WEBVTT - The Nation Meets JD Vance and Tech Pulls Back 0:00:00.080 --> 0:00:12.879 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:12.960 --> 0:00:16.960 Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join 0:00:17.079 --> 0:00:21.000 us each day for insight from the best in economics, finance, investment, 0:00:21.200 --> 0:00:24.840 and international relations. You can also watch the show live 0:00:25.079 --> 0:00:29.400 on YouTube. Visit the Bloomberg Podcast channel on YouTube to 0:00:29.520 --> 0:00:32.920 see the show weekday mornings from seven to ten am 0:00:32.960 --> 0:00:37.000 Eastern from our global headquarters in New York City. Subscribe 0:00:37.000 --> 0:00:40.360 to the podcast on Apple, Spotify, or anywhere else you 0:00:40.440 --> 0:00:44.600 listen and always I'm Bloomberg Radio, the Bloomberg Terminal, and 0:00:44.640 --> 0:00:48.280 the Bloomberg Business App. I can do this with Wendy Show. 0:00:48.280 --> 0:00:51.319 She's at Brown University and she's been to every bar 0:00:51.440 --> 0:00:54.560 every place it sells near against at lager Beer in 0:00:54.640 --> 0:00:57.360 Rhode Island. And when I was thirty nine years old, 0:00:57.720 --> 0:00:59.240 I mean two or three nights a week, I was 0:00:59.240 --> 0:01:02.480 at Lupo's heart Break Hotel, really, and they served the 0:01:02.560 --> 0:01:07.240 Meragansett and plastic cups. Professor Schuller nows this is way back. 0:01:07.360 --> 0:01:08.560 I mean, you get it down on to the dark 0:01:08.640 --> 0:01:12.800 side in Newport. Listen, you know, listen to the Blues 0:01:12.959 --> 0:01:17.160 and RBQ and all that Wendy thirty nine years old. 0:01:17.360 --> 0:01:21.320 I'm a vice presidential nominee. Is that too young? 0:01:23.440 --> 0:01:23.600 No? 0:01:23.680 --> 0:01:25.080 I mean I don't think it's too young. 0:01:25.240 --> 0:01:29.000 I think he's navigated a political career after being a 0:01:29.440 --> 0:01:32.000 Yale law school and I'm writing a bestseller. 0:01:32.319 --> 0:01:33.399 I don't think it's too young. 0:01:33.440 --> 0:01:35.480 I think that's one of the things that Americans are 0:01:35.520 --> 0:01:38.560 looking for right, this big contrast between our older main 0:01:38.640 --> 0:01:42.440 candidates and the vps being younger. I think William Jennings 0:01:42.440 --> 0:01:46.120 Bryant would have enjoyed JD. Vance's speech Tom last night. 0:01:46.440 --> 0:01:50.120 I mean it struck almost identical themes to eighteen ninety six. 0:01:50.160 --> 0:01:53.160 I don't know if that should reassure people or make 0:01:53.200 --> 0:01:55.000 them very frightened that we're going backwards. 0:01:55.120 --> 0:01:58.120 But nonetheless, no, I don't think so at all. 0:01:58.720 --> 0:02:00.720 I think that he's positioning self to be the heir 0:02:00.720 --> 0:02:02.200 apparent before. 0:02:02.080 --> 0:02:04.840 Trump even wins this election. So that's an interesting political 0:02:04.920 --> 0:02:06.360 dynamic in the Republican Party. 0:02:06.440 --> 0:02:09.400 Bill Clinton forty six and a half, George W. Bush 0:02:09.440 --> 0:02:13.519 Bush the younger, fifty four and a half, President Obama 0:02:14.040 --> 0:02:16.400 forty seven and a half. I guess the trends there. 0:02:16.760 --> 0:02:21.080 We've been talking this morning, Professor Schiller about isolationism. What's 0:02:21.080 --> 0:02:24.560 the character of the Trump vance isolationism. 0:02:25.720 --> 0:02:28.919 Well, Trump has successfully pitched this in two ways. One is, 0:02:28.960 --> 0:02:33.399 we get bad deals when we go into multi multination agreements, 0:02:33.880 --> 0:02:37.000 particularly NAFTA, which he renegotiated, which by the way, was 0:02:37.040 --> 0:02:38.440 triumphed by new Gingridge and. 0:02:38.360 --> 0:02:40.639 The Republicans in the House in nineteen ninety three. 0:02:40.720 --> 0:02:42.840 So I thought it was amazing that they just pushed 0:02:42.840 --> 0:02:44.079 this all to the Democrats. 0:02:44.560 --> 0:02:46.000 It was pretty clever of them. 0:02:46.639 --> 0:02:48.880 So that's one way, right, we just don't get a 0:02:48.880 --> 0:02:51.120 good deal when we're part of these multinations in the courts, 0:02:51.160 --> 0:02:52.359 and economically we suffer. 0:02:52.560 --> 0:02:55.320 The other is in military arrangements, we end up paying 0:02:55.360 --> 0:02:56.280 most of the bills. 0:02:56.560 --> 0:02:59.320 And that's what Trump had said in twenty sixteen there 0:02:59.400 --> 0:03:02.440 was presidents, and he's saying again that resonates with a 0:03:02.440 --> 0:03:04.839 lot of Americans, particularly in a time where they see 0:03:04.880 --> 0:03:07.679 that they're struggling to pay their bills because of inflation. 0:03:08.000 --> 0:03:11.519 So it's clever to bring these two issues together, mostly 0:03:11.560 --> 0:03:12.639 under an economic tent. 0:03:13.800 --> 0:03:16.280 Wendy, what do we expect to hear from the former 0:03:16.280 --> 0:03:20.240 president tonight at his speech, Well, Paul. 0:03:20.520 --> 0:03:24.320 Donald Trump has remained more disciplined in the last two 0:03:24.360 --> 0:03:27.239 months of his campaign than we've ever seen him either 0:03:27.240 --> 0:03:28.760 as candidate or president. 0:03:28.440 --> 0:03:32.040 In prior years. I mean, incredibly disciplined. So if this. 0:03:32.200 --> 0:03:34.760 Speech which he gave in twenty sixteen was, you know, 0:03:34.840 --> 0:03:36.840 I'm going to make sure we're safe from crime and 0:03:36.880 --> 0:03:38.920 I'm going to block immigrants, I think it's going to 0:03:38.920 --> 0:03:41.760 be very similar to twenty sixteen, but it might be 0:03:42.200 --> 0:03:45.720 just a little bit more moderated, just a little bit. 0:03:45.920 --> 0:03:48.040 He has squashed abortion at. 0:03:47.880 --> 0:03:51.000 The Republican Convention, which is really remarkable given that it's 0:03:51.040 --> 0:03:54.120 been the driving populist force in the Republican Party for 0:03:54.160 --> 0:03:57.280 so long. So if he stays disciplined and doesn't look 0:03:57.320 --> 0:04:00.680 literally too scary to independent voters, then I think they're 0:04:00.720 --> 0:04:02.680 going to walk away and think this convention was a 0:04:02.680 --> 0:04:03.360 big success. 0:04:03.920 --> 0:04:07.240 Let me break into your poll with Professor Schiller of Brown. 0:04:07.720 --> 0:04:11.160 At the European Central Bank, as expected, they leave key 0:04:11.240 --> 0:04:15.640 rates unched, they wait for signs inflation is under control, 0:04:15.800 --> 0:04:18.320 and they say that Christine lan Guard will not swim 0:04:18.320 --> 0:04:18.920 in the rivers. 0:04:19.360 --> 0:04:21.440 Embarrassedlympics, Wendy. 0:04:21.839 --> 0:04:24.599 It certainly appears to a lot of folks, including myself, 0:04:24.640 --> 0:04:27.640 that this has been a really solid convention for the 0:04:27.680 --> 0:04:28.400 Republican Party. 0:04:28.400 --> 0:04:31.040 How much how much momentum do they have coming out 0:04:31.080 --> 0:04:31.280 of this? 0:04:32.320 --> 0:04:35.080 Every party, if they can pull off a successful convention, 0:04:35.160 --> 0:04:36.280 has momentum coming out. 0:04:36.279 --> 0:04:38.719 Mitt Romney had a lot of momentum coming out in 0:04:38.760 --> 0:04:39.600 twenty twelve. 0:04:40.200 --> 0:04:44.960 You know, the government, I'm sorry, the public focuses on 0:04:45.000 --> 0:04:47.400 the party in that week, and if everybody looks good 0:04:47.400 --> 0:04:49.080 and sounds good, they think, hey, maybe this is the 0:04:49.120 --> 0:04:51.440 party we're going to go with. When we have incumbents, 0:04:51.560 --> 0:04:54.320 they're bringing their priors with, you know, anything that will 0:04:54.360 --> 0:04:56.880 push them away. That was the risk for the Republicans 0:04:56.920 --> 0:04:59.560 is that they've got this energized base, more unified now 0:04:59.760 --> 0:05:03.680 from lots of factors, including the tragic attempt on Trump's life. 0:05:03.760 --> 0:05:06.760 So now they got unity and energy, and you know, 0:05:06.839 --> 0:05:08.920 did they mess it up? And they did not mess 0:05:08.960 --> 0:05:12.000 it up, And that's why I think their momentum continues. 0:05:12.160 --> 0:05:15.360 The Democrats are the exact opposite. It's starting to feel 0:05:15.360 --> 0:05:17.320 a lot like nineteen eighty eight when there was a 0:05:17.400 --> 0:05:20.800 quote unquote winnable election for the Democrats and somehow they 0:05:20.839 --> 0:05:23.960 lost it. So I think the Democrats are under tremendous 0:05:23.960 --> 0:05:27.360 pressure to generate energy. And finally, I will say that 0:05:27.360 --> 0:05:31.760 that may require that Biden step aside very soon in 0:05:31.839 --> 0:05:33.400 order to give them the time to ramp up that 0:05:33.520 --> 0:05:34.760 energy for their own convention. 0:05:35.040 --> 0:05:36.480 So where are we with that? 0:05:36.560 --> 0:05:38.719 I mean, it seems like from past discussions, Wendy, that 0:05:38.800 --> 0:05:43.400 this is the decision solely on President Biden. Can he 0:05:43.560 --> 0:05:48.080 be persuaded to perhaps step down or create a process 0:05:48.120 --> 0:05:48.840 for a new Kennedy? 0:05:49.600 --> 0:05:51.880 Well, Paul, the biggest difference between two weeks ago and 0:05:51.920 --> 0:05:54.360 now is that, you know, chief donors, not just George 0:05:54.440 --> 0:05:55.960 Clooney in the New York Times, but you know, the 0:05:56.000 --> 0:05:57.880 people who are actually really writing a lot of checks 0:05:57.880 --> 0:06:01.120 have stopped basically freezing the money, not giving the money 0:06:01.279 --> 0:06:04.040 that's trickling down to send it house races as well, 0:06:04.279 --> 0:06:06.719 you know, and that means the party could completely collapse. 0:06:07.000 --> 0:06:09.720 So without any money, it just strikes me that Biden 0:06:09.760 --> 0:06:12.200 doesn't have a lot of choices here. And the question 0:06:12.320 --> 0:06:15.080 is really directly, you know, send his delegates to Kamala 0:06:15.080 --> 0:06:17.560 Harris or send it to an open convention, right, And 0:06:17.600 --> 0:06:19.720 I think he's still waiting to hear about that, tomm 0:06:19.720 --> 0:06:22.120 He's still waiting to hear do you have a choice 0:06:22.200 --> 0:06:23.800 is the party unified around Kamala. 0:06:24.000 --> 0:06:25.799 If so, then I'll get out. 0:06:26.040 --> 0:06:29.080 Okay, well maybe that's pulling. How do you envision a 0:06:29.200 --> 0:06:34.599 quote unquote open convention like from this Sunday forward? What 0:06:34.640 --> 0:06:36.440 does that look like? Professor Schiller? 0:06:37.839 --> 0:06:40.520 You know, if you ever imagine a political nightmare, an 0:06:40.520 --> 0:06:43.080 open Democratic convention in twenty twenty four would be that, 0:06:43.720 --> 0:06:45.880 because it will be it will expose the fissures and 0:06:45.920 --> 0:06:49.839 fractures within the Democratic Party between the very progressive left, 0:06:50.040 --> 0:06:51.440 the progressive. 0:06:51.200 --> 0:06:54.479 The middle, and you know, they won't be able to agree. 0:06:54.480 --> 0:06:57.400 They're going to want their person to challenge Trump and 0:06:57.440 --> 0:06:58.720 try and make arguments about that. 0:06:58.760 --> 0:07:01.240 All the way from Bernie Sanders Warren all the way 0:07:01.279 --> 0:07:02.000 down to you know. 0:07:02.240 --> 0:07:05.120 Dark horses like Gina Romando, Secretary of Commerce, you know, 0:07:05.240 --> 0:07:07.320 and Gresha and whiber might be dragged back into it. 0:07:07.640 --> 0:07:09.040 Joshua Prero of Pennsylvania. 0:07:09.080 --> 0:07:11.560 It will look like the Democrats can't decide and don't 0:07:11.600 --> 0:07:15.320 know what they're doing, and will only feed into whatever 0:07:15.440 --> 0:07:18.679 nostalgia Trump voters have for Trump, but also. 0:07:18.600 --> 0:07:22.160 Independent voters who want a stable system. And this is 0:07:22.160 --> 0:07:23.680 the big irony of twenty twenty four. 0:07:23.760 --> 0:07:26.760 Now, the Trump and Republicans appear right now to be 0:07:26.840 --> 0:07:30.200 more stable, less chaotic than Biden and the Democrats. 0:07:30.840 --> 0:07:44.280 Professor Schuler, thank you really appreciate it. You know, folks, 0:07:44.360 --> 0:07:46.920 I'm not big on the parlor game. I really don't 0:07:46.960 --> 0:07:50.600 care about four rate cuts, eight rate cuts, bada b 0:07:50.680 --> 0:07:53.520 blah blah blah. But what I do know is it's 0:07:53.520 --> 0:07:57.760 a lonely crew saying the consensus is wrong. I'm gonna 0:07:57.760 --> 0:08:01.480 put Lindsay pigs. It's stephel That group and the leadership 0:08:01.480 --> 0:08:07.400 of Jim Bianco has been profounding. He absolutely nailed the 0:08:07.600 --> 0:08:11.240 challenge of the last mile of disinflation. He joins us 0:08:11.280 --> 0:08:15.720 now from his Chicago Did Jim your note is seeing 0:08:16.320 --> 0:08:17.520 soon discuss? 0:08:18.720 --> 0:08:21.640 Yes, I don't think the FED should be cutting soon 0:08:21.720 --> 0:08:24.960 because I don't think that the economic data is supporting 0:08:24.960 --> 0:08:27.440 a FED rate cut. And that is is that the 0:08:27.520 --> 0:08:30.120 slowing that you've seen in the US economy might have 0:08:30.200 --> 0:08:33.440 already bottomed. It is growing yet somewhere at around two 0:08:33.440 --> 0:08:35.280 and a half percent for the second quarter. 0:08:35.400 --> 0:08:35.960 That's fine. 0:08:36.360 --> 0:08:39.040 And I think that the inflation rate, while it's come down, 0:08:39.440 --> 0:08:42.040 has largely been in a three to four percent range 0:08:42.080 --> 0:08:44.800 for the last year and a half. It's back to 0:08:44.880 --> 0:08:48.000 three percent, the lower end of the range. And to 0:08:48.120 --> 0:08:51.079 use a fancy term, there's some residual seasonality in the data, 0:08:51.120 --> 0:08:54.040 meaning that you get all the weak inflation data in 0:08:54.080 --> 0:08:56.439 the summer and that's what got you down to three percent. 0:08:56.920 --> 0:08:58.640 And then as we move into the fall, I think 0:08:58.640 --> 0:09:01.960 it stiffens up a little bit. FED shouldn't cut, but 0:09:02.040 --> 0:09:03.960 it looks like their intent on cutting. 0:09:04.040 --> 0:09:07.640 So okay, but chum is inflammatory. I mean, it's really 0:09:07.679 --> 0:09:11.199 something you've got as a for the sake of discussion 0:09:11.960 --> 0:09:15.280 and our start set. And we're not talking two point 0:09:15.440 --> 0:09:19.000 x percent. We're not talking Richard Clarita. We're talking to 0:09:19.120 --> 0:09:23.800 Jym bioncos three or four and you'll even print the 0:09:23.880 --> 0:09:28.320 number five. Is America ready for a three percent four 0:09:28.400 --> 0:09:29.560 percent our start? 0:09:31.080 --> 0:09:34.520 Uh? America is ready for it because the economy can 0:09:34.520 --> 0:09:37.360 handle it, the financial markets can handle it. It's the 0:09:37.400 --> 0:09:41.120 economic community that's not ready for it right now. If 0:09:41.160 --> 0:09:43.760 you look at the current level of interest rates and 0:09:43.800 --> 0:09:46.960 you listen to FED speak, they talk about it being 0:09:47.040 --> 0:09:50.520 highly restrictive. It might be retarding the economic growth. And 0:09:50.559 --> 0:09:53.400 again look at the stock market, Look at the rally 0:09:53.400 --> 0:09:56.319 in small cap stocks when we started pricing in September 0:09:56.320 --> 0:09:59.720 in the last week or so, and the data is 0:09:59.800 --> 0:10:03.280 just not there. But the economists still cling to this 0:10:03.800 --> 0:10:07.520 that the neutral funds rate, which is what our star is, 0:10:07.520 --> 0:10:10.080 is two and a half percent. And put this in terms, 0:10:10.440 --> 0:10:12.680 the Fed thinks they need to cut ten times to 0:10:12.679 --> 0:10:14.560 get to neutral. That's why they want to get started. 