WEBVTT - Outlook for Fed Easing and Trump-Putin 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.240 or watch us live on YouTube. 0:00:27.440 --> 0:00:30.600 We welcome James Bianco. I will make it as clear 0:00:30.640 --> 0:00:34.360 as I can. No one with a not an exception 0:00:34.440 --> 0:00:40.200 of Mohammad Aalerian. No one nailed resilient inflation coming out 0:00:40.200 --> 0:00:43.479 of COVID like Jim Bianco. He joins US today with 0:00:43.520 --> 0:00:47.840 Bianco Research. Jim published moments ago at Apollo Global Management. 0:00:48.159 --> 0:00:51.880 Torsten slocked that huge respect from his time at Deutsche Bank. 0:00:51.960 --> 0:00:52.880 I quote Jim. 0:00:53.360 --> 0:00:57.680 Container ship departures from China to the US are collapsing. 0:00:58.440 --> 0:01:01.240 When consumers cannot get the the products they want from 0:01:01.280 --> 0:01:05.040 abroad and the products that are imported are more expensive. 0:01:05.480 --> 0:01:09.160 The outcome is a slow down in US consumer spending. 0:01:09.240 --> 0:01:12.920 Gim you know consumption seventy percent of GDP. Are you 0:01:13.000 --> 0:01:15.319 modeling out of tepid real GDP? 0:01:17.240 --> 0:01:17.440 Yeah? 0:01:17.480 --> 0:01:20.280 I think that the real growth in the economy is 0:01:20.360 --> 0:01:23.679 going to slow. I don't have it going anywhere to 0:01:24.000 --> 0:01:26.560 like a recession. I also think the other thing you 0:01:26.640 --> 0:01:29.120 got to keep in mind that gets very little discussion 0:01:29.319 --> 0:01:31.959 is the closing of the US border, because most of 0:01:32.000 --> 0:01:35.399 the population growth of the United States comes from immigration, 0:01:35.760 --> 0:01:39.360 whether it's illegal or legal, and that's going to dramatically 0:01:39.440 --> 0:01:42.000 slow and that's also going to slow down the economy 0:01:42.040 --> 0:01:45.119 as well. But again, I don't think these numbers are 0:01:45.120 --> 0:01:49.280 going to produce anywhere near an inflation or excuse me, 0:01:49.320 --> 0:01:53.520 a recession. And also I don't think that cutting interest 0:01:53.600 --> 0:01:57.080 rates is going to solve these problems. All cutting interest 0:01:57.160 --> 0:02:00.160 rates are going to do is try to inject what 0:02:00.200 --> 0:02:03.040 we have with steroids, and it's just going to produce 0:02:03.080 --> 0:02:03.800 more inflation. 0:02:04.120 --> 0:02:06.240 It's not going to produce higher growth. I'm not going 0:02:06.280 --> 0:02:07.320 to mince words, folks. 0:02:07.680 --> 0:02:10.680 The conversation that John Farrah yesterday with the Secretary of 0:02:10.680 --> 0:02:15.000 Treasury was the single best conversation I heard because it 0:02:15.160 --> 0:02:20.120 allowed us to hear best in theory. John Authors is 0:02:20.200 --> 0:02:23.080 quite critical. He'll be on later in the show. And 0:02:23.120 --> 0:02:26.400 now we have Jim beyonco. What does Bessen get wrong? 0:02:26.520 --> 0:02:30.760 Jim bionco about four or five, six, seven rate cuts? 0:02:32.880 --> 0:02:37.239 Everything? Could I say that he's basically he says such 0:02:37.240 --> 0:02:37.840 a gentleman. 0:02:38.720 --> 0:02:43.919 Yeah, he basically said, any model suggests that that interest 0:02:44.000 --> 0:02:46.360 rates should be cut by one and a half to 0:02:46.400 --> 0:02:49.040 one and three quarter percent. I'll come back and say 0:02:49.040 --> 0:02:52.160 to you that there's no model that says that if 0:02:52.160 --> 0:02:55.280 you have a three percent interest rate, that you should 0:02:55.280 --> 0:02:58.040 be cutting interest rates by that much. And John Author's 0:02:58.480 --> 0:03:00.800 authored does something about that yes esterday, and he'll. 0:03:00.600 --> 0:03:02.000 Talk more about that. 0:03:02.000 --> 0:03:05.520 That the idea that interest rates should go below the 0:03:05.560 --> 0:03:09.320 inflation rate when the inflation rate is this high is unprecedented. 