WEBVTT - Surveillance: Structural Change With El-Erian 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:31.000 and of course on the Bloomberg Terminal. John, I've never 0:00:31.040 --> 0:00:33.880 seen a point, even the crisis of oh seven oh eight, 0:00:34.080 --> 0:00:37.040 where there's so many t decisions out there that we're 0:00:37.080 --> 0:00:39.880 all going to make off of a natural disaster. Let's 0:00:39.880 --> 0:00:42.920 start right there with Mohammed al Arian, quaits college president 0:00:42.920 --> 0:00:45.519 and Bloomberg opinion columnist in place to say, joins us 0:00:45.880 --> 0:00:48.800 right now, Mohammed two way risk? Do you think we're 0:00:48.800 --> 0:00:51.400 appreciating the two way risk a little bit more we 0:00:51.479 --> 0:00:55.240 are in the marketplace? I think the FED as yet 0:00:55.720 --> 0:01:00.639 hasn't It is absolutely convinced that there's just one outcome, 0:01:01.080 --> 0:01:06.839 so it's baseline is having a very high probability of materializing, 0:01:07.040 --> 0:01:09.720 whereas the marketplace is starting to think more in terms 0:01:09.800 --> 0:01:14.640 of a distribution of outcome that's tilted towards a horder 0:01:14.720 --> 0:01:17.800 economy than what the FED expects. Do you think Mohammad 0:01:17.840 --> 0:01:20.080 has an era of judgment, or just the factor of 0:01:20.080 --> 0:01:22.400 the seat you're sitting in. If your market participant, you 0:01:22.440 --> 0:01:24.600 have to recalibrate day to day the balance of risk. 0:01:24.640 --> 0:01:26.880 If your policymaker, you just like is a focused on 0:01:26.920 --> 0:01:31.679 the destination. Now that's new, John. Remember we used to 0:01:31.720 --> 0:01:35.440 be forecast based, which would allow you to cause correct 0:01:35.920 --> 0:01:39.399 as you saw information come in. Now the FED on 0:01:39.480 --> 0:01:42.880 this new monetary framework has become outcome based. And when 0:01:42.880 --> 0:01:46.319 you are outcome based, you don't cause correct as you 0:01:46.400 --> 0:01:49.520 go along. You wait for the outcome. And what the 0:01:49.560 --> 0:01:52.400 market is realizing now is that there's a downside to 0:01:52.520 --> 0:01:56.240 being outcome based when there are structural changes going on. 0:01:56.680 --> 0:02:01.120 The big message of the huge data miss, be it 0:02:01.240 --> 0:02:05.200 on Friday or yesterday, is that when the are structural 0:02:05.320 --> 0:02:09.040 changes going on in an economy, it becomes very difficult 0:02:09.040 --> 0:02:13.359 for economists to foecus with any degree of accuracy. Mohammad, 0:02:13.360 --> 0:02:16.800 I want to go to the mathematical hierarchy, the architecture 0:02:16.880 --> 0:02:18.520 that we have right now, and we do this in 0:02:18.600 --> 0:02:21.880 honor of your Queen's College and the mathematical bridge that 0:02:21.960 --> 0:02:25.639 I know you've walked across the mathematical bridge right now 0:02:25.680 --> 0:02:28.440 to two thousand twenty three. It's not in any of 0:02:28.440 --> 0:02:31.680 the textbooks, is it. So then what do we use? 0:02:33.800 --> 0:02:37.240 So we have to have an open mindset and a 0:02:37.320 --> 0:02:40.640 lot of humility. We have to recognize that we have 0:02:40.880 --> 0:02:43.480 to think in terms of a range of scenarios and 0:02:43.560 --> 0:02:47.760 not get become hostage to a single baseline. And we 0:02:47.840 --> 0:02:50.240 have to be able to make to cause correct. You know, 0:02:50.520 --> 0:02:53.560 this is the lesson of the past when you have 0:02:53.600 --> 0:02:57.160 take structural changes. And what's so important, your Dr Larian 0:02:57.280 --> 0:03:00.000 is the idea that we have a set of outcomes. 0:03:00.320 --> 0:03:03.360 The gloom crew, which you're not part of, pounces on 0:03:03.440 --> 0:03:06.560 this every day with the great negativity. Do you have 0:03:06.639 --> 0:03:11.440 a confidence that corporate officers can adapt and adjust to 0:03:11.680 --> 0:03:16.040 some form of set of positive outcomes. Yeah, the ones 0:03:16.200 --> 0:03:20.239 I speak to are very open to the possibility that 0:03:20.320 --> 0:03:24.400 there are more outcomes out there than they've faced in 0:03:24.440 --> 0:03:27.440 the past. So what you hear over and over again 0:03:27.520 --> 0:03:31.040 is this notion of resilience, this notion of optionality, being 0:03:31.040 --> 0:03:34.239 able to change your mind, this notion of agility, being 0:03:34.280 --> 0:03:37.080 able to move quickly when you have clarity, But that 0:03:37.320 --> 0:03:40.600 they are much more data dependent than policymakers have become 0:03:40.920 --> 0:03:45.080 policymakers now are focused on a destination with a degree 0:03:45.120 --> 0:03:49.320 of conviction Tom that isn't match with foundation and evidence, 0:03:49.640 --> 0:03:52.920 and that's really unusual in our recent economic history. And John, 0:03:52.960 --> 0:03:55.280 you saw this yesterday with City Group where they talked 0:03:55.280 --> 0:03:58.000 about the resilience of the United Kingdom economy and ma 0:03:58.040 --> 0:04:01.320 homm chief said, they've been had hostage policymakers. This Federal 0:04:01.320 --> 0:04:05.080 Reserve is how hostage by its own framework. How do 0:04:05.120 --> 0:04:08.640 you think that being howed hostage right now? So the 0:04:08.720 --> 0:04:12.280 framework was the product of a certain world, and that 0:04:12.440 --> 0:04:16.240 was the world pre pandemic. It was a world of 0:04:16.360 --> 0:04:21.680 deficient aggregate demand that had persisted for a while. That 0:04:21.800 --> 0:04:26.599 was the world the FED was formulating its framework force. 0:04:27.200 --> 0:04:29.479 And I have a lot of sympathy that that framework 0:04:29.560 --> 0:04:32.320 made sense for that world. In a world like that 0:04:33.000 --> 0:04:36.960 where the supply side is relatively stable structurally, where you 0:04:36.960 --> 0:04:40.320 have a persistent deficiency of aggregate demand, you go to 0:04:40.440 --> 0:04:43.479 average inflation targeting and you keep on signaling to the 0:04:43.520 --> 0:04:47.000 market over and over again that your outcome based. That 0:04:47.200 --> 0:04:49.120 is not the world we live in today. It is 0:04:49.360 --> 0:04:51.640 very hard for anybody to argue that we have a 0:04:51.680 --> 0:04:54.799 deficiency of aggregate demand. We don't neither on the public sector, 0:04:54.960 --> 0:04:57.880 on the private sector, and on the on the supply side. 0:04:57.880 --> 0:05:01.640 There are fundamental structural changes going on in the world 0:05:01.680 --> 0:05:05.440 like that. You need optionality, You need to be able 0:05:05.480 --> 0:05:08.560 to change your mind. You cannot be pinned in a 0:05:08.560 --> 0:05:12.559 corner that says I will make up my mind after 0:05:12.640 --> 0:05:15.760 I see many months of data, because by that time, 0:05:16.120 --> 0:05:19.640 if you're wrong, playing catch shop is really problematic. And 0:05:19.680 --> 0:05:21.960 what you're seeing is the market is actually being much 0:05:22.000 --> 0:05:26.800 more measured in how it's looking at risk, while the 0:05:26.960 --> 0:05:30.480 FED is pinned in a corner holding onto its conviction 0:05:31.080 --> 0:05:34.320 even though there isn't even though the evidence increasingly says 0:05:34.600 --> 0:05:37.520 be open on it. Through a little bit more humility, 0:05:37.600 --> 0:05:39.720 I'm Gonula asked this question advice check Clarida. How do 0:05:39.839 --> 0:05:41.880 you know if you're wrong? What do you think would 0:05:41.880 --> 0:05:45.279 sell them if they're wrong? So he answered that question 0:05:45.279 --> 0:05:46.920 to you. He said, by the end of the year 0:05:47.040 --> 0:05:50.760 or the beginning of next year, we will know. And 0:05:50.800 --> 0:05:54.080 that's why they are not quote thinking about thinking. So 0:05:54.200 --> 0:05:56.479 think how many stages you have you have to go 0:05:56.560 --> 0:05:59.680 from thinking about thinking to thinking. Then you've got to 0:05:59.680 --> 0:06:03.400 start explaining how are you gonna taper? Then you're gonna 0:06:03.560 --> 0:06:06.279 start tapering. And remember they had no good answer to 0:06:06.320 --> 0:06:08.760 Mike mckie's question about what if you buy a hundred 0:06:08.800 --> 0:06:11.320 and ten million billion a month? What if you buy 0:06:11.320 --> 0:06:13.640 a hundred billion a month? Right? So, so they are 0:06:13.839 --> 0:06:17.080 very far away because they are in this outcome based 0:06:17.080 --> 0:06:19.919 a quote. So, and that's what the marketplace realizes is 0:06:19.960 --> 0:06:23.080 by the time the Fed figures out did they make 0:06:23.120 --> 0:06:28.320 the right call on transitory inflation? If they are wrong, 0:06:28.760 --> 0:06:33.040 the adjustment process itself could end up sending the economy. 0:06:33.680 --> 0:06:34.920 Let me just jump in because I think this is 0:06:34.960 --> 0:06:38.120 really important. When Mike McKie asked this question, does a 0:06:38.160 --> 0:06:40.320 hundred and twenty billion get it done? A hundred and 0:06:40.320 --> 0:06:42.520 ten a hundred billion? The pushback from the likes of 0:06:42.560 --> 0:06:45.440 Neil cash Gari, it's a it's the same. This is 0:06:45.440 --> 0:06:47.680 the labor market, it's week and we need to support it. 0:06:47.960 --> 0:06:50.680 What I think they're failing to communicate right now is 0:06:50.680 --> 0:06:53.680 how billions upon billions of dollars of MBS purchases actually 0:06:53.760 --> 0:06:56.600 help them achieve that goal. Do you think the asset 0:06:56.600 --> 0:06:59.560 purchase program is helping them achieve that goal? Especially when 0:06:59.600 --> 0:07:01.719 we spent the last several weeks talking about a supply 0:07:01.760 --> 0:07:06.400 side problem. It's not helping them because they can't deal 0:07:06.400 --> 0:07:09.480 with the supply side of the economy. They can't lift 0:07:10.000 --> 0:07:14.239 supply bottlenecks by flooding us with liquidity. They cannot improve 0:07:14.320 --> 0:07:17.480 the functioning of the labor market. They cannot open schools 0:07:17.480 --> 0:07:20.600 with liquidity. They cannot improve childcare with liquidity. They cannot 0:07:20.680 --> 0:07:25.160 have a better matching of skills to demand with liquidity. 0:07:25.200 --> 0:07:28.120 And that's the problem. Um, we should spend more time 0:07:28.160 --> 0:07:30.280 looking at what the Bank of Canada did with the 0:07:30.320 --> 0:07:32.360 Bank of England did and say why is it that 0:07:32.440 --> 0:07:36.360 they feel confident they can taper a little bit, whereas 0:07:36.400 --> 0:07:40.480 the fact is really afraid. Oh, Mohammed, this is like 0:07:40.480 --> 0:07:43.320 a three hour conversation or control rooms deciding if we 0:07:43.400 --> 0:07:46.040 want to go there right now, have another biscuit baked 0:07:46.040 --> 0:07:50.200 in fourteen Mohammed, I want this is really really important, folks, 0:07:50.200 --> 0:07:52.320 what we're talking about here. And I'm gonna go back 0:07:52.440 --> 0:07:55.160 Dr Larry into your essay of five years ago on 0:07:55.240 --> 0:07:57.880 the delusion of liquidity. Let us speak now, and I'm 0:07:57.880 --> 0:08:00.440 not putting this in the year words the Delusian ab 0:08:00.440 --> 0:08:04.840 outcome based we're trying to rationalize an ex post structure, 0:08:05.240 --> 0:08:07.960 as you say, and I'll really lean on Canada here. 0:08:08.480 --> 0:08:11.640 They've had the courage to get away from an ex 0:08:11.720 --> 0:08:16.000 post structure. What is the mechanism the United States does 0:08:16.520 --> 0:08:20.480 or uses the Federal Reserve to drag themselves away from 0:08:20.480 --> 0:08:26.280 a deeply expost reality. I hope a robust internal discussion 0:08:27.120 --> 0:08:31.040 can be deducted in a in a safe zone that 0:08:31.160 --> 0:08:36.800 looks at the evidence and doesn't get dogmatic in terms 0:08:36.800 --> 0:08:38.920 of if we change our framework at this state, we 0:08:39.080 --> 0:08:42.280 lose credibility. That's going to be absolutely critical. They have 0:08:42.440 --> 0:08:45.680 to be open minded given the structural changes going on 0:08:45.720 --> 0:08:47.760 in the economy. Tak, do you not think that the 0:08:47.800 --> 0:08:50.920 stakes are higher for the Federal Reserve? They are just 0:08:51.000 --> 0:08:53.440 because of dollar, just because of dollar. Talking about typering 0:08:53.440 --> 0:08:55.079 at the Federal Reserve? Can you imagine the impact we 0:08:55.080 --> 0:08:57.480 would have had at your thoughts out on that. This 0:08:57.520 --> 0:08:59.959 is so important John, as you bring up I mean, Mohammed, 0:09:00.160 --> 0:09:04.760 what is the outcome of a Canada like taper by 0:09:04.880 --> 0:09:09.199 your own power? Well, that's what scares them because they 0:09:09.280 --> 0:09:13.959 remember not just May June, but they also remember the 0:09:14.080 --> 0:09:16.640 massive U turn they had to do in January of 0:09:17.160 --> 0:09:20.680 nine when the marketplace didn't like the message. They're back 0:09:20.720 --> 0:09:24.360 to the Bank of Japan fifteen or eighteen years ago. 0:09:24.720 --> 0:09:28.640 That's how tid they are, and and and tom. The 0:09:28.960 --> 0:09:32.520 question that the marketplace asks is what if we're wrong? 0:09:32.720 --> 0:09:36.800 What's the recoverability of the mistake? How we coverable is 0:09:36.840 --> 0:09:40.160 a mistake? That is what people in the marketplace ask. So, 0:09:40.160 --> 0:09:43.160 so if you think in that world, whereas there's lots 0:09:43.160 --> 0:09:46.160 of uncertainty, I may end up making a mistake. So 0:09:46.200 --> 0:09:48.959 instead of insisting that I'm gonna be white, let me 0:09:49.000 --> 0:09:51.400 ask the question, if I make a mistake, what mistake 0:09:51.400 --> 0:09:53.480 would I abou to make? I think you would end 0:09:53.559 --> 0:09:55.840 up with a different outcome than where the FED is today. 0:09:56.000 --> 0:09:57.720 So I see me right. The build unly paced early 0:09:57.760 --> 0:09:59.840 this week Mohammed on where the FED funds right could go. 0:10:00.559 --> 0:10:02.679 I've really struggled with it. Many others did too, This 0:10:02.720 --> 0:10:04.760 idea that we could tolerate a fat funds right with 0:10:04.800 --> 0:10:06.800 a full hand, Dole, what did you make that pace? 0:10:08.160 --> 0:10:11.360 So he's talking purely in terms of policy, and the 0:10:11.440 --> 0:10:15.319 economy can tolerate higher rates, And I'm not advocating higher rates, 0:10:15.360 --> 0:10:18.319 by the way, I'm advocating a taper of the que program. 0:10:18.320 --> 0:10:21.160 I just want to be straight. Um. The problem drawn 0:10:21.200 --> 0:10:23.840 as you saw it yesterday. You know, we've focused on 0:10:23.920 --> 0:10:25.880 the fact that equity is sold off, but you know 0:10:25.920 --> 0:10:30.280 what bonds sold off, bitcoins sold off, goal sold off. 0:10:30.720 --> 0:10:34.120 And what you see is the reverse of what we've 0:10:34.160 --> 0:10:37.319 seen earlier, which is when there's some doubt about the 0:10:37.360 --> 0:10:41.440 liquidity paradigm which has supported all asset classes, they so 0:10:41.559 --> 0:10:46.040 called everything rally, when some doubts surface, and very small 0:10:46.080 --> 0:10:49.800 doubts have surfaced so far, nothing major market sell off 0:10:49.840 --> 0:10:52.760 across the board. There is nowhere to hide, and that's 0:10:52.760 --> 0:10:54.840 what the FED is afraid of. That you have a 0:10:54.880 --> 0:10:57.800 marketplace where there is nowhere to hide, and when there's 0:10:57.840 --> 0:11:02.400 nowhere to hide, people start doing um city things. So 0:11:02.600 --> 0:11:04.960 that's what the FET is afraid of. It doesn't want 0:11:05.920 --> 0:11:09.880 unsettling financial volatility to contaminate the economy. The problem is, 0:11:10.320 --> 0:11:13.559 if it ends up being wrong, you will have at 0:11:13.559 --> 0:11:16.880 the same time policy slamming the brakes on and the 0:11:16.960 --> 0:11:19.720 marketplace tightening as well, and that's how you end up 0:11:19.720 --> 0:11:22.679 in a recession. That's why it's better to be somewhat 0:11:22.720 --> 0:11:25.319 preemptive then to wait till the last thing. I don't 0:11:25.360 --> 0:11:28.000 think there will be, but certainly I would argue they 0:11:28.000 --> 0:11:30.240 need to be mahamma just to found a question. Then 0:11:30.640 --> 0:11:32.559 how would you be positioned ahead of what you think 0:11:32.559 --> 0:11:36.360 could be a messy summer? It is really hard because 0:11:36.400 --> 0:11:40.280 you're being You're being challenged both on return generation and 0:11:40.400 --> 0:11:44.520 risk mitigation at the same time. So sophisticated investors will 0:11:44.559 --> 0:11:47.760 look at tail hedges and that's why the Vicks moved away. 0:11:47.760 --> 0:11:51.000 It moved yesterday, um, But for the average investor it's 0:11:51.040 --> 0:11:53.480 hard now. The average investor, in fact, all of us 0:11:53.520 --> 0:11:56.120 are hoping that the fet is right, because if the 0:11:56.120 --> 0:12:00.199 feed is right on its huge transitory inflation call, then 0:12:00.200 --> 0:12:04.559 we can have a smooth transition both economic policy as 0:12:04.600 --> 0:12:08.000 well as a smooth market adjustment. But it's a huge 0:12:08.080 --> 0:12:10.199 gamble at this point. Mom and I want to go 0:12:10.240 --> 0:12:13.280 to Cambridge Economics and unfortunately have very little time, not 0:12:13.400 --> 0:12:16.560 from Thomas melt there so the lawyer Angus Deaton. But 0:12:16.640 --> 0:12:18.960 I want to go back to the idea of Nikki Keldor, 0:12:19.080 --> 0:12:21.719 who believes in a public solution. Are we going to 0:12:21.800 --> 0:12:25.959 get a public solution here or have we overreached so 0:12:26.080 --> 0:12:29.319 so the public solution comes to make the FED more 0:12:29.440 --> 0:12:32.520 comfortable about its ability to taper by being better on 0:12:32.600 --> 0:12:36.439 potential supervision and regulation. One of the things that is 0:12:36.480 --> 0:12:39.760 not spoken about is that risk has migrated and moved 0:12:40.000 --> 0:12:42.800 from the banks to the non banks, but the supervisor 0:12:42.800 --> 0:12:46.320 and regulatory system is seriously lagging this. And I suspect 0:12:46.360 --> 0:12:49.600 if the FED had more confidence in the supervision and 0:12:49.640 --> 0:12:52.440 regulation of non banks, it would feel more comfortable on 0:12:52.480 --> 0:12:55.280 the monetary policy side. Mohammed, this was way too serious. 0:12:55.280 --> 0:12:59.440 We didn't even get to talk about your meds, succeeds, success, 0:12:59.559 --> 0:13:01.439 want to be I don't want him, I don't I 0:13:01.440 --> 0:13:03.800 don't want Tom to jinx them. So please, let's not 0:13:03.840 --> 0:13:06.160 talk about my mets. We are all quietly watching this. 0:13:06.240 --> 0:13:08.599 We've seen this movie before. We get hope for we 0:13:08.640 --> 0:13:13.120 get grabbed in and then we get dumped. Right. Is 0:13:13.160 --> 0:13:19.000 it seven games now, John? And we're not commenting on 0:13:19.080 --> 0:13:21.319 either the seven game win next week or first place 0:13:21.440 --> 0:13:23.760 A Mohammed, It's gonna catch up. It's great to catch up. 0:13:23.800 --> 0:13:25.960 It's really good to see a mohammed erin their Queens 0:13:25.960 --> 0:13:36.600 College president and Bloomberg opinion columnists always generous. Dennis Gartman 0:13:36.679 --> 0:13:39.520 joins us, now retired editor of The Gartman Letter, with 0:13:39.559 --> 0:13:42.200 the University of Akron and domind fund as well done. 0:13:42.200 --> 0:13:43.640 It's I got eight ways to go, But I've got 0:13:43.760 --> 0:13:46.360 to start with the market reaction. Here. You and I 0:13:46.440 --> 0:13:49.520 know this is not a correction, it's not a bear market. 0:13:49.600 --> 0:13:52.720 It's a little bit of what the French call agitasia. 0:13:53.040 --> 0:13:56.960 What do you do when you get this cacophany of events. 0:13:57.840 --> 0:13:59.760 I think you have to be very careful. I've really 0:13:59.760 --> 0:14:02.680 not like stocks for the last two months especially, I 0:14:02.679 --> 0:14:05.040 have not liked high tech. I've I like the things 0:14:05.040 --> 0:14:07.200 I've made it some somewhat famous. I like the things 0:14:07.200 --> 0:14:08.760 that if you drop them on your foot will hurt. 0:14:08.760 --> 0:14:15.360 I'd like copper steel, tin, aluminum, automobiles, tires, that sort 0:14:15.360 --> 0:14:18.200 of thing, railroads, those sorts of very simple things. But 0:14:18.240 --> 0:14:20.680 I've been very ambivalent. Actually, I've been very barish about 0:14:20.680 --> 0:14:23.160 the stock market generally. And I think that we're going 0:14:23.200 --> 0:14:25.120 to have a bounce today. You can't take the dow 0:14:25.240 --> 0:14:28.360 down what points in the course of three days and 0:14:28.440 --> 0:14:31.200 not have some return, some bounce from the lows. But 0:14:31.280 --> 0:14:34.360 what bothers me, or what we should watch for, is 0:14:34.360 --> 0:14:36.840 how the volume comes in. The volume came in yesterday 0:14:37.120 --> 0:14:39.680 on the downside, very hard. If we have a bounce 0:14:39.720 --> 0:14:42.160 today and the volume is less, the volume is limited, 0:14:42.200 --> 0:14:45.240 and I think it shall be, that'll be a deletarious circumstance, 0:14:45.280 --> 0:14:47.080 So be very I still think you have to be 0:14:47.160 --> 0:14:49.080 very careful. I think that the Dow can go down 0:14:49.440 --> 0:14:52.520 another several thousand points from you that's so much called, 0:14:52.640 --> 0:14:54.760 and still be within the confines of the long term 0:14:55.080 --> 0:14:57.360 multi year secular bowl market. But you could fall off 0:14:57.440 --> 0:15:00.120 quite some distance in the next month or two. Us 0:15:00.160 --> 0:15:03.040 You and I have argued over this beverage of our choice, 0:15:03.160 --> 0:15:05.800 and that is the study of volume. I don't believe 0:15:05.800 --> 0:15:09.400 in it. You do. Is the volume study today the 0:15:09.480 --> 0:15:12.080 same it was what was when you and I were 0:15:12.080 --> 0:15:14.760 holding the standard and pours blodder in her hand, trying 0:15:14.760 --> 0:15:18.080 to figure out what to buy next. I think it does, Honestly. 0:15:18.080 --> 0:15:20.480 I still believe that good markets go up on strong 0:15:20.560 --> 0:15:23.680 volume and fall on weak volume, and weak markets go 0:15:23.840 --> 0:15:26.600 up on lesser volume and down on strong volume. And 0:15:26.600 --> 0:15:28.120 that's what we've seen in the course of the past 0:15:28.160 --> 0:15:30.760 several months, is that the rallies have been on very 0:15:30.840 --> 0:15:33.640 light volume, the declines have been on very steep volume. 0:15:33.680 --> 0:15:35.760 And I think that that was the precursor to this weakness. 0:15:35.800 --> 0:15:38.120 We'll see if if my thesis holds, will see if 0:15:38.160 --> 0:15:40.640 your thesis holds. But I think right now watching the 0:15:40.760 --> 0:15:44.040 volume is a very important circumstance to pay attention to. 0:15:44.160 --> 0:15:46.400 And I think it's barish at this point. And Dennis, 0:15:46.400 --> 0:15:48.400 some people trying to work out how they protect themselves 0:15:48.400 --> 0:15:50.840 because quite clearly, if the risk is inflation that you 0:15:50.840 --> 0:15:53.640 don't protect yourself with treasury bonds because you know too 0:15:53.760 --> 0:15:56.160 high yesterday too, what do you do? Do you raise 0:15:56.240 --> 0:15:58.840 some cash, keep some dry Piet when you pull back 0:15:58.840 --> 0:16:01.840 a deep risk, what is the actually look like? Dennis Well, 0:16:01.880 --> 0:16:03.880 as the chairman of the University of Akron's endowment, I 0:16:03.880 --> 0:16:07.200 actually pushed hard and we we moved in February to 0:16:07.280 --> 0:16:10.320 reduce our exposure to the equities market by three percent, 0:16:10.400 --> 0:16:13.480 which in in endowment land, that's a material change. When 0:16:13.480 --> 0:16:15.400 you reduce anything by one or two or three percent, 0:16:15.440 --> 0:16:17.840 you've made a material change. And we actually took a 0:16:17.880 --> 0:16:21.320 position in gold to hedge out inflation risk. That's proved 0:16:21.320 --> 0:16:23.800 to be wise. I've been very lucky thus far from 0:16:23.840 --> 0:16:25.600 given the fact that we've made that change. In very 0:16:25.680 --> 0:16:28.680 late February, the rustle's down about four or five percent 0:16:28.720 --> 0:16:30.840 from that level and golds up five or six percent. 0:16:31.160 --> 0:16:33.680 Call it good luck, call it fortune, call it maybe 0:16:34.240 --> 0:16:36.760 a wise trade. But I think reducing exposure to the 0:16:36.760 --> 0:16:40.120 equities market, raising a little cash, buying a little gold, 0:16:40.640 --> 0:16:43.920 buying tips probably is not a bad idea, and buying 0:16:44.080 --> 0:16:47.040 monthly dividend paying e t f s that that are 0:16:47.080 --> 0:16:49.360 well covered, and I think that's that's the way to go. 0:16:49.480 --> 0:16:51.400 Raising cash is not a bad thing at this point. 0:16:51.680 --> 0:16:54.280 Let's talk about gold, because that's a really really interesting point. 0:16:54.680 --> 0:16:57.360 When you moved, as you describe it, that has been 0:16:57.360 --> 0:16:59.040 a good play. Over the last couple of weeks. We've 0:16:59.080 --> 0:17:01.840 had to move off the month slows. It hasn't worked 0:17:01.840 --> 0:17:04.800 all year, though, even though inflation is dominated the conversation. 0:17:05.040 --> 0:17:07.680 Yesterday another example, it was down about one percent, even 0:17:07.680 --> 0:17:10.040 though the key theme was inflation. What's been going on 0:17:10.160 --> 0:17:12.399 do you think, Dennis, just in terms of relationship between 0:17:12.640 --> 0:17:16.720 inflation and gold, I think millennials at the balance like 0:17:16.800 --> 0:17:19.720 to like to speculate, or like to take positions with 0:17:19.800 --> 0:17:23.240 their with their stimulus checks uh in in bitcoin and 0:17:23.240 --> 0:17:24.840 in ethereum and the rest of them. And I think 0:17:24.880 --> 0:17:26.800 that that's been a drain at the margin at the 0:17:27.080 --> 0:17:30.080 all price of all the commodities, all price of all stocks, 0:17:30.119 --> 0:17:32.240 all price of all bonds is actually made at the margin. 0:17:32.280 --> 0:17:34.919 When the last two percent of the buyers become sellers. 0:17:34.960 --> 0:17:37.120 When the last two percent of the sellers become buyers, 0:17:37.440 --> 0:17:40.040 that's when price changes. And I think we've seen some 0:17:40.200 --> 0:17:43.160 movement on the part of an investors into bitcoin, into 0:17:43.200 --> 0:17:46.960 the cryptocurrencies, and away from gold. However, I'll think that 0:17:47.000 --> 0:17:50.080 the several thousand years history of gold will will will 0:17:50.119 --> 0:17:53.800 trump the five year or six years, seven year history 0:17:53.840 --> 0:17:56.760 of the cryptocurrencies. But I think that's cryptoes that have 0:17:56.800 --> 0:17:59.600 been the pressure point very quickly. Or Dennis, it's ninety 0:17:59.640 --> 0:18:01.800 six dollars at four dollars a gale and for you 0:18:01.880 --> 0:18:04.240 to fill up the Bentley, you know, ninety liters. It's 0:18:04.240 --> 0:18:06.879 a twenty four galon tank. Tell you're living in the 0:18:06.920 --> 0:18:11.240 heart of this no gasolene thing. Is it all over again? 0:18:11.960 --> 0:18:14.040 It feels like it it has that that looked to it. 0:18:14.119 --> 0:18:16.200 There are the lines at some of the service stations 0:18:16.240 --> 0:18:20.000 around here in Southeast Virginia, especially on Tuesday, we're very long, 0:18:20.160 --> 0:18:23.439 very very surprising. It's you can find gasoline in the 0:18:23.480 --> 0:18:25.520 morning when the tanker trucks come in, but by noon 0:18:25.560 --> 0:18:27.960 they're they're running out of running out of gas. And 0:18:28.000 --> 0:18:30.600 it does have that feel of the nineteen seventies when 0:18:30.640 --> 0:18:33.119 the odds and even license plate numbers were allowed to 0:18:33.119 --> 0:18:37.680 go and buy gasoline. It's a this will resolve itself. Obviously, 0:18:37.720 --> 0:18:40.560 the colonial pipeline said that they're gonna be back online 0:18:40.640 --> 0:18:43.400 or camera back online last night. It's the last mile. 0:18:43.480 --> 0:18:46.680 It's difficult. By the weekend we'll be it should be resolved. 0:18:46.840 --> 0:18:48.880 I'm so sorry as the typo there, Dennis, I gotta 0:18:48.880 --> 0:18:51.879 get this corrected. Dennis Carbon thinks so much wonderful to 0:18:51.960 --> 0:18:59.920 see you. This is a really really important interview. And 0:19:00.040 --> 0:19:03.760 let me put it in context. James Sweeney literally staked 0:19:03.800 --> 0:19:07.160 his career three or four years ago by saying, Europe, 0:19:07.280 --> 0:19:10.160 get over it. There's not going to be deflation, there's 0:19:10.160 --> 0:19:14.040 not going to be disinflation. You're wrong, wrong, wrong. The 0:19:14.080 --> 0:19:16.920 credit sweet chief Economists joins us. Right now is the 0:19:17.040 --> 0:19:22.560 tables have been turned towards worry of rising inflation. James Sweeney, 0:19:22.600 --> 0:19:26.680 should we fear a redux of the nineteen sixties? M 0:19:26.880 --> 0:19:30.320 hm um no. I think we should be open minded 0:19:30.359 --> 0:19:32.359 to that risk. But I think what we're really talking 0:19:32.400 --> 0:19:36.200 about here on the upside is you know, core inflation 0:19:36.400 --> 0:19:40.280 running for a year something like that. Um that that's 0:19:40.760 --> 0:19:43.120 not our forecast. It's a little bit higher than our forecast. 0:19:43.200 --> 0:19:46.760 But I think the evidence is mounting that that kind 0:19:46.760 --> 0:19:50.639 of outcome could happen. If that happens, that's not the 0:19:50.720 --> 0:19:53.240 end of the world. That's kind of maybe it's nineteen 0:19:53.280 --> 0:19:56.680 sixty six to nineteen sixty seven, sixty eight before inflation 0:19:56.800 --> 0:19:58.399 really got out of hand at the end of the 0:19:58.440 --> 0:20:01.639 sixties and into the eighteen seventies. But the FED is 0:20:01.680 --> 0:20:04.720 going to handle that in a different way than they 0:20:04.760 --> 0:20:08.879 than they did in eighteen sixties. And um, you know, 0:20:09.080 --> 0:20:10.960 it's it's it's not the end of the world, but 0:20:11.160 --> 0:20:13.879 it is a big change for financial markets and thinking 0:20:13.880 --> 0:20:16.960 about what happens to monetary policy. Uh, if we get 0:20:17.000 --> 0:20:19.680 that outcome is really important for for us at christ. 0:20:19.760 --> 0:20:23.320 How do you expected inflation expectation consumer inflation expectations to 0:20:23.400 --> 0:20:26.200 shape up, James, given the experience that they're having right 0:20:26.240 --> 0:20:29.439 now in this country. You know, I don't really know 0:20:29.520 --> 0:20:33.000 what consumer inflation expectations are. Um, you know, these are 0:20:33.119 --> 0:20:36.720 these are strange surveys. Most people I know don't have 0:20:36.760 --> 0:20:40.040 a clear sense of of what they're answering when they 0:20:40.080 --> 0:20:43.760 When they answer that question, usually those surveys people are saying, 0:20:43.840 --> 0:20:46.760 what's happened to gasoline prices? Um, But you know, the 0:20:46.840 --> 0:20:49.560 question is are the surveys stable? Like in my view 0:20:50.280 --> 0:20:53.639 that when inflation expectations increase and it leads to inflation, 0:20:54.200 --> 0:20:56.199 what that really means is not that a bunch of 0:20:56.200 --> 0:20:59.040 surveys jumps. It means that people have started buying more 0:20:59.280 --> 0:21:01.879 stuff because they think the stuff is going to be 0:21:01.960 --> 0:21:05.120 more expensive in the future. So to me, the expectation 0:21:05.280 --> 0:21:08.520 has to be embedded in the demand behavior to actually 0:21:08.600 --> 0:21:13.440 get a problematic inflation spiral. And you know the risk 0:21:13.520 --> 0:21:17.200 of that is rising. But um, but we're not there 0:21:17.280 --> 0:21:19.159 right now. We're in a we're in a data fog 0:21:19.640 --> 0:21:24.080 period where we're reopening and there's vaccinations and there's base effects. 0:21:24.160 --> 0:21:27.480 You know that there's and there's supply chain issues. So 0:21:27.720 --> 0:21:29.960 you know the risk of it is rising, but we 0:21:29.960 --> 0:21:32.640 should be a little careful about jump into extreme conclusions. 0:21:32.760 --> 0:21:34.440 That's the point I'm trying to get to hit James, 0:21:34.480 --> 0:21:37.000