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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. So

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Speaker 1: it's Federal Reserve decision day without a news conference, which

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Speaker 1: typically means got to lunch and don't expect much. But

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Speaker 1: officials have a tricky problem to navigate at this week's meeting.

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Speaker 1: How to describe inflation that has just bounced back to

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Speaker 1: their elusive two percent target, which joined now by Alan Ruskin,

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Speaker 1: Deutsche Bank Global co head of G ten effect Strategy,

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Speaker 1: and I always great to catch up with you, sir,

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Speaker 1: So thank you for coming on the program. Oh my pleasure.

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Speaker 1: Help me understand how they're going to navigate that problem.

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Speaker 1: How do they describe inflate? Should now it's back target

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Speaker 1: pretty much? I think, you know, it's a relatively easy

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Speaker 1: job to describe the past as distinct from predict the future,

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Speaker 1: and in this instance, as you rightly point out, they're

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Speaker 1: really going to be focused on really describing the past

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Speaker 1: and this slow edging up an inflation towards two percent,

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Speaker 1: so they can effectively just say that close to close

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Speaker 1: to target as it were. Is this in line with

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Speaker 1: your expectations for how inflation is going to involve this year? Well,

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Speaker 1: I think there's some danger that, you know, not just

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Speaker 1: over this year, and one has to look a little

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Speaker 1: bit further than that. Over the next couple of years.

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Speaker 1: Inflation is just going to continue to drift higher. And

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Speaker 1: one of the more interesting aspects of inflation. You know,

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Speaker 1: we focus a lot on the cost side, but in general,

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Speaker 1: the demand side is slowly going to place upper pressure inflation.

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Speaker 1: So we see inflation indicators LAG G D p UM.

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Speaker 1: We see that effectively LAG is M. You know, these

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Speaker 1: coincident indicators by roughly about eighteen months to twenty four months,

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Speaker 1: so we've already got in the work really some acceleration

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Speaker 1: inflation that's going to occur. And do you see capacity

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Speaker 1: constraints in the in the data, the survey data that's

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Speaker 1: been out in the last twenty four hours allan, I'm

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Speaker 1: not too worried about domestic capacity. It used to be

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Speaker 1: back in the early nineties one of my favorite indicators

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Speaker 1: in terms of predicting inflation going forward that fell by

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Speaker 1: the waistide when I think global capacity really became the

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Speaker 1: big feature. Global capacities in something very hard to prove

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Speaker 1: econometrically as being a key driver of inflation. But believe me,

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Speaker 1: you know it's it's there in the background. And pal

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Speaker 1: has taken the same line on that. Give us the

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Speaker 1: Alan Ruskin on real rate versus capital flows amid rising inflation?

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Speaker 1: Do you just default the capital flows studies because you

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Speaker 1: really don't know where the real rates going to be? Well,

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Speaker 1: I think the inflation expectations and the knock on effect

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Speaker 1: in terms of real rates really matters in environments like

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Speaker 1: the e M countries where inflation might be real. It

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Speaker 1: turns out the pair and the study. So if you're

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Speaker 1: looking exactly at something like dollar Brazil, extremely relevant to

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Speaker 1: look at real real rates. If you're looking at countries

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Speaker 1: where you're comparing it's a country A with an inflation

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Speaker 1: rate of one percent and another country with a inflation

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Speaker 1: rate of caulled a one and a half or two percent,

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Speaker 1: kind of different exactly. I think those kind of differentials

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Speaker 1: don't really matter. And in the end, I think nominal

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Speaker 1: rates or what the investors will focus on. So from

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Speaker 1: a capital flow standpoint, I think we really kind of

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Speaker 1: keep keep to nominal rates in that in that set

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Speaker 1: of circumstances. So well, and big story in FX over

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Speaker 1: the last couple of weeks is this re certain U

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Speaker 1: S dollar. What's the view for you right now? Yeah,

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Speaker 1: I think there's a lot of momentum here. I think

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Speaker 1: the catalyst for it has really been the tenure he'll

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Speaker 1: sort of backing up above three percent. I think that's

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Speaker 1: that's been absolutely crucial. There'd been other background factors that

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Speaker 1: are been maybe helpful. The euro economy seemed to be

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Speaker 1: slowing down a little bit, maybe the I Passe, the

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Speaker 1: you know, the malay you see in terms of Italian politics,

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Speaker 1: maybe that's a fact to as well. But I think

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Speaker 1: at the end of the day, it's really helds catching

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Speaker 1: up now and us reaching what I think is a

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Speaker 1: little bit of a tipping point in terms of healeds

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Speaker 1: hitting levels where they're relevant again for the currency, where

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Speaker 1: great differential start to matter. What's the catalyst for that change? Yeah,

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Speaker 1: I think you know, to some extent it's uh, it's

