1 00:00:12,960 --> 00:00:16,640 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:16,760 --> 00:00:19,600 Speaker 1: My name is Mike Reagan, I'm a senior editor at 3 00:00:19,600 --> 00:00:23,480 Speaker 1: Bloomberg and i'm La Donna Higher, across asset reporter with Bloomberg. 4 00:00:24,480 --> 00:00:26,920 Speaker 1: And this week on the show, well, as my colleague 5 00:00:26,960 --> 00:00:30,040 Speaker 1: Cameron Christ wrote, the Fed jest doesn't get much more 6 00:00:30,080 --> 00:00:33,560 Speaker 1: hawkish than this. After raising interest rates by a quarter 7 00:00:33,600 --> 00:00:37,360 Speaker 1: percentage point, policymakers are projecting the equivalent of six more 8 00:00:37,479 --> 00:00:41,120 Speaker 1: such increases this year, and this comes as Russia's war 9 00:00:41,240 --> 00:00:45,200 Speaker 1: with Ukraine rages on, clouding the outlook for the global economy. 10 00:00:45,880 --> 00:00:48,400 Speaker 1: So what's it all mean for markets? Well, we're lucky 11 00:00:48,400 --> 00:00:51,000 Speaker 1: to have two veteran FED watchers on his guests this 12 00:00:51,040 --> 00:00:53,800 Speaker 1: week to sort it all out for us. But first, 13 00:00:53,800 --> 00:00:56,520 Speaker 1: Fili Donna, I have to point out that we are 14 00:00:56,560 --> 00:01:00,280 Speaker 1: recording this podcast on St Patrick's Day, March seven teeth 15 00:01:01,160 --> 00:01:04,080 Speaker 1: And for guys like me you know of Irish descent 16 00:01:04,160 --> 00:01:06,600 Speaker 1: but really have never stepped foot in Ireland, we have 17 00:01:06,640 --> 00:01:09,040 Speaker 1: a few traditions on St Patrick's Day, so so let 18 00:01:09,040 --> 00:01:11,640 Speaker 1: me just tell you what they are. My favorite Irish 19 00:01:11,680 --> 00:01:14,520 Speaker 1: tradition is you get the whole extended Irish family together 20 00:01:14,920 --> 00:01:19,080 Speaker 1: and eat Italian food. So I did that. That's that's 21 00:01:19,400 --> 00:01:23,080 Speaker 1: that's one thing, spaghetti or something. Yeah. Yeah. The other 22 00:01:23,120 --> 00:01:27,000 Speaker 1: thing is we tend to tell really long, rambling stories 23 00:01:27,040 --> 00:01:29,200 Speaker 1: that really don't have much of a point um, but 24 00:01:29,240 --> 00:01:30,800 Speaker 1: they have a lot of metaphors. So I'm gonna do 25 00:01:30,840 --> 00:01:32,280 Speaker 1: that right now because I want to tell you a 26 00:01:32,319 --> 00:01:34,160 Speaker 1: story about a good friend of mine. He was a 27 00:01:34,160 --> 00:01:37,960 Speaker 1: photographer at the Associated Press for like thirty years. Like 28 00:01:38,120 --> 00:01:41,520 Speaker 1: guy lived the life. He went to every Olympics, he 29 00:01:42,360 --> 00:01:47,120 Speaker 1: photographed like every NBA Championship. Anyway, now he's retired and 30 00:01:47,120 --> 00:01:49,920 Speaker 1: he's on Long Beach Island and all he does all 31 00:01:50,040 --> 00:01:54,960 Speaker 1: days take pictures of birds, regrets, and the herons and 32 00:01:54,960 --> 00:01:58,400 Speaker 1: and all sorts of uh seabirds, um, and they're beautiful. 33 00:01:58,440 --> 00:02:01,240 Speaker 1: It's like kept me saying, you're in the endemic. But 34 00:02:01,360 --> 00:02:04,960 Speaker 1: recently he took a picture over the bay. It was 35 00:02:05,000 --> 00:02:07,640 Speaker 1: sunset on Barnegat Bay, and on the other side of 36 00:02:07,640 --> 00:02:11,359 Speaker 1: the bay they were doing a controlled burn of the 37 00:02:11,400 --> 00:02:14,040 Speaker 1: pine lands. So they were trying to burn down I 38 00:02:14,080 --> 00:02:17,040 Speaker 1: guess a few acres in order to not have a 39 00:02:17,120 --> 00:02:21,040 Speaker 1: bad forest fire in the pilots. And I thought, vil Donna, 40 00:02:21,200 --> 00:02:23,799 Speaker 1: this is exactly what's the FED is doing right now? 41 00:02:24,000 --> 00:02:29,440 Speaker 1: Controlled burn of the markets in order to avoid a 42 00:02:29,480 --> 00:02:33,440 Speaker 1: major nasty, uh forest fire later on. What do you 43 00:02:33,440 --> 00:02:36,080 Speaker 1: think about that? Pretty good for at least you warned us. 44 00:02:36,240 --> 00:02:39,280 Speaker 1: But that is a really long winded way to get 45 00:02:39,280 --> 00:02:42,880 Speaker 1: back to the FED. Yeah, yeah, it could have been 46 00:02:42,880 --> 00:02:44,919 Speaker 1: more long winded. I've been known to being more long winded, 47 00:02:44,919 --> 00:02:47,520 Speaker 1: as you know. I heard, I heard, actually I think 48 00:02:47,560 --> 00:02:49,919 Speaker 1: it was. A strategist wrote in a note a better 49 00:02:50,639 --> 00:02:54,360 Speaker 1: sort of analogy. The FED is dating without the commitment, 50 00:02:55,200 --> 00:02:58,720 Speaker 1: dating without the committing something like that. I like mine better, 51 00:02:58,720 --> 00:03:02,280 Speaker 1: But that's fine. Ya, you go with here. It's good, 52 00:03:02,360 --> 00:03:05,760 Speaker 1: it's fine. Think I have a kill. They're gonna pick 53 00:03:05,800 --> 00:03:09,320 Speaker 1: minds better. Why I want to bring in Ben Emmons. 54 00:03:09,360 --> 00:03:12,720 Speaker 1: He's the managing director of Global macro Strategy at Medley Global. 55 00:03:13,120 --> 00:03:16,200 Speaker 1: And we also have Edward Harrison, who's with Bloomberg's Markets 56 00:03:16,240 --> 00:03:18,040 Speaker 1: team with us with us this week. So I want 57 00:03:18,040 --> 00:03:21,720 Speaker 1: to welcome you both to the podcast. Thank you very much. 58 00:03:22,560 --> 00:03:24,400 Speaker 1: And uh and I want to start with you because 59 00:03:24,840 --> 00:03:27,360 Speaker 1: Ben's been on this show probably as many times as 60 00:03:27,440 --> 00:03:30,959 Speaker 1: Rodney Dangerfield was on Johnny Carson, and uh, he gets 61 00:03:31,000 --> 00:03:33,239 Speaker 1: a little bit more respect from US. But but about 62 00:03:33,240 --> 00:03:35,440 Speaker 1: that many appearances, but this is your first time, so 63 00:03:35,480 --> 00:03:37,960 Speaker 1: welcome to the show. I wanted to just tell our 64 00:03:38,000 --> 00:03:39,920 Speaker 1: listeners a little bit about yourself, how you ended up 65 00:03:39,960 --> 00:03:42,520 Speaker 1: in Bloomberg and ed. You'll be happy to know we 66 00:03:42,560 --> 00:03:44,560 Speaker 1: allow a little bit of book talking on this show. 67 00:03:44,640 --> 00:03:47,960 Speaker 1: So so tell us about your new newsletter too. Yes, actually, 68 00:03:47,960 --> 00:03:52,120 Speaker 1: that's that's good. And by the way, I vacation every 69 00:03:52,160 --> 00:03:56,720 Speaker 1: summer on LBI, so I'm probably partial to you to 70 00:03:56,800 --> 00:04:00,080 Speaker 1: your story about that because I go up to Barney It. 71 00:04:00,360 --> 00:04:02,760 Speaker 1: I have a good friend who has a house up there, 72 00:04:02,800 --> 00:04:07,000 Speaker 1: and uh so good good story. Definitely beautiful part of 73 00:04:07,040 --> 00:04:09,440 Speaker 1: the world too. By the way, Jersey gets a bad rap, 74 00:04:09,440 --> 00:04:12,200 Speaker 1: but that is some of the most beautiful scenery over 75 00:04:12,200 --> 00:04:16,200 Speaker 1: that ball in my opinion. So I came to Bloomberg 76 00:04:16,200 --> 00:04:19,640 Speaker 1: through securitist route that started as I was a diplomat 77 00:04:19,680 --> 00:04:23,960 Speaker 1: in the US Born Service. I left to go to 78 00:04:24,080 --> 00:04:28,480 Speaker 1: business school, ended up in UH financial markets doing leverage 79 00:04:28,520 --> 00:04:34,080 Speaker 1: finance and high yield in London. UH subsequently decided this 80 00:04:34,160 --> 00:04:37,120 Speaker 1: was the Internet bubble. Why don't I get into the bubble? 81 00:04:37,800 --> 00:04:41,560 Speaker 1: Went to UH some technology companies as an M and 82 00:04:41,600 --> 00:04:46,920 Speaker 1: a guy and Eventually I found my way uh into 83 00:04:47,080 --> 00:04:51,839 Speaker 1: back into the markets uh via writing. UH. I was 84 00:04:52,000 --> 00:04:56,239 Speaker 1: writing a blog which became a newsletter called Credit write Downs, 85 00:04:56,400 --> 00:05:00,720 Speaker 1: which I did for thirteen years before I came the Bloomberg. 86 00:05:01,040 --> 00:05:05,080 Speaker 1: And so now I'm reanimating a newsletter called The Everything 87 00:05:05,200 --> 00:05:09,160 Speaker 1: Risk and sort of the main gist of it is 88 00:05:09,000 --> 00:05:14,400 Speaker 1: is that we have a very difficult macro situation in 89 00:05:14,440 --> 00:05:19,560 Speaker 1: the developed economies that allows us to continuously be at 90 00:05:19,720 --> 00:05:26,799 Speaker 1: risk from large uh financial large economic events and so uh, 91 00:05:26,839 --> 00:05:30,160 Speaker 1: this this sort of semi crisis uh state that we're 92 00:05:30,160 --> 00:05:33,960 Speaker 1: in is a result of the preconditions. UH. Much of 93 00:05:34,000 --> 00:05:37,040 Speaker 1: that has to do with debt and demographics. That's my uh, 94 00:05:37,360 --> 00:05:41,800 Speaker 1: that's my book talking there and I have to uh 95 00:05:42,040 --> 00:05:45,800 Speaker 1: two posts that I've done thus far, but many more 96 00:05:45,800 --> 00:05:48,680 Speaker 1: to coom H. I love the name of the newsletter 97 00:05:48,720 --> 00:05:51,560 Speaker 1: for for a paranoid worry work like me, The Everything 98 00:05:51,720 --> 00:05:53,960 Speaker 1: Risk early hits home. That's a that's a good name. 99 00:05:54,640 --> 00:05:56,760 Speaker 1: And then to turn to you and to turn to 100 00:05:57,080 --> 00:05:59,000 Speaker 1: this week, I was actually hoping you could sort of 101 00:05:59,040 --> 00:06:03,720 Speaker 1: recap some of the takeaways from from Paul's conference this week, 102 00:06:03,760 --> 00:06:06,279 Speaker 1: and I wanted to ask you why you think stocks 103 00:06:06,400 --> 00:06:12,520 Speaker 1: ended up rallying so strongly after shortly after he started speaking, Yeah, sure, 104 00:06:12,560 --> 00:06:15,280 Speaker 1: and again Feldana and Mike, it's great to be back. 105 00:06:15,320 --> 00:06:17,320 Speaker 1: I think it is need my third or fourth time 106 00:06:17,360 --> 00:06:21,880 Speaker 1: on the podcast. It's great to have this discussion. So 107 00:06:22,160 --> 00:06:25,320 Speaker 1: you know yesterday that you could explain it one one 108 00:06:25,400 --> 00:06:28,159 Speaker 1: or the other way. So the fat delivers is fat. 109 00:06:28,160 --> 00:06:30,640 Speaker 1: There's dark plot that looks pretty hockeys. Right. All these 110 00:06:30,680 --> 00:06:34,400 Speaker 1: dots are movable a significant amount, but if you really 111 00:06:34,520 --> 00:06:36,520 Speaker 1: drill into it, then you can see that they match 112 00:06:36,600 --> 00:06:39,320 Speaker 1: the expectations from the market, at least for this and 113 00:06:39,440 --> 00:06:42,239 Speaker 1: next year. And that's just how far the market wants 114 00:06:42,279 --> 00:06:45,920 Speaker 1: to look out for policy, because whatever happens in twenty four, 115 00:06:45,960 --> 00:06:48,280 Speaker 1: who knows, right like it could be a recession. Who 116 00:06:48,279 --> 00:06:51,040 Speaker 1: knows to spaying certain So I think that was one 117 00:06:51,120 --> 00:06:54,480 Speaker 1: candalyst that the market said, Okay, this is a fat 118 00:06:54,560 --> 00:06:56,919 Speaker 1: that's willing to step on the break, but not go 119 00:06:57,200 --> 00:06:59,760 Speaker 1: much more beyond what we already have been pricing in 120 00:07:00,400 --> 00:07:03,760 Speaker 1: about right, So there's a little reaction tending your yields 121 00:07:03,839 --> 00:07:06,119 Speaker 1: on that announcement. I think there was just a slight 122 00:07:06,400 --> 00:07:09,720 Speaker 1: difference between twenty three projection and when the market was 123 00:07:09,760 --> 00:07:12,760 Speaker 1: at that moment, but by and large I think that 124 00:07:12,840 --> 00:07:15,840 Speaker 1: was I think the key catalysts. Now coming into the meeting, 125 00:07:15,880 --> 00:07:19,080 Speaker 1: we had two other tillings behind us, in which I 126 00:07:19,160 --> 00:07:21,840 Speaker 1: think was a very nicely put by a colleague, John 127 00:07:21,880 --> 00:07:25,680 Speaker 1: Author's today of basically had three people throwing in the 128 00:07:25,760 --> 00:07:28,760 Speaker 1: towel pow right. I guess on inflation, I could gotta 129 00:07:28,800 --> 00:07:31,960 Speaker 1: fight it. But just the news out of China definitely 130 00:07:32,000 --> 00:07:36,240 Speaker 1: played a role, because that's a that's a different story, 131 00:07:37,000 --> 00:07:39,840 Speaker 1: but can have significant effect on markets, right because if 132 00:07:39,880 --> 00:07:43,680 Speaker 1: if you're gaining, is a real support of Chinese equities 133 00:07:44,280 --> 00:07:46,720 Speaker 1: that spreads around the region. It's not just there, it's 134 00:07:46,800 --> 00:07:50,560 Speaker 1: Hong Kong. She was significant, so that it's still over 135 00:07:50,600 --> 00:07:53,240 Speaker 1: I think to the equity markets here as we went 136 00:07:53,280 --> 00:07:56,640 Speaker 1: into that meeting, and then a lot of noise but 137 00:07:57,200 --> 00:08:00,680 Speaker 1: cutting through it, Ukraine and Russia are moving lowly towards 138 00:08:00,760 --> 00:08:04,320 Speaker 1: some sort of a cease fire at some points as 139 00:08:04,360 --> 00:08:07,800 Speaker 1: these conditions are negotiated. The ft with floating it. So 140 00:08:07,840 --> 00:08:11,120 Speaker 1: I think it was all a combined catalysts taking it 141 00:08:11,160 --> 00:08:14,040 Speaker 1: back to the fat um now creadly they want to 142 00:08:14,040 --> 00:08:16,680 Speaker 1: step on the break this year in particularly to get 143 00:08:16,680 --> 00:08:19,960 Speaker 1: that infatier rate. You now down to two percent by 144 00:08:20,000 --> 00:08:21,920 Speaker 1: next year two and a half to to point seven. 145 00:08:22,520 --> 00:08:26,680 Speaker 1: And the market seek incredibility in that, they say, and 146 00:08:26,720 --> 00:08:29,320 Speaker 1: that was the reaction the law under you curve it 147 00:08:29,360 --> 00:08:32,600 Speaker 1: would autherivize have sold off quite aggressively on the Harkeys dots. 148 00:08:32,720 --> 00:08:37,160 Speaker 1: It didn't because, as imagine they analyze this restrictive policy 149 00:08:37,160 --> 00:08:40,880 Speaker 1: that maybe the feathers pursuing. Paul took that back and said, like, 150 00:08:40,920 --> 00:08:43,640 Speaker 1: we're not reading in the business of restrictive policy. We 151 00:08:43,679 --> 00:08:46,280 Speaker 1: want to get back to neutrals practically as we can. 152 00:08:46,360 --> 00:08:48,720 Speaker 1: And how he said it that was too a soothing 153 00:08:48,760 --> 00:08:52,360 Speaker 1: way of saying, we're taking steps. You may get to 154 00:08:52,440 --> 00:08:55,120 Speaker 1: this neutral rate maybe student a half to seventy five 155 00:08:55,160 --> 00:08:58,000 Speaker 1: what it is, and that's sufficient enough to get this 156 00:08:58,080 --> 00:09:00,480 Speaker 1: infatier rate over time back to two percent. I think 157 00:09:00,520 --> 00:09:04,000 Speaker 1: all of that together that it is relief rally, which 158 00:09:04,200 --> 00:09:08,440 Speaker 1: didn't continue today. But it was a notable movie, you know. Uh. 159 00:09:08,800 --> 00:09:12,000 Speaker 1: But it's a great point about the China story sort 160 00:09:12,040 --> 00:09:15,439 Speaker 1: of being an underlying story there for listeners who might 161 00:09:15,440 --> 00:09:17,240 Speaker 1: have missed that. I mean, I guess the big concern 162 00:09:17,920 --> 00:09:21,320 Speaker 1: lately in China is that all these US listed uh 163 00:09:21,559 --> 00:09:25,240 Speaker 1: Chinese companies would basically get kicked off of the exchanges 164 00:09:25,360 --> 00:09:30,400 Speaker 1: for not uh complying with the auditing requirements that that 165 00:09:30,440 --> 00:09:33,000 Speaker 1: the US wants, and China came out and said they're 166 00:09:33,000 --> 00:09:35,720 Speaker 1: gonna make some concessions to allow that, and and there's 167 00:09:36,000 --> 00:09:38,640 Speaker 1: a few other statements to to basically try to prop 168 00:09:38,720 --> 00:09:41,920 Speaker 1: up the market. That and as that Golden China Golden 169 00:09:41,960 --> 00:09:45,199 Speaker 1: Dragon China Index up thirty percent, I think on the 170 00:09:45,280 --> 00:09:48,880 Speaker 1: day the biggest game ever, unbelievable story and it's it's 171 00:09:48,920 --> 00:09:52,200 Speaker 1: a you know, I think that is sort of something 172 00:09:52,240 --> 00:09:55,520 Speaker 1: that that propped up sentiment, you know, despite the FED. Um, 173 00:09:55,679 --> 00:09:58,160 Speaker 1: and I'm glad you brought that up. But but let's 174 00:09:58,160 --> 00:10:01,640 Speaker 1: bring you in here. Um, any other takeaways from the 175 00:10:01,640 --> 00:10:04,520 Speaker 1: FED for you? And one thing I'm I'm really curious 176 00:10:04,600 --> 00:10:08,840 Speaker 1: about is FED credibility. Um, they seem to have lost 177 00:10:08,880 --> 00:10:13,800 Speaker 1: a lot of credibility regarding the notion of inflation being transitory. 178 00:10:14,320 --> 00:10:16,160 Speaker 1: They basically come out and said, what's our bet, We're 179 00:10:16,200 --> 00:10:18,120 Speaker 1: gonna take a mulligan on that. We we got that 180 00:10:18,160 --> 00:10:21,680 Speaker 1: one wrong. And some of the rationality I I heard 181 00:10:21,720 --> 00:10:24,600 Speaker 1: for the rally after the statement was that while they're 182 00:10:24,720 --> 00:10:28,280 Speaker 1: expressing confidence that these rate hikes won't uh you know, 183 00:10:28,320 --> 00:10:31,080 Speaker 1: temp us into a recession. Um. But I'm wondering how 184 00:10:31,160 --> 00:10:35,720 Speaker 1: much credibility they have left and whether you know, that 185 00:10:35,800 --> 00:10:37,880 Speaker 1: might be a mistake by some people to to use 186 00:10:37,880 --> 00:10:40,480 Speaker 1: that as a rationale to buy. Yeah, you know, I 187 00:10:40,520 --> 00:10:42,760 Speaker 1: think that what Ben was saying about the relief rally 188 00:10:42,840 --> 00:10:44,720 Speaker 1: there at the end makes a lot of sense to 189 00:10:44,760 --> 00:10:49,720 Speaker 1: me that, uh, there was a certain relief that uh 190 00:10:49,760 --> 00:10:52,720 Speaker 1: the news is behind this. Uh, stocks world were sold. 191 00:10:53,280 --> 00:10:56,000 Speaker 1: Uh so people they bought in. And now we can 192 00:10:56,040 --> 00:10:59,880 Speaker 1: see how much, how much, how many legs the relief rally, 193 00:10:59,880 --> 00:11:03,720 Speaker 1: how as how long this relief rally lasts. I look 194 00:11:03,800 --> 00:11:07,280 Speaker 1: at this last move is sort of a regime shift. Uh. 195 00:11:07,320 --> 00:11:11,560 Speaker 1: It's a regime shift basically because we're moving from the 196 00:11:11,640 --> 00:11:16,360 Speaker 1: forward guidance game, uh to actual rate cuts or rate hikes, 197 00:11:16,760 --> 00:11:22,640 Speaker 1: because that's the Fed's main policy tool. When rates or zero, 198 00:11:22,679 --> 00:11:25,400 Speaker 1: they don't have any rate cuts or rate hikes that 199 00:11:25,440 --> 00:11:28,040 Speaker 1: they can they don't have any rate cuts they can use, 200 00:11:28,480 --> 00:11:30,720 Speaker 1: so they have to use forward guidance. But now that 201 00:11:30,720 --> 00:11:32,960 Speaker 1: we're getting off the zero lower bound, we're moving to 202 00:11:33,000 --> 00:11:36,040 Speaker 1: a different regime. And so the question for the FED was, 203 00:11:36,120 --> 00:11:39,839 Speaker 1: as we moved to this regime. How much can credibility 204 00:11:39,880 --> 00:11:44,520 Speaker 1: can we have in terms of meeting market expectations. I 205 00:11:44,600 --> 00:11:47,040 Speaker 1: think it was interesting that Ben talked about the FED 206 00:11:47,120 --> 00:11:50,960 Speaker 1: being banged on expectations, uh for what the market is 207 00:11:51,000 --> 00:11:54,400 Speaker 1: looking for. They basically capitulated because if you looked at 208 00:11:54,480 --> 00:11:59,360 Speaker 1: the dot plot from December two one, uh to the 209 00:11:59,440 --> 00:12:02,600 Speaker 1: one that just came out, and think about the messaging 210 00:12:02,640 --> 00:12:06,240 Speaker 1: in between, this is a lot more hawkish than they 211 00:12:06,280 --> 00:12:10,600 Speaker 1: were speaking uh two weeks ago. So they basically have said, 212 00:12:10,640 --> 00:12:15,880 Speaker 1: we're shifting from the Ford guidance game to rate hikes, 213 00:12:16,200 --> 00:12:19,319 Speaker 1: and we're gonna do that by taking on the market position. 