1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day, we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,560 --> 00:00:15,600
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

5
00:00:15,600 --> 00:00:18,479
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:22,960
Speaker 1: at Bloomberg dot com slash podcast. President Joe Biden selected

7
00:00:23,000 --> 00:00:25,920
Speaker 1: Jerome pal for a second four year term as US

8
00:00:25,960 --> 00:00:29,840
Speaker 1: Federal Reserve Chair and elevated Governor Leo Brainerd to vice chair.

9
00:00:30,600 --> 00:00:33,640
Speaker 1: And I guess, uh, we're talking about consistency here, and

10
00:00:33,640 --> 00:00:35,240
Speaker 1: that's kind of what the market likes. With the SMP

11
00:00:35,320 --> 00:00:37,559
Speaker 1: up nine tenths of one percent this morning. Let's get

12
00:00:37,600 --> 00:00:39,400
Speaker 1: some color behind the decision. We can do that with

13
00:00:39,440 --> 00:00:43,040
Speaker 1: Craig Tours, Federal Reserve, an economy reporter for Bloomberg News. So,

14
00:00:43,120 --> 00:00:49,560
Speaker 1: Craig again, I guess this. The message here today is consistency. Yeah. Yeah.

15
00:00:49,800 --> 00:00:53,840
Speaker 1: And the so elevation of Governor brainer to vice chair

16
00:00:54,240 --> 00:00:57,840
Speaker 1: is interesting in that gives her a little bit more

17
00:00:57,920 --> 00:01:03,360
Speaker 1: agency over monetary policy. I think, um, I can go

18
00:01:03,400 --> 00:01:08,040
Speaker 1: into that if you want, yeah, please, okay, So, chairs

19
00:01:08,440 --> 00:01:11,399
Speaker 1: Taylor have to kind of be in the center. Right,

20
00:01:11,800 --> 00:01:14,520
Speaker 1: They can't be like on one side of their committee

21
00:01:14,600 --> 00:01:16,800
Speaker 1: or on the other. They have to find the consensus.

22
00:01:17,560 --> 00:01:20,760
Speaker 1: And right now you to both know the consensus is

23
00:01:20,840 --> 00:01:26,000
Speaker 1: shifting towards tighter policy. So where I think Governor Brainard

24
00:01:26,080 --> 00:01:29,360
Speaker 1: comes in as a voice that doesn't have to be

25
00:01:29,400 --> 00:01:32,120
Speaker 1: in the center, but kind of can kind of push

26
00:01:32,200 --> 00:01:36,399
Speaker 1: hard on the flank, um, and maybe push the consensus

27
00:01:36,520 --> 00:01:40,759
Speaker 1: one direction or another. UM. I want to as suspect

28
00:01:40,840 --> 00:01:44,920
Speaker 1: that she'd opposed the chair, but she she can exercise

29
00:01:44,959 --> 00:01:48,640
Speaker 1: a lot of weight here. That That's how I view it. Craig,

30
00:01:48,680 --> 00:01:51,280
Speaker 1: what do you think? I guess you know, Taylor and

31
00:01:51,280 --> 00:01:54,400
Speaker 1: I were just talking earlier. This just feels like a

32
00:01:54,440 --> 00:01:57,520
Speaker 1: decision that could have been made days ago, weeks ago,

33
00:01:57,600 --> 00:02:01,360
Speaker 1: and agree to the timing here. I don't have a

34
00:02:01,400 --> 00:02:04,200
Speaker 1: lot of thoughts the timing, and as you know, there

35
00:02:04,200 --> 00:02:08,400
Speaker 1: are more vacancies. UM. It does seem that the delay

36
00:02:08,600 --> 00:02:12,959
Speaker 1: gave rise to a lot of, um, frankly distasteful personal

37
00:02:13,080 --> 00:02:16,200
Speaker 1: digging at both these people. So I don't know why

38
00:02:16,240 --> 00:02:19,720
Speaker 1: it took so long. People say democrats are a complex

39
00:02:19,800 --> 00:02:24,679
Speaker 1: lot now, UM, so maybe there was some work to do.

40
00:02:25,000 --> 00:02:27,720
Speaker 1: I just don't know. On that note, Craig, it's not

41
00:02:27,800 --> 00:02:30,120
Speaker 1: just sort of the two headliners that we got today,

42
00:02:30,160 --> 00:02:33,320
Speaker 1: but a vacancy for Vice Chair of Supervision to other

43
00:02:33,440 --> 00:02:36,200
Speaker 1: vacancies as well. Are we going to hear more about

44
00:02:36,240 --> 00:02:39,840
Speaker 1: those in early December? And you know who do we

45
00:02:39,880 --> 00:02:42,680
Speaker 1: think could be in the front running for those? I

46
00:02:42,680 --> 00:02:48,440
Speaker 1: mean clearly, Um, the White House will want diverse voices

47
00:02:48,600 --> 00:02:53,120
Speaker 1: at the FED. Of course that's important. Um uh So

48
00:02:53,240 --> 00:02:56,480
Speaker 1: I would expect them to go in that direction on

49
00:02:56,600 --> 00:03:00,640
Speaker 1: the two governors seats and on the Vice Chair of Supervision. Wow,

50
00:03:00,880 --> 00:03:06,600
Speaker 1: that requires a lot of expertise. It's highly complicated. Um.

