 1: The US Air Force has about five thousand, six hundred aircraft,

275
00:17:03,880 --> 00:17:08,080
Speaker 1: which range an age from just delivered to sixties six

276
00:17:08,200 --> 00:17:11,800
Speaker 1: zero years old. Many of those aircraft, including the cost

277
00:17:11,880 --> 00:17:16,000
Speaker 1: to replace F sixteen, fifteen fifty D E, C one

278
00:17:16,119 --> 00:17:19,240
Speaker 1: thirty and B one B bombers, are nearing the end

279
00:17:19,359 --> 00:17:22,400
Speaker 1: of their service life. Do you think that this president

280
00:17:22,600 --> 00:17:27,880
Speaker 1: understands that there's a business to our military that has

281
00:17:27,920 --> 00:17:30,240
Speaker 1: to be done day to day or is he just

282
00:17:30,280 --> 00:17:34,240
Speaker 1: looking at whatever the latest debate is on Syria? Yeah?

283
00:17:34,240 --> 00:17:37,840
Speaker 1: I don't think the president understands that there's a business

284
00:17:37,880 --> 00:17:41,840
Speaker 1: on side to our military. Bureaucracy was invested in it,

285
00:17:41,920 --> 00:17:44,720
Speaker 1: he would be, but he's not. And it's a real problem.

286
00:17:44,760 --> 00:17:46,480
Speaker 1: You know. It's and it's not just our air Force,

287
00:17:46,520 --> 00:17:50,080
Speaker 1: our Navy. We have ships that need to be replaced

288
00:17:50,160 --> 00:17:53,560
Speaker 1: or repaired. There are enormous parts of our military that

289
00:17:53,720 --> 00:17:59,080
Speaker 1: need resupply or need to be transformed for a modern

290
00:17:59,160 --> 00:18:02,800
Speaker 1: military and in a modern world stage. And the President

291
00:18:03,000 --> 00:18:06,480
Speaker 1: is behaving in ways that is turning away the best

292
00:18:06,600 --> 00:18:11,080
Speaker 1: people equipped to help advance those interests. So how does

293
00:18:11,119 --> 00:18:13,560
Speaker 1: this work out? Am I right? But I believe my

294
00:18:13,600 --> 00:18:16,880
Speaker 1: colleague John Farrell mentioned this knowing more about American civics

295
00:18:16,880 --> 00:18:21,680
Speaker 1: that I do. The Secretary Defense has to be confirmed, right, Yes,

296
00:18:21,760 --> 00:18:23,840
Speaker 1: he has to be confirmed by the Senate. Yeah, here

297
00:18:23,920 --> 00:18:26,879
Speaker 1: she has to be a confirmed Do you anticipate a

298
00:18:26,960 --> 00:18:28,920
Speaker 1: brawl there are They just like, let's get a warm

299
00:18:28,960 --> 00:18:33,159
Speaker 1: body and let's go. You know, Typically the Defense Secretary

300
00:18:33,200 --> 00:18:36,879
Speaker 1: is a position that ends up not being terribly confrontational

301
00:18:36,960 --> 00:18:39,919
Speaker 1: with the Senate, in part because the President and the

302
00:18:39,960 --> 00:18:43,040
Speaker 1: Senate have a conversation about this um. But I think

303
00:18:43,320 --> 00:18:47,040
Speaker 1: what was most surprising yesterday in a day full of surprises,

304
00:18:47,400 --> 00:18:51,000
Speaker 1: was Mitch McConnell's response to the Maddest resignation. He essentially

305
00:18:51,080 --> 00:18:54,920
Speaker 1: threw down a red line and said, you are going

306
00:18:54,960 --> 00:18:57,760
Speaker 1: to pick someone who thinks like Jim Maddest and not

307
00:18:57,960 --> 00:19:00,240
Speaker 1: someone who thinks like you. And I think it was

308
00:19:00,280 --> 00:19:02,920
Speaker 1: a subtle threat to the White House that the confirmation

309
00:19:03,040 --> 00:19:05,720
Speaker 1: is not just going to be automatic, but the Senate,

310
00:19:05,840 --> 00:19:08,840
Speaker 1: especially Republicans in the Senate, are gonna look hard at

311
00:19:08,920 --> 00:19:12,160
Speaker 1: what type of person the president. Then, thank you Anna

312
00:19:12,280 --> 00:19:15,879
Speaker 1: Edgerton and Washington for our comments on that. Before let

313
00:19:15,960 --> 00:19:20,240
Speaker 1: us talk pray tell within this news flow about the shutdown.

