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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best an economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Right now,

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Speaker 1: we're going to dive into this. This is really important.

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Speaker 1: I'm gonna give you a little bit of visibility here.

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Speaker 1: There are people like men Deep Singh and our Anniragrana

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Speaker 1: who actually walk in offices, sit down at desks, and work.

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Speaker 1: Their hallmark their guidepost is a guy named David Cutler.

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Speaker 1: Dave Cutler was legendary at Digital Equipment Deck years ago

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Speaker 1: in Maynard, Massachusetts. They stole them to the West coast

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Speaker 1: of Microsoft is one of the founding forces behind something

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Speaker 1: we all do, Windows and t Man Deep sing joins

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Speaker 1: us now and knows Dave Cutler the giant of Microsoft programming.

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Speaker 1: This is about Dave Cutler's. All this is about is

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Speaker 1: this kid Autman can bring the meat over this Microsoft

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Speaker 1: well Okay.

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Speaker 2: I think in this case it sounds like the CEO

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Speaker 2: was too overconfident and didn't really talk to his executives

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Speaker 2: and you know, the board, and you come to a

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Speaker 2: point where he was making all the decisions about the

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Speaker 2: future of the company. And look, there's no doubt the

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Speaker 2: market is real. I don't think, you know, you can

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Speaker 2: compare it to a Tarranos or one of the hypes

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Speaker 2: here because there are so many other competing companies that

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Speaker 2: are trying to do the same. The CEO really wanted

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Speaker 2: to move fast in this case r and clearly the

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Speaker 2: board and the executives weren't, you know, in line with them.

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Speaker 1: There will be forty phone calls made today, mister aman Brockman.

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Speaker 1: I believe it is joining him as well. The attributes

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Speaker 1: they will use to sell a given really really supervite,

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Speaker 1: first in their class and and everything. One of these

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Speaker 1: whiz kids, what are the attributes they sell to say,

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Speaker 1: join us at Microsoft.

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Speaker 2: Well, so clearly Microsoft is the compute infrastructure that's powering

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Speaker 2: all the open AI lan come.

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Speaker 1: On stock options. Is it mariners tickets? What? What what

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Speaker 1: gets these guys to move their their slide role over

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Speaker 1: to Microsoft.

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Speaker 2: I mean that could be an exit, but I can't

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Speaker 2: imagine Microsoft really going out of the way to attract talent. Look,

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Speaker 2: they hired Sam Altman, and they will leave it on

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Speaker 2: him to figure out which of the engineers really he

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Speaker 2: wants on his team at Microsoft and how to get there.

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Speaker 1: Should they make a year, we're.

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Speaker 2: Talking about over a million dollars for all of these engineers.

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Speaker 2: So clearly, yeah, that's.

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Speaker 3: Why is this guy so important?

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Speaker 2: So he was the face of open AI and think

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Speaker 2: of you know, chatchipt as the verb when it comes

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Speaker 2: to generative AI. That's why it got so much traction,

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Speaker 2: and he was the face of the company. But clearly

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Speaker 2: there were a lot of engineers behind the scenes that

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Speaker 2: were part of the development and they weren't on board

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Speaker 2: with his approach. They had concerns around AI safety, and

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Speaker 2: that's one thing that I think everyone needs to think

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Speaker 2: about in terms of, you know, the roadmap for when

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Speaker 2: this technology will be deployed. There's a lot going on

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Speaker 2: in terms of developing it, but in terms of really

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Speaker 2: changing your production environments with generative AI, it could be

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Speaker 2: a few years. And that's where I think and not

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Speaker 2: everyone wasn't sync.

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Speaker 3: If they were more concerned about safety on Friday? Are

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Speaker 3: they more or less concerned this morning?

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Speaker 4: Now?

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Speaker 3: Is it Microsoft?

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Speaker 2: Well, so, clearly the talent loss is a big concern,

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Speaker 2: and that's where the board got it wrong the way

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Speaker 2: they went about it. And clearly, I mean, from all

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Speaker 2: we know, OpenAI could lose almost half of its value

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Speaker 2: just because of the fact that they lost the CEO.

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Speaker 5: But does it raise a question about policing of some

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Speaker 5: of the these developments at a place that is focused

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Speaker 5: just on making money the bottom line, and when expectations

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Speaker 5: are pretty high in the market.

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Speaker 2: Well, so look at the development of you know, chat,

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Speaker 2: GPT and all these large anguage models. It's pretty expensive

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Speaker 2: and for any startup to sustain themselves. Right now we

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Speaker 2: are talking about you know, billion dollar R and D budgets,

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Speaker 2: So how do you sustain it? So I don't blame

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Speaker 2: you know, Sam Altman for trying to be ahead in

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Speaker 2: terms of monetization and thinking about it, but not having

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Speaker 2: your executives on board about your thinking or your board.

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Speaker 2: I think that's where you got it wrong.

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Speaker 5: Well, but I guess I'm wondering from a humanity standpoint,

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Speaker 5: if we're going to go with some of the ideals

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Speaker 5: that they're talking about and the fact that the board

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Speaker 5: was concerned about bots that could kind of take on

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Speaker 5: a life of their own and give all sorts of

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Speaker 5: information online. We're already seeing some sort of emblems of that.

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Speaker 5: How much does that just get magnified with a move

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Speaker 5: to Microsoft that doesn't necessarily have a nonprofit board trying

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Speaker 5: to espouse these values.

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Speaker 2: Yeah. So the Google approach so far has been They've

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Speaker 2: been very protective about, you know, what they release, so

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Speaker 2: they have been very conservative. A lot of people have

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Speaker 2: actually blamed them for being slow and not releasing their

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Speaker 2: Gemini Large Anguige model. But this sort of validates a

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Speaker 2: Google approach that you have to take a measured approach

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Speaker 2: when it comes to releasing these models, whether it's open

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Speaker 2: source or proprietary. I think we know open AI was

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Speaker 2: even though it's a nonprofit, everything is proprietary. Well that's

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Speaker 2: I think this brings into focus what should be open

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Speaker 2: source and what can the community work on it collectively,

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Speaker 2: And I think that's on the table now that SAM

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Speaker 2: is moving to Microsoft. I won't be surprised if they

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Speaker 2: go with an open source approach because such an Adellas

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Speaker 2: focus has always been on embracing open source since the

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Speaker 2: time he took the helm.

