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Speaker 2: We're up on CPI. I can think of no major
Speaker 2: economic report that I've ignored the last number of days
Speaker 2: like this important inflation study. Greg Bottle of BMP, Perry
Speaker 2: Bob will be with us. Tiffany Wild will really give
Speaker 2: us direction her wonderful work at PIMCO. But first, with
Speaker 2: his incredible schedule, we had to squeeze in your Patrick Armstrong,
Speaker 2: He's plurring me wealth for years with Templeton in Toronto,
Speaker 2: which is a magical place for me. Patrick Armstrong in
Speaker 2: the United Kingdom, thank you so much for joining us today.
Speaker 2: Are we at a point where the foreigners won't buy
Speaker 2: American stocks and bonds? Is something radically changed here? I
Speaker 2: don't you.
Speaker 3: Say won't, but I do think the winds are pushing
Speaker 3: against it, and Trump's tariffs are going to carve out
Speaker 3: some economic winds in the short term because Europe isn't
Speaker 3: going to respond immediately. To the tariffs that have been
Speaker 3: put on them. But they it is a risk for
Speaker 3: the United States that you've got global trade xus and
Speaker 3: it turns into that kind of thing. And there's going
Speaker 3: to be really strong rhetoric from the White House because
Speaker 3: they know that's a real risk that they just get
Speaker 3: basically disintermediated and their dollar becomes disintermediated. Is the global
Speaker 3: reserve currency if you push things to extremes. So I
Speaker 3: do think there's risks for this. I'm confident Trump is
Speaker 3: going to carve oute some economic wins from this, but
Speaker 3: I think the consequences maybe far greater, and it may
Speaker 3: be a sort of backhanded win for Europe and the
Speaker 3: rest of the world.
Speaker 2: Even let's get out of the front of Tiffany Wilder.
Speaker 2: We want to talk to you Patrick. After this inflation report,
Speaker 2: the Jobs Economy analysis waits for May or June. Does
Speaker 2: this CPI report a current measure of inflation?
Speaker 3: Well, it's last month, and we're in a different world,
Speaker 3: and some months go by and nothing happens. Some days
Speaker 3: go by, and months and years happen, and that's where
Speaker 3: it feels like we are right now. The one thing
Speaker 3: the CPAI may be able to do is it may
Speaker 3: give Powell an excuse to cut rates. He'll view transitory
Speaker 3: inflation as transitory, and he does have inflation probably on
Speaker 3: a downward trend with this print, so it may give
Speaker 3: him the impetus if he wants to to cut a
Speaker 3: little bit more aggressively, where his hands may be tied
Speaker 3: later in the year if we do have stagflationary consequences.
Speaker 4: Patrick, where are you on the risk profile here? We've
Speaker 4: had just such a volatile number of days, capped by
Speaker 4: yesterday's big, big rally, but boy, we had to vix
Speaker 4: it close to sixty just a couple of days ago.
Speaker 4: Where are you going to risk profile these days?
Speaker 3: So I don't think it's a time to be a hero,
Speaker 3: but it was the time to incrementally increase equities. We
Speaker 3: decided on Monday, So we had a bad Tuesday when
Speaker 3: we added it, but had a really nice bounce yesterday.
Speaker 3: And anytime you're buying equities after a twenty percent sell off,
Speaker 3: you're skewing the odds to your favor. And what we
Speaker 3: looked at the VIX when it was at sixty, we said,
Speaker 3: the only two times it's been like that before was
Speaker 3: the COVID crash, and the financial crisis and the VIX
Speaker 3: at sixty on Monday. This was a man made crisis
Speaker 3: and we knew and about turn could be not the
Speaker 3: end of the crisis, but really diminished the risks there.
Speaker 3: And that's why we felt a little bit confident to
Speaker 3: add risk. We actually started shorting a VIX in our
Speaker 3: macro fund on Monday with that premise.
Speaker 2: Patrick Armstrong with us here for one more good question, Patrick,
Speaker 2: just to cut to the chase. If I see the
Speaker 2: shock of a negative statistic ONCPI, is that China exporting
Speaker 2: deflation there?
Speaker 3: Actually I hadn't thought about it, but for that one
Speaker 3: month there may have been a big jump in Chinese
Speaker 3: imports at lower prices. Is China wanted to get them
Speaker 3: into the US buyers wanted to get them in the
Speaker 3: head of tariffs, and that may have been a bit
Speaker 3: of a disinflationary and deflationary impact that's come out of it.
Speaker 3: Powell's going to treat it how he wants to treat it.
Speaker 3: It may give him the excuse to cut a little
Speaker 3: bit more than he would have otherwise. So I think
Speaker 3: if you are an equity bull, you'll welcome this news.
Speaker 2: I mean, it's interesting see Patrick, one final question. We
Speaker 2: can do this, folks when we're coming to your commercial
Speaker 2: free has ede done at Tottenham? I mean Tottenham is
Speaker 2: not going to be relegated, but I mean it's pretty ugly.
Speaker 2: What do you think.
Speaker 3: I'm a Man United fan and that's the only team
Speaker 3: that's doing as poorly as we are, so right, yeah,
Speaker 3: I can't throw stones when I live in a glasshouse.
Speaker 2: Comfort is Man United and Tottenham go down in flames
Speaker 2: this year. Patrick Armstrong, thank you so much from London.
Speaker 2: We'll get him on again for a much longer discussion.
Speaker 2: Now to the economics of the moment. Greg Bodill, be
Speaker 2: MP Pariba with it, cinemam of a Tiffany wild of
Speaker 2: Pimco was a Tiffany month over month? Is that negative statistic?
Speaker 2: Simply this crazy tariff driven wall of unit import volume.
Speaker 5: Well, just having a quick look at some of the details,
Speaker 5: it actually looked like the services side of the goods basket,
Speaker 5: or of the consumer price basket was was what was
Speaker 5: weaker in this report. And I think that that just
Speaker 5: really speaks to the broader uncertainty that we had, you know,
Speaker 5: even before these latest news. This latest news, So travel
Speaker 5: services categories hotels, airfares. You know, people are There's been
Speaker 5: a lot of anecdotal reports about how you know, folks
Speaker 5: that were thinking about traveling to the United States are
Speaker 5: canceling those plans.
Speaker 2: Yeah.
Speaker 5: So I think it's it's a little bit of a
Speaker 5: calm before the storm, and you had heighther uncertainty that
Speaker 5: was reducing demand for services in the US.
Speaker 2: The tape improves. The VIX was up three big figures
Speaker 2: now up to thirty five point five to three. The
Speaker 2: futures of negative seventy seven, they were a negative one
Speaker 2: hundred here a bit agoes, So a little better tape.
Speaker 2: Is that because Tiffany this gives talking points or chat
Speaker 2: for Jerown Powell to ease rates without the pressure from
Speaker 2: the president.
Speaker 5: Yeah, well, I mean we still think there will be
Speaker 5: a price level adjustment that will have to happen. On
Speaker 5: the good side, you know, there will be some pass
Speaker 5: through from this, and I think the question is just
Speaker 5: how big will that be?
Speaker 6: You know?
Speaker 5: And then the other question on that is is how
Speaker 5: much weakness do you see on the services side of
Speaker 5: the economy as a result of these actions, you know
Speaker 5: that are impacting the prices of goods and you know,
Speaker 5: maybe what this CPI suggests is that you will have
Speaker 5: a weakening economy on the services side that will contain
Speaker 5: some of this inflationary pressure that obviously will allow the
Speaker 5: Fed and make it less awkward for the Fed whenever
Speaker 5: they're cutting interest rates.
Speaker 4: Tiffany, have you guys over there go taking down your
Speaker 4: GDP forecast for twenty twenty five.
Speaker 5: And if so, why we think there's a fifty to
Speaker 5: fifty chance of recession. You know, and even with this
Speaker 5: latest reprieve. You know, if you just take a step back,
Speaker 5: the effective tariff rate in the United States, just assuming
Speaker 5: that imports stay unchanged, has gone back to levels that
Speaker 5: we have not seen since the nineteen thirties. And that's
Speaker 5: even with this ninety day reprieve. So you have a
Speaker 5: very big tear off shock that is impacting the US economy.
Speaker 5: And we do think there will be some disruption on that,
Speaker 5: you know, over the near term, and that will slow
Speaker 5: growth quite dramatically. And again we think there's kind of
Speaker 5: a fifty to fifty chance of recession here. We think
Speaker 5: growth grinds to a halt later this year.
Speaker 2: One of the great distinction here, folks, and I think
Speaker 2: in the chaos that we're living. I need to partition this.
Speaker 2: Tiffany Wilding is with specific investment management company PIMCO, and
Speaker 2: a responsibility is to a broad asset manager versus a
Speaker 2: market economists and frankly, derivatives expert like Greg Boudele. So
Speaker 2: we get two different not views, but two different mandates.
Speaker 2: Here from BNP Perry Bay with us in a bit,
Speaker 2: and right now we stay with Tiffany wild Here we
Speaker 2: welcome all of you across the nation. Frankly, futures worsened
Speaker 2: out off the joy of twenty of five minutes ago.
Speaker 2: I got the vix out two point seven seven figures
Speaker 2: thirty six point thirty nine. Tiffany, if you've seen it,
Speaker 2: and I don't want you to give away the secrets
Speaker 2: of PIMCOH But is it sort of steady as she
Speaker 2: goes as they listen to you, the managers, or is
Speaker 2: this a time for a radical reset of PIMCO.
Speaker 5: Well, you know what I think that we have. You know,
Speaker 5: we have been arguing. I think we've been on the
Speaker 5: right side of the recent volatility, you know, because we
Speaker 5: were arguing like late last year that the markets just
Speaker 5: you know, weren't focused enough on the sort of radical
Speaker 5: changes that the Trump administration was taught about, you know,
Speaker 5: and I think that they've been actually quite clear about
Speaker 5: what they're trying to do. And I think everybody was
Speaker 5: just focused on various constraints, whether political, economic, or even
Speaker 5: legal constraints that would maybe impin their ability to implement
Speaker 5: their policy. But they've just blown through all those constraints
Speaker 5: and you are seeing the president basically do what he
Speaker 5: said he would do on the campaign trail. You know,
Speaker 5: we think the ten percent tariff across the board, you know,
Speaker 5: that's that's sticking, higher tariffs on China is sticking. I mean,
Speaker 5: we are you know, they are very effectively trying to
Speaker 5: decouple the US economy from China. And that's exactly what
Speaker 5: they said they would do, you know, And so I think,
Speaker 5: you know, take them literally.
Speaker 4: So Tiffany, I mean, we report a lot of stuff
Speaker 4: from China and a big tariff there. What does that
Speaker 4: mean for inflation for the US?
Speaker 2: Do you think?
Speaker 4: Yeah?
Speaker 5: I mean, we do think there's going to be a
Speaker 5: big price level adjustment that happens as a result of this,
Speaker 5: you know. Now, I think from the CPI report this morning,
Speaker 5: you know, one thing that it does suggest is that
Speaker 5: even if you're getting getting goods prices that are being
Speaker 5: set higher as some of the cost at least is
Speaker 5: passed on to consumers, the services side, you know, might
Speaker 5: be weakening at the same time offsetting that. So I
Speaker 5: think it's you know, again, how much price level adjustment
Speaker 5: we get here? I think is the key question for
Speaker 5: the next you know, call it six months and in.
Speaker 2: Folks, unfair question Like if you asked me this question,
Speaker 2: you saw me, you know, having a beverage of my choice,
Speaker 2: and you said Tom when I'd say, I don't know.
Speaker 2: So let's as Tiffany Wilding. When Tiffany Wilding, when does
Speaker 2: the slow down of tariffs at Walmart, tariffs at Duke's bookstore?
Speaker 2: When we got to we gotta text, somebody said, stop
Speaker 2: talking about Duke. We're double in the Duke conversation right
Speaker 2: now this morning, Tiffany Wilder, When for the consumer, does
Speaker 2: all this agony click in?
Speaker 7: Yeah?
Speaker 5: I mean, you know, I think it's clicking in for
Speaker 5: businesses already and they're trying to figure out what to do.
Speaker 5: And I think that you will have, you know, you
Speaker 5: will have to have businesses that are raising prices at
Speaker 5: least somewhat. It will be you know, there will be
Speaker 5: margin compression, there will be and there will be price
Speaker 5: increases and that will hit the consumer because they will
Speaker 5: their real incomes will just go down as a result
Speaker 5: of that. So so I think you will see consumers
Speaker 5: that are are getting hit from this. You know. The
Speaker 5: other thing is just it's creating a lot of uncertainty.
Speaker 5: You know, people could be more fearful of their jobs
Speaker 5: and things like that, and that could just result in
Speaker 5: more of a general pullback and consumption as well.
Speaker 2: Good morning Montreal. Major shout out to Bears and the
Speaker 2: team at Bank Credit Analyst. It's like ed your Danny CJ.
Speaker 2: Lawrence with Edheiman years ago. B c A is venerable
Speaker 2: and Paul they had a chart on labor yesterday yeh
Speaker 2: out of BCA that was just shocking the rapid deterioration.
Speaker 2: Tiffany Wild, thank you so much. Great to talk to
Speaker 2: you on this day of CPI. The tape was a
Speaker 2: VIX was up three big figures. We had a little
Speaker 2: bit of a Paul would say, quiescent move here. We've
Speaker 2: given it back a little bit. The VICS thirty six
Speaker 2: point four or five future is now back negative one hundred.
Speaker 2: This is standard in Poores futures negative one hundred. John
Speaker 2: Farrell tells me the Dow futures negative six oh eight
Speaker 2: are worth noting as well. Even bitdog down one thousand,
Speaker 2: down twelve hundred points rather eighty one thousand. There's a
Speaker 2: little bit of tension here to say the least. We
Speaker 2: welcome all of you on YouTube worldwide, including in Paris
Speaker 2: Bloomberg Surveillance. It's brought to you by ibk R. Well
Speaker 2: the US consumer Sentiment Index. Will it exceed seventy in
Speaker 2: April twenty twenty five at IBKR forecast Trader that yes,
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Speaker 2: I've really anticipated this because Greg Battle takes equity strategy,
Speaker 2: folds it into the derivative space, wraps it around a
Speaker 2: true international view for the bank Pariba is that like
Speaker 2: the French way to say it, They'll come closer.
Speaker 8: My French isn't outstanding.
Speaker 2: If I'm honest, they have the best lunch in Manhattan,
Speaker 2: is what I know. Please advise us here how you
Speaker 2: prepare for a Monday research note. A completely unfair question.
Speaker 2: It could change three times. But how are you framing
Speaker 2: the tone of your weekend note?
Speaker 8: Well, I think you have to be prepared to write
Speaker 8: to it and then rewrite it three times in between
Speaker 8: now and then. So I think the thing that which
Speaker 8: one I do is put in context some of the
Speaker 8: moves around, some of the flows, and then think about
Speaker 8: some of the headline risks. But then ultimately, how does
Speaker 8: that translate into what we're going to see over earning season?
Speaker 2: Okay, earning season, it's tomorrow, right, ye, indeed, come out.
Speaker 2: We don't have I guess we sort of do on
Speaker 2: this earning season, but there'll be no guidance.
Speaker 8: Right, No, So I think like the backwards looking data,
Speaker 8: whether it's this we've just seen payrolls from last week
Speaker 8: or the earnings prints themselves, hold little value I.
Speaker 2: Think at this point.
Speaker 8: But any qualitative read commentary tone from management is going
Speaker 8: to be looked at very closely.
Speaker 4: So what did you see on your trading desk? What
Speaker 4: did you hear from your clients over the last I
Speaker 4: don't know twenty four to forty eight hours, because yesterday
Speaker 4: it was just crazy. The bond market the night before
Speaker 4: was just incredible.
Speaker 2: Do you know you can't get hired at BMP Periba
Speaker 2: unless you know all the Greek letters Gamma, that's what
Speaker 2: I want, the row derivative, sam, the whole thing.
Speaker 8: So we think some of those Greek letters were certainly
Speaker 8: responsible for some of the magnitude of the moves yesterday.
Speaker 8: So obviously the move itself is triggered by the headline
Speaker 8: of the tweet, but the magnitude of that move is
Speaker 8: driven by the fact that we do have a short
Speaker 8: Gamma complex in the market. What this means is that
Speaker 8: there's rehadging needs for when the market moved both lower
Speaker 8: and hyer.
Speaker 2: I opened the show this morning on this people got
Speaker 2: to go out and rehatch folks. You and I are
Speaker 2: not you know, and we're trying to pay the rent.
Speaker 2: But in the institutional space, people are protecting themselves and
Speaker 2: now it's so expensive to protect yourself you really can't
Speaker 2: reheedge Kenya. How you doing that? Well?
Speaker 8: I do you think there are opportunities to use the
Speaker 8: optionality complex? We look at the headline levels of the
Speaker 8: vics and certainly where it peaked and they got incredibly
Speaker 8: elevated but one anecdote that I would give you, Please,
Speaker 8: at the close yesterday, you could look at the Nasdaq
Speaker 8: and the market options implied probability of it getting back
Speaker 8: down to yesterday's lows by the end of next week
Speaker 8: was more than a ten to one payout. So I
Speaker 8: think there are interesting asymmetries that you can find.
Speaker 4: So where where did you see on your desk yesterday
Speaker 4: the buying or where did you see the activity yesterday?
Speaker 8: There were different pockets, so we have an active positioning
Speaker 8: indicated the tracks institutional positioning, and it got to absolutely
Speaker 8: washed out levels before yesterday, So institutional position is very clean.
Speaker 8: But what we have seen is just consistent dip buying
Speaker 8: more from the retail complex. So if you look at
Speaker 8: net ETF flows in the US yesterday, you saw more
Speaker 8: than ten billion of inflows on the day. At the
Speaker 8: same time, some of these rebalancing flows that we've talked
Speaker 8: about have been a dominant force in the market. So
Speaker 8: we think there was more than fifty five billion driven
Speaker 8: purely from the short gamma complex yesterday.
Speaker 4: Short gamma. We have seen institutional capitalization in positioning. I've
Speaker 4: been trading for forty years. I have no idea what
Speaker 4: that means? What does that mean?
Speaker 8: Yeah, So in terms of capitulation in positioning, you know,
Speaker 8: we track various metrics. Some of the systematic funds are
Speaker 8: easier to track, things like CTAs. We know that those
Speaker 8: funds moved to a net short position volatility target that
Speaker 8: manage capital based on the levels of volatility have become
Speaker 8: extremely de risked. But you can also look at things
Speaker 8: like hedge fund positioning. You can use things like the
Speaker 8: safetyc Future's data. You can see that there has been
Speaker 8: a massive degrossing.
Speaker 2: Okay, there's been a massive build degrossing. Okay, great, But
Speaker 2: the answer is where's the blood in the streets? Without
Speaker 2: getting it. I don't want to mention names here, that's
Speaker 2: not appropriate. But when somebody has the cliche there's blood
Speaker 2: in the streets, where do you and B ANDP Bury
Speaker 2: boss suggest there's been some real DiMAGE.
Speaker 8: Well, I would say that actually, like when we think
Speaker 8: about the US equity market, and particularly the volatility market,
Speaker 8: it has been maybe a little bit more orderly than
Speaker 8: it seems on the surface. So when we look at
Speaker 8: our positioning indicator, it had been trending down a long
Speaker 8: way prior to the tariff announcements, and we think about
Speaker 8: this announcement. Nobody was expecting the magnitude of the moves,
Speaker 8: but this was an unknown in terms of a catalyst
Speaker 8: that we do think people will hedged for. So when
Speaker 8: you look at the Thursday move, I think that's quite
Speaker 8: indicative of actually a calmer options market than you would expect.
Speaker 8: We got a big move higher in the VIX Thursday,
Speaker 8: but what we do is we look at the size
Speaker 8: of the VIX move relative to the size of the
Speaker 8: S and P move, And in normal calm markets, what
Speaker 8: you see as the VIS go up one and a
Speaker 8: half points for every one percent decline in US and
Speaker 8: Peer and that's actually what we saw on Thursday. You
Speaker 8: compare that to other pockets of risk, and that move
Speaker 8: is much more explosive.
Speaker 2: You and folks stay with us here on this. There's
Speaker 2: a little bit of jargon we're doing here, but we're
Speaker 2: thrilled bole bmp periba with us. You were cautious in
Speaker 2: the bull market emotion of the recent year or two
Speaker 2: or three, and now we've got the market back to
Speaker 2: a Greg Boudle level. H do we now have an
Speaker 2: equity value in the market where we're now where you
Speaker 2: always thought we'd be, or do you need to see
Speaker 2: some catharsis here to really step in long I.
Speaker 8: Think it really depends on ultimately, what do you think
Speaker 8: the growth outlook is. So if you believe that this
Speaker 8: volatility and this newsflow in terms of tariff isn't going
Speaker 8: to derail the growth outlook, then a twenty percent correction,
Speaker 8: which is where we got kind of highs to lows,
Speaker 8: is it the extreme of what you get without a recession. However,
Speaker 8: when we start looking at where do we think earnings
Speaker 8: could be this year, if you've got a two to
Speaker 8: fifty five number four S ANDP earnings, that's a five
Speaker 8: percent year of year growth that's not overly bearish. Put
Speaker 8: that on an eighteen times multiple that would get you
Speaker 8: around forty five hundred. So I'm not sure that there's
Speaker 8: a really obvious value case to make for US equities here.
Speaker 2: Do you have a belief in European equities?
Speaker 8: So I think one of the things we saw at
Speaker 8: the start of the year before this episode of volatility
Speaker 8: was that there was undoubtedly rotation starting to happen from
Speaker 8: US into the rest of the world. Now, clearly what
Speaker 8: has happened in terms of trade and tariff has derailed
Speaker 8: that in the short term. If we do get back
Speaker 8: to a more stable market, then I do think there
Speaker 8: is potential for that rotation to continue, but not whilst
Speaker 8: we're in a volatility environment such as this.
Speaker 4: All right, Greg, Tom, I if we take the Bloomberg
Speaker 4: surveillance show over to London, do we do a day
Speaker 4: trip to South End on Sea?
Speaker 8: I think it would be extremely What do we do there?
Speaker 8: I think you would take a walk down the seafront.
Speaker 8: Maybe you go and try and catch a game, have
Speaker 8: a bear a.
Speaker 4: Great south it's on the estuary, Tom, it is on
Speaker 4: the Thames yesterday, Thames River.
Speaker 2: It's out past Charles Dickens place.
Speaker 4: I think so. I mean it looks great. I'm look
Speaker 4: at it right here and that's where it great's from.
Speaker 4: So I figured we'd ask a local here, take a.
Speaker 8: Walk down the pair.
Speaker 2: You ever met to Dickens House? Righteous the one that
Speaker 2: you haven't loved? I haven't. It's supposed to be magical.
Speaker 2: It's over extent of what Dickens was when he was
Speaker 2: there in eighteen sixty, eighteen seventy.
Speaker 4: Okay, have you ever finished the castle park?
Speaker 2: Have you ever finished a full Charles Dickens or did
Speaker 2: you use the United Kingdom cliff notes?
Speaker 8: Wow, maybe I listened to the audio book.
Speaker 2: Yeah, Greg, thank you so much really, and congratulations on
Speaker 2: the work the derivatives base her folks, the French and
Speaker 2: this goes back hundreds of years. There's exquisite mathematical integrity
Speaker 2: out of the French banks just gets them into trouble sometimes.
Speaker 2: But good morning to the Paris banks for all that
Speaker 2: they do, particularly using the Bloomberg and derivative equity measurement
Speaker 2: as we did from mister Boutele as well.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: Our interview of the day on fixed income with our question.
Speaker 2: Ian Lingen is with Bemon Capital Market. He writes the densest, tightest,
Speaker 2: most in depth. Note Paul and I were talking about it.
Speaker 2: You get a paragraph from Ian Lingen and like you're
Speaker 2: lucky you get through it at lunch. It's so intelligent.
Speaker 2: He's won just in the II surveys, folks. I think
Speaker 2: he won eleven consecutive years. It's like Juan Soto and
Speaker 2: walks right. I mean, you know, Ian just keeps doing
Speaker 2: it with Bemon capital markets. And on the inflation report,
Speaker 2: you're brilliant quote this is the lowest in over four years.
Speaker 2: Is it a one off pre Trump tariffs or can
Speaker 2: this disinflation continue? Well?
Speaker 6: I do think that what we're seeing is that they
Speaker 6: FED was reasonably successful in finally getting inflation back to
Speaker 6: or at least toward where they would like to see it.
Speaker 6: It does set up a good departure point for absorbing
Speaker 6: the incoming price increases that we are sure to see. So,
Speaker 6: if anything, today's report suggests that we won't retest the
Speaker 6: pandemic highs and inflation simply based on the trade war.
Speaker 2: I can't say not, folks about the holistic work of
Speaker 2: the Bank of Montreal within your entire team, Ian and
Speaker 2: with your leadership here. How many FED rate cuts? What's
Speaker 2: the degrees of freedom the chairman Powell has?
Speaker 6: Well, the events of this week I bought him a
Speaker 6: little bit more flexibility. I think that we are going
Speaker 6: to see two rate cuts this year, one in September
Speaker 6: and one in December. The only way that we actually
Speaker 6: see something in June or earlier, is if we see
Speaker 6: a re escalation of the trade war that pushes equity
Speaker 6: prices even lower.
Speaker 4: So I what did you see in the bond market
Speaker 4: over the last thirty six hours, because boy, we had
Speaker 4: some big moves there, And what did you see in
Speaker 4: a treasury market?
Speaker 6: So in the treasury market, we saw a very sharp
Speaker 6: re steeping in of the yield curve because there was
Speaker 6: a lot of concern that the trade war would lead
Speaker 6: to a buyer's strike in the ten year auction. And
Speaker 6: the fact that we had such a strong sponsorship for
Speaker 6: the ten year auction really bodes well for the treasury
Speaker 6: market as an asset class. And I think that that
Speaker 6: speaks to why we are stabilizing here with ten year
Speaker 6: yields well below four fifty and certainly no concern of
Speaker 6: retesting five percent anytime soon.
Speaker 2: We had a dash to the ian ling and lower
Speaker 2: yields thee and you've been way out front on a
Speaker 2: vector of lower yields with this turmoil in Washington. I
Speaker 2: guess when it's over, do we reaffirm your disinflation, lower yield,
Speaker 2: higher price environment.
Speaker 6: Yes. I actually think if anything, the turmoil in Washington
Speaker 6: increases the chances of a consumer led economic slowdown, and
Speaker 6: a recession is disinflationary on a forward basis. Once we
Speaker 6: absorb all the tariff increases, I think we'll have a
Speaker 6: consumer that is in a much different, much less compelling
Speaker 6: place than it was during the pandemic. And so I'm
Speaker 6: worried about disinflation in two thousand and twenty six and
Speaker 6: beyond recession?
Speaker 4: Is that in your call in?
Speaker 6: It's not our baseline scenario, but the events of the
Speaker 6: last two weeks certainly have increased the probability from let's
Speaker 6: call it ten percent to thirty five or forty percent.
Speaker 2: You know, you know Belski once told me he reads
Speaker 2: every word. I mean, it'll help us out here. I in,
Speaker 2: if we get you know, a three percent ten years
Speaker 2: three point x percent ten year yield, we get disinflation.
Speaker 2: And that is that good for Brian Belski in equities
Speaker 2: or not?
Speaker 6: I think that it depends on the departure point for
Speaker 6: the equity market at the moment. If we come into
Speaker 6: the event with the S and P five hundred at
Speaker 6: forty seven hundred, that's going to be a net positive
Speaker 6: and stocks would rally into the end of the year,
Speaker 6: if we're at the peaks and the market comes to
Speaker 6: the realization that we're going to be facing an economic
Speaker 6: slowdown of some magnitude, then that will initially be bad
Speaker 6: for stocks until the FED gets involved.
Speaker 4: And how do you think the FED kind of looks
Speaker 4: at all the news coming out of Washington, DC, all
Speaker 4: the tweets, all the the side press conferences, the little
Speaker 4: gaggles and things like that, which kind of really really
Speaker 4: move the market on an intra day basis. How does
Speaker 4: a FED deal with that?
Speaker 2: Do you think?
Speaker 6: Well, it is a pretty challenging environment for the FED,
Speaker 6: to be sure, but it's not the first time the
Speaker 6: FED has had to absorb and react to social media
Speaker 6: posts and announcements, so it isn't as dramatic as it
Speaker 6: was during Trump's first presidency. However, I do think that
Speaker 6: Powell's stance of wait and see has only been reinforced
Speaker 6: by the developments this week, because if we don't know
Speaker 6: what the tariffs are ultimately going to look like, it's
Speaker 6: very difficult to base any money terry policy decisions on
Speaker 6: the what ifs, And that's what Trump or Powell is
Speaker 6: struggling with at the moment.
Speaker 2: In its nine o'clock hour, with the market opening here
Speaker 2: in twenty minutes. We welcome all of you on your
Speaker 2: commute across the nation. We welcome you on YouTube. Thank
Speaker 2: you so much in your office at your home, subscribing
Speaker 2: to Bloomberg Podcast, your interest growing each and every day.
Speaker 2: Good evening on the Pacific RIM and over to India
Speaker 2: as well. Just humbled by the South, particularly Southern Asia.
Speaker 2: You know, I mean in Japan as well. I've had
Speaker 2: some anecdote, but really, thank you so much in the
Speaker 2: South Asian India, in Malaysia, Singapore Evening greatly, greatly appreciate
Speaker 2: your attendance. Paul Sweeney and Tom Can. We are commercial
Speaker 2: free in this hour. Thrilled to bring you. Ian Lincoln
Speaker 2: of BEMO Capital Markets.
Speaker 4: Hey, Ian, you know, honestly, I don't pay attention to
Speaker 4: these treasury auctions. They're smarter people that do that for
Speaker 4: US Ira Jersey, Lisa Bromwitz for me, did what happened
Speaker 4: yesterday with these auctions?
Speaker 2: And why were they important?
Speaker 6: So we had a strong takedown of the ten year auction.
Speaker 6: The risk was that in retaliation for some of the
Speaker 6: higher tariffs, that foreign buyers would step away from the
Speaker 6: treasury auction and it would tail dramatically. In fact, we
Speaker 6: saw a strong stop through which really reaffirmed the markets
Speaker 6: perception that there are going to be buyers of treasuries,
Speaker 6: particularly in an environment like this with so much uncertainty.
Speaker 2: Ian Lingan, thank you so much for being my capital markets.
Speaker 2: Of course, you can protect the copyright of all of
Speaker 2: our guests. Look to his important research note at the
Speaker 2: Bank of Montreal.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business App. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 2: Joining us now from Laffert Tangler Investments, Nancy Tangler. I
Speaker 2: saw a Professor Laugher writing yesterday. Now maybe it was
Speaker 2: a couple of days ago. Join out ed about we're
Speaker 2: going to get through this, and we're going to get
Speaker 2: through it with a budget responsibility. Nancy, were all exhausted.
Speaker 2: Take us away from the politics, and when do we
Speaker 2: get back to what we call a few years ago
Speaker 2: is normal?
Speaker 9: I know, Tom.
Speaker 10: I went to bed at five point thirty last night,
Speaker 10: and I slept all the way through you slept.
Speaker 2: All the way through me. I'm going arethramatic. I had
Speaker 2: two hours sleep than four hours sleep, and last night
Speaker 2: it was like five and a half hours sleep. So
Speaker 2: after your beauty rest, wait to see.
Speaker 10: So I feel like this was an unforced error Ago
Speaker 10: red SOX I was told to say how about this?
Speaker 3: Ye with exact about it.
Speaker 10: I think, look, you expected the president to come out
Speaker 10: and declare victory. He did, All the proxies are declaring victory.
Speaker 10: But really this was one of the sloppiest policy rollouts
Speaker 10: I've ever witnessed in my forty plus your career. It
Speaker 10: didn't I don't think advance the ball to the extent
Speaker 10: that we wanted it to. And the repercussions will be
Speaker 10: felt for some time. So if you look at Google
Speaker 10: reinforced or restated, Yes, we're going to use our you know,
Speaker 10: we're going to implement our CAPEX budget. Microsoft pulled the factory.
Speaker 10: These are very long, as you know, time horizons to
Speaker 10: build a factory and to get parts. Sixty eight percent
Speaker 10: of industrial I'm sorry of manufacturing GDP is imported parts.
Speaker 10: You can't fix that overnight. So I think we're going
Speaker 10: to continue to see this ripple through the markets, and
Speaker 10: I wouldn't jump in quickly. I take my time and
Speaker 10: add to names. I do think we come out the
Speaker 10: other side.
Speaker 2: Laugh For Tangler is the most interesting. I've been a
Speaker 2: defender of Arthur laugh where a lot of critics going
Speaker 2: after Emie and I will argue about the calculus of
Speaker 2: the laugh For curve and where the tangent is in
Speaker 2: the curve. Forget about that. You got Yale and Stanford
Speaker 2: economics on your creative writing and psychology. It's a really
Speaker 2: interesting mix out there. And when you say you don't
Speaker 2: get what they're doing in a white house, that's important.
Speaker 2: What's our laughless say? He's got to be as appalled
Speaker 2: as you.
Speaker 10: I mean, I can't speak for him, but I can
Speaker 10: say he's pretty annoyed.
Speaker 9: So I just spoke.
Speaker 2: Okay, we're missing an action. Where's the Secretary Treasury, Where's
Speaker 2: the Secretary of Commerce? Where in God's name is a
Speaker 2: Penn PhD. Kevin Hassett to advise them within the prism
Speaker 2: of Laffler Tangler economics.
Speaker 10: They have to get through Peter Navarro has been the problem.
Speaker 10: Come on, I mean it I mean I do, and
Speaker 10: I'm I'm I think it's really interesting how he's been
Speaker 10: m I A from the media, and that's a good thing.
Speaker 10: And now they just need to get Howard Lutnik off
Speaker 10: the air and put out Bessett, put out Hassett, and
Speaker 10: have the president speak to his own to his own policy.
Speaker 10: But I think it was so poorly rolled down. I
Speaker 10: don't think they knew what they were doing until the
Speaker 10: day before. And I was told they used chat GPT
Speaker 10: to generate that chart, which was ridiculous. All of us
Speaker 10: were going, what the no, we.
Speaker 2: Can't say that at radio. You can say that over
Speaker 2: on Bloomberg TV and the gakire on radio you go
Speaker 2: to jail. So be careful, Paul. Let me get one
Speaker 2: more in here, because I think this is just absolutely critical.
Speaker 2: What does the president have to do with comfortable conservative economists,
Speaker 2: the giant Glenn Hubbard of Columbia University, exquisite Cudlow, it
Speaker 2: was a legit.
Speaker 7: Economist over at Fox, all of them. What does the Tangler, Lafler, Coudlow,
Speaker 7: Hubbard crew, the great Ed Lazir who we miss every
Speaker 7: day at Stanford. What does your cadre have to do
Speaker 7: to get past Navarro to the President.
Speaker 10: I think we've sort of done it in the media.
Speaker 10: I think there's been a drum beat, and you know,
Speaker 10: ten percent isn't as troublesome as these arbitrary slapped on tariffs.
Speaker 10: But I actually think that the President believes a lot
Speaker 10: of this, and just like he believes the trade deficit
Speaker 10: is bad, and those of us who have been around
Speaker 10: for a while would say trade deficits are good if
Speaker 10: it's driven by prosperity. So ten percent would be more
Speaker 10: like a flat tax, and I think that would at
Speaker 10: least stop distorting behavior.
Speaker 2: Down negative seven under surveillance. Apology. I'm sorry, Paul, it
Speaker 2: took too much time there. I was all wound up
Speaker 2: about the moment there, about the bodies at the White House.
Speaker 2: Nancy knows them all. That's what Nancy.
Speaker 4: Have you guys changed your risk outlook over the last
Speaker 4: several days year, as we've had to deal with a
Speaker 4: lot of this tariff volatility.
Speaker 10: We started changing it, Paul, after the market peaked and
Speaker 10: we started getting sell off, so we moved a little
Speaker 10: bit more defensively. We're still selectively buying tech names, mostly
Speaker 10: focused on the software side of things, less focused on
Speaker 10: the hardware side. We still believe AI is instrumental. You
Speaker 10: saw Spotify headline that said, no more new jobs unless
Speaker 10: you can prove it can't be done with AI. So
Speaker 10: I think those are important. Walmart came out and re
Speaker 10: affirmed the full year guidance they're going to generate fifth
Speaker 10: They're our poster child of an old economy company that
Speaker 10: is pivoted to the new names. So we've added names
Speaker 10: like eccentric, or added two names like accenture in Netflix, Spotify.
Speaker 10: These these could be more defensive names if we do
Speaker 10: go into recession, but I think we're into economic deceleration
Speaker 10: as opposed to a potential recession.
Speaker 4: What do you expect to hear from the c suite
Speaker 4: this earning season? I mean, I think a lot of
Speaker 4: folks are concerned that there's headwind and there's really earnings
Speaker 4: risk out there, that the essens that are out on
Speaker 4: the street need to come down, and maybe come down
Speaker 4: pretty significantly. Maybe that's already priced in. I don't know,
Speaker 4: but are you concerned about the earnings season coming out?
Speaker 10: I don't think we're gonna hear much. I think we're
Speaker 10: gonna hear delayed guidance. Why I mean I would do
Speaker 10: that if I was in the c suite? Why would
Speaker 10: you give guidance? But Walmart was interesting at their investor
Speaker 10: day because they did reaffirm the year, they just kind
Speaker 10: of gave a wider range on the quarter. So I
Speaker 10: think what we heard last earning season around tariffs was
Speaker 10: that the CEOs were confident they knew how to navigate.
Speaker 10: I don't think they were expecting maybe some of what
Speaker 10: we got, but they could be, you know, expecting what
Speaker 10: now what we've got now. So but it is a
Speaker 10: ninety day pause, and I think we have to be
Speaker 10: aware of that.
Speaker 2: I'm focused on the labor economy. It's maybe the greatest
Speaker 2: disagreement I've had with the supply side crew. I think
Speaker 2: of you know, folks, this is esoteric but real business
Speaker 2: economic Carnegie Mail in Freshwater, Charles plots Er, Philadelphia. I've
Speaker 2: got some real issues with a job generation. A guy
Speaker 2: named Summers who's from the dark side, and Olivier Blanchard
Speaker 2: the Giant. We'll talk about hysteresis where just the labor
Speaker 2: economy just falls apart. Do we risk a new permanent
Speaker 2: higher unemployment rate with all this carnage?
Speaker 10: I think we could Tom I mean so far that
Speaker 10: you know we've seen here.
Speaker 2: Now that's a headline for the day. Tangler and Summers
Speaker 2: on the same page.
Speaker 3: Continue.
Speaker 10: I found myself agreeing with Elizabeth Warren the other day,
Speaker 10: what please on maybe Congress should be a little more
Speaker 10: involved in tariff policy. Yeah, but I think we could,
Speaker 10: and I think it could be accelerated by AI because
Speaker 10: we are seeing, like at our firm, we're using AI
Speaker 10: software to listen to the calls for us and then
Speaker 10: we can go in the earnings calls that is, and
Speaker 10: then we can go in and focus on when we
Speaker 10: want to. So that saves hours and hours a quarter,
Speaker 10: and I think you'll start to see more of that
Speaker 10: more in our firm. It's more thinking, less just analyzing headlines,
Speaker 10: and I think that's important. So I think we're hearing
Speaker 10: that we're hearing AI. Last quarter we heard the theme
Speaker 10: was we're hiring less on the low end or entry level,
Speaker 10: and we're hiring less or keeping less middle management people
Speaker 10: and that spanned across sectors. So I do think it's
Speaker 10: a risk, but I also see in expanding growing economy,
Speaker 10: if we get deregulation or once we realize the effects
Speaker 10: of deregulation and the tax cuts if we get them.
Speaker 4: What are we doing in the bond market these days?
Speaker 4: See come are we taking credit risk? Are we sitting
Speaker 4: in the treasury market where we're going?
Speaker 10: So we've done so in our uni portfolios. We've built
Speaker 10: callable portfolios and kept the duration below a year, so
Speaker 10: we've been getting a little over four percent. As you know,
Speaker 10: the muni market melted down a couple of days back,
Speaker 10: but it started to come back on credit. We're not
Speaker 10: taking credit risk at this particular point. Although the credit
Speaker 10: the spreads have expanded, they're still not in danger zone.
Speaker 10: So we've been parking in the short end of the
Speaker 10: treasury market for clients where we're expecting to extend duration later.
Speaker 2: To finish up here with a broad philosophy, and this
Speaker 2: goes back to I remember sitting. I was in the
Speaker 2: hanover in in Dartmouth with a guy named Nut Gingrich
Speaker 2: and we were talking about that night in nineteen ninety four.
Speaker 10: I'm sitting in the current remember it well.
Speaker 2: Dan rathers talking to me. He was CDs. Nobody's prepared
Speaker 2: for this, and all of a sudden, folks, supply side
Speaker 2: was run in Congress. Where is your movement Doctor Laffer's
Speaker 2: movement in ten or twenty years. I can't figure it out.
Speaker 10: I mean, let's hope that it's not forgotten. I know
Speaker 10: he has the Laffer Center and he continues to put
Speaker 10: forward his policies through the Laffer Center. Got Young of
Speaker 10: Americans or Foundation for Young Americans that focuses on it
Speaker 10: and is teaching young college students about the movement. But
Speaker 10: I do think at some level it is common sense
Speaker 10: and it will continue if we get congressmen who can
Speaker 10: stand a position. And I think that's what's been so
Speaker 10: disappointing for me, the falling in line on either side
Speaker 10: all the time, like we need fresh thinking and supply
Speaker 10: side economics worked and it could work again.
Speaker 2: This has been wonderful. Don't be a stranger. Nancy Tangler
Speaker 2: folks Iconic with Laffler Tangler.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay, Android Otto with
Speaker 1: the Bloomberg Business app. You can also watch us live
Speaker 1: every weekday on YouTube and always on the Bloomberg Terminal to.
Speaker 2: Short visit right now with Jordan Rochester, We're gonna have
Speaker 2: the mind for a longer visit here in the coming days.
Speaker 2: But we just had to get them in writing with
Speaker 2: the Missuo their fic macro strategy Jordan. In the currency
Speaker 2: market right now, it appears that China's affecting some form
Speaker 2: of depreciation if they do. You want remember depreciation, what
Speaker 2: does that mean for the dollar and.
Speaker 9: For America, Typically it would mean a stronger doll It
Speaker 9: usually would mean therefore you offset the impact of tarifs.
Speaker 9: But the tricky thing is is that we've not really
Speaker 9: seen broad dollar strength after tarifs were announced. It actually
Speaker 9: breaks most of the textbooks in terms of tariffs usually
Speaker 9: mean that the dollar has to appreciate because the terms
Speaker 9: of trade of Europe and everybody else's wee can. But
Speaker 9: what we've seen is it's just laid. This whole situation
Speaker 9: led to a seizing up of the financial markets. Dollar
Speaker 9: export received usually in Asia weren't being received as now.
Speaker 9: Everyone's been trying to wait out the tariffs and try
Speaker 9: and hopefully get a better deal down the line, and
Speaker 9: so you've not had the same recycling into US treasuries
Speaker 9: and into US equities, so you've seen broad dollar selling.
Speaker 9: As a result, you've seen much less dollar buying on
Speaker 9: the equities and the fixed income signed from foreign investors
Speaker 9: thanks to all of this.
Speaker 4: Jordan, What does it one hundred and twenty five percent
Speaker 4: tariff on Chinese goods mean for the US economy? Everything
Speaker 4: it seems like we use comes from China at some point.
Speaker 4: What does that mean for the economy?
Speaker 9: Do you think it's a level of tariff that I
Speaker 9: think is so high that it makes it very difficult
Speaker 9: to say that you're going to continue to imput from
Speaker 9: China at the same rate. But really what's going to
Speaker 9: happen is a lot of rerouting of trade from China
Speaker 9: to Vietnam, to Cambodia to Singapore, and it's going to
Speaker 9: have the lower tariff rates than one hundred and twenty five.
Speaker 9: So the US is still going to import from China,
Speaker 9: it's just going to have a bit of a sight
Speaker 9: seeing trip along the way. And so for the US economy,
Speaker 9: this is still way on growth. It's still a tax
Speaker 9: hike on the economy, but it's not as bad as
Speaker 9: the sticker price.
Speaker 2: Is that cheating? I mean, what we're going to hear
Speaker 2: in the house is China's cheating because they're running the
Speaker 2: Jordan Rochester missul merch Yes, through Vietnam. By the way,
Speaker 2: is that like that's just to me, that's like normal
Speaker 2: decision making a trade. Or do you buy the idea
Speaker 2: during Rochester that it's cheating.
Speaker 9: I don't know if the word cheating, it's just what
Speaker 9: happens in business. I do you think about oil sanctions
Speaker 9: as well, there's lots of you know, the EU still
Speaker 9: buys a lot of natural gas and oil from Russia
Speaker 9: despite the being sanctioned. So there is lots of these
Speaker 9: examples into an international trade where the aim seems right
Speaker 9: but the actual outcome is different. I think really the
Speaker 9: sort of ten percent flaw that Donald Trump is set
Speaker 9: for everybody is a better example of how to avoid
Speaker 9: that problem of rerouting. There is no one to reroot
Speaker 9: through that is actual zero And I think this applies
Speaker 9: to the trade talks with the UK, Japan and everybody else.
Speaker 9: I don't know how they go get them below ten percent,
Speaker 9: because then you'll just have rerouting through Belfast from Dublin.
Speaker 9: That's the sort of thing that will happen if we
Speaker 9: go any lower.
Speaker 4: So Jordan, what is the fixed income commodities credit macro
Speaker 4: strategy call out on Zuho today after what we learned yesterday.
Speaker 9: Every day is a new day. If you asked me yesterday,
Speaker 9: I would have said flattening is the best trade. And
Speaker 9: I didn't expect to thirty basis points flattener in just
Speaker 9: thirty minutes after I said it in two tens for
Speaker 9: the US. So I think what you're likely to see
Speaker 9: is you're a dollar is going to be quite range
Speaker 9: bound because the ECB is probably going to cut rates
Speaker 9: more aggressively than the market prices, and the FED will
Speaker 9: not cut rates as aggressively as the market prices. We
Speaker 9: have about eighty five basis points priced by the year
Speaker 9: end for the Fed. We don't think they're going to
Speaker 9: cut at all. So I think that we could see
Speaker 9: some dollar strength at some point when the Fed makes
Speaker 9: their reaction function more clear. But I think the better
Speaker 9: trade if you want to be short the dollar is
Speaker 9: short dollar m because I think the the Japanese will
Speaker 9: continue to raise rates this year slowly. The market completely
Speaker 9: whacked that lower yesterday before the good news, and we
Speaker 9: had no hikes at all. Price for Japan. We started
Speaker 9: to creep back in for higher rates in Japan. That's
Speaker 9: going to continue, I think, and I think the US
Speaker 9: will put pressure on the Japanese to raise their rates
Speaker 9: as well and to have a stronger currency. So Dolly
Speaker 9: end to one forty is another view, and the US
Speaker 9: ten year five percent by year end.
Speaker 2: Oh oh okay, Jordan sets us up. We need to
Speaker 2: get you out in the next couple of days for
Speaker 2: much much longer than you York even a two blocker.
Speaker 2: If he's in New York City, we'll steptured Rochester and
Speaker 2: studio as well. He is with Maszua.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Otto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station. Just
Speaker 1: say Alexa play Bloomberg eleven thirty joining us now, Kona.
Speaker 2: Haiks so happy that she could be with us today,
Speaker 2: Kona in this crisis, I should say, with Ed and
Speaker 2: f Man iconic in commodities, which soft commodity is of
Speaker 2: the greatest study for you this morning.
Speaker 11: Because it seems to be a US China trade war
Speaker 11: focus right now, I guess it would have to be
Speaker 11: soybeans China imports heavily from the US. Well, it had been.
Speaker 11: It managed to divert away from the US market in
Speaker 11: Trump's first term during the first trade war. So I
Speaker 11: guess it's less reliant on the US as it was before,
Speaker 11: but it's still very it's still big imports. Today it
Speaker 11: gets a lot more from Brazil. So I think that's
Speaker 11: going to be the big trade flow move that we're
Speaker 11: going to see as a result of these retaliations.
Speaker 2: For all of you across the Great Midwest of America,
Speaker 2: this is the conversation of the day, COONa Haik. How
Speaker 2: easy is it for Beijing to say, Donald Trump Sia,
Speaker 2: We're going to Brazil for the marginal soybean pretty easily.
Speaker 11: Actually, In fact, right now most of it's coming from Brazil,
Speaker 11: and I think that shipment is going to have to
Speaker 11: happen in a more rapid force. The seasonality is such
Speaker 11: that that's going to happen right now as we speak.
Speaker 11: The US season export season doesn't happen until later in
Speaker 11: the year, in September, so we have a long time
Speaker 11: to go before we actually decide we actually see how
Speaker 11: this time spent out, because you know, six months is
Speaker 11: a long time in this trade war. Right, things could
Speaker 11: create completely different by then. So until now, China is
Speaker 11: getting most of it soybeans from Brazil. Brazil stands to
Speaker 11: be a massive beneficiary of any trade war arising from
Speaker 11: US and China, and they're taking advantage of it. So yeah,
Speaker 11: I think that China has managed to diversify our fair
Speaker 11: amount already.
Speaker 4: So kind of you know, we're not really sure where
Speaker 4: we are with this trade war here. We had a
Speaker 4: little bit of a pause yesterday, the presidents stepping back
Speaker 4: a little bit on rest of world. Here, what's the
Speaker 4: commodities play here in a world where trade tensions are
Speaker 4: so high? Where do you go?
Speaker 11: Oh, it's not good. I mean, commodities ultimately is a
Speaker 11: risk asset. So whenever you have macro risk of commodities
Speaker 11: will be sold off. As we have seen in this
Speaker 11: last week which was on presidental volatility, crude oil is tanking,
Speaker 11: as it should be because the economic outlook in any
Speaker 11: trade war is always so negative. The first thing that
Speaker 11: he gets impacted is negative energy demands, So that's impacting
Speaker 11: all the energy commodities. Metals, likewise, softs and agricultural commodities
Speaker 11: have weather the storm better than the other three. I guess,
Speaker 11: particularly because I think that you know, at the end
Speaker 11: of the day, inputs will still have to happen. It's
Speaker 11: just a question of trade dislocation. The one thing that
Speaker 11: tends to win always is gold. It is the classic
Speaker 11: safe haven, and it has reached record highs. It probably
Speaker 11: will go higher again. So I think, you know, long
Speaker 11: gold all the way, but crude oil at some point
Speaker 11: it starts getting very cheap. I worry about Donald Trump
Speaker 11: plans to for drill, baby drill, because he's you know,
Speaker 11: you need, you need, you need seventy dollars all to
Speaker 11: get any kind of investment in the US for shale oil.
Speaker 2: Paul's up sixty three dollars, thirty one forty three. Yep,
Speaker 2: that's a wow statistic.
Speaker 4: Wow statistics. So Connor, when you think about gold, is
Speaker 4: there is there a valuation call here for gold and all?
Speaker 4: Is there a way you look at gold and think
Speaker 4: about a relative to maybe other commodities, whether it's a
Speaker 4: stock market, the bond market. How do you think about
Speaker 4: evaluation here or is it just buy it?
Speaker 11: It's you buy it, you buy it. It's one of
Speaker 11: your diversification portfolios, alongside other safe havens like the Swiss,
Speaker 11: frank and the Japanese. Yeah, traditionally US bonds and the
Speaker 11: US dollar would have been in that basket, but today
Speaker 11: arguably it's less in favor. So gold still has that
Speaker 11: instrinsic value that people like, so I think it definitely
Speaker 11: has more upside to go. But you know, at some point,
Speaker 11: once we start getting a more of a feel for
Speaker 11: where negotiations are going with bilateral negotiations, and eventually, and
Speaker 11: I do believe at some point China and the US
Speaker 11: will come back to the table. At some point you
Speaker 11: start looking at the metals and energy again.
Speaker 2: One final question con ed n f Man. With just
Speaker 2: the heritage that you have, if you are in Beijing today,
Speaker 2: what's the commodity where China has power or leverage over America.
Speaker 2: It's I'm sure it's some odd commodity. I don't know
Speaker 2: which is it.
Speaker 11: It's a critical minerals, it's the rarer. It's they have
Speaker 11: complete ownership and control over that. And that's that is
Speaker 11: one thing that the USA needs badly if they want
Speaker 11: to build this whole electrification and transition energy side of things,
Speaker 11: which we clearly trun Donald Trump wants, because those minerals
Speaker 11: have been actually exempt in these tariff tariffs. So yeah,
Speaker 11: I think that's something where China definitely has leverage. And
Speaker 11: then the sheer population. China has been a very export
Speaker 11: oriented economy. Today China is going to have to shift
Speaker 11: into more domestic consumption led economy. So that's been forced
Speaker 11: upon them, becoming a bit more like the US GDP.
Speaker 11: And once that happens, that doesn't reverse rapidly. So I
Speaker 11: think then this is structure and it's going to be
Speaker 11: forced upon. We'll have dramatic changes on the way the
Speaker 11: world second largest economic power starts behaving with the rest
Speaker 11: of the world. I think really interesting times.
Speaker 2: Just brilliant Colin. Thank you so much, particularly on soybeans.
Speaker 6: There.
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