WEBVTT - More Eco Data This Week, How Traders Can Use AI 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.560 --> 0:00:12.920 This is Bloomberg business Week inside from the reporters and 0:00:13.080 --> 0:00:16.640 editors who bring you America's most trusted business magazine, plus 0:00:16.720 --> 0:00:20.880 global business, finance and tech news. The Bloomberg Business Week 0:00:20.920 --> 0:00:26.200 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:28.360 --> 0:00:31.160 We know this is a market environment that moves from 0:00:31.160 --> 0:00:34.160 economic data point to economic data point, and we also 0:00:34.240 --> 0:00:37.720 know that not all economic data point or data is 0:00:37.720 --> 0:00:40.360 treated equally by investors, nor economists, nor the Fed for 0:00:40.360 --> 0:00:40.720 that matter. 0:00:40.760 --> 0:00:42.400 Tim Well, this week though we do have a few 0:00:42.440 --> 0:00:44.479 that are watched by all, as we get two reads 0:00:44.479 --> 0:00:47.120 on inflation just over the next two days. Also a 0:00:47.159 --> 0:00:50.640 read on retail sales on Friday, throwing some jobless claims, Carol, 0:00:51.040 --> 0:00:53.599 the Fed is watching the US labor market closely. All 0:00:53.640 --> 0:00:56.320 this could make for an interesting week. And then Michael 0:00:56.400 --> 0:00:59.720 McKee next week goes off to Jackson Hole. Right, so 0:01:00.120 --> 0:01:01.320 hear from VET chair J. 0:01:01.440 --> 0:01:01.840 Powell. 0:01:01.840 --> 0:01:03.800 We'll see what he has to say. How that shapes 0:01:03.800 --> 0:01:05.640 the narrative? All right, So let's get to it with 0:01:05.720 --> 0:01:08.760 us our round table Bloomberg News Economics editor of Molly Smith, 0:01:09.319 --> 0:01:12.479 along with Bloomberg economics US economist Stuart Paul Stewart here 0:01:12.520 --> 0:01:16.760 in studio Molly on Zoom here in New York City, 0:01:16.920 --> 0:01:19.080 and so let's get to it. So we do, first 0:01:19.120 --> 0:01:21.759 of all, Molly lay it out for us and what matters, 0:01:22.200 --> 0:01:26.119 and it's actually forgive me, I think there's three inflation reports, 0:01:26.160 --> 0:01:28.520 although I'm not quite sure the New York Fed one 0:01:28.640 --> 0:01:31.440 year inflation expectations it already came out. There's two more 0:01:31.480 --> 0:01:33.639 that come in aware over the next couple of days. 0:01:34.360 --> 0:01:36.600 What matters, Yeah, I. 0:01:36.520 --> 0:01:39.080 Mean, it's really just going to be CPI, the Consumer 0:01:39.120 --> 0:01:42.040 Price Index and full focus that comes out on Wednesday 0:01:42.040 --> 0:01:44.600 this week, and we also get a look at producer prices, 0:01:44.600 --> 0:01:47.400 so this is a level of wholesale inflation that comes 0:01:47.400 --> 0:01:51.600 out on Tuesday. Obviously, the CPI is one of, if 0:01:51.640 --> 0:01:54.680 not the biggest margaret moving events in any given month, 0:01:54.800 --> 0:01:58.000 and I don't think that this will necessarily be too 0:01:58.080 --> 0:02:00.400 much different from that. But hopefully we won't see nearly 0:02:00.440 --> 0:02:02.880 the same reaction that we did to the jobs report 0:02:02.920 --> 0:02:05.920 that you guys mentioned just two weeks ago, pretty fast 0:02:06.000 --> 0:02:08.840 and furious moves and stocks and treasuries on that front. 0:02:08.880 --> 0:02:11.000 And I think this one is I think people are 0:02:11.000 --> 0:02:14.000 maybe just looking for Okay, let's just get through this. 0:02:14.120 --> 0:02:17.880 Hopefully it's a fairly as expected reading. Maybe inflation is 0:02:17.919 --> 0:02:20.000 going to pick up a little bit relative to June, 0:02:20.040 --> 0:02:23.040 but the broader trend of disinflation is still going to 0:02:23.080 --> 0:02:25.560 be intact. And I think something like that will just 0:02:25.600 --> 0:02:29.800 bring hopefully a reassuring colm to the market. But that said, 0:02:29.960 --> 0:02:32.240 it doesn't take that much to tip the scales these days, 0:02:32.240 --> 0:02:35.160 Like everybody is just very jittery about the data right now. 0:02:35.400 --> 0:02:37.600 Well, Stuart, come on in here. Let's talk CPI before 0:02:37.600 --> 0:02:39.280 we talk PPI here, because you and the team over 0:02:39.320 --> 0:02:42.800 at Bloomberg Economics argue that July CPI will likely be soft, 0:02:43.120 --> 0:02:46.600 with the year over year changing core CPI edging further down, 0:02:46.720 --> 0:02:48.440 take us into your thinking and what you're modeling. 