Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg
Speaker 1: dot com, and of course, on the Bloomberg Terminal. A
Speaker 1: conversation this morning with the Mayor of New York. Based
Speaker 1: on the briefing I'm from my law enforcement officials and
Speaker 1: based on the evidence that we were able to accumulate,
Speaker 1: he has now been upgraded to a suspect and we're
Speaker 1: asking all New york Is to assist us in his apprehension.
Speaker 1: H please do not approach him. If you see him,
Speaker 1: or if you know about his you know his whereabouts,
Speaker 1: please notify law enforcement. Can you tell us what you
Speaker 1: and all of your staff have learned about Mr James
Speaker 1: in the last six or seven hours. Well, you know
Speaker 1: this is moving and is extremely fluid of There is
Speaker 1: a host of evidence that we have been recovering of
Speaker 1: the NYPD, the FBI, as well as our state law
Speaker 1: enforcement entities have all collaborated together. I cannot say enough
Speaker 1: about the fast of growth that you have you are
Speaker 1: witnessing of. They had to piece together this case, from
Speaker 1: the band arrival here to the city, to the devices,
Speaker 1: things that we collected. They're doing a great job in
Speaker 1: bringing this person to justice. Mayor, I want to talk
Speaker 1: here about what we're gonna do. As Governor Hoco said
Speaker 1: about crime, you know the numbers in Chicago, you don't
Speaker 1: know the numbers here. I would say that you are
Speaker 1: arguably the most qualified politician in the nation with your
Speaker 1: experience from Bushwick years ago, after where you are now
Speaker 1: to talk about this First, I'm cameras in amendments and
Speaker 1: civil liberties and all that London is covered with cameras
Speaker 1: after terror events. Is this the tipping point where New
Speaker 1: York City one fifth of the cameras of London, begins
Speaker 1: to monitor the public like London. Well, I think that
Speaker 1: I've been talking about this since the time I took office.
Speaker 1: In January. I sent to my deputy mayor public safety
Speaker 1: across the globe to find out, how are we protecting
Speaker 1: human beings throughout the entire globe. And we are not
Speaker 1: going to sit back and allow this technology to exist
Speaker 1: and not protect the people of the city. And we're
Speaker 1: going to continue to explore it. Mayor Adams, you also
Speaker 1: had put more police forces into subway stations to protect
Speaker 1: the people of the city, given that this is just
Speaker 1: one in a series of events that have unfolded over
Speaker 1: the last year during the pandemic, even in subway stations,
Speaker 1: acts of violence. Clearly that failed yesterday. I know you've
Speaker 1: said you given yourself an incomplete on crime in the
Speaker 1: first one hundred days of your campaign. Is that incomplete
Speaker 1: looking more like a failure, less like anything of semblance
Speaker 1: of a passing grade. Well, we should be clear. We've
Speaker 1: been here before, as New York is. You know, I
Speaker 1: often talk about my mid eighties when I started into
Speaker 1: transit police ironically, and I'm aware of what it takes
Speaker 1: to turn around generational poverty, generational crisis, that violence in
Speaker 1: our cities. And then we cannot ignore the over proliferation
Speaker 1: of guns. Uh No, NYPD. My administration has not failed.