51
00:03:06,639 --> 00:03:10,079
Speaker 1: Obviously Democrats like Elizabeth Warren want to see a new

52
00:03:10,120 --> 00:03:13,880
Speaker 1: direction after Randy Quarrels. I really don't have any idea

53
00:03:14,320 --> 00:03:17,480
Speaker 1: who they're going to pick for that, but it probably

54
00:03:17,480 --> 00:03:22,720
Speaker 1: won't be as complicated as as controversial um as their

55
00:03:22,760 --> 00:03:27,040
Speaker 1: pick for o CC So, Craig, we're gonna hear um

56
00:03:27,040 --> 00:03:31,799
Speaker 1: from the President um and the FED Chairman Palellan uh

57
00:03:31,960 --> 00:03:34,400
Speaker 1: and Governor brainer. Did I guess one Wall Street time here,

58
00:03:34,440 --> 00:03:36,840
Speaker 1: what do you expect to hear from the President as

59
00:03:36,840 --> 00:03:41,400
Speaker 1: it relates to these selections. You know, I think what

60
00:03:41,560 --> 00:03:46,560
Speaker 1: he said a lot is um. He's emphasized independence, and

61
00:03:46,640 --> 00:03:49,880
Speaker 1: so now we have a Republican. His chair at Democrat

62
00:03:50,040 --> 00:03:53,120
Speaker 1: is vice chair. I think he'll strike that note, but

63
00:03:53,320 --> 00:03:58,280
Speaker 1: I think he'll also strike, uh, Paul, the note of

64
00:03:58,560 --> 00:04:02,119
Speaker 1: inflation is high and he expects that independence to lean

65
00:04:02,120 --> 00:04:06,000
Speaker 1: against us. If you look at pulling on biden Um,

66
00:04:06,040 --> 00:04:10,680
Speaker 1: inflation is really hurting them. So I think those are

67
00:04:10,680 --> 00:04:13,360
Speaker 1: the two things he'll bring up. And Craig talked to

68
00:04:13,440 --> 00:04:16,080
Speaker 1: us more about that because we're Some have said this

69
00:04:16,120 --> 00:04:18,400
Speaker 1: is one of the more difficult times that we faced

70
00:04:18,440 --> 00:04:22,200
Speaker 1: in Federal Reserve history, given inflation is taking up, and

71
00:04:22,320 --> 00:04:26,279
Speaker 1: yet there has been an increased emphasis on meeting maximum

72
00:04:26,320 --> 00:04:29,400
Speaker 1: in full employment, and the measures of that full employment

73
00:04:29,640 --> 00:04:32,920
Speaker 1: are looking a little bit differently than they did before.

74
00:04:33,320 --> 00:04:36,000
Speaker 1: How are you thinking about a balancing act of tackling

75
00:04:36,040 --> 00:04:43,000
Speaker 1: inflation but maximizing full employment. So good observation. Taylor and

76
00:04:43,240 --> 00:04:45,839
Speaker 1: I had a story on this on the Terminal and

77
00:04:45,839 --> 00:04:49,640
Speaker 1: on our website yesterday. So this is a challenge, right

78
00:04:49,680 --> 00:04:55,320
Speaker 1: they made. They went around the country in and with

79
00:04:55,400 --> 00:05:00,240
Speaker 1: this trumping that maximum employment is a broad Bay East

80
00:05:00,360 --> 00:05:05,359
Speaker 1: an inclusive mandate which is aimed at correcting their past

81
00:05:05,480 --> 00:05:10,240
Speaker 1: mistakes of tightening before, things like minority unemployment rates had

82
00:05:10,680 --> 00:05:16,120
Speaker 1: moved down substantially, before female labor force participation have moved

83
00:05:16,279 --> 00:05:19,000
Speaker 1: up substantially. So what are they going to do here?

84
00:05:19,040 --> 00:05:21,839
Speaker 1: How are they going to keep that pledge but go

85
00:05:22,000 --> 00:05:28,200
Speaker 1: on the fight against inflation? I think one answer is gradualism.

86
00:05:28,240 --> 00:05:31,440
Speaker 1: This is a highly credible central bank. They don't have

87
00:05:31,520 --> 00:05:35,280
Speaker 1: to use a lot of power to get um inflation

88
00:05:35,360 --> 00:05:40,600
Speaker 1: expectations nailed down. But you pointed directly at the challenge

89
00:05:40,640 --> 00:05:43,880
Speaker 1: their Taylor, just like third thirty seconds. Do you think

90
00:05:43,880 --> 00:05:48,880
Speaker 1: this White House is adequately you know, touting the success

91
00:05:48,880 --> 00:05:51,560
Speaker 1: they're having with the economy coming out of this pandemic

92
00:05:51,720 --> 00:05:54,080
Speaker 1: or it just seems like maybe the inflation narrative is

93
00:05:54,200 --> 00:05:58,159
Speaker 1: overtaking it. It does as I said, It does seem

94
00:05:58,160 --> 00:06:01,840
Speaker 1: to be overtaking the public sentiment for sure, and that's

95
00:06:01,880 --> 00:06:06,720
Speaker 1: showing up in lots of places. As you both know, Uh, inflation,

96
00:06:06,839 --> 00:06:09,039
Speaker 1: it's probably in your food basket when you go to

97
00:06:09,080 --> 00:06:12,599
Speaker 1: the grocery store and other costs. You have. Americans really

98
00:06:12,760 --> 00:06:16,520
Speaker 1: of all levels, Okay, Americans of all income levels really

99
00:06:16,560 --> 00:06:20,119
Speaker 1: don't like inflation. Greig Tours, thanks so much for joining

100
00:06:20,160 --> 00:06:24,000
Speaker 1: us Craig is the Federal Reserve, an economy reporter for

101
00:06:24,160 --> 00:06:30,320
Speaker 1: Bloomberg News. I want to bring in Brian ben Diggi's

102
00:06:30,360 --> 00:06:33,920
Speaker 1: president of m JP Wealth Advisors. Bryant thinks so much

103
00:06:33,960 --> 00:06:35,840
Speaker 1: for joining us here. I don't know. I'm looking at

104
00:06:35,880 --> 00:06:37,880
Speaker 1: my screen here. I see a lot of green here.

105
00:06:38,000 --> 00:06:41,680
Speaker 1: So the market likes I guess some continuity at this

106
00:06:42,000 --> 00:06:44,360
Speaker 1: Federal Reserve. What do you make of the announcements this morning?

