WEBVTT - Fed Should Cut Rates Now: Narayana Kocherlakota 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.640 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.319 at Bloomberg dot com. You know, Lisa, the market's just 0:00:20.520 --> 0:00:22.240 you're just kind of looking at They were holding onto 0:00:22.239 --> 0:00:24.240 some gains here just a few minutes ago. Then they 0:00:24.280 --> 0:00:26.640 just rolled over. We've got the SMP down twenty and 0:00:26.680 --> 0:00:29.080 the Dow off two hundred. They were again for that 0:00:29.120 --> 0:00:31.680 first hour of the market kind of holding those small 0:00:31.720 --> 0:00:34.360 gains but uh not enough. Yeah, we're looking right now 0:00:34.440 --> 0:00:36.760 than has dacked down in tens of a percent, really 0:00:36.880 --> 0:00:40.680 tanking around. Uh you know, ten fifteen ten ten am. 0:00:40.760 --> 0:00:43.160 Would try to figure out what the catalyst was there, 0:00:43.280 --> 0:00:46.400 which headline it was for everyone to push the cell button. 0:00:46.400 --> 0:00:48.200 I'd sell it's a perfect set up for next guest. 0:00:48.400 --> 0:00:52.599 Narianna cultural Lakota, former Minneapolis Fed president and Bloomberg opinion columnists, 0:00:52.680 --> 0:00:54.520 is also the professor of economics at the University of 0:00:54.600 --> 0:00:58.760 Rochester based in Rochester. Now, Rihanna, you wrote a really 0:00:58.840 --> 0:01:02.760 interesting column for or Bloomberg just yesterday kind of talking 0:01:02.800 --> 0:01:06.039 about how the FED should be aggressive not wait, maybe 0:01:06.080 --> 0:01:08.760 think about some pre emptive rate cuts to kind of 0:01:08.760 --> 0:01:11.560 get ahead of this coronavirus. I guess the question is 0:01:11.880 --> 0:01:14.280 would that even help? Would that matter given how low 0:01:14.360 --> 0:01:18.160 rates are right now? Oh yeah, and thanks for having 0:01:18.200 --> 0:01:21.520 me on. Actually, I think given how low rates are 0:01:21.680 --> 0:01:25.240 right now, I'll really um makes the case even stronger 0:01:25.280 --> 0:01:29.600 for a preemptive move. UM. You know the basics thinking 0:01:29.640 --> 0:01:33.600 about UM let's emerged the last ten to fifteen years 0:01:33.640 --> 0:01:36.440 about what central banks should do when they're so close 0:01:36.440 --> 0:01:38.160 to the zero or bround, that is, when they're so 0:01:38.200 --> 0:01:40.920 close to being odd of tools, is to try to 0:01:41.000 --> 0:01:44.280 keep the economy as healthy as possible when faced with 0:01:44.319 --> 0:01:48.600 the risk of a downturn or adverse shock. And I 0:01:48.600 --> 0:01:51.800 think the coronavirus is exactly an example that My benchmark 0:01:51.840 --> 0:01:56.080 outlook is one where UM, the the U S economy 0:01:56.320 --> 0:02:00.240 remains resilient, but there's downside risk, and the FED should 0:02:00.560 --> 0:02:03.639 I think the very sensitive that downside risk, given given 0:02:03.680 --> 0:02:07.000 how low rates are already, meaning given how little ammunition 0:02:07.040 --> 0:02:09.760 they have. Um, they really should be moving right now 0:02:09.800 --> 0:02:12.560 to try to keep the economy as healthy as possible. Ariana, 0:02:12.600 --> 0:02:15.000 I just want to bring you this because we did 0:02:15.040 --> 0:02:18.239 note a real rollover in equity markets, and I asked 0:02:18.240 --> 0:02:21.080 Men Signerella, our macro strategist here at Bloomberg, and he 0:02:21.200 --> 0:02:24.120 was saying, there are a number of headlines about the virus, 0:02:24.120 --> 0:02:27.320 the coronavirus, hitting mainland Spain and Barcelona, as well as 0:02:27.320 --> 0:02:30.920 in Switzerland. So this idea that it's becoming more widespread 0:02:30.960 --> 0:02:34.640 throughout the euro continent. I'm just wondering, from your perspective, 0:02:35.120 --> 0:02:37.360 the fact that this makes the case even more for 0:02:37.520 --> 0:02:40.560 the Federal Reserve to cut rates. What will that actually do, 0:02:40.800 --> 0:02:43.760 given the fact that it won't necessarily make people more 0:02:43.800 --> 0:02:45.760 incentivized to go out and spend money. I mean, if 0:02:45.760 --> 0:02:49.959 they're just pulling up and trying not to get sick. Uh. No, 0:02:50.240 --> 0:02:54.639 I think that what you you do by um, by 0:02:54.639 --> 0:02:58.519 cutting rates is uh in the in the in the 0:02:59.120 --> 0:03:01.799 US is special. I think what you see when we've 0:03:01.800 --> 0:03:04.840 seen the last couple of days is flights to save havens. 