1 00:00:00,080 --> 00:00:02,840 Speaker 1: We bring you news and analysis every day on the 2 00:00:02,880 --> 00:00:06,840 Speaker 1: Bloomberg Surveillance Podcast. But now you can get the latest 3 00:00:06,880 --> 00:00:11,639 Speaker 1: news on demand whenever you want. Subscribe to Bloomberg News 4 00:00:11,640 --> 00:00:14,400 Speaker 1: Now to get the latest headlines at the click of 5 00:00:14,440 --> 00:00:18,880 Speaker 1: a button. Get informed on your schedule. You can listen 6 00:00:18,960 --> 00:00:22,720 Speaker 1: and subscribe to Bloomberg News Now on the Bloomberg Business App, 7 00:00:22,760 --> 00:00:27,720 Speaker 1: Bloomberg dot Com plus Apple, Spotify, and anywhere else you 8 00:00:27,800 --> 00:00:37,360 Speaker 1: get your podcasts. Search Bloomberg News Now and subscribe today. 9 00:00:37,760 --> 00:00:41,120 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 10 00:00:41,120 --> 00:00:44,960 Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day 11 00:00:45,000 --> 00:00:49,480 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 12 00:00:49,920 --> 00:00:54,720 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 13 00:00:54,920 --> 00:00:59,240 Speaker 1: anywhere you get your podcasts and always on Bloomberg dot Com, 14 00:00:59,280 --> 00:01:02,959 Speaker 1: the Bloomberg Minol and the Bloomberg Business App. And we're 15 00:01:03,000 --> 00:01:04,880 Speaker 1: not going to turn this into a history lesson, but 16 00:01:04,959 --> 00:01:07,160 Speaker 1: to give you some perspective. And I thought the Washington 17 00:01:07,240 --> 00:01:11,240 Speaker 1: Post captured brilliantly this morning with the word rebellion. There 18 00:01:11,280 --> 00:01:15,560 Speaker 1: are different kinds of Southerners. Knut Gingrich with Sean Hannity 19 00:01:15,640 --> 00:01:19,680 Speaker 1: last night was heated and on fire. The former speaker 20 00:01:19,760 --> 00:01:22,800 Speaker 1: with the revolution of nineteen ninety four, and now we 21 00:01:22,880 --> 00:01:25,560 Speaker 1: have the immense honor speaking with french Hill. He's been 22 00:01:25,600 --> 00:01:28,840 Speaker 1: a good friend of the program and far more important, folks, 23 00:01:28,840 --> 00:01:32,520 Speaker 1: french Hill is linked to American finance through his banking 24 00:01:32,920 --> 00:01:36,440 Speaker 1: and little Rock Frenchhill, how do you link this moment 25 00:01:37,080 --> 00:01:39,520 Speaker 1: to confidence in our banking system? 26 00:01:39,920 --> 00:01:42,200 Speaker 2: Well, Tom, it's good to be with you, and I 27 00:01:42,280 --> 00:01:44,920 Speaker 2: don't like the dysfunction in the House. Of course, I 28 00:01:45,080 --> 00:01:48,600 Speaker 2: was very opposed to what happened yesterday because if we 29 00:01:48,640 --> 00:01:51,600 Speaker 2: want to continue to build confidence in the US and 30 00:01:51,640 --> 00:01:55,080 Speaker 2: the US and global capital markets, we've got to show 31 00:01:55,160 --> 00:01:58,720 Speaker 2: leadership on the fiscal side of the House. And right 32 00:01:58,760 --> 00:02:01,800 Speaker 2: here in the midst of a appropriations fight and a 33 00:02:01,880 --> 00:02:05,680 Speaker 2: fight over federal funding in less than now forty days 34 00:02:05,720 --> 00:02:08,840 Speaker 2: to a government shut down, to be shut down in 35 00:02:08,919 --> 00:02:12,440 Speaker 2: the House without a speaker for the next week is 36 00:02:12,480 --> 00:02:16,400 Speaker 2: not contributing to that vote of confidence. So I think 37 00:02:16,400 --> 00:02:20,280 Speaker 2: they are linked, and I would I really hate to 38 00:02:20,320 --> 00:02:23,920 Speaker 2: say that, but this rebellion has come at a very 39 00:02:23,960 --> 00:02:24,560 Speaker 2: poor time. 40 00:02:24,720 --> 00:02:27,640 Speaker 1: The rebellion has a tinge of geography. We had votes 41 00:02:27,639 --> 00:02:31,639 Speaker 1: from Montana and the rest, and John, you know, I'm sorry. 42 00:02:31,680 --> 00:02:34,160 Speaker 1: I look at this as a political context of the nation. 43 00:02:34,400 --> 00:02:39,000 Speaker 1: It's not just about what we're doing at surveillance or 44 00:02:39,120 --> 00:02:42,360 Speaker 1: the cable TV theater that we're seeing in Washington. 45 00:02:42,360 --> 00:02:44,520 Speaker 3: It's a real fitting that a Republican party shut it 46 00:02:44,560 --> 00:02:47,000 Speaker 3: south in the foot Accompressman, the question I'd have to 47 00:02:47,040 --> 00:02:48,680 Speaker 3: ask of you this morning is how can the American 48 00:02:48,680 --> 00:02:52,079 Speaker 3: public have any confidence in your party's ability to govern? 49 00:02:52,600 --> 00:02:52,799 Speaker 4: Well? 50 00:02:52,840 --> 00:02:55,239 Speaker 2: I think under Kevin McCarthy in the past nine months 51 00:02:55,280 --> 00:02:58,040 Speaker 2: we demonstrated that quite successfully. 52 00:02:58,080 --> 00:03:00,320 Speaker 4: And that's why I'm so disappointed. 53 00:03:00,240 --> 00:03:04,240 Speaker 2: In eight people, which represent about four percent of Republicans 54 00:03:04,240 --> 00:03:07,080 Speaker 2: in Congress. Let me repeat that, about four percent of 55 00:03:07,120 --> 00:03:11,800 Speaker 2: Republicans in Congress. They voted with all the Democrats yesterday 56 00:03:11,840 --> 00:03:16,519 Speaker 2: to take down Kevin McCarthy's speakership. But under his speakership 57 00:03:16,840 --> 00:03:19,839 Speaker 2: we passed in all the above energy strategy to make 58 00:03:20,000 --> 00:03:24,520 Speaker 2: energy America energy independent once again. We passed border security 59 00:03:24,560 --> 00:03:28,080 Speaker 2: that both reforms the immigration system that's failed and do 60 00:03:28,240 --> 00:03:31,960 Speaker 2: border security. And it was Kevin McCarthy, after waiting ninety 61 00:03:32,040 --> 00:03:35,640 Speaker 2: days for President Biden to provide any kind of leadership, 62 00:03:36,040 --> 00:03:40,240 Speaker 2: that crafted a historic debt sealing deal which resulted in 63 00:03:40,280 --> 00:03:43,200 Speaker 2: two trillion dollars of spending reductions and a one percent 64 00:03:43,240 --> 00:03:47,440 Speaker 2: cap on discretionary spending. And then just last week pro 65 00:03:47,560 --> 00:03:51,080 Speaker 2: offered a good stop gap spending measure so that we 66 00:03:51,120 --> 00:03:55,600 Speaker 2: could finish our appropriations work, which also included a debt commission, 67 00:03:55,840 --> 00:03:58,480 Speaker 2: which I think is so critically important if we want 68 00:03:58,520 --> 00:04:01,600 Speaker 2: to get a handle on what really drives our deficit, 69 00:04:02,000 --> 00:04:03,960 Speaker 2: which are our mandatory spending. 70 00:04:03,640 --> 00:04:06,680 Speaker 5: Program Congressman, as yields do continue to rise, and I 71 00:04:06,720 --> 00:04:08,360 Speaker 5: do know that every day you do come in and 72 00:04:08,400 --> 00:04:10,800 Speaker 5: you look at that ten year yield and watch it 73 00:04:10,960 --> 00:04:14,000 Speaker 5: climb in tandem with the interest payments of the US 74 00:04:14,080 --> 00:04:17,800 Speaker 5: government Goleman's access estimating that yields climbing where they are 75 00:04:17,880 --> 00:04:20,800 Speaker 5: at about one hundred billion dollars to the deficit come 76 00:04:20,839 --> 00:04:25,080 Speaker 5: twenty twenty five versus expectations just in July alone. Do 77 00:04:25,160 --> 00:04:28,320 Speaker 5: you think right now that other members of your party 78 00:04:28,400 --> 00:04:31,280 Speaker 5: realize that the longer this dysfunction goes on, the more 79 00:04:31,320 --> 00:04:34,440 Speaker 5: they contribute to that deficit, Lisa, such. 80 00:04:34,320 --> 00:04:36,479 Speaker 2: An important question, but I want to really turn it 81 00:04:36,520 --> 00:04:39,000 Speaker 2: around and say yes, I think every day in the 82 00:04:39,080 --> 00:04:42,000 Speaker 2: last few weeks We've talked about the impact on fiscal 83 00:04:42,040 --> 00:04:45,240 Speaker 2: finance and rising interest rates with our House members, but 84 00:04:45,360 --> 00:04:48,719 Speaker 2: this is a fundamental issue that goes back to both 85 00:04:48,760 --> 00:04:52,719 Speaker 2: pre pandemic and certainly during the pandemic, when the Democratic 86 00:04:52,760 --> 00:04:55,919 Speaker 2: House Budget Committee chairman at the time said, there's no 87 00:04:56,080 --> 00:04:58,920 Speaker 2: limit to what America can borrow from the world and 88 00:04:58,960 --> 00:05:02,480 Speaker 2: spend it home. Deficits don't matter, and that went on 89 00:05:02,600 --> 00:05:08,040 Speaker 2: steroids during the pandemic obstensively to help offset the output 90 00:05:08,720 --> 00:05:11,720 Speaker 2: loss during the pandemic. But we did five or six 91 00:05:11,839 --> 00:05:14,919 Speaker 2: times with that help point output loss was and we 92 00:05:15,000 --> 00:05:18,480 Speaker 2: didn't take our foot off the accelerator and President Biden's 93 00:05:18,480 --> 00:05:22,280 Speaker 2: compound of that. So it's a bipartisan second to do this. 94 00:05:22,560 --> 00:05:25,240 Speaker 5: But Congressman, I mean to be fair, the deficit did 95 00:05:25,320 --> 00:05:28,880 Speaker 5: rise by about eight trillion dollars during Trump's time in office, 96 00:05:29,000 --> 00:05:31,720 Speaker 5: and it actually accelerated during that period, and a lot 97 00:05:31,720 --> 00:05:35,520 Speaker 5: of the aid was accelerated during that point. So isn't 98 00:05:35,560 --> 00:05:39,080 Speaker 5: this both parties And the fact that there's complete dysfunction 99 00:05:39,520 --> 00:05:42,640 Speaker 5: now just exacerbates the inability to really address any of 100 00:05:42,680 --> 00:05:45,040 Speaker 5: these issues, which is a bar partisan issue. 