0:03:09.639 --> 0:03:12.600 It's never been there when it's been above three percent. 0:03:13.160 --> 0:03:17.200 It should stay above the inflation rate by some premium. 0:03:17.560 --> 0:03:19.960 And that's why I think that the current funds rate 0:03:20.000 --> 0:03:21.440 at four and a quarter to four and a half 0:03:22.120 --> 0:03:24.800 is very close to neutral. And that's why I was 0:03:24.800 --> 0:03:27.280 saying earlier. If you want to cut interest rates and 0:03:27.320 --> 0:03:30.760 the FED looks like they're going to, you're not going 0:03:30.800 --> 0:03:33.440 to get the desired economic growth outcome. 0:03:33.560 --> 0:03:35.720 You're going to get an inflationary outcome. 0:03:36.680 --> 0:03:39.840 So Jim going back to the labor and again we're 0:03:39.840 --> 0:03:42.280 going to get initial jobs claims today, what is a 0:03:42.400 --> 0:03:47.000 reasonably I guess, decent growing economy. How many new jobs 0:03:47.040 --> 0:03:49.560 per month does an economy need that's growing in a 0:03:49.600 --> 0:03:50.200 decent clip. 0:03:51.480 --> 0:03:55.480 This is the question that economist seem to be skirting within. 0:03:55.600 --> 0:03:58.560 Population growth slowing as much as it has, and the 0:03:58.600 --> 0:04:01.920 President putting out a truth social post last week saying 0:04:01.920 --> 0:04:06.120 we might have net net negative immigration growth, more people 0:04:06.200 --> 0:04:08.640 leaving the country than entering for the first time in 0:04:08.680 --> 0:04:09.600 American history. 0:04:10.240 --> 0:04:13.120 The population growth might be down around zero. 0:04:13.200 --> 0:04:15.080 If that's the case, you can make the case that 0:04:15.280 --> 0:04:18.200 anything and now you quote the American Enterprise Institute is 0:04:18.240 --> 0:04:21.360 put pen to paper on this, anything around ten thousand 0:04:21.440 --> 0:04:24.400 jobs a month might be enough. So when we freaked 0:04:24.400 --> 0:04:27.839 out about nineteen thousand jobs, fourteen thousand jobs, seventy three 0:04:27.880 --> 0:04:31.080 thousand jobs, what we were doing is we were assuming 0:04:31.200 --> 0:04:33.400 this is the way it was when we had the 0:04:33.440 --> 0:04:36.279 border open and we needed eighty or one hundred thousand 0:04:36.360 --> 0:04:39.440 jobs a month. We're now in probably a ten thousand 0:04:39.520 --> 0:04:41.479 job a month range. 0:04:41.800 --> 0:04:43.119 And that is enough jobs. 0:04:43.160 --> 0:04:46.159 And again, if you're going to cut rates because ten 0:04:46.160 --> 0:04:47.839 thousand jobs is too small. 0:04:47.600 --> 0:04:50.320 You're just going to produce inflation. Bottle it, folks. 0:04:50.320 --> 0:04:52.880 What you just heard there from James biancle paul I 0:04:52.960 --> 0:04:56.919 hereby call it the Great Reset That yeah, I'm stealing 0:04:56.920 --> 0:04:59.599 that from Lisa Matteo. She has a great reset with 0:04:59.680 --> 0:05:03.320 on ustibles, but I'm calling it the great reset. People 0:05:03.360 --> 0:05:06.520 don't understand what mister Bianco said, and Paul, you know, 0:05:06.520 --> 0:05:09.359 I got a bunch of questions on this. Please step 0:05:09.400 --> 0:05:12.279 forward to your Paul and continue this discussion, Folks, this 0:05:12.560 --> 0:05:16.080 is so important in honor of Angus Madison about a 0:05:16.200 --> 0:05:17.720 changing America. 0:05:18.040 --> 0:05:20.039 Jim, as a result of kind of what we've just 0:05:20.040 --> 0:05:22.279 been talking about here is, are we in a world 0:05:22.279 --> 0:05:24.560 of just elevated inflationship? 0:05:24.600 --> 0:05:26.840 People get used to what they're paying in the supermarket. 0:05:26.920 --> 0:05:29.400 For example, I think we are. 0:05:29.560 --> 0:05:32.719 I mean, the Fed has a target of two percent. 0:05:33.640 --> 0:05:37.120 They cut interest rates last year, when in September of 0:05:37.200 --> 0:05:40.440 last year, a year ago, when the cornflation rate was 0:05:40.480 --> 0:05:43.920 over three, the cornflation rates three point one. Right now, 0:05:44.080 --> 0:05:47.120 they're about to cut interest rates again with it over three. 0:05:47.760 --> 0:05:50.880 Forget what they say. Forget that, you know, j Paul, you. 0:05:50.800 --> 0:05:52.840 Know, will say in a September press or that we're 0:05:52.839 --> 0:05:55.240 strongly committed to our two percent target. 0:05:55.360 --> 0:05:58.239 They're cutting interest rates with it above three. 0:05:58.560 --> 0:06:00.560 So they're telling you that the two percent target is 0:06:00.600 --> 0:06:02.760 no longer the target is closer to three. 0:06:02.960 --> 0:06:04.080 Now why does that matter. 0:06:04.680 --> 0:06:08.960 Indeed, the website that does jobs did a study and 0:06:09.000 --> 0:06:11.600 they said something like thirty five or forty percent of 0:06:11.640 --> 0:06:15.680 the American public is not getting raises equal to the 0:06:15.720 --> 0:06:19.280 three percent inflation rate. So that's probably the bottom thirty 0:06:19.279 --> 0:06:21.680 five or forty percent of income. So we're just going 0:06:21.720 --> 0:06:25.320 to tell those people, sorry, your job is going to 0:06:25.360 --> 0:06:28.560 continue to give you raised increases above the inflation rate. 0:06:28.640 --> 0:06:30.560 So every time you go to store, you have to 0:06:30.560 --> 0:06:33.200 buy less things because prices are moving up faster than 0:06:33.240 --> 0:06:36.520 your paycheck. And that's where that becomes important. I know 0:06:36.560 --> 0:06:38.720 a lot of people want to stroke their shoulder. Ah two, 0:06:38.800 --> 0:06:41.200 make it three. What's the difference for a third of 0:06:41.200 --> 0:06:43.160 the country. It's a big difference if you can't get 0:06:43.160 --> 0:06:45.400 the inflation Jim, let me ask you the question again, folks. 0:06:45.400 --> 0:06:48.919 An interpolation is where you have a belief and you 0:06:49.000 --> 0:06:51.560 have something else to look at and you try to 0:06:51.680 --> 0:06:56.040 guess or interpolate what the numbers should be. So, Jim Bianco, 0:06:56.120 --> 0:07:00.600 if I have flat population growth as a general statement, and. 0:07:00.600 --> 0:07:02.800 I've got the way we frame. 0:07:02.560 --> 0:07:05.240 The unemployment rate, let's call it four point two four 0:07:05.240 --> 0:07:08.719 point three percent to pick a number when you when 0:07:08.880 --> 0:07:13.160 we do a Bianco interpolation is four point five percent 0:07:13.640 --> 0:07:16.320 the new five percent unemployment rate. 0:07:17.640 --> 0:07:20.000 No, I don't think it is at least in that 0:07:20.080 --> 0:07:22.280 regard because you know, not to get tu wonky, but 0:07:22.320 --> 0:07:26.920 the UH unemployment rate is measured on a household survey 0:07:27.320 --> 0:07:29.560 and that's one of the reasons why I think you 0:07:29.600 --> 0:07:34.040 saw with the payroll report falling, the unemployment rate didn't rise. 0:07:34.520 --> 0:07:39.040 We don't have with slow population growth, every month thousands 0:07:39.040 --> 0:07:43.360 of people entering the workforce, either they're turning eighteen, which 0:07:43.400 --> 0:07:45.800 is one way you can enter the workforce, or they're 0:07:45.840 --> 0:07:49.320 coming into the country new looking for a job. So 0:07:49.360 --> 0:07:53.600 that's why you could have slow imp payroll growth and 0:07:53.680 --> 0:07:56.600 not high unemployment. And I thought it was kind of 0:07:56.600 --> 0:08:01.080 interesting because Chairman pol has mentioned the supply of labor, 0:08:01.120 --> 0:08:04.080 which is their phrase for, you know, slowing population growth, 0:08:04.240 --> 0:08:07.560 and said he's more interested in the unemployment rate than 0:08:07.600 --> 0:08:10.400 he is in the payroll report, because if nobody's coming 0:08:10.440 --> 0:08:12.920 into the country and no one's looking for a job, 0:08:13.320 --> 0:08:17.200 these slow numbers may not produce higher unemployment. So I 0:08:17.240 --> 0:08:19.560 think that you know, the four point two number is 0:08:19.560 --> 0:08:21.120 what it used to be, and that's. 0:08:20.920 --> 0:08:23.000 Why it's not going up. The unemployment rate. 0:08:23.120 --> 0:08:24.800 It's four point two a year ago when we were 0:08:24.800 --> 0:08:26.000 still producing one hundred thousand. 0:08:26.160 --> 0:08:28.760 How do you carry this over to the equity market. 0:08:28.880 --> 0:08:33.120 If we talk about a flatline demographics, does that mean 0:08:33.240 --> 0:08:36.800 a more tipid demure stock market. 0:08:38.080 --> 0:08:40.680 Not initially. I mean the stock market is all about 0:08:40.720 --> 0:08:42.880 cheap money. And if they sees the FED is going 0:08:42.920 --> 0:08:45.960 to be cutting rates and it's celebrating the idea that 0:08:46.120 --> 0:08:48.200 cheaper borrowing costs are coming, and it's going to. 0:08:48.240 --> 0:08:49.120 Keep going from there. 0:08:49.360 --> 0:08:53.080 But over time, yes, it will take away some of 0:08:53.120 --> 0:08:55.640 the growth of the country. Nominal GDP will go down. 0:08:55.679 --> 0:09:00.560 That's real growth plus inflation. That should over time herd 0:09:00.600 --> 0:09:04.480 earnings and over time, let me go on another direction 0:09:04.520 --> 0:09:07.640 here for you, it should help to correct housing because 0:09:07.679 --> 0:09:10.120 one of the problems with housing is there's not enough houses. 0:09:10.160 --> 0:09:13.840 Everybody talks about the affordability crisis. When we have home 0:09:13.880 --> 0:09:17.040 prices at all time highs, we don't have enough houses. Well, 0:09:17.040 --> 0:09:18.640 if you slow down the number of people that meat 0:09:18.679 --> 0:09:22.120 houses over time, that should correct itself too. 0:09:22.480 --> 0:09:23.440 Now it's not all good. 0:09:23.559 --> 0:09:27.400 I mean, you'd rather have growing population faster than slower, 0:09:27.800 --> 0:09:30.040 But those are some of the immediate effects. 0:09:30.120 --> 0:09:33.240 If this continues, jim are you surprised that US dollars 0:09:33.320 --> 0:09:36.240 not rebounded like the US equity markets have rebounded. 0:09:38.320 --> 0:09:40.720 Not really, because I think what the dollar did was 0:09:40.880 --> 0:09:46.040 after Liberation Day, when it disconnected from interest rates, it reconnected, 0:09:46.440 --> 0:09:49.120 and so when you get lower interest rates in the US, 0:09:49.240 --> 0:09:51.280 you tend to get a lower dollar. When you get 0:09:51.360 --> 0:09:53.280 higher interest rates, you tend to get a higher dollar. 0:09:53.559 --> 0:09:56.000 So I think the big driver of the dollar right 0:09:56.040 --> 0:09:59.400 now is back. It wasn't for a while, but it's 0:09:59.480 --> 0:10:02.040 back to being interest rates. So as long as they're 0:10:02.080 --> 0:10:04.559 headed down, I think that's going to keep the dollar 0:10:04.600 --> 0:10:05.520 relatively weak. 0:10:05.800 --> 0:10:08.240 Most currency traders are playing this relative interest. 0:10:08.080 --> 0:10:10.000 Rate game, where can I get the highest interest rate, 0:10:10.200 --> 0:10:12.600 and if our rates are going down, it becomes less attractive. 0:10:12.800 --> 0:10:15.040 Hey, Jimmy, we pretty much three with the second quarter 0:10:15.120 --> 0:10:18.040 earnings here, How did they look to you? Hou's corporate 0:10:18.080 --> 0:10:22.240 America dealing with this current economic environment. 0:10:22.960 --> 0:10:23.800 It's looking great. 