WEBVTT - Boris Johnson, AI, Fed 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.640 along with my co host Lisa brahma Witz. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penel podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.720 that Bloomberg dot Com. Time to check in with Bloomberg Opinion. 0:00:24.720 --> 0:00:27.200 We're joined by opinion calumnist John Authors. John is a 0:00:27.240 --> 0:00:29.280 senior editor for Bloomberg Markets, joining us here in our 0:00:29.280 --> 0:00:32.120 Bloomberg and Director Brooker Studio. So, John, we need an 0:00:32.159 --> 0:00:34.400 update on Brexit. A lot of moving pieces over the 0:00:34.440 --> 0:00:37.160 last twenty four hours. Can you give us kind of 0:00:37.280 --> 0:00:39.680 just the latest lay of the land and where army 0:00:39.760 --> 0:00:42.559 right now? The latest leg of the lands. We can 0:00:42.600 --> 0:00:48.519 assume that that the plan that's Boris Johnson was putting 0:00:48.520 --> 0:00:52.720 into place, that he would basically frighten everybody into letting 0:00:52.800 --> 0:00:56.440 him have a no deal Brexit is dead. Doesn't necessarily 0:00:56.440 --> 0:00:58.760 mean it won't happen some other way, but that strategy 0:00:58.800 --> 0:01:02.600 has been decisively to feed it. The question now is 0:01:02.880 --> 0:01:09.279 whether we actually have another general election and what point 0:01:09.440 --> 0:01:13.080 that happens now. The critical thing, and I think possibly 0:01:13.120 --> 0:01:17.039 the critical misjudgment that Johnson and his team made, is 0:01:17.080 --> 0:01:21.720 that there was a change in the rules under David Cameron. 0:01:22.240 --> 0:01:24.679 It was meant to be part of a big sweeping 0:01:24.880 --> 0:01:27.240 change of of the British constitution. In fact it was 0:01:27.280 --> 0:01:30.319 just about the only big thing that got passed, so 0:01:30.360 --> 0:01:33.880 that now we have something approaching a fixed term parliament. 0:01:34.360 --> 0:01:37.280 And for the previous century or so you had to 0:01:37.319 --> 0:01:39.959 have an election within five years of the previous one, 0:01:40.200 --> 0:01:42.520 but the prime minister could go to the country earlier 0:01:42.560 --> 0:01:45.360 than that if they felt like it greatly increased the 0:01:45.360 --> 0:01:48.120 strength of incumbency. In Factor and Blair were popular prime 0:01:48.120 --> 0:01:52.360 ministers and they went early rather than get another mandate 0:01:52.360 --> 0:01:56.360 before doing something unpopular. That is no longer an option. 0:01:56.680 --> 0:01:58.920 Now you have to serve five years and if you 0:01:59.000 --> 0:02:02.360 want to hold a another election you need sixty six 0:02:02.400 --> 0:02:05.960 point six percent of the MP's labor has thirty eight 0:02:06.120 --> 0:02:10.600 percent of MPs labor is not totally united, but it's 0:02:10.720 --> 0:02:16.960 probably able to block any attempt at an election. As um, 0:02:17.040 --> 0:02:19.720 we don't have a precedent for what goes on under 0:02:19.760 --> 0:02:23.120 these new sets of rules. Some people think that the 0:02:23.160 --> 0:02:27.040 rest of Parliament, we just say, Boris, you're stuck. You're there, 0:02:27.639 --> 0:02:30.240 you don't have a majority, but you're still in the job. 0:02:30.760 --> 0:02:33.040 I don't understand why this is positive. I'm trying to 0:02:33.040 --> 0:02:36.560 stay so there's no snap election. They're going to block that. 0:02:36.880 --> 0:02:40.280 But Boris Johnson basically doesn't have full authority or power 0:02:40.320 --> 0:02:43.800 to go forth with negotiations with lack thereof, so this 0:02:44.120 --> 0:02:47.480 just makes the UK kind of hamstrung. I don't see 0:02:47.480 --> 0:02:49.760 how this gets them further away from a hard Brexit. 0:02:49.880 --> 0:02:53.760 It gets okay, it's positive because precisely as you said, 0:02:54.120 --> 0:02:57.560 Boris Johnson doesn't have as much authority as people thought 0:02:57.560 --> 0:02:59.120 he did, and they weren't happy about Is having so 0:02:59.200 --> 0:03:03.359 much authority because they didn't trust his judgment. More broadly, 0:03:04.000 --> 0:03:08.600 the market really dislikes the idea of no deal brexit. 