Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast and I'm Tom
Speaker 1: Keene Jai Ley. We bring you insight from the best
Speaker 1: in economics, finance, investment, and international relations. Find Bloomberg Surveillance
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Speaker 1: on the Bloomberg It's one security, it's one number, the
Speaker 1: ten year tracery and three percent. Just what is so important?
Speaker 1: If there's anything important at all about a psychological line
Speaker 1: in the sand that hasn't been crossed in more than
Speaker 1: four years, we can bring in now Carl Weinberg, high
Speaker 1: frequency Economics founder who joins us in New York. Car
Speaker 1: important or not important at all? Oh, it's it's psychologically important,
Speaker 1: I think. But I'm hard pressed to argue that the
Speaker 1: gentle rise we're seeing in bond yields over time is
Speaker 1: really making a breaking force on the economy. With inflation
Speaker 1: sizing up to be around I don't know, two and
Speaker 1: a half percent or thereabouts, you're looking at half a
Speaker 1: percent real rate of interest on ten year bonds. That's
Speaker 1: not going to do the job that the Fed has
Speaker 1: to do of slowing the rate of growth of jobs
Speaker 1: in the economy. Carl would you describe this as grant
Speaker 1: you Although we were close to two percent just back
Speaker 1: in September the two year no that yields doubled in
Speaker 1: in less than a year. We've had a real real
Speaker 1: re price across the curve over the last six to
Speaker 1: nine months. Yeah, I see, I see what you're saying.
Speaker 1: And for markets, is a good bit of volatility in
Speaker 1: there that we haven't seen in a long time. And
Speaker 1: that's certainly an issue for the markets. But speaking as
Speaker 1: an economist, which unfortunately is the limit of my abilities,
Speaker 1: we're looking at really long term yields that still have
Speaker 1: to go higher in order to break the economy. What's
Speaker 1: more important at the moment, Carl, as far as you're
Speaker 1: concerned in terms of what's happening with the debt market.
Speaker 1: Is it the supply the amount of debt issuance we
Speaker 1: get even more through this week as well? Is it
Speaker 1: a cross spective inflations down into bubble away the price
Speaker 1: pressure finally started to come through. Is it something else?
Speaker 1: What is it? Well, it's yes and yes the both
Speaker 1: of those questions. I mean, the market should be thinking
Speaker 1: about inflation risks. It's it's not here now, But the
Speaker 1: laws of supply and demand haven't been repealed. The labor
Speaker 1: market keeps on getting tighter, and is by colleague Jim
Speaker 1: O'Sullivan suggests, unless the labor market stops getting tighter, it's
Speaker 1: going to reach a point where it is going to
Speaker 1: trigger some wage pressure. And as far as supply is concerned,
Speaker 1: while we've all been reading about the the US deficit
Speaker 1: and the impact that the tax cuts on it, that's
Speaker 1: got to be weighing very heavily on the market, especially
Speaker 1: at an auction time like this. Well, much of that
Speaker 1: issuance has come at the front end so far. Colm,
Speaker 1: I guess my question to you is, at what point
Speaker 1: do you start to consider these yields as sort of
Speaker 1: a restriction against the general economy. You say, not now,
Speaker 1: but looking at where short term interest rates, that's got
Speaker 1: to take a fight at some point, Yes, at some
Speaker 1: point it does. Right now, though, the indications that that
Speaker 1: we're looking at and that the Feder looking at, just
Speaker 1: that it's not biting very much. We're seeing the sentiment
Speaker 1: in disease looking quite positive. We're seeing the Fed remarking
Speaker 1: that financial conditions are still quite easy, with the stock
Speaker 1: market being so strong, so profits being good, so overall,
Speaker 1: it doesn't seem to be biting just yet. How do
Speaker 1: guys like you draw fiscal debt and deficit economics into
Speaker 1: all your monetary and international swirl. Where does it fit
Speaker 1: in algebraically, where does it fit in geometrically, or just
Speaker 1: simply where's it fit in in reality? Well? I think
Speaker 1: reality is the easiest place to put it, because as
Speaker 1: economists you have to have a free floating anxiety about
Speaker 1: this business of running up the fiscal deficit at a
Speaker 1: time when the economy is so tight, stimulating the economy,
Speaker 1: when labor is already in scarce supply relative to demand,
Speaker 1: of pushing an economy that's arguably at the peak of
Speaker 1: its business cycle. That's what the I m F told
Speaker 1: this this weekend. That's what jam O. Sullivan is telling
Speaker 1: us in his high frequency e CAN mixed notes. Um. So,
Speaker 1: the overall the question is not so much what happens
Speaker 1: right now, but what's going to happen when the cycle turns?
