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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news on the Bloomberg Markets Podcast,

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. We had, uh, what

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Speaker 1: looked to me at least like a very dovish J.

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Speaker 1: Powell on Wednesday with just a mini hike five basis points.

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Speaker 1: Almost didn't even notice that, and then um talking about

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Speaker 1: dependency on data and didn't give a straight no to

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Speaker 1: the question of whether they thought about a pause in

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Speaker 1: the meeting. UM just generally, you know, he thought financial

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Speaker 1: conditions were tightening, which we're still not sure what index

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Speaker 1: he was looking at. UM that may change after Friday's

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Speaker 1: jobs number blew away the estimates and showed that this

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Speaker 1: US labor market is still red hot, regardless of the

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Speaker 1: West Coast pink slips that we report on every day.

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Speaker 1: Let's bring in Liz Capit McCormick to talk about this,

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Speaker 1: Chief Correspondent Global Macro Markets for Bloomberg News. So did

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Speaker 1: Friday you know, change the path for the FED. Well,

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Speaker 1: I think you want to hope that even despite pal

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Speaker 1: sounding devish, they had a plan. They kept saying higher

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Speaker 1: for longer. Maybe it doesn't matter whenever comes next, is

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Speaker 1: you know, whichever way the wind blows is the way

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Speaker 1: they're going. I know it's a rough road, but I

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Speaker 1: think Friday kind of locked in. You saw a lot

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Speaker 1: of the street economist say, you know, those who are

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Speaker 1: forecasting two more three more quarter point hikes said oh yeah,

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Speaker 1: we're good, you know. I mean, it was just so

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Speaker 1: strong all across the board. You know, it's kind of

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Speaker 1: head scratching. But no one kind of wrote it off

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Speaker 1: as like a cork or something. So I think it

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Speaker 1: definitely figure out what it was because a lot of

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Speaker 1: people did try and write it off. I didn't see

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Speaker 1: any credible arguments. Um, but it wasn't just the most

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Speaker 1: recent month. Um. They also revised previous months higher. It

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Speaker 1: just looks incredible. Yeah. And I was listening to our

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Speaker 1: Mike McKee, and he went through it all and he

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Speaker 1: didn't couldn't find any reason to like write it off.

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Speaker 1: You know, like you said, the revisions were higher. I mean,

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Speaker 1: maybe some people say even if you took out some

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Speaker 1: of it, it's still strong. Right. We want to be

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Speaker 1: kind of below one fifty. I mean, not that we

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Speaker 1: want people out of work, but to kind of cool

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Speaker 1: the labor market a little and bring inflation down further.

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Speaker 1: What does that the mean for the bond market reaction?

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Speaker 1: I think it was up like sixteen basis points on

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Speaker 1: the front end of the curve just off that report.

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Speaker 1: The equity market was kind of like, but the bond

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Speaker 1: market was very much reacting to it. But even another

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Speaker 1: twelve today, fourty on the two year, exactly one on

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Speaker 1: the tenure. But it's still within its range. Yeah, but

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Speaker 1: look at the terminal rates. So finally, like like Matt

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Speaker 1: was saying Wednesday, oh, people thought pal was kind of dubbish.

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Speaker 1: The terminal rate, where the market sees the peak for

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Speaker 1: the Fed, came down even further. They were like locking

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Speaker 1: in fifty basis points the cuts coming by the end

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Speaker 1: of the year. Now things have changed a little. They

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Speaker 1: got the terminal rate back up towards like five point

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Speaker 1: one percent, which is about around where the dots are

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Speaker 1: the FEDS dots, and there's less than half a point

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Speaker 1: of cuts in there now. So I think the market

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Speaker 1: kind of got a little religion on Friday to say, oh,

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Speaker 1: you know, maybe we've gone too far, you know, maybe

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Speaker 1: we kind of we're wrong footed, and the impression of

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Speaker 1: pal or even not even if we were right now,

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Speaker 1: these jobs data is so strong. Now we have another

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Speaker 1: jobs report right before the next FED meetings, so let's

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Speaker 1: see what happens there. We have the inflation numbers. But

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Speaker 1: I think the bond market kind of got a gut check,

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Speaker 1: you know that maybe we've kind of leaned too far,

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Speaker 1: Like what's the new trendy thing now they're saying no landing,

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Speaker 1: you know, you know, some saying soft landing. Maybe there's

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Speaker 1: no landing. I don't know about that, but I think

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Speaker 1: the barn market, at least that is hedging. And we

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Speaker 1: have a lot of supply this week coming with the

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Speaker 1: refundings and about nineties six billion. I was gonna say

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Speaker 1: for debt auctions to your point, that is a lot

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Speaker 1: of new supply addition to a lot of the M

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Speaker 1: and A deals by the way, that are I think

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Speaker 1: being funded mostly by debt. Yeah, um, what does that

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Speaker 1: then do? What do we expect this week? Well, it's

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Speaker 1: been crazy this year. The auctions have gone like crazy good,

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Speaker 1: you know, not that I don't want them to go well,

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Speaker 1: but like so many in a row, the yield came

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Speaker 1: below that where it was trading right before the bidding,

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Speaker 1: which is a sign of strong demand. So people are saying,

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Speaker 1: maybe not this round. Nine billion, yields aren't as high

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Speaker 1: as they were. Um, now we think the Fed maybe

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Speaker 1: higher for longer. It's going to be a real litmus

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Speaker 1: test of how strong is this demand for treasuries. So

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Speaker 1: we'll see, well what does it mean to I mean

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Speaker 1: if if you know, bond auctions are going great and

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Speaker 1: m and I EM and a activity picks up, and um,

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Speaker 1: you know we're adding five thousand jobs a month, or

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Speaker 1: even if we're adding two jobs a month, um, and

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Speaker 1: inflation is coming down, then the Fed is pretty cool

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Speaker 1: on its um you know, wandering path of of devishness. Well,

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Speaker 1: but is deva fishness like the market was pricing dovishness cuts?

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Speaker 1: You know, should they wander to cuts. There's a lot

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Speaker 1: of people who say, like, why does the market price

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Speaker 1: that in it's just hopes brings eternal in the equity

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Speaker 1: market or in the in the fixed income market. I

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Speaker 1: think so, and they have to be leading and to

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Speaker 1: be all. To be fair, there's some optionality in that, right,

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Speaker 1: if you're a trader, you got a price, let me

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Speaker 1: hedge myself. There's some risk of cuts, so that's gonna

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Speaker 1: bring the implied rate in the futures down. Um. But

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Speaker 1: I think, you know, it's I hate to say, like

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Speaker 1: Pavlov's dogs. The market is so you know, trading the pivot.

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Speaker 1: We've got to get hitt of the pivot. And they've

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Speaker 1: been wrong a lot. Um. Not that the Fed hasn't

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Speaker 1: been wrong on many things, to be fair, but I

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Speaker 1: think the market it just thinks, like the old playbook,

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Speaker 1: the FED has to pivot. But you know, if inflation,

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Speaker 1: even if it comes down four percent, is way above

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Speaker 1: two percent, you know, and if the growth is going

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Speaker 1: okay and we don't have a bad recession, why does

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Speaker 1: the Fed have to cut anyway? You know? So I

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Speaker 1: don't know. I think we could be sitting here in

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Speaker 1: December and saying, good point, Wow, the Fed didn't even

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Speaker 1: cut this year at all. They just stuck at five.

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Speaker 1: What ever, that would be a new thing as long

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Speaker 1: as the economy is humming on all cylinders. Um, if

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Speaker 1: inflation is coming down, we're adding jobs, m and a

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Speaker 1: activity is good, Um, you know, earnings aren't a drop

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Speaker 1: of then they might as well leave it where it

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Speaker 1: is until we have a problem. And Pal said on Wednesday, like,

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Speaker 1: we see more risk to turning to you know, easy

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Speaker 1: policy too soon than going a little bit too far

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Speaker 1: because we can always cut later. And I think that

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Speaker 1: was a very telling point. You know, they want to

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Speaker 1: air on the side of maybe going a little too

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Speaker 1: far quote unquote then turning course too fast and having

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Speaker 1: to restart. They don't like that stop stark kind of thing.

