WEBVTT - US Deficit Concerns Spur Wall Street Selloff 0:00:02.520 --> 0:00:11.280 Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Daybreak 0:00:11.320 --> 0:00:15.040 Asia podcast. I'm deg Chrisner. The bond market was rattled 0:00:15.080 --> 0:00:17.880 in the last session by worries over the federal budget deficit. 0:00:17.960 --> 0:00:20.960 It's been a major theme all week, beginning with that 0:00:21.120 --> 0:00:25.239 Moody's downgrade. Today, the sale of sixteen billion dollars in 0:00:25.280 --> 0:00:28.760 twenty year bonds saw lackluster demand. We're talking about a 0:00:28.800 --> 0:00:32.080 five percent coupon rate, the highest since the twenty year 0:00:32.240 --> 0:00:35.640 was reintroduced back in twenty twenty. Here is Gina Martin 0:00:35.680 --> 0:00:37.360 Adams from Bloomberg Intelligence. 0:00:37.760 --> 0:00:41.440 It's just really difficult to justify owning bonds in that 0:00:41.520 --> 0:00:43.800 kind of environment to degree that you would have yesterday, 0:00:43.840 --> 0:00:46.640 the day before, a year ago, and that certainly is 0:00:46.680 --> 0:00:49.200 creating some risk peripheralist to the equity market. 0:00:49.360 --> 0:00:52.320 That is Gina Martin Adams from Bloomberg Intelligence. So we 0:00:52.360 --> 0:00:55.240 saw yield spike right across the treasury curve today. The 0:00:55.280 --> 0:00:58.200 ten year was up eleven bases points to just under 0:00:58.400 --> 0:01:01.360 four to sixty, and those higher yields and turns sent 0:01:01.520 --> 0:01:04.000 stocks lower. In a moment, we'll take a look at 0:01:04.000 --> 0:01:07.840 today's market action and reaction with Rebecca Walzer. She is 0:01:07.920 --> 0:01:11.039 president at Wallser Wealth Management. But we begin in the 0:01:11.080 --> 0:01:13.920 Asia Pacific. Joining me now is Joe Little. He is 0:01:13.959 --> 0:01:18.480 the global Chief Strategist at HSBC Asset Management. Joe joining 0:01:18.520 --> 0:01:21.080 from our studios in Hong Kong. Joe, thank you so 0:01:21.160 --> 0:01:23.280 much for making time to chat with me. Can you 0:01:23.360 --> 0:01:28.640 take me inside the HSBC Asset Management morning meeting? How 0:01:28.720 --> 0:01:31.319 much consensus is there right now? I know there are 0:01:31.319 --> 0:01:35.039 so many different points of view. It's a very mercurial 0:01:35.120 --> 0:01:37.320 world that we're living in right now. Is there much 0:01:37.319 --> 0:01:39.039 in the way of consensus in your shop? 0:01:39.760 --> 0:01:43.160 Yeah? I mean that's a great question, and you're quite 0:01:43.240 --> 0:01:47.560 right because we're living in unusual times, ultra high policy uncertainty, 0:01:47.960 --> 0:01:52.480 many different dimensions to the investment market equation at this 0:01:52.720 --> 0:01:56.080 point in time. So we tend to run an approach 0:01:56.160 --> 0:02:00.960 to think about investment markets based around scenarios. We like 0:02:01.000 --> 0:02:06.240 to have three scenarios in mind. Juggling more scenarios than 0:02:06.240 --> 0:02:10.640 that becomes quite quite quite difficult mental mental exercise, and 0:02:10.880 --> 0:02:13.200 it means then you've got less time to really kind 0:02:13.240 --> 0:02:16.520 of develop and think about what the data flow and 0:02:16.560 --> 0:02:20.040 investment market action might look like under different scenarios. The 0:02:20.080 --> 0:02:23.080 central theme that we've had is what I call spinning around, 0:02:23.120 --> 0:02:26.840 so lots of policy uncertainty, high volatility in markets, a 0:02:26.880 --> 0:02:32.320 big challenge to US exceptionalism, rotation into other global stock markets, 0:02:32.520 --> 0:02:36.240 policy support in Europe and China, and a situation then 0:02:36.280 --> 0:02:38.760 where the rest of the world equities e F equities 0:02:38.760 --> 0:02:42.440 can outperform the US, but clearly with the tariffs, with 0:02:42.600 --> 0:02:45.920 the Dodge fiscal agenda to a degree, as well some 0:02:46.040 --> 0:02:50.679 of the themes around immigration policy in the US. There's 0:02:50.680 --> 0:02:54.280 a there's a left hand scenario which we've been also 0:02:54.560 --> 0:02:58.040 highly attuned to, particularly colleagues in the in the fixed 0:02:58.040 --> 0:03:02.160 income area, highly attuned to to this idea of big 0:03:02.240 --> 0:03:08.520 challenges around the growth, inflation mix, recession worries elevated still 0:03:08.840 --> 0:03:12.799 and that has a slightly different set of prognoses in 0:03:12.880 --> 0:03:15.600 terms of how investment markets then behave. And on the 0:03:15.680 --> 0:03:20.160 right hand side, you know, investors in our equity area, 0:03:20.960 --> 0:03:24.240 more growth focused investors still want to think about technology 0:03:24.280 --> 0:03:28.920 and the importance of AI, which increasingly is the most positive, 0:03:29.120 --> 0:03:35.640 most bullish scenario in the chessboard. And again that would 0:03:35.680 --> 0:03:39.520 have a slightly different set of consequences for markets as 0:03:39.520 --> 0:03:41.720 we think through the scenario so we like to think 0:03:42.040 --> 0:03:45.160 in terms of that framework, and most of our discussions 0:03:45.160 --> 0:03:47.800 are focused on a central scenario of spinning around lots 0:03:47.800 --> 0:03:50.600 of volatility, but a way forward for markets over the 0:03:50.640 --> 0:03:53.160 course of the next twelve to eighty months, or a 0:03:53.200 --> 0:03:57.280 more adverse negative scenario. Worries about recession risk being a 0:03:57.360 --> 0:04:00.360 big feature of a lot of our conversations, and tracking 0:04:00.360 --> 0:04:02.880 the data very closely to monitor that risk. 0:04:02.840 --> 0:04:05.200 No doubt about that. So maybe you can tell me, 0:04:05.640 --> 0:04:09.120 in your view, what is the most critical pressure point 0:04:09.200 --> 0:04:12.280 right now? Is it trade policy where the US is concerned. 0:04:12.760 --> 0:04:16.080 Is it what's happening in Beijing as they try to 0:04:16.120 --> 0:04:19.080 balance doing a little bit more to stimulate domestic demand. 0:04:19.440 --> 0:04:22.120 Is it a story about the FED and being a 0:04:22.120 --> 0:04:26.080 little hesitant to be a combinative given the risk not 0:04:26.120 --> 0:04:29.720 only to the inflation outlook, but maybe a period of 0:04:29.960 --> 0:04:31.480 stagflation here in the US. 0:04:32.160 --> 0:04:34.560 Yeah, certainly in the NATO. I mean, all of those 0:04:34.800 --> 0:04:40.000 are big issues and definitely part of our ongoing conversations 0:04:40.040 --> 0:04:44.359 with investment managers across our business. But I think the 0:04:44.360 --> 0:04:47.440 big one is the bond market vigilantes waking up, they're 0:04:47.480 --> 0:04:51.679 settling up, riding into town and really exerting a big 0:04:51.760 --> 0:04:57.640 influence on the situation, both in terms of the response 0:04:57.920 --> 0:05:01.680 to recent news around credit and grades and the fiscal 0:05:01.720 --> 0:05:06.960 measures being unveiled and talked about. But the consequences of 0:05:06.960 --> 0:05:09.200 a situation where the FED is already in a cutting 0:05:09.240 --> 0:05:13.599 cycle and long term bonyards arising. That's quite a puzzling 0:05:14.800 --> 0:05:18.400 trajectory and pattern relative to what we normally see in history. 0:05:18.920 --> 0:05:21.120 But if it sustains itself and we still see this 0:05:21.200 --> 0:05:24.799 pattern of fiscal risk premium coming into the long term 0:05:25.000 --> 0:05:27.520 part of the US Treasury curve, it has really big 0:05:27.560 --> 0:05:31.119 consequences for investment markets in the US but right around 0:05:31.120 --> 0:05:33.880 the world. So at some point, maybe a level around 0:05:33.960 --> 0:05:37.880 five percent long term boniards, the consequence and the pressure 0:05:37.880 --> 0:05:41.760 on equity markets get pretty severe in our view. In 0:05:41.800 --> 0:05:46.239 other words, higher bond yields squeeze out the last drops 0:05:46.240 --> 0:05:48.880 of risk premium from the equity market and make that 0:05:49.000 --> 0:05:52.960 valuation arithmetic really difficult to justify at a point in time, 0:05:52.960 --> 0:05:58.239 whether macro vibes, the vibes around the profits outlook, the 0:05:58.279 --> 0:06:01.440 fuzzy and vague guide that's being offered by S and 0:06:01.440 --> 0:06:05.520 P five hundred corporates, that really has a big effect. 