0:10:23.960 --> 0:10:26.640 I mean, more than eighty percent of the S and 0:10:26.640 --> 0:10:30.320 P five hundred companies beat. The guidance that the companies 0:10:30.320 --> 0:10:33.200 have given has been the most positive in four years. 0:10:34.000 --> 0:10:36.559 The outlook for the second half of the year looks 0:10:36.720 --> 0:10:37.200 very good. 0:10:37.679 --> 0:10:39.520 So at least in the interim. 0:10:40.040 --> 0:10:42.800 It looks like if you were to judge of Corporate 0:10:42.800 --> 0:10:44.880 America as an economic indicator. 0:10:44.960 --> 0:10:47.400 They're telling you that the economy is doing very well. 0:10:48.160 --> 0:10:50.920 Jim, I think your comments on the Secretary Treasure are 0:10:50.920 --> 0:10:53.360 apt and against John on authors is scathing, and we 0:10:53.559 --> 0:10:56.120 have them on here later. At the beginning, I thought 0:10:56.200 --> 0:11:00.480 John Farrell was brilliant. At the beginning, Jim Bianco, the 0:11:00.520 --> 0:11:05.640 Secretary walked through his belief of the diffusion of tariffs 0:11:06.200 --> 0:11:10.240 from the export country to the importer at the shore, 0:11:10.840 --> 0:11:14.920 to the consumer, and to me, with all I've read, 0:11:14.960 --> 0:11:18.800 including Douglas within the classic at Dartmouth, it was all 0:11:18.880 --> 0:11:24.400 Greek to me, critique the Trump vestent theory that the 0:11:24.440 --> 0:11:28.000 consumer won't pick up the burden of these tariffs, and 0:11:28.040 --> 0:11:31.040 the zeitgeist. This morning, folks, is Michael Barr. He is 0:11:31.320 --> 0:11:33.839 every morning in the food court, folks. Michael Barr has 0:11:33.880 --> 0:11:37.280 a bowl. It's a bowl of raisin bran with a 0:11:37.280 --> 0:11:39.840 banana on it, but it's actually a bowl of bananas 0:11:40.040 --> 0:11:42.880 with some raisin brand I mean, I mean, Jim Bianco, 0:11:43.240 --> 0:11:46.959 the bananas alone are already killing us. Are these tariffs 0:11:47.040 --> 0:11:50.440 going to pass on to the consumer unlike what the 0:11:50.480 --> 0:11:52.000 Secretary of Treasury says. 0:11:53.040 --> 0:11:54.200 I think eventually they are. 0:11:54.320 --> 0:11:57.240 You're right, there's three people that can Let's bear remind 0:11:57.240 --> 0:12:00.680 that terraffs are up by about a quarter of a 0:12:00.760 --> 0:12:04.199 trillion dollars, So to put it in the vernacular, somebody's 0:12:04.240 --> 0:12:07.080 paying an extra two hundred and fifty billion dollars for 0:12:07.320 --> 0:12:10.480 product that we weren't because of tariffs. Who's paying that? 0:12:10.559 --> 0:12:14.000 We got three choices? The export country. That means China 0:12:14.040 --> 0:12:18.240 cuts its rates, cuts its prices, Japan cuts its prices 0:12:18.600 --> 0:12:21.439 of things that they ship to the United States. That 0:12:21.559 --> 0:12:23.880 might have been happening in the first thirty or sixty 0:12:23.960 --> 0:12:25.720 days after Liberation Day. 0:12:25.640 --> 0:12:27.439 But it looks like it's reversing right now. 0:12:27.440 --> 0:12:29.560 They did it as a panic right away, didn't know 0:12:29.559 --> 0:12:31.719 what to do, but now they're starting to reverse that 0:12:31.800 --> 0:12:33.800 and bring it up. The other one is the importer, 0:12:33.880 --> 0:12:36.400 the company that imports it. They're going to cut their 0:12:36.440 --> 0:12:40.800 prices to the consumer. Well, as I mentioned with Corporate America, 0:12:40.840 --> 0:12:43.120 margins are fine and Corporate America earnings. 0:12:42.760 --> 0:12:46.599 Are doing fine. There's no sign that they're eating a quarter. 