WEBVTT - Surveillance: Rep. Hill on McCarthy Ousting 0:00:00.080 --> 0:00:02.840 We bring you news and analysis every day on the 0:00:02.880 --> 0:00:06.840 Bloomberg Surveillance Podcast. But now you can get the latest 0:00:06.880 --> 0:00:11.639 news on demand whenever you want. Subscribe to Bloomberg News 0:00:11.640 --> 0:00:14.400 Now to get the latest headlines at the click of 0:00:14.440 --> 0:00:18.880 a button. Get informed on your schedule. You can listen 0:00:18.960 --> 0:00:22.720 and subscribe to Bloomberg News Now on the Bloomberg Business App, 0:00:22.760 --> 0:00:27.720 Bloomberg dot Com plus Apple, Spotify, and anywhere else you 0:00:27.800 --> 0:00:37.360 get your podcasts. Search Bloomberg News Now and subscribe today. 0:00:37.760 --> 0:00:41.120 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:41.120 --> 0:00:44.960 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:45.000 --> 0:00:49.480 for insight from the best and economics, geopolitics, finance and investment. 0:00:49.920 --> 0:00:54.720 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:54.920 --> 0:00:59.240 anywhere you get your podcasts and always on Bloomberg dot Com, 0:00:59.280 --> 0:01:02.959 the Bloomberg Minol and the Bloomberg Business App. And we're 0:01:03.000 --> 0:01:04.880 not going to turn this into a history lesson, but 0:01:04.959 --> 0:01:07.160 to give you some perspective. And I thought the Washington 0:01:07.240 --> 0:01:11.240 Post captured brilliantly this morning with the word rebellion. There 0:01:11.280 --> 0:01:15.560 are different kinds of Southerners. Knut Gingrich with Sean Hannity 0:01:15.640 --> 0:01:19.680 last night was heated and on fire. The former speaker 0:01:19.760 --> 0:01:22.800 with the revolution of nineteen ninety four, and now we 0:01:22.880 --> 0:01:25.560 have the immense honor speaking with french Hill. He's been 0:01:25.600 --> 0:01:28.840 a good friend of the program and far more important, folks, 0:01:28.840 --> 0:01:32.520 french Hill is linked to American finance through his banking 0:01:32.920 --> 0:01:36.440 and little Rock Frenchhill, how do you link this moment 0:01:37.080 --> 0:01:39.520 to confidence in our banking system? 0:01:39.920 --> 0:01:42.200 Well, Tom, it's good to be with you, and I 0:01:42.280 --> 0:01:44.920 don't like the dysfunction in the House. Of course, I 0:01:45.080 --> 0:01:48.600 was very opposed to what happened yesterday because if we 0:01:48.640 --> 0:01:51.600 want to continue to build confidence in the US and 0:01:51.640 --> 0:01:55.080 the US and global capital markets, we've got to show 0:01:55.160 --> 0:01:58.720 leadership on the fiscal side of the House. And right 0:01:58.760 --> 0:02:01.800 here in the midst of a appropriations fight and a 0:02:01.880 --> 0:02:05.680 fight over federal funding in less than now forty days 0:02:05.720 --> 0:02:08.840 to a government shut down, to be shut down in 0:02:08.919 --> 0:02:12.440 the House without a speaker for the next week is 0:02:12.480 --> 0:02:16.400 not contributing to that vote of confidence. So I think 0:02:16.400 --> 0:02:20.280 they are linked, and I would I really hate to 0:02:20.320 --> 0:02:23.920 say that, but this rebellion has come at a very 0:02:23.960 --> 0:02:24.560 poor time. 0:02:24.720 --> 0:02:27.640 The rebellion has a tinge of geography. We had votes 0:02:27.639 --> 0:02:31.639 from Montana and the rest, and John, you know, I'm sorry. 0:02:31.680 --> 0:02:34.160 I look at this as a political context of the nation. 0:02:34.400 --> 0:02:39.000 It's not just about what we're doing at surveillance or 0:02:39.120 --> 0:02:42.360 the cable TV theater that we're seeing in Washington. 0:02:42.360 --> 0:02:44.520 It's a real fitting that a Republican party shut it 0:02:44.560 --> 0:02:47.000 south in the foot Accompressman, the question I'd have to 0:02:47.040 --> 0:02:48.680 ask of you this morning is how can the American 0:02:48.680 --> 0:02:52.079 public have any confidence in your party's ability to govern? 