Speaker 1: This is the Bloomberg Surveillance Podcast.
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Speaker 1: App with Us.
Speaker 2: Ellen Zettner of James Gorman's Morgan Stanley with us right now.
Speaker 2: I saw a hockey stick chart on manufacturing in America.
Speaker 2: Doesn't matter what the details are, the answer is it's
Speaker 2: something we're not used to. I have a chart that
Speaker 2: went back, I got a big splash with it a
Speaker 2: million years ago of manufacturing labor to our population in America.
Speaker 2: And basically the back was broken in nineteen seventy and
Speaker 2: then really broken into how can we have a manufacturing
Speaker 2: renaissance in America?
Speaker 3: Well, we can, we can have increasing share of manufacturing
Speaker 3: in the economy. But these things are slow moving beasts,
Speaker 3: and the decline of manufacturing over time has taken decades
Speaker 3: to play out with larger step downs. As you said
Speaker 3: in the seventies, and then is after the WTO and
Speaker 3: China's rise right more more pronounced after that, And so
Speaker 3: I think, you know, I think we've got something exciting
Speaker 3: going on right now. I think we're digging into the
Speaker 3: data and we're seeing that. And especially if you go
Speaker 3: around the country and you talk to small manufacturers in
Speaker 3: the country, which I have done, and they'll tell you
Speaker 3: that they're starting to get more and more domestic orders
Speaker 3: of people that are.
Speaker 1: On shoring having manufacturing.
Speaker 3: Rooms, they at least feel that their business is picking up. Now,
Speaker 3: this feels like it could be the start of something.
Speaker 3: We're seeing something. There is some on shoring story there,
Speaker 3: there's some near shoring story there. I think the story
Speaker 3: around Mexico's benefit from near shoring is exciting.
Speaker 4: There is a lot.
Speaker 3: Of infrastructure building going on across the country. State and
Speaker 3: local governments have been ramping up hiring around that as well.
Speaker 3: So I think there's something going on in manufacturing here
Speaker 3: that is exciting. But that's a smaller share of the
Speaker 3: economy than the service's side.
Speaker 2: And Katie, one of the unspokens here through June is
Speaker 2: Mexican Paeso stunning in its Mexican peso strength through twenty
Speaker 2: through nineteen through eighteen, you're gonna get a sixteen handle
Speaker 2: on Mexican peso at some point, which is I never thought.
Speaker 1: I'd see that.
Speaker 5: Yeah, And it's important to remember because we talk about
Speaker 5: how strong and resilient the dollar has been all the time,
Speaker 5: but there's definitely some pairs where that is not quite true.
Speaker 5: But Ellen, of course, we have you on Monday, we
Speaker 5: get the jobs report on Friday. Is there anything that
Speaker 5: we could get at eight thirty am on Friday that
Speaker 5: would take the FED off the course for a twenty
Speaker 5: five basis hike later this month.
Speaker 4: Yes, So we've given this a lot of thoughts.
Speaker 3: So we have these roadmaps to each FED decision that
Speaker 3: we produce of here's what we think the data will
Speaker 3: look like in hand, and this is what we think
Speaker 3: their response will be. And because it seems like, yes,
Speaker 3: they're data dependent, but it feels like they're sort of
Speaker 3: locked in for this July hike, I think the bar
Speaker 3: is just a lot lower than we thought it would
Speaker 3: be that you would have to.
Speaker 4: For the data to say.
Speaker 3: Don't hike, and so I think it would be a
Speaker 3: payroll print less than one hundred thousand right, because really
Speaker 3: that would get the market thinking maybe they're not going
Speaker 3: to hike in July and then still wait for that
Speaker 3: CPI print to do the rest of the job. And
Speaker 3: if you've got a downside surprise and CPI as well,
Speaker 3: then I think that would be the final you know,
Speaker 3: box to tick off that says Okay, it doesn't have
Speaker 3: to be a July hike. I think it would still
Speaker 3: keep the Fed saying, hey, there's still may be more
Speaker 3: to do. I think there's still going to be an
Speaker 3: asymmetric hiking bias, but I think it would have to
Speaker 3: be some pretty big downward misses for them to not
Speaker 3: hike in July.
Speaker 5: Yeah, definitely an important point that we do have a
Speaker 5: CPI before we do get to that July decision. But
Speaker 5: when you look at and I don't want to get
Speaker 5: too short term here, but when you look at sort
Speaker 5: of the expectations that are baked in for the Fed
Speaker 5: to go ahead in July, for you know, probably the
Speaker 5: labor strength that we've been seeing to continue with June's report,
Speaker 5: what do you think would prompt the bigger reaction in markets?
Speaker 5: Is it an upside surprise or a downside surprise?
Speaker 3: You know, I think it would be a downside surprise
Speaker 3: because the market is is you know, the Fed's been
Speaker 3: really successful here. The market is saying, Okay, they're on
Speaker 3: this hiking bias, and we're going to give them the
Speaker 3: benefit of the doubt that it could be two additional
Speaker 3: hikes from here, not just one additional hike or no hikes,
Speaker 3: or even pushing out the expectation they could be cutting
Speaker 3: before the end of the year. I think the market
Speaker 3: has really grabbed onto that narrative and the data has
Speaker 3: helped support that. So I think it would be a
Speaker 3: downside surprise. It would probably get the bigger reaction we.
Speaker 2: Partitioned where part of the American public has a two
Speaker 2: percent unemployment rate and another part of the public has
Speaker 2: a seven percent unemployment rate. Yeah, how does morganstantly see
Speaker 2: the quintile makeup or docile makeup?
Speaker 3: Well, look, it's it's more around you know, sort of
Speaker 3: education level.
Speaker 2: You know, the the bottom descile's done well off the pandemic,
Speaker 2: right they.
Speaker 3: Have from government support which is now ended. They have
Speaker 3: off of a tight labor market, which has increased labor
Speaker 3: income and wage growth, especially for low wage paying service sectors.
Speaker 3: But we're only just now seeing real wage gains positive,
Speaker 3: So it was really you know, inflation was still outpacing
Speaker 3: wage gains for those folks. But that divergence between sort
Speaker 3: of those with a seven percent unemployment rate and those
Speaker 3: with a two percent, it's really do you go all
Speaker 3: the way to like a thirteen percent unemployment rate and
Speaker 3: those with a two percent? That has always been the case.
Speaker 3: It's always been the case. So what I look at
Speaker 3: is has the unemployment rate been improving across all.
Speaker 2: All of.