0:10:14.559 --> 0:10:16.440 They got a lot of work to do. The market 0:10:16.480 --> 0:10:18.920 is probably telling them, no, you probably need only about 0:10:18.920 --> 0:10:21.400 four or five cuts to get to neutral. There really 0:10:21.400 --> 0:10:24.199 isn't any hurry. But if you're gonna give me stimulatives 0:10:24.679 --> 0:10:27.000 interest rates by lowering them, then I'm going to pile 0:10:27.040 --> 0:10:29.000 into small cap stocks. And that's what we've seen in 0:10:29.040 --> 0:10:29.720 the last week. 0:10:29.600 --> 0:10:33.079 And pout on YouTube live chat. They nail it. It's 0:10:33.120 --> 0:10:39.120 a Sweeney It's a Sweeney live chat six percent cash. Yeah, 0:10:39.160 --> 0:10:40.640 I mean that's maybe what Jim's talking. 0:10:40.679 --> 0:10:41.480 What's wrong with that? 0:10:41.720 --> 0:10:45.400 Hey, Jimm, we have seen that rotation into small caps. 0:10:45.760 --> 0:10:47.440 What do you make of that, because, I mean what 0:10:47.480 --> 0:10:49.720 I'm hearing from some of the strategists is that's a 0:10:49.800 --> 0:10:51.440 rotation like we've never seen before. 0:10:52.600 --> 0:10:53.400 Oh yeah, I agree. 0:10:53.480 --> 0:10:56.520 I mean I've looked at the statistics and it is unprecedented. 0:10:56.960 --> 0:10:59.600 Depending on how you look at it, and usually when 0:10:59.640 --> 0:11:02.600 you get a massive rotation in the small cap stocks 0:11:02.600 --> 0:11:06.240 in the past, it's because the market is literally collapsing 0:11:06.440 --> 0:11:09.280 and big cap stocks are going down faster than small 0:11:09.280 --> 0:11:12.840 cap stocks. This one is everything's going up except for yesterday, 0:11:13.040 --> 0:11:15.200 and small cap stocks are going up a lot more. 0:11:15.480 --> 0:11:17.600 But I really think what it is is that this 0:11:17.640 --> 0:11:21.240 is such a macro dependent market and that that negative 0:11:21.280 --> 0:11:24.280 point one on CPI, you know, the bell one off, 0:11:24.320 --> 0:11:26.960 that's it. The Fed's gonna give us cheaper money. Let's 0:11:27.000 --> 0:11:28.800 go to all of the let's go to all of 0:11:28.800 --> 0:11:31.160 the lagging companies, and let's go to all the companies 0:11:31.200 --> 0:11:34.080 that have borrowed more than that would be in the 0:11:34.120 --> 0:11:37.560 small cap space or have losses in the small cap space, 0:11:37.920 --> 0:11:41.559 and that that cheaper money will benefit them. So everybody 0:11:41.559 --> 0:11:44.559 started to exit large cap and rallied. It ran into 0:11:44.640 --> 0:11:47.600 small cap to a degree we've never seen before. So 0:11:47.880 --> 0:11:51.560 there is no historical precedent for what this means, like 0:11:51.760 --> 0:11:54.120 what what this is mean a month or two months later, 0:11:54.280 --> 0:11:56.360 because we've never seen it, especially in a rally. 0:11:57.080 --> 0:12:00.720 So this is an election year, Jim, how does that 0:12:00.840 --> 0:12:04.120 impact the FED really at the end of the day. 0:12:05.160 --> 0:12:07.360 Well, it should and it has in the past, and 0:12:07.600 --> 0:12:09.800 you know, to be very nuanced about it, the FED 0:12:09.840 --> 0:12:13.840 has never changed direction between Memorial Day and Election Day 0:12:14.120 --> 0:12:15.000 changed direction. 0:12:15.040 --> 0:12:15.520 If they were. 0:12:15.440 --> 0:12:18.560 Hiking, they continue to hike, cutting, continue to cut, hold, 0:12:18.600 --> 0:12:21.720 they continue to hold. They're talking about changing directions in 0:12:21.760 --> 0:12:28.120 September by cutting rates. That is unusual. And the fear 0:12:28.200 --> 0:12:32.240 is that interjects themselves into the political debate because Donald 0:12:32.240 --> 0:12:34.680 Trump won't be happy. He'll say that Jay Paul's trying 0:12:34.720 --> 0:12:38.480 to rig the election against him, and then the FED 0:12:38.520 --> 0:12:41.439 would prefer that their name not get mentioned between now 0:12:41.440 --> 0:12:45.439 an election day, and so they shouldn't be part of it. Now, 0:12:45.480 --> 0:12:48.040 what does it mean for markets? At a macro level? 0:12:48.160 --> 0:12:50.880 Stock spawns the dollar. I don't think you can really 0:12:50.920 --> 0:12:54.560 see the machinations in the in the election there. But 0:12:54.720 --> 0:12:57.200 when you go further down the line, if you look 0:12:57.200 --> 0:13:01.280 at maybe the mean stock of Donald DJ you know, 0:13:01.280 --> 0:13:04.520 Trump Media, that one goes up and down. Tesla seems 0:13:04.559 --> 0:13:06.839 to be another stock because Elon Musk is so tied 0:13:06.920 --> 0:13:09.640 himself with Donald Trump. You know, if you look at 0:13:09.679 --> 0:13:12.080 maybe the prison stocks or the body armor stocks, because 0:13:12.080 --> 0:13:14.840 there's going to be more spending on police and protection, 0:13:15.360 --> 0:13:18.160 those kind of things are moving, but not at the 0:13:18.280 --> 0:13:22.600 higher levels. Are you really seeing this election impacting the market? 0:13:23.080 --> 0:13:23.920 Impacting the market? 0:13:24.440 --> 0:13:27.280 Jim? What's the stock market do here? I mean away 0:13:27.280 --> 0:13:29.640 from the economics. So now do you have an SPX 0:13:29.720 --> 0:13:33.400 or dowd Jones faith out twelve months? 0:13:34.840 --> 0:13:37.480 Well, you know that, you know the stock market I 0:13:37.480 --> 0:13:40.720 think is going to really take its cues from interest rates. 0:13:41.760 --> 0:13:44.559 It bottomed to September of twenty twenty two, and it's 0:13:44.600 --> 0:13:46.679 been rally and there's only been two times when it 0:13:46.720 --> 0:13:50.240 didn't rally, a ten percent correction between June and October 0:13:50.280 --> 0:13:52.840 of last year and March and April this year six 0:13:52.920 --> 0:13:58.200 percent correction. What was what was existed during both those 0:13:58.320 --> 0:14:01.320 corrections the tenure field above four and a half percent. 0:14:01.720 --> 0:14:03.280 When the ten year yield gets above four and a 0:14:03.280 --> 0:14:06.240 half percent, the stock market seems to struggle. We're at 0:14:06.280 --> 0:14:08.360 four eighteen right now, so we're not above four and 0:14:08.400 --> 0:14:12.280 a half percent. But if the market starts to feel 0:14:12.280 --> 0:14:15.440 like the Fed's going to ease, the economy's okay. This 0:14:15.520 --> 0:14:19.800 inflation problem is not solved. The rejection of that policy 0:14:19.800 --> 0:14:21.920 could be higher interest rates, and if it gets above 0:14:21.960 --> 0:14:24.920 four and a half percent, that could become a problem 0:14:24.960 --> 0:14:27.440 for the stock market. So right now, I think it's 0:14:27.440 --> 0:14:29.120 going to be okay. It's just going to go through 0:14:29.120 --> 0:14:33.040 this massive rotation that we haven't seen before, and it's 0:14:33.080 --> 0:14:35.440 going to be really dependent on whether or not interest 0:14:35.520 --> 0:14:38.080 rates start to head higher. And I'll conclude by saying, 0:14:38.480 --> 0:14:41.000 I ultimately think by the end of the year into 0:14:41.040 --> 0:14:43.600 the first quarter they will get well above four and 0:14:43.600 --> 0:14:46.280 a half percent again and it will be a problem. 0:14:46.280 --> 0:14:47.480 But they're not there right now. 0:14:47.640 --> 0:14:50.960 Jim Bianco from Chicago, thank you so much. Bianco there 0:14:51.080 --> 0:14:54.760 is it's really important comments there pushing against the Fedzeite 0:14:54.800 --> 0:15:08.920 geys to say the least quot he Van Steinas joins 0:15:09.000 --> 0:15:11.120 us right now, Hugh, I got to rip up the 0:15:11.120 --> 0:15:15.640 script here on ECB, we stagger from Deusenberg to Triche 0:15:16.480 --> 0:15:19.320 and a dragi in the modern day of leguard. How's 0:15:19.360 --> 0:15:24.360 that ECB experience experiment going, h von Steina's. 0:15:25.400 --> 0:15:28.000 Well, great to be back with you, Tom, and glad 0:15:28.040 --> 0:15:29.520 I'm not swimming in the Sein at the moment, left 0:15:29.560 --> 0:15:32.920 alone in the Thames. Look, I think ECB experiment has 0:15:32.960 --> 0:15:36.000 been painful. You and I have chatted many times over 0:15:36.040 --> 0:15:38.720 the last you know, a dozen a dozen and a 0:15:38.760 --> 0:15:41.880 half years really since the Euro has been introduced. How 0:15:42.320 --> 0:15:44.680 we've had to have an awful lot of emergency measures, 0:15:44.960 --> 0:15:48.720 whether it's q E and tltrra's special bank lending schemes 0:15:48.800 --> 0:15:51.280 to fend off the Eurozone crisis. Then we had this 0:15:51.440 --> 0:15:55.760 dangerous experiment of negative interest rates. Finally we're getting back 0:15:55.760 --> 0:15:58.040 to a little bit of normality, even if maybe not 0:15:58.080 --> 0:16:00.520 so normal on the politics side. So I think it's 0:16:00.560 --> 0:16:03.360 been a very painful experience, and I think, well, you know, 0:16:03.360 --> 0:16:04.560 one of the things I'd put in my op ed 0:16:04.560 --> 0:16:07.240 of the ft last week is we still haven't finished 0:16:07.280 --> 0:16:10.800 the reforms. I went to that I was invited somehow. 0:16:10.840 --> 0:16:12.640 It's the ten year anniversary of Banking Union. 0:16:13.040 --> 0:16:13.240 Tom. 0:16:13.240 --> 0:16:15.640 I didn't see you there. But the problem was it's 0:16:15.640 --> 0:16:17.920 only got one leg finished to two parts of the 0:16:17.960 --> 0:16:21.400 house are still unfinished, and securitization in Europe has been 0:16:21.440 --> 0:16:23.720 basically dead as a dodo for fifteen years, and so 0:16:23.720 --> 0:16:25.600 there's plenty of work still to be done. 0:16:25.720 --> 0:16:29.200 I should interview. I introduced him properly here. Vanstein is 0:16:29.320 --> 0:16:33.560 vice chair of Oliver Wyman's Service to the United Kingdom 0:16:33.640 --> 0:16:35.560 with Mark Kearney at the Bank of England and of 0:16:35.600 --> 0:16:39.960 course his endowment work with his Oxford University here Vansteina, 0:16:40.040 --> 0:16:41.800 she sent me a chat the other day, which is 0:16:41.840 --> 0:16:45.800 your wheelhouse, which is trying to keep track of the 0:16:45.840 --> 0:16:49.840 shadows to come in banking and this is always about 0:16:50.040 --> 0:16:56.080 highest quality tranches unloading the garbage of lower quality tranches 0:16:56.920 --> 0:17:01.120 to somebody else. Who's the somebody else this time around? 0:17:02.760 --> 0:17:05.600 It's a great question, tom So. I think that the 0:17:05.720 --> 0:17:09.639 challenge here is it's there's no simple picture. So if 0:17:09.680 --> 0:17:13.160 you take let's say our friends at Apollo or Blackstone 0:17:13.200 --> 0:17:17.760 working with their insurance colleagues, well, insurance companies need investment grade. 0:17:18.280 --> 0:17:21.080 If they can just get even fifty basis points more 0:17:21.600 --> 0:17:25.439 than their competitors over a decade to twelve years, that's huge. 0:17:25.920 --> 0:17:28.560 So in their case, they're really wanting high quality, investment 0:17:28.600 --> 0:17:31.040 grade assets. Clearly, if you're going to get twelve to 0:17:31.080 --> 0:17:33.520 fifteen points of return, you're going to need to be 0:17:33.560 --> 0:17:36.480 taking a lot more risk. And so there's some endowments, 0:17:36.800 --> 0:17:40.280 pension funds and increasingly high network or maybe reaching down, 0:17:40.680 --> 0:17:42.800 but there is no The challenge here is there's not 0:17:42.840 --> 0:17:45.120 a great data set. And that's in way why black 0:17:45.200 --> 0:17:48.119 Rock Port. You know that big data company recently, but 0:17:48.240 --> 0:17:52.520 also it's more complex. I mean, I'm not Look, credit 0:17:52.600 --> 0:17:54.479 is credit, there is a site, there'll be a cycle. 