1 00:00:02,920 --> 00:00:06,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio. 2 00:00:06,920 --> 00:00:09,800 Speaker 2: News, equity markets coming off the last week of the year, 3 00:00:09,880 --> 00:00:12,399 Speaker 2: the best week of the year, investors looking ahead to 4 00:00:12,440 --> 00:00:15,360 Speaker 2: Friday when fed share Jaypal speaks and we get the 5 00:00:15,400 --> 00:00:19,520 Speaker 2: core PCEE deflatory of your denty research writing this in 6 00:00:19,560 --> 00:00:22,760 Speaker 2: the Financial Times, at this nirvana level, all is right 7 00:00:22,800 --> 00:00:26,520 Speaker 2: with the US economy because it's growing while inflation remains moderate. 8 00:00:26,800 --> 00:00:29,120 Speaker 2: If the economy is doing well with the current level 9 00:00:29,160 --> 00:00:32,640 Speaker 2: of interest rates, why lower them? At gardentny On please 10 00:00:32,720 --> 00:00:35,240 Speaker 2: to say, joined us now for more and fantastic piece 11 00:00:35,280 --> 00:00:37,279 Speaker 2: of the FT. Enjoys reading over it when it came 12 00:00:37,280 --> 00:00:39,400 Speaker 2: out a little bit earlier this morning, you say, why 13 00:00:39,440 --> 00:00:41,839 Speaker 2: mess with success? Can I get your base case? Do 14 00:00:41,880 --> 00:00:43,880 Speaker 2: you think they will mess with success? 15 00:00:44,560 --> 00:00:48,519 Speaker 3: Well, based on what I heard coming in the presser 16 00:00:48,760 --> 00:00:52,400 Speaker 3: at the press conference that J. Powellhead, it seems as 17 00:00:52,400 --> 00:00:58,680 Speaker 3: though he at least is continuing to tell us all 18 00:00:58,720 --> 00:01:02,120 Speaker 3: that they probably are going to lower interest rates, and 19 00:01:02,600 --> 00:01:06,320 Speaker 3: that kind of again raises the question exactly why is that? 20 00:01:06,920 --> 00:01:10,880 Speaker 3: I mean, we had a hot CPI and PPI in 21 00:01:11,240 --> 00:01:14,960 Speaker 3: a few days before his press conference, and yet notwithstanding that, 22 00:01:15,440 --> 00:01:19,840 Speaker 3: he expressed confidence that all as well and he's right 23 00:01:19,880 --> 00:01:23,520 Speaker 3: about the economy. The economy is doing absolutely fine. I 24 00:01:23,560 --> 00:01:27,480 Speaker 3: think there's some FED officials who believe in the concept 25 00:01:27,520 --> 00:01:31,280 Speaker 3: of real interest rates that if inflation continues to come down, 26 00:01:32,000 --> 00:01:34,360 Speaker 3: then real rates, real rates will be restrictive, and that 27 00:01:34,440 --> 00:01:37,759 Speaker 3: might cause a recession. So I'm concluding that the Fed 28 00:01:37,840 --> 00:01:39,199 Speaker 3: put might actually be back. 29 00:01:39,680 --> 00:01:41,839 Speaker 2: So if they do go forward, a mess with success. 30 00:01:41,920 --> 00:01:43,720 Speaker 2: Given that you believed the FED put is back, does 31 00:01:43,720 --> 00:01:46,560 Speaker 2: it really match up? Is it equities up and up 32 00:01:46,560 --> 00:01:46,840 Speaker 2: and up? 33 00:01:46,880 --> 00:01:50,200 Speaker 3: And why no, it's it's it's fine for the for 34 00:01:50,280 --> 00:01:54,000 Speaker 3: the economy. I think inflation is still going to moderate, though. 35 00:01:54,080 --> 00:01:57,200 Speaker 3: I think they're taking a chance here. There's with all 36 00:01:57,320 --> 00:02:00,320 Speaker 3: prices going up the way they have, that's it's that's 37 00:02:00,320 --> 00:02:02,760 Speaker 3: an area that can always spill over to the rest 38 00:02:02,760 --> 00:02:06,320 Speaker 3: of the economy. So I don't think they want to 39 00:02:06,320 --> 00:02:09,920 Speaker 3: get everybody thinking about the possibility of translation coming back. 40 00:02:09,960 --> 00:02:14,200 Speaker 3: But yeah, I think this is starting to possibly be 41 