Speaker 3: By ethnicity, by age, by geographic location, like, has it
Speaker 3: been improving across all groups? Yes, it has, and we
Speaker 3: are back to the kind of tight labor market for
Speaker 3: the most underserved in the country being just as good
Speaker 3: or as tight as it was pre pandemic.
Speaker 1: Yeah.
Speaker 2: I look at this and Alan, you know, they said
Speaker 2: to me, can we get Zentner for the Monday before
Speaker 2: fourth of July? And I said, well, she's probably going
Speaker 2: to be in waiters in some trout stream and in
Speaker 2: Chile as well. But you know, folks, this is really
Speaker 2: a sacrifice on the part of ellen Zetner because she's
Speaker 2: going to take a nymphanite fly ride that I can't
Speaker 2: afford and go out in the river.
Speaker 1: This is a Zettner.
Speaker 2: You don't know fly fishing with Zetner the saltwater thing
Speaker 2: that say shells and the Bahamas not.
Speaker 3: As big on saltwater fly fishing salt water, but not
Speaker 3: to fly fish.
Speaker 1: You go to Jacksons far enough.
Speaker 2: Yeah, you go to Jackson all the Smith River, Salmon River,
Speaker 2: Jellystone River and all of it. But Patagonian. We had
Speaker 2: listeners today emailing in from Chile with your appearance here today,
Speaker 2: and there's like the Rio Simpson, Like Chile is like
Speaker 2: huge trout fishing and the fish are ginormous.
Speaker 4: They're ginormous.
Speaker 6: Yeah, there's so much bigger down there.
Speaker 3: You know, they don't get a lot of pressure. There's
Speaker 3: not a whole lot of people going down to Chile.
Speaker 3: It takes quite some time to get down there to fish.
Speaker 3: And do you know that the trout are not native
Speaker 3: to the region. They were introduced to the introduced They
Speaker 3: were introduced in the nineteen thirties by the British. Yeah,
Speaker 3: and so we've got them to think for that.
Speaker 4: So they're invasive. They not invasive.
Speaker 7: Listen to you, it's sport.
Speaker 1: It's not invasive.
Speaker 4: Some inflammatory commentary.
Speaker 1: It's like we don't even miss Bramo. She's worth some bread.
Speaker 3: There's not evidence that they have killed off the native
Speaker 3: populations of fish, but they have really thrived there and
Speaker 3: it's been a great industry now in Chile.
Speaker 1: What's your favorite river in the rocky mountains of this nation?
Speaker 7: Oh?
Speaker 4: Gosh, in Montana? Probably, Well, there's one.
Speaker 3: I can't say publicly because then everybody will go. Let's
Speaker 3: let's say like the beaver Head in Montana, because everybody
Speaker 3: knows that when it is a great river.
Speaker 4: And I won't say the one that's my absolute.
Speaker 3: Favorite because then it will get more pressure.
Speaker 1: Did you make up when? Next time?
Speaker 2: Was that?
Speaker 1: Can we get a beeper in here? So we see
Speaker 1: that Sunday in.
Speaker 2: Montana is a fishing good near Jackson Hawayoming the third
Speaker 2: or fourth week August.
Speaker 8: You know it?
Speaker 4: Well, it depends, right.
Speaker 3: The runoff was really big this year, a lot of
Speaker 3: those record snows.
Speaker 4: Right, the river levels are high.
Speaker 3: And it's not been high like that in quite some time.
Speaker 3: August has been really dry. But if you love cutthroat fishing,
Speaker 3: then you want.
Speaker 4: To be around Jackson Hall.
Speaker 2: James Gorman thinks she's cuts her she's going to be
Speaker 2: on the phone the first week of August. I just
Speaker 2: really think I need to go to Jackson Hall to
Speaker 2: read academic papers. This has been a joy. Ellen Zettner
Speaker 2: with us here on radio and television.
Speaker 1: And all you need to know. It's sort of like
Speaker 1: Tulips and stocks a million years ago.
Speaker 2: Joining us now the guy that wrote the book on this,
Speaker 2: we are thrilled to Tony Cscenzi could join us in
Speaker 2: PIMCO this morning. The Strategic Bond Investor is the grown
Speaker 2: up book to read on it. It's in its fourteenth edition.
Speaker 2: You could buy half a Staten Island off for the
Speaker 2: royalties of it. From Tulips to treasuries, how close are
Speaker 2: we to tulips or are we buying treasuries?
Speaker 9: I think we're closest to treasuries. The Tulips view was
Speaker 9: a couple of years ago, but when treasury yields were
Speaker 9: quite low, and yields globally with negative about eighteen trillion
Speaker 9: or so of negative yielding bonds, and in fact, that
Speaker 9: Tulip's idea I think will probably affect the bond market
Speaker 9: for a generation. What investor for the next twenty years
Speaker 9: will purchase a German blend at minus fifty bases points.
Speaker 10: Again, given the car looking.
Speaker 2: At me in my Austrian ninety seven year you're looking
Speaker 2: at me, yeah, yeah.
Speaker 9: And I say a generation because things change. Think about
Speaker 9: the housing market. Of course, in two thousand and eight,
Speaker 9: two thousand and nine we would have said the housing
Speaker 9: market will never rebound, and of course it certainly did vigorously.
Speaker 9: It takes time, but I think the low and negative
Speaker 9: yielding bonds are probably out the door, out the window
Speaker 9: for quite a long time.
Speaker 2: I'm looking at the splash this weekend from your shop.
Speaker 2: In the Financial Times they gave one Daniel Ivison. I
Speaker 2: think he's an intern with PIMCO. Front and center.
Speaker 1: Headlines bond fund giant.
Speaker 2: PIMCO prepares for quote harder landing for global economy. How
Speaker 2: does econobabble fit into total return in the fixed income market?
Speaker 9: I think that view from Dan I in our group
Speaker 9: CEO is just a cautionary note and so relative when
Speaker 9: we say hard landing, we're saying relative to perhaps what
Speaker 9: others are expecting. At Pimco, we're expecting a soft landing,
Speaker 9: but that may be harder than others are thinking. So
Speaker 9: in terms of a total return type portfolio, a Bloomberg
Speaker 9: aggregate style of portfolio, which of course is a collection
Speaker 9: of bonds, treasuries, mortgages, corporates, mostly market cap weighted. You
Speaker 9: want to be up in quality. Of course, we think
Speaker 9: if there is a slowdown or a recession, the credit
Speaker 9: spreads could widen. The broader point is that one needn't
Speaker 9: take a lot of duration risk, credit risk, et cetera
Speaker 9: to get good yields in the bond market. We're looking
Speaker 9: at five, six, seven percent type returns in assets we
Speaker 9: think are so called money good, So you needn't take
Speaker 9: a big leap. Consider, for example, tom where high yield
Speaker 9: bonds are. Even though they may be attractive to some,
Speaker 9: we'd say be cautious in the area. At spreads of
Speaker 9: over four hundred basis points or four hundred and four
Speaker 9: fifty on average, it's kind of tight relative to what
Speaker 9: could happen in recession with the spread of call it,
Speaker 9: let's say eight hundred bases points or more, and a
Speaker 9: widening of that magnitude can in a total turn style
Speaker 9: portfolio be painful because it would be losses. And so
Speaker 9: we're saying prepare by keeping your podder dry and don't
Speaker 9: reach so much. You needn't these days, with where yields
Speaker 9: are well.
