1 00:00:00,320 --> 00:00:04,160 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:04,200 --> 00:00:07,640 Speaker 1: their trust in independent registered investment advisors to the tune 3 00:00:07,640 --> 00:00:12,240 Speaker 1: of four trillion dollars. Why learn more and find your 4 00:00:12,240 --> 00:00:27,240 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,320 --> 00:00:31,320 Speaker 1: I'm Tom Keane. Always with Michael McKee. Daily we bring 6 00:00:31,360 --> 00:00:35,280 Speaker 1: you insight from the best in economics, finance, investment and 7 00:00:35,360 --> 00:00:41,519 Speaker 1: international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, 8 00:00:41,560 --> 00:00:49,640 Speaker 1: and of course on the Bloomberg. It is wonderful to 9 00:00:49,800 --> 00:00:52,760 Speaker 1: start off our radio surveillance this morning with William Lee 10 00:00:53,280 --> 00:00:56,760 Speaker 1: of a City Group. You bring such a rich heritage 11 00:00:56,800 --> 00:01:00,240 Speaker 1: of city group economics. Working with Villin Powder me go 12 00:01:00,320 --> 00:01:05,119 Speaker 1: broader global before we tear apart what we observed yesterday 13 00:01:05,400 --> 00:01:08,360 Speaker 1: Catherine Man and O. E. C. D. I believe are 14 00:01:08,400 --> 00:01:13,120 Speaker 1: looking for two point nine global growth down from three. 15 00:01:13,520 --> 00:01:16,760 Speaker 1: I believe that's a recession in most textbooks. Is it 16 00:01:17,240 --> 00:01:19,399 Speaker 1: well when you start to get to trend and trend 17 00:01:19,560 --> 00:01:22,119 Speaker 1: is closer to two percent, but bordering on that because 18 00:01:22,120 --> 00:01:25,040 Speaker 1: the measurement error is just huge on global GDP. The 19 00:01:25,240 --> 00:01:29,280 Speaker 1: big problem is we have global slowdown, global productivity slowdown, 20 00:01:29,360 --> 00:01:33,959 Speaker 1: global investment slowdown. These are the pillars of sustainable expansion 21 00:01:33,959 --> 00:01:36,319 Speaker 1: that we no now. I love to tell Villain Bowder 22 00:01:36,360 --> 00:01:39,759 Speaker 1: when he's wrong. That doesn't happen very often. You guys 23 00:01:39,800 --> 00:01:45,520 Speaker 1: have been so out front in right about global slow down, 24 00:01:45,920 --> 00:01:50,320 Speaker 1: global tepid growth. What's the distinction of why equals C 25 00:01:50,480 --> 00:01:54,480 Speaker 1: plus I plus G plus annex to the global tround. 26 00:01:54,560 --> 00:01:58,080 Speaker 1: I'm gonna guess it's non trade or flat trade exactly. 27 00:01:58,280 --> 00:02:00,919 Speaker 1: The trade volume used in Coral it's six or seven percent. 28 00:02:01,080 --> 00:02:03,080 Speaker 1: And that was the source and engine of growth for 29 00:02:03,160 --> 00:02:06,240 Speaker 1: all emerging markets. Everyone said, oh, it's China doing It's 30 00:02:06,240 --> 00:02:08,520 Speaker 1: not just China, but China and the entire supply chain 31 00:02:08,960 --> 00:02:11,520 Speaker 1: all into South Asia, and and and and the rest 32 00:02:11,560 --> 00:02:14,079 Speaker 1: of the world that was going to export stuff to 33 00:02:14,160 --> 00:02:17,520 Speaker 1: the advanced economies. Now, with trade volume going down because 34 00:02:17,520 --> 00:02:21,000 Speaker 1: they slow down in domestic advanced economies, you have a 35 00:02:21,120 --> 00:02:24,360 Speaker 1: collapse in the emerging markets. And the hardest thing for 36 00:02:24,400 --> 00:02:26,560 Speaker 1: investors to do now is the investing emerging markets because 37 00:02:26,720 --> 00:02:28,720 Speaker 1: you no longer have to. You have to look for 38 00:02:28,800 --> 00:02:32,600 Speaker 1: domestic stories. The hardest thing to do is be Janet 39 00:02:32,680 --> 00:02:36,840 Speaker 1: yelling should she focus on the domestic economy? All of 40 00:02:36,880 --> 00:02:41,200 Speaker 1: the three dissenters, or can she take an internationalist approach 41 00:02:41,600 --> 00:02:44,280 Speaker 1: of the slow grows Tom The radio ones can't see 42 00:02:44,280 --> 00:02:46,200 Speaker 1: how much great here we've got. But one of the 43 00:02:46,200 --> 00:02:48,480 Speaker 1: things that I was doing at the at the board, 44 00:02:48,480 --> 00:02:52,919 Speaker 1: excuse me, the radio audience knows how we have continued. 45 00:02:53,080 --> 00:02:56,080 Speaker 1: When I entered the board right after my PhD, my 46 00:02:56,160 --> 00:02:58,440 Speaker 1: first assignment was to work on the international sector of 47 00:02:58,440 --> 00:03:01,880 Speaker 1: what's known as the Ferbest Model. Now that was UM. 48 00:03:02,040 --> 00:03:05,360 Speaker 1: The Board has and the FED has always been globally oriented, 49 00:03:05,600 --> 00:03:07,640 Speaker 1: and we have always looked at what's going on the world, 50 00:03:07,760 --> 00:03:10,000 Speaker 1: what we're not doing. What we're doing now that's different 51 00:03:10,200 --> 00:03:13,120 Speaker 1: is that we're letting the world run US monetary policy. 52 00:03:13,480 --> 00:03:16,160 Speaker 1: That's been a shift in the way Montrey policy has 53 00:03:16,200 --> 00:03:19,959 Speaker 1: been conducted between Chair Volca and Chair Yelling, and that shift, 54 00:03:20,000 --> 00:03:22,320 Speaker 1: I think is not for the good. Always, yes, we 55 00:03:22,360 --> 00:03:24,560 Speaker 1: should consider the rest of the world, but we shouldn't 56 00:03:24,600 --> 00:03:27,040 Speaker 1: let the rest of the world dominate in deciding what's 57 00:03:27,120 --> 00:03:29,520 Speaker 1: probably monster pulse for us. Let's dive into the press 58 00:03:29,560 --> 00:03:32,000 Speaker 1: conference yesterday, and for those of you that heard every 59 00:03:32,080 --> 00:03:34,600 Speaker 1: word of it, thank you so much for listening to 60 00:03:34,760 --> 00:03:38,280 Speaker 1: to Bloomberg. From everything from Eric Chiasker's question that led 61 00:03:38,320 --> 00:03:41,480 Speaker 1: to the debate on product discussion rather on productivity, to 62 00:03:41,760 --> 00:03:45,440 Speaker 1: just the sheer confusion. There were billy three or four 63 00:03:45,600 --> 00:03:50,200 Speaker 1: times where Chair Yelling stated something of what we want 64 00:03:50,280 --> 00:03:54,400 Speaker 1: to do, a prescriptive fread and out front fed, and 65 00:03:54,480 --> 00:03:57,680 Speaker 1: then she came back a minute later or two minutes 66 00:03:57,760 --> 00:04:01,160 Speaker 1: later and said, but we need evidence. I'm baffled. Help. 67 00:04:01,720 --> 00:04:04,880 Speaker 1: Not only are we baffled, but it is clearly showing 68 00:04:05,120 --> 00:04:07,720 Speaker 1: how the FETE has lost its way, is working without 69 00:04:07,760 --> 00:04:10,240 Speaker 1: a rudder. And Eric asked exactly the question I would 70 00:04:10,240 --> 00:04:13,440 Speaker 1: have asked, how can you in this slowing economy where 71 00:04:13,480 --> 00:04:16,640 Speaker 1: your forecast is slowing down, are you pushing up rates 72 00:04:16,720 --> 00:04:19,720 Speaker 1: by several hundred basis points and you're and you're telling 73 00:04:19,839 --> 00:04:22,800 Speaker 1: us a normalized interest rate is one with a real 74 00:04:22,920 --> 00:04:25,080 Speaker 1: rate that's near zero, and yet you don't see the 75 00:04:25,120 --> 00:04:27,920 Speaker 1: inflation going up several hundred basis points in your forecast. 76 00:04:28,279 --> 00:04:30,840 Speaker 1: So so that I think is caught yelling to the 77 00:04:30,839 --> 00:04:34,279 Speaker 1: point where she had to stumble and said, well, this productivity, well, 78 00:04:34,480 --> 00:04:36,599 Speaker 1: as she went to her script, which is to say, 79 00:04:36,839 --> 00:04:39,679 Speaker 1: we've got structural headwinds. We need to address the headwinds. 80 00:04:39,839 --> 00:04:41,960 Speaker 1: And that's The only thing she could rely on within 81 00:04:42,040 --> 00:04:46,560 Speaker 1: the Strug struggle was the idea of Vector's traditional economics 82 00:04:46,640 --> 00:04:50,240 Speaker 1: is to set up a VECTOR personified by Chairman Greenspan, 83 00:04:50,320 --> 00:04:53,920 Speaker 1: and the idea of a measured approach. We've got suits 84 00:04:53,960 --> 00:04:57,800 Speaker 1: and ties on, fancy dresses, were organized, we know what 85 00:04:58,040 --> 00:05:01,680 Speaker 1: we're doing. We're in control roll. And then there's the 86 00:05:01,800 --> 00:05:05,280 Speaker 1: idea of just let's get back to normal and let 87 00:05:05,400 --> 00:05:08,320 Speaker 1: the market in the system work it out. What would 88 00:05:08,400 --> 00:05:12,480 Speaker 1: be the consequences if the dissenters win and we get 89 00:05:12,520 --> 00:05:15,360 Speaker 1: to one or two or three rate increases, So the 90 00:05:15,440 --> 00:05:19,560 Speaker 1: macroeconomy absolutely nothing, because between zero and a hundred and 91 00:05:19,560 --> 00:05:22,400 Speaker 1: fifty basis points, the cost of capital is still going 92 00:05:22,440 --> 00:05:25,720 Speaker 1: to be negative or zero. Everyone is incentivized with the 93 00:05:25,760 --> 00:05:28,000 Speaker 1: cost of capital as much as they can be right now. 94 00:05:28,200 --> 00:05:31,760 Speaker 1: And where's it led us to? Nothing? Nothing? What we what? 95 00:05:32,000 --> 00:05:34,160 Speaker 1: What I think everyone is concerned about is that my 96 00:05:34,279 --> 00:05:37,159 Speaker 1: god basis points and a vector of another hundred basis 97 00:05:37,200 --> 00:05:39,760 Speaker 1: points over three years is going to collapse with the 98 00:05:40,279 --> 00:05:42,680 Speaker 1: U S economy, There's no But what it will do 99 00:05:43,040 --> 00:05:47,400 Speaker 1: is remove that distortion that's preventing firms from investing resources 100 00:05:47,480 --> 00:05:51,000 Speaker 1: adequately and in the right places short of markets, throw 101 00:05:51,040 --> 00:05:54,800 Speaker 1: off markets. Vice Chairman Fisher entered the press conference briefly. 102 00:05:54,920 --> 00:05:56,760 Speaker 1: He made a cameo appearance. I don't know if you 103 00:05:56,839 --> 00:06:00,440 Speaker 1: saw that, where cheer yelling discuss alter a com dative 104 00:06:01,000 --> 00:06:06,320 Speaker 1: shifting to modestly accommodative. It's like we're doing adverb economics. 105 00:06:06,880 --> 00:06:09,640 Speaker 1: I mean Matt Winkler, the emeritus editor in chief of 106 00:06:09,720 --> 00:06:12,560 Speaker 1: Bloomberg News, would say he'd be starts. Matt's bow tie 107 00:06:12,600 --> 00:06:17,800 Speaker 1: would be spinning, as we all were yesterday over adverb economics. 108 00:06:17,880 --> 00:06:20,520 Speaker 1: That's what we've come down to. And and even worse 109 00:06:20,720 --> 00:06:23,400 Speaker 1: with adverb economics, we know have a framework. We are 110 00:06:23,560 --> 00:06:26,960 Speaker 1: we are data dependent in an adverbial way, and that's ridiculous. 111 00:06:27,400 --> 00:06:30,040 Speaker 1: We we used to be tied with full employment and 112 00:06:30,040 --> 00:06:33,159 Speaker 1: massill employment and postability and a framework to get their 113 00:06:33,520 --> 00:06:38,040 Speaker 1: steady Montrey policy correcting market distortions. That was Montrey policy. 114 00:06:38,279 --> 00:06:41,600 Speaker 1: Now we are adding to market distortions and not going 115 00:06:41,600 --> 00:06:45,159 Speaker 1: into steady fashion. We're letting events and immediate data drive 116 00:06:45,480 --> 00:06:48,200 Speaker 1: from Monty policy. And now, folks, my dumb question of 117 00:06:48,240 --> 00:06:50,680 Speaker 1: the press conference, I could you imagine me given share 118 00:06:50,760 --> 00:06:53,080 Speaker 1: yelling a question of the press conference, it would be 119 00:06:53,160 --> 00:06:57,240 Speaker 1: a frightening thing. Bill Lee, what's the difference between evidence 120 00:06:57,680 --> 00:07:02,279 Speaker 1: and data dependence? Help me here. And that's the struggle 121 00:07:02,360 --> 00:07:04,360 Speaker 1: that that I think they're coming with, which is to say, 122 00:07:04,760 --> 00:07:07,640 Speaker 1: we don't we get a lot of data and we 123 00:07:07,720 --> 00:07:10,760 Speaker 1: are not consistently reacting to it. We're acting to some 124 00:07:10,920 --> 00:07:15,400 Speaker 1: source of events like the child evaluation, we're reacting to fears, 125 00:07:15,680 --> 00:07:18,400 Speaker 1: but we're not reacting in a consistent framework. Help me 126 00:07:18,480 --> 00:07:20,480 Speaker 1: with here, and folks, this is a cottage industry, and 127 00:07:20,480 --> 00:07:24,280 Speaker 1: the United Kingdom is called economic epistemology. It's not that 128 00:07:24,480 --> 00:07:28,200 Speaker 1: much trained in the U S. Bruce Cadwell is legendary 129 00:07:28,280 --> 00:07:30,680 Speaker 1: at North Carolina. But there was a guide bill a 130 00:07:30,800 --> 00:07:33,880 Speaker 1: years ago, Mark Blogg out of Yale and then over 131 00:07:33,920 --> 00:07:36,480 Speaker 1: to Llse and Louvin and I had the honor of 132 00:07:36,600 --> 00:07:40,160 Speaker 1: interviewing him a few times. And Professor Blogg set up 133 00:07:40,280 --> 00:07:44,280 Speaker 1: the philosophy of economics, and the heart of it is 134 00:07:44,360 --> 00:07:48,800 Speaker 1: ex post ex ante, an institution that gets out front 135 00:07:49,520 --> 00:07:54,120 Speaker 1: versus an institution that reacts to evidence and data. The historians, 136 00:07:54,160 --> 00:07:58,240 Speaker 1: including going Bi Bernanke, would say, by definition their ex post, 137 00:07:59,360 --> 00:08:02,040 Speaker 1: where is this idea that we can get out front 138 00:08:02,440 --> 00:08:04,640 Speaker 1: as a central bank? Come from the heart of the 139 00:08:04,960 --> 00:08:09,080 Speaker 1: SEP right. The projections of the FOLC members is to 140 00:08:09,160 --> 00:08:12,240 Speaker 1: say we need to base policy on looking forward our 141 00:08:12,320 --> 00:08:15,760 Speaker 1: ex anti presumptions of where the economy is going. To 142 00:08:15,840 --> 00:08:18,360 Speaker 1: say that we are driving Montree policy by looking at 143 00:08:18,440 --> 00:08:22,600 Speaker 1: data realizations, which is a beautifull ridiculous. But come on, 144 00:08:22,720 --> 00:08:25,200 Speaker 1: it's ridiculous. But I heard her say four times in 145 00:08:25,280 --> 00:08:28,160 Speaker 1: the press conference and making that up folks, maybe two times, 146 00:08:28,440 --> 00:08:31,760 Speaker 1: maybe eight times, that she needs to see evidence, which 147 00:08:31,800 --> 00:08:35,600 Speaker 1: is by definition expost We've never had more Latin. We've 148 00:08:35,679 --> 00:08:38,280 Speaker 1: never had more Latin on surveillance than we are right now. 149 00:08:38,440 --> 00:08:41,360 Speaker 1: Which is it. She's been driven into this evidence based 150 00:08:41,400 --> 00:08:44,600 Speaker 1: world because the brainers and the other doves have said 151 00:08:44,920 --> 00:08:48,319 Speaker 1: the costs and benefits are asymmetric, and we need to 152 00:08:48,400 --> 00:08:51,079 Speaker 1: make sure that we don't see downside evidence and we 153 00:08:51,160 --> 00:08:54,040 Speaker 1: are not seeing upside evidence, so we cannot do everything 154 00:08:54,280 --> 00:08:56,720 Speaker 1: consistent with ex anti upside. I don't want to get 155 00:08:56,720 --> 00:08:58,680 Speaker 1: you in trouble with the General Council of City Group 156 00:08:58,960 --> 00:09:02,440 Speaker 1: or with Mr Corbett, but the basic idea here, would 157 00:09:02,480 --> 00:09:06,360 Speaker 1: you suggest Vice Sherman Fisher and John Williams, non voter, 158 00:09:06,800 --> 00:09:10,480 Speaker 1: would have dissented as well. They would have absolutely dissented. 159 00:09:10,520 --> 00:09:12,760 Speaker 1: And in fact, I think Fisher is tying his hands 160 00:09:12,800 --> 00:09:14,959 Speaker 1: behind his back so he doesn't punch her out. No, 161 00:09:15,200 --> 00:09:16,760 Speaker 1: that's what he did in my interview with him, he 162 00:09:16,800 --> 00:09:18,880 Speaker 1: had his hands behind his back so he wouldn't touch me. 163 00:09:19,000 --> 00:09:20,880 Speaker 1: Bill Lee with us a city, go how about a 164 00:09:21,000 --> 00:09:28,040 Speaker 1: little bit of surveillance inside baseball? We do different things here. No, 165 00:09:28,120 --> 00:09:30,839 Speaker 1: I'm not talking red Side the first place, Boston Red Sox. 166 00:09:31,120 --> 00:09:34,840 Speaker 1: John Tucker does certain things. Why you yen Wire producer 167 00:09:35,000 --> 00:09:40,560 Speaker 1: Colin Our, producer, Ken Folio Global technical director, Michael McKee 168 00:09:40,640 --> 00:09:46,079 Speaker 1: does certain things. He dredges up ancient documents quote. It 169 00:09:46,280 --> 00:09:49,120 Speaker 1: was agreed that the next meeting of the committee would 170 00:09:49,160 --> 00:09:57,440 Speaker 1: be held on Tuesday, November. The meeting adjourned Greenspan, Corrigan, 171 00:09:57,600 --> 00:10:03,360 Speaker 1: Angel Bain, Boykin, Buskins, Kelly la where Mullen, Seeger and Stern. 172 00:10:04,200 --> 00:10:07,400 Speaker 1: Mr Melzer of St. Louis attended the meeting. One of 173 00:10:07,440 --> 00:10:11,800 Speaker 1: the giants of a Siren of economics, so Thecone is 174 00:10:11,840 --> 00:10:16,000 Speaker 1: a secretary and economist Donald Cone, Ted Truman I believe 175 00:10:16,480 --> 00:10:21,640 Speaker 1: was in the room. Mike McKee. What happened on October two? Well, 176 00:10:21,679 --> 00:10:27,560 Speaker 1: he had four descents that day, um which was unusual. 177 00:10:27,640 --> 00:10:30,160 Speaker 1: It's it was the last time he had four descents. 178 00:10:30,480 --> 00:10:35,559 Speaker 1: Governors Seeger and Angel dissented, President Boyken of Dallas, and 179 00:10:35,679 --> 00:10:38,839 Speaker 1: President Hoskins of Cleveland, for those of you old enough 180 00:10:38,920 --> 00:10:44,440 Speaker 1: to remember those names. Uh. They disagreed with the apparently 181 00:10:44,760 --> 00:10:47,640 Speaker 1: because his specifics weren't recorded, but they disagreed with the 182 00:10:47,720 --> 00:10:51,960 Speaker 1: idea that they should be lowering interest rates. Take us 183 00:10:52,000 --> 00:10:55,880 Speaker 1: to one William Lee on this descent. Uh, it is 184 00:10:56,000 --> 00:10:59,680 Speaker 1: very unusual to have three descents. Obviously, it is almost 185 00:11:00,360 --> 00:11:03,520 Speaker 1: unheard of to have four. But I've been going back. 186 00:11:03,600 --> 00:11:05,520 Speaker 1: I still am. I'm going back through all the minutes 187 00:11:05,559 --> 00:11:08,400 Speaker 1: of the previous meetings where we had at least three descents. 