WEBVTT - Fed Cuts Rates by Quarter Point While Hinting at a Policy Pause 0:00:00.560 --> 0:00:03.080 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.160 --> 0:00:05.640 Jason Kelly. We're here every day bringing you the latest 0:00:05.640 --> 0:00:09.920 news from the world's of business and finance, plus technology, politics, economics, 0:00:10.000 --> 0:00:13.600 all harnessing the power of Bloomberg Business Week reporters and editors, 0:00:13.640 --> 0:00:17.240 not to mention our journalists analysts more than a hundred 0:00:17.239 --> 0:00:20.919 and twenty countries. You can download Bloomberg Business Week on iTunes, SoundCloud, 0:00:20.960 --> 0:00:23.040 or Bloomberg dot com. You can also listen to our 0:00:23.120 --> 0:00:26.360 radio show weekdays at two pm Eastern only on Bloomberg Radio. 0:00:26.720 --> 0:00:29.639 Welcome to Bloomberg Business Week. On this FED decision day 0:00:29.720 --> 0:00:34.560 and the FED crossing the headlines uncertainties remain, will assess 0:00:34.640 --> 0:00:38.400 appropriate ratepath cutting the federal funds rate target twenty five 0:00:38.440 --> 0:00:40.600 basis points to one and a half to one point 0:00:40.680 --> 0:00:44.920 seventy so as expected, Jason cutting for a third straight meeting. 0:00:45.880 --> 0:00:49.800 We're gonna dig into some of these headlines omitting acts 0:00:49.880 --> 0:00:52.680 as appropriate. I want to understand what that means when 0:00:52.720 --> 0:00:54.160 we get to our experts in just a minute. But 0:00:54.200 --> 0:00:57.120 first let's get some market reaction from Charlie Pellett. Hy Charlie, 0:00:57.200 --> 0:00:59.400 right now, we have got the SMP five hundred index 0:00:59.480 --> 0:01:03.480 down down two tenths of one percent. Stocks flat heading 0:01:03.600 --> 0:01:06.880 into that announcement, the Tenure up seven thirty seconds, with 0:01:06.959 --> 0:01:10.120 the yield now of one point eight one percent. The 0:01:10.160 --> 0:01:13.240 Dow down twenty nine points, dropping one tenth of one percent, 0:01:13.840 --> 0:01:16.560 NAS Stack Laura by twenty five, down three tenths of 0:01:16.560 --> 0:01:20.039 one percent, Gold up two tenths four eighty nine, the 0:01:20.040 --> 0:01:22.520 Ounce and West Texas in enemediate crew down one half 0:01:22.520 --> 0:01:25.560 percent fifty four seventy one, So again a drop for 0:01:25.600 --> 0:01:28.479 the down down thirty five, down one tenth SMP now 0:01:28.560 --> 0:01:31.120 Laura by eight down three tenths and as stacked down 0:01:31.160 --> 0:01:33.880 by three tenths of one percent. I'm Charlie Pellett. That's 0:01:33.880 --> 0:01:36.480 a Bloomberg Business Flash. Charlie, thank you so much for 0:01:36.600 --> 0:01:38.840 listening to Bloomberg Business Week to focus on the FED. 0:01:38.880 --> 0:01:41.440 Brought to you by Commonwealth Financial Network. For the sixth 0:01:41.560 --> 0:01:44.959 straight time, JD Power ranks Commonwealth number one in independent 0:01:44.959 --> 0:01:49.120 advisory satisfaction among financial investment firms. Is it Commonwealth dot 0:01:49.200 --> 0:01:53.360 Com to learn more? Where we are all about the 0:01:53.400 --> 0:01:55.520 FED right now? So most read story just want to 0:01:55.520 --> 0:01:57.440 get to our Chris Connon, who puts out our FED 0:01:57.520 --> 0:02:00.720 story Federal Reserve officials reducing interest rates by order percentage 0:02:00.720 --> 0:02:03.160 point for the third time this year, hinting they may 0:02:03.240 --> 0:02:07.400 now put monetary policy on hold for one meeting at least. 0:02:07.400 --> 0:02:10.399 And we did see equities dig a little bit deeper 0:02:10.840 --> 0:02:13.880 into the lost column as a result, and as for yield, 0:02:13.919 --> 0:02:17.040 a slight uptick, but really slight. Let's get into this 0:02:17.520 --> 0:02:20.440 with our team. Kathleen Hayes is Global Economics and Policy 0:02:20.560 --> 0:02:23.680 editor here at Bloomberg News. She's in our interactive broker's 0:02:23.720 --> 0:02:25.840 studio in New York along with Dave Wilson. Our stocks 0:02:25.880 --> 0:02:28.679 that are Bloomberg News. Kathleen write to you what stands out? 0:02:28.720 --> 0:02:32.160 Does this mean the Fed is on pause for December? No, okay, 0:02:32.200 --> 0:02:34.520 I don't think so. I do think though they could be. 0:02:35.160 --> 0:02:38.399 I think that the fact that j. Powell and the 0:02:38.400 --> 0:02:42.240 Fed the FOMC took out act as appropriate to sustain 0:02:42.320 --> 0:02:47.400 the expansion, which had become a phrase that everyone took 0:02:47.440 --> 0:02:50.400 to mean we're going to keep cutting interest rates. That's gone, 0:02:50.600 --> 0:02:53.520 but they're going to monitor the data and assess the 0:02:53.560 --> 0:02:55.880 appropriate path of the target reach for the federal funds. Right, So, 0:02:55.960 --> 0:02:58.040 to me, it's pretty clear. I think this is more 0:02:58.120 --> 0:03:00.200 or less what people expected. You don't now you're want 0:03:00.200 --> 0:03:03.520 to get away from promising to do a rate cut 0:03:03.600 --> 0:03:07.280 at every meeting and maybe even December. But if the 0:03:07.400 --> 0:03:11.120 data are weak enough, right, then there's that the door 0:03:11.360 --> 0:03:14.120 is still wide open. And again I think, now what 0:03:14.200 --> 0:03:15.679 we have to go ahead? Well, this is what I 0:03:15.680 --> 0:03:17.760 don't always get because it's like I understand that they 0:03:17.800 --> 0:03:20.840 take a phrase out of the statement and we you know, 0:03:20.840 --> 0:03:23.240 assess the significance of it. But the's going to act 0:03:23.240 --> 0:03:26.200 appropriate as needed no matter what, whether it's in there 0:03:26.280 --> 0:03:28.320 or not. Right, But what's the well, but what the 0:03:28.400 --> 0:03:32.160 significance is that when this the statement, this statement that 0:03:32.440 --> 0:03:36.680 they make, the policy statement is understood to be which 0:03:36.720 --> 0:03:40.240 it is something that is so carefully worded. Remember when 0:03:40.400 --> 0:03:43.200 the forward guidance under Berninky and then Yelling was you know, 0:03:43.280 --> 0:03:45.960 keeping rates low for an extended period that was considered 0:03:46.000 --> 0:03:48.400 really important. When they removed that, it was a big deal. 0:03:48.800 --> 0:03:51.280 So removing this is a one of those soul but 0:03:51.560 --> 0:03:55.000 so clear signals that they have made a shift. I 0:03:55.040 --> 0:03:57.200 just think it's so important. Though it doesn't mean they 0:03:57.240 --> 0:04:00.360 won't cut in December. It just means out, you know, 0:04:00.400 --> 0:04:02.240 this is the division we've seen those who don't think 0:04:02.240 --> 0:04:03.640 we need to cut it all, those who think we 0:04:03.680 --> 0:04:05.320 need to cut more. Those in the middle are trying 0:04:05.360 --> 0:04:06.880 to figure out what we need to do, or say, hey, 0:04:06.920 --> 0:04:09.080 we just cut rates three times and let's don't forget 0:04:09.080 --> 0:04:13.000 everybody in the background. We do see a mini trade 0:04:13.000 --> 0:04:16.080 deal forming. Maybe the trade part is moving ahead. And 0:04:16.080 --> 0:04:18.320 if there's been one big weight on the US economy, 0:04:18.320 --> 0:04:21.640 on the global economy, it has been the tensions from 0:04:21.640 --> 0:04:24.640 trade manufacturing slowing it so that we talk about this, 0:04:24.680 --> 0:04:28.039 wasn't it canceled? Yeah? It was. Isn't that where they're 0:04:28.040 --> 0:04:30.320 supposed to meet? Well, maybe they'll find another place. To 0:04:30.400 --> 0:04:33.160 me maybe I was thinking maybe maral Lago. It's sort 0:04:33.200 --> 0:04:34.960 of like that that moment where you say, oh, that 0:04:35.000 --> 0:04:37.000 place we used to go as close, we need to 0:04:37.000 --> 0:04:40.560 find a new place. President, they'll write each other beautiful letters. 0:04:40.880 --> 0:04:44.080 Dave Wilson, come on in here. The stock market reaction, 0:04:44.120 --> 0:04:48.080 the equity side reaction, sort of bounced a little bit downward, 0:04:48.520 --> 0:04:50.359 if I could say that, and now it's sort of 0:04:50.360 --> 0:04:53.000 bouncing back up more or less to where it was. 0:04:53.400 --> 0:04:57.080 How does an equity investor read this? Well, in short, 0:04:57.200 --> 0:05:00.400 not much of a reaction as far as the media 0:05:00.520 --> 0:05:04.080 move goes beyond that, if you look at what's been 0:05:04.120 --> 0:05:07.040 going on in stocks like that, you see there's been 0:05:07.080 --> 0:05:11.039 a real preference for bond proxies. Now what we're talking 0:05:11.080 --> 0:05:15.400 about their utilities, real estate companies. They've actually been the 0:05:15.440 --> 0:05:18.800 best performers in the past three months among the eleven 0:05:18.800 --> 0:05:21.919 main industry groups in the SMP five hundreds. So you know, 0:05:22.040 --> 0:05:25.560 in fact today utilities are the best performers and they 0:05:25.760 --> 0:05:30.120 barely budge after this rate decision. So it's clear that 0:05:30.160 --> 0:05:33.359 what people were figuring on going into the meeting is 0:05:33.480 --> 0:05:36.280 playing out in terms of the decision, and it's being 0:05:36.320 --> 0:05:38.960 reflected in the shares. I mean, heck, I was reading 0:05:39.040 --> 0:05:42.080 report today from Bank of America talking about that's you know, 0:05:42.200 --> 0:05:45.000 where the money is flowing into the bond proxies and 0:05:45.040 --> 0:05:48.039 not into bonds. So it's like there's nothing that really 0:05:48.120 --> 0:05:51.200 kind of changes the equation at this point in terms 0:05:51.200 --> 0:05:54.919 of investor preferences, right, utilities, healthcare, consumer