WEBVTT - Surveillance: U.S. Not In Liquidity Trap, Henry Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 0:00:13.960 --> 0:00:17.560 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 --> 0:00:29.040 Bloomberg dot Com, and of course on the Bloomberg. Let's 0:00:29.040 --> 0:00:31.120 go to someone who's been here longer than the first 0:00:31.200 --> 0:00:33.440 day to help me. Diana Moa thrilled that she could 0:00:33.520 --> 0:00:36.680 join us with JP Morkan Asset Management today. Dane, if 0:00:36.720 --> 0:00:38.919 you were writing a research note for a dummy like 0:00:39.040 --> 0:00:42.760 me today, as Mr Farrell just mentioned, what's the salient 0:00:42.960 --> 0:00:47.200 point indicated by yield? Right now? What's the yield thing 0:00:47.680 --> 0:00:53.360 that our listeners need to know about. They are saying that, um, 0:00:53.520 --> 0:00:55.960 the FED needs to act, and they need to act 0:00:56.240 --> 0:01:00.320 um into a deeper cutting cycle. So I think um, 0:01:00.560 --> 0:01:04.319 John's actually nailed it. It's the sense that if they're 0:01:04.319 --> 0:01:08.119 waiting for uncertainties to be resolved come July, if those 0:01:08.200 --> 0:01:11.320 uncertainties are unresolved, they might start to look as if 0:01:11.360 --> 0:01:13.520 they're behind the curves. And I think the bond market 0:01:13.560 --> 0:01:15.399 is starting to first that in a bit are we 0:01:15.600 --> 0:01:17.880 are we really? When everything is sata and done here 0:01:17.880 --> 0:01:21.319 with the oddities of GDP and growth, are we really 0:01:21.360 --> 0:01:24.720 setting ourselves up for a Bruce Casman economy? I mean, 0:01:24.800 --> 0:01:27.959 even though the FED won't admit it is the zeitgeist 0:01:28.040 --> 0:01:32.480 now a US one point five percent, except nobody will 0:01:32.480 --> 0:01:37.840 talk about it. Well, you can't discount that given where 0:01:38.280 --> 0:01:41.720 bonds deals are globally, right, we have an increasing stock 0:01:41.760 --> 0:01:45.600 of negative guielding bonds um Once more, we have ECB 0:01:45.800 --> 0:01:48.400 indicating that they're willing to go farther into negative rates. 0:01:48.480 --> 0:01:50.840 You have the bug against starting to state that they're 0:01:50.840 --> 0:01:54.560 willing to consider all tools in the context of what's 0:01:54.560 --> 0:01:58.280 happening externally. So beyond this economy, I think a low 0:01:58.360 --> 0:02:02.560 bond yield environment is actually here for now. Yeah, wells 0:02:03.360 --> 0:02:05.520 as John and I was wrong, you were right. So 0:02:06.160 --> 0:02:08.440 we should cut that and replay it every morning and 0:02:08.480 --> 0:02:10.320 put it in a highlight real Danna is great to 0:02:10.360 --> 0:02:12.720 have you with us on the program. You run an 0:02:12.720 --> 0:02:14.800 e M fund, You're in and out of the market. 0:02:14.840 --> 0:02:16.440 That's why I love talking to you about what is 0:02:16.440 --> 0:02:19.880 happening in emerging markets right now. There is a belief 0:02:19.919 --> 0:02:21.880 that people will be staffed for income, they will be 0:02:21.960 --> 0:02:25.040 pushed to go out somewhere Danna. Will they be pushed 0:02:25.040 --> 0:02:27.480 to go back into em in a more pronounced way 0:02:27.480 --> 0:02:30.080 than maybe we have seen over the last twelve months. 0:02:31.040 --> 0:02:33.640 I think they will. We've already seen a lot of 0:02:33.680 --> 0:02:37.520 money coming back into the hard currency so sovereign hard 0:02:37.520 --> 0:02:40.680 currency debt in the last few months. What we're starting 0:02:40.720 --> 0:02:43.680 to see now is with the dollar turning a lot 0:02:43.720 --> 0:02:46.799 more interest in local markets. So that's been the bit 0:02:46.880 --> 0:02:50.359 that's been lugging flows because of we've come from an 0:02:50.400 --> 0:02:54.240 eight year dollar bull trend. I think as as the 0:02:54.280 --> 0:02:57.160 belief that we've seen the pick in the dollar builds momentum, 0:02:57.560 --> 0:03:00.760 investors will look beyond our dollars in non needed assets 0:03:00.760 --> 0:03:03.160 and to those emergine market economies that need to be 0:03:03.200 --> 0:03:05.720 cutting rates where you still get paid at descent pickup 0:03:05.720 --> 0:03:08.639 in yield um. I think for me it's just pretty 0:03:08.680 --> 0:03:11.040 much a no brainer. If you think the dollar has picked, 0:03:11.320 --> 0:03:13.320 what kind of yield can we pick up at the moment? 