1
00:00:06,000 --> 00:00:08,880
Speaker 1: Welknd A trillions. I'm Joel Weipper and I'm Eric beltis

2
00:00:12,320 --> 00:00:15,200
Speaker 1: Eric these inflation numbers, it's like it might not even

3
00:00:15,200 --> 00:00:19,239
Speaker 1: be a problem anymore, right, Well, it's become. It depends

4
00:00:19,280 --> 00:00:24,080
Speaker 1: on your narrative. These these numbers, it's like they perfectly

5
00:00:24,120 --> 00:00:28,000
Speaker 1: fit two different narratives. Uh, and politics are now involved.

6
00:00:28,040 --> 00:00:31,200
Speaker 1: It's a shame. Politics ruins everything. But basically, some people

7
00:00:31,240 --> 00:00:35,559
Speaker 1: are out saying inflation is zero percent, which in a

8
00:00:35,560 --> 00:00:38,000
Speaker 1: way it is if you look month over month, but

9
00:00:38,360 --> 00:00:40,480
Speaker 1: it's also eight point five percent if you look over

10
00:00:40,720 --> 00:00:43,640
Speaker 1: I was gonna say it's not zero. Yeah, So actually

11
00:00:43,640 --> 00:00:46,599
Speaker 1: pulled people, I said, what would you say? Us inflation

12
00:00:46,680 --> 00:00:49,640
Speaker 1: is in July zero or eight point five, like two

13
00:00:49,680 --> 00:00:52,519
Speaker 1: massively different numbers, and it was almost fifty fifty. So

14
00:00:52,560 --> 00:00:55,959
Speaker 1: I think it depends on you know, I had. It's

15
00:00:55,960 --> 00:00:59,160
Speaker 1: probably depends on where you fall politically. It also probably

16
00:00:59,160 --> 00:01:01,720
Speaker 1: depends on whether you're a fan of the FED or

17
00:01:01,800 --> 00:01:04,000
Speaker 1: you hate the Fed. There's a lot of things that

18
00:01:04,080 --> 00:01:06,920
Speaker 1: go into people presenting this number. There are some people

19
00:01:07,000 --> 00:01:10,440
Speaker 1: middle of the road who do explain all that. They say, well,

20
00:01:10,520 --> 00:01:13,920
Speaker 1: it's good that it didn't grow, but it's still a problem. Overall,

21
00:01:14,280 --> 00:01:16,319
Speaker 1: and I think that's sort of the route I like

22
00:01:16,400 --> 00:01:18,800
Speaker 1: to see or I like to take. But this number,

23
00:01:19,280 --> 00:01:22,200
Speaker 1: the importance of this number isn't just the elections. It's

24
00:01:22,200 --> 00:01:25,520
Speaker 1: also what the FED will do so and what the

25
00:01:25,520 --> 00:01:28,560
Speaker 1: FED does just determines everything. Again, the Feds like God,

26
00:01:28,680 --> 00:01:30,840
Speaker 1: and we all have to live under this God. So

27
00:01:30,880 --> 00:01:34,200
Speaker 1: we need to know what God is up to to

28
00:01:34,280 --> 00:01:37,520
Speaker 1: help us make sense of of what God is up to. You,

29
00:01:37,520 --> 00:01:40,319
Speaker 1: you came up with a person on Bloomberg Intelligence named

30
00:01:40,319 --> 00:01:43,760
Speaker 1: Ira Jersey for us to speak to. He's got a

31
00:01:43,800 --> 00:01:47,920
Speaker 1: direct line to God, direct line to God. He's the

32
00:01:48,040 --> 00:01:53,280
Speaker 1: US interest rate strategist in Bloomberg Intelligence. So so why

33
00:01:53,280 --> 00:01:56,240
Speaker 1: do we want to talk to Ira today? I have

34
00:01:56,560 --> 00:01:59,040
Speaker 1: found him to be the smartest person on this topic.

35
00:01:59,480 --> 00:02:02,280
Speaker 1: He also worked as an actual asset manager, so he's

36
00:02:02,280 --> 00:02:05,160
Speaker 1: had to put money to work. Now he writes about it,

37
00:02:05,200 --> 00:02:06,960
Speaker 1: but I like that he had to have skin in

38
00:02:06,960 --> 00:02:10,560
Speaker 1: the game for many years, and so he he really

39
00:02:10,760 --> 00:02:13,840
Speaker 1: is great in interpreting the FED and how they will

40
00:02:14,360 --> 00:02:17,760
Speaker 1: interpret different numbers their balance sheet. There's a lot of

41
00:02:18,160 --> 00:02:21,520
Speaker 1: things that go into quote, just what's the FED gonna do? Um?

42
00:02:21,560 --> 00:02:23,720
Speaker 1: And he's that's all He writes about So I thought

43
00:02:23,720 --> 00:02:26,400
Speaker 1: he'd be good to give his take on where we're

44
00:02:26,400 --> 00:02:28,760
Speaker 1: going to go from here and sort of fed splain

45
00:02:29,680 --> 00:02:34,280
Speaker 1: all of the numbers that are coming out, namely the inflation. Okay,

46
00:02:34,280 --> 00:02:37,000
Speaker 1: so joining us is going to be Ira Jersey of

47
00:02:37,000 --> 00:02:39,480
Speaker 1: bloom Brig Intelligence. He's also one of the hosts of

48
00:02:39,520 --> 00:02:44,120
Speaker 1: the Thick Focus podcast by bloom Brig Intelligence. So if

49
00:02:44,160 --> 00:02:46,120
Speaker 1: you like what he has to say this time, please

50
00:02:46,160 --> 00:02:52,160
Speaker 1: go check out that podcast as well, this time on Trilliance,

51
00:02:53,080 --> 00:02:59,240
Speaker 1: fed splaining AI, Right, welcome to Trilliance, Thanks very much

52
00:02:59,240 --> 00:03:03,000
Speaker 1: for having me. Okay, so we've got these inflation numbers.

53
00:03:03,800 --> 00:03:07,040
Speaker 1: Maybe a little bit surprising because after you know, the

54
00:03:07,120 --> 00:03:11,000
Speaker 1: numbers have just been on a tear. Maybe he's plateau ing. Now,

55
00:03:11,080 --> 00:03:14,919
Speaker 1: how does that change the Fed's next move? Well, first,

56
00:03:15,480 --> 00:03:19,360
Speaker 1: it was not completely unexpected that we'd have somewhat slower

57
00:03:19,400 --> 00:03:23,000
Speaker 1: inflation in July than we had in June. Um, we

58
00:03:23,000 --> 00:03:25,360
Speaker 1: were always expecting June to kind of be the peak

59
00:03:25,480 --> 00:03:29,040
Speaker 1: in a year on year inflation in particular. Um. So

60
00:03:29,120 --> 00:03:31,160
Speaker 1: for the FED, they're gonna look past some of these

61
00:03:31,240 --> 00:03:33,320
Speaker 1: numbers for for one thing, it's only one number, right,

62
00:03:33,400 --> 00:03:36,600
Speaker 1: So so we need a string of better numbers for

63
00:03:36,680 --> 00:03:40,520
Speaker 1: the FED reserve not to remain relatively hawkish on hike

64
00:03:40,560 --> 00:03:44,040
Speaker 1: interest rates. That's number one and number two. Um, when

65
00:03:44,040 --> 00:03:46,640
Speaker 1: when you look into the details, right, So why was

66
00:03:46,920 --> 00:03:51,360
Speaker 1: headline inflation zero month on month? Primarily because gas prices

67
00:03:51,480 --> 00:03:53,839
Speaker 1: are down a lot. And then when you look under

68
00:03:53,880 --> 00:03:56,000
Speaker 1: the hood and you look at a lot of the

69
00:03:56,040 --> 00:03:59,360
Speaker 1: details of the numbers, so what we call call core inflation,

70
00:03:59,400 --> 00:04:02,200
Speaker 1: so that's x looting food and energy that was still

71
00:04:02,280 --> 00:04:04,880
Speaker 1: up pretty hefty and looks like you know, on on

72
00:04:04,920 --> 00:04:08,440
Speaker 1: a on an annualized basis still up almost four percent,

73
00:04:08,640 --> 00:04:11,040
Speaker 1: so and and on a year on year basis still

74
00:04:11,120 --> 00:04:14,040
Speaker 1: up almost six percent. So you're still looking at inflation

75
00:04:14,080 --> 00:04:17,200
Speaker 1: trends in for most goods and services that are still

76
00:04:17,320 --> 00:04:20,800
Speaker 1: rising very significantly. And um, and the Fed is still

77
00:04:20,839 --> 00:04:22,240
Speaker 1: not going to like that. And I think that you're

78
00:04:22,240 --> 00:04:23,800
Speaker 1: going to have to hear that from a lot of

79
00:04:23,800 --> 00:04:26,640
Speaker 1: FED speakers over the next six weeks or so before

80
00:04:26,680 --> 00:04:30,119
Speaker 1: the next meeting. So, um, you know I have heard again,

81
00:04:30,240 --> 00:04:32,159
Speaker 1: um correctly if I'm wrong, that the Fed is would

82
00:04:32,160 --> 00:04:34,880
Speaker 1: like to get two what is the two percent the

83
00:04:34,960 --> 00:04:38,600
Speaker 1: year over year? Like what what? What? What? What number

84
00:04:38,760 --> 00:04:42,120
Speaker 1: is two percent? And how would they get there? Yeah, so,

85
00:04:42,120 --> 00:04:44,560
Speaker 1: so the goal of the Federal Reserve is two percent

86
00:04:44,760 --> 00:04:47,919
Speaker 1: year on year inflation for the headline number. Now, you know,

87
00:04:47,960 --> 00:04:50,400
Speaker 1: if they hit two point three or you know, if

88
00:04:50,560 --> 00:04:52,440
Speaker 1: if it's within the range and then they see core

89
00:04:52,520 --> 00:04:54,919
Speaker 1: inflation that that X food and energy is kind of

90
00:04:54,960 --> 00:04:57,920
Speaker 1: at two percent, they that would make them pretty happy. Um.