staples. That's if 0:05:54.960 --> 0:05:57.800 I look at the SPX, the SMP five hundred and 0:05:57.800 --> 0:06:00.560 the Bloomberg IMAP function on the term, that's where you 0:06:00.560 --> 0:06:03.200 see a little bit of upside in today's a little bit. 0:06:03.240 --> 0:06:06.840 I mean, in real estate stocks are holding up reasonably well, 0:06:06.880 --> 0:06:09.240 They're index is only down the tenth of represent at 0:06:09.240 --> 0:06:14.320 the moment. Let's remember that that two things that happened today. One, 0:06:14.440 --> 0:06:16.480 I mean, you just talking about stocks and where they've been, 0:06:16.600 --> 0:06:20.000 but think about spire is heating another record, another record, 0:06:20.000 --> 0:06:22.400 another area. Right, and today GDP came in at one 0:06:22.440 --> 0:06:25.200 point nine percent, a bit stronger than forecast, so just 0:06:25.279 --> 0:06:27.800 above what the Fed seas is potential. We're waiting for 0:06:27.839 --> 0:06:30.159 a job support on Friday. That could be on the 0:06:30.200 --> 0:06:32.360 weaker side. But I mean, I think if you're one 0:06:32.360 --> 0:06:34.720 of the people the Fed saying let's let's stop now, 0:06:34.960 --> 0:06:37.960 you're feeling pretty good about that decision, right, that those 0:06:38.040 --> 0:06:41.039 kinds of things are backing up your sense that you 0:06:41.080 --> 0:06:43.920 know the world's meant tough the trade war. Maybe we'll 0:06:43.920 --> 0:06:46.120 have well people, we'll go back pedaling alls all of 0:06:46.160 --> 0:06:48.680 a sudden, but for now, there's it doesn't seem to 0:06:48.680 --> 0:06:50.720 be that the reason it's not as compelling to keep 0:06:50.760 --> 0:06:53.120 going and cutting reins. But I think again, I think 0:06:53.120 --> 0:06:56.000 the stock market really has got to be a big one. Right, Yeah, 0:06:56.000 --> 0:06:58.840 it's a good point, and so we will hear from 0:06:58.880 --> 0:07:01.640 the FED chair J Powell. In about twenty five minutes 0:07:01.720 --> 0:07:05.240 or so, he'll take the podium in Washington. Kathleen Hayes, 0:07:05.279 --> 0:07:08.200 what do you expect will be the key questions that 0:07:08.240 --> 0:07:11.480 he will get off the top? What is this a pause? 0:07:12.080 --> 0:07:14.600 Or are you telling us no more interest rate cuts? 0:07:14.640 --> 0:07:19.720 Why if he says dances whatever, he says, well, I 0:07:19.720 --> 0:07:22.400 think he's gonna do that little data tod I think 0:07:22.440 --> 0:07:25.440 I think it's going to say well I said, I 0:07:25.480 --> 0:07:28.800 think I'll be very interested. I don't know, because J. Powell, 0:07:29.080 --> 0:07:30.640 in a lot of ways is a pretty straight shooter. 0:07:30.680 --> 0:07:33.400 He may say, well, we we mean what we said. Yeah, 0:07:33.560 --> 0:07:36.160 things are looking a bit better. We've cut right three times, 0:07:36.160 --> 0:07:38.280 so yeah, this may be a pause, but we are 0:07:38.360 --> 0:07:40.560 watching what also says that we're gonna follow the appropriate 0:07:40.560 --> 0:07:41.960 path for the federal funds? Right? And then people are 0:07:41.960 --> 0:07:44.160 gonna say, well, what are you watching? Are you watching 0:07:44.240 --> 0:07:46.240 the jobs report? What if it's weak? Well, are you 0:07:46.280 --> 0:07:48.400 watching the stock market? Well? Is it the trade war? 0:07:48.440 --> 0:07:50.040 And he's gonna be he's going to be hit with 0:07:50.080 --> 0:07:53.480 so many different questions on this. Uh, I think we 0:07:53.520 --> 0:07:57.120 should get some good, some good perspective. I think we'll 0:07:57.160 --> 0:07:59.720 get more information, and J. Powe knows full well that 0:07:59.840 --> 0:08:01.480 this is what the press conference is for, is to 0:08:01.600 --> 0:08:04.240 flesh out that policy statement and as much as he 0:08:04.280 --> 0:08:07.000 can clarify the f O m C. Thinking well, and 0:08:07.080 --> 0:08:09.520 you know, when we have the FED say once again, 0:08:09.520 --> 0:08:11.600 which we've heard them off and say, uncertainties remain, I 0:08:11.640 --> 0:08:14.120 want to know specifically, like I'd love a pecking order 0:08:14.160 --> 0:08:17.200 of Okay, sure, what's the biggest absolutely, because then you 0:08:17.240 --> 0:08:19.400 can assess it and then maybe figure out and predict 0:08:19.560 --> 0:08:22.720 what future FED policy is. Absolutely should ask question, Well, 0:08:22.760 --> 0:08:25.680 if I was in Washington, I would let's just do 0:08:25.720 --> 0:08:29.160 the show right in the on Twitter and they cannot true? 0:08:30.960 --> 0:08:38.720 Can you keep it down? I have a question? And so, Dave, 0:08:38.840 --> 0:08:40.920 are there in certain sectors that you look at as 0:08:40.960 --> 0:08:43.560 you go down a level that react in one way 0:08:43.640 --> 0:08:48.480 or another to this type of decision? Well, I mean 0:08:48.559 --> 0:08:51.520 just looking at today's trading and you're not really seeing 0:08:51.559 --> 0:08:56.280 a whole lot post FED that you didn't see pre FED, 0:08:56.480 --> 0:09:00.520 So it's not like there's really that much move within 0:09:00.600 --> 0:09:03.720 the industry groups. And like I say, seeing utilities on 0:09:03.800 --> 0:09:05.960 top of the heap though it's kind of telling and 0:09:06.000 --> 0:09:08.640 they're hanging in there. I mean, you know, so it 0:09:08.760 --> 0:09:13.320 shows that you know, people looking for income, you know, 0:09:13.480 --> 0:09:16.720 focusing on the stock market as much or more than 0:09:16.800 --> 0:09:18.720 they do on the bob market everywhere. I like to 0:09:18.720 --> 0:09:20.880 reconcile maybe what we're gonna hear from the Fed if 0:09:20.960 --> 0:09:22.720 you know, they're being a little bit more optimistic. So 0:09:22.720 --> 0:09:24.280 we've got to see what they're looking at. But I 0:09:24.320 --> 0:09:26.559 do wonder what the equity markets, as Kathleen said, you 0:09:26.559 --> 0:09:29.400 know here we are continuing to hit records out there. 0:09:29.440 --> 0:09:32.199 There's a fair amount of recession talks. We've heard it 0:09:32.240 --> 0:09:36.520 from the CEOs, concerns about trade in their earnings releases. 0:09:36.559 --> 0:09:38.880 So I'm trying to reconcile with the equity markets are 0:09:38.920 --> 0:09:41.160 telling versus some of the economic data points and what 0:09:41.200 --> 0:09:43.080 we might hear from J. Powell. What does the equity 0:09:43.120 --> 0:09:45.360 market tell us? What do earnings tell us? J? Well, 0:09:45.640 --> 0:09:50.079 clearly people are expecting better results down the road, and 0:09:50.120 --> 0:09:55.040 that's consistent with the analysts forecast anticipating a return you know, 0:09:55.120 --> 0:09:57.920 to growth in the fourth quarter, assuming they end up 0:09:57.960 --> 0:09:59.880 being right for the third quarter. In essent, people I 0:10:00.040 --> 0:10:02.920 under profit falls and then next year, you know, you 0:10:03.000 --> 0:10:06.520 get back towards ten percent growth if you buy what 0:10:06.600 --> 0:10:09.960 the analysts are selling in terms of their predictions. That said, 0:10:10.000 --> 0:10:14.120 I have seen lately, you know, some strategists expressing optimism 0:10:14.679 --> 0:10:17.679 about next year when it comes to Arni's and and 0:10:17.760 --> 0:10:20.240 saying that at least there are some investors kind of 0:10:20.280 --> 0:10:23.360 going along with that view quickly. I just want to 0:10:23.360 --> 0:10:26.800 add that, you know, Jim Bullard has been dissenting, dissenting, 0:10:26.840 --> 0:10:29.840 dissenting for bigger cuts for more, you know, and today 0:10:29.840 --> 0:10:32.319 he didn't dissent. So I think that's very interesting. Jim 0:10:32.320 --> 0:10:35.400 Bullard St. Louis fed present if he is now ready 0:10:35.440 --> 0:10:37.320 to say, okay, we cut three times. You know, I 0:10:37.360 --> 0:10:40.480 wanted to try, and this YO curb has uninverted, right, 0:10:41.120 --> 0:10:45.240 I've helped change that. Um, you know, inflation expectations are 0:10:45.240 --> 0:10:47.120 still low. Inflation is still a low target. But we've 0:10:47.160 --> 0:10:49.320 done enough for now, you know, cittain weight. I think 0:10:49.360 --> 0:10:53.280 that is a pretty significant voice to join that consensus 0:10:53.360 --> 0:10:55.080 in the middle saying we've done enough for now. Let's 0:10:55.080 --> 0:10:58.040 see what happens next. Yeah, all right, well, I think 0:10:58.040 --> 0:11:00.080 we're gonna leave it there. When have you guys, we 0:11:00.120 --> 0:11:03.559 really appreciated Kathleen Hayes Global Economics and policiator for Bloomberg 0:11:03.800 --> 0:11:06.320 here in our Bloomberg Interactive Broker studio, and Dave Wilson, 0:11:06.360 --> 0:11:10.360 Stocks editor for Bloomberg. He's also here with us in 0:11:10.360 --> 0:11:12.120 New York City. All right, time to head on over 0:11:12.120 --> 0:11:13.880 to Charlie Pellett for check in the world of business 0:11:13.880 --> 0:11:15.800 and a look at today's trading. All right, I thank 0:11:15.800 --> 0:11:17.880 you very much. We've got the down higher SMP nes 0:11:17.880 --> 0:11:21.880 stack both lower, recapping resetting FED officials reducing rates by 0:11:21.960 --> 0:11:25.240 a quarter percentage point for the third time this year, 0:11:25.520 --> 0:11:29.480 hinting they may now put monetary policy on hold for 0:11:29.600 --> 0:11:32.480 one meeting. At least. Our coverage will continue in just 0:11:32.600 --> 0:11:35.440 a moment right here on Bloomberg Radio. SMP down two 0:11:35.440 --> 0:11:37.680 now at three thousand thirty four. That is a drop 0:11:37.720 --> 0:11:39.880 of one tenth of one percent. We've got the Dow 0:11:40.040 --> 0:11:42.880 higher little change now, but on the plus side, up seven, 0:11:42.920 --> 0:11:45.000 up by less than one tenth of one percent. We 0:11:45.080 --> 0:11:48.079 did see a dip right after the headlines crossed on 0:11:48.120 --> 0:11:50.960 the Bloomberg, but again the dow rebounding ne stack down 0:11:51.000 --> 0:11:53.240 six now a drop there of one tenth of one percent. 