Speaker 1: And that's inevitable. You nailed the thing here, Carl, is
Speaker 1: we take the net present value of what we think
Speaker 1: is going to happen to debt and deficit out there,
Speaker 1: and we pull it back to the present to the
Speaker 1: current chronic trillion dollar deficits plural of the United States
Speaker 1: of America create a present moment of angst or not.
Speaker 1: I think at this point they create concern about angst
Speaker 1: rather than angst itself. But you know what they say,
Speaker 1: the fear of dying is worse than itself. You know
Speaker 1: that's NIGI. That was way too excessential. Help me, Jo.
Speaker 1: There was a fantastic time EF report and I'm sure
Speaker 1: you guys discussed it when I was a wife from
Speaker 1: the studio. I lost weight Tom and within this report,
Speaker 1: Oh you weren't here. I wasn't here. Did you miss me?
Speaker 1: Were you interviewing with Arsenal? I was interviewing with Arsenal
Speaker 1: for Vengus Jol. I was in North London. I thought
Speaker 1: it was winder. I got in trouble. Did you get
Speaker 1: in trouble? I imagine you're going in trouble for saying
Speaker 1: that and a few other things as well, Um, Carl Weinberg.
Speaker 1: Within this IMF report just showed where debt to GDP
Speaker 1: ratios are going to be over the next five years
Speaker 1: for the world developed economies and standing alone with the
Speaker 1: United States, it was the only debt to GDP ratio
Speaker 1: that the IMF forecasts to increase over the next five years.
Speaker 1: How significant is that, Carl, I'd share the I m
Speaker 1: F is concerned that the US that the g d
Speaker 1: P is going to rise. It seems to be affordable
Speaker 1: right now in good times, there's lots of savings out there.
Speaker 1: But if the business cycle turns sour, it's going to
Speaker 1: become more difficult to finance. So I think the risks
Speaker 1: are clear, and the I m F has done a
Speaker 1: good job of seating them just looking at some of
Speaker 1: the risks now though, and as far as the next
Speaker 1: downturn is potentially concerned, Carl, I see the United States
Speaker 1: and its fiscal position increasingly exhausted before the next downturn.
Speaker 1: And I see the Europeans, the euro Zone in the
Speaker 1: European Central Bank increasingly exhausting their monetary policy options before
Speaker 1: we reach the next downturn as well. Out of those
Speaker 1: two situations, an exhausted fiscal position in the United States,
Speaker 1: an exhausted monetary policy position in Europe going into the
Speaker 1: latter years of this cycle. What are you more concerned
Speaker 1: about Europe the United States? Well, I think that in
Speaker 1: Europe sluggish economic growth and subpart economic growth isn't news, alright,
Speaker 1: it's yours become accustomed to underperforming in terms of historical standards.
Speaker 1: We've had a little bit of a blip in the
Speaker 1: last few quarters, but net net GDP growth has been
Speaker 1: rather slow. I think a slowdown in the United States
Speaker 1: from the point where we are right now, from this
Speaker 1: overheated condition that we're moving into after this fiscal stereo.
Speaker 1: We're assuming in Jim's forecast that the U. S economy
Speaker 1: is going to get a blip from the tax cuts
Speaker 1: that we've seen and from this regulations that that that
Speaker 1: that expires in the new year. You see, the thing
Speaker 1: about fiscal policy is you have to keep on increasing
Speaker 1: it just to keep it steady. You have to spend
Speaker 1: more and more each year in order to keep the
Speaker 1: same impact on growth. And once this blip goes through,
Speaker 1: the growth is going to go back down ten yor
Speaker 1: yield three percent. Just in your head, car with your
Speaker 1: decades of experience, at what tenure yield do we go? Oh,
Speaker 1: there's just a psychic there's that glimmer that shift. Are
Speaker 1: we close to that or is it distant like four
Speaker 1: or five from another time? And place. Yeah, well, I
Speaker 1: think Jim and I have maybe slightly different views on
Speaker 1: all of this, But speaking for myself, I look at
Speaker 1: about a hundred points above inflation as being a level
Speaker 1: that is a breaking level for a long term yield.
Speaker 1: So if inflation is going to run a two to
Speaker 1: three percent, then we could see long term yields in
Speaker 1: the three to four percent, which is being still neutral.
Speaker 1: Carol Weinberg, thank you so much. I freaking say economics.
Speaker 1: Just really good to get. Great person, John. It was
Speaker 1: great to have Dr Weinberg on the set with David
Speaker 1: Pearl of Epic Investments, like two different worlds. Just this
Speaker 1: world class character with us right now. For those of
Speaker 1: you on Global Wall Street, for those of you grinding
Speaker 1: away for the c f A exam usually June one
Speaker 1: dish and this year later, this is a clinic of
Speaker 1: the morning. David Pearl it Epic Investments where they manage money.
Speaker 1: He and Bill priests Um are basically iconic on the
Speaker 1: study of free cash David Pearl, what do we get
Speaker 1: most wrong about free cash flow? When you see c
Speaker 1: f A s or NBA's blather on about it, What
Speaker 1: do they most get wrong? Well, first, the concept of
Speaker 1: free cash flow is you know, everyone is used to
Speaker 1: this idea of earnings, but earnings are an accounting measure.
Speaker 1: It's not like a law of physics. It's not immutable.
Speaker 1: It's a game like baseball. If everyone plays by the rules,
Speaker 1: you can compare company A to company B. No one
Speaker 1: plays by the rules anymore. Companies use ProForma earnings, estimated earnings.
Speaker 1: We call it earnings before expenses. They do whatever they want.
Speaker 1: You can't even compare this year to last year in
Speaker 1: most companies. Whereas cash is real, that's how you run
Speaker 1: a business, and generating cash is how you grow a business.
Speaker 1: That's how you pay for new people, build a factory.
Speaker 1: Then what do you see among the technology people. When
Speaker 1: you hear people say, oh, the social media guys and
Speaker 1: technology guys, they think they play by a different playbook.
Speaker 1: But does Amazon is one example, generate a lot of
Speaker 1: free cash flow? Yeah? So Amazon only generates cash in
Speaker 1: two areas that we can really see, which is the
Speaker 1: cloud and uh, you know that's under intense competition, but
Speaker 1: a great business and third party fulfillment where they don't
Speaker 1: own any of the inventory, they just mail it to you.
Speaker 1: So otherwise their free cash flow is pretty negative. Their
Speaker 1: profit margins are actually lower than Whole Foods, which was
Speaker 1: a you know, not successful food retailer. So the answer
Speaker 1: is no. And the point about um Wall Street is
Speaker 1: some companies just get rewarded for growth, and Amazon's one
Speaker 1: of those, and as long as they can grow faster
Speaker 1: than expectation, it goes up and no one seems to
Speaker 1: care about profits. You know, Netflix is the other major
Speaker 1: fang company where growth is very, very high, and frankly,
Speaker 1: they're losing about three billion dollars on let's say sixteen
Speaker 1: billion of sales. That's just not good and it doesn't
Speaker 1: look like that's going to change. It's actually going to
Speaker 1: accelerate that laws. So Netflix a company with high cash burn,
Speaker 1: Tesla another big company we all know of with high
Speaker 1: cash burn. What's the catalyst for change and changing the
Speaker 1: way investors perceived these companies as to what is successful
Speaker 1: and what isn't. Is it high rates um At some
Speaker 1: point for Netflix and Tesla will be because they are
Speaker 1: running out of money. I mean, Netflix will have to
Speaker 1: raise money in six months to nine months at the
Speaker 1: rate of cash burn. And Tesla has the same issue
Speaker 1: where now you know they're debt is trading at eighty
Speaker 1: five to nine d cents on the dollar, and they're
Speaker 1: paying five percent, and as rates go up, this becomes
Speaker 1: a ownerous task to keep financing a company that's going
Speaker 1: to continue to lose money. Amazon is sort of self funding,
Speaker 1: God bless them. They also have something that's unusual in accounting.
