1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 5 00:00:23,920 --> 00:00:30,479 Speaker 1: and of course on the Bloomberg Terminal. This is the 6 00:00:30,520 --> 00:00:33,760 Speaker 1: interview of the day on the shock in awe of 7 00:00:33,800 --> 00:00:36,720 Speaker 1: the short term paper market six months in. It is 8 00:00:36,760 --> 00:00:39,479 Speaker 1: our Kane. It's complex, and you've got to read the 9 00:00:39,520 --> 00:00:43,600 Speaker 1: fourteen thousand pages of stagums written by Tony Kriscenzi to 10 00:00:43,760 --> 00:00:45,960 Speaker 1: understand a little bit of it. We don't have the 11 00:00:46,000 --> 00:00:48,400 Speaker 1: time to do that, so we'll talk to him instead. 12 00:00:48,479 --> 00:00:52,080 Speaker 1: Chriscenzi a pintel Now on where we are, Tony, there 13 00:00:52,080 --> 00:00:56,240 Speaker 1: are two groups. The FED is organized. The FED is 14 00:00:56,320 --> 00:01:00,600 Speaker 1: providing stability and the overnight market surge we've seen in 15 00:01:00,680 --> 00:01:05,280 Speaker 1: Rebo is no big deal. There's another camp that says, Bologny, 16 00:01:05,400 --> 00:01:08,720 Speaker 1: the world's fallen apart, which is a bringing chart upbread 17 00:01:08,800 --> 00:01:11,240 Speaker 1: for TV and on radio. All you need to know 18 00:01:11,280 --> 00:01:14,080 Speaker 1: it's a spike like you've never seen. Think about Jeff 19 00:01:14,120 --> 00:01:17,760 Speaker 1: Bezos going up in space. That's what the spike looks like, Tony, 20 00:01:17,800 --> 00:01:22,119 Speaker 1: what's it mean? Well, it's as if the FED wrote 21 00:01:22,160 --> 00:01:26,720 Speaker 1: its recent framework on disappearing inc to some. Because the 22 00:01:26,720 --> 00:01:30,720 Speaker 1: FEDS new framework released last August said that it wouldn't 23 00:01:30,840 --> 00:01:33,039 Speaker 1: raise this policy rate until the inflation rate had gone 24 00:01:33,080 --> 00:01:36,520 Speaker 1: above its two percent target for some time. It hasn't 25 00:01:36,520 --> 00:01:38,679 Speaker 1: really done that for some time, and so hence the 26 00:01:38,720 --> 00:01:42,320 Speaker 1: idea of disappearing INC. This is the spike we're seeing 27 00:01:42,319 --> 00:01:46,000 Speaker 1: in rates. Of course, relates to the FEDS communication. And 28 00:01:46,080 --> 00:01:48,880 Speaker 1: I should add that Bembrank is an advisor to Pimco 29 00:01:48,960 --> 00:01:54,920 Speaker 1: has famously said that FED policy is two percent action communication. 30 00:01:55,120 --> 00:01:59,640 Speaker 1: It goes to show how how strongly markets take the 31 00:01:59,680 --> 00:02:03,720 Speaker 1: word of the Federal reserved. And certainly UM they were 32 00:02:03,760 --> 00:02:06,840 Speaker 1: taken very strongly. So so the rising rates to just 33 00:02:06,880 --> 00:02:10,799 Speaker 1: to sum up UH, I would say that it's as 34 00:02:10,800 --> 00:02:13,640 Speaker 1: if the Fed is UH put the inflation cop back 35 00:02:13,800 --> 00:02:16,480 Speaker 1: on the beat. It wanted to regain control of the 36 00:02:16,520 --> 00:02:20,919 Speaker 1: inflation narrative because the public's hype over inflation had gotten 37 00:02:21,040 --> 00:02:24,400 Speaker 1: too high. The fact got spooked. That's what it says, 38 00:02:24,480 --> 00:02:28,680 Speaker 1: and it'll probably be good final words Tom on this UM. 39 00:02:28,800 --> 00:02:31,200 Speaker 1: It'll probably be good for the equity market, for the 40 00:02:31,200 --> 00:02:35,160 Speaker 1: credit markets, private investments, including real estate, because it looks 41 00:02:35,160 --> 00:02:39,120 Speaker 1: like it will uh rain in inflation fears, but it 42 00:02:39,160 --> 00:02:41,880 Speaker 1: made in fact. But Tony, this is really important. If 43 00:02:41,919 --> 00:02:45,839 Speaker 1: Chrisensi's telling me that FED got spooked, that's really really important. 44 00:02:46,000 --> 00:02:50,000 Speaker 1: What about the responsiveness, the male ability, the dynamics, the 45 00:02:50,120 --> 00:02:56,000 Speaker 1: elasticity of trillions of dollars. I don't understand the theoretical 46 00:02:56,160 --> 00:03:02,440 Speaker 1: model of what that money does. It came from this pandemic. Well, 47 00:03:02,520 --> 00:03:05,120 Speaker 1: we see seven fifty billion of it in a FED 48 00:03:05,480 --> 00:03:08,800 Speaker 1: repro facility. There's still a lot of money slashing around. 49 00:03:08,919 --> 00:03:11,600 Speaker 1: And it's the reason why the Federal Reserve raised a 50 00:03:11,680 --> 00:03:15,960 Speaker 1: few official polls. Just should say technical policy rates that 51 00:03:16,000 --> 00:03:18,320 Speaker 1: it attracts it has. Its official policy, of course, is 52 00:03:18,320 --> 00:03:21,239 Speaker 1: around zero. But it does things to tweak behavior in 53 00:03:21,280 --> 00:03:24,280 Speaker 1: the money markets. And last week it raised two specific 54 00:03:24,360 --> 00:03:27,000 Speaker 1: rates by five basis points because so there's so much 55 00:03:27,000 --> 00:03:30,080 Speaker 1: money floating around that it was putting downward pressure on 56 00:03:30,240 --> 00:03:33,519 Speaker 1: money market rates called commercial paper, etcetera. And three month bible, 57 00:03:33,520 --> 00:03:35,640 Speaker 1: which reached an all time low of thirteen basis points 58 00:03:35,680 --> 00:03:38,360 Speaker 1: last week. And so there's still that money still is 59 00:03:38,440 --> 00:03:40,960 Speaker 1: out there so to speak, and it won't be removed 60 00:03:41,000 --> 00:03:43,440 Speaker 1: for a long time. Remember, the FED is still purchasing 61 00:03:44,200 --> 00:03:46,440 Speaker 1: billion dollars new securities per month. In other words, it's 62 00:03:46,480 --> 00:03:50,320 Speaker 1: printing another one billion of money each month. It will 63 00:03:50,440 --> 00:03:53,240 Speaker 1: do so into next year, and it won't shrink its 64 00:03:53,600 --> 00:03:56,000 Speaker 1: balance sheet for a wild Why because it's going to 65 00:03:56,040 --> 00:03:58,640 Speaker 1: reinvest the principle and interest payments it gets on the 66 00:03:58,640 --> 00:04:02,600 Speaker 1: mortgages it has. And the Lisa, I don't mean interrupt, Tony, 67 00:04:02,640 --> 00:04:05,400 Speaker 1: but this is so damn important, Lisa. What's so important? 68 00:04:05,400 --> 00:04:08,720 Speaker 1: And Mr Senz just said, is that phrase for a 69 00:04:08,840 --> 00:04:11,640 Speaker 1: very long time? I mean, that's really what the markets 70 00:04:11,720 --> 00:04:14,320 Speaker 1: arguing about. Yeah, the the issue here is that people 71 00:04:14,360 --> 00:04:17,279 Speaker 1: are trying to extra plate forward. What the trillions of 72 00:04:17,320 --> 00:04:21,000 Speaker 1: dollars in excess cash slashing around that Clearly banks and 73 00:04:21,040 --> 00:04:23,520 Speaker 1: the FED are struggling to know how to handle what 74 00:04:23,680 --> 00:04:27,200 Speaker 1: the ramifications for this will be. Salton Posar of Credit 75 00:04:27,200 --> 00:04:30,280 Speaker 1: Suite writing in a recent note that by paying trillions 76 00:04:30,320 --> 00:04:33,880 Speaker 1: in reserves five basis points, the FED just planted the 77 00:04:33,880 --> 00:04:39,039 Speaker 1: seeds of the next liquidity crisis. Tony, do you agree? No? 78 00:04:39,640 --> 00:04:43,400 Speaker 1: For one, markets understand the Federal Reserve's reaction function, which 79 00:04:43,440 --> 00:04:45,640 Speaker 1: is that if there were a liquidity problem with that, 80 00:04:45,680 --> 00:04:50,200 Speaker 1: the federals would stand up and inject additional liquidity. This 81 00:04:50,279 --> 00:04:52,720 Speaker 1: is something we learned after the g FC, the Global 82 00:04:52,720 --> 00:04:55,600 Speaker 1: financial crisis. There was some doubts about whether the FED 83 00:04:55,640 --> 00:04:57,680 Speaker 1: would stick to it in two thousand and thirteen when 84 00:04:57,680 --> 00:04:59,680 Speaker 1: there was a so called tape attention. When there's a 85 00:04:59,720 --> 00:05:02,839 Speaker 1: fear are like now that the FED might remove its 86 00:05:02,880 --> 00:05:07,000 Speaker 1: monetary accommodation. That fear subsided over the years, and look today, 87 00:05:07,400 --> 00:05:11,520 Speaker 1: Federal reserves communicated an idea that the markets didn't believe 88 00:05:11,560 --> 00:05:16,200 Speaker 1: in previously. Yet the reaction was not much of a reaction. 89 00:05:16,320 --> 00:05:19,800 Speaker 1: It's it's rather tame. Uh. You're not seeing meaningful movement 90 00:05:19,839 --> 00:05:24,400 Speaker 1: in global markets from this, i e. Downward movement in equities, 91 00:05:24,480 --> 00:05:28,000 Speaker 1: credit and our jump in interest rates. And so it's 92 00:05:28,000 --> 00:05:32,320 Speaker 1: a rather benign notion related to the reaction function the idea. 93 00:05:32,880 --> 00:05:36,000 Speaker 1: So this notion that there isn't enough liquidity to the 94 00:05:36,080 --> 00:05:40,240 Speaker 1: liquidity crunches, uh, not not happening in my idea. What 95 00:05:40,320 --> 00:05:42,800 Speaker 1: one quick gut notion though, to think about is the 96 00:05:42,839 --> 00:05:46,840 Speaker 1: idea of chaos in periods when UH credit cycles end. 97 00:05:46,920 --> 00:05:51,480 Speaker 1: After two thow we all saw that credit instruments did 98 00:05:51,520 --> 00:05:54,400 Speaker 1: not trade well. And this relates to the breakdown the 99 00:05:54,400 --> 00:05:57,480 Speaker 1: so called principal agent model, which is that there's so 100 00:05:57,520 --> 00:06:01,760 Speaker 1: many dead securities in existence that when the investors go 101 00:06:01,839 --> 00:06:05,480 Speaker 1: to sell that the system can't handle those securities because 102 00:06:05,520 --> 00:06:09,400 Speaker 1: there is no intermediary to bid for them. So that's 103 00:06:09,400 --> 00:06:12,880 Speaker 1: where there's a liquidity crunch in financial markets in debt 104 00:06:12,960 --> 00:06:18,400 Speaker 1: securities because of the problems in the broth the principal 105 00:06:18,400 --> 00:06:21,440 Speaker 1: agent model, and Tony that sort of speaks the so 106 00:06:21,640 --> 00:06:25,520 Speaker 1: called paper tantrum type of model, particularly in credit, because 107 00:06:25,520 --> 00:06:27,800 Speaker 1: it isn't traded in the same kind of way as 108 00:06:27,920 --> 00:06:30,880 Speaker 1: a full faith and credit government debt of the United States. 109 00:06:31,120 --> 00:06:33,760 Speaker 1: Here we are, though, with two year yields moving and 110 00:06:33,839 --> 00:06:37,720 Speaker 1: as a number of analysts noted, people expressing the hawkishness 111 00:06:37,880 --> 00:06:40,800 Speaker 1: heard by a number of the FED members in markets, 112 00:06:40,839 --> 00:06:43,360 Speaker 1: but not, as you point out, in credit, we are 113 00:06:43,440 --> 00:06:46,640 Speaker 1: not seeing the stress in risk assets. How do you 114 00:06:46,720 --> 00:06:50,160 Speaker 1: make sense of this? Well, first, I thought the first 115 00:06:50,160 --> 00:06:51,919 Speaker 1: thing I came to my head when you said that 116 00:06:52,040 --> 00:06:56,559 Speaker 1: is corporate profit story cash flow. What investors care about 117 00:06:56,640 --> 00:06:59,800 Speaker 1: bond investors ecuting investors is cash flow. A bond investor 118 00:07:00,080 --> 00:07:03,720 Speaker 1: is about getting his or her or its money back. Uh. 119 00:07:03,720 --> 00:07:06,360 Speaker 1: And the earning story is quite good. In fact, we 120 00:07:06,440 --> 00:07:10,760 Speaker 1: think the the equity that investors should be overweight equities 121 00:07:10,760 --> 00:07:14,240 Speaker 1: today overweight credit. The story and equities is that the 122 00:07:14,280 --> 00:07:18,080 Speaker 1: earnings will grow near thirty percent this year, and most 123 00:07:18,080 --> 00:07:20,480 Speaker 1: projected we would project as well that earnings will grow 124 00:07:20,520 --> 00:07:22,600 Speaker 1: tem percent next year, tem percent the year after that. 125 00:07:22,920 --> 00:07:28,080 Speaker 1: The Federal Reserves communication, if anything, will elongate the economic 126 00:07:28,120 --> 00:07:34,360 Speaker 1: expansion by team tapering, I should say, bringing down inflation expectations, 127 00:07:34,400 --> 00:07:38,920 Speaker 1: inflation fears the type that might have truncated the the 128 00:07:38,960 --> 00:07:42,120 Speaker 1: economic expansion. And so the story is looking good. And 129 00:07:42,160 --> 00:07:45,000 Speaker 1: again I mentioned I refer back to the notion of 130 00:07:45,000 --> 00:07:49,680 Speaker 1: the Fed's reaction function. Most believed that the Federal Reserve 131 00:07:49,800 --> 00:07:53,280 Speaker 1: would step in and take action if, in fact the 132 00:07:53,360 --> 00:07:59,280 Speaker 1: knockts got into trouble. Tony, I wonder about the renewed 133 00:07:59,760 --> 00:08:02,000 Speaker 1: as Ben Rom calls it on the m Live blog. 134 00:08:02,440 --> 00:08:04,720 Speaker 1: Hey hey, Tony, good to talk to you. He says, 135 00:08:04,760 --> 00:08:07,840 Speaker 1: there's a renewed quest for duration, and I wonder if 136 00:08:07,840 --> 00:08:11,800 Speaker 1: that just point to market expectations of real volatility coming 137 00:08:11,800 --> 00:08:16,720 Speaker 1: back in rates. Looking out several years and into so 138 00:08:16,800 --> 00:08:19,840 Speaker 1: called forward rates, one sees that and even out five 139 00:08:19,920 --> 00:08:23,920 Speaker 1: years that the market consensus is that interest rates of course, 140 00:08:23,960 --> 00:08:26,000 Speaker 1: the you OC curve will be in the low twos. 141 00:08:26,320 --> 00:08:29,400 Speaker 1: In fact, that's down twenty basis points in the past 142 00:08:29,400 --> 00:08:32,920 Speaker 1: week or so. We would say that the sixty forty 143 00:08:33,000 --> 00:08:36,360 Speaker 1: model is alive and well. Returns have been quite good 144 00:08:36,400 --> 00:08:40,240 Speaker 1: this year, called it seven or so. We still believe 145 00:08:40,280 --> 00:08:43,479 Speaker 1: in the hedge value of high quality fixed income instruments. 146 00:08:43,720 --> 00:08:46,840 Speaker 1: And I said earlier that we prefer to be overweight credit, 147 00:08:46,920 --> 00:08:51,520 Speaker 1: overweight equities, ovoid private assets including real estate. But that's 148 00:08:51,559 --> 00:08:55,000 Speaker 1: not a very balanced portfolio. We would say then that 149 00:08:55,480 --> 00:08:59,280 Speaker 1: the way to balance that is, of course through the 150 00:08:59,400 --> 00:09:03,839 Speaker 1: use of aition having fixed income up in a portfolio 151 00:09:03,880 --> 00:09:08,120 Speaker 1: because in the long run of adverse scenarios will affect 152 00:09:08,960 --> 00:09:12,880 Speaker 1: treasuries in a way that benefits portfolio while the other 153 00:09:12,920 --> 00:09:17,000 Speaker 1: instruments don't fare so well. So so we believe in 154 00:09:17,000 --> 00:09:21,760 Speaker 1: the head value of treasuries and and the still big 155 00:09:21,760 --> 00:09:24,760 Speaker 1: believers in that's a shock, you know, I was. I've 156 00:09:24,760 --> 00:09:26,840 Speaker 1: been terrified to check my I r A over the 157 00:09:26,880 --> 00:09:29,440 Speaker 1: last couple of years as we continue to hear that 158 00:09:29,480 --> 00:09:33,800 Speaker 1: the sixty forty model is dead and gone. Why was 159 00:09:33,880 --> 00:09:36,200 Speaker 1: that and and how come you think it's it's healthy 160 00:09:36,200 --> 00:09:40,280 Speaker 1: and surviving well. Thinking first of the returns for the year, 161 00:09:40,400 --> 00:09:44,960 Speaker 1: which are quite respectable. UH cent or so is a 162 00:09:44,960 --> 00:09:50,320 Speaker 1: fair return, and it's very difficult to surmise that in 163 00:09:50,400 --> 00:09:54,520 Speaker 1: a quite adverse scenario that longer term treasuries, and then 164 00:09:54,520 --> 00:09:56,480 Speaker 1: this has been demonstrated in the past week, would not 165 00:09:56,559 --> 00:10:01,320 Speaker 1: fare well in an adverse scenario. So last week a microcosm, 166 00:10:01,400 --> 00:10:04,920 Speaker 1: perhaps when the Dow Jones Industrial average was following five 167 00:10:05,360 --> 00:10:08,920 Speaker 1: points longer term treasury yields with falling uh and this 168 00:10:09,000 --> 00:10:11,480 Speaker 1: is the sort of behavior we would expect in other 169 00:10:11,679 --> 00:10:15,160 Speaker 1: adverse scenarios, and that could be prompted by numerous things 170 00:10:15,200 --> 00:10:18,680 Speaker 1: that are difficult to predict, but we do believe that 171 00:10:18,720 --> 00:10:21,160 Speaker 1: investors would move in that way. I should add finally 172 00:10:21,200 --> 00:10:26,840 Speaker 1: that the reach duration is a global story, and this 173 00:10:26,920 --> 00:10:29,840 Speaker 1: is obvious in Germany where yields where you are, where 174 00:10:29,920 --> 00:10:33,959 Speaker 1: yields are still in negative territory, and also in Japan, 175 00:10:34,120 --> 00:10:36,880 Speaker 1: of course, where the near zero all the way years 176 00:10:36,920 --> 00:10:40,480 Speaker 1: practically correct. So the the reach for duration, the need 177 00:10:40,600 --> 00:10:42,240 Speaker 1: for it is still high, and I should the final 178 00:10:42,280 --> 00:10:46,319 Speaker 1: final note is in sixty models because of the performance 179 00:10:46,320 --> 00:10:49,760 Speaker 1: of equities, if anything, is likely to be some adjustments 180 00:10:49,760 --> 00:10:53,920 Speaker 1: by large pension funds and other investors following it into 181 00:10:53,920 --> 00:11:00,400 Speaker 1: fixed income, especially given some of the volatility of thank 182 00:11:00,400 --> 00:11:09,800 Speaker 1: you so much, thanks this morning. Right now, all of 183 00:11:09,800 --> 00:11:13,800 Speaker 1: this market action dovetails into the banks. There has never 184 00:11:13,840 --> 00:11:17,320 Speaker 1: been a crisis like this in the career of Gerard Cassidy. 185 00:11:17,320 --> 00:11:20,480 Speaker 1: He's with RBC Capital Markets and joins us right now. 186 00:11:20,520 --> 00:11:24,720 Speaker 1: He has seen this before. Angst and handwringing. What does 187 00:11:24,800 --> 00:11:30,600 Speaker 1: all this uproar, Jerry mean for the big banks, tomm 188 00:11:30,640 --> 00:11:33,719 Speaker 1: You're right, We've been through a number of different cycles 189 00:11:33,760 --> 00:11:36,960 Speaker 1: and each one has a different side to it, but 190 00:11:37,080 --> 00:11:40,920 Speaker 1: this one it's quite interesting because we've not seen this 191 00:11:41,000 --> 00:11:44,520 Speaker 1: low rate environment persists for so long, particularly on the 192 00:11:44,520 --> 00:11:48,160 Speaker 1: long end of the curve, with the likelihood of inflation 193 00:11:48,480 --> 00:11:51,800 Speaker 1: heating up two levels possibly we haven't seen in over 194 00:11:51,840 --> 00:11:55,920 Speaker 1: twenty five years. So the industry right now is grappling 195 00:11:55,960 --> 00:11:59,959 Speaker 1: with an excess amount of liquidity caused by the quantitative 196 00:12:00,080 --> 00:12:03,080 Speaker 1: vizing by the Federal Reserve. As you know, Tim, they're 197 00:12:03,080 --> 00:12:06,880 Speaker 1: balancing defense balance sheet now is over eight trillion dollars, 198 00:12:07,240 --> 00:12:10,119 Speaker 1: and that's up from four trillion prior to the pandemic, 199 00:12:10,320 --> 00:12:12,800 Speaker 1: and that's got into the banking system, which is weighing 200 00:12:12,840 --> 00:12:15,440 Speaker 1: on their margins along with this rate environment. You know, 201 00:12:15,520 --> 00:12:17,760 Speaker 1: I looked your right and we were talking about thirty 202 00:12:17,800 --> 00:12:20,079 Speaker 1: or four dollar lobster roles because we were coming on 203 00:12:20,280 --> 00:12:23,480 Speaker 1: with Gerard Cassidy of Portland, Maine. And I guess the 204 00:12:23,559 --> 00:12:25,959 Speaker 1: question is, when you see a pullback in JP, we're 205 00:12:25,960 --> 00:12:30,080 Speaker 1: going of eleven percent or other selected Cassidy stocks, is 206 00:12:30,080 --> 00:12:32,920 Speaker 1: it time for Gerard Cassidy to load the lobster boat. 207 00:12:34,920 --> 00:12:37,640 Speaker 1: I think it is, Tom. In fact, this pullback is 208 00:12:37,640 --> 00:12:41,120 Speaker 1: a great opportunity for investors to buy bank stocks, whether 209 00:12:41,160 --> 00:12:44,320 Speaker 1: it's JP, Morgan Chase, or Bank America, earning the large 210 00:12:44,320 --> 00:12:47,840 Speaker 1: regionals like a PNC or Truest. And you're right, Tom, 211 00:12:48,080 --> 00:12:50,480 Speaker 1: if you believe that the U. S economy is truly 212 00:12:50,640 --> 00:12:53,959 Speaker 1: growing at six or seven percent and throwing three or 213 00:12:54,000 --> 00:12:58,160 Speaker 1: four percent for inflation loan growth historically, Tom, going back 214 00:12:58,200 --> 00:13:01,440 Speaker 1: to the nineteen forties, it's carlat it's a nominal GDP 215 00:13:01,559 --> 00:13:04,200 Speaker 1: growth and the low growth hasn't shown up yet because 216 00:13:04,240 --> 00:13:07,280 Speaker 1: of the liquidity of corporates and consumers. But over the 217 00:13:07,320 --> 00:13:10,199 Speaker 1: next twelve months, we do expect to see loan growth 218 00:13:10,240 --> 00:13:12,880 Speaker 1: with the growth in the economy the way it's projected today, 219 00:13:12,960 --> 00:13:15,600 Speaker 1: at least that this is so important, you know, Grizzel 220 00:13:15,640 --> 00:13:18,480 Speaker 1: pro like Cassidy who remembers that a lobster roll was 221 00:13:18,520 --> 00:13:23,200 Speaker 1: three dollars forty And I'm sorry, the fact of the 222 00:13:23,200 --> 00:13:26,880 Speaker 1: matter is he's looking at twelve months, not twelve hours. Tom. 223 00:13:26,880 --> 00:13:29,080 Speaker 1: I love that your priority right now is a lobster roll. 224 00:13:29,240 --> 00:13:32,080 Speaker 1: I am right there with you, Gerard, talking about the 225 00:13:32,120 --> 00:13:36,199 Speaker 1: liquidity beyond perhaps the beverage of your choice to accompany 226 00:13:36,440 --> 00:13:39,760 Speaker 1: a lobster roll, but rather the liquidity in the financial system. 227 00:13:39,760 --> 00:13:42,240 Speaker 1: You talk about extending loans. The idea that there's three 228 00:13:42,280 --> 00:13:46,640 Speaker 1: point nine trillion dollars of cash of reserves at the 229 00:13:46,640 --> 00:13:50,880 Speaker 1: Federal Reserve versus pre financial crisis of forty six billion 230 00:13:50,920 --> 00:13:55,679 Speaker 1: dollars on average, a complete magnitude change. What is the 231 00:13:55,720 --> 00:13:59,520 Speaker 1: trajectory of getting that money into lending at the same 232 00:13:59,600 --> 00:14:03,560 Speaker 1: time people are drawing down their deposits and actually spending 233 00:14:03,600 --> 00:14:06,560 Speaker 1: that cash, perhaps taking that cash out of the banks 234 00:14:06,600 --> 00:14:10,640 Speaker 1: and into the economy. Now that that is the key metric, 235 00:14:10,840 --> 00:14:13,880 Speaker 1: and it's you're very observant on the numbers, and I 236 00:14:13,880 --> 00:14:16,760 Speaker 1: would suggest that that's what the banks want to do 237 00:14:16,800 --> 00:14:20,440 Speaker 1: to the banks. As I try to remind myself and investors, 238 00:14:20,640 --> 00:14:22,880 Speaker 1: banks are in the business to lend money. They want 239 00:14:22,880 --> 00:14:26,040 Speaker 1: to lend money to qualified borrows, and in right now 240 00:14:26,120 --> 00:14:29,320 Speaker 1: the demands not there, but as the liquidity is used up. 241 00:14:29,480 --> 00:14:32,800 Speaker 1: And remember, the consumer has a number of benefits that 242 00:14:32,840 --> 00:14:35,520 Speaker 1: are expiring in the fall. For example, if you're a 243 00:14:35,520 --> 00:14:38,840 Speaker 1: student and you're deferred your loan payments, that expires in 244 00:14:38,880 --> 00:14:40,880 Speaker 1: the fall. So I think you're gonna find people are 245 00:14:40,880 --> 00:14:43,520 Speaker 1: going to be used up their stimulus payments to help 246 00:14:43,560 --> 00:14:46,600 Speaker 1: with their monthly cash flows. And then we're revolved back 247 00:14:46,640 --> 00:14:49,360 Speaker 1: onto credit cards, which were starting to actually see so 248 00:14:49,440 --> 00:14:51,600 Speaker 1: maybe they are buying those lots of roles Tom the 249 00:14:51,680 --> 00:14:55,320 Speaker 1: thirty ft dollars. Maybe people are buying lobster roles. I 250 00:14:55,360 --> 00:14:58,440 Speaker 1: wonder if companies are going to start buying other companies, 251 00:14:58,480 --> 00:15:00,960 Speaker 1: because he asked the consumer balance it's looking pretty healthy, 252 00:15:00,960 --> 00:15:02,840 Speaker 1: but companies have a lot of cash on hand as well. 253 00:15:02,840 --> 00:15:05,120 Speaker 1: And Jamie Diamond last week and talking about the fact 254 00:15:05,120 --> 00:15:07,440 Speaker 1: that okay, yeah, trading isn't going to be as great 255 00:15:07,640 --> 00:15:10,200 Speaker 1: look to M and A as a driver. How much 256 00:15:10,200 --> 00:15:12,000 Speaker 1: of a growth catalyst do you think M and A 257 00:15:12,040 --> 00:15:14,680 Speaker 1: will be for these banks. And you know, and that's 258 00:15:14,680 --> 00:15:16,480 Speaker 1: a real good question, and I think it will be 259 00:15:16,520 --> 00:15:20,480 Speaker 1: a real driver because as corporates become more confident that 260 00:15:20,560 --> 00:15:23,640 Speaker 1: the U. S economy is out of the downturn that 261 00:15:23,680 --> 00:15:26,680 Speaker 1: we experienced last year, do the pandemic, they will have 262 00:15:26,760 --> 00:15:29,880 Speaker 1: more confidence to either build new plant or equipment or 263 00:15:29,920 --> 00:15:32,560 Speaker 1: go out and buy a competitor to become more efficient. 264 00:15:32,720 --> 00:15:34,880 Speaker 1: So we do see that as being one of the 265 00:15:34,920 --> 00:15:38,560 Speaker 1: accelerants to loan growth, along with regular corporate loan demand, 266 00:15:38,760 --> 00:15:42,400 Speaker 1: you know, the building of all the new green initiatives, 267 00:15:42,440 --> 00:15:45,960 Speaker 1: whether it's electric vehicles and other things, those two are 268 00:15:46,000 --> 00:15:49,600 Speaker 1: really demanding corporate borrowing. And that you will pick up 269 00:15:49,680 --> 00:15:53,640 Speaker 1: as again confidence comes back into this economy. How much 270 00:15:53,680 --> 00:15:56,520 Speaker 1: does your buy banks call get threatened by a flattening 271 00:15:56,560 --> 00:15:58,960 Speaker 1: yield curve as many people now are looking at the 272 00:15:59,000 --> 00:16:03,480 Speaker 1: consensus call as being of that continuing No, that that 273 00:16:03,640 --> 00:16:07,160 Speaker 1: is a risk. I I don't disagree with you whatsoever. 274 00:16:07,560 --> 00:16:10,400 Speaker 1: If we're chatting here a year from now, in the 275 00:16:10,480 --> 00:16:12,920 Speaker 1: ten year government bond yield is a hundred and ten 276 00:16:12,960 --> 00:16:15,880 Speaker 1: basis points or a hundred and twenty basis points, and 277 00:16:15,920 --> 00:16:19,600 Speaker 1: there's more talk of the FED raising shorting that that is, 278 00:16:19,800 --> 00:16:22,760 Speaker 1: that would be a very challenging bank stock environment. I 279 00:16:22,760 --> 00:16:25,680 Speaker 1: don't disagree with you, Jerry, I don't care what I 280 00:16:25,720 --> 00:16:30,280 Speaker 1: care about drug Cassidy is Connecticut or a main lobster role? 281 00:16:30,360 --> 00:16:33,280 Speaker 1: Are you gonna go with a butter sauce? Or in 282 00:16:33,400 --> 00:16:35,920 Speaker 1: honor of your colleague and crime, are you gonna go 283 00:16:36,000 --> 00:16:39,600 Speaker 1: with the Mike mayonnaise Like a good main guy. You 284 00:16:39,680 --> 00:16:44,000 Speaker 1: gotta go with the butter sauce. Time with the nice 285 00:16:44,080 --> 00:16:46,520 Speaker 1: I p A and we'll we'll call it a day. 286 00:16:47,000 --> 00:16:51,680 Speaker 1: Butter sauce. I never thought, Lisa, I'm absolutely shocked. Really yeah, 287 00:16:52,640 --> 00:16:56,200 Speaker 1: just think he was ice called Mike Mayonnaise and the 288 00:16:56,240 --> 00:17:01,520 Speaker 1: whole thing. No, butter sauces is far superior. Okay, thank you. 289 00:17:01,600 --> 00:17:05,360 Speaker 1: I learned something finally today on the show Gerard Cassidy 290 00:17:05,359 --> 00:17:08,520 Speaker 1: of RBC Capital Markets, truly expert. We didn't even have 291 00:17:08,600 --> 00:17:11,160 Speaker 1: time there to go for his single best buy within 292 00:17:11,200 --> 00:17:21,600 Speaker 1: the south Side and ben Emma's was booked. We said, yeah, okay, great, 293 00:17:21,720 --> 00:17:24,399 Speaker 1: seven a slot. Is wonderful that Ben Emmons with us 294 00:17:24,440 --> 00:17:27,520 Speaker 1: on this Monday, and then things blew up on Friday. 295 00:17:27,560 --> 00:17:30,440 Speaker 1: So this is a genius booking of Benjamin Emmons and 296 00:17:30,520 --> 00:17:33,760 Speaker 1: mentally Global Advisors with an important research note over the weekend, 297 00:17:33,800 --> 00:17:36,320 Speaker 1: what'd you right? Yeah at him, I was looking at 298 00:17:36,359 --> 00:17:38,639 Speaker 1: the dynamic of the of the curve on Friday, and 299 00:17:38,840 --> 00:17:41,480 Speaker 1: you know it speaks to that you get guidance actually 300 00:17:41,560 --> 00:17:43,600 Speaker 1: through the dop lots, which was different in the twenty 301 00:17:43,640 --> 00:17:46,280 Speaker 1: thirteen when the fat actually didn't do that and yields jumped, 302 00:17:46,680 --> 00:17:48,800 Speaker 1: and so the opposite effect that happens on the long 303 00:17:48,920 --> 00:17:51,359 Speaker 1: end of the UK that says, okay, maybe these future 304 00:17:51,440 --> 00:17:55,479 Speaker 1: right acts are sufficient to control inflation around that two percent. 305 00:17:56,080 --> 00:17:58,359 Speaker 1: So the market is given some credibility on that front 306 00:17:58,359 --> 00:18:01,160 Speaker 1: to the FAT. But as also lot of technicals at work, 307 00:18:01,280 --> 00:18:03,439 Speaker 1: and you probably have talked about with Tony, you know, 308 00:18:03,600 --> 00:18:06,600 Speaker 1: dis positioning that took place prior to all this flattening 309 00:18:06,640 --> 00:18:10,199 Speaker 1: ever seen was really predicated on that market expecting as 310 00:18:10,560 --> 00:18:12,280 Speaker 1: this is folks, this is what we do when we 311 00:18:12,320 --> 00:18:15,160 Speaker 1: invented surveillance. This was a couple of months ago, when 312 00:18:15,200 --> 00:18:17,880 Speaker 1: we invented surveillance, we said what we want to do 313 00:18:18,080 --> 00:18:21,199 Speaker 1: is get a short term guy like Chriscenzi on the 314 00:18:21,240 --> 00:18:23,800 Speaker 1: show and then get a long term guy like Emmon's 315 00:18:23,840 --> 00:18:27,919 Speaker 1: as well