1
00:00:02,600 --> 00:00:07,000
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:11,880 --> 00:00:15,000
Speaker 2: This market got the dubvishness it wanted to hear. The

3
00:00:15,040 --> 00:00:17,439
Speaker 2: equity market's positive by close to two percent on the

4
00:00:17,520 --> 00:00:19,280
Speaker 2: S and P five hundred on the NAS NAK one

5
00:00:19,400 --> 00:00:22,520
Speaker 2: hundred up by three point three. We're moving closer to

6
00:00:22,560 --> 00:00:25,439
Speaker 2: cunning interest rates. September could well be on the table.

7
00:00:25,520 --> 00:00:28,240
Speaker 2: Push that through the bond market. A fifth consecutive day

8
00:00:28,680 --> 00:00:31,120
Speaker 2: of gains for the ten year tracery yield to lower.

9
00:00:31,240 --> 00:00:33,159
Speaker 2: We're down by four basis points on a ten year.

10
00:00:33,200 --> 00:00:35,320
Speaker 2: It's a break of four point one percent. So we've

11
00:00:35,360 --> 00:00:37,239
Speaker 2: all got the same question. Just how low is the

12
00:00:37,280 --> 00:00:40,159
Speaker 2: bar for a rate cut in September. This is what

13
00:00:40,240 --> 00:00:41,440
Speaker 2: the chairman had to say.

14
00:00:43,600 --> 00:00:46,880
Speaker 3: The question will be whether the totality of the data,

15
00:00:47,040 --> 00:00:50,599
Speaker 3: the evolving outlook in the balance of risks are consistent

16
00:00:50,640 --> 00:00:54,320
Speaker 3: with rising confidence on inflation and maintaining a solid labor market.

17
00:00:54,560 --> 00:00:57,320
Speaker 3: If that test is met, a reduction in our policy

18
00:00:57,400 --> 00:00:59,600
Speaker 3: rate could be on the table as soon as the

19
00:00:59,600 --> 00:01:00,960
Speaker 3: next meeting in September.

20
00:01:01,320 --> 00:01:02,720
Speaker 4: So let's talk about the calendar.

21
00:01:02,920 --> 00:01:07,399
Speaker 2: The next meeting September eighteenth, the data in between August second,

22
00:01:07,560 --> 00:01:11,840
Speaker 2: This come in Friday payrolls August fourteenth, CPI report, September sixth,

23
00:01:12,040 --> 00:01:15,559
Speaker 2: the jobs report on the eleventh, another CPI report, going

24
00:01:15,600 --> 00:01:18,200
Speaker 2: into a Federal Reserve decision week, and most people are

25
00:01:18,160 --> 00:01:21,000
Speaker 2: seeming after that, Lisa, we're like this far away from

26
00:01:21,000 --> 00:01:22,640
Speaker 2: that interest rate cup, especially at.

27
00:01:22,560 --> 00:01:25,319
Speaker 1: A time where there was a different type of language

28
00:01:25,360 --> 00:01:29,080
Speaker 1: in this communication. We are not data dependent. They are

29
00:01:29,280 --> 00:01:32,080
Speaker 1: or they are data dependent, They're not data point dependent.

30
00:01:32,120 --> 00:01:34,959
Speaker 1: They want to draw distinction that one data point isn't

31
00:01:34,959 --> 00:01:38,320
Speaker 1: going to throw them off materially. They repeated the totality

32
00:01:38,400 --> 00:01:41,200
Speaker 1: of the data as well as how they just need

33
00:01:41,240 --> 00:01:43,400
Speaker 1: to see the same kind of good data that they've

34
00:01:43,400 --> 00:01:44,039
Speaker 1: already been seeing.

35
00:01:44,120 --> 00:01:47,040
Speaker 5: Turn continuum to me was critical that Steve Leisman's question

36
00:01:47,200 --> 00:01:50,240
Speaker 5: was great about measured alluded to this their slaves to measure. John,

37
00:01:50,320 --> 00:01:52,240
Speaker 5: that's other is to it. I just don't know what

38
00:01:52,280 --> 00:01:54,720
Speaker 5: else to say. You know, I'll talk to Dudley about

39
00:01:54,760 --> 00:01:56,600
Speaker 5: it here. This to have Clarena and Dudley with.

40
00:01:56,600 --> 00:01:59,680
Speaker 2: Us today is fantastic last lights out and I really

41
00:01:59,760 --> 00:02:01,200
Speaker 2: for you a global Wall Street.

42
00:02:01,240 --> 00:02:04,680
Speaker 5: What's coming up here with doctor Dudley is required listening.

43
00:02:04,760 --> 00:02:07,520
Speaker 2: There was a fantastic line that came from evercause Krishnakua,

44
00:02:07,760 --> 00:02:09,560
Speaker 2: I want to share this quote with you. He thinks

45
00:02:09,560 --> 00:02:11,960
Speaker 2: they've laid the foundations for a rake Caunt September. I

46
00:02:11,960 --> 00:02:14,920
Speaker 2: think a lot of people observing that news conference would agree.

47
00:02:15,040 --> 00:02:18,120
Speaker 2: But this quote's interesting. We think in practice it's not

48
00:02:18,280 --> 00:02:21,160
Speaker 2: very data point dependent and view the cautious evolution of

49
00:02:21,200 --> 00:02:24,560
Speaker 2: the statement as intended to carry hawks along and avoid descents,

50
00:02:24,919 --> 00:02:28,600
Speaker 2: as was indeed the case today. Expect a clearer signal

51
00:02:28,840 --> 00:02:31,560
Speaker 2: a month from now at Jackson Hole. I'm thinking about

52
00:02:31,600 --> 00:02:34,320
Speaker 2: the minutes as well. I just wonder how well set

53
00:02:34,400 --> 00:02:36,960
Speaker 2: the stage is for the doves to dance and sing

54
00:02:37,080 --> 00:02:39,160
Speaker 2: very loudly in these minutes that come out in a

55
00:02:39,240 --> 00:02:40,040
Speaker 2: number of weeks time.

56
00:02:40,160 --> 00:02:42,400
Speaker 1: I was very happy that the reporter asked him to

57
00:02:42,440 --> 00:02:45,400
Speaker 1: elaborate on the fact that at this particular meeting they

58
00:02:45,520 --> 00:02:49,079
Speaker 1: did discuss the possibility of cutting reeds, that there were

59
00:02:49,120 --> 00:02:52,200
Speaker 1: a few members but not the vast majority. Here is

60
00:02:52,240 --> 00:02:55,200
Speaker 1: the question, how loud was that voice and what did

61
00:02:55,240 --> 00:02:57,600
Speaker 1: they have to give to those people to get on

62
00:02:57,639 --> 00:02:59,280
Speaker 1: board with them in terms of this decision?

63
00:02:59,280 --> 00:03:01,239
Speaker 5: Did you bring the dark to Dudley? Moments ago the

64
00:03:01,280 --> 00:03:03,399
Speaker 5: ten yure yield broke down to a four oh eight

65
00:03:03,520 --> 00:03:06,320
Speaker 5: ninety two. It's a new low yield. Could you imagine, John,

66
00:03:06,760 --> 00:03:08,240
Speaker 5: what our shows are going to be like with a

67
00:03:08,240 --> 00:03:11,720
Speaker 5: three ninety nine ten year I can't get.

68
00:03:11,560 --> 00:03:13,880
Speaker 2: There where we're going to be in September. Where's the

69
00:03:13,919 --> 00:03:16,640
Speaker 2: unemployment rate going to be in September? That's the big question.

70
00:03:16,680 --> 00:03:19,320
Speaker 2: I have gone into the payrolls report this Friday. Bill

71
00:03:19,360 --> 00:03:21,480
Speaker 2: Dudley got a shout out in this news conference. Bill

72
00:03:21,520 --> 00:03:23,639
Speaker 2: dut Lee joins us now the former New York Fed

73
00:03:23,639 --> 00:03:27,520
Speaker 2: president and Bloomberg opinion columnist as well. Bill, I want

74
00:03:27,560 --> 00:03:29,160
Speaker 2: to go to your column that you wrote in the

75
00:03:29,280 --> 00:03:31,800
Speaker 2: last week or so. It was quoted in this news conference.

76
00:03:31,840 --> 00:03:33,359
Speaker 2: I'm sure you heard it. What did you think of

77
00:03:33,360 --> 00:03:34,639
Speaker 2: the chairman's response to it?

78
00:03:36,000 --> 00:03:37,880
Speaker 6: I thought it was a fair response. I mean, this

79
00:03:37,960 --> 00:03:41,760
Speaker 6: is my opinion and is reaching a slightly different opinion.

80
00:03:41,760 --> 00:03:44,400
Speaker 6: I mean, we're at a point where the risks are

81
00:03:44,400 --> 00:03:47,080
Speaker 6: pretty closely balanced, and so the question is do you

82
00:03:47,080 --> 00:03:48,960
Speaker 6: go a little earlier or do you go a little later?

83
00:03:49,000 --> 00:03:51,480
Speaker 6: I think you know the reason why I thought it

84
00:03:51,520 --> 00:03:53,400
Speaker 6: makes more sense to go is that if the market's

85
00:03:53,400 --> 00:03:56,000
Speaker 6: already pricing in September with a high degree of certainty.

86
00:03:56,640 --> 00:03:59,120
Speaker 6: What are you really waiting for at this point? Why

87
00:03:59,240 --> 00:04:02,680
Speaker 6: take the additional risk of you know, the community deteriorating further,

88
00:04:03,040 --> 00:04:04,560
Speaker 6: so you know, end of the day, it's probably not

89
00:04:04,600 --> 00:04:06,800
Speaker 6: going to make a big bit a lot of difference.

90
00:04:06,920 --> 00:04:09,000
Speaker 6: But I think you know, given the fact that the

91
00:04:09,000 --> 00:04:11,800
Speaker 6: market expects the Fed to cut once that decision is

92
00:04:11,880 --> 00:04:13,680
Speaker 6: mostly made, and I think you heard today it was

93
00:04:13,720 --> 00:04:15,640
Speaker 6: mostly made, then why are you waiting?

94
00:04:16,320 --> 00:04:19,000
Speaker 5: Bill Dudley, your essay heard around the world, the single

95
00:04:19,080 --> 00:04:22,560
Speaker 5: sentence the Fed doesn't want to be fooled again. You've

96
00:04:22,760 --> 00:04:26,239
Speaker 5: held court at Princeton, where the late wonderful Daniel Kahneman

97
00:04:27,080 --> 00:04:30,920
Speaker 5: held court. Here's common with Taversky. Decision makers know they

98
00:04:30,960 --> 00:04:34,400
Speaker 5: are prone to regret, and the anticipation of that painful

99
00:04:34,400 --> 00:04:38,680
Speaker 5: emotion plays a part in many decisions. How is regret

100
00:04:38,920 --> 00:04:45,360
Speaker 5: aversion playing in to this massive data dependency x post ballet.

101
00:04:46,839 --> 00:04:49,000
Speaker 6: What maybe happening here is the fact that they got

102
00:04:49,000 --> 00:04:51,360
Speaker 6: fooled on inflation, you know, earlier this year where the

103
00:04:51,440 --> 00:04:55,000
Speaker 6: data came in bad makes them overly cautious that they're

104
00:04:55,000 --> 00:04:56,960
Speaker 6: going to make this and that they they can make

105
00:04:56,960 --> 00:04:59,839
Speaker 6: the same mistake again by going early. I think it's

106
00:05:00,000 --> 00:05:02,000
Speaker 6: you know, kind of has talked about recency bias, you

107
00:05:02,000 --> 00:05:05,039
Speaker 6: put too much weight on the most recent experience. So

108
00:05:05,080 --> 00:05:07,080
Speaker 6: this may be a case where they're not putting enough

109
00:05:07,080 --> 00:05:09,520
Speaker 6: weight on the on the fact that, you know, things

110
00:05:09,520 --> 00:05:12,520
Speaker 6: are slowing and the inflation's coming down, and maybe now

111
00:05:12,520 --> 00:05:14,119
Speaker 6: it's the time to act. I think it was interesting

112
00:05:14,160 --> 00:05:16,680
Speaker 6: you got a question about the sombrule. You know that

113
00:05:16,760 --> 00:05:19,640
Speaker 6: the fact when the unemployery climbs above zero point five

114
00:05:19,640 --> 00:05:22,719
Speaker 6: percent on a three month moving average basis you always

115
00:05:22,720 --> 00:05:26,080
Speaker 6: have recession. He said he's aware of it, but clearly

116
00:05:26,240 --> 00:05:28,400
Speaker 6: the FED doesn't put a lot of weight on that risk.

117
00:05:29,120 --> 00:05:31,559
Speaker 1: Do you feel like we're getting closer to the moment

118
00:05:31,560 --> 00:05:34,400
Speaker 1: where we will see real dissent on a committee that's

119
00:05:34,440 --> 00:05:36,440
Speaker 1: being cobbled together and you can kind of feel the

120
00:05:36,520 --> 00:05:39,320
Speaker 1: strains in some of the community case.

121
00:05:40,160 --> 00:05:43,360
Speaker 6: Now, I think what happened, you know today was basically

122
00:05:43,440 --> 00:05:47,279
Speaker 6: the Doves got a pretty dubbish statement and a pretty

123
00:05:47,320 --> 00:05:50,480
Speaker 6: dubblish press conference, and so you know, they're sort of

124
00:05:50,600 --> 00:05:53,919
Speaker 6: set on board, and the Hawks got more patience. And

125
00:05:53,960 --> 00:05:56,400
Speaker 6: so when you arrive at the center Tamber meeting, assuming

126
00:05:56,440 --> 00:05:58,560
Speaker 6: the outlook doesn't change in the material way and That's

127
00:05:58,560 --> 00:06:00,520
Speaker 6: basically what pub was saying. It's not about a single

128
00:06:00,600 --> 00:06:03,160
Speaker 6: data point. The outlook has a change in a fundamental

129
00:06:03,200 --> 00:06:05,000
Speaker 6: way for the FED not to go to in September.

130
00:06:05,400 --> 00:06:08,280
Speaker 6: At that point, you have something to basically you give

131
00:06:08,320 --> 00:06:10,240
Speaker 6: to both the doves and the hawks. The doves, you

132
00:06:10,400 --> 00:06:13,520
Speaker 6: thank you for being patient. The Hawks, we waited, So

133
00:06:13,640 --> 00:06:17,080
Speaker 6: let's go together unanimously at the September meeting. So I think,

134
00:06:17,560 --> 00:06:19,760
Speaker 6: you know, I think it's a good, good possibility that

135
00:06:19,800 --> 00:06:22,159
Speaker 6: you'll see an unanimous vote at September for a twenty

136
00:06:22,160 --> 00:06:23,960
Speaker 6: five base point recud.

137
00:06:24,279 --> 00:06:26,800
Speaker 2: But you brought up the Psalm rule. The chairman also

138
00:06:26,839 --> 00:06:29,240
Speaker 2: brought up the yield curve in this news conference as

139
00:06:29,240 --> 00:06:31,880
Speaker 2: well and highlights it the false positives we're getting from

140
00:06:31,920 --> 00:06:34,680
Speaker 2: traditional indicators. Just to reflect back on that piece that

141
00:06:34,720 --> 00:06:37,120
Speaker 2: you wrote for Bloomberg Opinion, can you walk us through

142
00:06:37,160 --> 00:06:39,920
Speaker 2: why you do think actually the Psalm rule does matter,

143
00:06:40,279 --> 00:06:42,800
Speaker 2: that maybe we should have a little bit more of

144
00:06:42,839 --> 00:06:45,880
Speaker 2: a focus on these traditional indicators still and not completely

145
00:06:45,880 --> 00:06:47,600
Speaker 2: ignore them.

146
00:06:47,800 --> 00:06:49,400
Speaker 6: Well, if I can start with the yelkur the reason

147
00:06:49,400 --> 00:06:51,120
Speaker 6: why I don't think the ill curve is necessarily a

148
00:06:51,120 --> 00:06:53,760
Speaker 6: good predictor is the US curves is inverted because people

149
00:06:53,760 --> 00:06:57,000
Speaker 6: think monetary policy is tight. So it's not that you'll

150
00:06:57,080 --> 00:06:59,480
Speaker 6: cruise shape that causes the economy to week it weaken.

151
00:06:59,520 --> 00:07:02,480
Speaker 6: It's the prison sumption that monitary policy is restricted because

152
00:07:02,520 --> 00:07:04,719
Speaker 6: of the economy weaken. Most of the time when the

153
00:07:04,720 --> 00:07:07,560
Speaker 6: occurs inverted, monitary policy is tight, and so the he

154
00:07:07,560 --> 00:07:10,120
Speaker 6: occurs a good predictor The soumrule, I think is a

155
00:07:10,160 --> 00:07:12,760
Speaker 6: little bit different and basically saying once the libor market

156
00:07:12,760 --> 00:07:17,200
Speaker 6: deterioration goes beyond a certain point, it becomes self reinforcing. Essentially,

157
00:07:17,240 --> 00:07:20,160
Speaker 6: why I think happens is business households here about the

158
00:07:20,200 --> 00:07:23,160
Speaker 6: liver market weakening, they pull back on their consumer spending.

159
00:07:23,680 --> 00:07:26,840
Speaker 6: That causes businesses to pull back in terms of investment

160
00:07:26,880 --> 00:07:29,720
Speaker 6: and hiring, and that leads to further weakness and consumption.

161
00:07:29,800 --> 00:07:31,840
Speaker 6: And then for the rises in the unemployer rate, it's

162
00:07:31,840 --> 00:07:35,960
Speaker 6: a pretty amazing statistical regularity that either rises less than

163
00:07:35,960 --> 00:07:38,400
Speaker 6: a half a percent or next stop is a full

164
00:07:38,400 --> 00:07:41,480
Speaker 6: blown recession. There's nothing in between. The smallest increase in

165
00:07:41,480 --> 00:07:46,040
Speaker 6: the unemployer rate trough to peak is either between zero

166
00:07:46,120 --> 00:07:48,480
Speaker 6: point five and one point nine percentage points. There's nothing

167
00:07:48,520 --> 00:07:51,280
Speaker 6: in the middle, which I think is pretty interesting statistically,

168
00:07:51,440 --> 00:07:54,200
Speaker 6: Now he did recognize that as a statistical just a

169
00:07:54,240 --> 00:07:57,400
Speaker 6: statistical result. There's nothing sort of there's no economic law

170
00:07:57,440 --> 00:08:00,400
Speaker 6: behind it. But the track record is thirteen and oh.

171
00:08:00,440 --> 00:08:02,240
Speaker 6: So you know, think about the odds of flipping a

172
00:08:02,240 --> 00:08:04,440
Speaker 6: coin thirteen times and coming up heads there every time

173
00:08:04,720 --> 00:08:06,320
Speaker 6: after a Why you're starting to believe that the next

174
00:08:06,320 --> 00:08:08,480
Speaker 6: flip is going to generate the same result?

175
00:08:08,680 --> 00:08:11,960
Speaker 5: Bill take us back to first principles. Why can't they

176
00:08:12,120 --> 00:08:15,080
Speaker 5: just cut and say one and done and will observe

177
00:08:15,800 --> 00:08:18,000
Speaker 5: versus our addiction to measured?

178
00:08:19,560 --> 00:08:21,760
Speaker 6: Well, I think what will happen is once they start

179
00:08:21,960 --> 00:08:24,440
Speaker 6: start to cut, they'll probably keep going. You know, once

180
00:08:24,440 --> 00:08:26,960
Speaker 6: they start to do the first rate cut, they basically

181
00:08:27,000 --> 00:08:29,680
Speaker 6: decide that mantre Paul's that we've accomplished our mission in

182
00:08:29,760 --> 00:08:33,480
Speaker 6: terms of inflation and unemployment. Policies restrict us, so we

183
00:08:33,520 --> 00:08:36,160
Speaker 6: know now have to go back to neutral. Neutral's not

184
00:08:36,240 --> 00:08:39,200
Speaker 6: twenty five bases points away. So if you have a

185
00:08:39,280 --> 00:08:41,240
Speaker 6: rate cut in September, it's probably gonna be followed by

186
00:08:41,280 --> 00:08:44,640
Speaker 6: raycuts at least one or two more raycuts later this year.

187
00:08:45,120 --> 00:08:48,480
Speaker 1: Well, it seems like this was a setup for Jackson Hall.

188
00:08:48,559 --> 00:08:50,800
Speaker 1: We've been talking about that. It seems like there will

189
00:08:50,840 --> 00:08:54,319
Speaker 1: be some sort of policy regime shift that we will

190
00:08:54,360 --> 00:08:57,120
Speaker 1: observe in August. What do you think it will be.

191
00:08:59,640 --> 00:09:02,280
Speaker 6: I think that Paul really needs to save much more

192
00:09:02,320 --> 00:09:04,280
Speaker 6: than what he said today, frankly, and I think the

193
00:09:04,400 --> 00:09:06,720
Speaker 6: changes in the statement and the press conference the day

194
00:09:07,040 --> 00:09:09,760
Speaker 6: basically tell you that September is going to happen unless

195
00:09:09,760 --> 00:09:14,200
Speaker 6: the economic outlook changes materially. Now that's possible, you could

196
00:09:14,200 --> 00:09:17,360
Speaker 6: get a whole string of bad inflation numbers, or the

197
00:09:17,520 --> 00:09:20,480
Speaker 6: economy could come in hot, but I think, you know,

198
00:09:21,000 --> 00:09:24,080
Speaker 6: in the next six weeks or seven weeks, is the

199
00:09:24,240 --> 00:09:26,600
Speaker 6: outlook going to change materially? I doubt it. So I

200
00:09:26,600 --> 00:09:29,720
Speaker 6: think regardless of what happens in Jackson Hole, I think

201
00:09:29,880 --> 00:09:31,720
Speaker 6: the Fed's going to cut in September. I think, you

202
00:09:31,720 --> 00:09:35,760
Speaker 6: know this, Paul will sort of check in at the

203
00:09:35,840 --> 00:09:39,199
Speaker 6: Jackson Hole and basically, you know, probably confirm that we're

204
00:09:39,240 --> 00:09:42,280
Speaker 6: still on track for this this result for Ray cut

205
00:09:42,360 --> 00:09:44,720
Speaker 6: in September. But I don't I don't think it's you know,

206
00:09:44,880 --> 00:09:46,120
Speaker 6: I don't think he has to use.

207
00:09:46,000 --> 00:09:49,080
Speaker 1: It for that well, although it's not just about September,

208
00:09:49,160 --> 00:09:51,040
Speaker 1: it's not just about whether they're going to move again

209
00:09:51,320 --> 00:09:54,120
Speaker 1: one more time this year. It's about what the destination is,

210
00:09:54,200 --> 00:09:57,240
Speaker 1: it's about the pace, it's about what the goal is.

211
00:09:57,360 --> 00:10:00,880
Speaker 1: In terms of just the view of where the economy is, Bill,

212
00:10:00,920 --> 00:10:02,880
Speaker 1: do you expect there to be any discussion about the

213
00:10:02,960 --> 00:10:05,600
Speaker 1: terminal rate, about what it means to be neutral at

214
00:10:05,640 --> 00:10:08,000
Speaker 1: a time or this is a very different economy than

215
00:10:08,000 --> 00:10:08,760
Speaker 1: pre pandemic.

216
00:10:09,720 --> 00:10:12,400
Speaker 6: Well, I would assume that once you get inflation, you know,

217
00:10:12,960 --> 00:10:15,200
Speaker 6: highly common the inflation is going back to two percent,

218
00:10:15,280 --> 00:10:17,160
Speaker 6: and you think the labor markets and balance, then you

219
00:10:17,200 --> 00:10:19,800
Speaker 6: presume you want to go back to a neutral manitrate policy.

220
00:10:20,040 --> 00:10:23,000
Speaker 6: And the question is what's neutral? And that comes down

221
00:10:23,000 --> 00:10:25,440
Speaker 6: to that whole question of what is the level of

222
00:10:25,480 --> 00:10:29,199
Speaker 6: our star the neutral federal fund rate. I think that

223
00:10:29,280 --> 00:10:32,480
Speaker 6: neutral is clearly lower than where we are today, But

224
00:10:32,640 --> 00:10:35,120
Speaker 6: is it one hundred basis points lower or two hundred

225
00:10:35,160 --> 00:10:37,520
Speaker 6: basis points lower. That remains to be seen. So the

226
00:10:37,559 --> 00:10:39,760
Speaker 6: Feds can be sort of feeling its way now. Obviously,

227
00:10:39,800 --> 00:10:42,800
Speaker 6: if we fall into recession, then the whole story changes

228
00:10:43,160 --> 00:10:45,400
Speaker 6: because in a recession environment, the Fed doesn't want to

229
00:10:45,400 --> 00:10:47,480
Speaker 6: go to a neutral manitrate policy. They want to go

230
00:10:47,480 --> 00:10:50,880
Speaker 6: to a stimulative mantarate policy. So if we actually, if

231
00:10:50,880 --> 00:10:53,200
Speaker 6: it turns out, with the benefit of hindsight, that the

232
00:10:53,200 --> 00:10:55,719
Speaker 6: FED is late and we have a mild recession, then

233
00:10:55,720 --> 00:10:57,720
Speaker 6: the Fed's going to cut rates much more dramatically.

234
00:10:58,160 --> 00:11:01,960
Speaker 5: Bill, I've never said this. I've got Dudley, Krugman and

235
00:11:02,080 --> 00:11:05,320
Speaker 5: Blinder on the same page. Never did I think i'd

236
00:11:05,360 --> 00:11:09,160
Speaker 5: say that the money paragraph from your good friend Alan Blinder,

237
00:11:10,280 --> 00:11:13,720
Speaker 5: any such early cut should be accompanied by a warning

238
00:11:13,800 --> 00:11:16,839
Speaker 5: not to expect a steady stream of rap cuts. He

239
00:11:16,880 --> 00:11:20,480
Speaker 5: alludes to the ECB. Do we need some MECB religion

240
00:11:20,520 --> 00:11:21,520
Speaker 5: at the Eccles building?

241
00:11:23,000 --> 00:11:25,559
Speaker 6: Now? I think that the FED will probably cut more

242
00:11:25,600 --> 00:11:28,200
Speaker 6: than one, because once you start to cut, you're basically saying,

243
00:11:28,240 --> 00:11:32,040
Speaker 6: I think it's time to remove montary restraint. And Monterey

244
00:11:32,080 --> 00:11:34,199
Speaker 6: restraint is not going to be removed with just one

245
00:11:34,280 --> 00:11:35,679
Speaker 6: twenty five base point raycut.

246
00:11:36,480 --> 00:11:38,520
Speaker 2: Bell great to get your thoughts, appreciate it, go down

247
00:11:38,600 --> 00:11:41,160
Speaker 2: be there. The former New York Thanking President Wengan on

248
00:11:41,200 --> 00:11:43,280
Speaker 2: this Federal Reserve decision. As you got a lot of

249
00:11:43,320 --> 00:11:45,120
Speaker 2: people talking over the last week about the need to

250
00:11:45,160 --> 00:11:47,480
Speaker 2: move in July and the mat thing this just passed,

251
00:11:47,520 --> 00:11:49,360
Speaker 2: I want to bring you a headline comes from the

252
00:11:49,400 --> 00:11:52,720
Speaker 2: New York Times and it reads as follows around Supreme

253
00:11:52,800 --> 00:11:57,800
Speaker 2: leader ordering a retaliatory attack on Israel. The New York Times,

254
00:11:57,840 --> 00:12:01,840
Speaker 2: citing three Iranian officials, brief on the order. This is

255
00:12:01,840 --> 00:12:03,839
Speaker 2: what I can tell you about crude. Crud's been rallying

256
00:12:03,840 --> 00:12:05,640
Speaker 2: all day, and the price of crude looks like this

257
00:12:05,679 --> 00:12:09,120
Speaker 2: at a moment, Brent crude by four percentage points TK.

258
00:12:09,160 --> 00:12:11,800
Speaker 2: You would off to say, overtaken by events. The last

259
00:12:11,840 --> 00:12:14,199
Speaker 2: thing that FED needs other next month or so is

260
00:12:14,240 --> 00:12:15,200
Speaker 2: an energy price shock.

261
00:12:15,320 --> 00:12:17,439
Speaker 5: I'm so glad you brought this up. Jan We let

262
00:12:17,480 --> 00:12:19,960
Speaker 5: off the show this morning with Ethan Bronner, our Tel

263
00:12:20,000 --> 00:12:25,400
Speaker 5: Aviv Nears news bureau chief encyclopedic in the region, and

264
00:12:25,400 --> 00:12:28,640
Speaker 5: he says the position here now is unprecedented, and he

265
00:12:28,760 --> 00:12:31,760
Speaker 5: made clear there's going to be immediate news following both

266
00:12:31,840 --> 00:12:34,440
Speaker 5: from the north to Lebanon. In the news that you

267
00:12:34,600 --> 00:12:35,480
Speaker 5: just have from Tate Ryan.

268
00:12:35,720 --> 00:12:37,640
Speaker 2: As we get those updates, we'll bring them to you.

269
00:12:37,679 --> 00:12:39,600
Speaker 2: I just want to reset if you are joining us.

270
00:12:39,600 --> 00:12:41,400
Speaker 2: We've just had a federal reserve decision in the last

271
00:12:41,440 --> 00:12:45,480
Speaker 2: couple of hours. Interest rates unchanged, incremental changes to the statement.

272
00:12:45,760 --> 00:12:47,680
Speaker 2: There was a sense that in September the Federal Reserve

273
00:12:47,760 --> 00:12:49,840
Speaker 2: chair would set us up for a rake cut. In September,

274
00:12:50,040 --> 00:12:52,240
Speaker 2: he took a baby step towards doing so, and the

275
00:12:52,240 --> 00:12:55,600
Speaker 2: market picked up on things accordingly, big rally across equities

276
00:12:55,720 --> 00:12:57,760
Speaker 2: on the NASTAC on the s and P on a rustle,

277
00:12:57,840 --> 00:12:59,800
Speaker 2: it looks like this right now. It fades just to touch,

278
00:12:59,840 --> 00:13:02,080
Speaker 2: but we're still higher by one point four percent on

279
00:13:02,120 --> 00:13:04,640
Speaker 2: the SMP. Bear in mind, the Nasdaq was poised for

280
00:13:04,640 --> 00:13:06,920
Speaker 2: the worst month of the year, and at one point

281
00:13:06,920 --> 00:13:08,440
Speaker 2: in the last couple of hours was on course for

282
00:13:08,480 --> 00:13:11,040
Speaker 2: its best day of twenty twenty four. That fades, We're

283
00:13:11,040 --> 00:13:13,480
Speaker 2: back down to about two point seven percent higher on

284
00:13:13,520 --> 00:13:15,880
Speaker 2: the session on the Nasdaq. We reference this stat a

285
00:13:15,920 --> 00:13:18,760
Speaker 2: little bit earlier on today a few times. We are

286
00:13:18,800 --> 00:13:23,079
Speaker 2: now on course for the seventh consecutive Fed decision day

287
00:13:23,160 --> 00:13:25,520
Speaker 2: rally on a two year bond at least, so that

288
00:13:25,600 --> 00:13:27,640
Speaker 2: yield is lower by six basis points.

289
00:13:27,720 --> 00:13:30,280
Speaker 1: How much is this just that Jerome Powell tends to

290
00:13:30,480 --> 00:13:33,200
Speaker 1: skew dubvish And how much is this that the market

291
00:13:33,240 --> 00:13:38,000
Speaker 1: still has a probability or a possibility baked into what

292
00:13:38,040 --> 00:13:41,120
Speaker 1: the yield is that the Fed could maybe surprised in

293
00:13:41,160 --> 00:13:43,920
Speaker 1: a hawkish manner. Either way, this is a market that

294
00:13:44,120 --> 00:13:46,720
Speaker 1: likes to hear FED shero Powell to speak, and today

295
00:13:46,960 --> 00:13:47,560
Speaker 1: was no different.

296
00:13:47,679 --> 00:13:49,720
Speaker 2: Mike McKee was in the room with a Federal Reserve

297
00:13:49,800 --> 00:13:50,959
Speaker 2: chair down in Washington, d C.

298
00:13:51,080 --> 00:13:52,520
Speaker 4: He joined us from the nation's capital.

299
00:13:52,559 --> 00:13:54,640
Speaker 2: Now, might you've just got outside walk us through your

300
00:13:54,640 --> 00:13:57,280
Speaker 2: biggest takeaway from that news conference this afternoon.

301
00:13:58,040 --> 00:14:00,280
Speaker 7: Well, I think what you walk away with is what

302
00:14:00,320 --> 00:14:03,160
Speaker 7: Bill Dudley was talking about. If the economy doesn't do

303
00:14:03,240 --> 00:14:07,640
Speaker 7: something weird, change positions, change directions, then the Fed is

304
00:14:07,679 --> 00:14:09,199
Speaker 7: going to be cutting in September.

305
00:14:09,400 --> 00:14:10,560
Speaker 4: But there are a lot of.

306
00:14:10,600 --> 00:14:14,400
Speaker 7: Potential twists and turns between now and then. Friday is

307
00:14:14,400 --> 00:14:16,680
Speaker 7: e at risk with the jobs report, and of course

308
00:14:16,679 --> 00:14:20,120
Speaker 7: you just mentioned the situation with Iran. I don't think

309
00:14:20,120 --> 00:14:24,320
Speaker 7: the Fed was taking those things into consideration today as

310
00:14:24,440 --> 00:14:28,680
Speaker 7: reasons not to move today, but they do have to

311
00:14:28,760 --> 00:14:29,640
Speaker 7: worry about.

312
00:14:29,360 --> 00:14:31,440
Speaker 4: Them and what might happen.

313
00:14:31,560 --> 00:14:36,040
Speaker 7: So they will at this point be on a cutting

314
00:14:36,120 --> 00:14:39,880
Speaker 7: course unless something significantly changes. And I think that was

315
00:14:39,920 --> 00:14:42,320
Speaker 7: the message that Paul wanted to deliver, and I think

316
00:14:42,320 --> 00:14:44,160
Speaker 7: Bill put it well when he talked about how the

317
00:14:44,240 --> 00:14:47,760
Speaker 7: statement was skewed to the doves a little bit, and

318
00:14:48,280 --> 00:14:52,080
Speaker 7: the news conference maybe to the hawks, and both sides

319
00:14:52,120 --> 00:14:53,040
Speaker 7: get something out of it.

320
00:14:53,280 --> 00:14:55,400
Speaker 5: Mike, you've been doing this for a few years. Back

321
00:14:55,440 --> 00:14:58,840
Speaker 5: to mcchestney Martin, we almost printed a four h six

322
00:14:58,960 --> 00:15:02,520
Speaker 5: ten year moment. Go Can the bond market tell the

323
00:15:02,560 --> 00:15:04,080
Speaker 5: Fed what to do?

324
00:15:06,240 --> 00:15:08,960
Speaker 7: Probably not. And one of the things that you have

325
00:15:09,000 --> 00:15:11,560
Speaker 7: to keep in mind is that we have all this

326
00:15:11,760 --> 00:15:15,360
Speaker 7: international news going on, and the US bond market is

327
00:15:16,000 --> 00:15:18,920
Speaker 7: the haven market. So a certain amount of what's going

328
00:15:18,960 --> 00:15:23,240
Speaker 7: on today is probably in reaction to Israel and Iran,

329
00:15:23,800 --> 00:15:26,760
Speaker 7: and a certain amount of it is the politics going

330
00:15:26,800 --> 00:15:29,560
Speaker 7: on in this country. And then on top of that,

331
00:15:29,840 --> 00:15:32,800
Speaker 7: what the FED is considering and what the economic data

332
00:15:32,840 --> 00:15:35,960
Speaker 7: are showing. But I suspect today's less about the Fed

333
00:15:36,040 --> 00:15:38,680
Speaker 7: and the data than it is about other things. Because

334
00:15:38,680 --> 00:15:41,680
Speaker 7: the market had pretty much priced for a September breake cut,

335
00:15:41,680 --> 00:15:44,200
Speaker 7: they didn't get any surprises out of the Fed today.

336
00:15:44,720 --> 00:15:47,200
Speaker 1: Mike, you're referring, of course, to the news that John

337
00:15:47,440 --> 00:15:51,560
Speaker 1: broke about Uranian Supreme leader ordering an attack on Israel

338
00:15:52,040 --> 00:15:55,760
Speaker 1: for the two assassinations that Israel carried out. Right now,

339
00:15:55,800 --> 00:15:58,800
Speaker 1: we're seeing crude markedly higher, particularly Brent crud Mike. I

340
00:15:58,840 --> 00:16:01,720
Speaker 1: wonder how this relates to Fedchair Powell has been talking

341
00:16:01,720 --> 00:16:05,320
Speaker 1: about that this is actually better inflation data today than

342
00:16:05,360 --> 00:16:08,040
Speaker 1: it was, say late last year or earlier this year,

343
00:16:08,080 --> 00:16:10,600
Speaker 1: simply because it is not being driven by goods, It

344
00:16:10,640 --> 00:16:13,880
Speaker 1: is being driven by the employment market, is being driven

345
00:16:13,960 --> 00:16:17,680
Speaker 1: by services. How much do you believe based in those comments,

346
00:16:17,680 --> 00:16:19,840
Speaker 1: this is a FED that is willing to look through

347
00:16:20,320 --> 00:16:23,520
Speaker 1: good side inflation and focus much more on something else.

348
00:16:24,760 --> 00:16:27,600
Speaker 7: Well, I think they are, especially if oil prices go

349
00:16:27,720 --> 00:16:30,560
Speaker 7: up only temporarily. The problem is if oil prices go

350
00:16:30,640 --> 00:16:33,600
Speaker 7: up for quite some time, then that feeds through into

351
00:16:33,640 --> 00:16:37,040
Speaker 7: the real economy, particularly on the services side. See surch

352
00:16:37,080 --> 00:16:40,840
Speaker 7: charges by delivery companies. Airline affairs might go up, that

353
00:16:40,880 --> 00:16:42,840
Speaker 7: sort of thing. So they're going to have to keep.

354
00:16:42,680 --> 00:16:43,360
Speaker 4: An eye on that.

355
00:16:43,400 --> 00:16:46,280
Speaker 7: But their general instinct would be to look past any

356
00:16:46,400 --> 00:16:50,400
Speaker 7: kind of energy price change that comes about that they

357
00:16:50,440 --> 00:16:53,560
Speaker 7: think might be temporary. And at this point we have

358
00:16:53,640 --> 00:16:57,880
Speaker 7: been waiting for a major shift in energy prices since

359
00:16:57,920 --> 00:17:00,920
Speaker 7: October seventh, when the first attack on Israel game.

360
00:17:01,320 --> 00:17:02,880
Speaker 4: So we haven't seen it yet.

361
00:17:03,200 --> 00:17:05,879
Speaker 7: Let's see whether this holds or not, and then the

362
00:17:05,920 --> 00:17:07,520
Speaker 7: FED would have to take it into account.

363
00:17:07,800 --> 00:17:09,080
Speaker 4: If it's still going up.

364
00:17:09,240 --> 00:17:11,600
Speaker 2: Five percent rally in crew today might make great work.

365
00:17:11,640 --> 00:17:13,760
Speaker 2: As always, sir, appreciate it. We'll catch up with you

366
00:17:13,800 --> 00:17:16,440
Speaker 2: a little bit later. This week's not over. Still got

367
00:17:16,440 --> 00:17:18,920
Speaker 2: some work to do. The FED decision behind us. Tomorrow

368
00:17:19,080 --> 00:17:22,000
Speaker 2: we'll get jobless claims. On Friday, we'll get a payrolls

369
00:17:22,040 --> 00:17:24,080
Speaker 2: report and we'll be catching up with Jeff Rosenberg of

370
00:17:24,160 --> 00:17:26,359
Speaker 2: black Rock. We can do that now, Jeff at eight

371
00:17:26,520 --> 00:17:30,639
Speaker 2: thirty one on Friday, Will this decision today to do nothing?

372
00:17:30,840 --> 00:17:32,040
Speaker 4: Will that look like the right one?

373
00:17:34,280 --> 00:17:36,240
Speaker 8: Well, you know, it might look like the right one.

374
00:17:36,240 --> 00:17:38,159
Speaker 9: But I think the point you're also getting to is

375
00:17:38,200 --> 00:17:40,720
Speaker 9: that Friday, and we'll see on Friday as well, is

376
00:17:40,720 --> 00:17:41,080
Speaker 9: going to be.

377
00:17:41,119 --> 00:17:42,160
Speaker 8: Much more consequential.

378
00:17:42,200 --> 00:17:45,159
Speaker 9: But I think the important point about how it's going

379
00:17:45,240 --> 00:17:48,160
Speaker 9: to be more consequential is what we've heard from everybody

380
00:17:48,200 --> 00:17:50,919
Speaker 9: so far. We've heard from the chairman and in the

381
00:17:51,000 --> 00:17:54,440
Speaker 9: statement is this is very much setting the table for September,

382
00:17:55,080 --> 00:17:58,399
Speaker 9: and the bond market had already priced that outcome. And

383
00:17:58,480 --> 00:18:01,639
Speaker 9: so what you look at into and the payroll is

384
00:18:01,920 --> 00:18:04,919
Speaker 9: you're setting up the bond market, perhaps broader markets for

385
00:18:04,960 --> 00:18:10,160
Speaker 9: a very asymmetric outcome. If the data is much much stronger,

386
00:18:10,840 --> 00:18:13,760
Speaker 9: then you're going to have some disappointment. If the data

387
00:18:13,800 --> 00:18:18,720
Speaker 9: comes in along lines of what Chairman Powell was talking

388
00:18:18,720 --> 00:18:22,680
Speaker 9: about in terms of gradual normalization, or even a little

389
00:18:22,680 --> 00:18:25,760
Speaker 9: bit weaker than that, the market will continue to price

390
00:18:25,800 --> 00:18:29,120
Speaker 9: in this path of a cut in September, a cut

391
00:18:29,119 --> 00:18:32,119
Speaker 9: in December, and even more into twenty twenty five. So

392
00:18:32,160 --> 00:18:34,720
Speaker 9: I think Friday, the risk is really on the upside

393
00:18:34,760 --> 00:18:38,880
Speaker 9: that you get a surprisingly strong payroll report, and that

394
00:18:39,160 --> 00:18:43,800
Speaker 9: has to call into question whether or not policy is

395
00:18:43,920 --> 00:18:47,040
Speaker 9: really as tight as it is, and that's really the issue.

396
00:18:47,080 --> 00:18:50,399
Speaker 9: Everyone's kind of saying, hey, this is right. The Fed's

397
00:18:50,440 --> 00:18:53,359
Speaker 9: got it right. The Fed saying we've got the soft landing.

398
00:18:53,400 --> 00:18:55,960
Speaker 9: We want to secure the benefits of soft landing. But

399
00:18:56,000 --> 00:18:59,679
Speaker 9: he kept report repeating PDFP at two point six percent.

400
00:19:00,000 --> 00:19:01,800
Speaker 9: You look at the GDP number that just came out,

401
00:19:01,840 --> 00:19:05,080
Speaker 9: You look at Atlanta Fed GDP now forecast for third quarter.

402
00:19:05,359 --> 00:19:10,080
Speaker 9: We are well above in growth terms anything associated with

403
00:19:10,160 --> 00:19:13,560
Speaker 9: long term sustainable growth. And so yes, we've seen some

404
00:19:13,720 --> 00:19:18,000
Speaker 9: signs of restrictiveness, but how much of that restricted because

405
00:19:18,160 --> 00:19:20,119
Speaker 9: that's where the asymmeturity.

406
00:19:19,359 --> 00:19:21,840
Speaker 2: Against the grain totally against the grain. And I think

407
00:19:21,880 --> 00:19:23,760
Speaker 2: you know you well, most of the people coming on

408
00:19:23,800 --> 00:19:26,359
Speaker 2: this show right now, if they're going against the Federal Reserve,

409
00:19:27,040 --> 00:19:29,160
Speaker 2: they're saying it's because they think this FED is too tight,

410
00:19:29,840 --> 00:19:32,560
Speaker 2: not restrictive enough. You're making the point, hey, Jeff, that

411
00:19:32,600 --> 00:19:34,840
Speaker 2: might be they're not as tight as they think they are.

412
00:19:35,040 --> 00:19:36,879
Speaker 2: Now that really goes against the grain, Jeff. Is that

413
00:19:36,880 --> 00:19:37,720
Speaker 2: the point you're trying to make?

414
00:19:39,080 --> 00:19:41,720
Speaker 9: That is the point exactly that I just made. No

415
00:19:41,800 --> 00:19:44,600
Speaker 9: one's really talking about it because the Fed's not talking

416
00:19:44,600 --> 00:19:47,680
Speaker 9: about it, But the data is what your question was

417
00:19:47,720 --> 00:19:50,360
Speaker 9: about what happens on Friday and how does that make

418
00:19:50,600 --> 00:19:51,639
Speaker 9: this moment?

419
00:19:51,840 --> 00:19:52,080
Speaker 8: Look?

420
00:19:52,160 --> 00:19:57,120
Speaker 9: Well, if the data comes in continually stronger, then we're going.

421
00:19:57,119 --> 00:19:58,640
Speaker 8: To have to start to talk about that.

422
00:19:58,720 --> 00:19:58,920
Speaker 6: Now.

423
00:19:59,080 --> 00:20:01,639
Speaker 9: I'm not saying that that's where we're going. Where we

424
00:20:01,840 --> 00:20:04,280
Speaker 9: have been, and what we tend to do is to

425
00:20:04,400 --> 00:20:08,400
Speaker 9: extrapolate where we just have been. So we're extrapolating out

426
00:20:08,480 --> 00:20:12,480
Speaker 9: the benefits of the gradual slow down in labor markets.

427
00:20:12,520 --> 00:20:15,520
Speaker 9: The normalization ecis another great data point.

428
00:20:15,680 --> 00:20:17,879
Speaker 8: There's nothing in the crystal ball that says that that

429
00:20:17,960 --> 00:20:18,560
Speaker 8: won't happen.

430
00:20:18,600 --> 00:20:21,359
Speaker 9: But your question was, what if it does then you

431
00:20:21,480 --> 00:20:24,040
Speaker 9: start to think about these things. And my point is

432
00:20:24,280 --> 00:20:27,359
Speaker 9: everyone is so one sided on this point that the

433
00:20:27,400 --> 00:20:30,720
Speaker 9: asymmetry to the market reaction is much greater to the

434
00:20:30,840 --> 00:20:34,159
Speaker 9: upside surprise and strength on Friday than it is to

435
00:20:34,200 --> 00:20:36,880
Speaker 9: coming in in line or even being weaker.

436
00:20:37,040 --> 00:20:38,840
Speaker 1: So let's put a call around that, Jeff, are you

437
00:20:38,840 --> 00:20:41,040
Speaker 1: basically selling to your notes right now, trying to lock

438
00:20:41,080 --> 00:20:42,680
Speaker 1: in because you think that this could be the highs

439
00:20:42,720 --> 00:20:44,919
Speaker 1: given that they are not recognizing the risk of an

440
00:20:45,000 --> 00:20:47,400
Speaker 1: upside surprise to the job's report.

441
00:20:48,600 --> 00:20:50,600
Speaker 9: No, I wouldn't say I'd go that far, But what

442
00:20:50,640 --> 00:20:53,200
Speaker 9: I would say is it tempers some of the enthusiasm

443
00:20:53,320 --> 00:20:57,240
Speaker 9: for adding to two years at this point when it's

444
00:20:57,400 --> 00:21:00,399
Speaker 9: all in the price and even more so, releive to

445
00:21:00,440 --> 00:21:02,400
Speaker 9: what the Fed is saying that you're going to get.

446
00:21:02,440 --> 00:21:06,159
Speaker 9: So the bar is a little bit higher to what

447
00:21:06,200 --> 00:21:09,240
Speaker 9: do I do with this information in my portfolio when

448
00:21:09,280 --> 00:21:11,440
Speaker 9: you look at well, you know, the bond market's really

449
00:21:11,520 --> 00:21:13,879
Speaker 9: quite a priced a lot of that in so it

450
00:21:14,000 --> 00:21:16,720
Speaker 9: makes it a little bit more tricky than just saying, Oh,

451
00:21:16,760 --> 00:21:19,440
Speaker 9: the Fed's going to cut rates and I should back

452
00:21:19,520 --> 00:21:21,880
Speaker 9: up the truck and buy a whole bunch of duration well,

453
00:21:22,200 --> 00:21:24,520
Speaker 9: a lot of that trade has happened in the last month.

454
00:21:24,680 --> 00:21:28,560
Speaker 9: So if you're just talking about maintenance cuts and the

455
00:21:28,640 --> 00:21:31,439
Speaker 9: degree of maintenance cuts that are required is what you

456
00:21:31,480 --> 00:21:33,520
Speaker 9: were talking about with Bill Dudley a minute ago. We

457
00:21:33,600 --> 00:21:36,240
Speaker 9: don't really know where that neutral is. So how do

458
00:21:36,320 --> 00:21:38,439
Speaker 9: we know where neutral is? You know it when you

459
00:21:38,520 --> 00:21:40,600
Speaker 9: see it, meaning you know it when you see it

460
00:21:40,640 --> 00:21:45,120
Speaker 9: in the data. So if the economy doesn't slow and

461
00:21:45,200 --> 00:21:48,760
Speaker 9: that unemployment rate doesn't continue to rise, and it says

462
00:21:49,040 --> 00:21:52,040
Speaker 9: you're not so restrictive as you think you are, and

463
00:21:52,359 --> 00:21:54,719
Speaker 9: I think, you know, we just kind of have a

464
00:21:54,840 --> 00:21:57,560
Speaker 9: pile up on one side of the debate here when

465
00:21:57,560 --> 00:22:03,320
Speaker 9: the data is still saying two point six percent PDFP.

466
00:22:03,600 --> 00:22:07,400
Speaker 8: He said it twice during the press conference.

467
00:22:07,600 --> 00:22:09,920
Speaker 9: He also said the other thing that has been supportive

468
00:22:09,960 --> 00:22:13,600
Speaker 9: of restrictedness interest rates, sensitive sectors and the slowdown in

469
00:22:13,640 --> 00:22:16,679
Speaker 9: the labor market. But it's a more balanced view around

470
00:22:16,680 --> 00:22:19,320
Speaker 9: this debate around how restrictive we are than where the

471
00:22:19,320 --> 00:22:21,439
Speaker 9: market is kind of lining up, and that sets up

472
00:22:21,440 --> 00:22:22,800
Speaker 9: in asymmetry to the outcome.

473
00:22:22,920 --> 00:22:25,399
Speaker 5: And Jeffrey a great student of history, and if we

474
00:22:25,480 --> 00:22:28,320
Speaker 5: have the headlines that John Farrell was talking about, there

475
00:22:28,359 --> 00:22:32,359
Speaker 5: of Tehran and Israel, and for that matter, up to

476
00:22:32,440 --> 00:22:35,840
Speaker 5: Lebanon as well. How far out the full faith and

477
00:22:35,960 --> 00:22:41,440
Speaker 5: credit curve does politics does war do our fears play in?

478
00:22:41,640 --> 00:22:43,800
Speaker 5: Is it short term, is it out to the two

479
00:22:43,880 --> 00:22:46,560
Speaker 5: year pinch, or is it out even further to the

480
00:22:46,600 --> 00:22:47,359
Speaker 5: ten year note.

481
00:22:49,080 --> 00:22:51,600
Speaker 9: So I'm going to frame that in that question or

482
00:22:51,960 --> 00:22:54,880
Speaker 9: my answer to that question, in terms of how does

483
00:22:55,040 --> 00:22:59,760
Speaker 9: the kind of flight quality response in the bond market

484
00:22:59,760 --> 00:23:02,560
Speaker 9: place out in this environment. I've said this on the

485
00:23:02,600 --> 00:23:04,720
Speaker 9: show maybe a couple of times. We've written about it,

486
00:23:05,000 --> 00:23:08,880
Speaker 9: that flight to quality during the q zero interest rate

487
00:23:08,920 --> 00:23:10,440
Speaker 9: policy environment was.

488
00:23:10,400 --> 00:23:11,359
Speaker 8: A curve flattener.

489
00:23:11,560 --> 00:23:13,920
Speaker 9: If you're very close to zero rates in the front

490
00:23:14,040 --> 00:23:17,280
Speaker 9: end and you're looking for portfolio protection, you buy it

491
00:23:17,320 --> 00:23:20,159
Speaker 9: in the long end. Today we're in a very different environment.

492
00:23:20,240 --> 00:23:21,960
Speaker 9: Five and a quarter to five and a half. There's

493
00:23:22,040 --> 00:23:24,800
Speaker 9: plenty of room for the front end to go down,

494
00:23:24,880 --> 00:23:28,240
Speaker 9: and so it's more of that pre GFC kind of

495
00:23:28,320 --> 00:23:32,320
Speaker 9: bond market reaction, where flight to quality is a steepener

496
00:23:32,400 --> 00:23:33,880
Speaker 9: and it's in the front end of the curve.

497
00:23:33,960 --> 00:23:36,120
Speaker 8: So I think you see the most powerful reaction.

498
00:23:36,560 --> 00:23:39,879
Speaker 9: It's hard to disentangle the high frequency between the news

499
00:23:39,880 --> 00:23:41,080
Speaker 9: that Jonathan Broke and.

500
00:23:42,840 --> 00:23:44,720
Speaker 8: The result of the press conference.

501
00:23:44,960 --> 00:23:47,199
Speaker 9: But you do see a little bit of a steepener

502
00:23:47,280 --> 00:23:50,480
Speaker 9: move into the market. Again, hard to disentangle the two,

503
00:23:50,840 --> 00:23:52,800
Speaker 9: but I think when you take a step back, flight

504
00:23:52,840 --> 00:23:56,080
Speaker 9: to quality now is the steepener trade, and your better

505
00:23:56,200 --> 00:23:58,680
Speaker 9: yield response is going to be more in the front

506
00:23:58,760 --> 00:23:59,960
Speaker 9: end in this kind of environment.

507
00:24:00,080 --> 00:24:03,080
Speaker 1: What's interesting to me today, Jeff, is what's not rallying

508
00:24:03,119 --> 00:24:05,399
Speaker 1: on the heels of some of those headlines, especially in

509
00:24:05,480 --> 00:24:08,240
Speaker 1: light of the fed's dubbish tilt. Yes, but they did

510
00:24:08,240 --> 00:24:10,840
Speaker 1: not cut rates, is that the dollar is not catch

511
00:24:10,880 --> 00:24:12,919
Speaker 1: it a bit. It's weakening pretty dramatically. You're seeing the

512
00:24:12,920 --> 00:24:15,120
Speaker 1: Bank of Japan very happy today. They're getting what they

513
00:24:15,119 --> 00:24:18,560
Speaker 1: wanted in terms of a little bit more yen strength.

514
00:24:18,600 --> 00:24:21,439
Speaker 1: How much is this sort of the new narrative that

515
00:24:21,480 --> 00:24:23,679
Speaker 1: in a flight to safety type of moment, if the

516
00:24:23,720 --> 00:24:26,720
Speaker 1: FED is going to cut rates and not recognize that

517
00:24:26,880 --> 00:24:30,560
Speaker 1: upside risk, you will see persistent dollar weakness heading into

518
00:24:30,560 --> 00:24:31,000
Speaker 1: next year.

519
00:24:32,520 --> 00:24:34,840
Speaker 9: It's a tricky one, Lisa, because you know, on the

520
00:24:34,840 --> 00:24:38,840
Speaker 9: one hand, you've got kind of interest rate differentials driving

521
00:24:38,880 --> 00:24:42,680
Speaker 9: some of those dollar moves. Clearly with the yen a

522
00:24:42,760 --> 00:24:46,000
Speaker 9: balanced against the other side of flight to quality, which

523
00:24:46,000 --> 00:24:49,640
Speaker 9: is which is the pure risk off trade, is usually

524
00:24:49,680 --> 00:24:55,639
Speaker 9: dollar strength. You go for the strongest institutional protection in

525
00:24:56,160 --> 00:24:59,280
Speaker 9: terms of wealth, and so I think I think initially

526
00:24:59,359 --> 00:25:02,080
Speaker 9: the move is much more about interest rate differentials, and

527
00:25:02,080 --> 00:25:03,760
Speaker 9: that's why you're not seeing so much of the move

528
00:25:03,800 --> 00:25:06,359
Speaker 9: on the dollar. I think it's too soon to say

529
00:25:06,440 --> 00:25:08,159
Speaker 9: whether or not you're going to see a bid to

530
00:25:08,240 --> 00:25:10,200
Speaker 9: the dollar from political risk.

531
00:25:10,840 --> 00:25:12,080
Speaker 8: But I think if it was a.

532
00:25:12,640 --> 00:25:17,040
Speaker 9: Larger issue that spreads, you're going to think more Traditionally

533
00:25:17,080 --> 00:25:18,200
Speaker 9: that's going to be dollar strength.

534
00:25:18,280 --> 00:25:20,919
Speaker 5: You got to jump down and gold up forty one dollars.

535
00:25:20,520 --> 00:25:22,199
Speaker 2: Got a big running in the bond market too, and

536
00:25:22,280 --> 00:25:24,520
Speaker 2: equities as well. Jeff, just find a question before I go.

537
00:25:24,600 --> 00:25:27,119
Speaker 2: There's people watching listening to this program right now. They

538
00:25:27,200 --> 00:25:28,800
Speaker 2: just want to know, can I buy the S and

539
00:25:28,840 --> 00:25:31,439
Speaker 2: P five hundred and take a vacation? Is there anything

540
00:25:31,480 --> 00:25:33,359
Speaker 2: to worry about between now and September.

541
00:25:35,760 --> 00:25:38,280
Speaker 8: Well, you know, you never want to say take a vacation.

542
00:25:38,840 --> 00:25:41,919
Speaker 9: You know, buying equities you've got some risk, but you

543
00:25:42,000 --> 00:25:44,959
Speaker 9: take the totality of what the chairman went over, and

544
00:25:45,000 --> 00:25:46,960
Speaker 9: this is a lot of good news. I mean, this

545
00:25:47,160 --> 00:25:51,000
Speaker 9: is a chairman, basically saying without saying it, we've achieved

546
00:25:51,000 --> 00:25:56,080
Speaker 9: the soft landing. That's a great outcome for the equity market,

547
00:25:56,200 --> 00:25:57,960
Speaker 9: it's a great outcome for the economy.

548
00:25:58,000 --> 00:25:59,600
Speaker 8: It's a great outcome.

549
00:25:59,800 --> 00:26:02,800
Speaker 9: More more broadly, So I think that's the takeaway and

550
00:26:03,000 --> 00:26:05,679
Speaker 9: generally that's going to be pretty supportive. I think the

551
00:26:05,720 --> 00:26:08,399
Speaker 9: other thing, just to mention, obviously, you know you're not

552
00:26:08,440 --> 00:26:09,960
Speaker 9: really buying the S and P five hundred.

553
00:26:10,000 --> 00:26:11,040
Speaker 8: It's not the economy.

554
00:26:11,359 --> 00:26:13,600
Speaker 9: It's a collection of stocks that has a very high

555
00:26:13,680 --> 00:26:17,320
Speaker 9: weight to a secular technology theme. And that secular technology

556
00:26:17,359 --> 00:26:21,240
Speaker 9: theme is playing out again today following Microsoft's earnings and

557
00:26:21,240 --> 00:26:23,760
Speaker 9: you're seeing a bid back to Semis. So you've got

558
00:26:23,800 --> 00:26:27,639
Speaker 9: like the micro story there a lot as well as

559
00:26:27,920 --> 00:26:30,320
Speaker 9: the policy story, and we've got to keep that in

560
00:26:30,359 --> 00:26:32,439
Speaker 9: mind when we're looking at this high frequency data, and

561
00:26:32,440 --> 00:26:34,199
Speaker 9: if you're buying the S and P five hundred with

562
00:26:34,280 --> 00:26:38,440
Speaker 9: a very high historical share to tech, it's really also

563
00:26:38,520 --> 00:26:40,520
Speaker 9: buying into that tech story as much as it is

564
00:26:40,800 --> 00:26:42,000
Speaker 9: about the macro economy.

565
00:26:42,080 --> 00:26:43,080
Speaker 4: Just trying to take a vacation.

566
00:26:43,320 --> 00:26:46,199
Speaker 2: Jeff, appreciate it, Jeff Rosenberg, the frank Row Jeff, thank you,

567
00:26:46,280 --> 00:26:49,320
Speaker 2: deeply thoughtful stuff go into payrolls on Friday. We should

568
00:26:49,320 --> 00:26:52,200
Speaker 2: share with you the numbers that we're looking for on Friday.

569
00:26:52,280 --> 00:26:55,000
Speaker 2: Just another peak snap peak of the payrolls survey here

570
00:26:55,040 --> 00:26:58,600
Speaker 2: at Bloomberg. The meeting estimate, it's one seventy five on Friday,

571
00:26:58,640 --> 00:27:02,479
Speaker 2: the previous number two of six. Unemployment coming into focus

572
00:27:02,560 --> 00:27:04,200
Speaker 2: much more for many of you, I know. So here's

573
00:27:04,200 --> 00:27:06,840
Speaker 2: the estimate for unemployment four point one percent, in line

574
00:27:06,840 --> 00:27:09,639
Speaker 2: with the previous number previous month of four point one percent.

575
00:27:09,680 --> 00:27:09,960
Speaker 4: Lisa.

576
00:27:10,080 --> 00:27:13,040
Speaker 1: And the reason why it matters that unemployment read possibly

577
00:27:13,040 --> 00:27:14,760
Speaker 1: more than anything else, is because of a guest to

578
00:27:14,760 --> 00:27:15,600
Speaker 1: four point two percent.

579
00:27:15,640 --> 00:27:16,520
Speaker 4: It triggers a S rule.

580
00:27:16,560 --> 00:27:20,160
Speaker 1: Bill Dudley talking about why that's important at that point,

581
00:27:20,480 --> 00:27:24,200
Speaker 1: Historically it becomes a self reinforcing mechanism of weakness.

582
00:27:24,320 --> 00:27:26,720
Speaker 5: The difference is you and I are taking vacation like

583
00:27:26,800 --> 00:27:30,720
Speaker 5: eighteen hours. Pharaoh's taken eighteen days. That's the difference here.

584
00:27:30,800 --> 00:27:32,919
Speaker 1: Actually, I'm missing Fridays. I'm going to be on vacation.

585
00:27:33,119 --> 00:27:37,119
Speaker 1: Thank you you're missing it's on American It had to

586
00:27:37,119 --> 00:27:38,040
Speaker 1: do a kid's schedule.

587
00:27:38,440 --> 00:27:40,200
Speaker 4: That's a manager here.

588
00:27:39,880 --> 00:27:44,040
Speaker 2: As a manager, here are I track everyone's vacation. You

589
00:27:44,440 --> 00:27:47,720
Speaker 2: absolutely correct, you've both taken much more than I have. Okay,

590
00:27:48,440 --> 00:27:51,080
Speaker 2: just for the bar chart of it I do at home.

591
00:27:51,119 --> 00:27:53,439
Speaker 2: It's a spreadsheet I let up with the Boomberg terminal

592
00:27:53,480 --> 00:27:55,280
Speaker 2: and a monochy vacation at the same time.

593
00:27:55,640 --> 00:27:56,520
Speaker 1: That's productivity.

594
00:27:56,560 --> 00:27:58,280
Speaker 4: Miss this, haven't we appreciate?

595
00:27:58,280 --> 00:28:01,000
Speaker 2: It's going to see its TK Please, thank you, sir, Lisa,

596
00:28:01,040 --> 00:28:03,000
Speaker 2: thank you, thank you. You're going to bless us with

597
00:28:03,040 --> 00:28:05,240
Speaker 2: some of your criticism of the Federal Reserve tomorrow.

598
00:28:10,640 --> 00:28:12,000
Speaker 4: That's the line of the press conference.

599
00:28:12,040 --> 00:28:12,560
Speaker 8: That really is

600
00:28:15,640 --> 00:28:17,919
Speaker 6: M m hm