WEBVTT - Fed’s Favored Inflation Gauge Rises 0:00:02.400 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.119 --> 0:00:13.320 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.320 --> 0:00:15.800 Eastern on Apple car Playing and Broud Auto with the 0:00:15.800 --> 0:00:19.720 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:19.920 --> 0:00:23.440 or watch us live on YouTube. 0:00:23.320 --> 0:00:25.640 Alex Steal for the next hour on Paul Sweeney Live 0:00:25.640 --> 0:00:28.880 here on Bloomberg Interactive Broker Studio and streaming live. 0:00:28.720 --> 0:00:31.520 On YouTube as well, so you can do that as well. 0:00:31.360 --> 0:00:34.000 John Tucker, I'm looking at the inflation data. I mean, 0:00:34.080 --> 0:00:37.440 people tell me, the smart people that core PCE is 0:00:37.479 --> 0:00:39.760 a core or is one of the big big issues 0:00:39.800 --> 0:00:42.760 of things that the FED looks at. You know, month 0:00:42.760 --> 0:00:45.560 on month, zero point three percent, right in line with expectations, 0:00:45.600 --> 0:00:46.600 in line with last month. 0:00:46.720 --> 0:00:49.839 But two point eight percent, I mean that's above. It 0:00:49.960 --> 0:00:52.160 seems to me that it has stalled there. 0:00:52.400 --> 0:00:54.640 Yes, that is a great point, but it will above. 0:00:55.200 --> 0:00:56.240 But I think, true to. 0:00:56.240 --> 0:00:59.160 Me, just in my experience, two point eight percent is fine. 0:00:59.560 --> 0:01:01.480 I mean wages are higher than that, so I mean 0:01:01.640 --> 0:01:03.960 I have more money in my pocket. 0:01:03.640 --> 0:01:05.240 Relative to what I'm spending. 0:01:05.560 --> 0:01:07.120 Just if you look at the real wages four and 0:01:07.120 --> 0:01:09.959 a half five percent a nominal wage growth. 0:01:10.760 --> 0:01:11.640 You know, I don't know. 0:01:11.800 --> 0:01:14.319 It's interesting here, but I know the FED wants to 0:01:14.319 --> 0:01:16.280 go lower, doesn't it once it get down closer to 0:01:16.319 --> 0:01:17.640 that two percent level? 0:01:17.800 --> 0:01:19.160 What did the experts say. 0:01:19.280 --> 0:01:21.360 Well, I don't know, I mean they experts say, like, 0:01:21.520 --> 0:01:22.880 I think they kind of said what you. 0:01:22.800 --> 0:01:24.880 Said, which is, we kind of stalled here. 0:01:24.920 --> 0:01:27.280 We've made a lot of the economy has made a 0:01:27.319 --> 0:01:29.640 lot of progress in terms of bringing inflation down from 0:01:29.640 --> 0:01:31.800 that really high level coming out of the pandemic. But 0:01:32.040 --> 0:01:34.160 maybe this last fifty or a hundred basis points. 0:01:34.000 --> 0:01:35.839 Is going to be a little a little bit more tougher. 0:01:35.920 --> 0:01:39.399 So let's check in with somebody who actually, somehow has 0:01:39.400 --> 0:01:41.200 built a career out of doing this, and that is 0:01:41.240 --> 0:01:44.959 Ira Jersey, chief US interest rate strategist for Bloomberg Intelligence. 0:01:45.319 --> 0:01:48.000 He liked the government bond market that he focuses on, 0:01:48.040 --> 0:01:50.120 pays a lot of attention to a lot of this 0:01:50.200 --> 0:01:51.640 macroeconomic data. 0:01:52.000 --> 0:01:52.880 Hey, I don't know. 0:01:52.920 --> 0:01:55.320 I look at the inflation data today. I mean it's 0:01:55.480 --> 0:01:59.560 in line with expectations. It feels like maybe we've stalled 0:01:59.560 --> 0:02:01.600 a little bit in terms of pushing this down a little. 