0:11:53.520 --> 0:11:55.960 Your ten year up eleven thirty seconds yield one point 0:11:56.040 --> 0:11:58.839 seven nine percent gold up three tenths fourteen. Note he 0:11:58.920 --> 0:12:01.880 won the ounce where Texas ENEMYIA crew to retreat today 0:12:01.880 --> 0:12:05.439 down one point two fifty eight seven a barrel. So again, 0:12:05.520 --> 0:12:07.960 FED cuts rates by a quarter point while hinting at 0:12:07.960 --> 0:12:11.160 a pause, SMP down two points lower by one tenth 0:12:11.160 --> 0:12:14.120 of one percent. I'm Charlie Pellett. That's a Bloomberg Business 0:12:14.160 --> 0:12:20.880 Flash three number. Well, and it seems like three. It 0:12:21.120 --> 0:12:23.480 was the magic number at least for now. The FED 0:12:23.559 --> 0:12:27.000 as expected cutting for a third straight meeting. Uh, let's 0:12:27.040 --> 0:12:29.640 get into that decision in some of the analysis we 0:12:29.800 --> 0:12:31.560 heard from the FED so far. Of course, in about 0:12:31.600 --> 0:12:34.120 fifteen minutes we will head to the Federal Reserve to 0:12:34.200 --> 0:12:37.240 hear from FED Chair J Powell. In the meantime, all Jersey, 0:12:37.520 --> 0:12:39.640 he is our chief US interest rate strategist here at 0:12:39.640 --> 0:12:42.720 Bloomberg Intelligence. He's with us along with Steve Blitz, chief 0:12:42.760 --> 0:12:45.800 US economist at TS Lombard, both in our Bloomberg Interactor 0:12:45.840 --> 0:12:48.160 Broker studio in New York. I'm gonna start with you. 0:12:48.160 --> 0:12:51.120 You've been taking part in our Bloomberg Live blog. What's 0:12:51.160 --> 0:12:54.120 notable to you in this FED decision? Yeah? Not not 0:12:54.200 --> 0:12:57.000 really a lot there wasn't much that changed. I think 0:12:57.080 --> 0:12:59.880 that some people were expecting, including me, quite frankly, that 0:13:00.240 --> 0:13:03.199 they would have at least modestly changed their assessment of 0:13:03.240 --> 0:13:05.480 the economy. So they have this whole first paragraph where 0:13:05.480 --> 0:13:08.439 they talk about the economy and they basically left it unchanged. 0:13:08.480 --> 0:13:11.040 And I think, you know, with things like the Michigan 0:13:11.120 --> 0:13:15.280 Survey of UH consumer attitudes and in particular the inflation 0:13:15.320 --> 0:13:18.200 portion of that hitting all time record lows, that they 0:13:18.200 --> 0:13:20.880 would have at least acknowledged that inflation was still running 0:13:20.880 --> 0:13:23.800 below their their targets. So so some people, and I 0:13:23.840 --> 0:13:27.000 think the market reaction, the rates market is suggesting that 0:13:27.280 --> 0:13:29.280 the Fed will have to do more because they're not 0:13:29.360 --> 0:13:32.200 yet acknowledging the fact that the economy is not as 0:13:32.240 --> 0:13:36.000 strong as they hoped it would be by this point. Alright, Steve, 0:13:36.080 --> 0:13:38.440 so come on in here. What was your initial read? 0:13:38.480 --> 0:13:41.680 You're sitting uh in our lovely Bloomberg in director Broker's 0:13:41.720 --> 0:13:46.120 lounge looking at all of this play through on the Bloomberg. 0:13:46.160 --> 0:13:49.000 You've got your notes? What what jumped out at you? Well? 0:13:49.040 --> 0:13:51.400 Two things. First of all, I've been I've been expecting 0:13:51.440 --> 0:13:54.400 the FED to say we're done. Now we know the 0:13:54.400 --> 0:13:56.839 Feds never just gonna come out and say we're done. 0:13:57.320 --> 0:14:01.400 But when you go from will monitor and act as appropriate, 0:14:01.960 --> 0:14:07.600 two will monitor and assess the appropriate path. They're done. Now. Obviously, 0:14:07.640 --> 0:14:10.079 what they're saying is if the data falls apart between 0:14:10.120 --> 0:14:12.400 now in December, they're lacked again. I mean, they're always 0:14:12.440 --> 0:14:15.320 going to leave that door open. They're not gonna close 0:14:15.360 --> 0:14:18.600 it completely. And in fact, if you look at even 0:14:18.679 --> 0:14:23.040 their quarter GDP, you look at so many, so much 0:14:23.080 --> 0:14:27.520 economic data from their perspective, right and you listen to 0:14:27.600 --> 0:14:30.560 Powell's speech from a couple of weeks ago, they think 0:14:30.560 --> 0:14:33.800 that domestic economy is just fine. So you don't think, 0:14:33.840 --> 0:14:35.560 like il Reads said that they're kind of ignoring some 0:14:35.640 --> 0:14:37.480 of the weakness and the economy. You don't. You don't. 0:14:37.680 --> 0:14:39.840 I don't think so much that they're ignoring the weakness. 0:14:39.880 --> 0:14:42.600 The weakness is the reason why they've cut three times. 0:14:42.680 --> 0:14:45.720 The reason is why over the next eight months they're 0:14:45.760 --> 0:14:50.720 basically putting back all the tightening they they put into 0:14:50.720 --> 0:14:53.120 the balance sheet. They're putting it back. They are buying 0:14:53.120 --> 0:14:57.640 over the next eight months about of net new treasury issuance. 0:14:58.080 --> 0:15:00.560 That's a lot of cash going into the bill market. 0:15:00.600 --> 0:15:02.240 It's going to steep in the curve, it's going to 0:15:02.360 --> 0:15:04.680 help weaken the dollar. These all the things that they've 0:15:04.720 --> 0:15:08.640 wanted to get done. Well, it's not because they're not 0:15:08.680 --> 0:15:11.560 buying term yields. But you know, if you take all 0:15:11.600 --> 0:15:13.640 the gold away and then you put it back, it's 0:15:13.680 --> 0:15:17.520 still policies. So well, I think a couple of things. 0:15:17.560 --> 0:15:19.920 I think firstly that the Fed will probably actually slow 0:15:19.960 --> 0:15:22.960 down it's bill purchases come January, so UM, so we're 0:15:22.960 --> 0:15:25.760 expecting closer. It's still a lot right, so they're still 0:15:25.760 --> 0:15:27.840 buying a lot of UM, a lot of bills, a 0:15:27.840 --> 0:15:31.520 lot of net issuance UM. But it's it's not que 0:15:31.800 --> 0:15:33.840 just because of what they're buying. And in a way, 0:15:33.840 --> 0:15:36.520 it's kind of like balance sheet normalization because they haven't 0:15:36.520 --> 0:15:38.960 owned T bills for twelve years and now all of 0:15:38.960 --> 0:15:40.520 a sudden they're gonna buit T bills again, which I 0:15:40.520 --> 0:15:43.400 haven't owned for a very long time. I think, on 0:15:43.480 --> 0:15:45.640 the on the other side that yeah, I agree that 0:15:45.640 --> 0:15:47.640 the FED is not ignoring it. I suspect that since 0:15:47.640 --> 0:15:49.640 we're doing this in real time, I expect that we'll 0:15:49.640 --> 0:15:53.000 see a bigger market reaction from the press conference than 0:15:53.040 --> 0:15:54.960 we give the statement because I think that there'll be 0:15:54.960 --> 0:15:57.160 a little bit more nuance in there. I would be 0:15:57.240 --> 0:16:00.320 shocked if if j Pal, particularly if they are done 0:16:00.400 --> 0:16:02.880 tightening or easy and excuse me, and they don't want 0:16:02.880 --> 0:16:05.800 to cut in December at least that he'll talk about 0:16:06.040 --> 0:16:08.720 monetary policy working on long and variable legs, and we're 0:16:08.720 --> 0:16:10.280 not sure what that is and we need to see 0:16:10.280 --> 0:16:13.160 more incoming data before we make any additional decisions. Right, 0:16:13.200 --> 0:16:16.560 So something along that vein I think will be re 0:16:16.560 --> 0:16:19.040 iterated two, three or four times during the course of 0:16:19.080 --> 0:16:21.840 the press conference. And and the more you hear that, 0:16:21.960 --> 0:16:24.320 the more that that means they're not going in December. Well, 0:16:24.320 --> 0:16:26.400 it doesn't take January off the table by any Yes, 0:16:26.520 --> 0:16:29.120 but I think that January it doesn't take any month 0:16:29.200 --> 0:16:33.720 off the table. But you have to recognize they made 0:16:33.720 --> 0:16:37.480 in terms of the communication. They made this move on 0:16:37.520 --> 0:16:40.680 the balance sheet a couple of weeks ago when everybody 0:16:40.760 --> 0:16:44.400 was expecting them to announce it at this meeting, because 0:16:44.520 --> 0:16:48.400 they wanted to say something special at this meeting and 0:16:48.440 --> 0:16:51.280 they didn't want to have the message mixed up with 0:16:51.320 --> 0:16:54.840 the balance sheet. There was no fire drill on October 0:16:54.920 --> 0:16:58.880 eleven that required them to make that particular announcement about 0:16:58.880 --> 0:17:01.120 what they wanted to do over the next eight months. 0:17:01.120 --> 0:17:03.720 I disagree with that because in the funding markets, in 0:17:03.760 --> 0:17:06.399 the treasury market, they were really worried about what was 0:17:06.400 --> 0:17:10.199 going to happen on October fifteenth during the settlement of 0:17:10.760 --> 0:17:13.320 significant portion of new debt that was going to be issued, 0:17:13.720 --> 0:17:16.480 and the balance sheets of dealers has been very tight, 0:17:16.560 --> 0:17:18.560 so they wanted to do something to at least alleviate 0:17:18.640 --> 0:17:21.639 the idea that we're going to have tight funding markets forever. 0:17:22.040 --> 0:17:23.960 And they didn't want to have to do, you know, 0:17:24.040 --> 0:17:27.399 massive open market operations in order to alleviate that stress 0:17:27.440 --> 0:17:29.680 on a moment's notice. So I think that that's one 0:17:29.680 --> 0:17:32.040 of the reasons why they announced it on October eleventh, 0:17:32.040 --> 0:17:34.520 as opposed to weight here. Now. I I initially thought 0:17:34.960 --> 0:17:37.560 that they would probably wait till this this meeting to 0:17:37.560 --> 0:17:39.040 do it. But at the same time, I think that 0:17:39.080 --> 0:17:41.840 they were really scared because they were getting yeah, yeah, 0:17:41.920 --> 0:17:43.879 or at least at least the market fear yeah, so 0:17:43.960 --> 0:17:45.480 the market fear to get ahead of it. You know, 0:17:45.520 --> 0:17:47.919 let's announce this, so at least if they know that, 0:17:47.960 --> 0:17:52.160 at least we're paying attention. If nothing, when you guys disagree, Well, 0:17:52.200 --> 0:17:54.479 I would say this. You know, first of all, they 0:17:54.480 --> 0:17:58.720 could have done rebo right. Secondly, but they are I 0:17:58.800 --> 0:18:00.880 know that. But they could go back to the way 0:18:00.960 --> 0:18:03.560 life was before two thousand and eight and just do repot. 0:18:03.880 --> 0:18:08.600 The truth is that, because of regulatory reasons, basically you 0:18:08.760 --> 0:18:11.560 have balance sheets at the broker deals and at the 0:18:11.560 --> 0:18:14.120 banks that are smaller than they've been since at least 0:18:14.160 --> 0:18:17.480 thirty years, if not longer, while obviously the dead side 0:18:17.720 --> 0:18:20.440 has grown, so they have to be the balance sheet. 0:18:20.480 --> 0:18:25.080 And to say it's not QE okay, is it's falling 0:18:25.119 --> 0:18:29.600 into their semantic argument. Okay. The fact is that they 0:18:29.640 --> 0:18:32.320 are adding a tremendous amount of liquidity to the system. 0:18:32.640 --> 0:18:35.439 They need to buy bills. Because they don't buy bills, 0:18:35.440 --> 0:18:37.399 they can't grow their balance sheet because they have to 0:18:37.480 --> 0:18:40.440 wash the yields at the lower end so that banks 0:18:40.480 --> 0:18:43.760 will hold these reserves which are not required at the FED. 0:18:44.280 --> 0:18:47.040 If it just keeps leaking elsewhere, they can't grow their 0:18:47.040 --> 0:18:49.840 balance sheet, so they have to wash yields at the 0:18:49.880 --> 0:18:53.520 lower end, which is why they're buying bills. Right. So now, 0:18:54.000 --> 0:18:58.600 if I buy this many bills for eighty billion over 0:18:58.640 --> 0:19:01.679 the next eight months. That's a lot of money and 0:19:01.720 --> 0:19:04.919 it's going to impact the market already has begun to 0:19:05.000 --> 0:19:08.200 do that, you know, in terms of watching slow steepening 0:19:08.240 --> 0:19:11.760 of the curve. So if you're the Fed, you've got 0:19:11.760 --> 0:19:14.639 a steepening of the curve, you've got a lessening of 0:19:14.720 --> 0:19:18.920 the mess of foreign headwinds, at least seemingly with the US, 0:19:19.080 --> 0:19:25.280 China and the domestic economy. From their perspective, it's doing fine, 0:19:25.440 --> 0:19:28.159 and that they've done enough given leads and legs, And 0:19:28.200 --> 0:19:29.960 I agree you're gonna hear a lot about leads and 0:19:30.040 --> 0:19:31.640 legs in the press. Cart I just want to mention 0:19:31.640 --> 0:19:34.480 the equity markets are now positive territories and we've bounced 0:19:34.480 --> 0:19:37.240 back of Dow's up thirty, the nastacks up about a 0:19:37.280 --> 0:19:39.919 point little changed, unchanged almost but a little bit higher. 0:19:39.960 --> 0:19:41.720 So actually on the SB I'm just saying the equitive 0:19:42.359 --> 0:19:44.639 to watch it sort of. I mean, it's bouncing really 0:19:44.680 --> 0:19:48.639 like right along that gain and loss markets pretty much 0:19:48.640 --> 0:19:51.120 where it was if you're the Fed. If you're the Fed, 0:19:51.400 --> 0:19:54.760 you don't you there's no recession. So there's a limit 0:19:54.760 --> 0:19:57.840 to how far you're gonna cut rates because your financial 0:19:58.280 --> 0:20:01.720 stability issues, etcetera. So it weren't even the Trump wants that. 0:20:01.760 --> 0:20:04.080 They don't. They're not going to zero without a recession, 0:20:04.320 --> 0:20:07.160 so there's a normal point for them to stop. What 0:20:07.240 --> 0:20:10.480 they need to do is have the markets buy in 0:20:10.720 --> 0:20:13.240 that they're stopping, not for a bad reason, but for 0:20:13.359 --> 0:20:16.840 good reason, that the economy looks like it's gonna do better. 0:20:17.320 --> 0:20:21.359 And and if the market buys into that viewpoint, the 0:20:21.359 --> 0:20:24.320 equity market does better, the curse steepens up a little bit, 0:20:24.400 --> 0:20:27.119 and it's back to being risk on. And if the 0:20:27.240 --> 0:20:30.919 data follow through, they're not cutting again for you know, 0:20:31.240 --> 0:20:33.800 until the data tells me. I mean, in fairness, the 0:20:33.920 --> 0:20:37.960 market had already been discounting a cut until May or 0:20:38.080 --> 0:20:41.160 June of next year, right, So so basically that the statement, 0:20:41.280 --> 0:20:44.119 at least from a market perspective, seemed to be pretty 0:20:44.200 --> 0:20:46.560 much what the market was anticipating, right. And I think 0:20:46.600 --> 0:20:49.160 a few people, obviously guess you have in the market reaction, 0:20:49.400 --> 0:20:51.520 had expected them perhaps to be a little bit more devish. 0:20:51.560 --> 0:20:54.560 But it's you know, semantics and not not that big 0:20:54.600 --> 0:20:56.359 of a deal. So Ira, let's go back to this 0:20:56.400 --> 0:20:59.320 press conference that we will hear and give or take 0:20:59.520 --> 0:21:03.000 seven eight minutes when J Powell, uh takes the podium 0:21:03.040 --> 0:21:06.159 down there in Washington at the Federal Reserve because and 0:21:06.240 --> 0:21:09.960 everybody around this table knows this. Well. The stock market 0:21:10.600 --> 0:21:12.880 has generally, shall we say, not been a big fan 0:21:13.040 --> 0:21:16.240 of these press conferences in terms of it has I 0:21:16.280 --> 0:21:19.879 think in all but one meeting, Uh, there's been a 0:21:19.880 --> 0:21:24.199 sell off as J. Powell has been speaking. What is 0:21:24.240 --> 0:21:26.040 he going to be saying? What does he need to 0:21:26.080 --> 0:21:28.119 say to at least keep us kind of where we 0:21:28.160 --> 0:21:31.680 are here, which is just barely in the green. Well, 0:21:31.920 --> 0:21:34.679 I'm not sure about the I mean, for for the 0:21:34.720 --> 0:21:37.359 equity market. I suppose for all risk assets, they just 0:21:37.359 --> 0:21:39.240 want to make sure that they're nowhere near tightening and 0:21:39.240 --> 0:21:40.800 that they're gonna keep on. You know. You know, there's 0:21:40.840 --> 0:21:42.880 other things that he can hint at, too, right, So 0:21:43.160 --> 0:21:46.080 one of the there are some d davish actions that 0:21:46.440 --> 0:21:49.159 he might be asked about. So, for example, the mortgage basis, 0:21:49.160 --> 0:21:53.040 the difference between mortgage backed securities and treasuries is the 0:21:53.040 --> 0:21:56.800 widest that it's been since they for about three years, right, 0:21:56.840 --> 0:21:58.680 And so one of the things that he could hint 0:21:58.680 --> 0:22:00.640 at is, you know, if someone asked him this question, 0:22:00.680 --> 0:22:03.320 which I hope someone does, what other devish actions can 0:22:03.400 --> 0:22:06.119 you take without actually cutting He can say, well, we 0:22:06.160 --> 0:22:08.960 can start reinvestments of mortgage backed securities again, which might 0:22:08.960 --> 0:22:11.359 tighten tighten the basis right, so that could be one 0:22:11.400 --> 0:22:13.359 of the things we can buy longer term securities and 0:22:13.600 --> 0:22:15.720 basically saying we're we can start que So there's other 0:22:15.760 --> 0:22:19.040 things that they could do besides cutting rates. More So, 0:22:19.080 --> 0:22:21.840 what do you want to hear stee Blitz when j 0:22:21.960 --> 0:22:25.600 Pal speaks in seven or eight minutes, clarity of purpose? 0:22:26.280 --> 0:22:30.359 How is that meaning? What meaning? He out of me? 0:22:30.440 --> 0:22:36.600 Every day? You know? It's it's just like I think, 0:22:36.840 --> 0:22:38.960 I think, I think he's I think what you need 0:22:39.040 --> 0:22:41.440 to hear is just some plain and simple talk about 0:22:41.480 --> 0:22:45.280 what they're doing and why and and rather uh and 0:22:45.359 --> 0:22:48.800 not skip stumble over his words and get the kind 0:22:48.840 --> 0:22:52.240 of negative market reaction he's gotten in the past. Look, 0:22:53.240 --> 0:22:57.359 tenure yields are down, the housing markets responding, capital spending 0:22:57.400 --> 0:22:59.800 a little respond with the lag and all of that, 0:23:00.359 --> 0:23:04.080 and he just needs to lay out a very positive 0:23:04.440 --> 0:23:08.360 economic story. But can he do that? I mean, or 0:23:08.400 --> 0:23:10.400 do you think that there's enough there? But I think 0:23:10.400 --> 0:23:12.360 it's I think that's a little bit tricky. But when 0:23:12.400 --> 0:23:14.400 you look at you look at some of the data 0:23:14.440 --> 0:23:16.280 that I look at. For example, I have some new orders, 0:23:16.280 --> 0:23:18.639 which tends to be a very good leading indicator of 0:23:18.640 --> 0:23:20.439 a lot of other things that that looks like it 0:23:20.480 --> 0:23:22.359 may have stabilized, which is not dis similar to what 0:23:22.400 --> 0:23:24.879 happened in two thousand sixteen. So unless you start to 0:23:24.880 --> 0:23:26.520 make kind of new loads and some of that kind 0:23:26.520 --> 0:23:29.280 of data, you can argue that we're starting to stabilize 0:23:29.320 --> 0:23:32.199 the economy. And assuming it stabilizes, then it means that 0:23:32.200 --> 0:23:34.080 the Fed's probably done its job. And then you have 0:23:34.119 --> 0:23:36.760 to wait, you know, two three more months at least 0:23:36.840 --> 0:23:39.240 before you get enough data to say that, hey, the Fed, 0:23:39.600 --> 0:23:41.720 you know, needs to do more or not. And I 0:23:41.760 --> 0:23:43.439 think that that's where we would like to get the 0:23:43.440 --> 0:23:45.240 market at this point, so kind of say like, look, 0:23:45.440 --> 0:23:49.760 we're steady, let's wait until early next year, which a 0:23:49.800 --> 0:23:52.960 strong economy or decent it's not so much. I think 0:23:52.960 --> 0:23:54.919 it's the point that things are bottoming out. I mean, 0:23:54.960 --> 0:23:57.520 if you look at a lot of the manufacturing data 0:23:57.680 --> 0:23:59.600 right now the very short term, it's a little mixed 0:23:59.640 --> 0:24:03.680 up because yeah, but it's just it looks like it's 0:24:03.720 --> 0:24:07.040 stabilizing out that the household sector continues to buy the 0:24:07.080 --> 0:24:13.840 great inventory. Uh, reduction hasn't really occurred. Uh. Net exports 0:24:13.840 --> 0:24:15.920 are kind of sel so you don't see anything that's 0:24:15.960 --> 0:24:20.240 really deteriorating. And housing is starting starting to pick up. 0:24:20.440 --> 0:24:23.200 Don't we need companies though, to do capital expenditures in 0:24:23.320 --> 0:24:25.840 order to keep this economic momentum going, Like we're late 0:24:25.880 --> 0:24:27.879 in the cycle. Don't we need that? Yeah? We do, 0:24:28.119 --> 0:24:31.160 we do ultimately, but that's going to take a while 0:24:31.200 --> 0:24:34.720 because that tends to follow um. That tends to follow 0:24:34.760 --> 0:24:37.680 profits by about two quarters. So we need to turn 0:24:37.720 --> 0:24:41.920 in profits, and everything that's going on should eventually turn profits, 0:24:41.920 --> 0:24:45.639 and that becomes more of a or late twenties story 0:24:45.680 --> 0:24:48.520 than something you're gonna get over the next couple of quarters. 0:24:48.600 --> 0:24:50.679 And they know that, I mean, they'd be in the 0:24:50.720 --> 0:24:53.760 fitness So I want to ask you, you know, this 0:24:53.800 --> 0:24:56.120 whole sort of repo market question. I mean, it's been 0:24:56.200 --> 0:24:58.240 so front of mine. I mean, we've talked about the 0:24:58.240 --> 0:25:01.439 repo market on this show probably more cumulatively over the 0:25:01.480 --> 0:25:05.600 past month than we had in the previous ten years. Uh, 0:25:05.640 --> 0:25:07.879 how much do you think that will come up in 0:25:07.960 --> 0:25:10.320 the press conference? I mean, you've got Jamie Diamond talking 0:25:10.320 --> 0:25:12.760 about it, You've got the Secretary of the Treasury talking 0:25:12.800 --> 0:25:16.440 about it, like and in what context what can the 0:25:16.440 --> 0:25:19.080 FED chairmans say to sort of calm people down here. Well, 0:25:19.600 --> 0:25:21.480 for one thing, I think he could point to evidence 0:25:21.520 --> 0:25:23.720 that right now it looks like this month end is 0:25:23.800 --> 0:25:26.439 going to be just boring in terms of funding markets 0:25:26.480 --> 0:25:28.280 in a good way. And in a good way, yeah, yeah, 0:25:28.359 --> 0:25:32.080 so so so basically not they've basically provided enough liquidity 0:25:32.080 --> 0:25:34.560 to the funding markets via the repurchase agreements that they've 0:25:34.600 --> 0:25:37.680 been doing both term and overnight, that the market is 0:25:37.680 --> 0:25:41.600 not going to be significantly worried about about funding treasuries. 0:25:41.920 --> 0:25:44.080 And I think he could talk about He is probably 0:25:44.119 --> 0:25:45.680 going to talk about, you know, is there going to 0:25:45.760 --> 0:25:48.560 be a a new facility that they're gonna do that's 0:25:48.560 --> 0:25:53.880 gonna maybe be a full allotment UH overnight facility instead 0:25:53.920 --> 0:25:57.200 of them doing the the current operations which are more 0:25:57.240 --> 0:25:59.919 traditional kind of reproach agreements. I'm not sure they have 0:26:00.040 --> 0:26:01.639 do they can keep on doing what they're doing and 0:26:01.680 --> 0:26:04.040 that would work out fine. But um, but I think 0:26:04.080 --> 0:26:06.280 he's gonna be asked about that and and and a 0:26:06.359 --> 0:26:08.320 lot of the details in that, quite frankly won't come 0:26:08.320 --> 0:26:10.040 out at the press conference. Those will be things that 0:26:10.240 --> 0:26:13.879 you know will happen probably else in other forms. Maybe 0:26:13.880 --> 0:26:17.280 some good reporting by Bloomberg News reporters will elucidate some 0:26:17.359 --> 0:26:20.960 of that. I have a feeling all right, Thanks, thank 0:26:21.000 --> 0:26:23.760 you so much, Chief US Interest Rate Strategies for Bloomberg 0:26:23.800 --> 0:26:27.000 Intelligence and Steve Let's chief US economist for T. S. Lombard, 0:26:27.280 --> 0:26:33.919 both here with us in New York City, are well. 0:26:34.600 --> 0:26:39.119 Did it covers quarter point widely as expected? Its third 0:26:39.119 --> 0:26:42.880 consecutive cut this year, signal to pause in further cuts 0:26:42.960 --> 0:26:46.720 unless the economic outlook changes materially. Equity markets they are 0:26:46.760 --> 0:26:49.520 near their highs of the session, so they've certainly turned around. 0:26:49.680 --> 0:26:52.800 Rallied UH to some extent on that news, and in 0:26:52.880 --> 0:26:55.320 terms of the rate picture, I just want to recap 0:26:55.760 --> 0:26:58.800 pretty much where we were prior actually a little bit 0:26:58.880 --> 0:27:01.800 higher on the shorter into the Yeel curve, the longer 0:27:01.880 --> 0:27:03.480 end of the Yel curb, pretty much where it was 0:27:04.200 --> 0:27:07.040 prior to the FED decision. Let's get into it though, 0:27:07.080 --> 0:27:10.119 with our team here and we've got in the house. 0:27:10.200 --> 0:27:13.520 We've got Alex Harris, Bond, reporter at Bloomberg New Sorry 0:27:13.640 --> 0:27:16.439 are these people who just wanted into our studio and 0:27:16.480 --> 0:27:18.600 also with us is Josh right chief Econos and I 0:27:18.720 --> 0:27:21.400 Sims both in our Bloomberg Interactive Broker studio. Sorry, I'm 0:27:21.400 --> 0:27:23.480 looking at too many notes today, is it? J pal 0:27:23.600 --> 0:27:25.840 j Is that you know? Jason? Nice of you to 0:27:25.960 --> 0:27:29.480 join us, right, Josh, let's start with you. Would you 0:27:29.520 --> 0:27:32.240 make of a decision and the press conference, Well, we're 0:27:32.280 --> 0:27:34.800 looking for a hawk is cut and that's very much 0:27:34.840 --> 0:27:37.960 what we got with this strong bias to hold um 0:27:38.000 --> 0:27:41.040 from infect isn't it? You know, that's really what the 0:27:41.040 --> 0:27:43.400 market seems to think. But I was surprised by how 0:27:43.440 --> 0:27:46.000 explicit the chairman was. No, he didn't come out and 0:27:46.040 --> 0:27:49.160 say in exactly these words, but saying a material reassessment 0:27:49.160 --> 0:27:51.720 of our outlook is about as much of a promise 0:27:51.800 --> 0:27:53.160 as he's going to make to say, you know, we're 0:27:53.200 --> 0:27:57.120 kind of done now, all right, Alex Harris, you were 0:27:57.200 --> 0:28:01.800 on the desk amid the fevered uh, listening and analyzing 0:28:01.920 --> 0:28:04.720 a number of our colleagues weighing in with questions there 0:28:05.240 --> 0:28:08.399 Mike mckeye and Steve Matthews making his land from Atlanta 0:28:08.400 --> 0:28:11.000 to ask a question, what did you make? What was 0:28:11.040 --> 0:28:13.800 sort of catching people's attention? Where were you sort of 0:28:13.800 --> 0:28:17.080 looking around and saying, well, we're looking around that. How 0:28:17.119 --> 0:28:21.200 often the reporters in that room asked the same like 0:28:21.480 --> 0:28:24.399 a variation on the same exact question. Um. You know, 0:28:24.480 --> 0:28:26.439 one of the things I talked to people about on 0:28:26.480 --> 0:28:29.120 the desk is, you know, there's a lot of operational 0:28:29.240 --> 0:28:34.200 things that were discussed off meeting, and you know, Powell reiterated, yes, 0:28:34.240 --> 0:28:37.200 they're going to be, you know, doing Treasury bill purchases 0:28:37.200 --> 0:28:40.520 at least through the second quarter. They're doing these repo 0:28:40.640 --> 0:28:44.040 operations through the at least through January. And you know, 0:28:44.120 --> 0:28:46.440 one of the things that caught our attention, and we 0:28:46.440 --> 0:28:48.760 we pinned, you know, our team in the room and said, 0:28:49.040 --> 0:28:52.200 someone asked him, how do they expect to remove that 0:28:52.280 --> 0:28:56.000 liquidity from the market in January and not cause any 0:28:56.080 --> 0:28:58.520 sort of disturbance, you know, and Powell probably would have 0:28:58.560 --> 0:29:00.560 said something about, oh, well, our reserve levels will be 0:29:00.640 --> 0:29:03.800 kind of more normal, but that's a that's a serious question. 0:29:04.000 --> 0:29:05.680 And and the other thing that kind of caught our 0:29:05.720 --> 0:29:09.000 attention on that front is why does the Federal Reserve 0:29:09.080 --> 0:29:19.080 that has all these very intelligent economists seem absolutely bump fuzzled, puzzled. 