1 00:00:05,120 --> 00:00:07,119 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,160 --> 00:00:11,080 Speaker 2: I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 3 00:00:11,280 --> 00:00:15,760 Speaker 2: Join us each day for insight from the best an economics, geopolitics, 4 00:00:15,760 --> 00:00:20,720 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,960 --> 00:00:25,439 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:25,520 --> 00:00:29,960 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business. 7 00:00:29,600 --> 00:00:30,840 Speaker 1: App with Us. 8 00:00:30,880 --> 00:00:34,800 Speaker 2: Ellen Zettner of James Gorman's Morgan Stanley with us right now. 9 00:00:35,120 --> 00:00:39,760 Speaker 2: I saw a hockey stick chart on manufacturing in America. 10 00:00:39,960 --> 00:00:42,720 Speaker 2: Doesn't matter what the details are, the answer is it's 11 00:00:42,760 --> 00:00:45,800 Speaker 2: something we're not used to. I have a chart that 12 00:00:45,840 --> 00:00:47,640 Speaker 2: went back, I got a big splash with it a 13 00:00:47,640 --> 00:00:54,240 Speaker 2: million years ago of manufacturing labor to our population in America. 14 00:00:54,720 --> 00:00:58,120 Speaker 2: And basically the back was broken in nineteen seventy and 15 00:00:58,160 --> 00:01:02,200 Speaker 2: then really broken into how can we have a manufacturing 16 00:01:02,320 --> 00:01:03,760 Speaker 2: renaissance in America? 17 00:01:03,960 --> 00:01:08,119 Speaker 3: Well, we can, we can have increasing share of manufacturing 18 00:01:09,240 --> 00:01:12,720 Speaker 3: in the economy. But these things are slow moving beasts, 19 00:01:12,760 --> 00:01:15,479 Speaker 3: and the decline of manufacturing over time has taken decades 20 00:01:16,319 --> 00:01:18,880 Speaker 3: to play out with larger step downs. As you said 21 00:01:18,920 --> 00:01:21,920 Speaker 3: in the seventies, and then is after the WTO and 22 00:01:22,080 --> 00:01:26,640 Speaker 3: China's rise right more more pronounced after that, And so 23 00:01:26,720 --> 00:01:29,440 Speaker 3: I think, you know, I think we've got something exciting 24 00:01:29,480 --> 00:01:32,000 Speaker 3: going on right now. I think we're digging into the 25 00:01:32,080 --> 00:01:35,039 Speaker 3: data and we're seeing that. And especially if you go 26 00:01:35,080 --> 00:01:37,640 Speaker 3: around the country and you talk to small manufacturers in 27 00:01:37,680 --> 00:01:41,320 Speaker 3: the country, which I have done, and they'll tell you 28 00:01:41,360 --> 00:01:43,800 Speaker 3: that they're starting to get more and more domestic orders 29 00:01:43,800 --> 00:01:45,360 Speaker 3: of people that are. 30 00:01:44,959 --> 00:01:48,880 Speaker 1: On shoring having manufacturing. 31 00:01:48,120 --> 00:01:52,600 Speaker 3: Rooms, they at least feel that their business is picking up. Now, 32 00:01:53,520 --> 00:01:57,600 Speaker 3: this feels like it could be the start of something. 33 00:01:57,800 --> 00:02:01,120 Speaker 3: We're seeing something. There is some on shoring story there, 34 00:02:01,160 --> 00:02:03,480 Speaker 3: there's some near shoring story there. I think the story 35 00:02:03,480 --> 00:02:08,520 Speaker 3: around Mexico's benefit from near shoring is exciting. 36 00:02:09,120 --> 00:02:10,040 Speaker 4: There is a lot. 37 00:02:09,880 --> 00:02:13,680 Speaker 3: Of infrastructure building going on across the country. State and 38 00:02:13,760 --> 00:02:16,919 Speaker 3: local governments have been ramping up hiring around that as well. 39 00:02:17,160 --> 00:02:19,760 Speaker 3: So I think there's something going on in manufacturing here 40 00:02:19,760 --> 00:02:22,280 Speaker 3: that is exciting. But that's a smaller share of the 41 00:02:22,360 --> 00:02:25,320 Speaker 3: economy than the service's side. 42 00:02:25,440 --> 00:02:27,880 Speaker 2: And Katie, one of the unspokens here through June is 43 00:02:28,440 --> 00:02:33,280 Speaker 2: Mexican Paeso stunning in its Mexican peso strength through twenty 44 00:02:33,360 --> 00:02:36,800 Speaker 2: through nineteen through eighteen, you're gonna get a sixteen handle 45 00:02:36,840 --> 00:02:40,480 Speaker 2: on Mexican peso at some point, which is I never thought. 46 00:02:40,280 --> 00:02:40,800 Speaker 1: I'd see that. 47 00:02:41,000 --> 00:02:43,680 Speaker 5: Yeah, And it's important to remember because we talk about 48 00:02:43,680 --> 00:02:47,079 Speaker 5: how strong and resilient the dollar has been all the time, 49 00:02:47,160 --> 00:02:50,440 Speaker 5: but there's definitely some pairs where that is not quite true. 50 00:02:50,440 --> 00:02:52,400 Speaker 5: But Ellen, of course, we have you on Monday, we 51 00:02:52,480 --> 00:02:56,840 Speaker 5: get the jobs report on Friday. Is there anything that 52 00:02:56,919 --> 00:02:59,480 Speaker 5: we could get at eight thirty am on Friday that 53 00:02:59,520 --> 00:03:01,880 Speaker 5: would take the FED off the course for a twenty 54 00:03:01,880 --> 00:03:03,280 Speaker 5: five basis hike later this month. 55 00:03:03,360 --> 00:03:05,040 Speaker 4: Yes, So we've given this a lot of thoughts. 56 00:03:05,120 --> 00:03:08,240 Speaker 3: So we have these roadmaps to each FED decision that 57 00:03:08,280 --> 00:03:10,480 Speaker 3: we produce of here's what we think the data will 58 00:03:10,480 --> 00:03:12,000 Speaker 3: look like in hand, and this is what we think 59 00:03:12,040 --> 00:03:15,200 Speaker 3: their response will be. And because it seems like, yes, 60 00:03:15,240 --> 00:03:17,360 Speaker 3: they're data dependent, but it feels like they're sort of 61 00:03:17,600 --> 00:03:20,840 Speaker 3: locked in for this July hike, I think the bar 62 00:03:21,160 --> 00:03:22,960 Speaker 3: is just a lot lower than we thought it would 63 00:03:23,000 --> 00:03:25,520 Speaker 3: be that you would have to. 64 00:03:27,840 --> 00:03:29,079 Speaker 4: For the data to say. 65 00:03:28,880 --> 00:03:31,200 Speaker 3: Don't hike, and so I think it would be a 66 00:03:31,240 --> 00:03:35,200 Speaker 3: payroll print less than one hundred thousand right, because really 67 00:03:35,600 --> 00:03:38,040 Speaker 3: that would get the market thinking maybe they're not going 68 00:03:38,080 --> 00:03:40,000 Speaker 3: to hike in July and then still wait for that 69 00:03:40,120 --> 00:03:43,560 Speaker 3: CPI print to do the rest of the job. And 70 00:03:43,560 --> 00:03:45,720 Speaker 3: if you've got a downside surprise and CPI as well, 71 00:03:45,760 --> 00:03:49,040 Speaker 3: then I think that would be the final you know, 72 00:03:49,160 --> 00:03:51,160 Speaker 3: box to tick off that says Okay, it doesn't have 73 00:03:51,240 --> 00:03:53,880 Speaker 3: to be a July hike. I think it would still 74 00:03:54,000 --> 00:03:56,080 Speaker 3: keep the Fed saying, hey, there's still may be more 75 00:03:56,120 --> 00:03:57,440 Speaker 3: to do. I think there's still going to be an 76 00:03:57,440 --> 00:04:00,760 Speaker 3: asymmetric hiking bias, but I think it would have to 77 00:04:00,800 --> 00:04:03,280 Speaker 3: be some pretty big downward misses for them to not 78 00:04:03,360 --> 00:04:03,920 Speaker 3: hike in July. 79 00:04:04,400 --> 00:04:06,880 Speaker 5: Yeah, definitely an important point that we do have a 80 00:04:06,920 --> 00:04:09,960 Speaker 5: CPI before we do get to that July decision. But 81 00:04:10,520 --> 00:04:12,360 Speaker 5: when you look at and I don't want to get 82 00:04:12,400 --> 00:04:14,160 Speaker 5: too short term here, but when you look at sort 83 00:04:14,200 --> 00:04:16,760 Speaker 5: of the expectations that are baked in for the Fed 84 00:04:16,800 --> 00:04:19,240 Speaker 5: to go ahead in July, for you know, probably the 85 00:04:19,320 --> 00:04:22,680 Speaker 5: labor strength that we've been seeing to continue with June's report, 86 00:04:22,760 --> 00:04:26,279 Speaker 5: what do you think would prompt the bigger reaction in markets? 87 00:04:26,400 --> 00:04:29,600 Speaker 5: Is it an upside surprise or a downside surprise? 88 00:04:30,160 --> 00:04:32,560 Speaker 3: You know, I think it would be a downside surprise 89 00:04:32,640 --> 00:04:35,360 Speaker 3: because the market is is you know, the Fed's been 90 00:04:35,400 --> 00:04:37,680 Speaker 3: really successful here. The market is saying, Okay, they're on 91 00:04:37,720 --> 00:04:41,560 Speaker 3: this hiking bias, and we're going to give them the 92 00:04:41,560 --> 00:04:44,240 Speaker 3: benefit of the doubt that it could be two additional 93 00:04:44,320 --> 00:04:47,080 Speaker 3: hikes from here, not just one additional hike or no hikes, 94 00:04:47,600 --> 00:04:49,800 Speaker 3: or even pushing out the expectation they could be cutting 95 00:04:49,839 --> 00:04:52,040 Speaker 3: before the end of the year. I think the market 96 00:04:52,080 --> 00:04:54,840 Speaker 3: has really grabbed onto that narrative and the data has 97 00:04:54,880 --> 00:04:56,760 Speaker 3: helped support that. So I think it would be a 98 00:04:56,839 --> 00:05:00,280 Speaker 3: downside surprise. It would probably get the bigger reaction we. 99 00:05:00,279 --> 00:05:03,640 Speaker 2: Partitioned where part of the American public has a two 100 00:05:03,640 --> 00:05:07,560 Speaker 2: percent unemployment rate and another part of the public has 101 00:05:07,600 --> 00:05:11,400 Speaker 2: a seven percent unemployment rate. Yeah, how does morganstantly see 102 00:05:11,440 --> 00:05:14,279 Speaker 2: the quintile makeup or docile makeup? 103 00:05:14,400 --> 00:05:16,640 Speaker 3: Well, look, it's it's more around you know, sort of 104 00:05:16,760 --> 00:05:18,120 Speaker 3: education level. 105 00:05:19,360 --> 00:05:23,760 Speaker 2: You know, the the bottom descile's done well off the pandemic, 106 00:05:23,880 --> 00:05:25,039 Speaker 2: right they. 107 00:05:25,200 --> 00:05:30,159 Speaker 3: Have from government support which is now ended. They have 108 00:05:30,320 --> 00:05:33,640 Speaker 3: off of a tight labor market, which has increased labor 109 00:05:33,760 --> 00:05:39,039 Speaker 3: income and wage growth, especially for low wage paying service sectors. 110 00:05:39,480 --> 00:05:44,000 Speaker 3: But we're only just now seeing real wage gains positive, 111 00:05:44,720 --> 00:05:48,000 Speaker 3: So it was really you know, inflation was still outpacing 112 00:05:48,680 --> 00:05:52,880 Speaker 3: wage gains for those folks. But that divergence between sort 113 00:05:52,920 --> 00:05:55,240 Speaker 3: of those with a seven percent unemployment rate and those 114 00:05:55,240 --> 00:05:56,760 Speaker 3: with a two percent, it's really do you go all 115 00:05:56,800 --> 00:05:58,960 Speaker 3: the way to like a thirteen percent unemployment rate and 116 00:05:59,040 --> 00:06:01,680 Speaker 3: those with a two percent? That has always been the case. 117 00:06:02,240 --> 00:06:04,640 Speaker 3: It's always been the case. So what I look at 118 00:06:04,760 --> 00:06:09,120 Speaker 3: is has the unemployment rate been improving across all. 119 00:06:10,480 --> 00:06:10,839 Speaker 2: All of. 120 00:06:12,560 --> 00:06:18,599 Speaker 3: By ethnicity, by age, by geographic location, like, has it 121 00:06:18,680 --> 00:06:22,479 Speaker 3: been improving across all groups? Yes, it has, and we 122 00:06:22,520 --> 00:06:27,000 Speaker 3: are back to the kind of tight labor market for 123 00:06:27,160 --> 00:06:31,960 Speaker 3: the most underserved in the country being just as good 124 00:06:32,040 --> 00:06:34,360 Speaker 3: or as tight as it was pre pandemic. 