0:02:48.800 --> 0:02:51.360 So we have a few factors that are going on. First, 0:02:51.520 --> 0:02:55.240 is that the most inter sensitive categories, things like used autos, 0:02:55.240 --> 0:02:58.799 are exerting meaningful drag on both core and headline inflation. 0:02:59.160 --> 0:03:01.919 We have some pretty came numbers for gasoline, so it's 0:03:01.960 --> 0:03:05.480 not really boosting the headline all that much. And then 0:03:05.480 --> 0:03:08.279 if we look at some of the more discretionary services categories, 0:03:08.320 --> 0:03:11.480 things like airfares, things like hotels. We're expecting to see 0:03:11.480 --> 0:03:13.160 some pretty meaningful drag on the core. 0:03:13.560 --> 0:03:15.800 The thing that's going to come that from the earnings front, 0:03:15.800 --> 0:03:18.040 the earnings picture where there was airlines, where it was 0:03:18.080 --> 0:03:22.120 airbnbat mean Expedia. Nonetheless, there's stock rally because there was 0:03:22.120 --> 0:03:24.560 a beat. But there everybody's talking about softness in the 0:03:24.600 --> 0:03:25.320 travel sector. 0:03:25.560 --> 0:03:28.160 That's right, it's really some of those more discretionary services 0:03:28.200 --> 0:03:31.280 categories where consumers are tightening their belt. We expect to 0:03:31.280 --> 0:03:33.640 see the same thing in the retail sales number this week. 0:03:33.680 --> 0:03:36.360 We expect to see folks really looking for discounts and 0:03:36.400 --> 0:03:40.040 doing some online bargain hunting as opposed to splurging on 0:03:40.240 --> 0:03:43.040 food services and some more of the intro sensitive items 0:03:43.080 --> 0:03:46.040 like appliances and autos, even though we will get some 0:03:46.280 --> 0:03:50.320 auto spending after last months the June cyber attack on 0:03:50.400 --> 0:03:54.480 auto dealers. But on the inflation front, it's interesting this 0:03:54.600 --> 0:03:57.160 is one of those peculiar months where we get PPI 0:03:57.480 --> 0:04:01.240 ahead of CPI and we're expecting see more softness in 0:04:01.280 --> 0:04:04.840 the headline PPI number than in CPI. So to Mally's 0:04:04.840 --> 0:04:07.040 points about folks wanting to take a deep breath, it's 0:04:07.080 --> 0:04:10.800 possible that when they see the monthly pace of producer 0:04:10.920 --> 0:04:14.240 prices ticking down. So when we see producer price inflation 0:04:14.280 --> 0:04:16.279 which is zero point two percent on the month instead 0:04:16.279 --> 0:04:18.880 of zero point four as they saw last month, folks 0:04:18.960 --> 0:04:21.600 might breathe that sigh of relief. It might be a 0:04:21.640 --> 0:04:24.599 little bit too early when they then see the headline 0:04:24.640 --> 0:04:28.120 pace of CPI increase on the month. So this is 0:04:28.160 --> 0:04:30.159 one of those peculiar months where the timing of the 0:04:30.200 --> 0:04:32.800 data has the opportunity to both lull people into a 0:04:32.800 --> 0:04:35.000 sense of complacency and then give a little bit of 0:04:35.040 --> 0:04:36.880 a whipsaw just the next day. 0:04:37.000 --> 0:04:39.520 Well, molly, what matters in terms of like help me 0:04:39.600 --> 0:04:43.839 through the supply chain right PPI or the endpoint input prices? 0:04:43.960 --> 0:04:44.200 Right? 