0:29:19.200 --> 0:29:24.040 I liked as to like, why why banks didn't come in, 0:29:24.760 --> 0:29:28.200 you know, when repo writs spiked last month, and to me, 0:29:28.320 --> 0:29:31.880 it's signals that you know, they're one of the regulators 0:29:31.880 --> 0:29:34.320 of the banks, they conduct monetary policy, and yet they 0:29:34.320 --> 0:29:37.000 have no idea how the two intersect and work off 0:29:37.000 --> 0:29:40.040 of each other. And that is a little concerning for me. 0:29:40.480 --> 0:29:44.160 Deemed man. There was a stunning turnaround from just a 0:29:44.240 --> 0:29:45.960 year ago when you had Simon Potter the New York 0:29:45.960 --> 0:29:48.240 Fed saying, oh, we feel pretty good about reserve levels, 0:29:48.280 --> 0:29:51.520 We've got ways to go, and kind of like how 0:29:51.560 --> 0:29:53.120 Powell had to do the turnaround at the end of 0:29:53.120 --> 0:29:56.080 twenty team going into early twenty nineteen feeling good about 0:29:56.120 --> 0:29:58.920 rates and then suddenly, oh, maybe that was a mistake. 0:29:59.320 --> 0:30:01.000 Another big turn around that we saw, though it was 0:30:01.040 --> 0:30:04.360 look at the market reaction. This is an incredible turnaround 0:30:04.400 --> 0:30:08.239 for Chair Powell's performance. In a press conference, I mean, 0:30:08.280 --> 0:30:12.160 we were all complaining, well, I think effective the market is. 0:30:12.320 --> 0:30:14.479 You know, this is a hawkish cut, even more hawkish 0:30:14.480 --> 0:30:16.480 than I and some other people expected, and yet the 0:30:16.480 --> 0:30:18.560 market is taking it very well. A hundred and twenty 0:30:18.560 --> 0:30:20.640 four points now on the Dow Jones Industrial average. We're 0:30:20.680 --> 0:30:23.360 up about twelve points, so we're looking about point four 0:30:23.440 --> 0:30:25.280 percent higher on the SNP, almost a half a percent 0:30:25.360 --> 0:30:28.360 higher on both the TAO and the NAZAC. That is interesting. 0:30:28.600 --> 0:30:31.000 The dynamic has really changed. And he even was pretty 0:30:31.000 --> 0:30:34.280 explicit about what kinds of considerations will be looking for 0:30:34.400 --> 0:30:37.080 before they raise rates again. And I think that's probably 0:30:37.120 --> 0:30:38.760 part of why the market tickets so well because a 0:30:38.800 --> 0:30:41.000 lot of those conditions are pretty remote. Do you think 0:30:41.040 --> 0:30:43.560 inflation is gonna spike anytime soon? Do you think inflation 0:30:43.600 --> 0:30:46.760 expectations are gonna going to perk up? Because the two 0:30:47.120 --> 0:30:49.239 was yielding Okay, this is minor was yielding about one 0:30:49.240 --> 0:30:51.280 six one prior to the FED decisions, now at one 0:30:51.360 --> 0:30:54.440 fifty nine, uh five years yielding one six two is 0:30:54.480 --> 0:30:56.280 at one sixty. So we've seen a little bit of 0:30:56.280 --> 0:30:59.040 a what does that mean? I think you need to 0:30:59.040 --> 0:31:01.200 look at it more than the next of the curves, 0:31:01.400 --> 0:31:03.720 you know. And Stott Minern from Guggenheim was on Bloomberg 0:31:03.800 --> 0:31:06.080 TV after the statement was real used talking about this 0:31:06.200 --> 0:31:10.160 very effect, which is the two ten curve flattened after 0:31:10.200 --> 0:31:12.280 we got that statement, and so I think it's either 0:31:12.480 --> 0:31:14.160 you know, he was saying, it's either the front end 0:31:14.200 --> 0:31:17.880 that is repricing you know, less easy to come, or 0:31:18.360 --> 0:31:21.720 it's a market that's concerned that more stimulus is going 0:31:21.760 --> 0:31:24.760 to be needed here because we're going to hit a 0:31:24.920 --> 0:31:27.640 very you know, a slow patch for the economy, and 0:31:27.640 --> 0:31:30.480 and so that you know, flattening and the curves or 0:31:30.520 --> 0:31:32.040 something that we're going to have to keep an eye 0:31:32.040 --> 0:31:35.000 on here. Not just the outright you know, benchmark ded 0:31:35.040 --> 0:31:37.320 recession completely off the table. Now, oh wait, go ahead. Well, 0:31:37.400 --> 0:31:38.600 I was just just gonna say, I think there's also the 0:31:38.600 --> 0:31:41.520 possibility of pricing out on the tail risk of the 0:31:41.520 --> 0:31:44.080 Fed being even more hawkish today than it was, you know, 0:31:44.080 --> 0:31:46.240 I mean, yes, it was relatively explicit, but again, those 0:31:46.240 --> 0:31:49.440 conditions under which they would be raising rates seem pretty remote, 0:31:49.840 --> 0:31:51.440 and tail risk was really one of the big themes. 0:31:51.440 --> 0:31:53.360 You know. Sometimes the last questions in the press conference, 0:31:53.360 --> 0:31:55.080 you think, okay, we've heard every ready to go now. 0:31:55.280 --> 0:31:56.920 But I thought Don Lee from the l A Times 0:31:56.960 --> 0:31:59.520 really elicited an interesting comment where some we found out 0:31:59.600 --> 0:32:01.840 what is it that you think Powell has changed? And 0:32:01.880 --> 0:32:03.760 yet look you said, look it's the tail risks that 0:32:03.760 --> 0:32:05.720 are gone. We don't know what's gonna happen with trade, 0:32:05.840 --> 0:32:07.640 but we're less concerned that's going to blow up in 0:32:07.680 --> 0:32:11.840 our faces, which is I mean, I feel like trade 0:32:11.960 --> 0:32:15.000 was very much front of mind with him the last 0:32:15.000 --> 0:32:17.560 time we heard from him in this sort of setting, 0:32:17.600 --> 0:32:20.760 but also in the intervening speeches and q and a's 0:32:20.800 --> 0:32:23.920 that he's given and his colleagues have given. Are they 0:32:24.080 --> 0:32:27.440 right to be less worried? Does the bond market and 0:32:27.480 --> 0:32:30.400 do investors agree with that sentiment? Alex, I think it's 0:32:30.440 --> 0:32:34.080 just more that the trade rhetoric has become less inflammatory 0:32:34.120 --> 0:32:36.560 than it has been. I still think it's a concern. 0:32:36.640 --> 0:32:38.480 I think, you know, Brexit is still on the burner. 0:32:38.520 --> 0:32:40.800 I think trade still on the burner, but I think 0:32:40.840 --> 0:32:44.480 because the rhetoric around it has been less inflammatory, that 0:32:44.680 --> 0:32:48.200 it's not an immediate concern. You know, I do want 0:32:48.200 --> 0:32:50.800 to mention Carol. You mentioned the inflation and Powell had 0:32:50.800 --> 0:32:52.880 a comment where he said inflation seems to be settling 0:32:52.920 --> 0:32:56.480 below two percent. And Vince Saignarella, you know, my our 0:32:56.520 --> 0:32:59.200 colleague here at Bloomberg, Um, you know, we've had this 0:32:59.240 --> 0:33:01.800 discussion that it's like, oh gosh, you know, if the 0:33:01.800 --> 0:33:05.040 central banks around the world had to acknowledge that maybe inflation, 0:33:05.560 --> 0:33:08.640 like a two percent inflation target is unrealistic and inflation 0:33:08.680 --> 0:33:10.520 is just gonna end up being below there. Then it's 0:33:10.560 --> 0:33:13.000 like the jig is up. Why do you need stimulus? 0:33:13.000 --> 0:33:16.080 So then it calls into question every global central bank 0:33:16.120 --> 0:33:19.800 stimulus program if you acknowledge that inflation might never reach 0:33:19.960 --> 0:33:23.160 two percent again. And I think that's an interesting comment 0:33:23.200 --> 0:33:25.880 and something that we should really be thinking about because 0:33:25.880 --> 0:33:27.640 now we have to talk about the efficacy of the 0:33:27.640 --> 0:33:30.080 tool kits and and why are we even doing all 0:33:30.120 --> 0:33:32.000 these things in the first place if this is just 0:33:32.040 --> 0:33:34.600 where inflation is going to be settling Now about that, well, 0:33:34.640 --> 0:33:36.240 I wanted to go back to the trade point, this 0:33:36.320 --> 0:33:38.200 idea that you know, we've had played lucy with the 0:33:38.200 --> 0:33:41.400 football several times now with yes, the trade talks are 0:33:41.400 --> 0:33:43.080 on again and they're off again. I think one of 0:33:43.080 --> 0:33:47.000 the differences here in slippery football too. But we're heading 0:33:47.000 --> 0:33:49.600 into a different environment because next year is an election year, 0:33:49.640 --> 0:33:50.920 of course, so I'm sure that there are a lot 0:33:50.960 --> 0:33:53.160 of people in the market we're thinking, you know, it's 0:33:53.200 --> 0:33:55.080 a lot less likely that they're going to blow something 0:33:55.160 --> 0:33:57.200 up in an election year. That's just kind of the 0:33:57.200 --> 0:34:01.040 real politique from a market perspective right now. It's like 0:34:01.160 --> 0:34:03.400 if you're the Trump team, you know, the White House team, 0:34:03.400 --> 0:34:05.960 and you're strategizing about you've got to start thinking, Okay, 0:34:06.040 --> 0:34:07.320 what are the things that we need to come and 0:34:07.360 --> 0:34:10.680 get some closure on, even if it's a mini trade dealer, 0:34:10.719 --> 0:34:12.879 whatever the heck it is, you've got to figure it out. 0:34:12.920 --> 0:34:15.880 What you're laughing, I'm laughing because one of those things 0:34:15.880 --> 0:34:17.600 on the list, you know, we don't want to wait 0:34:17.640 --> 0:34:20.040 in there, but we're all probably thinking it, which is probably, 0:34:20.080 --> 0:34:23.279 you know, impeachment or don't get No. I think we 0:34:23.320 --> 0:34:25.520 can talk about that. I mean, no, I think that's 0:34:25.160 --> 0:34:28.760 that's absolutely true. I mean we've got the House, uh, 0:34:28.960 --> 0:34:32.880 you know, essentially exploring exactly what they're gonna do along 0:34:32.920 --> 0:34:34.839 those lines right now. I mean, when we think about 0:34:34.880 --> 0:34:37.160 what we're telling our viewers in our weekend show, we're 0:34:37.239 --> 0:34:40.279 starting to think about brexit and impeachment and not just 0:34:40.360 --> 0:34:42.720 the new economy. Just a reminder, the Fed reducing interest 0:34:42.800 --> 0:34:45.560 rates by a quarter percentage point for the third time 0:34:45.760 --> 0:34:48.400 this year, signaling a pause and further cuts unless the 0:34:48.440 --> 0:34:52.839 economic outlooks changes materially. Let's continue the conversation with our 0:34:52.880 --> 0:34:56.279 team here. Alex Harris, Bonding, reporter for Bloomberg and Josh Wright, 0:34:56.360 --> 0:35:00.960 chief economists forms both in our Bloomberg Interactive Broker studio. 0:35:01.040 --> 0:35:04.120 We kept him hanging around to get some final thoughts 0:35:04.200 --> 0:35:07.600 as we continue to synthesize digest a little bit what 0:35:07.640 --> 0:35:12.440 we heard from j Pale. So Josh right, what happens next? Like, 0:35:12.600 --> 0:35:16.120 you know, as they look at data, the f O 0:35:16.280 --> 0:35:18.399 M C. J. Powell and his colleagues, as you look 0:35:18.440 --> 0:35:21.240 at data, what are you looking for? Job stay obviously 0:35:21.480 --> 0:35:23.680 right around the corner. Yeah, that's a big deal coming 0:35:23.719 --> 0:35:25.640 up on Friday. I think the one of the things 0:35:25.719 --> 0:35:28.480 is we talk about data dependence. Which kind of data 0:35:28.520 --> 0:35:30.080 is that that's going to be focused on in a 0:35:30.120 --> 0:35:32.600 world where unemployment is already lower than the FED is 0:35:32.640 --> 0:35:36.200 actually comfortable with, inflation is pretty soft. Are they focused 0:35:36.200 --> 0:35:38.520 on real economic variables or they focus more on how 0:35:38.560 --> 0:35:41.080 the financial markets respond to them? Because a lot of 0:35:41.080 --> 0:35:43.239 it has to do with where you think, do you 0:35:43.280 --> 0:35:46.080 want your policy to be accommodative or neutral? Sounds like 0:35:46.200 --> 0:35:48.399 cha Powell wants it to be a little bit accommodative. Yeah, 0:35:48.600 --> 0:35:51.040 what's the deal with inflation? I mean, are we truly 0:35:51.320 --> 0:35:56.239 in a different environment like the jury Seinfeld question inflation? 0:35:56.560 --> 0:35:58.799 What's the deal. I don't know what do you I mean, Josh, 0:35:58.800 --> 0:36:00.920 what's the conversation do you guys having at your place? 0:36:01.840 --> 0:36:04.440 It's a lot of head scratching. You know, we've been 0:36:04.480 --> 0:36:06.319 having this conversation for a couple of years now. It's 0:36:06.320 --> 0:36:08.040 clear that there are some structural factors, you know, we 0:36:08.080 --> 0:36:09.959 work for alone to Oh it's gonna, it's gonna, it's coming, 0:36:10.000 --> 0:36:12.920 it's coming. It hasn't. I think we have to acknowledge that. 0:36:12.960 --> 0:36:14.839 You know, there's some ways in which we're going back 0:36:14.880 --> 0:36:16.239 to the old normal, but this is a way in 0:36:16.280 --> 0:36:18.480 which we do not seem to be headed backwards. Right. 0:36:18.480 --> 0:36:21.160 We've got technology changes, those are deep and long lasting. 0:36:21.160 --> 0:36:23.720 We've got demographic changes, those are deep and long lasting, 0:36:24.120 --> 0:36:26.239 and that that seems to be holding these numbers down, 0:36:26.280 --> 0:36:28.440 which actually is helpful for the FED in a lot 0:36:28.440 --> 0:36:30.600 of ways. Yeah, exactly. But I think also you have 0:36:30.640 --> 0:36:32.319 it on a from a global standpoint, and I know 0:36:32.400 --> 0:36:34.840 our BA Governor Phil Lowe makes this point quite a 0:36:34.840 --> 0:36:38.080 bit when he speaks that, you know, globalization has an 0:36:38.120 --> 0:36:41.560 impact here and that's something that I think Powell has 0:36:41.640 --> 0:36:44.719 maybe like quietly acknowledged and remarks. But I mean that 0:36:44.920 --> 0:36:47.000 is a factor as well, that it's not just about 0:36:47.040 --> 0:36:50.680 the U S. It's inflation broadly, because globalization does change 0:36:50.800 --> 0:36:53.319 the game a little bit. And despite the confidence that 0:36:53.520 --> 0:36:56.319 fed share Powell was evincing today, I think we do 0:36:56.400 --> 0:36:59.160 need to be concerned about assetprice inflation. So traditionally we 0:36:59.200 --> 0:37:01.800 worried about consumers inflation, but really it's been asset prices 0:37:01.800 --> 0:37:03.960 that have been the problem for the last two segments. 0:37:04.000 --> 0:37:07.640 If we're there yet, I mean, he was very optimistic, 0:37:07.719 --> 0:37:10.279 He said, I don't see broad problems. Yes, there's some 0:37:10.320 --> 0:37:12.759 concerns of the corporate debt market seems contained. They have 0:37:12.960 --> 0:37:16.799 like a you know, clear analytical framework that he laid out. Um, 0:37:16.880 --> 0:37:19.120 but we can't deny the fact that there's a possibility 0:37:19.120 --> 0:37:21.560 that we could simply get a shock to confidence through 0:37:21.600 --> 0:37:23.799 some kind of tumble in the stock market. I mean, 0:37:23.800 --> 0:37:26.439 how many people really feel that all those stocks out there, 0:37:26.680 --> 0:37:28.040 some of them, I mean, look at what's happened in 0:37:28.080 --> 0:37:30.560 i Pos this year. How many people really feel confident 0:37:30.600 --> 0:37:32.560 that the stock market actually what it has happened in 0:37:32.600 --> 0:37:35.040 IPOs To meet to this your kind of gives me 0:37:35.080 --> 0:37:37.120 some confidence that I feel like the capital markets have 0:37:37.200 --> 0:37:39.520 said either you're not making money so you're going to 0:37:39.600 --> 0:37:41.680 get beat up, or you're not going to come to market, 0:37:41.760 --> 0:37:43.360 or you know what I mean. Like to some extent, 0:37:43.400 --> 0:37:46.560 I feel like the markets are doing what they're supposed to. 0:37:46.719 --> 0:37:49.680 I think that's right. A little healthy popping of bubbles 0:37:49.719 --> 0:37:51.560 along the way you can can really help. We've seen 0:37:51.600 --> 0:37:54.719 that true, But it requires continued vigilance. I mean, still 0:37:54.760 --> 0:37:57.560 you've got some some companies still have some pretty optimistic 0:37:57.560 --> 0:38:00.239 evaluations out there. Yeah, that's fair. I think the other 0:38:00.280 --> 0:38:02.120 point that Joshua, you know, and going back to what 0:38:02.160 --> 0:38:05.960 Powell said about corporate debt and pimco's anti Christians, was 0:38:05.960 --> 0:38:08.600 on radio this morning with Tom Kinge and John Farrow, 0:38:08.680 --> 0:38:12.080 making this point is like the problem is there a 0:38:12.120 --> 0:38:15.960 Batman and Robin by the way, which is which is which? 0:38:16.160 --> 0:38:21.200 I don't know, but I guess this is what happens 0:38:21.239 --> 0:38:24.080 when we get ninety minutes into the FED decision on 0:38:24.239 --> 0:38:27.520 But here's the issue and anti Christians. He was making 0:38:27.560 --> 0:38:29.719 this point is that everything is well and good in 0:38:29.760 --> 0:38:33.040 corporate bonds except when you have to sell and and 0:38:33.080 --> 0:38:35.520 this is the problem though, And he was making the 0:38:35.560 --> 0:38:38.360 point that the structure of the markets has changed, and 0:38:38.400 --> 0:38:40.400 this is where he was equating kind of what happened 0:38:40.400 --> 0:38:43.600 in the money markets to what could potentially happen with 0:38:43.640 --> 0:38:47.040 the corporate bonds is that banks are no longer the 0:38:47.080 --> 0:38:50.400 intermediaris that they once were, and he said, they're now movers. 0:38:50.640 --> 0:38:54.040 They're they're not warehousing anymore. They're just trying to move 0:38:54.080 --> 0:38:56.560 inventory off their balance sheet. They don't want to have it. 0:38:56.840 --> 0:38:58.920 And so this is going to be the problem if 0:38:58.960 --> 0:39:02.040 you get waves of investors trying to sell their corporate 0:39:02.040 --> 0:39:04.520 brownhold things all at once. And and this is what 0:39:04.880 --> 0:39:06.640 that we need to be concerned about. And I think 0:39:06.640 --> 0:39:08.960 what the FEND needs to be vigilant about the law 0:39:09.040 --> 0:39:11.680 of unintended consequences. Right there, Powell said that they weren't 0:39:11.680 --> 0:39:13.520 going to take another look at regulations, but I think 0:39:13.560 --> 0:39:16.120 you just made the best argument for why they should. Yeah, 0:39:16.360 --> 0:39:19.800 she's always good to make I know she makes good recommendations. 0:39:19.800 --> 0:39:22.760 The Great round Table. I'm not saying who's Batman, who's Robin, 0:39:22.880 --> 0:39:27.120 Who's Superman? Who's wonder was that woman? It's all all 0:39:27.120 --> 0:39:30.040 one and the same, alright. Alex Harris Bond, reporter for 0:39:30.200 --> 0:39:35.120 Bloomberg gosh right, chief economists for I SAMs. I'm gonna 0:39:35.200 --> 0:39:42.759 get out while the getting is good. Journal, Yeah, but 0:39:42.880 --> 0:39:46.400 you let me drive. Oh no, no, no, no home, 0:39:47.400 --> 0:39:55.000 please revel, I want to dry ball. Just drive baby, 0:39:57.760 --> 0:40:09.600 good questions, drive to the globe that communings, We'll drive 0:40:09.760 --> 0:40:14.200 us on Bloomberg Radio. All right, it's time for the 0:40:14.320 --> 0:40:18.200 drive to the clothes. On this FED day Wednesday, David 0:40:18.239 --> 0:40:21.000 diets back with US president, chief investment officer for Point 0:40:21.120 --> 0:40:24.560 View Wealth Management, looking after about five point eight billion 0:40:24.640 --> 0:40:27.520 dollars out in Summit, New Jersey. That's where he joins 0:40:27.600 --> 0:40:30.600 us on the phone. David, Nice to have you back 0:40:30.640 --> 0:40:33.680 with us as always. Thank you so much. Jason. All right, 0:40:33.920 --> 0:40:37.040 so let's talk a little FED since it's top of mine. 0:40:37.400 --> 0:40:39.600 What did you hear? Because the market, at least the 0:40:39.640 --> 0:40:44.439 equity markets, seem to like what they heard from old JP. Well, well, 0:40:44.440 --> 0:40:47.520 certainly they complied with what the market was expecting, which 0:40:47.600 --> 0:40:51.800 was their third quarter point caught in as many months. UM. 0:40:51.840 --> 0:40:53.880 But then they talked about the future and the change 0:40:53.880 --> 0:40:58.240 of language a little bit, suggesting that we were not 0:40:58.400 --> 0:41:02.400 going to expect any time soon additional rate cuts. But 0:41:02.600 --> 0:41:05.719 when queried as to what would be the grounds to 0:41:06.280 --> 0:41:10.600 reverse rate cuts and increase, they talked about, UM, seeing 0:41:10.600 --> 0:41:13.080 more inflation, which by all accounts is not going to 0:41:13.160 --> 0:41:17.600 come anytime soon. So people like what they heard. I 0:41:17.640 --> 0:41:20.400 think the main takeaway from me was they got the 0:41:20.480 --> 0:41:23.080 rate cut, rache are going to stay low, but they 0:41:23.120 --> 0:41:26.400 didn't scare us in terms of their concerns over the economy. 