Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz Jaily. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple podcast, sun Cloud, Bloomberg dot com,
Speaker 1: and of course on the Bloomberg terminal. I'm placed to
Speaker 1: say that joining us now is a Labor Secretary Marty
Speaker 1: Welsh off the back of this Stella jobs report. Secondly, Walsh,
Speaker 1: the floor is yours set your thoughts on this one. No,
Speaker 1: thank you very much. This certainly is a great jobs report.
Speaker 1: When you look at the different sectors. Uh, most of
Speaker 1: the economy is recovered. The jobs that were that companies
Speaker 1: had pre pandemic or all returned. So it shows good gains.
Speaker 1: We've showed some good wage growth, We've shown good good areas.
Speaker 1: Manufacturing is one of those areas that certainly we've seen
Speaker 1: come back, not just come back to pre pandemic levels.
Speaker 1: About going beyond that. I think with the Chips bill
Speaker 1: that was passed and signed is gonna be signed until
Speaker 1: next week, we can do more manufacturing United States of America,
Speaker 1: which in the long term will help us with some
Speaker 1: of the inflationary pressures such as semiconductors and and more microchips. Secondly, well,
Speaker 1: what a turnaround this has been since the pandemic. Can
Speaker 1: we just take a moment to think about that, how
Speaker 1: much we've recovered over the last couple of years, and
Speaker 1: can you talk to me about how sustainable you think
Speaker 1: these jobs gains might be. I'll tell you, Uh, pandemic
Speaker 1: March of I was the mirror Boston and we were
Speaker 1: shutting businesses down. We're shutting h restaurants down. Uh, we
Speaker 1: didn't really know what the economy held, and thinking about
Speaker 1: where we are today was really incredible. And I think
Speaker 1: that this will, in my opinion, will be sustainable moving forward.
Speaker 1: I think companies are understanding. I think we're gonna have
Speaker 1: a new type of economy. I think we're still obviously
Speaker 1: dealing with the inflationary pressures. You talked about it right
Speaker 1: before we got on the air here. I heard you talking,
Speaker 1: and I think that you know, we're going to adapt
Speaker 1: and adjust and we're gonna move forward. I think that
Speaker 1: the infrastructure law that was was signed into law, we're
Speaker 1: going to see more investments all across American roads, and bridges.
Speaker 1: I think with the chips all that was passed and
Speaker 1: move forward, we're going to see more investment in manufacturing. Hopefully,
Speaker 1: the bill that's being worked on now in front of
Speaker 1: the Senate is going to be working on prescription drug
Speaker 1: costs and environmental climate change in some other areas is
Speaker 1: going to help when you really think about a lot
Speaker 1: of what's happened here under the Biden administration is something
Speaker 1: that we've talked about for the last decade or so.
Speaker 1: And these are all going to be good bills and
Speaker 1: good investments to move our economy and quite honestly, move
Speaker 1: America forward. And you've got a lot of people to
Speaker 1: talk to this morning. I did want to talk to
Speaker 1: you about the negotiations on the West Coast with the ports.
Speaker 1: This was gonna bring out. I know you are because
Speaker 1: this was your quote last time we spoke. You said,
Speaker 1: next month, I'll come on the If I come on
Speaker 1: this show. If we don't have a contract, and we're
Speaker 1: not close to a contract, then you and I might
Speaker 1: be having a very different conversation. So I guess that
Speaker 1: we have one to be close to one, or we
Speaker 1: have a very different conversations. No, we're not well, I
Speaker 1: don't know how close we had to get into contract.
Speaker 1: But one thing that that has happened and since we've
Speaker 1: spoken and both sides have agreed is the healthcare And
Speaker 1: that was a big sticking point. That's usually a big
Speaker 1: sticking point, the costs around healthcare and who's gonna pay
Speaker 1: for healthcare, and and that was an aociated and solved
Speaker 1: about ten days ago. So I'm very pleased with that.
Speaker 1: Now they're onto the next phase of negotiation. UH. And
Speaker 1: usually when you think about contracts negotiations, the biggest sticking
Speaker 1: point is around healthcare, pensions, things like that, and those
Speaker 1: are in the rearview Marna. Now now they're moving forward
Speaker 1: on some of the other issues they want to tackle.
Speaker 1: So I feel good where we are. If I said that,
Speaker 1: I probably should have used my words a little better
Speaker 1: if you don't have a contract by next month, but
Speaker 1: I certainly I am very confident where we are in
Speaker 1: the negotiation right now. I am not concerned. Uh. And
Speaker 1: I say in very close contact with both the longshoreman
Speaker 1: union in the companies on the ports to offer any
Speaker 1: type of support we need. But every time I talk
Speaker 1: to them, they said, we're moving forward. A secondly, well,
Speaker 1: for some people who might not be that confident as
Speaker 1: you are, they might not be familiar with how this
Speaker 1: works with this particular set of negotiations. Have you said before,
Speaker 1: this particularly one is a little bit different because it
Speaker 1: only starts six weeks before expliration. Can you help us
Speaker 1: understand things a little bit better by comparing it to
Speaker 1: where we were then at this stage and where we
Speaker 1: are now. Well, I think we're further along than we
Speaker 1: were if I remember that took an awful long time
Speaker 1: to get done. But just for people that don't quit
Speaker 1: quite understand collective boggating or negotiations, usually you can start
Speaker 1: months ahead of time to lay down the foundation for
Speaker 1: a contract. In this particular case, it's six weeks before
Speaker 1: the termination of the contract, which means it always runs
Speaker 1: over the expiration day. I don't think they've ever had
Speaker 1: a contract done on the expiration date itself. Normally you
Speaker 1: want to shoot to get a contract by expiration day.
Speaker 1: But what both sides have agreed to do in this
Speaker 1: case have continued to agree to keep the current collective
Speaker 1: bargaining agreement in place while they negotiate moving forward. There's
Speaker 1: been no no conversation of strikes lockout, slowdowns, none of
Speaker 1: that stuff that hasn't even broached up, brought up and
Speaker 1: talked about. And that's the thing that I don't think
Speaker 1: will happen in this negotiation. And I'm going to continue
Speaker 1: to talk to the sides and where I need to
Speaker 1: pro pressure on them. Certainly, this is a big, big
Speaker 1: issue for the ports and for products coming into the
Speaker 1: United States America and quite honestly for exports out the
Speaker 1: United States of America too, So we want to make
Speaker 1: stay very closely now myself in general, Lions whose liaison
Speaker 1: at the White House has been in constant communication. We
Speaker 1: talked more than we talked a couple of times a week,
Speaker 1: but we have a scheduled call just to go over
Speaker 1: where we are just so we can stay on top
Speaker 1: of these negotiations. Secondly, Welsh and Monster jobs report, it's
Speaker 1: the final question for me for Boston. Do you need
Speaker 1: to see some labor turn over at the Red Sox? Uh? God,
Speaker 1: I get myself in trouble. They I'm not really sure
Speaker 1: what's going on there, although that they seem like they
Speaker 1: didn't make any many changes, so uh, they're going for something,
Speaker 1: So they must be going for that wild card spot.
Speaker 1: That was from Mike McKay and Tom Kane. They were
Speaker 1: pushing me to our secondary wolves. They had to go there.
Speaker 1: It's gonna catch up with you, sir. Thank you, Labor
Speaker 1: Secretary Marty Wolves. There on just the Killer Jobs report again,
Speaker 1: tape negative two, down on negative one, a little bit
Speaker 1: of improvement. We'll see where that goes through This Friday,
Speaker 1: we continue with Tiffany Welding of PIMCO, their chief US economists.
Speaker 1: Tim Tiffany, I want to talk about something that's harder
Speaker 1: than it sounds, which is the physics of inertial force
Speaker 1: and momentum and the idea that a trend gets inertia,
Speaker 1: the trend is going to be higher interest rates. Explain
Speaker 1: how the next rate increase is different than the third
Speaker 1: or fourth rate increase out UM. Well, so I think that, uh,
Speaker 1: you know, it depends on the level of interest rates
Speaker 1: that you start at. So UM. You know, before July,
Speaker 1: the most recent fo MC meeting, for example, you know,
Speaker 1: we would have argued that interest rates, the level of
Speaker 1: interest rates was still providing accommodation to the US economy UM,
Speaker 1: and that was increasingly inconsistent with economic fundamentals, you know,
Speaker 1: which we would even argue before July and before this
Speaker 1: payroll report, we're calling for more restrictive monetary policy. So
Speaker 1: the July increase of seventy basis points from the Federal
Speaker 1: Reserve basically just got them out of accommodative territory into
Speaker 1: something closer to neutral, although I think you could even
Speaker 1: argue that maybe they're not neutral yet. Um. But now
Speaker 1: what the focus is on is really recaliber rating to
Speaker 1: where we need to be, which is in restrictive territory,
Speaker 1: you know. So that's why we think federers are officials
Speaker 1: are probably also going to do another seventy five basis
Speaker 1: point rate hike at the at the September meeting, you know.
Speaker 1: But ultimately eventually they will slow the pace of those
Speaker 1: adjustments down. Um, but as they get closer to kind
Speaker 1: of where they think they need to be on on
Speaker 1: the restrictive side. Tiffany, I'm looking at the two year
Speaker 1: and the ten year treasury yields. I see a forty
Speaker 1: basis point inversion. Do I need to pay attention to that?
Speaker 1: I'm just an equity analyst wanted to pay attention to that. Yeah,
Speaker 1: I mean so historically, you know, what we call the
Speaker 1: yield curve you just mentioned has been one of the
Speaker 1: best leading indicators of inflation UM and then obviously today
Speaker 1: in reaction to the data that was released the employment
Speaker 1: report you saw, I think even more inversion in the
Speaker 1: yield curve. So maybe the markets pricing in more of
Speaker 1: a recessionary outcome or higher probability of that event. I
Speaker 1: think that's right in terms of market reaction. So although
Speaker 1: this for a court confirmed that the economy was not
Speaker 1: in recession in July UM, it also suggests that the
Speaker 1: FED needs to do more to tame inflation, and that
Speaker 1: means tighter financial conditions, putting more pressure on the economy,
Speaker 1: which just raises the risk of you know, of a
Speaker 1: recession call it twelve to eighteen months out. So um.
Speaker 1: You know, I think that there's a growing concern, certainly
Speaker 1: from US and probably from others, that the Fed will
Speaker 1: have to do more than just um produce below trend
Speaker 1: growth to get the economy to cool down. You know,
Speaker 1: if you look at you know, historical precedents, you know,
Speaker 1: in the seventies and eighties for this, the FED actually
Speaker 1: had to engineer a recession, or at least recessions did
Speaker 1: follow these kinds of high inflationary episodes. You know, so
Speaker 1: it's certainly possible that you know, the FED was to
Speaker 1: bring down inflation and quite quickly they might have to
Speaker 1: do more. Uh. But back then, and I spent a
Speaker 1: lot of time looking at log proportional change of the
Speaker 1: curving versions, Tiffany, and we're not going to go there
Speaker 1: on August Friday, but Tiffany welding when we we're doing that.
Speaker 1: In the seventies, the ten year yield was what Paul whatever,
Speaker 1: I I don't see the equivalency to the Voker period.
Speaker 1: Do you see that? Well? I think what you have
Speaker 1: to do is, you know, you have to adjust for
Speaker 1: the fact that you know, what we call the real
Speaker 1: neutral interest rate in the economy, so kind of the
Speaker 1: interest rate, uh, that the economy can handle right where
Speaker 1: where is uh monetary policy accommodative or restrictionary, and that
Speaker 1: that level has declined over the years. Um. So it
Speaker 1: was much higher in the seventies and eighties. Uh. You know,
Speaker 1: the model suggests we kit observed this in the market,
Speaker 1: so we have to try to estimate it. It was
Speaker 1: much higher than that it is now. So you do
Speaker 1: have to adjust for that, you know. So we don't
Speaker 1: think interest rates are going back to where they were
Speaker 1: back then. Um, but nevertheless, we think the FED will
Speaker 1: have to be restrictive at this lower level of interest
Speaker 1: rates now. So tiffany five wage increase that sounds pretty
Speaker 1: good to me? Is that's something that you think is sustainable,
Speaker 1: sticky healthy. How do you think about the wage environment
Speaker 1: out there? Well, you know, the you know, I think
Speaker 1: the bottom line from that is that although wages wage
Speaker 1: inflation has started to accelerate, you know, of course, it's
Speaker 1: still below uh price level inflation. So people are are
Speaker 1: still getting squeezed. If you look at you know, the
Speaker 1: kind of data and aggregate what we see or interpret
Speaker 1: is that, um, you know, more people are getting jobs,
Speaker 1: so overall, aggregate incomes are still growing, um, you know,
Speaker 1: and they're growing much more in line with with h
Speaker 1: inflation prices, price inflation, um, you know, so maybe people
Speaker 1: are getting two jobs to deal with uh, you know,
Speaker 1: to get some extra income to deal with these types
Speaker 1: of price increases that they're seeing in the grocery store, etcetera.
Speaker 1: You know, but I think overall you're asking if if
Speaker 1: the wage the wage numbers, is that is that normal?
Speaker 1: I mean, I think the concerns still that we have
Speaker 1: is that as you get more price increases, people negotiate
Speaker 1: higher wages. The wage inflation broadens out, you know, and
Speaker 1: then you get even more you get higher prices as
Speaker 1: companies pass on those additional costs, so you get in
Speaker 1: this kind of trial situation. We don't think we're there yet,
Speaker 1: but certainly that's something that we want to avoid. Tiffany,
Speaker 1: thank you so much. PIMCO. Let us get a briefing
Speaker 1: from someone who's sat at the desk in the Echoes building.
Speaker 1: Randall Krosner continues, where there's a former FED governor at
Speaker 1: Both School Chicago. Randy, how does this change the calculus
Speaker 1: for the Federal Open Market Committee? I think it's really
Speaker 1: clear that they are in a path to continue to
Speaker 1: raise those rates UM. Certainly seventy five basis points will
Speaker 1: be on the table for the UH for the next meeting. UH.
Speaker 1: The thing, it's not only the strength of the labor market,
Speaker 1: but it is also the UH the significant increase in wages,
Speaker 1: higher than expected upward revisions. UM. The FED really worries
Speaker 1: about inflation expectation becoming entrenched. They're really hoping that inflation
Speaker 1: is gonna be coming down low five percent fairly soon.
Speaker 1: But if people are still demanding five percent wage increases,
Speaker 1: that gets them into a lot of difficulty, and so
Speaker 1: that's why they're going to continue to move. I think
Speaker 1: this means that they'll will certainly be in the fours
Speaker 1: by early next year. And I said I said before,
Speaker 1: I think it's going to be there for a while.
Speaker 1: And exactly as Jonathan had said, when the Fed moves
Speaker 1: the rates up, it's not that they just pivot and
Speaker 1: pull them back down. They typically keep them up for
Speaker 1: a while because they really want to stamp inflation, inflation
Speaker 1: expectations out of the system. Randy, someone's going to ask
Speaker 1: this question, does this pass the smell test for you?
Speaker 1: A number this big? I mean, there can be always revisions.
Speaker 1: You never want to put too much emphasis on any
Speaker 1: one month. But you've got an upward revision last month,
Speaker 1: you have a strong number this month. UM. The Fed
Speaker 1: is not going to overreact to any one number, but
Speaker 1: you know the upward revisions to UM that that came
Speaker 1: last month with this will certainly embolden them to to
Speaker 1: move expeditiously as they have said. And I think they're
Speaker 1: gonna get least I think it's going to be very
Speaker 1: close to four by the end of the year. By
Speaker 1: the end of the year, Randy, can you talk a
Speaker 1: little bit about the path you did mention earlier that
Speaker 1: you expect them to go to four percent for the
Speaker 1: Fed funds rate and stay there for a while. How
Speaker 1: long is that while and what will determine that length?
Speaker 1: So it's gonna depend a lot on these these statistics
Speaker 1: that we're that we're getting. What's gonna be happening labor market,
Speaker 1: what's gonna be happening to two wages? And Um, you know,
Speaker 1: right now we're not seeing the economy going over cliff
Speaker 1: and this is exactly the time that the Fed needs
Speaker 1: to be moving quickly. Um, the the economy hasn't sputtered yet,
Speaker 1: so they need to move. But also they haven't gotten
Speaker 1: the political pressure on them yet because the unemployed rate
Speaker 1: is at near record lows. So this is the time
Speaker 1: to be raising races to try to stamp the inflation
Speaker 1: expectations and inflation out of the system. Brandy, you're gonna
Speaker 1: throw me out of the classroom, but I'm gonna ask
Speaker 1: the question. I'm gonna raise my snarky arm and say,
Speaker 1: Professor Krasner, where's the neutral rate? And I say that
Speaker 1: with great respect because is within all the back and
Speaker 1: forth of all our guests, and that it's when does
Speaker 1: this become painful, which means through the neutral rate? Where's
Speaker 1: the neutral rate? Professor? I always knew you were the
Speaker 1: troublemaker in the back of the class. Um, and uh,
Speaker 1: and you continue to be. That's exactly. That's a very
Speaker 1: important question, and one where Um, the consensus of the Fed,
Speaker 1: what they say is around two and a half, so
Speaker 1: roughly where they are. But that's two and a half
Speaker 1: when they think of inflation being down at two percent
Speaker 1: in the long run. In the short run, when inflation
Speaker 1: is still very very high, Um, you're still the very
Speaker 1: dramatically negative inflation adjusted rate. So two and a half
Speaker 1: is not neutral right now. In the long run it
Speaker 1: might be neutral, but it's still quite expansionary when inflation
Speaker 1: is depending on are you are? Are you giving up
Speaker 1: the Chicago school and joining adam posing with a three
Speaker 1: percent inflation level? Is that really what we're talking about here,
Speaker 1: is we need to adjust a neutral rate higher? No, no, no,
Speaker 1: I'm not saying that that the goal should change from
Speaker 1: from two percent and I'm not saying that that in
Speaker 1: the long run they're not. I think they're right about
Speaker 1: the or it seems reasonable that they are in a
Speaker 1: reasonable range for the for the long run. But in
Speaker 1: the short run you can't say that two and a
Speaker 1: half percent is neutral when inflation is eight percent and
Speaker 1: so you have a you know, very significantly negative real rate.
Speaker 1: So it's there's a bit of a long run versus
Speaker 1: short run kind of thing. To catch up Randy Crossing
Speaker 1: at that to make sense of this stunning report, Jeffrey
Speaker 1: Rosenberg joins US portfolio manager of the Systematic Multi Strategy
Speaker 1: Fund at black Rock. Jeff Rosenberg, let me cut to
Speaker 1: the chase, how do you do? Multi strategy? Was such
Speaker 1: a shock? It is a bit of a surprise. Clearly,
Speaker 1: you guys have hit it on the head with you know,
Speaker 1: good news being being bad is and and it's surprising.
Speaker 1: We strong, and it's a reminder of just you know,
Speaker 1: how strong the economy is. We're expecting an eventual slow down,
Speaker 1: but it's not here yet. And Lisa and I we're
Speaker 1: talking about this ahead of time. You know, what does
Speaker 1: the market do on a on a big upside surprise?
Speaker 1: And the narrative going in here from the fm C
Speaker 1: was the Powell pivot, and this is the payroll pushback,
Speaker 1: and the pushback is they're not going to be able
Speaker 1: to pivot as aggressively as the market was expecting post
Speaker 1: that FOMC. And that's what you're seeing with that yield
Speaker 1: curve flattening and the big increase in the front end
Speaker 1: of the race and then on risky assets and equities.
Speaker 1: You know, they don't like that because they like, you know,
Speaker 1: the end of the FED tightening, and as Randy Krassner
Speaker 1: was was talking about, if inflation doesn't come down, we
Speaker 1: are nowhere near neutral and so you've got a lot
Speaker 1: more FED hikes if you don't have that inflation coming down. Jeff,
Speaker 1: I've got a bunch of Doeby Bond questions for you,
Speaker 1: but I think it's important. And a lot large pop
Speaker 1: relation of our radio and TV audience worldwide don't have
Speaker 1: fancy financial degrees, and they're asking what's wrong with generating
Speaker 1: five fifties six thousand jobs with the revision? Why is
Speaker 1: so much good jobs reformation a bad thing? I just
Speaker 1: don't get that. Yeah, Well, it's it's about it's about
Speaker 1: overheating and it's about inflation. And one of the challenges
Speaker 1: that you have is in this report you see a
Speaker 1: lot of signs of that wage inflation and the wage
Speaker 1: price spiral. Uh. That is is really the bigger risk
Speaker 1: here that you you transition from COVID supply side disruptions
Speaker 1: transitory to something that's much more persistent. And the risk
Speaker 1: is that inflation hurts everyone and if you don't snub
Speaker 1: it out early, the pain that has to happen later
Speaker 1: is much much greater. And so that's why good news
Speaker 1: is bad news because for financial markets it means the
Speaker 1: FED is going to have to do a lot more,
Speaker 1: and it's going to have to do that sooner, tightening
Speaker 1: financial conditions to rain in the demand side. It's the
Speaker 1: only tool they have to address this inflation concern. So, Jeff,
Speaker 1: we were talking before we got these numbers that the
Speaker 1: Powell pivot would turn into the payroll push back, which
Speaker 1: is exactly what we're seeing. And that was your expectation
Speaker 1: just based on how lopside of the markets have gotten
Speaker 1: in their belief of the pivot. How much have we
Speaker 1: unwound of that? How much more do we have to go?
Speaker 1: And I say this as we look, yes at NAZDAC
Speaker 1: futures out about a percent and going lower but still
Speaker 1: well off the lows after surging over the past few weeks. Well,
Speaker 1: there's a there's a narrow reaction to today, and then
Speaker 1: there's a longer run issue. The narrow reaction is, as
Speaker 1: I looked at it last about seventeen basis points. You know,
Speaker 1: you're you're taking back you know, a little bit less
Speaker 1: than twenty five that you priced out follow going the
Speaker 1: FO and C in the Powell pivot. But the bigger
Speaker 1: issue is really what Randy is talking about and what
Speaker 1: Somers is talking about that you know, to say that
Speaker 1: that we're at neutral, we're at two and a half
Speaker 1: percent is the conflation. It's the difference between the long
Speaker 1: run neutral, which was really what he was talking about,
Speaker 1: and the issue of the short run And and this
Speaker 1: is the issue we're gonna be talking about for the
Speaker 1: next six to nine months, which is we're past peak inflation.
Speaker 1: We're going to see inflation decline. But to what level?
Speaker 1: Because the forecast in the FED. To say that they're
Speaker 1: at neutral is Randy was just saying, is that's a
Speaker 1: two percent inflation rate. If you don't get to that
Speaker 1: two percent inflation rates. Say you get to a higher
Speaker 1: inflation rate of say three percent, well, what it means
Speaker 1: is that you're nowhere near your long term neutral, and
Speaker 1: the whole bond market expectations in terms of where rates
Speaker 1: settle in have to reprice, because what we're pricing right
Speaker 1: now is a two percent inflation two and a half
Speaker 1: percent long term neutral, and that's all conditional on the
Speaker 1: realization that two percent inflation. Right, Jeff, this is a
Speaker 1: sea of uncertainty, and we're getting a little nodes that
Speaker 1: might point to a direction of travel. Where is your
Speaker 1: conviction right now as you tweak your portfolio, as you
Speaker 1: try to understand where the risks are miss priced in markets? Yeah,
Speaker 1: you know, we're a little bit uh skeptical of the
Speaker 1: of the rally that we've seen in risky assets. We're
Speaker 1: still concerned that you have uh, both a shock in
Speaker 1: terms of inflation what we're talking about here today in
Speaker 1: terms of what the Fed has to do in front
Speaker 1: of that tightening financial conditions not being conducive for risky assets.
Speaker 1: So we've been pulling back from our risky asset position.
Speaker 1: We didn't add uh in the rally that we saw
Speaker 1: in July. It's important to recognize that when you're in
Speaker 1: bear markets, they don't go straight down. They have ratchets,
Speaker 1: they have bear market rallies. That's what people are characterizing
Speaker 1: the last up move here. That's barely consensus. We're a
Speaker 1: little concerned that that we're in the consensus camp there,
Speaker 1: but we think all the data is pointing to still
Speaker 1: considerable challenges to the risky asset profile going forward here,
Speaker 1: So it's a little bit more cautious. Vie, what about
Speaker 1: your portfolio of cash? I know that black Rock has
Speaker 1: been adjusting as cash and holding a higher than usual
Speaker 1: level of it. How have you maneuvered in that space? Yeah,
Speaker 1: you know, I mean every portfolio and portfolio management team runs,
Speaker 1: you know, their own portfolios and are fun. As Tom
Speaker 1: introduced at the beginning, you know, we have run higher
Speaker 1: cash levels. Um, it's it's a way to reduce some
Speaker 1: of the risky acid exposure. The other issue that all
Speaker 1: investors are facing in this summer environment is it's been
Speaker 1: an exceptionally a liquid environment, very expensive to trade, uh,
Speaker 1: and so using cash as as opposed to other means
Speaker 1: to bring your risk down is just a more efficient
Speaker 1: way of reducing transactions, costs and and and retaining value
Speaker 1: for our investors. What do you do on duration? Here
Speaker 1: is a general statement of black Rock. What do you
Speaker 1: do on duration? You guys are gonna have twenty of
Speaker 1: you in a meeting yelling and scream is going to
Speaker 1: assume you know, we just we just understand that probably
Speaker 1: cost her. It shall be rude. I mean, that's just
Speaker 1: use you the way it is. But then, Jeff Rosenberg,
Speaker 1: what's a duration call? Well, I think the duration call,
Speaker 1: you know, I'll speak for our our team. Obviously, as
Speaker 1: you highlighted, there's a lot of different voices, and you're
Speaker 1: gonna hear some more voices in Jonathan's program uh in
Speaker 1: the next hour. But it's still a cautious view on
Speaker 1: duration here. Again, that's the view of the uncertainty of inflation.
Speaker 1: Markets are pricing certainty we're gonna have a clean path
Speaker 1: to two percent. We are more skeptical about that being realized.
Speaker 1: And if it is not realized and you end up
Speaker 1: with higher inflation, the whole bond curve, inflation risk premium,
Speaker 1: they need to reset higher. And so you've got to
Speaker 1: be a bit more defensive on duration with that uncertainty
Speaker 1: Jeff Rozenberg, Thank you so much, greatly greatly appreciated. This
Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us
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Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg