WEBVTT - Surveillance: Dollar's Power Here to Stay, Bloom Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.560 Bloomberg dot Com, and of course on the Bloomberg. Let's 0:00:28.560 --> 0:00:30.520 bring Lindsay Bell. Why don't you start off, John? I 0:00:30.520 --> 0:00:32.680 mean your new show is going to be called The 0:00:32.720 --> 0:00:34.880 Real Equity, right, the Real Equity, the Real Dividend? To 0:00:35.080 --> 0:00:38.000 do every day? Do I do that weekly? It depends. 0:00:38.080 --> 0:00:40.360 I mean the amount of people that I've heard over 0:00:40.400 --> 0:00:42.120 the last couple of days saying I want to buy 0:00:42.159 --> 0:00:44.479 Europe and I'll want to buy Europe for income. I 0:00:44.520 --> 0:00:46.640 want to buy Europe for income for the dividend. What 0:00:46.680 --> 0:00:49.080 do you make of the argument, Lindsay, Well, I think 0:00:49.120 --> 0:00:51.040 it just talked it. It goes to show you how 0:00:51.080 --> 0:00:54.000 nervous people are in this environment. UM, and the valuation 0:00:54.040 --> 0:00:57.400 in Europe has come down so significantly too. You can 0:00:57.640 --> 0:01:00.760 actually see some good value there. Um And I think 0:01:00.800 --> 0:01:03.280 that you're seeing in general over the last several months, 0:01:03.480 --> 0:01:07.240 investors flocked to defensive sectors like real estate has been 0:01:07.400 --> 0:01:12.039 in the US outperforming UM most other sectors. Uh, consumer 0:01:12.080 --> 0:01:14.720 staples is another one that's been doing quite well. Um, 0:01:14.760 --> 0:01:17.000 and we're looking for healthcare to pick up some slack too. 0:01:17.200 --> 0:01:18.760 So this has been the story for me of the 0:01:18.840 --> 0:01:22.360 last couple of months. The headline numbers scream record highs, 0:01:22.440 --> 0:01:25.160 all time highs, and maybe tell a story of exuberance. 0:01:25.200 --> 0:01:29.200 Beneath the surface, it's a really defensive rally, isn't it. Utilities, 0:01:29.280 --> 0:01:32.760 consumer staples. What's the story that talked to us about it? No, 0:01:32.920 --> 0:01:36.160 you're absolutely right. While the market overall is, you know, 0:01:36.720 --> 0:01:39.800 hitting new all time highs. The SMP five up almost 0:01:39.800 --> 0:01:43.240 twenty on a year to day basis, and it's trading 0:01:43.360 --> 0:01:46.600 at a rich valuation right now, nearly eighteen times on 0:01:46.600 --> 0:01:49.720 a Ford pe basis. So not all is cheap, but 0:01:49.760 --> 0:01:52.760 it just doesn't feel exumer And underneath the surf attention 0:01:52.800 --> 0:01:56.720 to your defensive call is people are putting a premium 0:01:56.840 --> 0:02:01.600 on revenue growth in selected sectors as well. Is your 0:02:01.680 --> 0:02:05.240 defensive call because that belief in the revenue growth is 0:02:05.240 --> 0:02:10.000 going to disappear or diminish partially, you are revenue growth 0:02:10.080 --> 0:02:15.919 is expected expected to slow precipitously in some sectors. I'm 0:02:15.919 --> 0:02:19.880 buying nine or ten percent or revenue growth, and I'm 0:02:19.880 --> 0:02:23.400 paying a huge premium for that privilege, right right exactly. 0:02:23.480 --> 0:02:27.040 So financials or is one area. Healthcare is another area. 0:02:27.080 --> 0:02:30.320 Healthcare has always been done extremely well from a revenue 0:02:30.400 --> 0:02:33.480 and earnings perspective every single quarter. They don't always get 0:02:33.520 --> 0:02:36.320 the credit for it. Um But also, you know, you 0:02:36.320 --> 0:02:39.120 see investors flocking to your point to the tech sector 0:02:39.160 --> 0:02:41.760 because because they do want that growth, and that's where 0:02:41.760 --> 0:02:45.519 you're getting top line growth. Bottom line growth is expect change. 0:02:45.600 --> 0:02:50.600 What what will change the desire on a microeconomic basis 0:02:50.720 --> 0:02:55.840 the demand function for that tech revenue growth. You know, 0:02:55.919 --> 0:02:58.120 I think it's going to be difficult for it to 0:02:58.240 --> 0:03:01.440 change because tech is one sack there where investors actually 0:03:01.440 --> 0:03:04.760 feel very comfortable. Despite the defensive sectors doing well, tech 0:03:04.840 --> 0:03:07.440 is still the best performing sector on a year to date. 0:03:07.520 --> 0:03:11.120 Thank you. That's important state a believe that will continue. 0:03:11.360 --> 0:03:14.560 Yes we do. We're overweight the technology sector, will also 0:03:14.600 --> 0:03:18.000 overweight the communication services sector, which is an interesting play 0:03:18.080 --> 0:03:21.880 between that growth techy growth and defensive because you've got 0:03:21.880 --> 0:03:24.160 Google and Facebook and then A T and T and 0:03:24.240 --> 0:03:28.080 Verizon were those are the four largest companies in that sector. 0:03:32.560 --> 0:03:37.280 So you're you're bundling Verizon together with Google, not me. 0:03:37.440 --> 0:03:41.080 That's what the SMP five hundred is doing. The recalibration 0:03:41.200 --> 0:03:44.360 last year where they created the communication services sector out 0:03:44.360 --> 0:03:50.360 of the telecommunication services me neither, But what did they 0:03:50.360 --> 0:03:52.720 do with ana kind of copper? Save me? John? Did 0:03:52.760 --> 0:03:56.320 you see BSF this morning? Yes, imagined twice on air. 0:03:56.400 --> 0:04:03.400 I dazzled could be fit percent. You're so gloomy levels 0:04:03.440 --> 0:04:07.880 that blaming trade's the scapegoat for this, you know, I 0:04:07.880 --> 0:04:10.960 don't know if it's the scapegoat. I think it's reality. 0:04:11.040 --> 0:04:13.600 The trade is actually having an impact, and I think 0:04:13.600 --> 0:04:15.160 this is going to be the quarter where you start 0:04:15.200 --> 0:04:19.320 to hear corporate management teams really talk about the numerical 0:04:19.640 --> 0:04:23.440 impact UM and they're gonna take numbers and guidance down 0:04:23.480 --> 0:04:25.680 for the second half of the year. The second half 0:04:25.680 --> 0:04:28.320 of the year, you have a Q four that's expecting 0:04:28.360 --> 0:04:32.000 nearly seven percent earnings growth. That's gonna probably have to 0:04:32.040 --> 0:04:35.200 come down if trade there's not you know, a resolution 0:04:35.240 --> 0:04:37.360 at least on the tariffs in the near term, because 0:04:37.680 --> 0:04:40.880 as we discussed earlier, Tom, you're seeing the economic data 0:04:41.400 --> 0:04:45.239 in China, especially very much weakened. That's starting to bleed 0:04:45.279 --> 0:04:48.200 into Europe and at some point it will impact the 0:04:48.360 --> 0:05:09.320 U S Here, Lindsey, thank a good day to catch 0:05:09.400 --> 0:05:13.040 up with our Christopher Whalen. He has a number of 0:05:13.040 --> 0:05:15.680 books out and the one I would really highlight, folks, 0:05:15.760 --> 0:05:20.320 is his one volume Inflated, which is a fabulous walk 0:05:20.400 --> 0:05:24.760 through of the financial history of the United States of America. 0:05:24.960 --> 0:05:29.520 It is a different financial history then Germany. And he 0:05:29.600 --> 0:05:33.040 joins US now Chris Whalen on uh Deutsche Bank as well. 0:05:33.160 --> 0:05:35.679 Just just you know, two days into the saving plan, 0:05:36.160 --> 0:05:39.840 just your general thought and a likelihood that Deutsche Bank 0:05:39.880 --> 0:05:45.520 can execute this plan? I think low, tom My, guess 0:05:45.600 --> 0:05:49.200 is that what we're watching here is the final death 0:05:49.279 --> 0:05:53.039 struggle before the bank ends up being acquired or merged. 0:05:53.200 --> 0:05:56.120 What is the what is the reaction function that is 0:05:56.240 --> 0:05:58.520 key here? Is it a revenue dynamic? Is it a 0:05:58.600 --> 0:06:04.240 cost dynamic? Is it a capital raise dynamic? Capital raise 0:06:04.400 --> 0:06:07.080 is not possible at this point. The stock is trading 0:06:07.120 --> 0:06:11.440 below book value. All banks, at the end of the 0:06:11.520 --> 0:06:15.640 day live or die based on profitability, not capital. They 0:06:15.680 --> 0:06:17.960 have to have the profits to deal with problems and 0:06:18.040 --> 0:06:22.119 keep going, as the US banks illustrated a decade ago, 0:06:22.880 --> 0:06:25.160 and that's just not been the case in Europe as 0:06:25.160 --> 0:06:28.159 such as Deutsche mek Toom. The whole continent has a 0:06:28.200 --> 0:06:32.039 basic problem with bank profitability and you can see it 0:06:32.080 --> 0:06:34.800 in the stock prices. Even Santon they are, which is 0:06:34.839 --> 0:06:40.600 a reasonably healthy, broad based institution, is down thirty this year. 0:06:40.720 --> 0:06:42.640 So Chris, let's talk about that. What is it about 0:06:42.680 --> 0:06:47.280 Europe that is so difficult for a bank to make profit? Well, 0:06:47.320 --> 0:06:50.159 the role of the state in terms of financing. You have, 0:06:50.560 --> 0:06:53.360 you know Germany, for example, you have all different types 0:06:53.400 --> 0:06:57.760 of state institutions that provide most of the basic finance. 0:06:58.400 --> 0:07:01.120 You don't have an asset backs earties market as you 0:07:01.200 --> 0:07:04.960 do in the U S which was enormously important to 0:07:05.080 --> 0:07:07.960 helping us recover from the two thousand and eight crisis. 0:07:07.960 --> 0:07:11.360 It came back within months, and so you you lack 0:07:11.480 --> 0:07:15.440 these basic pieces. In Deutsche has been forced to look externally, 0:07:15.760 --> 0:07:19.800 not in Germany for opportunities. And it's so strange when 0:07:19.840 --> 0:07:22.800 we hear the CEO talk about going back to the 0:07:22.840 --> 0:07:26.119 old model. Well, that's seventy years ago when they banked 0:07:26.200 --> 0:07:29.360 small and medium sized enterprises. They have stopped doing that. 0:07:29.840 --> 0:07:33.040 They gave up their foreign markets. The French didn't do this. 0:07:33.200 --> 0:07:36.080 If you look at Associetation General, look at B and P. 0:07:36.640 --> 0:07:40.080 They still have a basic lending business to small and 0:07:40.120 --> 0:07:44.680 midsized enterprises, which gives them deposits. So Deutsche looks a 0:07:44.680 --> 0:07:47.640 lot like City. The only difference is is that it 0:07:47.680 --> 0:07:51.480 doesn't have a big consumer finance business as City does, 0:07:51.560 --> 0:07:54.640 which makes a lot of money, and that is a problem. 0:07:54.680 --> 0:07:57.640 I've often joked and and frankly I was more than 0:07:57.720 --> 0:08:01.000 half serious. I said we should just merge Deutschan City 0:08:01.360 --> 0:08:04.720 because they have capital markets, they have global payments, they 0:08:04.720 --> 0:08:07.920 have some important back office functions which I've been very 0:08:07.960 --> 0:08:11.400 concerned about. And it might make sense, but I don't 0:08:11.400 --> 0:08:13.480 think the Germans are willing to do it. Number one. 0:08:14.280 --> 0:08:16.320 Number two, you can't even talk about it in Europe. 0:08:16.480 --> 0:08:18.920 The politics are so poisonous, so you can't even mention 0:08:18.920 --> 0:08:22.200 the word bank and eight things to talk about Chris Whalen. 0:08:22.320 --> 0:08:25.800 But there's a lot of people walking out of the 0:08:25.880 --> 0:08:28.520 doors down on Wall Street today with cardboard boxes in 0:08:28.560 --> 0:08:32.280 their hands. How do you go about getting another job 0:08:33.360 --> 0:08:36.360 in New York in the mill you were in right now? 0:08:36.400 --> 0:08:38.640 I mean, is it you just assume you're going to 0:08:38.720 --> 0:08:43.240 go to a boutique firm well, that's certainly what I did. Um. 0:08:43.760 --> 0:08:47.640 I have specialized on the world of mortgage finance, which 0:08:47.640 --> 0:08:50.000 is a bit of a ghetto. Most of the public 0:08:50.040 --> 0:08:52.400 companies that are trade well below book value that you're 0:08:52.400 --> 0:08:55.560 a ghetto kind of guy. So it works well. Yeah, 0:08:55.600 --> 0:08:57.920 but it's an important sector. And this is one of 0:08:57.920 --> 0:09:00.120 the things about Deutsche Bank that most people don't know. 0:09:00.240 --> 0:09:03.280 They're very important in the world of both residential and 0:09:03.320 --> 0:09:06.560 commercial real estate. So these people have skill sets. You're saying, 0:09:06.559 --> 0:09:09.080 of the eighteen thousand people, some of them have some 0:09:09.160 --> 0:09:13.120 genuine skill sets. Yes, those that can differentiate themselves can 0:09:13.160 --> 0:09:16.120 stay in this business. But it's eat what you killed today. Tom. 0:09:16.280 --> 0:09:18.840 You know that the investment banks aren't handing up big 0:09:18.880 --> 0:09:22.440 salaries anymore, and I think for most people they're gonna 0:09:22.440 --> 0:09:24.880 have to go find something else. Do you want to 0:09:24.960 --> 0:09:28.200 make a six percent coupon? You can do that with 0:09:28.280 --> 0:09:32.040 Chris Whalen Chris Let's review from eight years ago. You're 0:09:32.160 --> 0:09:35.640 courage to say, shut up and buy the banks. But 0:09:35.800 --> 0:09:39.600 you did it through a high coupon preferred stock. How 0:09:39.600 --> 0:09:43.760 did that work out? It works great? They're boring. I 0:09:43.920 --> 0:09:48.320 own US Bank, I own Cities Trups, which we're awesome. 0:09:48.360 --> 0:09:53.000 In December they were yielding double digits and Bank America preferred, 0:09:53.640 --> 0:09:56.640 and I buy them for income. My beautiful wife has 0:09:56.679 --> 0:09:59.720 most of my money issues a private banker, and we're 0:09:59.720 --> 0:10:01.880 both in the world of investments, so it makes our 0:10:01.920 --> 0:10:04.640 lives a little simpler in terms of compliance. But I 0:10:04.720 --> 0:10:08.320 look for income. I look for idiosyncratic financials. Where are 0:10:08.320 --> 0:10:10.320 you looking right now? I mean, if the JP Morgan 0:10:10.440 --> 0:10:13.640 story is over and you know expercent look good earlier, 0:10:14.320 --> 0:10:17.080 you know, is the play been made in a high 0:10:17.160 --> 0:10:21.800 yield American banking securities for now? Yes? I think the 0:10:21.840 --> 0:10:25.079 banks are gonna have some weakness in the near terms 0:10:25.080 --> 0:10:28.040 simply because of interest rates, and that interest income is 0:10:28.040 --> 0:10:32.120 slat and it will be going down again this quarter. Um. 0:10:32.160 --> 0:10:34.360 I think there are credit concerns out there that will 0:10:34.400 --> 0:10:37.720 cause investors to lighten up on financials after loading up 0:10:37.720 --> 0:10:40.720 on them two years ago, and then you can go shopping. 0:10:41.080 --> 0:10:43.920 But to me, what is in prospect is that the 0:10:43.960 --> 0:10:47.480 FED may allow the next down cycle to chew up 0:10:47.520 --> 0:10:49.720 many of these non banks that are competing with the 0:10:49.760 --> 0:10:51.760 banks today, and then the banks are going to be 0:10:51.760 --> 0:10:54.920 a huge by tom are going to end up with monopoly. 0:10:55.080 --> 0:10:57.160 I want to go to your book Financial Stability. Where's 0:10:57.200 --> 0:11:00.960 the instability now? Is it leverage loans? It's somewhere that 0:11:01.040 --> 0:11:03.840 we haven't identified yet, but come on, but you're thinking 0:11:03.840 --> 0:11:06.839 about Chris, you did this a crawl. You're doing it 0:11:06.880 --> 0:11:11.600 at Whalen Global Advisors. Is it leverage loans? It's in bonds. 0:11:11.640 --> 0:11:14.000 It's not directly in the banks, but the banks have 0:11:14.160 --> 0:11:17.760 indirect exposure and that's what people worry about. Okay, Chris Whalen, 0:11:17.800 --> 0:11:20.439 thank you so much for the update. Greatly appreciate it. 0:11:20.559 --> 0:11:23.240 I can't say enough from a decade ago, the prescient 0:11:23.400 --> 0:11:28.319 nature of his read through of American financial history order 0:11:28.400 --> 0:11:46.520 Romini writing a nice forward to his book, Inflated. Can 0:11:46.559 --> 0:11:50.440 you imagine David's loom as an ambassador for anybody? Hsv 0:11:50.600 --> 0:11:52.959 C Global head of Currency Strategy joins us, Now do 0:11:53.000 --> 0:11:57.200 you want that job? Blew me. I'm no ambassador. Say 0:11:57.200 --> 0:12:00.079 it's strike luck. I think so. No, you're like the 0:12:00.160 --> 0:12:03.880 least diplomatic currency strategist I've ever met. David. Talk to 0:12:03.880 --> 0:12:06.319 me about the dollar. All these calls for the dollar 0:12:06.400 --> 0:12:10.040 to go weaker, weaker, It's not happening. That's your view, 0:12:10.080 --> 0:12:12.959 isn't it. Yeah? It's not happening. They need a bit 0:12:12.960 --> 0:12:16.160 of a brush to scrub the egg off their faces. 0:12:16.280 --> 0:12:18.640 Even when the market are just a couple of weeks ago, 0:12:18.720 --> 0:12:21.840 is passing in fifty by the Fed, the dollar was 0:12:21.880 --> 0:12:25.000 hardly selling off the dollars powerman. It's yet to stay. 0:12:25.040 --> 0:12:28.760 It offers high yields, it's a great currency. So many 0:12:28.800 --> 0:12:31.720 people look at rate differentials. They think the rate differentials 0:12:31.800 --> 0:12:35.400 reassert themselves. They believe that the Federal Reserve needs to 0:12:35.440 --> 0:12:38.000 cut rates, and that rates must narrow between the United 0:12:38.040 --> 0:12:40.600 States and Europe, and therefore dollar weakness. Why is that 0:12:40.640 --> 0:12:43.280 the wrong way of looking at it, David, Because at 0:12:43.280 --> 0:12:45.800 the zero bound of interest rates, the way you rate 0:12:46.040 --> 0:12:49.640 is not symmetrical. So the ECB can only copen and 0:12:49.679 --> 0:12:52.040 the Fed we could cut twenty five. So let's imagine 0:12:52.080 --> 0:12:54.520 on the same day the desire to cut and the 0:12:54.520 --> 0:12:56.560 ECB says things are going wrong in Europe, and the 0:12:56.600 --> 0:12:58.280 Fed goest things are going wrong in the U S 0:12:58.280 --> 0:13:00.360 and they're both cut on the same day. The one 0:13:00.400 --> 0:13:02.480 cuts twenty five, the other can only cut ten. Where 0:13:02.520 --> 0:13:05.199 you're saying that's positive for euro No, it's not. They 0:13:05.200 --> 0:13:07.960 can't cut more than ten. So that's the problem at 0:13:07.960 --> 0:13:10.679 the zero bound of interest rates, when your negative territory, 0:13:10.720 --> 0:13:13.360 the mount you can cut is limited, and you interest 0:13:13.480 --> 0:13:16.640 rate deferential doll that you used to see where things are. 0:13:16.920 --> 0:13:19.880 While you're flying this plane through financial markets, you look 0:13:19.880 --> 0:13:22.679 at the doll. It's broken. So forget about interest rate 0:13:22.760 --> 0:13:25.400 differentials from that perspective. But if you look at one 0:13:25.480 --> 0:13:27.559 your money where one your money can fall a long way, 0:13:27.559 --> 0:13:29.800 you're getting offer nearly two and one your money in 0:13:29.840 --> 0:13:33.440 the US, guaranteed by the U S taxplayer. It's beautiful. 0:13:33.840 --> 0:13:36.600 And what's important, folks, is this will be a podcast 0:13:36.720 --> 0:13:39.920 with Professor Bloom and what you just heard there was 0:13:40.200 --> 0:13:44.440 absolutely brilliant about the zero bound. Are we in a 0:13:44.520 --> 0:13:48.079 liquidity trap? I know it's an economist question, but a 0:13:48.240 --> 0:13:51.440 foreign exchange is a litmus paper of the system. Does 0:13:51.480 --> 0:13:55.200 it is suggest some kind of liquidity trap where monetary 0:13:55.280 --> 0:13:58.640 policy can't work. Well, we would argue it's even worse 0:13:58.679 --> 0:14:02.719 than that, in the sense at according to the US administration, 0:14:02.800 --> 0:14:05.520 now you can't use your currency as a lever and 0:14:05.600 --> 0:14:09.440 put your problem onto another country. This is now unacceptable practice. 0:14:09.800 --> 0:14:11.960 So before, when all the leavers were tied up, you 0:14:12.040 --> 0:14:14.280 might do quei and that drives your currency down, and 0:14:14.360 --> 0:14:16.720 that helps you, but now you're at risk. If you 0:14:16.800 --> 0:14:19.640 drive your currency down deliberately against the United States, you're 0:14:19.680 --> 0:14:23.440 at risk of a backlash. You know, the US administration 0:14:23.520 --> 0:14:27.160 is not prepared to have the dollar as your your 0:14:27.560 --> 0:14:30.160 your puppet, and this is changing the way we didn't 0:14:31.000 --> 0:14:33.760 foreign exchange and it's changing the world. So that extra 0:14:33.880 --> 0:14:37.200 lever that you thought you might have by manipulating your currency, 0:14:37.280 --> 0:14:39.920 this has all gone also out of the toolbox, and 0:14:39.960 --> 0:14:43.080 that puts us into a much narrower paradigm of what 0:14:43.240 --> 0:14:45.000 you can get away with it. Davis put a little 0:14:45.000 --> 0:14:47.960 bit more meat on that phrase backlash. What does a 0:14:48.000 --> 0:14:50.640 backlash actually mean? How does that play out in practice? 0:14:50.680 --> 0:14:52.600 What do they do well? We've seen that in terms 0:14:52.760 --> 0:14:55.920 of threats of tariffs, in terms of trade wars, in 0:14:56.080 --> 0:14:59.640 terms of you know, people countries getting upset with you 0:15:00.080 --> 0:15:02.960 and actually doing something about it. So when Albey came 0:15:03.040 --> 0:15:05.800 in in Japan, that did Kwie and Dollyan went from 0:15:05.880 --> 0:15:09.880 eight twenty five, and this created some inflation in Japan, 0:15:09.960 --> 0:15:13.080 but at someone else's cost. You can't do that anymore. 0:15:13.120 --> 0:15:17.320 The US administration doesn't want you another country to manipulate 0:15:17.360 --> 0:15:20.840 the dollar. At your own gain for someone else's expense, 0:15:20.880 --> 0:15:23.520 and they say, we've had enough of this, and you 0:15:23.560 --> 0:15:25.840 know that is the part of the backlash. And with 0:15:25.960 --> 0:15:29.080 the unit, we've seen threats of tariffs, so you can't 0:15:29.160 --> 0:15:32.120 just use the currency as a tool willy nilly anymore 0:15:32.160 --> 0:15:35.680 without thinking there may be some repercussions set up the 0:15:35.920 --> 0:15:39.320 range of some of these major pairs against your dollars 0:15:39.360 --> 0:15:42.880 stability and even dollars strength. What does euro drift to? 0:15:43.280 --> 0:15:47.640 What does Yan drift to? Well, we've got Euro drifting 0:15:47.680 --> 0:15:49.920 down to one ten. We've had it the whole year, 0:15:50.000 --> 0:15:52.800 you know, to break one ten, something new fundamental and 0:15:52.880 --> 0:15:55.800 different tests happened and I can't see it at the moment, Tom, 0:15:55.840 --> 0:15:58.480 I think you know, both economies struggling a little bit 0:15:59.000 --> 0:16:01.520 dead on the devilsh side, DCB on the dovish side. 0:16:01.560 --> 0:16:05.280 So you know, drifting down of the drifting down. You know, 0:16:05.360 --> 0:16:08.080 these are the currencies, the dollar, you know, having a 0:16:08.160 --> 0:16:11.040 nice little drift, a small little current, you know, which 0:16:11.040 --> 0:16:13.400 won't carry you away play nicely in it. If you're 0:16:13.680 --> 0:16:15.840 one of those tubes you get carried on the lazy river. 0:16:16.000 --> 0:16:18.760 You know, tell us about sterling farall, you know, we're 0:16:18.800 --> 0:16:21.320 trying to base season tickets to the charts me and 0:16:21.440 --> 0:16:25.600 generals Sherman, Can I translate for you called Tottenham Hospers 0:16:26.080 --> 0:16:29.240 the charts? Yeah, you know, you know, I mean, is 0:16:29.280 --> 0:16:34.760 that the rate? Yeah, I mean I'm gonna enjoin on 0:16:34.840 --> 0:16:38.200 one nineteen. You're going to be eating the beautiful prawn 0:16:38.280 --> 0:16:42.840 sandwiches as well, coming with your beautiful dollars. So um, yeah, 0:16:42.920 --> 0:16:45.840 look at Sterling's under pressure. People are worried about the 0:16:46.040 --> 0:16:49.320 no Brexit scenario. There's a lot going in basically on 0:16:49.480 --> 0:16:52.760 Parliament at the moment. We've got a leadership contest. You know, 0:16:52.880 --> 0:16:56.160 we change the data of Brexit from basically April Fools 0:16:56.200 --> 0:17:00.880 to Halloween and that tells you something about it. So basically, 0:17:00.960 --> 0:17:03.680 you know, Sterling is under pressure all the time. The 0:17:03.800 --> 0:17:06.600 only way that student is gonna really show a massive 0:17:06.680 --> 0:17:08.960 bird is if we get some kind of deal, and 0:17:09.040 --> 0:17:11.119 that's what we're all hoping for and that's what we 0:17:11.200 --> 0:17:14.639 think is very still possible in the HSBC world. And 0:17:15.560 --> 0:17:19.680 just there's the prawn sandwich brigade. Yeah. Well he just 0:17:19.760 --> 0:17:23.479 said to me he was making little posh seats at 0:17:23.520 --> 0:17:25.800 the point of Tottenham and you sit in the posh 0:17:25.840 --> 0:17:28.000 seat to go buy yourself of beautiful, proud and sandwich 0:17:30.320 --> 0:17:32.800 Sirenlex Ferguson of Manchester United. When he used to complain 0:17:32.840 --> 0:17:34.920 about the atmosphere at Old Traffic, he would say, the 0:17:34.960 --> 0:17:38.359 fans are sitting there eating their prawn sandwiches and aren't 0:17:38.359 --> 0:17:43.040 making any noise. That's David Bloom is not a football 0:17:43.040 --> 0:17:47.600 fan anyway. He likes m m A. He likes the 0:17:47.640 --> 0:17:51.639 mixed martial arts, he likes the UFC, that kind of stuff. 0:17:52.119 --> 0:17:56.000 I have no idea. And the sports called rugby and cricket. 0:17:56.040 --> 0:17:58.440 I'll show you pictures one day. They played mostly in 0:17:58.560 --> 0:18:03.280 the old Empire. David. We're going to before you cause anybo. 0:18:03.960 --> 0:18:22.840 Thank you so m HSV strategy Tom Psly joining us 0:18:22.880 --> 0:18:26.119 now our BC Capital Markets chief US economist Thomas. We 0:18:26.160 --> 0:18:28.040 look ahead to Chairman Pou What are you looking for? 0:18:29.160 --> 0:18:32.320 You know, it's this is the outstanding question at this point, 0:18:32.480 --> 0:18:34.880 and I'll tell you what I think he should say. 0:18:35.040 --> 0:18:36.959 I think he should say that things look really good 0:18:37.000 --> 0:18:39.960 in the United States. We couldn't be happier with the 0:18:40.040 --> 0:18:45.000 piece of job growth. We uh think that the economy 0:18:45.080 --> 0:18:47.359 does not need cuts right now. Um, this is what 0:18:47.480 --> 0:18:50.520 we think you should say. Um, it's, you know, given 0:18:50.600 --> 0:18:52.720 what he has been sort of hinting at and when 0:18:52.720 --> 0:18:54.800 others have been hinting at, I don't know if that 0:18:55.000 --> 0:18:57.320 is what he is going to say, but um, that's 0:18:57.320 --> 0:18:59.280 what he's supposed to be saying right now. This economy 0:18:59.280 --> 0:19:01.960 does not need job cuts as job cuts you see, 0:19:02.160 --> 0:19:05.520 just economy does not need uh pit funds eating. Um, 0:19:05.600 --> 0:19:08.879 this economy needs I'm gonna defend that is going to 0:19:08.960 --> 0:19:11.960 show support. Um. But at this juncture, we don't we 0:19:12.000 --> 0:19:14.520 don't need cuts. What is the price of waiting from 0:19:14.640 --> 0:19:18.320 July thirty one to September eighteen? I would suggest it's 0:19:18.440 --> 0:19:21.359 next to nothing. It is absolutely next to nothing. And 0:19:21.560 --> 0:19:24.280 again but it even begs the question Tom, it's you know, well, 0:19:24.400 --> 0:19:27.000 do we need cuts in September? Well, I don't know, 0:19:27.240 --> 0:19:28.760 but you know, we'll see the data. And there's a 0:19:28.800 --> 0:19:30.879 whole group of people we talked to Tom who are 0:19:30.960 --> 0:19:33.600 looking for a rate cut right now. But the answer is, 0:19:33.640 --> 0:19:35.520 if you just wait six weeks, aren't we all a 0:19:35.600 --> 0:19:39.440 lot smarter? I think that's absolutely true, and and and 0:19:39.560 --> 0:19:41.680 I think that's a completely fair way of of of 0:19:41.800 --> 0:19:43.359 thinking about And what I would say is, if you 0:19:43.440 --> 0:19:44.840 do want to wait six more weeks. I think in 0:19:44.880 --> 0:19:46.560 six four weeks you're gonna see exactly what you see 0:19:46.640 --> 0:19:49.160 right now, which is, hey, a backdrop that actually looks 0:19:49.240 --> 0:19:51.880 pretty decent and does not need any cuts at this point, 0:19:52.280 --> 0:19:54.640 Tommy through an argument that they've already talked themselves into 0:19:54.680 --> 0:19:57.360 an interest rate cut, and then we have loose financial conditions, 0:19:57.440 --> 0:20:00.119 largely because the Federals have got us here, and now 0:20:00.160 --> 0:20:02.320 they're in a position where if they don't cut, they're 0:20:02.320 --> 0:20:04.200 going to face a little bit of a market santrum. 0:20:04.280 --> 0:20:06.479 What are your thoughts on that situation? So, I think 0:20:06.520 --> 0:20:08.359 what the market has to recognize is what, you know, 0:20:08.440 --> 0:20:11.480 why is it tantruming right? Right? You know what what 0:20:11.720 --> 0:20:14.159 is actually going on in the economic backdrop? You know 0:20:14.320 --> 0:20:16.520 it's it's funny the Feds, f R b U S right, 0:20:16.560 --> 0:20:19.159 this is there, the big macro model, right furboce um. 0:20:19.320 --> 0:20:21.320 You know we and let me be very clear, we 0:20:21.560 --> 0:20:24.520 don't happen to love that model. Um. It's uh and 0:20:24.680 --> 0:20:28.440 and all models suffer from various limitations, not the least 0:20:28.440 --> 0:20:31.000 of which is it's not the real world. Right, You're 0:20:31.119 --> 0:20:34.680 you're creating this sort of this perfect environment um in 0:20:34.880 --> 0:20:36.719 in a model um sort of you know, spit out 0:20:36.760 --> 0:20:39.399 some output. But here, but let's just walk through, uh 0:20:39.840 --> 0:20:42.399 this idea for a second. If if you were to 0:20:42.480 --> 0:20:48.440 put a fifty basis point cut into the FEDS um model. Um, again, 0:20:48.560 --> 0:20:52.400 all else equal, a fifty basis point cut is only 0:20:52.480 --> 0:20:55.080 worth a couple of tends to growth. I mean that 0:20:55.200 --> 0:20:57.520 that's actually what you would be adding to growth at 0:20:57.600 --> 0:21:00.440 this point. So again, that sort of naturally begs a question, 0:21:00.520 --> 0:21:02.960 you know, why are we cutting rates? Cutting rates? Begin 0:21:03.080 --> 0:21:06.240 to what to get to? One ad from a growth perspective. 0:21:06.640 --> 0:21:09.680 They have a meeting. The thirty one job's day is 0:21:09.760 --> 0:21:13.320 August two, two days later, forty eight hours later. Do 0:21:13.480 --> 0:21:16.760 they know the numbers when they have their meeting? For 0:21:17.000 --> 0:21:20.679 which for does the Fed? Does the Federal at twelve 0:21:20.760 --> 0:21:25.240 noon on January thirty, July thirty one? What the job 0:21:25.359 --> 0:21:28.920 numbers are going to be at eight thirty on August two? No? No, no, 0:21:29.440 --> 0:21:34.080 come on, I mean, look, I that number comes out 0:21:35.280 --> 0:21:37.840 a few days later. Most of that report is compiled 0:21:37.880 --> 0:21:40.720 at that point. UM. So sure, I mean, you know, 0:21:40.840 --> 0:21:44.280 I think Tom, you're you're raising the right question. It's Oh, 0:21:44.359 --> 0:21:46.240 if they cut we're gonna get a really bad jobs number. 0:21:46.520 --> 0:21:50.480 I completely look again, I hate to be the practical 0:21:50.560 --> 0:21:52.200 one in the in the room on this. It's fun 0:21:52.240 --> 0:21:55.000 to be impractical. But but but let's let's just be clear. 0:21:55.720 --> 0:22:00.320 The FED is already looking for much slower job the 0:22:00.400 --> 0:22:03.720 whet anyone else's forecasting. Like, if you look at their forecast, 0:22:03.920 --> 0:22:06.560 they actually had the unemployment rate rising over the course 0:22:06.720 --> 0:22:08.400 of the next couple of years, what's their non farm 0:22:08.480 --> 0:22:11.680 payroll equipment they are They run into a hundred thousands, 0:22:12.000 --> 0:22:14.280 if that's exactly my point. So if you actually have 0:22:15.119 --> 0:22:18.280 an increase in the unemployment rate over the coming couple 0:22:18.320 --> 0:22:20.640 of years, then you necessarily write the math. The math 0:22:20.720 --> 0:22:23.760 behind it necessarily says that you're looking for below brick 0:22:23.840 --> 0:22:26.200 even from a job growth perspective, and brick even is, 0:22:26.400 --> 0:22:28.200 you know, sort of some one thousand right now. So 0:22:28.240 --> 0:22:31.320 the FED already has we got through Tom Perselli without 0:22:31.320 --> 0:22:33.560 talking about wage growth. Tom Priselli, thank you so much, 0:22:33.600 --> 0:22:49.920 OURBC Capital Markets A nice briefing there. Paul Sweeney is 0:22:50.040 --> 0:22:54.000 out at the RAM. The RAM has been there since 0:22:54.160 --> 0:22:58.200