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Speaker 1: Welcome to Bloomberg Business Week. On this FED decision day
Speaker 1: and the FED crossing the headlines uncertainties remain, will assess
Speaker 1: appropriate ratepath cutting the federal funds rate target twenty five
Speaker 1: basis points to one and a half to one point
Speaker 1: seventy so as expected, Jason cutting for a third straight meeting.
Speaker 1: We're gonna dig into some of these headlines omitting acts
Speaker 1: as appropriate. I want to understand what that means when
Speaker 1: we get to our experts in just a minute. But
Speaker 1: first let's get some market reaction from Charlie Pellett. Hy Charlie,
Speaker 1: right now, we have got the SMP five hundred index
Speaker 1: down down two tenths of one percent. Stocks flat heading
Speaker 1: into that announcement, the Tenure up seven thirty seconds, with
Speaker 1: the yield now of one point eight one percent. The
Speaker 1: Dow down twenty nine points, dropping one tenth of one percent,
Speaker 1: NAS Stack Laura by twenty five, down three tenths of
Speaker 1: one percent, Gold up two tenths four eighty nine, the
Speaker 1: Ounce and West Texas in enemediate crew down one half
Speaker 1: percent fifty four seventy one, So again a drop for
Speaker 1: the down down thirty five, down one tenth SMP now
Speaker 1: Laura by eight down three tenths and as stacked down
Speaker 1: by three tenths of one percent. I'm Charlie Pellett. That's
Speaker 1: a Bloomberg Business Flash. Charlie, thank you so much for
Speaker 1: listening to Bloomberg Business Week to focus on the FED.
Speaker 1: Brought to you by Commonwealth Financial Network. For the sixth
Speaker 1: straight time, JD Power ranks Commonwealth number one in independent
Speaker 1: advisory satisfaction among financial investment firms. Is it Commonwealth dot
Speaker 1: Com to learn more? Where we are all about the
Speaker 1: FED right now? So most read story just want to
Speaker 1: get to our Chris Connon, who puts out our FED
Speaker 1: story Federal Reserve officials reducing interest rates by order percentage
Speaker 1: point for the third time this year, hinting they may
Speaker 1: now put monetary policy on hold for one meeting at least.
Speaker 1: And we did see equities dig a little bit deeper
Speaker 1: into the lost column as a result, and as for yield,
Speaker 1: a slight uptick, but really slight. Let's get into this
Speaker 1: with our team. Kathleen Hayes is Global Economics and Policy
Speaker 1: editor here at Bloomberg News. She's in our interactive broker's
Speaker 1: studio in New York along with Dave Wilson. Our stocks
Speaker 1: that are Bloomberg News. Kathleen write to you what stands out?
Speaker 1: Does this mean the Fed is on pause for December? No, okay,
Speaker 1: I don't think so. I do think though they could be.
Speaker 1: I think that the fact that j. Powell and the
Speaker 1: Fed the FOMC took out act as appropriate to sustain
Speaker 1: the expansion, which had become a phrase that everyone took
Speaker 1: to mean we're going to keep cutting interest rates. That's gone,
Speaker 1: but they're going to monitor the data and assess the
Speaker 1: appropriate path of the target reach for the federal funds. Right, So,
Speaker 1: to me, it's pretty clear. I think this is more
Speaker 1: or less what people expected. You don't now you're want
Speaker 1: to get away from promising to do a rate cut
Speaker 1: at every meeting and maybe even December. But if the
Speaker 1: data are weak enough, right, then there's that the door
Speaker 1: is still wide open. And again I think, now what
Speaker 1: we have to go ahead? Well, this is what I
Speaker 1: don't always get because it's like I understand that they
Speaker 1: take a phrase out of the statement and we you know,
Speaker 1: assess the significance of it. But the's going to act
Speaker 1: appropriate as needed no matter what, whether it's in there
Speaker 1: or not. Right, But what's the well, but what the
Speaker 1: significance is that when this the statement, this statement that
Speaker 1: they make, the policy statement is understood to be which
Speaker 1: it is something that is so carefully worded. Remember when
Speaker 1: the forward guidance under Berninky and then Yelling was you know,
Speaker 1: keeping rates low for an extended period that was considered
Speaker 1: really important. When they removed that, it was a big deal.
Speaker 1: So removing this is a one of those soul but
Speaker 1: so clear signals that they have made a shift. I
Speaker 1: just think it's so important. Though it doesn't mean they
Speaker 1: won't cut in December. It just means out, you know,
Speaker 1: this is the division we've seen those who don't think
Speaker 1: we need to cut it all, those who think we
Speaker 1: need to cut more. Those in the middle are trying
Speaker 1: to figure out what we need to do, or say, hey,
Speaker 1: we just cut rates three times and let's don't forget
Speaker 1: everybody in the background. We do see a mini trade
Speaker 1: deal forming. Maybe the trade part is moving ahead. And
Speaker 1: if there's been one big weight on the US economy,
Speaker 1: on the global economy, it has been the tensions from
Speaker 1: trade manufacturing slowing it so that we talk about this,
Speaker 1: wasn't it canceled? Yeah? It was. Isn't that where they're
Speaker 1: supposed to meet? Well, maybe they'll find another place. To
Speaker 1: me maybe I was thinking maybe maral Lago. It's sort
Speaker 1: of like that that moment where you say, oh, that
Speaker 1: place we used to go as close, we need to
Speaker 1: find a new place. President, they'll write each other beautiful letters.
Speaker 1: Dave Wilson, come on in here. The stock market reaction,
Speaker 1: the equity side reaction, sort of bounced a little bit downward,
Speaker 1: if I could say that, and now it's sort of
Speaker 1: bouncing back up more or less to where it was.
Speaker 1: How does an equity investor read this? Well, in short,
Speaker 1: not much of a reaction as far as the media
Speaker 1: move goes beyond that, if you look at what's been
Speaker 1: going on in stocks like that, you see there's been
Speaker 1: a real preference for bond proxies. Now what we're talking
Speaker 1: about their utilities, real estate companies. They've actually been the
Speaker 1: best performers in the past three months among the eleven
Speaker 1: main industry groups in the SMP five hundreds. So you know,
Speaker 1: in fact today utilities are the best performers and they
Speaker 1: barely budge after this rate decision. So it's clear that
Speaker 1: what people were figuring on going into the meeting is
Speaker 1: playing out in terms of the decision, and it's being
Speaker 1: reflected in the shares. I mean, heck, I was reading
Speaker 1: report today from Bank of America talking about that's you know,
Speaker 1: where the money is flowing into the bond proxies and
Speaker 1: not into bonds. So it's like there's nothing that really
Speaker 1: kind of changes the equation at this point in terms
Speaker 1: of investor preferences, right, utilities, healthcare, consumer staples. That's if
Speaker 1: I look at the SPX, the SMP five hundred and
Speaker 1: the Bloomberg IMAP function on the term, that's where you
Speaker 1: see a little bit of upside in today's a little bit.
