WEBVTT - The Fed Decision and Middle East Conflict 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.440 --> 0:00:30.960 Jack Divine is founder of the ark And Group and 0:00:31.080 --> 0:00:36.080 is just definitive on the arc of our Cia, away 0:00:36.120 --> 0:00:41.600 from the movies, away from all the different silliness is well, 0:00:41.880 --> 0:00:44.320 and in fact some would say he was actually a 0:00:44.400 --> 0:00:49.279 character taken by Philip Seymour Hoffman long ago, Jack Divine. 0:00:49.640 --> 0:00:53.559 Because of limited time, questions are so important here. My 0:00:53.760 --> 0:00:59.320 memory is our colossal misguests on the intelligence of the 0:00:59.360 --> 0:01:04.400 Soviet Union. Do we have quality intelligence on Iran? 0:01:07.400 --> 0:01:09.959 Well, I hope. So let me put it that way. 0:01:10.000 --> 0:01:12.920 We're at that point where push comes to shop. There's 0:01:12.959 --> 0:01:15.640 no doubt in my mind that we have great technical coverage. 0:01:16.080 --> 0:01:19.720 I also believe we have a force multiplier in Israel. 0:01:19.959 --> 0:01:24.759 Israel has fantastic intelligence collection on Iran, There's no doubt 0:01:24.760 --> 0:01:28.640 about it, and I therefore think that we're well positioned 0:01:29.480 --> 0:01:33.720 to deal with the situation because of that intelligence, and 0:01:33.760 --> 0:01:36.640 they've shared it amply because it's in their interest in 0:01:36.760 --> 0:01:39.360 our interests. So I think we're squaring this one. This 0:01:39.400 --> 0:01:42.080 is not a I don't see it. There are opportunities 0:01:42.080 --> 0:01:45.040 for mistakes on this, for sure, but it won't be 0:01:45.040 --> 0:01:46.640 because they don't have good intelligence. 0:01:47.040 --> 0:01:50.400 There's great discussion of the linkage of the Pentagon to 0:01:50.440 --> 0:01:52.880 the White House. In the White House to the Pentagon. 0:01:53.400 --> 0:01:58.240 Do you perceive a good use of our CIA intelligence 0:01:58.800 --> 0:02:00.160 by President t. 0:02:02.480 --> 0:02:07.120 This is a controversial issue today because Tulsa Gabbertt went 0:02:08.040 --> 0:02:11.920 in March, went down the hill and said that the 0:02:12.280 --> 0:02:14.640 Iranians did not have a nuclear weapon and that was 0:02:14.840 --> 0:02:17.840 three years before they could deliver it. And that was 0:02:18.200 --> 0:02:20.640 raised with President Trump yesterday and he said he's really 0:02:20.680 --> 0:02:24.720 not counting on that information. And so therefore I think 0:02:24.760 --> 0:02:27.120 there is a disconnect. Then I guess I would have 0:02:27.200 --> 0:02:30.840 a cautionary note for political leaders, and that is, if 0:02:30.840 --> 0:02:35.040 you have a choice between the intelligence community that says 0:02:35.120 --> 0:02:36.920 we're going to give you nothing but the truth, and 0:02:36.960 --> 0:02:39.799 you have political leaders and other countries who have a 0:02:39.880 --> 0:02:45.000 vested interest in presenting facts in a particular way, I 0:02:45.000 --> 0:02:48.800 would recommend you stick close to those intelligence estimates. So 0:02:50.840 --> 0:02:54.720 having said that, there are subset issues in this that 0:02:55.200 --> 0:02:58.840 I could touch on, which is, for example, we have 0:02:58.880 --> 0:03:02.000 to be careful and defense of net How's presentation of 0:03:02.040 --> 0:03:05.240 the situation that is not underestimated. You cannot get this 0:03:05.360 --> 0:03:10.519 wrong and say that it's not it's not a dangerous situation. 0:03:10.960 --> 0:03:14.120 And I would add to that that I think we 0:03:14.160 --> 0:03:16.440 spend a lot of time thinking about, oh, they won't 0:03:16.480 --> 0:03:18.880 be able to deliver by a missile, and that's what 0:03:19.160 --> 0:03:20.880 pushes it out a few years, and I think we 0:03:20.960 --> 0:03:24.520 need to step back and realize that's not the only 0:03:24.600 --> 0:03:28.840 way that nuclear weapons can be detonated and can be dangerous. 