WEBVTT - Market Volatility, EV Outlook, Housing Market 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.800 at Bloomberg dot com slash podcast. Today's focus on fixed 0:00:21.800 --> 0:00:24.079 income is brought to you by Pimco, a global leader 0:00:24.079 --> 0:00:27.200 and active fixed income. Learn how Pimco creates opportunities for 0:00:27.240 --> 0:00:30.639 investors at pimco dot com slash bonds. All investments contain 0:00:30.760 --> 0:00:34.960 risk and may lose value. Consult your investment professional before investing. 0:00:35.440 --> 0:00:38.040 All right, So Lisa Bramwinz long ago told me I 0:00:38.080 --> 0:00:41.720 need to pay attention to these treasury auctions and before like, 0:00:41.880 --> 0:00:44.159 really do I have to? Apparently there was a two 0:00:44.200 --> 0:00:47.280 year treasury auction yesterday that saw some week demand. I 0:00:47.320 --> 0:00:49.559 think a five year one is on deck here. So 0:00:50.280 --> 0:00:53.880 Ira Jersey, he's our chief US indust rate strategist. He's 0:00:53.880 --> 0:00:56.280 gonna tell us why don't we need to pay attention? 0:00:57.520 --> 0:01:00.120 You know, I had a producer, um Tim Andreacchi. He 0:01:00.520 --> 0:01:02.840 was always freaking out about the treasury auctions because our 0:01:02.880 --> 0:01:04.600 show was at one o'clock and they always come out, 0:01:05.080 --> 0:01:08.839 I mean what, they rarely tell you anything, don't they ira, 0:01:09.640 --> 0:01:15.160 So they they tell you where demand is at that moment, 0:01:15.240 --> 0:01:17.240 right And and I think that the reason why the 0:01:17.240 --> 0:01:21.640 treasury auctions are so important right now is because they 0:01:21.640 --> 0:01:23.880 give you a hint as to who's willing to take 0:01:24.000 --> 0:01:27.039 risk and if investors are willing to take risk or not. 0:01:27.240 --> 0:01:29.720 And and the last couple of months you've seen a 0:01:29.800 --> 0:01:35.320 significant reduction in demand by particularly foreigners and domestic investment 0:01:35.360 --> 0:01:39.000 funds for for treasuries at auction, and and it just 0:01:39.000 --> 0:01:40.920 shows you that, like you know it, it proves a 0:01:41.040 --> 0:01:42.920 level when when when you think about the fixed income 0:01:42.959 --> 0:01:47.039 market UM, it's not as as homogeneous as saying the 0:01:47.080 --> 0:01:50.160 equity market is in general. So you have multiple bonds 0:01:50.200 --> 0:01:52.440 with different maturities, so you have a lot of different 0:01:52.480 --> 0:01:56.560 instruments at play. And by having a new issue, whether 0:01:56.600 --> 0:01:58.320 it's in the in the corporate world or in the 0:01:58.880 --> 0:02:02.080 UM or in the treasure remarket UM, you you get 0:02:02.120 --> 0:02:05.400 the gauge real demand for that new supply. And you've 0:02:05.400 --> 0:02:08.600 seen that even though the sizes of the treasury auctions 0:02:08.639 --> 0:02:11.680 are getting smaller. You're seeing demand go down even faster. 0:02:11.800 --> 0:02:14.320 And that's the reason you've seen a lot of softness 0:02:14.360 --> 0:02:17.360 in some of these these issues. So why are the 0:02:17.400 --> 0:02:20.239 international buyers, Why are they not there? Maybe like the 0:02:20.400 --> 0:02:23.080 maybe how they used to be well, but partially because 0:02:23.080 --> 0:02:25.000 I think there is a preference for cash right now. 0:02:25.040 --> 0:02:28.480 Because if if you're even if you're a foreign buyer 0:02:28.560 --> 0:02:30.640 where you know yields in the US or you know, 0:02:30.760 --> 0:02:33.320 multiples of what they are in your your home jurisdiction, 0:02:33.600 --> 0:02:35.120 if you think that interest rates are going to keep 0:02:35.160 --> 0:02:37.600 going up, you you don't want to be buying a 0:02:37.639 --> 0:02:40.120 bond because then you'll wind up losing money on on 0:02:40.160 --> 0:02:43.480 the price side, um you know. So so as as 0:02:43.520 --> 0:02:45.960 to your treasury yields, if they go up from you know, 0:02:46.040 --> 0:02:49.000 four percent to five percent, you're gonna lose UM. You're 