0:03:13.360 --> 0:03:18.680 Dina in local currency, so the index level yielded about 0:03:18.760 --> 0:03:22.639 five point eight percent. But then within that these stories, um, 0:03:22.720 --> 0:03:25.079 you can go to a market like South Africa where 0:03:25.080 --> 0:03:27.480 you're getting paid close to temp scent. On the longer 0:03:27.600 --> 0:03:31.920 end of the curve UM on a story that's still decent. UM. 0:03:31.960 --> 0:03:34.079 You can look at places like Mexico, which I think 0:03:34.160 --> 0:03:38.120 is really interesting right now. Um. Historically the Mexican rate 0:03:38.640 --> 0:03:40.520 rate cup would move one to one with the FED. 0:03:40.880 --> 0:03:43.960 They haven't really done that time round because of what's 0:03:44.000 --> 0:03:46.240 been happening with the trade. So I think that's probably 0:03:46.280 --> 0:03:49.480 one that could reply reprice quite aggressively and you get 0:03:49.480 --> 0:03:51.800 paid around seven and a half eight percent to own 0:03:51.880 --> 0:03:56.200 Mexican bonds. Diana very quickly. The equity market, so many 0:03:56.240 --> 0:03:59.200 people feel so behind the railly what's the mood in 0:03:59.240 --> 0:04:02.440 the bond market? It are people? Do they feel way 0:04:02.520 --> 0:04:09.920 behind what the industries are doing? UM. I'd say generally 0:04:10.000 --> 0:04:15.560 fixed income investors have traded this rally well because we 0:04:15.600 --> 0:04:18.839 came in quite cautious into the start of the year. UM. 0:04:18.880 --> 0:04:22.120 I think the disconnected is equities are rallying UM, and 0:04:22.200 --> 0:04:25.760 bonds are rallying. But for you know, you'd expect these 0:04:25.760 --> 0:04:29.320 things to move in different directions. UM. So everyone came 0:04:29.360 --> 0:04:32.440 into the year cautious, actives kept going actives. Investors filled 0:04:32.440 --> 0:04:35.400 they've missed that we came in cautious, we were long duration, 0:04:35.640 --> 0:04:39.440 and that trade has worked out Dynamo. Thank you so much. 0:04:39.880 --> 0:04:57.520 Appreciate right now we want to pause an investment. If 0:04:57.600 --> 0:05:02.839 you are behind, if you're looking at indicas the markets. 0:05:03.400 --> 0:05:06.520 I'm looking at sp X right now. Year to date up, 0:05:06.800 --> 0:05:09.320 um and I got market, Kevin, Where did that? Somebody's 0:05:09.360 --> 0:05:13.880 been playing with my screen. Um, I'm falling apart year 0:05:13.920 --> 0:05:18.880 to date of SPX. This is the interview of the day. 0:05:18.960 --> 0:05:24.520 William Smade buys Value. He is in the nineti percentile 0:05:24.720 --> 0:05:29.000 plus across all sorts of timelines. He's hitting the ball 0:05:29.080 --> 0:05:31.640 out of the hedge fund park. He joins us now 0:05:31.720 --> 0:05:34.960 from our studios in London. Bill Smede, let's back up 0:05:34.960 --> 0:05:37.720 and look at it. How did you perform so well? 0:05:37.960 --> 0:05:41.960 How are you garnering double digit performance where so many 0:05:42.000 --> 0:05:46.640 others are falling behind? Well, I I thank you very 0:05:46.720 --> 0:05:50.599 much for the kindness. The main thing that we're doing, 0:05:50.600 --> 0:05:54.160 I think different than most of the value community is 0:05:54.400 --> 0:05:56.559 most value buyers going and try to buy a fifty 0:05:56.600 --> 0:05:59.080 cent dollar and then in the next year and a 0:05:59.080 --> 0:06:02.680 half of it goes to ninety cents they sell it automatically. 0:06:03.120 --> 0:06:06.159 We're trying to buy outstanding companies when they get to 0:06:06.279 --> 0:06:09.480 be a fifty cent dollar and then hope to hold 0:06:09.520 --> 0:06:12.200 them for a long long time. And if there's anything 0:06:12.240 --> 0:06:14.720 that's helped in the last ten years, it's holding your 0:06:14.720 --> 0:06:17.839 winners to a fault so that that that's that's a blessing. 