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Speaker 1: just literally the pace of the change that matters. So

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Speaker 1: when you see accelerations in heels, particularly back end of

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Speaker 1: the curve that sets in train more of a sort

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Speaker 1: of risk off moving The dollar looks pretty good against

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Speaker 1: all the e M currencies, the commodity currency complex, but

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Speaker 1: you know, I think it's now reached the point where

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Speaker 1: it's not just the radar change. I think the level

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Speaker 1: actually matters as well. So there's three percent level on

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Speaker 1: the tenures big if you go through three oh five,

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Speaker 1: I think people see this as a shift in regime really,

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Speaker 1: and that opens the door tore on the tenure and

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Speaker 1: that I think would give the dollar another boost. And

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Speaker 1: I think a lot of people now starting to rethink

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Speaker 1: where they believed previously where the federal reserve rate would peak.

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Speaker 1: Do you think there's a little bit more uncertainty doubt

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Speaker 1: injected into that story. There was some comfort over the

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Speaker 1: last couple of years that that was one way, it

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Speaker 1: was just going to drift lower over time. Do you

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Speaker 1: have that same comfort now? No. I think that's been

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Speaker 1: an evolving story, And I think the Federal reserve is

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Speaker 1: also signaled the fact that the peak in the interest

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Speaker 1: rates is not ultimately where our star is where the

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Speaker 1: equilibrium rate will ultimately settle. There's actually a cycle in

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Speaker 1: the Fed funds rate, believe it or not. Now we

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Speaker 1: know that as as you know, more or less a

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Speaker 1: fact really in terms of what we've ever seen in

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Speaker 1: the past than in fact, the peak and the Fed

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Speaker 1: funds rate is way above the equilibrium rate. So there's

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Speaker 1: not going to be some sort of miracle sort of

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Speaker 1: landing on some small aircraft carrier where somehow rates you know,

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Speaker 1: sort of just gently land at the equilibrium rate joint

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Speaker 1: stay so that at some point rates that the Federal

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Speaker 1: Reserve become restrictive. Right now, real rates are incredibly accommodative

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Speaker 1: at the Federal Reserve. When did they become restrictive? Allen, Well,

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Speaker 1: the first port of call I would say is, you know,

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Speaker 1: really take real rates up to something like, uh, you know,

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Speaker 1: one percent. I mean the equilibrium the our star rate

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Speaker 1: made me slightly below that, maybe between point five and

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Speaker 1: one percent, but that means a nominal rate of it,

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Speaker 1: say at least two and a half to three percent,

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Speaker 1: and Fed funds. That's a starting point. But I think

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Speaker 1: you don't want to get too obsessed with the Fed

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Speaker 1: Funds rate. I think what happens at the back end

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Speaker 1: of the curve is absolutely crucial. This is the stuff

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Speaker 1: that you know drives a lot of credit, A certainly

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Speaker 1: drives mortgage credit. But the back end of the curve

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Speaker 1: is not a linear path. It's very quadratic, and you

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Speaker 1: get these tipping points, almost kinks in the movement where

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Speaker 1: you get jump conditions. Where do you is three and

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Speaker 1: a quarter percent tenure the first test of a jump condition? Well,

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Speaker 1: I think we've been jumping really, you know, pretty much

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Speaker 1: from two and a half to three, So maybe you've

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Speaker 1: already gone through what would amount to Yeah, thereafter you

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Speaker 1: presume it might get a little slower going really, so

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Speaker 1: you know, three oh five becomes three twenty five, five

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Speaker 1: becomes three fifty. I think, uh, you know, at this

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Speaker 1: point in time, those jumps are assumed to become smaller. Now,

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Speaker 1: if that's not the case, what's the history of that squeeze,

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Speaker 1: the change there from three and a quarter three, what's

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Speaker 1: the history? Do we end up with a lot of

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Speaker 1: market volt Well, if you're looking at market volatility, I

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Speaker 1: would say the best place to look at certainly bond volatility.

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Speaker 1: So I think that's really the epicenter of all vowel.

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Speaker 1: As such, Look, we are still likely to end up

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Speaker 1: with a tenure healed well below past cycle loads. Now,

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Speaker 1: if we saw a broader normalization, say, for example, tenure

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Speaker 1: healed up at five percent, Okay, that is certainly going

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Speaker 1: to breed an enormous amount of volatility. Three and a

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Speaker 1: quarter percent, three and a half percent we can just

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Speaker 1: about with. But I think we're seeing a little bit

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Speaker 1: in the emerging market countries and emerging flows that it's start.

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Speaker 1: You know, the u s heells, the actual level of

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Speaker 1: hills is now taking a bit of at all. Ellen Ruskin,

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Speaker 1: thank you so much. Don't you bank this morning? Why

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Speaker 1: don't you bring in um an important Apple guests and

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Speaker 1: the financials of a Yeah, the stock up in a

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Speaker 1: pre market by four point seven percent. You know how

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Speaker 1: this works. Time we go into the earnings, nervous, pessimistic

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Speaker 1: will be this be the quarter where Apple fails. And

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Speaker 1: let me tell you it was not service revenue searching,

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Speaker 1: a one hundred billion dollars stuck repurchased program and a

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Speaker 1: higher dividend also helping lift the sentiment as we come

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Speaker 1: out of results day for Apple joining us now is

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Speaker 1: Angelo Zeno cfire a analyst and he joins us on

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Speaker 1: the phone. Angelo, great to get your perspective. Give me

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Speaker 1: some perspective on that monster stock buy back program. Yeah,

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Speaker 1: I mean, if we're talking about the start stock by

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Speaker 1: back here, a hundred billion UM is an enormous number UM,

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Speaker 1: which an interesting is any given actual timetable of when

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Speaker 1: they plan on on you know, buying back the shares.

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Speaker 1: We actually believe they're going to be very aggressive with

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Speaker 1: this and potentially um look to reduce their share account

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Speaker 1: by as much as ten percent here over the next

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Speaker 1: year UM. Given um, you know, our belief that they

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Speaker 1: think that the shares are extremely attractive to currently. I mean, Angela,

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Speaker 1: when you just think about it, reducing the share a

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Speaker 1: count by ten percent is a phenomenal task. And the

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Speaker 1: view of Apple and management at the moment is we'd

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Speaker 1: prefer to do the buy backs then really boost the

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Speaker 1: dividend because we think the stock is undervalued. Angelo, in

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Speaker 1: your mind, to what extent is this stock still undervalued?

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Speaker 1: So um, you know it's interesting first with the buy backs.

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Speaker 1: I mean you look at how much they've brought back.

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Speaker 1: It's but they've got back about the shares um since

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Speaker 1: you know, you know, back in which is absolutely enormous UM.

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Speaker 1: You know, our belief is, you know, the twelve month

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Speaker 1: taget price on the shares um of represents um some

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Speaker 1: nice upside um and as a result, you know, we

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Speaker 1: do think this is a good time to be buying

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Speaker 1: back shares. Angelo, you know with us in Angelo, you

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Speaker 1: just gave the statistic I've been looking for all morning,

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Speaker 1: which is they brought back of their shares. Is you know,

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Speaker 1: good morning, William Priest over an epic. There's a thing

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Speaker 1: called shareholder yield, which can be defined different ways, but

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Speaker 1: basically it's the dividend and the share buy back percent

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Speaker 1: is a yield, isn't it double digit for Apple? Well

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Speaker 1: that's interesting. Um, you know they've brought back about three

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Speaker 1: dred billion or you know they've returned let's say about

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Speaker 1: um since so you know that being said, I mean yeah,

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Speaker 1: I mean at this point our view is that you

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Speaker 1: will see that double percentage yield here at least, I mean,

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Speaker 1: this is profound. You know, that's just double digit sheer

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Speaker 1: oalder yield means January one, you start the day in

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Speaker 1: a pretty good pole position. They are stunning numbers. And Angelo,

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Speaker 1: I think we go back to the basic question around Apple,

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Speaker 1: how do I value this company? What multiple should I

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Speaker 1: apply to it? Is it a value stock, is it

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Speaker 1: a growth stock? What is it? And what do you

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Speaker 1: tell clients when they ask you that, Angelo, Yeah, well

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Speaker 1: that's interesting, right, so you know, and that's I guess

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Speaker 1: the important question here with Apple. So when we look

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Speaker 1: at Apple historically, the way it's been valued, it has

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Speaker 1: been valued as a hardware company. When you look at

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Speaker 1: the multiple we've put on the company, essentially, is UM

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Speaker 1: one that we value as a hardware company, that being

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Speaker 1: just under fifteen times earnings UM based on our next

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Speaker 1: year's estimate. But that being said, UM, you know, the

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Speaker 1: company is transitioning towards their service based business, which is

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Speaker 1: more recurring in nature. And you know our view is

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Speaker 1: by two thousand and twenty about thirty about thirty five

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Speaker 1: of their profits will come between services and what's called

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Speaker 1: other hardware UM. And because of that UM, we do

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Speaker 1: think over time you've got the potential for that multiple

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Speaker 1: to expand, but it probably will continue to take some

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Speaker 1: time before the street recognizes that. What are you looking

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Speaker 1: for from the revenue in the services business? Angelo? And

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Speaker 1: how profitable is it? I mean I heard numbers at

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Speaker 1: thirty something billion last night and forecast of getting up

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Speaker 1: to fifty billion, which in and of itself is another

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Speaker 1: company in a big company as well. Yeah, No, absolutely so. Um,

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Speaker 1: when you look at what we're looking at, you know,

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Speaker 1: this year, you're looking at let's say thirty six thirty

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Speaker 1: eight billion in twenty and fiscal eighteen UM, we think

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Speaker 1: by you could start getting close to that that fifty

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Speaker 1: billion level UM. And then when you take into account,

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Speaker 1: like we said, other hardware offerings, you could potentially be

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Speaker 1: even looking at another twenty billion there. So Um, you

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Speaker 1: know that kind of tells you the story here is

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Speaker 1: no longer iPhones for Apple. Anyone that thinks that really

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Speaker 1: missing the picture when it comes to Apple. If you've

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Speaker 1: done as some of the parts I mean, if you

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Speaker 1: really I mean, gee, Monster legendarily did this folks like

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Speaker 1: three or four years ago when he was up at

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Speaker 1: Piper Jaffrey in in in um in Minneapolis. But Angelo,

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Speaker 1: if you've done a real some of the parts of Apple,

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Speaker 1: you know, we we haven't looked at it in a while.

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Speaker 1: It's something that we've done in the past. Um, but

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Speaker 1: you know, currently break some news here. Make it up.

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Speaker 1: It's okay, it's BLUEBIRG surveillance. You can make up the number.

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Speaker 1: What is it? Yeah, that's that's something we'd rather not do. UM.

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Speaker 1: But you know, when when you when you kind of

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Speaker 1: look at the company here, when you look at their

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Speaker 1: neckcast position still at a hundred forty five billion UM

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Speaker 1: that alone, um, you know, plus the services business as

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Speaker 1: well as kind of the keeping you know, we we

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Speaker 1: think the combination of those three gives you, you know,

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Speaker 1: about six or so of the total value of the

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Speaker 1: company at least UM. So it's like I said, it's

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Speaker 1: no longer um iPhones that are really kind of the

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Speaker 1: story or the valuation of this company. And how folks,

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Speaker 1: this is plug and chug to get Zeno over the

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Speaker 1: edge with the General Council of ce f r A.

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Speaker 1: You take what you just heard, folks, six of vail

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Speaker 1: you and then you extrap light out three to five

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Speaker 1: years some form of trend John, and then you come

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Speaker 1: back and you fill in the X. How do I do? Angelo? Angela?

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Speaker 1: Are you there ningwa compliances? You know? Thank you so much.

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Speaker 1: I hope you have you're trying to if it comes back.

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Speaker 1: All that was classic Angels, you know, thank you so much.

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Speaker 1: It's see if our folks, what's going on there is

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Speaker 1: when you publish in the investment business. It's really important,

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Speaker 1: and this is critical. What analysts right is more important

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Speaker 1: than what they say, because the paper trail is everything.

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Speaker 1: And so what you heard. There was a running joke

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Speaker 1: which is he can't talk about it, John until he

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Speaker 1: writes it. But can we get to those statistics? What

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Speaker 1: did he say? The the overall stock of Apple since

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Speaker 1: has been cut by twenty something because of these buy backs,

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Speaker 1: which is phenomenal. It's phenomenal the amount of support Insequity

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Speaker 1: has had from the Yeah, there's some ways of doing this,

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Speaker 1: but one thing, you know, and Taylor rigs awesome on this.

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Speaker 1: You take the harmonic rate. So if they're they're buying back,

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Speaker 1: then the next block of time they buy back twelve percent,

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Speaker 1: and the next block of time they buy back six

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Speaker 1: and the July saying we're taking it by But if

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Speaker 1: you do harmonic, you go two twelve six three. And

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Speaker 1: the key thing is to add up, add up twelve

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Speaker 1: six three, which is eight teens twenty one. So plus

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Speaker 1: twenty one is how much John Tucker remember when Dylan

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Speaker 1: went harmonic. Oh, I got to confuse nobody harmonic. He

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Speaker 1: just gets it. Honestly, I just want to know how

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Speaker 1: the stock is the stocks up by over four percent

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Speaker 1: in the premarket. And there's two big stories here, Tom

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Speaker 1: that painted very bullish pitcher for Apple. One is this

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Speaker 1: huge biback program that's going to give that fundamental support

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Speaker 1: demand to the equity. And the other is this huge

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Speaker 1: surging services business which many people think deserved to hire

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Speaker 1: multiple on. The overall company percent was twenty one, so

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Speaker 1: they'd retire fort over your time estimate, and that's that's study.

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Speaker 1: We've never seen this, Joan. Now, the bibacks are phenomena

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Speaker 1: Intel and the the you know, the Heyday. Maybe it's

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Speaker 1: the only equivalent in Microsoft. You wonder what they'll do

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Speaker 1: with other cash. Maybe they'll do the same. I don't

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Speaker 1: know either, but that this was really this was the

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Speaker 1: first time we've really got our hands in the last

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Speaker 1: twenty four hours around what they were going to do

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Speaker 1: with this cash after the tax bill came through. Ut

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Speaker 1: For those of you that are pro Angelo Zeno out

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Speaker 1: on our podcast, will be sure that he gets on

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Speaker 1: the podcast today so you can run through that math.

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Speaker 1: Uh in you know, pause repeat. Lindsay Piegsa at Stiffle

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Speaker 1: is known for incredibly important charts. Just as one example,

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Speaker 1: in our latest report is a differential of labor force

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Speaker 1: participation of the real working world versus kids, and it's

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Speaker 1: really something is one social aspect. As Chairman Powell uh

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Speaker 1: reports today with the Fed again our full coverage this

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Speaker 1: afterno Dr Piegs, wonderful to have you with us. I

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Speaker 1: really want to dive into fed arcadia right now. What

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Speaker 1: are the distinctions of debate at the table of the Fed.

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Speaker 1: How big is the descent from a very new chairman, Oh,

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Speaker 1: it's it's going to have a very big impact, and

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Speaker 1: it's really going to highlight the ongoing discussion that's going

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Speaker 1: on at the Federal Reserve among officials. Now, the statement

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Speaker 1: seems to give a sense that there there's a united

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Speaker 1: front among policy officials, but if we do see a descent,

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Speaker 1: that's really going to indicate that that's not the case.

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Speaker 1: There is a growing diversions of opinions. State the divergence inflation,

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Speaker 1: I'm sorry, state the divergence. What's the what's the distinction

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Speaker 1: that allows for this argument is people are being polite

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Speaker 1: with Chairman Paul Well. The biggest question surrounds inflation. Is

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Speaker 1: inflation going to continue to rise? As the committee seems

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Speaker 1: to expect or is inflation simply reflecting some one off

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Speaker 1: price reversals that we saw this time last year, and

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Speaker 1: then prices will continue to lose momentum away from that

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Speaker 1: two percent target, And that really is the question. Inflation

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Speaker 1: has not shown strong upward moment intem and some SET

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Speaker 1: officials are saying, looking at the data, there's really no

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Speaker 1: indication that we should be concerned about reining in out

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Speaker 1: of control prices at this point and accelerate the pace

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Speaker 1: of rate increases. Instead, we should air on the side

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Speaker 1: of caution and wait until inflation is clearly stabilized above

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Speaker 1: two percent before proceeding with additional rate height And then, so,

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Speaker 1: are you confident that inflation is stabilizing above Oh? Absolutely not,

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Speaker 1: absolutely not not. Certainly, the c p I and the

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Speaker 1: pp I show indications of rising price pressures. But when

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Speaker 1: we look at the broader measure, the PC which is

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Speaker 1: what the FED looks at, and we exclude food and

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Speaker 1: energy costs, what we see is that inflation has failed

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Speaker 1: to meet that two percent target for the past one

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Speaker 1: of the past twenty five years. So there really is

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Speaker 1: no historical precedent for inflation gaining momentum and pushing higher,

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Speaker 1: and with the the outlook for the U. S economy

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Speaker 1: really to the downside at this point, meaning now guard

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Speaker 1: lends you place. Well, I was just gonna say, our

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Speaker 1: thesis is looking at the U. S economy, the risk

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Speaker 1: is not that we go from two percent GDP to

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Speaker 1: three percent. The risk is that we go from two

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Speaker 1: percent down to one percent, again putting downward pressure potentially

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Speaker 1: on inflation. John, that that that fact towards this year's

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Speaker 1: incredibly important that twenty x years we haven't made the

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Speaker 1: two percent. You know, it's really really important. What inflation

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Speaker 1: has been trending lower? And is that a structural story?

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Speaker 1: I guess is that the question we should be asking

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Speaker 1: Vincy Well, I think in part of it is a

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Speaker 1: structural story. Remember, we're no longer isolated. This is a

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Speaker 1: global economy, and as we continue to import deflation from abroad,

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Speaker 1: meaning cheap goods from abroad, that will essentially put a

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Speaker 1: ceiling on domestic price levels. Now, certainly we could see

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Speaker 1: that reverse if trade tensions lead to an outright trade wall,

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Speaker 1: then we put up barriers to the inflow of capital, labor, goods.

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Speaker 1: But barring that dire scenario, I do think from a

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Speaker 1: structural standpoint, maybe we have lowered this ceiling to what

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Speaker 1: equation we can reach in the domestic economy. So to

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Speaker 1: line up, and I've been making jokes about this, Lindsay's

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Speaker 1: you know I do. There's a there's a live meeting, folks,

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Speaker 1: and then there's a dead meeting. Lindsay, I want you

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Speaker 1: to explain why our global audience are Tom Keene John

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Speaker 1: Farrell audience should listen to my bladder at two pm

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Speaker 1: this afternoon of a dead meeting. And the answer is

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Speaker 1: there's a lot to talk about, isn't there? Well, there

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Speaker 1: there potentially is a lot to talk about, particularly when

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Speaker 1: we look at the language within the statement. If the

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Speaker 1: FED maintains a very gradual assessment of the rate pathway,

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Speaker 1: or if there's some sort of hint to not only

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Speaker 1: a June rate increase, but an accelerated rate path that

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Speaker 1: certainly could spook the market into concerns that the FED

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Speaker 1: is willing to tighten too soon, too fast, and maybe

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Speaker 1: derail the recovery in the U S economy. So there's

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Speaker 1: a lot of details, the devils and the details when

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Speaker 1: it comes to the statement later this afternoon. I thank

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Speaker 1: you so much with stephil Nicholas today through sure that

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Speaker 1: she could be with us, with us for a good

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Speaker 1: bit here, Dennis Gartment, the garment letter, Dennis, is a

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Speaker 1: lot to talk about today. I want to get the

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Speaker 1: gold call out of the way because people are always

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Speaker 1: interested on gold. Is gold linked to dollar strength? Now?

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Speaker 1: Is gold linked to fundamentals that are traditional? It's lost,

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Speaker 1: it's it's linked to fundamentals that I think are traditionally.

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Speaker 1: It is linked for the last several months directly tick

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Speaker 1: for tick, pip for pip to what the euro is doing,

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Speaker 1: not particularly what the dollar is doing, but what the

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Speaker 1: euro is doing. Take a chart of the euro, take

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Speaker 1: a chart of golden They are and moving in absolute

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Speaker 1: convention one with the other. That's where the that's where

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Speaker 1: the relationship. The relationship is now it may change. Gold

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Speaker 1: should be trading higher because other commodity prices have begun

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Speaker 1: to move higher. Inflation are risks are beginning to become

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Speaker 1: incumbent for right now, as goes the euro, so goes gold,

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Speaker 1: as goes to euro. Do you have a euro? I mean,

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Speaker 1: I mean is it dollar strength, dollar weakness? And how

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Speaker 1: does it fold over the euro? For Dennis Gartment, if

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Speaker 1: you take a look at at an expansive chart over

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Speaker 1: the course the past several years. I think you're seeing

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Speaker 1: right now a movement one has stopped the euro one

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Speaker 1: twenty is an important technical circumstance. Any strength that you

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Speaker 1: get in the Euro, any bounce that you have in

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Speaker 1: the next week or two, you have to be a seller.

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Speaker 1: A major trend line has been broken. It's definitive. We

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Speaker 1: are on the process of tightening monetary policy, and the

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Speaker 1: Europeans are considering tightening monetary policy. It shall be quite

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Speaker 1: some period of time before they do it. And all

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Speaker 1: things being otherwise equal, the euro gets weaker, the dollar

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Speaker 1: gets stronger. The dollar gets stronger. Does that mean commodity

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Speaker 1: prices fall? That's the problem. I think commodity prices want

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Speaker 1: to go higher. And what's interesting is we all know

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Speaker 1: that as goes the dollar, so goes in contravention, the

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Speaker 1: commodity markets on balanced and generally, But what's happened over

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Speaker 1: the course of the past month or so. If somebody

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Speaker 1: had told you three weeks ago that dollar euro was

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Speaker 1: trading from down to one big figure one nineteen, and

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Speaker 1: then ask you where are commodity markets, you would have

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00:24:09,400 --> 00:24:12,840
Speaker 1: to say they're lower. No, interestingly enough, they're actually higher

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00:24:13,280 --> 00:24:16,480
Speaker 1: that that relationship is broken down. So normally one would

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00:24:16,480 --> 00:24:19,680
Speaker 1: say a strong dollar be gets weak commodities. Hasn't happened

433
00:24:19,720 --> 00:24:22,879
Speaker 1: in the past month. Something's changing. So what is changing?

434
00:24:22,920 --> 00:24:26,240
Speaker 1: Because we're gonna getting a gas We're getting higher gasoline

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00:24:26,240 --> 00:24:28,680
Speaker 1: prices for the summer driving season, and you're getting higher

436
00:24:28,680 --> 00:24:31,160
Speaker 1: wheat prices. You're getting higher cotton prices, You're getting higher

437
00:24:31,240 --> 00:24:33,720
Speaker 1: lumber prices, you're getting higher steel prices, you're geting higher

438
00:24:33,760 --> 00:24:36,200
Speaker 1: aluminum prices. So why are we waiting for inflation? For

439
00:24:36,359 --> 00:24:39,040
Speaker 1: the FED? Maybe it doesn't pass through to labor costs.

440
00:24:39,040 --> 00:24:41,119
Speaker 1: That's probably the only thing that hasn't been rising, and

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00:24:41,200 --> 00:24:42,960
Speaker 1: even that I think is going to begin to rise.

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00:24:43,000 --> 00:24:45,960
Speaker 1: So I am at one who thinks that the FED

443
00:24:46,000 --> 00:24:49,000
Speaker 1: has already won its battle with two percent inflation, and

444
00:24:49,040 --> 00:24:50,800
Speaker 1: soon she'll be wondering, how did we get to three

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00:24:50,800 --> 00:24:52,560
Speaker 1: and four percent as quickly as we did? Is that

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00:24:52,640 --> 00:24:55,680
Speaker 1: where the tenure goes? I think the tenure I am

447
00:24:55,720 --> 00:24:58,320
Speaker 1: of the generation that still thinks that I can remember

448
00:24:58,320 --> 00:25:01,240
Speaker 1: trading the a year at an eight percent coupon. I

449
00:25:01,280 --> 00:25:03,159
Speaker 1: can remember trading the long pond at of fourteen and

450
00:25:03,200 --> 00:25:06,080
Speaker 1: a quarter percent coupon. So to think that the that

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00:25:06,119 --> 00:25:07,920
Speaker 1: the ten year can get to four percent or five

452
00:25:07,920 --> 00:25:09,879
Speaker 1: percent doesn't bother me much at all. In fact, I

453
00:25:09,880 --> 00:25:12,199
Speaker 1: think that's really quite rational. And I want to in

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00:25:12,320 --> 00:25:14,240
Speaker 1: here for the next couple of minutes and come back

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00:25:14,280 --> 00:25:17,399
Speaker 1: and talk about this. Well, is is the future of

456
00:25:17,400 --> 00:25:20,320
Speaker 1: global Wall Street? Did you see it? Let's review. You

457
00:25:20,320 --> 00:25:23,040
Speaker 1: were in the commodity business, is a young lad. That's

458
00:25:23,040 --> 00:25:25,080
Speaker 1: where I started. I starting the cotton business. I started

459
00:25:25,080 --> 00:25:27,920
Speaker 1: as kids now actually in Raleigh, North Carolina. I was

460
00:25:27,920 --> 00:25:30,960
Speaker 1: an economist for Cotton Incorporated, Cotton Keeps America Feeling Company.

461
00:25:30,960 --> 00:25:34,240
Speaker 1: How far is Royley from Nashville? Like now, it's quite

462
00:25:34,320 --> 00:25:38,199
Speaker 1: quite some distance. It's probably five miles through chatting across,

463
00:25:38,400 --> 00:25:43,520
Speaker 1: that's correct. Alliance bernstein Is moving to Nashville was symbolized

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00:25:43,520 --> 00:25:46,800
Speaker 1: to Dennis Garpment. It symbolizes the Internet and the expansiveness

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00:25:46,800 --> 00:25:51,120
Speaker 1: of communications and the ease with which communications is transmitted nowadays.

466
00:25:51,200 --> 00:25:53,359
Speaker 1: I think that's what that has told us, that you

467
00:25:53,440 --> 00:25:55,600
Speaker 1: don't have to be in London, you don't have to

468
00:25:55,640 --> 00:25:57,600
Speaker 1: be love coming to New York though, I mean I

469
00:25:57,640 --> 00:26:01,440
Speaker 1: love coming down five acres and you know, I mean

470
00:26:01,440 --> 00:26:04,200
Speaker 1: you got WATERMARKA on the back side of the well. Actually,

471
00:26:04,880 --> 00:26:07,119
Speaker 1: in Virginia we don't have water moccasins, but we do

472
00:26:07,200 --> 00:26:09,240
Speaker 1: have We have an abundance of snakes if you look

473
00:26:09,240 --> 00:26:11,439
Speaker 1: around for them. We live on the second t of

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00:26:11,440 --> 00:26:13,200
Speaker 1: my country club. So it would you like to come,

475
00:26:13,240 --> 00:26:16,080
Speaker 1: you know, and Central Park South and all that. Absolutely,

476
00:26:16,320 --> 00:26:18,800
Speaker 1: My my wife and I love to come here. It

477
00:26:18,880 --> 00:26:20,560
Speaker 1: used to be we had visit our daughter who lived here.

478
00:26:20,600 --> 00:26:23,359
Speaker 1: She gave up and moved to Charlotte, and that was

479
00:26:23,400 --> 00:26:25,760
Speaker 1: because of the same reasons Alliance Bernstein has given up

480
00:26:25,760 --> 00:26:28,119
Speaker 1: and moving to Shore Well. Actually because for two reasons.

481
00:26:28,119 --> 00:26:29,879
Speaker 1: One the cost of living here was so expensive and

482
00:26:29,920 --> 00:26:32,120
Speaker 1: to the cost of taxes for her was so expensive

483
00:26:32,440 --> 00:26:35,000
Speaker 1: she took a pay cutting his way ahead. On balance,

484
00:26:35,280 --> 00:26:37,440
Speaker 1: do you think that moving to Nashville will even help

485
00:26:37,480 --> 00:26:41,359
Speaker 1: the business? Because it gives everybody a different perspective. I

486
00:26:41,440 --> 00:26:44,479
Speaker 1: have lived I have run my business from from Suffolk,

487
00:26:44,520 --> 00:26:46,480
Speaker 1: Virginia for the past thirty five years, and I must

488
00:26:46,480 --> 00:26:49,040
Speaker 1: tell you it's gotten easier and easier and easier to

489
00:26:49,080 --> 00:26:51,879
Speaker 1: live there because of the better communications that exists. So

490
00:26:51,920 --> 00:26:54,160
Speaker 1: I think that Alliance Bernstein has made a brilliant decision

491
00:26:55,000 --> 00:26:59,040
Speaker 1: and it's a sophisticated place. It is not an unsophisticated place.

492
00:26:59,080 --> 00:27:01,320
Speaker 1: To be certain, I this is this is a a

493
00:27:01,400 --> 00:27:04,320
Speaker 1: seminal shift. If Alliance Bernstein is capable of moving and

494
00:27:04,400 --> 00:27:07,560
Speaker 1: is going to make the move, others shall follow. Let's

495
00:27:07,600 --> 00:27:10,720
Speaker 1: talk about investing money right now. You mentioned the tenure

496
00:27:10,840 --> 00:27:13,880
Speaker 1: at what FO I think I think four percent is

497
00:27:13,960 --> 00:27:17,320
Speaker 1: a given by when what kind of time for? I

498
00:27:17,359 --> 00:27:19,960
Speaker 1: think four percent before the end of within twelve months

499
00:27:19,960 --> 00:27:21,360
Speaker 1: of where we are right now, and I think five

500
00:27:21,359 --> 00:27:23,480
Speaker 1: percent within twenty four months of where we are right now?

501
00:27:23,600 --> 00:27:25,480
Speaker 1: What does that do to the auto industry and other

502
00:27:25,520 --> 00:27:28,320
Speaker 1: industries that depend on credit in order to sell their products.

503
00:27:28,359 --> 00:27:31,040
Speaker 1: Makes it a a little more difficult, doesn't you know? Pam,

504
00:27:31,080 --> 00:27:34,440
Speaker 1: I'm looking at Suffolk, virgin There's a house here smaller

505
00:27:34,440 --> 00:27:39,320
Speaker 1: than gartment's five bedrooms, six bears, seven thousand square feet.

506
00:27:39,720 --> 00:27:41,840
Speaker 1: The deck off the back of the house is bigger

507
00:27:41,840 --> 00:27:45,280
Speaker 1: than years in my place combined combined. Yes, I mean,

508
00:27:45,320 --> 00:27:47,919
Speaker 1: and it's only one point six million. This this puppy

509
00:27:47,960 --> 00:27:51,000
Speaker 1: outside New York would be four or five six million dollars.

510
00:27:51,680 --> 00:27:53,119
Speaker 1: I'll be honest. We live on an eight and a

511
00:27:53,160 --> 00:27:54,880
Speaker 1: half on the second t of my Club looking into

512
00:27:54,880 --> 00:27:57,280
Speaker 1: the James River. I think we have six thousand square

513
00:27:57,280 --> 00:27:59,159
Speaker 1: feet in a nice backyard, and if you bid me

514
00:27:59,280 --> 00:28:01,520
Speaker 1: eight hundred thou and from my house, I'd hit your

515
00:28:01,520 --> 00:28:03,879
Speaker 1: bids so fast it would make your head spin. Dennis

516
00:28:03,920 --> 00:28:07,280
Speaker 1: Garbon with us as we compare and contrast, you're going

517
00:28:07,320 --> 00:28:09,800
Speaker 1: to happen on surveillance? Maybe, well, I don't know. You know,

518
00:28:09,960 --> 00:28:12,960
Speaker 1: Alliance clubs covering to Nashville, and you know people are

519
00:28:13,440 --> 00:28:17,679
Speaker 1: I mean Golden Sex, Tom, It's still the United States.

520
00:28:18,400 --> 00:28:21,480
Speaker 1: I like living one zero zero two two. It's okay.

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00:28:21,640 --> 00:28:30,800
Speaker 1: There are other zip codes. Thanks for listening to the

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00:28:30,800 --> 00:28:37,320
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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00:28:37,680 --> 00:28:41,880
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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00:28:41,920 --> 00:28:46,200
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio