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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast and I'm Tom

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Speaker 1: Keene Jai Ley. We bring you insight from the best

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Speaker 1: in economics, finance, investment, and international relations. Find Bloomberg Surveillance

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Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course

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Speaker 1: on the Bloomberg It's one security, it's one number, the

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Speaker 1: ten year tracery and three percent. Just what is so important?

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Speaker 1: If there's anything important at all about a psychological line

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Speaker 1: in the sand that hasn't been crossed in more than

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Speaker 1: four years, we can bring in now Carl Weinberg, high

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Speaker 1: frequency Economics founder who joins us in New York. Car

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Speaker 1: important or not important at all? Oh, it's it's psychologically important,

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Speaker 1: I think. But I'm hard pressed to argue that the

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Speaker 1: gentle rise we're seeing in bond yields over time is

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Speaker 1: really making a breaking force on the economy. With inflation

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Speaker 1: sizing up to be around I don't know, two and

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Speaker 1: a half percent or thereabouts, you're looking at half a

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Speaker 1: percent real rate of interest on ten year bonds. That's

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Speaker 1: not going to do the job that the Fed has

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Speaker 1: to do of slowing the rate of growth of jobs

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Speaker 1: in the economy. Carl would you describe this as grant

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Speaker 1: you Although we were close to two percent just back

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Speaker 1: in September the two year no that yields doubled in

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Speaker 1: in less than a year. We've had a real real

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Speaker 1: re price across the curve over the last six to

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Speaker 1: nine months. Yeah, I see, I see what you're saying.

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Speaker 1: And for markets, is a good bit of volatility in

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Speaker 1: there that we haven't seen in a long time. And

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Speaker 1: that's certainly an issue for the markets. But speaking as

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Speaker 1: an economist, which unfortunately is the limit of my abilities,

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Speaker 1: we're looking at really long term yields that still have

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Speaker 1: to go higher in order to break the economy. What's

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Speaker 1: more important at the moment, Carl, as far as you're

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Speaker 1: concerned in terms of what's happening with the debt market.

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Speaker 1: Is it the supply the amount of debt issuance we

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Speaker 1: get even more through this week as well? Is it

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Speaker 1: a cross spective inflations down into bubble away the price

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Speaker 1: pressure finally started to come through. Is it something else?

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Speaker 1: What is it? Well, it's yes and yes the both

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Speaker 1: of those questions. I mean, the market should be thinking

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Speaker 1: about inflation risks. It's it's not here now, But the

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Speaker 1: laws of supply and demand haven't been repealed. The labor

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Speaker 1: market keeps on getting tighter, and is by colleague Jim

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Speaker 1: O'Sullivan suggests, unless the labor market stops getting tighter, it's

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Speaker 1: going to reach a point where it is going to

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Speaker 1: trigger some wage pressure. And as far as supply is concerned,

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Speaker 1: while we've all been reading about the the US deficit

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Speaker 1: and the impact that the tax cuts on it, that's

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Speaker 1: got to be weighing very heavily on the market, especially

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Speaker 1: at an auction time like this. Well, much of that

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Speaker 1: issuance has come at the front end so far. Colm,

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Speaker 1: I guess my question to you is, at what point

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Speaker 1: do you start to consider these yields as sort of

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Speaker 1: a restriction against the general economy. You say, not now,

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Speaker 1: but looking at where short term interest rates, that's got

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Speaker 1: to take a fight at some point, Yes, at some

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Speaker 1: point it does. Right now, though, the indications that that

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Speaker 1: we're looking at and that the Feder looking at, just

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Speaker 1: that it's not biting very much. We're seeing the sentiment

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Speaker 1: in disease looking quite positive. We're seeing the Fed remarking

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Speaker 1: that financial conditions are still quite easy, with the stock

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Speaker 1: market being so strong, so profits being good, so overall,

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Speaker 1: it doesn't seem to be biting just yet. How do

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Speaker 1: guys like you draw fiscal debt and deficit economics into

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Speaker 1: all your monetary and international swirl. Where does it fit

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Speaker 1: in algebraically, where does it fit in geometrically, or just

