1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,640 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:36,720 Speaker 2: Terminal and the Bloomberg Business app. We'll begin with our 10 00:00:36,760 --> 00:00:40,040 Speaker 2: top story, investors positioning for a potential second Trump term, 11 00:00:40,240 --> 00:00:43,559 Speaker 2: James Athey of Marlbaret Investment Management, writing, this isn't it 12 00:00:43,560 --> 00:00:46,000 Speaker 2: a bit keen to be positioning for the Trump trade 13 00:00:46,040 --> 00:00:49,839 Speaker 2: four months before the election, six months before inauguration, and 14 00:00:49,880 --> 00:00:52,880 Speaker 2: based on the twenty seventeen timeline around eighteen months before 15 00:00:52,880 --> 00:00:56,520 Speaker 2: the passing of legislation. James Jones is now for more so, James, 16 00:00:56,560 --> 00:00:59,440 Speaker 2: do you think maybe this move is a little bit premature? 17 00:01:01,200 --> 00:01:01,400 Speaker 3: Yeah? 18 00:01:01,680 --> 00:01:04,720 Speaker 4: Either that, John, or really with sort of backward engineering 19 00:01:04,760 --> 00:01:07,520 Speaker 4: and narrative to describe the move higher and treasury yields, 20 00:01:07,560 --> 00:01:11,360 Speaker 4: I mean the timing with respect to this move higher 21 00:01:11,360 --> 00:01:13,360 Speaker 4: in the odds of Trump being elected doesn't seem to 22 00:01:13,760 --> 00:01:17,480 Speaker 4: tie up perfectly. It almost looked to me like maybe 23 00:01:17,520 --> 00:01:21,240 Speaker 4: there was a bit of inventory overhang from dealers into 24 00:01:21,319 --> 00:01:24,760 Speaker 4: and out of month end, and that's just precipitated and 25 00:01:24,840 --> 00:01:27,640 Speaker 4: move higher and treasury yields led by the long end, 26 00:01:27,880 --> 00:01:31,200 Speaker 4: and now we're starting to sort of engineer that into 27 00:01:31,280 --> 00:01:34,760 Speaker 4: being related to an increased chance of Trump's elections. So 28 00:01:35,240 --> 00:01:38,120 Speaker 4: either way, for me, now is not the time to 29 00:01:38,200 --> 00:01:44,120 Speaker 4: push hard on trades investment ideas which rely on Trump 30 00:01:44,200 --> 00:01:46,280 Speaker 4: passing legislation. I think there's a lot of wood to 31 00:01:46,319 --> 00:01:47,200 Speaker 4: chop before we get there. 32 00:01:47,280 --> 00:01:48,640 Speaker 5: So James, what should we rely on? 33 00:01:48,680 --> 00:01:51,120 Speaker 2: You said it's too early to position for a Trump presidency. 34 00:01:51,200 --> 00:01:54,080 Speaker 2: You say there's nothing clear on the macro front either, 35 00:01:54,360 --> 00:01:56,120 Speaker 2: So what should I focus on and what should I do? 36 00:01:57,040 --> 00:01:59,520 Speaker 4: No, exactly, And that's the difficult thing. I mean, the 37 00:01:59,560 --> 00:02:02,080 Speaker 4: trade trend in the last six weeks or so has 38 00:02:02,120 --> 00:02:04,680 Speaker 4: been a reversal of the trend which had preceded it, 39 00:02:04,680 --> 00:02:07,160 Speaker 4: which is to say, we've had some upside surprises in 40 00:02:07,200 --> 00:02:09,760 Speaker 4: economic data in Europe and the UK, and some downside 41 00:02:09,760 --> 00:02:12,960 Speaker 4: surprises in the US, But broadly speaking, the US still 42 00:02:13,000 --> 00:02:15,240 Speaker 4: feels like it's in a better place. You know, if 43 00:02:15,240 --> 00:02:18,200 Speaker 4: you look traditionally at economic cycles, they don't turn on 44 00:02:18,240 --> 00:02:21,079 Speaker 4: the consumer, they turn on business investment, and that then 45 00:02:21,120 --> 00:02:25,239 Speaker 4: precipitates through into higher unemployment and the consumer. In Europe 46 00:02:25,240 --> 00:02:28,800 Speaker 4: and the UK, we are seeing that deterioration in investment data. 47 00:02:28,960 --> 00:02:31,160 Speaker 4: In the US. Actually, we've seen that picking up of 48 00:02:31,240 --> 00:02:33,280 Speaker 4: late and so it still looks to us that you 49 00:02:33,320 --> 00:02:37,320 Speaker 4: should be more comfortable taking duration positions from an economic perspective. 50 00:02:37,440 --> 00:02:39,880 Speaker 4: In Europe and the UK, we've already had one cut 51 00:02:39,880 --> 00:02:42,560 Speaker 4: from the ECB. Yes, they got buyers remorse, but I 52 00:02:42,560 --> 00:02:44,400 Speaker 4: think the data is going to give them cover to 53 00:02:44,720 --> 00:02:47,600 Speaker 4: continue cutting. Likewise, the bank when we get to August 54 00:02:47,880 --> 00:02:50,880 Speaker 4: fed certainly more uncertain, but you're just getting paid that 55 00:02:51,080 --> 00:02:54,280 Speaker 4: little bit more to take on that duration risk in 56 00:02:54,320 --> 00:02:57,079 Speaker 4: the US, and so ultimately we still see that as 57 00:02:57,080 --> 00:03:00,560 Speaker 4: being attractive because the direction of travel is cycle. 58 00:03:00,880 --> 00:03:03,040 Speaker 1: This is fascinating to me, this whole idea of market 59 00:03:03,080 --> 00:03:05,120 Speaker 1: move in search of a narrative, which is something that 60 00:03:05,120 --> 00:03:07,000 Speaker 1: we've seen consistently and the part of the reason why 61 00:03:07,000 --> 00:03:09,680 Speaker 1: we've been playing you know, market ping pong or table tennis. 62 00:03:09,760 --> 00:03:12,600 Speaker 1: With the respect of different narratives. What narrative do you 63 00:03:12,639 --> 00:03:16,040 Speaker 1: paint end of cycle rate cutting, go into duration, probably 64 00:03:16,080 --> 00:03:18,959 Speaker 1: more heavily in Europe, less so maybe in the US, 65 00:03:19,000 --> 00:03:21,880 Speaker 1: but still in the US, go into dollar assets. Is 66 00:03:21,919 --> 00:03:24,120 Speaker 1: this basically the game plan that you've just been describing. 67 00:03:25,440 --> 00:03:28,160 Speaker 4: Yeah, ultimately, Lisa, it is. I mean, obviously, you know, 68 00:03:28,200 --> 00:03:30,919 Speaker 4: what we're not trying to do is make some bold 69 00:03:31,000 --> 00:03:33,959 Speaker 4: prognostication on the macro outlook and then vet the farm. 70 00:03:34,000 --> 00:03:37,240 Speaker 4: You know, we're trying to think about the world probabilistically. 71 00:03:37,280 --> 00:03:41,280 Speaker 4: We're trying to understand the various outcomes of the various scenarios, 72 00:03:41,320 --> 00:03:44,360 Speaker 4: the various themes that are affect in market pricing, deduce 73 00:03:44,400 --> 00:03:46,920 Speaker 4: what we think the market is assuming, and position ourselves 74 00:03:47,040 --> 00:03:49,640 Speaker 4: where it's most attractive, where the most asymmetry is. So 75 00:03:49,960 --> 00:03:52,560 Speaker 4: the fact that you've got credit spreads as tight as 76 00:03:52,560 --> 00:03:54,600 Speaker 4: they are and equities at the all time highs and 77 00:03:54,640 --> 00:03:59,160 Speaker 4: equity multiples looking very rich. Meanwhile, you've got yields broadly 78 00:03:59,200 --> 00:04:02,080 Speaker 4: and particularly sort of five to ten year yields looking 79 00:04:02,120 --> 00:04:06,640 Speaker 4: pretty attractive relative to the dynamics which are being described 80 00:04:06,680 --> 00:04:10,120 Speaker 4: broadly by the economic data that as a starting proposition 81 00:04:10,160 --> 00:04:13,200 Speaker 4: as an asset allocator that to us informs the idea 82 00:04:13,240 --> 00:04:18,000 Speaker 4: that bonds, and particularly high quality, safe defensive government bonds 83 00:04:18,320 --> 00:04:21,120 Speaker 4: are the more attractive medium term investment proposition. 84 00:04:21,160 --> 00:04:23,239 Speaker 1: Here, a lot of people are looking to the data 85 00:04:23,279 --> 00:04:25,640 Speaker 1: that we get today, John just went through it, and 86 00:04:25,680 --> 00:04:28,640 Speaker 1: then on Friday we get the non FORIGN payrolls report. 87 00:04:29,000 --> 00:04:32,840 Speaker 1: A key question here has been how dependent is this market? 88 00:04:32,880 --> 00:04:36,360 Speaker 1: How data dependent are people like yourself who don't know 89 00:04:36,440 --> 00:04:40,359 Speaker 1: what macro compass to really use. What's the more important 90 00:04:40,480 --> 00:04:43,279 Speaker 1: data to really be looking at in the slew of 91 00:04:43,320 --> 00:04:45,960 Speaker 1: information that we get today and also on Friday. 92 00:04:46,839 --> 00:04:49,880 Speaker 4: Yeah, and therein lies the problem, Lisa, because the data 93 00:04:49,880 --> 00:04:52,880 Speaker 4: that matters the most in our opinion ultimately is unemployment, 94 00:04:52,880 --> 00:04:55,680 Speaker 4: the labor market in general. That is the spine of 95 00:04:55,720 --> 00:04:59,360 Speaker 4: the economic cycle. That's exactly how you know, these sort 96 00:04:59,360 --> 00:05:02,600 Speaker 4: of positive and negative drivers feed through the economy in 97 00:05:02,640 --> 00:05:05,560 Speaker 4: a cyclical fashion. You know, the same dollar being spent 98 00:05:05,920 --> 00:05:09,920 Speaker 4: multiple times, that cyclicality that's both good in the upswing 99 00:05:09,960 --> 00:05:12,600 Speaker 4: and then very negative in the downswing. And those changes 100 00:05:12,680 --> 00:05:16,360 Speaker 4: largely happen because of changes to employment or changes to unemployment. 101 00:05:16,600 --> 00:05:19,520 Speaker 4: But of course that's the most lagging of those major 102 00:05:19,800 --> 00:05:23,080 Speaker 4: indicators and so it's difficult to make forecast based on that. 103 00:05:23,120 --> 00:05:25,359 Speaker 4: So you have to use the forward looking data to 104 00:05:25,440 --> 00:05:28,040 Speaker 4: try and inform a view and where the labor. 105 00:05:27,760 --> 00:05:28,520 Speaker 5: Market is heading. 106 00:05:28,760 --> 00:05:31,520 Speaker 4: And broadly speaking, this data has been telling us for 107 00:05:31,560 --> 00:05:34,480 Speaker 4: a while and continues to tell us that things are softening, 108 00:05:34,520 --> 00:05:37,880 Speaker 4: things are normalizing. And again, the nature of the economy 109 00:05:37,920 --> 00:05:42,320 Speaker 4: means that that second derivative is incredibly important in trying 110 00:05:42,360 --> 00:05:45,719 Speaker 4: to understand where a more medium trend is. So unless 111 00:05:45,760 --> 00:05:48,480 Speaker 4: we see the jobs market picking up again, it still 112 00:05:48,520 --> 00:05:50,760 Speaker 4: looks to us to be an economy which is losing speed. 113 00:05:50,960 --> 00:05:53,160 Speaker 2: James, we started this conversation and you were playing down 114 00:05:53,200 --> 00:05:55,880 Speaker 2: the importance of politics in the United States. I just 115 00:05:55,920 --> 00:05:59,000 Speaker 2: wonder how important the politics are, how relevant the elections 116 00:05:59,040 --> 00:06:02,599 Speaker 2: are in the UK and France over the next several days, James, 117 00:06:02,600 --> 00:06:05,240 Speaker 2: given that this list trust shark seems to have become 118 00:06:05,240 --> 00:06:08,599 Speaker 2: a south imposed debt break across the continent, just how 119 00:06:08,640 --> 00:06:10,200 Speaker 2: relevant is the politics? 120 00:06:11,400 --> 00:06:12,920 Speaker 4: Yeah, and I think that's a really important point. 121 00:06:13,000 --> 00:06:13,200 Speaker 6: John. 122 00:06:13,200 --> 00:06:15,000 Speaker 4: I would note the same that I think there's been 123 00:06:15,000 --> 00:06:17,840 Speaker 4: a wake up moment for UK politicians in particular, and 124 00:06:17,880 --> 00:06:20,080 Speaker 4: I think it's good politics from the labor Party to 125 00:06:20,160 --> 00:06:24,039 Speaker 4: essentially shackle themselves to the kind of fiscal responsibility that 126 00:06:24,080 --> 00:06:28,240 Speaker 4: the Tories were campaigning on from an electioneering perspective that 127 00:06:28,440 --> 00:06:31,320 Speaker 4: new to the Tories. Their chances of winning became virtually 128 00:06:31,440 --> 00:06:35,719 Speaker 4: zero at that point, and ultimately the lessons will live 129 00:06:35,880 --> 00:06:37,719 Speaker 4: somewhat long in the memory, at least for the next 130 00:06:37,800 --> 00:06:40,520 Speaker 4: year or so, I would have thought. In Europe, it's 131 00:06:40,520 --> 00:06:43,799 Speaker 4: almost constitutional. You have fiscal rules still within the European Union, 132 00:06:44,800 --> 00:06:48,840 Speaker 4: conveniently ignored during the pandemic, but they're starting to hove 133 00:06:48,920 --> 00:06:53,240 Speaker 4: interview again. Excessive deficit procedures certainly are going to be 134 00:06:53,279 --> 00:06:57,280 Speaker 4: part of the future. What that means for European politics, however, 135 00:06:57,720 --> 00:07:00,000 Speaker 4: is less easy to say, because you have this right 136 00:07:00,240 --> 00:07:04,400 Speaker 4: of the extremes who really are ultimately skeptical with respect 137 00:07:04,480 --> 00:07:07,240 Speaker 4: to Europe and the power of the European Commission, and 138 00:07:07,279 --> 00:07:09,760 Speaker 4: of course that could set some of these countries on 139 00:07:09,800 --> 00:07:13,040 Speaker 4: a collision course with Brussels near term. Therefore, there is 140 00:07:13,080 --> 00:07:16,040 Speaker 4: a lot of event risk. But actually in Europe medium term, 141 00:07:16,080 --> 00:07:19,239 Speaker 4: I think there are more structural risks to bond market pricing. 142 00:07:19,480 --> 00:07:21,760 Speaker 1: So, in other words, by the dear treasuries. 143 00:07:21,840 --> 00:07:23,400 Speaker 5: In longer term, treasuries. 144 00:07:22,960 --> 00:07:25,800 Speaker 1: And political risk maybe a little bit less so over 145 00:07:25,960 --> 00:07:28,280 Speaker 1: in euroregion, just because of some of these structural issues. 146 00:07:28,360 --> 00:07:28,760 Speaker 5: Is that right? 147 00:07:29,760 --> 00:07:32,320 Speaker 4: Well, certainly in the non core you know that Germany 148 00:07:32,400 --> 00:07:34,840 Speaker 4: is the safe haven, that's the core rates market. We 149 00:07:35,000 --> 00:07:37,120 Speaker 4: do not favor owning a lot of the spread risk 150 00:07:37,200 --> 00:07:40,480 Speaker 4: here because we think there are a preponderance of downside 151 00:07:40,560 --> 00:07:44,360 Speaker 4: risks and the market is not handicapping pricing those effectively 152 00:07:44,400 --> 00:07:47,040 Speaker 4: at the moment. We'd like to see more spread before 153 00:07:47,080 --> 00:07:49,080 Speaker 4: we'd be comfortable taking on some of those risks. 154 00:07:49,160 --> 00:07:51,440 Speaker 2: Hey, James, going to catch up, sir as always James 155 00:07:51,480 --> 00:08:04,320 Speaker 2: Act of Marlborough Investment Management, Adam London, Thomas sim As, 156 00:08:04,320 --> 00:08:06,840 Speaker 2: a Jeffries mart mccomack a tad Bank. With this amount 157 00:08:06,840 --> 00:08:08,920 Speaker 2: of table, thomast I start with you. Lets talk about that, 158 00:08:08,920 --> 00:08:11,520 Speaker 2: don't worry about that, okay, talk about jobless claims. What 159 00:08:11,640 --> 00:08:13,640 Speaker 2: do you think is sort of normal and what's worthy 160 00:08:13,640 --> 00:08:15,800 Speaker 2: of worry as we start to creep a little bit higher? 