188 00:11:08,480 --> 00:11:11,120 Speaker 1: I can't find a time when you had three people 189 00:11:11,200 --> 00:11:14,719 Speaker 1: dissent in favor of higher rates. Uh. This is this 190 00:11:14,920 --> 00:11:19,400 Speaker 1: is obviously a strong message to the chair that there 191 00:11:19,440 --> 00:11:22,800 Speaker 1: are some people concerned. Absolutely, and in fact, it's even 192 00:11:22,880 --> 00:11:27,400 Speaker 1: more shocking in a consensus oriented Yelling fed where you 193 00:11:27,520 --> 00:11:30,760 Speaker 1: have three descents, because Yelling's modus at Brenda has always 194 00:11:30,800 --> 00:11:33,800 Speaker 1: been to try to forge that consensus even before the 195 00:11:33,880 --> 00:11:36,679 Speaker 1: meeting starch that she can have a clear sense of 196 00:11:36,760 --> 00:11:39,120 Speaker 1: backing from the rest of the FOMC. I think she 197 00:11:39,520 --> 00:11:43,480 Speaker 1: differs from the chairs of Vote Vocal and Greenspan because 198 00:11:43,679 --> 00:11:45,920 Speaker 1: they were personality driven in the sense that they said, 199 00:11:46,240 --> 00:11:49,079 Speaker 1: I think this, what do you guys think? Chair Yelling 200 00:11:49,120 --> 00:11:51,439 Speaker 1: goes around asking what is it that it's on your 201 00:11:51,520 --> 00:11:54,280 Speaker 1: mind and how can we forge a consensus together. I 202 00:11:54,360 --> 00:11:56,920 Speaker 1: think that's her strength, but it's also been her weakness 203 00:11:56,960 --> 00:12:00,920 Speaker 1: because the consensus that has driven the pop policy decisions 204 00:12:01,080 --> 00:12:03,400 Speaker 1: has been consensus driven by Brainer and the doves on 205 00:12:03,440 --> 00:12:05,880 Speaker 1: the committee, and I think the hawks have finally said, 206 00:12:06,160 --> 00:12:08,480 Speaker 1: we're putting our foot down now. Remember the history of 207 00:12:08,520 --> 00:12:11,120 Speaker 1: the FED is that the Board has always been a 208 00:12:11,200 --> 00:12:14,599 Speaker 1: more devish leaning part of the fom C, and the 209 00:12:14,800 --> 00:12:17,720 Speaker 1: regional FETs have always tended to be somewhat more hawkish 210 00:12:18,000 --> 00:12:21,520 Speaker 1: because they, I think, are closer in touch with markets 211 00:12:21,679 --> 00:12:24,760 Speaker 1: and people who are doing business, and the business people say, 212 00:12:24,840 --> 00:12:27,920 Speaker 1: we need their market signals. We cannot have FED distortions, 213 00:12:27,960 --> 00:12:30,040 Speaker 1: and that's what we have now. Mike Wayne Angel being 214 00:12:30,120 --> 00:12:33,440 Speaker 1: the example of that from Wayne was. I was there 215 00:12:33,440 --> 00:12:35,160 Speaker 1: when Wayne was there, and I must say he was 216 00:12:35,240 --> 00:12:38,160 Speaker 1: quite a supply cider, so he was quite an extremist, 217 00:12:38,280 --> 00:12:41,679 Speaker 1: but nevertheless he was very market oriented and this consistent 218 00:12:41,800 --> 00:12:44,640 Speaker 1: message from Wayne and and and and and a lot 219 00:12:44,720 --> 00:12:48,959 Speaker 1: of the regional fed governors of uh presidents now is 220 00:12:49,040 --> 00:12:51,760 Speaker 1: that the governors on the fl on the board have 221 00:12:52,000 --> 00:12:55,400 Speaker 1: really lost touch with what is needed in markets, which 222 00:12:55,480 --> 00:12:58,360 Speaker 1: is clear signals. And you cannot have clear signals when 223 00:12:58,360 --> 00:13:01,160 Speaker 1: you have distortions caused by or rate policies. But for 224 00:13:01,240 --> 00:13:05,640 Speaker 1: eight years, and to go back to something that Tom said, well, 225 00:13:05,679 --> 00:13:10,280 Speaker 1: it was actually Fran said earlier on Surveillance TV. Should 226 00:13:10,320 --> 00:13:13,679 Speaker 1: we cut them break in the sense that we have 227 00:13:13,840 --> 00:13:18,000 Speaker 1: not seen monetary conditions like this or any economy like 228 00:13:18,120 --> 00:13:22,120 Speaker 1: this since the Great Depression. So they're working from a 229 00:13:22,240 --> 00:13:26,679 Speaker 1: playbook that is eighty years old and still um and 230 00:13:26,760 --> 00:13:29,839 Speaker 1: may not be completely relevant because of conditions. So the 231 00:13:29,960 --> 00:13:33,040 Speaker 1: fact that there are disagreements, it's not something that should 232 00:13:33,040 --> 00:13:35,839 Speaker 1: be unusually absolutely by. But the conditions that we're seeing 233 00:13:35,880 --> 00:13:39,640 Speaker 1: and the ones that that share yellings highlighting are low productivity, 234 00:13:40,040 --> 00:13:43,120 Speaker 1: low investment, and slow growth. Those are not the things 235 00:13:43,160 --> 00:13:45,240 Speaker 1: that monstro policy can address because, as we all know 236 00:13:45,320 --> 00:13:48,920 Speaker 1: from our textbooks, monster policy cannot create growth. You can 237 00:13:48,960 --> 00:13:50,880 Speaker 1: only move it around. You can borrow it from the 238 00:13:50,920 --> 00:13:53,280 Speaker 1: future by lowing rates, or you take it from a neighbor. 239 00:13:53,360 --> 00:13:55,720 Speaker 1: But I depreciate the exchange rate. But you can only 240 00:13:55,840 --> 00:13:58,319 Speaker 1: set the conditions to allow market force to work and 241 00:13:58,480 --> 00:14:02,640 Speaker 1: structural policies that really get growth and enhance Billy very quickly. 242 00:14:02,840 --> 00:14:06,200 Speaker 1: Eric Schatz had a dashon airplane yesterday after his killer question. 243 00:14:06,520 --> 00:14:09,000 Speaker 1: He cracked the door open to the press conference. How 244 00:14:09,120 --> 00:14:12,240 Speaker 1: much credibility leaked out of the room. In fact, the 245 00:14:12,360 --> 00:14:17,319 Speaker 1: press conference was an example of how credibility just disappeared 246 00:14:17,480 --> 00:14:20,960 Speaker 1: in a heartbeat because chair yelling was flailing. Four answers 247 00:14:21,280 --> 00:14:25,000 Speaker 1: as as you quite uh you know rightly mentioned words 248 00:14:25,120 --> 00:14:28,560 Speaker 1: like data dependent, evidence based. How is it that we 249 00:14:28,640 --> 00:14:33,520 Speaker 1: are letting a world of of expost data drive future policy. 250 00:14:33,760 --> 00:14:36,520 Speaker 1: How is it that we're letting past events drive where 251 00:14:36,560 --> 00:14:40,480 Speaker 1: futures are going? When past events are at hawk chosen 252 00:14:40,520 --> 00:14:43,960 Speaker 1: in an alcoholic exceptionally valuable. I'll be blunt. We would 253 00:14:44,040 --> 00:14:46,560 Speaker 1: kill to get you and villin powder, Stephen England or 254 00:14:46,600 --> 00:14:49,600 Speaker 1: whatever all on the table at the same time. Billy, 255 00:14:50,240 --> 00:14:54,120 Speaker 1: I gotta kill you. He's a city group just just wonderful, wonderful. 256 00:14:54,680 --> 00:14:59,320 Speaker 1: This is fun. Michael McKeon, Tom Kane, this is Bloomberg. 257 00:15:10,560 --> 00:15:15,120 Speaker 1: John Manley is well Sarto's chief equity strategists. So he's 258 00:15:15,160 --> 00:15:17,200 Speaker 1: the guy who was sitting around on the trading guest 259 00:15:17,600 --> 00:15:21,800 Speaker 1: yesterday watching the FED decision come in and telling people, well, 260 00:15:21,840 --> 00:15:24,800 Speaker 1: here's what you do next. And clearly John the advice 261 00:15:24,920 --> 00:15:28,720 Speaker 1: for most strategists was by because the FED has put 262 00:15:28,800 --> 00:15:32,560 Speaker 1: off raising rates. But I wonder how long can that 263 00:15:33,480 --> 00:15:36,840 Speaker 1: knee jerk reaction be justified, given the fact that there's 264 00:15:36,880 --> 00:15:40,960 Speaker 1: so much data between now and December, and we really 265 00:15:41,000 --> 00:15:43,360 Speaker 1: don't know where the economy is going at this point. 266 00:15:44,360 --> 00:15:46,320 Speaker 1: I know it's a set exactly, and I think that's 267 00:15:46,480 --> 00:15:48,520 Speaker 1: part of the trick. I think it's important to realize 268 00:15:48,520 --> 00:15:50,600 Speaker 1: the FED will raise interest rates just as soon as 269 00:15:50,640 --> 00:15:54,120 Speaker 1: they think they can without adversely affecting the economy. As 270 00:15:54,160 --> 00:15:58,040 Speaker 1: the economy gets stronger, it needs less stimulation from the Fed. Uh, 271 00:15:58,200 --> 00:16:00,440 Speaker 1: it can deal with higher interest rates, and market can 272 00:16:00,480 --> 00:16:02,320 Speaker 1: deal with higher interest rates. I think the trick is 273 00:16:02,400 --> 00:16:04,560 Speaker 1: to wait. The set is trying to get a sense 274 00:16:04,640 --> 00:16:07,200 Speaker 1: that the economy has enough momentum that they can ease 275 00:16:07,280 --> 00:16:09,760 Speaker 1: off the throttle. They're not tapping the brake, they're easing 276 00:16:09,800 --> 00:16:12,440 Speaker 1: off the throttle of it. Are you when you look 277 00:16:12,480 --> 00:16:14,840 Speaker 1: at what the fed. Did you pay more attention to 278 00:16:15,920 --> 00:16:19,640 Speaker 1: the fact that they're saying, well, we're getting closer to 279 00:16:19,680 --> 00:16:22,000 Speaker 1: an interest rate increase, or to the fact that they 280 00:16:22,080 --> 00:16:24,400 Speaker 1: lowered the number of interest rate increases they're looking at 281 00:16:24,520 --> 00:16:28,600 Speaker 1: for two thousand seventeen from three to two. Well, as 282 00:16:28,720 --> 00:16:31,000 Speaker 1: with anything a human being does, it's always the best 283 00:16:31,040 --> 00:16:32,680 Speaker 1: guest what are they going to do in the future. 284 00:16:32,760 --> 00:16:35,000 Speaker 1: I think to me, the most important thing is they're 285 00:16:35,000 --> 00:16:37,920 Speaker 1: thinking about it. They realize the risk involved in raising 286 00:16:38,040 --> 00:16:40,360 Speaker 1: rates too quickly. I think there's a muted risk of 287 00:16:40,480 --> 00:16:42,320 Speaker 1: raising them too slowly with that's something you can deal 288 00:16:42,400 --> 00:16:44,720 Speaker 1: with later on. I think they're going to be dated 289 00:16:44,760 --> 00:16:46,960 Speaker 1: dependent in the same way I'm daated dependent. When I 290 00:16:46,960 --> 00:16:48,960 Speaker 1: get off an airplane, I know when it's supposed to land, 291 00:16:49,000 --> 00:16:50,440 Speaker 1: but if it's late and don't get off early, and 292 00:16:50,440 --> 00:16:52,760 Speaker 1: if it's earlier, I don't get off late. Uh. They're 293 00:16:52,800 --> 00:16:57,000 Speaker 1: going to have I think, ample justification to raise rates, 294 00:16:57,040 --> 00:16:59,400 Speaker 1: and I think at some point that's ther were you yesterday? 295 00:16:59,520 --> 00:17:01,520 Speaker 1: Come on, John Manley, I mean you were hanging on 296 00:17:01,640 --> 00:17:05,359 Speaker 1: every word Michael McKee said yesterday afternoon. Of course, data 297 00:17:05,440 --> 00:17:10,520 Speaker 1: dependent is so two thousand and fifteen. It's evidence, evidence 298 00:17:10,640 --> 00:17:14,560 Speaker 1: we need evidence. Evidence is the new word. That's what 299 00:17:14,640 --> 00:17:17,800 Speaker 1: I learned yesterday. I'm an old fashioned guy. Uh, and 300 00:17:18,119 --> 00:17:21,920 Speaker 1: this prosy Tom, your research note is brilliant and you 301 00:17:22,080 --> 00:17:25,520 Speaker 1: absolutely nailed what we observed yesterday. You talk about the 302 00:17:25,640 --> 00:17:29,720 Speaker 1: idea and the risk that a central bank could lose control. 303 00:17:31,040 --> 00:17:35,080 Speaker 1: Did the central bank lose control and that press conference yesterday? 304 00:17:36,520 --> 00:17:39,200 Speaker 1: I don't think so. I mean, um, you know, controlling 305 00:17:39,240 --> 00:17:42,000 Speaker 1: a press conference and controlling the economy are two different things, 306 00:17:42,080 --> 00:17:44,240 Speaker 1: and uh, I think one is more difficult than the other. 307 00:17:44,280 --> 00:17:47,720 Speaker 1: And it's not the obvious one. Um. Uh. The said 308 00:17:48,040 --> 00:17:51,679 Speaker 1: still is in control or the economy is in control. 309 00:17:51,720 --> 00:17:53,320 Speaker 1: The you know, they only have so many tools. They 310 00:17:53,359 --> 00:17:55,960 Speaker 1: can't make us do things, so it's always a question 311 00:17:56,000 --> 00:17:58,199 Speaker 1: of pushing or pulling money to us or from us, 312 00:17:58,600 --> 00:18:01,760 Speaker 1: And that's inherently will look like they don't have absolute 313 00:18:01,800 --> 00:18:04,600 Speaker 1: control because they never have absolute control on bounce though, 314 00:18:04,640 --> 00:18:06,479 Speaker 1: I don't think the economy is running away from them, 315 00:18:06,480 --> 00:18:08,920 Speaker 1: and I don't think it's plunging too quickly. I'll say 316 00:18:08,960 --> 00:18:12,320 Speaker 1: they're in control. With that, in control of the economy 317 00:18:13,280 --> 00:18:17,880 Speaker 1: to what extent um As you say, Uh, they only 318 00:18:17,960 --> 00:18:20,920 Speaker 1: have some tools, so can they only maybe put a 319 00:18:21,000 --> 00:18:23,320 Speaker 1: floor under things. They can't create growth. That was the 320 00:18:23,359 --> 00:18:26,560 Speaker 1: point that Bill Lee was talking about. They can't, Uh, 321 00:18:27,359 --> 00:18:29,639 Speaker 1: they can. They can't make us buy a car, or 322 00:18:29,680 --> 00:18:31,959 Speaker 1: build a house, or start a factory. All they can 323 00:18:32,040 --> 00:18:34,400 Speaker 1: do is make the money we used to do those 324 00:18:34,480 --> 00:18:37,000 Speaker 1: things seem cheaper expensive. So it truly is leading a 325 00:18:37,080 --> 00:18:40,200 Speaker 1: horse to water. It's an imperfect control. Because this is 326 00:18:40,240 --> 00:18:43,080 Speaker 1: a free market economy. We do not have planned growth. 327 00:18:43,160 --> 00:18:45,440 Speaker 1: We don't build so many steel mills or flour mills 328 00:18:45,520 --> 00:18:47,840 Speaker 1: or whatever because the government wants, and we build them 329 00:18:47,880 --> 00:18:51,560 Speaker 1: by supply and demand. The FED, using interest rates, using 330 00:18:51,600 --> 00:18:54,720 Speaker 1: the pressure of money in or out, tries to push 331 00:18:54,800 --> 00:18:56,440 Speaker 1: that along in the way they want to, and then 332 00:18:56,960 --> 00:18:59,280 Speaker 1: it should run by itself. You don't constantly need the 333 00:18:59,320 --> 00:19:02,200 Speaker 1: Fed to push. Let's state it right now. What is 334 00:19:02,240 --> 00:19:06,160 Speaker 1: the level of bullishness that you are It's it's I'm 335 00:19:06,240 --> 00:19:09,560 Speaker 1: still my head spinning off the press conference yesterday. Let 336 00:19:09,640 --> 00:19:13,920 Speaker 1: me just spact something clear. Should I acquire shares this morning? 337 00:19:15,160 --> 00:19:18,760 Speaker 1: I would Yes, it's radio John. You can ask why 338 00:19:19,040 --> 00:19:22,960 Speaker 1: if you give us longer answers? Well, I think I 339 00:19:23,680 --> 00:19:25,280 Speaker 1: think you should. I think you know, it depends on 340 00:19:25,359 --> 00:19:27,920 Speaker 1: what you want. Obviously, individuals what you want to do. 341 00:19:28,119 --> 00:19:30,760 Speaker 1: I think the markets can move higher from here, and 342 00:19:30,840 --> 00:19:33,040 Speaker 1: I think there's a chance that people finally get excited 343 00:19:33,040 --> 00:19:36,399 Speaker 1: about markets, and that usually happens before Beau markets. There's 344 00:19:36,440 --> 00:19:39,360 Speaker 1: a b exclusive right there. Michael McKee and Tom Keene 345 00:19:39,400 --> 00:19:41,920 Speaker 1: were trying to digress away from the FED for like, 346 00:19:42,040 --> 00:19:44,679 Speaker 1: oh six or seven minutes totally. John Manley with US 347 00:19:45,280 --> 00:19:48,240 Speaker 1: with Wells Fargo Asset Management. John, If I had a 348 00:19:48,320 --> 00:19:51,639 Speaker 1: given company and they take sixty two cents on the 349 00:19:51,720 --> 00:19:55,080 Speaker 1: dollar down to gross profit, they take a very ample 350 00:19:55,240 --> 00:19:59,160 Speaker 1: thirty two cents on the dollar down to IBADAR operating 351 00:19:59,240 --> 00:20:04,600 Speaker 1: income net income? Is it exceptionally risk twenty cents on 352 00:20:04,760 --> 00:20:10,000 Speaker 1: the dollar? Free cash flow is ginormous as compared to 353 00:20:10,080 --> 00:20:13,199 Speaker 1: net income. That would be a stock that would develop 354 00:20:13,240 --> 00:20:15,560 Speaker 1: a lot of cash that would have to make a 355 00:20:15,640 --> 00:20:18,800 Speaker 1: decision should they invest or should they give it back 356 00:20:18,840 --> 00:20:23,879 Speaker 1: to shareholders? That company would be Microsoft. Is it financial 357 00:20:24,080 --> 00:20:28,560 Speaker 1: engineering when a blue chip multinational goes, we don't know 358 00:20:28,640 --> 00:20:30,960 Speaker 1: what to do with our cash, let's give it back 359 00:20:31,000 --> 00:20:35,040 Speaker 1: to shareholders. I don't think it is. I think it's 360 00:20:35,040 --> 00:20:39,480 Speaker 1: a legitimate investment decision. Obviously not speaking about the specific company, 361 00:20:39,560 --> 00:20:43,439 Speaker 1: but when a company is generating tremendous profits and doesn't 362 00:20:43,480 --> 00:20:46,159 Speaker 1: see in the opportunity to invest, they shouldn't invest just 363 00:20:46,400 --> 00:20:49,200 Speaker 1: because they're supposed to invest. They should find the best 364 00:20:49,240 --> 00:20:51,280 Speaker 1: place for that money, and that could mean buying into 365 00:20:51,320 --> 00:20:54,720 Speaker 1: their business. So they're I don't think they're necessarily trying 366 00:20:54,720 --> 00:20:57,160 Speaker 1: to manipulate stock prices. That they're trying to buy into 367 00:20:57,160 --> 00:20:59,440 