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Speaker 1: simply where's it fit in in reality? Well? I think

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Speaker 1: reality is the easiest place to put it, because as

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Speaker 1: economists you have to have a free floating anxiety about

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Speaker 1: this business of running up the fiscal deficit at a

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Speaker 1: time when the economy is so tight, stimulating the economy,

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Speaker 1: when labor is already in scarce supply relative to demand,

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Speaker 1: of pushing an economy that's arguably at the peak of

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Speaker 1: its business cycle. That's what the I m F told

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Speaker 1: this this weekend. That's what jam O. Sullivan is telling

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Speaker 1: us in his high frequency e CAN mixed notes. Um. So,

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Speaker 1: the overall the question is not so much what happens

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Speaker 1: right now, but what's going to happen when the cycle turns?

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Speaker 1: And that's inevitable. You nailed the thing here, Carl, is

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Speaker 1: we take the net present value of what we think

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Speaker 1: is going to happen to debt and deficit out there,

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Speaker 1: and we pull it back to the present to the

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Speaker 1: current chronic trillion dollar deficits plural of the United States

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Speaker 1: of America create a present moment of angst or not.

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Speaker 1: I think at this point they create concern about angst

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Speaker 1: rather than angst itself. But you know what they say,

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Speaker 1: the fear of dying is worse than itself. You know

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Speaker 1: that's NIGI. That was way too excessential. Help me, Jo.

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Speaker 1: There was a fantastic time EF report and I'm sure

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Speaker 1: you guys discussed it when I was a wife from

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Speaker 1: the studio. I lost weight Tom and within this report,

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Speaker 1: Oh you weren't here. I wasn't here. Did you miss me?

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Speaker 1: Were you interviewing with Arsenal? I was interviewing with Arsenal

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Speaker 1: for Vengus Jol. I was in North London. I thought

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Speaker 1: it was winder. I got in trouble. Did you get

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Speaker 1: in trouble? I imagine you're going in trouble for saying

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Speaker 1: that and a few other things as well, Um, Carl Weinberg.

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Speaker 1: Within this IMF report just showed where debt to GDP

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Speaker 1: ratios are going to be over the next five years

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Speaker 1: for the world developed economies and standing alone with the

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Speaker 1: United States, it was the only debt to GDP ratio

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Speaker 1: that the IMF forecasts to increase over the next five years.

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Speaker 1: How significant is that, Carl, I'd share the I m

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Speaker 1: F is concerned that the US that the g d

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Speaker 1: P is going to rise. It seems to be affordable

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Speaker 1: right now in good times, there's lots of savings out there.

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Speaker 1: But if the business cycle turns sour, it's going to

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Speaker 1: become more difficult to finance. So I think the risks

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Speaker 1: are clear, and the I m F has done a

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Speaker 1: good job of seating them just looking at some of

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Speaker 1: the risks now though, and as far as the next

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Speaker 1: downturn is potentially concerned, Carl, I see the United States

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Speaker 1: and its fiscal position increasingly exhausted before the next downturn.

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Speaker 1: And I see the Europeans, the euro Zone in the

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Speaker 1: European Central Bank increasingly exhausting their monetary policy options before

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Speaker 1: we reach the next downturn as well. Out of those

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Speaker 1: two situations, an exhausted fiscal position in the United States,

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Speaker 1: an exhausted monetary policy position in Europe going into the

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Speaker 1: latter years of this cycle. What are you more concerned

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Speaker 1: about Europe the United States? Well, I think that in

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Speaker 1: Europe sluggish economic growth and subpart economic growth isn't news, alright,

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Speaker 1: it's yours become accustomed to underperforming in terms of historical standards.

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Speaker 1: We've had a little bit of a blip in the

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Speaker 1: last few quarters, but net net GDP growth has been

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Speaker 1: rather slow. I think a slowdown in the United States

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Speaker 1: from the point where we are right now, from this

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Speaker 1: overheated condition that we're moving into after this fiscal stereo.