0:02:52.600 --> 0:02:52.799 Well? 0:02:52.840 --> 0:02:55.239 I think under Kevin McCarthy in the past nine months 0:02:55.280 --> 0:02:58.040 we demonstrated that quite successfully. 0:02:58.080 --> 0:03:00.320 And that's why I'm so disappointed. 0:03:00.240 --> 0:03:04.240 In eight people, which represent about four percent of Republicans 0:03:04.240 --> 0:03:07.080 in Congress. Let me repeat that, about four percent of 0:03:07.120 --> 0:03:11.800 Republicans in Congress. They voted with all the Democrats yesterday 0:03:11.840 --> 0:03:16.519 to take down Kevin McCarthy's speakership. But under his speakership 0:03:16.840 --> 0:03:19.839 we passed in all the above energy strategy to make 0:03:20.000 --> 0:03:24.520 energy America energy independent once again. We passed border security 0:03:24.560 --> 0:03:28.080 that both reforms the immigration system that's failed and do 0:03:28.240 --> 0:03:31.960 border security. And it was Kevin McCarthy, after waiting ninety 0:03:32.040 --> 0:03:35.640 days for President Biden to provide any kind of leadership, 0:03:36.040 --> 0:03:40.240 that crafted a historic debt sealing deal which resulted in 0:03:40.280 --> 0:03:43.200 two trillion dollars of spending reductions and a one percent 0:03:43.240 --> 0:03:47.440 cap on discretionary spending. And then just last week pro 0:03:47.560 --> 0:03:51.080 offered a good stop gap spending measure so that we 0:03:51.120 --> 0:03:55.600 could finish our appropriations work, which also included a debt commission, 0:03:55.840 --> 0:03:58.480 which I think is so critically important if we want 0:03:58.520 --> 0:04:01.600 to get a handle on what really drives our deficit, 0:04:02.000 --> 0:04:03.960 which are our mandatory spending. 0:04:03.640 --> 0:04:06.680 Program Congressman, as yields do continue to rise, and I 0:04:06.720 --> 0:04:08.360 do know that every day you do come in and 0:04:08.400 --> 0:04:10.800 you look at that ten year yield and watch it 0:04:10.960 --> 0:04:14.000 climb in tandem with the interest payments of the US 0:04:14.080 --> 0:04:17.800 government Goleman's access estimating that yields climbing where they are 0:04:17.880 --> 0:04:20.800 at about one hundred billion dollars to the deficit come 0:04:20.839 --> 0:04:25.080 twenty twenty five versus expectations just in July alone. Do 0:04:25.160 --> 0:04:28.320 you think right now that other members of your party 0:04:28.400 --> 0:04:31.280 realize that the longer this dysfunction goes on, the more 0:04:31.320 --> 0:04:34.440 they contribute to that deficit, Lisa, such. 0:04:34.320 --> 0:04:36.479 An important question, but I want to really turn it 0:04:36.520 --> 0:04:39.000 around and say yes, I think every day in the 0:04:39.080 --> 0:04:42.000 last few weeks We've talked about the impact on fiscal 0:04:42.040 --> 0:04:45.240 finance and rising interest rates with our House members, but 0:04:45.360 --> 0:04:48.719 this is a fundamental issue that goes back to both 0:04:48.760 --> 0:04:52.719 pre pandemic and certainly during the pandemic, when the Democratic 0:04:52.760 --> 0:04:55.919 House Budget Committee chairman at the time said, there's no 0:04:56.080 --> 0:04:58.920 limit to what America can borrow from the world and 0:04:58.960 --> 0:05:02.480 spend it home. Deficits don't matter, and that went on 0:05:02.600 --> 0:05:08.040 steroids during the pandemic obstensively to help offset the output 0:05:08.720 --> 0:05:11.720 loss during the pandemic. But we did five or six 0:05:11.839 --> 0:05:14.919 times with that help point output loss was and we 0:05:15.000 --> 0:05:18.480 didn't take our foot off the accelerator and President Biden's 0:05:18.480 --> 0:05:22.280 compound of that. So it's a bipartisan second to do this. 0:05:22.560 --> 0:05:25.240 But Congressman, I mean to be fair, the deficit did 0:05:25.320 --> 0:05:28.880 rise by about eight trillion dollars during Trump's time in office, 0:05:29.000 --> 0:05:31.720 and it actually accelerated during that period, and a lot 0:05:31.720 --> 0:05:35.520 of the aid was accelerated during that point. So isn't 0:05:35.560 --> 0:05:39.080 this both parties And the fact that there's complete dysfunction 0:05:39.520 --> 0:05:42.640 now just exacerbates the inability to really address any of 0:05:42.680 --> 0:05:45.040 these issues, which is a bar partisan issue. 