WEBVTT - Surveillance: Currency Intervention Risk With Nordvig 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 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 --> 0:00:28.120 Bloomberg dot Com, and of course on the Bloomberg. Let's 0:00:28.120 --> 0:00:30.240 bring in Yan's Norfolk shows and to day to founder 0:00:30.320 --> 0:00:33.879 and CEO. Fair to say that summer never really got started, 0:00:33.960 --> 0:00:35.879 So I don't think we can say summer ended if 0:00:35.880 --> 0:00:38.960 it never started. Excuse me, and summer never got started? 0:00:39.120 --> 0:00:44.199 He came back from a sabbatical, okay, trust well, yeah, 0:00:44.240 --> 0:00:47.159 but I didn't have the romance of the images of you. 0:00:47.960 --> 0:00:49.840 I thought we were gonna wait at least twenty minutes 0:00:49.880 --> 0:00:52.120 before we started taking dicks at each Jans asked me, 0:00:52.200 --> 0:00:55.720 didn't Did he really claimbed the matter Horns taught to 0:00:55.760 --> 0:00:57.720 me about the morning so far, because it has been, 0:00:57.760 --> 0:01:01.279 fair to say, pretty crazy. So I think I think 0:01:01.320 --> 0:01:04.200 what's going on is that we've had a big drop 0:01:04.200 --> 0:01:08.880 in the equity market on Friday, and the U S 0:01:08.920 --> 0:01:12.000 authorities are keen to generate a bounce today and that's 0:01:12.000 --> 0:01:16.200 why the communication is how should we say, confusing, But 0:01:16.480 --> 0:01:19.399 the attempt to to talk up the equity market. That's 0:01:19.400 --> 0:01:21.720 what's going on. If I can make another comment on 0:01:21.760 --> 0:01:24.399 the dollar, like on Friday, obviously we had a lot 0:01:24.440 --> 0:01:26.960 of things going on. We've we've seen in a number 0:01:27.000 --> 0:01:30.400 of occasions that the dollar tends to now be weakened 0:01:30.440 --> 0:01:33.000 against the end and the euro when you have dramatic 0:01:33.080 --> 0:01:35.920 escalation on the trade fund because the Fed has now 0:01:35.959 --> 0:01:39.320 communicated that they are going to be potentially easing more 0:01:39.360 --> 0:01:43.200 aggressively when these things happen. So that's the kind of 0:01:43.240 --> 0:01:46.720 bounce you're having today, like the dollars coming back after 0:01:46.880 --> 0:01:52.200 after that set back on Friday. And that's what you're 0:01:52.200 --> 0:01:54.120 seeing in the euro cross and in the end cross 0:01:54.200 --> 0:01:56.560 in the general sort of cheat guide for foreign exchange 0:01:56.560 --> 0:01:57.880 over the last couple of years. And you and I 0:01:57.880 --> 0:01:59.520 have gone back and forth on this end a couple 0:01:59.560 --> 0:02:03.240 of times. When global risk appetite is good, the dollar 0:02:03.360 --> 0:02:05.880 is weaker. When it's bad, the dollar is stronger. But 0:02:05.880 --> 0:02:08.400 there's some extra nuance and you've touched on it. The 0:02:08.440 --> 0:02:12.800 way the euro behaves in global risk off. It's not 0:02:12.840 --> 0:02:14.440 the story this morning, but it's been the story over 0:02:14.440 --> 0:02:16.560 the last several months. Just walk out listeners through it. 0:02:16.639 --> 0:02:19.240 Yet why this is slightly different for the Euro just 0:02:19.320 --> 0:02:21.919 in terms of the risk mitigating characteristics of the single 0:02:21.960 --> 0:02:26.280 currency that maybe they didn't have several years back. Well, 0:02:26.320 --> 0:02:28.240 I think you can actually see it, and this is 0:02:28.240 --> 0:02:31.239 something we tracked closely in our data that over the 0:02:31.320 --> 0:02:34.519 last couple of weeks, we've had various types of repatriation, 0:02:34.680 --> 0:02:38.520 Like people normally invest outside their country in good times, 0:02:38.560 --> 0:02:40.600 and then we when we had tension, some of that 0:02:40.639 --> 0:02:43.440 money comes back. We've seen a lot of money, especially 0:02:43.480 --> 0:02:46.680 in equity space, come back to the US that was 0:02:46.720 --> 0:02:49.840 previously invested in the emerging markets, and in Europe you've 0:02:49.880 --> 0:02:52.080 had a little bit of the same. So