0:06:17.880 --> 0:06:19.880 Once in a great while, you'll round trip a stock. 0:06:19.920 --> 0:06:22.359 You'll you'll buy it at fifty, it'll go to a hundred, 0:06:22.360 --> 0:06:23.720 and I'll go it all the way back to fifty. 0:06:23.760 --> 0:06:27.520 But most of all the time, most most of the time, 0:06:27.839 --> 0:06:31.680 the mathematics of common stock investing are that when you're wrong, 0:06:31.720 --> 0:06:34.080 you can only lose a hundred percent of what you 0:06:34.120 --> 0:06:36.280 put in if you paid cash. But if you're right, 0:06:36.400 --> 0:06:38.880 you can go up many times your money. And those 0:06:39.000 --> 0:06:41.880 three and five and seven and ten beggars make a 0:06:41.960 --> 0:06:44.160 huge difference over a ten year times. Jenni Ferroll what 0:06:44.320 --> 0:06:46.760 he just said there, you can take down to people 0:06:46.800 --> 0:06:51.640 trading five intervals or five year interviews. We heard this 0:06:51.760 --> 0:06:56.880 the other day. It's incredibly important to let your winners go. 0:06:57.279 --> 0:06:59.960 Remember the rebalancing interview we had with a gentleman. Yeah, 0:07:00.040 --> 0:07:03.440 number of weeks ago. Yeah, I remember, he's on your 0:07:03.920 --> 0:07:08.080 che chevon Steve Chevalon nailed Bill Smede one a one, 0:07:08.120 --> 0:07:10.560 so Bill. Let's talk about the smide Value Fund. It's 0:07:10.560 --> 0:07:13.000 got about a billion dollars in assets. Just north of that. 0:07:13.040 --> 0:07:15.920 You've returned a round about fifteen percent year today. And 0:07:16.000 --> 0:07:19.600 what you guys do is pick fifteen to thirty companies 0:07:19.680 --> 0:07:22.720 rather so twenty five to thirty companies within that portfolio. 0:07:22.840 --> 0:07:25.240 But talk to me about why that's the optimal number 0:07:25.680 --> 0:07:29.520 for you guys in that fund. Really good question, uh. 0:07:29.640 --> 0:07:34.400 I think of the benefit of diversification and common stock 0:07:34.400 --> 0:07:39.720 ownership comes with the twentie security. So we have over 0:07:39.800 --> 0:07:43.400 fifty of our portfolio the top ten. Think of us 0:07:43.440 --> 0:07:46.160 as a producer of a play or a producer of movies. 0:07:46.640 --> 0:07:50.440 We audition actors and actresses uh, based on our eight 0:07:50.440 --> 0:07:54.440 criteria for a common stock selection. If they enter the portfolio, 0:07:54.680 --> 0:07:57.040 then in the first three years they're basically on probation 0:07:57.160 --> 0:07:59.600 to see what kind of audience they can draw. And 0:07:59.640 --> 0:08:01.920 you move move up the ladder in our portfolio by 0:08:01.960 --> 0:08:04.560 your success because we let our winners run. So you 0:08:04.640 --> 0:08:07.640 might think, and typically we might start with a two 0:08:07.680 --> 0:08:09.760 percent position and maybe go up to three if we 0:08:09.800 --> 0:08:12.160 have a lot of confidence, and then five or six 0:08:12.240 --> 0:08:14.320 years later, if you've been successful, you might work your 0:08:14.360 --> 0:08:16.800 way up into the top ten. How does that strategy 0:08:16.840 --> 0:08:20.320 work in a legitimate correction, plus moving to a bear market? 0:08:20.560 --> 0:08:24.880 Forget about the gloom and negative What does the elasticity 0:08:24.920 --> 0:08:30.240 of your portfolio if you're down sp X? Wonderful question 0:08:30.840 --> 0:08:33.960 by only good one of the day Bill enjoy it. Yeah. So, 0:08:34.400 --> 0:08:38.120 our eight criteria for common stock selection are mostly qualitative, 0:08:38.679 --> 0:08:43.280 so wide mode, long history of profitability, consistently high free 0:08:43.320 --> 0:08:48.320 cash flow, shareholder friendliness, strong balance sheet, et cetera. So 0:08:48.520 --> 0:08:51.880 most of the eight criteria qualitative. When you get in 0:08:52.040 --> 0:08:56.120 difficult markets and they're virtually guaranteed to come, those qualitative 0:08:56.200 --> 0:09:00.400 characteristics allow you to be patient in that environment. By 0:09:00.400 --> 0:09:02.559 the way, since you asked it. The other thing that's 0:09:02.600 --> 0:09:05.360 really helped us the last three to five years is 0:09:05.720 --> 0:09:08.200 we're back to what we used to be before the 0:09:08.240 --> 0:09:10.480 O seven to oh nine to bacle, because in O 0:09:10.640 --> 0:09:14.000 seven at O nine, the normal qualitative things did not 0:09:14.080 --> 0:09:17.360 protect you, because the hedge funds had to sell what 0:09:17.400 --> 0:09:19.920 they could sell because they couldn't sell what they couldn't sell, 0:09:20.280 --> 0:09:22.800 and since they had to sell what they could sell, 0:09:22.840 --> 0:09:26.160 we owned what they could sell. Now on the decline 0:09:26.240 --> 0:09:30.760 in August through December, of last year, we outperformed. In 0:09:30.760 --> 0:09:34.080 in May, when the market fell sharply, we outperformed. We're 0:09:34.160 --> 0:09:39.280 back to the normal historical ability of quality or dividend 0:09:39.320 --> 0:09:42.360 yield to defend you on the downside, which makes us 0:09:42.440 --> 0:09:45.480 very excited for the future because we're very positive about 0:09:45.559 --> 0:09:48.680 what we're doing. The price rings ratio discount to the 0:09:48.800 --> 0:09:52.640 SNP is among the highest we've had. But but we're 0:09:52.679 --> 0:09:54.880 also conscious of fact that the chart of the day 0:09:54.880 --> 0:09:59.360 for Bloomberg is momentum has blistered value. Uh and and 0:09:59.520 --> 0:10:01.520 momentum is due for a come up in sometime in 0:10:01.559 --> 0:10:03.640 the next year or two. So let's talk about where 0:10:03.640 --> 0:10:05.760 the opportunities on right now for you guys. You want 0:10:05.840 --> 0:10:08.360 buying small caps that people have never heard of, and 0:10:08.480 --> 0:10:10.800 you're buying large caps, So wont me through a company 0:10:10.880 --> 0:10:14.160 names and White you like these companies right now? Well, 0:10:14.320 --> 0:10:17.880 let's just be in the news. Uh CBS is talking 0:10:17.920 --> 0:10:21.760 about getting remarried to Viacom, and there are there's some 0:10:21.920 --> 0:10:24.440 rumors out there that they would like very much for 0:10:24.520 --> 0:10:28.760 David Zasloft that runs Discovery Inc. To To run a 0:10:28.760 --> 0:10:31.840 a three headed monster rather than the two headed monster. 0:10:32.559 --> 0:10:37.000 We don't necessarily think That's a great idea because the 0:10:37.040 --> 0:10:42.400 big behemoth market compization companies, the Amazons and Apples and 0:10:42.400 --> 0:10:47.000 and uh Netflix, their biggest problem is they're they're just 0:10:47.160 --> 0:10:52.359 pretenders in content. They're just pretending that their content producers 0:10:52.720 --> 0:10:57.000 and and the best UH profit margins in the entire 0:10:57.080 --> 0:11:02.080 industry are unscripted television. UH and and UH. I might 0:11:02.120 --> 0:11:07.200 add that, Joseph Mr. Seed, that's right. In intercom, the 0:11:07.240 --> 0:11:10.440 guy that the manor owner of Intercom is loading the boat. 0:11:10.440 --> 0:11:13.240 He's buying up every every share of intercomy cam, so 0:11:13.240 --> 0:11:17.080 he agrees with you completely. So unscripted television has ten 0:11:17.160 --> 0:11:21.480 percent of the cost of of of of scripted TV 0:11:21.600 --> 0:11:24.199 and movies. And so here are these tech companies who 0:11:24.240 --> 0:11:27.160 are loaded with confidence, loaded with arrogance, and they're spending 0:11:27.160 --> 0:11:30.320 money in Hollywood like drunken sailors on leave when the 0:11:30.360 --> 0:11:32.880 truth of it is they could pay seventy dollars a 0:11:32.960 --> 0:11:38.000 share to buy the premier UH content UH in television, 0:11:38.240 --> 0:11:43.360 which is h G t V, food network, travel channels, 0:11:43.400 --> 0:11:49.319 Catch Shark week, I D You're you're on a roll bill? 0:11:49.360 --> 0:11:52.800 I got a Bloomberg's Surveillance bill, s U. Harvey, we're 0:11:52.800 --> 0:11:55.840 doing a direct listing, Um, Bill, I got time for 0:11:55.920 --> 0:11:58.959 one more question. What are the hedge funds getting wrong? 