WEBVTT - Markets, The Fed, And Credit Suisse (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.759 at Bloomberg dot com slash podcast Why. I read something 0:00:21.800 --> 0:00:23.720 a couple of days ago on the Bloomberg terminal that 0:00:23.760 --> 0:00:27.080 really got my attention. The author said, hey, we are 0:00:27.280 --> 0:00:30.640 or we're very close into recession already, but he says 0:00:30.800 --> 0:00:34.720 that's not all bad news. While growth slows, the FED 0:00:34.760 --> 0:00:37.360 will take notice and any pause and raid hikes will 0:00:37.440 --> 0:00:40.680 be a boon to risk assets. That got my attention. 0:00:40.720 --> 0:00:42.239 I said, we gotta get this guy on the air. 0:00:42.320 --> 0:00:46.040 Vince Signarella, global macro strategist for bloom blerg Bloomberg News 0:00:46.120 --> 0:00:48.360 joint us. I will note working from home, he has 0:00:48.479 --> 0:00:53.440 lost forever, his Metro North past, his you know, subway tokens, 0:00:53.640 --> 0:00:57.000 no nothing. It's interesting to see the juxtaposition because you 0:00:57.040 --> 0:01:01.360 have so much respect for Vince and his halls. Um, 0:01:01.520 --> 0:01:03.160 we were talking about the night he sent out the 0:01:03.640 --> 0:01:06.880 story on the other hand, you feel like he's phoning 0:01:06.880 --> 0:01:09.240 it in as someone who's working from home. He's one 0:01:09.240 --> 0:01:11.600 of the few people that I believe it's one of 0:01:11.640 --> 0:01:14.280 the few people. Yeah, I'm generally a not a fan 0:01:14.319 --> 0:01:16.000 of work from home, but there are some people that 0:01:16.040 --> 0:01:19.520 have earned it, and Vince Signarella has earned the ability 0:01:19.600 --> 0:01:21.680 to work from home, and plus he's got a great 0:01:21.680 --> 0:01:23.880 set up. Vince, talk to us about the Chicago FED 0:01:24.200 --> 0:01:27.680 National Activity Index. What did we see? Yeah, you know, 0:01:27.760 --> 0:01:30.399 it is one of the most overlooked indexes because people 0:01:30.440 --> 0:01:32.759 don't really understand it because it just kind of hovers 0:01:32.800 --> 0:01:35.840 around zero um and it's not sort of fused to 0:01:36.000 --> 0:01:38.600 the hundred that a lot of indexes are. So where 0:01:38.600 --> 0:01:41.600 you see, you know, confidence indexes at just the or 0:01:41.640 --> 0:01:44.880 below signaling recession. People don't really know what to do 0:01:44.920 --> 0:01:47.720 with the Chicago Fed. But on a quarterly basis, it 0:01:47.880 --> 0:01:50.680 is such a great indicator of g d P and 0:01:50.720 --> 0:01:53.920 when it sustains below zero, and it's just dip below zero, 0:01:54.000 --> 0:01:56.720 so it's a little too soon to tell. We need 0:01:56.760 --> 0:01:59.400 a few readings below zero for sure, but if we 0:01:59.480 --> 0:02:02.080 get them a few months and it stays below zero 0:02:02.240 --> 0:02:05.880 on that quarterly basis, it's basically signaling a recession. And 0:02:06.280 --> 0:02:07.920 you know, when you look at some of the numbers, 0:02:08.200 --> 0:02:11.800 you know the Atlanta is calling second quarter growth at 0:02:11.840 --> 0:02:16.280 minus one point six and such. You put it all together, um, 0:02:16.320 --> 0:02:18.560 it very much looks like we're already in a recession. 0:02:18.960 --> 0:02:20.960 And when you see the White House trying to walk 0:02:20.960 --> 0:02:23.480 it back and trying to change the definition of the recession, 0:02:23.880 --> 0:02:25.760 makes you feel like you know you're there. And I 0:02:25.800 --> 0:02:29.919 think the final shot off for me yesterday when Janet Yellen, 0:02:29.960 --> 0:02:33.880 Secretary Yelling called for a press conference on Thursday. When 0:02:33.919 --> 0:02:37.520 we get the GDP numbers on Thursday morning, if I 0:02:37.520 --> 0:02:39.400 had to roll the dice, I'd say she's doing that 0:02:39.520 --> 0:02:42.080 because she wants to try to walk back the fact 0:02:42.120 --> 0:02:44.760 that we're going to see a second negative growth number, 0:02:45.320 --> 0:02:47.960 um and and try to talk the market out of 0:02:47.960 --> 0:02:50.240 the fact that we're in a recession. So so we 0:02:50.840 --> 0:02:55.079 I mean, the Atlanta Fed shows the second quarter was contraction. 0:02:55.320 --> 0:02:58.519 The first quarter we know was also a contraction. Nonetheless, 0:02:58.639 --> 0:03:03.079 unemployment at three and a half percent and nominal GDP 0:03:03.520 --> 0:03:07.000 in double digits. Um, how do you how do you 0:03:07.040 --> 0:03:10.480 put those things together? Well, unemployment first of all, as 0:03:10.480 --> 0:03:12.360 a lagging indu theater so it's going to take about 0:03:12.360 --> 0:03:14.000 two or six months where it could catch up, and 0:03:14.040 --> 0:03:16.360 I think it will. UM. I think is you know, 0:03:16.360 --> 0:03:19.440 if the Fed keeps things going UM and keeps pushing 0:03:19.639 --> 0:03:22.000 the interest rate environment. I mean, look at home sales 0:03:22.040 --> 0:03:25.000 this morning, dropped precipitously and for one of the first 0:03:25.040 --> 0:03:27.919 times we've seen home sales fall in both the South 0:03:27.960 --> 0:03:30.600 and that's where Florida and Miami has been leading, and 0:03:30.680 --> 0:03:35.160 in the Northeast, which has been residient to higher mortgage rates, 0:03:35.200 --> 0:03:37.880 and a big drop in both of those areas. And 0:03:38.000 --> 0:03:41.600 you know, that's where the average consumer feels. Well. The 0:03:41.640 --> 0:03:45.080 average consumer isn't attached to the stock market. They're attached 0:03:45.120 --> 0:03:48.160 to their home, and when home prices start to fall, 0:03:48.280 --> 0:03:53.360 consumers feel poorer and the confidence drops and spending drops, etcetera, etcetera. 0:03:53.440 --> 0:03:57.000 So my point is, I think the Feds already done 0:03:57.320 --> 0:04:00.800 a substantial effort to try to slow inflation. They're gonna 0:04:00.840 --> 0:04:03.400 go seventy five basis points today because it's baked in 0:04:03.600 --> 0:04:06.480 and they'll lose credibility if they don't. UM. But I 0:04:06.520 --> 0:04:08.760 don't think they need to be too aggressive going forward. 0:04:08.840 --> 0:04:11.720 I think they need to let this play out. It 0:04:11.800 --> 0:04:15.080 takes at least six months for monetary policy to work 0:04:15.120 --> 0:04:17.320 its way through the system, and they're not giving it 0:04:17.480 --> 0:04:19.800 enough time. If they go like, you know, hell bent 0:04:20.240 --> 0:04:23.520 without waiting for it to do something and and giving 0:04:23.640 --> 0:04:27.320 the consumer and opportunity to react, all right, So then 0:04:27.400 --> 0:04:29.920 if the seventy five basis points is baked in today 0:04:30.040 --> 0:04:33.040 as the market is implying, I guess it comes down 0:04:33.040 --> 0:04:35.240 to kind of trying to read the tea leaves of 0:04:35.279 --> 0:04:37.920 the tone of the body language of FED Chairman Pal. 0:04:37.960 --> 0:04:41.240 We have Michael McKee uh from Bloomberg down there in 0:04:41.320 --> 0:04:44.320 d C today will tend the press conference. What are 0:04:44.360 --> 0:04:47.520 you looking for from FED Chairman Pal? What message do 0:04:47.560 --> 0:04:51.360 you think he should deliver? You know, I know he's 0:04:51.400 --> 0:04:53.359 going to say that we're still pushing this because we 0:04:53.400 --> 0:04:57.240 still need to find inflation. Inflation is at very high levels. Um, 0:04:57.440 --> 0:04:59.960 we don't want to you know, we don't want to 0:05:00.040 --> 0:05:03.000 back off and lose control of this. I mean to me, 0:05:03.320 --> 0:05:05.800 it's a policy error because they're just reacting to the 0:05:05.880 --> 0:05:09.640 value when they call the transitory. What I would love 0:05:09.680 --> 0:05:11.760 to hear him say is that we're you know, we're 0:05:11.839 --> 0:05:14.800 doing this to try to get FED funds rate. You know, 0:05:14.880 --> 0:05:16.960 close to the three to three and a half percent level, 0:05:16.960 --> 0:05:19.440 which is where we think inflation is going to come 0:05:19.480 --> 0:05:23.680 back to eventually, and that from this point forward, while 0:05:23.720 --> 0:05:26.240 we will be potentially raising rates to get to that 0:05:26.320 --> 0:05:28.240 three and a three and a half percent, we want 0:05:28.279 --> 0:05:30.960 to see how the economy reacts and what the data 0:05:31.000 --> 0:05:34.560 show us. And if there's a sustained drop in inflation 0:05:34.680 --> 0:05:38.360 over the next three months, that's going to effect September's 0:05:38.400 --> 0:05:42.440 policy decision, not just let's just raise another seventy five 0:05:42.880 --> 0:05:45.240 basis points in hell and high water are what the 0:05:45.279 --> 0:05:49.000 economy and doesn't want inflation numbers. Do they ditch forward guidance? 0:05:51.000 --> 0:05:53.719 I don't think they will. Um. They've been relying on 0:05:53.800 --> 0:05:57.279 that so much, and realistically I wish they would. Um. 0:05:57.320 --> 0:05:59.600 You know. I remember being at a at a money 0:05:59.640 --> 0:06:03.719 market here talk with fed's Bullard and he said, I 0:06:03.720 --> 0:06:06.520 don't know why you guys keep calling higher interest rates, 0:06:06.520 --> 0:06:08.240 and I sort of raised my hand and went, it's 0:06:08.240 --> 0:06:12.000 in your bloody dot plot if you would if you 0:06:12.040 --> 0:06:14.040 don't point it out in your dot plot, and that 0:06:14.200 --> 0:06:16.320 that's the forward guide. It's the market to reacting on. 0:06:16.400 --> 0:06:18.880 So I'd love to see the forward guidance go away 0:06:19.560 --> 0:06:22.840 and and markets trade the way they once did is 0:06:22.920 --> 0:06:25.560 based on their their own thoughts of where they think 0:06:25.440 --> 0:06:27.840 things things are going, and it would be helpful. I 0:06:28.279 --> 0:06:30.800 feel like it would be helpful. Also, then you could 0:06:30.880 --> 0:06:33.680 use the market as an input right in terms of 0:06:33.839 --> 0:06:37.520 reaction to economics. Otherwise the markets are just reacting to 0:06:37.600 --> 0:06:42.279 what they expect from the Fed. Vincinerello, global macro strategist 0:06:42.440 --> 0:06:45.119 for Bloomberg News joining us read his stuff I highly 0:06:45.120 --> 0:06:48.280 recommended on the Bloomberg terminal. He's making a case that yeah, 0:06:48.320 --> 0:06:49.960 maybe we're in a recession, but that just means the 0:06:50.040 --> 0:06:52.640 FED can be a little cautious and that's good for 0:06:52.920 --> 0:07:02.839 risk assets. Well, my good friends like Credit Suisse, they're 0:07:02.880 --> 0:07:08.560 replacing their CEO Thomas Gotstein. Got Stein, thank you very much. 0:07:08.560 --> 0:07:10.040 Who was the reason I'm going to ask you from work? 0:07:11.760 --> 0:07:14.760 So he's resigning after a two year tenure mark by scandal, 0:07:14.760 --> 0:07:20.000 turmoil and huge losses Shownalie Bassett, I get that right. Yes, 0:07:20.840 --> 0:07:24.080 that's not where my expertise lies. All morning long, I've 0:07:24.080 --> 0:07:26.560 heard people say, Gottstein, you're not the first, and you 0:07:26.560 --> 0:07:30.080 won't be the scot Stein. If it's an e I 0:07:30.600 --> 0:07:34.640 in German it's always I and also Stein means stone, 0:07:34.800 --> 0:07:37.320 so it's never Steen unless the person came to America 0:07:37.600 --> 0:07:39.960 through l Well, anyways, he's on his way out. He's 0:07:39.960 --> 0:07:42.920 on his way out. Who's coming in a corner? Did 0:07:42.960 --> 0:07:46.480 I say that correctly? Yes? Okay, pretty much. He is 0:07:46.520 --> 0:07:49.800 going to be taking over his chief executive officer of Remember, 0:07:49.880 --> 0:07:52.960 this is a bank that has lost about of its 0:07:53.000 --> 0:07:56.440 stock market value this year. This is a tiny bank 0:07:56.480 --> 0:08:00.200 these days. It's fifteen billion dollars in market a TENCNY 0:08:00.280 --> 0:08:03.800 little zombie. Teen little zombie. It's got it's it's also 0:08:03.840 --> 0:08:09.600 got results out. The worst trading performance this century is 0:08:09.640 --> 0:08:11.760 how Donald Griffin of Bloomberg puts it, which is, you know, 0:08:11.760 --> 0:08:14.080 it sounds dramatic, and it is because again their macro 0:08:14.200 --> 0:08:16.960 had been going on. But other European banks are able 0:08:17.000 --> 0:08:19.920 to hold up some results, but they're also zombies. By 0:08:19.920 --> 0:08:22.880 the way, can we just rewind for a second. You care, Paul, 0:08:22.960 --> 0:08:26.360 You care about Credit Sweets because you used to work 0:08:26.400 --> 0:08:29.800 for the correct CB. You listen, guys, Credit Sweez is 0:08:29.840 --> 0:08:31.640 still one of the biggest wealth managers in the world, 0:08:31.920 --> 0:08:35.480 and so to kind of chip away at this firm 0:08:35.640 --> 0:08:38.400 is a really interesting thing. You have Morgan Stanley interesting 0:08:38.480 --> 0:08:41.040 and during wealth management of City Group trying to get bigger, 0:08:41.040 --> 0:08:43.600 and wealth management you have, and both of those firms 0:08:43.600 --> 0:08:45.600 have huge investment banks already. Well did you think about 0:08:45.600 --> 0:08:47.800 Credit sweee is just a few years ago? Like my 0:08:47.840 --> 0:08:49.880 account has been with Credit Swiss ever since I worked there. 0:08:50.559 --> 0:08:53.719 They got out of the US wealth management business just 0:08:53.960 --> 0:08:58.000 when Morgan Stanley and everybody else was ramping looked around, 0:08:58.200 --> 0:09:00.079 like why would you get out of a business that 0:09:00.200 --> 0:09:04.840 has low capital allocation steady returns only Credit Swiss wood Well, 0:09:05.000 --> 0:09:08.360 not not because they wanted to. They had regulatory issues 0:09:08.400 --> 0:09:10.960 here in the United States which really pushed them out 0:09:10.960 --> 0:09:12.720 of the United States. And so if you look at 0:09:12.880 --> 0:09:16.960 what's happened over the last couple of decades here for 0:09:17.000 --> 0:09:21.160 Credit Swiss is a series of regulatory issues, um and 0:09:21.280 --> 0:09:24.800 mishaps with major clients, most recently Archagos and Green Cell. 0:09:25.240 --> 0:09:27.719 Remember it was just before the pandemic that they were 0:09:27.840 --> 0:09:31.880 ramping up their trading business. They were hiring from major 0:09:32.000 --> 0:09:36.360 rivals across Wall Street, both and trading and investment banking. 0:09:36.559 --> 0:09:39.480 Sale and I don't know the Swiss politics about you 0:09:39.559 --> 0:09:42.480 might know of UBS and Credit Swiss ever getting together 0:09:42.520 --> 0:09:46.240 because yeah, that's for no other reason, just to get bigger. Well, 0:09:47.600 --> 0:09:50.320 then you leave Switzerland with one major bank, right right, 0:09:50.360 --> 0:09:53.360 So it's a complicated question. I think the Swiss government 0:09:53.400 --> 0:09:55.959 is always liked the two. They wanted to protect the two, 0:09:55.960 --> 0:09:58.319 which is why they have such strict capital requirements out 0:09:58.320 --> 0:10:01.280 of Switzerland, some of the toughest in the world. And 0:10:01.600 --> 0:10:03.680 you look at it now and the question about Credit 0:10:03.679 --> 0:10:06.400 Sweets getting bought to save it is a real question. 0:10:06.440 --> 0:10:09.120 The question is whether the UBS merger makes sense or 0:10:09.160 --> 0:10:12.960 whether a different company like a Deutsche Bank or a 0:10:12.960 --> 0:10:16.840 Morgan Stanley, which is not all that likely from all 0:10:16.840 --> 0:10:19.400 of my reporting over the years, but it's something that 0:10:19.520 --> 0:10:21.920 is pan European making more sense for from the Credit 0:10:21.920 --> 0:10:23.800 Sweez People talk about it a lot, but I think 0:10:23.800 --> 0:10:26.440 you're right, not gonna happen. The Swiss government does not 0:10:26.559 --> 0:10:28.240 want that to happen. They want to keep them. They 0:10:28.240 --> 0:10:30.240 want to keep two banks. Look, you don't want to 0:10:30.240 --> 0:10:34.520 be reliant on one, as the German UH natural gas 0:10:34.559 --> 0:10:37.439 situation illustrates. You don't want to be relying on one 0:10:37.480 --> 0:10:43.160 supplier um And also cross border European bank mergers just 0:10:43.280 --> 0:10:45.719 not gonna happen right now. That could happen eventually, but 0:10:45.800 --> 0:10:49.440 probably not another nation picking up credit st banks do 0:10:49.559 --> 0:10:52.199 turn around. Look at Deutsche Bank for example, they shrunk 0:10:52.240 --> 0:10:54.480 to grow and now they're at a place where they're 0:10:54.520 --> 0:10:58.000 performing better and trading and investment banking they're taking on 0:10:58.160 --> 0:11:00.439 less risk. That is what Credit wants to do. Listen, 0:11:00.440 --> 0:11:02.960 it's such an interesting thing because this business model change 0:11:02.960 --> 0:11:04.440 has been talked about for as long as I've been 0:11:04.480 --> 0:11:06.760 on the beat. This is nine years that you know, 0:11:06.880 --> 0:11:11.080 UBS has made this change capital light trading desks for 0:11:11.120 --> 0:11:14.680 the most part, only having investment banking to serve the 0:11:14.720 --> 0:11:17.720 wealth clients. And that's what Credit Swiss now wants to do. 0:11:17.840 --> 0:11:20.360 Now can they pull it off as they're losing so 0:11:20.440 --> 0:11:23.160 much talent? That's the question, all right, what do we 0:11:23.200 --> 0:11:29.120 know about this? Ulric Kerner Kerner our Bloomberg's Marion Halfdemeyer 0:11:29.280 --> 0:11:33.960 calls him a fixer, so he has he has a 0:11:34.080 --> 0:11:37.559 reputation for being technical, decisive, remember credits. We's just presented 0:11:37.559 --> 0:11:41.120 a plan to investors under Thomas Scott Stegn. We were 0:11:41.160 --> 0:11:44.640 talking about it um about the way they would move forward. 0:11:44.840 --> 0:11:50.200 So can he create a more precise laser sharp playbook? 0:11:50.240 --> 0:11:52.600 Here and her reporting is interesting. I mean, he's just 0:11:52.640 --> 0:11:56.959 a formal former US UBS. Guy Kerner, who is currently 0:11:57.000 --> 0:12:00.319 Credit Swiss as asset management has spent twenty years at 0:12:00.320 --> 0:12:03.240 the largest Swiss firms, UBS and Credit Swiss, and the 0:12:03.320 --> 0:12:08.680 musical chairs between UBS and Credit Swiss is consistently interesting, right, interesting, 0:12:08.720 --> 0:12:11.400 So all right, it's more change at Credit Swiss. I 0:12:11.440 --> 0:12:13.320 guess that's yeah. And God's tigned, by the way, just 0:12:13.440 --> 0:12:16.840 came in at the beginning of the pandemic right February. 0:12:17.120 --> 0:12:20.359 He wasn't responsible for our ark goes, he wasn't responsible 0:12:20.400 --> 0:12:23.600 for green sill. But it's like every quarter there's a 0:12:23.640 --> 0:12:25.920 profit warning. He just can't turn it around. Why didn't 0:12:25.920 --> 0:12:27.680 he just do a kitchen sink thing and get it 0:12:27.720 --> 0:12:30.400 all out of the way. I think that's the hope now, yeah, 0:12:30.640 --> 0:12:33.840 for sure. Alright, Just you know, you think about Swiss banking, 0:12:34.200 --> 0:12:37.760 you want to think stability, and you don't necessarily get that. 0:12:38.000 --> 0:12:40.240 I like, I like to think secrecy too, but they 0:12:40.240 --> 0:12:41.640 don't do that anymore. You'd like to think that, like 0:12:41.679 --> 0:12:44.240 the Born Identity, that that kind of stuff is a great, 0:12:44.400 --> 0:12:47.240 great scene and I mean obviously an awesome movie. I 0:12:47.280 --> 0:12:52.800 also like that you think about art I think about 0:12:52.840 --> 0:12:55.400 you know, secret money stashes and all that kind of 0:12:55.440 --> 0:13:03.719 good stuff, and you know international intrigue. It is fed Day, 0:13:03.880 --> 0:13:05.920 but that's a big day here at that Bloomberg. It's 0:13:05.920 --> 0:13:08.360 like Draft Day for ESPN. True if Draft Day were 0:13:08.400 --> 0:13:10.760 once a month. Yeah, exactly. So we're all in, and 0:13:10.760 --> 0:13:13.360 we're all in. That means we get Danielle di Martino 0:13:13.440 --> 0:13:16.839 booth here in our Bloomberg Interactive Broker studio. Danielle CEO 0:13:16.880 --> 0:13:19.880 and chief strategists at Quill Intelligence also spent some time 0:13:19.920 --> 0:13:23.280 at the Federal Reserve and some don't town down in 0:13:23.320 --> 0:13:26.839 Texas or something big, the big book. I love the title, 0:13:26.880 --> 0:13:29.920 will still love the title of your book, fed up exactly. 0:13:29.960 --> 0:13:31.960 That kind of gets you there, all right. Lots of 0:13:32.040 --> 0:13:34.920 ECO data on their terminal E c O go for 0:13:35.040 --> 0:13:37.040 you kids out there with the Bloomberg terminal. One of 0:13:37.040 --> 0:13:39.360 the things that just jumped out of as Danielle pointed 0:13:39.360 --> 0:13:41.160 out as he was coming into the studio, pending home 0:13:41.200 --> 0:13:46.400 sales month on month minus eight point six percent. Census 0:13:46.760 --> 0:13:52.239 was minus one percent. Housing had been such an economic stalwart, 0:13:52.360 --> 0:13:56.280 daniel What about the year over year depending home minus 0:13:56.400 --> 0:14:00.600 ninth YEP minus twenty Louise census were did you sell 0:14:00.640 --> 0:14:02.559 your house? You bought you. I've bought my house that 0:14:02.800 --> 0:14:05.400 literally the top of the market. The only thing that 0:14:05.400 --> 0:14:07.600 makes me feel okay is that I've got a decent 0:14:07.640 --> 0:14:10.360 mortgage rate and you're gonna be there for twenty years. 0:14:10.360 --> 0:14:12.720 You did notice in the retail inventories data that auto 0:14:12.760 --> 0:14:16.120 and auto parts drove the train there at three the 0:14:16.120 --> 0:14:20.000 car is coming, I hope. So from from your mouth 0:14:20.040 --> 0:14:23.840 to Mary Mary Barry, Mary Barry yesterday warned about economic 0:14:23.840 --> 0:14:27.520 conditions weakening. I just wanted the one chip they need 0:14:27.520 --> 0:14:30.440 for my Silverado. Put it in the truck and then 0:14:30.520 --> 0:14:32.240 ship it to me. That's all I want. So what 0:14:32.280 --> 0:14:34.240 does the housing data? What does the eco data? Danielle 0:14:34.280 --> 0:14:37.040 kind of tell you. So, look housing, since we're actually 0:14:37.080 --> 0:14:41.360 talking about the two sectors that lead economies consistently, in 0:14:41.440 --> 0:14:45.520 and out of expansions and contractions, housing and autos always 0:14:45.560 --> 0:14:47.600 take the lead. Those are just the rules of ECO 0:14:47.640 --> 0:14:51.640 one oh one. Because housing has tentacles, right, It affects consumption, 0:14:51.760 --> 0:14:54.040 If it affects what you put in houses, it affects 0:14:54.040 --> 0:14:56.280 your sentiment. If you start hearing people who have been 0:14:56.280 --> 0:14:57.920 all excited my house price is going up this much, 0:14:57.920 --> 0:15:00.480 blah blah blah. Now they're like my house price way up. 0:15:00.520 --> 0:15:03.680 My my property taxes are through the roof, and sales 0:15:03.680 --> 0:15:05.720 are cratering, so you're not as happy anymore. You're not 0:15:05.760 --> 0:15:08.920 going to buy as much stuff. So it has ripple 0:15:08.960 --> 0:15:10.720 effects throughout the rest of the economy. And I think 0:15:10.720 --> 0:15:12.200 that that's what we need to be paying attention to. 0:15:12.240 --> 0:15:15.480 Outside of the spike down that we saw during during COVID, 0:15:15.880 --> 0:15:18.120 this is the lowest data that we've seen since after 0:15:18.160 --> 0:15:21.800 the financial crisis, after the housing bubble burst. By the way, 0:15:21.880 --> 0:15:25.240 my my property taxes, I could put my kid through Harvard. Yes, 0:15:25.480 --> 0:15:28.120 with my property taxes. It's insane. But you're going to 0:15:28.160 --> 0:15:32.120 see property tax foreclosures for older Americans on fixed incomes 0:15:33.160 --> 0:15:36.600 own their homes right terrifying and and I I know 0:15:36.680 --> 0:15:38.360 so many people now have been trying to sell their 0:15:38.400 --> 0:15:41.720 houses but they can't because nobody can get our wants 0:15:41.760 --> 0:15:44.600 to get a mortgage for six percent at these prices, 0:15:44.680 --> 0:15:48.520 and financing is falling through, and new home sales you're 0:15:48.560 --> 0:15:53.000 hearing about cancelations with every single home home. Speaking of cancelations, 0:15:53.040 --> 0:15:55.120 I really want to get to forward guidance. The Fed 0:15:55.240 --> 0:15:58.840 decides today, and yes it's every month, but it's really 0:15:59.040 --> 0:16:02.680 more excitingly lead than it had been for a while. Um, 0:16:02.720 --> 0:16:05.360 not only do we expect seventy five basis points, maybe 0:16:05.400 --> 0:16:09.880 even a hundred, but they could ditch forward guidance. Is 0:16:09.920 --> 0:16:13.440 that a possibility? It's like taken away the pacifier. Yeah, 0:16:13.480 --> 0:16:15.440 it really is. I mean and and as I was 0:16:15.480 --> 0:16:17.680 saying before we went on the air, to me, this 0:16:17.720 --> 0:16:21.000 indicates a lower strike price on the FED poot and 0:16:21.120 --> 0:16:23.160 it means to me that that markets are going to 0:16:23.200 --> 0:16:25.320 be much more reactionary because they're going to assume that 0:16:25.360 --> 0:16:27.520 the FED is going to be much more reactionary to 0:16:27.600 --> 0:16:31.760 the data rather than like one ludes. So because that 0:16:31.880 --> 0:16:36.720 forward guidance implies, it implies a calmness no matter what happens. 0:16:36.720 --> 0:16:39.120 And this is what we plan to do, and we're 0:16:39.120 --> 0:16:41.880 gonna stick to our word, or we're gonna follow leg 0:16:41.840 --> 0:16:44.600 guard down the rabbit hole and get rid of it. Daniel. 0:16:44.680 --> 0:16:45.880 Earlier in the show we had it. We had a 0:16:45.920 --> 0:16:47.960 trader type on and he was kind of making the 0:16:48.040 --> 0:16:52.040 trading call that you know, recession, if we're not in it, 0:16:52.080 --> 0:16:54.200 we're darned close to it. And that's going to give 0:16:54.280 --> 0:16:57.400 reason for the FED to be more cautious going forward. 0:16:57.440 --> 0:17:00.760 That's a positive for risk assets. That was his trading call. 0:17:00.880 --> 0:17:03.320 That's the FED put. Okay, how does that's the assumption 0:17:03.360 --> 0:17:06.240 that the FED put is intact? And we get any 0:17:06.280 --> 0:17:09.560 sense of that today from so I need to pay attention. 0:17:09.800 --> 0:17:12.240 I still think off course, so but I have to 0:17:12.240 --> 0:17:14.560 pay atten well basically, But it's not popular. But I 0:17:14.600 --> 0:17:17.720 think Powell is determined to push through in September. Yeah, 0:17:17.880 --> 0:17:22.760 because going against this is his desire not to be 0:17:22.960 --> 0:17:26.359 and Arthur Burns repeat exactly, he would rather be a 0:17:26.400 --> 0:17:31.280 Paul Volker exactly. That was always his idol. He loved, 0:17:31.640 --> 0:17:35.880 loves Paul Volker. Who doesn't don't didn't We all love 0:17:35.880 --> 0:17:39.399 Paul Volker? But the giant to the extent that he 0:17:39.480 --> 0:17:42.159 can without breaking credit, and you have not seen this 0:17:42.240 --> 0:17:46.160 massive gapping out in how yield spreads to indicate distresses 0:17:46.200 --> 0:17:49.919 like systemic watch out to the extent he doesn't break credit. 0:17:49.960 --> 0:17:52.119 I think he keeps going. I think Powell keep I 0:17:52.119 --> 0:17:54.119 think he goes on September twenty one. So what do 0:17:54.160 --> 0:17:56.879 you think a terminal rate? We're talking about four? I 0:17:56.920 --> 0:18:01.720 heard we've been Tryinhart was saying he thinks five percent 0:18:01.880 --> 0:18:04.600 or more. An unemployment at six percent, now that's an outlier. 0:18:04.800 --> 0:18:08.560 Pending home sales down, you're over your I don't think so. Okay, 0:18:08.640 --> 0:18:11.120 not happening. It'll break the economy. Two and a half 0:18:11.400 --> 0:18:15.359 broke the economy before the crisis. So what do you think? Three? 0:18:16.080 --> 0:18:18.480 And I think we may get to a three handle. 0:18:18.560 --> 0:18:21.960 But again, we've got two trillion dollars more in corporate 0:18:21.960 --> 0:18:26.399 debt than we had last time he attempted this. While cute, 0:18:26.560 --> 0:18:30.440 nobody's talking about quantitative tightening, it's still going on, it 0:18:30.720 --> 0:18:33.840 still ramping up. It's oh my gosh. The conspiracy theorists 0:18:33.840 --> 0:18:36.640 on my Twitter feed are making me nuts. Look, there 0:18:36.680 --> 0:18:39.840 are two dates in which treasuries mature, fifteen of the 0:18:39.880 --> 0:18:42.560 month and the last day of the month. So if 0:18:42.600 --> 0:18:44.439 if there's kind of some some kind of noise in 0:18:44.480 --> 0:18:47.480 between some week, it's because treasuries didn't mature. Get over it. 0:18:47.880 --> 0:18:50.840 What's your Twitter handle? By the way, at DeMartino booth, 0:18:50.840 --> 0:18:55.560 Now you're gonna send more crazy social media. I look 0:18:55.560 --> 0:19:00.080 at I'm looking at euro dollar futures um and to 0:19:00.119 --> 0:19:02.199 see what the market thinks the Fed is going to do. 0:19:02.400 --> 0:19:05.399 And I've been pointed this direction by Kevin Muir. The 0:19:05.440 --> 0:19:09.160 macro tourists love his stuff. Um, he sees a peek 0:19:09.280 --> 0:19:11.520 or euro dollar future show as a peek at around 0:19:11.520 --> 0:19:13.920 three e D and then they come right back down 0:19:14.480 --> 0:19:16.800 in twenty three and twenty four. Is that what we're 0:19:16.800 --> 0:19:19.680 going to see? It depends on who Powell is. That's 0:19:19.680 --> 0:19:22.480 the FED put, right, that is the Fed put, and 0:19:22.600 --> 0:19:25.720 markets are anticipating that already. That's what we're seeing in 0:19:25.760 --> 0:19:27.840 the stock market right now. They're anticipating that rates are 0:19:27.880 --> 0:19:31.359 coming down in twenty three and quickly. And you think 0:19:31.880 --> 0:19:35.600 maybe not so much. Just look, there's a midterm election 0:19:35.640 --> 0:19:37.439 in front of us, there really is, and there's no 0:19:37.520 --> 0:19:40.520 fiscal relief coming. And Powell really does want to prove 0:19:40.640 --> 0:19:44.280 his his medal. He wants to take back his reputation. 0:19:44.320 --> 0:19:47.639 He wants to undo the transitory sin. But does he 0:19:47.760 --> 0:19:50.240 want to make sure that the Democrats don't get too 0:19:50.280 --> 0:19:53.200 slaughtered in the mid terms? I mean, last check, he's 0:19:53.240 --> 0:19:56.240 a Republican, so yeah, so, and he's like the only 0:19:56.240 --> 0:19:58.879 one on the whole board, and he wants to prove 0:19:59.000 --> 0:20:01.600 he's got the veto the ultimate detail power. He wants 0:20:01.680 --> 0:20:05.480 to exert his his his his control over his board, 0:20:05.560 --> 0:20:08.119 and I think he is Wow, alright, good stuff. I 0:20:08.119 --> 0:20:10.800 mean we get Danielle DiMartino booth In Studio brings the 0:20:10.880 --> 0:20:14.600 A game every time. Well, and it's an incredibly dramatic time, right, 0:20:15.920 --> 0:20:17.879 I'm like, oh my gosh, every bit of data, very 0:20:17.880 --> 0:20:20.920 exciting economic geeks, interest rate geeks, we got them here. 0:20:21.080 --> 0:20:24.200 Daniel D. Martino, Booths CEO and chief strategist at quill 0:20:24.320 --> 0:20:26.760 In Intelligence, joining us life here in our Bloomberg Interactive 0:20:26.760 --> 0:20:29.880 Broker studio. The FED released two pm Wall Street Time 0:20:30.200 --> 0:20:33.080 press conference two thirty Wall Street Time. Of course, Bloomberg's 0:20:33.080 --> 0:20:37.840 complete coverage starting at one thirty pm Wall Street Time. 0:20:37.880 --> 0:20:43.960 We cover it because it's important. So it's kind of 0:20:44.040 --> 0:20:47.600 mid June. We've had interest rates pullback really substantially when 0:20:47.600 --> 0:20:49.879 I got the tenure down at two point seven six percent. 0:20:49.920 --> 0:20:52.320 We've had the S and P five you know, rally 0:20:52.440 --> 0:20:55.560 abound eight percent during that time, and so you know, 0:20:55.720 --> 0:20:58.240 kind of dumb money like me, I'm saying, do I 0:20:58.359 --> 0:21:00.639 buy this thing? Is it a dead cat bounce? What 0:21:00.680 --> 0:21:03.240 do I do here? And I know other people are 0:21:03.240 --> 0:21:07.400 out there like me asking those questions, and hopefully Katerina Simonetti, 0:21:07.440 --> 0:21:09.960