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Speaker 1: But then how do you factor in, say the e

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Speaker 1: C B, the b O E. If you're looking at

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Speaker 1: what could be some very volatile days ahead for for

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Speaker 1: the boon market, specifically in the guilt market, how does

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Speaker 1: that translate or at least affect the treasury market. Well,

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Speaker 1: it was interesting last week. I thought Laguard did a

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Speaker 1: nice job at a press conference. I thought they were

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Speaker 1: hawkers that market rally too. So there's a little bit

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Speaker 1: of this uber euphoria going on all around. But if

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Speaker 1: if she was saying there they intend to raise rates

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Speaker 1: fifty right, she was, Yeah, they're not. They're not locking

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Speaker 1: in there, you know, right, Well, they they can't write

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Speaker 1: a legal contracts were for sure. I'm just saying, like

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Speaker 1: you know, across the board, you didn't really hear forcefully

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Speaker 1: hawkish language. You heard a lot of optionality, which I'm

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Speaker 1: not saying that's the wrong move. I would want optionality too.

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Speaker 1: I'm just saying the way the market interprets that is devishness. Well,

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Speaker 1: and like you said, the central banks have to kind

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Speaker 1: of set the stage, right, even if the stage means

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Speaker 1: a couple quarters away, I don't think anyone could argue.

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Speaker 1: We were talking to some of my colleagues that bond

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Speaker 1: ball has come down a lot. That's a good thing,

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Speaker 1: and people are saying, at the least give or take

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Speaker 1: two more hikes, three more hikes, what the ECB does, whatever,

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Speaker 1: we're getting closer to the end than last year when

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Speaker 1: we had this big hill to climb of tightening, right,

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Speaker 1: So I think bond ball coming down is telling to

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Speaker 1: your point that, yeah, they're getting closer to the end,

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Speaker 1: whether of FED just kind of hikes to whatever's terminal

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Speaker 1: for them, it just sits there for a year. That's

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Speaker 1: also good for all. If we know, hey, FED sent

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Speaker 1: still and maybe they cut. I'm not predicting that, but

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Speaker 1: we know, like somebody was saying to me the other

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Speaker 1: day that last year, every meeting, you're like, is it

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Speaker 1: is it fifties at least? All that has kind of

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Speaker 1: narrowed down the range of outcomes for the FED, the ECB,

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Speaker 1: other central banks, I would say has narrowed. But so um,

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Speaker 1: I think last year, late last year Daniel D. Martino

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Speaker 1: Booth was telling us she thought Powell was trying to

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Speaker 1: kill the FED put and you know, you point out

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Speaker 1: that everybody wants to trade the pivot. You know it's

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Speaker 1: gonna happen, it's gonna happen, it's gonna happen. It never happens.

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Speaker 1: But this isn't killed. He's not putting it to bed

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Speaker 1: with that kind of language. None of them really are. Um.

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Speaker 1: They're all kind of leaving it open, and that leads

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Speaker 1: to looser financial conditions, which could lead to more inflation.

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Speaker 1: That's the problem, right, right, And I think you're right, Like,

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Speaker 1: no one wants to go against the Chairman of the FED,

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Speaker 1: but everyone was kind of like, what way financial conditions

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Speaker 1: are tighter than a month ago? What are they looking at?

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Speaker 1: So I think, yes, he's right, long run versus last year,

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Speaker 1: they're tighter but that you know, some people are saying

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Speaker 1: like things are heating up again, the housing markets picking

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Speaker 1: up a little bit, like they don't want things to

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Speaker 1: heat up again, right, which is inflationary? I mean not

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Speaker 1: for nothing. They've brought inflation down a lot, but it's

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Speaker 1: still has more to go. And a few people smarter

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Speaker 1: than me have said, you know, the hardest nut for

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Speaker 1: inflation is the final like few percentage points bringing it down,

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Speaker 1: getting it from the uber high to hear, you know,

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Speaker 1: took a lot like these last five pounds killing, so true,

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Speaker 1: so true, Poor, poor poor Matt on the last five pounds. Uh.

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Speaker 1: Liz McCormick, thank you, as always, Chief Markets correspondent, Um.

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Speaker 1: She kind of does a little bit of everything, bonds,

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Speaker 1: dollar stocks, anything you need, right, Matt. Yeah, and we're

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Speaker 1: very happy to have her. Thank you, very She wrote

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Speaker 1: the cover story as well with Katie Greifeld on the

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Speaker 1: latest edition of Bloomberg Business Week, and what a timely

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Speaker 1: cover story that is definitely check out that don't the

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Speaker 1: FED addition or we are fighting the FED addition. M

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Speaker 1: let's bring in pre a miserable She is managing director

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Speaker 1: and global head of Rate Strategy over a T D

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Speaker 1: securities Pria. What was your take on the incredible roller

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Speaker 1: coaster ride that we had last week after the FED

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Speaker 1: um and the non farm payrolls. Sure, thanks for having

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Speaker 1: me on, It's been quite the week. Um So I think,

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Speaker 1: you know, I think the market is dealing with both

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Speaker 1: uncertaintly on the economic outclook, and that's what we saw

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Speaker 1: with both payrolls as well as i s M very

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Speaker 1: strong numbers. We're not seeing signs of slowdown there at

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Speaker 1: least in the labor market or even service demand. Actually

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Speaker 1: was more interested in is M services because I think

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Speaker 1: that's going to be a leading indicator and so far

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Speaker 1: not really seen moderation. But then the other source of

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Speaker 1: uncertaintly is the FED, and there was there's a clear

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Speaker 1: lack of urgency from chap out from the Fed to

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Speaker 1: keep hiking, and he was very noncommittal. I mean, I

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Speaker 1: was surprised a little bit with the re action on

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Speaker 1: Wednesday because I don't think he was devilish per se,

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Speaker 1: but he didn't push back on the using of financial

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Speaker 1: conditions that we've seen since December. He was very noncommittal

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Speaker 1: on the end point, like where do they end hikes

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Speaker 1: and sort of left it to the data, so I

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Speaker 1: think it's going to really come down. I know there's

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Speaker 1: a lot of focus on tomorrow's comments by Chepower, but

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Speaker 1: I think their data dependent and it's very hard for

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Speaker 1: the market to get you know, exactly where the end

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Speaker 1: point is. We're gonna have to watch the economy and inflation.

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Speaker 1: I think there's a lot of optimism that inflation will

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Speaker 1: keep declining, and our view is it's going to be sticky,

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Speaker 1: and so you'll get a series of twenty five hikes

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Speaker 1: as the Fed ends, but they don't end what the

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Speaker 1: market was pricing in on Wednesday, just one more high week.

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Speaker 1: Expect two more hikes, possibly chance of another twenty five

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Speaker 1: in June. If inflation sort of flatlines here and doesn't

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Speaker 1: keep declining, let's put some numbers on that. Here, we're

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Speaker 1: looking at ten years, Matt pointed out higher about nine

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Speaker 1: basis points three sixty one. As the bond market is

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Speaker 1: factoring everything you just laid out is kind of being

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Speaker 1: a little wishy washy and just kind of sticking into

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Speaker 1: this trading range. Why aren't we seeing it break out?

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Speaker 1: I think the tenure is really tricky, right, because that's

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Speaker 1: your view on fat funds, in a way over the

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Speaker 1: next ten years, and so that incorporates a slowdown you know,

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Speaker 1: later this year, next year, it incorporates rate cuts at

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Speaker 1: some point. I mean, even if we get a soft landing,

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Speaker 1: the FED is not going to keep rates at five

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Speaker 1: or five in a quarter. They're going to have to

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Speaker 1: bring it down. So I think the tenure likely stays

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Speaker 1: in a range. Seventy five is the range we're thinking.

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Speaker 1: The front end I think can break out. If we

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Speaker 1: find that inflation is sticky, UM wages are staying strong,

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Speaker 1: then I can see front endry. It's going back to

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Speaker 1: the upper bound of the range, maybe even moving higher

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Speaker 1: because we realize the FED is not cutting. We have

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Speaker 1: a lot of cuts priced in for this year and

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Speaker 1: next year. I think they can start to get taken out.

