1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloombergs Surveillance Podcast time Tom Keene along 2 00:00:09,200 --> 00:00:12,560 Speaker 1: with the Jonathan Ferrill and Lisa are Brawnwitz, Jay Leie, 3 00:00:12,640 --> 00:00:16,160 Speaker 1: we bring you insight from the best and economics, finance, 4 00:00:16,280 --> 00:00:22,440 Speaker 1: investment and international relations, Fine Bloomberg Surveillance and Apple Podcast, Suncloud, 5 00:00:22,800 --> 00:00:26,280 Speaker 1: Bloomberg dot Com and of course on the Bloomberg Terminal. 6 00:00:29,240 --> 00:00:30,840 Speaker 1: I keep saying, as a man on Wall straight with 7 00:00:30,880 --> 00:00:33,760 Speaker 1: the crystal ball and the fortune talent joins us right now, 8 00:00:33,960 --> 00:00:36,600 Speaker 1: Mike wolves to the CEO and chief us could be 9 00:00:36,640 --> 00:00:38,800 Speaker 1: strategistic more? Could Stanley might wanted for to catch up 10 00:00:38,800 --> 00:00:40,360 Speaker 1: with you, Sir. I say this because you come out 11 00:00:40,440 --> 00:00:43,400 Speaker 1: last week and talk about this short term tactical call 12 00:00:43,800 --> 00:00:45,559 Speaker 1: of a market that's going to mount up a little bit, 13 00:00:45,640 --> 00:00:48,680 Speaker 1: maybe through four K again on the SMP five hundred 14 00:00:48,680 --> 00:00:51,360 Speaker 1: and here we are, massive week of gains last week, 15 00:00:51,440 --> 00:00:53,480 Speaker 1: first couple of days this week, pretty tidy as well. 16 00:00:53,680 --> 00:00:55,480 Speaker 1: What is it about the short term? Mike? And we 17 00:00:55,480 --> 00:00:56,840 Speaker 1: could talk about the longer term, but what is it 18 00:00:56,880 --> 00:00:59,240 Speaker 1: about the short term between now and maybe the start 19 00:00:59,240 --> 00:01:03,120 Speaker 1: of next year. Way become a little bit more constructive. Yeah, 20 00:01:03,160 --> 00:01:05,240 Speaker 1: you know, it's it's a it's a tough gig, right, Uh, 21 00:01:05,440 --> 00:01:08,240 Speaker 1: Making predictions is a tough job, especially about the future. 22 00:01:08,319 --> 00:01:11,080 Speaker 1: But that's what that's the life we've chosen. And um, 23 00:01:11,120 --> 00:01:12,880 Speaker 1: and look, we have to try and make these tactical 24 00:01:12,880 --> 00:01:15,800 Speaker 1: calls when we feel like they're actually tradeable. And we 25 00:01:15,840 --> 00:01:18,040 Speaker 1: do feel like we got to a point a couple 26 00:01:18,040 --> 00:01:21,240 Speaker 1: of weeks ago, mainly for technical reasons, but there are 27 00:01:21,240 --> 00:01:23,639 Speaker 1: some fundamental things that are changing too now. The summer 28 00:01:23,680 --> 00:01:26,479 Speaker 1: we didn't actually try and pivot into that tactical move 29 00:01:26,560 --> 00:01:28,520 Speaker 1: because we didn't have all the elements. Let's talk about 30 00:01:28,560 --> 00:01:30,920 Speaker 1: them one at a time. The first one is, you know, 31 00:01:31,120 --> 00:01:34,319 Speaker 1: sentiment positioning is extremely bearish, probably as barish as we 32 00:01:34,319 --> 00:01:36,640 Speaker 1: saw back in June at the last time we had 33 00:01:36,760 --> 00:01:39,600 Speaker 1: a tactical rally. Um. Secondly, though we got to the 34 00:01:39,600 --> 00:01:41,720 Speaker 1: two hundred week moving average, that's something that we did 35 00:01:41,760 --> 00:01:45,360 Speaker 1: not achieve in June. And we that's a very important 36 00:01:45,360 --> 00:01:47,360 Speaker 1: technical level that a lot of people don't talk about. 37 00:01:47,440 --> 00:01:50,040 Speaker 1: We look at it very closely. It is your long 38 00:01:50,240 --> 00:01:52,840 Speaker 1: term support level and when you and you and to 39 00:01:52,960 --> 00:01:56,680 Speaker 1: break that level, you typically need a recession. Okay, now, 40 00:01:56,720 --> 00:01:58,880 Speaker 1: the odds of recession are very high, as you were 41 00:01:58,880 --> 00:02:01,120 Speaker 1: just speaking, but we didn't. We haven't seen the whites 42 00:02:01,160 --> 00:02:03,600 Speaker 1: of the eyes of that recession yet. And until you 43 00:02:03,680 --> 00:02:05,680 Speaker 1: get that, you can usually hold that two in a 44 00:02:05,680 --> 00:02:08,079 Speaker 1: week movie after. It was a big factor. And then 45 00:02:08,120 --> 00:02:10,880 Speaker 1: probably the most other other important factors. We think rates 46 00:02:10,880 --> 00:02:13,840 Speaker 1: are topic. You know, rates rates are are are looking 47 00:02:14,040 --> 00:02:16,120 Speaker 1: very topy. Are are rate strategist who have done a 48 00:02:16,160 --> 00:02:19,360 Speaker 1: great job here. They've gotten more neutral. Uh, they're now 49 00:02:19,480 --> 00:02:23,720 Speaker 1: calling for no longer bear flatteners, but actually steepeners and 50 00:02:23,720 --> 00:02:25,240 Speaker 1: and that's gonna be mostly at the front end, but 51 00:02:25,280 --> 00:02:27,640 Speaker 1: nonetheless the backend tend to come down to as the 52 00:02:27,720 --> 00:02:30,440 Speaker 1: market starts to think about the FED pivoting. And then 53 00:02:30,480 --> 00:02:32,320 Speaker 1: the last thing is the earning story is you guys know, 54 00:02:32,360 --> 00:02:34,280 Speaker 1: I mean, that's what we've been focused. We're probably more 55 00:02:34,320 --> 00:02:36,760 Speaker 1: bearish than most on the outlook for next year, but 56 00:02:36,960 --> 00:02:39,120 Speaker 1: you know, we've got earnings this this quarter. And what 57 00:02:39,160 --> 00:02:40,960 Speaker 1: we just don't think we're gonna get John, is we're 58 00:02:40,960 --> 00:02:43,840 Speaker 1: not going to get the full capitulation from companies on 59 00:02:43,919 --> 00:02:46,799 Speaker 1: two thousand twenty three. We think it's just gonna take longer. 60 00:02:46,840 --> 00:02:48,359 Speaker 1: We've written about that quite a bit. You know, you 61 00:02:48,400 --> 00:02:51,000 Speaker 1: read our research, so you know how we're thinking we're 62 00:02:51,000 --> 00:02:52,760 Speaker 1: still bearish in the intermediate term. We don't think the 63 00:02:52,800 --> 00:02:55,320 Speaker 1: bear markets over, but we do think this tactico rally 64 00:02:55,400 --> 00:02:57,200 Speaker 1: is going to be big enough to try and pivot 65 00:02:57,200 --> 00:02:59,079 Speaker 1: and trade and trade it, you know, for those clients 66 00:02:59,120 --> 00:03:01,280 Speaker 1: you can do that are along, Mike, Are we in 67 00:03:01,320 --> 00:03:05,120 Speaker 1: this tactical rally? You know, all rallies and all you know, 68 00:03:05,200 --> 00:03:07,840 Speaker 1: down terms are about the time and price, Lisa, As 69 00:03:07,880 --> 00:03:10,040 Speaker 1: you know, um, I would say in terms of price, 70 00:03:10,160 --> 00:03:12,919 Speaker 1: we've talked about two inter day moving average now is 71 00:03:12,960 --> 00:03:16,320 Speaker 1: an achievable level. That's sort of it's coming down. So 72 00:03:16,440 --> 00:03:19,200 Speaker 1: depending on when you get there, that will determine the level. 73 00:03:19,639 --> 00:03:21,880 Speaker 1: I think in terms of time, it's probably into the 74 00:03:21,919 --> 00:03:25,480 Speaker 1: holiday period, maybe Thanksgiving, you know, then we'll get the 75 00:03:25,600 --> 00:03:28,320 Speaker 1: certain you know, the Black Monday results, uh uh, you 76 00:03:28,360 --> 00:03:30,760 Speaker 1: know from you know, from the holiday shopping season, and 77 00:03:30,760 --> 00:03:32,240 Speaker 1: and we'll see if it is going to be a 78 00:03:32,320 --> 00:03:33,959 Speaker 1: you know, a Black Monday or a Red Monday. You know, 79 00:03:34,080 --> 00:03:37,600 Speaker 1: do we get the cell through. We're pretty we're pretty discouraged, 80 00:03:37,720 --> 00:03:38,960 Speaker 1: you know, in terms of what we think we're gonna 81 00:03:38,960 --> 00:03:42,720 Speaker 1: get through on holiday sell through, mainly because what you 82 00:03:42,760 --> 00:03:44,480 Speaker 1: just mentioned, there's gonna be a lot of discounting to 83 00:03:44,600 --> 00:03:46,600 Speaker 1: move some to the extra inventories. Some we've been highlighting 84 00:03:46,640 --> 00:03:49,000 Speaker 1: for a while, and so that's when we'll get the 85 00:03:49,040 --> 00:03:52,400 Speaker 1: next chance to perhaps see you know, the fundamentals overtake 86 00:03:52,480 --> 00:03:54,720 Speaker 1: the technicles on the down side, and then we think 87 00:03:54,800 --> 00:03:57,080 Speaker 1: ultimately the bear market will be over, probably sometime in 88 00:03:57,120 --> 00:03:59,440 Speaker 1: the first quarter. Now, all of this is you know, 89 00:03:59,480 --> 00:04:01,680 Speaker 1: subject a vision, right, so I want to make it 90 00:04:01,680 --> 00:04:04,440 Speaker 1: perfectly clear. If the market starts to trade off again 91 00:04:04,840 --> 00:04:07,560 Speaker 1: and the SMP breaks down and blows through thirty six 92 00:04:07,600 --> 00:04:11,280 Speaker 1: fifty on the downside, will be bearish again. Okay, But 93 00:04:11,320 --> 00:04:13,120 Speaker 1: you know the third job. We we think and we 94 00:04:13,200 --> 00:04:15,760 Speaker 1: like the price the action last couple of weeks, notwithstanding 95 00:04:15,800 --> 00:04:18,960 Speaker 1: you know, some some negative earning reports last night. We 96 00:04:19,000 --> 00:04:20,640 Speaker 1: think maybe the market will hold up and there will 97 00:04:20,640 --> 00:04:23,479 Speaker 1: be another positive cantalyst. Because if stocks don't go down 98 00:04:23,480 --> 00:04:25,120 Speaker 1: on bad news and the market is going on band 99 00:04:25,120 --> 00:04:27,040 Speaker 1: news and fundamentals, then what do you have and make 100 00:04:27,080 --> 00:04:29,560 Speaker 1: you talked about this difference between technical factors and fundamental 101 00:04:29,640 --> 00:04:32,000 Speaker 1: factors in the nit um. What's the optimal way of 102 00:04:32,000 --> 00:04:34,400 Speaker 1: paying that tactical rally in the equity market? How do 103 00:04:34,480 --> 00:04:35,760 Speaker 1: you want to do that through the index of the 104 00:04:35,839 --> 00:04:39,280 Speaker 1: SMP or somewhere beneath it, somewhere else. Yeah, good question. 105 00:04:39,320 --> 00:04:41,280 Speaker 1: I mean, first of all, you know, the call is 106 00:04:41,360 --> 00:04:43,960 Speaker 1: really you know, to help our clients who you know 107 00:04:44,279 --> 00:04:46,240 Speaker 1: are can short stocks. Right, So the main call was 108 00:04:46,360 --> 00:04:48,480 Speaker 1: just get out of the way. Uh. And and because 109 00:04:48,720 --> 00:04:50,920 Speaker 1: when you get these kinds of rallies, the shorts usually 110 00:04:50,920 --> 00:04:53,880 Speaker 1: got the most. And that's what that's what's happened so far. 111 00:04:53,960 --> 00:04:57,359 Speaker 1: So it's a low quality rally so far. Uh, you know, 112 00:04:57,360 --> 00:04:59,040 Speaker 1: the shorts of rally the most. So some of the 113 00:04:59,160 --> 00:05:02,359 Speaker 1: expensive uh you know, kind of growth stocks, some of 114 00:05:02,400 --> 00:05:04,720 Speaker 1: the low quality typical stocks, the small caps have in 115 00:05:04,800 --> 00:05:07,800 Speaker 1: a little run here that will probably persist, and then 116 00:05:07,839 --> 00:05:11,640 Speaker 1: I think ultimately it will morph into probably NASDAC leading 117 00:05:12,040 --> 00:05:14,039 Speaker 1: because rates are going to come down. Right. Part of 118 00:05:14,040 --> 00:05:16,320 Speaker 1: our call is that rates have to come down. If 119 00:05:16,400 --> 00:05:18,520 Speaker 1: rates don't come down, John, and we don't go below 120 00:05:18,600 --> 00:05:21,120 Speaker 1: four percent like in a meaningful way, the rally will 121 00:05:21,120 --> 00:05:23,960 Speaker 1: peer out probably around these levels. But if that's if 122 00:05:23,960 --> 00:05:26,080 Speaker 1: that happens as we suspect, and rates do come in, 123 00:05:26,480 --> 00:05:29,559 Speaker 1: then you'll see these gross stocks have probably a pretty 124 00:05:29,600 --> 00:05:31,880 Speaker 1: meaningful move despite the fact that maybe we're getting some 125 00:05:31,920 --> 00:05:33,680 Speaker 1: bad range reporters. We're gonna talk a little bit more 126 00:05:33,680 --> 00:05:35,960 Speaker 1: about the fundamental stuff in just a moment, but just 127 00:05:36,000 --> 00:05:39,840 Speaker 1: a little tease, Mike, if you can twenty three, it's 128 00:05:39,839 --> 00:05:41,880 Speaker 1: earning season for Q four and maybe some guidance for 129 00:05:41,920 --> 00:05:44,280 Speaker 1: the rest of the year. You said, we haven't had 130 00:05:44,320 --> 00:05:48,880 Speaker 1: it yet. We haven't had that overwhelming negative guide from 131 00:05:49,000 --> 00:05:52,520 Speaker 1: corporate C suite management all the rest of it in America, Mike, 132 00:05:52,560 --> 00:05:54,400 Speaker 1: how do you know what that looks like? What does 133 00:05:54,440 --> 00:05:55,840 Speaker 1: that look like? What do you think that looks like? 134 00:05:55,880 --> 00:05:59,440 Speaker 1: How do you know when you see it? Well, those 135 00:05:59,480 --> 00:06:04,080 Speaker 1: are trades acreas I can share that. I mean, look, 136 00:06:04,320 --> 00:06:06,440 Speaker 1: you know, we'll know it when we see the forward 137 00:06:06,520 --> 00:06:09,960 Speaker 1: estimates really come down. Okay. In other words, so far, 138 00:06:10,720 --> 00:06:12,480 Speaker 1: let's just talk about some numbers. Makes it easier for 139 00:06:12,480 --> 00:06:14,320 Speaker 1: people to kind of follow what we're looking at, which 140 00:06:14,360 --> 00:06:16,880 Speaker 1: is so we think we think market's trade on next 141 00:06:16,920 --> 00:06:20,880 Speaker 1: twelve month EPs. Okay, And in the SMP five case 142 00:06:21,000 --> 00:06:23,279 Speaker 1: that got the two forty that was the peak in June, 143 00:06:23,279 --> 00:06:26,360 Speaker 1: we're down to about two thirty four, which is only 144 00:06:26,360 --> 00:06:28,599 Speaker 1: about two or three percent off the highs. You know, 145 00:06:28,640 --> 00:06:30,599 Speaker 1: we think that ultimately is gonna go to about one. 146 00:06:31,680 --> 00:06:34,559 Speaker 1: So when we see that forward estimate get down about 147 00:06:36,880 --> 00:06:40,720 Speaker 1: and it's way to the ultimate destination, then we'll feel like, Okay, 148 00:06:40,880 --> 00:06:42,920 Speaker 1: it's there. We're not gonna wait for one n five. 149 00:06:42,960 --> 00:06:45,479 Speaker 1: But then the market would have definitely discounted it. But 150 00:06:45,520 --> 00:06:49,080 Speaker 1: at two thirty four, that's not anywhere near what we 151 00:06:49,080 --> 00:06:51,040 Speaker 1: need we think we need to be to say, Okay, 152 00:06:51,080 --> 00:06:54,320 Speaker 1: the market gets a joke, and that's something like John, 153 00:06:54,360 --> 00:06:56,160 Speaker 1: that's kind of what we're looking for and into MVPs 154 00:06:56,200 --> 00:06:58,000 Speaker 1: for those people who follow it. You would just rank 155 00:06:58,120 --> 00:07:00,680 Speaker 1: the best portfolio strategist in the lights of the institutional 156 00:07:00,720 --> 00:07:04,000 Speaker 1: investor surfy Mike, and know you Wow, you shad that 157 00:07:04,040 --> 00:07:05,960 Speaker 1: price with the whole of your team. Mike, Can we 158 00:07:06,000 --> 00:07:08,440 Speaker 1: stop that? Can you walk me through what has really 159 00:07:08,480 --> 00:07:11,080 Speaker 1: given you in the team the edge this year as 160 00:07:11,120 --> 00:07:13,800 Speaker 1: you've worked through a really fast moving economy and a 161 00:07:13,800 --> 00:07:17,000 Speaker 1: tremendously difficult market. You know, thanks too, I appreciate that, 162 00:07:17,040 --> 00:07:19,360 Speaker 1: and you're right. As a team effort, I mean a 163 00:07:19,400 --> 00:07:21,960 Speaker 1: lot of effort goes into this this ranking. A lot 164 00:07:22,000 --> 00:07:24,000 Speaker 1: of it has to do this client service. If anything 165 00:07:24,040 --> 00:07:26,480 Speaker 1: else or calls have been right, but you know, clients 166 00:07:26,480 --> 00:07:28,640 Speaker 1: passed for and what clients really want from us is 167 00:07:28,840 --> 00:07:31,320 Speaker 1: is critical thinking and you know, holding their feet to 168 00:07:31,360 --> 00:07:33,120 Speaker 1: the fire on you know, kind of what's happening. And 169 00:07:33,120 --> 00:07:35,960 Speaker 1: I think what's allowed us to maybe get ahead of 170 00:07:35,960 --> 00:07:37,840 Speaker 1: the curve a little bit is I'll go back to 171 00:07:38,080 --> 00:07:40,840 Speaker 1: three years ago and you know our research, well, we 172 00:07:40,840 --> 00:07:43,560 Speaker 1: we first started talking about the recession itself, it was 173 00:07:43,560 --> 00:07:45,800 Speaker 1: gonna be you know, really nasty, but then the V 174 00:07:45,880 --> 00:07:48,400 Speaker 1: shape recovering. We said the next cycle will be hotter, 175 00:07:48,520 --> 00:07:52,000 Speaker 1: but shorter. And so having that framework right this we 176 00:07:52,280 --> 00:07:55,600 Speaker 1: know we're cycle analysts a little different than psycho analysts, 177 00:07:55,640 --> 00:07:58,920 Speaker 1: but we're cycle analysts and we look at history. Yeah, 178 00:07:59,160 --> 00:08:02,680 Speaker 1: it's similar, and it helps us understand kind of, okay, 179 00:08:02,680 --> 00:08:04,840 Speaker 1: well what does this period look like. They're never the 180 00:08:04,920 --> 00:08:08,760 Speaker 1: same exactly, but having that context, at historical context, we 181 00:08:08,840 --> 00:08:10,760 Speaker 1: spend an enormous amount of time on that. Plus I'm 182 00:08:10,760 --> 00:08:12,880 Speaker 1: a little bit older, so some of them I lived through, 183 00:08:13,240 --> 00:08:15,840 Speaker 1: and we understand when we see something, okay, it's different 184 00:08:15,840 --> 00:08:18,000 Speaker 1: this time, and that helps us sort of stay ahead 185 00:08:18,040 --> 00:08:20,480 Speaker 1: of the pack. Not always, but I think in this 186 00:08:20,560 --> 00:08:22,960 Speaker 1: year in particular, right, we saw early on and this 187 00:08:23,080 --> 00:08:25,840 Speaker 1: is gonna be a shorter cycle. The penn was gonna 188 00:08:25,840 --> 00:08:28,679 Speaker 1: have to move faster than people expected. That was gonna 189 00:08:28,720 --> 00:08:33,160 Speaker 1: you know, curtail expectations on profits. Ultimately the fire and 190 00:08:33,200 --> 00:08:34,920 Speaker 1: ice narrative is played out, and that, you know, so 191 00:08:35,080 --> 00:08:37,080 Speaker 1: just being willing to kind of get in front of 192 00:08:37,080 --> 00:08:39,840 Speaker 1: the pack I think has has really helped us, not 193 00:08:39,960 --> 00:08:42,600 Speaker 1: just this year, but in the years past as well. 194 00:08:42,640 --> 00:08:44,640 Speaker 1: And of course when you do that, you run the 195 00:08:44,720 --> 00:08:47,240 Speaker 1: risk of being wrong. Okay, we're wrong occasionally, you know 196 00:08:47,360 --> 00:08:49,880 Speaker 1: it's not always right, but yet be willing to go 197 00:08:49,920 --> 00:08:51,880 Speaker 1: there and be willing to take a shot and get 198 00:08:51,920 --> 00:08:56,120 Speaker 1: away from the consensus. Mike, given the historical perspective that 199 00:08:56,160 --> 00:08:58,960 Speaker 1: you do bring to this, where are we in terms 200 00:08:58,960 --> 00:09:01,720 Speaker 1: of the ice and short and shallow? And this question 201 00:09:01,800 --> 00:09:04,520 Speaker 1: of okay, if it is deeper, how long will it last? 202 00:09:04,640 --> 00:09:07,280 Speaker 1: And how long can inflation will remain prolonged? When you 203 00:09:07,320 --> 00:09:10,280 Speaker 1: take a look, when you start to find optimism and 204 00:09:10,320 --> 00:09:13,360 Speaker 1: the equity markets perhaps early next year, is that predicated 205 00:09:13,360 --> 00:09:15,840 Speaker 1: on this idea that we are not going to be 206 00:09:15,920 --> 00:09:18,520 Speaker 1: in some sort of high inflation environment for a very 207 00:09:18,559 --> 00:09:22,440 Speaker 1: long time. I mean, here's a great example where you know, 208 00:09:22,440 --> 00:09:25,839 Speaker 1: we're just we have a view that is not consensus, 209 00:09:25,880 --> 00:09:28,120 Speaker 1: and we have more conviction in it. We've been actually 210 00:09:28,120 --> 00:09:30,040 Speaker 1: thinking about this for four or five years. If you 211 00:09:30,040 --> 00:09:31,559 Speaker 1: go back and look at our research, we did just 212 00:09:31,600 --> 00:09:34,200 Speaker 1: pull it on a left field. We think we're entering, 213 00:09:34,280 --> 00:09:36,440 Speaker 1: you know, the end of financial oppression, the end of 214 00:09:36,520 --> 00:09:40,320 Speaker 1: secular stagnation, and actually the pandemic is was the catalyst 215 00:09:40,440 --> 00:09:42,760 Speaker 1: to kind of break us out. Now, of course, we're 216 00:09:42,800 --> 00:09:46,720 Speaker 1: experiencing this first wave of inflation, which was spectacular, um 217 00:09:46,800 --> 00:09:49,480 Speaker 1: and you know, more than people expected. But we think 218 00:09:49,480 --> 00:09:51,920 Speaker 1: we're into what we think is a boom bust environment. 219 00:09:51,960 --> 00:09:54,600 Speaker 1: It's very similar to the post War War two period 220 00:09:54,640 --> 00:09:58,080 Speaker 1: of forties and fifties, where we had more frequent recessions 221 00:09:58,520 --> 00:10:02,240 Speaker 1: and inflation was polatile. Okay, So it wasn't higher and 222 00:10:02,280 --> 00:10:05,800 Speaker 1: then stayed there. It was highe low high low, and 223 00:10:05,800 --> 00:10:09,640 Speaker 1: and the trend is up. Okay. So we have no uh, 224 00:10:09,720 --> 00:10:12,400 Speaker 1: sort of you know, naive belief that we're going back 225 00:10:12,400 --> 00:10:14,960 Speaker 1: to the way the world was lower for longer and 226 00:10:15,200 --> 00:10:17,079 Speaker 1: the Fed can continue to keep you know, rates and 227 00:10:17,200 --> 00:10:19,720 Speaker 1: zero or lower. That's not we're never going back to that. 228 00:10:20,040 --> 00:10:22,600 Speaker 1: It's gonna be something different. But we also don't think 229 00:10:22,600 --> 00:10:25,480 Speaker 1: it's the seventies. We're gonna have this cost push inflation. 230 00:10:25,520 --> 00:10:27,600 Speaker 1: We've always said that we think it's a demand pull 231 00:10:28,240 --> 00:10:32,000 Speaker 1: inflation and that demand is waning now as supply picks up, 232 00:10:32,000 --> 00:10:34,760 Speaker 1: and so that will create the ebbs and flows. And 233 00:10:34,800 --> 00:10:37,160 Speaker 1: what we really think we're in this is a volatile 234 00:10:37,160 --> 00:10:41,960 Speaker 1: economic outcome, which includes inflation and includes NOMLO GDP, includes 235 00:10:42,000 --> 00:10:44,120 Speaker 1: all the factors, and it's just gonna be a lot 236 00:10:44,200 --> 00:10:46,240 Speaker 1: more volatile. And that's just a different environment. If you 237 00:10:46,320 --> 00:10:49,280 Speaker 1: understand that, you can it could be quite profitable if 238 00:10:49,280 --> 00:10:51,360 Speaker 1: you understand how to traded on both sides. M just 239 00:10:51,400 --> 00:10:53,719 Speaker 1: a fund of question from me. Then does it tell 240 00:10:53,720 --> 00:10:55,200 Speaker 1: you want to think at this point? And how does 241 00:10:55,200 --> 00:10:58,400 Speaker 1: it influence your thinking about future leadership in this market 242 00:10:58,520 --> 00:11:03,320 Speaker 1: After a decade of dominance on the s MP, Yeah, 243 00:11:03,360 --> 00:11:04,840 Speaker 1: we're not in the camp that is just gonna be 244 00:11:04,880 --> 00:11:06,680 Speaker 1: one or the other. We think it's gonna be a 245 00:11:06,760 --> 00:11:10,880 Speaker 1: broader kind of market where you get broader participation, kind 246 00:11:10,880 --> 00:11:12,760 Speaker 1: of like two thousand and twenty and then you know 247 00:11:13,040 --> 00:11:15,240 Speaker 1: it was. It was broader with small caps lead, right, 248 00:11:15,240 --> 00:11:18,360 Speaker 1: we had growth and value working together. I can tell 249 00:11:18,360 --> 00:11:22,160 Speaker 1: you this. The days of you know, ridiculously priced growth stocks, 250 00:11:22,240 --> 00:11:24,040 Speaker 1: that's over, okay, And that by the way, that was 251 00:11:24,120 --> 00:11:26,480 Speaker 1: dumb to begin with. So that's good you take that 252 00:11:26,520 --> 00:11:29,000 Speaker 1: stuff out and then but that doesn't mean all grows 253 00:11:29,040 --> 00:11:31,640 Speaker 1: stocks are do. It just means you can't overpay for 254 00:11:31,760 --> 00:11:34,920 Speaker 1: it the way that you could when rates were negative. Okay, 255 00:11:35,000 --> 00:11:36,680 Speaker 1: so we're not We're not going back to that environment, 256 00:11:36,679 --> 00:11:38,719 Speaker 1: which means you have to focus on companies that can 257 00:11:38,760 --> 00:11:43,079 Speaker 1: actually operate efficiently in this more volatile economic environment, deliver 258 00:11:43,200 --> 00:11:45,800 Speaker 1: the goods on earnings, and then pay a reasonable multiple. 259 00:11:45,960 --> 00:11:47,400 Speaker 1: It was kind of back to basics, you know. It's 260 00:11:47,440 --> 00:11:48,800 Speaker 1: kind of the way it was when I first started 261 00:11:48,800 --> 00:11:50,839 Speaker 1: in the business, you know, getting out to get the 262 00:11:50,840 --> 00:11:53,080 Speaker 1: training wheels off the bike and learn how to write again. 263 00:11:53,240 --> 00:11:55,319 Speaker 1: And Mike just wonderful to catch up and send out 264 00:11:55,320 --> 00:11:57,839 Speaker 1: best to the team. One you congratulations Mike Wilson of 265 00:11:57,960 --> 00:12:09,640 Speaker 1: More can stand me that. Yeah. Neil Datter of an 266 00:12:09,640 --> 00:12:11,800 Speaker 1: Exos Macro joined us around a table. I was told 267 00:12:11,800 --> 00:12:14,880 Speaker 1: by Joe wisonial to ask you about your sterling target 268 00:12:15,080 --> 00:12:16,520 Speaker 1: out of the UK, and I said to Joe straight 269 00:12:16,559 --> 00:12:18,400 Speaker 1: away and the message about thirty minutes ago, Joe, what 270 00:12:18,440 --> 00:12:20,240 Speaker 1: are you talking about? Does f X targets? Now? What's 271 00:12:20,280 --> 00:12:23,120 Speaker 1: Joe talking? I don't have a Sterling target. But I 272 00:12:23,160 --> 00:12:25,600 Speaker 1: can tell you that my kids have convinced me to 273 00:12:25,640 --> 00:12:28,000 Speaker 1: go as the Prime Minister of the UK for Halloween. 274 00:12:28,040 --> 00:12:31,000 Speaker 1: You're going as Richie Soon. Yeah, I definitely am is 275 00:12:31,040 --> 00:12:35,080 Speaker 1: Richie Soon at coming with good things. I mean, as 276 00:12:35,120 --> 00:12:37,640 Speaker 1: I was joking with Joe, I mean I told him 277 00:12:37,760 --> 00:12:40,760 Speaker 1: very clearly that you know, I ever have b it 278 00:12:40,840 --> 00:12:44,679 Speaker 1: of betting on Indian and I told him as a result, um, 279 00:12:45,760 --> 00:12:47,959 Speaker 1: it's time to go along Sterling. He's got the credibility 280 00:12:48,000 --> 00:12:49,920 Speaker 1: back in the market exactly. That's more than a joke 281 00:12:49,960 --> 00:12:51,760 Speaker 1: for a lot of people. Let's talk about the credibility 282 00:12:51,760 --> 00:12:53,480 Speaker 1: of this fair chair as well. Near and it's wonderful 283 00:12:53,480 --> 00:12:55,640 Speaker 1: to have you with the surround a table. The politicians 284 00:12:55,640 --> 00:13:00,480 Speaker 1: are pushing batnil the usual suspects Warren Sanders, but also 285 00:13:00,600 --> 00:13:02,920 Speaker 1: now the Senate Banking Committee chair as well. In a 286 00:13:03,040 --> 00:13:04,959 Speaker 1: letter recording to punch Ball yesterday, how did you in 287 00:13:05,000 --> 00:13:09,880 Speaker 1: the same response to that, Well, I think it's it's amusing. Um. 288 00:13:09,920 --> 00:13:14,000 Speaker 1: You know, look, if the prediction markets are right, they 289 00:13:14,040 --> 00:13:17,439 Speaker 1: better get in their um jabs right now because the 290 00:13:17,520 --> 00:13:21,480 Speaker 1: likelihood is is that the Republicans will sweep the both 291 00:13:21,520 --> 00:13:23,800 Speaker 1: the House and the Senate if the prediction markets are right, 292 00:13:24,080 --> 00:13:26,200 Speaker 1: and I can tell you right now that if the 293 00:13:26,240 --> 00:13:29,680 Speaker 1: Republicans are playing this right, uh, they will not have 294 00:13:29,880 --> 00:13:32,760 Speaker 1: any political interest to tell the FED to back off 295 00:13:32,880 --> 00:13:36,360 Speaker 1: from hiking. So threats to the FEDS independents from higher 296 00:13:36,400 --> 00:13:39,640 Speaker 1: interest rates I think will be dramatically coming down once 297 00:13:39,679 --> 00:13:43,320 Speaker 1: the Republicans take over the Congress, because they want the 298 00:13:43,360 --> 00:13:45,800 Speaker 1: Fed to keep hiking to slow the economy down to 299 00:13:45,840 --> 00:13:48,959 Speaker 1: improve their own political fortunes going into elections. This is 300 00:13:49,000 --> 00:13:52,280 Speaker 1: actually really important because it also suggests an unwillingness on 301 00:13:52,320 --> 00:13:54,640 Speaker 1: the fiscal side at a time when we're heading into 302 00:13:54,679 --> 00:13:59,040 Speaker 1: a downturn. Does this mean that any fiscal impulse from Washington, 303 00:13:59,120 --> 00:14:00,800 Speaker 1: d C based on the come that you said is 304 00:14:00,840 --> 00:14:03,160 Speaker 1: most likely is going to be that much more reduced 305 00:14:03,240 --> 00:14:05,640 Speaker 1: and going to be that much less of a countercyclical 306 00:14:05,679 --> 00:14:10,240 Speaker 1: balance to what's upcoming. Well, I think that's the case 307 00:14:10,920 --> 00:14:12,600 Speaker 1: going forward. I mean, the next time we have an 308 00:14:12,640 --> 00:14:16,800 Speaker 1: economic slump, given where interest rates are UH and given 309 00:14:17,160 --> 00:14:20,280 Speaker 1: the recent experience with inflation, I think it's highly likely 310 00:14:20,360 --> 00:14:24,120 Speaker 1: that will have less countercyclical policy, both not only from 311 00:14:24,160 --> 00:14:25,920 Speaker 1: the monetary side, because I don't think the FED will 312 00:14:25,920 --> 00:14:28,240 Speaker 1: be going as aggressively next time around, but also obviously 313 00:14:28,240 --> 00:14:30,400 Speaker 1: from the fiscal side, because the fact that interest rates 314 00:14:30,440 --> 00:14:33,440 Speaker 1: are higher means that the government spending more on interest expense, 315 00:14:33,520 --> 00:14:38,240 Speaker 1: which will limit their ability to do backstop the economy. 316 00:14:38,320 --> 00:14:41,400 Speaker 1: Growing issue coming out of the election if the Republicans 317 00:14:41,440 --> 00:14:45,400 Speaker 1: take control is the presumptive Speaker of the House Kevin 318 00:14:45,440 --> 00:14:48,560 Speaker 1: McCarthy saying that they will hold the economy hostage to 319 00:14:48,600 --> 00:14:52,000 Speaker 1: the debt ceiling, which would come up theoretically sometime in 320 00:14:52,040 --> 00:14:54,720 Speaker 1: the first half of the year, and that they are 321 00:14:54,800 --> 00:14:57,160 Speaker 1: basically willing to go up to the line and maybe 322 00:14:57,160 --> 00:15:00,720 Speaker 1: fall over and see the US downgraded or end or default. 323 00:15:01,200 --> 00:15:02,800 Speaker 1: How much of a risk do you think that is. 324 00:15:03,320 --> 00:15:05,520 Speaker 1: I think it's a risk. Um. I don't know that 325 00:15:05,560 --> 00:15:08,040 Speaker 1: it's any more than previous years. I mean, remember we've 326 00:15:08,080 --> 00:15:12,200 Speaker 1: we've had this happen with you know, Democratic President Um 327 00:15:12,640 --> 00:15:16,520 Speaker 1: back in eleven Republicans just got into power, we pushed 328 00:15:16,560 --> 00:15:18,920 Speaker 1: up to the limit. Um, the debt did get downgraded, 329 00:15:18,920 --> 00:15:21,440 Speaker 1: and what happened with the interest rates They actually declined 330 00:15:21,480 --> 00:15:24,960 Speaker 1: at the time. So maybe this time will be different. Um, 331 00:15:25,000 --> 00:15:27,560 Speaker 1: But I have a feeling that they'll push up to 332 00:15:27,600 --> 00:15:30,960 Speaker 1: the last moment and if it wasn't for the last minute, 333 00:15:31,000 --> 00:15:32,480 Speaker 1: nothing would get done sort of. I hope we're not 334 00:15:32,480 --> 00:15:34,720 Speaker 1: doing that again anytime soon, Mike, but I'll show your 335 00:15:34,760 --> 00:15:37,280 Speaker 1: first that we might be pretty soon as well. Neil. 336 00:15:37,360 --> 00:15:39,040 Speaker 1: The pushback that we often get on this show when 337 00:15:39,080 --> 00:15:40,960 Speaker 1: we have guests come on and talk about runaway inflation 338 00:15:41,120 --> 00:15:43,000 Speaker 1: is just to open your eyes and look beyond the data. 339 00:15:43,200 --> 00:15:45,480 Speaker 1: Look at freight rates, Look what's happening with supply chains, 340 00:15:45,720 --> 00:15:48,160 Speaker 1: look at what's happening with house price data, with rents 341 00:15:48,200 --> 00:15:50,360 Speaker 1: in certain cities. Starts to roll over a little bit. 342 00:15:50,800 --> 00:15:53,120 Speaker 1: When does that start to show up? I mean, is 343 00:15:53,160 --> 00:15:55,600 Speaker 1: there a statue of limitations on those arguments? I mean, 344 00:15:55,640 --> 00:15:58,960 Speaker 1: that's my issue. We've been talking about those um issues 345 00:15:59,000 --> 00:16:00,720 Speaker 1: for for the last six mons, and that's not to 346 00:16:00,760 --> 00:16:03,480 Speaker 1: say that those things aren't happening, but during that time, 347 00:16:03,520 --> 00:16:07,680 Speaker 1: core inflation is actually accelerated, and underlying inflation is actually accelerated. 348 00:16:07,720 --> 00:16:10,680 Speaker 1: So I think there's a statute of limitations on those arguments. Um. 349 00:16:10,680 --> 00:16:13,400 Speaker 1: I think ultimately what we're talking about there is just 350 00:16:13,480 --> 00:16:17,000 Speaker 1: relative price shifting. If you know, let's say people are 351 00:16:17,040 --> 00:16:19,080 Speaker 1: getting paid and they have their jobs and their wages 352 00:16:19,120 --> 00:16:22,760 Speaker 1: are growing at five Okay, and now the rent burden 353 00:16:22,840 --> 00:16:25,400 Speaker 1: is becoming too onerous, So everyone who decided to go 354 00:16:25,440 --> 00:16:27,320 Speaker 1: out and live on their own decides to shack up 355 00:16:27,360 --> 00:16:29,400 Speaker 1: with a roommate. What did you just do? You gave 356 00:16:29,400 --> 00:16:32,440 Speaker 1: yourself a tax cut if you don't lose your job. Um, 357 00:16:32,640 --> 00:16:34,960 Speaker 1: you're not paying as much on rent. That frees up 358 00:16:35,360 --> 00:16:38,040 Speaker 1: dollars to go spend elsewhere, driving up the prices for 359 00:16:38,080 --> 00:16:40,600 Speaker 1: those other goods and services upon which you are spending money. 360 00:16:40,880 --> 00:16:42,760 Speaker 1: And so I don't know where the money is going 361 00:16:42,800 --> 00:16:44,240 Speaker 1: to go, but I can tell you apps in a 362 00:16:44,360 --> 00:16:47,280 Speaker 1: sort of spontaneous increase in the savings. Right, it's highly unlikely, 363 00:16:47,560 --> 00:16:50,800 Speaker 1: um that you know. I mean, all they're talking about 364 00:16:50,920 --> 00:16:54,240 Speaker 1: is really relative price shifting. Um. I don't necessarily think 365 00:16:54,280 --> 00:16:56,600 Speaker 1: that's the way the FETE is thinking about inflation, rightly 366 00:16:56,680 --> 00:17:00,120 Speaker 1: or wrongly for whatever reason, Okay, am I not. My 367 00:17:00,240 --> 00:17:01,760 Speaker 1: job is not to tell people whether I think it's 368 00:17:01,840 --> 00:17:03,640 Speaker 1: right or wrong. It's about it's about trying to tell 369 00:17:03,720 --> 00:17:07,240 Speaker 1: people what I think is going to happen, and rightly 370 00:17:07,320 --> 00:17:10,040 Speaker 1: or wrongly. The FED views the labor markets as the 371 00:17:10,119 --> 00:17:14,399 Speaker 1: conduit to achieve their inflation objectives, and that means you 372 00:17:14,440 --> 00:17:17,200 Speaker 1: need to see higher unemployment, and if that's the goal, 373 00:17:17,760 --> 00:17:21,520 Speaker 1: they are failing miserably. Okay, I mean we just learned that. Um, 374 00:17:22,240 --> 00:17:26,320 Speaker 1: you know, despite all the sort of chatter about tech layoffs, 375 00:17:26,600 --> 00:17:28,720 Speaker 1: I mean Google still hiring lots of people. I mean, 376 00:17:28,720 --> 00:17:30,800 Speaker 1: all these large tech companies are hiring lots of people. 377 00:17:30,800 --> 00:17:33,639 Speaker 1: Consumers still feel very confident about the jobs market. Claims 378 00:17:33,640 --> 00:17:36,120 Speaker 1: are still very low. Even if you look at regional 379 00:17:36,200 --> 00:17:40,000 Speaker 1: manufacturing indicators that have been slowing down, the employment components 380 00:17:40,000 --> 00:17:42,520 Speaker 1: within them remain relatively strong. I wanted to ask you 381 00:17:42,560 --> 00:17:44,560 Speaker 1: though about big tech. That's exactly where I wanted to go, 382 00:17:44,640 --> 00:17:47,480 Speaker 1: because it's perhaps we haven't seen the job cuts yet, 383 00:17:48,080 --> 00:17:51,439 Speaker 1: but perhaps they're coming based on the rhetoric from Google, 384 00:17:51,560 --> 00:17:54,359 Speaker 1: based on the rhetoric that we've heard from Meta or Facebook, 385 00:17:54,600 --> 00:17:56,960 Speaker 1: based on the rhetoric that we've heard pretty much across 386 00:17:56,960 --> 00:18:00,399 Speaker 1: the board today. Seegate Technology Holdings says that is going 387 00:18:00,480 --> 00:18:03,600 Speaker 1: to cut three thousand jobs. I mean, we keep hearing anecdotally, 388 00:18:03,680 --> 00:18:06,440 Speaker 1: Yes this is happening. So is it too soon to 389 00:18:06,480 --> 00:18:08,240 Speaker 1: say that we're not going to see those broad based 390 00:18:08,240 --> 00:18:12,360 Speaker 1: tech cutbacks. I mean, I think you are seeing those cutbacks, 391 00:18:12,400 --> 00:18:14,200 Speaker 1: but I think what also is happening is that there 392 00:18:14,200 --> 00:18:16,560 Speaker 1: are lots of lots of job openings, and so those 393 00:18:16,600 --> 00:18:22,040 Speaker 1: people are transitioning relatively quickly too new employment opportunities. And 394 00:18:22,240 --> 00:18:23,960 Speaker 1: one of the things we find is that you know, 395 00:18:24,000 --> 00:18:26,720 Speaker 1: the media and spell for unemployment is like very low. 396 00:18:26,760 --> 00:18:29,200 Speaker 1: I mean I think, I mean maybe less than ten weeks. 397 00:18:29,320 --> 00:18:31,639 Speaker 1: So so I think a lot of those people may 398 00:18:31,680 --> 00:18:33,480 Speaker 1: be getting layoffs. Not to say that the news is fake, 399 00:18:33,520 --> 00:18:35,560 Speaker 1: I mean, but they're just Um, you know, the fact 400 00:18:35,640 --> 00:18:38,760 Speaker 1: that continuing claims remain low tells you that those newly 401 00:18:38,800 --> 00:18:41,399 Speaker 1: laid off people are transitioning into new jobs pretty quickly. 402 00:18:41,440 --> 00:18:43,080 Speaker 1: What do you make of this step down document? Then 403 00:18:43,560 --> 00:18:47,480 Speaker 1: the story that to fifty to twenty five? I think 404 00:18:47,560 --> 00:18:50,919 Speaker 1: that's implicit in the FEDS dots plot. Now, the issue 405 00:18:51,000 --> 00:18:53,520 Speaker 1: is for the FED is that if every time they 406 00:18:53,600 --> 00:18:57,320 Speaker 1: hint at a mini pivot the market rips and break 407 00:18:57,359 --> 00:19:00,600 Speaker 1: even rates go up ten basis points, that's a problem 408 00:19:00,640 --> 00:19:04,159 Speaker 1: and it makes the pivot less likely. So UM, I 409 00:19:04,200 --> 00:19:08,239 Speaker 1: do think, um, you know, the risk is that they 410 00:19:08,320 --> 00:19:10,800 Speaker 1: end up doing more than what they've already signaled in 411 00:19:10,800 --> 00:19:13,120 Speaker 1: the dots plot. Um. I wouldn't be surprised to see 412 00:19:13,160 --> 00:19:16,520 Speaker 1: if FED funds rate, you know, well north of five percent. 413 00:19:16,600 --> 00:19:18,439 Speaker 1: I think we're actually on a glide path to that. 414 00:19:18,520 --> 00:19:20,240 Speaker 1: And and and the fact that you know, to me, 415 00:19:20,320 --> 00:19:22,840 Speaker 1: the most notable thing that that that share Powell has 416 00:19:22,880 --> 00:19:25,520 Speaker 1: said was at the September meeting when he had that 417 00:19:25,600 --> 00:19:27,119 Speaker 1: kind of moment where he said, I don't know what 418 00:19:27,160 --> 00:19:28,760 Speaker 1: the path will be, I can just tell you it'll 419 00:19:28,800 --> 00:19:31,919 Speaker 1: be enough. That to me tells you that relative to 420 00:19:32,000 --> 00:19:34,640 Speaker 1: whatever they've they've put into their dots plot, it's likely 421 00:19:34,680 --> 00:19:36,359 Speaker 1: to be higher than that. They want to put a 422 00:19:36,400 --> 00:19:40,080 Speaker 1: little market at least on financial conditions. That's a problem, right, 423 00:19:40,080 --> 00:19:42,880 Speaker 1: and this sort of self fulfilling prophecy Neil just said there, 424 00:19:42,880 --> 00:19:44,680 Speaker 1: then they're on a glide path to well north of 425 00:19:44,760 --> 00:19:46,320 Speaker 1: five percent, and they're going to have to get there 426 00:19:46,320 --> 00:19:49,639 Speaker 1: because they can't signal anything close to a pivot unless 427 00:19:49,640 --> 00:19:52,200 Speaker 1: things are so bad. There's room that things may even improve, 428 00:19:52,600 --> 00:19:54,760 Speaker 1: you know, in the equity markets between now and year end. 429 00:19:54,760 --> 00:19:56,600 Speaker 1: I mean, I think that's the interesting thing is that 430 00:19:57,200 --> 00:19:59,080 Speaker 1: you know from our my client now, I don't follow 431 00:19:59,119 --> 00:20:01,119 Speaker 1: Europe closely, but you know I was just in London 432 00:20:01,160 --> 00:20:03,000 Speaker 1: not long ago, and I can tell you that people 433 00:20:03,040 --> 00:20:05,960 Speaker 1: are feeling a little bit better about the European energy situation. 434 00:20:06,080 --> 00:20:10,119 Speaker 1: We talked. We talked about the Rishi Rishi Sunac rally. 435 00:20:10,520 --> 00:20:13,640 Speaker 1: Um that's going to take pressure off the US dollar 436 00:20:13,720 --> 00:20:17,720 Speaker 1: exchange rate, which will breathe life into cyclical stocks like industrials, 437 00:20:17,720 --> 00:20:20,159 Speaker 1: which by the way, have been out performing. So you 438 00:20:20,200 --> 00:20:22,920 Speaker 1: know you can see a potential melt up into into 439 00:20:22,960 --> 00:20:24,600 Speaker 1: the end of the year. I've got the final word here. 440 00:20:24,640 --> 00:20:26,600 Speaker 1: If you're going to Rishi, you need one of these. 441 00:20:26,640 --> 00:20:30,399 Speaker 1: I was about to say skinny time. I think I 442 00:20:30,400 --> 00:20:33,840 Speaker 1: have to buy the product shoes first, and I've got 443 00:20:33,840 --> 00:20:36,399 Speaker 1: no idea what that suits from, but I'm sure I 444 00:20:36,400 --> 00:20:40,800 Speaker 1: can't afford it. Renaissance and Neil just absolutely awesome. Thank you. 445 00:20:40,840 --> 00:20:48,560 Speaker 1: Sec is Selins, the global head of Fax Strategy at RBC. So, 446 00:20:48,600 --> 00:20:50,280 Speaker 1: I'd love your reaction to what we're hearing from the 447 00:20:50,320 --> 00:20:52,639 Speaker 1: British compliment and ultimately what it means for pouts sterling, 448 00:20:52,680 --> 00:20:56,040 Speaker 1: with Cable seeing a higher session of one sixteen twenty 449 00:20:56,200 --> 00:20:59,159 Speaker 1: this morning. Sure, So, I think, as you said, a 450 00:20:59,240 --> 00:21:02,199 Speaker 1: lot of this is dollar weakness rather than Sterling strength. 451 00:21:02,440 --> 00:21:05,360 Speaker 1: But on the UK side, some interesting developments because I think, 452 00:21:05,800 --> 00:21:08,960 Speaker 1: um soon I can hunt probably right to actually delay 453 00:21:09,040 --> 00:21:11,560 Speaker 1: that statement, certainly from October thirty one. I mean, the 454 00:21:11,600 --> 00:21:14,080 Speaker 1: tabloid writers would have had a field day with the 455 00:21:14,119 --> 00:21:17,479 Speaker 1: Halloween headlines, And yes, it makes the Bank England's decision 456 00:21:17,480 --> 00:21:19,720 Speaker 1: a lot harder on November three. But I think what 457 00:21:19,800 --> 00:21:21,719 Speaker 1: son I can Hunt are hoping is that if the 458 00:21:21,760 --> 00:21:24,560 Speaker 1: current momentum continues, you know, you can see global bond 459 00:21:24,600 --> 00:21:27,119 Speaker 1: yields actually coming down everywhere, that the whole they have 460 00:21:27,200 --> 00:21:29,720 Speaker 1: to fill on November seventeenth will actually be smaller rather 461 00:21:29,760 --> 00:21:31,680 Speaker 1: than larger. I have no idea li soa why it 462 00:21:31,800 --> 00:21:33,960 Speaker 1: was ever October thirty one. As soon as I saw 463 00:21:33,960 --> 00:21:35,639 Speaker 1: the headline, it's exactly what I said, Why are they 464 00:21:35,640 --> 00:21:37,920 Speaker 1: doing this on Halloween? Oh my gosh. I always feel 465 00:21:37,960 --> 00:21:39,320 Speaker 1: like it kind of wanted to be act over with 466 00:21:39,359 --> 00:21:41,400 Speaker 1: thirty first, so that we can see those tabloid headlines. 467 00:21:41,400 --> 00:21:42,959 Speaker 1: I mean, is that really reason to delay? A lot 468 00:21:42,960 --> 00:21:45,720 Speaker 1: of people talked about the incompetence of the former leader. 469 00:21:45,800 --> 00:21:47,960 Speaker 1: I always had a problem with that October thirty one. 470 00:21:48,320 --> 00:21:50,879 Speaker 1: I think it's great timing. I think it's ridiculous. So 471 00:21:51,000 --> 00:21:53,000 Speaker 1: we do have a meeting at the MPC at the 472 00:21:53,000 --> 00:21:55,359 Speaker 1: Bank of Thing that the decision will come on November three. 473 00:21:55,560 --> 00:21:57,800 Speaker 1: Does this complicate things for them? And to what degree? 474 00:21:58,400 --> 00:22:01,760 Speaker 1: And I think for this meeting, probably seventy five and 475 00:22:01,760 --> 00:22:04,280 Speaker 1: then a wait and see further out the curve, there's 476 00:22:04,320 --> 00:22:06,200 Speaker 1: quite a lot in the price. And actually we're looking 477 00:22:06,200 --> 00:22:09,359 Speaker 1: for saying, you know, June twenty three, Sonya's to rally 478 00:22:09,359 --> 00:22:11,320 Speaker 1: a little bit. But they don't need to make those 479 00:22:11,320 --> 00:22:13,360 Speaker 1: decisions right now. They certainly don't need to give any 480 00:22:13,400 --> 00:22:16,120 Speaker 1: forward guidance. You know, they'll be very much guided by 481 00:22:16,160 --> 00:22:18,240 Speaker 1: what comes out on November seventeenth and the state of 482 00:22:18,240 --> 00:22:21,440 Speaker 1: the market as they make each and every decision. So yes, 483 00:22:21,720 --> 00:22:23,560 Speaker 1: they're not in an easy position, but I think their 484 00:22:23,600 --> 00:22:25,200 Speaker 1: position is a lot easier now than it was a 485 00:22:25,240 --> 00:22:27,719 Speaker 1: few weeks ago. As you said, this is also very 486 00:22:27,800 --> 00:22:31,160 Speaker 1: much a dollar weakness story. How sustainable is that dollar weakness? 487 00:22:31,520 --> 00:22:33,879 Speaker 1: And that's a critical question list. I mean, we had 488 00:22:34,119 --> 00:22:37,359 Speaker 1: on Friday that apparent shift in rhetoric from the Fed 489 00:22:37,800 --> 00:22:41,119 Speaker 1: right before the blackout, then over the weekend developments in 490 00:22:41,240 --> 00:22:43,840 Speaker 1: China made markets a little bit risk averse on Monday. 491 00:22:43,880 --> 00:22:46,280 Speaker 1: Now appears to be turning again. You know, we've seen 492 00:22:46,280 --> 00:22:48,960 Speaker 1: your dollar break some pretty big levels, not just parity, 493 00:22:49,040 --> 00:22:53,000 Speaker 1: but the downtrend that really started in January UM and 494 00:22:53,080 --> 00:22:56,560 Speaker 1: so if we see a combination of lower yields slightly 495 00:22:56,640 --> 00:22:59,000 Speaker 1: higher equities, I think the dollar will be in a 496 00:22:59,040 --> 00:23:02,040 Speaker 1: little bit of trouble for next month ahead. Longer term structurally, 497 00:23:02,080 --> 00:23:05,320 Speaker 1: like you said, it doesn't change anything fundamentally, but for now, 498 00:23:05,320 --> 00:23:07,320 Speaker 1: I do think there's a little bit of profit taking 499 00:23:07,400 --> 00:23:10,359 Speaker 1: and a relief brandy for other currencies. John Elsa was 500 00:23:10,400 --> 00:23:12,720 Speaker 1: just saying on Friday we got hints of something different 501 00:23:12,760 --> 00:23:15,280 Speaker 1: from the Federal Reserve. Is she talking about a particular 502 00:23:15,359 --> 00:23:17,240 Speaker 1: article in the Wall Street Turnle? Is that really what 503 00:23:17,320 --> 00:23:19,080 Speaker 1: people are hinging? This are one. I don't think you 504 00:23:19,119 --> 00:23:20,920 Speaker 1: need to read the article in the Wall Street Journal. 505 00:23:20,960 --> 00:23:22,879 Speaker 1: I think Mary Daily said it for herself over the 506 00:23:22,880 --> 00:23:25,320 Speaker 1: San Francisco Fed. I think other Fed presidents have said 507 00:23:25,359 --> 00:23:27,720 Speaker 1: the same thing, This whole idea about a step down, though, 508 00:23:27,880 --> 00:23:30,720 Speaker 1: can you have a step down without the CPI confirming 509 00:23:30,760 --> 00:23:33,359 Speaker 1: a desalleration and inflation a much bigger way? Now we 510 00:23:33,400 --> 00:23:36,000 Speaker 1: could all identify falling prices. And I've heard the pushback, 511 00:23:36,000 --> 00:23:37,560 Speaker 1: and I'm sure I'm going to get it any minute now. 512 00:23:37,680 --> 00:23:39,840 Speaker 1: My bloom booth terminal that message, it will light up 513 00:23:39,920 --> 00:23:41,960 Speaker 1: and get all of that. It's not about what I 514 00:23:41,960 --> 00:23:43,440 Speaker 1: think the FED should do, it's what they're going to 515 00:23:43,520 --> 00:23:45,520 Speaker 1: tell us they will do. And what they're telling us 516 00:23:45,560 --> 00:23:48,400 Speaker 1: they will do is that they need a convincing, convincing 517 00:23:48,800 --> 00:23:51,960 Speaker 1: several months maybe worth of core data that tells them 518 00:23:52,119 --> 00:23:55,040 Speaker 1: that they're on a trajectory back towards a two percent 519 00:23:55,080 --> 00:23:57,760 Speaker 1: inflation target. Well, and there's this other question of let's 520 00:23:57,800 --> 00:23:59,879 Speaker 1: say the FED does have a step down, right, and 521 00:24:00,000 --> 00:24:02,199 Speaker 1: and they keep rates at four and a half percent 522 00:24:02,520 --> 00:24:05,840 Speaker 1: for a prolonged period of time, Elsa, is that going 523 00:24:05,880 --> 00:24:07,679 Speaker 1: to mean that the dollar is going to be weaker 524 00:24:08,080 --> 00:24:10,560 Speaker 1: or does that mean that it will be stronger because 525 00:24:10,600 --> 00:24:13,080 Speaker 1: it will be a more persistent higher yield, and it 526 00:24:13,119 --> 00:24:15,400 Speaker 1: means that the rest of the world isn't catching up 527 00:24:15,440 --> 00:24:18,000 Speaker 1: necessarily at the same pace. Right, And that's what I 528 00:24:18,000 --> 00:24:20,320 Speaker 1: wanted to come onto with, you know, the structural comment, 529 00:24:20,440 --> 00:24:22,800 Speaker 1: because to your point, Lisa, if they are going to 530 00:24:22,880 --> 00:24:24,600 Speaker 1: keep rates up for in half per cent, and yes, 531 00:24:24,640 --> 00:24:27,480 Speaker 1: other central banks are hiking, but they're also beginning to 532 00:24:27,520 --> 00:24:30,080 Speaker 1: slow down, the dollar is going to maintain that yield 533 00:24:30,080 --> 00:24:32,960 Speaker 1: advantage and it's going to maintain effectively the status of 534 00:24:33,000 --> 00:24:35,560 Speaker 1: the highest carrier, one of the highest carry currencies within 535 00:24:35,640 --> 00:24:38,720 Speaker 1: G ten and even relative to several emerging markets. So 536 00:24:39,280 --> 00:24:41,840 Speaker 1: you know, I think you've got to distinguish the kind 537 00:24:41,840 --> 00:24:45,280 Speaker 1: of short term tactical repositioning from the longer term structural moods. 538 00:24:45,280 --> 00:24:47,960 Speaker 1: And at the moment, we've not yet seen that turnaround 539 00:24:47,960 --> 00:24:50,480 Speaker 1: in US inflation that will really get the Fed to 540 00:24:50,480 --> 00:24:53,119 Speaker 1: actually cut rates rather than just pause the hikes. To 541 00:24:53,280 --> 00:24:55,359 Speaker 1: bear with me, this isn't exactly a butterfly theory, but 542 00:24:55,400 --> 00:24:57,879 Speaker 1: how much is the UK getting a reprieve from what 543 00:24:58,000 --> 00:25:00,680 Speaker 1: Japan and China are doing to try to support their currencies. 544 00:25:01,480 --> 00:25:04,239 Speaker 1: I mean, it's often been said that politics is all 545 00:25:04,280 --> 00:25:07,800 Speaker 1: about timing, and you can't exactly feel sorry for less trust, 546 00:25:07,880 --> 00:25:10,280 Speaker 1: but you can look at kind of global developments and 547 00:25:10,280 --> 00:25:13,880 Speaker 1: feel like, had she had not had such terrible timing, 548 00:25:14,040 --> 00:25:16,479 Speaker 1: she perhaps might have lasted longer than that letters. I mean, 549 00:25:16,480 --> 00:25:18,119 Speaker 1: all I'll say is that, yes, there is a bit 550 00:25:18,119 --> 00:25:21,240 Speaker 1: of a reprieve here for the UK um but certainly 551 00:25:21,400 --> 00:25:22,919 Speaker 1: they have their work cut out as well. It's not 552 00:25:22,920 --> 00:25:25,840 Speaker 1: going to be straightforward sailing, especially the current account as 553 00:25:25,840 --> 00:25:27,399 Speaker 1: it is at the moment. Did you remember when everyone 554 00:25:27,400 --> 00:25:29,680 Speaker 1: got really excited about stepped down in right highs early 555 00:25:29,760 --> 00:25:31,240 Speaker 1: this month, and it was because the r B a 556 00:25:31,880 --> 00:25:35,160 Speaker 1: over in Australia didn't go fifty, there went twenty five. 557 00:25:35,640 --> 00:25:39,159 Speaker 1: We had CPI data out of Australia overnight for the 558 00:25:39,200 --> 00:25:42,520 Speaker 1: third quarter and it's surprised big time to the upside. 559 00:25:42,720 --> 00:25:44,520 Speaker 1: So I know this is a lagging indicator of things, 560 00:25:44,560 --> 00:25:46,439 Speaker 1: and I'm sure the RBA has got a lot of 561 00:25:46,440 --> 00:25:48,920 Speaker 1: tightening in the pipeline, but is that a warning shot 562 00:25:49,000 --> 00:25:52,000 Speaker 1: to this federal reserve in part? But I think also 563 00:25:52,040 --> 00:25:53,640 Speaker 1: what will be interesting is to see how the Bank 564 00:25:53,680 --> 00:25:56,000 Speaker 1: of Canada yet today. If you recalled the Bank of 565 00:25:56,000 --> 00:25:58,600 Speaker 1: Canada height in March, just a couple of weeks ahead 566 00:25:58,600 --> 00:26:00,479 Speaker 1: of the bed and at the time they were very 567 00:26:00,520 --> 00:26:03,440 Speaker 1: much seen as you know, leading things, they'll be able 568 00:26:03,520 --> 00:26:06,280 Speaker 1: to still very much sucking its forward guidance. Um, so 569 00:26:06,359 --> 00:26:08,479 Speaker 1: let's see what the band Canda do today. A very 570 00:26:08,520 --> 00:26:11,600 Speaker 1: finely balanced decision between seventy five and fifty. I think 571 00:26:11,600 --> 00:26:13,560 Speaker 1: a lot of people will be looking at as a 572 00:26:13,720 --> 00:26:16,320 Speaker 1: as signed perhaps of things to come. So wonderful to 573 00:26:16,320 --> 00:26:20,000 Speaker 1: hear from you, as always, as if this is the 574 00:26:20,000 --> 00:26:24,679 Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays 575 00:26:24,720 --> 00:26:28,199 Speaker 1: from seven to ten am Eastern. I'm Bloomberg Radio and 576 00:26:28,280 --> 00:26:32,560 Speaker 1: I'm Bloomberg Television each day from six to nine am 577 00:26:32,640 --> 00:26:36,399 Speaker 1: for insight from the best in economics, finance, investment, and 578 00:26:36,480 --> 00:26:43,040 Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 579 00:26:43,160 --> 00:26:46,760 Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm 580 00:26:46,800 --> 00:26:49,400 Speaker 1: Tom Keene and this is Bloomberg