0:03:09.080 --> 0:03:11.160 We now know that we have a very strong majority 0:03:11.200 --> 0:03:14.360 in Parliament against it, and it looks thanks to the 0:03:14.360 --> 0:03:17.800 fact that Parliament has stronger power over deciding when an 0:03:17.840 --> 0:03:20.639 election happens and it used to that they can insist 0:03:21.000 --> 0:03:24.200 that a no deal is ruled out before we even 0:03:24.240 --> 0:03:28.960 have an election. It is an ungodly mess to use 0:03:29.000 --> 0:03:33.000 my own term from my column this morning, and the 0:03:33.040 --> 0:03:36.520 prospect for volatility is high, the prospect for good governance 0:03:36.640 --> 0:03:40.320 is very low. From the point of view of British assets, 0:03:40.400 --> 0:03:44.840 they have been priced on an increasing probability of no 0:03:45.000 --> 0:03:49.080 deal anything other than anything other than no deal. Frankly, 0:03:49.920 --> 0:03:53.080 they are amply priced for that risk, and that risk 0:03:53.160 --> 0:03:58.520 swamps all other things. It doesn't make Britain attractive investment particularly, 0:03:58.560 --> 0:04:02.600 but it does make it an appealingly priced investment. All right, 0:04:02.680 --> 0:04:06.640 So give us your best guess as to next steps. 0:04:06.640 --> 0:04:08.800 How does this play out? Are we? You know, as 0:04:08.800 --> 0:04:13.440 we get to October one? Well, it's going to be 0:04:13.560 --> 0:04:18.080 very difficult. I don't think. I don't think there is 0:04:18.200 --> 0:04:22.720 a lot that Johnson himself can do about it at 0:04:22.800 --> 0:04:26.200 this point, because his legs really have been cut from 0:04:26.360 --> 0:04:30.800 under him. They've basically overplake their hand and now they've 0:04:31.360 --> 0:04:37.279 the bluff has been called. Now the question becomes, can 0:04:37.400 --> 0:04:41.600 the opposition to Brexits actually get its act together and 0:04:41.680 --> 0:04:45.279 agree on something having failed to do so for the 0:04:45.360 --> 0:04:48.480 last three years? What's the deadline for Boris Johnson in 0:04:48.600 --> 0:04:51.680 terms of another election or when his tenure might be 0:04:51.800 --> 0:04:56.920 up just naturally? Okay, So again, I'm not seeing how 0:04:56.960 --> 0:05:01.800 this resolves in any positive way. There is there is 0:05:01.920 --> 0:05:05.440 no I really really cannot imagine he's going to be 0:05:05.440 --> 0:05:08.440 allowed to drag on for another three years. It might 0:05:08.520 --> 0:05:13.520 be moderately amusing Jacob, Jacob re smug decides he's going 0:05:13.560 --> 0:05:15.960 to make a habit of lying across three seats for 0:05:16.040 --> 0:05:20.800 this that that that really could be quite amusing. You 0:05:21.279 --> 0:05:24.159 how to do government better than yes? We do, yes, 0:05:24.240 --> 0:05:26.719 but but you did have a big revolution when you 0:05:26.800 --> 0:05:28.920 thought that you might have a better notion than we did. 0:05:29.279 --> 0:05:35.839 So there we go. Um No, thats basically this is 0:05:35.960 --> 0:05:39.400 purely the market reaction at the moment, and the notion 0:05:39.440 --> 0:05:44.160 that this is positive is purely because um people really, 0:05:44.560 --> 0:05:48.080 people in the investment community really think no deal is 0:05:48.120 --> 0:05:50.440 a bad idea, and I personally do agree with them, 0:05:50.520 --> 0:05:53.280 and no deal is not completely out of the question. 