91
00:04:58,080 --> 00:05:01,520
Speaker 1: So that's their goal and that's their state objective. The

92
00:05:01,600 --> 00:05:03,880
Speaker 1: problem is is that it's quite frankly, it's gonna take

93
00:05:03,960 --> 00:05:06,200
Speaker 1: years for them to get there. So the question is

94
00:05:06,240 --> 00:05:10,880
Speaker 1: do they remain um in this inflation fighting mode until

95
00:05:10,920 --> 00:05:13,760
Speaker 1: they get to two percent? Or if you see this

96
00:05:13,920 --> 00:05:17,840
Speaker 1: massive downtrend and inflation, will that make them you know,

97
00:05:17,880 --> 00:05:21,160
Speaker 1: stop hiking interest rates and maybe do some more dovish activity,

98
00:05:21,320 --> 00:05:23,880
Speaker 1: especially if the rest of the economy looks like it's

99
00:05:23,920 --> 00:05:27,039
Speaker 1: falling apart. So if you see unemployment going up and

100
00:05:27,120 --> 00:05:30,320
Speaker 1: you see um retail sales for example, start to plummet

101
00:05:30,440 --> 00:05:34,000
Speaker 1: very significantly again excluding gas, right because get you know,

102
00:05:34,040 --> 00:05:36,359
Speaker 1: retail sales with gas in it is going to be

103
00:05:36,400 --> 00:05:39,480
Speaker 1: down anyway, just because we're paying less at the pump. Um.

104
00:05:39,520 --> 00:05:42,360
Speaker 1: So so I that really is that number, Eric, that

105
00:05:42,360 --> 00:05:44,400
Speaker 1: that you have to focus on when you're thinking about

106
00:05:44,440 --> 00:05:47,120
Speaker 1: what is the federal reserves next move, is that um

107
00:05:47,600 --> 00:05:49,680
Speaker 1: is going to be the trend in that headline number,

108
00:05:49,720 --> 00:05:51,880
Speaker 1: but also that core number. So you really need to

109
00:05:51,960 --> 00:05:54,920
Speaker 1: look at both. Well, okay, let me okay, if it's

110
00:05:55,000 --> 00:05:58,719
Speaker 1: year over year and it was nine in June and

111
00:05:58,800 --> 00:06:01,800
Speaker 1: now eight point five percent in July, I guess my

112
00:06:01,839 --> 00:06:05,880
Speaker 1: point is we elevated that much in a year. Now

113
00:06:06,080 --> 00:06:10,600
Speaker 1: are they looking to undo the elevation or just hang

114
00:06:10,680 --> 00:06:13,719
Speaker 1: on for the next ten months until the elevated number

115
00:06:14,160 --> 00:06:17,760
Speaker 1: goes up less than two from an already elevated number.

116
00:06:17,800 --> 00:06:20,359
Speaker 1: Like if we're let's let's put this in weight terms,

117
00:06:20,720 --> 00:06:23,279
Speaker 1: where we weigh two hundred pounds nick, but Julie did

118
00:06:23,279 --> 00:06:25,080
Speaker 1: this on Twitter. I thought it was a good metaphor.

119
00:06:25,440 --> 00:06:28,880
Speaker 1: We now we weigh two hundred and twenty pounds, uh,

120
00:06:28,920 --> 00:06:32,280
Speaker 1: and in July we gain no weight. We're still to twenty.

121
00:06:32,000 --> 00:06:34,560
Speaker 1: Are they Are they going to look to go back

122
00:06:34,560 --> 00:06:37,479
Speaker 1: down to two hundred or just keep to twenty for

123
00:06:37,520 --> 00:06:40,719
Speaker 1: the next eight months or ten months? Well, so, so

124
00:06:40,800 --> 00:06:43,440
Speaker 1: the real goal is to get the growth rate lower.

125
00:06:43,600 --> 00:06:47,239
Speaker 1: So it would be the weight example is not quite

126
00:06:47,240 --> 00:06:49,640
Speaker 1: good because I'd be saying you know, we went from

127
00:06:49,680 --> 00:06:52,360
Speaker 1: two percent to two or two two hundred pounds to

128
00:06:52,440 --> 00:06:55,280
Speaker 1: twenty and now in the future we only want to

129
00:06:55,320 --> 00:06:57,480
Speaker 1: go up. We only want to go up about four

130
00:06:57,520 --> 00:06:59,839
Speaker 1: pounds a year, right, And so so I'm not sure

131
00:06:59,880 --> 00:07:03,400
Speaker 1: that analogy is why I don't like that. That sounds

132
00:07:03,560 --> 00:07:10,920
Speaker 1: that sounds too real, um, which which you know may

133
00:07:10,920 --> 00:07:13,200
Speaker 1: be true for some people. But but the real goal

134
00:07:13,320 --> 00:07:16,400
Speaker 1: is to kind of stop the stop the increase, right,

135
00:07:16,440 --> 00:07:18,280
Speaker 1: So it's really but in other words, but that that

136
00:07:18,400 --> 00:07:22,240
Speaker 1: still accepts the fact that it has increased. Prices are up,

137
00:07:22,440 --> 00:07:24,840
Speaker 1: and that's so in other words, we're okay at this

138
00:07:24,880 --> 00:07:27,640
Speaker 1: new normal. We just don't want it to grow anymore. Correct.

139
00:07:27,640 --> 00:07:30,240
Speaker 1: So so the so so the FEDS, the FEDS job

140
00:07:30,320 --> 00:07:34,400
Speaker 1: here is to um slow the growth, not change the level,

141
00:07:34,560 --> 00:07:36,880
Speaker 1: if that makes sense, right. You know, it's okay, you

142
00:07:36,880 --> 00:07:38,920
Speaker 1: don't want to go from the Fed's not going to

143
00:07:39,000 --> 00:07:41,040
Speaker 1: go from two to two hundred, right, that would be

144
00:07:41,080 --> 00:07:44,120
Speaker 1: deflation or disinflation. That would be a whole different problem.

145
00:07:44,360 --> 00:07:46,320
Speaker 1: We're gonna be in the heavyweight category from now on.

146
00:07:48,240 --> 00:07:49,720
Speaker 1: I'm going to use this on my wife because I

147
00:07:49,760 --> 00:07:52,120
Speaker 1: did put on about fifteen pounds during the pandemic, but

148
00:07:52,160 --> 00:07:55,120
Speaker 1: I haven't gained any weight in about six months. I

149
00:07:55,160 --> 00:07:57,400
Speaker 1: was gonna do that inflation Jedi mind trick on her

150
00:07:57,480 --> 00:08:00,320
Speaker 1: and be like, I haven't gained any weight zero. Good

151
00:08:00,400 --> 00:08:02,200
Speaker 1: luck with that. She's gonna go, Yes, you have, but

152
00:08:02,240 --> 00:08:07,480
Speaker 1: I'm like, no, I'm talking about in July. So so

153
00:08:07,520 --> 00:08:11,680
Speaker 1: if you're the Fed, your j PAL, you're looking at

154
00:08:11,720 --> 00:08:15,280
Speaker 1: this in your options, what what are you looking for

155
00:08:15,480 --> 00:08:18,680
Speaker 1: going forward here in these next few weeks before this

156
00:08:18,920 --> 00:08:22,120
Speaker 1: next right decision that might you know, change the course

157
00:08:22,160 --> 00:08:25,640
Speaker 1: of what the next hike or non hike looks like. Well,

158
00:08:25,680 --> 00:08:29,120
Speaker 1: what's interesting about this cycle is normally you you get

159
00:08:29,160 --> 00:08:31,680
Speaker 1: six weeks in between Federal Reserve meetings, so you kind

160
00:08:31,680 --> 00:08:34,360
Speaker 1: of get one and a half month's worth of data

161
00:08:34,440 --> 00:08:36,760
Speaker 1: before the FED has to make a decision. But this

162
00:08:36,800 --> 00:08:39,560
Speaker 1: time is unusual because they're gonna have two months. They

163
00:08:39,559 --> 00:08:42,440
Speaker 1: have eight weeks in between FED meetings, and because of that,

164
00:08:42,440 --> 00:08:44,480
Speaker 1: they're actually gonna get two sets of data. So even

165
00:08:44,480 --> 00:08:47,400
Speaker 1: though we got the July numbers for CPI and we'll

166
00:08:47,400 --> 00:08:50,840
Speaker 1: get the July retail sales numbers um and you know,

167
00:08:50,880 --> 00:08:54,480
Speaker 1: before the Jackson Whole symposium where where j PAL will

168
00:08:54,520 --> 00:08:58,080
Speaker 1: speak and probably make a pretty important policy address. They're

169
00:08:58,080 --> 00:09:00,199
Speaker 1: gonna get all the August numbers too before or the

170
00:09:00,280 --> 00:09:03,200
Speaker 1: next meeting, so they're gonna have this whole huge set

171
00:09:03,240 --> 00:09:05,400
Speaker 1: of data that they're going to have to consider. So

172
00:09:05,679 --> 00:09:09,000
Speaker 1: if there's a re acceleration, like you know, oil prices

173
00:09:09,000 --> 00:09:11,000
Speaker 1: are up a little bit now compared to where they

174
00:09:11,040 --> 00:09:15,720
Speaker 1: were um when when the when the July number was calculated,

175
00:09:16,000 --> 00:09:19,760
Speaker 1: so all of these things will probably see um, you know,

176
00:09:19,840 --> 00:09:24,760
Speaker 1: a a maybe a slightly continued downtrend of of headline inflation,

177
00:09:25,080 --> 00:09:27,960
Speaker 1: but things like core inflation at five point nine percent,

178
00:09:28,080 --> 00:09:30,200
Speaker 1: which is by the way, a multi decade high, and

179
00:09:30,240 --> 00:09:33,319
Speaker 1: we stayed there um from June to July, so it's

180
00:09:33,320 --> 00:09:35,400
Speaker 1: at the exact same number on a year on year basis.