0:41:26.520 --> 0:41:32.520 Perhaps goldilocks, dare I say, David, Yeah, that's what I 0:41:32.560 --> 0:41:36.040 think the market heard. Of course, that was juxtaposed with 0:41:36.120 --> 0:41:39.680 a better than expected reading on GDP. We got a 0:41:39.800 --> 0:41:44.120 one point nine percent reading today, which was um not 0:41:44.239 --> 0:41:46.399 as good as the two from two two, but better 0:41:46.440 --> 0:41:50.600 than the market expected. So that adds to that Goldilocks story. 0:41:50.840 --> 0:41:55.520 And so what do you do as an investor here, David, 0:41:55.719 --> 0:41:58.960 Because you know, we've had a nice run up here 0:41:59.239 --> 0:42:02.080 in a bun to names and sort of pretty broadly. 0:42:02.080 --> 0:42:04.040 You know, we were talking with Dave Wilson even at 0:42:04.080 --> 0:42:07.120 the top of the show and thinking about how the 0:42:07.160 --> 0:42:10.000 markets have generally been reacting. You know, sp is going 0:42:10.040 --> 0:42:12.520 to hit another record today if I'm reading my chart right, 0:42:12.960 --> 0:42:15.680 So what's not to like here or what do you 0:42:16.000 --> 0:42:19.440 especially like? Maybe it's a better way to ask. In sure, absolutely, 0:42:19.480 --> 0:42:22.600 I think longer term we're still very constructive, and I 0:42:23.040 --> 0:42:27.040 think the key metric that I continue to share with 0:42:27.080 --> 0:42:29.600 my clients is you've got to yield on the SMP 0:42:29.920 --> 0:42:32.560 of two. You've got to yield on the ten year 0:42:32.640 --> 0:42:36.080 treasury well under that at one point seven, which means 0:42:36.120 --> 0:42:39.120 over the next ten years, with dividends typically increasing and 0:42:39.160 --> 0:42:42.359 of course fixed income staying fixed, you've got a high 0:42:42.480 --> 0:42:45.120 likelihood over time of making more money in them in 0:42:45.160 --> 0:42:48.600 the market. But certainly near term, any types of headwinds 0:42:48.640 --> 0:42:52.359 could develop. Just today we heard that UM, the much 0:42:52.440 --> 0:42:57.920 vaunted meeting of of of World Monetary Chiefs and and 0:42:57.960 --> 0:43:00.520 so forth in Santiago, Chile is going to be canceled. 0:43:00.600 --> 0:43:03.239 We were hoping that we could put a bow on 0:43:03.440 --> 0:43:06.759 Phase one down there. That doesn't look likely right now, 0:43:06.760 --> 0:43:10.520 So that's potential near term volatility UM. Of course, there's 0:43:10.560 --> 0:43:14.440 still concerns over the economy abroad, particularly in Europe as 0:43:14.480 --> 0:43:17.319 they as they face and deal with Brexit UM. But 0:43:17.760 --> 0:43:20.920 you know, given the valuation tilt in favor of equities, 0:43:21.239 --> 0:43:24.520 we're focusing on areas that have lagged a little bit. 0:43:24.880 --> 0:43:27.480 And to be honest with you, Jason, we like companies 0:43:27.680 --> 0:43:30.880 that are blockbusters in their fields. You know, I go 0:43:30.960 --> 0:43:33.879 back a generation to what Jack Welch said that all 0:43:33.920 --> 0:43:36.839 the profits of every industry is made pretty much by 0:43:36.880 --> 0:43:39.160 those companies who are number one or number two. So 0:43:39.200 --> 0:43:41.680 we try and pick them out within industries that we 0:43:41.800 --> 0:43:46.680 think makes sense invest accordingly. So Budweiser and that's when 0:43:46.719 --> 0:43:51.320 that falls into that category. So I mean and iSER Bush, 0:43:51.360 --> 0:43:54.640 which is basically the merger of the Belgian InBev and 0:43:54.680 --> 0:43:58.600 of course Budweiser. Here they dominate the beer industry like 0:43:58.880 --> 0:44:02.640 if few companies any type of industry do, owning five 0:44:02.680 --> 0:44:07.319 of the top brands across the planet, um eighteen of 0:44:07.400 --> 0:44:10.920 their brands generating more than one billion in revenues. They 0:44:11.000 --> 0:44:14.080 got four nearly half of the US market, nearly two 0:44:14.120 --> 0:44:17.719 thirds of many of the markets in Brazil. But the 0:44:17.760 --> 0:44:21.719 stock is down from July. There was some weakness in 0:44:21.880 --> 0:44:24.279 Asia in terms of volumes. But at the end of 0:44:24.280 --> 0:44:26.960 the day, when there's any kind of hiccup in an industry, 0:44:27.160 --> 0:44:31.000 the biggest company can squeeze costs further, push harder on 0:44:31.040 --> 0:44:33.960 their networks. And of course those brands are not to 0:44:34.000 --> 0:44:36.839 be duplicated. And I think, while you're waiting, you've got 0:44:36.920 --> 0:44:39.680 the two and a half percent dividend, This looks good, 0:44:39.719 --> 0:44:43.760 no matter what the economic climate going forward looks. All right, David, 0:44:43.840 --> 0:44:46.120 got to ask you about Wells Fargo because I feel 0:44:46.160 --> 0:44:48.239 like we've been talking about it every time you've come 0:44:48.239 --> 0:44:51.279 to visit this or been able to call in. They 0:44:51.320 --> 0:44:55.080 got their CEO. You must be so happy, Yeah, I am. 0:44:55.120 --> 0:44:58.920 And it did get the stock above fifty um, it's 0:44:58.920 --> 0:45:01.080 spurred about ten per done in the news. It has 0:45:01.200 --> 0:45:04.520 fallen back. Of course, all the banks that even today, 0:45:05.000 --> 0:45:07.640 the banks didn't participate in the rally so much, are 0:45:07.719 --> 0:45:12.560 still grappling with these narrow net interest margins. In the 0:45:12.600 --> 0:45:14.799 amount that they're paying is a lot relative to what 0:45:14.880 --> 0:45:18.400 they can lend. That's hurting them. But again, Wells Fargo 0:45:18.560 --> 0:45:21.640 has one of the best franchises coast to coast, which 0:45:21.680 --> 0:45:25.880 gives them tremendous economies of scale in terms of distribution, 0:45:25.920 --> 0:45:28.759 in terms of branches, in terms of advertising, and I 0:45:28.800 --> 0:45:31.600 think they can make money here. Again, while you're waiting, 0:45:31.600 --> 0:45:35.839 you're collecting a four percent dividend, and recently, of course, 0:45:35.880 --> 0:45:38.920 with the lower interest rates, the re five business is 0:45:38.960 --> 0:45:42.120 perking back up, and apparently Wells fargoes getting more than 0:45:42.160 --> 0:45:44.440 its fair share of that. All right, And you also 0:45:44.560 --> 0:45:48.120 like speaking of dividends. Those pharmaceutical companies as are always 0:45:48.160 --> 0:45:50.239 a good place to go. Fiser is the one that 0:45:50.360 --> 0:45:53.720 you liked, also a huge player, and you're talking about 0:45:53.719 --> 0:45:58.360 a three point seven percent dividend exactly. You know, the 0:45:58.400 --> 0:46:01.759 biggest sales force in the world, the largest amount spent 0:46:01.880 --> 0:46:04.560 on R and D. I still don't think the market 0:46:04.760 --> 0:46:06.400 is giving them enough credit for what they have in 0:46:06.400 --> 0:46:09.120 the pipeline. I think the eight hundred pound guerilla over 0:46:09.200 --> 0:46:13.680 the industry, of course, is politics and certainly proposals as 0:46:13.680 --> 0:46:16.960 we get into the political season to radically change the 0:46:17.040 --> 0:46:20.239 health care system. But quite frankly, we have seen that 0:46:20.280 --> 0:46:24.040 movie before, and you know, certainly, I think after the 0:46:24.120 --> 0:46:28.239 candidates um, after the primaries are over and and and 0:46:28.280 --> 0:46:31.960 the candidates on the Democratic side start playing for that 0:46:32.040 --> 0:46:34.000 middle I think they'll back off some of the most 0:46:34.040 --> 0:46:37.000 radical plans and people will see its business as usual. 0:46:37.200 --> 0:46:40.439 Five is fifty two weeks forty four right now, thirty eight, 0:46:40.760 --> 0:46:44.279 collect three percent and move up another fift with one 0:46:44.320 --> 0:46:47.319 of your top healthcare companies in the world. Doesn't look 0:46:47.360 --> 0:46:49.800 so bad at the intentional We're going to talk about 0:46:49.840 --> 0:46:53.920 some of the political market plays coming up in the 0:46:53.960 --> 0:46:56.239 final hour of the show for now, We're gonna leave 0:46:56.239 --> 0:46:59.400 it there with David Deed's President, chief investment officer of 0:46:59.480 --> 0:47:03.240 Point View Wealth Management joining us on the phone from Summit, 0:47:03.320 --> 0:47:05.760 New Jersey. Love talking names with him. Thanks for listening 0:47:05.760 --> 0:47:08.440 to Bloomberg Business Week. You can subscribe to the podcast 0:47:08.480 --> 0:47:11.359 on iTunes, SoundCloud, or Bloomberg dot com. You can also 0:47:11.400 --> 0:47:13.879 listen to our radio show every weekday at two pm 0:47:13.920 --> 0:47:15.720 Eastern only on Bloomberg Radio.