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Speaker 2: Alex Steal for the next hour on Paul Sweeney Live

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Speaker 2: here on Bloomberg Interactive Broker Studio and streaming live.

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Speaker 3: On YouTube as well, so you can do that as well.

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Speaker 2: John Tucker, I'm looking at the inflation data. I mean,

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Speaker 2: people tell me, the smart people that core PCE is

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Speaker 2: a core or is one of the big big issues

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Speaker 2: of things that the FED looks at. You know, month

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Speaker 2: on month, zero point three percent, right in line with expectations,

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Speaker 2: in line with last month.

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Speaker 4: But two point eight percent, I mean that's above. It

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Speaker 4: seems to me that it has stalled there.

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Speaker 3: Yes, that is a great point, but it will above.

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Speaker 4: But I think, true to.

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Speaker 2: Me, just in my experience, two point eight percent is fine.

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Speaker 2: I mean wages are higher than that, so I mean

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Speaker 2: I have more money in my pocket.

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Speaker 3: Relative to what I'm spending.

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Speaker 2: Just if you look at the real wages four and

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Speaker 2: a half five percent a nominal wage growth.

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Speaker 3: You know, I don't know.

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Speaker 2: It's interesting here, but I know the FED wants to

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Speaker 2: go lower, doesn't it once it get down closer to

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Speaker 2: that two percent level?

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Speaker 4: What did the experts say.

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Speaker 2: Well, I don't know, I mean they experts say, like,

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Speaker 2: I think they kind of said what you.

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Speaker 3: Said, which is, we kind of stalled here.

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Speaker 2: We've made a lot of the economy has made a

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Speaker 2: lot of progress in terms of bringing inflation down from

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Speaker 2: that really high level coming out of the pandemic. But

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Speaker 2: maybe this last fifty or a hundred basis points.

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Speaker 3: Is going to be a little a little bit more tougher.

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Speaker 2: So let's check in with somebody who actually, somehow has

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Speaker 2: built a career out of doing this, and that is

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Speaker 2: Ira Jersey, chief US interest rate strategist for Bloomberg Intelligence.

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Speaker 2: He liked the government bond market that he focuses on,

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Speaker 2: pays a lot of attention to a lot of this

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Speaker 2: macroeconomic data.

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Speaker 3: Hey, I don't know.

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Speaker 2: I look at the inflation data today. I mean it's

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Speaker 2: in line with expectations. It feels like maybe we've stalled

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Speaker 2: a little bit in terms of pushing this down a little.

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Speaker 3: Bit lower, but still all in all, not bad. How

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Speaker 3: do you think the markets will look at this?

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Speaker 5: So I agree to John's point. You know, it seems

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Speaker 5: like we've stalled here on core inflation, and a big

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Speaker 5: reason for that stalling in core inflation is some of

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Speaker 5: the consumption that's going on. So services continues to be

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Speaker 5: the main driver of that core PCE number being as

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Speaker 5: high as it is because excluding gasoline and fuel prices

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Speaker 5: which have come down, which is a reason you see

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Speaker 5: headline year on year deflator down at two point three percent,

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Speaker 5: the services continues to grow like gangbusters. So people are

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Speaker 5: still spending money. You look at that personal spending data

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Speaker 5: and you can see that. You know, people have money

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Speaker 5: in their pockets and they're willing to spend it. So

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Speaker 5: I think overall this is a steady state from where

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Speaker 5: we were.

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Speaker 6: Now.

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Speaker 5: Does this mean that it gives a green light for

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Speaker 5: the Fed to cut interest rates in December? They could

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Speaker 5: if they wanted to, But you could also couch this

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Speaker 5: in Hey, things still aren't bad enough for them to

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Speaker 5: have to cut aggressively, so maybe they could skip this

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Speaker 5: one and then reassess and then go again in January.

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Speaker 5: But you know, next week's payrolls numbers will be the

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Speaker 5: deciding factor of that more likely.

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Speaker 4: Does this beg the question where where's everybody getting this

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Speaker 4: money from? Or are they just charging other credit cards?

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Speaker 5: Well, well, well, the simple answer to that, John is

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Speaker 5: it's coming from wages. So when you look at the

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Speaker 5: personal income numbers that that came out today, you have

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Speaker 5: a zero point six increase month on month in personal

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Speaker 5: income and if you know analyze annualize that you're talking

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Speaker 5: about well well over five percent increase in wages in

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Speaker 5: personal income year on year. Now, some of that comes

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Speaker 5: from government transfers and the like, but a lot of

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Speaker 5: that that that increase in government transfers really usually happens

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Speaker 5: early in the year when you get costs of living,

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Speaker 5: adjustments to social security and the like. So so it's

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Speaker 5: really coming people are spending their extra income that they're receiving.

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Speaker 5: So I don't see how that stops unless the labor

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Speaker 5: market really turns around.

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Speaker 2: Meaning here, So what else do you think the FED

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Speaker 2: is looking at here? Because it feels like inflation by

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Speaker 2: and large most parts of the economy kind of under control.

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Speaker 2: Is it primarily labor here that they're looking at now?

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Speaker 5: Ira, Yeah, they shifted that basically four or five months

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Speaker 5: ago toward you know, looking at the job market, and

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Speaker 5: it looked like for a very brief period of time

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Speaker 5: earlier this year, in the middle of the year, that

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Speaker 5: the job market was starting to slow very meaningfully. It's

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Speaker 5: a reason why in a way, the Fed maybe panicked

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Speaker 5: a little bit in September and cut by fifty basis points.

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Speaker 5: You saw some anecdotal data out of the Beige Book

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Speaker 5: and out of some of the other surveys that employment

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Speaker 5: was softening, but you haven't seen that in the hard data.

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Speaker 5: And what you've seen the treasury market do is follow

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Speaker 5: the hard data, the actual data that's coming out, as

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Speaker 5: opposed to the survey data, which maybe was influenced by

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Speaker 5: the election, influenced by just sentiment of things and the

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Speaker 5: political aspects that were going on where everyone was so

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Speaker 5: divided and unsure about the future. But that didn't stop

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Speaker 5: them from actually spending money or actually hiring people or

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Speaker 5: giving raises. And you see that in today's data, where

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Speaker 5: you know, personal personal spending was up zero point four percent.

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Speaker 5: That's fine, right, but it's really that income numbers that

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Speaker 5: come up, which also means ironically, Paul, that you have

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Speaker 5: to remember that means the savings rate went up, and

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Speaker 5: I haven't looked dug into the data significantly, but the

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Speaker 5: savings rate now is four point four percent, up from

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Speaker 5: four point one percent the month before. So you know,

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Speaker 5: that increase in the savings rate means that there's more

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Speaker 5: people putting money into money market mutual funds and into

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Speaker 5: other investments. So that's something else that can prop up

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Speaker 5: some risk asset markets maybe as as we move forward,

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Speaker 5: and people are not only spending, but they're also saving.

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Speaker 4: So the way it works, you've got to track workers.

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Speaker 4: You're going to pay them more to attract them to

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Speaker 4: keep them. If you're going to pay them more, then

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Speaker 4: you have to raise your prices and pass that along

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Speaker 4: to the customers who are actually the workers that you

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Speaker 4: just hired, that you just paid.

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Speaker 5: So well, yes, John, that's true. But at the same time,

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Speaker 5: what you are seeing is that inflation is going up

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Speaker 5: just a little bit more than consumer spending, right, So

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Speaker 5: so what that probably means is that margins are basically

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Speaker 5: being maintained, not necessarily increasing. And in services, and keep

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Speaker 5: in mind, we don't have the same kind of you know,

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Speaker 5: micro level detail in services because a lot of services

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Speaker 5: are smaller businesses. They're franchises and the like, so you

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Speaker 5: don't have the kind of you know, information like we

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Speaker 5: always here at Bloomberg and a lot of financial market analysts, right,

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Speaker 5: we see the public data that comes in from public

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Speaker 5: companies and they give us a whole slew of information.

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Speaker 5: But that's but there's most services companies are not those

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Speaker 5: large corporations. They're smaller businesses or maybe franchises of some

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Speaker 5: of the larger corporations that you don't necessarily know exactly

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Speaker 5: what their margins are, exactly what they're charging at the

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Speaker 5: ground level. And that's one reason why the PC data

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Speaker 5: is so important because it does do a better job

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Speaker 5: than say the retail sales figures in determining what service

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Speaker 5: is spending and services prices are doing.

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Speaker 2: Lisa Bromwitz told me this morning that there's a government

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Speaker 2: treasury auction do what.

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Speaker 4: I don't care about the seven years, right, it is.

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Speaker 2: About that I refer for the folks out there and

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Speaker 2: tell us why it's important.