0:02:01.440 --> 0:02:03.600 Bit lower, but still all in all, not bad. How 0:02:03.600 --> 0:02:05.280 do you think the markets will look at this? 0:02:05.920 --> 0:02:08.200 So I agree to John's point. You know, it seems 0:02:08.200 --> 0:02:11.080 like we've stalled here on core inflation, and a big 0:02:11.160 --> 0:02:13.440 reason for that stalling in core inflation is some of 0:02:13.480 --> 0:02:17.000 the consumption that's going on. So services continues to be 0:02:17.080 --> 0:02:21.680 the main driver of that core PCE number being as 0:02:21.720 --> 0:02:25.640 high as it is because excluding gasoline and fuel prices 0:02:25.639 --> 0:02:27.440 which have come down, which is a reason you see 0:02:27.480 --> 0:02:32.160 headline year on year deflator down at two point three percent, 0:02:33.320 --> 0:02:36.360 the services continues to grow like gangbusters. So people are 0:02:36.360 --> 0:02:39.120 still spending money. You look at that personal spending data 0:02:39.280 --> 0:02:41.880 and you can see that. You know, people have money 0:02:41.880 --> 0:02:43.600 in their pockets and they're willing to spend it. So 0:02:43.639 --> 0:02:46.200 I think overall this is a steady state from where 0:02:46.240 --> 0:02:46.600 we were. 0:02:46.639 --> 0:02:46.799 Now. 0:02:47.080 --> 0:02:49.440 Does this mean that it gives a green light for 0:02:49.520 --> 0:02:52.679 the Fed to cut interest rates in December? They could 0:02:52.720 --> 0:02:55.480 if they wanted to, But you could also couch this 0:02:55.600 --> 0:02:58.480 in Hey, things still aren't bad enough for them to 0:02:58.560 --> 0:03:02.000 have to cut aggressively, so maybe they could skip this 0:03:02.040 --> 0:03:05.520 one and then reassess and then go again in January. 0:03:06.400 --> 0:03:09.400 But you know, next week's payrolls numbers will be the 0:03:09.440 --> 0:03:11.080 deciding factor of that more likely. 0:03:11.360 --> 0:03:14.160 Does this beg the question where where's everybody getting this 0:03:14.240 --> 0:03:16.760 money from? Or are they just charging other credit cards? 0:03:16.960 --> 0:03:19.440 Well, well, well, the simple answer to that, John is 0:03:19.960 --> 0:03:21.880 it's coming from wages. So when you look at the 0:03:21.919 --> 0:03:24.960 personal income numbers that that came out today, you have 0:03:25.040 --> 0:03:28.840 a zero point six increase month on month in personal 0:03:28.880 --> 0:03:32.720 income and if you know analyze annualize that you're talking 0:03:32.720 --> 0:03:36.880 about well well over five percent increase in wages in 0:03:36.960 --> 0:03:40.040 personal income year on year. Now, some of that comes 0:03:40.040 --> 0:03:42.920 from government transfers and the like, but a lot of 0:03:42.960 --> 0:03:46.400 that that that increase in government transfers really usually happens 0:03:46.400 --> 0:03:48.080 early in the year when you get costs of living, 0:03:48.080 --> 0:03:51.360 adjustments to social security and the like. So so it's 0:03:51.400 --> 0:03:55.040 really coming people are spending their extra income that they're receiving. 0:03:55.800 --> 0:03:58.680 So I don't see how that stops unless the labor 0:03:58.720 --> 0:03:59.760 market really turns around. 0:03:59.760 --> 0:04:03.640 Meaning here, So what else do you think the FED 0:04:03.800 --> 0:04:07.680 is looking at here? Because it feels like inflation by 0:04:07.760 --> 0:04:10.160 and large most parts of the economy kind of under control. 0:04:10.280 --> 0:04:13.160 Is it primarily labor here that they're looking at now? 0:04:13.200 --> 0:04:18.040 Ira, Yeah, they shifted that basically four or five months 0:04:18.080 --> 0:04:21.040 ago toward you know, looking at the job market, and 0:04:21.400 --> 0:04:23.640 it looked like for a very brief period of time 0:04:23.720 --> 0:04:25.440 earlier this year, in the middle of the year, that 0:04:25.480 --> 0:04:28.080 the job market was starting to slow very meaningfully. It's 0:04:28.080 --> 0:04:30.960 a reason why in a way, the Fed maybe panicked 0:04:30.960 --> 0:04:33.800 a little bit in September and cut by fifty basis points. 0:04:34.160 --> 0:04:37.240 You saw some anecdotal data out of the Beige Book 0:04:37.279 --> 0:04:40.880 and out of some of the other surveys that employment 0:04:41.000 --> 0:04:43.640 was softening, but you haven't seen that in the hard data. 0:04:44.040 --> 0:04:46.320 And what you've seen the treasury market do is follow 0:04:46.360 --> 0:04:48.880 the hard data, the actual data that's coming out, as 0:04:48.920 --> 0:04:52.120 opposed to the survey data, which maybe was influenced by 0:04:52.120 --> 0:04:56.240 the election, influenced by just sentiment of things and the 0:04:56.279 --> 0:04:59.200 political aspects that were going on where everyone was so 0:04:59.320 --> 0:05:02.760 divided and unsure about the future. But that didn't stop 0:05:02.800 --> 0:05:05.960 them from actually spending money or actually hiring people or 0:05:06.000 --> 0:05:08.960 giving raises. And you see that in today's data, where 0:05:09.080 --> 0:05:12.640 you know, personal personal spending was up zero point four percent. 0:05:12.680 --> 0:05:15.480 That's fine, right, but it's really that income numbers that 0:05:15.720 --> 0:05:18.680 come up, which also means ironically, Paul, that you have 0:05:18.720 --> 0:05:20.640 to remember that means the savings rate went up, and 0:05:20.640 --> 0:05:23.840 I haven't looked dug into the data significantly, but the 0:05:23.880 --> 0:05:26.440 savings rate now is four point four percent, up from 0:05:26.480 --> 0:05:29.320 four point one percent the month before. So you know, 0:05:29.360 --> 0:05:31.560 that increase in the savings rate means that there's more 0:05:31.560 --> 0:05:34.360 people putting money into money market mutual funds and into 0:05:34.400 --> 0:05:36.840 other investments. So that's something else that can prop up 0:05:37.000 --> 0:05:40.359 some risk asset markets maybe as as we move forward, 0:05:40.400 --> 0:05:42.560 and people are not only spending, but they're also saving. 0:05:42.839 --> 0:05:45.880 So the way it works, you've got to track workers. 0:05:45.920 --> 0:05:48.520 You're going to pay them more to attract them to 0:05:48.640 --> 0:05:50.840 keep them. If you're going to pay them more, then 0:05:50.880 --> 0:05:53.280 you have to raise your prices and pass that along 0:05:53.360 --> 0:05:55.919 to the customers who are actually the workers that you 0:05:56.040 --> 0:05:57.479 just hired, that you just paid. 0:05:58.560 --> 0:06:02.040 So well, yes, John, that's true. But at the same time, 0:06:02.120 --> 0:06:05.320 what you are seeing is that inflation is going up 0:06:05.360 --> 0:06:09.200 just a little bit more than consumer spending, right, So 0:06:09.200 --> 0:06:12.640 so what that probably means is that margins are basically 0:06:12.680 --> 0:06:16.920 being maintained, not necessarily increasing. And in services, and keep 0:06:16.920 --> 0:06:19.560 in mind, we don't have the same kind of you know, 0:06:20.040 --> 0:06:23.120 micro level detail in services because a lot of services 0:06:23.120 --> 0:06:26.680 are smaller businesses. They're franchises and the like, so you 0:06:26.720 --> 0:06:29.600 don't have the kind of you know, information like we 0:06:29.680 --> 0:06:33.360 always here at Bloomberg and a lot of financial market analysts, right, 0:06:33.440 --> 0:06:36.400 we see the public data that comes in from public 0:06:36.440 --> 0:06:38.960 companies and they give us a whole slew of information. 0:06:39.360 --> 0:06:43.320 But that's but there's most services companies are not those 0:06:43.480 --> 0:06:48.080 large corporations. They're smaller businesses or maybe franchises of some 0:06:48.120 --> 0:06:51.200 of the larger corporations that you don't necessarily know exactly 0:06:51.240 --> 0:06:53.719 what their margins are, exactly what they're charging at the 0:06:53.720 --> 0:06:55.760 ground level. And that's one reason why the PC data 0:06:55.800 --> 0:06:58.320 is so important because it does do a better job 0:06:58.360 --> 0:07:01.520 than say the retail sales figures in determining what service 0:07:01.600 --> 0:07:03.440 is spending and services prices are doing. 0:07:04.480 --> 0:07:07.320 Lisa Bromwitz told me this morning that there's a government 0:07:07.440 --> 0:07:08.840 treasury auction do what. 0:07:09.279 --> 0:07:12.440 I don't care about the seven years, right, it is. 0:07:12.600 --> 0:07:15.640 About that I refer for the folks out there and 0:07:15.680 --> 0:07:16.920 tell us why it's important. 0:07:17.480 --> 0:07:20.240 Yeah, Well, it's important because the government has to fund 0:07:20.320 --> 0:07:23.120 the massive deficit. So one of the reasons why personal 0:07:23.160 --> 0:07:26.080 spending is where it is as high as it is 0:07:26.080 --> 0:07:28.800 is because the government transfers money to the household sector, 0:07:28.880 --> 0:07:31.000 and where it gets that money from is from savers, 0:07:31.000 --> 0:07:33.160 So it is a bit of a circular thing going 0:07:33.200 --> 0:07:37.040 on here where where Right now, twenty eight percent of 0:07:37.080 --> 0:07:43.200 consumption is coming from government transfers, so basically social security recipients, Medicare, Medicaid, 0:07:44.120 --> 0:07:47.640 you know, and other you know programs that the government 0:07:47.760 --> 0:07:51.080 runs and gives transfers to the household and business sector. 0:07:51.480 --> 0:07:54.840 That's contributing about a quarter of our personal consumption right now, 0:07:55.560 --> 0:07:58.200 which means that that it has to be maintained in 0:07:58.280 --> 0:08:01.440 order for the economy to to continue to be as 0:08:01.560 --> 0:08:05.680 robust as it has been. And the government bond auctions 0:08:05.720 --> 0:08:08.360 just show how much demand there is for new bonds 0:08:08.400 --> 0:08:11.560 being issued. And forty four billion dollars of seven year 0:08:11.640 --> 0:08:15.120 supply right before a holiday weekend, when you know, maybe 0:08:15.160 --> 0:08:17.680 a lot of senior traders are off, you know, can 0:08:17.760 --> 0:08:20.080 create some fireworks and maybe move the market a little 0:08:20.120 --> 0:08:23.000 bit if demand isn't particularly high. That being said, the 0:08:23.080 --> 0:08:25.880 last couple of auctions this week have actually gone okay, 0:08:26.240 --> 0:08:29.120 So I don't suspect that the seven year is going 0:08:29.160 --> 0:08:32.160 to be particularly bad. But if you do see a 0:08:32.200 --> 0:08:35.439 big slip in the amount of demand at this auction 0:08:35.520 --> 0:08:37.680 and you wind up with pushing yields a bit higher. 0:08:38.320 --> 0:08:40.400 You know, that means we have to even pay more 0:08:40.400 --> 0:08:43.280 attention when we get the auctions next month to see 0:08:43.280 --> 0:08:45.280 if that is just a one off flip on a 0:08:45.320 --> 0:08:48.040 holiday week or if it's something that is more concerning 0:08:48.200 --> 0:08:50.840 in terms of demand for new bonds. 0:08:51.320 --> 0:08:54.280 Is there a loud and clear message coming from the bond. 0:08:54.000 --> 0:08:59.920 Market, Well, if there is one, it's that the economies 0:09:00.040 --> 0:09:02.560 better than a lot of people thought it was just 0:09:02.600 --> 0:09:05.960 six months ago. And and the market right now is 0:09:06.000 --> 0:09:10.000 signaling that it doesn't expect a very rapid pace of 0:09:10.040 --> 0:09:14.400 cuts or cutsow below four percent for example on the 0:09:15.400 --> 0:09:17.480 on the Fed funds rate right now. So it's you know, 0:09:17.520 --> 0:09:20.120 the market is expecting more cuts, but it's only expecting 0:09:20.200 --> 0:09:22.679 you know, maybe another fifty to one hundred basis points 0:09:22.720 --> 0:09:26.839 at the most in terms of interest rate declines because 0:09:26.880 --> 0:09:29.439 the economy has been so strong, and that is confirmed 0:09:29.480 --> 0:09:32.040 by this data, which is the first data that we 0:09:32.080 --> 0:09:34.320 get for the fourth quarter, of course, and and the 0:09:34.320 --> 0:09:36.240 fact that it is so strong I think bodes well 0:09:36.320 --> 0:09:38.920 for things like GDP. You're going to see GDP now 0:09:39.760 --> 0:09:43.760 forecasts get get updated after this data and they're all 0:09:43.760 --> 0:09:45.720 going to show that the fourth quarter is pretty good. 0:09:45.800 --> 0:09:48.520 Atlanta FED, Cleveland FED. There's a couple of different people, 0:09:48.600 --> 0:09:51.760 you know, Bloomer Bloomberg Economics has their own now cast 0:09:51.800 --> 0:09:53.800 as well, so so you know, take a look at 0:09:53.800 --> 0:09:56.160 those and see and you're going to see that the 0:09:56.200 --> 0:10:00.440 market right now is suggesting that we're that the economy 0:10:00.520 --> 0:10:02.839 is reasonably strong, and the STATA just confirms that we 0:10:03.200 --> 0:10:03.680 just had. 0:10:03.520 --> 0:10:05.760 An election, And I don't think that's the message I 0:10:05.800 --> 0:10:07.760 took away from the election results. 0:10:08.559 --> 0:10:11.520 Yeah, that's I you know, obviously there was a lot 0:10:11.559 --> 0:10:15.720 that probably went into the election, but you know, clearly 0:10:16.400 --> 0:10:18.400 there were people who, you know, maybe blame the Biden 0:10:18.400 --> 0:10:20.640 administration for the inflation that we had, right and that 0:10:20.760 --> 0:10:24.240 is backward looking, not forward looking. But the economy is 0:10:24.679 --> 0:10:27.120 not doing badly regardless of who's in the White House. 0:10:27.240 --> 0:10:33.200 And I suspect that that could certainly change right going 0:10:33.200 --> 0:10:36.480 into twenty twenty five, but at least where we sit 0:10:36.559 --> 0:10:39.680 right now, you know, over the next two three quarters, 0:10:40.040 --> 0:10:41.920 I don't think that we're going to wind up seeing 0:10:41.920 --> 0:10:44.640 the recession that a lot of people, including myself, thought 0:10:44.640 --> 0:10:47.080 we were going to see by this time. But by 0:10:47.120 --> 0:10:49.840 this time when we were looking back eighteen months ago. 0:10:50.040 --> 0:10:51.800 I had great stuff. Thanks so much for joining us, 0:10:51.840 --> 0:10:52.560 our Jersey folks. 0:10:52.600 --> 0:10:55.319 He's the chief US interst rate strategist for Bloomberg Intelligence. 0:10:55.840 --> 0:11:02.760 Safely asconced then another Princeton, New Jersey officers nobody. It's 0:11:02.760 --> 0:11:04.400 a great office, by the way, and they redid it. 0:11:04.480 --> 0:11:07.240 It's an awesome place for those folks to work down 0:11:07.280 --> 0:11:08.840 a lot of good folks down there in Princeton. 0:11:10.320 --> 0:11:14.240 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:14.320 --> 0:11:17.800 weekdays at ten am Eastern on applecard Play and Android 0:11:17.840 --> 0:11:20.640 Auto with the Bloomberg Business App. You can also listen 0:11:20.760 --> 0:11:23.840 live on Amazon Alexa from our flagship New York station 0:11:24.200 --> 0:11:26.959 Just say Alexa playing Bloomberg eleven thirty. 0:11:28.440 --> 0:11:31.600 John Tucker sitting in for Alex Steel and I'm Paul 0:11:31.600 --> 0:11:34.000 Swhen you were live here in our Bloomberg Interactive Broker studio, 0:11:34.000 --> 0:11:35.559 we're streaming live on YouTube, so you have to go 0:11:35.600 --> 0:11:37.920 over to YouTube dot com search Bloomberg Podcast and that's 0:11:38.040 --> 0:11:40.080 where you will find us. I don't know, John, We're 0:11:40.080 --> 0:11:44.560 getting some pretty solid economic data. I've the earnings that 0:11:44.600 --> 0:11:47.840 were just kind of finishing up were pretty solid. Expectations 0:11:47.880 --> 0:11:49.920 are still pretty positive for earnings. I got a FED 0:11:49.960 --> 0:11:52.080 that I think is cutting rates. I think that's all 0:11:52.080 --> 0:11:54.800 pretty constructive for markets. Here, let's check in with somebody 0:11:54.800 --> 0:11:57.320 who does this stuff for a living, Sylvia Jablonski, chief 0:11:57.320 --> 0:12:02.760 executive Officer and chief investment Officer, Defiance TFS. You know, Sylvia, 0:12:02.800 --> 0:12:05.040 I'd love to just get your thoughts just broadly defined, 0:12:05.040 --> 0:12:07.360 to start off here about where you think we are 0:12:07.360 --> 0:12:09.760 with some just kind of the market outlook as we 0:12:09.760 --> 0:12:12.520 think about twenty twenty five. Where are you guys in 0:12:12.600 --> 0:12:14.440 terms of thinking about where this could go. 0:12:15.720 --> 0:12:20.600 Well, good morning, and I'm happy early Thanksgiving to you both. Well, 0:12:20.880 --> 0:12:23.320 I think that the markets are probably poised for a 0:12:23.320 --> 0:12:26.280 small rally into year end. We'll probably you know, go 0:12:26.360 --> 0:12:28.880 back to these highs that we've tested this year and 0:12:29.200 --> 0:12:30.800 see that happen in the next month or so. 0:12:31.160 --> 0:12:32.520 You had a great setup there, right. 0:12:32.559 --> 0:12:35.240 The FED has cut already and is potentially on a 0:12:35.280 --> 0:12:39.000 path to continue cutting or at least holding and not raising. So, 0:12:39.360 --> 0:12:41.840 you know, financial conditions should be a little bit better 0:12:41.880 --> 0:12:44.640 for corporations. We have a president that's coming in that's 0:12:44.679 --> 0:12:48.520 pro deregulation, you know, market friendly, tax cuts, things like that, 0:12:48.920 --> 0:12:51.720 So that tends to, you know, do well for markets 0:12:51.760 --> 0:12:53.840 as well. So you know, my view on this is 0:12:53.840 --> 0:12:56.319 that for the next call it eighteen months or so, 0:12:56.400 --> 0:12:58.920 I think we're in a pretty smooth soft you know, spot, 0:12:59.000 --> 0:13:01.960 barring any kind of made or changes to fiscal monetary 0:13:02.000 --> 0:13:05.040 policy to see the SMP and the broader based indices 0:13:05.040 --> 0:13:05.720 trend upward. 0:13:07.000 --> 0:13:10.920 How much money's on the sidelines at this point, Sylvia, Yeah, 0:13:10.920 --> 0:13:13.200 a lot, I think, you know, to the tune of 0:13:13.240 --> 0:13:14.600 seven trillion or more. 0:13:14.920 --> 0:13:16.960 And I think that that's because you know, a lot 0:13:16.960 --> 0:13:19.720 of this kind of risk off mentality came about in 0:13:19.760 --> 0:13:22.280 twenty twenty two and didn't come back into the markets, 0:13:22.559 --> 0:13:25.560 particularly when you know five percent is the type of 0:13:25.600 --> 0:13:28.280 interest rate you're getting on your cash, and so I 0:13:28.320 --> 0:13:30.640 think that's changed now. You know, the SMP is going 0:13:30.679 --> 0:13:32.880 to be probably up twenty five percent or so this year, 0:13:33.679 --> 0:13:35.960 all of a sudden, it really makes sense to put 0:13:36.000 --> 0:13:38.080 some of that dry powder to work in the markets. 0:13:38.200 --> 0:13:39.920 And I think, you know, we're going to start seeing 0:13:39.960 --> 0:13:42.080 that come back in in the next couple of years. 0:13:42.080 --> 0:13:44.559 And I think you know that with high digit, high 0:13:44.559 --> 0:13:47.800 single digit corporate earnings outlook, cash coming off of the sidelines, 0:13:47.840 --> 0:13:51.000 that bodes well for at least a pretty decent average 0:13:51.120 --> 0:13:53.480 rate of return type of SMP five hundred. 0:13:54.720 --> 0:13:57.679 Sylvie, just with your ATF platform, I always love to 0:13:57.720 --> 0:14:00.679 just ask folks like you that are seeing the flows 0:14:00.679 --> 0:14:06.199 out there, where are the flows going in your ETF platform. 0:14:06.360 --> 0:14:09.439 Well, the most the most popular ETF that we have 0:14:09.520 --> 0:14:12.560 and potentially that you know Planet Earth has right now 0:14:12.559 --> 0:14:14.679 because I see everybody writing about it and talking about it, 0:14:14.760 --> 0:14:17.840 is the leverage micro Strategy ETF. So we have a 0:14:17.880 --> 0:14:21.280 two beta micro strategy ETF ticker symbols mst X, and 0:14:21.760 --> 0:14:23.800 you know, it's it's seen almost a couple of billions 0:14:23.800 --> 0:14:28.000 of flows just since its inception, which is basically September 0:14:28.120 --> 0:14:30.880 late August, and so that's just been a wildly popular trade. 0:14:31.240 --> 0:14:33.440 And then the election results and this idea. 0:14:33.160 --> 0:14:37.720 Around you know again deregulation and crypto adoptance really really 0:14:37.720 --> 0:14:38.520 helped that ETF. 0:14:38.560 --> 0:14:42.200 It's been widely popular there. Second place though is quantum. 0:14:42.320 --> 0:14:44.160 And there are all these little stocks out there that 0:14:44.160 --> 0:14:46.240 people don't talk too much about, but you know, I 0:14:46.400 --> 0:14:50.240 on qqba q qb ts like some of these small 0:14:50.320 --> 0:14:53.640 quantum computing companies. We have them in our Quantum ETF 0:14:53.680 --> 0:14:56.000 and so you know, a lot of flows have flowed 0:14:56.000 --> 0:14:59.760 into there is this AI evolution continues to grow. 0:15:00.120 --> 0:15:02.360 That's the little companies. I was fortunate enough to see 0:15:02.400 --> 0:15:06.960 the up and sleepy hollow, the IBM research center, the 0:15:07.160 --> 0:15:08.280 I think it's the Watson Reaches. 0:15:08.520 --> 0:15:10.920 Yeah, they've got a huge quantum center. Yeah. 0:15:11.000 --> 0:15:14.040 Yeah, and they've got this this thing is it looks 0:15:14.120 --> 0:15:17.720 really cool. Most of it is just cooling coils. It's 0:15:17.720 --> 0:15:19.960 like a big air conditioner, a big freezer for what 0:15:20.440 --> 0:15:23.160 is essentially a chip like this big and they have 0:15:23.200 --> 0:15:26.800 to keep it just above absolute zero, which is really 0:15:26.840 --> 0:15:30.560 really cool. I think of quantum computing those sylvia as 0:15:30.600 --> 0:15:32.880 sort of like you know, fusion energy. It's going to 0:15:32.880 --> 0:15:35.720 be another five ten years and then we get there, 0:15:35.760 --> 0:15:37.760 it's going to be another five ten years, et cetera. 0:15:37.880 --> 0:15:38.160 Center. 0:15:39.440 --> 0:15:42.720 Yeah, I think, you know, the broad topic and idea 0:15:42.760 --> 0:15:45.840 for us is more around the idea of supercomputing, you know, 0:15:45.920 --> 0:15:48.600 machine learning, AI plus quantum competing. But we're kind of 0:15:48.640 --> 0:15:51.920 referring to the companies that are responsible for those coolers 0:15:51.960 --> 0:15:54.160 that you saw right, and they're they're kind of feeding 0:15:54.160 --> 0:15:57.320 the hyperscalers and their AI and machine learning R and 0:15:57.400 --> 0:16:00.480 D and you know they provide these cooling systems or else, 0:16:00.600 --> 0:16:02.840 you know, basic quantum computers for them to kind of 0:16:02.880 --> 0:16:05.760 run their data on. And so it does exist already 0:16:05.760 --> 0:16:08.560 to some degree, right, Like you have banks running supercomputing 0:16:08.680 --> 0:16:13.400 to detect risk. It's used in cryptography already. You know, 0:16:13.480 --> 0:16:16.320 drug research has some level of machine learning and supercomputing. 0:16:16.360 --> 0:16:19.000 But it's the idea that these quantum computers will come 0:16:19.000 --> 0:16:22.040 in and allow this to be done more efficiently and 0:16:22.320 --> 0:16:24.560 more quickly to make it, you know, kind of more commercial. 0:16:24.720 --> 0:16:26.240 Is what's going to play out, I think in the 0:16:26.280 --> 0:16:27.040 next few years. 0:16:27.160 --> 0:16:29.240 And if you have an algorithm, you can actually send 0:16:29.280 --> 0:16:31.560 it to IBM and they will run it for you. 0:16:31.720 --> 0:16:32.080 Is that right? 0:16:32.240 --> 0:16:35.160 Clean up all the mistakes that invariably happen to. 0:16:35.560 --> 0:16:39.080 Interesting So may you talk to us a little bit 0:16:39.080 --> 0:16:41.560 about x MAG, x M A G. 0:16:43.400 --> 0:16:43.640 Yeah. 0:16:43.680 --> 0:16:45.920 So if you know, if you're of the mindset that 0:16:45.960 --> 0:16:48.840 the that the MAG seven are kind of at their 0:16:48.920 --> 0:16:51.520 highs and have you know, high valuations, and you're looking 0:16:51.560 --> 0:16:54.440 to put that seven trillion to work in the market, 0:16:54.840 --> 0:16:56.680 but you know you're kind of worried about those names 0:16:56.720 --> 0:16:57.560 not being the leaders. 0:16:57.640 --> 0:16:58.640 We launch x MAG. 0:16:58.720 --> 0:17:00.800 So that's the S and P five hundred minus the 0:17:00.840 --> 0:17:04.439 top seven tech companies, right, And so the thought there is, 0:17:04.520 --> 0:17:07.800 you know, number one, diversify small caps. You know, domestic 0:17:07.840 --> 0:17:10.280 policy things like this might be whove the rest of 0:17:10.280 --> 0:17:14.119 the market sub Max seven. Again, you have winners in 0:17:14.160 --> 0:17:16.520 there in the other four hundred and ninety seven. You know, 0:17:16.680 --> 0:17:20.840 names like whether it's Costco or Broadcom or Fishtraw, Constellation Energy, 0:17:20.880 --> 0:17:23.760 like all of these stocks that are doing quite well 0:17:23.800 --> 0:17:25.800 this year and aren't talked about. You know, we kind 0:17:25.800 --> 0:17:27.679 of let them fly because it's a market cap waiting. 0:17:27.760 --> 0:17:31.639 But that's the diversification trade. And the second argument there is, 0:17:31.760 --> 0:17:33.679 you know, we love the Max seven. We just know 0:17:33.720 --> 0:17:36.240 you already have them. If you own SMP, you know 0:17:36.280 --> 0:17:38.560 a third of that is the MAC seven. So you've 0:17:38.600 --> 0:17:39.280 got it somewhere. 0:17:39.920 --> 0:17:43.280 You're mentioning tax cuts, et cetera, and so forth, the regulation, 0:17:43.480 --> 0:17:46.040 all that stuff. How much of that is actually baked 0:17:46.080 --> 0:17:47.840 into company forecasts right now? 0:17:49.800 --> 0:17:54.040 I think, you know, probably not much. I don't know. 0:17:54.119 --> 0:17:57.400 I think the market was anticipating this winner, but then 0:17:57.400 --> 0:17:59.640 there was enough of uncertainty where you kind of saw 0:17:59.640 --> 0:18:02.879 things like the dollar and gold and commodities and a 0:18:02.960 --> 0:18:05.159 ten year pop around a lot before the election, so 0:18:05.200 --> 0:18:07.199 I don't think any of it was fully priced in. 0:18:07.560 --> 0:18:09.840 I think that post election pop kind of gave us 0:18:09.840 --> 0:18:11.960 some of that. But longer term, I think this will 0:18:12.440 --> 0:18:15.760 play out as companies actually save this money and expand 0:18:15.800 --> 0:18:18.399 balance sheets and you know, kind of have better taxes, 0:18:18.440 --> 0:18:20.399 more capex hopefully and some growth. 0:18:20.600 --> 0:18:22.439 All Right, Sylvia, thank you so much for joining us. 0:18:22.480 --> 0:18:24.840 Always appreciate getting few mina at your time. Sylvia Jablonski, 0:18:24.920 --> 0:18:29.440 Chief executive Officer and chief investment Officer at Defiance EF. 0:18:31.240 --> 0:18:35.119 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:18:35.200 --> 0:18:37.920 weekdays at ten am Eastern on Apple car Playing and 0:18:38.040 --> 0:18:40.919 broud Otto with the Bloomberg Business app. Listen on demand 0:18:40.960 --> 0:18:45.280 wherever you get your podcasts, or watch us live on YouTube. 0:18:44.960 --> 0:18:48.600 Do you have plitical front Some good news coming out 0:18:48.600 --> 0:18:52.639 of the Middle East? Lebanon ceasefire starts after Israel and 0:18:52.640 --> 0:18:54.359 Hesbloh reach a deal. 0:18:54.400 --> 0:18:54.920 That's the good news. 0:18:54.960 --> 0:18:56.159 Let's break it down a little bit and see what 0:18:56.240 --> 0:18:59.200 it means for that part of the world. Ned Lazareth, 0:18:59.359 --> 0:19:03.360 Associate Professor of International Affairs at George Washington University down 0:19:03.359 --> 0:19:05.720 here in Washington, d C. Joins us via that zoom thing. 0:19:06.280 --> 0:19:08.680 Ned talk to us about this agreement. What does this 0:19:08.760 --> 0:19:11.720 agreement say, what does it do? How is important for 0:19:11.760 --> 0:19:12.480 that part of the world. 0:19:14.040 --> 0:19:18.359