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Speaker 1: We're assuming in Jim's forecast that the U. S economy

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Speaker 1: is going to get a blip from the tax cuts

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Speaker 1: that we've seen and from this regulations that that that

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Speaker 1: that expires in the new year. You see, the thing

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Speaker 1: about fiscal policy is you have to keep on increasing

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Speaker 1: it just to keep it steady. You have to spend

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Speaker 1: more and more each year in order to keep the

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Speaker 1: same impact on growth. And once this blip goes through,

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Speaker 1: the growth is going to go back down ten yor

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Speaker 1: yield three percent. Just in your head, car with your

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Speaker 1: decades of experience, at what tenure yield do we go? Oh,

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Speaker 1: there's just a psychic there's that glimmer that shift. Are

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Speaker 1: we close to that or is it distant like four

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Speaker 1: or five from another time? And place. Yeah, well, I

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Speaker 1: think Jim and I have maybe slightly different views on

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Speaker 1: all of this, But speaking for myself, I look at

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Speaker 1: about a hundred points above inflation as being a level

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Speaker 1: that is a breaking level for a long term yield.

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Speaker 1: So if inflation is going to run a two to

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Speaker 1: three percent, then we could see long term yields in

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Speaker 1: the three to four percent, which is being still neutral.

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Speaker 1: Carol Weinberg, thank you so much. I freaking say economics.

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Speaker 1: Just really good to get. Great person, John. It was

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Speaker 1: great to have Dr Weinberg on the set with David

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Speaker 1: Pearl of Epic Investments, like two different worlds. Just this

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Speaker 1: world class character with us right now. For those of

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Speaker 1: you on Global Wall Street, for those of you grinding

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Speaker 1: away for the c f A exam usually June one

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Speaker 1: dish and this year later, this is a clinic of

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Speaker 1: the morning. David Pearl it Epic Investments where they manage money.

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Speaker 1: He and Bill priests Um are basically iconic on the

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Speaker 1: study of free cash David Pearl, what do we get

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Speaker 1: most wrong about free cash flow? When you see c

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Speaker 1: f A s or NBA's blather on about it, What

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Speaker 1: do they most get wrong? Well, first, the concept of

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Speaker 1: free cash flow is you know, everyone is used to

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Speaker 1: this idea of earnings, but earnings are an accounting measure.

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Speaker 1: It's not like a law of physics. It's not immutable.

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Speaker 1: It's a game like baseball. If everyone plays by the rules,

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Speaker 1: you can compare company A to company B. No one

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Speaker 1: plays by the rules anymore. Companies use ProForma earnings, estimated earnings.

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Speaker 1: We call it earnings before expenses. They do whatever they want.

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Speaker 1: You can't even compare this year to last year in

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Speaker 1: most companies. Whereas cash is real, that's how you run

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Speaker 1: a business, and generating cash is how you grow a business.

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Speaker 1: That's how you pay for new people, build a factory.

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Speaker 1: Then what do you see among the technology people. When

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Speaker 1: you hear people say, oh, the social media guys and

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Speaker 1: technology guys, they think they play by a different playbook.

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Speaker 1: But does Amazon is one example, generate a lot of

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Speaker 1: free cash flow? Yeah? So Amazon only generates cash in

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Speaker 1: two areas that we can really see, which is the

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Speaker 1: cloud and uh, you know that's under intense competition, but

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Speaker 1: a great business and third party fulfillment where they don't

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Speaker 1: own any of the inventory, they just mail it to you.

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Speaker 1: So otherwise their free cash flow is pretty negative. Their

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Speaker 1: profit margins are actually lower than Whole Foods, which was

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Speaker 1: a you know, not successful food retailer. So the answer

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Speaker 1: is no. And the point about um Wall Street is

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Speaker 1: some companies just get rewarded for growth, and Amazon's one

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Speaker 1: of those, and as long as they can grow faster

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Speaker 1: than expectation, it goes up and no one seems to

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Speaker 1: care about profits. You know, Netflix is the other major

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Speaker 1: fang company where growth is very, very high, and frankly,

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Speaker 1: they're losing about three billion dollars on let's say sixteen

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Speaker 1: billion of sales. That's just not good and it doesn't

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Speaker 1: look like that's going to change. It's actually going to

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Speaker 1: accelerate that laws. So Netflix a company with high cash burn,

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Speaker 1: Tesla another big company we all know of with high

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Speaker 1: cash burn. What's the catalyst for change and changing the

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Speaker 1: way investors perceived these companies as to what is successful

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Speaker 1: and what isn't. Is it high rates um At some

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Speaker 1: point for Netflix and Tesla will be because they are

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Speaker 1: running out of money. I mean, Netflix will have to

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Speaker 1: raise money in six months to nine months at the

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Speaker 1: rate of cash burn. And Tesla has the same issue

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Speaker 1: where now you know they're debt is trading at eighty

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Speaker 1: five to nine d cents on the dollar, and they're

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Speaker 1: paying five percent, and as rates go up, this becomes

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Speaker 1: a ownerous task to keep financing a company that's going

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Speaker 1: to continue to lose money. Amazon is sort of self funding,

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Speaker 1: God bless them. They also have something that's unusual in accounting.

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Speaker 1: It's negative working capital because we all pay them up

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Speaker 1: front when we buy something, and they pay their vendors

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Speaker 1: whenever they feel like it, so they get an instant loan.

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Speaker 1: So anyway, for a lot of these companies, there is

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Speaker 1: a huge difference between earnings and free cash flow. Netflix

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Speaker 1: earned sixty cents this quarter and lost three d million dollars.

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Speaker 1: Is your research or are the opportunities rather, I should say,

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Speaker 1: in mid cap and small cap or there's the free

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Speaker 1: casual arbitrage if you will, in the bigger companies. Uh,

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Speaker 1: It is actually both. It depends on your point in

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Speaker 1: your uh your capital expense cycle. So for industrials like

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Speaker 1: Boeing or even smaller companies or cable companies, if you

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Speaker 1: spent ten years egging holes in the ground, if you're

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Speaker 1: a cable company, you're Boeing developing the seven eight seven,

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Speaker 1: you are at the point right now where you're starting

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Speaker 1: to make money like crazy. So Boeing is now selling

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Speaker 1: an airplane at you know, three million dollars. They are

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Speaker 1: getting cash, but they have all this non cash amortization

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Speaker 1: and depreciation built in, so their free cash flow per

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Speaker 1: share is higher than their earnings per share, and it's

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Speaker 1: going to be accelerating that gap. So Boeing looks a

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Speaker 1: lot cheaper on free cash flow than it does on earnings. Now,

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Speaker 1: what's your enthusiasm? Just one final question, what's your enthusiasm

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Speaker 1: on the market. I mean you're walking in to the

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Speaker 1: acclaimed investments and saying, let's put it to work, let's go,

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Speaker 1: go go. So if you're if you really are an

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Speaker 1: analyst they bottom up stock picker, you're feeling good because

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Speaker 1: most companies are having a great year and it's probably

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Speaker 1: going to continue because of tax reform with lower tax rates,

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Speaker 1: repatriation of cash if you're Microsoft or Google. But the

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Speaker 1: macro is the scary part. The big one on the

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Speaker 1: horizon is trade, which has been talked about every day

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Speaker 1: and today you know a little more favorably. Trade could

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Speaker 1: derail it all. So with a proviso, were bullish. David Pearl,

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Speaker 1: thank you so much. With Epic Investments. Uh, this morning,

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Speaker 1: Tom Percelly with us with RBC Capital Markets have been

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Speaker 1: talking wage dynamics, of which he is especially good. Tom.

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Speaker 1: I want to really focus here on investment by corporations.

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Speaker 1: We've got a tax cut, We've got this that we

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Speaker 1: just hit on David Pearl with Epic Investments, their legendary

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Speaker 1: and free cash flow analysis. Are they putting any of

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Speaker 1: that money to work actually like investing in American hardware?

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Speaker 1: You know? So I love this question. Um. I would

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Speaker 1: tell you that I think the pieces are are in

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Speaker 1: police for that to happen. Um. Whether it actually happens

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Speaker 1: is a slightly different story. But but let me let

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Speaker 1: me let me give you something to think about. Um So,

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Speaker 1: for starters, if you look at lending standards for commercial

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Speaker 1: and industrial loans, um, they have eased, and that has

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Speaker 1: been true now for a number of quarters, and that

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Speaker 1: tends to lead actual lending. UM. So I would tell

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Speaker 1: you that's that sort of piece one here. Here, here's

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Speaker 1: the other thing to think about. I'm not a U.

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Speaker 1: You know people talking about this idea of animal spirits, right,

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Speaker 1: I mean you're you're you've obviously talked about those countless times.

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Speaker 1: I have a hard time really sort of embracing the

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Speaker 1: notion of animal spirits because I can't I can't touch it, um.

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Speaker 1: And because I can't touch it, it's hard for me

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Speaker 1: to sort of model that. UM. But I've I've sort

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Speaker 1: of come to religion on this idea a little at

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Speaker 1: least a little bit recently. I've I've done a bunch

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Speaker 1: of corporate board meetings, UM, you know, just to sort

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Speaker 1: of give them my view on what's happening from an

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Speaker 1: economic perspective. UM. And when I go in, I've I've

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Speaker 1: been struck by UM how uh. You know, elated is

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Speaker 1: maybe too strong of a war heard, but there's a genuine,

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Speaker 1: a genuine sense of UM, positive vibe coming from the

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Speaker 1: idea that we have lower, lower corporate taxes, regulation might

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Speaker 1: be scaled back. And what's interesting is I don't know

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Speaker 1: how to model it, but I know what I'm seeing,

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Speaker 1: and I'm seeing this sort of generally better attitude towards

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Speaker 1: the backdrop, and I get it. You know, when we

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Speaker 1: talk about repatriation, we all talked about it in terms of,

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Speaker 1: you know, companies are going to use it for buybacks.

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Speaker 1: Dippen ends. Um, I just think you know what I've

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Speaker 1: been seeing recently, I would tell you, and given the

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Speaker 1: fact that fundamentally you've had this improved in living standards,

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Speaker 1: I wouldn't be the least bit surprise of something that

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Speaker 1: gets siphoned off and use for capex. Okay, I agree

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Speaker 1: with all that, but I still don't understand how a

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Speaker 1: corporate officer or CFO does a net present value analysis

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Speaker 1: with the real rates the fiction that they are do

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Speaker 1: you are we anywhere near where a responsible financial executive

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Speaker 1: can actually do the math that they learned in school. Yeah, Well,

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Speaker 1: here's the thing, and here's part of the here's part

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Speaker 1: of that math, the equation. I think people forget where

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Speaker 1: cash flow is doing because it's true that if if

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Speaker 1: you know, the net present value of of of anything

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Speaker 1: is going to deteriorate if we simply rise, that's true,

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Speaker 1: that's always true. But what if cash flows increase? Yeah,

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Speaker 1: then if your rate rises, then you're left with the

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Speaker 1: same net present value. And I think I think none

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Speaker 1: of the stuff exists in a vacuum, and everyone wanted to,

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Speaker 1: but that is simply not the way that the match. Well,

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Speaker 1: but the FED, the FED exists in a vacuum, which is,

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Speaker 1: by definition they have to be reactive given the data. Carney,

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Speaker 1: Draggy and the others clearly are waiting and waiting for inflation.

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Speaker 1: We're different. I'm told we are going to see inflation.

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Speaker 1: Our audience says they see it in Cleveland, CPI and

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Speaker 1: some of the more service sector laden indicase. But is

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Speaker 1: the inflation there for Powell Act. It's enough for them

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Speaker 1: to act in the way that we expect them to write,

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Speaker 1: which is to say, seven more hikes between now the

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Speaker 1: of nineteen. Are thinking, I get much more aggressive than that. UM. Again,

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Speaker 1: I think you know we've sort of were cut short

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Speaker 1: a little bit earlier. UM, And so it won't be

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Speaker 1: labor that at this point on a Monday you can

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Speaker 1: do that. But I think that there's a really sound

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Speaker 1: argument for not only our base case to come to fruition,

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Speaker 1: but even a slightly more aggressive fed than that. UM.