0:05:53.360 --> 0:05:56.200 Now there is still Nigel Farage out there. One of 0:05:56.240 --> 0:05:59.440 the possibilities is that this completely blessed burst the Conservatives 0:05:59.480 --> 0:06:02.640 balloon and that the Brexit Party becomes the biggest party 0:06:02.640 --> 0:06:06.599 when we finally have an election. But ultimately the ball 0:06:06.640 --> 0:06:09.280 is in the cult of the anti Brexity is they 0:06:09.320 --> 0:06:12.480 have to work out a way of doing things now 0:06:12.520 --> 0:06:14.760 that that bluff has been called for. John Boris Johnson 0:06:14.800 --> 0:06:17.320 and the Brexities. John Author's thank you so much for 0:06:17.360 --> 0:06:20.200 being with us. It's always fabulous get your perspective, especially 0:06:20.200 --> 0:06:23.320 on Brexit, which is I just shrug, which doesn't really 0:06:23.360 --> 0:06:26.880 translate on on radio. John Author is a senior editor 0:06:26.920 --> 0:06:29.279 for Bloomberg Markets, turning us here in our Bloomberger Active 0:06:29.279 --> 0:06:47.200 Broker Studios. As the market kind of jogs around this 0:06:47.480 --> 0:06:49.640 range and doesn't really make a big move in one 0:06:49.640 --> 0:06:52.360 way or another. There's a question kind of hanging over 0:06:53.120 --> 0:06:56.240 investment managers, which is when do they make a big move, 0:06:56.480 --> 0:06:58.880 when do they sort of dip their toe in or 0:06:58.920 --> 0:07:01.720 pull their money out? Winning us now, David Kotak, chairman 0:07:01.720 --> 0:07:04.760 and chief investment officer at Cumberland Advisers. He joins us 0:07:04.760 --> 0:07:07.400 here in our Bloomberg Intera Active Broker Studios. David, we 0:07:07.520 --> 0:07:10.680 love having you on. Thank you for being here. What 0:07:10.720 --> 0:07:13.520 are you doing at this point? Are you sitting on 0:07:13.560 --> 0:07:16.320 your hands like everybody says they are in terms of 0:07:16.360 --> 0:07:19.840 real money investment? At least it's always a pleasure. It's 0:07:20.160 --> 0:07:22.600 we've had a big change since the last time we 0:07:23.240 --> 0:07:29.320 talked last week we saw three rounds in our quantitative 0:07:29.360 --> 0:07:34.080 work on sentiment that was saying panic and fear is 0:07:34.120 --> 0:07:37.960 now rife in the markets. And that's appropriate when you 0:07:38.000 --> 0:07:41.240 see the kind of headline risk we've had day after day. 0:07:42.080 --> 0:07:45.600 We became nearly fully invested in the US stock market 0:07:45.880 --> 0:07:49.720 in those sell offs. So I said here today and yesterday, 0:07:49.760 --> 0:07:52.000 when I had my head handed to you, having just 0:07:52.160 --> 0:07:55.880 gone in the week before, it was looking pretty bleak. 0:07:55.960 --> 0:07:59.080 Today looks a little better. But the fact is we 0:07:59.160 --> 0:08:04.480 make the case three ways. Fiscal policy is expanding. That's 0:08:04.520 --> 0:08:07.640 a rising deficit's going to be over a trillion. That's 0:08:07.640 --> 0:08:12.320 a Trump deficit. Monetary policy is flat too easy. There 0:08:12.400 --> 0:08:15.360 isn't a chance interest rates go up in the United 0:08:15.400 --> 0:08:18.560 States for the next year. They go down or stay 0:08:18.560 --> 0:08:21.160 where they are. And the third one is the important one, 0:08:21.200 --> 0:08:25.640 because the entire distribution of U. S Government debt is 0:08:25.760 --> 0:08:28.800 somewhere between say one and a half and two percent 0:08:28.920 --> 0:08:32.480 interest rates, and the inflation rate in the United States 0:08:32.600 --> 0:08:35.360 is somewhere between one and a half and two percent, 0:08:35.920 --> 0:08:38.400 And if you put those together, that means the real 0:08:38.600 --> 0:08:42.280 interest rate in the United States is zero, which means 0:08:42.360 --> 0:08:49.080 money is free, money free loose monetary, loose fiscal and 0:08:49.160 --> 0:08:52.199 a hundred and sixty million people employed in the United 0:08:52.240 --> 0:08:57.160 States legally with wages, and it's the wages arising. Show 0:08:57.200 --> 0:09:01.160 me how you get to a big rush. I don't 0:09:01.240 --> 0:09:03.960 see it. So I don't like the policy. I don't 0:09:04.000 --> 0:09:07.120 like the trade war. I think it does a disservice 0:09:07.200 --> 0:09:09.960 to the nation in the world, and I think navarro 0:09:10.160 --> 0:09:14.520 Trump policy is wrong. I have to be agnostic on 0:09:14.760 --> 0:09:18.800 policy and apply as an investment professional what I think 0:09:18.880 --> 0:09:21.640 is the right choice. And that's what we did. Now 0:09:21.679 --> 0:09:23.960 we'll find out if it's good red, but it's we're 0:09:23.960 --> 0:09:25.960 in a new