0:03:04.960 --> 0:03:08.000 What that ends up doing is uh, the U S 0:03:08.080 --> 0:03:10.080 dollar is one of those safe havens. It pushes up 0:03:10.080 --> 0:03:12.440 the value of the dollar. And even if the US 0:03:12.520 --> 0:03:16.480 itself ends up not being affected greatly by the coronavirus, 0:03:16.800 --> 0:03:20.080 that appreciation of the dollar pulls the FED further away 0:03:20.080 --> 0:03:25.440 from its goals of UM two percent inflation. On the 0:03:25.480 --> 0:03:28.760 employment front, UH, if we can, if we by cutting rates, 0:03:28.760 --> 0:03:32.000 the FED can get more Americans to spend. That offsets 0:03:32.080 --> 0:03:34.720 the falling demand for US goods and services that we 0:03:34.760 --> 0:03:38.119 will be seeing from overseas. So I think that this 0:03:38.200 --> 0:03:40.360 is all about trying to keep the U s economy 0:03:40.360 --> 0:03:44.320 as healthy as possible. Given this. Uh, given this negative shock, 0:03:44.680 --> 0:03:49.400 would fiscal stimulus be a better option um than more 0:03:49.520 --> 0:03:53.040 rate cuts? Do you think? Well? You know, I'm completely 0:03:53.040 --> 0:03:56.400 supportive of what I heard from FED speakers last week 0:03:56.880 --> 0:04:00.560 who were putting out the case for Look, the FED 0:04:00.640 --> 0:04:03.320 doesn't have that many tools in the in the toolkit, 0:04:03.920 --> 0:04:08.080 so physical policy should be ready to roll if we 0:04:08.080 --> 0:04:12.600 were to get into, um a recessionary state or a 0:04:12.600 --> 0:04:17.320 negative negative demand shock of some kind. UM. I don't 0:04:17.320 --> 0:04:20.800 think Congress is in that situation right now, but I 0:04:20.839 --> 0:04:24.840 certainly agree with my former FED colleagues who were laying 0:04:24.839 --> 0:04:28.120 out this case that, look, the FED only has a limited, 0:04:28.480 --> 0:04:33.800 limited tool kit would be great if physical policy UM 0:04:34.000 --> 0:04:36.479 it was clearly going to step in to make up 0:04:36.520 --> 0:04:39.400 for that slack. Marianna, I would say that the bond 0:04:39.400 --> 0:04:42.919 market currently agrees with you that the Federal Reserve will 0:04:43.040 --> 0:04:46.960 or should be cutting rates potentially even three times by 0:04:47.000 --> 0:04:50.440 early next year, although perhaps disagrees in that there is 0:04:50.480 --> 0:04:53.119 a very dimnimous chance that they're going to cut rates 0:04:53.279 --> 0:04:56.120 on the March eighteenth meeting. The great cuts really are 0:04:56.200 --> 0:04:59.200 priced in to begin in June. I'm just wondering what 0:04:59.240 --> 0:05:02.800 you said about incentivizing consumers to spend. Is that sort 0:05:02.839 --> 0:05:06.920 of the last tool because we're not necessarily seeing corporations 0:05:06.960 --> 0:05:10.359 borrow that much more despite record low borrowing costs. Is 0:05:10.400 --> 0:05:13.880 it really aimed at the consumer levering up to go 0:05:13.960 --> 0:05:19.920 buy cars or microwaves or whatever else. Yeah, I mean, uh, 0:05:21.120 --> 0:05:25.160 we incentivized consumers to buy UM through monetary policy, partly 0:05:25.200 --> 0:05:29.360 through by making borrowing cheap, but also by making savings unattractive. 0:05:29.440 --> 0:05:32.479 So through both of those instruments, you're trying to incentivized spending. 0:05:33.080 --> 0:05:37.640 I've been disappointed by investment on the on the corporate side. 0:05:37.680 --> 0:05:42.880 I'm I'm not alone in that. Uh, that's really, um, 0:05:42.920 --> 0:05:46.320 you need some notion of I think better expectations about 0:05:46.360 --> 0:05:49.840 the long run than than the corporations appear to have, 0:05:50.560 --> 0:05:53.960 either in the US or in Europe, or in in 0:05:54.160 --> 0:05:58.599 China and Japan. I think that um it's long run 0:05:58.680 --> 0:06:03.960 diminished expectations are really keeping the lid on on corporate evolve. 0:06:04.160 --> 0:06:05.960 With all due respect, though, I have to wonder if 0:06:05.960 --> 0:06:10.039 you say that in making savings less advantageous, does that 0:06:10.120 --> 0:06:12.880 just push people into risk your assets, risk your debt 0:06:12.920 --> 0:06:17.120 that's already treating at highly elevated prices, into equities that 0:06:17.240 --> 0:06:22.440 already are at historically high levels. There's going to be 0:06:22.480 --> 0:06:24.560 some of that on the there's someone set it to 0:06:24.600 --> 0:06:26.719 do that. Although as you just pointed out, I mean 0:06:27.360 --> 0:06:32.159 equities are very expensive, um Um, So that that that 0:06:32.160 --> 0:06:35.280 that the fact that equities are so expensive should say 0:06:35.279 --> 0:06:38.200 to people, look, UM, I don't want to buy stocks. 0:06:38.279 --> 0:06:40.680 I might as well spend my money instead. So I 0:06:40.680 --> 0:06:44.400 think on on the margin, UM, all of this is 0:06:44.440 --> 0:06:47.000 on the margin, you are going to be able to 0:06:47.040 --> 0:06:51.599 stimulate spending and that will generate higher employment and um 0:06:52.000 --> 0:06:55.919 keep the FED closer to it's it's in inflation target. 0:06:56.760 --> 0:06:59.920 So it's interesting now Jana, the FED open market can 0:07:00.040 --> 0:07:02.839 mid he holds its next meeting March or eighteen. Do 0:07:02.839 --> 0:07:05.120 you think they will wait till then or do you 0:07:05.120 --> 0:07:10.200 think they will act preemptively? Well, um, my column was 0:07:10.240 --> 0:07:13.120 a should column. It wasn't the scription what the Fed 0:07:13.160 --> 0:07:17.360 will actually do? Um? So I I thought that the 0:07:17.360 --> 0:07:21.360 Fed should move preemptively. I don't anticipate that they will. Um. 0:07:21.480 --> 0:07:25.600 I share the skepticism that they will move in in March. 0:07:25.720 --> 0:07:28.880 I I think the Feeding yet again, has boxed itself 0:07:28.920 --> 0:07:31.880 into a quarter by saying, look, things are great, We're 0:07:31.880 --> 0:07:36.240 not gonna We're in a great position, and it means 0:07:36.320 --> 0:07:39.560 that by locking themselves in, by talking so much about that, 0:07:40.080 --> 0:07:42.320 it means a loss of face, a loss of quote 0:07:42.360 --> 0:07:45.280 unquote credibility of some kind for them to start to move, 0:07:45.360 --> 0:07:48.080 to move right in either direction. We're speaking with Marianna 0:07:48.120 --> 0:07:51.920 Kutula Quota, former Minneapolis FED President, professor of economics at 0:07:51.920 --> 0:07:55.560 the University of Rochester, a Bloomberg opinion columnist, about his 0:07:55.680 --> 0:07:59.720 column that called for a preemptive rate cup by the 0:07:59.720 --> 0:08:02.640 FED to reserve. We should just mention that right now 0:08:03.040 --> 0:08:06.200 we are seeing a sell off inequities, although off earlier 0:08:06.320 --> 0:08:10.040 lows after starting the day positive with the losses led 0:08:10.280 --> 0:08:12.760 by the SMP down a little bit more than six 0:08:12.760 --> 0:08:16.280 tenths of a percent. Arianna, I'm curious about the actual 0:08:16.320 --> 0:08:19.040 fundamental US economy in the state of it. We got 0:08:19.080 --> 0:08:21.960 some p m MY data on Friday that how to 0:08:22.040 --> 0:08:25.720 do with services in particular, that highlighted a degree of 0:08:25.800 --> 0:08:30.560 weakness that was really unexpected by economists and market players alike. 0:08:30.640 --> 0:08:33.440 I'm wondering what you make of that. Is there perhaps 0:08:33.679 --> 0:08:37.600 less momentum behind the US consumer than some people expect. 0:08:39.760 --> 0:08:42.080 I think they're, you know, as usual when you read 0:08:42.120 --> 0:08:45.480 the tea leaves. I think there's some some strong positives 0:08:45.520 --> 0:08:52.280 of the labor market remains a real source of good news. UM. 0:08:52.320 --> 0:08:54.400 On the other hand, UM market tends to be a 0:08:54.400 --> 0:08:57.040 little bit backward looking at Maybe there's things you can 0:08:57.080 --> 0:09:00.000 see that that are more forward looking at that, UM 0:09:00.320 --> 0:09:03.400 give you cause, would give ones cause for concern. My 0:09:03.440 --> 0:09:07.920 own benchmark outlook is remains that. UM. You know, I'd 0:09:07.920 --> 0:09:10.160 like to see more growth, but I think we're gonna 0:09:10.360 --> 0:09:15.200 see about two growth in this year. UM. That point, though, 0:09:15.400 --> 0:09:18.400 is when you're making policy, it's really not so much 0:09:18.440 --> 0:09:20.560 about your benchmark outlook as it is about the risks 0:09:20.600 --> 0:09:24.000 that outlook. And that's especially true when you're as close 0:09:24.040 --> 0:09:25.920 as you are to the zeroal are abound. All right. 0:09:26.000 --> 0:09:28.360 So just last thing, you know, we're always thinking about 0:09:28.480 --> 0:09:31.440 this feed is being data dependent. I wonder what day 0:09:31.520 --> 0:09:33.400 do you think they might be looking at now as 0:09:33.440 --> 0:09:35.760 it relates to the coronavirus. That might be a little 0:09:35.800 --> 0:09:41.000 different than what they've done in the past. Yeah, I mean, 0:09:41.040 --> 0:09:45.439 I I think that's a tough question. I you know, 0:09:45.559 --> 0:09:47.880 I think that one of the things I'll be looking at, 0:09:47.960 --> 0:09:51.160 I suspect is what's going on in markets. I think 0:09:51.240 --> 0:09:55.559 that you see UM fear in markets, you see the 0:09:55.600 --> 0:09:59.319 imprint of fear in markets, and UM that fear is 0:10:00.000 --> 0:10:01.679 be a drag on the economy. And so I think 0:10:01.720 --> 0:10:03.720 that the FED will be looking at that in terms 0:10:03.760 --> 0:10:08.040 of actual hard numbers on on on the economic front. 0:10:08.800 --> 0:10:10.760 I really hope they don't wait to see those. And 0:10:10.920 --> 0:10:14.640 I think last year they moved it away. UM. Their 0:10:14.720 --> 0:10:17.400 their interest rate cuts were less motivated by what was 0:10:17.600 --> 0:10:19.720 going on in the economy as opposed to a perception 0:10:19.760 --> 0:10:22.839 of risk the economy. That's exactly what I'm urging in 0:10:23.200 --> 0:10:25.719 the context of the coronavirus as well, and I hope 0:10:25.760 --> 0:10:28.480 they do that. Um. As I said, they again, I 0:10:28.559 --> 0:10:31.719 feel like they've used language to box themselves into a 0:10:31.840 --> 0:10:34.440 corner where it's hard. They're going to find it hard. 0:10:35.000 --> 0:10:36.960 They're gonna feel that it's hard for them to move 0:10:37.320 --> 0:10:40.760 interest rates either up or down. Naranna cultural Lakota, former 0:10:40.800 --> 0:10:43.480 Minneapolis Fed President, Thank you so much for being with us. 0:10:43.840 --> 0:10:46.840 Uh Naryana is a professor of economics at the University 0:10:46.880 --> 0:10:56.560 of Rochester and a Bloomberg opinion columnist. Paul, we really 0:10:56.640 --> 0:11:00.320 noticed a market turnaround from what had been a positive 0:11:00.360 --> 0:11:02.240 start to the day. Yeah. And I think, as you 0:11:02.320 --> 0:11:05.559 mentioned earlier, it looks like seeing some reporting of some 0:11:05.679 --> 0:11:08.200 cases you know now not just Italy, but perhaps Spain 0:11:08.320 --> 0:11:10.920 as well. Um. And so I think that just raises 0:11:11.000 --> 0:11:13.600 the concerns that a lot of investors have about how 0:11:13.720 --> 0:11:15.720 much of a potential is this to be a global 0:11:15.800 --> 0:11:19.760 pandemic which could impact global GDP. And I think that's 0:11:19.800 --> 0:11:22.319 kind of the risk we're seeing in the bond market. Um. 0:11:22.640 --> 0:11:24.800 You know, yields grinding lower in than the equity markets 0:11:24.880 --> 0:11:27.040 rolling over here. Yeah, this is just to be very clear, 0:11:27.120 --> 0:11:29.559 the who has not the World Health Organization has not 0:11:30.040 --> 0:11:32.679 deemed this yet. A pandemic, it is required that an 0:11:32.720 --> 0:11:36.880 international agency like that give it that designation. However, we 0:11:37.040 --> 0:11:39.920 are seeing it spread beyond the borders of China and 0:11:40.040 --> 0:11:43.920 Japan and Korea, uh and Italy now to Switzerland, which 0:11:43.960 --> 0:11:47.640 is confirmed and also reports in Spain as well. The 0:11:47.720 --> 0:11:50.120 question is do you buy this dip? And Jim Pulson, 0:11:50.240 --> 0:11:53.319 chief investment strategistic Luthhold Group, has been watching closely and 0:11:53.440 --> 0:11:58.840 joins us now on the phone, Jim, do you buy here? Well? 0:11:59.640 --> 0:12:03.280 I uh, I think if you've been underweighted dramatically, you 0:12:03.400 --> 0:12:05.559 might want to buy a little bit. But otherwise I 0:12:05.640 --> 0:12:08.679 think I'd stand pat here and let the let the 0:12:08.800 --> 0:12:12.439 fear sort of burn itself out here, uh for a 0:12:12.559 --> 0:12:15.800 few more days. You know. I think the coronavirus was 0:12:15.920 --> 0:12:18.719 the catalyst here, but I think this market would have 0:12:18.800 --> 0:12:22.119 found some catalyst. I mean, we've just had a tremendous 0:12:22.240 --> 0:12:25.719 run over the last year, and really we have not 0:12:25.880 --> 0:12:28.920 had a tempera set correction. We certainly could have here 0:12:29.000 --> 0:12:32.920 who knows, um, and that would not be at all 0:12:33.480 --> 0:12:37.439 you know, uh surprising. Probably at some point would have 0:12:37.480 --> 0:12:41.079 found some catalysts to do that. Um. You know, and 0:12:41.160 --> 0:12:44.000 when you have these Steve drops. You know, the fear 0:12:44.080 --> 0:12:50.280 really escalates and the stories get get pretty scary. Uh personally, 0:12:50.360 --> 0:12:54.199 who knows. I'm no pandemic expert by any means, so 0:12:54.800 --> 0:12:57.679 it could be a horrific outcome. I don't really know, 0:12:58.480 --> 0:13:02.640 but odds I think strong only favor that probably this 0:13:03.520 --> 0:13:07.400 epidemic will will start to fade a little bit here 0:13:07.960 --> 0:13:11.719 over the next several months, and and probably a lot 0:13:11.800 --> 0:13:16.120 of the spending that has been paused because of this, 0:13:16.520 --> 0:13:19.760 like in places like China, will catch up. And I 0:13:19.840 --> 0:13:23.199 still think that's the most likely outcome. It's not shocking 0:13:23.320 --> 0:13:25.480 to me that we have incidents in other parts of 0:13:25.480 --> 0:13:27.880 the world. Heck, we had long before last week. We 0:13:28.000 --> 0:13:30.440 had incidents here in the United States and several other 0:13:30.480 --> 0:13:34.000 places in the world, so we knew, uh it was spreading. 0:13:34.559 --> 0:13:37.560 I just I'll be surprised, though, to some extent, if 0:13:37.559 --> 0:13:40.920 it gets nearly as bad elsewhere as it did in China, 0:13:41.000 --> 0:13:43.599 simply because China, you know, that was the outbreak and 0:13:43.679 --> 0:13:45.400 no one really knew what it was, and no one 0:13:46.120 --> 0:13:49.120 expected that it was as bad as it was. Everywhere 0:13:49.679 --> 0:13:52.280 knows what this is from a standpoint that it's serious, 0:13:52.880 --> 0:13:56.520 and you know before it even gets bad, they've taken majors. 0:13:56.559 --> 0:13:59.800 I think that makes a difference, UM, where people have 0:14:00.040 --> 0:14:03.719 some warning to this as opposed to when it broken China. UM. 0:14:04.120 --> 0:14:07.120 So I you know, who knows, but you've never known 0:14:07.240 --> 0:14:09.719 these things. But I think underneath this, going into this 0:14:10.640 --> 0:14:15.880 UM coronavirus, we had an up tick in world economic growth. 0:14:16.000 --> 0:14:21.320 Manufacturing was recovering around the world, growth in general was recovering. UM. 0:14:21.680 --> 0:14:24.160 We had r I s M pop backup of fifty. 0:14:24.200 --> 0:14:27.280 We had the s M and China pop backup of fifty. 0:14:27.760 --> 0:14:30.880 Right now, economic surprises have been on the positive side 0:14:31.520 --> 0:14:35.280 in most places around the world, including China, Emerging World, 0:14:35.360 --> 0:14:38.840 in the United States. So we had positive momentum going 0:14:38.920 --> 0:14:41.480 into this, which I think is a very good thing, 0:14:41.680 --> 0:14:45.200 as opposed to negative momentum that we might have had 0:14:45.360 --> 0:14:48.760 last year of this hit. Ye. I certainly don't know, 0:14:48.960 --> 0:14:52.800 but but I would try to avoid uh, you know, 0:14:53.080 --> 0:14:56.720 panicking here. I think this whole is more a correction 0:14:56.800 --> 0:14:58.520 than the end of the cycle. Just to give you 0:14:58.560 --> 0:15:02.200 an update. Right now, all three major US equity indusicries 0:15:02.240 --> 0:15:06.160 down nearly one percent as Spain isolates a thousand people 0:15:06.600 --> 0:15:10.080 at an island hotel with the concern that there could 0:15:10.120 --> 0:15:14.520 be the spread of coronavirus, Switzerland confirming its first case. Meanwhile, 0:15:14.560 --> 0:15:16.720 you're seeing in the bond market thirty year yields down 0:15:17.200 --> 0:15:21.080 uh to new loads of one point eight percent at 0:15:21.120 --> 0:15:24.760 one point seven percent now actually uh, and you're seeing 0:15:25.000 --> 0:15:29.120 rate cut bets increasing, with a lot of people speculating 0:15:29.200 --> 0:15:33.000 the FED could cut rate three times by the beginning 0:15:33.000 --> 0:15:35.320 of next year. That's exactly where I wanted to go, Lisa, Jim, 0:15:35.600 --> 0:15:39.080 what do you think the FED should do could do? Uh? 0:15:39.400 --> 0:15:44.120 In response to some of the concerns that the coronavirus. Well, 0:15:44.320 --> 0:15:47.760 you know, it's uh, the market continues to go down. 0:15:48.400 --> 0:15:50.040 You know, I think the FED will probably come in 0:15:50.160 --> 0:15:53.120 and with the rate cut. Um. You know what does 0:15:53.160 --> 0:15:56.520 that do though, Well, I think it doesn't do much 0:15:56.560 --> 0:15:59.880 directly fundamentally um that we've already done. But I take 0:16:00.120 --> 0:16:03.360 does help confidence to some degree. One thing it would 0:16:03.400 --> 0:16:05.760 do is help take the inversion out of the yield curve, 0:16:06.480 --> 0:16:10.600 which would help Wall Street confidence to some degree. I think, Um, 0:16:11.000 --> 0:16:13.800 you know, I I also think so that in many 0:16:13.880 --> 0:16:17.800 ways that coronavirus is you know, the understanding of the 0:16:17.920 --> 0:16:20.800 story here, that's the narrative. I really think a big 0:16:20.920 --> 0:16:23.520 part of what's going on is is the bond market 0:16:23.640 --> 0:16:26.680 and the fact that the thirty year yield broke to 0:16:26.800 --> 0:16:29.880 new lows last week and the ten year is doing 0:16:30.000 --> 0:16:33.080 so now or is very close. I think that's scaring 0:16:33.120 --> 0:16:36.840 a lot of traders and investors more even than the coronaviruses. 0:16:37.600 --> 0:16:40.600 Is the breakdown and yields. What what does the bond 0:16:40.640 --> 0:16:43.080 market know that the stock market doesn't and and the 0:16:43.200 --> 0:16:47.240 fields break low below those levels? Is our yields in 0:16:47.280 --> 0:16:49.960 the United States headed negative? Like here's here's here's the 0:16:50.000 --> 0:16:52.080 sort of condundrum. Right. A lot of people say that 0:16:52.240 --> 0:16:54.680 the lower yields go on bonds in the United States, 0:16:54.960 --> 0:16:57.880 the more of a relative valuation case there is for equities. 0:16:58.040 --> 0:17:00.760 And yet there is this sort of confidence factor where 0:17:00.760 --> 0:17:04.719 if bond yields head south, price up, yield down, especially 0:17:04.800 --> 0:17:07.440 at these levels, it indicates a flight to safety and 0:17:07.480 --> 0:17:11.040 a fear trade that makes people risk averse. So which 0:17:11.200 --> 0:17:12.960 is it, right? I mean, which signal can you get 0:17:13.080 --> 0:17:15.760 that you're getting a better relative valuation and equities the 0:17:15.840 --> 0:17:18.720 lower that yields go, or that the bond market is 0:17:18.760 --> 0:17:20.560 telling you something kind of scary that you keep you 0:17:20.560 --> 0:17:24.240 away from risk assets well, the bond market has been 0:17:24.280 --> 0:17:29.280 telling is you know, uh, something scary for really since 0:17:29.359 --> 0:17:32.680 the end of two thousand eighteen, and it's also told 0:17:32.760 --> 0:17:35.320 us something scary in two thousand sixteen, and it also 0:17:35.400 --> 0:17:37.720 told us something scary in two thousand eleven and two 0:17:37.760 --> 0:17:40.600 thousand thirteen. I mean, the bond market has been telling 0:17:40.640 --> 0:17:44.639 a scary story throughout this bowl market and uh, you know, 0:17:45.240 --> 0:17:47.400 it hasn't really been right in a lot of those. 0:17:47.480 --> 0:17:49.119 Now it could be right at some point, there's no 0:17:49.200 --> 0:17:51.520 doubt about that. But the fact that we've got a 0:17:51.560 --> 0:17:53.720 scary story coming from the stock market is nothing new 0:17:53.840 --> 0:17:57.080 in the last decade um, where it's been professionally setting 0:17:57.119 --> 0:18:02.400 new lows and suggesting something sinis or is underneath the surface. Um, 0:18:02.840 --> 0:18:05.040 and we're doing that again. But you know, we did 0:18:05.119 --> 0:18:07.480 that at the end of the last manufacturing recession in 0:18:07.600 --> 0:18:10.560 two thousand sixteen as well, and the yields are about 0:18:10.600 --> 0:18:13.240 where they were, you know, and following it at this 0:18:13.400 --> 0:18:16.200 point then as well. So it's hard to know. I mean, 0:18:16.600 --> 0:18:19.560 the bottomark could be right, I'm not saying that, but 0:18:19.720 --> 0:18:21.720 it's not. It's not like this is a one off 0:18:21.760 --> 0:18:25.000 event that's never happened before. The bond market has been uh, 0:18:25.240 --> 0:18:29.119 you know, yelling fire for quite some time. Um, and 0:18:29.920 --> 0:18:32.119 you know who knows who who is right. I just 0:18:32.280 --> 0:18:35.040 think it connotes fear more than anything else right now. 0:18:35.760 --> 0:18:39.359 And to me, I wouldn't necessarily run from that. I'm 0:18:39.400 --> 0:18:41.520 not sure i'd buy into it. I'd let's see a 0:18:41.600 --> 0:18:43.960 few days, see if this can find a bottom, But 0:18:44.680 --> 0:18:48.880 I wouldn't necessarily panic along with everyone else. Hey, Jim, 0:18:48.920 --> 0:18:51.480 thanks so much for joining us. We appreciate your thoughts 0:18:51.520 --> 0:18:54.000 and commentary. Jim Paulson, Chief investment STRATEGI just for the 0:18:54.080 --> 0:19:11.600 Lithhole Group, joining us on the phone from Minneapolis. Presidential 0:19:11.640 --> 0:19:15.440 election is ramping up, and the concern remains from seen 0:19:15.560 --> 0:19:19.200 about the vulnerability of the campaigns and of the election 0:19:19.280 --> 0:19:24.840 itself to outside influences, most notably certainly from from Russia. 0:19:24.880 --> 0:19:26.280 To get a sense of kind of where we are 0:19:26.359 --> 0:19:30.080 today versus, we welcome Admiral James Turvidas. He's a columnist 0:19:30.119 --> 0:19:33.640 for Bloomberg Opinion, retired U S. Navy admiral and of course, 0:19:33.800 --> 0:19:37.040 former military commander of NATO. Adams Strevidis. Thank you so 0:19:37.160 --> 0:19:39.680 much for joining us. We know you are busy. Let's 0:19:39.720 --> 0:19:44.159 start with the presidential election. Clear evidence that the election 0:19:44.400 --> 0:19:48.440 was influence, was hacked by the Russians. Is that risk 0:19:48.680 --> 0:19:55.679 still there today? In the entire U S intelligence community, 0:19:55.800 --> 0:19:59.560 all seventeen elements of it had attested to that in 0:19:59.680 --> 0:20:04.239 front of Congress, most recently in a somewhat controversial briefing. Uh. 0:20:04.440 --> 0:20:06.840 It is clearly a threat. And I'll give you three 0:20:07.000 --> 0:20:12.000 quick things we got to focus on. One is local manipulation, 0:20:12.160 --> 0:20:16.200 actually going in and trying to work on balloting procedures. 0:20:16.320 --> 0:20:19.520 This is perhaps the most undefended portion of this that 0:20:19.600 --> 0:20:23.240 won't be manifest until November. Of course. Number two is 0:20:23.880 --> 0:20:27.760 going after the campaigns the way the Russians did in 0:20:29.320 --> 0:20:35.200 getting into emails, revealing insider detail to embarrass and deter campaigns. 0:20:35.600 --> 0:20:38.800 And then number three what you alluded to, Paul, attempting 0:20:38.920 --> 0:20:43.600 to influence the campaigns by getting on social media social networks, 0:20:43.680 --> 0:20:48.280 creating thoughts that drive social media campaigns. So there are 0:20:48.560 --> 0:20:51.879 layer upon layer of ways in which Russia, Ken and 0:20:52.000 --> 0:20:56.240 I would suspect, will try and attack these elections. Admiral, 0:20:56.320 --> 0:21:00.920 given your experience within the military and the the security 0:21:01.040 --> 0:21:05.360 forces all around, how good is our defense to these 0:21:05.440 --> 0:21:09.680 types of attacks now? Compared to two thousand sixteen. At least, 0:21:09.720 --> 0:21:12.640 I wish I could say it's, uh, it's much much better. 0:21:13.359 --> 0:21:16.560 I cannot. I would say that we are somewhat better 0:21:16.760 --> 0:21:19.639 because our technology and our tools coming out of the 0:21:19.720 --> 0:21:24.840 National Security Agency n s A are better, Our big 0:21:25.200 --> 0:21:31.400 banks are financials are telecom have improved. And then thirdly, 0:21:31.560 --> 0:21:35.480 a plus is that we're more aware of the threat 0:21:35.560 --> 0:21:39.159 than we were in But having said all of that, 0:21:40.119 --> 0:21:45.040 I would say our defenses are a C plus at best. 0:21:45.560 --> 0:21:47.600 I wouldn't say they are going to get us in 0:21:47.720 --> 0:21:51.440 a or even to be and you know, in elections, 0:21:51.560 --> 0:21:54.159 that's our democracy. You only want to get an A 0:21:54.280 --> 0:21:58.480 grade on the conduct of your democracy. So ad were 0:21:58.520 --> 0:22:00.320 one of the things that's been a theme for the 0:22:00.600 --> 0:22:04.680 Trump administration is generally not supportive of major parts of 0:22:04.760 --> 0:22:08.159 our intelligence community and apparatus, and you know, constant attacks 0:22:08.240 --> 0:22:11.560 on individuals as well as the UH the entities themselves 0:22:12.320 --> 0:22:16.080 have those as that position by the administration materially weakened 0:22:16.520 --> 0:22:19.199 US defenses as it relates to UM, you know, kind 0:22:19.200 --> 0:22:25.960 of cybersecurity and just overall intelligence UH support it has, unfortunately, 0:22:26.160 --> 0:22:29.960 and it manifests in two different ways. Paul One is 0:22:30.440 --> 0:22:35.600 internally it's extremely discouraging to the intelligence community when they're denigrated, 0:22:35.680 --> 0:22:39.359 dilluded a moment ago to a brief being done behind 0:22:39.440 --> 0:22:43.480 closed doors, classified briefing up on the Hill, conducted by 0:22:43.760 --> 0:22:49.280 the intelligence community about concerns of the election coming forward. Um, 0:22:49.520 --> 0:22:53.200 this was attacked by the president. That's not helpful. If 0:22:53.240 --> 0:22:55.560 the president has views on this, you have to get 0:22:55.640 --> 0:22:59.000 behind closed doors with the intelligence community. But um, it 0:22:59.200 --> 0:23:03.480 starts to buckle the morale inside the intelligence community when 0:23:03.520 --> 0:23:06.240 they perceive they're being attacked by the commander in chief. 0:23:06.560 --> 0:23:10.840 And then secondly, our allies are partners and our friends 0:23:10.880 --> 0:23:14.720 are watching this, and even worse, the Russians are watching this, 0:23:14.920 --> 0:23:17.880 and the Chinese and the Iranians and the North Koreans, 0:23:18.800 --> 0:23:23.960 and it gives them more license, more optimism that they 0:23:24.040 --> 0:23:26.919 can intrude in these elections if they see a split 0:23:27.560 --> 0:23:32.399 between the executive branch and the intelligence community itself. So uh, 0:23:32.560 --> 0:23:35.679 not helpful. I wish the President would take his concerns, 0:23:36.440 --> 0:23:39.879 which may be legitimate at times, do it behind closed doors, 0:23:39.920 --> 0:23:42.360