0:02:49.000 --> 0:02:51.560 gonna lose a couple of percent in UM in terms 0:02:51.560 --> 0:02:54.640 of opportunity cost uh and and the price of that 0:02:54.720 --> 0:02:56.880 instrument will go down. So I think that's the that's 0:02:56.919 --> 0:02:58.800 the A couple of the big reasons is that you 0:02:58.840 --> 0:03:01.800 don't have the um you know, massive demand you also 0:03:01.840 --> 0:03:04.320 have on the other side, and this is this is 0:03:04.360 --> 0:03:06.720 part of The issue I think with with the foreign 0:03:06.800 --> 0:03:09.920 investors and in terms of central banks, is that central 0:03:09.960 --> 0:03:12.560 banks want to uh, you know, want want to prop 0:03:12.639 --> 0:03:14.880 up their own currencies because their own currencies are slipping 0:03:15.280 --> 0:03:17.359 very quickly against the dollar. And if they go out 0:03:17.400 --> 0:03:19.880 and they go buy two year treasuries, they also have 0:03:19.919 --> 0:03:21.680 to buy dollars on top of that, which will just 0:03:21.720 --> 0:03:25.320 weaken their currency even further. So there's so foreign exchange 0:03:25.320 --> 0:03:27.800 managers aren't going to be involved in these auctions like 0:03:27.840 --> 0:03:32.000 they sometimes. I'm just surprised that Japanese. I mean, you're 0:03:32.040 --> 0:03:34.800 if if you're looking at a situation where there's no 0:03:34.840 --> 0:03:38.960 reason for the end um go down. Well, well, let's 0:03:38.960 --> 0:03:41.440 say this, if you're looking at a situation where the 0:03:41.520 --> 0:03:46.320 finance ministry is defending the end and um, you know 0:03:46.560 --> 0:03:48.880 your interest rates on the ten year or zero point 0:03:48.920 --> 0:03:51.680 two percent versus you know, four percent in the US, 0:03:51.720 --> 0:03:55.160 wouldn't you want that? Well no, because again you have 0:03:55.240 --> 0:03:57.440 to buy dollars then, and you're just weakening the end 0:03:57.520 --> 0:04:00.880 versus buying versus the dollar. And and if you're trying 0:04:00.920 --> 0:04:03.720 to defend your currency and trying to stop your currency 0:04:03.760 --> 0:04:06.640 from falling further, you want to actually be selling uh 0:04:06.680 --> 0:04:09.800 dollar denominated assets and buying the end denominated assets. And 0:04:09.840 --> 0:04:12.480 that's the that's the reason why you have those foreign 0:04:12.760 --> 0:04:15.000 foreign reserves, and and and that is one of the 0:04:15.040 --> 0:04:17.960 dynamics that you're seeing in some of these auctions. Now, unfortunately, 0:04:17.960 --> 0:04:20.479 we don't know what exactly what happened yesterday because this 0:04:20.600 --> 0:04:24.120 data comes out after the the auction settle and we 0:04:24.160 --> 0:04:26.719 get all of the other data. But the allotment data, 0:04:26.760 --> 0:04:29.440 when you look at it from the August auctions certainly 0:04:29.480 --> 0:04:32.920 showed that there was a slowdown in demand from foreign 0:04:32.920 --> 0:04:35.479 investors and a lot of the different issues across the curve. 0:04:35.520 --> 0:04:37.839 And I think that isn't part because of this idea 0:04:37.880 --> 0:04:40.320 that they don't want to strengthen their own currency. Now. Now, 0:04:40.360 --> 0:04:42.200 of course, if if they have a maturing bond, they 0:04:42.279 --> 0:04:45.640 might participate in the auction just to roll over that bond. 0:04:45.640 --> 0:04:47.839 They're not buying new dollars or just rolling over the 0:04:47.839 --> 0:04:51.159 old dollars. Um But but you know, no new money 0:04:51.200 --> 0:04:53.440 is going to come in. And and you know, even 0:04:53.480 --> 0:04:55.919 though even though you know, interest rate dynamics are going 0:04:55.960 --> 0:05:00.000 to matter here because eventually this might turn very significant 0:05:00.160 --> 0:05:03.280 because once the once the Fed's done hiking, I think 0:05:03.320 --> 0:05:05.640 what's gonna happen is that other central banks are gonna 0:05:05.640 --> 0:05:07.280 be catching up, and that's when you're going to see 0:05:07.279 --> 0:05:09.800 a significant turn in the dollar. And once you see 0:05:09.800 --> 0:05:12.080 that turn in the dollar, those all of those flows 0:05:12.080 --> 0:05:14.839 could wind up changing very quickly. Um. Now, I don't 0:05:14.839 --> 0:05:17.760 think that's going to happen until three but um, but 0:05:17.800 --> 0:05:20.599 it is something to look out for because the FED 0:05:20.800 --> 0:05:23.040 is ahead of the curve here. Well, I can't see 0:05:23.160 --> 0:05:26.440 the head of the curve that other central banks in 0:05:26.480 --> 0:05:29.039 its hiking cycle, right, so therefore it probably will stop 0:05:29.080 --> 0:05:31.200 before the other central banks are done. The FED is 0:05:31.240 --> 0:05:34.240 the curve. Now FED has the curve just a quick 0:05:34.279 --> 0:05:37.760 thirty seconds. Kind of a plumbing issue, dude. The dealers 0:05:37.880 --> 0:05:39.720 buy does the JP Morgan's of the world in the 0:05:39.760 --> 0:05:42.920 Goldmen Sex? Do they buy for their own account? At auctions? 0:05:42.920 --> 0:05:45.880 They have to Yeah, yeah, they have to bid for 0:05:46.040 --> 0:05:49.400 pro rata amount, so it's twenty primary dealers. They each 0:05:49.440 --> 0:05:51.360 have to bid for five percent of the auctions. That's 0:05:51.360 --> 0:05:53.080 one reason why in the US you won't ever have 0:05:53.120 --> 0:05:56.000 a failed auction um where you have less bids than 0:05:56.000 --> 0:05:58.599 you have issued. But so so they do buy for 0:05:58.600 --> 0:06:00.960 their own account, but they've been getting much smaller over 0:06:01.000 --> 0:06:03.800 the last couple of years in favor of money managers 0:06:03.880 --> 0:06:07.200 who are much more active and really the incremental price 0:06:07.240 --> 0:06:10.440 setters at a lot of these auctions. See, so I just, 0:06:10.920 --> 0:06:13.000 you know, I don't know, step up and buy him. 0:06:13.160 --> 0:06:16.200 See these auctions. See they're important. I just learned something that. Yeah, well, 0:06:16.200 --> 0:06:18.200 I mean, how important is an auction where you have 0:06:18.240 --> 0:06:21.760 a whole bunch of giant banks that are that are 0:06:21.800 --> 0:06:25.200 required to bid. Yeah, but you want him to bid aggressively, 0:06:25.240 --> 0:06:27.040 so you gotta put some competition out there, all right, 0:06:27.040 --> 0:06:32.320 Ira Jersey uh covers interest rates. He's a strategist Bloomberg Intelligence. Also, 0:06:32.560 --> 0:06:34.039 we didn't get to talk to about soccer, but he 0:06:34.080 --> 0:06:37.560 follows soccer religiously. He's also a part owner and some 0:06:39.160 --> 0:06:40.920 I think a minor league I think is a way 0:06:40.960 --> 0:06:44.280 to term it um soccer team professional soccer team in 0:06:44.480 --> 0:06:47.760 central New Jersey. So go figure how many strategies you 0:06:47.800 --> 0:06:49.760 know that owns a soccer team. I mean, he's just 0:06:49.800 --> 0:06:52.680 like these big players. Next is gonna be the premier league. 0:06:52.880 --> 0:06:59.920 Some Americans have to care, Matt. There are a lot 0:06:59.920 --> 0:07:02.320 of electric vehicle companies out there. Just seems like I 0:07:02.360 --> 0:07:04.760 saw a Lucid Air the other day. You know, I 0:07:04.839 --> 0:07:06.360 told my wife, I said, there's a lucid She said, 0:07:06.360 --> 0:07:08.000 what are you talking about? Said lucid Air said, I 0:07:08.040 --> 0:07:10.720 still don't know what you're talking about. Um. It was 0:07:10.720 --> 0:07:13.239 pretty cool, all right. Peter Wine, he's the CEO of Centro. 0:07:13.840 --> 0:07:15.160 What I love about There's a lot of things I 0:07:15.200 --> 0:07:17.640 like that's coming. One of it's based in Freehold, New Jersey. 0:07:17.640 --> 0:07:22.480 You know who came from Freehold, New Jersey, Grover Cleveland. Jeez, Peter, 0:07:22.560 --> 0:07:25.080 can you help him out? Who else is? They came 0:07:25.120 --> 0:07:29.760 from Freehold, New Jersey, between New York and the Pennsylvania 0:07:30.120 --> 0:07:33.080 and the Philadelphia and being good stuff. All right? Peter 0:07:33.120 --> 0:07:35.400 talked to us about Central. What do you guys do there? 0:07:35.440 --> 0:07:39.200 What's talks about your business? Your company? Sancho's visue actually 0:07:39.240 --> 0:07:43.440 beginning in twenty thirteen, and that desired to transform the 0:07:43.480 --> 0:07:48.960 commercial see industry, which to like pseudo mission vehicles. Yeah, 0:07:49.000 --> 0:07:54.280 that has and the remains are so and singer of focus. Yeah. 0:07:54.320 --> 0:07:58.840 We grow from one low speed vehicle in twenties Penteam 0:07:59.520 --> 0:08:01.960 and the two a full product line that the currently 0:08:02.000 --> 0:08:07.520 will include a commercial vehicles and the seven for industry 0:08:07.640 --> 0:08:13.080 use with multiple variations and the one for off road use. Yeah. 0:08:13.120 --> 0:08:17.040 So so our our mission is really try to lead 0:08:17.160 --> 0:08:20.680 the transformation in this automotive industry, and they try to 0:08:20.760 --> 0:08:26.080 become a leader in the electrical commercial vehicle sector. That's 0:08:26.120 --> 0:08:29.120 a little bit. So who's who's your who's your customer? 0:08:29.120 --> 0:08:33.440 Who's that a typical customer for one of your vehicles? Yes, 0:08:33.520 --> 0:08:37.920 it's mostly it's the free operators and also the municiples. 0:08:37.960 --> 0:08:41.640 They provided the local service and which is basically for 0:08:41.679 --> 0:08:45.440 the commercial user morally. Right now, it's like a percent 0:08:45.480 --> 0:08:49.240 of our our customers for steady deliver and the like 0:08:49.480 --> 0:08:54.240 urban services. So, um, how much traction are you getting? 0:08:54.280 --> 0:08:56.679 I mean, what's your revenue growth look like? And how 0:08:56.720 --> 0:09:02.040 are your projections? Yeah, we are already finished the face 0:09:02.160 --> 0:09:06.160 for the vehicle development and the way are looking for 0:09:06.240 --> 0:09:11.040 the first growing in the revenue and in the deliver delivery, 0:09:11.160 --> 0:09:15.360 and we are building our distribution and UH and the 0:09:15.559 --> 0:09:20.920 aftermarket support network in America and the Europe and something 0:09:21.000 --> 0:09:24.839 in Asia. So you've already you've already got what four 0:09:24.920 --> 0:09:29.680 or five thousand vehicles out yes, so far, Yeah, we 0:09:29.840 --> 0:09:33.000 already have more than I think more than five thousand 0:09:33.240 --> 0:09:36.160 already being add to the market. So who do you 0:09:36.200 --> 0:09:39.120 compete against in that part of the market world. You 0:09:39.160 --> 0:09:43.720 know obviously familiar with the consumer automobile segment, the Tessil's 0:09:43.720 --> 0:09:45.640 and and now all the other O E M is 0:09:45.679 --> 0:09:48.360 getting in there, But who do you typically compete against? 0:09:48.360 --> 0:09:50.560 Who do you think you will compete against in this segment? 0:09:51.280 --> 0:09:55.240 I think you know the company like uh like a workhorse, 0:09:55.920 --> 0:10:00.520 you know, that's our primary competitor, and all they're living 0:10:00.679 --> 0:10:04.520 and because the living they produce the pickups, they also 0:10:05.240 --> 0:10:09.360 uh makes deliver van. So that's our I think the 0:10:10.000 --> 0:10:15.280 biggest main competitor the market now. And I think you know, 0:10:15.320 --> 0:10:19.440 with the all the the product and ready, I think 0:10:19.640 --> 0:10:22.120 we are kind of like a leading the sector at 0:10:22.120 --> 0:10:24.680 this moment. So let me just finally ask you about 0:10:24.679 --> 0:10:27.720 the supply chain and the chip management that you've been 0:10:27.760 --> 0:10:29.960 able to do. What does your supply chain look like 0:10:30.240 --> 0:10:34.520 and how is your access to microchips? Yeah, that was 0:10:34.880 --> 0:10:38.199 our you know, last years of struggling. So so it's 0:10:38.240 --> 0:10:42.040 just like everybody is struggling for the supply chain and aware. 0:10:42.200 --> 0:10:45.040 I think we are in the very good position right 0:10:45.080 --> 0:10:48.160 now because you know, some of the r O E 0:10:48.320 --> 0:10:53.280 M is a tier one manufacturer and from from China 0:10:53.840 --> 0:10:56.560 and the previous we have a little bit of shipping problem, 0:10:56.640 --> 0:11:00.000 and but now we see all the shipping price school 0:11:00.000 --> 0:11:02.120 going down and that we are not able to get 0:11:02.120 --> 0:11:07.000 the container. I think, you know, we are strongly positioned 0:11:07.080 --> 0:11:10.520 and very well developed our supply chain base. I think 0:11:10.520 --> 0:11:13.400 away in the supply chain we're doing. I think we're 0:11:13.440 --> 0:11:17.200 doing very good, all right, Peter, Good stuff interesting story here, Peter, 0:11:17.240 --> 0:11:20.440 when he's the CEO of Centro making electric vehicles for 0:11:20.480 --> 0:11:25.720 the commercial commercial vehicle segments. So interesting, you know, segment 0:11:25.760 --> 0:11:28.520 there that likely will be addressed there with a lot 0:11:28.559 --> 0:11:32.000 of competitors. Stuff there. What I'm very much focused on 0:11:32.360 --> 0:11:37.000 is in this space, but more of a consumer vehicle segment. 0:11:38.000 --> 0:11:43.360 Harley Davidson. Today is down on the New York Stock Exchange. UM. 0:11:43.440 --> 0:11:45.920 Today is the day that they merge their live Wire 0:11:46.440 --> 0:11:50.600 electric motorcycle unit with UM. The spack. The spack name 0:11:50.679 --> 0:11:55.640 is a E. A. Bridges Impact Corps. Hopefully, dear goodness, 0:11:56.040 --> 0:11:58.480 they change that name. UM, so it's going to be 0:11:58.600 --> 0:12:00.959 I guess called live Wire now so you can get 0:12:01.000 --> 0:12:08.720 an electric Harley Davidson. Yes, Pounds Sterling steady here today 0:12:08.840 --> 0:12:12.640 one spot zero seven seven, but it has been under 0:12:12.720 --> 0:12:16.439 siege with mounting bets that it may below drop below 0:12:16.600 --> 0:12:19.360 one dollar, the old parody thing. Let's bring in Stephen Gallo. 0:12:20.080 --> 0:12:23.880 He's had of European FIC strategy for BEMO capital markets. Stephen, 0:12:24.040 --> 0:12:29.079 is is parity for sterling? Is that a reasonable possibility? 0:12:29.400 --> 0:12:33.880 I think anything that reasonable possibility or this in this 0:12:34.080 --> 0:12:37.480 ethics environment, with this type of volatility, in these types 0:12:37.520 --> 0:12:41.319 of swings, UM, we'd like to say the bottom for 0:12:41.360 --> 0:12:44.520 the cycle is in. UM. We're kind of hoping that 0:12:44.640 --> 0:12:46.640 the bottom for the cycle is and the thing goes 0:12:46.679 --> 0:12:51.920 for the top in the US dollar. UM, but I'd 0:12:51.960 --> 0:12:56.559 say we have moderate confection the view at this stage. UM, 0:12:57.000 --> 0:12:59.560 in terms of the dollar side of the equation, we're 0:12:59.559 --> 0:13:02.160 pretty confit in at this stage that most of what 0:13:02.280 --> 0:13:05.720 the FET is signaling is now priced in. Uh So, 0:13:06.120 --> 0:13:09.840 the transmission of set policy to the FX market via 0:13:09.960 --> 0:13:12.760 interest rate differentials, we think that has largely when it's 0:13:12.800 --> 0:13:17.600 called course. But what we're less what we're more concerned about, 0:13:17.720 --> 0:13:21.320 unless unless certain is finished, is the extent to which 0:13:21.320 --> 0:13:26.120 the FX market prices in a higher global recession probability, 0:13:26.640 --> 0:13:30.800 as well as the the lingering effect or the ongoing 0:13:30.840 --> 0:13:34.600 effect I should say, of quanticative heightening from the fet Uh. 0:13:34.679 --> 0:13:38.360 These concern us a loss for non dollar currencies. Uh. 0:13:38.480 --> 0:13:41.840 If you think most of the Fed rate hikes are 0:13:41.840 --> 0:13:45.320 priced in, where do you see the terminal rate? Well, 0:13:45.400 --> 0:13:50.319 the BEMO house is uh, you know, around four point 0:13:50.440 --> 0:13:54.199 six issue give or take for the effective set funds rate. 0:13:54.360 --> 0:13:59.480 And that's what he said basically at the press conference. Yeah, so, 0:13:59.640 --> 0:14:03.280 I mean, rough roughly in line with that, um, the 0:14:03.280 --> 0:14:06.720 effective that things are made. Um, we've got them going 0:14:07.000 --> 0:14:10.640 twice more uh in in two dozen twenty two and 0:14:10.640 --> 0:14:13.800 then hiking once again at the first meeting of two 0:14:13.840 --> 0:14:17.319 dozen and twenty three. But the you know, the main 0:14:17.480 --> 0:14:19.560 the main point here is that that is largely the 0:14:19.600 --> 0:14:22.520 old that he reflected, and then some just find a 0:14:22.520 --> 0:14:25.360 little bit uh into the dollar O I ask her. So, 0:14:26.120 --> 0:14:29.600 I mean, if if we start to see um, you know, 0:14:30.120 --> 0:14:34.560 core inflation showing clear signs of decelerating in the United 0:14:34.600 --> 0:14:37.360 States and we get one or two months of negative 0:14:37.400 --> 0:14:40.760 job prints, that that will definitely be a big helping 0:14:40.800 --> 0:14:44.560 hand for um, this dollar peach story. But on the 0:14:44.600 --> 0:14:47.440 other side of that, UM, we have to get through 0:14:47.520 --> 0:14:51.480 this issue of how bad the global and or US 0:14:51.560 --> 0:14:54.720 recession is going to be and we probably haven't gotten 0:14:54.720 --> 0:14:58.720 to the peak pricing for global recession risk just yet. Um, 0:14:58.760 --> 0:15:00.840 and until that happens, it's going to be harder for 0:15:00.880 --> 0:15:04.600 the dollar to fall sharply. Until we're confirmed that is so, 0:15:04.720 --> 0:15:06.920 the FED does a major pivot, it's going to be 0:15:07.000 --> 0:15:09.200 hard for the dollar to fall sharply. Well, you know, 0:15:09.280 --> 0:15:11.280 this is a question that Paul has been asking for 0:15:11.360 --> 0:15:15.080 a couple of weeks now, and UM, we haven't really 0:15:15.080 --> 0:15:19.160 heard anyone say yes, Is there any bearer case for 0:15:19.240 --> 0:15:22.000 the US dollar? Is there a bearer case for the 0:15:22.080 --> 0:15:24.880 US dollar? Is there any bearer case at all in 0:15:24.960 --> 0:15:28.800 the in the medium to long term, potentially in the 0:15:29.640 --> 0:15:33.800 short run. Uh, it's tough to see it. Uh, it's 0:15:33.800 --> 0:15:38.720 tough to see the dollar following system. I mean just look, 0:15:38.800 --> 0:15:40.720 I mean, if the FED word to engineer some type 0:15:40.760 --> 0:15:43.400 of the pivot and were to confirm that it's not 0:15:43.520 --> 0:15:45.480 that we're starting to see a clear science that core 0:15:45.520 --> 0:15:48.000 inflation pressures are rolling over and going in the set 0:15:48.200 --> 0:15:50.680 for a direction United States. The labor market is well, 0:15:51.280 --> 0:15:56.120 you still have all of these structural issues ongoing geopolitical 0:15:56.160 --> 0:16:00.640 and structural issues on the capital flow side, uh, for 0:16:00.760 --> 0:16:05.479 a number of major European currencies, for Asia ex japan currencies, 0:16:05.480 --> 0:16:09.160 for the Japanese en. UM, that that defect pivoting to 0:16:09.240 --> 0:16:11.960 a neutual policy stand is not simply going to make 0:16:12.000 --> 0:16:15.880 go away. It might help the healing process beginning for 0:16:15.920 --> 0:16:19.920 those structural um claws and those currencies. UM, but it's 0:16:19.920 --> 0:16:23.360 not gonna make no way. UM. You know, when we're 0:16:23.400 --> 0:16:28.400 moving from an environment or an era of globalization, UM 0:16:28.400 --> 0:16:31.120 where we got very used to ultra low interest rates, 0:16:31.200 --> 0:16:35.120 quantitative easing, high asset valuations, to an on the binding 0:16:35.200 --> 0:16:38.640 of that. Um, it's very hard for non dollar currencies 0:16:38.640 --> 0:16:44.200 to really sustainably uh. So UM, that's the picture. Unfortunately, Stephen, 0:16:44.240 --> 0:16:46.160 you've been in this FX game a long time. What 0:16:46.240 --> 0:16:50.720 did you make in the actual trading of pounds sterling 0:16:50.720 --> 0:16:57.600 over the past couple of days? Pretty pretty wild moves there. Well, UM, 0:16:57.640 --> 0:17:00.440 I'm not I'm a strategist, so I don't I don't 0:17:00.480 --> 0:17:03.640 have to write, but I mean, it's just just just 0:17:03.720 --> 0:17:06.159 the movements. What what what was that market, Telly, and 0:17:06.240 --> 0:17:08.280 just the market was just really give us an adjective. 0:17:10.600 --> 0:17:14.160 I think I think that we've seen a very here, 0:17:14.359 --> 0:17:19.240 but probably in my view, a long overdue repricing of 0:17:19.520 --> 0:17:24.320 UK risk premia um because of the fiscal picture, because 0:17:24.320 --> 0:17:26.800 of the good picture, because of the balance of payments picture. 0:17:27.400 --> 0:17:30.199 And I think that caught up with the currency and 0:17:30.280 --> 0:17:33.520 the guilt market this week and last week. And what 0:17:33.560 --> 0:17:38.520 you saw basically was a liquidity event, a low lack 0:17:38.560 --> 0:17:41.439 of liquidity in both the FX market and the guilt market, 0:17:41.480 --> 0:17:44.920 which made the price action ten times worse than it 0:17:44.960 --> 0:17:48.480 would have been. Uh with that to be there, um 0:17:48.640 --> 0:17:51.840 so um. You know, we're getting into a situation now 0:17:51.880 --> 0:17:54.919 where risk premia are adjusting, but they're not adjusting an 0:17:55.040 --> 0:17:58.880 orderly fashion. All right, good stuff, appreciate it as always 0:17:59.400 --> 0:18:02.320 Stephen gal Bmo Capital Market. So we didn't even get 0:18:02.320 --> 0:18:03.800 to the end. We didn't even get to the end. 0:18:03.840 --> 0:18:06.600 But that was it seems like ancient history, but that 0:18:06.680 --> 0:18:10.320 was just last week that the Finance Ministry intervened in 0:18:10.359 --> 0:18:14.280 the Japanese end to defend the currency for the first 0:18:14.320 --> 0:18:20.080 time since that was twenty four years ago. Remember it. Well, 0:18:20.160 --> 0:18:26.640 good year. Look at the housing market. We had new 0:18:26.640 --> 0:18:29.280 home sales data came out today, came in better than expected, 0:18:29.760 --> 0:18:33.199 uh six eighty five thousand verses consensus A five thousand, 0:18:33.760 --> 0:18:37.240 a little bit higher than last month, which was revised higher. 0:18:37.280 --> 0:18:40.200 But certainly they're housing sales are coming down from the 0:18:40.240 --> 0:18:43.800 peak of the pandemic. Question is can this housing market 0:18:43.840 --> 0:18:46.879 and engineer a soft landing or will it be ugly? 0:18:47.040 --> 0:18:49.919 Can it serve five rates? Rates? And what did you 0:18:49.920 --> 0:18:53.119 say that mortgage races today six point seven that's a 0:18:53.200 --> 0:18:55.680 long way from you know, three and a quarter from 0:18:55.720 --> 0:18:58.480 just you know, a year ago. Sam Dunlap ce Io 0:18:58.600 --> 0:19:01.600 at Angelo Capital, join just Sam, love to get your 0:19:01.600 --> 0:19:04.560 thoughts on kind of the register, you know, the residential 0:19:04.720 --> 0:19:07.600 real estate market here, how do you how do you 0:19:07.800 --> 0:19:10.000 characterize the last few years? And and then maybe where 0:19:10.000 --> 0:19:12.560 we are right now. Thanks for having me on a 0:19:12.560 --> 0:19:15.040 great question, you know, the to your point on you know, 0:19:15.160 --> 0:19:18.560 Cannon housing achieve a soft landing and given the pace 0:19:18.560 --> 0:19:23.680 of appreciation we saw and home prices really post pandemic um, 0:19:23.720 --> 0:19:27.080 it's clearly very difficult to sustain those type of levels. 0:19:27.160 --> 0:19:29.000 And and as you all know, you know, case Shiller 0:19:29.080 --> 0:19:32.840 came out this morning and uh it was below expectations 0:19:32.880 --> 0:19:35.439 and one of the more swift declines we've seen in 0:19:35.480 --> 0:19:38.800 the index um, you know, rising six on a year 0:19:38.800 --> 0:19:41.960 of a year basis, but we expect you know, home 0:19:42.200 --> 0:19:45.080 the home pace of a home price appreciation clearly cannot 0:19:45.240 --> 0:19:49.719 sustain the current levels. But you know, the housing market 0:19:49.760 --> 0:19:52.800 was really benefiting from you know, this historic supplying to 0:19:52.840 --> 0:19:56.639 man mismatch that market participants have been identifying for years. 0:19:57.480 --> 0:20:01.840 But the extraordinarily a little mortgage rates fueled surging home prices, 0:20:01.880 --> 0:20:05.080 particularly during COVID. While that's not sustainable. Uh, you know, 0:20:05.080 --> 0:20:09.280 we do expect the very favorable supply and demand dynamic 0:20:09.320 --> 0:20:12.920 in US housing supporting home prices, but the pace of 0:20:12.960 --> 0:20:17.600 appreciation clearly cannot cannot keep up. But what is um, 0:20:18.200 --> 0:20:20.840 what what does it look like in terms of US 0:20:20.920 --> 0:20:24.840 housing that makes you feel like it's supportive in terms 0:20:24.840 --> 0:20:26.560 of the supply and demand? Right? Is there just not 0:20:26.760 --> 0:20:31.560 enough land? Our builders UM still having trouble getting Uh, 0:20:31.720 --> 0:20:36.520 construction materials are is labored? The problem? What's the issue 0:20:36.800 --> 0:20:38.920 on the supply side? You know, on the supply side 0:20:38.960 --> 0:20:42.359 is you know, we just historically underbuilt really after the 0:20:42.400 --> 0:20:45.640 global financial crisis and that that really has not changed. 0:20:45.720 --> 0:20:48.399 And very similar to the dynamics that we saw in 0:20:48.440 --> 0:20:51.520 the not late nineteen seventies with the baby boomers, you know, 0:20:51.520 --> 0:20:54.920 they were forming households at a very brisk pace. We're 0:20:55.040 --> 0:20:57.960 still seeing that from the millennials, you know, on annualized 0:20:58.000 --> 0:21:02.080 pace of approximately one point two mill and household formations 0:21:02.520 --> 0:21:05.800 today and that's very supportive. Is is you know, the 0:21:05.800 --> 0:21:08.600 demand for single family shelter, particularly coming out of COVID, 0:21:08.720 --> 0:21:12.760 still remains strong. But affordability has really been the challenge 0:21:12.800 --> 0:21:16.040 here as the FEDS is inflicted as as Chairman Powell 0:21:16.080 --> 0:21:18.800 wanted a lot of pain clearly on the economy, and 0:21:18.840 --> 0:21:22.400 the initial transmission mechanism has definitely been surging mortgage rates 0:21:22.400 --> 0:21:25.880 as you pointed out, and that's really hurt the affordability aspect, 0:21:25.960 --> 0:21:30.000 but the underlying demand UH and lack of supply and 0:21:30.000 --> 0:21:33.640 and just the fact of how underbuilt the US housing 0:21:33.720 --> 0:21:37.080 as we think, you know, achieves that soft landing for 0:21:37.080 --> 0:21:40.840 for US housing and not the you know, extreme downturn 0:21:40.880 --> 0:21:43.560 that we saw really coming out of the financial crisis. 0:21:43.600 --> 0:21:45.880 What are you doing in your fund? Sam? You manage 0:21:46.160 --> 0:21:50.719 the Angelo Multi Strategy Income Fund, the Strategic Credit Fund, 0:21:50.840 --> 0:21:55.800 the Core Impact Fund, um Multi Strategy Income You see 0:21:55.840 --> 0:21:57.399 I T S fund. I don't even know what you 0:21:57.440 --> 0:21:59.880 see I t S means, But what are you doing 0:22:00.200 --> 0:22:02.560 in those funds right now. Yeah, So you know, the 0:22:02.840 --> 0:22:05.800 mortgage market, like all areas fixed income, has been under 0:22:05.800 --> 0:22:08.240 a tremendous amount of pressure this year, just given the 0:22:08.280 --> 0:22:11.520 swift pace of tightening and a complete revision of of 0:22:11.600 --> 0:22:16.080 fat expectations. But uh, mortgages have been particularly sensitive to 0:22:16.240 --> 0:22:19.480 what we're describing is really a volatility shock. So you know, 0:22:19.520 --> 0:22:22.240 we we went through the first phase of the inflation shock. 0:22:22.400 --> 0:22:26.320 Is inflation with parabolic this year, as we all um 0:22:26.600 --> 0:22:30.000 know very well at this point. But also you saw 0:22:30.560 --> 0:22:35.399 rates clearly repriced very swiftly, and volatility surging and the 0:22:35.400 --> 0:22:39.240 interest rate world to historic highs. And from a volatility perspective, 0:22:39.600 --> 0:22:42.920 we're really at a crisis like levels from a from 0:22:42.920 --> 0:22:47.400 an historical standpoint, and uh, that presents an extraordinarily favorable 0:22:47.440 --> 0:22:51.439