Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
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Speaker 1: YouTube search Bloomberg Global News. We'll get a perspective on
Speaker 1: the economy and certainly an update on monetary policy, because
Speaker 1: tomorrow this time we will have had the fourth f
Speaker 1: o MC decision of the year, the student meetings. Some
Speaker 1: have likened it that it could be fed Chief J.
Speaker 1: Powell's Vulcar moment, So let's get more on that. Francis
Speaker 1: Donald is an economist and strategist for Manual Life Investment Management.
Speaker 1: Francis joins us on the phone from Montreal this afternoon. Francis,
Speaker 1: how are you, I mean, I'm busy. Yeah. Taken in
Speaker 1: a lot of data. Well, thank you for taking the
Speaker 1: time to join us. Yeah, and it's only Tuesday, but
Speaker 1: I'm also really excited for this FED meeting. I think
Speaker 1: it's it's going to be one obviously one to watch.
Speaker 1: So here's my first question to Francis fifty. You know
Speaker 1: I'm not going to fight it. Uh, the said has
Speaker 1: somehow I've never seen this in my career, engineered in
Speaker 1: monetary policy shocks during a blackout via news channels. Uh,
Speaker 1: sometimes you just have to go with the flow and
Speaker 1: these things. Seventy five basis points looks like it's priced in,
Speaker 1: but that's not what I'm watching for tomorrow. What I
Speaker 1: want to see is one of the things either uh,
Speaker 1: any information about just how high we're gonna go this
Speaker 1: year and whether we're simply bringing in front loading all
Speaker 1: those hikes in uh. And then also any sort of
Speaker 1: notions from said chirp Howell about whether he's concerned about
Speaker 1: recession risk. We've seen this from some other central bankers.
Speaker 1: What does the unemployment rate look on those summary of
Speaker 1: economic projection? Because it is possible we get seventy five
Speaker 1: basis points, but there's a nod to downside risks which
Speaker 1: we haven't seen yet for a while, and I think
Speaker 1: those are going to be more relevant for a lot
Speaker 1: of this market than the twenty five basis point variation
Speaker 1: we could see. All right, so Francis, I still love
Speaker 1: talking with you. Um, what I wanted to say is
Speaker 1: on the Bloomberg terminal on this flag day is also
Speaker 1: a story that traders are betting the FED will cut
Speaker 1: rates after Steve hikes. Uh. You know, I do feel
Speaker 1: right that there is. It's not too soon to be
Speaker 1: talking about the FED cutting rates, No, of course not.
Speaker 1: I mean the average time between the last hike and
Speaker 1: the first historically has been eight months. We're in a
Speaker 1: compressed cycle. So that's what my team did today. We saw, okay, well,
Speaker 1: we had a more steady rate hikes cycle that had
Speaker 1: a curse steepiter in it. Were reassessing that and thinking,
Speaker 1: you know what, maybe this is a said that is
Speaker 1: more comfortable front loading a significant amount of hips into two.
Speaker 1: But I'm only going to add that into my forecast.
Speaker 1: Is it comes with uh coupour. And I gotta tell you,
Speaker 1: I've been on the road with us some long term
Speaker 1: investor clients over the past couple of weeks, and you'd
Speaker 1: be surprised how many of them are asking me about
Speaker 1: what the next easing cycle looks like. And that's not
Speaker 1: for me that we are now Almost every model that
Speaker 1: you look at is going to tell you growth is
Speaker 1: real darn low in recession or not. We gotta start
Speaker 1: talking about what the implications are for the next three years.
Speaker 1: And the bond market is thinking about that now. I
Speaker 1: wonder if you're opening act with Jim Bullard as you
Speaker 1: were on the road, because Jim Bullard is at this
Speaker 1: point I gotta be saying, I got this right. I've
Speaker 1: been talking about this for a long time. Um. Interesting,
Speaker 1: So can the markets deal with We've had a lot
Speaker 1: of whiplash already, you know, put pandemic, everything falls off
Speaker 1: a cliff, lots of stimulus, everything bounces back in a
Speaker 1: big way. You know, we're seeing another drop off a cliff,
Speaker 1: high rates. I mean, is this just what we need
Speaker 1: to get through until we get to some sort of
Speaker 1: normalcy again? Will things start to then settle down? Because
Speaker 1: because the supply chain in inflation, that stuff the FED
Speaker 1: can't fix. They can certainly reduce demand, but they can't
Speaker 1: fix that stuff overnight. The issue is that you know,
Speaker 1: at the beginning of the year, I certainly felt like
Speaker 1: the SAID tug of war was going to be between
Speaker 1: inflation and jobs. And we're running all thet charts that
Speaker 1: we have now on unemployment and looks like you're going
Speaker 1: to see a rise and unemployment, but the magnitude of
Speaker 1: which we're not sure of. So the initial call that
Speaker 1: I had at the beginning of the year was that
Speaker 1: the SAID is going to have to focus on the
Speaker 1: second part of their mandate. And yet what's occurring right
Speaker 1: now is not a SAID that's concerned about a rise
Speaker 1: and unemployment. In fact, it looks like they're intentionally engineering one.
Speaker 1: But avoiding a financial accident is going to become very
Speaker 1: relevant here. I look at credit. I mean, we have
Speaker 1: I do ets that are at the same levels they
Speaker 1: were in when we had massive SAID action. Now it's
Speaker 1: more orderly, and that's an important distinction here. But we're
Speaker 1: looking at a spect that the tug awar the SAID
Speaker 1: fields right now. It's not inflation versus employment, but actually
Speaker 1: inflation versus making sure they're sufficient liquidity and no financial
Speaker 1: accident ahead. What would that financial accident look like? Oh,
Speaker 1: at this point, you know, it's never what hits you
Speaker 1: between your eyes. It's what hits you in the back
Speaker 1: of your head. But we do need to watch some
Speaker 1: liquidity and the bond market. We do need to watch for,
Speaker 1: you know, disorderly type of moves that happen across asset classes.
Speaker 1: These are all things that need to be monitoring. And
Speaker 1: some of the tools that the SAID has at its
Speaker 1: disposal are things that we've been discussing in the last
Speaker 1: few days that we may see some sort of need
Speaker 1: to protect certain areas of the market ahead. And this
Speaker 1: is really the SAID. The challenge is how do they
Speaker 1: tighten financial conditions and an orderly fashion. I don't have
Speaker 1: particularly high hopes. Um does it bother you that about
Speaker 1: the bond and stock market are trading in cahoots if
Speaker 1: you will, and just got about thirty seconds the correlations
Speaker 1: are positive, is of course very challenging in the outset
Speaker 1: allocations space, so you to extend your investment horizon. But
Speaker 1: I do believe that the equity market has priced in
Speaker 1: a good amount of the growth slowdown we're heading into.
Speaker 1: What hasn't is the bond market. And every time the
Speaker 1: seat is hyped into a more difficult economic environment, we've
Speaker 1: seen raids. Ultimately declined, So do expect the stock bond
Speaker 1: correlation to turn negative again sometime in the next few months,
Speaker 1: maybe not tomorrow. Don't tell the rest of my guests,
Speaker 1: but you really were my favorite interview already for the
Speaker 1: day because I think so important, so much, you had
Speaker 1: to help. Nobody else is listening, Sorry, everybody. Francis Donald,
Speaker 1: she's economist strategist at Manual Life Investment Management. On the
Speaker 1: phone from Montreal. This is Bloomberg Business Week with Carol
Speaker 1: Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: She has the key to surviving a bear market, so
Speaker 1: just stop what you're doing. We've got the answers. This
Speaker 1: story from our Bloomberg Business Week team found online EP,
Speaker 1: Bloomberg dot com, slash Business Weekend on the Bloomberg We're
Speaker 1: talking about Susan Suzanne Wholly, personal finance reporter for Bloomberg
Speaker 1: near She is with us right now in the Bloomberg
Speaker 1: Interactive Brokers Studio. Follow her on Twitter at wealth Watch.