107
00:06:44,440 --> 00:06:48,400
Speaker 1: But Fed Chairman J. Pale, good morning Taylor. Yeah, I

108
00:06:48,440 --> 00:06:53,680
Speaker 1: completely agree. Uh, you know, less than certainty regarding UM

109
00:06:53,880 --> 00:06:57,719
Speaker 1: leadership at the FED obviously reduces some concerns and policy

110
00:06:57,760 --> 00:07:00,880
Speaker 1: direction moving forward. I mean, Chairman has done a great

111
00:07:00,920 --> 00:07:04,280
Speaker 1: job in trying to be as transparent as a communicator

112
00:07:04,320 --> 00:07:08,520
Speaker 1: in light of all the conflicting variables. I think, um,

113
00:07:08,560 --> 00:07:10,800
Speaker 1: you know, the focus is going to be moving forward.

114
00:07:11,080 --> 00:07:13,320
Speaker 1: Are we going to stay at this pace of bond

115
00:07:13,360 --> 00:07:17,440
Speaker 1: tapering or will that be accelerated as as we as

116
00:07:17,440 --> 00:07:22,000
Speaker 1: we look at economic numbers moving forward? And obviously some

117
00:07:22,640 --> 00:07:25,600
Speaker 1: commentary coming out of the St. Louis Fed, um, you know,

118
00:07:25,680 --> 00:07:29,120
Speaker 1: which isn't encouraging the f o MC to continue to

119
00:07:29,160 --> 00:07:31,280
Speaker 1: look at that policy. But I think at the end

120
00:07:31,320 --> 00:07:34,200
Speaker 1: of the day. UM, you know, less change is good,

121
00:07:34,320 --> 00:07:37,240
Speaker 1: especially when considering UM, some of the news out of

122
00:07:37,280 --> 00:07:40,760
Speaker 1: Europe and in the oral markets, and and obviously inflation

123
00:07:40,760 --> 00:07:43,560
Speaker 1: and interest rate. We have a full full plate here,

124
00:07:43,640 --> 00:07:47,960
Speaker 1: so one less item on on on on the on

125
00:07:48,000 --> 00:07:51,000
Speaker 1: the list is better for I think decision mature is

126
00:07:51,040 --> 00:07:53,600
Speaker 1: moving forward. You talk about the news out of Europe.

127
00:07:53,640 --> 00:07:55,440
Speaker 1: Of course we can talk about COVID cases. We can

128
00:07:55,440 --> 00:07:58,040
Speaker 1: also talk about the Buddhist being talking about six percent

129
00:07:58,160 --> 00:08:02,160
Speaker 1: inflation and this is a global inflationary story. How are

130
00:08:02,160 --> 00:08:04,600
Speaker 1: you thinking about markets next year as you have a

131
00:08:04,640 --> 00:08:08,880
Speaker 1: FED that's trying to confront inflation and maybe walk back

132
00:08:08,960 --> 00:08:13,240
Speaker 1: comments that it's uh less transitory than they thought, but

133
00:08:13,320 --> 00:08:17,480
Speaker 1: also trying to tackle full employment mandate and the changes

134
00:08:17,560 --> 00:08:22,400
Speaker 1: and what full employment really means. Great question. I think

135
00:08:22,400 --> 00:08:25,480
Speaker 1: we need to think about inflation actually into three parts,

136
00:08:26,200 --> 00:08:28,760
Speaker 1: uh and I'll take the easiest part, which is that

137
00:08:28,840 --> 00:08:32,040
Speaker 1: the FED does have a dual mandate, So until we

138
00:08:32,160 --> 00:08:36,360
Speaker 1: reach uh full unemployment, I think the FED is going

139
00:08:36,440 --> 00:08:40,520
Speaker 1: to be very cautious about raising short term interest rates.

140
00:08:40,559 --> 00:08:44,599
Speaker 1: And based on our analysis, m full employment UM is

141
00:08:44,640 --> 00:08:47,640
Speaker 1: getting to an unemployment rate probably around three point eight

142
00:08:47,760 --> 00:08:51,920
Speaker 1: percent when taking into account the number of folks that

143
00:08:51,960 --> 00:08:55,280
Speaker 1: have retired early or have chosen not to re engage

144
00:08:55,280 --> 00:08:57,440
Speaker 1: on a on a full time basis. And the economy

145
00:08:57,440 --> 00:09:00,520
Speaker 1: now the other two parts of the inflation store, I

146
00:09:00,559 --> 00:09:04,079
Speaker 1: think is breaking down the components of cp I. If

147
00:09:04,080 --> 00:09:07,200
Speaker 1: we take a look at food, energy, auto sales, and

148
00:09:07,280 --> 00:09:10,240
Speaker 1: some of these items that are really impacted by the

149
00:09:10,280 --> 00:09:14,640
Speaker 1: supply chain and efficiencies, we think that those core components

150
00:09:14,679 --> 00:09:17,520
Speaker 1: of inflation should come down as we move into Q

151
00:09:17,760 --> 00:09:20,400
Speaker 1: three in the beginning of Q four second half of

152
00:09:20,520 --> 00:09:23,240
Speaker 1: next year. I think the twelve six curveball or the

153
00:09:23,280 --> 00:09:27,319
Speaker 1: point of uncertainty is really around wages and wage labor

154
00:09:27,360 --> 00:09:30,480
Speaker 1: as being a critical driver of inflation year over year.

155
00:09:30,880 --> 00:09:34,240
Speaker 1: And I think as we look at the level of

156
00:09:34,320 --> 00:09:37,640
Speaker 1: engagement in the workforce, we look at the productivity numbers

157
00:09:38,320 --> 00:09:43,959
Speaker 1: moving forward, how technology is impacting employer's decisions as well as,

158
00:09:44,040 --> 00:09:47,160
Speaker 1: to be fair, the cultural shift that's going on, I

159
00:09:47,200 --> 00:09:50,600
Speaker 1: think domestically between people evaluating do they work to live

160
00:09:50,679 --> 00:09:53,040
Speaker 1: or live to work? Um if that's going to keep

161
00:09:53,040 --> 00:09:55,000
Speaker 1: a watchful eye on that. And I think that as

162
00:09:55,040 --> 00:09:57,839
Speaker 1: time goes on, with science, you know, trying to help

163
00:09:57,960 --> 00:10:01,000
Speaker 1: us lead out of this pandemic can We're optimistic that

164
00:10:01,040 --> 00:10:04,520
Speaker 1: next year will be in an epidemic UM. That should help.