Speaker 1: We have removed eighteen hundred guns up the streets of
Speaker 1: our cities since being elected. Think about that. You are
Speaker 1: experts at the study of games. On January four, you
Speaker 1: stated you showed up at a press conference and said,
Speaker 1: we gotta do something about gangs. These kids three dead
Speaker 1: in the last twenty four hours, not the headlines like Brooklyn,
Speaker 1: but three days on Gates Avenue, on the Avenue, on
Speaker 1: Laconia Avenue. What are we gonna do about the gangs
Speaker 1: that pull these kids into crime and violence at a
Speaker 1: zero And it's called precision policing, not just throwing out
Speaker 1: a wide net. Having a precision approach to those who
Speaker 1: are trigger police and violent gangs. That is at the
Speaker 1: heart of our crisis. Uh, they're the mayor of New
Speaker 1: York City and an important conversation and we really need
Speaker 1: to be abundantly clear that we had a headline at
Speaker 1: that moment of the apprehension of the suspect, and that
Speaker 1: was corrected by ABC or sorry for that. That happens
Speaker 1: within the news flow that we have, as you know
Speaker 1: on Bloomberg surveillance. We've done everything we can to speak
Speaker 1: to experts into people who have lived so much of
Speaker 1: continental Europe and this new war. It is our honor
Speaker 1: now to speak to Nina Krascheva, professor of International Affairs
Speaker 1: at the New School, with the hair didge of her
Speaker 1: family far and back to World War Two. And you know,
Speaker 1: we don't have time to go into the story of
Speaker 1: your family coming out of the death of I believe
Speaker 1: your grandfather in World War Two. But we can speak
Speaker 1: to you with your academics at New School, your work
Speaker 1: at Princeton, of the mind of Vladimir Putin. As we've
Speaker 1: talked to Angela Stent, you have studied Putin and his
Speaker 1: affair with not the Russia the Soviet Union of Christeff
Speaker 1: but the Russia and Soviet Union of Stalin. What is
Speaker 1: the distinction of how Vladimir Putin looks at the early
Speaker 1: Soviet Union. Well, we thank you very much. We know
Speaker 1: that he doesn't like the early Soviet Union because he
Speaker 1: thinks it was an interruption of great imperial history when
Speaker 1: the Soviet Union was trying to become part of its
Speaker 1: own self, sort of as Stallion put it, um country
Speaker 1: within its own nation. So socialism or communism with um
Speaker 1: within one taken country Putin wants to be. And I
Speaker 1: disagree with a lot of experts who say he wants
Speaker 1: to recreate the Soviet Union. He actually wants to go
Speaker 1: back into history thousand years and the only reason he's
Speaker 1: interested in study, well, one of the reasons he's interested
Speaker 1: in studed because Studin was a gather of lands such
Speaker 1: as Catherine the Great, right such just Peter the Great.
Speaker 1: So he was a gather of lands, and he sees
Speaker 1: cruse Chef as somebody who gave away those lands. And
Speaker 1: if you need to be very brutal and very firm
Speaker 1: and very angry at the world together lands, Putin is
Speaker 1: going to be that. Mr Kristcheff was very much affiliated
Speaker 1: with Poland in the news this morning, Professor Kristcheva is Finland.
Speaker 1: I refuse to believe that Vladim and Putin will not
Speaker 1: focus on Finland, given this heritage of Leningrad and St. Petersburg.
Speaker 1: What is the embolism to Mr Putin of this new
Speaker 1: independence of Sweden and the eight under mild border of Finland. Well,
Speaker 1: it is you know, originally the Russians were saying, well,
Speaker 1: we're not afraid of Finland and Sweden becoming part of
Speaker 1: NATO because we have good relationship with them. I think
Speaker 1: the tone may be changing, but I think what's important
Speaker 1: here is that Putin trying to prevent NATO from expanding east,
Speaker 1: in fact made NATO even more expensional in in the
Speaker 1: East and that in the East, and that's that's what
Speaker 1: should really give them pause on the other hand, what
Speaker 1: I also know about Puttin is that once you challenge him,
Speaker 1: he's going to challenge back. So I think that it's
Speaker 1: about time for Sweden and Finland to think about NATO,
Speaker 1: because if Putin gets angry, he does get angry, and
Speaker 1: we did. We do see it. We we've seen it
Speaker 1: and we do see it in Ukraine. Now, Nina, does
Speaker 1: this end with regime change in Russia? Well, this is
Speaker 1: a very terrifying words to say, because we go to
Speaker 1: prison for this for even utter those words. Um No,
Speaker 1: I don't think it does. Uh, it may get less toxic,
Speaker 1: because Puttin is toxic. But I do think that. I mean,
Speaker 1: what happened now, and we've never seen it before, even
Speaker 1: under Stallion, because now the KGB over that security Forces,
Speaker 1: the FSB and Putting they are one and the same.
Speaker 1: Even on the Stallion they were sort of on parallel tracks.
Speaker 1: But starting with the brutal Dictator and f F KGB
Speaker 1: Uh it was a different name then, but security forces
Speaker 1: worked for him. Now Putting works with He is the
Speaker 1: security force. And so in this sense, even if the
Speaker 1: main hydroid at the top of it is the main dragon,
Speaker 1: is gone, the system will remain the system is not
Speaker 1: going to give itself up, so maybe they would be
Speaker 1: slightly better relationship with outside world. But for the Russians,
Speaker 1: it really doesn't look good inside. Well, let's talk about
Speaker 1: inside Russia, professor. Does domestic feeling within Russia a have
Speaker 1: a bearing on the Kremlin or on Vladimir Putin's decision
Speaker 1: making whatsoever? And be what is that feeling at this moment? Well,
Speaker 1: it was. It's really very interesting what happened because at
Speaker 1: the beginning was such a shock on February twenty and
Speaker 1: about fifty one of the country was just terrified, horrified,
Speaker 1: and a lot of people went, as you remember, went
Speaker 1: to protest, and then the state completely regrouped and basically
Speaker 1: any word of opposition now became a crime. Everything is
Speaker 1: a crime. People just stopped in the streets. My niece
Speaker 1: was arrested three times. Uh stopped and asked why are
Speaker 1: you here when you're um when your passport shows that
Speaker 1: you live in an entirely different part of part of Moscow.
Speaker 1: So it is like that, I mean, it's very stealininless
Speaker 1: right now, and so slowly but surely, with also great
Speaker 1: propaganda on TV that we are liberating with the Russian
Speaker 1: liberate our Ukrainian brothers from Nazi regime installed by the
Speaker 1: United States and NATO. Then now about support they as
Speaker 1: they call it special Operation. I mean, the numbers are fudge,
Speaker 1: but there is a lot of patriotism. And one of
Speaker 1: the patriotism part is because the sanctions now and not
Speaker 1: just financial and economic, they are cultural, they are society,
Speaker 1: they're humanitarian and everything, and so Russians have no other
Speaker 1: choice but to rally around the flat. Professor, I've got
Speaker 1: thirty seconds. We saw Vladimir Putin yesterday at the Cosmo
Speaker 1: Drome in the far east of Russia. Is he healthy?
Speaker 1: A lot of rumors once again, a lot of rumors.
Speaker 1: He doesn't look sick to me, but the people do,
Speaker 1: saying that the reason he went into Ukraine sort of
Speaker 1: follow up the cliff so quickly and on Februar, because
Speaker 1: he's rushing for something. I don't know that, but they're rumors.
Speaker 1: For Nina Kristcheffer, thank you so much for joining Bloomberg
Speaker 1: this morning, Professor kristef at the New School UH here
Speaker 1: in New York City, and of course, with their heritage
Speaker 1: age across so many decades of the Soviet Union in
Speaker 1: the Russian Federation. We're now gonna do what we do
Speaker 1: best at Bloomberg Surveillance, and that is speak to someone
Speaker 1: truly expert. Stephen Englanders, Global head of G ten FX
Speaker 1: Research at Standard Charter. They have a fantastic Bill Winter's
Speaker 1: remit to look at emerging markets and particularly the Pacific
Speaker 1: rim up to Japan. Stephen Englander, thank you so much
Speaker 1: for joining us this morning. The ramifications of a weaker
Speaker 1: Japanese yen now at one out to one thirty. What
Speaker 1: does that do to the degrees of freedom that Powell
Speaker 1: and Laguard have? How does weak yen redound back to
Speaker 1: and unraveling of the yen red down back to America?
Speaker 1: In Europe, well, I'd say that the yend is the
Speaker 1: very optional along with the euro where the central banks
Speaker 1: have some ambiguity with respect to how hockey is they
Speaker 1: want to be. In fact, the the b o J's
Speaker 1: downright dubbish ecbats kind of on offense. UM. I don't
Speaker 1: think it's going to change very much what the Fed does. UM.
Speaker 1: I don't think the impact on US inflation or global
Speaker 1: growth is that strong. Um And the end is weakness
Speaker 1: is probably partly reflecting Chinese economic growth weakness, and the
Speaker 1: you know, the Governor Coroda's adamant insistence that they can
Speaker 1: continue the same kind of policy with Japanese rates drifting
Speaker 1: further and further away from everyone else's. It is such
Speaker 1: an artificiality, particularly with this phrase of buying their own
Speaker 1: paper on board at the Bank of Japan. The standard
Speaker 1: charter view on this is Japan something that will amend
Speaker 1: in a melleable way to the shocks of weekend and
Speaker 1: all around it. In this experiment of y s C
Speaker 1: or do you worry that something could snap, Well, I'd
Speaker 1: say we're not very exciting about the continuation of y
Speaker 1: c C under current circumstances. Um. We we don't see
Speaker 1: a huge benefit to Japan from a weaker yen at
Speaker 1: this point in a world where um growth is is
Speaker 1: kind of limited by supply, having a weaker currency doesn't
Speaker 1: really increase your ability to supply more um. You just
Speaker 1: pay more for imports. Now, in the case of Japan,
Speaker 1: the they've wanted to get their inflation up um, you know,
Speaker 1: for many years, almost a decade or more. But the
Speaker 1: problem is that they want to get domestic inflation up,
Speaker 1: not kind of make the population poorer because the port
Speaker 1: costs are higher. So, you know, so we don't see
Speaker 1: kind of where this has ended. And I'm looking right
Speaker 1: now at a very confusing picture when you take a
Speaker 1: look at the at the words from the Bank of Japan,
Speaker 1: Governor Quarta versus other authorities that are concerned about what
Speaker 1: you said, which is rising costs. Quota meanwhile is the
Speaker 1: one who's doubling down uneasing policies and the sort of
Speaker 1: yield curve control. At what point will there be a
Speaker 1: break and will be he'd be forced to back away
Speaker 1: from the purchases that Tom was talking about and really
Speaker 1: pay more attention to the end. It may not be immediate. Um.
Speaker 1: You know, in a number of places, the you know,
Speaker 1: the limit to how weak the currency can be in
Speaker 1: g ten countries and sometimes how expensive it is to
Speaker 1: travel abroad. But there's not that much of it now. Um.
Speaker 1: Quite possibly the erosion of real wages to Japan is
Speaker 1: going to become a political issue down down the road,
Speaker 1: So that might end up being the limiting factor. And
Speaker 1: I think as um, you know, many have discussed. I mean,
Speaker 1: y CC is great if it's kind of demand shocks
Speaker 1: that you're kind of trying to control and if your
Speaker 1: forecast of developments are are good and it provides guidance
Speaker 1: when circumstances have changed as much as they have. UM,
Speaker 1: it's not clear that y CC is the tool that
Speaker 1: that really gives you the flexibility that you need. Steve,
Speaker 1: you mentioned that part of the end weakness may have
Speaker 1: to do with the growth story in China, and it
Speaker 1: strikes me that the b o J isn't the only
Speaker 1: central bank we're talking about keeping policy easy while everyone
Speaker 1: else is out there hawking. China is as well. We
Speaker 1: were just talking about China, uh, talking about further triple
Speaker 1: our cuts if needed. Why aren't we seeing more weakness
Speaker 1: for unman B that we're seeing for the Japanese end. Well,
Speaker 1: you know, there's lots of moving parts for China. I
Speaker 1: think that the entry of China into the global um,
Speaker 1: you know, financial system, the the opening up of China markets,
Speaker 1: so there is capital inflow into China and the it's
Speaker 1: very music. But you know the fact that they have
Speaker 1: such a large trade surplus on an ongoing basis, UM,
Speaker 1: they're just not spending much abroad. They usually travel a
Speaker 1: lot or not and UM, you know, their current account
Speaker 1: is strong and they have capital influence that usually you know,
Speaker 1: that's that's a good sign for the currency. Obviously. I
Speaker 1: think that there's some concerns about the impact of the
Speaker 1: latest COVID wave and their ability to UM grow and
Speaker 1: how aggressive the policy easing is going to be, but
Speaker 1: there's some tail winds to c n Y that you
Speaker 1: you can't ignore. Steve Angelders, thank you so much. Greatly appreciated.
Speaker 1: With Standard Charter Bank, we get a perspective, a change
Speaker 1: perspective on the American economy. Kathleen bus Johnstick joins us
Speaker 1: right now. We are thrilled for that here with mixed
Speaker 1: moments in the market. Kathy, thank you so much for
Speaker 1: joining us from Oxford Economics. Kathy, what has changed for
Speaker 1: you on the duration of high inflation in the last
Speaker 1: twenty four hours. Thanks Tom, happy to be with you. Um.
Speaker 1: You know, the numbers really just confirm our view that
Speaker 1: we've had for a while now that inflation is untolerably high,
Speaker 1: and you're hearing that from Fed officials. That's why they're
Speaker 1: saying we need to get to neutral quickly and then
Speaker 1: actually moved to restrictive. Now we're going to debate whether
Speaker 1: the peak and inflation for consumer prices that is is
Speaker 1: in whether it was March or April May, and we
Speaker 1: think it's probably April. But nevertheless, the real issue is
Speaker 1: how quickly does it decelerate um and and there I
Speaker 1: think most believe it's going to be much more gradually
Speaker 1: than previously thought. And we still see headline inflation still
Speaker 1: above five percent by the end of the year. So yes,
Speaker 1: it's a bit of a reprieve, but still really high
Speaker 1: and uncomfortably high for the Fed reserve. Kathleen, can you
Speaker 1: make that help us understand that can action between pp
Speaker 1: I and cp I Basically the prices that consumers pay
Speaker 1: in stores when they go out to eat versus the
Speaker 1: prices that producers have to pay and how much that
Speaker 1: directly gets passed through to future inflation that people feel
Speaker 1: in the grocery store or when they go on a vacation.
Speaker 1: What do we have a sense of how direct and
Speaker 1: what the time is for that transmission. Yeah, so it's
Speaker 1: a great question. And you know what we have seen
Speaker 1: in this business, Suguli, So that's really different than the
Speaker 1: prior decade is that Corporate America has really strong pricing power.
Speaker 1: So let's say if we went back five six years ago,
Speaker 1: you would have hopefel prices would have won up, but
Speaker 1: corporations would have had a hard time pass laying it
Speaker 1: on to consumers and it would have erode it profit margins.
Speaker 1: Now we're not really seeing that right Earnings. I know
Speaker 1: you've been speaking a lot about earnings for the last
Speaker 1: few days. We're going to get the um the next
Speaker 1: quarterly earnings data rolling out, But up until this point,
Speaker 1: everything have actually been quite good and that's helped fuel
Speaker 1: the equity market. That's because Corporate America has pricing power
Speaker 1: and we see that many surveys. But Kathy, are we
Speaker 1: starting to reach the limits of that? Lisa has brought
Speaker 1: it up a few times during the show bed Bath
Speaker 1: and beyond disappointing facing inflationary pressure, supply chain headwinds, and
Speaker 1: a headline just coming out from the company, they see
Speaker 1: a slowdown in consumer demand. If demand starts to deteriorate,
Speaker 1: consumers start to push back against higher prices, are less
Speaker 1: tolerant of it. Is that the point we're at now,
Speaker 1: we may be and that is the critical point of
Speaker 1: the cycle. Right we all know we're late cycle. How
Speaker 1: late are we in the cycle and how much pressure
Speaker 1: on corporate profits. Right, So if you see input costs
Speaker 1: still rising as a PPI data suggest unit labor costs,
Speaker 1: we know wage games are still high. If companies are
Speaker 1: no longer able to pass it on as easily to consumers,
Speaker 1: then it is gonna start to bite into corporate profit margins.
Speaker 1: There's no way around that, and we may be reaching
Speaker 1: that point now. The consumers to us still look like
Speaker 1: they're in really good shape, but remember they don't have
Speaker 1: that fiscal stimulus, right, the checks that we're given out
Speaker 1: a year ago, that's gone, and now you really have
Speaker 1: to rely on private wage gains to really carry you
Speaker 1: through and the expect savings. The real question really for
Speaker 1: all of us when we fork I asked and look
Speaker 1: at this, is how much of that you know, two
Speaker 1: point seven trillion worth of accumulated savings does the consumer
Speaker 1: rely on? Kathy, We're also talking about an inflation surge
Speaker 1: stemming from commodities, and this often has been thought of
Speaker 1: as something that's temporary, transient, pick your poisonous word. How
Speaker 1: much is that changing in an era where it does
Speaker 1: seem like we are deglobalizing and it seems like these
Speaker 1: shocks are all having the same impact even though they
Speaker 1: are very different in nature. Yeah, that is something that
Speaker 1: could play out, you know, over the medium to long
Speaker 1: term and it and it is a real potential game
Speaker 1: changer to the backdrop um that globalization really brought in
Speaker 1: disinflationary forces where it kind of capped overall price games.
Speaker 1: If that's changing and praying on the ends, which it
Speaker 1: looks like it may be, that is very different. You know,
Speaker 1: scenario doesn't necessarily it's hard to say, you know, we're
Speaker 1: exactly oil prices or or copper or where that will
Speaker 1: play out. But what we can say is that you
Speaker 1: know that disinflationary impulse could be behind us or economics.
Speaker 1: This is a very confusing moment. I am here with
Speaker 1: Tom Keane, with Kaylee Lines. We are broadcasting both on
Speaker 1: radio as well as on television at a delicate moment
Speaker 1: where we're looking at earnings reflecting both strength when you
Speaker 1: take a look at delta and the incredible demand, and
Speaker 1: then you look at JP Morgan talking about increased credit
Speaker 1: loss provisions as a result of some of this uncertainty.
Speaker 1: Peter Sheer has been passing through all of this and
Speaker 1: has a fantastic view uh joining us right now, Peter
Speaker 1: sheer a orse I have with back economics with the
Speaker 1: full view. What's your view on how we should read
Speaker 1: this moment. So I'm starting with equities. I think equities
Speaker 1: right now are to me an easier read. I expect
Speaker 1: equity indust needs to go back to the pre March
Speaker 1: fed lows. So I think we get back and retest that.
Speaker 1: So I think you're gonna see ongoing pressure in the
Speaker 1: equity markets. To me, that translates to pressure on credit spreads.
Speaker 1: So I think we see credit spreads wide in particularly
Speaker 1: the I G spector, which is held in pretty well
Speaker 1: in the last month or so. And then finally on
Speaker 1: treasury yields, it's a little bit more up in the air.
Speaker 1: I really actually think the two year, three or four
Speaker 1: year stage I want to be buying those. I think
Speaker 1: those yields can head lower. I'm a little bit more
Speaker 1: confused in the tense to thirties. Peter, You're great at
Speaker 1: looking across equities, bonds, currencies, commodities. I'm seeing tangible currency
Speaker 1: signals of an unraveling with your almost hitting a one
Speaker 1: oh seven. It's almost like a David focus landal moaning
Speaker 1: from Deutsche Bank. With the depreciation we're seeing against the dollar.
Speaker 1: From where you sit at the academy, is the system
Speaker 1: malieable now and functionable or do you look at it
Speaker 1: with kinks or with breakpoints? So I think we're at
Speaker 1: this early stages of a real shift and how we
Speaker 1: have to think about Europe, how we have to think
Speaker 1: about dealing with autocratic nations, not just Russia, but also
Speaker 1: China the Middle East. And I think that's creating this
Speaker 1: new shift where you're getting the commodity nations and the
Speaker 1: autocrats aligning with China because China is a massive consumer
Speaker 1: of what they're selling, they need it. I think Europe
Speaker 1: is going to struggle. I think you're gonna start seeing
Speaker 1: all these second order effects and you don't know what
Speaker 1: it's gonna be, whether it's gonna be car harnesses or
Speaker 1: neon production. Europe is gonna have a lot of trouble,
Speaker 1: and food is going to be a problem over the
Speaker 1: summer as well. So I think it makes sense to,
Speaker 1: you know, avoid European assets right now. Well, and when
Speaker 1: we're talking about food, that leads me to the idea
Speaker 1: of just higher prices across the board, higher input costs
Speaker 1: that companies are facing. You're starting to see that showing
Speaker 1: up in earnings Bed Bath and Beyond. One example, it's
Speaker 1: down about twelve at the opening bell after posting a
Speaker 1: surprise lost warning of supply chain issues. And the interesting
Speaker 1: line out of the company is they're starting to see
Speaker 1: consumer demand taking a hit. Peter, are we reaching or
Speaker 1: at the limit of the ability of these companies to
Speaker 1: exercise pricing power and to pass costs on? Yeah, I
Speaker 1: think that's very exact here right now. People are just
Speaker 1: kind of getting hit left, right, and center right, whether
Speaker 1: it's gas, whether it's food, whether it's all the goods
Speaker 1: and services they're buying. So we're seeing that at the
Speaker 1: same time, you're seeing mortgage rates go spike higher. So
Speaker 1: I think you could get this double whammy where consumers
Speaker 1: are a little bit spent out, they're tapped out, it's
Speaker 1: getting too expensive for them to buy, and the housing
Speaker 1: market could start turning very quickly. So that's why I
Speaker 1: do think that the FAT is gonna be able to
Speaker 1: maintain QUT, which is dangerous for stocks. I think they're
Speaker 1: going to have to back pedal on all the rate
Speaker 1: hike talk though, because I think that economy is more
Speaker 1: precarious than people are talking about and Peter, this is
Speaker 1: perhaps reflected in the banking sector as well. As we
Speaker 1: passed through some of the earnings and take a look
Speaker 1: at some of the opening bell moves. JP Morgan now
Speaker 1: down uh substantially at one point down more than four percent.
Speaker 1: Now down about three percent. But I was just looking,
Speaker 1: that is the lowest since January five, two twenty one.
Speaker 1: For sspective, JP Morgan gained twenty five percent last year.
Speaker 1: We have almost erased those gains. Peter, what is this
Speaker 1: saying at a point when we are seeing a resteepening
Speaker 1: in the yield curve and you're actually getting some income
Speaker 1: for overnight rates. Well, what I think is people overestimate
Speaker 1: what two s tends means for banks. Most banks are
Speaker 1: fairly well hedged and that affects their income. But that's
Speaker 1: really slow and over time, where banks make a lot
Speaker 1: of their money is on transactions. And if you see
Speaker 1: that housing market slow, the number of re fives goes down,
Speaker 1: the number of you mortgages go down. I think that's
Speaker 1: a bigger hit if people start tapping out of their
Speaker 1: credit cards and saying, hey, I better start paying this
Speaker 1: off now because yields are getting too high. So I
Speaker 1: think you could see a bit of a consumer lead
Speaker 1: slow down, a housing led slowdown, and that to me
Speaker 1: is much worse for bank earnings than anything to do
Speaker 1: with two sends yield curve peter. A lot of people
Speaker 1: will say this is an overbeared market. People have gotten
Speaker 1: so bearish and so down in the dump set of time,
Speaker 1: when companies are still doing pretty well. How do you
Speaker 1: sort of pass through that noise which is real and
Speaker 1: come up with some sort of conviction about the direction
Speaker 1: of travel. You know, I think it's very tricky. You
Speaker 1: try and sit here and read the signs in the
Speaker 1: page and get lucky, like yesterday morning, where we're telling people, okay,
Speaker 1: we're barish, but it felt like you really want to
Speaker 1: pop after cp I, we got that that guy to
Speaker 1: a chance to reload. So you're managing that, and it
Speaker 1: does seem though it swings accessively to extremebarishnist to extreme bullishists.
Speaker 1: One thing we spend a lot of time thinking about
Speaker 1: is that there is very little liquidity either direction, right.
Speaker 1: We always think about no liquidity on the way down.
Speaker 1: There's no liquidity on the way up or down, which
Speaker 1: means any signal you get is lost. So I think
Speaker 1: you've gotta be a little bit in nimbo. You're running
Speaker 1: smaller position size, and so I'm trading this from the
Speaker 1: Berry side, and again at the back of that you
Speaker 1: look for long ideas. I want to be lawns some
Speaker 1: emerging markets, especially how it in South America. I love
Speaker 1: the oil and energy space. I think we are going
Speaker 1: to spend so much money not only building out sustainable energy,
Speaker 1: but reinvesting and refocusing on traditional energy sources, the oil services,
Speaker 1: those companies like that are going to do very, very well.
Speaker 1: So there's opportunities within this whole kind of mess to
Speaker 1: try and trade around. Peter. You know the Lehman Index,
Speaker 1: the Bloomberg aggregate indexes, the credit index I believe is
Speaker 1: down pretty much the largest draw down in history. That's
Speaker 1: French Peter tiered academy for a bond bear market. I'm
Speaker 1: fascinated by the equity language. Do you buy the bond dip?
Speaker 1: So I want to start shifting into some bombs. I
Speaker 1: think you are going to see people looking at this
Speaker 1: and saying, Okay, this a little bit more permanent, and
Speaker 1: to me, when we had quantitative easy, what that does
Speaker 1: is at every part of the point on the yield
Speaker 1: curve and risker, someone gets pushed out, and I think
Speaker 1: the reverse is gonna happen on the way back end. Peter.
Speaker 1: Come on, we're friends. We've been doing this a while. Peter.
Speaker 1: You're an academy of securities. Your monthly statement is delivered
Speaker 1: by carrier pigeon or whatever they do. You know, you're
Speaker 1: a bunch of davy guys. Great, I'm looking at my
Speaker 1: monthly statement and I'm self three years yield or four
Speaker 1: years yield. You're telling me to buy the dip. First off,
Speaker 1: I think on the retail side, everyone just keeps contributing
Speaker 1: to a G G and B n D monthly. It's
Speaker 1: in there for one case, I think already seen a
Speaker 1: lot of selling pressures. When you look at the e
Speaker 1: p s, there's a lot of men already a lot
Speaker 1: of outflows. So I think people are able to reload
Speaker 1: right now. It's the institutional investors that are driving. I
Speaker 1: think people are starting to take a little bit of
Speaker 1: a niblett yields here. What does that mean for the
Speaker 1: equity market, Peter? When it didn't seem to blink at
Speaker 1: yield at two and three quarters of a percent, are
Speaker 1: we going to reach the point where it does indeed
Speaker 1: blink and the Tina thesis is called into question. Yeah,
Speaker 1: I think we're at that stage right now. I think
Speaker 1: we're already seeing that where if you tackle a bitcoin right,
Speaker 1: it keeps struggling, and as yields go higher risk assets.
Speaker 1: When you look at the the higher risk text stocks right,
Speaker 1: they've done worse. So I think you're seeing people repriced
Speaker 1: risk and they're focused on steady growth, they're focused on dividends,
Speaker 1: they're looking for opportunity, they're looking for energy. So I
Speaker 1: think you're gonna again, I'm not comfortable with equities until
Speaker 1: they get back to both the March levels of this year,
Speaker 1: which for most coincides with one level. So I think
Speaker 1: that's where we get back. It's another you know something
Speaker 1: on the SMP maybe a bit lower. That's where I
Speaker 1: can get constructive again. What's going to be the leadership
Speaker 1: to the downside if that makes sense, Peter? What what
Speaker 1: creates the drag? What area of the equity market in particular?
Speaker 1: And I think it's still gonna be this, you know,
Speaker 1: the big high tax stocks where people question the valuations,
Speaker 1: where people say, well, you know what, we've got a
Speaker 1: good run. We can take some gains and look for
Speaker 1: something else, and maybe we just want to be a
Speaker 1: little bit conservative with so much going on right now.
Speaker 1: Peter Sheer, thank you so much for being with us
Speaker 1: of Academy Security as head of macro strategy, some really
Speaker 1: insightful moments. This is the Bloomberg Surveillance Podcast. Thanks for listening.
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