125 00:06:34,800 --> 00:06:35,000 Speaker 1: Yeah. 126 00:06:35,040 --> 00:06:37,479 Speaker 2: I look at this and Alan, you know, they said 127 00:06:37,480 --> 00:06:39,760 Speaker 2: to me, can we get Zentner for the Monday before 128 00:06:39,800 --> 00:06:41,640 Speaker 2: fourth of July? And I said, well, she's probably going 129 00:06:41,680 --> 00:06:44,960 Speaker 2: to be in waiters in some trout stream and in 130 00:06:45,120 --> 00:06:48,200 Speaker 2: Chile as well. But you know, folks, this is really 131 00:06:48,200 --> 00:06:50,800 Speaker 2: a sacrifice on the part of ellen Zetner because she's 132 00:06:50,839 --> 00:06:52,800 Speaker 2: going to take a nymphanite fly ride that I can't 133 00:06:52,839 --> 00:06:54,719 Speaker 2: afford and go out in the river. 134 00:06:54,839 --> 00:06:55,640 Speaker 1: This is a Zettner. 135 00:06:55,720 --> 00:07:00,960 Speaker 2: You don't know fly fishing with Zetner the saltwater thing 136 00:07:01,000 --> 00:07:03,200 Speaker 2: that say shells and the Bahamas not. 137 00:07:03,160 --> 00:07:07,200 Speaker 3: As big on saltwater fly fishing salt water, but not 138 00:07:07,279 --> 00:07:07,960 Speaker 3: to fly fish. 139 00:07:08,279 --> 00:07:09,920 Speaker 1: You go to Jacksons far enough. 140 00:07:10,080 --> 00:07:12,800 Speaker 2: Yeah, you go to Jackson all the Smith River, Salmon River, 141 00:07:12,880 --> 00:07:16,360 Speaker 2: Jellystone River and all of it. But Patagonian. We had 142 00:07:16,440 --> 00:07:22,320 Speaker 2: listeners today emailing in from Chile with your appearance here today, 143 00:07:22,360 --> 00:07:25,400 Speaker 2: and there's like the Rio Simpson, Like Chile is like 144 00:07:25,760 --> 00:07:28,560 Speaker 2: huge trout fishing and the fish are ginormous. 145 00:07:28,800 --> 00:07:29,680 Speaker 4: They're ginormous. 146 00:07:29,760 --> 00:07:31,680 Speaker 6: Yeah, there's so much bigger down there. 147 00:07:32,000 --> 00:07:34,080 Speaker 3: You know, they don't get a lot of pressure. There's 148 00:07:34,120 --> 00:07:36,800 Speaker 3: not a whole lot of people going down to Chile. 149 00:07:36,920 --> 00:07:39,440 Speaker 3: It takes quite some time to get down there to fish. 150 00:07:39,480 --> 00:07:41,520 Speaker 3: And do you know that the trout are not native 151 00:07:42,360 --> 00:07:46,400 Speaker 3: to the region. They were introduced to the introduced They 152 00:07:46,400 --> 00:07:49,680 Speaker 3: were introduced in the nineteen thirties by the British. Yeah, 153 00:07:49,880 --> 00:07:51,480 Speaker 3: and so we've got them to think for that. 154 00:07:51,680 --> 00:07:54,480 Speaker 4: So they're invasive. They not invasive. 155 00:07:54,640 --> 00:07:56,720 Speaker 7: Listen to you, it's sport. 156 00:07:56,760 --> 00:07:57,960 Speaker 1: It's not invasive. 157 00:07:59,040 --> 00:08:00,640 Speaker 4: Some inflammatory commentary. 158 00:08:01,400 --> 00:08:04,080 Speaker 1: It's like we don't even miss Bramo. She's worth some bread. 159 00:08:04,160 --> 00:08:06,679 Speaker 3: There's not evidence that they have killed off the native 160 00:08:06,720 --> 00:08:10,480 Speaker 3: populations of fish, but they have really thrived there and 161 00:08:10,520 --> 00:08:12,960 Speaker 3: it's been a great industry now in Chile. 162 00:08:13,120 --> 00:08:15,800 Speaker 1: What's your favorite river in the rocky mountains of this nation? 163 00:08:16,400 --> 00:08:16,720 Speaker 7: Oh? 164 00:08:16,800 --> 00:08:20,040 Speaker 4: Gosh, in Montana? Probably, Well, there's one. 165 00:08:20,080 --> 00:08:27,240 Speaker 3: I can't say publicly because then everybody will go. Let's 166 00:08:27,760 --> 00:08:30,720 Speaker 3: let's say like the beaver Head in Montana, because everybody 167 00:08:30,720 --> 00:08:32,160 Speaker 3: knows that when it is a great river. 168 00:08:32,320 --> 00:08:34,319 Speaker 4: And I won't say the one that's my absolute. 169 00:08:33,960 --> 00:08:36,680 Speaker 3: Favorite because then it will get more pressure. 170 00:08:36,760 --> 00:08:38,600 Speaker 1: Did you make up when? Next time? 171 00:08:38,679 --> 00:08:38,840 Speaker 2: Was that? 172 00:08:39,080 --> 00:08:41,439 Speaker 1: Can we get a beeper in here? So we see 173 00:08:41,440 --> 00:08:42,640 Speaker 1: that Sunday in. 174 00:08:42,679 --> 00:08:46,800 Speaker 2: Montana is a fishing good near Jackson Hawayoming the third 175 00:08:46,880 --> 00:08:48,440 Speaker 2: or fourth week August. 176 00:08:48,960 --> 00:08:49,480 Speaker 8: You know it? 177 00:08:49,480 --> 00:08:50,600 Speaker 4: Well, it depends, right. 178 00:08:50,640 --> 00:08:52,720 Speaker 3: The runoff was really big this year, a lot of 179 00:08:52,720 --> 00:08:53,720 Speaker 3: those record snows. 180 00:08:53,960 --> 00:08:56,240 Speaker 4: Right, the river levels are high. 181 00:08:56,320 --> 00:08:58,520 Speaker 3: And it's not been high like that in quite some time. 182 00:08:58,640 --> 00:09:01,840 Speaker 3: August has been really dry. But if you love cutthroat fishing, 183 00:09:01,880 --> 00:09:02,520 Speaker 3: then you want. 184 00:09:02,320 --> 00:09:03,280 Speaker 4: To be around Jackson Hall. 185 00:09:03,520 --> 00:09:05,400 Speaker 2: James Gorman thinks she's cuts her she's going to be 186 00:09:05,400 --> 00:09:08,240 Speaker 2: on the phone the first week of August. I just 187 00:09:08,320 --> 00:09:10,240 Speaker 2: really think I need to go to Jackson Hall to 188 00:09:10,320 --> 00:09:14,600 Speaker 2: read academic papers. This has been a joy. Ellen Zettner 189 00:09:14,679 --> 00:09:17,400 Speaker 2: with us here on radio and television. 190 00:09:22,080 --> 00:09:23,720 Speaker 1: And all you need to know. It's sort of like 191 00:09:23,760 --> 00:09:25,760 Speaker 1: Tulips and stocks a million years ago. 192 00:09:25,880 --> 00:09:28,320 Speaker 2: Joining us now the guy that wrote the book on this, 193 00:09:28,480 --> 00:09:31,319 Speaker 2: we are thrilled to Tony Cscenzi could join us in 194 00:09:31,400 --> 00:09:36,439 Speaker 2: PIMCO this morning. The Strategic Bond Investor is the grown 195 00:09:36,520 --> 00:09:39,079 Speaker 2: up book to read on it. It's in its fourteenth edition. 196 00:09:39,440 --> 00:09:41,280 Speaker 2: You could buy half a Staten Island off for the 197 00:09:41,360 --> 00:09:45,880 Speaker 2: royalties of it. From Tulips to treasuries, how close are 198 00:09:45,880 --> 00:09:48,480 Speaker 2: we to tulips or are we buying treasuries? 199 00:09:48,679 --> 00:09:51,760 Speaker 9: I think we're closest to treasuries. The Tulips view was 200 00:09:51,800 --> 00:09:54,120 Speaker 9: a couple of years ago, but when treasury yields were 201 00:09:54,600 --> 00:09:57,959 Speaker 9: quite low, and yields globally with negative about eighteen trillion 202 00:09:58,360 --> 00:10:01,360 Speaker 9: or so of negative yielding bonds, and in fact, that 203 00:10:01,400 --> 00:10:03,840 Speaker 9: Tulip's idea I think will probably affect the bond market 204 00:10:03,880 --> 00:10:07,680 Speaker 9: for a generation. What investor for the next twenty years 205 00:10:07,720 --> 00:10:10,800 Speaker 9: will purchase a German blend at minus fifty bases points. 206 00:10:10,800 --> 00:10:12,439 Speaker 10: Again, given the car looking. 207 00:10:12,160 --> 00:10:14,680 Speaker 2: At me in my Austrian ninety seven year you're looking 208 00:10:14,720 --> 00:10:16,440 Speaker 2: at me, yeah, yeah. 209 00:10:16,640 --> 00:10:19,800 Speaker 9: And I say a generation because things change. Think about 210 00:10:19,840 --> 00:10:22,400 Speaker 9: the housing market. Of course, in two thousand and eight, 211 00:10:22,440 --> 00:10:24,040 Speaker 9: two thousand and nine we would have said the housing 212 00:10:24,040 --> 00:10:27,840 Speaker 9: market will never rebound, and of course it certainly did vigorously. 213 00:10:28,040 --> 00:10:30,800 Speaker 9: It takes time, but I think the low and negative 214 00:10:30,840 --> 00:10:34,240 Speaker 9: yielding bonds are probably out the door, out the window 215 00:10:34,360 --> 00:10:35,360 Speaker 9: for quite a long time. 216 00:10:36,240 --> 00:10:40,040 Speaker 2: I'm looking at the splash this weekend from your shop. 217 00:10:40,080 --> 00:10:43,360 Speaker 2: In the Financial Times they gave one Daniel Ivison. I 218 00:10:43,400 --> 00:10:46,280 Speaker 2: think he's an intern with PIMCO. Front and center. 219 00:10:46,040 --> 00:10:48,280 Speaker 1: Headlines bond fund giant. 220 00:10:48,320 --> 00:10:53,559 Speaker 2: PIMCO prepares for quote harder landing for global economy. How 221 00:10:53,559 --> 00:10:58,240 Speaker 2: does econobabble fit into total return in the fixed income market? 222 00:10:58,520 --> 00:11:00,800 Speaker 9: I think that view from Dan I in our group 223 00:11:00,920 --> 00:11:06,480 Speaker 9: CEO is just a cautionary note and so relative when 224 00:11:06,520 --> 00:11:09,400 Speaker 9: we say hard landing, we're saying relative to perhaps what 225 00:11:09,440 --> 00:11:12,800 Speaker 9: others are expecting. At Pimco, we're expecting a soft landing, 226 00:11:13,200 --> 00:11:15,800 Speaker 9: but that may be harder than others are thinking. So 227 00:11:15,840 --> 00:11:18,520 Speaker 9: in terms of a total return type portfolio, a Bloomberg 228 00:11:18,559 --> 00:11:21,080 Speaker 9: aggregate style of portfolio, which of course is a collection 229 00:11:21,160 --> 00:11:26,280 Speaker 9: of bonds, treasuries, mortgages, corporates, mostly market cap weighted. You 230 00:11:26,400 --> 00:11:29,120 Speaker 9: want to be up in quality. Of course, we think 231 00:11:29,520 --> 00:11:32,400 Speaker 9: if there is a slowdown or a recession, the credit 232 00:11:32,400 --> 00:11:35,880 Speaker 9: spreads could widen. The broader point is that one needn't 233 00:11:35,880 --> 00:11:38,280 Speaker 9: take a lot of duration risk, credit risk, et cetera 234 00:11:39,000 --> 00:11:41,760 Speaker 9: to get good yields in the bond market. We're looking 235 00:11:41,800 --> 00:11:44,680 Speaker 9: at five, six, seven percent type returns in assets we 236 00:11:44,760 --> 00:11:47,600 Speaker 9: think are so called money good, So you needn't take 237 00:11:47,640 --> 00:11:51,520 Speaker 9: a big leap. Consider, for example, tom where high yield 238 00:11:51,600 --> 00:11:54,240 Speaker 9: bonds are. Even though they may be attractive to some, 239 00:11:54,360 --> 00:11:57,480 Speaker 9: we'd say be cautious in the area. At spreads of 240 00:11:57,520 --> 00:12:01,120 Speaker 9: over four hundred basis points or four hundred and four 241 00:12:01,200 --> 00:12:04,839 Speaker 9: fifty on average, it's kind of tight relative to what 242 00:12:04,880 --> 00:12:07,880 Speaker 9: could happen in recession with the spread of call it, 243 00:12:07,960 --> 00:12:10,680 Speaker 9: let's say eight hundred bases points or more, and a 244 00:12:10,800 --> 00:12:13,760 Speaker 9: widening of that magnitude can in a total turn style 245 00:12:13,840 --> 00:12:17,240 Speaker 9: portfolio be painful because it would be losses. And so 246 00:12:17,679 --> 00:12:21,760 Speaker 9: we're saying prepare by keeping your podder dry and don't 247 00:12:21,800 --> 00:12:24,480 Speaker 9: reach so much. You needn't these days, with where yields 248 00:12:24,520 --> 00:12:25,480 Speaker 9: are well. 249 00:12:25,320 --> 00:12:27,440 Speaker 5: To that point, I wanted to go to duration. 250 00:12:27,520 --> 00:12:28,640 Speaker 4: So I'm glad that we're there. 251 00:12:29,000 --> 00:12:31,000 Speaker 5: You think about where we were starting to get to 252 00:12:31,080 --> 00:12:33,920 Speaker 5: on the ten year treasure yield approaching four percent. We 253 00:12:33,960 --> 00:12:36,800 Speaker 5: can put that back into the conversation to your point 254 00:12:36,840 --> 00:12:39,240 Speaker 5: that you don't have to reach that far when you 255 00:12:39,280 --> 00:12:41,760 Speaker 5: start to see the ten uere approach four percent, Does 256 00:12:41,840 --> 00:12:43,720 Speaker 5: that look like a good entry point. 257 00:12:44,200 --> 00:12:47,200 Speaker 9: Yeah, PIMCO believes, and I believe as well because we 258 00:12:47,320 --> 00:12:49,760 Speaker 9: kind of different freuse within PIMCO. The range for the 259 00:12:49,840 --> 00:12:52,800 Speaker 9: US ten year is probably now we think call it 260 00:12:52,800 --> 00:12:55,320 Speaker 9: three point three percent or so to four four and 261 00:12:55,320 --> 00:12:59,280 Speaker 9: a quarter or so. But when thinking about core fixed 262 00:12:59,280 --> 00:13:03,440 Speaker 9: income and therefore duration relative to short term products which 263 00:13:03,480 --> 00:13:06,240 Speaker 9: have very little duration, you should be thinking about the 264 00:13:06,320 --> 00:13:09,199 Speaker 9: history since nineteen seventy eight, and forgiving with the earpiece 265 00:13:09,240 --> 00:13:12,720 Speaker 9: filling out. Since nineteen seventy eight, core fixed income, and 266 00:13:12,720 --> 00:13:15,920 Speaker 9: the Bloomberg aggregate is a good representation of that has 267 00:13:16,000 --> 00:13:19,800 Speaker 9: outpaced Treasury bill returns on a three year rolling basis 268 00:13:19,880 --> 00:13:22,480 Speaker 9: ninety percent of the time, and by a very substantial 269 00:13:22,679 --> 00:13:26,560 Speaker 9: margin three percentage points. So these yields look attractive on 270 00:13:26,600 --> 00:13:29,199 Speaker 9: that basis, and so one doesn't want to get into 271 00:13:29,240 --> 00:13:33,520 Speaker 9: the game of market timing because market timing, for diversifier 272 00:13:33,640 --> 00:13:36,360 Speaker 9: is a very dangerous game. And I should add Katie 273 00:13:36,400 --> 00:13:39,000 Speaker 9: that in core fixed income and this idea that they 274 00:13:39,000 --> 00:13:42,960 Speaker 9: can outpace T bills and have considerably since nineteen seventy eight, 275 00:13:43,400 --> 00:13:47,440 Speaker 9: that the time for entering core fixed income is typically 276 00:13:47,760 --> 00:13:51,000 Speaker 9: close to the peak for the Fed Funds rate, which 277 00:13:51,160 --> 00:13:54,880 Speaker 9: we think and many think the markets think is upon us. 278 00:13:54,920 --> 00:13:57,360 Speaker 9: And the typical timeline is called maybe up to six 279 00:13:57,400 --> 00:14:00,160 Speaker 9: months prior you're good. So you don't want to play 280 00:14:00,200 --> 00:14:04,280 Speaker 9: the game of timing diversifier too much, is what we'd say. 281 00:14:04,360 --> 00:14:06,400 Speaker 9: Final final view is that if I add in three 282 00:14:06,400 --> 00:14:09,960 Speaker 9: components really quickly, the inflation view two and a half percent, 283 00:14:10,040 --> 00:14:12,720 Speaker 9: the market has a term premium, the extra yield you 284 00:14:12,720 --> 00:14:14,760 Speaker 9: get for moving out the yield curve, and the real 285 00:14:14,800 --> 00:14:17,960 Speaker 9: interest rate where marcuts think the Fed Funds rate should 286 00:14:17,960 --> 00:14:20,680 Speaker 9: be relative to inflation. Those things together put a fair 287 00:14:20,760 --> 00:14:24,440 Speaker 9: value in the current zone. So again be cautious about 288 00:14:24,640 --> 00:14:26,200 Speaker 9: the idea of market timing. 289 00:14:26,080 --> 00:14:28,080 Speaker 4: So don't try to time the market. 290 00:14:28,080 --> 00:14:30,240 Speaker 5: But then you look at the five point four trillion 291 00:14:30,400 --> 00:14:34,680 Speaker 5: dollars in cash, Like you said, very little duration risk there. 292 00:14:35,320 --> 00:14:37,400 Speaker 5: When does that start to move out? 293 00:14:37,520 --> 00:14:41,400 Speaker 9: Though it is a hard mentality in financial markets. Time 294 00:14:41,400 --> 00:14:43,320 Speaker 9: you're quite familiar with this as well, and okay to 295 00:14:43,440 --> 00:14:47,640 Speaker 9: you two in your time in the market, tell cam 296 00:14:48,400 --> 00:14:53,640 Speaker 9: but it's when others, when others start to leave. But 297 00:14:53,720 --> 00:14:57,160 Speaker 9: that's not optimal for an investor, and that's what active 298 00:14:57,200 --> 00:14:59,000 Speaker 9: management is all about, and it's why we would say 299 00:14:59,320 --> 00:15:01,280 Speaker 9: now is the time get ahead of the herd? 300 00:15:01,840 --> 00:15:05,360 Speaker 1: Yeah, but is Jerome Schneider? Did he survive the first 301 00:15:05,400 --> 00:15:06,160 Speaker 1: half of this year? 302 00:15:07,040 --> 00:15:10,600 Speaker 9: Yes, and quite well. In the short term space, there's 303 00:15:10,600 --> 00:15:13,240 Speaker 9: plenty to do as well. Consider for example, you could 304 00:15:13,240 --> 00:15:15,680 Speaker 9: purchase a T bill and get in the low fives, 305 00:15:15,680 --> 00:15:19,560 Speaker 9: but there's asset backed securities assets that are backed by 306 00:15:19,880 --> 00:15:21,960 Speaker 9: student loans, car loans, equipment. 307 00:15:22,240 --> 00:15:27,080 Speaker 2: Are you gross in five percent on cameras on Jerome Schneider? 308 00:15:27,240 --> 00:15:30,440 Speaker 9: Short term versus short term ETF we have and not 309 00:15:30,480 --> 00:15:33,680 Speaker 9: to tout it, but just as an it's Monday mint 310 00:15:33,880 --> 00:15:37,040 Speaker 9: m I n T minting money. It's the yield is 311 00:15:37,080 --> 00:15:38,760 Speaker 9: currently five percent or so. 312 00:15:38,960 --> 00:15:40,280 Speaker 1: It's unbelievable. 313 00:15:41,840 --> 00:15:42,680 Speaker 10: Distribution yield. 314 00:15:42,760 --> 00:15:45,040 Speaker 2: Nobody at the table remembers this world and it's like 315 00:15:45,080 --> 00:15:45,880 Speaker 2: we're back to it. 316 00:15:45,800 --> 00:15:49,000 Speaker 9: But the asset backed securities and others large short term 317 00:15:49,000 --> 00:15:52,000 Speaker 9: measments to have fields close to six percent, Tony. 318 00:15:51,760 --> 00:15:54,720 Speaker 11: Is it possible to see a benign resteepening of the 319 00:15:54,760 --> 00:15:55,320 Speaker 11: yield curve? 320 00:15:56,480 --> 00:15:59,680 Speaker 9: Benign resteepening meaning that I think what you're thinking, Cameron, 321 00:15:59,760 --> 00:16:02,960 Speaker 9: is that in a steepening some event has occurred to 322 00:16:03,160 --> 00:16:06,000 Speaker 9: cause a flight into short term insturance. The type of 323 00:16:06,600 --> 00:16:09,480 Speaker 9: thing perhaps that Katie's thinking about that could cause movement 324 00:16:11,320 --> 00:16:16,680 Speaker 9: not usually, of course, the history suggests perhaps not, and 325 00:16:16,720 --> 00:16:19,080 Speaker 9: many are thinking, can there be a soft landing in 326 00:16:19,080 --> 00:16:23,440 Speaker 9: the soft landing that could occur? It may be occurring now. 327 00:16:23,600 --> 00:16:26,800 Speaker 9: US growth last year was about economic growth was one 328 00:16:26,880 --> 00:16:29,640 Speaker 9: percent or so. It's tracking a little higher today, but 329 00:16:29,680 --> 00:16:31,640 Speaker 9: we think it'll be slower than that for this year. 330 00:16:32,080 --> 00:16:33,880 Speaker 9: We're in a growth The US is in a growth 331 00:16:33,960 --> 00:16:37,200 Speaker 9: recession today. Growth recession is something above zero but below 332 00:16:37,760 --> 00:16:40,480 Speaker 9: growth potential. The US has a potential to grow each 333 00:16:40,520 --> 00:16:42,640 Speaker 9: year about one point eight percent. That's a combination of 334 00:16:42,640 --> 00:16:45,680 Speaker 9: productivity one and a half plus changes in labor force 335 00:16:45,960 --> 00:16:50,200 Speaker 9: about point three. The US is growing below that, which 336 00:16:50,320 --> 00:16:54,000 Speaker 9: enables supply to catch up with demand, the ability to 337 00:16:54,040 --> 00:16:56,000 Speaker 9: produce goods and services. 338 00:16:55,560 --> 00:16:56,520 Speaker 10: To meet demand. 339 00:16:56,600 --> 00:17:01,200 Speaker 9: It's catching up, and that can enable the steepening, because 340 00:17:01,240 --> 00:17:05,160 Speaker 9: then the Fed can say we needn't to raise interest 341 00:17:05,240 --> 00:17:08,280 Speaker 9: rates anymore. And if supply catches up enough, if they're 342 00:17:08,280 --> 00:17:11,480 Speaker 9: in a growth recession, there it can happen, and then 343 00:17:11,680 --> 00:17:15,200 Speaker 9: eventually there are interest rate cuts. But we'd caution that 344 00:17:15,440 --> 00:17:17,920 Speaker 9: the view on interest rate cuts flies in the face 345 00:17:17,960 --> 00:17:20,120 Speaker 9: of Paul Volker, the legendary FED Chair. 346 00:17:20,960 --> 00:17:22,280 Speaker 10: We felt that for some time. 347 00:17:22,400 --> 00:17:25,720 Speaker 9: I've certainly felt that personally, very strongly for a long time. 348 00:17:25,800 --> 00:17:26,000 Speaker 3: Now. 349 00:17:26,440 --> 00:17:29,160 Speaker 9: This is the idea that the Chair Powell has today 350 00:17:29,160 --> 00:17:32,080 Speaker 9: is to keep at it. And he's quoting directly from 351 00:17:32,680 --> 00:17:34,719 Speaker 9: Paul Volker in the book Keeping at It. You have 352 00:17:34,800 --> 00:17:39,080 Speaker 9: to persist with this view in the battle against inflation 353 00:17:39,160 --> 00:17:41,320 Speaker 9: to defeat it. And that's what's happening. And this is 354 00:17:41,359 --> 00:17:45,000 Speaker 9: why Chair Powell will go to heaven, so to speak, 355 00:17:45,040 --> 00:17:48,400 Speaker 9: central bank heaven, and because Tom the view and Cameron 356 00:17:48,480 --> 00:17:50,800 Speaker 9: and Katie the only the view is that only hawks 357 00:17:50,840 --> 00:17:51,960 Speaker 9: go to central bank heaven. 