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Speaker 1: That terminal rate can go higher than where it is

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Speaker 1: right now, like just above five percent. We can get

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Speaker 1: to five and a quarter. So the front end can

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Speaker 1: absolute selo. The tenure does get tricky because it's a longer.

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Speaker 1: It's your view over you know, the next ten years.

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Speaker 1: Why do you think the FED is going to have

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Speaker 1: to cut If we're adding jobs UM at such a

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Speaker 1: fantastic pace and UM we don't see such a huge

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Speaker 1: drop in earnings. I think right down right now, we're

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Speaker 1: looking at a three percent drop in earnings last quarter. Um,

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Speaker 1: what's gonna be the impetus for the cut? Great question.

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Speaker 1: So I'm gonna go back to the Fed's dual mandate

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Speaker 1: inflation and growth. So our view for rate cuts. We've

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Speaker 1: actually got a lot of cuts penciled in for next

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Speaker 1: years because we're looking for a recession in the base case,

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Speaker 1: and we see inflation I said it's sticky, but by

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Speaker 1: next year starting to get within the three two and

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Speaker 1: a half percent range. So cutting for both sides of

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Speaker 1: the dual mandate. But let's say we get this what

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Speaker 1: we're calling immaculate disinflation scenario right where inflation continues to fall,

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Speaker 1: soft landing every risk asset to the moon. Even in

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Speaker 1: that AIO, I can see the Fed cutting rates, which

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Speaker 1: is embedded in their dot plot. Right, They've got a

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Speaker 1: hundred basis once next day and the year after. That's

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Speaker 1: not for growth reasons, that's for inflation reasons, and because

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Speaker 1: the FED wants to get at that point rates away

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Speaker 1: from restrictive into let's in neutral territory. So if inflation

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Speaker 1: gets back to two and a half by the end

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Speaker 1: of the year. I think there's a case for the

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Speaker 1: FED starting to cut because FED funds at five or

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Speaker 1: five and a quarter is too high. We should be

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Speaker 1: closer to two and a half or three percent, So

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Speaker 1: that's the reason to cut. The timing the peace would

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Speaker 1: depend a lot, whether it's a recession or a soft

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Speaker 1: landing scenario. But the rate cuts is just if inflation

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Speaker 1: comes back down. Whenever it does, I think the FED

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Speaker 1: then starts to signal rate cuts. All right, Prea, thanks

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Speaker 1: so much for joining us. Priam Isra. They're managing director

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Speaker 1: and global head of rate strategy over TV Securities. We

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Speaker 1: love to get her take on the FED and the

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Speaker 1: fixed income space, and we hope to have her on

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Speaker 1: again very soon and talk to her a little bit longer. Okay,

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Speaker 1: let's bring in uh Andrew Merrick right now for Raymond James.

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Speaker 1: He's the VP of Equity Research and also has many

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Speaker 1: I'm sure thoughts on chickens and eggs and all. Yeah,

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Speaker 1: do you also spend so much time trying to understand

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Speaker 1: the eggs. Well, it's a real chicken in the eggs situation.

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Speaker 1: You're perfect for this, all right, Let's ask about, um,

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Speaker 1: what your reaction was to last week, because just I

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Speaker 1: spent the whole weekend talking about last week's news with

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Speaker 1: people who don't even participate in markets. I mean, it

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Speaker 1: was just that dramatic. Um, with the press conference on

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Speaker 1: Wednesday and then the job's number on Friday, does it

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Speaker 1: change at all your views what we saw? Well? So

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Speaker 1: in the gaming sector specifically. I mean, you know, the

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Speaker 1: economy and those types of reports are going to have

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Speaker 1: some impact, but gaming has proven to be a pretty

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Speaker 1: resilient form of entertainment when it comes to economic conditions

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Speaker 1: and things like that, because when you're buying a game

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Speaker 1: sixty seventy dollars, you get quite a good value in

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Speaker 1: terms of the number of hours of entertainment out of that.

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Speaker 1: So hell yeah, sometimes I'll be playing like red Dead

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Speaker 1: Redemption and realized that nine hours have gone by hundreds

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Speaker 1: of hours And that happens a lot, by the way,

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Speaker 1: you know, and with call of duty, and uh, well

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Speaker 1: I used to be a big Halo guy. Um, just flies,

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Speaker 1: do you play cretty? Do you play any games? Don't?

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Speaker 1: But I have to say, when, um, what was it

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Speaker 1: called red dead redemption? Redemption to red dead redemption to

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Speaker 1: his first release. I think it was I want to

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Speaker 1: say I was on the video game beat and they

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Speaker 1: gave us like an exclusive trial or whatever. It was

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Speaker 1: like all these other video game analysts and everyone was

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Speaker 1: so excited. It was like a bunch of dudes, and

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Speaker 1: I was just like, why am I here? I actually

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Speaker 1: asked myself the same question when I'm asking me when

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Speaker 1: I'm playing Red Dead Redemption? So, uh, you think Activision,

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Speaker 1: Blizzard and what are the other names in the gaming

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Speaker 1: industry that you follow? Yeah, the big ones right now

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Speaker 1: are Activision, Blizzard, e A and Take two Interactive, And uh,

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Speaker 1: you think they're set up for continued games? Yeah, I

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Speaker 1: think that. You know, we had seen over the past

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Speaker 1: two years since the pandemic, there was kind of a

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Speaker 1: moderation in the amount of time that people spend playing.

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Speaker 1: So there was a big spike around the pandemic onset

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Speaker 1: where people were cooped up found gaming as a nice

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Speaker 1: social outlet when you couldn't see people face to face,

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Speaker 1: And as things started to reopen and get back to normal,

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Speaker 1: people played a little bit less and less. Now I

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Speaker 1: think we're entering a more normalized environment for demand, where

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Speaker 1: the success of the companies and the stocks are more

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Speaker 1: dependent on things like how good are the coming games,

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Speaker 1: how good are the current games, rather than things like

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Speaker 1: are people playing less those more exogenous factors. What about

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Speaker 1: meta I mean, how long until we start spending all

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Speaker 1: of our time in the metaverse? Yeah? The the new

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Speaker 1: frontier of VR and the metaverse. I mean a lot

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Speaker 1: of these games are pretty metaverse already are. Yeah. I

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Speaker 1: think that's one thing that the traditional publishers, if you

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Speaker 1: want to call them that, the activisions and take twos

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Speaker 1: of the world, would say, is that we already integrate

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Speaker 1: so many of those digital community focused aspects that the

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Speaker 1: metaverse really, um, the metaverse really advertises already in our games.

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Speaker 1: Our games are already massively online multiplayer environments that are

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Speaker 1: living and breathing. Um. I would say probably the only

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Speaker 1: big difference is that you're not wearing an immersive headset

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Speaker 1: to play Call of Duty or Grand Theft Auto. At

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Speaker 1: this point, I think that there are still probably some

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Speaker 1: gains to be made on that virtual reality side. It

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Speaker 1: will probably be a little bit more incremental rather than

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Speaker 1: big leaps and bounds, um. But I think that that's

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Speaker 1: something to keep an eye on, maybe as like a

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Speaker 1: five plus year driver for the gaming space. Isn't there

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Speaker 1: a story out somewhere that a lot of the games

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Speaker 1: from uh I believe it's activision, like Star Wars, for example,

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Speaker 1: has been delayed to the tune if I want to

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Speaker 1: say six weeks um, what kind of effect does that

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Speaker 1: have on the bottom line for life's activision or take

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Speaker 1: two or whatever. Yeah, so the Star Wars game the

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Speaker 1: e a game um six week delay. When you get

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Speaker 1: those smaller delays like that, in terms of the bottom line,

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Speaker 1: it can move a quarter, like the Star Wars game

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Speaker 1: was moved from the end of one quarter to the

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Speaker 1: beginning of another. But in general, in terms of the

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Speaker 1: expectations for the lifetime sales of that game, doesn't really

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Speaker 1: affect it too much unless you think that the delay

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Speaker 1: is a signal of the upcoming quality of the game,

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Speaker 1: which we do not. UM. Where you start to get

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Speaker 1: into the more um the delays that more effect the

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Speaker 1: bottom lines are those ones where the games get pushed

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Speaker 1: by a few months or even delayed and definitely because

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Speaker 1: the project isn't progressings as they liked. We've seen a

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Speaker 1: couple of those over the course of the pandemic, where

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Speaker 1: work from home kind of up ended the development cycle.