Speaker 1: All right, Susanne, the key deep breaths right class that
Speaker 1: we should all do. Yes, it's financial yoga, but it's
Speaker 1: also about assessing your risk. It is I mean, it's
Speaker 1: now is a good time to just like you said,
Speaker 1: take a deep breath, look at your portfolio that I'm
Speaker 1: supposed to It's not true like inertia is sometimes really
Speaker 1: helpful and investing because from doing anything too crazy. So
Speaker 1: we're supposed to look at it. We're supposed to open
Speaker 1: it up, look at it after market hours. Okay, look
Speaker 1: at it after market hours. Wipe away the tears and
Speaker 1: then what I have a few quiet sobs and then
Speaker 1: you know, just take a hard look and think, see
Speaker 1: where you are. You know, do you have It's so
Speaker 1: easy to have gotten overexposed to text stocks obviously, because
Speaker 1: that's what's driven the market. It's been momentum driven market
Speaker 1: and you know, like five big text docks. So you
Speaker 1: want to sort of think about whether that's how you
Speaker 1: want your portfolio to be. So here's the deal, Like
Speaker 1: we all said, index fun right, spread your risk. We
Speaker 1: all like piled in for years because we thought this
Speaker 1: is where everything was going. As it turned out, there
Speaker 1: was a lot of you know, kind of overweight right
Speaker 1: in terms of certain members. But that was supposed to
Speaker 1: protect us to the down side, and it didn't happen.
Speaker 1: It didn't happen in the short term, and the short
Speaker 1: term in the market is very emotional and psychological. In
Speaker 1: the long term, I think that logic of diversification works.
Speaker 1: But right now, you know, even after this big drop,
Speaker 1: the big five, you know, the Apple, Microsoft, Amazon, people, um,
Speaker 1: they still make up about I think over of the
Speaker 1: SMP because it's market kath waited. So your five stocks
Speaker 1: were really more like five stocks, you know, or ten stocks,
Speaker 1: and you didn't have that diversification, which we at Bloomberg
Speaker 1: would tell people over and over and over again. And
Speaker 1: yet we all still kept going there, Yes, we all
Speaker 1: of us. Well, it's true because it's sort of it's
Speaker 1: there's the fomo, you know, fear of missing out, and
Speaker 1: the fact is that we had been in this. I'm
Speaker 1: just just going to ignore the bear market of twenty
Speaker 1: because that doesn't really count. It was such a quick one.
Speaker 1: We've been in such a long bowl market. A lot
Speaker 1: of people only know a bowl market, so it's very
Speaker 1: easy to think that this is just going to continue.
Speaker 1: This is how it is painful. Down drafts don't really happen,
Speaker 1: or they're not gonna happen to me. Should we beat
Speaker 1: ourselves up? Okay, as somebody who you know is very
Speaker 1: good at doing that. I don't think you should. I mean,
Speaker 1: I think if you have a good long term plan,
Speaker 1: you've sort of you have a smart you know, portfolio
Speaker 1: that it fits your goals and your life and your
Speaker 1: age and all that, you should not feel bad. You know,
Speaker 1: these down drafts. Bear markets happen and we live through them.
Speaker 1: Right now. This is really ugly because the tech stocks
Speaker 1: were so high and they've fallen so far. But the
Speaker 1: main thing to do is this is so trite, but
Speaker 1: not to panic and not to make any rash moves.
Speaker 1: One of the things we just talked about with Francis
Speaker 1: Donald of Manual Life is this correlation and this trade
Speaker 1: that's going hand in hand between bonds and stocks right
Speaker 1: both going down, which is not normal. So that whole
Speaker 1: idea of being diversified equity, you know, fixed income to
Speaker 1: kind of protect you on the downside, it any working. Yeah,
Speaker 1: it's not working right now, but you know over the
Speaker 1: long term it may work. I mean, Rob are Not
Speaker 1: of Research Affiliates that I spoke with them for the story.
Speaker 1: He made a really good point, which is that in
Speaker 1: the beginning of bearer markets, like everything seems to go
Speaker 1: to hell in a hand basket and the diversifiers don't work.
Speaker 1: But as you get further into a bear market, then
Speaker 1: the diversifiers really start to pay off. And I think
Speaker 1: right now we are seeing rates rise, so yields on
Speaker 1: bonds are gonna in chup a bit, and that will
Speaker 1: you know, that is an argument that they may play
Speaker 1: a much better role as a diversifier than they certainly
Speaker 1: have this year. So we've taken the deep breaths, We've
Speaker 1: looked at the portfolio, We've reassessed our risk. We haven't
Speaker 1: had any rash decisions. What else do we need to do?