00:02:14,320 --> 00:02:16,880 Speaker 3: reminiscent of the nineteen nineties. And if you ask me 42 00:02:16,960 --> 00:02:19,560 Speaker 3: where we are in the nineteen nineties, I think we're 43 00:02:19,639 --> 00:02:24,840 Speaker 3: at December fifth, nineteen ninety six, where Alan Greenspan asked, 44 00:02:24,840 --> 00:02:28,080 Speaker 3: how do we know if let's see rational exuberance, and 45 00:02:28,160 --> 00:02:31,400 Speaker 3: I'm concerned that the market we go up too fast. 46 00:02:31,720 --> 00:02:35,160 Speaker 3: I mean, it's great on the way up. Melt up 47 00:02:35,200 --> 00:02:39,040 Speaker 3: so wonderful, but by definition they can lead to meltdowns, 48 00:02:39,639 --> 00:02:42,240 Speaker 3: and so that's where my concern is. Look, I've been 49 00:02:42,280 --> 00:02:45,959 Speaker 3: forecasting fifty four hundred by year end. We can get 50 00:02:45,960 --> 00:02:47,639 Speaker 3: there by the end of the week the way things 51 00:02:47,680 --> 00:02:48,680 Speaker 3: are going well. 52 00:02:48,919 --> 00:02:50,720 Speaker 1: But just to sort of sit a little bit on 53 00:02:50,760 --> 00:02:53,520 Speaker 1: what you were talking about with respect to commodities or 54 00:02:53,800 --> 00:02:57,360 Speaker 1: oil prices, we've seen a number of strategistical misass coming 55 00:02:57,360 --> 00:02:59,840 Speaker 1: out and seeing the potential for a fifteen percent gain 56 00:03:00,160 --> 00:03:02,400 Speaker 1: in raw materials over the duration of this year, in 57 00:03:02,440 --> 00:03:05,320 Speaker 1: part because that that is going to allow growth to continue. 58 00:03:05,560 --> 00:03:08,600 Speaker 1: Mike Wilson over at Morgan Stanley also talking up the 59 00:03:08,680 --> 00:03:13,959 Speaker 1: liking likelihood that a commodity oriented cyclical boom really gets ignited. 60 00:03:14,320 --> 00:03:17,320 Speaker 1: At what point does this become a problem for the 61 00:03:17,360 --> 00:03:20,360 Speaker 1: broader market with the idea of inflation coming back. 62 00:03:21,440 --> 00:03:24,360 Speaker 3: Well, I'm not that worried about the inflation story because 63 00:03:24,400 --> 00:03:26,760 Speaker 3: I think certainly on the good side, China is going 64 00:03:26,800 --> 00:03:31,240 Speaker 3: to continue to export deflation. We continue to see that 65 00:03:31,280 --> 00:03:34,639 Speaker 3: their producer price index is negative. We continue to see 66 00:03:35,000 --> 00:03:39,680 Speaker 3: that import prices for the US coming in from China, 67 00:03:40,360 --> 00:03:43,880 Speaker 3: those are negative on a year over year basis. China's 68 00:03:43,920 --> 00:03:48,600 Speaker 3: in a pretty serious recession. They're really in a property depression, 69 00:03:48,840 --> 00:03:51,520 Speaker 3: kind of similar to what happened in Japan a while 70 00:03:51,600 --> 00:03:54,000 Speaker 3: ago and in the United States, and it takes years 71 00:03:54,280 --> 00:03:56,400 Speaker 3: to off set to come out of that kind of 72 00:03:56,400 --> 00:04:01,280 Speaker 3: deflationary experience. So I'm not particularly worried about the price inflation. 73 00:04:01,440 --> 00:04:04,320 Speaker 3: I'm more concerned about asset inflation. You know, it's not 74 00:04:04,400 --> 00:04:07,600 Speaker 3: just the stock market that sanitary, it's also gold, that's bitcoin. 75 00:04:08,680 --> 00:04:13,160 Speaker 3: The spread between high yield corporate bonds and the treasuries 76 00:04:13,880 --> 00:04:16,600 Speaker 3: is extremely narrow. So that's where the Fed's running a 77 00:04:16,680 --> 00:04:19,159 Speaker 3: risk here. I think there should be three mandates. If 78 00:04:19,200 --> 00:04:21,800 Speaker 3: they're going to have a mandate to keep inflation down, 79 00:04:21,920 --> 00:04:25,279 Speaker 3: price inflation down, keep unemployment rate down, they also have 80 00:04:25,320 --> 00:04:27,080 Speaker 3: to be concerned about financial stability. 