0:05:45.200 --> 0:05:47.719 Well, I just said that. I said during the pandemic. 0:05:47.800 --> 0:05:52.640 Well that's the Trump administration. Absolutely. We had spending out 0:05:52.640 --> 0:05:56.200 of control there with an eye towards trying to offset 0:05:56.240 --> 0:05:59.040 the output losses during the pandemic. The globe did that, 0:05:59.120 --> 0:06:03.320 but we over shot plus two. Lax monetary policy for 0:06:03.360 --> 0:06:06.159 too long, We've lost our way. I want to go 0:06:06.320 --> 0:06:10.120 back to when both parties said that zero deficits were 0:06:10.160 --> 0:06:14.000 the objective, not two trillion dollars, which is Joe Biden 0:06:14.160 --> 0:06:18.800 is projecting. So sure, both parties bear full responsibility for this, 0:06:18.920 --> 0:06:22.360 but what I've seen in my forty years of being 0:06:22.440 --> 0:06:25.039 in private business and in and out of government, is 0:06:25.080 --> 0:06:28.760 there is no consensus that large deficits are bad in 0:06:28.839 --> 0:06:32.120 the Democratic Party and some in the Republican Party. And 0:06:32.120 --> 0:06:33.200 that's what's got a change. 0:06:33.520 --> 0:06:36.760 I would suggest, Congressman Hill, that you and the former 0:06:36.800 --> 0:06:39.560 Speaker Gingrit are sort of on the same page. Well, 0:06:39.560 --> 0:06:42.920 this is embarrassing, let's fix it. The way to fix 0:06:43.000 --> 0:06:46.680 it is an anointed speaker of the House. How long 0:06:46.720 --> 0:06:47.520 is this going to take? 0:06:48.200 --> 0:06:49.200 Well, I hope Tom. 0:06:49.839 --> 0:06:51.960 I would have hoped that we could have started that 0:06:52.040 --> 0:06:56.320 process before we left this week, but we didn't, and 0:06:56.360 --> 0:06:59.320 so we're going to meet either Monday night or Tuesday 0:06:59.360 --> 0:07:02.680 morning early and start the process of selecting a new speaker, 0:07:03.080 --> 0:07:05.360 and I want to have that concluded next week. It's 0:07:05.520 --> 0:07:07.720 very important that we get on with our work in 0:07:07.760 --> 0:07:11.240 this midst of this appropriations fight that we have on 0:07:11.280 --> 0:07:14.560 our hands, with the government shut down looking us in 0:07:14.680 --> 0:07:16.440 the eye for November seventeen. 0:07:16.680 --> 0:07:20.600 Congressman, this is a difficult question, might be somewhat emotional 0:07:20.640 --> 0:07:24.360 for you as your party left you behind. Do you 0:07:24.400 --> 0:07:26.480 get the feeling that this is not the Republican Party 0:07:26.480 --> 0:07:28.600 that you joined and it's moved away from you. 0:07:29.240 --> 0:07:33.960 I think the Republican principles of balanced budgets, a strong defense, 0:07:34.080 --> 0:07:39.040 international leadership, the largest open market in the world that 0:07:39.120 --> 0:07:41.760 attracts people all over the world, these are core principles. 0:07:41.880 --> 0:07:45.640 Loyalty to the Bill of Rights in the Constitution, these 0:07:45.680 --> 0:07:48.640 are still fundamental tenets in the Republican Party. But I 0:07:48.680 --> 0:07:53.200 think we've lost our way tactically. We're throwing overboard a 0:07:53.320 --> 0:07:58.160 successful speaker that shares those views, absolutely shares those views, 0:07:58.200 --> 0:08:02.160 and was guiding us through the stormy waters of a 0:08:02.280 --> 0:08:06.880 dysfunctional presidency led by Joe Biden in a Democratic control Senate. 0:08:07.240 --> 0:08:08.040 Not easy to. 0:08:08.000 --> 0:08:11.520 Do with no plan. Those eight people who voted to 0:08:11.520 --> 0:08:16.040 throw Kevin McCarthy out yesterday incorrectly, in my view, don't 0:08:16.080 --> 0:08:19.760 have a plan except they're complaining about the fiscal conditions 0:08:19.760 --> 0:08:23.480 of the country. Well, that's shared by all Republicans. So tactically, 0:08:23.520 --> 0:08:27.880 I think they've failed. Strategically, I think the individual principles 0:08:27.960 --> 0:08:32.480 and governance that's guided the Republican Party are still intact. 0:08:32.559 --> 0:08:34.880 We've just got to move forward and regroup and find 0:08:34.880 --> 0:08:36.240 a leader that we can get behind. 0:08:36.320 --> 0:08:39.199 It's certainly shared by the Republicans, the majority of Republicans 0:08:39.360 --> 0:08:43.000 in Congress. The congressman is consistent with the views and 0:08:43.040 --> 0:08:46.120 the beliefs of the dominant leader in the presidential race 0:08:46.160 --> 0:08:49.079 for your party going into next year. I think overwhelming 0:08:49.080 --> 0:08:51.080 me the ads to that is no, isn't it? 0:08:51.400 --> 0:08:51.559 Well? 0:08:51.559 --> 0:08:54.560 I think President Trump believes certainly in a lot of 0:08:54.559 --> 0:08:57.920 those principles, and I've seen him do good work when 0:08:57.960 --> 0:09:02.119 he was president. But we need him to help rebuild 0:09:02.160 --> 0:09:04.240 this and not run counter to it. We need to 0:09:04.280 --> 0:09:06.520 have the Republican Party on the same page when it 0:09:06.559 --> 0:09:09.880 regards our role in the world and our role at 0:09:09.880 --> 0:09:11.920 home on how to do that. And you know, President 0:09:11.920 --> 0:09:15.800 Trump had challenges on the spending side too, and yet 0:09:15.840 --> 0:09:17.960 he was good on some other things. So we've got 0:09:18.000 --> 0:09:20.920 to get together and focus on the House in the 0:09:20.960 --> 0:09:24.000 next few days and get a House leader that Republicans 0:09:24.040 --> 0:09:26.520 can back, so that we're back in this game of 0:09:26.640 --> 0:09:31.120 countering the Biden's failed agenda on the border internationally and fiscally. 0:09:31.280 --> 0:09:34.320 Congressman, just find me in thirty seconds. Is he helping you? 0:09:34.360 --> 0:09:34.839 Were hurting you? 0:09:34.960 --> 0:09:35.120 Now? 0:09:36.040 --> 0:09:37.800 Who the former president? 0:09:38.480 --> 0:09:40.560 I don't think he comes into play in this issue 0:09:40.559 --> 0:09:42.680 in the House. What we've seen is these eight people 0:09:42.720 --> 0:09:47.080 were not doing Trump's bidding. They're concerned about the fiscal 0:09:47.160 --> 0:09:49.640 affairs of the United States. I get that they did 0:09:49.679 --> 0:09:53.160 not trust Kevin McCarthy. I don't agree with that, but 0:09:53.200 --> 0:09:55.920 I understand where they're coming from. This is an internal 0:09:55.960 --> 0:09:58.000 matter that we need to solve in the House, and 0:09:58.040 --> 0:09:59.880 we need to get a leader that we can get behind, 0:10:00.080 --> 0:10:02.800 as I say, in order to counter the mistakes and 0:10:02.840 --> 0:10:04.679 the direction of the Biden administration. 0:10:04.840 --> 0:10:07.240 A Congressman, thanks for your opinion of view this morning. 0:10:07.280 --> 0:10:10.080 We appreciate it as always. French Congressman french Hill there 0:10:10.320 --> 0:10:12.000 on the latest in Washington. 0:10:15.559 --> 0:10:17.920 Went in doubt, how'd we screw it up? In the thirties. 0:10:18.120 --> 0:10:20.240 We didn't look at the banks. BERNANKI one oh one. 0:10:20.520 --> 0:10:23.320 Michael Barr's a voting member as of today. Jean Sunuzzo 0:10:23.400 --> 0:10:26.280 could be a voting member someday, or governor Global had 0:10:26.320 --> 0:10:30.120 a fixed income a Columbia thread needle. He's surviving the 0:10:30.160 --> 0:10:33.480 wars gene. You know there's a point where it switches 0:10:33.559 --> 0:10:36.360 some yield analysis to price analysis. 0:10:36.720 --> 0:10:37.360 Are we there? 