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Speaker 3: We've had this conversation already a few times this morning.

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Speaker 3: Let's finish there. We've reported this some oltmums trying to

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Speaker 3: create some kind of rifle too in video. How seriously

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Speaker 3: should we take that? Now he's got to see the Microsoft, I.

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Speaker 2: Mean Microsoft and now a new chip of their own

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Speaker 2: last week, right, So clearly Microsoft also has ambitions in

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Speaker 2: terms of developing their chip. But at this point of time,

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Speaker 2: I mean now they have to think about what is

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Speaker 2: the IP that Sam can create over the next six months.

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Speaker 2: Can he develop a large ananguage model that's equivalent to

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Speaker 2: chat GPT in the next six months Because it's proprietary,

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Speaker 2: you know, that's not coming over even if he hires

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Speaker 2: the engineers. The engineers have to build it from scratch,

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Speaker 2: and data availability is in shortage. They can't get the

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Speaker 2: same amount of data that they had before.

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Speaker 3: Tough question. Microsoft's up about one percent or so in

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Speaker 3: a pre market. If open ai was trading in the

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Speaker 3: pre market, where would it be right now?

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Speaker 2: I mean at least fifty percent down?

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Speaker 3: You think that hard?

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Speaker 2: Yes, because now their IP is gone, I mean, especially

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Speaker 2: with Sam coming over this site, Microsoft has to redo

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Speaker 2: everything from scratch until unless the board resigns and Microsoft

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Speaker 2: ends up acquiring open Ai. That's a plausible scenario. But

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Speaker 2: if they have to build it from scratch, now we're

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Speaker 2: talking about a very long timeline. I mean, Google it's

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Speaker 2: clearly ahead in terms of developing their model.

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Speaker 3: So everyone's saying the Microsoft is one. But if they've

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Speaker 3: got to write down that stack by fifty percent, have

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Speaker 3: they won?

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Speaker 5: Well?

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Speaker 2: So, I mean, I think talent acquisition is one thing

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Speaker 2: I do think when it comes to large and wid models.

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Speaker 2: I mean, there are a couple of open source large

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Speaker 2: and AID models, but you could use that to build

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Speaker 2: yours on top of it. I don't think you know,

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Speaker 2: you can replicate what chatchipt had. Again, I go back

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Speaker 2: to the verb analogy, because everyone thought about you know,

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Speaker 2: generative AI and chat Gipt as synonymous.

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Speaker 3: Mante, thank you sir for the update. Manti Singher Bloomberg Intelligence.

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Speaker 1: Joining US is on the short list to be the

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Speaker 1: new Minister of the Economy for the Argentine Republic. Andrew

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Speaker 1: Hollenhorst joins US Chief US Economists. It's City group. Before

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Speaker 1: we get to the serious stuff at hand. How do

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Speaker 1: you save cultural human city grow with your incredible Latin

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Speaker 1: American experience. There no other bank has that experience.

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Speaker 6: How do you save Argentina?

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Speaker 7: Yeah, I mean, I think it's what we're seeing in

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Speaker 7: Argentina is what we've seen a lot of places across

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Speaker 7: the globe, which is this kind of anti establishment, anti

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Speaker 7: anti institutionalist trend that we're seeing in policy making. And

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Speaker 7: when you look at the inflation rate in a country

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Speaker 7: like Argentina, you can see why people are looking for

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Speaker 7: a change.

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Speaker 1: How are we've seen so alone now in a constructive

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Speaker 1: policy out of the pandemic? How a loone will American

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Speaker 1: policy be in twenty twenty four?

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Speaker 7: I mean, I think one thing that really strikes me

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Speaker 7: when you look at US policy relatives to the rest

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Speaker 7: of the world is the deficit in the US. This

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Speaker 7: is a country now where we're running six seven eight

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Speaker 7: percent of GDP deficit in a world with a very

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Speaker 7: low unemployment rate. There are very few countries that can

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Speaker 7: do that. The US may be the only one, maybe

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Speaker 7: some other examples that can just consistently run large deficit

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Speaker 7: like that and continue to provide generous fiscal support, so

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Speaker 7: that it's just a very different situation for the US.

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Speaker 3: Big data point in this week jobless claims, let's go there.

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Speaker 3: You mentioned this in your research at some point. This

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Speaker 3: loosening of the labor market is an unwelcoming deterioration in

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Speaker 3: the data. Are we close to that on jobless claims?

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Speaker 7: We may be, And I think that's yeah. I think

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Speaker 7: you said it earlier. We're getting some conflicting data here.

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Speaker 7: You have the unemployment rate that's up about half a

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Speaker 7: percentage point over the last few months. If you just

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Speaker 7: look at that data series in isolation and don't try

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Speaker 7: to kind of explain away what you're seeing there, and

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Speaker 7: that's what we tend to do as economists. That's what

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Speaker 7: you've seen before every recession. It looks very much like

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Speaker 7: the path into a recession. Now the jobless claims have

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Speaker 7: been low, they're still low, but they're a rising. So

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Speaker 7: I think that's the difficulty. We're waiting for data that

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Speaker 7: will confirm one of these narratives and you just don't

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Speaker 7: have the data in yet.

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Speaker 3: No Death of Anislas mancro had this great phrase in

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Speaker 3: the last couple of weeks, soft landing, Navanna. A lot

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Speaker 3: of people are embracing that soft landing divner. Are you

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Speaker 3: still anticipate in this dual mandate the feder Reserve is

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Speaker 3: going to be in conflict in the coming quarters.

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Speaker 7: I think more likely than not it will be, and

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Speaker 7: that's just based on the history of what we've seen

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Speaker 7: in cycle after cycle. It would be great for the FED,

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Speaker 7: it would be great for the economy if you just

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Speaker 7: had this wonderful Nirvana like scenario where everything kind of

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Speaker 7: slowed on the same schedule. If we had had a

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Speaker 7: different inflation print last week, we'd be having a very

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Speaker 7: different conversation now. And I think that just shows the

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Speaker 7: extent to which this market is focused on the very

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Speaker 7: recent data. So we had softer inflation print, we have

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Speaker 7: job those claims that are coming up a little bit

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Speaker 7: that looks like something that could be consistent with the

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Speaker 7: soft landing. But are you going to get some data

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Speaker 7: that starts going in different directions. Probably, and this is

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Speaker 7: probably going to become a lot more difficult for the FED.