place here, and so of course what 0:09:26.000 --> 0:09:29.600 we've seen almost on a daily basis is the headline risk, 0:09:29.640 --> 0:09:32.439 which you talk about, and it kind of brings you 0:09:32.520 --> 0:09:35.680 back to what seems to be the number one driver 0:09:35.880 --> 0:09:39.120 of daily fluctuations in the in the markets is the 0:09:39.120 --> 0:09:42.360 trade risk. So you, from your perspective, just have to 0:09:42.400 --> 0:09:44.960 put that aside and think longer term. I guess, well, 0:09:45.040 --> 0:09:48.640 I we're evolving a different position on the trade poll. 0:09:49.360 --> 0:09:52.760 We used to think about this as a temporary phenomenon, 0:09:53.160 --> 0:09:55.319 and the markets played that for a year and a 0:09:55.400 --> 0:09:59.040 half and the politics of it seemed to suggest it, 0:09:59.640 --> 0:10:02.760 but it's really happened, is I think what Trump and 0:10:03.240 --> 0:10:09.280 his policy have done is permanently set back globalization and integration, 0:10:09.600 --> 0:10:13.040 which was at work for decades. And the result of 0:10:13.040 --> 0:10:18.440 globalization and integration was a declining protectionist path, and we 0:10:18.520 --> 0:10:23.360 had it and more or less growing peace, although we 0:10:23.440 --> 0:10:28.800 had hotspots. We are reversing that. It's a shame. What 0:10:28.960 --> 0:10:34.200 does it mean. It means we'll have enclaves geographically instead 0:10:34.240 --> 0:10:38.680 of globalization. So you take the US and you take Canada, Mexico, 0:10:39.000 --> 0:10:41.520 put them together and say that's a North American place. 0:10:41.760 --> 0:10:43.920 You have another and it'll be China centric. You have 0:10:43.960 --> 0:10:46.840 another and it will be Europe, which is dealing now 0:10:46.920 --> 0:10:50.600 with this monstrosity of negative interest rates. But it's a 0:10:50.679 --> 0:10:55.200 separate enclave. And so for us, the focus then is 0:10:55.320 --> 0:10:57.920 on this new world. We are going through what I 0:10:57.960 --> 0:11:01.840 think is a hundred year flood and it's a major change. 0:11:02.120 --> 0:11:04.199 And if you try to play by the old rules, 0:11:04.240 --> 0:11:08.280 they don't work. Good example, if I have another minute, 0:11:09.200 --> 0:11:13.959 if you take negative rates, are seventeen trillion in negative rates? 0:11:14.080 --> 0:11:18.199 I know you follow that closely, and Lisa especially follows bonds. Yes, 0:11:18.280 --> 0:11:22.000 for a long time, so you so you say, okay, 0:11:22.400 --> 0:11:26.520 discount any asset with a negative interest rate, and the 0:11:26.600 --> 0:11:30.160 ultimate mass says it's worth infinity. Now we know that's 0:11:30.160 --> 0:11:34.880 not possible. So all bond models don't work when the 0:11:35.000 --> 0:11:39.360 duration is longer than the maturity. The bond model doesn't work. 0:11:39.760 --> 0:11:44.000 When you discount assets at these interest rates, you get 0:11:44.080 --> 0:11:50.680 prices which change behavior extraordinarily. Okay, so all this kind 0:11:50.720 --> 0:11:54.720 of comes down to why you just shifted your money 0:11:54.720 --> 0:11:57.840 into equities? Is that correct? So? Well, that's right, we 0:11:58.000 --> 0:12:00.400 took up the weight in equities and we're fully invested. 0:12:00.440 --> 0:12:05.640 When the SNPI index yield is higher than the ten 0:12:05.760 --> 0:12:10.520 year treasury? Would you buy the ten year treasury with 0:12:10.679 --> 0:12:14.440 your money? My answer when that question comes to me 0:12:14.920 --> 0:12:17.920 is no. But then I guess the flip side of 0:12:17.920 --> 0:12:20.880 that is, do you think that that bonds are going 0:12:20.920 --> 0:12:23.520 to underperform given that relationship, or do you think that 0:12:23.559 --> 0:12:25.800 stocks just need to rally a whole bunch more to 0:12:25.880 --> 0:12:28.240 sort of right size everything and then just returns will 0:12:28.280 --> 0:12:32.920 generally be lower going forward. I think bonds underperform in 0:12:33.040 --> 0:12:37.440 price as yields get restored if we don't have a 0:12:37.559 --> 0:12:43.640 global recession or depression, If we don't repeat smooth, Holly. 