WEBVTT - Dr. Shiller Talks Bitcoin 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.680 Bloomberg dot Com, and of course, on the Bloomberg. I'm 0:00:27.760 --> 0:00:29.840 very pleased to say that our next guest is Professor 0:00:29.920 --> 0:00:32.839 Robert Schiller, Noboud Laureate and Yale professor. Back in a 0:00:32.920 --> 0:00:35.200 year two thousand, at the hind of the dot com bubble, 0:00:35.479 --> 0:00:40.880 Professor Silla wrote a very well known book, Irrational Exuberance. Professor, 0:00:41.240 --> 0:00:43.080 I wonder if you had to write that book today 0:00:43.120 --> 0:00:45.320 and someone said to you can't write about tech stocks, 0:00:45.360 --> 0:00:47.600 You've got to write about bitcoin. What would be in 0:00:47.640 --> 0:00:50.440 that book? Professor? Every edition of that book came out 0:00:50.520 --> 0:00:53.360 with a new bubble and a different market, So yes, 0:00:53.479 --> 0:00:57.880 it would be bitcoin. Bitcoin is Uh. They captured the 0:00:57.920 --> 0:01:01.720 world's imagination. I was I was in Russia the other 0:01:01.840 --> 0:01:06.600 day and there every It's everywhere. Uh. It shows how 0:01:06.760 --> 0:01:10.679 contagion of ideas can spread across the entire world and 0:01:10.760 --> 0:01:14.000 affect markets. How do you define a spectative bubble in 0:01:14.120 --> 0:01:16.400 something like bitcoin, at least with the tank companies. You 0:01:16.400 --> 0:01:19.040 could have sat there and said, well, here's the pe ratio. 0:01:19.200 --> 0:01:21.160 There isn't really much of an e and this is 0:01:21.160 --> 0:01:24.720 why it's a speculative mania. What do you do with bitcoin? Well, 0:01:24.760 --> 0:01:28.080 I've been starting to think about that. So the bitcoin 0:01:28.200 --> 0:01:31.200 enthusiasts say it will be a medium of exchange. It 0:01:31.240 --> 0:01:34.440 would be money. So let's take that and go assume 0:01:34.480 --> 0:01:38.640 that it replaces money completely. I mean, is that a dream? 0:01:38.680 --> 0:01:40.800 And then I would go to some of the demand 0:01:40.880 --> 0:01:44.840 for money models that economists have made, but the velocity 0:01:44.880 --> 0:01:48.520 of bitcoin might be totally different. So I could try 0:01:48.560 --> 0:01:51.280 to get a fundamental value for a bitcoin, but it 0:01:51.320 --> 0:01:54.000 would be largely just guess work. I was speaking to 0:01:54.040 --> 0:01:55.800 someone just last night and they said, I cannot be 0:01:55.840 --> 0:01:58.760 invested in something I have zero risk tolerance for something 0:01:58.760 --> 0:02:00.840 when I don't know the difference White trades at four 0:02:00.920 --> 0:02:04.040 hundred four thousand or forty thousand. And then that seems 0:02:04.040 --> 0:02:07.080 to be the way traditional Wall Street minds think about 0:02:07.120 --> 0:02:10.280 about bitcoin. But this isn't a traditional Wall Street product. 0:02:10.320 --> 0:02:14.000 This is a retail product. I think we we here's 0:02:14.040 --> 0:02:17.480 a job for a young analyst figure out very much so, 0:02:17.480 --> 0:02:19.720 but the problem is it's going to be depending on 0:02:20.080 --> 0:02:25.440 assumptions about a wild future. I would say, let's have 0:02:25.480 --> 0:02:29.200 like five different pe ratios and they'll all be all 0:02:29.200 --> 0:02:31.920 over the map, and we still want Professor Paul Donovan 0:02:31.960 --> 0:02:35.560 over at UBS said, bubbles are irrational, so don't try 0:02:35.560 --> 0:02:38.720 and use rational analysis to to work out when this 0:02:38.800 --> 0:02:41.000 thing is going to burst? Is that decent advice for 0:02:41.040 --> 0:02:43.120 anyone on the outside looking in. But you want to 0:02:43.160 --> 0:02:46.400 know what it will burst too, so you have to 0:02:46.480 --> 0:02:50.480 have some idea when it's overpriced and when it's underpriced. Uh. 0:02:51.320 --> 0:02:54.720 Another thing about the bubble metaphor, which is unfortunate is 0:02:54.800 --> 0:02:57.760 it tends to the metaphor of a bubble. You know, 0:02:57.760 --> 0:03:01.120 a soap bubble burst and it does and come back, right, 0:03:01.440 --> 0:03:03.600 you can get a different bubble, but you can't get 0:03:03.600 --> 0:03:06.639 the old one back. But in financial markets, they're never 0:03:06.760 --> 0:03:11.960 quite done. Bitcoin burst in what was and I we 0:03:12.080 --> 0:03:14.480 most of us thought it was done. But here it 0:03:14.560 --> 0:03:18.000 comes roaring back. So it might burst again and come 0:03:18.080 --> 0:03:21.160 up again. Uh. That's why I don't know if I 0:03:21.480 --> 0:03:25.000 like the word epidemic. It's a expeculative epidemic. That's better, 0:03:25.360 --> 0:03:27.400 just in terms of how you characterize the bubble. To 0:03:27.520 --> 0:03:29.919 some people would define it by the order of which 0:03:30.200 --> 0:03:34.480 retail gets in Wall Street first, retail last, the retail 0:03:34.520 --> 0:03:37.640 investor marks the top Wall Street starts getting out. Can 0:03:37.680 --> 0:03:39.920 you apply the same thoughts to bitcoin when it seems 0:03:39.960 --> 0:03:42.040 to be the other way around, the retails first and 0:03:42.080 --> 0:03:47.080 Wall Street second. Well, you know, in my study of 0:03:47.600 --> 0:03:53.560 the difference between individual and professional investors, uh, I find 0:03:53.560 --> 0:03:55.720 it when it comes to things like this, they're not 0:03:55.840 --> 0:04:00.320 that different. Professional investors work well when they have something 0:04:00.320 --> 0:04:04.240 that they can analyze, but there's nothing clear to analyze here, 0:04:04.560 --> 0:04:06.680 so I think they may be just as vulnerable to 0:04:06.880 --> 0:04:09.880 bubbles as retail. Just as a final comment on this, professor, 0:04:09.920 --> 0:04:12.080 do you worry about the infrastructure that not enough thought 0:04:12.080 --> 0:04:14.400 and time has been given to having these kind of 0:04:14.400 --> 0:04:20.120 things trade on in exchange? As a future product? Yeah, 0:04:20.640 --> 0:04:22.919 I'm not sure it was a good idea to launch 0:04:23.000 --> 0:04:29.080 future because, uh, it's still not a reputable product. It's 0:04:29.120 --> 0:04:32.480 still wild. On the other hand, launching your futures market 0:04:33.160 --> 0:04:38.200 might help calm this market. It's been extremely volatile and 0:04:38.680 --> 0:04:41.560 generating futures There's been a lot of alarm that generating 0:04:41.839 --> 0:04:45.240 the futures markets will generate even more volatility, But I 0:04:45.240 --> 0:04:48.200 think it would probably more likely settled markets down a 0:04:48.240 --> 0:04:51.200 little bit. Professor Robertshi and Abou laureate and Yale professor. 0:05:09.279 --> 0:05:12.240 We want to go to UH Washington in a sense 0:05:12.440 --> 0:05:15.800 because it is the number two story this week. Um, 0:05:15.920 --> 0:05:17.440 we'll have the FED down there, and of course the 0:05:17.480 --> 0:05:21.080 tax debate and the efforts to put together a spending bill. 0:05:21.360 --> 0:05:25.000 Isaac Boltanski gets paid to follow all that for Compass Point. 0:05:25.040 --> 0:05:28.080 He's a senior vice president there and he joins us. Now, 0:05:28.160 --> 0:05:33.920 good morning, Isaac, Good morning. UH. The another analyst I 0:05:33.960 --> 0:05:36.120 won't give a name, but basically said, you know, there's 0:05:36.120 --> 0:05:38.960 a couple of things that are going to be happening 0:05:39.000 --> 0:05:43.360 this week. Um, the Conference Committy is going to have 0:05:43.400 --> 0:05:45.240 a photo op and the President is going to give 0:05:45.240 --> 0:05:47.960 a speech on Wednesday about taxes. But that's not the 0:05:48.000 --> 0:05:51.080 thing to watch because the real action is behind the scenes, 0:05:51.200 --> 0:05:55.160 right as they as they try to conduct a math 0:05:55.240 --> 0:05:59.840 exercise and make all the parts fit financially. Sure, I 0:06:00.000 --> 0:06:02.200 think it's important to not miss the forest for the 0:06:02.240 --> 0:06:06.560 trees here. There's going to be a week of speculation, 0:06:06.839 --> 0:06:10.960 political theater, and dubious details. But at the end of 0:06:10.960 --> 0:06:12.560 this week, I think we're going to have a really 0:06:12.560 --> 0:06:15.880 good picture of where the tax bill is, and the 0:06:15.960 --> 0:06:19.160 GOP is pushing to actually have this conference canna be 0:06:19.200 --> 0:06:21.880 done by Friday in the hopes of having something to 0:06:21.960 --> 0:06:25.080 the President's desk by Wednesday of next week. Now, I 0:06:25.080 --> 0:06:28.760 think that timeline is likely to slip, but it's realistic 0:06:28.800 --> 0:06:32.640 given that everything to date has been done at warp pace. 0:06:34.360 --> 0:06:37.080 When we get a bill, a two part question. One 0:06:37.680 --> 0:06:40.200 is anybody going to really know what's in it? And 0:06:40.279 --> 0:06:44.120 to how many mistakes will there be? I read a 0:06:44.120 --> 0:06:47.120 funny story over the weekend. A group of tax accountants 0:06:47.120 --> 0:06:50.640 got together and put together the Tax Accountant's Guide to 0:06:50.720 --> 0:06:56.120 Avoiding Taxes based on what was in the bills so far. Yeah, 0:06:56.200 --> 0:06:59.919 I think, Michael, you're absolutely right that this bill is 0:07:00.160 --> 0:07:04.560 being written at such a hurried pace that there will 0:07:04.640 --> 0:07:09.560 undoubtedly be a slew of mistakes and loopholes and unintended consequences. 0:07:09.640 --> 0:07:12.360 And a concerning theme that that I have when thinking 0:07:12.400 --> 0:07:17.720 about risks for is that, uh, I'm not sure this 0:07:17.800 --> 0:07:21.760 Congress will have the capacity to come back and enact 0:07:21.840 --> 0:07:25.840 a legislative fixed bill for some of those loopholes. So 0:07:26.240 --> 0:07:29.520 the bill that ultimately gets passed into law later this 0:07:29.600 --> 0:07:31.000 year is something I think we're going to have to 0:07:31.040 --> 0:07:34.119 live with for quite some time, which is concerning because 0:07:34.120 --> 0:07:38.760 it will be riddled with mistakes, loopholes, and untimely consequences. 0:07:38.800 --> 0:07:40.720 I think it feels like whole roads lead to and 0:07:40.840 --> 0:07:43.600 lead from the corporate tax rate and whatever that may 0:07:43.640 --> 0:07:47.200 well be. Both bills have it. At the President kind 0:07:47.200 --> 0:07:50.120 of hinted at that this number and twenty two kind 0:07:50.160 --> 0:07:53.000 of came out of nowhere. Where is your base case 0:07:53.120 --> 0:07:56.600 right now? Is that the twenty or the twenty two? Sure? 0:07:56.960 --> 0:07:59.400 I think that the framing this is a is a 0:07:59.440 --> 0:08:02.680 math ex size is exactly right, And because it's a 0:08:02.760 --> 0:08:07.760 math exercise and there are procedural limitations in the Senate 0:08:07.800 --> 0:08:12.760 regarding um UH revenue neutrality, our view is that the 0:08:12.840 --> 0:08:16.360 final rate is going to settle somewhere closer to and 0:08:16.400 --> 0:08:20.520 will likely be effective in You put those two concessions 0:08:20.520 --> 0:08:24.400 together and right there you've picked up about three billion 0:08:24.480 --> 0:08:27.320 and extra revenue to fill in gaps elsewhere in the 0:08:27.480 --> 0:08:29.240 in the bill. So the other thing we need to 0:08:29.280 --> 0:08:31.920 work out one once you've worked out in the corporate tax, right, 0:08:32.280 --> 0:08:34.600 is what happens with salt deductions. There seems to be 0:08:35.320 --> 0:08:38.080 some flexibility around this. If you talk to people in 0:08:38.120 --> 0:08:41.880 the administration, what do you think that comes out looking like, Isaac, 0:08:42.920 --> 0:08:45.520 I think this is something that's important for your listeners. 0:08:45.520 --> 0:08:50.000 In particular, the decimation of the salt deduction is something 0:08:50.040 --> 0:08:53.280 that um we've heard a fair amount from from our 0:08:53.320 --> 0:08:56.000 clients who live on the coast in particular and high 0:08:56.000 --> 0:08:58.959 code in high tax state. There has been a deal 0:08:59.160 --> 0:09:02.240 that would allow for up to ten thousand dollars worth 0:09:02.280 --> 0:09:05.520 of property taxes to be deducted. But what's interesting is 0:09:05.520 --> 0:09:08.200 that over the past week or so, we've started to 0:09:08.200 --> 0:09:11.520 hear more and more chatter from key stakeholders that there 0:09:11.640 --> 0:09:14.200 might be a deal to allow at least some degree 0:09:14.280 --> 0:09:17.280 of income to be deducted as well. Too early to 0:09:17.320 --> 0:09:20.880 tell how that will look or exactly what the mechanism 0:09:20.920 --> 0:09:23.560 will be, but that would be a win for for 0:09:23.720 --> 0:09:26.679 I would think reticent Republicans in high tax states, and 0:09:27.040 --> 0:09:31.560 also the mortgage industry that's been concerned that the decimation 0:09:31.600 --> 0:09:35.160 of salt would make the mortgage interest seduction, which has 0:09:35.200 --> 0:09:41.640 survived relatively useless. I want to uh do a shameless 0:09:41.679 --> 0:09:45.640 plug for Sahil coporor congressional correspondent for Bloomberg news story 0:09:45.679 --> 0:09:49.000 on the Bloomberg Today, asking the question will middle class 0:09:49.040 --> 0:09:51.920 folks notice their tax cut? He points out in two 0:09:51.920 --> 0:09:55.440 thousand nine there was a one year tax break worth 0:09:55.720 --> 0:10:00.559 eight dollars for married couples in working households, people got 0:10:00.600 --> 0:10:05.360 about oh fifteen dollars a week, and of the people 0:10:05.360 --> 0:10:07.800 who were surveying thought their taxes had gone up. Nobody 0:10:07.880 --> 0:10:10.920 noticed that they got a tax break. So is this 0:10:11.000 --> 0:10:14.240 bill that's being counted as the biggest thing of all 0:10:14.320 --> 0:10:16.520 time by the president actually going to be a win 0:10:16.640 --> 0:10:20.960 for Republicans. Well, right now, it's polling terribly and it's 0:10:21.000 --> 0:10:23.520 hard to believe that that polling is going to improve. 0:10:24.040 --> 0:10:26.000 We're going to have to wait and see though, until 0:10:26.440 --> 0:10:29.480 probably the second quarter of next year, because let's say 0:10:29.520 --> 0:10:32.960 this passes this year, and that means the individual rate 0:10:33.640 --> 0:10:36.520 reductions go into fact the beginning of next year. The 0:10:36.559 --> 0:10:39.160 i R s will be directed to actually change it's 0:10:39.200 --> 0:10:42.800 withholding amounts at the beginning of next year, and so 0:10:43.400 --> 0:10:46.360 there's a potential for folks to actually see some change 0:10:46.360 --> 0:10:50.040 in their own pocketbooks. The magnitude and the political ramifications 0:10:50.120 --> 0:10:51.640 yet to be seen. That I did want to come 0:10:51.679 --> 0:10:53.880 to you on why this is polling side badly. Is 0:10:53.920 --> 0:10:56.480 it the content at the bill? Although way it's been communicated, 0:10:57.679 --> 0:10:59.920 I think it's all the above, Johnath, I really do. 0:11:00.080 --> 0:11:02.600 I think it's it's the It's the tone, the tenor 0:11:02.679 --> 0:11:08.240 the speed, and the undeniable focus primarily on a corporate 0:11:08.360 --> 0:11:11.280 rate reduction. Everything else is peripheral in this bill. The 0:11:11.320 --> 0:11:14.599 corporate rate reduction is the temple. So, Mike, why have 0:11:14.679 --> 0:11:17.079 we got this focus on the corporate side of the 0:11:17.120 --> 0:11:20.000 bill when this was meant to be a consumer focused, 0:11:20.360 --> 0:11:23.199 get the middle class of America tax cut. It doesn't 0:11:23.200 --> 0:11:25.520 seem to me that many people are convinced by that, Mike. 0:11:25.679 --> 0:11:27.840 I think the politics were that it was supposed to 0:11:27.840 --> 0:11:30.040 be at least, you know, the publicity was that it 0:11:30.120 --> 0:11:32.599 was supposed to be. But the intent all along was 0:11:32.679 --> 0:11:36.640 to bring down the corporate tax rate ISAAC very quickly. 0:11:37.960 --> 0:11:41.120 Just because we're so focused on taxes doesn't mean there 0:11:41.160 --> 0:11:45.640 aren't other things Congress has to do. They punted the 0:11:45.640 --> 0:11:50.400 the spending bill, the Continuing Resolution into next week. Are 0:11:50.480 --> 0:11:54.240 we going to see a government shut down at some point? 0:11:55.679 --> 0:11:58.120 My sense is that if the tax bill gets done 0:11:58.440 --> 0:12:00.839 the middle of next week, the odds are high that 0:12:00.880 --> 0:12:03.480 there will be a shutdown at the end of the week. 0:12:03.760 --> 0:12:07.480 If the tax bill isn't yet done by the December 0:12:07.520 --> 0:12:11.080 twenty deadline, then there'll be another short term punt, because 0:12:11.080 --> 0:12:14.040 getting the tax bill is one through ten on the 0:12:14.080 --> 0:12:17.679 to do list for Republicans right now. Do Democrats keep 0:12:17.720 --> 0:12:21.280 going along with the idea of punting it, you know, 0:12:21.520 --> 0:12:24.840 putting off the day of reckoning? I think they will, 0:12:24.880 --> 0:12:29.680 but with increasing levels of political concessions necessary. Um, look there, 0:12:29.760 --> 0:12:32.240 I I firmly believe there will be a shutdown at 0:12:32.280 --> 0:12:34.960 some point over the next few weeks. It's really just 0:12:35.000 --> 0:12:37.480 a question to figure out figuring out when the tax 0:12:37.480 --> 0:12:39.679 bill will get done, and then we can go from 0:12:39.679 --> 0:12:43.000 there on prognosticating regarding the next shutdown. Well, we will 0:12:43.040 --> 0:12:48.079 get back to you for prognostications and as things happen. 0:12:48.320 --> 0:12:52.080 All right, Isaac Boltanski with a Compass Point investment, Thanks 0:12:52.120 --> 0:13:09.560 for joining us this morning. I want to know when 0:13:09.640 --> 0:13:12.480 Varaj Patavi, I g f X strategist who joins us 0:13:12.480 --> 0:13:15.480 on the telephone now, is going to start covering bitcoin 0:13:15.559 --> 0:13:17.880 and this regular effects wrap. Does this come into your 0:13:17.920 --> 0:13:22.280 world varrage or does it not matter yet? It's starting 0:13:22.320 --> 0:13:24.160 to come into a world, but not not so much. 0:13:24.240 --> 0:13:26.280 I wouldn't call it a currency just and for now, 0:13:26.320 --> 0:13:29.400 it's training like an asset, right, so if I'm an 0:13:29.440 --> 0:13:33.320 EEx strategist, it's not it's not necessarily a currency, but 0:13:33.360 --> 0:13:35.160 it's definitely what it does only one of the things. 0:13:35.160 --> 0:13:36.920 We haven't done a lot of work here, admittedly, but 0:13:36.960 --> 0:13:38.920 we are starting to take a look at it closely. 0:13:39.160 --> 0:13:41.960 It's having knock on implications for certain markets, all right. 0:13:42.000 --> 0:13:44.640 If you look at it from the Chinese remembee market, 0:13:44.679 --> 0:13:47.600 you start to see sort of the forward points trading off. 0:13:48.200 --> 0:13:52.760 When when you sort of saw bitcoin futures exchanges closing 0:13:53.080 --> 0:13:57.600 earlier this year. Similarly, when Zimbabwe were sort of you know, 0:13:57.640 --> 0:13:59.600 you had the elections around noise around there, you sort 0:13:59.600 --> 0:14:03.640 of Bitcoin having invitations for the African currencies around it. 0:14:03.760 --> 0:14:06.120 So it's starting to have knock on effects and it's 0:14:06.160 --> 0:14:08.560 definitely more work that we could do, but as a 0:14:08.559 --> 0:14:11.400 as a currency, when just not they're labeling that okay. 0:14:11.480 --> 0:14:14.160 So Valence today, of course brought you by Khne Resinic Accounting, 0:14:14.160 --> 0:14:17.679 Tax Advisory, Look Ahead, Gain inside, Imagine more. The professionals 0:14:17.679 --> 0:14:21.040 at khon Resinic can help your business breakthrough. Find out 0:14:21.080 --> 0:14:24.160 more at con resin dot com, so we can move 0:14:24.200 --> 0:14:26.960 off from G ten plus one and just concentrate on 0:14:27.040 --> 0:14:29.760 G ten. I guess for arg the pain trade of 0:14:29.880 --> 0:14:33.480 this year so far has been dollar strength that did 0:14:33.520 --> 0:14:36.640 not come. Dollar strength are pretty much everyone called for 0:14:36.720 --> 0:14:39.800 but did not materialize. Do you see the dollar getting 0:14:39.800 --> 0:14:42.040 the kind of bit in seen that so many people 0:14:42.120 --> 0:14:46.680 hoped and predicted it would in seventeen, Well, not at all. 0:14:46.720 --> 0:14:48.880 I think this year was the learning point for markets. 0:14:48.920 --> 0:14:51.560 I think we fell into a trump flation trap earlier 0:14:51.600 --> 0:14:53.960 this year. A lot of promises that the U S 0:14:54.000 --> 0:14:58.800 economy would be reflating, potentially generating three trend US growth 0:14:58.840 --> 0:15:02.200 two above two sent US inflation. We just haven't seen 0:15:02.280 --> 0:15:05.680 the evidence in the underlying U S data to to 0:15:05.760 --> 0:15:09.040 convince you that the dollar has another sort of cyclical upside. 0:15:09.040 --> 0:15:11.680 And so for US we see three broad reasons why 0:15:11.680 --> 0:15:16.040 we expect this dollar cycle to continue turning lower. One, 0:15:16.120 --> 0:15:18.720 the economics of a strong dollar doesn't make sense based 0:15:18.760 --> 0:15:21.080 on this sort of tax reform bill. For US, we 0:15:21.280 --> 0:15:23.920 focus on the sort of textbook negative, which is the 0:15:23.920 --> 0:15:27.000 fact that you're increasing the fiscal deathit without changing the 0:15:27.080 --> 0:15:30.360 long run trend growth in the US. Second, the politics 0:15:30.400 --> 0:15:33.600 of the strong dollar doesn't make sense as well. We've 0:15:33.600 --> 0:15:36.320 heard the president say he doesn't want a stronger dollar. 0:15:36.640 --> 0:15:39.080 We actually did some analysis and we looked in our 0:15:39.120 --> 0:15:42.800 outlook that the second and third terms of a Republican 0:15:42.840 --> 0:15:45.880 presidency is actually outright negative for the dollar. Now this 0:15:46.000 --> 0:15:48.480 maybe coincidence, but if you actually look at sort of 0:15:48.800 --> 0:15:52.320 some of the retric you here from past previous Republican administrations, 0:15:52.680 --> 0:15:55.400 plus the fact that you have midterm elections coming up 0:15:55.400 --> 0:15:58.640 as well, both could be a negative I guess politically 0:15:58.640 --> 0:16:00.800 for the dollar. And the third and most important point 0:16:00.880 --> 0:16:02.720 that we we point to, and this is what happened 0:16:02.720 --> 0:16:05.240 in twenty seventeen. The rest of the world is catching 0:16:05.320 --> 0:16:08.680 up to a late US cycle, and that's where when 0:16:08.760 --> 0:16:10.640 the rest of the world grows is out performing the 0:16:10.720 --> 0:16:13.680 US growth, that the dollar will take its kew from that. 0:16:13.920 --> 0:16:15.720 And we actually think that, you know, you've got a 0:16:15.760 --> 0:16:19.680 three to five percent narrowing also decline of the dollar 0:16:20.040 --> 0:16:23.200 just for every percentage point out performance in the US 0:16:23.480 --> 0:16:25.000 of the rest of the world from the U S economy, 0:16:25.040 --> 0:16:29.240 and that's where the dynamics will be early next year. Ah, 0:16:29.440 --> 0:16:32.040 I was gonna say who's better. I mean, do you 0:16:32.040 --> 0:16:36.480 want to hold Euros even though the BCB isn't going 0:16:36.520 --> 0:16:39.760 to be raising rates U and so the interest rate 0:16:39.800 --> 0:16:42.320 differential still favors the United States. You want to hold 0:16:42.320 --> 0:16:46.760 the end because people hold the end. What pair does 0:16:46.840 --> 0:16:53.120 best against the dollar? Well, it's certainly two sets of currencies, 0:16:53.120 --> 0:16:57.840 one where there's stronger growth potential, and there's certainly attractive 0:16:57.880 --> 0:17:01.880 investment environments in the emerging markets. We pinpoints say e 0:17:02.040 --> 0:17:04.720 M as a sort of a preferred investment destination going 0:17:04.720 --> 0:17:07.240 next year, as well as Central and Eastern Europe. But 0:17:07.600 --> 0:17:10.040 when it comes to the Euro, I think there's still 0:17:10.400 --> 0:17:13.400 a bit of juice left from this ECB story going 0:17:13.440 --> 0:17:16.760 into next summer. Certainly, what from an FX market which 0:17:16.800 --> 0:17:20.000 prices over an infinite time horizon. Yeah, sure the US 0:17:20.080 --> 0:17:22.600 to be won't be hiking next summer, but certainly they 0:17:22.600 --> 0:17:24.800 will start to let the foot off the pedal when 0:17:24.800 --> 0:17:27.280 it comes to talking about potential rate hikes. You know, 0:17:27.320 --> 0:17:29.920 the economy should be sound enough for them to start 0:17:30.280 --> 0:17:32.359 at least considering it. I mean, maybe it might be 0:17:32.400 --> 0:17:35.840 a late story, early nine story for the actual rate 0:17:35.920 --> 0:17:38.680 hikes to come through. At least the consideration should be 0:17:38.800 --> 0:17:41.520 euro doll at one in our view, is there anything 0:17:41.560 --> 0:17:43.679 that you see in the Eurozone economy that suggests that 0:17:43.760 --> 0:17:46.560 core inflation is going to pick up anytime soon for ours? 0:17:46.600 --> 0:17:49.280 Because if that's what's moving things at the ECB, that 0:17:49.359 --> 0:17:53.240 ain't moving much spot on us. But it's kind of 0:17:53.280 --> 0:17:55.880 like a global phenomena right right now, right core inflation 0:17:55.920 --> 0:17:58.760 across the d G tent spaces is there is no 0:17:58.840 --> 0:18:01.440 sort of underlying inflation pressure. So it makes the likes 0:18:01.480 --> 0:18:04.919 of the Eurozone and Japan less of an anomaly. Um, 0:18:04.960 --> 0:18:07.240 there's if you look at it by logic, there's a 0:18:07.240 --> 0:18:10.399 lot more slack in the Eurozone labor markets now. We 0:18:10.720 --> 0:18:13.440 I wrote once earlier this year suggesting that banking on 0:18:13.480 --> 0:18:16.239 the Phillips curve is a risky strategy. But it is. 0:18:16.359 --> 0:18:18.919 And but if if there's anywhere where at least you're 0:18:18.920 --> 0:18:21.359 going to get a couple of percentage points of positive surprises, 0:18:21.440 --> 0:18:23.840 it's probably the Eurozone relative to the US right now. 0:18:24.000 --> 0:18:26.320 And that's where the euro dollar view comes in. Well, 0:18:26.359 --> 0:18:33.640 you get US fundamentals good, um, turned growth better um, 0:18:33.760 --> 0:18:37.080 the real neutral rate in the US higher than in Europe. 0:18:37.080 --> 0:18:41.960 So how long can the dollar trend down? Certainly I 0:18:41.960 --> 0:18:44.399 think that's the euro dollar you has, it's sort of 0:18:44.440 --> 0:18:47.440 one one potential repricing opportunity, and then after that it's 0:18:47.480 --> 0:18:49.440 kind of a slow burner. I think that's where we've 0:18:49.480 --> 0:18:52.000 we've we've kind of markets are priced in the relative 0:18:52.320 --> 0:18:56.040 Eurozone and US dynamics. It's it's a trade wayed dollar 0:18:56.119 --> 0:18:58.720 that kind of has we will lose ground against the 0:18:58.880 --> 0:19:01.840 pro growth currencies, especially the emerging markets. You know, we 0:19:01.920 --> 0:19:04.399 are titled for the FX was happy how we do 0:19:04.560 --> 0:19:08.600 think that the current goldilocks gross investment environment will continue 0:19:08.800 --> 0:19:10.640 at least for the next six to my nine months. 0:19:10.920 --> 0:19:13.159 Like with any good happy hours, they'll probably end at 0:19:13.200 --> 0:19:17.199 some point. But that's but that's the late stories for it, 0:19:17.240 --> 0:19:18.680 and when they end, you want to get out before 0:19:18.720 --> 0:19:20.680 everyone else tries to get out of the mess starts. 0:19:20.680 --> 0:19:23.879 For arch Plateau, I n g FX strategist. You're listening 0:19:23.960 --> 0:19:47.119 to Bloomberg Surveillance. We're talking with Dan rist Miller. He 0:19:47.400 --> 0:19:51.199 is the chief academist at Strategious. Uh don I was 0:19:51.440 --> 0:19:55.119 noticing that um Larry Summers yesterday wrote a piece of 0:19:55.160 --> 0:19:57.720 to the U S Academy is on a sugar high 0:19:57.840 --> 0:20:00.760 right now because the signs of marketing economic strength are 0:20:00.840 --> 0:20:06.280 largely unrelated to government policy. Do you agree with that assessment, Well, 0:20:06.320 --> 0:20:08.359 we haven't done much in the way of policy, at 0:20:08.400 --> 0:20:11.560 least on the fiscal side. Yeah. I think there's some 0:20:11.640 --> 0:20:15.120 hope that maybe there's some aspirational moves. If we look 0:20:15.119 --> 0:20:18.840 at consumer confidence, that's at we're near highs. If we 0:20:18.840 --> 0:20:22.199 look at business confidence, small businesses are saying they're more optimistic, 0:20:22.280 --> 0:20:23.680 even c e O s If we look at the 0:20:23.680 --> 0:20:27.120 Business Roundtable survey have said they're a bit more optimistics. 0:20:27.119 --> 0:20:29.680 Maybe there's some expectation of policy. But I think it's 0:20:29.680 --> 0:20:32.760 fair to say we haven't had much actual policy put 0:20:32.800 --> 0:20:35.840 in place yet yet. I do think confidence matters, and 0:20:35.920 --> 0:20:39.240 it matters if we get some follow throughs and tax 0:20:39.280 --> 0:20:41.600 bill in a few weeks here, depending on the structure 0:20:41.600 --> 0:20:44.040 of it, could matter at least in the short run. 0:20:44.160 --> 0:20:46.880 So well, we'll see how that goes. If we get 0:20:46.960 --> 0:20:50.760 something along the lines of what's been talked about tax 0:20:50.840 --> 0:20:53.919 rate and lower taxes on passed through small businesses to 0:20:53.960 --> 0:20:57.120 the extent that they can use it, do you anticipate 0:20:57.200 --> 0:21:00.240 a lot of business investment is a supply side boost 0:21:00.480 --> 0:21:03.600 going to boost growth. So one thing we're watching is 0:21:03.640 --> 0:21:07.600 whether we get that lower rate in twenty nineteen, so 0:21:07.640 --> 0:21:11.200 there's still some debate on that. I think the better 0:21:11.440 --> 0:21:15.440 in the sense of being more of a boost package 0:21:15.440 --> 0:21:17.720 for growth, would be for that right, even if it's 0:21:17.720 --> 0:21:19.880 not twenty even if it's twenty two or twenty three 0:21:20.359 --> 0:21:25.680 to take effect here in as we move forward here. 0:21:26.119 --> 0:21:28.960 But if it is delayed, I think that you will 0:21:29.000 --> 0:21:33.040 see much less of an immediate impact, which may be obvious, 0:21:33.600 --> 0:21:37.240 but there's a lot of things to be worked out 0:21:37.320 --> 0:21:39.800 in a few things to pay attention to. But we 0:21:39.840 --> 0:21:41.919 should know soon. That's the good news. What is the 0:21:41.920 --> 0:21:45.000 political risk, uh, in the area of government shutdown and 0:21:45.320 --> 0:21:48.600 or the debt ceiling? Those issues punted into the future 0:21:48.600 --> 0:21:51.639 at least next week for the continuing Resolution by Congress, 0:21:51.640 --> 0:21:54.080 and UH it isn't clear when they'll get to the 0:21:54.119 --> 0:21:57.240 debt ceiling. Yeah, that's right, and I honestly wish we 0:21:57.280 --> 0:22:01.760 would just get rid of this item in its entirety, 0:22:01.800 --> 0:22:05.080 but we were stuck with it, and so we've chosen 0:22:05.119 --> 0:22:07.560 a few short term patches. We could have dealt with 0:22:07.600 --> 0:22:10.119 this a few months ago, it was really hard to 0:22:10.160 --> 0:22:12.960 deal with right now in the midst of everything else 0:22:12.960 --> 0:22:16.840 that's going on. So an extension for a little bit 0:22:16.880 --> 0:22:18.280 of time here makes sense, but we're not done and 0:22:18.320 --> 0:22:21.000 it's gonna come back. Government shutdowns aren't something we worry 0:22:21.040 --> 0:22:24.159 too much about. They have a short term impact on growth. 0:22:24.200 --> 0:22:27.679 You can see a modest impact on g d P 0:22:27.840 --> 0:22:32.760 as an example, but often workers are paid eventually, and 0:22:32.840 --> 0:22:35.480 so I wouldn't worry too much about it. One of 0:22:35.480 --> 0:22:38.120 the things that we were talking with Bob Shiller earlier about, 0:22:38.200 --> 0:22:41.400 and of course he's MR Housing the case Shiller Indexes 0:22:41.440 --> 0:22:45.119 and everything, is the impact of the tax deal on housing, 0:22:45.520 --> 0:22:48.160 because if you double the personal exemption, few of people 0:22:48.200 --> 0:22:50.800 will be taking the mortgage credit, and maybe that has 0:22:50.800 --> 0:22:53.280 an effect on how many homes are sold. I'm wondering 0:22:53.359 --> 0:22:56.320