Speaker 5: To that point, I wanted to go to duration.
Speaker 4: So I'm glad that we're there.
Speaker 5: You think about where we were starting to get to
Speaker 5: on the ten year treasure yield approaching four percent. We
Speaker 5: can put that back into the conversation to your point
Speaker 5: that you don't have to reach that far when you
Speaker 5: start to see the ten uere approach four percent, Does
Speaker 5: that look like a good entry point.
Speaker 9: Yeah, PIMCO believes, and I believe as well because we
Speaker 9: kind of different freuse within PIMCO. The range for the
Speaker 9: US ten year is probably now we think call it
Speaker 9: three point three percent or so to four four and
Speaker 9: a quarter or so. But when thinking about core fixed
Speaker 9: income and therefore duration relative to short term products which
Speaker 9: have very little duration, you should be thinking about the
Speaker 9: history since nineteen seventy eight, and forgiving with the earpiece
Speaker 9: filling out. Since nineteen seventy eight, core fixed income, and
Speaker 9: the Bloomberg aggregate is a good representation of that has
Speaker 9: outpaced Treasury bill returns on a three year rolling basis
Speaker 9: ninety percent of the time, and by a very substantial
Speaker 9: margin three percentage points. So these yields look attractive on
Speaker 9: that basis, and so one doesn't want to get into
Speaker 9: the game of market timing because market timing, for diversifier
Speaker 9: is a very dangerous game. And I should add Katie
Speaker 9: that in core fixed income and this idea that they
Speaker 9: can outpace T bills and have considerably since nineteen seventy eight,
Speaker 9: that the time for entering core fixed income is typically
Speaker 9: close to the peak for the Fed Funds rate, which
Speaker 9: we think and many think the markets think is upon us.
Speaker 9: And the typical timeline is called maybe up to six
Speaker 9: months prior you're good. So you don't want to play
Speaker 9: the game of timing diversifier too much, is what we'd say.
Speaker 9: Final final view is that if I add in three
Speaker 9: components really quickly, the inflation view two and a half percent,
Speaker 9: the market has a term premium, the extra yield you
Speaker 9: get for moving out the yield curve, and the real
Speaker 9: interest rate where marcuts think the Fed Funds rate should
Speaker 9: be relative to inflation. Those things together put a fair
Speaker 9: value in the current zone. So again be cautious about
Speaker 9: the idea of market timing.
Speaker 4: So don't try to time the market.
Speaker 5: But then you look at the five point four trillion
Speaker 5: dollars in cash, Like you said, very little duration risk there.
Speaker 5: When does that start to move out?
Speaker 9: Though it is a hard mentality in financial markets. Time
Speaker 9: you're quite familiar with this as well, and okay to
Speaker 9: you two in your time in the market, tell cam
Speaker 9: but it's when others, when others start to leave. But
Speaker 9: that's not optimal for an investor, and that's what active
Speaker 9: management is all about, and it's why we would say
Speaker 9: now is the time get ahead of the herd?
Speaker 1: Yeah, but is Jerome Schneider? Did he survive the first
Speaker 1: half of this year?
Speaker 9: Yes, and quite well. In the short term space, there's
Speaker 9: plenty to do as well. Consider for example, you could
Speaker 9: purchase a T bill and get in the low fives,
Speaker 9: but there's asset backed securities assets that are backed by
Speaker 9: student loans, car loans, equipment.
Speaker 2: Are you gross in five percent on cameras on Jerome Schneider?
Speaker 9: Short term versus short term ETF we have and not
Speaker 9: to tout it, but just as an it's Monday mint
Speaker 9: m I n T minting money. It's the yield is
Speaker 9: currently five percent or so.
Speaker 1: It's unbelievable.
Speaker 10: Distribution yield.
Speaker 2: Nobody at the table remembers this world and it's like
Speaker 2: we're back to it.
Speaker 9: But the asset backed securities and others large short term
Speaker 9: measments to have fields close to six percent, Tony.
Speaker 11: Is it possible to see a benign resteepening of the
Speaker 11: yield curve?
Speaker 9: Benign resteepening meaning that I think what you're thinking, Cameron,
Speaker 9: is that in a steepening some event has occurred to
Speaker 9: cause a flight into short term insturance. The type of
Speaker 9: thing perhaps that Katie's thinking about that could cause movement
Speaker 9: not usually, of course, the history suggests perhaps not, and
Speaker 9: many are thinking, can there be a soft landing in
Speaker 9: the soft landing that could occur? It may be occurring now.
Speaker 9: US growth last year was about economic growth was one
Speaker 9: percent or so. It's tracking a little higher today, but
Speaker 9: we think it'll be slower than that for this year.
Speaker 9: We're in a growth The US is in a growth
Speaker 9: recession today. Growth recession is something above zero but below
Speaker 9: growth potential. The US has a potential to grow each
Speaker 9: year about one point eight percent. That's a combination of
Speaker 9: productivity one and a half plus changes in labor force
Speaker 9: about point three. The US is growing below that, which
Speaker 9: enables supply to catch up with demand, the ability to
Speaker 9: produce goods and services.
Speaker 10: To meet demand.
Speaker 9: It's catching up, and that can enable the steepening, because
Speaker 9: then the Fed can say we needn't to raise interest
Speaker 9: rates anymore. And if supply catches up enough, if they're
Speaker 9: in a growth recession, there it can happen, and then
Speaker 9: eventually there are interest rate cuts. But we'd caution that
Speaker 9: the view on interest rate cuts flies in the face
Speaker 9: of Paul Volker, the legendary FED Chair.
Speaker 10: We felt that for some time.
Speaker 9: I've certainly felt that personally, very strongly for a long time.
Speaker 3: Now.