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Speaker 5: But just to build on that, is there an inherent

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Speaker 5: conflict in your belief of a growing chance of a

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Speaker 5: hard landing of a recession but also sticky inflation.

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Speaker 7: Yeah, So I think that's the real difficulty, and that's

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Speaker 7: what we haven't seen really in decades where you have

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Speaker 7: inflation that's still running above target and you have growth

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Speaker 7: that's weakening. Now, maybe they're going to happen together, And

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Speaker 7: maybe they happen together and kind of just the right

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Speaker 7: quantum so that you get the soft landing. I think

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Speaker 7: it's a possibility, But the more likely scenario is that

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Speaker 7: we'll have these kind of going in different directions where

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Speaker 7: inflation probably stays stickier and higher. One issue with inflation

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Speaker 7: and the way that the FED is conducting this policy

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Speaker 7: is inflation is going to lag what's going on in

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Speaker 7: the rest of the economy. So even if the economy

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Speaker 7: starts slowing down, job market starts loosening, you'll still be

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Speaker 7: running inflation that reflects where the economy was six months

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Speaker 7: ago or a year ago, and six months or a year

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Speaker 7: ago is very strong.

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Speaker 5: So are you saying that the Fed won't be kind

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Speaker 5: of rates as much as people think next year because

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Speaker 5: they won't be able to justify it given more inflation.

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Speaker 6: Is Yeah.

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Speaker 7: I think that's really the risk here, and it could

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Speaker 7: happen a couple of ways. So you could have this

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Speaker 7: scenario where the activity data is weakening, but you still

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Speaker 7: have inflation that's sticky and high. On the other hand,

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Speaker 7: even if we're on something that ends up looking more

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Speaker 7: like a soft land trajectory, eventually there wouldn't be a

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Speaker 7: lot of urgency for the FED to cut rates in

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Speaker 7: that scenario. I know, theoretically, if inflation comes down, and

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Speaker 7: I agree at some point the FED would be cutting rates,

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Speaker 7: that could take a very long time before we would

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Speaker 7: actually get those FED cuts.

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Speaker 1: I need to ask you about the linkage from your

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Speaker 1: UCLA and the Giant Almanac in Alvitor William Sharp, who

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Speaker 1: was a student up at Stanford, eventually to you, which

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Speaker 1: is the risk free rate? You absolutely nailed the increase

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Speaker 1: in rates. Do you have any clue where the risk

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Speaker 1: free rate is in twelve months.

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Speaker 7: Yeah, Like we were just discussing, it's going to depend

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Speaker 7: on the economic scenario, and I think you have to

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Speaker 7: be open to economic scenarios here. We do know that

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Speaker 7: we're in a world where inflation has been higher, has

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Speaker 7: been more volatile. We know that the correlation between equities

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Speaker 7: and fixed income has flipped. Essentially, you have equity prices

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Speaker 7: that are falling at the same time bond prices are falling.

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Speaker 7: That means we'll probably be some more term premium in there.

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Speaker 7: That means you'll probably have a higher interest rate all LSEQL,

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Speaker 7: so if anything, that risk free rate is probably going

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Speaker 7: to be higher.

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Speaker 3: And to what changed? What changed? What changed about the

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Speaker 3: fundamentals of things that's going to lead to this different

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Speaker 3: outcome now relative to pre pandemic.

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Speaker 7: I think the single biggest thing you can point to

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Speaker 7: is what's different in goods inflation. And I think that's

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Speaker 7: what we're all not looking at enough right now because

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Speaker 7: we've had a big disinflation and good so I think

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Speaker 7: it's easy to kind of look at that and say, well,

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Speaker 7: we've kind of returned to this pre pandemic goods deflation

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Speaker 7: and that's what we had pre pandemic. Goods prices went

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Speaker 7: down over time, and I think anyone who's been out

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Speaker 7: buying things over the last couple of years certainly the

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Speaker 7: experience is not. The goods prices are down now. Some

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Speaker 7: of that was specific to the pandemic. Some of that's

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Speaker 7: not going to continue. But what will continue is this

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Speaker 7: kind of topping out of globalization, maybe going the opposite

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Speaker 7: way in terms of globalization, and that means that stream

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Speaker 7: of low cost goods it's just not going to be

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Speaker 7: there in the same way that it was putting downward

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Speaker 7: pressure on goods prices. So I think we can expect

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Speaker 7: goods inflation going forward.

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Speaker 3: So this is a secular call for you. It's not

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Speaker 3: a call about the cy cope.

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Speaker 7: So that's a secular call. Yeah, I think that we're

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Speaker 7: the idea that inflation now is higher, more volatile, that

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Speaker 7: the economy is more subject to supply shocks than demand shocks.

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Speaker 7: These are structural, secular changes.

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Speaker 3: Andrew Kreig, to get your perspective on things, Thank you, buddy,

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Speaker 3: it's going to say you, thank you. Good to your

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Speaker 3: houn Hoste.

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Speaker 1: There is no perception to what nineteen seventy five was.

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Speaker 1: It was when a governor from Georgia wandered up north,

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Speaker 1: delusional that he could actually win an election. At the

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Speaker 1: same time, Ricky Skaggs, Tony Rice, Jerry Douglas and others

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Speaker 1: were doing a seminal album in bluegrass JD. Crow In

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Speaker 1: the New South nineteen seventy five. Terry Haynes remembers this.

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Speaker 1: He remembers the shift of the Old Seuth to the

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Speaker 1: New South. In honor of the first Lady Terry Haynes.

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Speaker 1: What was the battle that the two Carters had when

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Speaker 1: they invented the New South.

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Speaker 8: Well, the battle that went on was the idea, and

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Speaker 8: this is middle Watergate post Watergate, the idea that an

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Speaker 8: insurgent could actually shake up Washington. I mean, that was

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Speaker 8: the selling point for Carter. You know, he managed to

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Speaker 8: make that case. He won by a little over President Ford.

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Speaker 8: But then he ran into the realities of Washington, where

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Speaker 8: Tip O'Neill and others took him aside and said, no, actually,

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Speaker 8: this is the time where we get to make the

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Speaker 8: policy and you get to sign the bills. And one

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Speaker 8: ended up happening was basically a three year Democratic food

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Speaker 8: fight that weakened Carter greatly, not least because Ted Kennedy

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Speaker 8: ran against him, and that ended in President Reagan's election.

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Speaker 1: Is this Democratic Party now any shade or idea of

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Speaker 1: what the two Carters knew?

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Speaker 8: Yeah, some of them are. But I think that President

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Speaker 8: Carter would likely be uh, you know, unhappy with the

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Speaker 8: progressive direction, largely because I mean he would be aspirationally progressive,

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Speaker 8: but the idea that uh, you know, they they couldn't

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Speaker 8: win on a particular platform would not be helpful. And

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Speaker 8: uh and he'd see the politics I think very very

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Speaker 8: differently than the current group does.

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Speaker 5: Who do you think Terry is going to be the

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Speaker 5: torch payer for the Democratic Party in the next four

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Speaker 5: to eight years.

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Speaker 8: Oh, you know, beyond Biden. I mean, there's going to

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Speaker 8: be a lot of people that are going to fight

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Speaker 8: that out from from Governor Newtisom uh to Governor Whitmer

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Speaker 8: of Michigan.

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Speaker 2: Uh.

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Speaker 8: You know, there will be four or five others that

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Speaker 8: will try to pop up. It's going to be very

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Speaker 8: interesting the battle for the soul of the party. The

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Speaker 8: problem is, uh, relevancy. What you've got on the left

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Speaker 8: and on the right is a world where the primary

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Speaker 8: system rewards purists and at the same time, the money

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Speaker 8: out there, the money and the energy, rewards purists as well.

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Speaker 8: So there's a huge middle in the country that feels

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Speaker 8: unserved on a lot of levels. And that's I think

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Speaker 8: that's the basis of a lot of the tensions you

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Speaker 8: see politically.

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Speaker 5: Do you think that's the reason why President Biden hasn't

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Speaker 5: stepped down and allow somebody else to run in his stead?

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Speaker 8: One reason? Yeah, I mean, but you know, Democrats are

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Speaker 8: you know, the the old order never passes quietly, I

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Speaker 8: think historically, and what you've got is in. Biden is

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Speaker 8: by and large the old order, somebody who you know,

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Speaker 8: got there on the promise of centrism, of return to normality.

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Speaker 8: And and then when you've got in that is you know,

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Speaker 8: the pull and tug between the Centrists and the progressives,

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Speaker 8: and you know that's not the direction the Democratic Party's going,

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Speaker 8: and they're going for good or real and the progressive.

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Speaker 1: Terry Haynes, who's the Nikki Haley of the Democrats right now?

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Speaker 8: Oh Nikki Haley. Goodness, there isn't one on the radar

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Speaker 8: screen everybody else who's thinking about running when independent. Witner's

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Speaker 8: probably the closest to that, But I don't think there's

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Speaker 8: a close analog.

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Speaker 5: When you talk about President Biden and some of the

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Speaker 5: poll numbers recently, I'm wondering, given the foreign policy consideration,

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Speaker 5: how much is the lack of popularity going to drive

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Speaker 5: some policy decisions on his part in the coming months.

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Speaker 5: In other words, does it reduce his support of Israel

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Speaker 5: and change any of his Middle East policy?

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Speaker 8: I don't think it changes on Israel. I think he

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Speaker 8: gets a little bit tempted on China. The Chinese have

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Speaker 8: been dangling a great deal that you know, if you'd

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Speaker 8: be a little bit more reasonable on Taiwan, We'd work

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Speaker 8: with you one in the Middle East, we'd work with

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Speaker 8: you one rushing Ukraine much more overtly. And you know,

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Speaker 8: so I think he's a little bit tempted in that direction.

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Speaker 8: But you know, the way the White House sees this,

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Speaker 8: and I was following your comments earlier, the way the

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Speaker 8: White House sees this fundamentally is, you know, it's a

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Speaker 8: race against somebody, and they think that people will end

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Speaker 8: up reluctantly pulling the lever, but actually pulling the lever

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Speaker 8: as much to avoid the likely opposition as anything else.

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Speaker 3: Harry, do you think China would be happy with another

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Speaker 3: Biden term?

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Speaker 8: Happy?

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Speaker 9: Yeah?

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Speaker 8: I think short, because what China very likely sees is

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Speaker 8: a lot of mud living through a lot of a

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Speaker 8: lot of pronouncements about new policies chips, security and the like,

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Speaker 8: but not a lot of follow through. I mean, there's

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Speaker 8: a headline on the South China Morning Post this morning saying,

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Speaker 8: you know, America is building all these chip factories, but

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Speaker 8: the federal dollars haven't started to flow, which is true.

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Speaker 8: And you know that's been a year or more after

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Speaker 8: the Ship's Bill was passed you know, one of the

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Speaker 8: things that the United States has got in terms of

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Speaker 8: a large problem is follow through as procurement is actually

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Speaker 8: becoming the arsenal democracy here at this particular.

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Speaker 3: Point, Terry, appreciate your insight. Thank you, sir, Terry Haynes.

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Speaker 3: Theare of panchea policy.

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Speaker 1: So, you know, we sort of snoozed off with Jane

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Speaker 1: Foley in London last time we saw her.

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Speaker 6: Maybe we could do better.

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Speaker 1: Why don't you.

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Speaker 2: Bring in Jane here with big moves a checkond.

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Speaker 5: We did not fall asleep, It just seemed to be rangebound.

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Speaker 5: And now we've actually broken out to one oh nine.

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Speaker 5: The low that we got over the past couple of

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Speaker 5: weeks was just a bit ago at one O six

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Speaker 5: seventy seven one O four sixty seven on October third.

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Speaker 5: This has been a big move. Is at the beginning

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Speaker 5: of something more, Jane Folly? That's really my question? You know,

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Speaker 5: are we going to start to see more protracted dollar weakness?