214 00:12:19,320 --> 00:12:23,800 Speaker 1: We're capitulating our previous position. We're you know, waving the 215 00:12:24,120 --> 00:12:27,760 Speaker 1: white flag telling everyone that we got it wrong, and 216 00:12:27,880 --> 00:12:29,720 Speaker 1: we're going to take on the market position. And so 217 00:12:29,760 --> 00:12:33,280 Speaker 1: the reset is now for for that. And you know 218 00:12:33,320 --> 00:12:37,640 Speaker 1: I wrote about this actually a month ago. UH. Greenspan 219 00:12:37,720 --> 00:12:39,920 Speaker 1: back in two thousand and three, he was concerned about 220 00:12:39,920 --> 00:12:42,960 Speaker 1: the FED running out of bullets during that particular recession. 221 00:12:43,520 --> 00:12:47,520 Speaker 1: And what he said is is is that he was 222 00:12:47,559 --> 00:12:50,720 Speaker 1: talking to then Kansas City FED President Thomas Hoenig, and 223 00:12:50,760 --> 00:12:53,400 Speaker 1: he said, be as non specific as you know how 224 00:12:53,480 --> 00:12:56,360 Speaker 1: to be that was his guidance to him, and Ben 225 00:12:56,400 --> 00:12:58,880 Speaker 1: Bernanki got in there and he interceded. He said, you 226 00:12:58,880 --> 00:13:01,960 Speaker 1: know what, no, don't do that. Ambiguity had This is 227 00:13:01,960 --> 00:13:06,160 Speaker 1: his quote exact quote. Ambiguity has its uses, but mostly 228 00:13:06,240 --> 00:13:10,000 Speaker 1: in non cooperative games like poker. Monetary policy is a 229 00:13:10,040 --> 00:13:13,520 Speaker 1: cooperative game. The whole point is to get financial markets 230 00:13:13,559 --> 00:13:15,800 Speaker 1: on our side and for them to do some of 231 00:13:15,800 --> 00:13:19,040 Speaker 1: our workforce. So that's what the FEDS doing. They're saying, 232 00:13:20,120 --> 00:13:22,080 Speaker 1: you did all the work to get to the seven, 233 00:13:22,200 --> 00:13:25,559 Speaker 1: we're moving to your position and as a result, now 234 00:13:26,040 --> 00:13:28,520 Speaker 1: the proof is in the pudding in terms of whether 235 00:13:28,640 --> 00:13:32,000 Speaker 1: we uh, you know, move to the position that you 236 00:13:32,080 --> 00:13:34,760 Speaker 1: see and that's the best possible outcome that you could 237 00:13:34,760 --> 00:13:39,480 Speaker 1: get for fed that was behind the curve and losing credibility. Yeah, 238 00:13:39,480 --> 00:13:42,319 Speaker 1: And to me, and it reminds me when I was 239 00:13:42,360 --> 00:13:44,160 Speaker 1: a kid and I'd get in trouble with my parents 240 00:13:44,160 --> 00:13:46,280 Speaker 1: and they'd say, you're we're gonna ground you for the 241 00:13:46,320 --> 00:13:48,720 Speaker 1: next year, and then they'd kind of softened up in 242 00:13:48,800 --> 00:13:50,720 Speaker 1: a week or two. And so I wonder if that's 243 00:13:50,760 --> 00:13:52,320 Speaker 1: part of it, is kind of you know, trying to 244 00:13:52,320 --> 00:13:56,640 Speaker 1: influence behavior with with uh, you know, this really hawkish 245 00:13:56,720 --> 00:13:59,160 Speaker 1: dot plot, whereas you know, those dots can always move 246 00:13:59,200 --> 00:14:02,000 Speaker 1: down again later year if if inflation does sort of 247 00:14:02,080 --> 00:14:05,160 Speaker 1: behave better than than what everyone's but then what it's 248 00:14:05,160 --> 00:14:07,080 Speaker 1: doing now anyways, that you think that's part? Is there 249 00:14:07,080 --> 00:14:08,760 Speaker 1: a little bit of a psychology game going on? Do 250 00:14:08,800 --> 00:14:12,680 Speaker 1: you think I just feel that they have They're very 251 00:14:12,679 --> 00:14:17,400 Speaker 1: concerned about, uh, disappointing the market. Uh. They want to 252 00:14:17,440 --> 00:14:21,120 Speaker 1: be as transparent as possible. They tried their best to 253 00:14:21,400 --> 00:14:24,200 Speaker 1: talk down the market from seven rate hikes. You know, 254 00:14:24,400 --> 00:14:27,200 Speaker 1: people were upp in the anti from seven to eight 255 00:14:27,240 --> 00:14:31,800 Speaker 1: to nine consecutive rate hikes, and they weren't able to 256 00:14:31,840 --> 00:14:35,960 Speaker 1: do that, and so, uh, they had a decision to 257 00:14:36,000 --> 00:14:39,760 Speaker 1: make when we come out, are we going to move 258 00:14:39,840 --> 00:14:43,240 Speaker 1: to this new regime of rate hikes from Ford guidance 259 00:14:43,600 --> 00:14:47,000 Speaker 1: with the market and and ourselves, um, not on the 260 00:14:47,040 --> 00:14:49,880 Speaker 1: same page. The last time they did this in two 261 00:14:49,880 --> 00:14:53,080 Speaker 1: thousand and eighteen, they were telling the market, look, we're 262 00:14:53,080 --> 00:14:56,960 Speaker 1: gonna hike uh two times, We're gonna hike three times. 263 00:14:57,400 --> 00:15:00,240 Speaker 1: The market didn't believe them. The market was and we're 264 00:15:00,280 --> 00:15:02,600 Speaker 1: gonna hike. They're gonna hike two times, and they ended 265 00:15:02,640 --> 00:15:05,520 Speaker 1: up hiking four and it was that fourth hike in 266 00:15:05,640 --> 00:15:09,280 Speaker 1: December of two eighteen that caused the markets to just 267 00:15:09,600 --> 00:15:12,760 Speaker 1: go bananas. So I think that that's what they want 268 00:15:12,800 --> 00:15:15,840 Speaker 1: to avoid. They want to you know, give it to 269 00:15:15,920 --> 00:15:18,800 Speaker 1: the market on a platter, say we're meeting your expectations, 270 00:15:19,120 --> 00:15:22,760 Speaker 1: and then we can use forward guidance at the the 271 00:15:24,200 --> 00:15:27,520 Speaker 1: you know, um, at the margin to sort of you know, 272 00:15:27,840 --> 00:15:31,080 Speaker 1: get people to dial up or down bit depending upon 273 00:15:31,120 --> 00:15:41,800 Speaker 1: the economic circumstances at the time. And I want to 274 00:15:41,840 --> 00:15:44,680 Speaker 1: ask you too, maybe add on to that, and also 275 00:15:44,720 --> 00:15:47,800 Speaker 1: a weigh in on the recession talk. We keep hearing 276 00:15:47,800 --> 00:15:50,440 Speaker 1: about recession talk, and I wanted to ask you what 277 00:15:50,480 --> 00:15:53,720 Speaker 1: you make of that idea that potentially the US could 278 00:15:54,040 --> 00:15:57,680 Speaker 1: see a recession and then maybe possibly as soon as 279 00:15:58,080 --> 00:16:00,920 Speaker 1: later this year or early next year. Is that likely 280 00:16:00,960 --> 00:16:05,400 Speaker 1: to materialize? Yeah, I hope not. But it's something that's 281 00:16:05,760 --> 00:16:10,000 Speaker 1: has really creeped into the market's narrative increasingly. Of course, 282 00:16:10,000 --> 00:16:13,160 Speaker 1: everybody's zero into on the on the you curve, there 283 00:16:13,160 --> 00:16:16,840 Speaker 1: are inversions appearing. If you actually look at the three 284 00:16:16,880 --> 00:16:19,800 Speaker 1: monten year curve, which is what most of these recession 285 00:16:19,840 --> 00:16:23,080 Speaker 1: models are based upon, that's still very steep curve. But 286 00:16:23,120 --> 00:16:26,680 Speaker 1: if you discounted a year from now forward. It's it's inverted. 287 00:16:26,760 --> 00:16:29,560 Speaker 1: So there's definitely expectation that we're going to hit the 288 00:16:29,680 --> 00:16:33,120 Speaker 1: Ukraine version, and it has been the best predictor of 289 00:16:33,280 --> 00:16:37,480 Speaker 1: future recessions. So it seems like that the bomb market 290 00:16:37,520 --> 00:16:40,600 Speaker 1: is looking at this is a recession that may happen 291 00:16:40,680 --> 00:16:44,320 Speaker 1: by twenty four or about something in that nature, which 292 00:16:44,360 --> 00:16:48,400 Speaker 1: may also explain why there are rate cuts sort of 293 00:16:48,480 --> 00:16:51,920 Speaker 1: price starting in that year. And by the way, on 294 00:16:51,960 --> 00:16:54,960 Speaker 1: the on the vet Stop plot, there's one member that 295 00:16:55,120 --> 00:16:58,800 Speaker 1: actually put in a rate cut in that plot for 296 00:16:58,960 --> 00:17:02,440 Speaker 1: twenty four, right, so just keep that in mind to 297 00:17:02,520 --> 00:17:07,040 Speaker 1: the recession talk is here. Paul of course was pushing 298 00:17:07,119 --> 00:17:09,680 Speaker 1: back on that, not pushing hard like like aggressive, but 299 00:17:09,760 --> 00:17:12,760 Speaker 1: basically dismissing the idea that they are the economy is 300 00:17:12,880 --> 00:17:15,520 Speaker 1: way too strong. It's not, which was by the way, 301 00:17:15,560 --> 00:17:18,040 Speaker 1: another reason why perhaps of markets were up like it's 302 00:17:18,080 --> 00:17:20,800 Speaker 1: with Voto conference on the economy is always a really 303 00:17:21,240 --> 00:17:24,400 Speaker 1: positive impact on markets, especially if the fact comes out 304 00:17:24,480 --> 00:17:27,520 Speaker 1: with that sort of language. Even if their models are on, 305 00:17:28,119 --> 00:17:31,920 Speaker 1: it's an important psychological factor. So do that point BacT 306 00:17:32,480 --> 00:17:34,399 Speaker 1: if we're going to continue to talk about it. We 307 00:17:34,440 --> 00:17:36,040 Speaker 1: know from years ago, we're going to end up with 308 00:17:36,119 --> 00:17:40,280 Speaker 1: talking ourselves into this recession. People were back. Risk is 309 00:17:40,320 --> 00:17:44,640 Speaker 1: taken down, savings are off, and people are careful, right, 310 00:17:44,680 --> 00:17:48,680 Speaker 1: and that's something that we have to monitor. Now. Look 311 00:17:48,760 --> 00:17:52,320 Speaker 1: at the shocks that we just went through with Ukraine, 312 00:17:53,040 --> 00:17:57,160 Speaker 1: especially two weeks ago, is enormous if you believe on 313 00:17:57,160 --> 00:18:00,639 Speaker 1: on on how global and global skill that is taking 314 00:18:00,680 --> 00:18:05,800 Speaker 1: place because of oh, wheat exports for example come out 315 00:18:05,800 --> 00:18:10,480 Speaker 1: of that Bombus region as well as in the Odessa region, 316 00:18:10,600 --> 00:18:12,359 Speaker 1: So it all comes through the force and all the 317 00:18:12,480 --> 00:18:15,399 Speaker 1: size of the of Ukraine that in itself can have 318 00:18:15,400 --> 00:18:19,200 Speaker 1: a huge effect on global economy. Right. There's of food 319 00:18:19,280 --> 00:18:23,399 Speaker 1: either shortages or or sky marketing food prices that is 320 00:18:23,440 --> 00:18:27,560 Speaker 1: going to impact lower incomes and that's here happening here too. 321 00:18:28,080 --> 00:18:30,879 Speaker 1: And now it has to be method monetary tightening. And 322 00:18:30,960 --> 00:18:34,960 Speaker 1: that combination has been historically time and time again and 323 00:18:35,080 --> 00:18:38,959 Speaker 1: not a predictor of recession um and the last year 324 00:18:39,000 --> 00:18:42,240 Speaker 1: I guess is that that if you watch carefully with 325 00:18:42,280 --> 00:18:45,200 Speaker 1: credit markets are doing, I've always found out a good 326 00:18:45,320 --> 00:18:48,840 Speaker 1: leading indicator. So far, we haven't had the structures that 327 00:18:48,960 --> 00:18:52,120 Speaker 1: we had say five years ago, through energy markets into 328 00:18:52,119 --> 00:18:55,840 Speaker 1: the high market and spilling over the credit um. But 329 00:18:55,920 --> 00:18:57,840 Speaker 1: it is to be watched there too because you know, 330 00:18:57,960 --> 00:19:01,800 Speaker 1: the trading houses in modies are are really constraint in 331 00:19:01,840 --> 00:19:05,440 Speaker 1: liquidity currently cannot get any access of credit. So there's 332 00:19:05,480 --> 00:19:08,600 Speaker 1: something of a spill over going on that may become bigger. 333 00:19:08,960 --> 00:19:12,200 Speaker 1: And as that is the case if credit really starts 334 00:19:12,240 --> 00:19:15,040 Speaker 1: to like be pulled back, and there was some talk 335 00:19:15,119 --> 00:19:19,000 Speaker 1: about it that companies would challenged with with issuing bonds 336 00:19:19,040 --> 00:19:22,439 Speaker 1: in a certain period when the market got temporary volatile 337 00:19:22,480 --> 00:19:25,439 Speaker 1: because the Ukraine that just leads to the disruption and 338 00:19:25,480 --> 00:19:28,400 Speaker 1: I could lead them to again pairing back of activity 339 00:19:28,960 --> 00:19:31,600 Speaker 1: and lead us to down to that path. So I 340 00:19:31,640 --> 00:19:34,160 Speaker 1: think if I to take those three the you curve, 341 00:19:34,960 --> 00:19:38,520 Speaker 1: you know the fact that food press and and and 342 00:19:38,640 --> 00:19:43,199 Speaker 1: multi policy tightening, combined with signs some science and credit, 343 00:19:43,680 --> 00:19:45,960 Speaker 1: it points to that at least going to face a 344 00:19:45,960 --> 00:19:49,280 Speaker 1: significant slowdown of the economy, that's for sure. I think 345 00:19:49,320 --> 00:19:53,600 Speaker 1: that's almost a given. Now we would not be to 346 00:19:53,640 --> 00:19:59,520 Speaker 1: be authorized with equities here already correcting about twelve that 347 00:19:59,560 --> 00:20:01,680 Speaker 1: would have been last it we've been taken back much. 348 00:20:01,760 --> 00:20:04,639 Speaker 1: I think the rally is the last point yesterday was 349 00:20:04,640 --> 00:20:08,400 Speaker 1: was that Relieve rally on all the uncertainties that came 350 00:20:08,440 --> 00:20:11,439 Speaker 1: sort of to get over taken out briefly. But I 351 00:20:11,560 --> 00:20:15,119 Speaker 1: was not about, oh, Will the economy is actually a 352 00:20:15,160 --> 00:20:18,919 Speaker 1: good shape. We had mis calculate it is therefore rally 353 00:20:19,080 --> 00:20:21,159 Speaker 1: so I think the market is worried that there is 354 00:20:21,200 --> 00:20:24,879 Speaker 1: a risk of procession on the horizon. Yeah, it's a 355 00:20:25,040 --> 00:20:27,800 Speaker 1: it's an interesting point about credit. I mean, I feel 356 00:20:27,800 --> 00:20:31,680 Speaker 1: like the last time everyone freaked out about credit spreads 357 00:20:31,760 --> 00:20:34,680 Speaker 1: was when oil prices were so low that all that 358 00:20:34,800 --> 00:20:37,560 Speaker 1: junk energy debt was under pressure. Now you've got sort 359 00:20:37,560 --> 00:20:39,560 Speaker 1: of the opposite idea. And I wonder, you know, I 360 00:20:39,560 --> 00:20:43,920 Speaker 1: wonder if credit isn't maybe the signal uh as powerful 361 00:20:43,960 --> 00:20:46,640 Speaker 1: of the signal as as it was in previous time. 362 00:20:46,920 --> 00:20:49,440 Speaker 1: But I wanted to pick both of your brains about 363 00:20:49,760 --> 00:20:53,280 Speaker 1: the notion of inflation right now. Um to me, I 364 00:20:53,359 --> 00:20:57,240 Speaker 1: was never, you know, quite convinced that everyone was wrong 365 00:20:57,280 --> 00:21:01,480 Speaker 1: about transitory inflation. I just thought at the length of 366 00:21:01,480 --> 00:21:05,120 Speaker 1: of how long the transitory period was was off and 367 00:21:05,119 --> 00:21:08,960 Speaker 1: and but by the the whole paradigm is shifted now 368 00:21:09,000 --> 00:21:13,000 Speaker 1: with Will doing what it's doing, uh, China locking down 369 00:21:13,080 --> 00:21:17,159 Speaker 1: some factories again, you know, fouling up supply chains again. 370 00:21:18,640 --> 00:21:21,200 Speaker 1: But I'm curious how you both are thinking about inflation. 371 00:21:21,280 --> 00:21:26,880 Speaker 1: Have we sort of progressed away from the supply chains 372 00:21:27,359 --> 00:21:30,600 Speaker 1: uh and and sort of that big rebound and demand 373 00:21:30,840 --> 00:21:34,080 Speaker 1: being the main drivers of inflation. Are we more now? 374 00:21:34,119 --> 00:21:37,720 Speaker 1: And sort of the scary lingering effects of inflation with 375 00:21:37,720 --> 00:21:41,720 Speaker 1: wages going up and that forcing uh costs to go up, 376 00:21:42,080 --> 00:21:45,880 Speaker 1: you know, and and that cycle sort of feeding onto itself. Uh, 377 00:21:46,040 --> 00:21:49,560 Speaker 1: sort of that that labor push inflation. And how are 378 00:21:49,600 --> 00:21:51,359 Speaker 1: you thinking about it? Are are we in sort of 379 00:21:51,680 --> 00:21:53,840 Speaker 1: as the inflation genie kind of out of the bottle 380 00:21:53,880 --> 00:21:57,040 Speaker 1: now and you can't really put it back, um, regardless 381 00:21:57,119 --> 00:22:00,480 Speaker 1: of whether we normalize supply chains and everything else. Yeah, 382 00:22:00,520 --> 00:22:04,840 Speaker 1: I think we're definitely in a different mode right now 383 00:22:05,040 --> 00:22:07,240 Speaker 1: than we were. We're not in the so called secular 384 00:22:07,280 --> 00:22:11,560 Speaker 1: stagnation mode. Even Larry Summers, who's the guy who coined 385 00:22:11,560 --> 00:22:14,760 Speaker 1: that phrase, would say that. And going back to Ben's 386 00:22:14,800 --> 00:22:18,280 Speaker 1: comments just from before, that's one of the reasons that 387 00:22:18,400 --> 00:22:22,920 Speaker 1: you see the numbers ticking up in terms of the 388 00:22:22,920 --> 00:22:24,960 Speaker 1: FED model. You know, the New York Fed has a 389 00:22:25,000 --> 00:22:29,639 Speaker 1: probability of US recession uh predicted by the Treasury spread, 390 00:22:29,720 --> 00:22:31,920 Speaker 1: the one that Ben was talking about the three months 391 00:22:31,960 --> 00:22:34,680 Speaker 1: of the ten year, and if you look at how 392 00:22:34,720 --> 00:22:38,240 Speaker 1: that works out, we're right now at sort of two 393 00:22:38,320 --> 00:22:43,480 Speaker 1: thousand eighteen levels. That's when the FED was forced to pivot. Uh. 394 00:22:43,760 --> 00:22:46,920 Speaker 1: The numbers that you were talking about back during the 395 00:22:47,800 --> 00:22:51,399 Speaker 1: shale oil days were slightly lower, but they were still concerning. 