1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,160 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. A wild start 10 00:00:37,240 --> 00:00:39,720 Speaker 2: of the week in financial markets, Ross coasterriokat Black Rock 11 00:00:39,800 --> 00:00:41,680 Speaker 2: joins us now for more RUSS A big change, and 12 00:00:41,720 --> 00:00:43,519 Speaker 2: you turn from the President of the United States. Is 13 00:00:43,560 --> 00:00:45,920 Speaker 2: it making more bullish on equities or on bonds? 14 00:00:47,360 --> 00:00:52,080 Speaker 3: I say it right now, it makes us cautious. Good morning, Johnathan. 15 00:00:52,520 --> 00:00:55,600 Speaker 3: We've been pulling in risk for a while. Clearly yesterday 16 00:00:55,720 --> 00:00:58,880 Speaker 3: was the relief. Market took it as such. But you know, 17 00:00:58,960 --> 00:01:01,240 Speaker 3: as I just looking at a fourth this morning, you're 18 00:01:01,240 --> 00:01:05,720 Speaker 3: often get these big rallies during periods of turbulence. Our 19 00:01:05,800 --> 00:01:08,720 Speaker 3: view is that you're still in an environment where policy 20 00:01:08,800 --> 00:01:13,399 Speaker 3: uncertainty is heightened. You're also an environment that whatever you 21 00:01:13,600 --> 00:01:17,520 Speaker 3: came into twenty twenty five, whatever your economic assumptions were, 22 00:01:17,920 --> 00:01:20,160 Speaker 3: they've got to be lower today. So if we've got 23 00:01:20,200 --> 00:01:25,360 Speaker 3: a world of higher uncertainty, probably higher volatility, slower growth, 24 00:01:25,440 --> 00:01:28,280 Speaker 3: you've got to adjust the portfolio accordingly Russ. 25 00:01:28,319 --> 00:01:30,440 Speaker 1: In the past, that would mean going to bonds. This 26 00:01:30,560 --> 00:01:33,919 Speaker 1: time around, is that still true, Well. 27 00:01:33,760 --> 00:01:37,480 Speaker 3: We have been raising our allocation to bonds. We were underweight, 28 00:01:37,880 --> 00:01:39,520 Speaker 3: as you might remember. You know, over the last few 29 00:01:39,560 --> 00:01:42,559 Speaker 3: years have been talking about it generally modestly underweight bonds, 30 00:01:42,600 --> 00:01:44,640 Speaker 3: particularly on the long end of the curve. We've been 31 00:01:44,640 --> 00:01:47,600 Speaker 3: bringing that back closer to benchmark. And I'd say that 32 00:01:47,800 --> 00:01:50,960 Speaker 3: is more of a reflection of the economic environment than 33 00:01:51,040 --> 00:01:53,400 Speaker 3: trying to make a bet on policy. And now, if 34 00:01:53,400 --> 00:01:55,720 Speaker 3: you do have an environment where growth is going to 35 00:01:55,720 --> 00:01:59,480 Speaker 3: be slower, it's not crazy that your bond allocation is 36 00:01:59,480 --> 00:02:01,480 Speaker 3: going to be closed their home. But by the way, 37 00:02:01,480 --> 00:02:03,640 Speaker 3: we've done a similar thing in equities. We brought our 38 00:02:03,680 --> 00:02:07,920 Speaker 3: equity allocation down closer to benchmark. So what's happened generally 39 00:02:08,040 --> 00:02:11,440 Speaker 3: lowering the risk of the portfolio in this type of environment. 40 00:02:12,160 --> 00:02:14,000 Speaker 3: Rather than a strong bed on you want to be 41 00:02:14,040 --> 00:02:16,440 Speaker 3: in bonds and equities you want to bring risks down. 42 00:02:16,680 --> 00:02:20,720 Speaker 1: Maybe the larger question is US assets versus XUS assets. 43 00:02:20,760 --> 00:02:22,720 Speaker 1: At a time where the source of volatility is the 44 00:02:22,800 --> 00:02:25,160 Speaker 1: United States, and this has to do with bonds, but 45 00:02:25,320 --> 00:02:29,440 Speaker 1: more broadly with dollar denominated assets, does it make you 46 00:02:29,800 --> 00:02:33,760 Speaker 1: rethink some of what you have in your portfolio based 47 00:02:33,800 --> 00:02:37,120 Speaker 1: on where the source of volatility has been coming from. 48 00:02:37,600 --> 00:02:39,679 Speaker 3: This is a great question. I think this is actually 49 00:02:39,760 --> 00:02:41,840 Speaker 3: a harder question to answer. But what I would say 50 00:02:41,880 --> 00:02:44,200 Speaker 3: is I don't think you have a Kneiser reaction to 51 00:02:44,280 --> 00:02:47,720 Speaker 3: move away from dollar assets. A couple points. First of all, 52 00:02:47,800 --> 00:02:51,400 Speaker 3: we might remember twenty eleven during the debt sealing crisis, 53 00:02:51,680 --> 00:02:55,120 Speaker 3: the US gets downgrade and the epicenter of the crisis, 54 00:02:55,320 --> 00:02:59,520 Speaker 3: what happens, Treasury bonds go up. The dollar is still 55 00:02:59,560 --> 00:03:01,799 Speaker 3: the reserve currency. We can debate what's going to happen 56 00:03:01,840 --> 00:03:04,200 Speaker 3: in five or ten years. It is still a safe 57 00:03:04,280 --> 00:03:07,640 Speaker 3: haven asset, and I do think that you've got to 58 00:03:07,639 --> 00:03:11,040 Speaker 3: be skeptical about calling the end of dollar dominance. The 59 00:03:11,120 --> 00:03:12,760 Speaker 3: other point, in the equity side, you know we are 60 00:03:12,840 --> 00:03:16,200 Speaker 3: still modestly overweight the US. Now, why would you do 61 00:03:16,240 --> 00:03:19,160 Speaker 3: that with all the turbulence. Going on simple answer, we 62 00:03:19,240 --> 00:03:23,000 Speaker 3: still find better companies in the US. We think about 63 00:03:23,000 --> 00:03:25,520 Speaker 3: what do we want in this environment. We want profitability, 64 00:03:25,800 --> 00:03:29,240 Speaker 3: We want companies that can generate consistent earnings. Still find 65 00:03:29,320 --> 00:03:32,320 Speaker 3: more of those companies in the US rather than Europe 66 00:03:32,360 --> 00:03:35,640 Speaker 3: or Japan. So to my mind, even with the turbulence, 67 00:03:35,680 --> 00:03:38,240 Speaker 3: from a bottom up perspective, still in an argument to 68 00:03:38,280 --> 00:03:40,440 Speaker 3: be modestly overweight the US. 69 00:03:40,640 --> 00:03:44,040 Speaker 4: Given all the uncertainty, even whether or not Trump decides 70 00:03:44,080 --> 00:03:47,040 Speaker 4: to blank walk off the cliff, give these reprieves. 71 00:03:47,080 --> 00:03:48,120 Speaker 5: Do you still like gold? 72 00:03:49,280 --> 00:03:50,120 Speaker 2: We do like gold. 73 00:03:50,600 --> 00:03:52,320 Speaker 3: You know again, they have to trade around it. It's 74 00:03:52,320 --> 00:03:56,080 Speaker 3: been a huge move. We like gold back six months ago. 75 00:03:56,200 --> 00:03:59,040 Speaker 3: We definitely like it today. A couple of reasons. First 76 00:03:59,080 --> 00:04:02,000 Speaker 3: of all, you know m range, as you suggest, still 77 00:04:02,120 --> 00:04:05,320 Speaker 3: a asset that works during times of turbulence. You look 78 00:04:05,360 --> 00:04:08,320 Speaker 3: at the performance of gold when volatilities rising again. I 79 00:04:08,320 --> 00:04:10,240 Speaker 3: think it's safe to say we'll probably in a more 80 00:04:10,320 --> 00:04:13,920 Speaker 3: vol environment, generally does very well of over stocks. The 81 00:04:13,960 --> 00:04:18,159 Speaker 3: other argument is the long term fiscal picture. One of 82 00:04:18,160 --> 00:04:20,640 Speaker 3: the reasons we like gold is you can't print more 83 00:04:20,680 --> 00:04:23,360 Speaker 3: of it. It is a store of value. It's still 84 00:04:23,400 --> 00:04:26,920 Speaker 3: not obvious that there's going to be a significant improvement 85 00:04:26,920 --> 00:04:29,479 Speaker 3: in the fiscal picture. If we are an environment of 86 00:04:29,520 --> 00:04:33,160 Speaker 3: these two trillion dollars structural deficits, They're not necessarily going 87 00:04:33,160 --> 00:04:37,160 Speaker 3: away having something that can't you can't increase the supply. 88 00:04:37,640 --> 00:04:39,479 Speaker 3: It is a store of value of the portfolio. We 89 00:04:39,520 --> 00:04:41,920 Speaker 3: think that makes sense over the longer term. 90 00:04:42,040 --> 00:04:43,680 Speaker 2: Russ just wanted to jump in with some news now 91 00:04:43,760 --> 00:04:46,120 Speaker 2: to the European Union. The headline just crossing the Bloomberg 92 00:04:46,200 --> 00:04:50,600 Speaker 2: terminal that the EU is considering pausing counter tariffs against 93 00:04:50,600 --> 00:04:53,160 Speaker 2: the United States for ninety days, in line with that 94 00:04:53,240 --> 00:04:56,159 Speaker 2: ninety day pause that the President announced just yesterday. Just 95 00:04:56,200 --> 00:04:59,080 Speaker 2: taking the temperature down just a bit more this morning. 96 00:04:59,240 --> 00:05:01,320 Speaker 4: And I also think the European Union is looking around 97 00:05:01,320 --> 00:05:03,279 Speaker 4: the room and saying, look what's going on with Japan, 98 00:05:03,360 --> 00:05:05,680 Speaker 4: Look what's going on in South Korea. They are pushing 99 00:05:05,680 --> 00:05:07,680 Speaker 4: out all of branches. They are saying they want to 100 00:05:07,680 --> 00:05:10,080 Speaker 4: do deals with this president. He's come out and said, 101 00:05:10,080 --> 00:05:12,200 Speaker 4: you're going to get a ninety day reprieve, So why 102 00:05:12,240 --> 00:05:15,479 Speaker 4: should we escalate at this moment? Maybe we should send 103 00:05:15,480 --> 00:05:17,840 Speaker 4: a team over and try to de escalate and come 104 00:05:17,880 --> 00:05:18,840 Speaker 4: to a trade agreement. 105 00:05:18,960 --> 00:05:20,919 Speaker 2: The lyceis headline from the team here at Bloomberg that 106 00:05:20,960 --> 00:05:24,160 Speaker 2: the European Union is considering pausing counter tariff against the 107 00:05:24,240 --> 00:05:27,159 Speaker 2: United States on metals for ninety days. Russ. Just to 108 00:05:27,160 --> 00:05:28,760 Speaker 2: bring it back into the conversation as we take the 109 00:05:28,800 --> 00:05:31,880 Speaker 2: temperature down worldwide, how close did we come to an 110 00:05:31,880 --> 00:05:34,400 Speaker 2: accident in this bond market? What did you see developing 111 00:05:34,839 --> 00:05:36,960 Speaker 2: in the previous few days coming into the announcement from 112 00:05:37,000 --> 00:05:40,520 Speaker 2: the President just yesterday afternoon. Well, I think the. 113 00:05:40,480 --> 00:05:43,160 Speaker 3: Bond market move was definitely something we're paying attention, and 114 00:05:43,200 --> 00:05:45,680 Speaker 3: it was not just the treasure market. You'll remember that 115 00:05:46,240 --> 00:05:49,760 Speaker 3: during the initial phases of the selloff, credit markets were 116 00:05:49,800 --> 00:05:53,520 Speaker 3: remarkably well behaved. That all started to change on Friday. 117 00:05:53,760 --> 00:05:56,719 Speaker 3: We saw spreads back up dramatically. I think that gave 118 00:05:56,760 --> 00:06:00,160 Speaker 3: a lot of people pause because now it's not just 119 00:06:00,200 --> 00:06:02,240 Speaker 3: a matter of growth, it's a matter of liquidity. It's 120 00:06:02,279 --> 00:06:05,840 Speaker 3: a matter of what's happening with the availability of credit, 121 00:06:06,040 --> 00:06:09,680 Speaker 3: and that was something that definitely unnerved investors. If you 122 00:06:09,720 --> 00:06:14,240 Speaker 3: see the bond market calming down, it's definitely development that's 123 00:06:14,240 --> 00:06:16,159 Speaker 3: going to give a little bit more comfort to the 124 00:06:16,200 --> 00:06:17,400 Speaker 3: equity side of the market. 125 00:06:17,560 --> 00:06:19,599 Speaker 2: Things setting down in the bond market this morning. Ross 126 00:06:19,600 --> 00:06:32,560 Speaker 2: appreciate your time. Rouss Costrict of Bland Troup, rita's center 127 00:06:32,560 --> 00:06:35,719 Speaker 2: of Energy Aspects, writing, Trump needs higher supplies to lower 128 00:06:35,720 --> 00:06:38,160 Speaker 2: oil prices in a manner that can provide a tailwind 129 00:06:38,160 --> 00:06:41,719 Speaker 2: for global growth as an offset to his tariff policies. Instead, 130 00:06:42,040 --> 00:06:45,799 Speaker 2: tariff will lead to lower oil prices by hurting demand growth. 131 00:06:45,920 --> 00:06:48,039 Speaker 2: And Rita joined us now for more and Rita, welcome 132 00:06:48,080 --> 00:06:50,000 Speaker 2: to the program. You made some headlines in the past 133 00:06:50,040 --> 00:06:52,520 Speaker 2: few days on some very very low numbers in the 134 00:06:52,520 --> 00:06:54,520 Speaker 2: crude markets. So what do you expecting now. 135 00:06:57,080 --> 00:07:00,720 Speaker 6: Well, I think the prices, the general trajectory is still lower. 136 00:07:01,400 --> 00:07:03,120 Speaker 6: I know there's been a ninety day pause. We saw 137 00:07:03,160 --> 00:07:05,360 Speaker 6: a little bit of a bounce, but ultimately, if you 138 00:07:05,400 --> 00:07:11,000 Speaker 6: look at the trade weighted tariffs reciprocal tariffs globally on 139 00:07:11,040 --> 00:07:13,800 Speaker 6: the second of April, it was actually nineteen point one percent. 140 00:07:14,400 --> 00:07:18,160 Speaker 6: Yesterday it was twenty six point two percent despite the pause, 141 00:07:18,680 --> 00:07:21,880 Speaker 6: because of just how much the China bit has escalated. 142 00:07:22,160 --> 00:07:24,520 Speaker 6: It just tells you that that is ultimately the one 143 00:07:24,560 --> 00:07:27,080 Speaker 6: that matters the most when it comes to kind of 144 00:07:27,080 --> 00:07:30,560 Speaker 6: global growth. Of course, it's better news for some of 145 00:07:30,600 --> 00:07:32,760 Speaker 6: the countries some of those tariffs have been paused, but 146 00:07:32,840 --> 00:07:34,640 Speaker 6: like you guys were saying just now as well, there 147 00:07:34,680 --> 00:07:38,360 Speaker 6: is there is definitely no certainty that they will remain off. 148 00:07:39,200 --> 00:07:41,440 Speaker 6: We are hearing more and more from our clients that 149 00:07:41,520 --> 00:07:46,200 Speaker 6: consumer and a particularly business sentiment has completely come to 150 00:07:46,240 --> 00:07:49,920 Speaker 6: a stall. Nobody's investing, there's no capex investment, and we're 151 00:07:49,920 --> 00:07:52,120 Speaker 6: going to see a pretty big demand hit. We've just 152 00:07:52,200 --> 00:07:54,680 Speaker 6: reduced our oil demand number for the second half of 153 00:07:54,680 --> 00:07:57,400 Speaker 6: the year by four hundred and fifty thousand barrels per day, 154 00:07:57,440 --> 00:08:00,000 Speaker 6: the same for twenty twenty six. So I just don't 155 00:08:00,120 --> 00:08:02,480 Speaker 6: see how oil prices are going to start moving higher 156 00:08:02,520 --> 00:08:05,239 Speaker 6: anytime soon until we see the supply response. 157 00:08:05,360 --> 00:08:07,280 Speaker 4: How loo are we talking, Amerta, Do you think oil 158 00:08:07,320 --> 00:08:08,040 Speaker 4: prices can go? 159 00:08:10,760 --> 00:08:10,840 Speaker 3: So? 160 00:08:10,920 --> 00:08:14,040 Speaker 6: Look, the difference now versus in the past cycles is 161 00:08:14,040 --> 00:08:17,000 Speaker 6: that the shale breake events are higher. And when I 162 00:08:17,080 --> 00:08:19,120 Speaker 6: was there just last week as well, I would say 163 00:08:19,120 --> 00:08:22,000 Speaker 6: my biggest takeaway was that outside of the Permian, all 164 00:08:22,000 --> 00:08:24,920 Speaker 6: the other basins you're talking about like in the sixties, 165 00:08:24,960 --> 00:08:27,960 Speaker 6: well into the high sixties in some basins which are 166 00:08:27,960 --> 00:08:30,400 Speaker 6: now their break events. At the Permian it's in the fifties, 167 00:08:30,680 --> 00:08:33,880 Speaker 6: but that is effectively the flaw. The difference is it's 168 00:08:33,920 --> 00:08:34,840 Speaker 6: the timing of it. 169 00:08:35,000 --> 00:08:35,160 Speaker 2: Right. 170 00:08:35,200 --> 00:08:38,240 Speaker 6: We need to be here for one whole quarter before 171 00:08:38,280 --> 00:08:41,920 Speaker 6: supply response, and the response will be significant this time around. 172 00:08:42,000 --> 00:08:44,240 Speaker 6: You are going to lose a few hundred thousand barrels 173 00:08:44,240 --> 00:08:47,120 Speaker 6: per day pretty quickly. But it is just that timing 174 00:08:47,200 --> 00:08:50,880 Speaker 6: like in that within that timeframe, prices can continue to 175 00:08:50,920 --> 00:08:54,240 Speaker 6: go lower. I remember there's positioning driven. A lot of 176 00:08:54,240 --> 00:08:57,200 Speaker 6: this is positioning driven, and people are just liquidating positions. 177 00:08:57,200 --> 00:09:00,080 Speaker 6: So then it just becomes a number. But ultimately the 178 00:09:00,080 --> 00:09:02,360 Speaker 6: floor should be around where we are now, maybe a 179 00:09:02,360 --> 00:09:06,120 Speaker 6: couple of dollars lower. But I don't necessarily see sustained 180 00:09:06,200 --> 00:09:10,079 Speaker 6: prices in the forties or the fifties, but we can 181 00:09:10,160 --> 00:09:12,439 Speaker 6: absolutely test the four handle in the short term. 182 00:09:12,720 --> 00:09:15,200 Speaker 4: I know that opek plus in Saudi Arabia says they 183 00:09:15,200 --> 00:09:18,840 Speaker 4: do not target price, but given this environment you're describing, 184 00:09:18,960 --> 00:09:21,280 Speaker 4: why did they go further and add even more barrels 185 00:09:21,280 --> 00:09:21,920 Speaker 4: to the market. 186 00:09:24,280 --> 00:09:26,480 Speaker 6: Yeah, I mean, look, the timing of it is obviously 187 00:09:26,559 --> 00:09:29,319 Speaker 6: left to plenty of rumors about like, you know, were 188 00:09:29,360 --> 00:09:31,920 Speaker 6: they doing this on the back of tariffs or to 189 00:09:31,960 --> 00:09:34,720 Speaker 6: a peace. President Trump ahead of his visit to the Kingdom. 190 00:09:35,040 --> 00:09:38,600 Speaker 6: In reality, OPEK just has its own timelines for doing things. 191 00:09:38,840 --> 00:09:41,480 Speaker 6: The Saudi OSB always comes out around the fifth of 192 00:09:41,520 --> 00:09:43,959 Speaker 6: the month, so they had to take the decision before that. 193 00:09:44,200 --> 00:09:46,840 Speaker 6: So it was an unfortunate timing. But the decision was 194 00:09:47,000 --> 00:09:50,520 Speaker 6: entirely to do with internal OPEC dynamics. As we've been saying, 195 00:09:50,840 --> 00:09:53,319 Speaker 6: you know, we have seen laggards, a couple of you know, 196 00:09:53,880 --> 00:09:57,400 Speaker 6: ops in Middle Eastern countries itself, but it's mainly Kazakhstan. 197 00:09:57,440 --> 00:10:00,000 Speaker 6: If you look at Kazakhstan's production, four hundred thousand barrels 198 00:10:00,040 --> 00:10:02,560 Speaker 6: bit higher than where they are meant to be, and 199 00:10:02,640 --> 00:10:05,400 Speaker 6: they are just not showing any signs of coming off. 200 00:10:05,440 --> 00:10:08,400 Speaker 6: And I think that is where I worry even for 201 00:10:08,480 --> 00:10:11,680 Speaker 6: next month, regardless of price, because if this is about 202 00:10:11,760 --> 00:10:16,440 Speaker 6: getting cohesion and getting the message across that everybody needs 203 00:10:16,480 --> 00:10:19,800 Speaker 6: to do their bit, then it will not matter until 204 00:10:19,840 --> 00:10:22,600 Speaker 6: Anonilyst Prince Abdilacy sees that compliance number. 205 00:10:22,600 --> 00:10:24,120 Speaker 5: Pick up, let's put. 206 00:10:24,000 --> 00:10:26,439 Speaker 1: That into English. Basically, this is all designed to punish 207 00:10:26,960 --> 00:10:30,679 Speaker 1: Kazakhstan with lower oil prices for a margin grab unless 208 00:10:30,679 --> 00:10:32,520 Speaker 1: they're into compliance and then there can be some sort 209 00:10:32,559 --> 00:10:33,080 Speaker 1: of agreement. 210 00:10:36,120 --> 00:10:38,400 Speaker 6: Yes, I think long story short, that's it, and not 211 00:10:38,400 --> 00:10:40,439 Speaker 6: just Kassakhs and the few of the laggods. But yes, 212 00:10:40,480 --> 00:10:43,240 Speaker 6: it's to say that cuts need to be equitable. It 213 00:10:43,280 --> 00:10:45,760 Speaker 6: can't just be Saudi Arabia that carries the cuts for. 214 00:10:45,720 --> 00:10:47,720 Speaker 5: Everybody at a certain point. 215 00:10:47,920 --> 00:10:50,600 Speaker 1: There's also a knock und effect that this potentially could 216 00:10:50,640 --> 00:10:54,239 Speaker 1: become punitive at that kind of level for US jail producers, 217 00:10:54,440 --> 00:10:58,319 Speaker 1: for the US oil ex board system. That has been 218 00:10:58,559 --> 00:11:00,320 Speaker 1: one of the drivers of a lot of growth that 219 00:11:00,320 --> 00:11:03,160 Speaker 1: we've seen in the United States and the GDP here for. 220 00:11:03,080 --> 00:11:04,199 Speaker 2: The past decade. 221 00:11:04,280 --> 00:11:08,400 Speaker 1: I'm just wondering at what point that factors in as well. 222 00:11:08,559 --> 00:11:08,760 Speaker 2: Well. 223 00:11:08,760 --> 00:11:10,559 Speaker 6: That's what I was saying just now. Right, the shale 224 00:11:10,720 --> 00:11:13,760 Speaker 6: break events are significantly higher narn, which is why I 225 00:11:13,800 --> 00:11:17,520 Speaker 6: was saying that I don't see prices sustainably going below 226 00:11:17,920 --> 00:11:20,839 Speaker 6: fifty five to sixty or even sixty five. But in 227 00:11:20,880 --> 00:11:22,840 Speaker 6: the short term it could be because even at these 228 00:11:22,880 --> 00:11:25,760 Speaker 6: price levels, we are hearing from our shale producer clients 229 00:11:25,960 --> 00:11:28,680 Speaker 6: that they have just stopped drilling, or they're planning to 230 00:11:28,679 --> 00:11:31,600 Speaker 6: stop drilling. They could even drop rigs. You're going to 231 00:11:31,640 --> 00:11:35,720 Speaker 6: see a very significant turned down in shale production very quickly, 232 00:11:36,000 --> 00:11:38,200 Speaker 6: and like you said that, and we forget this. We 233 00:11:38,240 --> 00:11:40,520 Speaker 6: tend to talk about the US as a consumer nation. 234 00:11:40,960 --> 00:11:44,800 Speaker 6: Production and given how much US production is, production is 235 00:11:44,840 --> 00:11:46,920 Speaker 6: a huge part of US GDP. 236 00:11:47,080 --> 00:11:49,480 Speaker 2: Right now, I'm Rachel just quickly. We've seen commodities drop 237 00:11:49,520 --> 00:11:51,760 Speaker 2: across the board over the past week or so. See 238 00:11:51,840 --> 00:11:54,800 Speaker 2: some evidence that particularly with copper, Chinese buyers might be 239 00:11:54,800 --> 00:11:57,080 Speaker 2: stepping back in I had of stimulus, so you're seeing 240 00:11:57,120 --> 00:12:01,079 Speaker 2: anything like that. With crude, we've. 241 00:12:00,920 --> 00:12:03,320 Speaker 6: Seen a little bit here and there, but I do 242 00:12:03,360 --> 00:12:07,160 Speaker 6: think right now there's just a bit more panic because 243 00:12:07,640 --> 00:12:10,080 Speaker 6: it's still a moving target. They have come out with 244 00:12:10,120 --> 00:12:12,600 Speaker 6: an SBR program as well, saying that we need to 245 00:12:12,600 --> 00:12:15,480 Speaker 6: stalk pile, but that's really from July onwards. The biggest 246 00:12:15,520 --> 00:12:17,360 Speaker 6: hit is actually going to be on lpg F in 247 00:12:17,440 --> 00:12:21,560 Speaker 6: in particular, and propine foods still okay, but the physical 248 00:12:21,559 --> 00:12:23,840 Speaker 6: market is actually still very strong, even in the East. 249 00:12:23,840 --> 00:12:25,880 Speaker 6: It's you know, stocks are still drawing. But it is 250 00:12:25,960 --> 00:12:27,920 Speaker 6: really about the fear of the future. 251 00:12:28,160 --> 00:12:30,559 Speaker 2: Got it, and Racha appreciate the update. Thank you and 252 00:12:30,720 --> 00:12:42,400 Speaker 2: Rach to send there of energy aspect Erica and a 253 00:12:42,480 --> 00:12:45,160 Speaker 2: Jeron of UBS writing management teams are between a rock 254 00:12:45,280 --> 00:12:47,800 Speaker 2: and a hard place, as any outlook seen as quite 255 00:12:47,840 --> 00:12:51,600 Speaker 2: bearish could also punish the sector. Erica joins a snapper 256 00:12:51,640 --> 00:12:53,520 Speaker 2: more Erica always good to see you get to see. 257 00:12:53,640 --> 00:12:55,280 Speaker 2: What do they tell us the Morrow monic? What can 258 00:12:55,320 --> 00:12:55,880 Speaker 2: they tell us? 259 00:12:56,200 --> 00:12:58,360 Speaker 7: What can they tell us that will matter? A lot 260 00:12:58,400 --> 00:13:01,760 Speaker 7: of investors are thinking that whatever they'll say, which is 261 00:13:01,800 --> 00:13:04,280 Speaker 7: actually not so bad, is going to be seen as 262 00:13:04,320 --> 00:13:07,679 Speaker 7: backward looking. Now, I think there are really two things 263 00:13:07,720 --> 00:13:12,120 Speaker 7: that investors are looking for. Number One, are activity levels 264 00:13:12,160 --> 00:13:15,440 Speaker 7: now just permanently impaired from both the corporate side and 265 00:13:15,480 --> 00:13:19,480 Speaker 7: the consumer side. So clearly we had this animal spirits 266 00:13:19,679 --> 00:13:22,040 Speaker 7: economy that we really wanted to come through. 267 00:13:22,679 --> 00:13:25,880 Speaker 5: And if you're a corporation, how do you make decisions 268 00:13:25,960 --> 00:13:27,559 Speaker 5: in this environment? 269 00:13:27,760 --> 00:13:28,000 Speaker 2: Right? 270 00:13:28,440 --> 00:13:31,640 Speaker 7: And so as you think about investment, banking and loan 271 00:13:31,679 --> 00:13:34,400 Speaker 7: growth and commercial you would think that has to be 272 00:13:34,520 --> 00:13:35,640 Speaker 7: at least delayed. 273 00:13:35,960 --> 00:13:37,080 Speaker 5: Although I wonder. 274 00:13:36,800 --> 00:13:40,600 Speaker 7: If the equity market continues to rally obviously not today, 275 00:13:41,120 --> 00:13:43,280 Speaker 7: but I wonder if there's some deals that it's going 276 00:13:43,320 --> 00:13:45,640 Speaker 7: to get pushed through the pipeline over the short term. 277 00:13:45,960 --> 00:13:49,440 Speaker 7: On the consumer, you know, American Express is not normally 278 00:13:49,480 --> 00:13:52,559 Speaker 7: seen as a bell weather report, but given that ten 279 00:13:52,600 --> 00:13:56,160 Speaker 7: percent of Americans account for or high end Americans that 280 00:13:56,240 --> 00:13:58,400 Speaker 7: make two fifty account for fifty percent of the spend. 281 00:13:58,800 --> 00:14:01,240 Speaker 7: All of a sudden, there a bell the report because 282 00:14:01,280 --> 00:14:04,600 Speaker 7: if they're slowing down, that's not good for consumer activity 283 00:14:04,600 --> 00:14:05,520 Speaker 7: for the rest of the year. 284 00:14:05,640 --> 00:14:07,200 Speaker 2: So the banks are the best data points we have 285 00:14:07,240 --> 00:14:09,240 Speaker 2: at the moment. It's the best real time data. We'll 286 00:14:09,280 --> 00:14:11,040 Speaker 2: get a lot of people look at payrolls and just 287 00:14:11,080 --> 00:14:13,280 Speaker 2: set that old news. When you were in touch with 288 00:14:13,320 --> 00:14:15,280 Speaker 2: the management teams over the past few days, you put 289 00:14:15,320 --> 00:14:18,240 Speaker 2: together a picture of where things are act currently. What 290 00:14:18,240 --> 00:14:20,240 Speaker 2: are they telling you about activity at the moment? If 291 00:14:20,240 --> 00:14:21,280 Speaker 2: things slowed down. 292 00:14:21,480 --> 00:14:22,160 Speaker 5: Things are slow. 293 00:14:22,360 --> 00:14:24,560 Speaker 7: If you look at the regulatory data and you catch 294 00:14:24,640 --> 00:14:28,080 Speaker 7: up with the banks and commercial activity, it's slow, it's 295 00:14:28,160 --> 00:14:31,640 Speaker 7: quite flat. And if you look at the geologic data, 296 00:14:31,680 --> 00:14:35,760 Speaker 7: I mean it's depressing. The whole capital markets renaissance is 297 00:14:35,840 --> 00:14:39,600 Speaker 7: just not quite happening. But trading, you know, as you 298 00:14:39,600 --> 00:14:42,400 Speaker 7: can imagine, given all this volatility. 299 00:14:41,800 --> 00:14:44,680 Speaker 5: Trading could be lights out for this quarter. Okay, hold 300 00:14:44,720 --> 00:14:45,280 Speaker 5: on a second. 301 00:14:45,400 --> 00:14:47,200 Speaker 1: I remember when we used to get volatility and it 302 00:14:47,240 --> 00:14:49,240 Speaker 1: was good volatility, and then it was bad volatility. And 303 00:14:49,320 --> 00:14:51,160 Speaker 1: volatility isn't always a good thing. So is this good 304 00:14:51,200 --> 00:14:53,680 Speaker 1: volatility or bad volatility in terms of bank profits? 305 00:14:53,720 --> 00:14:56,800 Speaker 7: So so far again, you know, speaking about backward looking. 306 00:14:56,880 --> 00:14:58,520 Speaker 7: If you think about the month of March and think 307 00:14:58,520 --> 00:15:02,720 Speaker 7: about the equity market volatility, sell side desks are typically 308 00:15:02,720 --> 00:15:04,360 Speaker 7: long volatility, so that could. 309 00:15:04,160 --> 00:15:04,840 Speaker 5: Be good for them. 310 00:15:05,040 --> 00:15:07,160 Speaker 7: Now it makes me nervous, is what's been happening to 311 00:15:07,200 --> 00:15:10,880 Speaker 7: the treasury market in terms of dealer capacity. So the 312 00:15:10,960 --> 00:15:13,800 Speaker 7: key question for the month of April is, you know, 313 00:15:13,920 --> 00:15:17,080 Speaker 7: is there something going to happen? Is there bad volatility 314 00:15:17,120 --> 00:15:20,200 Speaker 7: now happening in the fixed income markets? That is not 315 00:15:20,280 --> 00:15:22,320 Speaker 7: going to be good news for the second quarter. 316 00:15:22,480 --> 00:15:24,640 Speaker 1: So going forward, what do you think is going to 317 00:15:24,720 --> 00:15:26,960 Speaker 1: potentially be the bigger driver? Is it going to be 318 00:15:27,040 --> 00:15:28,960 Speaker 1: the trading side of things, or is it going to 319 00:15:28,960 --> 00:15:31,000 Speaker 1: be the m and a wave that doesn't come to pass, 320 00:15:31,320 --> 00:15:33,520 Speaker 1: or is it going to be deregulation which we've seen 321 00:15:33,600 --> 00:15:36,320 Speaker 1: some of but not necessarily the full package. 322 00:15:36,400 --> 00:15:41,560 Speaker 7: So investors just never really value trading earnings. 323 00:15:41,200 --> 00:15:43,800 Speaker 5: Much, right, it's super volatile. It's like throwing a dart 324 00:15:43,840 --> 00:15:47,680 Speaker 5: on the board. Who knows in any given quarter, right, I. 325 00:15:47,640 --> 00:15:51,960 Speaker 7: Think what they're really looking for is, you know, honestly, 326 00:15:52,160 --> 00:15:55,480 Speaker 7: any signs of credit at this point, because the reaction 327 00:15:55,800 --> 00:16:00,600 Speaker 7: of banks up until yesterday really told me that investors 328 00:16:00,600 --> 00:16:03,520 Speaker 7: were starting to worry about recession rather than just to 329 00:16:03,560 --> 00:16:07,400 Speaker 7: slow down in activity levels. And so how they frame 330 00:16:07,520 --> 00:16:10,720 Speaker 7: that in terms of preparedness having the earnings power to 331 00:16:10,840 --> 00:16:11,960 Speaker 7: protect their capital. 332 00:16:12,320 --> 00:16:16,320 Speaker 5: Let's say, if credit. 333 00:16:15,360 --> 00:16:18,920 Speaker 7: Costs go up in anticipation of a tougher economy, I 334 00:16:18,960 --> 00:16:21,120 Speaker 7: think that's what the market sort of needs to hear 335 00:16:21,480 --> 00:16:25,080 Speaker 7: for now. On the deregulatory point, what's gotten lost in 336 00:16:25,200 --> 00:16:28,520 Speaker 7: all of this is I feel like the deregulatory momentum 337 00:16:28,560 --> 00:16:31,160 Speaker 7: and Trump two point zero is actually much stronger than 338 00:16:31,200 --> 00:16:31,800 Speaker 7: Trump one point. 339 00:16:31,800 --> 00:16:31,880 Speaker 8: Oh. 340 00:16:31,920 --> 00:16:33,000 Speaker 5: I mean we went to that lunch. 341 00:16:33,000 --> 00:16:36,400 Speaker 7: I mean he started off Secretary Besson started off with 342 00:16:36,440 --> 00:16:39,920 Speaker 7: bank deregulation at this lunch with the Economic Club in 343 00:16:39,960 --> 00:16:42,080 Speaker 7: New York, and everybody just wanted to talk about tariffs, 344 00:16:42,120 --> 00:16:44,880 Speaker 7: and he started off with bank deg But for now, 345 00:16:45,000 --> 00:16:48,400 Speaker 7: until we understand you know that they range of outcomes 346 00:16:48,400 --> 00:16:53,320 Speaker 7: for the economy, the macro volatility uncertainty will trump the 347 00:16:53,520 --> 00:16:55,800 Speaker 7: deregulatory positive catalyst. 348 00:16:56,040 --> 00:16:57,880 Speaker 4: But do you even believe these CEOs when they come 349 00:16:57,880 --> 00:16:59,600 Speaker 4: out and potentially say we're not gonna have a recession 350 00:16:59,680 --> 00:17:03,160 Speaker 4: or we Goldman Sachs pulled their call yesterday after Trump 351 00:17:03,240 --> 00:17:03,720 Speaker 4: came out and. 352 00:17:03,640 --> 00:17:07,720 Speaker 5: Blanked again Rock in a hard place. Right. 353 00:17:07,840 --> 00:17:11,960 Speaker 7: So, you know, if you think about how banks set 354 00:17:11,960 --> 00:17:13,920 Speaker 7: credit costs, they think about the future, they think about 355 00:17:13,920 --> 00:17:16,639 Speaker 7: the outlook, and they're saying to themselves, well, I have 356 00:17:16,680 --> 00:17:18,240 Speaker 7: no you know, I don't. 357 00:17:18,000 --> 00:17:19,000 Speaker 5: Know what the outlook is. 358 00:17:19,480 --> 00:17:23,000 Speaker 7: So perhaps they're going to build reserves a little bit, 359 00:17:23,240 --> 00:17:25,479 Speaker 7: but you don't have an inventory of losses that are 360 00:17:25,520 --> 00:17:25,920 Speaker 7: coming down. 361 00:17:25,960 --> 00:17:26,639 Speaker 5: The pipeline. 362 00:17:26,760 --> 00:17:30,920 Speaker 7: Card delinquencies are actually flat to down, and commercial delinquents 363 00:17:31,080 --> 00:17:33,840 Speaker 7: or non performing loans are pretty flat and improving. 364 00:17:34,400 --> 00:17:35,560 Speaker 5: And so it's tough. 365 00:17:35,600 --> 00:17:39,320 Speaker 7: But they have to talk defensively or else investors will 366 00:17:39,320 --> 00:17:40,720 Speaker 7: think they're baring their head in the sand. 367 00:17:41,240 --> 00:17:43,040 Speaker 4: It's an important point you brought up about Scott Besson 368 00:17:43,080 --> 00:17:44,560 Speaker 4: at the Economic cub of New York where we saw 369 00:17:44,560 --> 00:17:47,480 Speaker 4: each other last because he wanted to talk about deregulation 370 00:17:47,600 --> 00:17:49,359 Speaker 4: and tax cuts, but the entire room wants to talk 371 00:17:49,359 --> 00:17:51,480 Speaker 4: about tariffs. At the moment, there was all this unsurgerty 372 00:17:51,560 --> 00:17:52,280 Speaker 4: what they were going to. 373 00:17:52,200 --> 00:17:52,840 Speaker 5: Do with trade. 374 00:17:53,000 --> 00:17:57,119 Speaker 4: When you take the entire policies of the Trump administration, deregulation, 375 00:17:57,240 --> 00:18:00,080 Speaker 4: tax cuts, and tariffs. How much more constructive is that 376 00:18:00,160 --> 00:18:01,360 Speaker 4: for banks towards your end? 377 00:18:02,320 --> 00:18:07,399 Speaker 7: So deregulation is super super constructive, right, particularly as we 378 00:18:07,480 --> 00:18:10,600 Speaker 7: start thinking about changes in the stress test, which I 379 00:18:10,600 --> 00:18:13,320 Speaker 7: think could be a twenty twenty six catalyst. I know 380 00:18:13,359 --> 00:18:18,439 Speaker 7: it's not five minutes from now, as we like, So deregulation. 381 00:18:17,800 --> 00:18:19,280 Speaker 5: I think is a big catalyst. 382 00:18:19,520 --> 00:18:23,840 Speaker 7: You know, tax cuts obviously, the continuation of you know, 383 00:18:24,119 --> 00:18:26,159 Speaker 7: the tax cuts and jobs that would be you know, 384 00:18:26,240 --> 00:18:30,040 Speaker 7: beneficial for corporate activity, But that's something that's already embedded, right, 385 00:18:30,119 --> 00:18:33,040 Speaker 7: It's already baked in the base case. So just extending 386 00:18:33,040 --> 00:18:36,000 Speaker 7: that isn't necessarily going to pump up activity, which goes 387 00:18:36,040 --> 00:18:39,359 Speaker 7: back to trade. Right, it's like the big overhang that 388 00:18:40,160 --> 00:18:43,080 Speaker 7: is overshadowing everything else that's good. 389 00:18:43,640 --> 00:18:44,360 Speaker 5: So did the big. 390 00:18:44,200 --> 00:18:47,240 Speaker 1: Banks benefit the most from deregulation and an uncertain regime 391 00:18:47,240 --> 00:18:49,240 Speaker 1: where they consolidate a lot of trading volumes? 392 00:18:50,160 --> 00:18:52,720 Speaker 7: So I think that in a deregulatory environment you get 393 00:18:52,760 --> 00:18:55,400 Speaker 7: to unlock a lot of excess capital, and I think 394 00:18:55,480 --> 00:18:58,240 Speaker 7: that's great. But if there's not a lot of demand 395 00:18:58,280 --> 00:19:01,439 Speaker 7: for that capital other than trade, what good is it 396 00:19:01,520 --> 00:19:02,880 Speaker 7: to unlock excess capital? 397 00:19:03,200 --> 00:19:04,400 Speaker 5: Right? And by way. 398 00:19:04,760 --> 00:19:08,360 Speaker 7: Remember, buybacks tend to be very pro cyclical, like if 399 00:19:08,359 --> 00:19:11,040 Speaker 7: we're staring down the barrel of what we stared at 400 00:19:11,119 --> 00:19:13,480 Speaker 7: last week. You know, I don't feel like bank management 401 00:19:13,480 --> 00:19:15,360 Speaker 7: teams are gonna be like, I'm gonna buy. 402 00:19:15,160 --> 00:19:17,399 Speaker 5: Back a ton of stock now, right. 403 00:19:18,080 --> 00:19:20,639 Speaker 7: They tend to be like, well, we're gonna keep the capital. 404 00:19:20,560 --> 00:19:23,240 Speaker 5: You know, tight and excessive for a rainy day. 405 00:19:23,800 --> 00:19:28,000 Speaker 7: So you know, we have this regulatory or deregulatory momentum 406 00:19:28,040 --> 00:19:30,680 Speaker 7: to unlock the access capital, but we need somewhere to 407 00:19:30,720 --> 00:19:32,560 Speaker 7: put it. And I'm not sure it's going to be 408 00:19:32,640 --> 00:19:34,480 Speaker 7: like shoe factories in Binghamton, Right. 409 00:19:34,840 --> 00:19:36,560 Speaker 2: Do you think there's some pressure on them to cut costs? 410 00:19:36,640 --> 00:19:40,800 Speaker 7: Now? Pressure to cut costs? I think it's too early. 411 00:19:40,840 --> 00:19:43,600 Speaker 7: I mean, trading is great. No one is giving up 412 00:19:43,680 --> 00:19:47,000 Speaker 7: on the outlook yet for investment banking. And you know, 413 00:19:47,080 --> 00:19:50,560 Speaker 7: a lot, especially a lot of regional banks have PTSD 414 00:19:50,800 --> 00:19:53,800 Speaker 7: from cutting too much in twenty twenty three, and now 415 00:19:53,840 --> 00:19:56,200 Speaker 7: like they're you know, lost some A players and now 416 00:19:56,200 --> 00:19:59,879 Speaker 7: they're scrambling to hire even like a B plus player, right, 417 00:20:00,160 --> 00:20:02,320 Speaker 7: So I'm saying, so there might be. 418 00:20:02,320 --> 00:20:06,959 Speaker 5: Some durability in costs. It's too late to use that 419 00:20:07,040 --> 00:20:08,800 Speaker 5: as a lever, so sorry so early. 420 00:20:08,880 --> 00:20:11,480 Speaker 2: Rather looking across the companies that you cover at the moment, 421 00:20:11,640 --> 00:20:13,879 Speaker 2: just identify a couple that you do like in a 422 00:20:13,920 --> 00:20:16,159 Speaker 2: moment like this one. Because this sounds tremendously parish at 423 00:20:16,200 --> 00:20:18,320 Speaker 2: the moment, but I'm sure there's sometimes you like do 424 00:20:18,359 --> 00:20:19,080 Speaker 2: you like at the moment? 425 00:20:19,280 --> 00:20:21,680 Speaker 7: Counter to everything that I said, I am obsessed with 426 00:20:21,800 --> 00:20:26,480 Speaker 7: Capital One. I think that like so here here's the tagline. 427 00:20:26,560 --> 00:20:30,720 Speaker 7: Cycles are temporary, but networks are forever and buried under 428 00:20:30,760 --> 00:20:34,480 Speaker 7: all of the Liberation Day chaos. And Thursday was the 429 00:20:34,480 --> 00:20:37,520 Speaker 7: New York Times headline that the DOJ is okay with 430 00:20:37,640 --> 00:20:40,520 Speaker 7: the deal, right, and this is a once in a 431 00:20:40,560 --> 00:20:43,720 Speaker 7: lifetime deal for Capital One to own a debit network 432 00:20:43,720 --> 00:20:46,320 Speaker 7: and a credit network. So in an environment like this, 433 00:20:46,720 --> 00:20:48,560 Speaker 7: I have no idea what the macrost or else, I 434 00:20:48,600 --> 00:20:50,840 Speaker 7: wouldn't be sitting here, I'd be on the beach, right. 435 00:20:51,320 --> 00:20:54,919 Speaker 7: But in that case, what investors want will support and 436 00:20:55,119 --> 00:20:59,399 Speaker 7: like our stories where they can self start, like you know, 437 00:20:59,440 --> 00:21:02,080 Speaker 7: they can you know, grow earnings power in a different 438 00:21:02,119 --> 00:21:05,760 Speaker 7: way that's completely exclusive of the macro. And that's what happened, 439 00:21:05,760 --> 00:21:07,480 Speaker 7: That's what's happening with this discovery deal. 440 00:21:07,680 --> 00:21:09,360 Speaker 2: We all want to come to the beach with you. Eric, 441 00:21:09,480 --> 00:21:11,120 Speaker 2: is good to see it, Nanks for dropping by, Thanks 442 00:21:11,119 --> 00:21:13,080 Speaker 2: for your time, Eric, and the Jerry in the VPS 443 00:21:13,200 --> 00:21:25,800 Speaker 2: looking ahead. So those pancanics they dropped tomorrow morning. Susan's 444 00:21:25,760 --> 00:21:28,840 Speaker 2: slock of Apollo joints is surround the table, Sustin. Good morning, sir, 445 00:21:28,880 --> 00:21:30,960 Speaker 2: It's good to see you morning. Can I ignore all that? 446 00:21:31,800 --> 00:21:34,120 Speaker 9: Well, this is a golden lug starting point for the FED, 447 00:21:34,160 --> 00:21:36,280 Speaker 9: at least, I mean the dual mandate it says inflation 448 00:21:36,320 --> 00:21:37,919 Speaker 9: should be too. We moved a little bit more in 449 00:21:37,960 --> 00:21:41,240 Speaker 9: that direction, better than expected, and on jobless claims, we 450 00:21:41,280 --> 00:21:43,800 Speaker 9: also had a label market that still is reasonably strong. 451 00:21:44,040 --> 00:21:46,800 Speaker 9: So from that perspective, this is absolutely good news for 452 00:21:46,800 --> 00:21:49,240 Speaker 9: the FED that we did not get yet any inflation 453 00:21:49,280 --> 00:21:51,560 Speaker 9: surprise to the offside. But obviously we still have terriffs 454 00:21:51,560 --> 00:21:53,960 Speaker 9: in the pipeline, and what's left on the tariff front 455 00:21:54,040 --> 00:21:56,439 Speaker 9: could still add as much as one percentage point to 456 00:21:56,560 --> 00:21:58,720 Speaker 9: tariffs over the next I'm sorry to inflation over the 457 00:21:58,720 --> 00:22:01,240 Speaker 9: next twelve months. So in that sense, this is backward looking. 458 00:22:01,240 --> 00:22:03,200 Speaker 9: As Mike is saying. The risks are of course that 459 00:22:03,240 --> 00:22:05,360 Speaker 9: there's now more upside coming to inflation. 460 00:22:05,520 --> 00:22:07,639 Speaker 2: So this is the issue, and it's a sequencing gissue 461 00:22:07,680 --> 00:22:09,080 Speaker 2: and I'd love to get your thoughts on it. So 462 00:22:09,160 --> 00:22:12,639 Speaker 2: sentiments collapsed basically created over the past few months. What 463 00:22:12,680 --> 00:22:14,439 Speaker 2: we started to see with CPI, it's just a bit 464 00:22:14,480 --> 00:22:17,199 Speaker 2: of softness that's encouraging. How long before we see the 465 00:22:17,200 --> 00:22:20,399 Speaker 2: weakness in the output data before we then see the 466 00:22:20,480 --> 00:22:23,400 Speaker 2: higher prices in months to come? What comes before the other. 467 00:22:23,400 --> 00:22:26,000 Speaker 9: Well, let's think about how companies might respond to this. 468 00:22:26,320 --> 00:22:29,080 Speaker 9: So now you know tariffs are coming. For example, if 469 00:22:29,080 --> 00:22:32,520 Speaker 9: you think about Amazon, of this sellers on Amazon seventy 470 00:22:32,560 --> 00:22:35,280 Speaker 9: one percent they source their goods in China. So one 471 00:22:35,400 --> 00:22:37,639 Speaker 9: very important aspect is that it will be visible for everyone. 472 00:22:37,720 --> 00:22:39,840 Speaker 9: The prices are going up on things that are imported, 473 00:22:39,960 --> 00:22:42,320 Speaker 9: of course from China. So the conclusion to your question 474 00:22:42,320 --> 00:22:44,160 Speaker 9: is how do you respond to that? Do you take 475 00:22:44,200 --> 00:22:47,480 Speaker 9: your existing inventory and sell that at the old prices? 476 00:22:47,720 --> 00:22:50,800 Speaker 9: Do you take your existing inventory and raise the price immediately? 477 00:22:51,080 --> 00:22:54,320 Speaker 9: That profile will probably be individual for different companies, depending 478 00:22:54,320 --> 00:22:57,280 Speaker 9: on the competitive situation which sets are there in how 479 00:22:57,320 --> 00:22:59,840 Speaker 9: sensitive they are to tariffs. So we just don't know 480 00:23:00,080 --> 00:23:02,280 Speaker 9: yet what the impact will be and how quickly this 481 00:23:02,320 --> 00:23:04,800 Speaker 9: will feed through. But we do know that higher prices 482 00:23:04,840 --> 00:23:07,400 Speaker 9: are coming as a result of goods coming from China 483 00:23:07,520 --> 00:23:10,560 Speaker 9: becoming significantly more expensive. So even if companies decide to 484 00:23:10,600 --> 00:23:14,040 Speaker 9: sell the existing inventory at the old price, we will 485 00:23:14,040 --> 00:23:17,240 Speaker 9: over time see some outware pressure on goods inflation coming 486 00:23:17,240 --> 00:23:17,879 Speaker 9: from this source. 487 00:23:18,080 --> 00:23:19,919 Speaker 1: Is there a risk that we ignore this data at 488 00:23:19,920 --> 00:23:23,920 Speaker 1: our own peril? The idea that actually lower energy prices 489 00:23:24,000 --> 00:23:27,840 Speaker 1: are giving more disposable income to consumers to potentially go 490 00:23:27,920 --> 00:23:30,280 Speaker 1: out there and buy, and that, oh yeah, it's also 491 00:23:30,320 --> 00:23:33,280 Speaker 1: an offset for a lot of potential producers in the US. 492 00:23:33,480 --> 00:23:36,400 Speaker 9: Absolutely, low energy prices is very, very helpful for the consumer. 493 00:23:36,600 --> 00:23:38,520 Speaker 9: But the other thing, of course, is that the whole 494 00:23:38,560 --> 00:23:41,439 Speaker 9: surrounding sentiment around what's being going on is that we 495 00:23:41,480 --> 00:23:43,880 Speaker 9: literally went from the last few days from nuclear winter, 496 00:23:44,280 --> 00:23:47,360 Speaker 9: so now back to talking about stackflation and staflation. Has 497 00:23:47,400 --> 00:23:49,600 Speaker 9: these risks of course, that you have hit winds from 498 00:23:49,760 --> 00:23:52,880 Speaker 9: consumer sentiment being weak, corporate sentimenting weak. If you look 499 00:23:52,880 --> 00:23:55,600 Speaker 9: at the fit survey for CAPEX planning, they are really 500 00:23:55,640 --> 00:23:58,480 Speaker 9: beginning to turn south. So companies are beginning to pull 501 00:23:58,520 --> 00:24:00,880 Speaker 9: back more likely because of the unscore cercy. And let's 502 00:24:00,920 --> 00:24:03,240 Speaker 9: not forget we still have a five trillion dollar net 503 00:24:03,240 --> 00:24:05,760 Speaker 9: wealth effect on consumers from the stock market going down. 504 00:24:05,960 --> 00:24:08,400 Speaker 9: So if I add this whole list together of week 505 00:24:08,440 --> 00:24:12,080 Speaker 9: A corporate centiment, week A consumer centiment, tariffs coming, and 506 00:24:12,080 --> 00:24:14,080 Speaker 9: a negative wealth effect, and on top of that also 507 00:24:14,160 --> 00:24:17,560 Speaker 9: retaliation from foreigners who might be doing things to us 508 00:24:17,680 --> 00:24:20,119 Speaker 9: simply because of the trade wall, that brings you a 509 00:24:20,160 --> 00:24:23,280 Speaker 9: fairly long list of downside risk to the outlooker world. 510 00:24:23,160 --> 00:24:26,240 Speaker 1: Which raises this issue of how we even game out 511 00:24:26,280 --> 00:24:27,440 Speaker 1: the idea of inflation. 512 00:24:28,000 --> 00:24:29,160 Speaker 5: Why potentially are we. 513 00:24:29,160 --> 00:24:32,000 Speaker 1: Not talking about deflation or disinflation? And I say this 514 00:24:32,440 --> 00:24:35,240 Speaker 1: given the fact that we see Walmart, for example, saying 515 00:24:35,240 --> 00:24:38,280 Speaker 1: that they are going to invest in price competitiveness, basically 516 00:24:38,280 --> 00:24:41,680 Speaker 1: they're going to absorb all of the costs from tariffs. 517 00:24:41,720 --> 00:24:44,480 Speaker 1: At what point could potentially the lack of demand be 518 00:24:44,520 --> 00:24:46,240 Speaker 1: the main story more than inflation. 519 00:24:46,520 --> 00:24:48,800 Speaker 9: And that's why the key issue here is who is 520 00:24:48,880 --> 00:24:52,040 Speaker 9: going to absorb the increase in tariffs? Who's going to 521 00:24:52,080 --> 00:24:54,440 Speaker 9: absorb the price increase in goods that are coming here, 522 00:24:54,480 --> 00:24:55,600 Speaker 9: in particular from China. 523 00:24:55,720 --> 00:24:56,360 Speaker 2: Is it going to be. 524 00:24:56,320 --> 00:24:58,640 Speaker 9: Consumers that will face higher prices or is it going 525 00:24:58,680 --> 00:25:00,840 Speaker 9: to be taking out of margins will the E in 526 00:25:00,920 --> 00:25:03,320 Speaker 9: the PE ratio go down as a result of this 527 00:25:03,400 --> 00:25:06,320 Speaker 9: as companies such as Walmart, Costco, and of course Amazon 528 00:25:06,320 --> 00:25:08,600 Speaker 9: begins to say, well, maybe we are going to absorb 529 00:25:08,720 --> 00:25:10,639 Speaker 9: some of this, and that remains to be seen exactly. 530 00:25:10,640 --> 00:25:14,119 Speaker 9: Maybe it's going to be split across corporates and across consumers. 531 00:25:14,200 --> 00:25:16,280 Speaker 9: But the bottom line still is that someone has to 532 00:25:16,320 --> 00:25:18,120 Speaker 9: foot the bill when tariffs are going up. 533 00:25:18,720 --> 00:25:21,280 Speaker 4: Wall Street Journal has this morning that the President privately 534 00:25:21,320 --> 00:25:24,320 Speaker 4: acknowledged that his trained policies could potentially lead to a 535 00:25:24,400 --> 00:25:27,000 Speaker 4: trigger recession, but he said he wanted to make sure 536 00:25:27,040 --> 00:25:30,280 Speaker 4: it didn't cause a depression. Where are you now in 537 00:25:30,359 --> 00:25:32,880 Speaker 4: terms of potentially having a recession this year? 538 00:25:33,119 --> 00:25:35,480 Speaker 9: So, of course the last few days, it was pretty 539 00:25:35,480 --> 00:25:37,320 Speaker 9: clear that there would be a certain stop in the 540 00:25:37,359 --> 00:25:40,480 Speaker 9: economy where prices would go up significantly, literally on all 541 00:25:40,520 --> 00:25:42,760 Speaker 9: trading partners and everything coming in. So that was a 542 00:25:42,800 --> 00:25:45,520 Speaker 9: scenario where a recession was very likely, almost at one 543 00:25:45,560 --> 00:25:48,320 Speaker 9: hundred percent where we came from. Today, the recessiont probability 544 00:25:48,400 --> 00:25:50,560 Speaker 9: is probably fifty to fifty percent, meaning we think that 545 00:25:50,600 --> 00:25:52,640 Speaker 9: there is still a likelihood we will have a slow down, 546 00:25:52,640 --> 00:25:54,600 Speaker 9: but the risk is we just don't know what the 547 00:25:54,640 --> 00:25:57,240 Speaker 9: response is going to be from consumers, corporates, how much 548 00:25:57,440 --> 00:26:00,400 Speaker 9: markets go down further, in particular this wealth effect his own, 549 00:26:00,600 --> 00:26:02,520 Speaker 9: think about how we normally talk about when the stock 550 00:26:02,520 --> 00:26:04,960 Speaker 9: market's going down, we go back to the spreadsheets and say, 551 00:26:05,000 --> 00:26:08,040 Speaker 9: what's the mardule protenzeses to consume? How does consumers react 552 00:26:08,040 --> 00:26:09,720 Speaker 9: when the stock market goes down? Here on his own, 553 00:26:09,920 --> 00:26:12,639 Speaker 9: the stock market down now five trillion so far, and 554 00:26:12,720 --> 00:26:14,680 Speaker 9: of course now it's rebounding and then coming a little 555 00:26:14,680 --> 00:26:17,280 Speaker 9: bit back again. That's, on his own, a fairly significant 556 00:26:17,320 --> 00:26:20,280 Speaker 9: hit to consumers and the wealth effect for the consumer outlook. 557 00:26:20,320 --> 00:26:21,760 Speaker 2: And we still don't know what the policy will be 558 00:26:21,760 --> 00:26:24,040 Speaker 2: in a few months time, including the tax code. This 559 00:26:24,119 --> 00:26:27,040 Speaker 2: came from the President just moments ago a social media 560 00:26:27,040 --> 00:26:29,240 Speaker 2: post saying, great news, the big beautiful bill is coming 561 00:26:29,240 --> 00:26:32,719 Speaker 2: along really well. Republicans are working together nicely. The biggest 562 00:26:32,720 --> 00:26:35,680 Speaker 2: tax cuts in US history getting close. 563 00:26:35,800 --> 00:26:37,880 Speaker 4: Well, it's because yesterday they had to pull a vote 564 00:26:37,920 --> 00:26:40,000 Speaker 4: to vote on the budget resolution from the Senate in 565 00:26:40,080 --> 00:26:42,920 Speaker 4: the House because fiscal hawks are saying that Senate bill 566 00:26:43,000 --> 00:26:46,119 Speaker 4: doesn't do enough to for cut. So what's happening this morning? 567 00:26:46,119 --> 00:26:49,240 Speaker 4: Speaker Johnson? Leader soon are having a press conference later 568 00:26:49,320 --> 00:26:52,760 Speaker 4: this hour to outline a plan to get Trump's tax 569 00:26:52,800 --> 00:26:55,320 Speaker 4: cuts through. The President sees this and he says, oh, look, 570 00:26:55,359 --> 00:26:57,960 Speaker 4: they're working together now this morning. They weren't working together 571 00:26:58,040 --> 00:26:58,520 Speaker 4: last night. 572 00:26:58,560 --> 00:27:01,320 Speaker 2: Can they change the conversation We just had CPI TA, 573 00:27:01,440 --> 00:27:03,520 Speaker 2: So let's bring my the key back in for an update? 574 00:27:03,600 --> 00:27:05,800 Speaker 2: Might you find a second love? What stands out well? 575 00:27:05,840 --> 00:27:08,440 Speaker 10: A couple of things, John, We talked about grocery prices 576 00:27:08,520 --> 00:27:11,280 Speaker 10: and meat prices were up one point one percent. Chicken 577 00:27:11,320 --> 00:27:13,920 Speaker 10: prices were up, pork prices were up, so people will 578 00:27:13,960 --> 00:27:17,600 Speaker 10: really be noticing it at the meat counters in their stores. 579 00:27:18,680 --> 00:27:21,080 Speaker 10: More bad news for the president. He'd been bragging about 580 00:27:21,080 --> 00:27:23,640 Speaker 10: the price of eggs coming down, but they rise by 581 00:27:23,680 --> 00:27:25,800 Speaker 10: five point nine percent of the month, which puts them 582 00:27:25,880 --> 00:27:28,680 Speaker 10: up sixty point four percent for the year. Last month 583 00:27:28,720 --> 00:27:31,600 Speaker 10: it was fifty eight percent. So egg prices are going 584 00:27:31,640 --> 00:27:36,040 Speaker 10: back up now. The China impact perhaps, we saw furniture 585 00:27:36,119 --> 00:27:40,840 Speaker 10: prices rise on the month, and that is something we 586 00:27:40,880 --> 00:27:43,360 Speaker 10: get a lot of from China, up six tenths, bedroom 587 00:27:43,359 --> 00:27:47,359 Speaker 10: furniture up two point seven percent, Apparel up four tenths 588 00:27:47,400 --> 00:27:49,760 Speaker 10: after a six tenths rise the month before. 589 00:27:49,960 --> 00:27:51,240 Speaker 2: Also something we do. 590 00:27:51,200 --> 00:27:54,240 Speaker 10: Get a lot of from China. Toy prices went down, 591 00:27:54,240 --> 00:27:58,280 Speaker 10: though maybe that's because Christmas and Hanukkah are behind us. 592 00:27:58,680 --> 00:28:04,000 Speaker 10: Smartphone prices prizingly go down by one percent, so maybe 593 00:28:04,040 --> 00:28:07,879 Speaker 10: that's an inflation number that is coming but is not 594 00:28:08,040 --> 00:28:10,760 Speaker 10: there yet. The big market, well, let me do housing, 595 00:28:10,800 --> 00:28:13,880 Speaker 10: because everybody follows that owner's equivalent read up four tents. 596 00:28:13,960 --> 00:28:15,560 Speaker 2: That's a rise of a tenth of a percent. 597 00:28:16,240 --> 00:28:18,399 Speaker 10: So I was going to say the big thing that 598 00:28:18,440 --> 00:28:22,960 Speaker 10: people are going to be watching going forward is energy prices, 599 00:28:23,000 --> 00:28:26,880 Speaker 10: which were down six point three percent for gasoline. If 600 00:28:26,880 --> 00:28:28,879 Speaker 10: that continues, it takes some of the edge off the 601 00:28:28,920 --> 00:28:32,000 Speaker 10: food prices and it does help the administration's case. 602 00:28:31,800 --> 00:28:32,280 Speaker 5: A little bit. 603 00:28:32,280 --> 00:28:35,000 Speaker 10: But all in all, this is sort of a mixed report. 604 00:28:35,040 --> 00:28:37,399 Speaker 10: The things that we thought would go down airfares were 605 00:28:37,440 --> 00:28:40,880 Speaker 10: down five point four percent did go down. Some of 606 00:28:40,880 --> 00:28:43,720 Speaker 10: the things we got from China did go up, and 607 00:28:43,800 --> 00:28:47,160 Speaker 10: that's something that could continue with the big tariffs that 608 00:28:47,160 --> 00:28:47,680 Speaker 10: they now have. 609 00:28:48,160 --> 00:28:51,120 Speaker 2: Thank you for the update, Mi mckaytha following inflation dates 610 00:28:51,120 --> 00:28:53,400 Speaker 2: for about ten minutes ago. David Kety, hp Mouk and 611 00:28:53,400 --> 00:28:55,440 Speaker 2: Ascent Management joins us now for more. David welcome to 612 00:28:55,440 --> 00:28:59,440 Speaker 2: the program. How encouraging is that data this morning? I 613 00:28:59,440 --> 00:29:01,280 Speaker 2: don't agree that changes anarrative much. 614 00:29:01,520 --> 00:29:03,160 Speaker 8: I think, you know, Mike m keey was pointing out 615 00:29:03,240 --> 00:29:07,520 Speaker 8: that airfares are down five point four percent. Actually lodging 616 00:29:07,880 --> 00:29:11,040 Speaker 8: hotels and motels and so forth was down four point 617 00:29:11,080 --> 00:29:12,760 Speaker 8: three percent. So I think what we're seeing is a 618 00:29:12,800 --> 00:29:14,960 Speaker 8: lot of softness in the travel industry, which I think 619 00:29:15,040 --> 00:29:17,360 Speaker 8: is going to get worse over the course of this year. 620 00:29:18,080 --> 00:29:20,719 Speaker 8: It is a calm before the inflation storm. We're going 621 00:29:20,760 --> 00:29:23,520 Speaker 8: to get some higher inflation out of the tariffs. I mean, 622 00:29:23,600 --> 00:29:26,800 Speaker 8: remember we left the ten percent universal tariff in place. 623 00:29:26,800 --> 00:29:29,960 Speaker 8: That's a lot higher than anything we've seen really for decades, 624 00:29:30,200 --> 00:29:32,600 Speaker 8: so that's high. And then of course there's enormous tariff 625 00:29:32,600 --> 00:29:35,080 Speaker 8: on China which is going to clog supply chains and 626 00:29:35,120 --> 00:29:36,959 Speaker 8: push up prices too. So I think we will get 627 00:29:37,000 --> 00:29:37,640 Speaker 8: some inflation there. 628 00:29:37,640 --> 00:29:38,680 Speaker 2: But what I actually see. 629 00:29:38,480 --> 00:29:40,800 Speaker 8: In the data looking to get the travel numbers is 630 00:29:40,800 --> 00:29:43,440 Speaker 8: a sort of a deflationary tinge to the economy or 631 00:29:43,800 --> 00:29:46,080 Speaker 8: or or slow down tinge to the economy already. So 632 00:29:46,520 --> 00:29:48,920 Speaker 8: you know, you know, I'm glad that the market rallied 633 00:29:49,000 --> 00:29:51,520 Speaker 8: yesterday and say I'm glad that we've got rid of 634 00:29:52,040 --> 00:29:54,440 Speaker 8: the worst of the reciprocal tariffs apart from on China, 635 00:29:54,480 --> 00:29:56,080 Speaker 8: but I think that we are far from out of 636 00:29:56,080 --> 00:29:58,520 Speaker 8: the woods here. I think that these data do sort 637 00:29:58,560 --> 00:30:00,920 Speaker 8: of still suggest that they're is a slowdown coming in 638 00:30:00,960 --> 00:30:01,560 Speaker 8: the economy. 639 00:30:01,760 --> 00:30:04,600 Speaker 1: So the slowdown is what worries you more than the inflation. David, 640 00:30:04,600 --> 00:30:06,800 Speaker 1: if I'm hearing you correctly, at a time or CPI 641 00:30:06,960 --> 00:30:09,080 Speaker 1: just came in, when you strip out energy and food 642 00:30:09,080 --> 00:30:11,960 Speaker 1: at the lowest level going back to twenty twenty one, 643 00:30:12,120 --> 00:30:14,280 Speaker 1: are you saying that that's really what markets ought to 644 00:30:14,280 --> 00:30:16,200 Speaker 1: be focused on, both bond and stock. 645 00:30:16,640 --> 00:30:18,880 Speaker 8: Yes, because people talk about stagflation all the time, but 646 00:30:18,920 --> 00:30:21,480 Speaker 8: really it's always flation stag You get the inflation first, 647 00:30:21,520 --> 00:30:24,320 Speaker 8: and then you get the stagnation. And the problem is that, 648 00:30:24,480 --> 00:30:28,400 Speaker 8: you know, with labor for the labor supply falling away, 649 00:30:29,040 --> 00:30:33,800 Speaker 8: with these impediments to trade, with cutbacks in government spending, 650 00:30:33,840 --> 00:30:35,640 Speaker 8: government grants and so forth, with a lot of fiscal 651 00:30:35,720 --> 00:30:37,640 Speaker 8: drag this year, I can see a lot of things 652 00:30:37,640 --> 00:30:39,880 Speaker 8: that are going to slow the economy down. You know, 653 00:30:39,920 --> 00:30:42,680 Speaker 8: we'll get a temporary surge and inflation from this, but 654 00:30:42,720 --> 00:30:44,080 Speaker 8: I think we're going to be left with a pretty 655 00:30:44,280 --> 00:30:47,719 Speaker 8: stagnant economy afterwards. And the real question is, you know, 656 00:30:48,000 --> 00:30:50,960 Speaker 8: does that revolt in the House yesterday in terms of 657 00:30:50,960 --> 00:30:54,120 Speaker 8: House members who are fiscal hooks, is that really something 658 00:30:54,200 --> 00:30:56,120 Speaker 8: or not? Are we going to have a bigger deficit 659 00:30:56,200 --> 00:30:58,240 Speaker 8: in fiscal stimulus next year or not. If we have 660 00:30:58,280 --> 00:31:01,120 Speaker 8: fiscal stimulus, then I start working about inflation again. But 661 00:31:01,320 --> 00:31:04,200 Speaker 8: in the absence of major fiscal stimulus, I think that 662 00:31:04,440 --> 00:31:06,720 Speaker 8: people need to worry about recession more than inflation. 663 00:31:06,800 --> 00:31:10,040 Speaker 1: Here, our bond's still the best bet us treasure is. 664 00:31:10,080 --> 00:31:12,920 Speaker 1: In that type of scenario, recession comes very much back 665 00:31:12,920 --> 00:31:13,480 Speaker 1: on the table. 666 00:31:14,960 --> 00:31:17,080 Speaker 8: Well, yes, I mean I think this first of all, 667 00:31:17,120 --> 00:31:19,560 Speaker 8: I think, you know, long term interest rates at four 668 00:31:19,600 --> 00:31:22,400 Speaker 8: point three percent, four point two percent on a ten 669 00:31:22,480 --> 00:31:24,840 Speaker 8: year treasury, I think that's fine, and I think people need, 670 00:31:24,880 --> 00:31:27,040 Speaker 8: you know, i'd be level weight and fixed income. I 671 00:31:27,120 --> 00:31:29,680 Speaker 8: realize that we may have a mild recession here, but 672 00:31:30,400 --> 00:31:32,800 Speaker 8: you know, longer term, whatever recession we have, we'll we'll 673 00:31:32,800 --> 00:31:36,040 Speaker 8: pull out of it again. And these bond deals are 674 00:31:36,080 --> 00:31:38,320 Speaker 8: reasonable for the long run. I don't expect inflation to 675 00:31:38,360 --> 00:31:40,240 Speaker 8: hang around the long run, because you know, we'll get 676 00:31:40,240 --> 00:31:43,160 Speaker 8: these tariffs and then then you know, tarffs just don't work, 677 00:31:43,400 --> 00:31:45,760 Speaker 8: and eventually we'll pull back from them and that'll actually 678 00:31:45,760 --> 00:31:48,640 Speaker 8: have a deflationary impulse in the economy. So long term, 679 00:31:48,680 --> 00:31:50,760 Speaker 8: I'm not that worried about inflation. I am worried that 680 00:31:50,760 --> 00:31:53,120 Speaker 8: there won't be much dynamism about the economy overall. 681 00:31:53,360 --> 00:31:56,040 Speaker 2: David, appreciate the update. I know you're basically this morning, 682 00:31:56,080 --> 00:31:57,920 Speaker 2: so thanks for making time for a staved Kelly. There 683 00:31:57,920 --> 00:32:00,320 Speaker 2: of JP Morgan Asset Management, if you want to joining 684 00:32:00,400 --> 00:32:03,360 Speaker 2: us downside surprise on CPI market just kind of looks 685 00:32:03,400 --> 00:32:05,520 Speaker 2: through it. I could he still session loads with down 686 00:32:05,560 --> 00:32:07,600 Speaker 2: by two percent on the S and P five hundred. 687 00:32:07,800 --> 00:32:09,200 Speaker 2: There is a bit at the front end of the curve. 688 00:32:09,200 --> 00:32:11,640 Speaker 2: You ce year's falling back by eight basis points at 689 00:32:11,640 --> 00:32:13,800 Speaker 2: three eighty three on a ten year and in the 690 00:32:13,800 --> 00:32:16,480 Speaker 2: effects market that unlocks further dollar weakness. You wrote dollar 691 00:32:16,560 --> 00:32:19,160 Speaker 2: through one eleven rote one eleven fifteen. Torson' slock of 692 00:32:19,160 --> 00:32:22,000 Speaker 2: Apollo is still with us. Torston, David Kelly, come before 693 00:32:22,000 --> 00:32:24,480 Speaker 2: the storm focus on a growth story more than inflation. 694 00:32:24,840 --> 00:32:25,840 Speaker 2: Do you agree with some of that? 695 00:32:25,960 --> 00:32:27,120 Speaker 5: Well, I'm not so sure. 696 00:32:27,200 --> 00:32:28,719 Speaker 9: I mean, in the last few days the FED has 697 00:32:28,760 --> 00:32:31,920 Speaker 9: made very clear that they will also be focusing on inflation. 698 00:32:32,000 --> 00:32:34,400 Speaker 9: So the real big question for them here is do 699 00:32:34,440 --> 00:32:36,640 Speaker 9: they want their legacy to be Arthur parents or do they 700 00:32:36,600 --> 00:32:38,840 Speaker 9: want their legacy to be Paul Volka Because if they 701 00:32:38,840 --> 00:32:41,360 Speaker 9: walk out the door and have allowed inflation to be 702 00:32:41,480 --> 00:32:43,160 Speaker 9: a lot higher and then of course they will have 703 00:32:43,360 --> 00:32:45,600 Speaker 9: a serious risk. So I do think that this becomes 704 00:32:45,600 --> 00:32:48,400 Speaker 9: a very very important debate inside the FIT in terms 705 00:32:48,440 --> 00:32:50,880 Speaker 9: of what weight should they put on the dual mandate 706 00:32:50,920 --> 00:32:52,640 Speaker 9: When one side of the doual mandate says the fair 707 00:32:52,640 --> 00:32:54,800 Speaker 9: should be cutting, namely growth, and the other side of 708 00:32:54,800 --> 00:32:56,720 Speaker 9: the doal mandate inflation says they should be hiking. 709 00:32:56,720 --> 00:32:58,920 Speaker 2: It difficult to read minds, but based on the communication 710 00:32:59,000 --> 00:33:00,440 Speaker 2: of the past week or so, would you get the 711 00:33:00,440 --> 00:33:01,960 Speaker 2: feeling the weight of history is on. 712 00:33:02,120 --> 00:33:05,280 Speaker 9: Their shelters because I do see some final nuances between 713 00:33:05,320 --> 00:33:07,520 Speaker 9: what's being said in particular comparitives or with your power 714 00:33:07,560 --> 00:33:11,400 Speaker 9: lust Friday. Very importantly, can they get away with just saying, oh, 715 00:33:11,400 --> 00:33:13,960 Speaker 9: we're going to cut because long term inflation expectations in 716 00:33:14,080 --> 00:33:17,440 Speaker 9: markets are very well anchored, because survey expectations aren't going 717 00:33:17,520 --> 00:33:19,440 Speaker 9: up quite significantly. Both in the short term and in 718 00:33:19,480 --> 00:33:21,440 Speaker 9: the long term. So it really becomes a matter of 719 00:33:21,560 --> 00:33:24,000 Speaker 9: where do they put their weight when it comes to inflation. 720 00:33:24,160 --> 00:33:26,760 Speaker 9: Is it on actual incoming inflation or is it on 721 00:33:26,840 --> 00:33:30,160 Speaker 9: some measures of inflation expectations which are well anchored. 722 00:33:30,360 --> 00:33:32,880 Speaker 4: But Torsan, you said it earlier. You have tariff still 723 00:33:32,920 --> 00:33:35,800 Speaker 4: in the pipeline. Can they do anything until they actually 724 00:33:35,920 --> 00:33:37,520 Speaker 4: understand the rules. 725 00:33:37,280 --> 00:33:37,680 Speaker 5: Of the road. 726 00:33:38,120 --> 00:33:40,240 Speaker 9: I think they do the same calculations, of course, that 727 00:33:40,280 --> 00:33:42,160 Speaker 9: this read is doing in terms of the impact on 728 00:33:42,240 --> 00:33:45,040 Speaker 9: inflation is between half and a full percentage point higher 729 00:33:45,120 --> 00:33:47,160 Speaker 9: over the next twelve months. Then I do think that 730 00:33:47,200 --> 00:33:49,480 Speaker 9: they come to the conclusion that the forecast is saying 731 00:33:49,520 --> 00:33:51,760 Speaker 9: inflation is going up, and therefore it's going to be 732 00:33:51,840 --> 00:33:54,240 Speaker 9: difficult for them to signal a lot of rate cuts. 733 00:33:54,360 --> 00:33:56,800 Speaker 9: So that's why the market currently pricing three cuts. It 734 00:33:56,840 --> 00:33:59,480 Speaker 9: does make sense that we have a modest amount of cuts, 735 00:33:59,560 --> 00:34:02,440 Speaker 9: but not more than that, even if growth does last 736 00:34:02,480 --> 00:34:03,600 Speaker 9: to slow down more meaningfully. 737 00:34:03,720 --> 00:34:05,120 Speaker 1: Do you have the sense of how close they were 738 00:34:05,320 --> 00:34:07,280 Speaker 1: intervening with the treasury market yesterday. 739 00:34:07,600 --> 00:34:09,400 Speaker 9: I don't know the answers to that, but I do 740 00:34:09,520 --> 00:34:12,080 Speaker 9: know that they bought one hundred billion dollars during COVID 741 00:34:12,080 --> 00:34:14,279 Speaker 9: of course in March of twenty twenty every single day 742 00:34:14,280 --> 00:34:16,880 Speaker 9: in the treasury market, and I do guess that they 743 00:34:16,920 --> 00:34:19,040 Speaker 9: were probably worried that they would have to take out 744 00:34:19,040 --> 00:34:22,279 Speaker 9: some of the same tools if this were allowed to continue. So, 745 00:34:22,320 --> 00:34:25,200 Speaker 9: if both it was the cause by Japanese sellers, if 746 00:34:25,239 --> 00:34:27,600 Speaker 9: the sellof in rates was caused by risk reduction in 747 00:34:27,680 --> 00:34:29,920 Speaker 9: asset managers, and if it also was caused by the 748 00:34:29,960 --> 00:34:32,680 Speaker 9: basis trade on winding, that combination and the fact that 749 00:34:32,719 --> 00:34:34,880 Speaker 9: we don't even know which of these things were most powerful, 750 00:34:35,280 --> 00:34:37,960 Speaker 9: just still created a significant amount of risks to financial 751 00:34:38,000 --> 00:34:39,840 Speaker 9: stability if this were allowed to continue. 752 00:34:40,000 --> 00:34:42,520 Speaker 2: Do you think people are trying to drift away from 753 00:34:42,760 --> 00:34:45,640 Speaker 2: dollar assets? Do you see that building in the past week. 754 00:34:45,880 --> 00:34:48,000 Speaker 9: I don't see that, because the dollar would have gone 755 00:34:48,000 --> 00:34:49,640 Speaker 9: down a lot more in the last few days than 756 00:34:49,640 --> 00:34:52,320 Speaker 9: it actually did. So there are some discussions around maybe 757 00:34:52,520 --> 00:34:55,560 Speaker 9: China others were selling in custody holdings and just kept 758 00:34:55,560 --> 00:34:58,040 Speaker 9: the money in dollars and didn't sell it and took 759 00:34:58,080 --> 00:35:00,600 Speaker 9: it back home. But nevertheless, the fact that the dollar 760 00:35:00,640 --> 00:35:04,200 Speaker 9: index just moved relatively sideways the yen did appreciate, suggesting 761 00:35:04,200 --> 00:35:06,600 Speaker 9: that it's correct that there might have been some Japanese sellers, 762 00:35:06,640 --> 00:35:09,000 Speaker 9: but broadly speaking of that, the xy index onl Bloomberg 763 00:35:09,000 --> 00:35:11,560 Speaker 9: screen was relatively flat for the last few days, suggesting 764 00:35:11,760 --> 00:35:14,719 Speaker 9: that this was not a questioning about US exceptionalism. I 765 00:35:14,719 --> 00:35:17,600 Speaker 9: still think the US is exceptional, still the most dynamic economy, 766 00:35:17,680 --> 00:35:20,359 Speaker 9: is still the biggest financial market. We still have, of course, 767 00:35:20,400 --> 00:35:22,279 Speaker 9: a lot of investors that are looking here to come 768 00:35:22,320 --> 00:35:24,080 Speaker 9: and invest, and that does make sense. We just have 769 00:35:24,440 --> 00:35:26,719 Speaker 9: at the moment some turbulence, of course, that people are 770 00:35:26,719 --> 00:35:29,440 Speaker 9: thinking about that. This is probably mainly viewed as a 771 00:35:29,480 --> 00:35:31,000 Speaker 9: short term equippled in markets. 772 00:35:31,040 --> 00:35:32,759 Speaker 2: I hope you're right, Sustein. We said it's going to 773 00:35:32,800 --> 00:35:35,719 Speaker 2: see you as always, toson slock there as Apollo. This 774 00:35:35,880 --> 00:35:40,400 Speaker 2: is the Bloomberg Sevenants podcast, bringing you the best in markets, economics, 775 00:35:40,440 --> 00:35:43,360 Speaker 2: antient politics. You can watch the show live on Bloomberg 776 00:35:43,400 --> 00:35:46,600 Speaker 2: TV weekday mornings from six am to nine am Eastern. 777 00:35:46,880 --> 00:35:50,239 Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else 778 00:35:50,280 --> 00:35:52,920 Speaker 2: you listen, and as always on the Bloomberg Terminal and 779 00:35:52,960 --> 00:35:54,160 Speaker 2: the Bloomberg Business Amp.