161 00:08:16,840 --> 00:08:19,400 Speaker 7: So normal is really hard to define, right, I mean, 162 00:08:19,440 --> 00:08:21,600 Speaker 7: we've had many different states of normal in the last 163 00:08:21,680 --> 00:08:24,360 Speaker 7: four years, and I think that on an almost daily basis, 164 00:08:24,400 --> 00:08:26,960 Speaker 7: there's a new sort of remark of where normal is right, 165 00:08:27,240 --> 00:08:28,840 Speaker 7: last few months, it seems like two hundred and thirty 166 00:08:28,880 --> 00:08:31,120 Speaker 7: K is more or less normal, two twenty something like that. 167 00:08:31,680 --> 00:08:34,360 Speaker 7: I think that that's probably a decent enough benchmark for 168 00:08:34,880 --> 00:08:37,400 Speaker 7: the next few weeks at least, But as you get 169 00:08:37,440 --> 00:08:39,000 Speaker 7: into the end of the year, we'll probably continue to 170 00:08:39,000 --> 00:08:41,680 Speaker 7: creep a little bit higher. Right. If you go from 171 00:08:41,720 --> 00:08:43,840 Speaker 7: two thirty to two fifty or two sixty over the 172 00:08:43,880 --> 00:08:47,439 Speaker 7: course of six months, that's actually exactly what the Fed wants, right. 173 00:08:47,520 --> 00:08:49,839 Speaker 7: Like the whole thing with like the you know, the 174 00:08:50,040 --> 00:08:52,440 Speaker 7: the some rule and these these inflection points and whatnot, 175 00:08:52,520 --> 00:08:55,480 Speaker 7: is that this concept that economic data you know, goes 176 00:08:55,640 --> 00:08:57,920 Speaker 7: down on an elevator up on an escalator, right, Like 177 00:08:57,920 --> 00:09:01,920 Speaker 7: there's momentum that becomes self reinforced. Sing If we in 178 00:09:01,960 --> 00:09:04,880 Speaker 7: fact actually get this very gradual decline in you know, 179 00:09:05,000 --> 00:09:07,920 Speaker 7: labor market pressure, I think that's actually quite a good outcome. 180 00:09:07,960 --> 00:09:09,240 Speaker 5: Okay, let's build on that a little bit more. 181 00:09:09,240 --> 00:09:10,960 Speaker 2: Because City were with us earlier and they said two 182 00:09:10,960 --> 00:09:13,480 Speaker 2: sixties the dangers on for job as claims, they've got 183 00:09:13,480 --> 00:09:14,960 Speaker 2: a different view on this. They just don't think that 184 00:09:15,000 --> 00:09:17,600 Speaker 2: you stabilize at this lower level. You don't platt ou 185 00:09:17,640 --> 00:09:20,400 Speaker 2: here that once this journey starts, it continues, right. 186 00:09:20,320 --> 00:09:22,560 Speaker 7: And I mean, you know, you look at eighty five 187 00:09:22,640 --> 00:09:25,400 Speaker 7: plus years of labor market data and it supports that fact, 188 00:09:25,440 --> 00:09:27,560 Speaker 7: right that when when things start to go wrong, they 189 00:09:27,640 --> 00:09:28,640 Speaker 7: get wronger and wronger. 190 00:09:28,760 --> 00:09:28,920 Speaker 6: Right. 191 00:09:29,559 --> 00:09:31,439 Speaker 7: But the issue is, I think we have a very 192 00:09:31,480 --> 00:09:35,760 Speaker 7: different set of demographics that you know, is not consistent 193 00:09:35,800 --> 00:09:39,640 Speaker 7: with any other real, you know, labor market episode we've 194 00:09:39,679 --> 00:09:42,040 Speaker 7: had in the economy before. Right, we have a shrinking 195 00:09:42,440 --> 00:09:45,679 Speaker 7: prime age labor force as a percentage of the overall population. 196 00:09:46,160 --> 00:09:49,719 Speaker 7: We're ten plus years into baby boomers retiring at a 197 00:09:49,800 --> 00:09:52,120 Speaker 7: rate of about ten thousand people per day. We still 198 00:09:52,200 --> 00:09:55,680 Speaker 7: have about six more years of that to go. So there, 199 00:09:55,960 --> 00:09:58,720 Speaker 7: you know, the labor market shortage. The scarcity became extremely 200 00:09:58,760 --> 00:10:01,960 Speaker 7: acute after the pendemic was over. But that's not a 201 00:10:02,040 --> 00:10:04,760 Speaker 7: temporary factor. That's actually a secular trend that's going to 202 00:10:04,760 --> 00:10:05,439 Speaker 7: continue for years. 203 00:10:05,600 --> 00:10:06,960 Speaker 5: Malk Is it different this time? 204 00:10:08,360 --> 00:10:11,400 Speaker 6: I think what's important is really kind of considering the 205 00:10:11,440 --> 00:10:13,960 Speaker 6: supply side of the economy as well along with the 206 00:10:14,000 --> 00:10:16,680 Speaker 6: growth side. Like everyone is very focused on growth for 207 00:10:16,720 --> 00:10:18,520 Speaker 6: the FED, but it's like we kind of drop the 208 00:10:18,520 --> 00:10:20,480 Speaker 6: ball that inflation is still kind of the key metric 209 00:10:20,600 --> 00:10:22,360 Speaker 6: and it's like what we do is we run strategies 210 00:10:22,400 --> 00:10:24,280 Speaker 6: and we're trying to figure out what teams are driving 211 00:10:24,280 --> 00:10:27,280 Speaker 6: the markets. Like everyone's talking about this, but this factor 212 00:10:27,320 --> 00:10:29,040 Speaker 6: is what makes money, and no one's talking about that 213 00:10:29,080 --> 00:10:31,800 Speaker 6: anymore because it's not as interesting. But a key thing 214 00:10:31,880 --> 00:10:33,920 Speaker 6: is is if you look at currencies, they are trading 215 00:10:33,960 --> 00:10:36,040 Speaker 6: more on inflation than growth. And if you run back 216 00:10:36,080 --> 00:10:39,839 Speaker 6: tests on data surprises, consensus revisions, data strength, those things 217 00:10:39,880 --> 00:10:42,680 Speaker 6: aren't working. So while it's interesting to kind of work 218 00:10:42,679 --> 00:10:44,760 Speaker 6: through the data and say this is important, this one's 219 00:10:44,840 --> 00:10:46,480 Speaker 6: driving the FED, at the end of the day, what's 220 00:10:46,480 --> 00:10:47,960 Speaker 6: going to drive the FED in the next three months 221 00:10:48,000 --> 00:10:51,240 Speaker 6: to September is inflation. So if inflation's hot next week, 222 00:10:51,320 --> 00:10:52,760 Speaker 6: or if it's hot in the next month, or if 223 00:10:52,760 --> 00:10:56,200 Speaker 6: it's one hot inflation report could kill the entire narrative 224 00:10:56,200 --> 00:10:58,080 Speaker 6: that they will cut this year. So I think that's 225 00:10:58,120 --> 00:11:00,120 Speaker 6: one of the important things to think about is what 226 00:11:00,200 --> 00:11:02,199 Speaker 6: we tend to do from a market strategy point is 227 00:11:02,280 --> 00:11:05,120 Speaker 6: kind of aggregate all the data, scale it compared to 228 00:11:05,120 --> 00:11:07,480 Speaker 6: different countries and which country looks better. Right now, it's 229 00:11:07,480 --> 00:11:10,280 Speaker 6: still very clear that US is slowing, but it's slowing 230 00:11:10,280 --> 00:11:12,640 Speaker 6: from a very hot level, but it's still good and 231 00:11:12,679 --> 00:11:14,440 Speaker 6: it's still better than most of the rest of the world. 232 00:11:14,440 --> 00:11:17,600 Speaker 6: So I still think that's a key consideration that while 233 00:11:18,440 --> 00:11:20,319 Speaker 6: we could move into this inflection point where we go 234 00:11:20,400 --> 00:11:22,920 Speaker 6: from linear to nonlinear, and that's kind of how complex 235 00:11:22,920 --> 00:11:25,600 Speaker 6: systems work, but if it is a linear slow down, 236 00:11:25,640 --> 00:11:27,959 Speaker 6: you're just moving in a direction that markets are already 237 00:11:27,960 --> 00:11:29,920 Speaker 6: prepared for an absolutely price for this year. 238 00:11:30,040 --> 00:11:32,120 Speaker 1: So you don't think that there's a point at which 239 00:11:32,360 --> 00:11:35,079 Speaker 1: the labor market becomes a check on the ultimate read 240 00:11:35,160 --> 00:11:36,800 Speaker 1: that you say is inflation. 241 00:11:37,320 --> 00:11:39,839 Speaker 6: If it's non linear, Yes, But I think the thing 242 00:11:39,960 --> 00:11:42,360 Speaker 6: on the inflation side, as the drivers are coming from 243 00:11:42,360 --> 00:11:47,600 Speaker 6: the supply side, demographics, geopolitics, the changing nature of technology, 244 00:11:47,880 --> 00:11:50,240 Speaker 6: the pricing around those technologies. I think when you think 245 00:11:50,280 --> 00:11:52,040 Speaker 6: about war and some of the things that we've had 246 00:11:52,080 --> 00:11:54,440 Speaker 6: on the energy side, all the things that are happening 247 00:11:54,440 --> 00:11:57,600 Speaker 6: on the supply side have been accelerating through the pandemic. 248 00:11:57,640 --> 00:12:00,240 Speaker 6: But these are things that start in twenty ten. You know, 249 00:12:00,240 --> 00:12:01,520 Speaker 6: if we kind of look at all the you know, 250 00:12:01,559 --> 00:12:04,280 Speaker 6: if we look at like what is happening with globalization 251 00:12:04,360 --> 00:12:06,720 Speaker 6: and what is happening and how that impacts national sovereignty, 252 00:12:06,720 --> 00:12:09,040 Speaker 6: and politics, those things are all moving in a direction. 253 00:12:09,120 --> 00:12:12,560 Speaker 6: Even think about immigration trends. All these things are potential 254 00:12:12,640 --> 00:12:16,280 Speaker 6: drags on the supply side that makes inflation stickier over time, 255 00:12:16,320 --> 00:12:18,440 Speaker 6: which has nothing to do with demand or growth. So 256 00:12:18,480 --> 00:12:20,920 Speaker 6: I think those are things that are happening behind the background. 257 00:12:21,000 --> 00:12:22,600 Speaker 6: The FED has no control over that they have to 258 00:12:22,600 --> 00:12:24,719 Speaker 6: be cognitive of. And also in the next couple of months, 259 00:12:24,720 --> 00:12:26,800 Speaker 6: we're going to see base effects also just push inflation 260 00:12:26,880 --> 00:12:29,160 Speaker 6: higher just naturally from you know, the math of things 261 00:12:29,160 --> 00:12:32,120 Speaker 6: moving around. So those are considerations. I know the market 262 00:12:32,240 --> 00:12:34,600 Speaker 6: is really focused on the growth story, but we're still 263 00:12:34,720 --> 00:12:37,400 Speaker 6: like really focused on the inflation side for the dollar, 264 00:12:37,520 --> 00:12:38,880 Speaker 6: for the market, and for the Fed. 265 00:12:39,120 --> 00:12:41,080 Speaker 5: Tom, Do you agree, yeah, more or less. 266 00:12:41,120 --> 00:12:42,640 Speaker 7: I mean, you know, I think that our views on 267 00:12:42,640 --> 00:12:43,960 Speaker 7: the supply side are very similar. 268 00:12:44,040 --> 00:12:44,240 Speaker 1: You know. 269 00:12:44,760 --> 00:12:47,360 Speaker 7: I've kind of been trying to you know and again 270 00:12:47,440 --> 00:12:49,920 Speaker 7: sort of assessing new normal, like looking at what consumption 271 00:12:50,000 --> 00:12:52,680 Speaker 7: patterns are looking at like and kind of understanding this 272 00:12:52,840 --> 00:12:55,640 Speaker 7: dichotomy of you know, has versus have nuts in the economy. 273 00:12:56,040 --> 00:12:58,120 Speaker 7: You know, I think that there's probably some dynamic where 274 00:12:58,160 --> 00:13:01,480 Speaker 7: you know, we focus all this consumption pattern recognition on 275 00:13:02,320 --> 00:13:05,720 Speaker 7: you know, people traveling entertainment, all these things that are 276 00:13:05,760 --> 00:13:08,400 Speaker 7: really you know, services that are enjoyed by hire income households. 277 00:13:08,480 --> 00:13:08,640 Speaker 4: Right. 278 00:13:09,520 --> 00:13:10,920 Speaker 7: A lot of that happens in the second half of 279 00:13:10,920 --> 00:13:13,400 Speaker 7: the year, right, So like while we've seen growth slow down, 280 00:13:14,040 --> 00:13:16,880 Speaker 7: we could just have all of that activity kind of 281 00:13:16,920 --> 00:13:18,839 Speaker 7: concentrate in the second half, and then we'll see the 282 00:13:18,920 --> 00:13:22,400 Speaker 7: kind of logjam of supply not really being able to 283 00:13:22,440 --> 00:13:24,760 Speaker 7: meet demand in certain sectors. 284 00:13:24,800 --> 00:13:24,920 Speaker 2: Right. 285 00:13:24,960 --> 00:13:27,079 Speaker 7: I think that in the service sector that's going to 286 00:13:27,160 --> 00:13:29,880 Speaker 7: be something that we see consistently over time again for 287 00:13:30,240 --> 00:13:33,240 Speaker 7: many many years. Certainly you see it in the housing sector. 288 00:13:33,280 --> 00:13:35,920 Speaker 7: I mean, like that's probably the best example. I think 289 00:13:35,960 --> 00:13:38,160 Speaker 7: that a lot of folks who've been more sanguine on 290 00:13:38,160 --> 00:13:39,920 Speaker 7: inflation have been expecting that we're going to get some 291 00:13:40,000 --> 00:13:43,880 Speaker 7: delivered disinflation from rent and the or and whatnot. We 292 00:13:43,920 --> 00:13:45,520 Speaker 7: may get that for a short period of time, but 293 00:13:45,559 --> 00:13:47,640 Speaker 7: at the end of the day, we're still very undersupplied 294 00:13:47,679 --> 00:13:50,960 Speaker 7: with shelter, and I don't think that we're you know, 295 00:13:51,040 --> 00:13:53,839 Speaker 7: you can consistently expect that that's going to be something 296 00:13:53,880 --> 00:13:55,320 Speaker 7: that's relatively soft over time. 297 00:13:55,559 --> 00:13:58,480 Speaker 2: Less complicate things, and I mean really complicate things. The 298 00:13:58,520 --> 00:14:02,000 Speaker 2: Anhansis of Goldman with this to say in Centro Portugal. 299 00:14:02,080 --> 00:14:05,160 Speaker 2: I imagine this will get picked up everywhere on Wall 300 00:14:05,200 --> 00:14:07,080 Speaker 2: Street and political circles. 301 00:14:06,840 --> 00:14:09,280 Speaker 5: Maybe much more so. This is what he had to say. 302 00:14:09,360 --> 00:14:12,800 Speaker 2: The Trump proposals coming from the Donald Trump campaign could 303 00:14:12,880 --> 00:14:16,000 Speaker 2: raise the average US tariff rate by sixteen percentage points 304 00:14:16,040 --> 00:14:19,080 Speaker 2: to nearly twenty percent, which would be the highest in 305 00:14:19,120 --> 00:14:21,760 Speaker 2: the post war period. So that's sort of what their 306 00:14:21,800 --> 00:14:23,920 Speaker 2: base case is, and this is what they think the 307 00:14:23,920 --> 00:14:27,920 Speaker 2: implications are for monetary policy hawkish to the tune of 308 00:14:27,920 --> 00:14:31,040 Speaker 2: one hundred and thirty basis points, because the large hawkish 309 00:14:31,040 --> 00:14:34,720 Speaker 2: inflation effect clearly outweighs the smaller dubbish growth effect. At Goldman, 310 00:14:35,000 --> 00:14:37,680 Speaker 2: jan Hatzius is sort of modeling out the potential for 311 00:14:37,760 --> 00:14:40,560 Speaker 2: something like five hikes from the FED based on policy 312 00:14:41,000 --> 00:14:41,840 Speaker 2: from the Trump admin. 313 00:14:42,000 --> 00:14:42,960 Speaker 5: What's your reaction to that? 314 00:14:43,600 --> 00:14:45,920 Speaker 7: So my view has been that if the Fed were 315 00:14:46,000 --> 00:14:47,840 Speaker 7: to have to hike again, they would have to hike 316 00:14:47,960 --> 00:14:49,920 Speaker 7: something like five or six more times. Like one more 317 00:14:49,960 --> 00:14:52,480 Speaker 7: hike wouldn't really do too much, right, If we're pricing 318 00:14:52,560 --> 00:14:55,160 Speaker 7: in one hike, we should price in substantially more. I 319 00:14:55,200 --> 00:14:58,040 Speaker 7: don't necessarily share the view that tariffs should be you know, 320 00:14:58,080 --> 00:15:01,120 Speaker 7: should generate that sort of reaction. Remember even in twenty sixteen, 321 00:15:01,160 --> 00:15:04,440 Speaker 7: twenty seventeen, when Trump was initially putting on his big 322 00:15:04,480 --> 00:15:07,560 Speaker 7: tariffs against China, you know, Yellen's reaction was like, hey, look, 323 00:15:08,040 --> 00:15:10,800 Speaker 7: tariffs increase of price level once, but they don't create 324 00:15:10,840 --> 00:15:13,560 Speaker 7: like an upward slope of prices, right, so it may 325 00:15:13,560 --> 00:15:17,920 Speaker 7: be needed to kind of, you know, maybe offset one 326 00:15:18,360 --> 00:15:22,720 Speaker 7: vector of inflation. But I would be a I would 327 00:15:22,720 --> 00:15:25,760 Speaker 7: be very surprised that Trump actually did imply it, you know, 328 00:15:26,200 --> 00:15:29,720 Speaker 7: put in policy a tariff that was that high. And 329 00:15:29,760 --> 00:15:33,360 Speaker 7: I would be equally surprised if a chair Pale would 330 00:15:33,400 --> 00:15:34,080 Speaker 7: react that way. 331 00:15:34,320 --> 00:15:36,560 Speaker 2: Well, there's a lot of scenario analysis taking place right now, 332 00:15:36,600 --> 00:15:38,480 Speaker 2: Mark work with us. Let's cite that is the assumption, 333 00:15:38,840 --> 00:15:40,640 Speaker 2: and let's cite those policies that delivered. 334 00:15:40,800 --> 00:15:42,040 Speaker 5: Do you think that would be the reaction. 335 00:15:43,280 --> 00:15:46,600 Speaker 6: Well, yeah, that's a very spicy proposal. I think part 336 00:15:46,600 --> 00:15:48,720 Speaker 6: of it is that it's again two sided, like you 337 00:15:48,760 --> 00:15:51,280 Speaker 6: have lots of inflation and the other thing is is 338 00:15:51,320 --> 00:15:54,360 Speaker 6: you are taking away growth. So we are in goldilocks 339 00:15:54,440 --> 00:15:57,040 Speaker 6: right now. Our macro vall models are basically at the 340 00:15:57,080 --> 00:16:00,320 Speaker 6: lowest levels we've seen through the cycle. Carry trade kind 341 00:16:00,320 --> 00:16:03,240 Speaker 6: of incrementally blowing up here or there. But Carrie does 342 00:16:03,280 --> 00:16:04,200 Speaker 6: struggle when you start. 343 00:16:04,080 --> 00:16:04,960 Speaker 5: To see volatility. 344 00:16:05,280 --> 00:16:07,320 Speaker 6: But a big piece of that is if you have 345 00:16:07,640 --> 00:16:11,480 Speaker 6: like essentially growth being taken away from China and Europe 346 00:16:11,560 --> 00:16:13,440 Speaker 6: and even parts of the US, and then you have 347 00:16:13,560 --> 00:16:15,720 Speaker 6: higher inflation, you have the Fed responding to that. The 348 00:16:15,760 --> 00:16:19,000 Speaker 6: initial move is a much stronger dollar. It is a 349 00:16:19,080 --> 00:16:22,160 Speaker 6: complete decimation of goldilocks and a move into a higher 350 00:16:22,240 --> 00:16:24,880 Speaker 6: all environment. So I think the markets are not prepared 351 00:16:24,880 --> 00:16:26,640 Speaker 6: for this at all. And I think that's again you 352 00:16:26,720 --> 00:16:28,640 Speaker 6: come back to like what happened in the debate, and 353 00:16:28,640 --> 00:16:30,040 Speaker 6: then you kind of look at we had the French 354 00:16:30,040 --> 00:16:32,280 Speaker 6: elections over the weekend, which are important, but as soon 355 00:16:32,320 --> 00:16:34,200 Speaker 6: as we got the Supreme Court ruling kind of coming 356 00:16:34,200 --> 00:16:37,080 Speaker 6: out on Bloomberg dollar rallies. So we are like right 357 00:16:37,120 --> 00:16:40,080 Speaker 6: back into the kind of silly season here where every 358 00:16:40,080 --> 00:16:43,920 Speaker 6: headline related to a poll or who's happening? Is Trump leading? 359 00:16:43,960 --> 00:16:45,880 Speaker 6: All these things are going to drive markets now at least, 360 00:16:46,040 --> 00:16:48,640 Speaker 6: if not through the summer September, it's on. So if 361 00:16:48,640 --> 00:16:52,120 Speaker 6: we move into that direction, just the thought or the 362 00:16:52,200 --> 00:16:55,520 Speaker 6: uncertainty of the Fed having to reverse course and actually 363 00:16:55,520 --> 00:16:59,000 Speaker 6: start hiking again will be very bad for risk markets 364 00:16:59,240 --> 00:16:59,640 Speaker 6: either way. 365 00:16:59,720 --> 00:17:01,920 Speaker 1: Tom, And this is something that we keep talking about. 366 00:17:02,560 --> 00:17:04,960 Speaker 1: What does this mean in terms of what the neutral 367 00:17:05,040 --> 00:17:08,159 Speaker 1: rate could potentially be, not just rate hikes, but just 368 00:17:08,240 --> 00:17:10,879 Speaker 1: how far the FED can cut We were talking to Sneldasa, 369 00:17:11,119 --> 00:17:13,119 Speaker 1: She's talking about four to four and a quarter percent. 370 00:17:13,359 --> 00:17:15,040 Speaker 1: So even as we talk about the idea of a 371 00:17:15,080 --> 00:17:18,520 Speaker 1: label market that's normalizing, there is a floor to how 372 00:17:18,560 --> 00:17:19,280 Speaker 1: far they can go. 373 00:17:19,400 --> 00:17:20,159 Speaker 5: Do you agree with that? 374 00:17:20,280 --> 00:17:20,520 Speaker 6: I do. 375 00:17:20,600 --> 00:17:22,560 Speaker 7: Actually, it's more or less right around where I think 376 00:17:22,600 --> 00:17:24,639 Speaker 7: the terminal rate is going to end up, probably sometime 377 00:17:24,720 --> 00:17:27,359 Speaker 7: towards the end of twenty twenty six. I think that 378 00:17:27,480 --> 00:17:29,239 Speaker 7: it's it's something that FED really needs to be very 379 00:17:29,280 --> 00:17:32,479 Speaker 7: careful about. You know, we see more research coming out, 380 00:17:32,520 --> 00:17:34,320 Speaker 7: for instance from John Williams at the New York FED 381 00:17:34,359 --> 00:17:36,359 Speaker 7: just put out another paper this morning saying that, you know, 382 00:17:36,400 --> 00:17:38,800 Speaker 7: he still doesn't think that our star has moved very much, 383 00:17:39,520 --> 00:17:41,040 Speaker 7: you know, I mean, I have to give some difference 384 00:17:41,040 --> 00:17:42,879 Speaker 7: to him. He's spent probably more time than I've been 385 00:17:42,920 --> 00:17:45,520 Speaker 7: alive studying this, so I can't really, you know, say 386 00:17:45,560 --> 00:17:47,040 Speaker 7: that I know more than him. 387 00:17:46,880 --> 00:17:47,919 Speaker 5: But I. 388 00:17:49,720 --> 00:17:54,840 Speaker 7: Well, I d age myself like I like focus on 389 00:17:54,880 --> 00:17:59,360 Speaker 7: me a little bit more so the so fun Yeah, yeah, 390 00:17:59,600 --> 00:18:03,040 Speaker 7: I don't. I think that it's that easy to dismiss 391 00:18:03,080 --> 00:18:06,119 Speaker 7: that we're in the old normal that you know, our 392 00:18:06,160 --> 00:18:08,040 Speaker 7: star is still around two and a half percent. You know, 393 00:18:08,040 --> 00:18:10,080 Speaker 7: it wasn't that long ago that the Fed still thought 394 00:18:10,080 --> 00:18:12,760 Speaker 7: it was, you know, quite a bit higher. So I 395 00:18:12,800 --> 00:18:15,160 Speaker 7: think that if we do get, for instance, another wave 396 00:18:15,200 --> 00:18:17,680 Speaker 7: of terariffs, it really lowers potential growth, and then I 397 00:18:17,680 --> 00:18:20,960 Speaker 7: would be willing to entertain the fact that perhaps we 398 00:18:21,119 --> 00:18:25,000 Speaker 7: are moving to a lower rate environment overall, because it's 399 00:18:25,280 --> 00:18:28,040 Speaker 7: functionally like a tax, right, Like as much as it's 400 00:18:28,040 --> 00:18:31,800 Speaker 7: oh it's you know, tariffs are on the exporting countries. 401 00:18:32,240 --> 00:18:34,000 Speaker 7: At the end of the day, it's paid by the consumer, 402 00:18:34,119 --> 00:18:35,840 Speaker 7: and it's just a dead weight loss for them, right 403 00:18:35,960 --> 00:18:38,520 Speaker 7: so they'll have to take that consumption out of something else. 404 00:18:38,560 --> 00:18:40,840 Speaker 7: That just lowers the sort of dynamism of the economy, 405 00:18:40,840 --> 00:18:43,720 Speaker 7: and I would think probably lowers the potential interest rates. 406 00:18:43,880 --> 00:18:46,960 Speaker 1: Mark Given all of this, why would anyone short the dollar? 407 00:18:47,040 --> 00:18:49,919 Speaker 1: Why wouldn't everybody be as long as the dollars they 408 00:18:49,960 --> 00:18:50,480 Speaker 1: possibly could? 409 00:18:50,520 --> 00:18:51,640 Speaker 5: Right now, that's my view. 410 00:18:52,119 --> 00:18:55,199 Speaker 6: I would agree. It's you have like just on the 411 00:18:55,200 --> 00:18:58,199 Speaker 6: factors that we run. The dollar is ranked number one 412 00:18:58,240 --> 00:19:01,600 Speaker 6: in our trading baskets on growth, on risk, correlations on 413 00:19:01,680 --> 00:19:05,399 Speaker 6: inflation and carry, and so in this environment, like the 414 00:19:05,400 --> 00:19:07,399 Speaker 6: one thing, if you look at correlations of the dollar 415 00:19:07,480 --> 00:19:11,840 Speaker 6: to like risk models pre COVID, it wobbled, sometimes it 416 00:19:11,880 --> 00:19:13,920 Speaker 6: was cyclical, sometimes it was a safe haven kind of 417 00:19:13,920 --> 00:19:16,880 Speaker 6: moved around. Since the pandemic, that correlation has not gone 418 00:19:16,920 --> 00:19:19,120 Speaker 6: below zero. So essentially, when we're risk off, the dollar 419 00:19:19,200 --> 00:19:21,320 Speaker 6: is the only safe haven. The end is no longer 420 00:19:21,400 --> 00:19:24,000 Speaker 6: safe haven, Swiss ranks no longer safe haven. They are 421 00:19:24,000 --> 00:19:27,320 Speaker 6: cyclical currencies. So I think in this environment, especially if 422 00:19:27,359 --> 00:19:29,560 Speaker 6: we are focused on inflation or if we are focused 423 00:19:29,560 --> 00:19:32,040 Speaker 6: on growth, the fact the other interesting thing is the 424 00:19:32,080 --> 00:19:35,080 Speaker 6: only other places that offered yield are the places where 425 00:19:35,119 --> 00:19:38,359 Speaker 6: everyone's been positioned in FX for two years. So you 426 00:19:38,400 --> 00:19:40,840 Speaker 6: bought the commodity terms of trade story, you bought the 427 00:19:40,960 --> 00:19:43,760 Speaker 6: emerging markets that were the sellers of those, they were 428 00:19:43,800 --> 00:19:46,480 Speaker 6: also the ones that offered the carry. But Latin America 429 00:19:46,560 --> 00:19:49,199 Speaker 6: is no longer kind of immune from all of this, 430 00:19:49,600 --> 00:19:51,359 Speaker 6: so I would say, yeah. The other thing is is 431 00:19:51,359 --> 00:19:54,720 Speaker 6: the dollar represents at least sixty two percent more yield 432 00:19:54,760 --> 00:19:57,399 Speaker 6: pickup than all the currencies that we track. So to me, 433 00:19:57,520 --> 00:19:59,639 Speaker 6: this is a I wouldn't say a no brainer, because 434 00:19:59,680 --> 00:20:01,720 Speaker 6: that's you know, kind of that's the last thing you 435 00:20:01,720 --> 00:20:04,399 Speaker 6: should say. But I don't see the upside for the 436 00:20:04,400 --> 00:20:07,080 Speaker 6: euro or G ten currencies in the second half of 437 00:20:07,119 --> 00:20:09,240 Speaker 6: the year. But I feel like this is broad dollar. 438 00:20:09,359 --> 00:20:11,720 Speaker 6: It's not our v markets anymore. You should just be 439 00:20:11,760 --> 00:20:13,320 Speaker 6: long with the dollar into the second half of the year. 440 00:20:13,359 --> 00:20:15,720 Speaker 2: Mar Ma Kilmacatini, Mark, good to see you, a longside 441 00:20:15,840 --> 00:20:29,680 Speaker 2: Thomas Simon's of Jeffreesy major Biden donor Charles Myers of 442 00:20:29,800 --> 00:20:33,320 Speaker 2: Signum Global Advisors writing this, I'm all in on Biden. 443 00:20:33,480 --> 00:20:36,000 Speaker 2: His performance in the debate was weak, but his performance 444 00:20:36,000 --> 00:20:37,800 Speaker 2: as president for three and a half years has been 445 00:20:37,960 --> 00:20:40,200 Speaker 2: very strong. Charles and police to say, judge, just now 446 00:20:40,200 --> 00:20:42,160 Speaker 2: for more. Child's great to catch up with you, sir. 447 00:20:42,400 --> 00:20:45,760 Speaker 2: As you know, for many people after Thursday night, it's 448 00:20:45,800 --> 00:20:47,800 Speaker 2: not about the last three and a half years, it's 449 00:20:47,800 --> 00:20:49,960 Speaker 2: about the next four and a half years. 450 00:20:50,080 --> 00:20:51,760 Speaker 5: And let's run with the Pelosi question. 451 00:20:52,280 --> 00:20:54,280 Speaker 2: How do we know that was just a bad episode 452 00:20:54,720 --> 00:20:55,760 Speaker 2: and not just a condition. 453 00:20:57,440 --> 00:21:00,199 Speaker 3: Yeah, Look, I think the president and his team have 454 00:21:00,240 --> 00:21:02,200 Speaker 3: a lot of work to do to get him out there, 455 00:21:02,240 --> 00:21:05,600 Speaker 3: to show the American people that he is fit, that 456 00:21:05,680 --> 00:21:07,840 Speaker 3: he is alert, and that he can not only run 457 00:21:07,880 --> 00:21:09,639 Speaker 3: the rest of this campaign, but that he can govern 458 00:21:09,680 --> 00:21:12,160 Speaker 3: the country for another four years. So you know, again, 459 00:21:12,240 --> 00:21:13,520 Speaker 3: I think that they do have work to do. I 460 00:21:13,560 --> 00:21:16,880 Speaker 3: think what Nancy said is absolutely accurate, and the things 461 00:21:16,880 --> 00:21:18,960 Speaker 3: are moving a little faster than I expected. I thought 462 00:21:19,000 --> 00:21:21,000 Speaker 3: they'd have at least truth we were telling our clients 463 00:21:21,040 --> 00:21:24,240 Speaker 3: that have two or three weeks of polling before they 464 00:21:24,240 --> 00:21:26,040 Speaker 3: would have to make a decision. I thought, this is 465 00:21:26,080 --> 00:21:29,400 Speaker 3: a personal opinion. I think they've got probably another five 466 00:21:29,440 --> 00:21:31,720 Speaker 3: to six days. I think that things are moving much 467 00:21:31,720 --> 00:21:35,720 Speaker 3: faster against the president and we'll see. But they are 468 00:21:35,720 --> 00:21:37,720 Speaker 3: getting him out this weekend into the swing States, and 469 00:21:37,760 --> 00:21:41,800 Speaker 3: we'll see how he does. On the ABC interview with Stepanopolis. 470 00:21:40,920 --> 00:21:43,280 Speaker 2: What do you think Chelsea needs to accomplish in those 471 00:21:43,320 --> 00:21:44,800 Speaker 2: five days? What does he need to do? 472 00:21:46,240 --> 00:21:50,040 Speaker 3: I think he needs to be unscripted and show people 473 00:21:50,400 --> 00:21:54,960 Speaker 3: that he is fully there and can make decisions interact 474 00:21:55,040 --> 00:21:56,960 Speaker 3: with people. I was with him on Friday night in 475 00:21:57,000 --> 00:21:59,480 Speaker 3: New York one on one at a big event, but 476 00:21:59,520 --> 00:22:02,320 Speaker 3: then had about a three, three or four minute interaction 477 00:22:02,359 --> 00:22:04,840 Speaker 3: with him one on one, he was very together, very alert, 478 00:22:05,880 --> 00:22:07,600 Speaker 3: you know. So he needs to show that to the 479 00:22:07,600 --> 00:22:10,960 Speaker 3: American people instead of this perception that has been lingering 480 00:22:11,080 --> 00:22:14,159 Speaker 3: of him host debate of someone that is, you know, 481 00:22:14,640 --> 00:22:16,040 Speaker 3: really out of it Charles. 482 00:22:16,040 --> 00:22:18,960 Speaker 1: Isn't the damage done given the fact that people are 483 00:22:19,000 --> 00:22:22,240 Speaker 1: really questioning whether they're being told the truth, especially from 484 00:22:22,280 --> 00:22:24,840 Speaker 1: some of his advisors. And you have a number of 485 00:22:25,119 --> 00:22:29,080 Speaker 1: Democratic Congressmen, including one from Texas, now verbally saying that 486 00:22:29,119 --> 00:22:32,160 Speaker 1: they hope he steps down. Does that mean that there 487 00:22:32,200 --> 00:22:36,040 Speaker 1: already has been too much to shake his re election chances. 488 00:22:37,200 --> 00:22:37,360 Speaker 5: Yeah. 489 00:22:37,400 --> 00:22:39,480 Speaker 3: So I'd say a couple of things. One, the campaign 490 00:22:39,480 --> 00:22:42,359 Speaker 3: expected polling, you know, to take a hit, and you 491 00:22:42,400 --> 00:22:45,080 Speaker 3: know the puck stuff that was leaked. We you know, 492 00:22:45,119 --> 00:22:47,440 Speaker 3: it was pretty damaging. But again, I think you need 493 00:22:47,480 --> 00:22:49,720 Speaker 3: to see more than just one poll. You need to 494 00:22:49,720 --> 00:22:51,440 Speaker 3: see a set of polls over a week or so 495 00:22:52,280 --> 00:22:53,960 Speaker 3: and see if they can turn it around. But yes, 496 00:22:54,000 --> 00:22:56,080 Speaker 3: I think a lot of damage was done. I'm fully 497 00:22:56,080 --> 00:22:58,640 Speaker 3: on board with that, I understand it. So far, only 498 00:22:58,640 --> 00:23:01,560 Speaker 3: one member of Congress, sitting member of Congress, has called 499 00:23:01,560 --> 00:23:03,359 Speaker 3: for him to step down. I do think that could 500 00:23:03,400 --> 00:23:05,879 Speaker 3: be the next shoe to fall, though, meaning I'm you know, 501 00:23:05,920 --> 00:23:10,040 Speaker 3: there's reporting this morning that there's potentially forty additional elected 502 00:23:10,040 --> 00:23:11,720 Speaker 3: Democrats that are going to come out and call for 503 00:23:11,800 --> 00:23:15,320 Speaker 3: him to step down. That is probably the most serious 504 00:23:15,359 --> 00:23:19,840 Speaker 3: issue that in addition to further deterioration in polling, because 505 00:23:20,119 --> 00:23:22,720 Speaker 3: once you've got you know, elected members of your own 506 00:23:22,760 --> 00:23:25,720 Speaker 3: party asking you to step aside, it's hard to recover 507 00:23:25,760 --> 00:23:26,000 Speaker 3: from that. 508 00:23:26,320 --> 00:23:29,040 Speaker 1: There's also a question of who potentially would take his place, 509 00:23:29,359 --> 00:23:31,199 Speaker 1: and this has been one of the arguments from some 510 00:23:31,240 --> 00:23:34,320 Speaker 1: people who are saying that, you know, he's the best shot, 511 00:23:34,720 --> 00:23:37,879 Speaker 1: sort of to your point, because the other potential candidates, 512 00:23:37,960 --> 00:23:41,440 Speaker 1: whether it's Kamala Harris, whether it's Gretchen Whitmore, whether it's 513 00:23:41,440 --> 00:23:44,760 Speaker 1: Gavin Newsom, kind of pulls similarly in a head to 514 00:23:44,840 --> 00:23:48,200 Speaker 1: head matchup with Donald Trump. Do you feel like there 515 00:23:48,240 --> 00:23:51,280 Speaker 1: is sufficient polling to really make that decision, given the 516 00:23:51,280 --> 00:23:53,720 Speaker 1: fact that some of it isn't that extensive. 517 00:23:54,920 --> 00:23:57,439 Speaker 3: Pulling to make a decision on who should replace him 518 00:23:57,560 --> 00:24:01,160 Speaker 3: or if anyone should replace him both, Okay, so yes, 519 00:24:01,480 --> 00:24:03,879 Speaker 3: so on on you know, Plan B. Plan B is 520 00:24:03,920 --> 00:24:06,520 Speaker 3: absolutely the vice president. I'm here to tell everybody that 521 00:24:06,600 --> 00:24:08,919 Speaker 3: and that she may not be the favorite of every donor, 522 00:24:08,960 --> 00:24:10,959 Speaker 3: you know most You know, a lot of donors come 523 00:24:10,960 --> 00:24:13,000 Speaker 3: from financial services, and we tend to be a center 524 00:24:13,080 --> 00:24:17,960 Speaker 3: right industry. But you know, any notion that the White House, 525 00:24:18,040 --> 00:24:22,359 Speaker 3: the DNC, or the Democratic Congressional leadership is just going 526 00:24:22,400 --> 00:24:25,640 Speaker 3: to overlook the vice president and go to some other 527 00:24:25,840 --> 00:24:29,440 Speaker 3: candidate or have an open, contested convention, I think is 528 00:24:29,480 --> 00:24:31,280 Speaker 3: a misread of the situation. The whole point of the 529 00:24:31,320 --> 00:24:35,720 Speaker 3: vice president is to step in in the case of death, incapacitation, resignation, 530 00:24:35,960 --> 00:24:39,240 Speaker 3: or in this case, the president stepping aside, And I 531 00:24:39,280 --> 00:24:40,720 Speaker 3: can tell you they're going to try to do everything 532 00:24:40,760 --> 00:24:43,720 Speaker 3: they can to avoid a contested convention. Given what happened 533 00:24:43,760 --> 00:24:48,000 Speaker 3: in nineteen sixty eight, lbj's VP did ultimately win that nomination. 534 00:24:48,160 --> 00:24:50,399 Speaker 3: He was so weakened they lost the White House to 535 00:24:50,480 --> 00:24:53,240 Speaker 3: Richard Nixon. I think that if Biden steps aside, they 536 00:24:53,280 --> 00:24:55,800 Speaker 3: will try to engineer it so the Kamala the vice 537 00:24:55,800 --> 00:24:59,080 Speaker 3: president ultimately locks up the nomination. 538 00:24:59,240 --> 00:25:00,840 Speaker 2: At ChEls, I think it's worth pointing out to our 539 00:25:00,880 --> 00:25:03,760 Speaker 2: audience that you're wearing two hats in this conversation, as 540 00:25:03,760 --> 00:25:07,240 Speaker 2: both a donor and an individual running a global advisory firm, 541 00:25:07,280 --> 00:25:08,680 Speaker 2: And forgive me for saying this, and I hope you 542 00:25:08,760 --> 00:25:10,960 Speaker 2: take this to the spirit in which it's intended. When 543 00:25:11,000 --> 00:25:13,080 Speaker 2: you said you had a five minute exchange with him, 544 00:25:13,560 --> 00:25:15,919 Speaker 2: when it's behind closed doors and you tell people that 545 00:25:16,400 --> 00:25:19,080 Speaker 2: his sharp coj and these are things we've heard a 546 00:25:19,080 --> 00:25:20,800 Speaker 2: million times. And then we all see him in public 547 00:25:20,840 --> 00:25:23,160 Speaker 2: and not just Thursday night, for a length of time 548 00:25:23,240 --> 00:25:26,240 Speaker 2: now and we see something else. And I just wonder 549 00:25:26,240 --> 00:25:29,040 Speaker 2: how much tension there is between you as a donor 550 00:25:29,040 --> 00:25:31,280 Speaker 2: and the opinion you offer on a program like this 551 00:25:31,400 --> 00:25:33,480 Speaker 2: and the kind of advice that you've given too clients 552 00:25:33,560 --> 00:25:33,960 Speaker 2: right now. 553 00:25:35,040 --> 00:25:36,480 Speaker 3: Yeah, so I'm giving you the same advice. You know, 554 00:25:36,520 --> 00:25:38,800 Speaker 3: we've had a base case that Biden would win. We 555 00:25:38,840 --> 00:25:40,920 Speaker 3: haven't changed that yet because he's still in the race 556 00:25:41,000 --> 00:25:43,800 Speaker 3: and you know, Thursday was less than a week ago. 557 00:25:44,359 --> 00:25:46,000 Speaker 3: So you know, at the firm, we don't whip our 558 00:25:46,000 --> 00:25:47,560 Speaker 3: calls around. We want to, you know, try to look 559 00:25:47,560 --> 00:25:49,679 Speaker 3: at data and make a good assessment. The reason we 560 00:25:49,720 --> 00:25:51,560 Speaker 3: thought he would the reason we believe you would win 561 00:25:52,480 --> 00:25:54,480 Speaker 3: is he'd already beaten him once in twenty twenty. He's 562 00:25:54,480 --> 00:25:57,879 Speaker 3: got powered the incumbency, and we think as a firm, 563 00:25:57,960 --> 00:26:00,639 Speaker 3: we will see higher than average turnout by both women 564 00:26:01,240 --> 00:26:04,000 Speaker 3: and the Democratic based women because of abortion rights and 565 00:26:04,640 --> 00:26:07,200 Speaker 3: Democrats because Trump's on the ballot now. I think the 566 00:26:07,280 --> 00:26:11,159 Speaker 3: race has changed fundamentally since Thursday night. Absolutely, we want 567 00:26:11,200 --> 00:26:12,520 Speaker 3: to see if he's going to stay in the race 568 00:26:12,560 --> 00:26:15,960 Speaker 3: before we make any additional call from here. So I'm 569 00:26:16,000 --> 00:26:19,040 Speaker 3: sitting here both as a donor watching this very closely, 570 00:26:19,119 --> 00:26:21,160 Speaker 3: but also as the head of a firm that advises 571 00:26:21,200 --> 00:26:23,560 Speaker 3: clients on what to do. I think it's hard to 572 00:26:23,560 --> 00:26:25,119 Speaker 3: make a decision till we know to we have a 573 00:26:25,160 --> 00:26:27,680 Speaker 3: little more clarity on what the president intends to do. 574 00:26:27,960 --> 00:26:30,000 Speaker 3: And I think, as I said, we were telling clients 575 00:26:30,080 --> 00:26:32,240 Speaker 3: yesterday on a call that we thought there was three 576 00:26:32,240 --> 00:26:34,560 Speaker 3: weeks for the White House or for the Biden hairs campaign. 