0:03:28.840 --> 0:03:31.480 So there's an enrichment point, and once it gets that 0:03:31.639 --> 0:03:34.880 Richmond point, then the starting gates open. You have to 0:03:34.920 --> 0:03:35.560 take care of it. 0:03:36.040 --> 0:03:39.120 Jack. If the US does get involved here militarily, how 0:03:39.160 --> 0:03:41.119 do you think the Iranians will respond? 0:03:43.560 --> 0:03:47.000 I would not want to be in the Iranian leadership's position. 0:03:47.200 --> 0:03:50.800 It's like the featherweight fighter getting in with the heavyweight 0:03:50.880 --> 0:03:53.400 champion of the world and have never had a fight. 0:03:53.960 --> 0:03:55.800 And I think that's what you're looking at. And you 0:03:55.800 --> 0:03:58.080 can dance around the ring and jump up in the 0:03:58.160 --> 0:04:00.480 ropes and you're going to get knocked out, carried out, 0:04:00.520 --> 0:04:03.160 of the ring in the first round. How do you 0:04:03.200 --> 0:04:06.119 defend yourself if you have no air defense? I mean, 0:04:06.200 --> 0:04:09.360 if there is no way to prevent your adversary, and 0:04:09.360 --> 0:04:12.960 that would be in this case Israel and ourselves. This 0:04:13.000 --> 0:04:16.320 thing can only end one way, and I think the 0:04:16.320 --> 0:04:19.400 guy tools have a great struggle with it. That is, 0:04:19.960 --> 0:04:23.040 the President United States is saying unconditional surrender that has 0:04:23.200 --> 0:04:25.800 very specific meanings, and I think that's where we are. 0:04:26.400 --> 0:04:31.480 And I think for the Iranians the CounterPunch, they might 0:04:31.520 --> 0:04:36.440 get one in, but all hell will break loose after that. 0:04:36.480 --> 0:04:39.280 They have nothing to stop the US from flattening, and 0:04:39.400 --> 0:04:42.560 the Israel without using nuclear weapons, just flattening. They have 0:04:42.560 --> 0:04:45.039 no defense. So I think they may turn out to 0:04:45.040 --> 0:04:48.840 be a little more prudent than they're hopeful, more prudent 0:04:48.880 --> 0:04:50.040 than their verbiage. 0:04:50.839 --> 0:04:51.080 Jack. 0:04:51.200 --> 0:04:53.560 I guess one of the initial talking points is that, 0:04:53.680 --> 0:04:57.160 I guess the FOURD down nuclear site deeply buried under 0:04:57.200 --> 0:05:00.280 the ground. Does the US have the ordinance to take 0:05:00.320 --> 0:05:00.640 that out? 0:05:02.600 --> 0:05:06.120 All the experts have been practicing this for years. I 0:05:06.160 --> 0:05:08.600 shouldn't say tens of years, but I mean, you're sort 0:05:08.640 --> 0:05:14.240 of over the last decade they've been developing the GBU 0:05:14.440 --> 0:05:19.560 fifty seven and that has the capacity of but not 0:05:19.600 --> 0:05:22.200 a single shot. This is going to take multiple shots 0:05:22.240 --> 0:05:24.719 at four to oh to destroy it. But I think 0:05:24.720 --> 0:05:28.120 we have the capability. Unfortunately, we are the only ones 0:05:28.120 --> 0:05:30.159 that have it, and we only have They have the 0:05:30.200 --> 0:05:33.440 one platform, the B two that can deliver it. So 0:05:33.520 --> 0:05:36.400 I think if I were sitting in Tehran, I would 0:05:36.400 --> 0:05:37.919 say goodbye. 0:05:37.480 --> 0:05:37.839 Four to oh. 0:05:38.200 --> 0:05:38.560 Okay. 0:05:38.839 --> 0:05:42.520 I think that's where we are. It's going and you 0:05:42.520 --> 0:05:45.520 know it's not going to be pretty. I think it's 0:05:45.520 --> 0:05:48.039 the only alternative. I think I've read, and I know 0:05:48.120 --> 0:05:51.599 I've read, but that the Israelis believe that there's other alternatives, 0:05:51.640 --> 0:05:53.800 and if there were, I think we would have said, 0:05:53.800 --> 0:05:56.120 why don't you use them. I think it's either this 0:05:56.279 --> 0:05:59.120 or you let them keep developing nuclear weapons. So I 0:05:59.120 --> 