181
00:09:35,800 --> 00:09:38,480
Speaker 1: If that stays at those kind of levels, that's going

182
00:09:38,559 --> 00:09:41,160
Speaker 1: to lead the FED to say, okay, well we think

183
00:09:41,160 --> 00:09:43,360
Speaker 1: that inflation is going to be much stickier and at

184
00:09:43,440 --> 00:09:45,960
Speaker 1: levels we don't like. So so the FED is going

185
00:09:46,040 --> 00:09:50,120
Speaker 1: to be looking for significant down trends in the economy um.

186
00:09:50,320 --> 00:09:52,400
Speaker 1: And there are some signs of that of a slowing

187
00:09:52,400 --> 00:09:55,120
Speaker 1: in the economy, but they haven't rolled over enough I

188
00:09:55,120 --> 00:09:57,080
Speaker 1: think for the FED Reserve to get dubbish. So they're

189
00:09:57,080 --> 00:10:01,280
Speaker 1: gonna keep on reducing their balance sheet. Eric Apply alluded

190
00:10:01,320 --> 00:10:03,600
Speaker 1: to that not so long ago, UM. And at the

191
00:10:03,640 --> 00:10:05,800
Speaker 1: other at the other side, they're also going to be

192
00:10:06,120 --> 00:10:08,320
Speaker 1: UM continuing to hike interest rates, even if it's at

193
00:10:08,320 --> 00:10:11,080
Speaker 1: a slower pace. Right, the seventy five basis point hikes

194
00:10:11,080 --> 00:10:13,640
Speaker 1: that they've done the last couple of meetings probably won't

195
00:10:13,640 --> 00:10:16,480
Speaker 1: be sustained, UM, But if they go fifty basis points

196
00:10:16,480 --> 00:10:19,319
Speaker 1: in September and then basis points there after, that wouldn't

197
00:10:19,360 --> 00:10:21,720
Speaker 1: be a huge surprise to us. And just can you

198
00:10:21,800 --> 00:10:25,079
Speaker 1: break down what happens when the Fed hikes let's say

199
00:10:25,080 --> 00:10:29,200
Speaker 1: they hike seventy five basis points, how does that action

200
00:10:30,000 --> 00:10:33,480
Speaker 1: cause a reaction that helps inflation? Like, can you just

201
00:10:33,880 --> 00:10:36,480
Speaker 1: take us through that chain of events and where that

202
00:10:36,720 --> 00:10:39,920
Speaker 1: hike goes. Sure? So, so in the olden days, when

203
00:10:39,960 --> 00:10:43,080
Speaker 1: we go back to the pre N three you know,

204
00:10:43,160 --> 00:10:46,640
Speaker 1: when we're on the gold standard, the Federal Reserve tried

205
00:10:46,679 --> 00:10:49,160
Speaker 1: to slow the economy and increase the economy by changing

206
00:10:49,160 --> 00:10:51,160
Speaker 1: the amount of money in the economy. So they used

207
00:10:51,200 --> 00:10:54,360
Speaker 1: to target monetary aggregates, what they called monetary aggregates. So

208
00:10:54,880 --> 00:10:57,559
Speaker 1: M three M two UM and and some of these

209
00:10:57,559 --> 00:11:01,320
Speaker 1: other money supply measures UM and so since that time.

210
00:11:01,520 --> 00:11:04,800
Speaker 1: But but so since the nineteen seventy three, they instead

211
00:11:04,840 --> 00:11:09,199
Speaker 1: of targeting any particular stock of money, they basically say

212
00:11:09,240 --> 00:11:12,480
Speaker 1: we're gonna make borrowing either more or less expensive, and

213
00:11:12,520 --> 00:11:15,280
Speaker 1: they do that by raising the Federal Funds rate, which

214
00:11:15,280 --> 00:11:18,920
Speaker 1: is the base rate that banks uh that banks lend

215
00:11:18,920 --> 00:11:21,520
Speaker 1: money to each other. So when the Fed Funds rate

216
00:11:21,559 --> 00:11:24,120
Speaker 1: goes up, that means that that bank borrowing costs go

217
00:11:24,240 --> 00:11:26,640
Speaker 1: up that and they pass that along to the consumer,

218
00:11:27,000 --> 00:11:30,880
Speaker 1: and it just generally makes it more expensive, um for

219
00:11:30,880 --> 00:11:34,520
Speaker 1: for people to buy things on credit and UM and

220
00:11:34,640 --> 00:11:37,800
Speaker 1: and because it's it's more difficult to buy things on credit,

221
00:11:37,840 --> 00:11:40,760
Speaker 1: because it's just more expensive to do so, UM, that

222
00:11:40,800 --> 00:11:44,120
Speaker 1: tends to slow economic activity. And that's that's certainly worked

223
00:11:44,480 --> 00:11:48,240
Speaker 1: pretty pretty effectively over the last forty years or so. UM.

224
00:11:48,320 --> 00:11:51,880
Speaker 1: Paul Vulker, you know, UH famously raised interest rates to

225
00:11:53,080 --> 00:11:56,720
Speaker 1: during the nineteen uh the early nineteen eighties, and that

226
00:11:56,800 --> 00:12:00,000
Speaker 1: had a significant effect on credit growth in the econom

227
00:12:00,000 --> 00:12:02,920
Speaker 1: of me. UM. What's important now, and this is something

228
00:12:02,960 --> 00:12:05,120
Speaker 1: that that we've noted in some of our recent research,

229
00:12:05,880 --> 00:12:09,520
Speaker 1: is the the challenge I think for policymakers is that

230
00:12:09,840 --> 00:12:12,160
Speaker 1: not only is inflation very high, but one of the

231
00:12:12,200 --> 00:12:15,480
Speaker 1: reasons inflation is very high is because is that wages

232
00:12:15,520 --> 00:12:19,000
Speaker 1: are going up. So so now you have a situation

233
00:12:19,040 --> 00:12:21,000
Speaker 1: where the FED is going to be hiking short term

234
00:12:21,040 --> 00:12:23,720
Speaker 1: interest rates to try and slow the economy, but in

235
00:12:23,760 --> 00:12:27,840
Speaker 1: an environment where companies are willing to pay employees more money. Um.

236
00:12:28,000 --> 00:12:30,400
Speaker 1: And and that's something that you haven't seen since the

237
00:12:30,480 --> 00:12:33,520
Speaker 1: nineteen seventies. And I think that that's an important shift

238
00:12:33,640 --> 00:12:36,720
Speaker 1: from the last forty years versus say the nineteen seventies,

239
00:12:36,720 --> 00:12:40,360
Speaker 1: when people had were unions and they had automatic wage

240
00:12:40,360 --> 00:12:43,640
Speaker 1: increases when CPI was um what what went up? They

241
00:12:43,679 --> 00:12:46,080
Speaker 1: automatically had their wages increased. So you have this big

242
00:12:46,120 --> 00:12:50,520
Speaker 1: wage spiral. You're seeing some similar activity today, um, which

243
00:12:50,600 --> 00:12:54,560
Speaker 1: is which is very unusual, particularly in a non unionized workforce.

244
00:12:56,280 --> 00:12:59,320
Speaker 1: Speaking of sort of historical precedents, one of the things

245
00:12:59,320 --> 00:13:01,800
Speaker 1: that's interesting here, I saw a reference I think in

246
00:13:01,960 --> 00:13:05,880
Speaker 1: John Author's recent column about what the FED got wrong

247
00:13:06,120 --> 00:13:09,240
Speaker 1: in the seventies and sort of what what vocal Vulgar

248
00:13:09,360 --> 00:13:11,560
Speaker 1: ended up having to correct, and that was sort of

249
00:13:11,600 --> 00:13:14,200
Speaker 1: on on the Burns watch, I think, right. And so

250
00:13:14,440 --> 00:13:15,720
Speaker 1: one of the things I guess I would ask you

251
00:13:15,760 --> 00:13:17,760
Speaker 1: just to make that to bring it forward to now

252
00:13:17,880 --> 00:13:21,480
Speaker 1: is what what could the Fed potentially get wrong here

253
00:13:21,600 --> 00:13:25,400
Speaker 1: that J. Powell will be mindful of. Yeah. So I

254
00:13:25,440 --> 00:13:28,400
Speaker 1: think that the big danger here is that the FED decides,

255
00:13:28,440 --> 00:13:30,760
Speaker 1: because we're having a mid cycle slow down and the

256
00:13:30,760 --> 00:13:34,400
Speaker 1: economy slows a little bit, that they stop hiking interest rates,

257
00:13:34,520 --> 00:13:38,040
Speaker 1: and in doing so, the economy then re accelerates and

258
00:13:38,120 --> 00:13:42,280
Speaker 1: you wind up with more persistent inflation, more persistent inflation expectations,

259
00:13:42,800 --> 00:13:46,719
Speaker 1: and that forces the FED Reserve to hike even more later. Um.

260
00:13:46,800 --> 00:13:49,160
Speaker 1: So I think that that's a real danger. And when

261
00:13:49,240 --> 00:13:51,800
Speaker 1: you in all the work that that we've done, and

262
00:13:51,840 --> 00:13:54,720
Speaker 1: that even that our colleagues at Bloomberg Economics with that

263
00:13:54,800 --> 00:13:57,240
Speaker 1: and I'm Wrong's team in the US is has done,

264
00:13:57,480 --> 00:13:59,960
Speaker 1: we all think that the Fed Reserve is probably going

265
00:14:00,040 --> 00:14:02,559
Speaker 1: to have to hike more than what the market is

266
00:14:02,559 --> 00:14:05,520
Speaker 1: currently pricing. So the markets pricing you know, round numbers

267
00:14:05,559 --> 00:14:07,120
Speaker 1: three and a half to three and a half percent,

268
00:14:07,160 --> 00:14:10,520
Speaker 1: So another hundred basis points one percent increase in in

269
00:14:10,600 --> 00:14:12,560
Speaker 1: the FED funds rate over the over the next six

270
00:14:12,640 --> 00:14:15,280
Speaker 1: months or so, and then the market has has the

271
00:14:15,320 --> 00:14:17,680
Speaker 1: Fed stopping. Um. But we think that the Fed is

272
00:14:17,679 --> 00:14:20,240
Speaker 1: going to have to keep going into three up to

273
00:14:20,920 --> 00:14:22,920
Speaker 1: I think more like four and a quarter percent. The

274
00:14:22,920 --> 00:14:26,560
Speaker 1: Bloomberg Economics things five percent, but but still significantly more

275
00:14:26,640 --> 00:14:29,600
Speaker 1: than what the market is pricing. And in part because

276
00:14:29,640 --> 00:14:32,840
Speaker 1: if they don't do that, then if if if in

277
00:14:32,920 --> 00:14:35,280
Speaker 1: fact we're in the midst of a mid cycle slowdown,

278
00:14:35,280 --> 00:14:39,760
Speaker 1: which is not unusual after very large pickups in the economy, UM,

279
00:14:39,960 --> 00:14:43,560
Speaker 1: then you wind up getting more entrenched inflation expectations, and

280
00:14:43,600 --> 00:14:47,240
Speaker 1: that forces employees to ask for more money. UH. Wages

281
00:14:47,280 --> 00:14:50,240
Speaker 1: go up, profits get crimped on the on the corporate

282
00:14:50,600 --> 00:14:53,080
Speaker 1: UH side, which you know, we've already priced some of

283
00:14:53,120 --> 00:14:57,480
Speaker 1: that into the stock market for sure. But the you

284
00:14:57,520 --> 00:15:01,320
Speaker 1: wind up getting getting inflation that has to be crimped

285
00:15:01,360 --> 00:15:05,920
Speaker 1: down even harder and more. Um. So, so the worry

286
00:15:06,040 --> 00:15:08,040
Speaker 1: is that you wind up with a you know, an

287
00:15:08,120 --> 00:15:10,800
Speaker 1: Arthur Byurne situation where you stop hiking after a little

288
00:15:10,800 --> 00:15:13,560
Speaker 1: while and then you have to hike even more later um.

289
00:15:13,720 --> 00:15:15,920
Speaker 1: And so so we need a Vulcar. And I thought

290
00:15:15,920 --> 00:15:18,760
Speaker 1: it was interesting a couple of meetings ago. J. Powell

291
00:15:18,760 --> 00:15:21,480
Speaker 1: actually mentioned Vulcan and said that you know, they were

292
00:15:21,600 --> 00:15:24,280
Speaker 1: very that that the Federal Reserve was very keen and

293
00:15:24,320 --> 00:15:27,120
Speaker 1: appreciated what Volker had to do back in the nineteen eighties.

294
00:15:27,160 --> 00:15:29,160
Speaker 1: And and I took that to mean that, like, they

295
00:15:29,560 --> 00:15:31,880
Speaker 1: recognize what happened back then and they don't want to

296
00:15:31,880 --> 00:15:43,520
Speaker 1: repeat the same mistakes. Let's talk about the hiking and

297
00:15:43,560 --> 00:15:47,880
Speaker 1: the impact on on bonds first. Um. So, obviously, if

298
00:15:47,880 --> 00:15:52,120
Speaker 1: the Fed hikes rates, interest rates go up, it basically

299
00:15:52,160 --> 00:15:55,040
Speaker 1: means all the bonds that people hold are just worthless

300
00:15:55,120 --> 00:15:57,440
Speaker 1: because you can now get bonds at a higher rate. Right,

301
00:15:57,560 --> 00:16:01,040
Speaker 1: So what we've seen is just a bond e t

302
00:16:01,240 --> 00:16:04,480
Speaker 1: F s and bond mutual funds are down. I mean

303
00:16:04,560 --> 00:16:07,520
Speaker 1: basically everyone's down over the last twelve months. And in

304
00:16:07,520 --> 00:16:09,840
Speaker 1: the mutual fund space there's been a ton of outflows too.

305
00:16:09,920 --> 00:16:12,920
Speaker 1: It's just pretty bad. We have seen a lot of

306
00:16:12,920 --> 00:16:15,280
Speaker 1: flows in the treasury ETFs all year. They basically about

307
00:16:15,320 --> 00:16:20,000
Speaker 1: double their normal inflow takage. Then sometimes you'll see people

308
00:16:20,000 --> 00:16:23,280
Speaker 1: shift down the curve, um, but then they'll go back

309
00:16:23,360 --> 00:16:26,480
Speaker 1: to short term what's going on there? Um As a

310
00:16:26,520 --> 00:16:29,440
Speaker 1: money manager, what's your interpretation of all the flows into

311
00:16:29,600 --> 00:16:32,000
Speaker 1: treasury e t f this year? Yeah, I think part

312
00:16:32,040 --> 00:16:35,160
Speaker 1: of that is just taking advantage of of higher yields.

313
00:16:35,320 --> 00:16:37,760
Speaker 1: So when when interest rates or at zero, and they

314
00:16:37,800 --> 00:16:40,480
Speaker 1: were at zero obviously for more than more than a year,

315
00:16:41,200 --> 00:16:44,240
Speaker 1: you didn't have a lot of room to actually lose

316
00:16:44,280 --> 00:16:46,480
Speaker 1: any money. Right, So, if you were buying, say a

317
00:16:46,800 --> 00:16:49,760
Speaker 1: bond mutual fund, where when the tenure yield was at

318
00:16:49,840 --> 00:16:54,520
Speaker 1: one percent or under one percent, then if you if

319
00:16:54,720 --> 00:16:56,880
Speaker 1: interest rates only went up a couple of basis points,

320
00:16:56,880 --> 00:16:58,960
Speaker 1: you'd start to lose money because the price of that

321
00:16:59,080 --> 00:17:01,960
Speaker 1: bond would go down own um. There's something we call

322
00:17:02,080 --> 00:17:06,160
Speaker 1: duration and um where where it's basically the relationship between

323
00:17:06,240 --> 00:17:09,480
Speaker 1: the price and yield of a bond. Where um and

324
00:17:09,640 --> 00:17:12,200
Speaker 1: and durations were very high, meaning that if you get

325
00:17:12,280 --> 00:17:14,760
Speaker 1: just a one or two basis point increase in in

326
00:17:14,880 --> 00:17:17,960
Speaker 1: bond yields, you'd wind up with a large decrease in

327
00:17:18,040 --> 00:17:20,520
Speaker 1: the price of the bond. And that's exactly what's happened

328
00:17:20,560 --> 00:17:23,399
Speaker 1: over the course of this year in particular. But now

329
00:17:23,480 --> 00:17:25,720
Speaker 1: that we've reached you know, upwards of three percent on

330
00:17:25,800 --> 00:17:28,600
Speaker 1: the ten year yield um, it makes it a little

331
00:17:28,600 --> 00:17:32,040
Speaker 1: bit more attractive because you can actually get a coupon,

332
00:17:32,160 --> 00:17:35,240
Speaker 1: you actually get interest payments of some you know, some

333
00:17:36,000 --> 00:17:38,280
Speaker 1: amount I mean not the three percent is particularly high

334
00:17:38,320 --> 00:17:41,159
Speaker 1: in historical standards for the last forty years, but it's

335
00:17:41,200 --> 00:17:43,600
Speaker 1: still significantly more than you know, the seventy five basis

336
00:17:43,640 --> 00:17:46,320
Speaker 1: points where um, where bonds were at the beginning of

337
00:17:47,000 --> 00:17:49,080
Speaker 1: one right. So um, So, so you wind up with

338
00:17:49,240 --> 00:17:51,600
Speaker 1: with an environment where it's maybe a little bit more

339
00:17:51,640 --> 00:17:54,360
Speaker 1: attractive to buy bonds today than it has been recently.

340
00:17:55,160 --> 00:17:57,440
Speaker 1: So I read this being an e t F podcast,

341
00:17:57,960 --> 00:18:01,520
Speaker 1: Just let's stick with, uh what your outlook and how

342
00:18:01,600 --> 00:18:05,879
Speaker 1: that informs E t fs. And you know, Eric specifically

343
00:18:05,960 --> 00:18:09,119
Speaker 1: mentioned bonds. They're curious, um, you know, even on the

344
00:18:09,200 --> 00:18:11,640
Speaker 1: equity side, like where do you when you think about

345
00:18:11,680 --> 00:18:15,240
Speaker 1: this on a bigger macro level, what do people in

346
00:18:15,320 --> 00:18:18,080
Speaker 1: the E t F world? What should they be mindful

347
00:18:18,119 --> 00:18:21,640
Speaker 1: of here? Yeah? So, so I think firstly, if if

348
00:18:21,720 --> 00:18:25,080
Speaker 1: we are right and the Federal Reserve hikes a little

349
00:18:25,119 --> 00:18:27,760
Speaker 1: bit more um than the market is currently pricing, that

350
00:18:27,920 --> 00:18:30,879
Speaker 1: you could still see negative returns for bonds over the

351
00:18:30,960 --> 00:18:34,560
Speaker 1: next uh six six to twelve months. Um. But but

352
00:18:34,600 --> 00:18:37,160
Speaker 1: I don't think it's gonna compare anything like we had

353
00:18:37,359 --> 00:18:39,960
Speaker 1: over the previous six months. So um. You know, the

354
00:18:40,600 --> 00:18:46,280
Speaker 1: first half of has been absolutely abysmal forum for treasury

355
00:18:46,359 --> 00:18:50,120
Speaker 1: securities and and bonds in general. UM. So it's it's

356
00:18:50,680 --> 00:18:52,720
Speaker 1: what to look out for in particular is when the

357
00:18:52,760 --> 00:18:56,119
Speaker 1: Fed stops right, So, when the Federal Reserve stops hiking

358
00:18:56,160 --> 00:18:59,200
Speaker 1: interest rates, it's very likely that UM that shorter term

359
00:18:59,280 --> 00:19:02,720
Speaker 1: securities going to do a bit better than longer term securities. Now,

360
00:19:02,800 --> 00:19:04,880
Speaker 1: if you're you're if you're buying any t F typically

361
00:19:05,760 --> 00:19:08,520
Speaker 1: they don't wait securities by their risk profile, by the

362
00:19:08,640 --> 00:19:11,399
Speaker 1: duration that I talked about earlier. But what they do

363
00:19:11,720 --> 00:19:15,320
Speaker 1: what so so in total return terms UM is short

364
00:19:15,440 --> 00:19:19,359
Speaker 1: end securities could still maybe underperform longer term securities on

365
00:19:19,440 --> 00:19:22,280
Speaker 1: a price basis, but but you could wind up with

366
00:19:22,359 --> 00:19:25,280
Speaker 1: an environment like we have today where short term securities

367
00:19:25,359 --> 00:19:29,399
Speaker 1: offer more yield, more interest UM over over the near term.

368
00:19:29,480 --> 00:19:31,720
Speaker 1: So it really depends on what your risk profile is

369
00:19:31,760 --> 00:19:35,119
Speaker 1: why you're buying bonds UM. If you're buying bonds and

370
00:19:35,400 --> 00:19:38,360
Speaker 1: you're buying a bond fund you know t LT for example,

371
00:19:38,640 --> 00:19:40,800
Speaker 1: or one of those types of ETFs that that is

372
00:19:40,920 --> 00:19:44,240
Speaker 1: long only and tends to be longer term securities, they

373
00:19:44,640 --> 00:19:46,600
Speaker 1: at this point might be more of a hedge to

374
00:19:47,440 --> 00:19:51,719
Speaker 1: your equity portfolio than they were when um uh, when

375
00:19:52,160 --> 00:19:55,040
Speaker 1: interest rates were basically at zero, and and they didn't

376
00:19:55,119 --> 00:19:58,120
Speaker 1: offer very much protection because even if the stock market

377
00:19:58,160 --> 00:20:01,119
Speaker 1: went down ten percent, the tenure yield wasn't going to

378
00:20:01,200 --> 00:20:03,320
Speaker 1: go down so much that you were going to be

379
00:20:03,359 --> 00:20:05,920
Speaker 1: able to make up for that um that that that

380
00:20:06,080 --> 00:20:09,440
Speaker 1: downturn in your risk ask set portfolio. So so so

381
00:20:09,520 --> 00:20:11,560
Speaker 1: I think at this point we're going to have start

382
00:20:11,640 --> 00:20:15,080
Speaker 1: to have more and more of a normal relationship where

383
00:20:15,240 --> 00:20:18,440
Speaker 1: you know, equities go up, you know, bond prices go down,

384
00:20:18,560 --> 00:20:21,480
Speaker 1: and then vice versa, where where you can actually use

385
00:20:21,560 --> 00:20:23,680
Speaker 1: bonds as a hedge again, which you couldn't do for

386
00:20:23,720 --> 00:20:26,160
Speaker 1: a couple of years. Yeah. No, that was a big deal,

387
00:20:26,280 --> 00:20:28,440
Speaker 1: is that the sixty and the forty were down. Although

388
00:20:28,520 --> 00:20:31,120
Speaker 1: I was trying to explain to people that both went

389
00:20:31,280 --> 00:20:34,960
Speaker 1: up for many years. I think part of the reason

390
00:20:35,000 --> 00:20:37,040
Speaker 1: they both went up was the Fed was very accommodative.

391
00:20:37,080 --> 00:20:39,200
Speaker 1: So stands to reason if the Fed good does a

392
00:20:39,280 --> 00:20:41,439
Speaker 1: one eight uh, they would both go down for at

393
00:20:41,520 --> 00:20:44,800
Speaker 1: least a little bit um, which has happened already this year. Actually,

394
00:20:44,800 --> 00:20:47,560
Speaker 1: are right, So so you you have seen both stocks

395
00:20:47,600 --> 00:20:51,359
Speaker 1: and bonds prices go down and have negative returns and

396
00:20:51,400 --> 00:20:53,840
Speaker 1: like you said, sixty was terrible and and that's the

397
00:20:54,400 --> 00:20:57,479
Speaker 1: that's the quantitative tightening trade right there. So well when

398
00:20:57,600 --> 00:21:00,320
Speaker 1: when you and let me just jump in on that

399
00:21:00,480 --> 00:21:03,119
Speaker 1: quantitative tightening. So we just talked about the rates. Just

400
00:21:03,400 --> 00:21:05,800
Speaker 1: let's just hand like deal with the other side of this.

401
00:21:06,400 --> 00:21:09,359
Speaker 1: The Fed also has a balance sheet, right and do

402
00:21:09,400 --> 00:21:12,239
Speaker 1: you hear words like run off. In the past, they

403
00:21:12,280 --> 00:21:15,680
Speaker 1: were buying bonds, which was called quantitative easing. Now we're

404
00:21:15,680 --> 00:21:18,800
Speaker 1: doing cute quantitative tightning. You just explain where we're at

405
00:21:18,840 --> 00:21:23,040
Speaker 1: with that. Sure, So in in August of two, the

406
00:21:23,080 --> 00:21:27,400
Speaker 1: Federal Reserve is running off its balance sheet by allowing

407
00:21:27,520 --> 00:21:32,040
Speaker 1: maturing bonds not to um not get reinvested into their portfolio.

408
00:21:32,200 --> 00:21:35,399
Speaker 1: So that has the effect of shrinking the Fed's asset

409
00:21:35,560 --> 00:21:38,400
Speaker 1: pool in their balance sheets. So both mortgage backed securities

410
00:21:38,400 --> 00:21:41,119
Speaker 1: and trosury securities are running off. Starting in September of

411
00:21:41,160 --> 00:21:44,160
Speaker 1: this year, that will go up significantly where they're going

412
00:21:44,240 --> 00:21:48,440
Speaker 1: to run off up to billion dollars a month of

413
00:21:48,520 --> 00:21:53,200
Speaker 1: their portfolio. Now I don't never reach uh, primarily because

414
00:21:53,240 --> 00:21:57,359
Speaker 1: mortgage backed securities run off at different um at different

415
00:21:57,480 --> 00:22:01,280
Speaker 1: speeds based on how many people prepaid mortgages and and

416
00:22:01,480 --> 00:22:03,399
Speaker 1: with interest rates as high as they are, not as

417
00:22:03,440 --> 00:22:05,960
Speaker 1: many people are pre paying their mortgages as they used

418
00:22:05,960 --> 00:22:09,200
Speaker 1: to do, is not refinancings. People aren't moving as frequently

419
00:22:09,240 --> 00:22:11,879
Speaker 1: as they used to, so so that that's running more

420
00:22:12,000 --> 00:22:14,440
Speaker 1: like twenty billion dollars instead of the thirty five billion

421
00:22:14,480 --> 00:22:17,960
Speaker 1: dollar cap that the Federal Reserve um has put on.

422
00:22:18,359 --> 00:22:21,679
Speaker 1: But they will run off sixty billion dollars of treasury securities. Now,

423
00:22:21,760 --> 00:22:24,160
Speaker 1: some people think that because they're running off sixty billion

424
00:22:24,240 --> 00:22:27,800
Speaker 1: of treasury securities that means that bond yields should be

425
00:22:27,880 --> 00:22:31,920
Speaker 1: going higher. Well, just because you have extra supply in

426
00:22:32,520 --> 00:22:35,879
Speaker 1: the market. Um I would say there's two parts to that.

427
00:22:36,000 --> 00:22:38,280
Speaker 1: One is that the markets already anticipated that, because we've

428
00:22:38,359 --> 00:22:40,840
Speaker 1: known this now for six months, so the markets already

429
00:22:40,840 --> 00:22:44,000
Speaker 1: adjusted for this additional supply. This number one. Number two,

430
00:22:44,119 --> 00:22:46,399
Speaker 1: you have another interesting dynamic which has nothing to do

431
00:22:46,480 --> 00:22:49,000
Speaker 1: with the FED. It has to do with wages as

432
00:22:49,400 --> 00:22:52,200
Speaker 1: growing as strongly as they are. Tax receipts into the

433
00:22:52,240 --> 00:22:55,320
Speaker 1: federal government have been much larger than most of us anticipated.

434
00:22:55,760 --> 00:22:58,680
Speaker 1: And because of that those higher tax receipts the government,

435
00:22:59,080 --> 00:23:01,240
Speaker 1: the government deficit much lower than we thought it was

436
00:23:01,280 --> 00:23:03,800
Speaker 1: going to be. So even though the FED is running

437
00:23:03,840 --> 00:23:07,280
Speaker 1: off the treasury portfolio, Um, they don't have to uh

438
00:23:07,400 --> 00:23:10,119
Speaker 1: sell those bonds to the market or more bonds to

439
00:23:10,160 --> 00:23:13,240
Speaker 1: the market. So you've actually had a situation where, um,

440
00:23:13,480 --> 00:23:15,960
Speaker 1: where where the supply dynamics and the treasury market have

441
00:23:16,080 --> 00:23:18,680
Speaker 1: been more more even than you might have expected with

442
00:23:19,400 --> 00:23:22,640
Speaker 1: with the runoff of the Fed's portfolio. So, UM, there'll

443
00:23:22,640 --> 00:23:24,360
Speaker 1: be a little bit of a bump when we get

444
00:23:24,400 --> 00:23:27,440
Speaker 1: to when we get to September and October, but it's

445
00:23:27,480 --> 00:23:30,080
Speaker 1: not going to be very significant. In fact, we just

446
00:23:30,160 --> 00:23:33,080
Speaker 1: got information, um at the beginning of August that the

447
00:23:33,400 --> 00:23:36,359
Speaker 1: Treasury Department cut the amount of Treasury bonds that are

448
00:23:36,359 --> 00:23:39,320
Speaker 1: going to be issued every single month, and and they're

449
00:23:39,320 --> 00:23:41,320
Speaker 1: they're likely to cut it just a little bit more

450
00:23:41,400 --> 00:23:44,119
Speaker 1: over the next few months too, even with this extra

451
00:23:44,440 --> 00:23:50,040
Speaker 1: supply coming from the from the federal reserves runnel. That

452
00:23:50,200 --> 00:23:52,720
Speaker 1: is good to know. UM. And I think let's just

453
00:23:53,200 --> 00:23:55,800
Speaker 1: let's pivot here, and UM, I think we did. We've

454
00:23:55,880 --> 00:23:58,960
Speaker 1: covered the FED. I think hopefully everybody has a better

455
00:23:59,000 --> 00:24:02,000
Speaker 1: handle on what's going on and where the FEDS point

456
00:24:02,040 --> 00:24:04,879
Speaker 1: of views is going to be. I wanna do like

457
00:24:04,960 --> 00:24:08,160
Speaker 1: a rapid fire with you uh, and just throw out

458
00:24:08,200 --> 00:24:10,720
Speaker 1: some different type of bond ETFs and get your take

459
00:24:10,800 --> 00:24:13,480
Speaker 1: on them. Um. Again, I've always enjoyed talking to you

460
00:24:13,600 --> 00:24:16,560
Speaker 1: and hearing your take when a new e t F

461
00:24:16,680 --> 00:24:19,480
Speaker 1: comes out, usually it's interesting. Um, I want to start

462
00:24:19,520 --> 00:24:22,080
Speaker 1: with tips. Um. You you you're not a fan of

463
00:24:22,359 --> 00:24:25,200
Speaker 1: tip e t fs, but you are a fan of tips.

464
00:24:25,520 --> 00:24:30,199
Speaker 1: Explain why? Sure? Well? So so tips are treasury inflation

465
00:24:30,280 --> 00:24:33,560
Speaker 1: protected securities. These are these are bonds that UM if

466
00:24:33,640 --> 00:24:35,680
Speaker 1: you if you were to buy an individual bond and

467
00:24:35,720 --> 00:24:38,879
Speaker 1: hold it to maturity, you would get whatever the yield

468
00:24:39,080 --> 00:24:42,399
Speaker 1: was plus inflation. The problem is is that when you

469
00:24:42,480 --> 00:24:45,399
Speaker 1: buy it an e t F form UM, you're you

470
00:24:46,040 --> 00:24:49,119
Speaker 1: you don't hold to maturity and you take a lot

471
00:24:49,200 --> 00:24:51,040
Speaker 1: of interest rate risks. So if you're looking for an

472
00:24:51,080 --> 00:24:53,720
Speaker 1: inflation hedge, UM, you're not going to get it because

473
00:24:53,760 --> 00:24:55,720
Speaker 1: as interest rates go up, the price of a bond

474
00:24:55,800 --> 00:24:58,480
Speaker 1: goes down. That's true for tips as well. UM, So

475
00:24:58,680 --> 00:25:01,720
Speaker 1: as an inflation hedge, it's tips are not very good

476
00:25:02,200 --> 00:25:05,000
Speaker 1: now as an alternative to say, if you were to

477
00:25:05,040 --> 00:25:07,080
Speaker 1: go out and buy a TIP fund instead of say

478
00:25:07,240 --> 00:25:10,480
Speaker 1: t lt UM, it makes a lot of sense during

479
00:25:10,480 --> 00:25:13,240
Speaker 1: a time when inflation is going up and very high,

480
00:25:13,320 --> 00:25:16,960
Speaker 1: because then you have UM because your tip fund will

481
00:25:17,000 --> 00:25:20,360
Speaker 1: probably outperform the bond fund UM. But but that's not true.

482
00:25:20,400 --> 00:25:22,360
Speaker 1: It's not a true inflation head. So if you buy

483
00:25:22,440 --> 00:25:25,080
Speaker 1: tips as an inflation hedge, really what you have to

484
00:25:25,160 --> 00:25:27,080
Speaker 1: do is head your interest rate exposure. And there's not

485
00:25:27,240 --> 00:25:29,880
Speaker 1: too many funds that actually do that. UM. So there's

486
00:25:29,920 --> 00:25:33,840
Speaker 1: one fund called r I n F that actually buys

487
00:25:33,880 --> 00:25:37,399
Speaker 1: tips and then hedges your interest rate exposure, so you

488
00:25:37,520 --> 00:25:41,720
Speaker 1: do capture most of the UH, most of the inflation increase.

489
00:25:41,800 --> 00:25:43,600
Speaker 1: So that so that's one way that if you are

490
00:25:43,640 --> 00:25:45,560
Speaker 1: worried that inflation is going to remain very high for

491
00:25:45,600 --> 00:25:48,719
Speaker 1: the longer term, that's a fund that you might consider. UM.

492
00:25:48,920 --> 00:25:52,000
Speaker 1: But but but you know, buying tips tip fund outright,

493
00:25:52,119 --> 00:25:54,840
Speaker 1: thinking it's an inflation hedge is just absolutely false and

494
00:25:55,320 --> 00:25:57,959
Speaker 1: and and and that's why I don't love tips funds

495
00:25:58,119 --> 00:26:00,840
Speaker 1: unless you want to buy them as an alternative to

496
00:26:01,119 --> 00:26:03,680
Speaker 1: another bond fund in your portfolio UM, and you have

497
00:26:03,760 --> 00:26:07,359
Speaker 1: a good reason to do that. What about single bond

498
00:26:07,720 --> 00:26:12,919
Speaker 1: exchange traded funds. This is a relatively new phenomenon UH

499
00:26:13,119 --> 00:26:17,120
Speaker 1: and they hold UH ten year, two year, three year

500
00:26:17,280 --> 00:26:21,520
Speaker 1: treasury bonds right and bills. So that is like brand

501
00:26:21,600 --> 00:26:23,520
Speaker 1: new and I'm curious how that's going to play out.

502
00:26:23,720 --> 00:26:27,280
Speaker 1: UM and these tickers, Eric, uh, correct me if I'm wrong.

503
00:26:27,560 --> 00:26:32,199
Speaker 1: They've got uh U t E, n U t WO

504
00:26:32,880 --> 00:26:35,440
Speaker 1: and then T BUILD T B I L. So what's

505
00:26:35,480 --> 00:26:38,879
Speaker 1: your what's your outlook for those? Yeah? So so again

506
00:26:39,000 --> 00:26:42,040
Speaker 1: like it's it's they're more trading instruments then I think

507
00:26:42,080 --> 00:26:45,080
Speaker 1: that they would be in terms of buying hold um.

508
00:26:45,280 --> 00:26:47,359
Speaker 1: But but there is certain advantage to them because if

509
00:26:47,440 --> 00:26:49,840
Speaker 1: you you can you know, hone in on a particular

510
00:26:50,280 --> 00:26:53,080
Speaker 1: part of the yield curve. So when when we talk

511
00:26:53,119 --> 00:26:56,159
Speaker 1: about managing money, you know, you have two choices, right,

512
00:26:56,200 --> 00:26:58,720
Speaker 1: you can buy a bond, or you can buy the market. Right,

513
00:26:58,760 --> 00:27:00,640
Speaker 1: so you can buy an index like you can buy

514
00:27:00,720 --> 00:27:04,000
Speaker 1: the Bloomberg Treasury Index for example. And then obviously there's

515
00:27:04,080 --> 00:27:06,080
Speaker 1: mutual funds out there that that do that, and there's

516
00:27:06,119 --> 00:27:08,879
Speaker 1: ettfs out there that um that that have that mandate.

517
00:27:09,200 --> 00:27:12,159
Speaker 1: But if you do that, you're buying the entire market

518
00:27:12,320 --> 00:27:14,520
Speaker 1: from you know, the from one year treasuries all the

519
00:27:14,560 --> 00:27:17,080
Speaker 1: way out the thirty year treasuries. So this allows you

520
00:27:17,240 --> 00:27:19,639
Speaker 1: to say, okay, well we think that that ten year

521
00:27:19,720 --> 00:27:22,200
Speaker 1: securities are going to do better than two year security,

522
00:27:22,240 --> 00:27:23,880
Speaker 1: So I want to buy just the ten year part

523
00:27:23,920 --> 00:27:27,040
Speaker 1: of the curve. UM and and so a single um,

524
00:27:27,320 --> 00:27:30,120
Speaker 1: a single bond ETF would allow you to do that. Um,

525
00:27:30,440 --> 00:27:31,800
Speaker 1: you know, is it Is it going to be something

526
00:27:31,840 --> 00:27:34,119
Speaker 1: that's going to be used by most investors. I'm not

527
00:27:34,200 --> 00:27:37,480
Speaker 1: sure that they make sense for most investors, who if

528
00:27:37,520 --> 00:27:39,040
Speaker 1: you're going to buy a certain part of the curve,

529
00:27:39,080 --> 00:27:41,280
Speaker 1: you'd be better off buying, say this a seven to

530
00:27:41,400 --> 00:27:43,840
Speaker 1: ten year fund. And there's plenty of ETFs out there

531
00:27:43,880 --> 00:27:46,239
Speaker 1: that are like intermediate term bond funds or short term

532
00:27:46,280 --> 00:27:48,320
Speaker 1: bond funds, and I think those might make a little

533
00:27:48,400 --> 00:27:52,600
Speaker 1: more sense than buying a single bond ETF for for

534
00:27:52,640 --> 00:27:55,320
Speaker 1: a vast majority of investors. But for traders, if you

535
00:27:55,400 --> 00:27:59,440
Speaker 1: have a specific reason to buy a particular part of

536
00:27:59,440 --> 00:28:01,800
Speaker 1: the curve, then than a single bond ETF could make

537
00:28:01,800 --> 00:28:05,840
Speaker 1: a lot of sense. Okay, what about a new bond

538
00:28:05,880 --> 00:28:08,760
Speaker 1: blocks is a new sort of upstart bond ETF company

539
00:28:08,840 --> 00:28:10,360
Speaker 1: with some people who used to work at black Rock,

540
00:28:10,440 --> 00:28:13,560
Speaker 1: and they're very smart people there. Um we actually lost

541
00:28:13,680 --> 00:28:17,200
Speaker 1: Bloomberg person went to work there as well. Um x

542
00:28:17,440 --> 00:28:22,440
Speaker 1: C C C. This is um all triple C bonds

543
00:28:22,720 --> 00:28:25,040
Speaker 1: in an e t F. This is to me interesting

544
00:28:25,119 --> 00:28:27,639
Speaker 1: because up until now the most triple cs you can

545
00:28:27,680 --> 00:28:30,120
Speaker 1: get in a junk bond ETF was about it held

546
00:28:30,160 --> 00:28:33,239
Speaker 1: maybe was triple C. This is a hundred, so it's

547
00:28:33,280 --> 00:28:35,920
Speaker 1: going from to a hundred and h y G and

548
00:28:36,000 --> 00:28:39,920
Speaker 1: J and K only hold about eight. So this is

549
00:28:40,200 --> 00:28:43,640
Speaker 1: very very huge, big step forward into the junkier side

550
00:28:43,640 --> 00:28:45,520
Speaker 1: of junk. And I want to get your take on that.

551
00:28:46,720 --> 00:28:48,280
Speaker 1: So there's a couple of things. I mean, high yield

552
00:28:48,320 --> 00:28:50,640
Speaker 1: in general and and the lower rated you get, so

553
00:28:50,720 --> 00:28:53,080
Speaker 1: like going down to triple C, which is very close

554
00:28:53,160 --> 00:28:56,400
Speaker 1: to default ratings. So these are very low rated bonds

555
00:28:56,440 --> 00:28:59,200
Speaker 1: and not actually the sector that I curve currently, although

556
00:28:59,240 --> 00:29:01,680
Speaker 1: I haven't in the in the distant past, it was

557
00:29:01,760 --> 00:29:04,920
Speaker 1: part of my job. Um, they tend not to be

558
00:29:05,080 --> 00:29:07,760
Speaker 1: very interest rate sensitive, right, so so they tend to

559
00:29:07,840 --> 00:29:11,280
Speaker 1: trade more on price as opposed to yield. Um. You know,

560
00:29:11,320 --> 00:29:13,320
Speaker 1: if that if the five year treasury or ten year

561
00:29:13,320 --> 00:29:15,680
Speaker 1: treasury moves a lot, you might not see any movement

562
00:29:15,760 --> 00:29:18,840
Speaker 1: in triple C bonds because they trade much more like equities.

563
00:29:19,000 --> 00:29:22,200
Speaker 1: So buying a triple C bond is basically saying, I

564
00:29:22,280 --> 00:29:26,520
Speaker 1: don't think that the majority of companies within this UM,

565
00:29:26,960 --> 00:29:29,720
Speaker 1: within this portfolio, we're going to default, right, are gonna

566
00:29:29,800 --> 00:29:34,360
Speaker 1: stop paying their their interest and principal payments. So so

567
00:29:34,520 --> 00:29:37,760
Speaker 1: triple cs are very low rated, tend to be very

568
00:29:38,040 --> 00:29:41,200
Speaker 1: sensitive to two movements in the equity market and in

569
00:29:41,280 --> 00:29:44,000
Speaker 1: the underlying stocks of the companies that are UM that

570
00:29:44,080 --> 00:29:46,560
Speaker 1: are in that portfolio. So if you're going to buy that,

571
00:29:46,680 --> 00:29:48,880
Speaker 1: just know that you're you're not really buying interest rates,

572
00:29:49,000 --> 00:29:52,479
Speaker 1: You're you're more buying credit risk if you're if you're

573
00:29:52,520 --> 00:30:02,160
Speaker 1: going to buy anyt F like that, Okay, I want

574
00:30:02,160 --> 00:30:03,480
Speaker 1: to ask you about another one. This is one of

575
00:30:03,560 --> 00:30:06,480
Speaker 1: the fastest growing bond ETFs on the market. It's called

576
00:30:06,600 --> 00:30:09,960
Speaker 1: I U s B and it's the I shares Core

577
00:30:10,080 --> 00:30:14,760
Speaker 1: Total US Bond Market et F. Traditionally everybody has gone

578
00:30:14,800 --> 00:30:16,680
Speaker 1: into b n D and a g G, which tracked

579
00:30:16,720 --> 00:30:19,760
Speaker 1: the quote AG. The Aggregate Bond Index, which is a

580
00:30:19,760 --> 00:30:23,680
Speaker 1: Bloomberg index used to be Barkley's easily the most popular. Right,

581
00:30:24,280 --> 00:30:28,520
Speaker 1: a lot of fixed income managers have easily beaten the

582
00:30:28,560 --> 00:30:31,600
Speaker 1: EGG to a higher rate than equity managers can beat

583
00:30:31,640 --> 00:30:34,320
Speaker 1: the SNP, and thus they have staved off the move

584
00:30:34,400 --> 00:30:39,360
Speaker 1: to passive much better. But the agg IS holds a

585
00:30:39,400 --> 00:30:42,280
Speaker 1: lot of treasuries and doesn't hold any high yielded international

586
00:30:42,360 --> 00:30:44,120
Speaker 1: And many of these managers go out and they buy

587
00:30:44,240 --> 00:30:47,880
Speaker 1: high yield international. An I U s B holds dose

588
00:30:47,960 --> 00:30:51,720
Speaker 1: of high yield and international and it's more bonds. And

589
00:30:51,800 --> 00:30:54,040
Speaker 1: when you compare the fixed income managers to that, their

590
00:30:54,080 --> 00:30:56,520
Speaker 1: beat rate gets more in line with the equity side.

591
00:30:57,560 --> 00:30:59,760
Speaker 1: Thoughts on that as being your chords that of a

592
00:30:59,840 --> 00:31:03,479
Speaker 1: g g UM I have to admit I'm not as

593
00:31:03,560 --> 00:31:07,240
Speaker 1: familiar with with a USB at all, but it seems

594
00:31:07,280 --> 00:31:09,160
Speaker 1: to me like it. Again, it would depend on what

595
00:31:09,320 --> 00:31:12,320
Speaker 1: your um what your goal was. I mean, I mean

596
00:31:12,360 --> 00:31:16,680
Speaker 1: anytime you hold a broad based fixed income index, your

597
00:31:16,840 --> 00:31:19,719
Speaker 1: your primary returns are going to come from rates um

598
00:31:19,760 --> 00:31:22,800
Speaker 1: particularly investment grade indices, which which is what you're talking

599
00:31:22,800 --> 00:31:26,160
Speaker 1: about here. So if you own a g g like,

600
00:31:27,760 --> 00:31:29,320
Speaker 1: your return is going to come from what goes on

601
00:31:29,360 --> 00:31:31,360
Speaker 1: in mind market. The rest of it is going to

602
00:31:31,440 --> 00:31:33,760
Speaker 1: come from credit risk or what's gone on in the

603
00:31:33,800 --> 00:31:37,000
Speaker 1: mortgage market, where mortgage spreads might widen or tighten a

604
00:31:37,080 --> 00:31:39,600
Speaker 1: little bit because of supplying demand dynamics and the like.

605
00:31:40,240 --> 00:31:42,959
Speaker 1: UM so any time that that you own these I think,

606
00:31:43,040 --> 00:31:45,520
Speaker 1: you know, it's things like cost that are gonna matter,

607
00:31:45,640 --> 00:31:47,800
Speaker 1: you know, for for sure um. And then also how

608
00:31:47,880 --> 00:31:49,960
Speaker 1: much credit exposure do you want? Because I think that

609
00:31:50,080 --> 00:31:52,920
Speaker 1: that you know, there's a lot of people who in

610
00:31:53,000 --> 00:31:55,680
Speaker 1: a period where say they think that risk assets are

611
00:31:55,680 --> 00:31:58,560
Speaker 1: going to do better, they might want more credit exposure.

612
00:31:58,680 --> 00:32:00,880
Speaker 1: So you want to look at how muchy corporate bonds

613
00:32:00,920 --> 00:32:03,960
Speaker 1: and how much high yield is in any particular portfolio,

614
00:32:04,080 --> 00:32:06,360
Speaker 1: you know, whether it's whether it's an et F or

615
00:32:06,560 --> 00:32:09,239
Speaker 1: or a mutual fund. And you know, so I think

616
00:32:09,280 --> 00:32:12,080
Speaker 1: you really want to make sure that that your risk

617
00:32:12,160 --> 00:32:17,040
Speaker 1: profile also isn't um isn't commingled right. So so if

618
00:32:17,120 --> 00:32:19,760
Speaker 1: you were, if you're an investor who you know, you

619
00:32:19,840 --> 00:32:21,480
Speaker 1: have a lot of stocks, and you have a lot

620
00:32:21,520 --> 00:32:24,520
Speaker 1: of you know, say small cap stocks for example, you

621
00:32:24,600 --> 00:32:26,640
Speaker 1: might not want necessarily a whole lot of high yield

622
00:32:26,640 --> 00:32:29,880
Speaker 1: exposure because now you have two asset classes that are

623
00:32:29,960 --> 00:32:33,440
Speaker 1: very collinear um and and that will move very similarly.

624
00:32:33,840 --> 00:32:35,920
Speaker 1: So you you know, a lot of times you buy bonds,

625
00:32:35,920 --> 00:32:37,840
Speaker 1: like why do you buy bonds? If you buy bonds

626
00:32:37,920 --> 00:32:40,720
Speaker 1: because it's a hedge for your stock portfolio. Then you know,

627
00:32:40,840 --> 00:32:43,600
Speaker 1: you don't want a whole lot of um, a whole

628
00:32:43,640 --> 00:32:46,720
Speaker 1: lot of credit exposure compared to say treasuries or mortgages,

629
00:32:46,800 --> 00:32:51,000
Speaker 1: which tend to have less correlation in terms of in

630
00:32:51,160 --> 00:32:55,120
Speaker 1: terms of excess returns compared to the equity market. So um,

631
00:32:55,600 --> 00:32:57,400
Speaker 1: you know. So, so I would say in general that

632
00:32:57,560 --> 00:32:58,960
Speaker 1: that's what you have to look at, is just you

633
00:32:59,000 --> 00:33:01,680
Speaker 1: know what, what kind of risk profiles both of those

634
00:33:01,720 --> 00:33:04,720
Speaker 1: portfolios are going to have, regardless of of of which

635
00:33:04,800 --> 00:33:10,520
Speaker 1: broduct there. Okay Ira. At the top of this episode,

636
00:33:11,240 --> 00:33:16,080
Speaker 1: Eric likened the FED to God. So does God exist

637
00:33:17,040 --> 00:33:18,960
Speaker 1: well as one of the as one of the priests,

638
00:33:19,080 --> 00:33:22,120
Speaker 1: I have to say, yes, okay, So alright, I was

639
00:33:22,160 --> 00:33:24,560
Speaker 1: expecting that answer. Yeah. I don't know if am I

640
00:33:24,640 --> 00:33:26,240
Speaker 1: going to get in trouble from the real God for that?

641
00:33:28,840 --> 00:33:31,120
Speaker 1: Let me just say to the real God, it's just

642
00:33:31,240 --> 00:33:33,160
Speaker 1: the figure of speech, but I will say when it

643
00:33:33,200 --> 00:33:36,600
Speaker 1: comes to markets, Um, I'm just so blown away. Over

644
00:33:36,680 --> 00:33:40,680
Speaker 1: the last fifteen years, in particular, almost everything is related

645
00:33:40,720 --> 00:33:42,959
Speaker 1: to how the FED will react. So bad news can

646
00:33:43,040 --> 00:33:45,480
Speaker 1: be good and good news can be bad. And it's

647
00:33:45,520 --> 00:33:50,719
Speaker 1: just really interesting of how much power this one service

648
00:33:50,840 --> 00:33:53,440
Speaker 1: and the one person particularly whoever is the FED chair

649
00:33:54,080 --> 00:33:56,280
Speaker 1: has over the markets. I mean the whole thing. It's

650
00:33:56,280 --> 00:33:59,080
Speaker 1: like the sun. Maybe that's a better metaphor, but um,

651
00:33:59,320 --> 00:34:04,480
Speaker 1: it's just it's just something else. It's just really um

652
00:34:05,120 --> 00:34:06,800
Speaker 1: more than I thought when I was in like college

653
00:34:06,800 --> 00:34:09,200
Speaker 1: and stuff. I just didn't think the FED was this

654
00:34:09,880 --> 00:34:13,759
Speaker 1: this omnipotent. They always have been eric and you know,

655
00:34:13,840 --> 00:34:16,040
Speaker 1: the Federal Reserve when we go back to you know,

656
00:34:16,080 --> 00:34:18,320
Speaker 1: and I started my career in the early nineteen nineties,

657
00:34:18,760 --> 00:34:21,400
Speaker 1: and we were worried, and we were very worried about

658
00:34:21,480 --> 00:34:25,960
Speaker 1: the Federal Reserve, um, you know, hiking interest rates back then.

659
00:34:26,080 --> 00:34:28,440
Speaker 1: And and you know, one point, they hiked interest rate

660
00:34:29,040 --> 00:34:31,040
Speaker 1: basis points at one point, just like they did the

661
00:34:31,120 --> 00:34:33,320
Speaker 1: Less couple of meetings, and that was a bit of

662
00:34:33,400 --> 00:34:35,640
Speaker 1: a surprise because people thought that they were only gonna

663
00:34:35,680 --> 00:34:38,839
Speaker 1: hike fifty right. So, so you had this significant You've

664
00:34:38,840 --> 00:34:41,719
Speaker 1: always had the Federal Reserve and and the markets anticipating

665
00:34:42,040 --> 00:34:44,880
Speaker 1: what will the Federal Reserve do? And then what effect

666
00:34:44,920 --> 00:34:47,320
Speaker 1: will that then have on the economy and therefore the

667
00:34:47,440 --> 00:34:51,280
Speaker 1: markets and and so so the analysis of financial markets

668
00:34:51,320 --> 00:34:54,840
Speaker 1: in general almost has to start with the macroeconomy and

669
00:34:54,920 --> 00:34:57,719
Speaker 1: then how the Federal Reserve is going to react to that,

670
00:34:57,920 --> 00:35:00,160
Speaker 1: and then everything else stems from there and kind uh

671
00:35:00,480 --> 00:35:02,640
Speaker 1: you know, spokes off the wheel that you know, if

672
00:35:02,719 --> 00:35:04,560
Speaker 1: the if the Federal reserves that kind of in the

673
00:35:04,640 --> 00:35:07,160
Speaker 1: middle of the of that wheel. Think about all the

674
00:35:07,239 --> 00:35:09,719
Speaker 1: spokes that that come off from that and uh, and

675
00:35:10,000 --> 00:35:12,279
Speaker 1: how that affects the different parts of the economy and

676
00:35:12,360 --> 00:35:16,920
Speaker 1: the different markets. Okay, So last question, Ira, We've got

677
00:35:16,960 --> 00:35:23,080
Speaker 1: this Jackson Hole uh FED annual meeting happening soon. You

678
00:35:23,200 --> 00:35:25,880
Speaker 1: mentioned earlier that you would expect a big sort of

679
00:35:26,080 --> 00:35:31,239
Speaker 1: policy presence or or statement from from Pal. Pretend you're

680
00:35:31,320 --> 00:35:35,239
Speaker 1: j Pal and you have this forum. What what are

681
00:35:35,280 --> 00:35:38,960
Speaker 1: you going to put forward? Yeah, so Jackson Hole, I

682
00:35:39,080 --> 00:35:43,320
Speaker 1: think J. Powell will um, uh what will probably basically

683
00:35:43,360 --> 00:35:46,960
Speaker 1: stay the course and say, look, even though the CPI

684
00:35:47,160 --> 00:35:50,839
Speaker 1: data is better, and and we're encouraged by the fact

685
00:35:50,880 --> 00:35:54,439
Speaker 1: that we had you know, zero percent inflation court month

686
00:35:54,520 --> 00:35:58,960
Speaker 1: over month, um, we're still very concerned about core inflation measures.

687
00:35:59,280 --> 00:36:02,200
Speaker 1: We still think the employment the employment situation is very

688
00:36:02,280 --> 00:36:05,480
Speaker 1: hot and wages arising very quickly, and all of these

689
00:36:05,520 --> 00:36:08,600
Speaker 1: things still point to us needing to be vigilant over inflation,

690
00:36:08,680 --> 00:36:11,640
Speaker 1: which once he uses language like that that's suggesting that

691
00:36:11,760 --> 00:36:14,360
Speaker 1: they're still going to be in hiking mode. And I

692
00:36:14,440 --> 00:36:17,480
Speaker 1: think that J. Powell is likely to take the opportunity

693
00:36:17,560 --> 00:36:19,560
Speaker 1: to continue to say that, and I would agree with

694
00:36:19,640 --> 00:36:22,400
Speaker 1: him in that regard um. But but again, like I

695
00:36:22,560 --> 00:36:25,040
Speaker 1: think that he might even need to be And if

696
00:36:25,080 --> 00:36:27,759
Speaker 1: I were him, I would be even more forceful and say, like, look,

697
00:36:27,800 --> 00:36:30,240
Speaker 1: the market has it wrong. Just say it. The market

698
00:36:30,440 --> 00:36:32,360
Speaker 1: thinks that we're only going to hike to three and

699
00:36:32,360 --> 00:36:34,839
Speaker 1: a half percent, We're going more than that. And you've

700
00:36:34,840 --> 00:36:37,600
Speaker 1: already had a lot of speakers since the July meeting

701
00:36:38,080 --> 00:36:40,560
Speaker 1: say we've already you know, we we think we're gonna

702
00:36:40,600 --> 00:36:43,080
Speaker 1: hike to three point seven five to four percent by

703
00:36:43,239 --> 00:36:45,960
Speaker 1: year end. Well, you know the market is still not

704
00:36:46,040 --> 00:36:48,279
Speaker 1: pricing for that. So and and and this would be

705
00:36:48,440 --> 00:36:51,239
Speaker 1: his big opportunity for I think the FED chair to

706
00:36:51,360 --> 00:36:55,080
Speaker 1: be very explicit about the expectations of the Committee as

707
00:36:55,120 --> 00:36:57,239
Speaker 1: a whole and him in particular as to how how

708
00:36:57,360 --> 00:36:58,800
Speaker 1: much they're going to hike for the rest of the

709
00:36:58,920 --> 00:37:01,600
Speaker 1: year and in twenty me through it. I have a

710
00:37:01,680 --> 00:37:03,600
Speaker 1: last question for you. Do you have a favorite et

711
00:37:03,719 --> 00:37:07,720
Speaker 1: F ticker? Uh? You mean the actual ticker or the fund.

712
00:37:08,760 --> 00:37:10,759
Speaker 1: Well let's start with ticker, but you can tick. You

713
00:37:10,800 --> 00:37:14,279
Speaker 1: can if if you prefer fun that's okay too. Uh yeah,

714
00:37:15,000 --> 00:37:17,520
Speaker 1: well it's funny now that since my parents live in

715
00:37:17,560 --> 00:37:20,320
Speaker 1: North Carolina, I was I was thinking what Eric just

716
00:37:20,400 --> 00:37:25,399
Speaker 1: said with you all, um, but the yeah, probably probably tip.

717
00:37:25,440 --> 00:37:27,600
Speaker 1: I think that that's a great, great ticker, like just

718
00:37:27,719 --> 00:37:29,799
Speaker 1: in general, because it could actually have meant a lot

719
00:37:29,840 --> 00:37:32,520
Speaker 1: of things, Like I was actually surprised that, you know,

720
00:37:32,640 --> 00:37:34,560
Speaker 1: someone else didn't have some kind of e t F

721
00:37:34,719 --> 00:37:38,040
Speaker 1: that automatically, um, you know, did things off of you know,

722
00:37:38,200 --> 00:37:41,640
Speaker 1: tips that that uh you know, maybe maybe equity analysts

723
00:37:41,800 --> 00:37:44,920
Speaker 1: had or something like that. Um, but uh yeah, tip

724
00:37:45,040 --> 00:37:48,200
Speaker 1: is a great ticker, I think. Ira Gersy, thanks so

725
00:37:48,280 --> 00:37:50,759
Speaker 1: much for joining us on Trillions. Thank you for having me,

726
00:37:55,480 --> 00:37:58,440
Speaker 1: Thanks for listening to Trillions until next time. You can

727
00:37:58,480 --> 00:38:03,280
Speaker 1: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,

728
00:38:04,000 --> 00:38:06,400
Speaker 1: or wherever else you'd like to listen. We'd love to

729
00:38:06,480 --> 00:38:09,799
Speaker 1: hear from you. We're on Twitter, I'm at Joel Webber Show.

730
00:38:10,200 --> 00:38:14,800
Speaker 1: He's at Eric Baltunas. This episode of Trillions was produced

731
00:38:14,840 --> 00:38:17,040
Speaker 1: by Magnus Hendrickson spipe