WEBVTT - Bloomberg Surveillance TV: October 20th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.240 Terminal and the Bloomberg Business app. Stocks in chin KaiA 0:00:37.280 --> 0:00:40.240 as investors look past credit concern Sarah Hunt of Alpine 0:00:40.240 --> 0:00:43.559 Saxon Woods, seeing the wall of worry becoming somewhat Steve Hurt, 0:00:43.800 --> 0:00:46.360 She writes, the following credit is usually the culprit in 0:00:46.360 --> 0:00:49.800 stock market selloffs. Add to that concerns about equity market 0:00:49.880 --> 0:00:52.640 valuations and we go a pop pyre and volatility and 0:00:52.760 --> 0:00:54.360 lower in yields and equities. 0:00:54.560 --> 0:00:55.720 Sarah joins us now for more. 0:00:55.720 --> 0:00:58.000 Sarah, good morning, good morning. Have we got a credit 0:00:58.040 --> 0:00:59.720 problem or an isolated fraud? 0:00:59.720 --> 0:01:02.880 Isha, That is the big question, and I think that 0:01:02.880 --> 0:01:05.360 that is something that is going to come under increasing scrutiny. 0:01:05.400 --> 0:01:07.240 You saw what happened with the regional banks. You saw 0:01:07.280 --> 0:01:09.720 some of the business development companies have some issues with 0:01:09.720 --> 0:01:12.520 their stock prices because people start to worry about that 0:01:12.600 --> 0:01:15.520 whole private credit boom and what is underneath the surface 0:01:15.560 --> 0:01:17.240 where you can't see it, and whether or not that's 0:01:17.280 --> 0:01:19.679 going to be a problem. Right now, it looks to 0:01:19.720 --> 0:01:22.319 be somewhat isolated, but every time there's another thing that 0:01:22.360 --> 0:01:24.560 comes out, it becomes a bigger problem. And that sort 0:01:24.560 --> 0:01:26.720 of goes to Jamie Diamond's comment, right, So I think 0:01:26.760 --> 0:01:30.199 that is going to be the issue and how much 0:01:30.280 --> 0:01:33.039 that continues for the next couple of weeks, months, days, 0:01:33.200 --> 0:01:35.120 it really depends on whether or not something bigger happens. 0:01:35.160 --> 0:01:36.680 So did you find it odd that the Diamond comment 0:01:36.720 --> 0:01:38.520 became the headline for last week at the same time 0:01:38.560 --> 0:01:40.559 earnings knocked it out of the park on Wolf Street 0:01:40.560 --> 0:01:41.479 and stocks finished the week. 0:01:41.560 --> 0:01:44.480 Hia, Not really, because it sort of goes to that 0:01:44.800 --> 0:01:46.880 list of things that people are concerned about, and I 0:01:46.920 --> 0:01:49.120 think that people have been talking about private credit and 0:01:49.200 --> 0:01:52.320 talking about some of those illiquid areas of the market 0:01:52.360 --> 0:01:53.960 and whether or not there are going to be issues 0:01:54.000 --> 0:01:55.880 in there, and you can't see what the valuations are 0:01:56.160 --> 0:01:58.960 for a while. So it's more that once something comes out, 0:01:59.040 --> 0:02:01.600 then it becomes a bigger problem. So I think that 0:02:01.720 --> 0:02:03.600 part of that was just the fact that something did 0:02:03.640 --> 0:02:06.240 happen and everybody was a little bit worried about that happening. 0:02:06.280 --> 0:02:08.200 So it's not surprising that that got latched onto. 0:02:08.280 --> 0:02:10.200 It's hard to make the argument right now looking across 0:02:10.200 --> 0:02:12.200 the banks that net charge officer spired and out of 0:02:12.200 --> 0:02:16.080 control nonperforming loans are increasing, and I see much of 0:02:16.080 --> 0:02:17.440 that at all now. It's not to say that it 0:02:17.480 --> 0:02:19.520 can't happen, right and I can see why people are 0:02:19.520 --> 0:02:22.120 worrying that we go from zero to sixty pretty quickly. 0:02:22.160 --> 0:02:23.880 I understand all that, but it's the one I think 0:02:24.080 --> 0:02:26.680 outside of the issues we've discussed the support that need 0:02:26.760 --> 0:02:27.160 to worry. 0:02:27.520 --> 0:02:29.560 I think the issue in credit is not with the 0:02:29.560 --> 0:02:32.120 big money center banks, which reported first and reported really 0:02:32.160 --> 0:02:34.040 good numbers. I think it's more down in the regional 0:02:34.080 --> 0:02:36.240 banks and in some of those private credit areas, and 0:02:36.320 --> 0:02:39.120 I think that that's the concern, and to the extent 0:02:39.160 --> 0:02:42.240 that that's not the biggest spending cohort. To your point earlier, 0:02:42.240 --> 0:02:45.600 then it's not that it doesn't matter it's more that 0:02:45.680 --> 0:02:48.040 who's caught up in it and how bad is it 0:02:48.080 --> 0:02:50.359 going to be? And if it's not that bad, it's 0:02:50.360 --> 0:02:52.280 not going to matter. If it's a few banks that 0:02:52.360 --> 0:02:54.320 have a problem here or there, it's not an issue. 0:02:54.360 --> 0:02:55.880 But this sort of reminds me of the issue with 0:02:55.919 --> 0:02:58.760 treasuries last year, when it was like, oh my goodness, 0:02:58.760 --> 0:03:00.000 now all of a sudden, these banks that you would 0:03:00.160 --> 0:03:02.399 have thought of have the gap because of the marked 0:03:02.400 --> 0:03:05.320 to market problem. So it really depends on where this goes. 0:03:05.320 --> 0:03:07.680 If it stays somewhat small and contained. I don't think 0:03:07.680 --> 0:03:09.280 it's a big issue, but it's definitely one of the 0:03:09.280 --> 0:03:10.480 things that people are concerned about. 0:03:10.639 --> 0:03:13.320 It's staying small and contained, at least at the moment, 0:03:13.400 --> 0:03:14.799 is what it feels like. Do you think all this 0:03:14.960 --> 0:03:17.600 spend and focus on AI investment can kind of put 0:03:17.720 --> 0:03:20.359 pest infiltration to the side. 0:03:20.320 --> 0:03:22.960 As long as that continues and it doesn't look like 0:03:23.040 --> 0:03:24.799 that's got to crack in it, right, Because every time 0:03:24.840 --> 0:03:26.440 you see a crack in the AI story, whether or 0:03:26.440 --> 0:03:28.040 not there was something that went around I think last 0:03:28.040 --> 0:03:30.440 week about how many hits this happened and whether or 0:03:30.440 --> 0:03:32.320 not that was smaller than it was and what does 0:03:32.400 --> 0:03:34.600 that mean? And I think that anytime you get a 0:03:34.680 --> 0:03:37.600 question about that, people start to question the premise of 0:03:37.640 --> 0:03:39.920 why valuations are so high. On the other hand, we 0:03:39.960 --> 0:03:41.880 do have rates coming down, and that makes a difference 0:03:41.880 --> 0:03:43.360 as well, whether or not it makes a difference to 0:03:43.360 --> 0:03:46.040 the economy as such, it definitely makes a difference to 0:03:46.120 --> 0:03:49.960 investors into the stock market because lower roads do make 0:03:50.080 --> 0:03:50.880 room for those. 0:03:50.800 --> 0:03:54.400 Multiple Jentathan access question last hour. Is it more important 0:03:54.400 --> 0:03:57.480 to hear from the tech mega giants than it is 0:03:57.480 --> 0:03:58.400 from the federal Reserve? 0:03:59.360 --> 0:04:02.280 It's both, But right now, if there's any slippage and 0:04:02.360 --> 0:04:04.240 earnings from the tech guys, I think you're going to 0:04:04.240 --> 0:04:08.080 see a more wobbly, more volable market because with the 0:04:08.200 --> 0:04:10.040 lack of data and with the assumption that the Fed's 0:04:10.040 --> 0:04:11.520 going to cut at the end of this month, I 0:04:11.560 --> 0:04:13.680 think that right now that is not as much of 0:04:13.680 --> 0:04:16.479 an open question. But if you see anything in the earnings, 0:04:16.560 --> 0:04:18.280 or if you see any concern in the earnings on 0:04:18.360 --> 0:04:22.119 the tech side, or a slowdown meaningfully somewhere that can't 0:04:22.120 --> 0:04:25.360 be explained by we don't have this capacity to give 0:04:25.400 --> 0:04:27.640 people something, and then I think people really start to 0:04:27.640 --> 0:04:30.760 worry about what that looks like and that spend direction 0:04:30.880 --> 0:04:31.720 looks like I have You've. 0:04:31.600 --> 0:04:33.720 Got a company it'd be more focused on than others. 0:04:33.960 --> 0:04:36.320 Next Wednesday, the same day the FED meets, will have 0:04:36.400 --> 0:04:39.520 Microsoft meta alphabet. The rest will follow. Is the one 0:04:39.560 --> 0:04:40.760 that stands out more than others. 0:04:41.600 --> 0:04:44.120 I think it's the compendia of those who are spending 0:04:44.160 --> 0:04:46.880 the most right, So it's all of them. And if 0:04:46.920 --> 0:04:50.400 anybody says something odd and everybody else doesn't say it, 0:04:50.480 --> 0:04:52.159 then I think it's okay. If you get a bunch 0:04:52.240 --> 0:04:54.680 of different comments that are like, well, we're pulling back 0:04:54.680 --> 0:04:56.520 a little bit here, or the year of a year 0:04:56.560 --> 0:04:58.880 spend is going to be x instead of X plus ten, 0:04:59.120 --> 0:05:00.880 I think it's really going to be a question of 0:05:00.880 --> 0:05:04.360 what they say collectively, because collectively that huge spend in 0:05:04.440 --> 0:05:07.360 the top of the you know, basically data center market 0:05:07.400 --> 0:05:09.280 is what's been driving a lot of this stuff, So 0:05:09.360 --> 0:05:11.080 everybody kind of has to be on the same page. 0:05:11.120 --> 0:05:13.800 I think there's two very different approaches between China and 0:05:13.839 --> 0:05:16.359 the US. Of course, those two countries will become the 0:05:16.400 --> 0:05:18.120 folks of attention over the next week when the two 0:05:18.160 --> 0:05:20.520 leaders get together at the end of this month. China's 0:05:20.520 --> 0:05:23.159 shooting for efficiency we saw that with Deep Seek at 0:05:23.200 --> 0:05:25.360 the start of the year. America at the moment, based 0:05:25.400 --> 0:05:27.680 on what we're hearing from these companies, is just shooting 0:05:27.720 --> 0:05:31.600 for massive capacity, investing tons and tons of money. It's 0:05:31.640 --> 0:05:34.520 then approach that as an investor you feel more comfortable with. 0:05:35.200 --> 0:05:38.880 Well, I think that right now it's harder for the 0:05:39.000 --> 0:05:41.640 US to jump in and do the efficiency thing. They're 0:05:41.680 --> 0:05:44.480 going to have to because the reality on the ground 0:05:44.600 --> 0:05:47.720 is the power that's needed for currently what is extrapolating 0:05:47.760 --> 0:05:50.560 from the demand is way bigger than we have. So 0:05:50.600 --> 0:05:53.120 there has to be an efficiency argument ultimately, and I 0:05:53.160 --> 0:05:54.960 think that there will be. The question is going to be, 0:05:55.040 --> 0:05:57.680 hoo does that effect the most? And I think at 0:05:57.680 --> 0:06:00.480 the moment right now, it's just a race to get 0:06:01.320 --> 0:06:02.760 all the chips on the board. It's sort of like 0:06:02.760 --> 0:06:04.320 the dark Fiber in two thousand. It's like, we just 0:06:04.320 --> 0:06:05.640 need to put fiber down. We just need to put 0:06:05.640 --> 0:06:08.919 fiber down, and at some point that has to work together. 0:06:09.279 --> 0:06:10.920 And I think that there will be efficiency in the 0:06:11.000 --> 0:06:12.520 United States because I think there has to be, and 0:06:12.560 --> 0:06:15.159 the innovation will get there because you just don't have power. 0:06:15.160 --> 0:06:16.400 Prices are already higher. 0:06:16.480 --> 0:06:19.000 It's already an issue, it's only going to get worse, 0:06:19.040 --> 0:06:21.000 and I think that that's something that will end up 0:06:21.040 --> 0:06:24.200 being solved. How exactly and who benefits the most, I'm 0:06:24.240 --> 0:06:24.680 not sure yet. 0:06:24.760 --> 0:06:26.520 Yeah, how exactly is it going to be solved, because 0:06:26.520 --> 0:06:29.719 obviously potentially government regulation have to come into play. When 0:06:29.720 --> 0:06:31.960 you think about the trade talks, that's I'm sure part 0:06:31.960 --> 0:06:35.640 of your wall of worry. Were you given some comfort 0:06:35.640 --> 0:06:37.279 over the weekend by the President's comments? 0:06:38.000 --> 0:06:40.240 I think it's really difficult a comfort just in the 0:06:40.279 --> 0:06:43.200 de escalation, right. The words themselves are not as important 0:06:43.240 --> 0:06:45.200 as the tone, and if the tone is de escalation 0:06:45.360 --> 0:06:48.000 on both sides, that's probably better for markets. It's when 0:06:48.040 --> 0:06:50.080 the tone started to get very hot on both sides 0:06:50.080 --> 0:06:52.640 that market's got very wobbly. And I think that that's 0:06:52.839 --> 0:06:55.640 one of the things where we just can't know the outcome, 0:06:55.640 --> 0:06:57.360 and what they say and what actually happens on the 0:06:57.360 --> 0:06:59.159 ground are not necessarily going to be the same thing, 0:06:59.160 --> 0:07:01.680 because it almost never is when people are doing negotiations, 0:07:01.960 --> 0:07:04.240 So we won't know what the final terms are in 0:07:04.279 --> 0:07:06.960 any near term. But the idea of less fighting versus 0:07:06.960 --> 0:07:07.919 more fighting is better. 0:07:08.120 --> 0:07:10.880 But when you look at a meeting like that, are 0:07:10.880 --> 0:07:15.120 you concerned that it just bleeds into twenty twenty six 0:07:15.240 --> 0:07:17.200 if it doesn't go well, some of those hot rhetoric. 0:07:17.440 --> 0:07:19.480 Well, all of the tariff stuff is bleeding into twenty 0:07:19.480 --> 0:07:21.560 twenty six, right Like in April of this year, we 0:07:21.560 --> 0:07:23.440 were all convinced that something was going to happen, and 0:07:23.440 --> 0:07:25.160 it was very short term, and now all of a sudden, 0:07:25.360 --> 0:07:28.040 that has been pushed out throughout the entire year. So now, yes, 0:07:28.240 --> 0:07:30.080 it will bleed into twenty twenty six. And I don't 0:07:30.080 --> 0:07:33.040 think that's necessarily a concern as much as it's reality 0:07:33.040 --> 0:07:34.640 on the ground that piece of the wall of worry 0:07:34.720 --> 0:07:36.960 is going to continue to have to be climbed, and 0:07:37.040 --> 0:07:39.600 not just with China, but in general. China is obviously 0:07:39.680 --> 0:07:40.600 one of the biggest issues. 0:07:40.640 --> 0:07:42.440 And just quickly, what's your favorite sector right now? 0:07:42.520 --> 0:07:42.920 And why? 0:07:43.440 --> 0:07:44.760 Well, I think if you look at some of the 0:07:44.760 --> 0:07:47.160 places like defense, which has already run a lot, but 0:07:47.200 --> 0:07:50.080 you've got some big thematic stuff that's not just AI right, 0:07:50.120 --> 0:07:52.160 so Golden Dome, so some of the spending that's going 0:07:52.200 --> 0:07:54.760 to come that you know is coming is very helpful. 0:07:54.800 --> 0:07:56.720 So there are areas in the industrials and defense that 0:07:56.760 --> 0:07:58.480 are going to play into that and I think that 0:07:58.560 --> 0:07:59.960 this is a very good time to be looking a 0:08:00.200 --> 0:08:02.680 longer term thematic investing because you know that there are 0:08:02.720 --> 0:08:04.360 places where they're going to continue. 0:08:04.000 --> 0:08:05.800 To spend Least Favorite. 0:08:06.280 --> 0:08:08.840 Least favorite is tough. Consumers really hard right now, because 0:08:08.840 --> 0:08:10.239 I think that a lot of the low end consumer 0:08:10.320 --> 0:08:12.360 is having a hard time. So consumer is mixed, and 0:08:12.400 --> 0:08:15.360 even high end consumer is not perfect. So I think 0:08:15.360 --> 0:08:17.120 that there are some issues there. But it's interesting that 0:08:17.160 --> 0:08:19.720 the iPhone is finally getting that upgrade cycle that Danives 0:08:19.720 --> 0:08:21.520 has been looking for, So I think that there's some 0:08:21.600 --> 0:08:23.760 good I think there's some good news in that in 0:08:23.760 --> 0:08:24.840 that regard. 0:08:25.520 --> 0:08:26.160 Stay with us. 0:08:26.480 --> 0:08:39.200 More Bloomberg Surveillance coming up after this. Investors looking for 0:08:39.240 --> 0:08:41.600 signs of strength beyond AI, with a busy week of 0:08:41.679 --> 0:08:44.680 erning still ahead. In this, McFee of Oxford Economics saying, 0:08:44.720 --> 0:08:47.600 outside of AI, the world and the US are in 0:08:47.679 --> 0:08:51.520 an investment recession, but it's unlikely to become a broader downturn. 0:08:51.640 --> 0:08:52.120 And it's joints. 0:08:52.160 --> 0:08:53.520 It's now for more and it's good morning and welcome 0:08:53.520 --> 0:08:55.800 back to New York. Well, can you play twn the 0:08:55.840 --> 0:08:58.280 numbers for us? So what is AI and basically what 0:08:58.320 --> 0:09:00.360 does the rest of the world look like yes. 0:09:00.480 --> 0:09:02.960 I think the first thing to mention really is that 0:09:03.040 --> 0:09:04.480 a lot of people are focused a lot on the 0:09:04.559 --> 0:09:08.280 AI investment numbers, and they're not necessarily thinking about imports 0:09:08.320 --> 0:09:11.599 associated with them, so their net impact on growth is 0:09:11.640 --> 0:09:15.840 actually quite small just from the investment portion outside of AI. 0:09:15.880 --> 0:09:18.480 Of course, investments been contracting for a couple of quarters, 0:09:18.480 --> 0:09:20.960 but you know, we don't need to get too worried 0:09:20.960 --> 0:09:24.240 about that. Investment recessions are relatively common. Go back through 0:09:24.240 --> 0:09:26.960 the G seven for example, They're about twice as common 0:09:27.000 --> 0:09:30.040 as normal recessions, so one doesn't necessarily lead to the other. 0:09:30.400 --> 0:09:32.959 I think the key point for growth really is how 0:09:33.000 --> 0:09:35.839 these tech stocks are doing the wealth impact on the 0:09:35.920 --> 0:09:38.760 high end consumer and how that's actually driving growth, not 0:09:38.800 --> 0:09:40.440 necessarily just the AI investment. 0:09:40.640 --> 0:09:43.000 This goes to the bifurcation of the US economy right now. 0:09:43.200 --> 0:09:45.640 The low income cohort is really really struggling, and it 0:09:45.679 --> 0:09:47.800 has been for a while a number of years. Is 0:09:47.800 --> 0:09:49.880 there any reason to believe that's going to migrate up 0:09:50.120 --> 0:09:52.240 to upper income A cohorts as well? 0:09:52.720 --> 0:09:56.440 I think that's the real uncertainty. Remember, the low income households, 0:09:56.480 --> 0:09:59.320 the bottom twenty percent of the income distribution are only 0:09:59.360 --> 0:10:02.520 about nine percent of overall consumer spending, so it's manageable 0:10:02.520 --> 0:10:05.880 if it stays there. But they are driven by very 0:10:05.920 --> 0:10:08.760 different things than the top end, so there's not a 0:10:08.920 --> 0:10:12.240 not a direct move from one to the other. We are, 0:10:12.320 --> 0:10:15.960 of course in a very regressive tax environment in terms 0:10:15.960 --> 0:10:17.959 of tariffs, but also in terms of the one big 0:10:18.000 --> 0:10:21.880 beautiful bill that we'll see. Low income consumers have their 0:10:21.880 --> 0:10:25.000 income fall by two three percentage points, whereas at the 0:10:25.000 --> 0:10:28.320 top end go by two or three percentage points. So 0:10:28.520 --> 0:10:30.840 I'm not sure that there's a direct link between the two. 0:10:30.840 --> 0:10:32.560 I think we've got to watch the stock market really 0:10:32.600 --> 0:10:33.800 to worry about that contagion. 0:10:34.000 --> 0:10:36.120 How fad does a stock market go to explaining how 0:10:36.120 --> 0:10:38.679 we can have an economy where employment levels have dropped 0:10:38.720 --> 0:10:41.240 off to the extent they have and retail sales have 0:10:41.280 --> 0:10:42.959 remained run up there. 0:10:43.400 --> 0:10:45.840 Well, I think that's a big part. But remember with 0:10:45.920 --> 0:10:48.719 the labor market, we're seeing two shocks, and this is 0:10:48.760 --> 0:10:49.960 the thing we've got to get a bit used to 0:10:49.960 --> 0:10:52.680 in economics, actually, as we've had twenty years of demand 0:10:52.760 --> 0:10:56.360 side shocks and supply side being relatively benign nowadays, though 0:10:56.400 --> 0:10:58.480 of course we're seeing much more adverse supply shocks, and 0:10:58.520 --> 0:11:01.439 that's what's happening in the labor market. We've got negative 0:11:02.520 --> 0:11:05.679 supply side shocks alongside a cooling and demand, and that's 0:11:05.679 --> 0:11:08.600 how you can have this no fire, no higher labor market. 0:11:08.679 --> 0:11:11.520 When you talk about this investment recession and the fact 0:11:11.559 --> 0:11:14.319 that we're not going to have a real recession, can 0:11:14.360 --> 0:11:19.240 you US remain exceptional even with this investment depression? 0:11:19.280 --> 0:11:19.679 Almost? 0:11:20.440 --> 0:11:23.240 Yeah, I think it can because ultimately, you know, let's 0:11:23.240 --> 0:11:24.960 think about the three big shocks in the world at 0:11:24.960 --> 0:11:28.360 the moment. First, you've got deglobalization, the impacts of tariffs 0:11:28.600 --> 0:11:32.160 that clearly is going to impact to the surplus countries Germany, Europe, 0:11:32.360 --> 0:11:34.960 China much more than it is Europe. There's a strong 0:11:35.000 --> 0:11:37.880 correlation in our forecast revisions over the last year given 0:11:38.040 --> 0:11:42.960 trade balances. Secondly, you know, on the AI side, clearly 0:11:43.000 --> 0:11:45.400 the US is not only benefiting much more at the 0:11:45.440 --> 0:11:47.920 moment in terms of the investment and consumption picture, but 0:11:48.040 --> 0:11:53.400 should also do so in long term productivity. And then thirdly, 0:11:53.760 --> 0:11:57.560 on the sort of policy dynamics, the US is not 0:11:57.600 --> 0:12:00.000 constrained in its fiscal position, whereas you look around the world, 0:12:00.280 --> 0:12:02.120 there are a lot of economies who are at the moment. So, 0:12:02.160 --> 0:12:05.320 if anything, there's more upside I think to the policy 0:12:05.360 --> 0:12:07.320 stimulus in twenty twenty six for the US. 0:12:07.440 --> 0:12:09.839 Given this backdrop and the investment we are seeing in AI, 0:12:10.320 --> 0:12:12.880 how important is it going to be these tech earnings 0:12:12.880 --> 0:12:13.680 that are upcoming. 0:12:14.360 --> 0:12:17.319 I think it's really crucial. Actually, you know, it's a 0:12:17.400 --> 0:12:21.000 rally that for some has built on these earnings. If 0:12:21.000 --> 0:12:23.480 there's any sort of pullback in the market, really might 0:12:23.520 --> 0:12:26.400 well pull out the rug from underneath those high end consumers. 0:12:26.440 --> 0:12:28.800 I don't see that happening at the moment, but that 0:12:28.880 --> 0:12:29.880 I think is the key risk. 0:12:30.160 --> 0:12:32.600 Do you think it's become more important than the FED decision? 0:12:32.920 --> 0:12:35.240 And by important, I mean more important for the economy 0:12:35.360 --> 0:12:37.360 the onies we get from the megatech fires next week 0:12:37.480 --> 0:12:39.120 versus what Chairman Poun's got to say. 0:12:39.840 --> 0:12:42.160 Well, this is probably my unpopular opinion, but I have 0:12:42.280 --> 0:12:45.200 to say I'm not sure that FED rate carts really 0:12:45.240 --> 0:12:47.160 mean a huge amount for the economy, Certainly not in 0:12:47.160 --> 0:12:49.240 the next six months. Well, you know, if you look 0:12:49.280 --> 0:12:52.080 at the structure of debt in the economy, it's far 0:12:52.160 --> 0:12:54.000 longer now than it has been in the past. We've 0:12:54.000 --> 0:12:56.800 got a situation, where As in most rate culling cycles, 0:12:56.880 --> 0:12:58.800 we're seeing rates come down, but the long end of 0:12:58.840 --> 0:13:02.320 the yell curve rise deepening happening. So financial conditions aren't 0:13:02.320 --> 0:13:06.080 pulling back or easing as much as many people might 0:13:06.120 --> 0:13:08.960 think just by looking at the FED funds, whereas obviously 0:13:09.520 --> 0:13:12.240 equity stocks are having a much bigger impact on overall 0:13:12.280 --> 0:13:15.440 financial conditions in that first phase of path through. 0:13:15.840 --> 0:13:18.240 Interest rates are going to come down again next week. 0:13:18.280 --> 0:13:20.080 Most people think they're going to continue to come down. 0:13:20.120 --> 0:13:21.960 Are you suggesting that's not going to alleviate some of 0:13:21.960 --> 0:13:23.160 the issues in the labor market. 0:13:23.960 --> 0:13:27.480 Yeah, I think that. You know, fundamentally, FED rate cuts 0:13:27.600 --> 0:13:31.200 don't have a huge impact on employments, certainly not in 0:13:31.240 --> 0:13:33.640 the next six months. And remember that a big part 0:13:33.679 --> 0:13:35.680 of what's going on in the labor market is a 0:13:35.720 --> 0:13:38.280 supply shock, and central banks can't really touch that. 0:13:38.640 --> 0:13:42.560 What kind of risk is the feder reserve embracing if 0:13:42.600 --> 0:13:44.960 they're going to be lulled into an easing cycle by 0:13:45.000 --> 0:13:47.760 misdiagnosing the labor markets the extend that obviously, based on 0:13:47.800 --> 0:13:49.360 what you've said, you think they are. 0:13:50.640 --> 0:13:52.240 I wouldn't say that they're going to make a huge 0:13:52.240 --> 0:13:54.920 polity mistake or anything like that. Ultimately, we're talking about 0:13:54.960 --> 0:13:58.400 moving at twenty five basis points, you know, and ultimately 0:13:58.520 --> 0:14:01.920 from a stance that's pretty restrictive by all measures to 0:14:02.000 --> 0:14:03.800 something that's a bit more of a gray area. Who 0:14:03.840 --> 0:14:06.559 knows where neutral is. So it's not like we're going 0:14:06.600 --> 0:14:09.800 to go in most forecasts anyway into a period where 0:14:09.880 --> 0:14:13.240 we'll have really really loose policy. So I don't think 0:14:13.240 --> 0:14:14.920 it's going to be a big mistake, but you know, 0:14:15.080 --> 0:14:17.199 clearly it's something they can correct pretty quickly. 0:14:16.960 --> 0:14:19.560 On our lead, not this side of May, the other 0:14:19.600 --> 0:14:21.320 side of May, once we get a new leadership of 0:14:21.360 --> 0:14:23.760 the Fed Reserve, who knows for the future holds? How's 0:14:23.760 --> 0:14:26.119 that debate plan? And in Europe what kind of conversations 0:14:26.200 --> 0:14:28.120 you guys have in looking across the pond to the 0:14:28.200 --> 0:14:29.200 US At the moment. 0:14:29.920 --> 0:14:33.120 I think there's a lot being talked about institutional quality 0:14:33.160 --> 0:14:35.240 of the US and whether that plays some sort of 0:14:35.360 --> 0:14:37.360 role in the obvious decline and the dollar that we've 0:14:37.400 --> 0:14:39.600 seen so far this year. To be honest, I think 0:14:39.600 --> 0:14:42.880 that's a little bit overplayed. You know, who knows who 0:14:42.920 --> 0:14:46.400 we'll see as the next FED chair, But if they move, 0:14:46.680 --> 0:14:49.640 you know, rates by let's say fifty one hundred basis 0:14:49.680 --> 0:14:54.000 points relative to where the market has some price Now, 0:14:54.080 --> 0:14:57.240 I'm not sure that's actually a massive change, to be 0:14:57.280 --> 0:14:59.440 honest with you, And frankly, you know, we've got a 0:14:59.520 --> 0:15:02.800 very very data dependent FED at the moment. Maybe a 0:15:02.880 --> 0:15:04.880 FED that looks a little bit more towards the forecast 0:15:04.960 --> 0:15:07.120 and things where policy should go and what impact it 0:15:07.160 --> 0:15:09.400 should have would be a good thing. 0:15:11.080 --> 0:15:11.720 Stay with us. 0:15:12.000 --> 0:15:24.920 More Bloomberg surveillance coming up after this gold bouncing offer 0:15:25.000 --> 0:15:29.000 selloff and precious metals on Friday, Ongoing economic uncertainty keeping 0:15:29.040 --> 0:15:31.960 the commodity close to all time highs. Tom's haid saw 0:15:32.000 --> 0:15:34.120 Us of tatig Us, writing, we suspect the gold is 0:15:34.160 --> 0:15:37.000 telling markets that the usc old curve needs to steepen 0:15:37.280 --> 0:15:39.800 in order to tends to maintain their status as the 0:15:39.840 --> 0:15:42.480 primary safe haven. Tom joins us. Now for more, Tom, 0:15:42.520 --> 0:15:45.000 welcome to the program. Understand the theory, but based on 0:15:45.040 --> 0:15:46.920 a price section, does it back it up? 0:15:49.080 --> 0:15:49.320 Yes? 0:15:49.320 --> 0:15:51.520 Absolutely, I think the price action is telling us that 0:15:51.560 --> 0:15:55.160 there are overflows into safe havens, and those overflows are 0:15:55.160 --> 0:15:58.440 going into gold rather than treasuries. You know, we've gone 0:15:58.480 --> 0:16:01.680 through a period we'll call it fifteen where anytime there 0:16:01.720 --> 0:16:03.840 was a bump in the night anywhere around the globe, 0:16:03.880 --> 0:16:05.760 whether it started in the US or it started in 0:16:05.800 --> 0:16:09.000 France or anywhere else, the flows into ten year treasuries 0:16:09.040 --> 0:16:10.280 were just astronomical. 0:16:10.520 --> 0:16:11.960 And that's just not happening this time. 0:16:12.040 --> 0:16:14.200 Yes, you're getting some safe haven flows as we're seeing 0:16:14.240 --> 0:16:17.920 stories about bad loans and worries about systemic credit risk, 0:16:18.080 --> 0:16:20.200 and so ten year yields are rallying, but they're not 0:16:20.360 --> 0:16:23.200 rallying as much as you would see in previous cycles, 0:16:23.440 --> 0:16:26.400 and so gold is getting the overflow of that safe 0:16:26.440 --> 0:16:29.600 haven flow, and that's really the big reason why you've 0:16:29.600 --> 0:16:32.360 continued to see this momentum trade in gold in my opinion. 0:16:32.480 --> 0:16:36.400 Obviously there's folks following into that, but it's the overflows 0:16:36.760 --> 0:16:40.280 from lack of appeal from the traditional safe haven that 0:16:40.320 --> 0:16:42.920 I believe is really the big driver in gold right now. 0:16:43.160 --> 0:16:45.080 So if you think of how deep these polls are, 0:16:45.840 --> 0:16:47.960 the gold poll just isn't deep enough to be the 0:16:48.000 --> 0:16:51.040 alternative to treasuries. I've I've hurt that directly from Goldman 0:16:51.080 --> 0:16:52.520 two when they come on the program, which is why 0:16:52.520 --> 0:16:56.480 you've seen this massive exponential move in gold. Can it 0:16:56.600 --> 0:16:59.920 really replace treasuries, Tom, given the depth of the polar 0:17:00.000 --> 0:17:04.160 invitable liquidity and the treasury market compared to site Goat, Oh. 0:17:04.040 --> 0:17:05.440 Oh absolutely not. It can't. 0:17:05.520 --> 0:17:09.360 And so eventually, if these fares of credit contagent, if 0:17:09.359 --> 0:17:12.080 they really were to spread and we start to see 0:17:12.200 --> 0:17:15.440 more signs of pests in the attic and stuff like that, 0:17:15.600 --> 0:17:17.399 then you're going to see ten year treasure yields not 0:17:17.440 --> 0:17:20.800 just dropping below four percent, but rallying down to close 0:17:20.840 --> 0:17:22.280 to where two's are right now. 0:17:22.640 --> 0:17:23.760 And that's not happening yet. 0:17:23.760 --> 0:17:25.960 But there's just the gold market's not big enough, the 0:17:25.960 --> 0:17:29.199