0:06:02.280 think it's we're looking at the endgame here, Jack. 0:06:02.279 --> 0:06:04.719 Very importantly, one time for one more question. We'd love 0:06:04.800 --> 0:06:07.000 to get you on in the coming days and really 0:06:07.040 --> 0:06:11.240 appreciate your public service for over fifty years. The CIA. 0:06:11.960 --> 0:06:15.560 We had on the crown Prince in exile, the son 0:06:15.800 --> 0:06:19.039 of the Shah yesterday this my Global Headlines. Thank you, 0:06:19.120 --> 0:06:23.800 Danny Berger and Lisa Bramwitz for that, What does I 0:06:23.839 --> 0:06:28.440 mean you have talked about a partition of Iran, a 0:06:28.480 --> 0:06:34.000 partition of Iraq. What happens to the greater Persia if 0:06:34.040 --> 0:06:41.360 this all falls apart? Is it every big nation for themselves? 0:06:41.360 --> 0:06:44.240 In some degree? We're in a world where it's every 0:06:44.320 --> 0:06:46.520 nation for itself, and then you try and find some 0:06:47.279 --> 0:06:50.440 to build allies. But let me hit what I think 0:06:50.520 --> 0:06:54.800 is at the core of the shah sons approach and 0:06:54.839 --> 0:06:56.680 not approach the fact that he's on the scene, and 0:06:56.720 --> 0:07:01.839 that is the regime change. You know, the question is 0:07:01.839 --> 0:07:04.520 is Israel going to stop at fourdoh or are they 0:07:04.600 --> 0:07:06.880 going to push for a regime change. This is an 0:07:06.920 --> 0:07:09.880 issue that our policymakers are struggling with today as well. 0:07:10.880 --> 0:07:13.240 I want to be cautionary. I mean, I see the 0:07:13.280 --> 0:07:16.040 wisdom of taking an out for one way or the other. 0:07:16.080 --> 0:07:18.560 In the end, I hope. I wish it hadn't been 0:07:18.560 --> 0:07:22.480 with America, but I've made peace with that regime change. 0:07:22.560 --> 0:07:24.880 And my experience over all those years that you refer 0:07:25.000 --> 0:07:35.760 to is analysts political leaders underestimate how people put up 0:07:35.760 --> 0:07:40.400 with downtrodden conditions to such an extent, and they can't 0:07:40.440 --> 0:07:43.000 believe that, Oh if you're an American, you'd rise up 0:07:43.040 --> 0:07:47.800 in arms. So they overestimate the prospects for regime change. 0:07:48.200 --> 0:07:50.400 And I'm afraid that's where we may be here today. 0:07:50.440 --> 0:07:52.400 I don't see it. There's a lot of angry people 0:07:52.440 --> 0:07:55.800 with the Shaw, not with the show, with the Ayatola, 0:07:56.480 --> 0:07:59.120 but there's no armed group inside the country. There's no 0:07:59.240 --> 0:08:03.040 indication right fourth, there's no split at the very top 0:08:03.320 --> 0:08:06.680 where you can have a palace coupe. So I think 0:08:06.760 --> 0:08:09.200 that's the dangerous warders here that we have to void. 0:08:09.320 --> 0:08:11.800 Jack Divine, thank you so much. Just public service with 0:08:11.880 --> 0:08:14.840 the CoA, the ARC and group for decades. 0:08:19.400 --> 0:08:22.960 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:08:23.040 --> 0:08:26.200 weekday afternoons from seven to ten am Eastern. Listen on 0:08:26.280 --> 0:08:29.920 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:30.080 --> 0:08:31.600 watch us live on YouTube. 0:08:31.960 --> 0:08:34.960 Usually anticipated this day, Michael Darta joins us down from 0:08:34.960 --> 0:08:37.880 ourth capitol. Michael, let me start at the nominal level. 0:08:37.880 --> 0:08:40.480 It probably won't come up in the press conference, but 0:08:40.640 --> 0:08:44.600 is the animal spirit there or in risk of lessening? 0:08:44.640 --> 0:08:49.520 Can we generate with inflation four or even five percent growth? 0:08:50.200 --> 0:08:52.120 Well, Tom, I think we're seeing a little bit of 0:08:52.120 --> 0:08:56.920 slowing around the edges in terms of the nominal economy. 0:08:57.080 --> 0:08:59.840 So if we look at some of the tracking estimates 0:08:59.840 --> 0:09:04.480 for Q two, real final sales to the private sector 0:09:05.320 --> 0:09:08.680 look like they're sub two percent now, and we've had 0:09:08.920 --> 0:09:12.640 just over two years of three percent average growth, and 0:09:12.720 --> 0:09:16.600 so nominal has been up there, you know, five percent plus, 0:09:16.840 --> 0:09:20.120 which is you know, quite strong relative to the average 0:09:20.120 --> 0:09:22.520 of the last business cycle that was closer to four 0:09:23.240 --> 0:09:27.079 and then obviously during the high inflation period twenty twenty 0:09:27.120 --> 0:09:30.040 one twenty twenty two, we have double digit nominal growth. 0:09:30.120 --> 0:09:33.160 So the FED is slowed, not the nominal economy. It's 0:09:33.200 --> 0:09:37.600 brought inflation, you know, pretty close to target, but we 0:09:37.600 --> 0:09:40.480 don't want to go too far. And then you know, 0:09:40.520 --> 0:09:43.760 worry about you know, recessionary risks which have been out there, 0:09:43.800 --> 0:09:47.200 and you know, obviously the economy has divided those concerns 0:09:48.080 --> 0:09:50.200 over the course of the last two years. But there 0:09:50.280 --> 0:09:54.880 is some slowing here. And if nominal is about to 0:09:54.960 --> 0:09:58.480 run sub four percent, FED policy rate probably shouldn't be 0:09:58.520 --> 0:09:59.120 above four. 0:10:00.320 --> 0:10:03.240 So what we're not seeing, Michael, at least not yet, 0:10:03.720 --> 0:10:06.559 is inflation. Is there a scenario where maybe some of 0:10:06.600 --> 0:10:11.640 these tariffs are maybe taking in the margin of certain 0:10:11.679 --> 0:10:14.360 of corporate America versus maybe the pocketbooks of consumers. 0:10:16.320 --> 0:10:19.800 Yeah, that's really been quite a surprise with these benign 0:10:19.840 --> 0:10:22.520 inflation figures over the last few months. So part of 0:10:22.559 --> 0:10:25.000 it could be a little bit of a delay. Part 0:10:25.040 --> 0:10:27.679 of it is that there's a lot of moving parts here. 0:10:28.280 --> 0:10:34.640 Even with the recent geopolitically driven upward pressure and energy prices, 0:10:34.679 --> 0:10:38.040 we're still flatish year over year on crude, industrial metals 0:10:38.040 --> 0:10:42.720 are down year over year. Inflation expectations in the TIPS 0:10:42.720 --> 0:10:46.360 indexed bond market, you really haven't moved at all. They're 0:10:46.360 --> 0:10:51.120 at quite low levels consistent with price stability. So we're 0:10:51.160 --> 0:10:55.800 not seeing a big tariff fallout so far, and that's 0:10:55.840 --> 0:10:58.760 actually quite good news for the FED because I think 0:10:58.800 --> 0:11:03.960 that gives the FLMs more flexibility to ease policy, you know, 0:11:04.040 --> 0:11:07.360 in the event that we do seemore slowing ahead. But 0:11:07.440 --> 0:11:10.959 you're right, I mean, the question is, you know, profit margins, right, 0:11:11.000 --> 0:11:15.200 I mean, equity multiples are not low, so you know, 0:11:15.280 --> 0:11:18.040 we could you know, we're probably not looking at really 0:11:18.080 --> 0:11:21.440 strong earnings growth this year, but markets are really optimistic 0:11:21.520 --> 0:11:23.960 over a multi year horizon that will have pretty good 0:11:24.000 --> 0:11:24.720 earnings growth. 0:11:24.760 --> 0:11:28.439 And you're suggesting that'll be that'll be a disappointing event, right. 0:11:30.080 --> 0:11:32.839 Well, you know, Tom, I'll have to say, I mean 0:11:32.960 --> 0:11:37.200 I was quite skeptical of this, you know, whole AI revolution. 0:11:37.360 --> 0:11:40.079 I thought it was a bit overhyped and over baked. 0:11:40.640 --> 0:11:42.640 But I've kind of changed my view on that. And 0:11:42.720 --> 0:11:46.160 this is just anecdotal, but just through personal use of 0:11:46.200 --> 0:11:49.360 these AI interfaces, I mean, there has been a vast 0:11:49.679 --> 0:11:53.920 and breath taking improvement in what this technology can do, 0:11:54.400 --> 0:11:57.720 you know, whether we're dealing with health and wellness from 0:11:57.720 --> 0:12:02.880 a personal perspective or your favorite macroeconomic modeling. I mean, 0:12:02.920 --> 0:12:07.840 it's it's like having fifty research assistants at your disposal 0:12:08.280 --> 0:12:10.880 and you don't even have to be nice to them. 0:12:11.760 --> 0:12:16.520 So what is exactly just for me, exactly save this? 0:12:16.720 --> 0:12:20.360 Paul Michael, What do you think the FED should say today? 0:12:20.360 --> 0:12:22.920 What should fit Chairman Jpow's message be today? 0:12:22.920 --> 0:12:23.400 Do you think? 0:12:24.880 --> 0:12:28.199 Well, you know, I would love if the Chairman would 0:12:28.240 --> 0:12:32.200 focus on bond market inflation expectations. 0:12:32.240 --> 0:12:33.080 I think those are. 0:12:32.920 --> 0:12:36.000 More important, and some of the survey data is a 0:12:36.000 --> 0:12:38.440 bit divergent. You know, we've seen a lot of upward 0:12:38.480 --> 0:12:41.960 pressure from the U of MISH data, but not so 0:12:42.120 --> 0:12:44.720 much out of the New York Fed. But I really 0:12:44.760 --> 0:12:48.839 believe these indexed bond spreads are the key. And if 0:12:48.880 --> 0:12:51.400 we remember back to last summer, when it looked like 0:12:51.400 --> 0:12:55.040 the labor market was really losing steam in a dramatic fashion, 0:12:55.640 --> 0:12:58.920 those expectations started to tank, but they recovered when the 0:12:58.920 --> 0:13:02.080 FED started to lower policy rates. So the FED has 0:13:02.200 --> 0:13:04.360 just nailed it here. I mean, they've really pulled a 0:13:04.480 --> 0:13:06.760 rabbit out of a hat in terms of raising rates, 0:13:06.760 --> 0:13:10.960 sufficiently holding them there, and then seemingly cutting them just 0:13:11.000 --> 0:13:15.160 at the right time. Even the pause, which some think, 0:13:15.480 --> 0:13:17.880 you know was political based on the timing of the election, 0:13:18.520 --> 0:13:21.920 I think is perfectly justified based on the macro data 0:13:22.160 --> 0:13:26.360 and the behavior of bond market inflation expectations. So I 0:13:26.360 --> 0:13:30.359 would love if Fed Shair Poul would give some additional 0:13:30.480 --> 0:13:33.400 credence there, But I won't be holding my breath for that. 0:13:34.160 --> 0:13:35.880 I think he's going to hold it close to the basket. 0:13:35.960 --> 0:13:39.160 We'll see what these updated projections say, but I'd be 0:13:39.240 --> 0:13:41.920 kind of surprised if the FED was the Fed in 0:13:41.960 --> 0:13:46.200 the in the market expectations were seriously far apart at 0:13:46.200 --> 0:13:47.800 this point. I think they're fairly close. 0:13:47.880 --> 0:13:47.960 Pa. 0:13:48.000 --> 0:13:49.680 I'll get one. We're in here with Michael Darta, but 0:13:49.720 --> 0:13:52.360 I just went to Google Gemini Elboy and I typed 0:13:52.360 --> 0:13:56.959 a linear rational expectations model, which Darta was expert at 0:13:57.000 --> 0:14:00.760 the difference equations of when he was at Wisconsin as well, 0:14:00.920 --> 0:14:04.640 And just like he says, it lays out an incredible 0:14:05.480 --> 0:14:10.120 six paragraph summary including DSGE models. And we have Clarita 0:14:10.200 --> 0:14:13.880 today on the ferryating. I mean, you're right, Michael, it's 0:14:13.920 --> 0:14:15.840 just it's jaw dropping what they're doing. 0:14:16.160 --> 0:14:16.480 Michael. 0:14:16.480 --> 0:14:19.240 Do you think this US economy can have I mean 0:14:19.240 --> 0:14:21.680 it appears that we've a we've had that soft landing. 