0:12:46.400 --> 0:12:49.600 For trillion dollars worth of prices. So that leaves the 0:12:49.640 --> 0:12:53.000 price at the store that will eventually start to go up, 0:12:53.040 --> 0:12:56.040 and there's some evidence that those prices are starting to 0:12:56.160 --> 0:12:59.920 remember in May, June, July what you were paying for 0:13:00.080 --> 0:13:03.720 with stuff that was already imported without tariffs. But as 0:13:03.760 --> 0:13:06.680 you get into August, September, October, and further now, the 0:13:06.720 --> 0:13:08.839 stuff that's going to be on the shelves have that 0:13:09.040 --> 0:13:11.560 tariff price embedded in it, and that's going to start 0:13:11.640 --> 0:13:12.480 to creep higher. 0:13:12.679 --> 0:13:14.800 Jim, this has been absolutely brilliant. Thank you so much 0:13:14.880 --> 0:13:18.080 Jim Bianco with us today. I really appreciate it. Bianco 0:13:18.760 --> 0:13:21.440 Research can't say no, folks, this is what surveillance is about, 0:13:21.480 --> 0:13:25.359 the conversation back and forth, not to say someone's. 0:13:25.000 --> 0:13:28.040 Wrong or right, but to engage the debate, and we 0:13:28.120 --> 0:13:31.320 see that right now. Stay with us. 0:13:31.559 --> 0:13:34.800 More from Bloomberg Surveillance coming up after this. 0:13:42.040 --> 0:13:45.640 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:13:45.679 --> 0:13:48.840 weekday afternoons from seven to ten am Eastern Listen on 0:13:48.920 --> 0:13:52.600 Applecarplay and Android Auto with the Bloomberg Business app, or 0:13:52.760 --> 0:13:54.359 watch us live on YouTube. 0:13:54.520 --> 0:13:57.160 This is Joy And as we were talking earlier about 0:13:57.160 --> 0:13:59.560 options of Greek letters, the movements of the market, we 0:13:59.600 --> 0:14:02.640 continue you with Dean Kurrent and scrilled that he could 0:14:02.679 --> 0:14:05.880 be with us today with macro risk advisors. 0:14:06.559 --> 0:14:07.440 Know I'm kid about it. 0:14:07.640 --> 0:14:10.400 I mean my father said, we are almost named Greek 0:14:10.480 --> 0:14:12.480 letters alpha, beta, gamma, delta. 0:14:12.559 --> 0:14:14.400 You didn't do that to your children, did you, No, 0:14:14.679 --> 0:14:17.160 you just spare them, Spare them the Greek letters. 0:14:17.200 --> 0:14:20.480 One of them is theta, which is the guestiment or 0:14:20.640 --> 0:14:23.680 misjudgment of the time function. 0:14:24.360 --> 0:14:25.880 How badly do. 0:14:25.840 --> 0:14:29.800 You see us misjudging our economics now with a tariff 0:14:29.920 --> 0:14:34.760 overlay that completely screws up our theta, completely screws up 0:14:34.800 --> 0:14:35.640 our exxes. 0:14:35.840 --> 0:14:38.760 Well, I would first want to start with the reality 0:14:38.800 --> 0:14:41.000 that Theta has very much been on the mind of 0:14:41.040 --> 0:14:43.680 those who have paid money to own options. 0:14:43.800 --> 0:14:45.960 Options are valuable assets. 0:14:45.960 --> 0:14:48.040 I always say the right to change your mind is 0:14:48.080 --> 0:14:51.080 at the heart of options, and that's valuable bud you 0:14:51.120 --> 0:14:53.960 pay for it. And Theta is a reflection of the 0:14:54.040 --> 0:14:58.600 decay of that option price as time goes on. And 0:14:58.760 --> 0:15:00.760 in an environment in which the S and P is 0:15:00.800 --> 0:15:04.200 realizing ten, there was a stretch for the triple Q 0:15:04.440 --> 0:15:06.960 even over the course of a month where they realize 0:15:07.080 --> 0:15:07.680 was just eight. 0:15:08.360 --> 0:15:09.520 That's a lot of data. 0:15:09.720 --> 0:15:15.520 Your option, your insurance that you've paid for is decaying 0:15:15.560 --> 0:15:18.880 over time when you're not getting the moves, And I think, 0:15:19.720 --> 0:15:22.000 you know, that's an important thing you're looking forward. In 0:15:22.080 --> 0:15:26.920 terms of thinking about tariffs and trying to understand the 0:15:27.040 --> 0:15:29.920 lags with which they operate. I think that's a big thing. 0:15:30.080 --> 0:15:33.080 You know, people say monetary policy operates with lags. I 0:15:33.120 --> 0:15:35.440 think the same can be said for tariffs. 0:15:35.440 --> 0:15:37.000 I should advice with Dean Kerner. 0:15:37.120 --> 0:15:40.640 The amateur piles into an option certain that they're certain, 0:15:41.120 --> 0:15:44.720 and they lose their money. Nassen teleb is one example, 0:15:45.160 --> 0:15:50.200 says bet little bits of money farther out. Discuss those 0:15:50.240 --> 0:15:52.760 two hugely different approaches, right. 0:15:52.880 --> 0:15:57.640 So, I think in an environment of shortening attention spans, 0:15:57.800 --> 0:16:00.920 where it's just the latest tweet, it seems everything is 0:16:00.960 --> 0:16:04.200 happening on a very compressed time horizon. And I think 0:16:04.240 --> 0:16:06.840 investing is an example of that, where we've got this 0:16:07.000 --> 0:16:11.520 proliferation of zero days to expiration options, and I think 0:16:11.560 --> 0:16:15.600 there's with that, there is a misjudging very consistently by 0:16:15.640 --> 0:16:18.280 investors where they look at the nominal price of an 0:16:18.320 --> 0:16:21.160 option and they think, oh, that's a very low price, 0:16:21.240 --> 0:16:23.600 but it's only got one day to expiration. And so 0:16:23.640 --> 0:16:26.520 it's just not worth that much. The opposite's also true. 0:16:26.880 --> 0:16:32.120 Investors misjudge the value of time with respect to longer 0:16:32.240 --> 0:16:36.040 term options, and so you know, as an example with 0:16:36.200 --> 0:16:39.640 the private credit, really what you're doing there is you're 0:16:39.680 --> 0:16:43.160 clipping some coupon some excess yield, but you have given 0:16:43.200 --> 0:16:46.760 away a lot of optionality. And that optionality is the 0:16:46.880 --> 0:16:49.800 right to change your mind, the right to unwind your portfolio. 0:16:50.240 --> 0:16:53.920 So when time horizons get extended without the ability to 0:16:54.320 --> 0:16:58.840 make decisions very quickly, you're effectively in some way short optionality. 0:16:58.880 --> 0:17:00.680 And it's a big reason why I think at this 0:17:00.800 --> 0:17:06.119 moment where I see uncertainty really building and uncertainty being 0:17:06.240 --> 0:17:10.840 inconsistent with the price of insurance, I think it's very 0:17:10.880 --> 0:17:14.600 important to do two things for your portfolio. One, as 0:17:14.640 --> 0:17:16.080 you need to stay long in the S and P. 0:17:16.600 --> 0:17:18.880 I say, it's a benchmark that's very easy to track, 0:17:19.200 --> 0:17:23.640 very difficult to beat, but overlay some insurance basic put 0:17:23.680 --> 0:17:26.119 spread insurance on the S and P five hundred, and 0:17:26.160 --> 0:17:29.920 then also really search for diversifying assets. For me, those 0:17:30.000 --> 0:17:33.400 are gold and bitcoin. I think those are valuable overlays 0:17:33.400 --> 0:17:34.119 on a portfolio. 0:17:34.200 --> 0:17:35.680 At this time in. 0:17:35.600 --> 0:17:38.040 Your market, the futures and options market. Are your clients 0:17:38.480 --> 0:17:41.639 are they buying protection these days? Are they buying risk 0:17:41.800 --> 0:17:43.360 these days? What are they doing well? 0:17:43.400 --> 0:17:46.280 I think it's impossible not to be long risk. 0:17:46.520 --> 0:17:46.760 Boy. 0:17:46.840 --> 0:17:49.680 That S and P is a beast of a bench markets. 0:17:49.880 --> 0:17:53.840 You know, it's long the capex cycle, it's long the megacaps, 0:17:53.880 --> 0:17:58.280 which are delivering so much you know, return, they're delivering 0:17:58.320 --> 0:18:00.920 so much of the of the earth earnings twelve percent 0:18:01.000 --> 0:18:04.320 year over year earnings. But they are buying protection and 0:18:04.320 --> 0:18:08.160 they're frustrated. You know, Tom used that word theta. There's 0:18:08.200 --> 0:18:12.360 an old saying in markets. Theta is the rent on gamma, 0:18:12.520 --> 0:18:15.080 which is gamma is the good part. Gamma gama is 0:18:15.080 --> 0:18:17.560 what you want. It's the convexity that Tom talks about. 