Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amerie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business App. Jeremy Stretchers CIBC writing.
Speaker 2: Compared to the April May interventions, the latest round arguably
Speaker 2: carries more weight because of the coordinated moves by the
Speaker 2: US Treasury. Jeremy joins us now for more, Jeremy, there
Speaker 2: are some underlying problems in Japan. There is a term
Speaker 2: of trade shark. And welcome to the program, buddy. It's
Speaker 2: always good to see you.
Speaker 3: Good morning.
Speaker 2: You're facing a term to trade shark that oil is
Speaker 2: attributed to. You've got deficit issues as well, a massive
Speaker 2: rate different and saws with the US. Why does this
Speaker 2: intervention help them fight those three?
Speaker 4: Well, indeed, you are talking about, in effect a containment policy,
Speaker 4: because unless the oil price is going to come down materially,
Speaker 4: or unless the interest rates spread between the US and
Speaker 4: Japan closes exponentially, and that would imply that the boj
Speaker 4: would have to bring forward, not only bring forward that policy,
Speaker 4: tiling would be more aggressive, and perhaps the market reprice
Speaker 4: the FED expectations. It is seemingly more of a containment issue.
Speaker 4: But I've just been listening with great interest to your
Speaker 4: discussion with Lisa regarding the holdings of treasuries by Japanese investors,
Speaker 4: and I think that is particularly notable. I think that
Speaker 4: twist steepening that we did see in terms of the
Speaker 4: US curve after last Wednesday's FED decision, I think was
Speaker 4: also notable. And I think if we go back to
Speaker 4: Liberation Day and the post Liberation Day period, it was
Speaker 4: the discipline of the bond market that really exercised control
Speaker 4: on the politician. So I think it is that sort
Speaker 4: of bond market dynamic that I think is proven to
Speaker 4: be contingent here in terms of this broad and narrow
Speaker 4: regarding the Dollian exchange.
Speaker 1: Right, Jeremy, just to take that a step further, how
Speaker 1: much is the timing kind of predicated on the move
Speaker 1: that we saw following the Wednesday FED press conference.
Speaker 4: Well, certainly, I think the two are not inconsistent in
Speaker 4: terms of the timing dynamics. So we have seen obviously
Speaker 4: a consistent grind higher or had seen a consistent grind
Speaker 4: higher and dolly en through the month of July.
Speaker 3: But clearly that's risks.
Speaker 4: You know, there was an increasing degree of concern or
Speaker 4: destabilization perhaps in the bond space after that FED decision,
Speaker 4: So I think that did amplify concerns, and in a
Speaker 4: sense it is an opportunity, you know, to try and
Speaker 4: hit a market which is very extreme in terms of
Speaker 4: its positioning. I think it was very notable that if
Speaker 4: you look at yen short positions, they were at the
Speaker 4: most extreme in two years. And indeed we're pretty close
Speaker 4: to the levels that we hadn't seen since thirteen thousand
Speaker 4: and seven. So the market was pretty stretched. There was
Speaker 4: a degree of volatility or a degree of uncertainty which
Speaker 4: had been unleased in terms of the treasure curve, in
Speaker 4: particular after the FED guidance narrative. So I think those
Speaker 4: two things certainly coincided to provide perhaps a fertile ground
Speaker 4: into the month end for the authority to try and
Speaker 4: come in and hind a market which you've been heavily
Speaker 4: skewed in one direction.
Speaker 1: This is incredibly rare, Jerreman. We were talking about how
Speaker 1: the last time there was some sort of bilateral coordinator
Speaker 1: currency intervention was twenty eleven one, at the time a
Speaker 1: number of nations coordinated with Japan to help depreciate their currency.
Speaker 1: Then before that was two thousand, when the US and
Speaker 1: a group of other nations helped support the newly formed
Speaker 1: Euro when it was depreciating. Do you think that interventions
Speaker 1: like this are going to become more frequent, given what
Speaker 1: we're seeing now with Japan, given what happened with the
Speaker 1: credit line to Argentina, given some of the rhetoric that
Speaker 1: we're hearing out of the Trump administration.
Speaker 4: Well, again, I was listening to your discussion earlier when
Speaker 4: you were talking about free and fair markets, and in
Speaker 4: a sense that does beg the question that intervention or
Speaker 4: the prospect of interventions certainly creates uncertainty regards the free
Speaker 4: floating nature of both currencies, also the free flow of
Speaker 4: information and the market reactions accordingly from that, so I
Speaker 4: think there are degrees of concern in relation to the
Speaker 4: current environment, and I think there is going to be
Speaker 4: increasing skepticism as to whether there will be some degree
Speaker 4: of increase in official action going forward, and that could
Speaker 4: create additional pockets of volatility and or uncertainty. And I
Speaker 4: think that's the subtext here. And I think it's quite
Speaker 4: interesting to to tie this with the forward guideance debate
Speaker 4: and discussion that you've been having for some time, and
Speaker 4: in relation to mister Warshing, etc. I think we have
Speaker 4: to remember that we are in a new world, or
Speaker 4: at least for many market partisimants, we're in a new
Speaker 4: world because I've unfortunately been around more than long enough
Speaker 4: to remember free free forward guidance, and perhaps many in
Speaker 4: the market have yet to understand and ramifications and the
Speaker 4: uncertaintys that could come with us.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: Let's talk about SpaceX facing its next big test with
Speaker 2: this first public earnings report you want tomorrow. The stock
Speaker 2: is down over thirty percent since it's IPO. Sarah Conce
Speaker 2: of Cleo Capital writing, we know the headline story we'll
Speaker 2: hear at earnings. What we don't know is how much
Speaker 2: the fire sale we'll see and how much Elon and
Speaker 2: other large shareholders are willing to buy to stop the bleed.
Speaker 2: Sarah joined us. Now for more, Sarah, are you suggesting
Speaker 2: the beginning of the end of the lock up, the
Speaker 2: staggered lockup that we're about to see, is more important
Speaker 2: than the earnings report this week?
Speaker 5: I think it absolutely is.
Speaker 6: You know, we for the most part, don't know who
Speaker 6: owns those shares. We don't know who's able to participate
Speaker 6: in this initial lock up tranch. We do know that
Speaker 6: that's sort of one seventy five I think barrier they
Speaker 6: had to hit to unlock even more.
Speaker 5: I'm pretty sure that that is not going to happen.
Speaker 6: But you know, this is going to be a really
Speaker 6: fascinating test of who actually wants to hold this and
Speaker 6: what do they think about the law long term sort
Speaker 6: of promise of the company.
Speaker 2: So how much the move that we've seen since the
Speaker 2: IPO do you think is about front running some of
Speaker 2: those headwinds.
Speaker 6: I think a lot of the move post IPO is
Speaker 6: because people are getting nervous about one the AI trade,
Speaker 6: the macro in general, and two they're realizing that this
Speaker 6: might be kind of the end of the line for
Speaker 6: Elon's ability to sort of construct reality.
Speaker 5: We know that we're not on Mars.
Speaker 6: And I think that when you look at the fundamentals
Speaker 6: of the company, you kind of scratch your head and say, wait,
Speaker 6: what am I paying a trillion plus for?
Speaker 3: Well, this goes to the heart of the issue.
Speaker 1: How much is Elon Musk losing some of his capital
Speaker 1: and markets in a big way? You point out, we
Speaker 1: know the headline story, we'll hear at earnings, the rockets
Speaker 1: are having trouble, the stock is thinking Starlink works pretty well,
Speaker 1: AI needs improvement. I mean, at a certain point, are
Speaker 1: you seeing people look at the balance sheet more than
Speaker 1: they are listening to the words, the hopes, the dreams
Speaker 1: of CEOs in an era where people are saying, show
Speaker 1: me the money.
Speaker 5: Certainly, in general that is how happening.
Speaker 6: But with Elon, you know, we've been two years away
Speaker 6: from self driving cars with him, and.
Speaker 5: We always will be right.
Speaker 6: So there's a problem when you keep telling people things
Speaker 6: and they don't come true. And so I think he
Speaker 6: has a bit of a chicken little problem at this
Speaker 6: point where people just are starting to not believe no
Speaker 6: matter how much they like him, that he will deliver
Speaker 6: what he says when he says it. And then on
Speaker 6: top of that, a lot of people don't like the guy.
Speaker 6: They've heard enough, they've seen enough, and they're kind of
Speaker 6: sick of it. And so I think that sort of
Speaker 6: mania that took over Tesla for years of believing that
Speaker 6: he could do, you know, the impossible, has really really cooled.
Speaker 1: So how much does this set a precedent for the
Speaker 1: likes of open AI and Anthropic or color the potential
Speaker 1: IPOs that could be coming out later this year.
Speaker 6: I think that we've already seen with open Ai it's
Speaker 6: having a huge impact. You know, Sam talks a lot
Speaker 6: about how he doesn't want to be a public market CEO.
Speaker 6: You know, there's a lot of hesitation around that IPO.
Speaker 6: But at the same time we know they are absolutely
Speaker 6: bleeding cash and that private markets are getting a lot
Speaker 6: less excited about putting more money in. And I think
Speaker 6: with Anthropic there's a question mark there too. They seem
Speaker 6: like they have better margins, like they will go public.
Speaker 6: But I think everybody's going to slowly be dropping that
Speaker 6: tea that trillion and going back to hey, it's perfectly
Speaker 6: respectable that IPO is one hundreds of billions valuation.
Speaker 1: A situational awareness a convenient excuse.
Speaker 6: I mean, situational awareness is a very interesting peak. I
Speaker 6: think into sort of the tech mindset, which is tech
Speaker 6: is really bad at sort of managing downside risk.
Speaker 5: We are really good at sort of diamond hands.
Speaker 6: You put the money in money, printer go burn number
Speaker 6: goes up.
Speaker 5: We are simple, simple investors. And so I think what
Speaker 5: you're seeing with situational.
Speaker 6: Awareness is that there's a lack of it in Silicon Valley,
Speaker 6: and that is likely to be really tough with things
Speaker 6: like the SpaceX deal, where the question is where do
Speaker 6: you see when do you stop backing the founder?
Speaker 2: So that's also the case sometimes on Wall Street as well,
Speaker 2: and you can see the anticipation building just to buy
Speaker 2: semis and hardware all over again after the decline of
Speaker 2: last month, and to Lisa's point, they collapsed to that
Speaker 2: fund then blow up of it has basically told some
Speaker 2: people that that's a clearing of the decks, that's a
Speaker 2: clearing event and you can buy again. What would you
Speaker 2: tell investors this morning, can we're looking to buy into
Speaker 2: that dep particularly going into earning season this week with
Speaker 2: numbers from sand Disk.
Speaker 6: You have to look at the individual underlying company and
Speaker 6: see isn't a dip for that company?
Speaker 3: Right?
Speaker 5: If something was ten.
Speaker 6: X overvalued and now it's five x overvalued, that's still
Speaker 6: five x overvalued. And so with a lot of these names,
Speaker 6: they are so different until you get under the hood.
Speaker 6: You look at the pe ratio, you look at the
Speaker 6: profit margins, if they're profitable at all, and where the
Speaker 6: growth is going to come from, because for a lot
Speaker 6: of these companies, growth is coming from this idea that
Speaker 6: everyone will need more and more expensive memory.
Speaker 5: Forever, and I just don't know if that's true.
Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this.
Speaker 2: We begin this now with stocks rising a crude falling
Speaker 2: ahead of a busy first week of August trading. Joining
Speaker 2: us now the former NEC director and IBM Vice chair
Speaker 2: Gary good Morning, get.
Speaker 3: To see it, Good to see you. Thanks for having You've.
Speaker 2: Been following the debate. I wonder your reaction, you know,
Speaker 2: Kevin wash Well, what is everyone getting wrong? And I
Speaker 2: say everyone, I mean the consensus for you on their
Speaker 2: reaction to that news conference last Wednesday.
Speaker 7: I'm not going to characterize as anyone's getting anything wrong
Speaker 7: or anything anyone's getting it right. What I'm going to
Speaker 7: characterize this as Kevin is a masterful student of the market.
Speaker 7: Kevin has been at the FED before. He understands the
Speaker 7: limited toolbox, but the effective toolbox that the FED has.
Speaker 3: What Kevin is.