0:10:39.160 --> 0:10:42.200 It does feel like we're there, Tom, certainly. You know 0:10:42.240 --> 0:10:44.520 you're talking about it earlier. The sell off we've seen 0:10:44.559 --> 0:10:46.720 in the long end of the yield curve is equal 0:10:46.800 --> 0:10:48.760 to the amount of work that the Fed's done at 0:10:48.800 --> 0:10:49.360 the front end of. 0:10:49.320 --> 0:10:50.120 The curve all year. 0:10:50.280 --> 0:10:52.880 They've only raised interest rates by one percent through the 0:10:52.920 --> 0:10:55.880 course of this year, and maybe twenty five bases points more. 0:10:55.960 --> 0:10:58.559 But the risk premium that we've put into the long 0:10:58.640 --> 0:11:00.440 end of the curve is really what has. 0:11:00.360 --> 0:11:02.040 Taken investors by surprise. 0:11:02.160 --> 0:11:04.520 I think here because it doesn't seem to be driven 0:11:04.559 --> 0:11:07.640 by the fundamental data. We would argue that the most 0:11:07.679 --> 0:11:10.000 important fundamental data of the last couple of weeks for 0:11:10.040 --> 0:11:13.640 the bond market is the fact that core PCE inflation, 0:11:13.840 --> 0:11:17.080 the Fed's preferred gauge came in below expectations and is 0:11:17.120 --> 0:11:20.800 trending towards that two percent target. And yet we see 0:11:20.800 --> 0:11:24.200 this steepening and I think that should give investors pause 0:11:24.280 --> 0:11:27.040 and think that really there is a fiscal risk premium 0:11:27.040 --> 0:11:28.480 coming back into the treasury market. 0:11:28.640 --> 0:11:30.319 Jane, Have you changed your mind on that in the 0:11:30.360 --> 0:11:31.240 last couple of months. 0:11:32.640 --> 0:11:34.520 Well, I think what we've been doing, John is really 0:11:34.600 --> 0:11:37.600 trying to focus more on what we call the belly 0:11:37.640 --> 0:11:40.040 of the curve, or that five year point, where we 0:11:40.120 --> 0:11:43.240 think we've priced in more than a fair path for 0:11:43.320 --> 0:11:46.680 the FED funds rate and more than a fair higher 0:11:46.720 --> 0:11:51.040 for longer situation. And you have yields basically from the 0:11:51.120 --> 0:11:52.960 three year point all the way out to the thirty 0:11:53.040 --> 0:11:56.440 year point sitting right around or just below five percent, 0:11:56.840 --> 0:11:58.800 And for that same yield, we rather put our money 0:11:58.840 --> 0:12:01.360 in the five year point, where you're more looking at 0:12:01.360 --> 0:12:03.800 what the Fed might do and less worried about that 0:12:03.960 --> 0:12:06.920 term premium or that risk premium, which we learned last 0:12:07.040 --> 0:12:10.360 year in the UK guilt crisis, that that can get 0:12:10.400 --> 0:12:11.480 away from you pretty quickly. 0:12:11.920 --> 0:12:14.280 Jane, you think we've got the ingredients for that kind 0:12:14.280 --> 0:12:15.240 of outcome. 0:12:15.760 --> 0:12:18.200 I really don't. I think it's a very different market. 0:12:18.360 --> 0:12:21.079 The depth in the US treasury market is significantly greater 0:12:21.120 --> 0:12:23.560 than what we see in guilts. But you know, it's 0:12:23.880 --> 0:12:25.880 that time of year, and it was just a year 0:12:25.880 --> 0:12:27.520 ago we were looking at what was going on in 0:12:27.520 --> 0:12:31.240 the UK and that budget dynamic really did create scare 0:12:31.320 --> 0:12:33.840 across the market, and international investors. 0:12:33.440 --> 0:12:35.360 Drove yield hire quite rapidly. 0:12:35.559 --> 0:12:37.760 There are some similarities, but I do think the depth 0:12:37.760 --> 0:12:39.280 in the treasury market is very different. 0:12:39.720 --> 0:12:39.920 Gene. 0:12:39.920 --> 0:12:42.320 When we talk about the rest of the markets aside 0:12:42.320 --> 0:12:44.800 from treasuries, you can look at stocks which have been 0:12:44.840 --> 0:12:47.240 remarkably resilient in light of some of the recent moves. 0:12:47.240 --> 0:12:49.319 You can look at credit starting to maybe show a 0:12:49.360 --> 0:12:53.000 little concern but largely holding in. Does this indicate to 0:12:53.080 --> 0:12:55.840 you that the rest of the risk complex can actually 0:12:55.880 --> 0:12:59.199 sustain yields that a rising at this pace to these levels, 0:12:59.280 --> 0:13:01.240 or do you think that there is yet to be 0:13:01.360 --> 0:13:02.800 a wake up call that is coming. 0:13:04.000 --> 0:13:06.480 No. I think the wake up calls coming lista quite honestly, 0:13:06.559 --> 0:13:09.200 and we're starting to see that in liquidity of credit. 0:13:09.360 --> 0:13:12.280 It's starting to deteriorate, and spreads our widening and bid 0:13:12.280 --> 0:13:14.920 offers are widening. So it's a little bit of that 0:13:15.679 --> 0:13:19.480 unfavorable dynamic we saw for a lot of twenty twenty two, 0:13:19.559 --> 0:13:21.880 and this week that started to re emerge. So I 0:13:21.920 --> 0:13:24.880 think that credit investors are getting nervous and frankly, they 0:13:24.920 --> 0:13:29.400 realized that lags of monetary policy may be long or variable, 0:13:29.480 --> 0:13:31.760 but they do exist. And at the end of the day, 0:13:32.080 --> 0:13:35.040 companies and consumers are borrowing at much higher rates and 0:13:35.440 --> 0:13:37.040 that's going to cause cracks throughout the system. 0:13:37.240 --> 0:13:39.520 Are you saying things actually break or for selling or 0:13:39.559 --> 0:13:41.880 anything that seems like a catalyst, or just a little 0:13:41.920 --> 0:13:44.679 bit more fear that causes a little bit more caution 0:13:44.840 --> 0:13:45.520 in investments. 0:13:46.360 --> 0:13:47.920 I think it's more fear overall. 0:13:48.480 --> 0:13:52.520 Fundamentally, investment grade companies, for example, are very cash rich, 0:13:53.000 --> 0:13:55.720 and their cash flow profile is stronger than it was 0:13:55.760 --> 0:13:58.520 in twenty nineteen before the pandemic. So I don't think 0:13:58.559 --> 0:14:00.800 there's anything that's going to disrupt that from yields going 0:14:00.840 --> 0:14:02.680 up a quarter or to a half percent in a 0:14:02.679 --> 0:14:03.560 short period of time. 0:14:03.840 --> 0:14:05.600 When we think about highly levered. 0:14:05.320 --> 0:14:08.319 Companies, and for example, look at the fact that Triple 0:14:08.400 --> 0:14:12.640 C those highly levered companies that have returned over twelve 0:14:12.720 --> 0:14:15.200 percent through the course of this year. Year to date, 0:14:15.559 --> 0:14:19.000 well they're going to be really susceptible to higher borrowing costs, 0:14:19.240 --> 0:14:20.800 and as we go forward, I think that rally is 0:14:20.800 --> 0:14:21.800 going to be hard to sustain. 0:14:22.280 --> 0:14:25.480 Jane, let's go back to Minnesota Finance just a few 0:14:25.640 --> 0:14:28.320 years ago. There's a chapter there when it gets like this, 0:14:28.840 --> 0:14:32.120 look at the banks. You've got the advantage of Columbia 0:14:32.200 --> 0:14:35.440 thread needle that you're not representing a major bank directly 0:14:35.440 --> 0:14:38.640 in that, which is our advantage this morning. Are you 0:14:38.720 --> 0:14:42.520 stressed about the banks either too big to fail, those 0:14:42.560 --> 0:14:46.720 regionals below them, and critically the commercial real estate block 0:14:46.840 --> 0:14:48.560 below them? 0:14:48.720 --> 0:14:51.360 I think most importantly, we feel really comfortable with the 0:14:51.400 --> 0:14:54.760 global systemically important banks, those the sort of the big 0:14:56.000 --> 0:14:58.360 issuers here in the US, and we've actually been adding 0:14:58.400 --> 0:15:02.160 exposure since March through now to to that complex, and 0:15:02.200 --> 0:15:05.680 we think that they're exceptionally cheap rather relative to their 0:15:06.000 --> 0:15:10.640 industrial peers. As you get down into the regionals and 0:15:10.960 --> 0:15:13.040 some of the tier below that do have more of that. 0:15:13.000 --> 0:15:15.520 Commercial real estate exposure, I think you do have to 0:15:15.560 --> 0:15:16.400 be a bit nervous. 