0:18:17.600 --> 0:18:19.919 It's the right to change your mind. Theda is the 0:18:19.920 --> 0:18:22.960 tough part. That's the bleed, and there has been a. 0:18:22.840 --> 0:18:23.320 Lot of it. 0:18:23.880 --> 0:18:27.040 You know, we have had gone through a period. Just 0:18:27.080 --> 0:18:30.159 to give you another statistic, the HyG right, which is 0:18:30.240 --> 0:18:33.760 the junk bond ETF This is moving over the last 0:18:33.800 --> 0:18:37.160 month less than twenty basis points a day. It's it's 0:18:37.200 --> 0:18:41.240 as if the index was closed for a month. And again, 0:18:41.640 --> 0:18:45.240 what happens is option prices get pulled down. 0:18:45.680 --> 0:18:47.679 When there's that little movement. 0:18:47.840 --> 0:18:50.399 And so the setup here as we enter what I 0:18:50.400 --> 0:18:54.679 think is a seasonally valuable time to own options. As 0:18:54.720 --> 0:18:59.080 we come back from vacation, people sharpen their pencils after 0:18:59.160 --> 0:19:01.520 Labor Day, and it just tends to be the case 0:19:02.280 --> 0:19:04.840 with some consistency that there is a little bit more 0:19:04.880 --> 0:19:08.760 of a risk off character to the market late September 0:19:08.960 --> 0:19:11.800 through October. So I think this is a time when 0:19:11.960 --> 0:19:14.320 at least our advice to our clients at Macro Risk 0:19:14.359 --> 0:19:17.439 Advisors is, let's take a very good look at your 0:19:17.480 --> 0:19:22.480 portfolio what it's exposed to, and overlay some protection. Don't 0:19:22.520 --> 0:19:24.800 break the bank, because you can over insure yourself. 0:19:24.880 --> 0:19:25.520 That's for sure. 0:19:26.400 --> 0:19:28.600 You can buy too much protection and if it doesn't 0:19:28.600 --> 0:19:32.840 pay off, your left sacrificing return. But there are easy 0:19:32.920 --> 0:19:38.120 to do basic and I would argue cheap option overlays. 0:19:37.640 --> 0:19:39.320 To do that can protect the portfolio. 0:19:39.440 --> 0:19:42.639 What's the one you like the most, really simple, something 0:19:42.720 --> 0:19:46.720 like a two month put spread on the SMP struck 0:19:46.760 --> 0:19:49.359 it five percent out of the money is your top strike. 0:19:49.760 --> 0:19:52.960 And then to reduce the cost of it, which is 0:19:53.000 --> 0:19:56.159 important because again the realized volatility is low, so you 0:19:56.640 --> 0:19:59.399 can't spend too much. So sell something like a twenty 0:19:59.440 --> 0:20:01.600 percent out of the money put that's going to get 0:20:01.640 --> 0:20:04.440 you through October, which is again that seasonal period of 0:20:04.520 --> 0:20:05.119 higher evolve. 0:20:05.240 --> 0:20:07.200 Can you hedge MAG seven? 0:20:09.240 --> 0:20:09.600 Listen? 0:20:09.680 --> 0:20:13.480 The MAG seven is forty percent of the sub or 0:20:13.480 --> 0:20:15.640 at least the top ten stocks. That's not the MAG seven, 0:20:15.680 --> 0:20:18.320 but the top ten stocks are forty percent. They're also 0:20:18.640 --> 0:20:21.959 remarkably twenty six percent of the MSCI World Index. 0:20:22.000 --> 0:20:22.840 That's the top ten. 0:20:23.320 --> 0:20:24.119 I did not know that. 0:20:24.480 --> 0:20:28.600 That's the American MAG seven are one quarter of the 0:20:28.720 --> 0:20:30.240 ginormous global index. 0:20:30.359 --> 0:20:33.000 It's incredible, you know, I think I just saw a 0:20:33.040 --> 0:20:37.040 statu was probably on the Bloomberg terminal. In Vidia is 0:20:37.080 --> 0:20:40.520 bigger than the entire German stock market in terms of marketing. 0:20:40.560 --> 0:20:41.399 How do you hedge that? 0:20:41.600 --> 0:20:44.160 I mean, you know, you know, I know everybody out 0:20:44.160 --> 0:20:46.479