396 00:22:51,400 --> 00:22:55,120 Speaker 1: That was still a concerning market. But the reason that 397 00:22:55,760 --> 00:23:00,679 Speaker 1: it's like that is is there's a residual leaf that 398 00:23:00,760 --> 00:23:05,399 Speaker 1: the FED may not need the seven may not be enough, 399 00:23:05,920 --> 00:23:09,760 Speaker 1: and we they may have to accelerate. So the market 400 00:23:09,960 --> 00:23:12,920 Speaker 1: is positioned as it is now with a rate hike 401 00:23:12,960 --> 00:23:17,400 Speaker 1: at every meeting. But potentially, if we're in a new regime, 402 00:23:17,640 --> 00:23:21,400 Speaker 1: as I think that we potentially are, uh, we could 403 00:23:21,400 --> 00:23:24,200 Speaker 1: move to fifty basis points at any meeting. Every meeting 404 00:23:24,280 --> 00:23:27,600 Speaker 1: is live, and every meetings live for or even fifty 405 00:23:27,600 --> 00:23:31,479 Speaker 1: basis points from here on out. And why is it 406 00:23:31,560 --> 00:23:33,719 Speaker 1: that we would be in that regime? I think it 407 00:23:33,720 --> 00:23:36,680 Speaker 1: has to do with changing preferences. You know, there's the 408 00:23:36,760 --> 00:23:41,879 Speaker 1: d globalization and there's also the sense that we this 409 00:23:41,960 --> 00:23:44,520 Speaker 1: has gone on long enough that people they need to 410 00:23:44,680 --> 00:23:47,719 Speaker 1: stock up on certain things and they have their preferences 411 00:23:47,800 --> 00:23:51,159 Speaker 1: shift in terms of what they're willing to to stock 412 00:23:51,280 --> 00:23:55,000 Speaker 1: up on as a result of what's happening, So that 413 00:23:55,040 --> 00:24:01,040 Speaker 1: will continue the inflation genie rolling. And when that happens 414 00:24:01,400 --> 00:24:05,159 Speaker 1: long enough, people they say, time out, we need to 415 00:24:05,160 --> 00:24:09,600 Speaker 1: get a pay raise, we need more money, and then 416 00:24:09,760 --> 00:24:12,879 Speaker 1: you get that sort of uh, that that spiral that 417 00:24:12,920 --> 00:24:15,800 Speaker 1: you were talking about, Michael. So I think that we're there, 418 00:24:16,440 --> 00:24:21,600 Speaker 1: and I I believe that the market is, the bond 419 00:24:21,600 --> 00:24:24,359 Speaker 1: market is much more on edge about that being a 420 00:24:24,440 --> 00:24:28,679 Speaker 1: problem than the equity market. And that's reflected in the 421 00:24:28,800 --> 00:24:33,560 Speaker 1: very low spreads that we have between uh say, the 422 00:24:33,560 --> 00:24:36,199 Speaker 1: three month and the ten year, not as much, but 423 00:24:36,359 --> 00:24:38,960 Speaker 1: more so the two year and the ten year or 424 00:24:39,119 --> 00:24:43,399 Speaker 1: the seven year in the tenure which is now inverted. Yeah, 425 00:24:43,520 --> 00:24:45,560 Speaker 1: for both you. I wonder is you know, with all 426 00:24:45,600 --> 00:24:49,200 Speaker 1: these other drivers of inflation besides low interest rates, is 427 00:24:49,240 --> 00:24:53,760 Speaker 1: there a chance that you know, aggressive interest rate increases 428 00:24:54,240 --> 00:24:56,360 Speaker 1: won't even solve the problem, or if they do, it's 429 00:24:56,400 --> 00:24:58,120 Speaker 1: you know, the medicine will you're worse than the cure 430 00:24:58,240 --> 00:25:01,240 Speaker 1: and we'll have a real the growth as a result. 431 00:25:01,640 --> 00:25:04,880 Speaker 1: What do you think about that? Then? Yeah, it tends 432 00:25:04,920 --> 00:25:06,760 Speaker 1: to play out the way Mike, that you have to 433 00:25:07,000 --> 00:25:11,520 Speaker 1: then become really restrictive, as they say the wonkish term, 434 00:25:11,560 --> 00:25:13,639 Speaker 1: but that's kind of the way to think about it. 435 00:25:14,040 --> 00:25:17,520 Speaker 1: The funds ory goes far beyond where it may be neutral. 436 00:25:18,520 --> 00:25:20,840 Speaker 1: And that's a bit elusive concept, but okay, let's go 437 00:25:20,880 --> 00:25:22,800 Speaker 1: with it. Right that that neutral is something like to 438 00:25:23,000 --> 00:25:25,120 Speaker 1: point forward to put five is its been putting out 439 00:25:26,359 --> 00:25:29,840 Speaker 1: that you're you're too restrictive, and then you really you know, 440 00:25:30,119 --> 00:25:31,880 Speaker 1: first of all, in the US, it will be particularly 441 00:25:31,880 --> 00:25:34,680 Speaker 1: through credit. That's always how the US economy gets into 442 00:25:34,760 --> 00:25:39,479 Speaker 1: that recession. If you start stiffening kzoomer credit company credit, 443 00:25:40,000 --> 00:25:42,920 Speaker 1: things really slow down fast. That's what actually happened with 444 00:25:42,960 --> 00:25:45,960 Speaker 1: the shutdown two years ago, right there was shutting down 445 00:25:46,000 --> 00:25:48,560 Speaker 1: the economy at that an amplified effect on credit. We 446 00:25:48,560 --> 00:25:50,879 Speaker 1: were immediately in a recession almost on the day that 447 00:25:50,920 --> 00:25:53,640 Speaker 1: we shut down the economy. So we're now in slow 448 00:25:53,720 --> 00:25:57,639 Speaker 1: grind towards that, I think, And and yeah, the point 449 00:25:57,760 --> 00:26:01,680 Speaker 1: is how many rate hags are we necessary in order 450 00:26:01,720 --> 00:26:04,320 Speaker 1: to get this inflation right down? Now? There's one advantage 451 00:26:04,359 --> 00:26:07,240 Speaker 1: that the FAT has over other central banks in that regard, 452 00:26:07,240 --> 00:26:10,080 Speaker 1: and that's the dollar, Because if you were the high 453 00:26:10,240 --> 00:26:13,359 Speaker 1: rates such that you're getting a further surge in the 454 00:26:13,400 --> 00:26:15,560 Speaker 1: dollar coll it that way, and let's take a look 455 00:26:15,600 --> 00:26:19,640 Speaker 1: at episodes and as a as a good example of that, 456 00:26:20,200 --> 00:26:23,359 Speaker 1: right when we went from fifteen up to almost the 457 00:26:23,400 --> 00:26:26,080 Speaker 1: dollar or something like that. But the impact that will 458 00:26:26,160 --> 00:26:30,560 Speaker 1: have on commodity prices globally, that could be a way 459 00:26:30,600 --> 00:26:34,080 Speaker 1: of how the FAT can better control inflation. It doesn't 460 00:26:34,119 --> 00:26:36,520 Speaker 1: even have to say strong dollar policy, but just by 461 00:26:36,520 --> 00:26:40,120 Speaker 1: the nature of hiking rates that would boost the dollar, 462 00:26:40,160 --> 00:26:43,320 Speaker 1: particularly against geeta and currencies. Because if you think of 463 00:26:43,359 --> 00:26:46,240 Speaker 1: the other example that's playing out live is in Brazil. 464 00:26:47,160 --> 00:26:49,960 Speaker 1: Now they're a center back. There has been aggressive same 465 00:26:50,000 --> 00:26:52,640 Speaker 1: in Chili. Right they have taken they were much comprehemptive. 466 00:26:53,200 --> 00:26:55,679 Speaker 1: Their stock markets this year are up by right then 467 00:26:56,520 --> 00:26:59,240 Speaker 1: something that looked last time, and that is because the 468 00:26:59,359 --> 00:27:02,960 Speaker 1: inflation rate are topping out. Its still have very elevated. 469 00:27:03,600 --> 00:27:06,080 Speaker 1: But their style of multi policy is not something that 470 00:27:06,119 --> 00:27:09,960 Speaker 1: we easily would do here. Much as these dog propers 471 00:27:10,040 --> 00:27:12,840 Speaker 1: hockeys as you look like, it's nothing compared to what 472 00:27:12,960 --> 00:27:15,080 Speaker 1: the Brazilian Central Bank is doing. You know, it's take 473 00:27:15,160 --> 00:27:17,520 Speaker 1: hunt hund fifty basement hikes. Now, there's no way that 474 00:27:17,560 --> 00:27:20,600 Speaker 1: we're gonna get that here. But if if the fact 475 00:27:20,600 --> 00:27:22,760 Speaker 1: we're to move with the hunt on fifty base points 476 00:27:22,800 --> 00:27:25,840 Speaker 1: in a short order, you know, by by June or so, 477 00:27:25,920 --> 00:27:28,639 Speaker 1: we're up hundred fifty base points and in with the 478 00:27:28,640 --> 00:27:31,600 Speaker 1: fat funds rate, the dollar would meaningful take off, I think, 479 00:27:31,600 --> 00:27:35,200 Speaker 1: and that would be impactful maybe when on the last 480 00:27:35,200 --> 00:27:39,280 Speaker 1: point on inflation as it gets more entrenched embedded. You know, 481 00:27:39,280 --> 00:27:42,240 Speaker 1: if you follow the Michigan survey, you read the texts 482 00:27:42,520 --> 00:27:45,400 Speaker 1: day since last year. Some in the spring of last year, 483 00:27:45,880 --> 00:27:50,280 Speaker 1: they were inflation psychology started appear a number of times, 484 00:27:50,440 --> 00:27:53,159 Speaker 1: and I think they got this from surveys. This is 485 00:27:53,200 --> 00:27:56,800 Speaker 1: the seventies idea, right, If people got affected by inflation 486 00:27:57,160 --> 00:28:00,800 Speaker 1: and started making decisions about their purchases and they slower 487 00:28:00,880 --> 00:28:03,280 Speaker 1: down what it's not holding things or getting ahead of 488 00:28:03,320 --> 00:28:06,040 Speaker 1: the ahead of the curve, you will, right, because they're 489 00:28:06,080 --> 00:28:09,359 Speaker 1: worried about prices going up even further. So that's something 490 00:28:09,400 --> 00:28:13,240 Speaker 1: to keep in mind because consumers thinking that way, it's 491 00:28:13,320 --> 00:28:17,199 Speaker 1: obviously having effect on inflation long term. Because if you 492 00:28:17,240 --> 00:28:20,840 Speaker 1: look at the consumer projection for inflation from the Conference 493 00:28:20,880 --> 00:28:24,800 Speaker 1: Board since May, that one of your projection has been 494 00:28:24,800 --> 00:28:27,760 Speaker 1: over six percent. That's been dead on where we ended 495 00:28:27,840 --> 00:28:30,520 Speaker 1: up with inflation. You know, it's been one of the 496 00:28:30,520 --> 00:28:33,920 Speaker 1: best predictors this time around this case. So watch those 497 00:28:33,960 --> 00:28:36,080 Speaker 1: because I think if those do not come off right, 498 00:28:36,119 --> 00:28:38,760 Speaker 1: and that's seems to be the case both Michigan and 499 00:28:39,120 --> 00:28:43,240 Speaker 1: Conference Board one year expectations is not not stay very elevated, 500 00:28:44,000 --> 00:28:46,920 Speaker 1: and the Ukraine situation leads to further shock and energy, 501 00:28:47,040 --> 00:28:50,720 Speaker 1: which is very possible because of extremely tight conditions in 502 00:28:50,760 --> 00:28:54,760 Speaker 1: the physical markets, then then that could have further effect 503 00:28:54,840 --> 00:28:58,560 Speaker 1: on inflation long term. So that's something to think of. 504 00:28:59,440 --> 00:29:03,360 Speaker 1: And I'd add on to that that uh, on top 505 00:29:03,400 --> 00:29:07,800 Speaker 1: of that, you know, we should think about how did 506 00:29:07,920 --> 00:29:11,680 Speaker 1: the interest rates affect the economy over the short term 507 00:29:11,720 --> 00:29:16,040 Speaker 1: then versus the long term. Uh, it's just like with inflation, 508 00:29:16,560 --> 00:29:20,120 Speaker 1: there's a short term effect. But we're now going back 509 00:29:20,120 --> 00:29:24,720 Speaker 1: to Michael's question, we're getting into people changing their behavior 510 00:29:24,920 --> 00:29:30,000 Speaker 1: and if transitory at lasts long enough, even though it's 511 00:29:30,040 --> 00:29:33,760 Speaker 1: it's support, the the effects are are the the shock 512 00:29:33,880 --> 00:29:39,520 Speaker 1: is transitory, the impact on people's behavior is non transitory. 513 00:29:39,560 --> 00:29:41,640 Speaker 1: I would say you could see the same sort of 514 00:29:41,680 --> 00:29:44,840 Speaker 1: thing in terms of when Ben talks about the FED 515 00:29:44,880 --> 00:29:48,800 Speaker 1: having to jam it on. Actually when the FED first 516 00:29:49,160 --> 00:29:54,040 Speaker 1: hikes rates. Companies want to lock in their their their debt, 517 00:29:54,960 --> 00:29:58,640 Speaker 1: you get more expansion of credit. People they want to 518 00:29:58,760 --> 00:30:02,600 Speaker 1: lock in their mortgage, so you get more activity in mortgages. 519 00:30:02,920 --> 00:30:07,680 Speaker 1: You get higher uh income to the private sector, because 520 00:30:07,760 --> 00:30:10,560 Speaker 1: the private sector is a net receiver of interest. So 521 00:30:10,680 --> 00:30:16,120 Speaker 1: actually the initial phases are one where there's a certain 522 00:30:16,160 --> 00:30:20,680 Speaker 1: impulse that is pro cyclical. Uh. The FED is actually 523 00:30:20,840 --> 00:30:26,200 Speaker 1: adding in certain realms to uh, you know, to stimulus, 524 00:30:26,280 --> 00:30:28,640 Speaker 1: and so they really have to jam it on in 525 00:30:28,720 --> 00:30:31,560 Speaker 1: order to overcome that impact. And that's when the credit 526 00:30:31,640 --> 00:30:36,840 Speaker 1: starts to deteriorate. People get locked out of credit markets, 527 00:30:36,920 --> 00:30:39,760 Speaker 1: and the whole thing starts to fall apart. And that's 528 00:30:39,800 --> 00:30:43,520 Speaker 1: why it's so difficult for the FED to thread that needle. 529 00:30:44,160 --> 00:30:46,960 Speaker 1: What we're hoping is is that just like in the 530 00:30:47,720 --> 00:30:51,720 Speaker 1: shale oil phase when Janet Yelling just stopped for a 531 00:30:51,800 --> 00:30:55,560 Speaker 1: whole year, that the FED can wake up, look at 532 00:30:55,600 --> 00:31:00,440 Speaker 1: the signs, see the tension, and then stop and by 533 00:31:00,480 --> 00:31:05,120 Speaker 1: doing so, uh, save the economy. But there's a lot 534 00:31:05,120 --> 00:31:07,800 Speaker 1: of worry, including my own worry, that they won't be 535 00:31:07,840 --> 00:31:11,360 Speaker 1: able to do that. Maybe on that quick on that 536 00:31:11,400 --> 00:31:13,520 Speaker 1: point that is that you know, you have to think 537 00:31:13,560 --> 00:31:17,680 Speaker 1: now that the under the faith framework, right, the flexible 538 00:31:17,760 --> 00:31:21,520 Speaker 1: average inflation target in FLAME framework. You know that that 539 00:31:21,640 --> 00:31:23,920 Speaker 1: could be on one hand that they could do that. 540 00:31:23,960 --> 00:31:26,880 Speaker 1: They could pivot faster from from as they did pre 541 00:31:27,040 --> 00:31:30,200 Speaker 1: faith in twenty nineteen. They pivot it from time into easing. 542 00:31:31,360 --> 00:31:33,320 Speaker 1: This may happen again to right. If you get this 543 00:31:33,440 --> 00:31:37,280 Speaker 1: hikes frontloadus, we get backloaded rate cuts based on that 544 00:31:37,360 --> 00:31:40,760 Speaker 1: faith framework. They switched quickly. But there is it time 545 00:31:40,840 --> 00:31:43,200 Speaker 1: like here, like you have to as you say, you 546 00:31:43,200 --> 00:31:46,000 Speaker 1: have to get ahead of it. Now they're put out 547 00:31:46,040 --> 00:31:49,720 Speaker 1: this projection of seven hikes for this year, matching market expectation, 548 00:31:50,280 --> 00:31:52,600 Speaker 1: but you have to you really do have to follow too. 549 00:31:52,680 --> 00:31:55,560 Speaker 1: I think on trying to get this inflation rates stabilized 550 00:31:55,640 --> 00:31:57,520 Speaker 1: that even though it will stay higher than when it 551 00:31:57,760 --> 00:32:02,080 Speaker 1: was before and and for that's going to affect the economy, 552 00:32:02,480 --> 00:32:05,000 Speaker 1: then based on faith, you could switch to easing in 553 00:32:05,040 --> 00:32:09,040 Speaker 1: the future maybe quicker um. But we're not there. Yeah. 554 00:32:09,120 --> 00:32:11,760 Speaker 1: I think this is the discussion of the recession scenario. Right. 555 00:32:11,800 --> 00:32:15,200 Speaker 1: If the action of seven hikes gets inflation under control 556 00:32:15,480 --> 00:32:18,640 Speaker 1: and the economy stage relatively stable with employment not too 557 00:32:18,720 --> 00:32:21,880 Speaker 1: much effective, then maybe you're going to continue on a 558 00:32:21,960 --> 00:32:25,880 Speaker 1: rate path high path. If not, then faiths will dictate 559 00:32:25,960 --> 00:32:29,360 Speaker 1: that you should twitch the easy Yeah. And I would 560 00:32:29,360 --> 00:32:32,640 Speaker 1: say the fet IS is definitely not front loaded in 561 00:32:32,680 --> 00:32:34,479 Speaker 1: the way that we want them to be. I mean, 562 00:32:34,520 --> 00:32:36,640 Speaker 1: if you think about what's happened over the last two 563 00:32:36,680 --> 00:32:40,440 Speaker 1: months since the January meeting. The January meeting, they came 564 00:32:40,440 --> 00:32:45,320 Speaker 1: out and they were basically saying our summary of economic 565 00:32:45,320 --> 00:32:48,520 Speaker 1: objections in December, we're moving away from that and we're 566 00:32:48,520 --> 00:32:51,960 Speaker 1: gonna be more hawkish. Then the market exploded to the seven, 567 00:32:52,040 --> 00:32:55,760 Speaker 1: eight and nine times. People started talking about fifty basis points. 568 00:32:55,880 --> 00:32:57,520 Speaker 1: Actually I was one of the first people to start 569 00:32:57,600 --> 00:33:00,480 Speaker 1: talking about that, and the FETSI hang on way a minute, 570 00:33:00,720 --> 00:33:03,440 Speaker 1: that's way too aggressive for us. And they started to 571 00:33:03,480 --> 00:33:07,400 Speaker 1: dial it back, and then market expectations dialed back. Uh, 572 00:33:07,440 --> 00:33:10,160 Speaker 1: and it get to the point where the expectation was 573 00:33:10,240 --> 00:33:13,720 Speaker 1: for bases points and Power pretty much said that when 574 00:33:13,760 --> 00:33:17,640 Speaker 1: he talked to Congress. So that's not frontloaded. So the 575 00:33:18,600 --> 00:33:24,760 Speaker 1: FED talk the markets into accepting a non frontloaded policy, 576 00:33:24,800 --> 00:33:28,440 Speaker 1: And to me, that means that the risk is for 577 00:33:28,600 --> 00:33:31,400 Speaker 1: inflation to continue to be elevated and that the FED 578 00:33:31,480 --> 00:33:34,600 Speaker 1: is going to have to jam it on belatedly, and 579 00:33:34,680 --> 00:33:38,880 Speaker 1: that is where the recession risk comes into play. Then 580 00:33:39,360 --> 00:33:41,360 Speaker 1: I want to ask you just to sort of help 581 00:33:41,480 --> 00:33:43,680 Speaker 1: wrap things up a bit. I wanted to ask you 582 00:33:43,760 --> 00:33:46,320 Speaker 1: what sort of factors are signs you're looking for for 583 00:33:46,480 --> 00:33:50,440 Speaker 1: bottoming for the market. One particular idea I'm interested in 584 00:33:50,640 --> 00:33:53,120 Speaker 1: is this idea that institutions have been doing a lot 585 00:33:53,160 --> 00:33:55,680 Speaker 1: of the selling over the last couple of weeks. Retail 586 00:33:55,680 --> 00:33:59,320 Speaker 1: investors have been buying, but the institutional selling is just 587 00:33:59,440 --> 00:34:04,640 Speaker 1: overwhelmeding that retail bid. If we do see institutional selling 588 00:34:04,720 --> 00:34:07,440 Speaker 1: sort of exhaust itself, could that sort of sort of 589 00:34:07,480 --> 00:34:11,799 Speaker 1: help us stabilize a bit more. It could be. I mean, 590 00:34:11,840 --> 00:34:15,320 Speaker 1: it's it's a it's an interesting uh the economy because 591 00:34:15,400 --> 00:34:18,720 Speaker 1: party the retail flows are driven by the institutions investing 592 00:34:18,800 --> 00:34:21,719 Speaker 1: that on their behalf and stock funds right on the 593 00:34:21,719 --> 00:34:25,120 Speaker 1: other hand, is individuals that that take risk because of 594 00:34:26,440 --> 00:34:29,000 Speaker 1: yead to believe that the economy is so boosted that 595 00:34:29,120 --> 00:34:31,520 Speaker 1: from the pandemic it's not going to end in a recession. 596 00:34:31,560 --> 00:34:33,680 Speaker 1: There's still a lot of hope, there's still a lot 597 00:34:33,760 --> 00:34:37,000 Speaker 1: of I think by the deep mentality perhaps out there 598 00:34:37,160 --> 00:34:41,319 Speaker 1: among those investors in particular and it's as long as 599 00:34:41,360 --> 00:34:43,600 Speaker 1: the feat is not yet on on the course of 600 00:34:43,640 --> 00:34:47,279 Speaker 1: this bounce sheet reduction, which we didn't talk much about here. 601 00:34:47,280 --> 00:34:50,480 Speaker 1: But if they they're gonna do that, they're gonna have 602 00:34:50,520 --> 00:34:52,319 Speaker 1: a plan. They're gonna make that aware of it at 603 00:34:52,360 --> 00:34:55,440 Speaker 1: a meeting, which probably isn't May. But if there's a 604 00:34:55,440 --> 00:34:58,319 Speaker 1: psychology about that too, right, people view the balance sheet 605 00:34:58,360 --> 00:35:01,319 Speaker 1: of the fat and the stock market very linked to 606 00:35:01,320 --> 00:35:03,719 Speaker 1: one another. If it goes up, the stock market goes up, 607 00:35:03,719 --> 00:35:06,080 Speaker 1: and vice versa. So let us play a bit of 608 00:35:06,080 --> 00:35:08,880 Speaker 1: a role here too, because if if that, if the 609 00:35:08,880 --> 00:35:13,080 Speaker 1: fat gets aggressive, they're also as as in adding on 610 00:35:13,719 --> 00:35:16,680 Speaker 1: to get ahead of the curves, as at was explaining, 611 00:35:17,320 --> 00:35:19,920 Speaker 1: then I think the bottoming is going to be challenged. 612 00:35:20,000 --> 00:35:23,680 Speaker 1: You know, there's there's a lot of I think still psychology, 613 00:35:23,680 --> 00:35:27,040 Speaker 1: painful psychology left from twenty eighteen on that. On that part, 614 00:35:27,320 --> 00:35:30,240 Speaker 1: you know, it was clear that reserves in the system 615 00:35:30,280 --> 00:35:33,880 Speaker 1: were hoarded and the situation got too tight too quick 616 00:35:34,800 --> 00:35:38,560 Speaker 1: by doing both balance reductions and fat and fat funds 617 00:35:39,000 --> 00:35:42,200 Speaker 1: red hikes. So so I think this bottom is a 618 00:35:42,200 --> 00:35:46,359 Speaker 1: bit elusive at this moment um. In addition to that, 619 00:35:46,440 --> 00:35:49,440 Speaker 1: we we do deal with a geopolitical uncertainty that that 620 00:35:49,560 --> 00:35:54,000 Speaker 1: does have quite unknown outcomes, including what you're seeing today. Right, 621 00:35:54,080 --> 00:35:58,759 Speaker 1: these these headlines remain threatening, so we have to see that. So, 622 00:35:58,920 --> 00:36:01,160 Speaker 1: I I think gets a bit of a playoff on 623 00:36:01,239 --> 00:36:03,879 Speaker 1: the one hands, hope that the bid the dip is here, 624 00:36:04,000 --> 00:36:06,400 Speaker 1: or people willing to do it. They think it's just 625 00:36:06,600 --> 00:36:08,960 Speaker 1: over now. Right, let's let's do this because it's going 626 00:36:09,040 --> 00:36:11,720 Speaker 1: to be just the same kind of major rallies before. 627 00:36:11,800 --> 00:36:14,799 Speaker 1: But let's not forget that the psychology of the first 628 00:36:14,800 --> 00:36:17,520 Speaker 1: bouncy and the and the and the stock market are 629 00:36:18,080 --> 00:36:21,200 Speaker 1: it's actually very strong. So I wonder if the retail 630 00:36:21,360 --> 00:36:23,880 Speaker 1: traders at some point also there take notice of that 631 00:36:24,120 --> 00:36:26,520 Speaker 1: and say, you know what, this is maybe not so 632 00:36:26,600 --> 00:36:28,880 Speaker 1: much of a bid to dip here at this moment. 633 00:36:29,480 --> 00:36:47,680 Speaker 1: As we go from here, one more quick one before 634 00:36:47,680 --> 00:36:50,560 Speaker 1: we get to the crazy things. I'm always thinking of 635 00:36:50,600 --> 00:36:54,120 Speaker 1: our listeners who are like, listen, just get these guys 636 00:36:54,120 --> 00:36:56,040 Speaker 1: to tell me what to do with my money already, 637 00:36:56,400 --> 00:37:00,480 Speaker 1: you know, so here we got an aggressive FED and 638 00:37:00,560 --> 00:37:06,640 Speaker 1: aggressive Russia. Uh lockdowns in China. I mean, what do 639 00:37:06,719 --> 00:37:09,719 Speaker 1: you do in this scenario? Is it just to go 640 00:37:09,800 --> 00:37:12,239 Speaker 1: to cash wait for the dust to settle type of 641 00:37:12,239 --> 00:37:14,719 Speaker 1: scenario or quickly what would you guys do? And I 642 00:37:14,719 --> 00:37:20,160 Speaker 1: know everyone's risk tolerance is different and retirement horizon is different. 643 00:37:20,280 --> 00:37:22,840 Speaker 1: So let's just pretend our listener is, oh, I don't know, 644 00:37:22,960 --> 00:37:26,719 Speaker 1: a a cranky uh fifty something, your old guy in 645 00:37:26,760 --> 00:37:29,279 Speaker 1: New Jersey with three kids head in to college and 646 00:37:29,320 --> 00:37:31,479 Speaker 1: he's he's not the most risk tolerant kind in the world. 647 00:37:31,800 --> 00:37:34,959 Speaker 1: Where would you tell him? Well, you know, I would 648 00:37:34,960 --> 00:37:38,560 Speaker 1: definitely say that you're you do want to raise a 649 00:37:38,640 --> 00:37:41,880 Speaker 1: bit of cash to be able to redeploy it. You know, 650 00:37:41,920 --> 00:37:44,879 Speaker 1: there's a stealth bear market that's going on right now. 651 00:37:45,320 --> 00:37:48,960 Speaker 1: You know, even though the overall markets down ten percent, 652 00:37:49,000 --> 00:37:51,920 Speaker 1: if you look beneath the surface, there's a lot of 653 00:37:51,960 --> 00:37:54,799 Speaker 1: pain that's that's been had. I'm looking at some of 654 00:37:54,800 --> 00:37:57,360 Speaker 1: the stocks on my screen right now. Uh, you have 655 00:37:57,480 --> 00:38:00,640 Speaker 1: told Brothers down thirty two of from the fifty two 656 00:38:00,680 --> 00:38:06,359 Speaker 1: week high, Lenar's down, Home, Deposts down, fed X is down, 657 00:38:07,440 --> 00:38:12,319 Speaker 1: Starbucks is down. Uh you know, so Ford is down. 658 00:38:13,800 --> 00:38:18,560 Speaker 1: So these are you know, real companies that make real products, 659 00:38:19,200 --> 00:38:22,280 Speaker 1: and you have to ask yourself how much further down 660 00:38:22,320 --> 00:38:25,680 Speaker 1: can they go? Uh? It's not about by the dip. 661 00:38:25,800 --> 00:38:29,960 Speaker 1: It's about understanding the dynamics of the market and and 662 00:38:30,000 --> 00:38:34,799 Speaker 1: also the real economy. At some point, these companies are 663 00:38:34,800 --> 00:38:38,480 Speaker 1: going to be a buy uh both you know, from 664 00:38:38,480 --> 00:38:43,080 Speaker 1: evaluation perspective, but also just from a liquidity perspective. And 665 00:38:43,160 --> 00:38:45,480 Speaker 1: so I think that you you want to hold more 666 00:38:45,600 --> 00:38:49,000 Speaker 1: cash to be able to leverage into those real companies 667 00:38:49,280 --> 00:38:52,640 Speaker 1: when when the when the market turns, stick with the 668 00:38:52,719 --> 00:38:56,440 Speaker 1: quality and not the uh, not the innovators and disruptors 669 00:38:56,440 --> 00:38:59,200 Speaker 1: of the world. I guess, well, you know that's a 670 00:38:59,200 --> 00:39:01,359 Speaker 1: bit more of a crap shoot. I have another list 671 00:39:01,400 --> 00:39:06,719 Speaker 1: of companies. Uh there Uh you know Robin Hoods down eight. Uh. 672 00:39:06,880 --> 00:39:11,600 Speaker 1: You have like Beyond Meat is down seventy three. Uh. 673 00:39:11,680 --> 00:39:14,680 Speaker 1: You know, I don't think that. I mean they could 674 00:39:14,719 --> 00:39:16,840 Speaker 1: go to ninety, they could go to a hundred. You 675 00:39:16,880 --> 00:39:20,560 Speaker 1: never know. Uh, but are they coming back? And how 676 00:39:20,640 --> 00:39:24,000 Speaker 1: quickly are they coming back? Pilot has got to eat 677 00:39:24,000 --> 00:39:28,520 Speaker 1: more of those veggie burgers, I think, Mike, you know, 678 00:39:28,680 --> 00:39:31,319 Speaker 1: I've never been a fan of holding cash. I've always 679 00:39:31,360 --> 00:39:34,440 Speaker 1: been more about staying invested and now and as you know, 680 00:39:34,520 --> 00:39:37,239 Speaker 1: I would have work a major investments firm. There was 681 00:39:37,280 --> 00:39:40,120 Speaker 1: a strict discipline on on how much cash you should hold. 682 00:39:40,239 --> 00:39:42,400 Speaker 1: And obviously there was for a quickly reason because clients 683 00:39:42,400 --> 00:39:46,080 Speaker 1: could withdraw the money, but it was also about like, yes, 684 00:39:46,160 --> 00:39:49,719 Speaker 1: cashes can be very stabilizing, infecting your portfolio if you 685 00:39:49,800 --> 00:39:53,719 Speaker 1: go into a being of significant volatility. So when the 686 00:39:53,760 --> 00:39:56,480 Speaker 1: invasion happened on February twenty four and you had a 687 00:39:56,520 --> 00:39:58,840 Speaker 1: lot of cash from February twenty four through say the 688 00:39:58,880 --> 00:40:01,440 Speaker 1: first week of March, that probably would have helped you 689 00:40:01,480 --> 00:40:05,319 Speaker 1: a bit with that volatility move, but then it didn't. Right, 690 00:40:05,400 --> 00:40:08,080 Speaker 1: we had actually we have the best week closing week 691 00:40:08,080 --> 00:40:10,319 Speaker 1: probably coming in for the S and P since I 692 00:40:10,360 --> 00:40:13,360 Speaker 1: think a number of months now. So it just tell you, 693 00:40:13,480 --> 00:40:15,960 Speaker 1: like you you you don't want to be and let's 694 00:40:15,960 --> 00:40:19,440 Speaker 1: say sort of levels of cash. I think that that 695 00:40:19,560 --> 00:40:23,520 Speaker 1: would be really dragging on on your room run return 696 00:40:23,600 --> 00:40:26,719 Speaker 1: that you try to achieve for retirement. But you know 697 00:40:26,800 --> 00:40:29,239 Speaker 1: that you want to be optimistic with the cash that 698 00:40:29,320 --> 00:40:33,040 Speaker 1: you have. That that's always a good idea. Um. You know, 699 00:40:33,120 --> 00:40:37,600 Speaker 1: cashes is simply a volted an accid with zero volatility. 700 00:40:38,320 --> 00:40:41,800 Speaker 1: It cannot really be autorized valued, right It's it doesn't 701 00:40:41,800 --> 00:40:45,120 Speaker 1: have any discount factor nothing. But it is also something 702 00:40:45,160 --> 00:40:48,840 Speaker 1: about pure optimism. Right, if you have too much cash, 703 00:40:49,160 --> 00:40:51,640 Speaker 1: you're going to deploy it. This probably happened yesterday too. 704 00:40:51,719 --> 00:40:54,040 Speaker 1: There were probably people on the sidelines looking, this is 705 00:40:54,080 --> 00:40:57,000 Speaker 1: maybe a moment to do this right, And so I 706 00:40:57,040 --> 00:40:59,760 Speaker 1: think you're gonna think about in that context as opposed 707 00:40:59,800 --> 00:41:04,360 Speaker 1: to using cashes and acid that people something say, because 708 00:41:04,400 --> 00:41:08,040 Speaker 1: it isn't unless you put that cash into a treasury bill, right, 709 00:41:08,080 --> 00:41:11,360 Speaker 1: that's shadd cash equivalent. Sure, but that, as we now know, 710 00:41:11,560 --> 00:41:14,239 Speaker 1: that could lose value too, especially in this scenario of 711 00:41:14,320 --> 00:41:17,920 Speaker 1: a federal reserve hyaking rage vality, Will will, We'll go down. 712 00:41:19,680 --> 00:41:22,560 Speaker 1: Good stuff, guys, good stuff. But now it's time for 713 00:41:22,600 --> 00:41:26,440 Speaker 1: the crazy stuff. I gotta say, then get us started. 714 00:41:26,480 --> 00:41:29,920 Speaker 1: What's the craziest thing you saw this week? Well, something 715 00:41:29,960 --> 00:41:32,759 Speaker 1: I'm really interested in is this idea that crypto could 716 00:41:32,760 --> 00:41:37,239 Speaker 1: potentially be used to skirt sanctions, which there's a lot 717 00:41:37,239 --> 00:41:40,320 Speaker 1: of animals out there saying it's that's it's not really, 718 00:41:40,600 --> 00:41:42,400 Speaker 1: that's not really the case. But we had a story 719 00:41:42,480 --> 00:41:45,359 Speaker 1: from one of our colleagues all got care of. She 720 00:41:45,400 --> 00:41:48,600 Speaker 1: wrote about a crypto forensics firm potentially having found a 721 00:41:48,600 --> 00:41:51,799 Speaker 1: wallet with millions of dollars worth of crypto in it 722 00:41:52,320 --> 00:41:56,960 Speaker 1: and it might be linked to sanctioned individuals and and oligarchs. 723 00:41:57,080 --> 00:42:00,440 Speaker 1: And the company is called Elliptic, and they've only passed 724 00:42:00,440 --> 00:42:04,920 Speaker 1: the information onto the government. And uh, he was telling us, 725 00:42:05,000 --> 00:42:08,280 Speaker 1: he was telling Bloomberg News that crypto can be used 726 00:42:08,320 --> 00:42:11,960 Speaker 1: to skirt sanctions. So to me, that was really interesting. 727 00:42:12,560 --> 00:42:21,440 Speaker 1: That's that's pretty good, Bennet, was that your wallet? Uh? 728 00:42:21,480 --> 00:42:23,560 Speaker 1: And the crazy thing I thought that, well, you know 729 00:42:23,719 --> 00:42:27,080 Speaker 1: I watched Jim Cramer often on at night. You know, 730 00:42:27,120 --> 00:42:28,960 Speaker 1: you've never heard of him bad, never heard of him. 731 00:42:29,000 --> 00:42:30,960 Speaker 1: I know, I gotta mention this one because I thought 732 00:42:31,000 --> 00:42:33,719 Speaker 1: this was crazy. So he is a bull, right if 733 00:42:33,760 --> 00:42:37,080 Speaker 1: we know, checking a ball. I was like his enthusiasm. 734 00:42:37,120 --> 00:42:39,120 Speaker 1: But what he said was this, he said, like and 735 00:42:39,160 --> 00:42:44,440 Speaker 1: to an earlier question how the market will bottom, he said, look, everybody, 736 00:42:44,600 --> 00:42:47,040 Speaker 1: I mean, everybody on the bus, on the train, in 737 00:42:47,080 --> 00:42:50,080 Speaker 1: the stateium, wherever you are, just everybody has to think 738 00:42:50,120 --> 00:42:53,200 Speaker 1: barish about the market. Everybody's barish, everybody's selling. Then the 739 00:42:53,200 --> 00:42:55,520 Speaker 1: barcketbile bottom. That's what he said. I thought that was 740 00:42:55,560 --> 00:42:57,640 Speaker 1: crazy that. You know, that's one not going to happen 741 00:42:57,719 --> 00:43:01,600 Speaker 1: to you know that that's that's already mentality doesn't exist. 742 00:43:01,680 --> 00:43:04,400 Speaker 1: So that was pretty crazy. All right, that was a 743 00:43:04,400 --> 00:43:07,560 Speaker 1: pretty good cramer. You don't see Ben moving the hands. 744 00:43:07,600 --> 00:43:10,200 Speaker 1: It's the hands that did it for me. I uh, 745 00:43:10,280 --> 00:43:12,239 Speaker 1: I can almost see the sweat stains forming on your 746 00:43:12,239 --> 00:43:15,560 Speaker 1: shirt there. How about your add what's the craziest thing 747 00:43:15,600 --> 00:43:18,280 Speaker 1: you saw this week? Well, you know, I was gonna 748 00:43:18,440 --> 00:43:20,840 Speaker 1: I was telling you, Mike, I was thinking about oil 749 00:43:20,880 --> 00:43:23,360 Speaker 1: because it went up and down. But now that everyone's 750 00:43:23,680 --> 00:43:27,960 Speaker 1: talking about anecdotes, my anecdote is the craziest thing I 751 00:43:28,000 --> 00:43:37,080 Speaker 1: saw was a movie theater company buying a golden mining company. 752 00:43:37,200 --> 00:43:41,239 Speaker 1: And the gold mining company doesn't even mine gold. For me, 753 00:43:41,719 --> 00:43:44,640 Speaker 1: that is absolutely bonkers. And you know, I'm talking about 754 00:43:44,640 --> 00:43:48,840 Speaker 1: a MC's acquisition. And just so you know, the gold 755 00:43:48,880 --> 00:43:52,880 Speaker 1: mining company went public via a spack of course it did. 756 00:43:53,680 --> 00:43:57,120 Speaker 1: If that's not crazy stuff, I don't know what it 757 00:43:58,160 --> 00:43:59,799 Speaker 1: And you know what, what's such thing to me about 758 00:43:59,840 --> 00:44:02,840 Speaker 1: that is it really was only a twenty eight million 759 00:44:02,840 --> 00:44:07,000 Speaker 1: dollar investment. But the the amount of media that MC gets, 760 00:44:07,120 --> 00:44:09,759 Speaker 1: the arned media you get for for doing that, you 761 00:44:09,800 --> 00:44:12,560 Speaker 1: get all the apes back back on board with the stock. 762 00:44:12,600 --> 00:44:14,640 Speaker 1: Maybe maybe it's worth that twenty million. I don't know. 763 00:44:14,680 --> 00:44:19,040 Speaker 1: I don't know. Um, all right, you're you're crazy. Things 764 00:44:19,040 --> 00:44:21,080 Speaker 1: were all great. I'll give you the winning crazy thing now, 765 00:44:21,120 --> 00:44:24,200 Speaker 1: which is which is mine? Of course? Uh? Courtesy of 766 00:44:24,360 --> 00:44:26,719 Speaker 1: and it pains me that mine always wins, filled Onna, 767 00:44:26,880 --> 00:44:29,239 Speaker 1: But I mean I have to be objective about this 768 00:44:29,880 --> 00:44:32,680 Speaker 1: and and and be honest. Yeah, it's not crazy how 769 00:44:32,680 --> 00:44:37,600 Speaker 1: that always happens? Courtesy of the New York Post, which 770 00:44:37,680 --> 00:44:40,560 Speaker 1: is we all know is the crazy Things paper of record. 771 00:44:41,520 --> 00:44:45,720 Speaker 1: Elon Musk, you've heard of him, right, The world's richest 772 00:44:45,719 --> 00:44:51,040 Speaker 1: man challenged Russian President Vladimir Putin to quote single combat 773 00:44:51,160 --> 00:44:54,640 Speaker 1: amid the war in Ukraine, prompting the Kremlin official to 774 00:44:54,719 --> 00:44:57,320 Speaker 1: fire back at the Tesla boss, calling him a quote 775 00:44:57,360 --> 00:45:01,680 Speaker 1: weakling and a little devil. So must tweeted, I hereby 776 00:45:01,760 --> 00:45:06,200 Speaker 1: challenge Vladimir Putin to a single combat. Steaks are Ukraine 777 00:45:06,920 --> 00:45:09,640 Speaker 1: and the words Vladimir Putin and Ukraine were written in 778 00:45:09,680 --> 00:45:14,360 Speaker 1: cyrillic letters used both in Russian and Ukrainian. Uh. And 779 00:45:14,360 --> 00:45:17,120 Speaker 1: then he tagged Putin's official count saying do you agree 780 00:45:17,120 --> 00:45:19,960 Speaker 1: to this fight? I'm not sure what single combat is. 781 00:45:20,000 --> 00:45:22,640 Speaker 1: I guess I don't know. If you bring pitchforks and 782 00:45:22,640 --> 00:45:26,400 Speaker 1: and uh long swords or something. But the question is ed, 783 00:45:26,480 --> 00:45:29,200 Speaker 1: who are you backing in this fight? That is a 784 00:45:29,239 --> 00:45:32,360 Speaker 1: good question. Who do I have back in single combat? 785 00:45:32,840 --> 00:45:35,360 Speaker 1: You know, I'm gonna I'm gonna give it to Elon 786 00:45:35,960 --> 00:45:38,880 Speaker 1: on this one because he's a younger guy. I think 787 00:45:38,960 --> 00:45:41,799 Speaker 1: he has a little stealth to him. I'm gonna I'm 788 00:45:41,800 --> 00:45:44,759 Speaker 1: gonna go with Elon, all right. You know, Putin is 789 00:45:44,800 --> 00:45:47,080 Speaker 1: not judo master, but I'm not sure how serious the 790 00:45:47,120 --> 00:45:49,279 Speaker 1: competition has been. When you see those videos of him 791 00:45:49,400 --> 00:45:53,120 Speaker 1: uh uh knocking guys over. Definitely the craziest thing I 792 00:45:53,160 --> 00:45:56,480 Speaker 1: saw this week. Ben Emmons ed Harrison. Great to have 793 00:45:56,560 --> 00:46:00,080 Speaker 1: you both on the show. Really important week, and we 794 00:46:00,120 --> 00:46:03,080 Speaker 1: really appreciate being able to pick your brains and I 795 00:46:03,120 --> 00:46:06,640 Speaker 1: hope we can have you both back again soon. It 796 00:46:06,760 --> 00:46:09,640 Speaker 1: was a delight. I really enjoyed it. Thanks, Michael, Donna 797 00:46:09,680 --> 00:46:11,960 Speaker 1: would be great to be Becky, thanks for joining us. 798 00:46:21,440 --> 00:46:23,799 Speaker 1: What goes up? We'll be back next week. Until then, 799 00:46:23,840 --> 00:46:26,279 Speaker 1: you can find us on the Bloomberg Terminal website and 800 00:46:26,400 --> 00:46:29,799 Speaker 1: app or wherever you get your podcast. We love it 801 00:46:29,800 --> 00:46:31,440 Speaker 1: if you took the time to rate and review the 802 00:46:31,440 --> 00:46:33,879 Speaker 1: show on Apple Podcasts. So more listeners can find us 803 00:46:34,480 --> 00:46:37,600 Speaker 1: and you can find us on Twitter, follow me at Reaganonymous. 804 00:46:37,920 --> 00:46:41,200 Speaker 1: Bolbonna Hierrich is at Bolbanna Hirich. You can also follow 805 00:46:41,239 --> 00:46:45,240 Speaker 1: Bloomberg Podcasts at podcasts and thank you to Charlie petto 806 00:46:45,239 --> 00:46:49,120 Speaker 1: Bloomberg Radio. What Goes Up is produced by Magnus Hendrickson. 807 00:46:49,480 --> 00:46:53,440 Speaker 1: The Head of Bloomberg podcast is Francesco Levy. Thanks for listening, 808 00:46:53,520 --> 00:47:00,080 Speaker 1: See you next time. M