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Speaker 1: If this idea of that the consumer and I'll just

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Speaker 1: pick up on the thread that I left out there

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Speaker 1: in the first segment. If this idea that the consumer

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Speaker 1: is now all of a sudden going to start to

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Speaker 1: feel a little bit more emboldened to take on more credit, UM,

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Speaker 1: that's a that's a that that's a that will goose

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Speaker 1: up consumption um. And in the that scenario, again, all

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Speaker 1: in the context of what we take even before that,

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Speaker 1: this idea that wage pressure is a building. Um. Yeah,

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Speaker 1: I think that there's a real sound argument for the

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Speaker 1: FED to be a bit more aggressive, but again that

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Speaker 1: that that's not our base case. Our base case is

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Speaker 1: that the FED will go seven more times from now

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Speaker 1: in nineteen at the end of nineteen UM and and

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Speaker 1: I don't know that you can expect, uh, materially more

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Speaker 1: aggressive than that. What GDP is linked to your seven

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Speaker 1: rate hunts. Roughly, it's make American great. And the president

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Speaker 1: has succeeded without question, you can say the presidents has

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Speaker 1: succeeded into the mid terms and frankly into the beginning

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Speaker 1: of the presidential twenty twenty to deliver three percent g

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Speaker 1: d P. You know, again, I'll leave that to other

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Speaker 1: people to sort of figure out whether he did his

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Speaker 1: job or or not. But the reality is we're going

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Speaker 1: to get three percent growth UM. And you know, I

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Speaker 1: don't I don't think that's particularly heroic. I mean, going

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Speaker 1: into this year, we have two and a half percent

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Speaker 1: as our base case uh. And then on the back

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Speaker 1: of the tax cuts, um, we basically threw in an

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Speaker 1: extra few tents three tenths to be exact, and then

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Speaker 1: you get another tenth from from some CAPEX bill. So

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Speaker 1: we're officially we are two point nine percent, so and

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Speaker 1: round numbers three percent. So yeah, I mean, I think

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Speaker 1: that's it again, low hurdle to get there, Okay, very quickly.

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Speaker 1: One of the thought Tom perc and that is with

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Speaker 1: all the time PERCELLI chat, I'm hearing it just assumes

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Speaker 1: dal are stronger rates, up growth, up dollars stronger. It's

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Speaker 1: not happening yet, does it happen? So what I would

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Speaker 1: say is this, I think when you think about the dollar,

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Speaker 1: I think what you have to keep in mind is

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Speaker 1: you know which cross are you comparing it too. So

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Speaker 1: let's just pick on europe um. And here's the reality

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Speaker 1: behind europe Um. Europe is has stabilized and relative because

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Speaker 1: this isn't the idea. I think a lot of people

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Speaker 1: forget and relative to what we had been experiencing in Europe,

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Speaker 1: which was, you know, sort of like people worrying about

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Speaker 1: this worst case scenario. That is a major win from

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Speaker 1: a European perspective. So I never thought that the dollar

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Speaker 1: would really be able to sort of advance in any

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Speaker 1: material way on the back of the relative improvement in Europe.

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Speaker 1: I think that's a really important idea. So yeah, I

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Speaker 1: think it's reasonably expect some dollar strength, but I I

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Speaker 1: wouldn't get I wouldn't take that idea too far. Tim

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Speaker 1: for Solly, thank you so much, greatly appreciate it all

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Speaker 1: this morning, RBC Capital Markets and really original wage growth

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Speaker 1: work about eighteen months maybe two years ago as well,

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Speaker 1: Kitchos of Society General. We recalibrate before May first, Kit

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Speaker 1: when does the dollar go up? The big shock in

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Speaker 1: your world over the last number of weeks has been

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Speaker 1: dollar weakness. Is this lift that we've seen tangible? Do

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Speaker 1: we finally see reversal? Higher rates, better growth, stronger dollar?

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Speaker 1: Is it for real? Uh, it's it's trying to be

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Speaker 1: for real. We need to go a little bit further,

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Speaker 1: and I think we need to get tenure notes decisively

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Speaker 1: to hold through three in a way that doesn't cause

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Speaker 1: you know, equity Marcus to go into retreat, the FED

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Speaker 1: to start getting worried. Um. I think you know, if

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Speaker 1: we're going to see the US get interest rates support again. Um,

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Speaker 1: it's got to be, you know, a durable shift higher

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Speaker 1: and expectations about West terminal fet funds are and right

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Speaker 1: now I think we're doing enough to give heart to

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Speaker 1: some dollar balls and to make some of the dollar bears.

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Speaker 1: And that's the majority of the market, but pretty anxious.

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Speaker 1: What I mean if it does reach if it does

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Speaker 1: reach over three for the tenure, should you buy it treasuries?

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Speaker 1: I would be quite tempted to buy some terms, if

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Speaker 1: you know, once we settled down there, I would get

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Speaker 1: very tempted if we started seeing volatility pickup and an

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Speaker 1: equity market start to sell off because I don't think

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Speaker 1: there's much inflation out there, and I don't think the

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Speaker 1: FEDS changing its long term path reamb. What matters is

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Speaker 1: is the FED going to start moving its estimate of

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Speaker 1: our star of neutral real rates? So we're going to

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Speaker 1: change any of that? Or is this just just noise?

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Speaker 1: A spring comes around after after a poor first quarter.

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Speaker 1: Tell us about what's going on with energy markets and

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Speaker 1: how that affects your outlook. I know, I look, I'm

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Speaker 1: not a big expert on on oil. I think it's

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Speaker 1: going up because it's being squeezed where it will get

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Speaker 1: open bar before it's done. But if if we get

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Speaker 1: some station just because we see, you know, a spike

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Speaker 1: up to a new range and oil, and then all

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Speaker 1: prices find a level and go flat, I don't think

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Speaker 1: that changes the longer term inflationary story a jot. It

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Speaker 1: doesn't feed through in a durable way. The question on

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Speaker 1: inflations were about what happens to wage growth, um, not

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Speaker 1: what happens to all prices in a short period of time.

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Speaker 1: And I don't think all prices are going to run

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Speaker 1: away we I think that's you know, the the elasticity

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Speaker 1: and supply globally is I well understood enough, not by now.

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Speaker 1: So we may be moving to a sustainably higher range,

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Speaker 1: but we're not going to a hundred bucks. I I okay,

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Speaker 1: we're not gonna go to a hundred bucks. But within

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Speaker 1: your reading and as you say, you're you're away from

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Speaker 1: well and yet dollar denominated, etcetera. Are we at a

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Speaker 1: point where the nuance of five dollars a barrel matters?

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Speaker 1: Or have we sort of had the jump fifties sixty

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Speaker 1: all of a sudden to brent seventy three dollars a barrel?

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Speaker 1: Is the effect or impact of the move in the past,

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Speaker 1: or is it to come if we go five dollars higher.

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Speaker 1: I think it's in the past. Unless we start suddenly

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00:23:02,080 --> 00:23:04,919
Speaker 1: talking about breaking outwards. If we're going to settle at

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Speaker 1: seventies something where we were sixty something for the last year,

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00:23:08,400 --> 00:23:11,240
Speaker 1: and then we've come from from these lower levels, then

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00:23:11,400 --> 00:23:13,720
Speaker 1: you know, unless you unless you change that and talk

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00:23:13,720 --> 00:23:15,600
Speaker 1: about it, you know, a sustained move to something different

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00:23:15,600 --> 00:23:17,920
Speaker 1: than I think this is. This is just the back

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00:23:18,040 --> 00:23:19,800
Speaker 1: end of the move, which may include a little bit

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Speaker 1: of an overshoot before we finally settle down, but the

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00:23:22,200 --> 00:23:25,359
Speaker 1: move itself is basically done. Kit Are you at all

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Speaker 1: surprised by what gold hasn't done? You know, I mean, no,

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00:23:32,119 --> 00:23:34,879
Speaker 1: I'm not. I mean gold. You know, it tends to

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00:23:34,960 --> 00:23:37,960
Speaker 1: get somewhat more marginalized. But the big story that always

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00:23:38,000 --> 00:23:41,640
Speaker 1: supports gold is is going to be super low real

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00:23:41,760 --> 00:23:44,480
Speaker 1: yields and real returns on on on financial assets and

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00:23:45,080 --> 00:23:47,359
Speaker 1: concerns about inflation that come with that in a low

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00:23:47,440 --> 00:23:51,840
Speaker 1: inflationary world, and slightly higher slightly higher yields on treasuries

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00:23:51,920 --> 00:23:53,880
Speaker 1: than you know, there are there are things to buy

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00:23:53,920 --> 00:23:58,960
Speaker 1: other than gold. So gold has remained reasonably well supported

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00:23:59,000 --> 00:24:02,120
Speaker 1: in the big scheme of things. But right no, there's

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00:24:02,160 --> 00:24:03,600
Speaker 1: no reason to be find a hole in the ground

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00:24:03,640 --> 00:24:05,520
Speaker 1: to put all my money in gold anymore. And now

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Speaker 1: on Monday we go technical with kiss kit jokes, we

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Speaker 1: go into the granularity of the Swiss franc kit. We've

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Speaker 1: got to move weaker Swiss franc. Bunch of it is

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Speaker 1: the nuance, the speculation, the speculation, the speculation that the

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00:24:19,960 --> 00:24:23,360
Speaker 1: Russian rich people are pulling their money out of Switzerland,

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Speaker 1: whatever that may be. Is this a time where you

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00:24:26,800 --> 00:24:29,800
Speaker 1: get brave and go against the trend and go strong

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Speaker 1: Swiss franc I tell you I think against the Euro,

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00:24:34,600 --> 00:24:36,639
Speaker 1: the Swiss Frank will strengthen if you're all the breaks

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00:24:36,680 --> 00:24:38,880
Speaker 1: down through through one and a half and I think

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00:24:38,880 --> 00:24:41,919
Speaker 1: we'll flush out. So the big mover in looking at

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Speaker 1: the Swiss franc is what is happening against the Swiss

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Speaker 1: Frank against the Euro. We've taken that from We've taken

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Speaker 1: that from really from from one oh eight a year

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00:24:49,720 --> 00:24:52,440
Speaker 1: ago to one one twenties and level we broke down

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Speaker 1: through in the big surprise when the peg broke, we've

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Speaker 1: touched it and we're reversing. If the Euro loses its

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Speaker 1: mojo here, then I won't be shut of the Swiss

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00:25:01,720 --> 00:25:05,520
Speaker 1: Frank against anything. Kit the stronger Swiss Frank hasn't hurt

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Speaker 1: the Swiss economy. No, the Swiss economy is not sensitive

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Speaker 1: too much. You know it hurts Bits and his nice people.

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Speaker 1: But know the you know, the goods that Switzerland exports

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00:25:16,080 --> 00:25:19,800
Speaker 1: are not price sensitive. Um, it causes some concern because

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00:25:19,880 --> 00:25:25,000
Speaker 1: it's given them falling prices, negative inflation that that causes

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Speaker 1: some concerns and negative interest rates, which Swiss savers really

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Speaker 1: don't like at all. You know, they're up in arms

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00:25:31,800 --> 00:25:34,840
Speaker 1: regularly against their central bank about that that. Old folks

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Speaker 1: who live in Switzerland aren't happy. But um, you know

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Speaker 1: we we don't. We don't go I don't know skiing

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Speaker 1: in Switzerland or bank Swiss pharmaceuticals or beauty products because

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Speaker 1: because of the price, that's not what's driving that decision.

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Speaker 1: Thank you so much, greatly appreciated with society general. Thanks

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00:25:59,720 --> 00:26:03,960
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

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00:26:04,240 --> 00:26:09,560
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

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00:26:09,680 --> 00:26:13,920
Speaker 1: you prefer. I'm on Twitter at Tom Keene Before the podcast,

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Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio