1 00:00:00,040 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,800 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,960 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,320 --> 00:00:25,640 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:26,960 Speaker 1: us live on YouTube. 6 00:00:27,160 --> 00:00:30,000 Speaker 2: And Tanya for KOOI has one of the honest, most 7 00:00:30,120 --> 00:00:35,360 Speaker 2: wonderful paths in economics of anybody out there, darkening the 8 00:00:35,400 --> 00:00:39,159 Speaker 2: door at Pennsylvania and Wharton years ago with their finance ability. 9 00:00:39,240 --> 00:00:43,320 Speaker 2: She staggered to Columbia and then she went out to UCLA, 10 00:00:43,400 --> 00:00:46,000 Speaker 2: which is one of the most twisted programs in the country. 11 00:00:46,200 --> 00:00:50,400 Speaker 2: One of my heroes, Axel Leonovud, was there. I mean, 12 00:00:50,479 --> 00:00:53,479 Speaker 2: what you witnessed, Let's she say, Tanya for cooy with 13 00:00:53,520 --> 00:00:58,360 Speaker 2: MetLife with us. Now you're sitting there yesterday listening to this, 14 00:00:59,360 --> 00:01:03,280 Speaker 2: and you think of about Excel layanavudet uc La or 15 00:01:03,520 --> 00:01:08,160 Speaker 2: Clarida at Columbia or all I mean, Laurence Summer's father 16 00:01:08,400 --> 00:01:15,480 Speaker 2: at Pennsylvania. I mean, how did you distill that MBA speak? 17 00:01:16,080 --> 00:01:19,479 Speaker 3: Yeah, I mean that's ultimately what it was. Right, there 18 00:01:19,760 --> 00:01:24,399 Speaker 3: was and there was very little mention of economics, right, 19 00:01:24,440 --> 00:01:26,480 Speaker 3: and this is This was the Bloomberg quote of the 20 00:01:26,520 --> 00:01:29,679 Speaker 3: day was it's some deciding what not to do is 21 00:01:29,720 --> 00:01:33,119 Speaker 3: as important as deciding what to do, But deciding how 22 00:01:33,160 --> 00:01:36,640 Speaker 3: to not do anything was the problem here, Like he 23 00:01:37,040 --> 00:01:41,200 Speaker 3: I could have given you any number of economic rationales, reasons, thoughts, 24 00:01:41,400 --> 00:01:44,000 Speaker 3: you know, developed thesies of why not to why not 25 00:01:44,040 --> 00:01:45,759 Speaker 3: to hike? We didn't think there should be a hike, 26 00:01:46,200 --> 00:01:51,080 Speaker 3: but how it was conveyed was what There was a 27 00:01:51,160 --> 00:01:54,080 Speaker 3: vacuum of economic information there, economic analysis. 28 00:01:54,120 --> 00:02:00,600 Speaker 2: Are you optimistic he can escape what we witnessed yesterday? 29 00:02:00,880 --> 00:02:03,560 Speaker 3: He's going to have to decide whether he wants to 30 00:02:03,760 --> 00:02:08,720 Speaker 3: double down on his experiment here of pretend of trying 31 00:02:08,760 --> 00:02:13,000 Speaker 3: to be a next to Alan Greenspan, or give up 32 00:02:13,040 --> 00:02:16,120 Speaker 3: and say, hey, this we need I need to communicate better. 33 00:02:16,520 --> 00:02:20,959 Speaker 3: I need to under communicate my understanding of economic data, 34 00:02:21,320 --> 00:02:25,080 Speaker 3: what I'm doing, why I've done what I've done, And 35 00:02:25,200 --> 00:02:29,080 Speaker 3: I'm not I'm not sure he's going to give up 36 00:02:29,120 --> 00:02:31,000 Speaker 3: on the experiment, and that's the concern. 37 00:02:31,160 --> 00:02:35,519 Speaker 4: Well, one could argue that his disclosure or lack of 38 00:02:35,560 --> 00:02:39,360 Speaker 4: disclosure information yesterday or process yesterday was consistent with what 39 00:02:39,400 --> 00:02:41,080 Speaker 4: he said all along, which is I don't need to 40 00:02:41,160 --> 00:02:42,960 Speaker 4: hold the hand. It's not the job of the FED 41 00:02:43,000 --> 00:02:45,440 Speaker 4: and Reserve to hold the hand of the markets. You guys, 42 00:02:45,480 --> 00:02:47,839 Speaker 4: look at the data. You figured out do the same 43 00:02:47,880 --> 00:02:48,840 Speaker 4: thing that we're doing. 44 00:02:49,960 --> 00:02:53,160 Speaker 3: The problem with that is that the markets are trying 45 00:02:53,200 --> 00:02:56,560 Speaker 3: to figure out what the FED is doing at all 46 00:02:56,600 --> 00:02:58,600 Speaker 3: points in time, or what the FED will do at 47 00:02:58,639 --> 00:03:01,560 Speaker 3: all points in time, and in the absence of a vacuum, 48 00:03:01,919 --> 00:03:06,240 Speaker 3: we start analyzing. I guess in Greenspan's time, this people 49 00:03:06,240 --> 00:03:09,520 Speaker 3: analyze the fatness of his briefcase. That's what we're going 50 00:03:09,600 --> 00:03:12,400 Speaker 3: to go back to do. If he doesn't actually communicate 51 00:03:12,919 --> 00:03:16,040 Speaker 3: at the very least two things. He didn't even give 52 00:03:16,080 --> 00:03:19,480 Speaker 3: us backward guidance, right, He didn't even tell us his 53 00:03:19,600 --> 00:03:24,160 Speaker 3: rationale for what he did, and he doesn't say very 54 00:03:24,240 --> 00:03:26,200 Speaker 3: much about his reaction function. 55 00:03:26,800 --> 00:03:28,720 Speaker 2: Tanya for Cooey with this, I heard that phrased a 56 00:03:28,720 --> 00:03:31,079 Speaker 2: lot yesterday. Reaction function. I had to look it up. 57 00:03:31,480 --> 00:03:33,880 Speaker 2: Tanya for Cooey with us with the Metropolitan Life working 58 00:03:33,880 --> 00:03:37,360 Speaker 2: with drow Matison, just absolutely spectacular. We're going to continue 59 00:03:37,360 --> 00:03:39,920 Speaker 2: this conversation and as she said, we've got to get 60 00:03:39,920 --> 00:03:42,840 Speaker 2: to the next step. Guess what that is? The economic 61 00:03:42,920 --> 00:03:45,720 Speaker 2: data we're going to see right now the usual dump 62 00:03:45,760 --> 00:03:50,480 Speaker 2: personal income, personal spending, those key PC with a question. 63 00:03:50,760 --> 00:03:54,320 Speaker 2: Maybe Chairman warnsh knew at the press conference yesterday the data. 64 00:03:54,360 --> 00:03:56,520 Speaker 2: What do you think? Well, I think he was front 65 00:03:56,600 --> 00:03:57,320 Speaker 2: running the data. 66 00:03:57,480 --> 00:03:58,280 Speaker 4: I don't know. 67 00:03:58,560 --> 00:04:01,320 Speaker 2: I'm guessing he did not, folks, but we'll see. Look 68 00:04:01,320 --> 00:04:04,440 Speaker 2: at GDP annualize one point five percent gets my attention 69 00:04:04,560 --> 00:04:07,160 Speaker 2: as well, from two point one to two point zero. 70 00:04:07,320 --> 00:04:10,280 Speaker 2: And now off of that survey two point zero one 71 00:04:10,320 --> 00:04:14,080 Speaker 2: point five percent, we say good morning to all of 72 00:04:14,120 --> 00:04:17,839 Speaker 2: you as well. Something we're trying right now. Bloomberg dot com, 73 00:04:17,839 --> 00:04:21,960 Speaker 2: slash Ask Radio, Bloomberg dot com, slash Ask Radio, we're 74 00:04:22,040 --> 00:04:24,680 Speaker 2: rolling this out. Carol Massler had a tantrum, said I 75 00:04:24,720 --> 00:04:27,080 Speaker 2: have to do it first. So they did it last 76 00:04:27,160 --> 00:04:29,400 Speaker 2: night with the Tech thing with Mendy Job and they 77 00:04:29,480 --> 00:04:33,080 Speaker 2: got a huge response. Good morning around the world to 78 00:04:33,480 --> 00:04:37,719 Speaker 2: Bloomberg dot com subscribers and terminal users who can now 79 00:04:37,760 --> 00:04:41,039 Speaker 2: come in. I'm gonna be honest, We're gonna vet the questions. Okay, 80 00:04:41,440 --> 00:04:43,200 Speaker 2: you know, if if they ask me, you know, do 81 00:04:43,240 --> 00:04:45,120 Speaker 2: I really hate the Yankees that much, We're not going 82 00:04:45,200 --> 00:04:47,640 Speaker 2: to do that question. Unfortunately, we got a week in 83 00:04:47,720 --> 00:04:51,040 Speaker 2: Smart question this morning. This is some Andrew at Wisconsin, 84 00:04:51,560 --> 00:04:54,840 Speaker 2: Like I think he's probably you know, Madison economics is 85 00:04:54,880 --> 00:04:57,800 Speaker 2: pretty good. You gotta believe Andrew's doing this from the 86 00:04:57,839 --> 00:05:01,680 Speaker 2: classroom and with Tanya Forakou here. We can do this 87 00:05:01,720 --> 00:05:04,000 Speaker 2: with that life because it's great. It's about the parlor game. 88 00:05:04,400 --> 00:05:06,880 Speaker 2: What you and I we remember what it wasn't as 89 00:05:06,960 --> 00:05:10,760 Speaker 2: stupid as is now. Is everyone just mad that they 90 00:05:10,760 --> 00:05:13,719 Speaker 2: can no longer front run the FED for the first 91 00:05:13,720 --> 00:05:17,040 Speaker 2: time in fifteen years. That's the heart of the matter, 92 00:05:17,200 --> 00:05:17,640 Speaker 2: isn't it. 93 00:05:18,400 --> 00:05:22,320 Speaker 3: I think that's that's what Warsh is trying to get around. 94 00:05:22,400 --> 00:05:26,800 Speaker 3: He's trying to wean the markets off of excess dependence. 95 00:05:26,839 --> 00:05:29,120 Speaker 3: And I do think there's a point there where we 96 00:05:29,360 --> 00:05:32,760 Speaker 3: perhaps did too much forward guidance. We got into forward 97 00:05:32,760 --> 00:05:36,760 Speaker 3: guidance because rates were too low, rates hit zero FED 98 00:05:36,760 --> 00:05:39,120 Speaker 3: funds and we had to sort of say, well we continue, 99 00:05:39,160 --> 00:05:41,200 Speaker 3: We'll continue to have zero for a while. 100 00:05:41,320 --> 00:05:41,480 Speaker 2: Right. 101 00:05:41,560 --> 00:05:44,920 Speaker 3: That That was the origin story of some of this 102 00:05:45,040 --> 00:05:48,800 Speaker 3: forward guidance. Right, and now we are a little bit 103 00:05:48,839 --> 00:05:52,200 Speaker 3: too dependent on forward guidance. But we still need to 104 00:05:52,240 --> 00:05:55,080 Speaker 3: know why the Fed did what they did that, you know, 105 00:05:55,200 --> 00:05:58,320 Speaker 3: backward guidance, So to speak and what are they going 106 00:05:58,400 --> 00:06:01,520 Speaker 3: to do under different scenarios? Towed down that path, but 107 00:06:01,560 --> 00:06:04,760 Speaker 3: I would have liked to have seen some reaction function 108 00:06:05,560 --> 00:06:10,120 Speaker 3: articulated by by Walsh. Doesn't have to say what he 109 00:06:10,200 --> 00:06:12,280 Speaker 3: thinks is going to happen, but what are the things 110 00:06:12,279 --> 00:06:14,320 Speaker 3: that he worries about? Is he worried about wages? Is 111 00:06:14,360 --> 00:06:17,440 Speaker 3: he worried about the labor market? None of that was addressed. 112 00:06:17,400 --> 00:06:21,880 Speaker 4: The economy by not raising the rate yesterday. A lot 113 00:06:21,880 --> 00:06:24,240 Speaker 4: of folks to say, that's fine, that's actually decent. The 114 00:06:24,320 --> 00:06:28,279 Speaker 4: data is not there, This economy is not overheating. Is 115 00:06:28,320 --> 00:06:31,000 Speaker 4: that jive with what you're looking at the data? Percent? 116 00:06:31,080 --> 00:06:34,279 Speaker 3: I think what's what's actually been interesting is the you know, 117 00:06:34,320 --> 00:06:37,800 Speaker 3: one of the source of growth is AI. That's sort of, 118 00:06:38,920 --> 00:06:41,960 Speaker 3: you know, the our superstar for this team right now, 119 00:06:42,080 --> 00:06:45,400 Speaker 3: right and that is has been a little bit self 120 00:06:45,440 --> 00:06:48,000 Speaker 3: correcting right now. There's a bit of introspection in the markets. 121 00:06:48,040 --> 00:06:50,040 Speaker 3: There's a little bit of concern there, a little bit 122 00:06:50,040 --> 00:06:53,440 Speaker 3: of shaking out of of winners and losers a little. 123 00:06:53,200 --> 00:06:55,400 Speaker 4: Bit, and that's been doing its thing. 124 00:06:55,600 --> 00:06:59,640 Speaker 3: That's actually working in favor of not having to burst 125 00:06:59,640 --> 00:07:04,440 Speaker 3: any rational exuberance bubbles. The consumer is not overheating crazily. 126 00:07:06,080 --> 00:07:07,240 Speaker 4: It should be. 127 00:07:07,279 --> 00:07:10,840 Speaker 2: Okay, you're here, so don't go away, stay here. Interests 128 00:07:10,920 --> 00:07:13,600 Speaker 2: are ASKI on deck from Morgan Stanley. We're commercial free 129 00:07:13,600 --> 00:07:17,160 Speaker 2: to you across American and worldwide at special edition of 130 00:07:17,200 --> 00:07:21,120 Speaker 2: Bloomberg Surveillance after what we witnessed yesterday. And thank you 131 00:07:21,160 --> 00:07:24,520 Speaker 2: so much Andrew and Wisconsin for that question, really really 132 00:07:24,600 --> 00:07:28,960 Speaker 2: actually foundational question it right now Bloomberg Surveillance this morning, 133 00:07:29,000 --> 00:07:33,680 Speaker 2: brought you by IBKR trade election, climate and economic outcomes 134 00:07:33,680 --> 00:07:38,320 Speaker 2: with IBKR prediction markets right alongside your stocks and your options. 135 00:07:38,760 --> 00:07:41,440 Speaker 2: Earn interest in your position, and receive one dollar per 136 00:07:41,480 --> 00:07:46,720 Speaker 2: contract if you're right. Learn more at ibkr dot com 137 00:07:46,720 --> 00:07:51,040 Speaker 2: slash Predictions. Okay, I'm gonna go walk within a wong later. 138 00:07:51,080 --> 00:07:54,760 Speaker 2: We're gonna do that with Tani right now. And basically 139 00:07:54,800 --> 00:07:57,800 Speaker 2: what I'm saying, folks is what we have is a threat, 140 00:07:57,880 --> 00:08:00,400 Speaker 2: a war, an argument, whatever you want to hal it 141 00:08:01,000 --> 00:08:05,240 Speaker 2: between people that don't want to do traditional economics. If 142 00:08:05,240 --> 00:08:09,680 Speaker 2: you're Tony Faku and UCLA, did you study under Axel. 143 00:08:09,480 --> 00:08:12,960 Speaker 3: Leanovud No, I don't know if he was there at 144 00:08:12,960 --> 00:08:14,680 Speaker 3: the time, right, he probably wasn't there. 145 00:08:14,680 --> 00:08:18,160 Speaker 2: He's coming from Trent or over in Italy. Axle Leonovid 146 00:08:18,200 --> 00:08:20,119 Speaker 2: Folks is one of my heroes. I was so honored 147 00:08:20,160 --> 00:08:23,120 Speaker 2: to interview him a number of times. Is Milton Friedman 148 00:08:23,280 --> 00:08:26,400 Speaker 2: once said to me Leyanuvoud is the guy who came 149 00:08:26,480 --> 00:08:31,000 Speaker 2: out of the trenches and took on that nineteen sixties 150 00:08:31,120 --> 00:08:37,240 Speaker 2: certitude of Kynesian policy. He was the angry guy bulletproof academics. 151 00:08:37,640 --> 00:08:41,520 Speaker 2: Is this just a war against whether it's Robert Lucas 152 00:08:41,600 --> 00:08:46,320 Speaker 2: at Chicago or Clarida and what's called DSGE or some 153 00:08:46,600 --> 00:08:49,320 Speaker 2: you know, somebody new winning John Bates Clerk, Is this 154 00:08:49,520 --> 00:08:53,200 Speaker 2: just a discussion about we need to end the economic 155 00:08:53,240 --> 00:08:55,440 Speaker 2: discussion at the FED and just let the markets go. 156 00:08:56,240 --> 00:08:58,200 Speaker 3: I think that's what worsh is. I think that's the 157 00:08:58,240 --> 00:09:02,240 Speaker 3: direction that Warsh wants to head in. Is that really 158 00:09:03,840 --> 00:09:05,040 Speaker 3: is it accomplishing at that? 159 00:09:05,200 --> 00:09:05,440 Speaker 4: Though? 160 00:09:05,600 --> 00:09:08,080 Speaker 3: I think there's different there's better ways of accomplishing that. 161 00:09:08,160 --> 00:09:10,320 Speaker 3: If there, If there is, if that is a question, 162 00:09:11,120 --> 00:09:15,040 Speaker 3: because ultimately the markets are really still trying to understand, 163 00:09:15,080 --> 00:09:18,000 Speaker 3: and they're they're taking the indication from from you know, 164 00:09:18,040 --> 00:09:21,200 Speaker 3: all the other folks that are speaking wall Er Logan Hammick. 165 00:09:21,559 --> 00:09:25,360 Speaker 2: Is we got to go is uh as somebody emails 166 00:09:25,400 --> 00:09:28,320 Speaker 2: and thank you for this again. Thank a subscriber at 167 00:09:28,360 --> 00:09:32,520 Speaker 2: ASK Radio uh Tony and simple is Drew Madis okay. 168 00:09:32,240 --> 00:09:36,240 Speaker 3: He's okay, He's okay, I mean he yeah, he did 169 00:09:37,040 --> 00:09:37,760 Speaker 3: leave early. 170 00:09:41,200 --> 00:09:45,000 Speaker 2: TONYOI thank you so much, really really appreciate it. This 171 00:09:45,120 --> 00:09:48,160 Speaker 2: morning we get lucky as we had Michael Perverses earlier 172 00:09:48,240 --> 00:09:51,360 Speaker 2: to start the show scheduled and to Sisarowski with us 173 00:09:51,360 --> 00:09:54,640 Speaker 2: with Morgan Stanley, who's you know, he's bon dude, folks, 174 00:09:54,640 --> 00:09:58,760 Speaker 2: but he's really encyclopedic from Full Faith and Credit over 175 00:09:58,800 --> 00:10:01,480 Speaker 2: to the fancy stuff with all of his heritage out 176 00:10:01,480 --> 00:10:04,679 Speaker 2: of Eaton van some Morgan Stanley in Boston, Andrew, can 177 00:10:04,720 --> 00:10:07,320 Speaker 2: you buy the thirty year Full Faith and Credit this morning? 178 00:10:08,600 --> 00:10:10,760 Speaker 5: So I wouldn't be buying it this morning. I'd be 179 00:10:10,800 --> 00:10:12,719 Speaker 5: more focused on the front end of the curve, and 180 00:10:13,320 --> 00:10:16,120 Speaker 5: quite frankly, for the reasons you saw yesterday, which is 181 00:10:16,160 --> 00:10:19,440 Speaker 5: that there's still not enough clarity from the FED and 182 00:10:19,480 --> 00:10:21,960 Speaker 5: there's still not enough term premium being built into this 183 00:10:22,080 --> 00:10:25,000 Speaker 5: market for the new FED chair. And so I'd be 184 00:10:25,040 --> 00:10:27,640 Speaker 5: avoiding long end bonds. We've been avoiding them all year, 185 00:10:28,000 --> 00:10:30,760 Speaker 5: and yesterday's press conference didn't give us any more confidence 186 00:10:30,800 --> 00:10:32,400 Speaker 5: to go into them despite the backup. 187 00:10:33,120 --> 00:10:36,400 Speaker 4: So what was your take from yesterday's news coming out 188 00:10:36,440 --> 00:10:39,520 Speaker 4: of this Federal Reserve? I mean, Chairman Warsh getting some 189 00:10:39,559 --> 00:10:43,760 Speaker 4: criticism for a lack of disclosure, but it's kind of 190 00:10:43,800 --> 00:10:45,160 Speaker 4: been his call all along here. 191 00:10:45,200 --> 00:10:45,600 Speaker 2: I don't know. 192 00:10:46,760 --> 00:10:48,800 Speaker 5: Yeah, Look, I don't think the Fed made a mistake 193 00:10:48,880 --> 00:10:51,760 Speaker 5: by not hiking rates. I think that was what they 194 00:10:51,760 --> 00:10:54,800 Speaker 5: should have ultimately done. I think we had a weak 195 00:10:54,880 --> 00:10:57,960 Speaker 5: inflation report in the CPI earlier this month, we had 196 00:10:57,960 --> 00:11:00,120 Speaker 5: a weaker PAYO report, So I think it's if he 197 00:11:00,200 --> 00:11:04,720 Speaker 5: had justified the hold for those reasons and saying we 198 00:11:04,760 --> 00:11:06,640 Speaker 5: want a little more time, I don't think you would 199 00:11:06,679 --> 00:11:08,760 Speaker 5: have seen the bond market sell off and the equity 200 00:11:08,760 --> 00:11:10,760 Speaker 5: market self we did. I think instead of just kind 201 00:11:10,760 --> 00:11:14,560 Speaker 5: of coming out in kind of vague terms and talking 202 00:11:14,559 --> 00:11:17,360 Speaker 5: about maybe that let the market do the work for you, 203 00:11:17,600 --> 00:11:20,080 Speaker 5: I think that's the problem that the bond market and 204 00:11:20,240 --> 00:11:22,120 Speaker 5: risk markets ultimately had, because then it leads to a 205 00:11:22,120 --> 00:11:25,000 Speaker 5: credibility problem, which means you might ultimately end up having 206 00:11:25,040 --> 00:11:28,160 Speaker 5: to hike when you weren't going to have to a 207 00:11:28,200 --> 00:11:30,600 Speaker 5: few weeks ago. If the data kept coming in your direction. 208 00:11:30,679 --> 00:11:33,920 Speaker 5: Now you're kind of introducing credibility into the equation, which 209 00:11:33,960 --> 00:11:35,040 Speaker 5: is a big problem for the FED. 210 00:11:35,880 --> 00:11:38,680 Speaker 4: So I mean the bond market. I mean, as you mentioned, 211 00:11:38,720 --> 00:11:41,040 Speaker 4: mister Walsh said that he's letting the bond market do 212 00:11:41,080 --> 00:11:43,720 Speaker 4: the heavy lifting, which it certainly is with the or 213 00:11:43,760 --> 00:11:45,800 Speaker 4: the ten year. Now out of the four sixty seven 214 00:11:45,840 --> 00:11:48,040 Speaker 4: to thirty year or five twenty one, even a shorten, 215 00:11:48,400 --> 00:11:50,080 Speaker 4: you know, it's still at four and a quarter. So 216 00:11:50,160 --> 00:11:53,839 Speaker 4: I mean the bond market is in fact doing the 217 00:11:53,840 --> 00:11:56,840 Speaker 4: work of the FED historically. Is that a problem? 218 00:11:58,000 --> 00:11:58,080 Speaker 2: No? 219 00:11:58,160 --> 00:12:01,040 Speaker 5: I mean, look, the bond market and equity markets certainly 220 00:12:01,120 --> 00:12:05,559 Speaker 5: yesterday tighten financial conditions. That's something that you know would 221 00:12:05,840 --> 00:12:07,280 Speaker 5: would at the end of the day be going in 222 00:12:07,320 --> 00:12:09,520 Speaker 5: the fedce favor to kind of counter some of the 223 00:12:09,520 --> 00:12:13,959 Speaker 5: other inflationary forces. But I think that the lack of direction, 224 00:12:14,440 --> 00:12:17,360 Speaker 5: the lack of communication, we know it's going to lead 225 00:12:17,360 --> 00:12:20,880 Speaker 5: to more volatility, and if we're in some void, then 226 00:12:21,280 --> 00:12:23,400 Speaker 5: you don't want to let this get too uncontained. And 227 00:12:23,440 --> 00:12:25,440 Speaker 5: I think that's the thing where all of a sudden 228 00:12:25,480 --> 00:12:28,320 Speaker 5: you saw certain analysts out there estimating that, hey, maybe 229 00:12:28,360 --> 00:12:30,440 Speaker 5: the thirty year goes to five point fifty now and 230 00:12:30,520 --> 00:12:32,760 Speaker 5: can kind of gap there quickly. We saw how quickly 231 00:12:32,760 --> 00:12:35,880 Speaker 5: it just moved, you know, thirteen fourteen basis points yesterday, 232 00:12:36,320 --> 00:12:39,160 Speaker 5: And I think there's concern of if we're not going 233 00:12:39,200 --> 00:12:42,040 Speaker 5: to get any discussion from the FED, then how how 234 00:12:42,120 --> 00:12:42,760 Speaker 5: high can this go? 235 00:12:42,880 --> 00:12:43,480 Speaker 2: How quickly? 236 00:12:43,559 --> 00:12:45,840 Speaker 5: So I'd still be avoiding those long end bonds. But 237 00:12:45,880 --> 00:12:48,400 Speaker 5: again I think that the data could end up saving 238 00:12:48,440 --> 00:12:52,120 Speaker 5: the FED. But in the interim period, who knows how 239 00:12:52,600 --> 00:12:53,959 Speaker 5: bad it could get. 240 00:12:53,800 --> 00:12:56,719 Speaker 2: When you see these dynamics of all the you know, 241 00:12:56,760 --> 00:12:59,920 Speaker 2: all this stuff, the er that you're expert at, we use, 242 00:13:00,080 --> 00:13:03,760 Speaker 2: say price movement, is it working in a non panic 243 00:13:04,000 --> 00:13:08,080 Speaker 2: rational way or do you worry about jump conditions? We're 244 00:13:08,160 --> 00:13:11,400 Speaker 2: somewhere out there that I don't understand the fixed income 245 00:13:11,440 --> 00:13:12,719 Speaker 2: market could unravel. 246 00:13:13,800 --> 00:13:17,800 Speaker 5: Yeah, I think that, you know, it's certainly concerning how 247 00:13:17,840 --> 00:13:20,320 Speaker 5: how quickly this can escalate. And and the issue for 248 00:13:20,360 --> 00:13:23,439 Speaker 5: the FED and the US market is that it's not 249 00:13:23,559 --> 00:13:25,800 Speaker 5: just it's not just here in the United States that 250 00:13:25,800 --> 00:13:28,160 Speaker 5: we have this kind of massive issuance and and kind 251 00:13:28,200 --> 00:13:31,120 Speaker 5: of massive deficits. You know, the era of austerity in 252 00:13:31,160 --> 00:13:34,600 Speaker 5: Germany and Europe is over. We have China, who's exporting bonds. 253 00:13:34,840 --> 00:13:38,839 Speaker 5: We have these megacap hyperscalers that are issuing, you know, 254 00:13:38,960 --> 00:13:41,080 Speaker 5: hundreds of billions of bonds. So all this is kind 255 00:13:41,120 --> 00:13:44,840 Speaker 5: of compounding on itself and giving investors some concern of like, Okay, 256 00:13:45,240 --> 00:13:47,640 Speaker 5: how how much how much more issuance is the market 257 00:13:47,640 --> 00:13:49,760 Speaker 5: going to have to digest? And how high how high 258 00:13:49,800 --> 00:13:51,800 Speaker 5: should we be pricing in a term premium. So I 259 00:13:51,800 --> 00:13:53,720 Speaker 5: think that that's the thing, is that this is a 260 00:13:53,720 --> 00:13:55,760 Speaker 5: bit of a different situation that we've had the last 261 00:13:55,800 --> 00:13:59,000 Speaker 5: decade because there is so much more supply coming everywhere, 262 00:13:59,240 --> 00:14:01,160 Speaker 5: and so the market's not just trying to count, not 263 00:14:01,280 --> 00:14:03,079 Speaker 5: just trying to figure out where where rich should be 264 00:14:03,080 --> 00:14:05,480 Speaker 5: in the United States. But it's Europe, it's China, it's 265 00:14:05,600 --> 00:14:07,920 Speaker 5: it's Japan and and and then it's the spread that 266 00:14:07,920 --> 00:14:11,480 Speaker 5: you're getting on these kind of mega megacap tech companies, 267 00:14:11,840 --> 00:14:13,040 Speaker 5: tech company long bonds too. 268 00:14:13,600 --> 00:14:16,240 Speaker 4: Andrew as an active fiction income investor, did you come 269 00:14:16,280 --> 00:14:19,480 Speaker 4: into the office today with thinking differently about your portfolio 270 00:14:19,560 --> 00:14:20,960 Speaker 4: than you did maybe yesterday morning? 271 00:14:22,200 --> 00:14:24,760 Speaker 5: So so we've we've had a view that the yeal 272 00:14:24,800 --> 00:14:27,480 Speaker 5: curve should be steepening all year. We continue to kind 273 00:14:27,520 --> 00:14:30,040 Speaker 5: of even that view. I think the one thing that 274 00:14:30,040 --> 00:14:32,080 Speaker 5: that's changed in my mind is that I didn't think 275 00:14:32,120 --> 00:14:34,880 Speaker 5: the FED was going to have to to hike for 276 00:14:35,360 --> 00:14:37,880 Speaker 5: the rest of the year. I thought that the data itself, 277 00:14:37,880 --> 00:14:39,840 Speaker 5: as long as if the war in Iran can just 278 00:14:39,880 --> 00:14:42,840 Speaker 5: calm down. Oil prices are the main thing that's that's 279 00:14:42,880 --> 00:14:45,760 Speaker 5: kind of driving inflation and chip inflations there as well. 280 00:14:45,760 --> 00:14:47,800 Speaker 5: But I thought that FED, if they just kind of 281 00:14:47,840 --> 00:14:50,640 Speaker 5: could stall a little bit, that could give them enough 282 00:14:50,680 --> 00:14:52,320 Speaker 5: time for the data to come in their favor. 283 00:14:52,560 --> 00:14:53,480 Speaker 2: I think the one thing. 284 00:14:53,360 --> 00:14:56,280 Speaker 5: That's changed now is this FED credibility, and they might 285 00:14:57,200 --> 00:15:00,200 Speaker 5: end up having to hike in a situation just to 286 00:15:00,280 --> 00:15:02,360 Speaker 5: kind of regain that credibility. I think that's the one 287 00:15:02,360 --> 00:15:04,440 Speaker 5: thing that's changed in my mind that didn't exist twenty 288 00:15:04,480 --> 00:15:04,840 Speaker 5: four hours. 289 00:15:05,040 --> 00:15:07,000 Speaker 2: I'll find a question, Andrew, did you have a chance 290 00:15:07,080 --> 00:15:09,520 Speaker 2: during the World Club to go to Hennessy's Bar? What 291 00:15:09,640 --> 00:15:14,040 Speaker 2: a bomb show they're closing Hennessy's Bar, definitive iconic in Boston. 292 00:15:14,240 --> 00:15:15,800 Speaker 2: Did you have a chance to go there? Like for 293 00:15:15,840 --> 00:15:18,119 Speaker 2: the whole Scotland thing in the World. 294 00:15:17,880 --> 00:15:21,760 Speaker 5: Cup, a true institution and we're really sorry to see 295 00:15:21,760 --> 00:15:23,640 Speaker 5: it go. Between that, we still have the bell in 296 00:15:23,680 --> 00:15:26,520 Speaker 5: hand here, but we are sorry to see all the 297 00:15:27,040 --> 00:15:29,880 Speaker 5: Scottish people leave. They were walking around town with their 298 00:15:29,960 --> 00:15:33,080 Speaker 5: kilts and we miss them and hope they come back 299 00:15:33,080 --> 00:15:33,520 Speaker 5: real soon. 300 00:15:33,720 --> 00:15:35,800 Speaker 2: It's great and plus Hennessey's they're going to transfer the 301 00:15:35,800 --> 00:15:38,200 Speaker 2: Bloomberg terminal that they have at the bar over there. 302 00:15:38,480 --> 00:15:42,440 Speaker 2: Good Bar twenty three is going in there or whatever. Andrew, 303 00:15:42,520 --> 00:15:45,600 Speaker 2: thank you so much. And Seroski advanced Morgan Stanley there 304 00:15:45,880 --> 00:15:49,120 Speaker 2: on fixed income really important, the futures up forty for 305 00:15:49,320 --> 00:15:52,680 Speaker 2: we're commercial free to this hour with a great lineup 306 00:15:52,720 --> 00:15:56,800 Speaker 2: to come to help you understand what we witnessed yesterday. 