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Speaker 1: Oh?

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Speaker 4: You know, this is I think really exciting, you know,

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Speaker 4: and I think we're at a really equivocabal point. And

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Speaker 4: of course that started with the CPI data, and of

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Speaker 4: course right now we've got to question will is this

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Speaker 4: a little bit over extended. But you know, one thing

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Speaker 4: is for certain. You know that the dollar has a

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Speaker 4: pretty good inverted relationship with with risky assets, say they're

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Speaker 4: emerging market stocks. So basically what that says to us

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Speaker 4: is that when interest rates in the US go down, well,

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Speaker 4: risk appetite globally goes goes up and people move the

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Speaker 4: money out of dollars. So we know that. What we

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Speaker 4: don't know is if the market's got the timing right

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Speaker 4: about you know, the interest rate cuts coming from the

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Speaker 4: Federal Reserve next year, are we going to get some

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Speaker 4: pushback up? We're going to get more pushback about that.

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Speaker 4: You know for the next few weeks. Is the data

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Speaker 4: going to be a little bit more choppy? And I

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Speaker 4: think that's probably what's going to happen. We will get

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Speaker 4: some choppiness there. So we're probably not on a straight line.

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Speaker 4: But it does appear that we are a really pivotabul point,

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Speaker 4: which might just be a little bit more protracted than

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Speaker 4: many people hope it's going to be.

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Speaker 1: Jane with the multi decades at Robo Bank of Hedging,

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Speaker 1: is there a bet within this range bound market that

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Speaker 1: will allow for acceleration or convexity of moves. Is there

439
00:21:59,200 --> 00:22:03,000
Speaker 1: inability here to be surprised by big figure moves?

440
00:22:03,600 --> 00:22:05,920
Speaker 4: Well, there's always an ability to be a surprise, and

441
00:22:06,080 --> 00:22:07,639
Speaker 4: you know we've seen a lot of them now. But

442
00:22:07,720 --> 00:22:10,240
Speaker 4: we know that the central banks are a data dependent

443
00:22:10,320 --> 00:22:12,359
Speaker 4: and therefore you know, we don't get the forward guidance

444
00:22:12,400 --> 00:22:15,480
Speaker 4: there for perhaps the more scope to be surprised by

445
00:22:15,520 --> 00:22:16,960
Speaker 4: all of this. And of course you know you mentioned

446
00:22:17,000 --> 00:22:20,000
Speaker 4: the elections, this huge amount of elections in twenty twenty four.

447
00:22:20,080 --> 00:22:22,560
Speaker 4: I mean, I think it's it's there's a figure like

448
00:22:23,240 --> 00:22:25,639
Speaker 4: I think countries with a collective population of more than

449
00:22:25,640 --> 00:22:27,679
Speaker 4: four billion, half of the world's population will go to

450
00:22:27,720 --> 00:22:29,640
Speaker 4: the polls next year. So it's not just the US.

451
00:22:29,720 --> 00:22:32,800
Speaker 4: We've got a lot of the EU and Taiwan and

452
00:22:32,840 --> 00:22:35,560
Speaker 4: so many really pivotal places. So there's a lot of

453
00:22:35,600 --> 00:22:38,400
Speaker 4: scope I think for you know, excitement to be injected.

454
00:22:38,400 --> 00:22:41,000
Speaker 1: Okay, I love this, Jane, give me a big figure move,

455
00:22:41,040 --> 00:22:43,560
Speaker 1: give me your pair where I can make a Bramo

456
00:22:43,880 --> 00:22:47,560
Speaker 1: like five six big figure move into June of next year.

457
00:22:48,200 --> 00:22:50,200
Speaker 4: I think you probably look at the Swedish chrona for

458
00:22:50,520 --> 00:22:52,960
Speaker 4: one that's just started to turn around, that had huge

459
00:22:52,960 --> 00:22:55,040
Speaker 4: amount of weakness street for the last couple of years,

460
00:22:55,240 --> 00:22:59,040
Speaker 4: that's beginning to turn around, I think, coming back even

461
00:22:59,080 --> 00:23:02,600
Speaker 4: against the Euro. You know, if we look at the

462
00:23:02,840 --> 00:23:05,320
Speaker 4: Aussie dollar, if the risk appetite does pick up, and

463
00:23:05,320 --> 00:23:07,639
Speaker 4: of course that's the big if it will eventually, but

464
00:23:07,680 --> 00:23:10,760
Speaker 4: you know, this could be a protractive time of the market,

465
00:23:10,760 --> 00:23:12,960
Speaker 4: you know, trying to pick out and maybe knocks back

466
00:23:12,960 --> 00:23:15,000
Speaker 4: from data, knock back from the fad. But perhaps if

467
00:23:15,040 --> 00:23:17,320
Speaker 4: we go you know, towards the latter half of next year,

468
00:23:17,320 --> 00:23:19,520
Speaker 4: I think the Aussie will do really quite well because

469
00:23:19,520 --> 00:23:23,320
Speaker 4: the fundamentals in Australia are really quite good compared with

470
00:23:23,359 --> 00:23:25,600
Speaker 4: many other countries in the G ten. But of course

471
00:23:25,880 --> 00:23:29,280
Speaker 4: that necessitates a pick up in China too, So you know,

472
00:23:29,359 --> 00:23:31,480
Speaker 4: China is going to be a really important part of

473
00:23:31,560 --> 00:23:34,119
Speaker 4: this risk appetite story and how it emerges in twenty

474
00:23:34,119 --> 00:23:34,600
Speaker 4: twenty four.

475
00:23:34,680 --> 00:23:36,600
Speaker 1: Well, Lisa, that's right where I wanted to go, which

476
00:23:36,680 --> 00:23:39,240
Speaker 1: is Ausie off Pacific rim going. If I don't know

477
00:23:39,240 --> 00:23:41,720
Speaker 1: who you play Aussie sing Doll or Aussie China and

478
00:23:41,840 --> 00:23:44,320
Speaker 1: leave that to adults like Jane Foley, But to me,

479
00:23:44,520 --> 00:23:49,080
Speaker 1: Australia always has a modest surprise here. Plus they wanted cricket,

480
00:23:49,080 --> 00:23:52,760
Speaker 1: they'd be such an asull as India. So the long cricket,

481
00:23:52,800 --> 00:23:53,920
Speaker 1: you go long to Aussie.