Speaker 9: This is the idea that the Chair Powell has today
Speaker 9: is to keep at it. And he's quoting directly from
Speaker 9: Paul Volker in the book Keeping at It. You have
Speaker 9: to persist with this view in the battle against inflation
Speaker 9: to defeat it. And that's what's happening. And this is
Speaker 9: why Chair Powell will go to heaven, so to speak,
Speaker 9: central bank heaven, and because Tom the view and Cameron
Speaker 9: and Katie the only the view is that only hawks
Speaker 9: go to central bank heaven.
Speaker 11: Well, he also have been saying that history warns against
Speaker 11: cutting rates too soon. So do you think that lower
Speaker 11: inflation is enough for the Fed to cut rates? Or
Speaker 11: do you think that we actually need to see higher unemployment,
Speaker 11: much weaker growth.
Speaker 9: A lower inflation expectation would cut it.
Speaker 10: It is occurring.
Speaker 9: It is observable in the bond market through inflation protective
Speaker 9: securities the price for the inflation rate to be about
Speaker 9: two point two percent or so, but it's not observable
Speaker 9: in the general public. Think about various generations. I'm from
Speaker 9: the older generation. I'm a boomer born between forty six
Speaker 9: and sixty four. Take your guess, really which year that
Speaker 9: is sixty four?
Speaker 1: But I slipped right into that.
Speaker 9: But new generations of Americans have experienced inflation, so my
Speaker 9: generation did.
Speaker 10: We've always expect that could be inflation.
Speaker 9: Now the generations X, the millennials, and Z all believe
Speaker 9: that the prices can go higher faster than any time.
Speaker 10: You've got to get it out of their heads.
Speaker 9: And so the public's view on inflation could be enough,
Speaker 9: and that's what's needed.
Speaker 1: Let's listen.
Speaker 2: I think I went back and forth to Swarning with
Speaker 2: doctor Olarian. He's on a plane tomorrow be with us,
Speaker 2: I mean on Wednesday. But let me ask you something
Speaker 2: Mohammed would ask, which is the unknown unknown.
Speaker 1: That's out there?
Speaker 2: And to me, if I look at the Bloomberg Total
Speaker 2: Return Index, Lehman Barkley's index, beautiful. There's a textbook, Guy's Bolkowski.
Speaker 2: Everybody had to read Bolkowski with four hundred and fifty seven.
Speaker 2: It was almost as thick as Tony's Seigem's book. You
Speaker 2: had to read every chart, pat and known to mankind.
Speaker 2: I'm sorry, bonds are in an absolute textbook, Pennant. No
Speaker 2: one's looking for price down, yield up. What if we
Speaker 2: get that unknown unknown?
Speaker 9: It is the unknown unknown that I think. And I
Speaker 9: wrote a book on this matter, about the idea of
Speaker 9: a Kinesian endpoint, the idea of practical limits to the
Speaker 9: use of debt. There was evidence of that last fall
Speaker 9: when Prime Minister Trust wanted to to increase the indebtedness.
Speaker 9: The markets reacted violently, The bond market collapsed, the pound
Speaker 9: got pounded, so to speak. And so what's out there,
Speaker 9: thenown unknown is whether the bond markets would re act
Speaker 9: violently again in all the nations to increase in deadedness.
Speaker 2: Matthewess and a guy out on Twitter this weekend. He
Speaker 2: brought up Sheldon Naatenberg and all the Greek letters at
Speaker 2: Crescenzi frankly or world class at Do bonds display gamma?
Speaker 2: We all we all know equities display accelerated tendencies in
Speaker 2: a log normal space.
Speaker 1: Down they go when they go down.
Speaker 2: If we get priced down yields up, do you get
Speaker 2: bon gamma?
Speaker 10: There was gamma in the UK last year. It was arrested.
Speaker 9: I agree, and luckily the bond market is the comp
Speaker 9: on the beat in this sense that it disciplines the
Speaker 9: fiscal authorities. It disciplines the monetary authorities to say no,
Speaker 9: you can't do that anymore, and so any yield rise
Speaker 9: from here that gamma, the vola vol if you will,
Speaker 9: would be arrested by the bond market disciplining politicians and
Speaker 9: the monetary authorities to do to avoid doing the things
Speaker 9: that could.
Speaker 10: Self stabilizing.
Speaker 2: Okay, but ivic, said Dana ivicks And of PIMCO Worldwide
Speaker 2: Headlines this weekend.
Speaker 1: I don't think he's watching this morning. He's on some
Speaker 1: boat somewhere.
Speaker 10: Early Port Beach. It's three forty three.
Speaker 7: That's okay.
Speaker 1: Maybe he's who knows, Let me get you out on
Speaker 1: a linear.
Speaker 2: Are we going to see the bond market discipline central
Speaker 2: banks in the next eighteen months.
Speaker 9: And if there were proposals to increase indebtedness and the
Speaker 9: monetary authority seemed to support it, I will make the bed. Yes,
Speaker 9: But it looks like, first of all, I've got an
Speaker 9: election ahead, there won't be such a plan on the
Speaker 9: fiscal side for some time. And one important point, Thomas,
Speaker 9: I think that this means that any yield rives would
Speaker 9: be self stabilizing. So don't worry in Katie retalmentration, so
Speaker 9: don't worry so much that'd be self stabilizing.
Speaker 10: The Bottmarck of Vincilantes are back.
Speaker 2: I think Bramma Wison here that was depressing. Tony Crescenzi
Speaker 2: tanned and wrested from PIMCO.
Speaker 1: Thank you very much.
Speaker 2: Right now, it's not only the equity conversation of the day,
Speaker 2: it's the equity kickoff conversation of a second half. Anahon
Speaker 2: at Wells Fargo brings prodigious math and physics whither to
Speaker 2: the study of what we got. I'm going to go
Speaker 2: derivative honor so I so I can save myself. I
Speaker 2: recommended Sheldon Natanberg's Classic Options textbook to some intern the
Speaker 2: other day. All the Greek letters and all that I
Speaker 2: look at gamma as the accelerative tendencies of any given index.
Speaker 2: In this case, let's take the standard and purse five hundred.
Speaker 2: We came off the mat from a bear market October.
Speaker 2: Maybe it's a bull market. Can you identify with all
Speaker 2: your math and physics second leg of a bull market?
Speaker 12: Well, I'll put in a quick plug because I prefer
Speaker 12: the whole book of Naytenburgh, But you know, I'll let
Speaker 12: you go on that one. With the acceleration in the market,
Speaker 12: I think what's important is what's really dragging up the
Speaker 12: market and how much more can that go. The technicals
Speaker 12: on the uber cap led rally here look to be
Speaker 12: losing steam at overbought levels, but you've seen that. Really
Speaker 12: the correlation within these five hundred names of the S
Speaker 12: and P five hundred have declined because of that separation
Speaker 12: of these handful of names versus the rest of the market.
Speaker 12: And that's kind of what's bringing equity volatility lower. That
Speaker 12: might be which also has been people concerned with low breath.
Speaker 12: So until we see that breath expand, I don't think
Speaker 12: you see another the surge second half.
Speaker 2: Do you reallocate or do you read balance? You're not
Speaker 2: going to tell me I'm supposed to sell Apple or Nvidio.
Speaker 12: Right, Well, perhaps not sell, but maybe not be overweight
Speaker 12: those kind of areas. So with the tech market especially
Speaker 12: being tied with growth and the way that yields might
Speaker 12: be going higher before they come back lower, we would
Speaker 12: recommend me more neutral in the space and looking for
Speaker 12: other growth aptits.
Speaker 2: Do you agree with that that we could have an
Speaker 2: option where rates go higher and the price in the
Speaker 2: Bloomberg total return dicts could actually go down to new weakness?
Speaker 2: Is that part of you know, the mix of Mike
Speaker 2: Wilson's Morgan Stanley is different because they got forty seven opinions,
Speaker 2: But is the general statement there that you could have
Speaker 2: a higher yield regime at Morgan Stanley.
Speaker 4: Yeah. I think Look, there's there's a lot of.
Speaker 3: Parsing the economy versus the markets here, right, and the
Speaker 3: economy is not the markets, uh, And so you can
Speaker 3: have higher interest rates trying to slow the economy, but
Speaker 3: there are other factors driving different parts of the markets.
Speaker 3: I mean, I think that's what is that what you're
Speaker 3: saying on that, like, because you've got just a handful
Speaker 3: of names right that are propping up the market, whereas
Speaker 3: the economy looks you stronger, but there's this constant concern that, Okay,
Speaker 3: rates are going to go higher, but we're going to
Speaker 3: go into recession, and so I think you end up
Speaker 3: getting those differences.
Speaker 12: There's definitely can be that deviation you bring up a
Speaker 12: great point. There can be the economic health, there can
Speaker 12: be the economic recession, but what about the earnings recession.
Speaker 12: I think those two can have absolutely different timings. And
Speaker 12: that's what we're a little bit worried about here. It's
Speaker 12: what's been in people's minds. We might see a recession
Speaker 12: that might be mild, and and yet the consumer continues
Speaker 12: to spend as sure that you've seen, but that spending
Speaker 12: is slowing. So how much does that deceleration or the
Speaker 12: gamma and that spending really start to bleed into equity
Speaker 12: corporate earnings And that's what we as strategists are really
Speaker 12: trying to decipher.
Speaker 5: Well, even still, it feels like some of the worst
Speaker 5: case scenarios for earnings have been lifted in the last
Speaker 5: couple of weeks, especially, you know, when it comes to profits,
Speaker 5: was that premature?
Speaker 12: I think it is a little premature. I think you
Speaker 12: see some companies in corporates doing quite well. But what's
Speaker 12: concerning is if you look on a sequential basis overall
Speaker 12: for the S and P five hundred, you're seeing that
Speaker 12: top line revenue figures are declining faster than where the
Speaker 12: consensus EPs or consensus revenue numbers would put it. Now
Speaker 12: take into account, we're also seeing more margin compression than expected.
Speaker 12: What happens what's remaining of that bottom line sequentially for growth?
Speaker 12: Now that's not to say again that could be a
Speaker 12: little different from where multiples trade and where the market
Speaker 12: can trade. Perhaps the market is already looking to next
Speaker 12: year's earnings, but we do have to keep in mind
Speaker 12: that we need to still get there. We have another
Speaker 12: six months.
Speaker 5: I also want to get your thoughts on equity volatility.
Speaker 5: You brought it up, and you look at the VIX
Speaker 5: right now it's below fourteen. Equity of all has been declining.
Speaker 5: But does a VIX below fourteen feel right at this moment?
Speaker 12: Well, when you say feel right, I would say, given
Speaker 12: what's happened with the actual bounds and what's leading the market,
Speaker 12: it's not. I think that's part of what it is,
Speaker 12: that index correlation that brings it down. But on the
Speaker 12: other hand, you know who thought with this post a
Speaker 12: pandemic regime, we would see a thirteen handle against so
Speaker 12: soon particularly was still the fear of a session. So
Speaker 12: I'd say that I don't know if it feels right.
Speaker 12: I can't say I feel quite comfortable, but mechanically it
Speaker 12: seems to be the right value.
Speaker 2: And now the part of the show, folks, where we
Speaker 2: go and I seem to live on anahe and we
Speaker 2: do this to punish her. The essay the of last
Speaker 2: the first six months rather was Larry MacDonald wrote a
Speaker 2: brilliant essay went out on the Wall Street.
Speaker 1: It was ill and all that.
Speaker 2: And he starts with a massive lump of money and
Speaker 2: ETF's index funds the wall of four oh one k
Speaker 2: institutional money out there, and then he walks through on
Speaker 2: top of it x number of derivative strategies, almost like
Speaker 2: tranches of a build up of notional value. To you
Speaker 2: and the quants at Wells Fargo feel that we are
Speaker 2: going into a second half with notional derivative instability potentials
Speaker 2: or is there integrity.
Speaker 1: To the system.
Speaker 12: Now that's a great point when you bring up instability,
Speaker 12: because are people hedged right now? When wall is cheap.
Speaker 12: You'd expect the hedges are cheap, but why buy this
Speaker 12: downside protection if we're only going one way upwards? It
Speaker 12: feels like you're tearing up money.
Speaker 1: So it feels like nineteen eighty seven, but continue.
Speaker 12: So in that kind of environment, it comes to maybe
Speaker 12: it is prudent to have some protection. But we're not
Speaker 12: calling for a major pullback here or a major downturn,
Speaker 12: but perhaps again that deceleration in this upward trend we've seen.
Speaker 12: So I think that if you want to put on
Speaker 12: those option strategies, maintain your upside exposure, but also take
Speaker 12: them off the top in terms of your stock positions
Speaker 12: and consider rotating that to the less explore in parts
Speaker 12: of the market.
Speaker 2: Is you're study that rebalancing works. I mean Harry Mark,
Speaker 2: who it's stuying, the Nobel laureate ninety five years old.
Speaker 2: He's the one that gave us diversification in rebail. I'm
Speaker 2: not a big fan of rebail. Sell your winners. Where
Speaker 2: are you on that?
Speaker 8: Well?