0:17:54.560 --> 0:17:56.760 There's always stuff which goes wrong. So I'm not going 0:17:56.840 --> 0:18:00.159 to be panglossy on that there won't be problems. But 0:18:00.400 --> 0:18:02.760 on the other hand, I don't see that this is 0:18:02.920 --> 0:18:04.439 I don't think there's any reason to panic. 0:18:05.280 --> 0:18:08.399 You just you referenced upbed in the Financial Times back 0:18:08.680 --> 0:18:12.240 about eleven days ago, in that you say Europe's capital 0:18:12.280 --> 0:18:16.359 markets are underdeveloped while its banking sector is insufficiently sized 0:18:16.400 --> 0:18:19.439 to handle the growing demands for capital expenditures tied the 0:18:19.520 --> 0:18:21.879 energy transition, digital infrastructure defense. 0:18:22.920 --> 0:18:25.479 Is there a solution there? I mean, what is the solution? 0:18:27.160 --> 0:18:29.399 Look, I think it's a great point. And so Europe 0:18:29.400 --> 0:18:32.040 relies far far more on the banks. So point one, 0:18:32.160 --> 0:18:34.040 I would be in favor of trying to, you know, 0:18:34.640 --> 0:18:38.080 have interesting investment opportunities which fixed income investors around the 0:18:38.080 --> 0:18:41.080 world or equity ones would want to come and sees. 0:18:41.560 --> 0:18:43.960 So I think part one is making it easier to 0:18:44.040 --> 0:18:47.439 list having a small standardization in the bomb markets. And 0:18:47.480 --> 0:18:51.560 then the piece I was particularly saying securitizations have really 0:18:51.600 --> 0:18:55.560 not rebounded since the financial crisis the way the Europeans 0:18:55.640 --> 0:18:59.520 codified that closed the door after the financial crisis was 0:18:59.560 --> 0:19:02.240 incredible to be penal and therefore it's never really started. 0:19:02.600 --> 0:19:06.520 And I think that's that allowing banks to package loans 0:19:06.640 --> 0:19:09.400 and puncel them on to investors is actually a really 0:19:09.480 --> 0:19:12.600 smart way to help us through Europe's growth. So I 0:19:12.600 --> 0:19:16.720 think really scuritizations there. In the next two weeks we 0:19:16.800 --> 0:19:19.840 might see the Draggy report published, and certainly what my 0:19:19.960 --> 0:19:21.560 sense of that is that he's going to be also 0:19:21.640 --> 0:19:24.639 arguing to try and you know, dust off the plan 0:19:24.720 --> 0:19:28.240 to reopen securitizations. But it's more than just that. I mean, 0:19:28.480 --> 0:19:30.920 you know, whether it's you know how the US elections going, 0:19:31.119 --> 0:19:33.560 Europe will need to spend more on defense, It'll need 0:19:33.600 --> 0:19:36.959 to spend more on energy security, let alone transition and 0:19:37.000 --> 0:19:40.119 of course upgrading it's degenfrastructure. These are vast sums, and 0:19:40.160 --> 0:19:42.320 I don't think the banking system alone is big enough 0:19:42.320 --> 0:19:45.639 and strong enough. And Dragging himself in Portugal the other 0:19:45.680 --> 0:19:49.000 day said he didn't think Europe's banks had enough fast. 0:19:49.440 --> 0:19:52.000 But you know this is important. Bruce chas been publishing 0:19:52.040 --> 0:19:55.359 moments ago folks at JP Morgan and he's just his 0:19:55.480 --> 0:19:59.320 global disinflation to continue in the second half of this year. 0:20:00.119 --> 0:20:04.520 What does disinflation mean? You've unsteen as to the financial system. 0:20:04.880 --> 0:20:08.200 It's constructed as a good. I don't buy it. There's 0:20:08.200 --> 0:20:11.480 an ambiguity. 0:20:11.560 --> 0:20:14.120 So it depends which which bit of disinflation we're talking 0:20:14.160 --> 0:20:17.160 about here, If it's sort of if it's Chinese exports 0:20:17.440 --> 0:20:21.520 impacting Europe, that's one thing. It depends where we're going. 0:20:21.560 --> 0:20:23.679 I mean, as we're seeing from THECB today, there's not 0:20:23.840 --> 0:20:28.560 massive disinflation. There's quite frankly still inflationary pressures in the system. 0:20:28.880 --> 0:20:31.680 But at the end of the day, banks are lever 0:20:31.800 --> 0:20:35.040