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Speaker 1: But as we've gotten you know, used to work from

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Speaker 1: home people back in the office, we're seeing less of

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Speaker 1: those major impactful delays that would really hit bottom lines.

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Speaker 1: You seem um pretty grounded, uh for someone who has

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Speaker 1: a minor a nuclear engineer and M I T. I

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Speaker 1: mean you talk about these incremental changes, are there any

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Speaker 1: like moonshot um stocks out there that you like? I'm

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Speaker 1: just thinking about that because, UM, we heard so much

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Speaker 1: earlier this year about the uh possibility to uh create

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Speaker 1: basically a perpetual motion machine with vision or fusion. I

407
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Speaker 1: can remember which one it is. UM and we and

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Speaker 1: we see these big bets at like Facebook, you know,

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Speaker 1: putting ten billion a year or whatever into the metaverse,

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Speaker 1: but it's so far off right, Yeah. And I think

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Speaker 1: that Facebook specifically, like they're interested in that metaverse project

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Speaker 1: because it is kind of what they view as the

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Speaker 1: next major step change in digital life and digital interaction.

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Speaker 1: You know, we went from offline to the internet, and

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Speaker 1: now we're going to go from the Internet to the metaverse.

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Speaker 1: I think they want to be owners of of that

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Speaker 1: change in the way that some of the platform owners

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Speaker 1: that Facebook is not a part of at this point

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Speaker 1: have kind of owned that shift to the internet. So again,

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Speaker 1: you know, I think it's more of a long term shift,

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Speaker 1: but it is definitely something to keep an eye on,

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Speaker 1: given the sums of money invested and given the promise

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Speaker 1: that the metaverse holds. So but who are the big competitors?

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Speaker 1: Is it just roadblocks? Is there somebody else that you

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Speaker 1: think is going to be a winner here? Yeah, roadblocks

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Speaker 1: is kind of what investor view is kind of like

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Speaker 1: the pure play UM in metaverse at this point, I

428
00:21:22,040 --> 00:21:24,640
Speaker 1: think you're probably going to see a lot of companies

429
00:21:25,000 --> 00:21:28,720
Speaker 1: who come up through the ranks of venture funding UM

430
00:21:28,760 --> 00:21:31,720
Speaker 1: who probably aren't household names at this point, who are

431
00:21:31,960 --> 00:21:36,119
Speaker 1: specialists in the metaverse in VR, in that kind of

432
00:21:36,160 --> 00:21:39,240
Speaker 1: digital interaction that may become a little bit out of

433
00:21:39,320 --> 00:21:42,440
Speaker 1: left field. I think that's a very interesting space to

434
00:21:42,440 --> 00:21:44,679
Speaker 1: to keep an eye on, and you know, we'll be

435
00:21:44,760 --> 00:21:47,840
Speaker 1: we'll be following up with great interests as well. In

436
00:21:47,840 --> 00:21:50,320
Speaker 1: our last thirty seconds or so, here, how did you

437
00:21:50,359 --> 00:21:53,000
Speaker 1: go from a minor in nuclear engineering? Like why aren't

438
00:21:53,000 --> 00:21:55,320
Speaker 1: you not like a mad scientist somewhere at m I

439
00:21:55,400 --> 00:22:01,320
Speaker 1: T Well, you know, the the job's outlook at at

440
00:22:01,800 --> 00:22:05,400
Speaker 1: nuclear fusion at the time was was not as promising

441
00:22:05,440 --> 00:22:08,400
Speaker 1: as it is now. The old saying was, um, fusion

442
00:22:08,480 --> 00:22:10,280
Speaker 1: is twenty years away, and it has been for the

443
00:22:10,359 --> 00:22:14,000
Speaker 1: last sixty years. Um. But now now we've got it,

444
00:22:14,160 --> 00:22:17,440
Speaker 1: and uh, you know the eggs on my face. You know, well,

445
00:22:17,200 --> 00:22:19,639
Speaker 1: we're glad you ended up where you are because now

446
00:22:19,640 --> 00:22:21,080
Speaker 1: he gets talked to you in the studio and hope

447
00:22:21,080 --> 00:22:23,680
Speaker 1: we can get you back in here soon. Andrew Mack

448
00:22:23,760 --> 00:22:32,119
Speaker 1: their VP of equity research over at Raymond James. Now

449
00:22:32,200 --> 00:22:35,320
Speaker 1: let's get back to the markets here and bringing Jay Hatfield,

450
00:22:35,359 --> 00:22:40,320
Speaker 1: he's the CEO of Infrastructure Capital Advisors. And finally we

451
00:22:40,400 --> 00:22:43,040
Speaker 1: have a bowl on the program. Um. We were just

452
00:22:43,040 --> 00:22:46,040
Speaker 1: talking about David Costin lowering his expectation for the SPI

453
00:22:47,040 --> 00:22:50,119
Speaker 1: to four thousand, three months out and at the end

454
00:22:50,119 --> 00:22:51,679
Speaker 1: of the year, so he doesn't think the market's going

455
00:22:51,720 --> 00:22:55,400
Speaker 1: to do a whole lot of anything except for drop. Um,

456
00:22:55,600 --> 00:22:58,639
Speaker 1: why are you and I believe you have a higher

457
00:22:58,680 --> 00:23:00,800
Speaker 1: target ten percent higher target for a year and why

458
00:23:00,800 --> 00:23:04,040
Speaker 1: are you so bullish? Jay? Thanks man Critty for having

459
00:23:04,040 --> 00:23:08,120
Speaker 1: me on. First of all, we're bullish because we're far

460
00:23:08,280 --> 00:23:12,880
Speaker 1: more optimistic that inflation. But not only is inflation declining,

461
00:23:13,000 --> 00:23:15,960
Speaker 1: but they were actually in a deflation and the reason

462
00:23:16,000 --> 00:23:18,720
Speaker 1: for that is that we do have an inflation is very,

463
00:23:18,800 --> 00:23:22,960
Speaker 1: very similar to the seventies. In the seventies we had

464
00:23:23,080 --> 00:23:31,919
Speaker 1: to gigantic energy UM crisis is in seventy and we

465
00:23:31,960 --> 00:23:35,480
Speaker 1: had loose monetary policy and high inflation and housing. It's

466
00:23:35,520 --> 00:23:40,280
Speaker 1: exactly what we have now. But housing has rolled over UM.

467
00:23:40,320 --> 00:23:43,040
Speaker 1: It's been down five months in a row. So that's

468
00:23:43,080 --> 00:23:47,919
Speaker 1: why our index CPI dash R is negative UH annualized

469
00:23:47,960 --> 00:23:51,040
Speaker 1: four pc over the last quarter. And that's really what's

470
00:23:51,040 --> 00:23:53,040
Speaker 1: been we think has been playing out so far this

471
00:23:53,119 --> 00:23:54,639
Speaker 1: year is the rest of the world is kind of

472
00:23:54,640 --> 00:23:57,240
Speaker 1: coming along around to that view. Wait, what's the index

473
00:23:57,800 --> 00:24:01,160
Speaker 1: CPI dash R. So it's a real time CPI index.

474
00:24:01,600 --> 00:24:03,399
Speaker 1: Would be happy to license it to Bloomberg and you

475
00:24:03,440 --> 00:24:06,480
Speaker 1: can put this is a proprietary hand. You have the

476
00:24:06,520 --> 00:24:11,440
Speaker 1: infrastructure capital advisors and does it remove UM, how housing

477
00:24:11,560 --> 00:24:13,920
Speaker 1: or how does this differ from the typical CPI index.

478
00:24:14,040 --> 00:24:16,520
Speaker 1: It's it's not very exotic. It's really going back to

479
00:24:16,640 --> 00:24:20,720
Speaker 1: do inflation exactly how it was done before when they

480
00:24:20,760 --> 00:24:24,320
Speaker 1: switched from just taking housing prices and then having a

481
00:24:25,080 --> 00:24:30,760
Speaker 1: UM clawed measured measurement of owners equivalent rent, and an

482
00:24:30,800 --> 00:24:33,159
Speaker 1: actual rent problem with that is then you introduce the

483
00:24:33,200 --> 00:24:37,160
Speaker 1: twelve month lag because housing prices lead. Of course there's

484
00:24:37,160 --> 00:24:38,879
Speaker 1: a survey that slows it down as well, but it

485
00:24:38,960 --> 00:24:42,760
Speaker 1: leads the BLS index. I think last time I was

486
00:24:42,800 --> 00:24:45,040
Speaker 1: on you can verify that on the terminal and do

487
00:24:45,119 --> 00:24:48,520
Speaker 1: aggression sevent correlated, so you get the information twelve months

488
00:24:48,560 --> 00:24:53,159
Speaker 1: in advance, and it's sevent correlated. So the FED is

489
00:24:53,160 --> 00:24:56,480
Speaker 1: focused on the labor market. In certain markets, labor is important,

490
00:24:56,840 --> 00:25:01,199
Speaker 1: but when goods are um and particularly energy is skyrocketing

491
00:25:01,240 --> 00:25:06,200
Speaker 1: and then dropping goods actually drives labor or wages more

492
00:25:06,240 --> 00:25:08,960
Speaker 1: than vice versa. And we think that the FED will

493
00:25:09,200 --> 00:25:11,480
Speaker 1: eventually come aout around to that view, and in fact,

494
00:25:12,040 --> 00:25:15,880
Speaker 1: Leo Brainer you mentioned something along those lines. Unfortunately, she's

495
00:25:15,920 --> 00:25:18,640
Speaker 1: going to potentially move off the FED bet. So there

496
00:25:18,640 --> 00:25:20,960
Speaker 1: are some doves on the FED. So we think by

497
00:25:21,040 --> 00:25:23,280
Speaker 1: May they'll halt just as they said they would, and

498
00:25:23,280 --> 00:25:25,479
Speaker 1: that will be a big catalyst for the market. Well,

499
00:25:25,480 --> 00:25:27,520
Speaker 1: if you're looking at the inflationary story, how does the

500
00:25:27,560 --> 00:25:31,359
Speaker 1: commodity standpoint factor in there? For example, one of the

501
00:25:31,400 --> 00:25:33,840
Speaker 1: things that Tom Keen and I were actually speaking about

502
00:25:33,840 --> 00:25:37,440
Speaker 1: earlier on Bloomberck surveillance was why is Brent crude with

503
00:25:37,480 --> 00:25:40,399
Speaker 1: all of the bullish reopening themes not at a hundred

504
00:25:40,480 --> 00:25:42,240
Speaker 1: right now? Why is it? Well, now we're looking at

505
00:25:42,280 --> 00:25:47,959
Speaker 1: seventy handle. What is going on with that commodity? Well, Um,

506
00:25:48,000 --> 00:25:51,800
Speaker 1: the real key driver is the weather. So we're four

507
00:25:51,800 --> 00:25:55,680
Speaker 1: and a half degrees warmer in North America, which tracks

508
00:25:55,720 --> 00:25:59,639
Speaker 1: you are pretty closely as well, UM, and that's a

509
00:25:59,720 --> 00:26:03,520
Speaker 1: key driver during this more than last year than average

510
00:26:04,680 --> 00:26:08,440
Speaker 1: so um, but even the near term average or well

511
00:26:08,600 --> 00:26:11,320
Speaker 1: well above normal. It's a fifty degrees in Manhattan right now,

512
00:26:11,840 --> 00:26:15,320
Speaker 1: So during this season, heating oil demand is really critical.

513
00:26:15,680 --> 00:26:18,720
Speaker 1: So that's taken um some edge off of it. And

514
00:26:18,760 --> 00:26:23,639
Speaker 1: really the Russian situation, oil is fully fungible because it's

515
00:26:23,680 --> 00:26:26,040
Speaker 1: easy to transport. You can do rail, you can do

516
00:26:26,800 --> 00:26:30,840
Speaker 1: um trucking, shipping, and so that really hasn't been a

517
00:26:30,840 --> 00:26:34,840
Speaker 1: big impact. And that's really why, um, you haven't seen

518
00:26:34,880 --> 00:26:37,800
Speaker 1: a big increase. But I would also focus on natural gas.

519
00:26:37,920 --> 00:26:42,520
Speaker 1: It's off from its highs from the beginning of two

520
00:26:43,000 --> 00:26:45,320
Speaker 1: and keep in mind and the FED doesn't seem to

521
00:26:45,320 --> 00:26:47,119
Speaker 1: focus on this, even though they have a paper that

522
00:26:47,200 --> 00:26:51,359
Speaker 1: validates it. There's a five percent bleed through from energy

523
00:26:51,400 --> 00:26:55,640
Speaker 1: prices to core. So if you get natural gas down,

524
00:26:57,160 --> 00:27:01,400
Speaker 1: that's going to be a big help to inflation coming down.

525
00:27:01,600 --> 00:27:03,360
Speaker 1: But nobody seemed to focus on and they don't really

526
00:27:03,359 --> 00:27:05,080
Speaker 1: care about natural gas because you don't have to fill

527
00:27:05,080 --> 00:27:07,639
Speaker 1: your car up with it. It's half of the energy

528
00:27:07,640 --> 00:27:09,840
Speaker 1: costs of a consumer comes from natural gas because it

529
00:27:09,880 --> 00:27:13,560
Speaker 1: prices electricity as well. So that's a big bullish factor

530
00:27:13,600 --> 00:27:16,199
Speaker 1: that nobody's talking about. As well. Also helps the consumer

531
00:27:16,240 --> 00:27:18,679
Speaker 1: because they have more discretion discretionary spend. By the way,

532
00:27:18,680 --> 00:27:21,480
Speaker 1: when you're trying to figure out what j Pal and Co.

533
00:27:21,600 --> 00:27:23,639
Speaker 1: Are going to do next, it sounds like you have

534
00:27:23,640 --> 00:27:25,840
Speaker 1: a view on what the Fed should do and what

535
00:27:25,960 --> 00:27:31,600
Speaker 1: the Fed does do. Right, Um, what changes in your

536
00:27:31,880 --> 00:27:34,960
Speaker 1: mind what they should do to what they do do?

537
00:27:35,119 --> 00:27:37,280
Speaker 1: And I know I just said do do? But I mean,

538
00:27:37,440 --> 00:27:40,240
Speaker 1: is it a political issue? Is it a lack of independence?

539
00:27:40,320 --> 00:27:44,400
Speaker 1: Why do they you think make these mistakes even though

540
00:27:44,440 --> 00:27:47,479
Speaker 1: they have the research backing up your view on what

541
00:27:47,520 --> 00:27:50,040
Speaker 1: they what they should be doing. Well, it is a

542
00:27:50,080 --> 00:27:53,120
Speaker 1: little bit of a political issue because labor economists tend

543
00:27:53,160 --> 00:27:56,560
Speaker 1: to be Kinsian, which tend to be Democrats, and Biden

544
00:27:56,600 --> 00:27:59,639
Speaker 1: has appointed five out of the seven permanent members. But

545
00:27:59,680 --> 00:28:03,160
Speaker 1: having said that, even some of the Trump and appointees

546
00:28:03,200 --> 00:28:07,439
Speaker 1: were also Keynsian, so monitorism is really not well represented.

547
00:28:07,600 --> 00:28:09,520
Speaker 1: And by the way, you know, if you're just trying

548
00:28:09,520 --> 00:28:11,320
Speaker 1: to make money in the market, you shouldn't be either.

549
00:28:12,560 --> 00:28:15,560
Speaker 1: In some markets, a monetary policy dominates, like when the

550
00:28:15,560 --> 00:28:20,440
Speaker 1: FED increases the monetary base and then down twenty that's

551
00:28:20,440 --> 00:28:23,200
Speaker 1: going to be the key factor. If monetary policies flat

552
00:28:23,600 --> 00:28:25,639
Speaker 1: and you head into a pandemic, then you better be

553
00:28:25,720 --> 00:28:28,720
Speaker 1: looking at the labor market. So for us ordinary humans,

554
00:28:28,720 --> 00:28:30,919
Speaker 1: you just have to make money. It's better not to

555
00:28:30,960 --> 00:28:34,800
Speaker 1: be too ideological. But there are Keynesians clearly dominate the

556
00:28:34,840 --> 00:28:36,920
Speaker 1: FED at this point. They're too focused on the labor

557
00:28:36,960 --> 00:28:40,880
Speaker 1: market and not enough on energy prices and housing, and

558
00:28:40,920 --> 00:28:43,760
Speaker 1: they created the housing bubble. So that's one reason we

559
00:28:43,840 --> 00:28:46,960
Speaker 1: developed CPI dash are it's the smoking gun for bad

560
00:28:47,000 --> 00:28:50,560
Speaker 1: FED policy. They they had just followed that, they would

561
00:28:50,560 --> 00:28:53,480
Speaker 1: have started tightening in two thousand twenty and not in

562
00:28:53,600 --> 00:28:56,920
Speaker 1: late Are you at all factoring the debt ceiling when

563
00:28:56,920 --> 00:28:59,880
Speaker 1: you look at monetary policy the last time we have

564
00:29:00,160 --> 00:29:02,680
Speaker 1: kind of a debt ceiling crisis. We were in a

565
00:29:02,800 --> 00:29:07,040
Speaker 1: tightening e see me a easing phase of the economy.

566
00:29:07,040 --> 00:29:09,640
Speaker 1: Square the two for us, Well, there's no doubt that

567
00:29:09,640 --> 00:29:12,000
Speaker 1: that's a big risk for the stock market if we

568
00:29:12,080 --> 00:29:15,920
Speaker 1: get closer and closer to a showdown. But there is

569
00:29:15,960 --> 00:29:20,200
Speaker 1: a factor that rarely gets discussed, definitely not in the media,

570
00:29:20,680 --> 00:29:23,000
Speaker 1: and that is crowding out and I would go to

571
00:29:23,040 --> 00:29:25,479
Speaker 1: green Span is really the expert on that. So just

572
00:29:25,600 --> 00:29:29,120
Speaker 1: out of control federal spending is a problem, and there's

573
00:29:29,160 --> 00:29:32,920
Speaker 1: only one mechanism in federal law to limit that, which

574
00:29:32,920 --> 00:29:35,360
Speaker 1: is the debt ceiling. So the notion that we should

575
00:29:35,440 --> 00:29:38,960
Speaker 1: just automatically increase it because we owe the bills, I

576
00:29:39,000 --> 00:29:41,440
Speaker 1: think is a little bit overblown. But we're not worried

577
00:29:41,680 --> 00:29:45,440
Speaker 1: too worried about a crisis because the problem solvers Caucus,

578
00:29:45,480 --> 00:29:49,280
Speaker 1: which is a bipardon artisan caucus, has pretty much said

579
00:29:49,280 --> 00:29:51,480
Speaker 1: they're going to come to an agreement, and I think

580
00:29:51,520 --> 00:29:54,160
Speaker 1: that's the right outcome. You know, obviously you don't want

581
00:29:54,160 --> 00:29:57,040
Speaker 1: to default, but you shouldn't just ignore the only limit

582
00:29:57,840 --> 00:30:01,120
Speaker 1: that we have on federal spending. Whereas the state's almost

583
00:30:01,240 --> 00:30:06,000
Speaker 1: universally have balanced budgetmendance. So we think that in the

584
00:30:06,160 --> 00:30:07,960
Speaker 1: long run will be good for the stock market is

585
00:30:08,000 --> 00:30:11,440
Speaker 1: a risk factor and one thing to know too about

586
00:30:11,560 --> 00:30:16,120
Speaker 1: We have a target for the SMP, but that's a

587
00:30:16,200 --> 00:30:20,800
Speaker 1: year end target, not a end of February target, So

588
00:30:20,840 --> 00:30:22,760
Speaker 1: we're going to have a lot of volatility and we

589
00:30:22,800 --> 00:30:24,680
Speaker 1: think will be a little bit range bound until the

590
00:30:24,720 --> 00:30:27,280
Speaker 1: FED pauses, and this will be one of the factors

591
00:30:27,320 --> 00:30:31,120
Speaker 1: that you know, bears will use to you know, as

592
00:30:31,120 --> 00:30:33,880
Speaker 1: an excuse to trade the market down. Do you think that,

593
00:30:33,920 --> 00:30:37,240
Speaker 1: I mean with a year end target on the SMP,

594
00:30:37,480 --> 00:30:42,760
Speaker 1: does that I mean we're gonna have also eight barrels

595
00:30:42,800 --> 00:30:46,960
Speaker 1: of m W t I and hundred dollar barrels are brent. Yeah,

596
00:30:47,040 --> 00:30:49,040
Speaker 1: that would be the midpoint of our range is ninety

597
00:30:49,080 --> 00:30:52,480
Speaker 1: dollars per per barrel. And keep in mind, O, that's

598
00:30:52,520 --> 00:30:55,840
Speaker 1: still off the hides of a hundred and twenty dollars.

599
00:30:55,960 --> 00:30:59,000
Speaker 1: So it's not going to be a huge problem for

600
00:30:59,120 --> 00:31:02,800
Speaker 1: CPI because do annualize all these increases and I would

601
00:31:02,840 --> 00:31:05,600
Speaker 1: just go back to natural gas where we're to fifty

602
00:31:05,800 --> 00:31:08,360
Speaker 1: that's where it's been. That's like near the lows for

603
00:31:08,400 --> 00:31:11,800
Speaker 1: the last thirty years. The natural gas, it doesn't go

604
00:31:11,840 --> 00:31:13,760
Speaker 1: into your car and it doesn't sort of go on

605
00:31:13,760 --> 00:31:16,000
Speaker 1: this wheel that everybody gets excited about, but it's very

606
00:31:16,080 --> 00:31:20,320
Speaker 1: critical because the prices all electricity United States, so you

607
00:31:20,360 --> 00:31:23,920
Speaker 1: have the natural gas part of it offsetting the oil. Yeah. Alright,

608
00:31:24,000 --> 00:31:25,920
Speaker 1: J great having in the studio. Thanks so much for

609
00:31:25,920 --> 00:31:29,280
Speaker 1: coming and joining us. Jay Hatfield their CEO and founder

610
00:31:29,320 --> 00:31:34,200
Speaker 1: of Infrastructure Capital Advisers. He talks about his um proprietary

611
00:31:34,240 --> 00:31:37,520
Speaker 1: inflation and x CPI dash R, which you can get

612
00:31:37,600 --> 00:31:46,280
Speaker 1: on his website Infra cap Funds dot com. Now it's

613
00:31:46,320 --> 00:31:49,920
Speaker 1: the moment you've all been waiting for. We're gonna focus

614
00:31:50,000 --> 00:31:55,160
Speaker 1: in on the balloon. Okay, Uh, let's bring in West Cassova.

615
00:31:55,320 --> 00:32:00,000
Speaker 1: He is the Bloomberg Big Take podcast host and uh,

616
00:32:00,040 --> 00:32:03,360
Speaker 1: you know, Paul and I love these Big Take stories. Um,

617
00:32:03,880 --> 00:32:05,160
Speaker 1: kind of the first thing we talked about when we

618
00:32:05,200 --> 00:32:07,200
Speaker 1: get to work at the morning every day, and I

619
00:32:07,240 --> 00:32:10,360
Speaker 1: assume that Cretti reads them to cret does read them

620
00:32:10,480 --> 00:32:14,640
Speaker 1: and I big take. Well, West, are you zooming in

621
00:32:14,960 --> 00:32:18,160
Speaker 1: on this big balloon? What's the story, uh with with

622
00:32:18,200 --> 00:32:22,040
Speaker 1: the podcast today? Well, we actually just try to get

623
00:32:22,080 --> 00:32:25,000
Speaker 1: to the bottom of this whole thing. You know, last

624
00:32:25,040 --> 00:32:27,960
Speaker 1: week when that thing was kind of floating above mantenna,

625
00:32:28,120 --> 00:32:30,800
Speaker 1: and it was making its way across the country. A

626
00:32:30,800 --> 00:32:34,560
Speaker 1: team like this kind of curiosity, little alarming Chinese balloon

627
00:32:34,640 --> 00:32:37,000
Speaker 1: with a lot of equipment attached to it, but I

628
00:32:37,080 --> 00:32:39,600
Speaker 1: don't could quite know where to make of it um

629
00:32:39,680 --> 00:32:42,560
Speaker 1: And then it became pretty clear that there's something very

630
00:32:42,600 --> 00:32:46,160
Speaker 1: unusual about this situation. I mean, it's big, Like you

631
00:32:46,200 --> 00:32:49,080
Speaker 1: think about these weather balloons, are even those kind of

632
00:32:49,160 --> 00:32:52,080
Speaker 1: big balloons that can kind of take pictures of sight.

633
00:32:53,040 --> 00:32:55,920
Speaker 1: This thing is as big as two or three school busses,

634
00:32:56,080 --> 00:32:59,040
Speaker 1: just enormous and unlet's the payload you're talking about, right,

635
00:32:59,080 --> 00:33:01,720
Speaker 1: not the actual balloon, because I keep seeing references to

636
00:33:01,800 --> 00:33:03,720
Speaker 1: the balloon being two or three school busses. But the

637
00:33:03,720 --> 00:33:05,880
Speaker 1: balloon isn't what we're talking about. We're talking about the

638
00:33:05,880 --> 00:33:09,520
Speaker 1: thing it's carrying, and it had a lot of different

639
00:33:09,560 --> 00:33:11,880
Speaker 1: kind of equipment. They still want to know exactly what

640
00:33:12,560 --> 00:33:14,440
Speaker 1: U And then there were these growing calls to shoot

641
00:33:14,480 --> 00:33:17,000
Speaker 1: the thing down. Well, you're gonna shoot down three school buses?

642
00:33:17,040 --> 00:33:19,600
Speaker 1: Who knows where it's going to land? So well in Montana,

643
00:33:19,920 --> 00:33:25,560
Speaker 1: so it won't hit anything yet, never tell, you can

644
00:33:25,600 --> 00:33:29,160
Speaker 1: never tell. And also you know when it did eventually

645
00:33:29,200 --> 00:33:32,560
Speaker 1: come down and they shouted down it. Uh, you know,

646
00:33:32,640 --> 00:33:35,560
Speaker 1: spread debris for a seven mile radio, So that's a

647
00:33:35,560 --> 00:33:36,920
Speaker 1: lot of things that could have hit. So anyway, it

648
00:33:36,960 --> 00:33:39,800
Speaker 1: cuts across the water of South Carolina, and they ordered

649
00:33:39,800 --> 00:33:42,880
Speaker 1: the things shot down by fighter jets. And now there's

650
00:33:43,000 --> 00:33:46,720
Speaker 1: this whole incident between the US and China about what

651
00:33:46,760 --> 00:33:50,680
Speaker 1: that thing was. China claims it was a civilian science

652
00:33:50,760 --> 00:33:54,480
Speaker 1: balloon that drifted off course. The US says there's no

653
00:33:54,560 --> 00:33:57,280
Speaker 1: way that's true, that it's not plausible. And so tensions

654
00:33:57,280 --> 00:33:59,560
Speaker 1: between the U S and chinnel already high, are how

655
00:33:59,640 --> 00:34:02,360
Speaker 1: higher as a result of this? Wait? Well, I'm confused.

656
00:34:03,280 --> 00:34:07,160
Speaker 1: Feel I feel like airspace is something that is monitored

657
00:34:07,320 --> 00:34:10,400
Speaker 1: by the f a A all the time, and if

658
00:34:10,440 --> 00:34:13,040
Speaker 1: you go even higher, I'm assuming by NASA at some point.

659
00:34:14,120 --> 00:34:20,560
Speaker 1: Why didn't anyone see this on the radar? So big? Yeah?

660
00:34:20,600 --> 00:34:22,640
Speaker 1: We talked, Yeah, we talked about this a little bit

661
00:34:22,640 --> 00:34:25,640
Speaker 1: on the podcast. UM I talked to Rod mathieson Neverosities

662
00:34:25,680 --> 00:34:28,319
Speaker 1: all of Bloomberg's government coverage, and she, you know, has

663
00:34:28,320 --> 00:34:32,080
Speaker 1: been all over this story. And the interesting thing about

664
00:34:32,080 --> 00:34:34,400
Speaker 1: these bloons is exactly what you're saying, is, you know,

665
00:34:34,440 --> 00:34:37,279
Speaker 1: we have satellites looking down. We have everybody looking up,

666
00:34:37,440 --> 00:34:41,200
Speaker 1: and yet China seem to think that either this wouldn't

667
00:34:41,239 --> 00:34:44,279
Speaker 1: go you know, like that would go unnoticed, or maybe

668
00:34:44,280 --> 00:34:47,359
Speaker 1: they didn't intend for it to go there. Um. And

669
00:34:47,440 --> 00:34:50,360
Speaker 1: one reason why these blons are still used is that

670
00:34:50,440 --> 00:34:54,600
Speaker 1: they are sometimes able to evade the usual means of detection.

671
00:34:54,600 --> 00:34:58,239
Speaker 1: They're hard to hard to see. This one, though, is

672
00:34:58,320 --> 00:35:02,280
Speaker 1: so huge they it was impossible admit. And to be clear,

673
00:35:02,360 --> 00:35:04,920
Speaker 1: we did see it. I mean we tracked it coming

674
00:35:04,960 --> 00:35:09,160
Speaker 1: in over Alaska, um and then through Canada. I feel

675
00:35:09,160 --> 00:35:11,960
Speaker 1: like there's ample places to have shot it down with

676
00:35:12,000 --> 00:35:14,239
Speaker 1: a seven mile radius. But of course you don't want

677
00:35:14,239 --> 00:35:16,160
Speaker 1: to lose the gear, right. The key is we want

678
00:35:16,160 --> 00:35:18,160
Speaker 1: to get to that gear and find out what it is,

679
00:35:18,239 --> 00:35:21,279
Speaker 1: who made it, what they're doing, right, And that was

680
00:35:21,320 --> 00:35:23,200
Speaker 1: the other the other thing, you know. I mean, it's

681
00:35:23,200 --> 00:35:24,919
Speaker 1: really easy to say I'll just shoot the team down,

682
00:35:24,960 --> 00:35:27,400
Speaker 1: but I don't know would you want to be the

683
00:35:27,400 --> 00:35:29,040
Speaker 1: one to make that call and be responsible for what

684
00:35:29,120 --> 00:35:31,400
Speaker 1: it might hit. And then, of course, aside from that,

685
00:35:31,480 --> 00:35:33,719
Speaker 1: let's say you really were in desolate place if it

686
00:35:33,880 --> 00:35:37,080
Speaker 1: just smashed the smithereens and you lose the ability to

687
00:35:37,120 --> 00:35:41,240
Speaker 1: find out. But by the way, do you think, um,

688
00:35:41,400 --> 00:35:45,760
Speaker 1: this caught our attention or or scared us or freaked

689
00:35:45,840 --> 00:35:49,600
Speaker 1: us out because just because we can see it. Since

690
00:35:49,640 --> 00:35:54,759
Speaker 1: we all know that the Chinese have satellites UM with

691
00:35:54,800 --> 00:35:58,279
Speaker 1: super zooms on them, right, they can already see everything