0:11:59.200 --> 0:12:01.720 You are one of those humble guys. I've ever met 0:12:02.000 --> 0:12:08.199 your truly folks. Clock and David Harrow numbers you're likeentile percentile. 0:12:08.600 --> 0:12:12.280 All these smart guys off Madison Avenue and Mayfair are 0:12:12.320 --> 0:12:19.319 getting crushed. What are they doing wrong? Well, there's there 0:12:19.640 --> 0:12:23.040 are thousands of people that want to make money in 0:12:23.520 --> 0:12:27.120 six to twelve month durations and they all have access 0:12:27.160 --> 0:12:31.360 to massive computer power. And the problem is the laws 0:12:31.360 --> 0:12:34.720 of supply and demand haven't changed. There's hardly anyone that 0:12:34.800 --> 0:12:38.000 wants to work in five to ten youre durations and 0:12:38.400 --> 0:12:41.640 and so by what we've been left the five to 0:12:41.720 --> 0:12:46.000 ten year duration to a few other players, and there's 0:12:46.160 --> 0:12:49.880 not much there now. The negative is the capital should 0:12:49.920 --> 0:12:52.520 be coming to us, and that has not been the case. 0:12:52.880 --> 0:12:57.160 Uh that there's net outflows even among meritorious her strategies. 0:12:57.800 --> 0:13:04.080 Yester carlike con Oxy Darko Ana Darko overpaid by Oxy. 0:13:04.160 --> 0:13:07.959 Did you look at that transaction? Uh, we're researching it. 0:13:08.160 --> 0:13:11.120 And by the way, Icon has been following us around 0:13:11.120 --> 0:13:15.360 for the last five or six years and others. Yeah, 0:13:15.480 --> 0:13:18.679 Carl's out in Central Park with his two dogs walking around. 0:13:18.760 --> 0:13:22.240 He's not following Bill smeed, you think he's following you? No, 0:13:22.480 --> 0:13:24.880 just kidding. He happened to be an activist in a 0:13:24.960 --> 0:13:28.400 number of stocks that we already owned. So the bottom 0:13:28.480 --> 0:13:33.199 line is uh, since value looks extremely attractive relative to momentum, 0:13:33.880 --> 0:13:37.640 I don't think they overpaid for Anadarko. Thank you, Bill, 0:13:37.720 --> 0:13:57.040 sat appreciate a huge response if you're an economist, without question, 0:13:57.160 --> 0:13:59.960 the easy thing to do as a market economist, he's 0:14:00.040 --> 0:14:03.559 to blame your bond guys, blame your equity guys, Jannet 0:14:03.600 --> 0:14:07.439 Henry is professional and not doing this because our bond 0:14:07.480 --> 0:14:09.400 guys and our equity guys have been on the edge 0:14:09.400 --> 0:14:13.640 of perfect No one combined has that a bond equity 0:14:13.720 --> 0:14:18.040 house call like the Hong Kong and Shanghai Banking Corporation 0:14:18.600 --> 0:14:20.760 in the last I'm going to say eight months. She'll 0:14:20.760 --> 0:14:23.440 tell me to the month, maybe longer than that. The 0:14:23.520 --> 0:14:28.560 Steve Major Ben Laidler tandem has been lights out, Jane. 0:14:28.680 --> 0:14:31.160 What is it like to work with those guys? How 0:14:31.200 --> 0:14:36.640 did they influence Laidler's optimism on equity? Steve Major nailing 0:14:37.120 --> 0:14:40.200 lower interest rates? What does that do to shape your 0:14:40.280 --> 0:14:44.680 forecast day to day. Well, Tom, we all talk to 0:14:44.720 --> 0:14:47.200 each other, you know, and I think the economic view 0:14:47.360 --> 0:14:50.200 for the last few years, especially the lower for longer call, 0:14:50.320 --> 0:14:52.720 we work very close with speed Major. We've been of 0:14:52.800 --> 0:14:54.960 the view for the last five years at the pickup 0:14:54.960 --> 0:14:57.440 and wage growth was going to be very slow, very gradual, 0:14:57.520 --> 0:15:00.000 for a number of reasons to do with labor market disruption. 