1 00:00:05,120 --> 00:00:08,440 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:08,480 --> 00:00:12,320 Speaker 1: with Jonathan Faroh and Lisa Abramowitz. Join us each day 3 00:00:12,360 --> 00:00:16,840 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 4 00:00:17,239 --> 00:00:22,079 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,239 --> 00:00:26,479 Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com, 6 00:00:26,600 --> 00:00:30,520 Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. Tara Crunk 7 00:00:30,600 --> 00:00:34,240 Speaker 1: with us the CIO off and investment management at Wellcot 8 00:00:34,280 --> 00:00:36,000 Speaker 1: to see you, John, Do you have the courage to 9 00:00:36,040 --> 00:00:39,080 Speaker 1: be barished? We have had the courage to be barish 10 00:00:39,159 --> 00:00:42,199 Speaker 1: for all of two you know. Look, I think you'll 11 00:00:42,280 --> 00:00:46,760 Speaker 1: hear to the earlier conversation two mixed messages on jobs. Today. 12 00:00:46,920 --> 00:00:49,720 Speaker 1: You're gonna hear Powell at the at the Economic Club 13 00:00:50,040 --> 00:00:53,320 Speaker 1: say he's concerned about the economy overheating in too many jobs. 14 00:00:53,520 --> 00:00:55,320 Speaker 1: And then President Biden's going to get up at the 15 00:00:55,320 --> 00:00:57,000 Speaker 1: State of Union and tout how he's done such a 16 00:00:57,000 --> 00:00:59,320 Speaker 1: great job creating jobs. Right, So you're gonna have this 17 00:00:59,520 --> 00:01:02,440 Speaker 1: kind of deck economy that's going to happen. Um. I 18 00:01:02,560 --> 00:01:04,320 Speaker 1: think you know you've had a subtle change since the 19 00:01:04,360 --> 00:01:08,080 Speaker 1: FED meeting. Obviously the point about UM thirty five basis 20 00:01:08,160 --> 00:01:10,920 Speaker 1: point move in the in the two year UM the 21 00:01:11,040 --> 00:01:14,640 Speaker 1: dollars reverse course gold has started to come down. Um, 22 00:01:15,319 --> 00:01:17,120 Speaker 1: you do have a you have a different message right 23 00:01:17,160 --> 00:01:19,800 Speaker 1: now on on the equity market between technicals and fundamentals. 24 00:01:20,080 --> 00:01:23,480 Speaker 1: Your path was wrestling economics and finance at Dames Iowa 25 00:01:23,840 --> 00:01:25,919 Speaker 1: and then off you went to v BODI and bu. 26 00:01:26,760 --> 00:01:30,480 Speaker 1: The bottom line is you need courage to buy quality 27 00:01:30,680 --> 00:01:34,720 Speaker 1: right now. All the media razzle dazzles in nonprofit tech, 28 00:01:35,200 --> 00:01:37,560 Speaker 1: what memes stocks is that what they're called? And the 29 00:01:37,680 --> 00:01:41,000 Speaker 1: rest is well and what Wells Fargo was saying, get 30 00:01:41,080 --> 00:01:45,600 Speaker 1: brave and buy quality defined quality. Well quality is everything 31 00:01:45,680 --> 00:01:47,600 Speaker 1: that wasn't this rally at the being of the year. 32 00:01:47,680 --> 00:01:49,640 Speaker 1: So if there's only two themes that have driven this 33 00:01:49,840 --> 00:01:52,400 Speaker 1: entire rally at being a year, including across all assets, 34 00:01:52,480 --> 00:01:55,280 Speaker 1: it's long duration assets. And that's not just equities, you know, 35 00:01:55,360 --> 00:01:59,280 Speaker 1: think tech comm services, discretionary golds along duration asset it's 36 00:01:59,360 --> 00:02:02,120 Speaker 1: rallied hard to here. Right for up until the FED meeting, 37 00:02:02,160 --> 00:02:03,880 Speaker 1: the body the long end of the monk curve was 38 00:02:03,960 --> 00:02:06,080 Speaker 1: still rates were still falling and we're rallying. So eating 39 00:02:06,160 --> 00:02:09,880 Speaker 1: this huge long duration rally and then it's low quality, right, 40 00:02:10,080 --> 00:02:12,560 Speaker 1: it's it's all the things you don't want to own. 41 00:02:12,720 --> 00:02:16,800 Speaker 1: Basically that we're just either some form of a January effect, 42 00:02:17,040 --> 00:02:20,679 Speaker 1: some form of short UH covering, or some form of 43 00:02:20,800 --> 00:02:23,880 Speaker 1: just um reversion to the mean after tax lots selling. 44 00:02:24,200 --> 00:02:27,400 Speaker 1: That's not really the basis for a good sustainable rally 45 00:02:27,520 --> 00:02:30,680 Speaker 1: from here. Right now, you've you coiled the fifty day, 46 00:02:30,720 --> 00:02:33,239 Speaker 1: twenty day and two d day moving averages into a 47 00:02:33,360 --> 00:02:35,560 Speaker 1: tight band that had to break out one or the other. 48 00:02:35,600 --> 00:02:37,440 Speaker 1: They broke to the upside here in the short term, 49 00:02:37,800 --> 00:02:40,920 Speaker 1: but all near term indications suggest you're probably over bought 50 00:02:40,960 --> 00:02:43,480 Speaker 1: at this level, so we would fade this latest rally. 51 00:02:43,520 --> 00:02:46,640 Speaker 1: We still think it's probably a bear market rally allah, 52 00:02:47,000 --> 00:02:49,600 Speaker 1: you know, four or five of them in two and 53 00:02:49,720 --> 00:02:53,079 Speaker 1: probably fails into resistance and and eventually comes back down 54 00:02:53,160 --> 00:02:55,560 Speaker 1: before you move higher. How do you fade it? Do 55 00:02:55,639 --> 00:02:58,160 Speaker 1: you fade it with options? Do you bet against the NASDAC, 56 00:02:58,240 --> 00:03:00,239 Speaker 1: do you bet against specific companies? Do you just sell 57 00:03:00,600 --> 00:03:02,839 Speaker 1: on the margins what's gone up? I think you sell 58 00:03:02,919 --> 00:03:05,519 Speaker 1: on the margins. It's giving you a second chance, you know, 59 00:03:05,639 --> 00:03:08,079 Speaker 1: to unwind that lower quality If you want to, or 60 00:03:08,160 --> 00:03:10,280 Speaker 1: you just reduce your equity positions. You take your risk 61 00:03:10,360 --> 00:03:13,400 Speaker 1: budgets down in portfolios like you need to if you 62 00:03:13,440 --> 00:03:14,960 Speaker 1: don't have them where you want to be, and then 63 00:03:15,000 --> 00:03:17,520 Speaker 1: you hold that dry powder to your point of your 64 00:03:17,560 --> 00:03:19,959 Speaker 1: getting paid handsomely on the short side of the old 65 00:03:19,960 --> 00:03:22,679 Speaker 1: curve to hold dry powder, and you're actually, for the 66 00:03:22,760 --> 00:03:26,600 Speaker 1: first time in a long time, getting positive real rates. 67 00:03:26,720 --> 00:03:29,840 Speaker 1: Right If you look at the three month run rate 68 00:03:29,919 --> 00:03:32,080 Speaker 1: on the PC deflator or the CPI, there a two 69 00:03:32,120 --> 00:03:34,520 Speaker 1: point nine three point one percent. If I'm getting four 70 00:03:34,560 --> 00:03:37,080 Speaker 1: eighty two on a twelve month treasury, real rates are 71 00:03:37,120 --> 00:03:39,960 Speaker 1: finally now in a positive place. They hadn't been for 72 00:03:40,120 --> 00:03:42,000 Speaker 1: much of all of last year and the year before, 73 00:03:42,360 --> 00:03:44,560 Speaker 1: So that gives you some nice carry while you wait 74 00:03:44,640 --> 00:03:47,240 Speaker 1: out as this thing kind of the fundamentals catch up. 75 00:03:47,360 --> 00:03:51,000 Speaker 1: How distorted is your portfolio right now? Waited too fixed 76 00:03:51,000 --> 00:03:55,600 Speaker 1: income waited to short term debt versus equities versus other assets. 77 00:03:56,280 --> 00:03:59,000 Speaker 1: So it is definitely underweight equities, there's no doubt about it. 78 00:03:59,200 --> 00:04:02,520 Speaker 1: Um Uh. We had on the fixed income side, we're 79 00:04:02,560 --> 00:04:05,960 Speaker 1: overweight fixed income, but we barbelled the whole fixed income element. 80 00:04:06,080 --> 00:04:09,240 Speaker 1: So short term makes all kinds of sense the belly 81 00:04:09,280 --> 00:04:11,080 Speaker 1: of the yeld curve. You don't want to be there, 82 00:04:11,240 --> 00:04:13,240 Speaker 1: right because now you have instead of rolled down, you 83 00:04:13,320 --> 00:04:15,840 Speaker 1: have roll up in the yolk curve, which is not 84 00:04:15,960 --> 00:04:18,560 Speaker 1: the place to be. And you know, the tenure peeked 85 00:04:18,600 --> 00:04:21,440 Speaker 1: out in on October twenty four. We went long duration 86 00:04:21,560 --> 00:04:24,280 Speaker 1: on October twenty nine, so we were five days late. 87 00:04:24,440 --> 00:04:26,440 Speaker 1: But that's been just a heck of a trade, right, 88 00:04:26,520 --> 00:04:29,520 Speaker 1: I mean it is really um added, you know, mid 89 00:04:29,720 --> 00:04:34,240 Speaker 1: double digit returns to portfolios. At this level, I'd be 90 00:04:34,279 --> 00:04:36,840 Speaker 1: a little careful legging too far into the backside of 91 00:04:36,839 --> 00:04:39,240 Speaker 1: the ool curve. We think the tenure trades between three 92 00:04:39,320 --> 00:04:41,920 Speaker 1: forty and three ninety for most of this year and 93 00:04:42,040 --> 00:04:44,160 Speaker 1: back and forth. So I'd be a little careful here 94 00:04:44,160 --> 00:04:46,320 Speaker 1: at at the level we're at. If this takes up 95 00:04:46,320 --> 00:04:48,080 Speaker 1: the next question, ready, if they can only say to 96 00:04:48,120 --> 00:04:50,560 Speaker 1: keep surprising to the upside, like the types we got 97 00:04:50,600 --> 00:04:52,920 Speaker 1: on Friday with that change anything for you? How many 98 00:04:53,040 --> 00:04:55,479 Speaker 1: change things for you? Well, the obvious is it has 99 00:04:55,520 --> 00:04:57,880 Speaker 1: to price in more hikes. Right. It brings may into 100 00:04:57,920 --> 00:05:00,799 Speaker 1: the conversation, right which today, Um, it's it's all about 101 00:05:00,839 --> 00:05:04,760 Speaker 1: March is now basically a given and then another basis 102 00:05:04,800 --> 00:05:06,520 Speaker 1: points in May, and it takes out any hope of 103 00:05:06,600 --> 00:05:09,760 Speaker 1: cuts in the back half of the year. Great niece, Yeah, 104 00:05:09,800 --> 00:05:11,400 Speaker 1: I think that's the case right now. I mean, you 105 00:05:11,600 --> 00:05:13,560 Speaker 1: you just have to you have to let this thing 106 00:05:13,640 --> 00:05:16,839 Speaker 1: play out. I mean, earnings growth is just now turning negative. 107 00:05:17,080 --> 00:05:19,880 Speaker 1: Right In the last years, we've only seen that happen 108 00:05:19,960 --> 00:05:22,000 Speaker 1: four times. Every time we've seen it happen, it ends 109 00:05:22,040 --> 00:05:26,040 Speaker 1: up being a recession. Yesterday you saw the FEDS Senior 110 00:05:26,200 --> 00:05:31,120 Speaker 1: Loan Survey. Financial conditions are tightening quickly, right, So every 111 00:05:31,160 --> 00:05:33,840 Speaker 1: time you you think about a recession, you have three 112 00:05:33,920 --> 00:05:36,320 Speaker 1: things that happened. You have um interest rates have to 113 00:05:36,400 --> 00:05:38,880 Speaker 1: go up, you have inflation spikes, and you have lending 114 00:05:39,120 --> 00:05:41,920 Speaker 1: and conditions tighten. I think the chairman is more focused 115 00:05:41,960 --> 00:05:45,240 Speaker 1: on the lone survey than perhaps what's happening in public markets. 116 00:05:46,440 --> 00:05:49,920 Speaker 1: Uh No, I think I think still he's he's focused 117 00:05:49,960 --> 00:05:52,560 Speaker 1: on financial conditions too easy, right, I mean, you can 118 00:05:52,600 --> 00:05:54,760 Speaker 1: look at a whole bunch of financial conditions to this 119 00:05:54,920 --> 00:05:58,080 Speaker 1: time last year and Wednesday about what was that about? 120 00:05:58,160 --> 00:06:02,600 Speaker 1: Well Wednesday? Wednesday was his attempt to be hawkish, but 121 00:06:02,760 --> 00:06:06,480 Speaker 1: the but the market interpreted as dovish yeah, So he's 122 00:06:06,560 --> 00:06:09,680 Speaker 1: going to try and walk that back, I think today 123 00:06:10,120 --> 00:06:13,560 Speaker 1: and in subsequent speeches, to try and just continue to 124 00:06:13,839 --> 00:06:16,720 Speaker 1: pound the pulpit about like we have more work to do, 125 00:06:16,880 --> 00:06:19,400 Speaker 1: We're not there yet. Um. And so I think that's 126 00:06:19,560 --> 00:06:21,880 Speaker 1: that's an important thing for markets to kind of reconcile. 127 00:06:22,320 --> 00:06:24,320 Speaker 1: The reality is the equity markets and the bond market 128 00:06:24,560 --> 00:06:26,160 Speaker 1: have not believed the fed up at this point. They 129 00:06:26,160 --> 00:06:29,040 Speaker 1: just don't believe things like the disinflationary processes starts it. 130 00:06:29,279 --> 00:06:31,359 Speaker 1: I'm not going to hear the rest. Wasn't that the problem? 131 00:06:32,320 --> 00:06:33,680 Speaker 1: And that that was what they were looking at and 132 00:06:33,760 --> 00:06:35,760 Speaker 1: that was what they were hoping about. Is it's just 133 00:06:35,920 --> 00:06:38,200 Speaker 1: you know that he kind of failed at the communication. 134 00:06:38,480 --> 00:06:45,400 Speaker 1: That's right. Do we give you an evil evaluation? Killed 135 00:06:45,600 --> 00:06:48,880 Speaker 1: We've got people we talked to. It wonderful And she 136 00:06:49,120 --> 00:06:54,680 Speaker 1: described better than anyone I know, this path of disinflation down. 137 00:06:54,800 --> 00:06:58,240 Speaker 1: And she used the Amazon challenge of the last mile 138 00:06:58,360 --> 00:07:01,200 Speaker 1: to get to your house dating from three to two. 139 00:07:02,040 --> 00:07:04,160 Speaker 1: When you talk to Sarah House and you listen to 140 00:07:04,320 --> 00:07:07,120 Speaker 1: Sarah House, what's your yield there that you're trying to 141 00:07:07,200 --> 00:07:09,600 Speaker 1: get to three to two? Are you even trying to 142 00:07:09,640 --> 00:07:12,840 Speaker 1: get from four to three. Well, actually, I think that's 143 00:07:12,920 --> 00:07:14,800 Speaker 1: the mistake the markets are making right now. It's an 144 00:07:14,840 --> 00:07:17,360 Speaker 1: excellent point and I agree with you, Sarah, you did great, 145 00:07:17,560 --> 00:07:22,040 Speaker 1: she said a word. So, um, what what the markets 146 00:07:22,080 --> 00:07:23,880 Speaker 1: are missing is they keep using the inflation data on 147 00:07:23,960 --> 00:07:25,880 Speaker 1: year over year? Who cares about last year? Right? Last 148 00:07:25,960 --> 00:07:28,600 Speaker 1: year at this time was irrelevant. Right right now as 149 00:07:28,640 --> 00:07:30,720 Speaker 1: we speak for three month the rolling three months run 150 00:07:30,840 --> 00:07:33,160 Speaker 1: right on pc deflators two point nine and on cp 151 00:07:33,320 --> 00:07:35,880 Speaker 1: I at the core is three point one. So let's 152 00:07:35,880 --> 00:07:37,920 Speaker 1: just call it three at three year of stones throw 153 00:07:37,960 --> 00:07:39,680 Speaker 1: away from two to two and a half with still 154 00:07:39,800 --> 00:07:42,720 Speaker 1: downward pressure on prices. Right, So we're gonna get there 155 00:07:42,840 --> 00:07:45,320 Speaker 1: faster than what people think. That's what we wrote in 156 00:07:45,360 --> 00:07:49,280 Speaker 1: our economic Our outlook was, look, the great surprise of 157 00:07:49,320 --> 00:07:51,280 Speaker 1: this year is how fast inflation is gonna come down. 158 00:07:51,320 --> 00:07:54,720 Speaker 1: And if you think back in November December, people were like, no, way, no, 159 00:07:54,920 --> 00:07:57,720 Speaker 1: how right, and it is it's there already. Well that's 160 00:07:57,760 --> 00:08:13,559 Speaker 1: why this counts. Yes, run, this is a joy force 161 00:08:13,680 --> 00:08:16,640 Speaker 1: right now and a real symbol here, uh John, of 162 00:08:16,800 --> 00:08:20,680 Speaker 1: everything to move beyond the pandemic. To have Gerard Cassidy 163 00:08:20,720 --> 00:08:23,880 Speaker 1: with this remote from Maine is a legend Uh Tucker 164 00:08:23,920 --> 00:08:27,960 Speaker 1: Anthony uh for for years and onto RBC Capital Markets, 165 00:08:27,960 --> 00:08:29,520 Speaker 1: but have them in studio. I think it's a real 166 00:08:30,440 --> 00:08:33,719 Speaker 1: three years almost three years to the moment when we 167 00:08:33,880 --> 00:08:36,560 Speaker 1: last talked to you, A lobster role in Maine costs 168 00:08:36,679 --> 00:08:41,280 Speaker 1: eighteen dollars. Now it's like a bottle of champagne. What happened, Tom, 169 00:08:41,640 --> 00:08:44,960 Speaker 1: Rising costs even the lobstermen a facing higher inflation costs 170 00:08:45,200 --> 00:08:48,760 Speaker 1: obviously fuel also labor costs are very high. And that's 171 00:08:48,840 --> 00:08:50,600 Speaker 1: that's that's what's driving it. And look at the real 172 00:08:50,720 --> 00:08:53,120 Speaker 1: estate pricing. It's right out. Let's get to it right now, 173 00:08:53,600 --> 00:08:56,599 Speaker 1: Gerard Cassidy, I'm gonna look at securities analysis in the 174 00:08:56,679 --> 00:08:59,040 Speaker 1: four percent return over the last ten years I got 175 00:08:59,120 --> 00:09:02,520 Speaker 1: with a dog like City Group versus the fourteen percent 176 00:09:03,040 --> 00:09:06,199 Speaker 1: return I got as Harrison passed off JP Morgan to 177 00:09:06,320 --> 00:09:10,400 Speaker 1: James Diamond, that differential. How do you, with the legend 178 00:09:10,440 --> 00:09:13,599 Speaker 1: that you are, how do you grind out not to 179 00:09:13,760 --> 00:09:18,080 Speaker 1: pick the dogs in banking? It's very interesting, Tom, because 180 00:09:18,120 --> 00:09:20,840 Speaker 1: it's all about execution, as you know, and obviously JP 181 00:09:20,960 --> 00:09:24,000 Speaker 1: Morgan Chase has executed and City Group has not. And 182 00:09:24,120 --> 00:09:27,520 Speaker 1: now under the new leadership, Jane is trying to execute 183 00:09:27,600 --> 00:09:31,280 Speaker 1: and divest many of the businesses outside the United States. 184 00:09:31,600 --> 00:09:33,520 Speaker 1: Mexico is the big one, and I think if they 185 00:09:33,600 --> 00:09:35,839 Speaker 1: get that done this quarter, that will help the style 186 00:09:35,880 --> 00:09:38,880 Speaker 1: will buy Mexican City Group Banking, and there's such an 187 00:09:38,920 --> 00:09:41,840 Speaker 1: emotional loadstone there for the heritage of the company. Back 188 00:09:41,880 --> 00:09:44,400 Speaker 1: to Mr. Read No, you're you're quite right. At either 189 00:09:44,480 --> 00:09:46,280 Speaker 1: a local bank or a spent one of the Spanish 190 00:09:46,320 --> 00:09:48,240 Speaker 1: banks are most likely to be the buyers, not an 191 00:09:48,240 --> 00:09:50,800 Speaker 1: American bank. Though, as we reflect on the last decade 192 00:09:50,840 --> 00:09:53,199 Speaker 1: or side, just how much more defensive are these knips? 193 00:09:53,559 --> 00:09:56,840 Speaker 1: How much of these banks actually changed? John, That's really 194 00:09:56,880 --> 00:09:58,760 Speaker 1: a good question because we're gonna find out. This is 195 00:09:58,800 --> 00:10:00,800 Speaker 1: going to be the true test. We do go through 196 00:10:00,840 --> 00:10:04,040 Speaker 1: a recession and the banks have been derisked because of 197 00:10:04,120 --> 00:10:06,800 Speaker 1: the financial crisis and the stress tests they go through 198 00:10:06,840 --> 00:10:10,120 Speaker 1: every year. This will prove assuming they get through without 199 00:10:10,200 --> 00:10:13,120 Speaker 1: having a major earnings problem, assuming none of them cut 200 00:10:13,200 --> 00:10:15,839 Speaker 1: their dividends, imagine what's gonna what they're gonna look like 201 00:10:15,960 --> 00:10:19,400 Speaker 1: coming out of the next cycle if this all takes place, 202 00:10:19,480 --> 00:10:21,520 Speaker 1: which is what we think could very well. So what 203 00:10:21,559 --> 00:10:23,360 Speaker 1: does that mean for how we should value some of 204 00:10:23,400 --> 00:10:25,760 Speaker 1: these big banks there you go. So then do they 205 00:10:25,880 --> 00:10:28,760 Speaker 1: become so called financial utility. So they'll never trade like 206 00:10:28,880 --> 00:10:31,120 Speaker 1: Doke energy. But should they trade it eight to ten 207 00:10:31,240 --> 00:10:33,920 Speaker 1: times earnings? Maybe they get revalued to twelve and thirteen 208 00:10:33,960 --> 00:10:36,920 Speaker 1: times earnings. They'll they'll never be marking multiple stocks, of course, 209 00:10:37,120 --> 00:10:39,960 Speaker 1: but the point is that we could have a revaluation 210 00:10:40,080 --> 00:10:42,880 Speaker 1: coming out of this whatever we're going into slow down 211 00:10:42,920 --> 00:10:45,920 Speaker 1: slash recession, assuming the banks don't blow up like they 212 00:10:45,960 --> 00:10:48,320 Speaker 1: didn't of course eight or nine. So let's talk about 213 00:10:48,400 --> 00:10:50,240 Speaker 1: one of their main utilities, which is a place to 214 00:10:50,320 --> 00:10:53,920 Speaker 1: part cash right for consumers. Last year, in the second 215 00:10:54,040 --> 00:10:57,599 Speaker 1: third quarters, banks saw the biggest outflow of withdraw of 216 00:10:57,760 --> 00:11:01,880 Speaker 1: of of deposits on record. Going back, at what point 217 00:11:01,920 --> 00:11:04,680 Speaker 1: do they have to start attracting deposits with higher rates. 