parachute in the Chriscenzi's market. Long term, people 316 00:18:27,960 --> 00:18:30,880 Speaker 1: like you and frankly Jerome Powell, what do they think 317 00:18:30,920 --> 00:18:34,720 Speaker 1: of trillions of dollars in the Kresenzi space, overnight repo 318 00:18:34,840 --> 00:18:38,159 Speaker 1: and the rest of it. So it's not only substantial, 319 00:18:38,200 --> 00:18:41,040 Speaker 1: but it will continue to compress short term interest rates 320 00:18:41,080 --> 00:18:43,760 Speaker 1: over time. As much as you want to communicate that 321 00:18:43,840 --> 00:18:46,720 Speaker 1: you're going to raise rates, you can't have expected to 322 00:18:46,880 --> 00:18:49,919 Speaker 1: yield to jump all the way out to this projective 323 00:18:50,000 --> 00:18:51,880 Speaker 1: rate that the fetest put out. I think it's more 324 00:18:51,920 --> 00:18:56,600 Speaker 1: like a very slow normalization and markets are no notice 325 00:18:56,640 --> 00:19:00,000 Speaker 1: actually because we've experienced this in two when we were 326 00:19:00,000 --> 00:19:02,399 Speaker 1: eating slowly with the two yields over time, I think 327 00:19:02,440 --> 00:19:04,959 Speaker 1: that's what you can expect um. Whereas on the low 328 00:19:05,040 --> 00:19:07,360 Speaker 1: end of the U curve it's this dynamic. I think 329 00:19:07,400 --> 00:19:10,199 Speaker 1: of a technical positioning and the fact that you know, 330 00:19:10,440 --> 00:19:13,120 Speaker 1: maybe these rates are sufficient to keep inflation the future 331 00:19:13,160 --> 00:19:15,760 Speaker 1: under control. All right, So if it is technical, are 332 00:19:15,800 --> 00:19:18,480 Speaker 1: we almost through with the technicality? Ben are we moving 333 00:19:18,520 --> 00:19:21,440 Speaker 1: into a period where perhaps long ends along end of 334 00:19:21,600 --> 00:19:25,520 Speaker 1: rates can possibly rise on the prospect of less fed accommodation. 335 00:19:26,880 --> 00:19:29,120 Speaker 1: I think we said that the weights communicated this same 336 00:19:29,160 --> 00:19:32,440 Speaker 1: compared to twenty thirteen. Is that you know, we were 337 00:19:32,480 --> 00:19:35,439 Speaker 1: missing guidance own rates in twenty thirteen. And if we 338 00:19:35,520 --> 00:19:38,480 Speaker 1: have this idea now that okay, it's gonna go that trajectory, 339 00:19:38,960 --> 00:19:41,000 Speaker 1: you take out some of that rish premium out of 340 00:19:41,000 --> 00:19:43,480 Speaker 1: the low end. At the same time, to your points, 341 00:19:43,680 --> 00:19:46,840 Speaker 1: probably there some scope for rising long term rates as 342 00:19:46,880 --> 00:19:49,880 Speaker 1: new data comes in and surprises still to the upside. 343 00:19:49,880 --> 00:19:52,040 Speaker 1: You know, let's face it, we have an economy that's 344 00:19:52,520 --> 00:19:55,600 Speaker 1: really strong. It's not normal to have rates at these 345 00:19:55,640 --> 00:19:58,560 Speaker 1: low levels. Um, it's as we talked about a few 346 00:19:58,600 --> 00:20:00,399 Speaker 1: weeks ago. It looks like this loca it so I 347 00:20:00,440 --> 00:20:02,720 Speaker 1: would think an explay Rover report, even the core PC 348 00:20:03,000 --> 00:20:06,040 Speaker 1: data comes out this week, surprise to the upside, probably 349 00:20:06,040 --> 00:20:08,600 Speaker 1: a catalyst for rates to somewhat normalize. Again, back to 350 00:20:09,160 --> 00:20:11,560 Speaker 1: inside the race where we came from, Ben, did we 351 00:20:11,560 --> 00:20:14,479 Speaker 1: already get the taper tantrum? Was that what March was? 352 00:20:16,119 --> 00:20:19,480 Speaker 1: Maybe Caylee, but um, you know there's a definition about 353 00:20:19,520 --> 00:20:22,560 Speaker 1: the state potenttrum at Antoni thirteen. It was really a 354 00:20:22,600 --> 00:20:28,480 Speaker 1: communication that confused markets and led to this repositioning on Okay, 355 00:20:28,520 --> 00:20:30,480 Speaker 1: we didn't really expect you to go this fast with 356 00:20:30,680 --> 00:20:32,879 Speaker 1: ending quee and then moving to rate acts maybe in 357 00:20:32,880 --> 00:20:35,880 Speaker 1: the future. So and that respect, the FED I think 358 00:20:35,880 --> 00:20:38,919 Speaker 1: has done a really good job controlling that aspect. But 359 00:20:39,040 --> 00:20:41,280 Speaker 1: I think what the markets were not expecting last week 360 00:20:41,400 --> 00:20:43,720 Speaker 1: was to see this dog blot shift. And I think 361 00:20:43,720 --> 00:20:46,880 Speaker 1: what really having on Friday was just completely recalibrating what 362 00:20:46,920 --> 00:20:49,800 Speaker 1: we saw in March, where you know, the expectation for 363 00:20:49,880 --> 00:20:52,600 Speaker 1: rate acts were the same as they are now today, 364 00:20:52,720 --> 00:20:55,040 Speaker 1: with now the difference that the markets understand what the 365 00:20:55,040 --> 00:20:58,359 Speaker 1: FED is potentially planning to do, including you know, working 366 00:20:58,400 --> 00:21:01,280 Speaker 1: towards this the start of the tapering process. Well, Ben 367 00:21:01,520 --> 00:21:04,479 Speaker 1: to Kelly's point though, isn't it surprising that you're not 368 00:21:04,560 --> 00:21:07,320 Speaker 1: seeing a bigger wobble and risk assets given the fact 369 00:21:07,480 --> 00:21:11,040 Speaker 1: that people are starting to think about tapering sooner. I 370 00:21:11,080 --> 00:21:13,160 Speaker 1: think it's a two two things going on at least 371 00:21:13,200 --> 00:21:17,240 Speaker 1: that because yes, stapering means you know, removal of accommodation 372 00:21:17,400 --> 00:21:20,480 Speaker 1: over time, but we also have to discount of fact 373 00:21:20,480 --> 00:21:23,440 Speaker 1: that the fet is still super accommodated. Fact we will 374 00:21:23,480 --> 00:21:26,399 Speaker 1: continue buy on twenty billion dollars a month, which by 375 00:21:26,400 --> 00:21:29,640 Speaker 1: the way larger than in when it was like eighty 376 00:21:29,720 --> 00:21:32,400 Speaker 1: five billion. So so we're going to continue on that 377 00:21:32,440 --> 00:21:35,200 Speaker 1: pace for at least a number of months, if not longer, 378 00:21:35,280 --> 00:21:39,240 Speaker 1: until that tapering actually happens, maybe presumably in two So 379 00:21:39,280 --> 00:21:41,800 Speaker 1: you're looking at a balance sheet that's going to extend 380 00:21:42,080 --> 00:21:45,479 Speaker 1: beyond nine very quickly, around of time, very quickly. Here, 381 00:21:45,520 --> 00:21:47,600 Speaker 1: what do you need to hear from FETE officials in 382 00:21:47,600 --> 00:21:50,720 Speaker 1: the coming days, including today? I think you want to 383 00:21:50,760 --> 00:21:53,919 Speaker 1: hear that what they've put out as as projections is 384 00:21:53,960 --> 00:21:57,480 Speaker 1: a what we call bullish forecast. They're looking at the 385 00:21:57,520 --> 00:22:01,639 Speaker 1: economy will be protected. Here again, this surge of inflation 386 00:22:02,359 --> 00:22:04,360 Speaker 1: and this forecast that they put out on dop plot 387 00:22:04,400 --> 00:22:07,280 Speaker 1: has always been considered to be an individual that a's 388 00:22:07,320 --> 00:22:10,359 Speaker 1: re emphasized right. They are still at the starting phase 389 00:22:10,440 --> 00:22:14,520 Speaker 1: of considering future organization. Thank you so much for Medally 390 00:22:14,520 --> 00:22:24,760 Speaker 1: Global Advisors. Jane Foley joins the rubble Bank. She's been 391 00:22:24,800 --> 00:22:27,760 Speaker 1: dead on And what's so important, folks, is there price 392 00:22:27,800 --> 00:22:30,560 Speaker 1: targets are moving. I mean the idea of you get 393 00:22:30,560 --> 00:22:33,120 Speaker 1: a price target and a cup of coffee later you're 394 00:22:33,160 --> 00:22:35,440 Speaker 1: halfway there? What do you do with your movable feast 395 00:22:35,480 --> 00:22:38,800 Speaker 1: of FX targets? Jane, how ugly is this ben and 396 00:22:38,880 --> 00:22:41,639 Speaker 1: how do you adapt and adjust rubble bank on a 397 00:22:41,680 --> 00:22:45,359 Speaker 1: Monday morning. Well, to be honest, you know, my my 398 00:22:45,480 --> 00:22:47,320 Speaker 1: one month target at the end of last in the 399 00:22:47,359 --> 00:22:49,880 Speaker 1: middle of last week was at one twenty. I haven't 400 00:22:49,920 --> 00:22:51,520 Speaker 1: changed that yet because we could have a little bit 401 00:22:51,560 --> 00:22:54,160 Speaker 1: of price adjustment. But I do think that the dollar 402 00:22:54,320 --> 00:22:57,199 Speaker 1: is going to remain strong, certainly into the rest of 403 00:22:57,200 --> 00:22:59,320 Speaker 1: this year and certainly this summer. I mean, there had 404 00:22:59,320 --> 00:23:01,840 Speaker 1: already been a lot of focus on Jackson Hole. Maybe 405 00:23:01,880 --> 00:23:03,600 Speaker 1: that was going to be the meeting where the Fed 406 00:23:03,680 --> 00:23:05,919 Speaker 1: became in a more hawkish but I think what we 407 00:23:06,000 --> 00:23:09,879 Speaker 1: saw last there's a clearly really surprising market, and what 408 00:23:09,920 --> 00:23:12,560 Speaker 1: we've seeing now is a huge amount of dollar positioning 409 00:23:12,680 --> 00:23:15,760 Speaker 1: just being squeezed out here. Well, the dollar position has 410 00:23:15,800 --> 00:23:17,680 Speaker 1: been squeezed out. I got a little static on the land. 411 00:23:17,680 --> 00:23:19,679 Speaker 1: We're gonna keep going with Jane Foley, see if we 412 00:23:19,720 --> 00:23:22,560 Speaker 1: can get that. That's you know, clearly, that's what happens 413 00:23:22,560 --> 00:23:25,800 Speaker 1: when the micey the wires over the weekend released seven 414 00:23:25,880 --> 00:23:31,440 Speaker 1: thirty and the mice coming and working the wires as well. Jane. 415 00:23:31,680 --> 00:23:33,639 Speaker 1: You know, I look at the Pacific rim play just 416 00:23:33,760 --> 00:23:36,040 Speaker 1: as something that we haven't talked about today away from 417 00:23:36,080 --> 00:23:40,440 Speaker 1: the majors, and there's just been this idea of better economy, 418 00:23:41,000 --> 00:23:44,760 Speaker 1: Pacific RIM excellence. If I get a strong dollar, I 419 00:23:44,880 --> 00:23:50,720 Speaker 1: can't get Pacific RIM currency strength, which wins out well, 420 00:23:50,800 --> 00:23:52,280 Speaker 1: I think in the short term it's going to be 421 00:23:52,359 --> 00:23:54,120 Speaker 1: the dollar. But you know, what the Fed has done 422 00:23:54,680 --> 00:23:58,080 Speaker 1: last week does potentially allow other central banks to put 423 00:23:58,119 --> 00:24:00,920 Speaker 1: a different slant on their policies. But since if we 424 00:24:01,000 --> 00:24:02,600 Speaker 1: consider you know, the r B A, the r B 425 00:24:02,720 --> 00:24:04,960 Speaker 1: and Z, those economies have been pretty good. They didn't 426 00:24:05,000 --> 00:24:08,840 Speaker 1: really died that much last year compared with other detail economies, 427 00:24:08,880 --> 00:24:13,520 Speaker 1: they've had really strong rebounds um and yet the central banks, 428 00:24:13,640 --> 00:24:17,280 Speaker 1: or particularly r B A has remained pretty wish. Not 429 00:24:17,359 --> 00:24:18,440 Speaker 1: so much to the r B N s A. But 430 00:24:18,520 --> 00:24:21,960 Speaker 1: you could argue that now that the dollar is strengthened 431 00:24:22,000 --> 00:24:25,080 Speaker 1: and their currencies have come off, that this could really 432 00:24:25,160 --> 00:24:27,600 Speaker 1: open the door for other central banks to be a 433 00:24:27,720 --> 00:24:31,680 Speaker 1: little bit more hawkish too. Now you could potentially apply 434 00:24:31,800 --> 00:24:33,600 Speaker 1: that same sort of logic, maybe even to the Bank 435 00:24:33,640 --> 00:24:35,760 Speaker 1: of Thing or maybe even to the ECB. To what 436 00:24:35,960 --> 00:24:39,879 Speaker 1: extent does this open the way for other central banks 437 00:24:39,920 --> 00:24:43,000 Speaker 1: to to subtly change their turn Now we're not necessarily 438 00:24:43,040 --> 00:24:46,200 Speaker 1: expecting the shocks that you've we've seen from the FED. 439 00:24:46,240 --> 00:24:47,800 Speaker 1: And we look at the the Ye curves in the 440 00:24:47,960 --> 00:24:50,639 Speaker 1: UK and look at the Yo curves and in Europe 441 00:24:50,680 --> 00:24:53,800 Speaker 1: and Germany compared with the US over the last few days, 442 00:24:53,960 --> 00:24:56,280 Speaker 1: we haven't seen that much movement, but you know, it 443 00:24:56,440 --> 00:25:00,159 Speaker 1: could mean that we will see more central banks been 444 00:25:00,240 --> 00:25:02,600 Speaker 1: brave enough to come out and being a little bit 445 00:25:02,720 --> 00:25:06,640 Speaker 1: more hawkish because they don't need to fear that their 446 00:25:06,720 --> 00:25:10,240 Speaker 1: exchange rate is going to start zooming higher. Well, and 447 00:25:10,280 --> 00:25:12,720 Speaker 1: that's on the developed central bank side, right Jane. And 448 00:25:12,720 --> 00:25:14,800 Speaker 1: when you look at emerging markets, the Bloomberg or the 449 00:25:14,920 --> 00:25:16,480 Speaker 1: m S c I E m f X index right 450 00:25:16,480 --> 00:25:19,160 Speaker 1: now hovering around its lowest level in a month, obviously 451 00:25:19,760 --> 00:25:22,480 Speaker 1: on the losing end of that dollar strength equation. And 452 00:25:22,560 --> 00:25:25,600 Speaker 1: we know that emerging market central banks have been raising rates, 453 00:25:25,680 --> 00:25:28,040 Speaker 1: they have been tightening policy. They are trying to combat 454 00:25:28,160 --> 00:25:30,159 Speaker 1: rampant inflation. When you look at the legs of Brazil 455 00:25:30,600 --> 00:25:33,360 Speaker 1: and Turkey, are they going to be able to provide 456 00:25:33,480 --> 00:25:37,520 Speaker 1: enough support to their currencies? Well, you know, I think 457 00:25:37,560 --> 00:25:40,199 Speaker 1: at some point we've got to look at the various 458 00:25:40,200 --> 00:25:44,280 Speaker 1: different emerging markets in their own given their own fundamental 459 00:25:44,400 --> 00:25:47,000 Speaker 1: capacity rather than look at the group as a whole, 460 00:25:47,040 --> 00:25:50,520 Speaker 1: because some are better positioned than others. But clearly, you know, 461 00:25:50,760 --> 00:25:53,360 Speaker 1: in terms of there being a stronger dollar, in terms 462 00:25:53,400 --> 00:25:55,439 Speaker 1: of there being a FED who's a little bit more 463 00:25:55,480 --> 00:25:58,679 Speaker 1: hawkers than than than it was before, that is clearly 464 00:25:58,920 --> 00:26:02,399 Speaker 1: bad news for the whole all of em. But we 465 00:26:02,440 --> 00:26:04,720 Speaker 1: still remember that, you know that the theft has still 466 00:26:04,800 --> 00:26:07,800 Speaker 1: being accommodative at this point. Is it's just a little 467 00:26:07,840 --> 00:26:10,760 Speaker 1: less commoditive than before, but still accommodative. So from that 468 00:26:10,920 --> 00:26:14,320 Speaker 1: point of view, there will be still value in some 469 00:26:14,520 --> 00:26:18,080 Speaker 1: emerging markets, but it will be the investors that are 470 00:26:18,160 --> 00:26:21,640 Speaker 1: able to, you know, put apart the different em countries 471 00:26:21,720 --> 00:26:25,280 Speaker 1: and look for the ones that can still offer value. Gene. 472 00:26:25,320 --> 00:26:27,280 Speaker 1: Of course, we're getting the Bank of England decision later 473 00:26:27,400 --> 00:26:29,200 Speaker 1: on this weekend. Right now, I'm looking at a cable 474 00:26:29,280 --> 00:26:32,119 Speaker 1: rate one thirty eight or so. It is the pound 475 00:26:32,320 --> 00:26:35,000 Speaker 1: is the strongest performer in the G ten space today. 476 00:26:35,040 --> 00:26:38,760 Speaker 1: What is your base case for the pound? Well, you know, 477 00:26:39,280 --> 00:26:41,800 Speaker 1: we have seen obviously Sterling come back against you. We 478 00:26:41,880 --> 00:26:44,040 Speaker 1: stole in the last couple of days. That's not the 479 00:26:44,080 --> 00:26:46,440 Speaker 1: same sort of story that we've seen in Sterling against 480 00:26:46,480 --> 00:26:48,840 Speaker 1: the euro. It's we've still really very range bound and 481 00:26:49,119 --> 00:26:51,160 Speaker 1: although it's it's it's moved a little bit, it's still 482 00:26:51,240 --> 00:26:53,920 Speaker 1: towards the end of the lower end of its range. 483 00:26:53,960 --> 00:26:55,800 Speaker 1: Now the Bank of England, as you said, is clearly 484 00:26:55,840 --> 00:26:59,120 Speaker 1: in focus, probably not going to be that much or offer, 485 00:26:59,200 --> 00:27:02,600 Speaker 1: but I think the market's always expecting that chief Economist 486 00:27:02,640 --> 00:27:04,760 Speaker 1: whole day is he leaves the bank this month, will 487 00:27:04,800 --> 00:27:07,440 Speaker 1: come out with some hawkish parting remarks that I think 488 00:27:07,440 --> 00:27:10,240 Speaker 1: the market positioning for that. But I think there isn't 489 00:27:10,240 --> 00:27:12,680 Speaker 1: going to be any particular surprises over the summer. But 490 00:27:12,800 --> 00:27:15,199 Speaker 1: later in the year we could have a little bit 491 00:27:15,280 --> 00:27:17,359 Speaker 1: more taping from from the Bank of England, so we 492 00:27:17,480 --> 00:27:20,280 Speaker 1: need to watch out for that. But that assumes, of 493 00:27:20,400 --> 00:27:24,919 Speaker 1: course that the slowdown and reopening the economy in England 494 00:27:25,320 --> 00:27:28,440 Speaker 1: and doesn't impact confidence so too much that we still 495 00:27:28,600 --> 00:27:33,480 Speaker 1: carry on and see some see that the remainding reopening 496 00:27:33,520 --> 00:27:36,520 Speaker 1: of the economy take place in July. Jane Fowie, thank 497 00:27:36,560 --> 00:27:41,000 Speaker 1: you so much, greatly appreciate it, and tumultuous day. This 498 00:27:41,200 --> 00:27:44,959 Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us 499 00:27:45,040 --> 00:27:48,760 Speaker 1: live weekdays from seven to ten am. Eastern and Bloomberg 500 00:27:48,880 --> 00:27:53,000 Speaker 1: Radio and Bloomberg Television each day from six to nine 501 00:27:53,080 --> 00:27:57,480 Speaker 1: am for insight from the best in economics, finance, investment, 502 00:27:57,640 --> 00:28:02,639 Speaker 1: and international relations. And abscribe to the Surveillance podcast on 503 00:28:02,760 --> 00:28:06,560 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course, on 504 00:28:06,680 --> 00:28:10,760 Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg.