WEBVTT - May CPI and Major IPOs 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.800 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.960 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.320 --> 0:00:25.640 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.120 us live on YouTube. 0:00:27.440 --> 0:00:30.360 The reason Credit Suite was so good, Mark Flaherty and Oil, 0:00:30.440 --> 0:00:34.280 et cetera, et cetera, was their research was gorgeous, Which 0:00:34.320 --> 0:00:36.720 is why I hate laur Kelvisina because she sends over 0:00:36.760 --> 0:00:39.920 one hundred and three page power point read it because 0:00:39.960 --> 0:00:41.920 I got time to read every single screen. 0:00:41.960 --> 0:00:42.680 What do you marry? 0:00:42.720 --> 0:00:46.080 Meeker's in disguise, that's the mini pulse, that's the meeting. 0:00:46.400 --> 0:00:48.199 We cut it down recently. It was getting up to 0:00:48.200 --> 0:00:49.880 around like one hundred and thirty hundred and forty. 0:00:50.240 --> 0:00:51.920 It's just sick. Laurie. 0:00:51.920 --> 0:00:54.320 You're too young to remember this, but I remember LIFO 0:00:54.520 --> 0:00:59.240 FIFO and all the accounting that went into more traditional companies. 0:00:59.720 --> 0:01:04.560 Does big tech hyperscalers do they have accountable LIFEO fi 0:01:04.680 --> 0:01:06.640 fo balance sheets. 0:01:06.959 --> 0:01:10.000 That I'm not qualified to comment on. Tom, I'm not 0:01:10.040 --> 0:01:13.520 really sure. But the reality is that we are seeing 0:01:13.520 --> 0:01:16.639 the nervousness around that top ten cohort for one reason 0:01:16.720 --> 0:01:18.920 or another. Right, is it cash flow? Are we at 0:01:18.920 --> 0:01:21.759 a peak in the CAPEC cycle? How much are these 0:01:21.760 --> 0:01:25.800 technologies being used? Are we overspending? That nervousness you know, 0:01:25.959 --> 0:01:28.440 tends to rise and people start to pull things, you know, 0:01:28.480 --> 0:01:31.360 from all over the place when we get to peak valuations. 0:01:31.360 --> 0:01:33.640 And that's exactly what we saw last fall, and that's 0:01:33.680 --> 0:01:35.680 what we're starting to see again, though I would say 0:01:35.720 --> 0:01:39.240 it's not to the same degree. Give you a couple 0:01:39.319 --> 0:01:42.080 of examples. I mean, talking to clients earlier this week 0:01:42.120 --> 0:01:44.280 about you know, sort of the semi sell off that 0:01:44.360 --> 0:01:49.000 we saw on Friday. The general vibe I was getting was, Yeah, 0:01:49.040 --> 0:01:50.920 this stuff feels like it's been a little bit ahead 0:01:50.920 --> 0:01:54.160 of itself, but we still like these stories longer term. 0:01:54.240 --> 0:01:55.920 And if I go back to a month ago when 0:01:55.920 --> 0:01:57.600 I was in Europe, I was talking to a lot 0:01:57.680 --> 0:02:00.920 of clients in London and Zurich, I would say, in particular, 0:02:00.960 --> 0:02:02.880 where they're like, we've been in the semis, we've been 0:02:02.880 --> 0:02:03.800 on the AI theme. 0:02:04.600 --> 0:02:05.560 Is there anything else we. 0:02:05.480 --> 0:02:08.120 Should be looking at? We want to explore other opportunities. 0:02:08.120 --> 0:02:10.720 You could sense that impulse to diversify, But at the 0:02:10.720 --> 0:02:12.440 same time, when we would go through and look at 0:02:12.480 --> 0:02:15.520 all the other sectors, the picking seemed pretty slim, and 0:02:15.560 --> 0:02:17.920 I've picked up on that same vibe this week as well. 0:02:18.639 --> 0:02:21.760 Small mid caps. The Russell outperforming here today. What do 0:02:21.800 --> 0:02:22.200 you make of that? 0:02:22.520 --> 0:02:23.400 So if you look at. 0:02:23.360 --> 0:02:26.400 Russell, it's been outperforming since last fall, but it's been very, 0:02:26.520 --> 0:02:29.080 very choppy. It's been sort of jagged, you know, with 0:02:29.120 --> 0:02:31.080 big swings up and down, and one thing that seems 0:02:31.120 --> 0:02:33.680 to trip small caps up. You know, the fundamentals are 0:02:33.720 --> 0:02:37.000 fantastic right now in terms of jobs growth, three accelerating 0:02:37.040 --> 0:02:39.639 ism is above fifty for several months in a row. 0:02:40.080 --> 0:02:42.600 The animal spirits feel like they're coming back to the economy. 