1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,960 --> 00:00:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 3 00:00:15,600 --> 00:00:18,960 Speaker 2: with Paul Sweeney. Join us each day for insight from 4 00:00:18,960 --> 00:00:23,119 Speaker 2: the best in economics, finance, investment, and international relations. You 5 00:00:23,160 --> 00:00:26,520 Speaker 2: can also watch the show live on YouTube. Visit the 6 00:00:26,520 --> 00:00:31,280 Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday 7 00:00:31,280 --> 00:00:34,320 Speaker 2: mornings from seven to ten am Eastern from our global 8 00:00:34,360 --> 00:00:39,000 Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 9 00:00:39,360 --> 00:00:42,920 Speaker 2: or anywhere else you listen and always I'm Bloomberg Radio, 10 00:00:43,080 --> 00:00:47,319 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. Joining us 11 00:00:47,479 --> 00:00:51,760 Speaker 2: here is Na Seen teleb and Scott Patterson and celebration 12 00:00:51,960 --> 00:00:55,360 Speaker 2: of a brutal book. I really can't say enough about 13 00:00:55,360 --> 00:00:58,160 Speaker 2: this for Global Wall Street. I'm sorry. This is the 14 00:00:58,200 --> 00:01:03,640 Speaker 2: adult of book Chaosis, Bill Cohen, William Cohen. He wrote 15 00:01:03,640 --> 00:01:07,240 Speaker 2: a book about Duke Lacrosse. It was Bill Cohen, just 16 00:01:07,280 --> 00:01:10,720 Speaker 2: says Scott Patterson. He's done it again, which he did 17 00:01:10,760 --> 00:01:13,959 Speaker 2: in twenty twelve, and with Dark Pools and all that. 18 00:01:14,280 --> 00:01:16,120 Speaker 2: And the problem we got here, David is we can 19 00:01:16,160 --> 00:01:19,120 Speaker 2: spend the next three hours of tleeb but you know 20 00:01:19,160 --> 00:01:21,440 Speaker 2: we got to give some love here to Scott Patterson, 21 00:01:21,720 --> 00:01:27,120 Speaker 2: who's only here because James Madison University beat Chapel. That 22 00:01:27,200 --> 00:01:32,520 Speaker 2: happened your book. In full disclosure, I'm totally in that 23 00:01:32,680 --> 00:01:36,440 Speaker 2: seems camp and knows that like Wicked in his camp. 24 00:01:36,640 --> 00:01:40,600 Speaker 2: So when you set up your book, which is the 25 00:01:41,000 --> 00:01:45,479 Speaker 2: TALEB team like JMU against the other teams, some French 26 00:01:45,600 --> 00:01:49,360 Speaker 2: dude like unc, how did you set up that polarity? 27 00:01:49,520 --> 00:01:52,320 Speaker 2: Describe the tension of chaos kings? 28 00:01:52,920 --> 00:01:57,000 Speaker 3: Yeah, well, it seems belief is that you can't predict markets, 29 00:01:57,080 --> 00:02:00,160 Speaker 3: so you just need to prepare for extreme events all 30 00:02:00,200 --> 00:02:04,360 Speaker 3: the time, the black Swans, and I can't trast that 31 00:02:04,480 --> 00:02:09,960 Speaker 3: with another character, a French econophysicist named Didier Sornette who 32 00:02:10,480 --> 00:02:14,960 Speaker 3: uses advanced physics and other mathematical models to try to 33 00:02:15,040 --> 00:02:20,040 Speaker 3: predict these big advance He calls them dragon kings, which 34 00:02:20,040 --> 00:02:23,440 Speaker 3: technical term. Yeah, yeah, I call it Newtonian envy. So 35 00:02:23,480 --> 00:02:25,680 Speaker 3: he's a math guy, right, Yeah, he's a math guy. 36 00:02:25,840 --> 00:02:30,080 Speaker 3: He uses some things that could be used to predict 37 00:02:30,080 --> 00:02:33,920 Speaker 3: the explosion of rockets and transpose that onto financial markets. 38 00:02:33,919 --> 00:02:36,920 Speaker 2: You gotta be kid, here's the reality, folks now seeing 39 00:02:36,960 --> 00:02:41,120 Speaker 2: tallav changed the world with John and nero and fooled 40 00:02:41,120 --> 00:02:44,720 Speaker 2: by randomness. Everybody else would have retired to turks and 41 00:02:44,800 --> 00:02:48,000 Speaker 2: caicos or whatever. He went on to do Black Swan. 42 00:02:48,120 --> 00:02:50,120 Speaker 2: And then you and I sat on the stairs of 43 00:02:50,200 --> 00:02:54,519 Speaker 2: Saint Bart's on Park Avenue, and you described anti fragile 44 00:02:54,560 --> 00:02:58,360 Speaker 2: to me. Now, seeing where is the humility among the 45 00:02:58,480 --> 00:03:00,320 Speaker 2: quants in this great boomer. 46 00:03:00,880 --> 00:03:04,679 Speaker 4: The point is you don't need humility. Humility actually is 47 00:03:05,080 --> 00:03:08,160 Speaker 4: not necessary. I don't why people are arrogant. There's just 48 00:03:08,200 --> 00:03:12,840 Speaker 4: got to be paranoid about the right things, namely, how 49 00:03:12,919 --> 00:03:16,880 Speaker 4: much our error costs you when it happens that ruined problem, 50 00:03:17,200 --> 00:03:21,359 Speaker 4: and and and and basically Scott's book is about ruined problems. 51 00:03:22,360 --> 00:03:24,600 Speaker 4: Let's see. So you could be arrogant about everything, all right, 52 00:03:24,639 --> 00:03:27,799 Speaker 4: You could be wrong all the time, doesn't matter. You 53 00:03:27,880 --> 00:03:31,320 Speaker 4: gotta avoid You got to avoid ruin the big things. 54 00:03:31,320 --> 00:03:35,400 Speaker 4: You've got to be right about the big sources of risk, 55 00:03:35,600 --> 00:03:39,240 Speaker 4: and and and the rest take care of itself. 56 00:03:39,600 --> 00:03:42,600 Speaker 5: Could could I get your having come out of the pandemic, 57 00:03:42,680 --> 00:03:47,160 Speaker 5: your perspective on what happened there largely but within markets 58 00:03:47,160 --> 00:03:48,680 Speaker 5: as well, the reaction to what we. 59 00:03:48,680 --> 00:03:53,680 Speaker 4: Saw, you mean, the pandemic, the reaction to it. Yeah, okay, 60 00:03:53,760 --> 00:03:56,880 Speaker 4: we we were. I mean Scott discusses what happened in 61 00:03:56,920 --> 00:04:01,880 Speaker 4: the pandemic and and and how we were sessing over it. 62 00:04:02,680 --> 00:04:05,120 Speaker 4: I mean when we started the idea of universal. When 63 00:04:05,120 --> 00:04:09,120 Speaker 4: Mark started Universal, I was a passenger, you know, I 64 00:04:09,160 --> 00:04:14,080 Speaker 4: was a retired passenger. But the name universa means universal properties. 65 00:04:14,240 --> 00:04:21,400 Speaker 4: And we're talking about some universality of these classes of 66 00:04:21,600 --> 00:04:26,719 Speaker 4: tail uh processes that generate large tale events, and we 67 00:04:26,839 --> 00:04:29,480 Speaker 4: call them, I call them grace WANs. Hence that that's 68 00:04:29,480 --> 00:04:35,480 Speaker 4: where the name universe came from. So the the we were, 69 00:04:35,520 --> 00:04:37,520 Speaker 4: I was obsessing even when I wrote the blacks one 70 00:04:37,520 --> 00:04:41,200 Speaker 4: about pandemics, and kept obsessing and they said, okay, I 71 00:04:41,680 --> 00:04:44,080 Speaker 4: didn't remember the interview. Someone asked me, what what you 72 00:04:44,120 --> 00:04:46,560 Speaker 4: have to worry about this? And that no, you can't. 73 00:04:46,560 --> 00:04:51,599 Speaker 4: To worry. First thing about some germ traveling on air France. 74 00:04:52,680 --> 00:04:55,800 Speaker 4: Air France, you get good food and if they're bad germs, 75 00:04:55,839 --> 00:04:57,920 Speaker 4: they travel along British air or they get bad food. 76 00:04:57,960 --> 00:05:02,400 Speaker 4: So that was and sure enough nothing had happened since 77 00:05:02,800 --> 00:05:05,240 Speaker 4: for one hundred years, or for close to one hundred years, right, 78 00:05:05,600 --> 00:05:11,200 Speaker 4: So and people say, well, you know, just like financial risks, 79 00:05:11,800 --> 00:05:14,480 Speaker 4: you know, people the perception for before the crisis say, oh, 80 00:05:14,480 --> 00:05:16,560 Speaker 4: we don't have to worry about these they don't happen anymore. 81 00:05:17,000 --> 00:05:17,960 Speaker 4: Sure enough, All. 82 00:05:17,880 --> 00:05:20,320 Speaker 2: Right, Scott Patterson, you've got you know, one of the 83 00:05:20,400 --> 00:05:23,440 Speaker 2: sections is the Boston section that we could problem and 84 00:05:23,520 --> 00:05:26,240 Speaker 2: the answer is flying blind. I mean, you've been doing 85 00:05:26,279 --> 00:05:29,080 Speaker 2: this for fifteen years at the Wall Street Journal, trying 86 00:05:29,080 --> 00:05:32,040 Speaker 2: to figure out the mathiness and the certitude. And I'm 87 00:05:32,040 --> 00:05:34,279 Speaker 2: gonna wake up and win. We're gonna we're number six, 88 00:05:34,320 --> 00:05:37,279 Speaker 2: We're gonna be number two or number one. What are 89 00:05:37,320 --> 00:05:39,320 Speaker 2: we flying blind on right now? 90 00:05:41,160 --> 00:05:45,520 Speaker 3: I think that you know, right now, there's obviously a 91 00:05:45,600 --> 00:05:50,200 Speaker 3: huge amount of complacency in markets. Yeah, you know, we're 92 00:05:50,240 --> 00:05:53,680 Speaker 3: hitting records time after time, and yet you look outside 93 00:05:54,560 --> 00:05:59,400 Speaker 3: Wall Street and it looks pretty crazy. So there's all 94 00:05:59,440 --> 00:06:02,320 Speaker 3: sorts of things that can happen. And I know Naim 95 00:06:02,320 --> 00:06:05,599 Speaker 3: wants to talk about China. I've been predicting China would 96 00:06:05,880 --> 00:06:08,680 Speaker 3: collapse for two decades now, and they don't. 97 00:06:09,200 --> 00:06:12,320 Speaker 2: Right careful cash flow lives there. My oldest son speak 98 00:06:12,320 --> 00:06:14,760 Speaker 2: care of China's not going to collect. Let's do this, 99 00:06:14,800 --> 00:06:17,239 Speaker 2: We do China. David Gurr in the next section, Okay, 100 00:06:17,279 --> 00:06:20,240 Speaker 2: we're go an extended conversation when NA see teleb and 101 00:06:20,839 --> 00:06:24,320 Speaker 2: Scott Patterson Chaos Kings is a book. Okay, you know 102 00:06:24,400 --> 00:06:27,120 Speaker 2: I asked that question to Scott. I seem to set 103 00:06:27,160 --> 00:06:30,480 Speaker 2: you up here. We're flying blind, Na seeing teleb and 104 00:06:30,640 --> 00:06:32,880 Speaker 2: private equity in private credit. 