0:04:44.480 --> 0:04:46.839 So is that something then will show up in next 0:04:46.880 --> 0:04:50.080 month CPI report? Like how do you kind of distinguish 0:04:50.160 --> 0:04:51.719 those two pieces of data? 0:04:52.680 --> 0:04:56.080 So generally, when the reason why you would, as a 0:04:56.120 --> 0:04:59.520 typical person care about the PPI is because what's happening 0:04:59.560 --> 0:05:02.840 at the doucer price level tends to filter through to 0:05:02.920 --> 0:05:06.960 consumers over time. Overtime doesn't necessarily mean one month, though, 0:05:06.960 --> 0:05:09.200 these are trends that can take more than that to 0:05:09.560 --> 0:05:12.200 more time than that to develop, and of course movements 0:05:12.200 --> 0:05:15.039 through the supply chain are not always that quick. But 0:05:15.200 --> 0:05:17.159 it's of course, like really important to look at for 0:05:17.200 --> 0:05:20.960 the overall inflation trend, especially you know, when you're looking 0:05:20.960 --> 0:05:23.680 at what's happening with commodity prices, and so many of 0:05:23.720 --> 0:05:26.400 those have been really wild over the summer. With looking 0:05:26.440 --> 0:05:29.280 at what prices are for coffee and chocolate and other 0:05:29.400 --> 0:05:31.680 kinds of metals and like things like that that just 0:05:32.120 --> 0:05:34.640 you know, maybe you as a consumer aren't purchasing that 0:05:34.720 --> 0:05:37.480 as a raw good, but when you purchase it as 0:05:37.520 --> 0:05:40.800 a final product, then you start to notice how inspects 0:05:40.800 --> 0:05:42.400 how expensive those goods can be. 0:05:43.240 --> 0:05:46.279 Stuart, come on in, because I don't know about you guys, 0:05:46.320 --> 0:05:48.960 but I was gone last week, and I even though 0:05:48.960 --> 0:05:50.320 I wasn't you know, glued to. 0:05:50.279 --> 0:05:51.599 My phone, we weren't here. 0:05:51.839 --> 0:05:55.839 I could still hear people screaming about a fifty basis 0:05:55.880 --> 0:05:56.760 point rate cut. 0:05:56.839 --> 0:06:00.000 Oh wait, no, you mean the emergency rate. The emergency 0:06:00.120 --> 0:06:03.760 is seventy five basis points. I forget who was it 0:06:03.800 --> 0:06:06.719 that Jeremy Siegel was calling for us? 0:06:06.880 --> 0:06:08.800 So a lot has changed in just a few days. 0:06:08.800 --> 0:06:12.600 I don't hear those echoes right now pretty quickly. Actually, 0:06:12.680 --> 0:06:15.520 we didn't see one of those emergency rate cuts come 0:06:15.600 --> 0:06:20.120 from the FED, but could we get a not necessarily 0:06:20.160 --> 0:06:23.839 a reaction, but could we get calls for some sort 0:06:23.839 --> 0:06:26.799 of movement from the Fed based on the data moving 0:06:26.839 --> 0:06:28.240 one way or the other this week's store. 0:06:28.640 --> 0:06:29.960 I think that this week is going to be one 0:06:29.960 --> 0:06:32.120 of those odd weeks where you feel a little bit 0:06:32.160 --> 0:06:35.560 more stagflation risk as opposed to just outright recession risk. 0:06:35.640 --> 0:06:39.640 So and I think that because equity markets ever covered, 0:06:39.680 --> 0:06:43.280 because the feed through into credit mark into credit markets, 0:06:43.600 --> 0:06:46.680 you know, when it comes to interest rate spreads, when 0:06:46.680 --> 0:06:49.120 it comes to default risk, we haven't seen any sort 0:06:49.120 --> 0:06:51.279 of material move there. So I think that when it 0:06:51.360 --> 0:06:54.120 comes to what we're going to see this week and 0:06:54.160 --> 0:06:56.440 how it shapes the narrative, it's going to be more 0:06:56.520 --> 0:06:59.200 so around the idea of stagflation. We're going to see 0:06:59.760 --> 0:07:03.240 in that isn't as inflation data that aren't as good 0:07:03.360 --> 0:07:05.440 as they've been in the last three months. We're going 0:07:05.480 --> 0:07:08.599 to see retail sales data that when you look deeper 0:07:08.600 --> 0:07:10.600 in the core, it's going to be pretty dismal. I 0:07:10.600 --> 0:07:13.120 think that looking at the control group for retail sales 0:07:13.200 --> 0:07:14.720 it's going to be pretty rough, and we're going to 0:07:14.760 --> 0:07:17.040 see zero point two percent decline in the month and 0:07:17.160 --> 0:07:20.000 manufacturing data to round out the week. I also expect 0:07:20.040 --> 0:07:21.720 that we're going to see a decline about zero point 0:07:21.720 --> 0:07:25.200 three percent month on month decline in manufacturing output. So 0:07:25.520 --> 0:07:27.960 we're not going to have as good inflation data, and 0:07:28.000 --> 0:07:30.200 some of the other fundamental concepts are going to show 0:07:30.200 --> 0:07:32.800 some weakness, and that could be enough to just keep 0:07:32.840 --> 0:07:35.760 folks on edge having this fifty basis point twenty five 0:07:35.800 --> 0:07:37.600 bases point debate for another month. 0:07:37.440 --> 0:07:39.000 Which makes me want to jump to it. And I want 0:07:39.000 --> 0:07:40.800 to ask both of you, and let me Molly, let 0:07:40.840 --> 0:07:42.960 me start with you. So are more people starting to 0:07:43.000 --> 0:07:46.240 talk about a recession and that if we get a recession, 0:07:46.320 --> 0:07:49.320 that you know, if the FED possibly is behind the 0:07:49.360 --> 0:07:52.840 curve in terms of maybe sparking some growth or catching 0:07:52.840 --> 0:07:55.560 that we're slowing down maybe faster than we anticipated, could 0:07:55.560 --> 0:07:56.600 it be a deeper recession. 0:07:57.800 --> 0:08:00.640 More people definitely are talking about recession. And since that 0:08:00.760 --> 0:08:03.400 Job's report came out two weeks ago, we've seen JP 0:08:03.560 --> 0:08:07.280 Morgan and Golden Economists both boost their likelihood of a 0:08:07.320 --> 0:08:09.720 recession in the next twelve months. So I'm pretty sure 0:08:09.760 --> 0:08:12.240 both of them are still below fifty percent, so still 0:08:12.280 --> 0:08:15.600 fairly low odds. And I think those are the only 0:08:15.640 --> 0:08:17.440 two that I'm really aware of who have come out 0:08:17.440 --> 0:08:20.680 and boosted those odds in recent weeks. But I'm not 0:08:21.000 --> 0:08:23.680 really hearing that it would be that would make a 0:08:23.720 --> 0:08:26.440 recession any deeper. I think it's just now looking at 0:08:26.920 --> 0:08:28.720 is the FED behind the curve? Like you said that 0:08:28.760 --> 0:08:31.160 people are wondering that, And of course if you get 0:08:31.240 --> 0:08:34.719 more inflation data that comes in softer than expected, that's 0:08:34.760 --> 0:08:37.160 only just going to add fuel to that argument. 0:08:37.400 --> 0:08:39.480 Stuart remind us where you guys are the team on 0:08:39.600 --> 0:08:40.640 when it comes to recession. 0:08:41.240 --> 0:08:44.360 So we've been noting that there's been a material slow 0:08:44.400 --> 0:08:47.080 down in some of the underlying factors driving growth for 0:08:47.120 --> 0:08:50.000 a long time. We've also been noting that again, even 0:08:50.040 --> 0:08:51.960 if you just look at the Q two GDP data, 0:08:53.520 --> 0:08:55.640 about a quarter of the growth that we saw was 0:08:55.640 --> 0:08:59.320 from inventory accumulation. That folks and firms aren't trying to 0:08:59.320 --> 0:09:03.560 accumulate inventories, it's just that they're accidentally producing more on 0:09:03.600 --> 0:09:06.640 the expectation of zealing consumer demand that just isn't there. 0:09:07.160 --> 0:09:10.040 And so we think that the FED is behind the curve, 0:09:10.760 --> 0:09:13.240 and we do think that some of the recession, some 0:09:13.320 --> 0:09:15.800 of the recession probabilities that have been assigned are probably 0:09:15.840 --> 0:09:18.720 a smidge too low, but we've always been a little 0:09:18.720 --> 0:09:22.000 bit more bearish expected and a half percent unemployment rate 0:09:22.040 --> 0:09:25.959 by year end, and if we continue along this trajectory 0:09:26.000 --> 0:09:27.880 that we saw in the last month, we'll hit it 0:09:28.000 --> 0:09:28.640 or exceed it. 0:09:28.640 --> 0:09:30.320 It's interesting because you guys have been for a long 0:09:30.360 --> 0:09:32.720 time and at a time when it almost felt like, really, 0:09:32.920 --> 0:09:34.920 can you still be calling this? And now it starts 0:09:34.960 --> 0:09:38.200 to feel like things are falling into place. Guys, perfect 0:09:38.240 --> 0:09:40.560 setup for us. On this Monday, Bloomberg News Economics Center 0:09:40.600 --> 0:09:44.080 Molly Smith along with Bloomberg Economics US economist right here 0:09:44.120 --> 0:09:44.720 in studio. 0:09:45.480 --> 0:09:49.000 You're listening to the Bloomberg Business Week podcast. Catch us 0:09:49.040 --> 0:09:52.280 live weekday afternoons from two to five pm Eastern. Listen 0:09:52.320 --> 0:09:54.480 on Apple car Play and then Brout Auto with a 0:09:54.480 --> 0:10:00.640 Bloomberg Business app, or watch us live on YouTube. 0:10:00.960 --> 0:10:02.960 Now we got to talk take all of this together, 0:10:03.040 --> 0:10:05.560 Tim and talk about the treasury and rates market trades. 0:10:05.760 --> 0:10:06.000 Yeah. 0:10:06.520 --> 0:10:09.240 Among our most read stories on the Bloomberg on this 0:10:09.360 --> 0:10:11.840 Monday in August, how bonds are back as a hedge 0:10:11.880 --> 0:10:15.640 after failing investors for years, finally contribute to the story. 0:10:15.679 --> 0:10:19.320 Bloomberg News rates reporter Michael McKenzie. He ended last week 0:10:19.400 --> 0:10:21.840 with us and now he kicks off Carol the week for. 0:10:22.000 --> 0:10:25.160 Us, welcome back. You can't get away from us. 0:10:25.160 --> 0:10:27.000 He tries, he works from home to try to get 0:10:27.000 --> 0:10:28.840 away from us, and we still make him turn on 0:10:28.880 --> 0:10:30.920 the camera and come hang out with us. 0:10:31.240 --> 0:10:34.120 So Tim was away and he did read it. 0:10:34.600 --> 0:10:37.520 Oh yeah, but so well up, he missed nothing right. 0:10:38.840 --> 0:10:40.160 Yeah, we're violently unchanged. 0:10:40.840 --> 0:10:43.120 Violently unchanged. That's a good way to describe. 0:10:43.760 --> 0:10:46.400 How are you thinking about things on this Monday here? 0:10:48.320 --> 0:10:49.160 Well, pretty much. 0:10:49.200 --> 0:10:51.000 It's interesting too. So we've got a two year yeeld 0:10:51.320 --> 0:10:54.640 right there on four percent, ten years at what three ninety. 0:10:55.400 --> 0:10:57.240 So if you think last week we got as low, 0:10:57.320 --> 0:10:59.360 we got below three eighty on tens, and we bounced 0:10:59.360 --> 0:11:02.439 back to four to just shire four percent on Thursday 0:11:02.480 --> 0:11:05.520 after that very week tenure auction. So we're back in 0:11:05.559 --> 0:11:07.160 the middle of the range, and I think market's just 0:11:07.280 --> 0:11:10.280 parked here waiting for what will be I think the 0:11:10.280 --> 0:11:14.240 most important week for data until we get the payrolls report. 0:11:14.360 --> 0:11:17.720 First week of September, we've got PPI, tomorrow's CPI and 0:11:17.760 --> 0:11:20.480 then retail sales and jobbers claims. So we're going to 0:11:20.480 --> 0:11:25.520 see whether or not inflation is trending down or whether 0:11:25.559 --> 0:11:27.520 it's actually going to be proved to be sticky than 0:11:27.720 --> 0:11:31.520 people are expecting the bob market. That will put pressure 0:11:31.640 --> 0:11:34.400 on that front end. You should see high yields if 0:11:34.440 --> 0:11:38.079 inflation is stickier when people anticipate that said, if inflation 0:11:38.160 --> 0:11:41.280 comes in online bang in line with expectations, then I 0:11:41.280 --> 0:11:43.560 think that the focus will turn to Okay, how is 0:11:43.559 --> 0:11:46.680 the consumer looking for retail sales and are we seeing 0:11:46.720 --> 0:11:49.960 any signs of weakness in those initial weekly choppers claims 0:11:49.960 --> 0:11:50.480 on Thursday. 0:11:50.920 --> 0:11:52.800 Of the data points that you just mentioned, of all 0:11:52.800 --> 0:11:55.360 the economic data that we're getting this week, Michael, which 0:11:55.400 --> 0:11:58.080 one do you think has the biggest implications for the 0:11:58.200 --> 0:11:58.720 rates curve? 0:12:00.600 --> 0:12:04.840 I'd say CPI. If CPI is trending in the right direction, 0:12:05.360 --> 0:12:07.439 that means the bomb market and go right, this is 0:12:07.520 --> 0:12:11.760 yesterday's story and let's just focus on the consumer and 0:12:11.800 --> 0:12:14.560 the labor market. You get that all clear on CPI 0:12:14.840 --> 0:12:18.120 this month. I actually loved the last month and it's 0:12:18.160 --> 0:12:21.280 coming out this month. That means to focus on the 0:12:21.320 --> 0:12:24.520 Fed's dual mandate. The labor side of things becomes really 0:12:24.559 --> 0:12:26.600 really important now for the bomb market, and they will 0:12:26.640 --> 0:12:29.600 continue then to really watch carefully for any scigns of 0:12:29.840 --> 0:12:31.079 sort of labor deterioration. 0:12:31.679 --> 0:12:33.720 You know, we mentioned in the Leader and to you, Michael, 0:12:33.760 --> 0:12:35.520 about this story that's among the most read on the 0:12:35.520 --> 0:12:38.040 Bloomberg about bonds or back as a hedge after failing 0:12:38.080 --> 0:12:41.120 investors for years. We mentioned on Friday in our conversation 0:12:41.200 --> 0:12:43.520 with you how you had caught up with Dan iverson 0:12:43.559 --> 0:12:47.200 the world's biggest active bond fund manager, who says he's 0:12:47.320 --> 0:12:49.800 just about ready to start adding to his treasury positions. Again. 0:12:50.679 --> 0:12:53.959 You talk to a lot of investors, big bond investors, 0:12:54.280 --> 0:12:57.679 are you increasingly seeing that among them that they're getting 0:12:57.720 --> 0:12:59.839 ready to buy or are already buying. 0:13:00.480 --> 0:13:02.160 They're already long. I mean, if you look at all 0:13:02.160 --> 0:13:05.880 the positioning surveys, and in Himko's defense, when two year 0:13:06.160 --> 0:13:09.680 was back above five percent briefly late April, they were buying. 0:13:10.040 --> 0:13:12.920 So they all they've done is they've moderate their duration, 0:13:13.000 --> 0:13:15.160 They've pulled it back a bit. They're waiting for a backup. 0:13:15.200 --> 0:13:18.000 So if you get sticky inflation, I think they're going 0:13:18.000 --> 0:13:21.200 to people come in and I'll cap the rise and yields, 0:13:22.480 --> 0:13:26.000 but longer term, I mean himko take tend to take 0:13:26.000 --> 0:13:28.960 a three to five year viewpoint of things. So Dan 0:13:29.000 --> 0:13:31.439 Iverson's point to me was, if you're a long term investor, 0:13:31.480 --> 0:13:34.000 you step back, four percent on a ten year is 0:13:34.080 --> 0:13:36.600 very attractive. You know, you've got to go back to 0:13:36.800 --> 0:13:38.880 the middle of the first decade of this century when 0:13:38.880 --> 0:13:41.960 you had a consistent ten year around that four percent level. 0:13:42.200 --> 0:13:45.600 So these are attractive yields for longer term investors. And 0:13:45.679 --> 0:13:47.200 it means when you do get a wobble in the 0:13:47.200 --> 0:13:50.560 equity market, we do get something happening in credit, then 0:13:51.080 --> 0:13:54.240 that the trophy market, you know, reclaims its status as 0:13:54.280 --> 0:13:57.000 being the defensive asset to hold, and it will rally. 0:13:57.040 --> 0:13:58.800 And I think one of the problems the market's got 0:13:58.800 --> 0:14:00.800 at the moment is that we had a very extensive 0:14:01.120 --> 0:14:03.599 have and rally last a week ago Monday, when the 0:14:04.120 --> 0:14:07.520 carry trade was being carried out to some extent, and 0:14:07.760 --> 0:14:11.360 that's why yields fell so quickly and so sharply, and 0:14:11.360 --> 0:14:14.160 you're now having to come back and sort of fired 0:14:14.200 --> 0:14:16.920 an equilibrium. And it seems to me four percent on 0:14:17.000 --> 0:14:20.560 twos and three nineties, maybe four percent on ten seemed 0:14:20.560 --> 0:14:21.560 to be the right levels here. 0:14:21.920 --> 0:14:24.680 Hey Michael, before we let you go, as we mentioned 0:14:24.680 --> 0:14:26.720 at the top, you contributed to a story that is 0:14:26.760 --> 0:14:29.360 among the most read on the Bloomberg terminal about how 0:14:29.440 --> 0:14:32.360 bonds are back and increasingly money managers are hearing from 0:14:32.400 --> 0:14:36.440 clients about investing in bonds. You talked to professional bond 0:14:36.480 --> 0:14:38.680 investors each and every day, but talk a little bit 0:14:38.720 --> 0:14:41.200 about how that's sort of going back to the everyday 0:14:41.320 --> 0:14:43.680 investor who has their money managed by professionals. 0:14:45.400 --> 0:14:48.320 Well, I mean the important thing form invest I think 0:14:48.360 --> 0:14:49.920 a lot of people have liked the idea of putting 0:14:49.880 --> 0:14:50.880 their money in tea bills. 0:14:51.160 --> 0:14:51.760 You know what was it? 0:14:51.840 --> 0:14:53.840 We had t bill and chill. That was the Jeff 0:14:53.880 --> 0:14:58.000 Gunlack expression last year. But a lot of big bond 0:14:58.040 --> 0:15:01.640 investors were telling me back in November December, Look, you've 0:15:01.640 --> 0:15:03.560 got to take advantage of these treasure yields at five 0:15:03.560 --> 0:15:07.240 percent because it won't cash rates won't stay at five 0:15:07.280 --> 0:15:09.960 percent once the fair starts to cut again. And I 0:15:09.960 --> 0:15:12.920 think they've been born out here, that thesis has been validated. 0:15:12.920 --> 0:15:15.800 It's taken longer than people thought it would. Don't forget 0:15:15.800 --> 0:15:17.440 everyone at the beginning of the year thought the SAT 0:15:17.480 --> 0:15:19.360 would be cutting in March, and to a certain extent, 0:15:19.920 --> 0:15:23.800 Chairpale did kind of hint that was coming. But that said, 0:15:24.120 --> 0:15:27.640 you've now got treasure yields with four you know, four percent, 0:15:27.720 --> 0:15:30.360 two s and below four percent and tens and fives. 0:15:30.760 --> 0:15:33.920 So if you're still stuck in cash you're now sitting 0:15:33.960 --> 0:15:37.160 on you know, you've got an opportunity loss here because 0:15:37.200 --> 0:15:40.440 you could have rolled into a five percent two year 0:15:40.480 --> 0:15:44.640 back in April, right, three four seventy five on tens 0:15:44.680 --> 0:15:47.280 back in April. Okay, and again these bond managers saying, 0:15:47.320 --> 0:15:51.080 you've got to start thinking about moving out. So I 0:15:51.080 --> 0:15:55.960 think it now is time. So we had a record high. 0:15:55.720 --> 0:15:59.280 And Michael, we got to run. Michael McKenzie, forgive me. 0:15:59.600 --> 0:15:59.880 This is. 0:16:01.920 --> 0:16:05.800 You're listening to the Bloomberg Business Week podcast. Listen live 0:16:05.880 --> 0:16:08.720 each weekday starting at two pm Eastern on Apple car 0:16:08.840 --> 0:16:11.800 Play and Android Auto with the Bloomberg Business App. You 0:16:11.840 --> 0:16:15.080 can also listen live on Amazon Alexa from our flagship 0:16:15.160 --> 0:16:20.040 New York station, Just say Alexa play Bloomberg eleven thirty. 0:16:21.840 --> 0:16:23.800 Check your calendars. It was one week ago that we 0:16:23.840 --> 0:16:25.920 had the market sell off, But it was also one 0:16:25.920 --> 0:16:29.000 week ago that US District Court Judge am At Meta 0:16:29.160 --> 0:16:33.240 ruled that Google had illegally monopolized the online search market. 0:16:33.240 --> 0:16:36.880 The decision has serious ramifications for Alphabet's flagship business and 0:16:37.520 --> 0:16:40.200 tremendous connotations for Apple as well. It's something we've been 0:16:40.200 --> 0:16:42.720 talking about tim over the past week or so. 0:16:42.960 --> 0:16:44.640 Yeah, much of the focus has been on what this 0:16:44.680 --> 0:16:47.600 outcome means for Google's multi billion dollar payments to Apple 0:16:47.640 --> 0:16:51.000 that ensure Google is the default search engine across iPhones 0:16:51.000 --> 0:16:53.920 and iPads. But more pressing question may be what the 0:16:53.920 --> 0:16:57.000 case itself signals for the US Department of Justices separate 0:16:57.000 --> 0:16:58.880 anti trust lawsuit against Apple. 0:16:58.920 --> 0:17:00.640 Bottom line, there's always a lot going on when it 0:17:00.640 --> 0:17:03.600 comes to Apple and writing about Apple and it's cash prospects. 0:17:03.720 --> 0:17:06.160 A new research that is out by him is Bloomberg 0:17:06.160 --> 0:17:09.040 Intelligence Senior technology analyst to Ana Agrana. He joins us 0:17:09.080 --> 0:17:12.399 from Chicago. Happy Monday, an A, rag you were busy 0:17:12.480 --> 0:17:15.159 got some research out over the weekend. Help us make 0:17:15.240 --> 0:17:17.800 some sense. First of all, in terms of if Alphabet 0:17:17.840 --> 0:17:20.360 isn't making these payments to Apple, what does it mean 0:17:20.400 --> 0:17:23.440 in terms of their cash flow and their cash because 0:17:23.480 --> 0:17:25.840 you guys seem or you seem pretty upbeat about it 0:17:26.560 --> 0:17:27.760 or at least their prospects. 0:17:28.440 --> 0:17:31.480 Yeah, so if you were to, you know, wait and 0:17:31.520 --> 0:17:34.120 see what happens with this particular case. When you look 0:17:34.119 --> 0:17:37.520 at Apple's score business, it's doing very well, even though 0:17:37.560 --> 0:17:39.960 the top line is not growing in double digits like 0:17:40.040 --> 0:17:42.359 it's used to a few years ago. But even with 0:17:42.440 --> 0:17:45.639 five to seven percent growth type cost control, you know, 0:17:45.720 --> 0:17:48.040 this company is generating enough free cash. I think the 0:17:48.080 --> 0:17:49.960 biggest thing what we are trying to point out is 0:17:50.280 --> 0:17:53.679 when you look at the other large tech companies. You know, 0:17:53.760 --> 0:17:57.360 somebody like a Microsoft or an AWS, they are going 0:17:57.400 --> 0:18:00.000 to spend billions of dollars over the next few week 0:18:00.080 --> 0:18:04.000 years in order to expand their cloud data centers, invest 0:18:04.040 --> 0:18:07.040 in AI. But in the case of Apple, I think 0:18:07.040 --> 0:18:09.359 they're the ones they're going to stand out over the 0:18:09.400 --> 0:18:11.679 next twelve to twenty four months because they are not 0:18:11.800 --> 0:18:14.000 doing that same level of spending because they. 0:18:13.880 --> 0:18:15.160 Don't have that kind of business. 0:18:15.520 --> 0:18:15.680 Now. 0:18:15.680 --> 0:18:18.000 The Google case you brought up is an important point, 0:18:18.040 --> 0:18:20.880 and that's a big risk for Apple, But we're still 0:18:20.880 --> 0:18:23.040 far away to figure out what the remedies are going 0:18:23.080 --> 0:18:26.240 to be as long as there is no binding. If 0:18:26.320 --> 0:18:29.720 Google and Apple can renegotiate and figure out if people 0:18:29.720 --> 0:18:32.320 get choices, I think there is chances that they can 0:18:33.119 --> 0:18:36.480 salvage some of that particular twenty billion dollar revenue that 0:18:36.520 --> 0:18:39.520 comes in now if they are able to. If the 0:18:39.800 --> 0:18:42.000 judge comes out and say, well, you cannot pay them anything, 0:18:42.440 --> 0:18:44.720 then that's a problem. But even in that case, I 0:18:44.720 --> 0:18:46.919 think it will be a few years before Apple can 0:18:46.960 --> 0:18:48.240 make up for that revenue loss. 0:18:48.320 --> 0:18:49.920 I want to go back to this idea of Apple 0:18:50.000 --> 0:18:52.680 not having to make those huge CAPEX investments in AI 0:18:52.880 --> 0:18:55.640 like Microsoft and Amazon have to do when it comes 0:18:55.680 --> 0:19:00.320 to infrastructure and actually building out these facilities on a rock. 0:19:01.200 --> 0:19:04.040 Is it a risk for Apple that they're partnering instead 0:19:04.160 --> 0:19:07.080 with other companies that are making these investments and not 0:19:07.119 --> 0:19:11.120 doing them themselves. Is there a chance that they could 0:19:11.440 --> 0:19:14.359