0:12:43.760 --> 0:12:47.520 And in the mature economies and the US which is 0:12:47.600 --> 0:12:52.320 se now services, it's not that likely. You can't make 0:12:52.400 --> 0:12:55.040 that case so strongly, or at least I can't. I 0:12:55.080 --> 0:12:57.959 hear it all the time. The world's coming to an end. 0:12:58.320 --> 0:13:01.440 Here's a code talk forecast. The world won't come to 0:13:01.520 --> 0:13:04.000 an end. And if I'm wrong, you can tell me 0:13:04.040 --> 0:13:07.320 how wrong. So, David, should we be are you thinking? 0:13:07.520 --> 0:13:09.800 You know, when we've heard from some people as it 0:13:09.920 --> 0:13:14.000 is perhaps a new world order, less global perhaps, but 0:13:14.080 --> 0:13:17.559 that suggests that global growth is going to be less 0:13:17.600 --> 0:13:20.120 going forward over the next ten twenty years, and perhaps 0:13:20.120 --> 0:13:22.800 it was over the prior periods. I think you're right. 0:13:22.920 --> 0:13:28.800 I think, Paul, global growth slows because we have impediments 0:13:28.840 --> 0:13:32.840 to it now instead of assistance to it. You know, 0:13:32.960 --> 0:13:35.920 for me, this is tough. I spent my entire adult 0:13:36.000 --> 0:13:40.800 life in in philanthropic work and in geopolitical work with 0:13:40.960 --> 0:13:47.760 organizations devoted to globalization and integration, attaining peace and a 0:13:47.880 --> 0:13:52.040 higher standard of living worldwide. And it's all coming apart. 0:13:52.520 --> 0:13:56.839 And the reason it's coming apart is a misguided policy 0:13:56.920 --> 0:14:03.040 that originates in Washington. That's awful. So it's hard as 0:14:03.080 --> 0:14:06.000 on the policy. But I sit with my partners in 0:14:06.000 --> 0:14:08.319 the firm and I said, we don't make this policy. 0:14:08.520 --> 0:14:11.559 Our job is by cell hold for a client. And 0:14:11.600 --> 0:14:14.040 now we have an entry, and we have an entry 0:14:14.040 --> 0:14:17.800 because the world looks so ugly and crazy, right. Interesting. 0:14:17.880 --> 0:14:20.680 David Kota, thank you so much, as always, uh for 0:14:20.840 --> 0:14:24.360 your comments now saying I think very interesting to take away, 0:14:24.440 --> 0:14:27.680 lisays Mr Kotalk is fully invested in equities, using the 0:14:27.760 --> 0:14:30.600 recent volatility, of the recent weakness in the markets to 0:14:30.640 --> 0:14:32.640 get a little bit more restive on the equity side. 0:14:32.720 --> 0:14:35.600 I think that it's really poignant that he said that 0:14:35.600 --> 0:14:37.320 this is a hundred year of flood, that this is 0:14:37.760 --> 0:14:41.600 sort of turning a lot of fundamental assumptions on their heads, 0:14:42.080 --> 0:14:44.840 and what does that mean about how you look at 0:14:44.960 --> 0:14:48.040 investing and just in general, how to call your perceptions 0:14:48.200 --> 0:14:50.960 really important outlook. Yeah, very very it's a different view 0:14:50.960 --> 0:14:53.320 and it's certainly one that makes a lot of sense, 0:14:53.360 --> 0:14:56.400 and it's uh, it's probably perhaps just kind of recognizing 0:14:56.400 --> 0:14:59.440 how the markets have changed out there. David Kotak, chairman, 0:14:59.440 --> 0:15:01.720 a chief investor and officer Cumbler and Advisors, thank you 0:15:01.760 --> 0:15:04.240 very much for joining us, giving you your thoughts on 0:15:04.320 --> 0:15:23.800 the market. The question heading into the September f O 0:15:23.960 --> 0:15:26.600 m C meeting is not whether the Federal Reserve will 0:15:26.640 --> 0:15:30.600 cut rates, but whether they will signal substantial further cuts 0:15:30.920 --> 0:15:33.160 later in the year and next year. Joining us now 0:15:33.160 --> 0:15:34.680 to get a sense of what the pulse is in 0:15:34.760 --> 0:15:37.760 FED world is Christopher Condon, his Federal Reserve reporter for 0:15:37.880 --> 0:15:40.920 Bloomberg News. So, Chris, we are getting some Fed speak 0:15:41.040 --> 0:15:43.960 this week. We heard from Boston FED President Eric rosen 0:15:44.000 --> 0:15:46.320 Gren yesterday. We're going to hear from J. Powell on Friday. 