165
00:10:04,559 --> 00:10:06,360
Speaker 1: The labor marks has been cool some of the wage

166
00:10:06,880 --> 00:10:10,280
Speaker 1: labor inflation concerns, but that is definitely something I don't

167
00:10:10,280 --> 00:10:14,280
Speaker 1: think anyone can prognosticate with accuracy as of this point

168
00:10:14,320 --> 00:10:17,480
Speaker 1: in time. Hey, Brian, you know, looking at the SMP, boy,

169
00:10:17,720 --> 00:10:21,800
Speaker 1: what a year investors have had up twenty year to date.

170
00:10:22,559 --> 00:10:25,880
Speaker 1: When you talk to your clients about how do you

171
00:10:25,920 --> 00:10:32,280
Speaker 1: start the conversation? Absolutely, I think moving forward the point

172
00:10:32,400 --> 00:10:34,360
Speaker 1: is to break it down into a couple of quadrants.

173
00:10:34,400 --> 00:10:36,320
Speaker 1: I mean, the first is looking at things from a

174
00:10:36,360 --> 00:10:41,360
Speaker 1: fundamental economic perspective, which obviously is driving valuations UH, and

175
00:10:41,520 --> 00:10:44,640
Speaker 1: looking at corporate earnings and the pessimism that I've gone

176
00:10:44,679 --> 00:10:47,400
Speaker 1: into corporate earnings, and and the fact that you know,

177
00:10:47,559 --> 00:10:50,400
Speaker 1: over the last success of quarters we were beating those

178
00:10:50,440 --> 00:10:54,000
Speaker 1: expectations and earnings growth for next year is still robust.

179
00:10:54,400 --> 00:10:58,880
Speaker 1: We're thinking about a four percent global GDP growth perspective,

180
00:10:58,920 --> 00:11:05,120
Speaker 1: supply chains UH, inventory levels UH being healed, demand for

181
00:11:05,920 --> 00:11:10,320
Speaker 1: goods and services exceeding supplies, so we're still um optimistic

182
00:11:10,440 --> 00:11:14,280
Speaker 1: about the market continuing to grind higher over the course

183
00:11:14,360 --> 00:11:16,959
Speaker 1: of the next twelve thirteen months. But at the same

184
00:11:17,000 --> 00:11:19,600
Speaker 1: point in time, we have to be cognizant of those risks,

185
00:11:19,720 --> 00:11:23,640
Speaker 1: and those risks are policy decisions coming out of Washington

186
00:11:23,880 --> 00:11:28,400
Speaker 1: and the Fed. It's obviously the confluence of variables around

187
00:11:28,880 --> 00:11:33,320
Speaker 1: interest rates and inflation. So it doesn't mean we're risk gone.

188
00:11:33,440 --> 00:11:37,960
Speaker 1: We definitely need to find areas to allocate capital um

189
00:11:38,040 --> 00:11:41,600
Speaker 1: that that can that can think about portfolio management and

190
00:11:41,640 --> 00:11:44,080
Speaker 1: asset allocation, but doing it a little bit different. And

191
00:11:44,080 --> 00:11:46,480
Speaker 1: that's why I think, you know, looking at you know,

192
00:11:46,559 --> 00:11:49,960
Speaker 1: assets like real estate for example, might be a better hedge,

193
00:11:50,040 --> 00:11:52,440
Speaker 1: let's say, than you know, trying to stick to the

194
00:11:52,440 --> 00:11:56,679
Speaker 1: traditional sixty forty portfolio with with bonds being being the

195
00:11:56,960 --> 00:11:59,640
Speaker 1: other side of that allocation. Brian, thanks so much for

196
00:11:59,720 --> 00:12:03,199
Speaker 1: joining us. Really appreciate getting your thoughts here on this market.

197
00:12:03,280 --> 00:12:11,200
Speaker 1: Brian Vendigi's president of m JP Wealth Advisors, Paul, we know,

198
00:12:11,280 --> 00:12:13,000
Speaker 1: of course, the big news of the day has been

199
00:12:13,080 --> 00:12:15,960
Speaker 1: some of the consistency the clarity coming out of the

200
00:12:16,040 --> 00:12:18,240
Speaker 1: White House when it comes to the Federal Reserve. J

201
00:12:18,360 --> 00:12:21,280
Speaker 1: Powell of course getting the renomination for the head of

202
00:12:21,320 --> 00:12:24,480
Speaker 1: the Federal Reserve and Leal Brainerd of course the nominee

203
00:12:24,480 --> 00:12:27,320
Speaker 1: now for Vice chair. Of all of that, we talked

204
00:12:27,320 --> 00:12:29,840
Speaker 1: about some of the headline news, but really, Paul, what

205
00:12:30,000 --> 00:12:31,679
Speaker 1: stands out to me is some of the headline news

206
00:12:31,720 --> 00:12:34,920
Speaker 1: that we've gotten out of the rate markets. You have

207
00:12:35,000 --> 00:12:38,320
Speaker 1: two year yields now climbing about six basis points. Let's

208
00:12:38,320 --> 00:12:40,640
Speaker 1: do all of this with the Lnend Managing director and

209
00:12:40,760 --> 00:12:44,240
Speaker 1: head of US rates strategy for BEMO Capital Markets, where

210
00:12:44,240 --> 00:12:47,760
Speaker 1: he helps run the fixed income strategy team, and Ian

211
00:12:48,440 --> 00:12:50,800
Speaker 1: maybe talk to us about some of the jerk reactions

212
00:12:50,840 --> 00:12:53,840
Speaker 1: that we see within the rate market up six basis

213
00:12:53,920 --> 00:12:58,880
Speaker 1: points across the curve. What does that tell you? Well,

214
00:12:58,880 --> 00:13:02,000
Speaker 1: I think that the biggest take away from today's events

215
00:13:02,520 --> 00:13:06,800
Speaker 1: was that Biden has effectively doubled down on Powell, saying

216
00:13:06,800 --> 00:13:09,640
Speaker 1: that this is the person that we think should be

217
00:13:09,920 --> 00:13:12,520
Speaker 1: leading the tightening campaign the end of KIWI in the

218
00:13:12,600 --> 00:13:15,120
Speaker 1: first series of rate hikes. And what we're seeing in

219
00:13:15,160 --> 00:13:18,679
Speaker 1: the market is that any risk that we would have

220
00:13:18,920 --> 00:13:24,000
Speaker 1: a more decidedly dovish chair has been limitated until we're

221
00:13:24,040 --> 00:13:26,520
Speaker 1: pricing in rate hikes. We see that in the two

222
00:13:26,559 --> 00:13:29,160
Speaker 1: year sector, the three year sector, and the five year sector.

223
00:13:29,600 --> 00:13:32,959
Speaker 1: And what I'm watching is the continued flattening of the

224
00:13:33,000 --> 00:13:36,160
Speaker 1: five thirties curve that we expect will actually be very

225
00:13:36,280 --> 00:13:39,600
Speaker 1: thematic in two thousand and twenty two and be somewhat

226
00:13:39,640 --> 00:13:42,400
Speaker 1: at odds with what one would typically expect for this

227
00:13:42,480 --> 00:13:46,720
Speaker 1: point in the cycle. So in Taylor had to, you know,

228
00:13:46,840 --> 00:13:49,280
Speaker 1: correct me earlier this morning. She's so discussed about my

229
00:13:49,360 --> 00:13:51,400
Speaker 1: lack of knowledge of the yield curve because I said, Hey,

230
00:13:51,520 --> 00:13:53,480
Speaker 1: I look at the tenure and I see it at

231
00:13:53,520 --> 00:13:55,719
Speaker 1: one point six percent. It's kind of been around there

232
00:13:55,760 --> 00:13:58,280
Speaker 1: for a long time. What's the big deal? And she says, no,

233
00:13:58,360 --> 00:14:00,560
Speaker 1: you're looking at the wrong part of the curve. Look

234
00:14:00,600 --> 00:14:02,840
Speaker 1: at the short end, where you know, the two years

235
00:14:02,840 --> 00:14:04,840
Speaker 1: gone from you know, a little more than twenty basis

236
00:14:04,840 --> 00:14:07,160
Speaker 1: points up to where we are today at uh, you know,

237
00:14:07,280 --> 00:14:11,120
Speaker 1: close to fifty six basis points. What does that tell you?

238
00:14:11,160 --> 00:14:12,839
Speaker 1: Why should I be looking at the short end of

239
00:14:12,840 --> 00:14:17,120
Speaker 1: the curve? Well, what it tells us at a minimum

240
00:14:17,240 --> 00:14:20,440
Speaker 1: is that borrowing costs are going to be increasing for

241
00:14:20,520 --> 00:14:23,200
Speaker 1: a lot of the corporate sector and for a lot

242
00:14:23,240 --> 00:14:26,560
Speaker 1: of the economy because most rates, with the exception of

243
00:14:26,760 --> 00:14:30,960
Speaker 1: mortgages and longer dated paper, tend to be focused on

244
00:14:31,000 --> 00:14:34,560
Speaker 1: the two and five year sector as key benchmarks, and

245
00:14:34,640 --> 00:14:38,240
Speaker 1: that's why the FEDS tightening campaign, a potential tightening campaign,

246
00:14:38,560 --> 00:14:42,080
Speaker 1: is going to have so many ramifications for the outlook

247
00:14:42,120 --> 00:14:45,440
Speaker 1: on inflation as well as a potential for slowing growth

248
00:14:45,840 --> 00:14:49,640
Speaker 1: in a recovery that quite frankly has been going pretty

249
00:14:49,680 --> 00:14:52,600
Speaker 1: strong thus far. But two thousand and twenty two and

250
00:14:52,640 --> 00:14:56,280
Speaker 1: twenty three are are key periods of uncertainty for that.

251
00:14:56,960 --> 00:15:00,480
Speaker 1: What about borrowing costs for the Treasury? Your notes? Looking

252
00:15:00,520 --> 00:15:05,440
Speaker 1: at two's and fives today, what do you expect? I

253
00:15:05,480 --> 00:15:08,400
Speaker 1: do think that the Treasury Department has done a good

254
00:15:08,480 --> 00:15:13,080
Speaker 1: job historically in terms of turning out their debt, so

255
00:15:13,560 --> 00:15:16,760
Speaker 1: rising rate environment won't be too dramatic for the budget

256
00:15:16,800 --> 00:15:20,680
Speaker 1: in terms of federal borrowing in the very near term.

257
00:15:20,800 --> 00:15:25,680
Speaker 1: The two and five year auctions today, given the holiday

258
00:15:25,760 --> 00:15:28,320
Speaker 1: shortened week and some of the price action that we

259
00:15:28,360 --> 00:15:32,840
Speaker 1: have seen, will represent an important litmus tests for investor demand.

260
00:15:33,080 --> 00:15:35,600
Speaker 1: But all else being equal, the backup and rates I

261
00:15:35,640 --> 00:15:38,880
Speaker 1: think are going to provide an attractive buying opportunity for

262
00:15:38,960 --> 00:15:41,600
Speaker 1: investors in the front GEAM today, Ian, how do you

263
00:15:41,640 --> 00:15:46,280
Speaker 1: think the Fed will move here? Um? You know, assuming

264
00:15:46,320 --> 00:15:50,880
Speaker 1: they finish their you know, repurchases, the kind of kind

265
00:15:50,880 --> 00:15:53,360
Speaker 1: of winds down mid next year. How do you think

266
00:15:53,360 --> 00:15:54,800
Speaker 1: they're going to be in terms of raising rates in

267
00:15:55,520 --> 00:15:58,120
Speaker 1: because there's some folks out there, like pre Amira of

268
00:15:58,240 --> 00:16:02,400
Speaker 1: TV Security suggesting a gonna do anything three. What do

269
00:16:02,440 --> 00:16:05,240
Speaker 1: you think? Well, I think they will have a lot

270
00:16:05,240 --> 00:16:07,960
Speaker 1: of information over the course of the next two weeks

271
00:16:08,240 --> 00:16:11,320
Speaker 1: running up to the December f fm C meeting, and

272
00:16:11,360 --> 00:16:16,480
Speaker 1: if they're actively discussing accelerating the tapering process when they

273
00:16:16,520 --> 00:16:20,240
Speaker 1: meet in December, that suggests that they could be done

274
00:16:20,280 --> 00:16:24,480
Speaker 1: with kilee, not in the middle of but earlier let's

275
00:16:24,480 --> 00:16:27,280
Speaker 1: call it the INDO the first quarter, and then that

276
00:16:27,360 --> 00:16:31,680
Speaker 1: opens up the possibility for two rate hikes or potentially

277
00:16:31,840 --> 00:16:35,920
Speaker 1: more if the situation dictates it. What I worry about

278
00:16:36,160 --> 00:16:38,560
Speaker 1: is that Powell has come out and he had has

279
00:16:38,640 --> 00:16:41,920
Speaker 1: said that the set is expecting inflation to moderate in

280
00:16:42,240 --> 00:16:47,040
Speaker 1: Q two and Q three. So that's effectively the chair

281
00:16:47,160 --> 00:16:50,160
Speaker 1: doubling down on the transitory narrative and saying we're going

282
00:16:50,200 --> 00:16:53,960
Speaker 1: to continue to assume that this is temporary, temporary influence

283
00:16:54,000 --> 00:16:56,440
Speaker 1: on inflation until at least the middle of next year.

284
00:16:56,800 --> 00:16:59,280
Speaker 1: So while we might see an argument to be made

285
00:16:59,520 --> 00:17:03,080
Speaker 1: to two QUEI more quickly. At the end of the day,

286
00:17:03,520 --> 00:17:06,280
Speaker 1: we suspect that the FED will be content to deliver

287
00:17:06,680 --> 00:17:11,040
Speaker 1: one rate hike in two. Is that then, the why

288
00:17:11,080 --> 00:17:14,320
Speaker 1: behind the flattening of the yield curve that you started

289
00:17:14,320 --> 00:17:17,520
Speaker 1: this conversation with and you said it was traditionally not

290
00:17:17,600 --> 00:17:22,200
Speaker 1: what you would expect in this part of the economic cycle. Well,

291
00:17:22,240 --> 00:17:24,560
Speaker 1: I think one of the key reasons that we're seeing

292
00:17:24,600 --> 00:17:28,040
Speaker 1: the curve flatten is that there's already so much inflation

293
00:17:28,080 --> 00:17:31,199
Speaker 1: in the system, and the FED is has proven that

294
00:17:31,240 --> 00:17:35,719
Speaker 1: they're going to be reactive, perhaps not proactive, but trying

295
00:17:35,760 --> 00:17:38,240
Speaker 1: to make sure that inflation doesn't get out of control.

296
00:17:38,680 --> 00:17:42,520
Speaker 1: And so in that in that environment, we would typically

297
00:17:42,520 --> 00:17:44,920
Speaker 1: expect it to the curve to flatten, but we wouldn't

298
00:17:44,920 --> 00:17:49,280
Speaker 1: expect it to flatten with outright yields flat to lower.

299
00:17:49,359 --> 00:17:51,959
Speaker 1: And I think that that's the real interesting part of

300
00:17:51,960 --> 00:17:54,120
Speaker 1: what we're seeing play out in the market right now,

301
00:17:54,640 --> 00:17:58,040
Speaker 1: is that there's inflation that the market believes the FED

302
00:17:58,160 --> 00:18:03,080
Speaker 1: can counteract. But the global growth story has campt rates

303
00:18:03,119 --> 00:18:07,119
Speaker 1: contained overall, and when we think about it, each individual

304
00:18:07,160 --> 00:18:10,199
Speaker 1: economy up coming out of the pandemic in a different setting,

305
00:18:10,240 --> 00:18:12,880
Speaker 1: and I think that's what has contributed to that. Very good.

306
00:18:12,880 --> 00:18:14,439
Speaker 1: All right, and thank you so much for joining us.

307
00:18:14,480 --> 00:18:17,480
Speaker 1: Really appreciate it. In LinkedIn Managing director and head of

308
00:18:17,600 --> 00:18:22,560
Speaker 1: US Rates Strategies at BMO Capital Markets for home Strategy team.

309
00:18:22,560 --> 00:18:25,520
Speaker 1: That's Bank of Montreal for the folks that go back

310
00:18:25,560 --> 00:18:30,919
Speaker 1: a little bit. All right, let's talk tech with Dan.

311
00:18:31,040 --> 00:18:34,880
Speaker 1: I'ves he's a managing director senior equity analyst at Wedbush Securities.