0:14:22.120 --> 0:14:23.840 The question I think for a lot of people is 0:14:24.120 --> 0:14:28.320 in a world of higher trade tariffs, does that threaten 0:14:28.400 --> 0:14:31.120 that soft landing at all? What's what's your GDP view here? 0:14:33.360 --> 0:14:36.960 Yeah, I think we're in a trend growth economy and 0:14:37.000 --> 0:14:41.040 that is by definition of soft landing. But at the margin, 0:14:41.120 --> 0:14:44.080 the risks are probably to the downside here. You know, 0:14:44.160 --> 0:14:46.840 you guys were just talking about the messy real estate 0:14:46.920 --> 0:14:51.640 market and it's been messy for a while. But you 0:14:51.640 --> 0:14:54.800 know the risk with these tariffs is that we're self 0:14:54.840 --> 0:14:58.840 imposing adverse supply shops in an economy that is really 0:14:58.880 --> 0:15:02.920 benefit from a weakening of the supply side, right. I mean, 0:15:03.200 --> 0:15:06.160 you know, early in the pandemic recovery, we were getting 0:15:06.320 --> 0:15:09.960 negative productivity growth for about two years. Over the last 0:15:10.000 --> 0:15:12.960 two years we've seen much better numbers close to or 0:15:13.000 --> 0:15:16.480 above two percent. And that doesn't really even tell the 0:15:16.560 --> 0:15:19.960 AI story yet. That was really just a rebound from 0:15:20.000 --> 0:15:23.160 the pandemic oriented his stores. So you don't want to 0:15:23.200 --> 0:15:26.520 do anything that interferes with the supply side, and the 0:15:26.600 --> 0:15:30.000 terriffs are going to be a headwind there. I think 0:15:30.000 --> 0:15:32.440 the AI story is going to be much more powerful 0:15:32.480 --> 0:15:35.040 over the longer term. So as long as the FED 0:15:35.120 --> 0:15:38.920 doesn't fall drastically behind the curve here, Paul that I 0:15:39.480 --> 0:15:42.760 think you know that you can have good economic outcomes. 0:15:42.760 --> 0:15:44.280 So, Michael dart I got a run in the war. 0:15:44.400 --> 0:15:46.560 Thank you so much on this FED day for joining us. 0:15:46.640 --> 0:15:49.280 Mister Darta is with Roth Capital. 0:15:49.360 --> 0:15:53.320 Look, this is the Bloomberg Surveillance Podcast. Listen live each 0:15:53.360 --> 0:15:56.400 weekday starting at seven am Eastern on Apple Coarclay, and 0:15:56.400 --> 0:15:59.400 Android Auto with the Bloomberg Business App. You can also 0:15:59.520 --> 0:16:03.200 listen live on Amazon Alexa from our flagship New York station. 0:16:03.720 --> 0:16:06.400 Just say Alexa Play Bloomberg eleven thirty. 0:16:07.200 --> 0:16:11.760 This is a joy and hugely anticipated win. Thin is 0:16:11.760 --> 0:16:17.360 out of the Columbia Georgetown brandeis axis and particularly Columbia University. 0:16:17.480 --> 0:16:20.840 He's global out of market strategy for Brown Brothers Harriman. 0:16:21.440 --> 0:16:25.520 But he is definitive on the Pacific RIM. Wait, let's 0:16:25.560 --> 0:16:29.600 just start, doctor Finn with the basics of the Pacific Rim. 0:16:29.840 --> 0:16:33.280 Not not your Burma, but you know, North Singapore and 0:16:33.360 --> 0:16:38.680 on up north. The currencies are screaming. Taiwan dollar stronger, 0:16:39.040 --> 0:16:44.200 sing dollar almost down, New Reason strength as well. It's asymmetric. 0:16:44.400 --> 0:16:47.640 Is this about dollar weakness or is this about Pacific 0:16:47.720 --> 0:16:48.600 RIM success? 0:16:50.960 --> 0:16:53.000 First of all, Tom, Paul, Lisa, thanks for having me. 0:16:53.200 --> 0:16:56.360 It's always a pleasure. I would say there's a lot 0:16:56.400 --> 0:16:59.480 of moving parts. Much of it I think is to 0:16:59.480 --> 0:17:03.360 all weakness, but there's also as you know, there's rumblings 0:17:03.760 --> 0:17:06.919 out of these trade talks that the US would like 0:17:06.960 --> 0:17:10.320 these currencies to be allowed to strengthen. We've heard that 0:17:10.320 --> 0:17:13.000 out of Taiwan, We've heard that out of Korea. It's 0:17:13.040 --> 0:17:15.480 been reported and denied. But you know, I think where 0:17:15.480 --> 0:17:18.640 there's smoke, this fire, so there's it fits into the 0:17:18.760 --> 0:17:22.960 underlying sort of market view that this administration wants a 0:17:23.000 --> 0:17:25.600 weaker dollar pretty much across the board, and it's part 0:17:25.600 --> 0:17:26.160 and parts of. 0:17:26.119 --> 0:17:28.359 The whole trade talks. You know. 0:17:28.400 --> 0:17:30.840 That's not to say, you know, these these countries aren't 0:17:30.880 --> 0:17:31.199 doing well. 0:17:31.240 --> 0:17:31.920 Of course they are. 0:17:32.560 --> 0:17:35.000 There's some issues with obviously with China and supply chains 0:17:35.000 --> 0:17:37.760 and things like that, but overall, the fundamental story remains 0:17:38.119 --> 0:17:38.760 quite solid. 0:17:38.840 --> 0:17:42.440 So these currencies could strengthen, especially. 0:17:42.119 --> 0:17:44.720 If this if this dollar weakness picks up after today's 0:17:44.760 --> 0:17:46.400 what I think will be the expected dubbish hold. 0:17:47.560 --> 0:17:50.240 So when what do you make of this US dollar 0:17:50.280 --> 0:17:52.600 We've seen after the initial sell off and risk assets 0:17:52.680 --> 0:17:55.080 or this year on Liberation Day we saw that, I 0:17:55.119 --> 0:17:57.399 don't know, the US equity markets kind of retrace all 0:17:57.440 --> 0:18:00.920 the selloffs, but we've not seen a rebound in US dollar. 0:18:01.040 --> 0:18:04.399 Is just just a normal ten percent pullback on a 0:18:04.520 --> 0:18:07.360 on a rich currency. Is there something else going on? 0:18:09.040 --> 0:18:11.800 Well, Paul, you know, if you you know, asked me 0:18:11.840 --> 0:18:12.919 at the beginning of the year, you know, I was, 0:18:13.119 --> 0:18:14.640 you know, dollible coming this year. 0:18:15.480 --> 0:18:18.000 We had sort of the economy fire all cylinders, the 0:18:18.080 --> 0:18:22.000 FED hawkish et cetera, et cetera, deregulation, but really to 0:18:22.080 --> 0:18:22.840 your point, liberation. 0:18:22.960 --> 0:18:24.480 Liberation Day was really game changer. 0:18:25.000 --> 0:18:27.199 It was it was I think the realization by the 0:18:27.200 --> 0:18:29.719 market is that the policy making out of this administration 0:18:29.880 --> 0:18:36.400 was unpredictable. Uh and really and to me unexplainable, inexplicable. 0:18:37.280 --> 0:18:39.520 And I think it's been a lot of confidence in 0:18:39.560 --> 0:18:40.240 the dollar. 0:18:41.480 --> 0:18:41.960 Since then. 0:18:42.200 --> 0:18:44.800 We had so much back and forth on terrfs, on 0:18:44.840 --> 0:18:48.880 fiscal policy. It's it's really been, you know, a sort 0:18:48.880 --> 0:18:52.000 of game changer since April second, and then April ninth, Uh, 0:18:52.680 --> 0:18:53.960 the tariff announcements. 0:18:54.400 --> 0:18:55.720 So yeah, I've changed. 0:18:55.720 --> 0:18:58.119 I think the dollars is in for a weaker spell, 0:18:58.359 --> 0:19:01.359 especially again with the US comomy star on SHOs and cracks. 0:19:01.880 --> 0:19:03.960 That's why I think the FED is going to deliver 0:19:03.960 --> 0:19:08.400 a dubbish hole today. Tariff uncertain continues, fiscal uncertain continues, 0:19:08.440 --> 0:19:10.760 so all the elements are there for a week of dollar. 0:19:11.400 --> 0:19:14.679 Is a FED speaks today in the press conference on 0:19:14.720 --> 0:19:17.840 all Doctor Thinn. One of the things here is everything's 0:19:17.920 --> 0:19:21.280 unilateral discussion. The president, let's make a deal. Tim O'Brien 0:19:21.359 --> 0:19:25.119 coming up in a big folks or maybe bilateral and 0:19:25.200 --> 0:19:29.000 all of your academics is it's a multilateral world. Are 0:19:29.000 --> 0:19:32.600 we just going to see them shift their US exports 0:19:33.440 --> 0:19:36.800 through Singapore. Dare I say, through your Burma? I mean, 0:19:36.840 --> 0:19:40.320 are they just going to conduit their exports through other geographies? 0:19:41.840 --> 0:19:43.680 Well, I do you know? That's good question, Tom. 0:19:43.720 --> 0:19:46.280 I do know that the US is an alert for 0:19:46.440 --> 0:19:49.320 giants or sort of re export through Vietnam and sort 0:19:49.320 --> 0:19:50.240 of other proxies. 0:19:51.080 --> 0:19:52.480 It can be done, but it'll be difficult. 0:19:53.840 --> 0:19:56.320 What I think to me is get back to this 0:19:56.600 --> 0:19:58.400 bigger story about the dollars that the US is really 0:19:58.440 --> 0:20:01.720 is pulling inwards. It's becoming they call it America first, 0:20:02.080 --> 0:20:04.960 it's whatever you want to call it. It's isolationists. It's 0:20:05.040 --> 0:20:08.080 leaving a vacuum for other countries. I think China will 0:20:08.240 --> 0:20:12.960 will so exerts a greater influence, especially in the Pacific 0:20:13.040 --> 0:20:16.920 Rim in Southeast Asia. We have eur Zone becoming a 0:20:17.000 --> 0:20:20.000 bit more cohesive and perhaps picking up the ball over 0:20:20.000 --> 0:20:23.399 in the European sphere. So you know, it's a long 0:20:23.680 --> 0:20:25.119 you know this, We could talk about this for hours, 0:20:25.160 --> 0:20:26.640 but in seat of geopolitics, we. 0:20:26.560 --> 0:20:28.840 Could be coming into this sort of multipolar world. 0:20:28.920 --> 0:20:31.000 Which is doll The US really has pulled back and 0:20:31.000 --> 0:20:33.560 allowing others to come into this vacuum. Again, that's part 0:20:33.600 --> 0:20:35.480 and parts of the weeker dollar I think as well. 0:20:35.480 --> 0:20:38.080 Marcus move the yield comes in in two basis points 0:20:38.119 --> 0:20:41.280 four point three six percent. We have economic data and 0:20:41.440 --> 0:20:44.480 housing starts. There was a bit of a positive revision, 0:20:44.520 --> 0:20:48.639 but there's a grim statistic and housing starts. In building 0:20:48.680 --> 0:20:54.000 permits here the survey negative zero point eight percent, round 0:20:54.040 --> 0:20:57.560 it one percent, negative one percent. It came in at 0:20:57.600 --> 0:21:01.800 negative nine point eight percent, found it negative ten percent, 0:21:02.440 --> 0:21:07.520 huge miss and confirmed with building permits as well, which 0:21:07.520 --> 0:21:10.760 were to be flat. The survey was zero point zero 0:21:11.160 --> 0:21:15.200 and they came in negative two percent as well. Claims 0:21:15.880 --> 0:21:20.040 pretty much on track is well. Four week moving average 0:21:20.080 --> 0:21:23.120 lifts up from two hundred and forty one thousand up 0:21:23.119 --> 0:21:26.359 to two hundred and forty five thousand. So there's the 0:21:26.440 --> 0:21:29.440 economic data. Maybe it doesn't matter in a FED day, 0:21:29.480 --> 0:21:32.320 but it's there. And again that we'll be there at 0:21:32.359 --> 0:21:36.000 one point thirty giving you the FED press conference as such, Paul. 0:21:36.440 --> 0:21:38.240 When we saw earlier in the year, when there was 0:21:38.280 --> 0:21:41.760 this vul volatility in the in the US markets, a 0:21:42.119 --> 0:21:48.720 movement of capital over to Europe, particularly equities, people kind 0:21:48.720 --> 0:21:51.280 of buying into these European equities and now we've got 0:21:51.320 --> 0:21:54.080 European indites doing better than US. Is that simply a 0:21:54.119 --> 0:21:56.960 short term trade or is that something more fundamental? 0:21:57.040 --> 0:22:01.040 Do you think? Yeah, Paul, I think, uh, there's a 0:22:01.080 --> 0:22:01.880 million dollar question. 0:22:02.119 --> 0:22:05.080 My gut feelings, it's it's it's a it's a serious 0:22:05.160 --> 0:22:08.080 rotation out of the US. Again, everyone was was long 0:22:08.240 --> 0:22:12.520 US equities dollar at the beginning of this year, but 0:22:12.680 --> 0:22:14.760 since the year began, we've got we had some good 0:22:14.760 --> 0:22:19.000 news out of Europe, the fiscal sort of developments in Germany, 0:22:20.240 --> 0:22:24.040 some improving sentiments in the case out of most of Europe, 0:22:24.480 --> 0:22:26.919 at the same time that the US is starting to 0:22:26.960 --> 0:22:30.000 soften up. So I think it's it's a cyclical shift. 0:22:30.040 --> 0:22:31.760