Speaker 12: I think it depends on timing, and here again we're
Speaker 12: not saying get out of your winners completely, but take
Speaker 12: a little You know, it's been six months and you've
Speaker 12: already gotten thirty three percent on some of these names
Speaker 12: in the QTF and you're passive. You know, you can't
Speaker 12: be too mad about that one. And it wouldn't be
Speaker 12: the worst thing. It takes some of that home, or
Speaker 12: pocket it and put it into something of the lives.
Speaker 1: She sounds like a trader, Well she was a trader.
Speaker 5: Let's take that home, take some profits, you know, lock
Speaker 5: in some of those games. I want to go back
Speaker 5: to that essay that Tom brought up. I think you
Speaker 5: were having a conversation with amyble Silverman a week or
Speaker 5: to ago about covered call strategies. Some of the most
Speaker 5: popular ETFs out there on the market right now are
Speaker 5: covered call strategies. They sell call options. And when you
Speaker 5: think about the stability of markets and this drag lower involatility,
Speaker 5: do those sorts of strategies have any volatility masking effects.
Speaker 12: It is possible. And you think about if the average
Speaker 12: investor is selling calls, then the broker on the other
Speaker 12: side has to buy those calls and they need to
Speaker 12: delta hedge. So when they buy those calls, they need
Speaker 12: to sell the underlying to hedge those delta positions. So
Speaker 12: you have this kind of dynamic where some people are
Speaker 12: holding these calls on their own outright, other people are
Speaker 12: holding them hedged.
Speaker 2: What we do here, folks, is when any wise as
Speaker 2: derivative strategists mentions delta hedges, we always turn to the
Speaker 2: economists to translate. She's going on derivatives and Greek letters
Speaker 2: on us. Would you save us with a question for anahet?
Speaker 4: Okay, okay, I'll save this.
Speaker 3: So it's been really difficult with the incoming data being
Speaker 3: especially when you think about jobs, for anyone to believe
Speaker 3: that there's any other direction but up for equities, and
Speaker 3: so you know, we're looking for another big print on Friday,
Speaker 3: and so you know, it's just very difficult for investors
Speaker 3: to get past.
Speaker 8: That, right.
Speaker 3: So it is that what it's going to take just
Speaker 3: a really clear slow down in jobs or really clear
Speaker 3: increase in jobless claims something in order to get people
Speaker 3: to start to think that maybe there could be you know,
Speaker 3: more nefarious outcome for the economy in the back half
Speaker 3: of the year.
Speaker 12: I certainly think that an employment picture is probably the
Speaker 12: lynchpin that we're all looking for, and that's why we're
Speaker 12: so focused on every single jobs or wages related release
Speaker 12: and so right now we expect the consensus we're in
Speaker 12: line with about three point six on the unemployment rate.
Speaker 12: If that holds, I think the market has some of
Speaker 12: that priced in already. But unless we see, like you mentioned,
Speaker 12: something really concerning a big uptick in unemployment or some
Speaker 12: big deterioration. And in the wage picture for us, it
Speaker 12: seems like somewhat sideways to steady going.
Speaker 1: What's your SPX level.
Speaker 12: We're still at forty four to twenty in terms of
Speaker 12: for a soft landing.
Speaker 6: Now we've breached teak the summer office.
Speaker 12: That what that means, well, you know they are that
Speaker 12: sell and may go away. Maybe it's the sell and
Speaker 12: June go away, but we wouldn't say quite go away.
Speaker 12: I do think that you could see some further upside,
Speaker 12: but the question is how much more. And towards the
Speaker 12: end of the year, as we start realizing that consumer
Speaker 12: spending continues to deteriorate and that starts to take hold
Speaker 12: and that earnings picture kicks in, I think you see
Speaker 12: a little pullback.
Speaker 2: And thank you so much with Wells Fargo, but we're
Speaker 2: gonna have allen joy now. With Jim Bianco, he's president
Speaker 2: of Bianco Research. Hugely followed on the street, and what
Speaker 2: I find is it's a it's a smart note always.
Speaker 2: Of course that's Jim Bianco, but there'll be one sentence
Speaker 2: that hits you over the head. We get that now
Speaker 2: from Jim Bianco. Rory talks about inflation coming down to
Speaker 2: that before level and then it will reverse and drift higher.
Speaker 2: Jim state the theory, how will we get to three
Speaker 2: percent then drift higher?
Speaker 7: Well, it's the base effect.
Speaker 8: Last year, June of twenty twenty two, we had one
Speaker 8: of the highest monthly numbers ever at one point two percent.
Speaker 8: You may remember gasoline prices were five dollars a gallon
Speaker 8: a year ago. We're going to drop that off and
Speaker 8: we're going to replace it with a much lower number,
Speaker 8: something like point four or in that range, and that'll
Speaker 8: bring the year over year inflation rate down to three percent.
Speaker 7: For June.
Speaker 8: July of twenty twenty two was zero, August was point two.
Speaker 8: Those numbers are gonna be easy to jump over. And
Speaker 8: then if you start looking at September, November, December, you
Speaker 8: got point two's point ones.
Speaker 7: Those numbers will be easier to jump over.
Speaker 8: So we should bottom at three percent and start drifting
Speaker 8: towards four percent. Now, I'm assuming no major downturn, no
Speaker 8: kind of crisis that comes along, no heating up.
Speaker 7: Of the war that could change that equation.
Speaker 8: But if the inflation rate bottoms at three and starts
Speaker 8: drifting higher, the Fed's going to find this unacceptable and
Speaker 8: that two rate hikes that we have priced in for
Speaker 8: the rest of the year will happen if not three.
Speaker 2: Jimmy is such a student of history. Is the FED
Speaker 2: finding it unacceptable because they're wedded to a return to
Speaker 2: the Great Moderation, or, as Bill Dudley said last week
Speaker 2: in his Bloomberg Opinion essay, this is a society, a country,
Speaker 2: a nation, and the FED that has to get used
Speaker 2: to a permanent higher rate regime.
Speaker 8: I don't think the FEDS quite with Dudley that they
Speaker 8: need to get accept a higher permanent regime. I think
Speaker 8: they look at the two percent and I think it
Speaker 8: comes back to May of last year when Chair Paul
Speaker 8: was in the White House in the Oval Office and
Speaker 8: President Biden pointed at him and said, America, this is
Speaker 8: the guy that's going to bring inflation down.
Speaker 7: And he's taken that seriously.
Speaker 8: He has stated over and over again that their goal
Speaker 8: is two percent he has said that without getting inflation down,
Speaker 8: you don't have an economy. So he's dead serious about
Speaker 8: trying to bring it down, and he should because prices
Speaker 8: for the last two years have largely been running faster
Speaker 8: than raises and so on a real basis, especially people
Speaker 8: that live paycheck to paycheck, they've been falling behind they
Speaker 8: and that has to be rectified.
Speaker 5: And as such, we've seen expectations for the terminal rate
Speaker 5: definitely move higher over the past week or so after
Speaker 5: hearing from Powell that commitment to keep fighting inflation. But
Speaker 5: let's talk about the neutral rate. Has your calculus for
Speaker 5: where the neutral rate could be changed at all?
Speaker 7: No, it hasn't changed, except that I'll go with what
Speaker 7: the Fed says.
Speaker 8: The neutral rate is somewhere around half a percent above
Speaker 8: the long run average of inflation. Now, of course, we
Speaker 8: could argue to the cows come home, what is the
Speaker 8: long run rate of inflation?
Speaker 7: Is it two? Is it three? Is it three and
Speaker 7: a half? I'm more in three to three and a.
Speaker 8: Half range, which means that neutral is four. And then
Speaker 8: Chair Paul put a little nuance on it. He said,
Speaker 8: the entire yield curve has to be above the neutral rate,
Speaker 8: not just the funds rate. So some of the rates,
Speaker 8: like the ten year old at around three eighty five
Speaker 8: are not quite there and so that would suggest higher rates.
Speaker 8: So I am with Bill Dudley on that that rates
Speaker 8: are probably going to continue to drift higher.
Speaker 2: It feels like a FED to side show. He got
Speaker 2: Jim Bianco and Ellen Zenner with us. Ellen, I want
Speaker 2: you to ask a question to mister Biancle to try
Speaker 2: to be nice, but Ellen, I want to get an
Speaker 2: observation from you first. Is this a FED that has
Speaker 2: to make as John Taylor Stanford would say, this is
Speaker 2: a FED that has to make a regime shift away
Speaker 2: from the silliness of one point x run rate.
Speaker 1: On the FED funds rate.
Speaker 3: Well, I think this is something that is going to
Speaker 3: underscore how much they have to go back to the table,
Speaker 3: as they said, every five years and taking a look
Speaker 3: at their entire framework of how they conduct monetary poul
Speaker 3: and things like are we at a longer run higher news?
Speaker 6: Are yours?
Speaker 3: I think that it's that these things are evolution, not
Speaker 3: revolution when they make changes. I don't think that they're
Speaker 3: going to change the inflation target, but I think they
Speaker 3: can fudge around it like some of the central banks
Speaker 3: and have a band of uncertainty around that. But but, but, Jim,
Speaker 3: I want to ask you, you know, when you think
Speaker 3: about how long the expansion will last, we're going to
Speaker 3: have a downturn at some point and probably inflation will
Speaker 3: still be higher than goal at that point.
Speaker 4: Does that mean that the Fed is going to be.
Speaker 3: Less reluctant to do a steeper cutting cycle in order
Speaker 3: to offset slower growth.
Speaker 7: Sure, And let's look back a year ago.
Speaker 8: A year ago Q one, Q two, we had negative
Speaker 8: two consecutive negative quarters of GDP. And you remember a
Speaker 8: year ago the big debate was is that a recession?
Speaker 8: And most people said no? And what did the FED
Speaker 8: do during that they caught They hiked excuse me, by
Speaker 8: fifty and then by seventy five. They were not heard
Speaker 8: by a slowdown in GDP. So if we see the
Speaker 8: consensus forecast that at the end of the year we
Speaker 8: might see negative GDP numbers if inflation stays elevated, I
Speaker 8: don't think that.
Speaker 7: The defers or dissuades them from raising rates.
Speaker 8: What would is if we saw maybe if we saw
Speaker 8: a big slow down in the labor market. But as
Speaker 8: we all know, the payroll report has beaten fourteen consecutive months.
Speaker 8: So we haven't even gotten a miss on the payroll report,
Speaker 8: let alone a slowdown on it. But if we did,
Speaker 8: that might be the game changer.
Speaker 3: But how do you feel about, you know, the credit
Speaker 3: impacts that we've had. I mean, are we too complacent
Speaker 3: here that we've had this big credit shock? You know,
Speaker 3: there's sort of the economy pre March eight then post
Speaker 3: March eight, you know, and it feels like there's one
Speaker 3: camp that says, well, we've just escaped that is just
Speaker 3: not going to have a big impact on credit and
Speaker 3: the labor markets, and another another camp that says, well,
Speaker 3: we've just not seen it yet.
Speaker 4: Where do you where do you stand there?
Speaker 7: Yeah?
Speaker 8: I agree with you that, you know, March eighth was
Speaker 8: probably the most important economic date of the year pre
Speaker 8: the bank failures, post to bank failures, and I do
Speaker 8: agree that we've seen a big credit shock and we're
Speaker 8: going to continue to see that.
Speaker 7: Now.
Speaker 8: The credit shock is not going to probably result in
Speaker 8: another bank failure, but it is going to result in
Speaker 8: a pullback, especially for small and medium businesses.
Speaker 7: And I think that as we go forward, the FED
Speaker 7: will look at that.
Speaker 8: But then jar Pole is already kind of hinted that
Speaker 8: that's more of a regulatory measure. You know, Michael Barr,
Speaker 8: the head of supervision at the FED, it's his job.
Speaker 7: To deal with that. Our job is to deal with inflation.
Speaker 8: So I don't think at the end of the day
Speaker 8: that the credit situation is going to dissuade the FED
Speaker 8: other than push them from a regulatory standpoint, but not
Speaker 8: necessarily from a monetary policy standpoint.
Speaker 1: Jim Bianco, Thank you. Jim Bianco with US today.
Speaker 2: Now, Isaac Multanski joins the Right Now Directive Policy Research
Speaker 2: at bt IG. Isaac, were you surprised at Yellen will
Speaker 2: travel to China?
Speaker 6: So I think that the simple answer to that is no.
Speaker 6: And here's the reason why. What we've seen from the
Speaker 6: Biden administration is this concerted effort to keep tensions with
Speaker 6: China range bound effectively. So whenever there's a negative headline,
Speaker 6: you can almost bet with certainty that there's going to
Speaker 6: be a positive headline that follows. And so we've got
Speaker 6: this headline now, and the Treasury Secretary will go and
Speaker 6: hopefully they're productive talks that you know, ensure that there's
Speaker 6: a commitment to continue talking. But that tells us that
Speaker 6: something negative is going to follow. And I really think
Speaker 6: that what follows are these investment restrictions that we've been
Speaker 6: talking about for the past few months. Some folks call
Speaker 6: them the outbound scipious restrictions, and I think that we've
Speaker 6: got to think about this as an ebb and flow
Speaker 6: in terms of of the geopolitical tensions and this.
Speaker 4: Of course, the timing is interesting.
Speaker 5: Of course, Yellen expected to make the trip just three
Speaker 5: weeks after Secretary of State Blincoln visited China, and if
Speaker 5: you look at some of the reporting, quoting senior Treasury
Speaker 5: officials off the record, said that the goal of this
Speaker 5: trip is to seek to deepen and increase the frequency
Speaker 5: of communication between these two countries.
Speaker 4: When you think about this trip, what would a win
Speaker 4: look like.
Speaker 11: For the US?
Speaker 6: You know, I think that right now the bar is
Speaker 6: pretty low. I think it's that whenever they can leave
Speaker 6: the room agreeing that they will continue to talk, that
Speaker 6: is a win. Right now, it's difficult to see there
Speaker 6: being much more in terms of tangible, mild markers. We
Speaker 6: can look at rolling back of tariffs, for example, those
Speaker 6: types of things aren't anywhere near being on the table.
Speaker 6: They're not even in the room. So at the moment,
Speaker 6: really the bar that we're looking for is just making
Speaker 6: sure that after each one of these successive meetings, they're
Speaker 6: still willing to talk, they're still willing to travel.
Speaker 5: Well, we'll find out soon enough, of course. Treasury Secretary
Speaker 5: Yellen expected to visit between July sixth and July ninth.
Speaker 5: Let's focus States side, though, because it was a hefty
Speaker 5: week last week of Supreme Court decisions. One of the
Speaker 5: headlines there, of course, the Supreme Court basically throughout Biden's
Speaker 5: student loan relief plan. When you think about the ramifications
Speaker 5: for that on Biden campaigning for President Biden the candidate,
Speaker 5: what does this mean in terms of him trying to
Speaker 5: sort of rally those younger voters.
Speaker 6: Yeah, Look, I think if we even just view this
Speaker 6: through a politically craven lance, the young voters eighteen to
Speaker 6: thirty five were the ones who stopped that red wave
Speaker 6: from coming during the midterm elections. They are a vital,
Speaker 6: absolutely vital voting block for a Democratic party, and that
Speaker 6: informs our viewpoint on what the president's going to do here.
Speaker 6: And so he lost in the Supreme Court, lost handily
Speaker 6: all things considered, but that doesn't mean that they're done.
Speaker 6: And on Friday, after the clothes he came out and
Speaker 6: said they are going to attempt to do student loan cancelation. Again,
Speaker 6: I'm not sold on that for statutory reasons. But here's
Speaker 6: what's really important. They came out and said they are
Speaker 6: going to do effectively this delinquency grace period where for
Speaker 6: twelve months, if you can't make your paymental student loans,
Speaker 6: there'll be no repercussions. And that's a big deal given
Speaker 6: the twenty percent of student loan borrowers are showing signs
Speaker 6: of being unable to pay once that restart payments hits
Speaker 6: in October.
Speaker 2: I'm ready on television this morning, Isaac Bultanski with us
Speaker 2: as b Tig's spirited conversation here. Fourth of July is
Speaker 2: to be about kissing babies. Those days are gone. It's
Speaker 2: a battle to the first Republican debate in August. We
Speaker 2: are advantaged this hour with Sarah Hunt. She Marcus st Alpine,
Speaker 2: Saxon Woods joining us this morning. She is riveted to
Speaker 2: the political conversation.
Speaker 13: Sarah, So the student loan issue, this has been one
Speaker 13: of the things that people have been worried about from
Speaker 13: a spending standpoint, right, So consumer spending has been very strong,
Speaker 13: with student loans have been essentially in abyance since we
Speaker 13: started COVID. So the question then becomes, I think there
Speaker 13: were a lot of people counting on some form of relief,
Speaker 13: So how much stress is it going to put on
Speaker 13: if that relief doesn't come? If you stretched it out
Speaker 13: over twelve months, it's a lot easier than saying everybody
Speaker 13: start making those payments in September.
Speaker 4: I'm sure there are some.
Speaker 13: People who have been budgeting for those payments and are
Speaker 13: ready to make them, but I'm sure that there are
Speaker 13: many people who have not. So the big question about
Speaker 13: consumer spending, which leads into earnings and leads into the
Speaker 13: retail story, is what's going to happen now if you
Speaker 13: have to start paying back some of those loans or
Speaker 13: if you don't, and does that make a big difference
Speaker 13: in terms of earnings. There's been warnings for some of
Speaker 13: the retailers on that specific issue. So I think that
Speaker 13: this is a big it's a big question, and how
Speaker 13: it gets resolved still seems to be up in the air.
Speaker 4: Well, Isaac, let's throw that to you.
Speaker 5: When you think about some of the economic ripples that
Speaker 5: could follow, especially as we head into the twenty twenty
Speaker 5: four campaign season.
Speaker 4: What's your thinking at this juncture.
Speaker 6: The way I think about this is the consumer spending
Speaker 6: side I think is fair, and that you have twenty
Speaker 6: two million or so folks who are going to be
Speaker 6: able to begin repaying in October, and that's two hundred
Speaker 6: and seventy five to three hundred and fifty dollars a
Speaker 6: month that can start going towards student loan payments that
Speaker 6: won't go to other things. But here's another data point
Speaker 6: from the Consumer Financial Protection Bureau that I've been thinking
Speaker 6: about all weekend, which is nearly one in ten student
Speaker 6: loan borrowers are already delinquent on other credit problems, meaning
Speaker 6: that and I think we've seen this through academic papers
Speaker 6: as well, that some distressed student loan borrowers use those
Speaker 6: three years where they didn't have to pay their student
Speaker 6: loans to balloon their credit lines through credit cards, auto loans,
Speaker 6: whatever it may be. And so for them, I look
Speaker 6: at this twelve month twelve month on ramping as really
Speaker 6: a reprieve where it's clear that they will not have
Speaker 6: to pay their student loans. So my question I'll push
Speaker 6: it back. Is you know, are they going to suddenly say, well,
Speaker 6: now it's a time where I need to start saving
Speaker 6: to pay my student loan off, or will I continue
Speaker 6: to live at this pace knowing that the Democrats are
Speaker 6: most likely going to promise even more student loan relief
Speaker 6: once we get on the campaign trail in.
Speaker 1: January, Isaac, Thank you.
Speaker 2: Isaac Multotski with us is b tig this morning with
Speaker 2: a brief hear and particularly off the Supreme Court work.
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Speaker 1: Thanks for listening. I'm Tom Keane, and this is Bloomberg