358 00:17:52,920 --> 00:17:56,160 Speaker 11: Well, he also have been saying that history warns against 359 00:17:56,200 --> 00:17:59,119 Speaker 11: cutting rates too soon. So do you think that lower 360 00:17:59,119 --> 00:18:02,800 Speaker 11: inflation is enough for the Fed to cut rates? Or 361 00:18:02,800 --> 00:18:05,200 Speaker 11: do you think that we actually need to see higher unemployment, 362 00:18:05,280 --> 00:18:06,119 Speaker 11: much weaker growth. 363 00:18:06,200 --> 00:18:09,760 Speaker 9: A lower inflation expectation would cut it. 364 00:18:09,760 --> 00:18:10,560 Speaker 10: It is occurring. 365 00:18:10,720 --> 00:18:13,880 Speaker 9: It is observable in the bond market through inflation protective 366 00:18:13,920 --> 00:18:16,240 Speaker 9: securities the price for the inflation rate to be about 367 00:18:16,280 --> 00:18:19,840 Speaker 9: two point two percent or so, but it's not observable 368 00:18:19,920 --> 00:18:23,640 Speaker 9: in the general public. Think about various generations. I'm from 369 00:18:23,680 --> 00:18:26,880 Speaker 9: the older generation. I'm a boomer born between forty six 370 00:18:26,880 --> 00:18:29,480 Speaker 9: and sixty four. Take your guess, really which year that 371 00:18:29,680 --> 00:18:30,760 Speaker 9: is sixty four? 372 00:18:31,840 --> 00:18:33,120 Speaker 1: But I slipped right into that. 373 00:18:33,920 --> 00:18:37,399 Speaker 9: But new generations of Americans have experienced inflation, so my 374 00:18:37,480 --> 00:18:38,320 Speaker 9: generation did. 375 00:18:38,359 --> 00:18:40,000 Speaker 10: We've always expect that could be inflation. 376 00:18:40,160 --> 00:18:44,359 Speaker 9: Now the generations X, the millennials, and Z all believe 377 00:18:44,440 --> 00:18:47,560 Speaker 9: that the prices can go higher faster than any time. 378 00:18:48,040 --> 00:18:49,639 Speaker 10: You've got to get it out of their heads. 379 00:18:49,800 --> 00:18:52,600 Speaker 9: And so the public's view on inflation could be enough, 380 00:18:52,640 --> 00:18:53,600 Speaker 9: and that's what's needed. 381 00:18:54,240 --> 00:18:54,720 Speaker 1: Let's listen. 382 00:18:54,920 --> 00:18:56,760 Speaker 2: I think I went back and forth to Swarning with 383 00:18:56,800 --> 00:18:59,080 Speaker 2: doctor Olarian. He's on a plane tomorrow be with us, 384 00:18:59,119 --> 00:19:01,840 Speaker 2: I mean on Wednesday. But let me ask you something 385 00:19:01,920 --> 00:19:04,480 Speaker 2: Mohammed would ask, which is the unknown unknown. 386 00:19:04,119 --> 00:19:04,800 Speaker 1: That's out there? 387 00:19:05,119 --> 00:19:06,720 Speaker 2: And to me, if I look at the Bloomberg Total 388 00:19:06,760 --> 00:19:12,480 Speaker 2: Return Index, Lehman Barkley's index, beautiful. There's a textbook, Guy's Bolkowski. 389 00:19:13,000 --> 00:19:15,960 Speaker 2: Everybody had to read Bolkowski with four hundred and fifty seven. 390 00:19:16,080 --> 00:19:19,199 Speaker 2: It was almost as thick as Tony's Seigem's book. You 391 00:19:19,240 --> 00:19:21,600 Speaker 2: had to read every chart, pat and known to mankind. 392 00:19:22,280 --> 00:19:26,560 Speaker 2: I'm sorry, bonds are in an absolute textbook, Pennant. No 393 00:19:26,600 --> 00:19:30,600 Speaker 2: one's looking for price down, yield up. What if we 394 00:19:30,600 --> 00:19:31,919 Speaker 2: get that unknown unknown? 395 00:19:31,960 --> 00:19:34,560 Speaker 9: It is the unknown unknown that I think. And I 396 00:19:34,680 --> 00:19:37,040 Speaker 9: wrote a book on this matter, about the idea of 397 00:19:37,040 --> 00:19:40,359 Speaker 9: a Kinesian endpoint, the idea of practical limits to the 398 00:19:40,440 --> 00:19:43,920 Speaker 9: use of debt. There was evidence of that last fall 399 00:19:43,960 --> 00:19:48,480 Speaker 9: when Prime Minister Trust wanted to to increase the indebtedness. 400 00:19:48,760 --> 00:19:53,280 Speaker 9: The markets reacted violently, The bond market collapsed, the pound 401 00:19:53,320 --> 00:19:56,360 Speaker 9: got pounded, so to speak. And so what's out there, 402 00:19:56,520 --> 00:20:00,359 Speaker 9: thenown unknown is whether the bond markets would re act 403 00:20:00,440 --> 00:20:04,120 Speaker 9: violently again in all the nations to increase in deadedness. 404 00:20:05,000 --> 00:20:07,320 Speaker 2: Matthewess and a guy out on Twitter this weekend. He 405 00:20:07,400 --> 00:20:10,480 Speaker 2: brought up Sheldon Naatenberg and all the Greek letters at 406 00:20:10,520 --> 00:20:15,440 Speaker 2: Crescenzi frankly or world class at Do bonds display gamma? 407 00:20:15,840 --> 00:20:19,760 Speaker 2: We all we all know equities display accelerated tendencies in 408 00:20:19,840 --> 00:20:21,080 Speaker 2: a log normal space. 409 00:20:21,160 --> 00:20:22,440 Speaker 1: Down they go when they go down. 410 00:20:23,040 --> 00:20:26,560 Speaker 2: If we get priced down yields up, do you get 411 00:20:26,600 --> 00:20:27,240 Speaker 2: bon gamma? 412 00:20:27,600 --> 00:20:30,520 Speaker 10: There was gamma in the UK last year. It was arrested. 413 00:20:30,800 --> 00:20:34,320 Speaker 9: I agree, and luckily the bond market is the comp 414 00:20:34,440 --> 00:20:37,840 Speaker 9: on the beat in this sense that it disciplines the 415 00:20:37,840 --> 00:20:41,200 Speaker 9: fiscal authorities. It disciplines the monetary authorities to say no, 416 00:20:41,760 --> 00:20:44,440 Speaker 9: you can't do that anymore, and so any yield rise 417 00:20:44,440 --> 00:20:47,840 Speaker 9: from here that gamma, the vola vol if you will, 418 00:20:48,520 --> 00:20:52,400 Speaker 9: would be arrested by the bond market disciplining politicians and 419 00:20:52,440 --> 00:20:56,000 Speaker 9: the monetary authorities to do to avoid doing the things 420 00:20:56,000 --> 00:20:56,560 Speaker 9: that could. 421 00:20:58,440 --> 00:20:59,160 Speaker 10: Self stabilizing. 422 00:20:59,160 --> 00:21:03,440 Speaker 2: Okay, but ivic, said Dana ivicks And of PIMCO Worldwide 423 00:21:03,480 --> 00:21:04,399 Speaker 2: Headlines this weekend. 424 00:21:04,640 --> 00:21:06,920 Speaker 1: I don't think he's watching this morning. He's on some 425 00:21:07,040 --> 00:21:08,000 Speaker 1: boat somewhere. 426 00:21:08,080 --> 00:21:10,120 Speaker 10: Early Port Beach. It's three forty three. 427 00:21:10,280 --> 00:21:10,760 Speaker 7: That's okay. 428 00:21:11,000 --> 00:21:13,159 Speaker 1: Maybe he's who knows, Let me get you out on 429 00:21:13,200 --> 00:21:13,719 Speaker 1: a linear. 430 00:21:13,840 --> 00:21:16,880 Speaker 2: Are we going to see the bond market discipline central 431 00:21:16,960 --> 00:21:19,440 Speaker 2: banks in the next eighteen months. 432 00:21:19,240 --> 00:21:23,040 Speaker 9: And if there were proposals to increase indebtedness and the 433 00:21:23,119 --> 00:21:27,240 Speaker 9: monetary authority seemed to support it, I will make the bed. Yes, 434 00:21:27,720 --> 00:21:30,040 Speaker 9: But it looks like, first of all, I've got an 435 00:21:30,040 --> 00:21:33,200 Speaker 9: election ahead, there won't be such a plan on the 436 00:21:33,240 --> 00:21:37,600 Speaker 9: fiscal side for some time. And one important point, Thomas, 437 00:21:37,640 --> 00:21:39,960 Speaker 9: I think that this means that any yield rives would 438 00:21:39,960 --> 00:21:42,520 Speaker 9: be self stabilizing. So don't worry in Katie retalmentration, so 439 00:21:42,640 --> 00:21:44,600 Speaker 9: don't worry so much that'd be self stabilizing. 440 00:21:45,000 --> 00:21:46,720 Speaker 10: The Bottmarck of Vincilantes are back. 441 00:21:46,800 --> 00:21:49,560 Speaker 2: I think Bramma Wison here that was depressing. Tony Crescenzi 442 00:21:49,960 --> 00:21:51,560 Speaker 2: tanned and wrested from PIMCO. 443 00:21:51,800 --> 00:21:53,360 Speaker 1: Thank you very much. 444 00:22:04,320 --> 00:22:07,720 Speaker 2: Right now, it's not only the equity conversation of the day, 445 00:22:07,760 --> 00:22:11,800 Speaker 2: it's the equity kickoff conversation of a second half. Anahon 446 00:22:11,880 --> 00:22:15,520 Speaker 2: at Wells Fargo brings prodigious math and physics whither to 447 00:22:15,680 --> 00:22:17,359 Speaker 2: the study of what we got. I'm going to go 448 00:22:17,400 --> 00:22:20,800 Speaker 2: derivative honor so I so I can save myself. I 449 00:22:20,880 --> 00:22:26,240 Speaker 2: recommended Sheldon Natanberg's Classic Options textbook to some intern the 450 00:22:26,359 --> 00:22:29,320 Speaker 2: other day. All the Greek letters and all that I 451 00:22:29,440 --> 00:22:33,359 Speaker 2: look at gamma as the accelerative tendencies of any given index. 452 00:22:33,400 --> 00:22:35,760 Speaker 2: In this case, let's take the standard and purse five hundred. 453 00:22:36,359 --> 00:22:39,639 Speaker 2: We came off the mat from a bear market October. 454 00:22:40,119 --> 00:22:43,639 Speaker 2: Maybe it's a bull market. Can you identify with all 455 00:22:43,680 --> 00:22:46,840 Speaker 2: your math and physics second leg of a bull market? 456 00:22:47,400 --> 00:22:49,480 Speaker 12: Well, I'll put in a quick plug because I prefer 457 00:22:49,560 --> 00:22:51,520 Speaker 12: the whole book of Naytenburgh, But you know, I'll let 458 00:22:51,600 --> 00:22:54,280 Speaker 12: you go on that one. With the acceleration in the market, 459 00:22:54,359 --> 00:22:56,520 Speaker 12: I think what's important is what's really dragging up the 460 00:22:56,600 --> 00:22:59,720 Speaker 12: market and how much more can that go. The technicals 461 00:22:59,720 --> 00:23:02,200 Speaker 12: on the uber cap led rally here look to be 462 00:23:02,320 --> 00:23:05,600 Speaker 12: losing steam at overbought levels, but you've seen that. Really 463 00:23:05,680 --> 00:23:08,720 Speaker 12: the correlation within these five hundred names of the S 464 00:23:08,760 --> 00:23:12,200 Speaker 12: and P five hundred have declined because of that separation 465 00:23:12,480 --> 00:23:15,320 Speaker 12: of these handful of names versus the rest of the market. 466 00:23:15,600 --> 00:23:18,359 Speaker 12: And that's kind of what's bringing equity volatility lower. That 467 00:23:18,520 --> 00:23:21,679 Speaker 12: might be which also has been people concerned with low breath. 468 00:23:22,040 --> 00:23:24,520 Speaker 12: So until we see that breath expand, I don't think 469 00:23:24,560 --> 00:23:26,560 Speaker 12: you see another the surge second half. 470 00:23:26,680 --> 00:23:30,200 Speaker 2: Do you reallocate or do you read balance? You're not 471 00:23:30,280 --> 00:23:33,120 Speaker 2: going to tell me I'm supposed to sell Apple or Nvidio. 472 00:23:32,800 --> 00:23:36,119 Speaker 12: Right, Well, perhaps not sell, but maybe not be overweight 473 00:23:36,240 --> 00:23:39,200 Speaker 12: those kind of areas. So with the tech market especially 474 00:23:39,280 --> 00:23:41,679 Speaker 12: being tied with growth and the way that yields might 475 00:23:41,760 --> 00:23:44,400 Speaker 12: be going higher before they come back lower, we would 476 00:23:44,440 --> 00:23:47,280 Speaker 12: recommend me more neutral in the space and looking for 477 00:23:47,400 --> 00:23:48,119 Speaker 12: other growth aptits. 478 00:23:48,200 --> 00:23:49,760 Speaker 2: Do you agree with that that we could have an 479 00:23:49,800 --> 00:23:51,960 Speaker 2: option where rates go higher and the price in the 480 00:23:52,000 --> 00:23:55,920 Speaker 2: Bloomberg total return dicts could actually go down to new weakness? 481 00:23:56,040 --> 00:23:58,400 Speaker 2: Is that part of you know, the mix of Mike 482 00:23:58,480 --> 00:24:02,840 Speaker 2: Wilson's Morgan Stanley is different because they got forty seven opinions, 483 00:24:03,240 --> 00:24:05,320 Speaker 2: But is the general statement there that you could have 484 00:24:05,359 --> 00:24:07,439 Speaker 2: a higher yield regime at Morgan Stanley. 485 00:24:07,760 --> 00:24:10,000 Speaker 4: Yeah. I think Look, there's there's a lot of. 486 00:24:11,600 --> 00:24:14,320 Speaker 3: Parsing the economy versus the markets here, right, and the 487 00:24:14,400 --> 00:24:17,800 Speaker 3: economy is not the markets, uh, And so you can 488 00:24:17,880 --> 00:24:21,200 Speaker 3: have higher interest rates trying to slow the economy, but 489 00:24:21,280 --> 00:24:24,560 Speaker 3: there are other factors driving different parts of the markets. 490 00:24:24,600 --> 00:24:26,320 Speaker 3: I mean, I think that's what is that what you're 491 00:24:26,359 --> 00:24:28,800 Speaker 3: saying on that, like, because you've got just a handful 492 00:24:28,840 --> 00:24:31,800 Speaker 3: of names right that are propping up the market, whereas 493 00:24:33,040 --> 00:24:37,000 Speaker 3: the economy looks you stronger, but there's this constant concern that, Okay, 494 00:24:37,119 --> 00:24:38,359 Speaker 3: rates are going to go higher, but we're going to 495 00:24:38,400 --> 00:24:41,639 Speaker 3: go into recession, and so I think you end up 496 00:24:41,680 --> 00:24:42,680 Speaker 3: getting those differences. 497 00:24:43,359 --> 00:24:45,440 Speaker 12: There's definitely can be that deviation you bring up a 498 00:24:45,480 --> 00:24:47,879 Speaker 12: great point. There can be the economic health, there can 499 00:24:47,960 --> 00:24:50,800 Speaker 12: be the economic recession, but what about the earnings recession. 500 00:24:51,160 --> 00:24:53,840 Speaker 12: I think those two can have absolutely different timings. And 501 00:24:53,920 --> 00:24:55,959 Speaker 12: that's what we're a little bit worried about here. It's 502 00:24:56,000 --> 00:24:58,960 Speaker 12: what's been in people's minds. We might see a recession 503 00:24:59,040 --> 00:25:01,280 Speaker 12: that might be mild, and and yet the consumer continues 504 00:25:01,320 --> 00:25:03,919 Speaker 12: to spend as sure that you've seen, but that spending 505 00:25:04,040 --> 00:25:07,680 Speaker 12: is slowing. So how much does that deceleration or the 506 00:25:07,800 --> 00:25:11,920 Speaker 12: gamma and that spending really start to bleed into equity 507 00:25:12,000 --> 00:25:14,800 Speaker 12: corporate earnings And that's what we as strategists are really 508 00:25:14,840 --> 00:25:15,600 Speaker 12: trying to decipher. 509 00:25:15,880 --> 00:25:17,760 Speaker 5: Well, even still, it feels like some of the worst 510 00:25:17,840 --> 00:25:20,920 Speaker 5: case scenarios for earnings have been lifted in the last 511 00:25:21,000 --> 00:25:24,080 Speaker 5: couple of weeks, especially, you know, when it comes to profits, 512 00:25:24,560 --> 00:25:25,520 Speaker 5: was that premature? 513 00:25:26,200 --> 00:25:28,320 Speaker 12: I think it is a little premature. I think you 514 00:25:28,440 --> 00:25:31,440 Speaker 12: see some companies in corporates doing quite well. But what's 515 00:25:31,480 --> 00:25:34,760 Speaker 12: concerning is if you look on a sequential basis overall 516 00:25:34,920 --> 00:25:36,920 Speaker 12: for the S and P five hundred, you're seeing that 517 00:25:37,080 --> 00:25:41,080 Speaker 12: top line revenue figures are declining faster than where the 518 00:25:41,200 --> 00:25:45,720 Speaker 12: consensus EPs or consensus revenue numbers would put it. Now 519 00:25:46,080 --> 00:25:49,520 Speaker 12: take into account, we're also seeing more margin compression than expected. 520 00:25:49,880 --> 00:25:53,479 Speaker 12: What happens what's remaining of that bottom line sequentially for growth? 521 00:25:53,880 --> 00:25:56,080 Speaker 12: Now that's not to say again that could be a 522 00:25:56,119 --> 00:25:58,879 Speaker 12: little different from where multiples trade and where the market 523 00:25:58,960 --> 00:26:01,800 Speaker 12: can trade. Perhaps the market is already looking to next 524 00:26:01,920 --> 00:26:04,400 Speaker 12: year's earnings, but we do have to keep in mind 525 00:26:04,440 --> 00:26:06,240 Speaker 12: that we need to still get there. We have another 526 00:26:06,320 --> 00:26:06,879 Speaker 12: six months. 527 00:26:07,320 --> 00:26:09,840 Speaker 5: I also want to get your thoughts on equity volatility. 528 00:26:09,880 --> 00:26:11,399 Speaker 5: You brought it up, and you look at the VIX 529 00:26:11,560 --> 00:26:15,600 Speaker 5: right now it's below fourteen. Equity of all has been declining. 530 00:26:15,720 --> 00:26:19,800 Speaker 5: But does a VIX below fourteen feel right at this moment? 531 00:26:20,200 --> 00:26:22,240 Speaker 12: Well, when you say feel right, I would say, given 532 00:26:22,320 --> 00:26:25,320 Speaker 12: what's happened with the actual bounds and what's leading the market, 533 00:26:25,440 --> 00:26:27,800 Speaker 12: it's not. I think that's part of what it is, 534 00:26:27,920 --> 00:26:30,720 Speaker 12: that index correlation that brings it down. But on the 535 00:26:30,800 --> 00:26:33,040 Speaker 12: other hand, you know who thought with this post a 536 00:26:33,200 --> 00:26:35,680 Speaker 12: pandemic regime, we would see a thirteen handle against so 537 00:26:35,960 --> 00:26:39,359 Speaker 12: soon particularly was still the fear of a session. So 538 00:26:39,800 --> 00:26:41,520 Speaker 12: I'd say that I don't know if it feels right. 539 00:26:41,600 --> 00:26:44,760 Speaker 12: I can't say I feel quite comfortable, but mechanically it 540 00:26:44,840 --> 00:26:46,119 Speaker 12: seems to be the right value. 541 00:26:46,359 --> 00:26:48,000 Speaker 2: And now the part of the show, folks, where we 542 00:26:48,040 --> 00:26:49,800 Speaker 2: go and I seem to live on anahe and we 543 00:26:49,920 --> 00:26:53,640 Speaker 2: do this to punish her. The essay the of last 544 00:26:54,400 --> 00:26:57,520 Speaker 2: the first six months rather was Larry MacDonald wrote a 545 00:26:57,640 --> 00:26:59,560 Speaker 2: brilliant essay went out on the Wall Street. 546 00:26:59,560 --> 00:27:00,680 Speaker 1: It was ill and all that. 547 00:27:01,280 --> 00:27:04,280 Speaker 2: And he starts with a massive lump of money and 548 00:27:04,440 --> 00:27:07,320 Speaker 2: ETF's index funds the wall of four oh one k 549 00:27:07,560 --> 00:27:11,200 Speaker 2: institutional money out there, and then he walks through on 550 00:27:11,359 --> 00:27:14,680 Speaker 2: top of it x number of derivative strategies, almost like 551 00:27:14,800 --> 00:27:18,560 Speaker 2: tranches of a build up of notional value. To you 552 00:27:18,720 --> 00:27:21,840 Speaker 2: and the quants at Wells Fargo feel that we are 553 00:27:22,040 --> 00:27:28,480 Speaker 2: going into a second half with notional derivative instability potentials 554 00:27:29,080 --> 00:27:30,800 Speaker 2: or is there integrity. 555 00:27:30,280 --> 00:27:30,959 Speaker 1: To the system. 556 00:27:31,480 --> 00:27:33,680 Speaker 12: Now that's a great point when you bring up instability, 557 00:27:33,760 --> 00:27:36,520 Speaker 12: because are people hedged right now? When wall is cheap. 558 00:27:36,560 --> 00:27:39,280 Speaker 12: You'd expect the hedges are cheap, but why buy this 559 00:27:39,440 --> 00:27:42,720 Speaker 12: downside protection if we're only going one way upwards? It 560 00:27:42,760 --> 00:27:44,120 Speaker 12: feels like you're tearing up money. 561 00:27:44,240 --> 00:27:46,480 Speaker 1: So it feels like nineteen eighty seven, but continue. 562 00:27:47,720 --> 00:27:50,280 Speaker 12: So in that kind of environment, it comes to maybe 563 00:27:50,320 --> 00:27:52,720 Speaker 12: it is prudent to have some protection. But we're not 564 00:27:52,880 --> 00:27:56,200 Speaker 12: calling for a major pullback here or a major downturn, 565 00:27:56,520 --> 00:27:59,960 Speaker 12: but perhaps again that deceleration in this upward trend we've seen. 566 00:28:00,240 --> 00:28:02,040 Speaker 12: So I think that if you want to put on 567 00:28:02,119 --> 00:28:06,520 Speaker 12: those option strategies, maintain your upside exposure, but also take 568 00:28:06,600 --> 00:28:08,840 Speaker 12: them off the top in terms of your stock positions 569 00:28:09,160 --> 00:28:13,200 Speaker 12: and consider rotating that to the less explore in parts 570 00:28:13,200 --> 00:28:13,720 Speaker 12: of the market. 571 00:28:13,920 --> 00:28:16,560 Speaker 2: Is you're study that rebalancing works. I mean Harry Mark, 572 00:28:16,560 --> 00:28:18,800 Speaker 2: who it's stuying, the Nobel laureate ninety five years old. 573 00:28:18,840 --> 00:28:22,000 Speaker 2: He's the one that gave us diversification in rebail. I'm 574 00:28:22,040 --> 00:28:24,560 Speaker 2: not a big fan of rebail. Sell your winners. Where 575 00:28:24,560 --> 00:28:25,040 Speaker 2: are you on that? 576 00:28:25,560 --> 00:28:25,720 Speaker 8: Well? 577 00:28:25,800 --> 00:28:28,160 Speaker 12: I think it depends on timing, and here again we're 578 00:28:28,200 --> 00:28:30,880 Speaker 12: not saying get out of your winners completely, but take 579 00:28:30,920 --> 00:28:33,040 Speaker 12: a little You know, it's been six months and you've 580 00:28:33,040 --> 00:28:36,080 Speaker 12: already gotten thirty three percent on some of these names 581 00:28:36,119 --> 00:28:39,400 Speaker 12: in the QTF and you're passive. You know, you can't 582 00:28:39,440 --> 00:28:41,280 Speaker 12: be too mad about that one. And it wouldn't be 583 00:28:41,400 --> 00:28:43,080 Speaker 12: the worst thing. It takes some of that home, or 584 00:28:43,120 --> 00:28:45,440 Speaker 12: pocket it and put it into something of the lives. 585 00:28:45,680 --> 00:28:48,520 Speaker 1: She sounds like a trader, Well she was a trader. 586 00:28:49,120 --> 00:28:52,320 Speaker 5: Let's take that home, take some profits, you know, lock 587 00:28:52,400 --> 00:28:54,360 Speaker 5: in some of those games. I want to go back 588 00:28:54,400 --> 00:28:56,800 Speaker 5: to that essay that Tom brought up. I think you 589 00:28:56,880 --> 00:28:59,880 Speaker 5: were having a conversation with amyble Silverman a week or 590 00:29:00,080 --> 00:29:03,480 Speaker 5: to ago about covered call strategies. Some of the most 591 00:29:03,520 --> 00:29:06,360 Speaker 5: popular ETFs out there on the market right now are 592 00:29:06,440 --> 00:29:09,840 Speaker 5: covered call strategies. They sell call options. And when you 593 00:29:09,920 --> 00:29:14,800 Speaker 5: think about the stability of markets and this drag lower involatility, 594 00:29:15,160 --> 00:29:19,120 Speaker 5: do those sorts of strategies have any volatility masking effects. 595 00:29:19,760 --> 00:29:22,800 Speaker 12: It is possible. And you think about if the average 596 00:29:22,840 --> 00:29:26,240 Speaker 12: investor is selling calls, then the broker on the other 597 00:29:26,280 --> 00:29:28,440 Speaker 12: side has to buy those calls and they need to 598 00:29:28,560 --> 00:29:30,880 Speaker 12: delta hedge. So when they buy those calls, they need 599 00:29:31,000 --> 00:29:34,440 Speaker 12: to sell the underlying to hedge those delta positions. So 600 00:29:34,760 --> 00:29:36,880 Speaker 12: you have this kind of dynamic where some people are 601 00:29:36,920 --> 00:29:40,280 Speaker 12: holding these calls on their own outright, other people are 602 00:29:40,360 --> 00:29:41,240 Speaker 12: holding them hedged. 603 00:29:41,640 --> 00:29:44,120 Speaker 2: What we do here, folks, is when any wise as 604 00:29:44,200 --> 00:29:47,240 Speaker 2: derivative strategists mentions delta hedges, we always turn to the 605 00:29:47,320 --> 00:29:50,960 Speaker 2: economists to translate. She's going on derivatives and Greek letters 606 00:29:51,000 --> 00:29:53,440 Speaker 2: on us. Would you save us with a question for anahet? 607 00:29:53,560 --> 00:29:54,840 Speaker 4: Okay, okay, I'll save this. 608 00:29:55,560 --> 00:29:59,719 Speaker 3: So it's been really difficult with the incoming data being 609 00:30:00,240 --> 00:30:03,360 Speaker 3: especially when you think about jobs, for anyone to believe 610 00:30:03,400 --> 00:30:07,160 Speaker 3: that there's any other direction but up for equities, and 611 00:30:07,320 --> 00:30:11,080 Speaker 3: so you know, we're looking for another big print on Friday, 612 00:30:11,320 --> 00:30:15,200 Speaker 3: and so you know, it's just very difficult for investors 613 00:30:15,320 --> 00:30:16,720 Speaker 3: to get past. 614 00:30:16,560 --> 00:30:17,280 Speaker 8: That, right. 615 00:30:17,440 --> 00:30:19,840 Speaker 3: So it is that what it's going to take just 616 00:30:20,000 --> 00:30:23,720 Speaker 3: a really clear slow down in jobs or really clear 617 00:30:23,960 --> 00:30:27,120 Speaker 3: increase in jobless claims something in order to get people 618 00:30:27,240 --> 00:30:30,640 Speaker 3: to start to think that maybe there could be you know, 619 00:30:31,080 --> 00:30:33,320 Speaker 3: more nefarious outcome for the economy in the back half 620 00:30:33,360 --> 00:30:33,760 Speaker 3: of the year. 621 00:30:34,120 --> 00:30:36,360 Speaker 12: I certainly think that an employment picture is probably the 622 00:30:36,440 --> 00:30:38,680 Speaker 12: lynchpin that we're all looking for, and that's why we're 623 00:30:38,760 --> 00:30:42,920 Speaker 12: so focused on every single jobs or wages related release 624 00:30:43,320 --> 00:30:45,680 Speaker 12: and so right now we expect the consensus we're in 625 00:30:45,760 --> 00:30:48,200 Speaker 12: line with about three point six on the unemployment rate. 626 00:30:48,600 --> 00:30:50,960 Speaker 12: If that holds, I think the market has some of 627 00:30:51,040 --> 00:30:54,040 Speaker 12: that priced in already. But unless we see, like you mentioned, 628 00:30:54,160 --> 00:30:58,920 Speaker 12: something really concerning a big uptick in unemployment or some 629 00:30:59,080 --> 00:31:02,200 Speaker 12: big deterioration. And in the wage picture for us, it 630 00:31:02,280 --> 00:31:04,560 Speaker 12: seems like somewhat sideways to steady going. 631 00:31:04,920 --> 00:31:06,160 Speaker 1: What's your SPX level. 632 00:31:06,680 --> 00:31:09,240 Speaker 12: We're still at forty four to twenty in terms of 633 00:31:09,360 --> 00:31:10,280 Speaker 12: for a soft landing. 634 00:31:10,320 --> 00:31:12,360 Speaker 6: Now we've breached teak the summer office. 635 00:31:12,400 --> 00:31:14,600 Speaker 12: That what that means, well, you know they are that 636 00:31:14,880 --> 00:31:16,840 Speaker 12: sell and may go away. Maybe it's the sell and 637 00:31:16,960 --> 00:31:19,040 Speaker 12: June go away, but we wouldn't say quite go away. 638 00:31:19,400 --> 00:31:22,120 Speaker 12: I do think that you could see some further upside, 639 00:31:22,320 --> 00:31:24,760 Speaker 12: but the question is how much more. And towards the 640 00:31:24,920 --> 00:31:27,320 Speaker 12: end of the year, as we start realizing that consumer 641 00:31:27,360 --> 00:31:30,680 Speaker 12: spending continues to deteriorate and that starts to take hold 642 00:31:30,840 --> 00:31:33,200 Speaker 12: and that earnings picture kicks in, I think you see 643 00:31:33,200 --> 00:31:33,960 Speaker 12: a little pullback. 644 00:31:34,160 --> 00:31:42,240 Speaker 2: And thank you so much with Wells Fargo, but we're 645 00:31:42,240 --> 00:31:45,560 Speaker 2: gonna have allen joy now. With Jim Bianco, he's president 646 00:31:45,600 --> 00:31:49,320 Speaker 2: of Bianco Research. Hugely followed on the street, and what 647 00:31:49,440 --> 00:31:52,080 Speaker 2: I find is it's a it's a smart note always. 648 00:31:52,160 --> 00:31:55,480 Speaker 2: Of course that's Jim Bianco, but there'll be one sentence 649 00:31:55,760 --> 00:31:58,719 Speaker 2: that hits you over the head. We get that now 650 00:31:58,760 --> 00:32:03,120 Speaker 2: from Jim Bianco. Rory talks about inflation coming down to 651 00:32:03,280 --> 00:32:07,760 Speaker 2: that before level and then it will reverse and drift higher. 652 00:32:08,160 --> 00:32:10,560 Speaker 2: Jim state the theory, how will we get to three 653 00:32:10,640 --> 00:32:12,080 Speaker 2: percent then drift higher? 654 00:32:13,360 --> 00:32:14,640 Speaker 7: Well, it's the base effect. 655 00:32:15,160 --> 00:32:17,600 Speaker 8: Last year, June of twenty twenty two, we had one 656 00:32:17,600 --> 00:32:20,720 Speaker 8: of the highest monthly numbers ever at one point two percent. 657 00:32:20,880 --> 00:32:23,640 Speaker 8: You may remember gasoline prices were five dollars a gallon 658 00:32:24,080 --> 00:32:26,360 Speaker 8: a year ago. We're going to drop that off and 659 00:32:26,360 --> 00:32:28,360 Speaker 8: we're going to replace it with a much lower number, 660 00:32:28,920 --> 00:32:31,880 Speaker 8: something like point four or in that range, and that'll 661 00:32:31,880 --> 00:32:34,600 Speaker 8: bring the year over year inflation rate down to three percent. 662 00:32:34,840 --> 00:32:35,320 Speaker 7: For June. 663 00:32:36,040 --> 00:32:40,840 Speaker 8: July of twenty twenty two was zero, August was point two. 664 00:32:41,240 --> 00:32:44,120 Speaker 8: Those numbers are gonna be easy to jump over. And 665 00:32:44,240 --> 00:32:46,880 Speaker 8: then if you start looking at September, November, December, you 666 00:32:46,960 --> 00:32:48,200 Speaker 8: got point two's point ones. 667 00:32:48,280 --> 00:32:50,080 Speaker 7: Those numbers will be easier to jump over. 668 00:32:50,160 --> 00:32:53,720 Speaker 8: So we should bottom at three percent and start drifting 669 00:32:53,800 --> 00:32:58,080 Speaker 8: towards four percent. Now, I'm assuming no major downturn, no 670 00:32:59,000 --> 00:33:01,600 Speaker 8: kind of crisis that comes along, no heating up. 671 00:33:01,560 --> 00:33:03,760 Speaker 7: Of the war that could change that equation. 672 00:33:04,400 --> 00:33:06,760 Speaker 8: But if the inflation rate bottoms at three and starts 673 00:33:06,800 --> 00:33:10,360 Speaker 8: drifting higher, the Fed's going to find this unacceptable and 674 00:33:10,840 --> 00:33:13,240 Speaker 8: that two rate hikes that we have priced in for 675 00:33:13,360 --> 00:33:16,760 Speaker 8: the rest of the year will happen if not three. 676 00:33:17,360 --> 00:33:20,120 Speaker 2: Jimmy is such a student of history. Is the FED 677 00:33:20,280 --> 00:33:24,840 Speaker 2: finding it unacceptable because they're wedded to a return to 678 00:33:24,960 --> 00:33:28,560 Speaker 2: the Great Moderation, or, as Bill Dudley said last week 679 00:33:28,600 --> 00:33:33,400 Speaker 2: in his Bloomberg Opinion essay, this is a society, a country, 680 00:33:33,440 --> 00:33:36,680 Speaker 2: a nation, and the FED that has to get used 681 00:33:36,680 --> 00:33:38,760 Speaker 2: to a permanent higher rate regime. 682 00:33:40,840 --> 00:33:43,440 Speaker 8: I don't think the FEDS quite with Dudley that they 683 00:33:43,520 --> 00:33:46,880 Speaker 8: need to get accept a higher permanent regime. I think 684 00:33:46,960 --> 00:33:48,800 Speaker 8: they look at the two percent and I think it 685 00:33:48,880 --> 00:33:51,560 Speaker 8: comes back to May of last year when Chair Paul 686 00:33:51,720 --> 00:33:54,200 Speaker 8: was in the White House in the Oval Office and 687 00:33:54,280 --> 00:33:56,960 Speaker 8: President Biden pointed at him and said, America, this is 688 00:33:56,960 --> 00:33:58,560 Speaker 8: the guy that's going to bring inflation down. 689 00:33:58,920 --> 00:34:00,640 Speaker 7: And he's taken that seriously. 690 00:34:01,160 --> 00:34:03,120 Speaker 8: He has stated over and over again that their goal 691 00:34:03,240 --> 00:34:06,720 Speaker 8: is two percent he has said that without getting inflation down, 692 00:34:06,840 --> 00:34:10,080 Speaker 8: you don't have an economy. So he's dead serious about 693 00:34:10,120 --> 00:34:13,000 Speaker 8: trying to bring it down, and he should because prices 694 00:34:13,120 --> 00:34:15,920 Speaker 8: for the last two years have largely been running faster 695 00:34:16,480 --> 00:34:19,680 Speaker 8: than raises and so on a real basis, especially people 696 00:34:19,719 --> 00:34:23,319 Speaker 8: that live paycheck to paycheck, they've been falling behind they 697 00:34:23,560 --> 00:34:25,200 Speaker 8: and that has to be rectified. 698 00:34:25,760 --> 00:34:28,600 Speaker 5: And as such, we've seen expectations for the terminal rate 699 00:34:28,680 --> 00:34:31,439 Speaker 5: definitely move higher over the past week or so after 700 00:34:31,640 --> 00:34:35,160 Speaker 5: hearing from Powell that commitment to keep fighting inflation. But 701 00:34:35,239 --> 00:34:38,440 Speaker 5: let's talk about the neutral rate. Has your calculus for 702 00:34:38,560 --> 00:34:40,960 Speaker 5: where the neutral rate could be changed at all? 703 00:34:42,400 --> 00:34:45,360 Speaker 7: No, it hasn't changed, except that I'll go with what 704 00:34:45,480 --> 00:34:46,200 Speaker 7: the Fed says. 705 00:34:46,440 --> 00:34:49,920 Speaker 8: The neutral rate is somewhere around half a percent above 706 00:34:50,080 --> 00:34:53,440 Speaker 8: the long run average of inflation. Now, of course, we 707 00:34:53,480 --> 00:34:55,239 Speaker 8: could argue to the cows come home, what is the 708 00:34:55,280 --> 00:34:56,320 Speaker 8: long run rate of inflation? 709 00:34:56,480 --> 00:34:58,480 Speaker 7: Is it two? Is it three? Is it three and 710 00:34:58,520 --> 00:35:01,160 Speaker 7: a half? I'm more in three to three and a. 711 00:35:01,160 --> 00:35:04,400 Speaker 8: Half range, which means that neutral is four. And then 712 00:35:04,760 --> 00:35:07,239 Speaker 8: Chair Paul put a little nuance on it. He said, 713 00:35:07,280 --> 00:35:10,680 Speaker 8: the entire yield curve has to be above the neutral rate, 714 00:35:10,840 --> 00:35:13,799 Speaker 8: not just the funds rate. So some of the rates, 715 00:35:13,840 --> 00:35:16,600 Speaker 8: like the ten year old at around three eighty five 716 00:35:16,800 --> 00:35:20,280 Speaker 8: are not quite there and so that would suggest higher rates. 717 00:35:20,600 --> 00:35:22,399 Speaker 8: So I am with Bill Dudley on that that rates 718 00:35:22,400 --> 00:35:24,000 Speaker 8: are probably going to continue to drift higher. 719 00:35:24,120 --> 00:35:25,799 Speaker 2: It feels like a FED to side show. He got 720 00:35:25,880 --> 00:35:28,040 Speaker 2: Jim Bianco and Ellen Zenner with us. Ellen, I want 721 00:35:28,080 --> 00:35:30,560 Speaker 2: you to ask a question to mister Biancle to try 722 00:35:30,600 --> 00:35:32,799 Speaker 2: to be nice, but Ellen, I want to get an 723 00:35:32,840 --> 00:35:36,600 Speaker 2: observation from you first. Is this a FED that has 724 00:35:36,719 --> 00:35:39,440 Speaker 2: to make as John Taylor Stanford would say, this is 725 00:35:39,480 --> 00:35:42,560 Speaker 2: a FED that has to make a regime shift away 726 00:35:42,600 --> 00:35:46,360 Speaker 2: from the silliness of one point x run rate. 727 00:35:46,920 --> 00:35:48,480 Speaker 1: On the FED funds rate. 728 00:35:48,960 --> 00:35:51,120 Speaker 3: Well, I think this is something that is going to 729 00:35:51,239 --> 00:35:54,720 Speaker 3: underscore how much they have to go back to the table, 730 00:35:54,760 --> 00:35:57,480 Speaker 3: as they said, every five years and taking a look 731 00:35:57,520 --> 00:35:59,960 Speaker 3: at their entire framework of how they conduct monetary poul 732 00:36:00,680 --> 00:36:03,640 Speaker 3: and things like are we at a longer run higher news? 733 00:36:03,680 --> 00:36:06,520 Speaker 6: Are yours? 734 00:36:06,719 --> 00:36:10,440 Speaker 3: I think that it's that these things are evolution, not 735 00:36:10,560 --> 00:36:13,600 Speaker 3: revolution when they make changes. I don't think that they're 736 00:36:13,600 --> 00:36:15,880 Speaker 3: going to change the inflation target, but I think they 737 00:36:15,960 --> 00:36:18,040 Speaker 3: can fudge around it like some of the central banks 738 00:36:18,040 --> 00:36:21,640 Speaker 3: and have a band of uncertainty around that. But but, but, Jim, 739 00:36:21,719 --> 00:36:23,759 Speaker 3: I want to ask you, you know, when you think 740 00:36:23,840 --> 00:36:27,200 Speaker 3: about how long the expansion will last, we're going to 741 00:36:27,239 --> 00:36:29,560 Speaker 3: have a downturn at some point and probably inflation will 742 00:36:29,600 --> 00:36:31,799 Speaker 3: still be higher than goal at that point. 743 00:36:31,920 --> 00:36:33,719 Speaker 4: Does that mean that the Fed is going to be. 744 00:36:33,760 --> 00:36:37,640 Speaker 3: Less reluctant to do a steeper cutting cycle in order 745 00:36:37,640 --> 00:36:39,720 Speaker 3: to offset slower growth. 746 00:36:41,160 --> 00:36:43,040 Speaker 7: Sure, And let's look back a year ago. 747 00:36:43,239 --> 00:36:46,000 Speaker 8: A year ago Q one, Q two, we had negative 748 00:36:46,120 --> 00:36:49,000 Speaker 8: two consecutive negative quarters of GDP. And you remember a 749 00:36:49,120 --> 00:36:51,840 Speaker 8: year ago the big debate was is that a recession? 750 00:36:51,960 --> 00:36:54,560 Speaker 8: And most people said no? And what did the FED 751 00:36:54,680 --> 00:36:57,160 Speaker 8: do during that they caught They hiked excuse me, by 752 00:36:57,239 --> 00:37:00,319 Speaker 8: fifty and then by seventy five. They were not heard 753 00:37:00,440 --> 00:37:04,000 Speaker 8: by a slowdown in GDP. So if we see the 754 00:37:04,440 --> 00:37:06,800 Speaker 8: consensus forecast that at the end of the year we 755 00:37:06,880 --> 00:37:10,600 Speaker 8: might see negative GDP numbers if inflation stays elevated, I 756 00:37:10,640 --> 00:37:11,160 Speaker 8: don't think that. 757 00:37:11,239 --> 00:37:14,279 Speaker 7: The defers or dissuades them from raising rates. 758 00:37:14,600 --> 00:37:18,040 Speaker 8: What would is if we saw maybe if we saw 759 00:37:18,080 --> 00:37:20,520 Speaker 8: a big slow down in the labor market. But as 760 00:37:20,600 --> 00:37:25,160 Speaker 8: we all know, the payroll report has beaten fourteen consecutive months. 761 00:37:25,480 --> 00:37:27,760 Speaker 8: So we haven't even gotten a miss on the payroll report, 762 00:37:28,160 --> 00:37:30,399 Speaker 8: let alone a slowdown on it. But if we did, 763 00:37:30,880 --> 00:37:32,120 Speaker 8: that might be the game changer. 764 00:37:32,440 --> 00:37:34,840 Speaker 3: But how do you feel about, you know, the credit 765 00:37:34,920 --> 00:37:38,000 Speaker 3: impacts that we've had. I mean, are we too complacent 766 00:37:38,120 --> 00:37:40,360 Speaker 3: here that we've had this big credit shock? You know, 767 00:37:40,440 --> 00:37:43,040 Speaker 3: there's sort of the economy pre March eight then post 768 00:37:43,120 --> 00:37:45,239 Speaker 3: March eight, you know, and it feels like there's one 769 00:37:45,280 --> 00:37:47,279 Speaker 3: camp that says, well, we've just escaped that is just 770 00:37:47,360 --> 00:37:49,239 Speaker 3: not going to have a big impact on credit and 771 00:37:49,320 --> 00:37:52,279 Speaker 3: the labor markets, and another another camp that says, well, 772 00:37:52,320 --> 00:37:53,480 Speaker 3: we've just not seen it yet. 773 00:37:54,160 --> 00:37:55,600 Speaker 4: Where do you where do you stand there? 774 00:37:56,600 --> 00:37:56,799 Speaker 7: Yeah? 775 00:37:56,880 --> 00:37:59,360 Speaker 8: I agree with you that, you know, March eighth was 776 00:37:59,480 --> 00:38:02,480 Speaker 8: probably the most important economic date of the year pre 777 00:38:03,040 --> 00:38:06,080 Speaker 8: the bank failures, post to bank failures, and I do 778 00:38:06,239 --> 00:38:08,839 Speaker 8: agree that we've seen a big credit shock and we're 779 00:38:08,880 --> 00:38:10,120 Speaker 8: going to continue to see that. 780 00:38:10,320 --> 00:38:10,480 Speaker 7: Now. 781 00:38:10,760 --> 00:38:12,680 Speaker 8: The credit shock is not going to probably result in 782 00:38:12,719 --> 00:38:15,480 Speaker 8: another bank failure, but it is going to result in 783 00:38:15,560 --> 00:38:18,200 Speaker 8: a pullback, especially for small and medium businesses. 784 00:38:18,680 --> 00:38:21,479 Speaker 7: And I think that as we go forward, the FED 785 00:38:21,600 --> 00:38:22,279 Speaker 7: will look at that. 786 00:38:22,560 --> 00:38:25,960 Speaker 8: But then jar Pole is already kind of hinted that 787 00:38:26,120 --> 00:38:29,120 Speaker 8: that's more of a regulatory measure. You know, Michael Barr, 788 00:38:29,160 --> 00:38:31,680 Speaker 8: the head of supervision at the FED, it's his job. 789 00:38:31,560 --> 00:38:34,560 Speaker 7: To deal with that. Our job is to deal with inflation. 790 00:38:35,200 --> 00:38:36,799 Speaker 8: So I don't think at the end of the day 791 00:38:36,840 --> 00:38:39,600 Speaker 8: that the credit situation is going to dissuade the FED 792 00:38:39,760 --> 00:38:43,520 Speaker 8: other than push them from a regulatory standpoint, but not 793 00:38:43,640 --> 00:38:45,560 Speaker 8: necessarily from a monetary policy standpoint. 794 00:38:45,719 --> 00:38:48,320 Speaker 1: Jim Bianco, Thank you. Jim Bianco with US today. 795 00:38:58,640 --> 00:39:01,840 Speaker 2: Now, Isaac Multanski joins the Right Now Directive Policy Research 796 00:39:02,480 --> 00:39:07,399 Speaker 2: at bt IG. Isaac, were you surprised at Yellen will 797 00:39:07,480 --> 00:39:08,480 Speaker 2: travel to China? 798 00:39:10,440 --> 00:39:13,080 Speaker 6: So I think that the simple answer to that is no. 799 00:39:13,320 --> 00:39:15,880 Speaker 6: And here's the reason why. What we've seen from the 800 00:39:15,920 --> 00:39:20,360 Speaker 6: Biden administration is this concerted effort to keep tensions with 801 00:39:20,719 --> 00:39:24,600 Speaker 6: China range bound effectively. So whenever there's a negative headline, 802 00:39:25,080 --> 00:39:28,120 Speaker 6: you can almost bet with certainty that there's going to 803 00:39:28,239 --> 00:39:31,120 Speaker 6: be a positive headline that follows. And so we've got 804 00:39:31,480 --> 00:39:34,440 Speaker 6: this headline now, and the Treasury Secretary will go and 805 00:39:34,520 --> 00:39:37,799 Speaker 6: hopefully they're productive talks that you know, ensure that there's 806 00:39:37,800 --> 00:39:41,680 Speaker 6: a commitment to continue talking. But that tells us that 807 00:39:41,840 --> 00:39:45,120 Speaker 6: something negative is going to follow. And I really think 808 00:39:45,160 --> 00:39:49,600 Speaker 6: that what follows are these investment restrictions that we've been 809 00:39:49,640 --> 00:39:52,239 Speaker 6: talking about for the past few months. Some folks call 810 00:39:52,320 --> 00:39:57,000 Speaker 6: them the outbound scipious restrictions, and I think that we've 811 00:39:57,040 --> 00:39:59,160 Speaker 6: got to think about this as an ebb and flow 812 00:39:59,280 --> 00:40:02,600 Speaker 6: in terms of of the geopolitical tensions and this. 813 00:40:02,880 --> 00:40:04,680 Speaker 4: Of course, the timing is interesting. 814 00:40:04,760 --> 00:40:07,160 Speaker 5: Of course, Yellen expected to make the trip just three 815 00:40:07,280 --> 00:40:12,160 Speaker 5: weeks after Secretary of State Blincoln visited China, and if 816 00:40:12,200 --> 00:40:14,800 Speaker 5: you look at some of the reporting, quoting senior Treasury 817 00:40:14,840 --> 00:40:16,800 Speaker 5: officials off the record, said that the goal of this 818 00:40:16,960 --> 00:40:20,920 Speaker 5: trip is to seek to deepen and increase the frequency 819 00:40:20,960 --> 00:40:24,040 Speaker 5: of communication between these two countries. 820 00:40:24,080 --> 00:40:26,839 Speaker 4: When you think about this trip, what would a win 821 00:40:27,000 --> 00:40:27,480 Speaker 4: look like. 822 00:40:28,040 --> 00:40:28,720 Speaker 11: For the US? 823 00:40:30,080 --> 00:40:31,719 Speaker 6: You know, I think that right now the bar is 824 00:40:31,760 --> 00:40:34,560 Speaker 6: pretty low. I think it's that whenever they can leave 825 00:40:34,640 --> 00:40:38,840 Speaker 6: the room agreeing that they will continue to talk, that 826 00:40:39,080 --> 00:40:41,399 Speaker 6: is a win. Right now, it's difficult to see there 827 00:40:41,480 --> 00:40:44,840 Speaker 6: being much more in terms of tangible, mild markers. We 828 00:40:44,920 --> 00:40:48,759 Speaker 6: can look at rolling back of tariffs, for example, those 829 00:40:48,840 --> 00:40:52,320 Speaker 6: types of things aren't anywhere near being on the table. 830 00:40:52,640 --> 00:40:54,800 Speaker 6: They're not even in the room. So at the moment, 831 00:40:54,920 --> 00:40:57,120 Speaker 6: really the bar that we're looking for is just making 832 00:40:57,160 --> 00:40:59,759 Speaker 6: sure that after each one of these successive meetings, they're 833 00:40:59,760 --> 00:41:02,200 Speaker 6: still willing to talk, they're still willing to travel. 834 00:41:02,800 --> 00:41:05,680 Speaker 5: Well, we'll find out soon enough, of course. Treasury Secretary 835 00:41:05,760 --> 00:41:09,399 Speaker 5: Yellen expected to visit between July sixth and July ninth. 836 00:41:09,520 --> 00:41:12,080 Speaker 5: Let's focus States side, though, because it was a hefty 837 00:41:12,120 --> 00:41:14,880 Speaker 5: week last week of Supreme Court decisions. One of the 838 00:41:14,960 --> 00:41:18,560 Speaker 5: headlines there, of course, the Supreme Court basically throughout Biden's 839 00:41:18,600 --> 00:41:22,440 Speaker 5: student loan relief plan. When you think about the ramifications 840 00:41:22,440 --> 00:41:27,120 Speaker 5: for that on Biden campaigning for President Biden the candidate, 841 00:41:27,480 --> 00:41:29,719 Speaker 5: what does this mean in terms of him trying to 842 00:41:30,000 --> 00:41:31,720 Speaker 5: sort of rally those younger voters. 843 00:41:33,560 --> 00:41:35,480 Speaker 6: Yeah, Look, I think if we even just view this 844 00:41:35,719 --> 00:41:40,640 Speaker 6: through a politically craven lance, the young voters eighteen to 845 00:41:41,320 --> 00:41:44,279 Speaker 6: thirty five were the ones who stopped that red wave 846 00:41:44,400 --> 00:41:47,640 Speaker 6: from coming during the midterm elections. They are a vital, 847 00:41:47,880 --> 00:41:51,640 Speaker 6: absolutely vital voting block for a Democratic party, and that 848 00:41:51,800 --> 00:41:55,239 Speaker 6: informs our viewpoint on what the president's going to do here. 849 00:41:55,680 --> 00:41:58,120 Speaker 6: And so he lost in the Supreme Court, lost handily 850 00:41:58,280 --> 00:42:00,680 Speaker 6: all things considered, but that doesn't mean that they're done. 851 00:42:00,880 --> 00:42:03,160 Speaker 6: And on Friday, after the clothes he came out and 852 00:42:03,200 --> 00:42:06,560 Speaker 6: said they are going to attempt to do student loan cancelation. Again, 853 00:42:07,200 --> 00:42:10,960 Speaker 6: I'm not sold on that for statutory reasons. But here's 854 00:42:11,000 --> 00:42:13,640 Speaker 6: what's really important. They came out and said they are 855 00:42:13,719 --> 00:42:17,680 Speaker 6: going to do effectively this delinquency grace period where for 856 00:42:17,960 --> 00:42:22,360 Speaker 6: twelve months, if you can't make your paymental student loans, 857 00:42:22,520 --> 00:42:25,439 Speaker 6: there'll be no repercussions. And that's a big deal given 858 00:42:25,520 --> 00:42:28,840 Speaker 6: the twenty percent of student loan borrowers are showing signs 859 00:42:29,440 --> 00:42:33,280 Speaker 6: of being unable to pay once that restart payments hits 860 00:42:33,320 --> 00:42:33,840 Speaker 6: in October. 861 00:42:34,080 --> 00:42:36,880 Speaker 2: I'm ready on television this morning, Isaac Bultanski with us 862 00:42:36,920 --> 00:42:40,239 Speaker 2: as b Tig's spirited conversation here. Fourth of July is 863 00:42:40,280 --> 00:42:42,319 Speaker 2: to be about kissing babies. Those days are gone. It's 864 00:42:42,360 --> 00:42:46,080 Speaker 2: a battle to the first Republican debate in August. We 865 00:42:46,160 --> 00:42:50,080 Speaker 2: are advantaged this hour with Sarah Hunt. She Marcus st Alpine, 866 00:42:50,160 --> 00:42:53,680 Speaker 2: Saxon Woods joining us this morning. She is riveted to 867 00:42:53,719 --> 00:42:54,960 Speaker 2: the political conversation. 868 00:42:55,160 --> 00:42:59,480 Speaker 13: Sarah, So the student loan issue, this has been one 869 00:42:59,520 --> 00:43:01,319 Speaker 13: of the things that people have been worried about from 870 00:43:01,360 --> 00:43:04,120 Speaker 13: a spending standpoint, right, So consumer spending has been very strong, 871 00:43:04,200 --> 00:43:06,520 Speaker 13: with student loans have been essentially in abyance since we 872 00:43:06,640 --> 00:43:09,160 Speaker 13: started COVID. So the question then becomes, I think there 873 00:43:09,200 --> 00:43:11,400 Speaker 13: were a lot of people counting on some form of relief, 874 00:43:11,760 --> 00:43:13,680 Speaker 13: So how much stress is it going to put on 875 00:43:13,760 --> 00:43:15,799 Speaker 13: if that relief doesn't come? If you stretched it out 876 00:43:15,840 --> 00:43:18,240 Speaker 13: over twelve months, it's a lot easier than saying everybody 877 00:43:18,280 --> 00:43:19,760 Speaker 13: start making those payments in September. 878 00:43:19,880 --> 00:43:20,640 Speaker 4: I'm sure there are some. 879 00:43:20,719 --> 00:43:23,120 Speaker 13: People who have been budgeting for those payments and are 880 00:43:23,160 --> 00:43:24,520 Speaker 13: ready to make them, but I'm sure that there are 881 00:43:24,560 --> 00:43:26,919 Speaker 13: many people who have not. So the big question about 882 00:43:26,920 --> 00:43:29,320 Speaker 13: consumer spending, which leads into earnings and leads into the 883 00:43:29,400 --> 00:43:33,000 Speaker 13: retail story, is what's going to happen now if you 884 00:43:33,120 --> 00:43:36,080 Speaker 13: have to start paying back some of those loans or 885 00:43:36,200 --> 00:43:38,280 Speaker 13: if you don't, and does that make a big difference 886 00:43:38,320 --> 00:43:40,120 Speaker 13: in terms of earnings. There's been warnings for some of 887 00:43:40,160 --> 00:43:42,960 Speaker 13: the retailers on that specific issue. So I think that 888 00:43:43,040 --> 00:43:45,239 Speaker 13: this is a big it's a big question, and how 889 00:43:45,280 --> 00:43:47,319 Speaker 13: it gets resolved still seems to be up in the air. 890 00:43:48,360 --> 00:43:49,759 Speaker 4: Well, Isaac, let's throw that to you. 891 00:43:49,880 --> 00:43:52,520 Speaker 5: When you think about some of the economic ripples that 892 00:43:52,719 --> 00:43:55,319 Speaker 5: could follow, especially as we head into the twenty twenty 893 00:43:55,400 --> 00:43:56,960 Speaker 5: four campaign season. 894 00:43:57,000 --> 00:43:58,520 Speaker 4: What's your thinking at this juncture. 895 00:44:00,000 --> 00:44:02,400 Speaker 6: The way I think about this is the consumer spending 896 00:44:02,480 --> 00:44:04,439 Speaker 6: side I think is fair, and that you have twenty 897 00:44:04,520 --> 00:44:06,360 Speaker 6: two million or so folks who are going to be 898 00:44:06,520 --> 00:44:10,520 Speaker 6: able to begin repaying in October, and that's two hundred 899 00:44:10,560 --> 00:44:13,000 Speaker 6: and seventy five to three hundred and fifty dollars a 900 00:44:13,120 --> 00:44:16,200 Speaker 6: month that can start going towards student loan payments that 901 00:44:16,239 --> 00:44:18,879 Speaker 6: won't go to other things. But here's another data point 902 00:44:18,920 --> 00:44:21,759 Speaker 6: from the Consumer Financial Protection Bureau that I've been thinking 903 00:44:21,800 --> 00:44:25,800 Speaker 6: about all weekend, which is nearly one in ten student 904 00:44:25,880 --> 00:44:30,959 Speaker 6: loan borrowers are already delinquent on other credit problems, meaning 905 00:44:31,040 --> 00:44:33,880 Speaker 6: that and I think we've seen this through academic papers 906 00:44:33,880 --> 00:44:37,600 Speaker 6: as well, that some distressed student loan borrowers use those 907 00:44:37,680 --> 00:44:39,800 Speaker 6: three years where they didn't have to pay their student 908 00:44:39,880 --> 00:44:44,520 Speaker 6: loans to balloon their credit lines through credit cards, auto loans, 909 00:44:44,600 --> 00:44:47,000 Speaker 6: whatever it may be. And so for them, I look 910 00:44:47,040 --> 00:44:52,200 Speaker 6: at this twelve month twelve month on ramping as really 911 00:44:52,280 --> 00:44:55,360 Speaker 6: a reprieve where it's clear that they will not have 912 00:44:55,480 --> 00:44:58,160 Speaker 6: to pay their student loans. So my question I'll push 913 00:44:58,200 --> 00:45:01,359 Speaker 6: it back. Is you know, are they going to suddenly say, well, 914 00:45:01,440 --> 00:45:03,080 Speaker 6: now it's a time where I need to start saving 915 00:45:03,200 --> 00:45:05,640 Speaker 6: to pay my student loan off, or will I continue 916 00:45:06,320 --> 00:45:09,200 Speaker 6: to live at this pace knowing that the Democrats are 917 00:45:09,280 --> 00:45:12,120 Speaker 6: most likely going to promise even more student loan relief 918 00:45:12,160 --> 00:45:13,719 Speaker 6: once we get on the campaign trail in. 919 00:45:13,760 --> 00:45:15,719 Speaker 1: January, Isaac, Thank you. 920 00:45:15,920 --> 00:45:18,800 Speaker 2: Isaac Multotski with us is b tig this morning with 921 00:45:18,880 --> 00:45:21,919 Speaker 2: a brief hear and particularly off the Supreme Court work. 922 00:45:22,560 --> 00:45:26,400 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 923 00:45:26,560 --> 00:45:30,680 Speaker 2: anywhere else you get your podcasts. Listen live every weekday 924 00:45:31,000 --> 00:45:34,480 Speaker 2: starting at seven am Eastern. I'm Bloomberg dot Com, the 925 00:45:34,640 --> 00:45:39,080 Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You 926 00:45:39,200 --> 00:45:43,239 Speaker 2: can watch us live on Bloomberg Television and always I'm 927 00:45:43,280 --> 00:45:44,280 Speaker 2: the Bloomberg Terminal. 928 00:45:44,719 --> 00:45:48,920 Speaker 1: Thanks for listening. I'm Tom Keane, and this is Bloomberg