312
00:18:34,880 --> 00:18:37,679
Speaker 1: There's a million ways we can go with Dan, but

313
00:18:37,800 --> 00:18:41,080
Speaker 1: I want to start in honor of Matt Miller with

314
00:18:41,359 --> 00:18:45,320
Speaker 1: Tesla and the EV market. Um. Dan, you've been so

315
00:18:45,440 --> 00:18:47,679
Speaker 1: out in front on this story, and you've been so

316
00:18:47,760 --> 00:18:49,760
Speaker 1: kind to share your thoughts with us here Bloomberg Radio

317
00:18:49,760 --> 00:18:52,439
Speaker 1: and TV over the years about your bullishness about this

318
00:18:52,480 --> 00:18:56,640
Speaker 1: story and this market. Here as you think about two,

319
00:18:56,720 --> 00:18:59,560
Speaker 1: how do you think the EV market from a competitive

320
00:18:59,600 --> 00:19:02,680
Speaker 1: stamp point is going to evolve? And then how does

321
00:19:02,720 --> 00:19:07,200
Speaker 1: Tesla fit into that? Yeah? I think it's it's great

322
00:19:07,280 --> 00:19:10,160
Speaker 1: framing into two thousand twenty two because I think this

323
00:19:10,280 --> 00:19:12,879
Speaker 1: is where we see the next level of adoption for

324
00:19:12,960 --> 00:19:15,280
Speaker 1: ev s. I think you're going to see your rereading

325
00:19:15,840 --> 00:19:18,439
Speaker 1: on the likes of a GM and a Ford because

326
00:19:18,480 --> 00:19:20,560
Speaker 1: of what we see on evs is those comings have

327
00:19:20,680 --> 00:19:23,439
Speaker 1: success and more and more the street used them as

328
00:19:23,520 --> 00:19:27,480
Speaker 1: disruptive technology plays, and you lose it in others that

329
00:19:27,520 --> 00:19:30,760
Speaker 1: are going to benefit because we're not five trillions of

330
00:19:30,880 --> 00:19:34,760
Speaker 1: dollars over the next decade. But but ultimately the name

331
00:19:34,840 --> 00:19:38,560
Speaker 1: that's going to continue disproportionately benefit is Tesla. And that's

332
00:19:38,560 --> 00:19:43,640
Speaker 1: why this is a stock despite the musk circus, Twitter poll.

333
00:19:44,160 --> 00:19:46,120
Speaker 1: I think now this is this doctor's on its way.

334
00:19:46,200 --> 00:19:50,159
Speaker 1: Four are base case eighteen hundred bookcase talk to us

335
00:19:50,160 --> 00:19:52,520
Speaker 1: about some of the bold cases that you see more generally,

336
00:19:52,680 --> 00:19:55,280
Speaker 1: Dan when you think about next year. It was so interesting.

337
00:19:55,320 --> 00:19:57,560
Speaker 1: Paul and I were earlier speaking about a big call

338
00:19:57,560 --> 00:20:00,119
Speaker 1: out of b of A saying that tech is and

339
00:20:00,560 --> 00:20:02,560
Speaker 1: you know, one of the biggest bubbles that they've seen

340
00:20:02,600 --> 00:20:05,719
Speaker 1: going back since nineteen nine. But you have a federal

341
00:20:05,760 --> 00:20:09,800
Speaker 1: reserve that's holding rates still relatively low. How are you

342
00:20:09,840 --> 00:20:15,000
Speaker 1: thinking about tech and tech bubbles into next year? Yeah?

343
00:20:15,000 --> 00:20:17,399
Speaker 1: I mean, and I covered tech during the bubble and

344
00:20:17,480 --> 00:20:19,639
Speaker 1: during the burst, and when I compare thement, it's an

345
00:20:19,640 --> 00:20:24,679
Speaker 1: apple's oranges because the fundamental growth stories are happening, and

346
00:20:24,880 --> 00:20:28,639
Speaker 1: it's a fourth Industrial revolution that's happening across clouds, tiever security,

347
00:20:29,240 --> 00:20:32,000
Speaker 1: five G as well as disruptive tech with e VS

348
00:20:32,680 --> 00:20:34,879
Speaker 1: front and center. So I view it totally different in

349
00:20:35,040 --> 00:20:38,679
Speaker 1: terms of the fundamental stories that are happening now. Some could,

350
00:20:39,119 --> 00:20:42,040
Speaker 1: you know, web wards about valuation, but we're talking about

351
00:20:42,080 --> 00:20:44,600
Speaker 1: growth over the next three, five, seven years, and there's

352
00:20:44,640 --> 00:20:47,440
Speaker 1: a scarcity of growth stories. Many of them are in tech.

353
00:20:47,960 --> 00:20:51,200
Speaker 1: That's why we view Nastac nineteen thousands for two thousand

354
00:20:51,240 --> 00:20:54,040
Speaker 1: and twenty two. And you know, many investors that have

355
00:20:54,040 --> 00:20:57,000
Speaker 1: stayed focus on the right lane on so many of

356
00:20:57,000 --> 00:21:00,320
Speaker 1: these valuation calls. You missed Amazon, you missed net Licks,

357
00:21:00,480 --> 00:21:03,280
Speaker 1: you missed Tesla, and I think you know the worries

358
00:21:03,320 --> 00:21:05,080
Speaker 1: you're gonna miss so many these others that are really

359
00:21:05,520 --> 00:21:09,480
Speaker 1: part of this Fourth Industrial Revolution. Dan, how do you

360
00:21:09,560 --> 00:21:11,639
Speaker 1: think I'd love to get the Dan eyes of you

361
00:21:12,040 --> 00:21:16,840
Speaker 1: on the metaverse? To you? What is that? And is

362
00:21:16,880 --> 00:21:20,679
Speaker 1: it something you want to pay attention to? Yeah, I

363
00:21:20,680 --> 00:21:24,640
Speaker 1: mean to me, it's serious. Dours that's going after we'll

364
00:21:24,640 --> 00:21:27,399
Speaker 1: call them is an Internet three dota or four dota.