essentially equity 0:02:52.080 --> 0:02:55.280 investors in Europe are getting more cautious and repatriating. That's 0:02:55.320 --> 0:02:58.120 why we've had both the euro and the dollar actually 0:02:58.120 --> 0:02:59.880 been quite strong at the same time in the month 0:03:00.000 --> 0:03:02.679 of all this. What we've observed in August, what we've 0:03:02.680 --> 0:03:05.799 observed Friday, what we see today, what we're going to 0:03:05.880 --> 0:03:08.919 see this coming Thursday, etcetera. Do you look at it 0:03:09.000 --> 0:03:13.080 is continuous functions of smooth vectors or is there a 0:03:13.120 --> 0:03:18.480 discontinuity in an instability right now at critical levels? Well, so, 0:03:18.520 --> 0:03:21.960 I would say We all know that Pounds spoke on Friday, 0:03:22.240 --> 0:03:25.200 and we all know there was tweets about tariffs, but 0:03:25.280 --> 0:03:27.600 there was actually a third thing that was news reporting 0:03:27.680 --> 0:03:31.840 about like things going on in the background to get 0:03:31.840 --> 0:03:34.840 the dollar to trade weaker. Right, So that almost didn't 0:03:34.920 --> 0:03:36.960 get any airtime on on Friday because there was so 0:03:37.000 --> 0:03:39.520 much else going on. But there is this talk about 0:03:39.520 --> 0:03:43.920 a currency tacks or things that would be done to 0:03:44.120 --> 0:03:47.760 essentially remove power from his position of power, all meant 0:03:47.800 --> 0:03:50.200 to weaken the dollar. So that was part of the 0:03:50.240 --> 0:03:53.200 reason why the dollar was weak against the end and 0:03:53.240 --> 0:03:55.960 the Euro on Friday. And the question is we come 0:03:56.000 --> 0:03:58.720 back and say, okay, is that just something that's being 0:03:58.720 --> 0:04:02.920 discussed or is it really something investors have to take seriously. 0:04:03.360 --> 0:04:08.200 So it is definitely unnerving as a global portfolio manager 0:04:08.280 --> 0:04:11.400 not knowing what the dollar policy is and it creates 0:04:11.400 --> 0:04:13.160 a lot of volatility. So where do you come out 0:04:13.200 --> 0:04:15.400 on that debate? Right now? Yin's because it's an important one. 0:04:15.440 --> 0:04:17.160 What do you tell clients? Do you think that it's 0:04:17.200 --> 0:04:21.000 something that gets followed up with action? So, as as 0:04:21.040 --> 0:04:24.039 I mentioned with toma on on the TV, like a 0:04:24.040 --> 0:04:30.440 couple of minutes ago, we have to think about currents intervention. 0:04:30.480 --> 0:04:33.800 But we also have to acknowledge that if current intervention 0:04:34.040 --> 0:04:36.760 US unilateral current intervention is going to be effective, it's 0:04:36.760 --> 0:04:40.040 going to be a commitment to do unlimited amounts. It's 0:04:40.120 --> 0:04:43.360 not enough to do ten billion. Where does the limited 0:04:43.440 --> 0:04:46.880 come from? With a fiscal deficit, etcetera, etcetera. We we're 0:04:47.040 --> 0:04:49.720 very simple. Do we print? It's very simple, Like the 0:04:49.760 --> 0:04:53.520 only balance sheet that can offer unlimited potential just a 0:04:53.520 --> 0:04:56.560 fat balance sheet. So that's why it's crucial. Right in 0:04:56.640 --> 0:04:59.280 the past, it has always been the case that there 0:04:59.320 --> 0:05:02.719 was a chord in Asian between the Treasury and the Fed. 0:05:03.120 --> 0:05:05.680 There was even a kind of like rule thumb that 0:05:05.720 --> 0:05:09.800 they did half and half. So if the Trump administration 0:05:09.880 --> 0:05:13.080 wants to go ahead with currency intervention, they have to 0:05:13.120 --> 0:05:15.600 get the FED on board with it, otherwise it's going 0:05:15.640 --> 0:05:18.159 to be meaningless. I'm broke, dude, you have a trade 0:05:18.160 --> 0:05:20.280 that can get me to September? I mean, is there 0:05:20.279 --> 0:05:23.560 a trade right now in all this craziness? Well, so, 0:05:23.600 --> 0:05:26.480 I think one thing that's interesting is that because we 0:05:26.560 --> 0:05:30.200 have so much going on in terms of uncertainty about 0:05:30.279 --> 0:05:33.600 US policy, it has been forgotten that the e c 0:05:33.760 --> 0:05:38.120 B is probably going to deliver more quee on September twelve. 