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Speaker 5: Yeah, Well, it's important because the government has to fund

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Speaker 5: the massive deficit. So one of the reasons why personal

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Speaker 5: spending is where it is as high as it is

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Speaker 5: is because the government transfers money to the household sector,

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Speaker 5: and where it gets that money from is from savers,

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Speaker 5: So it is a bit of a circular thing going

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Speaker 5: on here where where Right now, twenty eight percent of

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Speaker 5: consumption is coming from government transfers, so basically social security recipients, Medicare, Medicaid,

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Speaker 5: you know, and other you know programs that the government

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Speaker 5: runs and gives transfers to the household and business sector.

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Speaker 5: That's contributing about a quarter of our personal consumption right now,

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Speaker 5: which means that that it has to be maintained in

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Speaker 5: order for the economy to to continue to be as

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Speaker 5: robust as it has been. And the government bond auctions

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Speaker 5: just show how much demand there is for new bonds

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Speaker 5: being issued. And forty four billion dollars of seven year

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Speaker 5: supply right before a holiday weekend, when you know, maybe

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Speaker 5: a lot of senior traders are off, you know, can

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Speaker 5: create some fireworks and maybe move the market a little

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Speaker 5: bit if demand isn't particularly high. That being said, the

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Speaker 5: last couple of auctions this week have actually gone okay,

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Speaker 5: So I don't suspect that the seven year is going

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Speaker 5: to be particularly bad. But if you do see a

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Speaker 5: big slip in the amount of demand at this auction

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Speaker 5: and you wind up with pushing yields a bit higher.

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Speaker 5: You know, that means we have to even pay more

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Speaker 5: attention when we get the auctions next month to see

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Speaker 5: if that is just a one off flip on a

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Speaker 5: holiday week or if it's something that is more concerning

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Speaker 5: in terms of demand for new bonds.

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Speaker 4: Is there a loud and clear message coming from the bond.

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Speaker 5: Market, Well, if there is one, it's that the economies

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Speaker 5: better than a lot of people thought it was just

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Speaker 5: six months ago. And and the market right now is

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Speaker 5: signaling that it doesn't expect a very rapid pace of

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Speaker 5: cuts or cutsow below four percent for example on the

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Speaker 5: on the Fed funds rate right now. So it's you know,

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Speaker 5: the market is expecting more cuts, but it's only expecting

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Speaker 5: you know, maybe another fifty to one hundred basis points

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Speaker 5: at the most in terms of interest rate declines because

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Speaker 5: the economy has been so strong, and that is confirmed

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Speaker 5: by this data, which is the first data that we

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Speaker 5: get for the fourth quarter, of course, and and the

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Speaker 5: fact that it is so strong I think bodes well

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Speaker 5: for things like GDP. You're going to see GDP now

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Speaker 5: forecasts get get updated after this data and they're all

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Speaker 5: going to show that the fourth quarter is pretty good.

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Speaker 5: Atlanta FED, Cleveland FED. There's a couple of different people,

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Speaker 5: you know, Bloomer Bloomberg Economics has their own now cast

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Speaker 5: as well, so so you know, take a look at

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Speaker 5: those and see and you're going to see that the

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Speaker 5: market right now is suggesting that we're that the economy

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Speaker 5: is reasonably strong, and the STATA just confirms that we

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Speaker 5: just had.

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Speaker 4: An election, And I don't think that's the message I

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Speaker 4: took away from the election results.

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Speaker 5: Yeah, that's I you know, obviously there was a lot

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Speaker 5: that probably went into the election, but you know, clearly

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Speaker 5: there were people who, you know, maybe blame the Biden

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Speaker 5: administration for the inflation that we had, right and that

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Speaker 5: is backward looking, not forward looking. But the economy is

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Speaker 5: not doing badly regardless of who's in the White House.

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Speaker 5: And I suspect that that could certainly change right going

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Speaker 5: into twenty twenty five, but at least where we sit

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Speaker 5: right now, you know, over the next two three quarters,

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Speaker 5: I don't think that we're going to wind up seeing

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Speaker 5: the recession that a lot of people, including myself, thought

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Speaker 5: we were going to see by this time. But by

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Speaker 5: this time when we were looking back eighteen months ago.

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Speaker 3: I had great stuff. Thanks so much for joining us,

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Speaker 3: our Jersey folks.

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Speaker 2: He's the chief US interst rate strategist for Bloomberg Intelligence.

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Speaker 2: Safely asconced then another Princeton, New Jersey officers nobody. It's

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Speaker 2: a great office, by the way, and they redid it.

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Speaker 2: It's an awesome place for those folks to work down

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Speaker 2: a lot of good folks down there in Princeton.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecard Play and Android

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Speaker 2: John Tucker sitting in for Alex Steel and I'm Paul

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Speaker 2: Swhen you were live here in our Bloomberg Interactive Broker studio,

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Speaker 2: we're streaming live on YouTube, so you have to go

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Speaker 2: over to YouTube dot com search Bloomberg Podcast and that's

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Speaker 2: where you will find us. I don't know, John, We're

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Speaker 2: getting some pretty solid economic data. I've the earnings that

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Speaker 2: were just kind of finishing up were pretty solid. Expectations

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Speaker 2: are still pretty positive for earnings. I got a FED

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Speaker 2: that I think is cutting rates. I think that's all

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Speaker 2: pretty constructive for markets. Here, let's check in with somebody

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Speaker 2: who does this stuff for a living, Sylvia Jablonski, chief

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Speaker 2: executive Officer and chief investment Officer, Defiance TFS. You know, Sylvia,

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Speaker 2: I'd love to just get your thoughts just broadly defined,

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Speaker 2: to start off here about where you think we are

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Speaker 2: with some just kind of the market outlook as we

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Speaker 2: think about twenty twenty five. Where are you guys in

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Speaker 2: terms of thinking about where this could go.

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Speaker 7: Well, good morning, and I'm happy early Thanksgiving to you both. Well,

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Speaker 7: I think that the markets are probably poised for a

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Speaker 7: small rally into year end. We'll probably you know, go

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Speaker 7: back to these highs that we've tested this year and

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Speaker 7: see that happen in the next month or so.

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Speaker 8: You had a great setup there, right.

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Speaker 7: The FED has cut already and is potentially on a

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Speaker 7: path to continue cutting or at least holding and not raising. So,

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Speaker 7: you know, financial conditions should be a little bit better

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Speaker 7: for corporations. We have a president that's coming in that's

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Speaker 7: pro deregulation, you know, market friendly, tax cuts, things like that,

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Speaker 7: So that tends to, you know, do well for markets

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Speaker 7: as well. So you know, my view on this is

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Speaker 7: that for the next call it eighteen months or so,

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Speaker 7: I think we're in a pretty smooth soft you know, spot,

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Speaker 7: barring any kind of made or changes to fiscal monetary

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Speaker 7: policy to see the SMP and the broader based indices

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Speaker 7: trend upward.

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Speaker 4: How much money's on the sidelines at this point, Sylvia, Yeah,

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Speaker 4: a lot, I think, you know, to the tune of

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Speaker 4: seven trillion or more.

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Speaker 7: And I think that that's because you know, a lot

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Speaker 7: of this kind of risk off mentality came about in

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Speaker 7: twenty twenty two and didn't come back into the markets,

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Speaker 7: particularly when you know five percent is the type of

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Speaker 7: interest rate you're getting on your cash, and so I

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Speaker 7: think that's changed now. You know, the SMP is going

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Speaker 7: to be probably up twenty five percent or so this year,

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Speaker 7: all of a sudden, it really makes sense to put

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Speaker 7: some of that dry powder to work in the markets.

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Speaker 7: And I think, you know, we're going to start seeing

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Speaker 7: that come back in in the next couple of years.

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Speaker 7: And I think you know that with high digit, high

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Speaker 7: single digit corporate earnings outlook, cash coming off of the sidelines,

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Speaker 7: that bodes well for at least a pretty decent average

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Speaker 7: rate of return type of SMP five hundred.

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Speaker 2: Sylvie, just with your ATF platform, I always love to

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Speaker 2: just ask folks like you that are seeing the flows

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Speaker 2: out there, where are the flows going in your ETF platform.

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Speaker 7: Well, the most the most popular ETF that we have

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Speaker 7: and potentially that you know Planet Earth has right now

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Speaker 7: because I see everybody writing about it and talking about it,

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Speaker 7: is the leverage micro Strategy ETF. So we have a

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Speaker 7: two beta micro strategy ETF ticker symbols mst X, and

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Speaker 7: you know, it's it's seen almost a couple of billions

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Speaker 7: of flows just since its inception, which is basically September

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Speaker 7: late August, and so that's just been a wildly popular trade.

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Speaker 8: And then the election results and this idea.

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Speaker 7: Around you know again deregulation and crypto adoptance really really

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Speaker 7: helped that ETF.

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Speaker 8: It's been widely popular there. Second place though is quantum.

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Speaker 7: And there are all these little stocks out there that

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Speaker 7: people don't talk too much about, but you know, I

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Speaker 7: on qqba q qb ts like some of these small

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Speaker 7: quantum computing companies. We have them in our Quantum ETF

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Speaker 7: and so you know, a lot of flows have flowed

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Speaker 7: into there is this AI evolution continues to grow.