577 00:26:34,760 --> 00:26:36,440 Speaker 3: I think they got five or six days to make 578 00:26:36,440 --> 00:26:36,919 Speaker 3: a decision. 579 00:26:37,080 --> 00:26:38,919 Speaker 2: Let's lean on the last just a little bit. Your 580 00:26:38,960 --> 00:26:41,159 Speaker 2: position as an advisor, can we just lean on that 581 00:26:41,200 --> 00:26:43,240 Speaker 2: a little bit more. I want to understand from your perspective, 582 00:26:43,440 --> 00:26:47,280 Speaker 2: Traditionally the accumbent would have some advantages. I just wonder 583 00:26:47,280 --> 00:26:50,439 Speaker 2: if it's actually a disadvantage for Biden. If you think 584 00:26:50,480 --> 00:26:53,240 Speaker 2: about how twenty twenty played out. He got to make 585 00:26:53,240 --> 00:26:56,080 Speaker 2: this a referendum on the former president. This feels like 586 00:26:56,160 --> 00:26:59,439 Speaker 2: a referendum on him, and not what he's delivered in 587 00:26:59,480 --> 00:27:01,960 Speaker 2: three and a half years, but whether he can last 588 00:27:02,080 --> 00:27:05,680 Speaker 2: four whether he can actually keep this job for that long. 589 00:27:05,960 --> 00:27:07,040 Speaker 2: How do they change that? 590 00:27:08,080 --> 00:27:09,560 Speaker 3: Yeah, I think that's going to be the hardest part 591 00:27:09,600 --> 00:27:12,040 Speaker 3: of the narrative to change, because I think up until Thursday, 592 00:27:12,680 --> 00:27:16,159 Speaker 3: this in fact, had been still partly a referendum on 593 00:27:16,240 --> 00:27:19,720 Speaker 3: the former president, on Trump, you know, as opposed to 594 00:27:19,720 --> 00:27:22,560 Speaker 3: the sitting president. Now I think it's really a referendum 595 00:27:22,560 --> 00:27:25,840 Speaker 3: on can the sitting president not only you know, campaign 596 00:27:25,880 --> 00:27:28,200 Speaker 3: for the next four months, but Kenny serve for four 597 00:27:28,240 --> 00:27:30,960 Speaker 3: more years. And relatedly, you know what if people think 598 00:27:30,960 --> 00:27:33,800 Speaker 3: of the vice president. So again, I think in politics 599 00:27:33,840 --> 00:27:37,840 Speaker 3: everything is fair. The race changed fundamentally on Thursday night, 600 00:27:38,280 --> 00:27:40,919 Speaker 3: And you know, as I said, I think we're going 601 00:27:40,960 --> 00:27:43,159 Speaker 3: to find out in the next four to five days 602 00:27:43,920 --> 00:27:45,920 Speaker 3: whether the president is still in this race. I don't 603 00:27:45,960 --> 00:27:46,960 Speaker 3: think he's got three weeks. 604 00:27:47,119 --> 00:27:49,520 Speaker 1: The dam is breaking, as John said, when it looked 605 00:27:49,560 --> 00:27:52,399 Speaker 1: when it comes to different Democratic Congress members, when it 606 00:27:52,400 --> 00:27:54,440 Speaker 1: comes to advisors, when it comes to people who are 607 00:27:54,440 --> 00:27:58,119 Speaker 1: starting to leak their feelings to a number of different outlets. 608 00:27:58,440 --> 00:28:01,160 Speaker 1: Is the dam breaking within the inner circle of Joe 609 00:28:01,160 --> 00:28:03,880 Speaker 1: Biden that we keep hearing about that keep saying keep 610 00:28:03,920 --> 00:28:04,879 Speaker 1: going run. 611 00:28:06,400 --> 00:28:08,480 Speaker 3: So No, I'm not part of the inner circle, but 612 00:28:08,520 --> 00:28:11,639 Speaker 3: I would from everything I'm seeing and picking up, is that. No, 613 00:28:11,720 --> 00:28:14,280 Speaker 3: the inner circle, which is his family and his closest 614 00:28:14,280 --> 00:28:17,199 Speaker 3: advisors and the campaign team who've been with him a 615 00:28:17,280 --> 00:28:21,520 Speaker 3: very long time, still absolutely believe he should keep fighting. 616 00:28:21,880 --> 00:28:24,800 Speaker 3: You know, again, this is a man who's dedicated his 617 00:28:24,920 --> 00:28:27,000 Speaker 3: entire life to public service and reached the pinnacle of 618 00:28:27,040 --> 00:28:30,080 Speaker 3: world power. To drop out after a really bad debate 619 00:28:30,240 --> 00:28:33,440 Speaker 3: or a terrible stumble on the campaign trail, it would 620 00:28:33,480 --> 00:28:35,520 Speaker 3: be highly unlikely. By the way, I wouldn't advise any 621 00:28:35,520 --> 00:28:38,360 Speaker 3: politician to drop out after that. You know, there's always 622 00:28:38,360 --> 00:28:40,720 Speaker 3: a chance to turn things around in a campaign, and 623 00:28:41,000 --> 00:28:44,120 Speaker 3: they're trying very hard. It's just that, again, the pressure 624 00:28:44,160 --> 00:28:48,000 Speaker 3: is building faster on him to drop out of the race, 625 00:28:48,040 --> 00:28:50,120 Speaker 3: and I think that that's probably been a bit of 626 00:28:50,160 --> 00:28:53,320 Speaker 3: a surprise of the campaign, and I think we will 627 00:28:53,360 --> 00:28:56,560 Speaker 3: see more electeds coming out saying he needs to And 628 00:28:57,040 --> 00:28:59,600 Speaker 3: the biggest risk in a way is his liability down 629 00:28:59,640 --> 00:29:03,040 Speaker 3: ballot right with elected Democrats in vulnerable seats both in 630 00:29:03,080 --> 00:29:05,560 Speaker 3: the House and the Senate, in really tough races. That's 631 00:29:05,600 --> 00:29:08,240 Speaker 3: where we're hearing. And I'm hearing the most pressure and 632 00:29:08,920 --> 00:29:11,720 Speaker 3: much much more panic actually than amongst the donors. 633 00:29:11,800 --> 00:29:14,160 Speaker 2: I've got thirty seconds left on the clock, Childs, just 634 00:29:14,160 --> 00:29:16,640 Speaker 2: to fit this in. Do you think people are underestimating 635 00:29:16,680 --> 00:29:20,000 Speaker 2: Kamala Harris? It's almost becoming jesuit. Do you think she 636 00:29:20,000 --> 00:29:20,760 Speaker 2: can win them? 637 00:29:21,320 --> 00:29:24,840 Speaker 3: Oh? Absolutely, Look, you know, Kamala Harris has three advantages. One, 638 00:29:24,960 --> 00:29:28,120 Speaker 3: she'll be totally underestimated in politics. Having low expectations is 639 00:29:28,160 --> 00:29:30,120 Speaker 3: one of the greatest advantages you could have. Secondly, she 640 00:29:30,160 --> 00:29:32,960 Speaker 3: gets all the Biden Harris money, which is not able 641 00:29:33,000 --> 00:29:35,760 Speaker 3: to be transferred to any other candidate, so she gets 642 00:29:35,800 --> 00:29:38,440 Speaker 3: the war chest. She'll be very well funded. Third, look 643 00:29:38,440 --> 00:29:40,920 Speaker 3: at her approve we're writing with Democrats eighty four percent. 644 00:29:41,200 --> 00:29:43,880 Speaker 3: She's much more popular within the president with young voters, 645 00:29:43,960 --> 00:29:46,600 Speaker 3: She's very popular with black voters, and she'll help drive 646 00:29:46,640 --> 00:29:50,080 Speaker 3: women turn out. By women, I think people will totally 647 00:29:50,160 --> 00:29:52,360 Speaker 3: underestimate the Vice president. I put my money on her. 648 00:29:52,640 --> 00:29:54,920 Speaker 2: Let's do this against Sir Childs. Thank you, Sir Chiles. 649 00:29:54,960 --> 00:30:00,200 Speaker 2: Master Signum Global. This is the Bloomberg Sevenants podcast, bring 650 00:30:00,240 --> 00:30:03,800 Speaker 2: you the best in markets, economics, and geopolitics. You can 651 00:30:03,840 --> 00:30:06,600 Speaker 2: watch the show live on Bloomberg TV weekday mornings from 652 00:30:06,640 --> 00:30:09,880 Speaker 2: six am to nine am Eastern. Subscribe to the podcast 653 00:30:09,960 --> 00:30:13,480 Speaker 2: on Apple, Spotify, or anywhere else you listen, and as always, 654 00:30:13,480 --> 00:30:16,080 Speaker 2: on the Bloomberg Terminal and the Bloomberg Business app.