0:15:46.520 --> 0:15:49.320 What have we heard? What are we expecting to hear? Well, 0:15:49.360 --> 0:15:52.680 we're hearing more about a split committee, really one I 0:15:52.720 --> 0:15:57.200 think where the majority still sits with J. Powell uh 0:15:57.240 --> 0:16:00.000 and his signal recently at Jackson Hole that there will 0:16:00.080 --> 0:16:04.440 be another rate cut coming in September. UM. But there's 0:16:04.640 --> 0:16:08.560 a good handful of regional presidents that are not comfortable 0:16:09.160 --> 0:16:12.240 with cutting again. A couple of them are voters, namely 0:16:12.360 --> 0:16:15.720 Eric rose and Gren. Esther George from Kansas City will 0:16:15.720 --> 0:16:20.480 probably be another dissenter. Although she hasn't spoken publicly since 0:16:21.080 --> 0:16:24.040 UM the last meeting. Rose and Gren has a couple 0:16:24.080 --> 0:16:28.800 of times, however, UM and he's making a case that, yes, 0:16:28.920 --> 0:16:32.920 the risks are growing to the US economy, obviously from 0:16:32.920 --> 0:16:37.520 the deteriorating trade picture, but the damage there is confined 0:16:37.640 --> 0:16:44.080 mainly to business sector, to manufacturing, especially whereas the consumer, 0:16:44.600 --> 0:16:47.960 which counts for about sevent of GDP in the US, 0:16:48.280 --> 0:16:51.680 is roaring on just fine because of tight labor market 0:16:52.240 --> 0:16:56.840 and UH steadily increasing wages, not dramatically, but steadily, and 0:16:56.920 --> 0:17:00.200 so the consumers continuing to spend in the consumer has 0:17:00.240 --> 0:17:03.880 the ability to carry the US economy to at least 0:17:04.200 --> 0:17:07.399 two percent growth this year. Yes, So, Christopher, you mentioned 0:17:07.440 --> 0:17:11.760 the manufacturing and business spending, and we saw that the 0:17:11.760 --> 0:17:14.200 I s M data came out the last week. We 0:17:14.280 --> 0:17:16.879 showed manufacturing contracting for the first time, I guess in 0:17:17.160 --> 0:17:20.199 three years, with at nine point one reading below that 0:17:20.240 --> 0:17:23.000 Matt at the important fifty level. So to what extent 0:17:23.040 --> 0:17:27.480 do you think that'll give the Hawks some ammunition? UM? Yeah, 0:17:27.560 --> 0:17:30.919 I think it certainly will. But you know, there's a 0:17:30.920 --> 0:17:33.679 lot of agreement on I would say, the diagnosis and 0:17:33.720 --> 0:17:38.879 not the prescription here across the committee, people seem to 0:17:38.960 --> 0:17:43.440 agree that the base case is still pretty good, um, 0:17:43.560 --> 0:17:46.399 and that the risks are rising. The question is it 0:17:46.440 --> 0:17:50.600 does all this turmoil and the business side, particularly in manufacturing, 0:17:50.720 --> 0:17:54.760 begin to infect the consumer side. And the bridge there 0:17:55.320 --> 0:17:57.600 is the jobs market. That's what a lot of people 0:17:57.640 --> 0:17:59.200 are going to be watching. We've got a big jobs 0:17:59.280 --> 0:18:02.879 number coming on Friday, the August non farm prey rolls. 0:18:03.280 --> 0:18:07.320 And you know, the idea is if um businesses which 0:18:07.320 --> 0:18:11.119 are already drawing back on plans for expansion, you know, 0:18:11.160 --> 0:18:15.159 delaying or even just canceling investment plans, if they also 0:18:15.359 --> 0:18:18.600 begin to lay off workers, and that gives us one 0:18:18.680 --> 0:18:22.879 or two bad jobs numbers that could spook the consumer. 0:18:23.200 --> 0:18:26.520 Rob Kaplan, the president of the Dallas FED, talked about that. 0:18:26.600 --> 0:18:29.399 He's he's supportive of a ray cut in September, and 0:18:29.440 --> 0:18:33.040 he worries that if the f o MC waits to 0:18:33.119 --> 0:18:36.600 see a real sign that consumer spending is starting to 0:18:36.640 --> 0:18:39.239 nose down, then they've waited a bit too long. Does 0:18:39.280 --> 0:18:42.359 the data even matter at this point? Oh well, that 0:18:42.520 --> 0:18:45.280 always matters, I think. But the reason why I ask 0:18:45.359 --> 0:18:47.960 that is because at this point it seems like uncertainty 0:18:48.040 --> 0:18:51.280 is the prevailing word. They're worried about uncertainty, creating some 0:18:51.400 --> 0:18:56.560 uncertainty for uncertainty at businesses with uncertainty, and you know 0:18:56.600 --> 0:18:59.359 that basically it's gonna slow spending and that they just 0:18:59.400 --> 0:19:01.040 want to get a out of that. I mean, it 0:19:01.119 --> 0:19:03.760 does not seem to be connected to you know, maybe 0:19:03.800 --> 0:19:06.200 perhaps the inflation readings, but I mean, it doesn't seem 0:19:06.240 --> 0:19:08.600 like anything could come out of the job's reporting Friday 0:19:08.840 --> 0:19:11.879 they would make them not cut rates. So I agree 0:19:11.920 --> 0:19:14.040 with that, Yes, yeah, I mean, and the short and 0:19:14.320 --> 0:19:16.680 you always you know that you're not going to get 0:19:16.680 --> 0:19:19.240 a dramatic move one way or the other based on 0:19:19.240 --> 0:19:22.040 one or two data points. It's more of the accumulation. 0:19:22.119 --> 0:19:24.080 So in that sense, I really do agree with you 0:19:24.160 --> 0:19:27.719 that they're they're going to cut in September um. But 0:19:27.760 --> 0:19:31.359 you know, there's a bigger decision waiting for this committee 0:19:31.440 --> 0:19:34.640 is and that's at what point do they switch, even 0:19:34.720 --> 0:19:39.040 the majority that's in favor of this mid cycle adjustment, 0:19:39.720 --> 0:19:42.520 what point do they change gears and say no, we're 0:19:42.560 --> 0:19:46.880 aheaded for a deeper downturn and we better start cutting harder. 0:19:47.359 --> 0:19:50.480 That's where the argument of trying to use your limited 0:19:51.000 --> 0:19:55.239 ammunition fast and aggressively starts to come into play. They 0:19:55.240 --> 0:19:59.480 are not there yet, but you know they're thinking about that, 0:20:00.119 --> 0:20:02.720 and the in the data as that accumulates will help 0:20:02.760 --> 0:20:06.440 inform them there for sure. So Chris, just real quickly, UM, 0:20:06.440 --> 0:20:08.600 how common is it to have you know the number 0:20:08.640 --> 0:20:10.480 of dissenters that we seem to have on the FMC 0:20:10.720 --> 0:20:14.440 right now? I would say it's not uncommon, particularly where 0:20:14.480 --> 0:20:17.840 it's confined to the regional presidents. Um, you know, you'll 0:20:17.840 --> 0:20:22.240 only have you know the potential for two dissenting voters there. Again, 0:20:22.880 --> 0:20:25.040 where in the background too, there will be some other 0:20:25.920 --> 0:20:29.280 uh certain probably I would say three or four other 0:20:29.320 --> 0:20:32.960 regional presidents that afterwards come out saying they weren't really 0:20:32.960 --> 0:20:36.480 comfortable with this. Uh. It gets a lot more dramatic 0:20:36.520 --> 0:20:41.240 if we eventually see a governor UM expressing severe discomfort. 0:20:41.280 --> 0:20:44.280 We're not quite there. So I don't think it's that 0:20:44.480 --> 0:20:47.320 highly unusual at this point. Very good, Christopher Connan, Thank 0:20:47.359 --> 0:20:49.600 you so much for joining us Chris as the Federal 0:20:49.600 --> 0:20:52.600 Reserve reporter for Bloomberg News, joining us from our Washington 0:20:52.680 --> 0:21:11.480 d C Bureau. Let's talk cryptocurrencies. Facebook made a big 0:21:11.520 --> 0:21:13.760 gus splash schuck a month or so ago with their 0:21:13.960 --> 0:21:17.359 libre product, their cryptocurrency entrance into the market. Let's get 0:21:17.400 --> 0:21:19.600 an update on kind of where that market stands. Welcome 0:21:19.640 --> 0:21:24.879 William Quickly. He's CEO of w a X Worldwide Asset Exchange. 