105 00:06:33,080 --> 00:06:37,640 Speaker 4: It's all the rage, Okay. The first thing I have 106 00:06:37,720 --> 00:06:43,000 Speaker 4: to say that we have a that problem in the West. Okay, 107 00:06:43,320 --> 00:06:46,919 Speaker 4: whether in the visual government, you know, you can have that. 108 00:06:47,600 --> 00:06:51,560 Speaker 4: China has that, but you must grow. And the problem 109 00:06:51,680 --> 00:06:55,200 Speaker 4: of the West is that we have an escurve of 110 00:06:55,320 --> 00:07:00,440 Speaker 4: growth or GDP or per capita and look like we're 111 00:07:00,480 --> 00:07:05,279 Speaker 4: at on the top right of that curve. So it's concave. 112 00:07:05,720 --> 00:07:09,720 Speaker 4: And people have two cars, they have two homes, and 113 00:07:09,840 --> 00:07:12,320 Speaker 4: what do they want, I mean, have perier watership to them. 114 00:07:12,440 --> 00:07:16,080 Speaker 4: I mean, so the incentive to grow isn't there. So 115 00:07:16,200 --> 00:07:19,760 Speaker 4: here it's a serious problem when you have low growth 116 00:07:19,800 --> 00:07:22,640 Speaker 4: and a lot of that. And the problem is that 117 00:07:23,120 --> 00:07:29,280 Speaker 4: Western Uh. You know, economies have never had more debt 118 00:07:29,400 --> 00:07:34,000 Speaker 4: in history as a time where gross became concave simply 119 00:07:34,200 --> 00:07:36,840 Speaker 4: the nature of gross. You grow fast when you're China, 120 00:07:37,160 --> 00:07:39,360 Speaker 4: because you've got to pull people out of the provinces 121 00:07:39,400 --> 00:07:42,480 Speaker 4: and stuff and centers of living can still rise and 122 00:07:42,520 --> 00:07:43,440 Speaker 4: make a difference now. 123 00:07:43,480 --> 00:07:46,600 Speaker 2: So they're not quants of credits sweet years ago. There, 124 00:07:47,560 --> 00:07:51,640 Speaker 2: our listeners, our viewers there, they put their pants on 125 00:07:51,640 --> 00:07:55,400 Speaker 2: one leg at a time. How did they hedge against 126 00:07:55,480 --> 00:07:58,760 Speaker 2: your concave tensions that we're in right now? How do 127 00:07:58,880 --> 00:07:59,960 Speaker 2: near mortals head? 128 00:08:00,840 --> 00:08:03,960 Speaker 4: Okay, the whole thing is, it's not you hedge. If 129 00:08:03,960 --> 00:08:08,360 Speaker 4: you're investing without a tail headge, you're practically not investing 130 00:08:09,120 --> 00:08:12,000 Speaker 4: because of the ruined problem. And that's what he discusses 131 00:08:12,320 --> 00:08:14,840 Speaker 4: in the book. That's my first statement and the second 132 00:08:14,880 --> 00:08:19,520 Speaker 4: one that people are way too static. They imagine either 133 00:08:20,240 --> 00:08:29,080 Speaker 4: they have a memory that's that's either too short or 134 00:08:28,960 --> 00:08:32,160 Speaker 4: or or has problems updating that they don't realize that, 135 00:08:32,280 --> 00:08:35,840 Speaker 4: for example, what's happening in China that the Nature index 136 00:08:36,080 --> 00:08:40,040 Speaker 4: of publications that's very hard to gain. What China used 137 00:08:40,080 --> 00:08:44,200 Speaker 4: to have one percent today it's in the twenties and 138 00:08:44,360 --> 00:08:48,560 Speaker 4: rising so tells you that that's a leading indicator of 139 00:08:48,600 --> 00:08:53,400 Speaker 4: what technologies may come out of China. So you realize that, 140 00:08:54,679 --> 00:08:59,640 Speaker 4: get a look back before seventeen fifty around when the 141 00:08:59,640 --> 00:09:03,160 Speaker 4: industry revolution started. Starting the show, so we're starting to 142 00:09:03,200 --> 00:09:05,760 Speaker 4: shift and in eighteen thirty TRYINGA had eight times the 143 00:09:05,880 --> 00:09:08,880 Speaker 4: GDP of Brittain. We're back there as soon it's gone. 144 00:09:09,000 --> 00:09:13,920 Speaker 4: So we're going back now in times like reversing the 145 00:09:13,920 --> 00:09:16,520 Speaker 4: Dominus of the West, not because the West is doing poorly, 146 00:09:16,960 --> 00:09:18,720 Speaker 4: but because it got one work. 147 00:09:18,920 --> 00:09:20,880 Speaker 2: David, We're going to China right now now seems to 148 00:09:20,920 --> 00:09:23,199 Speaker 2: running the show. We're doing China here right now we'll 149 00:09:23,240 --> 00:09:25,800 Speaker 2: do with the stock market opening your Foremanu's David Gern 150 00:09:25,920 --> 00:09:28,240 Speaker 2: China with Scott Patterson. Well now seeing. 151 00:09:28,080 --> 00:09:29,719 Speaker 5: Steth, let me ask you more about you said you've 152 00:09:29,760 --> 00:09:32,600 Speaker 5: been predicting the sort of dissolutionally been seeing for for 153 00:09:32,640 --> 00:09:35,680 Speaker 5: twenty years. What stands out to you about this moment. 154 00:09:35,720 --> 00:09:37,560 Speaker 5: We've spent the whole week talking about these kind of 155 00:09:37,679 --> 00:09:40,319 Speaker 5: unprecedented actions, the way they were delivered by the PBOC 156 00:09:40,520 --> 00:09:42,880 Speaker 5: in China. What that says about the actual state of 157 00:09:42,880 --> 00:09:45,640 Speaker 5: the economy there. Talk a bit about that and sort 158 00:09:45,640 --> 00:09:47,360 Speaker 5: of your your vantage of it, and also just sort 159 00:09:47,360 --> 00:09:50,160 Speaker 5: of how much varacity we can ascribe to the statistics 160 00:09:50,160 --> 00:09:51,360 Speaker 5: that we're getting out of China. 161 00:09:52,480 --> 00:09:55,000 Speaker 3: Well as to the veracity of the statistics. Who knows, 162 00:09:55,760 --> 00:09:59,120 Speaker 3: you know, they keep doing this, they keep they hit 163 00:09:59,160 --> 00:10:03,040 Speaker 3: a slow down and then they you know, hit the accelerator. 164 00:10:03,480 --> 00:10:04,320 Speaker 2: They've pulled. 165 00:10:04,440 --> 00:10:07,600 Speaker 3: You know, after the GFC, a great financial crisis, China 166 00:10:07,640 --> 00:10:12,080 Speaker 3: pulled the entire world out of that situation by stimulus. 167 00:10:13,920 --> 00:10:16,079 Speaker 3: You know, who knows how long they can keep it up. 168 00:10:16,160 --> 00:10:19,400 Speaker 3: It's a big mystery for me. You know, my focus 169 00:10:19,440 --> 00:10:24,280 Speaker 3: these days is on climate and the dominance of China 170 00:10:24,400 --> 00:10:29,400 Speaker 3: and climate technology is astonishing, and that's the future of energy, 171 00:10:29,440 --> 00:10:32,400 Speaker 3: it's the future of vehicles, it's the future of batteries. 172 00:10:32,920 --> 00:10:35,920 Speaker 3: And they're you know, light years ahead of everybody. We're 173 00:10:35,920 --> 00:10:38,559 Speaker 3: trying to catch up. Europe's trying to catch up, and 174 00:10:38,920 --> 00:10:41,559 Speaker 3: that for China is a big, big advantage. 175 00:10:41,640 --> 00:10:43,320 Speaker 2: I got to do a shout out here with the 176 00:10:43,360 --> 00:10:46,960 Speaker 2: Wall Street Journal this week with a stunning effort, China's 177 00:10:47,040 --> 00:10:52,040 Speaker 2: newest nuclear submarine sank, setting back its military modernization. That 178 00:10:52,120 --> 00:10:56,120 Speaker 2: was an incredible story. Out of your shop. Now on 179 00:10:56,320 --> 00:11:00,719 Speaker 2: China again, continue, Aaron Friedberg for Foreign Fair says it's 180 00:11:00,720 --> 00:11:05,040 Speaker 2: a Marxist Leninist regime. Nobody in Beijing read fooled. 181 00:11:04,720 --> 00:11:08,000 Speaker 4: By randomness now. But the point is the point is 182 00:11:08,040 --> 00:11:10,400 Speaker 4: that China is in reverse. Is the reverse of Europe. 183 00:11:10,600 --> 00:11:13,880 Speaker 4: If you're small in China, you can do whatever you want. 184 00:11:14,720 --> 00:11:17,720 Speaker 4: If you're big, the government calls you up for a meeting. 185 00:11:17,920 --> 00:11:18,120 Speaker 1: Right. 186 00:11:18,320 --> 00:11:23,160 Speaker 4: So in Europe, if you're small, you're overregulated. You got 187 00:11:23,160 --> 00:11:26,680 Speaker 4: you got like five tax inspectors breathing down your neck. 188 00:11:26,720 --> 00:11:28,920 Speaker 4: You've got to get all these permits. If you're big, 189 00:11:29,480 --> 00:11:32,360 Speaker 4: then you own the government, okay, particularly the case in 190 00:11:32,360 --> 00:11:35,520 Speaker 4: France and Germany everywhere and practically everywhere in Europe. So 191 00:11:36,080 --> 00:11:39,320 Speaker 4: China is a reverse. So they say, okay, it's capitalism 192 00:11:39,640 --> 00:11:44,079 Speaker 4: okay for the small and communism for the large, and 193 00:11:44,240 --> 00:11:46,880 Speaker 4: its effectively it's not that much that there's you know, 194 00:11:48,600 --> 00:11:51,160 Speaker 4: a centralized economy except for the top. 195 00:11:51,240 --> 00:11:56,440 Speaker 2: So what about America into our fractured election. 