365
00:21:27,560 --> 00:21:31,520
Speaker 1: And I think it's important because it's not just Facebook

366
00:21:31,800 --> 00:21:34,240
Speaker 1: in terms of metaverse, because when you look at Apple

367
00:21:34,359 --> 00:21:37,479
Speaker 1: and I believe Apple Glass comes out next summer, the

368
00:21:37,520 --> 00:21:40,840
Speaker 1: a r VR headset, that's just the start of really

369
00:21:40,880 --> 00:21:43,080
Speaker 1: what's gonna be in arms where it's going after metabus

370
00:21:43,080 --> 00:21:46,360
Speaker 1: between big tech and as well as pure plays on gaming,

371
00:21:46,880 --> 00:21:49,280
Speaker 1: as well as other errors its names like Mattaport and

372
00:21:49,280 --> 00:21:51,920
Speaker 1: others that play into the scheme. And I think it's

373
00:21:51,920 --> 00:21:55,400
Speaker 1: one where today you don't necessarily the revenue, but going forward,

374
00:21:55,560 --> 00:21:57,680
Speaker 1: this is not a hype theme. I mean it's real

375
00:21:57,880 --> 00:22:01,879
Speaker 1: dours being spent, and I ultimately think it's really Cupertino

376
00:22:01,960 --> 00:22:04,440
Speaker 1: that's going to lead the metaverse. I think facebooks on

377
00:22:04,440 --> 00:22:06,840
Speaker 1: the outside looking in when it comes to this, they're

378
00:22:06,840 --> 00:22:10,280
Speaker 1: gonna have to spend significant dours to catch up. But

379
00:22:10,440 --> 00:22:14,840
Speaker 1: is there any regulatory risk? We have an administration that

380
00:22:15,000 --> 00:22:18,880
Speaker 1: is very against and verbally has come out against big

381
00:22:18,920 --> 00:22:22,960
Speaker 1: tech about big conglomerates. What's the regulatory risk for you

382
00:22:23,119 --> 00:22:27,600
Speaker 1: next year? There is regulatory risk, and I think we've

383
00:22:27,640 --> 00:22:30,040
Speaker 1: seen that in terms of what coming out of the

384
00:22:30,040 --> 00:22:33,119
Speaker 1: belt Way as well as Brussels. But our view is

385
00:22:33,160 --> 00:22:38,679
Speaker 1: that is likely finds and importantly, the lack of consensus

386
00:22:38,760 --> 00:22:43,119
Speaker 1: within the Beltway is ultimately perceived bullish for tech because

387
00:22:43,119 --> 00:22:45,879
Speaker 1: the lack of consensus shows it's gonna be hard to

388
00:22:45,920 --> 00:22:50,760
Speaker 1: have legally change antitrust laws. And that's why right now

389
00:22:50,880 --> 00:22:53,760
Speaker 1: it's been at risk, but it's viewed as a contain

390
00:22:53,960 --> 00:22:57,000
Speaker 1: risk in the eyes of investors. I'd also say you

391
00:22:57,000 --> 00:22:59,359
Speaker 1: look at a company like Microsoft, which has already been

392
00:22:59,359 --> 00:23:02,360
Speaker 1: through the antect ust issues late nineties two thousands, they're

393
00:23:02,480 --> 00:23:05,560
Speaker 1: much more in position or strength to do acquisitions. First.

394
00:23:05,600 --> 00:23:07,480
Speaker 1: I think a lot of the traditional big tech which

395
00:23:07,480 --> 00:23:11,119
Speaker 1: you're going to be constrained, especially with that you're shining

396
00:23:11,200 --> 00:23:14,159
Speaker 1: light from the tour or two eight Dan, twenty seconds.

397
00:23:14,200 --> 00:23:19,880
Speaker 1: What's your top pick for continues to be Apple? Um?

398
00:23:19,960 --> 00:23:22,640
Speaker 1: You know, I mean Apple to me is a three

399
00:23:22,640 --> 00:23:25,480
Speaker 1: trillion dollar mark up going to next year. I think

400
00:23:25,520 --> 00:23:28,679
Speaker 1: it's a massive cycle that's going on iPhone and services

401
00:23:28,720 --> 00:23:31,160
Speaker 1: as a rerating, and this is one I think we're

402
00:23:31,160 --> 00:23:33,760
Speaker 1: going to conceive it move the high or despite Chip

403
00:23:33,800 --> 00:23:35,480
Speaker 1: shorte that's the other. I just want to say, Chip

404
00:23:35,520 --> 00:23:38,560
Speaker 1: shorts Transtor and I view as just the reason to

405
00:23:38,600 --> 00:23:41,399
Speaker 1: own more and more Apple. All right, Dan, thanks so

406
00:23:41,480 --> 00:23:44,000
Speaker 1: much for joining us. As always appreciate getting your broad

407
00:23:44,080 --> 00:23:46,400
Speaker 1: view of the tech sector. Dan ives He's a managing

408
00:23:46,440 --> 00:23:50,239
Speaker 1: director and senior equity analysts at web Bush Securities. He's

409
00:23:50,280 --> 00:23:54,320
Speaker 1: also proud alumnus of the Penn State University, where I

410
00:23:54,359 --> 00:23:57,560
Speaker 1: wrote many many tuition checks over the years. But Dan

411
00:23:57,600 --> 00:24:02,159
Speaker 1: has been consistently bullish on technology, consistently bullosh on the

412
00:24:02,160 --> 00:24:05,879
Speaker 1: ev market, and boy has he been right, and we

413
00:24:05,920 --> 00:24:09,720
Speaker 1: appreciate him taking some time now. Thanks for listening to

414
00:24:09,720 --> 00:24:13,240
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to

415
00:24:13,320 --> 00:24:17,480
Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.

416
00:24:17,840 --> 00:24:21,800
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller, three

417
00:24:22,240 --> 00:24:24,720
Speaker 1: pt on Fall Sweeney I'm on Twitter at pt Sweeney

418
00:24:24,760 --> 00:24:27,439
Speaker 1: Before the podcast. You can always catch us worldwide at

419
00:24:27,440 --> 00:24:28,480
Speaker 1: Bloomberg Radio.