101 00:05:45,200 --> 00:05:47,719 Speaker 2: Well, I just said that. I said during the pandemic. 102 00:05:47,800 --> 00:05:52,640 Speaker 2: Well that's the Trump administration. Absolutely. We had spending out 103 00:05:52,640 --> 00:05:56,200 Speaker 2: of control there with an eye towards trying to offset 104 00:05:56,240 --> 00:05:59,040 Speaker 2: the output losses during the pandemic. The globe did that, 105 00:05:59,120 --> 00:06:03,320 Speaker 2: but we over shot plus two. Lax monetary policy for 106 00:06:03,360 --> 00:06:06,159 Speaker 2: too long, We've lost our way. I want to go 107 00:06:06,320 --> 00:06:10,120 Speaker 2: back to when both parties said that zero deficits were 108 00:06:10,160 --> 00:06:14,000 Speaker 2: the objective, not two trillion dollars, which is Joe Biden 109 00:06:14,160 --> 00:06:18,800 Speaker 2: is projecting. So sure, both parties bear full responsibility for this, 110 00:06:18,920 --> 00:06:22,360 Speaker 2: but what I've seen in my forty years of being 111 00:06:22,440 --> 00:06:25,039 Speaker 2: in private business and in and out of government, is 112 00:06:25,080 --> 00:06:28,760 Speaker 2: there is no consensus that large deficits are bad in 113 00:06:28,839 --> 00:06:32,120 Speaker 2: the Democratic Party and some in the Republican Party. And 114 00:06:32,120 --> 00:06:33,200 Speaker 2: that's what's got a change. 115 00:06:33,520 --> 00:06:36,760 Speaker 1: I would suggest, Congressman Hill, that you and the former 116 00:06:36,800 --> 00:06:39,560 Speaker 1: Speaker Gingrit are sort of on the same page. Well, 117 00:06:39,560 --> 00:06:42,920 Speaker 1: this is embarrassing, let's fix it. The way to fix 118 00:06:43,000 --> 00:06:46,680 Speaker 1: it is an anointed speaker of the House. How long 119 00:06:46,720 --> 00:06:47,520 Speaker 1: is this going to take? 120 00:06:48,200 --> 00:06:49,200 Speaker 4: Well, I hope Tom. 121 00:06:49,839 --> 00:06:51,960 Speaker 2: I would have hoped that we could have started that 122 00:06:52,040 --> 00:06:56,320 Speaker 2: process before we left this week, but we didn't, and 123 00:06:56,360 --> 00:06:59,320 Speaker 2: so we're going to meet either Monday night or Tuesday 124 00:06:59,360 --> 00:07:02,680 Speaker 2: morning early and start the process of selecting a new speaker, 125 00:07:03,080 --> 00:07:05,360 Speaker 2: and I want to have that concluded next week. It's 126 00:07:05,520 --> 00:07:07,720 Speaker 2: very important that we get on with our work in 127 00:07:07,760 --> 00:07:11,240 Speaker 2: this midst of this appropriations fight that we have on 128 00:07:11,280 --> 00:07:14,560 Speaker 2: our hands, with the government shut down looking us in 129 00:07:14,680 --> 00:07:16,440 Speaker 2: the eye for November seventeen. 130 00:07:16,680 --> 00:07:20,600 Speaker 3: Congressman, this is a difficult question, might be somewhat emotional 131 00:07:20,640 --> 00:07:24,360 Speaker 3: for you as your party left you behind. Do you 132 00:07:24,400 --> 00:07:26,480 Speaker 3: get the feeling that this is not the Republican Party 133 00:07:26,480 --> 00:07:28,600 Speaker 3: that you joined and it's moved away from you. 134 00:07:29,240 --> 00:07:33,960 Speaker 2: I think the Republican principles of balanced budgets, a strong defense, 135 00:07:34,080 --> 00:07:39,040 Speaker 2: international leadership, the largest open market in the world that 136 00:07:39,120 --> 00:07:41,760 Speaker 2: attracts people all over the world, these are core principles. 137 00:07:41,880 --> 00:07:45,640 Speaker 2: Loyalty to the Bill of Rights in the Constitution, these 138 00:07:45,680 --> 00:07:48,640 Speaker 2: are still fundamental tenets in the Republican Party. But I 139 00:07:48,680 --> 00:07:53,200 Speaker 2: think we've lost our way tactically. We're throwing overboard a 140 00:07:53,320 --> 00:07:58,160 Speaker 2: successful speaker that shares those views, absolutely shares those views, 141 00:07:58,200 --> 00:08:02,160 Speaker 2: and was guiding us through the stormy waters of a 142 00:08:02,280 --> 00:08:06,880 Speaker 2: dysfunctional presidency led by Joe Biden in a Democratic control Senate. 143 00:08:07,240 --> 00:08:08,040 Speaker 6: Not easy to. 144 00:08:08,000 --> 00:08:11,520 Speaker 2: Do with no plan. Those eight people who voted to 145 00:08:11,520 --> 00:08:16,040 Speaker 2: throw Kevin McCarthy out yesterday incorrectly, in my view, don't 146 00:08:16,080 --> 00:08:19,760 Speaker 2: have a plan except they're complaining about the fiscal conditions 147 00:08:19,760 --> 00:08:23,480 Speaker 2: of the country. Well, that's shared by all Republicans. So tactically, 148 00:08:23,520 --> 00:08:27,880 Speaker 2: I think they've failed. Strategically, I think the individual principles 149 00:08:27,960 --> 00:08:32,480 Speaker 2: and governance that's guided the Republican Party are still intact. 150 00:08:32,559 --> 00:08:34,880 Speaker 2: We've just got to move forward and regroup and find 151 00:08:34,880 --> 00:08:36,240 Speaker 2: a leader that we can get behind. 152 00:08:36,320 --> 00:08:39,199 Speaker 3: It's certainly shared by the Republicans, the majority of Republicans 153 00:08:39,360 --> 00:08:43,000 Speaker 3: in Congress. The congressman is consistent with the views and 154 00:08:43,040 --> 00:08:46,120 Speaker 3: the beliefs of the dominant leader in the presidential race 155 00:08:46,160 --> 00:08:49,079 Speaker 3: for your party going into next year. I think overwhelming 156 00:08:49,080 --> 00:08:51,080 Speaker 3: me the ads to that is no, isn't it? 157 00:08:51,400 --> 00:08:51,559 Speaker 4: Well? 158 00:08:51,559 --> 00:08:54,560 Speaker 2: I think President Trump believes certainly in a lot of 159 00:08:54,559 --> 00:08:57,920 Speaker 2: those principles, and I've seen him do good work when 160 00:08:57,960 --> 00:09:02,119 Speaker 2: he was president. But we need him to help rebuild 161 00:09:02,160 --> 00:09:04,240 Speaker 2: this and not run counter to it. We need to 162 00:09:04,280 --> 00:09:06,520 Speaker 2: have the Republican Party on the same page when it 163 00:09:06,559 --> 00:09:09,880 Speaker 2: regards our role in the world and our role at 164 00:09:09,880 --> 00:09:11,920 Speaker 2: home on how to do that. And you know, President 165 00:09:11,920 --> 00:09:15,800 Speaker 2: Trump had challenges on the spending side too, and yet 166 00:09:15,840 --> 00:09:17,960 Speaker 2: he was good on some other things. So we've got 167 00:09:18,000 --> 00:09:20,920 Speaker 2: to get together and focus on the House in the 168 00:09:20,960 --> 00:09:24,000 Speaker 2: next few days and get a House leader that Republicans 169 00:09:24,040 --> 00:09:26,520 Speaker 2: can back, so that we're back in this game of 170 00:09:26,640 --> 00:09:31,120 Speaker 2: countering the Biden's failed agenda on the border internationally and fiscally. 171 00:09:31,280 --> 00:09:34,320 Speaker 3: Congressman, just find me in thirty seconds. Is he helping you? 172 00:09:34,360 --> 00:09:34,839 Speaker 3: Were hurting you? 173 00:09:34,960 --> 00:09:35,120 Speaker 6: Now? 174 00:09:36,040 --> 00:09:37,800 Speaker 3: Who the former president? 175 00:09:38,480 --> 00:09:40,560 Speaker 2: I don't think he comes into play in this issue 176 00:09:40,559 --> 00:09:42,680 Speaker 2: in the House. What we've seen is these eight people 177 00:09:42,720 --> 00:09:47,080 Speaker 2: were not doing Trump's bidding. They're concerned about the fiscal 178 00:09:47,160 --> 00:09:49,640 Speaker 2: affairs of the United States. I get that they did 179 00:09:49,679 --> 00:09:53,160 Speaker 2: not trust Kevin McCarthy. I don't agree with that, but 180 00:09:53,200 --> 00:09:55,920 Speaker 2: I understand where they're coming from. This is an internal 181 00:09:55,960 --> 00:09:58,000 Speaker 2: matter that we need to solve in the House, and 182 00:09:58,040 --> 00:09:59,880 Speaker 2: we need to get a leader that we can get behind, 183 00:10:00,080 --> 00:10:02,800 Speaker 2: as I say, in order to counter the mistakes and 184 00:10:02,840 --> 00:10:04,679 Speaker 2: the direction of the Biden administration. 185 00:10:04,840 --> 00:10:07,240 Speaker 3: A Congressman, thanks for your opinion of view this morning. 186 00:10:07,280 --> 00:10:10,080 Speaker 3: We appreciate it as always. French Congressman french Hill there 187 00:10:10,320 --> 00:10:12,000 Speaker 3: on the latest in Washington. 188 00:10:15,559 --> 00:10:17,920 Speaker 1: Went in doubt, how'd we screw it up? In the thirties. 189 00:10:18,120 --> 00:10:20,240 Speaker 1: We didn't look at the banks. BERNANKI one oh one. 190 00:10:20,520 --> 00:10:23,320 Speaker 1: Michael Barr's a voting member as of today. Jean Sunuzzo 191 00:10:23,400 --> 00:10:26,280 Speaker 1: could be a voting member someday, or governor Global had 192 00:10:26,320 --> 00:10:30,120 Speaker 1: a fixed income a Columbia thread needle. He's surviving the 193 00:10:30,160 --> 00:10:33,480 Speaker 1: wars gene. You know there's a point where it switches 194 00:10:33,559 --> 00:10:36,360 Speaker 1: some yield analysis to price analysis. 195 00:10:36,720 --> 00:10:37,360 Speaker 4: Are we there? 196 00:10:39,160 --> 00:10:42,200 Speaker 7: It does feel like we're there, Tom, certainly. You know 197 00:10:42,240 --> 00:10:44,520 Speaker 7: you're talking about it earlier. The sell off we've seen 198 00:10:44,559 --> 00:10:46,720 Speaker 7: in the long end of the yield curve is equal 199 00:10:46,800 --> 00:10:48,760 Speaker 7: to the amount of work that the Fed's done at 200 00:10:48,800 --> 00:10:49,360 Speaker 7: the front end of. 201 00:10:49,320 --> 00:10:50,120 Speaker 4: The curve all year. 202 00:10:50,280 --> 00:10:52,880 Speaker 7: They've only raised interest rates by one percent through the 203 00:10:52,920 --> 00:10:55,880 Speaker 7: course of this year, and maybe twenty five bases points more. 204 00:10:55,960 --> 00:10:58,559 Speaker 7: But the risk premium that we've put into the long 205 00:10:58,640 --> 00:11:00,440 Speaker 7: end of the curve is really what has. 206 00:11:00,360 --> 00:11:02,040 Speaker 4: Taken investors by surprise. 207 00:11:02,160 --> 00:11:04,520 Speaker 7: I think here because it doesn't seem to be driven 208 00:11:04,559 --> 00:11:07,640 Speaker 7: by the fundamental data. We would argue that the most 209 00:11:07,679 --> 00:11:10,000 Speaker 7: important fundamental data of the last couple of weeks for 210 00:11:10,040 --> 00:11:13,640 Speaker 7: the bond market is the fact that core PCE inflation, 211 00:11:13,840 --> 00:11:17,080 Speaker 7: the Fed's preferred gauge came in below expectations and is 212 00:11:17,120 --> 00:11:20,800 Speaker 7: trending towards that two percent target. And yet we see 213 00:11:20,800 --> 00:11:24,200 Speaker 7: this steepening and I think that should give investors pause 214 00:11:24,280 --> 00:11:27,040 Speaker 7: and think that really there is a fiscal risk premium 215 00:11:27,040 --> 00:11:28,480 Speaker 7: coming back into the treasury market. 216 00:11:28,640 --> 00:11:30,319 Speaker 3: Jane, Have you changed your mind on that in the 217 00:11:30,360 --> 00:11:31,240 Speaker 3: last couple of months. 218 00:11:32,640 --> 00:11:34,520 Speaker 7: Well, I think what we've been doing, John is really 219 00:11:34,600 --> 00:11:37,600 Speaker 7: trying to focus more on what we call the belly 220 00:11:37,640 --> 00:11:40,040 Speaker 7: of the curve, or that five year point, where we 221 00:11:40,120 --> 00:11:43,240 Speaker 7: think we've priced in more than a fair path for 222 00:11:43,320 --> 00:11:46,680 Speaker 7: the FED funds rate and more than a fair higher 223 00:11:46,720 --> 00:11:51,040 Speaker 7: for longer situation. And you have yields basically from the 224 00:11:51,120 --> 00:11:52,960 Speaker 7: three year point all the way out to the thirty 225 00:11:53,040 --> 00:11:56,440 Speaker 7: year point sitting right around or just below five percent, 226 00:11:56,840 --> 00:11:58,800 Speaker 7: And for that same yield, we rather put our money 227 00:11:58,840 --> 00:12:01,360 Speaker 7: in the five year point, where you're more looking at 228 00:12:01,360 --> 00:12:03,800 Speaker 7: what the Fed might do and less worried about that 229 00:12:03,960 --> 00:12:06,920 Speaker 7: term premium or that risk premium, which we learned last 230 00:12:07,040 --> 00:12:10,360 Speaker 7: year in the UK guilt crisis, that that can get 231 00:12:10,400 --> 00:12:11,480 Speaker 7: away from you pretty quickly. 232 00:12:11,920 --> 00:12:14,280 Speaker 3: Jane, you think we've got the ingredients for that kind 233 00:12:14,280 --> 00:12:15,240 Speaker 3: of outcome. 234 00:12:15,760 --> 00:12:18,200 Speaker 4: I really don't. I think it's a very different market. 235 00:12:18,360 --> 00:12:21,079 Speaker 7: The depth in the US treasury market is significantly greater 236 00:12:21,120 --> 00:12:23,560 Speaker 7: than what we see in guilts. But you know, it's 237 00:12:23,880 --> 00:12:25,880 Speaker 7: that time of year, and it was just a year 238 00:12:25,880 --> 00:12:27,520 Speaker 7: ago we were looking at what was going on in 239 00:12:27,520 --> 00:12:31,240 Speaker 7: the UK and that budget dynamic really did create scare 240 00:12:31,320 --> 00:12:33,840 Speaker 7: across the market, and international investors. 241 00:12:33,440 --> 00:12:35,360 Speaker 4: Drove yield hire quite rapidly. 242 00:12:35,559 --> 00:12:37,760 Speaker 7: There are some similarities, but I do think the depth 243 00:12:37,760 --> 00:12:39,280 Speaker 7: in the treasury market is very different. 244 00:12:39,720 --> 00:12:39,920 Speaker 8: Gene. 245 00:12:39,920 --> 00:12:42,320 Speaker 5: When we talk about the rest of the markets aside 246 00:12:42,320 --> 00:12:44,800 Speaker 5: from treasuries, you can look at stocks which have been 247 00:12:44,840 --> 00:12:47,240 Speaker 5: remarkably resilient in light of some of the recent moves. 248 00:12:47,240 --> 00:12:49,319 Speaker 5: You can look at credit starting to maybe show a 249 00:12:49,360 --> 00:12:53,000 Speaker 5: little concern but largely holding in. Does this indicate to 250 00:12:53,080 --> 00:12:55,840 Speaker 5: you that the rest of the risk complex can actually 251 00:12:55,880 --> 00:12:59,199 Speaker 5: sustain yields that a rising at this pace to these levels, 252 00:12:59,280 --> 00:13:01,240 Speaker 5: or do you think that there is yet to be 253 00:13:01,360 --> 00:13:02,800 Speaker 5: a wake up call that is coming. 254 00:13:04,000 --> 00:13:06,480 Speaker 7: No. I think the wake up calls coming lista quite honestly, 255 00:13:06,559 --> 00:13:09,200 Speaker 7: and we're starting to see that in liquidity of credit. 256 00:13:09,360 --> 00:13:12,280 Speaker 7: It's starting to deteriorate, and spreads our widening and bid 257 00:13:12,280 --> 00:13:14,920 Speaker 7: offers are widening. So it's a little bit of that 258 00:13:15,679 --> 00:13:19,480 Speaker 7: unfavorable dynamic we saw for a lot of twenty twenty two, 259 00:13:19,559 --> 00:13:21,880 Speaker 7: and this week that started to re emerge. So I 260 00:13:21,920 --> 00:13:24,880 Speaker 7: think that credit investors are getting nervous and frankly, they 261 00:13:24,920 --> 00:13:29,400 Speaker 7: realized that lags of monetary policy may be long or variable, 262 00:13:29,480 --> 00:13:31,760 Speaker 7: but they do exist. And at the end of the day, 263 00:13:32,080 --> 00:13:35,040 Speaker 7: companies and consumers are borrowing at much higher rates and 264 00:13:35,440 --> 00:13:37,040 Speaker 7: that's going to cause cracks throughout the system. 265 00:13:37,240 --> 00:13:39,520 Speaker 5: Are you saying things actually break or for selling or 266 00:13:39,559 --> 00:13:41,880 Speaker 5: anything that seems like a catalyst, or just a little 267 00:13:41,920 --> 00:13:44,679 Speaker 5: bit more fear that causes a little bit more caution 268 00:13:44,840 --> 00:13:45,520 Speaker 5: in investments. 269 00:13:46,360 --> 00:13:47,920 Speaker 4: I think it's more fear overall. 270 00:13:48,480 --> 00:13:52,520 Speaker 7: Fundamentally, investment grade companies, for example, are very cash rich, 271 00:13:53,000 --> 00:13:55,720 Speaker 7: and their cash flow profile is stronger than it was 272 00:13:55,760 --> 00:13:58,520 Speaker 7: in twenty nineteen before the pandemic. So I don't think 273 00:13:58,559 --> 00:14:00,800 Speaker 7: there's anything that's going to disrupt that from yields going 274 00:14:00,840 --> 00:14:02,680 Speaker 7: up a quarter or to a half percent in a 275 00:14:02,679 --> 00:14:03,560 Speaker 7: short period of time. 276 00:14:03,840 --> 00:14:05,600 Speaker 4: When we think about highly levered. 277 00:14:05,320 --> 00:14:08,319 Speaker 7: Companies, and for example, look at the fact that Triple 278 00:14:08,400 --> 00:14:12,640 Speaker 7: C those highly levered companies that have returned over twelve 279 00:14:12,720 --> 00:14:15,200 Speaker 7: percent through the course of this year. Year to date, 280 00:14:15,559 --> 00:14:19,000 Speaker 7: well they're going to be really susceptible to higher borrowing costs, 281 00:14:19,240 --> 00:14:20,800 Speaker 7: and as we go forward, I think that rally is 282 00:14:20,800 --> 00:14:21,800 Speaker 7: going to be hard to sustain. 283 00:14:22,280 --> 00:14:25,480 Speaker 1: Jane, let's go back to Minnesota Finance just a few 284 00:14:25,640 --> 00:14:28,320 Speaker 1: years ago. There's a chapter there when it gets like this, 285 00:14:28,840 --> 00:14:32,120 Speaker 1: look at the banks. You've got the advantage of Columbia 286 00:14:32,200 --> 00:14:35,440 Speaker 1: thread needle that you're not representing a major bank directly 287 00:14:35,440 --> 00:14:38,640 Speaker 1: in that, which is our advantage this morning. Are you 288 00:14:38,720 --> 00:14:42,520 Speaker 1: stressed about the banks either too big to fail, those 289 00:14:42,560 --> 00:14:46,720 Speaker 1: regionals below them, and critically the commercial real estate block 290 00:14:46,840 --> 00:14:48,560 Speaker 1: below them? 291 00:14:48,720 --> 00:14:51,360 Speaker 7: I think most importantly, we feel really comfortable with the 292 00:14:51,400 --> 00:14:54,760 Speaker 7: global systemically important banks, those the sort of the big 293 00:14:56,000 --> 00:14:58,360 Speaker 7: issuers here in the US, and we've actually been adding 294 00:14:58,400 --> 00:15:02,160 Speaker 7: exposure since March through now to to that complex, and 295 00:15:02,200 --> 00:15:05,680 Speaker 7: we think that they're exceptionally cheap rather relative to their 296 00:15:06,000 --> 00:15:10,640 Speaker 7: industrial peers. As you get down into the regionals and 297 00:15:10,960 --> 00:15:13,040 Speaker 7: some of the tier below that do have more of that. 298 00:15:13,000 --> 00:15:15,520 Speaker 4: Commercial real estate exposure, I think you do have to 299 00:15:15,560 --> 00:15:16,400 Speaker 4: be a bit nervous. 300 00:15:17,040 --> 00:15:18,840 Speaker 7: I think there, you know, there's a degree of capital 301 00:15:18,920 --> 00:15:21,200 Speaker 7: raising that's going on in that in that next tier 302 00:15:21,200 --> 00:15:24,120 Speaker 7: of bank, but that's Frankly, it's been orderly in terms 303 00:15:24,120 --> 00:15:27,560 Speaker 7: of investors being able to lend that capital. But I 304 00:15:27,600 --> 00:15:29,800 Speaker 7: don't think we should be so confident as to say 305 00:15:29,840 --> 00:15:32,240 Speaker 7: we'll never revisit any of the volatility that we saw 306 00:15:32,280 --> 00:15:32,840 Speaker 7: with SVB. 307 00:15:33,280 --> 00:15:35,280 Speaker 3: Jane, When you say you're adding, how are you doing that? 308 00:15:37,080 --> 00:15:38,720 Speaker 7: Yeah, I mean we're we're adding in the new issue 309 00:15:38,760 --> 00:15:41,480 Speaker 7: market and in the secondary. I think, you know, looking 310 00:15:41,520 --> 00:15:44,720 Speaker 7: at you know the big you know, JP Morgan and 311 00:15:44,760 --> 00:15:48,320 Speaker 7: Bank of America type, you know capital structures where you 312 00:15:48,320 --> 00:15:53,520 Speaker 7: know the capital profile has already been fortified post financial crisis, 313 00:15:53,640 --> 00:15:55,880 Speaker 7: unlike the regional the super. 314 00:15:55,640 --> 00:15:57,720 Speaker 4: Regionals that are having to add that capital now. 315 00:15:58,400 --> 00:16:00,480 Speaker 7: So that these are names that you know, over the 316 00:16:00,560 --> 00:16:03,960 Speaker 7: last six months we've been adding to portfolios, and frankly, 317 00:16:04,000 --> 00:16:06,760 Speaker 7: I think that they're good alternative relative to potentially more 318 00:16:06,800 --> 00:16:08,800 Speaker 7: cyclical corporate exposures. 319 00:16:09,280 --> 00:16:12,360 Speaker 3: Gens Jane, thank you for the insight. GININSA. They have 320 00:16:12,440 --> 00:16:15,320 Speaker 3: Columbia Threatnaedo on credit at the end the banking stress 321 00:16:15,400 --> 00:16:16,520 Speaker 3: we saw Earlie. 322 00:16:16,200 --> 00:16:16,760 Speaker 9: This year. 323 00:16:26,360 --> 00:16:29,880 Speaker 3: Andrew Hoddenhorse's city with this surrounded table. Andrew, your reaction 324 00:16:29,960 --> 00:16:32,240 Speaker 3: to that, what would you expect on Friday now based 325 00:16:32,240 --> 00:16:33,560 Speaker 3: on this? Does it change anything for you. 326 00:16:33,640 --> 00:16:34,600 Speaker 10: It doesn't change anything. 327 00:16:34,600 --> 00:16:34,800 Speaker 6: I think. 328 00:16:34,960 --> 00:16:38,120 Speaker 10: Just look at the scatter plot of ADP versus NFP. 329 00:16:38,680 --> 00:16:40,960 Speaker 10: There's not a high correlation between the two. So it's 330 00:16:40,960 --> 00:16:42,880 Speaker 10: a big if if we get this number. If we 331 00:16:42,960 --> 00:16:45,040 Speaker 10: get this number though, like Mike McKee said, it's a 332 00:16:45,040 --> 00:16:47,440 Speaker 10: big if. But if we get this number for payrolls 333 00:16:47,480 --> 00:16:50,800 Speaker 10: on Friday, this is goldilocks. Right around one hundred thousand 334 00:16:50,920 --> 00:16:54,760 Speaker 10: jobs per month. That's about what the population growth can sustain. 335 00:16:55,440 --> 00:16:57,480 Speaker 10: That would be a very sustainable piece of job growth. 336 00:16:57,560 --> 00:17:00,560 Speaker 10: So if we see this number, that would be a goldilockomy. 337 00:17:00,680 --> 00:17:04,520 Speaker 1: The heavyweight Janet Yellen was out yesterday with some select 338 00:17:04,640 --> 00:17:08,280 Speaker 1: comments that I'm sure your team saw as well. There's 339 00:17:08,320 --> 00:17:13,080 Speaker 1: another economist, Michael Tyson, who has a very famous quote 340 00:17:13,480 --> 00:17:16,280 Speaker 1: about getting punched in the face. You know, everybody's got 341 00:17:16,280 --> 00:17:18,600 Speaker 1: a plan here. How does the FED that? I mean, 342 00:17:18,640 --> 00:17:21,200 Speaker 1: with the trauma that we've seen the last week in 343 00:17:21,240 --> 00:17:24,400 Speaker 1: the bond market, I'm sorry, there's a point here where 344 00:17:24,400 --> 00:17:27,040 Speaker 1: the FED put comes back into place. Are we anywhere 345 00:17:27,080 --> 00:17:30,879 Speaker 1: near where the Fed looks at the financial trauma and 346 00:17:30,920 --> 00:17:32,240 Speaker 1: says we got to adapt? 347 00:17:32,640 --> 00:17:34,640 Speaker 10: So remember what the Fed is trying to do here 348 00:17:34,760 --> 00:17:37,440 Speaker 10: is to raise interest rates and slow the economy. They've 349 00:17:37,480 --> 00:17:41,359 Speaker 10: raised policy rates, but really what controls the economy mortgage rates, 350 00:17:41,400 --> 00:17:44,000 Speaker 10: corporate borrowing rates. Those are going to depend be dependent 351 00:17:44,040 --> 00:17:46,080 Speaker 10: on the tenure yield. So the fact that tenure yields 352 00:17:46,080 --> 00:17:48,919 Speaker 10: are higher, I think is probably consistent with what the 353 00:17:48,960 --> 00:17:52,920 Speaker 10: FED is trying to achieve. Now, like John was talking 354 00:17:53,000 --> 00:17:56,199 Speaker 10: about earlier, being in a fifteen basis point trading range 355 00:17:56,400 --> 00:17:58,440 Speaker 10: over the course of an hour or so in the 356 00:17:58,520 --> 00:18:01,400 Speaker 10: day is probably not the level of volatility the FED 357 00:18:01,400 --> 00:18:04,280 Speaker 10: officials would like to see. So they're watching this, as 358 00:18:04,320 --> 00:18:07,159 Speaker 10: you know, Fed officials, government officials always tell us they're watching, 359 00:18:08,040 --> 00:18:11,359 Speaker 10: and they'll be watching for do we see signs of 360 00:18:11,720 --> 00:18:14,720 Speaker 10: liquidity stress that are emerging. If you saw those type 361 00:18:14,720 --> 00:18:17,560 Speaker 10: of things, then yes, I think you could think about, 362 00:18:17,640 --> 00:18:19,399 Speaker 10: you know, would the FED actually react to this you 363 00:18:19,480 --> 00:18:21,440 Speaker 10: and first it would be with their rhetorics saying that, 364 00:18:21,680 --> 00:18:23,800 Speaker 10: you know, maybe treasure yields have moved too far, but 365 00:18:24,000 --> 00:18:26,640 Speaker 10: I think we're still away from that point. Treasure yield 366 00:18:26,680 --> 00:18:28,639 Speaker 10: curve is still inverted. We still have ten yure yields 367 00:18:28,720 --> 00:18:32,080 Speaker 10: below two year yields. They've come up a lot, We're 368 00:18:32,080 --> 00:18:35,679 Speaker 10: not as inverted as we were. If you're not imminently 369 00:18:35,760 --> 00:18:38,600 Speaker 10: looking at a recession, you're not staring down a recession. 370 00:18:39,160 --> 00:18:40,960 Speaker 10: It's not clear why that yield curve needs to be 371 00:18:41,040 --> 00:18:41,960 Speaker 10: as inverted as it was. 372 00:18:42,040 --> 00:18:43,760 Speaker 5: A number of people have come on this show have 373 00:18:43,880 --> 00:18:46,520 Speaker 5: said that a lot of the move in yields has 374 00:18:46,560 --> 00:18:47,960 Speaker 5: not been fundamentally justified. 375 00:18:48,480 --> 00:18:51,000 Speaker 11: Do you disagree? Do you think that fundamentally where the 376 00:18:51,040 --> 00:18:52,200 Speaker 11: yield is currently on the. 377 00:18:52,119 --> 00:18:54,440 Speaker 5: Ten year treasure and the thirty year treasury is completely 378 00:18:54,560 --> 00:18:57,720 Speaker 5: justified and constant and compensating you for inflation. 379 00:18:58,119 --> 00:19:00,879 Speaker 10: I think it depends on what you mean by fundamentals. 380 00:19:01,520 --> 00:19:04,240 Speaker 10: But if you're including in those fundamentals the fact that 381 00:19:04,240 --> 00:19:07,280 Speaker 10: we're running large deficits, there's more treasury supply that's coming 382 00:19:07,320 --> 00:19:08,720 Speaker 10: to the market. So some people would call that a 383 00:19:08,760 --> 00:19:11,440 Speaker 10: technical but I would say that is a fundamental structural 384 00:19:11,480 --> 00:19:15,160 Speaker 10: part of the US economic backdrop right now. And along 385 00:19:15,240 --> 00:19:17,600 Speaker 10: with that, we're running higher inflation, and that you were 386 00:19:17,640 --> 00:19:20,840 Speaker 10: just talking about this earlier. If we're running inflation that's 387 00:19:20,960 --> 00:19:23,520 Speaker 10: above four percent still by a lot of measures, it's 388 00:19:23,560 --> 00:19:26,200 Speaker 10: not that surprising to see treasure yields above four percent. 389 00:19:26,200 --> 00:19:28,280 Speaker 10: You need that yield just to be compensated for the 390 00:19:28,280 --> 00:19:29,240 Speaker 10: inflation that we're running. 391 00:19:29,280 --> 00:19:31,920 Speaker 3: Do you think dysfunction in Washington helps the Fed's cause. 392 00:19:33,320 --> 00:19:35,920 Speaker 10: I would not say that it helps the Fed's cause. 393 00:19:35,960 --> 00:19:38,679 Speaker 10: I don't know if it helps anyone's cause right now. 394 00:19:39,280 --> 00:19:43,480 Speaker 10: You know the developments. It does raise questions about, you know, 395 00:19:43,480 --> 00:19:47,359 Speaker 10: whether we're going to be in another shutdown November seventeenth, 396 00:19:47,400 --> 00:19:50,400 Speaker 10: and you saw markets that we're trading that, you saw 397 00:19:50,480 --> 00:19:52,600 Speaker 10: markets that priced out some of the probability of a 398 00:19:52,600 --> 00:19:54,440 Speaker 10: FED hike in November. I think what the FED wants 399 00:19:54,480 --> 00:19:57,440 Speaker 10: here is for the government to stay open, which would 400 00:19:57,480 --> 00:19:59,280 Speaker 10: allow them to respond to the economic data. And now 401 00:19:59,280 --> 00:19:59,800 Speaker 10: what's going on. 402 00:19:59,720 --> 00:20:03,000 Speaker 3: In is a fantastic concert, well played, very diplomatic. You 403 00:20:03,080 --> 00:20:06,320 Speaker 3: use my favorite phrase in the holy global financi and policymakers, 404 00:20:06,680 --> 00:20:07,440 Speaker 3: we're watching this. 405 00:20:07,520 --> 00:20:07,920 Speaker 6: That's rue. 406 00:20:08,880 --> 00:20:11,040 Speaker 3: And we often ask on this program, what does that mean? 407 00:20:11,520 --> 00:20:14,360 Speaker 3: What on earth does that mean? If they say we're watching. 408 00:20:14,080 --> 00:20:15,880 Speaker 10: This means they have a bloomberg? 409 00:20:20,200 --> 00:20:22,159 Speaker 3: Seriously, Andrew, stick. 410 00:20:21,880 --> 00:20:24,679 Speaker 5: Around, Andrew, Just a final thought here, is there an 411 00:20:24,680 --> 00:20:27,480 Speaker 5: incoherence between the Joeld data that we got yesterday, the 412 00:20:27,560 --> 00:20:30,280 Speaker 5: ism manufacturing read that we got the fact that in 413 00:20:30,320 --> 00:20:32,439 Speaker 5: general things have been coming in horder than expected, and 414 00:20:32,480 --> 00:20:34,760 Speaker 5: even just the direction of these ADP figures. 415 00:20:34,840 --> 00:20:37,480 Speaker 10: I think, especially seeing that manufacturing was down and the 416 00:20:38,240 --> 00:20:42,520 Speaker 10: ADP figures is surprising. We've seen those manufacturing PMI ISM's 417 00:20:42,600 --> 00:20:44,800 Speaker 10: bottom moving up, looks like they're going to move up 418 00:20:44,840 --> 00:20:46,359 Speaker 10: through fifty and we're going to be expanding in the 419 00:20:46,359 --> 00:20:50,280 Speaker 10: manufacturing sector. So I don't think that negative payroll growth 420 00:20:50,280 --> 00:20:52,320 Speaker 10: for manufacturing really makes sense with where we are in 421 00:20:52,359 --> 00:20:52,920 Speaker 10: the economy. 422 00:20:53,840 --> 00:20:56,040 Speaker 1: Look, Andrew, you got to go back. You got to 423 00:20:56,080 --> 00:21:00,240 Speaker 1: write an eight page paper with your team. A guestment 424 00:21:00,359 --> 00:21:02,280 Speaker 1: forward in the heart of the matter is the vector 425 00:21:02,280 --> 00:21:05,080 Speaker 1: of inflation? I mean within the dual mandate. Do you 426 00:21:05,119 --> 00:21:08,600 Speaker 1: agree that we've seen three monthly annualized disinflation and can 427 00:21:08,640 --> 00:21:12,280 Speaker 1: you state that we've got a generalized vector that is disinflation. 428 00:21:12,680 --> 00:21:14,800 Speaker 10: I can't state that. I wish I could state that, 429 00:21:14,800 --> 00:21:16,240 Speaker 10: but I can't state that. I think what we've seen 430 00:21:16,359 --> 00:21:18,160 Speaker 10: is a soft patch in inflation. You had a lot 431 00:21:18,160 --> 00:21:21,280 Speaker 10: of special factors that came together, autoprices moving down, airfares 432 00:21:21,280 --> 00:21:23,200 Speaker 10: moving down. Some of those factors are going to go 433 00:21:23,280 --> 00:21:25,639 Speaker 10: the other direction. We have a tight labor market. 434 00:21:25,720 --> 00:21:28,240 Speaker 1: This is a key inside John. This is the arch 435 00:21:28,680 --> 00:21:30,520 Speaker 1: debate on surveillance. 436 00:21:30,040 --> 00:21:32,760 Speaker 3: Right now forty on Friday, still still a two forty 437 00:21:32,760 --> 00:21:35,000 Speaker 3: on Friday. Unemployment at three point six three point six 438 00:21:35,040 --> 00:21:35,800 Speaker 3: unemployment West. 439 00:21:35,800 --> 00:21:38,560 Speaker 10: Wages wages we think zero point three percent, and that's 440 00:21:38,560 --> 00:21:41,200 Speaker 10: a big question. Ultimately, it does come back to wages. 441 00:21:41,240 --> 00:21:43,600 Speaker 10: Do we see wages that are slowing down where we 442 00:21:43,640 --> 00:21:45,639 Speaker 10: have them zero point three percent month one month? That's 443 00:21:45,680 --> 00:21:46,560 Speaker 10: kind of holding steady. 444 00:21:46,600 --> 00:21:48,760 Speaker 3: How much weight would you put on job openings? Here's 445 00:21:48,800 --> 00:21:50,240 Speaker 3: so many complaints about that data. 446 00:21:50,480 --> 00:21:53,159 Speaker 10: It is not the most high fidelity reading that we 447 00:21:53,200 --> 00:21:55,600 Speaker 10: have on the job market at all. So you know, 448 00:21:55,640 --> 00:21:58,840 Speaker 10: I'm watching the whole mosaic of jobs figures, and if 449 00:21:58,880 --> 00:22:00,640 Speaker 10: you look at the mosaic, I think it's all telling 450 00:22:00,640 --> 00:22:01,520 Speaker 10: you it's a tight labor market. 451 00:22:01,560 --> 00:22:03,119 Speaker 3: So it's talk an audition for the FM. Say that 452 00:22:03,960 --> 00:22:04,879 Speaker 3: Andrew Honand hosts a. 453 00:22:04,880 --> 00:22:12,200 Speaker 1: City Christopher Merinak joins the sound director of at Research. 454 00:22:12,280 --> 00:22:14,520 Speaker 1: You know the chart, Christopher, I'm going to bring it out. 455 00:22:14,600 --> 00:22:17,600 Speaker 1: I brought it out before. If Sandy Wild God love Him, 456 00:22:17,680 --> 00:22:20,119 Speaker 1: was here today, I'd bring it out for him. And 457 00:22:20,160 --> 00:22:22,440 Speaker 1: it's the Wild Group, It's City Group and the train 458 00:22:22,480 --> 00:22:27,320 Speaker 1: wreck known as their immense boom and financialization all that 459 00:22:27,440 --> 00:22:29,639 Speaker 1: love in two thousand and eight ten to one reverse 460 00:22:29,680 --> 00:22:32,520 Speaker 1: stock split and worth three dollars ninety cents a day. 461 00:22:32,920 --> 00:22:36,360 Speaker 1: When does the echals buildings stand up and go Houston, 462 00:22:36,720 --> 00:22:39,400 Speaker 1: New York we have a problem. 463 00:22:39,320 --> 00:22:41,720 Speaker 12: Well, Tom, I don't think the credit losses at City 464 00:22:41,720 --> 00:22:44,600 Speaker 12: are tough enough to get us there. They're still training 465 00:22:44,600 --> 00:22:46,720 Speaker 12: at a discount the tangible book and have been for 466 00:22:46,800 --> 00:22:49,320 Speaker 12: quite some time. I think it's been a confidence issue 467 00:22:49,600 --> 00:22:51,560 Speaker 12: in both the management team as well as the game 468 00:22:51,600 --> 00:22:54,359 Speaker 12: plan and executing. It may just be too far flung, 469 00:22:54,400 --> 00:22:55,760 Speaker 12: which I think may have been the issue of the 470 00:22:55,800 --> 00:22:58,399 Speaker 12: past thirty years, and bringing it back home is going 471 00:22:58,480 --> 00:23:00,320 Speaker 12: to be ultimately the answer. I don't think the credit 472 00:23:00,400 --> 00:23:02,119 Speaker 12: losses there are wide enough, and I think that's the 473 00:23:02,160 --> 00:23:04,639 Speaker 12: same issue for the domestic banks as well. We just 474 00:23:04,680 --> 00:23:08,080 Speaker 12: don't have the credit problems to warrant that level of fear. 475 00:23:08,000 --> 00:23:10,159 Speaker 1: As looking at commercial real estate. Just as one of 476 00:23:10,200 --> 00:23:12,760 Speaker 1: the fears that are out there on a Wednesday at 477 00:23:12,920 --> 00:23:20,040 Speaker 1: morning LinkedIn here Chris confidence, liquidity, and solvency. Link those 478 00:23:20,080 --> 00:23:23,680 Speaker 1: emotions of say nineteen ninety eight into where the financial 479 00:23:23,720 --> 00:23:24,840 Speaker 1: system is right now. 480 00:23:25,800 --> 00:23:28,960 Speaker 12: So the banks, Tom have pre tax pre provisioned earnings. 481 00:23:28,960 --> 00:23:29,760 Speaker 6: That's PP and R. 482 00:23:29,800 --> 00:23:32,080 Speaker 12: It's the central feature of the FED stress test and 483 00:23:32,119 --> 00:23:33,480 Speaker 12: really what we all look at as. 484 00:23:33,359 --> 00:23:34,480 Speaker 6: Investors and analysts. 485 00:23:35,119 --> 00:23:38,240 Speaker 12: That cash flow allows banks to build reserves, and we 486 00:23:38,280 --> 00:23:40,600 Speaker 12: think reserve building is going to continue to happen. It's 487 00:23:40,640 --> 00:23:43,880 Speaker 12: been strong year to date, will begetting again and next 488 00:23:43,880 --> 00:23:46,720 Speaker 12: week with earnings for the big banks, we think reserves 489 00:23:46,720 --> 00:23:49,440 Speaker 12: will rise for commercial real estate, for C and I loans, 490 00:23:49,480 --> 00:23:52,400 Speaker 12: for everything. It's what has to happen during this part 491 00:23:52,440 --> 00:23:55,160 Speaker 12: of the cycle, and then charge offs will rise. Charge 492 00:23:55,160 --> 00:23:57,439 Speaker 12: Offs are normalizing, but by the Santogan they're going to 493 00:23:57,480 --> 00:24:00,240 Speaker 12: be much higher in twenty four than they were in 494 00:24:00,280 --> 00:24:03,840 Speaker 12: twenty eighteen, nineteen, and even going back to the thirteen 495 00:24:03,920 --> 00:24:06,520 Speaker 12: fourteen years, we're going to retrace. 496 00:24:06,119 --> 00:24:08,160 Speaker 6: All charge off levels and that's going to be healthy. 497 00:24:08,240 --> 00:24:11,000 Speaker 12: We have to recognize risk and we have to recognize loss. 498 00:24:11,160 --> 00:24:13,000 Speaker 12: I don't think we have anything close to what we 499 00:24:13,080 --> 00:24:15,919 Speaker 12: had in the Great Financial Crisis era. We just have 500 00:24:16,119 --> 00:24:19,160 Speaker 12: higher losses, which banks have to provide for. The Fear 501 00:24:19,200 --> 00:24:21,840 Speaker 12: of the unknown in the commercial real estate is to 502 00:24:22,080 --> 00:24:23,840 Speaker 12: my opinion, somewhat overblown. 503 00:24:24,119 --> 00:24:26,880 Speaker 6: We still have to reserve for that, and Citygroup has 504 00:24:26,920 --> 00:24:27,520 Speaker 6: their share of that. 505 00:24:27,760 --> 00:24:30,520 Speaker 12: And so do all the other banks at all sizes 506 00:24:30,560 --> 00:24:31,240 Speaker 12: of the spectrum. 507 00:24:31,320 --> 00:24:33,159 Speaker 3: Chris, can we talk about the policy response to the 508 00:24:33,200 --> 00:24:35,919 Speaker 3: banking stress. Earlier this year there was a big focus 509 00:24:35,960 --> 00:24:38,920 Speaker 3: on unrealized losses in the treasury market. Based on the 510 00:24:38,960 --> 00:24:41,439 Speaker 3: most we've seen, those losses are even bigger. Do you 511 00:24:41,520 --> 00:24:43,959 Speaker 3: believe that these banks are well insulated with the policy 512 00:24:43,960 --> 00:24:46,359 Speaker 3: response of spring even with these bigger moves in the 513 00:24:46,400 --> 00:24:47,080 Speaker 3: treasury market? 514 00:24:47,160 --> 00:24:47,400 Speaker 1: Now? 515 00:24:48,200 --> 00:24:48,440 Speaker 6: Sure? 516 00:24:48,440 --> 00:24:51,119 Speaker 12: I mean, the banks can still contribute to the BTFP 517 00:24:51,320 --> 00:24:53,800 Speaker 12: a bank term funding program. They really have not done 518 00:24:53,920 --> 00:24:55,840 Speaker 12: much in the last several months, but still around one 519 00:24:55,920 --> 00:24:58,800 Speaker 12: hundred and eight billion dollars. It's twenty five percent of 520 00:24:58,800 --> 00:25:01,800 Speaker 12: the incremental borrowing that the industry has done here to date. 521 00:25:02,280 --> 00:25:06,000 Speaker 12: I think that the liquidity is perfectly fine. The challenge is, 522 00:25:06,000 --> 00:25:08,320 Speaker 12: to your point, John, is that the losses continue to 523 00:25:08,359 --> 00:25:10,480 Speaker 12: go up. We think there's another two to two and 524 00:25:10,480 --> 00:25:13,480 Speaker 12: a half percent mark on every bank portfolio at the 525 00:25:13,560 --> 00:25:17,600 Speaker 12: end of September, so that still is going to make 526 00:25:17,640 --> 00:25:20,280 Speaker 12: a net negative to tangible book We estimate today that 527 00:25:20,320 --> 00:25:22,480 Speaker 12: book values will probably fall about one and a half 528 00:25:22,560 --> 00:25:25,600 Speaker 12: percent for the industry, using the KRE or the NASTAC 529 00:25:25,680 --> 00:25:30,000 Speaker 12: Bank index as our benchmark, but that's still somewhat at 530 00:25:30,040 --> 00:25:30,680 Speaker 12: a nuisance. 531 00:25:31,000 --> 00:25:33,080 Speaker 6: The banks are still going to be profitable in the quarter. 532 00:25:33,160 --> 00:25:36,239 Speaker 12: They're just the profits will not outweigh the mark they 533 00:25:36,280 --> 00:25:38,320 Speaker 12: have at the end of September. We may find that 534 00:25:38,320 --> 00:25:40,600 Speaker 12: that starts to reverse as we head into year end 535 00:25:40,600 --> 00:25:43,160 Speaker 12: and next year, only because we've had such a big 536 00:25:43,160 --> 00:25:44,440 Speaker 12: move in treasuries, it could. 537 00:25:44,240 --> 00:25:45,359 Speaker 6: Simply quiet down. 538 00:25:45,720 --> 00:25:47,760 Speaker 12: We don't have to have the Fed making a rate 539 00:25:47,880 --> 00:25:51,200 Speaker 12: policy cut to see those marks start to reverse. Fact 540 00:25:51,400 --> 00:25:54,040 Speaker 12: I actually think they're going to start reversing surely, because 541 00:25:54,400 --> 00:25:56,800 Speaker 12: banks have a lot of four and five year securities 542 00:25:56,840 --> 00:25:59,479 Speaker 12: they acquired in twenty twenty and twenty one that are 543 00:25:59,480 --> 00:26:01,920 Speaker 12: starting to off. There's a portion that will begin to 544 00:26:01,960 --> 00:26:03,680 Speaker 12: burn off, particularly in the next six. 545 00:26:03,520 --> 00:26:04,280 Speaker 6: To twelve months. 546 00:26:04,480 --> 00:26:06,840 Speaker 11: But still there is a point here underlying this. 547 00:26:07,000 --> 00:26:09,159 Speaker 5: The risk is really in some of the reserves, the 548 00:26:09,200 --> 00:26:11,879 Speaker 5: safety assets, the things they are supposed to be really liquid. 549 00:26:12,040 --> 00:26:14,320 Speaker 5: At a certain point, you have to think these banks are 550 00:26:14,359 --> 00:26:17,240 Speaker 5: incredibly constrained when it comes to new loans with new 551 00:26:17,240 --> 00:26:20,800 Speaker 5: business if they have such a huge book of treasuries 552 00:26:20,800 --> 00:26:23,280 Speaker 5: that they're trying to cordon off and sort of keep 553 00:26:23,440 --> 00:26:26,639 Speaker 5: from any kind of active trading absolutely correct. 554 00:26:27,080 --> 00:26:29,359 Speaker 6: I think you will see the loan growth slow. 555 00:26:29,160 --> 00:26:31,520 Speaker 12: Down a fair amount in the third quarter and slow 556 00:26:31,560 --> 00:26:32,840 Speaker 12: again in the fourth. 557 00:26:32,920 --> 00:26:35,639 Speaker 6: We don't see loans going negative this point, but for 558 00:26:35,800 --> 00:26:36,879 Speaker 6: some companies that will. 559 00:26:37,160 --> 00:26:39,920 Speaker 12: Some companies are on a risk weighted asset diet, as 560 00:26:39,920 --> 00:26:42,800 Speaker 12: you've heard a lot of that is simply machinations about 561 00:26:42,800 --> 00:26:44,399 Speaker 12: what they're going to keep on their balance sheet. Do 562 00:26:44,480 --> 00:26:46,399 Speaker 12: a little bit less commercial real estate, a little bit 563 00:26:46,400 --> 00:26:49,720 Speaker 12: different mortgage lending, or other loans that have better risk weights. 564 00:26:49,720 --> 00:26:53,320 Speaker 12: We've seen some companies like Sonova sell medical office portfolios 565 00:26:53,359 --> 00:26:55,400 Speaker 12: because it's a better way for them to risk adjust 566 00:26:55,440 --> 00:26:59,000 Speaker 12: their returns and enhance their risk weighted assets. I think 567 00:26:59,040 --> 00:27:01,720 Speaker 12: you'll see Fifth Third the same, and many other regional banks. 568 00:27:01,720 --> 00:27:04,280 Speaker 12: Those are just a few examples that have announced moves 569 00:27:04,320 --> 00:27:05,919 Speaker 12: to limit their asset growth. 570 00:27:06,040 --> 00:27:07,920 Speaker 5: So, Chris, you're saying that we've seen all the bank 571 00:27:07,920 --> 00:27:10,080 Speaker 5: failures that we're not going to see anymore, especially in 572 00:27:10,160 --> 00:27:12,159 Speaker 5: light of some of the very big moves and the 573 00:27:12,200 --> 00:27:13,159 Speaker 5: constraints on lending. 574 00:27:13,880 --> 00:27:15,760 Speaker 12: I definitely agree with that, Lisa, and I think if 575 00:27:15,760 --> 00:27:17,560 Speaker 12: we have a bank failure, it's going to be a small, 576 00:27:17,640 --> 00:27:20,520 Speaker 12: family run bank that you never heard of. It's unfortunate 577 00:27:20,640 --> 00:27:22,480 Speaker 12: for any bank that fails. But we don't see anything 578 00:27:22,520 --> 00:27:25,040 Speaker 12: big happening this year. We think all of that noise 579 00:27:25,040 --> 00:27:25,960 Speaker 12: and drama. 580 00:27:25,640 --> 00:27:28,560 Speaker 6: Is behind us. The deposits are stabilizing in the industry. 581 00:27:28,920 --> 00:27:31,760 Speaker 12: The banks are simply struggling with net interest margin, and 582 00:27:31,840 --> 00:27:34,920 Speaker 12: more than anything else, a perception issue about how bad 583 00:27:35,000 --> 00:27:36,119 Speaker 12: credit is or is not. 584 00:27:36,320 --> 00:27:37,880 Speaker 6: I think it's a lot more tamer. 585 00:27:38,200 --> 00:27:40,480 Speaker 12: We simply have an increase in credit losses, which have 586 00:27:40,560 --> 00:27:42,720 Speaker 12: been next to zero, and now they're coming off the 587 00:27:42,840 --> 00:27:43,919 Speaker 12: floor and becoming normal. 588 00:27:44,080 --> 00:27:47,120 Speaker 1: And Chris, we've been here before. We're going to get 589 00:27:47,119 --> 00:27:49,760 Speaker 1: a marked down, We're gonna get a rework or redo 590 00:27:49,880 --> 00:27:53,200 Speaker 1: or restructuring, and then new money is going to step 591 00:27:53,200 --> 00:27:56,760 Speaker 1: in at a distress price. Who are those guys? Who 592 00:27:56,840 --> 00:27:59,879 Speaker 1: is the new money that's going to step in? Or 593 00:28:00,119 --> 00:28:02,440 Speaker 1: are we going to see foreign money step in? Sovereign 594 00:28:02,440 --> 00:28:05,600 Speaker 1: wealth money step in. Private equity has appolled and own 595 00:28:05,640 --> 00:28:07,320 Speaker 1: every sky scraper in America. 596 00:28:08,440 --> 00:28:11,360 Speaker 12: So Tom, I think there's incremental dollars in family offices 597 00:28:11,400 --> 00:28:13,639 Speaker 12: who actually have a fair amount of cash. You know, 598 00:28:13,720 --> 00:28:16,960 Speaker 12: family offices becoming very, very powerful. A lot of advisors 599 00:28:17,000 --> 00:28:18,919 Speaker 12: who used to be at the old first Republic are 600 00:28:18,920 --> 00:28:22,400 Speaker 12: now at family offices that have reconstituted, and they're competing 601 00:28:22,440 --> 00:28:25,119 Speaker 12: head to head with JP Morgan and those folks, in 602 00:28:25,119 --> 00:28:28,399 Speaker 12: addition to private debt funds and other private equity funds 603 00:28:28,440 --> 00:28:30,840 Speaker 12: are the new players. We think some of the institutional 604 00:28:30,840 --> 00:28:33,560 Speaker 12: investors who are on the sidelines will change their minds 605 00:28:33,560 --> 00:28:36,440 Speaker 12: and come back in, but they'll be followers. The leaders 606 00:28:36,440 --> 00:28:38,840 Speaker 12: are going to be those family offices and other private 607 00:28:38,840 --> 00:28:40,080 Speaker 12: equity and private funds. 608 00:28:40,320 --> 00:28:42,960 Speaker 6: It'll be domestic, but I imagine. 609 00:28:42,240 --> 00:28:44,440 Speaker 12: It will also be foreign as well. I don't think 610 00:28:44,480 --> 00:28:47,719 Speaker 12: it's just a US trade in the moment, but the 611 00:28:47,720 --> 00:28:49,720 Speaker 12: interest is there, and I think they're looking for better 612 00:28:49,720 --> 00:28:52,280 Speaker 12: prices and opportunities, and clearly where the kre is you 613 00:28:52,320 --> 00:28:54,920 Speaker 12: know below forty certainly attracts them. 614 00:28:54,920 --> 00:28:58,640 Speaker 3: Now A much more constructive from Chris Marnak if gentny Montgongrisco, Chris, 615 00:28:58,680 --> 00:28:59,440 Speaker 3: thank you said. 616 00:29:09,560 --> 00:29:13,120 Speaker 1: This is really special, and we thank Invesco for letting 617 00:29:13,160 --> 00:29:16,080 Speaker 1: him speak this morning to the head of US Government Affairs, 618 00:29:16,520 --> 00:29:20,280 Speaker 1: because yesterday afternoon, in that history making moment, the bow 619 00:29:20,400 --> 00:29:23,960 Speaker 1: tide one got up at the house and said we 620 00:29:24,080 --> 00:29:28,280 Speaker 1: will continue forward. His name is mckenry. He's from the Carolinas. 621 00:29:28,320 --> 00:29:31,480 Speaker 1: He's a really interesting guy working in the trenches of 622 00:29:31,560 --> 00:29:35,480 Speaker 1: political operation for George Bush the younger and on through 623 00:29:35,720 --> 00:29:39,720 Speaker 1: Carolina politics. Jennifer Flinton is with Invesco, Head of US 624 00:29:39,760 --> 00:29:44,480 Speaker 1: Government Affairs, but has worked for Congressman McHenry over the 625 00:29:44,560 --> 00:29:48,440 Speaker 1: number of years in chief of staff positions. Jennifer, thank 626 00:29:48,480 --> 00:29:50,520 Speaker 1: you so much. Who is this guy? It was like 627 00:29:50,520 --> 00:29:53,440 Speaker 1: Butch Cassidy last night. We know these faces, and to 628 00:29:53,480 --> 00:29:56,880 Speaker 1: be honest, most of our audience, particularly our international audience, 629 00:29:57,200 --> 00:29:59,200 Speaker 1: who is the Southerner McHenry? 630 00:30:00,240 --> 00:30:03,600 Speaker 9: Yeah, Well, he's the chairman of the Financial Services Committee 631 00:30:03,640 --> 00:30:08,320 Speaker 9: and he has been in Congress for almost two decades now. 632 00:30:08,440 --> 00:30:12,880 Speaker 9: He is an institutionalist, and he is a policy wonk, 633 00:30:13,120 --> 00:30:18,360 Speaker 9: and he's politically savvy. And it's not shocking that Speaker 634 00:30:18,440 --> 00:30:21,560 Speaker 9: McCarthy chose him on that short list of members to 635 00:30:21,600 --> 00:30:23,160 Speaker 9: succeed in time of emergency. 636 00:30:24,040 --> 00:30:27,760 Speaker 1: Jennifer in the Washington Post this morning, Marianna Soda Mayor. 637 00:30:27,880 --> 00:30:31,160 Speaker 1: They lead with the word rebellion that has a heritage, 638 00:30:31,240 --> 00:30:34,560 Speaker 1: a tenor a tone south of the Mason Dixon line. 639 00:30:34,840 --> 00:30:39,520 Speaker 1: Part the distinction of Southern Republicans like French Hill of 640 00:30:39,600 --> 00:30:43,120 Speaker 1: Little Rock or mister McHenry of the Carolinas parse their 641 00:30:43,200 --> 00:30:46,560 Speaker 1: distinction from eight or nine people that have rebelled. 642 00:30:48,480 --> 00:30:50,840 Speaker 9: These are fairly new members, right. I Mean, you look 643 00:30:50,880 --> 00:30:53,440 Speaker 9: at these eight and these are members who mostly came 644 00:30:53,480 --> 00:30:58,520 Speaker 9: in after twenty eighteen, and they really represent a different 645 00:30:58,600 --> 00:31:04,240 Speaker 9: thinking within the Republican Party that was made very clear 646 00:31:04,440 --> 00:31:07,760 Speaker 9: after the election of Donald Trump. And it really is 647 00:31:07,800 --> 00:31:10,640 Speaker 9: a small number, right, I mean, the vast majority of 648 00:31:10,680 --> 00:31:15,120 Speaker 9: the Republican Conference stood behind Kevin McCarthy, but due to 649 00:31:15,280 --> 00:31:18,960 Speaker 9: such small margins in the House a vote, basically five 650 00:31:19,720 --> 00:31:23,000 Speaker 9: eight members were able to unseat the speaker for the 651 00:31:23,040 --> 00:31:24,280 Speaker 9: first time in history. 652 00:31:24,960 --> 00:31:27,680 Speaker 5: Jennifer I was reading a story interviewing some of the 653 00:31:27,680 --> 00:31:31,360 Speaker 5: supporters of Congressman Gates in Florida, and they were very 654 00:31:31,360 --> 00:31:34,400 Speaker 5: supportive of what he was doing, and they were saying, basically, 655 00:31:34,440 --> 00:31:37,720 Speaker 5: the system hasn't worked for us. Throw it all down, basically, 656 00:31:37,760 --> 00:31:41,160 Speaker 5: take it apart. Why are there so many voters who 657 00:31:41,280 --> 00:31:44,160 Speaker 5: essentially want to disrupt the whole system. What's the galvanizing 658 00:31:44,200 --> 00:31:44,960 Speaker 5: force behind that? 659 00:31:45,760 --> 00:31:48,840 Speaker 9: There's a frustration, right, and Washington is but a reflection 660 00:31:49,360 --> 00:31:50,920 Speaker 9: of a lot of that frustration. 661 00:31:51,040 --> 00:31:51,640 Speaker 6: These are four. 662 00:31:51,640 --> 00:31:54,880 Speaker 9: Hundred and thirty five members of Congress of the House 663 00:31:54,920 --> 00:32:00,480 Speaker 9: who come to Washington to reflect their constituencies. There is 664 00:32:00,680 --> 00:32:05,960 Speaker 9: a frustration, There is sort of a distrust in Washington, 665 00:32:06,320 --> 00:32:10,640 Speaker 9: and yes, Matt Gates has decided to come in front 666 00:32:10,680 --> 00:32:14,160 Speaker 9: of that and in his expression to try to lead that. 667 00:32:15,760 --> 00:32:18,680 Speaker 8: But it does actually reflect. 668 00:32:18,400 --> 00:32:23,400 Speaker 9: A concern over a thirty three trillion dollars debt, a 669 00:32:23,920 --> 00:32:27,440 Speaker 9: one billion dollars of interest being paid every year. Right, 670 00:32:27,560 --> 00:32:31,240 Speaker 9: I mean, so that frustration is real. Whether Matt Gates 671 00:32:31,280 --> 00:32:34,480 Speaker 9: is necessarily the best to be the voice and the 672 00:32:34,560 --> 00:32:36,880 Speaker 9: leader of that, I think is an open question. 673 00:32:37,160 --> 00:32:39,360 Speaker 5: But the irony of this, Jennifer, is that the longer 674 00:32:39,400 --> 00:32:42,160 Speaker 5: the government doesn't make a resolution, the more bond deals 675 00:32:42,160 --> 00:32:44,560 Speaker 5: are going up, and the greater the interest expense and 676 00:32:44,600 --> 00:32:46,960 Speaker 5: the debt profile of this country. So at what point, 677 00:32:47,200 --> 00:32:50,160 Speaker 5: from a political standpoint, can you bridge that gap to 678 00:32:50,240 --> 00:32:54,720 Speaker 5: try to communicate that Sometimes dealing with the frustrations and 679 00:32:54,840 --> 00:32:58,480 Speaker 5: the inefficiencies of the system are maybe a more efficient 680 00:32:58,520 --> 00:33:00,000 Speaker 5: way of getting to the same end. 681 00:33:00,080 --> 00:33:03,080 Speaker 11: I mean, how do you communicate that politically well? 682 00:33:03,080 --> 00:33:05,840 Speaker 9: And I think we're going to see exactly that as 683 00:33:05,880 --> 00:33:11,280 Speaker 9: they negotiate this appropriations process over the next forty two days, Right, 684 00:33:11,360 --> 00:33:14,440 Speaker 9: because they had until November seventeenth to either pass another 685 00:33:14,480 --> 00:33:18,880 Speaker 9: stop gap resolution or to come to an agreement with 686 00:33:18,920 --> 00:33:23,560 Speaker 9: the Senate on appropriations, and right now they're still very divided. 687 00:33:24,000 --> 00:33:27,160 Speaker 8: Whoever is the next speaker is going to have to, 688 00:33:27,560 --> 00:33:30,960 Speaker 8: as you say, bridge that divide, and I think it's 689 00:33:30,680 --> 00:33:33,760 Speaker 8: a it's an open question, and over the next week, 690 00:33:33,840 --> 00:33:37,160 Speaker 8: these Republican members of this conference, from the. 691 00:33:37,080 --> 00:33:39,640 Speaker 9: Center to the far right, are going to have to 692 00:33:39,640 --> 00:33:40,640 Speaker 9: grapple with that question. 693 00:33:41,080 --> 00:33:43,280 Speaker 3: Jennifer, do you have a base case and where will 694 00:33:43,320 --> 00:33:45,160 Speaker 3: be November seventeenth. 695 00:33:45,480 --> 00:33:49,200 Speaker 9: I'm concerned, right, I mean, last night was very concerning, 696 00:33:49,560 --> 00:33:55,360 Speaker 9: and I think there's an understanding within the conference that 697 00:33:56,160 --> 00:33:59,400 Speaker 9: there needs to be unity among the Republicans if they're 698 00:33:59,440 --> 00:34:02,280 Speaker 9: going to move forward and have any leeway with the 699 00:34:02,320 --> 00:34:08,960 Speaker 9: Senate going forward. But it is clearly going to be 700 00:34:09,080 --> 00:34:13,960 Speaker 9: difficult for any new Speaker to work with the Senate, 701 00:34:14,040 --> 00:34:18,680 Speaker 9: which quite frankly has a bipartisan position on appropriations. So 702 00:34:19,120 --> 00:34:22,719 Speaker 9: at this point, at this date, I'm rather concerned how 703 00:34:22,719 --> 00:34:25,440 Speaker 9: we're going to move forward, and I think a government 704 00:34:25,480 --> 00:34:27,480 Speaker 9: shutdown is probable in the near term. 705 00:34:27,719 --> 00:34:31,080 Speaker 3: Jennifer, thank you your insident, your opinion. Jennifer flibb I, 706 00:34:31,160 --> 00:34:31,760 Speaker 3: Ben Bestcaug. 707 00:34:32,000 --> 00:34:35,840 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 708 00:34:35,960 --> 00:34:40,160 Speaker 1: anywhere else you get your podcasts. Listen live every weekday, 709 00:34:40,440 --> 00:34:43,920 Speaker 1: starting at seven am Eastern. I'm Bloomberg dot com, the 710 00:34:44,040 --> 00:34:48,560 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You 711 00:34:48,600 --> 00:34:52,560 Speaker 1: can watch us live on Bloomberg Television and always on 712 00:34:52,680 --> 00:34:56,719 Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and 713 00:34:56,800 --> 00:35:04,960 Speaker 1: this is Bloomberg