307 00:15:57,080 --> 00:16:01,080 Speaker 2: Francis Donald will join us from RBC. Michael Ball on 308 00:16:01,200 --> 00:16:04,240 Speaker 2: short notice. I think he's on vacate and he's coming in. 309 00:16:04,320 --> 00:16:07,120 Speaker 2: He's rocket and Michael Ball will be with us. And 310 00:16:07,160 --> 00:16:11,760 Speaker 2: now joining us here is Seemas Shaw with principle and 311 00:16:11,840 --> 00:16:18,520 Speaker 2: she's just magnificent. It's synthesizing the transatlantic arc from London. Seema. 312 00:16:18,520 --> 00:16:21,920 Speaker 2: How was this digested yesterday in the city. 313 00:16:24,040 --> 00:16:25,960 Speaker 6: I think it was digested in the same way that 314 00:16:26,000 --> 00:16:28,520 Speaker 6: it was in the US, which was a lot of confusion, 315 00:16:28,720 --> 00:16:33,200 Speaker 6: confusion and some concern with regards to clarity to the 316 00:16:33,240 --> 00:16:38,840 Speaker 6: clarity that Chosh was providing, and real question marks about 317 00:16:38,880 --> 00:16:43,720 Speaker 6: whether he's genuinely committed to that price stability goal that 318 00:16:43,760 --> 00:16:47,200 Speaker 6: he continued to talk about. So I think there's been 319 00:16:47,240 --> 00:16:49,280 Speaker 6: some I don't know if it's necessarily going to stick, 320 00:16:49,720 --> 00:16:52,240 Speaker 6: but certainly there are questions and concerns that maybe the 321 00:16:52,240 --> 00:16:54,120 Speaker 6: FED will have to address within the coming weeks. 322 00:16:54,640 --> 00:16:57,880 Speaker 4: Seema had We've got this FED presumably on hold, but 323 00:16:57,920 --> 00:17:01,720 Speaker 4: the expectations it will have to hype soon. If that's 324 00:17:01,800 --> 00:17:03,600 Speaker 4: kind of the case when we had the ECB hold 325 00:17:03,640 --> 00:17:08,639 Speaker 4: steady here today, how are you approaching these markets today 326 00:17:08,800 --> 00:17:10,640 Speaker 4: anything different from maybe the last day or two. 327 00:17:12,720 --> 00:17:14,399 Speaker 6: Well, I guess the only thing that's different is that 328 00:17:14,480 --> 00:17:18,000 Speaker 6: we went into the meeting not expecting any hikes at 329 00:17:18,080 --> 00:17:20,520 Speaker 6: all in twenty twenty six and even through twenty twenty seven, 330 00:17:21,000 --> 00:17:23,000 Speaker 6: and the reason for that was just that the economic 331 00:17:23,119 --> 00:17:27,439 Speaker 6: battery doesn't necessarily justify a hike yesterday. 332 00:17:27,800 --> 00:17:29,439 Speaker 7: But of course there is a risk that you. 333 00:17:29,760 --> 00:17:32,040 Speaker 6: See continued to high energy prices, and then that feeds 334 00:17:32,040 --> 00:17:35,520 Speaker 6: through inflation expectations and underlying inflation. The same debate that 335 00:17:35,560 --> 00:17:37,959 Speaker 6: I think everyone is having. I think the added dimension 336 00:17:38,000 --> 00:17:40,600 Speaker 6: that came from yesterday is that Let's say that we 337 00:17:40,640 --> 00:17:43,440 Speaker 6: do see continued to move up in energy prices, maybe 338 00:17:43,440 --> 00:17:45,960 Speaker 6: not very significant, but at least that inflation doesn't trend 339 00:17:46,000 --> 00:17:48,480 Speaker 6: down as much as the FED would want. The fact 340 00:17:48,520 --> 00:17:51,760 Speaker 6: is that because the bond market is really questioning that credibility, 341 00:17:51,880 --> 00:17:54,919 Speaker 6: it almost to a point, starts to raise the prospect 342 00:17:54,960 --> 00:17:58,880 Speaker 6: the probability of FED hikes later down the line, because 343 00:17:58,920 --> 00:18:02,600 Speaker 6: they need to react in order to put that credibility 344 00:18:02,600 --> 00:18:05,800 Speaker 6: back into the market and then suppress that bond movement higher. 345 00:18:05,840 --> 00:18:08,080 Speaker 6: So actually, I think the probability of hikes has actually 346 00:18:08,160 --> 00:18:11,400 Speaker 6: increased over the next twelve months off the back of yesterday. 347 00:18:12,720 --> 00:18:17,800 Speaker 4: So next steps here for the credit markets here, I 348 00:18:17,840 --> 00:18:22,000 Speaker 4: mean this change the way you're thinking about credit risk 349 00:18:22,080 --> 00:18:25,720 Speaker 4: here at all in the bond market, not at. 350 00:18:25,600 --> 00:18:27,560 Speaker 6: This stage, but it's certainly something that we want to watch. 351 00:18:27,600 --> 00:18:30,880 Speaker 6: I mean, typically when you're seeing thirty years and other 352 00:18:30,920 --> 00:18:34,280 Speaker 6: parts of the bond the yield curve moving up, things 353 00:18:34,320 --> 00:18:36,160 Speaker 6: do start to get a little bit messy. Now we're 354 00:18:36,200 --> 00:18:38,520 Speaker 6: at the early stages. I don't think it's the time 355 00:18:38,640 --> 00:18:42,720 Speaker 6: to react, certainly within twenty four hours of the FMC 356 00:18:43,600 --> 00:18:46,760 Speaker 6: press statement, but we need to see some talk and 357 00:18:46,960 --> 00:18:48,720 Speaker 6: if within the next month or so you're not getting 358 00:18:48,720 --> 00:18:51,480 Speaker 6: any clarity, then certainly, Yeah, then I think we could 359 00:18:51,520 --> 00:18:54,360 Speaker 6: be moving to a stage where markets generally risk assets 360 00:18:54,920 --> 00:18:57,720 Speaker 6: are facing a considerably more challenging time. If they're still 361 00:18:57,800 --> 00:19:00,960 Speaker 6: questioning the credibility of the THAD, then that will make 362 00:19:01,080 --> 00:19:04,760 Speaker 6: the I think the arithmetic pretty difficult for riskousis abroad, 363 00:19:05,119 --> 00:19:06,399 Speaker 6: across the across the market. 364 00:19:06,560 --> 00:19:10,399 Speaker 2: Seman, from where you set and synthesize this, you rocked 365 00:19:10,400 --> 00:19:12,960 Speaker 2: at the London School of Economics. You made it through 366 00:19:13,000 --> 00:19:16,560 Speaker 2: their freshman year math exam. Full disclosure, I actually put 367 00:19:16,600 --> 00:19:17,959 Speaker 2: Mick Jagger didn't pass it. 368 00:19:18,000 --> 00:19:18,440 Speaker 4: Is that right? 369 00:19:18,480 --> 00:19:22,520 Speaker 2: It's all right, Seema Shark killing it at LC. You're 370 00:19:22,560 --> 00:19:25,639 Speaker 2: twenty one years old. You're walking into Her Majesty's treasury 371 00:19:26,119 --> 00:19:28,159 Speaker 2: to help them out. I mean, you know you're the 372 00:19:28,200 --> 00:19:32,040 Speaker 2: real deal, Seema. Is this the distillate of the president 373 00:19:32,200 --> 00:19:36,399 Speaker 2: just really doesn't want economists economists to do central banking. 374 00:19:38,600 --> 00:19:39,480 Speaker 2: Look it may well be. 375 00:19:39,560 --> 00:19:40,800 Speaker 6: I mean, I think that was one of the things 376 00:19:40,840 --> 00:19:43,320 Speaker 6: that came out. Look, go back through four weeks. I 377 00:19:43,320 --> 00:19:46,000 Speaker 6: think the market have finally started to discard this idea 378 00:19:46,080 --> 00:19:49,119 Speaker 6: that the chairwash was going to be the mouthpiece for 379 00:19:49,520 --> 00:19:52,520 Speaker 6: President Trump. I think fast forward to today and those 380 00:19:52,600 --> 00:19:55,800 Speaker 6: question marks are back. You know it does, Chairwash. I 381 00:19:55,880 --> 00:19:58,879 Speaker 6: want to keep rates un change because that's President Trump's perspective. 382 00:19:59,200 --> 00:20:00,600 Speaker 6: I think there is a question, and I think it 383 00:20:00,600 --> 00:20:01,239 Speaker 6: needs to be dealt with. 384 00:20:01,520 --> 00:20:02,000 Speaker 5: I want to. 385 00:20:01,960 --> 00:20:05,520 Speaker 6: Hope that this is a truly independent FED, but I 386 00:20:05,560 --> 00:20:08,320 Speaker 6: think it's now up to the Central Bank to really 387 00:20:08,320 --> 00:20:12,160 Speaker 6: come out and reaffirm that commitment that it is genuinely 388 00:20:12,440 --> 00:20:13,600 Speaker 6: focused on pricetability. 389 00:20:13,800 --> 00:20:16,479 Speaker 2: She says it so politely. Yeah, it's not like everybody 390 00:20:16,520 --> 00:20:19,639 Speaker 2: else is in an upwrold. Sema Shaw is gracious, Sema 391 00:20:19,800 --> 00:20:22,760 Speaker 2: Shaw with principal, Thank you so much. Stay with us. 392 00:20:23,000 --> 00:20:26,240 Speaker 2: More from Bloomberg Surveillance coming up after this. 393 00:20:33,480 --> 00:20:37,080 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 394 00:20:37,119 --> 00:20:40,280 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 395 00:20:40,359 --> 00:20:44,040 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 396 00:20:44,200 --> 00:20:45,680 Speaker 1: watch us live on YouTube. 397 00:20:45,800 --> 00:20:48,920 Speaker 2: Paul Sankie's people caught up and had a tantrument. Can't cancel. 398 00:20:49,280 --> 00:20:52,680 Speaker 2: So we've got Sankie here and Hooties and Saudi's and 399 00:20:52,720 --> 00:20:55,600 Speaker 2: all the rest of it. So you're sitting in front 400 00:20:55,600 --> 00:20:57,480 Speaker 2: of a bunch of fancy people, which is the way 401 00:20:57,520 --> 00:21:02,840 Speaker 2: Paul Sankie rolls. What's the number one question fancy hydrocarbon 402 00:21:02,920 --> 00:21:05,040 Speaker 2: people want to know from you right now? 403 00:21:05,520 --> 00:21:07,360 Speaker 8: Well, I think there's this ongoing debate as to why 404 00:21:07,440 --> 00:21:10,480 Speaker 8: crude prices are not higher, right because the military situation 405 00:21:10,600 --> 00:21:14,639 Speaker 8: in the Gulf is developing in a way that's not great. 406 00:21:14,720 --> 00:21:17,800 Speaker 8: And obviously the main folks of that is Saudi Arabia. 407 00:21:18,280 --> 00:21:21,080 Speaker 8: Looks like we've got some peace in the UAE, we've 408 00:21:21,080 --> 00:21:24,480 Speaker 8: got a settled situation in Lebanon, and then of course 409 00:21:24,520 --> 00:21:27,840 Speaker 8: you've got an absolute beating that the Ukrainians are handing 410 00:21:27,840 --> 00:21:30,840 Speaker 8: out to the Russian oil infrastructure. So I think the 411 00:21:30,920 --> 00:21:34,360 Speaker 8: answer to the question is refining capacity limitations, and so 412 00:21:34,480 --> 00:21:38,320 Speaker 8: there's not the ability to use more crude to bring 413 00:21:38,359 --> 00:21:41,080 Speaker 8: down product prices. And you've got to remember that wholesale 414 00:21:41,119 --> 00:21:43,919 Speaker 8: gallasolene is right now one hundred and forty dollars a barrel. 415 00:21:44,000 --> 00:21:45,920 Speaker 8: So I think people are looking at the wrong oil price. 416 00:21:45,960 --> 00:21:51,040 Speaker 2: In fact, okay, this is critical Young trenchin in China, 417 00:21:52,280 --> 00:21:54,960 Speaker 2: off the desk in Singapore. Our oil people, they only 418 00:21:55,000 --> 00:21:58,800 Speaker 2: go to Oxford and Cambridge in LC and so he 419 00:21:58,840 --> 00:22:03,159 Speaker 2: comes up with the Ice Brant distillate refinery. Explain your 420 00:22:03,280 --> 00:22:06,359 Speaker 2: audience why looking at the wah Wah at four dollars 421 00:22:06,400 --> 00:22:08,639 Speaker 2: twenty cents isn't the way to look at this. You 422 00:22:08,720 --> 00:22:12,080 Speaker 2: got to look at ice gas oil in Europe. No, 423 00:22:12,480 --> 00:22:13,159 Speaker 2: slightly disagree. 424 00:22:13,200 --> 00:22:15,040 Speaker 8: I mean, I think four twenty at the wah Wah 425 00:22:15,320 --> 00:22:17,800 Speaker 8: is one hundred and sixty seventy dollars a barrow, right, 426 00:22:17,880 --> 00:22:20,119 Speaker 8: So when you think about it in those terms, and 427 00:22:20,160 --> 00:22:22,719 Speaker 8: then you know Brent's at ninety, we've got a seventy 428 00:22:22,760 --> 00:22:25,480 Speaker 8: dollars refining margin. And I say that's a margin, that's 429 00:22:25,520 --> 00:22:28,560 Speaker 8: not a price. So you know, we've had Valero, for example, 430 00:22:28,560 --> 00:22:31,320 Speaker 8: printing twelve dollars this morning in their results. I think 431 00:22:31,480 --> 00:22:34,240 Speaker 8: a year ago they made one or two. So there's 432 00:22:34,400 --> 00:22:36,520 Speaker 8: you know, it's just a question of how people look 433 00:22:36,560 --> 00:22:38,560 Speaker 8: at it, and they just focus on crude oil. But 434 00:22:38,600 --> 00:22:40,399 Speaker 8: when you think about what happened in horn Moves, you 435 00:22:40,440 --> 00:22:42,800 Speaker 8: shut down six million barrels of they of refining capacity, 436 00:22:43,200 --> 00:22:46,320 Speaker 8: that's that's demand for crude, and China of course shut 437 00:22:46,359 --> 00:22:49,280 Speaker 8: down six million barrels a day of oil crude oil imports. 438 00:22:49,560 --> 00:22:50,840 Speaker 2: So there's been quite a big pressure. 439 00:22:50,880 --> 00:22:53,159 Speaker 8: When you combine it with the SPR and the emergency 440 00:22:53,200 --> 00:22:56,240 Speaker 8: releases all crude oil, and then you see this enormous 441 00:22:56,280 --> 00:22:58,439 Speaker 8: price that we're paying. For example, jet fuel hasn't been 442 00:22:58,480 --> 00:23:01,520 Speaker 8: far off two hundred dollars a barrow. What's fascinating as well, Thomas, 443 00:23:01,560 --> 00:23:03,800 Speaker 8: people are still flying and driving, you know. So there's 444 00:23:03,840 --> 00:23:06,480 Speaker 8: been a really interesting thing there. And another thing i'd 445 00:23:06,560 --> 00:23:10,239 Speaker 8: highlight is long term thematic is the separation of the 446 00:23:10,240 --> 00:23:13,720 Speaker 8: North American oil market from the global Basically, because you 447 00:23:13,760 --> 00:23:17,359 Speaker 8: can't buy Chinese evs in North America, you've taken away 448 00:23:17,359 --> 00:23:20,359 Speaker 8: the EV subsidy in North America. So what's happening. A 449 00:23:20,400 --> 00:23:22,879 Speaker 8: tesla can't give away a tesla. So what you're seeing 450 00:23:22,920 --> 00:23:25,120 Speaker 8: here is actually a situation where we're looking like will 451 00:23:25,160 --> 00:23:28,080 Speaker 8: remain a very oil dependent economy. The rest of the 452 00:23:28,080 --> 00:23:30,800 Speaker 8: world will actually do everything they can post horn moves 453 00:23:30,800 --> 00:23:32,920 Speaker 8: to get off oil even more than they already were. 454 00:23:33,720 --> 00:23:35,639 Speaker 4: Can hormos ever go back to the way it was 455 00:23:36,080 --> 00:23:37,480 Speaker 4: pre war here? 456 00:23:37,640 --> 00:23:39,760 Speaker 8: Absolutely not Now. I mean it's done. It's the one 457 00:23:39,800 --> 00:23:41,720 Speaker 8: and done. And you know you've seen that with the 458 00:23:41,760 --> 00:23:44,400 Speaker 8: hooties and the sewers. You know that three years now 459 00:23:44,440 --> 00:23:47,280 Speaker 8: we've been at fifty percent of previous volumes. It's just 460 00:23:47,320 --> 00:23:49,680 Speaker 8: too much risk. And the one thing about the Hormoves, 461 00:23:49,760 --> 00:23:52,679 Speaker 8: you know, is it's the one incontrovertible if that's the 462 00:23:52,760 --> 00:23:55,960 Speaker 8: right word, choke point. So every other choke point globally 463 00:23:55,960 --> 00:23:59,639 Speaker 8: there's an alternate with horn moves essentially as pipelines. But 464 00:23:59,720 --> 00:24:03,240 Speaker 8: for you, just for example Katari liquid natural gas, I 465 00:24:03,280 --> 00:24:05,919 Speaker 8: don't see a solution other than the horn moves, so 466 00:24:06,400 --> 00:24:08,240 Speaker 8: they're going to have to make some sort of agreement 467 00:24:08,280 --> 00:24:10,439 Speaker 8: with the Iranians. The other thing people miss is if 468 00:24:10,480 --> 00:24:12,199 Speaker 8: you look at where the US Navy is, it's not 469 00:24:12,240 --> 00:24:14,600 Speaker 8: in the strait of horn Moves. Those aircraft carriers are 470 00:24:14,680 --> 00:24:17,639 Speaker 8: way way out in the Arabian Sea, which is actually 471 00:24:17,680 --> 00:24:21,719 Speaker 8: limiting our ability to bomb, which achieves basically nothing in 472 00:24:21,720 --> 00:24:25,400 Speaker 8: my view, so it remains a horrendous mess. The other 473 00:24:25,400 --> 00:24:29,040 Speaker 8: thing i'd highlight is two things. One is Ukraine had 474 00:24:29,040 --> 00:24:32,000 Speaker 8: a drone attack on Siberian refinery the other day. That's 475 00:24:32,040 --> 00:24:35,119 Speaker 8: oney eight hundred kilometers actually miles, I think it's a 476 00:24:35,160 --> 00:24:38,119 Speaker 8: long way. And the other mystery at the moment is 477 00:24:38,160 --> 00:24:42,760 Speaker 8: that a US owned gas floating a storage vessel in 478 00:24:42,840 --> 00:24:45,320 Speaker 8: Egypt was blown up by a drone with no one 479 00:24:45,359 --> 00:24:48,960 Speaker 8: claiming the responsibility for that. But that was another thing 480 00:24:48,960 --> 00:24:52,840 Speaker 8: that was a very strange outcome. Bottom line is the drone, 481 00:24:53,640 --> 00:24:56,280 Speaker 8: you know, the emergency drones. The emergence of Ukraine as 482 00:24:56,320 --> 00:25:00,560 Speaker 8: a global superpower in drones makes all of this refining 483 00:25:00,560 --> 00:25:04,359 Speaker 8: and tanker infrastructure incredibly vulnerable in a way that it 484 00:25:04,440 --> 00:25:07,760 Speaker 8: wasn't previously. And the need for domestic energy, which the 485 00:25:07,840 --> 00:25:12,479 Speaker 8: US has in abundance domestic infrastructure heavily defended, is going 486 00:25:12,520 --> 00:25:14,679 Speaker 8: to become a very very important thing more than it 487 00:25:14,800 --> 00:25:17,159 Speaker 8: was previously. And in that regard, the America's look in 488 00:25:17,240 --> 00:25:17,919 Speaker 8: very good shape. 489 00:25:18,000 --> 00:25:20,359 Speaker 4: What does Iran want? Do you think from an energy 490 00:25:20,359 --> 00:25:24,440 Speaker 4: perspective in theory, I think the economica they would want 491 00:25:24,520 --> 00:25:27,960 Speaker 4: the straight open to move their oil and their products. 492 00:25:29,080 --> 00:25:31,359 Speaker 4: Is there a way to negotiate with them to really 493 00:25:32,600 --> 00:25:35,080 Speaker 4: just from a economic standpoints say let's just open this up, 494 00:25:35,119 --> 00:25:37,600 Speaker 4: and because it's good for everybody, including you guys. 495 00:25:37,840 --> 00:25:39,760 Speaker 8: I mean I think where I would say, you know, 496 00:25:39,880 --> 00:25:41,960 Speaker 8: is this a sewer's moment for the US that you know, 497 00:25:42,119 --> 00:25:44,200 Speaker 8: like the UK, you just have to exit. The reason 498 00:25:44,240 --> 00:25:45,840 Speaker 8: I would have suggested it's the right thing to do 499 00:25:45,960 --> 00:25:48,080 Speaker 8: is because set of a given level. This is religious. 500 00:25:48,320 --> 00:25:50,960 Speaker 8: You know, Iran and the Iranian proxies are all Shea 501 00:25:51,760 --> 00:25:53,960 Speaker 8: and Iran against Israel is, Like, are you going to 502 00:25:54,000 --> 00:25:57,520 Speaker 8: really solve a religious war that goes back? You know, possibly, 503 00:25:57,760 --> 00:25:59,240 Speaker 8: you know, in the case of the Shia is a 504 00:25:59,320 --> 00:26:02,879 Speaker 8: thousand years, but you know, generally longer. And what are 505 00:26:02,880 --> 00:26:05,520 Speaker 8: we doing in that theater when we've got our own 506 00:26:05,560 --> 00:26:08,840 Speaker 8: oil and gas is an open question. What's really interesting 507 00:26:08,840 --> 00:26:10,680 Speaker 8: here is it seems like the UAE has made peace 508 00:26:10,680 --> 00:26:13,680 Speaker 8: with Iran. You'll notice there's no attacks right now going 509 00:26:13,720 --> 00:26:16,320 Speaker 8: on in the UAE, and of course Dubai historically was 510 00:26:16,320 --> 00:26:20,240 Speaker 8: a Persian trading post, so there's a very close relationship there. 511 00:26:20,720 --> 00:26:23,200 Speaker 8: What's not good is that you're now getting the US 512 00:26:23,320 --> 00:26:27,520 Speaker 8: bombing Iraq, which is where the Shias are attacking the Saudis, right, 513 00:26:27,760 --> 00:26:30,040 Speaker 8: and it's clear that the Saudis have a major issue 514 00:26:30,040 --> 00:26:32,000 Speaker 8: here that they have to resolve, having not really had 515 00:26:32,040 --> 00:26:34,760 Speaker 8: great relations historically with Iran in the way that UEE 516 00:26:34,920 --> 00:26:35,640 Speaker 8: or Katso has. 517 00:26:35,880 --> 00:26:37,359 Speaker 2: I want to close the loop on this. We're going 518 00:26:37,400 --> 00:26:39,000 Speaker 2: to have to go here, Paul Sankie, we got to 519 00:26:39,000 --> 00:26:41,159 Speaker 2: get you back shortly here. There's so much going on. 520 00:26:41,720 --> 00:26:43,960 Speaker 2: You mentioned and for a lot of people, this is 521 00:26:44,000 --> 00:26:48,040 Speaker 2: ancient history. For you and me, It's not nineteen fifty six, 522 00:26:48,720 --> 00:26:53,440 Speaker 2: Sir Anthony Eden blew up his career over Suez. Folks, 523 00:26:53,480 --> 00:26:55,640 Speaker 2: We're not going to make this a history lesson. All 524 00:26:55,680 --> 00:26:57,240 Speaker 2: you got to know is a prime minister of the 525 00:26:57,320 --> 00:27:00,800 Speaker 2: United Kingdom went down in flames. Yeah. How does President 526 00:27:00,840 --> 00:27:06,280 Speaker 2: Trump extricate himself from the Sanky complexities you just gave us? 527 00:27:06,840 --> 00:27:09,399 Speaker 8: Well, I think they have actually in real terms, because 528 00:27:09,400 --> 00:27:11,639 Speaker 8: the US Navy is out of the Gulf and we 529 00:27:11,800 --> 00:27:14,000 Speaker 8: you know, for example, the Basin Bahrain is on a 530 00:27:14,040 --> 00:27:17,280 Speaker 8: skeleton crew. You know, we're actually being forced by military pressure. 531 00:27:17,320 --> 00:27:19,520 Speaker 8: So I'm not believing a whole lot of what I'm hearing, 532 00:27:19,520 --> 00:27:22,280 Speaker 8: frankly from the US administration about what's happening in that theater. 533 00:27:22,440 --> 00:27:25,280 Speaker 8: I think it's going very poorly. So at a given level, 534 00:27:25,320 --> 00:27:27,439 Speaker 8: you need to make an agreement with the GCC, with 535 00:27:27,480 --> 00:27:28,800 Speaker 8: the Saudis and the ua Is that. 536 00:27:28,880 --> 00:27:31,199 Speaker 2: We're at We're out of here, agreed. We got about 537 00:27:31,400 --> 00:27:33,320 Speaker 2: this is like World War One. It's like, you know, T. 538 00:27:33,560 --> 00:27:36,080 Speaker 2: Lawrence coming over and looking at the Suez Canal. We 539 00:27:36,119 --> 00:27:38,760 Speaker 2: have to make an agreement from the trucial states up 540 00:27:38,760 --> 00:27:42,320 Speaker 2: to Kuwait and indeed even Iraq to extricate ourselves. 541 00:27:42,359 --> 00:27:43,800 Speaker 8: And you know what I always said Tom right at 542 00:27:43,800 --> 00:27:46,240 Speaker 8: the beginning is Trump has to immediately fly and see 543 00:27:46,280 --> 00:27:48,400 Speaker 8: she and talk to him and sort this out. That's 544 00:27:48,400 --> 00:27:49,960 Speaker 8: the only way you can sort it out. As was she, 545 00:27:50,320 --> 00:27:53,800 Speaker 8: Trump delayed the visit to she didn't agree a whole lot, 546 00:27:53,920 --> 00:27:56,159 Speaker 8: and then days later she met Putin. As you know 547 00:27:56,840 --> 00:27:59,160 Speaker 8: now she again is the only guy that Zara out 548 00:27:59,160 --> 00:28:02,000 Speaker 8: if you want to do it with you know, another superpower, 549 00:28:02,240 --> 00:28:04,280 Speaker 8: but you're gonna have to concede an awful lot to China. 550 00:28:04,440 --> 00:28:06,640 Speaker 2: So Paul from the Jersey Shore emails and it says, 551 00:28:06,680 --> 00:28:08,480 Speaker 2: get this guy back soon as can you come back, 552 00:28:08,520 --> 00:28:09,040 Speaker 2: like next week? 553 00:28:09,080 --> 00:28:10,960 Speaker 8: I see you inviting you back next week because I'm 554 00:28:10,960 --> 00:28:12,800 Speaker 8: then going to Norway for a couple of weeks. So 555 00:28:13,080 --> 00:28:16,359 Speaker 8: I'll drop back because theres a look to talk about you. Sank, 556 00:28:16,560 --> 00:28:19,399 Speaker 8: Thank you, thank you, thank yous for Definitive. 557 00:28:18,960 --> 00:28:21,600 Speaker 2: Is an oil house. Paul Sank with his own shop. 558 00:28:21,640 --> 00:28:23,920 Speaker 2: I can't say enough about his work over the decades 559 00:28:24,600 --> 00:28:28,639 Speaker 2: as well. Stay with us. More from Bloomberg Surveillance coming 560 00:28:28,720 --> 00:28:29,680 Speaker 2: up after this. 561 00:28:36,960 --> 00:28:40,520 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 562 00:28:40,600 --> 00:28:43,760 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 563 00:28:43,840 --> 00:28:47,480 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 564 00:28:47,640 --> 00:28:49,160 Speaker 1: watch us live on YouTube. 565 00:28:49,400 --> 00:28:51,520 Speaker 2: Gil Luria was thrilled to have with us today to 566 00:28:51,560 --> 00:28:54,160 Speaker 2: pick up the pieces off Microsoft and Meta and look 567 00:28:54,200 --> 00:28:57,720 Speaker 2: today to Apple. Gil I wanted to take you back 568 00:28:57,760 --> 00:29:02,280 Speaker 2: to April of twenty twenty five. Apple is up one 569 00:29:02,360 --> 00:29:07,400 Speaker 2: hundred percent. That's called a double seventy percent annualized. What 570 00:29:07,520 --> 00:29:10,960 Speaker 2: were you thinking about Apple on Liberation Today? It's all 571 00:29:10,960 --> 00:29:14,080 Speaker 2: going to end. Tim Cook's a failure and China's going 572 00:29:14,160 --> 00:29:17,080 Speaker 2: to crush Apple. What was it like back at that 573 00:29:17,240 --> 00:29:20,840 Speaker 2: dibaccle for Apple, like one sixty a share? 574 00:29:22,920 --> 00:29:27,400 Speaker 9: Well, Apple has decided to not participate in the AI 575 00:29:27,600 --> 00:29:31,640 Speaker 9: build out, to be cautious, careful, and wait for the 576 00:29:31,720 --> 00:29:34,400 Speaker 9: outcome before it commits to anything. In a year ago, 577 00:29:34,480 --> 00:29:37,360 Speaker 9: that looked like a terrible idea, and right now it 578 00:29:37,400 --> 00:29:42,200 Speaker 9: looks genius because everybody's fighting it out, spending so much 579 00:29:42,240 --> 00:29:43,080 Speaker 9: on capax. 580 00:29:43,280 --> 00:29:44,880 Speaker 2: Right we don't know who's going to win. 581 00:29:45,080 --> 00:29:49,360 Speaker 9: Whose model open closed, anthropic, open eye, Google and the 582 00:29:49,440 --> 00:29:53,480 Speaker 9: Apple's above the thread, whatever wins they'll use in their phones. 583 00:29:53,680 --> 00:29:57,120 Speaker 2: Microsoft prove yesterday they have a formula. What is the 584 00:29:57,280 --> 00:30:02,280 Speaker 2: distinction of Microsoft and KEP spend versus the other eight 585 00:30:02,400 --> 00:30:07,680 Speaker 2: mag seven stacks. Paul Sweeney owns. 586 00:30:06,120 --> 00:30:09,640 Speaker 9: That Microsoft came across as the adult in the room yesterday. 587 00:30:10,400 --> 00:30:13,479 Speaker 9: Here we are, we're going to accelerate Azure growth. By 588 00:30:13,480 --> 00:30:16,600 Speaker 9: the way, one hundred billion dollar business that accelerate from 589 00:30:16,640 --> 00:30:20,200 Speaker 9: thirty nine to forty three percent will accelerate to forty 590 00:30:20,320 --> 00:30:24,160 Speaker 9: five percent. And we can do it with just increasing capex. 591 00:30:24,520 --> 00:30:27,360 Speaker 9: We don't have to increase it significantly, which is what 592 00:30:27,440 --> 00:30:30,880 Speaker 9: Google said last week. Will increase kpex. We'll keep building 593 00:30:30,920 --> 00:30:34,480 Speaker 9: these data centers, but we're going to do it responsibly 594 00:30:35,240 --> 00:30:38,200 Speaker 9: to match the growth. And here we are with growth 595 00:30:38,240 --> 00:30:41,600 Speaker 9: accelerating very nicely, and by the way, it's impacting other 596 00:30:41,640 --> 00:30:45,080 Speaker 9: parts of Microsoft business favorably. So they just came across 597 00:30:45,080 --> 00:30:48,000 Speaker 9: as the adult in the room, which is what investors 598 00:30:48,120 --> 00:30:51,880 Speaker 9: sorely needed after what Google said and what Meta said 599 00:30:51,960 --> 00:30:52,480 Speaker 9: last night. 600 00:30:52,600 --> 00:30:55,520 Speaker 4: All right, let's go to Meta. If microsofts the adult 601 00:30:55,560 --> 00:30:58,360 Speaker 4: in the room, let's talk about mister Zuckerberg and maybe 602 00:30:58,360 --> 00:31:01,320 Speaker 4: some of his messaging yesday. What is the AI call 603 00:31:01,400 --> 00:31:01,760 Speaker 4: for Meta? 604 00:31:01,800 --> 00:31:05,360 Speaker 9: Here, do you think, Well, then mister Zuckerberg is treating 605 00:31:05,360 --> 00:31:07,800 Speaker 9: it like it's his company, which it is. He has 606 00:31:07,880 --> 00:31:10,560 Speaker 9: controlling interest, but shareholders don't like that. 607 00:31:11,120 --> 00:31:12,240 Speaker 2: They gave him. 608 00:31:12,120 --> 00:31:15,239 Speaker 9: Plenty of opportunity last night to say, hey, look, I 609 00:31:15,280 --> 00:31:17,560 Speaker 9: can turn around and rent out some of my excess 610 00:31:17,600 --> 00:31:21,120 Speaker 9: compute capacity for billions of dollars a month, just like 611 00:31:21,240 --> 00:31:23,960 Speaker 9: Elon's doing at SpaceX, and it's going to be a 612 00:31:24,000 --> 00:31:28,160 Speaker 9: windfall and that'll help me raise less capital and continue 613 00:31:28,160 --> 00:31:32,000 Speaker 9: the build out. And instead he was very circumspect. He said, well, 614 00:31:32,040 --> 00:31:34,080 Speaker 9: you know, there's a few ways I can monetize. We 615 00:31:34,120 --> 00:31:36,440 Speaker 9: can sell more ads, we can sell enterprise. We're going 616 00:31:36,480 --> 00:31:38,720 Speaker 9: to have a personal assistant, but I'm not going to 617 00:31:38,800 --> 00:31:41,520 Speaker 9: really tell you how much of each or what's more important. 618 00:31:42,040 --> 00:31:45,719 Speaker 9: And investors are frustrated because they're continuing to increase their 619 00:31:45,800 --> 00:31:51,160 Speaker 9: copex spend, revenue missed, and there's no clear strategy of 620 00:31:51,200 --> 00:31:53,840 Speaker 9: how they're going to pay for all that data center 621 00:31:53,880 --> 00:31:57,560 Speaker 9: build out. So investors just walked away feeling mister Zuckerber 622 00:31:57,600 --> 00:32:00,960 Speaker 9: is doing whatever he wants and we shareholders are left 623 00:32:01,000 --> 00:32:01,600 Speaker 9: holding the back. 624 00:32:01,720 --> 00:32:04,280 Speaker 4: Feels a little bit like the metaverse here. I mean, 625 00:32:04,920 --> 00:32:08,720 Speaker 4: what is the stated plan from Meta here is it. 626 00:32:08,800 --> 00:32:11,880 Speaker 4: Is it to build a standalone, you know, kind of 627 00:32:11,880 --> 00:32:16,800 Speaker 4: an app, a tool itself, an open ANI type thing, 628 00:32:16,800 --> 00:32:21,280 Speaker 4: a clawed type of tool itself. What's the stated plan 629 00:32:21,320 --> 00:32:21,760 Speaker 4: at least? 630 00:32:23,120 --> 00:32:25,880 Speaker 9: Yes, right now they're still in that race of trying 631 00:32:25,880 --> 00:32:28,239 Speaker 9: to have a better model and open ananthropic, which by 632 00:32:28,280 --> 00:32:32,400 Speaker 9: the way, is highly unlikely. But their ultimate goal is 633 00:32:32,440 --> 00:32:36,640 Speaker 9: to give us a personal assistant, a friend, an AI 634 00:32:36,800 --> 00:32:39,400 Speaker 9: friend that we can talk to get advice, have them 635 00:32:39,440 --> 00:32:42,880 Speaker 9: do chores for us, run errands for us. That's the 636 00:32:43,000 --> 00:32:46,240 Speaker 9: vision that they're proposing. They're pretty far from that, but 637 00:32:46,280 --> 00:32:49,000 Speaker 9: that's the main thrust of what they're headed towards. That's 638 00:32:49,080 --> 00:32:50,800 Speaker 9: why they want to have the best model. 639 00:32:50,920 --> 00:32:52,800 Speaker 2: Thirty seconds. Then we got to get over the final 640 00:32:52,880 --> 00:32:54,760 Speaker 2: question thirty secs, guill, do you have a single best 641 00:32:54,760 --> 00:32:57,240 Speaker 2: buy right now? Micron? 642 00:32:58,200 --> 00:33:01,320 Speaker 9: Micron is trading like the site is over. And what 643 00:33:01,360 --> 00:33:03,920 Speaker 9: we heard from Microsoft is that there's the belts in 644 00:33:03,960 --> 00:33:06,040 Speaker 9: the room and we're going to continue to build down 645 00:33:06,120 --> 00:33:08,320 Speaker 9: data centers, d more AI and we don't need to 646 00:33:08,360 --> 00:33:09,720 Speaker 9: hell of a lot more memory for that. 647 00:33:09,920 --> 00:33:13,640 Speaker 2: Okay, So you know, in terms of coolness points, and 648 00:33:13,720 --> 00:33:16,880 Speaker 2: I love that they're in Santorini for this ad. Gil Lauria, 649 00:33:17,040 --> 00:33:18,800 Speaker 2: have you tried, hon Or? Do you own a pair 650 00:33:18,840 --> 00:33:22,080 Speaker 2: of the seven hundred and ninety nine dollars Meta display 651 00:33:22,120 --> 00:33:23,480 Speaker 2: glasses from ray Ban. 652 00:33:25,160 --> 00:33:28,240 Speaker 9: No, My sons tell me that it's a violation of 653 00:33:28,280 --> 00:33:32,480 Speaker 9: other people's privacy. So they're not very popular right now, 654 00:33:32,520 --> 00:33:33,880 Speaker 9: and I'm not going to do that to them. 655 00:33:34,000 --> 00:33:38,000 Speaker 2: Okay, you'll do it next week. Seriously, that's a huge deal. 656 00:33:38,440 --> 00:33:41,400 Speaker 2: I mean, do they have any sensitivity at all that 657 00:33:41,480 --> 00:33:45,280 Speaker 2: if Michael bar wore the Meta display seven hundred ninety 658 00:33:45,360 --> 00:33:48,959 Speaker 2: nine glasses it would ruin Alexis Christoph versus privacy. 659 00:33:50,200 --> 00:33:52,960 Speaker 9: I don't think mister Zuckerberg cares about our privacy. I 660 00:33:52,960 --> 00:33:56,080 Speaker 9: think there's about twenty years of track record telling us that, Gil. 661 00:33:56,120 --> 00:33:59,680 Speaker 2: Thank you so much. Reporting from Gil Lauria, Da Davidson. 662 00:34:00,120 --> 00:34:04,240 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 663 00:34:11,480 --> 00:34:15,080 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 664 00:34:15,120 --> 00:34:18,279 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 665 00:34:18,360 --> 00:34:22,040 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 666 00:34:22,200 --> 00:34:23,680 Speaker 1: watch us live on YouTube. 667 00:34:24,000 --> 00:34:27,600 Speaker 2: We start strogging on this moment of interest for the 668 00:34:27,680 --> 00:34:32,200 Speaker 2: FED with Sophia durosis for years at Morgan Stanley Holding 669 00:34:32,239 --> 00:34:35,279 Speaker 2: Court right now at point seven to two, and we're 670 00:34:35,280 --> 00:34:37,480 Speaker 2: thrilled in well timed to be with us, and of 671 00:34:37,520 --> 00:34:40,719 Speaker 2: course all of our academics out of Michigan years ago. 672 00:34:41,080 --> 00:34:45,000 Speaker 2: How much does Chairman Warsh not like people like ned Gramlk. 673 00:34:45,400 --> 00:34:48,040 Speaker 2: I mean, the bottom line here is it's a war 674 00:34:48,160 --> 00:34:50,759 Speaker 2: against models in economics, isn't it? 675 00:34:51,640 --> 00:34:51,839 Speaker 4: Well? 676 00:34:51,840 --> 00:34:54,239 Speaker 7: Good morning, first of all, and I think it is 677 00:34:54,280 --> 00:34:57,560 Speaker 7: a bit more of a throwback to an evidence based FED, 678 00:34:58,120 --> 00:35:02,399 Speaker 7: waiting for data, waiting for inf fashion, and much less 679 00:35:02,440 --> 00:35:06,880 Speaker 7: focus on forecasting. And perhaps that reflects the difference in 680 00:35:06,920 --> 00:35:10,439 Speaker 7: this chairman compared with the other recent chairs that we've 681 00:35:10,480 --> 00:35:13,640 Speaker 7: had that have had more of an academic lean and 682 00:35:13,680 --> 00:35:18,240 Speaker 7: more confidence in forecasts and using forecasts as a guiding principle. 683 00:35:18,280 --> 00:35:21,080 Speaker 2: Will he be model based? Can he dare be the 684 00:35:21,120 --> 00:35:25,600 Speaker 2: excellence of Michigan? I think of Bessie Stevenson policy based, 685 00:35:25,920 --> 00:35:28,080 Speaker 2: what will be the worst framework? 686 00:35:28,640 --> 00:35:31,600 Speaker 7: I think the worst framework is evidence based. I think 687 00:35:31,640 --> 00:35:34,480 Speaker 7: that he will be watching the data as they come 688 00:35:34,520 --> 00:35:39,080 Speaker 7: in and deciding what is the correct policy path, gauging 689 00:35:39,160 --> 00:35:42,040 Speaker 7: whether the economy is in transition, and I thought the 690 00:35:42,120 --> 00:35:45,680 Speaker 7: data this morning, we're quite interesting in that regard. While 691 00:35:45,719 --> 00:35:49,280 Speaker 7: inflation is very high, the level of inflation is quite high, 692 00:35:49,520 --> 00:35:52,000 Speaker 7: it has been moderating. We saw a bit more of 693 00:35:52,000 --> 00:35:55,480 Speaker 7: a moderation than we expected today. So my sense is 694 00:35:55,480 --> 00:35:58,719 Speaker 7: that he's being cautious when we can potentially be at 695 00:35:58,760 --> 00:35:59,800 Speaker 7: an inflection point. 696 00:36:00,440 --> 00:36:03,160 Speaker 4: Is he running the risk of losing some credibility with 697 00:36:03,200 --> 00:36:06,120 Speaker 4: the marketplace because the trading action yesterday, I think was 698 00:36:06,120 --> 00:36:09,080 Speaker 4: a little erratic, to say the least. 699 00:36:08,680 --> 00:36:11,440 Speaker 7: Was quite an eye popper to see the thirty year 700 00:36:11,800 --> 00:36:15,239 Speaker 7: yield rise as much as it did. Certainly there's that 701 00:36:15,360 --> 00:36:17,719 Speaker 7: narrative out there, but I would also be a little 702 00:36:17,719 --> 00:36:21,040 Speaker 7: bit careful about reading too deeply into the price action, 703 00:36:21,280 --> 00:36:27,200 Speaker 7: considering that there was an unusual amount of uncertainty heading 704 00:36:27,239 --> 00:36:31,400 Speaker 7: into this decision. Typically the Fed signals very clearly what 705 00:36:31,480 --> 00:36:33,400 Speaker 7: they're going to do. We don't have a lot of 706 00:36:33,520 --> 00:36:36,680 Speaker 7: variation in futures. We did have a fair amount, so 707 00:36:37,000 --> 00:36:40,200 Speaker 7: perhaps some of that was investors kind of clearing the 708 00:36:40,280 --> 00:36:44,800 Speaker 7: deck after quite a bombshell of a press conference. 709 00:36:45,360 --> 00:36:48,080 Speaker 4: So I'm sure you've got a lot of emails and 710 00:36:48,120 --> 00:36:52,719 Speaker 4: a lot of ims for ibs from your trader saying Now, 711 00:36:52,719 --> 00:36:54,360 Speaker 4: what's the FED going to do the way pencil in 712 00:36:54,400 --> 00:36:57,360 Speaker 4: a September ike, at decemberike, does he sit on the 713 00:36:57,400 --> 00:37:01,520 Speaker 4: sidelines for maybe an extended period of time. What's the 714 00:37:01,520 --> 00:37:02,640 Speaker 4: message from you here? 715 00:37:02,920 --> 00:37:06,239 Speaker 7: Well, I am taking the message from their actions more 716 00:37:06,280 --> 00:37:09,640 Speaker 7: than from their words, and so looking at the committee 717 00:37:09,680 --> 00:37:11,680 Speaker 7: as a whole, this was a committee that still had 718 00:37:11,719 --> 00:37:15,520 Speaker 7: an easing bias in April, even though inflation was running 719 00:37:15,600 --> 00:37:19,239 Speaker 7: at a higher rate. And it was a committee that 720 00:37:19,360 --> 00:37:21,520 Speaker 7: didn't hike in June. I know it was the chair's 721 00:37:21,520 --> 00:37:24,200 Speaker 7: first meeting, but I think the data we're more compelling 722 00:37:24,239 --> 00:37:26,920 Speaker 7: for a hike. And now what we've seen is a 723 00:37:26,960 --> 00:37:30,400 Speaker 7: couple prints of inflation coming in a bit lower, the 724 00:37:30,480 --> 00:37:35,640 Speaker 7: labor market showing a bit more of a moderation as well. 725 00:37:36,040 --> 00:37:39,479 Speaker 7: And so to me, looking at their actions, it says 726 00:37:39,520 --> 00:37:41,600 Speaker 7: to me that the hurdle for at least those nine 727 00:37:41,680 --> 00:37:46,080 Speaker 7: other FOMC people is high in terms of hiking Sophia drosis. 728 00:37:46,080 --> 00:37:47,719 Speaker 2: With this, we're going to go to Kevin Hasset to 729 00:37:47,800 --> 00:37:51,320 Speaker 2: the White House here in about five six minutes as well, 730 00:37:51,480 --> 00:37:54,000 Speaker 2: the thrilled toy of Sophia drosis appoint seven to two 731 00:37:54,600 --> 00:37:57,440 Speaker 2: with us today. Kevin Gordon emailed in from Schwab and 732 00:37:57,480 --> 00:38:00,520 Speaker 2: we were talking about domestic final sales because it's a 733 00:38:00,880 --> 00:38:04,560 Speaker 2: wonderfully important statistic. I learned that from Bettina Dalton years 734 00:38:04,560 --> 00:38:08,320 Speaker 2: ago at Fidelity. The GDP number was some bit soggy. 735 00:38:08,320 --> 00:38:12,279 Speaker 2: As Sophia just mentioned. Nominal GDP was I believe to 736 00:38:12,320 --> 00:38:17,799 Speaker 2: be polite over six percent fold in the oomph of 737 00:38:17,880 --> 00:38:22,319 Speaker 2: the economy from the combined inflation in real GDP, and 738 00:38:22,360 --> 00:38:27,960 Speaker 2: our chairman Warsh can manage a supposed decline in nominal GDP. 739 00:38:28,400 --> 00:38:31,880 Speaker 7: Yes, well, that nominal GDP print probably speaks to ongoing 740 00:38:32,040 --> 00:38:34,880 Speaker 7: health in corporate profits. As you know, corporate profits are 741 00:38:34,920 --> 00:38:35,600 Speaker 7: coming off of. 742 00:38:35,680 --> 00:38:37,520 Speaker 2: Got an AI overlay. 743 00:38:37,560 --> 00:38:39,279 Speaker 7: It does, but you know, I would say that the 744 00:38:39,400 --> 00:38:42,279 Speaker 7: issue with the AI, the Kapex boom continues, and the 745 00:38:42,360 --> 00:38:45,560 Speaker 7: chair mentioned that yesterday it's quite strong, but a large 746 00:38:45,560 --> 00:38:49,080 Speaker 7: component of that is imported, so the potential for it 747 00:38:49,120 --> 00:38:53,000 Speaker 7: to create overheating domestic conditions seems a bit less to 748 00:38:53,080 --> 00:38:55,280 Speaker 7: me compared with other Kapex cycles. 749 00:38:55,840 --> 00:38:58,560 Speaker 2: We got to go back to Morgan Stanley here, I mean, okay, here, 750 00:38:58,560 --> 00:39:02,160 Speaker 2: we gotta go back. I'm sorry, Steve, I gotta go there. 751 00:39:02,160 --> 00:39:06,560 Speaker 2: Audrey Chuv Friedman was on did we, as an outlier yesterday, 752 00:39:06,680 --> 00:39:09,520 Speaker 2: have the dollar finally break? Is this a moment where 753 00:39:09,560 --> 00:39:14,800 Speaker 2: this shocking dollar resilience even with higher rates, finally turns 754 00:39:14,840 --> 00:39:18,440 Speaker 2: around and we get with a lack of credibility dollar weakness. 755 00:39:19,080 --> 00:39:21,279 Speaker 7: So I think the dollar is going to lose a 756 00:39:21,280 --> 00:39:23,959 Speaker 7: little bit of interest rate support and has. Of course, 757 00:39:24,000 --> 00:39:28,000 Speaker 7: the market has repriced seeing that the FED didn't act 758 00:39:28,200 --> 00:39:31,959 Speaker 7: on the accumulated high level of inflation at the last 759 00:39:31,960 --> 00:39:35,120 Speaker 7: two meetings, So the market's extrapolating that a bit forward 760 00:39:35,120 --> 00:39:37,719 Speaker 7: in terms of the reaction function. But we also need 761 00:39:37,760 --> 00:39:40,480 Speaker 7: to be cognizant of what other central banks are doing. 762 00:39:40,520 --> 00:39:46,600 Speaker 7: So the ECB last week declined to hike and also 763 00:39:46,640 --> 00:39:48,719 Speaker 7: stated a bit more of an open ended path, so 764 00:39:48,760 --> 00:39:52,360 Speaker 7: perhaps they will not fully meet the amount of tightening 765 00:39:52,400 --> 00:39:55,440 Speaker 7: that's priced in, and other central banks might be sounding 766 00:39:55,480 --> 00:39:57,400 Speaker 7: a bit circumspect, And we had the Bank of England 767 00:39:57,440 --> 00:40:00,799 Speaker 7: this morning they held rates. So the question to me is, 768 00:40:01,480 --> 00:40:03,920 Speaker 7: you know, the FED may have come across a bit 769 00:40:03,960 --> 00:40:06,680 Speaker 7: more dubbish than some people expected, but I think that 770 00:40:06,760 --> 00:40:10,479 Speaker 7: this is a broader trend among central banks now as 771 00:40:10,520 --> 00:40:14,560 Speaker 7: perhaps they contend with energy prices at higher levels which 772 00:40:14,640 --> 00:40:18,080 Speaker 7: also has a detrimental impact on growth. The tradeoff is 773 00:40:18,320 --> 00:40:20,759 Speaker 7: very clear here, So. 774 00:40:20,840 --> 00:40:23,279 Speaker 4: What is the underlying inflation actor? That's one of the 775 00:40:23,360 --> 00:40:26,719 Speaker 4: questions I think the market's asking, how do you do. 776 00:40:26,760 --> 00:40:29,520 Speaker 2: You have at point seven to a disinflation ary vector. 777 00:40:30,000 --> 00:40:32,800 Speaker 7: Well, I do think that inflation is going to moderate 778 00:40:33,080 --> 00:40:35,280 Speaker 7: in the second half of the year where we were 779 00:40:35,320 --> 00:40:37,920 Speaker 7: in the first half of the year. We're seeing already 780 00:40:38,000 --> 00:40:42,719 Speaker 7: some moderation in rents and in services, and I think 781 00:40:42,800 --> 00:40:45,440 Speaker 7: that there will be a bit more of that in 782 00:40:45,480 --> 00:40:49,799 Speaker 7: the pipeline. Obviously, this morning we saw a below than 783 00:40:49,880 --> 00:40:54,640 Speaker 7: expected move in inflation, so it seems to me that 784 00:40:54,680 --> 00:40:57,319 Speaker 7: perhaps the worst is behind us. The issue for the 785 00:40:57,320 --> 00:41:00,680 Speaker 7: Fed now is, though they might want to wait, and 786 00:41:00,719 --> 00:41:02,520 Speaker 7: though maybe the data gave them a little bit of 787 00:41:02,640 --> 00:41:05,600 Speaker 7: luxury of the time to wait, I don't think they 788 00:41:05,680 --> 00:41:08,720 Speaker 7: can tolerate any acceleration going forward. 789 00:41:08,840 --> 00:41:11,279 Speaker 2: Oh good news, Paul. I was so worried. I see 790 00:41:11,280 --> 00:41:13,680 Speaker 2: a list of people moving out of point seventy to two, 791 00:41:14,160 --> 00:41:17,839 Speaker 2: Freddie Perrault to Clay Holmes, AJ Minter, and I don't 792 00:41:17,840 --> 00:41:21,520 Speaker 2: see Sophia Dros's name on here. The Mets are cleaning house, 793 00:41:21,600 --> 00:41:22,080 Speaker 2: aren't they. 794 00:41:23,000 --> 00:41:25,239 Speaker 7: Well, you know what it's like to be a Mets fan. 795 00:41:25,320 --> 00:41:29,400 Speaker 7: It teaches you patience, it teaches you to show it. 796 00:41:30,880 --> 00:41:33,880 Speaker 7: I love my Mets merch it's co branded Mets and 797 00:41:34,040 --> 00:41:37,960 Speaker 7: points seventy two. But yes, as you know, a lot 798 00:41:37,960 --> 00:41:40,320 Speaker 7: of economists love baseball, so that brings a little added 799 00:41:40,360 --> 00:41:40,840 Speaker 7: fun to it. 800 00:41:40,960 --> 00:41:43,800 Speaker 2: Sophia, thank you, thank you so much for coming in today. 801 00:41:43,880 --> 00:41:47,239 Speaker 2: Just hugely valuable at all point seventy two. Thank you, 802 00:41:47,320 --> 00:41:51,160 Speaker 2: mister Cohen and all. And it's still It's still the Mets, 803 00:41:51,160 --> 00:41:53,160 Speaker 2: and they'll recover, we think. 804 00:41:53,680 --> 00:41:58,520 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 805 00:41:58,640 --> 00:42:02,920 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 806 00:42:03,040 --> 00:42:06,520 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 807 00:42:06,600 --> 00:42:10,640 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 808 00:42:10,640 --> 00:42:14,040 Speaker 1: can also watch us live every weekday on YouTube and 809 00:42:14,239 --> 00:42:15,960 Speaker 1: always on the Bloomberg terminal.