WEBVTT - Bloomberg Surveillance TV: June 30, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.360 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.040 Bloomberg Terminal and the Bloomberg Business app. Former Kansas City 0:00:37.040 --> 0:00:39.120 Fed President es the George, expecting the Fed to stay 0:00:39.120 --> 0:00:42.360 on hold right in the following, although inflation is not accelerating, 0:00:42.440 --> 0:00:45.559 it remained sticky and appropriately ties the Fed's hands on 0:00:45.640 --> 0:00:48.120 further rate adjustments. Esther joint us now for more and 0:00:48.240 --> 0:00:51.280 Esther for someone who used to lead the Jackson Hole Symposium. 0:00:51.320 --> 0:00:53.400 I apologize for Lisa. Just ignore everything. 0:00:53.400 --> 0:00:55.680 Lisa to Yes, I love it, I love the forum, 0:00:55.680 --> 0:00:57.040 and I love seeing you over there. 0:00:57.080 --> 0:00:59.959 Okay, can I just say no, I'm not gonna part 0:01:00.320 --> 0:01:02.080 because I'm just going to say I love it, I 0:01:02.120 --> 0:01:04.559 love the experience, I love the land. 0:01:04.880 --> 0:01:05.720 I'm a big proposent. 0:01:05.720 --> 0:01:08.000 I'm staying longer so that I can go tour around 0:01:08.000 --> 0:01:09.520 and takes to carry at leisure. 0:01:09.680 --> 0:01:10.560 Yes, there is convinced. 0:01:10.640 --> 0:01:11.880 Yes, I thank you. 0:01:12.120 --> 0:01:13.120 So let's start with that quote. 0:01:13.120 --> 0:01:14.000 It's an important one. 0:01:14.120 --> 0:01:16.440 Do you believe the labor market is strong enough to 0:01:16.520 --> 0:01:18.520 wait to see what happens with inflation? 0:01:20.560 --> 0:01:24.120 Well we're going to find out, obviously with this week's 0:01:24.120 --> 0:01:27.440 report how the labor market is faring. We have seen 0:01:27.480 --> 0:01:30.959 the labor market first kind of come into better balance, 0:01:31.000 --> 0:01:35.240 if you will. The number of job openings has come down. 0:01:35.800 --> 0:01:39.920 We do hear anecdotally that businesses are hanging onto people 0:01:40.440 --> 0:01:43.520 in some cases. We'll see whether they're shutting people. What 0:01:43.600 --> 0:01:46.920 the labor force looks like itself with all of the 0:01:47.840 --> 0:01:50.320 policy changes that have been going on there. So I 0:01:50.360 --> 0:01:53.480 think there's a lot to watch for in this particular 0:01:53.560 --> 0:01:56.840 report that could begin to give us a sense of 0:01:56.880 --> 0:01:58.240 how the labor market's doing. 0:01:58.360 --> 0:02:00.000 You know, as you're just to build on the Jacksonville 0:02:00.200 --> 0:02:03.200 Symposium this year, it's talking about the changing nature of 0:02:03.240 --> 0:02:05.840 the labor market and how difficult it is to really 0:02:05.920 --> 0:02:08.320 measure it. To pair that with a number that we 0:02:08.360 --> 0:02:10.720 get on Thursday, there's this belief that it's going to 0:02:10.760 --> 0:02:13.480 be lower than many people have become accustomed to, but 0:02:13.520 --> 0:02:16.480 that still is healthy. How do we gauge a market 0:02:16.520 --> 0:02:18.760 and its health that is so influx, both in the 0:02:18.800 --> 0:02:21.960 policy perspective and the technological perspective. 0:02:23.600 --> 0:02:26.440 Yeah, it's especially hardly so because I think we have 0:02:26.560 --> 0:02:29.520 come off a period that was I'm going to call 0:02:29.560 --> 0:02:32.560 it unusual to have an unemployment rate in the neighborhood 0:02:32.600 --> 0:02:35.919 of three and a half percent. And trying to diagnose 0:02:36.160 --> 0:02:39.400 what are the characteristics that are shaping that labor market 0:02:39.800 --> 0:02:43.320 is essential to how the FED really calibrates. 