0:06:05.839 --> 0:06:07.880 So rising bond yards has a big effect in terms 0:06:07.880 --> 0:06:10.039 of the outlook for US stock market, and then it 0:06:10.080 --> 0:06:15.159 also forces investors to reconsider where safe haven assets really are. 0:06:15.400 --> 0:06:19.119 Maybe investors are better off positioning in the European bond 0:06:19.160 --> 0:06:21.800 curve or in the UK guilt curve, or looking at 0:06:21.800 --> 0:06:24.840 emerging market bonds in India, for example, where yields are 0:06:24.920 --> 0:06:27.359 very high and there's some shelter from all of the 0:06:27.400 --> 0:06:30.839 tariff news, or even looking at the corporate sector where 0:06:30.880 --> 0:06:33.360 balance sheets are a lot better than the situation in 0:06:33.400 --> 0:06:36.560 the US government balance sheet. So I think it's these 0:06:36.560 --> 0:06:39.839 bond market vigilantes that's the key issue, but it's highly 0:06:39.880 --> 0:06:46.080 linked to the other policy themes fed themes global geopolitical 0:06:46.120 --> 0:06:47.480 issues that you mentioned as well. 0:06:47.600 --> 0:06:50.240 So as I'm listening to Joe, I'm wondering whether the 0:06:50.320 --> 0:06:54.240 clients that you serve are inclined to reduce some of 0:06:54.279 --> 0:06:57.159 their exposure to US assets right now, whether on the 0:06:57.200 --> 0:06:59.520 fixed income side or on the equity side. Is that 0:06:59.560 --> 0:07:00.720 a fairest statement. 0:07:01.120 --> 0:07:05.880 The end of exceptionalism? Yeah, exactly exactly like you say. 0:07:06.320 --> 0:07:10.000 I mean, I think most global investors looking at US 0:07:10.040 --> 0:07:14.120 stocks are now reflecting on the point we reached at 0:07:14.120 --> 0:07:17.080 the end of twenty twenty four beginning of twenty twenty five, 0:07:17.120 --> 0:07:20.560 where US stocks was seventy percent of global market capitalization 0:07:21.160 --> 0:07:23.960 as something that's something like a high water mark or 0:07:25.080 --> 0:07:27.920 a medium term top maybe in terms of the relative 0:07:27.960 --> 0:07:32.080 share of US stocks in global equities. And I think 0:07:32.120 --> 0:07:36.560 where investors are still keeping US exposure, they're doing it 0:07:36.600 --> 0:07:39.160 with a little bit less conviction around the dollar. So 0:07:39.240 --> 0:07:43.320 the exceptionalism story reflects on expectations around what the currency 0:07:43.360 --> 0:07:45.640 is going to do as well. So maybe for global investors, 0:07:45.680 --> 0:07:51.600 hedging equity exposure makes sense, or even else, rotating into Europe, 0:07:51.680 --> 0:07:55.040 rotating into China where stock markets are more lowly valued 0:07:55.320 --> 0:08:00.240 with big, positive visible catalysts for markets to continue, you 0:08:00.560 --> 0:08:03.160 to show good outperformance, especially if we can have a 0:08:03.200 --> 0:08:05.840 twelve to eighteen month time horizon, because the short term 0:08:06.040 --> 0:08:09.560 is very hard to predict, as you know, and it's 0:08:09.600 --> 0:08:13.960 ditto for the treasury market outlook. Many investors ask asking 0:08:13.960 --> 0:08:18.280 me about treasury markets substitutes long term treasuries, ten year, 0:08:18.320 --> 0:08:21.360 thirty year treasuries. With that bear steepening dynamic in place, 0:08:21.840 --> 0:08:26.360 investors want to explore opportunities in European duration opportunities in 0:08:26.440 --> 0:08:30.600 other parts of the India curve or areas in alternative 0:08:30.640 --> 0:08:33.400 assets as well. Private credits comes up, hedge funds come 0:08:33.480 --> 0:08:36.200 up a lot, and the reason is that you're looking 0:08:36.280 --> 0:08:40.360 for some sources of resilience in the portfolio in a 0:08:40.400 --> 0:08:43.479 world which is, you know, where markets are more volatile, 0:08:43.600 --> 0:08:45.959 not something that we've been so used to in recent years, 0:08:46.000 --> 0:08:50.319 where the policy uncertainty situation keeps that high level of 0:08:50.400 --> 0:08:54.840 volatility as a feature of investment market. It's not a 0:08:54.880 --> 0:08:57.720 short term bug, something that investors have to get used to. 0:08:58.120 --> 0:09:01.959 And so there's a real need and focus for having 0:09:02.640 --> 0:09:06.920 a more varied, many different color slices of pie in 0:09:06.960 --> 0:09:09.920 the pie chart of the portfolio to try and build 0:09:10.280 --> 0:09:14.400 good resilience in an unpredictable and volatile world. 0:09:14.640 --> 0:09:17.000 I'm going to ask you to make a prediction. That's it. 0:09:18.240 --> 0:09:21.320 To what extent are you confident that we are going 0:09:21.360 --> 0:09:24.439 to see a resolution to some of these trade issues 0:09:24.440 --> 0:09:25.560 before the end of the year. 0:09:26.400 --> 0:09:29.680 Well, we've already seen some important progress, haven't we, with 0:09:29.880 --> 0:09:34.120 the process now around de escalation and some trade deals 0:09:34.160 --> 0:09:39.360 being formed with the UK, for example. Most investors I 0:09:39.360 --> 0:09:45.560 speak to are expecting US tariffs to continue to some 0:09:45.600 --> 0:09:47.320 of the heat to continue to be taken out of 0:09:47.360 --> 0:09:50.079 that story, and maybe the average tariff rate settled down 0:09:50.120 --> 0:09:54.000 in the mid teens relative to what we've seen post 0:09:54.040 --> 0:09:59.800 the Liberation Day events. That's a positive outcome, but of 0:09:59.800 --> 0:10:02.400 course LuSE, it's still a big shock to the system, 0:10:02.800 --> 0:10:05.240 maybe six or seven times the tariff rate what we 0:10:05.320 --> 0:10:09.920 saw in the first Trump administration, So that still invokes 0:10:10.280 --> 0:10:13.400 a big stagflationary shock at least in the near term 0:10:13.960 --> 0:10:18.560 for investment markets and for economies to digest. But maybe 0:10:18.920 --> 0:10:23.840 in a situation where there are some good market stories 0:10:23.960 --> 0:10:27.800 round valuations around profits in other parts of global equity markets, 0:10:27.800 --> 0:10:31.600 particularly in China, particularly in Europe, there's something for investors 0:10:32.000 --> 0:10:37.559 to be positive about and look towards. But it's clearly 0:10:37.600 --> 0:10:41.120 a difficult situation, high level of uncertainty, and as much 0:10:41.160 --> 0:10:45.320 as anything in a more volatile environment, being agile and 0:10:45.480 --> 0:10:48.280 tactical and nimble in how we plot investment strategy is 0:10:48.320 --> 0:10:49.080 really really key. 0:10:49.400 --> 0:10:53.040 Is there some counter intuitive intuition that you have right 0:10:53.080 --> 0:10:55.080 now that you would be willing to share something that 0:10:55.120 --> 0:10:59.000 you believe the market may be overlooking, that you think 0:10:59.120 --> 0:11:02.920 will develop in a way that represents opportunity. 0:11:03.600 --> 0:11:06.640 Yeah, I mean there's lots because these sort of phases, 0:11:07.720 --> 0:11:09.880 there's an awful lot of focus on the very near 0:11:09.960 --> 0:11:12.840 term and if investors can take a slightly longer term 0:11:13.200 --> 0:11:16.719 time frame, the volatility and the uncertainty I think are 0:11:16.720 --> 0:11:22.480 throwing up a lot of opportunities, anomalous valuations for investors 0:11:22.520 --> 0:11:26.120 to look at different allocations in different parts of asset 0:11:26.120 --> 0:11:29.120 classes around the world. I mean, an interesting example is 0:11:29.160 --> 0:11:31.319 the movement that we've seen in Switzerland with bond yards 0:11:31.400 --> 0:11:34.960 going into negative territory. Is that something that is going 0:11:35.000 --> 0:11:37.559 to become a bigger feature of what we're seeing elsewhere 0:11:38.120 --> 0:11:41.760 in Europe. Maybe to reflect on the question about whether 0:11:41.800 --> 0:11:44.200 the European Central Bank should be more like Switzerland or 0:11:44.240 --> 0:11:46.440 maybe it should be more like the FED, it's clearly 0:11:46.480 --> 0:11:49.160 more like Switzerland. So Europe is going to be very 0:11:49.160 --> 0:11:52.840 proactive in cutting rates, and unless there's an awful lot 0:11:52.880 --> 0:11:56.960 of bond issuance, there's a big downward pressure on rates 0:11:57.400 --> 0:12:00.520 in Europe. So there are some very interesting positive fixed 0:12:00.520 --> 0:12:02.720 income stories, and there's a lot to focus on in 0:12:02.720 --> 0:12:05.920 the Asia region as well, India, fixed income, China stock markets. 0:12:06.240 --> 0:12:07.800 I think a lot of these themes tend to be 0:12:07.840 --> 0:12:11.000 a little bit overlooked by global investors because the story 0:12:11.040 --> 0:12:15.040 around US markets, US exceptionalism, which has been that dominant 0:12:15.080 --> 0:12:18.560 meme over the last decade, has sucked all of the 0:12:19.520 --> 0:12:23.280 interest and oxygen out of these other themes. As that breaks, 0:12:23.360 --> 0:12:26.440 as the fault lines appear in US exceptionalism, then it 0:12:26.480 --> 0:12:30.000 gives oxygen to some of these other stories. So big 0:12:30.040 --> 0:12:33.440 opportunity for rotation, A big opportunity to look at themes 0:12:33.440 --> 0:12:36.760 in Europe and Asia over the next twelve to eighty months. 0:12:36.800 --> 0:12:39.400 But extending a time horizon rather than just focusing on 0:12:39.400 --> 0:12:42.840 the very near term is probably the best advice at 0:12:42.840 --> 0:12:43.520 this juncture. 0:12:43.800 --> 0:12:46.600 Great conversation, Joe, thank you so much for joining us. 0:12:46.640 --> 0:12:51.400 He is Joe Little, the chief global strategist at Hsbcsset Management, 0:12:51.480 --> 0:12:55.000 Joining from Hong Kong here on the day Breakasia podcast. 0:13:01.679 --> 0:13:04.800 Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner. 0:13:05.280 --> 0:13:08.440 So the US equity market sold off today as those 0:13:08.559 --> 0:13:11.880 US treasury yields jumped. The message from the bond market 0:13:11.960 --> 0:13:15.120 seemed to be get your fiscal house in order. We 0:13:15.200 --> 0:13:17.440 had the S and P closing down one point six 0:13:17.520 --> 0:13:21.720 percent today for its sharpest slide in a month. Joining 0:13:21.800 --> 0:13:25.480 me now, is Rebecca Wallzer. She is president at Wallser 0:13:25.520 --> 0:13:28.840 Wealth Management. She's on the line today from Phoenix, Arizona. 0:13:29.360 --> 0:13:31.920 Can I begin by asking for your assessment on what 0:13:31.960 --> 0:13:34.400 we saw in today's market price section. 0:13:35.120 --> 0:13:37.440 Yeah, well, you know, Doug, it's what we've been talking 0:13:37.480 --> 0:13:39.880 about really for the last six months. This there global 0:13:39.960 --> 0:13:43.080 macroeconomic change that is really being spurred here by debt 0:13:43.120 --> 0:13:47.120 spend and growth of debt by central governments. You know, 0:13:47.160 --> 0:13:50.439 really for the last last i'd say fifteen twenty years, 0:13:50.440 --> 0:13:53.640 but since coronavirus in twenty twenty, it has been exponential. 0:13:53.920 --> 0:13:55.959 So we started off expecting this week to be a 0:13:56.000 --> 0:13:58.280 little bit turbulin in the equity space because of the 0:13:58.360 --> 0:14:01.680 downgrade on Friday Moody's to align with all of the 0:14:01.679 --> 0:14:04.040 other rating agencies. But we expected that that was going 0:14:04.080 --> 0:14:08.000 to create some turbulence. But now what we're seeing is 0:14:08.040 --> 0:14:11.120 that global impact. If you look at the twenty year 0:14:11.559 --> 0:14:15.320 sale yesterday in Japan that went really poorly and that 0:14:15.480 --> 0:14:19.680 was a big tell for Japan, and now today Wednesday 0:14:19.760 --> 0:14:20.840 we see similarly. 0:14:20.880 --> 0:14:22.320 And obviously twenty years is never. 0:14:22.200 --> 0:14:24.040 The same as the thirty or the ten, but it's 0:14:24.040 --> 0:14:26.440 still a tell, right and anytime we start to see 0:14:26.480 --> 0:14:30.040 sluggishness and US selling our debt. That has got to 0:14:30.200 --> 0:14:32.360 be a wake up call. And so obviously the equity 0:14:32.360 --> 0:14:36.640 markets did not like that. We are looking at a 0:14:36.720 --> 0:14:40.840 global slowdown, and obviously the tariff policy is on top 0:14:40.880 --> 0:14:42.680 of that. You know, we've been talking about this slowdown 0:14:42.680 --> 0:14:44.720 before Trump came in, before Trump starts hooking terraff, So 0:14:44.800 --> 0:14:47.920 this has been happening. Then he's got his policy on 0:14:47.960 --> 0:14:50.480 top of that. And then when you see that, you know, 0:14:50.680 --> 0:14:53.920 the global demand. This is not just a United States problem. 0:14:53.920 --> 0:14:54.360 This is it. 0:14:54.480 --> 0:14:58.320 China has issues and is collapsing from the property side. 0:14:58.440 --> 0:15:02.240 Japan has issues and collapsing from their debt financing. Their 0:15:02.280 --> 0:15:05.560 debt financing is way beyond ours. As you know, they 0:15:05.600 --> 0:15:09.200 are the highest leveraged country in the world. So, you know, 0:15:09.280 --> 0:15:11.960 we have all of these things that are pointing us 0:15:12.000 --> 0:15:17.760 to just real systemic, underlying foundational issues that are not 0:15:17.920 --> 0:15:22.359 just going to get worked around by micro quarterly expectations 0:15:22.360 --> 0:15:24.280 of Fortune one hundred companies to do well. 0:15:24.520 --> 0:15:27.520 The yield of the tenure just under four sixty today. 0:15:27.560 --> 0:15:29.880 I think we've picked up if you just look at 0:15:29.920 --> 0:15:32.760 the ten year alone since the FED pivot around ninety 0:15:32.840 --> 0:15:36.200 basis points. That's a monster size move. How much higher 0:15:36.200 --> 0:15:38.200 do you think the ten year yield can go from here? 0:15:38.680 --> 0:15:41.640 Well, I mean, I think that if we continue to 0:15:41.760 --> 0:15:45.360 see more what's happening is things that are being priced 0:15:45.360 --> 0:15:47.400 in right now is just too much risk. I mean, 0:15:47.400 --> 0:15:50.040 if you look at that Moody's, you know, PRISS release 0:15:50.120 --> 0:15:52.520 for what our debt, they finally you know, followed all 0:15:52.520 --> 0:15:54.720 of the other rating agencies and gave us a downgrade. 0:15:54.960 --> 0:15:58.040 It's simply a matter of the inability to sustain our 0:15:58.080 --> 0:16:01.120 interest payments. We can't have our interest payments be thirty 0:16:01.120 --> 0:16:03.920 percent plus of our budget in the next ten years 0:16:04.040 --> 0:16:06.480 or the next five years. And what happens when you 0:16:06.480 --> 0:16:09.480 have an administration like the Trump administration not saying pro 0:16:09.640 --> 0:16:13.680 or against, but his package is multi trillions of dollars, 0:16:13.720 --> 0:16:16.720 just as Biden's budget was a seven point two trillion 0:16:16.720 --> 0:16:19.480 dollar budget. When you're collecting five trillion dollars in taxes 0:16:19.600 --> 0:16:21.560 and your budgets are in the seven trillion dollars range, 0:16:21.560 --> 0:16:24.520 which you're debt financing two trillion, but you're not just 0:16:24.600 --> 0:16:27.400 debt financing two trillion jog. You're debt financing all of 0:16:27.440 --> 0:16:29.400 the interest on the thirty eight. I'm going around it 0:16:29.440 --> 0:16:32.480 up thirty eight trillion that we've already not collected in 0:16:32.480 --> 0:16:34.880 tax revenue that we've spent. And so you know, we 0:16:35.000 --> 0:16:37.480 used to say this is our grandchildren's problem, and then 0:16:37.560 --> 0:16:38.680 you say it's our children's problem. 0:16:38.720 --> 0:16:40.080 This is actually our problem. 0:16:40.240 --> 0:16:42.320 The people that are alive today are going to be 0:16:42.360 --> 0:16:44.920 dealing with this problem in less than ten years. This 0:16:45.080 --> 0:16:49.160 is a global macroeconomic catastrophe that is not going to 0:16:49.160 --> 0:16:51.200 be mathematically avoided at this point. 0:16:51.360 --> 0:16:53.240 So if you see the risk of a yield on 0:16:53.280 --> 0:16:55.480 the tenure pushing above, let's say we get to four 0:16:55.600 --> 0:16:58.720 seventy five on the tenure, that would be another fifteen 0:16:58.720 --> 0:17:01.720 basis points from here seem like a lot. Do you 0:17:01.840 --> 0:17:04.080 avoid the longer end of the curve right now? And 0:17:04.160 --> 0:17:05.800 if you had to put money to work in the 0:17:05.800 --> 0:17:07.680 bond market, stay on the short side. 0:17:08.040 --> 0:17:09.680 Yeah, I think you have to, And let me tell 0:17:09.720 --> 0:17:13.480 you why, because this is a self fulfilling prophecy. At 0:17:13.520 --> 0:17:16.040 a certain point, you have to understand that this is 0:17:16.119 --> 0:17:19.119 all interconnected. And even though the bond will really finances 0:17:19.160 --> 0:17:21.479 the world, we know that we do also know that 0:17:21.520 --> 0:17:24.280 Wall Street is the one buying the bonds eventually. And 0:17:24.320 --> 0:17:27.200 if Wall Street isn't seen that they can invest, they 0:17:27.200 --> 0:17:30.520 can't buy low and invest into their companies and make 0:17:30.560 --> 0:17:34.119 profits and sell make the differential, then they're not going 0:17:34.200 --> 0:17:34.880 to be doing that. 0:17:35.160 --> 0:17:37.639 And the fact is that when you have yields that 0:17:37.680 --> 0:17:39.560 are that high. 0:17:39.040 --> 0:17:40.960 And you have deficits that are this high, and you 0:17:41.000 --> 0:17:43.240 know you're going to be doing nothing but deficit financing 0:17:43.400 --> 0:17:45.399 for the foreseeable fear. I mean, we have economists that 0:17:45.400 --> 0:17:47.680 have basically said, we will never be able to pay 0:17:47.720 --> 0:17:48.120 our debt. 0:17:48.280 --> 0:17:50.760 It will never happen. And so we are. 0:17:50.560 --> 0:17:54.120 Globally entering kind of a debt spiral of just too 0:17:54.200 --> 0:17:57.639 much debt with too little income and too little revenue. 0:17:57.160 --> 0:17:57.919 To sustain it. 0:17:58.080 --> 0:18:02.119 You can't have a four percent, you know, net deficit 0:18:02.160 --> 0:18:05.160 trade deficit when you're only growing your economy by two 0:18:05.160 --> 0:18:07.200 point four percent or two point three percent a year. 0:18:07.480 --> 0:18:12.280 You're literally losing GDP as you speak. You're literally contracting 0:18:12.600 --> 0:18:13.760 the entire economy. 0:18:13.960 --> 0:18:16.720 So President Trump seems to be intent on getting his 0:18:16.960 --> 0:18:21.040 giant tax bill pushed through. The Joint Committee on Taxation 0:18:21.160 --> 0:18:24.360 is estimating this bill would increase the deficit by three 0:18:24.400 --> 0:18:28.399 point eight trillion over a decade to your point, what 0:18:28.440 --> 0:18:30.560 does this mean for the equity market? And if you 0:18:30.640 --> 0:18:32.880 had to put money to work in stocks right now 0:18:32.920 --> 0:18:34.800 for clients, how would you go about doing that? 0:18:35.520 --> 0:18:37.400 Well, it comes back down to what we've been talking 0:18:37.400 --> 0:18:39.040 about for six months down when we were getting to 0:18:39.080 --> 0:18:41.960 a point where there is a global macroeconomic problem with 0:18:42.000 --> 0:18:44.520 your currency, with the M two money supply, with what 0:18:44.600 --> 0:18:46.760 is happening with liquidity, because you remember, you've got all 0:18:46.760 --> 0:18:49.760 these commercial banks that now have unrealized equity losses since 0:18:49.760 --> 0:18:51.600 the chariffs went into a place, and they have all 0:18:51.680 --> 0:18:53.960 kinds of unrealized property losses that they haven't wanted to 0:18:54.000 --> 0:18:56.919 realize yet because the property valuations of our commercial lenders, 0:18:57.040 --> 0:18:59.960 obviously the commercials have gone down. So when you're looking 0:19:00.160 --> 0:19:02.439 not that, you have to think commodities. You have to 0:19:02.440 --> 0:19:05.399 think what are the safety assets for if we have 0:19:05.520 --> 0:19:08.000 some kind of collapse, You've got to have some kind 0:19:08.040 --> 0:19:12.680 of allocation to safety, and that's real assets, hard asset classes, 0:19:12.840 --> 0:19:16.520 real estate, gold, silver, commodities, energy utilities. 0:19:16.760 --> 0:19:18.720 Beyond that, because we have to have all of that 0:19:18.800 --> 0:19:19.160 to live. 0:19:19.200 --> 0:19:21.840 Beyond that, you have to then say, okay, on a 0:19:21.840 --> 0:19:24.240 certain portion of your portfolio, we want growth. So we're 0:19:24.240 --> 0:19:27.400 looking at AI robotics, quantum computing, but you can't look 0:19:27.440 --> 0:19:29.800 at that if you have to have immediate returns because 0:19:29.800 --> 0:19:32.520 this is in the monetization phase. It has not yet monetized. 0:19:32.560 --> 0:19:34.639 It's going to take a while to monetize. So we 0:19:34.720 --> 0:19:37.400 want to mix. But I will tell you these global 0:19:37.480 --> 0:19:39.760 changes that are happening right now are definitely make us 0:19:39.880 --> 0:19:44.040 be more macro resistant and a little bit more cautious 0:19:44.080 --> 0:19:45.840 and a little bit more going towards the things that 0:19:45.880 --> 0:19:48.359 we know are going to perform if we do have 0:19:48.480 --> 0:19:51.120 I mean just Japan yesterday and then in the United 0:19:51.160 --> 0:19:53.400 States to day, both on their twenty year auctions. 0:19:53.840 --> 0:19:55.160 This looks really bad, Doug. 0:19:55.200 --> 0:19:57.400 And this is on the heels of another credit downgrade 0:19:57.520 --> 0:19:58.680 that we've had in our country. 0:19:58.840 --> 0:19:59.960 So I just think that tr. 0:20:00.160 --> 0:20:03.560 Has got a really hard time dealing with all of 0:20:03.560 --> 0:20:05.960 this and still trying to pass a multi trillion dollar 0:20:06.040 --> 0:20:08.760 budget and package. And we can't have the salt limit 0:20:08.960 --> 0:20:11.120 at forty thousand, which is what is being the held 0:20:11.160 --> 0:20:12.600 up now by the Republicans. 0:20:12.800 --> 0:20:16.320 How can you authorize forty thousand as. 0:20:16.200 --> 0:20:18.600 Assault limit when ten thousand was scored to give us, 0:20:18.760 --> 0:20:21.000 you know, multi trillions of dollars of deficit. We just 0:20:21.359 --> 0:20:23.760 don't have the money, and we're starting to see that 0:20:23.800 --> 0:20:25.199 the rest of the world isn't going to buy it 0:20:25.200 --> 0:20:26.760 for us, isn't going to provide it for us. 0:20:26.800 --> 0:20:29.119 So you seem to be saying that it's not just 0:20:29.160 --> 0:20:31.320 a US issue when it comes to the risks of 0:20:31.400 --> 0:20:34.480 equity markets. It's global. I'm getting that clearly right. 0:20:35.000 --> 0:20:36.400 But absolutely it's. 0:20:36.200 --> 0:20:38.520 Something that I think we have to look at in 0:20:38.600 --> 0:20:41.640 terms of sell America. Is that still a predominant theme 0:20:41.640 --> 0:20:43.719 that maybe you want to look at markets like Europe, 0:20:43.760 --> 0:20:47.280 Maybe there are selective markets in Asia that the theme 0:20:47.320 --> 0:20:50.080 of sell America is still something that you want to 0:20:50.160 --> 0:20:51.679 kind of stay true to. 0:20:52.400 --> 0:20:54.600 If you look at the institutionals, the hedge funds and everything, 0:20:54.640 --> 0:20:57.359 they were still very pro Europe and anti America. And 0:20:57.359 --> 0:20:59.960 we're still net selling out in April. So I think 0:21:00.040 --> 0:21:01.480 that there are still a lot of groups that are 0:21:01.520 --> 0:21:03.600 like that. What will you be able to find a 0:21:03.600 --> 0:21:07.240 country that does and outperforms America in twenty twenty five, Yes, 0:21:07.680 --> 0:21:11.440 but will that country be have the economic security that 0:21:11.600 --> 0:21:13.680 we have here in the United States as the world's 0:21:13.720 --> 0:21:16.520 reserve currency. No, But is our security as the world 0:21:16.600 --> 0:21:18.679 reserve currency? What it's always been, and can we just 0:21:18.680 --> 0:21:20.439 relax on that and go to bed at night and 0:21:20.440 --> 0:21:21.159 not have any cares. 0:21:21.320 --> 0:21:22.320