Speaker 1: I mean, in real estate stocks are holding up reasonably well,
Speaker 1: They're index is only down the tenth of represent at
Speaker 1: the moment. Let's remember that that two things that happened today. One,
Speaker 1: I mean, you just talking about stocks and where they've been,
Speaker 1: but think about spire is heating another record, another record,
Speaker 1: another area. Right, and today GDP came in at one
Speaker 1: point nine percent, a bit stronger than forecast, so just
Speaker 1: above what the Fed seas is potential. We're waiting for
Speaker 1: a job support on Friday. That could be on the
Speaker 1: weaker side. But I mean, I think if you're one
Speaker 1: of the people the Fed saying let's let's stop now,
Speaker 1: you're feeling pretty good about that decision, right, that those
Speaker 1: kinds of things are backing up your sense that you
Speaker 1: know the world's meant tough the trade war. Maybe we'll
Speaker 1: have well people, we'll go back pedaling alls all of
Speaker 1: a sudden, but for now, there's it doesn't seem to
Speaker 1: be that the reason it's not as compelling to keep
Speaker 1: going and cutting reins. But I think again, I think
Speaker 1: the stock market really has got to be a big one. Right, Yeah,
Speaker 1: it's a good point, and so we will hear from
Speaker 1: the FED chair J Powell. In about twenty five minutes
Speaker 1: or so, he'll take the podium in Washington. Kathleen Hayes,
Speaker 1: what do you expect will be the key questions that
Speaker 1: he will get off the top? What is this a pause?
Speaker 1: Or are you telling us no more interest rate cuts?
Speaker 1: Why if he says dances whatever, he says, well, I
Speaker 1: think he's gonna do that little data tod I think
Speaker 1: I think it's going to say well I said, I
Speaker 1: think I'll be very interested. I don't know, because J. Powell,
Speaker 1: in a lot of ways is a pretty straight shooter.
Speaker 1: He may say, well, we we mean what we said. Yeah,
Speaker 1: things are looking a bit better. We've cut right three times,
Speaker 1: so yeah, this may be a pause, but we are
Speaker 1: watching what also says that we're gonna follow the appropriate
Speaker 1: path for the federal funds? Right? And then people are
Speaker 1: gonna say, well, what are you watching? Are you watching
Speaker 1: the jobs report? What if it's weak? Well, are you
Speaker 1: watching the stock market? Well? Is it the trade war?
Speaker 1: And he's gonna be he's going to be hit with
Speaker 1: so many different questions on this. Uh, I think we
Speaker 1: should get some good, some good perspective. I think we'll
Speaker 1: get more information, and J. Powe knows full well that
Speaker 1: this is what the press conference is for, is to
Speaker 1: flesh out that policy statement and as much as he
Speaker 1: can clarify the f O m C. Thinking well, and
Speaker 1: you know, when we have the FED say once again,
Speaker 1: which we've heard them off and say, uncertainties remain, I
Speaker 1: want to know specifically, like I'd love a pecking order
Speaker 1: of Okay, sure, what's the biggest absolutely, because then you
Speaker 1: can assess it and then maybe figure out and predict
Speaker 1: what future FED policy is. Absolutely should ask question, Well,
Speaker 1: if I was in Washington, I would let's just do
Speaker 1: the show right in the on Twitter and they cannot true?
Speaker 1: Can you keep it down? I have a question? And so, Dave,
Speaker 1: are there in certain sectors that you look at as
Speaker 1: you go down a level that react in one way
Speaker 1: or another to this type of decision? Well, I mean
Speaker 1: just looking at today's trading and you're not really seeing
Speaker 1: a whole lot post FED that you didn't see pre FED,
Speaker 1: So it's not like there's really that much move within
Speaker 1: the industry groups. And like I say, seeing utilities on
Speaker 1: top of the heap though it's kind of telling and
Speaker 1: they're hanging in there. I mean, you know, so it
Speaker 1: shows that you know, people looking for income, you know,
Speaker 1: focusing on the stock market as much or more than
Speaker 1: they do on the bob market everywhere. I like to
Speaker 1: reconcile maybe what we're gonna hear from the Fed if
Speaker 1: you know, they're being a little bit more optimistic. So
Speaker 1: we've got to see what they're looking at. But I
Speaker 1: do wonder what the equity markets, as Kathleen said, you
Speaker 1: know here we are continuing to hit records out there.
Speaker 1: There's a fair amount of recession talks. We've heard it
Speaker 1: from the CEOs, concerns about trade in their earnings releases.
Speaker 1: So I'm trying to reconcile with the equity markets are
Speaker 1: telling versus some of the economic data points and what
Speaker 1: we might hear from J. Powell. What does the equity
Speaker 1: market tell us? What do earnings tell us? J? Well,
Speaker 1: clearly people are expecting better results down the road, and
Speaker 1: that's consistent with the analysts forecast anticipating a return you know,
Speaker 1: to growth in the fourth quarter, assuming they end up
Speaker 1: being right for the third quarter. In essent, people I
Speaker 1: under profit falls and then next year, you know, you
Speaker 1: get back towards ten percent growth if you buy what
Speaker 1: the analysts are selling in terms of their predictions. That said,
Speaker 1: I have seen lately, you know, some strategists expressing optimism
Speaker 1: about next year when it comes to Arni's and and
Speaker 1: saying that at least there are some investors kind of
Speaker 1: going along with that view quickly. I just want to
Speaker 1: add that, you know, Jim Bullard has been dissenting, dissenting,
Speaker 1: dissenting for bigger cuts for more, you know, and today
Speaker 1: he didn't dissent. So I think that's very interesting. Jim
Speaker 1: Bullard St. Louis fed present if he is now ready
Speaker 1: to say, okay, we cut three times. You know, I
Speaker 1: wanted to try, and this YO curb has uninverted, right,
Speaker 1: I've helped change that. Um, you know, inflation expectations are
Speaker 1: still low. Inflation is still a low target. But we've
Speaker 1: done enough for now, you know, cittain weight. I think
Speaker 1: that is a pretty significant voice to join that consensus
Speaker 1: in the middle saying we've done enough for now. Let's
Speaker 1: see what happens next. Yeah, all right, well, I think
Speaker 1: we're gonna leave it there. When have you guys, we
Speaker 1: really appreciated Kathleen Hayes Global Economics and policiator for Bloomberg
Speaker 1: here in our Bloomberg Interactive Broker studio, and Dave Wilson,
Speaker 1: Stocks editor for Bloomberg. He's also here with us in
Speaker 1: New York City. All right, time to head on over
Speaker 1: to Charlie Pellett for check in the world of business
Speaker 1: and a look at today's trading. All right, I thank
Speaker 1: you very much. We've got the down higher SMP nes
Speaker 1: stack both lower, recapping resetting FED officials reducing rates by
Speaker 1: a quarter percentage point for the third time this year,
Speaker 1: hinting they may now put monetary policy on hold for
Speaker 1: one meeting. At least. Our coverage will continue in just
Speaker 1: a moment right here on Bloomberg Radio. SMP down two
Speaker 1: now at three thousand thirty four. That is a drop
Speaker 1: of one tenth of one percent. We've got the Dow
Speaker 1: higher little change now, but on the plus side, up seven,
Speaker 1: up by less than one tenth of one percent. We
Speaker 1: did see a dip right after the headlines crossed on
Speaker 1: the Bloomberg, but again the dow rebounding ne stack down
Speaker 1: six now a drop there of one tenth of one percent.
Speaker 1: Your ten year up eleven thirty seconds yield one point
Speaker 1: seven nine percent gold up three tenths fourteen. Note he
Speaker 1: won the ounce where Texas ENEMYIA crew to retreat today
Speaker 1: down one point two fifty eight seven a barrel. So again,
Speaker 1: FED cuts rates by a quarter point while hinting at
Speaker 1: a pause, SMP down two points lower by one tenth
Speaker 1: of one percent. I'm Charlie Pellett. That's a Bloomberg Business
Speaker 1: Flash three number. Well, and it seems like three. It
Speaker 1: was the magic number at least for now. The FED
Speaker 1: as expected cutting for a third straight meeting. Uh, let's
Speaker 1: get into that decision in some of the analysis we
Speaker 1: heard from the FED so far. Of course, in about
Speaker 1: fifteen minutes we will head to the Federal Reserve to
Speaker 1: hear from FED Chair J Powell. In the meantime, all Jersey,
Speaker 1: he is our chief US interest rate strategist here at
Speaker 1: Bloomberg Intelligence. He's with us along with Steve Blitz, chief
Speaker 1: US economist at TS Lombard, both in our Bloomberg Interactor
Speaker 1: Broker studio in New York. I'm gonna start with you.
Speaker 1: You've been taking part in our Bloomberg Live blog. What's
Speaker 1: notable to you in this FED decision? Yeah? Not not
Speaker 1: really a lot there wasn't much that changed. I think
Speaker 1: that some people were expecting, including me, quite frankly, that
Speaker 1: they would have at least modestly changed their assessment of
Speaker 1: the economy. So they have this whole first paragraph where
Speaker 1: they talk about the economy and they basically left it unchanged.
Speaker 1: And I think, you know, with things like the Michigan
Speaker 1: Survey of UH consumer attitudes and in particular the inflation
Speaker 1: portion of that hitting all time record lows, that they
Speaker 1: would have at least acknowledged that inflation was still running
Speaker 1: below their their targets. So so some people, and I
Speaker 1: think the market reaction, the rates market is suggesting that
Speaker 1: the Fed will have to do more because they're not
Speaker 1: yet acknowledging the fact that the economy is not as
Speaker 1: strong as they hoped it would be by this point. Alright, Steve,
Speaker 1: so come on in here. What was your initial read?
Speaker 1: You're sitting uh in our lovely Bloomberg in director Broker's
Speaker 1: lounge looking at all of this play through on the Bloomberg.
Speaker 1: You've got your notes? What what jumped out at you? Well?
Speaker 1: Two things. First of all, I've been I've been expecting
Speaker 1: the FED to say we're done. Now we know the
Speaker 1: Feds never just gonna come out and say we're done.
Speaker 1: But when you go from will monitor and act as appropriate,
Speaker 1: two will monitor and assess the appropriate path. They're done. Now. Obviously,
Speaker 1: what they're saying is if the data falls apart between
Speaker 1: now in December, they're lacked again. I mean, they're always
Speaker 1: going to leave that door open. They're not gonna close
Speaker 1: it completely. And in fact, if you look at even
Speaker 1: their quarter GDP, you look at so many, so much
Speaker 1: economic data from their perspective, right and you listen to
Speaker 1: Powell's speech from a couple of weeks ago, they think
Speaker 1: that domestic economy is just fine. So you don't think,
Speaker 1: like il Reads said that they're kind of ignoring some
Speaker 1: of the weakness and the economy. You don't. You don't.
Speaker 1: I don't think so much that they're ignoring the weakness.
Speaker 1: The weakness is the reason why they've cut three times.
Speaker 1: The reason is why over the next eight months they're
Speaker 1: basically putting back all the tightening they they put into
Speaker 1: the balance sheet. They're putting it back. They are buying
Speaker 1: over the next eight months about of net new treasury issuance.
Speaker 1: That's a lot of cash going into the bill market.
Speaker 1: It's going to steep in the curve, it's going to
Speaker 1: help weaken the dollar. These all the things that they've
Speaker 1: wanted to get done. Well, it's not because they're not
Speaker 1: buying term yields. But you know, if you take all
Speaker 1: the gold away and then you put it back, it's
Speaker 1: still policies. So well, I think a couple of things.
Speaker 1: I think firstly that the Fed will probably actually slow
Speaker 1: down it's bill purchases come January, so UM, so we're
Speaker 1: expecting closer. It's still a lot right, so they're still
Speaker 1: buying a lot of UM, a lot of bills, a
Speaker 1: lot of net issuance UM. But it's it's not que
Speaker 1: just because of what they're buying. And in a way,
Speaker 1: it's kind of like balance sheet normalization because they haven't
Speaker 1: owned T bills for twelve years and now all of
Speaker 1: a sudden they're gonna buit T bills again, which I
Speaker 1: haven't owned for a very long time. I think, on
Speaker 1: the on the other side that yeah, I agree that
Speaker 1: the FED is not ignoring it. I suspect that since
Speaker 1: we're doing this in real time, I expect that we'll
Speaker 1: see a bigger market reaction from the press conference than
Speaker 1: we give the statement because I think that there'll be
Speaker 1: a little bit more nuance in there. I would be
Speaker 1: shocked if if j Pal, particularly if they are done
Speaker 1: tightening or easy and excuse me, and they don't want
Speaker 1: to cut in December at least that he'll talk about
Speaker 1: monetary policy working on long and variable legs, and we're
Speaker 1: not sure what that is and we need to see
Speaker 1: more incoming data before we make any additional decisions. Right,
Speaker 1: So something along that vein I think will be re
Speaker 1: iterated two, three or four times during the course of
Speaker 1: the press conference. And and the more you hear that,
Speaker 1: the more that that means they're not going in December. Well,
Speaker 1: it doesn't take January off the table by any Yes,
Speaker 1: but I think that January it doesn't take any month
Speaker 1: off the table. But you have to recognize they made
Speaker 1: in terms of the communication. They made this move on
Speaker 1: the balance sheet a couple of weeks ago when everybody
Speaker 1: was expecting them to announce it at this meeting, because
Speaker 1: they wanted to say something special at this meeting and
Speaker 1: they didn't want to have the message mixed up with
Speaker 1: the balance sheet. There was no fire drill on October
Speaker 1: eleven that required them to make that particular announcement about
Speaker 1: what they wanted to do over the next eight months.
Speaker 1: I disagree with that because in the funding markets, in
Speaker 1: the treasury market, they were really worried about what was
Speaker 1: going to happen on October fifteenth during the settlement of
Speaker 1: significant portion of new debt that was going to be issued,
Speaker 1: and the balance sheets of dealers has been very tight,
Speaker 1: so they wanted to do something to at least alleviate
Speaker 1: the idea that we're going to have tight funding markets forever.
Speaker 1: And they didn't want to have to do, you know,
Speaker 1: massive open market operations in order to alleviate that stress
Speaker 1: on a moment's notice. So I think that that's one
Speaker 1: of the reasons why they announced it on October eleventh,
Speaker 1: as opposed to weight here. Now. I I initially thought
Speaker 1: that they would probably wait till this this meeting to
Speaker 1: do it. But at the same time, I think that
Speaker 1: they were really scared because they were getting yeah, yeah,
Speaker 1: or at least at least the market fear yeah, so
Speaker 1: the market fear to get ahead of it. You know,
Speaker 1: let's announce this, so at least if they know that,
Speaker 1: at least we're paying attention. If nothing, when you guys disagree, Well,
Speaker 1: I would say this. You know, first of all, they
Speaker 1: could have done rebo right. Secondly, but they are I
Speaker 1: know that. But they could go back to the way
Speaker 1: life was before two thousand and eight and just do repot.
Speaker 1: The truth is that, because of regulatory reasons, basically you
Speaker 1: have balance sheets at the broker deals and at the
Speaker 1: banks that are smaller than they've been since at least
Speaker 1: thirty years, if not longer, while obviously the dead side
Speaker 1: has grown, so they have to be the balance sheet.
Speaker 1: And to say it's not QE okay, is it's falling
Speaker 1: into their semantic argument. Okay. The fact is that they
Speaker 1: are adding a tremendous amount of liquidity to the system.
Speaker 1: They need to buy bills. Because they don't buy bills,
Speaker 1: they can't grow their balance sheet because they have to
Speaker 1: wash the yields at the lower end so that banks
Speaker 1: will hold these reserves which are not required at the FED.
Speaker 1: If it just keeps leaking elsewhere, they can't grow their
Speaker 1: balance sheet, so they have to wash yields at the
Speaker 1: lower end, which is why they're buying bills. Right. So now,
Speaker 1: if I buy this many bills for eighty billion over
Speaker 1: the next eight months. That's a lot of money and
Speaker 1: it's going to impact the market already has begun to
Speaker 1: do that, you know, in terms of watching slow steepening
Speaker 1: of the curve. So if you're the Fed, you've got
Speaker 1: a steepening of the curve, you've got a lessening of
Speaker 1: the mess of foreign headwinds, at least seemingly with the US,
Speaker 1: China and the domestic economy. From their perspective, it's doing fine,
Speaker 1: and that they've done enough given leads and legs, And
Speaker 1: I agree you're gonna hear a lot about leads and
Speaker 1: legs in the press. Cart I just want to mention
Speaker 1: the equity markets are now positive territories and we've bounced
Speaker 1: back of Dow's up thirty, the nastacks up about a
Speaker 1: point little changed, unchanged almost but a little bit higher.
Speaker 1: So actually on the SB I'm just saying the equitive
Speaker 1: to watch it sort of. I mean, it's bouncing really
Speaker 1: like right along that gain and loss markets pretty much
Speaker 1: where it was if you're the Fed. If you're the Fed,
Speaker 1: you don't you there's no recession. So there's a limit
Speaker 1: to how far you're gonna cut rates because your financial
Speaker 1: stability issues, etcetera. So it weren't even the Trump wants that.
Speaker 1: They don't. They're not going to zero without a recession,
Speaker 1: so there's a normal point for them to stop. What
Speaker 1: they need to do is have the markets buy in
Speaker 1: that they're stopping, not for a bad reason, but for
Speaker 1: good reason, that the economy looks like it's gonna do better.
Speaker 1: And and if the market buys into that viewpoint, the
Speaker 1: equity market does better, the curse steepens up a little bit,
Speaker 1: and it's back to being risk on. And if the
Speaker 1: data follow through, they're not cutting again for you know,
Speaker 1: until the data tells me. I mean, in fairness, the
Speaker 1: market had already been discounting a cut until May or
Speaker 1: June of next year, right, So so basically that the statement,
Speaker 1: at least from a market perspective, seemed to be pretty
Speaker 1: much what the market was anticipating, right. And I think
Speaker 1: a few people, obviously guess you have in the market reaction,
Speaker 1: had expected them perhaps to be a little bit more devish.
Speaker 1: But it's you know, semantics and not not that big
Speaker 1: of a deal. So Ira, let's go back to this
Speaker 1: press conference that we will hear and give or take
Speaker 1: seven eight minutes when J Powell, uh takes the podium
Speaker 1: down there in Washington at the Federal Reserve because and
Speaker 1: everybody around this table knows this. Well. The stock market
Speaker 1: has generally, shall we say, not been a big fan
Speaker 1: of these press conferences in terms of it has I
Speaker 1: think in all but one meeting, Uh, there's been a
Speaker 1: sell off as J. Powell has been speaking. What is
Speaker 1: he going to be saying? What does he need to
Speaker 1: say to at least keep us kind of where we
Speaker 1: are here, which is just barely in the green. Well,
Speaker 1: I'm not sure about the I mean, for for the
Speaker 1: equity market. I suppose for all risk assets, they just
Speaker 1: want to make sure that they're nowhere near tightening and
Speaker 1: that they're gonna keep on. You know. You know, there's
Speaker 1: other things that he can hint at, too, right, So
Speaker 1: one of the there are some d davish actions that
Speaker 1: he might be asked about. So, for example, the mortgage basis,
Speaker 1: the difference between mortgage backed securities and treasuries is the
Speaker 1: widest that it's been since they for about three years, right,
Speaker 1: And so one of the things that he could hint
Speaker 1: at is, you know, if someone asked him this question,
Speaker 1: which I hope someone does, what other devish actions can
Speaker 1: you take without actually cutting He can say, well, we
Speaker 1: can start reinvestments of mortgage backed securities again, which might
Speaker 1: tighten tighten the basis right, so that could be one
Speaker 1: of the things we can buy longer term securities and
Speaker 1: basically saying we're we can start que So there's other
Speaker 1: things that they could do besides cutting rates. More So,
Speaker 1: what do you want to hear stee Blitz when j
Speaker 1: Pal speaks in seven or eight minutes, clarity of purpose?
Speaker 1: How is that meaning? What meaning? He out of me?
Speaker 1: Every day? You know? It's it's just like I think,
Speaker 1: I think, I think he's I think what you need
Speaker 1: to hear is just some plain and simple talk about
Speaker 1: what they're doing and why and and rather uh and
Speaker 1: not skip stumble over his words and get the kind
Speaker 1: of negative market reaction he's gotten in the past. Look,
Speaker 1: tenure yields are down, the housing markets responding, capital spending
Speaker 1: a little respond with the lag and all of that,
Speaker 1: and he just needs to lay out a very positive
Speaker 1: economic story. But can he do that? I mean, or
Speaker 1: do you think that there's enough there? But I think
Speaker 1: it's I think that's a little bit tricky. But when
Speaker 1: you look at you look at some of the data
Speaker 1: that I look at. For example, I have some new orders,
Speaker 1: which tends to be a very good leading indicator of
Speaker 1: a lot of other things that that looks like it
Speaker 1: may have stabilized, which is not dis similar to what
Speaker 1: happened in two thousand sixteen. So unless you start to
Speaker 1: make kind of new loads and some of that kind
Speaker 1: of data, you can argue that we're starting to stabilize
Speaker 1: the economy. And assuming it stabilizes, then it means that
Speaker 1: the Fed's probably done its job. And then you have
Speaker 1: to wait, you know, two three more months at least
Speaker 1: before you get enough data to say that, hey, the Fed,
Speaker 1: you know, needs to do more or not. And I
Speaker 1: think that that's where we would like to get the
Speaker 1: market at this point, so kind of say like, look,
Speaker 1: we're steady, let's wait until early next year, which a
Speaker 1: strong economy or decent it's not so much. I think
Speaker 1: it's the point that things are bottoming out. I mean,
Speaker 1: if you look at a lot of the manufacturing data
Speaker 1: right now the very short term, it's a little mixed
Speaker 1: up because yeah, but it's just it looks like it's
Speaker 1: stabilizing out that the household sector continues to buy the
Speaker 1: great inventory. Uh, reduction hasn't really occurred. Uh. Net exports
Speaker 1: are kind of sel so you don't see anything that's
Speaker 1: really deteriorating. And housing is starting starting to pick up.
Speaker 1: Don't we need companies though, to do capital expenditures in
Speaker 1: order to keep this economic momentum going, Like we're late
Speaker 1: in the cycle. Don't we need that? Yeah? We do,
Speaker 1: we do ultimately, but that's going to take a while
Speaker 1: because that tends to follow um. That tends to follow
Speaker 1: profits by about two quarters. So we need to turn
Speaker 1: in profits, and everything that's going on should eventually turn profits,
Speaker 1: and that becomes more of a or late twenties story
Speaker 1: than something you're gonna get over the next couple of quarters.
Speaker 1: And they know that, I mean, they'd be in the
Speaker 1: fitness So I want to ask you, you know, this
Speaker 1: whole sort of repo market question. I mean, it's been
Speaker 1: so front of mine. I mean, we've talked about the
Speaker 1: repo market on this show probably more cumulatively over the
Speaker 1: past month than we had in the previous ten years. Uh,
Speaker 1: how much do you think that will come up in
Speaker 1: the press conference? I mean, you've got Jamie Diamond talking
Speaker 1: about it, You've got the Secretary of the Treasury talking
Speaker 1: about it, like and in what context what can the
Speaker 1: FED chairmans say to sort of calm people down here. Well,
Speaker 1: for one thing, I think he could point to evidence
Speaker 1: that right now it looks like this month end is
Speaker 1: going to be just boring in terms of funding markets
Speaker 1: in a good way. And in a good way, yeah, yeah,
Speaker 1: so so so basically not they've basically provided enough liquidity
Speaker 1: to the funding markets via the repurchase agreements that they've
Speaker 1: been doing both term and overnight, that the market is
Speaker 1: not going to be significantly worried about about funding treasuries.
Speaker 1: And I think he could talk about He is probably
Speaker 1: going to talk about, you know, is there going to
Speaker 1: be a a new facility that they're gonna do that's
Speaker 1: gonna maybe be a full allotment UH overnight facility instead
Speaker 1: of them doing the the current operations which are more
Speaker 1: traditional kind of reproach agreements. I'm not sure they have
Speaker 1: do they can keep on doing what they're doing and
Speaker 1: that would work out fine. But um, but I think
Speaker 1: he's gonna be asked about that and and and a
Speaker 1: lot of the details in that, quite frankly won't come
Speaker 1: out at the press conference. Those will be things that
Speaker 1: you know will happen probably else in other forms. Maybe
Speaker 1: some good reporting by Bloomberg News reporters will elucidate some
Speaker 1: of that. I have a feeling all right, Thanks, thank
Speaker 1: you so much, Chief US Interest Rate Strategies for Bloomberg
Speaker 1: Intelligence and Steve Let's chief US economist for T. S. Lombard,
Speaker 1: both here with us in New York City, are well.
Speaker 1: Did it covers quarter point widely as expected? Its third
Speaker 1: consecutive cut this year, signal to pause in further cuts
Speaker 1: unless the economic outlook changes materially. Equity markets they are
Speaker 1: near their highs of the session, so they've certainly turned around.
Speaker 1: Rallied UH to some extent on that news, and in
Speaker 1: terms of the rate picture, I just want to recap
Speaker 1: pretty much where we were prior actually a little bit
Speaker 1: higher on the shorter into the Yeel curve, the longer
Speaker 1: end of the Yel curb, pretty much where it was
Speaker 1: prior to the FED decision. Let's get into it though,
Speaker 1: with our team here and we've got in the house.
Speaker 1: We've got Alex Harris, Bond, reporter at Bloomberg New Sorry
Speaker 1: are these people who just wanted into our studio and
Speaker 1: also with us is Josh right chief Econos and I
Speaker 1: Sims both in our Bloomberg Interactive Broker studio. Sorry, I'm
Speaker 1: looking at too many notes today, is it? J pal
Speaker 1: j Is that you know? Jason? Nice of you to
Speaker 1: join us, right, Josh, let's start with you. Would you
Speaker 1: make of a decision and the press conference, Well, we're
Speaker 1: looking for a hawk is cut and that's very much
Speaker 1: what we got with this strong bias to hold um
Speaker 1: from infect isn't it? You know, that's really what the
Speaker 1: market seems to think. But I was surprised by how
Speaker 1: explicit the chairman was. No, he didn't come out and
Speaker 1: say in exactly these words, but saying a material reassessment
Speaker 1: of our outlook is about as much of a promise
Speaker 1: as he's going to make to say, you know, we're
Speaker 1: kind of done now, all right, Alex Harris, you were
Speaker 1: on the desk amid the fevered uh, listening and analyzing
Speaker 1: a number of our colleagues weighing in with questions there
Speaker 1: Mike mckeye and Steve Matthews making his land from Atlanta
Speaker 1: to ask a question, what did you make? What was
Speaker 1: sort of catching people's attention? Where were you sort of
Speaker 1: looking around and saying, well, we're looking around that. How
Speaker 1: often the reporters in that room asked the same like
Speaker 1: a variation on the same exact question. Um. You know,
Speaker 1: one of the things I talked to people about on
Speaker 1: the desk is, you know, there's a lot of operational
Speaker 1: things that were discussed off meeting, and you know, Powell reiterated, yes,
Speaker 1: they're going to be, you know, doing Treasury bill purchases
Speaker 1: at least through the second quarter. They're doing these repo
Speaker 1: operations through the at least through January. And you know,
Speaker 1: one of the things that caught our attention, and we
Speaker 1: we pinned, you know, our team in the room and said,
Speaker 1: someone asked him, how do they expect to remove that
Speaker 1: liquidity from the market in January and not cause any
Speaker 1: sort of disturbance, you know, and Powell probably would have
Speaker 1: said something about, oh, well, our reserve levels will be
Speaker 1: kind of more normal, but that's a that's a serious question.
Speaker 1: And and the other thing that kind of caught our
Speaker 1: attention on that front is why does the Federal Reserve
Speaker 1: that has all these very intelligent economists seem absolutely bump fuzzled, puzzled.
Speaker 1: I liked as to like, why why banks didn't come in,
Speaker 1: you know, when repo writs spiked last month, and to me,
Speaker 1: it's signals that you know, they're one of the regulators
Speaker 1: of the banks, they conduct monetary policy, and yet they
Speaker 1: have no idea how the two intersect and work off
Speaker 1: of each other. And that is a little concerning for me.
Speaker 1: Deemed man. There was a stunning turnaround from just a
Speaker 1: year ago when you had Simon Potter the New York
Speaker 1: Fed saying, oh, we feel pretty good about reserve levels,
Speaker 1: We've got ways to go, and kind of like how
Speaker 1: Powell had to do the turnaround at the end of
Speaker 1: twenty team going into early twenty nineteen feeling good about
Speaker 1: rates and then suddenly, oh, maybe that was a mistake.
Speaker 1: Another big turn around that we saw, though it was
Speaker 1: look at the market reaction. This is an incredible turnaround
Speaker 1: for Chair Powell's performance. In a press conference, I mean,
Speaker 1: we were all complaining, well, I think effective the market is.
Speaker 1: You know, this is a hawkish cut, even more hawkish
Speaker 1: than I and some other people expected, and yet the
Speaker 1: market is taking it very well. A hundred and twenty
Speaker 1: four points now on the Dow Jones Industrial average. We're
Speaker 1: up about twelve points, so we're looking about point four
Speaker 1: percent higher on the SNP, almost a half a percent
Speaker 1: higher on both the TAO and the NAZAC. That is interesting.
Speaker 1: The dynamic has really changed. And he even was pretty
Speaker 1: explicit about what kinds of considerations will be looking for
Speaker 1: before they raise rates again. And I think that's probably
Speaker 1: part of why the market tickets so well because a
Speaker 1: lot of those conditions are pretty remote. Do you think
Speaker 1: inflation is gonna spike anytime soon? Do you think inflation
Speaker 1: expectations are gonna going to perk up? Because the two
Speaker 1: was yielding Okay, this is minor was yielding about one
Speaker 1: six one prior to the FED decisions, now at one
Speaker 1: fifty nine, uh five years yielding one six two is
Speaker 1: at one sixty. So we've seen a little bit of
Speaker 1: a what does that mean? I think you need to
Speaker 1: look at it more than the next of the curves,
Speaker 1: you know. And Stott Minern from Guggenheim was on Bloomberg
Speaker 1: TV after the statement was real used talking about this
Speaker 1: very effect, which is the two ten curve flattened after
Speaker 1: we got that statement, and so I think it's either
Speaker 1: you know, he was saying, it's either the front end
Speaker 1: that is repricing you know, less easy to come, or
Speaker 1: it's a market that's concerned that more stimulus is going
Speaker 1: to be needed here because we're going to hit a
Speaker 1: very you know, a slow patch for the economy, and
Speaker 1: and so that you know, flattening and the curves or
Speaker 1: something that we're going to have to keep an eye
Speaker 1: on here. Not just the outright you know, benchmark ded
Speaker 1: recession completely off the table. Now, oh wait, go ahead. Well,
Speaker 1: I was just just gonna say, I think there's also the
Speaker 1: possibility of pricing out on the tail risk of the
Speaker 1: Fed being even more hawkish today than it was, you know,
Speaker 1: I mean, yes, it was relatively explicit, but again, those
Speaker 1: conditions under which they would be raising rates seem pretty remote,
Speaker 1: and tail risk was really one of the big themes.
Speaker 1: You know. Sometimes the last questions in the press conference,
Speaker 1: you think, okay, we've heard every ready to go now.
Speaker 1: But I thought Don Lee from the l A Times
Speaker 1: really elicited an interesting comment where some we found out
Speaker 1: what is it that you think Powell has changed? And
Speaker 1: yet look you said, look it's the tail risks that
Speaker 1: are gone. We don't know what's gonna happen with trade,
Speaker 1: but we're less concerned that's going to blow up in
Speaker 1: our faces, which is I mean, I feel like trade
Speaker 1: was very much front of mind with him the last
Speaker 1: time we heard from him in this sort of setting,
Speaker 1: but also in the intervening speeches and q and a's
Speaker 1: that he's given and his colleagues have given. Are they
Speaker 1: right to be less worried? Does the bond market and
Speaker 1: do investors agree with that sentiment? Alex, I think it's
Speaker 1: just more that the trade rhetoric has become less inflammatory
Speaker 1: than it has been. I still think it's a concern.
Speaker 1: I think, you know, Brexit is still on the burner.
Speaker 1: I think trade still on the burner, but I think
Speaker 1: because the rhetoric around it has been less inflammatory, that
Speaker 1: it's not an immediate concern. You know, I do want
Speaker 1: to mention Carol. You mentioned the inflation and Powell had
Speaker 1: a comment where he said inflation seems to be settling
Speaker 1: below two percent. And Vince Saignarella, you know, my our
Speaker 1: colleague here at Bloomberg, Um, you know, we've had this
Speaker 1: discussion that it's like, oh gosh, you know, if the
Speaker 1: central banks around the world had to acknowledge that maybe inflation,
Speaker 1: like a two percent inflation target is unrealistic and inflation
Speaker 1: is just gonna end up being below there. Then it's
Speaker 1: like the jig is up. Why do you need stimulus?
Speaker 1: So then it calls into question every global central bank
Speaker 1: stimulus program if you acknowledge that inflation might never reach
Speaker 1: two percent again. And I think that's an interesting comment
Speaker 1: and something that we should really be thinking about because
Speaker 1: now we have to talk about the efficacy of the
Speaker 1: tool kits and and why are we even doing all
Speaker 1: these things in the first place if this is just
Speaker 1: where inflation is going to be settling Now about that, well,
Speaker 1: I wanted to go back to the trade point, this
Speaker 1: idea that you know, we've had played lucy with the
Speaker 1: football several times now with yes, the trade talks are
Speaker 1: on again and they're off again. I think one of
Speaker 1: the differences here in slippery football too. But we're heading
Speaker 1: into a different environment because next year is an election year,
Speaker 1: of course, so I'm sure that there are a lot
Speaker 1: of people in the market we're thinking, you know, it's
Speaker 1: a lot less likely that they're going to blow something
Speaker 1: up in an election year. That's just kind of the
Speaker 1: real politique from a market perspective right now. It's like
Speaker 1: if you're the Trump team, you know, the White House team,
Speaker 1: and you're strategizing about you've got to start thinking, Okay,
Speaker 1: what are the things that we need to come and
Speaker 1: get some closure on, even if it's a mini trade dealer,
Speaker 1: whatever the heck it is, you've got to figure it out.
Speaker 1: What you're laughing, I'm laughing because one of those things
Speaker 1: on the list, you know, we don't want to wait
Speaker 1: in there, but we're all probably thinking it, which is probably,
Speaker 1: you know, impeachment or don't get No. I think we
Speaker 1: can talk about that. I mean, no, I think that's
Speaker 1: that's absolutely true. I mean we've got the House, uh,
Speaker 1: you know, essentially exploring exactly what they're gonna do along
Speaker 1: those lines right now. I mean, when we think about
Speaker 1: what we're telling our viewers in our weekend show, we're
Speaker 1: starting to think about brexit and impeachment and not just
Speaker 1: the new economy. Just a reminder, the Fed reducing interest
Speaker 1: rates by a quarter percentage point for the third time
Speaker 1: this year, signaling a pause and further cuts unless the
Speaker 1: economic outlooks changes materially. Let's continue the conversation with our
Speaker 1: team here. Alex Harris, Bonding, reporter for Bloomberg and Josh Wright,
Speaker 1: chief economists forms both in our Bloomberg Interactive Broker studio.
Speaker 1: We kept him hanging around to get some final thoughts
Speaker 1: as we continue to synthesize digest a little bit what
Speaker 1: we heard from j Pale. So Josh right, what happens next? Like,
Speaker 1: you know, as they look at data, the f O
Speaker 1: M C. J. Powell and his colleagues, as you look
Speaker 1: at data, what are you looking for? Job stay obviously
Speaker 1: right around the corner. Yeah, that's a big deal coming
Speaker 1: up on Friday. I think the one of the things
Speaker 1: is we talk about data dependence. Which kind of data
Speaker 1: is that that's going to be focused on in a
Speaker 1: world where unemployment is already lower than the FED is
Speaker 1: actually comfortable with, inflation is pretty soft. Are they focused
Speaker 1: on real economic variables or they focus more on how
Speaker 1: the financial markets respond to them? Because a lot of
Speaker 1: it has to do with where you think, do you
Speaker 1: want your policy to be accommodative or neutral? Sounds like
Speaker 1: cha Powell wants it to be a little bit accommodative. Yeah,
Speaker 1: what's the deal with inflation? I mean, are we truly
Speaker 1: in a different environment like the jury Seinfeld question inflation?
Speaker 1: What's the deal. I don't know what do you I mean, Josh,
Speaker 1: what's the conversation do you guys having at your place?
Speaker 1: It's a lot of head scratching. You know, we've been
Speaker 1: having this conversation for a couple of years now. It's
Speaker 1: clear that there are some structural factors, you know, we
Speaker 1: work for alone to Oh it's gonna, it's gonna, it's coming,
Speaker 1: it's coming. It hasn't. I think we have to acknowledge that.
Speaker 1: You know, there's some ways in which we're going back
Speaker 1: to the old normal, but this is a way in
Speaker 1: which we do not seem to be headed backwards. Right.
Speaker 1: We've got technology changes, those are deep and long lasting.
Speaker 1: We've got demographic changes, those are deep and long lasting,
Speaker 1: and that that seems to be holding these numbers down,
Speaker 1: which actually is helpful for the FED in a lot
Speaker 1: of ways. Yeah, exactly. But I think also you have
Speaker 1: it on a from a global standpoint, and I know
Speaker 1: our BA Governor Phil Lowe makes this point quite a
Speaker 1: bit when he speaks that, you know, globalization has an
Speaker 1: impact here and that's something that I think Powell has
Speaker 1: maybe like quietly acknowledged and remarks. But I mean that
Speaker 1: is a factor as well, that it's not just about
Speaker 1: the U S. It's inflation broadly, because globalization does change
Speaker 1: the game a little bit. And despite the confidence that
Speaker 1: fed share Powell was evincing today, I think we do
Speaker 1: need to be concerned about assetprice inflation. So traditionally we
Speaker 1: worried about consumers inflation, but really it's been asset prices
Speaker 1: that have been the problem for the last two segments.
Speaker 1: If we're there yet, I mean, he was very optimistic,
Speaker 1: He said, I don't see broad problems. Yes, there's some
Speaker 1: concerns of the corporate debt market seems contained. They have
Speaker 1: like a you know, clear analytical framework that he laid out. Um,
Speaker 1: but we can't deny the fact that there's a possibility
Speaker 1: that we could simply get a shock to confidence through
Speaker 1: some kind of tumble in the stock market. I mean,
Speaker 1: how many people really feel that all those stocks out there,
Speaker 1: some of them, I mean, look at what's happened in
Speaker 1: i Pos this year. How many people really feel confident
Speaker 1: that the stock market actually what it has happened in
Speaker 1: IPOs To meet to this your kind of gives me
Speaker 1: some confidence that I feel like the capital markets have
Speaker 1: said either you're not making money so you're going to
Speaker 1: get beat up, or you're not going to come to market,
Speaker 1: or you know what I mean. Like to some extent,
Speaker 1: I feel like the markets are doing what they're supposed to.
Speaker 1: I think that's right. A little healthy popping of bubbles
Speaker 1: along the way you can can really help. We've seen
Speaker 1: that true, But it requires continued vigilance. I mean, still
Speaker 1: you've got some some companies still have some pretty optimistic
Speaker 1: evaluations out there. Yeah, that's fair. I think the other
Speaker 1: point that Joshua, you know, and going back to what
Speaker 1: Powell said about corporate debt and pimco's anti Christians, was
Speaker 1: on radio this morning with Tom Kinge and John Farrow,
Speaker 1: making this point is like the problem is there a
Speaker 1: Batman and Robin by the way, which is which is which?
Speaker 1: I don't know, but I guess this is what happens
Speaker 1: when we get ninety minutes into the FED decision on
Speaker 1: But here's the issue and anti Christians. He was making
Speaker 1: this point is that everything is well and good in
Speaker 1: corporate bonds except when you have to sell and and
Speaker 1: this is the problem though, And he was making the
Speaker 1: point that the structure of the markets has changed, and
Speaker 1: this is where he was equating kind of what happened
Speaker 1: in the money markets to what could potentially happen with
Speaker 1: the corporate bonds is that banks are no longer the
Speaker 1: intermediaris that they once were, and he said, they're now movers.
Speaker 1: They're they're not warehousing anymore. They're just trying to move
Speaker 1: inventory off their balance sheet. They don't want to have it.
Speaker 1: And so this is going to be the problem if
Speaker 1: you get waves of investors trying to sell their corporate
Speaker 1: brownhold things all at once. And and this is what
Speaker 1: that we need to be concerned about. And I think
Speaker 1: what the FEND needs to be vigilant about the law
Speaker 1: of unintended consequences. Right there, Powell said that they weren't
Speaker 1: going to take another look at regulations, but I think
Speaker 1: you just made the best argument for why they should. Yeah,
Speaker 1: she's always good to make I know she makes good recommendations.
Speaker 1: The Great round Table. I'm not saying who's Batman, who's Robin,
Speaker 1: Who's Superman? Who's wonder was that woman? It's all all
Speaker 1: one and the same, alright. Alex Harris Bond, reporter for
Speaker 1: Bloomberg gosh right, chief economists for I SAMs. I'm gonna
Speaker 1: get out while the getting is good. Journal, Yeah, but
Speaker 1: you let me drive. Oh no, no, no, no home,
Speaker 1: please revel, I want to dry ball. Just drive baby,
Speaker 1: good questions, drive to the globe that communings, We'll drive
Speaker 1: us on Bloomberg Radio. All right, it's time for the
Speaker 1: drive to the clothes. On this FED day Wednesday, David
Speaker 1: diets back with US president, chief investment officer for Point
Speaker 1: View Wealth Management, looking after about five point eight billion
Speaker 1: dollars out in Summit, New Jersey. That's where he joins
Speaker 1: us on the phone. David, Nice to have you back
Speaker 1: with us as always. Thank you so much. Jason. All right,
Speaker 1: so let's talk a little FED since it's top of mine.
Speaker 1: What did you hear? Because the market, at least the
Speaker 1: equity markets, seem to like what they heard from old JP. Well, well,
Speaker 1: certainly they complied with what the market was expecting, which
Speaker 1: was their third quarter point caught in as many months. UM.
Speaker 1: But then they talked about the future and the change
Speaker 1: of language a little bit, suggesting that we were not
Speaker 1: going to expect any time soon additional rate cuts. But
Speaker 1: when queried as to what would be the grounds to
Speaker 1: reverse rate cuts and increase, they talked about, UM, seeing
Speaker 1: more inflation, which by all accounts is not going to
Speaker 1: come anytime soon. So people like what they heard. I
Speaker 1: think the main takeaway from me was they got the
Speaker 1: rate cut, rache are going to stay low, but they
Speaker 1: didn't scare us in terms of their concerns over the economy.
Speaker 1: Perhaps goldilocks, dare I say, David, Yeah, that's what I
Speaker 1: think the market heard. Of course, that was juxtaposed with
Speaker 1: a better than expected reading on GDP. We got a
Speaker 1: one point nine percent reading today, which was um not
Speaker 1: as good as the two from two two, but better
Speaker 1: than the market expected. So that adds to that Goldilocks story.
Speaker 1: And so what do you do as an investor here, David,
Speaker 1: Because you know, we've had a nice run up here
Speaker 1: in a bun to names and sort of pretty broadly.
Speaker 1: You know, we were talking with Dave Wilson even at
Speaker 1: the top of the show and thinking about how the
Speaker 1: markets have generally been reacting. You know, sp is going
Speaker 1: to hit another record today if I'm reading my chart right,
Speaker 1: So what's not to like here or what do you
Speaker 1: especially like? Maybe it's a better way to ask. In sure, absolutely,
Speaker 1: I think longer term we're still very constructive, and I
Speaker 1: think the key metric that I continue to share with
Speaker 1: my clients is you've got to yield on the SMP
Speaker 1: of two. You've got to yield on the ten year
Speaker 1: treasury well under that at one point seven, which means
Speaker 1: over the next ten years, with dividends typically increasing and
Speaker 1: of course fixed income staying fixed, you've got a high
Speaker 1: likelihood over time of making more money in them in
Speaker 1: the market. But certainly near term, any types of headwinds
Speaker 1: could develop. Just today we heard that UM, the much
Speaker 1: vaunted meeting of of of World Monetary Chiefs and and
Speaker 1: so forth in Santiago, Chile is going to be canceled.
Speaker 1: We were hoping that we could put a bow on
Speaker 1: Phase one down there. That doesn't look likely right now,
Speaker 1: So that's potential near term volatility UM. Of course, there's
Speaker 1: still concerns over the economy abroad, particularly in Europe as
Speaker 1: they as they face and deal with Brexit UM. But
Speaker 1: you know, given the valuation tilt in favor of equities,
Speaker 1: we're focusing on areas that have lagged a little bit.
Speaker 1: And to be honest with you, Jason, we like companies
Speaker 1: that are blockbusters in their fields. You know, I go
Speaker 1: back a generation to what Jack Welch said that all
Speaker 1: the profits of every industry is made pretty much by
Speaker 1: those companies who are number one or number two. So
Speaker 1: we try and pick them out within industries that we
Speaker 1: think makes sense invest accordingly. So Budweiser and that's when
Speaker 1: that falls into that category. So I mean and iSER Bush,
Speaker 1: which is basically the merger of the Belgian InBev and
Speaker 1: of course Budweiser. Here they dominate the beer industry like
Speaker 1: if few companies any type of industry do, owning five
Speaker 1: of the top brands across the planet, um eighteen of
Speaker 1: their brands generating more than one billion in revenues. They
Speaker 1: got four nearly half of the US market, nearly two
Speaker 1: thirds of many of the markets in Brazil. But the
Speaker 1: stock is down from July. There was some weakness in
Speaker 1: Asia in terms of volumes. But at the end of
Speaker 1: the day, when there's any kind of hiccup in an industry,
Speaker 1: the biggest company can squeeze costs further, push harder on
Speaker 1: their networks. And of course those brands are not to
Speaker 1: be duplicated. And I think, while you're waiting, you've got
Speaker 1: the two and a half percent dividend, This looks good,
Speaker 1: no matter what the economic climate going forward looks. All right, David,
Speaker 1: got to ask you about Wells Fargo because I feel
Speaker 1: like we've been talking about it every time you've come
Speaker 1: to visit this or been able to call in. They
Speaker 1: got their CEO. You must be so happy, Yeah, I am.
Speaker 1: And it did get the stock above fifty um, it's
Speaker 1: spurred about ten per done in the news. It has
Speaker 1: fallen back. Of course, all the banks that even today,
Speaker 1: the banks didn't participate in the rally so much, are
Speaker 1: still grappling with these narrow net interest margins. In the
Speaker 1: amount that they're paying is a lot relative to what
Speaker 1: they can lend. That's hurting them. But again, Wells Fargo
Speaker 1: has one of the best franchises coast to coast, which
Speaker 1: gives them tremendous economies of scale in terms of distribution,
Speaker 1: in terms of branches, in terms of advertising, and I
Speaker 1: think they can make money here. Again, while you're waiting,
Speaker 1: you're collecting a four percent dividend, and recently, of course,
Speaker 1: with the lower interest rates, the re five business is
Speaker 1: perking back up, and apparently Wells fargoes getting more than
Speaker 1: its fair share of that. All right, And you also
Speaker 1: like speaking of dividends. Those pharmaceutical companies as are always
Speaker 1: a good place to go. Fiser is the one that
Speaker 1: you liked, also a huge player, and you're talking about
Speaker 1: a three point seven percent dividend exactly. You know, the
Speaker 1: biggest sales force in the world, the largest amount spent
Speaker 1: on R and D. I still don't think the market
Speaker 1: is giving them enough credit for what they have in
Speaker 1: the pipeline. I think the eight hundred pound guerilla over
Speaker 1: the industry, of course, is politics and certainly proposals as
Speaker 1: we get into the political season to radically change the
Speaker 1: health care system. But quite frankly, we have seen that
Speaker 1: movie before, and you know, certainly, I think after the
Speaker 1: candidates um, after the primaries are over and and and
Speaker 1: the candidates on the Democratic side start playing for that
Speaker 1: middle I think they'll back off some of the most
Speaker 1: radical plans and people will see its business as usual.
Speaker 1: Five is fifty two weeks forty four right now, thirty eight,
Speaker 1: collect three percent and move up another fift with one
Speaker 1: of your top healthcare companies in the world. Doesn't look
Speaker 1: so bad at the intentional We're going to talk about
Speaker 1: some of the political market plays coming up in the
Speaker 1: final hour of the show for now, We're gonna leave
Speaker 1: it there with David Deed's President, chief investment officer of
Speaker 1: Point View Wealth Management joining us on the phone from Summit,
Speaker 1: New Jersey. Love talking names with him. Thanks for listening
Speaker 1: to Bloomberg Business Week. You can subscribe to the podcast
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