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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa Abramwoid's along

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Speaker 1: with Tom Keen and Jonathan Ferrell, join us each day

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Speaker 1: for insight from the best in economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App.

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Speaker 2: Terry Haines joins us now founder of Pangaea Policy. Terry,

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Speaker 2: we've seen one of these before a little more than

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Speaker 2: a decade ago. Terry, you witnessed that as well. We

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Speaker 2: all did. Can you tell me first of all, whether

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Speaker 2: it's justified and then we can get into whether it matters.

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Speaker 3: Well.

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Speaker 4: Look, I think I think a lot of the issues

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Speaker 4: that both you and Lisa have brought up are entirely

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Speaker 4: valid about about interest payments and all the rest, So

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Speaker 4: let me.

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Speaker 3: Just start there.

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Speaker 4: Secondly, you know, politically, I think it is bad news

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Speaker 4: for Biden, Azanne Marie has talked about. Thirdly, I question

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Speaker 4: and Fitch across the board and particularly the timing. You know,

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Speaker 4: Fitch is is older than the death ceialing law. They

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Speaker 4: were founded three years before the first death ceialing law happened.

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Speaker 4: And you know, now they're bestarring themselves to complain about

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Speaker 4: the process through which the United States appropriates money and

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Speaker 4: deals with its debt.

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Speaker 3: So, you know, whatever.

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Speaker 4: Else is going on here, you know, I think there's

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Speaker 4: a motivation that's a little less pure than a lot

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Speaker 4: of people would want to talk about. And finally, you know,

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Speaker 4: the economists, you know, a lot of the same people

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Speaker 4: that are complaining about Fitch are the same people that

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Speaker 4: were entirely silent through through the whole money printing and

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Speaker 4: fiscal bloat era. And I think they're a little bit

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Speaker 4: more concerned that that might be ending for good.

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Speaker 3: So, you know, so I think overall this isn't going

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Speaker 3: to be worth very much.

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Speaker 1: Said, there is a real concern over just how much

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Speaker 1: the budget is ballooning in terms of debt versus GDP,

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Speaker 1: how much interestry expenses are going up. I mean, to me,

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Speaker 1: the idea that it went from about six hundred billion

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Speaker 1: to nearly a trillion dollars in a year is pretty shocking,

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Speaker 1: given the fact the interest rates have been going up terry.

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Speaker 1: From your perspective, when you take a look at some

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Speaker 1: of the plans, the economic plans that are coming out

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Speaker 1: of the Republicans and the Democrats. Is anyone seriously talking

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Speaker 1: about remedying this or bringing in costs that could potentially

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Speaker 1: cut benefits.

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Speaker 4: No, they haven't talked about it, and they won't talk

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Speaker 4: They haven't talked about it for decades, and they won't

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Speaker 4: talk about it. You know, the good news and the

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Speaker 4: concerning news every year when spending is fixed is really

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Speaker 4: the same thing. The firstly, you know, on book spending

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Speaker 4: tends to be more or less status quo with some

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Speaker 4: minor adjustments, you know, but the off book obligations, whether

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Speaker 4: it's student loan debt or housing or anything else, are humongous,

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Speaker 4: and that's never dealt with in any sort of way,

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Speaker 4: and it's not going to be. You know, there's no

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Speaker 4: percentage for any of these politicians to want to take

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Speaker 4: it on. There's no percentage for the White House to

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Speaker 4: want to address it forthrightly and explain to the public

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Speaker 4: why it's a bad thing, why it amounts to attacks

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Speaker 4: on them, and so on and so forth, so that

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Speaker 4: situation won't change, you know, that's properly identified. I question

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Speaker 4: kind of the timing and the why you said that.

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Speaker 1: This would be politically damaging to President Biden heading into

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Speaker 1: the twenty twenty four election. And this comes at a

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Speaker 1: time of an indictment of former President Trump, and I'm

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Speaker 1: wondering a lot of people thinking that a runoff between

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Speaker 1: Trump and Biden sort of repeat of what we saw

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Speaker 1: in twenty twenty wouldn't necessarily end up with Biden winning.

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Speaker 1: Are you starting to question that?

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Speaker 4: Oh, I've never thought Biden's a shoe in or anything

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Speaker 4: of the kind, and I still don't today. You can

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Speaker 4: go back a few months and see that. And I

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Speaker 4: think I did this on your air once, where the

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Speaker 4: about two or three months ago, where you know, you

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Speaker 4: could look at different different national polling and see that

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Speaker 4: Trump was either beating Biden or was running essentially neck

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Speaker 4: and neck with him.

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Speaker 3: You know that that's still true.

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Speaker 4: You know. Kind of what the indictments for me mean

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Speaker 4: is that markets have a lot less certainty about what

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Speaker 4: the outcome is going to be. So I think there's

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Speaker 4: going to be a lot more trepidation and this kind

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Speaker 4: of this kind of motors on for a while as

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Speaker 4: a as a silent market negative terry.

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Speaker 2: There's a sense that we've lost sight of how serious

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Speaker 2: some of these illegal issues actually are a sense of fatigue,

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Speaker 2: I think for a lot of people in this country, Terry,

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Speaker 2: just to go through some of the federal charges, conspiracy

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Speaker 2: to defraud the United States, conspiracy to obstruct an official proceeding,

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Speaker 2: obstruction of an attempt to obstruct an official proceeding, again

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Speaker 2: and again again, these things come up, Terry, and people

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Speaker 2: in this country, many of them shrugging their shelters towards that, Terry,

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Speaker 2: just how serious are some of these charges?

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Speaker 5: Oh?

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Speaker 3: I think the chargers are quite serious.

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Speaker 4: I think their provability is very difficult, and and I'll

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Speaker 4: get to that in a second, But let me just

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Speaker 4: say off the top. You know, you've got the world,

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Speaker 4: the world those people are living in our or the

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Speaker 4: world where uh, you know, Trump is indicted, As my

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Speaker 4: daughter says, it's a day that ends in Why so

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Speaker 4: isn't there another Trump indictment?

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Speaker 3: Firstly? Secondly, you've got a slurge in the in the.

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Speaker 4: Biden matter, where we've now moved into a situation where

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Speaker 4: Biden seems to have been involved in his son's business,

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Speaker 4: which is directly contradictory to what he's been saying for years. Uh,

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Speaker 4: that's going to be a problem. We're just at the

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Speaker 4: beginning of that. And thirdly, you've got a situation, you know,

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Speaker 4: with this UH, with this prosecution itself, where the the

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Speaker 4: indictment UH concedes that Trump has a right, like every

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Speaker 4: American UM quoting to speak publicly about the election and

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Speaker 4: even to claim falsely that there had been outcome determinative fraud.

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Speaker 4: But now we're going to start prosecuting based on what

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Speaker 4: he did about that. He's the prosecutor is going to

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Speaker 4: have to establish motivation and it almost seems to me

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Speaker 4: like a few good men kind of code read examination,

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Speaker 4: cross examination. You're going to have to get the state

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Speaker 4: of mind at a time where you know that the

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Speaker 4: White House had different advisors telling the president different things.

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Speaker 3: How do you get to the bottom of that?

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Speaker 2: Very difficult Terry, what a twenty four as in Washington, DC?

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Speaker 2: Terry Hines, Panchaea, Terry, thank you, Robert, say have the

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Speaker 2: chief investment strategist I repagm fixed income? Robert, does that

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Speaker 2: decision by Fitch more than a decade after S and

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Speaker 2: P Global writings, did the same thing change anything for

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Speaker 2: you and the team this morning?

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Speaker 5: No? Not really.

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Speaker 6: I mean the United States is unrivaled in terms of

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Speaker 6: having a market for government bonds that is liquid and secure,

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Speaker 6: and that's going to remain the case for our generation.

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Speaker 6: But it is interesting and it does cause people to

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Speaker 6: stop and pause and ask these questions, which they should ask.

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Speaker 6: And in terms of the last twenty years, I would

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Speaker 6: say there has been an erosion in terms of the

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Speaker 6: US and our governance relative to other countries. Take a

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Speaker 6: look at the European Union, for example. They have a

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Speaker 6: stability and Growth pack which they flout, but it's on

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Speaker 6: the sidelines and it is debated. So you know, there

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Speaker 6: is an acknowledgment that debt matters, that you want to

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Speaker 6: be sustainable. And the United States has had a soaring debt.

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Speaker 6: You know, it's not just a little bit, it's not

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Speaker 6: a creep. It's from forty percent debt to GDP to rocketing,

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Speaker 6: you know, towards an over one hundred percent in the

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Speaker 6: last twenty years.

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Speaker 5: And this was never the case.

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Speaker 6: You know, in the last century, people would rack up

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Speaker 6: debt and they would pay it down and then people

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Speaker 6: would wring their hands about the countries that ran one

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Speaker 6: hundred percent debt to GDP. I don't know if you

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Speaker 6: recall time in the Eurozone crisis, all of those analyzes

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Speaker 6: that eighty to one hundred percent was the death zone

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Speaker 6: for sovereign credits.

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Speaker 5: Now nobody cares.

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Speaker 6: Monetary finance is commonplace, and so having something like this,

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Speaker 6: even though these are really vanity ratings, from a practical perspective,

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Speaker 6: it caused you to ask the questions because over fifty years,

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Speaker 6: one hundred years, eventually you do lose flexibility.

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Speaker 5: But in terms of what we do in a trade

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Speaker 5: on this now.

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Speaker 2: It is the independent assessment of America's credit worthiness on

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Speaker 2: behalf of Fitch, And to some people it matters. To others,

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Speaker 2: it doesn't. Many people on this program, it doesn't seem

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Speaker 2: to matter.

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Speaker 7: Robert. I'm wonder if this matters to you.

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Speaker 2: The Treasury Department coming down and essentially telling us that

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Speaker 2: net borrowing the estimate for July through September this quarter,

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Speaker 2: it's going to be a trillion. It's not going to

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Speaker 2: be the seven point thirty three that they thought it

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Speaker 2: would be back in May. Does that additional supply change

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Speaker 2: where you think this yield curve is going to develop into?

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Speaker 6: Yeah, now we're talking John, Yeah, the deficit had some

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Speaker 6: low prints. Looking back several months, which were kind of

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Speaker 6: surprising given that actually, you know, nobody is trying to

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Speaker 6: reduce deficit anywhere, but especially here in the United States.

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Speaker 6: So having a few hundred extra billion hit the market

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Speaker 6: I think does matter.

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Speaker 5: And what we're talking.

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Speaker 6: About is a little bit of an impact on the

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Speaker 6: absolute level of rates. It puts a little bit of

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Speaker 6: pressure there, but also puts pressure on relative rates. That's

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Speaker 6: really the thing to watch. You know, if you go

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Speaker 6: back thirty years, treasuries used to trade rich to swap rates,

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Speaker 6: as if there was a scarcity or a quality premium,

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Speaker 6: people would pay up for treasuries.

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Speaker 5: Now, by the time you get to the back end of.

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Speaker 6: The curve, treasuries trade seat basically to the Fed fund

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Speaker 6: swap curve, to the sofa curve to you know, a

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Speaker 6: riskless alternative out there that doesn't have the supply pressures

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Speaker 6: of the US Treasury. So this definitely makes a difference

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Speaker 6: in terms of relative spreads. And as these numbers continued

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Speaker 6: to become more and more unbelievable. I mean, on a

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Speaker 6: daily basis, the United States Treasury on a day when

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Speaker 6: they're hitting the bill market, the coupon market will do

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Speaker 6: more than all other countries in the world combined, And

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Speaker 6: that's pretty stunning number.

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Speaker 1: Robert, you were talking about how for a number of

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Speaker 1: years we cared about eighty to one hundred percent debt

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Speaker 1: to GDP.

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Speaker 8: Now no one cares.

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Speaker 1: We have the US with about one hundred and twenty

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Speaker 1: percent debt to GDP. Does that shift where people start

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Speaker 1: to care again, given that rates are not zero anymore?

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Speaker 1: In other words, are we in a new regime where

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Speaker 1: interest rate pressures and expenses suddenly make this a top

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Speaker 1: priority and make debt matter again from a fundamental perspective.

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Speaker 5: Yeah, well, we're not there right now.

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Speaker 6: I mean the UK used to be a place that

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Speaker 6: had a clear mindset on this. Now the places that

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Speaker 6: have a mindset that are active or where you see

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Speaker 6: it in the press are smaller countries, and it's incredibly limited.

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Speaker 6: If you go back to the nineties, it was incredibly different.

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Speaker 6: I differ with John Writing's take that the FED will

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Speaker 6: stop them. No central bank is stopping governments from missioning

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Speaker 6: debt these days.

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Speaker 5: If you go back to the nineties.

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Speaker 6: Even coming into this century, Greenspan had the nerve to

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Speaker 6: speak out say this is my job, that's their job.

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Speaker 6: That I'll tell you in the abstract there should be

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Speaker 6: a long term fiscal construct for controlling the amount of debt,

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Speaker 6: and now that's gone. So and there were, you know,

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Speaker 6: technical things people may not be aware of. I mean,

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Speaker 6: there was an effort to consciously balance the budget, which succeeded,

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Speaker 6: and by coming into this century, we were in surplus

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Speaker 6: and we were on track to literally pay down the

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Speaker 6: debt people were talking about, but things like paygo various

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Speaker 6: restrictions that actually kind of contained these depths.

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Speaker 5: That's over time, those have all been scrapped.

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Speaker 6: And you know, we need to get to that time

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Speaker 6: where people look for sustainability so that when you hit

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Speaker 6: a crisis, you have the fiscal flexibility to.

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Speaker 1: React, given the fact that there doesn't seem to be

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Speaker 1: a lot of it is in Washington, to bring that

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Speaker 1: under control or pay it back or have that ammunition.

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Speaker 1: As you were saying, how high could long term meals go?

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Speaker 5: Right?

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Speaker 6: So, you know, like I said, I think the fundamentals

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Speaker 6: are driving the level of yields, and those are around

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Speaker 6: current levels. I think if the expansion continues and it

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Speaker 6: turns out that this drop in inflation we've seen here

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Speaker 6: as transitory, you could get a little bit of an

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Speaker 6: increase in rates, you know, tens over four percent, but

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Speaker 6: it's going to be more owing to the fundamentals than to.

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Speaker 5: This technicality here.

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Speaker 6: I think though that you know, Fitch and on the

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Speaker 6: governance side, you know, on the one hand, it's it's

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Speaker 6: interesting timing because in this last showdown, there was you know,

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Speaker 6: open top of those thirteen words you could take from

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Speaker 6: the fourteenth Amendment about the sanctity of the US debt,

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Speaker 6: and that was uplifting. But the fact of the matter

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Speaker 6: is the politics, you know, ping pong, and you have

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Speaker 6: lawmakers that are upset about an unfettered rise in the

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Speaker 6: level of debt, and they can and you know, really

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Speaker 6: cause a lot of trouble in that process. So I

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Speaker 6: think it's noteworthy that Pitch brings this up and it's

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Speaker 6: worth keeping in front of people.

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Speaker 2: Robert Saif of aage and fixed income Robert, thanks for

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Speaker 2: jumping on. But Michael a JP Morgan Asset Management Joints

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Speaker 2: us around the table here in New York to go

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Speaker 2: through some of this.

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Speaker 7: Bob, good morning, good morning, what a morning.

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Speaker 2: Already to the entry report. Let's start with that down grade.

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Speaker 2: I just want to from your perspective, and we've asked

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Speaker 2: so many people this question. Does it matter to you personally?

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Speaker 2: You hold a lot of this stuff, does it change anythink?

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Speaker 9: Well, that's the question we asked ourselves last night, and

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Speaker 9: we wanted to confirm a number of things. The first

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Speaker 9: thing we did is go through all our client portfolios

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Speaker 9: and made sure that the guidelines exempted treasuries from any

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Speaker 9: kind of ratings. They all do. We went through that

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Speaker 9: exercise in twenty eleven. Then we looked at treasuries in

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Speaker 9: the market. We confirm that there's still exempt from sec

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Speaker 9: registration and they still maintain a zero risk wading in

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Speaker 9: terms of bank capital and liquidity considerations. Then they're also

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Speaker 9: very important in the collateral management market. And we just

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Speaker 9: confirm that the CFTC and the CME do not reference

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Speaker 9: rating agencies. They only reference US treasuries. So we wanted

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Speaker 9: to make sure the markets would remain stable. We're confident

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Speaker 9: they would. I think the next thing we're looking for

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Speaker 9: is what does Fitch do with the GSS. What do

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Speaker 9: they do with the mortgage market? Do they say because

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Speaker 9: it's securitized, it has a higher rating than the sovereign

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Speaker 9: I don't know. I'm anxious to see what they do there.

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Speaker 2: Okay, So for the same things, the same reasons you

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Speaker 2: went through point by point and said that ultimately this

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Speaker 2: downgrade doesn't matter. With the downgrades off the back of

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Speaker 2: it matter, would they have consequences elsewhere? Have we got

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Speaker 2: downngrades because of those reasons elsewhere?

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Speaker 9: I don't think so. And we go back to what

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Speaker 9: did Fitch do? And you have to go back to

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Speaker 9: May when they put it on watch. That was a

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Speaker 9: pretty clear signal that in no reasonable period of time

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Speaker 9: would the US be able to get its fiscal deficits,

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Speaker 9: debt to GDP, or how the governance process works into

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Speaker 9: line with what are the nine other remaining Triple A

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Speaker 9: rated sovereigns. And if you go through them one by

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Speaker 9: one and look at debt to GDP, the US is

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Speaker 9: headed to one hundred and twenty percent. The median of

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Speaker 9: the other nine Triple A rated Fitch sovereigns is thirty

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Speaker 9: nine percent. You look at fiscal deficits, the US is

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Speaker 9: going to run minus six to minus seven percent. Zero

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Speaker 9: is the median of the other nine Triple A sovereigns.

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Speaker 9: So you're miles away. I won't touch governance. I think

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Speaker 9: I heard what Anne Marie.

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Speaker 7: Saidst I've been down with already this morning. Both.

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Speaker 3: Yeah.

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Speaker 9: Do you know what, we have a lot of clients

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Speaker 9: who love the US markets, love you USS assets because

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Speaker 9: of the rule of law and the governance. They like

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Speaker 9: the transparency, they like to see the battles on the floor.

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Speaker 1: So then there's a question of just how strong the

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Speaker 1: US economy is because what a lot of people have

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Speaker 1: pushed back against the Fitch downgrade as saying the US

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Speaker 1: economy is actually increasing and the momentum is just developing.

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Speaker 1: You haven't been saying that you've been seeing a recession.

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Speaker 1: So do you take that argument that the US is

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Speaker 1: arguably in a stronger position or do you kind of push.

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Speaker 8: Back on that.

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Speaker 9: Well, the one that stands out is modeling the fiscal

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Speaker 9: deficit to unemployment, and with unemployment at three point four percent,

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Speaker 9: you wouldn't expect the US to need to run a

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Speaker 9: fiscal deficit of six to seven percent. But for US,

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Speaker 9: unemployment is a lagging indicator. Unemployment is confirmation that we're

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Speaker 9: not in recession or confirmation that we are in recession.

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Speaker 9: The high end unemployment is generally a couple quarters after

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Speaker 9: the recession, and the low is generally a couple quarters

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Speaker 9: before recession. We still think we're headed for recession sometime

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Speaker 9: around year end, and until we're in a recession, unemployment

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Speaker 9: will yes remain low.

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Speaker 1: Something we were talking about with Brian Weinstein, and I

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Speaker 1: know that John's been talking about with a number of guests,

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Speaker 1: including Mohammad al Arian, has been that the FED may

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Speaker 1: allow inflation to go down to just three percent or

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Speaker 1: two and a half percent or something like that and

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Speaker 1: then stop there with respect to how high they're willing

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Speaker 1: to hold rates. And Brian Weinstein was saying, then in

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Speaker 1: that case, you look at four percent as a floor

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Speaker 1: for ten year treasuries? Why do you not see that

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Speaker 1: as a likelihood?

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Speaker 9: So this brings back flexible average inflation targeting go back

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Speaker 9: to twenty nineteen. Makes sense for me because I wondered

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Speaker 9: if targeting two percent inflation exposes you too much to

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Speaker 9: the one point six one point seven one point eights,

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Speaker 9: which we've learned is too low for an economy the

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Speaker 9: complexity and size of the US economy. So I'm all

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Speaker 9: for this sort of two and a quarter maybe up

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Speaker 9: to two point four percent. That said, what people are

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Speaker 9: now saying is we hit CPI nine percent. Other measures.

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Speaker 9: You know high single digits, that the FED has thrown

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Speaker 9: an array of policies at it, and you're now in

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Speaker 9: a disinflationary trend. But disinflation will be transitory, that it's

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Speaker 9: coming down like a ski slope and it will stop

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Speaker 9: at two and a half percent. I don't believe that.

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Speaker 9: I think the policies are in place. The long and

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Speaker 9: variable lags are biting. They will hit people. Talk about employment,

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Speaker 9: No one's really talked about the ism employment component. It

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Speaker 9: was forty four point four. It's never been at that

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Speaker 9: level without the FED cutting rates. So throw that in

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Speaker 9: the basket of things that has a perfect track record

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Speaker 9: of the US economies either in recession, headed to recession,

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Speaker 9: or the FED should be cutting rates. I don't think

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Speaker 9: you can dismiss all of those things.

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Speaker 2: You talked about the lags. Did you read the Bill

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Speaker 2: Dudley pace on the Bloomberg terminal yesterday? I share the

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Speaker 2: quote with you at home. Bill Dudley said this the

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Speaker 2: former New York FED president. There's considerable evidence that the

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Speaker 2: lags have shortened, meaning that the economy is already found

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Speaker 2: nearly all of the impact of the Fed's actions. What's

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Speaker 2: the argument against that?

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Speaker 9: Businesses and households have locked in a lot of low

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Speaker 9: cost funding over the last couple of years. That's why

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Speaker 9: the supply of housing on the market isn't there. That's

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Speaker 9: why when you look at corporate fundamentals, businesses have locked

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Speaker 9: in very low cost of funding. Those things will change

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Speaker 9: as the quarters roll by, things will need to be refinanced,

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Speaker 9: there will be more borrowing that's put in place. Yes,

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Speaker 9: consumers may have locked in two and a half to

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Speaker 9: three percent mortgages, but what's alarming to us is the

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Speaker 9: amount of revolving credit that's been put in place. You

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Speaker 9: look at credit card usage, it's up like that, and

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Speaker 9: that's in the twenty percent sphere. So consumers are struggling

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Speaker 9: to pay higher prices now they've tapped out their access savings,

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Speaker 9: they're on their credit card. We'll see where it all ends.

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Speaker 2: You're going to stick with us, I hope after we

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Speaker 2: break this number. The ADP report out in about sixty

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Speaker 2: seconds time. The estimate is one hundred and ninety thousand.

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Speaker 2: Previous numbers five hundred k before that number breaks, and

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Speaker 2: I cross over to Mike mcckey, when do you expect

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Speaker 2: the weakness to turn up in the labor market. If

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Speaker 2: we still believe in these long and variable lags. Is

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Speaker 2: that a story for later this summer, later this year

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Speaker 2: or already twenty twenty four.

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Speaker 9: I think we'll see it before the end of the year.

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Speaker 9: I think we'll see it over the next several months.

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Speaker 2: Upside surprise on ADP. It doesn't matter, and then it does.

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Speaker 2: Three twenty four is the number. The estimate was one ninety.

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Speaker 2: The previous was that blowout four ninety seven. Alongside Lisa,

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Speaker 2: I'm Jonathan Fairrh. Joining us is Bob Michael and Nathan Sheets.

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Speaker 2: Nathan Sheets the City, Bob Michael of JP Morgan Asset Management. Bob,

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Speaker 2: we've had a chance to go through that number. Three

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Speaker 2: twenty four EIGHTYP doesn't matter, It doesn't matter.

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Speaker 7: It doesn't matter. Then you get a number like that,

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Speaker 7: does it matter?

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Speaker 9: It fell within my range of expectation for ADP of

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Speaker 9: minus five hundred thousand to plus five hundred thousand. No,

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Speaker 9: it's proven, it doesn't matter. I'm looking for the employment

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Speaker 9: report on Friday, and I'm specifically looking for hours work.

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Speaker 7: That's super helpful. Do you want to stick around?

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Speaker 8: Sure?

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Speaker 7: Great, Nathan Sheets.

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Speaker 2: Great to have you with us on a program Nathan,

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Speaker 2: your thoughts on that job's number one into Friday. You

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Speaker 2: guys are looking for a big one Friday, right too?

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Speaker 7: Ninety?

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Speaker 8: Yeah, we're at two ninety.

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Speaker 10: I think the part of the upside on it is

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Speaker 10: a seasonal adjustment issue. But I think that underneath that

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Speaker 10: the real narrative as we continue to see the US

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Speaker 10: labor market as being very strong and buoyant, and I

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Speaker 10: think the underlying driver of that is the US consumer

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Speaker 10: spending on services remains very strong and services are labor intensive,

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Speaker 10: and that has supported employment for the last eighteen months

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Speaker 10: or so, and we think that story continues.

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Speaker 1: So what do you make of what Bob Michael was

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Speaker 1: just talking about the ism component of the manufacturing survey

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Speaker 1: showing a real deterioration in the employment there does seem

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Speaker 1: to be on the margin signs.

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Speaker 8: That not all is right.

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Speaker 10: Yeah, See, the flip side of the strength and services

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Speaker 10: has been weakness in the manufacturing and the good sectors

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Speaker 10: or in the midst of a rebalance in rotation and

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Speaker 10: spending towards services. That's been ongoing now for a while,

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Speaker 10: but it seems like it continues.

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Speaker 8: So for me, one of.

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Speaker 10: The puzzles has been as the goods sectors have softened

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Speaker 10: to the extent that they have that we haven't seen

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Speaker 10: a little bit more kind of shedding of labor in

439
00:22:53,640 --> 00:22:57,199
Speaker 10: the manufacturing sector. And I pointed to that as an

440
00:22:57,240 --> 00:23:00,399
Speaker 10: example of labor hoarding. Well, maybe we're now getting to

441
00:23:00,440 --> 00:23:02,800
Speaker 10: a point where some of those firms are saying, well,

442
00:23:02,840 --> 00:23:06,480
Speaker 10: given where we are and the pressures that we're facing,

443
00:23:06,560 --> 00:23:08,560
Speaker 10: we're going to have to let some workers go or

444
00:23:08,600 --> 00:23:10,800
Speaker 10: the minimum, we're not going to be able to hire

445
00:23:10,960 --> 00:23:12,840
Speaker 10: quite as much as we have in the past.

446
00:23:13,040 --> 00:23:14,879
Speaker 1: And how quickly could this turn? I mean, that's one

447
00:23:14,920 --> 00:23:16,720
Speaker 1: of the big debates. Could it just fall off a cliff?

448
00:23:17,240 --> 00:23:20,480
Speaker 10: This is this is a very important question. And I

449
00:23:20,480 --> 00:23:23,320
Speaker 10: think when you look at labor market dynamics and you

450
00:23:23,359 --> 00:23:27,400
Speaker 10: look at the unemployment rate going into recessions, the unemployment

451
00:23:27,480 --> 00:23:30,960
Speaker 10: rate is usually pretty flat and then it moves in

452
00:23:31,040 --> 00:23:34,120
Speaker 10: a sharp kind of V shape, and it doesn't send

453
00:23:34,160 --> 00:23:36,840
Speaker 10: invitations beforehand, Sam getting ready to go.

454
00:23:37,400 --> 00:23:40,560
Speaker 8: It just goes. So I think these dynamics could be

455
00:23:41,119 --> 00:23:41,920
Speaker 8: quite abrupt.

456
00:23:42,160 --> 00:23:44,320
Speaker 7: Bob Michael was just like, mate, you can't hide it.

457
00:23:44,480 --> 00:23:45,800
Speaker 7: He wants to jump in. I can fail it.

458
00:23:46,480 --> 00:23:48,600
Speaker 8: Aside, what a wonderful comment.

459
00:23:49,280 --> 00:23:53,080
Speaker 9: Nathan's exactly right, and I've said it many times. The

460
00:23:53,160 --> 00:23:56,920
Speaker 9: low and unemployment is before recession. It's confirmation that you're

461
00:23:56,960 --> 00:24:01,359
Speaker 9: not in recession. I understand that that spending patterns on

462
00:24:01,400 --> 00:24:06,360
Speaker 9: the consumer have shifted from goods to services, but how

463
00:24:06,400 --> 00:24:11,640
Speaker 9: long can that continue? With credit card borrowing going vertical

464
00:24:12,040 --> 00:24:14,520
Speaker 9: and with excess servings being burned up.

465
00:24:14,960 --> 00:24:19,080
Speaker 10: The key metric we're looking at is the savings rate,

466
00:24:19,720 --> 00:24:25,280
Speaker 10: and the savings rate remains low. By historical metrics, it's

467
00:24:25,320 --> 00:24:28,560
Speaker 10: running around four and a half percent. Another prism into

468
00:24:28,600 --> 00:24:31,960
Speaker 10: this is the quote unquote access savings, and by our reckoning,

469
00:24:32,000 --> 00:24:35,240
Speaker 10: there's still some It really boils down to the question

470
00:24:35,359 --> 00:24:38,480
Speaker 10: of when is that savings rate going to normalize? And

471
00:24:38,600 --> 00:24:40,880
Speaker 10: is all I know is that for the last few

472
00:24:40,960 --> 00:24:43,840
Speaker 10: quarters it's been pretty stable at around four and a

473
00:24:43,880 --> 00:24:47,199
Speaker 10: half percent, And that makes me think this thing could continue,

474
00:24:47,640 --> 00:24:51,400
Speaker 10: and particularly the strength and services spending could continue from

475
00:24:51,400 --> 00:24:54,600
Speaker 10: maybe a couple more quarters. Maybe there'll be another discussion

476
00:24:54,680 --> 00:24:56,800
Speaker 10: in early twenty twenty four, but through the end of

477
00:24:56,800 --> 00:24:58,480
Speaker 10: this year things are looking pretty solid.

478
00:24:58,520 --> 00:24:58,680
Speaker 11: Well.

479
00:24:58,680 --> 00:25:01,280
Speaker 1: Has that dovetail? Then, Nathan to this idea of some

480
00:25:01,440 --> 00:25:04,880
Speaker 1: spike in unemployment and this sort of hard landing type

481
00:25:04,880 --> 00:25:07,320
Speaker 1: of narrative that has been all but taken off the table.

482
00:25:07,760 --> 00:25:08,000
Speaker 6: Right.

483
00:25:08,400 --> 00:25:11,000
Speaker 10: So, on the one hand, we've had the labor hoarding

484
00:25:11,040 --> 00:25:13,480
Speaker 10: in my view in the manufacturing sector, maybe some of

485
00:25:13,520 --> 00:25:15,600
Speaker 10: that starting to give, But I think.

486
00:25:15,400 --> 00:25:17,760
Speaker 8: That we need to see some easing.

487
00:25:17,600 --> 00:25:21,760
Speaker 10: In services spending, a rise in the overall savings rate.

488
00:25:22,119 --> 00:25:24,480
Speaker 10: I think we will see that, but it's more likely

489
00:25:24,480 --> 00:25:27,440
Speaker 10: to be an early twenty twenty four story, and there's

490
00:25:27,440 --> 00:25:30,240
Speaker 10: more uncertainty around it. I mean, many of our competitors

491
00:25:30,280 --> 00:25:35,040
Speaker 10: are shifting their macro calls away from recession in early

492
00:25:35,080 --> 00:25:38,320
Speaker 10: twenty twenty four to soft landing, you know, based on

493
00:25:38,520 --> 00:25:40,919
Speaker 10: history and the tightness of the labor market and some

494
00:25:40,960 --> 00:25:42,679
Speaker 10: of the imbalances in the economy.

495
00:25:43,040 --> 00:25:43,800
Speaker 8: We're not there.

496
00:25:44,200 --> 00:25:46,960
Speaker 10: We still think that there will be a recession next year.

497
00:25:47,320 --> 00:25:51,400
Speaker 10: But boy, this is a very very finely balanced call

498
00:25:51,560 --> 00:25:54,000
Speaker 10: between soft landing and recession during twenty t Well.

499
00:25:53,920 --> 00:25:56,680
Speaker 2: Let's talk about the federal reserve calls between you both, Bob,

500
00:25:57,040 --> 00:25:58,840
Speaker 2: going into the summer, you was holding for right cuts

501
00:25:58,880 --> 00:26:01,600
Speaker 2: potentially as soon as September. Where are you now in

502
00:26:01,680 --> 00:26:02,840
Speaker 2: that call on Fed policy?

503
00:26:03,920 --> 00:26:05,960
Speaker 9: We think this is going to be closer to nineteen

504
00:26:06,000 --> 00:26:10,040
Speaker 9: eighty one, where the FED didn't start cutting rates until

505
00:26:10,280 --> 00:26:13,560
Speaker 9: right on the doorstep of recession. So if we're right,

506
00:26:13,880 --> 00:26:17,600
Speaker 9: recession happens sometime right around year end, that's when the

507
00:26:17,640 --> 00:26:20,800
Speaker 9: first rate cut should be. So now no rate cuts

508
00:26:20,840 --> 00:26:21,520
Speaker 9: in September.

509
00:26:21,560 --> 00:26:23,159
Speaker 2: So it's a bit of disagreement between you both. And

510
00:26:23,160 --> 00:26:24,760
Speaker 2: when it comes to FED, imagine you're in a few

511
00:26:24,760 --> 00:26:27,840
Speaker 2: months apart rate cuts in potentially the turn of the year.

512
00:26:27,840 --> 00:26:28,600
Speaker 7: Where have you got right here?

513
00:26:28,680 --> 00:26:30,600
Speaker 8: We've got them in Q two, so.

514
00:26:30,520 --> 00:26:31,959
Speaker 7: Then we got well around here and I have six

515
00:26:32,040 --> 00:26:32,359
Speaker 7: months in.

516
00:26:32,480 --> 00:26:35,680
Speaker 10: Broadly i'd see broadly speaking, Now where it gets a

517
00:26:35,680 --> 00:26:39,040
Speaker 10: little triggier is if we're wrong and there isn't a

518
00:26:39,080 --> 00:26:41,880
Speaker 10: recession and we're looking at a soft landing. I think

519
00:26:41,920 --> 00:26:45,080
Speaker 10: a feature of a soft landing scenario that is not

520
00:26:45,119 --> 00:26:48,200
Speaker 10: getting enough attention is it means that rates are going

521
00:26:48,200 --> 00:26:51,080
Speaker 10: to be higher for longer. That recession is going to

522
00:26:51,119 --> 00:26:54,880
Speaker 10: open the door if and when it occurs.

523
00:26:54,480 --> 00:26:56,440
Speaker 8: To more aggressive FED rate cuts.

524
00:26:56,560 --> 00:26:58,199
Speaker 10: If we don't get it, it's going to be a

525
00:26:58,240 --> 00:27:01,439
Speaker 10: gradual glide down in the FED funds rating coming years.

526
00:27:01,480 --> 00:27:03,720
Speaker 1: When you say that rate cuts are going to happen,

527
00:27:03,840 --> 00:27:07,960
Speaker 1: does that happen well before inflation rates are south of

528
00:27:08,000 --> 00:27:08,560
Speaker 1: three percent.

529
00:27:09,880 --> 00:27:16,080
Speaker 10: I think that in engaging inflation, it's really important to

530
00:27:16,080 --> 00:27:19,000
Speaker 10: be looking at those monthly prints and thinking about them.

531
00:27:19,359 --> 00:27:22,639
Speaker 10: And I think that it will happen in our forecast

532
00:27:22,720 --> 00:27:25,679
Speaker 10: kind of in the second part of a two quarter recession,

533
00:27:26,080 --> 00:27:29,119
Speaker 10: and by that point the Federal will be fairly confident

534
00:27:29,160 --> 00:27:33,680
Speaker 10: that inflation is moving down sustainably into the two and

535
00:27:33,760 --> 00:27:35,040
Speaker 10: a half percent range.

536
00:27:35,119 --> 00:27:36,840
Speaker 2: Bubba wanted to give you the final word because I

537
00:27:36,840 --> 00:27:38,760
Speaker 2: think the kind of things you're talking about the long

538
00:27:38,880 --> 00:27:41,520
Speaker 2: term I'm getting enough attention. Do you still have to

539
00:27:41,600 --> 00:27:44,520
Speaker 2: view that we've broken out of this world of rate

540
00:27:44,600 --> 00:27:47,760
Speaker 2: hiking cycles rate cutting cycles, going from lower lows to

541
00:27:47,840 --> 00:27:50,320
Speaker 2: higher highs. Are we making that shift we leave in

542
00:27:50,359 --> 00:27:52,800
Speaker 2: the third last thirty years behind, and as we go

543
00:27:52,880 --> 00:27:55,160
Speaker 2: forward from here, never mind this cycle, but the next one,

544
00:27:55,280 --> 00:27:56,919
Speaker 2: the one after that, we go into a world of

545
00:27:57,160 --> 00:28:00,240
Speaker 2: higher lows and higher highs in each rate cut right

546
00:28:00,320 --> 00:28:01,040
Speaker 2: high can psycho?

547
00:28:01,280 --> 00:28:03,919
Speaker 9: Yeah, Absolutely, The last twenty years look to be the

548
00:28:04,000 --> 00:28:07,119
Speaker 9: anomaly to us. We think we'll go back to something

549
00:28:07,160 --> 00:28:10,040
Speaker 9: that looks more normal. I like to tell clients go

550
00:28:10,119 --> 00:28:14,280
Speaker 9: to that first dot back in twenty twelve, the median

551
00:28:14,560 --> 00:28:17,800
Speaker 9: long term estimate of neutral FED funds was four and

552
00:28:17,840 --> 00:28:20,280
Speaker 9: a quarter percent. Makes a lot of sense to me.

553
00:28:20,359 --> 00:28:24,640
Speaker 9: You're targeting two percent inflation over its history to that point,

554
00:28:24,680 --> 00:28:26,840
Speaker 9: the real Fed funds rate had been two and a

555
00:28:26,920 --> 00:28:30,359
Speaker 9: quarter percent. Slap the two together. There you go. There's

556
00:28:30,400 --> 00:28:34,520
Speaker 9: a real cost to borrowing and spending. That's an active,

557
00:28:34,840 --> 00:28:38,120
Speaker 9: vibrant economy. We think we're surely headed back to that.

558
00:28:38,440 --> 00:28:41,120
Speaker 9: But the path may be zero to five and a

559
00:28:41,160 --> 00:28:44,080
Speaker 9: quarter five and a half, then back to somewhere around

560
00:28:44,120 --> 00:28:46,800
Speaker 9: two and a half to three percent, and next time

561
00:28:47,080 --> 00:28:49,920
Speaker 9: maybe you know, up to six percent, and then back

562
00:28:49,960 --> 00:28:51,320
Speaker 9: to four to four and a quarter percent.

563
00:28:51,440 --> 00:28:52,960
Speaker 7: They changes brand potentially.

564
00:28:53,280 --> 00:28:55,080
Speaker 1: What this means to me is that the market's going

565
00:28:55,120 --> 00:28:57,040
Speaker 1: to get less and less interest rate sensitive because everyone

566
00:28:57,040 --> 00:28:58,720
Speaker 1: will just wait until things go back down to zero

567
00:28:58,840 --> 00:29:01,200
Speaker 1: to refinance for thirty years. So it'll mean that nobody

568
00:29:01,240 --> 00:29:02,960
Speaker 1: has any interest rate sensitivity whatsoever.

569
00:29:03,000 --> 00:29:04,960
Speaker 2: We'll going from zero to three and then from three

570
00:29:05,000 --> 00:29:06,680
Speaker 2: to five. Over time, we'll make a difference.

571
00:29:06,760 --> 00:29:08,880
Speaker 1: Right, it should, But this is the sort of question,

572
00:29:08,920 --> 00:29:12,160
Speaker 1: at what point does that volatility render it completely unuseful

573
00:29:12,360 --> 00:29:14,400
Speaker 1: in terms of a tool to really control inflation.

574
00:29:14,560 --> 00:29:17,280
Speaker 2: Bob, this was great. It's good to see you. Thank you, sir,

575
00:29:17,280 --> 00:29:19,080
Speaker 2: and to you as well, Nathan. Just awesome. Thanks for

576
00:29:19,160 --> 00:29:32,520
Speaker 2: dropping by on the latest ADP report. Joining us now

577
00:29:32,560 --> 00:29:34,600
Speaker 2: place to say on the equity market away from bonds

578
00:29:34,600 --> 00:29:37,120
Speaker 2: for a moment, maybe with Silverman, the head of derivative

579
00:29:37,120 --> 00:29:40,360
Speaker 2: strategy at RBC Capital Markets. There's this great line in

580
00:29:40,400 --> 00:29:42,280
Speaker 2: your note, Amy, just allow me to share that with

581
00:29:42,320 --> 00:29:45,600
Speaker 2: our audience. There is a reluctance to be the strategist

582
00:29:45,640 --> 00:29:49,240
Speaker 2: who cried low vol. Amy, just explain what you mean

583
00:29:49,280 --> 00:29:49,640
Speaker 2: by that.

584
00:29:51,600 --> 00:29:55,240
Speaker 11: Yeah, you know, look, we have been telling folks for

585
00:29:55,280 --> 00:29:57,640
Speaker 11: a while now that when you look at the cost

586
00:29:57,680 --> 00:30:01,920
Speaker 11: of hedging over a decade, we're really at historical lows.

587
00:30:02,120 --> 00:30:04,640
Speaker 11: So you know, in an SMP or Q put that's

588
00:30:04,680 --> 00:30:07,240
Speaker 11: struck five percent out of the money, John, These are

589
00:30:07,360 --> 00:30:11,200
Speaker 11: trading at historical lows now. But the problem is, you know,

590
00:30:11,400 --> 00:30:15,280
Speaker 11: low vol often begets lowvall the same way positive momentum

591
00:30:15,280 --> 00:30:18,040
Speaker 11: begets momentum. So you don't want to be the stratist

592
00:30:18,400 --> 00:30:21,520
Speaker 11: who cried lowvall. But still, you know, it's just really

593
00:30:21,560 --> 00:30:25,320
Speaker 11: important to highlight how inexpensive these hedging costs have gotten

594
00:30:25,760 --> 00:30:28,280
Speaker 11: in the face of kind of this huge sentiment shift

595
00:30:28,320 --> 00:30:29,440
Speaker 11: into something more positive.

596
00:30:29,680 --> 00:30:31,880
Speaker 2: I mean when you say that lovol can beget lovol,

597
00:30:31,960 --> 00:30:34,360
Speaker 2: are we seeing that develop currently? Is that what you're seeing?

598
00:30:36,320 --> 00:30:38,520
Speaker 11: We are, And you know, to some degree it's a

599
00:30:38,560 --> 00:30:43,320
Speaker 11: little concerning because there are these timeframes where lowvol begets lowball,

600
00:30:43,400 --> 00:30:46,520
Speaker 11: which begets low ball until it doesn't. So twenty eleven,

601
00:30:46,560 --> 00:30:48,200
Speaker 11: which I know you guys have been talking about in

602
00:30:48,240 --> 00:30:52,120
Speaker 11: the context of the last debt ceiling, or twenty eighteen

603
00:30:52,200 --> 00:30:55,520
Speaker 11: for US in the derivatives world, which which led to volmageddon.

604
00:30:55,560 --> 00:30:58,920
Speaker 11: You know, it doesn't mean it necessarily harkens these events,

605
00:30:58,960 --> 00:31:04,440
Speaker 11: but oftentimes these low volatility cycles does get kind of

606
00:31:04,440 --> 00:31:07,720
Speaker 11: a gap down at some point to higher volatiley regimes.

607
00:31:08,040 --> 00:31:10,520
Speaker 1: Does it feel, based on the metrics that you look at,

608
00:31:10,600 --> 00:31:13,000
Speaker 1: that we're at a tipping point, a narrative shift, a

609
00:31:13,040 --> 00:31:15,560
Speaker 1: point at which the higher treasure yields and some of

610
00:31:15,600 --> 00:31:18,080
Speaker 1: the jitters that we're seeing in certain corners are starting

611
00:31:18,120 --> 00:31:21,680
Speaker 1: to percolate out into the way people are shifting.

612
00:31:23,680 --> 00:31:26,280
Speaker 11: You know, not yet, Lisa, Maybe that changes a little

613
00:31:26,320 --> 00:31:29,800
Speaker 11: because the downgraade news for the US is relatively fresh.

614
00:31:29,880 --> 00:31:32,240
Speaker 11: But I will tell you when you look to earnings,

615
00:31:32,240 --> 00:31:35,120
Speaker 11: when you look to single stock volatility, it's sort of

616
00:31:35,160 --> 00:31:38,840
Speaker 11: exuberance all around, and that has really been true where

617
00:31:39,040 --> 00:31:41,600
Speaker 11: you know Tom's favorite words, the skew of the market

618
00:31:41,680 --> 00:31:44,680
Speaker 11: has leaned much more to the call side, and that's

619
00:31:44,760 --> 00:31:48,239
Speaker 11: part of this low volatility situation you're seeing, which is

620
00:31:48,240 --> 00:31:51,400
Speaker 11: there's just been much more demand for upside and a

621
00:31:51,400 --> 00:31:54,440
Speaker 11: lot of that has to do with the relative lack

622
00:31:54,520 --> 00:31:57,640
Speaker 11: of positioning we saw that caught people off sides, that

623
00:31:57,760 --> 00:32:00,720
Speaker 11: created fomo, and there are still folks who need to

624
00:32:00,720 --> 00:32:02,360
Speaker 11: dive in the pool, you know. That's how I would

625
00:32:02,440 --> 00:32:04,400
Speaker 11: characterize the options market right now.

626
00:32:04,600 --> 00:32:07,040
Speaker 1: How important will the earnings that we get tomorrow of

627
00:32:07,120 --> 00:32:10,880
Speaker 1: Amazon and Apple be in shaping some of that optimism.

628
00:32:10,920 --> 00:32:15,120
Speaker 1: Have earnings confirmed the optimism and this feeling of fomo

629
00:32:15,280 --> 00:32:16,400
Speaker 1: that everyone seems.

630
00:32:16,080 --> 00:32:20,400
Speaker 11: To be expressing, Yes, I think it has, and I

631
00:32:20,400 --> 00:32:22,920
Speaker 11: think the two earnings will get tomorrow, which is you know,

632
00:32:23,040 --> 00:32:25,560
Speaker 11: kind of twenty percent of waiting will be very important.

633
00:32:25,840 --> 00:32:29,000
Speaker 11: What's interesting for Amazon and Apple is you're actually seeing

634
00:32:29,000 --> 00:32:33,560
Speaker 11: a divergence here. So Amazon's call SCU is actually very high,

635
00:32:33,640 --> 00:32:36,040
Speaker 11: meaning you know, there's a good deal of bullish sentiment

636
00:32:36,080 --> 00:32:38,640
Speaker 11: that's actually not true in Apple, which is also very

637
00:32:38,720 --> 00:32:41,400
Speaker 11: different than the other megacap texts we saw, So I'll

638
00:32:41,400 --> 00:32:44,080
Speaker 11: be interested to see how that plays out because you're

639
00:32:44,080 --> 00:32:46,600
Speaker 11: actually seeing on those two stocks of divergence and that

640
00:32:46,720 --> 00:32:49,120
Speaker 11: option sentiment positioning going into earnings.

641
00:32:49,360 --> 00:32:51,880
Speaker 2: I mean, can we just finish up by maybe thinking

642
00:32:51,880 --> 00:32:54,520
Speaker 2: about what's developed in the last two halve hours from

643
00:32:54,600 --> 00:32:57,360
Speaker 2: Fitch and the downgrade of the US government credit writing

644
00:32:57,400 --> 00:33:01,000
Speaker 2: from Tripoli to double aplus from So someone in your seat,

645
00:33:01,560 --> 00:33:06,280
Speaker 2: do you consider governance issues political distincations that disputes the

646
00:33:06,280 --> 00:33:09,400
Speaker 2: division down in DC as a source of volatility or

647
00:33:09,400 --> 00:33:10,240
Speaker 2: something to ignore?

648
00:33:12,240 --> 00:33:14,920
Speaker 11: I think it absolutely is. And one thing I'll say, John,

649
00:33:15,160 --> 00:33:19,280
Speaker 11: is the options market in general is absolutely terrible at

650
00:33:19,440 --> 00:33:24,160
Speaker 11: pricing political and geopolitical events. It just really is bad

651
00:33:24,200 --> 00:33:27,360
Speaker 11: at handicapping it. And you saw that in twenty eleven.

652
00:33:27,440 --> 00:33:29,200
Speaker 11: So if we go back to that set ceiling, we

653
00:33:29,240 --> 00:33:31,240
Speaker 11: had a VIC spike at forty and part of it

654
00:33:31,320 --> 00:33:34,680
Speaker 11: was just this inability to handicap how situations like these

655
00:33:34,720 --> 00:33:36,640
Speaker 11: play out. So right now, I would say the market

656
00:33:36,720 --> 00:33:38,960
Speaker 11: is sort of nodding this off. I don't know if

657
00:33:38,960 --> 00:33:41,600
Speaker 11: that changes down the line, but historically, you know, the

658
00:33:41,640 --> 00:33:44,280
Speaker 11: options market tends to be the worst at pricing events

659
00:33:44,320 --> 00:33:47,120
Speaker 11: that are not catalysts driven much much more of these

660
00:33:47,160 --> 00:33:48,200
Speaker 11: political overhangs.

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00:33:48,840 --> 00:33:51,520
Speaker 1: People are talking about the election next year and how

662
00:33:51,600 --> 00:33:54,840
Speaker 1: much of an overhang that could be introducing potential volatility.

663
00:33:54,920 --> 00:33:57,520
Speaker 1: Is that something that you're expecting or seeing anything related

664
00:33:57,560 --> 00:34:00,560
Speaker 1: to or for now? Is it basically all about the earnings,

665
00:34:00,600 --> 00:34:03,440
Speaker 1: all about the economy, and not at all about drama

666
00:34:03,440 --> 00:34:04,760
Speaker 1: that people have gotten desensitized to.

667
00:34:06,760 --> 00:34:09,120
Speaker 11: Yeah, you know, look, I actually think investors really should

668
00:34:09,160 --> 00:34:11,680
Speaker 11: be focusing on that because it's sort of this tie

669
00:34:11,680 --> 00:34:14,239
Speaker 11: into what needs to happen this year because it likely

670
00:34:14,280 --> 00:34:16,840
Speaker 11: wouldn't happen next year. But you know, one thing that

671
00:34:17,040 --> 00:34:20,040
Speaker 11: structurally happened in the options market is we've gotten much

672
00:34:20,080 --> 00:34:22,800
Speaker 11: more short term. That's partly related to the rise of

673
00:34:22,880 --> 00:34:26,600
Speaker 11: zero DTE trading, just the tenor reduction overall to manage

674
00:34:26,600 --> 00:34:29,239
Speaker 11: these data events. But the options market, which was short

675
00:34:29,320 --> 00:34:31,920
Speaker 11: term to begin with, has gotten even more short term,

676
00:34:31,960 --> 00:34:34,359
Speaker 11: while I would say the long term risks have risen.

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00:34:34,400 --> 00:34:36,000
Speaker 11: When you look out the twenty twenty four.

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00:34:36,000 --> 00:34:38,279
Speaker 2: Amy Grit to get your input and some insight from

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00:34:38,360 --> 00:34:40,680
Speaker 2: you on the latest in days and beyond Amy with

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00:34:40,760 --> 00:34:43,560
Speaker 2: Silverman that of MBC Capital Markets. Responding to that, Dan

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00:34:43,640 --> 00:34:44,360
Speaker 2: Graid from Fitch.

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