0:02:43.400 --> 0:02:43.680 It's in. 0:02:46.480 --> 0:02:50.760 Well's see you think about both sides of our calculation 0:02:51.000 --> 0:02:57.640 here that we have seen the bottom line number around 0:02:57.680 --> 0:03:01.280 who's in the workforce, we have seen the hiring numbers, 0:03:02.000 --> 0:03:04.880 and trying to really assess that in a time of 0:03:04.919 --> 0:03:08.400 great uncertainty is one of the fit's' biggest challenges. 0:03:08.800 --> 0:03:11.200 There's a big debate right now on Wall Street in 0:03:11.200 --> 0:03:14.760 the push pull of is this market albeit not strong, 0:03:15.200 --> 0:03:18.720 not overly weak, just weakening, whether it's still healthy enough 0:03:18.800 --> 0:03:21.280 or whether it potentially is showing real cracks, like Neil 0:03:21.320 --> 0:03:25.280 Detta has pointed out of a renaissance macro, especially given 0:03:25.320 --> 0:03:27.680 the fact that the hiring rate is so low and 0:03:27.720 --> 0:03:30.320 people are staying on the unemployment rules for longer. 0:03:30.680 --> 0:03:32.720 Do you have a take for that? Do you think 0:03:32.720 --> 0:03:33.520 that there should. 0:03:33.240 --> 0:03:35.560 Be more emphasis placed in one thesis than the other. 0:03:37.600 --> 0:03:40.200 So I don't think you can wait one or the other. 0:03:40.400 --> 0:03:43.200 We know that the dynamics in our economy today are 0:03:43.240 --> 0:03:46.680 pushing in both directions. We've seen an economy that's beginning 0:03:46.720 --> 0:03:52.440 to slow, it's being hit by policy changes that businesses 0:03:52.480 --> 0:03:54.760 are trying to digest here, and so I think you 0:03:54.840 --> 0:03:58.760 really have to not lock into a particular narrative here, 0:03:58.800 --> 0:04:03.320 but be watching how those dynamics are unfolding. Remember, today, 0:04:03.400 --> 0:04:09.040 the economy is still in forward motion. It is still 0:04:09.120 --> 0:04:12.480 operating in a way that we see growth. Obviously, that 0:04:12.520 --> 0:04:18.160 can change with any particular data point or news announcement 0:04:18.200 --> 0:04:21.640 that we see. But I think the fundamentals here suggests 0:04:21.720 --> 0:04:25.839 that we shouldn't read too much into any particular narrative 0:04:25.880 --> 0:04:26.680 at this stage. 0:04:26.760 --> 0:04:29.360 If aight pril second hadn't happened, I'd love to explore 0:04:29.360 --> 0:04:32.640 this with you if it hadn't happened. Given the downside 0:04:32.640 --> 0:04:35.359 surprises we've had from core CPI over the last I 0:04:35.360 --> 0:04:39.120 think four months and the uplift we've seen in continuing claims, 0:04:39.120 --> 0:04:41.719 which on the market is slightly concerning. Which you have 0:04:41.800 --> 0:04:48.520 voted for a rake cup based on that alone. 0:04:47.000 --> 0:04:49.840 You know, Jonathan, I don't think so. And here's why. 0:04:50.360 --> 0:04:55.680 I view price stability as a prerequisite for sustained growth, 0:04:55.800 --> 0:04:59.640 for a healthy labor market in the long run, which 0:04:59.680 --> 0:05:02.760 is what the Fed's mandate really is is looking to 0:05:02.839 --> 0:05:05.400 the long run. And so I think when you see 0:05:05.640 --> 0:05:09.640 fiscal policy on the path that it's been on, it 0:05:09.680 --> 0:05:13.039 would be by itself. I think reason to be cautious 0:05:13.120 --> 0:05:16.120 right now in an environment where the FED is not 0:05:16.320 --> 0:05:20.159 yet hit its inflation target. So I don't want to 0:05:20.200 --> 0:05:23.680 take anything away from the fact that we have made progress, 0:05:23.960 --> 0:05:26.080 but I would also want to be careful in that 0:05:26.240 --> 0:05:31.000 risk management scenario that you're not putting too much promise 0:05:31.160 --> 0:05:35.520 yet on a state of inflation that has yet to 0:05:35.839 --> 0:05:36.520 be achieved. 0:05:36.760 --> 0:05:39.600 Speaking of risk management, if we get an announcement from 0:05:39.640 --> 0:05:42.960 the President in October, even earlier September, of who the 0:05:43.000 --> 0:05:45.560 next FED chair is going to be, who his pick is, 0:05:46.040 --> 0:05:49.479 well that blur the lines of the FED its independence 0:05:49.680 --> 0:05:52.120 and who's really leading the institution. 0:05:54.720 --> 0:05:57.320 Well, I don't think so. As long as the current 0:05:57.360 --> 0:05:59.880 FED chair is in his seat, He's been very clear, 0:06:00.040 --> 0:06:02.760 and I think he has every incentive to be focused 0:06:02.839 --> 0:06:09.120 on policies that achieve the Fed's mandate. Does it complicate communication, 0:06:09.440 --> 0:06:12.400 does it create a lot of noise? Of course it could, 0:06:12.920 --> 0:06:15.800 But I think any FED chair is going to understand 0:06:15.839 --> 0:06:22.159 that their obligation to meeting their congressionally assigned mandate is 0:06:22.200 --> 0:06:24.840 really the priority. And in the end, you're doing that 0:06:24.920 --> 0:06:28.039 on behalf of the American public. You're not serving just 0:06:28.160 --> 0:06:30.960 one part of the government. 0:06:31.400 --> 0:06:33.960 As to always appreciate your take on things, the clinic 0:06:33.960 --> 0:06:36.200 has always as the George that the former Kansas City 0:06:36.200 --> 0:06:49.559 FED President Terry Hynes of Pangaea Policy, John, just now, Terry, 0:06:49.560 --> 0:06:53.120 in your opinion, is this real authentic resistance or just 0:06:53.160 --> 0:06:56.320 a little bit of theater before the ultimate inevitable lights 0:06:56.320 --> 0:06:57.000 of this weekend? 0:06:58.000 --> 0:07:00.839 Good morning, John. I'm in the theater category, I think 0:07:01.120 --> 0:07:03.640 today and I enjoy theater, but it is theater. 0:07:04.240 --> 0:07:05.480 They you know, you. 0:07:07.600 --> 0:07:11.160 Political bodies always wrangle around for votes, and this is 0:07:11.200 --> 0:07:15.160 a situation where there are fifty three votes that absolutely 0:07:15.240 --> 0:07:18.800 matter and they're jockeying for the most they can get 0:07:18.880 --> 0:07:21.320 in a situation. But at the end of the day, 0:07:21.360 --> 0:07:25.840 here they come together, and if anything, the weekend saga 0:07:25.880 --> 0:07:31.120 with Senator Tillis is a pre foreshadows that because you've 0:07:31.120 --> 0:07:33.880 got a situation where you know, there was so much 0:07:33.920 --> 0:07:36.520 pressure put on him, he's decided not to run for reelection. 0:07:36.840 --> 0:07:39.239 These guys all like their seats and they they're probably 0:07:39.240 --> 0:07:40.280 gonna want to stay. 0:07:40.600 --> 0:07:42.680 Terry when it comes to who has the leverage right 0:07:42.720 --> 0:07:45.920 now when they're competing factions in the Senate, which group 0:07:46.000 --> 0:07:46.280 is it? 0:07:48.840 --> 0:07:51.560 Fundamentally, I think it's the people that are kind of 0:07:51.600 --> 0:07:53.960 the harder core versus the softer they're for. I mean, 0:07:54.480 --> 0:07:57.560 obviously there's more of them number one, number two there. 0:07:58.160 --> 0:07:59.960 They're pushing as hard as they can to get this 0:08:00.040 --> 0:08:03.520 thing done. They will make whatever smaller accommodations they have 0:08:03.600 --> 0:08:06.000 to to the other fashion to get some things done. 0:08:06.400 --> 0:08:09.040 But don't look for the Senate to automatically morph into 0:08:09.960 --> 0:08:12.600 kind of flip over to the soft side wholesale. 0:08:12.800 --> 0:08:15.680 When it comes to how this legislation, this process all 0:08:15.720 --> 0:08:18.520 comes together. What is going on with the bird rule? 0:08:18.600 --> 0:08:20.720 Do you think we're setting up a president now where 0:08:20.920 --> 0:08:25.200 any party can come in and basically set policy and 0:08:25.320 --> 0:08:27.760 extend that policy within the next ten years. 0:08:28.800 --> 0:08:31.520 Oh, I think that's been going on for sixty years 0:08:31.760 --> 0:08:35.599 through the reconciliation process. Frankly, let me also say on 0:08:35.640 --> 0:08:38.480 the Bird rule. The Bird rule is as a Germanist rule, 0:08:38.520 --> 0:08:40.280 by which I mean, you know whether or not it 0:08:40.320 --> 0:08:43.280 should be, you know, some provision ought to be in 0:08:43.360 --> 0:08:46.000 a budget bill or not, whether it has budget impact 0:08:46.120 --> 0:08:49.439 at all, and you know, those are rules of the Senate. 0:08:49.640 --> 0:08:52.520 And you know, I know there's all this kerfuffle about 0:08:52.520 --> 0:08:57.160 Liz MacDonough the parliamentarian, but what she's doing is faithfully 0:08:57.160 --> 0:09:04.080 executing her job as a staffer parliamentarian to interpret and 0:09:04.200 --> 0:09:09.079 finalize rules that the Senate itself has put into place. 0:09:09.720 --> 0:09:12.680 So this is not a situation where you know, the 0:09:12.720 --> 0:09:17.480 staff's hijacking some process, you know, and it's a terrible 0:09:17.520 --> 0:09:21.480 thing for any elected official to blame a staffer for 0:09:21.520 --> 0:09:25.360 that sort of thing. This is a situation where you know, 0:09:25.679 --> 0:09:30.600 the rules governing the particular budget process are in play. 0:09:30.920 --> 0:09:33.880 But back to your point, though, both parties have been 0:09:33.920 --> 0:09:36.800 gaming this system for sixty years and I expect that 0:09:36.840 --> 0:09:37.400 to continue. 0:09:37.480 --> 0:09:39.840 Yes, Terry, you said initially that you do think this 0:09:39.920 --> 0:09:43.040 is more theater than actual fissure in the Republican Party 0:09:43.080 --> 0:09:45.360 that could style of this bill. And yet we're all 0:09:45.400 --> 0:09:48.360 playing the numbers game over the weekend that the senator 0:09:48.400 --> 0:09:52.080 is the Congressional the Republican senators can only afford to 0:09:52.120 --> 0:09:54.520 lose three votes, and currently there are four that are 0:09:54.520 --> 0:09:57.520 on the line. There's Ron Paul, Lisa Murkowski, Susan Collins, 0:09:57.520 --> 0:09:59.920 and now Tom Tillis, who isn't running for reelection, is 0:10:00.000 --> 0:10:03.720 isn't necessarily constrained by potentially being primaried. 0:10:04.000 --> 0:10:05.280 Who cames on that front? 0:10:05.360 --> 0:10:07.480 Why do you see this is still getting over the 0:10:07.520 --> 0:10:08.719 finish line. 0:10:09.000 --> 0:10:14.800 Because of the sequence of votes. Generally speaking, I think 0:10:14.800 --> 0:10:18.840 what Senator Murkowski Senator Collins get is a little bit 0:10:18.880 --> 0:10:21.560 of softening on Medicaid provisions, maybe some other things that 0:10:21.559 --> 0:10:24.320 they're interested in. Senator Murkowski is always standing up for 0:10:24.360 --> 0:10:27.440 our last energy and as she should, and she'll work 0:10:27.520 --> 0:10:30.480 on that. And at the end of the day, what 0:10:30.520 --> 0:10:34.000 you're going to have then, once those accommodations are made, 0:10:34.160 --> 0:10:35.800 then you're going to have a situation where you have 0:10:35.840 --> 0:10:38.520 fifty two on one side and Ran Paul on the 0:10:38.559 --> 0:10:41.000 other and they will vote for final passage. There. 0:10:41.400 --> 0:10:43.720 So we spent a lot of time ringing our hands 0:10:43.760 --> 0:10:46.520 earlier this year talking about the increasing budget deficit in 0:10:46.520 --> 0:10:48.600 the United States and how this is going to cause 0:10:48.600 --> 0:10:51.280 some sort of bond vigilante moment where you get real 0:10:51.320 --> 0:10:53.360 pushback in the bond market. We just had the best 0:10:53.360 --> 0:10:56.280 month for the bond market in terms of performance going 0:10:56.320 --> 0:10:58.840 back to February. At the same time of the Committee 0:10:58.840 --> 0:11:01.600 for a Responsible Federal budok it says that this current 0:11:01.640 --> 0:11:04.720 iteration of the One Big Beautiful Bill is going to 0:11:04.720 --> 0:11:07.520 add three point nine trillion dollars to the deficit over 0:11:07.559 --> 0:11:08.400 the next decade. 0:11:08.720 --> 0:11:09.319 Which is it. 0:11:09.480 --> 0:11:11.520 Do you think that people are being a little overly 0:11:11.600 --> 0:11:14.640 sanguine about what this does to the deficit or do 0:11:14.679 --> 0:11:16.840 you think, like we heard from Steve Chivon, that they're 0:11:16.840 --> 0:11:19.280 going to be real offsets that we haven't accounted for. 0:11:20.400 --> 0:11:23.600 Well, two things. One, whoever's doing the interview with Secretary 0:11:23.640 --> 0:11:26.960 Best and I hope they'll acknowledge that he was absolutely 0:11:26.960 --> 0:11:29.800 correct on the on how he thought markets would react 0:11:29.800 --> 0:11:32.480 in the medium and long term here, both on both 0:11:32.520 --> 0:11:35.120 on equities and in bonds. He called that, and a 0:11:35.120 --> 0:11:39.560 lot of people didn't. The Secondly, seguine, I don't know 0:11:39.640 --> 0:11:43.280 the uh you know the rules by which the CBO 0:11:43.720 --> 0:11:49.680 and outside groups you know, cancoct their CANCCT. Their views 0:11:49.960 --> 0:11:54.160 are artificial and they exclude lots of things like the 0:11:55.160 --> 0:11:59.000 like the impact of tariffs and growth. Frankly, so yeah, 0:11:59.040 --> 0:12:00.880 I'm on teams Steve on this one. 0:12:00.920 --> 0:12:04.240 I think Terry when it comes to how this actually 0:12:04.280 --> 0:12:07.120 gets to the President's desk, what's going to happen in 0:12:07.160 --> 0:12:09.080 the House is the freedom call is just fold like 0:12:09.080 --> 0:12:10.160 they did in twenty seventeen. 0:12:12.200 --> 0:12:15.240 I've been for three months now been in the been 0:12:15.320 --> 0:12:17.880 advising markets that this thing was going to happen on 0:12:18.000 --> 0:12:20.880 or around July fourth, and now here we are. And 0:12:20.920 --> 0:12:24.800 I've also for probably a couple of months now had 0:12:24.800 --> 0:12:27.960 been advising that the whole purpose here is the Senate's 0:12:28.000 --> 0:12:30.600 going to jam the House, and the Senate bill will 0:12:30.600 --> 0:12:33.760 be the final bill. And I still think that. And Frankly, 0:12:33.800 --> 0:12:37.360 if you listen, I mean, this is that buzz is 0:12:37.679 --> 0:12:41.600 kind of bubbling under right now. But if you listen 0:12:41.640 --> 0:12:44.680 to what the House people say publicly, they expect that, 0:12:44.760 --> 0:12:47.240 you know, there's all kinds of talk about, you know, 0:12:47.240 --> 0:12:49.600 how we've accommodated the House and how we've been working 0:12:49.600 --> 0:12:52.160 together and all the rest. What that is is a 0:12:52.160 --> 0:12:55.559 signal that we're going to end up having to take 0:12:55.600 --> 0:12:59.640 whatever the Senate does, and the President's going to have 0:12:59.640 --> 0:13:01.360 to come in and put the hammer down on some people. 0:13:01.520 --> 0:13:03.000 Hey, Terry, it's going to catch very with it this 0:13:03.000 --> 0:13:13.840 Monday morning. Good morning's sir, Terry Hanks there of Pangaea policy. 0:13:16.440 --> 0:13:20.200 Michael Kutschmer of Morgan Stanley believes we're currently in a 0:13:20.240 --> 0:13:22.880 sweet spot for markets. Doesn't feel like one, but we 0:13:22.960 --> 0:13:27.280 have the unemployment report, budget negotiations, tariff dead blinds all 0:13:27.320 --> 0:13:29.839 coming up over the next two weeks or so. Michael 0:13:29.920 --> 0:13:32.040 joins us now for more. Michael, good mornch Good morning. 