WEBVTT - Bloomberg Surveillance TV: August 3rd, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.400 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amerie Hordert. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.760 Terminal and the Bloomberg Business App. Jeremy Stretchers CIBC writing. 0:00:37.840 --> 0:00:41.080 Compared to the April May interventions, the latest round arguably 0:00:41.080 --> 0:00:43.680 carries more weight because of the coordinated moves by the 0:00:43.760 --> 0:00:46.519 US Treasury. Jeremy joins us now for more, Jeremy, there 0:00:46.520 --> 0:00:49.959 are some underlying problems in Japan. There is a term 0:00:50.000 --> 0:00:51.800 of trade shark. And welcome to the program, buddy. It's 0:00:51.800 --> 0:00:52.519 always good to see you. 0:00:52.600 --> 0:00:53.120 Good morning. 0:00:53.159 --> 0:00:55.320 You're facing a term to trade shark that oil is 0:00:55.440 --> 0:00:59.440 attributed to. You've got deficit issues as well, a massive 0:00:59.520 --> 0:01:02.120 rate different and saws with the US. Why does this 0:01:02.160 --> 0:01:05.039 intervention help them fight those three? 0:01:06.080 --> 0:01:09.600 Well, indeed, you are talking about, in effect a containment policy, 0:01:09.640 --> 0:01:12.280 because unless the oil price is going to come down materially, 0:01:12.360 --> 0:01:14.560 or unless the interest rates spread between the US and 0:01:14.640 --> 0:01:18.119 Japan closes exponentially, and that would imply that the boj 0:01:18.200 --> 0:01:22.160 would have to bring forward, not only bring forward that policy, 0:01:22.160 --> 0:01:24.600 tiling would be more aggressive, and perhaps the market reprice 0:01:25.040 --> 0:01:28.360 the FED expectations. It is seemingly more of a containment issue. 0:01:28.440 --> 0:01:30.399 But I've just been listening with great interest to your 0:01:30.400 --> 0:01:35.360 discussion with Lisa regarding the holdings of treasuries by Japanese investors, 0:01:35.360 --> 0:01:37.679 and I think that is particularly notable. I think that 0:01:37.760 --> 0:01:39.440 twist steepening that we did see in terms of the 0:01:39.520 --> 0:01:42.280 US curve after last Wednesday's FED decision, I think was 0:01:42.319 --> 0:01:45.280 also notable. And I think if we go back to 0:01:45.319 --> 0:01:48.560 Liberation Day and the post Liberation Day period, it was 0:01:48.560 --> 0:01:51.920 the discipline of the bond market that really exercised control 0:01:51.920 --> 0:01:54.080 on the politician. So I think it is that sort 0:01:54.080 --> 0:01:56.440 of bond market dynamic that I think is proven to 0:01:56.480 --> 0:01:59.960 be contingent here in terms of this broad and narrow 0:02:00.240 --> 0:02:02.280 regarding the Dollian exchange. 0:02:02.320 --> 0:02:04.360 Right, Jeremy, just to take that a step further, how 0:02:04.440 --> 0:02:07.200 much is the timing kind of predicated on the move 0:02:07.280 --> 0:02:10.000 that we saw following the Wednesday FED press conference. 0:02:10.800 --> 0:02:14.680 Well, certainly, I think the two are not inconsistent in 0:02:14.760 --> 0:02:17.480 terms of the timing dynamics. So we have seen obviously 0:02:17.520 --> 0:02:20.560 a consistent grind higher or had seen a consistent grind 0:02:20.600 --> 0:02:22.320 higher and dolly en through the month of July. 0:02:22.800 --> 0:02:24.440 But clearly that's risks. 0:02:25.040 --> 0:02:27.799 You know, there was an increasing degree of concern or 0:02:27.840 --> 0:02:32.800 destabilization perhaps in the bond space after that FED decision, 0:02:32.840 --> 0:02:35.960 So I think that did amplify concerns, and in a 0:02:36.000 --> 0:02:39.280 sense it is an opportunity, you know, to try and 0:02:40.400 --> 0:02:42.640 hit a market which is very extreme in terms of 0:02:42.639 --> 0:02:44.480 its positioning. I think it was very notable that if 0:02:44.520 --> 0:02:46.800 you look at yen short positions, they were at the 0:02:46.800 --> 0:02:49.560 most extreme in two years. And indeed we're pretty close 0:02:49.600 --> 0:02:51.959 to the levels that we hadn't seen since thirteen thousand 0:02:52.000 --> 0:02:54.480 and seven. So the market was pretty stretched. There was 0:02:54.520 --> 0:02:57.160 a degree of volatility or a degree of uncertainty which 0:02:57.160 --> 0:02:59.120 had been unleased in terms of the treasure curve, in 0:02:59.160 --> 0:03:02.560 particular after the FED guidance narrative. So I think those 0:03:02.560 --> 0:03:06.919 two things certainly coincided to provide perhaps a fertile ground 0:03:06.960 --> 0:03:09.680 into the month end for the authority to try and 0:03:09.680 --> 0:03:12.240 come in and hind a market which you've been heavily 0:03:12.280 --> 0:03:13.079 skewed in one direction. 0:03:13.320 --> 0:03:15.400 This is incredibly rare, Jerreman. We were talking about how 0:03:15.440 --> 0:03:18.280 the last time there was some sort of bilateral coordinator 0:03:18.360 --> 0:03:21.320 currency intervention was twenty eleven one, at the time a 0:03:21.360 --> 0:03:25.400 number of nations coordinated with Japan to help depreciate their currency. 0:03:25.400 --> 0:03:27.920 Then before that was two thousand, when the US and 0:03:27.919 --> 0:03:30.600 a group of other nations helped support the newly formed 0:03:30.600 --> 0:03:34.000 Euro when it was depreciating. Do you think that interventions 0:03:34.080 --> 0:03:36.760 like this are going to become more frequent, given what 0:03:36.760 --> 0:03:39.480 we're seeing now with Japan, given what happened with the 0:03:39.480 --> 0:03:42.080 credit line to Argentina, given some of the rhetoric that 0:03:42.120 --> 0:03:44.040 we're hearing out of the Trump administration. 0:03:44.920 --> 0:03:46.640 Well, again, I was listening to your discussion earlier when 0:03:46.640 --> 0:03:48.200 you were talking about free and fair markets, and in 0:03:48.200 --> 0:03:51.760 a sense that does beg the question that intervention or 0:03:51.840 --> 0:03:58.000 the prospect of interventions certainly creates uncertainty regards the free 0:03:58.000 --> 0:04:01.280 floating nature of both currencies, also the free flow of 0:04:01.320 --> 0:04:05.520 information and the market reactions accordingly from that, so I 0:04:05.520 --> 0:04:09.000 think there are degrees of concern in relation to the 0:04:09.040 --> 0:04:11.120 current environment, and I think there is going to be 0:04:11.440 --> 0:04:15.240 increasing skepticism as to whether there will be some degree 0:04:15.240 --> 0:04:18.719 of increase in official action going forward, and that could 0:04:18.800 --> 0:04:21.919 create additional pockets of volatility and or uncertainty. And I 0:04:21.920 --> 0:04:24.760 think that's the subtext here. And I think it's quite 0:04:24.800 --> 0:04:28.159 interesting to to tie this with the forward guideance debate 0:04:28.200 --> 0:04:31.000 and discussion that you've been having for some time, and 0:04:31.040 --> 0:04:33.599 in relation to mister Warshing, etc. I think we have 0:04:33.680 --> 0:04:35.520 to remember that we are in a new world, or 0:04:35.560 --> 0:04:38.040 at least for many market partisimants, we're in a new 0:04:38.040 --> 0:04:41.400 world because I've unfortunately been around more than long enough 0:04:41.400 --> 0:04:45.719 to remember free free forward guidance, and perhaps many in 0:04:45.720 --> 0:04:48.080 the market have yet to understand and ramifications and the 0:04:48.160 --> 0:04:50.200 uncertaintys that could come with us. 0:04:50.600 --> 0:04:54.120 Stay with us. More Bloomberg surveillance coming up after this. 0:05:03.279 --> 0:05:06.080 Let's talk about SpaceX facing its next big test with 0:05:06.200 --> 0:05:08.680 this first public earnings report you want tomorrow. The stock 0:05:08.760 --> 0:05:11.800 is down over thirty percent since it's IPO. Sarah Conce 0:05:11.839 --> 0:05:14.080 of Cleo Capital writing, we know the headline story we'll 0:05:14.120 --> 0:05:16.640 hear at earnings. What we don't know is how much 0:05:16.760 --> 0:05:19.120 the fire sale we'll see and how much Elon and 0:05:19.200 --> 0:05:22.119 other large shareholders are willing to buy to stop the bleed. 0:05:22.360 --> 0:05:24.719 Sarah joined us. Now for more, Sarah, are you suggesting 0:05:24.800 --> 0:05:27.640 the beginning of the end of the lock up, the 0:05:27.720 --> 0:05:30.760 staggered lockup that we're about to see, is more important 0:05:30.800 --> 0:05:32.080 than the earnings report this week? 0:05:33.000 --> 0:05:34.360 I think it absolutely is. 0:05:34.400 --> 0:05:36.800 You know, we for the most part, don't know who 0:05:36.880 --> 0:05:41.240 owns those shares. We don't know who's able to participate 0:05:41.320 --> 0:05:44.000 in this initial lock up tranch. We do know that 0:05:44.000 --> 0:05:47.040 that's sort of one seventy five I think barrier they 0:05:47.040 --> 0:05:48.960 had to hit to unlock even more. 0:05:49.200 --> 0:05:51.159 I'm pretty sure that that is not going to happen. 0:05:51.200 --> 0:05:53.960 But you know, this is going to be a really 0:05:54.120 --> 0:05:58.520 fascinating test of who actually wants to hold this and 0:05:58.600 --> 0:06:01.279 what do they think about the law long term sort 0:06:01.320 --> 0:06:02.960 of promise of the company. 0:06:03.160 --> 0:06:05.120 So how much the move that we've seen since the 0:06:05.160 --> 0:06:07.599 IPO do you think is about front running some of 0:06:07.600 --> 0:06:08.320 those headwinds. 0:06:09.680 --> 0:06:11.800 I think a lot of the move post IPO is 0:06:11.839 --> 0:06:15.200 because people are getting nervous about one the AI trade, 0:06:15.200 --> 0:06:19.080 the macro in general, and two they're realizing that this 0:06:19.200 --> 0:06:21.560 might be kind of the end of the line for 0:06:21.640 --> 0:06:24.680 Elon's ability to sort of construct reality. 0:06:25.320 --> 0:06:27.680 We know that we're not on Mars. 0:06:27.440 --> 0:06:29.839 And I think that when you look at the fundamentals 0:06:29.880 --> 0:06:33.000 of the company, you kind of scratch your head and say, wait, 0:06:33.120 --> 0:06:34.720 what am I paying a trillion plus for? 0:06:35.400 --> 0:06:37.080 Well, this goes to the heart of the issue. 0:06:37.080 --> 0:06:39.480 How much is Elon Musk losing some of his capital 0:06:39.520 --> 0:06:41.599 and markets in a big way? You point out, we 0:06:41.600 --> 0:06:43.640 know the headline story, we'll hear at earnings, the rockets 0:06:43.640 --> 0:06:46.520 are having trouble, the stock is thinking Starlink works pretty well, 0:06:46.720 --> 0:06:49.320 AI needs improvement. I mean, at a certain point, are 0:06:49.320 --> 0:06:51.560 you seeing people look at the balance sheet more than 0:06:51.560 --> 0:06:53.760 they are listening to the words, the hopes, the dreams 0:06:54.000 --> 0:06:56.560 of CEOs in an era where people are saying, show 0:06:56.600 --> 0:06:57.159 me the money. 0:06:58.440 --> 0:07:00.400 Certainly, in general that is how happening. 0:07:00.400 --> 0:07:02.960 But with Elon, you know, we've been two years away 0:07:03.000 --> 0:07:04.640 from self driving cars with him, and. 0:07:04.600 --> 0:07:05.800 We always will be right. 0:07:06.040 --> 0:07:09.960 So there's a problem when you keep telling people things 0:07:10.040 --> 0:07:12.760 and they don't come true. And so I think he 0:07:12.800 --> 0:07:14.560 has a bit of a chicken little problem at this 0:07:14.640 --> 0:07:18.040 point where people just are starting to not believe no 0:07:18.080 --> 0:07:21.160 matter how much they like him, that he will deliver 0:07:21.280 --> 0:07:23.120 what he says when he says it. And then on 0:07:23.160 --> 0:07:25.960 top of that, a lot of people don't like the guy. 0:07:26.280 --> 0:07:28.840 They've heard enough, they've seen enough, and they're kind of 0:07:28.880 --> 0:07:30.840 sick of it. And so I think that sort of 0:07:30.920 --> 0:07:34.040 mania that took over Tesla for years of believing that 0:07:34.120 --> 0:07:37.640 he could do, you know, the impossible, has really really cooled. 0:07:38.000 --> 0:07:40.360 So how much does this set a precedent for the 0:07:40.480 --> 0:07:43.360 likes of open AI and Anthropic or color the potential 0:07:43.400 --> 0:07:46.000 IPOs that could be coming out later this year. 0:07:47.280 --> 0:07:49.880 I think that we've already seen with open Ai it's 0:07:49.920 --> 0:07:53.240 having a huge impact. You know, Sam talks a lot 0:07:53.280 --> 0:07:56.080 about how he doesn't want to be a public market CEO. 0:07:56.880 --> 0:07:59.360 You know, there's a lot of hesitation around that IPO. 0:07:59.480 --> 0:08:01.960 But at the same time we know they are absolutely 0:08:02.000 --> 0:08:05.480 bleeding cash and that private markets are getting a lot 0:08:05.560 --> 0:08:08.480 less excited about putting more money in. And I think 0:08:08.520 --> 0:08:11.880 with Anthropic there's a question mark there too. They seem 0:08:11.960 --> 0:08:15.040 like they have better margins, like they will go public. 0:08:15.280 --> 0:08:18.080 But I think everybody's going to slowly be dropping that 0:08:18.240 --> 0:08:21.440 tea that trillion and going back to hey, it's perfectly 0:08:21.480 --> 0:08:24.560 respectable that IPO is one hundreds of billions valuation. 0:08:24.880 --> 0:08:27.080 A situational awareness a convenient excuse. 0:08:28.840 --> 0:08:32.880 I mean, situational awareness is a very interesting peak. I 0:08:32.880 --> 0:08:36.360 think into sort of the tech mindset, which is tech 0:08:36.520 --> 0:08:39.600 is really bad at sort of managing downside risk. 0:08:39.679 --> 0:08:42.000 We are really good at sort of diamond hands. 0:08:42.040 --> 0:08:44.760 You put the money in money, printer go burn number 0:08:44.800 --> 0:08:45.280 goes up. 0:08:45.520 --> 0:08:48.320 We are simple, simple investors. And so I think what 0:08:48.320 --> 0:08:50.080 you're seeing with situational. 0:08:49.679 --> 0:08:53.080 Awareness is that there's a lack of it in Silicon Valley, 0:08:53.160 --> 0:08:56.760 and that is likely to be really tough with things 0:08:56.840 --> 0:08:59.640 like the SpaceX deal, where the question is where do 0:08:59.679 --> 0:09:02.240 you see when do you stop backing the founder? 0:09:02.480 --> 0:09:05.199 So that's also the case sometimes on Wall Street as well, 0:09:05.440 --> 0:09:10.600 and you can see the anticipation building just to buy 0:09:11.040 --> 0:09:13.400 semis and hardware all over again after the decline of 0:09:13.480 --> 0:09:16.960 last month, and to Lisa's point, they collapsed to that 0:09:17.080 --> 0:09:20.400 fund then blow up of it has basically told some 0:09:20.520 --> 0:09:22.880 people that that's a clearing of the decks, that's a 0:09:22.920 --> 0:09:25.679 clearing event and you can buy again. What would you 0:09:25.720 --> 0:09:28.080 tell investors this morning, can we're looking to buy into 0:09:28.120 --> 0:09:30.920 that dep particularly going into earning season this week with 0:09:31.040 --> 0:09:32.040 numbers from sand Disk. 0:09:33.280 --> 0:09:36.360 You have to look at the individual underlying company and 0:09:36.400 --> 0:09:38.320 see isn't a dip for that company? 0:09:38.400 --> 0:09:38.559 Right? 0:09:38.760 --> 0:09:40.000 If something was ten. 0:09:40.000 --> 0:09:43.000 X overvalued and now it's five x overvalued, that's still 0:09:43.000 --> 0:09:46.080 five x overvalued. And so with a lot of these names, 0:09:46.240 --> 0:09:48.720 they are so different until you get under the hood. 0:09:48.800 --> 0:09:50.920 You look at the pe ratio, you look at the 0:09:50.920 --> 0:09:54.280 profit margins, if they're profitable at all, and where the 0:09:54.320 --> 0:09:56.280 growth is going to come from, because for a lot 0:09:56.320 --> 0:09:59.840 of these companies, growth is coming from this idea that 0:10:00.080 --> 0:10:03.240 everyone will need more and more expensive memory. 0:10:02.880 --> 0:10:05.760 Forever, and I just don't know if that's true. 0:10:06.080 --> 0:10:09.600 Stay with us. More Bloomberg Surveillance coming up after this. 0:10:18.920 --> 0:10:21.240 We begin this now with stocks rising a crude falling 0:10:21.240 --> 0:10:23.559 ahead of a busy first week of August trading. Joining 0:10:23.600 --> 0:10:27.640 us now the former NEC director and IBM Vice chair 0:10:27.200 --> 0:10:28.600 Gary good Morning, get. 0:10:28.480 --> 0:10:30.440 To see it, Good to see you. Thanks for having You've. 0:10:30.360 --> 0:10:32.760 Been following the debate. I wonder your reaction, you know, 0:10:32.840 --> 0:10:35.280 Kevin wash Well, what is everyone getting wrong? And I 0:10:35.280 --> 0:10:37.160 say everyone, I mean the consensus for you on their 0:10:37.160 --> 0:10:39.440 reaction to that news conference last Wednesday. 0:10:40.960 --> 0:10:43.360 I'm not going to characterize as anyone's getting anything wrong 0:10:43.440 --> 0:10:46.120 or anything anyone's getting it right. What I'm going to 0:10:46.200 --> 0:10:50.120 characterize this as Kevin is a masterful student of the market. 0:10:50.400 --> 0:10:53.040 Kevin has been at the FED before. He understands the 0:10:53.120 --> 0:10:56.440 limited toolbox, but the effective toolbox that the FED has. 0:10:56.920 --> 0:10:57.800 What Kevin is. 0:10:57.679 --> 0:11:00.040 Doing right now, and I think people don't like this 0:11:00.520 --> 0:11:04.920 is Kevin is reverting the FED to the historic norms 0:11:04.960 --> 0:11:09.120 of what the FED did. We unfortunately, as newscasters or 0:11:09.160 --> 0:11:12.400 as market makers or as traders, we got spoiled from 0:11:12.400 --> 0:11:16.240 the eight period on. From eight period on, the FED 0:11:16.280 --> 0:11:20.199 has been an open box. They've been completely transparent. They 0:11:20.200 --> 0:11:22.680 have not done anything that you wouldn't know they would 0:11:22.679 --> 0:11:24.679 do hours or weeks or months before they did it, 0:11:25.000 --> 0:11:28.839 and the market became addicted to knowing what the FED 0:11:28.960 --> 0:11:29.679 was going to do. 0:11:30.080 --> 0:11:32.360 What Kevin is doing right now, he's trying to. 0:11:32.320 --> 0:11:35.680 Get the market off the addiction of me, the FED 0:11:35.760 --> 0:11:37.880 chairman of the FED Board having to tell you what 0:11:37.920 --> 0:11:41.439 we're going to do, and you the market and you participants. 0:11:41.720 --> 0:11:44.280 You should go and participate however you think it makes 0:11:44.320 --> 0:11:46.720 sense for you and wherever you think the opportunities are. 0:11:47.000 --> 0:11:50.080 This is a tough transition. People liked having the answers 0:11:50.080 --> 0:11:51.360 to the quiz before they took. 0:11:51.240 --> 0:11:53.360 The test, So there's a market's question. I also think 0:11:53.360 --> 0:11:56.000 there's an economics question that needs to be addressed. The 0:11:56.040 --> 0:11:58.079 issue for us, I think is less about the lack 0:11:58.120 --> 0:12:00.760 of guidance, less about having the answers before the test, 0:12:00.880 --> 0:12:03.720 more about you've got an inflation problem, why you're not 0:12:03.760 --> 0:12:06.480 doing anything about it, which essentially was the Mike mckein 0:12:06.679 --> 0:12:09.040 question in the news conference. Why are you waiting? What 0:12:09.080 --> 0:12:12.439 are you waiting for? Without giving us any real clarity 0:12:12.520 --> 0:12:16.120 on the preferred tool, why they're waiting, whether they carry 0:12:16.120 --> 0:12:18.400 on waiting, and at the same time telling us to 0:12:18.440 --> 0:12:21.000 believe them that I do something about inflation. I think 0:12:21.000 --> 0:12:23.160 the economic question is the difficult one to answer. 0:12:25.040 --> 0:12:26.680 Chairman Worrish is going out of his way. 0:12:26.760 --> 0:12:28.520 I mean he's literally going out of his way to 0:12:28.600 --> 0:12:31.880 tell you he is an inflation fighter, that the stable 0:12:31.960 --> 0:12:35.480 price mandate and the two percent inflation guide is his 0:12:35.520 --> 0:12:39.640 bell weather, and he's going there. He has limited tools 0:12:39.640 --> 0:12:41.400 to get there, as we know. In fact, he has 0:12:41.400 --> 0:12:44.160 said in the speech, I have two tools to help 0:12:44.240 --> 0:12:46.240 us get there. I can raise rates or I can 0:12:46.280 --> 0:12:47.320 sell down the balance sheet. 0:12:47.559 --> 0:12:48.800 Those are his two tools. 0:12:49.520 --> 0:12:52.160 Raising rates, as we know, will affect the overnight rate. 0:12:52.240 --> 0:12:55.359 The Fed Fund has very little effect on the economy 0:12:55.400 --> 0:12:57.920 as a whole. The real effect on the economy is, 0:12:58.040 --> 0:13:00.560 let's say, let's call it a five to ten year bucket. 0:13:00.679 --> 0:13:03.360 That's where most people borrow. That's where consumers borrow. That's 0:13:03.360 --> 0:13:05.719 where credit cards are, and that's where student loans are. 0:13:05.800 --> 0:13:09.280 That's where automobile loans are, that's where mortgages are. Kevin 0:13:09.360 --> 0:13:12.440 knows that what he's also telling you is right now, 0:13:12.600 --> 0:13:16.480 the market is doing its own work in steepening the 0:13:16.520 --> 0:13:20.080 yield curve. So in less than a year, we have 0:13:20.160 --> 0:13:23.880 gone from a twos tens interest rate curve inverted about 0:13:23.960 --> 0:13:28.079 twenty basis points to positive forty basis points. We've moved 0:13:28.160 --> 0:13:32.160 sixty basis points in two tens rates. So Kevin is saying, look, 0:13:32.360 --> 0:13:35.360 the market is doing my job. They're making the ability 0:13:35.400 --> 0:13:38.280 to borrow money out on the curve more and more expensive, 0:13:38.880 --> 0:13:41.040 and it's going to continue to get more expensive. If 0:13:41.080 --> 0:13:43.480 I raise Fed funds, yes, I can raise Fed funds, 0:13:43.559 --> 0:13:45.760 I'm not sure that has the effect. I think what 0:13:45.800 --> 0:13:48.760 he would probably prefer to do is he preferred to. 0:13:48.640 --> 0:13:50.800 Sell down the balance sheet, which again. 0:13:50.760 --> 0:13:53.280 Would put more supply into the market, which would steep 0:13:53.280 --> 0:13:53.960 in the yield curve. 0:13:54.120 --> 0:13:56.280 But the market's doing that for him right now. 0:13:56.520 --> 0:14:00.600 So being in that chair for less than two months, 0:14:01.920 --> 0:14:04.160 or about two months, But he happened to come in 0:14:04.200 --> 0:14:06.280 a funny time where a week and a half after 0:14:06.280 --> 0:14:08.120 he came in he had his first meeting, Then thirty 0:14:08.200 --> 0:14:10.040 days later he had a second meeting. He then tells 0:14:10.080 --> 0:14:14.160 you nothing happened in those thirty days. He's sitting here 0:14:14.480 --> 0:14:16.920 and I think he's evaluating where he wants to be. 0:14:17.000 --> 0:14:19.640 He's lucky on the schedule. He doesn't have an August meeting. 0:14:19.800 --> 0:14:21.960 He does have Jackson Hole. He could tell us what's 0:14:21.960 --> 0:14:24.560 going on in Jackson Hole. So I think Kevin wanted 0:14:24.560 --> 0:14:27.360 to probably get through those first two meetings, make it 0:14:27.480 --> 0:14:29.920 clear to the market that he is an inflation fighter, 0:14:30.320 --> 0:14:33.360 make it clear to everyone who's watching that the market 0:14:33.440 --> 0:14:36.040 is doing much of what He would have tried to 0:14:36.080 --> 0:14:41.200 get accomplished early and have the month of August before 0:14:41.200 --> 0:14:44.680 the September meeting to come out and deliver a relatively 0:14:44.720 --> 0:14:47.800 baked plan. In his mind, he's not going to give 0:14:47.840 --> 0:14:50.280 you the baked plan, but he himself will have a 0:14:50.400 --> 0:14:51.240 highly baked plan. 0:14:51.400 --> 0:14:53.520 Do you think that the selloff in the long end 0:14:53.560 --> 0:14:56.080 of the yield curve is by design that what he 0:14:56.240 --> 0:14:58.680 saw after the FED meeting with thirty eight rates going 0:14:58.680 --> 0:15:01.200 to the highest level since two thousand and seven was. 0:15:01.160 --> 0:15:04.880 A good thing. It's doing Kevin's jobs for him. 0:15:05.040 --> 0:15:06.760 At the end of the day, if you want to 0:15:06.800 --> 0:15:09.920 slow down the economy and you want to tamp inflation, 0:15:10.480 --> 0:15:12.200 you have to make the cost. 0:15:11.920 --> 0:15:13.120 Of money more expensive. 0:15:13.520 --> 0:15:15.560 So if the thirty year rates went up, which they did, 0:15:15.560 --> 0:15:17.680 and the tenure rates went up, in the front end 0:15:17.680 --> 0:15:19.880 of the curve basically stayed the same, which means we had. 0:15:19.720 --> 0:15:20.640 A curve sleeepener. 0:15:21.120 --> 0:15:23.680 You are accomplishing what a FED chair would want to 0:15:23.720 --> 0:15:27.080 accomplish if you're trying to tamp down inflation and moderate 0:15:27.360 --> 0:15:30.480 I don't think it's just Kevin that's doing that. I 0:15:30.520 --> 0:15:34.200 thank Kevin's being very realistic to what the environment is today. 0:15:34.640 --> 0:15:37.240 He knows the Treasury barrings are going up every year. 0:15:37.640 --> 0:15:41.240 He also knows there's this enormous amount of need for 0:15:41.440 --> 0:15:45.800 debt in the AI compute data center world, where we're 0:15:45.800 --> 0:15:49.080 talking about potentially on the trillion dollars of issuance going 0:15:49.080 --> 0:15:51.560 on in the market day. The market is finding a 0:15:51.640 --> 0:15:55.880 home to clear these bonds. It's also raising longer term rates. 0:15:55.960 --> 0:15:58.640 It's putting more risk premium into the curve. All things 0:15:58.640 --> 0:16:01.960 that Kevin is probably happy are happening without him having 0:16:02.000 --> 0:16:02.800 to do anything. 0:16:03.720 --> 0:16:06.320 Scott bustn't did something over the weekend, and I wonder 0:16:06.360 --> 0:16:09.280 how related you see this as the idea that there 0:16:09.480 --> 0:16:11.040 was a coordinated intervention. 0:16:11.280 --> 0:16:12.640 In the end, some. 0:16:12.560 --> 0:16:16.040 People are speculating it's because the Japanese Finance Ministry was 0:16:16.080 --> 0:16:20.320 selling treasuries to finance their unilateral intervention and their currency 0:16:20.680 --> 0:16:23.920 and this could potentially help support US yields from going 0:16:24.000 --> 0:16:27.480 much higher. Do you believe there is any coordination between the. 0:16:27.400 --> 0:16:29.800 Two, Well, we know that the US and Japan coordinat 0:16:29.880 --> 0:16:31.360 I mean, no one's nine. 0:16:32.000 --> 0:16:34.920 The thirty year yields in the US and potentially what happened. 0:16:35.480 --> 0:16:38.680 I think there are multiple factors and why the US 0:16:38.720 --> 0:16:43.000 would have got involved in an intervention. Obviously the rate, 0:16:43.320 --> 0:16:47.280 the trades that would force people into transactions where they 0:16:47.320 --> 0:16:50.880 may be selling US securities to buy at home. 0:16:51.640 --> 0:16:53.040 It also has to do trade balances. 0:16:53.160 --> 0:16:57.600 Remember we've got administration that is fixated on trade deficits. 0:16:58.120 --> 0:17:00.880 So to the extent that you know, WIGN products come 0:17:00.920 --> 0:17:03.960 into the United States below what we think is a 0:17:04.080 --> 0:17:08.280 market clearing price, or our products are extraordinally expensive to 0:17:08.400 --> 0:17:11.240 someone that would we would like to sell to. There's 0:17:11.280 --> 0:17:13.679 a way to try and equal out the trade deficit 0:17:13.800 --> 0:17:15.840 or trade balance with the country as well. So I 0:17:15.840 --> 0:17:18.440 don't think it's a single factor model. I think when 0:17:18.680 --> 0:17:22.760 Scott Besson gets the phone call from the bank in Japan, 0:17:23.280 --> 0:17:26.920 he's evaluating all of these factories. He's evaluating what's going 0:17:26.960 --> 0:17:29.480 on in supply demand of treasuries from foreigners, what's going 0:17:29.480 --> 0:17:31.399 on in the trade market, what's going on with the 0:17:31.440 --> 0:17:34.000 trade deficits, specifically with Japan, And each one of those 0:17:34.080 --> 0:17:36.639 has a different input into the equation to go ahead 0:17:36.880 --> 0:17:37.560 and move forward. 0:17:37.720 --> 0:17:39.119 No, Inpestant, it might have been the one that made 0:17:39.160 --> 0:17:42.040 the call, you know, sort of laser focused on these issues. 0:17:42.080 --> 0:17:43.680 Well, he has had an experience with that with a 0:17:43.720 --> 0:17:45.639 Bank of England, so why not bring it over to Japan. 0:17:45.720 --> 0:17:48.240 How Fronchile is the bankdrop for markets right now? All 0:17:48.240 --> 0:17:52.120 these little things going on, tension in Japan, situational awareness 0:17:52.200 --> 0:17:54.280 that fund getting into a bit of trouble in the 0:17:54.320 --> 0:17:55.960 last week too. How fragile do you think the bank 0:17:56.000 --> 0:17:56.399 drop is. 0:17:56.560 --> 0:17:57.440 I don't know if the mark. 0:17:57.880 --> 0:18:00.280 If i'd call it fragile, I would say we have 0:18:00.320 --> 0:18:03.320 as much instability or balls up. 0:18:03.200 --> 0:18:04.359 In the air as we've had. 0:18:04.720 --> 0:18:08.119 I mean, usually there's one or two driving factors in 0:18:08.160 --> 0:18:11.240 the market. Today, we've got a myriad of factors. You know, 0:18:11.280 --> 0:18:13.600 we've got the war going on, We've got the price 0:18:13.640 --> 0:18:17.240 of oil going on, we've got the major capex AI 0:18:17.520 --> 0:18:22.040 investment going on. And the question is, you've taken some 0:18:22.119 --> 0:18:24.879 of the largest companies in America that historically have owned 0:18:24.920 --> 0:18:29.320 intellectual property and we're massive free cash flow generators, and 0:18:29.320 --> 0:18:32.880 then they recirculated that cash into the market, either by 0:18:32.880 --> 0:18:36.600 buying assets, buying other things, returning dividends, buying back shares. 0:18:36.840 --> 0:18:40.479 You've taken those companies and you've now made them huge, 0:18:41.119 --> 0:18:45.960 huge asset gathers, huge asset builders, and they're no longer 0:18:46.520 --> 0:18:48.760 creating free cash flow. In fact, it's the first time 0:18:48.800 --> 0:18:51.080 I can remember in the history of an earning's call 0:18:51.320 --> 0:18:54.440 of some of these largest companies when they're talking about 0:18:54.640 --> 0:18:57.080 we will stay positive on free cash flow. It's hard 0:18:57.160 --> 0:19:00.400 to understand that these are companies that we're producing tens 0:19:00.440 --> 0:19:02.560 of billions of dollars a quarter in free cash flow. 0:19:02.800 --> 0:19:06.240 So the market's digesting that we went through the software 0:19:06.280 --> 0:19:10.080 scare versus the AI scare, markets digesting that we're trying 0:19:10.119 --> 0:19:13.320 to figure out where all these pieces come together. So 0:19:13.600 --> 0:19:17.239 there's an enormous amount of instability in the market at 0:19:17.280 --> 0:19:20.560 the same time rates are going up. But the consumer, 0:19:20.920 --> 0:19:24.560 we know, the consumer continues to spend, spend, and spend. 0:19:24.720 --> 0:19:27.119 So even when you look at the GDP numbers, the 0:19:27.160 --> 0:19:29.480 strongest pieces in there are the consumer spending. 0:19:29.560 --> 0:19:31.080