314
00:19:20,359 --> 00:19:22,240
Speaker 1: I mean, I guess there's a shutdown in the media

315
00:19:22,359 --> 00:19:24,240
Speaker 1: covers it, and there's a there's probably gonna be a

316
00:19:24,359 --> 00:19:30,960
Speaker 1: countdown clock. Uh, I guess it's Friday night into Saturday tonight,

317
00:19:31,080 --> 00:19:33,320
Speaker 1: and I see you in CNN. I'm looking here in

318
00:19:33,359 --> 00:19:36,120
Speaker 1: our studios folks that I'm going to pick on CNN

319
00:19:36,480 --> 00:19:42,119
Speaker 1: shutdown countdownturs six minutes, twenty one seconds. What are we

320
00:19:42,200 --> 00:19:46,840
Speaker 1: counting down too? So what we're counting down to is

321
00:19:46,960 --> 00:19:52,720
Speaker 1: appropriations running out for a group of federal agencies and

322
00:19:52,800 --> 00:20:00,400
Speaker 1: departments that includes the Department of Justice, State Department, Homeland Security, Agriculture, Treasury. UM.

323
00:20:00,480 --> 00:20:03,440
Speaker 1: Some of the government has been funded into next year,

324
00:20:03,920 --> 00:20:09,040
Speaker 1: but there remains outstanding appropriations bills that not the office.

325
00:20:09,240 --> 00:20:12,760
Speaker 1: They don't come into office Monday. Yeah, so actually the

326
00:20:12,760 --> 00:20:16,520
Speaker 1: President has by executive order UM signed everyone to have

327
00:20:16,640 --> 00:20:19,560
Speaker 1: Monday off. Of course, Monday would have been paid for

328
00:20:19,600 --> 00:20:21,840
Speaker 1: those employees. John are we joined that at blue Here?

329
00:20:22,160 --> 00:20:24,680
Speaker 1: Did you see a memo coming from mail from New Jersey?

330
00:20:24,760 --> 00:20:27,680
Speaker 1: I will not be here's an executive on my shutdown

331
00:20:27,680 --> 00:20:31,560
Speaker 1: begins at twelve, Johnny Deck, and I will be working

332
00:20:31,640 --> 00:20:35,880
Speaker 1: on Monday. So really they shake that in Washington on Monday, right, Yeah,

333
00:20:35,960 --> 00:20:39,439
Speaker 1: Monday will be shut down. Tuesday's Christmas, and so that

334
00:20:39,560 --> 00:20:44,640
Speaker 1: Monday will be an unpaid holiday. UM. So so will Tuesday. Um,

335
00:20:44,720 --> 00:20:48,280
Speaker 1: and then every day after that until Congress passes something,

336
00:20:48,280 --> 00:20:52,040
Speaker 1: the President will signal employees at least in those departments

337
00:20:52,119 --> 00:20:54,720
Speaker 1: will not come into work and they will not be paid.

338
00:20:55,000 --> 00:20:57,359
Speaker 1: Tell me, okay, you sound like you're in the media, John.

339
00:20:57,560 --> 00:20:59,960
Speaker 1: They're not going to be paid. But when they agree

340
00:21:00,160 --> 00:21:03,480
Speaker 1: to agree again forward, they make up the pay right.

341
00:21:04,720 --> 00:21:07,920
Speaker 1: Uh So that is Congress's discretion to do that. It's

342
00:21:07,960 --> 00:21:12,560
Speaker 1: not a requirement. Congress has always done that. But but

343
00:21:12,640 --> 00:21:14,600
Speaker 1: it's not a requirement. But that said, you're also not

344
00:21:14,640 --> 00:21:18,119
Speaker 1: getting a paycheck during that time, and though if you

345
00:21:18,200 --> 00:21:21,840
Speaker 1: have rent coming to no paycheck is coming in. Yeah,

346
00:21:22,280 --> 00:21:24,320
Speaker 1: this has become a common feature. I mean, and are

347
00:21:24,359 --> 00:21:27,560
Speaker 1: you this was a rare, rare discussion. But the President's

348
00:21:27,600 --> 00:21:32,000
Speaker 1: really change that dialogue, hasn't he? He absolutely has, And

349
00:21:32,320 --> 00:21:34,320
Speaker 1: I think, um, you know, one of the things that's

350
00:21:34,320 --> 00:21:37,280
Speaker 1: flown under the radar this week is that there was

351
00:21:37,320 --> 00:21:40,800
Speaker 1: actually quite a bit of cooperation between Mitch McConnell, Chuck Schumer,

352
00:21:40,840 --> 00:21:43,879
Speaker 1: and Nancy Pelosi about a path forward, and it was

353
00:21:43,920 --> 00:21:46,640
Speaker 1: the President and the Freedom Caucus who blew that up.

354
00:21:46,760 --> 00:21:49,320
Speaker 1: I mean, how often is Nancy Pelosi and Mitch McConnell

355
00:21:49,320 --> 00:21:52,560
Speaker 1: on the same page on a big budget decision. But

356
00:21:52,640 --> 00:21:55,400
Speaker 1: they were here and they were ready to move forward

357
00:21:55,440 --> 00:22:00,480
Speaker 1: with appropriations through February, and the President changed that overnight.

358
00:22:00,640 --> 00:22:03,639
Speaker 1: One final question, then, I want to go into February

359
00:22:03,680 --> 00:22:07,040
Speaker 1: into March, into April when the Red Sox redo their

360
00:22:07,080 --> 00:22:13,240
Speaker 1: World Series new season, if you will, John, is this

361
00:22:13,320 --> 00:22:16,119
Speaker 1: going to be legislative versus Trump? I mean, you mentioned

362
00:22:16,119 --> 00:22:19,560
Speaker 1: the cooperation of Republicans and Democrats. Is that the new

363
00:22:19,640 --> 00:22:22,959
Speaker 1: theme for next year? You know, I don't think so.

364
00:22:23,080 --> 00:22:24,560
Speaker 1: I think there's still going to be a lot of

365
00:22:24,600 --> 00:22:27,560
Speaker 1: partisan gridlock on Capitol Hill on a variety of issues.

366
00:22:28,040 --> 00:22:31,840
Speaker 1: But there is a sort of opening, I think for

367
00:22:32,119 --> 00:22:36,040
Speaker 1: members of Congress to start to recognize that they are

368
00:22:36,080 --> 00:22:38,600
Speaker 1: the adults in the room, that it is incumbent upon

369
00:22:38,720 --> 00:22:42,080
Speaker 1: them as a separate branch of government, a coequal branch,

370
00:22:42,480 --> 00:22:45,960
Speaker 1: to be the ones who babysit the president. Um for

371
00:22:45,960 --> 00:22:48,800
Speaker 1: for a long time Republicans and Congress and Democrats to

372
00:22:49,359 --> 00:22:52,159
Speaker 1: sort of delegated that to some of the cabinet. But

373
00:22:52,160 --> 00:22:54,439
Speaker 1: those cabinet members are gone now, or they're going to

374
00:22:54,520 --> 00:22:58,480
Speaker 1: be gone soon, and I think Congress really needs there

375
00:22:58,480 --> 00:23:00,439
Speaker 1: at a crossroads where they need to think about what

376
00:23:00,520 --> 00:23:02,920
Speaker 1: kind of role they're going to play or whether they're

377
00:23:02,960 --> 00:23:05,560
Speaker 1: going to abdicate that kind of authority. Jones, you Dieck,

378
00:23:05,640 --> 00:23:07,520
Speaker 1: Thank you so much. What a terrific briefing. He is

379
00:23:07,560 --> 00:23:25,720
Speaker 1: with Brookings and their governance study. Steve Gallow joins a

380
00:23:25,760 --> 00:23:29,880
Speaker 1: Stephen Gallow with bemo capital Margaret, Steve, what's your calls

381
00:23:29,880 --> 00:23:31,639
Speaker 1: the dollar? Let's get that out of the way. Is

382
00:23:31,680 --> 00:23:34,639
Speaker 1: there ambiguity here? Are you going outlier dollar strength or

383
00:23:34,680 --> 00:23:38,639
Speaker 1: do you go dollar weakness? Is dollar strength really an

384
00:23:38,680 --> 00:23:41,840
Speaker 1: outlier view? Right now? We we um that's a question.

385
00:23:41,880 --> 00:23:45,320
Speaker 1: I guess the the the cases that we started to

386
00:23:45,440 --> 00:23:47,240
Speaker 1: we started to make a case for a stronger dollar

387
00:23:47,280 --> 00:23:50,040
Speaker 1: around mid year. At the time, I think it was

388
00:23:50,080 --> 00:23:53,440
Speaker 1: out of consensus. But now given the global backdrop, even

389
00:23:53,440 --> 00:23:55,480
Speaker 1: though the FETE is turning a little bit more cautious,

390
00:23:55,760 --> 00:23:58,480
Speaker 1: the global backdrop suggests that we're still going to we're

391
00:23:58,480 --> 00:24:01,560
Speaker 1: still very much likely to get another like higher in

392
00:24:01,600 --> 00:24:04,119
Speaker 1: the dollar in the first half of the year. I

393
00:24:04,160 --> 00:24:06,600
Speaker 1: would say that the two biggest risks to that call,

394
00:24:06,680 --> 00:24:10,199
Speaker 1: although we don't really see them materializing anytime soon. The

395
00:24:10,200 --> 00:24:13,240
Speaker 1: two biggest risk to that call would be a significant

396
00:24:13,359 --> 00:24:17,879
Speaker 1: mammoth uh stimulus package from China or a quick resolution

397
00:24:17,960 --> 00:24:20,639
Speaker 1: of the of the U S China trade and pass. UM.

398
00:24:20,680 --> 00:24:23,600
Speaker 1: We don't think those things will happen anytime soon or

399
00:24:23,760 --> 00:24:26,239
Speaker 1: or at all. Indeed, So what do you how are

400
00:24:26,280 --> 00:24:30,040
Speaker 1: all these the craziness we're seeing globally in a geopolitical realm,

401
00:24:30,080 --> 00:24:32,800
Speaker 1: whether it's Brexit, whether it's the China you mentioned, whether

402
00:24:32,840 --> 00:24:35,479
Speaker 1: it's potential US government shutdown, How do you and your

403
00:24:35,520 --> 00:24:38,400
Speaker 1: clients kind of factor that into your assessment of kind

404
00:24:38,400 --> 00:24:42,440
Speaker 1: of where you think various currencies are going well. Unfortunately,

405
00:24:42,520 --> 00:24:45,480
Speaker 1: from the investor community, I mean, most of the FX

406
00:24:45,520 --> 00:24:48,000
Speaker 1: manager returned into sees that I look at. They suggest

407
00:24:48,040 --> 00:24:52,080
Speaker 1: that unlevered and levered FX specialty investors are are along

408
00:24:52,160 --> 00:24:54,639
Speaker 1: the dollar. But they got into that those positions that

409
00:24:54,720 --> 00:24:58,000
Speaker 1: trade pretty late in the cycle UM and with positioning

410
00:24:58,040 --> 00:25:01,040
Speaker 1: holding back further gains in the dollar. Right now, it's

411
00:25:01,040 --> 00:25:05,240
Speaker 1: still been a tough year for for f X investors UM.

412
00:25:05,280 --> 00:25:08,560
Speaker 1: But look, I mean in this environment when like as

413
00:25:08,560 --> 00:25:12,080
Speaker 1: you say, geopolitical risks are very elevated, and also now

414
00:25:12,119 --> 00:25:15,760
Speaker 1: it seems economic risks at the global level are becoming

415
00:25:16,000 --> 00:25:20,199
Speaker 1: um more realized or more palpable. The only game in

416
00:25:20,280 --> 00:25:24,320
Speaker 1: down is the dollar. It has natural safe haven attributes.

417
00:25:24,400 --> 00:25:26,760
Speaker 1: We could debate over the next three to five years

418
00:25:26,760 --> 00:25:29,880
Speaker 1: if it will retain those safe haven attributes, but right now,

419
00:25:29,920 --> 00:25:32,159
Speaker 1: in the short run, it has safe haven attributes and

420
00:25:32,160 --> 00:25:36,120
Speaker 1: it also pays decent carry. It's a no brainer. UM.

421
00:25:36,200 --> 00:25:41,040
Speaker 1: So the intensification of geopolitical and economic risks of materializing

422
00:25:41,080 --> 00:25:43,239
Speaker 1: in the first half of the year suggests us there

423
00:25:43,240 --> 00:25:45,280
Speaker 1: will be another leg higher in the dollar, but by

424
00:25:45,280 --> 00:25:48,320
Speaker 1: around me year we're expecting that dollar strength to break

425
00:25:48,359 --> 00:25:50,760
Speaker 1: a little bit. Is the leg higher in the dollar

426
00:25:50,920 --> 00:25:55,800
Speaker 1: against everyone or is it partition M G seven whatever?

427
00:25:56,760 --> 00:26:00,000
Speaker 1: I would say most of G ten. But E M.

428
00:26:00,119 --> 00:26:03,040
Speaker 1: You know you have to you have to put pick um.

429
00:26:03,119 --> 00:26:05,240
Speaker 1: You have to make your selections. Wisely, there will be

430
00:26:05,240 --> 00:26:10,600
Speaker 1: our performers and under performers. Um. The reason is going

431
00:26:10,680 --> 00:26:14,080
Speaker 1: into two and nineteen, we have already seen a very

432
00:26:14,119 --> 00:26:18,679
Speaker 1: significant about face and in capital altflows for me and

433
00:26:18,760 --> 00:26:21,359
Speaker 1: this was a story for a large portion of two eighteen,

434
00:26:21,440 --> 00:26:23,919
Speaker 1: so those flows are very mature. At the beginning of

435
00:26:24,000 --> 00:26:26,520
Speaker 1: Q four we were actually starting to see flows return

436
00:26:26,640 --> 00:26:30,119
Speaker 1: to some em currencies. Obviously that stopped getting its tracks

437
00:26:30,160 --> 00:26:32,920
Speaker 1: now in recent weeks given the financial term market TERMO

438
00:26:33,040 --> 00:26:35,879
Speaker 1: we've seen, but but capital alflows from many E M

439
00:26:35,960 --> 00:26:39,320
Speaker 1: S H that they've they're pretty well advanced at this stage.

440
00:26:39,320 --> 00:26:42,439
Speaker 1: Are you're gonna have to pick and choose wisely what

441
00:26:42,560 --> 00:26:44,800
Speaker 1: I would say a big, big theme for the U

442
00:26:44,880 --> 00:26:46,320
Speaker 1: s Dollar in the first few months of the year.

443
00:26:46,359 --> 00:26:48,679
Speaker 1: One reason why we don't see the dollar turning and

444
00:26:48,720 --> 00:26:51,840
Speaker 1: heading south significantly is we expect more weakness in the

445
00:26:51,920 --> 00:26:53,760
Speaker 1: R and B. The main point that I would make

446
00:26:53,800 --> 00:26:57,280
Speaker 1: here is that this depreciation cycle which has been organized

447
00:26:57,320 --> 00:27:01,160
Speaker 1: by the PBOC has not coincide with the same type

448
00:27:01,160 --> 00:27:06,119
Speaker 1: of proficient, pernicious net capital albums were SWO so that

449
00:27:06,280 --> 00:27:09,000
Speaker 1: gives them confidence that they can allow their currency to

450
00:27:09,040 --> 00:27:12,480
Speaker 1: behave like a normal G ten free floating currency and

451
00:27:12,680 --> 00:27:16,159
Speaker 1: weaken as fundamental shift to the downside. Okay, Stephen Gallows,

452
00:27:16,200 --> 00:27:25,280
Speaker 1: thank you so much. It's be more capital. Thanks for

453
00:27:25,359 --> 00:27:29,760
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

454
00:27:29,920 --> 00:27:35,679
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

455
00:27:36,200 --> 00:27:39,560
Speaker 1: I'm on Twitter at Tom Keane. Before the podcast, you

456
00:27:39,600 --> 00:27:42,960
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.