0:05:38.800 --> 0:05:41.400 So I think there's some trades around that that could 0:05:41.400 --> 0:05:45.360 be very interesting. If we can push the intervention risk 0:05:45.440 --> 0:05:49.320 and all that crazy stuff in the background. We're probably 0:05:49.320 --> 0:05:52.760 going to see the eurodrift lower as we get that 0:05:53.279 --> 0:05:56.800 que priced, and it would be a huge shock to 0:05:56.880 --> 0:05:59.720 investors if we trade below one ten now. So it's 0:05:59.760 --> 0:06:02.159 not very far from where we are, but that's we 0:06:02.160 --> 0:06:07.960 haven't seen. And thank you so much with you this morning. 0:06:23.200 --> 0:06:26.039 Up until the summer, we had a massive year for 0:06:26.160 --> 0:06:28.720 credit instore. The back half is looking a little bit 0:06:28.760 --> 0:06:31.359 more complex. Please to say that Markie Patol joins US 0:06:31.400 --> 0:06:36.200 now whilst Farco Asset Management Senior portfolio manager Markie walkers 0:06:36.200 --> 0:06:38.320 through it. What's the message from our listeners this morning 0:06:38.520 --> 0:06:41.320 in the world of US credit. Well, I think that 0:06:41.400 --> 0:06:45.240 everything looks okay for risk assets. That is how your 0:06:45.320 --> 0:06:49.760 bonds and invest in great corporate bonds and we clearly 0:06:49.880 --> 0:06:53.880 or in see treasuries in that trading range probably heading lowers. 0:06:53.880 --> 0:06:56.839 So that's a pretty good backdrop if powers committed to 0:06:56.920 --> 0:07:00.800 being passive, data dependent and not aggressively trying to tighten 0:07:00.880 --> 0:07:03.719 credit conditions. Marky now is a good opportunity to reflect 0:07:03.760 --> 0:07:06.240 on the speech from Chairman Poal on Friday. It has 0:07:06.279 --> 0:07:09.040 been overtaken by events. But what was in that speech 0:07:09.080 --> 0:07:11.200 for you that stood out that you think we need 0:07:11.240 --> 0:07:14.480 to pay a little bit more attention to. Well, two things. One, 0:07:14.960 --> 0:07:17.960 the FIT is clearly going to be a follower leader 0:07:18.120 --> 0:07:22.560 in determining credit conditions. And the second thing is they 0:07:22.560 --> 0:07:26.760 clearly are still working on an intellectual framework for where 0:07:26.760 --> 0:07:29.200 should they try to send interest rates? What's the neutral 0:07:29.320 --> 0:07:32.880 rate of interest with the economy growing? So I think 0:07:32.920 --> 0:07:35.960 they don't have a larger framework. So they're just sort of, 0:07:36.080 --> 0:07:38.040 you know, just taking it as it goes and looking 0:07:38.040 --> 0:07:42.280 at each data point. Mark follower, not a leader. This 0:07:42.320 --> 0:07:45.520 is really important. Financial conditions are loose, and are loose 0:07:45.560 --> 0:07:49.040 according to Chairman Pow because of the anticipated path of 0:07:49.160 --> 0:07:52.040 federal reserve policy. MARKI is that as close as we've 0:07:52.080 --> 0:07:54.840 come to an endorsement of market pricing from this chairman 0:07:54.920 --> 0:07:58.200 so far, I would say of any chairman that I 0:07:58.200 --> 0:08:02.559 can recall, yes, and I think that's positive. I'm looking 0:08:02.560 --> 0:08:05.760 at a thirty year investment grade piece. It has a 0:08:05.800 --> 0:08:11.920 four percent coupon price to perfection, yielding two point eight 0:08:12.000 --> 0:08:15.040 zero percent it's a famous American brand. We don't even 0:08:15.840 --> 0:08:18.800 bring up the name of the company. Why should I 0:08:18.840 --> 0:08:23.040 own that versus full faith in credit? Just for the 0:08:23.040 --> 0:08:26.680 extra yield that you get that extra two to two 0:08:26.760 --> 0:08:30.280 and a half percentage points, well, you'll simply compound more 0:08:30.440 --> 0:08:33.440 and you really aren't taking much risk in investment grade corporates, 0:08:33.800 --> 0:08:36.640 even with a huge premium of one one where it's 0:08:36.640 --> 0:08:41.560 going to roll out to a one hundred thirty years out. Yes, 0:08:41.760 --> 0:08:44.040 but you know that's the way the math works on bonds. 