81 00:04:27,720 --> 00:04:30,039 Speaker 4: And when you look at the take from Mohammad al 82 00:04:30,080 --> 00:04:31,760 Speaker 4: Laren and he told us on Friday, it might not 83 00:04:31,839 --> 00:04:34,320 Speaker 4: be this pinpoint when it comes to inflation. Maybe the 84 00:04:34,360 --> 00:04:36,760 Speaker 4: FED is now targeting a range, and he said last 85 00:04:36,800 --> 00:04:40,280 Speaker 4: week was a really good moment where potentially you saw 86 00:04:40,320 --> 00:04:42,800 Speaker 4: that shift. Do you agree. Do you think the FED 87 00:04:42,880 --> 00:04:45,320 Speaker 4: is now looking at a range instead of two percent? 88 00:04:46,600 --> 00:04:49,800 Speaker 3: Well, it seems more like, based on what Pal said, 89 00:04:49,839 --> 00:04:53,400 Speaker 3: that their target is still two percent. They're not putting 90 00:04:53,480 --> 00:04:56,279 Speaker 3: that in a range. It's just Powell kept saying over 91 00:04:56,320 --> 00:04:59,720 Speaker 3: and over again that they're shooting for two percent over time. 92 00:05:00,040 --> 00:05:04,000 Speaker 3: Percent over time. He said it several times, and that 93 00:05:04,240 --> 00:05:08,760 Speaker 3: implies that they're willing to lower rates before they actually 94 00:05:08,760 --> 00:05:11,760 Speaker 3: get to two percent, whereas the message before seemed to 95 00:05:11,800 --> 00:05:15,560 Speaker 3: be that they're not going to lower rates until they're 96 00:05:15,560 --> 00:05:18,479 Speaker 3: actually at two percent or so close to it and 97 00:05:18,520 --> 00:05:22,080 Speaker 3: so comfortable that it's going to stay there that they 98 00:05:22,120 --> 00:05:24,400 Speaker 3: can go ahead and ease. So I think the message 99 00:05:24,480 --> 00:05:29,520 Speaker 3: right now is pretty ambiguous. Quite honestly. It does kind 100 00:05:29,520 --> 00:05:31,159 Speaker 3: of make me wonder, you know, what do they know 101 00:05:31,240 --> 00:05:34,400 Speaker 3: that I don't know what's the worst to lower rates. 102 00:05:34,680 --> 00:05:36,880 Speaker 2: The answer to that is maybe nothing, as you know, 103 00:05:37,320 --> 00:05:39,640 Speaker 2: because they're often surprised by many things. And I just 104 00:05:39,680 --> 00:05:41,599 Speaker 2: want to know, given everything you've said in the last 105 00:05:41,600 --> 00:05:44,800 Speaker 2: five minutes or so, what are you advocating for in 106 00:05:44,880 --> 00:05:47,880 Speaker 2: equity markets? What are you adificating for now? From here 107 00:05:48,160 --> 00:05:49,000 Speaker 2: it's a year unt. 108 00:05:50,480 --> 00:05:53,000 Speaker 3: Well, I'm still going to use fifty four hundred. I mean, 109 00:05:53,440 --> 00:05:57,560 Speaker 3: obviously we were only you know what, two three percent 110 00:05:57,600 --> 00:06:01,520 Speaker 3: away from that. But I'm I think it's still a bullmarket. 111 00:06:01,600 --> 00:06:04,919 Speaker 3: I think next year we'll be looking at six thousand, 112 00:06:04,920 --> 00:06:07,920 Speaker 3: maybe sixty five hundred by the year after that. So 113 00:06:08,040 --> 00:06:10,160 Speaker 3: I think we're still in a bull market. I think 114 00:06:10,200 --> 00:06:12,800 Speaker 3: you stay invested, and if we get them melt up, 115 00:06:13,320 --> 00:06:16,640 Speaker 3: well we'll have to discuss whether it's time to take 116 00:06:16,680 --> 00:06:19,880 Speaker 3: some profits before I melt down. But that's a risk 117 00:06:19,960 --> 00:06:22,120 Speaker 3: scenario right now, it's not the most likely scenario. 118 00:06:22,440 --> 00:06:25,240 Speaker 1: So where does the financial stability point come into play? 119 00:06:25,400 --> 00:06:26,600 Speaker 1: How concerned are you about that? 120 00:06:28,160 --> 00:06:32,120 Speaker 3: Well, I think it's kind of like the nineteen nineties 121 00:06:32,120 --> 00:06:35,600 Speaker 3: in that regard, but it's not nineteen ninety nine. It's 122 00:06:35,640 --> 00:06:40,040 Speaker 3: more like nineteen ninety six. So we maybe early on 123 00:06:40,640 --> 00:06:43,800 Speaker 3: in the financial instability issue here. But things move pretty 124 00:06:43,839 --> 00:06:47,039 Speaker 3: quickly these days, and everybody knows the history of the 125 00:06:47,040 --> 00:06:50,839 Speaker 3: stock market, knows what happened in the nineteen nineties, And 126 00:06:51,240 --> 00:06:55,160 Speaker 3: if the FED really gives us a rate cut before 127 00:06:55,200 --> 00:06:58,200 Speaker 3: we're expecting it, I think you'll see the market moving 128 00:06:58,240 --> 00:06:58,880 Speaker 3: a lot higher. 129 00:06:59,640 --> 00:07:02,880 Speaker 1: Much concerned about bonds waking up to the idea of 130 00:07:03,000 --> 00:07:05,200 Speaker 1: something of a range of the idea of stick your 131 00:07:05,200 --> 00:07:06,880 Speaker 1: inflation right. 132 00:07:07,480 --> 00:07:11,120 Speaker 3: Well, I think the bottom market is happy to see 133 00:07:11,120 --> 00:07:15,840 Speaker 3: the inflation coming down, and I think the bottom market 134 00:07:15,880 --> 00:07:18,120 Speaker 3: is struggling the way all of us are with the 135 00:07:18,160 --> 00:07:20,400 Speaker 3: Fed's message. What do they really want to do here? 136 00:07:21,360 --> 00:07:24,080 Speaker 3: You know, the foc statement make it made it sound 137 00:07:24,160 --> 00:07:27,320 Speaker 3: like we're going to wait until we have the data 138 00:07:27,320 --> 00:07:30,360 Speaker 3: that gives us confidence that inflation is coming down, and 139 00:07:30,440 --> 00:07:34,200 Speaker 3: Power modified that statement by saying that you know, things 140 00:07:34,200 --> 00:07:35,920 Speaker 3: probably are going to work out in that direction. 141 00:07:36,440 --> 00:07:39,160 Speaker 2: And this just sounds like extended cycle, which raises a 142 00:07:39,240 --> 00:07:41,120 Speaker 2: question about the cycle that I'd like to ri input on. 143 00:07:41,920 --> 00:07:42,080 Speaker 4: Here. 144 00:07:42,080 --> 00:07:43,560 Speaker 2: Are a lot of people come on this program and say 145 00:07:43,560 --> 00:07:45,680 Speaker 2: we're late, Psycho. I think Lisa aunks the question a 146 00:07:45,720 --> 00:07:47,680 Speaker 2: few times, just how late are we actually? I've given 147 00:07:47,680 --> 00:07:49,120 Speaker 2: the conversation we have it. 148 00:07:51,160 --> 00:07:54,480 Speaker 3: Well. I think we've discovered over the past couple of 149 00:07:54,560 --> 00:07:58,360 Speaker 3: years that history doesn't always repeat itself, but it does rhyme, 150 00:07:58,520 --> 00:08:02,720 Speaker 3: and you know, we are I think, just somewhere in 151 00:08:02,760 --> 00:08:05,800 Speaker 3: the middle of the cycle. I don't think we're late. 152 00:08:05,960 --> 00:08:09,920 Speaker 3: I think the economy is still showing plenty of signs 153 00:08:09,920 --> 00:08:11,840 Speaker 3: of infation. Is coming down. But you know, you have 154 00:08:11,880 --> 00:08:15,160 Speaker 3: to put everything in a global context. It's not just 155 00:08:15,440 --> 00:08:18,360 Speaker 3: the same old US business cycles. You have to put 156 00:08:18,400 --> 00:08:20,080 Speaker 3: it in the context of what's going on in China, 157 00:08:20,120 --> 00:08:21,800 Speaker 3: what's going on in Europe, what's going on in the 158 00:08:21,800 --> 00:08:22,640 Speaker 3: geopolitics 159 00:08:24,280 --> 00:08:26,480 Speaker 2: If you had any research, Thank you sir, giving us 160 00:08:26,560 --> 00:08:27,280 Speaker 2: lots to think about.