218 00:11:05,240 --> 00:11:07,600 Speaker 1: It's really going to be the question in this high 219 00:11:07,720 --> 00:11:10,640 Speaker 1: rate environment. But we have to remind ourselves if you 220 00:11:10,720 --> 00:11:14,000 Speaker 1: go back to two thousand nineteen, the system had just 221 00:11:14,160 --> 00:11:17,920 Speaker 1: over thirteen trillion dollars of deposits and they were growing 222 00:11:18,000 --> 00:11:22,720 Speaker 1: approximately six billion a year. Today the system is closer 223 00:11:22,800 --> 00:11:26,760 Speaker 1: to eighteen trillion dollars because of que So I would 224 00:11:26,880 --> 00:11:30,319 Speaker 1: argue the banking system has over three trillion dollars of 225 00:11:30,440 --> 00:11:33,160 Speaker 1: deposits that shouldn't be there. So I think you're going 226 00:11:33,200 --> 00:11:36,360 Speaker 1: to see the continued outflow because of QUI as now 227 00:11:36,480 --> 00:11:38,959 Speaker 1: as QT Well. Another way to put this is do 228 00:11:39,080 --> 00:11:41,719 Speaker 1: they want these deposits? Are banks happy to see them go? 229 00:11:42,760 --> 00:11:45,240 Speaker 1: It's in a way I think they are, because you know, 230 00:11:45,320 --> 00:11:47,640 Speaker 1: they don't want to lose the good cored deposits like 231 00:11:47,960 --> 00:11:50,240 Speaker 1: you know, Tom's account or something like that. Of course 232 00:11:51,280 --> 00:11:54,640 Speaker 1: they you know they will lose some of the hot money, 233 00:11:54,920 --> 00:11:58,440 Speaker 1: and that's okay. But what's interesting is that the loan 234 00:11:58,520 --> 00:12:01,640 Speaker 1: to deposit ratio so still very low, and so a 235 00:12:01,760 --> 00:12:05,839 Speaker 1: normal loan to deposit ratios over and the system today 236 00:12:05,960 --> 00:12:12,040 Speaker 1: is under seven. Can I digress here? This is a 237 00:12:12,080 --> 00:12:15,760 Speaker 1: real hockey history. You and I knew Brian moynihan when 238 00:12:15,800 --> 00:12:18,440 Speaker 1: he was unheard of at the Bank of Boston long 239 00:12:18,600 --> 00:12:22,000 Speaker 1: time ago, correct, And you and I every year would 240 00:12:22,040 --> 00:12:25,240 Speaker 1: go to the St. Patrick's Day party for the Irish banks. 241 00:12:25,559 --> 00:12:29,760 Speaker 1: I remember sitting in one of their drunk fests on St. 242 00:12:29,800 --> 00:12:33,840 Speaker 1: Patrick's Day, four or five people going, this is gonna 243 00:12:34,080 --> 00:12:37,880 Speaker 1: end ugly. You saw the collapse of the regional bank 244 00:12:38,000 --> 00:12:42,840 Speaker 1: experience moynahan and after Ken Lewis helped pick up the pieces. 245 00:12:42,920 --> 00:12:47,280 Speaker 1: Now what's out there right now? That's the same emotion 246 00:12:47,440 --> 00:12:50,320 Speaker 1: that you and I felt on that Sat Patrick's day 247 00:12:50,400 --> 00:12:53,439 Speaker 1: morning long ago. Tom. We asked her to ask that 248 00:12:53,600 --> 00:12:57,520 Speaker 1: question to ourselves all the time, because every cycle we've 249 00:12:57,600 --> 00:12:59,719 Speaker 1: had something blow up. And one of the things that 250 00:12:59,800 --> 00:13:02,960 Speaker 1: I find so amazing is FED funds rates have gone 251 00:13:03,000 --> 00:13:06,120 Speaker 1: from zero twenty five basis points to four and three 252 00:13:06,200 --> 00:13:09,960 Speaker 1: quarters and there hasn't been any debacles yet. Exactly which 253 00:13:10,000 --> 00:13:13,640 Speaker 1: where is it? We're digging, We're turning over, We're turning 254 00:13:13,679 --> 00:13:16,840 Speaker 1: over every rock we ken. We do believe that loans 255 00:13:17,280 --> 00:13:21,800 Speaker 1: to non depository financial institutions could be the place where 256 00:13:21,800 --> 00:13:25,200 Speaker 1: it blows up, meaning loans to private equity companies. That's 257 00:13:25,200 --> 00:13:28,440 Speaker 1: where the valuations have come down dramatically. It's Harvey Shorts 258 00:13:28,480 --> 00:13:33,120 Speaker 1: watching this. It's going to be a conversation about private 259 00:13:33,160 --> 00:13:39,679 Speaker 1: mind that that's we're looking. Anytime you have rapid loan 260 00:13:39,760 --> 00:13:42,719 Speaker 1: growth in a specific asset class, that's where we take 261 00:13:42,760 --> 00:13:45,760 Speaker 1: our nose to and we just haven't really so wait, wait, 262 00:13:45,800 --> 00:13:48,559 Speaker 1: is this the question Paul asked Rubinstein today? Is that 263 00:13:48,679 --> 00:13:56,559 Speaker 1: the rest? But how about that loan about about sixty seconds. Child. 264 00:13:56,559 --> 00:13:58,079 Speaker 1: I want to want to kind of fit this in 265 00:13:58,720 --> 00:14:02,040 Speaker 1: bonuses happening with pay. If these banks are going to 266 00:14:02,080 --> 00:14:04,240 Speaker 1: become utilities, what does that mean for the pay of 267 00:14:04,280 --> 00:14:06,600 Speaker 1: the people that work at these companies? Credit Swace right 268 00:14:06,600 --> 00:14:10,120 Speaker 1: now talking about delaying some bonuses for bankers. What's the 269 00:14:10,200 --> 00:14:13,080 Speaker 1: message for maybe a group of college graduates to want 270 00:14:13,120 --> 00:14:15,240 Speaker 1: to go into this industry. What's the message for them? Now? 271 00:14:15,600 --> 00:14:17,439 Speaker 1: The pay is still quite good, even though the pay 272 00:14:17,480 --> 00:14:19,200 Speaker 1: has come down quite a bit, as you know, John, 273 00:14:19,280 --> 00:14:22,960 Speaker 1: and we have to remember one was all time record years, 274 00:14:23,280 --> 00:14:26,160 Speaker 1: so we're coming off a very high base. That being said, 275 00:14:26,440 --> 00:14:28,680 Speaker 1: pay is not what it was, you know, twelve or 276 00:14:28,760 --> 00:14:31,640 Speaker 1: eighteen months ago. But there's cycles, as we all know, 277 00:14:32,040 --> 00:14:34,320 Speaker 1: and there will be a capital market cycle. E C 278 00:14:34,600 --> 00:14:36,720 Speaker 1: M will come back, I P O S will come back, 279 00:14:36,960 --> 00:14:39,120 Speaker 1: and that's when the bonuses really do grow. So it's 280 00:14:39,200 --> 00:14:42,480 Speaker 1: very cyclical. Let's do this more often. I'd love to. 281 00:14:43,280 --> 00:14:48,120 Speaker 1: I'm thrilled you brought three pounds of lobster. Surprise, Tom 282 00:14:48,200 --> 00:14:50,680 Speaker 1: is not promoting the trip up to Maine. We want 283 00:14:50,680 --> 00:14:52,680 Speaker 1: to fit that in. No, you know, we get that in. 284 00:14:52,800 --> 00:14:54,840 Speaker 1: But May's weather is tough. We're gonna go up to 285 00:14:55,280 --> 00:14:57,240 Speaker 1: He doesn't like the weather, John, that's the reason why 286 00:14:57,280 --> 00:15:00,320 Speaker 1: he has there's better breakfas and bar. You went on 287 00:15:00,480 --> 00:15:02,760 Speaker 1: vacation that the guy didn't you. It was called I 288 00:15:03,040 --> 00:15:05,400 Speaker 1: took one day sabbatical. It was a three day weekend, 289 00:15:05,560 --> 00:15:07,560 Speaker 1: three day week I remember I went up to Bar Harbor. 290 00:15:07,600 --> 00:15:10,240 Speaker 1: We stopped in Portland, looked for Cassidy and he was 291 00:15:10,320 --> 00:15:16,120 Speaker 1: out in this fifty seventh Hinckley picnic boat than Portland Harbor. 292 00:15:16,360 --> 00:15:19,480 Speaker 1: That that that Hinckley boat you've got is gorgeous. I 293 00:15:19,800 --> 00:15:22,320 Speaker 1: wish I had one, But they are gorgeous. I wouldn't 294 00:15:22,320 --> 00:15:24,200 Speaker 1: make that clear. I wish I had one. Those are 295 00:15:24,240 --> 00:15:26,680 Speaker 1: great boats. That's a hedge fun boat there. It's like 296 00:15:26,760 --> 00:15:29,080 Speaker 1: you go sideways in it. Yeah, you got signed ways 297 00:15:29,120 --> 00:15:31,080 Speaker 1: on it. It's got little thrust is on the side. 298 00:15:31,240 --> 00:15:36,200 Speaker 1: Seen the Reefa boats like, yeah, that's the proper bout. Yeah, 299 00:15:36,240 --> 00:15:38,760 Speaker 1: that's a beautiful. But we didn't. More of a lake 300 00:15:38,840 --> 00:15:40,760 Speaker 1: kind of guy than I would be on the open waters. 301 00:15:41,200 --> 00:15:45,440 Speaker 1: That's the way, a kind of a big calma. Yeah. 302 00:15:45,520 --> 00:15:55,720 Speaker 1: This was thank you. Henrietta Treys joins us right now, 303 00:15:55,800 --> 00:15:58,800 Speaker 1: Director of Economic Policy Vada partners here on what we 304 00:15:58,960 --> 00:16:01,240 Speaker 1: just heard from the Speaker the House, Henriette, I want 305 00:16:01,240 --> 00:16:05,440 Speaker 1: to talk about the moral overlay, the moral politics of 306 00:16:05,600 --> 00:16:09,680 Speaker 1: O MG, we're in debt, o MG, we have a deficit. Hile. 307 00:16:09,760 --> 00:16:14,600 Speaker 1: Broner and Bernstein wrote brilliantly about this two lifetimes ago. 308 00:16:15,360 --> 00:16:18,520 Speaker 1: What's the moral debate in the Congress? You know so 309 00:16:18,760 --> 00:16:24,200 Speaker 1: well about our debt and about our deficit. It's a 310 00:16:24,280 --> 00:16:27,040 Speaker 1: great question. Um, and you mentioned Heritage before. I kind 311 00:16:27,080 --> 00:16:29,200 Speaker 1: of want to segue into that a little bit. The 312 00:16:29,320 --> 00:16:32,560 Speaker 1: Heritage Foundation, which is a lynchpin of the sort of 313 00:16:32,600 --> 00:16:36,680 Speaker 1: Republican morality component as you're referencing, is actually just embarking 314 00:16:36,680 --> 00:16:39,080 Speaker 1: on a study to figure out exactly how much defense 315 00:16:39,120 --> 00:16:42,400 Speaker 1: spending Republicans can cut right now in order to balance 316 00:16:42,440 --> 00:16:46,080 Speaker 1: the budget. It's this tremendous morality question that's not just 317 00:16:46,360 --> 00:16:50,520 Speaker 1: Democrat versus Republicans, but also Republicans within their own party. 318 00:16:50,800 --> 00:16:54,240 Speaker 1: Are we a party that is trying to reduce domestic 319 00:16:54,320 --> 00:16:57,000 Speaker 1: spending an increase defense spending? Do we want to keep 320 00:16:57,040 --> 00:16:59,840 Speaker 1: the parody? The Heritage Foundation is about to launch into 321 00:16:59,880 --> 00:17:02,080 Speaker 1: a investigation and to see where the Pentagon can cut, 322 00:17:02,120 --> 00:17:04,320 Speaker 1: where the Defense Department can cut um, and that is 323 00:17:04,440 --> 00:17:07,720 Speaker 1: a pretty unique um segue from the Republican Party. We 324 00:17:07,800 --> 00:17:10,280 Speaker 1: haven't seen and as long as I've been alive for sure. 325 00:17:10,760 --> 00:17:12,920 Speaker 1: UM So, I think that there's a lot of soul 326 00:17:12,960 --> 00:17:16,040 Speaker 1: searching from both sides right now, and especially from Republicans 327 00:17:16,080 --> 00:17:18,639 Speaker 1: before they even enter into conversations with Democrats about what 328 00:17:18,680 --> 00:17:21,520 Speaker 1: to do about this. To the memory of Pete Peterson, 329 00:17:21,960 --> 00:17:25,440 Speaker 1: Sangas of Massachusetts and the other sam none I'll even 330 00:17:25,520 --> 00:17:28,879 Speaker 1: put in here that fought about the debt and the deficit. 331 00:17:29,480 --> 00:17:32,639 Speaker 1: Where do, as President Trump would call them Republicans in 332 00:17:32,840 --> 00:17:37,800 Speaker 1: name only stand, where is the moral fiscal politics of 333 00:17:37,920 --> 00:17:44,040 Speaker 1: the middle ground of Republicans and Democrats? Um, I'll answer 334 00:17:44,040 --> 00:17:46,440 Speaker 1: your question in two phases. One, I think there's a 335 00:17:46,520 --> 00:17:49,359 Speaker 1: middle ground that is achievable. That is about three billion 336 00:17:49,400 --> 00:17:52,480 Speaker 1: dollars in fraud, waste and abuse trimming. That's a drop 337 00:17:52,560 --> 00:17:54,240 Speaker 1: in the bucket compared to the debt ceiling which is 338 00:17:54,280 --> 00:17:56,960 Speaker 1: currently thirty one point three eight one trillion dollars and 339 00:17:57,040 --> 00:18:00,040 Speaker 1: needs to get raised to at least three tri you 340 00:18:00,040 --> 00:18:04,320 Speaker 1: gonna get presidential election. So that's your moral like middle 341 00:18:04,359 --> 00:18:08,000 Speaker 1: ground that's achievable. But then you have Republicans that I 342 00:18:08,080 --> 00:18:10,719 Speaker 1: think they would call them rhinos. Certainly members that they 343 00:18:10,760 --> 00:18:12,720 Speaker 1: have tried this before. They want to do things like 344 00:18:12,920 --> 00:18:15,399 Speaker 1: tether the spending cuts to the debt ceiling hike on 345 00:18:15,480 --> 00:18:17,440 Speaker 1: a one to one ratio, so you see the numbers 346 00:18:17,480 --> 00:18:20,399 Speaker 1: are just relayed. You're looking at cutting one trillion at 347 00:18:20,440 --> 00:18:24,120 Speaker 1: a minimum from federal spending without touching Social Security, without 348 00:18:24,160 --> 00:18:27,200 Speaker 1: touching Medicare, without touching defense to get you two hundred 349 00:18:27,240 --> 00:18:29,160 Speaker 1: eighteen votes in the House and sixty and the Senate. 350 00:18:29,240 --> 00:18:32,920 Speaker 1: It's unworkable. Then there's an even uh more impossible theory 351 00:18:32,960 --> 00:18:35,520 Speaker 1: where you try to tether the debt to GDP ratio 352 00:18:36,000 --> 00:18:38,800 Speaker 1: um and if you get or exceed a certain amount, 353 00:18:38,840 --> 00:18:41,840 Speaker 1: you trigger automatic cuts. The current debt to GDP ratio 354 00:18:41,960 --> 00:18:44,080 Speaker 1: is a hundred and twenty four percent. They've never been 355 00:18:44,160 --> 00:18:48,159 Speaker 1: able to identify a ratio that they're comfortable with, and 356 00:18:48,359 --> 00:18:51,280 Speaker 1: they've certainly never been able to identify an automatic trigger 357 00:18:51,560 --> 00:18:53,399 Speaker 1: of what gets cut in the event you exceed that. 358 00:18:53,520 --> 00:18:55,720 Speaker 1: So there really is no middle ground at least. So 359 00:18:55,760 --> 00:18:57,399 Speaker 1: it's so important about what you use heard there on 360 00:18:58,680 --> 00:19:00,720 Speaker 1: which I was shot by. There's a lot of people 361 00:19:00,760 --> 00:19:02,440 Speaker 1: in that room tonight to think we're on the edge 362 00:19:02,480 --> 00:19:05,479 Speaker 1: of France. That's what this is really about. That's uh, 363 00:19:05,600 --> 00:19:08,000 Speaker 1: that's some of the messaging that we may hear after 364 00:19:08,359 --> 00:19:10,320 Speaker 1: the State of the Union. I am curious just to 365 00:19:10,400 --> 00:19:13,879 Speaker 1: pivot a little bit, Henrietta, not only domestic but internationally. 366 00:19:13,920 --> 00:19:15,920 Speaker 1: What you're looking for when it comes to China and 367 00:19:16,040 --> 00:19:21,600 Speaker 1: what President Biden's responses the latest increase intentions. That's a 368 00:19:21,680 --> 00:19:23,959 Speaker 1: great question. There's gonna be no fewer than three hearings 369 00:19:24,040 --> 00:19:26,760 Speaker 1: today on the House and Senate side, starting at ten am, 370 00:19:27,080 --> 00:19:29,440 Speaker 1: along with briefings of the Gang of Eight around the 371 00:19:29,560 --> 00:19:33,200 Speaker 1: sort of spy balloon fiasco over the weekend. I think 372 00:19:33,400 --> 00:19:36,159 Speaker 1: that what we've heard consistently from everyone from you know, 373 00:19:36,280 --> 00:19:40,280 Speaker 1: former ambassador Ambassador tie at Ustr even going so far 374 00:19:40,359 --> 00:19:41,720 Speaker 1: back is when she was chief of staff on the 375 00:19:41,760 --> 00:19:44,160 Speaker 1: trade subcommittees. This is an area where you can actually 376 00:19:44,240 --> 00:19:48,000 Speaker 1: get agreement from Democrats and Republicans. Especially heading into the 377 00:19:48,840 --> 00:19:52,760 Speaker 1: presidential um, we're gonna see Republicans and Democrats race to 378 00:19:52,880 --> 00:19:55,040 Speaker 1: out hawk each other. So one of the things I'm 379 00:19:55,040 --> 00:19:57,080 Speaker 1: focusing on for investors right now is what that means 380 00:19:57,119 --> 00:20:00,560 Speaker 1: for potential additional sanctions, what that means in terms of 381 00:20:00,600 --> 00:20:03,960 Speaker 1: Treasury auditing, the financial services industry in China, what it 382 00:20:04,040 --> 00:20:06,360 Speaker 1: means for potential ban on TikTok. I think all those 383 00:20:06,440 --> 00:20:09,719 Speaker 1: things are on the table and will be um at 384 00:20:09,800 --> 00:20:12,920 Speaker 1: a minimum headline risk for investors and probably very real 385 00:20:13,040 --> 00:20:15,080 Speaker 1: prospects as we head into the next two years. And 386 00:20:15,359 --> 00:20:18,000 Speaker 1: to just quickly here, what does that mean for large 387 00:20:18,119 --> 00:20:21,119 Speaker 1: international companies based in the US who are betting on 388 00:20:21,359 --> 00:20:25,760 Speaker 1: China's rebound to really help use their profits. You've got 389 00:20:25,880 --> 00:20:27,880 Speaker 1: to really be careful about which sector you're looking at, 390 00:20:27,960 --> 00:20:32,439 Speaker 1: because they're gonna be obviously those macroeconomic headwinds that benefit 391 00:20:32,520 --> 00:20:35,199 Speaker 1: them just from the reopening prospect and the sort of fundamentals, 392 00:20:35,480 --> 00:20:38,000 Speaker 1: but you must layer on the risk of federal intervention 393 00:20:38,080 --> 00:20:41,000 Speaker 1: from the United States, either through siffious Treasury, the Pentagon 394 00:20:41,560 --> 00:20:45,080 Speaker 1: um congressional action. Those risks are very real and present. 395 00:20:45,080 --> 00:20:47,160 Speaker 1: I think the second conductor in the battery space would 396 00:20:47,200 --> 00:20:50,000 Speaker 1: tell you that on a very clear recent illustration. And 397 00:20:50,080 --> 00:20:53,000 Speaker 1: you've got to be able to understand that the American 398 00:20:53,080 --> 00:20:56,480 Speaker 1: administration is ready willing and able and thoroughly prepared to 399 00:20:57,359 --> 00:21:00,399 Speaker 1: maintain existing tariffs, ratchet up existing tariff um you know, 400 00:21:00,480 --> 00:21:05,160 Speaker 1: we just saw the two tariffs on Russian aluminum floating yesterday. 401 00:21:05,400 --> 00:21:07,240 Speaker 1: Those are all the kinds of things that we should 402 00:21:07,280 --> 00:21:10,960 Speaker 1: expect for the foreseeable future, and probably at greater um 403 00:21:11,520 --> 00:21:15,200 Speaker 1: instances of frequency going into the presidential I've got thirty 404 00:21:15,280 --> 00:21:18,600 Speaker 1: seconds left, Henrietta, when this president announced he's running for 405 00:21:19,280 --> 00:21:22,760 Speaker 1: when we get that announcement from Biden. This is the 406 00:21:22,840 --> 00:21:24,520 Speaker 1: second time you've asked me that, So let's see if 407 00:21:24,560 --> 00:21:27,320 Speaker 1: I can actually get it right this time. My understanding 408 00:21:27,600 --> 00:21:29,560 Speaker 1: is that it is coming in the next couple of 409 00:21:29,640 --> 00:21:32,240 Speaker 1: weeks at the latest. You know, maybe a month or 410 00:21:32,280 --> 00:21:35,240 Speaker 1: two from now. We're gonna get Nicki Haley announcing next week, 411 00:21:35,359 --> 00:21:37,520 Speaker 1: and then more in May from the Republican side. There 412 00:21:37,600 --> 00:21:41,080 Speaker 1: we go and read a trace next accountle of weeks 413 00:21:41,280 --> 00:21:55,480 Speaker 1: one of the best, also awesome Christine account money Off Investco, 414 00:21:55,600 --> 00:21:59,760 Speaker 1: who I hope is still alongside base case for the 415 00:22:00,400 --> 00:22:03,080 Speaker 1: is they deliver an additional twenty five basis points in March, 416 00:22:03,520 --> 00:22:06,960 Speaker 1: bring FED funds to four seventy five, with the risk 417 00:22:07,040 --> 00:22:09,800 Speaker 1: of a continuing to at a twenty five basis point 418 00:22:09,840 --> 00:22:12,720 Speaker 1: pace for one or two additional meetings. I think that's 419 00:22:12,720 --> 00:22:14,800 Speaker 1: where a lot of the street right now, TK have 420 00:22:14,880 --> 00:22:17,160 Speaker 1: to pay rolls on Friday. Our heads are spinning. Invest 421 00:22:17,440 --> 00:22:19,960 Speaker 1: such a big shop and joining so Christina cat Manage, 422 00:22:19,960 --> 00:22:24,480 Speaker 1: Senior portfolio manager, Global Debt invest I'm gonna assume you're 423 00:22:24,480 --> 00:22:27,879 Speaker 1: not hanging on every word of the chairman today, but 424 00:22:28,040 --> 00:22:31,040 Speaker 1: yet all of our heads, institutional and retail, our heads 425 00:22:31,080 --> 00:22:34,600 Speaker 1: are spinning right now. How do we get controlled back 426 00:22:35,440 --> 00:22:38,359 Speaker 1: of a thought process to the future. I think that's right. 427 00:22:38,400 --> 00:22:40,480 Speaker 1: I mean, obviously, we came off of a massive data 428 00:22:40,560 --> 00:22:43,000 Speaker 1: week last week with the ECB, the FED, the b 429 00:22:43,160 --> 00:22:45,359 Speaker 1: O E, I, S, M h C. I mean, this 430 00:22:45,440 --> 00:22:47,840 Speaker 1: is this massive week, but it seemed that the market 431 00:22:47,880 --> 00:22:50,600 Speaker 1: took away the narrative that it wanted to find rather 432 00:22:50,720 --> 00:22:54,680 Speaker 1: than really listening to what all of these central banks 433 00:22:54,720 --> 00:22:58,040 Speaker 1: speakers gave us. And I think if you look at 434 00:22:58,080 --> 00:23:00,320 Speaker 1: the statements alone from all of these central banks, they 435 00:23:00,400 --> 00:23:03,280 Speaker 1: lean hawkish and that is not the market reaction that 436 00:23:03,359 --> 00:23:05,840 Speaker 1: we got Wednesday Thursday. And you've obviously seen a correction 437 00:23:05,920 --> 00:23:08,360 Speaker 1: the next couple of days. But I think the Fed 438 00:23:08,440 --> 00:23:10,080 Speaker 1: speak in the next couple of days, and Mary Daily 439 00:23:10,160 --> 00:23:12,040 Speaker 1: is kind of echoed it new and Cash Kari this morning, 440 00:23:12,119 --> 00:23:14,520 Speaker 1: I think say the same thing, and I think yesterday, Yeah, 441 00:23:14,640 --> 00:23:19,000 Speaker 1: you're gonna have this back and forth of where nobody 442 00:23:19,119 --> 00:23:23,160 Speaker 1: said we're done right, like we've made progress. I think 443 00:23:23,440 --> 00:23:26,080 Speaker 1: Friday's payroll report is a flying appointment for them, like 444 00:23:26,200 --> 00:23:28,560 Speaker 1: it doesn't give them the green light to just back off. 445 00:23:29,200 --> 00:23:32,080 Speaker 1: So the pushmat might be. On Wednesday, Chairman Pals said 446 00:23:32,080 --> 00:23:36,200 Speaker 1: the disinflationary process has started. He was asked about financial conditions, 447 00:23:36,240 --> 00:23:39,000 Speaker 1: which had eased markedly of the last couple of months, 448 00:23:39,000 --> 00:23:41,680 Speaker 1: and said they haven't changed too much. Was that a mistake? 449 00:23:41,760 --> 00:23:43,520 Speaker 1: What was he trying to tell us? I think on 450 00:23:43,880 --> 00:23:46,280 Speaker 1: when he spoke, the one kind of nod he gave 451 00:23:46,440 --> 00:23:49,320 Speaker 1: was more it seemed to shift to a singular focus 452 00:23:49,440 --> 00:23:52,720 Speaker 1: on inflation versus before it's really been the dual mandate 453 00:23:52,760 --> 00:23:54,920 Speaker 1: of inflation and we need to control the labor market. 454 00:23:55,000 --> 00:23:57,320 Speaker 1: And I still believe that they need to see both. 455 00:23:57,720 --> 00:24:01,119 Speaker 1: But perhaps the inflation coming down, if we actually fulfill 456 00:24:01,200 --> 00:24:03,080 Speaker 1: the market narrative and where we're pricing to get to 457 00:24:03,200 --> 00:24:06,000 Speaker 1: this back to two percent target by June, perhaps that's 458 00:24:06,000 --> 00:24:09,520 Speaker 1: sufficient for them to pause. I think where I have 459 00:24:09,640 --> 00:24:12,520 Speaker 1: trouble with the markets pricing or the markets narrative is 460 00:24:12,560 --> 00:24:15,800 Speaker 1: about this turnaround easing in the second half of the year, 461 00:24:16,320 --> 00:24:19,320 Speaker 1: even with the soft landing, Like if the FED navigates 462 00:24:19,320 --> 00:24:21,840 Speaker 1: a soft landing, there's not a real aggressive case for 463 00:24:21,960 --> 00:24:24,159 Speaker 1: them to ease. That's a good point. So this is 464 00:24:24,160 --> 00:24:26,760 Speaker 1: the pricing for FED funds. Let's talk about market pricing 465 00:24:26,840 --> 00:24:30,359 Speaker 1: and fixed income credits rounded so hard. Lesa's talked about 466 00:24:30,359 --> 00:24:32,960 Speaker 1: what's happened in investment grade further down the quality spectrum 467 00:24:33,000 --> 00:24:35,800 Speaker 1: to high yield as well. Do you move away from 468 00:24:35,840 --> 00:24:40,520 Speaker 1: certain parts of credit now? It's roundy so much? I think, Look, 469 00:24:40,600 --> 00:24:44,840 Speaker 1: I think you do, and I think we've across. I 470 00:24:44,880 --> 00:24:48,720 Speaker 1: think some of the easy, the easier trade of two 471 00:24:49,520 --> 00:24:53,879 Speaker 1: um of a duration trade and directional has has been 472 00:24:53,920 --> 00:24:56,040 Speaker 1: taken off the table in the last two days. We've 473 00:24:56,040 --> 00:24:57,840 Speaker 1: done a lot of work to reprice off of the 474 00:24:58,119 --> 00:25:01,000 Speaker 1: extreme richness in the treasury market. But I don't think 475 00:25:01,040 --> 00:25:04,040 Speaker 1: it's a duration trade as much. From here um so 476 00:25:04,320 --> 00:25:07,920 Speaker 1: spreads are tight. The underlying health of the corporate sector 477 00:25:08,040 --> 00:25:12,080 Speaker 1: remains strong, and global growth, if we take a step back, 478 00:25:12,720 --> 00:25:15,080 Speaker 1: looks a lot better than we thought we would be 479 00:25:15,200 --> 00:25:17,119 Speaker 1: six months ago. Six months ago in the summer, we 480 00:25:17,240 --> 00:25:20,200 Speaker 1: were talking about a massive energy crisis in Europe in 481 00:25:20,240 --> 00:25:24,320 Speaker 1: a very deep recession. European growth has continued to beat 482 00:25:24,440 --> 00:25:28,040 Speaker 1: to impress to the upside, China reopening has come to 483 00:25:28,119 --> 00:25:30,680 Speaker 1: the table sooner than we expected, So I think that 484 00:25:30,720 --> 00:25:34,800 Speaker 1: there's a lot of positive momentum um. But yeah, credit 485 00:25:34,960 --> 00:25:37,720 Speaker 1: is less appealing of the options for us. This is 486 00:25:37,760 --> 00:25:40,080 Speaker 1: fascinating because it actually builds what Darryl Cronk was saying 487 00:25:40,119 --> 00:25:41,800 Speaker 1: as well as Fargo, where he basically said that they 488 00:25:41,840 --> 00:25:44,359 Speaker 1: had really done it amazingly with the duration trade was 489 00:25:44,400 --> 00:25:46,800 Speaker 1: talking about when they got in, but saying perhaps that's 490 00:25:46,840 --> 00:25:48,840 Speaker 1: kind of over for now. He sees a range of 491 00:25:48,920 --> 00:25:51,200 Speaker 1: three point four to three point nine percent on the tenure. 492 00:25:51,560 --> 00:25:53,879 Speaker 1: Do you agree? Would you sell duration here and just 493 00:25:54,160 --> 00:25:57,360 Speaker 1: go into some of the areas that aren't the bar bell, 494 00:25:57,440 --> 00:26:00,119 Speaker 1: which basically you're saying isn't gonna work now? Yeah, I 495 00:26:00,200 --> 00:26:03,480 Speaker 1: think look the price action in the last two days. 496 00:26:04,280 --> 00:26:07,640 Speaker 1: I guess today would be three takes the compelling weird, 497 00:26:07,680 --> 00:26:09,760 Speaker 1: way too rich on the spectrum off the table, But 498 00:26:09,840 --> 00:26:14,560 Speaker 1: I think on the margin, yeah, duration isn't so compelling here. 499 00:26:14,600 --> 00:26:16,680 Speaker 1: I think it's more of a curve trade. Um. I 500 00:26:16,840 --> 00:26:20,879 Speaker 1: appreciate Priya's argument on the curve, and she has been right, 501 00:26:20,960 --> 00:26:23,440 Speaker 1: but I don't think that an inverted curve is sustainable 502 00:26:23,480 --> 00:26:26,600 Speaker 1: in the long run, right, And um, I think that 503 00:26:26,680 --> 00:26:29,240 Speaker 1: that's where the market will push back. But I think 504 00:26:29,280 --> 00:26:32,520 Speaker 1: positioning and all of these markets continues to be a 505 00:26:32,760 --> 00:26:35,480 Speaker 1: very large driving force. And you see it in equities, 506 00:26:35,520 --> 00:26:37,600 Speaker 1: and you see it in for in exchange the last 507 00:26:37,640 --> 00:26:40,120 Speaker 1: couple of days, and you you see it across the board. 508 00:26:40,160 --> 00:26:43,440 Speaker 1: And I think again, the price action on Thursday and 509 00:26:43,520 --> 00:26:46,960 Speaker 1: reversal on Friday speaks to positioning and people capitulating out 510 00:26:46,960 --> 00:26:49,080 Speaker 1: of things. I got an email from Lisbon last night 511 00:26:49,080 --> 00:26:51,840 Speaker 1: and I said, my god, Christina's on talk ben Fica 512 00:26:51,960 --> 00:26:54,800 Speaker 1: John at the World Cup. I don't know nothing, okay, 513 00:26:54,960 --> 00:26:57,879 Speaker 1: and I'm rooting for France and there's this kid on Argentina, 514 00:26:58,119 --> 00:27:02,840 Speaker 1: Enzo Fernandez. Who's would you explain? I mean, we got 515 00:27:02,920 --> 00:27:06,760 Speaker 1: the all time ben Fica fan ever with us from Investco. 516 00:27:07,200 --> 00:27:12,320 Speaker 1: Were you explained why Chelsea paid a hundred million dollars 517 00:27:12,440 --> 00:27:14,639 Speaker 1: get a big buyout, this piece of meat at a 518 00:27:14,640 --> 00:27:17,200 Speaker 1: big buyout, Claus and who is he? Ultimately that means 519 00:27:17,200 --> 00:27:19,359 Speaker 1: if Benfica even want to keep him, even if they 520 00:27:19,400 --> 00:27:21,560 Speaker 1: wanted to keep him, if it's met you meet the 521 00:27:21,600 --> 00:27:25,680 Speaker 1: buya clause, He's gone. So much money. I mean, this 522 00:27:25,840 --> 00:27:28,560 Speaker 1: is a This is not a benfi Lorenzo Fernandez issue. 523 00:27:28,720 --> 00:27:31,600 Speaker 1: This is a Chelsea issue. In the January transfer window 524 00:27:31,880 --> 00:27:34,080 Speaker 1: where they spent something like four hundred million. Why are 525 00:27:34,200 --> 00:27:41,600 Speaker 1: they different Benfica chel in terms of where's the money 526 00:27:41,680 --> 00:27:44,359 Speaker 1: comes exactly? That's going to be an important question. Okay, 527 00:27:44,359 --> 00:27:47,680 Speaker 1: I did okay there, It's going to be an important question. Okay, okay, 528 00:27:47,760 --> 00:27:50,320 Speaker 1: would you like to join us in her soccer in analysis? 529 00:27:50,359 --> 00:27:52,680 Speaker 1: I think she's going to take a pass you don't 530 00:27:52,680 --> 00:27:58,359 Speaker 1: have night, Is that right? You're ready? On top of it? 531 00:27:59,119 --> 00:28:07,199 Speaker 1: Should we send Tom to Should we send a hundred 532 00:28:07,280 --> 00:28:09,240 Speaker 1: million dollars on a player? And I think that was 533 00:28:09,280 --> 00:28:16,240 Speaker 1: Sterling actually Stern pant Sterning. He's that good Hetty Argentine, 534 00:28:16,359 --> 00:28:19,600 Speaker 1: No he's not. He does look any questions Tom Messi 535 00:28:19,720 --> 00:28:21,639 Speaker 1: does play for Argentine and no he's not as good 536 00:28:21,720 --> 00:28:25,359 Speaker 1: as Messy. I just think that transfer transfer valuations for 537 00:28:25,440 --> 00:28:29,240 Speaker 1: some of these plans now has just gone insane, insane, 538 00:28:29,240 --> 00:28:32,080 Speaker 1: and unlike American sports, that's the fee for the club, Tom, 539 00:28:32,320 --> 00:28:34,919 Speaker 1: that's not what the player gets. I didn't say he's 540 00:28:34,920 --> 00:28:37,920 Speaker 1: got to negotiat his sound read separate. Thank you, for 541 00:28:38,000 --> 00:28:41,280 Speaker 1: bringing this up, Christina. Thank you for the stuff on 542 00:28:41,320 --> 00:28:45,040 Speaker 1: the market. Thank you great cow money that I invest God. 543 00:28:45,680 --> 00:28:49,480 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 544 00:28:49,640 --> 00:28:53,800 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 545 00:28:54,120 --> 00:28:57,600 Speaker 1: starting at seven am Easter. I'm Bloomberg dot Com, the 546 00:28:57,720 --> 00:29:01,640 Speaker 1: I Heart Radio app tune In, and the Bloomberg Business app. 547 00:29:02,200 --> 00:29:05,800 Speaker 1: You can watch as live. I'm Bloomberg Television, and always 548 00:29:06,200 --> 00:29:10,120 Speaker 1: I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keane, 549 00:29:10,280 --> 00:29:12,040 Speaker 1: and this is Bloomberg