Speaker 1: It's negative working capital because we all pay them up
Speaker 1: front when we buy something, and they pay their vendors
Speaker 1: whenever they feel like it, so they get an instant loan.
Speaker 1: So anyway, for a lot of these companies, there is
Speaker 1: a huge difference between earnings and free cash flow. Netflix
Speaker 1: earned sixty cents this quarter and lost three d million dollars.
Speaker 1: Is your research or are the opportunities rather, I should say,
Speaker 1: in mid cap and small cap or there's the free
Speaker 1: casual arbitrage if you will, in the bigger companies. Uh,
Speaker 1: It is actually both. It depends on your point in
Speaker 1: your uh your capital expense cycle. So for industrials like
Speaker 1: Boeing or even smaller companies or cable companies, if you
Speaker 1: spent ten years egging holes in the ground, if you're
Speaker 1: a cable company, you're Boeing developing the seven eight seven,
Speaker 1: you are at the point right now where you're starting
Speaker 1: to make money like crazy. So Boeing is now selling
Speaker 1: an airplane at you know, three million dollars. They are
Speaker 1: getting cash, but they have all this non cash amortization
Speaker 1: and depreciation built in, so their free cash flow per
Speaker 1: share is higher than their earnings per share, and it's
Speaker 1: going to be accelerating that gap. So Boeing looks a
Speaker 1: lot cheaper on free cash flow than it does on earnings. Now,
Speaker 1: what's your enthusiasm? Just one final question, what's your enthusiasm
Speaker 1: on the market. I mean you're walking in to the
Speaker 1: acclaimed investments and saying, let's put it to work, let's go,
Speaker 1: go go. So if you're if you really are an
Speaker 1: analyst they bottom up stock picker, you're feeling good because
Speaker 1: most companies are having a great year and it's probably
Speaker 1: going to continue because of tax reform with lower tax rates,
Speaker 1: repatriation of cash if you're Microsoft or Google. But the
Speaker 1: macro is the scary part. The big one on the
Speaker 1: horizon is trade, which has been talked about every day
Speaker 1: and today you know a little more favorably. Trade could
Speaker 1: derail it all. So with a proviso, were bullish. David Pearl,
Speaker 1: thank you so much. With Epic Investments. Uh, this morning,
Speaker 1: Tom Percelly with us with RBC Capital Markets have been
Speaker 1: talking wage dynamics, of which he is especially good. Tom.
Speaker 1: I want to really focus here on investment by corporations.
Speaker 1: We've got a tax cut, We've got this that we
Speaker 1: just hit on David Pearl with Epic Investments, their legendary
Speaker 1: and free cash flow analysis. Are they putting any of
Speaker 1: that money to work actually like investing in American hardware?
Speaker 1: You know? So I love this question. Um. I would
Speaker 1: tell you that I think the pieces are are in
Speaker 1: police for that to happen. Um. Whether it actually happens
Speaker 1: is a slightly different story. But but let me let
Speaker 1: me let me give you something to think about. Um So,
Speaker 1: for starters, if you look at lending standards for commercial
Speaker 1: and industrial loans, um, they have eased, and that has
Speaker 1: been true now for a number of quarters, and that
Speaker 1: tends to lead actual lending. UM. So I would tell
Speaker 1: you that's that sort of piece one here. Here, here's
Speaker 1: the other thing to think about. I'm not a U.
Speaker 1: You know people talking about this idea of animal spirits, right,
Speaker 1: I mean you're you're you've obviously talked about those countless times.
Speaker 1: I have a hard time really sort of embracing the
Speaker 1: notion of animal spirits because I can't I can't touch it, um.
Speaker 1: And because I can't touch it, it's hard for me
Speaker 1: to sort of model that. UM. But I've I've sort
Speaker 1: of come to religion on this idea a little at
Speaker 1: least a little bit recently. I've I've done a bunch
Speaker 1: of corporate board meetings, UM, you know, just to sort
Speaker 1: of give them my view on what's happening from an
Speaker 1: economic perspective. UM. And when I go in, I've I've
Speaker 1: been struck by UM how uh. You know, elated is
Speaker 1: maybe too strong of a war heard, but there's a genuine,
Speaker 1: a genuine sense of UM, positive vibe coming from the
Speaker 1: idea that we have lower, lower corporate taxes, regulation might
Speaker 1: be scaled back. And what's interesting is I don't know
Speaker 1: how to model it, but I know what I'm seeing,
Speaker 1: and I'm seeing this sort of generally better attitude towards
Speaker 1: the backdrop, and I get it. You know, when we
Speaker 1: talk about repatriation, we all talked about it in terms of,
Speaker 1: you know, companies are going to use it for buybacks.