0:15:17.040 --> 0:15:18.840 I think there, you know, there's a degree of capital 0:15:18.920 --> 0:15:21.200 raising that's going on in that in that next tier 0:15:21.200 --> 0:15:24.120 of bank, but that's Frankly, it's been orderly in terms 0:15:24.120 --> 0:15:27.560 of investors being able to lend that capital. But I 0:15:27.600 --> 0:15:29.800 don't think we should be so confident as to say 0:15:29.840 --> 0:15:32.240 we'll never revisit any of the volatility that we saw 0:15:32.280 --> 0:15:32.840 with SVB. 0:15:33.280 --> 0:15:35.280 Jane, When you say you're adding, how are you doing that? 0:15:37.080 --> 0:15:38.720 Yeah, I mean we're we're adding in the new issue 0:15:38.760 --> 0:15:41.480 market and in the secondary. I think, you know, looking 0:15:41.520 --> 0:15:44.720 at you know the big you know, JP Morgan and 0:15:44.760 --> 0:15:48.320 Bank of America type, you know capital structures where you 0:15:48.320 --> 0:15:53.520 know the capital profile has already been fortified post financial crisis, 0:15:53.640 --> 0:15:55.880 unlike the regional the super. 0:15:55.640 --> 0:15:57.720 Regionals that are having to add that capital now. 0:15:58.400 --> 0:16:00.480 So that these are names that you know, over the 0:16:00.560 --> 0:16:03.960 last six months we've been adding to portfolios, and frankly, 0:16:04.000 --> 0:16:06.760 I think that they're good alternative relative to potentially more 0:16:06.800 --> 0:16:08.800 cyclical corporate exposures. 0:16:09.280 --> 0:16:12.360 Gens Jane, thank you for the insight. GININSA. They have 0:16:12.440 --> 0:16:15.320 Columbia Threatnaedo on credit at the end the banking stress 0:16:15.400 --> 0:16:16.520 we saw Earlie. 0:16:16.200 --> 0:16:16.760 This year. 0:16:26.360 --> 0:16:29.880 Andrew Hoddenhorse's city with this surrounded table. Andrew, your reaction 0:16:29.960 --> 0:16:32.240 to that, what would you expect on Friday now based 0:16:32.240 --> 0:16:33.560 on this? Does it change anything for you. 0:16:33.640 --> 0:16:34.600 It doesn't change anything. 0:16:34.600 --> 0:16:34.800 I think. 0:16:34.960 --> 0:16:38.120 Just look at the scatter plot of ADP versus NFP. 0:16:38.680 --> 0:16:40.960 There's not a high correlation between the two. So it's 0:16:40.960 --> 0:16:42.880 a big if if we get this number. If we 0:16:42.960 --> 0:16:45.040 get this number though, like Mike McKee said, it's a 0:16:45.040 --> 0:16:47.440 big if. But if we get this number for payrolls 0:16:47.480 --> 0:16:50.800 on Friday, this is goldilocks. Right around one hundred thousand 0:16:50.920 --> 0:16:54.760 jobs per month. That's about what the population growth can sustain. 0:16:55.440 --> 0:16:57.480 That would be a very sustainable piece of job growth. 0:16:57.560 --> 0:17:00.560 So if we see this number, that would be a goldilockomy. 0:17:00.680 --> 0:17:04.520 The heavyweight Janet Yellen was out yesterday with some select 0:17:04.640 --> 0:17:08.280 comments that I'm sure your team saw as well. There's 0:17:08.320 --> 0:17:13.080 another economist, Michael Tyson, who has a very famous quote 0:17:13.480 --> 0:17:16.280 about getting punched in the face. You know, everybody's got 0:17:16.280 --> 0:17:18.600 a plan here. How does the FED that? I mean, 0:17:18.640 --> 0:17:21.200 with the trauma that we've seen the last week in 0:17:21.240 --> 0:17:24.400 the bond market, I'm sorry, there's a point here where 0:17:24.400 --> 0:17:27.040 the FED put comes back into place. Are we anywhere 0:17:27.080 --> 0:17:30.879 near where the Fed looks at the financial trauma and 0:17:30.920 --> 0:17:32.240 says we got to adapt? 0:17:32.640 --> 0:17:34.640 So remember what the Fed is trying to do here 0:17:34.760 --> 0:17:37.440 is to raise interest rates and slow the economy. They've 0:17:37.480 --> 0:17:41.359 raised policy rates, but really what controls the economy mortgage rates, 0:17:41.400 --> 0:17:44.000 corporate borrowing rates. Those are going to depend be dependent 0:17:44.040 --> 0:17:46.080 on the tenure yield. So the fact that tenure yields 0:17:46.080 --> 0:17:48.919 are higher, I think is probably consistent with what the 0:17:48.960 --> 0:17:52.920 FED is trying to achieve. Now, like John was talking 0:17:53.000 --> 0:17:56.199 about earlier, being in a fifteen basis point trading range 0:17:56.400 --> 0:17:58.440 over the course of an hour or so in the 0:17:58.520 --> 0:18:01.400 day is probably not the level of volatility the FED 0:18:01.400 --> 0:18:04.280 officials would like to see. So they're watching this, as 0:18:04.320 --> 0:18:07.159 you know, Fed officials, government officials always tell us they're watching, 0:18:08.040 --> 0:18:11.359 and they'll be watching for do we see signs of 0:18:11.720 --> 0:18:14.720 liquidity stress that are emerging. If you saw those type 0:18:14.720 --> 0:18:17.560 of things, then yes, I think you could think about, 0:18:17.640 --> 0:18:19.399 you know, would the FED actually react to this you 0:18:19.480 --> 0:18:21.440 and first it would be with their rhetorics saying that, 0:18:21.680 --> 0:18:23.800 you know, maybe treasure yields have moved too far, but 0:18:24.000 --> 0:18:26.640 I think we're still away from that point. Treasure yield 0:18:26.680 --> 0:18:28.639 curve is still inverted. We still have ten yure yields 0:18:28.720 --> 0:18:32.080 below two year yields. They've come up a lot, We're 0:18:32.080 --> 0:18:35.679 not as inverted as we were. If you're not imminently 0:18:35.760 --> 0:18:38.600 looking at a recession, you're not staring down a recession. 0:18:39.160 --> 0:18:40.960 It's not clear why that yield curve needs to be 0:18:41.040 --> 0:18:41.960 as inverted as it was. 0:18:42.040 --> 0:18:43.760 A number of people have come on this show have 0:18:43.880 --> 0:18:46.520 said that a lot of the move in yields has 0:18:46.560 --> 0:18:47.960 not been fundamentally justified. 0:18:48.480 --> 0:18:51.000 Do you disagree? Do you think that fundamentally where the 0:18:51.040 --> 0:18:52.200 yield is currently on the. 0:18:52.119 --> 0:18:54.440 Ten year treasure and the thirty year treasury is completely 0:18:54.560 --> 0:18:57.720 justified and constant and compensating you for inflation. 0:18:58.119 --> 0:19:00.879 I think it depends on what you mean by fundamentals. 0:19:01.520 --> 0:19:04.240 But if you're including in those fundamentals the fact that 0:19:04.240 --> 0:19:07.280 we're running large deficits, there's more treasury supply that's coming 0:19:07.320 --> 0:19:08.720 to the market. So some people would call that a 0:19:08.760 --> 0:19:11.440 technical but I would say that is a fundamental structural 0:19:11.480 --> 0:19:15.160 part of the US economic backdrop right now. And along 0:19:15.240 --> 0:19:17.600 with that, we're running higher inflation, and that you were 0:19:17.640 --> 0:19:20.840 just talking about this earlier. If we're running inflation that's 0:19:20.960 --> 0:19:23.520 above four percent still by a lot of measures, it's 0:19:23.560 --> 0:19:26.200 not that surprising to see treasure yields above four percent. 0:19:26.200 --> 0:19:28.280 You need that yield just to be compensated for the 0:19:28.280 --> 0:19:29.240 inflation that we're running. 0:19:29.280 --> 0:19:31.920 Do you think dysfunction in Washington helps the Fed's cause. 0:19:33.320 --> 0:19:35.920 I would not say that it helps the Fed's cause. 0:19:35.960 --> 0:19:38.679 I don't know if it helps anyone's cause right now. 0:19:39.280 --> 0:19:43.480 You know the developments. It does raise questions about, you know, 0:19:43.480 --> 0:19:47.359 whether we're going to be in another shutdown November seventeenth, 0:19:47.400 --> 0:19:50.400 and you saw markets that we're trading that, you saw 0:19:50.480 --> 0:19:52.600 markets that priced out some of the probability of a 0:19:52.600 --> 0:19:54.440 FED hike in November. I think what the FED wants 0:19:54.480 --> 0:19:57.440 here is for the government to stay open, which would 0:19:57.480 --> 0:19:59.280 allow them to respond to the economic data. And now 0:19:59.280 --> 0:19:59.800