692
00:35:58,320 --> 00:36:02,000
Speaker 1: that we're doing with this satellite. They don't need a

693
00:36:02,080 --> 00:36:05,040
Speaker 1: balloon necessarily. It's actually like a step back in terms

694
00:36:05,120 --> 00:36:09,960
Speaker 1: of technology. So why do we care so much? Yeah,

695
00:36:10,000 --> 00:36:11,960
Speaker 1: it's a really good question. That's something that I asked

696
00:36:12,040 --> 00:36:16,000
Speaker 1: Rods about too. And in fact, these balloons, despite all

697
00:36:16,040 --> 00:36:20,880
Speaker 1: the satellite technology, have other kinds of capabilities, are able

698
00:36:20,960 --> 00:36:25,240
Speaker 1: to reason, detect and measure different sort of things that satellites,

699
00:36:25,280 --> 00:36:27,719
Speaker 1: which way up in space can't do. And so it's

700
00:36:27,760 --> 00:36:29,800
Speaker 1: not just China, but the US and a lot of

701
00:36:29,800 --> 00:36:34,040
Speaker 1: other countries are investing more in these balloon programs. And

702
00:36:34,280 --> 00:36:37,680
Speaker 1: this balloon was the one that you know got Carrent.

703
00:36:38,080 --> 00:36:41,520
Speaker 1: We all saw it. But uh, it seems that there's

704
00:36:41,520 --> 00:36:44,720
Speaker 1: been any number of these balloons fly around in the US.

705
00:36:44,920 --> 00:36:48,480
Speaker 1: Flies them too, that go that do sort of go

706
00:36:48,680 --> 00:36:53,080
Speaker 1: unnoticed because they're smaller, they flied beneath radar and they

707
00:36:53,120 --> 00:36:56,200
Speaker 1: wind up not being detected. But what about the ones

708
00:36:56,239 --> 00:36:58,120
Speaker 1: I mean, and now there's I believe reports of another

709
00:36:58,160 --> 00:37:00,360
Speaker 1: one I want to say, Latin America of the Olivia.

710
00:37:00,520 --> 00:37:03,080
Speaker 1: I want to say, I mean, what is the international

711
00:37:03,120 --> 00:37:08,960
Speaker 1: response to this? Right now? It's really cast sort of

712
00:37:08,960 --> 00:37:12,360
Speaker 1: a light end because you're right, Uh, China in particular

713
00:37:12,560 --> 00:37:17,520
Speaker 1: has used these balloons for various reasons, Uh, in many

714
00:37:17,600 --> 00:37:22,279
Speaker 1: different countries, you know, crossing space. And I have a

715
00:37:22,360 --> 00:37:24,759
Speaker 1: feeling that we're going to start to see more of

716
00:37:24,800 --> 00:37:29,960
Speaker 1: an international discussion about this violate you know, national international

717
00:37:30,000 --> 00:37:33,280
Speaker 1: borders and sovereignty into what it Maybe we haven't before,

718
00:37:33,400 --> 00:37:35,560
Speaker 1: just because it only takes one thing to call attention

719
00:37:35,600 --> 00:37:38,279
Speaker 1: to it, to bring something that it may be, you know,

720
00:37:38,440 --> 00:37:42,640
Speaker 1: simmering under the surface into the light. Yeah, if it's

721
00:37:42,800 --> 00:37:45,160
Speaker 1: under the Carmen line, that it is our airspace, right,

722
00:37:45,200 --> 00:37:49,440
Speaker 1: and this was well under the Carmen line. Um. Uh,

723
00:37:49,600 --> 00:37:52,080
Speaker 1: you talk about our balloons and are spying, and we're

724
00:37:52,080 --> 00:37:54,480
Speaker 1: so mad right now about the fact that the Chinese

725
00:37:54,480 --> 00:37:57,520
Speaker 1: are spying on us? Do we spy on them too?

726
00:37:59,080 --> 00:38:02,200
Speaker 1: I'm asking, well, I mean you sarcastically to assume, of course,

727
00:38:02,640 --> 00:38:06,680
Speaker 1: you know, right exactly, I mean, of course we do. Yeah,

728
00:38:06,760 --> 00:38:10,040
Speaker 1: and so it really is kind of when you don't

729
00:38:10,080 --> 00:38:12,399
Speaker 1: see if you don't really think about it. But this

730
00:38:12,440 --> 00:38:18,719
Speaker 1: seemed either really bad sort of mess up where this thing,

731
00:38:18,840 --> 00:38:21,000
Speaker 1: for one reason or another, was where they didn't want

732
00:38:21,040 --> 00:38:23,880
Speaker 1: it to be, or it would appear to be pretty

733
00:38:23,920 --> 00:38:27,000
Speaker 1: brazen because something that big, you would think they wouldn't

734
00:38:27,000 --> 00:38:30,640
Speaker 1: believe would go on. Detective What about the now that

735
00:38:30,719 --> 00:38:34,640
Speaker 1: it is shot down, it's underwater now, isn't it across

736
00:38:35,000 --> 00:38:37,440
Speaker 1: off the coast of South apparently not very deep? But

737
00:38:37,480 --> 00:38:43,960
Speaker 1: still doesn't it Yeah, this is another thing we talked about,

738
00:38:44,000 --> 00:38:46,480
Speaker 1: which is, you know they want that stuff. There's a

739
00:38:46,560 --> 00:38:49,600
Speaker 1: question of the water destroyed to have any sort of

740
00:38:49,719 --> 00:38:54,360
Speaker 1: self destruct mechanisms so that it would be destroyed before

741
00:38:54,400 --> 00:38:56,440
Speaker 1: anyone could get to it. And they just don't know.

742
00:38:56,680 --> 00:38:58,160
Speaker 1: They're going to get this thing and haul it out.

743
00:38:58,160 --> 00:38:59,640
Speaker 1: And I don't know that we're going to be finding

744
00:39:00,200 --> 00:39:03,080
Speaker 1: out exactly what was done anytime soon, because you could

745
00:39:03,080 --> 00:39:06,719
Speaker 1: imagine that they're going to keep secret a lot of

746
00:39:06,760 --> 00:39:09,840
Speaker 1: the stuff that they find. So of course we'll be reporting,

747
00:39:09,840 --> 00:39:14,240
Speaker 1: try and find out everything we can to tell our listeners, viewers, readers,

748
00:39:14,239 --> 00:39:16,960
Speaker 1: all the way that we try to tell people what's

749
00:39:16,960 --> 00:39:19,400
Speaker 1: happening in the world. All right, I hope when we

750
00:39:19,480 --> 00:39:22,600
Speaker 1: build our balloons we do include a self destruct mechanism.

751
00:39:22,640 --> 00:39:26,720
Speaker 1: It seems like a no brainer, right, I mean sure, yeah.

752
00:39:27,080 --> 00:39:30,120
Speaker 1: In any case, we can learn lessons from the Chinese West.

753
00:39:30,120 --> 00:39:32,600
Speaker 1: Thanks so much for joining us. West Gasova their host

754
00:39:32,719 --> 00:39:37,279
Speaker 1: of the Bloomberg Big Take podcast. They're focused on, um,

755
00:39:37,400 --> 00:39:41,040
Speaker 1: the alleged spy balloon, and of course now we know

756
00:39:41,080 --> 00:39:43,560
Speaker 1: it's been shot down by an F twenty two raptor,

757
00:39:43,680 --> 00:39:49,800
Speaker 1: which is pretty cool in itself. Thanks for listening to

758
00:39:49,840 --> 00:39:53,360
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to

759
00:39:53,400 --> 00:39:57,600
Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.

760
00:39:57,960 --> 00:40:02,480
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller seventy three,

761
00:40:02,360 --> 00:40:04,840
Speaker 1: and I'm fall Sweeney. I'm on Twitter at pt Sweeney.

762
00:40:04,880 --> 00:40:07,520
Speaker 1: Before the podcast, you can always catch us worldwide at

763
00:40:07,560 --> 00:40:08,319
Speaker 1: Bloomberg Radio