0:13:32.160 --> 0:13:34.400 It hasn't felt like a sweet spot for markets. I 0:13:34.400 --> 0:13:36.080 guess if you're away from all this and you see 0:13:36.080 --> 0:13:38.120 the start market of record highs, it might feel good. 0:13:38.120 --> 0:13:40.200 But if you've been in it, the last three months 0:13:40.240 --> 0:13:41.280 has been brutal, hasn't it. 0:13:41.679 --> 0:13:42.120 Absolutely. 0:13:42.120 --> 0:13:43.920 I really talk about the sweet spot from all the 0:13:43.960 --> 0:13:46.080 worries that we had just a couple of weeks ago. 0:13:46.160 --> 0:13:49.840 All the negative things which could happen have disappeared, you know, 0:13:49.880 --> 0:13:52.079 at least for the time being. But we've got this 0:13:52.360 --> 0:13:55.679 calendar coming up this week and next couple of weeks 0:13:55.720 --> 0:14:00.679 through July there are quite impressively potentially volatile, but like 0:14:00.760 --> 0:14:04.200 the digital service tax we canna yesterday, again positive news 0:14:04.200 --> 0:14:07.080 at the margin, just dripping it back into the market 0:14:07.120 --> 0:14:08.960 to reduce the intensity of worry. 0:14:09.320 --> 0:14:11.960 And in November when the election happened, we were wondering 0:14:12.000 --> 0:14:14.199 whether this bond market would push back what would be 0:14:14.240 --> 0:14:17.600 the biggest constraint on this particular bill down in Washington, 0:14:17.679 --> 0:14:20.080 d C. And here we are and this bond market 0:14:20.400 --> 0:14:21.280 is not pushing back it. 0:14:21.400 --> 0:14:24.920 So why I think it's the confidence that rates are 0:14:24.920 --> 0:14:27.280 going to be cut, that the deterioration and the labor 0:14:27.320 --> 0:14:31.160 market is going to continue, and that continuation of labor 0:14:31.240 --> 0:14:33.720 market and the idea of the Fed policy being a 0:14:33.800 --> 0:14:38.480 balance between employment and inflation as employment drifts weaker relative 0:14:38.560 --> 0:14:41.200 to inflation. Inflation has been good the last couple of months, 0:14:41.280 --> 0:14:43.480 but again it's been good seasonally the last couple of years. 0:14:43.360 --> 0:14:44.400 As well into the summer. 0:14:44.520 --> 0:14:47.920 That's why they cut rates less less September is it 0:14:48.000 --> 0:14:50.800 can deteriorate the next couple of months. But if inflation deteriorate, 0:14:50.840 --> 0:14:53.560 I mean, if the unemployment deteriorates, I think the Fed 0:14:53.640 --> 0:14:55.720 will will react to that, it seems. 0:14:55.400 --> 0:14:57.920 As though the bond market and stock market are getting 0:14:57.960 --> 0:15:01.560 excited about different things. Stock markets getting excited about AI 0:15:02.120 --> 0:15:04.880 and the potential for things to be sort of muddle 0:15:04.880 --> 0:15:07.760 along enough to allow companies to keep innovating and possible 0:15:07.800 --> 0:15:11.880 regulatory roll back. The bond market's getting excited about enough 0:15:11.920 --> 0:15:13.960 weakening that the Fed can cut, but not too much 0:15:14.000 --> 0:15:16.200 weakening that will fall off a cliff. Is that basically 0:15:16.400 --> 0:15:16.840 where we're at? 0:15:16.960 --> 0:15:20.400 Exactly the rate cuts in a still growing economy is perfect? 0:15:20.400 --> 0:15:23.840 Are the economies forecast will deteriorate, you know, one percent 0:15:23.920 --> 0:15:26.280 growth and back to trend growth next year as the 0:15:26.320 --> 0:15:27.080 Fed cut rates? 0:15:27.120 --> 0:15:28.360 How good a combination is this? 0:15:28.640 --> 0:15:31.040 So why are we not talking about the Fed cutting 0:15:31.120 --> 0:15:33.440 rates at a time where the economy is still moving forward, 0:15:33.480 --> 0:15:37.040 to use Ester George's phrase, with a budget that is 0:15:37.120 --> 0:15:41.280 getting more deficit driven and those fears still here, the 0:15:41.360 --> 0:15:45.360 dollar being sold, Institutional investors overseas real questions about how 0:15:45.440 --> 0:15:48.560 much they will be the incremental buyer of treasuries. Why 0:15:48.600 --> 0:15:50.760 are we no longer talking about that whole dynamic? At 0:15:50.760 --> 0:15:52.960 the long end, we. 0:15:52.880 --> 0:15:55.200 Still think there's gonna be a steepening buyers For that reason, 0:15:55.520 --> 0:15:57.720 I think about all in terms of back ten year 0:15:57.760 --> 0:16:01.160 heels are longer that we had to see a glut 0:16:01.200 --> 0:16:03.680 in the old days and a shortage of safe assets. 0:16:03.760 --> 0:16:06.280 The budget deficits were shrinking in Europe, the United States 0:16:06.440 --> 0:16:09.120 shortage of safe assets. Now we have an explosion of 0:16:09.160 --> 0:16:12.520 safe assets, and that's going to put demandual. For demand 0:16:12.600 --> 0:16:15.840 to be substandard relative to the supply of longer term 0:16:15.880 --> 0:16:19.240 government bonds. Whether it's European, whether it's US or other countries, 0:16:19.240 --> 0:16:22.200 pressures on budgets will continue, which again gets back to 0:16:22.240 --> 0:16:23.800 the point that why is the Fed going to be 0:16:23.800 --> 0:16:26.640 cutting rates aggressively one hundred base points in the next 0:16:26.680 --> 0:16:29.440 twelve months when fiscal policy is where it is and 0:16:29.480 --> 0:16:31.040 inflation is still problematic. 0:16:31.200 --> 0:16:33.360 Is this dollar weakness trend you think here to stay? 0:16:34.280 --> 0:16:36.880 I think it is, and mostly it's valuation and the 0:16:37.320 --> 0:16:41.240 underpinnings of the strong dollar are slowly eroding, not collapsing, 0:16:41.280 --> 0:16:41.880 but the eroding. 0:16:41.920 --> 0:16:43.600 It's a marginal change. 0:16:43.720 --> 0:16:46.240 If US is not going to maintain a multi percentage 0:16:46.240 --> 0:16:48.760 point growth differentials, the rest of the world just going. 0:16:48.760 --> 0:16:49.440 To narrow a bit. 0:16:49.680 --> 0:16:52.800 Given valuations where the dollar is, it's likely to fall. 0:16:52.920 --> 0:16:55.640 Fiscal policies be more expansionary outside the United States than 0:16:55.640 --> 0:16:56.800 maybe inside the United States. 0:16:56.880 --> 0:16:58.960 This has been talking with this idea how the bond 0:16:59.000 --> 0:17:01.680 vigilantes maybe are absent right now from this three point 0:17:01.800 --> 0:17:03.640 three trillion dollar to the deficit. 0:17:03.680 --> 0:17:05.280 The CBO says, this bill is going to. 0:17:05.240 --> 0:17:07.320 Cost, but maybe they're taking it out when it comes 0:17:07.320 --> 0:17:10.440 to unwinding in the dollar dollar dumpers. 0:17:10.520 --> 0:17:11.440 Is that what it is now? 0:17:11.600 --> 0:17:14.480 I think that's potentially it that the world is overweight 0:17:14.520 --> 0:17:17.240 dollar assets and for a good reason, and the dollars 0:17:17.280 --> 0:17:19.959 acted as a good hedge for those assets. So the 0:17:20.000 --> 0:17:21.600 S and P went down, the dollar went up. 0:17:21.640 --> 0:17:22.080 That was good. 0:17:22.080 --> 0:17:24.600 It balanced the risks of owning US assets. As that 0:17:24.720 --> 0:17:28.000 changes that there's been more dollar hedging going on. So 0:17:28.080 --> 0:17:30.800 maybe not selling dollar assets, BUTU look where equities are 0:17:30.800 --> 0:17:33.439 with why are we worried but the dollar? 0:17:33.520 --> 0:17:35.560 Maybe we should be hedging? Are US assets going? 0:17:35.560 --> 0:17:38.720 Where are you comfortable taking generation risks right now? The 0:17:38.720 --> 0:17:40.840 whole world's on the menu, by the way, Where are 0:17:40.840 --> 0:17:42.040 you comfortable taking that risk? 0:17:42.080 --> 0:17:45.159 I think it's sort of in shorter intermediate maturities, unless 0:17:45.160 --> 0:17:49.240 so to the ounces one. Yeah, well, well, well this 0:17:49.320 --> 0:17:51.680 huge rally we've had, well not huge, but really big 0:17:51.760 --> 0:17:54.320 rally into your notes down to three seventy five with 0:17:54.400 --> 0:17:56.639 FED funds still four and a half. But you have 0:17:56.680 --> 0:17:58.280 to have i know, a hound baselins of right cuts 0:17:58.280 --> 0:18:01.720 in the next nine to twelve months. They current pricing, 0:18:01.960 --> 0:18:04.480 which is justifiable if it does happen. Tame thing with 0:18:04.520 --> 0:18:08.000 ten year treasuries is potentially okay if we do deliver 0:18:08.280 --> 0:18:09.720 one hundred base points of ray cuts. 0:18:09.800 --> 0:18:11.840 If we do deliver one hundred basis points of rate 0:18:11.880 --> 0:18:13.879 cuts at a time where the economy is still strong, 0:18:13.960 --> 0:18:15.200 what happens to the yield curve? 0:18:15.240 --> 0:18:15.400 Though? 0:18:15.560 --> 0:18:17.920 And this really does ultimately go to a question John 0:18:17.960 --> 0:18:20.719 asked earlier, which is a really important one. Is there 0:18:20.760 --> 0:18:22.600 a lesson from what we saw last year from the 0:18:22.640 --> 0:18:24.920 Fed as one hundred basis point rate cut and what 0:18:24.920 --> 0:18:27.000 that could mean for this one? 0:18:27.119 --> 0:18:29.640 Exactly the last time we had rake cuts last year, 0:18:29.880 --> 0:18:32.399 the minute they finished rate cuts ten your treasure went 0:18:32.440 --> 0:18:33.399 up and yield the same thing. 0:18:33.640 --> 0:18:34.960 That's because same thing happened again. 0:18:35.000 --> 0:18:38.080 I'm not sure FED rate cuts help mortgage rates. 0:18:38.480 --> 0:18:40.800 What's the President going to say when that happens that's 0:18:40.880 --> 0:18:42.760 precisely what happened last year. 0:18:43.440 --> 0:18:45.199 I don't know, I mean, what does he say does 0:18:45.240 --> 0:18:47.040 he blame the FED chair, does he try to keep 0:18:47.040 --> 0:18:49.080 Powell in there to try to blame him. Does he 0:18:49.119 --> 0:18:53.600 say they should stare quantitative easing and essentially monetize the 0:18:53.680 --> 0:18:56.000 debt which is sort of the worst case scenario for 0:18:56.040 --> 0:18:58.520 the dollar. How do you job own this one? Or 0:18:58.520 --> 0:19:00.720 do you just say rates are too high? Cut more? 0:19:00.800 --> 0:19:03.719 I mean, really, it's really unclear how you message this 0:19:03.800 --> 0:19:06.160 when it's a very simple message of get rates lower, 0:19:06.400 --> 0:19:10.080 facing off with a very complicated economic reality of which 0:19:10.160 --> 0:19:11.119 rate you're talking. 0:19:10.880 --> 0:19:11.800 About a ladder? 0:19:12.240 --> 0:19:13.400 It's not enough cut. 0:19:13.240 --> 0:19:16.160 More So, that brings in the lights of risk, which 0:19:16.320 --> 0:19:19.480 means a new FED chair lights around in twenty twenty five. 0:19:19.520 --> 0:19:20.439 What does all that mean to you? 0:19:21.840 --> 0:19:28.399 It means that monetary policy is going to be more 0:19:28.480 --> 0:19:32.760 uncertain next year. But I'm not sure that a FED 0:19:32.920 --> 0:19:36.960 chair of the candidates that being bandied about or that 0:19:37.359 --> 0:19:39.240 wildly different than what we've got today. 0:19:39.280 --> 0:19:42.040 It's a board of governors, it's a committee. If you 0:19:42.160 --> 0:19:43.119 get Kevin. 0:19:42.880 --> 0:19:46.600 Worsh one of these other gentlemen or women that are 0:19:46.680 --> 0:19:50.879 being proposed, will not radically change monetary policy. If if 0:19:50.960 --> 0:19:53.840 we get conditions such that the economy is weakening, we'll 0:19:53.880 --> 0:19:54.600 get bigger rate. 0:19:54.840 --> 0:19:55.520 Explore this with me. 0:19:55.640 --> 0:19:57.439