0:02:42.960 --> 0:02:45.720 But at the same time, interest rates and when you 0:02:45.800 --> 0:02:48.080 bake in hikes from the Fed or dial down your 0:02:48.120 --> 0:02:50.840 dubbishness since twenty twenty two, that's been a surefire way 0:02:50.880 --> 0:02:52.640 to trip up the small cap trade. So we've been 0:02:52.680 --> 0:02:54.440 a little bit less enthusiastic here of. 0:02:54.480 --> 0:02:57.040 Lake a little more time with Lori Kelvicina Ira Jersey 0:02:57.120 --> 0:03:00.360 coming up. Jeff given as well. The tape does better. 0:03:00.440 --> 0:03:04.520 Negative seventy was a negative fifty now negative thirty seven. 0:03:04.320 --> 0:03:06.840 And the SMB futures. 0:03:06.840 --> 0:03:10.600 The Vics twenty handle twenty point ninety seven is better 0:03:10.680 --> 0:03:13.400 from twenty two to twenty one into a better twenty 0:03:13.440 --> 0:03:18.040 point ninety seven. Even oil comes in off the back 0:03:18.080 --> 0:03:21.600 and forth tweets, if you will, and newsfall from Iran 0:03:21.720 --> 0:03:26.720 to sixteen hundred Pennsylvania Avenue. In the yield space, thirty 0:03:26.760 --> 0:03:29.200 year bond five oh two becomes a five oh one. 0:03:29.720 --> 0:03:32.200 I'm running it out to four decimal points because that's 0:03:32.200 --> 0:03:34.839 the way we roll as well. Ten yere yield four 0:03:34.840 --> 0:03:42.000 point five two percent. Discuss companies make profit versus the 0:03:42.120 --> 0:03:43.800 nonprofit companies. 0:03:44.360 --> 0:03:46.280 This is a complicated issue. I mean, it's one that 0:03:46.400 --> 0:03:49.000 comes up quite a bit in smallcalf. We're seeing, you know, 0:03:49.080 --> 0:03:51.920 kind of low earnings quality stocks out performed similar to 0:03:51.960 --> 0:03:53.920 what we saw last year off the April eighth low. 0:03:54.280 --> 0:03:56.680 That's something that tends to happen off recession typelows. But 0:03:56.680 --> 0:03:58.480 we're also starting to see that show up in the 0:03:58.560 --> 0:04:01.280 S and P five hundred as well. You Know, what 0:04:01.360 --> 0:04:05.040 I would say is, especially when you get into small cap, 0:04:05.080 --> 0:04:07.800 there's a question of our loss makers really low quality. 0:04:07.840 --> 0:04:11.480 A lot of biotech stocks, for example, early stage technology companies. 0:04:12.720 --> 0:04:15.480 You know, I have seen frankly, in the small cap space, 0:04:15.640 --> 0:04:18.000 people are getting a little bit more comfortable with biotech, 0:04:18.480 --> 0:04:20.320 which is not something I would have heard five and 0:04:20.400 --> 0:04:22.680 ten years ago. And those are technically, you know, like 0:04:22.760 --> 0:04:25.800 quote unquote low quality because of the earnings component, but 0:04:25.920 --> 0:04:28.400 not really so I do think small caps, you know, 0:04:28.440 --> 0:04:30.840 I'm starting to increasingly think they're getting us a bad 0:04:31.000 --> 0:04:32.760 rap on the quality issue. 0:04:32.960 --> 0:04:35.960 Laurie, thanks so much for coming in the new slow 0:04:36.040 --> 0:04:37.520 is crazy. I don't know how you do it. I 0:04:37.560 --> 0:04:38.560 don't know anybody in that. 0:04:39.120 --> 0:04:39.679 I don't sleep. 0:04:40.640 --> 0:04:41.599 Yeah, we don't sleep. 0:04:41.640 --> 0:04:44.279 Literally, that's about five hours a night and it's one 0:04:44.320 --> 0:04:47.080 hour here, three hours there kind of thing. And then 0:04:47.040 --> 0:04:48.640 on the weekend and we take eight naps. 0:04:48.680 --> 0:04:50.599 I had an hour and forty nine minute nap on 0:04:50.680 --> 0:04:51.640 Sunday afternoon. 0:04:51.920 --> 0:04:56.880 Yes, heaven. Yeah, you gag the children. 0:04:58.160 --> 0:04:58.720 Their grandparents. 0:04:59.480 --> 0:05:03.120 I thank you, Lloyd Kelvicina, thank you so much. Of course, 0:05:03.240 --> 0:05:06.719 always and forever with RBC. We're gonna get Tira Jersey 0:05:06.720 --> 0:05:08.520 here in a moment. We got to have an extended 0:05:08.560 --> 0:05:10.800 time with him not only on what he sees off 0:05:10.800 --> 0:05:14.400 this CPI report, but also is work on the World 0:05:14.400 --> 0:05:18.640 Cup again. As I noticed on stub ub tickets issued. 0:05:18.760 --> 0:05:21.919 Tickets released today for so many games at this World 0:05:21.960 --> 0:05:24.520 Cup is like a huge deal. When was the last 0:05:24.520 --> 0:05:26.360 time we talked about the Nis Alexis? 0:05:26.880 --> 0:05:31.200 Oh a few minutes. It's been way too Our ticket 0:05:31.200 --> 0:05:32.839 price has gone up since then. Yeah. 0:05:32.880 --> 0:05:36.640 Jeff Gibbon joins how to develop market fixed income at 0:05:36.680 --> 0:05:39.840 Manual Life Investor. Thank you for coming today and just 0:05:39.880 --> 0:05:45.320 a crazy day. How do you synthesize a higher CPI? 0:05:46.320 --> 0:05:50.240 And this angst about what about core a Manual Life? 0:05:50.240 --> 0:05:53.040 How do you fold that into the bond story? Yeah? 0:05:53.200 --> 0:05:56.520 I mean one thing to look at is, you know, 0:05:56.720 --> 0:05:58.000 how temporary is this going to be? 0:05:58.040 --> 0:05:58.839 And you know, one of the. 0:05:58.880 --> 0:06:00.800 Dangers that we're in right now I was we're having 0:06:00.839 --> 0:06:03.000 all these one off shocks and we try to push 0:06:03.040 --> 0:06:04.480 it away and say it's one off, it's one off. 0:06:05.120 --> 0:06:07.720 At what point in time does it become not one off? 0:06:08.400 --> 0:06:10.159 You know, we're not trying to play too too much 0:06:10.200 --> 0:06:12.960 into the recent run up in CPI as it is 0:06:13.000 --> 0:06:15.360 more energy related and if we start to get oil 0:06:16.040 --> 0:06:18.479 flowing through the straight again, maybe that comes off a 0:06:18.480 --> 0:06:21.200 little bit. However, if we stay up here another three, four, 0:06:21.360 --> 0:06:24.159 five months, then we're gonna have to you know, really 0:06:24.560 --> 0:06:26.359 consider what the FED has to do to slow this 0:06:26.400 --> 0:06:27.160 economy down. 0:06:27.680 --> 0:06:30.039 We've got it seems like the bomb market's doing the 0:06:30.040 --> 0:06:33.240 Fed's work. Here, We've got rates moving higher. Here, I'm 0:06:33.279 --> 0:06:37.359 looking at the ten year four fifty two year. What 0:06:37.480 --> 0:06:39.359 do you think we end the year on a tenure exactly? 0:06:39.800 --> 0:06:42.440 You know, I do think we ended a ten year 0:06:42.480 --> 0:06:45.280 around the four to fifty ish level. It's really hard 0:06:45.279 --> 0:06:47.920 for me to see the tenure coming down a whole lot. 0:06:47.960 --> 0:06:51.200 It's hard to see getting back into pricing in FED 0:06:51.240 --> 0:06:54.200 cuts like we were at the end of February. You know, 0:06:54.400 --> 0:06:57.480 there is a risk it goes a bit higher. However, 0:06:57.560 --> 0:06:58.880 if we get to the point that we have to 0:06:59.360 --> 0:07:01.279 price in the bed saying we're going to need to 0:07:01.279 --> 0:07:05.600 crush inflation, I think that ends up being curved, flattener, 0:07:05.880 --> 0:07:08.520 and maybe an inverted curve, because you know, I don't 0:07:08.520 --> 0:07:10.560 think they're going to have to go gradually just to 0:07:10.680 --> 0:07:12.000 you know, make themselves feel better. 