1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordernt. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,080 Speaker 2: Terminal and the Bloomberg Business App. Mike Wilson and Walk 10 00:00:37,120 --> 00:00:41,040 Speaker 2: and Stanley writing, falling danaergy prices, peaking, tariff inflation and 11 00:00:41,080 --> 00:00:43,840 Speaker 2: contained services. Keep the Fed on hold rather than hiking 12 00:00:43,920 --> 00:00:47,280 Speaker 2: this year. Lower real rates should support equities and further 13 00:00:47,280 --> 00:00:49,440 Speaker 2: fuel the broadening trade. I'm pleased to say that Mike 14 00:00:49,479 --> 00:00:51,600 Speaker 2: joins us around the table for the next hour. He 15 00:00:51,680 --> 00:00:53,320 Speaker 2: joins us for more. Mike, good morning, Good to see you. 16 00:00:53,360 --> 00:00:53,760 Speaker 1: Good morning. 17 00:00:53,840 --> 00:00:55,800 Speaker 2: Let's just start with the stability we're seeing in the 18 00:00:55,880 --> 00:00:57,800 Speaker 2: rates market and how important that is to set the 19 00:00:57,840 --> 00:01:00,400 Speaker 2: stage for what you're anticipating in the next few months. 20 00:01:00,600 --> 00:01:02,000 Speaker 3: Yeah, I mean, I think you were saying it earlier 21 00:01:02,000 --> 00:01:04,400 Speaker 3: as listening to the show, I mean, there's somebody expecting 22 00:01:04,440 --> 00:01:06,039 Speaker 3: a hike, there someone expecting a cut, and. 23 00:01:06,000 --> 00:01:06,680 Speaker 1: We're on hold. 24 00:01:07,040 --> 00:01:08,319 Speaker 3: And this is I think what we got to get 25 00:01:08,400 --> 00:01:10,800 Speaker 3: used to is that with the new chair probably not 26 00:01:10,840 --> 00:01:13,080 Speaker 3: giving as much guidance, is going to allow the market 27 00:01:13,120 --> 00:01:15,040 Speaker 3: to kind of figure it out on its own and 28 00:01:15,040 --> 00:01:18,640 Speaker 3: have these different different views. We're in that adjustment period now, 29 00:01:18,880 --> 00:01:20,399 Speaker 3: and I think that's one of the reasons why the 30 00:01:20,400 --> 00:01:22,640 Speaker 3: market's been a little choppy or even correcting in the 31 00:01:22,720 --> 00:01:24,760 Speaker 3: last month or so, is we're getting used to this 32 00:01:24,800 --> 00:01:27,600 Speaker 3: new regime, which is going to be higher volatility and 33 00:01:27,959 --> 00:01:30,639 Speaker 3: potentially the bond market. But over time, I think what's 34 00:01:30,640 --> 00:01:32,280 Speaker 3: going to end up happening is the market's going to 35 00:01:32,319 --> 00:01:35,640 Speaker 3: sell down. It's going to it's actually more estimates. A 36 00:01:35,640 --> 00:01:38,560 Speaker 3: wider dispersion of estimates actually least to lower volatility in 37 00:01:38,640 --> 00:01:41,360 Speaker 3: the pricing over time. But we're in that adjustment period, 38 00:01:41,480 --> 00:01:44,360 Speaker 3: so we think rates are lower ultimately, particularly at the 39 00:01:44,360 --> 00:01:46,240 Speaker 3: back end. And by the way, we've talked about this 40 00:01:46,280 --> 00:01:49,480 Speaker 3: on the show many times, new Treasury Secretary, you know, 41 00:01:49,560 --> 00:01:53,600 Speaker 3: new Fed chair, this kind of new Fed Treasury accord 42 00:01:54,120 --> 00:01:56,960 Speaker 3: to really anchor the back end. That's what they're focused on. 43 00:01:57,000 --> 00:01:58,680 Speaker 3: You got to get the back end down or at 44 00:01:58,720 --> 00:02:01,120 Speaker 3: least anchored, because you have so much debt that you 45 00:02:01,200 --> 00:02:02,400 Speaker 3: have to basically finance. 46 00:02:02,480 --> 00:02:04,680 Speaker 2: Do you think in the meantime we're confusing a reduction 47 00:02:04,720 --> 00:02:07,920 Speaker 2: and guidance with an increase in hawkishness just in the meantime. 48 00:02:07,560 --> 00:02:10,000 Speaker 1: Yeah, I think that's right. And then market is pricing 49 00:02:10,000 --> 00:02:10,359 Speaker 1: that now. 50 00:02:10,440 --> 00:02:12,560 Speaker 3: So that's the good news is that we've already had 51 00:02:12,560 --> 00:02:15,919 Speaker 3: that adjustment, and that adjustment started four months ago. Right, 52 00:02:15,960 --> 00:02:18,960 Speaker 3: this is why precious metals have traded really poorly. You know, 53 00:02:19,200 --> 00:02:22,360 Speaker 3: the day that worsh was announced as a nominee, the 54 00:02:22,400 --> 00:02:24,920 Speaker 3: gold market peaked and that that was a sign the 55 00:02:24,960 --> 00:02:27,280 Speaker 3: dollar has been stronger. So once again the market has 56 00:02:27,400 --> 00:02:28,440 Speaker 3: really gotten ahead of this. 57 00:02:28,560 --> 00:02:30,639 Speaker 2: So rates of recent we've come down from around four 58 00:02:30,639 --> 00:02:32,880 Speaker 2: point suo percent to four point one. There's a belief 59 00:02:32,880 --> 00:02:35,360 Speaker 2: this morning at least we've removed the urgency to hide 60 00:02:35,520 --> 00:02:37,320 Speaker 2: as soon as July, so we can put that story 61 00:02:37,320 --> 00:02:40,560 Speaker 2: to bed. Cruise decline, massive reset crew from triple digits 62 00:02:40,600 --> 00:02:43,520 Speaker 2: down to the sixties on wti's Does that open the 63 00:02:43,560 --> 00:02:45,440 Speaker 2: door within the equity market and let's talk about the 64 00:02:45,440 --> 00:02:48,000 Speaker 2: stock market exclusively. Does that open the door to the 65 00:02:48,000 --> 00:02:49,119 Speaker 2: broadening trade again. 66 00:02:49,080 --> 00:02:51,760 Speaker 3: Yeah, that's our call basically is that that was happening 67 00:02:51,760 --> 00:02:54,240 Speaker 3: at the beginning of the year. Then we in Venezuela 68 00:02:54,320 --> 00:02:56,560 Speaker 3: and then I ran by the way the market priced 69 00:02:56,600 --> 00:03:00,400 Speaker 3: Iran before the invasion even happened or the attack happened, 70 00:03:00,400 --> 00:03:03,760 Speaker 3: because once again it was pretty well signaled. And so 71 00:03:04,240 --> 00:03:07,680 Speaker 3: that's when the broadening trade stopped. The barding trade literally 72 00:03:07,680 --> 00:03:10,200 Speaker 3: stopped the day that the attacks happened, and we had 73 00:03:10,200 --> 00:03:12,360 Speaker 3: the big spiking oil and then the pricing of the 74 00:03:12,400 --> 00:03:16,239 Speaker 3: FED to high rates. Since I say mid May, which 75 00:03:16,280 --> 00:03:18,160 Speaker 3: is when we reiterated the Barny call, we had a 76 00:03:18,160 --> 00:03:19,919 Speaker 3: different view of the most We thought all prices would 77 00:03:19,960 --> 00:03:22,400 Speaker 3: come down, and that has allowed now FED pricing to 78 00:03:22,440 --> 00:03:25,080 Speaker 3: sort of stabilize, and that has allowed the broadening trade 79 00:03:25,560 --> 00:03:26,480 Speaker 3: to regnate. 80 00:03:26,639 --> 00:03:28,960 Speaker 2: Small caps have performed nicely, just had a massive quarter 81 00:03:29,200 --> 00:03:31,679 Speaker 2: by more than twenty percent on the rustle. We've seen 82 00:03:31,680 --> 00:03:34,160 Speaker 2: the broadening trade. Speak to the performance we've seen in 83 00:03:34,160 --> 00:03:35,680 Speaker 2: the equal white on the S and P five hundred 84 00:03:35,720 --> 00:03:38,280 Speaker 2: as well. Let's talk about a Max seven, which increasingly 85 00:03:38,400 --> 00:03:40,240 Speaker 2: was called the lag seven. You've got to know out 86 00:03:40,240 --> 00:03:43,280 Speaker 2: this morning talking about maybe the money going back into 87 00:03:43,320 --> 00:03:45,600 Speaker 2: the hyperscalus. Just walk us through how you're thinking about 88 00:03:45,600 --> 00:03:48,160 Speaker 2: what's happened in tech and that divergence between the big 89 00:03:48,160 --> 00:03:50,880 Speaker 2: spending companies and the beneficiaries of all that spending, of 90 00:03:50,960 --> 00:03:54,280 Speaker 2: the divergence that's really widened in the last few months. 91 00:03:54,520 --> 00:03:57,360 Speaker 3: Yeah, I mean there's a symbiotic relationship between the spenders 92 00:03:57,360 --> 00:04:01,040 Speaker 3: and the beneficiaries and typically they trade sort of been lockstep. 93 00:04:01,160 --> 00:04:03,680 Speaker 3: And a couple of things we've been writing about for 94 00:04:03,720 --> 00:04:07,120 Speaker 3: the last several months. Number one, capex to sales, That 95 00:04:07,200 --> 00:04:10,160 Speaker 3: particular factor has been straight up since the Big beautiful 96 00:04:10,200 --> 00:04:13,640 Speaker 3: Bill was passed, right that basically the government's in scenting 97 00:04:13,880 --> 00:04:15,040 Speaker 3: businesses to spend. 98 00:04:14,800 --> 00:04:16,359 Speaker 1: Money today rather than later. 99 00:04:16,720 --> 00:04:19,320 Speaker 3: And so that capex the sales factor has been driving 100 00:04:19,480 --> 00:04:20,560 Speaker 3: a lot of stocks higher. 101 00:04:20,880 --> 00:04:22,200 Speaker 1: That looks like it's peaking now. 102 00:04:22,480 --> 00:04:24,760 Speaker 3: And by the way, the hyperscaler stocks started to trade 103 00:04:24,760 --> 00:04:27,640 Speaker 3: poorly about a month and a half ago and into 104 00:04:27,680 --> 00:04:31,360 Speaker 3: this idea. But that's not sustainable. You can't have the 105 00:04:31,480 --> 00:04:35,479 Speaker 3: spender stocks trading poorly and the beneficiary stocks continuing to 106 00:04:35,520 --> 00:04:37,800 Speaker 3: go straight up. And now what we saw last week, 107 00:04:37,839 --> 00:04:39,800 Speaker 3: you know, Meta announced perhaps they're going to sell some 108 00:04:39,880 --> 00:04:44,400 Speaker 3: excess capacity, maybe turned into a provider of capacity. That 109 00:04:44,600 --> 00:04:47,400 Speaker 3: is just a reason for these things to take a break. Also, 110 00:04:47,480 --> 00:04:50,360 Speaker 3: peak great a change on revision breath right, the memory stocks. 111 00:04:50,360 --> 00:04:53,359 Speaker 3: The revisions have been spectacular, but they can only go 112 00:04:53,440 --> 00:04:55,800 Speaker 3: so high. So all that's kind of happening at the 113 00:04:55,800 --> 00:04:58,839 Speaker 3: same time, and I expect the hyperscalers now to stabilize. 114 00:04:58,880 --> 00:05:00,640 Speaker 3: That's what's going on the last couple weeks, and the 115 00:05:00,640 --> 00:05:02,599 Speaker 3: semic counter stocks are going to are going to correct. 116 00:05:02,880 --> 00:05:05,880 Speaker 3: That's a good development. That doesn't mean the Capeck cycle 117 00:05:06,000 --> 00:05:09,039 Speaker 3: is over, but that ebbing and flowing between the two 118 00:05:09,200 --> 00:05:12,279 Speaker 3: is a natural kind of governing factor because you can't 119 00:05:12,320 --> 00:05:14,320 Speaker 3: have this divergence continue. 120 00:05:14,320 --> 00:05:15,120 Speaker 1: It's unstable. 121 00:05:15,279 --> 00:05:17,839 Speaker 2: Your words, take a break. That's interesting. Some people have 122 00:05:17,880 --> 00:05:20,240 Speaker 2: called it a narrative shift for the overall trade and 123 00:05:20,240 --> 00:05:21,320 Speaker 2: maybe a shift in spending. 124 00:05:21,360 --> 00:05:21,520 Speaker 4: Two. 125 00:05:21,520 --> 00:05:22,599 Speaker 2: Why is it one or not the other? 126 00:05:23,000 --> 00:05:23,720 Speaker 1: Well, we don't know. 127 00:05:23,720 --> 00:05:25,960 Speaker 3: For sure, but we've had three of these already, John, 128 00:05:26,040 --> 00:05:28,920 Speaker 3: So since chat GPT was announced in November twenty two, 129 00:05:29,320 --> 00:05:31,560 Speaker 3: we've had three of these sort of mini cycles within 130 00:05:31,640 --> 00:05:34,920 Speaker 3: the broader structural capex cycle, which is that the market 131 00:05:34,920 --> 00:05:37,440 Speaker 3: starts to question, oh, the return on capital isn't good 132 00:05:37,560 --> 00:05:40,200 Speaker 3: enough to support this kind of capex. What happens then 133 00:05:40,279 --> 00:05:42,680 Speaker 3: the stocks trade poorly, and then the CEOs of those 134 00:05:42,680 --> 00:05:44,719 Speaker 3: companies come out and say, well, you know, maybe we 135 00:05:44,720 --> 00:05:47,680 Speaker 3: won't spend as aggressively, and then it ebbs the other way. 136 00:05:47,760 --> 00:05:50,200 Speaker 3: And so that's that's the story. That's the dance back 137 00:05:50,240 --> 00:05:52,599 Speaker 3: and forth. Now there is going to be a period, 138 00:05:52,600 --> 00:05:53,919 Speaker 3: there is going to be a time, we don't know 139 00:05:54,000 --> 00:05:56,960 Speaker 3: when it's going to happen yet, where the capback cycle 140 00:05:57,000 --> 00:05:59,520 Speaker 3: will exhaust itself and we will have you know, we've 141 00:05:59,520 --> 00:06:02,080 Speaker 3: talked about this that there is going to be malinvestment here. 142 00:06:02,480 --> 00:06:05,560 Speaker 3: We don't think that that spending cycle is over because 143 00:06:05,600 --> 00:06:07,760 Speaker 3: they just start raising the capital and the credit market 144 00:06:07,839 --> 00:06:10,600 Speaker 3: so they're going to spend the capital. Okay, So but 145 00:06:10,760 --> 00:06:14,120 Speaker 3: we can have these mini cycles within in the structurable 146 00:06:14,160 --> 00:06:14,800 Speaker 3: market of COUNTIL. 147 00:06:14,800 --> 00:06:17,200 Speaker 2: I think, as you know, though, forget the spending that's 148 00:06:17,200 --> 00:06:19,520 Speaker 2: not yet happened. It's the intentions that matter. And a 149 00:06:19,600 --> 00:06:23,159 Speaker 2: deceleration in capex intentions from here, how do you think 150 00:06:23,160 --> 00:06:25,920 Speaker 2: this market's going to internalize the prospect of that in 151 00:06:25,920 --> 00:06:26,560 Speaker 2: the coming months. 152 00:06:26,680 --> 00:06:27,640 Speaker 1: Well, it's doing it right now. 153 00:06:27,720 --> 00:06:29,640 Speaker 3: So we talk about it as a peak rate of 154 00:06:29,760 --> 00:06:33,279 Speaker 3: change or you know, trough rate of change. Second derivative growth, 155 00:06:33,440 --> 00:06:35,400 Speaker 3: and that's exactly what's going on. There's two things we're 156 00:06:35,440 --> 00:06:38,799 Speaker 3: focused on. Earniche re vision breath for the semi country 157 00:06:38,839 --> 00:06:40,920 Speaker 3: stocks themselves are like seventy five percent. 158 00:06:41,000 --> 00:06:43,159 Speaker 1: That's about as high as it goes. We've documented that, 159 00:06:43,200 --> 00:06:44,200 Speaker 1: so that's going to roll over. 160 00:06:44,400 --> 00:06:47,240 Speaker 3: It doesn't mean it goes negative, but the deceleration on 161 00:06:47,320 --> 00:06:49,719 Speaker 3: that can cause those stocks to correct. And then of 162 00:06:49,720 --> 00:06:52,800 Speaker 3: course the hyperscalers will benefit if the market perceives these 163 00:06:52,800 --> 00:06:55,640 Speaker 3: companies as being somewhat capex disciplined, that they're not going 164 00:06:55,680 --> 00:06:59,000 Speaker 3: to do willy nilly spending in a way where free cash. 165 00:06:58,800 --> 00:07:00,479 Speaker 1: Flow goes to zero negative. 166 00:07:00,720 --> 00:07:02,960 Speaker 3: And by the way, free castrow expectations for some of 167 00:07:03,000 --> 00:07:04,520 Speaker 3: those companies are going towards zero. 168 00:07:04,680 --> 00:07:05,960 Speaker 1: That's why they've underperformed. 169 00:07:06,160 --> 00:07:08,240 Speaker 3: So it's just stands like I said back and forth, 170 00:07:08,560 --> 00:07:10,080 Speaker 3: and now in the last week and a half, the 171 00:07:10,120 --> 00:07:12,160 Speaker 3: hyperscale or some of the hyperscalar stocks have started to 172 00:07:12,160 --> 00:07:14,400 Speaker 3: trade better. That's a good sign that we're going to 173 00:07:14,440 --> 00:07:16,800 Speaker 3: have a little correction. This could last you know, four 174 00:07:16,800 --> 00:07:18,720 Speaker 3: to six, eight weeks something like that, and then we'll 175 00:07:18,720 --> 00:07:20,360 Speaker 3: probably have the next upcycle. 176 00:07:19,920 --> 00:07:20,360 Speaker 1: For the semi. 177 00:07:20,560 --> 00:07:22,600 Speaker 2: These are names that we're in bear markets. I'm talking 178 00:07:22,600 --> 00:07:26,080 Speaker 2: about Meta and Microsoft. Meta had a better week last week. Chips, 179 00:07:26,080 --> 00:07:28,040 Speaker 2: you keep using this word correct. When I hear that, 180 00:07:28,080 --> 00:07:29,920 Speaker 2: I'm just thinking, what do you mean by that? How 181 00:07:30,000 --> 00:07:32,000 Speaker 2: much is the downside? How big is the downside for 182 00:07:32,040 --> 00:07:32,840 Speaker 2: somebody's chip nips? 183 00:07:32,840 --> 00:07:34,000 Speaker 1: Well, there's are hype beta stocks. 184 00:07:34,040 --> 00:07:35,960 Speaker 3: I mean, they can correct thirty forty percent in a 185 00:07:35,960 --> 00:07:37,800 Speaker 3: bowl market, by the way, just like at the tuner 186 00:07:37,880 --> 00:07:40,440 Speaker 3: day moving average. So that's probably a really good gauge. 187 00:07:40,800 --> 00:07:44,800 Speaker 3: These stocks are so extended relative to those moving averages. 188 00:07:45,160 --> 00:07:46,800 Speaker 3: That's how you got to think about it. Those moving 189 00:07:46,800 --> 00:07:49,720 Speaker 3: averages exist for a reason, right, They always return to 190 00:07:49,760 --> 00:07:52,480 Speaker 3: the moving averages. Does it happen in a violent way 191 00:07:52,520 --> 00:07:54,240 Speaker 3: or does it happen kind of gradually over time. 192 00:07:54,280 --> 00:07:55,200 Speaker 1: We'll have to wait and see. 193 00:07:55,400 --> 00:07:57,960 Speaker 3: But yeah, thirty percent correction in these stocks is I 194 00:07:58,000 --> 00:08:00,000 Speaker 3: mean well within possibility. 195 00:08:00,200 --> 00:08:01,760 Speaker 1: In fact, some of them already have corrected. There. 196 00:08:01,800 --> 00:08:04,280 Speaker 2: You can have a thirty percent correction of chips just 197 00:08:04,480 --> 00:08:06,960 Speaker 2: bear with me here, and you can still see the 198 00:08:07,000 --> 00:08:09,200 Speaker 2: index move up into the right on the S and 199 00:08:09,200 --> 00:08:11,440 Speaker 2: P five hundred, even with the massive weight and they 200 00:08:11,440 --> 00:08:14,360 Speaker 2: have or we didn't say, that's what a most But. 201 00:08:14,320 --> 00:08:16,000 Speaker 3: I mean that's part of our call too, is that 202 00:08:16,320 --> 00:08:20,240 Speaker 3: we think this rotation is happening in a down tape. Okay, 203 00:08:20,440 --> 00:08:23,400 Speaker 3: unlike the correction we saw on the precious metal stocks 204 00:08:23,440 --> 00:08:27,080 Speaker 3: in January, because there's such a small part of the index, 205 00:08:27,240 --> 00:08:29,800 Speaker 3: energy stocks had a big correction after having a great 206 00:08:29,880 --> 00:08:32,560 Speaker 3: run in January and February. Now the market traded off 207 00:08:32,559 --> 00:08:34,640 Speaker 3: a little bit because of the war itself. But I'm 208 00:08:35,080 --> 00:08:37,240 Speaker 3: so I agree with what you're saying, or your premise 209 00:08:37,320 --> 00:08:39,920 Speaker 3: or your question, which is, since these stocks are such 210 00:08:39,960 --> 00:08:41,520 Speaker 3: a big part of the index, it's going to be 211 00:08:41,520 --> 00:08:44,439 Speaker 3: really hard for the index to make any upward progress 212 00:08:44,559 --> 00:08:46,760 Speaker 3: until this rotation has sort of happened. 213 00:08:47,040 --> 00:08:48,280 Speaker 2: This is a summer story for you. 214 00:08:48,480 --> 00:08:50,800 Speaker 1: Oh yeah, I don't. I mean, we're not bearish on 215 00:08:50,840 --> 00:08:51,280 Speaker 1: the year end. 216 00:08:51,320 --> 00:08:54,880 Speaker 3: We're still eight thousand plus per year end. And we've 217 00:08:54,960 --> 00:08:56,679 Speaker 3: had that call for quite a while based on. 218 00:08:56,640 --> 00:08:59,080 Speaker 1: The earning story. So that earning story is very much intact. 219 00:08:59,160 --> 00:09:01,680 Speaker 3: In fact, the fact that we're rotating now to some 220 00:09:01,720 --> 00:09:04,640 Speaker 3: of these other areas almost confirms the thesis we've had 221 00:09:04,679 --> 00:09:07,760 Speaker 3: all year, which is this is not just a tech story. 222 00:09:08,000 --> 00:09:08,959 Speaker 1: That's a great story. 223 00:09:09,160 --> 00:09:11,559 Speaker 3: But the broadening story is the story that I think 224 00:09:11,559 --> 00:09:15,280 Speaker 3: people have really underestimated the rolling recession from a year ago, 225 00:09:15,400 --> 00:09:18,920 Speaker 3: this operating lever story, which I think is still very underappreciated. 226 00:09:18,960 --> 00:09:21,040 Speaker 2: Do you think the banks can start working now too well? 227 00:09:21,040 --> 00:09:24,240 Speaker 3: They have been, I mean the money center banks and 228 00:09:24,280 --> 00:09:26,640 Speaker 3: the capital markets banks really have been. 229 00:09:26,840 --> 00:09:30,040 Speaker 2: Your Stock absolutely delven Stock's fantastic. I'm talking about the. 230 00:09:30,040 --> 00:09:32,520 Speaker 3: Other regionals and so they've started to perform, and that's 231 00:09:32,520 --> 00:09:35,599 Speaker 3: been an area we've been highlighting. Now they curve is 232 00:09:35,640 --> 00:09:38,520 Speaker 3: flattening still or you know, is having trouble kind of resteepening, 233 00:09:38,559 --> 00:09:40,840 Speaker 3: So I think that group could pause a bit. We 234 00:09:40,920 --> 00:09:42,920 Speaker 3: took that off of our list of favorites for the 235 00:09:43,040 --> 00:09:46,240 Speaker 3: for the broadening trade this week, but ultimately between now 236 00:09:46,280 --> 00:09:47,880 Speaker 3: and year in, we think we do think the banks 237 00:09:47,880 --> 00:09:49,800 Speaker 3: are going to do quite well because this is a 238 00:09:49,840 --> 00:09:52,280 Speaker 3: strategy of the Treasury and the Fed is they want 239 00:09:52,360 --> 00:09:56,600 Speaker 3: more lending going through the traditional lending sector. So while 240 00:09:56,640 --> 00:09:59,480 Speaker 3: the your curve is flattening, long growth is accelerating, and 241 00:09:59,600 --> 00:10:03,120 Speaker 3: that's this whole broadening out story of the economy. 242 00:10:03,360 --> 00:10:04,880 Speaker 1: This is a strategy of the administration. 243 00:10:05,000 --> 00:10:09,920 Speaker 3: They want a privately driven organic economic expansion, and that's 244 00:10:09,920 --> 00:10:13,160 Speaker 3: what we're getting, notwithstanding that maybe the labor market isn't 245 00:10:13,200 --> 00:10:14,760 Speaker 3: as robust as some people were hoping. 246 00:10:15,160 --> 00:10:17,040 Speaker 1: But that's also then feeding the earning. 247 00:10:16,760 --> 00:10:20,080 Speaker 3: Story, right, because you're seeing revenue growth without a crazy 248 00:10:20,240 --> 00:10:22,360 Speaker 3: need to hire a bunch of people, and that's the 249 00:10:22,360 --> 00:10:23,240 Speaker 3: operating liver story. 250 00:10:23,280 --> 00:10:27,520 Speaker 2: One on one stay with US multile Imberg surveillance coming 251 00:10:27,600 --> 00:10:39,199 Speaker 2: up after this, Hendrod to try and fight upon it's 252 00:10:39,200 --> 00:10:41,240 Speaker 2: looking forward to the Nighttive summit, saying it's a prime 253 00:10:41,280 --> 00:10:44,320 Speaker 2: opportunity to direct attention away from the war and the 254 00:10:44,440 --> 00:10:48,079 Speaker 2: energy fertilizer price spike it has created. So investors should 255 00:10:48,080 --> 00:10:50,720 Speaker 2: be prepared for a flurry of announcements. Henridd It joins 256 00:10:50,760 --> 00:10:52,920 Speaker 2: us now for more, Hendrid Welken, what kind of announcements 257 00:10:53,040 --> 00:10:53,800 Speaker 2: are you looking for? 258 00:10:54,800 --> 00:10:57,080 Speaker 5: Well, as you mentioned with Tyler, I think the idea 259 00:10:57,080 --> 00:10:59,640 Speaker 5: of a joint defense effort with Germany is exactly what 260 00:10:59,679 --> 00:11:02,000 Speaker 5: the doctor ordered. You know, the President is really looking 261 00:11:02,000 --> 00:11:05,280 Speaker 5: to deflect away from what is happening in the Strait 262 00:11:05,600 --> 00:11:09,000 Speaker 5: and there are so many issues, not least of which 263 00:11:09,120 --> 00:11:11,560 Speaker 5: is the toll that still hasn't been agreed to, and 264 00:11:11,600 --> 00:11:14,880 Speaker 5: which NATO nations have a real problem with so I 265 00:11:14,960 --> 00:11:18,199 Speaker 5: expect them to talk about pretty much anything other than 266 00:11:18,240 --> 00:11:21,600 Speaker 5: that throughout the next two days. The other piece would 267 00:11:21,640 --> 00:11:24,280 Speaker 5: obviously be Russia and Ukraine and a discussion there. 268 00:11:24,320 --> 00:11:25,000 Speaker 6: As the United. 269 00:11:24,800 --> 00:11:29,200 Speaker 5: States Congress provides substantial funding to not just Ukraine in 270 00:11:29,240 --> 00:11:32,440 Speaker 5: their various appropriations bills, but also to the neighboring regions 271 00:11:32,520 --> 00:11:35,920 Speaker 5: lat Via, Lithuania and the Baltic Region as a whole, 272 00:11:36,120 --> 00:11:38,680 Speaker 5: and as you were mentioning before, trying to ensure that 273 00:11:38,720 --> 00:11:41,720 Speaker 5: we keep troops in the region as well in Poland 274 00:11:41,720 --> 00:11:44,679 Speaker 5: and elsewhere across NATO nations and rid of the toll. 275 00:11:44,760 --> 00:11:46,560 Speaker 2: Let's talk about it. I get that the Europeans and 276 00:11:46,559 --> 00:11:48,720 Speaker 2: others sound happy about it, but right now at fills line, 277 00:11:48,720 --> 00:11:51,680 Speaker 2: that's the price of admission to get energy moving again. 278 00:11:51,760 --> 00:11:53,240 Speaker 2: Is there anything they can do about it? 279 00:11:53,880 --> 00:11:55,040 Speaker 6: Yeah, that's exactly it. 280 00:11:55,160 --> 00:11:58,080 Speaker 5: The result of this war is that Aroan now has 281 00:11:58,240 --> 00:11:59,960 Speaker 5: control of the street. You see it with the US 282 00:12:00,160 --> 00:12:03,040 Speaker 5: terms of tankers happening throughout the weekend and on a 283 00:12:03,120 --> 00:12:06,520 Speaker 5: daily basis, as people deal with the general uncertainty of 284 00:12:06,559 --> 00:12:09,080 Speaker 5: where these eighty minds are in the region. So Iran 285 00:12:09,200 --> 00:12:12,679 Speaker 5: has the ability here and is using different countries as 286 00:12:12,679 --> 00:12:14,800 Speaker 5: an example of how to set up a toll, call 287 00:12:14,840 --> 00:12:18,240 Speaker 5: it a climate assessment, an environmental fee, whatever you want 288 00:12:18,280 --> 00:12:21,680 Speaker 5: to call it. You're normalizing relations with the IRGC. And 289 00:12:21,760 --> 00:12:25,640 Speaker 5: this is in many of the NATO nations opinions I've 290 00:12:25,640 --> 00:12:29,679 Speaker 5: heard from Canada, for example, directly in France directly simply untenable. 291 00:12:29,679 --> 00:12:32,240 Speaker 5: They don't want to work with a state sponsor of terrorism. 292 00:12:32,760 --> 00:12:35,640 Speaker 5: And I would also point out that Treasury Secretary Best 293 00:12:35,920 --> 00:12:40,080 Speaker 5: has created waivers for all these sanctions, but those are 294 00:12:40,080 --> 00:12:43,360 Speaker 5: only going to hold as long as the administration decides 295 00:12:43,400 --> 00:12:46,240 Speaker 5: that they will. They've already reversed that several times since 296 00:12:46,280 --> 00:12:47,920 Speaker 5: the start of the war, and they don't have a 297 00:12:47,920 --> 00:12:51,360 Speaker 5: lot of comfort from banks or insurers or NATO nations 298 00:12:51,480 --> 00:12:53,320 Speaker 5: about what the policy is going to be in the future. 299 00:12:53,360 --> 00:12:55,280 Speaker 5: So this is going to take a while to unfurl, 300 00:12:55,320 --> 00:12:57,559 Speaker 5: probably much longer than the August twentieth deadline. 301 00:12:58,080 --> 00:13:01,440 Speaker 1: Hendry and HiT's Mike Wilson with respect to just how. 302 00:13:01,360 --> 00:13:04,560 Speaker 3: The world may get around the strait itself, and the 303 00:13:04,600 --> 00:13:07,480 Speaker 3: sense that what this war is highlighted is how crazy 304 00:13:07,520 --> 00:13:09,520 Speaker 3: it is that we have this choke point to begin with, 305 00:13:09,679 --> 00:13:12,640 Speaker 3: and how fast do you think the world itself will 306 00:13:12,720 --> 00:13:16,920 Speaker 3: start to migrate towards perhaps drilling for resources elsewhere or 307 00:13:16,960 --> 00:13:19,720 Speaker 3: building alternative ways to get the oil out of the 308 00:13:19,720 --> 00:13:22,280 Speaker 3: region through pipelines, et cetera. How fast can that happen? 309 00:13:22,320 --> 00:13:24,040 Speaker 3: And we'll let's be talked about over the weekend. 310 00:13:24,679 --> 00:13:25,960 Speaker 6: Yeah, perfect point, Mike. 311 00:13:26,040 --> 00:13:27,840 Speaker 5: I mean, the way to think about this is that 312 00:13:27,880 --> 00:13:30,360 Speaker 5: it was so obvious that going to war with Iran 313 00:13:30,440 --> 00:13:32,520 Speaker 5: would result in some sort of closure of the strait. 314 00:13:32,600 --> 00:13:38,119 Speaker 5: No administration has done it before, very transparent, very understood 315 00:13:38,440 --> 00:13:39,000 Speaker 5: this was. 316 00:13:38,920 --> 00:13:40,000 Speaker 6: A potential chow point. 317 00:13:40,000 --> 00:13:41,880 Speaker 5: We have many of them around the world, whether it's 318 00:13:41,880 --> 00:13:46,760 Speaker 5: in the Red Sea, the Black Sea, the Southeast Asian areas. 319 00:13:47,360 --> 00:13:49,720 Speaker 6: There are problems like this all around the world. 320 00:13:49,800 --> 00:13:52,960 Speaker 5: So you're going to see now a scramble to try 321 00:13:53,000 --> 00:13:55,240 Speaker 5: to create alternatives to whatever choke. 322 00:13:55,120 --> 00:13:57,040 Speaker 6: Point there might be in the entire world. 323 00:13:57,400 --> 00:14:00,760 Speaker 5: And what I think for investor purposes is what this means, 324 00:14:00,800 --> 00:14:03,800 Speaker 5: and particularly for the Federal Reserve chairman as they consider 325 00:14:03,960 --> 00:14:08,960 Speaker 5: inflation is permanently, higher insurance risk permanently, and higher cost 326 00:14:09,080 --> 00:14:12,000 Speaker 5: of doing this shipping, higher tanker rates, and those are 327 00:14:12,000 --> 00:14:13,760 Speaker 5: all things that we're seeing across the board. 328 00:14:13,880 --> 00:14:15,640 Speaker 6: So whatever level. 329 00:14:15,520 --> 00:14:18,080 Speaker 5: This settles at is almost guaranteed to be higher than 330 00:14:18,080 --> 00:14:20,520 Speaker 5: it was before the President made the decision on February 331 00:14:20,520 --> 00:14:21,600 Speaker 5: twenty eighth to start the bombing. 332 00:14:21,920 --> 00:14:24,520 Speaker 3: And what about Taiwan? Is that something that people are 333 00:14:24,560 --> 00:14:27,120 Speaker 3: still talking about in the mainstream. It seems like that's 334 00:14:27,160 --> 00:14:28,320 Speaker 3: kind of taken a back seat. 335 00:14:28,880 --> 00:14:29,920 Speaker 6: Yeah, absolutely, great point. 336 00:14:30,000 --> 00:14:33,800 Speaker 5: So Taiwan has taken a back seat publicly, but in 337 00:14:33,920 --> 00:14:39,040 Speaker 5: DC it's still paramount. You have a pretty substantial bipartisan 338 00:14:40,480 --> 00:14:44,120 Speaker 5: focused group, not a standing committee, but a select Committee 339 00:14:44,240 --> 00:14:47,160 Speaker 5: Onshine of Relations that focuses directly on Taiwan. And I 340 00:14:47,160 --> 00:14:49,560 Speaker 5: would say that as you look at BIS and what 341 00:14:49,600 --> 00:14:53,240 Speaker 5: they're doing with export control restrictions, they're very focused on Taiwan. 342 00:14:53,320 --> 00:14:55,800 Speaker 5: Members of Congress are very focused on Taiwan. So it 343 00:14:55,840 --> 00:14:58,080 Speaker 5: may not be front and center for this administration, and 344 00:14:58,080 --> 00:15:02,520 Speaker 5: there's a lot of questioning of how the President's allegiances 345 00:15:02,600 --> 00:15:06,440 Speaker 5: towards Taiwan differ from prior administrations, but I would say 346 00:15:06,640 --> 00:15:10,000 Speaker 5: Republicans and Democrats are unified in wanting to continue to 347 00:15:10,000 --> 00:15:11,920 Speaker 5: provide protections to Taiwan. 348 00:15:11,960 --> 00:15:12,800 Speaker 6: Whatever that takes. 349 00:15:14,160 --> 00:15:17,680 Speaker 2: Stay with us. More Bloomberg surveillance coming up after this. 350 00:15:27,080 --> 00:15:29,480 Speaker 2: Here's a take from no Dabta of Runmack, writing, June's 351 00:15:29,520 --> 00:15:32,800 Speaker 2: employment report is a reminder that the economy remains uneven, 352 00:15:32,880 --> 00:15:35,560 Speaker 2: inflation remains too high, and so the strate of hikes 353 00:15:35,680 --> 00:15:37,760 Speaker 2: is not receding. Neil joint just now for more, Noil, 354 00:15:37,800 --> 00:15:40,000 Speaker 2: good morning, good morning, just going to see in person, buddy, 355 00:15:40,000 --> 00:15:41,360 Speaker 2: I'm not going to bury the lead. You are not 356 00:15:41,400 --> 00:15:43,400 Speaker 2: impressed with Kevin Walsh FED cheap? Why? 357 00:15:43,880 --> 00:15:44,640 Speaker 4: Uh? 358 00:15:44,840 --> 00:15:46,480 Speaker 7: Well, I mean I think he's kind of blurring the 359 00:15:46,520 --> 00:15:51,160 Speaker 7: lines between the FED having a reaction function and forward guidance. 360 00:15:51,680 --> 00:15:53,680 Speaker 7: You know, getting rid of forward guidance is fine. No 361 00:15:53,720 --> 00:15:56,400 Speaker 7: one needs to be spoon fed every single meeting in advance. 362 00:15:56,720 --> 00:15:59,400 Speaker 7: That's not what this is about. But just to say, 363 00:16:00,600 --> 00:16:03,040 Speaker 7: you know, kind of swear on the monetary policy Bible 364 00:16:03,040 --> 00:16:05,320 Speaker 7: stack and say, you know, I believe in price stability. 365 00:16:05,400 --> 00:16:06,960 Speaker 4: I mean, that's fine, But the. 366 00:16:06,960 --> 00:16:09,600 Speaker 7: Question is how you actually achieved that any action, and 367 00:16:09,640 --> 00:16:12,200 Speaker 7: in my opinion, he hasn't really done much to tell 368 00:16:12,280 --> 00:16:16,560 Speaker 7: us how that will be achieved. So it's really about 369 00:16:16,560 --> 00:16:18,680 Speaker 7: how they respond to data and how that kind of 370 00:16:18,760 --> 00:16:21,400 Speaker 7: drives their decision making process, and we don't really know 371 00:16:21,520 --> 00:16:23,720 Speaker 7: much about that, which, you know, if the market has 372 00:16:24,000 --> 00:16:26,640 Speaker 7: one view of it, and the FED obviously has the 373 00:16:26,640 --> 00:16:28,920 Speaker 7: whippand they know more about their own reaction function in 374 00:16:28,920 --> 00:16:30,880 Speaker 7: the market. It could mean that the closer you get 375 00:16:30,920 --> 00:16:34,800 Speaker 7: to these meetings, we won't know their reaction function until 376 00:16:34,840 --> 00:16:39,040 Speaker 7: it's revealed, in which case it creates some volatility in 377 00:16:39,080 --> 00:16:41,600 Speaker 7: the financial markets. I think it's fine so long as 378 00:16:42,040 --> 00:16:45,080 Speaker 7: things are stable, as guests have been saying. But you 379 00:16:45,120 --> 00:16:46,800 Speaker 7: know that may not always be the case. So he's 380 00:16:46,800 --> 00:16:49,400 Speaker 7: going to have to tell us eventually, and I would 381 00:16:49,440 --> 00:16:50,520 Speaker 7: say sooner rather. 382 00:16:50,360 --> 00:16:53,800 Speaker 2: Than in the maintime. Is the ambiguity strategic? You think 383 00:16:53,840 --> 00:16:56,880 Speaker 2: it is beneficial. I think for him it is right. 384 00:16:56,920 --> 00:16:59,880 Speaker 7: I mean in the sense that I think by failing to, 385 00:17:00,200 --> 00:17:02,440 Speaker 7: I mean, he's been very vocal about not wanting to 386 00:17:02,480 --> 00:17:05,959 Speaker 7: submit dots, give a forecast, anything like that. But I 387 00:17:06,000 --> 00:17:09,879 Speaker 7: think because the Hawks really are ascendant on the committee, 388 00:17:10,160 --> 00:17:12,920 Speaker 7: the last job number didn't matter one way or the other. 389 00:17:12,960 --> 00:17:15,040 Speaker 7: It's really about the inflation data that's going to break 390 00:17:15,040 --> 00:17:19,119 Speaker 7: the tie, so to speak. But by not submitting a dot, 391 00:17:19,520 --> 00:17:24,840 Speaker 7: he absolves himself of having to take responsibility for the 392 00:17:24,880 --> 00:17:28,040 Speaker 7: Hawks on the committee, you know, And so it's kind 393 00:17:28,040 --> 00:17:28,520 Speaker 7: of interesting. 394 00:17:28,560 --> 00:17:30,160 Speaker 4: I mean, it's you know, you do see. 395 00:17:31,720 --> 00:17:38,200 Speaker 7: Some guidance from people like President Trump. A NEC director 396 00:17:38,240 --> 00:17:40,120 Speaker 7: has it talking about well, you know, in his heart 397 00:17:40,119 --> 00:17:42,080 Speaker 7: of hearts, he's actually dubbished, but he has these like 398 00:17:42,160 --> 00:17:44,320 Speaker 7: sort of people he has to deal with, and so, 399 00:17:44,680 --> 00:17:46,840 Speaker 7: you know, I think it kind of it absolves him 400 00:17:46,880 --> 00:17:49,240 Speaker 7: from having to kind of take responsibility if he's able 401 00:17:49,280 --> 00:17:51,000 Speaker 7: to say, look, I didn't submit something. 402 00:17:51,400 --> 00:17:52,800 Speaker 3: At the end of the day, though, don't we need 403 00:17:52,840 --> 00:17:55,199 Speaker 3: higher inflation to grand grow out the debt problem? And 404 00:17:55,280 --> 00:17:58,360 Speaker 3: so he's talking about rewriting the data sets that they're 405 00:17:58,359 --> 00:18:01,280 Speaker 3: going to use to sort of justify maybe inflation is 406 00:18:01,320 --> 00:18:04,720 Speaker 3: really only two point five but reality, as every American knows, 407 00:18:04,760 --> 00:18:05,719 Speaker 3: it's much higher than that. 408 00:18:05,880 --> 00:18:08,240 Speaker 1: We've been going through this song and dance for ten years. 409 00:18:08,280 --> 00:18:10,639 Speaker 3: So what's that framework look like and what is the 410 00:18:10,680 --> 00:18:13,280 Speaker 3: real target inflation rate? Do you think to actually grow 411 00:18:13,320 --> 00:18:14,280 Speaker 3: out of that problem? 412 00:18:14,840 --> 00:18:15,400 Speaker 4: I don't know, Mike. 413 00:18:15,440 --> 00:18:18,600 Speaker 7: We'll have a task force for that. I mean to 414 00:18:18,600 --> 00:18:19,879 Speaker 7: borrow from our chairman. 415 00:18:20,000 --> 00:18:20,600 Speaker 4: No, I don't. 416 00:18:20,880 --> 00:18:22,720 Speaker 7: Look, I don't think you can inflate your way out 417 00:18:22,720 --> 00:18:23,919 Speaker 7: of this. I mean you have to grow your way 418 00:18:23,920 --> 00:18:26,320 Speaker 7: out of it. I remember back after the financial crisis, 419 00:18:26,320 --> 00:18:28,280 Speaker 7: people were making the same argument we had to write, 420 00:18:28,600 --> 00:18:31,720 Speaker 7: you know, and what ended up happening We essentially grew 421 00:18:31,720 --> 00:18:33,159 Speaker 7: our way out of it, right, We had sort of 422 00:18:33,160 --> 00:18:37,320 Speaker 7: stable growth, stable inflation, and over time, you know, things 423 00:18:37,440 --> 00:18:41,280 Speaker 7: kind of evened out in the bondo market. So yeah, 424 00:18:41,359 --> 00:18:44,280 Speaker 7: I mean, I don't think he's leaning into the inflation 425 00:18:44,359 --> 00:18:46,520 Speaker 7: piece of it to the extent he's been leading into 426 00:18:46,560 --> 00:18:49,960 Speaker 7: anything in terms of dealing with it. It's the productivity boom, 427 00:18:50,000 --> 00:18:53,359 Speaker 7: the AI sort of Golden Age thesis that's been the 428 00:18:53,440 --> 00:18:54,200 Speaker 7: lynchpin for. 429 00:18:55,720 --> 00:18:57,040 Speaker 4: You know, for warsh I think. 430 00:18:57,080 --> 00:18:59,560 Speaker 3: Right, So not letting it don't kill the boom is 431 00:18:59,600 --> 00:19:02,720 Speaker 3: present Trump likes to say, And so having this obscurity 432 00:19:02,720 --> 00:19:05,200 Speaker 3: around what I'm actually looking at gives them the freedom 433 00:19:05,600 --> 00:19:08,399 Speaker 3: to maybe not be so reactive to the data sets. 434 00:19:08,680 --> 00:19:12,160 Speaker 7: Well sure, but at the same time, by not laying 435 00:19:12,200 --> 00:19:14,280 Speaker 7: out a strategy, that's the only thing that people are 436 00:19:14,359 --> 00:19:16,320 Speaker 7: I mean, the vacuum is ultimately going to be filled 437 00:19:16,320 --> 00:19:16,840 Speaker 7: by something. 438 00:19:16,920 --> 00:19:20,320 Speaker 4: And so what's I mean then you do you in an. 439 00:19:20,200 --> 00:19:22,800 Speaker 7: Odd way by trying to get people off the data, 440 00:19:22,800 --> 00:19:24,840 Speaker 7: he actually push them towards the data because they don't 441 00:19:24,880 --> 00:19:26,399 Speaker 7: actually know what strategy you. 442 00:19:27,200 --> 00:19:29,400 Speaker 2: What do you think he is in his hot defense. 443 00:19:31,560 --> 00:19:35,000 Speaker 7: I think he's I mean, I've thought he's hawkish, and 444 00:19:35,200 --> 00:19:37,479 Speaker 7: I think it's almost like a revealed preference. By not 445 00:19:37,520 --> 00:19:40,000 Speaker 7: saying anything, you allow the hawks on the committee to 446 00:19:40,040 --> 00:19:43,080 Speaker 7: become ascended, and so that's what he wants to say, 447 00:19:43,080 --> 00:19:45,040 Speaker 7: and you haven't done and you wouldn't have done that 448 00:19:45,560 --> 00:19:48,240 Speaker 7: if you didn't at some level kind of agree with them. 449 00:19:48,320 --> 00:19:50,680 Speaker 7: You know, the idea that you can you know, the 450 00:19:50,920 --> 00:19:55,160 Speaker 7: sort of productivity golden age if you were thinking about that, honestly, 451 00:19:55,160 --> 00:19:57,399 Speaker 7: the fact that inflation is above target, to pull a 452 00:19:57,440 --> 00:20:01,080 Speaker 7: green span would basically mean to allow productivity to remain 453 00:20:01,400 --> 00:20:04,199 Speaker 7: whatever it is to bring inflation down to target. So 454 00:20:04,240 --> 00:20:07,720 Speaker 7: you wouldn't be advocating for cuts, which is what he's doing. 455 00:20:08,680 --> 00:20:11,200 Speaker 7: So but you know, generally, generally speaking, I think if 456 00:20:11,200 --> 00:20:13,160 Speaker 7: you didn't la out a strategy, you allowed the hawks 457 00:20:13,160 --> 00:20:16,160 Speaker 7: to fill the void. You wouldn't have done that had 458 00:20:16,200 --> 00:20:19,359 Speaker 7: you not believed or kind of agree with them. 459 00:20:19,280 --> 00:20:19,840 Speaker 4: At some level. 460 00:20:19,880 --> 00:20:22,119 Speaker 2: Right base case for you, We've got Bank of America 461 00:20:22,200 --> 00:20:24,399 Speaker 2: on the one side looking for three hikes, City on 462 00:20:24,440 --> 00:20:26,800 Speaker 2: the other looking for something closer to two cuts this year. 463 00:20:26,800 --> 00:20:29,240 Speaker 2: That's how white things are right now on Wall Street. 464 00:20:29,240 --> 00:20:31,200 Speaker 2: That's quite a spread. What do you feel, Well. 465 00:20:31,080 --> 00:20:32,600 Speaker 7: I think if there was going to be a FED 466 00:20:32,640 --> 00:20:35,240 Speaker 7: that was dysfunctional enough to deliver a one and done, 467 00:20:35,359 --> 00:20:38,360 Speaker 7: it would be this one under Kevin Warsh. So that's 468 00:20:38,359 --> 00:20:40,200 Speaker 7: sort of I mean to me, it's sort of why 469 00:20:40,240 --> 00:20:42,320 Speaker 7: wouldn't you think the hawks kind of come back for more? 470 00:20:42,400 --> 00:20:45,360 Speaker 7: And from his mind, from his seat, I actually think 471 00:20:45,359 --> 00:20:48,400 Speaker 7: it makes sense because you can show that you gave 472 00:20:48,560 --> 00:20:50,520 Speaker 7: you gave a hike, you stood up to the president, 473 00:20:50,640 --> 00:20:53,680 Speaker 7: You're establishing yourself your credibility with the market, and now 474 00:20:53,720 --> 00:20:55,720 Speaker 7: we kind of can get past this and say, look 475 00:20:55,800 --> 00:20:57,520 Speaker 7: we got the hike. I mean almost like the UCB, 476 00:20:58,720 --> 00:21:02,920 Speaker 7: you kind of take some of the tail out of 477 00:21:02,960 --> 00:21:07,160 Speaker 7: the inflation risk and you maintain your optionality. So there's 478 00:21:07,200 --> 00:21:12,320 Speaker 7: a way for them to perhaps go once without having 479 00:21:12,320 --> 00:21:13,640 Speaker 7: the market price in a lot more. 480 00:21:14,119 --> 00:21:16,280 Speaker 3: And what about balance sheet because that's been the real 481 00:21:16,520 --> 00:21:19,160 Speaker 3: sort of angle on Worsh's He is a balance sheet 482 00:21:19,160 --> 00:21:22,080 Speaker 3: hawk and maybe he's less hawkish on race, which is 483 00:21:22,359 --> 00:21:26,480 Speaker 3: who knows. But do you think it requires market volatility 484 00:21:26,640 --> 00:21:28,760 Speaker 3: to get them to increase the R and P for example, 485 00:21:28,840 --> 00:21:30,399 Speaker 3: or to start doing more liquidity injection? 486 00:21:30,440 --> 00:21:32,040 Speaker 7: So I think that like this is one of these 487 00:21:32,040 --> 00:21:35,679 Speaker 7: things where people say things to get the job, to 488 00:21:35,760 --> 00:21:39,040 Speaker 7: create distinctions between themselves and the people that were there before. 489 00:21:39,640 --> 00:21:41,439 Speaker 7: And the balance sheet is a good example of that. 490 00:21:41,520 --> 00:21:44,760 Speaker 7: It's kind of like you know, hitting yelling over the 491 00:21:44,800 --> 00:21:46,919 Speaker 7: head with how she's dealing with bill management and then 492 00:21:46,960 --> 00:21:50,960 Speaker 7: coming in and then doing literally the same thing. All 493 00:21:51,000 --> 00:21:52,560 Speaker 7: of these things are going to be met by committee. 494 00:21:52,600 --> 00:21:54,600 Speaker 7: I do I think that's you know, that's something that 495 00:21:54,640 --> 00:21:57,199 Speaker 7: people say to rationalize it, right, like, oh, he's not 496 00:21:57,240 --> 00:21:59,200 Speaker 7: really hawkish, he's just hawkus on the balance sheet, so 497 00:21:59,240 --> 00:22:00,880 Speaker 7: he can be dubbish on rate's. Like, it doesn't work 498 00:22:00,880 --> 00:22:02,680 Speaker 7: that way because the balance is not really a tool 499 00:22:02,720 --> 00:22:07,560 Speaker 7: of monetary policy. The only tool is rates. So I 500 00:22:07,560 --> 00:22:09,400 Speaker 7: don't think it's to me, it's not a big big 501 00:22:09,440 --> 00:22:11,800 Speaker 7: factor being holkish on rates. Though we had this conversation 502 00:22:11,920 --> 00:22:14,320 Speaker 7: earlier in the hour. Has it allowed the longer end 503 00:22:14,359 --> 00:22:16,919 Speaker 7: of the Yelk curve to stabilize and is that something 504 00:22:17,040 --> 00:22:18,919 Speaker 7: that both the Treasury and this Fed would look at 505 00:22:19,119 --> 00:22:22,120 Speaker 7: say that's beneficial, that's the kind of approach we. 506 00:22:22,080 --> 00:22:22,680 Speaker 1: Need right now. 507 00:22:23,560 --> 00:22:26,119 Speaker 7: Yeah, I mean, I think I mean that, like the 508 00:22:26,160 --> 00:22:28,640 Speaker 7: first meeting was the most hawkish meeting that you've had 509 00:22:28,680 --> 00:22:30,520 Speaker 7: in the press conference era, and we had like what 510 00:22:30,560 --> 00:22:33,399 Speaker 7: like a thirteen to fifteen basis point rise into your yields, 511 00:22:33,440 --> 00:22:37,720 Speaker 7: So you know, talking helped take some of the risk. 512 00:22:37,560 --> 00:22:39,040 Speaker 4: Out of the back end. Yes, I would agree with that. 513 00:22:39,080 --> 00:22:42,080 Speaker 2: Do you think he fooled the president? Do you think 514 00:22:42,160 --> 00:22:44,760 Speaker 2: do you think he fooled the president in the interview process? 515 00:22:45,680 --> 00:22:48,800 Speaker 7: What do you mean, oh fooled him? Oh fooled him? 516 00:22:49,160 --> 00:22:49,360 Speaker 4: Yeah. 517 00:22:49,400 --> 00:22:52,520 Speaker 7: I think if there's a risk, it's that the president 518 00:22:52,600 --> 00:22:53,080 Speaker 7: was duped. 519 00:22:53,200 --> 00:22:55,800 Speaker 2: Yeah, how's that going to play out? If he was stooped? 520 00:22:56,200 --> 00:22:57,879 Speaker 4: I mean, I think there seems to be like, I 521 00:22:57,920 --> 00:22:58,240 Speaker 4: don't know. 522 00:22:58,320 --> 00:23:03,240 Speaker 7: I mean, your colleague Joe Eisenthal said, I think, you know, 523 00:23:03,359 --> 00:23:08,400 Speaker 7: maybearsh hikes and Trump is oddly chill about it, and 524 00:23:09,440 --> 00:23:11,600 Speaker 7: I don't know, it sounds like he's giving him a 525 00:23:11,640 --> 00:23:12,840 Speaker 7: lot of grace at the moment. 526 00:23:12,840 --> 00:23:14,560 Speaker 2: It spends how close we are to the midterms. If 527 00:23:14,560 --> 00:23:15,359 Speaker 2: that happens, right. 528 00:23:15,440 --> 00:23:17,119 Speaker 4: That's why I say get it out of the way sooner. 529 00:23:18,200 --> 00:23:21,720 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 530 00:23:21,800 --> 00:23:25,120 Speaker 2: in markets, economics, angio politics. 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