0:21:25.119 --> 0:21:28.040 He's also co founder of Tether. He joins us from 0:21:28.040 --> 0:21:30.480 our l A studio. Williams, thanks so much for joining us. 0:21:30.800 --> 0:21:34.720 You know, I guess cryptocurrencies for the broad audience kind 0:21:34.720 --> 0:21:38.919 of took a higher profile when Facebook made that announcement 0:21:39.000 --> 0:21:42.399 about its Libra crypto product. Give us, give us a 0:21:42.400 --> 0:21:45.000 sense of kind of where you think the cryptocurrency market 0:21:45.080 --> 0:21:48.800 is right now. First, I would say, Uh, the fact 0:21:48.840 --> 0:21:52.159 that Facebook is finally considering doing what we call a 0:21:52.200 --> 0:21:55.960 stable coin, which is issuing a token that's backed by 0:21:56.040 --> 0:21:58.520 the US dollar and and a basket of other goods 0:21:59.119 --> 0:22:01.800 is a is a strong indication that companies of that 0:22:01.920 --> 0:22:06.440 size finally realized the value of incorporating blockchain into their 0:22:06.440 --> 0:22:09.679 basic business. So there's a lot of other reasons why 0:22:09.680 --> 0:22:13.000 why Facebook is is doing uh, what we call a 0:22:13.040 --> 0:22:17.600 stable coin, other than simply saving money. Uh. The entire 0:22:18.119 --> 0:22:24.320 uh cross border international payment business is very difficult. It's slow, 0:22:24.400 --> 0:22:28.080 it's expensive, and when you think about somebody like Facebook, 0:22:28.080 --> 0:22:31.520 they've got two billion people on their platform. They could 0:22:31.600 --> 0:22:34.680 instantly create a currency if you will that would be 0:22:35.320 --> 0:22:37.320 one of the biggest, if not the biggest, in the world. 0:22:38.200 --> 0:22:40.840 So this is it's a very good use case what 0:22:40.880 --> 0:22:45.200 we call stable coins, uh for for blockchain. Blockchain is 0:22:45.240 --> 0:22:48.840 not perfect for everything. Now, in terms of your question, 0:22:49.080 --> 0:22:52.680 what is the state of blockchain today? Uh, there has 0:22:52.720 --> 0:22:58.320 been a ton of investment since seen back in hundreds 0:22:58.400 --> 0:23:01.200 of businesses did what we called I c o s. 0:23:01.240 --> 0:23:03.639 They raised lots to capital and they've been building out 0:23:04.200 --> 0:23:09.400 really nice software systems. So we're going way beyond blockchain. 0:23:09.640 --> 0:23:15.240 From the bitcoin perspective, Bitcoin is a is a fantastic invention, 0:23:15.400 --> 0:23:17.919 but it lacks a lot of things. You know, it's slow, 0:23:18.040 --> 0:23:21.879 it's expensive, and it's difficult to use. So those particular 0:23:21.920 --> 0:23:24.480 problems are things that are now getting addressed and i'd 0:23:24.560 --> 0:23:28.199 suspect over the second maybe the next year or so, 0:23:28.280 --> 0:23:33.040 you're going to see a lot more businesses adopting crypto 0:23:33.160 --> 0:23:36.040 and you're going to see them using these new types 0:23:36.080 --> 0:23:38.920 of block chains that go way beyond the capabilities of 0:23:38.920 --> 0:23:41.359 of the bitcoin block chain. So the concept of a 0:23:41.359 --> 0:23:44.480 stable coin, and this is important and you're the perfect 0:23:44.480 --> 0:23:46.359 person to be speaking about this because you're a co 0:23:46.440 --> 0:23:49.159 founder of Tether, which is the stable coin probably that 0:23:49.200 --> 0:23:52.680 people most note, uh, and my understanding, it's basically backed 0:23:52.760 --> 0:23:57.320 by some currency or some commodity, or there's something backing 0:23:57.440 --> 0:24:00.920 the value. So it's not just uh, you know, its 0:24:00.960 --> 0:24:03.800 own kind of entity that that rises or falls based 0:24:03.800 --> 0:24:07.000 on speculation. Am I correct? That's exactly right. So I 0:24:07.040 --> 0:24:10.040 guess that there's there's a question, and this really gets 0:24:10.960 --> 0:24:14.200 kind of dicey sometimes, what would you like to see 0:24:14.200 --> 0:24:18.480 when it comes to the regulatory regime that overseas whether 0:24:18.920 --> 0:24:22.879 the stuff that's backing the currency is actually worth what 0:24:22.920 --> 0:24:24.560 it is. I mean, I'm I'm talking. I'm thinking about tether, 0:24:24.640 --> 0:24:26.800 and there have been some questions about whether there are 0:24:26.880 --> 0:24:29.080 enough dollars backing it or just sort of you know, 0:24:29.320 --> 0:24:32.879 whether there's any you know, demonstration that they're all backed 0:24:32.880 --> 0:24:36.359 by by dollars. Yeah. Well, first I would say, uh, 0:24:36.359 --> 0:24:39.200