Speaker 1: If you sold and are looking for if you have
Speaker 1: money in cash, um, you may want to look at
Speaker 1: Hill savings accounts because as interest rates, interest rate has
Speaker 1: been raised on your cash account. It's lovely, isn't it.
Speaker 1: I mean it's still you know, Goldman still looks low.
Speaker 1: It is it's Goldman's Marcus Bank. You know. I think
Speaker 1: that they just bumped it recently up to like point
Speaker 1: eight five. It's like it's hard to get too excited
Speaker 1: over like less than one percent. But I sort of
Speaker 1: feel like if you have money in like a sweep
Speaker 1: account in your brokerage account that you're getting nothing. So
Speaker 1: I feel like we should at least if you have
Speaker 1: money in cash, try to, you know, get something on
Speaker 1: that money. I mean, is it smart to kind of
Speaker 1: if you have stuff in cash, hold it or maybe
Speaker 1: add to it. Is it? Is it at this point
Speaker 1: not a smart idea to move anything to cash because
Speaker 1: it's because of the selling that we've seen, certainly so
Speaker 1: much in equity. I mean, we could most think we're
Speaker 1: going to go down even more at this point, and
Speaker 1: you know, is there a role for crypto and all,
Speaker 1: oh my god question we can't even I just feel
Speaker 1: so the crypto question. I mean, if you are nearing retirement,
Speaker 1: then you need to really think about how much cash
Speaker 1: you need on hand. What's nearing retirement five years, ten years,
Speaker 1: I'm saying five. I'm saying five years because you can't
Speaker 1: afford you do not The worst thing is to have
Speaker 1: to sell into a down market, obviously right when you're
Speaker 1: around retirement age, because you don't have that many sadly,
Speaker 1: maybe you don't have that many years sort of in
Speaker 1: the job market left for you. Um So if you
Speaker 1: take a big hit, you can't really earn it back
Speaker 1: like a young person. Young person takes a big hit.
Speaker 1: They have tons of years of earnings potential ahead of them.
Speaker 1: But if you're heading into retirement and you need to
Speaker 1: that's a if you have to sell into a downmarket,
Speaker 1: you can permanently hobble your nest egg. So I will
Speaker 1: say in your story you talk one time, a fixed
Speaker 1: income in investment that offers a particularly strong hedge against
Speaker 1: inflation is a Series one savings bond from the U. S. Treasury.
Speaker 1: My friends will not stop talking about these. Seriously, sounds
Speaker 1: playing vanilla, but right yes, they think they're the smartest
Speaker 1: people in the world because they discovered these. I'm like,
Speaker 1: you did not discover this. You don't imagine that conversation.
Speaker 1: But I mean, you know, the sad thing is you
Speaker 1: can only invest ten thousand in them per calendar year,
Speaker 1: you know, but they're paying what are they paying? Like,
Speaker 1: I think it's like nine points. That's amazing. You can't
Speaker 1: get that anywhere right now. So that is really a
Speaker 1: great to hold them. Otherwise you have to hold them.
Speaker 1: You have to hold them for a year, and then
Speaker 1: if you sell before five years, you give up three
Speaker 1: months of interest. But there are very there are semi
Speaker 1: cash like move and you can't get that kind of
Speaker 1: yield anywhere else. Go ahead quickly reads to just about
Speaker 1: thirty seconds. Also an option reads in your story possibly,
Speaker 1: but reads will reads. You know if they have been
Speaker 1: traditionally been diversifiers, but they're not doing very well lately.
Speaker 1: They're not they're doing the old they're joining bonds in
Speaker 1: sort of the parade down. So in the short term
Speaker 1: they're not looking so great. Those coin cats, gender mattress.
Speaker 1: That was the other option, digging a hole and putting
Speaker 1: some gold bars in the ground in your backyard. All
Speaker 1: I will say ten years ago, the market was a
Speaker 1: lot lower. Right years ago, So just remember what goes
Speaker 1: down goes up, what goes up goes down. Look back
Speaker 1: five years and you're still way ahead of where you
Speaker 1: We're not telling you what to do for just a
Speaker 1: little perspective, Susan Willie, Thank you. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovich on Bloomberg Radio among our most read on the Bloomberg.
Speaker 1: And yes, this may be a moment to get out
Speaker 1: your tiniest violin, and yet it's significant pertains to a
Speaker 1: big market story of our time. It has to do
Speaker 1: with cryptotim Yeah. Tom Maloney is utter at Bloomberg News.
Speaker 1: He's with us right now. In the Bloomberg Interact to
Speaker 1: Broker Studios, he writes today all about the crypto billionaire
Speaker 1: fortunes that have vanished just as quickly as they were made. Tom,
Speaker 1: good to have you with us. Is that your tiny violin? Yes?
Speaker 1: All right, well it's still tiny because you know, all
Speaker 1: the people on this list are still billionaires right now,
Speaker 1: but they are less billionaires. I was so worried. Yeah, okay,
Speaker 1: well we should name some of these names, Okay, c
Speaker 1: Z over at Binance, people known as c Z Chang
Speaker 1: pang Yao, uh SPF, Sam Bakman, Freed. They all have initials.
Speaker 1: That's they're like, they're like Madonna, right, They're all known
Speaker 1: known by these things. That's I don't forget the winkle
Speaker 1: voe say there it is so um take us through
Speaker 1: the fortunes that have been lost here, because there are
Speaker 1: different types of cryptos in different types of companies too. Yeah. Well,
Speaker 1: most of the folks that we track on the Bloomberg
Speaker 1: Billionaires Index are associated with crypto exchanges. So people like
Speaker 1: c z as you mentioned, founder of Binance and bike, Winfreed,
Speaker 1: founder of f t X buying Armstrong, coin base, Um,
Speaker 1: the Winklevoye with Gemini and those businesses have really gone
Speaker 1: from um, you know law last year when there are
Speaker 1: kind of sky high evaluations and a lot of optimism
Speaker 1: about the future of that industry, to the total opposite now,
Speaker 1: you know, real pessimism, job cuts at those companies, and
Speaker 1: that's obviously had a massive impact on the fortunes of
Speaker 1: these folks. Last year in November, when crypto prices were
Speaker 1: at their peak, these guys collectively had a fortune of
Speaker 1: about a hundred forty five billion um. They've lost billion
Speaker 1: of that doubt now, so there are so how do
Speaker 1: we think about this, Like is this akin to a
Speaker 1: lot of the Internet billionaires or a millionaires you know,
Speaker 1: back in the day of two thousand, like similar haircuts
Speaker 1: of just you know, companies that people who seem to
Speaker 1: be wealthy and paper and then just we're not. Yeah, look,
Speaker 1: I think there are massive parallels with that era. You know,
Speaker 1: the crash that was saying in crypto A lot of
Speaker 1: people are comparing it to the dot com crash. Obviously,
Speaker 1: a lot of fortunes ended up still being made from
Speaker 1: the internet. We might see the same thing with Crypto.
Speaker 1: I think it's too early to say. Um, these guys
Speaker 1: are still billionaires, are still massively well, but a massive
Speaker 1: colm down from last year. Well, we can't forget the
Speaker 1: Winkle Loss. Twins are touring as part of their band
Speaker 1: right now. People were tweeting about this earlier this week
Speaker 1: with all the news about Gemini McDonald is the opening
Speaker 1: act for I did not know that she talked about Tory.
Speaker 1: That's great, so she so the wink Yeah, the winkled
Speaker 1: Um their uh their band is called Mars Junction. By
Speaker 1: the way, Brooklyn bawl last weekend and could have gone
Speaker 1: down and say them. I didn't find out until I
Speaker 1: wrote this story. Next time we'll have to do that.
Speaker 1: I did see some pictures circulating on Twitter. An interesting
Speaker 1: name on here, Mike Novograts, because that's not necessarily an exchange,
Speaker 1: and this is also a guy who's um made and
Speaker 1: lost fortunes before. That's right. Um Novigrats was a hedge
Speaker 1: fund manager bicycly at Fortress. He it was a macro
Speaker 1: fund that ended up being wound up back in I think, um,
Speaker 1: you know, he's kind of remade himself as a crypto evangelist.
Speaker 1: Last year, in November, when crypto processes were at the peak,
Speaker 1: he had a fortune about eight and a half billion,
Speaker 1: and now he's at two point one billion. He's also
Speaker 1: been kind of closely linked to one of the you know,
Speaker 1: crypto scandals. I suppose that sort of kicked off the
Speaker 1: crashing crypto process, which was Terra and its sister coin
Speaker 1: Luna that collapsed last month. Um, he was a big
Speaker 1: proponent of that coin, you know, going so far as
Speaker 1: to get the Lunar tattoo infamously on his on his
Speaker 1: arm last December or in January. Rather, tattoos are permanent
Speaker 1: crypto fortunes, not so much that's to get a Bloomberg tattoo.
Speaker 1: As much as I love this company still, yeah, I
Speaker 1: do have a few more years. Hey. You know, one
Speaker 1: thing I do wonder is when there's somebody who's so
Speaker 1: entrenched in an industry, you know, anybody who's saying I'm out,
Speaker 1: I'm out at this point. I know some of them
Speaker 1: probably can't because they're still involved and there's financial, uh
Speaker 1: positions at stake, But I do wonder if there anybody
Speaker 1: has just been like I'm out of this and I've
Speaker 1: changed by tune a little bit. Well, none of the
Speaker 1: folks on this list for sure. I mean these are
Speaker 1: who you know, their fortunes are still entrenched in these
Speaker 1: companies that most of them, you know, these guys are
Speaker 1: all founders of crypto focused company, so they're not going
Speaker 1: to be getting out anytime soon. And I think that
Speaker 1: the all of their statements that been as committed to
Speaker 1: crypto as ever. Michael Sailer keeping the faith, that's right.
Speaker 1: Michael Saylor of micro Strategy. We haven't mentioned him yet.
Speaker 1: We've talked to him a fair amount of times, right, Yeah,
Speaker 1: so we haven't tracked his fortune, but the steak in
Speaker 1: micro Strategy that he holds now, I mean that that
Speaker 1: the share price of micro Strategy is down around from
Speaker 1: its peak and his company has racked up about a
Speaker 1: billion in paper losses on its bigcoin investment. Before we
Speaker 1: let you go, Tom, I want to talk about El
Speaker 1: Salvador's president. I went to his Twitter feed yesterday because
Speaker 1: I was wondering if he's tweeted, and he hadn't as
Speaker 1: of yesterday. Um, because this is a country that made
Speaker 1: it legal tender just in the last twenty seconds that
Speaker 1: we have. How should we think about that? Well, look,
Speaker 1: I don't think it's great for El Salvador finances. Obviously.
Speaker 1: You know they've been buying bitcoin, I think at an
Speaker 1: average price of thirty six thousand. It's now just above
Speaker 1: twenty two thousand, so you know they they've they've got
Speaker 1: some serious losses on their hands. I was looking at
Speaker 1: his Twitter feet as well. He still has the laser
Speaker 1: eyes on his profile photos, so I guess he's as
Speaker 1: committed as ever. I do wonder if, like you know,
Speaker 1: we look back I don't know, twenty years from now
Speaker 1: and we say, okay, bitcoin had some problems, but it
Speaker 1: becomes something much bigger and is really a part of
Speaker 1: our exactly we will be Tom Maloney, thank you so much,
Speaker 1: editor Bloomberg News. Here in our interactive broker studio. I'm
Speaker 1: a journal now, but you let me drive. Oh no,
Speaker 1: no, no no, please, I'll gravel. I want to dry. It's
Speaker 1: a good question. Try to the clube radio. Right, just
Speaker 1: about ten and a half minutes left in today's training session.
Speaker 1: Another volatile day, one day, in less than twenty four hours,
Speaker 1: we'll have that latest FED decision. At that June meeting
Speaker 1: and get an indication of what the FED might be
Speaker 1: doing for the rest of the year. So let's get
Speaker 1: to it. Megan Horneman is chief investment officer at Ridden's
Speaker 1: Capital Advisors. Megan joins us this afternoon on the Access
Speaker 1: line from Hunt Valley, Maryland. All Right, Megan, I'm gonna
Speaker 1: ask you the same question I've asked other guests today.
Speaker 1: What happens tomorrow from FED Chair J Powell and the
Speaker 1: f O m C fifty. Um, it's like a Twitter poll.
Speaker 1: I'd love to see them go seventy five and insinuate
Speaker 1: that we'd have fifty and then the coming meetings. But
Speaker 1: the only thing that holds me back from there is
Speaker 1: he did make it pretty clear at the last meeting
Speaker 1: that seventy was not on the table for this meeting.
Speaker 1: Keep in mind, there's other ways that he can insinuate,
Speaker 1: you know, more tight. Was that the last meeting or
Speaker 1: was that the meeting before that. I'm trying to remember
Speaker 1: the last meeting. Um, he said that was none that
Speaker 1: he was using the press conference that you was asked
Speaker 1: if it was on the table, and he clearly said no.
Speaker 1: But remember, the data changes. The data does change. But
Speaker 1: the transparency the FED is very important. UM, it's important
Speaker 1: to markets. So there are ways that they can get
Speaker 1: around by maybe saying, you know, it's only going to
Speaker 1: be fifty this time, but they can also maybe accelerate
Speaker 1: that balance sheet runoff. They could double that in size
Speaker 1: instead of um keeping it where they had. I want
Speaker 1: to make sure I understand this. You're you're saying Megan
Speaker 1: that it's there. They'll do fifty because it's important for
Speaker 1: them to be consistent with their previous messaging credibility and credibility.
Speaker 1: But I think at the same time, they could do
Speaker 1: other things that they didn't make any mention of. They
Speaker 1: were very clear that the balance sheet runoff they would
Speaker 1: could accelerate that if necessary. So I think you may
Speaker 1: see some acceleration in that balance sheet runoff to kind
Speaker 1: of make up for those people that were looking for
Speaker 1: seven and five. But I also think that they can
Speaker 1: and maybe by learning their lesson insinuate that the rate
Speaker 1: hikes and the next couple of meetings could quite possibly
Speaker 1: be higher than what we have right right to use
Speaker 1: this meeting right, because if we want to make sure
Speaker 1: that the markets respect these FED meetings and what is
Speaker 1: said right like they could say, Okay, let's do what
Speaker 1: we said we would do and then open the door
Speaker 1: for maybe being more aggressive at the next meeting. Right
Speaker 1: and there is a lack like we need to understand.
Speaker 1: I mean, although it does feel like the needle isn't
Speaker 1: moving aggressively enough when it comes to inflation coming down.
Speaker 1: And keep in mind that they also are looking at
Speaker 1: economic data which is getting soft very fast, so they
Speaker 1: have to keep that in mind. I make consumer confidence
Speaker 1: at a record low, these are things that they have
Speaker 1: to take into consideration. Gas prices where they are, this
Speaker 1: is going to hurt the consumer. What else are you
Speaker 1: seeing in terms of softness right now, because we're still
Speaker 1: seeing some are than expected Prince, Yeah, the one thing
Speaker 1: that it will look closely that is the retail sales
Speaker 1: that comes out tomorrow. Keep in mind that will be
Speaker 1: from May and May was when we hit another record
Speaker 1: high and gasoline prices a very big jump in the
Speaker 1: month of May, so we'll be looking at that for
Speaker 1: any softening in the consumer. If you look at things
Speaker 1: like small business optimism and some of the different components
Speaker 1: within that week that we see that's weakening. The housing
Speaker 1: market is just looking very very very weak. So I
Speaker 1: think there's a lot of things that they can point
Speaker 1: to that suggest, hey, we have to be aggressive, we
Speaker 1: have to be flexible. He's probably kicking himself that he
Speaker 1: made that comment in the last press conference that he
Speaker 1: wouldn't go seventy five. He's got to make it very
Speaker 1: clear that it's a very fluid situation. We may need
Speaker 1: to go higher and more aggressive in the coming months,
Speaker 1: and we may need to be flexible with the balance
Speaker 1: sheet run off as well. Now that's a really good point.
Speaker 1: Nobody's really talked about, you know, using some of the
Speaker 1: other tools in the tool kit, right, and we have
Speaker 1: talked about that, you know, when the FED starts doing
Speaker 1: great moves, but it's also got the balance sheet, that's
Speaker 1: a double whammy like that is they're both going to
Speaker 1: impact what's going on in the economy and liquidity in
Speaker 1: the markets. Yes, and the one thing that they also
Speaker 1: need to address to kind of give themselves a little
Speaker 1: leeway if they need to come in with seventy or
Speaker 1: they could come in with emergency measures in between meetings
Speaker 1: when the FED. I keep saying, I was having conversation,
Speaker 1: I said, I used to remember you'd wake up in
Speaker 1: the morning or I was doing an early morning show
Speaker 1: and all of a sudden bam across the bloomberg would
Speaker 1: be the FED doing an emergency like they don't do that.
Speaker 1: It feels like anymore or less, it's a crisis, right,
Speaker 1: And I think that they can make note that these
Speaker 1: are things that they may utilize, so me, we may
Speaker 1: come in next week and we get another really bad
Speaker 1: print on something from an inflation standpoint, and they come
Speaker 1: in and they say, Okay, we're going to go another fifty.
Speaker 1: So they need to keep all at this point, all
Speaker 1: of their tools out there so that people aren't necessarily
Speaker 1: surprised if they use them. I think that they should
Speaker 1: go more than fifty. I think seventy five that you know,
Speaker 1: at a minimum for this, But I just don't know
Speaker 1: that they're going to be able to do that with
Speaker 1: how they kind of pitching them hold themselves at the
Speaker 1: last time. So what's an investor to do in this environment?
Speaker 1: So it's it's very frustrating and completely understand that because
Speaker 1: any hedges that you typically would use in an environment
Speaker 1: like this, I mean, let's talk about it. We've got
Speaker 1: elevated inflation pressures, we have a FED that's doing everything
Speaker 1: that they can to get that inflation under control. But
Speaker 1: the FED can only go so far some of these
Speaker 1: other inflation pressures to supply chain reasons and then maybe
Speaker 1: too much fiscal stimulus that was put out into the economy.
Speaker 1: Those are things that FED can't can't control. They also
Speaker 1: can't control, you know, other countries when they go on lockdowns,
Speaker 1: which then exacerbates the supply chain problems and then creates
Speaker 1: a weaker global economic situation. These are things they can't control.
Speaker 1: They can only control what's here. So um right now,
Speaker 1: an investor needs to be patient. Look at some of
Speaker 1: those areas in the market that have priced in the
Speaker 1: majority of the pessimism, the as we are in a
Speaker 1: bear market, and what history has told us that you know,
Speaker 1: these are part of any investment cycle, and if you're
Speaker 1: patient and you add a little bit in and when
Speaker 1: it goes down a certain amount, and then maybe a
Speaker 1: little bit if it goes down another ten or twenty,
Speaker 1: that these end up being good potential, good buying opportunities.
Speaker 1: We let me just ask you, because we've only got
Speaker 1: about seconds left here, Megan, Is it all about though,
Speaker 1: you know, capital preservation where to hide at this point?
Speaker 1: Or is it where to look for some really great opportunities.
Speaker 1: How do we need to think about it long and
Speaker 1: short term? So long term investors, you should be looking
Speaker 1: at opportunities in the market right now. Um short term
Speaker 1: be really defensive because I think that this summer, at
Speaker 1: least in a minimum, will a pretty brocky and vottle
Speaker 1: time for the market, which is it's already it's only
Speaker 1: June four tone, you know, can we get to fall
Speaker 1: pretty quickly? Uh? Megan? Thank you. Megan Horneman, chief investment
Speaker 1: officer at the wealth Advisory multi family office firm Verden's
Speaker 1: Buple Advisors, with us on the phone from Hunt Valley, Maryland.
Speaker 1: I think she made a really good point that the
Speaker 1: Fed could be more aggressive with the balance sheet. And
Speaker 1: you do wonder about j Powell wanting to be like
Speaker 1: this is what I said. I'm not going to muck
Speaker 1: around with it because that's how's to do with my
Speaker 1: messaging and respect in credibility. Basically, I know, look, only
Speaker 1: they know, only they know that's true, and we'll know
Speaker 1: unless it's twenty four hours time. Thanks for listening to
Speaker 1: Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or
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