Speaker 1: an attractive business. It just happens to be their own. 368 00:20:59,720 --> 00:21:02,840 Speaker 1: Mike point, Mike is there are many apples, and many 369 00:21:02,960 --> 00:21:09,399 Speaker 1: many apples. Microsoft Cash fifty three sixty three, seventy seven, 370 00:21:09,960 --> 00:21:16,600 Speaker 1: eighties six nine, seven hundred and thirteen billion, one tenth 371 00:21:16,640 --> 00:21:19,520 Speaker 1: of a trillion dollars. Michael McKey, Yeah, and you know 372 00:21:19,640 --> 00:21:21,560 Speaker 1: Apple has the same kind of cash. I know, John, 373 00:21:21,600 --> 00:21:24,040 Speaker 1: you don't want to talk about individual companies, although if 374 00:21:24,080 --> 00:21:26,160 Speaker 1: you'd like to insult any of them, please feel free. 375 00:21:26,200 --> 00:21:29,840 Speaker 1: It will help our ratings. Uh. But you seem to 376 00:21:29,880 --> 00:21:32,920 Speaker 1: be taking issue with the conventional wisdom that the only 377 00:21:33,000 --> 00:21:35,960 Speaker 1: reason companies are deploying cash is to keep the stock 378 00:21:36,040 --> 00:21:39,879 Speaker 1: price up so the CEO gets paid. Well, the CEO 379 00:21:40,000 --> 00:21:42,359 Speaker 1: wants to get paid. But that's how the world works, 380 00:21:42,520 --> 00:21:45,440 Speaker 1: or at least that's how it works in America. We're 381 00:21:45,480 --> 00:21:48,280 Speaker 1: all profit motivated. We all want more for ourselves, or 382 00:21:48,320 --> 00:21:50,240 Speaker 1: many of us do. Let's put it that way. And 383 00:21:50,359 --> 00:21:52,640 Speaker 1: I think that's what draws the economy, that's what's meant 384 00:21:52,720 --> 00:21:55,120 Speaker 1: is to success around the world. And I think there's 385 00:21:55,160 --> 00:21:57,080 Speaker 1: nothing wrong with that. I think that what you have 386 00:21:57,160 --> 00:21:59,080 Speaker 1: to look at his corporations are looking for the best 387 00:21:59,119 --> 00:22:02,440 Speaker 1: way to benefit their shareholders. Ultimately, now the CEO thinks 388 00:22:02,480 --> 00:22:03,960 Speaker 1: he or she's gonna get paid if he or she 389 00:22:04,040 --> 00:22:07,040 Speaker 1: does that, hopefully they align close enough. I think what 390 00:22:07,400 --> 00:22:10,040 Speaker 1: has to happen, you know the old saying for a 391 00:22:10,080 --> 00:22:12,320 Speaker 1: field of dreams building and they shall come as backwards. 392 00:22:12,480 --> 00:22:14,399 Speaker 1: When when your corporations, they shall come, and then you 393 00:22:14,480 --> 00:22:16,920 Speaker 1: build it. Uh, you know, I don't see the point 394 00:22:17,000 --> 00:22:20,080 Speaker 1: of adding to capacity with capacity isn't needed, and I 395 00:22:20,160 --> 00:22:22,359 Speaker 1: think the demand has to come to them. And that 396 00:22:22,480 --> 00:22:27,040 Speaker 1: means eventually all recoveries in the economy, all successful extended 397 00:22:27,119 --> 00:22:30,280 Speaker 1: recoveries come from the consumer. We want to buy more things. 398 00:22:31,080 --> 00:22:34,080 Speaker 1: Corporations decide they have to expand capacities provide us with 399 00:22:34,160 --> 00:22:37,280 Speaker 1: those things. That's I think healthy. Until that happens, why 400 00:22:37,359 --> 00:22:40,320 Speaker 1: not just invest in your own very profitable business well, 401 00:22:40,400 --> 00:22:42,000 Speaker 1: how do you get from here to there? How do 402 00:22:42,080 --> 00:22:46,159 Speaker 1: you get to the point where the economy is generating 403 00:22:46,440 --> 00:22:50,439 Speaker 1: more demand? Well, you know, we're all concerned. Has got 404 00:22:50,520 --> 00:22:53,640 Speaker 1: to pay me more for me to want to spend more. Well, 405 00:22:53,680 --> 00:22:56,240 Speaker 1: the company, You've got to feel more comfortable your situation, 406 00:22:56,320 --> 00:22:58,320 Speaker 1: depending what you're buying, of course, but you know, if 407 00:22:58,359 --> 00:23:01,840 Speaker 1: you if the job situation looks better, certainly better than 408 00:23:01,840 --> 00:23:03,480 Speaker 1: it did seven or eight years ago. If the housing 409 00:23:03,560 --> 00:23:06,680 Speaker 1: situation looks more secure, well, there's your income, there's your wealth. 410 00:23:07,160 --> 00:23:09,400 Speaker 1: You're going to feel a bit more confident in spending something, 411 00:23:09,480 --> 00:23:11,960 Speaker 1: and at some point in time, being one of millions 412 00:23:12,000 --> 00:23:14,200 Speaker 1: of people, you start to spend more. You you don't 413 00:23:14,400 --> 00:23:16,320 Speaker 1: hunker down as much as you did before. This is 414 00:23:16,359 --> 00:23:18,480 Speaker 1: how it's always worked, as far as I can tell, 415 00:23:18,600 --> 00:23:21,399 Speaker 1: to a degree of fright that goes away, that matters, 416 00:23:21,600 --> 00:23:23,760 Speaker 1: And I think that's what's happening. I think after eight 417 00:23:23,920 --> 00:23:26,840 Speaker 1: or nine years of being hunkered down for good reasons, 418 00:23:27,240 --> 00:23:30,160 Speaker 1: I think American consumers are starting to feel better. If 419 00:23:30,200 --> 00:23:34,040 Speaker 1: I want to acquire shares, mutual fun e t F folks, 420 00:23:34,119 --> 00:23:36,760 Speaker 1: individual securities. I don't know if some of you knew this. 421 00:23:36,920 --> 00:23:41,160 Speaker 1: You can buy shares of individual companies. John Manley. Where 422 00:23:41,200 --> 00:23:43,080 Speaker 1: do I want to be and where what do I 423 00:23:43,200 --> 00:23:47,600 Speaker 1: want to avoid? Well, I think one of the changes 424 00:23:47,640 --> 00:23:49,479 Speaker 1: in the last six months, in my mind, has been 425 00:23:49,560 --> 00:23:53,400 Speaker 1: mid caps um Historically, they have a habit of outperforming 426 00:23:53,480 --> 00:23:55,320 Speaker 1: on a risk adjusted basis, and I think part of 427 00:23:55,359 --> 00:23:57,600 Speaker 1: that is because they're sort of the small caps that 428 00:23:57,680 --> 00:23:59,800 Speaker 1: got big. You have a certain screening process. I think 429 00:23:59,840 --> 00:24:03,679 Speaker 1: that it on here. They also have liquidity characteristics somewhat 430 00:24:03,720 --> 00:24:06,200 Speaker 1: like the large caps, but inefficiently like the small caps, 431 00:24:06,280 --> 00:24:08,800 Speaker 1: So I think it's naturally a good place to be. However, 432 00:24:08,840 --> 00:24:10,640 Speaker 1: there's been no earnings growth for the last two years 433 00:24:10,680 --> 00:24:13,439 Speaker 1: from midcaps large cap small caps earnings growth has essentially 434 00:24:13,480 --> 00:24:16,159 Speaker 1: gone flat. I think that's changing. I think one of 435 00:24:16,200 --> 00:24:18,119 Speaker 1: the things I pick up in my little graphs is 436 00:24:18,520 --> 00:24:21,840 Speaker 1: the earnings expectations are starting to rise there back to 437 00:24:21,920 --> 00:24:24,440 Speaker 1: the old highs years ago for the large cast, but 438 00:24:24,800 --> 00:24:28,560 Speaker 1: new highs for the MidCap. Is that earnings expectations is 439 00:24:28,640 --> 00:24:32,480 Speaker 1: that really about a nominal GDP liftoff which means you 440 00:24:32,560 --> 00:24:35,680 Speaker 1: get a revenue pop which works down the income statement. 441 00:24:36,560 --> 00:24:38,280 Speaker 1: I think it is. I think it's also a little 442 00:24:38,280 --> 00:24:41,560 Speaker 1: bit of return to more normal oil prices rather than depressed. 443 00:24:41,560 --> 00:24:44,680 Speaker 1: I think the comparisons for oil gets easier, and I 444 00:24:44,800 --> 00:24:47,800 Speaker 1: think there is some greater demand from the consumer that 445 00:24:48,200 --> 00:24:50,560 Speaker 1: pushes things along a little bit. I'm, as I said 446 00:24:50,600 --> 00:24:52,959 Speaker 1: earlier in the in the show, I'm sort of old fashioned. 447 00:24:52,960 --> 00:24:55,520 Speaker 1: I think in the economy gets better, profits get better. Mike, Mike, 448 00:24:55,640 --> 00:24:57,440 Speaker 1: let's do this. We've done this before, but let's do 449 00:24:57,520 --> 00:25:01,119 Speaker 1: an update here from Michael the key Exxon mobile with 450 00:25:01,320 --> 00:25:05,200 Speaker 1: all the carnage and oil is down from its peak 451 00:25:05,240 --> 00:25:08,040 Speaker 1: of a number of years ago. I mean, that's all 452 00:25:09,160 --> 00:25:11,520 Speaker 1: you have thought the world had come to an end. Well, 453 00:25:11,560 --> 00:25:14,159 Speaker 1: we've talked about how the majors are able to leverage 454 00:25:14,160 --> 00:25:17,320 Speaker 1: all of their different business lines to keep profits from 455 00:25:17,359 --> 00:25:20,119 Speaker 1: falling a lot. But I guess John, the question is, Uh, 456 00:25:20,280 --> 00:25:23,240 Speaker 1: do you still want to look at energy because these 457 00:25:23,280 --> 00:25:26,760 Speaker 1: guys are at least on the on the major caps. Uh, 458 00:25:27,760 --> 00:25:29,639 Speaker 1: these guys are so good at what they do and 459 00:25:29,760 --> 00:25:31,960 Speaker 1: managing their earnings and have a lot of business lines, 460 00:25:32,440 --> 00:25:34,399 Speaker 1: and maybe it's time to look at getting back in 461 00:25:34,680 --> 00:25:37,640 Speaker 1: or is energy still you know, a little bit radioactive 462 00:25:37,840 --> 00:25:41,600 Speaker 1: because you don't know what's going to happen with oil prices. Well, 463 00:25:41,680 --> 00:25:43,679 Speaker 1: I think you you make a very good point when 464 00:25:43,720 --> 00:25:46,919 Speaker 1: you frese that question, because oil and oil stocks aren't 465 00:25:46,960 --> 00:25:50,720 Speaker 1: necessarily the same things and how they trade provided oil 466 00:25:50,800 --> 00:25:52,440 Speaker 1: doesn't collapse, and I don't see the reason for it. 467 00:25:52,480 --> 00:25:55,560 Speaker 1: I think we've already had a normal overshoot. I think 468 00:25:55,600 --> 00:26:00,720 Speaker 1: a large integrated international oils are attractive. I think they 469 00:26:01,240 --> 00:26:03,000 Speaker 1: may not be as cheap as they were a few 470 00:26:03,040 --> 00:26:05,800 Speaker 1: months ago. But when I look at high quality stocks 471 00:26:05,840 --> 00:26:07,399 Speaker 1: that kind of I'm gonna want to retire on in 472 00:26:07,480 --> 00:26:09,879 Speaker 1: five or ten or fifteen years, I know what I 473 00:26:09,960 --> 00:26:11,600 Speaker 1: want to own. I'm not sure I want to buy 474 00:26:11,640 --> 00:26:14,919 Speaker 1: something because some of them are not particularly cheap energy. 475 00:26:15,080 --> 00:26:18,400 Speaker 1: The high quality stuff is still relatively cheap versus other 476 00:26:19,200 --> 00:26:22,000 Speaker 1: high quality companies. That makes it attractive to me, and 477 00:26:22,080 --> 00:26:24,400 Speaker 1: I think that's going to keep these stocks going doing 478 00:26:24,480 --> 00:26:27,280 Speaker 1: pretty well. And you and I know that oil prices 479 00:26:27,320 --> 00:26:29,080 Speaker 1: go up and down at some point in time, and 480 00:26:29,160 --> 00:26:31,040 Speaker 1: it maybe three or four years and now we'll be 481 00:26:31,080 --> 00:26:33,800 Speaker 1: worried about prices that are too high. Maybe it's longer 482 00:26:33,840 --> 00:26:36,080 Speaker 1: than that, maybe it's shorter than that, but oil prices 483 00:26:36,119 --> 00:26:39,359 Speaker 1: go up and down. They're still mostly down. The stocks 484 00:26:39,400 --> 00:26:41,600 Speaker 1: are decent values. There what I want to own and 485 00:26:42,080 --> 00:26:44,320 Speaker 1: that's that's enough evidence for me to buy. Well, do 486 00:26:44,359 --> 00:26:46,080 Speaker 1: you hear that time? I think we made news there. 487 00:26:46,680 --> 00:26:49,239 Speaker 1: John is actually planning on retiring, which is different from 488 00:26:49,240 --> 00:26:55,120 Speaker 1: you and I. You can't, you can't, don't, don't worry, 489 00:26:55,280 --> 00:27:03,240 Speaker 1: it won't happen. We're wondering that match man only thank 490 00:27:03,320 --> 00:27:05,560 Speaker 1: you so much well as far ago, don't retire, get 491 00:27:05,600 --> 00:27:09,600 Speaker 1: to work. Always interesting and really important comments there about 492 00:27:10,320 --> 00:27:14,960 Speaker 1: lack of enthusiasm that are observed in equities. Who you 493 00:27:15,080 --> 00:27:18,880 Speaker 1: put your trust in matters. Investors have put their trust 494 00:27:19,000 --> 00:27:22,280 Speaker 1: in independent registered investment advisors to the tune of four 495 00:27:22,440 --> 00:27:26,919 Speaker 1: trillion dollars. Why they see their role as to serve, 496 00:27:27,400 --> 00:27:30,600 Speaker 1: not sell. That's why Charles Schwab is committed to the 497 00:27:30,680 --> 00:27:35,320 Speaker 1: success of over seven thousand independent financial advisors who passionately 498 00:27:35,400 --> 00:27:39,760 Speaker 1: dedicate themselves to helping people achieve their financial goals. Learn 499 00:27:39,840 --> 00:27:49,040 Speaker 1: more and find your independent advisor dot com. This is 500 00:27:49,080 --> 00:27:52,040 Speaker 1: a joy. Hans Rhdecker we usually speak to from London, 501 00:27:52,080 --> 00:27:55,600 Speaker 1: where he's distrected. He's flown in from London to be 502 00:27:55,720 --> 00:27:59,200 Speaker 1: with Morgan's Daney in New York. Possibly do sedate Ellen Zentner? 503 00:27:59,560 --> 00:28:01,920 Speaker 1: Did you have to hold her hand yesterday during the 504 00:28:01,960 --> 00:28:05,399 Speaker 1: press conference. Zender has been so right, it's sick and 505 00:28:05,520 --> 00:28:08,280 Speaker 1: yet that was a confusing press conference. Did you and 506 00:28:08,960 --> 00:28:12,960 Speaker 1: the Morgan standing team after calm her down? Is what 507 00:28:13,040 --> 00:28:16,920 Speaker 1: are we going to delay too hands? I guess no, 508 00:28:17,160 --> 00:28:20,440 Speaker 1: nobody needs to calm down Ellen. She's a very confident 509 00:28:20,560 --> 00:28:25,080 Speaker 1: and person and a very successful economist. But as the 510 00:28:25,200 --> 00:28:29,640 Speaker 1: point we take is that we have here Center Bank, 511 00:28:30,119 --> 00:28:34,199 Speaker 1: who obviously, by its communication, wants to high crates. Against 512 00:28:34,240 --> 00:28:37,520 Speaker 1: that you have a finding where you wonder why should 513 00:28:37,560 --> 00:28:42,959 Speaker 1: be their rate tike? So we have the economy currently 514 00:28:43,040 --> 00:28:47,000 Speaker 1: running at about three percent, we think that economic activity 515 00:28:47,040 --> 00:28:50,640 Speaker 1: in the fourth quarter is going to reduce to something 516 00:28:50,760 --> 00:28:53,800 Speaker 1: like one percent. Now, if you take that finding, it 517 00:28:54,040 --> 00:28:56,320 Speaker 1: is going to be an increasing headwind for the FETE 518 00:28:56,440 --> 00:28:59,800 Speaker 1: to deliver, and therefore we stay with our opinions at 519 00:28:59,840 --> 00:29:02,360 Speaker 1: the it is not going to hike this here. That 520 00:29:02,640 --> 00:29:05,760 Speaker 1: is an out of consensus call. What we link into 521 00:29:05,880 --> 00:29:07,880 Speaker 1: that is our call on the US dollar. We think 522 00:29:07,960 --> 00:29:10,360 Speaker 1: that's the US dollar in this environment is going to 523 00:29:10,440 --> 00:29:15,840 Speaker 1: decline between four to five index wise. And what this 524 00:29:16,040 --> 00:29:19,960 Speaker 1: means to is for the next couple of months you 525 00:29:20,040 --> 00:29:23,680 Speaker 1: have a very positive risk environment simply because the market 526 00:29:23,800 --> 00:29:26,560 Speaker 1: is priced for a fet that is more than sixty 527 00:29:26,600 --> 00:29:29,680 Speaker 1: percent probability. When data are now coming in weekends the 528 00:29:29,720 --> 00:29:32,960 Speaker 1: United States, you have an automatism in the marketplace where 529 00:29:33,080 --> 00:29:36,000 Speaker 1: the FETE is going to be repriced. That means the 530 00:29:36,080 --> 00:29:37,960 Speaker 1: curve on the front and is going to flatten, and 531 00:29:38,080 --> 00:29:41,400 Speaker 1: that is going to lend support for risk appetite globally. 532 00:29:41,800 --> 00:29:44,120 Speaker 1: You see, is that how emerging markets were reacting over 533 00:29:44,160 --> 00:29:46,720 Speaker 1: the past two days. And there's more to Mike, I 534 00:29:46,760 --> 00:29:50,000 Speaker 1: guess that's the evidence we need that Morgan Stanley with 535 00:29:50,120 --> 00:29:54,400 Speaker 1: a few other houses in outline, we just got evidence. Well, 536 00:29:54,880 --> 00:29:59,720 Speaker 1: you've got a FED that basically said there's nothing wrong 537 00:30:00,280 --> 00:30:03,600 Speaker 1: with raising rates right now given the data that we have. 538 00:30:03,880 --> 00:30:07,200 Speaker 1: We just want to get some confirmation. So if nothing changes, 539 00:30:07,800 --> 00:30:09,960 Speaker 1: you really have to forecast sort of decline in the 540 00:30:10,040 --> 00:30:13,280 Speaker 1: economy to say that they won't raise rates because they 541 00:30:13,360 --> 00:30:17,400 Speaker 1: seem to want to. Now that is that reminds us 542 00:30:17,480 --> 00:30:20,040 Speaker 1: a little bit of last year. So in last year, 543 00:30:20,040 --> 00:30:23,000 Speaker 1: as they came out and we're very clear that I 544 00:30:23,040 --> 00:30:25,120 Speaker 1: wanted to hike rates at the end of the year, 545 00:30:25,160 --> 00:30:27,520 Speaker 1: so we came into a kinde type of calendar guidance 546 00:30:28,240 --> 00:30:31,320 Speaker 1: and the nwer question is how are they going to 547 00:30:31,480 --> 00:30:35,960 Speaker 1: react to upcoming a data weakness. And I think that 548 00:30:37,160 --> 00:30:40,640 Speaker 1: the likelihood offers them going to act in December should 549 00:30:40,680 --> 00:30:43,720 Speaker 1: be not put higher than forty percent at this stage, 550 00:30:44,040 --> 00:30:48,120 Speaker 1: but the market is expecting much more. And we should 551 00:30:48,160 --> 00:30:51,560 Speaker 1: as well think about the quality of communication yesterday in 552 00:30:51,640 --> 00:30:54,880 Speaker 1: the in the FATS press conference. So what you have 553 00:30:55,240 --> 00:30:58,479 Speaker 1: is um that the Center Bank seems to look at 554 00:30:59,400 --> 00:31:04,760 Speaker 1: at areas into various UH situations. We have on one hand, 555 00:31:05,080 --> 00:31:08,520 Speaker 1: we have whereas the capital markets are currently trading, we 556 00:31:08,640 --> 00:31:10,640 Speaker 1: have where the economy is, and then we have as 557 00:31:10,680 --> 00:31:13,320 Speaker 1: well to look into the structure of economic role, So 558 00:31:13,440 --> 00:31:17,280 Speaker 1: especially this situation where you have labor market strengths look 559 00:31:17,320 --> 00:31:20,880 Speaker 1: at the initial claims today, but you have an undergoing 560 00:31:21,600 --> 00:31:24,480 Speaker 1: decline in productivity. And I guess that that's a very 561 00:31:24,520 --> 00:31:27,280 Speaker 1: good reason. So when you have a lack of investment 562 00:31:27,360 --> 00:31:31,320 Speaker 1: activity is very difficult to develop productivity and that is 563 00:31:31,320 --> 00:31:34,360 Speaker 1: a key element here. And Mike, when she mentioned productivity 564 00:31:34,400 --> 00:31:37,440 Speaker 1: of Shasker's question yesterday, the end strengthened. That was a 565 00:31:37,520 --> 00:31:40,920 Speaker 1: rule point where the end moved. What evidence do you 566 00:31:40,960 --> 00:31:42,600 Speaker 1: have that the economy is going to be in a 567 00:31:42,680 --> 00:31:44,840 Speaker 1: position where they would hold I mean, what are you 568 00:31:44,960 --> 00:31:49,280 Speaker 1: looking at? What should investors look at between now and December? 569 00:31:49,360 --> 00:31:53,680 Speaker 1: But you need to look at as UH when you 570 00:31:53,840 --> 00:31:57,000 Speaker 1: when you have an economic viewpoint, you have always look 571 00:31:57,360 --> 00:32:00,200 Speaker 1: at early indications in the economy and as a best 572 00:32:00,240 --> 00:32:03,640 Speaker 1: indication you can get this credit and just look at 573 00:32:03,880 --> 00:32:07,240 Speaker 1: the credit indicators we have seen now that consumer climate 574 00:32:08,080 --> 00:32:11,640 Speaker 1: is a surprisingly week. Look at the University of Michigan indicator. 575 00:32:12,360 --> 00:32:15,760 Speaker 1: And the investment site that is really the troubling spot 576 00:32:15,800 --> 00:32:19,680 Speaker 1: in this economy. The investment site doesn't doesn't develop, and 577 00:32:19,800 --> 00:32:21,920 Speaker 1: I think there's a very good reason for the investment 578 00:32:22,000 --> 00:32:25,680 Speaker 1: site and not to develop. There's over there's over capacity globally, 579 00:32:26,320 --> 00:32:28,400 Speaker 1: and I think that the FAT has to learn one thing. 580 00:32:28,520 --> 00:32:32,440 Speaker 1: We may talk about global cost when it comes to wages, 581 00:32:33,160 --> 00:32:35,600 Speaker 1: local cost when it comes to wages, but we have 582 00:32:35,720 --> 00:32:39,840 Speaker 1: to talk about global inflation because of overcapacity. Definition. Let's 583 00:32:39,880 --> 00:32:42,600 Speaker 1: come back with that with the CD marked on yesterday, 584 00:32:42,680 --> 00:32:44,640 Speaker 1: the global growth that's been one of our themes as well. 585 00:32:45,040 --> 00:32:47,480 Speaker 1: Hands Rahecker with it with Morgan Stanley throw they have 586 00:32:47,560 --> 00:32:50,080 Speaker 1: him in our studios today. Is he visits New York 587 00:32:50,200 --> 00:32:54,560 Speaker 1: from London. Hands I'm behind, I'm so damn far behind 588 00:32:54,680 --> 00:32:57,160 Speaker 1: for the year. I need to create some alpha and 589 00:32:57,280 --> 00:33:00,400 Speaker 1: I can only do it with brutal moves in foreign change. 590 00:33:01,000 --> 00:33:03,760 Speaker 1: Where can I make money? Is I go to your end? 591 00:33:04,080 --> 00:33:08,520 Speaker 1: Where will be the move within this ridiculously quiet market? Okay, 592 00:33:08,560 --> 00:33:13,240 Speaker 1: I can make you two offerings. Offerings. One is for 593 00:33:13,440 --> 00:33:16,760 Speaker 1: the very short term, so the next two two months 594 00:33:16,840 --> 00:33:19,240 Speaker 1: I would sell dollars. I would go into high Beata 595 00:33:19,680 --> 00:33:23,960 Speaker 1: as things that the positioning of further market in High 596 00:33:24,000 --> 00:33:27,240 Speaker 1: Beata is still underrepresented. Of course we have seen a 597 00:33:27,320 --> 00:33:29,600 Speaker 1: lot of flows going into this direction, but when you 598 00:33:29,680 --> 00:33:33,640 Speaker 1: look into how a normal portfolio locations should look like, 599 00:33:33,920 --> 00:33:39,040 Speaker 1: then this is still underrepresented. So by a merchant markets 600 00:33:39,280 --> 00:33:43,680 Speaker 1: sells the US, South Africa and Brazilian real commodity based Well, 601 00:33:43,720 --> 00:33:45,240 Speaker 1: I mean you need to look at the story and 602 00:33:45,400 --> 00:33:46,840 Speaker 1: then you may have first of all to add a 603 00:33:46,920 --> 00:33:49,640 Speaker 1: little bit with or you can play with momentum a bit. 604 00:33:49,720 --> 00:33:51,560 Speaker 1: So the story where the story good. The story is 605 00:33:51,600 --> 00:33:54,520 Speaker 1: good in Indonesia, the story is good in Brazil. The 606 00:33:55,040 --> 00:33:57,520 Speaker 1: disadvantages there is that a lot of the move had 607 00:33:57,560 --> 00:34:00,480 Speaker 1: been there already seen. And then yeah, father's where people 608 00:34:00,480 --> 00:34:03,040 Speaker 1: are taking a risk and uh and to jump on 609 00:34:03,080 --> 00:34:05,760 Speaker 1: a momentum trade and that is currently happening as you 610 00:34:05,840 --> 00:34:08,759 Speaker 1: mentioned in South Africa. But I mean you have really 611 00:34:08,800 --> 00:34:11,400 Speaker 1: to recognize that's a risk profile. There is a completely 612 00:34:11,440 --> 00:34:14,719 Speaker 1: different one. And then of course the big exception to 613 00:34:14,880 --> 00:34:21,600 Speaker 1: the rule there is Mexico where very specific different fundamentals 614 00:34:21,600 --> 00:34:25,359 Speaker 1: and as well political political things are coming in. Right. 615 00:34:25,400 --> 00:34:29,040 Speaker 1: If I look at dollar Indonesia, okay, folks, this is 616 00:34:29,120 --> 00:34:31,879 Speaker 1: not something we mentioned, Mike doing this two or three 617 00:34:31,920 --> 00:34:36,680 Speaker 1: times a week, we mentioned Dollar Indonesia rights, it's a 618 00:34:36,840 --> 00:34:42,560 Speaker 1: twenty nine move back to the decade long trend of 619 00:34:42,719 --> 00:34:45,400 Speaker 1: years ago. When you say you want to be in Indonesia, 620 00:34:46,360 --> 00:34:49,959 Speaker 1: is it a structural call for that big move back 621 00:34:50,000 --> 00:34:53,640 Speaker 1: to once what was? Or is it back to some resistance? 622 00:34:53,640 --> 00:34:56,359 Speaker 1: Would you be say a quarter of that move Now, 623 00:34:56,440 --> 00:34:58,080 Speaker 1: first of all, you have to look into the reform 624 00:34:58,160 --> 00:35:00,600 Speaker 1: process in the country itself, so it's a very positive 625 00:35:00,600 --> 00:35:03,759 Speaker 1: fundamental story behind it. So the country is improving to 626 00:35:03,840 --> 00:35:06,839 Speaker 1: what's the better. Then secondly you need to look into 627 00:35:07,360 --> 00:35:10,919 Speaker 1: what is the outlook for commodities for the next two months, 628 00:35:11,400 --> 00:35:13,279 Speaker 1: And I think that the outlook for commodity since the 629 00:35:13,360 --> 00:35:16,440 Speaker 1: next two months or is on the positive side. So 630 00:35:16,520 --> 00:35:19,759 Speaker 1: Indonesia is going to benefit from that side. We have 631 00:35:19,880 --> 00:35:24,160 Speaker 1: seen significant inflow wire fixed income related funds into Indonesia 632 00:35:24,400 --> 00:35:27,280 Speaker 1: and that had been not fully reflected into exchange rate strengths. 633 00:35:27,680 --> 00:35:30,360 Speaker 1: This is a story. It's amazing Michael McKee. Within the 634 00:35:30,440 --> 00:35:33,880 Speaker 1: sophistication that Mr Roddicker works in the difference in the 635 00:35:34,080 --> 00:35:41,160 Speaker 1: chart of dollar Indonesia versus yen Indonesia, well two different 636 00:35:41,160 --> 00:35:45,400 Speaker 1: planets the dollar yen pair. Which one drives the trade 637 00:35:45,520 --> 00:35:47,680 Speaker 1: right now? And the reason I ask is because then 638 00:35:47,680 --> 00:35:51,680 Speaker 1: which one is going to drive emerging market? So first 639 00:35:51,680 --> 00:35:54,400 Speaker 1: of all you can get currently the impression of that 640 00:35:54,480 --> 00:35:57,320 Speaker 1: there you have three major funding currencies around right and 641 00:35:57,760 --> 00:36:00,719 Speaker 1: that is because of center bank policy within Europe, within 642 00:36:00,920 --> 00:36:05,160 Speaker 1: the United States and within with on on the Japanese side. 643 00:36:05,680 --> 00:36:08,120 Speaker 1: Now on on Japan, I would make do you sing 644 00:36:08,640 --> 00:36:10,279 Speaker 1: a very big I would like to make a very 645 00:36:10,400 --> 00:36:13,040 Speaker 1: big statement. So we had been bullish on the Japanese 646 00:36:13,120 --> 00:36:16,240 Speaker 1: yen for three quarters. We called the year twenty sixteen 647 00:36:16,719 --> 00:36:20,600 Speaker 1: the year of yen strengths. And it is no time 648 00:36:20,920 --> 00:36:23,560 Speaker 1: slowly to turn the boat. And I think that the 649 00:36:23,680 --> 00:36:28,360 Speaker 1: yen is as well traded in line with the global 650 00:36:28,400 --> 00:36:32,000 Speaker 1: inflation outlook. It is traded in line with the local 651 00:36:32,080 --> 00:36:35,640 Speaker 1: inflation outlook in Japan itself. And I think that in 652 00:36:35,760 --> 00:36:39,439 Speaker 1: Japan itself there's a there's a change taking place. While 653 00:36:39,480 --> 00:36:43,680 Speaker 1: we have talked so much about the fat, we actually 654 00:36:43,760 --> 00:36:46,640 Speaker 1: should talk about the b O J. There seems to 655 00:36:46,760 --> 00:36:50,640 Speaker 1: be a central bank moving one step further. This is 656 00:36:50,680 --> 00:36:53,879 Speaker 1: called yield curve management. So they fix a ten year 657 00:36:54,000 --> 00:36:57,040 Speaker 1: and they run as well as a responsibility for the 658 00:36:57,080 --> 00:36:59,520 Speaker 1: short end of the market. And the question then is 659 00:37:00,000 --> 00:37:02,520 Speaker 1: how do you fill this into a broader context and 660 00:37:02,640 --> 00:37:05,960 Speaker 1: what are the implications for the Japanese en. The Japanese 661 00:37:06,000 --> 00:37:10,560 Speaker 1: yen is driven by, or had been driven in the 662 00:37:10,640 --> 00:37:15,400 Speaker 1: past three quarters by a significant decline in monetary velocity 663 00:37:15,640 --> 00:37:19,040 Speaker 1: in Japan. So when you look at how much central 664 00:37:19,080 --> 00:37:21,719 Speaker 1: bank money had been pumped and you compare that to 665 00:37:21,840 --> 00:37:25,160 Speaker 1: the credit in the country, you see a significant diversion. 666 00:37:25,239 --> 00:37:29,040 Speaker 1: So monetary velocity is declining. Why is it that has 667 00:37:29,080 --> 00:37:32,160 Speaker 1: to do with the financial sector? The financial sector distribution 668 00:37:32,280 --> 00:37:35,800 Speaker 1: channel of central bank liquidity seemed to be blocked. You 669 00:37:35,880 --> 00:37:40,760 Speaker 1: need to unblock this distribution channel. Various measures are required 670 00:37:40,840 --> 00:37:43,560 Speaker 1: for that. One is the yield curve management is a 671 00:37:43,600 --> 00:37:46,760 Speaker 1: step in the right direction. Secondly, they have to push 672 00:37:47,320 --> 00:37:50,680 Speaker 1: inflation expectations, for which I believe the MF is going 673 00:37:50,719 --> 00:37:53,360 Speaker 1: to come in, so you will have a much tighter 674 00:37:54,040 --> 00:37:56,880 Speaker 1: coordination of policy between the m o F and the 675 00:37:57,040 --> 00:37:59,160 Speaker 1: b o J. And I think that the market has 676 00:37:59,239 --> 00:38:02,319 Speaker 1: not woken to that. And I guess concerning doll again, 677 00:38:02,400 --> 00:38:06,040 Speaker 1: you have now to see the slow turnaround, the slow 678 00:38:06,120 --> 00:38:08,600 Speaker 1: turnaround to the better. And I think that next year 679 00:38:08,800 --> 00:38:13,400 Speaker 1: doll again should actually trade higher, and that against the 680 00:38:13,480 --> 00:38:17,400 Speaker 1: consensus view. Our analysis concerning positioning in the market does 681 00:38:17,520 --> 00:38:21,440 Speaker 1: show that as a market is overwhelming the long the 682 00:38:21,560 --> 00:38:24,640 Speaker 1: Japanese skin. When I came over here to this country 683 00:38:24,680 --> 00:38:28,680 Speaker 1: in November last year to promote the idea of yen strength, 684 00:38:28,800 --> 00:38:31,520 Speaker 1: nobody wanted to hear about that. Now I'm here back 685 00:38:31,560 --> 00:38:34,200 Speaker 1: again in the United States and I promote the idea 686 00:38:34,239 --> 00:38:38,719 Speaker 1: of potentially end weakness. Nobody wanted to hear about it. Well, 687 00:38:38,800 --> 00:38:43,239 Speaker 1: we do. We're happy to have you in here. We 688 00:38:43,320 --> 00:38:45,800 Speaker 1: don't make it feel bad and go home. You know, 689 00:38:46,080 --> 00:38:47,880 Speaker 1: I'm not saying that that people feel that, but I 690 00:38:47,960 --> 00:38:50,440 Speaker 1: mean this appointment, but it's still it's still doesn't get 691 00:38:51,040 --> 00:38:53,440 Speaker 1: kind of my questions, which of the pair is going 692 00:38:53,480 --> 00:38:57,600 Speaker 1: to drive currency movements in other markets as certainly I 693 00:38:58,000 --> 00:39:00,520 Speaker 1: do look at who is most signal of currency, is 694 00:39:00,560 --> 00:39:04,960 Speaker 1: most significant for funding purposes, and they're traditionally US dollar 695 00:39:05,040 --> 00:39:07,840 Speaker 1: had played a major role, and therefore you need to 696 00:39:08,000 --> 00:39:10,560 Speaker 1: analyze US dollar correctly to get the rest of the 697 00:39:10,680 --> 00:39:13,920 Speaker 1: bunch in in good shape. So to be clear here, 698 00:39:14,000 --> 00:39:17,160 Speaker 1: I don't hear a brutal move in US dollar. You know, 699 00:39:17,280 --> 00:39:19,600 Speaker 1: we had some love here a couple of years ago, 700 00:39:19,719 --> 00:39:23,560 Speaker 1: not like two You think, well, this this this brutal 701 00:39:23,680 --> 00:39:27,880 Speaker 1: thing that was riches a way of arguing, now, I 702 00:39:27,960 --> 00:39:30,440 Speaker 1: think that's the European Center Bank is actually in a 703 00:39:30,760 --> 00:39:34,239 Speaker 1: very difficult situation. Now you see that euro dollar is 704 00:39:34,320 --> 00:39:37,239 Speaker 1: going to basically go sideways. Our call is that we 705 00:39:37,320 --> 00:39:39,080 Speaker 1: are going to see one eighteen at the end of 706 00:39:39,200 --> 00:39:42,080 Speaker 1: the year. And you know the reason why I see 707 00:39:42,160 --> 00:39:46,160 Speaker 1: that despite the situation in Italy, you despite upcoming election 708 00:39:46,280 --> 00:39:50,640 Speaker 1: uncertainties ranging from whatever it is about, theres a lack 709 00:39:50,840 --> 00:39:54,520 Speaker 1: of euros selling. There's nobody out there who can sell euros. Yeah, 710 00:39:55,080 --> 00:39:59,560 Speaker 1: very quickly, hands sterling, we've had some real outlier cause 711 00:39:59,600 --> 00:40:03,279 Speaker 1: in this how do you frame sterling one year or 712 00:40:03,360 --> 00:40:06,640 Speaker 1: even two years out? I think yesterday is the o 713 00:40:06,840 --> 00:40:09,399 Speaker 1: CD brought out a very important report. Basically, you're saying 714 00:40:09,440 --> 00:40:12,800 Speaker 1: yet to our stabilization outlook long terms is negative. What 715 00:40:13,000 --> 00:40:17,640 Speaker 1: it is is that the shift towards heart exit cannot 716 00:40:17,840 --> 00:40:21,120 Speaker 1: be a good thing for Sterling. What's the scope and 717 00:40:21,200 --> 00:40:23,359 Speaker 1: scale of that move? That seems to be the point. 718 00:40:23,760 --> 00:40:26,200 Speaker 1: Our forecast is that in euro Sterling we are going 719 00:40:26,280 --> 00:40:28,960 Speaker 1: to see ninety two to ninety four. We are currently 720 00:40:29,040 --> 00:40:33,560 Speaker 1: today trading eighty six and in cable one twenty four. 721 00:40:34,000 --> 00:40:38,279 Speaker 1: So here by the end of two thousand sixteen, by 722 00:40:38,320 --> 00:40:39,759 Speaker 1: the end can you give me the end of two 723 00:40:39,840 --> 00:40:43,520 Speaker 1: thousand seventeen, That is actually where we see that UM 724 00:40:43,800 --> 00:40:46,040 Speaker 1: there is going to be um There's going to be 725 00:40:46,239 --> 00:40:49,960 Speaker 1: a situation of more um U s dollar strength, general 726 00:40:50,040 --> 00:40:53,120 Speaker 1: stabilization of of of many of many things in that year. 727 00:40:53,520 --> 00:40:55,960 Speaker 1: I would focus on on euro Sterling. So I think 728 00:40:56,040 --> 00:40:58,800 Speaker 1: that we are going to have a trading range between 729 00:40:58,880 --> 00:41:01,640 Speaker 1: one twenty four and ABE one s three. Very good, 730 00:41:01,800 --> 00:41:06,360 Speaker 1: Hans Rhdicker, Just fabulous, Thank you so much with Morgan Stanley. 731 00:41:07,920 --> 00:41:11,880 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 732 00:41:12,080 --> 00:41:17,480 Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform 733 00:41:17,560 --> 00:41:21,400 Speaker 1: you prefer. I'm on Twitter at Tom Keane. Michael McKee 734 00:41:21,719 --> 00:41:25,279 Speaker 1: is at Economy Before the podcast. You can always catch 735 00:41:25,360 --> 00:41:35,520 Speaker 1: us worldwide. I'm Bloomberg Radio. Who you put your trust 736 00:41:35,640 --> 00:41:40,080 Speaker 1: in matters. Investors have put their trust in independent registered 737 00:41:40,120 --> 00:41:43,879 Speaker 1: investment advisors to the tune of four trillion dollars. Why 738 00:41:44,760 --> 00:41:47,839 Speaker 1: learn more and find your independent advisor dot com.