Speaker 7: Doing right now, and I think people don't like this
Speaker 7: is Kevin is reverting the FED to the historic norms
Speaker 7: of what the FED did. We unfortunately, as newscasters or
Speaker 7: as market makers or as traders, we got spoiled from
Speaker 7: the eight period on. From eight period on, the FED
Speaker 7: has been an open box. They've been completely transparent. They
Speaker 7: have not done anything that you wouldn't know they would
Speaker 7: do hours or weeks or months before they did it,
Speaker 7: and the market became addicted to knowing what the FED
Speaker 7: was going to do.
Speaker 3: What Kevin is doing right now, he's trying to.
Speaker 7: Get the market off the addiction of me, the FED
Speaker 7: chairman of the FED Board having to tell you what
Speaker 7: we're going to do, and you the market and you participants.
Speaker 7: You should go and participate however you think it makes
Speaker 7: sense for you and wherever you think the opportunities are.
Speaker 7: This is a tough transition. People liked having the answers
Speaker 7: to the quiz before they took.
Speaker 2: The test, So there's a market's question. I also think
Speaker 2: there's an economics question that needs to be addressed. The
Speaker 2: issue for us, I think is less about the lack
Speaker 2: of guidance, less about having the answers before the test,
Speaker 2: more about you've got an inflation problem, why you're not
Speaker 2: doing anything about it, which essentially was the Mike mckein
Speaker 2: question in the news conference. Why are you waiting? What
Speaker 2: are you waiting for? Without giving us any real clarity
Speaker 2: on the preferred tool, why they're waiting, whether they carry
Speaker 2: on waiting, and at the same time telling us to
Speaker 2: believe them that I do something about inflation. I think
Speaker 2: the economic question is the difficult one to answer.
Speaker 3: Chairman Worrish is going out of his way.
Speaker 7: I mean he's literally going out of his way to
Speaker 7: tell you he is an inflation fighter, that the stable
Speaker 7: price mandate and the two percent inflation guide is his
Speaker 7: bell weather, and he's going there. He has limited tools
Speaker 7: to get there, as we know. In fact, he has
Speaker 7: said in the speech, I have two tools to help
Speaker 7: us get there. I can raise rates or I can
Speaker 7: sell down the balance sheet.
Speaker 3: Those are his two tools.
Speaker 7: Raising rates, as we know, will affect the overnight rate.
Speaker 7: The Fed Fund has very little effect on the economy
Speaker 7: as a whole. The real effect on the economy is,
Speaker 7: let's say, let's call it a five to ten year bucket.
Speaker 7: That's where most people borrow. That's where consumers borrow. That's
Speaker 7: where credit cards are, and that's where student loans are.
Speaker 7: That's where automobile loans are, that's where mortgages are. Kevin
Speaker 7: knows that what he's also telling you is right now,
Speaker 7: the market is doing its own work in steepening the
Speaker 7: yield curve. So in less than a year, we have
Speaker 7: gone from a twos tens interest rate curve inverted about
Speaker 7: twenty basis points to positive forty basis points. We've moved
Speaker 7: sixty basis points in two tens rates. So Kevin is saying, look,
Speaker 7: the market is doing my job. They're making the ability
Speaker 7: to borrow money out on the curve more and more expensive,
Speaker 7: and it's going to continue to get more expensive. If
Speaker 7: I raise Fed funds, yes, I can raise Fed funds,
Speaker 7: I'm not sure that has the effect. I think what
Speaker 7: he would probably prefer to do is he preferred to.
Speaker 3: Sell down the balance sheet, which again.
Speaker 7: Would put more supply into the market, which would steep
Speaker 7: in the yield curve.
Speaker 3: But the market's doing that for him right now.
Speaker 7: So being in that chair for less than two months,
Speaker 7: or about two months, But he happened to come in
Speaker 7: a funny time where a week and a half after
Speaker 7: he came in he had his first meeting, Then thirty
Speaker 7: days later he had a second meeting. He then tells
Speaker 7: you nothing happened in those thirty days. He's sitting here
Speaker 7: and I think he's evaluating where he wants to be.
Speaker 7: He's lucky on the schedule. He doesn't have an August meeting.
Speaker 7: He does have Jackson Hole. He could tell us what's
Speaker 7: going on in Jackson Hole. So I think Kevin wanted
Speaker 7: to probably get through those first two meetings, make it
Speaker 7: clear to the market that he is an inflation fighter,
Speaker 7: make it clear to everyone who's watching that the market
Speaker 7: is doing much of what He would have tried to
Speaker 7: get accomplished early and have the month of August before
Speaker 7: the September meeting to come out and deliver a relatively
Speaker 7: baked plan. In his mind, he's not going to give
Speaker 7: you the baked plan, but he himself will have a
Speaker 7: highly baked plan.
Speaker 1: Do you think that the selloff in the long end
Speaker 1: of the yield curve is by design that what he
Speaker 1: saw after the FED meeting with thirty eight rates going
Speaker 1: to the highest level since two thousand and seven was.
Speaker 3: A good thing. It's doing Kevin's jobs for him.
Speaker 7: At the end of the day, if you want to
Speaker 7: slow down the economy and you want to tamp inflation,
Speaker 7: you have to make the cost.
Speaker 3: Of money more expensive.
Speaker 7: So if the thirty year rates went up, which they did,
Speaker 7: and the tenure rates went up, in the front end
Speaker 7: of the curve basically stayed the same, which means we had.
Speaker 3: A curve sleeepener.
Speaker 7: You are accomplishing what a FED chair would want to
Speaker 7: accomplish if you're trying to tamp down inflation and moderate
Speaker 7: I don't think it's just Kevin that's doing that. I
Speaker 7: thank Kevin's being very realistic to what the environment is today.
Speaker 7: He knows the Treasury barrings are going up every year.
Speaker 7: He also knows there's this enormous amount of need for
Speaker 7: debt in the AI compute data center world, where we're
Speaker 7: talking about potentially on the trillion dollars of issuance going
Speaker 7: on in the market day. The market is finding a
Speaker 7: home to clear these bonds. It's also raising longer term rates.
Speaker 7: It's putting more risk premium into the curve. All things
Speaker 7: that Kevin is probably happy are happening without him having
Speaker 7: to do anything.
Speaker 1: Scott bustn't did something over the weekend, and I wonder
Speaker 1: how related you see this as the idea that there
Speaker 1: was a coordinated intervention.
Speaker 3: In the end, some.
Speaker 1: People are speculating it's because the Japanese Finance Ministry was
Speaker 1: selling treasuries to finance their unilateral intervention and their currency
Speaker 1: and this could potentially help support US yields from going
Speaker 1: much higher. Do you believe there is any coordination between the.
Speaker 3: Two, Well, we know that the US and Japan coordinat
Speaker 3: I mean, no one's nine.
Speaker 1: The thirty year yields in the US and potentially what happened.
Speaker 7: I think there are multiple factors and why the US
Speaker 7: would have got involved in an intervention. Obviously the rate,
Speaker 7: the trades that would force people into transactions where they
Speaker 7: may be selling US securities to buy at home.
Speaker 3: It also has to do trade balances.
Speaker 7: Remember we've got administration that is fixated on trade deficits.
Speaker 7: So to the extent that you know, WIGN products come
Speaker 7: into the United States below what we think is a
Speaker 7: market clearing price, or our products are extraordinally expensive to
Speaker 7: someone that would we would like to sell to. There's
Speaker 7: a way to try and equal out the trade deficit
Speaker 7: or trade balance with the country as well. So I
Speaker 7: don't think it's a single factor model. I think when
Speaker 7: Scott Besson gets the phone call from the bank in Japan,
Speaker 7: he's evaluating all of these factories. He's evaluating what's going
Speaker 7: on in supply demand of treasuries from foreigners, what's going
Speaker 7: on in the trade market, what's going on with the
Speaker 7: trade deficits, specifically with Japan, And each one of those
Speaker 7: has a different input into the equation to go ahead
Speaker 7: and move forward.
Speaker 2: No, Inpestant, it might have been the one that made
Speaker 2: the call, you know, sort of laser focused on these issues.
Speaker 1: Well, he has had an experience with that with a
Speaker 1: Bank of England, so why not bring it over to Japan.
Speaker 2: How Fronchile is the bankdrop for markets right now? All
Speaker 2: these little things going on, tension in Japan, situational awareness
Speaker 2: that fund getting into a bit of trouble in the
Speaker 2: last week too. How fragile do you think the bank
Speaker 2: drop is.
Speaker 3: I don't know if the mark.
Speaker 7: If i'd call it fragile, I would say we have
Speaker 7: as much instability or balls up.
Speaker 3: In the air as we've had.
Speaker 7: I mean, usually there's one or two driving factors in
Speaker 7: the market. Today, we've got a myriad of factors. You know,
Speaker 7: we've got the war going on, We've got the price
Speaker 7: of oil going on, we've got the major capex AI
Speaker 7: investment going on. And the question is, you've taken some
Speaker 7: of the largest companies in America that historically have owned
Speaker 7: intellectual property and we're massive free cash flow generators, and
Speaker 7: then they recirculated that cash into the market, either by
Speaker 7: buying assets, buying other things, returning dividends, buying back shares.
Speaker 7: You've taken those companies and you've now made them huge,
Speaker 7: huge asset gathers, huge asset builders, and they're no longer
Speaker 7: creating free cash flow. In fact, it's the first time
Speaker 7: I can remember in the history of an earning's call
Speaker 7: of some of these largest companies when they're talking about
Speaker 7: we will stay positive on free cash flow. It's hard
Speaker 7: to understand that these are companies that we're producing tens
Speaker 7: of billions of dollars a quarter in free cash flow.
Speaker 7: So the market's digesting that we went through the software
Speaker 7: scare versus the AI scare, markets digesting that we're trying
Speaker 7: to figure out where all these pieces come together. So
Speaker 7: there's an enormous amount of instability in the market at
Speaker 7: the same time rates are going up. But the consumer,
Speaker 7: we know, the consumer continues to spend, spend, and spend.
Speaker 7: So even when you look at the GDP numbers, the
Speaker 7: strongest pieces in there are the consumer spending.
Speaker 3: Now we could even go further.
Speaker 7: We know the consumer is spending, but we also know
Speaker 7: that's a bit of a bifurcated event. We know that
Speaker 7: the wealthier consumers in this country are consuming at extraordinary
Speaker 7: high levels, and we know the low end consumer is
Speaker 7: barely getting by. And this is one of the dilemmas
Speaker 7: that everyone's trying to deal with. And how does this
Speaker 7: filter through markets? I think all of these pieces of
Speaker 7: instability are out there, and look, markets can handle one
Speaker 7: or two pieces of instability. They start to they start
Speaker 7: to fail when it's three four and five, and they
Speaker 7: really fail when it's three four and five and they're
Speaker 7: totally out of their control or the answer is six
Speaker 7: to twelve to eighteen months off.
Speaker 2: And that's what I'm trying to work out. How close
Speaker 2: sw we So you've got a massive competition for capital,
Speaker 2: you want circulate that really well. You've had a huge
Speaker 2: terms of trade shock at the energy market that's hitting
Speaker 2: Japan when they've already got a frenchile backdrop. On top
Speaker 2: of that, there's evidence of leverage building up in places
Speaker 2: like South Korea and hedge funds blowing up. And I
Speaker 2: wanted to go back to the very beginning of this
Speaker 2: conversation whether now is a good time to go back
Speaker 2: to the old world of reducing forward guidance in the
Speaker 2: handholding post GFC at central banks. How difficult will that
Speaker 2: mission be?
Speaker 7: I don't think it's difficult. Like I said, we've been
Speaker 7: trained since two thousand and eight to today to expect
Speaker 7: the FED to telegraph, and for a guy prior to
Speaker 7: two thousand and eight, when I was trading for a
Speaker 7: living and running bigging trading desks, we did not know
Speaker 7: when the FED was going to move. There were surprise
Speaker 7: meetings after surprise meetings, after surprise meetings. You know, the
Speaker 7: FED doesn't have to wait for a scheduled meeting to
Speaker 7: cut or raise interest rates.
Speaker 3: Now they have not.
Speaker 7: Done it really since the I guess they did in COVID.
Speaker 7: The last time they did it was twenty twenty. We
Speaker 7: had one hundred basis point cut on a Sunday evening
Speaker 7: in COVID, if you remember. But we've now gotten in
Speaker 7: this point where the market insists not only there be
Speaker 7: a meeting, there'll be a meeting with a press conference.
Speaker 7: You can't have actions list there's a meeting with a
Speaker 7: press conference. I think the chair is trying to say, no,
Speaker 7: I have a job to do. We will meet whenever
Speaker 7: necessary to raise or lower raise. We will meet whenever
Speaker 7: necessary to do any action we need to do based
Speaker 7: on what's going on in the environment, not based on
Speaker 7: the schedule that I put out eighteen months in advance.
Speaker 2: That's bringing the discipline back to capitalism and financial markets.
Speaker 2: I'm not averse to that at all. Just trying to
Speaker 2: work out the consequences of making the switch when you've
Speaker 2: been feasting gone easy money and forward guidance for fifteen
Speaker 2: sixteen years and knowing they're always going to be there
Speaker 2: to have your back and step in whenever there's a problem,
Speaker 2: and they'll loll fee the guidance. Since you're the why
Speaker 2: you put it, they'll give you the answers to the
Speaker 2: quiz before you sit the test. Wall Streets feasted on
Speaker 2: that for years.
Speaker 3: They have.
Speaker 2: That's why I use the word French out how much
Speaker 2: fragility is in the system that needs to be unwound
Speaker 2: as we make that transition back to the old world.
Speaker 7: I don't think there's as much fragility as you think.
Speaker 7: Like I said, most of my career trading, I had
Speaker 7: the opposite world I had.
Speaker 2: Because you had the two way discipline you had.
Speaker 3: I had to be disciplined.
Speaker 7: I had to assume when I went home with the
Speaker 7: position or I made a price for something. And I
Speaker 7: ran a big mortgage business for a while, man ran
Speaker 7: a big treasury business for a while, ran a big
Speaker 7: at Christ business. I had to assume that the FED
Speaker 7: could meet any moment and change policy and were we
Speaker 7: trading appropriately? Were we managing risk appropriately? Instead of saying, oh,
Speaker 7: I don't have to worry about because that there's a
Speaker 7: FED put or rates can't change until September something. Now
Speaker 7: because there's no FED meeting, maybe they'll say something in
Speaker 7: Jackson Hall. So I'll manage my risk up till the
Speaker 7: Jackson meeting. I'll wait for that. Then I'll manage my
Speaker 7: risk differently after that. That's not the way markets should work.
Speaker 7: The markets should manage themselves in a way that anything
Speaker 7: is possible in any given day.
Speaker 2: I hope we got back to that world. I just
Speaker 2: know that when the guard tried that we're not here
Speaker 2: to close spreads, the guard quickly closed spreads straight afterwards. Right,
Speaker 2: It's difficult to make the transition.
Speaker 1: The question, and I think you're alluding to it, John,
Speaker 1: how much has the financial market changed and debt build
Speaker 1: up under the old regime that has to be unwound
Speaker 1: in a period of a new regime that potentially is
Speaker 1: much less transparent but allows markets to do their things.
Speaker 8: Did you write a piece, Gary, I did not write
Speaker 8: the piece that said, you know, there are an enormous
Speaker 8: amount of hedging tools today, so as you see debt
Speaker 8: move up and you see the private credit markets explosed,
Speaker 8: which has been very helpful.
Speaker 3: You know, you can head your interest rate exposure.
Speaker 7: You can't head your credit exposure as much, but heading
Speaker 7: underlying interest rate exposure happens to be one of the
Speaker 7: most development markets in the world. You can interest rate
Speaker 7: exposure in almost virtually every currency that we issue bonds
Speaker 7: in today, So managing interest rate exposure.
Speaker 3: Is not hard.
Speaker 7: Now people have historically said, well, I know exactly what
Speaker 7: the Fed's.
Speaker 3: Going to do. I don't need to manage this.
Speaker 7: That's probably not a good outcome. It's probably a better
Speaker 7: outcome when people look at their risk and say, my
Speaker 7: interest rate risk is x AM I happy with that
Speaker 7: or not not. Oh, I don't really care because the
Speaker 7: Fed's got my back.
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