Speaker 1: Dippen ends. Um, I just think you know what I've
Speaker 1: been seeing recently, I would tell you, and given the
Speaker 1: fact that fundamentally you've had this improved in living standards,
Speaker 1: I wouldn't be the least bit surprise of something that
Speaker 1: gets siphoned off and use for capex. Okay, I agree
Speaker 1: with all that, but I still don't understand how a
Speaker 1: corporate officer or CFO does a net present value analysis
Speaker 1: with the real rates the fiction that they are do
Speaker 1: you are we anywhere near where a responsible financial executive
Speaker 1: can actually do the math that they learned in school. Yeah, Well,
Speaker 1: here's the thing, and here's part of the here's part
Speaker 1: of that math, the equation. I think people forget where
Speaker 1: cash flow is doing because it's true that if if
Speaker 1: you know, the net present value of of of anything
Speaker 1: is going to deteriorate if we simply rise, that's true,
Speaker 1: that's always true. But what if cash flows increase? Yeah,
Speaker 1: then if your rate rises, then you're left with the
Speaker 1: same net present value. And I think I think none
Speaker 1: of the stuff exists in a vacuum, and everyone wanted to,
Speaker 1: but that is simply not the way that the match. Well,
Speaker 1: but the FED, the FED exists in a vacuum, which is,
Speaker 1: by definition they have to be reactive given the data. Carney,
Speaker 1: Draggy and the others clearly are waiting and waiting for inflation.
Speaker 1: We're different. I'm told we are going to see inflation.
Speaker 1: Our audience says they see it in Cleveland, CPI and
Speaker 1: some of the more service sector laden indicase. But is
Speaker 1: the inflation there for Powell Act. It's enough for them
Speaker 1: to act in the way that we expect them to write,
Speaker 1: which is to say, seven more hikes between now the
Speaker 1: of nineteen. Are thinking, I get much more aggressive than that. UM. Again,
Speaker 1: I think you know we've sort of were cut short
Speaker 1: a little bit earlier. UM, And so it won't be
Speaker 1: labor that at this point on a Monday you can
Speaker 1: do that. But I think that there's a really sound
Speaker 1: argument for not only our base case to come to fruition,
Speaker 1: but even a slightly more aggressive fed than that. UM.
Speaker 1: If this idea of that the consumer and I'll just
Speaker 1: pick up on the thread that I left out there
Speaker 1: in the first segment. If this idea that the consumer
Speaker 1: is now all of a sudden going to start to
Speaker 1: feel a little bit more emboldened to take on more credit, UM,
Speaker 1: that's a that's a that that's a that will goose
Speaker 1: up consumption um. And in the that scenario, again, all
Speaker 1: in the context of what we take even before that,
Speaker 1: this idea that wage pressure is a building. Um. Yeah,
Speaker 1: I think that there's a real sound argument for the
Speaker 1: FED to be a bit more aggressive, but again that
Speaker 1: that that's not our base case. Our base case is
Speaker 1: that the FED will go seven more times from now
Speaker 1: in nineteen at the end of nineteen UM and and
Speaker 1: I don't know that you can expect, uh, materially more
Speaker 1: aggressive than that. What GDP is linked to your seven
Speaker 1: rate hunts. Roughly, it's make American great. And the president
Speaker 1: has succeeded without question, you can say the presidents has
Speaker 1: succeeded into the mid terms and frankly into the beginning
Speaker 1: of the presidential twenty twenty to deliver three percent g
Speaker 1: d P. You know, again, I'll leave that to other
Speaker 1: people to sort of figure out whether he did his
Speaker 1: job or or not. But the reality is we're going
Speaker 1: to get three percent growth UM. And you know, I
Speaker 1: don't I don't think that's particularly heroic. I mean, going
Speaker 1: into this year, we have two and a half percent
Speaker 1: as our base case uh. And then on the back
Speaker 1: of the tax cuts, um, we basically threw in an
Speaker 1: extra few tents three tenths to be exact, and then
Speaker 1: you get another tenth from from some CAPEX bill. So
Speaker 1: we're officially we are two point nine percent, so and
Speaker 1: round numbers three percent. So yeah, I mean, I think
Speaker 1: that's it again, low hurdle to get there, Okay, very quickly.
Speaker 1: One of the thought Tom perc and that is with
Speaker 1: all the time PERCELLI chat, I'm hearing it just assumes
Speaker 1: dal are stronger rates, up growth, up dollars stronger. It's
Speaker 1: not happening yet, does it happen? So what I would
Speaker 1: say is this, I think when you think about the dollar,
Speaker 1: I think what you have to keep in mind is
Speaker 1: you know which cross are you comparing it too. So
Speaker 1: let's just pick on europe um. And here's the reality
Speaker 1: behind europe Um. Europe is has stabilized and relative because
Speaker 1: this isn't the idea. I think a lot of people
Speaker 1: forget and relative to what we had been experiencing in Europe,
Speaker 1: which was, you know, sort of like people worrying about
Speaker 1: this worst case scenario. That is a major win from
Speaker 1: a European perspective. So I never thought that the dollar
Speaker 1: would really be able to sort of advance in any
Speaker 1: material way on the back of the relative improvement in Europe.
Speaker 1: I think that's a really important idea. So yeah, I
Speaker 1: think it's reasonably expect some dollar strength, but I I
Speaker 1: wouldn't get I wouldn't take that idea too far. Tim
Speaker 1: for Solly, thank you so much, greatly appreciate it all
Speaker 1: this morning, RBC Capital Markets and really original wage growth
Speaker 1: work about eighteen months maybe two years ago as well,
Speaker 1: Kitchos of Society General. We recalibrate before May first, Kit
Speaker 1: when does the dollar go up? The big shock in
Speaker 1: your world over the last number of weeks has been
Speaker 1: dollar weakness. Is this lift that we've seen tangible? Do
Speaker 1: we finally see reversal? Higher rates, better growth, stronger dollar?
Speaker 1: Is it for real? Uh, it's it's trying to be
Speaker 1: for real. We need to go a little bit further,
Speaker 1: and I think we need to get tenure notes decisively
Speaker 1: to hold through three in a way that doesn't cause
Speaker 1: you know, equity Marcus to go into retreat, the FED
Speaker 1: to start getting worried. Um. I think you know, if
Speaker 1: we're going to see the US get interest rates support again. Um,
Speaker 1: it's got to be, you know, a durable shift higher
Speaker 1: and expectations about West terminal fet funds are and right
Speaker 1: now I think we're doing enough to give heart to
Speaker 1: some dollar balls and to make some of the dollar bears.
Speaker 1: And that's the majority of the market, but pretty anxious.
Speaker 1: What I mean if it does reach if it does
Speaker 1: reach over three for the tenure, should you buy it treasuries?
Speaker 1: I would be quite tempted to buy some terms, if
Speaker 1: you know, once we settled down there, I would get
Speaker 1: very tempted if we started seeing volatility pickup and an
Speaker 1: equity market start to sell off because I don't think
Speaker 1: there's much inflation out there, and I don't think the
Speaker 1: FEDS changing its long term path reamb. What matters is
Speaker 1: is the FED going to start moving its estimate of
Speaker 1: our star of neutral real rates? So we're going to
Speaker 1: change any of that? Or is this just just noise?
Speaker 1: A spring comes around after after a poor first quarter.
Speaker 1: Tell us about what's going on with energy markets and
Speaker 1: how that affects your outlook. I know, I look, I'm
Speaker 1: not a big expert on on oil. I think it's
Speaker 1: going up because it's being squeezed where it will get
Speaker 1: open bar before it's done. But if if we get
Speaker 1: some station just because we see, you know, a spike
Speaker 1: up to a new range and oil, and then all
Speaker 1: prices find a level and go flat, I don't think
Speaker 1: that changes the longer term inflationary story a jot. It
Speaker 1: doesn't feed through in a durable way. The question on
Speaker 1: inflations were about what happens to wage growth, um, not
Speaker 1: what happens to all prices in a short period of time.
Speaker 1: And I don't think all prices are going to run
Speaker 1: away we I think that's you know, the the elasticity
Speaker 1: and supply globally is I well understood enough, not by now.
Speaker 1: So we may be moving to a sustainably higher range,
Speaker 1: but we're not going to a hundred bucks. I I okay,
Speaker 1: we're not gonna go to a hundred bucks. But within
Speaker 1: your reading and as you say, you're you're away from
Speaker 1: well and yet dollar denominated, etcetera. Are we at a
Speaker 1: point where the nuance of five dollars a barrel matters?
Speaker 1: Or have we sort of had the jump fifties sixty
Speaker 1: all of a sudden to brent seventy three dollars a barrel?
Speaker 1: Is the effect or impact of the move in the past,
Speaker 1: or is it to come if we go five dollars higher.
Speaker 1: I think it's in the past. Unless we start suddenly
Speaker 1: talking about breaking outwards. If we're going to settle at
Speaker 1: seventies something where we were sixty something for the last year,
Speaker 1: and then we've come from from these lower levels, then
Speaker 1: you know, unless you unless you change that and talk
Speaker 1: about it, you know, a sustained move to something different
Speaker 1: than I think this is. This is just the back
Speaker 1: end of the move, which may include a little bit
Speaker 1: of an overshoot before we finally settle down, but the
Speaker 1: move itself is basically done. Kit Are you at all
Speaker 1: surprised by what gold hasn't done? You know, I mean, no,
Speaker 1: I'm not. I mean gold. You know, it tends to
Speaker 1: get somewhat more marginalized. But the big story that always
Speaker 1: supports gold is is going to be super low real
Speaker 1: yields and real returns on on on financial assets and
Speaker 1: concerns about inflation that come with that in a low
Speaker 1: inflationary world, and slightly higher slightly higher yields on treasuries
Speaker 1: than you know, there are there are things to buy
Speaker 1: other than gold. So gold has remained reasonably well supported
Speaker 1: in the big scheme of things. But right no, there's
Speaker 1: no reason to be find a hole in the ground
Speaker 1: to put all my money in gold anymore. And now
Speaker 1: on Monday we go technical with kiss kit jokes, we
Speaker 1: go into the granularity of the Swiss franc kit. We've
Speaker 1: got to move weaker Swiss franc. Bunch of it is
Speaker 1: the nuance, the speculation, the speculation, the speculation that the
Speaker 1: Russian rich people are pulling their money out of Switzerland,
Speaker 1: whatever that may be. Is this a time where you
Speaker 1: get brave and go against the trend and go strong
Speaker 1: Swiss franc I tell you I think against the Euro,
Speaker 1: the Swiss Frank will strengthen if you're all the breaks
Speaker 1: down through through one and a half and I think
Speaker 1: we'll flush out. So the big mover in looking at
Speaker 1: the Swiss franc is what is happening against the Swiss
Speaker 1: Frank against the Euro. We've taken that from We've taken
Speaker 1: that from really from from one oh eight a year
Speaker 1: ago to one one twenties and level we broke down
Speaker 1: through in the big surprise when the peg broke, we've
Speaker 1: touched it and we're reversing. If the Euro loses its
Speaker 1: mojo here, then I won't be shut of the Swiss
Speaker 1: Frank against anything. Kit the stronger Swiss Frank hasn't hurt
Speaker 1: the Swiss economy. No, the Swiss economy is not sensitive
Speaker 1: too much. You know it hurts Bits and his nice people.
Speaker 1: But know the you know, the goods that Switzerland exports
Speaker 1: are not price sensitive. Um, it causes some concern because
Speaker 1: it's given them falling prices, negative inflation that that causes
Speaker 1: some concerns and negative interest rates, which Swiss savers really
Speaker 1: don't like at all. You know, they're up in arms
Speaker 1: regularly against their central bank about that that. Old folks
Speaker 1: who live in Switzerland aren't happy. But um, you know
Speaker 1: we we don't. We don't go I don't know skiing
Speaker 1: in Switzerland or bank Swiss pharmaceuticals or beauty products because
Speaker 1: because of the price, that's not what's driving that decision.
Speaker 1: Thank you so much, greatly appreciated with society general. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
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Speaker 1: you prefer. I'm on Twitter at Tom Keene Before the podcast,
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