0:07:12.680 --> 0:07:15.960 So again, we got this inflation print today in line 0:07:16.000 --> 0:07:19.360 with expectations, but it's higher, I mean, and how much 0:07:19.360 --> 0:07:22.320 of that is just energy? I mean, I'm looking at 0:07:22.320 --> 0:07:24.520 the core that's higher too, But I mean, I don't know. 0:07:24.840 --> 0:07:27.280 Yeah, I mean, I think it's not just energy story. Right, 0:07:27.320 --> 0:07:29.920 We're starting to see a bit stronger inflation back even 0:07:29.960 --> 0:07:31.680 in January and February when you look at some of 0:07:31.720 --> 0:07:35.640 the subcomponents, and so there's other things going on now 0:07:35.680 --> 0:07:39.200 that what we don't know is, you know, energy prices 0:07:39.280 --> 0:07:42.360 usually have a six to twelve month lag on the economy, 0:07:42.600 --> 0:07:45.080 and does that put the consumer at risk when he 0:07:45.200 --> 0:07:46.480 hit October this year? 0:07:46.840 --> 0:07:49.800 What is a five thirty year bond signal? I mean, 0:07:50.440 --> 0:07:53.840 and again after this inflation report, looking at really yields, 0:07:53.840 --> 0:07:57.240 some of the hourly real yield statistics were negative. I mean, 0:07:57.280 --> 0:07:59.920 what is the how does your day to day grine 0:08:00.120 --> 0:08:01.760 ensure with a five percent thirty year? 0:08:02.000 --> 0:08:04.000 Yeah, I mean, I you know, I worry a little 0:08:04.000 --> 0:08:05.920 bit more about the tenure. If the tenure got up 0:08:05.920 --> 0:08:08.640 to five percent, I'd be very concerned. As far as 0:08:08.640 --> 0:08:11.280 where we're going a big move. I would take a 0:08:11.280 --> 0:08:14.240 look at which mortgage rates. He's seeing housing prices across 0:08:14.280 --> 0:08:17.360 the across the US slowing and you know in some 0:08:17.480 --> 0:08:19.920 areas podcat is turning negative, and if you added another 0:08:19.920 --> 0:08:22.640 fifty basis points to mortgage rates, I mean, I think 0:08:22.640 --> 0:08:25.840 that's a problem. For the overall economy and in addition 0:08:25.920 --> 0:08:28.200 to having higher energy prices at the same time. 0:08:28.960 --> 0:08:30.760 How much credit risk are you taking these days? 0:08:31.000 --> 0:08:33.439 You know, we're moving our credit risk a bit higher quality. 0:08:33.480 --> 0:08:35.080 I mean, you don't have to reach for yield anymore. 0:08:35.080 --> 0:08:36.720 And I think that's one of the things that you 0:08:36.760 --> 0:08:38.600 can't be missed. Like, when's the last time we've been 0:08:38.640 --> 0:08:40.679 able to learn four and a half percent on tenure 0:08:40.720 --> 0:08:43.120 treasury and if you're throw in another hundred basis points, 0:08:43.160 --> 0:08:45.480 so so for credit five and a half percent, that's 0:08:45.480 --> 0:08:47.920 pretty good. And you're seeing fixed annuity buyers come in 0:08:47.960 --> 0:08:50.720 the market because they like that print insurance companies, you know, 0:08:50.760 --> 0:08:53.720 we you know, as a total return investor maybe five 0:08:53.760 --> 0:08:56.520 percent thirty years, you know, a bit scary at times, 0:08:56.520 --> 0:08:59.760 but an insurance company, they loving that environment. 0:09:00.040 --> 0:09:02.280 Interesting, So that's kind of the place to be. I 0:09:02.320 --> 0:09:06.040 think people want to talk to these bodcasts now, well. 0:09:05.960 --> 0:09:08.560 Yeah, they have no right for years. Is it a 0:09:08.600 --> 0:09:11.600 total return man your life or you just clipped the cooper. 0:09:11.920 --> 0:09:14.400 We're more we're totally more total return approach. You know, 0:09:14.640 --> 0:09:17.000 you know, we're benchmark against the AG but it's a 0:09:17.040 --> 0:09:21.280 bit of AG aware and looking for a fair amount 0:09:21.280 --> 0:09:21.680 of access. 0:09:21.679 --> 0:09:24.120 Did you have v body at Boston University? 0:09:25.040 --> 0:09:27.720 I was not fortunate enough to take one of his classes, 0:09:27.760 --> 0:09:30.000 but I had obviously had to read his book. 0:09:30.640 --> 0:09:32.760 I mean, Paul, you know this has got to be 0:09:32.800 --> 0:09:33.800 a Duke equivalent. 0:09:34.000 --> 0:09:37.600 Yeah, if you go academics from BU to I mean 0:09:37.600 --> 0:09:40.360 you have to switch from Cornwalls, which is the bar 0:09:41.160 --> 0:09:42.000 for BU, and you. 0:09:42.040 --> 0:09:44.480 Got to go up to Marianne's. Okay, all right, I 0:09:44.520 --> 0:09:47.200 mean that's a whole of a shift in Boston. It's 0:09:47.240 --> 0:09:48.120 one of my little part. 0:09:48.679 --> 0:09:52.480 I mean, Boston College in Boston University, they're just two 0:09:52.520 --> 0:09:54.280 separate worlds, aren't. 0:09:54.040 --> 0:09:54.719 They They are. 0:09:54.760 --> 0:09:57.280 I mean it's teach pub versus Marianne's after a hockey 0:09:57.280 --> 0:09:58.560 game all the day, all day long. 0:09:59.040 --> 0:10:01.960 Yeah, I mean I don't think people understand like Duke 0:10:02.040 --> 0:10:04.760 and in the UNC, how far are a part of 0:10:04.800 --> 0:10:05.760 They like. 0:10:05.559 --> 0:10:06.520 Literally about a mile. 0:10:06.679 --> 0:10:09.160 Yeah, it's a little a mile, and they integrate like 0:10:09.200 --> 0:10:12.400 when you the student sections the lines of blurred. 0:10:12.520 --> 0:10:12.920 Yeah. 0:10:13.040 --> 0:10:14.120 Absolutely, we'll have to see. 0:10:14.360 --> 0:10:16.920 Thank you for coming in. We got massive breaking news 0:10:16.920 --> 0:10:19.200 today that we've got to run to. Can you I 0:10:19.240 --> 0:10:21.640 hope you can come back again when it's not nuts. 0:10:21.720 --> 0:10:24.200 Jeffrey given had a developed. 0:10:23.760 --> 0:10:27.760 Market fixing income and fixed income portfolio manager, a manual 0:10:27.760 --> 0:10:30.920 life of Boston. So here's what we're going to do. 0:10:31.080 --> 0:10:33.240 Hugely anticipate. I've got a lot of emails on this 0:10:33.720 --> 0:10:34.959 is Ira coming on today. 0:10:35.040 --> 0:10:37.560 Yeah, we're gonna do the World Cup, but. 0:10:37.480 --> 0:10:40.920 We've got to do the inflation report first, and all 0:10:40.960 --> 0:10:45.599 of his wonderful fixed income work as well. Ira, go 0:10:45.840 --> 0:10:50.560 phobosy on me here and tell me what matters within 0:10:50.600 --> 0:10:56.120 the four characteristics of the curve right now, discuss the premium, 0:10:56.200 --> 0:10:59.640 the fancy stuff you guys work in every day. 0:10:59.720 --> 0:11:01.880 Yes, so if you're talking about term premium, you know 0:11:01.920 --> 0:11:05.080 basically the risk premium that you need to hold in 0:11:05.160 --> 0:11:08.200 order to or get the extra yield you need in 0:11:08.280 --> 0:11:11.480 order to hold a bond for the long term. You know, 0:11:11.520 --> 0:11:15.440 that's actually been very stable for five years out. 0:11:15.280 --> 0:11:16.040 The thirty years. 0:11:16.080 --> 0:11:18.640 Over the last couple of months, it's the two year 0:11:18.760 --> 0:11:22.160 really that's been moving around quite a lot. And initially 0:11:22.200 --> 0:11:26.240 that was because inflation expectations jumped much higher, and now 0:11:26.280 --> 0:11:29.840 it's really because the policy rate is now expected maybe 0:11:29.880 --> 0:11:33.199 to be increased, So basically the Fed hiking interest rates. 0:11:33.200 --> 0:11:36.080 So that's where you get two year yields up above 0:11:36.160 --> 0:11:39.319 four percent and the yield curve flattening a little bit. 0:11:40.240 --> 0:11:41.920 I think that's probably about done. 0:11:42.000 --> 0:11:44.920 We put out a note just this morning noting that 0:11:44.960 --> 0:11:47.920 we thought the two year yield was fully priced for 0:11:48.040 --> 0:11:51.880 the realistic outcomes for the policy and for the FED, 0:11:51.920 --> 0:11:54.559 and a big reason for that was this number today. 0:11:54.640 --> 0:11:57.880 Because this number, this four point two percent year on 0:11:58.040 --> 0:12:01.360 year CPI print, is price by the market to be 0:12:01.520 --> 0:12:04.400 the high print of this cycle. So so I think 0:12:04.400 --> 0:12:06.800 that's very important because if inflation starts to come down, 0:12:06.840 --> 0:12:08.080 then two year yield's good stable. 0:12:08.240 --> 0:12:09.040 I you agree with that. 0:12:09.240 --> 0:12:10.880 I don't mean to be rude here, but this is 0:12:10.920 --> 0:12:13.839 like saying Senegal is going to be France. Do you 0:12:13.640 --> 0:12:18.640 that you believe four point two percent the peak? It probably? 0:12:18.720 --> 0:12:21.400 It probably is now obviously there's a lot of risk 0:12:21.480 --> 0:12:24.280 in that. But but but based on where the where 0:12:24.320 --> 0:12:27.120 the oil futures curve is pricing based on the fact 0:12:27.160 --> 0:12:29.520 that you you get a level adjustment, right, So we 0:12:29.600 --> 0:12:31.560 have to be careful because I think a lot of 0:12:31.559 --> 0:12:33.920 times people say, oh, there's still a lot of inflation, 0:12:34.040 --> 0:12:36.880 because you know, bread prices are you know, five dollars 0:12:36.880 --> 0:12:39.800 a you know a bag or whatever, but but the 0:12:39.920 --> 0:12:43.120 issue is is that that a jump in UH in 0:12:43.200 --> 0:12:45.520 prices to a new level doesn't mean that you're going 0:12:45.559 --> 0:12:48.439 to get high a bigger change in the future, right. 0:12:48.440 --> 0:12:51.800 It just means that the level is high of individual prices, 0:12:52.080 --> 0:12:54.360 But it doesn't mean that that you're going to have 0:12:54.559 --> 0:12:58.880 persistent inflation and persistently increasing prices even if prices never 0:12:58.960 --> 0:13:01.280 go down, right. I think that's it's a kind of 0:13:01.320 --> 0:13:04.760 one of the observational fallacies that a lot of people, 0:13:05.360 --> 0:13:07.400 you know, wind up having because they'll say, oh, you know, 0:13:07.440 --> 0:13:09.240 gas prices are still four dollars a gallon. 0:13:09.320 --> 0:13:12.280 Yeah, but they're still at four. They're not going to five. Right, 0:13:12.320 --> 0:13:14.880 That's the I think one of the issues that people 0:13:14.920 --> 0:13:18.160 don't don't see. It's changed versus level. So yeah, I 0:13:18.200 --> 0:13:20.560 think that four point two percent probably is the high now. 0:13:20.800 --> 0:13:23.040 Of course, if we continue to run at three percent, 0:13:23.080 --> 0:13:25.280 which is something that the market's also priced for over 0:13:25.320 --> 0:13:27.800 the next year or so, you know, obviously it's going 0:13:27.840 --> 0:13:30.360 to be difficult for the Federal Reserve to decrease interest 0:13:30.440 --> 0:13:34.360 rates if you're still well above their targeted inflation level. 0:13:35.280 --> 0:13:37.360 We haven't been, as some quoted, we haven't been in 0:13:37.480 --> 0:13:40.559 two percent inflation and like forever, where did this two 0:13:40.640 --> 0:13:41.400 percent number go? 0:13:41.520 --> 0:13:42.760 Can we kick this to the curb? 0:13:44.160 --> 0:13:46.720 Well, I actually think that it was kind a little 0:13:46.760 --> 0:13:48.680 bit of a mistake to have any kind of hard 0:13:48.760 --> 0:13:51.640 two percent number, right, So Paul, you know, you know, 0:13:51.720 --> 0:13:54.000 we think back in the nineteen nineties, we were running 0:13:54.040 --> 0:13:56.760 a bit above that, right, PC deflator was running around 0:13:56.800 --> 0:13:59.560 two point three two point five percent. Things seemed fine, right, 0:13:59.600 --> 0:14:01.959 because wages were growing faster than that and we had 0:14:02.000 --> 0:14:06.040 a decent, decent economic activity. You know, I think the 0:14:06.040 --> 0:14:10.120 Fed lost a little bit of flexibility and how they 0:14:10.160 --> 0:14:14.160 approach their inflation target by by you know, having a 0:14:14.200 --> 0:14:16.720 hard two percent target. And you know, quite frankly, that 0:14:16.800 --> 0:14:20.000 is something Kevin Moorsh would like to would like to revisit. 0:14:20.160 --> 0:14:22.280 So as he comes in next week and to his 0:14:22.360 --> 0:14:26.000 first meeting as the FOMC chair, you know, he'll need 0:14:26.040 --> 0:14:29.640 to He'll need to try to figure out with his colleagues, like, Hey, 0:14:29.640 --> 0:14:32.320 should we actually have this hard two percent number or 0:14:32.360 --> 0:14:34.880 should we think about it more as in is it 0:14:35.120 --> 0:14:37.600 two point three percent two point five percent and stable? 0:14:37.720 --> 0:14:37.840 Right? 0:14:37.920 --> 0:14:41.120 That that's really probably more important in my view to 0:14:41.320 --> 0:14:43.760 the health of the economy is give certainty to how 0:14:43.840 --> 0:14:46.720 quickly prices are going to grow, and the economy will 0:14:46.720 --> 0:14:48.960 figure it out around that, which it always has done. 0:14:48.920 --> 0:14:51.800 Across America, Ira Jersey, with us driving all of Bloomberg 0:14:51.840 --> 0:14:57.280 intelligence fixed income that covers definitive at credit squeeze years ago, Ira, 0:14:57.760 --> 0:15:02.800 help us here off your remit with the complexity of 0:15:02.920 --> 0:15:09.000 the fixed income transactions of the technology. Bro Paul and 0:15:09.040 --> 0:15:12.240 I learned that if we see the word mezzaning, circle 0:15:12.280 --> 0:15:14.760 it in the perspectives. This is back folks when there 0:15:14.800 --> 0:15:19.040 was pencil and paper. We've gone way beyond mezzaning. Do 0:15:19.120 --> 0:15:23.440 you see a complexity and a frenzy like two thousand 0:15:23.440 --> 0:15:23.880 and six. 0:15:25.560 --> 0:15:27.920 It's not quite as bad, but there are people who 0:15:27.960 --> 0:15:30.520 were you know, I think, I think when you go 0:15:30.640 --> 0:15:34.760 back to that period of time, remember we spent five 0:15:34.840 --> 0:15:37.160 years with the Fed fundrate at one percent. 0:15:37.560 --> 0:15:40.120 Interest rates were relatively low and stable. 0:15:40.600 --> 0:15:43.000 And you had a lot of financial engineering and a 0:15:43.000 --> 0:15:45.520 lot of new products that were trying to be used 0:15:45.520 --> 0:15:49.480 for yield enhancement purposes. I actually think, and I wrote 0:15:49.480 --> 0:15:50.880 about this actually when I was at. 0:15:50.760 --> 0:15:52.600 Credits a long time ago. 0:15:53.120 --> 0:15:57.560 Was one of the reasons why the markets created all 0:15:57.600 --> 0:16:00.400 of these you know, CDOs and all of the triple 0:16:00.440 --> 0:16:05.320 A tranches of different fixed income products was really because 0:16:05.560 --> 0:16:09.120 the Federal Reserve didn't increase the money supply quickly enough. 0:16:09.160 --> 0:16:12.520 And I know a lot of you know, academic economists 0:16:12.520 --> 0:16:15.440 don't agree with me with this, but the fact this 0:16:15.520 --> 0:16:17.560 is that money demand was going very quickly during that 0:16:17.600 --> 0:16:22.160 period of time. And when money demand is outstripping money supply, 0:16:22.320 --> 0:16:25.080 then obviously the market will create new kinds of money, 0:16:25.520 --> 0:16:27.560 and then of course, once that doesn't become money, you 0:16:27.600 --> 0:16:30.000 wind up putting on the financial crisis. I think in 0:16:30.000 --> 0:16:33.280 today's environment, we have plenty of money out there. There's 0:16:33.360 --> 0:16:35.960 some funding market needs that need to be addressed and 0:16:36.320 --> 0:16:39.360 have been addressed by the Fed. But otherwise, no, we 0:16:39.600 --> 0:16:41.720 don't see the same kind of you know, gearing that 0:16:41.760 --> 0:16:42.480 we had back then. 0:16:42.800 --> 0:16:44.360 Nobody cares, Okay, iira. 0:16:44.480 --> 0:16:47.600 What they care about is two thirds of America doesn't 0:16:47.640 --> 0:16:50.200 care about the World Cup. I guess a lot of 0:16:50.240 --> 0:16:53.920 them do care about the World Cup. The world's coming 0:16:53.960 --> 0:16:56.520 to America for the World Cup. And I saw on 0:16:56.640 --> 0:17:00.680 stub ub today all sorts of games with new ticket issueance. 0:17:01.320 --> 0:17:05.080 How bad has FEFA screwed up the tickets nationwide? 0:17:05.520 --> 0:17:08.680 Yeah? I think they've made some you know, pretty big mistakes. 0:17:08.680 --> 0:17:10.960 I mean they were trying to maximize I think their 0:17:11.000 --> 0:17:15.080 their profits by you know, leaking out leaking out tickets. 0:17:15.119 --> 0:17:17.159 But then you know, that became a problem for the 0:17:17.200 --> 0:17:20.080 resellers and the like. There's a lot of people that 0:17:20.119 --> 0:17:21.800 I've talked to in Europe, a lot of my friends 0:17:21.840 --> 0:17:23.520 from when I was in graduate school and the like, 0:17:23.560 --> 0:17:25.800 who are like, you know, tickets are crazy expensive. 0:17:25.920 --> 0:17:26.760 How are we going to go? 0:17:26.920 --> 0:17:28.840 Like when you know, when we went to Russia where 0:17:28.840 --> 0:17:31.040 we went to cutter, like, yeah, there were some tickets 0:17:31.040 --> 0:17:32.800 that were expensive, but we were able to get into 0:17:32.840 --> 0:17:33.960 a match for you. 0:17:33.880 --> 0:17:35.240 Know, one hundred euros or whatever. 0:17:35.280 --> 0:17:38.399 And so these were eye popping kind of prices for 0:17:38.680 --> 0:17:40.520 a lot of people, especially when you have to consider 0:17:40.520 --> 0:17:43.200 you have to travel over you know, over an ocean, 0:17:43.240 --> 0:17:45.840 and then you have all of the relatively high priced 0:17:46.200 --> 0:17:49.520 accommodations in the United States compared to other places where 0:17:49.520 --> 0:17:51.520 the World's Cup has been held over the last twenty 0:17:51.600 --> 0:17:54.640 years or so, So there is a big sticker shock. 0:17:54.680 --> 0:17:56.800 So I'm a little bit concerned that you won't get 0:17:57.080 --> 0:18:01.159 the kind of environment that where you have a sellout crowd, 0:18:01.440 --> 0:18:03.639 or you'll have a lot of a lot of maybe 0:18:03.680 --> 0:18:07.840 domestic people going to games instead of people from these 0:18:07.840 --> 0:18:10.160 countries to create a great stadium environment. 0:18:10.240 --> 0:18:12.520 So I'm really interested to see how that's going to work. 0:18:12.720 --> 0:18:14.680 We'll have to see our jersey. Thank you so much. 0:18:15.000 --> 0:18:19.480 Driving all the fixed incoment, Bloomberg Intelligence is Surveillance World 0:18:19.520 --> 0:18:21.120 Cup corresponded. 0:18:21.480 --> 0:18:22.160 Stay with us. 0:18:22.440 --> 0:18:25.680 More from Bloomberg Surveillance coming up after this. 0:18:32.920 --> 0:18:36.520 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:18:36.560 --> 0:18:39.720 weekday afternoons from seven to ten am Eastern. Listen on 0:18:39.800 --> 0:18:43.480 Applecarplay and Android Auto with the Bloomberg Business app, or 0:18:43.640 --> 0:18:45.080 watch us live on YouTube. 0:18:45.320 --> 0:18:47.440 Joining Center Studio usually in San Francisco. 0:18:47.600 --> 0:18:51.359 Edward Lovelow driving all of our technology coverage. Open question, 0:18:51.840 --> 0:18:54.800 How do you study SpaceX this morning? 0:18:55.880 --> 0:19:01.200