0:08:44.080 --> 0:08:47.280 And actually, in my experience, those very high dollar bonds 0:08:47.559 --> 0:08:50.000 tend off for the investor a little bit of value 0:08:50.440 --> 0:08:53.840 because the yield is greater than because no one wants 0:08:53.840 --> 0:08:56.280 to pay the big premium. Folks, that is margat Patel 0:08:56.360 --> 0:08:58.079 one oh one that you just heard there, do not 0:08:58.240 --> 0:09:01.640 be a feared of premium. Are there any bonds out there, 0:09:01.679 --> 0:09:07.160 Margaret discount? They were very, very few, and typically they're 0:09:07.200 --> 0:09:13.240 distressed or they the doll. Let's talk about the young 0:09:13.360 --> 0:09:16.720 character than Daniel Fuss. He's at UH in Boston at 0:09:16.760 --> 0:09:19.440 Looma Sales, and Margie, I look at you and the 0:09:19.520 --> 0:09:22.840 heritage of Fuss and Patel and and all that. There 0:09:22.880 --> 0:09:25.120 was a point where you you bought bonds at a 0:09:25.200 --> 0:09:28.840 discount and you made a credit upgrade as you went along, 0:09:28.880 --> 0:09:32.319 and you actually made some snappy total return. Will we 0:09:32.400 --> 0:09:38.640 ever get back to that? I don't think in our lifetime. Now, wow, 0:09:39.040 --> 0:09:41.640 I mean that you know these are important statement life. 0:09:42.120 --> 0:09:44.320 Well this, John, this goes to the heart of your show, 0:09:44.400 --> 0:09:47.679 the real yield, I mean, Margaie, do let me rephrase, 0:09:47.840 --> 0:09:50.880 do we ever get back to a legitimate, really yield 0:09:50.920 --> 0:09:54.719 where our listeners who are saviors, savers can actually look 0:09:54.800 --> 0:09:59.960 up twelve months and say, hey, I made a little money. Well, 0:10:00.040 --> 0:10:01.760 they can make a little money. And of course, if 0:10:01.760 --> 0:10:04.559 you compare to inflation, if you make eight percent on 0:10:04.679 --> 0:10:08.360 a bond but inflation was seven, you haven't really made 0:10:08.400 --> 0:10:11.600 that much. And today you're making one or two percent 0:10:11.640 --> 0:10:14.480 over inflation, So that's not That reminds me of a 0:10:14.520 --> 0:10:17.120 conversation I had about a year ago with Mike Collins 0:10:17.120 --> 0:10:19.800 of p JIM and I raised the following question. I 0:10:19.840 --> 0:10:22.200 said to Mike, how will we look back at this 0:10:22.240 --> 0:10:24.880 bond market in ten years time? Looking back in ten 0:10:25.120 --> 0:10:27.920 ten years ago and saying all that negative yielding debt 0:10:28.000 --> 0:10:31.360 sixteen trillion dollars worth wasn't this crazy? And I remember 0:10:31.440 --> 0:10:33.880 Mike turning around to me and saying, never mind that. 0:10:34.600 --> 0:10:37.160 What you'll do in ten years looking back ten years 0:10:37.200 --> 0:10:39.840 is look at the treasury market and wish you'd bought 0:10:39.880 --> 0:10:43.120 a thirty year with a three percent coupon because you 0:10:43.200 --> 0:10:45.280 probably won't be able to get it. And guess what 0:10:45.720 --> 0:10:49.960 a hundred basis points south. Here we are at Margie. 0:10:50.080 --> 0:10:54.040 All of the concerns about the deficit, about the debt pile, 0:10:54.600 --> 0:10:57.600 it's just not in the treasury market, Markie, is this it? 0:10:58.040 --> 0:11:00.679 Are we heading to the japanification? Not at the bund 0:11:00.760 --> 0:11:03.720 market will beyond that. But is that the direction of 0:11:03.720 --> 0:11:07.520 travel for the treasury market too? I think it is. 0:11:07.760 --> 0:11:11.320 We've seen Japan go first, in Europe second, we're on 0:11:11.360 --> 0:11:14.240 that same trail. We have a little bit more robust 0:11:14.520 --> 0:11:18.480 economic condition, so we're behind them. But you know that 0:11:18.520 --> 0:11:22.199 burden of death is simply weighing on returns and growth 0:11:22.440 --> 0:11:25.040 and as legislationary force. That's just the way it is. 0:11:25.320 --> 0:11:29.319 Do you have equities within your portfolio, within your blended portfolio, 0:11:29.360 --> 0:11:33.000 Wells Fargo. Do you have equities for dividend growth? Yes? 0:11:33.040 --> 0:11:40.240 I do right now, it's about at fifteen hil bonds. 0:11:40.640 --> 0:11:42.600 That's where the return will be. I mean, that's where 0:11:42.600 --> 0:11:45.120 the return will be. What's an appropriate dividend growth for 0:11:45.160 --> 0:11:47.800 our listeners? I mean everybody's addicted to double digit growth 0:11:48.160 --> 0:11:51.240 or the big fat coupon and say telephones whatever. But 0:11:51.440 --> 0:11:54.559 what's an appropriate dividend growth for Margie patell? Is it 0:11:54.640 --> 0:11:59.120 nominal GDP? Well, the standard poor is a dividend yield 0:11:59.200 --> 0:12:01.960 is a touch under two percent, and so for me 0:12:02.480 --> 0:12:04.600 one and a half percent is good enough if I 0:12:04.600 --> 0:12:07.600 think I can get capital appreciation to be a lot 0:12:07.679 --> 0:12:10.439 more than the total. But do you model and dividend 0:12:10.480 --> 0:12:16.520 growth off a one percent yield? Uh? No, because I 0:12:16.559 --> 0:12:19.920 think it's really more important is what's the earnings growth 0:12:20.000 --> 0:12:24.160 cash flow the whole company that dividend. That's really important 0:12:24.200 --> 0:12:26.720 statement folks on the Monday morning, I mean financial planning 0:12:26.720 --> 0:12:29.920 one oh one. Uh it's simple. Do you look at 0:12:29.960 --> 0:12:33.679 the company as a whole in its financial metrics or 0:12:33.720 --> 0:12:37.600 do you focus in on the dividend growth mantra and 0:12:37.640 --> 0:12:40.600 you just mislay and market. Just as a final question, 0:12:40.640 --> 0:12:43.320 there'll be many listeners looking at the equity market and 0:12:43.400 --> 0:12:47.400 saying those safe bond type proxies in the equity market 0:12:48.360 --> 0:12:51.559 is where the biggest appreciation has been. They look expensive 0:12:51.720 --> 0:12:54.160 right now. We don't want exposure to that area market. 0:12:54.200 --> 0:12:57.480 What's the message for those individuals this morning. I think 0:12:57.520 --> 0:13:00.520 the messages you should dial back income for friends in 0:13:00.600 --> 0:13:04.000 favor of capital appreciation. I think capital appreciation is still 0:13:04.559 --> 0:13:09.680 undervalued by investors of yesteryear. Terrific Monday briefing, Margaret Patel, 0:13:09.760 --> 0:13:14.480 thank you so much, Capital Management greatly greatly appreciate it. 0:13:26.720 --> 0:13:29.600 Josh Allencott joins us down from Janis Sanderson. Dr Alan 0:13:29.640 --> 0:13:32.520 Carr is always a joy to listen to with his 0:13:32.559 --> 0:13:35.720 work at m I T and Chemical Engineering and also 0:13:35.880 --> 0:13:39.959 at Berkeley UH as well. Ash writes a hyper detailed 0:13:40.000 --> 0:13:43.360 note as he is global asset allocation and portfolio manager 0:13:43.440 --> 0:13:47.400 for Janis Ash. I'm a big, big believer in sharp 0:13:47.520 --> 0:13:51.280 ratios because beta, the volatility of the market really isn't 0:13:51.320 --> 0:13:54.880 in there. There's a purity to the sharp ratio. You 0:13:55.000 --> 0:14:00.160 go further and you normalize the sharp ratios. What that 0:14:00.440 --> 0:14:05.600 signal within the market hysteria of the last two weeks. Great? 0:14:05.800 --> 0:14:09.000 Thanks Tom for the other kind words. Um So we 0:14:09.040 --> 0:14:12.160 do normalize or we adjust the sharp ratio. Um and 0:14:12.240 --> 0:14:16.240 we adjust the sharp ratio very quickly for what turns 0:14:16.280 --> 0:14:20.760 out to be the most important driver of portfolio performance, 0:14:20.800 --> 0:14:24.440 which are the large moves um. The average moves UH 0:14:24.640 --> 0:14:28.000 don't impose as big of an impact on how your 0:14:28.080 --> 0:14:31.240 overall portfolio performs in the long run, but it's the 0:14:31.280 --> 0:14:34.280 tails that matter the most. So one of the problems 0:14:34.320 --> 0:14:37.280 with the sharp ratio is the fallacy of averages. Right 0:14:37.320 --> 0:14:39.880 I could, for example, if I didn't know how to swim. 0:14:39.920 --> 0:14:41.400 I'm not a very good swimmer, and I was trying 0:14:41.440 --> 0:14:44.600 to cross a river and Tom, you told me the 0:14:44.680 --> 0:14:47.800 river on average has a depth of three feet. Should 0:14:47.800 --> 0:14:50.400 I feel comfortable crossing that river or not? I'm probably 0:14:50.400 --> 0:14:52.960 not going to be comfortable because what if the cross 0:14:53.000 --> 0:14:56.600 section I'm sitting at right now is not a three 0:14:56.640 --> 0:15:00.440 ft foot depth, but rather it's twenty um. So we 0:15:00.480 --> 0:15:03.000 look at the insurance markets to give us an idea 0:15:03.640 --> 0:15:08.160 of the potential expected large upside um as well as 0:15:08.200 --> 0:15:11.840 the potential large downside um, using a combination of call 0:15:12.000 --> 0:15:15.600 prices and put options and put prices and what these 0:15:15.640 --> 0:15:19.120 option contracts are telling us. Which are insurance contracts they 0:15:19.160 --> 0:15:23.040 tell us today risky assets aren't offering a very attractive 0:15:23.080 --> 0:15:28.680 risk premium UM UH equities globally, from US equities, UH, 0:15:28.720 --> 0:15:32.560 non US developed equities, emerging market equities, they all are 0:15:32.640 --> 0:15:38.400 showcasing not much upside given the downside risk you bear UM. 0:15:38.480 --> 0:15:41.000 And I think that's all an artifact of what's going 0:15:41.040 --> 0:15:45.280 on in the markets today with UH uncertainty obviously on 0:15:45.320 --> 0:15:49.240 the trade front, uncertainty on the political front UM, and 0:15:49.280 --> 0:15:53.840 slowing economic um real economic numbers so actual. Was there 0:15:53.840 --> 0:15:57.000 anything coming out of Jackson whole last week from FED 0:15:57.080 --> 0:16:01.200 Chairman Poal that might suggest that the FED has an 0:16:01.200 --> 0:16:04.640 opportunity here to really help markets now? I actually think 0:16:04.680 --> 0:16:07.960 that the biggest takeaway UM from the FED was and 0:16:08.000 --> 0:16:10.480 I believe this is the first time Powell directly said 0:16:10.520 --> 0:16:14.560 this monetary policy may not be able to do much 0:16:15.040 --> 0:16:18.920 to quell the uncertainty UM to cushion the blows on 0:16:18.960 --> 0:16:22.600 the trade front UM. That that's something which is outside 0:16:22.600 --> 0:16:25.600 of the purview, outside of the toolkit of monetary policy 0:16:26.120 --> 0:16:28.920 UM so, so I think he took a stand in 0:16:28.920 --> 0:16:32.880 a call to action that don't look at monetary policy 0:16:33.240 --> 0:16:36.280 um UM to be able to be the panacea for everything. 0:16:36.880 --> 0:16:38.680 It's just not going to help much when you have 0:16:38.720 --> 0:16:43.080 these structural risks that that are potentially hitting UM global 0:16:43.120 --> 0:16:47.120 trade and the fabric UM that that really has um 0:16:47.400 --> 0:16:50.760 UM led to to this great expansion over the last 0:16:51.080 --> 0:16:54.680 I don't know, two decades, three decades. And so unfortunately 0:16:54.680 --> 0:16:56.120 it sounds like, I mean, there's some of the market 0:16:56.120 --> 0:16:58.640 that are kind of coming to the conclusion that they're 0:16:58.680 --> 0:17:02.960 likely won't be resolution into this trade uncertain until after election. 0:17:03.000 --> 0:17:06.280 If that's in fact the case, then is the best 0:17:06.320 --> 0:17:08.880 move just to stay on the sidelines here. I think 0:17:08.920 --> 0:17:10.960 that's right. UM. There's a lot of noise, and I 0:17:11.440 --> 0:17:15.480 actually think you're correct. UM. I do believe UM, and 0:17:15.520 --> 0:17:19.679 the data supports this. The parallels that people are drawing 0:17:19.760 --> 0:17:24.879 today between the trade issues that exist today and the 0:17:25.000 --> 0:17:29.119 trade issues UM and the trade problems that came about 0:17:29.240 --> 0:17:32.119 during the Great Depression UM and the use of terroiffs 0:17:32.119 --> 0:17:37.480 and a protective stance taking by countries globally UM intensified 0:17:37.760 --> 0:17:42.280 the recession into a Great depression are unfounded. UM. What 0:17:42.440 --> 0:17:47.880 the data shows is it was the gold standard. It 0:17:47.960 --> 0:17:52.480 was the inability of countries to control the value of 0:17:52.480 --> 0:17:58.000 the currency that really accelerated this recession into a great depression. UM. 0:17:58.040 --> 0:18:01.000 And the fact is those countries Ease which were off 0:18:01.040 --> 0:18:04.719 the gold standard or abandoned the gold standard very quickly 0:18:05.080 --> 0:18:08.440 only suffered mild recessions by e Japan. It was only 0:18:08.440 --> 0:18:11.439 those countries that stayed on the gold standard, such as 0:18:11.520 --> 0:18:16.200 the US, such as Germany, will suffered the Great Depression. Yeah, 0:18:16.280 --> 0:18:18.280 Ken Rogost done a ton of work on this, on 0:18:18.359 --> 0:18:21.159 the advantage. Do you guys at Jennis Henderson have a 0:18:21.200 --> 0:18:25.240 confidence in floating right right now to compensate for all 0:18:25.240 --> 0:18:27.760 the uproar were in? Yeah, I think you see that. 0:18:27.800 --> 0:18:30.760 I think that's the power. And that's the characteristic of 0:18:30.760 --> 0:18:33.520 an efficient market. What an efficient market does for you 0:18:33.600 --> 0:18:36.600 and why an efficient market is so powerful. It figures 0:18:36.600 --> 0:18:41.000 out ways to get around artificial barriers, just like gravity 0:18:41.040 --> 0:18:43.919 will figure out a way. And Tom, you try to 0:18:44.440 --> 0:18:48.040 um prevent water from flowing down a hill. Um, Sure, 0:18:48.040 --> 0:18:50.600 you might be successful for a couple of days, but 0:18:50.680 --> 0:18:53.639 gravity will figure out a way to get that water 0:18:53.800 --> 0:18:56.000 to the bottom of the hill. Um. And that's what 0:18:56.040 --> 0:18:59.159 the capital markets. So if there's an artificial embaran imbalanced 0:18:59.320 --> 0:19:04.600 artificial years such as Harris, currencies will adjust. And that's 0:19:04.600 --> 0:19:08.359 what you're talking in China right now. Well, we're going 0:19:08.400 --> 0:19:10.320 to run out of time, Ash, we needn't make a 0:19:10.400 --> 0:19:12.399 note your cong Can you make a note that we 0:19:12.440 --> 0:19:16.280 could drag drag dr Alan Car on again? Soonest with 0:19:16.359 --> 0:19:18.440 Janisonder said, because I got like, I got like forty 0:19:18.480 --> 0:19:21.159 two more questions and only four of them have to 0:19:21.200 --> 0:19:23.359 do with the Greek letters. We get you got your 0:19:23.359 --> 0:19:25.960 shop ratio question, and so they always leave it the 0:19:25.960 --> 0:19:28.720 strongest AshEL and car Where this is, Janiser said, love 0:19:28.760 --> 0:19:31.840 having him on to talk about the dynamics in the market. 0:19:46.720 --> 0:19:49.920 John Hudack speaks I think fourteen languages. He's at Brookings 0:19:50.520 --> 0:19:54.480 where he dissects American policy. John help us with one 0:19:54.520 --> 0:19:58.520 of the themes this weekend, which is the durability or 0:19:58.560 --> 0:20:04.000 the longevity or the entrenchment of various presidential policies we've 0:20:04.040 --> 0:20:07.240 seen in the last three years. Is there a durability 0:20:07.280 --> 0:20:11.639 to Trump foreign policy? I don't think there's a durability 0:20:11.720 --> 0:20:15.639 necessarily to Trump foreign policy, in large part because it 0:20:15.680 --> 0:20:19.480 has been fairly scattered from one moment to the next. 0:20:19.680 --> 0:20:23.679 On a given issue, we're not entirely sure what the 0:20:23.720 --> 0:20:27.640 president believes is best. I think one of the best 0:20:27.720 --> 0:20:32.240 examples of that is the president's position on troops in Afghanistan. Um, 0:20:32.320 --> 0:20:35.840 we have gone from a president who is now saying 0:20:35.840 --> 0:20:39.199 there's no timeline to pull troops out, um, coming all 0:20:39.240 --> 0:20:41.280 the way from a president who was ready to pull 0:20:41.359 --> 0:20:44.439 all the troops out very quickly. And so because of that, 0:20:44.520 --> 0:20:47.919 it's hard to imagine that a set of policies that 0:20:47.960 --> 0:20:51.800 are so volatile could possibly be durable. So, John, as 0:20:51.840 --> 0:20:54.080 we take a look at the waning moments of the 0:20:54.119 --> 0:20:56.840 G seven meeting, it's at you know, when we think 0:20:56.880 --> 0:21:00.000 about the global trade here obviously that was discussed um 0:21:00.000 --> 0:21:02.560 probably at length there at the G seven. Is it 0:21:03.000 --> 0:21:06.199 realistic to believe that any country could enter into a 0:21:06.320 --> 0:21:11.000 substantive trade agreement with the United States given how President 0:21:11.000 --> 0:21:13.760 Trump has been so I guess, you know, back and 0:21:13.800 --> 0:21:16.199 forth on so many key issues. You know, I do 0:21:16.320 --> 0:21:19.480 think it is possible for a country or for um, 0:21:19.520 --> 0:21:23.159 the EU UH to enter into a trade agreement with 0:21:23.240 --> 0:21:28.359 the President. Certainly there are mutual interests that extend among 0:21:28.480 --> 0:21:32.520 countries and the possibility really exists. I think you're right 0:21:32.920 --> 0:21:36.879 Paul that because of the President's vacillation, it's hard to 0:21:36.960 --> 0:21:38.760 nail him down. And of course when it comes to 0:21:38.800 --> 0:21:42.199 a trade agreement, everyone needs to be very firmly on 0:21:42.240 --> 0:21:45.399 the same page. But I do think it's possible, maybe 0:21:45.400 --> 0:21:50.119 not grand trade agreements, but something more narrowed in on 0:21:50.240 --> 0:21:52.680 the fuss of things that you can nail the president 0:21:52.720 --> 0:21:56.000 down on John twice today, At least I haven't watched 0:21:56.040 --> 0:22:00.000 all of the president's actions. He turned a secretary minution 0:22:00.040 --> 0:22:04.159 and and lined up officers for whatever the answer was 0:22:04.200 --> 0:22:06.960 as having to do with China and the dialogue with China. 0:22:07.119 --> 0:22:11.280 How engaged are they in the Trump messaging that we 0:22:11.280 --> 0:22:14.600 saw him particularly observed on Friday. You know, I think 0:22:14.600 --> 0:22:18.520 that the team around the president is critical to however 0:22:18.800 --> 0:22:22.919 the trade talks will proceed with China. The reality is 0:22:23.000 --> 0:22:26.240 that the president often speaks off the cuff. Um. It 0:22:26.320 --> 0:22:31.560 appears that that sort of conversational style approach to presidential 0:22:31.640 --> 0:22:36.440 rhetoric is not always one informed. And while I think 0:22:36.520 --> 0:22:40.720 that some might view the president constantly turning to someone 0:22:40.760 --> 0:22:43.919 like the Treasury Secretary as a signal of weakness, I 0:22:43.960 --> 0:22:48.560 actually think it's the president at least UH substituting uh 0:22:49.200 --> 0:22:52.960 better judgment for his own when it's not fully informed. 0:22:53.000 --> 0:22:55.240 And so I think the more that the president turns 0:22:55.280 --> 0:22:57.959 to his advisors and asks for a more firm answer 0:22:58.400 --> 0:23:01.560 is much better for UH, this country and for the 0:23:01.600 --> 0:23:04.720 world than the president just simply saying whatever comes to 0:23:04.760 --> 0:23:07.680 the top of his mind. So, John, given some of 0:23:07.720 --> 0:23:12.240 the vacillations of this administration, what incentive do you think 0:23:12.240 --> 0:23:16.359 the Chinese have for actually engaging in meaningful discussions and 0:23:16.400 --> 0:23:18.920 trying to get a deal done? Or are they kind 0:23:18.920 --> 0:23:22.080 of on the flip side saying we'll just wait. Well, 0:23:22.119 --> 0:23:24.480 you know, I think this is something that the Chinese 0:23:24.480 --> 0:23:28.240 are still figuring out. Ideally, um, they are going to 0:23:29.200 --> 0:23:32.480 strike a trade deal when it is most opportune for them. 0:23:32.520 --> 0:23:35.199 And I think for President she he has had moments 0:23:35.280 --> 0:23:38.240 during the Trump administration where he has thought, you know, 0:23:38.760 --> 0:23:41.760 this is the administration to strike this deal with, and 0:23:41.800 --> 0:23:45.760 then those moments passed. I think over the next six months, 0:23:45.760 --> 0:23:48.800 probably the Chinese are really going to start to game 0:23:48.840 --> 0:23:52.199