482
00:23:54,040 --> 00:23:56,520
Speaker 5: I'll leave you to the cricket updates. But just sticking

483
00:23:56,840 --> 00:23:59,399
Speaker 5: with the Pacific RIM, there is a question if you

484
00:23:59,440 --> 00:24:01,520
Speaker 5: want a real big surprise, maybe Japan is the way

485
00:24:01,520 --> 00:24:04,160
Speaker 5: to go. And that's what PIMCO is doing, going into

486
00:24:04,160 --> 00:24:07,240
Speaker 5: the Yen expecting that maybe a bit of softening in

487
00:24:07,280 --> 00:24:09,680
Speaker 5: the stance of the FED, and even ray Kut sort

488
00:24:09,720 --> 00:24:12,639
Speaker 5: of gives an opening to move away from yeld curve control.

489
00:24:12,840 --> 00:24:13,640
Speaker 5: Are you buying that?

490
00:24:15,119 --> 00:24:17,560
Speaker 4: You know, I think it will happen, but I'm still

491
00:24:17,600 --> 00:24:20,480
Speaker 4: not too excited about the pace. Yes, I mean I

492
00:24:20,480 --> 00:24:22,840
Speaker 4: think the real story for twenty twenty four will be Yes,

493
00:24:23,320 --> 00:24:26,000
Speaker 4: more unwinding of view curve control. But it's when are

494
00:24:26,040 --> 00:24:28,240
Speaker 4: they going to be able to hike interest rates? And

495
00:24:28,280 --> 00:24:30,520
Speaker 4: I listened really carefully to the comments from New Adia

496
00:24:30,640 --> 00:24:33,400
Speaker 4: just a couple of weeks ago. He's still really very cautious.

497
00:24:33,560 --> 00:24:36,879
Speaker 4: And then we had some very disappointing GDP data from Japan.

498
00:24:37,200 --> 00:24:39,320
Speaker 4: Of course that's what we need. If we had better

499
00:24:39,400 --> 00:24:41,680
Speaker 4: growth in Japan, we'd all be a lot more confident

500
00:24:41,720 --> 00:24:43,520
Speaker 4: that they can move away from from negative interest rates.

501
00:24:43,560 --> 00:24:45,879
Speaker 4: So we need to watch the economic data, and as

502
00:24:45,920 --> 00:24:48,960
Speaker 4: long as that's sort of disappointing, I think it's still

503
00:24:49,359 --> 00:24:51,960
Speaker 4: difficult to get too excited about the pace at which

504
00:24:51,960 --> 00:24:54,240
Speaker 4: this unwinding net will come. But we have started all

505
00:24:54,359 --> 00:24:57,240
Speaker 4: Japan has started the process of this unwind from a

506
00:24:58,280 --> 00:25:02,159
Speaker 4: very accommodative monetary policy SETU means. What the question is

507
00:25:01,960 --> 00:25:03,720
Speaker 4: is how fast can they really go?

508
00:25:04,080 --> 00:25:05,840
Speaker 3: Jane, Let's get away from G ten, let's go to

509
00:25:05,880 --> 00:25:10,320
Speaker 3: something different. Finish on this. How does a country experiencing

510
00:25:10,320 --> 00:25:12,840
Speaker 3: more than one hundred percent inflation get rid of his

511
00:25:13,000 --> 00:25:16,199
Speaker 3: currency and replace it with the US dollar? Jane, I'm

512
00:25:16,240 --> 00:25:17,560
Speaker 3: sure you and the team we've given this some thought.

513
00:25:17,600 --> 00:25:19,960
Speaker 3: How's this going to work in Argentina? If this is

514
00:25:20,000 --> 00:25:21,280
Speaker 3: the road he wants to go down.

515
00:25:21,800 --> 00:25:24,240
Speaker 4: Well, I mean that's what he said, dollarization, you know.

516
00:25:24,400 --> 00:25:27,000
Speaker 4: And I think what they probably do is probably just

517
00:25:27,560 --> 00:25:30,320
Speaker 4: use the dollar a lot more in trade at price

518
00:25:30,359 --> 00:25:32,920
Speaker 4: things in the dollar and just piggyback off the back

519
00:25:32,960 --> 00:25:37,920
Speaker 4: of the FED much more credible interest rate to ability.

520
00:25:38,000 --> 00:25:42,000
Speaker 4: So it's just that piggybacking of the Fed as much

521
00:25:42,000 --> 00:25:45,119
Speaker 4: as they possibly can. But this is not going to

522
00:25:45,119 --> 00:25:47,280
Speaker 4: be an easy dynamic, as I think we're all aware.

523
00:25:47,280 --> 00:25:49,199
Speaker 3: Going to mean nothing easy about this. Jane, Thank you,

524
00:25:49,280 --> 00:25:51,080
Speaker 3: Jane Furley there of Rabbit Bank.

525
00:25:55,280 --> 00:25:57,240
Speaker 1: Full disclosure. I am a member of the cars on

526
00:25:57,320 --> 00:26:00,359
Speaker 1: Foreign Relations. I can't say enough about his publics service

527
00:26:00,440 --> 00:26:03,600
Speaker 1: back well to World War Two, starting with the Kenonessa

528
00:26:03,800 --> 00:26:07,200
Speaker 1: and other great moments along the way. And I remember,

529
00:26:07,320 --> 00:26:10,840
Speaker 1: I'm going to say, fifteen years ago when the CFI,

530
00:26:10,920 --> 00:26:14,560
Speaker 1: the consult Foreign Relations are the courage to reinvent themselves digitally.

531
00:26:15,000 --> 00:26:18,000
Speaker 1: It is one of the greatest successes in anything we

532
00:26:18,080 --> 00:26:21,720
Speaker 1: do this in international relations. The website of the Consolan

533
00:26:21,800 --> 00:26:27,400
Speaker 1: Foreign Relations, which is the foundational intellectual input of Richard Has.

534
00:26:27,880 --> 00:26:31,399
Speaker 1: So what do you do when has exit? The joy

535
00:26:31,640 --> 00:26:35,200
Speaker 1: is it's Michael froman president of the Consulate Foreign Relations

536
00:26:35,240 --> 00:26:39,280
Speaker 1: to say he's former US trade representative, barely describes the

537
00:26:39,440 --> 00:26:43,919
Speaker 1: miles he has clocked on airplanes for this nation. Michael,

538
00:26:44,040 --> 00:26:47,280
Speaker 1: just thrilled you could join us this morning. Congratulations on

539
00:26:47,720 --> 00:26:51,040
Speaker 1: the new effort with the Consolen Foreign Relations. It's a

540
00:26:51,080 --> 00:26:54,040
Speaker 1: little busy out there, Michael. What are you focused on

541
00:26:54,200 --> 00:26:54,720
Speaker 1: right now?

542
00:26:56,440 --> 00:26:59,320
Speaker 9: Well, we see the return of great power politics with

543
00:26:59,440 --> 00:27:04,119
Speaker 9: Russia at war. The emergence of a competition, multi dimension

544
00:27:04,200 --> 00:27:07,960
Speaker 9: competition with China, and of course you've got the war

545
00:27:07,960 --> 00:27:11,040
Speaker 9: in the Middle East breaking out, and global issues like

546
00:27:11,280 --> 00:27:13,639
Speaker 9: pandemics and climate change still to deal with. So there

547
00:27:13,640 --> 00:27:16,000
Speaker 9: are a lot of issues on the global agenda, a

548
00:27:16,040 --> 00:27:20,520
Speaker 9: lot of demands for cooperation and collaboration, precisely at a

549
00:27:20,560 --> 00:27:22,680
Speaker 9: time when there's also a lot of fragmentation.

550
00:27:23,040 --> 00:27:24,639
Speaker 6: So it's a very challenging period.

551
00:27:24,720 --> 00:27:28,639
Speaker 1: There is a bipartisan toned the console on foreign relations.

552
00:27:28,680 --> 00:27:32,560
Speaker 1: In this new Foreign Affairs magazine, your work with President Obama.

553
00:27:32,640 --> 00:27:36,399
Speaker 1: There's mister Gates, Secretary of Defense, with an important essay

554
00:27:36,840 --> 00:27:40,919
Speaker 1: in your Foreign Affairs magazine. Is it a bipartisan debate

555
00:27:41,040 --> 00:27:45,280
Speaker 1: in Washington or is our politics so fractured we're not

556
00:27:45,480 --> 00:27:47,760
Speaker 1: having a normal CFR debate?

557
00:27:49,440 --> 00:27:53,440
Speaker 9: Well, clearly the country is more polarized politically than it's

558
00:27:53,520 --> 00:27:56,400
Speaker 9: ever been. I think when it comes to foreign policy

559
00:27:56,680 --> 00:28:00,359
Speaker 9: national security, there is a bit more of a non

560
00:28:00,400 --> 00:28:04,879
Speaker 9: partisan or bipartisan debate going on. The center left and

561
00:28:04,920 --> 00:28:09,240
Speaker 9: the center right, I think share a fair number of perspectives,

562
00:28:09,240 --> 00:28:10,800
Speaker 9: and of course then there are a wide range of

563
00:28:10,840 --> 00:28:16,000
Speaker 9: perspectives in both parties as well. But right now, whether

564
00:28:16,040 --> 00:28:18,640
Speaker 9: it's Ukraine or the Middle East. I think the majority

565
00:28:18,640 --> 00:28:22,440
Speaker 9: of both parties are very focused on providing the necessary support,

566
00:28:22,560 --> 00:28:24,480
Speaker 9: and when it comes to an issue like China, there's

567
00:28:24,520 --> 00:28:27,120
Speaker 9: a very strong bipartisan consensus that we need to be

568
00:28:27,480 --> 00:28:30,000
Speaker 9: very firm with China and reset the relationship.

569
00:28:30,080 --> 00:28:32,720
Speaker 5: Focus on that master of proman. Just taking a look

570
00:28:32,760 --> 00:28:35,720
Speaker 5: at what happened last week, do you think it truly

571
00:28:35,920 --> 00:28:38,560
Speaker 5: was more of a success than maybe many people are

572
00:28:38,600 --> 00:28:39,320
Speaker 5: giving it credit for.

573
00:28:41,240 --> 00:28:44,080
Speaker 9: I think it was a success in that the goal

574
00:28:44,280 --> 00:28:47,960
Speaker 9: was to stabilize the relationship heading into twenty twenty four,

575
00:28:48,040 --> 00:28:50,360
Speaker 9: when you have elections in Taiwan and elections in the

576
00:28:50,440 --> 00:28:52,640
Speaker 9: United States where the China issue.

577
00:28:52,360 --> 00:28:54,560
Speaker 6: Is clearly going to play a role.

578
00:28:54,600 --> 00:28:57,680
Speaker 9: And I think they both achieve that in terms of

579
00:28:57,720 --> 00:29:01,360
Speaker 9: not just talking because we shouldn't can views a meeting

580
00:29:01,520 --> 00:29:04,760
Speaker 9: or a conversation with actual progress. But they did make

581
00:29:04,840 --> 00:29:09,680
Speaker 9: actual progress on issues like military to military conflict management,

582
00:29:10,080 --> 00:29:14,920
Speaker 9: on fentanyl, on climate change, and on really trying to

583
00:29:14,960 --> 00:29:18,920
Speaker 9: reset the relationship going into next year. So President she

584
00:29:18,960 --> 00:29:21,840
Speaker 9: gave a speech in San Francisco which frankly could have

585
00:29:21,880 --> 00:29:24,360
Speaker 9: been given seven or ten years ago. There was no

586
00:29:24,920 --> 00:29:29,320
Speaker 9: wolf Warrior diplomacy in evidence. There was no reference to

587
00:29:30,000 --> 00:29:32,960
Speaker 9: the challenges and conflicts that have defined the relationship over

588
00:29:33,000 --> 00:29:35,720
Speaker 9: the last few years. And I think there's a real

589
00:29:35,760 --> 00:29:38,200
Speaker 9: effort on their part for their own reasons that the

590
00:29:38,280 --> 00:29:40,800
Speaker 9: Chinese wanted to make sure that we have a more

591
00:29:40,840 --> 00:29:43,320
Speaker 9: benign international environment looking ahead.

592
00:29:43,400 --> 00:29:45,800
Speaker 5: They want the appearance of at least some sort of

593
00:29:45,840 --> 00:29:47,240
Speaker 5: back to the future and when it comes to the

594
00:29:47,320 --> 00:29:50,000
Speaker 5: business climate, but there's a real question about how much

595
00:29:50,680 --> 00:29:53,080
Speaker 5: that really carries through. There was a little discussion about

596
00:29:53,080 --> 00:29:56,280
Speaker 5: them buddying up with Iran as well as North Korea,

597
00:29:56,360 --> 00:30:00,080
Speaker 5: and particularly siding with them with respect to c and

598
00:30:00,120 --> 00:30:03,320
Speaker 5: issues in Ukraine as well as in Israel. Today Russian

599
00:30:03,600 --> 00:30:08,160
Speaker 5: delegates excuse me, Chinese delegates are meeting with urban nations

600
00:30:08,200 --> 00:30:09,920
Speaker 5: to try to discuss what's going to happen in Israel.

601
00:30:09,960 --> 00:30:12,680
Speaker 5: Do we have a sense of where they stand on this,

602
00:30:12,880 --> 00:30:14,600
Speaker 5: of what they are going to argue for.

603
00:30:16,320 --> 00:30:19,160
Speaker 9: I think China is trying to figure out what its

604
00:30:19,240 --> 00:30:23,560
Speaker 9: global role is beyond economics. It did play a role

605
00:30:23,560 --> 00:30:27,480
Speaker 9: in witnessing the normalization of relations a bit between Iran

606
00:30:27,520 --> 00:30:29,880
Speaker 9: and Saudi Arabia. That was a limited agreement around not

607
00:30:30,080 --> 00:30:36,360
Speaker 9: bombing Saudi oil infrastructure it has offered its help in Ukraine,

608
00:30:36,360 --> 00:30:38,560
Speaker 9: but given the fact that it has a friendship without

609
00:30:38,600 --> 00:30:42,320
Speaker 9: limits with Russia, that help is not being particularly welcomed

610
00:30:42,320 --> 00:30:45,360
Speaker 9: by the Ukrainians. And in the Middle East, of course,

611
00:30:45,840 --> 00:30:47,920
Speaker 9: I imagine the parties in the region will be seeking

612
00:30:47,920 --> 00:30:50,960
Speaker 9: out support wherever they can, and capitals around the world,

613
00:30:51,000 --> 00:30:53,760
Speaker 9: including in China, I think to the degree that they

614
00:30:53,800 --> 00:30:55,480
Speaker 9: can play a constructive role.

615
00:30:55,480 --> 00:30:56,800
Speaker 6: Of course it should be welcomed.

616
00:30:57,320 --> 00:31:00,640
Speaker 9: But that means really playing a role in providing a

617
00:31:00,680 --> 00:31:03,840
Speaker 9: public good that they've never really done before. China has

618
00:31:03,880 --> 00:31:09,400
Speaker 9: been amazingly disciplined about pursuing its national interests narrowly defined,

619
00:31:09,600 --> 00:31:11,440
Speaker 9: and if they really want to be a global power,

620
00:31:11,480 --> 00:31:13,280
Speaker 9: then they also have to help provide for some of

621
00:31:13,320 --> 00:31:13,920
Speaker 9: the public good.

622
00:31:14,320 --> 00:31:18,320
Speaker 1: Michael, you are more identified with TPP than anyone I know.

623
00:31:18,480 --> 00:31:22,360
Speaker 1: The failure of Transpacific Partnership something you work on. The

624
00:31:22,560 --> 00:31:27,120
Speaker 1: fact is we are deploying four military basis to the Philippines,

625
00:31:27,440 --> 00:31:31,560
Speaker 1: two in Kegayon Isabella and that long skinny island down

626
00:31:31,600 --> 00:31:36,080
Speaker 1: towards the South China Sea Palawan. Is our military doing

627
00:31:36,240 --> 00:31:40,680
Speaker 1: TPP for us? Is that the actual TPP is the

628
00:31:40,760 --> 00:31:45,560
Speaker 1: military expansion of America to the Pacific RIM.

629
00:31:45,880 --> 00:31:47,760
Speaker 9: I think one thing that's clear is that the more

630
00:31:47,840 --> 00:31:51,719
Speaker 9: that China asserts itself across the region, the more the

631
00:31:51,760 --> 00:31:54,280
Speaker 9: countries in the region want the US to be present

632
00:31:54,680 --> 00:31:57,520
Speaker 9: and engaged. And they're looking for our engagement in a

633
00:31:57,560 --> 00:32:02,000
Speaker 9: military security sense, in a political dimension, but also in

634
00:32:02,040 --> 00:32:06,200
Speaker 9: an economic dimension. This is the most economically dynamic region

635
00:32:06,320 --> 00:32:08,840
Speaker 9: of the world, and they desperately want the US to

636
00:32:08,880 --> 00:32:12,000
Speaker 9: be engaged there, not just as a military power, but

637
00:32:12,080 --> 00:32:13,520
Speaker 9: also as an economic power.

638
00:32:14,240 --> 00:32:17,520
Speaker 1: Michael Froman again congratulations new duties at the Council on

639
00:32:17,560 --> 00:32:21,720
Speaker 1: Foreign Relations. He is the President of the cf Subscribe

640
00:32:21,760 --> 00:32:25,480
Speaker 1: to the Bloomberg Surveillance podcast on Apple, Spotify and anywhere

641
00:32:25,520 --> 00:32:29,920
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642
00:32:29,960 --> 00:32:34,520
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643
00:32:34,840 --> 00:32:38,400
Speaker 1: tune In, and the Bloomberg Business app. You can watch

644
00:32:38,560 --> 00:32:42,840
Speaker 1: us live on Bloomberg Television and always. I'm the Bloomberg Terminal.

645
00:32:43,280 --> 00:32:47,480
Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg