WEBVTT - Equities, Bonds, and Geopolitics 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.000 us live on YouTube. 0:00:27.160 --> 0:00:30.520 Right now, Secretary Page joins Sebastian that Page has had 0:00:30.520 --> 0:00:35.960 a global multi asset definitive undiversification here at tea row 0:00:36.400 --> 0:00:41.760 Price Sebastian after this, this non breadth rally, this lack 0:00:41.800 --> 0:00:44.960 of dispersion, I think it's three stocks as the reason 0:00:45.000 --> 0:00:50.120 we're going up. How do you rediversify? How do you rebalance? 0:00:50.280 --> 0:00:51.720 Or do you just stay with it? 0:00:54.440 --> 0:00:56.560 You know, Tom, when you're at a cocktail party and 0:00:56.600 --> 0:01:01.520 someone finds out you're an investment business, want advice right 0:01:01.640 --> 0:01:04.120 and I always feel like you don't have enough time 0:01:04.160 --> 0:01:08.560 to do this, So I always stay stay invested, stay diversified. 0:01:09.040 --> 0:01:13.639 Right now, I would say stay invested, stay diversified. Hedge 0:01:13.680 --> 0:01:19.200 inflation risk. I think it's important investors to diversify their hedges, 0:01:19.360 --> 0:01:22.840 not just treasuries, but holds in cash, some hedged equities, 0:01:22.880 --> 0:01:25.200 some tips, some real asset equities. 0:01:25.319 --> 0:01:27.520 You know, look Sebastian at the card and rule here, 0:01:27.600 --> 0:01:32.480 the technology doesn't play like an industrial if yields go up, 0:01:32.959 --> 0:01:35.760 what does the technology sector typically do? 0:01:38.240 --> 0:01:38.399 You know? 0:01:38.640 --> 0:01:43.440 I think the typical is hard to describe because it's duration, 0:01:43.840 --> 0:01:49.400 it's sensitivity to interest rate moves has been highly unstable historically. 0:01:49.680 --> 0:01:52.800 You know what matters right now, Tom, is the earnings. 0:01:53.200 --> 0:01:56.080 The earnings growth projected for the next twelve months for 0:01:56.240 --> 0:02:00.480 US large gap growth stocks are at twenty eight percent. 0:02:00.720 --> 0:02:05.800 That's the highest it's been in my twenty five year chart. Now, 0:02:05.840 --> 0:02:08.200 you could say that's a high bar, but those are 0:02:08.240 --> 0:02:12.000 companies that tend to meet that high bar. So Tom, 0:02:12.040 --> 0:02:14.480 we're still along the broadening trade, but we've taken about 0:02:14.520 --> 0:02:17.520 half the profits and we've been moving money from international 0:02:17.960 --> 0:02:21.280 back to the US. US ultimately is an et exporter 0:02:21.400 --> 0:02:25.839 of oil. Europe is much more exposed. Those earnings are phenomenal, 0:02:26.200 --> 0:02:29.400 and the evaluations for large cap growth stocks they're actually 0:02:29.520 --> 0:02:32.800 lower than their five year average. So that's the move 0:02:32.800 --> 0:02:35.880 we're doing now. It doesn't mean to your introduction that 0:02:35.919 --> 0:02:40.560 we're concentrating the portfolio. It just boils down to balancing, 0:02:40.680 --> 0:02:43.760 taking a little bit risk of risk, active risk off 0:02:43.800 --> 0:02:46.919 the table. And I go back to stay invested state 0:02:46.960 --> 0:02:50.919 diversified hedge. Inflation risk tom more neutral between stocks and bonds. 0:02:51.000 --> 0:02:55.000 Right now, Sebastian inflation. It's there, and a lot of 0:02:55.000 --> 0:02:58.160 folks are saying it's going to become even more pronounced 0:02:58.560 --> 0:03:02.000 in the back half of twenty twenty. How does one hedge. 0:03:01.680 --> 0:03:07.240 That you can diversify the hedges. One way is to 0:03:07.320 --> 0:03:10.520 have a short duration position, so hold some cash. You 0:03:10.560 --> 0:03:13.239 can also hold some short term tips. Of course, a 0:03:13.280 --> 0:03:16.840 lot of people like to buy gold or metals. We 0:03:16.960 --> 0:03:20.120 like to do that through stocks, so metal stocks and 0:03:20.280 --> 0:03:24.840 energy stocks. I think there's still time to establish those hedges. 0:03:24.880 --> 0:03:28.520 Even though it's already happened, right the oil shock has 0:03:28.520 --> 0:03:31.440 already happened, I think the risk is still there on 0:03:31.480 --> 0:03:34.240 the table. So that's another way. Another way we like 0:03:34.360 --> 0:03:37.600 is just to hedge equities. You know, hedged equities give 0:03:37.640 --> 0:03:39.640 you a little bit of asymmetry. You give up some 0:03:39.720 --> 0:03:42.600 of the upside, but you hedge your tail risk. And 0:03:43.280 --> 0:03:47.040 any portfolio where treasuries might not hedge you really well. 0:03:47.080 --> 0:03:50.680 If you get an inflation shock, you start building some 0:03:50.920 --> 0:03:55.200 positions that help you make up for the failure of 0:03:55.240 --> 0:03:57.160 treasuries and an inflation shock. 0:03:57.320 --> 0:03:59.840 And Sebastially, you call that earnings and we're just finishing up. 0:04:00.120 --> 0:04:03.400 It's turned out to be a really solid earning season 0:04:03.400 --> 0:04:06.920 for corporate America. Are the earnings and earnings forecasts enough 0:04:06.920 --> 0:04:07.920 to support this market? 0:04:10.640 --> 0:04:13.440 I think so, and I think this can continue. The 0:04:13.520 --> 0:04:17.240 earnings momentum is remarkably strong. The last estimate I saw 0:04:17.400 --> 0:04:23.320 for ai cap X is three trillion by twenty twenty eight. 0:04:23.680 --> 0:04:26.200 Of course it sets a high bar, and chips are 0:04:26.240 --> 0:04:30.119 more cyclical than other sectors. Of course, there's a lot 0:04:30.160 --> 0:04:33.600 of this that's priced thin. Look, I don't like the 0:04:33.640 --> 0:04:37.400 bubble comparisons, the tech bubble, the Internet. But you know, 0:04:37.440 --> 0:04:41.279 if you look at trailing price to cash, trailing price 0:04:41.400 --> 0:04:44.240 to sales, those metrics are actually higher than during the 0:04:44.279 --> 0:04:47.600 Dot Com But I will say this fall but margins, 0:04:47.760 --> 0:04:48.960 margins are double. 0:04:49.040 --> 0:04:51.960 Sebastian Page, Thank you so much. Sebastian. You think Montreal 0:04:52.040 --> 0:04:54.600 can do it? You think it past the Savers? Do 0:04:54.640 --> 0:04:56.800 you think Montreal can take out the Carolinas. 0:04:58.760 --> 0:05:02.120 I'm all in on montre all all the time, Tom, 0:05:02.279 --> 0:05:05.919 Given my French Canadian heritage, it's just completely on bias. 0:05:06.120 --> 0:05:10.320 I do tear up. I get misty eyed like Taylor Kendall, 0:05:10.360 --> 0:05:13.400 and I would be misty eyed if Sebastian Tyler Kendra, 0:05:13.440 --> 0:05:16.360 excuse me if I brought If Sebastian brought in the torch, 0:05:17.120 --> 0:05:19.600 you know, wash your torch, twenty thousand people at the 0:05:19.600 --> 0:05:22.880 Bell Center, Sebastian, that would be great. Sebastian Page, Thank 0:05:22.920 --> 0:05:25.640 you so much from Sherbrook and I've always tea wrote 0:05:25.839 --> 0:05:29.640 price as well. Stay with us more from Bloomberg Surveillance 0:05:29.720 --> 0:05:31.040 coming up after this. 0:05:38.279 --> 0:05:41.880 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:05:41.920 --> 0:05:45.440 weekday afternoons from seven to ten am Eastern Listen on Apple, 0:05:45.520 --> 0:05:48.839 Karplay and Android Otto with the Bloomberg Business app, or 0:05:49.000 --> 0:05:50.600 watch us live on YouTube. 0:05:50.839 --> 0:05:54.080 Ian Lincoln taught me this price down yield up, but 0:05:54.279 --> 0:05:56.640 it's the rate of change. You got a five point 0:05:56.680 --> 0:06:00.640 one zero thirty or I've got a four point this up, 0:06:00.720 --> 0:06:04.839 Ian go. Ian Lincoln wouldn't do this, but it's entertainment, Connie, 0:06:04.880 --> 0:06:07.719 and stay with me. Four point five six percent and 0:06:07.800 --> 0:06:10.159 a ten year yield four point zero six and the 0:06:10.200 --> 0:06:13.080 Sweeney two year yield. The interview of the Day for 0:06:13.160 --> 0:06:15.880 Global Wall Street Ian Lincoln of the Bank of Montreal 0:06:16.160 --> 0:06:19.680 Demo Capital Markets. The tickets you got me for Saturday, 0:06:20.080 --> 0:06:23.840 I almost teared up. Thank you, the AA box right 0:06:23.880 --> 0:06:26.680 at the goal line. I looked those up on stub hup. 0:06:26.960 --> 0:06:31.080 Two tickets eighty five hundred dollars. Thank you, Bank of Montreal. 0:06:31.279 --> 0:06:33.599 I'm glad you appreciate it. Good. What's the first and 0:06:33.680 --> 0:06:36.560 second derivative of this bott move the convexity? We say, 0:06:36.839 --> 0:06:39.320 what's the rate of change that we need to know about? 0:06:39.839 --> 0:06:41.720 So I'm really worried that what we're seeing in the 0:06:41.760 --> 0:06:44.760 equity market is going to accelerate. We haven't seen a 0:06:44.800 --> 0:06:47.760 breakout of yields to these levels in quite some time, 0:06:48.120 --> 0:06:51.120 and that five percent level for the long bond that matters, 0:06:51.120 --> 0:06:53.800 and it has in the past for equities. So I'm 0:06:53.839 --> 0:06:56.400 keeping an eye on what happens in the stock market today. 0:06:56.400 --> 0:06:59.479 Frankly, what is pushing rates higher? 0:06:59.480 --> 0:06:59.680 Again? 0:06:59.720 --> 0:07:02.440 You mention at the thirty year at five point one 0:07:02.520 --> 0:07:05.440 zero percent, That really gets people's attention. The ten year 0:07:05.520 --> 0:07:07.520 four point fifty five, that breaks out a little bit. 0:07:07.560 --> 0:07:08.400 What's going on there? 0:07:08.800 --> 0:07:11.560 Well, I think we're still trading the conflict in the 0:07:11.560 --> 0:07:15.280 Middle East. We're still worried about the energy complex, we're 0:07:15.280 --> 0:07:18.280 coming off of a series of inflation prints that have 0:07:18.840 --> 0:07:21.400 demonstrated that we're already starting to see some pass through 0:07:21.440 --> 0:07:24.520 to core. There were a few technical adjustments from the 0:07:24.520 --> 0:07:27.239 BLS that propped up the core numbers, so we weren't 0:07:27.280 --> 0:07:30.560 particularly surprised or worried. But the market clearly is. And 0:07:30.600 --> 0:07:33.600 we just went through the ten and thirty year auctions 0:07:33.760 --> 0:07:36.560 and so they're still in the process of being redistributed. 0:07:36.880 --> 0:07:38.640 And as we have seen in the run up to 0:07:38.680 --> 0:07:42.360 pretty much every weekend, we're worried about the event risk 0:07:42.400 --> 0:07:44.600 of those two days in the Middle East, because frankly, 0:07:44.640 --> 0:07:45.360 anything can happen. 0:07:45.440 --> 0:07:46.960 You don't want to hold a risk position over the 0:07:46.960 --> 0:07:51.120 weekendise exactly. I mean, this is telling me. I'm an 0:07:51.160 --> 0:07:52.960 equity guy, so but you know, I try to stay 0:07:52.960 --> 0:07:54.960 away from the bond market. When I see rates move 0:07:55.040 --> 0:07:58.360 higher like this, that just shows me angst in the marketplace. 0:07:58.800 --> 0:08:02.480 And I guess, yes, the angst is for more persistent, 0:08:02.520 --> 0:08:04.400 more stickire inflation. Is that what we're seeing. 0:08:04.720 --> 0:08:05.560 I think that's part of it. 0:08:05.600 --> 0:08:09.360 There's also a fiscal concern, Okay, so the inflation argument 0:08:09.480 --> 0:08:12.720 is fed into by the by the notion that the 0:08:12.840 --> 0:08:16.160 labor market remains on solid footing. We had a higher 0:08:16.200 --> 0:08:19.240 than expected but still low initial jobless claims number. We 0:08:19.560 --> 0:08:23.080 inflation is moving along fine, but not two kill levels 0:08:23.080 --> 0:08:23.720 that are troubling. 0:08:23.920 --> 0:08:24.440 Yet. 0:08:24.680 --> 0:08:27.720 If the unemployment rate had been materially higher, or we 0:08:27.760 --> 0:08:29.960 hadn't had strong payrolls, I think we'd be in a 0:08:30.280 --> 0:08:32.120 much different macro environment. 0:08:31.840 --> 0:08:34.679 In Lincoln with U BMO Capital Markets. He's taken every 0:08:34.720 --> 0:08:39.160 trophy there isn't fixed in comers note dense in extremely 0:08:39.400 --> 0:08:42.040 read on the morning hours. Get that from the Bank 0:08:42.120 --> 0:08:47.360 of Montreal, BMO Capital Markets, BMO Capital Markets. So I 0:08:47.400 --> 0:08:49.440 look at the real yield. There's a number of ways 0:08:49.440 --> 0:08:51.960 to look at this. I've seen a leap here from 0:08:51.960 --> 0:08:54.720 a one ninety out to a two point zero four. 0:08:54.760 --> 0:08:56.880 I got some history at two point one point one. 0:08:57.040 --> 0:09:00.840 What are the ramifications if the ten year really breaks 0:09:00.840 --> 0:09:02.600 out the new territory. 0:09:03.040 --> 0:09:06.000 Well, I think that it depends on how that occurs. 0:09:06.080 --> 0:09:08.839 If it occurs with a compression of break evens because 0:09:08.880 --> 0:09:13.360 inflation expectations have moderated, then I think that the real 0:09:13.400 --> 0:09:15.360 economy can absorb that in it. 0:09:15.559 --> 0:09:18.880 It's a more voyant economy, productivity, innovation in that. 0:09:19.080 --> 0:09:21.679 But if it's a flip side, and you see why 0:09:21.760 --> 0:09:25.640 native break evens and higher real rates that is a 0:09:25.760 --> 0:09:27.600 vote of non confidence of treasuries. 0:09:28.080 --> 0:09:30.480 Nicely explained. Now you're a grizzled pro at this. He's 0:09:30.480 --> 0:09:34.240 got three bloomberg you should see it. I mean, twirivere 0:09:34.640 --> 0:09:39.320 darkens what he dunes in his Bloomberg. Okay, so you've 0:09:39.360 --> 0:09:43.520 got a bond market complexity and the answer is there 0:09:43.600 --> 0:09:46.880 have to be trip points. What's the Ian lingoln trip 0:09:46.880 --> 0:09:49.680 point is that the five year yield the ten year yield? 0:09:49.800 --> 0:09:51.439 Is it something esoteric? 0:09:51.960 --> 0:09:55.040 Well, I think that the world looks at ten year yields. 0:09:55.600 --> 0:09:58.079 I look at the two year yield. There's nothing more 0:09:58.120 --> 0:10:01.400 than reflection of near term monetary policy expectations. And so 0:10:01.559 --> 0:10:04.400 anytime we're over four percent in this environment, that means 0:10:04.400 --> 0:10:07.360 that we're really contemplating rate heights, which I don't think 0:10:07.360 --> 0:10:09.679 should be on the table. The long bond is more 0:10:09.679 --> 0:10:12.640 of an inflation story, and as we see, five handle 0:10:12.720 --> 0:10:15.200 on the thirty year is troubling for a lot of 0:10:15.200 --> 0:10:18.079 different asset classes. So I do think that the shape 0:10:18.080 --> 0:10:21.280 of the curve is going to be the story to 0:10:21.360 --> 0:10:22.120 follow this year. 0:10:22.960 --> 0:10:26.120 Kevin Walsh can be stepping into the big chair at 0:10:26.120 --> 0:10:29.120 the FED that's going to be a little uncomfortable given 0:10:29.120 --> 0:10:30.560 some of the data we're seeing here. I mean, what 0:10:30.600 --> 0:10:32.679 do you think the messaging that's going to come out 0:10:32.720 --> 0:10:36.000 of this new FED chair will be should be? Because 0:10:36.000 --> 0:10:38.240 we're going to hear from in the next few days probably. 0:10:38.840 --> 0:10:42.040 So he has been given a very difficult FED to 0:10:42.080 --> 0:10:44.360 take over. At the moment, Powell's still going to be 0:10:44.400 --> 0:10:48.360 in the room. He's coming in with three descents against 0:10:48.440 --> 0:10:50.720 some of the language within the statement. It's interesting that 0:10:50.760 --> 0:10:53.280 the descents were against the language and not against the 0:10:53.320 --> 0:10:56.520 move itself, as is typically the case. I suspect that 0:10:56.840 --> 0:10:59.760 he's going to have a very hard time building consensus 0:10:59.760 --> 0:11:03.920 over the summer to do anything outside of potentially scale 0:11:04.000 --> 0:11:07.400 back some of the forward guidance. Normally, I would say 0:11:07.840 --> 0:11:11.160 one of his objectives is to talk less in terms 0:11:11.200 --> 0:11:14.800 of being a FED leader, and that could mean at 0:11:14.800 --> 0:11:17.960 some point reducing the SEPs or the dot loot. But 0:11:18.000 --> 0:11:19.080 I don't think anything's happening. 0:11:19.120 --> 0:11:22.319 Say I mentioned this earlier, Governor Myron on yesterday, Faro grilledim. 0:11:22.320 --> 0:11:25.960 I thought John did a great job on the interview, 0:11:26.280 --> 0:11:29.520 and the distinction there is the inflation not so much 0:11:29.600 --> 0:11:32.960 at one off. But is it various supply side even 0:11:33.000 --> 0:11:38.000 demand side shocks or is there a fiscal persistency finally 0:11:38.120 --> 0:11:41.240 to it, how do you parse that? When you look 0:11:41.240 --> 0:11:44.080 at the dynamics of the ian LNCOLN bomb market. 0:11:44.720 --> 0:11:48.920 It does feel as though forward inflation expectations are moving 0:11:49.000 --> 0:11:52.320 higher for the average consumer and the average household. And 0:11:52.360 --> 0:11:54.320 that's what the Fed needs to worry about, because you 0:11:54.320 --> 0:11:57.000 can drill down into CPI and you can see that 0:11:57.040 --> 0:11:59.800 in April, core goods or effectively flat, and that's what 0:12:00.040 --> 0:12:02.959 everyone was worried about last year, the past through. So 0:12:03.000 --> 0:12:07.880 we're beyond the tariff story, but now we're worried about airfares, 0:12:08.400 --> 0:12:11.199 energy prices flowing through to products at the end of 0:12:11.240 --> 0:12:14.040 the day. But that takes months to actually see zero diet. 0:12:14.080 --> 0:12:17.000 A nice summary of a Goldman Sachs note where they 0:12:17.040 --> 0:12:19.720 triangle it out to a four point sixty zero percent 0:12:19.760 --> 0:12:22.199 ten ure yield being important. Do you have in your 0:12:22.280 --> 0:12:25.920 head that trip point on the ten year where things 0:12:26.040 --> 0:12:27.360 change for the stock market. 0:12:28.120 --> 0:12:29.920 I would say that we're right up against it. I 0:12:29.960 --> 0:12:33.360 would say four seventy five. But right now we're just 0:12:33.800 --> 0:12:37.080 chopping around in a range that is reasonably well defined 0:12:37.240 --> 0:12:40.040 and again we're the level of conviction that is in 0:12:40.080 --> 0:12:42.480 this market is so low right now when we talk 0:12:42.559 --> 0:12:45.240 to clients and make the rounds, people just don't know. 0:12:45.480 --> 0:12:47.199 In fixed income space. 0:12:47.640 --> 0:12:50.160 Ten year at four fifty six, I mean the year ender. 0:12:50.640 --> 0:12:51.560 Are we higher here? 0:12:51.640 --> 0:12:52.040 Do you think? 0:12:52.280 --> 0:12:56.160 I think we're lower? But the floor has been certainly 0:12:56.200 --> 0:12:58.880 been increased given the events of the last eight weeks. 0:12:59.080 --> 0:13:01.000 I mean, I'm pounded the bloomberg here. I'm trying to 0:13:01.000 --> 0:13:03.680 pretend like I mean Lincoln no on a triple high 0:13:03.720 --> 0:13:05.600 top at a thirty year bond, pall out of five 0:13:05.640 --> 0:13:08.719 point one zero five point one point one. We're you 0:13:08.800 --> 0:13:11.640 know there there now? If I go c t thirty 0:13:11.920 --> 0:13:13.880 Ian Lncoln taught me how to do this. I went 0:13:13.920 --> 0:13:16.880 to bond camp with Ian Lincoln. Okay, you should say 0:13:16.960 --> 0:13:20.520 Kumbaya and ie bring tears here. If I look at 0:13:21.040 --> 0:13:24.480 the current thirty year bond, I don't know if it's 0:13:24.480 --> 0:13:26.320 going to give me much information here. Let me see 0:13:26.320 --> 0:13:28.640 if I can get it up. But I believe there's 0:13:28.679 --> 0:13:33.040 a price decline involved. If yields go up, prices go down. 0:13:33.760 --> 0:13:37.920 Is it hard for institutions forget about all this financial 0:13:37.960 --> 0:13:40.920 media stuff like alexis the way you quote the yield, 0:13:40.960 --> 0:13:44.480 it brings tears to my eyes. Nobody cares. It's about 0:13:44.559 --> 0:13:49.000 price down right. Is there pain out there into this weekend. 0:13:49.320 --> 0:13:52.120 Into this weekend? I would say less so than we 0:13:52.160 --> 0:13:54.680 saw at the beginning of the conflict. There were a 0:13:54.679 --> 0:13:57.920 lot of position stop outs when this all started. People 0:13:57.960 --> 0:14:00.400 were caught on the wrong direction on the curve, caught 0:14:00.440 --> 0:14:04.000 the wrong direction on duration. Now positions have been paired back, 0:14:04.320 --> 0:14:06.760 and frankly, there's plenty of shorts in the market, so 0:14:06.840 --> 0:14:10.280 this run up could actually be benefiting certain holders. 0:14:10.679 --> 0:14:14.319 But again, as you mentioned, the two year well above 0:14:14.360 --> 0:14:18.040 four percent now, and we don't typically see that in 0:14:18.080 --> 0:14:20.480 this in the last I don't, however, long But I 0:14:20.480 --> 0:14:23.680 mean is that I mean again, that kind of tells 0:14:23.720 --> 0:14:26.760 me that the Fed is more as likely to raise 0:14:26.840 --> 0:14:29.200 rates than the cut rates the next time they move. 0:14:30.000 --> 0:14:32.000 So I think that the two year is very interesting 0:14:32.040 --> 0:14:34.240 at this moment because if you believe what the FED 0:14:34.320 --> 0:14:37.320 has been saying, which is we're pausing on the way 0:14:37.360 --> 0:14:40.840 to further normalization, then two year yields should be at 0:14:40.960 --> 0:14:44.160 or below effective FED funds, and that's in the mid 0:14:44.160 --> 0:14:46.400 three sixties, and we're well above that. So the market 0:14:46.440 --> 0:14:49.200 is saying, either we know the bestone's going to do 0:14:49.200 --> 0:14:50.080 a lot of borrowing in the front. 0:14:50.120 --> 0:14:51.960 Ad Come on, it's a hope and a prayer that 0:14:52.000 --> 0:14:55.880 the hormones opens up, right, I mean, that's all words unlikely. 0:14:55.960 --> 0:14:58.720 An air force one flying back right now, Bemo has 0:14:58.720 --> 0:15:02.680 a golf student should see it's Montreal Canadian colors. It's wonderful, 0:15:02.720 --> 0:15:06.440 red les, blue, be rouge. Okay, So whatever airplane you're 0:15:06.480 --> 0:15:08.920 on in your fancy like Ian Lincoln, this is just 0:15:08.960 --> 0:15:12.320 a hope and a prayer that Iran gets over oil 0:15:12.400 --> 0:15:15.280 breaks and we all go back to fed normal, right. 0:15:16.000 --> 0:15:18.360 I do think that there's a lot of optimism implied 0:15:18.520 --> 0:15:20.280 in the notion it's going to reopen, and you also 0:15:20.280 --> 0:15:23.920 see it in in oil futures. Oil futures should be higher, 0:15:24.120 --> 0:15:25.680 and in the doors are going to draw down. Over 0:15:25.680 --> 0:15:26.240 the summer, I go. 0:15:26.440 --> 0:15:28.280 You know, when I took the Bemoh summer camp with 0:15:28.360 --> 0:15:31.600 the Ligan course, you don't look at the c T thirty. 0:15:31.760 --> 0:15:35.560 You look at the old old like there's different old 0:15:35.600 --> 0:15:39.840 old bonds, Paul. Since the end of February, the thirty 0:15:39.920 --> 0:15:43.520 year bond on price, not yield, folks, not the way 0:15:43.560 --> 0:15:47.400 bow type people talk ian We're down seven point five 0:15:47.600 --> 0:15:52.920 five percent thirty one percent annualized. Is that a bear 0:15:53.040 --> 0:15:55.120 market in bonds? Is that where we are. 0:15:55.280 --> 0:15:58.000 Certainly has been a bear market in the thirty year sector. 0:15:58.160 --> 0:15:59.360 There's no question about that. 0:16:00.120 --> 0:16:02.360 You know, movements in the bond marker. We're talking bomb marking. 0:16:02.400 --> 0:16:04.160 I'm all fired up. Where's Lisa Rows? 0:16:05.080 --> 0:16:07.280 I just start going. She's off the door. She's going. 0:16:07.760 --> 0:16:10.720 She's like she's rocking it. She's going skiing somewhere. 0:16:10.800 --> 0:16:15.200 Ohe like way like North Okay, like band for something? 0:16:16.080 --> 0:16:18.800 Can I do one more question? I mean they didn't 0:16:18.840 --> 0:16:22.239 pull Dobish last night. I mean Montreal took out Buffalo. 0:16:22.520 --> 0:16:26.920 It was enough. It was just magical to see. Explain 0:16:27.200 --> 0:16:30.760 the culture. I mean, we're all witnessing this as outsiders. 0:16:31.120 --> 0:16:34.920 Twenty thousand mental people in the Bell Center, twenty thousand 0:16:35.000 --> 0:16:37.920 mental people outside the Bell mentor they have a portrait 0:16:37.920 --> 0:16:40.960 of Leonard Cohen on a Bank of Montreal building and 0:16:41.000 --> 0:16:44.720 they got up dressed in a habs explain culture of 0:16:44.760 --> 0:16:47.840 the Montreal Canadians to the Bank of Montreal and all 0:16:47.880 --> 0:16:48.440 of the city. 0:16:48.960 --> 0:16:51.080 I do think there's a lot of history and they're 0:16:51.240 --> 0:16:54.120 very proud of that history. I think you can see 0:16:54.120 --> 0:16:55.600 it in the sports, you can see it in the culture, 0:16:55.600 --> 0:16:57.440 you can see it in the music. So I do 0:16:57.520 --> 0:17:00.760 think that the Bank of Montreal is a very good 0:17:00.800 --> 0:17:02.400 representation of that culture. 0:17:02.520 --> 0:17:06.640 Can you get rush tickets for the summer? Ian? Thank 0:17:06.720 --> 0:17:10.080 you so much. I love busting his chops because Ian 0:17:10.160 --> 0:17:13.679 plays it so straight and he is so excellent with 0:17:13.840 --> 0:17:16.960 his work over the years with Pimo at Capital Marcus 0:17:17.440 --> 0:17:21.680 Stay with us. More from Bloomberg Surveillance coming up after this. 0:17:28.880 --> 0:17:32.480 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:17:32.520 --> 0:17:35.679 weekday afternoons from seven to ten am Eastern. Listen on 0:17:35.800 --> 0:17:39.160 Apple Karplay and Android Otto with the Bloomberg Business app, 0:17:39.359 --> 0:17:41.040 or watch us live on YouTube. 0:17:41.320 --> 0:17:43.159 What we're gonna do here, which a lot of people 0:17:43.200 --> 0:17:47.240 don't know, is how did we get here? And I 0:17:47.240 --> 0:17:50.440 don't mean Kissinger's sitting in the Piece hotel in Shanghai. 0:17:50.560 --> 0:17:53.520 Are on the way to Beijing. And for all of 0:17:53.600 --> 0:17:58.359 us fossils the shock of seventy two and Nixon with us, 0:17:58.560 --> 0:18:03.440 Robert Hormants, some people talk other people? Do you? And 0:18:03.560 --> 0:18:09.040 Winston Lord got this going back then? There had to 0:18:09.080 --> 0:18:13.200 be literally like Columbus looking over the horizon. Tell us 0:18:13.320 --> 0:18:17.720 about what Winston Lord, with your assistance on economics, Ambassador, 0:18:18.200 --> 0:18:22.560 what was the shing I communicate like to jumpstart this 0:18:22.880 --> 0:18:24.760 new Asia US nexus. 0:18:24.840 --> 0:18:27.600 It's a great question, and I wrote a piece about 0:18:27.600 --> 0:18:31.880 it in Foreign Affairs to document this. The goal at 0:18:31.920 --> 0:18:37.400 that point was to try to make the relationship more normal, 0:18:38.640 --> 0:18:41.080 to deal with a whole series of problems that had 0:18:41.119 --> 0:18:44.560 been built up over twenty five years of no communication, 0:18:44.800 --> 0:18:49.080 no trade, no investment. And of course the key issue 0:18:49.160 --> 0:18:51.879 on the minds of both the Chinese and the Americans 0:18:52.560 --> 0:18:56.479 was Taiwan and Joe and Lai, who was the premier 0:18:56.520 --> 0:18:59.600 of China who was their negotiator, and Henry Kissinger, who 0:18:59.640 --> 0:19:04.480 Wasson's negotiator, and both formidable people on their own, decided 0:19:04.520 --> 0:19:08.879 they would need some compromise language and the Shinghai Declaration 0:19:09.119 --> 0:19:14.040 that still is the centerpiece of China US relations on 0:19:14.080 --> 0:19:17.640 that issue was worked out between the two of them, 0:19:17.800 --> 0:19:21.520 and that opened the way to a building up of confidence. 0:19:21.960 --> 0:19:24.320 And then after that we came up with a few 0:19:24.359 --> 0:19:29.239 economic issues that we can use to normalize relations, to 0:19:29.280 --> 0:19:33.560 increase trade incrementally, and it built from there. But it 0:19:33.600 --> 0:19:38.480 was trust and confidence and precise planning, and we're critical 0:19:38.520 --> 0:19:39.960 to this and trust. 0:19:39.840 --> 0:19:43.159 Which of course the Trump administration is wonderful and just 0:19:43.200 --> 0:19:44.880 because of time and Paul wants to get in here 0:19:44.880 --> 0:19:47.400 with some real questions. I've got to ask you this 0:19:47.520 --> 0:19:51.679 President g seems to venerate the pre cho in like China. 0:19:51.760 --> 0:19:54.280 He wants to go back to Mao. He wants to 0:19:54.320 --> 0:19:57.720 go back to a more rigid, tougher China. When you 0:19:57.760 --> 0:20:01.520 see the turmoil with their defense leaders, generals, they're admirals, 0:20:01.520 --> 0:20:04.720 when you see just the clock ticking, is there any 0:20:04.800 --> 0:20:08.239 chance President, she can pull back and become more like 0:20:08.280 --> 0:20:08.840 the China. 0:20:08.960 --> 0:20:12.560 Robert Pormance new Well, I think he's I know him 0:20:12.640 --> 0:20:14.919 quite well because I've worked with him since he was 0:20:15.560 --> 0:20:18.919 the Party secretary and Juan Province, which was in the nineties. 0:20:20.200 --> 0:20:24.240 He's a very methodical person and he does sort of 0:20:24.280 --> 0:20:29.439 venerate Mao, but he also realizes Mao had a number 0:20:29.720 --> 0:20:33.400 of issues that made him controversial. But there are two 0:20:33.480 --> 0:20:37.360 parts of the Mau background that are extremely important to understand. 0:20:37.880 --> 0:20:41.560 Mao made one point that we've been bullied by the 0:20:41.600 --> 0:20:45.240 foreigners over the last one hundred years, and we're not 0:20:45.320 --> 0:20:48.840 going to be bullied again, and she is very much 0:20:48.880 --> 0:20:51.040 of the view that that must be a critical part 0:20:51.600 --> 0:20:57.040 of China's strategy to be invulnerable to bullying or pressure 0:20:57.280 --> 0:21:02.080 or leveraged by the foreigners. The second is that Mao understood, 0:21:02.160 --> 0:21:05.440 and she understands that the fall of the Soviet Union 0:21:05.520 --> 0:21:08.040 was in part because they did not have a lot 0:21:08.040 --> 0:21:12.000 of trading partners. They were confined to very few products 0:21:12.000 --> 0:21:14.800 that they produced and a very few countries to sell 0:21:14.800 --> 0:21:19.360 them too. And he Shi Jinpain was going to make 0:21:19.400 --> 0:21:22.160 sure that China had a broad range of trading partners 0:21:22.640 --> 0:21:26.800 and had a very diversified economy and therefore could not 0:21:27.000 --> 0:21:30.640 be leveraged by the United States or anyone else. Those 0:21:30.680 --> 0:21:33.959 were really two key points that he draws from the 0:21:33.960 --> 0:21:37.760 mal period and the fall of the Soviet Union. And 0:21:37.840 --> 0:21:41.440 let me make one other point follows up your point, Tom, 0:21:41.480 --> 0:21:45.479 and that is, if we learned anything from this summit, 0:21:46.359 --> 0:21:49.199 it is that for the first time in nearly one 0:21:49.240 --> 0:21:54.399 hundred years, the US has a peer competitor, a peer 0:21:54.480 --> 0:21:59.720 competitor on military issues, political issues, technology issues, and he 0:21:59.760 --> 0:22:05.159 can issues and appear both in scale and in skill. 0:22:05.840 --> 0:22:06.280 We have. 0:22:06.680 --> 0:22:08.920 If we didn't know that before, we know it now. 0:22:09.000 --> 0:22:11.960