0:15:00.040 --> 0:15:02.760 And must admit over the last year or so that 0:15:02.880 --> 0:15:06.000 the kind of optimism on bonds and optimism on equities 0:15:06.280 --> 0:15:09.120 seem to fit a little oddly, And to be honest, 0:15:09.480 --> 0:15:11.960 over the last few weeks, I've been surprised myself at 0:15:12.000 --> 0:15:14.000 the extent to which everything is good news for the 0:15:14.040 --> 0:15:16.720 equity market. If the Fed cutting rates because things are 0:15:16.720 --> 0:15:19.080 going wrong, that's good news for equities. But if we 0:15:19.120 --> 0:15:21.760 get a trade deal, that's good news for equities, whereas 0:15:21.800 --> 0:15:25.280 the bond market obviously is much more kewed towards the 0:15:25.280 --> 0:15:30.120 downside risks on global ground. Does a traditional punchball model 0:15:30.400 --> 0:15:33.640 work And if it is, where's the punch ball right 0:15:33.680 --> 0:15:40.440 now overflowing on the floor. UM, I think it's it's 0:15:41.040 --> 0:15:44.040 it's difficult, Um, you know, it's going into the meeting 0:15:44.120 --> 0:15:47.120 yesterday of the Fed, it was how can the Fed 0:15:47.240 --> 0:15:50.640 out of the market? What could they possibly do? Um? 0:15:50.680 --> 0:15:52.680 You know, we thought maybe if they cut rates in June, 0:15:52.720 --> 0:15:55.240 the market maybe even happier. But it was almost the 0:15:55.320 --> 0:15:59.840 perfect set of dots. It's basically, are you know, suggesting 0:15:59.840 --> 0:16:03.560 that most of the Fed, you know, nearly half of 0:16:03.560 --> 0:16:06.200 the Fed is now ready to cut rates by fifty 0:16:06.200 --> 0:16:09.800 basis points this year, but there's no pre commitment to 0:16:09.880 --> 0:16:12.440 actually do it. Their growth numbers were good, they were 0:16:12.520 --> 0:16:15.840 not downgraded, they were edged up. Unemployment rate was edged down. 0:16:16.320 --> 0:16:19.040 But we seem to be now on their projections in 0:16:19.080 --> 0:16:23.360 this perfect world where they're about to cut interest rates 0:16:23.400 --> 0:16:26.360 because inflation is lower than expected. Are we yeah? I 0:16:26.360 --> 0:16:29.400 think there's a lot of optimism priced into the equity market. 0:16:29.440 --> 0:16:32.720 Are we too close to a liquidity trap? Or is 0:16:32.760 --> 0:16:39.560 it something different this time? Let's say, Okay, it's premature, 0:16:39.560 --> 0:16:41.720 I guess, but it's radio Come on, stay with me here. 0:16:41.720 --> 0:16:44.200 It's premature, I get there. But if we get one 0:16:44.280 --> 0:16:47.200 to nobody's looking forward. But what if it happens three 0:16:47.280 --> 0:16:49.800 rate cuts? Are we right back to where we were 0:16:49.800 --> 0:16:54.280 in oh eight or nine ten. I think a liquidity 0:16:54.320 --> 0:16:56.720 trap is when no one is borrowing, no matter how 0:16:56.800 --> 0:17:00.440 low or negative interest rate. It's very clear that corporate 0:17:00.480 --> 0:17:02.760 sector has been borrowing in the US for the last 0:17:02.760 --> 0:17:06.200 few years. And we've seen the resurgence in mortgage refinancing 0:17:06.240 --> 0:17:09.080 in the US as long term interest rates have come down. 0:17:09.119 --> 0:17:11.720 I don't think the US is in an aquidity trap. 0:17:11.960 --> 0:17:14.720 I think what the US is seeing is that, of course, 0:17:14.880 --> 0:17:17.719 inflation in the US is influenced by global developments. And 0:17:17.760 --> 0:17:19.439 that was a lot of what we heard yesterday. It 0:17:19.480 --> 0:17:22.600 was about global uncertainties, global p m s, and they 0:17:22.640 --> 0:17:25.879 matter to what are uncertainties to me? They are less 0:17:26.000 --> 0:17:31.480 data dependent, less function, less reaction function in much more 0:17:31.760 --> 0:17:37.119 things tangible like trade and trade war. Is that what 0:17:37.160 --> 0:17:42.240 we mean by modern uncertainties? I think yeah, trade is 0:17:42.240 --> 0:17:44.160 a big part of it. And you know, a lot 0:17:44.200 --> 0:17:46.720 of the slowed the way in which trade has impacted 0:17:47.000 --> 0:17:49.360 the trade trade wars has impacted over the last year 0:17:49.440 --> 0:17:51.879 has been on investments. We've seen a slowdown in demand 0:17:51.880 --> 0:17:54.639 for capital goods. We've also seen particular things related to 0:17:54.680 --> 0:17:58.119 the auto sector and to the semiconductor sector. Industry is 0:17:58.200 --> 0:18:01.359 very weak, and the longer industry is weak, the greater 0:18:01.400 --> 0:18:05.080 the likelihood that that does feed through into employment and 0:18:05.119 --> 0:18:08.240 into consumer spending, which, let's be honest, is the real 0:18:08.320 --> 0:18:11.280 area of resilience. Even in the Euro Area. Over the 0:18:11.320 --> 0:18:14.639 course of last year, consumer spending has still been pretty 0:18:14.680 --> 0:18:18.399 solid because unemployment rates and weight growth is now at 0:18:18.400 --> 0:18:21.760 the highest level for a decade. Okay, wage growth is 0:18:21.760 --> 0:18:24.879 the highest level, but a lot of America feels the anks. 0:18:24.960 --> 0:18:27.320 This is a really interesting point, and that there's a 0:18:27.359 --> 0:18:31.680 part of America not participating. And there's another part which 0:18:31.720 --> 0:18:35.440 Chairman Paul mentioned yesterday. We're you know, consumer data is 0:18:35.440 --> 0:18:38.720 pretty good, service sector is pretty good, etcetera. Is that 0:18:38.760 --> 0:18:42.480 going to be the surprise staggering the September eighteenth, whatever 0:18:42.520 --> 0:18:45.200 that two meetings out is, is that we still get 0:18:45.640 --> 0:18:51.280 good consumer data. Maybe we get okay, unemployment numbers. Yes, 0:18:51.480 --> 0:18:54.720 I think, well that's already in the FED Central forecast 0:18:54.760 --> 0:18:57.240 to some degree. Of course, we just had another solid 0:18:57.480 --> 0:19:00.280 initial jobless claims. They fell to a new lower level. 0:19:00.600 --> 0:19:03.040 So I think what the Fed was saying yesterday is that, 0:19:03.200 --> 0:19:06.040 you know, the lower the unemployment falls, the greater the 0:19:06.160 --> 0:19:08.280 likelihood that more and more people who have not so 0:19:08.480 --> 0:19:12.000 far benefited from the recovery do start to benefit. But 0:19:12.040 --> 0:19:14.520 it would appear that just a continuation of the solid 0:19:14.520 --> 0:19:18.399 consumer data is not for the FED to remain on hold. 0:19:18.600 --> 0:19:21.640 It is still that global weakness and what it means 0:19:21.640 --> 0:19:25.760 for global inflation, and therefore US inflation will be what 0:19:25.840 --> 0:19:28.080 tips the balanced for the FED if it cuts right. So, 0:19:28.160 --> 0:19:31.439 Jani Hearry, you're saying with our question, Jeron Pal's central 0:19:31.440 --> 0:19:35.400 banker to the world, that's what I'm hearing. Yes, yes, 0:19:35.560 --> 0:19:38.600 it is. And remember last year there was a lot 0:19:38.600 --> 0:19:41.560 of the FED tightening on the back of strong US growth, 0:19:41.600 --> 0:19:44.399 which was helped along by fiscal stimulus. Because it was 0:19:44.440 --> 0:19:46.720 out said tightening that impacted on the rest of the 0:19:46.760 --> 0:19:49.040 world and contributed to the slow down and growth elsewhere 0:19:49.040 --> 0:19:51.639 in the world. My first question the Vice Chairman Clara 0:19:51.680 --> 0:19:56.040 tomorrow has to be on his word salad. I associate 0:19:56.119 --> 0:19:58.880 that with the vice chairman. We heard Chairman Pile talk 0:19:58.920 --> 0:20:02.800 about salad yesterday. What would be your question, Janet Henry 0:20:02.840 --> 0:20:08.760 for the vice chairman. My my question for the Vice 0:20:08.840 --> 0:20:12.520 chairman is, uh, well, I suppose a lot of it 0:20:12.560 --> 0:20:16.199 would still be to do with the labor market, and 0:20:16.280 --> 0:20:19.359 this is something that talked about in his recent speech. 0:20:19.400 --> 0:20:21.880 You know, economists always talk about the stars it's all 0:20:21.880 --> 0:20:24.920 in the stars. Be our star. The neutral rate, um, 0:20:24.960 --> 0:20:28.280 and you star is the new thing, the maximum level 0:20:28.320 --> 0:20:31.440 of employment. They don't know what that is. Um Clarada 0:20:31.480 --> 0:20:33.760 actually mentioned that it would be. He now think it's 0:20:34.000 --> 0:20:37.200 you know, around four percent, possibly below. We're already below 0:20:37.920 --> 0:20:41.800 four percent. How low does he think unemployment in the 0:20:41.920 --> 0:20:45.879 US without wage growth picking up? Jeneen, I'm gonna give 0:20:45.880 --> 0:20:47.399 you a shout out if I get to that question 0:20:47.440 --> 0:20:50.440 with Vice Chairman Clarata. But this is important, folks, and 0:20:50.440 --> 0:20:53.520 and and Jenneh Henry, this is just so key. Is 0:20:53.680 --> 0:20:57.480 you star in this dream of a perfect unemployment rate? 0:20:58.080 --> 0:21:01.960 Is a tangible and an agg regated basis? Or are 0:21:02.000 --> 0:21:04.720 we so polarized that we have two or even three 0:21:04.800 --> 0:21:08.080 Americas and we really can't get there even if we 0:21:08.480 --> 0:21:13.120 want to get there. It is, But also it matters 0:21:13.800 --> 0:21:17.480 for how this whole expansion plays out. You know, we've 0:21:17.520 --> 0:21:20.560 become used to over the last few decades of most 0:21:21.440 --> 0:21:25.320 FED tightening cycles being a response too higher than expected inflation. 0:21:25.560 --> 0:21:27.720 They have to squeeze inflation out of the system. That 0:21:27.800 --> 0:21:30.439 requires a sharper slowdown. If we are now back in 0:21:30.480 --> 0:21:32.840 this world whereas you know, you're alluding to you've got 0:21:32.880 --> 0:21:35.960 different parts of the labor market seeing some pick up 0:21:35.960 --> 0:21:38.600 in wage growth. If that's coming through more through the 0:21:38.640 --> 0:21:41.520 profits cycle, it's back to an old fashioned business cycle. 0:21:41.880 --> 0:21:44.760 You could see different parts of the economy and being 0:21:44.760 --> 0:21:47.520 affected in a different way, and that means that it's 0:21:47.560 --> 0:21:50.919 it's not necessarily just about the response to inflation, but 0:21:51.040 --> 0:21:53.720 we could still get areas of the economy slowing down 0:21:53.760 --> 0:21:56.000 because they're the parts that are being hit more on 0:21:56.040 --> 0:21:58.400 the profit snide. This has been wonderful, Jenna Henry think 0:21:58.400 --> 0:22:17.000 of so much. Hs BC sure over day Bloomberg opinion 0:22:17.080 --> 0:22:20.520 columnists covering all things technology really wanted to get her 0:22:20.560 --> 0:22:24.439 thoughts on Slack. That company's raising capital today? I should 0:22:24.480 --> 0:22:27.440 know Tom that Bloomberg Beta, the venture capital arm of 0:22:27.440 --> 0:22:31.359 Bloomberg LP, is an investor in Slacks. Make that disclosure, 0:22:31.840 --> 0:22:36.359 yep um So again Slack raising capital? Can you just 0:22:36.400 --> 0:22:38.960 give it? Walk us through kind of what's happening today? 0:22:39.040 --> 0:22:42.240 Who's raising capital? Is it? How this you know? Listening 0:22:42.280 --> 0:22:44.560 this direct listing is different from an I P O. Well, 0:22:44.600 --> 0:22:47.400 the way it's different is that they're actually not raising capital. 0:22:47.480 --> 0:22:49.520 The company is not raising The company is not raising capital. 0:22:49.600 --> 0:22:52.879 So Basically, you know, Slack over the years as a 0:22:52.920 --> 0:22:57.280 private company has issued about five hundred million shares in 0:22:57.320 --> 0:23:02.359 its lifetime, and basically today it declares those five million 0:23:02.400 --> 0:23:07.560 shares are in essence available for trade. So the company 0:23:07.640 --> 0:23:11.080 is not selling new shares to to a new crop 0:23:11.119 --> 0:23:13.760 of investors, as typically happens in an I p O. 0:23:14.160 --> 0:23:17.520 It's simply decides two days the day that we become 0:23:17.560 --> 0:23:22.040 a public company, and it makes shares available for trade. 0:23:22.119 --> 0:23:25.280 So people who previously owned Slack shares when the company 0:23:25.320 --> 0:23:29.200 was private are now able in principle at least to 0:23:29.200 --> 0:23:32.199 to sell those shares to willing buyers, and buyers are 0:23:32.240 --> 0:23:35.680 going to line up potentially to purchase those shares, and 0:23:35.720 --> 0:23:38.639 we'll see what happens. How many of million will end 0:23:38.720 --> 0:23:42.080 up in new hands. It's a good question. So part 0:23:42.080 --> 0:23:44.080 of the issue with a direct listing, right is that 0:23:44.359 --> 0:23:46.840 it's a little bit less controlled than an I p O. 0:23:47.000 --> 0:23:50.560 So it's not like the company can say we determine 0:23:50.560 --> 0:23:56.639