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Speaker 4: That's the little companies. I was fortunate enough to see

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Speaker 4: the up and sleepy hollow, the IBM research center, the

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Speaker 4: I think it's the Watson Reaches.

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Speaker 8: Yeah, they've got a huge quantum center. Yeah.

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Speaker 4: Yeah, and they've got this this thing is it looks

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Speaker 4: really cool. Most of it is just cooling coils. It's

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Speaker 4: like a big air conditioner, a big freezer for what

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Speaker 4: is essentially a chip like this big and they have

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Speaker 4: to keep it just above absolute zero, which is really

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Speaker 4: really cool. I think of quantum computing those sylvia as

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Speaker 4: sort of like you know, fusion energy. It's going to

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Speaker 4: be another five ten years and then we get there,

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Speaker 4: it's going to be another five ten years, et cetera.

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Speaker 2: Center.

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Speaker 7: Yeah, I think, you know, the broad topic and idea

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Speaker 7: for us is more around the idea of supercomputing, you know,

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Speaker 7: machine learning, AI plus quantum competing. But we're kind of

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Speaker 7: referring to the companies that are responsible for those coolers

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Speaker 7: that you saw right, and they're they're kind of feeding

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Speaker 7: the hyperscalers and their AI and machine learning R and

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Speaker 7: D and you know they provide these cooling systems or else,

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Speaker 7: you know, basic quantum computers for them to kind of

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Speaker 7: run their data on. And so it does exist already

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Speaker 7: to some degree, right, Like you have banks running supercomputing

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Speaker 7: to detect risk. It's used in cryptography already. You know,

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Speaker 7: drug research has some level of machine learning and supercomputing.

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Speaker 7: But it's the idea that these quantum computers will come

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Speaker 7: in and allow this to be done more efficiently and

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Speaker 7: more quickly to make it, you know, kind of more commercial.

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Speaker 8: Is what's going to play out, I think in the

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Speaker 8: next few years.

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Speaker 4: And if you have an algorithm, you can actually send

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Speaker 4: it to IBM and they will run it for you.

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Speaker 9: Is that right?

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Speaker 4: Clean up all the mistakes that invariably happen to.

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Speaker 3: Interesting So may you talk to us a little bit

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Speaker 3: about x MAG, x M A G.

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Speaker 8: Yeah.

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Speaker 7: So if you know, if you're of the mindset that

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Speaker 7: the that the MAG seven are kind of at their

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Speaker 7: highs and have you know, high valuations, and you're looking

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Speaker 7: to put that seven trillion to work in the market,

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Speaker 7: but you know you're kind of worried about those names

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Speaker 7: not being the leaders.

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Speaker 8: We launch x MAG.

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Speaker 7: So that's the S and P five hundred minus the

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Speaker 7: top seven tech companies, right, And so the thought there is,

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Speaker 7: you know, number one, diversify small caps. You know, domestic

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Speaker 7: policy things like this might be whove the rest of

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Speaker 7: the market sub Max seven. Again, you have winners in

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Speaker 7: there in the other four hundred and ninety seven. You know,

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Speaker 7: names like whether it's Costco or Broadcom or Fishtraw, Constellation Energy,

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Speaker 7: like all of these stocks that are doing quite well

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Speaker 7: this year and aren't talked about. You know, we kind

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Speaker 7: of let them fly because it's a market cap waiting.

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Speaker 7: But that's the diversification trade. And the second argument there is,

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Speaker 7: you know, we love the Max seven. We just know

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Speaker 7: you already have them. If you own SMP, you know

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Speaker 7: a third of that is the MAC seven. So you've

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Speaker 7: got it somewhere.

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Speaker 4: You're mentioning tax cuts, et cetera, and so forth, the regulation,

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Speaker 4: all that stuff. How much of that is actually baked

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Speaker 4: into company forecasts right now?

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Speaker 8: I think, you know, probably not much. I don't know.

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Speaker 7: I think the market was anticipating this winner, but then

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Speaker 7: there was enough of uncertainty where you kind of saw

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Speaker 7: things like the dollar and gold and commodities and a

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Speaker 7: ten year pop around a lot before the election, so

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Speaker 7: I don't think any of it was fully priced in.

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Speaker 7: I think that post election pop kind of gave us

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Speaker 7: some of that. But longer term, I think this will

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Speaker 7: play out as companies actually save this money and expand

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Speaker 7: balance sheets and you know, kind of have better taxes,

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Speaker 7: more capex hopefully and some growth.

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Speaker 2: All Right, Sylvia, thank you so much for joining us.

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Speaker 2: Always appreciate getting few mina at your time. Sylvia Jablonski,

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Speaker 2: Chief executive Officer and chief investment Officer at Defiance EF.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple car Playing and

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Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: Do you have plitical front Some good news coming out

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Speaker 2: of the Middle East? Lebanon ceasefire starts after Israel and

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Speaker 2: Hesbloh reach a deal.

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Speaker 3: That's the good news.

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Speaker 2: Let's break it down a little bit and see what

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Speaker 2: it means for that part of the world. Ned Lazareth,

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Speaker 2: Associate Professor of International Affairs at George Washington University down

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Speaker 2: here in Washington, d C. Joins us via that zoom thing.

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Speaker 2: Ned talk to us about this agreement. What does this

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Speaker 2: agreement say, what does it do? How is important for

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Speaker 2: that part of the world.

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Speaker 9: It's extremely important and has the potential to be a

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Speaker 9: turning point in what has become the most active front

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Speaker 9: of the war. It sets out a sixty day period

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Speaker 9: during which Israel and Hezbela are supposed to cease fire,

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Speaker 9: and so that means ceasing the bombardments of many areas

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Speaker 9: in Lebanon, ceasing idea of troops that have gone up

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Speaker 9: to the Litany River in Lebanese territory, ceasing the advance

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Speaker 9: of idea of troops, and ceasing as Belaw has continued

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Speaker 9: missile fire on Israel, firing dozens, often hundreds of missiles

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Speaker 9: every day despite all of the blows that has absorbed

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Speaker 9: from Israel in the last few months. So the fire

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Speaker 9: is supposed to cease over a sixty day period. The

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Speaker 9: Israeli military is to withdraw from Lebanese territory back to

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Speaker 9: the international border, and the Lebanese army is supposed to

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Speaker 9: deploy in southern Lebanon. So that is in tune with

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Speaker 9: a former a previous UN resolution seventeen oh one. UN

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Speaker 9: Security Council resolution that ended the two thousand and six

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Speaker 9: war between Israel and has Belah. But the Lebanese army

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Speaker 9: never did deploy and instead has been built an enormous

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Speaker 9: militarized area right up to the Israeli border, including tunnels,

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Speaker 9: including massive amounts of munitions, all set for the order

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Speaker 9: to invade northern Israel. What the Israeli military has sought

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Speaker 9: to do is to destroy hesbelaws, very elaborate set up

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Speaker 9: for an invasion. And what is meant to happen now

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Speaker 9: in these sixty days is that Hesbla is meant to

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Speaker 9: not return to southern Lebanon and not to re arm.

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Speaker 9: The test will be if this is actually what happens,

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Speaker 9: because the you know, the chaotic reality, you know, may

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Speaker 9: put the best of intentions. Of course, right away after

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Speaker 9: announcing the ceasefire, there were you know, celebrations of relieved

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Speaker 9: people in Lebanon and protests from many of the displaced

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Speaker 9: residents of northern Israel who don't trust that the agreement

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Speaker 9: will in fact be enforced.

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Speaker 4: This is Hesblah and Lebanon. What about to the south,

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Speaker 4: with God, what's happening on that front? Does this cover

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Speaker 4: anything like that or could it be used as a

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Speaker 4: template for something with respect to Hamas well.

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Speaker 9: President Biden certainly expressed that hope in his announcement of

439
00:22:15,440 --> 00:22:20,520
Speaker 9: the ceasefire, and the the Israeli families whose family members

440
00:22:20,560 --> 00:22:26,159
Speaker 9: are being held hostage by Hamas have repeatedly expressed both

441
00:22:26,480 --> 00:22:32,080
Speaker 9: that hope and also some anger, saying that you know,

442
00:22:32,400 --> 00:22:36,320
Speaker 9: similar terms could could result in a deal with Hamas

443
00:22:36,320 --> 00:22:41,520
Speaker 9: that would free their loved ones from captivity. And so

444
00:22:41,560 --> 00:22:45,600
Speaker 9: there was anger at the government that it has prioritized

445
00:22:45,680 --> 00:22:49,360
Speaker 9: the Northern Front and not the release of the hostages

446
00:22:49,600 --> 00:22:53,000
Speaker 9: while sort of accepting terms with Hasballah that the Israeli

447
00:22:53,000 --> 00:22:59,040
Speaker 9: government rejects with Hamas. So we will we will see

448
00:22:59,080 --> 00:23:05,199
Speaker 9: if there is renewed momentum. Hamas has also issued a

449
00:23:05,240 --> 00:23:08,719
Speaker 9: statement that it is you know that that it is

450
00:23:09,240 --> 00:23:12,200
Speaker 9: ready ready for a deal. So that is that may

451
00:23:12,359 --> 00:23:15,240
Speaker 9: perhaps just be meant to put pressure on the on

452
00:23:15,280 --> 00:23:19,560
Speaker 9: the Israeli government right, because the far right elements in

453
00:23:19,560 --> 00:23:24,800
Speaker 9: the Israeli government on which Bignami Natail's coalition depends, do

454
00:23:24,880 --> 00:23:28,880
Speaker 9: not really want any kind of hostage deal. They want

455
00:23:28,920 --> 00:23:31,720
Speaker 9: to reoccupy the Gaza strip permanently.

456
00:23:32,320 --> 00:23:37,280
Speaker 2: Professor, what was the role of Iran in this ceasefire agreement,

457
00:23:37,359 --> 00:23:39,800
Speaker 2: and what do you think the role will be going

458
00:23:39,800 --> 00:23:41,320
Speaker 2: forward as a which to a gaza.

459
00:23:42,920 --> 00:23:49,560
Speaker 9: So the ceasefire agreement is binding on Israel and Hasbella

460
00:23:49,680 --> 00:23:52,480
Speaker 9: has Belah is the armed actor that needs to cease fire,

461
00:23:52,880 --> 00:23:56,040
Speaker 9: but it's not signed by Hesbella, and it's not it's

462
00:23:56,080 --> 00:23:59,720
Speaker 9: an agreement between Israel and the State of Lebanon. It

463
00:23:59,800 --> 00:24:03,879
Speaker 9: is simply understood, uh, that hes Belah must follow this

464
00:24:03,960 --> 00:24:06,680
Speaker 9: agreement and a sense to it. And it's a similar

465
00:24:07,720 --> 00:24:11,600
Speaker 9: thing with Iran. So hes Bella is a proxy of Iran.

466
00:24:11,680 --> 00:24:15,560
Speaker 9: It is armed, funded, trained, supported by Iran.

467
00:24:16,200 --> 00:24:16,320
Speaker 7: Uh.

468
00:24:16,440 --> 00:24:23,080
Speaker 9: And so without Iranian consent, this agreement wouldn't be happening. Uh.

469
00:24:23,119 --> 00:24:27,080
Speaker 9: And uh, you know, I think the UH it's very

470
00:24:27,119 --> 00:24:31,400
Speaker 9: clear that Israel's military campaign against Hezbollah in the last

471
00:24:31,400 --> 00:24:35,959
Speaker 9: three months has been devastatingly effective. UH and uh and

472
00:24:36,040 --> 00:24:40,240
Speaker 9: has forced uh, you know, the organization to accept terms

473
00:24:40,960 --> 00:24:44,880
Speaker 9: that it probably would not have wanted to. Nonetheless, has

474
00:24:44,920 --> 00:24:49,720
Speaker 9: Belah is apparently, uh, you know, putting out messages in

475
00:24:49,760 --> 00:24:55,960
Speaker 9: the media celebrating its great victory today. But in reality,

476
00:24:56,000 --> 00:24:58,920
Speaker 9: it's very it's very clear what has happened.

477
00:24:59,359 --> 00:24:59,560
Speaker 5: Uh.

478
00:24:59,720 --> 00:25:02,960
Speaker 9: None the less, Hesbilla remains a potent organization and again

479
00:25:03,000 --> 00:25:05,400
Speaker 9: has continued to fire hundreds of missiles into Israel every

480
00:25:05,440 --> 00:25:07,240
Speaker 9: day during the past few months.

481
00:25:07,680 --> 00:25:12,920
Speaker 4: How many caveats or provisions does this agreement have? Those

482
00:25:12,920 --> 00:25:16,439
Speaker 4: aren't the usual words you'll toss around a diplomacy with

483
00:25:16,640 --> 00:25:22,240
Speaker 4: agreements such as this. But is there a chance that

484
00:25:23,920 --> 00:25:28,080
Speaker 4: Israel's militaries is going to strike at the slightest provocation

485
00:25:28,400 --> 00:25:32,080
Speaker 4: and send things spiraling back to square one?

486
00:25:33,440 --> 00:25:36,960
Speaker 9: There there are, I mean, the key caveat is in

487
00:25:37,040 --> 00:25:41,280
Speaker 9: a side letter between the US government and the Israeli government,

488
00:25:42,359 --> 00:25:47,320
Speaker 9: and that caveat says that if Hasbolah attempts to re

489
00:25:47,560 --> 00:25:53,160
Speaker 9: arm attempts to re infiltrate personnel into the southern Lebanon

490
00:25:53,240 --> 00:25:57,880
Speaker 9: area on the Israeli border, that Israel retains the right

491
00:25:58,800 --> 00:26:03,879
Speaker 9: to strike to use military force to prevent the re

492
00:26:04,040 --> 00:26:11,040
Speaker 9: emergence of that threat. President Biden explained that by saying

493
00:26:11,119 --> 00:26:13,880
Speaker 9: Israel has the right to defend itself as any country does,

494
00:26:14,880 --> 00:26:18,639
Speaker 9: and that Lebanon has the right to its sovereignty. So

495
00:26:18,680 --> 00:26:21,520
Speaker 9: that's a side letter between the US and Israel. Because

496
00:26:21,680 --> 00:26:25,200
Speaker 9: the Lebanese government would not sign off on an agreement

497
00:26:25,240 --> 00:26:28,040
Speaker 9: that included an inherent violation of its sovereignty.

498
00:26:28,200 --> 00:26:30,200
Speaker 3: All right, Ned, thank you very much, really appreciated.

499
00:26:30,240 --> 00:26:34,640
Speaker 2: Ned. Lazarus's associate professor of International Affairs, George Washington University

500
00:26:34,920 --> 00:26:38,880
Speaker 2: down there in Washington, d C. Getting the latest analysis

501
00:26:38,960 --> 00:26:44,080
Speaker 2: of this ceasefire between Israel and Hesbola, which is a

502
00:26:44,119 --> 00:26:45,000
Speaker 2: good news for that.

503
00:26:45,280 --> 00:26:47,400
Speaker 3: Part of the world. And we'll see how much more

504
00:26:47,440 --> 00:26:47,880
Speaker 3: we can get.

505
00:26:48,119 --> 00:26:49,320
Speaker 5: This is Bloomberg.

506
00:26:50,480 --> 00:26:54,320
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

507
00:26:54,400 --> 00:26:57,920
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

508
00:26:57,960 --> 00:27:01,160
Speaker 1: Otto with the Bloomberg Business. You can also listen live

509
00:27:01,240 --> 00:27:04,399
Speaker 1: on Amazon Alexa from our flagship New York station Just

510
00:27:04,480 --> 00:27:07,080
Speaker 1: Say Alexa playing Bloomberg eleven thirty.

511
00:27:08,160 --> 00:27:10,040
Speaker 3: Brian Wellen joins us here in our studio.

512
00:27:10,160 --> 00:27:10,840
Speaker 10: He's in New York.

513
00:27:10,880 --> 00:27:11,320
Speaker 3: How about that?

514
00:27:11,600 --> 00:27:15,360
Speaker 2: Brian Wellen, Chief Investment Officer and Generalists Portfolio Manager at TCW.

515
00:27:15,640 --> 00:27:17,520
Speaker 3: Hey, Brian, when you and your team got up.

516
00:27:17,440 --> 00:27:20,240
Speaker 2: The day after the election, you centered around your big

517
00:27:20,240 --> 00:27:20,840
Speaker 2: conference room.

518
00:27:21,200 --> 00:27:22,560
Speaker 3: Did you all look at each other saying, do we

519
00:27:22,600 --> 00:27:26,120
Speaker 3: have to change anything? Here's what just changed, if anything overnight?

520
00:27:26,119 --> 00:27:26,720
Speaker 3: How did you guys?

521
00:27:26,880 --> 00:27:27,200
Speaker 4: We did?

522
00:27:27,240 --> 00:27:29,360
Speaker 11: In fact, we kind of scratched our head a little

523
00:27:29,359 --> 00:27:31,440
Speaker 11: bit because we felt like the market's reaction was just

524
00:27:31,520 --> 00:27:32,960
Speaker 11: kind of a knee jerk reaction.

525
00:27:33,040 --> 00:27:33,199
Speaker 5: You know.

526
00:27:33,240 --> 00:27:35,440
Speaker 11: It felt like it was the holidays coming up. It

527
00:27:35,480 --> 00:27:37,080
Speaker 11: felt like the market hit the easy button. They just

528
00:27:37,080 --> 00:27:39,120
Speaker 11: wanted to take everything kind of on the surface, which

529
00:27:39,200 --> 00:27:42,000
Speaker 11: was like, Okay, we're gonna have tariffs, you know, twenty

530
00:27:42,040 --> 00:27:44,920
Speaker 11: percent on the rest of the world, sixty percent on China,

531
00:27:45,280 --> 00:27:47,399
Speaker 11: We're going to deport tens of millions of people, and

532
00:27:47,480 --> 00:27:48,639
Speaker 11: inflation's going to jump up.

533
00:27:48,760 --> 00:27:48,919
Speaker 1: You know.

534
00:27:48,960 --> 00:27:51,520
Speaker 11: We sat back and we said, you know what, like, actually,

535
00:27:51,600 --> 00:27:53,840
Speaker 11: you know, inflation was running at about two point two

536
00:27:53,840 --> 00:27:56,280
Speaker 11: percent when Trump came into office the first time, and

537
00:27:56,359 --> 00:27:59,400
Speaker 11: through his presidency up until you know, the pandemic.

538
00:27:58,960 --> 00:28:00,399
Speaker 4: It actually went down point one.

539
00:28:00,440 --> 00:28:04,000
Speaker 11: And that included tough immigration policies that included tariffs, and

540
00:28:04,000 --> 00:28:05,440
Speaker 11: then on the growth side, the market all of a

541
00:28:05,440 --> 00:28:07,680
Speaker 11: sudden said, oh, oh my gosh, we're gonna we're gonna

542
00:28:07,840 --> 00:28:10,520
Speaker 11: cut corporate taxes. We're gonna, you know, maybe do this

543
00:28:10,840 --> 00:28:13,720
Speaker 11: adjustment to the salt man. I know that's near and

544
00:28:13,720 --> 00:28:16,000
Speaker 11: dear to your heart, huge for me, right, and all

545
00:28:16,000 --> 00:28:18,240
Speaker 11: of a sudden, we're gonna have higher treasure issues and

546
00:28:18,320 --> 00:28:20,800
Speaker 11: higher budget deficits and treasure yields have to go higher.

547
00:28:21,119 --> 00:28:22,600
Speaker 11: You know, we sat back and said, wait a minute,

548
00:28:22,640 --> 00:28:25,040
Speaker 11: Like the first time Trump came into office, it was

549
00:28:25,040 --> 00:28:26,000
Speaker 11: one hundred percent debt.

550
00:28:25,880 --> 00:28:28,120
Speaker 3: To GDP with three percent budget deficits.

551
00:28:28,359 --> 00:28:30,040
Speaker 11: You know, right now he's coming with one hundred and

552
00:28:30,040 --> 00:28:33,760
Speaker 11: twenty percent debt to GDP the budget deficits over six percent. Yeah,

553
00:28:33,800 --> 00:28:36,920
Speaker 11: you've had a Republican suitep. However, the margin in the

554
00:28:36,960 --> 00:28:39,880
Speaker 11: House is not that great. There's certainly budget hawks out there,

555
00:28:39,880 --> 00:28:41,480
Speaker 11: and so you know, at the end of the day,

556
00:28:41,520 --> 00:28:44,320
Speaker 11: we just didn't feel like, you know, the narrative or

557
00:28:44,320 --> 00:28:46,960
Speaker 11: the landscape had changed that much, and that whatever was

558
00:28:47,000 --> 00:28:48,480
Speaker 11: going to get done, was it going to get done

559
00:28:48,480 --> 00:28:51,600
Speaker 11: and probably a deluded manner from the administration, and what

560
00:28:51,680 --> 00:28:53,280
Speaker 11: was going to be effective was probably going to be

561
00:28:53,360 --> 00:28:56,320
Speaker 11: something later next year, if not twenty twenty six. And

562
00:28:56,400 --> 00:28:58,760
Speaker 11: so from our perspective, we felt like it was an overreaction,

563
00:28:58,880 --> 00:29:01,760
Speaker 11: particularly an interest rates, and rather we'd rather kind of

564
00:29:01,760 --> 00:29:03,880
Speaker 11: get back and focus on maybe the economic trends that

565
00:29:03,880 --> 00:29:05,400
Speaker 11: were in place before the election day.

566
00:29:05,680 --> 00:29:08,160
Speaker 6: It's interesting because I always put the question usually the

567
00:29:08,200 --> 00:29:12,440
Speaker 6: stocks guys on my TV show Bloomberg Open Interest weekdays

568
00:29:12,560 --> 00:29:13,800
Speaker 6: nine to eleven AM Boom.

569
00:29:13,880 --> 00:29:16,960
Speaker 3: I always listen, so I always put the question would

570
00:29:16,960 --> 00:29:18,400
Speaker 3: you rather be in stocks or bonds?

571
00:29:18,440 --> 00:29:22,040
Speaker 6: Going into Trump two point zero? Because he's gonna, he says, deregulate,

572
00:29:22,080 --> 00:29:26,120
Speaker 6: he's gonna cut taxes, he's going to you know, raise tariffs,

573
00:29:26,160 --> 00:29:29,600
Speaker 6: and it would seem that stocks are the answer. But

574
00:29:29,720 --> 00:29:32,160
Speaker 6: right now the S and P is yielding like less

575
00:29:32,200 --> 00:29:35,200
Speaker 6: than four percent, right and the ten uere is I

576
00:29:35,200 --> 00:29:37,320
Speaker 6: don't know, four to twenty six right now.

577
00:29:38,280 --> 00:29:40,080
Speaker 11: So what do you think I think that Well, the

578
00:29:40,160 --> 00:29:42,440
Speaker 11: knee direk reaction was, you know, bonds went down in

579
00:29:42,480 --> 00:29:44,600
Speaker 11: price and stocks went up. And now I think cooler

580
00:29:44,640 --> 00:29:46,600
Speaker 11: heads are prevailing, and they're kind of looking at what

581
00:29:46,600 --> 00:29:48,480
Speaker 11: I said earlier, which is saying, you know what, like

582
00:29:48,560 --> 00:29:50,480
Speaker 11: maybe the story right now should be like what was

583
00:29:50,520 --> 00:29:51,880
Speaker 11: the economic and trend in.

584
00:29:51,880 --> 00:29:53,320
Speaker 3: Place going into November?

585
00:29:53,400 --> 00:29:55,920
Speaker 11: And you know we can talk about that and look

586
00:29:55,960 --> 00:29:57,720
Speaker 11: at the end of the day, you know, Trump is Trump.

587
00:29:57,760 --> 00:29:59,880
Speaker 11: You're gonna get a lot of volatility. And you know,

588
00:30:00,040 --> 00:30:02,320
Speaker 11: let's not forget who he's a commercial real estate guy.

589
00:30:02,400 --> 00:30:04,760
Speaker 11: You know Donald Trump wants lower interest rates, right, you

590
00:30:04,760 --> 00:30:07,520
Speaker 11: know that that's good from his perspective, and I think

591
00:30:07,520 --> 00:30:09,080
Speaker 11: the administrations.

592
00:30:08,400 --> 00:30:09,320
Speaker 3: Them, but can you get them.

593
00:30:09,520 --> 00:30:11,280
Speaker 6: I mean, you look at dots go on the terminal.

594
00:30:11,360 --> 00:30:11,600
Speaker 9: Dude.

595
00:30:11,600 --> 00:30:14,320
Speaker 6: If you look at dots go right now, and then

596
00:30:14,360 --> 00:30:19,440
Speaker 6: you punch in FED funds futures, the market is pricing

597
00:30:19,480 --> 00:30:22,680
Speaker 6: a terminal rate of like four percent, and the Fed

598
00:30:22,760 --> 00:30:24,800
Speaker 6: is penciled in a rate of less than three.

599
00:30:24,920 --> 00:30:25,080
Speaker 4: Right.

600
00:30:26,240 --> 00:30:27,720
Speaker 3: You know, he's probably going to get him.

601
00:30:27,800 --> 00:30:29,800
Speaker 11: Unfortunately for the administration, he ain't not get him in

602
00:30:29,840 --> 00:30:31,760
Speaker 11: the way he wants, you know, which may mean that

603
00:30:32,200 --> 00:30:35,000
Speaker 11: some of the softening trends we've seen in the economy

604
00:30:35,040 --> 00:30:37,959
Speaker 11: and the labor market that were in place before the election,

605
00:30:39,200 --> 00:30:41,960
Speaker 11: you know, from our opinion, they're more likely going to

606
00:30:42,000 --> 00:30:43,640
Speaker 11: be what you want to look to in terms of direction,

607
00:30:43,720 --> 00:30:45,560
Speaker 11: which means once we come to the new year, we

608
00:30:45,560 --> 00:30:47,719
Speaker 11: could be in an environment where the economy is slowing.

609
00:30:48,240 --> 00:30:50,200
Speaker 11: The Fed may have to lower rates further than the

610
00:30:50,240 --> 00:30:52,680
Speaker 11: markets expecting, but that's probably going to be coinciding and

611
00:30:52,760 --> 00:30:55,160
Speaker 11: due to a slowing economy, which is not necessarily the

612
00:30:55,200 --> 00:30:56,320
Speaker 11: best thing for the administration.

613
00:30:56,720 --> 00:30:58,960
Speaker 2: So where we're giving that kind of backdrop, do you

614
00:30:59,000 --> 00:31:01,560
Speaker 2: guys see that value in the fixed in market these

615
00:31:01,600 --> 00:31:02,360
Speaker 2: days days.

616
00:31:02,440 --> 00:31:04,640
Speaker 11: We love the you know, the for the bond nerds,

617
00:31:04,640 --> 00:31:06,680
Speaker 11: it's the front end of the yield curf. You know, basically,

618
00:31:07,000 --> 00:31:09,000
Speaker 11: if you think about, let's put the yield curve into

619
00:31:09,000 --> 00:31:11,040
Speaker 11: two pieces, we'll call it the front end, which.

620
00:31:10,880 --> 00:31:12,840
Speaker 3: Is like the two year treasury and the five year treasury,

621
00:31:12,880 --> 00:31:13,120
Speaker 3: and then you.

622
00:31:13,160 --> 00:31:13,680
Speaker 1: Got the long end.

623
00:31:13,720 --> 00:31:15,240
Speaker 11: That's kind of like, let's call it the thirty year

624
00:31:15,280 --> 00:31:18,000
Speaker 11: treasury out there, you know, we think the thirty year TCW.

625
00:31:18,120 --> 00:31:19,560
Speaker 11: We're kind of looking at the at the math and

626
00:31:19,640 --> 00:31:22,000
Speaker 11: the fundamental kind of bottoms of work and say, you know,

627
00:31:22,040 --> 00:31:23,520
Speaker 11: there's a lot of questions on the long end, like

628
00:31:23,520 --> 00:31:25,440
Speaker 11: maybe we do have a lot of treasury erasments, Like

629
00:31:25,880 --> 00:31:29,120
Speaker 11: there's a lot of factors maybe overseas, you know, essentral

630
00:31:29,160 --> 00:31:31,040
Speaker 11: banks may sell it, Like a lot of factors can

631
00:31:31,040 --> 00:31:33,360
Speaker 11: influence that. Where we would rather kind of tie our

632
00:31:33,360 --> 00:31:36,239
Speaker 11: client's money is to is to the Federal Reserve. What

633
00:31:36,280 --> 00:31:38,520
Speaker 11: they're gonna do with with the Fed funds rate, and

634
00:31:38,560 --> 00:31:41,040
Speaker 11: that will highly influence what happens with the two year

635
00:31:41,120 --> 00:31:43,400
Speaker 11: and the five year. And right now those yields are

636
00:31:43,400 --> 00:31:46,200
Speaker 11: about four point two percent plus or minus. So first

637
00:31:46,240 --> 00:31:48,800
Speaker 11: of all, you're getting paid a good yield or coupon

638
00:31:48,920 --> 00:31:50,720
Speaker 11: to kind of sit there, kind of like a cash

639
00:31:50,840 --> 00:31:53,600
Speaker 11: like investment. And then if we're right and the Fed

640
00:31:53,640 --> 00:31:55,840
Speaker 11: actually has to lower rates not to what the market expects,

641
00:31:55,840 --> 00:31:58,840
Speaker 11: which is about four percent, maybe three percent or even lower,

642
00:31:59,120 --> 00:32:01,360
Speaker 11: you're gonna get a really good price return and that

643
00:32:01,520 --> 00:32:04,240
Speaker 11: prices are going to jump up when yields go from

644
00:32:04,240 --> 00:32:06,760
Speaker 11: about four point two today to something closer to three

645
00:32:06,800 --> 00:32:07,480
Speaker 11: or even below that.

646
00:32:08,480 --> 00:32:10,200
Speaker 2: But the best performing sector is just a year to

647
00:32:10,280 --> 00:32:13,200
Speaker 2: date have been US high yield and US leverage loans.

648
00:32:13,840 --> 00:32:16,040
Speaker 3: That does that surprise you? Are you an I go

649
00:32:16,400 --> 00:32:18,600
Speaker 3: I N go? Yes?

650
00:32:19,200 --> 00:32:21,440
Speaker 11: Does it surprise when you look at you know, equities

651
00:32:21,480 --> 00:32:24,320
Speaker 11: at twenty two plus? You know, price to earnings when

652
00:32:24,360 --> 00:32:27,280
Speaker 11: you look at the Vicks at fourteen, does it surprise me? No,

653
00:32:27,360 --> 00:32:29,120
Speaker 11: because it's kind of in line with other things going

654
00:32:29,120 --> 00:32:32,320
Speaker 11: on in the marketplace. But that's extremely expensive, Like you

655
00:32:32,360 --> 00:32:34,920
Speaker 11: are not getting compensated to take risk. In the high

656
00:32:34,960 --> 00:32:37,040
Speaker 11: yield bond market right now, you get about two point

657
00:32:37,040 --> 00:32:39,959
Speaker 11: six percent of extra yield. It's over it's great height,

658
00:32:40,040 --> 00:32:43,240
Speaker 11: just historical levels or north of four percent. So basically

659
00:32:43,240 --> 00:32:44,880
Speaker 11: what the market's telling you, at least in the high

660
00:32:44,920 --> 00:32:47,000
Speaker 11: yield market is that it's going to be a no

661
00:32:47,120 --> 00:32:49,960
Speaker 11: landing things are there's not going to be volatility. Everything

662
00:32:50,000 --> 00:32:52,000
Speaker 11: is going to be smooth sailing for a year plus

663
00:32:52,000 --> 00:32:53,760
Speaker 11: on out, you know, when we're willing to kind of

664
00:32:53,760 --> 00:32:54,560
Speaker 11: position against that.

665
00:32:55,040 --> 00:32:55,680
Speaker 3: Yeah, I was.

666
00:32:55,720 --> 00:32:57,400
Speaker 6: I think there is a Bloomberg story just a couple

667
00:32:57,440 --> 00:33:00,600
Speaker 6: of days ago about building up short positions in that

668
00:33:01,800 --> 00:33:04,400
Speaker 6: in that debt. By the way, we are always pimping

669
00:33:04,400 --> 00:33:07,760
Speaker 6: Bloomberg functions. That's why Yes, I and go you know

670
00:33:07,840 --> 00:33:11,440
Speaker 6: them all right, But how about worp YEA, Yeah, we're

671
00:33:11,600 --> 00:33:15,560
Speaker 6: for sure. I absolutely love warp N go E C

672
00:33:15,720 --> 00:33:16,320
Speaker 6: t R goes.

673
00:33:16,360 --> 00:33:17,520
Speaker 3: I'm not thinking out today.

674
00:33:18,440 --> 00:33:22,120
Speaker 6: I wonder how focused you are in on the US

675
00:33:22,440 --> 00:33:26,520
Speaker 6: or do you also cast your gaze abroad? Because someone

676
00:33:26,560 --> 00:33:30,000
Speaker 6: sent me the Feta breeze spread today, which I thought

677
00:33:30,040 --> 00:33:33,480
Speaker 6: was interesting. So French tenure yields are about to be

678
00:33:33,640 --> 00:33:37,760
Speaker 6: higher than Greek ten year yields, and I mean those

679
00:33:37,760 --> 00:33:40,600
Speaker 6: of us old enough to remember the European debt crisis.

680
00:33:40,720 --> 00:33:42,959
Speaker 6: That's insane, right, Athens was burning.

681
00:33:44,200 --> 00:33:46,160
Speaker 11: It is all over the bat in fact, yeah, what

682
00:33:46,360 --> 00:33:49,080
Speaker 11: Greece is actually paying down debt? Yeah, France is having

683
00:33:49,240 --> 00:33:51,520
Speaker 11: you know, they're gonna their government is probably gonna dissolve,

684
00:33:51,600 --> 00:33:51,880
Speaker 11: I think.

685
00:33:51,960 --> 00:33:54,200
Speaker 3: Actually, yeah, we do stuff all over the globe.

686
00:33:54,200 --> 00:33:56,840
Speaker 11: Like actually, just this morning, we were buying French debt

687
00:33:56,920 --> 00:33:59,800
Speaker 11: at eighty six basis points over boons, you know, which which.

688
00:33:59,680 --> 00:34:01,840
Speaker 3: Is quite a bit, and then other areas of value.

689
00:34:02,000 --> 00:34:04,440
Speaker 11: You know, we love the pound, you know, we think

690
00:34:04,520 --> 00:34:07,719
Speaker 11: you know, that currency looks attractive versus the Euro. New

691
00:34:07,800 --> 00:34:10,120
Speaker 11: Zealand talk about cutting interest rates. You know, Zealand just

692
00:34:10,120 --> 00:34:13,399
Speaker 11: cut interstrates fifty basis points overnight. There's still at least

693
00:34:13,440 --> 00:34:16,480
Speaker 11: two hundred basis points away from neutral. So given the

694
00:34:16,680 --> 00:34:19,120
Speaker 11: just it was a except for Japan, there was this

695
00:34:19,200 --> 00:34:22,600
Speaker 11: kind of developed central bank hiking throughout twenty one through

696
00:34:22,640 --> 00:34:25,000
Speaker 11: twenty three, and now we're on the other side of that.

697
00:34:25,080 --> 00:34:28,280
Speaker 11: We're on the back nine, and interstrates globally except Japan,

698
00:34:28,560 --> 00:34:31,400
Speaker 11: are coming back down and they're creating some interesting opportunity.

699
00:34:31,440 --> 00:34:33,319
Speaker 11: A lot of cross currents out there to do things

700
00:34:33,400 --> 00:34:35,080
Speaker 11: not just in the US, but from a rate and

701
00:34:35,120 --> 00:34:36,799
Speaker 11: a currency perspective all over the globe.

702
00:34:36,880 --> 00:34:38,800
Speaker 3: Yeah, that's the exciting part of the story.

703
00:34:38,840 --> 00:34:42,480
Speaker 6: And do you see any significant divergence there. I mean,

704
00:34:42,480 --> 00:34:44,680
Speaker 6: at the beginning of the year we all thought everyone

705
00:34:44,719 --> 00:34:47,080
Speaker 6: was going to be on a cutting cycle together. And

706
00:34:47,640 --> 00:34:50,560
Speaker 6: now I mean, is it still the case or do

707
00:34:50,600 --> 00:34:53,360
Speaker 6: you expect some banks to be cutting more than others,

708
00:34:53,400 --> 00:34:54,920
Speaker 6: others to be holding.

709
00:34:54,760 --> 00:34:58,680
Speaker 11: Back, some cut more than others the ECB and I said,

710
00:34:58,680 --> 00:35:01,080
Speaker 11: New Zealand will probably cut more. So then Australia is

711
00:35:01,120 --> 00:35:02,680
Speaker 11: going to hang back a little bit. You know, inflation

712
00:35:02,760 --> 00:35:05,600
Speaker 11: in Australia has not come down. Actually, growth looks decent there,

713
00:35:06,480 --> 00:35:08,480
Speaker 11: and then you look at places like Japan, like Japan's

714
00:35:08,480 --> 00:35:10,719
Speaker 11: behind the curve. I mean, you know what an incredible

715
00:35:10,719 --> 00:35:13,000
Speaker 11: turnaround story there. So they're gonna have to hike rates

716
00:35:13,040 --> 00:35:15,840
Speaker 11: a lot more aggressively, we think than the market expects.

717
00:35:15,840 --> 00:35:17,640
Speaker 11: And you know when you talk interest rates, you can't

718
00:35:17,640 --> 00:35:18,760
Speaker 11: you have to talk about currency.

719
00:35:18,840 --> 00:35:19,040
Speaker 9: Yeah.

720
00:35:19,040 --> 00:35:20,759
Speaker 11: Absolutely, So when we look at that, it's like, you know,

721
00:35:20,800 --> 00:35:23,959
Speaker 11: the end looks like an incredibly attractive The dollar's been.

722
00:35:23,840 --> 00:35:24,239
Speaker 3: On a run.

723
00:35:24,280 --> 00:35:25,080
Speaker 4: It's so weak.

724
00:35:25,280 --> 00:35:26,680
Speaker 3: I mean, you can buy more than one hundred and

725
00:35:26,680 --> 00:35:27,840
Speaker 3: fifty en for a dollar.

726
00:35:28,160 --> 00:35:31,400
Speaker 11: But you know, I think both from an economic perspective,

727
00:35:31,400 --> 00:35:34,120
Speaker 11: from an interst rate perspective, and a growth perspective, you've

728
00:35:34,160 --> 00:35:36,359
Speaker 11: got three nice tail winds behind the end right now

729
00:35:36,360 --> 00:35:38,200
Speaker 11: and it's gone against you for the last month, but

730
00:35:38,239 --> 00:35:40,640
Speaker 11: you know, it's kind of value investors, but we think

731
00:35:40,760 --> 00:35:42,840
Speaker 11: is like, that's just a buying opportunity. You're getting in

732
00:35:42,840 --> 00:35:45,160
Speaker 11: at a better price right now to purchase that currency.

733
00:35:45,200 --> 00:35:47,239
Speaker 3: How about emerging markets? Do you guys traffic in that

734
00:35:47,280 --> 00:35:48,080
Speaker 3: alt all over?

735
00:35:48,160 --> 00:35:49,680
Speaker 11: And yeah, I talk about you know, the election and

736
00:35:49,719 --> 00:35:53,080
Speaker 11: tying it back to the emerging markets, like great opportunities

737
00:35:53,120 --> 00:35:56,160
Speaker 11: cross currents, like with regards to tariffs and immigration and

738
00:35:56,480 --> 00:36:00,640
Speaker 11: the currency volatility, it's created opportunities, kind of bottoms up,

739
00:36:00,719 --> 00:36:03,239
Speaker 11: kind of issue selection opportunities, and kind of where we've

740
00:36:03,280 --> 00:36:06,000
Speaker 11: been favoring is is economies that are more in the

741
00:36:06,000 --> 00:36:09,280
Speaker 11: emerging markets and more idiosyncratic, so kind of less exposed

742
00:36:09,320 --> 00:36:12,600
Speaker 11: to generic like tariff increases on high exporting economies right

743
00:36:12,600 --> 00:36:15,319
Speaker 11: on the other side, where the economies tend to be

744
00:36:15,360 --> 00:36:18,160
Speaker 11: more isolated and they've had very favorable fundamentals behind them.

745
00:36:18,680 --> 00:36:20,719
Speaker 6: Damn, I want to come back as a macro trader, dude,

746
00:36:20,719 --> 00:36:21,880
Speaker 6: that's where all the action.

747
00:36:22,160 --> 00:36:22,440
Speaker 9: I know.

748
00:36:22,960 --> 00:36:25,000
Speaker 10: Yes, why are we stocks guys?

749
00:36:25,120 --> 00:36:27,520
Speaker 3: You could be you could be the next Treasury secretary.

750
00:36:27,719 --> 00:36:28,560
Speaker 3: Yes you can macro.

751
00:36:29,400 --> 00:36:31,440
Speaker 6: You know, I probably have a better shot at that

752
00:36:31,520 --> 00:36:33,880
Speaker 6: in this administration than I ever have in my life.

753
00:36:34,120 --> 00:36:37,320
Speaker 3: Exactly, just the odd unique calls.

754
00:36:37,440 --> 00:36:39,080
Speaker 2: Brian Well and thanks so much for joining us. Brian

755
00:36:39,080 --> 00:36:41,280
Speaker 2: Well And he's a chief investment officer and a general's

756
00:36:41,280 --> 00:36:43,880
Speaker 2: portfolio manager at TCW based out there in Los Angeles,

757
00:36:43,920 --> 00:36:46,800
Speaker 2: but in our New York studium in New York City. Exactly,

758
00:36:46,840 --> 00:36:48,240
Speaker 2: we just get rain on the parade tomorrow.

759
00:36:48,280 --> 00:36:49,440
Speaker 3: Still capital in the world.

760
00:36:49,520 --> 00:36:55,480
Speaker 1: Right, you're listening to the Bloomberg Intelligence Podcast. Catch us

761
00:36:55,520 --> 00:36:58,919
Speaker 1: live weekdays at ten am Eastern on applecar Play and

762
00:36:58,920 --> 00:37:02,600
Speaker 1: androyd outto with Bloomberg Business. You can also listen live

763
00:37:02,680 --> 00:37:05,840
Speaker 1: on Amazon Alexa from our flagship New York station Just

764
00:37:05,920 --> 00:37:08,560
Speaker 1: Say Alexa playing Bloomberg eleven thirty.

765
00:37:10,040 --> 00:37:12,760
Speaker 2: One of the most widely read stories on the Bloomberg

766
00:37:12,840 --> 00:37:14,920
Speaker 2: terminal has to do with some of the bigger names

767
00:37:14,920 --> 00:37:16,840
Speaker 2: out there in global wall streets. That's not a surprise.

768
00:37:16,880 --> 00:37:22,920
Speaker 2: Black Rock Vanguard accused of antitrust violations by Texas. What's

769
00:37:22,960 --> 00:37:25,200
Speaker 2: going on down with our friends in Texas? Peter Jeffrey

770
00:37:25,239 --> 00:37:28,480
Speaker 2: joins as Bloomberg News Legal editor. Peter, what's going on

771
00:37:28,560 --> 00:37:31,799
Speaker 2: with some of these huge, huge asset managers and are

772
00:37:31,840 --> 00:37:33,600
Speaker 2: good friends at the State of Texas. What's going on?

773
00:37:33,840 --> 00:37:39,240
Speaker 10: The asset managers have belonged to groups that are seeking

774
00:37:39,320 --> 00:37:44,080
Speaker 10: to mitigate climate change by reducing, for example, coal output.

775
00:37:44,360 --> 00:37:46,560
Speaker 10: Some of them have drifted away from these groups. But

776
00:37:47,000 --> 00:37:50,560
Speaker 10: Texas sued this morning in federal court claiming that the

777
00:37:50,600 --> 00:37:55,680
Speaker 10: asset managers are effectively colluding to depress the output of

778
00:37:55,760 --> 00:37:59,600
Speaker 10: coal and therefore raising energy prices on consumers in the

779
00:37:59,640 --> 00:38:03,799
Speaker 10: states that suit, including Texas, West Virginia, Montana, Alabama, and

780
00:38:03,800 --> 00:38:05,799
Speaker 10: so forth. Republican led states.

781
00:38:05,719 --> 00:38:08,520
Speaker 4: How much of this is just kind of looney? Ken Paxton,

782
00:38:09,480 --> 00:38:11,839
Speaker 4: Republican Texas Politics.

783
00:38:12,239 --> 00:38:15,120
Speaker 10: Ken Paxton does sue a lot, But it's an interesting suit.

784
00:38:15,120 --> 00:38:17,960
Speaker 10: It's one hundred pages long, and I think you know,

785
00:38:18,120 --> 00:38:21,280
Speaker 10: just looking at over they're going to have to show

786
00:38:21,920 --> 00:38:25,480
Speaker 10: that it was the actions of Black Rock and State

787
00:38:25,480 --> 00:38:31,560
Speaker 10: Street and Vanguard themselves. They're pushing these portfolio companies to

788
00:38:32,360 --> 00:38:36,920
Speaker 10: cut down on their coal output. The states are going

789
00:38:37,000 --> 00:38:39,200
Speaker 10: to have to show that that is what led to

790
00:38:39,320 --> 00:38:41,920
Speaker 10: the reduction of the coal output, it seems to me,

791
00:38:42,400 --> 00:38:45,759
Speaker 10: and therefore raised prices on consumers. So to your question, yes,

792
00:38:45,840 --> 00:38:48,440
Speaker 10: Ken Paxton does sue a lot. Yes, he's got to

793
00:38:48,480 --> 00:38:50,360
Speaker 10: show all that as well as the other states.

794
00:38:51,160 --> 00:38:54,759
Speaker 4: Attorney the Attorney General, who himself went through an impeachment

795
00:38:55,280 --> 00:38:56,120
Speaker 4: and prevailed.

796
00:38:56,200 --> 00:38:59,359
Speaker 10: But I will say that it's carefully been looking at it.

797
00:38:59,360 --> 00:39:02,640
Speaker 10: This just this more. It's a carefully written, fairly well

798
00:39:02,680 --> 00:39:07,000
Speaker 10: structured suit presentationally. Now, whether it can prove the allegations

799
00:39:07,040 --> 00:39:07,880
Speaker 10: is an open question.

800
00:39:08,000 --> 00:39:08,879
Speaker 3: I always find that funny.

801
00:39:09,080 --> 00:39:11,360
Speaker 2: I'm learning from Alex Steel, who's, you know, our expert

802
00:39:11,400 --> 00:39:14,120
Speaker 2: hero on energy. You know, you think of Texas, you

803
00:39:14,120 --> 00:39:17,440
Speaker 2: think oil and gas, but they're also the biggest wind

804
00:39:17,520 --> 00:39:21,520
Speaker 2: farm people, the biggest solar places are down there in Texas.

805
00:39:21,880 --> 00:39:24,320
Speaker 3: I mean, so they are cranking out a ton of alternatives.

806
00:39:24,320 --> 00:39:27,080
Speaker 10: And in fact it's those alternative sources that are partly

807
00:39:27,120 --> 00:39:30,080
Speaker 10: playing a role by competing with coal one of the

808
00:39:30,120 --> 00:39:35,040
Speaker 10: forces that may be making it maybe depressing coal output

809
00:39:35,080 --> 00:39:37,680
Speaker 10: as well. So again to show this connection that it's

810
00:39:37,760 --> 00:39:41,640
Speaker 10: Larry Fink who is driving down the coal output and

811
00:39:41,760 --> 00:39:44,080
Speaker 10: up the prices is the challenge for the states that

812
00:39:44,120 --> 00:39:45,719
Speaker 10: are suing. It's quite an interesting suit.

813
00:39:45,960 --> 00:39:48,480
Speaker 4: We also know from having rid the grid that Texas

814
00:39:48,480 --> 00:39:50,759
Speaker 4: has its own grid that's not hooked up to the

815
00:39:50,760 --> 00:39:54,960
Speaker 4: rest of us, right, but fiercely independent streak that yes, yeah, exactly.

816
00:39:55,080 --> 00:39:59,240
Speaker 10: And coal output in Texas I think is down to

817
00:39:59,280 --> 00:40:03,279
Speaker 10: ten percent of its energy output from eighteen percent just

818
00:40:03,800 --> 00:40:06,600
Speaker 10: four or five years ago, if I've got those figures right.

819
00:40:06,920 --> 00:40:10,840
Speaker 10: So there's no question that the coal output is diminishing.

820
00:40:10,880 --> 00:40:13,000
Speaker 10: But what's causing that will be one of the crucial

821
00:40:13,440 --> 00:40:15,400
Speaker 10: links to show in succeeding.

822
00:40:15,400 --> 00:40:17,720
Speaker 3: And what are these asset manage Have they said anything

823
00:40:17,760 --> 00:40:19,640
Speaker 3: in response to these so far?

824
00:40:19,719 --> 00:40:23,760
Speaker 10: No, they haven't yet given us their position. We're waiting.

825
00:40:23,760 --> 00:40:25,520
Speaker 10: We're hoping to get that position. Put it in an

826
00:40:25,600 --> 00:40:27,279
Speaker 10: update in our story. But I'll tell you what they're

827
00:40:27,280 --> 00:40:29,960
Speaker 10: asking the court to do. They're asking the court. It's

828
00:40:30,320 --> 00:40:33,799
Speaker 10: kind of interesting. One of the possible asks, if necessary,

829
00:40:34,040 --> 00:40:37,800
Speaker 10: is asking the court to force these giant money managers,

830
00:40:37,800 --> 00:40:41,359
Speaker 10: the top three US money managers, to divest themselves of

831
00:40:41,400 --> 00:40:43,759
Speaker 10: these coal holdings. We'll see if it happens, but that

832
00:40:43,920 --> 00:40:45,600
Speaker 10: is one of the things the suit seeks.

833
00:40:45,880 --> 00:40:48,640
Speaker 4: Do they still shake in their boots when this happens

834
00:40:48,760 --> 00:40:50,920
Speaker 4: or are they sort of like the asset managers kind

835
00:40:50,920 --> 00:40:51,600
Speaker 4: of fighting back.

836
00:40:52,040 --> 00:40:55,719
Speaker 10: Well, that's a good question. I mean, there's been so

837
00:40:55,960 --> 00:41:03,919
Speaker 10: much litigation around ESG and some money withdrawn because of ESG.

838
00:41:04,600 --> 00:41:07,359
Speaker 10: But I think at this point, you know, they'll look

839
00:41:07,440 --> 00:41:09,960
Speaker 10: the suit, they'll read the suit carefully, they'll be prepared.

840
00:41:11,440 --> 00:41:13,080
Speaker 10: I don't know if they're shaking in their boots.

841
00:41:13,280 --> 00:41:17,400
Speaker 2: Yeah, it's uh, I'm from Van Garter State's really you know,

842
00:41:17,600 --> 00:41:18,200
Speaker 2: I'll go against.

843
00:41:18,680 --> 00:41:21,279
Speaker 10: One of the federal statutes that the suit invokes is

844
00:41:21,320 --> 00:41:24,080
Speaker 10: the Clayton Anti Trust Act from nineteen fourteen, and what

845
00:41:24,200 --> 00:41:28,520
Speaker 10: that says is that if you any action that you take,

846
00:41:28,600 --> 00:41:32,200
Speaker 10: for example, in shareholder proposals, voting on shareholder proposals, has

847
00:41:32,239 --> 00:41:37,400
Speaker 10: the effect of limiting competition is illegal.

848
00:41:37,440 --> 00:41:38,880
Speaker 3: All right, Peter, thank you so much for joining us.

849
00:41:38,880 --> 00:41:41,520
Speaker 2: Peter Jeffrey, he's a legal editor for a Bloomberg News

850
00:41:41,600 --> 00:41:42,759
Speaker 2: joining us here in a Bloomberg ARCTORP.

851
00:41:42,800 --> 00:41:43,360
Speaker 3: Porker studio.

852
00:41:43,640 --> 00:41:48,120
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853
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854
00:41:51,320 --> 00:41:54,920
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855
00:41:55,040 --> 00:41:58,399
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856
00:41:58,560 --> 00:42:00,439
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857
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858
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