196 00:11:55,280 --> 00:11:59,720 Speaker 4: Okay, I don't know about whether the election makes it 197 00:11:59,720 --> 00:12:03,360 Speaker 4: different and uh in many respects. But we have a problem. 198 00:12:03,480 --> 00:12:09,599 Speaker 4: And that problem is that our death servicing is increasing, 199 00:12:10,600 --> 00:12:13,880 Speaker 4: and I guess that you cross is more than military 200 00:12:13,880 --> 00:12:17,080 Speaker 4: spending is more already okay, so and and it will 201 00:12:17,080 --> 00:12:19,199 Speaker 4: continue to pay interest on that. Now you may say 202 00:12:19,320 --> 00:12:23,560 Speaker 4: interest rates may be lower. I don't think we can 203 00:12:23,640 --> 00:12:26,480 Speaker 4: go back to zero interest rate because zero interest rates 204 00:12:27,280 --> 00:12:29,160 Speaker 4: gallas here, all right, so we're going to go back 205 00:12:29,200 --> 00:12:32,160 Speaker 4: to normal interest rates. So the death problem is not 206 00:12:32,280 --> 00:12:35,160 Speaker 4: going to go away. That service is going to keep increasing. 207 00:12:36,080 --> 00:12:40,520 Speaker 4: And and the problem is if the East becomes and 208 00:12:40,559 --> 00:12:43,680 Speaker 4: that's just China, just the East in general becomes powerful 209 00:12:43,840 --> 00:12:48,400 Speaker 4: and and becomes a target of you know, retirement money 210 00:12:48,400 --> 00:12:51,040 Speaker 4: and stuff like that, then the dollar would be in trouble. 211 00:13:01,360 --> 00:13:04,240 Speaker 2: Michael Mobison with us two days ago and nussing teleb 212 00:13:04,720 --> 00:13:08,440 Speaker 2: today was Scott Patterson and celebration of chaos King Scott, 213 00:13:08,480 --> 00:13:11,240 Speaker 2: what's the other side of the story here the mathewness 214 00:13:11,320 --> 00:13:13,679 Speaker 2: and certitude of Zurich, Switzerland. 215 00:13:15,440 --> 00:13:19,440 Speaker 3: Yeah, you're referring to Didder Sournett, the Dragon Kings guy. 216 00:13:20,960 --> 00:13:24,280 Speaker 3: You know, I we were talking about China, predicting what 217 00:13:24,320 --> 00:13:27,800 Speaker 3: happens in China. I just you know, after covering financial 218 00:13:27,840 --> 00:13:32,800 Speaker 3: markets and talking to you know, hedge fund managers who 219 00:13:32,840 --> 00:13:35,480 Speaker 3: twenty years ago were billionaires and now they're you know, 220 00:13:36,600 --> 00:13:41,400 Speaker 3: buzzing tables at diners. I you know, this is where 221 00:13:41,400 --> 00:13:44,080 Speaker 3: I come down on the Seams side is I don't 222 00:13:44,120 --> 00:13:48,600 Speaker 3: think you can predict markets. I think it's impossible. I 223 00:13:48,640 --> 00:13:50,920 Speaker 3: think that they're you know, when you look at quant 224 00:13:51,120 --> 00:13:55,160 Speaker 3: trading strategies are very short term, like over the course 225 00:13:55,200 --> 00:13:57,839 Speaker 3: of a few minutes and seconds. Those are the only 226 00:13:58,120 --> 00:14:01,400 Speaker 3: strategies that really survive long term. And even they you know, 227 00:14:01,520 --> 00:14:04,360 Speaker 3: my first book The Quants showed how they almost blew 228 00:14:04,440 --> 00:14:08,240 Speaker 3: up in the two thousands in a period of big 229 00:14:08,280 --> 00:14:08,760 Speaker 3: d leveraging. 230 00:14:09,000 --> 00:14:13,000 Speaker 4: So basically they're basically getting a higher dimensional bit than mask. 231 00:14:14,040 --> 00:14:15,199 Speaker 2: Okay, yeah, they're trading. 232 00:14:15,480 --> 00:14:19,040 Speaker 3: Didn't asked very rapidly, and that's that's good strategy. But 233 00:14:19,560 --> 00:14:23,520 Speaker 3: you know, trading making big bets on your prediction of 234 00:14:23,520 --> 00:14:26,000 Speaker 3: what China is going to do next quarter, next year, 235 00:14:26,760 --> 00:14:28,680 Speaker 3: or you know what the Fed is going to do, 236 00:14:29,560 --> 00:14:30,680 Speaker 3: This is very very. 237 00:14:30,520 --> 00:14:32,920 Speaker 2: Hard to do. My humility or David Gray is it's 238 00:14:32,920 --> 00:14:36,000 Speaker 2: a once in a lifetime event. And you know, years 239 00:14:36,040 --> 00:14:39,040 Speaker 2: ago in the old world, which is where tab is from, 240 00:14:39,360 --> 00:14:41,600 Speaker 2: you know, eleven Aine and all that, and over to 241 00:14:41,600 --> 00:14:44,560 Speaker 2: the continent of Europe. You know, they're laughing at us 242 00:14:44,600 --> 00:14:47,160 Speaker 2: about once in a lifetime event. You and I have 243 00:14:47,520 --> 00:14:51,680 Speaker 2: gotten Gray doesn't eve any great. But the answer is 244 00:14:51,680 --> 00:14:53,520 Speaker 2: there's a lot of once in a lifetime events. 245 00:14:53,680 --> 00:14:58,200 Speaker 5: David, I have a question about young people in this industry, 246 00:14:58,240 --> 00:14:59,800 Speaker 5: and it's inspired by a conversation. I had to my 247 00:15:00,080 --> 00:15:02,200 Speaker 5: and Robert Smith, who is at NPR. He's now running 248 00:15:02,200 --> 00:15:04,200 Speaker 5: the Night Badge of program at Columbia. I said, I 249 00:15:04,200 --> 00:15:05,560 Speaker 5: was gonna be talking to you today and he said, 250 00:15:05,840 --> 00:15:07,240 Speaker 5: here's what you should ask him. He pulled up a 251 00:15:07,240 --> 00:15:10,040 Speaker 5: tweet that you filed more than a year ago. Now, 252 00:15:10,520 --> 00:15:12,480 Speaker 5: the story we haven't covered this week is Caroline Ellison 253 00:15:12,880 --> 00:15:15,480 Speaker 5: of FTX getting sentenced, going to spend two years in prison, 254 00:15:15,480 --> 00:15:18,880 Speaker 5: and you tweeted about Sam Begmanfreed when everything blew up. 255 00:15:19,120 --> 00:15:21,080 Speaker 5: He said, the problem with people like SBF is knowing 256 00:15:21,080 --> 00:15:23,360 Speaker 5: the tiny bit of statistics to pairrot about it, but 257 00:15:23,480 --> 00:15:27,480 Speaker 5: not understanding processes. That is dynamics, cross time. Shakespeare has 258 00:15:27,520 --> 00:15:31,280 Speaker 5: survived nearly half a millennium by filtering by time. Then 259 00:15:31,320 --> 00:15:33,960 Speaker 5: you close, Sam Begnfreed worked at Jane Street. You're right 260 00:15:34,000 --> 00:15:36,760 Speaker 5: to Jane Street. He would have flunked my job interview. 261 00:15:37,040 --> 00:15:39,720 Speaker 5: What does the Naseem teleb job interview look like? What 262 00:15:39,720 --> 00:15:41,120 Speaker 5: do you ask somebody's applying. 263 00:15:40,920 --> 00:15:47,000 Speaker 4: For understand some basics things like ruined problems and understand dynamics. 264 00:15:47,520 --> 00:15:49,920 Speaker 4: So which is the same. You know that people if 265 00:15:49,960 --> 00:15:56,520 Speaker 4: you have probability of losing money, eventually would go out 266 00:15:56,560 --> 00:16:00,480 Speaker 4: of business, okay, over time. So if you're aware of it, 267 00:16:00,560 --> 00:16:02,240 Speaker 4: that's fine. If you're not aware of it, you've got 268 00:16:02,240 --> 00:16:05,920 Speaker 4: a problem. The other one is sizing comes from sizing. Also, 269 00:16:07,400 --> 00:16:11,360 Speaker 4: if you have the edge, you still have probably one 270 00:16:11,440 --> 00:16:14,320 Speaker 4: hundred percent of blown up if you don't size properly. 271 00:16:14,400 --> 00:16:18,800 Speaker 4: So sizing is very delicate. Two basic things, And the 272 00:16:18,880 --> 00:16:21,440 Speaker 4: third one is about fat tales, the difference between tin 273 00:16:21,480 --> 00:16:24,920 Speaker 4: tails and fat tails. That's pretty much the theme of 274 00:16:25,120 --> 00:16:30,080 Speaker 4: the Black Swan, the remedy and anti fragile and discussion 275 00:16:30,080 --> 00:16:32,520 Speaker 4: of white people don't understanding and skinning the game. Okay, 276 00:16:32,800 --> 00:16:36,640 Speaker 4: so the difference between fat tail and thin tail finance 277 00:16:36,800 --> 00:16:41,560 Speaker 4: is not Gaussian. Now everybody claims, yeah, we know that. Yeah, 278 00:16:41,560 --> 00:16:44,880 Speaker 4: if you know that, then why are you using Gaussian tools? 279 00:16:44,880 --> 00:16:47,760 Speaker 4: What tools do you use? What do you suggest people 280 00:16:47,800 --> 00:16:51,480 Speaker 4: in the street understand the parreto eighty twenty? It is 281 00:16:51,600 --> 00:16:55,960 Speaker 4: very intuitive. You need to learn to know some mass, 282 00:16:55,960 --> 00:16:59,400 Speaker 4: but not enough, okay to get to stuck to you know, 283 00:16:59,440 --> 00:17:01,080 Speaker 4: if you teach people a little bit of math but 284 00:17:01,120 --> 00:17:02,480 Speaker 4: not enough, they go to the coe. 285 00:17:03,200 --> 00:17:05,880 Speaker 2: This not Sing's laughing at me here right now because 286 00:17:05,880 --> 00:17:08,359 Speaker 2: he knows it to Thudau, David, thank you, Kerr and 287 00:17:08,400 --> 00:17:10,399 Speaker 2: I don't speak before the show. In fact we're not 288 00:17:10,480 --> 00:17:13,760 Speaker 2: on speaking terms. But I'm so I brought that up. 289 00:17:14,440 --> 00:17:17,880 Speaker 2: Not seem fine, you know me on position sizing. Position 290 00:17:18,000 --> 00:17:21,040 Speaker 2: sizing is everything, and right now we're living in a 291 00:17:21,080 --> 00:17:25,359 Speaker 2: MAG seven world where everybody, whether they admit it or not, 292 00:17:25,560 --> 00:17:28,560 Speaker 2: is Scott Patterson's four oh one k at the Journal 293 00:17:28,920 --> 00:17:31,760 Speaker 2: is loaded up with Nvidia and all the rest of 294 00:17:31,800 --> 00:17:35,200 Speaker 2: it not seeing tell out on Mag seven the anti 295 00:17:35,480 --> 00:17:36,560 Speaker 2: position sizing. 296 00:17:37,480 --> 00:17:41,800 Speaker 4: Okay, so I let me give you one one thing 297 00:17:41,840 --> 00:17:44,000 Speaker 4: since I don't have a lot of things. Yeah, I read. 298 00:17:44,400 --> 00:17:46,920 Speaker 4: I wrote a tweet saying that if someone gave you 299 00:17:47,119 --> 00:17:51,720 Speaker 4: twenty four hours in advance the newspaper tomorrow's newspaper, that 300 00:17:51,840 --> 00:17:56,200 Speaker 4: you would go bust. And actually someone just tested it. 301 00:17:56,400 --> 00:18:01,760 Speaker 4: Victor Hagani Formative LTCN, who visibly no has long experience 302 00:18:01,840 --> 00:18:04,560 Speaker 4: in the market, has tested it by giving people over 303 00:18:04,880 --> 00:18:09,200 Speaker 4: fifteen years next day's the newspaper and tell and giving 304 00:18:09,240 --> 00:18:12,359 Speaker 4: them you can trade that today's price, knowing towards newspaper, 305 00:18:13,840 --> 00:18:17,919 Speaker 4: and people didn't do well. Why One of it is, 306 00:18:18,000 --> 00:18:21,639 Speaker 4: of course sizing. They don't know how to size the 307 00:18:21,640 --> 00:18:24,160 Speaker 4: position right, whether whether they're right. They don't know how 308 00:18:24,240 --> 00:18:26,760 Speaker 4: right they are because they can't figure out how much 309 00:18:26,800 --> 00:18:30,160 Speaker 4: of it is noise, all right, and of course the sizing. 310 00:18:30,440 --> 00:18:33,679 Speaker 4: So so the just you know, I heard of the 311 00:18:33,720 --> 00:18:36,880 Speaker 4: paper yesterday because it starts with my tweet. It's interesting 312 00:18:37,119 --> 00:18:39,520 Speaker 4: to have a tweet turning into a paper by someone else, 313 00:18:40,000 --> 00:18:42,960 Speaker 4: like for someone lazy like me, it's perfect, right because 314 00:18:42,960 --> 00:18:45,840 Speaker 4: tweets I don't an airport's typically right, So. 315 00:18:46,080 --> 00:18:49,560 Speaker 3: And that's not that's not how markets work. The markets 316 00:18:49,600 --> 00:18:52,959 Speaker 3: work on anticipation of news events. Oftentimes, when you you know, 317 00:18:53,080 --> 00:18:55,960 Speaker 3: you see the Fed cut interest rates, the marketer go down, Yeah, 318 00:18:56,000 --> 00:18:57,960 Speaker 3: because it's already traded on that news. 319 00:18:57,960 --> 00:19:01,000 Speaker 4: There's a fact Tony story and anti a right, how 320 00:19:01,240 --> 00:19:07,160 Speaker 4: people who anticipated the invasion of Iraq or the starting 321 00:19:07,160 --> 00:19:12,320 Speaker 4: of the war against Saddam in nineteen ninety one, those 322 00:19:12,400 --> 00:19:16,080 Speaker 4: what dissipated It went bust because guess what happened to 323 00:19:16,119 --> 00:19:20,000 Speaker 4: oil prices? They collapsed, all right. So it's not figuring 324 00:19:20,080 --> 00:19:22,760 Speaker 4: out the news. There's something more subtle about markets. 325 00:19:23,400 --> 00:19:25,480 Speaker 2: I want to get one more question in a kiss 326 00:19:25,560 --> 00:19:27,280 Speaker 2: Kings and Nassin, then we've got to talk to you 327 00:19:27,320 --> 00:19:30,880 Speaker 2: about it. Fractured your old World, your Europe with one, 328 00:19:30,960 --> 00:19:34,440 Speaker 2: two three. They're calling them conflicts, but I think there 329 00:19:34,720 --> 00:19:37,840 Speaker 2: was Skim Patterson, you have such a history of writing 330 00:19:37,880 --> 00:19:41,040 Speaker 2: of the tension of Wall Street in your experience. Is 331 00:19:41,080 --> 00:19:45,240 Speaker 2: anybody on Wall Street putting the tension and the outcome 332 00:19:45,359 --> 00:19:48,639 Speaker 2: of it of your books into practice or we still 333 00:19:48,640 --> 00:19:52,120 Speaker 2: what a to var which I know Nasim loves var. 334 00:19:52,640 --> 00:19:54,119 Speaker 2: Is anything changed on Wall Street? 335 00:19:54,200 --> 00:19:57,720 Speaker 3: I think that's it's funny. No, I don't think that 336 00:19:57,800 --> 00:20:00,399 Speaker 3: we learn our lessons. I think people are still using 337 00:20:00,640 --> 00:20:04,520 Speaker 3: value at risk even though it just got just I 338 00:20:04,520 --> 00:20:05,840 Speaker 3: mean it was a laughing stock. 339 00:20:05,640 --> 00:20:06,480 Speaker 2: In two thousand and eight. 340 00:20:07,560 --> 00:20:09,520 Speaker 3: People looked at this and like this is insane. We're 341 00:20:09,520 --> 00:20:11,920 Speaker 3: cutting out five percent of the worst days every year, 342 00:20:11,960 --> 00:20:15,200 Speaker 3: and like that doesn't matter. So yeah, no, I don't 343 00:20:15,240 --> 00:20:17,399 Speaker 3: think we learned less I wanted to come back to 344 00:20:17,440 --> 00:20:23,240 Speaker 3: the question of an interview asking, you know at a 345 00:20:23,240 --> 00:20:28,879 Speaker 3: hedge fund. Yeah. I spoke to a while back somebody 346 00:20:28,920 --> 00:20:33,399 Speaker 3: who you know at Renaissance Technologies and the big quant 347 00:20:33,600 --> 00:20:36,480 Speaker 3: Shop of Long Island. One of the questions they asked 348 00:20:36,640 --> 00:20:42,280 Speaker 3: perspective employees is how does the toilet work? Which you 349 00:20:42,320 --> 00:20:44,760 Speaker 3: know you're talking about dynamics. I thought that that's an 350 00:20:44,800 --> 00:20:48,840 Speaker 3: inod question interesting and the answer is to vacuum. 351 00:20:49,080 --> 00:20:50,960 Speaker 2: I want to devote the rest of the time with 352 00:20:51,080 --> 00:20:54,320 Speaker 2: great honor to all the people from Lebanon that have 353 00:20:54,359 --> 00:20:57,400 Speaker 2: assisted David ger and I and what we've seen over 354 00:20:57,440 --> 00:21:01,200 Speaker 2: the last weeks, days and Indian quarters and years led 355 00:21:01,240 --> 00:21:05,720 Speaker 2: by Jumana Bricchecci over in Dubai, who has been really 356 00:21:05,760 --> 00:21:09,200 Speaker 2: helpful to us here. Her show is Horizon out of Dubai. 357 00:21:09,320 --> 00:21:12,639 Speaker 2: Look for that now, seeing you have lived this, you 358 00:21:12,680 --> 00:21:16,080 Speaker 2: were in your family or deputy prime ministers, you were 359 00:21:16,160 --> 00:21:19,800 Speaker 2: involved with it. Out of the Greek Orthodox Christian sphere 360 00:21:19,960 --> 00:21:25,560 Speaker 2: of a Lebanon I remember with great prosperity, it is shattered. 361 00:21:26,200 --> 00:21:26,960 Speaker 2: What did you not know? 362 00:21:27,119 --> 00:21:29,280 Speaker 4: I mean, I was in Lebanon two weeks ago, and 363 00:21:29,359 --> 00:21:31,879 Speaker 4: I go to Lebanon, I reside there part of the time. 364 00:21:32,680 --> 00:21:36,399 Speaker 4: So what you see in pictures isn't doesn't map to 365 00:21:36,520 --> 00:21:38,760 Speaker 4: any when you hear about the economy, doesn't map to 366 00:21:38,800 --> 00:21:42,960 Speaker 4: what's going on there. There've been a little slowed down 367 00:21:43,000 --> 00:21:46,160 Speaker 4: by the slowed down by the Gaza War, some kind 368 00:21:46,200 --> 00:21:51,879 Speaker 4: of rise and across all economic sectors in Lebanon On 369 00:21:51,960 --> 00:21:55,960 Speaker 4: a more anti fragile basis. In other words, the collapse 370 00:21:55,960 --> 00:22:00,399 Speaker 4: of the government of Lebanon economically gave rise to central 371 00:22:01,040 --> 00:22:06,000 Speaker 4: large municipal power and to a lot more entrepreneurship. Okay, 372 00:22:06,240 --> 00:22:10,280 Speaker 4: because the central bank was conducting a ponzi and the 373 00:22:10,320 --> 00:22:14,240 Speaker 4: ponzi went away, and then suddenly people recovered and four 374 00:22:14,320 --> 00:22:18,240 Speaker 4: years later, you know, it's on amend and and you 375 00:22:18,280 --> 00:22:21,040 Speaker 4: can see economic activity across all sectors. I mean, restaurants 376 00:22:21,080 --> 00:22:24,080 Speaker 4: are all full, new restaurants opening up like every day, 377 00:22:27,240 --> 00:22:29,639 Speaker 4: at least in my in my my neighbor is like 378 00:22:29,680 --> 00:22:32,400 Speaker 4: forty to fifty past year, I mean every day every week. 379 00:22:33,400 --> 00:22:35,960 Speaker 4: So so you have you have. So what the perception 380 00:22:36,040 --> 00:22:40,680 Speaker 4: of Lebanon from from the outside is quite distorted, given 381 00:22:40,720 --> 00:22:45,359 Speaker 4: that I spent time there the this war, I think 382 00:22:45,640 --> 00:22:49,440 Speaker 4: is I mean, there there is a problem. Okay, let's 383 00:22:49,520 --> 00:22:54,080 Speaker 4: let's say there is a problem. The fighting is confined 384 00:22:54,640 --> 00:23:00,600 Speaker 4: to Hizballah and the State of Israel. But but but 385 00:23:00,720 --> 00:23:07,199 Speaker 4: of course their side effects outside. But something tells me 386 00:23:07,320 --> 00:23:09,320 Speaker 4: that that if you go to a bigger war, if 387 00:23:09,359 --> 00:23:12,240 Speaker 4: Israel wants to drive the US and too a that war, 388 00:23:12,920 --> 00:23:15,280 Speaker 4: and then then then think would would would blow up? 389 00:23:15,440 --> 00:23:19,600 Speaker 2: David? Yeah, David. One final question, how. 390 00:23:19,520 --> 00:23:21,399 Speaker 5: Do you engage the prospects of that happening. 391 00:23:21,920 --> 00:23:25,280 Speaker 4: I think that the Yes is resisting and the Iranians 392 00:23:25,320 --> 00:23:29,360 Speaker 4: are trying to be nice, and there is a more 393 00:23:29,520 --> 00:23:33,040 Speaker 4: considerate tone here, so we'll see, we'll see. I mean, 394 00:23:34,240 --> 00:23:36,280 Speaker 4: from there, you can see how irrational would be for 395 00:23:36,320 --> 00:23:40,560 Speaker 4: everyone to get involved in broader war, particularly that long 396 00:23:40,680 --> 00:23:42,800 Speaker 4: term it's not going to help me, think about it. 397 00:23:42,880 --> 00:23:45,240 Speaker 4: Israel had with his Balla in two thousand and six, 398 00:23:45,480 --> 00:23:49,280 Speaker 4: they got stronger, they they had they occupied the southern 399 00:23:49,359 --> 00:23:52,840 Speaker 4: Lebanon and and has been stronger and stronger. So every 400 00:23:52,840 --> 00:23:57,600 Speaker 4: every war is just like delayed training program for for 401 00:23:57,680 --> 00:24:02,360 Speaker 4: his Ballad. So Israel doesn't have it's in its own interest. Okay, 402 00:24:02,840 --> 00:24:08,640 Speaker 4: you can't destroy a you can't destroy you know, a ideology. 403 00:24:08,720 --> 00:24:16,160 Speaker 4: You can you can destroy military installations. 404 00:24:16,680 --> 00:24:21,119 Speaker 2: Coughing on Ariston. We got to leave it there rather 405 00:24:21,320 --> 00:24:23,960 Speaker 2: not seeing teller. Thank you so much. One of the 406 00:24:24,320 --> 00:24:28,360 Speaker 2: protagonists of Chaos kings how Wall Street traders make billions 407 00:24:28,359 --> 00:24:31,040 Speaker 2: in the new age of crisis. Scott Patterson, thank you 408 00:24:31,080 --> 00:24:33,800 Speaker 2: so much for coming to today. This is a really 409 00:24:33,880 --> 00:24:37,880 Speaker 2: really important book for global Wall Street. Not so much 410 00:24:37,960 --> 00:24:42,520 Speaker 2: what to do, but what not to do. Scott Patterson's 411 00:24:42,800 --> 00:24:47,760 Speaker 2: Chaos Kings setting up attension between two giants of investments. 412 00:24:52,040 --> 00:24:54,800 Speaker 2: Dying to talk to Lindsey Piggs up of Steve Wall 413 00:24:55,200 --> 00:24:59,600 Speaker 2: she's really pushed against soft landing certitude, Doctor PAGs is 414 00:24:59,600 --> 00:25:03,800 Speaker 2: thank you so much for joining Bloomberg's surveillance. How remote 415 00:25:04,000 --> 00:25:05,000 Speaker 2: is a soft landing? 416 00:25:06,280 --> 00:25:09,040 Speaker 1: Well, I think it's still a possibility. It's still out 417 00:25:09,040 --> 00:25:12,159 Speaker 1: there as a potential for the economy, but it is 418 00:25:12,200 --> 00:25:14,720 Speaker 1: going to be challenging for the FED to achieve that. Remember, 419 00:25:14,760 --> 00:25:18,679 Speaker 1: part of the soft landing is instilling price stability on 420 00:25:18,720 --> 00:25:21,760 Speaker 1: a sustained basis, So getting us back to two percent, 421 00:25:22,000 --> 00:25:25,199 Speaker 1: not just touching it, but maintaining that along with the 422 00:25:25,240 --> 00:25:28,720 Speaker 1: prospect of avoiding a downturn. Now, I do think on 423 00:25:28,800 --> 00:25:31,920 Speaker 1: the growth set, on the growth side, at least in hindsight, 424 00:25:32,000 --> 00:25:35,320 Speaker 1: the US economy remains on solid footing. But I'm not 425 00:25:35,520 --> 00:25:39,960 Speaker 1: convinced that the FED has the focus, has the stomach 426 00:25:40,000 --> 00:25:42,639 Speaker 1: to get us back to two percent. They feel they 427 00:25:42,680 --> 00:25:45,800 Speaker 1: seem to be very complacent at this point with this 428 00:25:46,119 --> 00:25:51,280 Speaker 1: very tepid, somewhat sideways and uneven movement in inflation. 429 00:25:51,440 --> 00:25:53,960 Speaker 5: At this point, I know they would beg to differ 430 00:25:54,119 --> 00:25:56,280 Speaker 5: We have heard such adamant from the FED chair about 431 00:25:56,280 --> 00:25:59,280 Speaker 5: that two percent target, but it raises this larger question 432 00:25:59,359 --> 00:26:01,399 Speaker 5: of when do we get there. There will be no 433 00:26:01,480 --> 00:26:04,240 Speaker 5: declaration of victory, of course, but what's it going to 434 00:26:04,240 --> 00:26:08,439 Speaker 5: take for you to say, look, mission accomplished, Pick your trope. 435 00:26:09,119 --> 00:26:10,920 Speaker 5: The FED has been able to win this fight. 436 00:26:12,040 --> 00:26:14,359 Speaker 1: Well, that's right. The Fed's forecast does not look for 437 00:26:14,560 --> 00:26:17,600 Speaker 1: two percent on a sustained basis until twenty twenty six, 438 00:26:17,720 --> 00:26:20,239 Speaker 1: so some two years from now. But in order for 439 00:26:20,280 --> 00:26:23,159 Speaker 1: me to get an increased level of confidence that we 440 00:26:23,200 --> 00:26:27,840 Speaker 1: will get there eventually, is further meaningful progress. Now, this 441 00:26:27,880 --> 00:26:31,320 Speaker 1: morning's report was encouraging when we look at the headline number, 442 00:26:31,840 --> 00:26:35,640 Speaker 1: but the core, after several months of sideways movement, has 443 00:26:35,680 --> 00:26:38,919 Speaker 1: now ticked higher. So we're moving in the opposite direction 444 00:26:39,000 --> 00:26:41,359 Speaker 1: of that two percent price level. And you have to 445 00:26:41,359 --> 00:26:43,320 Speaker 1: couple that with the lack of movement that we saw 446 00:26:43,320 --> 00:26:46,679 Speaker 1: on the core PPI, the core CPI. So there's a 447 00:26:46,800 --> 00:26:51,000 Speaker 1: number of key inflation metrics that are showing no further improvement, 448 00:26:51,400 --> 00:26:53,880 Speaker 1: offering no further confidence to the FED that we are 449 00:26:53,960 --> 00:26:57,680 Speaker 1: on a sustainable disinflationary trend. So I do find myself 450 00:26:57,720 --> 00:27:00,560 Speaker 1: in the camp of the sole descent into some Michelle 451 00:27:00,600 --> 00:27:04,400 Speaker 1: Bowman saying, no, there's still inflationary risks out there, there's 452 00:27:04,560 --> 00:27:08,080 Speaker 1: upside risk potential, and we need to stay focused on 453 00:27:08,119 --> 00:27:10,160 Speaker 1: that inflation component of the dual mandate. 454 00:27:10,560 --> 00:27:12,240 Speaker 5: Lindsay, if you and I were in the Echos building 455 00:27:12,280 --> 00:27:14,600 Speaker 5: looking at that dashboard, looking at all of these data 456 00:27:14,800 --> 00:27:18,399 Speaker 5: in complement, what is what is or what are the 457 00:27:18,400 --> 00:27:19,800 Speaker 5: types of data that stand out the most of you? 458 00:27:19,880 --> 00:27:21,440 Speaker 5: Is most important here as we move ahead? 459 00:27:22,560 --> 00:27:24,440 Speaker 1: Well, I think as the FED is looking at the 460 00:27:24,520 --> 00:27:26,919 Speaker 1: key data points are the inflation data and the reads 461 00:27:26,960 --> 00:27:29,639 Speaker 1: on the labor market. But what's interesting is when we 462 00:27:29,680 --> 00:27:32,880 Speaker 1: look at the labor market data, independent of any commentary 463 00:27:32,880 --> 00:27:35,560 Speaker 1: from the FED or the media of the market, the 464 00:27:35,640 --> 00:27:40,440 Speaker 1: labor market is still near full employment. The unemployment rate, yes, 465 00:27:40,480 --> 00:27:42,600 Speaker 1: has ticked up from a low level, but we're still 466 00:27:42,640 --> 00:27:45,480 Speaker 1: at four point two percent, well below what the FED 467 00:27:45,560 --> 00:27:50,160 Speaker 1: designates as that full employment range, the desirable or sustainable 468 00:27:50,240 --> 00:27:54,159 Speaker 1: level of joblessness. Jobless claims have not ticked any higher. 469 00:27:54,200 --> 00:27:56,200 Speaker 1: So the other side of the inflation excuse me, the 470 00:27:56,240 --> 00:27:59,520 Speaker 1: other side to labor equation, job destruction, is not seeing 471 00:27:59,560 --> 00:28:03,280 Speaker 1: any side movement. We're still talking about over seven million 472 00:28:03,359 --> 00:28:06,280 Speaker 1: job vacancies, and on average we're still creating over one 473 00:28:06,359 --> 00:28:10,159 Speaker 1: hundred and eighty thousand new payrolls month to month. So 474 00:28:10,240 --> 00:28:13,720 Speaker 1: that's still indicative of a tight ish labor market. 475 00:28:13,920 --> 00:28:16,720 Speaker 2: If you're joining us, Lindsay, Pie is Steefel thrilled that 476 00:28:16,800 --> 00:28:18,960 Speaker 2: she's with us today. After this report, it lifts the 477 00:28:19,000 --> 00:28:25,360 Speaker 2: market quiescent CPI pce I should say price index futures 478 00:28:25,400 --> 00:28:29,119 Speaker 2: up three now up nine, NASTAC up thirty five points 479 00:28:29,119 --> 00:28:31,560 Speaker 2: two tenths of a percent, Small cap leads away up 480 00:28:31,600 --> 00:28:33,960 Speaker 2: a solid nine tents of a percent. The fix comes 481 00:28:34,000 --> 00:28:37,760 Speaker 2: in ever so slightly fifteen point twenty nine. Looking at 482 00:28:37,760 --> 00:28:41,520 Speaker 2: the yield space ten year yield three point seven seven 483 00:28:41,560 --> 00:28:44,680 Speaker 2: and three basis points. I always look at the ten 484 00:28:44,760 --> 00:28:47,360 Speaker 2: year real yield one point six to zero comes in 485 00:28:47,400 --> 00:28:51,560 Speaker 2: two basis points, sort of inconsequential. It's now time for 486 00:28:51,640 --> 00:28:55,560 Speaker 2: the math portion. We do this with pigs of Stepheljo. 487 00:28:55,160 --> 00:28:55,920 Speaker 5: You're gonna get a coffee. 488 00:28:55,960 --> 00:28:58,360 Speaker 2: Well, yeah, Lindsay, I'm going to cut to the chase 489 00:28:58,400 --> 00:29:00,840 Speaker 2: from the cheap cheap to the high fed funds rate. 490 00:29:01,680 --> 00:29:04,320 Speaker 2: We have a belief in eight nine ten rate cuts 491 00:29:04,320 --> 00:29:07,360 Speaker 2: to come to get back to the center tendency two 492 00:29:07,440 --> 00:29:10,440 Speaker 2: point eight ish, two point nine ish, maybe three percent 493 00:29:10,560 --> 00:29:15,640 Speaker 2: as well. To me, it's wildly nonlinear. Aren't the next 494 00:29:16,240 --> 00:29:19,800 Speaker 2: twenty five, twenty five or fifty base point sort of 495 00:29:19,840 --> 00:29:23,680 Speaker 2: a non event and the real sweat for the FED comes, say, 496 00:29:23,720 --> 00:29:25,880 Speaker 2: the spring of twenty twenty five. 497 00:29:27,320 --> 00:29:30,680 Speaker 1: Well, yes, in the longer term and in terms of 498 00:29:30,720 --> 00:29:33,480 Speaker 1: the longer term timeline for getting us back to neutral. 499 00:29:33,680 --> 00:29:36,320 Speaker 1: But I would push back and say that the next 500 00:29:36,320 --> 00:29:38,600 Speaker 1: two meetings are going to be key in terms of 501 00:29:38,640 --> 00:29:42,040 Speaker 1: setting the tone for the Fed's willingness to remain data dependent. 502 00:29:42,600 --> 00:29:46,400 Speaker 1: If we see a stronger than expected labor report coupled 503 00:29:46,440 --> 00:29:49,520 Speaker 1: with this morning somewhat disappointing move in the core PCE, 504 00:29:50,600 --> 00:29:52,680 Speaker 1: I think the FED is going to have to respond 505 00:29:52,800 --> 00:29:56,680 Speaker 1: with a much smaller rate cut or a potential snip 506 00:29:56,720 --> 00:29:59,040 Speaker 1: of a meeting. And if they don't, that's going to 507 00:29:59,080 --> 00:30:01,400 Speaker 1: send the message to the that maybe they're less data 508 00:30:01,440 --> 00:30:04,440 Speaker 1: dependent than they're indicating, and they are on somewhat of 509 00:30:04,480 --> 00:30:08,040 Speaker 1: a blind sided focus to get us back to a 510 00:30:08,040 --> 00:30:12,000 Speaker 1: particular position in policy, regardless of what the data is saying. 511 00:30:12,120 --> 00:30:14,160 Speaker 2: Across the history of the FED, and particularly the more 512 00:30:14,200 --> 00:30:19,200 Speaker 2: modern FED, which labor statistic really matters. Is it non 513 00:30:19,240 --> 00:30:22,720 Speaker 2: farm payrolls? Is it the unemployment rate? Is it something 514 00:30:22,840 --> 00:30:24,880 Speaker 2: David Gerrin, Tim King don't understand. 515 00:30:26,280 --> 00:30:27,440 Speaker 1: I think the Fed is going to look at a 516 00:30:27,480 --> 00:30:29,320 Speaker 1: number of factors, but if we had to look at one, 517 00:30:29,360 --> 00:30:31,680 Speaker 1: it's going to be the unemployment rate. It's going to 518 00:30:31,720 --> 00:30:35,280 Speaker 1: be that fluctuation into or are still away from the 519 00:30:35,320 --> 00:30:38,920 Speaker 1: full employment range. Now, the non farm payroll number certainly 520 00:30:38,960 --> 00:30:42,240 Speaker 1: seems to set the tone for market expectations, but when 521 00:30:42,240 --> 00:30:45,320 Speaker 1: it comes to monetary policy, the Fed officials typically focus 522 00:30:45,360 --> 00:30:49,040 Speaker 1: on that unemployment number to really gauge what the momentum 523 00:30:49,120 --> 00:30:51,080 Speaker 1: is in terms of labor market conditions. 524 00:30:51,200 --> 00:30:54,080 Speaker 2: Sure, there're folks really really important, David, I'm going to 525 00:30:54,080 --> 00:30:56,640 Speaker 2: segue you in. Folks again, we're commercial free for cross 526 00:30:56,640 --> 00:31:01,120 Speaker 2: this hour on a PCE statistics. Market lifts on it 527 00:31:01,200 --> 00:31:03,680 Speaker 2: as well. We thank all of our good sponsors for 528 00:31:03,720 --> 00:31:07,080 Speaker 2: allowing us to do this. David Gerra anam Wong at 529 00:31:07,120 --> 00:31:11,000 Speaker 2: Bloomberg Economics, and she pushes against doctor Piegso there's no 530 00:31:11,120 --> 00:31:14,120 Speaker 2: question about that. She's got non farm payrolls three month 531 00:31:14,200 --> 00:31:17,920 Speaker 2: moving average one sixteen. She does a revision which is 532 00:31:18,040 --> 00:31:22,480 Speaker 2: hugely controversial and lowers that number, and that's the polarity 533 00:31:22,560 --> 00:31:24,200 Speaker 2: between Wong and Piegs. 534 00:31:24,840 --> 00:31:27,440 Speaker 5: Lindsey, let's marry these hard data with the softer ones. 535 00:31:27,440 --> 00:31:29,200 Speaker 5: We had Dana Peterson on the show a little earlier 536 00:31:29,200 --> 00:31:31,640 Speaker 5: in the week and talked about those consumer sentiment numbers 537 00:31:31,640 --> 00:31:33,480 Speaker 5: that were softer than a lot of folks expected and 538 00:31:33,480 --> 00:31:35,680 Speaker 5: I think spooked some folks in the market as well. 539 00:31:36,040 --> 00:31:38,200 Speaker 5: How do you look at them in complement? And you 540 00:31:38,240 --> 00:31:41,560 Speaker 5: were talking about what would happen if we saw a 541 00:31:41,600 --> 00:31:44,800 Speaker 5: real sharp decline in employment, for instance, how the FED 542 00:31:44,800 --> 00:31:48,960 Speaker 5: would react, how would both investors and consumers react to 543 00:31:49,000 --> 00:31:50,440 Speaker 5: that as well? Because that has to be front of 544 00:31:50,440 --> 00:31:52,520 Speaker 5: mine for FED policy makers too. Yes, they're kind of 545 00:31:52,600 --> 00:31:54,880 Speaker 5: looking at this in a very in this vacuum of 546 00:31:54,880 --> 00:31:56,640 Speaker 5: looking at it from a policy perspective, but they have 547 00:31:56,680 --> 00:31:59,320 Speaker 5: to be aware or cognizant of how people are going 548 00:31:59,360 --> 00:32:01,200 Speaker 5: to react to what they're doing as well. 549 00:32:02,480 --> 00:32:05,040 Speaker 1: Absolutely, and we have to also be aware that not 550 00:32:05,080 --> 00:32:06,920 Speaker 1: all the data is going to point in the same direction. 551 00:32:07,000 --> 00:32:08,840 Speaker 1: This is not going to be an easy decision for 552 00:32:08,880 --> 00:32:11,840 Speaker 1: the FED or an easy interpretation for the market by 553 00:32:11,840 --> 00:32:13,960 Speaker 1: any means. But when we look at some of this 554 00:32:14,600 --> 00:32:17,680 Speaker 1: secondary and tertiary data, what we're continuing to see is 555 00:32:17,680 --> 00:32:21,080 Speaker 1: an ongoing resilient consumer. Now, as we saw this morning, 556 00:32:21,280 --> 00:32:24,640 Speaker 1: somewhat softer income and consumption numbers, But looking at the 557 00:32:24,720 --> 00:32:27,840 Speaker 1: Q two GDP report, we anticipated that we knew what 558 00:32:27,880 --> 00:32:29,959 Speaker 1: the third month was going to be. But when we 559 00:32:29,960 --> 00:32:32,200 Speaker 1: look at that, on average, we're still talking about a 560 00:32:32,320 --> 00:32:35,680 Speaker 1: three percent growth rate and a three percent spending rate. 561 00:32:35,720 --> 00:32:39,400 Speaker 1: That's still very indicative of a solid economy and an 562 00:32:39,400 --> 00:32:42,920 Speaker 1: economy that can withstand a very slow and patient removal 563 00:32:42,920 --> 00:32:45,640 Speaker 1: of policy firming. So I go back to the Fed's 564 00:32:45,680 --> 00:32:49,200 Speaker 1: decision in September. The biggest risk of a fifty basis 565 00:32:49,240 --> 00:32:52,880 Speaker 1: point move was always sending an inappropriate signal of concern 566 00:32:53,360 --> 00:32:55,840 Speaker 1: regarding the state of the US economy the current level 567 00:32:55,840 --> 00:32:58,959 Speaker 1: of weakness, as well as an inappropriate signal that the 568 00:32:58,960 --> 00:33:02,000 Speaker 1: Fed is willing to rush back to a state of 569 00:33:02,120 --> 00:33:05,640 Speaker 1: not just neutral, but accommodation to provide stimulus to an 570 00:33:05,680 --> 00:33:09,239 Speaker 1: ailing economy, as opposed to simply removing their foot from 571 00:33:09,280 --> 00:33:12,360 Speaker 1: the break and moving back towards neutral as the data 572 00:33:12,480 --> 00:33:13,440 Speaker 1: begin to normalize. 573 00:33:13,440 --> 00:33:15,880 Speaker 2: WELLNZI. Yet one final question here, and this is a 574 00:33:16,000 --> 00:33:18,240 Speaker 2: men's respect and part of the pigs a charm, folks, 575 00:33:18,280 --> 00:33:20,800 Speaker 2: is she's out in the Midwest, you know, I mean 576 00:33:20,840 --> 00:33:24,920 Speaker 2: she's putting up with cubs, white sox and all that. Lindsey. Seriously, 577 00:33:25,520 --> 00:33:29,880 Speaker 2: the FED has to aggregate towards one policy. Can they 578 00:33:30,000 --> 00:33:33,800 Speaker 2: not do that? Because the American labor economy and the 579 00:33:33,880 --> 00:33:38,880 Speaker 2: personal income around this polarized economy is so split. Can 580 00:33:38,920 --> 00:33:41,280 Speaker 2: they not succeed in aggregating? 581 00:33:42,800 --> 00:33:45,200 Speaker 1: Well, it is difficult. When we talk about the resilience 582 00:33:45,200 --> 00:33:47,240 Speaker 1: of the consumer. It is dangerous to paint with a 583 00:33:47,240 --> 00:33:49,520 Speaker 1: broad brush, because we do see that those at the 584 00:33:49,520 --> 00:33:52,000 Speaker 1: middle and the lower end of the spectrum are having 585 00:33:52,000 --> 00:33:55,320 Speaker 1: a much more difficult time faring in this environment amid 586 00:33:55,600 --> 00:33:58,960 Speaker 1: higher borrowing costs, higher prices, the resumption of student debt 587 00:33:58,960 --> 00:34:01,880 Speaker 1: payments than while those at the top are not necessarily 588 00:34:01,920 --> 00:34:04,920 Speaker 1: feeling a pitch amid a growth of household net worth 589 00:34:04,960 --> 00:34:08,480 Speaker 1: over sixteen trillion dollars in the past year. So we 590 00:34:08,600 --> 00:34:11,960 Speaker 1: do see two very different themes in the underlying consumer. 591 00:34:12,320 --> 00:34:14,160 Speaker 1: And it's not a difference of hals and have nots, 592 00:34:14,200 --> 00:34:17,440 Speaker 1: but asset holders and non asset holders. So that is 593 00:34:17,520 --> 00:34:20,919 Speaker 1: complicating FED policy, But that's nothing new. We always see 594 00:34:20,960 --> 00:34:23,799 Speaker 1: that bifurcation. But what we do see, which is new. 595 00:34:23,920 --> 00:34:27,680 Speaker 1: Is this growing divide among FED officials themselves. While the 596 00:34:27,760 --> 00:34:30,520 Speaker 1: median is looking for fifty basis points by the end 597 00:34:30,560 --> 00:34:33,719 Speaker 1: of the year, nine FEED officials say no, we're going 598 00:34:33,800 --> 00:34:36,920 Speaker 1: to see maybe one twenty five basis points cut or 599 00:34:37,040 --> 00:34:40,799 Speaker 1: no further adjustice is great. So that divide alone, I 600 00:34:40,840 --> 00:34:44,600 Speaker 1: think underscores how difficult the December decision was and how 601 00:34:44,640 --> 00:34:46,759 Speaker 1: difficult further decisions are going to be. 602 00:34:47,000 --> 00:34:50,480 Speaker 2: David. If Pigsa was a governor, she'd dissent at every meeting. 603 00:34:50,840 --> 00:34:55,279 Speaker 2: She'd be the Catherine Man of American economicory. She'd be 604 00:34:55,320 --> 00:34:59,000 Speaker 2: like pounding the table. Jay, no, Chay, no, don't do it. Lindsey, 605 00:34:59,040 --> 00:35:02,920 Speaker 2: pigs thank you so much. It's Stifel there pushing against 606 00:35:02,920 --> 00:35:15,560 Speaker 2: the soft landing, joining us on for Chicago, where she's 607 00:35:15,600 --> 00:35:19,000 Speaker 2: interviewing to be the general manager of Chicago White Sox. 608 00:35:19,080 --> 00:35:23,920 Speaker 2: John Adams, Gina. Martin Adams joins us here on your 609 00:35:24,360 --> 00:35:27,960 Speaker 2: stock market, your bullmarket forward, Gina, I'm going to cut 610 00:35:28,000 --> 00:35:32,359 Speaker 2: to the chase. There's all this noise, China, China. Are 611 00:35:32,400 --> 00:35:36,480 Speaker 2: we just discounting still double digit earnings growth? 612 00:35:37,719 --> 00:35:41,440 Speaker 6: I think it's a great point is the macro has oftentimes, 613 00:35:41,440 --> 00:35:46,600 Speaker 6: oftentimes overwhelmed the earnings in terms of commentary, but ultimately 614 00:35:46,600 --> 00:35:50,080 Speaker 6: earnings drive stock prices, and earnings have frankly continued to 615 00:35:50,080 --> 00:35:55,240 Speaker 6: surprise the consensus. Right now, the analyst consensus is looking 616 00:35:55,320 --> 00:35:57,840 Speaker 6: at close to ten percent earnings growth emerging over the 617 00:35:57,880 --> 00:36:00,480 Speaker 6: course of the next year. I would say the stock 618 00:36:00,520 --> 00:36:03,800 Speaker 6: market is pricing closer to five to seven percent earnings 619 00:36:03,840 --> 00:36:07,080 Speaker 6: growth just based upon what our macro models suggest. What's 620 00:36:07,120 --> 00:36:09,239 Speaker 6: been so interesting about the last two years, and I 621 00:36:09,320 --> 00:36:13,239 Speaker 6: think this persists is the macro has been closer to 622 00:36:13,280 --> 00:36:16,600 Speaker 6: what the market price is, where the analyst consensus, even 623 00:36:16,640 --> 00:36:20,040 Speaker 6: though they've been conservative, are still not bullish enough, and 624 00:36:20,080 --> 00:36:23,400 Speaker 6: so that big divergence is what has created the uptrend 625 00:36:23,400 --> 00:36:27,880 Speaker 6: in stocks. Is we persistently have this sort of negative undertone, 626 00:36:27,920 --> 00:36:32,000 Speaker 6: this negative view that is embedded in the psychology, that's 627 00:36:32,040 --> 00:36:35,120 Speaker 6: embedded in prices. But kind of the reality on the 628 00:36:35,120 --> 00:36:37,880 Speaker 6: ground from corporations is that things are still improving and 629 00:36:37,960 --> 00:36:41,360 Speaker 6: have been improving really since twenty twenty two, and that 630 00:36:41,400 --> 00:36:44,640 Speaker 6: doesn't appear to be changing. Analysts are slowly getting on 631 00:36:44,640 --> 00:36:47,959 Speaker 6: board with that, so certainly they're you know, expecting better 632 00:36:47,960 --> 00:36:50,000 Speaker 6: growth in the next twelve months than they did twelve 633 00:36:50,000 --> 00:36:53,560 Speaker 6: months ago. But it is a slow climb. 634 00:36:53,640 --> 00:36:57,480 Speaker 2: Textbook Gino Martin Adams, and she combines us like Edheimen, 635 00:36:57,880 --> 00:37:02,000 Speaker 2: with fundamental analysis, technical analysis, and a respect for the 636 00:37:02,040 --> 00:37:05,760 Speaker 2: economic Gino Martin Adams. What does the bull market chart 637 00:37:05,800 --> 00:37:06,279 Speaker 2: tell you? 638 00:37:07,440 --> 00:37:07,600 Speaker 1: Oh? 639 00:37:07,600 --> 00:37:10,160 Speaker 6: Well, I mean, look, the trend is your friend. The 640 00:37:10,320 --> 00:37:14,360 Speaker 6: stocks are still up and to the right right, so 641 00:37:15,120 --> 00:37:18,399 Speaker 6: very simplistically, when you're making new highs, and more than 642 00:37:18,480 --> 00:37:20,759 Speaker 6: seventy percent of stocks they're still trading above their tu 643 00:37:20,840 --> 00:37:24,160 Speaker 6: nity moving average. So contrary to popular beliefs, breadth is 644 00:37:24,200 --> 00:37:28,000 Speaker 6: still improving. We're making new highs. Even small caps are 645 00:37:28,040 --> 00:37:30,319 Speaker 6: showing some signs of clawing their way out of their 646 00:37:30,320 --> 00:37:32,759 Speaker 6: bear market condition that has existed for the better part 647 00:37:32,760 --> 00:37:35,000 Speaker 6: of three years. There's just not a lot in the 648 00:37:35,040 --> 00:37:37,800 Speaker 6: charts to complain about. If there is anything to complain about, 649 00:37:37,840 --> 00:37:40,960 Speaker 6: it is really about leadership inside the market, where we 650 00:37:41,040 --> 00:37:43,680 Speaker 6: do appear to be sort of grappling with a potential 651 00:37:43,719 --> 00:37:46,239 Speaker 6: leadership change away from the MAX seven toward the four 652 00:37:46,400 --> 00:37:49,160 Speaker 6: ninety three other stocks in the S and P five hundred, 653 00:37:49,680 --> 00:37:53,960 Speaker 6: sort of away from predominantly growth towards some mored value 654 00:37:54,040 --> 00:37:57,560 Speaker 6: oriented industries. There are a lot of sort of internal churn. 655 00:37:57,600 --> 00:38:01,200 Speaker 6: A lot of internal churning happening, but nonetheless, markets are 656 00:38:01,239 --> 00:38:03,759 Speaker 6: still making new heights, especially the S and P five hundred, 657 00:38:03,800 --> 00:38:05,440 Speaker 6: so there's not a lot to complain about from a 658 00:38:05,440 --> 00:38:08,319 Speaker 6: technical perspective. The only thing that I would say from 659 00:38:08,320 --> 00:38:11,120 Speaker 6: a broad charting perspective that we're watching with a really 660 00:38:11,200 --> 00:38:15,359 Speaker 6: close sort of eye is what's happening with momentum. When 661 00:38:15,400 --> 00:38:17,120 Speaker 6: we look at what's happening with momentum in the S 662 00:38:17,200 --> 00:38:20,280 Speaker 6: and P five hundred, it's been struggling as a result 663 00:38:20,360 --> 00:38:24,920 Speaker 6: of this internal turn. It certainly has confirmed the recent 664 00:38:25,000 --> 00:38:28,799 Speaker 6: rally off of those October sort of depressed lows, but 665 00:38:28,960 --> 00:38:32,000 Speaker 6: nonetheless it's not as positive or not as strong as 666 00:38:32,000 --> 00:38:34,360 Speaker 6: we would like it to see or like to see it, 667 00:38:34,400 --> 00:38:36,440 Speaker 6: and I think that that's something to watch going forward. 668 00:38:36,480 --> 00:38:38,640 Speaker 6: We do need to gather a bit more momentum to 669 00:38:38,719 --> 00:38:40,160 Speaker 6: sustain the games that we've had. 670 00:38:40,760 --> 00:38:42,360 Speaker 5: Gina, great to talk to you, and I wanted to 671 00:38:42,400 --> 00:38:44,520 Speaker 5: ask you about this China story that we've been falling 672 00:38:44,520 --> 00:38:46,400 Speaker 5: over the course of the week and what it means 673 00:38:46,160 --> 00:38:48,920 Speaker 5: for US investors. We talked a little earlier in the 674 00:38:48,920 --> 00:38:53,279 Speaker 5: show about the PBOC put on Chinese equities. What does 675 00:38:53,280 --> 00:38:57,480 Speaker 5: it mean for the palatability or attractiveness of Chinese stocks 676 00:38:57,520 --> 00:38:58,680 Speaker 5: what the bank has done this week. 677 00:38:58,719 --> 00:39:02,399 Speaker 6: Yeah, I think it's been tough in China. Honestly, we've had, 678 00:39:02,440 --> 00:39:05,280 Speaker 6: you know, a series of stimulus measures all year, from 679 00:39:05,719 --> 00:39:08,520 Speaker 6: direct purchases of assets in the market, to changes in 680 00:39:08,560 --> 00:39:12,799 Speaker 6: policy rates to the news of this week, you know, 681 00:39:13,160 --> 00:39:16,719 Speaker 6: to the degree that it ultimately creates more stability in 682 00:39:16,840 --> 00:39:20,439 Speaker 6: economic conditions, that's the thing that I think can draw 683 00:39:20,520 --> 00:39:24,080 Speaker 6: investors back into China. It's a wait and see approach 684 00:39:24,120 --> 00:39:27,120 Speaker 6: though with respect to China, and it's been such a 685 00:39:27,120 --> 00:39:29,800 Speaker 6: difficult run for the last several years as a global 686 00:39:29,800 --> 00:39:33,799 Speaker 6: investor starting to think about investment in China that we've 687 00:39:33,800 --> 00:39:37,880 Speaker 6: had a proliferation of EM equity products excluding China, just 688 00:39:37,960 --> 00:39:40,839 Speaker 6: to try to get at where the other growth opportunities 689 00:39:40,880 --> 00:39:43,400 Speaker 6: are in EM. So, you know, I would say, we 690 00:39:43,480 --> 00:39:46,520 Speaker 6: need to see this manifest itself in real economic conditions 691 00:39:46,560 --> 00:39:50,720 Speaker 6: and even more importantly, real earnings growth prospects improving for China. 692 00:39:51,239 --> 00:39:53,640 Speaker 6: That's a long time coming yet, because when you look 693 00:39:53,680 --> 00:39:58,800 Speaker 6: at EM equity revisions X China, they are surging. Equity 694 00:39:59,000 --> 00:40:01,960 Speaker 6: analysts are getting much more optimistic about the outlook for 695 00:40:02,000 --> 00:40:06,080 Speaker 6: earnings growth outside of China, and analysts are not telling 696 00:40:06,160 --> 00:40:08,080 Speaker 6: us that things are getting better in China yet, So 697 00:40:08,120 --> 00:40:10,160 Speaker 6: we need to see that momentum turn around there. 698 00:40:10,400 --> 00:40:12,120 Speaker 2: You know, I got to ask you this, Gina. I 699 00:40:12,200 --> 00:40:14,799 Speaker 2: know you're not on speaking terms with Allison Williams, but 700 00:40:15,400 --> 00:40:19,520 Speaker 2: the banks for end of Q three, what is their 701 00:40:19,600 --> 00:40:22,520 Speaker 2: business plan for Q four? How bad are the cost 702 00:40:22,520 --> 00:40:25,120 Speaker 2: cuts going to be? Yeah? 703 00:40:25,160 --> 00:40:27,520 Speaker 6: I think, first of all, I'm in great terms with 704 00:40:27,560 --> 00:40:29,799 Speaker 6: Alison Williams, and I think she was a brilliant analysts 705 00:40:30,160 --> 00:40:34,600 Speaker 6: in terms of all those H courses help Gina in 706 00:40:34,719 --> 00:40:37,319 Speaker 6: terms of financials. You know, I think that it's going 707 00:40:37,400 --> 00:40:40,600 Speaker 6: to be really interesting coming into this court because the 708 00:40:40,680 --> 00:40:43,800 Speaker 6: banks spent so much of their time really cutting costs 709 00:40:43,840 --> 00:40:47,120 Speaker 6: back in twenty twenty three that that's been a bit 710 00:40:47,160 --> 00:40:47,840 Speaker 6: of a tailwind. 711 00:40:47,920 --> 00:40:48,040 Speaker 1: Right. 712 00:40:48,080 --> 00:40:50,040 Speaker 6: Remember twenty twenty three was the year in which we 713 00:40:50,080 --> 00:40:53,720 Speaker 6: saw tremendous provisions, a lot of concern about loan losses 714 00:40:53,760 --> 00:40:57,160 Speaker 6: emerging in commercial real estate, decent amount of cost cutting 715 00:40:57,480 --> 00:41:00,759 Speaker 6: coming out of that sector because the yield curve was 716 00:41:00,800 --> 00:41:05,480 Speaker 6: tremendously inverted. Right, We've come off of that deep inversion 717 00:41:05,480 --> 00:41:07,799 Speaker 6: in the yield curve over the course of the last 718 00:41:07,800 --> 00:41:11,680 Speaker 6: several months. That improves the outlook for an interest margin 719 00:41:11,760 --> 00:41:14,800 Speaker 6: for some of the segments, but it's still tough going. 720 00:41:14,920 --> 00:41:17,400 Speaker 6: What was most interesting out of the second quarter is 721 00:41:17,440 --> 00:41:19,520 Speaker 6: that financials, for the first time in a long time, 722 00:41:19,920 --> 00:41:23,040 Speaker 6: feed on top line. We saw better revenue growth out 723 00:41:23,040 --> 00:41:25,480 Speaker 6: of financials than we've seen in a very, very long time. 724 00:41:25,600 --> 00:41:28,640 Speaker 6: That's what I'm looking for going into third quarter because 725 00:41:28,640 --> 00:41:31,239 Speaker 6: that's what's been missing in financials for the better part 726 00:41:31,239 --> 00:41:34,319 Speaker 6: of five years. Not just sort of short term what's 727 00:41:34,320 --> 00:41:36,680 Speaker 6: happening with a lot of cost cuts. When we get 728 00:41:36,680 --> 00:41:40,239 Speaker 6: into October and then even more importantly in the January season, though, 729 00:41:40,360 --> 00:41:43,000 Speaker 6: I think you do want to start looking for layoffs. 730 00:41:43,320 --> 00:41:45,440 Speaker 6: Are we going to see a surgeon layoffs again? This 731 00:41:45,520 --> 00:41:48,640 Speaker 6: sector has been a big persistent part of that story 732 00:41:48,760 --> 00:41:53,200 Speaker 6: from twenty twenty two on financials as well as technology companies. 733 00:41:53,200 --> 00:41:55,800 Speaker 6: Communication companies, to a slightly lesser degree, have led the 734 00:41:55,880 --> 00:41:59,600 Speaker 6: layoff trend. They've kept costs very, very lean, and that's 735 00:42:00,120 --> 00:42:03,239 Speaker 6: enabling margins to continue to stay a float. There. So 736 00:42:03,280 --> 00:42:04,880 Speaker 6: there are a lot of moving parks to watch for 737 00:42:04,960 --> 00:42:07,640 Speaker 6: in financials. It's frankly one of the sectors that we've 738 00:42:07,680 --> 00:42:11,279 Speaker 6: been watching most closely in this rotation because we are 739 00:42:11,320 --> 00:42:14,560 Speaker 6: seeing much better growth start to emerge there and finally 740 00:42:14,600 --> 00:42:17,000 Speaker 6: some investor interest, but I think that that's mostly related 741 00:42:17,000 --> 00:42:17,600 Speaker 6: to the yieldcaper. 742 00:42:17,680 --> 00:42:20,200 Speaker 2: Okay, Gina, don't take the White Sox job unless you 743 00:42:20,200 --> 00:42:23,040 Speaker 2: can clean out the bullpen. Gina Martin Adams from Chicago, 744 00:42:23,600 --> 00:42:27,040 Speaker 2: where she's on a job interview at Kimiski Park, which 745 00:42:27,080 --> 00:42:28,359 Speaker 2: I will always call it. 746 00:42:28,320 --> 00:42:29,359 Speaker 5: In a fact check this entime. 747 00:42:29,920 --> 00:42:33,520 Speaker 2: Grandpa took me to Komiski Park. I saw Nellie Fox 748 00:42:34,400 --> 00:42:36,840 Speaker 2: a few years ago. Only Michael Barr on the planet 749 00:42:36,840 --> 00:42:40,680 Speaker 2: knows who Nellie Fox is. This is a Bloomberg Surveillance podcast, 750 00:42:40,880 --> 00:42:45,719 Speaker 2: bringing you the best in economics, finance, investment, and international relations. 751 00:42:45,960 --> 00:42:49,320 Speaker 2: You can also watch the show live on YouTube. Visit 752 00:42:49,360 --> 00:42:53,520 Speaker 2: the Bloomberg Podcast channel on YouTube to see the show 753 00:42:53,719 --> 00:42:56,799 Speaker 2: weekday mornings from seven to ten am Eastern from our 754 00:42:56,800 --> 00:43:00,560 Speaker 2: global headquarters in New York City. Subscribe to the podcast 755 00:43:00,640 --> 00:43:04,680 Speaker 2: on Apple, Spotify, or anywhere else you listen, and always 756 00:43:04,800 --> 00:43:09,200 Speaker 2: on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.